UNITED STATES ~~SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549~~

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

ý	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2002
OR
o	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Commission File No. 001-14163

ý	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

~~National~~For ~~Equipment~~the ~~Services, Inc. (Exact~~quarterly ~~name~~period ofended ~~registrant as specified in its charter)~~ June 30, 2003

DELAWARE (State or other Jurisdiction of Incorporation or Organization)		36-4087016 (I.R.S. Employer Identification No.)
1603 Orrington Avenue, Suite 1600 Evanston, Illinois 60201 (Address of principal executive offices) (Zip code)
(847) 733-1000 (Registrant's telephone number, including area code)

~~Indicate~~o byTRANSITION ~~check~~REPORT ~~mark~~PURSUANT ~~whether~~TO ~~the~~SECTION ~~Registrant (1) has filed all reports required to be filed by Section~~ 13 orOR 15(d) ofOF ~~the~~THE ~~Securities~~SECURITIES ~~Exchange~~EXCHANGE ~~Act of~~ACT ~~1934~~OF 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 ý No o 1934

~~There were~~Commission ~~21,151,163 shares~~File ~~of Common Stock ($~~No.~~01 par value) outstanding as of November~~ ~~5, 2002.~~ 001-14163

~~NATIONAL~~National ~~EQUIPMENT~~Equipment ~~SERVICES~~Services, ~~INC. QUARTERLY~~ ~~REPORT ON FORM 10-Q For the Quarter ended September 30, 2002~~ Inc.

(Debtor-in-Possession ~~INDEX~~ as of June 27, 2003)

			Page
PART I.		FINANCIAL INFORMATION	3
	Item 1.	Financial Statements	3
		Consolidated Balance Sheets at September 30, 2002 (Unaudited) and December 31, 2001	3
		Consolidated Statements of Operations for the three and nine months ended September 30, 2002 and 2001 (Unaudited)	4
		Consolidated Statements of Cash Flows for the nine months ended September 30, 2002 and 2001 (Unaudited)	5
		Notes to Consolidated Financial Statements (Unaudited)	6
	Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	12
	Item 3.	Quantitative and Qualitative Disclosures About Market Risk	16
	Item 4.	Controls and Procedures	16
PART II.		OTHER INFORMATION	17
	Item 1.	Legal Proceedings	17
	Item 2.	Changes in Securities	17
	Item 3.	Defaults upon Senior Securities	17
	Item 4.	Submission of Matters to a Vote of Security Holders	17
	Item 5.	Other Information	17
	Item 6.	Exhibits and Reports on Form 8-K	17
SIGNATURE			18
Index of Exhibits			21

(Exact name of registrant as specified in its charter)

DELAWARE		36-4087016
(State or other Jurisdiction of Incorporation or Organization)		(I.R.S. Employer Identification No.)

8770 ~~PART I~~W. ~~FINANCIAL~~ ~~INFORMATION~~ Bryn Mawr, 4th Floor

Chicago, ~~ITEM 1. FINANCIAL~~Illinois ~~STATEMENTS~~ 60631

~~NATIONAL EQUIPMENT SERVICES, INC. CONSOLIDATED BALANCE SHEETS~~ (inAddress ~~thousands,~~of ~~except~~principal ~~share~~executive ~~data~~offices)

			September 30, 2002			December 31, 2001
			(Unaudited)
Assets
	Cash and cash equivalents		$	5,368		$	4,199
	Accounts receivable, net of allowance for doubtful accounts of $7,658 and $5,844, respectively			131,299			102,144
	Inventory, net			25,759			26,785
	Rental equipment, net			529,332			576,680
	Property and equipment, net			48,880			52,283
	Intangible assets, net			139,028			296,609
	Loan origination costs, net			6,437			10,548
	Deferred income taxes			—			10,066
	Prepaid expenses and other assets, net			12,742			11,369
	Assets associated with discontinued operations			3,856			111,648
		Total assets	$	902,701		$	1,202,331
Liabilities
	Book overdraft		$	2,806		$	8,040
	Accounts payable			26,231			20,386
	Accrued interest			13,968			7,847
	Deferred income taxes, net			—			35,662
	Accrued expenses and other liabilities			48,467			61,380
	Debt			762,271			869,015
	Liabilities associated with discontinued operations			3,281			3,373
		Total liabilities		857,024			1,005,703
	Senior redeemable convertible preferred stock			96,671			96,297
	Commitments and contingencies			—			—
Stockholders' Equity
Common stock, $0.01 par, 100,000 shares authorized; 24,170 shares issued				241			241
Additional paid-in capital				123,887			123,887
Retained earnings (accumulated deficit)				(148,548	)		6,468
Stock subscriptions receivable				(80	)		(102	)
Treasury stock at cost, 3,019 shares				(19,062	)		(19,062	)
Accumulated other comprehensive loss				(7,432	)		(11,101	)
		Total stockholders' equity (deficit)		(50,994	)		100,331
		Total liabilities and stockholders' equity (deficit)	$	902,701		$	1,202,331

(773) 695-3999

~~The~~(Registrant’s telephone ~~accompanying~~number, ~~notes~~including ~~are~~area ~~an integral part of the consolidated financial statements.~~ code)

3Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Section 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court. Yes ý No o

~~NATIONAL~~Indicate ~~EQUIPMENT~~by ~~SERVICES, INC. CONSOLIDATED~~check ~~STATEMENTS~~mark OFwhether ~~OPERATIONS~~the ~~(UNAUDITED)~~registrant is an accelerated filer (inas ~~thousands,~~defined ~~except~~in ~~per~~Exchange ~~share~~Act ~~data~~Rule 12b-2) . Yes o No ý

			For the Three Months Ended September 30,						For the Nine Months Ended September 30,
			2002			2001			2002			2001
Revenues
	Rental revenues		$	122,214		$	109,865		$	343,994		$	317,363
	New equipment sales			11,062			11,017			32,157			35,362
	Rental equipment sales			13,760			5,422			30,804			19,751
	Parts, service and other			24,416			21,741			64,596			53,819
		Total revenues	$	171,452		$	148,045		$	471,551		$	426,295
Cost of revenues
	Rental equipment depreciation			29,576			23,811			85,661			72,922
	Cost of new equipment sales			9,519			8,174			26,157			26,702
	Cost of rental equipment sales			11,997			4,811			23,002			15,298
	Other operating expenses			72,235			59,385			199,190			166,260
		Total cost of revenues		123,327			96,181			334,010			281,182
Gross profit				48,125			51,864			137,541			145,113
Selling, general and administrative expenses				38,001			31,221			108,251			93,146
Non-rental depreciation and amortization				2,286			4,336			7,172			13,070
Operating income				7,838			16,307			22,118			38,897
Other income, net				252			202			1,032			505
Interest expense, net				17,631			16,081			51,858			51,875
Income (loss) from continuing operations before income taxes				(9,541	)		428			(28,708	)		(12,473	)
Income tax expense (benefit)				—			540			—			(3,657	)
Loss from continuing operations				(9,541	)		(112	)		(28,708	)		(8,816	)
Discontinued operations:
	Income (loss) from discontinued operations, net of tax			—			769			(3,409	)		(104	)
	Gain on disposal of discontinued operations, net of tax			—			—			6,981			—
Income (loss) before cumulative effect of a change in accounting principle				(9,541	)		657			(25,136	)		(8,920	)
Cumulative effect of a change in accounting principle, net of tax				—			—			(129,505	)		—
Net income (loss)			$	(9,541	)	$	657		$	(154,641	)	$	(8,920	)
Other comprehensive income (loss)				1,499			(9,871	)		3,669			(10,793	)
Comprehensive loss			$	(8,042	)	$	(9,214	)	$	(150,972	)	$	(19,713	)
Basic income (loss) per common share:
	Continuing operations		$	(0.46	)	$	(0.01	)	$	(1.37	)	$	(0.44	)
	Discontinued operations			—			0.04			0.17			(0.00	)
Cumulative effect of a change in accounting principle				—			—			(6.13	)		—
Net earnings (loss)			$	(0.46	)	$	0.03		$	(7.33	)	$	(0.44	)
Diluted income (loss) per common share:
	Continuing operations		$	(0.46	)	$	(0.01	)	$	(1.37	)	$	(0.44	)
	Discontinued operations			—			0.04			0.17			(0.00	)
Cumulative effect of a change in accounting principle				—			—			(6.13	)		—
Net earnings (loss)			$	(0.46	)	$	0.03		$	(7.33	)	$	(0.44	)
Weighted average shares outstanding:
	Basic			21,151			20,989			21,140			20,924
	Diluted			21,151			20,989			21,140			20,924

There were 21,151,163 shares of Common Stock ($.01 par value) outstanding as of August 14, 2003.

TheExplanatory accompanying notes are an integral part of the consolidated financial statements. Note

4National Equipment Services, Inc., (“NES”) is filing this Quarterly Report on Form 10-Q for the period ended June 30, 2003. NES and its domestic subsidiaries filed voluntary petitions under Chapter 11 of the U.S. Bankruptcy Code on June 27, 2003. At the time of filing for bankruptcy protection, NES owed a substantial amount to its independent auditors at the time, PricewaterhouseCoopers LLP (“PwC”). As a result, PwC did not perform the limited review of the quarterly financial statements included in this Report as required by Rule 10-01(d) of Regulation S-X under the U.S. securities laws. On November 12, 2003, NES notified PwC of its intent to replace them as independent auditor. NES subsequently retained KPMG LLP as its independent auditor. Except as specifically noted herein, this Form 10-Q does not contain updates to reflect any events occurring after June 30, 2003, which was the end of the period covered by this Form 10-Q. Please see the discussion in Note 2 for information about emergence from bankruptcy protection on February 11, 2004. All information contained in this Form 10-Q is subject to updating and supplementing as provided in the reports filed with the Securities and Exchange Commission for periods subsequent to the end of the original period for this Form 10-Q.

~~NATIONAL~~National ~~EQUIPMENT~~Equipment ~~SERVICES~~Services, ~~INC~~ Inc. ~~CONSOLIDATED~~ ~~STATEMENTS OF CASH FLOWS (UNAUDITED)~~and ~~(in thousands)~~ Subsidiaries

			For the Nine Months Ended September 30,
			2002			2001
Operating Activities:
	Net loss		$	(154,641	)	$	(8,920	)
Adjustments to reconcile net loss to net cash provided by operating activities:
	Depreciation and amortization			97,142			88,743
	Gain on sale of discontinued operations			(6,981	)		—
	Cumulative effect of a change in accounting principle			129,505			—
	Gain on sale of equipment			(8,167	)		(4,604	)
	Deferred income taxes			—			(4,120	)
	Changes in operating assets and liabilities:
		Accounts receivable		(29,155	)		6,734
		Inventory		1,026			(333	)
		Prepaid expenses and other assets		(24	)		(586	)
		Accounts payable		5,845			(14,843	)
		Accrued expenses and other liabilities		(3,123	)		8,740
Net cash provided by discontinued operations				6,062			939
Net cash provided by operating activities				37,489			71,750
Investing Activities:
Proceeds received from sale of discontinued operations				108,890			—
Purchases of rental equipment				(58,778	)		(16,214	)
Proceeds from sale of rental equipment				30,804			19,751
Purchases of property and equipment				(6,150	)		(8,762	)
Proceeds from sale of property and equipment				1,361			930
Net cash used in discontinued operations				—			(3,409	)
Net cash provided by (used in) investing activities				76,127			(7,704	)
Financing Activities:
Proceeds from long-term debt				37,000			41,001
Payments on long-term debt and capital leases				(143,942	)		(109,652	)
Book overdrafts				(5,234	)		2,301
Net cash provided by (used in) discontinued operations				(271	)		129
Net cash used in financing activities				(112,447	)		(66,221	)
Net increase (decrease) in cash and cash equivalents				1,169			(2,175	)
Cash and cash equivalents at beginning of period				4,199			3,162
Cash and cash equivalents at end of period			$	5,368		$	987

(Debtor-in-Possession as of June 27, 2003)

~~The~~QUARTERLY ~~accompanying~~REPORT ~~notes~~ON ~~are~~FORM ~~an integral part of the consolidated financial statements.~~ 10-Q

5For the quarter ended

~~NATIONAL EQUIPMENT SERVICES,~~June ~~INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (in thousands~~30, ~~except per share data)~~ 2003

~~1. Organization~~ INDEX

National Equipment Services, Inc. (the "Company") is principally a holding company organized on June 4, 1996 (date of inception) under the laws of Delaware. The Company conducts its operations through its wholly owned subsidiaries acquired since the date of inception. The Company owns and operates equipment rental, sales and service facilities primarily located throughout the United States. The Company rents various types of equipment to a diverse customer base, including construction, petro-chemical and other industrial users. The Company also sells new and used rental equipment and related parts, and provides other services. The nature of the Company's business is such that short-term obligations are typically met by cash flow generated from long-term assets. Consequently, consistent with industry practice, the accompanying balance sheets are presented on an unclassified basis.

PART I. FINANCIAL INFORMATION

Item 1.	Financial Statements

	Consolidated Balance Sheets at June 30, 2003 (Unaudited) and December 31, 2002

	Consolidated Statements of Operations for the three and six months ended June 30, 2003 and 2002 (Unaudited)

	Consolidated Statements of Cash Flows for the six months ended June 30, 2003 and 2002 (Unaudited)

	Notes to Consolidated Financial Statements (Unaudited)

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations

Item 3.	Quantitative and Qualitative Disclosures About Market Risk

Item 4.	Controls and Procedures

PART II. OTHER INFORMATION

Item 1.	Legal Proceedings

Item 2.	Changes in Securities; Use of Proceeds and Issuer Purchases of Equity Securities

Item 3.	Defaults upon Senior Securities

Item 4.	Submission of Matters to a Vote of Security Holders

Item 5.	Other Information

Item 6.	Exhibits and Reports on Form 8-K

SIGNATURE

Index of Exhibits

2~~. Basis of presentation~~

~~General—The accompanying unaudited financial statements as of and for the quarters ended September 30, 2002 and 2001~~Forward ~~have~~Looking been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. The December 31, 2001 consolidated balance sheet was derived from audited financial statements but does not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments considered necessary for a fair presentation, consisting only of normal recurring adjustments, have been included. Results of operations for the interim periods are not necessarily indicative of the results that may be expected for a full year. Due to the seasonality that impacts a significant portion of the Company's locations, the second and third quarters are typically the most active quarters for the Company. Statements

~~Derivative~~ Note: ~~Instrument—Statement~~This ofreport ~~Financial~~contains ~~Accounting~~forward-looking statements ~~Standards~~as ~~("SFAS")~~encouraged ~~No. 133,~~by ~~"Accounting~~the ~~for~~Private ~~Derivative~~Securities Litigation Reform Act of ~~Instruments~~1995. ~~and~~All ~~Hedging~~statements ~~Activities",~~contained asin ~~amended~~this document, ~~became~~other ~~effective~~than ashistorical information, ofare ~~January 1,~~forward-looking ~~2001~~statements. ~~Currently,~~These ~~the~~statements ~~Company'~~represent management’s ~~only~~current ~~derivative~~judgment ison anwhat ~~interest~~the ~~rate~~future ~~swap~~holds. ~~used~~A tovariety ~~hedge~~of afactors could ~~portion~~cause ofbusiness conditions and the Company'’s ~~debt~~actual ~~and~~results isto ~~designated~~differ materially asfrom athose ~~cash~~expected ~~flow~~by ~~hedging~~the ~~instrument.~~Company ~~The~~or expressed in the Company'’s forward-looking ~~objective~~statements. ~~for~~These ~~holding~~factors include, without limitation, the ~~derivative~~Company’s isability to ~~minimize~~successfully ~~interest~~integrate ~~rate~~acquired ~~risks~~businesses; ~~and~~changes ~~stabilize~~in market ~~cash~~price ~~flows.~~or ~~The~~market ~~derivative~~demand; ~~is required~~loss toof bebusiness ~~recorded~~from ascustomers; angeneral declines ~~asset~~in orrental ~~liability~~rates onin the ~~consolidated~~market; ~~balance~~pricing ~~sheet~~pressure atfrom ~~fair~~competitors; inability ~~value,~~to ~~with~~fund ~~any~~required ~~changes~~capital inexpenditures; the ~~fair~~Company’s ~~value~~bankruptcy reorganization; ofunanticipated ~~the~~expenses; ~~derivative~~changes ~~recorded~~ in ~~other~~financial ~~comprehensive~~markets; ~~income.~~the Company’s Assubstantial ~~of September 30,~~leverage; ~~2002,~~potential defaults in the ~~derivative~~Company’s indebtedness; ~~liability~~inability ~~totaled~~to ~~$7,432~~make scheduled principal amortization payments on indebtedness; and ~~was~~other ~~recorded~~factors asdiscussed anin ~~accrued~~the ~~liability~~Company’s onfilings with the Securities ~~consolidated~~and ~~balance~~Exchange ~~sheet~~Commission.

~~Comprehensive~~ Our ~~Income—Statement~~annual ofreport ~~Financial~~on ~~Accounting~~Form ~~Standards ("SFAS") No. 130~~10-K, ~~"Reporting~~quarterly ~~Comprehensive Income",~~reports ~~which~~on ~~requires~~Form ~~comprehensive~~10-Q, ~~income~~current ~~and~~reports ~~its~~on ~~components~~Form to8-K beand ~~disclosed~~amendments into ~~the~~these ~~financial~~reports ~~statements~~are available ~~for~~on ~~all~~our ~~periods~~internet ~~presented~~website ~~became~~free ~~effective~~of ~~in 1999~~charge. These ~~The~~reports ~~only~~are ~~item~~available ofas ~~other~~soon ~~comprehensive~~as ~~income applicable~~practicable toafter ~~the~~we electronically ~~Company~~file isthese areports ~~change~~with in the ~~fair~~Securities ~~value of a derivative instrument, totaling $1,499~~ and ~~$3,669~~Exchange Commission. Our ofwebsite ~~income~~address ~~during the three- and nine-month periods ending~~is ~~September 30, 2002~~www. nesrentals.com.

~~Recently~~PART ~~Issued Accounting Standards—In May 2002, the FASB issued SFAS No~~I. ~~145,~~ ~~"Rescission of FASB Statements~~FINANCIAL No. 4, 44, and 64, Amendment of FASB Statement No. 13, and Technical Corrections." This Statement rescinds FASB Statement No. 4, "Reporting Gains and Losses from Extinguishment of Debt," and an amendment of that Statement, FASB Statement No. 64, "Extinguishment of Debt Made to Satisfy Sinking-Fund Requirements." This Statement amends FASB Statement No. 13, "Accounting for Leases," to eliminate an inconsistency between the required accounting for sale-leaseback transactions and the required accounting for certain lease modifications that have economic effects that are similar to sale-leaseback transactions. This Statement also amends other existing authoritative pronouncements to make various technical corrections, clarify meanings, or describe their applicability under changed conditions. The provisions of this Statement related to the recission of Statement No. 4 are effective beginning in 2003. All other provisions are effective after May 15, 2002. There will be no material effect resulting from the adoption of the Statement. INFORMATION

~~In June 2001,~~ITEM ~~the Financial Accounting Standards Board ("FASB") issued SFAS No~~1. ~~141,~~ ~~"Business Combinations," that supersedes Accounting Principles Board ("APB") Opinion~~FINANCIAL ~~No. 16, Business Combinations. SFAS No. 141 is effective for all business combinations initiated after June 30, 2001 and all business combinations~~ STATEMENTS

6National Equipment Services, Inc. and Subsidiaries

~~accounted~~(Debtor-in-Possession ~~for~~as ~~by the purchase method for which the date~~ of ~~acquisition is after~~ June 30 27, ~~2001. All business combinations under the scope of SFAS No. 141 are to be accounted for using the purchase method. There will be no material effect resulting from the adoption of the Statement.~~ 2003)

~~Also~~CONSOLIDATED inBALANCE June 2001, the FASB issued SFAS No. 142, "Goodwill and Other Intangible Assets," that supersedes APB Opinion No. 17, Intangible Assets. SFAS No. 142 is effective for fiscal years beginning after December 15, 2001. Under this standard, goodwill is no longer amortized but subject to annual impairment tests on a reporting unit level. In the second quarter of 2002, the Company completed a transitional impairment test on its reporting units. As a result of this test, the Company recorded an impairment charge of approximately $129,505, net of tax benefit, as a cumulative effect of change in accounting principle retroactive to January 1, 2002. SHEETS

~~The effect~~(in ~~of adopting the new standards on net income and diluted earnings per share for the three and nine months ended September 30, 2001 is as follows:~~ thousands)

			For the three Months Ended September 30, 2001			For the nine Months Ended September 30, 2001
		June 30, 2003			December 31, 2002
Reported net income (loss)			$	657		$	(8,920	)
		(Unaudited)
Plus: goodwill amortization				2,511			7,578
Assets
Adjusted net income (loss)			$	3,168		$	(1,342	)
Cash and cash equivalents		$	19,692		$	15,184
Diluted earnings (loss) per share:
Trade accounts receivable, net of allowance for doubtful accounts of $4,764 and $5,477, respectively		131,225			123,094
	Reported net income (loss)		$	0.02		$	(0.44	)
Inventory, net		16,586			18,186
	Goodwill amortization		$	0.09		$	0.36
Loan origination costs, net		2,154			6,791
	Adjusted net income (loss)		$	0.11		$	(0.08	)
Prepaid expenses and other assets		29,774			20,811
Rental equipment, net		450,176			492,775
Property and equipment, net		40,675			45,803
Intangible assets, net		1,370			139,978
Total assets		$	691,652		$	862,622
Liabilities
Liabilities not subject to compromise
Book overdraft		$	9,605		$	490
Trade accounts payable		—			28,965
Accrued interest		—			8,592
Accrued expenses and other liabilities		41,673			51,715
Debt		2,420			763,276
Liabilities subject to compromise		810,922			—
Total liabilities		864,620			853,038
Commitments and contingencies		—			—
Senior mandatorily redeemable convertible preferred stock		97,046			96,796
Stockholders’ deficit:
Common stock, $0.01 par, 100,000 shares authorized; 24,170 shares issued, 21,151 shares outstanding		241			241
Additional paid-in capital		123,887			123,887
Accumulated deficit		(376,310		)	(187,589		)
Stock subscriptions receivable		—			(80		)
Treasury stock at cost, 3,019 shares		(19,062		)	(19,062		)
Accumulated other comprehensive income (loss)		1,230			(4,609		)
Total stockholders’ deficit		(270,014		)	(87,212		)
Total liabilities and stockholders’ deficit		$	691,652		$	862,622

~~The Company's intangible asset balance at September 30, 2002 consists of $136,790 goodwill subject to annual impairment tests under SFAS 142 and~~See ~~$2,238~~accompanying ofnotes non-compete agreements recorded at a cost of $9,595 and amortized on a straight-line basis over five years. Accumulated amortization on these agreements was $7,357 at September 30, 2002, and amortization expense for the nine months ended September 30, 2002 is $1,153. Amortization expense for the years ended December 31, 2002, 2003, 2004 and 2005 is estimated to beconsolidated ~~$1,556,~~financial ~~$1,129, $624 and $82, respectively~~statements.

~~Reclassifications—Certain reclassifications of prior year financial statement amounts have been made to conform to the current year reporting.~~ 3

~~3. Earnings~~National ~~per~~Equipment ~~share~~ Services, Inc. and Subsidiaries

~~The~~(Debtor-in-Possession ~~Company's~~as ~~earnings~~of ~~per~~June ~~share for the three and nine months ended September 30~~27, ~~2002 and 2001 are calculated as follows:~~ 2003)

		For the Three Months Ended September 30,						For the Nine Months Ended September 30,
		2002			2001			2002			2001
Loss from continuing operations		$	(9,541	)	$	(112	)	$	(28,708	)	$	(8,816	)
Less accretion on preferred stock			(125	)		(125	)		(375	)		(375	)
Loss from continuing operations available to common stockholders		$	(9,666	)	$	(237	)	$	(29,083	)	$	(9,191	)
Weighted average shares			21,151			21,151			21,151			21,151
	Less unvested stock		—			(162	)		(11	)		(227	)
Basic weighted average shares			21,151			20,989			21,140			20,924
Effect of dilutive securities
	Unvested stock		—			—			—			—
	Convertible preferred stock		—			—			—			—
Diluted weighted average shares			21,151			20,989			21,140			20,924
Basic loss per share from continuing operations		$	(0.46	)	$	(0.01	)	$	(1.37	)	$	(0.44	)
Diluted loss per share from continuing operations		$	(0.46	)	$	(0.01	)	$	(1.37	)	$	(0.44	)

CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)

~~The~~(in effect of dilutive securities is omitted from the computation of earnings per share during periods of net loss because inclusion would be anti-dilutive by reducing the loss per share. At September 30, 2002 and 2001, stock options totaling approximately 3,300 and 2,800, respectively, were excluded from the computation of the thousands)

	For the Three Months Ended June 30,						For the Six Months Ended June 30,
	2003			2002			2003			2002

Revenues
Rental and service revenues	$	126,692		$	132,348		$	233,304		$	248,108
New equipment sales	9,722			11,633			18,512			21,095
Rental equipment sales	9,125			10,537			17,470			17,045
Other revenues	5,052			7,131			10,923			13,851
Total revenues	150,591			161,649			280,209			300,099
Cost of revenues
Cost of rental and service revenues	65,093			62,690			119,985			119,859
Rental equipment depreciation	27,308			28,539			53,554			56,085
Cost of new equipment sales	8,407			9,294			15,881			16,638
Cost of rental equipment sales	6,578			6,345			12,015			11,005
Other operating expenses	5,471			6,988			11,123			13,695
Total cost of revenues	112,857			113,856			212,558			217,282

Gross profit	37,734			47,793			67,651			82,817
Selling, general and administrative expenses	36,919			32,425			71,992			63,650
Goodwill impairment	138,115			—			138,115			—
Non-rental depreciation and amortization	1,519			2,447			3,452			4,886
Operating (loss) income	(138,819		)	12,921			(145,908		)	14,281
Other income, net	277			333			399			779
Interest expense, net	19,820			17,543			42,467			34,227
Loss from continuing operations before income taxes	(158,362		)	(4,289		)	(187,976		)	(19,167		)
Income tax expense	—			—			—			—
Loss from continuing operations	(158,362		)	(4,289		)	(187,976		)	(19,167		)
Discontinued operations
Loss from discontinued operations, net of tax	(518		)	(1,779		)	(518		)	(3,409		)
Gain on disposal of discontinued operations, net of tax	—			6,981			—			6,981
Income (loss) before cumulative effect of a change in accounting principle	(158,880		)	913			(188,494		)	(15,595		)
Cumulative effect of a change in accounting principle, net of tax	—			—			—			(129,505		)
Net income (loss)	$	(158,880	)	$	913		$	(188,494	)	$	(145,100	)
Other comprehensive income (loss)	1,933			(1,498		)	5,838			2,170
Comprehensive loss	$	(156,947	)	$	(585	)	$	(182,656	)	$	(142,930	)

See ~~diluted~~accompanying ~~earnings~~notes ~~per~~to ~~share~~consolidated ~~because~~financial ~~the exercise prices were greater than the average market price of the common shares~~statements.

4~~. Acquisitions and Dispositions~~

InNational ~~December~~Equipment ~~2001~~Services, ~~the Company purchased the North American equipment rental business of Brambles U~~Inc.~~S.A.~~ and ~~Brambles Canada ("Brambles"), an equipment rental~~ company based in Taylor, MI. The following unaudited financial information for the three and nine months ended September 30, 2001 represents the pro forma results of operations as if the Brambles acquisition had been completed on January 1, 2001, after giving effect to certain adjustments including increased depreciation of property and equipment, interest expense for acquisition debt and amortization of related intangibles. These pro forma results and loss per share have been prepared for comparative purposes only and do not purport to be indicative of the results of operations that would have been achieved had this acquisition been completed as of January 1, 2001, nor are the results indicative of the Company's future results of operations. Subsidiaries

		Three Months Ended September 30, 2001		Nine Months Ended September 30, 2001
Revenues		$	190,745	$	551,595
Operating income			21,107		48,497
Net income (loss)			2,657		(5,820	)
Net income (loss) per share:
	Basic	$	0.12	$	(0.30	)
	Diluted	$	0.09	$	(0.30	)
Weighed average shares outstanding
	Basic		20,989		20,924
	Diluted		28,843		20,924

(Debtor-in-Possession as of June 27, 2003)

OnCONSOLIDATED ~~June 30,~~STATEMENTS ~~2002,~~OF ~~the~~CASH ~~Company~~FLOWS sold its underground trench shoring business. The proceeds of $108,890 from the sale were used to repay existing indebtedness under the Credit Facility. In accordance with SFAS No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets," the financial condition and results of operations of this business are reflected herein as discontinued operations. For the period from January 1, 2002 to June 30, 2002, the trench shoring business incurred a loss of $3,409. On June 30, 2002, the Company recognized a gain of $6,981 in conjunction with the sale. (UNAUDITED)

~~5. Inventory~~ (in thousands)

Inventory, net consists of the following, at:

	For the Six Months Ended June 30,
	2003			2002

Cash flows from operating activities:
Net loss	$	(188,494	)	$	(145,100	)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation and amortization	57,006			60,970
Goodwill impairment	138,115			—
Cumulative effect of a change in accounting principle, net of tax	—			129,505
Amortization of deferred finance costs and debt discount	5,035			3,059
Gain on sale of equipment	(5,620		)	(6,213		)
Gain on sale of discontinued operations	—			(6,981		)
Changes in operating assets and liabilities
Trade accounts receivable	(8,131		)	(26,669		)
Inventory	1,600			(743		)
Prepaid expenses and other assets	(8,967		)	456
Trade accounts payable	(4,500		)	9,024
Accrued expenses and other liabilities	13,536			(1,303		)
Net cash flows (used in) provided by continuing operating activities	(420		)	16,005
Net cash flows provided by discontinued operating activities	—			5,171
Net cash flows (used in) provided by operating activities	(420		)	21,176

Cash flows from investing activities:
Proceeds received from the sale of discontinued operations	—			108,890
Purchases of rental equipment	(17,878		)	(33,455		)
Proceeds from sale of rental equipment	17,470			17,045
Purchases of property and equipment	(3,910		)	(3,499		)
Proceeds from sale of property and equipment	1,156			519
Net cash (used in) provided by investing activities	(3,162		)	89,500

Cash flows from financing activities:
Proceeds from long-term debt	—			27,000
Payments on long-term debt	(1,025		)	(136,346		)
Increase (decrease) in book overdraft	9,115			(1,826		)
Net cash provided by (used in) financing activities	8,090			(111,172		)
Net increase (decrease) in cash and cash equivalents	4,508			(496		)
Cash and cash equivalents at beginning of period	15,184			4,199
Cash and cash equivalents at end of period	$	19,692		$	3,703

Supplemental Cash Flow Information:
Cash paid for interest	$	26,043		$	33,542
Cash paid for income taxes	502			631

	September 30, 2002			December 31, 2001
New equipment	$	4,907		$	5,288
Used equipment		3,153			4,512
Contractor supplies		5,802			4,495
Parts		15,584			17,166
		29,446			31,461
Reserves for excess and obsolete inventory		(3,687	)		(4,676	)
	$	25,759		$	26,785

See accompanying notes to consolidated financial statements.

~~6. Income Taxes~~ 5

AsNational aEquipment ~~result of the adoption of SFAS No. 142~~Services, ~~the Company's deferred tax assets exceeded the Company's deferred tax liabilities~~Inc. ~~The Company did not provide~~and any current or deferred US federal, state or foreign income tax provision or benefit during 2002 because it has recently experienced significant operating losses. The Company has provided a full valuation allowance on the net deferred tax asset, consisting primarily of net operating loss, because of uncertainty regarding its realizability. At September 30, 2002, the valuation allowance was $16,384. Subsidiaries

8(Debtor-in-Possession as of June 27, 2003)

~~7. Debt~~ NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

~~The Company's Credit Facility, as amended, provides for a term loan of $70,000 and a revolving loan of $480,000. Based upon the available borrowing base~~ (~~which~~Amounts ~~is based~~in ~~on the book value of the Company's inventory and accounts receivable and the appraised value of the Company's rental equipment~~thousands) at September 30, 2002, the Company had $28,487 available on the revolving Credit Facility loan, of which $6,875 is reserved for the interest payments on the Company's Series B Notes and Series D Notes. The Credit Facility is collateralized by substantially all of the Company's assets and extends to July 2003.

~~The available borrowing base is recomputed monthly~~1. In the event that the book value of the Company's inventory or accounts receivable or the appraised value of the Company's rental equipment declines without a corresponding increase in one of the other categories, the available borrowing base will be reduced accordingly. A significant reduction in the available borrowing base would adversely affect the Company's liquidity, including its ability to pay interest on the Series B Notes and the Series D Notes when due. A failure to pay such interest when due would result in a default under the indentures governing the Series B Notes and the Series D Notes, which would have a material adverse effect on the Company. The necessary appraisal of the Company's rental equipment for purposes of calculating the Company's October 2002 borrowing base under the Credit Facility has not yet been finalized. The results of this appraisal could reduce the Company's available borrowing base such that the Company would be prohibited by the Credit Facility from paying the interest due on the Series B Notes and the Series D Notes at the end of November 2002, which would have a material adverse effect on the Company. Organization

~~During 1997,~~National ~~the~~Equipment ~~Company issued $100~~Services,~~000~~ ofInc. ~~Senior Subordinated Notes due November 2004~~ (the ~~"Series A Notes"~~“Company”) atis principally a holding ~~discount~~company ~~netting~~organized ~~proceeds~~under the laws of ~~$99,000~~Delaware. ~~During~~The ~~1998,~~Company ~~the~~conducts ~~Company~~its ~~completed~~operations through its ~~exchange~~wholly ofowned ~~$100,000~~subsidiaries ofacquired ~~Senior~~or ~~Subordinated~~formed ~~Notes~~since ~~due~~the date ~~November~~of ~~2004,~~inception. ~~Series B~~The ~~(the~~Company ~~"Series B~~owns ~~Notes"),~~and ~~which~~operates ~~have~~equipment ~~been~~rental, ~~registered~~sales ~~for~~and service ~~public~~facilities ~~trading,~~primarily ~~for~~located throughout the ~~Series A Notes.~~United ~~During~~States ~~1998,~~of ~~the~~America. The Company ~~issued~~rents ~~$125,000~~various types of ~~Senior~~equipment ~~Subordinated~~to ~~Notes~~a ~~due~~diverse ~~2004~~customer base, including ~~Series C~~construction, ~~(the~~automotive ~~"Series C~~and ~~Notes")~~other atindustrial ausers. ~~discount~~The ~~netting~~Company ~~proceeds~~also sells ofnew ~~$122,000.~~equipment ~~During~~and ~~1999,~~used ~~the Company~~equipment ~~issued~~out ~~$50,000~~ of ~~additional~~its ~~Series C~~rental ~~Notes~~fleet, atsells arelated parts ~~discount~~and ~~netting~~provides ~~proceeds~~other ~~of $49,000~~services. ~~Later~~The ~~during~~nature ~~1999,~~of the Company’s ~~completed~~business ~~its~~is ~~exchange~~such that ofshort-term ~~$175,000~~obligations ofare ~~Senior~~met ~~Subordinated~~typically ~~Notes due~~by ~~2004,~~cash ~~Series D~~flow ~~(the~~generated ~~"Series D~~from long-term ~~Notes")~~assets. Consequently, ~~which~~consistent ~~have~~with ~~been~~industry ~~registered~~practice, ~~for~~the accompanying ~~public~~consolidated ~~trading,~~balance ~~for~~sheets ~~the~~are ~~Series C~~presented ~~Notes.~~on an unclassified basis.

~~The Company is a holding company with no independent operations, and the Company's assets (excluding the intercompany receivables and common stock of its subsidiaries) are insignificant~~2. ~~All~~ ofBankruptcy; ~~the~~Subsequent Company's subsidiaries make full, unconditional, joint and several guarantees of the Series B Notes and the Series D Notes, and all of these subsidiaries are directly or indirectly wholly-owned by the Company. There are no restrictions on the ability of the Company to obtain funds from these subsidiaries by dividend or loan. The separate financial statements of each of these wholly-owned subsidiaries are not presented as management believes that separate financial statements and other disclosures concerning these subsidiaries are not individually meaningful for presentation or material to investors. Event

~~The Credit~~On ~~Facility~~June 27, ~~contains~~2003, ~~certain~~the ~~covenants~~Company ~~that,~~and ~~among~~its ~~other~~U.S. ~~things~~subsidiaries (collectively, ~~require~~ the ~~Company~~“Debtors”) tofiled ~~satisfy~~for ~~certain~~voluntary ~~financial~~reorganization ~~tests,~~under ~~including~~Chapter 11 ~~tests~~(the ~~relating~~“Filing”) toof the U.S. Bankruptcy Code (ithe “Bankruptcy Code”) in the Northern ~~ratio~~District of ~~senior~~ ~~debt~~Illinois to(“Bankruptcy ~~earnings~~Court”). The ~~before~~Company’s ~~interest,~~subsidiary ~~taxes,~~located ~~depreciation~~in Canada, ~~and~~which ~~amortization~~represents ~~("EBITDA"),~~less than ~~(ii) minimum~~2% ~~interest~~of ~~coverage~~total ~~ratio~~revenues and ~~(iii) the~~total ~~ratio~~assets ofwas ~~funded~~not ~~debt~~included toin ~~EBITDA~~the petition. Due Into ~~addition,~~ the ~~Credit~~size ~~Facility~~of ~~and~~ the Company’s ~~indentures~~Canadian ~~for~~subsidiary, the ~~Series B~~consolidated ~~and~~financial ~~Series D~~statements ~~Notes~~of ~~contain~~the Company ~~certain~~presented ~~covenants~~herein ~~that~~are ~~set~~essentially ~~certain~~equivalent ~~limitations~~to on the ~~granting~~consolidated financial statements of ~~liens,~~the ~~asset~~Debtors. As of ~~sales~~June 30, ~~additional indebtedness~~2003, ~~transactions~~the ~~with~~Debtors ~~affiliates,~~were ~~restricted~~operating ~~payments,~~their ~~investments,~~businesses ~~issuances~~as “debtors-in-possession” under the jurisdiction of ~~stock~~the Bankruptcy Court and ~~payment~~in accordance with the applicable provisions of ~~dividends.~~the Bankruptcy Code.

~~As of~~The ~~September 30,~~initial ~~2002,~~joint ~~the~~plan ~~Company~~of reorganization was ~~not~~filed inon ~~compliance with the leverage covenants under its Credit Facility. In~~ October ~~2002,~~ ~~the Company amended its Credit Facility~~17, to2003. On ~~reduce~~January ~~the maximum available borrowings under the revolving credit facility from $550~~23,~~000~~ ~~to $480~~2004,~~000~~ ~~and~~the toDebtors ~~revise~~filed a ~~certain~~fourth ~~covenants.~~amended Asjoint aplan ~~result~~ of ~~this~~reorganization ~~amendment,~~ (the ~~Company~~“Plan isof ~~currently in~~Reorganization”), ~~compliance~~which ~~with~~received ~~all covenants of~~ the ~~Credit~~requisite ~~Facility~~support ~~and~~from the ~~indentures~~creditors ~~governing~~authorized ~~the~~to ~~Series B Notes and the Series D Notes~~vote thereon. The ~~However,~~Plan ~~the~~of ~~Company~~Reorganization ~~expects that it will not be able to~~was ~~deliver~~confirmed ~~the~~by ~~October 2002 borrowing base calculation to its lenders until after~~ the ~~November 15~~bankruptcy ~~due~~court ~~date~~on ~~required~~January ~~under~~23, ~~the Credit Facility because the necessary appraisal of the Company's rental equipment has not yet been finalized. In addition~~2004, ~~there~~and ~~can be no assurance that~~ the Company ~~will be in compliance with all other covenants and satisfy all financial ratios and tests~~emerged ~~under~~from ~~the~~bankruptcy ~~Credit~~on ~~Facility~~February in11, ~~the~~2004 ~~future. Any such failure would have a material adverse effect on~~ (the ~~Company.~~“Effective Date”).

9From June 27, 2003 through February 11, 2004, the Debtors continued to operate as debtors-in-possession pursuant to Sections 1107 and 1108 of the Bankruptcy Code. Shortly after the Filing, the Debtors began notifying all known or potential creditors about the Filing for the purposes of identifying all pre-petition claims against the Debtors. Any creditor actions to obtain possession of property from the Debtors or to create, perfect or enforce any lien against the property of the Debtors were stayed. As a result, the creditors of the Debtors were precluded from collecting pre-petition debts without the approval of the Bankruptcy Court. Certain pre-petition liabilities have been paid after obtaining the approval of the Bankruptcy Court, including certain wages and benefits of

~~8. Segment information~~ 6

~~All~~employees ~~operations are managed on a branch basis. The Company has two reporting segments, Traffic Safety~~ and ~~General~~insurance ~~Rental and Other~~costs. The Traffic Safety operations have different contractual, regulatory and capital requirements than the General Rental and Other operations. Intersegment revenues are not material and the operating earnings of the segments do not include interest expense (income) or income tax expense (benefit). The Company has no single customer that represents greater than 2% of the Company's consolidated revenues. Identifiable assets are those used in the Company's operations in each segment.

The Company obtained Debtor-in-Possession financing which provided up ~~following~~to ~~table~~$30 ~~presents~~million of availability to the ~~information~~Company ~~for~~to fund operations during the bankruptcy ~~reported~~period. The ~~segments~~Company ~~for~~did not borrow any funds from this financing source during the ~~quarters~~period ~~ended~~it ~~September 30:~~was in place.

		Traffic Safety		Continuing General Rental and Other		Discontinued Operations		Consolidated
2002:
	Total revenues	$	34,435	$	137,017			$	171,452
	Operating income		5,328		2,510				7,838
	Identifiable assets		112,580		786,265	$	3,856		902,701
	Depreciation and amortization		2,889		28,973				31,862
	Capital expenditures		1,593		26,143				27,736
	Goodwill, net		39,645		97,145				136,790
2001:
	Total revenues	$	36,696	$	111,349			$	148,045
	Operating income		7,295		9,012				16,307
	Identifiable assets		121,309		917,298	$	115,548		1,154,155
	Depreciation and amortization		3,366		24,781				28,147
	Capital expenditures		1,554		2,579				4,133
	Goodwill, net		39,560		255,359				294,919

The Plan of Reorganization provides for the cancellation of all of the issued and outstanding shares of common stock, par value $0.01 per share, of the Company (the “Old Common Stock”), all of the issued and outstanding shares of preferred stock of the Company, and all other outstanding securities of the Company, including common stock options as of the Effective Date.

~~The~~On ~~following~~the ~~table~~Effective ~~presents~~Date, National Equipment Services, Inc. merged into NES Rentals, Inc. NES Rentals, Inc. was the ~~information~~surviving ~~for~~company in the ~~reported~~merger ~~segments~~and ~~for~~was renamed National Equipment Services, Inc. NES Rentals, Inc. is a subsidiary of both NES IT Services, Inc. and NES Real Estate Management, Inc., which are subsidiaries of the ~~nine~~newly ~~months~~formed ~~ended~~NES ~~September~~Rentals Holdings, Inc. (“NESR”), which is the successor to National Equipment Services, Inc. NESR is the new public company parent of National Equipment Services, Inc. ~~30:~~ NESR has 25,000 authorized shares of common stock, of which 21,400 will be issued (the “New Common Stock”).

		Traffic Safety		Continuing General Rental and Other		Discontinued Operations		Consolidated
2002:
	Total revenues	$	79,918	$	391,633			$	471,551
	Operating income		6,471		15,647				22,118
	Identifiable assets		112,580		786,265	$	3,856		902,701
	Depreciation and amortization		8,801		84,032				92,833
	Capital expenditures		4,356		60,572				64,928
	Goodwill, net		39,645		97,145				136,790
2001:
	Total revenues	$	83,767	$	342,528			$	426,295
	Operating income		9,344		29,553				38,897
	Identifiable assets		121,309		917,298	$	115,548		1,154,155
	Depreciation and amortization		14,260		71,730				85,990
	Capital expenditures		4,072		20,904				24,976
	Goodwill, net		39,560		255,359				294,919

In accordance with the Plan of Reorganization, (i) holders of general unsecured claims, including the holders of the Company’s Senior Subordinated Notes due 2004, Series B (the “Series B Notes”) and Senior Subordinated Notes due 2004, Series D (the “Series D Notes”), are to receive 97.5% (20,865 shares) of the New Common Stock of the Company, (ii) the holders of the Company’s preferred stock are to receive 2.0% (428 shares) of the New Common Stock of the Company, and (iii) the holders of the Company’s Old Common Stock are to receive 0.5% (107 shares) of the New Common Stock of the Company.

9On the Effective Date, NESR entered into a new senior secured credit facility (the “New Credit Facility”). ~~Restructuring~~ The ~~charge~~ New Credit Facility consists of $285,000 of term loan facilities and a $205,000 revolving credit facility. There are quarterly scheduled principal repayments on the term loan facilities through the May 15, 2007 maturity date of the New Credit Facility.

~~During~~As ~~the~~a ~~fourth~~result ~~quarter~~ of ~~2001~~the emergence from bankruptcy, the Company ~~recorded~~is ato ~~non~~adopt fresh-~~recurring~~start ~~pre-tax~~reporting ~~restructuring~~in ~~charge~~accordance with Statement of $1Position 90-7,~~700~~ ~~related~~“Financial Reporting by Entities in Reorganization Under the Bankruptcy Code” (“SOP 90-7”). SOP 90-7 requires the Company to allocate the ~~acquisition~~reorganization value of ~~Brambles~~the reorganized company to its assets and to state liabilities existing at the Plan of Reorganization confirmation date at present values of amounts to be paid determined at appropriate current interest rates. For ~~This~~financial ~~charge~~reporting ~~consists~~purposes, ~~primarily~~the effective date of athe ~~reserve~~emergence ~~for~~from ~~lease~~bankruptcy ~~termination~~is ~~and~~the ~~severance~~close ~~costs~~of business on January 31, 2004. Accordingly, the ~~More~~effects ~~than~~of ~~200~~the ~~branch~~adjustments on the reported amounts of individual assets and liabilities ~~administrative~~resulting ~~employees~~from ~~have~~the ~~been~~adoption ~~terminated~~of infresh-start ~~conjunction~~reporting ~~with~~will ~~this~~be recorded ~~restructuring.~~in ~~The~~the Company ~~also~~’s ~~established~~consolidated financial statements prior to emergence. As a ~~reserve~~result of $8the reorganization and the expected adoption of fresh-start reporting,~~000,~~ ~~which~~the ~~was~~Company’s ~~recorded~~results ~~against~~of ~~goodwill~~operations after January 31, ~~related~~2004 will not be comparable to results reported in prior periods.

103. Basis of Presentation

The accompanying unaudited financial statements have been prepared in toaccordance with accounting principles generally accepted in the ~~closure~~United States of ~~certain~~America ~~Brambles~~for ~~locations~~interim infinancial ~~conjunction~~statements and with the ~~purchase~~instructions to Form 10-Q and Rule 10-01 of Regulation S-X. Accordingly, they do not include all of the information and disclosures required by accounting principles generally accepted in the United States of America for annual financial statements. In the ~~acquisition~~opinion of management, all adjustments considered necessary for a fair presentation, consisting only of normal recurring adjustments, except as described in the following sentence, have been included. The consolidated financial statements gave effect to the following adjustments that are not of a normal recurring nature: (a) the reclassification of liabilities subject to compromise described in Note 4 7 and (b). ~~Details~~the impairment of goodwill described in Note 5. For further information, refer to the consolidated ~~restructuring~~financial ~~reserve~~statements ~~are~~and asnotes ~~follows:~~thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2002. The balance sheet at December 31, 2002 has been derived from the audited financial statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2002.

	Balance at December 31, 2001		Utilized		Balance at September 30, 2002
Lease termination costs and other facility closure costs	$	5,059	$	2,246	$	2,813
Severance		4,641		2,927		1,714
	$	9,700	$	5,173	$	4,527

As noted in Note 2, no adjustments have been made to the consolidated financial statements to reflect the reorganization resulting from the Filing. Results of operations for the interim periods are not necessarily indicative of the results that may be expected for a full year. Due to the seasonality that impacts a significant portion of the Company’s locations, the second and third quarters are typically the most active quarters for the Company.

ItAs isall ~~expected~~of ~~that~~ the Company’s ~~restructuring~~Old ~~activities~~Common ~~will~~Stock bewas ~~substantially~~cancelled ~~complete~~in byaccordance with the ~~end~~terms of the Plan ~~year.~~of Reorganization, stock-based compensation, per share and share information for all periods presented on the consolidated statement of operations have been omitted as such information is deemed to be not meaningful.

11The consolidated financial statements include the accounts of the Company and its subsidiaries. All significant intercompany transactions and balances have been eliminated.

The consolidated financial statements have been prepared on a going concern basis, which contemplates continuity of ~~ITEM 2~~operations, realization of assets, and payment of liabilities in the ordinary course of business, and do not reflect adjustments that might result if the Company is unable to continue as a going concern. The ~~MANAGEMENT'S~~Company’s ~~DISCUSSION~~history ~~AND~~of ~~ANALYSIS~~significant OFlosses, ~~FINANCIAL~~the ~~CONDITION~~stockholders’ deficit, ~~AND~~and ~~RESULTS~~the OFFiling ~~OPERATIONS~~ discussed herein raise substantial doubt about the Company’s ability to continue as a going concern. Continuing as a going concern is dependent upon, among other things, the success of future business operations and the generation of sufficient cash from operations and financing sources to meet the Company’s obligations.

The ~~following~~consolidated ~~table~~financial ~~shows~~statements ~~information~~have been ~~derived~~prepared in accordance with AICPA Statement of Position 90-7, “Financial Reporting by Entities in Reorganization under the Bankruptcy Code” (“SOP 90-7”). Under SOP 90-7, revenues and expenses, realized gains and losses and provisions for losses resulting from the ~~Company's~~reorganization ~~historical~~of the business are to be reported in the consolidated statements of operations separately as reorganization aexpense. Professional fees ~~percentage~~are ofexpensed ~~total~~as ~~revenues~~incurred. Interest expense is reported only to the extent that it will be paid during the bankruptcy or that it is probable that it will be an allowed claim. The consolidated financial statements do not reflect the effect of any changes to the Company’s capital structure or in the Company’s business operations as the result of the Plan of Reorganization.

	Three Months Ended September 30,				Nine Months Ended September 30,
	2002		2001		2002		2001
	(dollar amounts in thousands)
Rental revenues	71.3	%	74.2	%	73.0	%	74.5	%
New equipment sales	6.5		7.4		6.8		8.3
Rental equipment sales	8.0		3.7		6.5		4.6
Parts, service and other	14.2		14.7		13.7		12.6
Total revenues	100.0		100.0		100.0		100.0
Cost of revenues	71.9		65.0		70.8		66.0
Gross margin	28.1		35.0		29.2		34.0
Selling, general and administrative expenses	22.2		21.1		23.0		21.8
Non-rental depreciation and amortization	1.3		2.9		1.5		3.1
Operating income	4.6		11.0		4.7		9.1
Other income, net	0.1		0.1		0.2		0.1
Interest expense, net	10.3		10.9		11.0		12.2
Income (loss) before income taxes	(5.6	)	0.2		(6.1	)	(3.0	)
Income tax expense (benefit)	—		0.3		—		(0.9	)
Income (loss) from continuing operations	(5.6	)	(0.1	)	(6.1	)	(2.1	)
Income (loss) from discontinued operations, net of tax	—		0.5		(0.7	)	(0.0	)
Gain on disposal of discontinued operations, net of tax	—		—		1.5		—
Cumulative effect of a change in accounting principle, net of tax	—		—		(27.5	)	—
Net income (loss)	(5.6	)%	0.4	%	(32.8	)%	(2.1	)%

Hedging Instruments—Statement of Financial Accounting Standards (“SFAS”) No. 133, “Accounting for Derivative

~~Results of Operations~~ 7

~~Three~~Instruments and Hedging Activities”, and ~~Nine~~its ~~Months~~related ~~Ended~~amendment, ~~September~~SFAS No. 30138, “Accounting ~~2002~~for ~~Compared~~Certain ~~with~~Derivative ~~Three~~Instruments and ~~Nine~~Certain ~~Months~~Hedging ~~Ended~~Activities” (collectively ~~September~~referred to as “SFAS No. 30133”) require that all derivative financial instruments be recorded on the consolidated balance sheet at their fair value as either assets or liabilities. Changes in the fair value of derivatives are recorded each period as charges or credits to operations or accumulated other comprehensive loss, ~~2001~~ depending on whether a derivative is designated and effective as part of a hedge transaction and, if it is, the type of hedge transaction. The interest rate swap agreement expired on April 17, 2003.

~~Revenues~~ Comprehensive Income—Included in other comprehensive income for the three-month period ending June 30, 2003 is a change in the fair value of a derivative instrument, totaling $1,257 of income and unrealized foreign currency translation gains totaling $676.

~~Total revenues increased to $171,452 for the three months ended September 30, 2002 from $148,045 for the three months ended September 30, 2001 and~~Reclassifications—Certain toreclassifications $471,551 for the nine months ended September 30, 2002 from $426,295 for the nine months ended September 30, 2001. Rental revenues increased to $122,214 for the three months ended September 30, 2002 from $109,865 for the three months ended September 30, 2001 and to $343,994 for the nine months ended September 30, 2002 from $317,363 for the nine months ended September 30, 2001. The increase in rental revenues was primarily the result of ~~the~~prior ~~operations~~year ~~acquired~~financial instatement ~~conjunction~~amounts ~~with~~have ~~the~~been ~~Company's~~made acquisition of the North American equipment rental business of Brambles U.S.A. and Brambles Canada ("Brambles"), partially offset by a slower economy. Rental equipment sales were up $8,338 and $11,053 for the three- and nine-month periods in 2002 as compared to ~~the same periods in 2001. These increases are the result of a variety of fleet management techniques utilized during the year, including fleet auctions and vendor trade~~ ~~packages,~~conform ~~in an effort~~ to ~~improve~~current ~~the overall quality of the Company's fleet. New equipment sales for the three months ended September 30, 2002 were consistent with the same period in the prior~~ year, ~~while parts, service and other revenues increased $2,675~~reporting. New equipment sales for the nine months ended September 30, 2002 declined $3,205 from the same period in the prior year, and parts, service and other revenue increased $10,777. Similar to the increase in rental revenues, the increase in parts, service and other revenue for the three and nine months ended September 30, 2002, were primarily the result of the Brambles acquisition.

Total revenues within the Company's General Rental and Other operations increased to $137,017 for the three months ended September 30, 2002 from $111,349 for the three months ended September 30, 2001 and to $391,633 for the nine months ended September 30, 2002 from $342,528 for the nine months ended September 30, 2001 as a result of the Brambles acquisition4. ~~Rental revenues increased 15% and 10% for the three- and nine-month periods in 2002 as compared to the same periods in 2001.~~ Dispositions

12On June 30, 2002, the Company sold its underground trench shoring business. The proceeds of $108,890 from the sale were used to repay existing indebtedness under the Credit Facility. In accordance with SFAS No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets,” the results of operations of this business are presented as discontinued operations. Assets and liabilities associated with discontinued operations are not considered significant for separate disclosure in the periods presented herein.

Total revenues within the Company's Traffic Safety operations decreased to $34,435 for the three months ended September 30, 2002 from $36,696 for the three months ended September 30, 2001 and to $79,918 for the nine months ended September 30, 2002 from $83,767 for the nine months ended September 30, 2001 due to increased rental rate pressure. Rental revenues declined 5% and 4% for the three- and nine-month periods in 2002 as compared to the same periods in 2001. 8

~~Gross~~5. Intangible ~~Profit~~ Assets

~~Gross~~At ~~profit~~December ~~decreased~~31, to2002, the Company had $48139,~~125~~978 ~~for~~of ~~the~~goodwill ~~three~~and non-compete ~~months~~agreements ~~ended~~related ~~September 30,~~to ~~2002~~acquisitions ~~from~~recorded ~~$51,864~~on ~~for~~our ~~the~~balance sheet. In ~~three~~accordance ~~months~~with ~~ended~~SFAS ~~September 30~~No. 142, “Goodwill ~~2001~~ and ~~to $137,541~~Other ~~for~~Intangible ~~the~~Assets,” ~~nine~~goodwill ~~months~~is ~~ended~~subject ~~September 30,~~to ~~2002~~annual impairment ~~from~~test ~~$145,113~~on ~~for~~a ~~the~~reporting ~~nine~~unit ~~months~~level. ~~ended~~As ~~September 30,~~a ~~2001.~~result ~~Gross~~of ~~margins~~the ~~decreased~~Company’s bankruptcy tofiling ~~28.1%~~on ~~from~~June ~~35.0%~~27, 2003 and tothe ~~29.2%~~resulting ~~from~~reorganization, ~~34.0%~~the ~~during~~Company ~~these~~determined ~~respective~~that ~~periods.~~its ~~The~~remaining ~~decreases~~goodwill ~~are~~was afully ~~reflection~~impaired ofand ~~the~~recorded a ~~declining~~non-cash ~~margins~~impairment ~~earned~~charge onof ~~fleet~~approximately ~~sales~~$138,115, inwhich ~~2002~~reflected inthe impairment ~~connection~~of ~~with~~ the ~~fleet~~remaining ~~management~~goodwill ~~techniques~~of ~~discussed~~the ~~above~~Company.

~~Gross profit within the General Rental and Other operations declined slightly to $38,189 for the three months ended September~~6. ~~30, 2002 from $38,306 for the three months ended~~ ~~September 30,~~Liabilities ~~2001~~Not ~~and~~Subject to $117,823 for the nine months ended September 30, 2002 from $118,067 for the nine months ended September 30, 2001. The decreases are primarily due to increased pressure on rental rates more than offsetting the increase in revenues. Compromise

~~Gross profit~~Liabilities ~~within~~which the Traffic Safety operations decreased to $9,936 for the three months ended September 30, 2002 from $13,558 for the three months ended September 30, 2001 and to $19,718 for the nine months ended September 30, 2002 from $27,046 for the nine months ended September 30, 2001. The decreases are ~~primarily~~not ~~due~~subject to ~~increased pressure on~~ ~~rental~~compromise ~~rates,~~consist ~~which~~of ~~has depressed~~ the ~~segment's gross margins for both the three- and nine-periods ended September 30, 2002.~~ following:

Selling, General and Administrative Expenses

	June 30, 2003		December 31, 2002

Book overdraft	$	9,605	$	490
Accounts payable	—		28,965
Accrued interest	—		8,592
Other accrued expenses	41,673		51,715
Debt	2,420		763,276

	$	53,698	$	853,038

~~Selling, general and administrative expenses increased to $38,001 for the three months ended September~~7. ~~30, 2002 from $31,221 for the three months ended~~ ~~September 30,~~Liabilities ~~2001~~Subject ~~and~~ to $108,251 for the nine months ended September 30, 2002 from $93,146 for the nine months ended September 30, 2001. As a percentage of total revenues, selling, general and administrative expenses increased to 22.2% from 21.1% and to 23.0% from 21.8% during these respective periods. These increases are primarily the result of additional infrastructure acquired in conjunction with the Brambles transaction. Compromise

~~Selling general~~Liabilities ~~and~~subject ~~administrative expenses for the General Rental and Other operations have increased~~ to ~~$33,564~~compromise ~~for~~consist ~~the~~of ~~three months ended September 30, 2002 from $26,274 for~~ the ~~three~~following ~~months~~at ~~ended~~June ~~September~~ 30, ~~2001 and to $95,500 for the nine months ended September 30, 2002 from $79,420 for the nine months ended September 30, 2001. Cost reduction~~ ~~initiatives undertaken to date do not completely offset the additional infrastructure acquired with Brambles.~~ 2003:

Selling, general and administrative expenses for the Traffic Safety operations have declined to $4,437 for the three months ended September 30, 2002 from $4,947 for the three months ended September 30, 2001 and to $12,751 for the nine months ended September 30, 2002 from $13,726 for the nine months ended September 30, 2001. These decreases are the result of various cost-savings initiatives implemented during 2002 within the Traffic Safety operations.

Accounts payable	$	24,465
Accrued interest	19,929
Accrued expenses	6,299
Debt	760,229
	$	810,922

~~Non~~All amounts above may be subject to adjustment depending on further developments with respect to disputed claims, the completion of the reconciliation of claims filed with the Bankruptcy Court to amounts included in the Company’s records or other events. Additional pre-~~rental~~petition claims ~~Depreciation~~may ~~and~~arise ~~Amortization~~ from the rejection of executory contracts or unexpired leases.

Non-rental depreciation and amortization decreased to $2,286 for the three months ended September 30, 2002 from $4,336 for the three months ended September 30, 2001 and to $7,172 for the nine months ended September 30, 2002 from $13,070 for the nine months ended September 30, 20018. Debt ~~This decrease is primarily the result of the Company's adoption of SFAS No. 142, "Goodwill~~ and ~~Other Intangible Assets," in 2002, under which no amortization expense of goodwill is recorded.~~ Liquidity

~~Interest~~In ~~Expense~~1998, ~~Net~~ the Company entered into a credit facility with various financial institutions (as amended, the “Credit Facility”). This provided for a secured credit facility, including a term loan of $100,000 and a revolving credit facility loan of

Interest expense, net, increased to $17,631 for the three months ended September 30, 2002 from $16,081 for the three months ended September 30, 2001, but declined slightly to $51,858 for the nine months ended September 30, 2002 from $51,875 for the nine months ended September 30, 2001. The increase in interest expense, net, for the three months ended September 30, 2002 as compared to the same period in the prior year is 9

13$300,000. Proceeds from the Credit Facility were used to repay approximately $59,513 of indebtedness under the Company’s previous credit facility. During 1999, the Company amended its Credit Facility to increase the available borrowings from $400,000 up to a maximum amount of $750,000. In 2001, the Company amended its Credit Facility to decrease the maximum available borrowings to $650,000. In 2002, the Company amended its credit facility to decrease the maximum available borrowings to $550,000.

As of December 31, 2002, the Company was in default under the financial covenants governing the ~~result~~credit facility. As of ~~higher~~January ~~average~~23, ~~debt~~2003, ~~balances~~the ~~associated~~Company ~~with~~and ~~continuing~~the ~~operations~~lenders inunder the ~~current~~credit facility ~~year~~entered in a forbearance agreement with an initial expiration of March 14, ~~partially~~2003. As ~~offset~~of byMarch ~~lower~~14, ~~interest~~2003, ~~rates~~the Company inand the ~~current~~lenders ~~year~~under onthe credit facility entered into a second forbearance agreement which extended the ~~company's~~forbearance ~~variable~~period ~~rate~~until ~~debt~~May 14, 2003, subject to earlier expiration upon the occurrence of certain circumstances. This forbearance period was subsequently extended to June 15, 2003.

~~Loss~~During ~~from~~1997, ~~Discontinued~~the ~~Operations~~ Company issued $100,000 of Senior Subordinated Notes due 2004 (the “Series A Notes”) at a discount netting proceeds of $99,000. During 1998, the Company completed its exchange of $100,000 of Senior Subordinated Notes due 2004, Series B (the “Series B Notes”), which have been registered for public trading, for the Series A Notes. During 1998, the Company issued $125,000 of Senior Subordinated Notes due 2004, Series C (the “Series C Notes”) at a discount netting proceeds of $122,000. During 1999, the Company issued $50,000 of additional Series C Notes, at a discount netting proceeds of $49,000. Later during 1999, the Company completed its exchange of $175,000 of Senior Subordinated Notes due 2004, Series D (the “Series D Notes”), which have been registered for public trading, for the Series C Notes.

OnThe ~~June 30,~~Series ~~2002,~~B Notes and the ~~Company~~Series ~~sold~~D ~~its~~Notes ~~underground~~contained ~~trench~~a ~~shoring~~cross-default provision ~~business.~~whereby ~~The~~the ~~proceeds~~Company’s ~~from~~default ~~the~~on ~~sale~~its ~~were~~Credit ~~used~~Facility toresulted ~~repay~~in ~~existing~~a default ~~indebtedness~~on ~~under~~the Series B Notes and the ~~Credit~~ ~~Facility.~~Series D Notes. In accordance with ~~SFAS~~the ~~No. 144~~Plan of Reorganization, ~~"Accounting~~the ~~for~~holders of the Company’s ~~Impairment~~Series orB ~~Disposal~~Notes ofand ~~Long-Lived~~Series ~~Assets,"~~D ~~the~~Notes ~~financial~~are ~~condition~~to ~~and~~receive ~~results~~97.5% of ~~operations~~the new common stock of ~~this business~~the ~~are~~Company ~~reflected~~created ~~herein~~upon asemergence ~~discontinued~~from ~~operations~~bankruptcy. The Company ceased accruing interest on the Series B and Series D Notes upon the Filing.

~~Gain~~The onCompany ~~Disposal~~is a holding company with no independent operations, and the Company’s assets (excluding the intercompany receivables and common stock of ~~Discontinued~~its ~~Operations~~ subsidiaries) are insignificant. All of the Company’s subsidiaries make full, unconditional, joint and several guarantees of the Series B Notes and the Series D Notes, and all of these subsidiaries are directly or indirectly wholly-owned by the Company. There are no restrictions on the Company’s ability to obtain funds from its subsidiaries by dividend or loan.

The ~~gain~~separate onfinancial ~~the~~statements ~~disposal~~of each of ~~discontinued~~these ~~operations~~wholly-owned subsidiaries ~~reflects~~are ~~the~~not ~~gain~~presented ~~recognized~~as inmanagement ~~conjunction~~believes ~~with~~that separate financial statements and other disclosures concerning these subsidiaries are not individually meaningful for presentation or material to investors. In addition, the ~~sale~~Company ofhas pledged the ~~underground~~stock ~~trench~~of ~~shoring~~each ~~business~~of ~~discussed~~its subsidiaries as further ~~above.~~security for the Company’s obligations under the Credit Facility.

~~Cumulative~~Prior ~~Effect~~to seeking protection in bankruptcy on June 27, 2003, the Company obtained Debtor-in-Possession financing which provided up to $30,000 of availability ato ~~Change~~the Company to fund operations during the bankruptcy period. The financing required that the Company meet certain financial tests monthly during the period that the facility was in ~~Accounting~~place. The ~~Principle~~ Company did not borrow any funds from this financing source during the period it was in place. The fees associated with this financing were expensed during 2003.

In connection with the Company’s emergence from bankruptcy on February 11, 2004, NESR entered into a new senior secured credit facility (the “New Credit Facility”). The ~~cumulative~~New ~~effect~~Credit Facility consists of $285,000 of term loan facilities and a ~~change~~$205,000 inrevolving credit ~~accounting~~facility. Proceeds ~~principle~~under ~~reflects~~the New Credit Facility were used to repay the ~~charge~~balance ~~recognized~~outstanding inunder ~~conjunction~~the ~~with~~Credit Facility. NESR has scheduled principal repayments quarterly on the ~~adoption~~term loan facilities through the May 15, 2007 maturity date of ~~SFAS~~the NoNew Credit Facility. ~~142~~ Scheduled principal payments are as follows: $55,000 ~~"Goodwill~~in ~~and Other~~2004, ~~Intangible~~$20,000 ~~Assets"~~in 2005, ~~effective~~$20,000 ~~January 1~~in 2006 and the balance of $369,000 ~~2002~~is due upon expiration in 2007. The average interest rate on the new credit facility is base rate plus 3% or LIBOR plus 4.25%.

~~Liquidity~~The New Credit Facility contains certain covenants that require the Company to, among other things, satisfy certain financial tests relating to 1) adjusted EBITDA levels, 2) fixed charge coverage ratios, 3) debt leverage ratios and ~~Capital~~4) capital ~~Resources~~ expenditure levels. The credit facility also contains various other covenants that restrict the Company’s ability to, among other things, 1) incur additional indebtedness, 2) permit liens to attach to its assets, 3) pay dividends or make other restricted payments on its common stock and certain other securities and 4) make acquisitions unless certain financial conditions are satisfied. The New Credit Facility is collateralized by substantially all of the Company’s assets.

~~The Company's primary capital requirements are for purchasing new rental equipment~~9. Segment The Company's other capital expenditures include buying vehicles used for delivery and maintenance, and for property, plant and equipment. The Company purchases rental equipment throughout the year to replace equipment that has been sold as well as to maintain adequate levels of equipment to meet existing and new customer needs. Rental fleet purchases for the Company were $58,778 and $16,214 in the first nine months of 2002 and 2001, respectively. information

~~For the~~All ~~nine~~operations ~~months~~are ~~ended~~managed ~~September 30,~~on ~~2002~~a ~~and~~branch ~~2001,~~basis. ~~the~~The Company's ~~net~~has ~~cash~~two reporting ~~provided~~segments: byTraffic ~~operations~~Safety ~~was~~and ~~$37,489~~General Rental and ~~$71,750, respectively~~Other. ~~For~~The ~~the nine months ended~~General ~~September 30,~~Rental ~~2002~~operations ~~and~~are ~~2001,~~primarily ~~the~~involved ~~Company's net cash provided by (used~~ in) ~~investing~~the ~~activities~~rental ~~was $76,127~~ and ~~$(7,704),~~sale ~~respectively.~~of ~~Net cash used for investing activities consists primarily~~various oftypes ~~purchases~~ of ~~rental~~lift ~~equipment~~ and ~~property~~specialty ~~and~~ equipment ~~offset~~to byconstruction, ~~proceeds~~automotive ~~received~~and onother industrial ~~the~~users. ~~sale~~The ofTraffic ~~discontinued~~Safety operations. ~~For~~are ~~the~~primarily ~~nine~~involved ~~months~~in ~~ended September 30, 2002 and 2001,~~ the ~~Company's~~rental ~~net~~of ~~cash~~traffic ~~used~~safety inequipment ~~financing activities was $112,447~~ and ~~$66,221,~~providing ~~respectively.~~the ~~Net~~related ~~cash~~services ~~used~~to inmanage traffic ~~financing~~flow ~~activities~~during ~~consists~~construction. The Traffic ~~primarily~~Safety ofoperations ~~repayments~~have ~~of indebtedness under the Company's credit facility.~~ different

The Company's credit facility, as amended, provides for a $70,000 term loan and a revolving credit facility up to a maximum of $480,000 (subject to availability based on certain financial tests including a borrowing base) to meet acquisition needs, as well as seasonal working capital and general corporate requirements. As of September 30, 2002, $494,751 was outstanding under the credit facility. Based upon the available borrowing base (which is based on the book value of the Company's inventory and accounts receivable and the appraised value of the Company's rental equipment) at September 30, 2002, the Company had additional availability of $28,487 on the revolving Credit Facility loan, of which $6,875 is reserved for the interest payments on the Series B Notes and Series D Notes. The available borrowing base is recomputed monthly. In the event that the book value of the Company's inventory or accounts receivable or the appraised value of the Company's rental equipment declines without a corresponding increase in one of the other categories, the available borrowing base will be reduced accordingly. A significant reduction in the available borrowing base would adversely affect the Company's liquidity, including its ability to pay interest on the Series B Notes and the Series D Notes when due. A failure to pay such interest when due would result in a default under the indentures governing the Series B Notes and the Series D Notes, which would have a material adverse effect on the Company. The necessary appraisal of the Company's rental equipment for purposes of calculating the Company's October 2002 borrowing base under the Credit Facility has not yet been finalized. The results of this appraisal could reduce the Company's available borrowing base such that the Company would be prohibited by the Credit Facility from paying the interest due on the Series B Notes and the Series D Notes at the end of November 2002, which would have a material adverse effect on the Company. 10

~~The credit facility contains certain covenants that require the Company to~~contractual, ~~among other things, satisfy certain financial tests, including tests relating to 1) the ratio of senior~~ ~~debt~~regulatory toand ~~EBITDA,~~capital ~~2) minimum~~requirements ~~interest~~than ~~coverage ratio and 3)~~ the ~~ratio~~General ofRental ~~funded debt to EBITDA~~operations. The accounting ~~credit~~policies ~~facility~~for ~~also~~these ~~contains~~segments ~~various~~are ~~other covenants that restrict~~ the ~~Company's ability~~same ~~to,~~as ~~among~~those ~~other~~described ~~things, 1)~~in Note ~~incur additional indebtedness, 2) permit liens to attach to~~ 3.

14The Company’s operations in Canada represent less than 2% of total revenues and total assets of the Company. Due to the size of the Company’s Canadian operations, these operations are considered insignificant for separate geographical segment reporting.

~~its~~The ~~assets,~~Company ~~3) pay~~has ~~dividends~~no orsingle ~~make~~customer ~~other~~that ~~restricted~~represents ~~payments~~greater onthan ~~its~~10% ~~common~~of the ~~stock~~Company’s ~~and~~consolidated ~~certain~~revenues. ~~other~~Identifiable ~~securities~~assets ~~and~~are ~~4) make~~those ~~acquisitions~~used ~~unless~~in ~~certain~~the Company’s ~~financial~~operations ~~conditions~~in ~~are satisfied~~each segment. Intersegment revenues are not material.

~~As of~~The ~~September 30,~~following ~~2002,~~table ~~the~~presents ~~Company was not in compliance with~~ the ~~leverage~~information ~~covenants~~for ~~under its Credit Facility. In October 2002,~~ the ~~Company~~reporting ~~amended its Credit Facility~~segments tofor ~~reduce~~ the ~~maximum~~quarters ~~available~~ended ~~borrowings~~June under the revolving credit facility from $550,000 to $480,000 and to revise certain covenants. As a result of this amendment, the Company is currently in compliance with all covenants of the Credit Facility and the indentures governing the Series B Notes and the Series D Notes. However, the Company expects that it will not be able to deliver the October 2002 borrowing base calculation to its lenders until after the November 15 due date required under the Credit Facility because the necessary appraisal of the Company's rental equipment has not yet been finalized. In addition, there can be no assurance that the Company will be in compliance with all other covenants and satisfy all financial ratios and tests under the Credit Facility in the future. Any such failure would have a material adverse effect on the Company. 30:

During 1997, the Company issued $100,000 of Senior Subordinated Notes due 2004 (the "Series A Notes") at a discount netting proceeds of $98,767. During 1998, the Company completed its exchange of $100,000 of Senior Subordinated Notes due 2004, Series B (the "Series B Notes"), which have been registered for public trading, for the Series A Notes.

	Traffic Safety			General Rental and Other			Discontinued Operations			Consolidated
2003:
Rental and service revenues	$	27,957		$	98,735					$	126,692
New equipment sales	1,469			8,253						9,722
Rental equipment sales	56			9,069						9,125
Other revenues	417			4,635						5,052
Total revenues	29,899			120,692						150,591
Operating loss(a)	(36,385		)	(102,434		)				(138,819		)
Net loss(a)	(36,277		)	(122,085		)	$	(518	)	(158,880		)
Identifiable assets	72,885			618,767						691,652
Goodwill impairment	39,644			98,471						138,115
Depreciation and amortization	2,949			25,878						28,827
Capital expenditures	2,468			10,320						12,788
2002:
Rental and service revenues	$	28,162		$	104,186					$	132,348
New equipment sales	1,965			9,668						11,633
Rental equipment sales	108			10,429						10,537
Other revenues	763			6,368						7,131
Total revenues	30,998			130,651						161,649
Operating income	4,910			8,011						12,921
Net income (loss)	3,261			(7,550		)	$	5,202		913
Identifiable assets	112,798			910,042			13,227			1,036,067
Depreciation and amortization	2,942			28,044						30,986
Capital expenditures	1,983			21,820						23,803

~~During 1998,~~The ~~the~~following ~~Company~~table ~~issued~~presents ~~$125,000 of Senior Subordinated Notes due 2004, Series C (~~the ~~"Series C~~information ~~Notes")~~for ~~at a discount netting proceeds of $122,288. During 1999,~~ the ~~Company~~ ~~issued~~reporting ~~$50,000 of additional Series C Notes, at a discount netting proceeds of $49,000. Later during 1999, the Company completed its exchange of $175,000 of Senior Subordinated Notes~~segments ~~due~~for ~~2004, Series D (~~the ~~"Series D~~six ~~Notes"),~~month ~~which~~periods ~~have~~ended ~~been~~June ~~registered for public trading, for the Series C Notes.~~ 30:

The Company accretes the original issue discount of the Series B Notes and Series D Notes over the term of the notes using the effective interest rate method. The indentures for the Series B and Series D notes contain a number of covenants that, among other things, set certain limitations on the granting of liens, asset sales, additional indebtedness, transactions with affiliates, restricted payments, investments, issuances of stock and payment of dividends. The Company is currently in compliance with all such covenants under the indentures.

	Traffic Safety		General Rental and Other		Discontinued Operations		Consolidated
2003:
Rental and service revenues	42,934		190,370				233,304
New equipment sales	1,928		16,584				18,512
Rental equipment sales	74		17,396				17,470
Other revenues	1,168		9,755				10,923
Total revenues	46,104		234,105				280,209
Operating loss(a)	(39,590	)	(106,318	)			(145,908	)
Net loss(a)	(39,455	)	(148,521	)	(518	)	(188,494	)
Identifiable assets	72,885		618,767				691,652
Goodwill impairment	39,644		98,471				138,115
Depreciation and amortization	5,983		51,023				57,006
Capital expenditures	3,869		17,919				21,788
2002:
Rental and service revenues	41,315		206,793				248,108
New equipment sales	3,065		18,030				21,095
Rental equipment sales	125		16,920				17,045
Other revenues	978		12,873				13,851
Total revenues	45,483		254,616				300,099
Operating income	1,143		13,138				14,281
Net loss (b)	(2,099	)	(146,573	)	3,572		(145,100	)
Identifiable assets	112,798		910,042		13,227		1,036,067
Depreciation and amortization	5,912		55,059				60,971
Capital expenditures	2,763		34,191				36,954

~~The Company~~(a) Operating ~~believes~~loss ~~that its credit facility, together with funds generated by operations~~ and ~~related~~net ~~activities,~~loss ~~will~~for ~~provide~~Traffic ~~the Company with sufficient liquidity and capital~~Safety ~~resources in the near-term to finance its operations~~ and ~~pursue~~for ~~its~~General ~~business~~Rental ~~strategy. In the near term, the Company will need to refinance its credit facility, which becomes due~~ and ~~payable~~ inOther ~~July 2003.~~operations ~~The~~include ~~Company's~~goodwill ~~Series B~~impairment ~~Notes and Series D Notes become due and payable in November 2004. There can be no assurance that the Company will be able to~~charges ~~raise~~of ~~the necessary capital to refinance its debt on favorable terms~~$39,644 and ~~any~~$98,471, ~~such failure would have a material adverse effect on the Company's future financial condition and results of operations~~respectively.

(b) Net loss for the General ~~Economic~~Rental ~~Conditions~~and other segment includes a goodwill impairment charge of $129,505 ~~Inflation~~recorded ~~and~~as ~~Seasonality~~ the cumulative effect of a change in accounting principle as a result of the initial adoption of SFAS No. 142.

The Company's operating results may be adversely affected by 1) changes in general economic conditions, including changes in construction and industrial activity, or increases in interest rates, or 2) adverse weather conditions that may temporarily decrease construction and industrial activity in a particular geographic area. Although the Company cannot accurately anticipate the effect of inflation on its operations, management believes that inflation has not had a material impact on the Company's results of operations and is not likely to in the foreseeable future. The Company's revenues and operating results fluctuate due to the seasonal nature of the industry in which the Company operates, with rental activity tending to be lower in winter. 11

~~Recently~~ITEM ~~Issued~~2. MANAGEMENT’S ~~Accounting~~DISCUSSION ~~Pronouncements~~ AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

~~In May 2002, the FASB issued SFAS No. 145, "Rescission of FASB Statements No. 4, 44, and 64, Amendment of FASB Statement No. 13, and Technical Corrections."~~ This ~~Statement~~discussion ~~rescinds~~should ~~FASB~~be ~~Statement~~read ~~No. 4,~~in ~~"Reporting~~conjunction ~~Gains~~with ~~and~~the ~~Losses~~Company’s ~~from Extinguishment of Debt," and an amendment of that Statement, FASB Statement No. 64,~~Annual ~~"Extinguishment~~Report ofon ~~Debt~~Form ~~Made~~10-K tofor ~~Satisfy~~the ~~Sinking~~year-~~Fund~~ended ~~Requirements."~~December ~~This Statement amends FASB Statement No. 13~~31, ~~"Accounting~~2002 ~~for~~as ~~Leases,"~~filed towith ~~eliminate an inconsistency between~~ the ~~required~~Securities ~~accounting~~and ~~for~~Exchange ~~sale-leaseback~~Commission ~~transactions~~ and ~~the required accounting for certain lease modifications that have economic effects that are similar to sale-leaseback transactions. This Statement also amends~~ other ~~existing~~information ~~authoritative~~included ~~pronouncements to make various technical corrections, clarify meanings, or describe their applicability under changed conditions~~herein. ~~The~~ All ~~provisions~~dollar ofamounts ~~this Statement related to the rescission of Statement No. 4~~ are ~~effective~~in thousands.

15General

The Company was founded in ~~beginning~~June 1996 to acquire and integrate businesses that focus on the rental of general and specialty equipment to industrial and construction end-users. Since inception, the Company acquired 42 businesses in ~~2003~~separate transactions. All acquisitions ~~other~~were ~~provisions~~accounted ~~are~~for ~~effective~~using ~~after~~the ~~May 15,~~purchase ~~2002~~method of accounting. ~~There~~The results ~~will~~of beoperations noof ~~material~~the ~~effect~~businesses ~~resulting~~acquired ~~from~~are included in the ~~adoption~~Company’s financial ofstatements ~~the~~only ~~Statement.~~from their respective dates of acquisition.

The Company derives its revenues ~~ITEM~~from four sources: 1) equipment rental and service, 2) new equipment sales, 3) rental equipment sales and 4) sales of complementary parts and merchandise. ~~QUANTITATIVE~~The ~~AND~~Company’s ~~QUALITATIVE~~primary ~~DISCLOSURES~~source ~~ABOUT~~of ~~MARKET~~revenue ~~RISK~~ is the rental and service of equipment to industrial and construction end-users. The growth of rental revenues depends on several factors, including demand for rental equipment, the amount and quality of equipment available for rent, rental rates and general economic conditions. Revenues generated from the sale of new equipment are affected by price and general economic conditions. Revenues generated from the sale of used rental equipment are affected by price, general economic conditions and the Company’s fleet management program. Revenues from the sale of complementary parts and services are primarily affected by equipment rental and sales volume.

~~The~~Cost ~~Company's~~of ~~credit~~revenues ~~facility,~~consists primarily asof ~~amended,~~rental ~~provides~~equipment depreciation, the ~~Company~~cost ~~with~~of arental ~~$70,000 term loan~~ and ~~permits~~service revenue, the ~~Company~~cost toof ~~borrow~~new upequipment, tothe annet ~~additional~~book ~~$480,000~~value of ~~revolving~~ ~~loans~~rental ~~provided~~equipment ~~that certain conditions~~ sold and ~~financial~~other ~~tests~~direct ~~are~~operating ~~met, subject to a borrowing base~~costs. ~~Borrowings~~Given ~~under~~ the ~~credit facility bear interest~~varied, atand ~~the~~in ~~Company's~~some ~~option~~cases specialized, atnature aof ~~specified base~~its ~~rate~~rental ~~or Eurodollar rate plus the applicable borrowing margin. At November 5~~equipment, ~~2002,~~ the Company ~~had~~uses ~~total~~a ~~borrowings~~range ~~under the credit facility~~ of periods ~~$488,900,~~from ~~$88,900~~two ~~of which was subject~~ to ~~interest~~ ~~rate~~fifteen ~~risk.~~years ~~Each~~over ~~100~~which ~~basis~~it ~~point~~depreciates ~~increase~~its inequipment ~~interest rates~~ on ~~the~~a straight-line ~~variable rate debt would decrease pretax earnings by approximately $889~~basis.

~~The Company~~Critical ~~may, from time to time, use interest rate swap contracts to hedge the impact of interest rate fluctuations on certain variable rate debt. The Company does not hold or issue~~Accounting derivative financial instruments for trading or speculative purposes. Effective April 18, 2001, the Company entered into an interest rate swap contract, which fixes the interest rate at 4.71% on $400,000 of variable rate debt through April 17, 2003. The interest differential is paid or received on a monthly basis and recognized currently as a component of interest expense. The counter-party to the swap is a major financial institution and management believes that the risk of incurring credit losses is remote. Policies

We prepare our consolidated financial statements in accordance with accounting principles generally ~~ITEM~~accepted in the United States of America, which requires our management to make estimates and general assumptions about the effects of matters that are inherently uncertain. We have summarized our significant accounting policies in Note 43 to our consolidated financial statements, as presented in our Annual Report on Form 10-K for the year ended December 31, 2002. ~~CONTROLS~~Of ~~AND~~these accounting ~~PROCEDURES~~ policies, we believe the following may involve a higher degree of judgment and complexity.

~~Explanation~~Application of ~~disclosure~~SOP ~~controls and procedures—After evaluating the effectiveness of the Company's disclosure controls and procedures (as defined in Exchange Act Rules 13a-14(c) and 15d-14(c) as of a date within~~ 90 days of the filing date of this quarterly report (the "Evaluation Date"), the Company's chief executive officer and chief financial officer have concluded that, as of the Evaluation Date, the Company's disclosure controls and procedures were adequate and effective to ensure that material information relating to the Company and its subsidiaries would be made known to them by others within those entities, particularly during the period in which this quarterly report was being prepared. -7

~~Changes~~The consolidated financial statements have been prepared in ~~internal~~accordance ~~controls—There~~with ~~were~~SOP no90-7. Under ~~significant~~SOP ~~changes~~90-7, inrevenues ~~the~~and ~~Company's~~expenses, realized ~~internal~~gains ~~controls~~and orlosses inand ~~other~~provisions ~~factors~~for ~~that~~losses resulting from the ~~could~~reorganization ~~significantly~~of ~~affect~~the business are to be reported in the ~~Company's~~consolidated statements ~~disclosure~~of ~~controls~~operations ~~and~~separately ~~procedures~~as ~~subsequent~~reorganization items. Professional fees are expensed as incurred. Interest expense is reported only to the ~~Evaluation~~extent ~~Date,~~that ~~nor~~it ~~were~~will ~~there~~be ~~any~~paid ~~significant~~during ~~deficiencies~~the bankruptcy or ~~material~~that ~~weaknesses~~it inis probable ~~such~~that ~~disclosure controls~~it ~~and~~will ~~procedures~~be ~~requiring~~an ~~corrective~~allowed ~~actions~~claim. The Asapplication aof ~~result,~~SOP no90-7 ~~corrective~~also ~~actions~~requires ~~were~~that ~~taken~~the Company estimate the expected amount of allowed claims with respect to pre-petition liabilities in accordance with Statement of Financial Accounting Standards (“SFAS”) No. 5, “Accounting for Contingencies.”

ForwardAllowance Lookingfor Statements Doubtful Accounts

~~This~~At ~~document~~June ~~contains~~30, ~~forward-looking~~2003, ~~statements~~we ashad ~~encouraged~~an allowance byfor ~~the~~doubtful ~~Private~~accounts ~~Securities~~totaling ~~Litigation~~$4,764, ~~Reform~~which ~~Act~~we ofhave ~~1995.~~established ~~All statements~~in ~~contained~~the inevent ~~this~~that ~~document,~~we ~~other~~are ~~than~~unable ~~historical~~to ~~information,~~collect ~~are~~certain ~~forward-looking statements~~receivables. ~~These~~This ~~statements~~allowance represents ~~represent~~our ~~management's~~estimate ~~current~~of ~~judgment on what~~ the ~~future~~total ~~holds.~~receivables Arecorded ~~variety~~as of ~~factors~~June 30, ~~could~~2003 ~~cause~~that ~~business~~we ~~conditions~~will ~~and~~be ~~the~~unable ~~Company's actual results~~ to ~~differ~~collect. ~~materially~~Future ~~from~~general ~~those~~events, ~~expected~~such byas ~~the Company or expressed~~ changes in the ~~Company's~~economy, ~~forward-looking~~and ~~statements.~~specific ~~These factors include~~events, ~~without~~such ~~limitation,~~as ~~the Company's ability to successfully integrate acquired businesses;~~ changes in ~~market~~the ~~price~~economic ~~or market demand; loss~~ condition of ~~business~~our ~~from~~ customers;, ~~unanticipated~~could ~~expenses; changes~~significantly inimpact ~~financial~~our ~~markets;~~ability ~~and~~to ~~other~~collect ~~factors~~on ~~discussed~~these receivables, inand ~~the~~therefore, ~~Company's~~cause ~~filings~~us ~~with~~to ~~the~~change ~~Securities~~our ~~and~~allowance ~~Exchange Commission~~estimate.

16Useful Lives of Rental Equipment and Property and Equipment

At June 30, 2003, we had $450,176 of net rental equipment and $40,675 of net property and equipment ~~PART~~recorded on our balance sheet. Rental equipment is depreciated using the straight-line method over two to fifteen years. Property and equipment is depreciated over three to thirty IIyears, depending on the type of asset. ~~OTHER~~ Our ~~INFORMATION~~ depreciable lives are based on our estimates of the useful lives of the respective assets over which they will generate revenues. These estimates may require adjustment based on changing circumstances in the marketplace. Changes to these estimates could result in us having to recognize an increase to or decrease in depreciation expense.

Impairment ITEM 1. LEGALof PROCEEDINGS Long-Lived Assets

~~Not~~In ~~applicable~~accordance with SFAS No. 144, “Accounting for the Impairment or Disposal of Long-lived Assets,” we test long-lived assets or asset groups for recoverability whenever events or changes in circumstances indicate that its carrying amount may not be recoverable. When such events occur, we compare the sum of the undiscounted cash flows expected to result from the use and eventual disposition of the asset or asset group to the carrying amount of the long-lived asset or asset group. If this comparison indicates that an impairment exists, the amount of the impairment is measured by comparing the carrying value to the fair market value of the asset. Fair market value is typically based on the discounted expected future cash flows. The discount rate applied to these cash flows is based on our weighted-average cost of capital, which represents the blended after-tax costs of debt and equity.

Impairment of ITEM 2. CHANGES IN SECURITIES Goodwill

~~Not~~Effective ~~applicable~~January 1, 2002, we adopted SFAS No. 142, “Goodwill and Other Intangible Assets” issued by the Financial Accounting Standards Board (FASB). Under this standard, goodwill is no longer amortized but is subject to annual impairment tests on a reporting unit level. We completed our initial impairment analysis in the second quarter of 2002 and recorded a non-cash impairment charge of approximately $155,102 ($129,505, net of tax benefit), as a cumulative effect of a change in accounting principle retroactive to January 1, 2002, on the consolidated statement of operations and comprehensive loss. We completed a subsequent analysis at the end of 2002 and did not identify any goodwill impairment. In the most recent analysis performed as of June 30, 2003, we recorded a non-cash impairment charge of approximately $138,115, which reflects the impairment of the remaining goodwill of the Company.

We evaluated the recoverability of goodwill by estimating the future discounted cash flows of the businesses to which the ~~ITEM 3~~goodwill related. ~~DEFAULTS~~ ~~UPON~~The ~~SENIOR~~rate ~~SECURITIES~~ used in determining discounted cash flows is a rate corresponding to our cost of capital, risk adjusted where necessary. Estimated cash flows were then determined by disaggregating our business segments to a reporting level for which meaningful identifiable cash flows could be determined. As the estimated future discounted cash flows were less than the carrying value of the net assets (tangible and identifiable intangibles) and related goodwill, an impairment loss was recognized. The impairment losses, limited to the carrying value of goodwill, represented the excess of the sum of the carrying value of the net assets (tangible and identifiable intangible) and goodwill over the discounted cash flows of the business being evaluated. In determining the estimated future cash flows, we considered current and projected future levels of income as well as business trends, prospects and market and economic conditions.

NotValuation applicable.Allowance on Net Deferred Tax Assets

At June 30, 2003, we provided a full valuation allowance on our net deferred tax assets. Realization of net deferred income tax assets ~~ITEM~~is dependent upon generating sufficient future taxable income in the periods in which the underlying temporary differences reverse, or prior to the dates that net operating loss carryforwards expire. 4 We must assess the likelihood that our net deferred tax assets will be recovered in the future. ~~SUBMISSION~~ Because OFwe believe ~~MATTERS~~that TOrecovery Ais ~~VOTE~~not OFlikely, ~~SECURITY~~we ~~HOLDERS~~ have established a full valuation allowance.

~~Not~~Results ~~applicable.~~of Operations

The following table shows information derived from the Company’s historical consolidated statements of operations as a ~~ITEM 5. OTHER~~percentage ~~INFORMATION~~ of total revenues.

On September 23, 2002, Mr. Joseph M. Gullion succeeded Mr. Kevin P. Rodgers as President and Chief Executive Officer of the Company. Mr. Rodgers will continue to serve the Company as Vice-Chairman of the Board of Directors.

	Three Months Ended June 30,				Six Months Ended June 30,
	2003		2002		2003		2002

Rental and service revenues	84.1	%	81.9	%	83.3	%	82.7	%
New equipment sales	6.5		7.2		6.6		7.0
Rental equipment sales	6.1		6.5		6.2		5.7
Other revenues	3.3		4.4		3.9		4.6
Total revenues	100.0		100.0		100.0		100.0
Cost of revenues	74.9		70.4		75.9		72.4
Gross margin	25.1		29.6		24.1		27.6
Selling, general and administrative expenses	24.5		20.1		25.7		21.2
Goodwill impairment	91.7		—		49.3		—
Non-rental depreciation and amortization	1.0		1.5		1.2		1.6
Operating income (loss)	(92.1	)	8.0		(52.1	)	4.8
Other income, net	0.2		0.2		0.1		0.2
Interest expense, net	13.2		10.9		15.2		11.4
Loss before income taxes	(105.1	)	(2.7	)	(67.2	)	(6.4	)
Income tax expense	—		—		—		—
Loss from continuing operations	(105.1	)	(2.7	)	(67.2	)	(6.4	)
Loss from discontinued operations, net of tax	(0.3	)	(1.1	)	(0.2	)	(1.1	)
Gain on disposal of discontinued operations, net of tax	—		4.3		—		2.3
Cumulative effect of a change in accounting principle, net of tax	—		—		—		(43.2	)
Net income (loss)	(105.4	)%	0.5	%	(67.4	)%	(48.4	)%

The Company’s financial performance has been negatively affected over the last two years due to lower activity levels in the economy, a slowdown in ~~ITEM 6. EXHIBITS~~non-residential ~~AND~~construction, ~~REPORTS~~competitive ONpricing ~~FORM 8~~pressure due to over-K capacity of rental equipment in the industry and lower demand. Additionally, the Company’s Filing on June 27, 2003 has generated concern among the Company’s customers and vendors and disrupted business for a period of time.

~~See~~The ~~Index~~resulting ofdecrease ~~Exhibits~~in onearnings ~~page 16.~~negatively ~~The~~impacted the Company’s cash ~~filed~~flows afrom ~~Current~~operations ~~Report~~during onthis ~~Form 8-K~~period, ~~dated~~limiting ~~July~~the Company’s ability to invest in its rental fleet. 2, Management ~~2002~~initiated several actions in response to these circumstances, including actions to ~~report~~reduce ~~the~~its ~~sale~~operating expenses through personnel reductions and consolidation of ~~its~~branch and support operations, as well as asset sales to ~~trench~~reduce ~~shoring~~its ~~business~~debt. Although these actions reduced debt levels by more than $100,000 in 2002 and 2003, the Company’s liquidity has remained strained.

17Over the last two years, the Company closed and consolidated branch locations and centralized administrative functions in an effort to reduce costs. For several months leading to the bankruptcy filing in June 2003, the Company entered into a series of discussions with its debt and equity holders to evaluate various restructuring alternatives. It was determined that it was in the best interest of the Company’s creditors and other constituents to seek protection through voluntary petitions under Chapter 11 of the U.S. Bankruptcy Code. As a result of defaults under its credit facilities, the Company has operated with limited capital resources due to its inability to borrow under its senior credit facility.

Three and SIGNATURE Six Months Ended June 30, 2003, Compared with the Three and Six Months Ended June 30, 2002

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 on November 14, 2002. Revenues

~~NATIONAL~~Total ~~EQUIPMENT~~revenues ~~SERVICES~~decreased to $150,591 ~~INC.~~for ~~By:~~the ~~/s/~~three ~~MICHAEL~~months D.ended ~~MILLIGAN~~June 30, ~~Michael~~2003 D.from ~~Milligan~~$161,649 ~~Chief~~for ~~Financial~~the ~~Officer~~three months ended

1812

~~Form 10-Q:~~June ~~For~~30, 2002. Revenues were down in all major categories in the current quarter as compared to the same period in the previous year. Rental and service revenues declined to $126,692 for the three months ended ~~September~~ June 30, 2003 from $132,348 for the same period in 2002. This decrease is primarily the result of continued pressure on rental rates, brought about by the continued slowness in the economy. New equipment sales of $9,722 were down $1,911 from the prior year, and rental equipment sales of $9,125 were down $1,412 or 13% from 2002 levels.

The majority of the decline in revenues year-over-year is due to declines within the General Rental segment. ~~CERTIFICATIONS~~ Total revenues within this segment decreased to $120,692 for the three months ended June 30, 2003 from $130,651 for the three months ended June 30, 2002. Rental and service revenues decreased $5,451, and volume in all other revenue categories declined as well. Total revenues within the Company’s Traffic Safety operations declined only slightly to $29,899 for the second quarter of 2003, as compared to $30,998 during the same period in 2002.

ISimilarly, total ~~Joseph M~~revenues for the six months ended June 30, 2003 were $280,209, down $19,890 or 7% as compared to the same period in 2002. Rental ~~Gullion~~revenues comprise $14,804 ~~certify~~of ~~that:~~this shortfall, as rates continue to trend downward. Revenues are also down year-over-year for new equipment sales and other revenues. Rental equipment sales were up slightly from 2002, primarily as the result of an auction in which the Company participated in February. The current year declines resulted primarily from the Company’s General Rental operations, as 2003 revenue levels within the Traffic Safety segment are consistent with those of 2002.

~~1. I have~~Gross ~~reviewed this quarterly report on Form 10-Q of National Equipment Services, Inc.;~~ Profit

~~2. Based~~Gross profit decreased to $37,734 for the three months ended June 30, 2003 onfrom my$47,793 ~~knowledge~~for the three months ended June 30, ~~this~~2002. ~~quarterly~~Gross ~~report~~margins ~~does~~decreased to ~~not~~25% ~~contain~~from ~~any~~30%. Profitability ~~untrue~~was ~~statement~~down in both of athe ~~material~~Company’s ~~fact~~operating orsegments, ~~omit~~as gross margins on rental and service revenues declined to ~~state~~49% afor ~~material~~the ~~fact~~current ~~necessary~~quarter as compared to 53% during the same quarter in ~~order~~2002. Within the General Rental and Other operations, gross profit decreased to ~~make~~$30,340 for the three months ended June 30, 2003 from $38,535 for the three months ended ~~statements~~June ~~made~~30, in2002. The ~~light~~decrease is a result of the ~~circumstances~~continuing ~~under~~pressure ~~which~~on ~~such~~rental ~~statements~~rates ~~were~~described ~~made,~~above. ~~not~~Gross ~~misleading~~profit ~~with~~within the ~~respect~~Traffic Safety operations decreased to $7,394 for the ~~period~~three ~~covered~~months byended June ~~this~~30, ~~quarterly~~2003 ~~report;~~from $9,258 for the three months ended June 30, 2002. Decreased state funding of highway and road construction projects resulted in more competitive bidding for fewer projects.

~~3. Based~~Year-to-date, ongross myprofit ~~knowledge~~of $67,651 ~~the~~is ~~financial~~down ~~statements~~18% from the $82,817 ~~and~~recognized ~~other~~during ~~financial~~the first ~~information~~six ~~included~~months inof ~~this~~2002. Gross ~~quarterly~~profit within ~~report,~~the ~~fairly~~General ~~present~~Rental insegment ~~all~~declined ~~material~~18% ~~respects~~to ~~the~~$59,695, ~~financial~~while gross profit ~~condition,~~within ~~results~~the ofTraffic Safety operations ~~and~~declined ~~cash~~19% ~~flows~~to of$7,956. Overall, ~~the~~gross ~~registrant~~margins asdeclined ~~of,~~to ~~and~~24% for the six months ended June 30, ~~the~~2003, ~~periods~~as ~~presented~~compared into ~~this~~28% ~~quarterly~~for ~~report;~~the six months ended June 30, 2002.

~~4. The registrant's~~Selling, ~~other~~General ~~certifying officers~~ and ~~I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act~~ ~~Rules 13a-14~~Administrative ~~and 15d-14) for the registrant and we have:~~ Expenses

~~a) designed~~Selling, general and administrative expenses increased to $36,919 for ~~such~~the ~~disclosure~~three ~~controls~~months ended June 30, 2003 from $32,425 for the three months ended June 30, 2002. Selling, general and administrative ~~procedures~~expenses tofor ~~ensure~~the ~~that~~General ~~material~~Rental ~~information~~and ~~relating~~Other tooperations were $33,116 for the ~~registrant~~three months ended June 30, ~~including~~2003, ~~its~~up ~~consolidated~~slightly ~~subsidiaries~~from the $28,139 recognized isfor ~~made~~the ~~known~~three months ended June 30, 2002 due to increases in usconsulting byand ~~others~~professional ~~within~~fees ~~those~~related ~~entities~~to bankruptcy filing. Selling, ~~particularly~~general and administrative expenses for the Traffic Safety operations have declined to $3,803 for the three months ended June 30, 2003 from $4,286 for the three months ended June 30, 2002. These decreases are the result of various cost-savings initiatives implemented during 2002 within the ~~period~~Traffic inSafety operations. For ~~which~~the ~~this~~six ~~quarterly~~months ~~report~~ended June is30, ~~being~~2003, ~~prepared;~~selling, general and administrative expenses increased to $71,992 as compared to $63,650 for the same period in 2002.

~~b) evaluated the~~Goodwill ~~effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the "Evaluation Date"); and~~ Impairment

~~c) presented~~As a result of the Company’s bankruptcy filing on June 27, 2003, the inCompany ~~this~~completed ~~quarterly~~an ~~report~~impairment ~~our~~analysis ~~conclusions~~of ~~about~~goodwill as of June 30, 2003. Based on the ~~effectiveness~~results of this analysis, the Company ~~disclosure~~recorded ~~controls~~a ~~and~~non-cash ~~procedures~~impairment ~~based~~charge onof ~~our~~$138,115 ~~evaluation~~during asthe second quarter of the ~~Evaluation~~year, ~~Date;~~which reflected the impairment of the remaining goodwill of the Company.

~~5. The registrant's~~Non-rental ~~other~~Depreciation ~~certifying officers~~ and ~~I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent function):~~ Amortization

~~a) all significant~~Non-rental ~~deficiencies~~depreciation inand ~~the~~amortization ~~design~~declined orslightly ~~operation~~to $1,519 for the second quarter of ~~internal~~2003 ~~controls~~as ~~which~~compared ~~could~~to ~~adversely~~$2,447 ~~affect~~for the ~~registrant's~~same ~~ability~~period toin 2002. This ~~record,~~decline ~~process,~~is ~~summarize~~primarily ~~and~~due to ~~report~~the ~~financial~~expiration ~~data~~of ~~and~~a ~~have~~portion ~~identified~~of ~~for~~ the ~~registrant'~~Company’s ~~auditors~~non-compete ~~any~~agreements. For ~~material~~the ~~weaknesses~~six inmonths ~~internal~~ended ~~controls;~~June 30, 2003, non-rental depreciation and amortization was down $1,434 to $3,452.

~~b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and~~ 13

~~6. The registrant's~~Interest other certifying officers and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluationExpense, ~~including any corrective actions with regard to significant deficiencies and material weaknesses.~~ Net

~~Date:~~Interest ~~November~~expense, 14net, increased to $19,820 for the three months ended June 30, 2003 from $17,543 for the three months ended June 30, 2002. The /increase in the current quarter is the result of higher interest rates on the Company’s/ ~~JOSEPH~~senior M.debt ~~GULLION~~as ~~Joseph~~a Mresult of the default in the credit facility and resulting forbearance agreements. Year-to-date, ~~Gullion~~net ~~Chief~~interest ~~Executive~~expense ~~Officer~~is up similarly.

19Loss from Discontinued Operations

I,On ~~Michael~~June D30, 2002, the Company sold its underground trench shoring business. ~~Milligan~~The proceeds from the sale were used to repay existing indebtedness under the Credit Facility. In accordance with SFAS No. 144, ~~certify~~“Accounting for ~~that:~~the Impairment or Disposal of Long-Lived Assets,” the results of operations of this business are presented as discontinued operations.

~~1. I have~~Cumulative ~~reviewed~~Effect ~~this quarterly report on Form 10-Q~~ of ~~National~~a ~~Equipment~~Change ~~Services, Inc.;~~in Accounting Principle

~~2. Based on~~The mycumulative ~~knowledge,~~effect ~~this quarterly report does not contain any untrue statement~~ of a ~~material~~change ~~fact or omit to state a material fact necessary~~ in ~~order~~accounting toprinciple ~~make~~reflects the ~~statements~~charge ~~made,~~recognized in ~~light~~conjunction ofwith the ~~circumstances~~adoption ~~under~~of ~~which~~SFAS ~~such statements were made~~No. 142, “Goodwill ~~not~~and ~~misleading~~Other ~~with~~Intangible ~~respect~~Assets”, toeffective ~~the~~January 1, ~~period covered by this quarterly report;~~ 2002.

~~3. Based on my knowledge~~Liquidity, ~~the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial~~ ~~condition,~~Financial ~~results~~Condition ~~of operations~~ and ~~cash~~Capital ~~flows of the registrant as of, and for, the periods presented in this quarterly report;~~ Resources

4. The ~~registrant'~~ Company’s ~~other~~consolidated ~~certifying~~financial ~~officers~~statements ~~and~~have Ibeen ~~are~~prepared ~~responsible~~on ~~for~~a going ~~establishing~~concern basis, which contemplates continuity of operations, realization of assets, and ~~maintaining~~payment ~~disclosure~~of ~~controls~~liabilities in the ordinary course of business, and do ~~procedures~~not (reflect adjustments that might result if the Company is unable to continue as ~~defined~~a ingoing ~~Exchange~~concern. The ~~Act~~Company’s ~~Rules~~history of significant losses, the stockholders’ deficit, and the Chapter 11 bankruptcy filing discussed herein raise substantial doubt about the Company’s ability to continue as a going concern. ~~13a-14~~ Continuing as a going concern is dependent upon, among other things, the success of future business operations and ~~15d-14)~~the ~~for~~generation of sufficient cash from operations and financing sources to meet the ~~registrant~~Company’s obligations. The Company is presently considering a variety of alternatives to provide other sources of cash flow outside of ordinary operations. These alternatives include refinancing, fleet sales and weother ~~have:~~asset dispositions.

~~a) designed such~~The ~~disclosure~~consolidated ~~controls~~financial ~~and~~statements ~~procedures~~do tonot ~~ensure~~reflect ~~that~~the ~~material~~effect ~~information~~of ~~relating~~any changes to the ~~registrant,~~Company’s ~~including~~capital ~~its~~structure ~~consolidated~~or ~~subsidiaries,~~in isthe ~~made~~Company’s ~~known to~~business usoperations byas ~~others~~the ~~within~~result ~~those~~of ~~entities, particularly during~~ the ~~period~~Plan inof ~~which this quarterly report is being prepared;~~ Reorganization.

~~b) evaluated~~The Company’s primary capital requirements are for purchasing new rental equipment. The Company purchases rental equipment throughout the ~~effectiveness~~year to replace equipment that has been sold as well as to maintain adequate levels of equipment to meet existing and new customer needs. Rental fleet purchases for the ~~registrant's~~Company ~~disclosure~~were ~~controls~~$17,878 and ~~procedures~~$33,455 asin the first six months of a2003 ~~date~~and ~~within~~2002, respectively. ~~90 days~~The ~~prior~~Company’s toprincipal sources of cash are cash generated from operations and borrowings available under its credit facility. In the ~~filing~~last ~~date~~two ofyears, ~~this~~however, ~~quarterly~~as ~~report~~a result (of the ~~"Evaluation~~Company’s ~~Date");~~financial position, the Company has had limited capital available for capital expenditures due to more immediate funding requirements associated with debt service, insurance bonds and performance deposits.

cFor the six months ended June 30, 2003 and 2002, the Company’s net cash (used in) ~~presented~~ provided by operations was $(420) and $20,976, respectively. For the six months ended June 30, 2003 and 2002, the Company’s net cash (used in) ~~this~~provided ~~quarterly~~by ~~report~~investing activities ~~our~~was ~~conclusions~~$(3,162) ~~about~~and $89,500, respectively. Net cash used in investing activities consists primarily of purchases of rental equipment and property and equipment. In 2002, this includes the ~~effectiveness~~proceeds from the sale of the ~~disclosure~~trench shoring ~~controls~~business. For the six months ended June 30, 2003 and ~~procedures~~2002, ~~based~~the onCompany’s ~~our~~net ~~evaluation~~cash asprovided by (used in) financing activities was $8,090 and $(110,972), respectively. Net cash used in financing activities consists primarily of repayments under the ~~Evaluation~~Company’s credit ~~Date;~~facility. In 2002, the proceeds from the sale of the trench shoring business were used to repay existing indebtedness under the credit facility.

5During 1997, the Company issued $100,000 of Senior Subordinated Notes due 2004 (the “Series A Notes”) at a discount netting proceeds of $99,000. ~~The~~ ~~registrant's~~During ~~other~~1998, ~~certifying~~the ~~officers~~Company ~~and~~completed Iits ~~have~~exchange ~~disclosed~~of $100,000 ~~based~~of onSenior Subordinated ~~our~~Notes ~~most~~due ~~recent~~2004, ~~evaluation~~Series B (the “Series B Notes”), towhich were registered for public trading, for the ~~registrant's~~Series A ~~auditors~~Notes. ~~and~~Also during 1998, the ~~audit~~Company ~~committee~~issued $125,000 of ~~registrant's~~Senior Subordinated Notes due 2004, ~~board~~Series C (the “Series C Notes”) at a discount netting proceeds of $122,000. ~~directors~~During ~~(or~~1999, ~~persons~~the ~~performing~~Company issued $50,000 of additional Series C Notes, at a discount netting proceeds of $49,000. Later during 1999, the Company ~~equivalent~~completed ~~function~~its exchange of $175,000 of Senior Subordinated Notes due 2004, Series D (the “Series D Notes”):, which were registered for public trading, for the Series C Notes. In accordance with the Plan of Reorganization, the holders of the Company’s Series B Notes and Series D Notes received 97.5% of the New Common Stock of the Company.

a) all significantNew deficienciesCredit in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and Facility

bIn connection with the Company’s emergence from Chapter 11 on February 11, 2004, the Company entered into a new senior secured credit facility (the “New Credit Facility”) ~~any~~. The New Credit Facility ~~fraud~~consists of $285,000 ~~whether~~of orterm ~~not~~loan ~~material~~facilities and a $205,000 ~~that~~revolving ~~involves~~credit facility, ~~management~~subject orto ~~other~~availability ~~employees~~based ~~who~~on ~~have~~certain financial tests that include a ~~significant~~borrowing ~~role~~base. As inof February 11, 2004, the ~~registrant'~~Company had $464,000 outstanding under the New Credit Facility, and $26,000 of additional availability on the revolving credit facility. The borrowing base is determined by the Company’s ~~internal~~eligible ~~controls;~~inventory, accounts receivable and rental

6. The registrant's other certifying officers and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. 14

~~Date:~~equipment ~~November~~and ~~14,~~is ~~2002~~recomputed monthly. In /the event that the book value of the Company’s/ ~~MICHAEL~~inventory D.or ~~MILLIGAN~~accounts ~~Michael~~receivable D.or ~~Milligan~~the ~~Chief~~appraised ~~Financial~~value of ~~Officer~~the Company’s rental equipment declines without a corresponding increase in one of the other categories, the available borrowing base will be temporarily reduced accordingly.

20The New Credit Facility contains certain covenants that require the Company to, among other things, satisfy certain financial tests relating to 1) adjusted EBITDA levels, 2) fixed charge coverage ratios, 3) debt leverage ratios and 4) capital expenditure levels. The credit facility also contains various other covenants that restrict the Company’s ability to, among other things, 1) incur additional indebtedness, 2) permit liens to attach to its assets, 3) pay dividends or make other restricted payments on its common stock and certain other securities and 4) make acquisitions unless certain financial conditions are satisfied.

Factors That ~~INDEX~~May OFInfluence ~~EXHIBITS~~ Future Results

Exhibit Number		Description of Document
10.1		Employment Letter Agreement dated September 23, 2002, by and between the Company and Joseph M. Gullion.
11.1		Statement re Computation of Per Share Earnings. Not required because the relevant computations can be clearly determined from the material contained in the financial statements included herein.
99.1		Certification Pursuant to 18 U.S.C. Section 1350, As Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
99.2		Certification Pursuant to 18 U.S.C. Section 1350, As Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

Filing

21The Company’s Filing on June 27, 2003 generated concern among the Company’s customers and suppliers and disrupted business for a period of time during 2003. Disclosure of the terms of the Company’s Plan of Reorganization to employees, customers and vendors, as well as the subsequent emergence from bankruptcy protection in February 2004, have reduced the distractions caused by the Filing. However, the ultimate impact of the Filing on future results is not known.

~~QuickLinks~~Unfavorable Economic Conditions

Our end-users consist of construction and industrial customers. Weaknesses in these markets may lead to a decrease in demand for our equipment and services. Recent declines in the non-residential construction industry, as well as reduced funding at the federal and state levels on infrastructure, have adversely affected our results of operations. The future impact of potential continued declines in these areas is not known.

Seasonality

The Company’s revenues and operating results fluctuate significantly from quarter to quarter due to the seasonal nature of the markets in which the Company operates. The Company’s presence both in the traffic safety and control industry and in the general rental market in the Northeast and Midwest are both highly seasonal in nature, with activity tending to be lower in the winter.

Indebtedness

The Company’s substantial indebtedness could adversely affect the Company’s operations in the future in one or more of the following ways:

• Significant cash required for debt service could limit the Company’s ability to invest in its rental fleet and grow operations,

• Increases in interest rates could result in increased interest expense and increased cash for debt service,

• The Company’s ability to obtain additional financing could be limited as essentially all of the assets of the Company secure the existing indebtedness and

• Failure to comply with covenants associated with the existing indebtedness could result in the creditors’ ability to require repayment of outstanding indebtedness thereunder.

Competition

The equipment rental Industry is highly fragmented and competitive. Numerous competitors serve many of the markets in which the Company operates. These competitors range from national and multi-regional operators to small, independent businesses with a limited number of locations. Management believes that participants in the equipment rental industry compete on the basis of availability and quality of equipment, service, delivery time and price. Recent economic pressures have reduced market demand and forced industry participants to lower rental rates, adversely impacting the Company’s results of operations. The future impact of potential continued economic declines is unknown.

Legal Proceedings

From time to time, the Company has been and is involved in various legal proceedings, all of which management believes are routine in nature and incidental to the conduct of its business. Although the Company does not believe that an adverse ruling in any of these proceedings would have a material adverse impact on the Company’s results of operations, the Company’s ultimate legal and financial liability resulting from any of these proceedings cannot be estimated with certainty.

Environmental

The Company’s facilities are subject to federal, state and local environmental requirements relating to discharges to air, water and land; the handling and disposal of solid and hazardous waste; and the cleanup of properties affected by hazardous substances. Based on environmental assessments conducted in connection with the Company’s acquisitions, the Company believes that its facilities are in substantial compliance with environmental requirements, and that the Company has no material liabilities arising under environmental requirements. However, some risk of environmental liability is inherent in the nature of the Company’s business, and in the future the Company may incur material costs to meet current or more stringent compliance, cleanup or other obligations under environmental laws.

Recently Issued Accounting Pronouncements

In May 2003, the Financial Accounting Standards Board issued Statement No. 150, “Accounting for Certain Financial Instruments with Characteristics of Both Liabilities and Equity” (“SFAS No. 150”). SFAS No. 150 requires that certain financial instruments with characteristics of both liabilities and equity be classified as a liability and the accretion of any related fees be classified as interest expense rather than as a charge to retained earnings. The Company will adopt SFAS No. 150 on July 1, 2003, and

as a result the Company will reclassify $97,046 of senior redeemable preferred stock to liabilities. SFAS No. 150 does not permit the reclassification of the senior redeemable preferred stock to liabilities in financial statements prior to the effective date.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The New Credit Facility consists of $285 million of term loan facilities and a $205 million revolving credit facility, subject to availability based on certain financial tests that include a borrowing base. Borrowings under the credit facility bear interest, at the Company’s option, at a specified base rate or LIBOR rate plus the applicable borrowing margin. At February 11, 2004, the Company had total borrowings under the credit facility of $462 million. Each 100 basis point increase in interest rates on the variable rate debt would decrease pretax earnings by approximately $4.6 million.

ITEM 4. CONTROLS AND PROCEDURES

Evaluation of disclosure controls and procedures - After evaluating the effectiveness of the Company’s disclosure controls and procedures (as defined in Exchange Act Rules 13a-14(c) and 15d-14(c) as of June 30, 2003 (the “Evaluation Date”), the Company’s chief executive officer and chief financial officer have concluded that, as of the Evaluation Date, the Company’s disclosure controls and procedures were adequate and effective to ensure that material information relating to the Company and its subsidiaries would be made known to them by others within those entities, particularly during the period in which this quarterly report was being prepared.

Changes in internal controls – The Company has taken steps to strengthen its control and operating environment, information systems and procedures, including: the establishment of Company wide policies, procedures and internal control standards; the establishment of an internal audit function; the integration and consolidation of information systems into comprehensive operating and financial reporting systems and the establishment of a shared serviced center.

PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

Following the Company’s announcement in April 2002 that it was restating its prior period financial statements through the filing of its 2002 Annual Report on Form 10-K, the Company received a notice of inquiry from the SEC relating to the Company’s restated financial statements. Following a review of the Company’s response to the notice of inquiry, the SEC commenced an informal investigation into this matter. The informal investigation included the production of relevant documents and the taking of testimony from certain current and former Company employees. The Company was informed that the SEC also commenced an investigation with respect to three individuals (two former NES employees no longer associated with the Company and one current NES employee).

On April 10, 2003, the Company was informed by the staff of the SEC, through receipt of a “Wells Notice,” that the SEC intended to recommend that the Commission institute a cease-and-desist proceeding against the Company, alleging that NES violated Sections 13(a), 13(b)(2)(A), and 13(b)(2)(B) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) and Rules 12b-20, 13a-1, and 13a-13 thereunder. Prior to and during the investigation, the Company had voluntarily upgraded and reinforced significant portions of its financial controls functions. The Company fully cooperated with the Commission throughout the investigation.

In August 2003, the Company offered to settle the SEC investigation (the “Offer”) by agreeing to certain reporting violations of the Exchange Act and by agreeing to consent to the entry of an administrative Cease-and-Desist Order (the “Order”). While the Commission has not indicated at this time that it intends to seek a civil monetary penalty against the Company, the Commission has the statutory authority to seek a civil penalty of up to $500,000 for each violation of the Exchange Act committed by the Company. As of the date hereof, the SEC has not taken any formal action on the Offer or the Order. The Company is continuing its efforts to resolve this matter with the SEC.

ITEM 2. CHANGES IN SECURITIES, USE OF PROCEEDS AND ISSUER OF EQUITY SECURITIES

Not applicable.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

See Note 8 of the Notes to Consolidated Financial Statements for a discussion of certain defaults under the Company’s Senior Credit Facility and Senior Subordinated Notes.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

(a) The Company held its annual meeting of stockholders on May 29, 2003.

(b) Proxies for the annual meeting were solicited pursuant to Regulation 14A of the Securities Exchange Act of 1934, as amended. There was no solicitation in opposition to management’s nominees for directors as listed in the definitive proxy statement of the Company dated as of April 14, 2003, and all of such nominees were elected.

(c) Briefly described below is each matter voted upon at the annual meeting. The number of shares of common stock of the Company issued and outstanding and entitled to 1 vote per share on matters submitted at the annual meeting was 21,151,163. The number of shares of preferred stock of the Company issued and outstanding and entitled to 76.923077 votes per share on matters submitted at the annual meeting was 100,000. Such shares of common stock and preferred stock were entitled to cast an aggregate of 28,843,471 votes at the annual meeting.

(i) Election of directors of the Company.

All proxy nominees for directors as listed in the proxy statement were elected to serve three-year terms with the following vote:

Nominee		For		Against		Abstain
Daniel Timm		18,934,901		—		40,759

(ii) Ratification of the appointment of PricewaterhouseCoopers LLP as independent public accountants for the fiscal year ending December 31, 2003.

The appointment of PricewaterhouseCoopers LLP was ratified with the following vote:

For		Against		Abstain
18,938,421		33,950		3,289

ITEM 5. OTHER INFORMATION

Not applicable.

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

See Index of Exhibits on page 20. The Company filed a Current Report on Form 8-K dated May 28, 2003 to report the extension of the forbearance period as provided for in the Third Forbearance Agreement.

SIGNATURE

	National Equipment Services, Inc.


	By:	/s/ Michael D. Milligan
		Michael D. Milligan
		Chief Financial Officer

Form 10-Q: For the quarter ended June 30, 2003.

INDEX OF EXHIBITS

Exhibit Number		Description of Document

11.1		Statement re Computation of Per Share Earnings. Not required because per share earnings (loss) information has not been presented in the Consolidated Financial Statements due to the cancellation of the previously outstanding common stock.
31.1		Certification Pursuant to 18 U.S.C. Section 1350, As Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2		Certification Pursuant to 18 U.S.C. Section 1350, As Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1		Certification Pursuant to 18 U.S.C. Section 1350, As Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32.2		Certification Pursuant to 18 U.S.C. Section 1350, As Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

Filing Compare · NATIONAL EQUIPMENT SERVICES INC