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~~March 3031, ~~2010~~2011


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

Commission File Number 333-144625-01
333-144625

RSC Holdings III, LLC ~~RSC Equipment Rental, Inc.~~

RSC Equipment Rental, Inc.

(Exact name of registrant as specified in its charter)


Delaware Arizona		41-2218971 86-0933835

(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, including area code)

N/A

(Former name, former address and former fiscal year, if changed since last report)

The Registrants meet the conditions set forth in General Instructions H (1) (a) and (b) of Form 10Q and are therefore filing this Form with the reduced disclosure format as permitted.

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes þ No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

Yes o No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer o Accelerated filer o Non- accelerated filer þ Smaller reporting company o (Do not check if a smaller reporting company) ~~Smaller reporting company o~~

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes o No þ

As of ~~October~~April 2018, ~~2010~~2011 there were 1,000 shares of no par value Common Stock outstanding.

Table of Contents

Cautionary Note for Forward-Looking Information			1
Cautionary Note for Forward-Looking Statements		1
PART I. Financial Information		3	3
ITEM 1.	Financial Statements (unaudited)		3
ITEM 1. Financial Statements (unaudited)		3
	Condensed Consolidated Balance Sheets at September 30, 2010 and December 31, 2009		3
Condensed Consolidated Balance Sheets at March 31, 2011 and December 31, 2010		3
	Condensed Consolidated Statements of Operations for the three and nine months ended September 30, 2010 and September 30, 2009		4
Condensed Consolidated Statements of Operations for the three months ended March 31, 2011 and March 31, 2010		4
	Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 2010 and September 30, 2009		5
Condensed Consolidated Statements of Cash Flows for the three months ended March 31, 2011 and March 31, 2010		5
Notes to Condensed Consolidated Financial Statements	~~Notes to Condensed Consolidated Financial Statements~~	7	7
ITEM 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		15
ITEM 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations		15
ITEM 3.	Quantitative and Qualitative Disclosures About Market Risk		29
ITEM 3. Quantitative and Qualitative Disclosures about Market Risk		27
ITEM 4.	Controls and Procedures		30
ITEM 4. Controls and Procedures		27
PART II. Other Information		28	31
ITEM 1.	Legal Proceedings		31
ITEM 1. Legal Proceedings		28
ITEM 1A.	Risk Factors		31
ITEM 1A. Risk Factors		28
ITEM 2.	Unregistered Sales of Equity Securities and Use of Proceeds		32
ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds		28
ITEM 3.	Defaults Upon Senior Securities		32
ITEM 3. Defaults Upon Senior Securities		28
ITEM 4.	Reserved		32
ITEM 4. Reserved		28
ITEM 5.	Other Information		32
ITEM 5. Other Information		28
ITEM 6.	Exhibits		33
ITEM 6. Exhibits		29
SIGNATURES		30	34
EX-10.2
EX-31.1
EX-31.2
EX-32.1

Introductory Note

Unless the context otherwise requires, in this Quarterly Report on Form 10-Q, (i) “RSC” means RSC Equipment Rental, Inc. and RSC Equipment Rental of Canada, Ltd, which are our operating entities and indirect wholly-owned subsidiaries of RSC Holdings, (ii) “RSC Holdings” means RSC Holdings Inc., our ultimate parent company, (iii) “we,” “us” and “our” means RSC Holdings III, LLC and, RSC and its consolidated subsidiaries, and, when used in connection with disclosure relating to to our publicly traded equity securities, RSC Holdings, (iv) “Ripplewood” means RSC Acquisition LLC and RSC Acquisition II LLC, (v) “Oak Hill” means OHCP II RSC, LLC, OHCMP II RSC, LLC and OHCP II RSC COI, LLC, (vi) the “Sponsors” means Ripplewood and Oak Hill, (vii) “ACAB” means Atlas Copco AB, (viii) “ACA” means Atlas Copco Airpower n.v., a wholly owned subsidiary of ACAB, (ix) “ACF” means Atlas Copco Finance S.à.r.l., a wholly owned subsidiary of ACAB, and (x) “Atlas” means ACAB, ACA and ACF, except as otherwise set forth in this Quarterly Report on Form 10-Q.

Cautionary Note for Forward-Looking ~~Information~~Statements

All statements other than statements of historical facts included in this Quarterly Report on Form 10-Q, including, without limitation, statements regarding our future financial position, business strategy, budgets, projected costs and plans and objectives of management for future operations, are forward-looking statements. In addition, forward-looking statements generally can be identified by the use of forward-looking terminology such as “may”, “plan”, “seek”, “will”, “should”, “expect”, “intend”, “estimate”, “anticipate”, “believe” or “continue” or the negative thereof or variations thereon or similar terminology.

Forward-looking statements include the statements in this Quarterly Report on Form 10-Q regarding, among other things: management forecasts; efficiencies; cost savings and opportunities to increase productivity and profitability; income and margins; liquidity; anticipated growth; economies of scale; the economy; future economic performance; our ability to maintain liquidity during adverse economic cycles and unfavorable external events; our business strategy; future acquisitions and dispositions; litigation; potential and contingent liabilities; management’s plans; taxes; and refinancing of existing debt.

Although we believe that the expectations reflected in such forward-looking statements are reasonable, we can give no assurance that such expectations will prove to have been correct. Important factors that could cause actual results to differ materially from our expectations are set forth below and disclosed in “Risk Factors” in Part II, Item 1A and elsewhere in this Quarterly Report on Form 10-Q. Factors that could cause actual results or outcomes to differ materially from ~~those~~ those projected include, but are not limited to, the following:

• 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 New Senior ABL Revolving Facility; • our ability to comply with our debt covenants; • risks related to the credit markets’ willingness to continue to lend to borrowers ~~rated~~with a B- rating; • our ability to generate cash and/or Cincur additional indebtedness to finance equipment purchases;

• ~~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.”

In light of these risks, uncertainties and assumptions, the forward-looking statements contained in this Quarterly Report on Form 10-Q might not prove to be accurate and you should not place undue reliance upon them. All forward-looking statements speak only as of the filing date of this Quarterly Report on Form 10-Q, and we undertake no obligation to update or revise publicly any forward-looking statements, whether as a result of new information, future events or otherwise.

PART I. Financial Information

Item 1. Financial Statements

RSC HOLDINGS III, LLC AND SUBSIDIARIES ~~CONDENSED CONSOLIDATED BALANCE SHEETS (In thousands, except share data) (Unaudited)~~

	September 30,			December 31,
	2010			2009
Assets
Cash and cash equivalents	$	5,564		$	4,535
Accounts receivable, net of allowance for doubtful accounts of $9,768 and $10,741 at September 30, 2010 and December 31, 2009, respectively		221,463			181,975
Inventory		13,528			14,421
Rental 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			1,384,999
Property and equipment, net of accumulated depreciation of $201,790 and $180,495 at September 30, 2010 and December 31, 2009, respectively		113,604			123,197
Goodwill and other intangibles, net		939,492			940,063
Deferred financing costs		46,758			55,539
Other assets		20,859			23,537
Total assets	$	2,735,321		$	2,728,266
Liabilities and Stockholders’ (Deficit) Equity
Accounts payable	$	232,266		$	46,275
Accrued expenses and other liabilities		182,621			173,496
Debt		2,060,824			2,172,109
Deferred income taxes		297,078			312,745
Total liabilities		2,772,789			2,704,625
Commitments and contingencies
Common stock, no par value, (1,000 shares authorized, issued and outstanding at September 30, 2010 and December 31, 2009)		293,050			288,761
Accumulated deficit		(325,680	)		(259,315	)
Accumulated other comprehensive loss		(4,838	)		(5,805	)
Total stockholders’ (deficit) equity		(37,468	)		23,641
Total liabilities and stockholders’ (deficit) equity	$	2,735,321		$	2,728,266

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except share data)
(Unaudited)


	March 31,			December 31,
	2011			2010
Assets
Cash and cash equivalents	$	32,153		$	3,510
Accounts receivable, net of allowance for doubtful accounts of $7,717 and $7,009 at March 31, 2011 and December 31, 2010, respectively		237,163			228,532
Inventory		14,994			14,171
Deferred tax assets, net		10,494			17,912
Prepaid expense and other current assets		12,349			13,798

Total current assets		307,153			277,923

Rental equipment, net of accumulated depreciation of $1,097,946 and $1,089,843 at March 31, 2011 and December 31, 2010, respectively		1,394,632			1,336,424
Property and equipment, net of accumulated depreciation of $213,797 and $208,495 at March 31, 2011 and December 31, 2010, respectively		108,904			110,779
Goodwill and other intangibles, net		939,112			939,302
Deferred financing costs		58,309			44,205
Other long-term assets		9,336			9,342

Total assets	$	2,817,446		$	2,717,975


Liabilities and Stockholders’ Deficit
Accounts payable	$	246,660		$	193,819
Accrued expenses and other current liabilities		106,528			119,608
Current portion of long-term debt		25,603			25,294

Total current liabilities		378,791			338,721

Long-term debt		2,166,773			2,043,887
Deferred tax liabilities, net		305,084			330,862
Other long-term liabilities		29,037			41,782

Total liabilities		2,879,685			2,755,252


Commitments and contingencies

Common stock, no par value, (1,000 shares authorized, issued and outstanding at March 31, 2011 and December 31, 2010)		296,066			293,462
Accumulated deficit		(383,263	)		(332,831	)
Accumulated other comprehensive income		24,958			2,092

Total stockholders’ deficit		(62,239	)		(37,277	)

Total liabilities and stockholders’ deficit	$	2,817,446		$	2,717,975

See accompanying notes to the unaudited condensed consolidated financial statements.

RSC HOLDINGS III, LLC 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			2009
Revenues:
Equipment rental revenue	$	291,671		$	271,547		$	773,618		$	829,517
Sale of merchandise		12,897			12,633			37,588			40,121
Sale of used rental equipment		29,216			31,384			84,315			123,757
Total revenues		333,784			315,564			895,521			993,395
Cost of revenues:
Cost of equipment rentals, excluding depreciation		149,445			138,723			424,659			423,567
Depreciation of rental equipment		68,878			70,169			202,921			217,492
Cost of merchandise sales		9,312			8,775			27,266			28,193
Cost of used rental equipment sales		24,575			30,117			73,143			115,414
Total cost of revenues		252,210			247,784			727,989			784,666
Gross profit		81,574			67,780			167,532			208,729
Operating expenses:
Selling, general and administrative		34,511			31,970			101,256			107,096
Depreciation and amortization of non-rental equipment and intangibles		10,012			10,696			29,979			33,672
Other operating gains, net		(1,167	)		(119	)		(3,617	)		(233	)
Total operating expenses, net		43,356			42,547			127,618			140,535
Operating income		38,218			25,233			39,914			68,194
Interest expense, net		48,446			50,666			146,472			130,911
Gain on extinguishment of debt, net		—			(12,489	)		—			(12,489	)
Other (income) expense, net		(264	)		(75	)		(364	)		335
Loss before benefit for income taxes		(9,964	)		(12,869	)		(106,194	)		(50,563	)
Benefit for income taxes		3,542			7,034			39,829			19,734
Net loss	$	(6,422	)	$	(5,835	)	$	(66,365	)	$	(30,829	)
Weighted average shares outstanding used in computing net loss per common share:
Basic and diluted		1,000			1,000			1,000			1,000
Net loss per common share:
Basic and diluted	$	(6.42	)	$	(5.84	)	$	(66.37	)	$	(30.83	)

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share data)

(Unaudited)


	Three Months Ended
	March 31,
	2011			2010
Revenues:
Equipment rental revenue	$	271,775		$	222,213
Sale of merchandise		12,652			11,421
Sale of used rental equipment		42,493			27,106

Total revenues		326,920			260,740

Cost of revenues:
Cost of equipment rentals, excluding depreciation		148,976			129,292
Depreciation of rental equipment		70,889			66,645
Cost of merchandise sales		8,442			8,074
Cost of used rental equipment sales		30,970			24,637

Total cost of revenues		259,277			228,648

Gross profit		67,643			32,092

Operating expenses:
Selling, general and administrative		41,718			35,712
Depreciation and amortization of non-rental equipment and intangibles		10,225			10,057
Other operating gains, net		(719	)		(2,312	)

Total operating expenses, net		51,224			43,457

Operating income (loss)		16,419			(11,365	)
Interest expense, net		81,959			49,793
Loss on extinguishment of debt		15,342			—
Other income, net		(337	)		(199	)

Loss before benefit for income taxes		(80,545	)		(60,959	)
Benefit for income taxes		30,113			23,131

Net loss	$	(50,432	)	$	(37,828	)


Weighted average shares outstanding used in computing net loss per common share:
Basic and diluted		1,000			1,000

Net loss per common share:
Basic and diluted	$	(50.43	)	$	(37.83	)

See accompanying notes to the unaudited condensed consolidated financial statements.

RSC HOLDINGS III, LLC AND SUBSIDIARIES ~~CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)~~

	Nine Months Ended September 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			251,164
Amortization of deferred financing costs		9,553			8,574
Amortization of original issue discount		826			213
Share-based compensation expense		3,966			3,473
Gain 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	)		73,229
Inventory		903			4,654
Other assets		2,925			4,975
Accounts payable		186,517			(60,730	)
Accrued expenses and other liabilities		8,217			2,930
Net cash provided by operating activities		312,449			230,217
Cash 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			123,757
Proceeds from sales of property and equipment		2,185			10,539
Insurance proceeds from rental equipment and property claims		1,736			3,086
Net cash (used in) provided by investing activities		(183,108	)		101,297
Cash flows from financing activities:
Proceeds from Senior ABL Revolving Facility		104,000			218,016
Proceeds from issuance of 2017 Notes		—			389,280
Payments 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	)
Capital contributions from RSC Holdings		323			256
Increase in outstanding checks in excess of cash balances		—			347
Net cash used in financing activities		(129,006	)		(327,195	)
Effect of foreign exchange rates on cash		694			1,001
Net increase in cash and cash equivalents		1,029			5,320
Cash and cash equivalents at beginning of period		4,535			13,670
Cash and cash equivalents at end of period	$	5,564		$	18,990

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)


	Three Months Ended March 31,
	2011			2010
Cash flows from operating activities:
Net loss	$	(50,432	)	$	(37,828	)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation and amortization		81,114			76,702
Amortization of deferred financing costs		2,730			3,173
Amortization of original issue discount		299			268
Share-based compensation expense		1,274			663
Gain on sales of rental and non-rental property and equipment, net of non-cash write-offs		(12,041	)		(2,608	)
Deferred income taxes		(31,180	)		(23,666	)
Gain on settlement of insurance property claims		—			(1,736	)
Loss on extinguishment of debt		15,342			—
Interest expense, net on ineffective hedge		(104	)		85
Changes in operating assets and liabilities:
Accounts receivable, net		(7,986	)		7,372
Inventory		(798	)		485
Other assets		1,179			160
Accounts payable		53,131			35,382
Accrued expenses and other liabilities		6,656			7,029

Net cash provided by operating activities		59,184			65,481

Cash flows from investing activities:
Purchases of rental equipment		(157,921	)		(44,906	)
Purchases of property and equipment		(2,444	)		(331	)
Proceeds from sales of rental equipment		42,493			27,106
Proceeds from sales of property and equipment		1,594			1,296
Insurance proceeds from rental equipment and property claims		—			1,736

Net cash used in investing activities		(116,278	)		(15,099	)

Cash flows from financing activities:
Proceeds from Old Senior ABL Revolving Facility		72,000			35,000
Proceeds from New Senior ABL Revolving Facility		383,000			—
Proceeds from issuance of 2021 Notes		650,000			—
Payments on Old Senior ABL Revolving Facility		(376,195	)		(73,000	)
Payments on New Senior ABL Revolving Facility		(9,000	)		—
Payments on 2014 Notes		(117,000	)		—
Payments for call premium on 2014 Notes		(5,562	)		—
Payments on Second Lien Term Facility		(479,395	)		—
Payments on capital leases and other debt		(6,916	)		(9,020	)
Payments for deferred financing costs		(26,826	)		(624	)
Capital contributions from RSC Holdings		1,330			15
Decrease in outstanding checks in excess of cash balances		(440	)		—

Net cash provided by (used in) financing activities		84,996			(47,629	)

Effect of foreign exchange rates on cash		741			574

Net increase in cash and cash equivalents		28,643			3,327
Cash and cash equivalents at beginning of period		3,510			4,535

Cash and cash equivalents at end of period	$	32,153		$	7,862

See accompanying notes to the unaudited condensed consolidated financial statements.

RSC HOLDINGS III, LLC AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (continued) (In thousands) (Unaudited)

	Nine Months Ended September 30,
	Three Months Ended March 31,
	2010		2009
	2011		2010
	(In thousands)
Supplemental disclosure of cash flow information:
Cash paid for interest	$	~~126~~70,~~655~~305	$	~~104~~36,~~402~~831
Cash received for taxes, net		~~25,562~~66		~~7,098~~406
Supplemental schedule of non-cash investing and financing activities:
Purchase of assets under capital lease obligations	$	156,~~817~~401	$	~~895~~1,484
Accrued deferred financing costs		5113		~~174~~260
Accrued non-deferred financing costs		—		100

See accompanying notes to the unaudited condensed consolidated financial statements.

RSC HOLDINGS III, LLC AND SUBSIDIARIES ~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)~~

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

(1) Organization

Business and Basis of Presentation

Description of Business

RSC Holdings III, LLC and its wholly owned subsidiaries (collectively, the “Company”) are engaged primarily in the rental of a diversified line of construction and industrial equipment, geographically dispersed throughout the United States and Canada. The Company is a wholly owned subsidiary of RSC Holdings Inc. (“RSC Holdings”). RSC Holdings III, LLC is a limited liability company that does not have a Board of Directors, its business and affairs are managed by the Board of Directors of RSC Holdings, its ultimate parent. At ~~September~~March 3031, ~~2010~~2011, the Company’s total ~~assets~~ assets were $2,~~735~~817.34 million, of which 9594.27% and 45.83% were employed in the Company’s U.S. and ~~Canadian~~ Canadian operations, respectively. For the ~~nine~~three months ended ~~September~~March 3031, ~~2010~~2011, the Company ~~generated~~ generated approximately 8683.41% of its revenues from equipment rentals, and it derived the remaining 13 16.69% of its revenues from sales of used rental equipment, merchandise and other related items.

Basis of Presentation

The accompanying unaudited condensed consolidated interim financial statements have been prepared in accordance with the accounting policies described in our Annual Report on Form 10-K~~/A for~~ for the year ended December 31, ~~2009~~2010 (the “~~2009~~2010 Form 10-K”). In the opinion of management, the accompanying unaudited condensed consolidated financial statements reflect all material adjustments, consisting only of normal recurring adjustments, necessary for a fair presentation of financial results for the interim periods presented. Interim results of operations are not necessarily indicative of full year results. Certain information and note disclosures have been condensed or omitted as permitted under Securities and Exchange Commission (“SEC”) rules and regulations governing the preparation of interim financial reporting on Form 10-Q; as such, this Quarterly Report on Form 10-Q should be read in conjunction with the ~~2009~~2010 Form 10-K.

Use of Estimates

The preparation of the condensed consolidated financial statements in conformity with accounting principles generally accepted in the United States of America (“GAAP”) requires management of the Company to make a number of estimates and assumptions relating to the reported amount of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements and the reported amounts of revenues and expenses during the period. Significant items subject to such estimates and assumptions include the carrying amounts of long-lived assets, goodwill, and inventories; the allowance for doubtful accounts; deferred income taxes; environmental liabilities; reserves for claims; assets and obligations related to employee benefits; the fair value of derivative instruments and determination of share-based compensation amounts. Management believes that its estimates and assumptions are reasonable in the circumstances; however, actual results may differ from these estimates.

Recent Accounting Pronouncements

In ~~February~~December 2010, the Financial Accounting Standards Board (the “FASB”) issued ~~amended~~an update to the existing guidance onfor ~~subsequent~~goodwill ~~events~~and other intangible assets. ~~Under~~The ~~this~~update ~~amended~~modifies ~~guidance,~~Step ~~SEC~~1 ~~filers~~of ~~are~~the goodwill noimpairment ~~longer~~test for reporting units with zero or negative carrying amounts. For those reporting units, an entity is required to perform Step 2 of the goodwill impairment test if there ~~disclose~~are qualitative factors indicating that it is more likely than not that a goodwill impairment exists. The qualitative factors are consistent with the ~~date~~existing ~~through~~guidance which ~~subsequent~~requires ~~events~~goodwill of ~~have~~a ~~been~~reporting ~~evaluated~~unit into ~~originally~~be ~~issued~~tested ~~and~~for impairment between annual tests if an event occurs or ~~revised~~circumstances ~~financial~~change ~~statements~~that would more likely than not reduce the fair value of a reporting unit below its carrying amount. ~~The~~This guidance ~~was~~is effective ~~immediately~~for fiscal years, and interim periods within those years, beginning after December 15, 2010, which for the Company ~~has~~is ~~adopted~~calendar year 2011. The ~~this~~Company ~~new~~does not anticipate that the adoption of this guidance will have a material impact on its financial condition, results of operations or cash flows.

In January 2010, the FASB issued guidance to improve disclosures about fair value measurements. Specifically, the guidance requires new disclosures for transfers in and out of levels 1 and 2 of the fair value measurement hierarchy, and expands disclosures related to activity associated with level 3 fair value measurements. The new disclosures, which are effective for interim and annual reporting periods beginning after December 15, 2009, had no impact on the Company’s disclosures at September 30, 2010.

RSC HOLDINGS III, LLC AND SUBSIDIARIES ~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)~~

InNOTES ~~October 2009,~~TO ~~the~~CONDENSED ~~FASB~~CONSOLIDATED ~~issued~~FINANCIAL ~~updated~~STATEMENTS guidance on multiple-deliverable revenue arrangements. Specifically, the guidance amends the existing criteria for separating consideration received in multiple-deliverable arrangements, eliminates the residual method of allocation and requires that arrangement consideration be allocated at the inception of the arrangement to all deliverables using the relative selling price method. The FASB guidance also establishes a hierarchy for determining the selling price of a deliverable, which is based on vendor-specific objective evidence; third-party evidence; or management estimates. Expanded disclosures related to multiple-deliverable revenue arrangements will also be required. The new guidance is effective for revenue arrangements entered into or materially modified on and after January 1, 2011. The Company does not expect the application of this new standard to have a significant impact on its consolidated financial statements. (continued)

(Unaudited)

In November 2010, the FASB issued an update to its existing guidance on business combinations. This guidance requires a public entity that presents comparative financial statements to present in its pro forma disclosure the revenue and earnings of the combined entity as though the business combination(s) that occurred during the current year had occurred as of the beginning of the prior annual reporting period. In addition, this guidance expands the supplemental pro forma disclosures to include a description of the nature and amount of material, nonrecurring pro forma adjustments directly attributable to the business combination included in the reported pro forma revenue and earnings. The guidance is effective prospectively for business combinations for which the acquisition date is on or after the beginning of the first annual reporting period on or after December 15, 2010, which for the Company is calendar year 2011. The guidance did not have an impact on the Company’s disclosures for the quarter ended March 31, 2011.

(2) Fair Value of Financial Instruments

The fair value of a financial instrument is the exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. The carrying values of cash, accounts receivable and accounts payable approximate fair values due to the short maturity of these financial instruments.

The fair values of the Company’s ~~Second~~2014 ~~Lien~~Senior ~~Term~~Unsecured ~~Facility,~~Notes (the “2014 Notes”), the 2017 Senior Secured Notes ~~and~~(the “2017 Notes”), the 2019 Senior Unsecured Notes (the “2019 Notes”) and the 2021 Senior Unsecured Notes (the “2021 Notes”) (collectively the “Notes”) are based on quoted market prices. The fair value of the Company’s New Senior ABL Revolving Facility is estimated based on borrowing rates currently available to the Company for debt with similar terms and maturities. The fair value of capital lease obligations approximates the carrying value due to the fact that the underlying instruments include provision to adjust interest rates to approximate fair market value.

See Note 5 for additional fair market information related to debt instruments and Note 7 for additional information about measuring the fair value ~~information~~of ~~about~~assets ~~other~~and ~~financial instruments~~liabilities.

(3) Accumulated Other Comprehensive Income ~~(Loss)~~

Accumulated other comprehensive income (loss) components as of ~~September~~March 3031, ~~2010~~2011 were as follows:

						Accumulated
	Foreign					Accumulated Other
	Foreign		Fair Market			Other
	Currency		Fair Market Value			Comprehensive
	Currency		Value of Cash			Comprehensive
	Translation		of Cash Flow Hedges			Income
	Translation		Flow Hedges			Income (Loss)
			(in 000s)
Balance at December 31, 2009	$	15,967	$	(21,772	)	$	(5,805	)
Balance at December 31, 2010	$	21,722	$	(19,630	)	$	2,092
Foreign currency translation		13,~~934~~236		—			13,~~934~~236
Change in fair value of cash flow hedges, net of tax		—		~~(967~~19,630	)		~~(967~~19,630	)
Balance at September 30, 2010	$	17,901	$	(22,739	)	$	(4,838	)
Balance at March 31, 2011	$	24,958	$	—		$	24,958

Comprehensive loss was as follows:

	Three Months Ended						Nine Months Ended
	September 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			11,898
Change in fair value of cash flow hedges, net of tax		(1,000	)		(3,290	)		(967	)		1,433
Comprehensive loss	$	(5,433	)	$	(2,504	)	$	(65,398	)	$	(17,498	)

RSC HOLDINGS III, LLC AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued) (Unaudited)

Comprehensive income (loss) was as follows:


	Three Months Ended
	March 31,
	2011			2010
	(in 000s)
Net loss	$	(50,432	)	$	(37,828	)
Currency translation adjustments		3,236			3,567
Change in fair value of cash flow hedges, net of tax		19,630			134

Comprehensive loss	$	(27,566	)	$	(34,127	)

(4) Closed Location Charges

The Company regularly reviews the financial performance of its locations to identify those with operating margins that consistently fall below the Company’s performance standards. The Company also reviews the financial performance of groups of locations to identify those that are underperforming relative to the Company’s standards. Once identified, the Company continues to monitor these locations or groups of locations to determine if operating performance can be improved or if the performance is attributable to economic factors unique to the particular market with long-term prospects that are not favorable. If necessary, locations with unfavorable long-term prospects are closed and the rental fleet is deployed to more profitable locations with higher demand.

During the ~~nine~~three months ended ~~September~~March 3031, ~~2010~~2011, the Company closed ~~six~~nine locations. During the year ended December 31, ~~2009~~2010, the Company closed or consolidated 2412 locations. The closed location reserves at ~~September~~March 3031, ~~2010~~2011 and December 31, ~~2009~~2010, consist primarily of ~~unpaid obligations for~~ employee termination costs, costs to terminate operating leases prior to the end of their contractual lease term, ~~estimated~~and estimated costs that will continue to be incurred under operating leases that have no future economic benefit to the Company,. ~~freight~~Freight costs to transport fleet from closed locations to other locations and the write-off of leasehold improvements are expensed as incurred. Except in instances where a lease settlement agreement has been negotiated with a landlord, costs recognized to terminate operating leases before the end of their contractual term represent the estimated fair value of the liability at the cease-use date. The fair value of the liability is determined based on the present value of remaining lease rentals, reduced by estimated sublease rentals that could be reasonably obtained for the property even if the Company does not intend to enter into a sublease. ~~During~~Although the ~~nine~~ ~~months ended September 30, 2010, the~~ Company reduced its closed location reserves by $0.3 million due primarily to the execution of subleases containing favorable contractual terms relative to those used to estimate the reserves. Although the Company does not expect to incur additional material charges for location closures occurring prior to ~~September~~March 3031, ~~2010~~2011, additional charges are possible to the extent that actual future settlements differ from ~~our~~the Company’s estimates. The Company cannot predict the extent of future location closures or the financial impact of such closings, if any.

Closed location charges (to be cash settled) by type and a reconciliation of the associated accrued liability were as follows (in 000s):

	Lease Exit and			Employee			Other
	Other Related			Termination			Other Exit
	Other Related Costs			Termination Costs			Exit
	Costs (a)			Costs (b)			Costs (c)			Total
	(a)			(b)			Costs (c)			Total
Closed location reserves at December 31, 2009	$	(6,492	)	$	(122	)	$	—		$	(6,614	)
Closed location reserves at December 31, 2010	$	(4,265	)	$	—		$	—		$	(4,265	)
Charges incurred to close locations		(50700	)		—(59	)		(2758	)		(77817	)
Cash payments		~~1,895~~665			~~164~~32			2758			~~2,086~~755
Adjustments to reserve		~~250~~(21	)		~~(42~~—	)		—			~~208~~(21	)
Closed location reserves at September 30, 2010	$	(4,397	)	$	—		$	—		$	(4,397	)
Closed location reserves at March 31, 2011	$	(4,321	)	$	(27	)	$	—		$	(4,348	)

(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.


(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 March 31, 2011 are expected to be paid over the remaining contractual term of the leases, which range from three to 84 months.

(b)		Employee termination costs primarily consist of severance payments and related benefits. For the three months ended March 31, 2011, these costs are included within cost of equipment rentals in the condensed consolidated statement of operations.

During the nine months ended September 30, 2010, the Company also recognized $2.6 million of other severance costs not directly associated with location closures. Of the additional severance expense recognized, $0.4 million is included within cost of equipment rentals and $2.2 million is included within selling, general and administrative expenses in the unaudited condensed consolidated statements of operations.

RSC HOLDINGS III, LLC AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued) (Unaudited)

(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.

During the three months ended March 31, 2011, the Company also recognized $0.6 million of other severance costs not directly associated with location closures. Of the additional severance expense recognized, $0.5 million is included within cost of equipment rentals and $0.1 million is included within selling, general and administrative expenses in the unaudited condensed consolidated statement of operations.

(5) Debt

Debt consists of the following at:

						September 30,								December 31,
								March 31,								December 31,
						2010								2009
								2011								2010
						Deferred
								Unamortized
	Interest			Maturity		Financing
								Deferred
	Rate (a)			Date		Costs				Debt				Debt
	Interest Rate (a)			Maturity Date				Financing Costs				Debt				Debt
										~~(in 000s)~~		(in 000s)
Senior ABL Revolving Facility		3.56	%	(b)		$	14,996			$	295,195			$	401,195
New Senior ABL Revolving Facility		2.75	%	Feb. 2016				$	21,942			$	374,000			$	—
Second Lien Term Facility		9.83	%	Nov. 2013			5,675				479,395				479,395
Old Senior ABL Revolving Facility		n/a			(b)				—				—				304,195
2014 Notes		9.50	%	Dec. 2014			12,542				620,000				620,000
Second Lien Term Facility		n/a			(c)				—				—				479,395
2017 Notes		10.50	%	Jul. 2017			8,568				400,000				400,000
2014 Notes		9.50	%	Dec. 2014					9,148				503,000				620,000
2019 Notes		10.50	%	Nov. 2019			4,977				200,000				200,000
2017 Notes		10.50	%	Jul. 2017					8,126				400,000				400,000
Capitalized lease obligations		1.16	%	Various			—				78,722				84,833
2019 Notes		10.50	%	Nov. 2019					4,813				200,000				200,000
Total						$	46,758				2,073,312				2,185,423
2021 Notes		8.25	%	Feb. 2021					14,280				650,000				—
Original issue discounts (c)		n/a		n/a							(12,488	)			(13,314	)
Capitalized lease obligations (d)		1.59	%	Various					—				77,274				77,788
Total, net										$	2,060,824			$	2,172,109
Total								$	58,309				2,204,274				2,081,378
Original issue discounts (e)		n/a			n/a								(11,898	)			(12,197	)
Total												$	2,192,376			$	2,069,181

(a) Estimated interest rate presented is the effective interest rate as of ~~September~~March 3031, ~~2010~~2011 including the effect of ~~interest rate swaps and~~ original issue discounts, where applicable, and excluding the effects of deferred financing costs. (b) OfIn February 2011, the Company repaid the outstanding balance of the Old Senior ABL Revolving Facility and replaced it with the New Senior ABL Revolving Facility due February 2016. As a result, the Company classified the outstanding balance on the Old Senior ABL Revolving Facility as long-term debt at ~~September~~December 3031, 2010. Had the Company not entered into the New Senior ABL Revolving Facility, $7678.14 million isof ~~due~~the ~~November~~outstanding ~~2011~~balance (on the ~~“Non-Extending”~~Old ~~portion)~~Senior ABL Revolving Facility at December 31, 2010 would have been due November 2011 with the remaining $~~219~~225.18 million due August 2013. See “New Senior ABL Revolving Facility” below for additional information. (c) In January 2011, the Company repaid the $479.4 million outstanding balance on the Second Lien Term Facility using proceeds received from the sale of the 2021 Notes. See “~~Extending~~$650.0 million Senior Unsecured Notes Offering” ~~portion~~below for additional information. (d) Capital leases include $25.6 million and $51.7 million of obligations that are classified as current and long-term debt, respectively, at March 31, 2011. (ce) The original issue ~~discount~~discounts ~~represents~~represent 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.

As of ~~September~~March 3031, ~~2010~~2011, the Company had $~~674~~640.08 million available for borrowing under the New Senior ABL Revolving Facility. A portion of the New Senior ABL Revolving Facility is available ~~for~~ for the issuance of letters of credit and swingline loans, which are seven day loans that can be ~~drawn~~ drawn on the same day as requested for an amount not to exceed $25.0 million. The Company is in compliance with all applicable debt covenants as of ~~September~~March 3031, ~~2010~~2011.

As of September 30, 2010, the estimated fair value of the Company’s debt was as follows (in 000s):

	Fair Value
Senior ABL Revolving Facility	$	295,195
Second Lien Term Facility		463,575
2014 Notes		644,180
2017 Notes		443,500
2019 Notes		212,500
Capitalized lease obligations		78,722
Total	$	2,137,672

In September 2007, the Company entered into four forward-starting interest rate swap agreements covering a combined notional amount of debt totaling $700.0 million. In January 2008, the Company entered into an additional interest rate swap agreement for a notional amount of $250.0 million. The objective of the swaps is to effectively hedge the cash flow risk associated with portions of the Second Lien Term Facility and Senior ABL Revolving Facility, which have variable interest rates. See Note 6 for additional information.

RSC HOLDINGS III, LLC AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued) (Unaudited)

~~(6)~~ As of March ~~Derivative~~31, ~~Instruments~~2011, the estimated fair value of the Company’s debt was as follows (in 000s):

The Company is exposed to market risk associated with changes in interest rates under existing floating-rate debt. At the Company’s election, the interest rate per annum applicable to the debt under the Senior ABL Revolving Facility and the Second Lien Term Facility is based on a fluctuating rate of interest measured by reference to an adjusted London interbank offered rate, or (“LIBOR”), plus a borrowing margin; or an alternate base rate plus a borrowing margin. In order to hedge exposure to market conditions, reduce the volatility of financing costs and achieve a desired balance between fixed-rate and floating-rate debt, the Company utilizes interest rate swaps under which it exchanges floating-rate interest payments for fixed-rate interest payments. The Company does not use derivative financial instruments for trading or speculative purposes.


	Fair Value
New Senior ABL Revolving Facility	$	374,000
2014 Notes		526,893
2017 Notes		454,000
2019 Notes		209,000
2021 Notes		677,625
Capitalized lease obligations		77,274

Total	$	2,318,792

In September 2007, the Company entered into four forward-starting interest rate swap agreements under which it exchanged benchmark floating-rate interest payments for fixed-rate interest payments. The agreements were intended to hedge only the benchmark portion of interest associated with a portion of the Second Lien Term Facility. Interest on this debt is based on a fluctuating rate of interest measured by reference to a benchmark interest rate, plus a borrowing margin, which was 3.5% for the LIBOR option at September 30, 2010. The agreements were designed to cover a combined notional amount of debt totaling $~~700~~650.0 million, ofSenior ~~which~~Unsecured $500.0 million was for a five-year period with a weighted average fixed interest rate of 4.66%, and $200.0 million was for a three-year period with a weighted average fixed interest rate of 4.57%. The swaps were effective on October 5, 2007 and are settled on a quarterly basis. In October 2009, the Company reduced the notional amount of one interest rate swap from $100.0 million to approximately $71.5 million thereby reducing the combined notional amount from $700.0 million to $671.5 million. In November 2009, the Company entered into two additional interest rate swap agreements under which it exchanged fixed-rate interest payments for floating-rate interest payments (the “reverse swaps”). The reverse swaps cover a combined notional amount of debt totaling $192.1 million, of which $20.6 million is for a three-year period with a fixed interest rate of 1.51%, and $171.5 million is for a one-year period with a fixed interest rate of 0.32%. The reverse swaps are intended to offset a portion of the fixed-rate payments the Company is making under swap agreements that were de-designated as cash flow hedges in November 2009 upon the Company prepaying $192.1 million of principal on the Second Lien Term Facility using proceeds from the issuance of the 2019 Notes. ~~The~~Offering reverse swap with a notional amount of $171.5 million expired on October 5, 2010. Two of the original swaps with a combined notional amount of $171.5 million also expired on October 5, 2010. At September 30, 2010, the combined notional amount of interest rate swaps designated as cash flow hedges was $479.4 million, which was equal to the outstanding balance on the Second Lien Term Facility.

~~The~~On ~~Company~~January 19, ~~entered~~2011, ~~into~~the anCompany ~~additional~~completed ~~interest~~a ~~rate~~private ~~swap~~offering ~~agreement~~of ~~in January~~$650.0 ~~2008,~~million ~~under~~aggregate ~~which~~principal itamount ~~exchanged~~of ~~benchmark~~8.25% ~~floating-rate~~senior ~~interest~~unsecured ~~payments~~notes ~~for~~due ~~fixed-rate~~February 2021 ~~interest~~(the ~~payments~~“2021 Notes”). The ~~This~~proceeds ~~swap~~from ~~was~~the ~~intended~~sale of the 2021 Notes were used to ~~hedge~~repay the ~~benchmark~~outstanding balance on the Company’s Second Lien Term Facility, which totaled $479.4 million plus accrued interest of $0.7 million, redeem a portion of the 2014 Notes as described below, settle the Company’s outstanding interest ~~associated~~rate ~~with~~swap obligations of $35.1 million and pay a portion of the transaction costs incurred ~~Senior~~with ~~ABL~~the ~~Revolving~~issuance ~~Facility~~of the 2021 Notes. ~~Interest~~The ontransaction ~~this~~costs, ~~debt~~which ~~was~~totaled ~~based~~$14.5 million, onwere capitalized aas ~~fluctuating~~deferred ~~rate~~financing ofcosts and are being amortized to interest expense over the term ~~measured~~of bythe ~~reference~~2021 toNotes ausing ~~benchmark~~the effective interest rate method. On February 21, ~~plus~~2011, athe ~~borrowing~~Company redeemed ~~margin~~$117.0 million ~~This~~of ~~agreement covered~~aggregate aprincipal ~~notional~~of ~~amount~~the Company’s 2014 Notes, paid accrued interest of ~~debt~~$2.5 million ~~totaling~~on the 2014 Notes and incurred a call premium of $~~250~~5.06 million, ~~for~~which was funded with the remaining proceeds from the 2021 Notes and in part from a ~~two-year~~draw ~~term~~on atthe Company’s New Senior ABL Revolving Facility. As a ~~fixed~~result ~~interest~~of the Second Lien Term Facility repayment and the partial ~~rate~~repayment of 2the 2014 Notes, the Company expensed $7.~~66%.~~3 million ~~The~~of ~~swap~~unamortized deferred financing costs, which ~~was~~together ~~settled~~with onthe a$5.6 million ~~quarterly~~in ~~basis~~call premiums, ~~was~~is ~~effective~~characterized as a loss on extinguishment ~~April~~of debt in the condensed consolidated statement of operations for the quarter ended March 531, ~~2008~~2011. The settlement of the Company’s interest rate swaps resulted in a charge of $33.9 ~~and~~million, ~~expired~~which onis ~~April~~characterized as interest expense in the condensed consolidated statement of operations for the quarter ended March 531, ~~2010~~2011.

~~The~~In ~~Company~~March 2011, ~~presents derivatives in~~ the ~~consolidated~~Company ~~balance~~initiated ~~sheet~~an asexchange ~~either~~offer ~~assets~~where ~~or liabilities depending on~~ the ~~rights~~holders orof ~~obligations under~~ the ~~contract.~~2021 ~~Derivatives are measured~~Notes ~~and~~could ~~reported~~exchange insuch ~~the~~unregistered ~~consolidated~~notes ~~balance~~for ~~sheets~~new, atregistered ~~fair value~~notes. AtThe ~~September 30,~~terms ~~2010~~of ~~and~~the ~~December 31~~new, ~~2009,~~registered notes ~~the~~offered ~~fair~~in ~~value of~~ the ~~Company’s~~exchange ~~interest~~offer ~~rate~~are ~~swaps~~identical in aall ~~liability~~material ~~position~~respects ~~totaled~~to ~~$39.1 million~~the ~~and~~terms ~~$42.8 million,~~of ~~respectively~~the unregistered notes, ~~and~~except ~~are~~that ~~classified within accrued expenses and other liabilities in~~ the ~~condensed~~new ~~consolidated~~notes ~~balance~~will ~~sheets.~~be Atregistered ~~September 30,~~under ~~2010,~~ the ~~fair~~Securities ~~value~~Act of 1933 ~~the~~and ~~Company’s~~will ~~interest~~not ~~rate~~contain ~~swap~~restrictions inon ~~an asset position totaled $0~~transfer.~~4 million,~~ ~~and~~The isCompany ~~classified within~~expects ~~other assets in~~ the ~~condensed~~exchange ~~consolidated~~offer ~~balance~~to ~~sheet~~close in April 2011.

~~The~~New ~~Company~~Senior ~~formally~~ABL ~~documents~~Revolving ~~its risk management objectives and strategy for undertaking~~Facility each swap at the contract’s inception and assesses whether the hedging relationship is expected to be highly effective in achieving cash flows that offset changes in interest payments resulting from fluctuations in the benchmark rate. For each of the Company’s four interest rate swaps that were executed in September 2007 as well as the interest rate swap that was executed in January 2008, the Company determined at inception that the hedging relationships were expected to

On February 9, 2011, the Company entered into the New Senior ABL Revolving Facility, which replaced its Old Senior ABL Revolving Facility, and borrowed $383.0 million of loans under the New Senior ABL Revolving Facility. The proceeds of these loans were used to repay the outstanding balance on the Company’s Old Senior ABL Revolving Facility, which totaled $370.2 million plus accrued interest and other fees of $1.1 million, and to pay a portion of transaction costs including legal fees. Total transaction costs of $12.3 million were capitalized as deferred financing costs and are being amortized to interest expense over the term of the New Senior ABL Revolving Facility. In addition, the Company wrote off $2.4 million of unamortized deferred financing costs associated with the Old Senior ABL Revolving Facility, which is included in the loss on extinguishment of debt in the condensed consolidated statement of operations for the three months ended March 31, 2011. The Company’s New Senior ABL Revolving Facility, which is due February 2016, provides commitments for aggregate borrowings of approximately $1,100.0 million subject to, among other things, the Company’s maintenance of a sufficient borrowing base under such facility. The borrowing base reporting requirements that the Company is subject to, under the New Senior ABL Revolving Facility are substantially similar to those under the Old Senior ABL Revolving Facility.

RSC HOLDINGS III, LLC AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued) (Unaudited)

be Interest ~~highly~~Rate ~~effective~~Swaps in mitigating the exposure to variability in expected cash flows arising from the Company’s floating-rate debt. As a result, the Company initially concluded that the interest rate swaps were hedges of specified cash flows. An assessment of the effectiveness of derivative instruments designated as cash flows hedges is performed at inception and on an ongoing basis. The Company evaluates the effectiveness of its remaining interest rate swaps designated as cash flow hedges on a quarterly basis using the perfectly effective hypothetical derivative method. Gains or losses resulting from changes in the fair value of derivatives designated as cash flow hedges are reported as a component of accumulated other comprehensive (loss) income for the portion of the derivative instrument determined to be effective. Gains and losses reported in accumulated other comprehensive (loss) income are reclassified into earnings as interest income or expense in the periods during which the hedged transaction affects earnings. Gains or losses resulting from changes in the fair value of derivatives designated as cash flow hedges are reported as interest expense for the portion of the derivative instrument determined to be ineffective. The ineffective portion of the derivatives qualifying as cash flow hedges totaled $157,000 and $62,000 at September 30, 2010 and December 31, 2009, respectively.

In September 2007, the Company entered into four forward-starting interest rate swap agreements covering a combined notional amount of debt totaling $700.0 million. The objective of the swaps was to effectively hedge the cash flow risk associated with a portion of the Second Lien Term Facility which had variable interest rates. In November 2009, the Company entered into two reverse swaps to offset a portion of the fixed rate payments under certain other swap agreements that were de-designated as cash flow hedges in November 2009. All interest rate swaps and reverse swaps in effect at December 31, 2010 were settled on January 19, 2011 in conjunction with the debt transactions described above. See Note 6 for additional information.

(6) Derivative Instruments

The Company is exposed to market risk associated with changes in interest rates under existing floating-rate debt. At the Company’s election, the interest rate per annum applicable to the Second Lien Term Facility, which was repaid in January 2011, was based on a fluctuating rate of interest measured by reference to an adjusted London interbank offered rate, or (“LIBOR”), plus a borrowing margin; or an alternate base rate plus a borrowing margin. To hedge exposure to market conditions, reduce the volatility of financing costs and achieve a desired balance between fixed-rate and floating-rate debt, the Company has utilized interest rate swaps under which it has exchanged floating-rate interest payments for fixed-rate interest payments. The Company does not use derivative financial instruments for trading or speculative purposes.

The Company formally documents its risk management objectives and strategy for undertaking each swap at the contract’s inception and assesses whether the hedging relationship is expected to be highly effective in achieving cash flows that offset changes in interest payments resulting from fluctuations in the benchmark rate. An assessment of the effectiveness of derivative instruments designated as cash flow hedges is performed on a quarterly basis using the perfectly effective hypothetical derivative method. Gains or losses resulting from changes in the fair value of derivatives designated as cash flow hedges are reported as a component of accumulated other comprehensive income (loss) for the portion of the derivative instrument determined to be effective. Gains and losses reported in accumulated other comprehensive income (loss) are reclassified into earnings as interest income or expense in the periods during which the hedged transaction affects earnings. Gains or losses resulting from changes in the fair value of derivatives designated as cash flow hedges are reported as interest expense for the portion of the derivative instrument determined to be ineffective. The ineffective portion of the liabilities for derivatives qualifying as cash flow hedges totaled $104,000 at December 31, 2010. As previously described, the Company settled all interest rate swaps in effect at December 31, 2010 on January 19, 2011. The Company does not have any outstanding interest rate swaps as of March 31, 2011. In connection with the Company’s interest rate swap settlements, the Company paid $35.1 million of which $33.9 million was recognized as interest expense in the three months ended March 31, 2011. The difference of $1.2 million was recognized as interest expense in November 2009 when certain of the Company’s interest rate swaps were de-designated as cash flow hedges.

When the Company’s derivative instruments are in a net liability position, the Company is exposed to its own credit risk. When the Company’s derivative instruments are in a net asset position, the Company is exposed to credit losses in the event of non-performance by counterparties to its hedging derivatives. To manage credit risks, the Company carefully selects counterparties, conducts transactions with multiple counterparties which limits its exposure to any single counterparty and monitors the market position of the program and its relative market position with each counterparty.

The fair value of liabilities associated with the Company’s interest rate swaps and cumulative losses resulting from changes in the fair value of the effective portion of derivative instruments designated as hedging instruments and recognized within accumulated other comprehensive loss (“OCL”) were as follows (in 000s):

September 30, 2010

December 31, 2009

September 30, 2010

December 31, 2009

Loss in

accumulated

Fair Value of

OCL

Derivative Type

Swap Liabilities

(net of tax) (b)

(net of tax)

Interest rate swaps designated as hedges (a)

37,435

35,755

22,739

21,772

Interest rate swaps not designated as hedges (a)

1,691

7,068

N/A

(a)		See Note 7 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.

The fair value of the asset associated with the Company’s interest rate swaps not designated as a hedge totaled $0.4 million at September 30, 2010.

The effect of derivative instruments on comprehensive loss for the nine months ended September 30, 2010 was as follows (in 000s):

Loss

Loss recognized in

Loss reclassified from

recognized on

accumulated OCL

accumulated OCL into

ineffective portion

Derivative Type

(net of tax)

expense (net of tax)

of derivative

Interest rate swaps

11,489

10,522

RSC HOLDINGS III, LLC AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued) (Unaudited)

~~For~~The ~~the~~fair ~~nine~~value ~~months~~of ~~ended~~liabilities ~~September 30,~~associated ~~2010,~~with the Company’s ~~recognized~~interest arate ~~net~~swaps ~~loss~~and ~~of $0.3~~cumulative ~~million~~losses onresulting ~~interest~~from ~~rate~~changes ~~swaps~~in ~~not~~the fair value of the effective portion of derivative instruments designated as hedging instruments. ~~The~~and ~~net~~recognized ~~loss was included~~ within ~~interest~~accumulated ~~expense,~~other ~~net~~comprehensive inincome (loss) ~~the~~(“OCIL”) ~~condensed~~were ~~consolidated~~as ~~statements~~follows of(in ~~operation.~~000s):

March 31, 2011

December 31, 2010

March 31, 2011

December 31, 2010

Fair

Loss in

Value of

Accumulated OCIL

Derivative Type

Swap Liabilities

(Net of Tax)(a)

(Net of Tax)

Interest rate swaps designated as hedges

n/a

32,285

n/a

19,630

Interest rate swaps not designated as hedges

n/a

1,388

n/a


(a)		The Company settled its interest rate swaps and reverse swaps in January 2011 and in doing so reclassified all related losses in accumulated other comprehensive income (loss) into earnings. See Note 5 for additional information.

The effect of derivative instruments on comprehensive loss for the three months ended March 31, 2011 was as follows (in 000s):

Loss Reclassified

Gain

Loss Recognized in

from Accumulated

Recognized on

Accumulated OCIL

OCIL into Expense

Ineffective Portion

Derivative Type

(Net of Tax)

of Derivatives

Interest rate swaps

—

19,630

104

For the three months ended March 31, 2011, the Company recognized a loss of $80,000 on interest rate swaps not designated as hedging instruments. The loss was included within interest expense, net in the condensed consolidated statement of operation.

(7) Fair Value

Measurements

Fair value is an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. As such, fair value is a market-based measurement that should be determined based on assumptions that market participants would use in pricing an asset or liability. GAAP establishes a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value as follows:

• 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.

~~Assets~~• ~~and~~Level ~~liabilities~~2 ~~measured~~— atInputs, ~~fair~~other ~~value~~than onthe aquoted ~~recurring~~prices ~~basis~~in asactive ~~of September 30~~markets, ~~2010~~ that are asobservable ~~follows~~either ~~(in~~directly ~~000s):~~ or indirectly; and

					Significant
			Quoted Prices in		Other
			Active Markets for		Observable		Significant
	Fair Value		Identical Assets		Inputs		Unobservable Inputs
	September 30, 2010		(Level 1)		(Level 2)		(Level 3)
Liabilities from interest rate derivatives (a)	$	39,126	$	—	$	39,126	$	—
Assets from interest rate derivatives (a)		362		—		362		—

•

Level 3 — Unobservable inputs in which there is little or no market data, which require the reporting entity to develop its own assumptions.

~~(a)~~ As ~~The~~of ~~Company’s~~March 31, ~~interest~~2011, ~~rate~~no ~~derivative~~assets ~~instruments~~or ~~are~~liabilities ~~not~~were ~~traded~~measured onat ~~a market exchange and therefore the~~ fair ~~values~~value ~~are determined using valuation models which include assumptions about interest rates and the Company’s and the counterparty’s credit risk based~~ on ~~those~~a ~~observed~~recurring inor nonrecurring ~~the underlying markets (LIBOR swap rate)~~basis.

As of September 30, 2010, no assets or liabilities were measured at fair value on a nonrecurring basis.

(8) Income Tax

The benefit for income taxes was $3.5 million and $7.0 million for the three months ended September 30, 2010 and 2009, respectively. The benefit for income taxes was due to a pre-tax net loss for the three months ended September 30, 2010 and 2009, respectively. The effective tax rate for the third quarter of 2010 and 2009 was 35.5% and 54.7%, respectively. The Company’s effective tax rate normally differs from the U.S. federal statutory rate of 35% primarily due to certain non-deductible permanent items, state income taxes and certain state minimum and gross receipts taxes, which are incurred regardless of whether the Company earns income. The effective tax rate for the third quarter of 2009 also includes a $2.7 million discrete income tax benefit relating to the true-up of the Company’s deferred tax liabilities from filing the Company’s 2008 federal, state and foreign tax returns.

RSC HOLDINGS III, LLC AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued) (Unaudited)

~~income. The effective tax rate for the 2009 nine month period also differs from the U.S. federal statutory rate due to a $2.7~~(8) ~~million~~Income ~~discrete income tax benefit~~Tax ~~noted above and an offsetting expense recognized during the second quarter of 2009 relating to the expiration of share appreciation rights granted by ACAB to certain employees of the Company.~~

~~During~~The benefit for income taxes was $30.1 million and $23.1 million for the three months ended ~~September~~ March 3031, 2011 and 2010, ~~the~~respectively. ~~Company~~The ~~released~~benefit ~~$1.0 million~~for ~~of unrecognized~~income ~~tax~~taxes ~~benefits~~was due to ~~reflect~~a pre-tax net loss for the ~~inclusion~~three ofmonths ~~uncertain~~ended March 31, 2011 and 2010, respectively. The effective tax ~~positions~~rate inwas 37.4% and 37.9% during the ~~2009~~three ~~Federal~~months ended March 31, 2011 and 2010, respectively. The Company’s effective tax ~~return~~rate normally differs from the U.S. ~~The~~federal ~~release~~statutory rate of ~~these~~35% ~~unrecognized~~primarily ~~tax~~due ~~benefits~~to certain ~~had~~non-deductible nopermanent ~~impact~~items, onstate income taxes and certain state minimum and gross receipts taxes, which are incurred regardless of whether the ~~benefit~~Company ~~for~~earns income. The Company’s ~~taxes~~effective ~~recognized~~tax rate decreased due to the effect of enacted state tax rate changes applied to the Company’s deferred balances, during the three months ended ~~September~~March 3031, ~~2010~~2011.

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~~Statements” 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~~2010 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~~March 3031, ~~2010~~2011 included in this Quarterly Report on Form 10-Q.

Overview

We are one of the largest equipment rental providers in North America. We operate through a network of ~~457~~446 rental locations across ten regions in 4041 U.S. states and three Canadian provinces. and service customers primarily in the industrial or non-construction, and non-residential construction markets. We rent a broad selection of equipment ranging from large equipment such as backhoes, forklifts, air compressors, scissor lifts, aerial work platform booms and skid-steer loaders to smaller items such as pumps, generators, welders and electric hand tools. We also sell used equipment, parts, merchandise and supplies for customers’ maintenance, repair and operations.

For the three months ended ~~September~~March 3031, ~~2010~~2011 and ~~September~~March 3031, ~~2009~~2010, we generated approximately 8783.41% and 8685.12% of our revenues from equipment rentals, respectively, and we derived the remaining 1216.~~6% and 13.~~9% ~~of our revenues from sales of used equipment, merchandise and other~~ ~~related items, respectively. For the nine months ended September 30, 2010~~ and ~~September 30, 2009, we generated approximately 86~~14.48% ~~and 83.5%~~ of our revenues from ~~equipment rentals, respectively, and we derived the remaining 13.6% and 16.5% of our revenues from~~ sales of used rental equipment, merchandise and other related items, respectively.

The following table summarizes our total revenues, loss before benefit for income taxes and net loss for the three ~~and nine~~ months ended ~~September~~March 3031, ~~2010~~2011 and ~~2009~~2010 (in 000s):

	Three Months Ended						~~Nine Months Ended~~
	September 30,						September 30,
	March 31,
	2010			2009			2010			2009
	2011			2010
Total revenues	$	~~333~~326,~~784~~920		$	~~315~~260,~~564~~740		$	~~895,521~~		$	~~993,395~~
Loss before benefit for income taxes		(980,~~964~~545	)		(1260,~~869~~959	)		~~(106,194~~	)		~~(50,563~~	)
Net loss		(650,~~422~~432	)		(537,~~835~~828	)		~~(66,365~~	)		~~(30,829~~	)

We manage our operations through the application of a disciplined, yet highly flexible business model, in which we utilize various financial and operating metrics to measure our operating performance and make decisions on the acquisition and disposal of rental fleet and the allocation of resources to and among our locations. Key metrics that we regularly review on a consolidated basis include Adjusted EBITDA, fleet utilization, average fleet age and original equipment fleet cost. The following is a summary of these key operating metrics:

	Three Months Ended (or at)						Nine Months Ended (or at)
	Three Months Ended
	September 30,						September 30,
	March 31,
	2010			2009			2010			2009
	2011			2010
Adjusted EBITDA (in millions) (a)	$	~~118~~98.8		$	~~107~~66.30		$	~~276.8~~		$	~~322.8~~
Fleet utilization (b)		6863.76	%		5854.98	%		~~62.4~~	%		~~58.0~~	%
Average fleet age at period end (months) (c)		43			3842			43			38
Original equipment fleet cost (in millions) (d)	$	2,375		$	2,394		$	2,375		$	2,394
Original equipment fleet cost at period end (in millions) (d)	$	2,408		$	2,301

(a) Defined as consolidated net income (loss) before net interest expense, income taxes and depreciation and amortization and before certain other items, including ~~gain~~loss 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 and reconciliation between net cash provided by operating activities 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 or “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.

For the three ~~and nine~~ months ended ~~September~~March 3031, ~~2010~~2011, Adjusted EBITDA increased $1132.~~5 million and decreased $46.0~~8 million, ~~respectively,~~ from $~~107~~66.3 0 million in the ~~third~~first quarter of ~~2009~~ 2010 to $~~118~~98.8 million in the ~~third~~first quarter of ~~2010~~2011. ~~and~~The ~~from~~ $~~322~~32.8 million ~~for~~increase ~~the~~in ~~nine~~Adjusted ~~months~~EBITDA ~~ended September 30,~~in ~~2009 to $276.8 million for~~ the ~~nine~~three months ended ~~September~~March 3031, ~~2010.~~2011 ~~The~~was due to a $1129.59 million ~~Adjusted EBITDA~~ increase in ~~the~~equipment ~~three~~rental ~~months~~margins, ~~ended~~excluding ~~September 30~~depreciation, ~~2010~~and ~~was~~a ~~due primarily to an 11~~$9.8%1 million increase in used rental ~~volume~~equipment ~~net~~sales ofmargins offset by a 7$6.7%0 million increase in ~~cost~~selling, ofgeneral ~~equipment~~and administrative ~~rentals~~expenses. Equipment rental margins, excluding depreciation, ~~partially~~were ~~offset~~higher byduring the 2011 three-month period due to a 420.43% ~~decline~~increase in rental ~~rates.~~volume ~~Also~~and ~~contributing~~a to2.0% ~~the~~ increase in ~~Adjusted~~rental rates. ~~EBITDA~~Used ~~were~~rental ~~increased~~equipment margins onwere ~~used~~higher ~~equipment~~during ~~sales~~the ~~compared~~three tomonths ~~the~~ended ~~prior year quarter~~March 31, ~~and~~2011 adue to ~~$1.0 million~~an ~~gain~~improvement ~~related~~in tomargins ~~the~~on ~~settlement~~used ofrental aequipment ~~lawsuit~~sold inthrough ~~the~~both ~~current~~retail ~~quarter.~~and auction channels. The ~~quarter~~increase ~~over~~in ~~quarter~~selling, ~~contributions~~general toand ~~Adjusted~~administrative ~~EBITDA~~expenses ~~were~~was ~~offset~~driven by anincreases ~~increase~~ in ~~selling,~~ ~~general~~administrative and ~~administrative~~sales force wages as well as travel and meeting expenses.

~~The~~For ~~$46.0 million~~the ~~decrease~~three inmonths ~~Adjusted~~ended ~~EBITDA~~March 31, ~~for~~2011, ~~the~~our ~~nine~~utilization ~~months~~increased ~~ended~~880 ~~September 30~~basis points, ~~2010~~ as compared to the same prior year, isperiod ~~due~~despite ~~primarily~~an toapproximate ~~a 7.7~~3% ~~decrease in rental rates, offset by a 1.0%~~ increase in ~~rental~~average ~~volume~~OEC. ~~Equipment rental margins were lower during the current year period due~~The ~~primarily to the decrease in rental rates and to a lesser extent an~~ increase in ~~freight,~~utilization ~~fuel, and equipment repairs and maintenance. Offsetting these negative factors~~ was adriven ~~$9.0 million~~primarily ~~decrease in~~by ~~closure~~rising ~~and~~demand ~~severance~~for ~~costs~~our asrental ~~compared to the prior year period~~equipment.

~~For~~Average ~~the~~fleet ~~three~~age ~~and~~at ~~nine~~March 31, ~~months~~2011 ~~ended~~was ~~September~~43 30months, ~~2010,~~up ~~our~~one ~~utilization increased 980 basis points and 440 basis points~~month, asfrom ~~compared~~42 months toat ~~the same prior year periods. The increase was due to a combination of rising demand for our rental equipment and a decline in OEC~~March 31, ~~resulting from our~~ ~~initiative~~2010. toRental ~~adjust our~~ fleet ~~levels~~purchases, towhich ~~more~~totaled ~~appropriately match our business needs~~$440.1 million ~~During 2009 our utilization continued to decline due to lower demand for our rental equipment brought on by a weakening of demand~~ in the ~~non-residential~~twelve construction market and to a lesser extent, a weakening of demand in the industrial or non-construction markets. This weakening of demand continued into the first quarter of 2010 as utilization for the three months ended March 31, ~~2010 was lower than~~ ~~the~~2011, ~~comparable~~were ~~prior~~not ~~year~~at ~~period.~~a ~~Market~~pace ~~conditions~~sufficient ~~improved~~to ~~during~~offset the ~~second~~growth ~~and third quarters of 2010 resulting~~ in ~~strengthening~~overall ~~demand for our rental equipment as~~ fleet ~~on rent increased approximately 48% at September 30, 2010 as compared to December 31, 2009~~age. ~~This compares to a~~ ~~decrease of approximately 6% at September 30, 2009 as compared to December 31, 2008.~~

~~Average~~OEC ~~fleet age~~ at ~~September~~March 3031, ~~2010~~2011 was 43$2,408 ~~months~~million, up ~~five~~4.7% ~~months,~~ from 38$2,301 ~~months~~million at ~~September~~ March 3031, ~~2009~~2010. The increase inconsists ~~2010~~primarily ~~resulted~~of ~~from~~rental aequipment ~~reduction~~purchases inof ~~capital~~approximately ~~expenditures~~$440 million ~~during~~in the ~~2009.~~twelve ~~During~~months ~~times~~ended ~~of weakening demand~~March 31, we2011 ~~deliberately~~offset ~~allow~~primarily ~~our~~by used equipment tosales ~~age~~at ~~and~~OEC ~~reduce capital expenditures~~ in ~~order~~the totwelve months ~~maximize~~ended ~~cash~~March 31, ~~flow~~2011.

~~OEC~~Business atEnvironment ~~September 30, 2010 was $2,375 million, down 0.8% from $2,394 million at September 30, 2009. Higher than normal sales experienced in the fourth quarter of 2009~~ and ~~continuing into 2010,~~Outlook ~~were largely offset by increased capital expenditures in the nine months ended September 30, 2010.~~

Our revenues and operating results are driven in large part by activities in the industrial or non-construction market and the non-residential construction market. On a combined basis we currently derive approximately 97% of our rental revenues from these two markets.

The industrial or non-construction market generated approximately 62% of our rental revenues during the three months ended March 31, 2011. The non-residential construction market generated approximately 35% of our rental revenues during the three months ended March 31, 2011. Generally, the industrial or non-construction market is less exposed to cyclicality than the non-residential construction market.

~~Business~~ In the ~~Environment~~beginning of 2010, demand for our rental equipment remained weak and ~~Outlook~~year over year rental rates were negative due to a continuation of the economic recession, which began in late 2008. During the second quarter of 2010 and continuing through the end of the first quarter of 2011, market conditions improved, which translated into strengthening demand for our rental equipment as fleet on rent increased approximately 16.2% at March 31, 2011 as compared to March 31, 2010. In addition, fleet utilization for the quarter ended March 31, 2011 was 63.6%, an increase of 880 basis points from 54.8% for the quarter ended March 31, 2010. The increase in fleet utilization was despite an approximate 3% increase in average OEC in the 2011 versus 2010 first quarter. The increased demand for our rental equipment also contributed to improved pricing as rental rates increased 2.0% in the first quarter of 2011 as compared to the first quarter of 2010. We expect year-over-year rental rates, fleet on rent and utilization in the second quarter of 2011 to be favorable to the second quarter of 2010. Year-over-year comparisons for rental revenues in the second quarter of 2011 are also expected to be favorable.

Our revenues and operating results are driven in large part by activities in the industrial or non-construction markets and the non-residential construction market. On a combined basis we currently derive approximately 97% of our rental revenues from these two markets.

Non-residential construction markets generated approximately 38% of our rental revenues during the nine months ended September 30, 2010. Industrial or non-construction markets generated approximately 59% of our rental revenues during the nine months ended September 30, 2010. During 2009, we saw a continued weakening of demand in the non-residential construction market which resulted in a decrease in the demand for our rental equipment and downward pressure on our rental rates. These trends continued into the first quarter of 2010. Demand in the industrial or non-construction markets also weakened through 2009, however, not to the same extent as the non-residential construction market. Generally, industrial or non-construction markets are less exposed to cyclicality than the non-residential construction market. We responded to the economic slowdown by employing a number of financial and operational measures, which enabled us to right-size our business, generate positive cash flow and utilize any excess cash flow to repay outstanding amounts on our Senior ABL Revolving Facility.

During the second quarter of 2010 and continuing throughout the third quarter of 2010, market conditions began to show signs of improvement, which translated into strengthening demand for our rental equipment as fleet on rent increased approximately 48% at September 30, 2010 as compared to December 31, 2009. This compares to a decrease of approximately 6% at September 30, 2009 as compared to December 31, 2008. In addition, fleet utilization for the three months ended September 30, 2010 was 68.7%, an increase of 980 basis points from 58.9% for the three months ended September 30, 2009. Although rental rates declined 7.7% in the nine months ended September 30, 2010, the year over year rental rate decline in the third quarter of 2010 was 4.4%, which represents a sequential improvement of 400 bps and 550 bps from the year over year rental rate declines of 8.4% and 9.9% in the quarters ended June 30, 2010 and March 31, 2010, respectively. We expect year over year rental rates to be negative in the fourth quarter of 2010 but favorable compared to the 4.4% decline in the third quarter of 2010. We also expect fleet on rent and utilization to continue to compare favorably to the prior year during the fourth quarter of 2010 and while pricing remains challenging, year-over-year comparisons for rental revenues for the fourth quarter of 2010 are expected to be favorable.

Factors Affecting Our Results of Operations

Our revenues and operating results are driven in large part by activities in the industrial or non-construction ~~markets~~market and the non-residential construction market. These markets are cyclical with activity levels that tend to increase in line with growth in gross domestic product and decline during times of economic weakness; however, the industrial or non-construction ~~markets~~market ~~are~~is historically less exposed to cyclicality than the non-residential construction ~~markets~~market. In addition, activity in the construction market tends to be susceptible to seasonal fluctuations in certain parts of the country. This results in changes in demand for our rental equipment. The cyclicality and seasonality of the equipment rental industry result in variable demand and, therefore, our revenues and operating results may fluctuate from period to period.

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~~represents sales of contractor supplies, replacement parts, 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.

Selling, general and administrative costs primarily include sales force compensation, information technology costs, advertising and marketing costs, professional fees and administrative overhead.

Depreciation and amortization of non-rental equipment and intangibles consists of straight-line depreciation of vehicles and equipment used to support our operations, leasehold improvements and amortization of intangible assets with finite useful lives.

Other operating (gains) losses, net are gains and losses resulting from the disposition of non-rental assets. Other operating gains and losses represent the difference between proceeds received upon disposition of non-rental assets (if any) and the net book value of the asset at the time of disposition. Other operating (gains) losses, net also include insurance proceeds from rental and equipment claims in excess of losses incurred ~~as well as proceeds received in connection with legal settlements~~.

Three Months Ended ~~September~~March 3031, ~~2010~~2011, Compared to Three Months Ended ~~September~~March 3031, ~~2009~~2010

The following table sets forth for each of the periods indicated our statements of operations data and expresses revenue and expense data as a percentage of total revenues for the periods presented (in 000s):

							Percent of Revenue
	Three Months Ended						Three Months Ended
	September 30,						September 30,						Increase (decrease)
	March 31,						March 31,						Increase (Decrease)
	2010			2009			2010			2009			2010 versus 2009
	2011			2010			2011			2010			2011 versus 2010
	(unaudited)
Revenues:
Equipment rental revenue	$	~~291~~271,~~671~~775		$	~~271~~222,~~547~~213			8783.41	%		8685.12	%	$	2049,~~124~~562		722.43	%
Sale of merchandise		12,~~897~~652			1211,~~633~~421			3.9			4.04			~~264~~1,231		210.18
Sale of used rental equipment		2942,~~216~~493			3127,~~384~~106			813.70			910.94			(215,~~168~~387	)	(656.98	)
Total revenues		~~333~~326,~~784~~920			~~315~~260,~~564~~740			100.0			100.0			1866,~~220~~180		525.84
Cost of revenues:
Cost of equipment rentals, excluding depreciation		~~149~~148,~~445~~976			~~138~~129,~~723~~292			4445.86			4449.06			1019,~~722~~684		715.72
Depreciation of rental equipment		6870,~~878~~889			7066,~~169~~645			2021.67			2225.26			(14,~~291~~244	)	(16.84	)
Cost of merchandise sales		98,~~312~~442			8,~~775~~074			2.86			23.81			~~537~~368		64.16
Cost of used rental equipment sales		2430,~~575~~970			3024,~~117~~637			79.45			9.54			(56,~~542~~333	)	~~(18~~25.47	)
Total cost of revenues		~~252~~259,~~210~~277			~~247~~228,~~784~~648			7579.63			7887.57			430,~~426~~629		113.84
Gross profit		8167,~~574~~643			6732,~~780~~092			2420.47			2112.53			1335,~~794~~551		20110.48
Operating expenses:
Selling, general and administrative		3441,~~511~~718			3135,~~970~~712			1012.38			1013.17			26,~~541~~006		716.98
Depreciation and amortization of non-rental equipment and intangibles		10,~~012~~225			10,~~696~~057			3.01			3.49			~~(684~~168	)	(61.47	)
Other operating gains, net		(~~1,167~~719	)		(~~119~~2,312	)		(0.32	)		—(0.9	)		(1,~~048~~593	)	n/a
Total operating expenses, net		4351,~~356~~224			4243,~~547~~457			1315.07			1316.57			~~809~~7,767		117.9
Operating income		38,218			25,233			11.4			8.0			12,985		51.5
Operating income (loss)		16,419			(11,365	)		5.0			(4.4	)		27,784		n/a
Interest expense, net		4881,~~446~~959			5049,~~666~~793			1425.51			1619.1			(232,~~220~~166	)	(464.46	)
Gain on extinguishment of debt, net		—			(12,489	)		—			(4.0	)		12,489		n/a
Loss on extinguishment of debt		15,342			—			4.7			—			15,342		n/a
Other income, net		(~~264~~337	)		(75199	)		(0.1	)		—(0.1	)		(~~189~~138	)	n/a
Loss before benefit for income taxes		(980,~~964~~545	)		(1260,~~869~~959	)		(324.06	)		(423.14	)		2(19,~~905~~586	)	n/a
Benefit for income taxes		330,~~542~~113			723,~~034~~131			19.12			28.29			(36,~~492~~982	)	n/a
Net loss	$	(650,~~422~~432	)	$	(537,~~835~~828	)		(115.94	)%		(114.85	)%	$	(~~587~~12,604	)	n/a

Total revenues increased $1866.2 million, or 525.84%, from $~~315~~260.67 million for the three months ended ~~September~~March 3031, ~~2009~~2010 to $~~333~~326.89 million for the three months ended ~~September~~March 3031, ~~2010~~2011. Equipment ~~rental~~ rental revenue increased $2049.16 million, or 722.43%, from $~~271~~222.52 million for the three months ended ~~September~~ March 3031, 2010 ~~2009~~ to $~~291~~271.68 million for the three months ended ~~September~~March 3031, ~~2010~~2011. The increase in equipment rental revenue is primarily the result of a $3245.02 million, or 1120.83%, increase in rental volume ~~offset~~and bya an $114.9 4 million, or 42.40%, ~~decrease~~increase in rental rates. The increase in rental volume is inclusive of a $1.0 1 million increase due to currency rate changes.

Sale of merchandise revenues increased $01.32 million, or 210.18%, from $1211.64 million for the ~~three~~ three months ended ~~September~~March 3031, ~~2009~~2010 to $12.97 million for the three months ended ~~September~~March 3031, ~~2010~~2011. The increase was driven primarily by increases in parts and new equipment sales of $0.5 million and $0.4 million, respectively. The increase in parts is due primarily to ~~normal~~an ~~operating~~increase ~~activity~~in rental revenue and the increase in new equipment sales is due primarily to mix.

Revenues from the sale of used rental equipment ~~decreased~~increased $215.24 million, or 656.98%, from $3127.41 million for the three months ended ~~September~~March 3031, ~~2009~~2010 to $2942.25 million for the three months ended March ~~September 30~~31, ~~2010~~2011. The ~~decrease~~increase was due to aan 15approximate 40% ~~decrease~~increase in volume ~~offset~~combined bywith improved pricing in both auction and retail channels.

~~During~~Used ~~2010,~~equipment ~~we intentionally slowed our~~ sales ofat ~~certain~~OEC ~~categories of used rental equipment as compared to the prior year period in order to preserve fleet in response to rising demand. Increased demand~~ for ~~our rental equipment in~~ the ~~third quarter of 2010 was evidenced by our fleet utilization, which increased 980 basis points to 68.7% from 58.9% for the~~ three months ~~ended~~ ~~September~~ended March 3031, ~~2009.~~2011 ~~During~~totaled ~~the third quarter of 2010 we also purchased~~ $~~118~~90.73 million ofand ~~new rental fleet. Our sales of used rental equipment in the third quarter of 2010~~ represent a normal part of the rental fleet life cycle.

Cost of equipment rentals, excluding depreciation, increased $1019.7 million, or 715.72%, from $~~138~~129.73 million for the three months ended ~~September~~March 3031, ~~2009~~2010 to $149.40 million for the three months ended ~~September~~March 3031, ~~2010~~2011, due primarily to the 1120.83% increase in rental volume. ~~Despite~~Cost ~~the increase in rental volume, cost~~ of equipment rentals excluding depreciation, as a percentage of equipment rental revenues ~~increased~~decreased ~~slightly~~from ~~to 51~~58.2% for the three months ended ~~September~~March 3031, 2010, upto 054.18% ~~from~~for the three months ended ~~September~~March 3031, ~~2009~~2011. ~~This increase was primarily~~ ~~attributable to a 4.4% decrease in rental rates.~~

Depreciation of rental equipment ~~decreased~~increased $14.32 million, or 16.84%, from $7066.26 million for the three months ended ~~September~~March 3031, ~~2009~~2010 to $6870.9 million for the three months ended ~~September~~March 3031, ~~2010~~ 2011. The increase ~~decrease~~ in depreciation of rental equipment ~~resulted~~was ~~from~~due ~~our~~largely ~~actions~~to ~~throughout~~an ~~2009~~approximate 3% increase in toaverage ~~reduce~~OEC. The increase in average OEC was driven by $157.9 million of rental ~~fleet~~equipment purchases, net of $90.3 million of used equipment sales at OEC in ~~response~~the tothree ~~weakened~~months ~~demand~~ended March 31, 2011. As a percent of equipment rental revenues, depreciation of rental equipment decreased from 25 30.80% in the three months ended ~~September~~March 3031, ~~2009~~ 2010 to 2326.61% in the three months ended ~~September~~March 3031, ~~2010~~2011. This decrease was due primarily to an increase in fleet utilization during the ~~third~~first quarter of 2011 ~~2010~~ as compared to the ~~third~~first quarter of 2010, and to a smaller extent, an increase in rental ~~2009~~rates.

Cost of merchandise sales increased $0.54 million, or 64.16%, from $8.81 million for the three months ended ~~September~~March 3031, ~~2009~~2010 to $98.34 million for the three months ended ~~September~~March 3031, ~~2010~~2011. ~~due~~The increase consisted of increases in ~~part~~the tocost aof ~~2.1%~~new ~~increase~~equipment insales and parts sales ~~volume~~of $0.4 million and $0.5 million, respectively, offset by a ~~change~~decrease in the cost of non-stock sales ~~mix~~of $0.2 million. Gross margin for merchandise sales ~~decreased~~increased from 3029.53% for the three months ended ~~September 30~~March 31, ~~2009~~2010 to 2733.83% for the three months ended ~~September~~March 3031, ~~2010~~2011 due primarily to margin ~~declines~~improvements on non-stock ~~and parts~~ sales.

Cost of used rental equipment sales ~~decreased~~increased $56.53 million, or 1825.47%, from $3024.16 million for the three months ended ~~September~~March 3031, ~~2009~~2010 to $2431.60 million for the three months ended ~~September~~March 3031, ~~2010.~~ 2011. The ~~decrease~~increase is due primarily to aan ~~decline~~increase in the volume ~~in sales~~ of used rental equipment ~~for~~sold during the three months ended ~~September~~March 3031, ~~2010~~2011. Gross margin for the sale of used rental equipment ~~increased~~ increased from 49.01% for the three months ended ~~September~~March 3031, ~~2009~~2010 to 1527.91% for the three months ended ~~September~~March 3031, ~~2010~~ 2011. The increase was ~~due~~reflected ~~to improvements~~ in higher margins on used equipment sold through both retail and auction channels and was driven by strengthening demand for used rental equipment.

Selling, general and administrative expenses increased $26.50 million, or 716.98% , from $3235.07 million for the three months ended ~~September~~March 3031, ~~2009~~2010 to $3441.57 million for the three months ended March ~~September 30~~31, ~~2010~~2011. The increase is due primarily to increases in administrative and sales force wages and benefits as well as travel and meeting costs. Administrative and sales force wages and benefits increased $4.0 million in the 2011 versus 2010 first quarter and consisted primarily of a $32.2 million increase in sales commissions, a $1.1 million increase in direct wages and ~~benefits~~a $0.9 million increase in variable compensation. The increase in sales commission was due primarily to increases in equipment rental revenues and the sale of used rental equipment. The increase in direct wages was due primarily to an increase in headcount. On a combined basis, travel and meeting costs increased approximately $1.8 million. These increases were offset by a $0.95 million decrease in our provision for doubtful accounts. Selling, general and administrative expenses ~~increased~~decreased ~~slightly~~ as a percentage of total revenues from 1013.17% for the three months ended ~~September~~March 3031, ~~2009~~2010 to 1012.38% for the three months ended ~~September~~March 3031, ~~2010~~2011.

Depreciation and amortization of non-rental equipment and intangibles ~~decreased~~increased $0.72 million, or 61.47%, from $10.71 million for the three months ended ~~September~~March 3031, ~~2009~~2010 to $10.02 million for the three months ended ~~September~~March 3031, ~~2010~~2011. The ~~decrease~~increase is ~~primarily~~ due to aan ~~smaller~~increase ~~fleet~~in ofdepreciation on ~~capitalized~~non-rental ~~leased~~ vehicles ~~during~~and ~~the~~trailers ~~three months ended September 30, 2010 as compared to the three months ended September 30, 2009. To a lesser extent, the decrease was also~~ due to a ~~decrease in~~larger ~~the net book value of leasehold improvements, which resulted from leasehold improvements that had reached the end of their useful lives~~fleet.

Other operating gains, net ~~for~~were $0.7 million in the three months ended ~~September~~March 3031, ~~2010~~2011 ~~includes~~and consisted primarily of gains on the ~~receipt~~ sale of adelivery trailers. Other operating gains, net were $2.3 million in the three months ended March 31, 2010 and consisted primarily of $1.07 million ~~legal~~of proceeds ~~settlement~~received from our insurance carrier for rental equipment and property claims attributable to hurricane damage. This gain represents proceeds in excess of

Interest expense, net decreased $2.2 million, or 4.4%, from $50.7 million for the three months ended September 30, 2009 to $48.4 million for the three months ended September 30, 2010, due to the combination of lower debt levels, the April 2010 expiration of the interest rate swap on our Senior ABL Revolving Facility and the de-designation of certain interest rate swaps in the fourth quarter of 2009, which resulted in the accelerated recognition

ofpreviously ~~interest~~indemnified ~~expense that would have been incurred during 2010 had the de-designation not occurred~~losses. ~~The impact of these factors was offset by higher interest rates under our 2019 Notes as~~ ~~compared~~Recoveries ~~to interest rates on our Second Lien Term Facility. The 2019 Notes were issued~~ in ~~the fourth~~excess ~~quarter~~ of ~~2009~~losses ~~and~~incurred ~~the~~are ~~net~~considered ~~proceeds~~gain ~~were~~contingencies ~~used~~and toare ~~partially~~not ~~repay the outstanding balance on~~recognized ~~the~~until ~~Second~~they ~~Lien~~are ~~Term Facility~~received.

~~Gain~~Interest onexpense ~~extinguishment of debt, net~~ was $1282.50 million ~~for~~in the three months ended ~~September~~March 3031, ~~2009~~ ~~and~~2011, ~~consists~~up ~~of a~~ $1632.2 million from ~~net~~$49.8 million ~~gain~~for ~~from~~ the ~~pay-down~~three ofmonths ~~our~~ended ~~Second~~March 31, ~~Lien~~2010. ~~Term~~The ~~Facility offset~~increase bywas adue ~~$3.7 million~~to ~~loss from~~ the settlement ~~extinguishment~~ of our ~~Senior~~interest ~~ABL~~rate ~~Term~~swaps ~~Loan.~~and ~~The~~reverse ~~$16.2 million~~swaps ~~net~~in ~~gain~~January 2011 ~~associated~~net ~~with~~of ~~the~~lower ~~Second~~debt ~~Lien~~rates ~~Term~~on our ~~Facility~~2021 ~~includes~~Notes aas ~~$20.6 million~~compared ~~gain,~~to ~~which represents~~ the ~~difference~~average ~~between~~rate on ~~carrying~~our ~~value of the~~ Second Lien Term Facility, ~~and~~which ~~the repurchase~~was ~~price~~repaid ~~offset~~in ~~by $1.9~~January ~~million~~2011 ~~of creditor~~ and ~~third~~the ~~party~~rate ~~fees~~on ~~incurred~~our ~~to amend and~~2014 ~~pay-down~~Notes, ~~the~~which ~~Second~~were ~~Lien~~partially ~~Term~~repaid ~~Facility~~in asFebruary 2011. ~~well~~In asconnection ~~$2.5 million~~with ofour ~~unamortized~~interest ~~deferred~~rate ~~financing~~swap ~~costs~~settlements, ~~that~~we ~~were~~paid ~~expensed~~$35.1 million ~~The~~of which $333.79 million ~~loss~~was ~~from~~recognized as interest expense in the three ~~extinguishment~~months ofended ~~our~~March 31, ~~Senior~~2011. ~~ABL~~The ~~Term Loan~~difference ~~includes~~of $1.42 million ofwas ~~creditor~~recognized ~~fees~~as tointerest expense ~~amend~~in ~~our~~November 2009 ~~ABL~~when ~~Facilities~~certain ~~credit~~of ~~agreement~~our ~~and~~interest ~~$2.3 million~~rate ofswaps ~~unamortized~~were ~~deferred~~de-designated ~~financing~~as ~~costs~~cash ~~that were expensed~~flow hedges.

~~The~~Loss ~~benefit~~on ~~for~~extinguishment ~~income~~of ~~taxes~~debt was $315.53 million ~~and $7.0 million~~ for the three months ended ~~September~~ March 3031, ~~2010~~2011 and ~~2009, respectively. The benefit for income taxes was due to a pre-tax net~~ ~~loss~~consists ~~for~~of (i) the ~~three~~write-off ~~months~~of ~~ended September~~$5.1 ~~30,~~million ~~2010~~of ~~and~~unamortized ~~2009,~~deferred ~~respectively.~~financing ~~The~~costs ~~effective tax rate~~associated ~~for~~with ~~the~~our ~~third~~Second ~~quarter~~Lien ofTerm ~~2010~~Facility, ~~and~~which ~~2009~~we ~~was~~repaid ~~35.5%~~in ~~and 54.7%~~January 2011, ~~respectively. Our effective tax rate normally differs from~~ (ii) the ~~U.S.~~write-off ~~federal statutory rate~~ of ~~35% primarily due to certain~~$2.2 ~~non-deductible~~million ~~permanent~~of ~~items,~~unamortized ~~state~~deferred ~~income~~financing ~~taxes~~costs and ~~certain~~$5.6 million ~~state~~of ~~minimum~~call ~~and~~premiums ~~gross~~associated ~~receipts~~with ~~taxes,~~partial ~~which~~repayment ~~are incurred regardless~~ of ~~whether~~our we2014 ~~earn~~Notes ~~income.~~in ~~The~~February 2011, ~~effective~~and ~~tax rate for~~ (iii) the ~~third~~ ~~quarter~~write-off of ~~2009 also includes a~~ $2.74 million ~~discrete~~of unamortized ~~income~~deferred ~~tax~~financing ~~benefit~~costs ~~relating~~associated towith the ~~true-up~~ ofOld ~~our~~Senior ~~deferred~~ABL ~~tax~~Revolving ~~liabilities~~Facility, ~~from~~which was ~~filing~~replaced ~~our~~with ~~2008~~the ~~federal,~~New ~~state~~Senior ~~and~~ABL ~~foreign~~Revolving ~~tax returns~~Facility in February 2011.

The benefit for income taxes was $30.1 million and $23.1 million for the three months ended March 31, 2011 and 2010, respectively. The benefit for income taxes was due to a pre-tax net loss for the three months ended March 31, 2011 and 2010. The effective tax rate was 37.4% and 37.9% during the three months ended March 31, 2011 and 2010, respectively. Our effective tax rate normally differs from the U.S. federal statutory rate of 35% primarily due to certain non-deductible permanent items, state income taxes and certain state minimum and gross receipts taxes, which are incurred regardless of whether we earn income. Our effective tax rate decreased due to the effect of enacted state tax rate changes applied to our deferred balances, during the three months ended March 31, 2011.

Liquidity and Capital Resources

Cash Flows and Liquidity

Our primary source of capital is from cash generated by our rental operations including cash received from the sale of used rental equipment, and secondarily from borrowings available under our New Senior ABL Revolving Facility. Our business is highly capital intensive, requiring significant investments in order to expand our rental fleet during periods of growth and smaller investments required to maintain and replace our rental fleet during times of weakening rental demand.

Cash flows from operating activities as well as the sale of used rental equipment enable us to fund our operations and service our debt obligations including the continued repayment of our New Senior ABL Revolving Facility. We continuously monitor utilization of our rental fleet and if warranted we divest excess fleet, which generates additional cash flow. In addition, due to the condition and relative age of our fleet, we have the ability to significantly reduce capital expenditures during difficult economic times, therefore allowing us to redirect this cash towards further debt reduction during these periods. The following table summarizes our sources and uses of cash for the three months ended March 31, 2011 and 2010:


	Three Months Ended
	March 31,
	2011			2010
	(in 000s)
Net cash provided by operating activities	$	59,184		$	65,481
Net cash used in investing activities		(116,278	)		(15,099	)
Net cash provided by (used in) financing activities		84,996			(47,629	)
Effect of foreign exchange rates on cash		741			574

Net increase in cash and cash equivalents	$	28,643		$	3,327

~~Nine~~As ~~Months~~of ~~Ended~~March 31, ~~September~~2011, we had cash and cash equivalents of $32.2 30million, an increase of $28.6 million from December 31, 2010. Generally, ~~Compared~~we manage our cash flow by using any excess cash, after considering our working capital and capital expenditure needs, to ~~Nine~~pay ~~Months~~down ~~Ended~~the ~~September~~outstanding balance of our New Senior ABL Revolving Facility. The increase in cash is due primarily to an increase in cash held at our wholly-owned Canadian subsidiary, RSC Equipment Rental of Canada, Ltd. In December 302010, ~~2009~~RSC Equipment Rental of Canada, Ltd. transferred approximately $27.0 million to RSC Equipment Rental, Inc., which used the funds to pay down our Old Senior ABL Revolving Facility. RSC Equipment Rental, Inc. repaid the outstanding balance to RSC Equipment Rental of Canada, Ltd. in the first quarter of 2011. Refer to the “Financing Activities” section below for additional information.

~~The~~Operating ~~following~~activities ~~table~~— ~~sets~~Net ~~forth~~cash ~~for~~provided ~~each~~by operating activities during the three months ended March 31, 2011 consisted of the ~~periods~~add-back ~~indicated~~of ~~our~~non-cash ~~statements~~items and other adjustments of ~~operations~~$57.4 ~~data~~million and ~~expresses~~a ~~revenue~~decrease ~~and~~in ~~expense~~operating ~~data~~assets as(net of operating liabilities) of $52.2 million offset by a ~~percentage~~net loss of ~~total~~$50.4 million. ~~revenues~~The ~~for~~most ~~the~~significant ~~periods~~change in operating assets and liabilities ~~presented~~was (an increase in ~~000s):~~accounts payable, which was primarily attributable to capital purchases, resulting in a cash inflow of $53.1 million offset by an increase in accounts receivable resulting in a cash outflow of $8.0 million.

							Percent of Revenue
	Nine Months Ended						Nine Months Ended
	September 30,						September 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		0.3
Depreciation 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/a
Total 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		11.9
Gain on extinguishment of debt, net		—			(12,489	)		—			(1.3	)		12,489		n/a
Other (income) expense, net		(364	)		335			—			—			(699	)	n/a
Loss before benefit for income taxes		(106,194	)		(50,563	)		(11.9	)		(5.1	)		(55,631	)	n/a
Benefit for income taxes		39,829			19,734			4.4			2.0			20,095		n/a
Net loss	$	(66,365	)	$	(30,829	)		(7.4	)%		(3.1	)%	$	(35,536	)	n/a

Net cash provided by operating activities during the three months ended March 31, 2010 consisted of the add-back of non-cash items and other adjustments of $52.9 million and a decrease in operating assets (net of operating liabilities) of $50.4 million offset by a net loss of $37.8 million. The most significant change in operating assets and liabilities was an increase in accounts payable, which was primarily attributable to capital purchases, resulting in a cash inflow of $35.4 million. In addition, an increase in accrued expenses and other liabilities coupled with a decrease in accounts receivable resulted in additional cash inflows of $14.4 million.

~~Total~~Investing ~~revenues~~activities ~~decreased~~— ~~$97.9 million,~~Net orcash ~~9.9%,~~used ~~from~~in ~~$993.4 million~~investing ~~for~~activities ~~the~~during ~~nine months ended September 30, 2009 to $895.5 million for~~ the ~~nine~~three months ended ~~September 30, 2010. Equipment rental~~ ~~revenue decreased $55.9~~March ~~million~~31, or2011 ~~6.7%,~~consisted ~~from~~of $~~829~~160.54 million ~~for~~of ~~the~~capital ~~nine~~purchases ~~months~~offset ~~ended~~by ~~September 30, 2009 to~~ $~~773~~44.61 million ~~for~~of ~~the nine months ended September 30, 2010. The decrease in equipment~~proceeds ~~rental~~received ~~revenue~~from ~~is primarily~~ the ~~result~~sale of ~~a $63.8 million, or 7.7%, decrease in~~ rental ~~rates~~and ~~offset by a $7.9 million, or 1.0%, increase in~~ non-rental ~~volume~~equipment. ~~The~~Capital ~~increase~~expenditures ininclude ~~rental volume is inclusive~~purchases of arental ~~$5.4 million~~and ~~increase~~non-rental ~~due to currency rate changes~~equipment.

~~Sale~~Net ofcash ~~merchandise~~used ~~revenues~~in ~~decreased~~investing ~~$2.5 million,~~activities orduring ~~6.3%~~the three months ended March 31, ~~from~~2010 consisted of $4045.12 million ~~for~~of ~~the~~capital ~~nine months~~purchases ~~ended~~offset ~~September 30,~~by ~~2009 to~~ $3728.64 million ~~for~~of proceeds received from the ~~nine~~sale ~~months~~of rental ~~ended~~and ~~September 30,~~non-rental ~~2010.~~equipment ~~The decrease~~and ~~consists~~$1.7 million of ainsurance ~~decrease~~proceeds inassociated ~~general~~with ~~merchandise~~rental equipment ~~sales,~~and ~~which~~property ~~was~~claims. ~~primarily~~Capital ~~driven~~expenditures byinclude ~~our shift~~purchases ~~towards~~of ~~industrial~~rental orand non-~~construction markets~~rental equipment.

~~Revenues~~The ~~from~~increase in net cash used in investing activities during the ~~sale~~first quarter of ~~used~~2011 as compared to the first quarter of 2010, was due primarily to our changing priorities with respect to our rental fleet. In response to growing demand for our rental equipment ~~decreased~~and rising utilization, we purchased $39157.49 million, orof rental fleet in the three months ended March 31, 2011, up $113.9%0 million, from $~~123~~44.8 9 million ~~for~~in the ~~nine~~three months ended ~~September~~March 3031, ~~2009~~2010. toOur ~~$84.3 million~~sales ~~for~~of used rental equipment in the ~~nine~~three months ended ~~September~~ March 3031, 2011 and 2010 were driven by our decision to divest and replace aging rental equipment.

Financing activities —

$650.0 million Senior Unsecured Notes Offering

On January 19, 2011, we completed a private offering of $650.0 million aggregate principal amount of 8.25% senior unsecured notes due February 2021 (the “2021 Notes”). The proceeds from the sale of the 2021 Notes were used to repay the outstanding balance on our Second Lien Term Facility, which totaled $479.4 million plus accrued interest of $0.7 million, redeem a portion of the 2014 Notes as described below, settle our outstanding interest rate swap obligations of $35.1 million and pay a portion of the transaction costs incurred with the issuance of the 2021 Notes. The transaction costs, which totaled $14.5 million, were capitalized as deferred financing costs and are being amortized as interest expense over the term of the 2021 Notes using the effective interest rate method. On February 21, 2011, we redeemed $117.0 million of aggregate principal of our 2014 Notes, paid accrued interest of $2.5 million on the 2014 Notes and incurred a call premium of $5.6 million, which was funded with the remaining proceeds from the 2021 Notes and in part from a draw on our New Senior ABL Revolving Facility. As a result of

~~Throughout~~the ~~2009,~~Second weLien ~~continued~~Term ~~our initiative to aggressively sell used equipment in response~~Facility torepayment aand ~~drop~~the inpartial ~~rental~~repayment ~~demand~~of ~~that was greater than~~ the ~~normal~~2014 ~~seasonal decline. During 2010~~Notes, we ~~intentionally~~ ~~slowed~~expensed ~~our~~$7.3 million ~~sales~~ of ~~certain~~unamortized deferred ~~types~~financing ofcosts, ~~used~~which ~~rental~~together ~~equipment~~with tothe ~~preserve fleet while experiencing rising demand~~$5.6 million ~~Increased demand for our rental equipment beginning~~ in ~~the~~call ~~second quarter of 2010 was evident by our fleet utilization~~premiums, ~~which~~is ~~increased 980 basis points to 68.7% for~~characterized ~~the~~as ~~three~~a ~~months~~loss ~~ended~~on ~~September 30,~~extinguishment ~~2010~~of ~~from~~debt ~~58.9%~~in ~~for~~ the ~~three~~condensed ~~months~~consolidated ~~ended~~statement ~~September 30,~~of ~~2009 and~~operations ~~increased 440 basis points to 62.4%~~ for the quarter ~~nine months~~ ended ~~September~~March 3031, ~~2010 from 58~~2011.0% ~~for the~~The ~~nine~~settlement ~~months~~of ~~ended~~our ~~September 30,~~interest ~~2009.~~rate ~~During~~swaps ~~the~~resulted ~~nine~~in ~~months~~a ~~ended~~charge ~~September 30, 2010 we also~~of ~~purchased~~ $~~265~~33.79 million, ofwhich ~~new~~is ~~rental~~characterized ~~fleet.~~as ~~Our~~interest ~~sales~~expense ofin ~~used~~the ~~rental~~condensed ~~equipment~~consolidated instatement of operations for the ~~nine months~~quarter ended ~~September~~March 3031, ~~2010 were driven in part by our decision to divest and replace aging rental fleet~~2011.

~~Cost~~ In ~~of equipment rentals, excluding depreciation, increased $1.1~~March ~~million~~2011, orwe ~~0.3%,~~initiated ~~from $423.6 million~~an ~~for~~exchange ~~the~~offer ~~nine~~where ~~months ended September 30, 2009 to $424.7 million for~~ the ~~nine~~holders ~~months ended~~of ~~September 30, 2010. Included in~~ the ~~prior~~2021 ~~year~~Notes ~~period is $10.2 million of closing and~~could ~~severance~~exchange ~~costs~~such ~~compared~~unregistered tonotes ~~$0.3 million~~for innew, ~~the~~registered ~~current year~~notes. ~~Increased~~The ~~expenses~~terms ~~resulting~~of ~~from higher~~the ~~equipment repairs and maintenance~~new, ~~fuel~~registered ~~and~~notes offered ~~freight~~in ~~costs~~the ~~more~~exchange ~~than~~offer ~~offset~~are ~~the~~identical ~~decrease~~ in ~~closing~~ ~~and~~all ~~severance~~material ~~costs.~~respects ~~Equipment~~to ~~repairs~~the ~~and~~terms ~~maintenance,~~of ~~fuel and freight costs increased~~the ~~$5.6 million,~~unregistered ~~$5.2 million and $3.9 million in the nine months ended September 30~~notes, ~~2010~~except asthat ~~compared to~~ the ~~same~~new ~~prior~~notes ~~year~~will ~~period. These increases were partially offset by a $2.5 million decrease in~~be ~~personal~~registered ~~property~~under ~~taxes.~~the ~~Cost~~Securities Act of ~~equipment~~1933 ~~rentals~~and ~~excluding~~will ~~depreciation,~~not ascontain arestrictions ~~percentage~~on ~~of equipment rental revenues increased from 51~~transfer.1% ~~for the nine months ended September 30, 2009 to~~We ~~54.9%~~expect ~~for~~ the ~~nine~~exchange ~~months~~offer ~~ended September 30, 2010 due primarily~~ to aclose ~~7.7% decrease~~ in ~~equipment rental rates~~April 2011.

~~Depreciation~~ New ofSenior ~~rental~~ABL ~~equipment~~Revolving ~~decreased $14.6 million, or 6.7%, from $217.5 million for the~~Facility nine months ended September 30, 2009 to $202.9 million for the nine months ended September 30, 2010. The decrease in depreciation of rental equipment resulted from our actions throughout 2009 to reduce rental fleet in response to weakened demand. As a percent of equipment rental revenues, depreciation of rental equipment was 26.2%, unchanged from September 30, 2009.

~~Cost~~ On ofFebruary 9, ~~merchandise~~2011, ~~sales~~we ~~decreased~~entered into the New Senior ABL Revolving Facility, which replaced our Old Senior ABL Revolving Facility, and we borrowed $0383.90 million, orof 3loans under our New Senior ABL Revolving Facility.3% The proceeds of these loans were used to repay the outstanding balance on our Old Senior ABL Revolving Facility, ~~from~~which totaled $28370.2 million ~~for~~plus ~~the~~accrued ~~nine~~interest and other ~~months~~fees ~~ended~~of ~~September~~$1.1 30million, ~~2009~~and to pay a portion of transaction costs including legal fees. Total transaction costs of $2712.3 million ~~for~~were capitalized as deferred financing costs and are being amortized to interest expense over the ~~nine~~term ~~months~~of ~~ended~~the ~~September 30,~~New ~~2010~~Senior ABL Revolving Facility. In addition, ~~which~~we ~~corresponds~~wrote off $2.4 million of unamortized deferred financing costs associated with the ~~decrease~~Old Senior ABL Revolving Facility, which is included in ~~merchandise~~the ~~sales~~loss ~~revenue.~~on ~~Gross~~extinguishment ~~margin~~of ~~for~~debt ~~merchandise~~in the condensed ~~sales~~consolidated ~~decreased~~statement ~~from~~of ~~29.7%~~operations for the ~~nine~~three months ended ~~September~~March 3031, ~~2009~~2011. Our New Senior ABL Revolving Facility, which is due February 2016, provides commitments for aggregate borrowings of approximately $1,100.0 million subject to, 27among other things, our maintenance of a sufficient borrowing base under such facility.5% ~~for~~The borrowing base reporting requirements that we are subject to, under the ~~nine~~New Senior ABL Revolving Facility are substantially similar to those under our Old Senior ABL Revolving Facility. Financing activities for the three months ended ~~September~~March 3031, ~~2010~~2011, include ~~due~~net tocash aproceeds ~~margin~~of ~~decline~~$374.0 million on ~~replacement~~our ~~parts~~New ~~sales~~Senior ~~associated~~ABL ~~with~~Revolving Facility and net cash ~~customer~~payments ~~workorders~~of $304.2 million on our Old Senior ABL Revolving Facility.

~~Cost~~Other ofcash used ~~rental~~in ~~equipment~~financing ~~sales~~activities ~~decreased~~during ~~$42.3 million, or 36.6%, from $115.4 million for~~ the ~~nine~~three months ended ~~September~~March 3031, ~~2009~~2011 to includes $736.19 million ~~for~~of ~~the~~repayments ~~nine~~on ~~months~~our ~~ended~~capital ~~September 30, 2010~~leases. ~~The~~Pursuant ~~decrease~~to isan ~~due~~intercompany ~~primarily~~revolving toagreement between ~~the~~RSC ~~31.9%~~Equipment ~~decrease~~Rental ~~in sales~~ of ~~used~~Canada, ~~rental~~Ltd ~~equipment~~and ~~for~~RSC ~~the nine~~Equipment ~~months ended September 30~~Rental, ~~2010~~Inc., ~~Gross~~we ~~margin~~will ~~for~~periodically transfer ~~the~~excess ~~sale~~cash ofgenerated ~~used~~from ~~rental~~our ~~equipment~~Canadian ~~increased from~~operations ~~6.7%~~to ~~for~~ the ~~nine~~U.S. ~~months~~in ~~ended~~order ~~September 30, 2009~~ to ~~13.3%~~pay ~~for~~down the outstanding ~~nine~~balance ~~months~~on ~~ended~~our ~~September 30,~~Senior ~~2010~~ABL Revolving Facility. ~~The~~There ~~increase~~were inno ~~gross~~outstanding ~~margin~~intercompany loan ~~was~~balances ~~due~~at ~~primarily~~March 31, to2011. anInterest ~~improvement~~payable inunder ~~margins~~the onSenior ~~used~~ABL Revolving Facility normally ~~equipment~~exceeds ~~sold~~that ~~through~~earned ~~both~~under ~~retail~~an ~~and~~interest ~~auction~~bearing ~~channels~~cash account.

~~Selling,~~Net ~~general~~cash ~~and~~used ~~administrative~~in ~~expenses~~financing ~~decreased~~activities ~~$5.8 million,~~during ~~or 5.5%, from $107.1 million for~~ the ~~nine~~three months ended ~~September~~March 3031, ~~2009 to $101.3 million for the nine months ended September 30,~~ 2010. ~~The decrease is due~~ consists primarily toof a $538.50 million ~~decrease~~net inpayments on our ~~provision~~Old ~~for doubtful~~Senior ~~accounts,~~ABL aRevolving $3Facility.~~4 million~~ ~~decrease~~We inalso ~~sales force wages and benefits and a $1.0 million~~repaid ~~decrease in direct marketing costs. These decreases were partially offset by a~~ $49.0 million ~~increase~~ inon ~~administrative~~our ~~wages~~capital ~~and~~lease ~~benefits~~obligations. ~~Selling, general and administrative expenses~~ increased as a percentage of total revenues from 10.8% for the nine months ended September 30, 2009 to 11.3% for the nine months ended September 30, 2010. The increase as a percentage of revenues is primarily due to a 7.7% decrease in equipment rental rates.

~~Depreciation and amortization of non-rental equipment and intangibles decreased $3.7 million,~~Indebtedness or 11.0%, from $33.7 million for the nine months ended September 30, 2009 to $30.0 million for the nine months ended September 30, 2010. The decrease is primarily due to a smaller fleet of capitalized leased vehicles during the nine months ended September 30, 2010 as compared to the nine months ended September 30, 2009. The decrease was also driven by a decrease in the net book value of leasehold improvements, which resulted from leasehold improvements that had reached the end of their useful lives.

We are highly leveraged and a substantial portion of our liquidity needs arise from debt service requirements and from funding our costs of operations and capital expenditures. As of March 31, 2011, we had $2.2 billion of indebtedness outstanding, consisting of $374.0 million under the New Senior ABL Revolving Facility, $503.0 million of 2014 Notes, $400.0 million of 2017 Notes, $200.0 million of 2019 Notes, $650.0 million of 2021 Notes and $77.3 million under capital lease obligations. The 2017 Notes and the 2019 Notes are presented net of unamortized original issue discounts of $9.1 million and $2.8 million, respectively, in our condensed consolidated balance sheet at March 31, 2011.

As of March 31, 2011, we had an outstanding balance of $374.0 million on our New Senior ABL Revolving Facility leaving $640.8 million available for future borrowings. The available borrowings of $640.8 million are net of outstanding letters of credit.

~~Other~~Substantially ~~operating~~all ~~gains, net were $3.6 million for the nine months ended September 30, 2010 and consisted primarily~~ of ~~$1.7 million of proceeds received from~~ our ~~insurance carrier for~~ rental equipment and ~~property~~all ~~claims~~our ~~attributable~~other toassets ~~hurricane~~are ~~damage~~subject ~~and~~to ~~$1.0 million~~liens ~~of proceeds~~under ~~received~~our inNew ~~connection~~Senior ~~with~~ABL aRevolving ~~legal~~Facility ~~settlement.~~and ~~The~~our ~~gain~~2017 ~~associated~~Notes ~~with~~and ~~the~~none ~~hurricane damage represents proceeds in excess~~ of ~~previously~~such ~~indemnified~~assets ~~losses.~~are ~~Recoveries~~available ~~in excess of losses~~to ~~incurred~~satisfy ~~are~~the ~~considered~~general ~~gain~~claims ~~contingencies~~of ~~and~~our ~~are not recognized until they are received~~creditors.

~~Interest~~The ~~expense~~New Senior ABL Revolving Facility contains a number of covenants that, ~~net~~among ~~increased~~other ~~$15.6 million~~things, limit or ~~11.9%~~restrict RSC’s ability to incur additional indebtedness; provide guarantees; engage in mergers, ~~from~~acquisitions ~~$130.9 million~~or ~~for~~dispositions; enter into sale-leaseback transactions; make dividends and other restricted payments; prepay other indebtedness; engage in certain transactions with affiliates; make investments; change the ~~nine~~nature of its business; incur liens; with respect to RSC ~~months~~Holdings ~~ended~~II, ~~September 30~~LLC, ~~2009~~take toactions ~~$146~~other than those enumerated; and amend specified debt agreements.~~5 million~~ The ~~for~~respective indentures governing the ~~nine~~Notes ~~months~~also ~~ended~~contain ~~September 30,~~restrictive ~~2010~~covenants that, ~~due~~among other things, limit RSC’s ability to ~~higher~~incur ~~interest~~additional ~~rates~~debt; ~~under~~pay dividends or distributions on our capital ~~2017~~stock ~~Notes~~or ~~and~~repurchase our ~~2019~~capital ~~Notes,~~stock; ~~which~~make ~~were~~certain ~~issued~~investments; increate ~~the~~liens ~~second~~to ~~half~~secure debt; enter into certain transactions with affiliates; create limitations on the ability of ~~2009,~~our asrestricted ~~compared~~subsidiaries to make ~~interest~~dividends ~~rates~~or ondistributions ~~our~~to ~~Second~~their ~~Lien~~parents; ~~Term~~merge ~~Facility,~~or ~~which~~consolidate ~~was~~with ~~partially~~another ~~repaid~~company; and intransfer ~~2009~~and sell assets. ~~The~~In ~~impact~~addition, ofunder the ~~higher~~New ~~rates~~Senior ~~was~~ABL ~~partially~~Revolving ~~offset~~Facility, byupon ~~lower~~excess availability ~~debt~~falling ~~levels~~below as$100.0 million, ~~well~~we aswill ~~the de-designation~~become ofsubject ~~certain~~to ~~interest~~more ~~rate~~frequent ~~swaps~~borrowing inbase reporting ~~the~~requirements ~~fourth~~and ~~quarter~~upon ofthe ~~2009,~~excess ~~which~~availability ~~resulted~~falling inbelow the greater of $125.0 million ~~accelerated~~and ~~recognition~~12.5% of ~~our~~the ~~interest~~sum ~~expense~~of ~~that~~the ~~would~~total ~~have~~commitments ~~been~~under ~~incurred~~the ~~during~~New ~~2010~~Senior ~~had~~ABL Revolving Facility, the ~~de-designation~~borrowers ~~not~~will ~~occurred.~~be Inrequired ~~addition~~to comply with specified financial ratios, ~~amortization~~including a minimum fixed charge coverage ratio of ~~deferred~~1.00 ~~financing~~to ~~costs~~1.00 ~~increased~~and a maximum leverage ratio as aof the last day of each ~~result~~quarter of ~~the~~5.25 ~~2017~~to ~~and~~1.00, ~~2019~~decreasing ~~Notes~~to ~~issuances~~5.00 to 1.00 on December 31, 2011.

~~Gain~~As of March 31, 2011, excess availability on ~~extinguishment~~our ofNew ~~debt,~~Senior ~~net~~ABL Revolving Facility was $12640.5 8 million ~~for~~and ~~the~~we ~~nine~~were ~~months~~therefore ~~ended~~not ~~September 30, 2009~~required ~~and~~to ~~consists~~comply ofwith aeither ~~$16.2 million~~the ~~gain~~fixed ~~from~~charge ~~the~~coverage ~~pay-down~~ratio ofor leverage ~~our~~ratio. ~~Second~~Had ~~Lien~~excess ~~Term~~availability ~~Facility~~fallen ~~offset by~~below athe greater of $3125.70 million ~~loss~~and ~~from~~12.5% of the ~~extinguishment~~sum of ~~our~~the total commitments under the New Senior ABL ~~Term~~Revolving ~~Loan.~~Facility ~~The~~as ~~$16.2~~of March ~~million~~31, ~~net~~2011, ~~gain~~compliance ~~associated~~ with ~~the~~these ~~Second~~financial ~~Lien~~ratios ~~Term~~would ~~Facility~~have ~~includes~~been arequired ~~$20.6 million~~and ~~gain,~~we ~~which~~would ~~represents~~ have violated the minimum ~~difference~~fixed ~~between~~charge ~~carrying~~coverage ~~value~~ratio ofrequirement, ~~the~~which ~~Second~~would ~~Lien~~be ~~Term~~an ~~Facility~~event ~~and~~of ~~the~~default. ~~repurchase~~We ~~price~~do not ~~offset~~expect byexcess availability to fall below the greater of $1125.90 million and 12.5% of ~~creditor~~the ~~and~~sum ~~third~~of ~~party~~the total ~~fees~~commitments ~~incurred~~under tothe ~~amend~~New ~~and~~Senior ~~pay-down~~ABL Revolving Facility at any time during the ~~Second~~next twelve ~~Lien~~months ~~Term~~and ~~Facility~~therefore asdo ~~well~~not asexpect ~~$2.5 million~~that ofwe ~~unamortized~~will ~~deferred~~be ~~financing~~required ~~costs~~to ~~that~~comply ~~were~~with the specified financial ~~expensed.~~ratios ~~The~~during $3that time.~~7 million~~ ~~loss~~If ~~from~~an ~~the~~event ~~extinguishment~~ of ~~our~~default ~~Senior~~occurred, ~~ABL~~we ~~Term~~would ~~Loan~~seek ~~includes~~a ~~$1.4 million~~waiver of ~~creditor~~the covenants and could incur upfront fees toand ~~amend~~increased ~~our~~interest ~~ABL~~costs. ~~Facilities~~However, ~~credit~~there ~~agreement~~can ~~and~~be ~~$2.3 million~~no ofassurances ~~unamortized~~that ~~deferred~~such ~~financing~~a ~~costs~~waiver ~~that~~could ~~were~~be ~~expensed~~obtained.

The benefit for income taxes was $39.8 million and $19.7 million for the nine months ended September 30, 2010 and 2009, respectively. The benefit for income taxes was due to a pre-tax net loss for the nine months ended September 30, 2010 and 2009, respectively. The effective tax rate for the nine month period ending September 30, 2010 and 2009 was 37.5% and 39.0%, respectively. Our effective tax rate normally differs from the U.S. federal statutory rate of 35% due to certain non-deductible permanent items, state income taxes and certain state minimum and gross receipts taxes, which are incurred regardless of whether we earn income. The effective tax rate for the 2009 nine month period also includes a $2.7 million discrete income tax benefit relating to the true-up of our deferred tax liabilities from filing our 2008 federal, state and foreign tax returns and an offsetting expense recognized during the second quarter of 2009 relating to the expiration of share appreciation rights granted by ACAB to certain employees of the Company.

Liquidity and Capital Resources

Cash Flows and Liquidity

Our primary source of capital is from cash generated by our rental operations including cash received from the sale of used rental equipment, and secondarily from borrowings available under our Senior ABL Revolving Facility. Our business is highly capital intensive, requiring significant investments in order to expand our rental fleet during periods of growth and smaller investments required to maintain and replace our rental fleet during times of weakening rental demand.

Cash flows from operating activities as well as the sale of used rental equipment enable us to fund our operations and service our debt obligations including the continued repayment of our Senior ABL Revolving Facility. We continuously monitor utilization of our rental fleet and if warranted we divest excess fleet, which generates additional cash flow. In addition, due to the condition and age of our fleet we have the ability to significantly reduce capital expenditures during difficult economic times, therefore allowing us to redirect this cash towards further debt reduction during these periods. The following table summarizes our sources and uses of cash for the nine months ended September 30, 2010 and 2009:

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

As of September 30, 2010, we had cash and cash equivalents of $5.6 million, an increase of $1.0 million from December 31, 2009. Generally, we manage our cash flow by using any excess cash, after considering our working capital and capital expenditure needs, to pay down the outstanding balance of our Senior ABL Revolving Facility.

Operating activities — Net cash provided by operating activities during the nine months ended September 30, 2010 consisted of the add-back of non-cash items and other adjustments of $219.7 million and an increase in operating liabilities (net of operating assets) of $159.1 million offset by a net loss of $66.4 million. The most significant change in operating assets and liabilities was an increase in accounts payable of $186.5 million, which was primarily attributable to capital purchases made in the six months ended September 30, 2010.

Net cash provided by operating activities during the nine months ended September 30, 2009 consisted of the add-back of non-cash items and other adjustments of $236.0 million and a decrease in operating assets (net of operating liabilities) of $25.0 million offset by a net loss of $30.8 million. The most significant change in operating assets and liabilities was a reduction in accounts receivable resulting in a cash inflow of $73.2 million offset by the settlement of accounts payable resulting in a cash outflow of $60.7 million.

Investing activities — Net cash used in investing activities during the nine months ended September 30, 2010 consisted of $271.3 million of capital purchases offset by $86.5 million of proceeds received from the sale of rental and non-rental equipment and $1.7 million of insurance proceeds associated with rental equipment and property claims. Capital expenditures include purchases of rental and non-rental equipment.

The change from net cash provided by investing activities during the nine months ended September 30, 2009 as compared to net cash used in investing activities during the nine months ended September 30, 2010 was due primarily to our changing priorities with respect to our rental fleet. During 2009, we continued our efforts to accelerate sales of used rental equipment in response to a drop in rental demand. During 2010, we intentionally slowed our sales of certain used rental equipment to preserve fleet in anticipation of rising demand. To satisfy the increase in demand, we also purchased $265.7 million of new rental fleet in the nine months ended September 30, 2010, up $232.2 million, from $33.5 million in the nine months ended September 30, 2009. Our sales of used rental equipment in the nine months ended September 30, 2010 were driven in part by our decision to divest and replace aging rental equipment.

Financing activities — Net cash used in financing activities during the nine months ended September 30, 2010 consists primarily of $106.0 million net payments on our Senior ABL Revolving Facility and $21.9 million of repayments on our capital leases. Pursuant to an intercompany revolving credit agreement between RSC Equipment Rental of Canada, Ltd and RSC Equipment Rental, Inc., the Company will periodically transfer excess cash generated from its Canadian operations to the U.S. in order to pay down the outstanding balance on its Senior ABL Revolving Facility. The outstanding balance of the intercompany loan in U.S. dollars was approximately $26.2 million at September 30, 2010. Interest payable under the Senior ABL Revolving Facility normally exceeds that earned under an interest bearing cash account.

Net cash used in financing activities during the nine months ended September 30, 2009 consists primarily of $277.2 million net payments on our Senior ABL Revolving Facility, $244.4 million of payments to extinguish our Senior ABL Term Loan and $137.1 million of prepayments on our Second Lien Term Facility. We also repaid $31.9 million on our other debt obligations and paid $26.4 million of deferred and non-deferred financing costs of which

$23.2 million pertains to costs associated with the 2017 Notes and amendments to the Senior ABL Revolving Facility and $2.7 million pertains to costs associated with an amendment to the Second Lien Term Facility and the related prepayments noted above. These cash outflows were offset by $389.3 million of proceeds from the 2017 Notes.

Indebtedness

We are highly leveraged and a substantial portion of our liquidity needs arise from debt service requirements and from funding our costs of operations and capital expenditures. As of September 30, 2010, we had $2.1 billion of indebtedness outstanding, consisting primarily of $295.2 million under the Senior ABL Revolving Facility, $479.4 million under the Second Lien Term Facility, $620.0 million of 2014 Notes, $400.0 million of 2017 Notes and $200.0 million of 2019 Notes. The 2017 Notes and the 2019 Notes are presented net of unamortized original issue discounts of $9.6 million and $2.9 million, respectively, in our condensed consolidated balance sheet at September 30, 2010.

As of September 30, 2010, we had an outstanding balance of $295.2 million on our Senior ABL Revolving Facility leaving $674.0 million available for future borrowings. The available borrowings of $674.0 million are net of outstanding letters of credit and the net fair value liability for our interest rate swap agreements before the adjustment for credit-risk. During the nine months ended September 30, 2010, we borrowed $104.0 million under the Senior ABL Revolving Facility and repaid $210.0 million.

Substantially all of our rental equipment and all our other assets are subject to liens under our Senior ABL Revolving Facility, our Second Lien Term Facility and our 2017 Notes and none of such assets are available to satisfy the general claims of our creditors.

The Senior ABL Revolving Facility and the Second Lien Term Facility contain a number of covenants that, among other things, limit or restrict RSC’s ability to incur additional indebtedness; provide guarantees; engage in mergers, acquisitions or dispositions; enter into sale-leaseback transactions; make dividends and other restricted payments; prepay other indebtedness; engage in certain transactions with affiliates; make investments; change the nature of its business; incur liens; with respect to RSC Holdings II, LLC, take actions other than those enumerated; and amend specified debt agreements. The indentures governing the Notes also contain restrictive covenants that, among other things, limit RSC’s ability to incur additional debt; pay dividends or distributions on our capital stock or repurchase our capital stock; make certain investments; create liens to secure debt; enter into certain transactions with affiliates; create limitations on the ability of our restricted subsidiaries to make dividends or distributions to their parents; merge or consolidate with another company; and transfer and sell assets. In addition, under the Senior ABL Revolving Facility, upon excess availability falling below $100.0 million, we will become subject to more frequent borrowing base reporting requirements and upon the excess availability falling below (a) before the maturity date of the Non-Extending portion of the Senior ABL Revolving Facility (the “Non-Extending Maturity Date”) and the date of any increase in commitments under the Extending portion of the Senior ABL Revolving Facility (the “Commitment Increase Date”), $140.0 million, (b) after the Commitment Increase Date but before the Non-Extending Maturity Date, the greater of $140.0 million and 12.5% of the sum of the total commitments under the Senior ABL Revolving Facility on the Commitment Increase Date and (c) on or after the Non-Extending Maturity Date, 12.5% of the sum of the total commitments under the Senior ABL Revolving Facility on the Non-Extending Maturity Date, the borrowers will be required to comply with specified financial ratios and tests, including a minimum fixed charge coverage ratio of 1.00 to 1.00 and a maximum leverage ratio as of the last day of each quarter of 4.25 to 1.00.

As of September 30, 2010, our fixed charge coverage ratio was 1.37 to 1.00 and the leverage ratio was 5.51 to 1.00, as calculated in accordance with the Senior ABL Revolving Facility. However, because excess availability was $674.0 million as of September 30, 2010 the covenant test did not apply. Had excess availability fallen below $140.0 million as of September 30, 2010 compliance with these financial ratios would have been required and we would have violated the maximum leverage ratio requirement, which would be an event of default. We do not expect excess availability to fall below $140.0 million at any time during the next twelve months and therefore do not expect that we will be required to comply with the specified ratios and tests during that time. If an event of default occurred, the Company would seek a waiver of the covenants and could incur upfront fees and increased interest costs. However, there can be no assurances that such a waiver could be obtained.

Outlook

We believe that cash generated from operations, together with amounts available under the New Senior ABL Revolving Facility, ~~as amended,~~ will be adequate to permit us to meet our debt service obligations, ongoing costs of operations, working capital needs and capital expenditure requirements for at least the next twelve months and the foreseeable future. Our future financial and operating performance, ability to service or refinance our debt and ability to comply with covenants and restrictions contained in our debt agreements will be subject to future economic conditions and to financial, business and other factors, many of which are beyond our control. See “Cautionary Note for Forward-Looking Statements” on page 1 and “Risk Factors” in Part II, Item 1A of this Quarterly Report on Form 10-Q.

~~We expect to generate positive cash flow from operations, net of capital expenditures, for the year ending December 31, 2010.~~ From time to time, we evaluate various alternatives for the use of excess cash generated from our operations including paying down debt, funding acquisitions and repurchasing common stock or debt securities. ~~Assuming~~Unless certain payment conditions ~~under the Senior ABL Revolving Facility~~ are satisfied, ~~our~~the ~~Second~~New ~~Lien~~Senior ~~Term~~ABL Revolving Facility limits our capacity to repurchase common stock, make cash dividends or make optional payments on unsecured debt securities. This limitation at ~~September~~ March 3031, ~~2010~~2011 was $~~116~~100.~~8 million, when considering a total basket of $150.~~0 million~~, net of $33~~.~~2 million of usage. We are also limited to $50.0 million in cash dividends in 2010.~~

Adjusted EBITDA

As a supplement to the financial statements in this Quarterly Report on Form 10-Q, which are prepared in accordance with GAAP, we also present Adjusted EBITDA. Adjusted EBITDA is generally 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. We present Adjusted EBITDA because we believe the calculation is useful to investors in evaluating our ability to service debt and our financial performance. However, Adjusted EBITDA is not a recognized measure under GAAP, and when analyzing our performance, investors should use Adjusted EBITDA in addition to, and not as an alternative to, net (loss) income or net cash provided by operating activities as defined under GAAP. In addition, all companies do not calculate Adjusted EBITDA in the same manner and therefore our presentation may not be comparable to those presented by other companies.

~~The table below provides a reconciliation between net loss, as determined in accordance with~~24 ~~GAAP, and Adjusted EBITDA:~~

	Three Months Ended						Nine Months Ended
	September 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			251,164
Interest expense, net		48,446			50,666			146,472			130,911
Benefit for income taxes		(3,542	)		(7,034	)		(39,829	)		(19,734	)
EBITDA	$	117,372		$	118,662		$	273,178		$	331,512
Adjustments:
Gain on extinguishment of debt, net		—			(12,489	)		—			(12,489	)
Share-based compensation		1,708			1,179			3,966			3,473
Other (income) expense, net		(264	)		(75	)		(364	)		335
Adjusted EBITDA	$	118,816		$	107,277		$	276,780		$	322,831

income (loss) before net interest expense, income taxes and depreciation and amortization and before certain other items, including loss on extinguishment of debt, share-based compensation and other (income) expense, net. We present Adjusted EBITDA because we believe the calculation is useful to investors in evaluating our financial performance and as a liquidity measure. Adjusted EBITDA is not a measure of performance calculated in accordance with GAAP and there are material limitations to its usefulness on a stand alone basis. Adjusted EBITDA does not include reductions for cash payments for our obligations to service our debt, fund our working capital and pay our income taxes. In addition, certain items excluded from Adjusted EBTIDA such as interest, income taxes, depreciation and amortization are significant components in understanding and assessing our financial performance. All companies do not calculate Adjusted EBITDA in the same manner and our presentation may not be comparable to those presented by other companies. Investors should use Adjusted EBITDA in addition to, and not as an alternative to, net income (loss) or net cash provided by operating activities as defined under GAAP.

The table below provides a reconciliation between net loss, as determined in accordance with GAAP, and Adjusted EBITDA:


	Three Months Ended March 31,
	2011			2010
	(in 000s)
Net loss	$	(50,432	)	$	(37,828	)
Depreciation of rental equipment and depreciation and amortization of non-rental equipment and intangibles		81,114			76,702
Interest expense, net		81,959			49,793
Benefit for income taxes		(30,113	)		(23,131	)

EBITDA	$	82,528		$	65,536

Adjustments:
Loss on extinguishment of debt		15,342			—
Share-based compensation		1,274			663
Other income, net		(337	)		(199	)

Adjusted EBITDA	$	98,807		$	66,000

The table below provides a reconciliation between net cash provided by operating activities, as determined in accordance with GAAP, and Adjusted EBITDA:

	Three Months Ended						Nine Months Ended
	Three Months Ended March 31,
	September 30,						September 30,
	2011			2010
	2010			2009			2010			2009
	(in 000s)
	(in 000s)
Net cash provided by operating activities	$	59,184		$	65,481
Net cash provided by operating activities	$	142,556		$	107,033		$	312,449		$	230,217
Gain on sales of rental and non-rental property and equipment, net of non-cash write-offs		12,041			2,608
Gain on sales of rental and non-rental property and equipment, net of non-cash writeoffs		4,310			713			9,635			6,329
Gain on settlement of insurance property claims		—			1,736
Gain on insurance settlement		—			—			1,736			—
Cash paid for interest		70,305			36,831
Cash paid for interest		33,301			20,314			126,655			104,402
Cash received for taxes, net		(66	)		(406	)
Cash received for taxes, net		(25,489	)		(12,733	)		(25,562	)		(7,098	)
Other income, net		(337	)		(199	)
Other (income) expense, net		(264	)		(75	)		(364	)		335
Changes in other operating assets and liabilities		(42,320	)		(40,051	)
Changes in other operating assets and liabilities		(35,598	)		(7,975	)		(147,769	)		(11,354	)
Adjusted EBITDA	$	98,807		$	66,000
Adjusted EBITDA	$	118,816		$	107,277		$	276,780		$	322,831

Free Cash Flow

We also present free cash flow as a supplement to the financial statements. We define free cash flow as net cash provided by operating activities ~~plus~~and net capital inflows (expenditures). ~~All~~ All companies do not calculate free cash flow in the same manner, and our presentation may not be comparable to those presented by other companies. We believe free cash flow provides useful additional information concerning cash flow available to meet future debt service obligations and working capital needs. However, free cash flow is a non-GAAP measure in addition to, and not as an alternative to, net income (loss) ~~income~~ or net cash provided by operating activities as defined under GAAP. ~~Moreover, free cash flow does not represent remaining cash flows available for discretionary~~ ~~expenditures because the measure does not deduct payment required for debt maturities.~~

Moreover, free cash flow does not represent remaining cash flows available for discretionary expenditures because the measure does not deduct payment required for debt maturities.

The table below reconciles free cash flow, a non-GAAP measure, to net cash provided by operating activities, which is the most directly comparable financial measure determined in accordance with GAAP:

	Three Months Ended						Nine Months Ended
	Three Months Ended March 31,
	September 30,						September 30,
	2011			2010
	2010			2009			2010			2009
	(in 000s)
	(in 000s)
Net cash provided by operating activities	$	59,184		$	65,481
Net cash provided by operating activities	$	142,556		$	107,033		$	312,449		$	230,217
Purchases of rental equipment		(157,921	)		(44,906	)
Purchases of rental equipment		(118,748	)		(15,151	)		(265,714	)		(33,488	)
Purchases of property and equipment		(2,444	)		(331	)
Purchases of property and equipment		(3,995	)		(708	)		(5,630	)		(2,597	)
Proceeds from sales of rental equipment		42,493			27,106
Proceeds from sales of rental equipment		29,216			31,384			84,315			123,757
Proceeds from sales of property and equipment		1,594			1,296
Proceeds from sale of property and equipment		533			2,409			2,185			10,539
Insurance proceeds from rental equipment and property claims		—			1,736
Insurance proceeds from rental equipment and property claims		—			—			1,736			3,086
Net capital expenditures		(116,278	)		(15,099	)
Net capital (expenditures) inflows		(92,994	)		17,934			(183,108	)		101,297
Free cash flow	$	(57,094	)	$	50,382
Free cash flow	$	49,562		$	124,967		$	129,341		$	331,514

Critical Accounting Policies and Estimates

Our discussion and analysis of financial condition and results of operations are based upon our unaudited condensed consolidated financial statements, which have been prepared in accordance with GAAP. The preparation of these financial statements requires management to make estimates and judgments that affect the reported amounts in the unaudited condensed consolidated financial statements and accompanying notes. Actual results, however, may materially differ from our calculated estimates and this difference would be reported in our current operations. We have made no significant changes to our critical accounting policies and estimates since December 31, ~~2009~~2010.

Recent Accounting Pronouncements

In ~~February~~December 2010, the Financial Accounting Standards Board (the “FASB”) issued ~~amended~~an update to the existing guidance onfor ~~subsequent~~goodwill ~~events~~and other intangible assets. ~~Under~~The ~~this~~update ~~amended~~modifies ~~guidance,~~Step ~~SEC~~1 ~~filers~~of ~~are~~the goodwill noimpairment ~~longer~~test for reporting units with zero or negative carrying amounts. For those reporting units, an entity is required to perform Step 2 of the goodwill impairment test if there ~~disclose~~are qualitative factors indicating that it is more likely than not that a goodwill impairment exists. The qualitative factors are consistent with the ~~date~~existing ~~through~~guidance which ~~subsequent~~requires ~~events~~goodwill of ~~have~~a ~~been~~reporting ~~evaluated~~unit into ~~originally~~be ~~issued~~tested ~~and~~for impairment between annual tests if an event occurs or ~~revised~~circumstances ~~financial~~change ~~statements~~that would more likely than not reduce the fair value of a reporting unit below its carrying amount. ~~The~~This guidance ~~was~~is effective ~~immediately~~for fiscal years, and weinterim ~~have~~periods ~~adopted~~within those ~~this~~years, ~~new~~beginning after December 15, 2010, which for us is calendar year 2011. We do not anticipate that the adoption of this guidance will have a material impact on our financial condition, results of operations or cash flows.

In ~~January~~November 2010, the FASB issued ~~guidance~~an update to ~~improve~~its ~~disclosures~~existing ~~about~~guidance ~~fair~~on ~~value measurements~~business combinations. This ~~Specifically, the~~ guidance requires ~~new~~a ~~disclosures~~public ~~for~~entity ~~transfers~~that presents comparative financial statements to present in its pro forma disclosure the revenue and ~~out~~earnings of the combined entity as though the business ~~levels~~combination(s) 1that ~~and~~occurred 2during the current year had occurred as of the ~~fair~~beginning ~~value~~of ~~measurement~~the ~~hierarchy~~prior annual reporting period. In addition, ~~and~~this guidance expands ~~disclosures~~the ~~related~~supplemental pro forma disclosures to ~~activity~~include a description of the nature and amount of material, nonrecurring pro forma adjustments ~~associated~~directly ~~with~~attributable ~~level~~to 3the ~~fair~~business ~~value~~combination ~~measurements~~included in the reported pro forma revenue and earnings. The ~~new~~guidance ~~disclosures,~~is ~~which~~effective ~~are~~prospectively ~~effective~~for business combinations for which the ~~interim~~acquisition ~~and~~date is on or after the beginning of the first annual reporting ~~periods~~period ~~beginning~~on ~~after~~or after December 15, ~~2009~~2010, ~~had~~which nofor us is calendar year 2011. The guidance did not have an impact on our disclosures atfor ~~September~~the quarter ended March 3031, ~~2010~~2011.

~~In October 2009, the FASB issued updated guidance on multiple-deliverable revenue~~26 arrangements. Specifically, the guidance amends the existing criteria for separating consideration received in multiple-deliverable arrangements, eliminates the residual method of allocation and requires that arrangement consideration be allocated at the inception of the arrangement to all deliverables using the relative selling price method. The guidance also establishes a hierarchy for determining the selling price of a deliverable, which is based on vendor-specific objective evidence; third-party evidence; or management estimates. Expanded disclosures related to multiple-deliverable revenue arrangements will also be required. The new guidance is effective for revenue arrangements entered into or materially modified on and after January 1, 2011. We do not expect the application of this new standard to have a significant impact on our consolidated financial statements.

Item 3.Table Quantitativeof and Qualitative Disclosures About Market Risk Contents

Item 3. Quantitative and Qualitative Disclosures about Market Risk

We are exposed to market risk associated with changes in interest rates and foreign currency exchange rates.

Interest Rate Risk

~~Excluding~~As ~~the effect~~ of ~~our hedge agreements~~March 31, 2011 we have a significant amount of debt under the New Senior ABL Revolving Facility, ~~and the Second Lien Term Facility~~ with variable rates of interest based generally on adjusted London inter-bank offered rate (“LIBOR”), or an alternate interest rate, in each case, plus an applicable margin (or, in the case of Canadian dollar borrowings under the New Senior ABL Revolving Facility, variable borrowing costs based generally on bankers’ acceptance discount rates, plus a stamping fee equal to an applicable margin, or on the Canadian prime rate, plus an applicable margin). We also had $479.4 million of variable rate debt under the Second Lien Term Facility, which was repaid in January 2011. Increases in interest rates could therefore significantly increase the associated interest payments that we are required to make on this debt. We have assessed our exposure to changes in interest rates by analyzing the sensitivity to our earnings assuming various changes in market interest rates. Assuming a hypothetical increase of 1% in interest rates on ~~our~~the variable rate debt in our debt portfolio, as of ~~September~~March 3031, ~~2010~~2011, our net interest expense for the ~~nine~~three months ended ~~September~~March 3031, ~~2010~~2011 would have increased by an estimated $21.30 million. ~~Excluding the effect of our~~ ~~hedge agreements, for the same period interest expense would have increased $6.8 million assuming a hypothetical increase of 1%.~~

WeTo entered into four forward-starting interest rate swap agreements in September 2007 under which we exchanged our benchmark floating-rate interest payments for fixed-rate interest payments. The agreements are intended to hedge ~~only~~exposure ~~the benchmark portion of interest associated with a portion of the Second Lien Term Facility. Interest on this debt is based on a fluctuating rate of interest measured by reference~~ to amarket ~~benchmark interest rate~~conditions, ~~plus~~reduce ~~a borrowing margin, which was 3.5% for~~ the ~~LIBOR~~volatility ~~option at September 30, 2010. The agreements cover a combined notional amount~~ of ~~debt~~financing ~~totaling~~costs ~~$700.0 million,~~and ofachieve ~~which $500.0 million is for~~ a ~~five-year period with a weighted~~ ~~average~~desired ~~fixed~~balance ~~interest~~between fixed-rate ~~of 4.66%~~ and ~~$200.0 million is for a three~~floating-~~year~~rate ~~period~~debt, ~~with~~we ahave ~~weighted average~~utilized ~~fixed~~ interest rate ~~of 4.57%. The~~ swaps ~~became effective on October 5, 2007 and are~~ ~~settled~~under onwhich ~~a quarterly basis. In connection with an October 2009 partial prepayment of outstanding principal on the Second Lien Term Facility,~~ we ~~reduced~~have ~~the~~exchanged ~~notional~~floating-rate ~~amount~~interest ofpayments ~~one~~for offixed-rate ~~these~~ interest ~~rate~~ ~~swaps from $100~~payments.~~0 million~~ ~~to $71.5 million.~~ In ~~November~~ January ~~2009~~2011, wein ~~prepaid~~conjunction anwith ~~additional $192.1 million of principal on~~ the ~~Second~~financing ~~Lien~~activities ~~Term~~previously ~~Facility~~discussed, ~~thereby~~all ~~reducing the~~ outstanding swaps ~~balance~~were ~~to $479~~settled.~~4 million.~~ As ~~a result~~ of ~~this~~March 31, ~~prepayment~~2011, ~~$192.1 million~~no ~~of the notional amounts on our~~ interest rate swaps ~~were~~are ~~de-designated as cash flow hedges as they no longer hedge the variability in expected future cash flows associated with the variable interest on the Second Lien Term Facility~~outstanding. ~~In order to offset our~~

29 As of March 31, 2011, 79.4% of our $2,192.4 million of debt had fixed rate interest.

exposure to the de-designated interest rate swaps, we entered into two reverse interest rate swap agreements in November 2009 under which we exchanged a portion of our fixed-rate interest payments for floating-rate interest payments. These agreements cover a combined notional amount of debt totaling $192.1 million, of which $171.5 million is for a one-year period and $20.6 million is for a three-year period. The reverse swaps became effective October 5, 2009 and are settled on a quarterly basis. The reverse swap with a notional amount of $171.5 million expired on October 5, 2010. Two of the original swaps with a combined notional amount of $171.5 million also expired on October 5, 2010.

We entered into an additional interest rate swap agreement in January 2008, under which we exchanged our benchmark floating-rate interest payment for a fixed-rate interest payment. This agreement was intended to hedge the benchmark portion of interest associated with a portion of the Senior ABL Revolving Facility. Interest on this debt was based on a fluctuating rate of interest measured by reference to a benchmark interest rate, plus a borrowing margin. This agreement covered a notional amount of debt totaling $250.0 million, for a two-year term at a fixed interest rate of 2.66%. The swap, which was settled on a quarterly basis, was effective on April 5, 2008, and expired on April 5, 2010.

Considering the $479.4 million of the Second Lien Term Facility that was hedged as of September 30, 2010, 81.9% of our $2,060.8 million of debt at September 30, 2010 had fixed rate interest.

Currency Exchange Risk

The functional currency for our Canadian operations is the Canadian dollar. In the ~~nine months~~three months ended ~~September~~March 3031, ~~2010~~2011 and ~~September~~March 3031, ~~2009~~2010, 67.21% and 46.94%, respectively, of our revenues were generated by our Canadian operations. As a result, our future earnings could be affected by fluctuations in the exchange rate between the U.S. and Canadian dollars. Based upon the level of our Canadian operations during the ~~nine~~three months ended ~~September~~March 3031, ~~2010~~2011, relative to our operations as as a whole, a 10% increase in the value of the Canadian dollar as compared to the U.S. dollar would have reduced net loss by approximately $0.52 million for the ~~nine~~three months ended ~~September~~March 3031, ~~2010~~2011.

Item 4. Controls and Procedures

Disclosure controls and procedures are controls and other procedures that are designed to ensure that information required to be disclosed in company reports filed or submitted under the Securities Exchange Act of 1934, as amended (the “Exchange Act”) is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the Securities and Exchange Commission, and that such information is accumulated and communicated to management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.

Evaluation of Disclosure Controls and Procedures

An evaluation of the effectiveness of our disclosure controls and procedures was performed under the supervision of, and with the participation of, management, including our Chief Executive Officer and Chief Financial Officer, as of the end of the period covered by this Quarterly Report on Form 10-Q. Based on this evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures are effective.

~~Changes in Internal Control Over Financial Reporting~~27

An evaluation of our internal controls over financial reporting was performed under the supervision of, and with the participation of, management, including our Chief Executive Officer and Chief Financial Officer, to determine whether any changes have occurred during the period covered by this Quarterly Report on Form 10-Q that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. Based upon this evaluation, our Chief Executive Officer and Chief Financial Officer concluded that no changes in our internal control over financial reporting have occurred during the quarter ended September 30, 2010 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Changes in Internal Control Over Financial Reporting

An evaluation of our internal controls over financial reporting was performed under the supervision of, and with the participation of, management, including our Chief Executive Officer and Chief Financial Officer, to determine whether any changes have occurred during the period covered by this Quarterly Report on Form 10-Q that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. Based upon this evaluation, our Chief Executive Officer and Chief Financial Officer concluded that no changes in our internal control over financial reporting have occurred during the quarter ended March 31, 2011 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II. Other Information

Item 1. Legal Proceedings

We are party to legal proceedings and potential claims arising in the ordinary course of our business, including claims related to employment matters, contractual disputes, personal injuries and property damage. In addition, various legal actions, claims and governmental inquiries and proceedings are pending or may be instituted or asserted in the future against us and our subsidiaries.

Litigation is subject to many uncertainties, and the outcome of the individual litigated matters is not predictable with assurance. It is possible that certain of the actions, claims, inquiries or proceedings, including those discussed above, could be decided unfavorably to us or any of our subsidiaries involved. Although we cannot predict with certainty the ultimate resolution of lawsuits, investigations and claims asserted against us, we do not believe that any currently pending legal proceedings to which we are a party will have a material adverse effect on our business, results of operations, cash flows or financial condition.

Item 1A. Risk Factors

In addition to the other information set forth in this Quarterly Report on Form 10-Q, you should carefully consider the factors discussed in “Risk Factors” in our ~~2009~~2010 Form 10-K filed with the SEC on February 1810, ~~2010~~2011, which could materially affect our business, financial condition or future results. The risks described in our ~~2009~~2010 Form 10-K are not the only risks we face. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition or future results. ~~Except as noted below, there have been no material changes to the risk factors discussed~~ ~~in Part 1, Item 1A of our 2009 Form 10-K filed with the SEC.~~

~~Certain~~ There ~~existing~~have ~~stockholders~~been ofno ~~RSC~~material ~~Holdings~~changes ~~have~~in ~~significant~~the ~~control~~risk ~~over~~factors ~~our~~previously ~~company~~disclosed ~~and~~in ~~large~~“Risk Factors” ~~ownership~~in ~~positions~~Part 1, ~~that~~Item 1A ~~could~~of beour ~~sold,~~2010 ~~transferred~~Form or10-K ~~distributed~~filed with the SEC.

Oak Hill, Ripplewood, ACF and RSC Holdings are parties to an Amended and Restated Stockholders Agreement dated May 29, 2007, as amended further by Amendment No. 1 dated August 24, 2009 (the “Stockholders Agreement”), pursuant to which Oak Hill currently has the right to nominate four members of RSC Holdings’ Board of Directors. As of September 30, 2010, Oak Hill, Ripplewood and ACF collectively owned just over 50% of the outstanding shares of RSC Holdings’ common stock and together may exercise control over matters requiring stockholder approval and its policies and affairs. Due to the Stockholders Agreement, Oak Hill has significant influence with respect to: (1) the election of RSC Holdings’ Board of Directors; (2) the approval or disapproval of any other matters requiring stockholder approval; and (3) the affairs, policies and direction of RSC Holdings’ business. The interests of RSC Holdings’ existing stockholders may conflict with the interests of other security holders. In addition, actual or possible sales, transfers or distributions of substantial amounts of the common stock of RSC Holdings by Oak Hill, Ripplewood or ACF, or the perception of the forgoing by investors, may cause the trading price of RSC Holdings’ common stock to decline and could adversely affect our ability to obtain financing in the future.

RSC Holdings has elected to be exempt from certain corporate governance requirements since RSC Holdings is a “controlled company” within the meaning of the NYSE Rules and, as a result, RSC Holdings’ stockholders do not have the protections afforded by these corporate governance requirements for so long as RSC Holdings’ election continues.

As a result of the ownership of RSC Holdings’ common stock by Oak Hill, Ripplewood and ACF, RSC Holdings is a “controlled company” for the purposes of the NYSE listing requirements, and therefore, RSC Holdings is eligible for, and has elected to take advantage of, exemptions from certain NYSE listing requirements that would otherwise require RSC Holdings’ board of directors to have a majority of independent directors and its compensation and nominating and corporate governance committees to be comprised entirely of independent directors. Accordingly, for so long as RSC Holdings remains a “controlled company” and elects to opt out of these provisions, RSC Holdings’ stockholders do not and will not have the same protection afforded to stockholders of companies that are subject to all of the NYSE governance requirements, and the ability of its independent directors to influence our business policies and affairs may be reduced.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

Not applicable.

Item 3. Defaults Upon Senior Securities

Not applicable.

Item 4. Reserved

Item 5. Other Information

None.

3228

Item 6. Exhibits

Exhibits and Financial Statement Schedules

Incorporated By Reference

Exhibit

Filed

Number

Exhibit Description

Form

File No.

Exhibit

Filing Date

Herewith

10.1

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

9/27/2010

4.1

Indenture, dated as of January 19, 2011, by and among RSC Equipment Rental, Inc., RSC Holdings III, LLC and Wells Fargo Bank, National Association, as Trustee

8-K

333-144625

4.1

1/20/2011

4.2

Registration Rights Agreement, dated as of January 19, 2011, by and among RSC Equipment Rental, Inc., RSC Holdings III, LLC and Deutsche Bank Securities Inc. and the other initial purchasers named therein

8-K

333-144625

4.2

1/20/2011

4.3

U.S. Guarantee and Collateral Agreement, dated as of February 9, 2011, by and among RSC Holdings II, LLC, RSC Holdings III, LLC, RSC Equipment Rental, Inc., and certain domestic subsidiaries of RSC Holdings III, LLC that may become party thereto from time to time, Deutsche Bank AG New York Branch, as collateral agent and administrative agent

8-K

333-144625

4.1

2/14/2011

4.4

Canadian Security Agreement, dated as of February 9, 2011, by and among RSC Equipment Rental of Canada Ltd., Deutsche Bank AG Canada Branch as Canadian collateral agent

8-K

333-144625

4.2

2/14/2011

4.5

First Amendment to First Lien Intercreditor Agreement, dated as of February 9, 2011, by and among RSC Holdings III, LLC, RSC Equipment Rental, Inc. and Deutsche Bank AG New York Branch, as U.S. collateral agent under the Senior Loan Documents (as defined therein)

8-K

333-144625

4.3

2/14/2011

10.1

Credit Agreement, dated as of February 9, 2011, by and among RSC Holdings II, LLC, RSC Holdings III, LLC, RSC Equipment Rental, Inc., RSC Equipment Rental of Canada Ltd., Deutsche Bank AG New York Branch, Deutsche Bank AG Canada Branch, Wells Fargo Capital Finance, LLC, Bank of America, N.A., General Electric Capital Corporation, J.P. Morgan Securities LLC and Barclays Capital

8-K

333-144625

10.1

2/14/2011

10.2

Executive Employment and Noncompetition Agreement by and between Juan Corsillo and RSC Holdings Inc. effective March 15, 2010

31.1

Certification of Chief Executive Officer as required by Rule 13a-14(a) of the Securities Exchange Act of 1934, as amended

31.2

Certification of Chief Financial Officer as required by Rule 13a-14(a) of the Securities Exchange Act of 1934, as amended

32.1

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

3329

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

RSC Holdings III, LLC
RSC EQUIPMENT RENTAL, INC.

Signature	Title	Date
/s/ Erik Olsson	President, ~~Chief Executive Officer and Director (Principal Executive Officer)~~	~~October~~April 21, ~~2010~~2011
Erik Olsson	Chief Executive Officer and Director (Principal Executive Officer)
/s/ Patricia D. Chiodo Patricia D. Chiodo	Senior Vice President and Chief Financial Officer (Principal Financial and Principal Accounting Officer)	October 21, 2010
/s/ Patricia D. Chiodo	Senior Vice President and	April 21, 2011
Patricia D. Chiodo	Chief Financial Officer (Principal Financial and Principal Accounting Officer)

3430

EXHIBIT INDEX

Incorporated By Reference

Exhibit

Filed

Number

Exhibit Description

Form

File No.

Exhibit

Filing Date

Herewith

10.1

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

9/27/2010

4.1

Indenture, dated as of January 19, 2011, by and among RSC Equipment Rental, Inc., RSC Holdings III, LLC and Wells Fargo Bank, National Association, as Trustee

8-K

333-144625

4.1

1/20/2011

4.2

8-K

333-144625

4.2

1/20/2011

4.3

8-K

333-144625

4.1

2/14/2011

4.4

Canadian Security Agreement, dated as of February 9, 2011, by and among RSC Equipment Rental of Canada Ltd., Deutsche Bank AG Canada Branch as Canadian collateral agent

8-K

333-144625

4.2

2/14/2011

4.5

8-K

333-144625

4.3

2/14/2011

10.1

8-K

333-144625

10.1

2/14/2011

10.2

Executive Employment and Noncompetition Agreement by and between Juan Corsillo and RSC Holdings Inc. effective March 15, 2010

31.1

Certification of Chief Executive Officer as required by Rule 13a-14(a) of the Securities Exchange Act of 1934, as amended

31.2

Certification of Chief Financial Officer as required by Rule 13a-14(a) of the Securities Exchange Act of 1934, as amended

32.1

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

3531

Filing Compare · RSC Holdings III, LLC