UNITED STATES ~~SECURITIES~~ ~~AND EXCHANGE COMMISSION~~

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM 10-Q

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

For the quarterly period ended ~~June~~September 30, 2011

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

Commission File Number 333-144625-01 ~~333-144625~~

~~RSC~~333-144625 ~~Holdings III, LLC RSC Equipment Rental, Inc.~~

RSC Holdings III, LLC

RSC Equipment Rental, Inc.

(Exact name of registrant as specified in its charter)


Delaware Arizona		41-2218971 86-0933835
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification Number)
		(I.R.S. Employer Identification Number)

6929 E. Greenway Pkwy. Scottsdale, Arizona		85254
6929 E. Greenway Pkwy. Scottsdale, Arizona		85254
(Address of principal executive offices)		(Zip code)

(480) 905-3300

(Registrant’s telephone number, including area code)

N/A

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

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

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No ¨

~~Yes~~Indicate þby Nocheck omark whether the registrant has submitted electronically and posted on its corporate web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x No ¨

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

Yes þ No o

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

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

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No x

~~Yes~~As oof NoOctober 14, þ 2011, there were 1,000 shares of no par value Common Stock outstanding.

AsTable of July 15, 2011, there were 1,000 shares of no par value Common Stock outstanding. Contents

Table of Contents

Cautionary Note for Forward-Looking Statements			1
PART I. Financial Information			3
ITEM 1. Financial Statements (unaudited)			3
Condensed Consolidated Balance Sheets at June 30, 2011 and December 31, 2010			3
Condensed Consolidated Balance Sheets at September 30, 2011 and December 31, 2010			3
Condensed Consolidated Statements of Operations for the three and six months ended June 30, 2011 and June 30, 2010			4
Condensed Consolidated Statements of Operations for the three and nine months ended September 30, 2011 and September 30, 2010			4
Condensed Consolidated Statements of Cash Flows for the six months ended June 30, 2011 and June 30, 2010			5
Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 2011 and September 30, 2010			5
Notes to Condensed Consolidated Financial Statements			7
ITEM 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations			1514
ITEM 3. Quantitative and Qualitative Disclosures about Market Risk			3128
ITEM 4. Controls and Procedures			3129
PART II. Other Information			3230
ITEM 1. Legal Proceedings			3230
ITEM 1A. Risk Factors			3230
ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds			3230
ITEM 3. Defaults Upon Senior Securities			3230
ITEM 4. Reserved			3230
ITEM 5. Other Information			3230
ITEM 6. Exhibits			3331
SIGNATURES			3432
EX-31.1
EXHIBIT 4.7
EX-31.2
EXHIBIT 31.1
EX-32.1
EXHIBIT 31.2
EX-101 INSTANCE DOCUMENT
EXHIBIT 32.1
EX-101 SCHEMA DOCUMENT
EXHIBIT 101 INSTANCE DOCUMENT
EX-101 CALCULATION LINKBASE DOCUMENT
EXHIBIT 101 SCHEMA DOCUMENT
EX-101 LABELS LINKBASE DOCUMENT
EXHIBIT 101 CALCULATION LINKBASE DOCUMENT
EX-101 PRESENTATION LINKBASE DOCUMENT
EXHIBIT 101 LABELS LINKBASE DOCUMENT
EX-101 DEFINITION LINKBASE DOCUMENT
EXHIBIT 101 PRESENTATION LINKBASE DOCUMENT
EXHIBIT 101 DEFINITION LINKBASE DOCUMENT

Introductory Note

Unless the context otherwise requires, in this Quarterly Report on Form 10-Q, (i) “RSC” means RSC Equipment Rental, Inc. and RSC Equipment Rental of Canada, Ltd, which are our operating entities and indirect wholly-owned subsidiaries of RSC Holdings, (ii) “RSC Holdings” means RSC Holdings Inc., our ultimate parent company, (iii) “we,” “us” and “our” means RSC Holdings III, LLC and RSC and its consolidated subsidiaries, and when used in connection with disclosure relating to our publicly traded equity securities, RSC Holdings, except as otherwise set forth in this Quarterly Report on Form 10-Q.

Cautionary Note for Forward-Looking Statements

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

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

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

• the effect of a further economic downturn or other factors resulting in a decline in ~~non-residential~~ construction, non-construction maintenance, capital improvements and capital investment;

•

intense rental rate price pressure from competitors, some of whom are heavily indebted and may significantly reduce their prices to generate cash to meet debt covenants; from contractor customers, some of whom are bidding contracts at cost or below to secure work for their remaining best employees; from industrial customers who generally are experiencing profitability shortfalls in the current economic climate and in return are asking all of their most significant suppliers for price reductions and cost reduction ideas;

•

the rental industry’s ability to continue to sell used equipment through both the retail and auction markets at prices sufficient to enable us to maintain orderly liquidation values that support our borrowing base to meet our minimum availability and to avoid covenant compliance requirements for leverage and fixed charge coverage contained in our New Senior ABL Revolving Facility;

•

our ability to comply with our debt covenants;

•

risks related to the credit markets’ willingness to continue to lend to borrowers with a B rating;

•

our ability to generate cash and/or incur additional indebtedness to finance equipment purchases;

•

exposure to claims for personal injury, death and property damage resulting from the use of equipment rented or sold by us;

• exposure to claims for personal injury, death and property damage resulting from the use of equipment rented or sold by us;

•

the effect of changes in laws and regulations, including those relating to employment legislation, the environment and customer privacy, among others;

•

fluctuations in fuel and, or supply costs;

•

heavy reliance on centralized information technology systems;

•

claims that the software products and information systems on which we rely infringe on the intellectual property rights of others; and

•

the other factors described in Part II, Item 1A of this Quarterly Report on Form 10-Q under the caption “Risk Factors.”

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

PART I. Financial Information

Item 1. Financial Statements

RSC HOLDINGS III, LLC AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS ~~(In~~ ~~thousands, except share data) (Unaudited)~~

	June 30,			December 31,
	2011			2010
Assets
Cash and cash equivalents	$	37,763		$	3,510
Accounts receivable, net of allowance for doubtful accounts of $7,925 and $7,009 at June 30, 2011 and December 31, 2010, respectively		252,751			228,532
Inventory		15,301			14,171
Deferred tax assets, net		10,176			17,912
Prepaid expense and other current assets		13,314			13,798
Total current assets		329,305			277,923
Rental equipment, net of accumulated depreciation of $1,114,808 and $1,089,843 at June 30, 2011 and December 31, 2010, respectively		1,504,511			1,336,424
Property and equipment, net of accumulated depreciation of $218,437 and $208,495 at June 30, 2011 and December 31, 2010, respectively		111,237			110,779
Goodwill and other intangibles, net		938,921			939,302
Deferred financing costs		56,425			44,205
Other long-term assets		9,161			9,342
Total assets	$	2,949,560		$	2,717,975
Liabilities and Stockholders’ Deficit
Accounts payable	$	384,207		$	193,819
Accrued expenses and other current liabilities		124,869			119,608
Current portion of long-term debt		25,231			25,294
Total current liabilities		534,307			338,721
Long-term debt		2,143,139			2,043,887
Deferred tax liabilities, net		304,954			330,862
Other long-term liabilities		26,330			41,782
Total liabilities		3,008,730			2,755,252
Commitments and contingencies
Common stock, no par value, (1,000 shares authorized, issued and outstanding at June 30, 2011 and December 31, 2010)		298,433			293,462
Accumulated deficit		(383,196	)		(332,831	)
Accumulated other comprehensive income		25,593			2,092
Total stockholders’ deficit		(59,170	)		(37,277	)
Total liabilities and stockholders’ deficit	$	2,949,560		$	2,717,975

(In thousands, except share data)

(Unaudited)


	September 30, 2011			December 31, 2010
Assets
Cash and cash equivalents	$	27,807		$	3,510
Accounts receivable, net of allowance for doubtful accounts of $6,959 and $7,009 at September 30, 2011 and December 31, 2010, respectively		267,823			228,532
Inventory		16,087			14,171
Deferred tax assets, net		10,362			17,912
Prepaid expense and other current assets		11,362			13,798

Total current assets		333,441			277,923
Rental equipment, net of accumulated depreciation of $1,137,380 and $1,089,843 at September 30, 2011 and December 31, 2010, respectively		1,602,117			1,336,424
Property and equipment, net of accumulated depreciation of $220,997 and $208,495 at September 30, 2011 and December 31, 2010, respectively		119,559			110,779
Goodwill and other intangibles, net		957,503			939,302
Deferred financing costs		54,699			44,205
Other long-term assets		8,560			9,342

Total assets	$	3,075,879		$	2,717,975

Liabilities and Stockholders’ Deficit
Accounts payable	$	380,882		$	193,819
Accrued expenses and other current liabilities		124,454			119,608
Current portion of long-term debt		27,180			25,294

Total current liabilities		532,516			338,721
Long-term debt		2,257,174			2,043,887
Deferred tax liabilities, net		310,711			330,862
Other long-term liabilities		26,214			41,782

Total liabilities		3,126,615			2,755,252

Commitments and contingencies
Common stock, no par value, (1,000 shares authorized and outstanding at September 30, 2011 and December 31, 2010)		300,600			293,462
Accumulated deficit		(367,363	)		(332,831	)
Accumulated other comprehensive income		16,027			2,092

Total stockholders’ deficit		(50,736	)		(37,277	)

Total liabilities and stockholders’ deficit	$	3,075,879		$	2,717,975

See accompanying notes to the unaudited condensed consolidated financial statements.

RSC HOLDINGS III, LLC AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS ~~(In~~ ~~thousands, except per share data) (Unaudited)~~

	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2011			2010			2011			2010
Revenues:
Equipment rental revenue	$	315,696		$	259,734		$	587,471		$	481,947
Sale of merchandise		13,126			13,270			25,778			24,691
Sale of used rental equipment		38,306			27,993			80,799			55,099
Total revenues		367,128			300,997			694,048			561,737
Cost of revenues:
Cost of equipment rentals, excluding depreciation		157,706			141,948			306,682			271,240
Depreciation of rental equipment		73,959			67,398			144,848			134,043
Cost of merchandise sales		8,589			9,880			17,031			17,954
Cost of used rental equipment sales		25,785			23,931			56,755			48,568
Total cost of revenues		266,039			243,157			525,316			471,805
Gross profit		101,089			57,840			168,732			89,932
Operating expenses:
Selling, general and administrative		43,483			35,007			85,201			70,719
Depreciation and amortization of non-rental equipment and intangibles		10,691			9,910			20,916			19,967
Other operating gains, net		(964	)		(138	)		(1,683	)		(2,450	)
Total operating expenses, net		53,210			44,779			104,434			88,236
Operating income		47,879			13,061			64,298			1,696
Interest expense, net		46,984			48,233			128,943			98,026
Loss on extinguishment of debt		—			—			15,342			—
Other (income) expense, net		(169	)		99			(506	)		(100	)
Income (loss) before (provision) benefit for income taxes		1,064			(35,271	)		(79,481	)		(96,230	)
(Provision) benefit for income taxes		(997	)		13,156			29,116			36,287
Net income (loss)	$	67		$	(22,115	)	$	(50,365	)	$	(59,943	)
Weighted average shares outstanding used in computing net income (loss) per common share:
Basic and diluted		1,000			1,000			1,000			1,000
Net income (loss) per common share:
Basic and diluted	$	.07		$	(22.12	)	$	(50.37	)	$	(59.94	)

(In thousands, except per share data)

(Unaudited)


	Three Months Ended September 30,						Nine Months Ended September 30,
	2011			2010			2011			2010
Revenues:
Equipment rental revenue	$	360,554		$	291,671		$	948,025		$	773,618
Sale of merchandise		14,573			12,897			40,351			37,588
Sale of used rental equipment		32,245			29,216			113,044			84,315

Total revenues		407,372			333,784			1,101,420			895,521

Cost of revenues:
Cost of equipment rentals, excluding depreciation		171,851			147,451			478,533			418,691
Depreciation of rental equipment		76,782			68,878			221,630			202,921
Cost of merchandise sales		9,796			9,312			26,827			27,266
Cost of used rental equipment sales		19,869			24,575			76,624			73,143

Total cost of revenues		278,298			250,216			803,614			722,021

Gross profit		129,074			83,568			297,806			173,500

Operating expenses:
Selling, general and administrative		45,519			36,505			130,720			107,224
Depreciation and amortization of non-rental equipment and intangibles		10,619			10,012			31,535			29,979
Other operating gains, net		(1,025	)		(1,167	)		(2,708	)		(3,617	)

Total operating expenses, net		55,113			45,350			159,547			133,586

Operating income		73,961			38,218			138,259			39,914
Interest expense, net		47,363			48,446			176,306			146,472
Loss on extinguishment of debt		—			—			15,342			—
Other (income) expense, net		444			(264	)		(62	)		(364	)

Income (loss) before (provision) benefit for income taxes		26,154			(9,964	)		(53,327	)		(106,194	)
(Provision) benefit for income taxes		(10,321	)		3,542			18,795			39,829

Net income (loss)	$	15,833		$	(6,422	)	$	(34,532	)	$	(66,365	)

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

Net income (loss) per common share:
Basic and diluted	$	15.83		$	(6.42	)	$	(34.53	)	$	(66.37	)

See accompanying notes to the unaudited condensed consolidated financial statements.

RSC HOLDINGS III, LLC AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS ~~(In~~ ~~thousands) (Unaudited)~~

	Six Months Ended
	June 30,
	2011			2010
Cash flows from operating activities:
Net loss	$	(50,365	)	$	(59,943	)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation and amortization		165,764			154,010
Amortization of deferred financing costs		5,103			6,348
Amortization of original issue discount		606			543
Share-based compensation expense		3,168			2,258
Gain on sales of rental and non-rental property and equipment, net of non-cash write-offs		(25,250	)		(5,325	)
Deferred income taxes		(31,045	)		(37,442	)
Gain on settlement of insurance property claims		—			(1,736	)
Loss on extinguishment of debt		15,342			—
Interest expense, net on ineffective hedge		(104	)		33
Changes in operating assets and liabilities:
Accounts receivable, net		(23,459	)		(15,304	)
Inventory		(1,100	)		877
Other assets		402			5,389
Accounts payable		191,813			122,854
Accrued expenses and other liabilities		22,268			(2,669	)
Net cash provided by operating activities		273,143			169,893
Cash flows from investing activities:
Purchases of rental equipment		(367,347	)		(146,966	)
Purchases of property and equipment		(4,783	)		(1,635	)
Proceeds from sales of rental equipment		80,799			55,099
Proceeds from sales of property and equipment		3,204			1,652
Insurance proceeds from rental equipment and property claims		—			1,736
Net cash used in investing activities		(288,127	)		(90,114	)
Cash flows from financing activities:
Proceeds from Old Senior ABL Revolving Facility		72,000			84,000
Proceeds from New Senior ABL Revolving Facility		407,000			—
Proceeds from issuance of 2021 Notes		650,000			—
Payments on Old Senior ABL Revolving Facility		(376,195	)		(141,000	)
Payments on New Senior ABL Revolving Facility		(61,000	)		—
Payments on 2014 Notes		(117,000	)		—
Payments for call premium on 2014 Notes		(5,562	)		—
Payments on Second Lien Term Facility		(479,395	)		—
Payments on capital leases and other debt		(14,329	)		(15,969	)
Payments for deferred financing costs		(27,070	)		(1,109	)
Capital contributions from RSC Holdings		1,803			308
Decrease in outstanding checks in excess of cash balances		(1,922	)		—
Net cash provided by (used in) financing activities		48,330			(73,770	)
Effect of foreign exchange rates on cash		907			485
Net increase in cash and cash equivalents		34,253			6,494
Cash and cash equivalents at beginning of period		3,510			4,535
Cash and cash equivalents at end of period	$	37,763		$	11,029

(In thousands)

(Unaudited)


	Nine Months Ended September 30,
	2011			2010
Cash flows from operating activities:
Net loss	$	(34,532	)	$	(66,365	)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation and amortization		253,165			232,900
Amortization of deferred financing costs		7,532			9,553
Amortization of original issue discount		921			826
Share-based compensation expense		5,216			3,966
Gain on sales of rental and non-rental property and equipment, net of non-cash write-offs		(37,777	)		(9,635	)
Deferred income taxes		(24,719	)		(16,261	)
Gain on settlement of insurance property claims		—			(1,736	)
Loss on extinguishment of debt		15,342			—
Interest expense, net on ineffective hedge		(104	)		95
Changes in operating assets and liabilities:
Accounts receivable, net		(37,396	)		(39,456	)
Inventory		(1,849	)		903
Other assets		3,020			2,925
Accounts payable		163,346			186,517
Accrued expenses and other liabilities		22,001			8,217

Net cash provided by operating activities		334,166			312,449

Cash flows from investing activities:
Net cash paid for acquisition		(49,098	)		—
Purchases of rental equipment		(543,335	)		(265,714	)
Purchases of property and equipment		(8,381	)		(5,630	)
Proceeds from sales of rental equipment		113,044			84,315
Proceeds from sales of property and equipment		4,832			2,185
Insurance proceeds from rental equipment and property claims		—			1,736

Net cash used in investing activities		(482,938	)		(183,108	)

Cash flows from financing activities:
Proceeds from Old Senior ABL Revolving Facility		72,000			104,000
Proceeds from New Senior ABL Revolving Facility		551,000			—
Proceeds from issuance of 2021 Notes		650,000			—
Payments on Old Senior ABL Revolving Facility		(376,195	)		(210,000	)
Payments on New Senior ABL Revolving Facility		(97,000	)		—
Payments on 2014 Notes		(117,000	)		—
Payments for call premium on 2014 Notes		(5,562	)		—
Payments on Second Lien Term Facility		(479,395	)		—
Payments on capital leases and other debt		(21,839	)		(21,928	)
Payments for deferred financing costs		(27,926	)		(1,401	)
Capital contributions from RSC Holdings		1,922			323
Increase in outstanding checks in excess of cash balances		24,451			—

Net cash provided by (used in) financing activities		174,456			(129,006	)

Effect of foreign exchange rates on cash		(1,387	)		694

Net increase in cash and cash equivalents		24,297			1,029
Cash and cash equivalents at beginning of period		3,510			4,535

Cash and cash equivalents at end of period	$	27,807		$	5,564

See accompanying notes to the unaudited condensed consolidated financial statements.

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

	Six Months Ended
	June 30,
	2011		2010
Supplemental disclosure of cash flow information:
Cash paid for interest	$	107,609	$	93,354
Cash paid (received) for taxes, net		2,490		(73	)
Supplemental schedule of non-cash investing and financing activities:
Purchase of assets under capital lease obligations	$	17,501	$	8,043
Accrued deferred financing costs		358		254

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (continued)

(In thousands)

(Unaudited)


	Nine Months Ended September 30,
	2011			2010
Supplemental disclosure of cash flow information:
Cash paid for interest	$	159,702		$	126,655
Cash paid (received) for taxes, net		(14,393	)		(25,562	)
Supplemental schedule of non-cash investing and financing activities:
Purchase of assets under capital lease obligations	$	32,681		$	15,817
Accrued deferred financing costs		205			5

See accompanying notes to the unaudited condensed consolidated financial statements.

RSC HOLDINGS III, LLC AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS ~~(Unaudited)~~

(Unaudited)

(1)

Organization

Business and Basis of Presentation

Description of Business

RSC Holdings III, LLC and its wholly owned subsidiaries (collectively, the “Company”) are engaged primarily in the rental of a diversified line of construction and industrial equipment, geographically dispersed throughout the United States and Canada. The Company is a wholly owned subsidiary of RSC Holdings Inc. (“RSC Holdings”). RSC Holdings III, LLC is a limited liability company that does not have a Board of Directors, its business and affairs are managed by the Board of Directors of RSC Holdings, its ultimate parent. At ~~June~~September 30, 2011, the Company’s total assets were $23,~~949~~075.6 9 million, of which 9495.84% and 54.26% were employed in the Company’s U.S. and Canadian operations, respectively. For the ~~six~~nine months ended ~~June~~September 30, 2011, the Company generated approximately 8486.61% of its revenues from equipment rentals, and it derived the remaining 1513.49% of its revenues from sales of used rental equipment, merchandise and other related items.

Basis of Presentation

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

Use of Estimates

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

Recent Accounting Pronouncements

In ~~June~~ September 2011, the Financial Accounting Standards Board (the “FASB”) issued an ~~amendment~~update to the existing guidance onfor ~~the~~goodwill ~~presentation~~and ofother ~~comprehensive~~intangible ~~income~~assets. ~~Under~~The ~~the~~update ~~amended~~simplifies ~~guidance, entities~~how ~~have~~a ~~the~~company ~~option~~tests togoodwill ~~present~~for ~~the~~impairment ~~components~~by ofallowing ~~net~~both ~~income~~public and ~~other~~nonpublic ~~comprehensive~~entities ~~income in~~an ~~either~~option ato ~~single~~first ~~continuous~~assess ~~statement~~qualitative offactors ~~comprehensive~~to ~~income~~determine orwhether init is necessary to perform the two-step ~~separate~~quantitative ~~but~~goodwill ~~consecutive statements~~impairment test. ~~Entities~~Under that option, an entity would no longer ~~have~~be required to calculate the ~~option~~fair value of ~~presenting~~a reporting unit unless the ~~components~~entity ofdetermines, ~~other~~based ~~comprehensive income~~on ~~within~~that ~~the~~qualitative ~~statement~~assessment, ofthat ~~changes~~it inis ~~stockholders’~~more ~~equity.~~likely ~~For~~than ~~public~~not ~~entities,~~that ~~the~~its ~~amendment~~ fair value is ~~effective~~less onthan aits ~~retrospective~~carrying ~~basis~~amount. ~~for~~The ~~fiscal~~amendments ~~years,~~are effective for annual and interim ~~periods~~goodwill ~~within~~impairment tests performed for ~~those~~fiscal years, beginning after December 15, 2011,. ~~which~~Early ~~for~~adoption ~~the~~is ~~Company~~permitted. isThe ~~the~~Company ~~first~~does ~~quarter~~not ~~in 2012.~~anticipate ~~The~~that adoption of ~~this~~these ~~amendment~~amendments will ~~result~~have in a ~~change~~material toimpact ~~the~~on ~~Company’s~~its ~~current presentation~~financial condition, results of ~~comprehensive~~operations ~~income~~or cash flows.

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

InNOTES ~~May 2011,~~TO ~~the~~CONDENSED ~~FASB~~CONSOLIDATED ~~issued~~FINANCIAL ~~amendments~~STATEMENTS to the existing guidance on fair value measurement. The amendments are intended to create consistency between U.S. generally accepted accounting standards and International Financial Reporting Standards on measuring fair value and disclosing information about fair value measurements. The amendments clarify the application of existing fair value measurement requirements including (icontinued) ~~the~~ application of the highest and best use valuation premise concepts, (ii) measuring the fair value of an instrument classified in a reporting entity’s shareholders’ equity, and (iii) quantitative information required for fair value measurements categorized within Level 3. In addition, the amendments require additional disclosure for Level 3 measurements regarding the sensitivity of fair value to changes in unobservable inputs and any interrelationships between those inputs. For public entities, the amendments are effective for interim and annual periods beginning after December 15, 2011, which for the Company is calendar year 2012. These changes are required to be applied prospectively. The Company does not anticipate that the adoption of these amendments will have a material impact on its financial condition or results of operations.

(Unaudited)

In June 2011, the FASB issued an amendment to the existing guidance on the presentation of comprehensive income. Under the amended guidance, entities have the option to present the components of net income and other comprehensive income in either a single continuous statement of comprehensive income or in two separate but consecutive statements. Entities no longer have the option of presenting the components of other comprehensive income within the statement of changes in stockholders’ equity. For public entities, the amendment is effective on a retrospective basis for fiscal years, and interim periods within those years, beginning after December 15, 2011, which for the Company is the first quarter in 2012. The adoption of this amendment will result in a change to the Company’s current presentation of comprehensive income.

In May 2011, the FASB issued amendments to the existing guidance on fair value measurement. The amendments are intended to create consistency between U.S. generally accepted accounting standards and International Financial Reporting Standards on measuring fair value and disclosing information about fair value measurements. The amendments clarify the application of existing fair value measurement requirements including (i) the application of the highest and best use valuation premise concepts, (ii) measuring the fair value of an instrument classified in a reporting entity’s shareholders’ equity, and (iii) quantitative information required for fair value measurements categorized within Level 3. In addition, the amendments require additional disclosure for Level 3 measurements regarding the sensitivity of fair value to changes in unobservable inputs and any interrelationships between those inputs. For public entities, the amendments are effective for interim and annual periods beginning after December 15, 2011, which for the Company is calendar year 2012. These changes are required to be applied prospectively. The Company does not anticipate that the adoption of these amendments will have a material impact on its financial condition, results of operations or cash flows.

In December 2010, the FASB issued an update to the existing guidance for goodwill and other intangible assets. The update modifies Step 1 of the goodwill impairment test for reporting units with zero or negative carrying amounts. For those reporting units, an entity is required to perform Step 2 of the goodwill impairment test if there are qualitative factors indicating that it is more likely than not that a goodwill impairment exists. The qualitative factors are consistent with the existing guidance which requires goodwill of a reporting unit to be tested for impairment between annual tests if an event occurs or circumstances change that would more likely than not reduce the fair value of a reporting unit below its carrying amount. This guidance is effective for fiscal years, and interim periods within those years, beginning after December 15, 2010, which for the Company is the fourth quarter of 2011. The Company does not anticipate that the adoption of this guidance will have a material impact on its financial condition, results of operations or cash flows.

In November 2010, the FASB issued an update to its existing guidance on business combinations. This guidance requires a public entity that presents comparative financial statements to present in its pro forma disclosure the revenue and earnings of the combined entity as though the business combination(s) that occurred during the current year had occurred as of the beginning of the ~~prior~~ prior annual reporting period. In addition, this guidance expands the supplemental pro forma disclosures to include a description of the nature and amount of material, nonrecurring pro forma adjustments directly attributable to the business combination included in the reported pro forma revenue and earnings. The guidance is effective prospectively for business combinations for which the acquisition date is on or after the beginning of the first annual reporting period on or after December 15, 2010, which for the Company is calendar year 2011. ~~The~~Adoption of this guidance did not have an impact on the Company’s disclosures for the ~~six~~three and nine months ended ~~June~~September 30, 2011.

(2)

Fair Value of Financial Instruments

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

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

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

~~See~~NOTES ~~Note~~TO 5CONDENSED ~~for~~CONSOLIDATED ~~additional~~FINANCIAL ~~fair~~STATEMENTS ~~market~~(continued) ~~information related to debt instruments and Note 7 for additional information about measuring the fair value of assets and liabilities.~~

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

~~Accumulated~~See ~~other~~Note ~~comprehensive~~4 ~~income~~for ~~(loss) components~~additional asfair ofmarket ~~June 30,~~information ~~2011~~related ~~were~~to asdebt ~~follows:~~instruments and Note 6 for additional information about measuring the fair value of assets and liabilities.

						Accumulated
	Foreign		Fair Market			Other
	Currency		Value of Cash			Comprehensive
	Translation		Flow Hedges			Income
			(in 000s)
Balance at December 31, 2010	$	21,722	$	(19,630	)	$	2,092
Foreign currency translation		3,871		—			3,871
Change in fair value of cash flow hedges, net of tax		—		19,630			19,630
Balance at June 30, 2011	$	25,593	$	—		$	25,593

(3) Other Comprehensive Income

Accumulated other comprehensive income (loss) components as of September 30, 2011 were as follows:


	Foreign Currency Translation			Fair Market Value of Cash Flow Hedges			Accumulated Other Comprehensive Income
	(in 000s)
Balance at December 31, 2010	$	21,722		$	(19,630	)	$	2,092
Foreign currency translation adjustments		(5,695	)		—			(5,695	)
Change in fair value of cash flow hedges, net of tax		—			19,630			19,630

Balance at September 30, 2011	$	16,027		$	—		$	16,027

Comprehensive income (loss) was as follows:

	Three Months Ended						Six Months Ended
	Three Months EndedSeptember 30,						Nine Months EndedSeptember 30,
	June 30,						June 30,
	2011			2010			2011			2010
	(in 000s)
Net income (loss)	$	6715,833		$	(226,~~115~~422	)	$	(5034,~~365~~532	)	$	(5966,~~943~~365	)
Currency translation adjustments		635			(3,622	)		3,871			(55	)
Foreign currency translation adjustments		(9,566	)		1,989			(5,695	)		1,934
Change in fair value of cash flow hedges, net of tax		—			(~~101~~1,000	)		19,630			33(967	)
Comprehensive income (loss)	$	~~702~~6,267		$	(255,~~838~~433	)	$	(2620,~~864~~597	)	$	(5965,~~965~~398	)

(4) ~~Closed~~ ~~Location~~Debt ~~Charges~~

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

During the six months ended June 30, 2011, the Company closed or consolidated ten locations. During the year ended December 31, 2010, the Company closed or consolidated 12 locations. The closed location reserves at June 30, 2011 and December 31, 2010, consist primarily of employee termination costs, costs to terminate operating leases prior to the end of their contractual lease term and estimated costs that will continue to be incurred under operating leases that have no future economic benefit to the Company. Freight costs to transport fleet from closed locations to other locations and the write-off of leasehold improvements are expensed as incurred. Except in instances where a lease settlement agreement has been negotiated with a landlord, costs recognized to terminate operating leases before the end of their contractual term represent the estimated fair value of the liability at the cease-use date. The fair value of the liability is determined based on the present value of remaining lease rentals, reduced by estimated sublease rentals that could be reasonably obtained for the property even if the Company does not intend to enter into a sublease. Although the Company does not expect to incur additional material charges for location closures occurring prior to June 30, 2011, additional charges are possible to the extent that actual future settlements differ from the Company’s estimates. The Company cannot predict the extent of future location closures or the financial impact of such closings, if any.


			September 30, 2011					December 31, 2010
	Interest Rate (a)	Maturity Date	Unamortized Deferred Financing Costs		Debt			Debt
			(in 000s)
New Senior ABL Revolving Facility	2.74%	Feb. 2016	$	20,366	$	454,000		$	—
Old Senior ABL Revolving Facility	n/a	(b)		—		—			304,195
Second Lien Term Facility	n/a	(c)		—		—			479,395
2014 Notes	9.50%	Dec. 2014		8,088		503,000			620,000
2017 Notes	10.50%	Jul. 2017		7,660		400,000			400,000
2019 Notes	10.50%	Nov. 2019		4,640		200,000			200,000
2021 Notes	8.25%	Feb. 2021		13,945		650,000			—
Capitalized lease obligations (d)	2.10%	Various		—		88,629			77,788

Total			$	54,699		2,295,629			2,081,378

Original issue discounts (e)	n/a	n/a				(11,275	)		(12,197	)

Total					$	2,284,354		$	2,069,181

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

~~Closed~~NOTES ~~location~~TO ~~charges~~CONDENSED ~~(to~~CONSOLIDATED beFINANCIAL ~~cash~~STATEMENTS ~~settled) by type and a reconciliation of the associated accrued liability were as follows~~ (~~in 000s~~continued):

	Lease Exit and			Employee			Other
	Other Related			Termination			Exit
	Costs (a)			Costs (b)			Costs (c)			Total
Closed location reserves at December 31, 2010	$	(4,265	)	$	—		$	—		$	(4,265	)
Charges incurred to close locations		(1,111	)		(59	)		(62	)		(1,232	)
Cash payments		1,379			54			62			1,495
Adjustments to reserve		(122	)		—			—			(122	)
Closed location reserves at June 30, 2011	$	(4,119	)	$	(5	)	$	—		$	(4,124	)

(Unaudited)

(a) ~~Lease~~Estimated ~~exit~~interest ~~and~~rate ~~other~~presented ~~related~~is ~~costs are included within cost of equipment rentals in~~ the ~~condensed~~effective ~~consolidated~~interest ~~statements~~rate ofas ~~operations. The lease exit portion~~ of ~~the~~September ~~closed location reserves at June~~ 30, 2011 ~~are~~including ~~expected to be paid over~~ the ~~remaining~~effect ~~contractual term~~ of ~~the~~original ~~leases~~issue discounts, ~~which~~where ~~range~~applicable, ~~from three to 81 months. (b) Employee termination costs primarily consist of severance payments~~ and ~~related~~excluding ~~benefits. For~~ the ~~six~~effects ~~months ended June 30, 2011, these costs are included within cost~~ of ~~equipment~~deferred ~~rentals~~financing ~~in the condensed consolidated statement of operations. (c) Other exit~~ costs ~~include costs incurred primarily to transport fleet from closed locations to other locations~~. ~~These costs are included within cost of equipment rentals in the condensed consolidated statements of operations.~~

~~During~~(b) ~~the~~In ~~six~~February ~~months ended June 30,~~ 2011, the Company ~~also~~repaid ~~recognized~~the ~~$0.8 million~~outstanding balance of ~~other~~ ~~severance~~the ~~costs~~Old ~~not~~Senior ~~directly~~ABL ~~associated~~Revolving Facility and replaced it with ~~location~~the ~~closures~~New Senior ABL Revolving Facility due February 2016. OfAs a result, the ~~additional~~Company ~~severance expense~~classified ~~recognized~~the outstanding balance on the Old Senior ABL Revolving Facility as long-term debt at December 31, $02010.~~6 million~~ isHad ~~included~~the ~~within~~Company ~~cost~~not ofentered ~~equipment~~into ~~rentals~~the ~~and~~New Senior ABL Revolving Facility, $078.2 4 million ~~is included~~of ~~within~~the ~~selling~~outstanding balance on the Old Senior ABL Revolving Facility at December 31, ~~general~~2010 ~~and~~would ~~administrative~~have ~~expenses~~been indue November 2011 with the ~~unaudited~~remaining ~~condensed consolidated~~$225.8 ~~statement~~million ofdue ~~operations~~August 2013. See “New Senior ABL Revolving Facility” below for additional information.

(5c) ~~Debt~~ In January 2011, the Company repaid the $479.4 million outstanding balance on the Second Lien Term Facility using proceeds received from the sale of the 2021 Notes. See “$650.0 million Senior Unsecured Notes Offering” below for additional information.

~~Debt~~(d) ~~consists~~Capital leases include $27.2 million and $61.4 million of ~~the~~obligations ~~following~~that are classified as current and long-term debt, respectively, at: September 30, 2011.

					June 30,					December 31,
					2011					2010
					Unamortized
					Deferred
	Interest			Maturity	Financing
	Rate (a)			Date	Costs		Debt			Debt
							(in 000s)
New Senior ABL Revolving Facility		2.69	%	Feb. 2016	$	20,999	$	346,000		$	—
Old Senior ABL Revolving Facility		n/a		(b)		—		—			304,195
Second Lien Term Facility		n/a		(c)		—		—			479,395
2014 Notes		9.50	%	Dec. 2014		8,618		503,000			620,000
2017 Notes		10.50	%	Jul. 2017		7,896		400,000			400,000
2019 Notes		10.50	%	Nov. 2019		4,728		200,000			200,000
2021 Notes		8.25	%	Feb. 2021		14,184		650,000			—
Capitalized lease obligations (d)		1.80	%	Various		—		80,961			77,788
Total					$	56,425		2,179,961			2,081,378
Original issue discounts (e)		n/a		n/a				(11,591	)		(12,197	)
Total							$	2,168,370		$	2,069,181

(e)

The original issue discounts represent the unamortized difference between the $400.0 million aggregate principal amount of the 2017 Notes and the proceeds received upon issuance and the unamortized difference between the $200.0 million aggregate principal amount of the 2019 Notes and the proceeds received upon issuance.

As of September 30, 2011, the Company had $648.1 million available for borrowing under the New Senior ABL Revolving Facility as amended. A portion of the New Senior ABL Revolving Facility is available for the issuance of letters of credit and swingline loans, which are seven day loans that can be drawn on the same day as requested for an amount not to exceed $25.0 million. Due to the $648.1 million of excess availability on the New Senior ABL Revolving Facility at September 30, 2011, the Company was not required to comply with either the fixed charge coverage ratio or leverage ratio. Had excess availability fallen below the greater of $125.0 million and 12.5% of the sum of the total commitments under the New Senior ABL Revolving Facility as of September 30, 2011, compliance with these financial ratios would have been required and the Company would have violated the minimum fixed charge coverage ratio requirement, which would be an event of default.

As of September 30, 2011, the estimated fair value of the Company’s debt was as follows (in 000s):


	Fair Value
New Senior ABL Revolving Facility	$	454,000
2014 Notes		497,970
2017 Notes		418,000
2019 Notes		194,000
2021 Notes		552,500
Capitalized lease obligations		88,629

Total	$	2,205,099

$650.0 million Senior Unsecured Notes Offering

On January 19, 2011, the Company completed a private offering of $650.0 million aggregate principal amount of 8.25% senior unsecured notes due February 2021 (the “2021 Notes”). The proceeds from the sale of the 2021 Notes were used to repay the outstanding balance on the Company’s Second Lien Term Facility, which totaled $479.4 million plus accrued interest of $0.7 million, redeem a portion of the 2014 Notes as described below, settle the Company’s outstanding interest rate swap obligations of $35.1 million and pay a portion of the transaction costs incurred with the issuance of the 2021 Notes. The transaction costs, which totaled $14.6 million, were capitalized as deferred financing costs and are being amortized to interest expense over the term of the 2021 Notes using the effective interest rate method. On February 21, 2011, the Company redeemed $117.0 million of aggregate principal of the Company’s 2014 Notes, paid accrued interest of $2.5 million on the 2014 Notes and incurred a call premium of $5.6 million, which was funded with the remaining proceeds from the 2021 Notes and in part from a draw on the Company’s New Senior ABL Revolving Facility. As a result of the Second Lien Term Facility repayment and the partial repayment of the 2014 Notes, the Company expensed $7.3 million of unamortized deferred financing costs, which together with the $5.6 million in call premiums, is characterized as a loss on extinguishment of debt in the condensed consolidated statement of operations for the nine months ended September 30, 2011. The settlement of the Company’s interest rate swaps resulted in a charge of $33.9 million, which is characterized as interest expense in the condensed consolidated statement of operations for the nine months ended September 30, 2011.

In April 2011, the Company completed an exchange offer where the holders of the 2021 Notes could exchange such unregistered notes for new, registered notes. The terms of the new, registered notes offered in the exchange offer are identical in all material respects to the terms of the unregistered notes, except that the new notes are registered under the Securities Act of 1933 and do not contain restrictions on transfer.

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

~~(a)~~NOTES ~~Estimated~~TO ~~interest~~CONDENSED ~~rate~~CONSOLIDATED ~~presented~~FINANCIAL isSTATEMENTS ~~the effective interest rate as of June 30, 2011 including the effect of original issue discounts, where applicable, and excluding the effects of deferred financing costs.~~ (bcontinued) In February 2011, the Company repaid the outstanding balance of the Old Senior ABL Revolving Facility and replaced it with the New Senior ABL Revolving Facility due February 2016. As a result, the Company classified the outstanding balance on the Old Senior ABL Revolving Facility as long-term debt at December 31, 2010. Had the Company not entered into the New Senior ABL Revolving Facility, $78.4 million of the outstanding balance on the Old Senior ABL Revolving Facility at December 31, 2010 would have been due November 2011 with the remaining $225.8 million due August 2013. See “New Senior ABL Revolving Facility” below for additional information. (c) In January 2011, the Company repaid the $479.4 million outstanding balance on the Second Lien Term Facility using proceeds received from the sale of the 2021 Notes. See “$650.0 million Senior Unsecured Notes Offering” below for additional information. (d) Capital leases include $25.2 million and $55.8 million of obligations that are classified as current and long-term debt, respectively, at June 30, 2011. (e) The original issue discounts represent the unamortized difference between the $400.0 million aggregate principal amount of the 2017 Notes and the proceeds received upon issuance and the unamortized difference between the $200.0 million aggregate principal amount of the 2019 Notes and the proceeds received upon issuance.

As(Unaudited) of June 30, 2011, the Company had $641.1 million available for borrowing under the New Senior ABL Revolving Facility. A portion of the New Senior ABL Revolving Facility is available for the issuance of letters of credit and swingline loans, which are seven day loans that can be drawn on the same day as requested for an amount not to exceed $25.0 million. The Company is in compliance with all applicable debt covenants as of June 30, 2011.

As of June 30, 2011, the estimated fair value of the Company’s debt was as follows (in 000s):

	Fair Value
New Senior ABL Revolving Facility	$	346,000
2014 Notes		518,090
2017 Notes		450,000
2019 Notes		221,000
2021 Notes		648,375
Capitalized lease obligations		80,961
Total	$	2,264,426

$650.0 million Senior Unsecured Notes Offering

On January 19, 2011, the Company completed a private offering of $650.0 million aggregate principal amount of 8.25% senior unsecured notes due February 2021 (the “2021 Notes”). The proceeds from the sale of the 2021 Notes were used to repay the outstanding balance on the Company’s Second Lien Term Facility, which totaled $479.4 million plus accrued interest of $0.7 million, redeem a portion of the 2014 Notes as described below, settle the Company’s outstanding interest rate swap obligations of $35.1 million and pay a portion of the transaction costs incurred with the issuance of the 2021 Notes. The transaction costs, which totaled $14.6 million, were capitalized as deferred financing costs and are being amortized to interest expense over the term of the 2021 Notes using the effective interest rate method. On February 21, 2011, the Company redeemed $117.0 million of aggregate principal of the Company’s 2014 Notes, paid accrued interest of $2.5 million on the 2014 Notes and incurred a call premium of $5.6 million, which was funded with the remaining proceeds from the 2021 Notes and in part from a draw on the Company’s New Senior ABL Revolving Facility. As a result of the Second Lien Term Facility repayment and the partial repayment of the 2014 Notes, the Company expensed $7.3 million of unamortized deferred financing costs, which together with the $5.6 million in call premiums, is characterized as a loss on extinguishment of debt in the condensed consolidated statement of operations for the six months ended June 30, 2011. The settlement of the Company’s interest rate swaps resulted in a charge of $33.9 million, which is characterized as interest expense in the condensed consolidated statement of operations for the six months ended June 30, 2011.

During the six months ended June 30, 2011, the Company initiated and completed an exchange offer where the holders of the 2021 Notes could exchange such unregistered notes for new, registered notes. The terms of the new, registered notes offered in the exchange offer are identical in all material respects to the terms of the

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

unregistered notes, except that the new notes are registered under the Securities Act of 1933 and do not contain restrictions on transfer.

New Senior ABL Revolving Facility

On February 9, 2011, the Company entered into the New Senior ABL Revolving Facility, which replaced its Old Senior ABL Revolving Facility, and borrowed $383.0 million of loans under the New Senior ABL Revolving Facility. The proceeds of these loans were used to repay the outstanding balance on the Company’s Old Senior ABL Revolving Facility, which totaled $370.2 ~~million~~ ~~plus~~million plus accrued interest and other fees of $1.1 million, and to pay a portion of transaction costs including legal fees. Total transaction costs of $12.3 million were capitalized as deferred financing costs and are being amortized to interest expense over the term of the New Senior ABL Revolving Facility. In addition, the Company wrote off $2.4 million of unamortized deferred financing costs associated with the Old Senior ABL Revolving Facility, which is included in the loss on extinguishment of debt in the condensed consolidated statement of operations for the ~~six~~ nine months ended ~~June~~September 30, 2011. The Company’s New Senior ABL Revolving Facility, which is due February 2016, provides commitments for aggregate borrowings of approximately $1,100.0 million subject to, among other things, the Company’s maintenance of a sufficient borrowing base ~~under such facility. The borrowing base~~ reporting requirements that the Company is subject to, under the New Senior ABL Revolving Facility are substantially similar to those under the Old Senior ABL Revolving Facility.

Additionally, on September 28, 2011 the New Senior ABL Revolving agreement was amended to increase the commitment for aggregate borrowings by approximately $110.0 million. Of this amount $85.0 million represents additional U.S. commitments and $25.0 million represents Canadian commitments. No other material modifications were made. The Company’s New Senior ABL Revolving Facility, which is due February 2016, now provides commitments for aggregate borrowings of approximately $1,210.0 million subject to, among other things, the Company’s maintenance of a sufficient borrowing base under such facility. In connection with the Company’s expansion of the New Senior ABL Revolving Facility, the Company incurred transaction costs of $0.7 million that will be amortized to interest expense over the remaining term of the New Senior ABL Revolving Facility.

Interest Rate Swaps

In September 2007, the Company entered into four forward-starting interest rate swap agreements covering a combined notional amount of debt totaling $700.0 million. The objective of the swaps was to effectively hedge the cash flow risk associated with a portion of the Second Lien Term Facility which had variable interest rates. In November 2009, the Company entered into two ~~reverse~~ reverse swaps to offset a portion of the fixed rate payments under certain other swap agreements that were de-designated as cash flow hedges in November 2009. All interest rate swaps and reverse swaps in effect at December 31, 2010 were settled on January 19, 2011 in conjunction with the debt transactions described above. See Note 65 for additional information.

(65) Derivative Instruments

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

The Company formally documents its risk management objectives and strategy for undertaking each swap at the contract’s inception and assesses whether the hedging relationship is expected to be highly effective in achieving cash flows that offset changes in interest payments resulting from fluctuations in the benchmark rate. An assessment of the effectiveness of derivative instruments designated as cash flow hedges is performed on a quarterly basis using the perfectly effective hypothetical derivative method. Gains or losses resulting from changes in the fair value of derivatives designated as cash flow hedges are reported as a component of accumulated other comprehensive income (loss) for the portion of the derivative instrument determined to be effective. Gains and losses reported in accumulated other comprehensive income (loss) are ~~reclassified~~ reclassified into earnings as interest income or expense in the periods during which the hedged transaction affects earnings. Gains or losses resulting from changes in the fair value of derivatives designated as cash flow hedges are reported as interest expense ~~for the portion of the derivative instrument determined to be ineffective. The~~ ~~ineffective portion of the liabilities~~ for ~~derivatives qualifying as cash flow hedges totaled $104,000 at December 31, 2010. As previously described,~~ the

12 11

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

~~Company~~NOTES ~~settled~~TO ~~all~~CONDENSED ~~interest~~CONSOLIDATED ~~rate swaps~~FINANCIAL inSTATEMENTS ~~effect~~(continued) at December 31, 2010 on January 19, 2011. The Company does not have any outstanding interest rate swaps as of June 30, 2011. In connection with the Company’s interest rate swap settlements, the Company paid $35.1 million of which $33.9 million was recognized as interest expense in the six months ended June 30, 2011. The difference of $1.2 million was recognized as interest expense in November 2009 when certain of the Company’s interest rate swaps were de-designated as cash flow hedges.

(Unaudited)

portion of the derivative instrument determined to be ineffective. The ineffective portion of the liabilities for derivatives qualifying as cash flow hedges totaled $104,000 at December 31, 2010. As previously described, the Company settled all interest rate swaps in effect at December 31, 2010 on January 19, 2011. The Company does not have any outstanding interest rate swaps as of September 30, 2011. In connection with the Company’s interest rate swap settlements, the Company paid $35.1 million of which $33.9 million was recognized as interest expense in the nine months ended September 30, 2011. The difference of $1.2 million was recognized as interest expense in November 2009 when certain of the Company’s interest rate swaps were de-designated as cash flow hedges.

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

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

June 30, 2011

December 31, 2010

June 30, 2011

December 31, 2010

September 30,2011

December 31, 2010

September 30,2011

December 31, 2010

Loss in

Derivative Type

FairValue ofSwap Liabilities

Loss inAccumulatedOCIL(Net of Tax)(a)

Loss inAccumulatedOCIL(Net of Tax)

Fair

Accumulated

Interest rate swaps designated as hedges

n/a

32,285

n/a

19,630

Value of

OCIL

Interest rate swaps not designated as hedges

n/a

1,388

n/a

Derivative Type

Swap Liabilities

(Net of Tax)(a)

(Net of Tax)

Interest rate swaps designated as hedges

n/a

32,285

n/a

19,630

Interest rate swaps not designated as hedges

n/a

1,388

n/a

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

The effect of derivative instruments on comprehensive loss for the ~~six~~nine months ended ~~June~~ September 30, 2011 was as follows (in 000s):

Loss Reclassified from

Gain

Derivative Type

Loss Recognized inAccumulated OCIL(Net of Tax)

Loss Reclassified fromAccumulated OCIL intoExpense(Net of Tax)

GainRecognized onIneffective Portionof Derivatives

Loss Recognized in

Accumulated OCIL into

Recognized on

Accumulated OCIL

Expense

Ineffective Portion

Derivative Type

(Net of Tax)

of Derivatives

Interest rate swaps

—

19,630

104

For the ~~six~~nine months ended ~~June~~ September 30, 2011, the Company recognized a loss of $80,000 on interest rate swaps not designated as hedging instruments. The loss was included within interest expense, net in the condensed consolidated statement of operations.

13 12

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

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (7continued) ~~Fair~~ ~~Value~~

(Unaudited)

(6)

Fair Value

Measurements

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

• Level 1 —– Observable inputs such as quoted prices in active markets;

• Level 2 —– Inputs, other than the quoted prices in active markets, that are observable either directly or indirectly; and

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

As of ~~June~~September 30, 2011, no assets or liabilities were measured at fair value on a recurring ~~or nonrecurring~~ basis.

(87) Income Tax

The provision for income taxes was $110.0 3 million for the three months ended ~~June~~September 30, 2011. The benefit for income taxes was $133.2 5 million for the three months ended ~~June~~September 30, 2010. The effective tax rate for the third quarter of 2011 and 2010 was 9339.75% and 3735.35%, ~~during~~respectively. The benefit for income taxes was $18.8 million and $39.8 million for the ~~three~~nine months ended ~~June~~September 30, 2011 and 2010, respectively. The effective tax rate for the nine month period ending September 30, 2011 and 2010 was 35.2% and 37.5%, respectively. The Company’s effective tax rate normally differs from the U.S. federal statutory rate of 35% primarily due to certain non-deductible permanent items, state income taxes and certain state minimum and gross receipts taxes, which are incurred regardless of whether the Company earns ~~income.~~ The Company’s high effective tax rate during the three months ended June 30, 2011 is primarily due to the impact of state gross receipts taxes totaling $0.2 million in the second quarter of 2011 when combined with low pre-tax net income.

~~The~~(8) benefit for income taxes was $29.1 million and $36.3 million for the six months ended June 30, 2011 and 2010, respectively, and resulted from a pre-tax net loss for both periods. The effective tax rate was 36.6% and 37.7% for the six months ended June 30, 2011 and 2010, respectively. The Company’s effective tax rate normally differs from the U.S. federal statutory rate of 35% primarily due to certain non-deductible permanent items, state income taxes and certain state minimum and gross receipts taxes, which are incurred regardless of whether the Company earns income. The Company’s effective tax rate decreased due to the effect of enacted state tax rate changes applied to the Company’s deferred balances during the six months ended June 30, 2011. Acquisition

On July 8, 2011, the Company acquired certain rights and assets of Independent Aerial Equipment (9“IAE”) ~~Subsequent~~. The ~~Event~~acquisition, which consists primarily of rental fleet and three existing operations in New Jersey, Pennsylvania and Maryland, enabled the Company to strengthen its presence in the northeastern United States. The rights and assets were acquired in exchange for consideration of $49.1 million subject to certain post-close adjustments. In connection with the acquisition, the Company recorded $13.3 million of goodwill and $5.6 million of intangible assets with finite useful lives. Additionally, the Company incurred $0.1 million of transaction costs. The Company did not assume any liabilities. The purchase price allocation for IAE was based on preliminary valuations and is subject to change during the acquisition measurement period.

On13 July 8, 2011, the Company acquired the assets and operations of Independent Aerial Equipment (“IAE”), a privately held equipment rental company. Substantially all of the assets and operations, which consist primarily of rental fleet and three stores in New Jersey, Pennsylvania and Maryland, were acquired in exchange for cash consideration of approximately $49.0 million subject to certain post-close adjustments. The Company financed the acquisition of IAE by borrowing the funds from the New Senior ABL Revolving Facility.

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

Statements in this management’s discussion and analysis regarding industry outlook, our expectations regarding the performance of our business and other non-historical statements are forward-looking statements. These forward-looking statements are subject to numerous risks and uncertainties. See “Cautionary Note for Forward-Looking Statements” on page 1 of this Quarterly Report on Form 10-Q. Our actual results may differ materially from those contained in, or implied by, any forward-looking statements.

The following discussion is intended to enhance the reader’s understanding of our business operations and present business environment. It should be read in conjunction with our 2010 Form 10-K, the section entitled “Risk Factors” in Part II, Item 1A herein and our unaudited condensed consolidated financial statements for the three and ~~six~~nine months ended ~~June~~ September 30, 2011 included in this Quarterly Report on Form 10-Q.

Overview

We are one of the largest equipment rental providers in North America. We operate through a network of ~~449~~452 rental locations across ten regions in 42 U.S. states and three Canadian provinces and service customers primarily in the industrial or non-construction, and ~~non-residential~~ construction markets. We rent a broad selection of equipment ranging from large equipment such as backhoes, forklifts, air compressors, scissor lifts, aerial work platform booms and skid-steer loaders to smaller items such as pumps, generators, welders and electric hand tools. We also sell used equipment, parts, merchandise and supplies for customers’ maintenance, repair and operations.

For the three months ended ~~June~~September 30, 2011 and ~~June~~September 30, 2010, we generated approximately 8688.05% and 8687.34% of our revenues from equipment rentals, respectively, and we derived the remaining 1411.05% and 1312.76% of our revenues from sales of used rental equipment, merchandise and other related items, respectively. For the ~~six~~nine months ended ~~June~~September 30, 2011 and ~~June~~September 30, 2010, we generated approximately 84 86.61% and 8586.84% of our revenues from equipment rentals, respectively, and we derived the remaining 15 13.49% and 1413.26% of our revenues from sales of used rental equipment, merchandise and other related items, respectively.

The following table summarizes our total revenues, income (loss) before (provision) benefit for income taxes and net income (loss) for the three and ~~six~~nine months ended ~~June~~September 30, 2011 and 2010 (in 000s):

	Three Months Ended					Six Months Ended
	Three Months EndedSeptember 30,					Nine Months EndedSeptember 30,
	June 30,					June 30,
	2011		2010			2011			2010
Total revenues	$	~~367~~407,~~128~~372	$	~~300~~333,~~997~~784		$	~~694~~1,~~048~~101,420		$	~~561~~895,~~737~~521
Income (loss) before (provision) benefit for income taxes		126,~~064~~154		(359,~~271~~964	)		(7953,~~481~~327	)		(96106,~~230~~194	)
Net income (loss)		6715,833		(226,~~115~~422	)		(5034,~~365~~532	)		(5966,~~943~~365	)

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

	Three Months Ended (or at)						Six Months Ended (or at)
	Three Months Ended (or at)September 30,						Nine Months Ended (or at)September 30,
	June 30,						June 30,
	2011			2010			2011			2010
Adjusted EBITDA (in millions) (a)	$	~~134~~163.4		$	92118.08		$	~~233~~396.26		$	~~158~~276.08
Fleet utilization (b)		6772.85	%		6368.57	%		6568.82	%		5962.24	%
Average fleet age at period end (months) (c)		41			4243			41			4243
Original equipment fleet cost at period end (in millions) (d)	$	2,~~537~~696		$	2,~~337~~375		$	2,~~537~~696		$	2,~~337~~375

15 14

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

~~For~~(b) ~~the~~Defined ~~three~~as ~~and six months ended June 30, 2011, our Adjusted EBITDA increased $42.4 million and $75.2 million, respectively, from $92.0 million in~~ the ~~second~~average ~~quarter~~aggregate ofdollar ~~2010~~value ~~to $134.4 million in the second quarter~~ of ~~2011~~equipment ~~and~~rented ~~from~~by ~~$158.0 million~~customers ~~for~~(based ~~the~~on ~~six~~original months ended June 30, 2010 to $233.2 million in the six months ended June 30, 2011. The $42.4 million increase in Adjusted EBITDA in the three months ended June 30, 2011 was due primarily to a $40.2 million increase in equipment ~~rental~~ ~~margins,~~fleet ~~excluding~~cost ~~depreciation.~~or ~~Equipment~~“OEC”) ~~rental margins, excluding depreciation, were higher~~ during the ~~2011~~relevant ~~three-month~~ period, ~~due~~divided toby ~~a 15.2% increase in rental volume and a 6.3% increase in rental rates. The $75.2 million increase in Adjusted EBITDA in~~ the ~~six~~average ~~months~~aggregate ~~ended June 30,~~dollar ~~2011~~value ~~was~~of ~~due~~all ~~primarily to a $70.1 million increase in~~ equipment ~~rental~~owned ~~margins,~~(based ~~excluding depreciation,~~on ~~and~~OEC) a $17.5 million increase in used rental equipment sales margins offset by a $14.5 million increase in selling, general and administrative expenses. Equipment rental margins, excluding depreciation, were higher during the ~~2011~~relevant ~~six-month~~ period ~~due to a 17~~.6% increase in rental volume and a 4.3% increase in rental rates. Used rental equipment margins were higher during the six months ended June 30, 2011 due to an improvement in margins on used rental equipment sold through both retail and auction channels. The increase in selling, general and administrative expenses was driven by increases in administrative and sales force wages and benefits, travel and meeting costs and professional fees.

~~For~~(c) ~~the~~Defined ~~three~~as ~~and~~the ~~six~~number of months ~~ended~~since ~~June 30,~~an ~~2011~~equipment unit was first placed in service, ~~our~~weighted ~~utilization~~by ~~increased~~multiplying ~~430~~individual ~~basis~~equipment ~~points and~~ages ~~660~~by ~~basis~~their ~~points,~~respective asoriginal ~~compared~~costs toand dividing the ~~same~~sum ~~prior~~of ~~year~~those ~~periods.~~individual ~~The~~calculations ~~increase~~by inthe ~~utilization~~total ~~was driven~~original ~~primarily~~cost. Equipment refurbished by ~~rising~~the ~~demand~~original ~~for~~equipment ~~our~~manufacturer ~~rental~~is ~~equipment~~considered new.

~~Average~~(d) ~~fleet~~Defined ~~age~~as atthe ~~June 30,~~original ~~2011~~dollar ~~was~~value ~~41 months,~~of ~~down~~rental ~~one~~equipment ~~month,~~purchased from ~~42 months~~the atoriginal ~~June 30, 2010.~~equipment ~~The~~manufacturer ~~decline~~(“OEM”). ~~was~~Fleet ~~due~~purchased tofrom ~~rental~~non-OEM ~~fleet~~sources ~~purchases,~~is ~~which~~assigned ~~totaled~~a ~~approximately~~comparable ~~$548 million~~OEC ~~in the~~dollar ~~twelve~~value ~~months~~at ~~ended~~the ~~June 30,~~time ~~2011~~of purchase.

~~OEC~~For atthe ~~June~~three and nine months ended September 30, 2011, ~~was~~our Adjusted EBITDA increased $~~2,537~~ 44.6 million and $119.9 million, uprespectively, from $118.8 million in the third quarter of 2010 to $163.6%4 million in the third quarter of 2011 and from $~~2,337~~ 276.8 million atfor ~~June~~the nine months ended September 30, 2010 to $396.6 ~~The increase~~million ~~consists~~in ~~primarily~~the ofnine ~~rental~~months ~~equipment~~ended ~~purchases~~September 30, of2011. ~~approximately~~The $~~548~~ 44.6 million increase in Adjusted EBITDA in the ~~twelve~~ three months ended ~~June~~September 30, 2011 ~~offset~~was due primarily byto ~~used~~a $44.5 million increase in equipment rental ~~sales~~margins, atexcluding ~~OEC~~depreciation. inEquipment ~~the~~rental ~~twelve months~~margins, ~~ended~~excluding ~~June 30~~depreciation, were higher during the 2011 three-month period due to a 19.0% increase in rental volume and a 4.6% increase in rental rates. Additionally, Adjusted EBITDA increased due to increased contribution from used equipment sales of $7.7 million. These increases were partially offset by a $9.0 million increase in selling, general and administrative costs during the three month period.

16The $119.9 million increase in Adjusted EBITDA in the nine months ended September 30, 2011 was due primarily to a $114.6 million increase in equipment rental margins, excluding depreciation. Equipment rental margins, excluding depreciation, were higher during the 2011 nine-month period due to an 18.2% increase in rental volume and a 4.4% increase in rental rates. Additionally, Adjusted EBITDA increased due to a $25.2 million increase in used rental equipment sales margins. These increases were partially offset by a $23.5 million increase in selling, general and administrative expenses. Used rental equipment margins were higher during the three and nine months ended September 30, 2011 due to improvement in margins on used rental equipment sold through both retail and auction channels.

~~Table~~For ofthe ~~Contents~~three and nine months ended September 30, 2011, our utilization increased 380 basis points and 580 basis points, as compared to the same prior year periods. The increase in utilization was driven primarily by rising demand for our rental equipment.

Average fleet age at September 30, 2011 was 41 months, down two months, from 43 months at September 30, 2010. The decline was due to increased rental fleet purchases, which totaled approximately $605.0 million in the twelve months ended September 30, 2011.

OEC at September 30, 2011 was $2,696 million, up 13.5% from $2,375 million at September 30, 2010. The increase consists primarily of rental equipment purchases of approximately $605 million in the twelve months ended September 30, 2011 partially offset by used equipment sales at OEC in the twelve months ended September 30, 2011.

Business Environment and Outlook

Our revenues and operating results are driven in large part by activities in the industrial or non-construction market and the construction market. The industrial or non-~~residential~~ construction market generated approximately 60.0% Onof aour ~~combined~~rental ~~basis~~revenues weduring the nine months ended ~~currently~~September 30, ~~derive~~2011. The construction market generated approximately 9740.0% of our rental revenues ~~from~~during ~~these~~the ~~two~~nine ~~markets~~months ended September 30, 2011. Generally, the industrial or non-construction market is less exposed to cyclicality than the non-residential construction market.

~~The~~15 industrial or non-construction market generated approximately 62% of our rental revenues during the six months ended June 30, 2011. The non-residential construction market generated approximately 35% of our rental revenues during the six months ended June 30, 2011. Generally, the industrial or non-construction market is less exposed to cyclicality than the non-residential construction market.

In the beginning of 2010, demand for our rental equipment remained weak and year over year rental rates were negative due to a continuation of the economic recession, which began in late 2008. During the second quarter of 2010 and continuing through the twelve months ended June 30, 2011, market conditions improved, which translated into strengthening demand for our rental equipment as fleet on rent increased approximately 13.9% at June 30, 2011 as compared to June 30, 2010. In addition, fleet utilization for the six months ended June 30, 2011 was 65.8%, an increase of 660 basis points from 59.2% for the six months ended June 30, 2010. The increase in fleet utilization was despite an approximate 5% increase in average OEC in the first six months of 2011 versus the first six months of 2010. The increased demand for our rental equipment also contributed to improved pricing as rental rates increased 4.3% in the six months ended June 30, 2011 as compared to the six months ended June 30, 2010. We expect year-over-year rental rates, fleet on rent and utilization in the third quarter of 2011 to be favorable to the third quarter of 2010. Year-over-year comparisons for rental revenues in the third quarter of 2011 are also expected to be favorable.

Subsequent Event

Factors Affecting Our Results of Operations

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

In the beginning of 2010, demand for our rental equipment remained weak and year over year rental rates were negative due to a continuation of the economic recession, which began in late 2008. During the second quarter of 2010 and continuing through the twelve months ended September 30, 2011, market conditions improved, which translated into strengthening demand for our rental equipment as fleet on rent increased approximately 17.5% at September 30, 2011 as compared to September 30, 2010. In addition, fleet utilization for the nine months ended September 30, 2011 was 68.2%, an increase of 580 basis points from 62.4% for the nine months ended September 30, 2010. The increase in fleet utilization was despite an approximate 7.5% increase in average total fleet at OEC in the first nine months of 2011 versus the first nine months of 2010. The increased demand for our rental equipment also contributed to improve pricing as rental rates increased 4.4% in the nine months ended September 30, 2011 as compared to the nine months ended September 30, 2010. We expect year-over-year rental rates, fleet on rent and utilization in the fourth quarter of 2011 to be favorable to the fourth quarter of 2010. Year-over-year comparisons for rental revenues in the fourth quarter of 2011 are also expected to be favorable.

Acquisition

On July 8, 2011, we acquired the assets and operations of Independent Aerial Equipment (“IAE”), a privately held equipment rental company. Substantially all of the assets and operations, which consist primarily of rental fleet and three stores in New Jersey, Pennsylvania and Maryland, were acquired in exchange for cash consideration of approximately $49.1 million subject to certain post-close adjustments. We financed the acquisition of IAE by borrowing the funds from the New Senior ABL Revolving Facility. In connection with the acquisition, we recorded $13.3 million of goodwill and $5.6 million of intangible assets with finite useful lives. Additionally, we incurred $0.1 million of transaction costs. The Company did not assume any liabilities. The purchase price allocation for IAE was based on preliminary valuations and is subject to change during the acquisition period.

Factors Affecting Our Results of Operations

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

Results of Operations

Revenues:

•

Equipment rental revenue consists of fees charged to customers for use of equipment owned by us over the term of the rental as well as other fees charged to customers for items such as delivery and pickup, fuel and damage waivers.

•

Sale of merchandise revenues represents sales of contractor supplies, replacement parts, consumables and ancillary products and, to a lesser extent, new equipment.

•

Sale of used rental equipment represents revenues derived from the sale of rental equipment that has previously been included in our rental fleet.

Cost of revenues:

•

Cost of equipment rentals, excluding depreciation, consists primarily of wages and benefits for employees involved in the delivery and maintenance of rental equipment, rental location facility costs and rental equipment repair and maintenance expenses.

•

Depreciation of rental equipment consists of straight-line depreciation of equipment included in our rental fleet.

•

Cost of merchandise sales represents the costs of acquiring those items.

•

Cost of used rental equipment sales represents the net book value of rental equipment at the date of sale.

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

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

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

18 17

Three Months Ended ~~June~~September 30, 2011, Compared to Three Months Ended ~~June~~September 30, 2010

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

							Percent of Revenue
	Three Months EndedSeptember 30,						Percent of RevenueThree Months EndedSeptember 30,						Increase (Decrease)2011 versus 2010
	Three Months Ended						Three Months Ended
	2011			2010			2011			2010
	June 30,						June 30,						Increase (Decrease)
	2011			2010			2011			2010			2011 versus 2010
	(unaudited)
Revenues:
Equipment rental revenue	$	~~315~~360,~~696~~554		$	~~259~~291,~~734~~671			8688.05	%		8687.34	%	$	5568,~~962~~883		2123.56	%
Sale of merchandise		1314,~~126~~573			1312,~~270~~897			3.6			43.49			~~(144~~1,676	)	(113.10	)
Sale of used rental equipment		3832,~~306~~245			2729,~~993~~216			107.49			98.37			103,~~313~~029		3610.84
Total revenues		~~367~~407,~~128~~372			~~300~~333,~~997~~784			100.0			100.0			6673,~~131~~588		22.0
Cost of revenues:
Cost of equipment rentals, excluding depreciation		~~157~~171,~~706~~851			~~141~~147,~~948~~451			4342.02			4744.2			1524,~~758~~400		1116.15
Depreciation of rental equipment		7376,~~959~~782			6768,~~398~~878			2018.18			2220.46			67,~~561~~904		911.75
Cost of merchandise sales		89,~~589~~796			9,~~880~~312			2.34			32.38			~~(1,291~~484	)	~~(13~~5.12	)
Cost of used rental equipment sales		2519,~~785~~869			2324,~~931~~575			74.09			87.04			1(4,~~854~~706	)	7(19.71	)
Total cost of revenues		~~266~~278,~~039~~298			~~243~~250,~~157~~216			7268.53			8075.80			2228,~~882~~082		911.42
Gross profit		~~101~~129,~~089~~074			5783,~~840~~568			2731.57			1925.20			4345,~~249~~506		7454.85
Operating expenses:
Selling, general and administrative		4345,~~483~~519			3536,~~007~~505			11.82			1110.69			89,~~476~~014		24.27
Depreciation and amortization of non-rental equipment and intangibles		10,~~691~~619			910,~~910~~012			2.96			3.30			~~781~~607		76.91
Other operating gains, net		(~~964~~1,025	)		(~~138~~1,167	)		(0.3	)		(0.03	)		~~(826~~142	)	n/a
Total operating expenses, net		5355,~~210~~113			4445,~~779~~350			1413.5			1413.96			89,~~431~~763		1821.85
Operating income		4773,~~879~~961			1338,~~061~~218			1318.02			411.34			3435,~~818~~743		n/a
Interest expense, net		4647,~~984~~363			48,~~233~~446			1211.86			1614.05			(1,~~249~~083	)	(2.62	)
Other (income) expense, net		~~(169~~444	)		99(264	)		0.01			(0.01	)		~~(268~~708	)	n/a
Income (loss) before (provision) benefit for income taxes		126,~~064~~154			(359,~~271~~964	)		06.34			(113.70	)		36,~~335~~118		n/a
(Provision) benefit for income taxes		(~~997~~10,321	)		133,~~156~~542			(02.35	)		41.41			(1413,~~153~~863	)	n/a
Net income (loss)	$	6715,833		$	(226,~~115~~422	)		03.09	%		(71.39	)%	$	22,~~182~~255		n/a

Total revenues increased $6673.1 6 million, or 22.0%, from $~~301~~333.08 million for the three months ~~ended~~ ~~June~~ended September 30, 2010 to $~~367~~407.14 million for the three months ended ~~June~~September 30, 2011. Equipment rental revenue increased $5668.09 million, or 2123.56% from $~~259~~291.7 million for the three months ended ~~June~~September 30, 2010 to $~~315~~360.7 6 million for the three months ended ~~June~~September 30, 2011. The increase in equipment rental revenue is primarily the result of a $3955.7 5 million, or 1519.20%, increase in rental volume and a $1613.3 4 million, or 64.36%, increase in rental rates. ~~The increase in rental volume is inclusive of a $1.2 million increase due to currency rate changes.~~

Sale of merchandise revenues ~~decreased~~increased $0.1.7 million, or 113.10%, from $1312.3 9 million for the three months ended ~~June~~September 30, 2010 to $1314.16 million for the three months ended ~~June~~September 30, 2011. The ~~decrease consisted~~increase ofrelates aprimarily ~~decrease~~to inequipment ~~merchandise~~and ~~sales of $0.5 million offset by a $0.4 million increase in~~ parts sales.

Revenues from the sale of used rental equipment increased $~~10.~~3.0 million, or 3610.84%, from $2829.0 2 million for the three months ended ~~June~~September 30, 2010 to $3832.32 million for the three months ended ~~June~~ September 30, 2011. ~~The~~A ~~increase was due to an approximate 22~~3% ~~increase~~decrease in volume ~~combined~~was ~~with~~more than offset by improved pricing in both auction and retail channels. Used equipment sales at OEC for the three months ended September 30, 2011 totaled $67.0 million and represent a normal part of the rental fleet life cycle.

Cost of equipment rentals, excluding depreciation, increased $24.4 million, or 16.5%, from $147.5 million for the three months ended September 30, 2010 to $171.9 million for the three months ended September 30, 2011, due primarily to the 19.0% increase in rental volume. Cost of equipment rentals excluding depreciation, as a percentage

of equipment rental revenues decreased from 50.6% for the three months ended September 30, 2010 to 47.7% for the three months ended September 30, 2011 due to a 4.6% increase in equipment rental rates. Unlike increases in rental volume, increases in equipment rental rates are not generally accompanied by an increase in cost of equipment rentals.

Depreciation of rental equipment increased $7.9 million, or 11.5%, from $68.9 million for the three months ended September 30, 2010 to $76.8 million for the three months ended September 30, 2011. The increase in depreciation of rental equipment was due largely to an approximate 12% net increase in average OEC. As a percent of equipment rental revenues, depreciation of rental equipment decreased from 23.6% in the three months ended September 30, 2010 to 21.3% in the three months ended September 30, 2011. This decrease was due primarily to an increase in fleet utilization during the third quarter of 2011 as compared to the third quarter of 2010 combined with a 4.6% increase in rental rates.

Cost of merchandise sales increased $0.5 million, or 5.2%, from $9.3 million for the three months ended September 30, 2010 to $9.8 million for the three months ended September 30, 2011. Gross margin for merchandise sales increased from 27.8% for the three months ended September 30, 2010 to 32.8% for the three months ended September 30, 2011. The margin increase is due to normal fluctuations between the various sales categories.

Cost of used rental equipment sales decreased $4.7 million, or 19.1%, from $24.6 million for the three months ended September 30, 2010 to $19.9 million for the three months ended September 30, 2011. This decrease is due to the 3% volume decrease in sales of used rental equipment noted above and generally lower net book values for the used rental equipment sold in the current quarter. Gross margin for the sale of used rental equipment increased from 15.9% for the three months ended September 30, 2010 to 38.4% for the three months ended September 30, 2011. The increase was reflected in higher prices on used equipment sold through both retail and auction channels and was driven by strengthening demand for used rental equipment.

Selling, general and administrative expenses increased $9.0 million, or 24.7%, from $36.5 million for the three months ended September 30, 2010 to $45.5 million for the three months ended September 30, 2011. The increase is due primarily to increases in administrative and sales force wages and benefits, travel and meeting costs and professional fees. Total sales force compensation increased $3.4 million in the 2011 versus 2010 third quarter and includes a $1.8 million increase in commissions. The increase in sales commission was due to increases in equipment rental revenues and the sale of used rental equipment, and the remaining increase in sales force costs is due primarily to an overall increase in our salesforce headcount. Total administrative wages and benefits increased $1.7 million, including an increase of $0.8 million in variable compensation. Travel and meeting costs increased approximately $2.1 million and professional fees increased $1.7 million. Selling, general and administrative expenses increased as a percentage of total revenues from 10.9% for the three months ended September 30, 2010 to 11.2% for the three months ended September 30, 2011.

Depreciation and amortization of non-rental equipment and intangibles increased $0.6 million, or 6.1%, from $10.0 million for the three months ended September 30, 2010 to $10.6 million for the three months ended September 30, 2011. The increase is due to additions of non-rental delivery vehicles and trailers to support the increased rental activity.

Other operating gains, net were $1.0 million in the three months ended September 30, 2011 and consisted primarily of gains on the sale of non-rental delivery vehicles and trailers. Other operating gains, net were $1.1 million in the three months ended September 30, 2010.

Interest expense was $47.4 million in the three months ended September 30, 2011, down $1.1 million, or 2.2% from $48.4 million for the three months ended September 30, 2010. The decrease was due to lower debt rates on our 2021 Notes as compared to the average rate on our Second Lien Term Facility, which was repaid in January 2011 and the rate on our 2014 Notes, which were partially repaid in February 2011. The decrease in interest expense from lower debt rates was partially offset by an increase in average debt outstanding in the third quarter of 2011 as compared to the third quarter of 2010.

The provision for income taxes was $10.3 million for the three months ended September 30, 2011. The benefit for income taxes was $3.5 million for the three months ended September 30, 2010. The effective tax rate for the third quarter of 2011 and 2010 was 39.5% and 35.5%, respectively. Our effective tax rate normally differs from the U.S. federal statutory rate of 35% primarily due to certain non-deductible permanent items, state income taxes and certain state minimum and gross receipts taxes, which are incurred regardless of whether we earn income.

~~Used~~Nine ~~equipment sales at OEC for the three~~ months ~~ended~~Ended ~~June~~September 30, 2011, ~~totaled~~Compared ~~$78.4 million~~to ~~and represent~~Nine amonths ~~normal~~Ended ~~part~~September 30, ~~of the rental fleet life cycle.~~2010

~~Cost~~The offollowing ~~equipment~~table ~~rentals,~~sets ~~excluding~~forth ~~depreciation, increased $15.8 million, or 11.1%, from $141.9 million~~ for ~~the~~each ~~three~~of ~~months ended June 30, 2010 to $157.7 million for~~ the ~~three~~periods ~~months ended~~indicated ~~June 30,~~our ~~2011,~~statements ~~due~~of ~~primarily~~operations todata ~~the~~and ~~15.2%~~expresses ~~increase in rental volume. Cost of equipment~~revenue ~~rentals~~and ~~excluding~~expense ~~depreciation,~~data as a percentage of ~~equipment~~total ~~rental~~ revenues ~~decreased from 54.7%~~ for the ~~three~~periods ~~months~~presented ~~ended June 30, 2010 to 50.0% for the three months ended June 30, 2011 due to a 6.3% increase~~ (in ~~equipment~~000s): ~~rental rates. Unlike increases in rental volume, increases in equipment rental rates are not accompanied by an increase in cost of equipment rentals.~~

Depreciation of rental equipment increased $6.6 million, or 9.7%, from $67.4 million for the three months ended June 30, 2010 to $74.0 million for the three months ended June 30, 2011. The increase in depreciation of rental equipment was due largely to an approximate 7% increase in average OEC. The increase in average OEC was driven by $209.4 million of rental equipment purchases, net of $78.4 million of used equipment sales at OEC in the three months ended June 30, 2011. As a percent of equipment rental revenues, depreciation of rental equipment decreased from 25.9% in the three months ended June 30, 2010 to 23.4% in the three months ended June 30, 2011. This decrease was due primarily to an increase in fleet utilization during the second quarter of 2011 as compared to the second quarter of 2010 combined with a 6.3% increase in rental rates.


	Nine Months Ended September 30,						Percent of Revenue Nine Months Ended September 30,						Increase (Decrease)
	2011			2010			2011			2010			2011 versus 2010
	(unaudited)
Revenues:
Equipment rental revenue	$	948,025		$	773,618			86.1	%		86.4	%	$	174,407		22.5	%
Sale of merchandise		40,351			37,588			3.6			4.2			2,763		7.4
Sale of used rental equipment		113,044			84,315			10.3			9.4			28,729		34.1

Total revenues		1,101,420			895,521			100.0			100.0			205,899		23.0

Cost of revenues:
Cost of equipment rentals, excluding depreciation		478,533			418,691			43.4			46.8			59,842		14.3
Depreciation of rental equipment		221,630			202,921			20.1			22.7			18,709		9.2
Cost of merchandise sales		26,827			27,266			2.4			3.0			(439	)	(1.6	)
Cost of used rental equipment sales		76,624			73,143			7.0			8.2			3,481		4.8

Total cost of revenues		803,614			722,021			73.0			80.6			81,593		11.3

Gross profit		297,806			173,500			27.0			19.4			124,306		71.6

Operating expenses:
Selling, general and administrative		130,720			107,224			11.9			12.0			23,496		21.9
Depreciation and amortization of non-rental equipment and intangibles		31,535			29,979			2.9			3.3			1,556		5.2
Other operating gains, net		(2,708	)		(3,617	)		(0.2	)		(0.4	)		909		n/a

Total operating expenses, net		159,547			133,586			14.5			14.9			25,961		19.4

Operating income		138,259			39,914			12.6			4.5			98,345		n/a
Interest expense, net		176,306			146,472			16.0			16.4			29,834		20.4
Loss on extinguishment of debt		15,342			—			1.4			—			15,342		n/a
Other income, net		(62	)		(364	)		—			—			302		n/a

Loss before benefit for income taxes		(53,327	)		(106,194	)		(4.8	)		(11.9	)		52,867		n/a
Benefit for income taxes		18,795			39,829			1.7			(4.4	)		(21,034	)	n/a

Net loss	$	(34,532	)	$	(66,365	)		(3.1	)%		(7.4	)%	$	31,833		n/a

~~Cost~~Total ofrevenues ~~merchandise~~increased ~~sales decreased~~ $1205.39 million, or 1323.10%, from $9895.9 5 million for the ~~three~~ nine months ended ~~June~~ September 30, 2010 to $81,101.64 million for the ~~three~~nine months ended ~~June~~September 30, 2011. ~~Gross~~Equipment ~~margin for~~rental ~~merchandise~~revenue ~~sales~~ increased $174.4 million, or 22.5%, from 25$773.6% million for the ~~three~~nine months ended ~~June~~September 30, 2010 to 34 $948.6%0 million for the ~~three~~nine months ended ~~June~~September 30, 2011. ~~due~~The increase in equipment rental revenue is primarily tothe ~~margin~~result ~~improvements~~of ona ~~non-stock~~$140.6 million, ~~sales~~or 18.2%, increase in rental volume and a $33.8 million, or 4.4%, increase in rental rates. The increase in rental volume is inclusive of a $3.7 million increase due to currency rate changes.

~~Cost~~Sale of merchandise ~~used~~revenues ~~rental equipment sales~~ increased $12.98 million, or 7.74%, from $2337.96 million for the ~~three~~nine months ended ~~June~~September 30, 2010 to $2540.84 million for the ~~three~~nine months ended ~~June~~September 30, 2011. The increase iswas ~~due~~driven primarily ~~to an increase in the volume of used rental equipment sold during the~~by ~~three~~increases months ended June 30, 2011. Gross margin for the sale of used rental equipment increased from 14.5% for the three months ended June 30, 2010 to 32.7% for the three months ended June 30, 2011. The increase was reflected in ~~higher~~parts ~~margins on used equipment sold through both retail~~ and ~~auction~~ ~~channels~~new ~~and was driven by strengthening demand for used rental~~ equipment sales.

~~Selling,~~Revenues ~~general~~from ~~and~~the ~~administrative~~sale ~~expenses~~of used rental equipment increased $828.57 million, or 24 34.21%, from $3584.0 3 million for the ~~three~~nine months ended ~~June~~September 30, 2010 to $43113.50 million for the ~~three~~nine months ended ~~June~~ September 30, 2011. The increase iswas due ~~primarily~~ to ~~increases~~an inapproximate ~~administrative~~19% ~~and~~increase ~~sales force wages and benefits, travel and meeting costs and professional fees. Administrative and sales force wages and benefits increased $4.4 million~~ in ~~the~~volume ~~2011~~combined ~~versus~~with ~~2010~~improved ~~second quarter and consisted primarily of a~~pricing ~~$2.0 million increase~~ in ~~sales~~both ~~commissions,~~auction ~~a $1.4 million increase in direct wages~~ and aretail $1channels.~~0 million~~ ~~increase~~Used inequipment ~~variable compensation. The increase in~~ sales ~~commission~~at ~~was~~OEC ~~due~~for ~~primarily to increases in equipment rental revenues and~~ the ~~sale~~nine ofmonths ~~used~~ended ~~rental equipment. The increase in direct wages was due primarily to an increase in headcount. Travel and meeting costs increased approximately $1.9~~September ~~million~~30, ~~and~~2011 ~~professional~~totaled ~~fees increased~~ $1235.5 7 million. ~~Selling, general~~ and ~~administrative~~ ~~expenses~~represents ~~increased as~~ a ~~percentage~~normal part of ~~total revenues from 11.6% for~~ the ~~three~~rental ~~months ended~~fleet ~~June 30,~~life ~~2010 to 11~~cycle.8% ~~for the three months ended June 30, 2011.~~

Depreciation and amortization of non-rental equipment and intangibles increased $0.8 million, or 7.9%, from $9.9 million for the three months ended June 30, 2010 to $10.7 million for the three months ended June 30, 2011. The increase is due to an increase in depreciation on non-rental vehicles and trailers due to a larger fleet.

Other operating gains, net were $1.0 million in the three months ended June 30, 2011 and consisted primarily of gains on the sale of non-rental delivery vehicles and trailers. Other operating gains, net were $0.1 million in the three months ended June 30, 2010.

Interest expense was $47.0 million in the three months ended June 30, 2011, down $1.2 million from $48.2 million for the three months ended June 30, 2010. The decrease was due to lower debt rates on our 2021

~~Notes~~Cost asof ~~compared~~equipment torentals, ~~the~~excluding ~~average~~depreciation, ~~rate~~increased on$59.8 million, ~~our~~or ~~Second~~14.3%, from ~~Lien~~$418.7 million ~~Term~~for ~~Facility,~~the ~~which~~nine ~~was~~months ~~repaid~~ended inSeptember 30, ~~January 2011~~2010 ~~and~~to $478.5 million for the ~~rate~~nine onmonths ~~our~~ended ~~2014~~September 30, ~~Notes~~2011, ~~which~~due ~~were~~primarily ~~partially~~to ~~repaid~~the 18.2% increase in ~~February 2011~~rental volume. ~~The~~Cost ~~decrease~~of inequipment rentals excluding ~~interest~~depreciation, ~~expense~~as a percentage of equipment rental revenues decreased from ~~lower~~54.1% ~~debt~~for ~~rates~~the ~~was~~nine ~~partially~~months ~~offset~~ended bySeptember 30, an2010 to 50.5% for the nine months ended September 30, 2011 primarily due to a 4.4% increase in ~~average~~rental ~~debt~~rates. Unlike ~~outstanding~~increases in ~~the~~rental ~~second~~volume, ~~quarter~~increases ofin ~~2011~~equipment asrental ~~compared~~rates toare ~~the~~not ~~second~~accompanied ~~quarter~~by an increase in cost of ~~2010~~equipment rentals.

~~The~~Depreciation ~~provision~~of ~~for~~rental ~~income~~equipment ~~taxes~~increased ~~was~~$18.7 million, or 9.2%, from $1202.09 million for the ~~three~~nine months ended ~~June~~September 30, ~~2011.~~2010 ~~The benefit~~to ~~for income taxes was~~ $13221.26 million for the ~~three~~nine months ended ~~June~~ September 30, ~~2010~~2011. The ~~effective tax~~increase ~~rate~~in ~~was~~depreciation ~~93.7%~~of ~~and~~rental ~~37.3%~~equipment ~~during~~was ~~the~~due ~~three~~largely ~~months~~to ~~ended~~an ~~June 30,~~approximate ~~2011~~7% ~~and~~net ~~2010,~~increase ~~respectively~~in average OEC. ~~Our~~ ~~effective~~As ~~tax~~a ~~rate~~percent ~~normally~~of ~~differs~~equipment ~~from~~rental ~~the~~revenues, ~~U.S.~~depreciation ~~federal~~of ~~statutory~~rental ~~rate~~equipment ofdecreased 35from 26.2% ~~primarily~~in ~~due~~the nine tomonths ~~certain~~ended ~~non-deductible permanent items~~September 30, ~~state~~2010 ~~income~~to ~~taxes~~23.4% ~~and~~in ~~certain~~the ~~state~~nine ~~minimum~~months ~~and~~ended ~~gross receipts taxes~~September 30, ~~which~~2011. ~~are~~This ~~incurred~~decrease ~~regardless~~was ofdue ~~whether~~primarily weto ~~earn~~an ~~income.~~increase ~~Our~~in ~~high~~fleet ~~effective~~utilization ~~tax rate~~ during the ~~three~~first nine months ~~ended~~of ~~June 30,~~ 2011 isas ~~primarily~~compared ~~due~~ to the ~~impact~~first ofnine ~~state~~months ~~gross~~of ~~receipts~~2010, ~~taxes~~and ~~totaling~~to ~~$0.2 million~~a insmaller ~~the~~extent, ~~second~~an ~~quarter~~increase ofin ~~2011~~rental ~~when combined with low pre-tax net income~~rates.

Cost of merchandise sales decreased $0.4 million, or 1.6%, from $27.3 million for the nine months ended September 30, 2010 to $26.8 million for the nine months ended September 30, 2011. Gross margin for merchandise sales increased from 27.5% for the nine months ended September 30, 2010 to 33.5% for the nine months ended September 30, 2011. The margin increase is due to normal fluctuations between the various sales categories.

Cost of used rental equipment sales increased $3.5 million, or 4.8%, from $73.1 million for the nine months ended September 30, 2010 to $76.6 million for the nine months ended September 30, 2011. The increase is due primarily to the increase in sales of used rental equipment for the nine months ended September 30, 2011. Gross margin for the sale of used rental equipment increased from 13.3% for the nine months ended September 30, 2010 to 32.2% for the nine months ended September 30, 2011. The increase was reflected in higher prices on used equipment sold through both retail and auction channels and was driven by strengthening demand for used rental equipment.

Selling, general and administrative expenses increased $23.5 million, or 21.9%, from $107.2 million for the nine months ended September 30, 2010 to $130.7 million for the nine months ended September 30, 2011. The increase is due primarily to increases in administrative and sales force wages and benefits, travel and meeting costs and professional fees. Total sales force compensation increased $9.2 million in the 2011 versus 2010 nine month period and includes a $6.0 million increase in commissions. The increase in sales commission was due to increases in equipment rental revenues and the sale of used rental equipment, and the remaining increase in sales force costs is due primarily to an overall increase in our sales force headcount. Total administrative wages and benefits increased $4.2 million, including an increase of $2.6 million in variable compensation. Travel and meeting costs increased approximately $6.6 million and professional fees increased $3.4 million. Selling, general and administrative expenses of 11.9% as a percentage of total revenues remained relatively flat for the nine months ended September 30, 2010 compared to the nine months ended September 30, 2011.

Depreciation and amortization of non-rental equipment and intangibles increased $1.6 million, or 5.2%, from $30.0 million for the nine months ended September 30, 2010 to $31.5 million for the nine months ended September 30, 2011. The increase is due to additions of non-rental delivery vehicles and trailers to support the increased rental activity.

Other operating gains, net were $2.7 million for the nine months ended September 30, 2011 and consisted primarily of gains on the sale of non-rental delivery vehicles and trailers. Other operating gains, net were $3.6 million in the nine months ended September 30, 2010 and consisted primarily of $1.7 million of proceeds received from our insurance carrier for rental equipment and property claims attributable to hurricane damage and $1.0 million of proceeds received in connection with a legal settlement. The gain associated with the hurricane damage represents proceeds in excess of previously indemnified losses. Recoveries in excess of losses incurred are considered gain contingencies and are not recognized until they are received.

Loss on extinguishment of debt was $15.3 million for the nine months ended September 30, 2011 and consists of (i) the write-off of $5.1 million of unamortized deferred financing costs associated with our Second Lien Term Facility, which we repaid in January 2011, (ii) the write-off of $2.2 million of unamortized deferred financing costs and $5.6 million of call premiums associated with partial repayment of our 2014 Notes in February 2011, and (iii) the write-off of $2.4 million of unamortized deferred financing costs associated with the Old Senior ABL Revolving Facility, which was replaced with the New Senior ABL Revolving Facility in February 2011.

~~Six~~Interest ~~Months~~expense, ~~Ended~~net ~~June~~increased $29.8 30million, ~~2011~~or 20.4%, ~~Compared~~from to$146.5 million ~~Six~~for the ~~Months~~nine ~~Ended~~months ~~June~~ended September 30, 2010 to $176.3 million for the nine months ended September 30, 2011. The increase was due to the settlement of our interest rate swaps and reverse swaps in January 2011 net of lower debt rates on our 2021 Notes as compared to the average rate on our Second Lien Term Facility, which was repaid in January 2011 and the rate on our 2014 Notes, which were partially repaid in February 2011. In connection with our interest rate swap settlements, we paid $35.1 million of which $33.9 million was recognized as interest expense in the current year period. The difference of $1.2 million was recognized as interest expense in November 2009 when certain of our interest rate swaps were de-designated as cash flow hedges.

The ~~following~~benefit ~~table~~for ~~sets~~income ~~forth~~taxes was $18.8 million and $39.8 million for ~~each~~the ofnine months ended September 30, 2011 and 2010, respectively. The effective tax rate for the ~~periods~~nine ~~indicated~~month ~~our~~period ~~statements~~ending ofSeptember 30, ~~operations data~~2011 and ~~expresses~~2010 ~~revenue~~was 35.2% and ~~expense~~37.5%, ~~data~~respectively. asOur aeffective ~~percentage~~tax ofrate ~~total~~normally ~~revenues~~differs ~~for~~from the ~~periods presented~~U.S. ~~(in~~federal ~~000s):~~statutory rate of 35% primarily due to certain non-deductible permanent items, state income taxes and certain state minimum and gross receipts taxes, which are incurred regardless of whether we earn income.

							Percent of Revenue
	Six Months Ended						Six Months Ended
	June 30,						June 30,						Increase (Decrease)
	2011			2010			2011			2010			2011 versus 2010
	(unaudited)
Revenues:
Equipment rental revenue	$	587,471		$	481,947			84.6	%		85.8	%	$	105,524		21.9	%
Sale of merchandise		25,778			24,691			3.7			4.4			1,087		4.4
Sale of used rental equipment		80,799			55,099			11.7			9.8			25,700		46.6
Total revenues		694,048			561,737			100.0			100.0			132,311		23.6
Cost of revenues:
Cost of equipment rentals, excluding depreciation		306,682			271,240			44.2			48.3			35,442		13.1
Depreciation of rental equipment		144,848			134,043			20.9			23.9			10,805		8.1
Cost of merchandise sales		17,031			17,954			2.5			3.2			(923	)	(5.1	)
Cost of used rental equipment sales		56,755			48,568			8.2			8.6			8,187		16.9
Total cost of revenues		525,316			471,805			75.7			84.0			53,511		11.3
Gross profit		168,732			89,932			24.3			16.0			78,800		87.6
Operating expenses:
Selling, general and administrative		85,201			70,719			12.3			12.6			14,482		20.5
Depreciation and amortization of non-rental equipment and intangibles		20,916			19,967			3.0			3.6			949		4.8
Other operating gains, net		(1,683	)		(2,450	)		(0.2	)		(0.4	)		767		n/a
Total operating expenses, net		104,434			88,236			15.0			15.7			16,198		18.4
Operating income		64,298			1,696			9.3			0.3			62,602		n/a
Interest expense, net		128,943			98,026			18.6			17.5			30,917		31.5
Loss on extinguishment of debt		15,342			—			2.2			—			15,342		n/a
Other income, net		(506	)		(100	)		(0.1	)		—			(406	)	n/a
Loss before benefit for income taxes		(79,481	)		(96,230	)		(11.5	)		(17.1	)		16,749		n/a
Benefit for income taxes		29,116			36,287			4.2			6.5			(7,171	)	n/a
Net loss	$	(50,365	)	$	(59,943	)		(7.3	)%		(10.7	)%	$	9,578		n/a

Total revenues increased $132.3 million, or 23.6%, from $561.7 million for the six months ended June 30, 2010 to $694.0 million for the six months ended June 30, 2011. Equipment rental revenue increased $105.5 million, or 21.9%, from $481.9 million for the six months ended June 30, 2010 to $587.5 million for the six months ended June 30, 2011. The increase in equipment rental revenue is primarily the result of an $84.8 million, or 17.6%, increase in rental volume and a $20.7 million, or 4.3%, increase in rental rates. The increase in rental volume is inclusive of a $2.3 million increase due to currency rate changes.

Sale of merchandise revenues increased $1.1 million, or 4.4%, from $24.7 million for the six months ended June 30, 2010 to $25.8 million for the six months ended June 30, 2011. The increase was driven primarily by increases in parts and new equipment sales of $0.9 million and $0.4 million, respectively. The increase in parts is due primarily to an increase in rental revenue and the increase in new equipment sales is due primarily to mix.

Revenues from the sale of used rental equipment increased $25.7 million, or 46.6%, from $55.1 million for the six months ended June 30, 2010 to $80.8 million for the six months ended June 30, 2011. The increase was due to an approximate 31% increase in volume combined with improved pricing in both auction and retail channels. Used equipment sales at OEC for the six months ended June 30, 2011 totaled $168.7 million and represents a normal part of the rental fleet life cycle.

Cost of equipment rentals, excluding depreciation, increased $35.4 million, or 13.1%, from $271.2 million for the six months ended June 30, 2010 to $306.7 million for the six months ended June 30, 2011, due primarily to the 17.6% increase in rental volume. Cost of equipment rentals excluding depreciation, as a percentage of equipment rental revenues decreased from 56.3% for the six months ended June 30, 2010 to 52.2% for the six months ended June 30, 2011 due to a 4.3% increase in rental rates. Unlike increases in rental volume, increases in equipment rental rates are not accompanied by an increase in cost of equipment rentals.

Depreciation of rental equipment increased $10.8 million, or 8.1%, from $134.0 million for the six months ended June 30, 2010 to $144.8 million for the six months ended June 30, 2011. The increase in depreciation of rental equipment was due largely to an approximate 5% increase in average OEC. The increase in average OEC was driven by $367.3 million of rental equipment purchases, net of $168.7 million of used equipment sales at OEC in the six months ended June 30, 2011. As a percent of equipment rental revenues, depreciation of rental equipment decreased from 27.8% in the six months ended June 30, 2010 to 24.7% in the six months ended June 30, 2011. This decrease was due primarily to an increase in fleet utilization during the first six months of 2011 as compared to the first six months of 2010, and to a smaller extent, an increase in rental rates.

Cost of merchandise sales decreased $0.9 million, or 5.1%, from $18.0 million for the six months ended June 30, 2010 to $17.0 million for the six months ended June 30, 2011. The decrease was due primarily to a decrease in cost of non-stock sales of $0.7 million. Gross margin for merchandise sales increased from 27.3% for the six months ended June 30, 2010 to 33.9% for the six months ended June 30, 2011, due primarily to margin improvements on non-stock sales. The improvement in margins on non-stock sales was driven primarily by a change in mix.

Cost of used rental equipment sales increased $8.2 million, or 16.9%, from $48.6 million for the six months ended June 30, 2010 to $56.8 million for the six months ended June 30, 2011. The increase is due primarily to the 46.6% increase in sales of used rental equipment for the six months ended June 30, 2011. Gross margin for the sale of used rental equipment increased from 11.9% for the six months ended June 30, 2010 to 29.8% for the six months ended June 30, 2011. The increase was reflected in higher margins on used equipment sold through both retail and auction channels and was driven by strengthening demand for used rental equipment.

Selling, general and administrative expenses increased $14.5 million, or 20.5%, from $70.7 million for the six months ended June 30, 2010 to $85.2 million for the six months ended June 30, 2011. The increase is due primarily to increases in administrative and sales force wages and benefits, travel and meeting costs and professional fees. Administrative and sales force wages and benefits increased $8.4 million in the 2011 versus 2010 six-month period and consisted primarily of $4.2 million increase in sales commissions, a $2.2 million increase in variable compensation and a $2.4 million increase in direct wages offset by a $2.0 million decrease in severance expense. The increase in sales commission was due primarily to increase in equipment rental revenue and the sale of used rental equipment. The increase in direct wages was due primarily to an increase in headcount. On a combined basis, travel and meeting costs increased approximately $4.5 million and professional fees increased $1.7 million. Selling, general and administrative expenses decreased as a percentage of total revenues from 12.6% for the six months ended June 30, 2010 to 12.3% for the six months ended June 30, 2011.

Depreciation and amortization of non-rental equipment and intangibles increased $0.9 million, or 4.8%, from $20.0 million for the six months ended June 30, 2010 to $20.9 million for the six months ended June 30, 2011. The increase is due to an increase in depreciation on non-rental vehicles and trailers due to a larger fleet.

Other operating gains, net were $1.7 million for the six months ended June 30, 2011 and consisted primarily of gains on the sale of non-rental delivery vehicles and trailers. Other operating gains, net were $2.5 million in the six months ended June 30,

2010 and consisted primarily of proceeds received from our insurance carrier for rental equipment and property claims attributable to hurricane damage. This gain represents proceeds in excess of previously indemnified losses. Recoveries in excess of losses incurred are considered gain contingencies and are not recognized until they are received.

Interest expense, net increased $30.9 million, or 31.5%, from $98.0 million for the six months ended June 30, 2010 to $128.9 million for the six months ended June 30, 2011. The increase was due to the settlement of our interest rate swaps and reverse swaps in January 2011 net of lower debt rates on our 2021 Notes as compared to the average rate on our Second Lien Term Facility, which was repaid in January 2011 and the rate on our 2014 Notes, which were partially repaid in February 2011. In connection with our interest rate swap settlements, we paid $35.1 million of which $33.9 million was recognized as interest expense in the three months ended March 31, 2011. The difference of $1.2 million was recognized as interest expense in November 2009 when certain of our interest rate swaps were de-designated as cash flow hedges.

The benefit for income taxes was $29.1 million and $36.3 million for the six months ended June 30, 2011 and 2010, respectively, and resulted from a pre-tax net loss for both periods. The effective tax rate was 36.6% and 37.7% for the six months ended June 30, 2011 and 2010, respectively. Our effective tax rate normally differs from the federal statutory rate of 35% primarily due to certain non-deductible permanent items, state income taxes and certain state minimum and gross receipts taxes, which are incurred regardless of whether we earn income. Our effective tax rate decreased due to the effect of enacted tax rate changes applied to our deferred balances during the six months ended June 30, 2011.

Liquidity and Capital Resources

Cash Flows and Liquidity

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

Cash flows from operating activities, as well as the sale of used rental equipment, enable us to fund our operations and service our debt obligations including the continued repayment of our New Senior ABL Revolving Facility. We continuously monitor utilization of our rental fleet and if warranted we divest excess fleet, which generates additional cash flow. In addition, due to the condition and relative age of our fleet, we have the ability to significantly reduce capital expenditures during difficult economic times by holding our fleet for longer periods of time, therefore allowing us to redirect this cash towards further debt reduction during these periods. The following table summarizes our sources and uses of cash for the ~~six~~nine months ended ~~June~~ September 30, 2011 and 2010:

	Six Months Ended
	Nine Months EndedSeptember 30,
	June 30,
	2011			2010
	(in 000s)
Net cash provided by operating activities	$	~~273~~334,~~143~~166		$	~~169~~312,~~893~~449
Net cash used in investing activities		(~~288~~482,~~127~~938	)		(90183,~~114~~108	)
Net cash provided by (used in) financing activities		48174,~~330~~456			(73129,~~770~~006	)
Effect of foreign exchange rates on cash		~~907~~(1,387	)		~~485~~694
Net increase in cash and cash equivalents	$	3424,~~253~~297		$	61,~~494~~029

As of ~~June~~September 30, 2011, we had cash and cash equivalents of $3727.8 million, an increase of $3424.3 million from December 31, 2010. Generally, we manage our cash flow by using any excess cash, after considering our working capital and capital expenditure needs, to pay down the outstanding balance of our revolving facility. The increase in cash is due primarily to an increase in cash and cash equivalents held at our wholly-owned Canadian subsidiary, RSC Equipment Rental of Canada, Ltd. At September 30, 2011, RSC Equipment Rental of Canada, Ltd. had $27.4 million in cash and cash equivalents. In December 2010, RSC Equipment Rental of Canada, Ltd. transferred approximately $27.0 million to RSC Equipment Rental, Inc., which used the funds to pay down our Old Senior ABL Revolving Facility. RSC Equipment Rental, Inc. repaid the outstanding balance to RSC Equipment Rental of Canada, Ltd. in the first quarter of 2011. Refer to the “Financing Activities” section below for additional information.

24 22

~~capital~~Operating ~~and~~activities ~~capital~~– ~~expenditure~~Net ~~needs,~~cash toprovided ~~pay~~by ~~down~~operating ~~the~~activities ~~outstanding~~during ~~balance~~the ~~of our revolving~~nine ~~facility.~~months ~~The~~ended ~~increase~~September 30, in2011 ~~cash~~consisted isof ~~due~~the ~~primarily~~add-back toof ~~an increase in~~ non-cash ~~held~~items atand ~~our~~other ~~wholly-owned Canadian~~adjustments ~~subsidiary,~~of ~~RSC~~$219.6 ~~Equipment~~million ~~Rental~~and ofan ~~Canada,~~increase ~~Ltd.~~in Inoperating ~~December 2010,~~assets ~~RSC~~(net ~~Equipment Rental~~ of ~~Canada,~~operating ~~Ltd.~~liabilities) ~~transferred~~of ~~approximately~~ $27149.0 1 million tooffset ~~RSC~~by ~~Equipment~~a ~~Rental,~~net ~~Inc~~loss of $34.,5 ~~which~~million. ~~used~~The ~~the~~most ~~funds~~significant tochange ~~pay~~in ~~down~~operating ~~our~~assets ~~Old~~and ~~Senior~~liabilities ~~ABL~~was ~~Revolving~~an ~~Facility.~~increase ~~RSC~~in ~~Equipment~~accounts ~~Rental~~payable, ~~Inc.~~which ~~repaid~~was ~~the outstanding~~primarily ~~balance~~attributable to ~~RSC~~capital ~~Equipment Rental of Canada~~purchases, ~~Ltd.~~resulting in ~~the~~a ~~first~~cash ~~quarter~~inflow of ~~2011~~$163.3 ~~Refer~~million tooffset by an increase in accounts receivable ~~the~~resulting ~~“Financing~~in ~~Activities”~~a ~~section~~cash ~~below~~outflow ~~for~~of ~~additional~~$37.4 ~~information~~million.

~~Operating activities —~~ Net cash provided by operating activities during the ~~six~~nine months ended ~~June~~September 30, ~~2011~~2010 consisted of the add-back of non-cash items and other adjustments of $~~133~~219.6 7 million and aan ~~decrease~~increase in operating ~~assets~~liabilities (net of operating ~~liabilities~~assets) of $~~189~~159.9 1 million offset by a net loss of $5066.4 million. The most significant change in operating assets and liabilities was an increase in accounts payable of $186.5 million, which was primarily attributable to capital purchases, ~~resulting~~made in ~~a cash~~the ~~inflow~~nine ofmonths ~~$191.8~~ended September ~~million~~30, ~~offset by an increase in accounts receivable resulting in a cash outflow of $23~~2010.~~5 million.~~

Investing activities – Net cash ~~provided~~used byin ~~operating~~investing activities during the ~~six~~nine months ended ~~June~~September 30, ~~2010~~2011 consisted primarily of ~~the~~$551.7 ~~add-back~~million of ~~non-cash~~capital ~~items~~purchases ~~and~~offset ~~other~~by ~~adjustments of~~ $~~118~~117.7 9 million ~~and~~of aproceeds ~~decrease~~received ~~in operating~~from ~~assets~~the ~~(net~~sale of ~~operating~~rental ~~liabilities)~~and ofnon-rental ~~$111~~equipment.~~1 million~~ ~~offset~~Capital byexpenditures ainclude ~~net~~purchases ~~loss~~ of ~~$59.9 million.~~rental ~~The most significant change in operating assets~~ and ~~liabilities~~non-rental ~~was~~equipment. anAdditionally, ~~increase~~we inacquired the ~~accounts~~net ~~payable~~assets of IAE for $~~122~~49.9 1 million, ~~which~~during ~~was primarily attributable to capital purchases made in~~ the ~~first~~current ~~half~~year ~~of 2010~~period.

~~Investing activities —~~ Net cash used in investing activities during the ~~six~~ nine months ended ~~June~~ September 30, ~~2011~~2010 consisted of $~~372~~271.1 3 million of capital purchases offset by $8486.0 5 million of proceeds received from the sale of rental and non-rental equipment and $1.7 million of insurance proceeds associated with rental equipment and property claims. Capital expenditures include purchases of rental and non-rental equipment.

~~Net~~The increase in net cash used in investing activities during the ~~six~~first nine months ~~ended~~of ~~June 30~~2011, as compared to the first nine months of 2010, ~~consisted~~was due primarily to our changing priorities with respect to our rental fleet. In response to growing demand for our rental ~~$148.6 million~~equipment ofand ~~capital~~rising ~~purchases~~utilization, ~~offset~~we bypurchased $56543.8 3 million of ~~proceeds~~rental ~~received~~fleet ~~from~~in the ~~sale~~nine ~~of rental~~months ~~and~~ended ~~non-rental~~September 30, ~~equipment~~2011 ~~and~~up $1277.6 million, from $265.7 million ofin ~~insurance~~the ~~proceeds~~nine ~~associated~~months ~~with~~ended September 30, 2010. Our sales of used rental equipment ~~and~~in ~~property~~the ~~claims.~~nine ~~Capital~~months ~~expenditures~~ended ~~include~~September 30, ~~purchases~~2011 and 2010 represent a normal part of the rental ~~and~~fleet ~~non-rental equipment~~life cycle.

~~The~~Financing ~~increase in net cash used in investing~~ activities ~~during~~– the first six months of 2011, as compared to the first six months of 2010, was due primarily to our changing priorities with respect to our rental fleet. In response to growing demand for our rental equipment and rising utilization, we purchased $367.3 million of rental fleet in the six months ended June 30, 2011 up $220.3 million, from $147.0 million in the six months ended June 30, 2010. Our sales of used rental equipment in the six months ended June 30, 2011 and 2010 were driven by our decision to divest and replace aging rental equipment.

Financing activities —

$650.0 million Senior Unsecured Notes Offering

On January 19, 2011, we completed a private offering of $650.0 million aggregate principal amount of 8.25% senior unsecured notes due February 2021 (the “2021 Notes”). The proceeds from the sale of the 2021 Notes were used to repay the outstanding balance on our Second Lien Term Facility, which totaled $479.4 million plus accrued interest of $0.7 million, redeem a portion of the 2014 Notes as described below, settle our outstanding interest rate swap obligations of $35.1 million and pay a portion of the transaction costs incurred with the issuance of the 2021 Notes. The transaction costs, which totaled $14.6 million, were capitalized as deferred financing costs and are being amortized as interest expense over the term of the 2021 Notes using the ~~effective~~ effective interest rate method. On February 21, 2011, we redeemed $117.0 million of aggregate principal of our 2014 Notes, paid accrued interest of $2.5 million on the 2014 Notes and incurred a call premium of $5.6 million, which was funded with the remaining proceeds from the 2021 Notes and in part from a draw on our New Senior ABL Revolving Facility. As a result of the Second Lien Term Facility repayment and the partial repayment of the 2014 Notes, we expensed $7.3 million of ~~unamortized~~ unamortized deferred financing costs, which together with the $5.6 million in call premiums, is characterized as a loss on extinguishment of debt in the condensed consolidated statement of operations for the nine months ended September 30, ~~six~~2011. The settlement of our interest rate swaps resulted in a charge of $33.9 million, which is characterized as interest expense in the condensed consolidated statement of operations for the nine months ended September 30, 2011.

25During the nine months ended September 30, 2011, we initiated and completed an exchange offer where the holders of the 2021 Notes could exchange such unregistered notes for new, registered notes. The terms of the new, registered notes offered in the exchange offer are identical in all material respects to the terms of the unregistered notes, except that the new notes are registered under the Securities Act of 1933 and do not contain restrictions on transfer.

June 30, 2011. The settlement of our interest rate swaps resulted in a charge of $33.9 million, which is characterized as interest expense in the condensed consolidated statement of operations for the six months ended June 30, 2011.

During the six months ended June 30, 2011, we initiated and completed an exchange offer where the holders of the 2021 Notes could exchange such unregistered notes for new, registered notes. The terms of the new, registered notes offered in the exchange offer are identical in all material respects to the terms of the unregistered notes, except that the new notes are registered under the Securities Act of 1933 and do not contain restrictions on transfer.

New Senior ABL Revolving Facility

On February 9, 2011, we entered into the New Senior ABL Revolving Facility, which replaced our Old Senior ABL Revolving Facility, and we borrowed $383.0 million of loans under our New Senior ABL Revolving Facility. The proceeds of these loans were used to repay the outstanding balance on our Old Senior ABL Revolving Facility, which totaled $370.2 million plus accrued interest and ~~other~~ other fees of $1.1 million, and to pay a portion of transaction costs including legal fees. Total transaction costs of $12.3 million were capitalized as deferred financing costs and are being amortized to interest expense over the term of the New Senior ABL Revolving Facility. In addition, we wrote off $2.4 million of unamortized deferred financing costs associated with the Old Senior ABL Revolving Facility, which is included in the loss on extinguishment of debt in the condensed consolidated statement of operations for the ~~six~~nine months ended ~~June~~September 30, 2011. Our New Senior ABL Revolving Facility, which is due February 2016, provides commitments for aggregate borrowings of approximately $1,100.0 million subject to, among other things, our maintenance of a sufficient borrowing base under such facility. The borrowing base reporting requirements that we are subject to under the New Senior ABL Revolving Facility are substantially similar to those under our Old Senior ABL Revolving Facility. Financing activities for the six months ended June 30, 2011 include net cash proceeds of $346.0 million on our New Senior ABL Revolving Facility and net cash payments of $304.2 million on our Old Senior ABL Revolving Facility.

~~Other~~Additionally, ~~cash~~on ~~used~~September 28, 2011 inthe ~~financing~~New ~~activities~~Senior ~~during~~ABL Revolving agreement was amended to increase the ~~six~~commitment ~~months~~for ~~ended~~aggregate ~~June 30,~~borrowings ~~2011~~by ~~includes~~ approximately $14110.3 0 million. ofOf ~~repayments~~this onamount ~~our~~$85.0 ~~capital~~million ~~leases~~represents additional U.S. ~~Pursuant~~commitments toand an$25.0 ~~intercompany~~million ~~revolving~~represents ~~agreement~~Canadian ~~between~~commitments. ~~RSC~~No ~~Equipment~~other ~~Rental~~material ofmodifications ~~Canada~~were made. Our New Senior ABL Revolving Facility, ~~Ltd~~which ~~and~~is ~~RSC~~due ~~Equipment~~February ~~Rental~~2016, ~~Inc~~now provides commitments for aggregate borrowings of approximately $1,210.0 million subject to, weamong ~~will~~other ~~periodically~~things, our ~~transfer~~maintenance ~~excess~~of ~~cash~~a ~~generated~~sufficient ~~from~~borrowing ~~our~~base ~~Canadian~~under ~~operations~~such tofacility. In connection with our expansion of the UNew Senior ABL Revolving Facility, we incurred transaction costs of $0.S.7 inmillion ~~order~~that will be amortized to ~~pay~~interest ~~down~~expense over the remaining ~~outstanding~~term ~~balance~~of onthe ~~our~~New Senior ABL Revolving Facility. ~~There~~The ~~were~~borrowing nobase ~~outstanding~~reporting ~~intercompany~~requirements that we are subject to under the New Senior ABL Revolving Facility are substantially similar to those under our Old Senior ABL Revolving Facility. Financing ~~loan~~activities ~~balances~~for atthe ~~June~~nine months ended September 30, 2011 include net cash proceeds of $454.0 ~~Interest~~million ~~payable~~on ~~under~~our ~~the~~New Senior ABL Revolving Facility ~~normally exceeds~~and ~~that~~net ~~earned~~cash ~~under~~payments anof ~~interest~~$304.2 ~~bearing~~million ~~cash~~on ~~account~~our Old Senior ABL Revolving Facility.

~~Net~~Other cash used in financing activities during the ~~six~~nine months ended ~~June~~September 30, ~~2010~~2011 ~~consists primarily~~includes of $5721.0 8 million ~~net~~of ~~payments~~repayments on our capital ~~Old~~leases. Pursuant to an intercompany revolving agreement between RSC Equipment Rental of Canada, Ltd. and RSC Equipment Rental, Inc., we will periodically transfer excess cash generated from our Canadian operations to the U.S. in order to pay down the outstanding balance on our Senior ABL Revolving Facility. WeThere ~~also~~were ~~repaid $16.0 million~~no onoutstanding ~~our~~intercompany ~~capital~~loan ~~lease~~balances ~~obligations~~at September 30, 2011. Interest payable under the Senior ABL Revolving Facility normally exceeds that earned under an interest bearing cash account.

Net cash used in financing activities during the nine months ended September 30, 2010 consists primarily of $106.0 million net payments on our Old Senior ABL Revolving Facility and $21.9 million of repayments on our capital leases.

Indebtedness

We are highly leveraged and a substantial portion of our liquidity needs arise from debt service requirements and from funding our costs of operations and capital expenditures. As of ~~June~~ September 30, 2011, we had $2.2 3 billion of indebtedness outstanding, consisting of $~~346~~454.0 million under the New Senior ABL Revolving Facility, $503.0 million of 2014 Notes, $400.0 million of 2017 Notes, $200.0 million of 2019 Notes, $650.0 million of 2021 Notes and $8188.0 6 million under capital lease obligations. The 2017 Notes and the 2019 Notes are presented net of unamortized original issue discounts of $8.8 6 million and $2.8 7 million, respectively, in our condensed consolidated balance sheet at ~~June~~September 30, 2011.

As of ~~June~~September 30, 2011, we had an outstanding balance of $~~346~~454.0 million on our New Senior ABL Revolving Facility leaving $~~641~~648.1 million available for future borrowings. The available borrowings of $~~641~~648.1 million are net of outstanding letters of credit.

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

The New Senior ABL Revolving Facility contains a number of covenants that, among other things, limit or restrict RSC’s ability to incur additional indebtedness; provide guarantees; engage in mergers, acquisitions or dispositions; enter into sale-leaseback transactions; make dividends and other restricted payments; prepay other indebtedness; engage in certain transactions with affiliates; make investments; change the nature of its business; incur liens; with respect to RSC ~~Holdings~~ Holdings II, LLC, take actions other than those enumerated; and amend specified debt agreements. The respective indentures governing the Notes also contain restrictive covenants that, among other things, limit RSC’s ability to incur additional debt; pay dividends or distributions on our capital stock or repurchase our capital stock; make certain investments; create liens to secure debt; enter into certain transactions with affiliates; create limitations on the ability of our restricted subsidiaries to make dividends or distributions to their parents; merge or consolidate with another company; and transfer and sell assets. In addition, under the New Senior ABL Revolving Facility, upon excess availability falling below $100.0 million, we will become subject to more frequent borrowing base reporting requirements and upon the excess availability falling below the greater of $125.0 million and 12.5% of the sum of the total commitments under the New Senior ABL Revolving Facility, the borrowers will be required to comply with specified financial ratios, including a minimum fixed charge coverage ratio of 1.00 to 1.00 and a maximum leverage ratio as of the last day of each quarter of 5.25 to 1.00, decreasing to 5.00 to 1.00 on December 31, 2011.

As24 of June 30, 2011, excess availability on our New Senior ABL Revolving Facility was $641.1 million and we were therefore not required to comply with either the fixed charge coverage ratio or leverage ratio. Had excess availability fallen below the greater of $125.0 million and 12.5% of the sum of the total commitments under the New Senior ABL Revolving Facility as of June 30, 2011, compliance with these financial ratios would have been required and we would have violated the minimum fixed charge coverage ratio requirement, which would be an event of default. We do not expect excess availability to fall below the greater of $125.0 million and 12.5% of the sum of the total commitments under the New Senior ABL Revolving Facility at any time during the next twelve months and therefore do not expect that we will be required to comply with the specified financial ratios during that time. If an event of default occurred, we would seek a waiver of the covenants and could incur upfront fees and increased interest costs. However, there can be no assurances that such a waiver could be obtained.

debt agreements. The respective indentures governing the Notes also contain restrictive covenants that, among other things, limit RSC’s ability to incur additional debt; pay dividends or distributions on our capital stock or repurchase our capital stock; make certain investments; create liens to secure debt; enter into certain transactions with affiliates; create limitations on the ability of our restricted subsidiaries to make dividends or distributions to their parents; merge or consolidate with another company; and transfer and sell assets. In addition, under the New Senior ABL Revolving Facility, upon excess availability falling below $100.0 million, we will become subject to more frequent borrowing base reporting requirements and upon the excess availability falling below the greater of $125.0 million and 12.5% of the sum of the total commitments under the New Senior ABL Revolving Facility, the borrowers will be required to comply with specified financial ratios, including a minimum fixed charge coverage ratio of 1.00 to 1.00 and a maximum leverage ratio as of the last day of each quarter of 5.25 to 1.00, decreasing to 5.00 to 1.00 on December 31, 2011.

As of September 30, 2011, excess availability on our New Senior ABL Revolving Facility was $648.1 million and we were therefore not required to comply with either the fixed charge coverage ratio or leverage ratio. Had excess availability fallen below the greater of $125.0 million and 12.5% of the sum of the total commitments under the New Senior ABL Revolving Facility as of September 30, 2011, compliance with these financial ratios would have been required and we would have violated the minimum fixed charge coverage ratio requirement, which would be an event of default. We do not expect excess availability to fall below the greater of $125.0 million and 12.5% of the sum of the total commitments under the New Senior ABL Revolving Facility at any time during the next twelve months and therefore do not expect that we will be required to comply with the specified financial ratios during that time. If an event of default occurred, we would seek a waiver of the covenants and could incur upfront fees and increased interest costs. However, there can be no assurances that such a waiver could be obtained.

Outlook

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

From time to time, we evaluate various alternatives for the use of excess cash generated from our operations including paying down debt, funding acquisitions and repurchasing common stock or debt securities. ~~Unless~~Our ~~certain payment conditions are satisfied, the New Senior ABL Revolving Facility limits our~~ capacity to repurchase common stock, make cash dividends or make optional payments on unsecured debt securities is limited to $100.0 ~~This~~million ~~limitation~~by the New Senior ABL Revolving Facility at ~~June~~ September 30, 2011 ~~was~~unless ~~$100~~certain payment conditions are satisfied.~~0 million.~~

Adjusted EBITDA

As a supplement to the financial statements in this Quarterly Report on Form 10-Q, which are prepared in accordance with GAAP, we also present Adjusted EBITDA. Adjusted EBITDA is generally consolidated net income (loss) before net interest expense, income taxes and depreciation and amortization and before certain other items, including loss on extinguishment of debt, share-based compensation and other (income) expense, net. We present Adjusted EBITDA because we believe the calculation is useful to investors in evaluating our financial performance and as a liquidity measure. Adjusted EBITDA is not a measure of performance calculated in accordance with GAAP and there are material limitations to its usefulness on a stand alone basis. Adjusted EBITDA does not include reductions for cash payments for our obligations to service our debt, fund our working capital and pay our income taxes. In addition, certain items excluded from Adjusted EBTIDA such as interest, income taxes, depreciation and amortization are significant components in understanding and assessing our financial performance. All companies do not calculate Adjusted EBITDA in the same manner and our presentation may not be comparable to those presented by other companies. Investors should use Adjusted EBITDA in addition to, and not as an alternative to, net income (loss) or net cash provided by operating activities as defined under GAAP.

27 25

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

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

	Three Months Ended						Six Months Ended
	Three Months EndedSeptember 30,						Nine Months EndedSeptember 30,
	June 30,						June 30,
	2011			2010			2011			2010
	(in 000s)
Net income (loss)	$	6715,833		$	(226,~~115~~422	)	$	(5034,~~365~~532	)	$	(5966,~~943~~365	)
Depreciation of rental equipment and depreciation and amortization of non-rental equipment and intangibles		8487,~~650~~401			7778,~~308~~890			~~165~~253,~~764~~165			~~154~~232,~~010~~900
Interest expense, net		4647,~~984~~363			48,~~233~~446			~~128~~176,~~943~~306			98146,~~026~~472
Provision (benefit) for income taxes		~~997~~10,321			(133,~~156~~542	)		(2918,~~116~~795	)		(3639,~~287~~829	)
EBITDA	$	~~132~~160,~~698~~918		$	90117,~~270~~372		$	~~215~~376,~~226~~144		$	~~155~~273,~~806~~178
Adjustments:
Loss on extinguishment of debt		—			—			15,342			—
Share-based compensation		12,~~894~~048			1,~~595~~708			35,~~168~~216			23,~~258~~966
Other (income) expense, net		~~(169~~444	)		99(264	)		(~~506~~62	)		(~~100~~364	)
Adjusted EBITDA	$	~~134~~163,~~423~~410		$	91118,~~964~~816		$	~~233~~396,~~230~~640		$	~~157~~276,~~964~~780

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

	Three Months Ended						Six Months Ended
	Three Months EndedSeptember 30,						Nine Months EndedSeptember 30,
	June 30,						June 30,
	2011			2010			2011			2010
	(in 000s)
Net cash provided by operating activities	$	~~213~~61,~~959~~023		$	~~104~~142,~~412~~556		$	~~273~~334,~~143~~166		$	~~169~~312,~~893~~449
Gain on sales of rental and non-rental property and equipment, net of non-cash write-offs		1312,~~209~~527			24,~~717~~310			2537,~~250~~777			59,~~325~~635
Gain on settlement of insurance property claims		—			—			—			1,736
Cash paid for interest		3752,~~304~~093			5633,~~523~~301			~~107~~159,~~609~~702			93126,~~354~~655
Cash paid (received) for taxes, net		2(16,~~556~~883	)		~~333~~(25,489	)		2(14,~~490~~393	)		(7325,562	)
Other (income) expense, net		~~(169~~444	)		99(264	)		(~~506~~62	)		(~~100~~364	)
Changes in other operating assets and liabilities		~~(132~~54,~~436~~206	)		(7235,~~120~~598	)		(~~174~~120,~~756~~550	)		(~~112~~147,~~171~~769	)
Adjusted EBITDA	$	~~134~~163,~~423~~410		$	91118,~~964~~816		$	~~233~~396,~~230~~640		$	~~157~~276,~~964~~780

Free Cash Flow

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

28 26

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

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

	Three Months Ended						Six Months Ended
	Three Months EndedSeptember 30,						Nine Months EndedSeptember 30,
	June 30,						June 30,
	2011			2010			2011			2010
	(in 000s)
Net cash provided by operating activities	$	~~213~~61,~~959~~023		$	~~104~~142,~~412~~556		$	~~273~~334,~~143~~166		$	~~169~~312,~~893~~449
Purchases of rental equipment		(~~209~~175,~~426~~988	)		(~~102~~118,~~060~~748	)		(~~367~~543,~~347~~335	)		(~~146~~265,~~966~~714	)
Purchases of property and equipment		(23,~~339~~598	)		(13,~~304~~995	)		(48,~~783~~381	)		(15,~~635~~630	)
Proceeds from sales of rental equipment		3832,~~306~~245			2729,~~993~~216			80113,~~799~~044			5584,~~099~~315
Proceeds from sales of property and equipment		1,~~610~~628			~~356~~533			34,~~204~~832			12,~~652~~185
Insurance proceeds from rental equipment and property claims		—			—			—			1,736
Net capital expenditures		(~~171~~145,~~849~~713	)		(7592,~~015~~994	)		(~~288~~433,~~127~~840	)		(90183,~~114~~108	)
Free cash flow	$	42(84,~~110~~690	)	$	2949,~~397~~562		$	(1499,~~984~~674	)	$	79129,~~779~~341

Critical Accounting Policies and Estimates

Our discussion and analysis of financial condition and results of operations are based upon our unaudited condensed consolidated financial statements, which have been prepared in accordance with GAAP. The preparation of these financial statements requires management to make estimates and judgments that affect the reported amounts in the unaudited condensed consolidated financial statements and accompanying notes. Actual results, however, may materially differ from our calculated estimates and this difference would be reported in our current operations. In the course of our ongoing analysis of our accounting estimates, adjustments were made in the September 2011 quarter that resulted in an increase to net income of approximately $1.1 million. We have made no significant changes to our critical accounting policies and estimates since December 31, 2010.

Recent Accounting Pronouncements

In ~~June~~ September 2011, the Financial Accounting Standards Board (the “FASB”) issued anAccounting ~~amendment~~Standards toUpdate ~~the existing~~(ASU) ~~guidance~~No. 2011-08, onIntangibles ~~the~~– ~~presentation~~Goodwill ofand ~~comprehensive~~Other ~~income.~~(Topic ~~Under~~350): ~~the~~Testing ~~amended~~Goodwill ~~guidance, entities~~for ~~have~~Impairment. ~~the~~The ~~option~~update tosimplifies ~~present~~how ~~the~~a ~~components~~company oftests ~~net~~goodwill ~~income~~for impairment by allowing both public and ~~other~~nonpublic ~~comprehensive~~entities ~~income~~an ~~in either~~option ato ~~single~~first ~~continuous~~assess ~~statement~~qualitative offactors ~~comprehensive~~to ~~income~~determine orwhether init is necessary to perform the two-step ~~separate~~quantitative ~~but~~goodwill ~~consecutive statements~~impairment test. ~~Entities~~Under that option, an entity would no longer be ~~have~~required to calculate the ~~option~~fair value of ~~presenting~~a reporting unit unless the ~~components~~entity ofdetermines, ~~other~~based ~~comprehensive income~~on ~~within~~that ~~the~~qualitative ~~statement~~assessment, ofthat ~~changes~~it inis ~~stockholders’~~more ~~equity.~~likely ~~For~~than ~~public~~not ~~entities,~~that ~~the~~its ~~amendment~~ fair value is ~~effective~~less onthan aits ~~retrospective~~carrying ~~basis~~amount. ~~for~~The ~~fiscal~~amendments ~~years,~~are effective for annual and interim ~~periods~~goodwill ~~within~~impairment ~~those~~tests performed for fiscal years, beginning after December 15, 2011,. ~~which~~Early ~~for~~adoption us is ~~the~~permitted. ~~first~~We ~~quarter~~do innot ~~2012.~~anticipate ~~The~~that adoption of ~~this amendment~~these amendments will ~~result~~have in a ~~change~~material toimpact on our ~~current~~financial condition, ~~presentation~~results of ~~comprehensive~~operations ~~income~~or cash flows.

In ~~May~~ June 2011, the FASB issued ~~amendments~~an amendment to the existing guidance on ~~fair value measurement.~~the ~~The~~presentation ~~amendments~~of ~~are~~comprehensive ~~intended to create consistency between U~~income.S. ~~generally~~Under ~~accepted~~the ~~accounting standards~~amended ~~and~~guidance, ~~International~~entities ~~Financial~~have ~~Reporting Standards on measuring fair value and disclosing information about fair value measurements. The amendments clarify~~ the ~~application~~option ofto ~~existing~~present ~~fair value measurement requirements including (i)~~ the ~~application~~components of ~~the~~net ~~highest~~income and ~~best~~other ~~use~~comprehensive ~~valuation premise~~income ~~concepts,~~in ~~(ii) measuring~~either ~~the~~a ~~fair~~single ~~value~~continuous statement of ancomprehensive ~~instrument~~income ~~classified~~or in atwo ~~reporting~~separate ~~entity’s~~but ~~shareholders’~~consecutive ~~equity,~~statements. ~~and~~Entities ~~(iii) quantitative~~no ~~information~~longer ~~required~~have ~~for~~the ~~fair~~option ~~value~~of ~~measurements categorized~~presenting ~~within Level 3. In addition,~~ the ~~amendments~~components ~~require~~of ~~additional~~other ~~disclosure~~comprehensive ~~for~~income ~~Level~~within ~~3 measurements regarding~~ the ~~sensitivity~~statement of ~~fair value to~~ changes in ~~unobservable~~stockholders’ ~~inputs and any interrelationships between those inputs~~equity. For public entities, the ~~amendments~~amendment ~~are~~is effective ~~for~~on a retrospective ~~interim~~basis for fiscal years, and ~~annual~~interim periods within those years, beginning after December 15, 2011, which for us is ~~calendar~~the ~~year~~first ~~2012. These~~quarter ~~changes~~in ~~are required to be applied prospectively~~2012. WeThe ~~do not anticipate that the~~ adoption of ~~these~~ ~~amendments~~this amendment will ~~have~~result in a ~~material~~change ~~impact~~to on our ~~financial~~current ~~condition~~presentation ~~or results~~ of ~~operations.~~comprehensive income.

29In May 2011, the FASB issued amendments to the existing guidance on fair value measurement. The amendments are intended to create consistency between U.S. generally accepted accounting standards and International Financial Reporting Standards on measuring fair value and disclosing information about fair value measurements. The amendments clarify the application of existing fair value measurement requirements including (i) the application of the highest and best use valuation premise concepts, (ii) measuring the fair value of an instrument classified in a reporting entity’s shareholders’ equity, and (iii) quantitative information required for fair value measurements categorized within Level 3. In addition, the amendments require additional disclosure for Level 3 measurements regarding the sensitivity of fair value to changes in unobservable inputs and any interrelationships

between those inputs. For public entities, the amendments are effective for interim and annual periods beginning after December 15, 2011, which for us is calendar year 2012. These changes are required to be applied prospectively. We do not anticipate that the adoption of these amendments will have a material impact on our financial condition, results of operations or cash flows.

In December 2010, the FASB issued an update to the existing guidance for goodwill and other intangible assets. The update modifies Step 1 of the goodwill impairment test for reporting units with zero or negative carrying amounts. For those reporting units, an entity is required to perform Step 2 of the goodwill impairment test if there are qualitative factors indicating that it is more likely than not that a goodwill impairment exists. The qualitative factors are consistent with the existing guidance which requires goodwill of a reporting unit to be tested for impairment between annual tests if an event occurs or circumstances change that would more likely than not reduce the fair value of a reporting unit below its carrying amount. This guidance is effective for fiscal years, and interim periods within those years, beginning after December 15, 2010, which for us is the fourth quarter of 2011. We do not anticipate that the adoption of this guidance will have a material impact on our financial condition, results of operations or cash flows.

In November 2010, the FASB issued an update to its existing guidance on business combinations. This guidance requires a public entity that presents comparative financial statements to present in its pro forma disclosure the revenue and earnings of the combined entity as though the business combination(s) that occurred during the current year had occurred as of the beginning of the ~~prior~~ prior annual reporting period. In addition, this guidance expands the supplemental pro forma disclosures to include a description of the nature and amount of material, nonrecurring pro forma adjustments directly attributable to the business combination included in the reported pro forma revenue and earnings. The guidance is effective prospectively for business combinations for which the acquisition date is on or after the beginning of the first annual reporting period on or after December 15, 2010, which for us is calendar year 2011. ~~The~~Adoption of this guidance did not have an impact on our disclosures for the ~~six~~three and nine months ended ~~June~~September 30, 2011.

Item 3. Quantitative and Qualitative Disclosures about Market Risk

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

Interest Rate Risk

As of ~~June~~September 30, 2011 we have a significant amount of debt under the New Senior ABL Revolving Facility, with variable rates of interest based generally on adjusted London inter-bank offered rate (“LIBOR”), or an alternate interest rate, in each case, plus an applicable margin (or, in the case of Canadian dollar borrowings under the New Senior ABL Revolving Facility, variable borrowing costs based generally on bankers’ acceptance discount rates, plus a stamping fee equal to an applicable margin, or on the Canadian prime rate, plus an applicable margin). We also had $479.4 million of variable rate debt under the Second Lien Term Facility, which was repaid in January 2011. Increases in interest rates could therefore significantly increase the associated interest payments that we are required to make on this debt. We have assessed our exposure to changes in interest rates by analyzing the sensitivity to our earnings assuming various changes in market interest rates. Assuming a hypothetical increase of 1% in interest rates on the variable rate debt in our debt portfolio as of ~~June~~September 30, 2011, our net interest expense for the ~~six~~nine months ended ~~June~~ September 30, 2011 would have increased by an estimated $23.1 4 million.

To hedge exposure to market conditions, reduce the volatility of financing costs and achieve a desired balance between fixed-rate and floating-rate debt, we have utilized interest rate swaps under which we have exchanged floating-rate interest payments for fixed-rate interest payments. In January 2011, in conjunction with the financing activities previously discussed, all ~~outstanding~~ outstanding swaps were settled. As of ~~June~~September 30, 2011, no interest rate swaps are outstanding.

As of ~~June~~ September 30, 2011, 8076.32% of our $2,~~168~~284.4 million of debt had fixed rate interest.

Currency Exchange Risk

The functional currency for our Canadian operations is the Canadian dollar. In the ~~six~~nine months ended ~~June~~September 30, 2011 and ~~June~~September 30, 2010, 6.97% and 6.2%, respectively , of our revenues were generated by our Canadian operations. As a result, our future earnings could be affected by fluctuations in the exchange rate between ~~the U.S. and Canadian dollars. Based upon the level of our Canadian~~ operations during the six months ended June 30, 2011, relative to our operations as a whole, a 10% increase in the value of the Canadian dollar as compared to the U.S. dollar would have reduced net loss by approximately $0.3 million for the six months ended June 30, 2011.

the U.S. and Canadian dollars. Based upon the level of our Canadian operations during the nine months ended September 30, 2011, relative to our operations as a whole, a 10% increase in the value of the Canadian dollar as compared to the U.S. dollar would have reduced net loss by approximately $0.6 million for the nine months ended September 30, 2011.

Item 4. Controls and Procedures

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

Evaluation of Disclosure Controls and Procedures

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

Changes in Internal Control Over Financial Reporting

An evaluation of our internal controls over financial reporting was performed under the supervision of, and with the participation of, management, including our Chief Executive Officer and Chief Financial Officer, to determine whether any changes have occurred during the period covered by this Quarterly Report on Form 10-Q that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. Based upon this evaluation, our Chief Executive Officer and Chief Financial Officer concluded that no changes in our internal control over financial reporting have occurred during the quarter ended ~~June~~September 30, 2011 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II. Other Information

Item 1. Legal Proceedings

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

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

Item 1A. Risk Factors

In addition to the other information set forth in this Quarterly Report on Form 10-Q, you should carefully consider the factors discussed in “Risk Factors” in our 2010 Form 10-K filed with the SEC on February 10, 2011, which could materially affect our business, financial condition or future results. The risks described in our 2010 Form 10-K are not the only risks we face. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition or future results.

There have been no material changes in the risk factors previously disclosed in “Risk Factors” in Part 1, Item 1A of our 2010 Form 10-K filed with the SEC.

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

Not applicable.

Item 3. Defaults Upon Senior Securities

Not applicable.

Item 4. Reserved

Item 5. Other Information

None.

32 30

Item 6. Exhibits

Exhibits and Financial Statement Schedules

Incorporated By Reference

Exhibit

Filed

ExhibitNumber

Exhibit Description

Form

File No.

Exhibit

Filing Date

FiledHerewith

Number

Exhibit Description

Form

File No.

Exhibit

Filing Date

Herewith

10.1

Incremental Amendment, dated as of September 28, 2011, by and among RSC Holdings III, LLC, RSC Holdings III, LLC, RSC Equipment Rental, Inc., RSC Equipment Rental of Canada, Ltd., Deutsche Bank AG, New York Branch, as U.S. Administrative agent, Deutsche Bank, AG, Canada Branch, as Canadian administrative agent, and other Financial Institutions party thereto

8-K

333-144625

10.1

10/4/2011

31.1

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

4.7

Second Amended and Restated Stockholders Agreement, dated as of October 6, 2011

31.2

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

31.1

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

32.1*

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

31.2

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

101**

The following financial information from our Quarterly Report on Form 10-Q for the period ended June 30, 2011, filed with the SEC on July 21, 2011, formatted in Extensible Business Reporting Language (“XBRL”): (i) the Condensed Consolidated Balance Sheets at June 30, 2011 and December 31, 2010, (ii) the Condensed Consolidated Statements of Operations for the three and six months ended June 30, 2011 and June 30, 2010, (iii) the Condensed Consolidated Statements of Cash Flows for the six months ended June 30, 2011 and June 30, 2010, and (iv) the Notes to Condensed Consolidated Financial Statements

32.1*

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

101**

The following financial information from our Quarterly Report on Form 10-Q for the period ended September 30, 2011, filed with the SEC on October 20, 2011, formatted in Extensible Business Reporting Language (“XBRL”): (i) the Condensed Consolidated Balance Sheets at September 30, 2011 and December 31, 2010, (ii) the Condensed Consolidated Statements of Operations for the three and nine months ended September 30, 2011 and September 30, 2010, (iii) the Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 2011 and September 30, 2010, and (iv) the Notes to Condensed Consolidated Financial Statements

*		The certifications attached as Exhibit 32.1 that accompany this Quarterly Report on Form 10-Q, are not deemed filed with the Securities and Exchange Commission and are not to be incorporated by reference into any filing of RSC Holdings III, LLC or RSC Equipment Rental, Inc., under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, whether made before or after the date of this Quarterly Report on Form 10-Q, irrespective of any general incorporation language contained in such filing.
**		The XBRL related information in Exhibit 101 to this Quarterly Report on Form 10-Q shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to liability of that section and shall not be incorporated by reference into any filing or other document pursuant to the Securities Act of 1933, as amended, except as shall be expressly set forth by specific reference in such filing or document.

The certifications attached as Exhibit 32.1 that accompany this Quarterly Report on Form 10-Q, are not deemed filed with the Securities and Exchange Commission and are not to be incorporated by reference into any filing of RSC Holdings III, LLC or RSC Equipment Rental, Inc. under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, whether made before or after the date of this Quarterly Report on Form 10-Q, irrespective of any general incorporation language contained in such filing.

33 ** The XBRL related information in Exhibit 101 to this Quarterly Report on Form 10-Q shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to liability of that section and shall not be incorporated by reference into any filing or other document pursuant to the Securities Act of 1933, as amended, except as shall be expressly set forth by specific reference in such filing or document.

SIGNATURES

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

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

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

RSC EQUIPMENT RENTAL, INC.


Signature	Title	Date

/s/ Erik Olsson Erik Olsson	President, Chief Executive Officer and Director (Principal Executive Officer)	October 20, 2011

/s/ Patricia D. Chiodo Patricia D. Chiodo	Senior Vice President and Chief Financial Officer (Principal Financial and Principal Accounting Officer)	October 20, 2011

EXHIBIT INDEX

Incorporated By Reference

Exhibit

Filed

ExhibitNumber

Exhibit Description

Form

File No.

Exhibit

Filing Date

FiledHerewith

Number

Exhibit Description

Form

File No.

Exhibit

Filing Date

Herewith

10.1

8-K

333-144625

10.1

10/4/2011

31.1

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

4.7

Second Amended and Restated Stockholders Agreement, dated as of October 6, 2011

31.2

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

31.1

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

32.1*

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

31.2

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

101**

32.1*

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

101**

*		The certifications attached as Exhibit 32.1 that accompany this Quarterly Report on Form 10-Q, are not deemed filed with the Securities and Exchange Commission and are not to be incorporated by reference into any filing of RSC Holdings III, LLC or RSC Equipment Rental, Inc., under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, whether made before or after the date of this Quarterly Report on Form 10-Q, irrespective of any general incorporation language contained in such filing.
**		The XBRL related information in Exhibit 101 to this Quarterly Report on Form 10-Q shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to liability of that section and shall not be incorporated by reference into any filing or other document pursuant to the Securities Act of 1933, as amended, except as shall be expressly set forth by specific reference in such filing or document.

35 ** The XBRL related information in Exhibit 101 to this Quarterly Report on Form 10-Q shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to liability of that section and shall not be incorporated by reference into any filing or other document pursuant to the Securities Act of 1933, as amended, except as shall be expressly set forth by specific reference in such filing or document.

Filing Compare · RSC Holdings III, LLC