United Rentals Board Acts Upon Special Committee Report
January 26, 2006 — The board of directors at United Rentals, Inc.,
The committee's report included several findings relating to the accounting for certain minor sale-leaseback transactions from December 2000 to March 2002 and trade packages from the fourth quarter of 2000 through 2002, including:
- Confirmation of its preliminary conclusion that there were irregularities with respect to six minor sale-leaseback transactions. The board also approved the company's previously announced plan to restate its results for those transactions.
- Conclusion that there were irregularities with respect to some trade packages that involved undisclosed inducements. The company has concluded that disclosure, rather than restatement, for these transactions is appropriate — the committee concurred.
- Findings regarding company practices in connection with equipment acquired in purchase business combinations between 1997 and August 2000 were disclosed, but the committee did not conclude that a restatement was necessary. The company continues to review the appropriate accounting treatment of these practices in connection with the preparation of its restated historical financial statements.
“The report by our special committee represents a significant step forward for the company,” said CEO Wayland Hicks. “By its actions today, the board has reaffirmed United Rentals' commitment to the highest standards of conduct in our business, in the interests of our shareholders and for the thousands of dedicated employees who have enabled United Rentals to become the leader in our industry. The misconduct by some of our employees found by the committee is unacceptable. The company remains fully committed to cooperating with the SEC in its inquiry.”
Hicks went on to say that the company is making progress toward finalizing its financial results for 2004. “We have been working diligently on concluding the restatements for minor sale-leaseback transactions and also for items which are unrelated to the special committee's review, including self-insurance reserves and income tax provisions,” he said.
Based upon recommendations by the special committee, the board directed a number of actions to address issues identified by the committee. These include the development and distribution of an acquisition accounting manual; development of a plan to centralize control of document retention; creation of more definitive job descriptions for corporate positions and more specific responsibilities for executives; scheduling of additional regular meetings between the chairman of the Audit Committee and the chief financial officer and the independent auditors; issuance of a policy statement clarifying the company's position regarding circumstances, if any, and requisite procedures, where sales to vendors may involve the company's forgoing marketing allowances or agreeing to other vendor incentives; potential establishment of regular schedules for package sales of equipment; issuance of a policy regarding package sales of equipment and sales to vendors; evaluation of potential claims against certain former company personnel; consideration by the Nominating and Corporate Governance Committee of designating a lead independent director, and a review of executive employment agreements to standardize agreements with appropriate terms.
The committee also reviewed with the board evidence regarding the conduct of a number of current company employees. On the committee's recommendation, the board directed the company to remove its corporate controller and principal accounting officer and its vice president • finance from their positions, although there was no finding of intentional wrongdoing on the part of these individuals. In addition, on the committee's recommendation, the board directed the company to dismiss two employees. Three other employees also received written reprimands. The committee also considered the actions of the company's chairman and its chief executive officer and did not find wrongdoing on their part.
For more commentary on the inquiry, read Publisher Guy Ramsey's Perspective.
