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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

 

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FORM 11-K

 

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ANNUAL REPORT

PURSUANT TO SECTION 15(d) OF THE SECURITIES

EXCHANGE ACT OF 1934

 

x	Annual Report pursuant to Section 15(d) of the Securities Exchange Act of 1934

For the fiscal year ended December 31, 2006

Or

 

¨	Transition Report pursuant to Section 15(d) of the Securities Exchange Act of 1934

For the transition period from              to             

Commission File Number 1-14387

 

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A.	Full title of the plan and the address of the plan, if different from that of the issuer named below:

United Rentals, Inc. 401(k) Investment Plan

 

B.	Name of issuer of the securities held pursuant to the plan and the address of its principal executive office:

United Rentals, Inc.

Five Greenwich Office Park

Greenwich, Connecticut 06831

 

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ANNUAL REPORT ON FORM 11 - K

FINANCIAL STATEMENTS AND SUPPLEMENTAL SCHEDULE

United Rentals, Inc. 401(k) Investment Plan

Year Ended December 31, 2006 and 2005

With Report of Independent Auditors

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Annual Report on Form 11-K

United Rentals, Inc. 401(k) Investment Plan

Financial Statements

and Supplemental Schedule

December 31, 2006 and 2005

Contents

 

Report of Independent Registered Public Accounting Firm		1
Financial Statements
Statements of Net Assets Available for Benefits as of December 31, 2006 and 2005		2
Statements of Changes in Net Assets Available for Benefits for the Years Ended December 31, 2006 and 2005		3
Notes to Financial Statements		4
Supplemental Schedule
Schedule H, Line 4(i)—Schedule of Assets (Held at End of Year)		10
Consent of Independent Registered Public Accounting Firm		Exhibit 23

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Report of Independent Registered Public Accounting Firm

To United Rentals, Inc. Benefits and Retirement Committee

We have audited the accompanying statements of net assets available for benefits of United Rentals, Inc. 401(k) Investment Plan as of December 31, 2006 and 2005, and the related statements of changes in net assets available for benefits for the years then ended. These financial statements are the responsibility of the Plan’s management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. We were not engaged to perform an audit of the Plan’s internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Plan’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the net assets available for benefits of the Plan at December 31, 2006 and 2005, and the changes in its net assets available for benefits for the years then ended, in conformity with U.S. generally accepted accounting principles.

Our audits were performed for the purpose of forming an opinion on the financial statements taken as a whole. The accompanying supplemental schedule of assets (held at end of year) as of December 31, 2006, is presented for purposes of additional analysis and is not a required part of the financial statements but is supplementary information required by the Department of Labor’s Rules and Regulations for Reporting and Disclosure under the Employee Retirement Income Security Act of 1974. This supplemental schedule is the responsibility of the Plan’s management. The supplemental schedule has been subjected to the auditing procedures applied in our audits of the financial statements and, in our opinion, is fairly stated in all material respects in relation to the financial statements taken as a whole.

/s/ Ernst & Young LLP

New York, New York

June 4, 2007

 

1

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United Rentals, Inc. 401(k) Investment Plan

Statements of Net Assets Available for Benefits

 

		December 31
		2006			2005
Assets:
Cash		$	694		$	1,235
Investments, at fair value:
United Rentals, Inc. Common Stock			5,782,540			6,537,446
T. Rowe Price Equity Index Trust			19,549,195			16,973,837
T. Rowe Price Tradelink Investments			148,089			214,865
Mutual Funds:
T. Rowe Price Spectrum Bond Income Fund			10,039,418			9,056,185
T. Rowe Price Balanced Fund			7,081,419			5,156,953
T. Rowe Price Blue Chip Growth Fund			15,348,510			13,272,108
T. Rowe Price Growth and Income Fund			6,549,690			5,004,384
T. Rowe Price International Stock Fund			10,775,382			8,122,583
T. Rowe Price New Horizons Fund			16,820,277			15,794,431
T. Rowe Price Prime Reserve Fund			22,334,239			19,884,384
T. Rowe Price Retirement Income Fund			430,876			198,081
T. Rowe Price Retirement 2005 Fund			340,846			205,140
T. Rowe Price Retirement 2010 Fund			2,327,072			985,297
T. Rowe Price Retirement 2015 Fund			1,855,877			518,123
T. Rowe Price Retirement 2020 Fund			6,000,721			2,473,648
T. Rowe Price Retirement 2025 Fund			3,868,757			945,280
T. Rowe Price Retirement 2030 Fund			7,604,834			3,236,571
T. Rowe Price Retirement 2035 Fund			3,315,703			749,658
T. Rowe Price Retirement 2040 Fund			4,491,187			1,622,360
T. Rowe Price Retirement 2045 Fund			681,796			55,413
T. Rowe Price Science & Technology Fund			—			4,842,695
T. Rowe Price Value Fund			17,181,047			13,945,860
T. Rowe Price Small Cap Value			1,116,182			—
Total mutual funds			138,163,833			106,069,154
Participant loans			8,188,682			6,804,873
Company contributions receivable			173,437			38,210
Participants contributions receivable			595,513			201,171
Total assets			172,601,983			136,840,791
Liabilities:
Refunds due to participants for excess contributions			—			26,098
Net assets available for benefits		$	172,601,983		$	136,814,693

See accompanying notes.

 

2

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United Rentals, Inc. 401(k) Investment Plan

Statements of Changes in Net Assets Available for Benefits

 

		Year Ended December 31
		2006				2005
Additions
Contributions:
Participants		$	23,393,279			$	18,674,484
Company			7,470,396				4,826,088
Rollovers			2,674,096				1,774,006
Investment income:
Interest and dividend income			5,587,303				3,435,917
Net change in realized and unrealized appreciation/ depreciation in fair value of investments			12,098,772				5,289,902
			51,223,846				34,000,397
Deductions
Benefits paid directly to participants			(15,271,128	)			(10,742,429	)
Administrative fees			(165,428	)			(224,236	)
Net increase			35,787,290				23,033,732
Net assets available for benefits, beginning of year			136,814,693				113,780,961
Net assets available for benefits, end of year		$	172,601,983			$	136,814,693

See accompanying notes.

 

3

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United Rentals, Inc. 401(k) Investment Plan

Notes to Financial Statements

December 31, 2006

1. Description of the Plan

The following description of the United Rentals, Inc. 401(k) Investment Plan (the “Plan”) provides only general information. Participants should refer to the Plan document for a more complete description of the Plan’s provisions.

General

The Plan is a defined contribution plan, which was established by United Rentals, Inc. (the “Company” or “Plan Sponsor”) on May 1, 1998. All employees are eligible to participate in the Plan following completion of three months of employment and effective January 1, 2006 as of their hire date (provided they have reached the minimum age of 21 years and are a resident of the United States). The Plan has been designed to allow tax deferred contributions by the participants with discretionary Company contributions. The Plan is subject to provisions of the Employee Retirement Income Security Act of 1974 (ERISA).

Contributions

Participants may elect to contribute up to 50% of their annual wages paid by the Company, limited to $15,000 and $14,000 per annum (plus catch-up contributions for participants age 50 and over of $5,000 and $4,000) in 2006 and 2005, respectively, (subject to certain additional limitations for highly compensated employees as defined under the Internal Revenue Code). Participants can suspend their contributions at any time and still remain in the Plan. Participants can resume contributions and can change their elected contribution rate at any time.

The Company may contribute a discretionary amount to the Plan, which amount is determined annually. During the years ended December 31, 2006 and 2005, the Company contributed 50% of the first 6% of each participant’s compensation up to a maximum contribution of $2,000 and $1,500, respectively. Company matches historically have begun on January 1 or July 1 following twelve months of employment with the Company. Effective January 1, 2006, participants became eligible for Company matches following three months of employment.

Participant Accounts

Each participant account is credited with the participant’s share of the Company’s discretionary contribution, if any, assets transferred to this Plan from the participant’s prior employer plan, the participant’s share of the net earnings or losses on the investments of the assets of the Plan, distributions from the participant’s account, and any expenses or liabilities charged to the participant’s account.

 

4

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United Rentals, Inc. 401(k) Investment Plan

Notes to Financial Statements (continued)

 

1. Description of the Plan (continued)

Vesting

Participants are always 100% vested in their contributions plus actual earnings thereon. Company contributions plus actual earnings thereon begin vesting 20% per year after one year of service and are 100% vested after five years of service (365 days minimum service per year). Forfeitures of Company contributions, which aggregated $216,366 for 2006 and $139,617 for 2005, are applied to reduce future Company contributions or to pay for Plan administrative expenses.

Investment Options

All of the Plan’s investment options are fully participant directed. The Plan’s custodian is T. Rowe Price Trust Company.

Participants Loans

Participants may borrow from their vested balances in the Plan, subject to certain restrictions and limitations set forth in the Plan document and the Internal Revenue Code. Loan terms range from one to five years for personal loans and up to a reasonable period of time as established by the Plan administrator for the purchase of a primary residence. The loans are secured by the vested balance in the participant’s account and bear interest at a rate determined by the Plan administrator. Interest rates on outstanding loans range from 5.50% to 10.50%. Principal and interest are paid ratably through payroll deductions.

Distributions and Withdrawals

Upon retirement, termination of employment, or proven hardship, a participant may make withdrawals from their account. Hardship withdrawals must be authorized by the Plan administrator and are subject to the requirements and limitations set forth in the Plan document, the Internal Revenue Code and the regulations thereunder.

 

5

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United Rentals, Inc. 401(k) Investment Plan

Notes to Financial Statements (continued)

 

1. Description of the Plan (continued)

Administrative Expenses

A portion of the Plan’s administrative expenses are paid by the Company. All investment related expenses, and the balance of administrative expenses, are borne by the participants.

Plan Termination

Although it has not expressed any intent to do so, the Company has the right under the Plan to discontinue its contributions at any time and terminate the Plan subject to the provisions of ERISA. In the event that the Plan is terminated, the participants will become 100% vested in their accounts.

2. Summary of Significant Accounting Policies

Basis of Accounting

The Plan’s financial statements are prepared on the accrual basis of accounting.

Investments and Income Recognition

The Plan’s investments are stated at fair value as of the last trading date for periods presented. The fair value for common stock and mutual fund investments was measured by quoted prices in an active market. The T. Rowe Price Equity Index Trust is an underlying trust of a T. Rowe Price Common Trust Fund. The Plan’s accounting for the T. Rowe Price Equity Index Trust is based on the redemption value of the Plan’s units of participation in the T. Rowe Price Common Trust Fund. The redemption value is based on the fair market value of the underlying investments, as determined by the Plan’s custodian. Participant loans are valued at their outstanding principal balances, which approximate fair value.

Purchases and sale of securities are recorded on a trade-date basis. Interest income is recorded on the accrual basis. Dividends are recorded on the ex-dividend date.

Use of Estimates

The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates.

 

6

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United Rentals, Inc. 401(k) Investment Plan

Notes to Financial Statements (continued)

 

3. Income Tax Status

The Plan has received a determination letter from the Internal Revenue Service dated April 19, 2004, stating that the Plan is qualified under Section 401(a) of the Internal Revenue Code (the “Code”) and, therefore, the related trust is exempt from taxation. Subsequent to this determination by the Internal Revenue Service, the Plan was amended. Once qualified, the Plan is required to operate in conformity with the Code to maintain its qualification. The Plan administrator believes the Plan is being operated in compliance with the applicable requirements of the Code, and, therefore, believes that the Plan, as amended, is qualified and the related trust is tax exempt. If it were necessary, however, the Company, as Plan Sponsor, has indicated that it would take the necessary steps to bring the Plan’s operations into compliance with the Code.

4. Investments

During 2006 and 2005, the Plan’s investments (including investments purchased, sold, or held during the period) appreciated (depreciated) in fair value as follows:

 

		Year Ended December 31
		2006				2005
T. Rowe Price Spectrum Bond Income Fund		$	318,600			$	(217,275	)
T. Rowe Price Balanced Fund			465,323				25,740
T. Rowe Price Blue Chip Growth			1,294,163				748,563
T. Rowe Price Growth and Income Fund			410,550				(397,759	)
T. Rowe Price International Stock Fund			1,176,876				970,853
T. Rowe Price New Horizons Fund			253,467				1,167,292
T. Rowe Price Retirement Income Fund			15,938				4,219
T. Rowe Price Retirement 2005 Fund			16,043				4,648
T. Rowe Price Retirement 2010 Fund			135,216				29,473
T. Rowe Price Retirement 2015 Fund			113,910				16,069
T. Rowe Price Retirement 2020 Fund			441,330				104,842
T. Rowe Price Retirement 2025 Fund			258,067				36,493
T. Rowe Price Retirement 2030 Fund			635,510				186,552
T. Rowe Price Retirement 2035 Fund			258,211				26,349
T. Rowe Price Retirement 2040 Fund			373,057				82,058
T. Rowe Price Retirement 2045 Fund			47,139				1,855
T. Rowe Price Science & Technology Fund			231,187				126,795
T. Rowe Price Value Fund			2,238,821				283,928
T. Rowe Price Small Cap Value Fund			14,705				—
T. Rowe Price Tradelink Investments			(36,762	)			7,245
T. Rowe Price Equity Index Trust			2,619,247				780,405
United Rentals, Inc. Common Stock			818,174				1,301,557
		$	12,098,772			$	5,289,902

 

7

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United Rentals, Inc. 401(k) Investment Plan

Notes to Financial Statements (continued)

 

5. Contingencies

In August 2004, the Company received notice from the Securities and Exchange Commission (the “SEC”) that it was conducting a non-public, fact-finding inquiry of the Company. The SEC inquiry appears to relate to a broad range of the Company’s accounting practices and is not confined to a specific period. In March 2005, the Company’s Board of Directors formed a Special Committee of independent directors to review matters related to the SEC inquiry. The Company’s Board of Directors received and acted upon findings of the Special Committee in January 2006. The SEC inquiry, the actions that the Company took with respect to the Special Committee’s findings, and actions that the Company took with respect to certain other accounting matters, including the restatement of previously issued consolidated financial statements for 2003 and 2002, are discussed in further detail in Notes 3 and 17 to the Company’s consolidated financial statements included in its annual report on Form 10-K for 2005 (the “2005 Form 10-K”) and also summarized in the Company’s press release and related report on Form 8-K dated January 26, 2006. The SEC inquiry is ongoing and the Company is continuing to cooperate fully with the SEC. The U.S. Attorney’s office for the District of Connecticut has also requested information from the Company informally and by subpoena about matters related to the SEC inquiry. The Company is also cooperating fully with this office.

Following the Company’s announcement of the SEC inquiry, a number of purported class action lawsuits were filed against the Company. In addition, a number of alleged shareholders commenced actions by which they purported to sue derivatively on behalf of the Company. These matters are discussed in further detail in Note 17 to the Company’s consolidated financial statements included in the 2005 Form 10-K. Following the Company’s filing of the 2005 Form 10-K, amended complaints in certain of these actions have been filed that, among other things, add allegations relating to the conclusions of the Special Committee and the other matters disclosed in the 2005 Form 10-K, as well as, in the case of the class actions (which have been consolidated), expand the purported class period. Reference should be made to Note 5 to the Company’s consolidated financial statements included in its quarterly report on Form 10-Q for the quarterly period ended March 31, 2007 for the most recent summary of the status of these matters.

At December 31, 2006 and December 31, 2005, the Plan had $5.8 million or 3.4%, and $6.5 million or 4.8%, respectively, of its total assets invested in the United Rentals, Inc. Common Stock.

 

8

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United Rentals, Inc. 401(k) Investment Plan

Notes to Financial Statements (continued)

 

6. Risks and Uncertainties

The Plan invests in various investment securities. Investment securities are exposed to various risks such as interest rate, market and credit risks. Due to the level of risk associated with certain investment securities, it is at least reasonably possible that changes in the values of investment securities will occur in the near term and that such changes could materially affect participants’ account balances and the amounts reported in the statements of net assets available for benefits.

7. Subsequent Event

In December 2006, the Company entered into a definitive agreement to sell its traffic control business to HTS Acquisition, Inc (“HTS”). The transaction closed in February 2007. HTS established a 401(k) plan for the traffic control employees and after the sale transaction closed, investments of approximately $15.2 million were transferred out of the Plan.

In April 2007, the Company announced that its board of directors had authorized the commencement of a process to explore a broad range of strategic alternatives to maximize shareholder value, including a possible sale of the Company, and had retained financial advisors in this process. There can be no assurance that the exploration of alternatives will result in a transaction.

 

9

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Supplemental Schedule

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United Rentals, Inc. 401(k) Investment Plan

EIN: 06-1493538

Plan #: 001

Schedule H, Line 4(i)—Schedule of Assets (Held at End of Year)

December 31, 2006

 

Identity of Issue, Borrower, Lessor or Similar Party		Description of Investment, Including Maturity Date, Rate of Interest, Par or Maturity Value		Shares/ Units		Current Value as of December 31, 2006
T. Rowe Price Trust Company*		Spectrum Bond Income Fund		823,578		$	10,039,418
		Balanced Fund		332,617			7,081,419
		Blue Chip Growth Fund		429,569			15,348,510
		Growth and Income Fund		295,831			6,549,690
		International Stock Fund		620,249			10,775,382
		New Horizons Fund		520,913			16,820,277
		Prime Reserve Fund		22,334,239			22,334,239
		Retirement Income Fund		32,816			430,876
		Retirement 2005 Fund		29,358			340,846
		Retirement 2010 Fund		146,633			2,327,072
		Retirement 2015 Fund		150,030			1,855,877
		Retirement 2020 Fund		345,863			6,000,721
		Retirement 2025 Fund		300,836			3,868,757
		Retirement 2030 Fund		409,082			7,604,834
		Retirement 2035 Fund		251,762			3,315,703
		Retirement 2040 Fund		239,530			4,491,187
		Retirement 2045 Fund		55,117			681,796
		Value Fund		635,159			17,181,047
		Small-Cap Value Fund		27,085			1,116,182
		Equity Index Trust		472,203			19,549,195
		Tradelink Investments (see detail of investments in the Tradelink Investments on pages 11-12)					148,089
United Rentals, Inc.*		United Rentals, Inc. Common Stock		227,391			5,782,540
							163,643,657
Participant loans*		Interest rates range from 5.50% to 10.50%; maturities ranging from 3 months to 30 years					8,188,682
						$	171,832,339

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*	Indicates party-in-interest to the Plan.

 

Note:

The “Cost” column is not applicable because all of the Plan’s investment options are participant directed.

 

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United Rentals, Inc. 401(k) Investment Plan

EIN: 06-1493538

Plan #: 001

Schedule H, Line 4(i)--Schedule of Assets (Held at End of Year) (continued)

December 31, 2006

 

Identity of Issue, Borrower, Lessor or Similar Party		Description of Investment, Including Maturity Date, Rate of Interest, Par or Maturity Value		Shares/ Units		Current Value as of December  31, 2006
T. Rowe Price Trust Company*		Tradelink Investments:
		Stocks:
		Auduiocodes, LTD		2		$	38
		Alcatel Lucent Sponsored ADR		19			270
		Amalot Holding, Inc.		10			—
		American Unity Investments, Inc.		4			1
		Banro Corp.		1			13
		Biovail Corp.		60			1,269
		Buffalo Gold Ltd.		6			11
		Cyop Systems Intl		10			—
		China Direct Trading Corp		5,310			186
		Consortium Service Management Group, Inc.		25			8
		Curagen Corp.		100			460
		Dell, Inc		150			3,764
		Dragon International Group		800			104
		ESS Technology Inc.		100			103
		8x8, Inc.		2,000			2,340
		First Pet Life, Inc.		5			—
		Galton Biometrics, Inc.		1,000			5
		Gen-ID Lab Services		10			—
		General Electric Company		100			3,721
		Generex Biotechnology Corp.		750			1,170
		Global 1 Investment Holdings Corp.		2,100			57
		Harvard Learning Centers, Inc.		400			44
		Home Depot, Inc.		35			1,406
		Jordan Kane Floor Coverings, Inc.		5			—
		Lockheed Martin Corp.		9			832
		M Wise, Inc		50			3
		Mirant Corp		1,080			—
		Napco Security Systems		150			881
		Nutralogix laboratories, Inc.		136			—
		Penn West Energy Trust		90			2,750
		Pfizer, Inc.		60			1,554
		Pingchuan Pharmaceutical, Inc.		1,305			170
		Poseidis, Inc.		3			—

 

11

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United Rentals, Inc. 401(k) Investment Plan

EIN: 06-1493538

Plan #: 001

Schedule H, Line 4(i)--Schedule of Assets (Held at End of Year) (continued)

December 31, 2006

 

Identity of Issue, Borrower, Lessor or Similar Party		Description of Investment, Including Maturity Date, Rate of Interest, Par or Maturity Value		Shares/ Units		Current Value as of December  31, 2006
T. Rowe Price Trust Company*		Tradelink Investments:
		Stocks:
		Provident Energy Trust		50		$	546
		Realty Income Corp.		200			5,540
		Roboserver Systems Corp.		1			—
		Saba Software Inc.		100			623
		Sirius Satellite Radio Inc.		3,300			11,682
		Stratex Networks, Inc.		100			483
		Sulja Brothers Building Supplies Ltd.		2,005			22
		Sun Microsystems, Inc.		50			271
		Suntron Corp.		10			11
		Think Partnership, Inc.		30			97
		Three Five Systems, Inc.		10			1
		Tuesday Morning Corp.		200			3,110
		Veriphone Holdings, Inc.		50			1,770
		Xechem Intl., Inc.		500			13
		Zoran Corporation		69			1,006
		Mutual Funds:
		Oakmark Global Fund		408			10,311
		Vanguard Windsor II Fund		174			6,046
		Vanguard Index Trust Total Stock Market Index Fund		1,644			56,058
		Prime Reserve		29,339			29,339
						$	148,089

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*	Indicates party-in-interest to the Plan.

 

12

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SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the trustees (or other persons who administer the employee benefit plan) has duly caused this annual report to be signed on its behalf by the undersigned hereunto duly authorized.

 

June 7, 2007

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EXHIBIT INDEX

 

Exhibit Number		Exhibit Description
23		Consent of Independent Registered Public Accounting Firm