03.10.2004

Shareholders file suit against United Rentals

The law firms of Schiffrin & Barroway and Schatz & Nobel, have both released announcements that they have filed lawsuits seeking class action status in the United States District Court for the District of Connecticut on behalf of all persons who purchased the publicly traded securities of United Rentals, Inc between October 23, 2003 and August 30, 2004, inclusive.

The complaint charges United Rentals, Wayland R. Hicks, Bradley S. Jacobs, John N. Milne, and Joseph B. Sherk with violations of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 and Rule 10b-5.

Specifically they claim that the Company

1) Failed to disclose and misrepresented material adverse facts which were known to the defendants or recklessly disregarded by them in an effort to generate a more favorable stock price and raise capital, and that they manipulated its financial results through the use of restructuring charges, asset write downs, and debt refinancing;

(2) That the Company improperly delayed recognition of bad accounts receivable;

(3) That as a result of these manipulations, the Company's announced financial results were in violation of Generally Accepted Accounting Principles ("GAAP") and

4) That the Company's financial results were materially inflated at all relevant times.

The Plaintives seek to recover damages on behalf of class members.

Schiffrin & Barroway, prosecutes class actions in both state and federal courts throughout the USA and claims to be a driving force behind corporate governance reform, and has recovered in excess of a billion dollars on behalf of institutional and high net worth individual investors.

United Rentals have declined to comment at this time, but have said that United Rentals will cooperate with the Securities and Exchange Commission (SEC).

The suit references Sky Reach Equipment Ltd of St. Albert, Alberta, Canada Which United purchased at the beginning of this year after Skyreach had filed for creditor protection, the Canadian equivalent of chapter 11 in the USA. Skyreach Equipment an Aerial lift specialist was heavily indebted when it filed and was 25 in the RER top 100 rental companies with sales of around $40 million and 13 locations mainly in British Columbia and Alberta. United paid $54 million for the business.

A few weeks ago United Rentals announced that it had received notice that the SEC would conduct a fact-finding inquiry into the company(See Vertikal.Net September 6th). As is usual in these circumstances the notice stated that the inquiry does not mean that the SEC has concluded that the company has broken the law or that the SEC has a negative opinion of the company or its employees. The notice was accompanied by a subpoena requesting the production of documents relating to certain of the company's accounting records, but did not specify the purpose of the inquiry.

In addition to the above United Rentals said last week that it is likely to take a non-cash charge in the third quarter for the impairment of goodwill relating to the company’s traffic control business. The company also said that it can't currently quantify the amount of the charge.

A release from United quotes John Milne, United Rentals’ president and CFO, “As we previously disclosed in our second quarter 10-Q, continued weakness in our traffic control business may necessitate a goodwill write-off. The goodwill balance of our traffic control business was $140.5 million at the end of the second quarter.

“We continue to see weakness in our traffic control business,” Milne said “Although disappointing, the weakness in this segment was anticipated in our previously issued earnings guidance. As a result of this weakness, we believe it likely that we will be required to record a significant non-cash goodwill impairment charge in the third quarter. We have not yet completed our analysis and, accordingly, currently cannot quantify the amount of this write-off. However, we expect that this write-off is likely to have a material adverse affect on our GAAP results for the third quarter and full-year 2004.”

United shares have dropped from around $21 to a range last week of between $14 and $15 per share a fall of around 30 percent. United Rentals is the world’s largest rental company with over 730 locations in North America. It also operates the largest fleet of aerial lifts in the world with over 60,000 units. Revenues for 2003 were $2.9 billion.