United Rentals Board Acts Upon Special Committee Report; Company Provides Update on Restatements

The committee's report included findings relating to theaccounting for certain minor sale-leaseback transactions from December2000 to March 2002 and trade packages from the fourth quarter of 2000through 2002:

-- The committee confirmed its preliminary conclusion that there were irregularities with respect to six minor sale-leaseback transactions, and the board approved the company's previously announced plan to restate its results for those transactions.

-- The committee concluded that there were irregularities with respect to some trade packages which involved undisclosed inducements, as more fully described below. The company has concluded that disclosure, rather than restatement, for these transactions is appropriate. The committee accepted that view.

In addition, the committee also made findings regarding companypractices in connection with equipment acquired in purchase businesscombinations between 1997 and August 2000, but did not conclude that arestatement was necessary. The company continues to review theappropriate accounting treatment of these practices in connection withthe preparation of its restated historical financial statements.

Wayland Hicks, chief executive officer, said, "The report by ourspecial committee represents a significant step forward for thecompany. By its actions today, the board has reaffirmed UnitedRentals' commitment to the highest standards of conduct in ourbusiness, in the interests of our shareholders and for the thousandsof dedicated employees who have enabled United Rentals to become theleader in our industry. The misconduct by some of our employees foundby the committee is unacceptable. The company remains fully committedto cooperating with the SEC in its inquiry."

Hicks further stated, "We are making progress toward finalizingour financial results for 2004. We have been working diligently onconcluding the restatements for minor sale-leaseback transactions andalso for items which are unrelated to the special committee's review,including self-insurance reserves and income tax provisions." These,and other items, are discussed below under Update on Restatements forPrior Periods.

Findings of the Special Committee

The special committee's report to the board included the followingfindings, and the company has decided to take the actions indicated:

Minor Sale-Leaseback Transactions. The committee reviewed sevenminor sale-leaseback transactions entered into between December 2000and March 2002. Consistent with the preliminary conclusions previouslyreported, the committee concluded that the accounting for six of thesetransactions involved irregularities and that critical informationassociated with these transactions was concealed from the company'sauditors. These six transactions accounted for reported gross profitof $12.2 million, $20.2 million and $1.0 million in 2000, 2001 and2002, respectively. The committee concluded that the companyimproperly recognized revenue from these transactions, and that theimpact on quarterly earnings per share during the relevant quartersranged from $.01 to $.08. As previously announced, the company expectsto restate its results for applicable periods for these sixtransactions. The effect of restating for these transactions isdescribed below under Update on Restatements for Prior Periods.

Trade Packages. The committee reviewed a number of "trade package"transactions in which the company sold used equipment to certainsuppliers at prices that may have included a premium above fair value.The committee found that, during the period from the fourth quarter of2000 through 2002, in order to induce these suppliers to buy usedequipment at premium prices, the company made commitments orconcessions to suppliers. During this period, all sales of usedequipment to these suppliers (which includes all trade packagetransactions) generated total revenues of $38 million and grossprofits of $9 million. The committee found that the commitments orconcessions to suppliers were not disclosed and that the companyimproperly recognized revenue from the transactions involving theundisclosed inducements. The committee further found that, as a resultof instructions given by certain former employees, documents were notcreated that would have permitted the linkage of the sales andinducements. As a result, the true nature of certain of thesetransactions was concealed. Because of this lack of documentation, thecompany is unable to determine the portion of the $9 million grossprofit recognized in connection with trade packages with thesesuppliers between 2000 and 2002 that was improperly recognized. Thecompany determined that, under the circumstances, disclosure ratherthan a restatement of its results for these periods is appropriate.The committee accepted the company's conclusion.

The committee concluded that, based on the evidence it reviewed,the practices regarding minor sale-leaseback transactions and tradepackages described above appear to have been directed by the company'stwo former chief financial officers. Both of these individuals, whoare no longer with the company, declined to cooperate with thecommittee's investigation.

Purchase Accounting. The committee considered the company'shistorical practices concerning its accounting for purchase businesscombinations. The primary focus of this inquiry was the company'shistorical practices concerning the valuation of rental equipmentacquired in purchase business combinations and the practice ofrecognizing profit on sales of this equipment within one year of itsacquisition. These practices remain under review by the company inconnection with the preparation of its restated historical financialstatements.

With respect to the company's practices in valuing equipmentacquired in purchase business combinations, the committee concludedthat certain of these practices were not adequate between 1997 andAugust 2000. These included, among other things, the use ofinconsistent valuation methodologies, some of which were reflected inmemoranda that were not provided to or reviewed by the company'sauditors, suggestions contained in those memoranda that impropermethods of valuation be used (although the committee did not findevidence that such improper methods were generally applied),inadequate supervision of personnel, inadequate coordination withproviders of outside valuations and apparent confusion on the part ofone of those providers. Because it was unable to validate thecompany's reported depreciation expense for, and income recognized on,sales of equipment acquired in purchase business combinations, thecommittee concluded that certain company personnel (whom the committeewas unable to identify) may have sought to manipulate opening balancesheet values for equipment acquired in purchase business combinationsby causing them to be understated and that these opening balance sheetvalues may have been understated by an amount the committee was unableto determine. Notwithstanding deficiencies in the company's historicalvaluation process as it relates to purchase business combinations, thecompany does not believe a restatement is required and believes thatits financial statements from and after 2002 are materially correctwith respect to the effect of equipment valuations. The committee didnot recommend a restatement with respect to this matter.

With respect to the company's practice of recognizing profit onsales of equipment within one year of its acquisition in a purchasebusiness combination, the committee reviewed the company's accountingpractices. The committee, which recognized that accountingprofessionals could differ on this issue, did not conclude that thecompany's policy on this matter was incorrect. The company and itsauditors continue to believe that the accounting policy of recognitionof profit on these sales is correct.

The committee also considered whether the company had properlyaccounted for intangible assets when it accounted for purchasebusiness combinations. The committee found no error regarding thehistorical treatment of intangible assets. The company continues toreview this subject in connection with the preparation of its restatedhistorical financial statements.

Actions Directed by the Board of Directors

Based upon recommendations by the special committee, the boarddirected a number of actions to address issues identified by thecommittee. These include the development and distribution of anacquisition accounting manual; development of a plan to centralizecontrol of document retention; creation of more definitive jobdescriptions for corporate positions and more specificresponsibilities for executives; scheduling of additional regularmeetings between the chairman of the Audit Committee and the chieffinancial officer and the independent auditors; issuance of a policystatement clarifying the company's position regarding circumstances,if any, and requisite procedures, where sales to vendors may involvethe company's forgoing marketing allowances or agreeing to othervendor incentives; potential establishment of regular schedules forpackage sales of equipment; issuance of a policy regarding packagesales of equipment and sales to vendors; evaluation of potentialclaims against certain former company personnel; consideration by theNominating and Corporate Governance Committee of designating a leadindependent director and a review of executive employment agreementsto standardize agreements with appropriate terms.

The committee also reviewed with the board evidence regarding theconduct of a number of current company employees. On the committee'srecommendation, the board directed the company to remove its corporatecontroller and principal accounting officer and its vice president -finance from their positions, although there was no finding ofintentional wrongdoing on the part of these individuals. In addition,on the committee's recommendation, the board directed the company todismiss two employees. Also, three other employees are receivingwritten reprimands. The committee also considered the actions of thecompany's chairman and its chief executive officer and did not findwrongdoing on their part.

About the Special Committee

The special committee is composed of four independent directorsassisted by independent counsel who employed independent forensicaccountants. The committee noted that its work and conclusions werelimited in some respects by, among other things, a lack of cooperationfrom some former company personnel, the condition of the company'shistorical records and the lapse of time since the transactions underreview occurred.

Update on Restatements for Prior Periods

Minor Sale-Leaseback Restatement Expected

As discussed above, the company expects to restate its results tocorrect the accounting for six minor sale-leaseback transactions whichoccurred between December 2000 and March 2002. The company'spreliminary estimate of the impact on previously reported pre-taxincome for the four years ended December 31, 2003 is as follows ($ inmillions):
Year Ended Increase/(Decrease)
December 31, in Pre-tax Income (Loss)
------------ ------------------------

2000 $(12.2)
2001 (19.4)
2002 3.4
2003 17.0

In addition to the minor sale-leaseback restatement, the companyhas determined that it is appropriate to make certain otherrestatements unrelated to the special committee's report. Thoserestatements are as follows:

Update on Self-Insurance Reserve Restatement

The company previously announced that it expects to restate itsfinancial statements for the years 2000 through 2003 and the firstnine months of 2004 to correct the expense associated with theself-insurance reserve. The company estimates that this expense wasoverstated by approximately $38.5 million and $8.1 million in 2004 and2003, respectively, understated by $13.3 million in 2002 andunderstated by $40.7 million in the aggregate in 2001 and prior years.

Update on Income Tax Restatement

The company also previously announced that it expects to restateits financial statements for years prior to 2004 to correct theprovision for income taxes. The income tax provision was understatedby approximately $0.2 million and $10.4 million in 2004 and 2003,respectively, and understated in 2002 and prior years, in theaggregate, by approximately $7.1 million.

Equipment Rental Revenue Restatement Expected

The company has historically recognized equipment rental revenuebased on the minimum amounts that are due and payable under the termsof its applicable rental contracts. The company has determined that itshould recognize equipment rental revenue on a straight-line basis andintends to restate its financial statements accordingly. The company'spreliminary estimate of the impact on previously reported equipmentrental revenues for the four years ended December 31, 2004 is asfollows ($ in millions):
Previously Increase/(Decrease)
Year Ended Reported Equipment in Equipment Percent
December 31, Rental Revenues Rental Revenues Change
------------ --------------- --------------- -------

2001 $2,212.9 $3.2 0.14%
2002 2,154.7 (2.7) (0.13)
2003 2,177.5 (1.5) (0.07)
2004 2,302.2 (6.8) (0.30)

The company also expects to adjust preliminary quarterly resultsfor 2005 to reflect the recognition of equipment rental revenue on astraight-line basis.

Operating Expense Reclassification

The company has determined that $88 million of costs for the yearended 2003 previously classified below operating income should bereclassified and included in operating income. This amount primarilyrepresents the amount in excess of the fair value related to thebuy-out of equipment under operating leases. The company expects toreflect this reclassification in its restated financial statements.This reclassification will have no impact on 2003 net income orearnings per share.

Update on the SEC Inquiry

The previously announced SEC inquiry of the company is ongoing andthe company is continuing to cooperate fully with the investigation.As previously stated, this inquiry appears to relate to a broad rangeof the company's accounting practices and is not confined to aspecific period.

Caution on Historical Financial Statements

In view of the expected restatements described above, investorsare cautioned not to rely on the company's historical financialstatements.

About United Rentals

United Rentals, Inc. is the largest equipment rental company inthe world, with an integrated network of more than 740 rentallocations in 48 states, 10 Canadian provinces and Mexico. Thecompany's 13,500 employees serve construction and industrialcustomers, utilities, municipalities, homeowners and others. Thecompany offers for rent over 600 different types of equipment with atotal original cost of $3.96 billion. United Rentals is a member ofthe Standard & Poor's MidCap 400 Index and the Russell 2000 Index(R)and is headquartered in Greenwich, Connecticut. Additional informationabout United Rentals is available at unitedrentals.com.

Certain statements contained in this press release areforward-looking in nature. These statements can be identified by theuse of forward-looking terminology such as "believes," "expects,""plans," "intends," "projects," "forecasts," "may," "will," "should,""on track" or "anticipates" or the negative thereof or comparableterminology, or by discussions of strategy or outlook. The company'sbusiness and operations are subject to a variety of risks anduncertainties and, consequently, actual results may differ materiallyfrom those projected by any forward-looking statements. Factors thatcould cause actual results to differ from those projected include, butare not limited to, the following: (1) the audits of the company's2004 and 2005 results have not yet been completed and, accordingly,previously announced data for these periods or portions thereof arepreliminary and subject to change, (2) the evaluation and testing ofthe company's internal controls over financial reporting have not yetbeen completed and additional material weaknesses may be identified,(3) the company may incur significant expenses in connection with theSEC inquiry of the company, the related internal review and the classaction lawsuits and derivative actions that were filed in light of theSEC inquiry, (4) there can be no assurance that the outcome of the SECinquiry or internal review will not require changes in the company'saccounting policies and practices, restatement of financialstatements, revisions of preliminary results or guidance, and/orotherwise be adverse to the company, (5) the SEC inquiry is ongoing,and there is no assurance that the SEC or its staff will concur withthe conclusions of the special committee or the company, (6) thecompany may be unable to deliver financial statements and/or make SECfilings within the time period required by its lenders or theindentures governing various securities, as amended, (7) the companymay not be able to file its 2004 10-K by March 31, 2006 (theexpiration date of an extension granted by the New York StockExchange), in which case the Exchange will initiate suspension anddelisting procedures, and (8) the estimated impact of expectedrestatements is preliminary and may change based upon additionalanalysis by the company or its auditors. Certain of these risks anduncertainties, as well as others, are discussed in greater detail inthe company's filings with the SEC. The company makes no commitment torevise or update any forward-looking statements in order to reflectevents or circumstances after the date any such statement is made.