<PAGE>
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------------
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2000
OR
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Commission File No. 001-14163
National Equipment Services, Inc.
(Exact name of registrant as specified in its charter)
DELAWARE 36-4087016
(State or other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
1603 Orrington Avenue, Suite 1600
Evanston, Illinois 60201
(Address of principal executive offices)
(Zip code)
(847) 733-1000
(Registrant's telephone number, including area code)
----------------
Indicate 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 [_]
There were 24,123,387 shares of Common Stock ($.01 par value) outstanding as
of November 6, 2000.
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<PAGE>
NATIONAL EQUIPMENT SERVICES, INC.
QUARTERLY REPORT ON FORM 10-Q
For the Quarter ended
September 30, 2000
INDEX
<TABLE>
<CAPTION>
Page
Number
------
<C> <S> <C>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets at September 30, 2000
(Unaudited) and December 31, 1999 .......................... 3
Consolidated Statements of Operations for the three and nine
months ended September 30, 2000 and 1999 (Unaudited)........ 4
Consolidated Statements of Cash Flows for the nine months
ended September 30, 2000 and 1999 (Unaudited)............... 5
Notes to Consolidated Financial Statements (Unaudited)...... 6
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations................................... 8
Item 3. Quantitative and Qualitative Disclosures About Market Risk.. 10
PART II. OTHER INFORMATION
Item 1. Legal Proceedings........................................... 11
Item 2. Changes in Securities....................................... 11
Item 3. Defaults upon Senior Securities............................. 11
Item 4. Submission of Matters to a Vote of Security Holders......... 11
Item 5. Other Information........................................... 11
Item 6. Exhibits and Reports on Form 8-K............................ 11
SIGNATURE............................................................. 12
INDEX OF EXHIBITS..................................................... 13
</TABLE>
2
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
NATIONAL EQUIPMENT SERVICES, INC.
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands, except per share data)
<TABLE>
<CAPTION>
September 30, December 31,
2000 1999
------------- ------------
(Unaudited)
<S> <C> <C>
Assets
Cash and cash equivalents.......................... $ 6,267 $ 33,530
Accounts receivable, net of allowance for doubtful
accounts of $5,042 and $5,425, respectively....... 138,120 113,136
Inventory, net..................................... 39,759 37,016
Rental equipment, net.............................. 640,665 559,762
Property and equipment, net........................ 63,536 60,249
Intangible assets, net............................. 363,341 383,074
Loan origination costs, net........................ 9,667 11,720
Prepaid expenses and other assets, net............. 25,250 21,127
---------- ----------
Total assets..................................... $1,286,605 $1,219,614
========== ==========
Liabilities
Accounts payable................................... $ 38,775 $ 45,764
Accrued interest................................... 16,232 6,353
Deferred income taxes, net......................... 40,444 40,444
Accrued expenses and other liabilities............. 32,201 23,568
Debt............................................... 915,238 856,710
---------- ----------
Total liabilities................................ 1,042,890 972,839
---------- ----------
Convertible preferred stock......................... 95,672 95,297
Commitments and contingencies....................... -- --
Stockholders' Equity
Common stock, $0.01 par, 100,000 shares authorized;
24,123 shares issued............................... 241 241
Additional paid-in capital.......................... 123,606 123,606
Retained earnings................................... 43,360 33,959
Stock subscriptions receivable...................... (102) (102)
Treasury stock at cost, 3,019 shares and 905 shares,
respectively....................................... (19,062) (6,226)
---------- ----------
Total stockholders' equity....................... 148,043 151,478
---------- ----------
Total liabilities and stockholders' equity....... $1,286,605 $1,219,614
========== ==========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
3
<PAGE>
NATIONAL EQUIPMENT SERVICES, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
(in thousands, except per share data)
<TABLE>
<CAPTION>
For the Three For the Nine
Months Ended Months Ended
September 30, September 30,
------------------ ------------------
2000 1999 2000 1999
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Revenues
Rental revenues....................... $127,630 $ 98,111 $345,011 $236,940
New equipment sales................... 13,976 11,982 39,871 30,717
Rental equipment sales................ 5,585 7,128 20,714 20,417
Parts, service and other.............. 20,322 14,883 54,927 41,405
-------- -------- -------- --------
Total revenues...................... 167,513 132,104 460,523 329,479
-------- -------- -------- --------
Cost of revenues
Rental equipment depreciation......... 23,923 18,286 67,872 45,946
Cost of new equipment sales........... 10,127 9,730 29,758 24,426
Cost of rental equipment sales........ 3,505 4,774 13,468 13,762
Other operating expenses.............. 57,353 37,168 155,520 100,097
-------- -------- -------- --------
Total cost of revenues.............. 94,908 69,958 266,618 184,231
-------- -------- -------- --------
Gross profit........................... 72,605 62,146 193,905 145,248
Selling, general and administrative
expenses.............................. 33,340 26,229 94,395 64,465
Non-rental depreciation and
amortization.......................... 6,985 4,778 20,564 12,351
-------- -------- -------- --------
Operating income....................... 32,280 31,139 78,946 68,432
Other income, net...................... 86 269 280 936
Interest expense, net.................. (21,628) (15,500) (61,740) (41,834)
-------- -------- -------- --------
Income before income taxes............. 10,738 15,908 17,486 27,534
Income tax expense..................... 4,977 6,681 7,710 11,564
-------- -------- -------- --------
Net income............................. $ 5,761 $ 9,227 $ 9,776 $ 15,970
======== ======== ======== ========
Basic earnings per common share........ $ 0.27 $ 0.39 $ 0.44 $ 0.68
======== ======== ======== ========
Average number of common shares used in
basic calculation..................... 20,696 23,465 21,251 23,362
======== ======== ======== ========
Diluted earnings per common share...... $ 0.20 $ 0.29 $ 0.32 $ 0.56
======== ======== ======== ========
Average number of common shares used in
diluted calculation................... 28,811 31,774 29,430 28,834
======== ======== ======== ========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
4
<PAGE>
NATIONAL EQUIPMENT SERVICES, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(in thousands)
<TABLE>
<CAPTION>
For the Nine
Months Ended
September 30,
--------------------
2000 1999
--------- ---------
<S> <C> <C>
Operating Activities
Net income.............................................. $ 9,776 $ 15,970
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation and amortization.......................... 88,436 58,297
Gain on sale of equipment.............................. (7,162) (6,799)
Changes in operating assets and liabilities:
Accounts receivable................................... (23,399) (20,966)
Inventory............................................. (1,748) (12,068)
Prepaid expenses and other assets..................... (3,290) (11,800)
Accounts payable...................................... (7,114) 15,291
Accrued expenses and other liabilities................ 19,523 20,220
--------- ---------
Net cash provided by operating activities............... 75,022 58,145
--------- ---------
Investing Activities
Acquisitions, net of cash received...................... (14,427) (217,132)
Cash received in connection with business combination... 18,000 --
Purchases of rental equipment........................... (157,676) (167,165)
Proceeds from sale of rental equipment.................. 20,714 20,417
Purchases of property and equipment..................... (16,699) (17,662)
Proceeds from sale of property and equipment............ 1,787 1,227
--------- ---------
Net cash used in investing activities................... (148,301) (380,315)
--------- ---------
Financing Activities
Proceeds from long-term debt............................ 100,000 513,476
Payments on long-term debt and capital leases........... (41,472) (183,910)
Net proceeds from sale of common stock.................. -- 42
Repurchase of treasury stock............................ (12,836) (1,541)
Payments of loan origination costs...................... 324 --
--------- ---------
Net cash provided by financing activities............... 46,016 328,067
--------- ---------
Net (decrease) increase in cash and cash equivalents.... (27,263) 5,897
Cash and cash equivalents at beginning of period........ 33,530 344
--------- ---------
Cash and cash equivalents at end of period.............. $ 6,267 $ 6,241
========= =========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
5
<PAGE>
NATIONAL EQUIPMENT SERVICES, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except per share data)
1. Organization
National Equipment Services, Inc. (the "Company") is principally a holding
company organized on June 4, 1996 (date of inception) under the laws of
Delaware. The Company conducts its operations through its wholly owned
subsidiaries acquired or formed since the date of inception. The Company owns
and operates equipment rental, sales and service facilities located throughout
the United States. The Company rents various types of equipment to a diverse
customer base, including construction, petro-chemical and other industrial
users. The Company also sells new and used rental equipment, related parts,
and provides other services. The nature of the Company's business is such that
short-term obligations are typically met by cash flow generated from long-term
assets. Consequently, consistent with industry practice, the accompanying
balance sheets are presented on an unclassified basis.
2. Basis of presentation
The accompanying unaudited financial statements as of and for the quarters
ended September 30, 2000 and 1999 have been prepared in accordance with
generally accepted accounting principles for interim financial information and
with the instructions to Form 10-Q and Article 10 of Regulation S-X. The
December 31, 1999 consolidated balance sheet was derived from audited
financial statements but does not include all of the information and footnotes
required by generally accepted accounting principles for complete financial
statements presentation. In the opinion of management, all adjustments
considered necessary for a fair presentation, consisting only of normal
recurring adjustments, have been included. Results of operations for the
interim periods are not necessarily indicative of the results that may be
expected for a full year. Due to the seasonality which impacts a significant
portion of the Company's locations, the second and third quarters of the year
are typically the most active quarters for the Company.
The Company does not have any components of other comprehensive income that
would have to be reported in accordance with Statement of Financial Accounting
Standards No. 130, "Reporting Comprehensive Income."
Certain reclassifications of prior year financial statement amounts have
been made to conform with the current year reporting.
3. Earnings per share
The Company's earnings per share for the three and nine months ended
September 30, 2000 and 1999 is calculated as follows:
<TABLE>
<CAPTION>
For the Three For the Nine
Months Ended Months Ended
September 30, September 30,
---------------- ----------------
2000 1999 2000 1999
------- ------- ------- -------
<S> <C> <C> <C> <C>
Net income.............................. $ 5,761 $ 9,227 $ 9,776 $15,970
Plus interest on convertible debt, net
of tax................................. -- -- -- 348
Less accretion on preferred stock....... (125) (172) (375) (172)
------- ------- ------- -------
Net income available to common
stockholders........................... $ 5,636 $ 9,055 $ 9,401 $16,146
======= ======= ======= =======
Weighted average shares................. 21,119 24,082 21,738 24,109
Less unvested stock................... (423) (617) (487) (747)
------- ------- ------- -------
Basic weighted average shares........... 20,696 23,465 21,251 23,362
Effect of dilutive securities
Unvested stock........................ 423 617 487 747
Convertible debt...................... -- -- -- 1,175
Convertible preferred stock........... 7,692 7,692 7,692 3,550
------- ------- ------- -------
Diluted weighted average shares......... 28,811 31,774 29,430 28,834
======= ======= ======= =======
Basic earnings per share................ $ 0.27 $ 0.39 $ 0.44 $ 0.68
======= ======= ======= =======
Diluted earnings per share.............. $ 0.20 $ 0.29 $ 0.32 $ 0.56
======= ======= ======= =======
</TABLE>
6
<PAGE>
NATIONAL EQUIPMENT SERVICES, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(in thousands, except per share data)
4. Acquisitions
As more fully disclosed in the Company's Form 10-K for the year ended
December 31, 1999, the Company completed nineteen acquisitions, accounted for
as purchases, at various times during 1999. In 2000, the Company purchased the
following rental equipment companies:
<TABLE>
<CAPTION>
Acquisition
Date Company Location Purchase Price
----------- ------------------------ -------------- --------------
<C> <S> <C> <C>
March 7, 2000 Cassidy & Lee, Inc. Canton, MA $9,200
Road Light,
Inc./Interstate Sign,
March 7, 2000 Inc. Providence, RI 2,000
June 21, 2000 Laser Products, Inc. Atlanta, GA 2,000
St. Clair Equipment Com-
August 31, 2000 pany Houston, TX 2,300
</TABLE>
During the quarter ended June 30, 2000, the Company completed an exchange of
all of the stock of its subsidiary, Safety Lights Sales & Leasing, Inc. for
all of the stock of Texoma, Inc. and approximately $18 million in cash. No
gain or loss was recognized on this transaction.
The following pro forma financial information represents the results of
operations as if the 1999 and 2000 acquisitions had been completed on January
1, 1999, after giving effect to certain adjustments including increased
depreciation and amortization of property and equipment and other assets,
interest expense for acquisition debt and amortization of related intangibles
and goodwill. These pro forma results have been prepared for comparative
purposes only and do not purport to be indicative of the results of operations
which would have been achieved had these acquisitions been completed as of
January 1, 1999, nor are the results indicative of the Company's future
results of operations.
<TABLE>
<CAPTION>
For the Three For the Nine
Months Ended Months Ended
September 30, September 30,
----------------- -----------------
2000 1999 2000 1999
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Revenues............................. $167,794 $155,652 $462,117 $422,839
Operating income..................... $ 32,354 $ 36,427 $ 80,108 $ 83,282
Net income........................... $ 6,697 $ 9,277 $ 10,605 $ 12,871
Basic earnings per share............. $ 0.32 $ 0.45 $ 0.48 $ 0.59
Diluted earnings per share........... $ 0.23 $ 0.32 $ 0.35 $ 0.42
</TABLE>
5. Inventory
Inventory, net consists of the following, at:
<TABLE>
<CAPTION>
September 30, December 31,
2000 1999
------------- ------------
<S> <C> <C>
New equipment.................................. $17,789 $16,703
Used equipment................................. 4,859 3,503
Contractor supplies............................ 6,221 8,577
Parts.......................................... 14,023 10,491
Reserves for excess and obsolete inventory..... (3,133) (2,258)
------- -------
$39,759 $37,016
======= =======
</TABLE>
7
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (in thousands)
The following table shows information derived from the Company's
consolidated statements of operations as a percentage of total revenues.
<TABLE>
<CAPTION>
Nine Months
Three Months Ended Ended
September 30, September 30,
-------------------- --------------
2000 1999 2000 1999
--------- --------- ------ ------
<S> <C> <C> <C> <C>
Rental revenues.......................... 76.2% 74.3% 74.9% 71.9%
Rental equipment sales................... 3.3 5.4 4.5 6.2
New equipment sales and other............ 20.5 20.3 20.6 21.9
--------- --------- ------ ------
Total revenues........................... 100.0 100.0 100.0 100.0
Cost of revenues......................... 56.7 53.0 57.9 55.9
--------- --------- ------ ------
Gross profit............................. 43.3 47.0 42.1 44.1
Selling, general and administrative
expenses................................ 19.9 19.9 20.5 19.6
Non-rental depreciation and amortization. 4.2 3.6 4.5 3.7
--------- --------- ------ ------
Operating income......................... 19.2 23.5 17.1 20.8
Other income, net........................ 0.1 0.2 0.1 0.3
Interest expense, net.................... 12.9 11.7 13.4 12.7
--------- --------- ------ ------
Income before income taxes............... 6.4 12.0 3.8 8.4
Income tax expense....................... 3.0 5.0 1.7 3.5
--------- --------- ------ ------
Net income............................... 3.4% 7.0% 2.1% 4.9%
========= ========= ====== ======
</TABLE>
Results of Operations
The Company's consolidated financial statements cover the three and nine
months ended September 30, 2000 and 1999. Comparisons of the Company's results
for these periods are significantly impacted by the fact that the Company
completed nineteen acquisitions at different times during 1999, with fourteen
completed during the first nine months of the year. Four additional
acquisitions were completed during the first nine months of 2000. The results
of operations of the businesses acquired in these acquisitions are included in
the Company's financial statements only from their respective dates of
acquisition. Due to the seasonality which impacts a significant portion of the
Company's locations, the second and third quarters of the year are typically
the most active quarters for the Company.
Results of Operations for the Three and Nine Months Ended September 30, 2000
and 1999
Revenues. Total revenues increased to $167,513 for the three months ended
September 30, 2000 from $132,104 for the three months ended September 30,
1999. Rental revenues increased to $127,630 from $98,111 during these
respective periods. The increases were primarily the result of the acquisition
of additional businesses after the third quarter of 1999 as well as the
inclusion in 2000 of a full quarter's results for the businesses acquired in
the third quarter of 1999. The increase is also related to strong industry
demand resulting in same store rental revenue growth of 15%. Similarly, total
revenues increased to $460,523 for the nine months ended September 30, 2000
from $329,479 for the nine months ended September 30, 1999.
Gross Profit. Gross profit increased to $72,605 for the three months ended
September 30, 2000 from $62,146 for the three months ended September 30, 1999
and to $193,905 for the nine months ended September 30, 2000 from $145,248 for
the nine months ended September 30, 1999. Gross margins decreased to 43.3%
from 47.0% and to 42.1% from 44.1% during these respective periods. The
decreases in gross margins are primarily due to the effect of increased costs
relating to 24 start-up locations over the past 21 months and soft rental
rates in some markets.
8
<PAGE>
Selling, General and Administrative Expenses. Selling, general and
administrative expenses increased to $33,340 for the three months ended
September 30, 2000 from $26,229 for the three months ended September 30, 1999
and to $94,395 for the nine months ended September 30, 2000 from $64,465 for
the nine months ended September 30, 1999. As a percentage of total revenues,
selling, general and administrative expenses remained constant at 19.9% for
the three months ended September 30, 2000 and 1999. As a percentage of total
revenues, selling, general and administrative expenses increased to 20.5% for
the nine months ended September 30, 2000 from 19.6% for the nine months ended
September 30, 1999. This increase is primarily the result of the acquisitions
in 1999 that have higher fixed costs as a percentage of revenues than the
Company and the result of higher costs associated with the start-up locations.
Non-rental Depreciation and Amortization. Non-rental depreciation and
amortization increased to $6,985 for the three months ended September 30, 2000
from $4,778 for the three months ended September 30, 1999 and to $20,564 for
the nine months ended September 30, 2000 from $12,351 for the nine months
ended September 30, 1999. These increases were due primarily to increased
amortization expense from the acquisition of additional businesses.
Interest Expense, net. Interest expense, net, increased to $21,628 for the
three months ended September 30, 2000 from $15,500 for the three months ended
September 30, 1999 and to $61,740 for the nine months ended September 30, 2000
from $41,834 for the nine months ended September 30, 1999. These increases
were due to additional debt necessary to complete the acquisition of
businesses during 1999, as well as an overall increase in interest rates on
the Company's revolving line of credit.
Liquidity and Capital Resources
The Company's primary capital requirements are for the purchasing of new
rental equipment and for acquisitions. The Company's other capital
expenditures include buying vehicles used for delivery and maintenance, and
for property, plant and equipment. The Company purchases rental equipment
throughout the year to replace equipment that has been sold as well as to
maintain adequate levels of equipment to meet existing and new customer needs.
Rental fleet purchases for the Company were $157,676 and $167,165 in the first
nine months of 2000 and 1999, respectively. The Company has substantially
completed its capital expenditure program for 2000.
For the nine months ended September 30, 2000 and 1999, the Company's net
cash provided by operations was $75,022 and $58,145, respectively. The
increase in 2000 was due primarily to higher earnings before depreciation and
amortization. For the nine months ended September 30, 2000 and 1999, the
Company's net cash used in investing activities was $148,301 and $380,315,
respectively. Net cash used in investing activities consists primarily of
expenditures for new acquisitions and purchases of rental equipment and
property and equipment. The decrease in 2000 was due primarily to reduced
acquisition activity. For the nine months ended September 30, 2000 and 1999,
the Company's net cash provided by financing activities was $46,016 and
$328,067, respectively. Net cash provided by financing activities consists
primarily of borrowings, net of repayments, under the Company's credit
facility. The decrease in 2000 was due primarily to reduced acquisition
spending, offset in part by the Company's increase in purchases of treasury
shares under its stock repurchase program during the nine months ended
September 30, 2000.
The Company's credit facility provides for a $100,000 term loan and a
revolving credit facility up to a maximum of $650,000 (subject to availability
based on certain financial tests including a borrowing base) to meet
acquisition needs, purchase rental equipment as well as seasonal working
capital and general corporate requirements. As of September 30, 2000, $640,000
was outstanding under the credit facility. Based upon the available borrowing
base at September 30, 2000, the Company had $109,950 available on the
revolving credit facility loan. The Company believes that its credit facility,
together with funds generated by operations, will provide the Company with
sufficient liquidity and capital resources in the near-term to finance its
operations and pursue its business strategy, including acquisitions. Over the
long-term, the Company will need additional financing to continue its
acquisition strategy.
9
<PAGE>
General Economic Conditions, Inflation and Seasonality
The Company's operating results may be adversely affected by 1) changes in
general economic conditions, including changes in construction and industrial
activity, or increases in interest rates or 2) adverse weather conditions that
may temporarily decrease construction and industrial activity in a particular
geographic area. Although the Company cannot accurately anticipate the effect
of inflation on its operations, management believes this has not had a
material impact on the Company's results of operations and is not likely to in
the foreseeable future.
The Company's revenues and operating results fluctuate due to the seasonal
nature of the industry in which the Company operates. This is more apparent in
the current year-to-date results because of the more seasonal nature of
businesses acquired during 1999 and the rental patterns of customers in its
new geographical regions (with rental activity tending to be lower in winter).
Recently Issued Accounting Pronouncements
Statement of Financial Accounting Standards ("SFAS") No. 133, "Accounting
for Derivative Instruments and Hedging Activities," requires an entity to
recognize all derivatives as either assets or liabilities in its statement of
financial position, and measure those instruments at fair value. The
accounting for changes in the fair value of a derivative depends on the
intended use of the derivative and the resulting designation. An entity that
elects to apply hedge accounting is required to establish at the inception of
the hedge the method it will use for assessing the effectiveness of the
hedging derivative, and the measurement approach for determining the
ineffective aspect of the hedge. Those methods must be consistent with the
entity's approach to managing risk. SFAS No. 133 is effective for the
Company's fiscal quarter beginning January 1, 2001. The Company has not yet
determined the impact the new statement may have on the consolidated financial
statements.
Staff Accounting Bulletin ("SAB") No. 101, "Revenue Recognition," provides
guidance on the recognition, presentation and disclosure of revenue in
financial statements filed with the Securities and Exchange Commission. The
SAB is effective for the Company's quarter beginning October 1, 2000. The
Company has evaluated the relevant revenue recognition criteria discussed in
this SAB and believes it should not have a material impact on the Company's
current accounting policies.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company's credit facility provides the Company with a $100 million term
loan and permits the Company to borrow up to an additional $650 million of
revolving loans provided that certain conditions and financial tests are met,
subject to a borrowing base. Borrowings under the credit facility bear
interest, at the Company's option, at a specified base rate or eurodollar rate
plus the applicable borrowing margin. At November 6, 2000, the Company had
total borrowings under the revolving facility and the term loan of $630
million, all of which is subject to interest rate risk. Each 1.0% increase in
interest rates on the unhedged variable rate debt would affect pretax earnings
by approximately $6.3 million.
The Company uses interest rate swap contracts to hedge the impact of
interest rate fluctuations on certain variable rate debt. The Company does not
hold or issue derivative financial instruments for trading or speculative
purposes. The interest rate swap fixed the interest rate at 4.51% on $150
million of variable rate debt through October 23, 2000. The interest
differential was paid or received on a monthly basis and recognized as a
component of interest expense.
Forward Looking Statements
Note: This document contains forward-looking statements as encouraged by the
Private Securities Litigation Reform Act of 1995. All statements contained in
this document, other than historical information, are forward-looking
statements. These statements represent management's current judgement on what
the future holds. A
10
<PAGE>
variety of factors could cause business conditions and the Company's actual
results to differ materially from those expected by the Company or expressed
in the Company's forward-looking statements. These factors include, without
limitation, the Company's ability to successfully integrate acquired
businesses; changes in market price or market demand; loss of business from
customers; unanticipated expenses; changes in financial markets; and other
factors discussed in the Company's filings with the Securities and Exchange
Commission.
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
Not applicable.
ITEM 2. CHANGES IN SECURITIES
Not applicable.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
Not applicable.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable.
ITEM 5. OTHER INFORMATION
Not applicable.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
See Index of Exhibits on page 13. The Company did not file any Current
Reports on Form 8-K for the quarterly period ended September 30, 2000.
11
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized on November 13, 2000.
National Equipment Services, Inc.
/s/ Dennis O'Connor
By: _________________________________
Dennis O'Connor
Chief Financial Officer
Form 10-Q: For the quarter ended September 30, 2000.
12
<PAGE>
INDEX OF EXHIBITS
<TABLE>
<CAPTION>
Exhibit
Number Description of Document
------- -----------------------
<C> <S> <C>
11.1 Statement re Computation of Per Share Earnings. Not required
because the relevant computations can be clearly determined from
the material contained in the financial statements included
herein.
21.1 Subsidiaries of the Company.(1)
27.1 Financial Data Schedule.
</TABLE>
--------
(1) Incorporated by reference to the Company's Quarterly Report on Form 10-Q
for the fiscal quarter ended March 31, 2000 (File No. 001-14163).
13
