UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
PFORM 10-KURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 | | | | | |
| (Mark One) | |
| ☒ | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the fiscal year ended December 31, 2019 | 2021 |
| OR | |
| ☐ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
| For the transition period from ___ to ___ | |
| |
Commission File Number: 001-37552 | |
WILLSCOT CORPORATIONMOBILE MINI HOLDINGS CORP.
(Exact name of registrant as specified in its charter)
| | | | | |
| Delaware | 82-3430194 |
| (State or other jurisdiction of incorporation) | (I.R.S. Employer Identification No.) |
901 S. Bond Street, #6004646 E Van Buren St., Suite 400
Baltimore, Maryland 21231Phoenix, Arizona 85008
(Address of principal executive offices)
(410) 931-6000(480) 894-6311
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
| | | | | | | | |
| Title of Each Class | Trading Symbol(s) | Name of Each Exchange on Which Registered |
Class A common stock,Common Stock, par value $0.0001 per share | WSC | The Nasdaq Capital Market |
Warrants to purchase Class A common stock(1)Common Stock | WSCWW(1) | OTC Markets Group Inc. |
Warrants to purchase Class A common stock(2) | WSCTW | OTC Markets Group Inc. |
(1) Issued in connection with the registrant's acquisition of Modular Space Holdings, Inc. in August 2018, which are exercisable for one share of the registrant's common stock at an exercise price of $15.50 per share.
Securities registered pursuant to Section 12(g) of the Act: None.
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐☒ No ☒☐
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐ No ☒
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 ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulations S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| | | | | |
Large accelerated filer ☒ | Accelerated filer ☐ |
Non-accelerated filer ☐ | Smaller reporting company ☐ |
| Emerging growth company ☐ |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant has filed a report on and attestation to its management's assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☒
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐ No ☒
The aggregate market value of the common shares held by non-affiliates of the registrant, computed as of June 30, 20192021 (the last business day of the registrant’s most recently completed second quarter), was approximately $848,851,148.roximately $5.5 billion.
Shares of Class A common stock,Common Stock, par value $0.0001 per share, outstanding: 110,316,368outstanding: 223,277,733 shares at February 27, 2020.21, 2022
Shares of Class B common stock, par value $0.0001 per share, outstanding: 8,024,419 shares at February 27, 2020.
Documents Incorporated by Reference
The information required by Part III of this Report, to the extent not set forth herein, is incorporated herein by reference from the registrant's definitive proxy statement relating tofor the Annual Meeting2022 annual meeting of Shareholders to be held in 2020,stockholders, which definitive proxy statement will be filed with the Securities and Exchange Commission within 120 days after the end of the fiscal year to which this Report relates.
WILLSCOT CORPORATIONWillScot Mobile Mini Holdings Corp.
Annual Report on Form 10-K
Table of Contents
Cautionary Note Regarding Forward Looking Statements
This Annual Report on Form 10-K contains forward-looking statements within the meaning of the US Private Securities Litigation Reform Act of 1995 and Section 21E of the Securities Exchange Act. The words “estimates,” “expects,” “anticipates,” “believes,” “forecasts,” “plans,” “intends,” “may,” “will,” “should,” “shall,” “outlook,” “guidance” and variations of these words and similar expressions identify forward-looking statements, which are generally not historical in nature and relate to expectations for future financial performance or business strategies or objectives. Forward-looking statements are subject to a number of risks, uncertainties, assumptions and other important factors, many of which are outside our control, which could cause actual results or outcomes to differ materially from those discussed in the forward-looking statements. Although we believe that these forward-looking statements are based on reasonable assumptions, we can give no assurance that any such forward-looking statement will materialize. Important factors that may affect actual results or outcomes include, among others:
•our ability to successfully acquire and integrate new operations;
•the effect of global or local economic conditions in the industries and markets in which the Company operates and any changes therein, including financial market conditions and levels of end market demand;
•operational, economic, political and regulatory risks;
•the impact of public health crises, such as the global pandemic related to COVID-19, including the financial condition of the Company’s customers and suppliers and employee health and safety;
•risks associated with cybersecurity and IT systems disruptions, including our ability to manage the business in the event a disaster shuts down our management information systems;
•effective management of our rental equipment;
•trade policies and changes in trade policies, including the imposition of tariffs, their enforcement and downstream consequences;
•our ability to effectively compete in the modular space, portable storage and tank and pump industries;
•our ability to effectively manage our credit risk, collect on our accounts receivable, or recover our rental equipment;
•the effect of changes in state building codes on our ability to remarket our buildings;
•foreign currency exchange rate exposure;
•fluctuations in interest rates and commodity prices;
•significant increases in the costs and restrictions on the availability of raw materials and labor;
•fluctuations in fuel costs or oil prices, a reduction in fuel supplies, or a sustained decline in oil prices;
•our reliance on third party manufacturers and suppliers;
•risks associated with labor relations, labor costs and labor disruptions;
•impairment of our goodwill, intangible assets and indefinite-life intangible assets;
•various laws and regulations, including those governing government contracts, corruption and the environment;
•changes in the competitive environment of our customer base as a result of the global, national or local economic climate in which they operate and/or economic or financial disruptions to their industry;
•our ability to adequately protect our intellectual property and other proprietary rights that are material to our business;
•natural disasters and other business disruptions such as pandemics, fires, floods, hurricanes, earthquakes and terrorism;
•our ability to establish and maintain the appropriate physical presence in our markets;
•property, casualty or other losses not covered by our insurance;
•our ability to close our unit sales transactions;
•our ability to maintain an effective system of internal controls and accurately report our financial results;
•evolving public disclosure, financial reporting and corporate governance expectations;
•our ability to achieve our environmental, social and governance goals;
•our ability to use our net operating loss carryforwards and other tax attributes;
•our ability to recognize deferred tax assets such as those related to our tax loss carryforwards and, as a result, utilize future tax savings;
•unanticipated changes in tax obligations, adoption of a new tax legislation, or exposure to additional income tax liabilities;
•our ability to access the capital and credit markets or the ability of key counterparties to perform their obligations to us:
•our ability to service our debt and operate our business;
•our ability to incur significant additional amounts of debt, which could further exacerbate the risks associated with our substantial indebtedness;
•covenants that limit our operating and financial flexibility;
•uncertainty regarding the phase-out of LIBOR;
•our stock price volatility; and
•other factors detailed under the section entitled "Risk Factors."
Any forward-looking statement speaks only at the date which it is made, and we undertake no obligation, and disclaim any obligation, to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law.
PART I
ITEM 1. Business
Unless the context otherwise requires, “we,” “us,” “our” and the “Company” refers to WillScot CorporationMobile Mini Holdings Corp. ("WillScot"WillScot Mobile Mini") and its subsidiaries.
Our Company
Headquartered in Baltimore, Maryland,Phoenix, Arizona, we are a market leaderleading business services provider specializing in the North America specialty rental services industry. We provide innovative modularflexible work space and portable storage solutions tosolutions. We service diverse end markets utilizingacross all sectors of the economy from a branch network ofapproximately 120275 branch locations and additional drop lots throughout the United States (“US”), Canada, Mexico, and Mexico.the United Kingdom ("UK"). We are also a leading provider of specialty containment solutions in the US.
With roots dating back more than 60 years, we lease modular space and portable storage units (our “lease fleet”) to customers in the commercial and industrial, construction, education, energy and natural resources, government, and other end markets. We deliveroffer our customers an extensive selection of “Ready to Work” solutions. As part of our "Ready to Work" solutions, through our growing offering ofwe offer value-added products and services, (“VAPS”), such as the rental of steps, ramps, and furniture packages, damage waivers, and other amenities.amenities to improve the overall customer experience. These turnkey solutions offer customers flexible, low-cost, and timely solutions to meet their flexible work space and storage needs on an outsourced basis. We complement our core leasing business by selling both new
On July 1, 2020, WillScot Corporation ("WillScot") combined with Mobile Mini, Inc. ("Mobile Mini") in a stock-for-stock merger (the "Merger"), and used units, allowing usWillScot changed its name to leverage our scale, achieve purchasing benefits and redeploy capital employed in our lease fleet.
WillScot Mobile Mini Holdings Corp. WillScot Mobile Mini is the holding company for the Williams Scotsman familyand Mobile Mini families of companies. AllThe Company operates in four reportable segments as follows: North America Modular Solutions ("NA Modular"), North America Storage Solutions ("NA Storage"), United Kingdom Storage Solutions ("UK Storage"), and Tank and Pump Solutions ("Tank and Pump"). Prior to the third quarter of our2021, the NA Modular segment aligned with the WillScot legacy business prior to the Merger, and the NA Storage, UK Storage, and Tank and Pump segments aligned with the Mobile Mini segments prior to the Merger. During the third quarter of 2021, the majority of the portable storage product business within the NA Modular segment was transitioned to the NA Storage segment, and associated revenues, expenses, and operating metrics beginning in the third quarter of 2021 were transferred to the NA Storage segment. Within this Annual Report on Form 10-K, we have presented certain financial information on a pro forma basis and supplemental pro forma financial statements within assetsManagement’s Discussion and Analysis of Financial Condition and Results of Operations to include Mobile Mini's results as if the Merger and related financing transactions had occurred on January 1, 2019, as we believe this is a better representation of the go-forward operations are owned through Williams Scotsman Holdings Corp. (“WS Holdings”). We operateof the combined company, and own 91.0%we believe this information is useful to investors in order for them to better understand the combined historical financial results of WS Holdings, and Sapphire Holding S.a r.l (“Sapphire”), an affiliate of TDR Capital LLP ("TDR Capital"), owns the remaining 9.0%.legacy businesses for comparative purposes.
Products and Services
Modular Space Solutions
Our modular space and portable storage units are used to meet a broad range of customer needs. Our modular units are typically made of wood, steel and aluminum frames, as well as traditional building materials, and range from standalone portable units as small as 24 square feet to large complex units that can be coupled together or aluminum frames mounted on a steel chassis,stacked to create versatile work spaces in excess of 10,000 square feet. In all cases, we deploy modular units to customers rapidly from our extensive branch network using our hybrid in-house and typically rangeoutsourced logistics and service infrastructure. We specialize in size from 8turnkey ‘Ready to 14 feet in width and 16 to 70 feet in length. MostWork’ solutions, which means our units arecan arrive fully equipped with air conditioning, heating, and heating,filtration units, electrical and Ethernet cable outletsports, plumbing and if necessary, plumbing facilities.utility hookups, as well as our proprietary line of furnishings and appliances, which we together refer to as Value-Added Products and Services (“VAPS”). Our unitsunits are transported by truck, either towed (if fitted with axles and hitches) or mounted on flat-bed trailers. Additionally, we offer VAPS along
Modular space units have attractive economic characteristics, and our ability to lease and maintain our assets’
profitability over economic lives, which often exceed 20 years, is a unique capability and competitive advantage. We utilize standard fleet maintenance procedures across the branch network, monitor fleet condition and allocate capital expenditures centrally, and ensure all units meet consistent quality and condition requirements, regardless of unit age, prior to delivery to a customer. Modular leasing is complemented by new unit sales and sales of rental units. In connection with our leasing and sales activities, we provide services including delivery and installation, maintenance and ad hoc services, and removal services at the end of lease fleet (collectively, “rental equipment”) in order to deliver “Ready to Work” solutions to our customers.
Modular Space Solutionstransactions.
Panelized and Stackable Offices. Our FlexTM panelized and stackable offices are the next generation of modular space technology and offer maximum flexibility and design configurations. These units provide a modern, innovative design, smaller footprint, ground level access, and interchangeable panels, including all glass panels that allow customers to configure the space to their precise requirements. These units have the ability to expand upwards (up to three stories) and outwards.outwards, providing maximum versatility.
Single-Wide Modular Space Units.Single-wide modular space units include mobile offices and sales offices. These units offer maximum ease of installation and removal and are deployed across the broadest range of applications in our fleet. These units typically have “open interiors”interiors,” which can be modified using movable partitions, and include tile floors, air conditioning, heating, and heatingfiltration units, partitions and if requested, toilet facilities.
Section Modulars and Redi-Plex.Section modulars are two or more units combined into one structure. Redi-Plex complexes offer advanced versatility for large, open floor plans or custom layouts with private offices. Redi-Plex is built with clearspan construction, which eliminates interference from support columns and allows for up to sixty feet of open building width and building lengths that increase in twelve foottwelve-foot increments based on the number of units coupled together. Our proprietary design meets a wide range of national and state building, electrical, mechanical, and plumbing codes, which creates versatility in fleet management. Examples of section modular units include hospital diagnostic annexes, special events headquarters, temporary data centers, and larger general commercial offices.
Classrooms.Classroom units are generally double-wide units or Flex panelized units adapted specifically for use by school systems or universities. Classroom units usually feature teaching aids, air conditioning/conditioning, heating, and filtration units, windows and, if requested, toilet facilities.
Ground Level Offices and Container Offices. ContainerWe also offer steel ground level offices from 10 to 40 feet in length and 8 or 10 feet in width. Many of these units are converted to office use from International Organization for Standardization (“ISO”("ISO") certified shipping containers that we convert for office use. They provide safe, secure, ground-level access with fully welded weather-resistant steel corrugated exteriors and exterior window guards made of welded steel and tamper-proof screws. Containercontainers. These offices are available in 20 and 40 foot lengths and in a combination ofvarious configurations, including all-office floor plans or office and storage floor plans,combination units that provide a 10‑ or all-office floor plans.15‑foot office with the remaining area available for storage. Ground level offices provide the advantage of ground accessibility for ease of access and high security in an all‑steel design. These office units are equipped with electrical wiring, air conditioning, heating, filtration units, phone jacks, carpet or tile, high security doors, and windows with security bars or shutters. Some of these offices are also equipped with sinks, hot water heaters, cabinets, and toilet facilities.
Other Modular Space.We offer a range of other specialty products that vary across regions and provide flexibility to serve demands for local markets. Examples include workforce accommodation units with dining facilities used to house workers, often in remote locations, blast-resistant units, and toilet facilities to complement office and classroom units.
Portable Storage Solutions
Portable Storage Containers. Our portable storage containers offer an assortment of differentiated features such as patented locking systems, premium and multiple door options, optional climate control, and numerous configuration options. Standard portable storage containers are made from weather‑resistant corrugated steel and are available in lengths ranging from 5 to 48 feet, widths of either 8 feet or 10 feet, and a variety of configuration options. Doors can be placed at the front, front and back, or the sides of containers. Other options include partitions and shelving. Storage containers can be equipped with our patented Tri‑Cam Locking System®, which features a waist‑level opening lever and interlocking bars to provide easy access for the owner without sacrificing security. We also offer ContainerGuardLock®, an optional security device, which features a hidden six‑pin tumbler system and is made from drill‑resistant hardened steel. We believe these steel storage containers are a cost‑effective alternative to mass warehouse storage, with a high level of security to protect our customers' goods.
Steel containers have a long useful life with no technical obsolescence. Our portable storage containers generally have estimated useful lives of 30 years from the date we build or acquire and remanufacture them, with average residual values in excess of 50%. We maintain our steel containers on a regular basis by removing rust, painting them with rust inhibiting paint, plug‑welding holes, and occasionally replacing the wooden floor or a rusted steel panel. Repainting the outside of storage units guard houses, dormitories,is the most common maintenance item. A properly maintained container is essentially in the same condition as when it was initially remanufactured.
The remanufacturing process begins with the purchase of used ISO containers from leasing companies, shipping lines, and dining facilities.brokers. These containers were originally built to ISO standards and are 8 feet wide, up to 9.5 feet high and 20, 40 or 45 feet long. After acquisition, we remanufacture and modify these ISO containers. Remanufacturing typically involves cleaning, removing rust and dents, repairing floors and sidewalls, painting, adding our signs, and further customizing units by adding our proprietary easy opening door system and our patented locking system. Modification typically involves splitting some containers into differing lengths.
Portable Storage Solutions
Storage units are typically ISO shipping containers with swing doors that are repurposed for commercial storage applications. These units are primarily ground-level entry, windowless storage containers made of heavy exterior metals for secure storage and water tightness.
VAPS
We offer a thoughtfully curated portfolio of VAPS that make modular space and portable storage units more productive, comfortable, secure, and “Ready to Work” for our customers. We lease furniture, steps, ramps, basic appliances, internet connectivity devices, and other items to our customers for use in connection with our products. We also offer our lease customers a damage waiver program that protects them in case the leased unit is damaged. For customers who do not select the damage waiver program, we bill them for the cost of repairs above and beyond normal wear and tear. Importantly, management believes that our scale, branch network, supply chain, and sales performance management tools give us a significant advantage in delivering “Ready to Work” solutions and growing VAPS revenue relative to our competitors.
Delivery, Installation and Removal
We provideoperate a hybrid in-house and outsourced logistics and service infrastructure that provides delivery, site-work,site work, installation, disassembly, unhooking and removal, and other services to our customers for an additional fee as part of our leasing and sales operations. Revenue from delivery, site work, and installation results from the transportation of units to a customer's location, as well as site work required prior to installation, and installation of the units which have been leased or sold. Typically, modular units are placed on temporary foundations constructed by our in-housein‑house service technicians or subcontractors. These in-housein‑house service technicians or subcontractors also generally install any ancillary products and VAPS. We also derive revenue from disassembling, unhooking, and removing units once a lease expires. We believe that our logistics and service capabilities are unrivaled in the industry, differentiate us from competitors, and enhance our value proposition to our customers.
Tank and Pump Solutions
Our Tank and Pump Solutions business offers a broad range of liquid and solid specialty containment equipment and services complemented by an assortment of pumps, filtration units, and waste hauling services. In addition, ancillary products for rental and for sale are available, such as hoses, pipes, filters, and spill containment. Our principal products and services within our Tank and Pump Solutions business include steel tanks, stainless steel tank trailers, roll‑off boxes, vacuum boxes, dewatering boxes, pumps and filtration equipment, and value‑added services.
Our fleet of steel tanks offers flexible sizes and other options such as weir, gas buster, and open top steel tanks for applications ranging from temporary storage of chemicals, water, and other liquids, thorough mixing, agitation, and circulation of stored liquids with other products, and removal of gas from fluids circulated in the wellbore—such as mud used during drilling operations and settling of solids in liquids prior to filtration or discharge. Our stainless-steel tankers meet Department of Transportation specifications for use in the storage and transportation of chemical, caustics, and other liquids and are offered insulated or non‑insulated with level indication and vapor recovery capability. Roll‑off boxes provide simple, leak‑proof storage and transportation of solid industrial byproducts and are utilized for a variety of containment applications where it is necessary to maintain the homogeneity of the contents. Roll-tarps or rolling metal lids are available to protect the contents from the elements during transport or storage. Vacuum roll‑off boxes are also offered to pair with a vacuum truck for containment, storage, or transportation of pressurized contents. Dewatering boxes are configured to provide for the draining of excess liquid from slurry or sludge which reduces storage, transportation, and disposal costs. Upon completion of dewatering, the container is generally picked up by a roll‑off truck for content disposal. Vacuum dewatering boxes are also offered. In addition, we offer a variety of pumps and filtration equipment that can be used primarily for liquid circulation and filtration in municipal and industrial applications.
Additional services performed by our specialty containment employees include transportation of containers for waste management between multiple locations or in-plant, waste management oversight and service provision by an on-site dedicated team, system design including assessment of pumping, filtration and temporary storage needs, and field services to correctly install and connect customer containment equipment.
Product Leases
Rental equipment leasing isWe primarily lease, rather than sell, our core business. Overmodular and portable storage units to customers, which results in a highly diversified and predictable recurring revenue stream. For the year ended December 31, 2021, over 90% of new lease orders arewere on our standard lease agreement, pre-negotiated master lease, or national account agreements. The initial lease periods vary, and our leases are customarily renewable on a month-to-month basis after their initial term. WhileFor the initial lease term is often relatively short,year ended December 31, 2021, the average actual leaseeffective duration of our consolidated lease portfolio (including month-to-month renewals)for modular space and portable storage units was over 31 months. As a result, our lease revenue is significantly longer. Ourhighly predictable due to its recurring nature and the underlying stability and diversification of our lease portfolio.
For the year ended December 31, 2021, our average minimum contractual lease termsterm at the time of delivery in our NA Modular segment for modular space units and portable storage units are 14 months and 7 months, respectively, whilewas 11 months. However, given that our customers value flexibility, they consistently extend their leases or renew on a month-to-month basis such that the average effective duration of our NA Modular segment lease portfolio is 34was over 35 months.
Customers are responsible for the costs of delivery and set-up, dismantling and pick-up, customer-specified modifications, costs to return custom modifications back to standard configuration at end of lease, and any loss or damage beyond normal wear and tear. Our leases generally require customers to maintain liability and property insurance covering the units during the lease term and to indemnify us from losses caused by the negligence of the customer.customer or their employees.
Rental contracts with customers within our NA Storage and UK Storage segments are generally based on a 28‑day rate and billing cycle. The rental continues until cancelled by the customer or us. On average, steel storage containers on rent in our NA Storage and UK Storage segments for the year ended December 31, 2019,2021 had been in place for over 31 months, and the steel ground level offices on rent for the year ended December 31, 2021 had been in place for over 15 months. Rental contracts provide that the customer is responsible for the cost of delivery and pickup and specify that the customer is liable for any damage done to the unit beyond ordinary wear and tear. Customers may purchase a damage waiver to avoid damage liability in certain circumstances, which provides an additional source of recurring revenue. Customer possessions stored within a portable storage unit are the responsibility of that customer.
Rental contracts with Tank and Pump Solutions customers typically offer daily, weekly, or monthly rates. Certain larger customers have multi-year agreements that limit rate increases during the term of the contract. The rental duration varies widely by application, and the rental continues until the unit is returned in clean condition to us. On average, contracts in our Tank and Pump Solutions segments for the year ended December 31, 2021 had been in place for over 8 months. Rental contracts specify that the customer is responsible for carrying commercial general liability insurance, is liable for any damage to the unit beyond ordinary wear and tear, and for all materials the customer contains in rented equipment. The customer is contractually responsible for the cost of delivery and pickup, as well as thoroughly emptying and cleaning the equipment before return.
Demand for our products varies by end market. Construction customers typically reflect higher demand during months with more temperate weather, while demand from large retailers is stronger from September through December, when more space is needed to store holiday inventories. Retail customers usually return these rented units in December and early in the following year, but also undertake ongoing rolling store renovations which present consistent recurring demand throughout the year. In our Tank and Pump Solutions business, demand from customers is typically higher in the middle of the year from March to October, driven by the timing of customer maintenance projects.
As of December 31, 2021, we had approximately 390,000 total units including over 125,000 162,000 modular space units, over 213,000 portable storage units, over 13,000 tank and pump units, and other value-added products representing fleet net book value of which 88,495,$3.1 billion. Approximately 111,000 of our modular space units, or 69%, 68% and 180,000 of our portable storage units, or 84% were on rent as wellof December 31, 2021, and tank and pump Original Equipment Cost ("OEC") utilization was 73.5% as over 25,000 portable storage units, of which 16,892, or 66%, were on rent.December 31, 2021.
Product Sales
We complement our core leasing business with product sales ofby selling both new and used units, thatallowing us to leverage our scale, achieve purchasing benefits, and redeploy capital employed in our lease fleet. Generally, we purchase new units from a broad network of third-party manufacturers. We typically do notonly purchase new modular space units for resale untilwhen we have obtained firm purchase orders (which normally are non-cancelable and include up-front deposits) for such units. Buying units directly for resale adds scale to our purchasing, which is beneficial to our overall supplier relationships and purchasing terms. New unit sales are a natural extension of our leasing operations in situations where customers have long-lived or permanent projects, making it more cost-effective to purchase rather than to lease a standard unit.unit, and our customers benefit from our product expertise and delivery and installation capabilities.
In the normal course of managing our business, we also sell idle, used rental units at fair market value and units that are already on rent if the customer expresses interest in owning, rather than continuing to rent, the unit. The sale of units from our rental equipment has historically been both a profitable and cost-effective method to finance the replenishment and upgrade of theour lease fleet, as well as to generate free cash flow during periods of lower rental demand and utilization. Our sales business may include modifying or customizing units to meet customer requirements. We also offer delivery, installation, and removal-related services for an additional fee as part of our sales operations.
Customers
Our customers operate in a diversified set of end markets, including construction, commercial and industrial, retail and wholesale trade, energy and natural resources, education, government and institutions, and healthcare. Core to our operating model is the ability to redeploy standardized assets across end markets, as we did in 2020 and 2021 to service emerging demand in the healthcare and government sectors related to COVID‑19, as well as expanded space requirements related to social distancing. We track several market leading indicators in order to predict demand, including those related to our two largest end markets, the commercial and industrial segment and the construction segment, which collectively accounted for approximately 47% and 40% of our revenues, respectively, for the year ended December 31, 2021. In order to optimize the use of fleet assets across our branch network, we centrally manage fleet rebalancing across our end markets. This allows us to serve 15 distinct end markets in which no one customer accounted for more than 2% of revenues for the year ended December 31, 2021.
For the year ended December 31, 2021, our top 10 customers accounted for approximately 5% of revenues, and our top 50 customers accounted for less than 13% of revenues, reflecting low customer concentration and significant project diversification within our portfolio.
Our logistics and service infrastructure is designed to meet or exceed our customers’ expectations by reacting quickly, efficiently, and with consistent service levels. As a result, we have established strong relationships with a diverse customer
base, ranging from large multinational companies to local sole proprietors. We served over 50,000 customers.85,000 unique customers in 2021. We believe that our customers prefer our modular space and portable storage products over fixed, on-site built space because modular space productsthey are a quick, flexible, cost-effective, and cost-effectivelow-risk solution for temporary or permanent expansion.expansion or storage.
For the years ended December 31, 2019, 2018 and 2017, no one customer accounted for more than 3% of our total consolidated revenues. For the year ended December 31, 2019, no one customer accounted for more than 1% of revenue, our top 10 customers accounted for 4% of revenue, and our top 50 customers accounted for less than 11% of revenue, reflecting the low customer concentration and project diversification within our portfolio. Our strategy involves operating standardized rental equipment and "Ready toto Work" solutions that can be redeployed across our diversified customer base and branch network in 15 discrete end markets. Key customer end markets include:
Construction and Infrastructure
We provide office and storage space to a broad array of contractors associated with non-residential buildings and non-building infrastructure. Our client portfolio includes many of the largest general contractors and engineering, architecture, procurement, and construction companies in North America, as well as home builders, developers, and subcontractors. Examples include highway, street, bridge, and tunnel contractors; water, sewer, communication, and power line contractors; and special construction trades, including glass, glazing, and demolition. Our construction and infrastructure customer base is characterized by a wide variety of contractors that are associated with original construction as well as capital improvements in the private, institutional, and municipal arenas. Units are used as offices, break rooms, accommodations, security offices, and other applications.
Commercial and Industrial
Our customersCustomers in this category use our products as their primary office or retail space, to expand their existing commercial workspace, to increase their storage capabilities, andor as temporary space for festivals, sporting, and other events. Customers in this category span a variety of industries ranging from commercial offices; chemicals and other manufacturing; agriculture, forestry &and fishing; arts, media, hotels, &and entertainment; chemicals and other manufacturing; professional services; and retail & wholesale trade, including fast food and retail, as well as commercial offices, warehousing and other industrial end markets.
The commercial and industrial segment also includes customers in retail and wholesale trade. These include department, drug, grocery, and strip mall stores, logistics, warehousing and distribution services, as well as restaurants, service stations, and dry cleaners. Our customers in retail and wholesale trade include big‑box retailers who have storage needs during renovations or other large on-site projects. On a stand‑alone basis, retail and wholesale trade customers comprised approximately 11% of fiscal year 2021 rental revenue.
Energy and Natural Resources
Our products are leased to companies involved in electricity generation and transmission, utilities, up-mid-andup- mid- and down-stream oil and gas, mining exploration and extraction, and other related sectors. Units are used as temporary offices, break rooms, accommodations, security offices, and other applications.
Education
Rapid shifts in populations within regions, as well as recent needs to expand square footage per student in in-person education settings, often necessitate quick and cost effective expansion of education facilities, particularly in elementary and secondary schools and universities and colleges. Regional and local governmental budgetary pressures, classroom size reduction legislation, refurbishment of existing facilities, and the expansion of charter schools have made modular classrooms a convenient and economically advantageous alternativecost-effective way to expand capacity in education settings. In addition, our products are used as classrooms when schools are undergoing large scale modernization, which allows continuous operation of a school while modernization progresses.
Government and Institutions
Government customers consist of national, state, provincial, and local public sector organizations. Modular space and portable storage solutions are particularly attractive to focused niches such as healthcare facilities, small municipal buildings, prisons and jails, courthouses, military installations, national security buildings, and offices during building modernization, as well as disaster relief.
Competitive Strengths
We believe that the following competitive strengths have been instrumental to our success and position us for future growth:
North American Market Leader in Turnkey Modular Space and Portable Storage Solutions
The Mobile Mini Merger brought together WillScot’s leading modular space capabilities and Mobile Mini’s leading portable storage solutions to create an industry-leading business services provider specializing in innovative flexible work space and portable storage solutions. We benefit from complementary capabilities, a diverse customer base with Significant Scale Advantagesover 85,000 customers across different end markets, and a geographic footprint of approximately 275 branch locations and additional drop lots.
We have developed our market position by leveragingOur broad and complementary network serves the largest North American metropolitan areas with local teams who are experts in their respective markets. Our cost‑effective coverage model serves smaller customers at the local and regional level, while also addressing the needs of larger national customers looking for a full suite of high-quality services that can be provided on a consistent basis throughout North America. Since geographic proximity to customers is a competitive advantage in the modular space and portable storage industry, we believe that our extensive branch network diverse fleet, technical expertise, operational capabilities and strong brand awareness among our customers. Our extensive scale allows us to better serve existing customers and attract and retain talent and implement industry leading technology tools and process. Thisnew customers.
We believe our extensive scale results in significant operational benefits, such as optimization of fleet yield and utilization, efficient capital allocation, superior service capabilities, and the ability to offer consistent "Ready to Work" solutions across all of our branch locations.
Customer,VAPS
We deliver "Ready to Work" solutions through our growing offering of VAPS, such as the rental of steps, ramps, furniture packages, damage waivers, and other amenities. This thoughtfully curated portfolio of VAPS makes modular space and portable storage units more productive, comfortable, and secure for our customers and allows us to generate higher revenue per transaction and return on capital, and differentiates us from our competitors. These turnkey solutions offer customers flexible, low‑cost, capital efficient, and timely solutions to meet their space needs on an outsourced basis.
VAPS have been a substantial source of revenue growth in our NA Modular segment. We have been able to successfully drive a material increase in customer VAPS spend into our recently acquired businesses, which generates highly tangible revenue synergies. We believe our ability to drive VAPS growth following our historical acquisitions highlights the value proposition our VAPS provide to our customers.
During 2021, we introduced a similar cross-selling opportunity within ground level offices in the NA Storage segment. We are also introducing an innovative "Ready to Work" storage solution with VAPS such as integral tool racking, storage desks and charging stations, shelving, lighting and locks.
Sophisticated Logistics and Service Capabilities
Building from the largest branch network in the industry, we operate a sophisticated hybrid in-house and outsourced logistics and service infrastructure that we believe is highly differentiated from our competitors and enhances the value proposition we provide to customers. Precise scheduling of installations and removals, same-day delivery capabilities on certain products, and ability to mobilize large volumes of equipment in any geography serviced by our branch network are all unique capabilities that differentiate WillScot Mobile Mini, particularly among more demanding customer segments. We believe that continuing to further optimize our logistics and service capabilities through the deployment of technology and in-sourcing our services is an opportunity for further cost efficiency and differentiation with our customers.
Investments in Technology
We believe our technology serves as a primary differentiator relative to our competition and is a key component of our customer value proposition. Initiatives underway to further leverage our state of the art SAP enterprise resource planning platform will result in further operating efficiencies and enhance the overall customer experience. Effective use of real‑time information allows us to monitor and optimize the utilization of our fleet, allocate our fleet to the highest demand markets, optimize pricing, and determine the best allocation of our capital to invest in fleet and branches.
We are able to dynamically price and approach customer accounts in a strategic and statistically informed manner. We also believe our ability to leverage this data helps us to increase our market share and effectively manage supply and demand dynamics in our fleet in order to maximize cash flow in all phases of the economic cycle, including identifying opportunities where underutilized lease fleet can be sold to generate cash.
Similarly, technology is continuing to develop related to our fleet to offer an enhanced experience for our customers. Unit tracking, customer service portals, and other customer‑facing technological benefits differentiate our offering from competitors who have not invested in these capabilities. We believe we possess superior technology infrastructure relative to our competition and we intend to extend this advantage further by leveraging our infrastructure investments.
Diversified Revenue Base by End Market, Product, Service and Geographic DiversityGeography
We have established strong relationships with a diverse customer base, ranging from large national accounts to small local businesses. Our customers operate in multiplea diversified set of end markets, including commercial and industrial, construction, education, energy and natural resources, government, and government, among others.other end markets. For the year ended December 31, 2021, the top 50 customers for WillScot Mobile Mini accounted for less than 13% of total revenues. We believe that the diversity of our customer end markets reduces our exposure to changes related to a given customer, shifts within an industry or geographic region, and end market industry seasonality, while also providing significant opportunities to grow our business. Furthermore, the business. When combined with our 34 month average lease duration, the diversification and flexibility in our portfolio results in predictable lease revenue streams.
Since geographic proximity to customers is a competitive advantage in the industry, we maintain a network of approximately 120 branches and additional drop lots to better service our customers. Our branches typically have a sales staff dedicated to the local market, with transportation personnel responsible for delivery and pick-upnature of our unitsproducts is such that their use is generally agnostic to industry. This flexibility insulates utilization from exposure to industry‑specific shocks, provided there are other needs and yard personnel responsibleapplications for loading and unloading units and performing repairs and maintenance. Customers benefit from improved service and response times, reduced time to occupancy, better access to sales representatives with local market knowledge, as well as lower freight costs, which are typically paid by the customer. We benefit because we arethese products within a reasonable distance. Accordingly, our business has been able to leverage investments in shared services, technology,support front‑line workers and marketing costs over a larger lease base, redeploy units within our branch network to optimize utilization, enhance our competitive positionother essential businesses during the COVID‑19 crisis by providing ample local supplytemporary testing sites, treatment centers, exam rooms, hospital swing space, temperature screening checkpoints, office space to support social distancing, and offer profitable short-term leases which either would not be profitable or would be cost prohibitive to the customer without a local market presence. We believe that the geographic diversity of our branch network reduces our exposure to changesstorage for related to a givensupplies.
region, while presenting us with significant growth opportunities.
The following chart illustrates the breakdown of our customers and revenue by end markets as of December 31, 2019.2021. In order to optimize the use of fleet assetassets across our branch network, we centrally manage fleet rebalancing across our end markets. This allows us to serve 15 distinct end markets in which no customer accounted for more than 1%2% of consolidated revenue for the year ended December 31, 2019.2021.
| | | | | |
| REVENUE MIX BY END MARKET | CUSTOMER CONCENTRATION |
Long-Life FleetProven Track Record Realizing Acquisition Synergies and Effective Fleet ManagementDeploying Best Practices
AsWe have a strong track record of integrations generating significant synergies with our acquisitions of Mobile Mini, Modular Space Holdings, Inc. ("ModSpace"), Onsite Space LLC ("Tyson"), and Acton Mobile Holdings LLC ("Acton"). During the year ended December 31, 2019, 2021, the Company acquired certain assets and liabilities of seven regional modular space and storage businesses and quickly integrated these assets into our leasing portfolio and branch network. Opportunities such as these allow us to reach new customers, expand our product and service offering, and provide further opportunities for revenue and cost synergies. See “Risk Factors—We may be unable to successfully acquire and integrate new operations, which could cause our business to suffer."
Our Asset Base Provides Highly Attractive Asset-Level Returns with Long Useful Lives
The combination of long, predictable lease durations, long asset lives, and attractive unit economics underpins the compelling cash generation capability in our business model. As such, we have made significant investments in our lease fleet and consolidated several competitors. For the year ended December 31, 2021, our modular space and portable storage lease fleet consistsconsisted of 76.8over 129 million square feet of relocatable space, comprising approximately 153,000over 162,000 office units with a gross book valueand over 213,000 steel container units.
We generate an attractive internal rate of approximately $2.6 billion. Modular space units have attractive economic characteristics and our ability to lease and maintain our assets profitability over economic lives that often exceed 20 years, is a unique capability and competitive advantage for WillScot. We utilize standard fleet maintenance procedures across the branch network, monitor fleet condition and allocate capital expenditures centrally, and ensure all units meet consistent quality and condition requirements, regardless of unit age, prior to delivery to a customer.
Our standardized lease fleet meets multi-state industrial building codes, which allows us to leverage our branch network and rapidly redeploy units to areas of higher customer demandreturn ("IRR") in the surrounding geographic markets, as well as easily modify our structures to meet specific customer needs. Additionally, we have the flexibility to refurbish existing units in order to re-lease them when we have sufficient customer demand or we can choose to sell used units to customers.
The relative simplicity and favorable condition and quality of the lease fleet, as well as our sourcing strategy where we source our units with no significant dependence on any one particular supplier and have no long-term purchase contracts with manufacturers, provides purchasing flexibility and allows us to adjust such expenditures based on our business needs and prevailing economic conditions.
The nature of our modular space product line and diverse customer end uses support our growing offeringportfolio driven by the long economic life of VAPS, which typically have useful lives between 2 and 8 years and offer an incremental return on investment.
We supplement our fleet, exceeding 20 years on average, inclusive of any capital expenditure ("capex") required to maintain the fleet to its value maximizing earning potential. On average, the IRR for a modular unit, including VAPS, is over 25%.
Similarly, portable storage containers are able to generate an IRR of approximately 30%. These units require minimal maintenance capex. The stability of cash flows combined with strong economic returns make both modular space and VAPS investments with acquisitions,portable storage containers highly attractive specialty rental asset classes, and adjust our logistics and service capabilities and investments in fleet and acquisitions opportunistically.
The following chart illustrates the breakdown of the net book value ("NBV") of our rental equipment between the various modular space product types, portable storage and VAPS as of December 31, 2019.2021.
Our recurring revenue, combined with our flexible capex requirements and efficient use of working capital has allowed us to generate substantial free cash flow, both in periods of growth and economic downturn. The long term nature of our leases, with average lease durations in excess of 31 months as of December 31, 2021, produces strong operating income and predictable cash flow.
We exercise control and discretion over capex, due to the longevity and relative simplicity of our products, the ability to invest only where needed and when needed to meet demand, and the ability to sell excess fleet during lower utilization periods. During periods of economic stress, we have the ability to substantially reduce capex throughout the portfolio in order to maximize cash flow, resulting in a counter‑cyclical free cash flow profile. See discussion of “COVID‑19 impact on business" within our "Recent Developments" section below.
Our Industry
Our businessWe primarily operatesoperate within the modular space, and portable storage, markets however, ourand specialty containment markets. Our services also span across a variety of related sectors, including furniture rental, transportation and logistics, facilities management and rental services, job site services and commercial real estate.
Modular Space Market
The modular space market is fragmented. Modular space units are non-residential structures designed to meet federal, provincial, state, and local building codes and, in most cases, are designed to be relocatable. Modular space units are constructed offsite, utilizing manufacturing techniques to prefabricate single or multi-story whole building solutions in deliverable modular sections. Units are typically constructed of steel, wood and conventional building materials.materials and can be permanent or relocatable.
The modular space market has evolved in recent years as businesses and other potential customers increasingly recognize the value of modular space. The key growth drivers in this market are:are similar to portable storage and include:
•Growing need and demand for spacespace: - driven by general economic activity, including gross domestic product growth, industrial production, mining and natural resources activity, non-residential construction, urbanization, public and education spending, and the scale and frequency of special events.
•Increasing shiftShift from traditional fixed, on-site built space to modular space solutionssolutions: - driven by several advantages as compared with fixed, on-site built space, including:
◦•Quick to install install:- the pre-fabrication of modular space units allows them to be put in place rapidly, providing potential long-term solutions to needs that may have materialized quickly.
◦•Flexibility Flexibility:- flexible assembly design allows modular space units to be built to suit a customer’s needs while offering customers the ability to adjust their space as their needs change.
◦•Cost effectiveness effectiveness:- modular space units provide a cost effectivecost-effective solution for temporary and permanent space requirements and allow customers to improve returns on capital in their core business.
•Quality Quality:- the pre-fabrication of modular space units is based on a repeatable process in a controlled environment, resulting in more consistent quality.
◦•MobilityMobility: - modular space units can easily be disassembled, transported to a new location and re-assembled.
◦•Environmentally friendly friendly:- relocatable buildings promote the reuse of facilities, on an as-needed basis, by the occupants.
Portable Storage Market
The portable storage market, like the modular space market, is highly fragmented and remains primarily local in nature. Portable storage units are typically ground‑level entry, windowless storage containers made of heavy exterior metals for secure storage and water tightness. Portable storage units can be built to specification or can be remanufactured from existing storage products, such as ISO shipping containers. Remanufacturing typically involves cleaning, removing rust and dents, repairing floors and sidewalls, painting, and adding company logos or signs as well as our patented Tri‑Cam Locking System®.
Portable storage units continue to find new applications as business needs change and develop. Demand for portable storage is driven by a number of factors, including:
•Versatility: portable storage units can be easily customized to suit customer specifications. While standard applications include locking double‑door systems to facilitate loading. However, custom entrances, such as rolling or sliding doors, can be added for personnel access.
•Affordability: portable storage provides customers with a flexible and low-costlow‑cost storage alternative to permanent warehouse space and fixed-site self-storage. In addition,fixed‑site self‑storage.
•Safety: units can be easily outfitted with fire and water‑resistant surfaces and materials. ISO containers are often wind and leak‑proof by virtue of their uses in logistics and shipping. Nearly all units are made from steel, which is a low‑cost, durable material.
•Security: a variety of enhanced locking mechanisms are available for portable storage addressesunits, including our patented Tri‑Cam Locking System® and ContainerGuardLock®. These features offer additional protection for high‑value goods and inventory.
•Convenience: portable storage units provide immediate ground‑level access for consumers and can be easily transported in large quantities via truck, rail, or cargo ship.
•Aesthetics: portable storage units can be easily painted and decorated with company colors and logos and are less conspicuous than other portable storage alternatives.
Specialty Containment Market
This market is served by our Tank and Pump Solutions business. In the needspecialty containment sector, we service different markets: the industrial market, comprised mainly of chemical facilities and refineries, also known as the “downstream” market and, to a lesser extent, companies engaged in the exploration and production of oil and natural gas, or the “upstream” market. Additionally, we serve a diversified group of customers engaged in projects in the construction, pipeline, and mining markets. Downstream customers utilize tank and pump equipment and services to manage and remove liquid and solid waste generated by ongoing operating activities as well as turn‑around projects and large‑scale expansion projects. Upstream customers, who we estimate represent approximately 2% of tank and pump revenues for security while providing for conveniencethe year ended December 31, 2021, tend to rent steel tanks to store and immediate accessibility to customers.
transport water and propellant used in well hydraulic fracturing. Other customers utilize a wide variety of our products differentiated by the type of project in which they are engaged.Other Related Markets
In the normal course of providing our “Ready to Work” solutions, we perform services that are characteristic of activities in other industries. For example, we coordinate a broad network of third-party and in-house transportation and service resources to support the timely movement of our products to, as well as maintenance on, customer sites. Additionally, we design, source, lease, and maintain a broad offering of ancillary products, including furniture, thatwhich render our modular structuresunits immediately functional in support of our customers’ needs. We have developed networks of third‑party service providers that we coordinate to expand the breadth of capabilities that our customers can source through us. These third‑party‑managed services represent incremental revenue and margin opportunities for us and simplify the number of vendor touchpoints for our customers.
We also provide technical expertise and oversight for customers regarding building design and permitting, site preparation, and expansion or contraction of installed space based on changes in project requirements. Further, we have the capability to compete in adjacent markets, such as commercial and institutional housing, thatwhich have received less focus historically in the modular space market. We believe that this broad service capability differentiates us from other rental and business services providers and clearly differentiates us in the marketplace.
Competition
Although our competition varies significantly by local market, the modular space and portable storage industry is highly competitive and fragmented as a whole. Based on customer feedback, weWe believe that participants in our industry compete on the basis of customer
relationships, product quality and availability, delivery speed, VAPS and service capabilities, pricing, and overall ease of doing business. We typically compete with one or more local providers in all of our markets, as well as with a limited number of national and regional companies.
Our competitors include lessors of storage units, mobile offices, van trailers, and other structures used for portable storage, as well as traditional commercial office space and conventional fixed self-storage facilities. Some of our competitors may have greater market share in certain geographic regions. Significant modular space and portable storage competitors include Mobile Mini, Mobile Modular, Pac-Van,McGrath RentCorp, PODS, United Rentals, ATCO Structures & Logistics, BOXX Modular, and BOXX Modular.1-800-PACK-RAT in North America, and Wernick Hire and Elliott in the UK. Numerous other regional and local companies compete in individual markets.
Strategic Acquisitions
Our Tank and Pump Solutions business offers liquid and solid containment products. The liquid and solid containment industry is also highly fragmented, consisting principally of local providers, with a handful of regional and national providers. We believe the scalabilitycompete based on factors including quality and breadth of our branch network, corporateequipment, technical applications expertise, knowledgeable and shared services infrastructure, technology,experienced sales and processes allows us to integrate acquisitions efficiently, realize cost savings, cross-sell VAPS,service personnel, on‑time delivery and improve the yield on acquired assets. As such, we manage an active acquisition pipelineproactive logistics management, geographic areas serviced, rental rates, and consider acquisitions to be an important component of our growth strategy.customer service. Our competitors include United Rentals, Rain For Rent, Adler Tanks, Sprint/Republic Services, and numerous other smaller competitors.
EmployeesOur Business and Growth Strategies
We intend to maintain a leading market position and increase our revenue and profitability by pursuing the following strategies, all of which we have demonstrated in our historical operating performance:
Expand Penetration of Value-Added Products and Services
As of December 31, 20192021, we estimate that we have an organic revenue growth opportunity of over $150 million as the average VAPS rate of our units on rent in our NA Modular segment converges over time to the VAPS price and penetration levels achieved on our most recently delivered units. We believe this growth opportunity could be substantially larger if we successfully penetrate more of our modular space orders, and expand our VAPS offering for portable storage units.
Optimize Rate Across Fleet
We continue to advance multiple pricing strategies across our fleet to drive revenue growth. Leveraging our expertise developed in NA Modular, we plan to implement dynamic pricing, customer segmentation, and contract standardization in our other segments. Our long history of success, demonstrated by 17 consecutive quarters of double-digit rate growth as of December 31, 2021 in the US within our NA Modular segment, gives us confidence that we can successfully deploy this strategy. The turnover of our fleet, with average lease durations of nearly three years, creates natural and recurring opportunities to capture incremental price increases. As the market leader in our industry, we offer the broadest fleet portfolio, the most differentiated turnkey VAPS, and the most consistent service capabilities across the largest branch network to help our customers be 'Ready to Work'.
Enhance Market Penetration Between Segments
The combination of WillScot and Mobile Mini created a leading business services provider specializing in innovative flexible work space and portable storage solutions. At the outset of the Merger, we recognized that there was 80% end-market overlap and 40% customer overlap, a clear strategic opportunity for our complementary product lines. By offering a combined product suite, we simplify our customers' procurement needs and enable productivity from start to finish for projects. We believe cross-selling will also increase utilization and yield of our combined fleet. Our sales force is optimally positioned to improve efficiency by leveraging our management information systems and using real-time information to monitor and optimize conversion of customer opportunities across our core segments. In turn, we expect that our broadened and enhanced fleet will attract new customers, increase customer retention, and increase margins and return on invested capital.
Generate Cash Flow Through Operational Efficiencies, Cost Reductions, and Technology
We are implementing many initiatives designed to improve operations and increase profitability. We continually assess our branch operating footprint, vendor base, and operating structure to maximize revenue generation while minimizing costs. The Merger provides us with increased scale, numerous operational best practices from both the legacy WillScot and legacy Mobile Mini businesses, and a state-of-the-art SAP ERP platform, all of which we believe will significantly improve our operating efficiency over time. We have a proven track record of efficiently integrating acquisitions and quickly eliminating operational redundancies while maintaining acquired customer relationships.
Deploy Capital to Strategically Support Organic Growth and Optimize Returns
We maintain a disciplined focus on our return on capital and invest opportunistically across multiple uniquely attractive asset classes, prioritizing our investments to where we see the strongest potential returns. We continually assess both our existing lease fleet and customer demand for opportunities to deploy capital more efficiently. We manage our maintenance capex and growth capex to align with the economic conditions in which we operate. Within our existing lease fleet, we examine the potential cash and earnings generation of an asset sale versus continuing to lease the asset. In addition, we examine the relative benefits of organic expansion opportunities versus expansion through acquisition to obtain a favorable return on capital.
Leverage Scale and Organic Initiatives with Accretive Acquisitions
Our markets for modular space and portable storage solutions are fragmented. We estimate that approximately 55% of the modular market and approximately 70% of the portable storage market in North America are supplied by regional and local competitors. We have the broadest network of operating branches in North America, as well as a scalable corporate center and information technology systems, which position us to continue to acquire and integrate other companies while expanding the products and services available and offered to acquired customers. During 2021, the Company acquired certain assets and liabilities of several smaller entities, which consisted primarily of 15,700 storage units and 5,800 modular units. We expect to pursue acquisitions opportunistically that will provide further scale efficiencies and allow us to improve returns generated by the acquired assets.
Use Free Cash Flow to Drive Value Creation
Our free cash flow generation has accelerated rapidly in recent years, and we expect this trend to continue as we execute our strategy. While we see numerous organic and inorganic opportunities to re-invest in our core businesses, we believe we can generate surplus free cash flow with which we can both reduce leverage and return capital to shareholders over time. We view this as an additional powerful value creation lever, and we are committed to deploying this capital as productively as possible in the interests of our shareholders.
Human Capital Management
As of December 31, 2021, we employed approximately 4,700 people worldwide, the majority of which are full time. Of these employees, approximately 4,320 are employed in North America (the US, Canada and Mexico), we had over 2,500 employees.and approximately 380 are employed in the UK. We have collective bargaining agreements in portions of our Mexico-based operations representing approximately 1% of our worldwide employees. Approximately 89%87% of employees work in our employees are in the field,approximately 275 branch locations and additional drop lots, while 11%13% of employees serve in various corporate functions. We have not experienced a strike or significant work stoppage, and we consider our relations with the labor unions and employees toto be good.
Our Chief Human Resources Officer ("CHRO") along with other members of our executive leadership team, and with guidance from our board of directors, develops and executes our human capital strategy. This includes attracting, hiring, developing, retaining and engaging talent to deliver our strategy, designing employee compensation and benefits programs, and developing and integrating our inclusion and diversity ("I&D") initiatives.
Whether at a branch location or onsite with our customers, our people give us a competitive advantage versus our peers and competitors in the industry. That differentiation begins with our values. Our values are lived through our employees, acknowledged by our vendors and aligned to the needs of our customers and communities. Our values provide the basis for our approach to human capital management as well as how we treat our stakeholders.
Company Values
•Dedicated to Health & Safety: We are subject to certain environmental, health and safety regulations as well as other laws and regulations in countries, states or provinces, and localities in which we operate. Our health and safety programs are designed around global standards with appropriate variations addressing the multiple jurisdictions and regulations, specific hazards and unique working environments of our operations. We take responsibility for our own well being and for those around us.
•Committed to Inclusion & Diversity: We are stronger together when we celebrate our differences and strive for inclusiveness. We believe that a rich culture of inclusion and diversity enables us to create, develop and fully leverage the strengths of our workforce to exceed customer expectations and meet our growth objectives. We encourage collaboration and support the diverse voices and thoughts of our employees and communities.
•Driven to Excellence:We measure success through our results and achievement of our goals. We continuously improve ourselves and our products and services in pursuit of maximizing shareholder value.
•Trustworthy & Reliable: We hold ourselves accountable to do the right thing.
•Devoted to Our Customers: We anticipate the growing needs of our customers and strive to exceed their expectations and make it easy to do business with us.
•Community Focused: We actively engage in the communities we serve and deliver sustainable solutions.
Elements of Our Human Capital Strategy
The disruption in the labor force in 2020 continued into 2021. Many of our industry competitors have met these changes with little more than short-term compensation increases. We have taken a more holistic approach designed to meet our employees where they are at any stage within their lives. Our employee value proposition is simple: every day our employees deliver excellent service to our customers, and we are committed to delivering an employee experience that creates opportunity and ensures dignity for every employee.
Our involuntary turn over remains manageable at 23%, and the average tenure of our drivers remains strong at five years, during a period where demand for drivers is increasingly high. We believe that our strategy with the cornerstones of opportunity and personal dignity gives us an advantage over other companies. Our offerings are designed to benefit employees and their families, and we continue to develop best in class programs and services that are aligned to deliver
targeted business outcomes that best fuel our growth trajectory. Through our acquisitions, we believe that we have extended these benefits to a broader employee population while raising the operating standards in our industry. The following highlights a few of our programs.
Employee Engagement
We are committed to keeping our employees informed and engaged in Company news and events, while helping them connect to our strategy and values. We share information through a range of channels including direct email and text capabilities, an employee intranet, televisions in our branches and quarterly all-employee town halls. We actively engage with our employees in topics that impact their experiences at work. We work with an outside vendor to administer an annual employee engagement survey along with regular pulse surveys to give our teams an active voice on topics that impact them directly. Their feedback is leveraged to shape policies, processes and other aspects of our workplace.
Learning and Development
Human capital development underpins our efforts to execute our strategy and continue to develop our people, products and services. We continually invest in our employees’ career growth and provide all employees with a wide range of personal and professional development experiences, both formal and informal, for all stages of their career journey.
Our formal offerings include tuition reimbursement, a diverse curriculum of over 6,000 learning courses, vocational training, and leadership development experiences. We have organized a proprietary foundational leadership development program, which combines skill building with an opportunity to put skills into practice. Since 2015, over 500 of our team members have participated in this program. In 2019, we partnered with a leading graduate business school to launch a targeted executive education program. And in 2021, we launched our new driver apprentice program to provide development opportunities to employees interested in becoming a Commercial Driver's License ("CDL") Class A driver for the Company. This new program also created internal development opportunity for current employees to become trainers.
Continual learning and career development is advanced through our in-depth succession planning process where we look across the organization to ensure diversity and inclusion are at the forefront of our human capital management. We then transition into goal planning and development conversations with employees that are supported by our library of personal and professional development courses, customized training engagements and seminars, conferences, and other training events where employees are encouraged to attend in connection with their job duties and developmental goals.
Inclusion and Diversity
We encourage and empower the diverse voices and contributions of our stakeholders to drive increased market share and global value. In 2021, we established and held the first meeting of our Inclusion & Diversity Council and launched five Inclusiveness Resource Teams ("IRTs"): Women of WSMM ("WOW"), Black Organization for Leadership & Direction ("BOLD"), Veterans United, Hispanos, and People Respecting that Identity and Sexuality Matters ("PRISM"). IRTs are voluntary, employee-led groups that foster an inclusive and diverse workplace aligned with our values and strategy. These groups were established to support our employees and provide opportunities for exposure, development and contribution to the organization.
The tone for I&D in our Company starts at the top with our executives and is bolstered with support from our board of directors. The Inclusion & Diversity Council is a cross-functional team of leaders, including our CEO, CHRO, and divisional senior vice presidents, that acts as a steering committee to help guide our I&D efforts globally. We expect to achieve the Company’s aspirations by (i) having regular board oversight of the Company’s I&D efforts, and (ii) improving I&D initiatives throughout the complete lifecycle of employee engagement (from recruitment, through development and advancement). We have trained hundreds of leaders in our organization on unconscious bias and provided I&D e-learning opportunities to our employees. Our CEO and CFO have I&D metrics as part of their compensation and performance targets.
Rewards, Health & Well Being
We crafted our total rewards strategy with a strategic focus on the health and well being of our employees. We do this, in part, by ensuring competitive pay at every level of the organization. We employ human capital consultant data to set and maintain pay ranges and pay levels across the organization. Incentives are designed to reward eligible employees commensurate with Company performance. Depending on the position, incentives may be either individually based (sales commissions), group-based (regional performance bonuses), or Company-based (corporate and executive employees).
Executive compensation is reviewed and analyzed via an independent third-party consultant and approved by the compensation committee of our board of directors. The consultant takes peer group data and general market data into account, when providing pay guidance, to ensure executive pay is both competitive and reasonable, based on the prevailing market standards.
Our approach to our benefits begins with a centralized focus on the employee. We use high deductible healthcare plans to promote positive consumer behaviors and pay approximately 70% of the cost of the employee premiums. We mitigate the burden to the employee from these plans by seeding their health savings accounts (“HSA”) at the beginning of each year, covering between 35% and 50% of employee deductibles. We also provide a biometric screening incentive in the form of an additional HSA contribution. HSA incentives are used to promote behaviors as needed, such as compliance with federal, state and local COVID-19 requirements and guidance. We have an employee assistance program to provide counseling sessions for every employee as they are needed.
Wellness does not end with physical and mental health. We also offer several ways for our employees to feel prepared financially. Along with our 401(k) matching, we offer several educational services employees can use to strengthen their financial acumen. Additionally, we provide short-term disability pay at 100% of annualized wages for approved cases, and support can last up to 26 weeks. We offer paid parental leave for those employees who expand their families, as well. Regardless of the hurdles our employees face we are prepared to support them through their major life events and times of need.
Our employees are doing their part to support each other as well. The Minions of Kindness Fund is an employee-led 501(c)(3) organization that uses employee donations to support WillScot Mobile Mini employees in times of distress.
Our Approach to Environmental, Social and Governance
We are committed to upholding high standards when it comes to our environmental, social and governance ("ESG") responsibilities, as well as the safety of our employees and our business partners. The principal products we provide to our customers are long-lived, reusable and relocatable assets that produce minimal waste. For decades, we have committed ourselves to circular economic practices to reuse as many of the assets as possible. Our board of directors, at the direction of its nominating and corporate governance committee, is actively involved in the development of our ESG strategy and approach. Over the next several years, we will focus on numerous goals in the areas of ESG:
Focus Areas
•Environmental - Our commitment to environmentally sound business practices includes three key areas of focus:
◦reducing greenhouse gas emissions as part of our operations;
◦reducing the amount of waste we deliver to landfills; and
◦improving the energy efficiency of our products.
•Social - We are committed to socially responsible business practices throughout our operations. We have focused especially on improving diversity, equity, and inclusion throughout our organization, and on improving the communities in which we work. Our five areas of focus in this regard are to:
◦improve inclusion and diversity across the organization (as described above);
◦focus on community partnering across all of our locations;
◦remain diligent in placing safety first, always;
◦improve health and wellness opportunities for all our employees (as described above); and
◦improve customer engagement and relations.
•Governance
◦Continue to align our corporate governance structure with our ESG strategy
◦Improve the diversity of our Board and management
In the near term, we are pursuing the following five key strategic initiatives to drive increased benefits for our stakeholders.
•Materials: Reduce, reuse, recycle with our modular and storage units and VAPS
•Climate: Reducing greenhouse gas emissions from our owned trucking and yard fleet
•Health & Safety: Health & Safety First at our branches, on the road and at our customer sites
•Inclusion: Ensuring every employee has the opportunity to thrive and seek upward mobility
•Community: Leveraging our scale to lift up all 275+ of our communities and amplify our impact
Environmental
Circular Business Model (Materials)
We lease commercial grade office and storage units that are designed to be reused, relocated and reconfigured and have refurbishment capabilities for our office units. These assets are cycled to different customers seven times over their 20-year lifetime with a minimal refresh or get ready before each new cycle. We then layer on refurbishment, which can extend the asset life by another 10 years. With the cost of refurbishment at only 20-30% of the cost of a new unit, it’s more capital efficient to refurbish our units and it extends the life significantly. Our newest office space, called FLEX, is a panelized product which means that the panels, or walls, can be reconfigured and reused, thus eliminating wood waste.
We also have modernization facilities to put our storage assets, which we acquire used, into service as a storage unit.
Value Added Products (“VAPs”) adds another dimension to our circular story because we are able to reuse, repair, and maintain VAPs that come off rent, which helps drive better margins and growth. In addition, putting VAPs into our circular business model significantly reduces material usage both for us and for our customers, who otherwise buy and dispose of their VAPs at the end of the project.
Circular by design, our lease and renew business model helps us to reduce material usage, emissions and costs, while helping our customers with their ESG goals.
GHG Emissions (Climate)
Compared to other industrial companies, our greenhouse gas footprint and risk is small, but we can still produce positive impacts that directly align with cost efficiency and customer benefits. To reduce greenhouse gas emissions and other air quality impacts from our diesel-fueled delivery and setup fleet, we have begun replacing older diesel truck engines with modern, efficient engines, and are working to test delivery trucks fueled by renewable natural gas. Over time, these efforts will help to reduce our fuel costs and risks, while also helping us secure contracts with like-minded customers.
Social
Safety
Protection of people and the environment is a core value at WillScot Mobile Mini. It is a key component of our Sales, People and Operational Excellence priorities. These priorities are the driving force that shapes who we are and what we do. WillScot Mobile Mini fosters an environment in which our employees feel empowered and choose to make the safest and best decisions possible. Safety extends beyond our branches and yards and includes travel on roads and highways and our activities at customer sites.
Today, we are operating at high levels of safety and low levels of injury. Our Total Recordable Incident Rate (“TRIR”) is 0.82 incidents per labor hour, compared to the 2.5 incidents per labor hour rate for the construction industry as reported by the Bureau of Labor Statistics. We are using technology to assist our drivers and other team members in the safety arena. In 2020, we created an assessment tool, our “Safety Save” application, that tracks leadership safety engagement and measures the number of safety engagements as our team members complete them. Any employee is encouraged to complete a safety assessment on an observation of a task, tool, behavior or other condition during working duties. Use of the Safety Save application is just one manner we use to manage safety leadership at all levels. Further, we use and are expanding a vehicle/truck-based camera system used to improve driving behaviors.
Lastly, we maintain a safety assessment program that drives increased focus to our Health & Safety core value, by providing increased visibility. Our goal is to help each team member succeed and enjoy a safe working experience. We know no business can exist without people. Who we are as people ultimately defines what we are as a business, and safety is everyone’s responsibility.
COVID-19 Safety Protocols
We remain dedicated to protecting the health and safety of our employees and customers and have adjusted our business to meet various country, state, and local requirements. We are considered an “essential business” and our employees are considered “essential workers.” We have continued to service our customers throughout the pandemic, while implementing robust health and safety protocols to protect our visitors, employees and customers.
We follow US Centers for Disease Control and Prevention, OSHA and/or applicable country, state and local guidelines at the locations where we operate. To comply with public health guidance and reduce the risk of COVID-19 transmission, unvaccinated visitors, customers and employees are required, prior to commencing work at our facilities and offices each day, to check their temperature and complete a daily symptom certification that is documented and reviewed by our COVID team members. We provide masks and hand sanitizer to our visitors, customers, and employees, as well as require adherence to appropriate social distancing practices. We have also enhanced cleaning/sanitization protocols at our locations.
COVID-19 testing for employees is covered by our health insurance and we actively track key COVID metrics. Additionally, we are providing an incentive to our employees that choose to get vaccinated, as well as paid time off for vaccination and any side effects. We also meet all client requirements for site access or general compliance with their required COVID protocols. We remain flexible to the situation, and keep our employees informed of the current best guidance, as provided by professionals and experts.
Community
Community engagement is at the heart of our business. Due to our scale, we bring new engagement opportunities to our entire workforce in two ways. We recently launched our giving platform called "Give Where You Live" where employees can partner with the local charity of their choice across all 275 of our locations in the way that is most meaningful to them. We encourage our employees to give their time, talent and/or treasure locally to our core four causes of Shelter, Hunger, Education, and Health & Wellness. We have expanded our existing Company match program and have created a volunteer rewards program to encourage increased volunteerism globally. Our IRTs support our community-focused values through volunteer opportunities that are meaningful to the populations that they represent. We also have Company-wide partnerships like Habitat for Humanity, where we are able to provide giving opportunities in the normal course of business, like the temporary use of our storage containers at Habitat build sites. We know that when we give where we live, we can make a difference.
Governance
Good governance enables everything we do. After the WillScot Mobile Mini merger, our combined board of directors created a roadmap to transition the company’s governance practices. We modified our charter to establish an ESG initiative, and to provide oversight for that initiative. Our audit committee and enterprise risk management committee each review the board of directors’ and the Company’s activities to assess risks and develop plans to mitigate those risks. These committees consider a variety of potential risks that may affect the Company over the next three years, including climate change, truck fleet emissions, labor law changes, diversity, and zoning laws.
Intellectual Property
We own a numberoperate primarily under the WillScot and Mobile Mini brands. We protect our products and services through the use of trademarks and patents, none of which are individually material to our business. Our trademarks and patents are registered or pending applications for registrations in the US Patent and Trademark Office and various non‑US jurisdictions. On our Modular fleet, we maintain a patent for the design of our Flex units in the US and other patents in the US and non-US jurisdictions. jurisdictions concerning various assembly and panel components. We believe that Flex represents innovative and versatile purpose built modular space solutions in the industry, which has helped us expand commercially into new end markets. On our Storage fleet, we have patented our proprietary Tri‑Cam Locking System®, ContainerGuardLock® and other continued improvements in locking technology in the markets in which we operate, as well as in Europe and China. We believe that continued innovation differentiates WillScot Mobile Mini with our customers and represents a source of long-term competitive advantage.
Significant Developments
Mobile Mini Merger
On July 1, 2020, we closed the Merger at which time Mobile Mini became a wholly-owned subsidiary of WillScot. Concurrent with the closing of the Merger, we changed our name to WillScot Mobile Mini Holdings Corp. We believe that the Merger is resulting in strategic and financial benefits by combining the two industry leaders in the complementary modular space and portable storage solutions markets. During the second quarter of 2021, we executed the successful integration of the two companies' enterprise resource planning ("ERP") operating and financial systems.
Reportable Segments
We operate in 4 reportable segments as follows: North America Modular Solutions ("NA Modular"), North America Storage Solutions ("NA Storage"), United Kingdom Storage Solutions ("UK Storage") and Tank and Pump Solutions ("Tank and Pump"). The reporting segments are aligned with how we operate and analyze our business results. Prior to the third quarter of 2021, the NA Modular segment represented the activities of WillScot historical segments prior to the Merger, and the NA Storage, UK Storage and Tank and Pump segments represented the segments reported by Mobile Mini prior to the Merger. During the third quarter of 2021, the majority of the portable storage product business within the NA Modular segment was transitioned to the NA Storage segment, and associated revenues, expenses, and operating metrics were transferred to the NA Storage segment beginning in the third quarter of 2021.
Asset Acquisitions
During the third and fourth quarters of 2021, we acquired the assets and liabilities of seven regional storage and modular companies, which consisted primarily of 15,700 storage units and 5,800 modular units for $147.2 million in cash. We recorded rental equipment of $142.1 million as a result of these acquisitions.
Financing Activities
On March 26, 2021, we redeemed $65.0 million of our 6.125% senior secured notes due 2025 (the "2025 Secured Notes") at a redemption price of 103.0%, plus accrued and unpaid interest. This repayment was funded by internally generated cash flow and lower cost borrowings under the ABL Credit Agreement, dated July 1, 2020, by and among Williams Scotsman Holdings Corp. (“Holdings”), Williams Scotsman International, Inc. (“WSII”), the guarantors party thereto, the lenders party thereto, and Bank of America, N.A., as administrative agent and collateral agent (as amended from time to time, the “2020 ABL Facility”). Upon redemption in the first quarter of 2021, we recorded a loss on extinguishment of debt in the consolidated statement of operations of $3.2 million comprised of a redemption premium of $1.9 million and write off of unamortized deferred financing fees of $1.3 million.
On June 16, 2021, we redeemed an additional $58.5 million of our 2025 Secured Notes at a redemption price of 103.0%, plus accrued and unpaid interest. This repayment was funded by internally generated cash flow and lower cost borrowings under the 2020 ABL Facility. Upon redemption in the second quarter of 2021, we recorded a loss on extinguishment of debt in the consolidated statement of operations of $2.8 million comprised of a redemption premium of $1.8 million and write off of unamortized deferred financing fees of $1.0 million.
Share and Warrant Repurchases
On March 1, 2021, in connection with an underwritten secondary offering of shares of our Common Stock offered by Sapphire Holding S.à r.l. (“Sapphire Holdings”), our largest shareholder at that time and an entity controlled by TDR Capital
LLP (“TDR Capital”), we repurchased and cancelled 2,750,000 shares of our Common Stock directly from Sapphire Holdings for $73.7 million at a per share price equal to the per share price paid by the underwriters in the concurrent offering. On June 29, 2021, in connection with a second underwritten secondary offering of shares of our Common Stock offered by Sapphire Holdings, we repurchased and cancelled an additional 3,900,000 shares of our Common Stock directly from Sapphire Holdings for $108.2 million at a per share price equal to the per share price paid by the underwriters in the concurrent offering. On September 9, 2021, in connection with a third underwritten secondary offering of shares of our Common Stock offered by Sapphire Holdings, we repurchased and cancelled an additional 2,379,839 shares of our Common Stock directly from Sapphire Holdings for $67.1 million at a per share price equal to the per share price paid by the underwriters in the concurrent offering.
During the year ended December 31, 2021, we repurchased and cancelled 3,055,000 of the 2015 Private Warrants (as defined below) for $25.5 million. In addition, during the year ended December 31, 2021, 9,655,000 of the 2015 Private Warrants were exercised on a cashless basis, resulting in the issuance of 2,939,898 shares of Common Stock. As a result of these transactions, no 2015 Private Warrants were outstanding as of December 31, 2021.
During the year ended December 31, 2021, we repurchased and cancelled 254,373 of the 2018 Warrants for $2.9 million. In addition, during the year ended December 31, 2021, 5,397,695 of the 2018 Warrants were exercised on a cashless basis, resulting in the issuance of 2,835,968 shares of Common Stock. At December 31, 2021, 4,078,173 of the 2018 Warrants were outstanding.
During the year ended December 31, 2021, we repurchased and cancelled 12,878,490 shares of Common Stock and stock equivalents for $365.9 million, including the shares repurchased from Sapphire Holdings and all repurchased warrants. In October 2021, our Board of Directors replaced the existing share repurchase program with a new share repurchase program that authorizes us to repurchase up to $1.0 billion of our outstanding shares of Common Stock and stock equivalents. As of December 31, 2021, we had $956.7 million of the $1.0 billion share repurchase authorization remaining. Given the predictability of our free cash flow, we believe that repurchases will be a reoccurring capital allocation priority.
Amendment to 2020 ABL Facility and Supplemental Indentures
In connection with an internal tax-related reorganization (the "Reorganization") involving indirect wholly-owned subsidiaries of the Company, on December 23, 2021, WSII merged with and into its direct wholly-owned subsidiary, Williams Scotsman, Inc., a Maryland corporation (“WSI”), with WSI as the surviving entity of such merger. The purpose of the Reorganization was to simplify the Company's legal entity structure following numerous acquisitions and to reduce related franchise taxes and other administrative costs and had no impact on our underlying business operations.
In connection with the Reorganization, on December 23, 2021, WSI, the guarantors party thereto and Deutsche Bank Trust Company Americas, as trustee and as collateral agent (in such capacities, the “Trustee”), entered into (i) a Supplemental Indenture (the “2025 Notes Supplemental Indenture”) in relation to that certain Indenture, dated as of June 15, 2020, (as amended, amended and restated, supplemented or otherwise modified from time to time, the “2025 Notes Indenture”), by and among WSII (as successor to Picasso Finance Sub, Inc.), as issuer, the guarantors from time to time party thereto and the Trustee in respect of WSII’s 6.125% Senior Secured Notes due 2025 and (ii) a Supplemental Indenture (the “2028 Notes Supplemental Indenture” and together with the 2025 Notes Supplemental Indenture, the “Supplemental Indentures”) in relation to that certain Indenture, dated as of August 25, 2020, (as amended, amended and restated, supplemented or otherwise modified from time to time, the “2028 Notes Indenture” and together with the 2025 Notes Indenture, the “Indentures”), by and among WSII (as successor to Picasso Finance Sub, Inc.), as issuer, the guarantors from time to time party thereto and the Trustee in respect of WSII’s 4.625% Senior Secured Notes due 2028, pursuant to which WSI assumed all of WSII’s obligations and rights under each Indenture, and the guarantors party to each Supplemental Indenture confirmed their respective guarantees under each Indenture. Prior to its entry into the Supplemental Indentures, WSI was a guarantor under each Indenture and jointly and severally liable for WSII’s obligations under each Indenture.
Additionally, in connection with the Reorganization, on December 16, 2021, WSII and certain other subsidiaries of the Company entered into a third amendment (the “Third Amendment”) to the 2020 ABL Facility which, among other things, permits (i) the merger of WSII with and into WSI, and (ii) WSI to assume the duties and obligations of the Administrative Borrower (as defined in the 2020 ABL Facility) under the Loan Documents (as defined in the 2020 ABL Facility) in connection with the Reorganization.
Following the Reorganization and the entry into the Supplemental Indentures and the Third Amendment, there is no change to the consolidated operating cash flows of the obligors under the Indentures and the 2020 ABL Facility or the consolidated assets of such obligors pledged as collateral under the Indentures and the 2020 ABL Facility.
COVID-19 impact on business
Since the outbreak of COVID‑19 was designated as a global pandemic by the World Health Organization (the “WHO”) in March 2020, our operations have generally continued to operate normally with additional safety protocols in place as we have been considered an essential business in most jurisdictions. The global macroeconomic backdrop and impact on our end markets has evolved rapidly since the beginning of 2020. However, overall our lease portfolio and financial results have proven to be durable and consistent despite the severity of the economic contraction in 2020 and the current expansion in 2021.
Importantly, because of the long durations of our leases, the majority of our gross profit in any given period is from units already out on rent. This gives us significant visibility into our future cash flows, which allows us to plan ahead and adjust
our capital expenditures and cost structure for varying demand levels. Our portfolio of units already out on rent at the onset of the pandemic was resilient and largely not impacted, despite the unprecedented swings in economic activity in 2020.
Activity levels in the fourth quarter of 2020 and the first half of 2021 stabilized, and our volume of new lease activations grew significantly in the second quarter of 2021 as economic activity rebounded sharply with modular deliveries across our NA Modular and NA Storage segments up a combined 9% over pro forma 2020 levels and storage product deliveries across these two segments up a combined 39% over pro forma 2020 levels and on par with 2019 pro forma activity levels. This recovery continued in the third quarter of 2021 and for the three months ended September 30, 2021, both modular and storage product deliveries across our NA Modular and NA Storage segments were up a combined 6% over 2020 levels. Economic activity for the three months ended December 31, 2021 remained strong against a more stable fourth quarter of 2020 with storage product deliveries across our NA Modular and NA Storage segments up a combined 6% over 2020 levels and modular product deliveries essentially flat with 2020 levels. Overall, while new lease activation volumes over the past eight quarters were impacted in line with the swings in economic activity, our lease revenue streams were stable and remain on an attractive upward long-term trajectory, a result of the diversification in our end markets, our long lease durations, and the success of the organic growth initiatives that we are executing.
Available Information
Our website address is www.willscotmobilemini.com. We make available, free of charge through our website, our Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (the “Exchange Act”) as soon as reasonably practicable after such documents are electronically filed with, or furnished to, the United States Securities and Exchange Commission (the “SEC”). The SEC maintains an internet website at www.sec.gov that contains reports, proxy and information statements and other information regarding WillScot brand.Mobile Mini.
Regulatory and Environmental Compliance
We are subject to certain environmental, transportation, anti-corruption, import controls,control, health and safety, and other laws and regulations in countries, states or provinces, and localities in which we operate. We incur significant costs in our business to comply with these laws and regulations. However, from time to time we may be subject to additional costs and penalties as a result of non-compliance. The discovery of currently unknown matters or conditions, new laws and regulations, or different enforcement or interpretation of existing laws and regulations could materially harm our business or operations in the future.
We are subject to laws and regulations that govern and impose liability for activities that may have adverse environmental effects, including discharges into air and water and handling and disposal of hazardous substances and waste. As of the date of this filing, no environmental matter has been material to our operations. Based on our management’s assessment, we believe that any environmental matters relating to us of which we are currently aware will not be material to our overall business or financial condition.
The jurisdictions in which we operate are also subject to anti-bribery laws and regulations, such as the US Foreign Corrupt Practices Act of 1977, as amended (the “FCPA”). These regulations prevent companies and their officers, employees, and agents from making payments to officials and public entities of foreign countries to facilitate obtaining new contracts. Violations of these laws and regulations may result in criminal sanctions and significant monetary penalties.
A portionCertain of our units are subject to regulation in certain states under motor vehicle and similar registrations and certificate of title statutes. Management believes that we havethe Company has complied, in all material respects, with all motor vehicle
registration and similar certificate of title statutes in states where such statutes clearly apply to modular space units. We have not taken actions under such statutes in states where we have determined that such statutes do not apply to modular space units. However, in certain states, the applicability of such statutes to modular space units is not clear beyond doubt. If additional registration and related requirements are deemed to be necessary in such states or if the laws in such states or other states were to change to require us to comply with such requirements, we could be subject to additional costs, fees, and taxes as well as administrative burdens in order to comply with such statutes and requirements. Management does not believe that the effect of such compliance will be material to our business andor financial condition.
Recent Developments
Warrant Redemption
On January 24, 2020, the Company delivered a notice (the “Redemption Notice”) for the redemption of all of its outstanding Public Warrants (as defined in Item 5, 2015 Warrants, of this Annual Report on Form 10-K) to purchase shares of the Company’s Class A common stock, par value $0.0001 per share, that were issued under the Warrant Agreement, dated September 10, 2015, by and between the Company’s legal predecessor company Double Eagle Acquisition Corp. (“Double Eagle”) and Continental Stock Transfer & Trust Company, as warrant agent (the “Warrant Agreement”), as part of the units sold in Double Eagle's initial public offering (the “IPO”) that remain unexercised at 5:00 p.m. New York City time on February 24, 2020. As further described in the Redemption Notice and permitted under the Warrant Agreement, holders of the Public Warrants who exercised such Public Warrants following the date of the Redemption Notice were required to do so on a “cashless basis.”
From January 1, 2020 through January 24, 2020, 796,610 Public Warrants were exercised for cash, resulting in the Company receiving cash proceeds of $4.6 million in the aggregate. An aggregate of 398,305 shares of the Company's Class A common stock were issued in connection with these exercises.
After January 24, 2020 through February 24, 2020, 5,836,040 Public Warrants were exercised on a cashless basis. An aggregate of 1,097,162 shares of the Company's Class A common stock were issued in connection with these exercises. Thereafter, the Company completed the redemption of 38,509 remaining Public Warrants for $0.01 per warrant.
Following the redemption of the Public Warrants, (i) 17,561,700 Private Warrants (as defined in Item 5, 2015 Warrants, of this Annual Report on Form 10-K), each exercisable for one-half of one share of Common Stock at an exercise price of $5.75 per half-share, issued under the Warrant Agreement in a private placement simultaneously with the IPO and still held by the initial holders thereof or their permitted transferees remain outstanding and (ii) 9,966,070, each exercisable for one share of the Company's Class A common stock at an exercise price of $15.50 per share, issued in connection with the Company’s acquisition of Modular Space Holdings, Inc. ("ModSpace") under a warrant agreement dated August 15, 2018, between Continental Stock Transfer & Trust Company, as warrant agent. As of February 28, 2020, 110,316,368 shares of the Company's Class A common stock were issued and outstanding.
Merger
On March 1, 2020, the Company, along with its newly formed subsidiary, Picasso Merger Sub, Inc. (“Merger Sub”), entered into an Agreement and Plan of Merger (the “Merger Agreement”) with Mobile Mini, Inc. (“Mobile Mini”). The Merger Agreement provides for the merger of Mobile Mini with and into Merger Sub (the “Merger”), with Mobile Mini surviving as a wholly-owned subsidiary of the Company. At the effective time of the Merger, and subject to the terms and subject to the conditions set forth in the Merger Agreement, each outstanding share of the common stock of Mobile Mini shall be converted into the right to receive 2.4050 shares of WillScot Class A common stock. Under the terms of the Merger Agreement, we expect our and Mobile Mini’s stockholders would own 54% and 46% of the combined company,
respectively.
The Merger has been unanimously approved by the Company and Mobile Mini’s boards of directors. The Merger is subject to customary closing conditions, including receipt of regulatory and stockholder approvals by the Company and Mobile Mini’s stockholders, and is expected to close in third quarter of 2020. Additionally, the transaction also has the support of TDR Capital, the Company's largest shareholder, which has entered into a customary voting agreement in support of the Merger.
In connection with the Merger, the Company entered into a commitment letter (the “Commitment Letter”), dated March 1, 2020, with the lenders party thereto (the “Lenders”). Pursuant to the Commitment Letter, the Lenders have agreed to provide debt financing to refinance the Company’s existing ABL Facility (as defined below), Mobile Mini’s existing ABL credit facility and Mobile Mini’s outstanding senior notes due 2024 on the terms and conditions set forth in the Commitment Letter.
Available Information
Our website address is www.willscot.com. We make available, free of charge through our website, our Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (the “Exchange Act”) as soon as reasonably practicable after such documents are electronically filed with, or furnished to, the United States Securities and Exchange Commission (the “SEC”). The SEC maintains an internet website at www.sec.gov that contains reports, proxy and information statements and other information regarding WillScot.
ITEM 1A. Risk Factors
Risks Relating to Our Business
We facemay be unable to successfully acquire and integrate new operations, which could cause our business to suffer.
We have historically achieved a significant competitionportion of our growth through acquisitions, and we will continue to consider potential acquisitions on a selective basis. There can be no assurance that we will be able to identify suitable acquisition opportunities in the modular spacefuture or that we will be able to consummate any such transactions on terms and portable storage unit industry. Ifconditions acceptable to us.
Additionally, we are unable to compete successfully, we could lose customers and our revenue and profitability could decline.
Although our competition varies significantly by market, the modular space and portable storage unit industry is highly competitive in general. We compete on the basis of a number of factors, including customer relationships, product quality and availability, delivery speed, VAPS and service capabilities, pricing, and overall ease of doing business. We may experience pricing pressures in our operations as some of our competitors seek to obtain market share by reducing prices,cannot predict if or when acquisitions will be completed, and we may face reduced demandsignificant competition for ouracquisition targets. Acquisitions involve numerous risks, including (a) difficulties in integrating the operations, technologies, management information systems, products and services ifpersonnel of the acquired companies; (b) diversion of management’s attention from normal daily operations of the business; (c) loss of key employees; (d) difficulties in entering markets in which we have no or limited prior experience and where our competitors in such markets have stronger market positions; (e) difficulties in complying with regulations, such as antitrust and environmental regulations, and managing risks related to an acquired business; (f) an inability to timely obtain financing, including any amendments required to existing financing agreements; (g) an inability to implement uniform standards, controls, procedures and policies; (h) undiscovered and unknown problems, defects, liabilities or other issues related to any acquisition that become known to us only after the acquisition, particularly relating to rental equipment on lease that are ableunavailable for inspection during the diligence process; and (i) loss of key customers or suppliers.
In connection with acquisitions, we may assume liabilities or acquire damaged assets, some of which may be unknown to provide new or innovative products or services that better appeal to customers. In mostus at the time of such acquisitions.
We assess the condition and regulatory certification of an acquired fleet as part of our end markets, we face competition from national, regional and local companies who have an established market positionacquisition due diligence. In some cases, fleet condition or regulatory certification may be difficult to determine due to the fleet being on lease at the time of acquisition and/or inadequate certification records. Fleet acquisitions may therefore result in the specific service area, and we expect to encounter similar competition in any new marketsa rectification cost that we may enter. In certain markets, somenot have factored into the acquisition price, impacting our ability to deploy units and the profitability of the fleet we acquired.
We must continue to take actions to realize the combined cost synergies that we forecast for the acquisition. We may incur more costs than we anticipated to achieve the forecast synergies (thus reducing the net benefit of the cost synergies), realize synergies later than we expected or fail altogether to achieve a portion of the cost savings we anticipated. Any of these events could cause reductions in our competitors may have greater marketearnings per share, less debt, greater pricing flexibility, more attractive productimpact our ability to borrow funds under our credit facility, decrease or service offerings,delay the accretive effect of the acquisitions that we anticipated and negatively impact our stock price.
Acquisitions are inherently risky, and we cannot provide assurance that any future acquisitions will be successful or superior marketing and financial resources. Increased competition could result in lower profit margins, substantial pricing pressure and reduced market share. Price competition, together with other forms of competition, maywill not materially adversely affect our business, results of operations and financial condition.
Our operations are exposed to operational, economic, political and regulatory risks.
We operate in the US, Canada and Mexico. For the year ended December 31, 2019, approximately 90.9%, 7.6%, and 1.5% If we do not manage new markets effectively, some of our revenue was generatednew branches and acquisitions may lose money or fail, and we may have to close unprofitable branches. Closing a branch in such circumstances would likely result in additional expenses that would cause our operating results to suffer. To manage growth successfully, we will need to continue to identify additional qualified managers and employees to integrate acquisitions within our established operating, financial and other internal procedures and controls. The efficient integration of any acquired operations will also require the US, Canadaintegration of technology infrastructure systems and Mexico, respectively. Oura transition to new systems when required. An inability to integrate these systems following an acquisition, or an inability to scale our existing infrastructure or systems to support such acquired operations, in these countries could be affected by foreign and domestic economic, political and regulatory risks, including the following:
• regulatory requirements that are subject to change and that could restrictmight impact our ability to assemble, leaserespond effectively to changing customer expectations, manage our business, scale our solutions effectively or sell
products;
• inflation, recession,impact our customer service levels, which could put us at a competitive disadvantage and fluctuations in foreign currency exchangenegatively impact our financial results. We will also need to effectively motivate, train and interest rates;
• trade protection measures, including increased dutiesmanage our employees. Failure to successfully integrate recent and taxesfuture acquisitions and import or export licensing requirements;
• compliance with applicable antitrust and other regulatory rules and regulations relating to potential acquisitions;
• different local product preferences and product requirements;
• pressures on management time and attention due to the complexities of overseeing multi-national operations;
• challenges in maintaining staffing;
• different labor regulations and the potential impact of collective bargaining;
• potentially adverse consequences from changes in, or interpretations of, tax laws;
• political and economic instability;
• enforcement of remedies in various jurisdictions;
• the risk that the business partners upon whom we depend for technical assistance will not perform as expected;
• compliance with applicable export control laws and economic sanctions laws and regulations;
• price controls and ownership regulations;
• obstacles to the repatriation of earnings and cash;
• differences in business practices that may result in violation of company policies, including, but not limited to, bribery
and collusive practices; and
• reduced protection for intellectual property in some countries.
These and other risks maynew branches into existing operations could materially adversely affect our business, results of operations and financial condition.
Global or local economic movements could have a material adverse effect on our business.
We operate ourOur business, which operates in the US, Canada, Mexico and Mexico. Our businessthe UK, may be negatively impacted by economic movements or downturns in the local markets in which we operate or global markets generally. These adverse economic conditions may reduce commercial activity, cause disruption and extreme volatility in global financial markets and increase rates of default and bankruptcy. Reduced commercial activity has historically resulted in reduced demand for our products and services. For example, reduced commercial activity in the construction, energy and natural resources sectors in certain markets in which we operate, particularly the US and Canada, has negatively impacted our business in the past. Disruptions in financial markets could negatively impact the ability of our customers to pay their obligations to us in a timely manner and increase our counterparty risk. If economic conditions worsen, we may face reduced demand and an increase, relative to historical levels, in the time it takes to receive customer payments. If we are not able to adjust our business in a timely and
effective manner to changing economic conditions, our business, results of operations and financial condition may be materially adversely affected.
Moreover, the level of demand for our products and services is sensitive to the level of demand within various sectors, particularly the commercial and industrial, construction, education, energy and natural resources, and government end
markets. Each of these sectors is influenced not only by the state of the general global economy, but also by a number of more specific factors as well. For example, a decline in global or local energy prices may materially adversely affect demand for modular buildings within the energy and resources sector. The levels of activity in these sectors and geographic regions may also be cyclical, and we may not be able to predict the timing, extent or duration of the activity cycles in the markets in which we or our key customers operate. A decline or slowed growth in any of these sectors or geographic regions could result in reduced demand for our products and services, which may materially adversely affect our business, results of operations and financial condition.
Our operations are exposed to operational, economic, political and regulatory risks.
We operate in the US, Canada, Mexico and the UK. For the year ended December 31, 2021, approximately 87.2%, 6.1%, 0.8%, and 5.9% of our revenue was generated in the US, Canada, Mexico and the UK, respectively. For the year ended December 31, 2021, approximately 61.4%, 26.8%, 5.9%, and 5.9% of our revenue was derived from our NA Modular Solutions business, NA Storage Solutions business, UK Storage Solutions business and Tank and Pump Solutions business, respectively.
Our operations in any of these countries could be affected by foreign and domestic economic, political and regulatory risks, including (a) regulatory requirements that are subject to change and that could restrict our ability to assemble, lease or sell products; (b) inflation, recession, and fluctuations in foreign currency exchange and interest rates; (c) trade protection measures, including increased duties and taxes and import or export licensing requirements; (d) compliance with applicable antitrust and other regulatory rules and regulations relating to potential acquisitions; (e) different local product preferences and product requirements; (f) pressures on management time and attention due to the complexities of overseeing multi-national operations; (g) challenges in maintaining staffing; (h) different labor regulations and the potential impact of collective bargaining; (i) potentially adverse consequences from changes in, or interpretations of, tax laws; (j) potentially adverse consequences from change in, or interpretation of, securities laws and other financial reporting regulations; (k) political and economic instability; (l) enforcement of remedies in various jurisdictions; (m) the risk that the business partners upon whom we depend for technical assistance will not perform as expected; (n) compliance with applicable export control laws and economic sanctions laws and regulations; (o) price controls and ownership regulations; (p) obstacles to the repatriation of earnings and cash; (q) differences in business practices that may result in violation of Company policies, including, but not limited to, bribery and collusive practices; and (r) reduced protection for intellectual property in some countries. Additionally, any sustained international conflict may have a negative economic or other impact on the markets we serve, our operations and financial results. These and other risks may materially adversely affect our business, results of operations and financial condition.
Our operations may be adversely impacted by public health crises such as the global pandemic associated with COVID-19.
We are subject to risks related to public health crises, such as the global pandemic associated with COVID-19, which could significantly impact general commercial activity related to our supply chain and customer base and which could have a material adverse effect on our business, financial condition, or result of operations. To the extent that the COVID-19 pandemic continues or worsens, or any future public health crisis emerges, governments may impose additional restrictions, including work restrictions, and supply chains may be interrupted, slowed, or rendered inoperable. As a result, it may be challenging to obtain and process raw materials and labor resources necessary to support our business needs. We may need to recognize material charges in future periods for impairments of our rental equipment, property, plant, and equipment and/or intangible assets. Furthermore, our employees, suppliers or customers could become ill, quarantined or otherwise unable to work and/or travel due to health reasons or governmental restrictions. The COVID-19 global pandemic has affected and may continue to affect our industry and the industries in which our customers operate, and there may be an adverse impact on customer demand for our rentals. We also have been, and will be, adversely impacted by project delays, early returns of equipment on rent with customers and payment delay, or non-payment, by customers who are significantly impacted by COVID-19. If our customers’ businesses continue to be affected, they might delay or reduce purchases from or payments to us, which could adversely affect our business, financial condition or results of operations.
In addition, increased volatility and diminished expectations for the global economy, coupled with the prospect of decreased business and consumer confidence and increased unemployment resulting from the COVID-19 pandemic or any future public health crises may precipitate an economic slowdown and recession. If the economic climate deteriorates, our ability to continue to grow our business organically or through additional acquisitions and integration of acquired businesses, as well as the financial condition of customers, suppliers and lenders, could be adversely affected, resulting in a negative impact on the business, financial condition, results of operations and cash flows of our Company.
The situation surrounding COVID-19 remains fluid. A lack of public acceptance of vaccines could lead people to continue to self-isolate and not participate in the economy at pre-pandemic levels for a prolonged period of time. Further, even if vaccines are widely accepted, there can be no assurance that the vaccine will ultimately be successful in limiting or stopping the spread of COVID-19 and its variants. Therefore, it remains difficult to predict the potential impact of the virus on our results of operations and financial position. The potential effects of COVID-19 also could impact many of our risk factors, as discussed herein, including, but not limited to our exposure to operational, economic, political and regulatory risks; risks related to global or local economic movements; changes in trade policies; and labor disruptions. However, given the evolving health, economic, social, and governmental environments, the potential impact that COVID-19 could have on our risk factors that are further
described herein remains uncertain. Any future pandemics could similarly negatively impact our operations and financial results.
Several governmental entities have enacted or may enact enforceable government mandates with respect to employee vaccinations against COVID-19. Any requirement to mandate COVID-19 vaccination of our workforce or require our unvaccinated employees to be tested weekly could result in employee attrition and difficulty securing future labor needs, which could adversely affect our business, financial condition or results of operations.
Any failure of our management information systems could disrupt our business operations both in the field and back office, which could result in decreased lease or sale revenue and increase overhead costs.
We rely heavily on information systems across our operations. We also utilize third-party cloud providers to host certain of our applications and to store data. Our ability to effectively manage our business depends significantly on the reliability and capacity of these systems. The failure of our management information systems to perform as anticipated could damage our reputation with our customers, disrupt our business or result in, among other things, decreased lease and sales revenue and increased overhead costs. Any such failure could harm our business, results of operations and financial condition. In addition, the delay or failure to implement information system upgrades and new systems effectively could disrupt our business, distract management’s focus and attention from business operations and growth initiatives and increase our implementation and operating costs, any of which could materially adversely affect our operations and operating results. Moreover, the integration of any acquisition may create unforeseen challenges for our management information systems which could result in unforeseen expenditures and other risks, including difficulties in managing facilities and employees in different geographic areas.
We believe we have implemented appropriate measures to mitigate potential risks; however, like other companies, our information technology systems may be vulnerable to a variety of interruptions due to our own error or events beyond our control. The measures that we employ to protect our systems may not detect or prevent cybersecurity breaches, natural disasters, terrorist attacks, telecommunication failures, computer viruses, hackers, phishing attacks, and other security issues. We have previously been the target of an attempted cyber-attack and have from time to time experienced threats to our data and systems, computer virus attacks and phishing attempts, and we may be subject to breaches of the information systems that we use. We have not experienced a material cybersecurity breach. We have programs in place that are intended to detect, contain and respond to data security incidents and that provide employee awareness training regarding phishing, malware, and other cyber risks to protect against cyber risks and security breaches. However, because the techniques used to obtain unauthorized access, disable or degrade service, or sabotage systems change frequently and may be difficult to detect for long periods of time, we may be unable to anticipate these techniques or implement adequate preventative measures. In addition, because our systems contain information about individuals and other businesses, the failure to maintain the security of the data we hold, whether the result of our own error or the malfeasance or errors of others, could harm our reputation or give rise to legal liabilities leading to lower revenue, increased costs, regulatory sanctions and other potential material adverse effects on our business, results of operations and financial condition.
Effective management of our fleet is vital to our business, and our failure to properly safeguard, design, manufacture, repair, maintain and maintainmanage our fleet could harm our business and reduce our operating results and cash flows.
Our modular space and portable storage units have long economic lives and managing our fleet is a critical element to our leasing business. Rental equipment asset management requires designing and building long-lived products that anticipate customer needs and changes in legislation, regulations, building codes and local permitting in the various markets in which we operate. In addition, we must cost-effectively maintain and repair our fleet to maximize the economic life of the products and the proceeds we receive from product sales. As the needs of our customers change, we may incur costs to relocate or retrofit our assets to better meet shifts in demand. If the distribution of our assets is not aligned with regional demand, we may be unable to take advantage of sales and leasing opportunities in certain regions, despite excess inventory in other regions. If we are not able to successfully manage our lease assets, our business, results of operations and financial condition may be materially adversely affected.
If we do not appropriately manage the design, manufacture, repair and maintenance of our product fleet, or if we delay or defer such repair or maintenance or suffer unexpected losses of rental equipment due to theft or obsolescence, we may be required to incur impairment charges for equipment that is beyond economic repair or incur significant capital expenditures to acquire new rental equipment to serve demand. These failures may also result in personal injury or property damage claims, including claims based on poor indoor air quality and termination of leases or contracts by customers. Costs of contract performance, potential litigation and profits lost from termination could materially adversely affect our future operating results and cash flows. If a significant number of leased units are returned in a short period of time, a large supply of units would need to be remarketed. Our failure to effectively remarket a large influx of units returning from leases could materially adversely affect our financial performance.
Trade policies and changes in trade policies, including the imposition of tariffs, their enforcement and downstream consequences, may materially adversely affect our business, results of operations, and outlook.
Tariffs and/or other developments with respect to trade policies, trade agreements and government regulations may materially, adversely affect our business, financial condition and results of operations. For example, the US government has imposed tariffs on steel, aluminum and lumber imports from certain countries, which could result in increased costs to us for these materials. Without limitation, (i) tariffs currently in place and (ii) the imposition by the federal government of new tariffs on imports to the US could materially increase (a) the cost of our products that we are offering for sale or lease, (b) the cost of certain products that we source from foreign manufacturers, and (c) the cost of certain raw materials or products that we utilize. We may not be able to pass such increased costs on to our customers, and we may not be able to secure sources of certain products and materials that are not subject to tariffs on a timely basis. Although we actively monitor our procurement policies and practices to avoid undue reliance on foreign-sourced goods subject to tariffs, when practicable, such developments may materially adversely affect our business, financial condition and results of operations.
We face significant competition in the modular space, portable storage and tank and pump industries. Such competition may beresult in pricing pressure or an inability to maintain or grow our market share. If we are unable to acquirecompete successfully, we could lose customers and integrate new operations, whichour revenue and profitability could causedecline.
Although our business to suffer.
competition varies significantly by market, the modular space, portable storage, and the tank and pump solutions industries are highly competitive, in general, and the portable storage and tank and pump solutions industries are highly fragmented. We compete on the basis of a number of factors, including customer relationships, product quality and availability, delivery speed, VAPS and service capabilities, pricing, and overall ease of doing business. We may be unable to complete strategic acquisitions or integrate acquired businesses or assets intoexperience pricing pressures in our operations for various reasons. We completed the Modular Space Holdings, Inc., or ModSpace, and Acton Mobile Holdings LLC, or Acton, acquisitions in 2018 and 2017. While the ModSpace and Acton integrations are substantially complete, we may explore acquisitions in the future that meetas some of our strategic growth plans. We cannot predict if or when acquisitions will be completed,competitors seek to obtain market share by reducing prices, and we may face significant competitionreduced demand for acquisition targets. Acquisitions involve numerous risks, including the following:
•difficulties in integrating the operations, technologies,our products and personnel of the acquired companies;
•diversion of management’s attention from normal daily operations of the business;
•loss of key employees;
•difficulties in entering markets in which we have no or limited prior experience and whereservices if our competitors in such markets have stronger market positions;
•difficulties in complying with regulations, such as environmental regulations, and managing risks relatedare able to an acquired business;
•an inabilityprovide new or innovative products or services that better appeal to timely obtain financing, including any amendments required to existing financing agreements;
•an inability to implement uniform standards, controls, procedures and policies;
•undiscovered and unknown problems, defects, liabilities or other issues related to any acquisition that become known to us only after the acquisition, particularly relating to rental equipment on lease that are unavailable for inspection during the diligence process; and
•loss of key customers, suppliers or employees.
customers. In connection with acquisitions, we may assume liabilities or acquire damaged assets, some of which may be unknown to us at the time of such acquisitions.
We assess the condition and regulatory certification of an acquired fleet as partmost of our acquisition due diligence. In some cases, fleet condition or regulatory certification may be difficultend markets, we face competition from national, regional and local companies who have an established market position in the specific service area, and we expect to determine due to the fleet being on lease at the time of acquisition and/or inadequate certification records. Fleet acquisitions may therefore resultencounter similar competition in a rectification costany new markets that we may notenter. In certain markets, some of our competitors may have factored into the acquisition price, impacting deployabilitygreater market share, less debt, greater pricing flexibility, more attractive product or service offerings, better brand recognition or superior marketing and ultimate profitabilityfinancial resources. Increased competition could result in lower profit margins, substantial pricing pressure and reduced market share. Price competition, together with other forms of the fleet we acquired.
In particular, we have made two major acquisitions (Acton and ModSpace) since November 29, 2017. Although we have substantially integrated the acquired businesses and assets into our organization and platforms, we must continue to take actions in 2020 to realize the combined cost synergies that we forecast for those acquisitions. Wecompetition, may incur more costs than we anticipated to achieve the forecast synergies (thus reducing the net benefit of the cost synergies), realize synergies later than we expected or fail altogether to achieve a portion of the cost savings we anticipated. Any of these events could cause reductions in our earnings per share, impact our ability to borrow funds under our credit facility, decrease or delay the accretive effect of the acquisitions that we anticipated and negatively impact our stock price.
Acquisitions are inherently risky, and we cannot provide assurance that any future acquisitions will be successful or will not materially adversely affect our business, results of operations and financial condition. If we do not manage new markets effectively, some of our new branches and acquisitions may lose money or fail, and we may have to close unprofitable branches. Closing a branch in such circumstances would likely result in additional expenses that would cause our operating results to suffer. To manage growth successfully, we will need to continue to identify additional qualified managers and employees to integrate acquisitions within our established operating, financial and other internal procedures and controls. We will also need to effectively motivate, train and manage our employees. Failure to successfully integrate recent and future acquisitions and new branches into existing operations could materially adversely affect our results of operations and financial condition.
If we do not manage our credit risk effectively, collect on our accounts receivable, or recover our rental equipment from our customers, it could materially adversely affect our business, financial condition and results of operations.
We perform credit evaluation procedures on our customers on each transaction and require security deposits or other forms of security from our customers when we identify a significant credit risk. Failure to manage our credit risk and receive timely payments on our customer accounts receivable may result in the write-off of customer receivables and loss of units if we are unable to recover our rental equipment from our customers’ sites. If we are not able to manage credit risk, or if a large number of customers should have financial difficulties at the same time, our credit and rental equipment losses would increase above historical levels. If this should occur, our business, financial condition, results of operations and cash flows may be materially adversely affected.
Our ability to use our net operating loss carryforwards and other tax attributes may be limited.
As of December 31, 2019, we had US net operating loss (“NOL”) carryforwards of approximately $899.5 million and $619.9 million for US federal income tax and state tax purposes, respectively, available to offset future taxable income, prior to consideration of annual limitations that Section 382 of the Internal Revenue Code of 1986 may impose. The US NOL carryforwards begin to expire in 2019 for state and 2022 for federal if not utilized. In addition, we had foreign NOLs of $20.7 million as a result of our operations in Canada and Mexico. Our Mexico and Canadian NOL carryforwards begin to expire in 2021 and 2038, respectively, if not utilized.
Our US NOL and tax credit carryforwards could expire unused and be unavailable to offset future income tax liabilities. Under Section 382 of the Internal Revenue Code and corresponding provisions of US state law, if a corporation undergoes an “ownership change,” generally defined as a greater than 50% change, by value, in its equity ownership over a three-year period, the corporation’s ability to use its US NOLs and other applicable tax attributes before the ownership change, such as research and development tax credits, to offset its income after the ownership change may be limited. We have completed Section 382 analyses for applicable transactions, and performed utilization analysis under US GAAP. As a result, if we earn net taxable income, our ability to use our pre-ModSpace US NOL carryforwards to offset US federal taxable income may be subject to limitations, which could potentially result in increased future tax liability to us. In addition, at the state level, there may be periods during which the use of US NOLs is suspended or otherwise limited, which could accelerate or permanently increase state taxes owed.
Lastly, we may experience ownership changes in the future as a result of subsequent shifts in our stock ownership, some of which may be outside of our control. If we determine that an ownership change has occurred and our ability to use our
historical NOL and tax credit carryforwards is materially limited, it may result in increased future tax obligations and income tax expense.
We may be unable to recognize deferred tax assets such as those related to our tax loss carryforwards and, as a result, lose future tax savings, which could have a negative impact on our liquidity and financial position.
We recognize deferred tax assets primarily related to deductible temporary differences based on our assessment that the item will be utilized against future taxable income and the benefit will be sustained upon ultimate settlement with the applicable taxing authority. Such deductible temporary differences primarily relate to tax loss carryforwards and business interest expense limitations. Tax loss carryforwards arising in a given tax jurisdiction may be carried forward to offset taxable income in future years from such tax jurisdiction and reduce or eliminate income taxes otherwise payable on such taxable income, subject to certain limitations. Deferred interest expense exists primarily within our US operating companies, where interest expense was not previously deductible as incurred but may become deductible in the future subject to certain limitations. We may have to write down, through income tax expense, the carrying amount of certain deferred tax assets to the extent we determine it is not probable we will realize such deferred tax assets.
Some of the tax loss carryforwards expire and if we do not have sufficient taxable income in future years to use the tax benefits before they expire, the benefit may be permanently lost. In addition, the taxing authorities could challenge our calculation of the amount of our tax attributes, which could reduce certain of our recognized tax benefits. Further, tax laws in certain jurisdictions may limit the ability to use carryforwards upon a change in control.
Unanticipated changes in our tax obligations, the adoption of a new tax legislation, or exposure to additional income tax liabilities could affect profitability.
We are subject to income taxes in the US, Canada and Mexico. Our tax liabilities are affected by the amounts we charged for inventory, services, funding and other transactions on an intercompany basis. We are subject to potential tax examinations in these jurisdictions. Tax authorities may disagree with our intercompany charges, cross-jurisdictional transfer pricing or other tax positions and assess additional taxes. We regularly assess the likely outcomes of these examinations to determine the appropriateness of our tax provision. However, there can be no assurance that we will accurately predict the outcomes of these potential examinations, and the amounts that we ultimately pay upon resolution of examinations could be materially different from the amounts we previously included in our income tax provision and, therefore, could have a material impact on our results of operations and cash flows. In addition, our future effective tax rate could be adversely affected by changes to our operating structure, changes in the mix of earnings in countries with differing statutory tax rates, changes in the valuation allowance of deferred tax assets, changes in tax laws and the discovery of new information in the course of our tax return preparation process. Changes in tax laws or regulations may increase tax uncertainty and adversely affect our results of operations.
Changes in state building codes could adversely impact our ability to remarket our buildings, which could have a material adverse impact on our business, financial condition and results of operations.
Building codes are generally reviewed, debated and, in certain cases, modified on a national level every three years as an ongoing effort to keep the regulations current and improve the life, safety and welfare of the building’sbuildings' occupants. All aspects of a given code are subject to change, including, but not limited to, such items as structural specifications for earthquake safety, energy efficiency and environmental standards, fire and life safety, transportation, lighting and noise limits. On occasion, state agencies have undertaken studies of indoor air quality and noise levels with a focus on permanent and modular classrooms. This process leads to a systematic change that requires engagement in the process and recognition that past methods will not always be accepted. New modular construction is very similar to conventional construction where newer codes and regulations generally increase cost. New governmental regulations may increase our costs to acquire new rental equipment, as well as increase our costs to refurbish existing equipment.
Compliance with building codes and regulations entails risk as state and local government authorities do not necessarily interpret building codes and regulations in a consistent manner, particularly where applicable regulations may be unclear and subject to interpretation. These regulations often provide broad discretion to governmental authorities that oversee these matters, which can result in unanticipated delays or increases in the cost of compliance in particular markets. The construction and modular industries have developed many “best practices” which are constantly evolving. Some of our peers and competitors may adopt practices that are more or less stringent than ours. When, and if, regulators clarify regulatory standards, the effect of the clarification may be to impose rules on our business and practices retroactively, at which time we may not be in compliance with such regulations and we may be required to incur costly remediation. If we are unable to pass
these increased costs on to our customers, our business, financial condition, operating cash flows and results of operations could be negatively impacted.
Our operations face foreign currency exchange rate exposure, which may materially adversely affect our business, results of operations and financial condition.
We hold assets, incur liabilities, earn revenue and pay expenses in certain currencies other than the US dollar,Dollar, primarily the Canadian dollarDollar, the Mexican Peso and the Mexican peso.British Pound. Our consolidated financial results are denominated in US dollars,Dollars, and
therefore, during times of a strengthening US dollar,Dollar, our reported revenue in non-US dollarDollar jurisdictions will be reduced because the local currency will translate into fewer US dollars.Dollars. Revenue and expenses are translated into US dollarsDollars at the average exchange rate for the period. In addition, the assets and liabilities of our non-US dollarDollar subsidiaries are translated into US dollarsDollars at the exchange rates in effect on the balance sheet date. Foreign currency exchange adjustments arising from certain intercompany obligations with and between our domestic companies and our foreign subsidiaries are marked-to-market and recorded as a non-cash loss or gain in each of our financial periods in our consolidated statements of operations. Accordingly, changes in currency exchange rates will cause our foreign currency translation adjustment in the consolidated statements of comprehensive lossincome (loss) to fluctuate. In addition, fluctuations in foreign currency exchange rates will impact the amount of US dollarsDollars we receive when we repatriate funds from our non-US dollarDollar operations.
Fluctuations in interest rates and commodity prices may also materially adversely affect our revenues, results of operations and cash flows.
Although we have converted a portion of our senior secured revolving credit facility borrowings into fixed-rate debt through interest rate swaps, a significant portion of our borrowings under the facility remain variable rate debt. Fluctuations in interest rates may negatively impact the amount of interest payments, as well as our ability to refinance portions of our existing debt in the future at attractive interest rates. In addition, certain of our end markets, as well as portions of our cost structure, such as transportation costs, are sensitive to changes in commodity prices, which can impact both demand for and profitability of our services. These changes could impact our future earnings and cash flows, assuming other factors are held constant.
Significant increases in the costs and restrictions on the availability of raw materialmaterials and labor costs could increase our operating costs significantly and harm our profitability.
We incur labor costs and purchase raw materials, including steel, lumber, siding and roofing, paint, glass, fuel and other productsparts and materials to perform periodic repairs, modifications and refurbishments to maintain physical conditions of our units and in connection with get-ready, delivery and installation of our units. The volume, timing and mix of such work may vary quarter-to-quarter and year-to-year. Generally, increases in labor and raw material costs will increase the acquisition costs of new units and also increase the repair and maintenance costs of our fleet. We also maintain a truck fleet to deliver units to and return units from our customers, the cost of which is sensitive to maintenance and fuel costs and rental rates on leased equipment. During periods of rising prices for labor or raw materials, and in particular, when the prices increase rapidly or to levels significantly higher than normal, we may incur significant increases in our acquisition costs for new units and higher operating costs that we may not be able to recoup from customers through changes in pricing, which could materially adversely affect our business, results of operations and financial condition. If raw material prices decline significantly, we may have to write down our raw materials inventory values. If this happens, our results of operations and financial condition could decline.
In addition, the availability of raw materials components fluctuates from time to time due to factors outside of our control, including trade laws and tariffs, natural disasters, global pandemics like COVID-19 and resulting supply chain disruptions, and may impact our ability to meet the production demands of our customers. If the costs of raw materials increase or the availability thereof is restricted, it could adversely affect our financial condition, operating results and cash flows.
Fluctuations in fuel costs or oil prices, a reduction in fuel supplies, or a sustained decline in oil prices may have a material adverse effect on our business and results of operations.
In connection with our business, to better serve our customers and limit our capital expenditures, we often move our fleet from branch to branch. In addition, the majority of our customers arrange for delivery and pickup of our units through us. Accordingly, we could be materially adversely affected by significant increases in fuel prices that result in higher costs to us for transporting equipment. In the event of fuel and trucking cost increases, we may not be able to promptly raise our prices to make up for increased costs. A significant or prolonged price fluctuation or disruption of fuel supplies could have a material adverse effect on our financial condition and results of operations.
Additionally, oil prices can be volatile and are subject to fluctuations in supply and demand, market uncertainty and a variety of additional factors that are beyond our control. If oil prices remain volatile for an extended period of time or there is a sustained decline in demand for oil, demand for our Tank and Pump Solutions products from refineries and companies engaged in the exploration and production of oil and natural gas could be adversely impacted, which would in turn have an adverse effect on our results of operations and financial condition.
Third parties may fail to manufacture or provide necessary components for our products properly or in a timely manner.
We are often dependent on third parties to manufacture or supply components for our products. We typically do not enter into long-term contracts with third-party suppliers. We may experience supply problems as a result of financial or operating difficulties or the failure or consolidation of our suppliers. We may also experience supply problems as a result of shortages and discontinuations resulting from product obsolescence or other shortages or allocations by suppliers. Unfavorable economic conditions may also adversely affect our suppliers or the terms on which we purchase products. In the future, we may not be able to negotiate arrangements with third parties to secure products that we require in sufficient quantities or on reasonable terms. If we cannot negotiate arrangements with third parties to produce our products or if the third parties fail to produce our products to our specifications or in a timely manner, our business, results of operations and financial condition may be materially adversely affected.
We are subject to risks associated with labor relations, labor costs and labor disruptions.
We are subject to the costs and risks generally associated with labor disputes and organizing activities related to unionized labor. From time to time,It is possible that strikes, public demonstrations or other coordinated actions and publicity may disrupt our operations. We may incur increased legal costs and indirect labor costs as a result of contractual disputes, negotiations or other labor-related disruptions. We havehave collective bargaining agreements with employees in portions of our Mexico-based operations, which accounted for approximately 1.0%1% of our total employees as of December 31, 2019.2021. These operations may be more highly affected by labor force activities than others, and all collective bargaining agreements must be renegotiated annually. Other locations may also face organizing activities or effects. Labor organizing activities could result in additional employees becoming unionized. Furthermore, collective bargaining agreements may limit our ability to reduce the size of work forces during an economic downturn, which could put us at a competitive disadvantage.
Failure to retain key personnel We believe a unionized workforce outside of Mexico would generally increase our operating costs, divert attention of management from servicing customers and increase the risk of work stoppages, all of which could impede our ability to executehave a material adverse effect on our business, plan and growth strategy.results of operations or financial condition.
Our ability to profitably execute our business plan depends on our ability to attract, develop and retain qualified personnel. Certain of our key executives, managers and employees have knowledge and an understanding of our business and our industry, and/or have developed meaningful customer relationships, that cannot be duplicated readily. Our ability to attract and retain qualified personnel is dependent on, among other things, the availability of qualified personnel and our ability to provide a competitive compensation package.package, including the implementation of adequate drivers of retention and rewards based on performance, and work environment. Failure to retain qualified key personnel may materially adversely affect our business, results of operations and financial condition.
The departure of any key personnel and our inability to enforce non-competition agreements could have a negative impact on our business.Moreover, labor shortages, the inability to hire or retain qualified employees and increased labor costs could have a material adverse effect on our ability to control expenses and efficiently conduct our operations. We may not be able to continue to hire and retain the sufficiently skilled labor force necessary to operate efficiently and to support our operating strategies. Labor expenses could also increase as a result of continuing shortages in the supply of personnel.
If we determine that our goodwill, intangible assets, and indefinite-life intangible assets have become impaired, we may incur impairment charges, which may adversely impact our operating results.
We have a substantial amount of goodwill and indefinite-life intangible assets (trade names), which represents the excess of the total purchase price of our acquisitions over the fair value of the assets acquired, and other intangible assets. As of December 31, 2019,2021, we had approximately $235.2$1,178.8 million and $126.6$460.7 million of goodwill and intangible assets, net, respectively, in our consolidated balance sheets,sheet, which would representrepresented approximately 8.1%20.4% and 4.5%8.0% of total assets, respectively.respectively, and primarily arose through our acquisition of Mobile Mini.
We testevaluate goodwill and indefinite-lived intangible assets for impairment on an annual basis and when events occur or circumstances change that indicate that the fair value of the reporting unit or intangible asset may be below its carrying amount. Fair value determinations require considerable judgment and are sensitive to inherent uncertainties and changes in estimates and assumptions regarding revenue growth rates, EBIT margins, capital expenditures, working capital requirements, tax rates, terminal growth rates, discount rates, exchange rates, royalty rates, benefits associated with a taxable transaction and synergistic benefits available to market participants. Impairment may result from, among other things, deterioration in the performance of the business, adverse market conditions, stock price and adverse changes in applicable laws and regulations, including changes that restrict our activities. Declines in market conditions, a trend of weaker than anticipated financial performance for our reporting units or declines in projected revenue, a decline in our share price for a sustained period of time, an increase in the market-based weighted average cost of capital or a decrease in royalty rates, among other factors, are indicators that the carrying value of our goodwill or indefinite-life intangible assets may not be recoverable. These risks may be heightened by the COVID-19 pandemic. In the event impairment is identified, a charge to earnings would be recorded which may materially adversely affect our financial condition and results of operations.
We are subject to various laws and regulations, including those governing government contracts, corruption and the environment. Obligations and liabilities under these laws and regulations may materially harm our business.
Government Contract Laws and Regulations
We lease and sell our products to government entities, and this subjects us to statutes and regulations applicable to companies doing business with the government. The laws governing government contracts can differ from the laws governing private contracts. For example, many government contracts contain favorable pricing terms and conditions that are not typically included in private contracts, such as clauses that make certain obligations of government entities subject to budget appropriations. Many government contracts can be terminated or modified, in whole or in part, at any time, without penalty, by the government. In addition, our failure to comply with these laws and regulations might result in administrative penalties or the suspension of our government contracts or debarment and, as a result, the loss of the related revenue which would harm our business, results of operations and financial condition. We are not aware of any action contemplated by any regulatory authority related to any possible non-compliance by or in connection with our operations.
Our operations are subject to an array of governmental regulations in each of the jurisdictions in which we operate. For example, our activities in the US are subject to regulation by several federal and state government agencies, including the Occupational Safety and Health Administration, and by federal and state laws. Our operations and activities in other jurisdictions are subject to similar governmental regulations. Similar to conventionally constructed buildings, the modular business industry is also subject to regulations by multiple governmental agencies in each jurisdiction relating to, among others, environmental, zoning and building standards, and health, safety and transportation matters. These regulations affect our Storage Solutions and Tank and Pump Solutions customers, most of whom use our storage units to store their goods on their own properties for various lengths of time. If local zoning laws or planning permission regulations in one or more of our markets no longer allow our units to be stored on customers' sites, our business in that market will suffer. Noncompliance with applicable regulations, implementation of new regulations or modifications to existing regulations may increase costs of compliance, require a termination of certain activities or otherwise materially adversely affect our business, results of operations and financial condition.
US Government Contract Laws and Regulations
Our government customers include the US government, which means we are subject to various statutes and regulations applicable to doing business with the US government. These types of contracts customarily contain provisions that give the US government substantial rights and remedies, many of which are not typically found in commercial contracts and which are unfavorable to contractors, including provisions that allow the government to unilaterally terminate or modify our federal government contracts, in whole or in part, at the government’s convenience. Under general principles of US government contracting law, if the government terminates a contract for convenience, the terminated company may generally recover only its incurred or committed costs and settlement expenses and profit on work completed prior to the termination. If the government terminates a contract for default, the defaulting company may be liable for any extra costs incurred by the government in procuring undelivered items from another source.
In addition, US government contracts and grants normally contain additional requirements that may increase our costs of doing business, reduce our profits, and expose us to liability for failure to comply with these terms and conditions. These requirements include, for example:
• (a) specialized disclosure and accounting requirements unique to US government contracts;
• (b) financial and compliance audits that may result in potential liability for price adjustments, recoupment of government funds after such funds have been spent, civil and criminal penalties, or administrative sanctions such as suspension or debarment from doing business with the US government;
• (c) public disclosures of certain contract and company information; and
• (d) mandatory socioeconomic compliance requirements, including labor requirements, non-discrimination and affirmative action programs and environmental compliance requirements.
If we fail to comply with these requirements, our contracts may be subject to termination, and we may be subject to financial and/or other liability under our contracts or under the Federal Civil False Claims Act.Act (the "False Claims Act"). The False Claims Act’s “whistleblower” provisions allow private individuals, including present and former employees, to sue on behalf of the US government. The False Claims Act statute provides for treble damages and other penalties, and if our operations are found to be in violation of the False Claims Act, we could face other adverse action, including suspension or prohibition from doing business with the US government. Any penalties, damages, fines, suspension or damages could adversely affect our ability to operate our business and our financial results.
Department of Transportation and Titling Regulations
We operate in the US pursuant to operating authority granted by the US Department of Transportation (the “DOT”). Our drivers must comply with the safety and fitness regulations of the DOT, including those relating to drug and alcohol testing and hours of service. Such matters as equipment weight and dimensions are also subject to government regulations. Our safety record could be ranked poorly compared to peer firms. A poor safety ranking may result in the loss of customers or difficulty attracting and retaining qualified drivers which could affect our results of operations. Should additional rules be enacted in the future, compliance with such rules could result in additional costs.
Additionally, we are subject to, and may be required to expend funds to ensure compliance with a variety of laws, regulations, and ordinances related to unit titling, stamping, and registration rules and procedures, and notification requirements to agencies and law enforcement relating to unit transfers, particularly when acquiring new assets and operations. Many of these laws and regulations are frequently complex and subject to interpretation, and failure to comply with present or future regulations or changes in interpretations of existing laws or regulations may result in impairment or suspension of our operations and the imposition of penalties and other liabilities. At various times, we may be involved in disputes with local governmental officials regarding the development and/or operation of our units. We may be subject to similar types of regulations by governmental agencies in new markets. In addition, new legal or regulatory requirements or changes in existing requirements may delay or increase the cost of acquiring and integrating new units, which may adversely impact our ability to conduct business.
Anti-Corruption Laws and Regulations
We are subject to various anti-corruption laws that prohibit improper payments or offers of payments to foreign governments and their officials by a US person for the purpose of obtaining or retaining business. We operate in countries that may present a more corruptible business environment than the US. Such activities create the risk of unauthorized payments or offers of payments by one of our employees or agents that could be in violation of various laws, including the FCPA. We have implemented safeguards and policies to discourage these practices by our employees and agents. However, existing safeguards and any future improvements may prove to be ineffective and employees or agents may engage in conduct for which we might be held responsible.
If employees violate our policies or we fail to maintain adequate record-keeping and internal accounting practices to accurately record our transactions, we may be subject to regulatory sanctions. Violations of the FCPA or other anti-corruption laws may result in severe criminal or civil sanctions and penalties, including suspension or debarment from US government contracting, and we may be subject to other liabilities which could materially adversely affect our business, results of operations and financial condition. We are also subject to similar anti-corruption laws in other jurisdictions.
Environmental Laws and Regulations
We are subject to a variety of national, state, regional and local environmental laws and regulations. Among other things, these laws and regulations impose limitations and prohibitions on the discharge and emission of, and establish standards for the use, disposal and management of, regulated materials and waste and impose liabilities for the costs of investigating and cleaning up, and damages resulting from, present and past spills, disposals or other releases of hazardous substances or materials. In the ordinary course of business, we use and generate substances that are regulated or may be hazardous under environmental laws. We have an inherent risk of liability under environmental laws and regulations, both with respect to ongoing operations and with respect to contamination that may have occurred in the past on our properties or as a result of our operations. FromFor example, we own, transport and rent tanks and boxes in which waste materials are placed by our customers. Although we have a policy which, with certain limited exceptions, requires customers to return tanks and containers clean of any substances, they may fail to comply with these obligations. Additionally, we may provide waste hauling services, which involves environmental risks during transport. While we endeavor to comply with all regulatory requirements, from time to time, our operations or conditions on properties that we have acquired have resulted in liabilities under these environmental laws. We may in the future incur material costs to comply with environmental laws or sustain material liabilities from claims concerning noncompliance or contamination. Under certain environmental laws, we could be held responsible for all of the costs relating to any contamination at, or migration to or from, our or our predecessors' past or present facilities. These laws often impose liability even if the owner, operator or lessor did not know of, or was not responsible for, the release of such hazardous substances. We have no reserves for any such liabilities.
We are also required to obtain environmental permits from governmental authorities for certain of our operations. If we violate or fail to obtain or comply with these laws, regulations, or permits, we could be fined or otherwise sanctioned by regulators. We could also become liable if employees or other parties are improperly exposed to hazardous materials.
In addition, ongoing governmental review of hydraulic fracturing (“fracking”) and its environmental impact could lead to changes to this activity or its substantial curtailment, which could adversely affect our revenue and results of operations. Approximately 2% of our consolidated rental revenue for the year ended December 31, 2021 was related to customers involved in the upstream exploration and production of oil and natural gas. A portion of this revenue involves rentals to customers that use the fracking method to extract natural gas. The US Environmental Protection Agency has issued regulations or guidance regarding certain aspects of the process. Other federal, state and local governments and governmental agencies also investigate and/or regulate fracking. Additional governmental regulation could result in increased costs of compliance or the curtailment of fracking in the future, which would adversely affect our revenue and results of operations.
We cannot predict what environmental legislation or regulations will be enacted in the future, how existing or future laws or regulations will be administered or interpreted, or what environmental conditions may be found to exist at our facilities or at third party sites for which we may be liable. Enactment of stricter laws or regulations, stricter interpretations of existing laws and regulations or the requirement to undertake the investigation or remediation of currently unknown environmental contamination at sites we own or third partythird-party sites may require us to make additional expenditures, some of which could be material.
Any failure Responding to governmental investigations or other actions may be both time-consuming and disruptive to our operations and could divert the attention of our management information systems could disruptand key personnel from our business operations bothoperations. The impact of these and other investigations and lawsuits could have a material adverse effect on our financial statements.
Our customer base includes customers operating in the field and back office,a variety of industries which could result in decreased lease or sale revenue and increase overhead costs.
The failure of our management information systems to perform as anticipated could damage our reputation with our customers, disrupt our business or result in, among other things, decreased lease and sales revenue and increased overhead costs. Any such failure could harm our business, results of operations and financial condition. In addition, the delay or failure to implement information system upgrades and new systems effectively could disrupt our business, distract management’s focus and attention from business operations and growth initiatives and increase our implementation and operating costs, any of which could materially adversely affect our operations and operating results.
We have previously been the target of an attempted cyber-attack and may be subject to breacheschanges in their competitive environment as a result of the information systems that we use. We have not experiencedglobal, national or local economic climate in which they operate and/or economic or financial disruptions to their industry.
Our customer base includes customers operating in a material cybersecurity breach. We have programs in place that are intended to detect, containvariety of industries, including commercial and respond to data security incidentsindustrial, construction, education, energy and that provide employee awareness training regarding phishing, malware,natural resources, government, retail and other cyber risksend markets. Many of these customers, across this wide range of industries, are facing economic and/or financial pressure from changes to protect against cyber riskstheir industry resulting from the global, national and security breaches. However, becauselocal economic climate in which they operate and industry-specific economic and financial disruptions, including, in some cases, consolidation and lower sales revenue from physical locations, resulting from the techniques used toimpact of the COVID-19 pandemic and the related changes in political, social and economic conditions. These and any future
obtain unauthorized access, disablechanges to any of the industries in which our customers operate could cause them to rent fewer units from us or degrade service, or sabotage systems change frequently and may be difficult to detect for long periods of time, we mayotherwise be unable to anticipate these techniques or implement adequate preventative measures.satisfy their obligations to us. In addition, becausecertain of our systems contain information about individualscustomers are facing financial pressure and such pressure, from COVID-19 or other factors, may result in consolidation in some industries and/or an increase in bankruptcy filings by certain customers. Each of these facts and industry impacts, individually or in the aggregate, could have a materially adverse effect on our operating results.
We may not be able to adequately protect our intellectual property and other businesses, the failureproprietary rights that are material to maintain the security of the data we hold, whether the resultour business.
Our ability to compete effectively depends in part upon protection of our rights in trademarks, copyrights and other intellectual property rights we own error or license, including patents to the malfeasanceMobile Mini locking system. Our use of contractual provisions, confidentiality procedures and agreements, and trademark, copyright, unfair competition, trade secret and other laws to protect our intellectual property and other proprietary rights may not be adequate. Litigation may be necessary to enforce our intellectual property rights and protect our proprietary information and patents, or errorsto defend against claims by third parties that our services or our use of others,intellectual property infringe their intellectual property rights. Any litigation or claims brought by or against us could result in substantial costs and diversion of resources. A successful claim of trademark, copyright or other intellectual property infringement against us could prevent us from providing services, which could harm our reputationbusiness, financial condition or give riseresults of operations. In addition, a breakdown in our internal policies and procedures may lead to legal liabilities leading to lower revenue, increased costs, regulatory sanctions and other potentialan unintentional disclosure of our proprietary, confidential or material adverse effects onnon-public information, which could in turn harm our business, financial condition or results of operations and financial condition.operations.
Our operations could be subject to natural disasters and other business disruptions, which could materially adversely affect our information systems, future revenue, financial condition, cash flows and increase our costs and expenses.
Our operations could be subject to natural disasters and other business disruptions such as pandemics, fires, floods, hurricanes, earthquakes and terrorism, which could adversely affect our information systems, future revenue, financial condition, and cash flows and increase our costs and expenses. See "Our operations may be adversely impacted as a result of COVID-19." In addition, the occurrence and threat of terrorist attacks may directly or indirectly affect economic conditions, which could adversely affect demand for our products and services. In the event of a major natural or man-made disaster, we could experience loss of life of our employees, destruction of facilities or business interruptions, any of which may materially adversely affect our business. If any of our facilities or a significant amount of our rental equipment were to experience a catastrophic loss, it could disrupt our operations, delay orders, shipments and revenue recognition and result in expenses to repair or replace the damaged rental equipment and facility not covered by asset, liability, business continuity or other insurance contracts. Also, we could face significant increases in premiums or losses of coverage due to the loss experienced during and associated with these and potential future natural or man-made disasters that may materially adversely affect our business. In addition, attacks or armed conflicts that directly impact one or more of our properties could significantly affect our ability to operate those properties and thereby impair our results of operations.
In general, any of these events could cause consumer confidence and spending to decrease or result in increased volatility in the global economy and worldwide financial markets. Any such occurrence could materially adversely affect our business, results of operations and financial condition.
Our operations are dependent, in part, on our ability to establish and profitably maintain the appropriate physical presence in the markets we serve.
Our operations depend, in part, on our ability to develop and optimize our branch network and market coverage while maintaining profitability. Our ability to optimize our branch network and market coverage requires active management of our real estate portfolio in a manner that permits locations and offerings to evolve over time, which to the extent it involves the relocation of existing branch locations or the opening of additional branch locations will depend on a number of factors, including our identification and availability of suitable locations; our success in negotiating leases on acceptable terms; and our timely development of new branch locations, including the availability of construction materials and labor and the absence of significant construction and other delays based on weather or other events. These factors could potentially increase the cost of doing business and the risk that our business practices could result in liabilities that may adversely affect our business, results of operations and financial condition.
We have in the past, and we intend in the future, to expand our operations into new geographic markets. This expansion could require financial resources that would not therefore be available for other aspects of our business. In addition, this expansion could require the time and attention of management, leaving less time to focus on existing business. If we fail to manage the risks inherent in our geographic expansion, we could incur capital and operating costs without any related increase in revenue, which would harm our operating results.
We may incur property, casualty or other losses not covered by our insurance.
We are predominantlypartly self-insured for a number of different risk categories, such as property, general liability (including product liability), workers' compensation, automobile claims, crime, and cyber liability, with insurance coverage for certain catastrophic risks. The types and amounts of insurance may vary from time to time based on our decisions with respect to risk retention and regulatory requirements. The occurrence of significant claims, a substantial rise in costs to maintain our insurance, or the failure to maintain adequate insurance coverage could have an adverse impact on our financial condition and results of operations.
We may not be able to redeploy our units effectively should a significant number of our leased units be returned during a short period of time, which could adversely affect our financial performance.
While our typical lease terms include contractual provisions requiring customers to retain units on lease for a specified period, our customers generally rent their units for periods longer than the contractual lease terms. As of December 31, 2019, the average lease duration of our current lease portfolio is approximately 34 months. If a significant number of leased units are returned in a short period of time, a large supply of units would need to be remarketed. Our failure to effectively remarket a large influx of units returning from leases could materially adversely affect our financial performance.
Failure to close our unit sales transactions as we project could cause our actual revenue or cash flow for a particular fiscal period to differ from expectations.
Sales of new and used modular space and portable storage units to customers represented approximately 9.3%5.7% of ourWillScot Mobile Mini's revenue during the year ended December 31, 2019.2021. Sale transactions are subject to certain factors that are beyond our control, including permit requirements, the timely completion of prerequisite work by others and weather conditions. Accordingly, the actual timing of the completion of these transactions may take longer than we expect. As a result, our actual revenue and cash flow in a particular fiscal period may not consistently correlate to our internal operational plans and budgets. If we are unable to accurately predict the timing of these sales,sales, we may fail to take advantage of business and growth opportunities otherwise available, and our business, results of operations, and financial condition and cash flows may be materially adversely affected.
If we fail to maintain an effective system of internal controls, we may not be able to accurately report our financial results, which could lead to a loss of investor confidence in our financial statements and have an adverse effect on our stock price.
Effective internal controls are necessary for us to provide reliable and accurate financial statements and to effectively prevent fraud. We devote significant resources and time to comply with the internal control over financial reporting requirements of the Sarbanes-Oxley Act.Act of 2002 as amended (the "Sarbanes-Oxley Act"). There is no assurance that material weaknesses or significant deficiencies will not occur or that we will be successful in adequately remediating any such material weaknesses and significant deficiencies. We may in the future discover areas of our internal controls that need improvement. We cannot be certain that we will be successful in maintaining adequate internal control over our financial reporting and financial processes. Furthermore, as we
grow our business, including through acquisition, our internal controls will become more complex, and we will require significantly more resources to ensure our internal controls remain effective. Additionally, the existence of any material weakness or significant deficiency would require management to devote significant time and incur significant expense to remediate any such material weaknesses or significant deficiencies, and management may not be able to remediate any such material weaknesses or significant deficiencies in a timely manner. The existence of any material weakness in our internal control over financial reporting could also result in errors in our financial statements that could require us to restate our financial statements, cause us to fail to meet our reporting obligations, subject us to investigations from regulatory authorities or cause stockholders to lose confidence in our reported financial information, all of which could materially and adversely affect us.
We incur significantly increasedare subject to evolving public disclosure, financial reporting and corporate governance expectations and regulations that impact compliance costs and risks of noncompliance.
We are subject to changing rules and regulations promulgated by a number of governmental and self-regulatory organizations, including the SEC and Nasdaq, as a resultwell as evolving investor expectations around disclosures, financial reporting, corporate governance and environmental and social practices. These rules and regulations continue to evolve in scope and complexity, and many new requirements have been created in response to laws enacted by the US and foreign governments, making compliance more difficult and uncertain. The increase in costs to comply with such evolving expectations, rules and regulations, as well as any risk of operating as a public company, and our management is required to devote substantial time to compliance efforts. Public company requirements may strain our resources and divert management’s attention, whichnoncompliance, could adversely impact us.
We may be unable to achieve our environmental, social and governance goals.
We are dedicated to corporate social responsibility and sustainability and face pressures from our employees, customers, and stockholders to make significant advancements in environmental, social and governance matters. In part to address these concerns, we established certain goals as part of our ESG strategy. Achievement of our goals is subject to risks and uncertainties, many of which are outside of our control, and it is possible that we may fail to achieve these goals or that our colleagues, customers, or stockholders might not be satisfied with our efforts. These risks and uncertainties include, but are not limited to: our ability to execute our strategyoperational strategies and harm operating results.
We incur significant legal, accounting, insuranceachieve our goals within the currently projected costs and the expected timeframes; the availability and cost of renewable energy and other expensesmaterials; compliance with, and changes or additions to, global and regional regulations, taxes, charges, mandates or requirements relating to climate-related goals; labor-related regulations and requirements that restrict or prohibit our ability to impose requirements on third-party contractors; the actions of competitors and competitive pressures; an acquisition of or merger with another company that has not adopted similar goals or whose progress towards reaching its goals is not as a result of being a public company. The Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010,advanced as amended (the “Dodd-Frank Act”),ours; and the Sarbanes-Oxley Act, as well as related rules implemented bypace of regional and global recovery from the SEC, have required changesCOVID-19 pandemic. A failure to meet our goals could adversely affect public perception of our business, employee morale or customer or stockholder support.
Further, an increasing percentage of employees, customers, and stockholders considers sustainability factors in corporate governance practices of public companies. In addition, rules that the SEC is implementing or is requiredmaking employment, business and investment decisions. If we are unable to implement pursuant to the Dodd-Frank Act are expected to require additional change. We expect that ongoing compliance with these and other similar laws, rules and regulations, including compliance with Section 404 of the Sarbanes-Oxley Act, will substantially increasemeet our expenses, including legal and accounting costs, and make some activities more time-consuming and costly. It is possible that these expenses will exceed the increases that management projects. These laws, rules and regulations may also make it more expensive to obtain director and officer liability insurance, andgoals, we may lose employees, and have difficulty recruiting new employees, investors, customers, or partners, our stock price may be required to accept reduced policy limitsnegatively impacted, our reputation may be negatively affected, and coverage or incur substantially higher costs to obtain the same or similar coverage, whichit may make itbe more difficult for us to attractcompete effectively, all of which would have an adverse effect on our business, operating results, and retain qualified personsfinancial condition.
Risks Relating to serveIncome Tax
Our ability to use our net operating loss carryforwards and other tax attributes may be limited.
As of December 31, 2021, we had US net operating loss (“NOL”) carryforwards of approximately $1,232.7 million and $632.9 million for US federal income tax and state tax purposes, respectively, available to offset future taxable income, prior to consideration of annual limitations that Section 382 of the Internal Revenue Code of 1986 may impose. The US NOL carryforwards begin to expire in 2022 for state and federal if not utilized. In addition, we had foreign NOLs of $3.9 million as a result of operations in Canada and Mexico. Our Mexico and Canada NOL carryforwards begin to expire in 2026 and 2032, respectively, if not utilized.
Our US NOL and tax credit carryforwards could expire unused and be unavailable to offset future income tax liabilities. Under Section 382 of the Internal Revenue Code and corresponding provisions of US state law, if a corporation undergoes an “ownership change,” generally defined as a greater than 50% change, by value, in its equity ownership over a three-year period, the corporation’s ability to use its US NOLs and other applicable tax attributes before the ownership change, such as research and development tax credits, to offset its income after the ownership change may be limited. Similar provisions apply with respect to certain state and non-US jurisdictions which could limit our ability to offset taxable income. In addition, at the state level, there may be periods during which the use of NOLs is suspended or otherwise limited, which could accelerate or permanently increase state taxes owed. We have tax attributes subject to the foregoing provisions primarily from the Merger.
Lastly, we may experience ownership changes in the future as a result of subsequent shifts in our stock ownership, some of which may be outside of our control. If we determine that an ownership change has occurred and our ability to use our historical NOL and tax credit carryforwards is materially limited, it may result in increased future tax obligations and income tax expense.
Some of the tax loss carryforwards could expire, and if we do not have sufficient taxable income in future years to use the tax benefits before they expire, the benefit may be permanently lost. In addition, the taxing authorities could challenge our calculation of the amount of our tax attributes, which could reduce certain of our recognized tax benefits. Further, tax laws in certain jurisdictions may limit the ability to use carryforwards upon a change in control.
We may be unable to recognize deferred tax assets such as those related to our tax loss carryforwards and, as a result, lose future tax savings, which could have a negative impact on its boardour liquidity and financial position.
We recognize deferred tax assets primarily related to deductible temporary differences based on our assessment that the item will be utilized against future taxable income and the benefit will be sustained upon ultimate settlement with the applicable taxing authority. Such deductible temporary differences primarily relate to tax loss carryforwards and business interest expense limitations. Tax loss carryforwards arising in a given tax jurisdiction may be carried forward to offset taxable income in future years from such tax jurisdiction and reduce or eliminate income taxes otherwise payable on such taxable income, subject to certain limitations. Deferred interest expense exists primarily within our US operating companies, where interest expense was not previously deductible as incurred but may become deductible in the future subject to certain limitations. We may have to write down, through income tax expense, the carrying amount of directorscertain deferred tax assets to the extent we determine it is not more likely than not that we will realize such deferred tax assets under US Generally Accepted Accounting Principles ("GAAP").
Unanticipated changes in our tax obligations, the adoption of a new tax legislation, or as officers.exposure to additional income tax liabilities could affect profitability.
We are subject to income taxes in the reporting requirements ofUS, Canada, Mexico and the Exchange Act,UK. Our tax liabilities are affected by the Sarbanes-Oxley Act of 2002 as amended (the “Sarbanes-Oxley Act”), the listing requirements of Nasdaqamounts we charged for inventory, services, funding and other transactions on an intercompany basis. We are subject to potential tax examinations in these jurisdictions. Tax authorities may disagree with our intercompany charges, cross-jurisdictional transfer pricing or other tax positions and assess additional taxes. We regularly assess the appropriateness of our tax positions based on all the facts including on-going tax examinations and the applicable securities rulestax laws. However, there can be no assurance that we will accurately predict the outcomes of our tax positions or the challenges of applicable taxing authorities during tax examinations, and regulations. Compliance with these rulesthe amounts that we ultimately pay upon resolution of examinations could be materially different from the amounts we previously included in our income tax provision and, regulations increases our legal and financial compliance costs, makes some activities more difficult, time-consuming or costly and increases the demandstherefore, could have a material impact on our systemsresults of operations and resources.
Certain executives have more experiencecash flows. In addition, our future effective tax rate could be adversely affected by changes to our operating structure, changes in managing a public company than other membersthe mix of earnings in countries with differing statutory tax rates, changes in the valuation allowance of deferred tax assets, changes in tax laws and the discovery of new information in the course of our management team. Our internal infrastructuretax return preparation process. Changes in tax laws or regulations, including changes in the US related to the treatment of accelerated depreciation
expense, carry-forwards of net operating losses, and taxation of foreign income and expenses may not be adequate to support increased reporting obligations, and we may be unable to hire, train or retain necessary staff and may be reliant on engaging outside consultants or professionals to overcome lack of experience or employees. Our management may fail to comply with public company requirements, or may fail to do so effectively and efficiently, either of which would materiallyincrease tax uncertainty and adversely harmaffect our ability to execute our strategy and, consequently, our operating results.results of operations.
Risks Relating to Our Capital Structure
Global capital and credit market conditions could materially and adversely affect our ability to access the capital and credit markets or the ability of key counterparties to perform their obligations to us.
Although we believe the banks participating in our credit facility have adequate capital and resources, we can provide no assurance that all of those banks will continue to operate as a going concern in the future. If any of the banks in our lending group were to fail, it is possible that the borrowing capacity under our facility would be reduced. Practical, legal and tax limitations may also limit our ability to access and service the working capital needs of our businesses. In the event that the availability under our credit facility were reduced significantly, we could be required to obtain capital from alternate sources to finance our capital needs. The options for addressing such capital constraints would include, among others, obtaining commitments from the remaining banks in the lending group or from new banks to fund increased amounts under the terms of our credit facility, and seeking to access the public capital markets. In addition, we may delay certain capital expenditures to ensure that we maintain appropriate levels of liquidity. If it became necessary to access additional capital, any such alternatives could have terms less favorable than those terms under our credit facility, which could have a material adverse effect on our business, results of operations, financial condition and cash flows.
In addition, in the future we may need to raise additional funds to, among other things, refinance existing indebtedness, fund existing operations, improve or expand itsour operations, respond to competitive pressures or make acquisitions. If adequate funds are not available on acceptable terms, we may be unable to achieve our business or strategic objectives or compete effectively. Our ability to pursue certain future opportunities may depend in part on our ongoing access to debt and equity capital markets. We cannot assure you that any such financing will be available on terms satisfactory to us or at all. If we are unable to obtain financing on acceptable terms, we may have to curtail our growth by, among other things, curtailing the expansion of our fleet of units or our acquisition strategy. Additionally, future credit market conditions could increase the likelihood that one or more of our lenders may be unable to honor their commitments under our credit facility, which could have an adverse effect on our financial condition and results of operations.
Economic disruptions affecting key counterparties could also materially adversely affect our business. We monitor the financial strength of our larger customers, derivative counterparties, lenders, vendors, service providers and insurance carriers on a periodic basis using publicly-available information to evaluate our exposure to those who have or who we believe may
likely experience significant threats to their ability to adequately perform their obligations to us. The information available will differ from counterparty to counterparty and may be insufficient for us to adequately interpret or evaluate our exposure and/or determine appropriate or timely responses.
Our leverage may make it difficult for us to service our debt and operate our business.
As of December 31, 2019,2021, we had $1,663.0$2,760.1 million of total indebtedness, excluding deferred financing fees, consisting of $903.0$1,644.5 million of borrowings under our credit facility, $270.02020 ABL Facility, $526.50 million of 7.875% senior secured notes due December 15, 2022, and $490.0our 2025 Secured Notes, $500.0 million of 6.875% senior secured notes due August 15, 2023.our 2028 Secured Notes and $89.1 million of finance leases. Our leverage could have important consequences, including:
•including (a) making it more difficult to satisfy our obligations with respect to our various debt and liabilities;
• (b) requiring us to dedicate a substantial portion of our cash flow from operations to debt payments, thus reducing the
availability of cash flow to fund internal growth through working capital and capital expendituresexpenditure on our existing fleet
or a new fleet and for other general corporate purposes;
•purposes; (c) increasing our vulnerability to a downturn in our business or adverse economic or industry conditions;
• (d) placing us at a competitive disadvantage compared to our competitors that have less debt in relation to cash flow
and that, therefore, may be able to take advantage of opportunities that our leverage would prevent us from pursuing;
• (e) limiting our flexibility in planning for or reacting to changes in our business and industry;
• (f) restricting us from pursuing strategic acquisitions or exploiting certain business opportunities or causing us to make
non-strategic divestitures; restricting us from pursuing strategic acquisitions or exploiting certain business opportunities or causing us to make non-strategic divestitures; (g) requiring additional monitoring, reporting and
• borrowing base requirements under our 2020 ABL Facility if borrowings significantly increase or if certain liquidity thresholds are not satisfied; and (h) limiting our ability to borrow additional funds or raise equity capital in the future and increasing the costs of such
additional financings.
Our ability to meet our debt service obligations or to refinance our debt depends on our future operating and financial performance, which will be affected by our ability to successfully implement our business strategy as well as general economic, financial, competitive, regulatory and other factors beyond our control. If our business does not generate sufficient cash flow from operations, or if future borrowings are not available to us in an amount sufficient to enable us to pay our indebtedness or to fund our other liquidity needs, we may need to refinance all or a portion of our indebtedness on or before its maturity, sell assets, reduce or delay capital investments or seek to raise additional capital, any of which could have a material adverse effect on our operations. In addition, we may not be able to affect any of these actions, if necessary, on commercially reasonable terms or at all. Any refinancing of our debt could be at higher interest rates and may require us to comply with more onerous covenants, which could further restrict our business operations. The terms of our existing or future debt instruments may limit or prevent us from taking any of these actions.actions. If we default on the payments required under the terms of certain of our indebtedness, that indebtedness, together with debt incurred pursuant to other debt agreements or instruments that contain cross-default or cross-acceleration provisions, may become payable on demand, and we may not have sufficient funds to repay all of our debts. As a result, our inability to generate sufficient cash flow to satisfy our debt service obligations, or to refinance or restructure our obligations on commercially reasonable terms or at all, would have an adverse effect, which could be material, on our business, financial condition and results of operations, as well as on our ability to satisfy our debt obligations.obligations.
Despite our current level of indebtedness, we and our subsidiaries will still be able to incur significant additional amounts of debt, which could further exacerbate the risks associated with our substantial indebtedness.
We and our subsidiaries may be able to incur substantial additional debt in the future.future, including in connection with capital leases. Although the indentures that governs our outstanding secured notes and the credit agreement that governs our credit facility and the indentures that govern our outstanding notes contain restrictions on the incurrence of additional debt, these restrictions are subject to a number of significant qualifications and exceptions, and under certain circumstances, the amount of debt that we could incur in compliance with
these restrictions could be substantial. In addition, the indenturescredit agreement that governs our credit facility and the credit agreementindentures do not prevent us from incurring other obligations that do not constitute indebtedness under those agreements. If we add debt to our and our subsidiaries’ existing debt levels, the risks associated with our substantial indebtedness described above, including our possible inability to service our debt, will increase.
We are subject to and may, in the future become subject to, covenants that limit our operating and financial flexibility and, if we default under our debt covenants, we may not be able to meet our payment obligations.
The credit agreement that governs our credit facility and the indentures that govern our outstanding notes, as well as any instruments that govern any future debt obligations, contain covenants that impose significant restrictions on the way our subsidiaries can operate, including restrictions on the ability to:
•to (a) incur or guarantee additional debt and issue certain types of stock;
• (b) create or incur certain liens;
• (c) make certain payments, including dividends or other distributions, with respect to our equity securities;
• (d) prepay or redeem junior debt;
• (e) make certain investments or acquisitions, including participating in joint ventures;
• (f) engage in certain transactions with affiliates;
• (g) create unrestricted subsidiaries;
• (h) create encumbrances or restrictions on the payment of dividends or other distributions, loans or advances to, and on
the transfer of, assets to the issuer or any restricted subsidiary;
• (i) sell assets, consolidate or merge with or into other companies;
• (j) sell or transfer all or substantially all our assets or those of our subsidiaries on a consolidated basis; and
• (k) issue or sell share capital of certain subsidiaries.
Although these limitations are subject to significant exceptions and qualifications, these covenants could limit our ability to finance future operations and capital needs and our ability to pursue acquisitions and other business activities that may be in our interest. Our subsidiaries’ ability to comply with these covenants and restrictions may be affected by events beyond our control. These include prevailing economic, financial and industry conditions. If any of our subsidiaries default on their obligations under our credit facility or our secured notes, then the relevant lenders or holders could elect to declare the debt, together with accrued and unpaid interest and other fees, if any, immediately due and payable and proceed against any collateral securing that debt. If the debt under our credit facility, the indentures or any other material financing arrangement that we enter into were to be accelerated, our assets may be insufficient to repay in full the credit facility, the secured notes and our other debt.such indebtedness.
The credit agreement that governs our credit facility also requires our subsidiaries to satisfy specified financial maintenance tests in the event that we do not satisfy certain excess liquidity requirements. Deterioration in our operating results, as well as events beyond our control, including increases in raw materials prices and unfavorable economic conditions, could affect the ability to meet these tests, and we cannot assure that we will meet these tests. If an event of default occurs under our credit facility, the lenders could terminate their commitments and declare all amounts borrowed, together with accrued and unpaid interest and other fees, to be immediately due and payable. Borrowings under other debt instruments that contain cross-acceleration or cross-default provisions also may be accelerated or become payable on demand. In these circumstances, our assets may not be sufficient to repay in full that indebtedness and our other indebtedness then outstanding.
The amount of borrowings permitted at any time under our credit facility is subject to compliance with limits based on a periodic borrowing base valuation of the collateral thereunder. As a result, our access to credit under the credit facility is subject to significantpotential fluctuations depending on the value of the borrowing base of eligible assets as of any measurement date, as well as certain discretionary rights of the agent in respect of the calculation of such borrowing base value. As a result of any change in valuation, the availability under the credit facility may be reduced, or we may be required to make a repayment of the credit facility, which may be significant. The inability to borrow under the credit facility or the use of available cash to repay the credit facility as a result of a valuation change may adversely affect our liquidity, results of operations and financial position.
The uncertainty regarding the potential phase-out of LIBOR may negatively impact our operating results.
LIBOR, the interest rate benchmark used as a reference rate on our variable rate debt, including our asset backed credit facility and interest rate swaps, is expected to be phased out after 2021, when private-sector banks are no longer required to report the information used to set the rate. Without this data, LIBOR may no longer be published, or the lack of quality and quantity of data may cause the rate to no longer be representative of the market.market, though the ICE Benchmark Administration, in its capacity as administrator of US dollar LIBOR, announced that it intends to extend publication of USD LIBOR (other than one-week and two-month tenors) until June 30, 2023. At this time, no consensus exists as to what rate or rates willmay become accepted alternatives to LIBOR, althoughand it is impossible to predict whether and to what extent banks will continue to provide LIBOR submissions to the U.S.administrator of LIBOR and whether one-month, three-month, six‑month, and twelve-month USD LIBOR rates will continue to be published until June 2023. The US Federal Reserve, in connection with the Alternative Reference Rates Committee ("ARRC"), a steering committee comprised of large U.S.US financial institutions, is considering replacing U.S.US dollar LIBOR with the Secured Overnight Financing Rate. Secured Overnight Financing Rate ("SOFR"). SOFR is a more generic measure than LIBOR and considers the cost of borrowing cash overnight collateralized by U.S.US Treasury securities. Given the inherent differences between LIBOR and Secured Overnight Financing RateSOFR or any other alternative benchmark rate that may be established, there are many uncertainties regarding a transition from LIBOR, including but not limited to the need to amend
all contracts with LIBOR as the referenced rate and how this will impact the Company’sour cost of variable rate debt and derivative financial instruments. The CompanyWe will also need to consider new contracts and if they should reference an alternative benchmark rate or include suggested fallback language, as published by the Alternative Reference Rates Committee.ARRC. The consequences of these developments with respect to LIBOR cannot be entirely predicted and
span multiple future periods but could result in an increase in the cost of our variable rate debt or derivative financial instruments which may be detrimental to our financial position or operating results.
IfOn December 6, 2021, our warrants are exercised,indirect subsidiary entered into a LIBOR Transition Amendment to our credit facility for the application of a successor rate for borrowings denominated in Pounds Sterling from a LIBOR-based rate to a SONIA (Sterling Overnight Index Average)-based rate and borrowings denominated in Euros from a LIBOR-based rate to a EURIBOR (Euro Interbank Offered Rate)-based rate, subject to certain adjustments specified in our credit facility. It is not currently possible to predict the effect of any establishment of alternative reference rates or any other reforms to LIBOR that may be enacted.
The historical market price of WillScot Mobile Mini’s Common Stock has been volatile and the market price of our Common Stock may continue to be volatile and the value of your investment may decline.
The historical market price of our Common Stock has been volatile and the market price of our Common Stock may continue to be volatile moving forward. Volatility may cause wide fluctuations in the price of our Common Stock on Nasdaq. The market price of our Common Stock is likely to be affected by (a) changes in general conditions in the economy, geopolitical events or the financial markets; (b) variations in our quarterly operating results; (c) changes in financial estimates by securities analysts; (d) our share repurchase or dividend policies; (e) other developments affecting us, our industry, customers or competitors; (f) changes in demand for our products or the prices we charge due to changes in economic conditions, competition or other factors; (g) general economic conditions in the markets where we operate; (h) the cyclical nature of our customers’ businesses and certain end markets that we service; (i) rental rate changes in response to competitive factors; (j) bankruptcy or insolvency of our customers, thereby reducing demand for our used units; (k) seasonal rental patterns; (l) acquisitions or divestitures and related costs; (m) labor shortages, work stoppages or other labor difficulties; (n) possible unrecorded liabilities of acquired companies; (o) possible write-offs or exceptional charges due to changes in applicable accounting standards, goodwill impairment, or divestiture or impairment of assets; (p) the operating and stock price performance of companies that investors deem comparable to us; (q) the number of shares of our Class A common stock eligible for future resale in the public market would increase and result in dilution to our stockholders.
At December 31, 2019, we had issued and outstanding 24,232,867 warrants exercisable for 12,116,433 shares of WillScot Class A common stock at an exercise price of $11.50 per whole share and 9,977,516 warrants exercisable for 9,977,516 shares of WillScot Class A common stock at an exercise price of $15.50 per share. To the extent warrants are exercised, additional Class A shares will be issued, which will result in dilution to the holders of our Class A common stock and increase the number of shares eligibleavailable for resale in the public market. We would also receive a cash capital contribution equal tomarkets under applicable securities laws; (r) the number of warrants exercised multiplied times the exercise price of the warrant, to the extent the warrants are not exercised on a cashless basis. In addition, sales of substantial numbers of such shares in the public market could adversely affect the market pricecomposition of our Class A common stock. Refer to the Recent Developments section in Part I, Item 1, Business, herein for further information about our recent Warrant Redemption.
Our principal stockholder controls a significant amount of our common stockshareholder base; and has substantial control over our business, and it may take actions or have interests that are adverse to or conflict with those of our(s) other stockholders.
As of December 31, 2019, Sapphire, which TDR Capital controls, beneficially owned approximately 45.1% of our Class A Common Stock and 100% of our outstanding Class B common stock. Sapphire also owns warrants giving it the right to buy 2,425,000 additional shares of our Class A common stock, and also has the right to receive additional new shares of our Class A common stock in exchange for its stock of WS Holdings, pursuant to an exchange agreement with us, which we described in Note 13 of the consolidated financial statements in Item 8 to this Annual Report on Form 10-K.
Two directors nominated by TDR Capital currently serve on our board of directors. As a result of its control of a significant percentage of our outstanding common stock, TDR Capital may have substantial control over matters requiring approval by our stockholders, including the election and removal of directors, amendments to our certificate of incorporation and bylaws, any proposed merger, consolidation or sale of all or substantially all of our assets and other corporate transactions. TDR Capital may have interests that are different from those of other stockholders.
Sapphire's ownership of our common stock may adversely affect the trading price for our Class A shares to the extent investors perceive disadvantages in owning shares of a company with a significant stockholder or in the event Sapphire takes any action with its shares that could result in an adverse impact on the price of our Class A shares, including a sale of a substantial portion of our common shares.
In August 2018, Sapphire pledged all of the Class A shares that it owns as security for a margin loan under which Sapphire borrowed $125.0 million. An event of default under the margin loan could result in the foreclosure on the pledged securities and a subsequent sale of a significant number of shares of our common stock by the lender, which could cause the market price of our Class A shares to decline. Moreover, the occurrence of a foreclosure, and a subsequent sale of all, or substantially all, of the pledged shares could result in a change of control under the credit agreement governing our credit facility and the indentures governing our secured notes, even when such change may not be in the best interest of our stockholders. Such sale of Sapphire’s pledged shares may also result in another stockholder beneficially owning a significant amount of our common stock and being able to exert a significant degree of influence or actual control over our management and affairs. Such stockholder's interests may be different from or conflict with those of TDR Capital or our other stockholders.
Risks Related to the Merger
In order to complete the Merger, we must obtain certain governmental authorizations, and if such authorizations are not granted or are granted with conditions that become applicable to the parties, completion of the Merger may be jeopardized or prevented or the anticipated benefits of the Merger could be reduced.
Completion of the Merger is conditioned upon the expiration or early termination of the waiting period relating to the Merger under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and certain other applicable laws or regulations and the required governmental authorizations having been obtained and being in full force and effect. Although we have agreed in the Merger Agreement to use our reasonable best efforts, subject to certain limitations, to make certain governmental filings or obtain the governmental authorizations required to complete the Merger, as the case may be, there can be no assurance that the relevant waiting periods will expire or authorizations will be obtained and no assurance that the Merger will be completed.
In addition, the governmental authorities from which these authorizations are required have broad discretion in administering the governing laws and regulations, and may take into account various facts andunspecified circumstances in their consideration of the Merger, including other potential transactions in the specialty rental services industry, the portal storage industry or other industries. These governmental authorities may initiate proceedings seeking to prevent, or otherwise seek to prevent, the Merger. As a condition to authorization of the Merger or related transactions, these governmental authorities also may impose requirements, limitations or costs, require divestitures or place restrictions on the conduct of our business after completion of the Merger.
Under the terms of the Merger Agreement, we are not required to agree to or commit to any actions that individually or in the aggregate would, or could reasonably be expected to have, a material adverse effect on the condition (financial or otherwise), assets, liabilities, business or results of operations of the combined company. However, notwithstanding the provisions of the Merger Agreement, we could become subject to terms or conditions in connection with such waiting periods, laws or other authorizations (whether because such term or condition does not rise to the specified level of materiality or we otherwise consent to its imposition) the imposition of which could adversely affect our ability to integrate Mobile Mini’s operations with our operations, reduce the anticipated benefits of the Merger or otherwise materially and adversely affect our business and results of operations after completion of the Merger.
In addition to receipt of certain governmental authorizations, completion of the Merger is subject to a number of other conditions, and if these conditions are not satisfied or waived, the Merger will not be completed.
Our obligations to complete the Merger are subject to satisfaction or waiver of a number of conditions in addition to receipt of certain governmental authorizations, including, among other conditions: (i) approval of the Merger by Mobile Mini’s stockholders at a Mobile Mini special meeting, (ii) approval of the stock issuance by us to Mobile Mini’s stockholders and our amended and restated certificate of incorporation by our stockholders at a WillScot special meeting, (iii) absence of any applicable law or order that prohibits completion of the Merger, (iv) accuracy of the representations and warranties made in the Merger Agreement by Mobile Mini, subject to certain materiality qualifications, (v) performance in all material respects by Mobile Mini of the material obligations required to be performed by it at or prior to completion of the transaction, and (vi) the absence of a material adverse effect on Mobile Mini. There can be no assurance that the conditions to completion of the Merger will be satisfied or waived or that the Merger will be completed.
After completion of the Merger, we may fail to realize the anticipated benefits and cost savings of the Merger, which could adversely affect the value of shares of our common stock.
The success of the Merger will depend, in part, on our ability to realize the anticipated benefits and cost savings from combining our and Mobile Mini’s businesses. Our ability to realize these anticipated benefits and cost savings is subject to certain risks, including:
•our ability to successfully combine our and Mobile Mini’s businesses and the costs relating thereto;
•whether the combined business will perform as expected;
•the possibility that we paid more for Mobile Mini than the value we will derive from the acquisition;
•the incurrence of additional indebtedness in connection with the Merger; and
•the assumption of known and unknown liabilities of Mobile Mini.
If we are not able to successfully combine our and Mobile Mini’s businesses within the anticipated time frame, or at all, or the costs of such combination exceed our current expectation, the anticipated cost savings and other benefits of the Merger may not be realized fully or may take longer to realize than expected, the combined business may not perform as expected and the value of the shares of our common stock may be adversely affected.
We and Mobile Mini have operated and, until completion of the Merger will continue to operate, independently, and there can be no assurances that our respective businesses can be integrated successfully. It is possible that the integration process could result in the loss of our key employees, the disruption of our ongoing businesses or in unexpected integration issues, higher than expected integration costs and an overall post-completion integration process that takes longer than originally anticipated. Specifically, issues that must be addressed in integrating our and Mobile Mini’s operations in order to realize the anticipated benefits of the Merger so the combined business performs as expected include, among other things:
•combining the companies’ separate operational, commercial, financial, reporting and corporate functions;
•integrating the companies’ products and services;
•identifying and eliminating redundant operations and assets;
•harmonizing the companies’ operating practices, employee development, compensation and benefit programs, internal controls and other policies, procedures and processes;
•addressing possible differences in business backgrounds, corporate cultures and management philosophies;
•consolidating the companies’ corporate, administrative and information technology infrastructure;
•coordinating sales, distribution and marketing efforts;
•managing the movement of certain businesses and positions to different locations;
•maintaining existing agreements with customers and suppliers and avoiding delays in entering into new agreements with prospective customers and suppliers; and
•effecting potential actions that may be required in connection with obtaining regulatory approvals.
In addition, at times, the attention of certain members of our managementcompany specific circumstances or overall industry and resources may be focused on completion of the Merger and the integration of the businesses of the two companies and diverted from day-to-day business operations, which may disrupt our ongoing business and the business of the combined company.
Failure to complete the Merger could negatively impact our stock price and our future business and financial results.
If the Merger is not completed for any reason, including as a result of Mobile Mini’s stockholders failing to approve the Merger or our stockholders failing to approve the stock issuance by us to Mobile Mini’s stockholders and our amended and restated certificate of incorporation, our ongoing business may be materially and adversely affected and, without realizing any of the benefits of having completed the Merger, we would be subject to a number of risks, including the following:
•we may experience negative reactions from the financial markets, including negative impacts on the trading price of our common stock and other securities, and from our customers, suppliers and employees;
•we may be required to pay Mobile Mini a termination fee of $66.6 million if the Merger Agreement is terminated under certain circumstances;
•we will be required to pay certain transaction expenses and other costs incurred in connection with the Merger, whether or not the Merger is completed;
•the Merger Agreement places certain restrictions on the conduct of our businesses prior to completion of the Merger, and such restrictions, the waiver of which is subject to the consent of Mobile Mini, may prevent us from making certain acquisitions, taking certain other specified actions or otherwise pursuing business opportunities during the pendency of the Merger that we would have made, taken or pursued if these restrictions were not in place; and
•matters relating to the Merger (including arranging permanent financing and integration planning) will require substantial commitments of time and resources by our management and the expenditure of significant funds in the form of fees and expenses, which would otherwise have been devoted to day-to-day operations and other opportunities that may have been beneficial to us as an independent company.
There can be no assurance that the risks described above will not materialize. If any of those risks materialize, they may materially and adversely affect our businesses, financial condition, financial results, ratings, stock prices and/or bond prices.
We may be targets of securities class action and derivative lawsuits which could result in substantial costs and may delay or prevent the Merger from being completed.
Securities class action lawsuits and derivative lawsuits are often brought against public companies that have entered into merger agreements. Even if the lawsuits are without merit, defending against these claims can result in substantial costs and divert management time and resources. An adverse judgment could result in monetary damages, which could have a negative impact on our liquidity and financial condition. Additionally, if a plaintiff is successful in obtaining an injunction prohibiting completion of the Merger, then that injunction may delay or prevent the Merger from being completed, which may adversely affect our business, financial position and results of operation.market driven.
ITEM 1B. Unresolved Staff Comments
None.
ITEM 2. Properties
Our primary corporate headquarters areis located in Baltimore, Maryland. Our executive, financial, accounting, legal, administrative, management information systems and human resources functions operate from this single, leased office.
Phoenix, Arizona. We operate approximately 120275 branch locations and additional drop lots across the US, Canada, Mexico, and Mexico.the UK. Collectively, we lease approximately 75%85% of our branch properties and own the remaining balance.
Our management believes that none of our properties, on an individual basis, is material to our operations, and we alsothat our properties are well maintained and suitable for their intended use. We further believe that satisfactory alternative properties could be found in all of our markets, if ever necessary.
these locations generally have adequate capacity and can accommodate seasonal demands, changing product mixes and additional growth.Subject to certain exceptions, substantially all of our owned real and personal property in the US and Canada is encumbered under our credit facility and our secured notes. We do not believe that the encumbrances will materially detract from the value of our properties, or materially interfere with their use in the operation of our business.
ITEM 3. Legal Proceedings
We areThe Company is involved in various lawsuits, claims and legal proceedings that arise in the ordinary course of business. These matters involve, among other things, disputes with vendors or customers, personnel and employment matters, and personal injury. We assessThe Company assesses these matters on a case-by-case basis as they arise and establishestablishes reserves as required.
As of December 31, 2019, there were no2021, with respect to these outstanding matters, the Company believes that the amount or range of reasonably possible loss will not, either individually or in the aggregate, have a material pending legal proceedings in which weadverse effect on the consolidated financial position, results of operations, or anycash flows. However, the outcome of our subsidiaries are a party orsuch matters is inherently unpredictable and subject to which any of our property is subject.significant uncertainties.
ITEM 4. Mine Safety Disclosures
Not applicable.
PART II
ITEM 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
Common Stock
Our Class A common stockCommon Stock is listed on the Nasdaq Capital Market under the symbol “WSC.” Through November 29, 2017, our common stock, warrants,Our certificate of incorporation authorizes the issuance of 500,000,000 shares of Common Stock with a par value of $0.0001 per share. The Company had 223,939,527 shares of Common Stock issued and units were quoted under the symbols “EAGL,” “EAGLW” and “EAGLU,” respectively. Upon consummationoutstanding as of December 31, 2021. The outstanding shares of the Business Combination (as defined in Item 6Company's Common Stock are duly authorized, validly issued, fully paid and non-assessable.
Preferred Stock
Our certificate of this Annual Report on Form 10-K), (i) our public units automatically separated into their component securities and, asincorporation authorizes the issuance of 1,000,000 shares of Preferred Stock with a result, no longer trade as a separate security and were delisted; (ii) our Class A common shares (into which Double Eagle’s (as defined in Item 6 on this Annual Report on Form 10-K) ordinary shares were converted) continued to trade on Nasdaq under the ticker symbol “WSC”; and (iii) the 2015 Warrants continued to trade on Nasdaq under the ticker symbol “WSCWW,” although the warrants were subsequently suspended for trading on July 12, 2018 and delisted on October 8, 2018.
Holders
par value of $0.0001 per share. As ofof December 31, 2019, there were 28 holders of record of our Class A common stock, one holder of record of our Class B common stock, four holders of record of our 2015 Warrants, and 51 holders of record of our 2018 Warrants. The number of holders of record does not include a substantially greater number of “street name” holders or beneficial holders whose Class A common stock or warrants are held of record by banks, brokers and other financial institutions.
Securities Authorized for Issuance under Equity Compensation Plans
On February 5, 2018, we filed a registration statement on Form S-8, registering 4,000,0002021, no shares of Class A commonPreferred Stock were issued and outstanding, and no designation of rights and preferences of preferred stock relating to awards to be undertaken in the future, with such vesting conditions, as applicable, to be determined in accordance with the WillScot Corporation 2017 Incentive Award Plan (the “Plan”). The following types of awards can be issued under the Plan: stock options, stock appreciation rights, restricted stock, restricted stock units, performance compensation awards and other stock-based awards.
2015 Warrants
Double Eagle issued warrants to purchase its common stock as components of units sold in its initial public offering (the “Public Warrants”). Double Eagle also issued warrants to purchase its common stock in a private placement concurrently with its initial public offering (the “Private Warrants,” and together with the Public Warrants, the "2015 Warrants"). The Private Warrants are identical to the Public Warrants, except that, if held by Double Eagle’s sponsor or founders (or their permitted assignees), the Private Warrants may be exercised on a cashless basis and are not subject to redemption.
As of December 31, 2019, there were 24,232,867 2015 Warrants outstanding. Each 2015 Warrant entitles its holder to purchase one half of one share of our Class A common stock in accordance with its terms. The 2015 Warrants became exercisable on December 29, 2017 and expire five years after that date. We may redeem the Public Warrants at a price of $0.01 per warrant, if the last sale price of our Class A common stock is at least $18.00 per share on each of the 20 trading days within a 30 trading day period ending on the third business day prior to the date on which notice of the redemption is given. See Note 13 of the financial statements in Part 8 herein for additional information. Refer to the Recent Developments section in Part I, Item 1, Business, herein for further information about our recent Warrant Redemption.had been adopted.
2018 Warrants
On August 15, 2018, WillScot issued warrants (the "2018 Warrants") to the former ModSpace shareholders as part of the ModSpace acquisition (the "2018 Warrants")of ModSpace. Our 2018 Warrants are listed on an OTC Markets Group, Inc. Pink Open Market under the symbol "WSCTW." Over-the-counter market quotations reflect inter-dealer prices, without retail mark-up, mark-down or commission, and may not represent actual transactions.
Each 2018 Warrant entitles the holder thereof to purchase one share of WillScot Class A common stockour Common Stock at an exercise price of $15.50 per share, subject to potential adjustment. The 2018 Warrants were not exercisable or transferable until February 11, 2019 and expire on November 29, 2022. As of December 31, 2019, 9,977,5162021, 4,078,173 of the 2018 Warrants were outstanding.
Holders
As of December 31, 2021, there were 44 holders of record of our Common Stock, no holders of record of our Preferred Stock, and 23 holders of record of our 2018 Warrants. The number of holders of record does not include a substantially greater number of “street name” holders or beneficial holders whose Common Stock or warrants are held of record by banks, brokers and other financial institutions.
Dividend Policy
To date, we have not declared or paid dividends on our Common Stock. We have strong recurring cash flows, which gives us flexibility in how we allocate capital, and we review the appropriate mix of growth investments, debt reduction, and returns to shareholders on an ongoing basis. Declaration or payment of dividends, if any, in the future, will be at the discretion of our Board of Directors and will depend on our then current financial condition, results of operations, capital requirements and other factors deemed relevant by the Board of Directors.
Securities Authorized for Issuance under Equity Compensation Plans
On February 5, 2018, we filed a registration statement on Form S-8, registering 4,000,000 shares of Common Stock, relating to awards to be undertaken in the future, with such vesting conditions, as applicable, to be determined in accordance with the WillScot Corporation 2017 Incentive Award Plan (the "2017 Incentive Award Plan"). On July 2, 2020, we filed a registration statement on Form S-8 registering 6,488,988 shares of Common Stock (including 1,488,988 shares that remained available under the 2017 Incentive Award Plan), relating to awards to be undertaken in the future, with such vesting conditions, as applicable, to be determined in accordance with the WillScot Mobile Mini 2020 Incentive Award Plan (the "2020 Incentive Plan"). The following types of awards can be issued under the 2020 Incentive Plan: non-qualified stock options, incentive stock options, stock appreciation rights, restricted stock awards, restricted stock units, performance compensation awards and stock bonus awards. See Note 1316 in Part II, Item 8 herein for additional information.
On November 8, 2018,The following table sets forth information as of December 31, 2021 with respect to compensation plans under which equity securities are authorized for issuance:
| | | | | | | | | | | | | | | | | |
| Plan Category | Number of securities to be issued upon exercise of outstanding options, warrants and rights
| | Weighted-average exercise price of outstanding options, warrants, and rights
| | Number of securities remaining available for issuance under equity compensation plans (excluding securities reflected the first column) |
| Equity compensation plans approved by security holders | 3,195,304 | | (1) | | $ | 13.60 | | (2) | | 4,627,837 | |
| Equity compensation plans not approved by security holders | N/A | | N/A | | N/A |
| Total | 3,195,304 | | | $ | 13.60 | | | 4,627,837 | |
(1) Includes (a) 0.5 million stock options, (b) 1.0 million restricted stock units and 1.8 million performance-based restricted stock units based on relative total stockholder return ("TSR") attainment levels at December 31, 2021, and (c) 0.04 million restricted stock awards issued to non-employee directors.
(2) The weighted-average exercise price is reported for the outstanding stock options reported in the first column. There are no exercise prices for the restricted stock units, performance-based restricted stock units or restricted stock awards in the first column.
In connection with the Merger, on July 2, 2020, we converted Mobile Mini's outstanding fully vested stock options to 7,361,516 WillScot commenced an offerMobile Mini stock options using a conversion ratio of 2.405 as contemplated by the Agreement and Plan of Merger, dated as of March 1, 2020, as amended on May 28, 2020 (as so amended, the “Merger Agreement”), by and among WillScot, Mobile Mini, and Picasso Merger Sub, Inc. As of December 31, 2021, 1,527,643 options were outstanding and exercisable; each option is exercisable for one share of Common Stock. The weighted average exercise price of the outstanding options was $14.66 as of December 31, 2021. These options are not included in the table above as they were not issued under the incentive award plans.
Repurchases
In October 2021, our Board of Directors replaced the existing share repurchase program with a new share repurchase program that authorizes us to exchange the 2015 Warrants forrepurchase up to $1.0 billion of our outstanding shares of its Class A commonCommon Stock and equivalents. The stock in a cashless transaction (the “Warrant Exchange”). Pursuantrepurchase program does not obligate us to purchase any particular number of shares, and the termstiming and exact amount of any repurchases will depend on various factors, including market pricing and conditions, business, legal, accounting, and other considerations. As of December 31, 2021, $956.7 million of the Warrant Exchange, WillScot issued 8,205,841 shares$1.0 billion share repurchase authorization remained available for use.
The following table summarizes our purchase of Class A common stock on December 11, 2018. See Note 13 in Part II, Item 8 herein for additional information.Common Stock and equivalents during the fourth quarter of 2021:
As the fair value of the warrants exchanged in the Warrant Exchange offer was less than the fair value of the common stock issued, the Company recorded a non-cash deemed dividend of $2.1 million in 2018 for the incremental fair value provided to the holders of the warrants. | | | | | | | | | | | | | | |
| Period | Total Number of Shares and Equivalents Purchased (in thousands) | Average Price Paid per Share | Total Numbers of Shares and Equivalents Purchased as part of Publicly Announced Plan (in thousands) | Maximum Dollar Value of Shares and Equivalents that May Yet Be Purchased Under the Plan (in thousands) |
| October 1, 2021 - October 31, 2021 | Common Stock - 638.7 | $ | 32.82 | | 638.7 | | $ | 978,663 | |
| 2018 Warrants - 11.3 | $ | 31.91 | | 11.3 | |
| November 1, 2021 - November 30, 2021 | Common Stock - 224.0 | $ | 35.66 | | 224.0 | | $ | 970,468 | |
| 2018 Warrants - 5.3 | $ | 37.83 | | 5.3 | |
| December 1, 2021 - December 31, 2021 | Common Stock - 342.6 | $ | 40.23 | | 342.6 | | $ | 956,679 | |
| 2018 Warrants - 0 | N/A | N/A |
| Total | 1,221.9 | | $ | 29.98 | | 1,221.9 | | |
Performance Graph
The following stock price performance graph should not be deemed incorporated by reference by any general statement incorporating by reference this Annual Report on Form 10-K into any filing under the Exchange Act or the Securities Act of 1933, as amended, (the "Securities Act"), except to the extent that we specifically incorporate this information by reference and shall not otherwise be deemed filed under such acts.
The graph below compares the cumulative total return of our Class A common stock from November 5, 2015,Common Stock from January 1, 2017 through December 31, 2019,2021, with the comparable cumulative return of twofour indices, the Russell 2000 andIndex, the Nasdaq US Benchmark TR Index, the S&P 400 Index and the Russell 3000 Index. We began showing the cumulative return of the S&P 400 Index and Russell 3000 Index in 2021, as the S&P 400 Index includes companies with comparable market capitalization and the Russell 3000 Index includes our peer group of issuers. The graph plotsplots the growthgrowth in value of an initial investment in each of our Class A ordinarycommon shares, the Russell 2000 Index, and the Nasdaq US Benchmark Index, the S&P 400 Index and the Russell 3000 Index over the indicated time periods, and assumesassumes reinvestment of all dividends, if any, paid on the securities. We have not paid any cash dividends and, therefore, the cumulative total return calculation for us is based solely upon share price appreciation and not upon reinvestment of cash dividends. The share price performance shown on the graph is not necessarily indicative of future price performance.
Repurchases
ITEM 6. [Reserved]
The Company repurchased and terminated 22,063 of the 2018 Warrants in 2019.
| | | | | | | | | | | | | | |
| Total Number of 2018 Warrants Purchased | Average price paid per warrant | Total number of warrants purchased as part of a publicly announced plan | Maximum number of warrants that may yet be purchased under the plan |
| December 1, 2019 - December 31, 2019 | 22,063 | | $ | 2.22 | | $ | — | | $ | — | |
Overview of Securities Outstanding
The table below is intended to help investors better understand (i) how the number of Class A shares outstanding under accounting principles generally accepted in the US (“GAAP”) may differ from the actual number of Class A shares issued and outstanding at specific points in time, and (ii) the potential impact, dilutive or otherwise, of certain events or transactions on our shareholders. Due to the fact that our predecessor was a special purpose acquisition company and to illustrate the impact of certain of the arrangements implemented in connection with our Business Combination, management believes that the information below will help investors better understand our capital structure and the risks associated with investing in our securities. This information is provided solely for illustrative purposes, and speaks only as of the date(s) indicated. We can provide no assurances if or when any future events or transactions may occur that would result in a change in the number of shares of our Class A common stock outstanding.
| | | | | |
| Outstanding as of December 31, 2019 |
Total Class A common shares | 108,818,854 | |
Total Class B common shares(a)
| 8,024,419 | |
| |
Class A common shares underlying 2015 Warrants | 12,116,434 | |
Class A common shares underlying 2018 Warrants | 9,977,516 | |
Total shares underlying warrants | 22,093,950 | |
| |
Total stock options vested and exercisable | 133,546 | |
| |
Weighted average shares - Class A - basic and diluted share counts | 108,683,820 | |
(a) TDR Capital owns common shares of WS Holdings that are exchangeable into new WillScot Class A shares, pursuant to the terms of an exchange agreement. The Class B common shares will be redeemed automatically upon TDR Capital's exercise of its exchange right. Please see Note 13 for additional detail.
ITEM 6. Selected Financial Data
WillScot was incorporated under the name Double Eagle Acquisition Corporation ("Double Eagle"), on June 26, 2015. Prior to November 29, 2017, Double Eagle was a Nasdaq-listed special purpose acquisition company formed for the purpose of effecting a merger, share exchange, asset acquisition, share purchase, reorganization or similar business combination. On November 29, 2017, Double Eagle indirectly acquired Williams Scotsman International, Inc. (“WSII”) from Algeco Scotsman Global S.à r.l., (together with its subsidiaries, the “Algeco Group”), which is majority owned by an investment fund managed by TDR Capital. As part of the transaction (the “Business Combination”), Double Eagle domesticated to Delaware and changed its name to WillScot Corporation
The Business Combination was accounted for as a reverse acquisition in which WSII was the accounting acquirer. Except as otherwise provided herein, our financial statement presentation includes (i) the results of WSII and its subsidiaries as our accounting predecessor for periods prior to the completion of the Business Combination, and (ii) the results of WillScot (including the consolidation of WSII and its subsidiaries) for periods after the completion of the Business Combination. The operating statistics and data contained herein represents the operating information of WSII’s business.
On December 20, 2017, WSII acquired 100% of the issued and outstanding ownership interests of Acton Mobile Holdings LLC ("Acton"). Results of operations from Acton subsequent to the acquisition are included in our consolidated operating results.
On August 15, 2018, WSII acquired ModSpace. Results of operations from ModSpace subsequent to the acquisition are included in our consolidated operating results.
The Company's modular leasing and sales business is comprised of two operating segments: US and Other North America. The US modular operating segment (“Modular - US”) consists of the contiguous 48 states and Hawaii. The Other North America operating segment (“Modular - Other North America”) consists of Alaska, Canada and Mexico. Corporate and
other includes eliminations of costs and revenue between segments and Algeco Group corporate costs not directly attributable to the underlying segments. Following the Business Combination, no additional Algeco Group corporate costs were incurred and the Company's ongoing corporate costs are included within the Modular - US segment. Transactions between reportable segments are not significant.
The following selected historical financial information should be read together with the consolidated financial statements and accompanying notes and “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” The selected historical financial information in this section is not intended to replace WillScot’s consolidated financial statements and the related notes.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Consolidated Results | As of and for the Year Ended December 31, | | | | | | | | |
| (in thousands) | 2019 | | | 2018 | | | 2017 | | | 2016 | | | 2015 | |
| Revenues: | | | | | | | | | |
| Leasing and services revenue: | | | | | | | | | |
| Modular leasing | $ | 744,185 | | | $ | 518,235 | | | $ | 297,821 | | | $ | 283,550 | | | $ | 300,212 | |
| Modular delivery and installation | 220,057 | | | 154,557 | | | 89,850 | | | 81,892 | | | 83,103 | |
| Sales revenue: | | | | | | | | | |
| New units | 59,085 | | | 53,603 | | | 36,371 | | | 39,228 | | | 54,359 | |
| Rental units | 40,338 | | | 25,017 | | | 21,900 | | | 21,942 | | | 15,661 | |
| Total revenues | 1,063,665 | | | 751,412 | | | 445,942 | | | 426,612 | | | 453,335 | |
| Costs: | | | | | | | | | |
| Costs of leasing and services: | | | | | | | | | |
| Modular leasing | 213,151 | | | 143,120 | | | 83,588 | | | 75,516 | | | 80,081 | |
| Modular delivery and installation | 194,107 | | | 143,950 | | | 85,477 | | | 75,359 | | | 77,960 | |
| Costs of sales: | | | | | | | | | |
| New units | 42,160 | | | 36,863 | | | 26,025 | | | 27,669 | | | 43,626 | |
| Rental units | 26,255 | | | 16,659 | | | 12,643 | | | 10,894 | | | 10,255 | |
| Depreciation of rental equipment | 174,679 | | | 121,436 | | | 72,639 | | | 68,981 | | | 78,473 | |
| Gross profit | 413,313 | | | 289,384 | | | 165,570 | | | 168,193 | | | 162,940 | |
| | | | | | | | | |
| Expenses: | | | | | | | | | |
| Selling, general and administrative | 271,004 | | | 254,871 | | | 162,351 | | | 139,093 | | | 139,355 | |
| Other depreciation and amortization | 12,395 | | | 13,304 | | | 8,653 | | | 9,019 | | | 22,675 | |
| Impairment losses on goodwill | — | | | — | | | 60,743 | | | 5,532 | | | — | |
| Impairment losses on long-lived assets | 2,848 | | | 1,600 | | | — | | | — | | | — | |
| Lease impairment expense and other related charges | | 8,674 | | | — | | | — | | | — | | | — | |
| Restructuring costs | | 3,755 | | | 15,468 | | | 2,196 | | | 2,810 | | | 9,185 | |
| Currency (gains) losses, net | (688) | | | 2,454 | | | (12,878) | | | 13,098 | | | 11,308 | |
| Other (income) expense, net | | (2,200) | | | (4,574) | | | 2,827 | | | 1,831 | | | 1,189 | |
| Operating income (loss) | 117,525 | | | 6,261 | | | (58,322) | | | (3,190) | | | (20,772) | |
| Interest expense | 122,504 | | | 98,433 | | | 119,308 | | | 94,671 | | | 92,028 | |
| Interest income | — | | | — | | | (12,232) | | | (10,228) | | | (9,778) | |
| Loss on extinguishment of debt | 8,755 | | | — | | | — | | | — | | | — | |
| Loss from continuing operations before income tax | (13,734) | | | (92,172) | | | (165,398) | | | (87,633) | | | (103,022) | |
| Income tax benefit | (2,191) | | | (38,600) | | | (936) | | | (24,502) | | | (34,069) | |
| Loss from continuing operations | $ | (11,543) | | | $ | (53,572) | | | $ | (164,462) | | | $ | (63,131) | | | $ | (68,953) | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Net loss per share attributable to WillScot – basic and diluted - continuing operations | $ | (0.10) | | | $ | (0.59) | | | $ | (8.21) | | | $ | (4.34) | | | $ | (4.74) | |
| | | | | | | | | |
| Cash Flow Data: | | | | | | | | | |
| Net cash from operating activities | $ | 172,566 | | | $ | 37,149 | | | $ | (1,362) | | | $ | 58,731 | | | $ | 119,865 | |
| Net cash from investing activities | $ | (152,582) | | | $ | (1,217,202) | | | $ | (392,650) | | | $ | (30,236) | | | $ | (193,159) | |
| Net cash from financing activities | $ | (26,063) | | | $ | 1,180,037 | | | $ | 396,833 | | | $ | (31,394) | | | $ | 76,758 | |
| | | | | | | | | |
| Other Financial Data: | | | | | | | | | |
Adjusted EBITDA - Modular - US(a) | $ | 325,068 | | | $ | 196,410 | | | $ | 110,822 | | | $ | 103,798 | | | $ | 85,448 | |
Adjusted EBITDA - Modular - Other North America(a) | $ | 31,480 | | | $ | 19,123 | | | $ | 13,099 | | | $ | 24,360 | | | $ | 45,495 | |
Adjusted EBITDA - Corporate and other(a)(b) | $ | — | | | $ | — | | | $ | (15,112) | | | $ | (21,644) | | | $ | (22,419) | |
Consolidated Adjusted EBITDA(a) | $ | 356,548 | | | $ | 215,533 | | | $ | 108,809 | | | $ | 106,514 | | | $ | 108,524 | |
Free Cash Flow(c) | $ | 19,984 | | | $ | (96,907) | | | N/A | | | N/A | | | N/A | |
Adjusted Gross Profit(a) | $ | 587,992 | | | $ | 410,820 | | | $ | 238,209 | | | $ | 237,174 | | | $ | 241,413 | |
Net CAPEX(a)(c) | $ | 152,582 | | | $ | 134,056 | | | N/A | | | N/A | | | N/A | |
| | | | | | | | | |
| Balance Sheet Data: | | | | | | | | | |
| Cash and cash equivalents | $ | 3,045 | | | $ | 8,958 | | | $ | 9,185 | | | $ | 2,352 | | | $ | 5,142 | |
| Rental equipment, net | $ | 1,944,436 | | | $ | 1,929,290 | | | $ | 1,040,146 | | | $ | 814,898 | | | $ | 832,586 | |
| Total assets | $ | 2,897,649 | | | $ | 2,752,485 | | | $ | 1,410,742 | | | $ | 1,699,450 | | | $ | 1,785,713 | |
| Total debt, including current portion | $ | 1,632,589 | | | $ | 1,676,499 | | | $ | 626,746 | | | $ | 657,583 | | | $ | 696,055 | |
| Total shareholders’ equity | 644,365 | | | $ | 638,215 | | | $ | 435,619 | | | $ | 23,131 | | | $ | 55,350 | |
(a) WillScot presents Adjusted EBITDA, Free Cash Flow, Adjusted Gross Profit and Net CAPEX, which are measurements not calculated in accordance with GAAP and are defined below in the section "Reconciliation of non-GAAP Financial Measures," because they are key metrics used by management to assess financial performance. Our business is capital-intensive and these additional metrics allow management to further evaluate its operating performance. See below for reconciliations of non-GAAP financial measures.
(b) Included in Corporate and other are selling, general and administrative costs related to the Algeco Group's corporate costs incurred prior to or as part of the Business Combination which are not anticipated to be part of the ongoing costs of WillScot.
(c) We do not present Free Cash Flow or Net CAPEX for the years ended December 31, 2017, 2016 or 2015, as the cash flows for those periods contain the financial results from discontinued operations. Therefore, Free Cash Flow and Net CAPEX for periods prior to 2018 would not be comparable to the current periods.
Quarterly Consolidated Results for the Year Ended December 31, 2019
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| (in thousands, except for units on rent and monthly rental rate) | Q1 | | Q2 | | Q3 | | Q4 | | Full Year |
Revenue(a) | $ | 253,685 | | | $ | 263,713 | | | $ | 268,222 | | | $ | 278,045 | | | $ | 1,063,665 | |
Gross profit(a) | $ | 103,331 | | | $ | 101,484 | | | $ | 99,307 | | | $ | 109,191 | | | $ | 413,313 | |
Adjusted EBITDA(a) | $ | 83,354 | | | $ | 87,555 | | | $ | 87,422 | | | $ | 98,217 | | | $ | 356,548 | |
| Net CAPEX | $ | 41,814 | | | | $ | 43,199 | | | | $ | 37,761 | | | | $ | 29,808 | | | | $ | 152,582 | |
| Modular space units on rent (average during the period) | 93,309 | | | 92,300 | | | 91,233 | | | 90,013 | | | 91,682 | |
| Average modular space utilization rate | 72.4 | % | | 71.9 | % | | 71.2 | % | | 70.7 | % | | 72.0 | % |
| Average modular space monthly rental rate | $ | 575 | | | $ | 611 | | | $ | 630 | | | $ | 641 | | | $ | 614 | |
| Portable storage units on rent (average during the period) | 17,419 | | | 16,544 | | | 16,416 | | | 16,944 | | | 16,878 | |
| Average portable storage utilization rate | 66.1 | % | | 63.3 | % | | 63.0 | % | | 66.1 | % | | 65.8 | % |
| Average portable storage monthly rental rate | $ | 119 | | | $ | 121 | | | $ | 123 | | | $ | 118 | | | $ | 120 | |
(a) The quarterly amounts in this table were adjusted for the adoption of Accounting Standards Update ("ASU") 2016-02, Leases (Topic 842) ("ASC 842"), effective retroactively to January 1, 2019, of and therefore do not agree to the Quarterly Reports filed on Form 10-Q for the respective periods of 2019. Refer to Note 22 in Part II, Item 8 herein for further information.
Quarterly Consolidated Results for the Year Ended December 31, 2018
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| (in thousands, except for units on rent and monthly rental rate) | Q1 | | Q2 | | Q3 | | Q4 | | Full Year |
| Revenue | $ | 134,751 | | | $ | 140,333 | | | $ | 218,924 | | | $ | 257,404 | | | $ | 751,412 | |
| Gross profit | $ | 50,921 | | | $ | 54,640 | | | $ | 80,946 | | | $ | 102,877 | | | $ | 289,384 | |
| Adjusted EBITDA | $ | 35,492 | | | $ | 41,916 | | | $ | 64,618 | | | $ | 73,507 | | | $ | 215,533 | |
| Net CAPEX | $ | 24,433 | | | $ | 29,232 | | | $ | 38,657 | | | $ | 41,734 | | | $ | 134,056 | |
| Modular space units on rent (average during the period) | 54,112 | | | 54,521 | | | 75,413 | | | 95,549 | | | 70,257 | |
| Average modular space utilization rate | 69.9 | % | | 70.3 | % | | 71.8 | % | | 73.0 | % | | 71.6 | % |
| Average modular space monthly rental rate | $ | 534 | | | $ | 551 | | | $ | 561 | | | $ | 562 | | | $ | 552 | |
| Portable storage units on rent (average during the period) | 13,986 | | | 13,496 | | | 15,781 | | | 18,297 | | | 15,480 | |
| Average portable storage utilization rate | 70.3 | % | | 68.1 | % | | 68.0 | % | | 68.9 | % | | 68.9 | % |
| Average portable storage monthly rental rate | $ | 118 | | | $ | 119 | | | $ | 120 | | | $ | 119 | | | $ | 119 | |
Modular - US Quarterly Results
Quarterly Results for the Year Ended December 31, 2019
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| (in thousands, except for units on rent and monthly rental rate) | Q1 | | Q2 | | Q3 | | Q4 | | Full Year |
Revenue(a) | $ | 230,175 | | | $ | 236,501 | | | $ | 243,708 | | | $ | 251,299 | | | $ | 961,683 | |
Gross profit(a) | $ | 93,948 | | | $ | 92,468 | | | $ | 90,265 | | | $ | 98,178 | | | $ | 374,859 | |
Adjusted EBITDA(a) | $ | 75,946 | | | $ | 80,548 | | | $ | 79,774 | | | $ | 88,800 | | | $ | 325,068 | |
| Net CAPEX | $ | 42,191 | | | $ | 45,599 | | | $ | 34,785 | | | $ | 29,899 | | | $ | 152,474 | |
| Modular space units on rent (average during the period) | 84,462 | | | 83,273 | | | 82,053 | | | 81,060 | | | 82,709 | |
| Average modular space utilization rate | 74.8 | % | | 74.1 | % | | 73.2 | % | | 72.8 | % | | 74.2 | % |
| Average modular space monthly rental rate | $ | 577 | | | $ | 612 | | | $ | 632 | | | $ | 648 | | | $ | 617 | |
| Portable storage units on rent (average during the period) | 17,010 | | | 16,146 | | | 15,993 | | | 16,513 | | | 16,462 | |
| Average portable storage utilization rate | 66.6 | % | | 63.6 | % | | 63.3 | % | | 66.4 | % | | 66.2 | % |
| Average portable storage monthly rental rate | $ | 120 | | | $ | 121 | | | $ | 123 | | | $ | 118 | | | $ | 120 | |
(a) The quarterly amounts in this table were adjusted for the adoption of ASC 842, effective retroactively to January 1, 2019, of and therefore do not agree to the Quarterly Reports filed on Form 10-Q for the respective periods of 2019.
Quarterly Results for the Year Ended December 31, 2018
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| (in thousands, except for units on rent and monthly rental rate) | Q1 | | Q2 | | Q3 | | Q4 | | Full Year |
| Revenue | $ | 122,087 | | | $ | 124,813 | | | $ | 197,625 | | | $ | 233,065 | | | $ | 677,590 | |
| Gross profit | $ | 46,808 | | | $ | 49,741 | | | $ | 73,007 | | | $ | 94,764 | | | $ | 264,320 | |
| Adjusted EBITDA | $ | 32,612 | | | $ | 38,104 | | | $ | 58,454 | | | $ | 67,240 | | | $ | 196,410 | |
| Net CAPEX | $ | 23,315 | | | $ | 27,501 | | | $ | 35,825 | | | $ | 41,440 | | | $ | 128,081 | |
| Modular space units on rent (average during the period) | 48,657 | | | 48,997 | | | 67,978 | | | 86,369 | | | 63,336 | |
| Average modular space utilization rate | 71.8 | % | | 72.2 | % | | 73.8 | % | | 75.3 | % | | 73.7 | % |
| Average modular space monthly rental rate | $ | 533 | | | $ | 549 | | | $ | 559 | | | $ | 563 | | | $ | 551 | |
| Portable storage units on rent (average during the period) | 13,625 | | | 13,127 | | | 15,373 | | | 17,868 | | | 15,089 | |
| Average portable storage utilization rate | 70.8 | % | | 68.5 | % | | 68.3 | % | | 69.4 | % | | 69.4 | % |
| Average portable storage monthly rental rate | $ | 118 | | | $ | 120 | | | $ | 120 | | | $ | 119 | | | $ | 119 | |
Modular - Other North America Quarterly Results
Quarterly Results for the Year Ended December 31, 2019
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| (in thousands, except for units on rent and monthly rental rate) | Q1 | | Q2 | | Q3 | | Q4 | | Full Year |
Revenue(a) | $ | 23,510 | | | $ | 27,212 | | | $ | 24,514 | | | $ | 26,746 | | | $ | 101,982 | |
Gross profit(a) | $ | 9,383 | | | $ | 9,016 | | | $ | 9,042 | | | $ | 11,013 | | | $ | 38,454 | |
Adjusted EBITDA(a) | $ | 7,408 | | | $ | 7,007 | | | $ | 7,648 | | | $ | 9,417 | | | $ | 31,480 | |
| Net CAPEX | $ | (377) | | | $ | (2,400) | | | $ | 2,976 | | | $ | (91) | | | $ | 108 | |
| Modular space units on rent (average during the period) | 8,847 | | | 9,027 | | | 9,180 | | | 8,953 | | | 8,973 | |
| Average modular space utilization rate | 55.1 | % | | 56.3 | % | | 57.2 | % | | 55.9 | % | | 56.1 | % |
| Average modular space monthly rental rate | $ | 552 | | | $ | 603 | | | $ | 618 | | | $ | 577 | | | $ | 590 | |
| Portable storage units on rent (average during the period) | 409 | | | 398 | | | 423 | | | 431 | | | 416 | |
| Average portable storage utilization rate | 52.0 | % | | 50.8 | % | | 54.3 | % | | 55.7 | % | | 53.7 | % |
| Average portable storage monthly rental rate | $ | 109 | | | $ | 121 | | | $ | 106 | | | $ | 109 | | | $ | 111 | |
(a) The quarterly amounts in this table were adjusted for the adoption of ASC 842, effective retroactively to January 1, 2019, of and therefore do not agree to the Quarterly Reports filed on Form 10-Q for the respective periods of 2019.
Quarterly Results for the Year Ended December 31, 2018
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| (in thousands, except for units on rent and monthly rental rate) | Q1 | | Q2 | | Q3 | | Q4 | | Full Year |
| Revenue | $ | 12,664 | | | $ | 15,520 | | | $ | 21,299 | | | $ | 24,339 | | | $ | 73,822 | |
| Gross profit | $ | 4,113 | | | $ | 4,899 | | | $ | 7,939 | | | $ | 8,113 | | | $ | 25,064 | |
| Adjusted EBITDA | $ | 2,880 | | | $ | 3,812 | | | $ | 6,164 | | | $ | 6,267 | | | $ | 19,123 | |
| Net CAPEX | $ | 1,118 | | | $ | 1,731 | | | $ | 2,832 | | | $ | 294 | | | $ | 5,975 | |
| Modular space units on rent (average during the period) | 5,455 | | | 5,524 | | | 7,435 | | | 9,180 | | | 6,921 | |
| Average modular space utilization rate | 56.6 | % | | 57.1 | % | | 57.3 | % | | 56.6 | % | | 56.8 | % |
| Average modular space monthly rental rate | $ | 541 | | | $ | 573 | | | $ | 587 | | | $ | 546 | | | $ | 559 | |
| Portable storage units on rent (average during the period) | 362 | | | 369 | | | 408 | | | 429 | | | 391 | |
| Average portable storage utilization rate | 55.8 | % | | 57.4 | % | | 56.4 | % | | 54.0 | % | | 55.6 | % |
| Average portable storage monthly rental rate | $ | 116 | | | $ | 116 | | | $ | 101 | | | $ | 101 | | | $ | 108 | |
Reconciliation of non-GAAP Financial Measures
The following presents definitions and reconciliations to the nearest comparable GAAP measure of certain WillScot and its operating segments’ non-GAAP financial measures used in this Annual Report on Form 10-K.
Adjusted EBITDA
We define EBITDA as net income (loss) plus interest (income) expense, income tax expense (benefit), depreciation and amortization. Our adjusted EBITDA ("Adjusted EBITDA") reflects the following further adjustments to EBITDA to exclude certain non-cash items and the effect of what we consider transactions or events not related to our core business operations:
•Currency (gains) losses, net: on monetary assets and liabilities denominated in foreign currencies other than the subsidiaries’ functional currency. Substantially all such currency gains (losses) are unrealized and attributable to financings due to and from affiliated companies.
•Goodwill and other impairment charges related to non-cash costs associated with impairment charges to goodwill, other intangibles, rental fleet and property, plant and equipment.
•Restructuring costs, lease impairment expense, and other related charges associated with restructuring plans designed to streamline operations and reduce costs including employee and lease termination costs.
•Transaction costs including legal and professional fees and other transaction specific related costs.
•Costs to integrate acquired companies, including outside professional fees, fleet relocation expenses, employee training costs, and other costs.
•Non-cash charges for stock compensation plans.
•Other expense includes consulting expenses related to certain one-time projects, financing costs not classified as interest expense, and gains and losses on disposals of property, plant, and equipment.
Adjusted EBITDA has limitations as an analytical tool, and you should not consider the measure in isolation or as a substitute for net income (loss), cash flow from operations or other methods of analyzing WillScot’s results as reported under US GAAP. Some of these limitations are:
•Adjusted EBITDA does not reflect changes in, or cash requirements for our working capital needs;
•Adjusted EBITDA does not reflect our interest expense, or the cash requirements necessary to service interest or principal payments, on our indebtedness;
•Adjusted EBITDA does not reflect our tax expense or the cash requirements to pay our taxes;
•Adjusted EBITDA does not reflect historical cash expenditures or future requirements for capital expenditures or contractual commitments;
•Adjusted EBITDA does not reflect the impact on earnings or changes resulting from matters that we consider not to be indicative of our future operations;
•although depreciation and amortization are non-cash charges, the assets being depreciated and amortized will often have to be replaced in the future and Adjusted EBITDA does not reflect any cash requirements for such replacements; and
•other companies in our industry may calculate Adjusted EBITDA differently, limiting its usefulness as a comparative measure.
Because of these limitations, Adjusted EBITDA should not be considered as discretionary cash available to reinvest in the growth of our business or as measures of cash that will be available to meet our obligations. The following tables provide an unaudited reconciliation of Net loss to Adjusted EBITDA:
| | | | | | | | | | | | | | | | | |
| Year Ended December 31, | | | | |
| (in thousands) | 2019 | | | 2018 | | | 2017 | |
| Net loss | $ | (11,543) | | | $ | (53,572) | | | $ | (149,812) | |
| Income from discontinued operations, net of tax | — | | | — | | | 14,650 | |
| Loss from continuing operations | (11,543) | | | (53,572) | | | (164,462) | |
| Income tax benefit | (2,191) | | | (38,600) | | | (936) | |
| Loss from continuing operations before income tax | (13,734) | | | (92,172) | | | (165,398) | |
| Loss on extinguishment of debt | 8,755 | | | — | | | — | |
Interest expense, net(a) | 122,504 | | | 98,433 | | | 107,076 | |
| Depreciation and amortization | 187,074 | | | 134,740 | | | 81,292 | |
| Currency (gains) losses, net | (688) | | | 2,454 | | | (12,878) | |
| Restructuring costs, lease impairment expense and other related charges | 12,429 | | | 15,468 | | | 2,196 | |
| Goodwill and other impairments | 2,848 | | | 1,600 | | | 60,743 | |
| Transaction costs | — | | | 20,051 | | | 23,881 | |
| Integration costs | 26,607 | | | 30,006 | | | — | |
| Stock compensation expense | 6,686 | | | 3,439 | | | 9,382 | |
Other expense(b) | 4,067 | | | 1,514 | | | 2,515 | |
| Adjusted EBITDA | $ | 356,548 | | | $ | 215,533 | | | $ | 108,809 | |
(a) In connection with the ModSpace acquisition, the Company incurred bridge financing fees and upfront commitment fees of $20.5 million, included within interest expense, during the year ended December 31, 2018. In 2017 interest expense included expenses related to our prior parent holding company prior to our recapitalization on November 29, 2017.
(b) Other expense represents primarily acquisition-related costs such as advisory, legal, valuation and other professional fees in connection with actual or potential business combinations, which are expensed as incurred, but do not reflect ongoing costs of the business.
Adjusted Gross Profit and Adjusted Gross Profit Percentage
We define Adjusted Gross Profit as gross profit plus depreciation on rental equipment. Adjusted Gross Profit Percentage is defined as Adjusted Gross Profit divided by revenue. Adjusted Gross Profit and Percentage are not measurements of our financial performance under GAAP and should not be considered as an alternative to gross profit, gross profit percentage, or other performance measures derived in accordance with GAAP. In addition, our measurement of Adjusted Gross Profit and Adjusted Gross Profit Percentage may not be comparable to similarly titled measures of other companies. Our management believes that the presentation of Adjusted Gross Profit and Adjusted Gross Profit Percentage provides useful
information to investors regarding our results of operations because it assists in analyzing the performance of our business.
The following table provides an unaudited reconciliation of gross profit to Adjusted Gross Profit and Adjusted Gross Profit Percentage on a historical basis:
| | | | | | | | | | | | | | | | | |
| Year Ended December 31, | | | | |
| (in thousands) | 2019 | | 2018 | | 2017 |
| Revenue (A) | $ | 1,063,665 | | | $ | 751,412 | | | $ | 445,942 | |
| | | | | |
| Gross profit (B) | $ | 413,313 | | | $ | 289,384 | | | $ | 165,570 | |
| Depreciation of rental equipment | 174,679 | | | 121,436 | | | 72,639 | |
| Adjusted Gross Profit (C) | $ | 587,992 | | | $ | 410,820 | | | $ | 238,209 | |
| | | | | |
| Gross Profit Percentage (B/A) | 38.9 | % | | 38.5 | % | | 37.1 | % |
| Adjusted Gross Profit Percentage (C/A) | 55.3 | % | | 54.7 | % | | 53.4 | % |
Net CAPEX
We define Net CAPEX as purchases of rental equipment and refurbishments and purchases of property, plant and equipment (collectively, "Total Capital Expenditures"), less proceeds from sale of rental equipment and proceeds from the sale of property, plant and equipment (collectively, "Total Proceeds"), which are all included in cash flows from investing activities. Our management believes that the presentation of Net CAPEX provides useful information to investors regarding the net capital invested into our rental fleet and plant, property and equipment each year to assist in analyzing the performance of our business.
The following tables provide unaudited reconciliations of Net CAPEX on a historical quarterly basis:
Quarterly Consolidated Results for the Year Ended December 31, 2019
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| (in thousands) | Q1 | | Q2 | | Q3 | | Q4 | | Full Year |
| Total Capital Expenditures | $ | 53,502 | | | $ | 63,485 | | | $ | 50,490 | | | $ | 45,969 | | | $ | 213,446 | |
| Total Proceeds | 11,688 | | | 20,286 | | | 12,729 | | | 16,161 | | | 60,864 | |
| Net CAPEX | $ | 41,814 | | | $ | 43,199 | | | $ | 37,761 | | | $ | 29,808 | | | $ | 152,582 | |
Quarterly Consolidated Results for the Year Ended December 31, 2018
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| (in thousands) | Q1 | | Q2 | | Q3 | | Q4 | | Full Year |
| Total Capital Expenditures | $ | 33,084 | | | $ | 33,295 | | | $ | 48,217 | | | $ | 50,909 | | | $ | 165,505 | |
| Total Proceeds | 8,651 | | | 4,063 | | | 9,560 | | | 9,175 | | | 31,449 | |
| Net CAPEX | $ | 24,433 | | | | $ | 29,232 | | | | $ | 38,657 | | | | $ | 41,734 | | | | $ | 134,056 | |
Modular - US Net CAPEX
Quarterly Results for the Year Ended December 31, 2019
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Q1 | | Q2 | | Q3 | | Q4 | | Full Year |
| Total Capital Expenditures | $ | 50,633 | | | $ | 60,343 | | | $ | 47,390 | | | $ | 42,480 | | | $ | 200,846 | |
| Total Proceeds | 8,442 | | | 14,744 | | | 12,605 | | | 12,581 | | | 48,372 | |
| Net CAPEX | $ | 42,191 | | | $ | 45,599 | | | $ | 34,785 | | | $ | 29,899 | | | $ | 152,474 | |
Quarterly Results for the Year Ended December 31, 2018
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Q1 | | Q2 | | Q3 | | Q4 | | Full Year |
| Total Capital Expenditures | $ | 31,509 | | | $ | 31,438 | | | $ | 44,413 | | | $ | 48,276 | | | $ | 155,636 | |
| Total Proceeds | 8,194 | | | 3,937 | | | 8,588 | | | 6,836 | | | 27,555 | |
| Net CAPEX | $ | 23,315 | | | $ | 27,501 | | | $ | 35,825 | | | $ | 41,440 | | | $ | 128,081 | |
Modular - Other North America Net CAPEX
Quarterly Results for the Year Ended December 31, 2019
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Q1 | | Q2 | | Q3 | | Q4 | | Full Year |
| Total Capital Expenditures | $ | 2,869 | | | $ | 3,142 | | | $ | 3,100 | | | $ | 3,489 | | | $ | 12,600 | |
| Total Proceeds | 3,246 | | | 5,542 | | | 124 | | | 3,580 | | | 12,492 | |
| Net CAPEX | $ | (377) | | | $ | (2,400) | | | $ | 2,976 | | | $ | (91) | | | $ | 108 | |
Quarterly Results for the Year Ended December 31, 2018
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Q1 | | Q2 | | Q3 | | Q4 | | Full Year |
| Total Capital Expenditures | $ | 1,575 | | | $ | 1,857 | | | $ | 3,804 | | | $ | 2,633 | | | $ | 9,869 | |
| Total Proceeds | 457 | | | 126 | | | 972 | | | 2,339 | | | 3,894 | |
| Net CAPEX | $ | 1,118 | | | $ | 1,731 | | | $ | 2,832 | | | $ | 294 | | | $ | 5,975 | |
Free Cash Flow
We define Free Cash Flow as net cash provided by operating activities, less purchases of, and proceeds from, rental equipment and property, plant and equipment, which are all included in cash flows from investing activities. Management believes that the presentation of Free Cash Flow provides useful information to investors regarding our results of operations because it provides useful additional information concerning cash flow available to meet future debt service obligations and working capital requirements.
Free Cash Flow for the three months ended June 30, 2019 and 2018, is derived by subtracting the cash flows from operating activities and the relevant line items within financing activities for the three months ended March 31, 2019 and 2018, from corresponding items for the six months ended September 30, 2019 and 2018, respectively. Free Cash Flow for the three months ended September 30, 2019 and 2018, is derived by subtracting the cash flows from operating activities and the relevant line items within financing activities for the six months ended June 30, 2019 and 2018, from corresponding items for the nine months ended September 30, 2019 and 2018, respectively. Free Cash Flow for the three months ended December 31, 2019 and 2018, is derived by subtracting the cash flows from operating activities and the relevant line items within financing activities for the nine months ended September 30, 2019 and 2018, from corresponding items for the years ended December 31, 2019 and 2018, respectively.
We do not present Free Cash Flow for the quarters within, or for the years ended December 31, 2017, 2016 or 2015, as the cash flows for those periods contain the financial results from discontinued operations. Therefore, Free Cash Flow for periods prior to 2018 would not be comparable to the current periods.
The following tables provide a reconciliation of net cash provided by operating activities to Free Cash Flow.
Quarterly Consolidated Results for the Year Ended December 31, 2019
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| (in thousands) | Q1 | | Q2 | | Q3 | | Q4 | | Full Year |
| Net cash provided by operating activities | $ | 15,256 | | | | $ | 44,798 | | | | $ | 39,022 | | | | $ | 73,490 | | | | $ | 172,566 | |
| Purchase of rental equipment and refurbishments | (51,873) | | | | (61,215) | | | | (47,789) | | | | (44,229) | | | | (205,106) | |
| Proceeds from sale of rental equipment | 11,601 | | | | 11,482 | | | | 8,421 | | | | 10,597 | | | | 42,101 | |
| Purchase of property, plant and equipment | (1,629) | | | | (2,270) | | | | (2,701) | | | | (1,740) | | | | (8,340) | |
| Proceeds from the sale of property, plant and equipment | 87 | | | | 8,804 | | | | 4,308 | | | | 5,564 | | | | 18,763 | |
| Free Cash Flow | $ | (26,558) | | | | $ | 1,599 | | | | $ | 1,261 | | | | $ | 43,682 | | | | $ | 19,984 | |
Quarterly Consolidated Results for the Year Ended December 31, 2018
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| (in thousands) | Q1 | | Q2 | | Q3 | | Q4 | | Full Year |
| Net cash provided by operating activities | $ | 4,782 | | | | $ | 14,018 | | | | $ | (3,220) | | | | $ | 21,569 | | | | $ | 37,149 | |
| Purchase of rental equipment and refurbishments | (32,084) | | | | (32,679) | | | | (46,742) | | | | (49,378) | | | | (160,883) | |
| Proceeds from sale of rental equipment | 8,128 | | | | 3,905 | | | | 9,560 | | | | 9,168 | | | | 30,761 | |
| Purchase of property, plant and equipment | (1,000) | | | | (616) | | | | (1,475) | | | | (1,531) | | | | (4,622) | |
| Proceeds from the sale of property, plant and equipment | 523 | | | | 158 | | | | — | | | | 7 | | | | 688 | |
| Free Cash Flow | $ | (19,651) | | | | $ | (15,214) | | | | $ | (41,877) | | | | $ | (20,165) | | | | $ | (96,907) | |
Cautionary Note Regarding Forward Looking Statements
This Annual Report on Form 10-K includes forward-looking statements within the meaning of the US Private Securities Litigation Reform Act of 1995 and Section 21E of the Securities Act of 1934, as amended. The words "estimates," “expects,” “anticipates,” “believes,” “forecasts,” “plans,” “intends,” “may,” “will,” “should,” “shall,” “outlook,” “guidance” and variations of these words and similar expressions identify forward-looking statements, which are generally not historical in nature and relate to expectations for future financial performance or business strategies or objectives.
Forward-looking statements are subject to a number of risks, uncertainties, assumptions and other important factors, many of which are outside our control, which could cause actual results or outcomes to differ materially from those discussed in the forward-looking statements. Although we believe that these forward-looking statements are based on reasonable assumptions, it can give no assurance that any such forward-looking statement will materialize.
Important factors that may affect actual results or outcomes include, among others:
•our ability to effectively compete in the modular space and portable storage industry;
•changes in demand within a number of key industry end markets and geographic regions;
•our ability to manage growth and execute our business plan;
•rising costs adversely affecting our profitability (including cost increases resulting from tariffs);
•effective management of our rental equipment;
•our ability to acquire and successfully integrate new operations and achieve desired synergies;
•the effect of changes in state building codes on our ability to remarket our buildings;
•our ability to effectively manage our credit risk, collect on our accounts receivable, or recover our rental equipment;
•foreign currency exchange rate exposure;
•our reliance on third party manufacturers and suppliers;
•risks associated with labor relations, labor costs and labor disruptions;
•failure to retain key personnel; and
•other factors detailed under the section entitled“Risk Factors.”
Any forward-looking statement speaks only at the date which it is made, and we undertake no obligation, and disclaim any obligation, to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as may be required by law.
ITEM 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
The following Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) is intended to help the reader understand WillScot Mobile Mini Holdings Corp. ("WillScot Mobile Mini"), formerly known as WillScot Corporation ("WillScot"), our operations and our present business environment. MD&A is provided as a supplement to, and should be read in conjunction with, our financial statements and the accompanying notes thereto, contained in Part II, Item 8 of this report. AsThe discussion of results of operations in this MD&A is presented on a resulthistorical basis, as of or for the year ended December 31, 2021 or prior periods. On July 1, 2020, in connection with the closing of the Business Combination, (i) WillScot’s consolidatedMerger, Mobile Mini, Inc. ("Mobile Mini") became a wholly-owned subsidiary of WillScot and the Company changed it's name to WillScot Mobile Mini Holdings Corp. As the Merger was completed on July 1, 2020, unless the context otherwise requires, the terms “we”, “us”, “our” “Company” and “WillScot Mobile Mini” as used in these financial results forstatements mean WillScot and its subsidiaries when referring to periods prior to November 29, 2017 reflectJuly 1, 2020 (prior to the financial results of WSIIMerger) and to WillScot Mobile Mini and its subsidiaries when referring to periods on or after July 1, 2020 (after the Merger).
The consolidated subsidiaries, asfinancial statements were prepared in conformity with accounting principles generally accepted in the accounting predecessor to WillScot, and (ii) for periods from and after this date, WillScot’s financial results reflect those of WillScot and its consolidated subsidiaries (including WSII and its subsidiaries) as the successor following the Business Combination.US (“GAAP”). We use certain pro forma calculations as non-GAAP financial information that we believe is important for purposes of comparison to the prior periods and developmentperiod due to the addition of future projections and earnings growth prospects.significant acquisitions during the reported financial reporting periods. This information is also used by management to measure the profitabilityperformance of our ongoing operations and analyze our business performance and trends. This information is used by investors for the purposes of development of future projections and earnings growth prospects. In addition, we use certain non-GAAP financial metrics to supplement the GAAP reported results in order to highlight key operational metrics that are used by management to evaluate Company performance. Reconciliations of GAAP financial information to the disclosed non-GAAP measures are provided where presented.in the Reconciliation of Non-GAAP Financial Measures section.
Executive Summary
We are a leading provider of modularbusiness services provider specializing in innovative flexible work space and portable storage solutions. We service diverse end markets across all sectors of the economy throughout the United States ("US"), Canada, Mexico, and the United Kingdom ("UK"). We are also a leading provider of specialty containment solutions in the US Canadawith over 13,000 tank and Mexico.pump units in our fleet. As of December 31, 2019,2021, our branch network included approximately 120275 branch locations and additional drop lots to better service our more than 50,000 customers across the US, Canada, and Mexico.over 85,000 customers. We offer our customers an extensive selection of “ready“Ready to work”Work” modular space and portable storage solutions with over 125,000162,000 modular space units and over 25,000213,000 portable storage units in our fleet.
We primarily lease, rather than sell, our modular and portable storage units to customers, which results in a highly diversified and predictable recurring revenue stream. Over 90% of new lease orders are on our standard lease agreement, pre-negotiated master lease or national account agreements. The initial lease periods vary, and our leases are customarily renewable on a month-to-month basis after their initial term. Our lease revenue is highly predictable due to its recurring nature and the underlying stability and diversification of our lease portfolio. Furthermore, given that our customers value flexibility, they consistently extend their leases or renew on a month-to-month basis such that the average effective duration of our lease portfolio, excluding seasonal portable storage units, is nearly 31 months. We complement our core leasing business by selling both new and used units, allowing us to leverage scale, achieve purchasing benefits and redeploy capital employed in our lease fleet.
We remain focused on our core priorities of growing modulargrowing leasing revenues by increasing modular space units on rent, both organically and through our consolidation strategy, delivering “Ready to Work” solutions to our customers with VAPSvalue added products and services ("VAPS"), and on continually improving the overall customer experience.
2019 was During 2021, the Company acquired certain assets and liabilities of seven regional and local modular space and storage businesses, which consisted primarily of 15,700 storage units and 5,800 modular units. We also achieved a transformational year for WillScot as we completedsignificant milestone in our integration of ModSpacethe WillScot and realized significant cost synergies from both the ModSpace and Acton strategic transactions. Over the past two years, we have consolidated over 200 combined operating locations into approximately 120 operating locations. We will continue the last remaining integration efforts around real estate consolidation and fleet relocation over the first half of 2020. These acquisitions coupled with WillScot's innovative "Ready to Work" solutions and commitment to customer service have solidified WillScot's position as the industry market leaderMobile Mini businesses, consolidating onto a single ERP system in the modular space and portable storage solutions markets.second quarter of 2021. This full integration to SAP enabled an expedited integration of the acquisitions.
For the year ended December 31, 2019,2021, key drivers of our financial performance included:
•Total revenues increased by $312.3$527.3 million, or 41.6% as compared38.6%, attributable to the same period in 2018, driven by a 43.3% increase in our core leasing and servicesaddition of Mobile Mini's revenues from both organic pricing growth, and the impact of an additional 8.5 months of contribution from the ModSpace acquisition during 2019 (discussed in Note 2 ofto our consolidated financial statements). Newresults once the Merger closed on July 1, 2020 and due to organic revenue growth levers in the business. Leasing revenue increased $410.7 million, or 41.0%, delivery and installation revenue increased $100.5 million, or 36.7%, rental unit sales increased 10.3%$16.3 million, or 41.9%, and 61.2%, respectively, also driven by acquisitions.new unit sales revenue decreased $0.2 million, or 0.4%.
Key leasing revenue drivers included:
–Consolidated modular space average monthly rental rate increased to $614 representing an 11.2% increase year over year.
–Consolidated averageAverage modular space units on rent increased 21,425,10,876 units, or 30.5%10.9%, year over year,and average portable storage units on rent increased 77,318 units, or 91.9%. Both increases were primarily driven by an additional 8.5 months of contribution from the ModSpace acquisition, and average modular space utilization increased 40 basis points (“bps”) year over year to 72.0%.
•On a pro forma basis, including results of WillScot and ModSpace for all periods presented:
–Modular leasing revenues increased $53.4 million, or 7.7%, driven by a 13.7% year over year increase in modular space average monthly rental ratesMobile Mini Merger. Average portable storage units on rent also grew as a result of our price optimization toolsorganic increases in average portable storage units driven by increased economic activity in 2021 and processes, as well as by continued growth in our “Readydue to Work” solutions and increased VAPS penetration across our customer base.units on rent acquired during 2021 from several smaller entities.
–Sales revenue declined $46.9 million,Average modular space monthly rental rate increased $86, or 32.1%13.1%, to $744 driven by a $124, or 18.1% increase in the NA Modular segment, offset partially by the dilutive impact of lower rates due to mix on the Mobile Mini modular space units.
–Average portable storage monthly rental rate increased $12, or 9.1%, to $144 driven primarily by one large new sale recognized in 2018the accretive impact of higher rates from ModSpace related to hurricane relief in the amount of $29.0 million in our Modular - US segment.Mobile Mini portable storage fleet and price increases achieved throughout 2021.
–Total revenues decreased $0.4 million, as the impact of non-recurring sales in the prior year were nearly offset by continued strong organic growth in our core leasing revenues.
–ModularAverage utilization for modular space units on rent decreased 4.3% year over year,10 basis points ("bps") to 70.1% and average utilization for portable storage units increased 30 bps.to 81.5%, from 75.6% from the same period in 2020, driven by higher utilization of the Mobile Mini portable storage units and increased demand for this product category driven by increased economic activity throughout 2021.
•NA Modular - US segment revenues, whichrevenue represented 90.4%61.4% of revenues in 2019,consolidated revenue for the year ended December 31, 2021, and increased by $284.1$113.0 million, or 41.9%10.7%, as compared to 2018, through:$1,164.2 million driven by increased leasing revenue of $94.6 million, or 12.3%, an increased sales volumes of $7.1 million, or 9.8%, and a $11.3 million, or 5.4%, increase in delivery and installation revenues. NA Modular revenue drivers for the year ended December 31, 2021 include:
–Modular space average monthly rental rate of $617$809 for the year, increased 12.0% year over year including18.1% representing a continuation of the dilutive impacts of acquisitions. Improved pricing was driven by a combination of ourlong-term price optimization toolsinitiative and processes, as well as by continued growth in our "Ready to Work" solutions and increased VAPS penetration opportunities across our customer base.portfolio.
–Average modular space units on rent increased by 19,373for the year decreased 2,350 units, or 30.6%, due to the impact of an additional 8.5 months of contribution from the ModSpace acquisition.
–Average modular space monthly utilization2.7% driven by increased 50 basis points (“bps”) to 74.2% in 2019returns during 2021 and by lower, although improving, delivery demand as compared to the same period in 2018. This increase was driven primarily by de-fleeting activities associated with our integration efforts during year.
–On a pro forma basis, including results of WillScot and ModSpace for all periods presented, average modular space monthly rental rate increased 14.9% organically, withhistorical levels seen pre-pandemic. However, average modular space units on rent down 4.5% and average modular space monthly utilization up by 40 basis points (“bps”) during the yearincreased 0.1% sequentially from Q3 into Q4 to 74.2%.
•Modular - Other North America segment84,328, which represents 9.6% of revenuescompares to a 0.5% drop from Q3 to Q4 in 2019, increased by $28.1 million, or 38.1% as compared to the same period in 2018. Increases were driven primarily by:
–Average modular space monthly rental rate increased 5.5% to $590.
–Average modular space units on rent increased by 2,052 units, or 29.6%, as compared to the same period in 2018 driven primarily by acquired units from the ModSpace transaction.2020.
–Average modular space monthly utilization decreased by 70 bps130 basis points to 56.1% in 2019 as compared to the same period in 2018.
–On a pro forma basis, including results of WillScot and ModSpace67.6% for all periods presented, Modular - Other North America segment modular space monthly rental rate increased 4.4%, with modular space units on rent down 2.5%, and average modular space monthly utilization down by 30 bps during the year to 56.1%.ended December 31, 2021, but only dropped 10 basis points sequentially from Q3 into Q4.
•Generated consolidated net lossincome of $11.5$160.1 million whichfor the year ended December 31, 2021, representing an increase of $84.8 million versus the year ended December 31, 2020. Net Income Excluding Gain/Loss from Warrants of $186.7 million for the year ended December 31, 2021, represented an increase of $114.8 million, or 159.7%, versus the year ended December 31, 2020, and included an $8.8a $6.0 million loss on extinguishment of debt related to our financing activities in the first and $46.0second quarter of 2021 and $44.6 million of discrete costs expensed in the period related to transaction and integration activities. Discrete costs in the ModSpace integration and other acquisition-related activities, including $26.6period included $1.4 million of transaction costs, $28.4 million of integration costs, $11.5and $14.8 million of impairment of long-lived assets andrestructuring costs, lease impairment expense and other related charges, $3.8 million of restructuring cost, and $4.1 of other expense. The consolidated net loss of $11.5 million represented an improvement of $42.1 million as compared to the same period in 2018.charges.
•Generated Adjusted EBITDA of $356.5$740.4 million in 2019,for the year ended December 31, 2021, representing an increase of $141.0$210.1 million, or 65.4%39.6%, as compared to the same period2020. Of this increase, $181.9 million was driven by including a full year of Mobile Mini in 2018, which includesour consolidated results, including strong year over year organic growth within the impact of an additional 8.5 months of contribution from the ModSpace acquisition in 2019, as well as continued realization of commercialNA Storage, UK, and cost synergies associated with the ModSpaceTank and Acton acquisitions. Adjusted EBITDA for the Modular - US segmentPump segments, and the Modular - Other North America segment, respectively,remainder was $325.0 million and $31.5 million in 2019.driven by strong organic growth across all of our segments.
•–On a pro forma basis, including the results of WillScot and ModSpace for all periods presented, Adjusted EBITDA in 2019our NA Modular segment, which represents the activities of $356.5 million represents an increase of $72.0WillScot prior to the Merger, increased $28.2 million, or 25.3% organically from $284.5 million7.1% primarily driven by increases in 2018. These pro forma results include realized cost savings fromleasing gross profit driven by increased pricing, including VAPS, partially offset by increased variable costs as a result of higher activity levels in the ModSpacecurrent year as compared to 2020.
–Consolidated Adjusted EBITDA Margin was 39.1% and Acton acquisitions,increased 30 bps versus prior year driven by the addition of the higher margin Mobile Mini operations. This was partially offset by a 130 bps decrease in the NA Modular segment, driven by an expected higher proportion of delivery and incremental revenue growth frominstallation revenues to total revenues and increased penetration of "Ready to Work" solutions across the combined portfolio, but do not include any additional cost savings that management expects to realize in future years.variable costs.
•Generated Free Cash Flow of $20.0$303.0 million in 2019,for the year ended December 31, 2021, representing an increase of $140.7 million as netcompared to 2020. Net cash provided by operating activities of $172.6increased $235.1 million after funding $26.6 million of integration costs was reinvested primarily in value added products and fleet refurbishments to support growth of modular leasing revenues (net$539.9 million. Net cash used in investing activities, excluding cash acquired or used as part of $152.6 million)acquisitions, increased $94.3 million as a result of increased capital spending to support growing demand for new project deliveries across all segments. The referenced Free Cash Flow along with additional net borrowings under the ABL was deployed to acquire storage and modular units of several smaller entities for a total of $147.2 million and to pay down debt $16.5 million.repurchase $363.6 million of our common stock and warrants. This was possible due to our resilient lease revenues and strong margin expansion, reduced interest costs due to our financing activities during the year and our strong financial position.
In addition to focusing onusing GAAP financial measurements, we focus onuse Adjusted EBITDA and Free Cash Flow, which are non-GAAP financial measures, to measureevaluate our operating results. As such, we include in this Annual Report on Form 10-K reconciliations to their most directly comparable GAAP financial measures. These reconciliations and descriptions of why we believe these measures provide useful information to investors as well as a description of the limitations of these measures are included in “Item 6. Selected"Reconciliation of non-GAAP Financial Data.”
Measures."
RecentSignificant Developments
Refer to the RecentSignificant Developments section in Part I, Item 1, Business, herein for further information about the Mobile Mini Merger, other acquisitions, financing activities, share and warrant repurchases, and the impact of COVID-19 on our recent warrant redemption and merger agreement.business.
Business Environment and Outlook
Our customers operate in a diversifieddiversified set of end markets, including construction, commercial and industrial, construction,retail and wholesale trade, education, energy and natural resources, government and other end markets.healthcare. We track several market leading indicators in order to predict demand, including those related to our two largest end markets, the commercial and industrial segmentsector and the construction segment,sector, which collectively accounted for approximately 80% approximately 85% of our revenues in the year ended December 31, 2019.2021. Market fundamentals underlying these end markets were impacted in 2020 as a result of the COVID-19 pandemic which resulted in delivery volume declines, primarily in the second and third quarters, in response to shelter-in-place orders and other market restrictions. During 2021, market fundamentals recovered to varying degrees across our product offerings with portable storage demand back above pre-pandemic levels. Demand for modular space products as measured by new project deliveries have partially recovered from the lower demand seen in 2020, but still remained approximately 4% below pre-pandemic delivery levels in 2021. Real Gross Domestic Product ("real GDP") in the US, where the majority of our revenues are currently stable,generated, is estimated to have increased by over 5.6% in 2021, and estimates from Dodge Data & Analytics suggest that non-residential construction square footage starts in the US increased by 17% as compared to 2020. Based on our analyses of industry forecasts and macroeconomic indications, we expect continued modest market growthrecovery in 2022 as we saw during 2021, and expect both real GDP and non-residential construction square footage starts in the next several years.US to grow 4-7% in 2022, which would also exceed pre-pandemic levels seen in 2019.
Core to our operating model is the ability to redeploy standardized assets across end markets, and we have recently serviced emerging demand in the healthcare and government sectors related to COVID-19, as well as expanded space requirements related to social distancing. Current improving market conditions, and potential growth driversmarket catalysts such as a robust U.S. economy, increased infrastructure spending, and idiosyncratic growth levers such as continued penetration of our customer base with our VAPS offering, long-term pricing tailwinds, cross-selling between our Modular and Storage segment customers, and other commercial best practice sharing between our segments provide us confidence in our continued demand for our products.
For the year ended December 31, 2019, 9.6% of our revenues were from the Modular - Other North America segment, markets in Canada, including Alaska, and Mexico. Revenues from this segment had declined since 2014 as a result of exposure to upstream oil and gas end markets in Alberta, Canada and Alaska. While average modular space units on rent and rental rates have stabilized, competitive pressures in these markets may continue to impact performance until utilization across the industry improves.
Our Business and Growth Strategies
We intend to maintain a leading market position and increase our revenue and profitability by pursuing the following strategies:
Expanding our “Ready to Work” Value Proposition.
We combine product quality and availability, the largest service network in North America, an industry-leading offering of VAPS and a commitment to customer service to provide increased value to our customers. This attracts new customers, increases customer retention and increases our margins. We intend to grow the business by continuing to improve the quality, delivery and service of our products and by continuing to introduce new and innovative products and services that complement our core offering to the most attractive industry and geographic end markets.
Increasing the Utilization and Yield of our Rental Equipment.
We are continuously working to increase the utilization and yield of our lease fleet by improving the efficiency and performance of our sales force, expanding penetration of VAPS and enhancing our management information systems. Effective use of real-time information allows us to monitor and optimize the utilization of our fleet, allocate our fleet to the highest demand markets, optimize pricing and determine the best allocation of our capital to invest in fleet and branches as well as to identify opportunities where underutilized lease fleet can be sold to generate cash.
Optimizing Cash Flow through Strategic Deployment of Capital.
We maintain a disciplined focus on our return on capital. As part of this discipline, we diligently consider the potential returns and opportunity costs associated with each investment we make. We continually assess both our existing lease fleet and customer demand for opportunities to deploy capital more efficiently. We manage our maintenance capital expenditures as well asorganic growth capital expenditures to best fit the economic conditions at the time. Within our existing lease fleet, we examine the potential cash and earnings generation of an asset sale versus continuing to lease the asset. In addition, we examine the relative benefits of organic expansion opportunities versus expansion through acquisition to obtain a favorable return on capital.
Generating Additional Cash Flow Through Operational Efficiencies and Cost Reductions.
We have implemented a number of management initiatives designed to improve operations and increase profitability, efficiency and operating leverage. We continually assess our branch operating footprint, our vendor base, and our operating structure to maximize revenue generation while minimizing costs. The acquisitions of Acton and ModSpace provided us with increased scale that allowed us to reduce from over 200 combined operating locations to approximately 120 operating locations by the end of 2019. With this post-acquisition scale, we expect to extract over $60.0 million of redundant costs from the combined businesses. As of December 31, 2019, we estimate that we have realized over $40 million of cumulative savings related to the Acton and ModSpace acquisitions and subsequent integrations. We have a proven track record of efficiently integrating acquisitions and quickly eliminating operational redundancies, while maintaining acquired customer relationships.
Leveraging Scale via Acquisitions.
The US market for modular space and portable storage solutions is fragmented, with approximately 60% of the modular space market supplied by regional and local competitors. We have a broad network of operating branches in North
America, as well as a highly scalable corporate center and management information systems, which we believe positions us well to continue to acquire and integrate other companies. We may pursue acquisitions that will provide further scale efficiencies to our platform, allowing us to improve returns generated by the acquired assets.outlook.
Components of Our Consolidated Historical Results of Operations
Revenue
Our revenue consists mainly of leasing, services and sales revenue. We derive our leasing and services revenue primarily from the leasing of modular space and portable storage units. Included in modular leasing revenue are VAPS, such as rentals offurniture, steps, ramps, furniture, air conditioners, wirelessbasic appliances, internet access points, damage waiversconnectivity devices, and service plans. Modular deliveryother items our customers use in connection with our products. Delivery and installation revenue includes fees that we charge for the delivery, setup, knockdownsite work, installation, disassembly, unhooking and pick-upremoval, and other services to our customers for an additional fee as part of our leasing equipment to and from customers’ premises and repositioning leasing equipment.sales operations.
The key drivers of changes in our leasing revenue are:
•the number of units in our modular lease fleet;
•the average utilization rate of our modular lease units; and
•the average monthly rental rate per unit, including VAPS.
The average utilization rate of our modular lease units is the ratio of (i) the average number of units in use during a period (which includes units from the time they are leased to a customer until the time they are returned to us) to (ii) the average total number of units available for lease in our modular fleet during a period. Our average monthly rental rate per unit for a period is equal to the ratio of (i) our rental income for that period including VAPS but excluding delivery and installation services and other leasing-related revenues, to (ii) the average number of modular lease units rented to our customers during that period.
The table below sets forth the average number of units on rent in our modular lease fleet, the average utilization of our modular lease units, and the average monthly rental rate per unit, including VAPS:
| | | Year Ended December 31, | | | Year Ended December 31, |
| (in thousands, except unit numbers and rates) | (in thousands, except unit numbers and rates) | 2019 | | 2018 | | 2017 | (in thousands, except unit numbers and rates) | 2021 | | 2020 | | 2019 |
| Modular space units on rent (average during the period) | Modular space units on rent (average during the period) | 91,682 | | | 70,257 | | | 41,263 | | Modular space units on rent (average during the period) | 110,402 | | | 99,526 | | | 91,682 | |
| Average modular space utilization rate | Average modular space utilization rate | 72.0 | % | | 71.6 | % | | 70.3 | % | Average modular space utilization rate | 70.1 | % | | 70.2 | % | | 72.0 | % |
| Average modular space monthly rental rate | Average modular space monthly rental rate | $ | 614 | | | $ | 552 | | | $ | 538 | | Average modular space monthly rental rate | $ | 744 | | | $ | 658 | | | $ | 614 | |
| Portable storage units on rent (average during the period) | Portable storage units on rent (average during the period) | 16,878 | | | 15,480 | | | 12,599 | | Portable storage units on rent (average during the period) | 161,466 | | | 84,148 | | | 16,878 | |
| Average portable storage utilization rate | Average portable storage utilization rate | 65.8 | % | | 68.9 | % | | 71.4 | % | Average portable storage utilization rate | 81.5 | % | | 75.9 | % | | 65.8 | % |
| Average portable storage monthly rental rate | Average portable storage monthly rental rate | $ | 120 | | | $ | 119 | | | $ | 116 | | Average portable storage monthly rental rate | $ | 144 | | | $ | 132 | | | $ | 120 | |
| Average tank and pump solutions rental fleet utilization based on original equipment cost | | Average tank and pump solutions rental fleet utilization based on original equipment cost | 72.3 | % | | 61.7 | % | | N/A |
In addition to leasing revenue, we also generate revenue from sales of new and used modular space and portable storage units to our customers, as well as delivery, installation, maintenance, removal services and other incidental items related to accommodationsaccommodation services for our customers. Included in our sales revenue are charges for modifying or customizing sales equipment to customers’ specifications.
Gross Profit
We define gross profit as the difference between total revenuerevenues and cost of revenue.revenues. Cost of revenues associated with our leasing business includes payroll and payroll-related costs for branch operations personnel, material and other costs related to the repair, maintenance, storage and transportation of rental equipment. Cost of revenue also includes depreciation expense associated with our rental equipment. Cost of revenues associated with our new unit sales business includes the cost to purchase, assemble, transport and customize units that are sold. Cost of revenues for our rental unit sales consist primarily of the net book value of the unit at date of sale.
Selling, General and Administrative Expense
Our selling, general and administrative (“SG&A”) expense includes all costs associated with our selling efforts, including marketing costs, marketing salaries and benefits, as well as the salary and commissions of sales personnel. It also includes integrationthe leasing of facilities we occupy, professional fees and transaction costs associated with acquisitions and business combinations,information systems, our overhead costs, such as salaries of management, administrative and corporate personnel, and integration costs associated with acquisitions and business combinations.
Transaction Costs
Transaction costs include discrete expenses incurred related to the leasing of facilities we occupy. General and administrative costs in our historical results for CorporateMerger and other relate to the Algeco Group’s corporate costs incurred prior to or in connection with the Business Combination which are not anticipated to be recurring costs.acquisitions.
Other Depreciation and Amortization
Other depreciation and amortization includes depreciation of our property, plant and equipment, as well as the amortization of our intangible assets.
Impairment Losses on Goodwill
We recognize goodwill impairment charges associated with our reporting units when the carrying value exceeds the estimated fair value of the reporting unit.
Impairment Losses on Long-Lived Assets
We recognize property, plant, and equipment impairment charges when an indicator of impairment is present and the carrying value of assets exceeds the estimated undiscounted cash flows and fair value of the assets.
Lease Impairment Expense and Other Related Charges
Lease impairment expense and other related charges include impairment of right-of-use ("ROU") assets, under ASC 842, gain or loss on the exit of a leased property generally associated with lease termination payments and rent expense for locations which have been closed but have not been abandoned or impaired.
Restructuring Costs
Restructuring costs include charges associated with exit or disposal activities that meet the definition of restructuring under Financial Accounting Standards Board ("FASB") ASC Topic 420, Exit or Disposal Cost Obligations (“ASC 420”). Our restructuring plans are generally country or region specific and are typically completed within a one yearone-year period. Prior to the adoption of ASC 842 effective January 1, 2019, restructuring costs incurred under these plans included (i) one-time termination benefits related to employee separations, (ii) contract termination costs and, (iii) other related costs associated with exit or disposal activities including, but not limited to, costs for consolidating or closing facilities. After the adoption of ASC 842, restructuringRestructuring costs include one-time termination benefits related to employee separation costs. The restructuring costs incurred in 2021, 2020, and 2019 and 2018 primarily generally relate to the integration of our acquisitions. Costs related to the integration of acquired businesses that do not meet the definition of restructuring under ASC 420, such as employee training costs, duplicate facility costs, and professional services expenses, are included within SG&A expenses.expense.
Currency (Gains) Losses, Net
Currency (gains) losses, net include unrealized and realized gains and losses on monetary assets and liabilities denominated in foreign currencies other than our functional currency at the reporting date.
Other (Income) Expense, Net
Other (income) expense, net primarily consists of the non-recurring gain (loss) on disposal of non-operational property, plant and equipment, other financing related costs and other non-recurring charges.
Interest Expense
Interest expense consists of the costs of external debt including the Company’s ABL credit agreement (the "ABL Facility"), the senior secured notes due December 15, 2022 (the "2022 Secured Notes) and the senior secured notes due August 15, 2023 (the "2023 Secured Notes, together with thefacility, 2022 Secured Notes, the "Senior2023 Secured Notes"),Notes, 2025 Secured Notes, 2028 Secured Notes, and the senior unsecured notes due November 15, 2023 (the "Unsecured Notes"), and prior to the Business Combination, interest due on amounts owed to affiliates and interest on obligations under finance leases.
Fair Value (Gain) Loss on Common Stock Warrant Liabilities
Fair value (gain) loss on common stock warrant liabilities consists of non-cash gains and losses recorded related to changes in the revolving credit facility associatedfair value of common stock warrant liabilities as the common stock warrant liabilities are marked-to-market liabilities. It also includes gains and losses recorded related to the settlement of common stock warrant liabilities.
Loss on Extinguishment of Debt
In 2021, using cash on hand and borrowings on the 2020 ABL Facility, we redeemed $123.5 million of our 2025 Secured Notes and recorded loss on extinguishment of debt. In 2020, in connection with the Algeco Group.
Interest Income
Interest income consistsMerger and related financing transactions, using proceeds from the 2025 Secured Notes, we redeemed all of interestour 2022 Secured Notes. We also completed a private offering of our 2028 Secured Notes in August 2020 and used the offering proceeds to repay our 2023 Secured Notes. As a result of these transactions, we recorded losses on notes due from affiliates which were settled in 2017.extinguishment of debt.
Income Tax BenefitExpense (Benefit)
We are subject to income taxes in the US, Canada, Mexico and Mexico.the UK. Our overall effective tax rate is affected by a number of factors, such as the relative amounts of income we earn in differing tax jurisdictions, state and jurisdictionaltax law changes, and certain non-deductible expenses such as compensation disallowance. The rate is also affected by discrete items that may occur in any given year, such as state legislationlegislative enactments. These discrete items may not be consistent from year to year. Income tax expense (benefit), deferred tax assets and liabilities and liabilities for unrecognized tax benefits reflect our best estimate of current and future taxes to be paid.
Consolidated Results of Operations
Our consolidated statements of net losincome (losss) for the years ended December 31, 2019, 2018,2021, 2020, and 20172019 are presented below. The below results only include results from ModSpace and ActonMobile Mini for the periods subsequent to their acquisition datesthe Merger and doesdo not include any incremental unrealized cost savings, revenue growth, or pro forma adjustments that management expects to result from the integration of the acquired business.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Years Ended December 31, | | | | | | 2019 vs. 2018 Change | | 2018 vs 2017 Change |
| 2019 | | 2018 | | 2017 | | | | |
| Revenues: | | | | | | | | | |
| Leasing and services revenue: | | | | | | | | | |
| Modular leasing | $ | 744,185 | | | $ | 518,235 | | | $ | 297,821 | | | $ | 225,950 | | | $ | 220,414 | |
| Modular delivery and installation | 220,057 | | | 154,557 | | | 89,850 | | | 65,500 | | | | 64,707 | |
| Sales revenue: | | | | | | | | | |
| New units | 59,085 | | | 53,603 | | | 36,371 | | | 5,482 | | | | 17,232 | |
| Rental units | 40,338 | | | 25,017 | | | 21,900 | | | 15,321 | | | | 3,117 | |
| Total revenues | 1,063,665 | | | 751,412 | | | 445,942 | | | 312,253 | | | | 305,470 | |
| Costs: | | | | | | | | | |
| Costs of leasing and services: | | | | | | | | | |
| Modular leasing | 213,151 | | | 143,120 | | | 83,588 | | | 70,031 | | | | 59,532 | |
| Modular delivery and installation | 194,107 | | | 143,950 | | | 85,477 | | | 50,157 | | | | 58,473 | |
| Costs of sales: | | | | | | | | | |
| New units | 42,160 | | | 36,863 | | | 26,025 | | | 5,297 | | | | 10,838 | |
| Rental units | 26,255 | | | 16,659 | | | 12,643 | | | 9,596 | | | | 4,016 | |
| Depreciation of rental equipment | 174,679 | | | 121,436 | | | 72,639 | | | 53,243 | | | | 48,797 | |
| Gross profit | 413,313 | | | 289,384 | | | 165,570 | | | 123,929 | | | | 123,814 | |
| Expenses: | | | | | | | | | |
| Selling, general and administrative | 271,004 | | | 254,871 | | | 162,351 | | | 16,133 | | | | 92,520 | |
| Other depreciation and amortization | 12,395 | | | 13,304 | | | 8,653 | | | (909) | | | | 4,651 | |
| Impairment losses on goodwill | — | | | — | | | 60,743 | | | — | | | | (60,743) | |
| Impairment losses on long-lived assets | 2,848 | | | 1,600 | | | — | | | 1,248 | | | | 1,600 | |
| Lease impairment expense and other related charges | 8,674 | | | — | | | — | | | 8,674 | | | | — | |
| Restructuring costs | 3,755 | | | 15,468 | | | 2,196 | | | (11,713) | | | | 13,272 | |
| Currency (gains) losses, net | (688) | | | 2,454 | | | (12,878) | | | (3,142) | | | | 15,332 | |
| Other (income) expense, net | (2,200) | | | (4,574) | | | 2,827 | | | 2,374 | | | | (7,401) | |
| Operating income (loss) | 117,525 | | | 6,261 | | | (58,322) | | | 111,264 | | | | 64,583 | |
| Interest expense | 122,504 | | | 98,433 | | | 119,308 | | | 24,071 | | | | (20,875) | |
| Interest income | — | | | — | | | (12,232) | | | — | | | | 12,232 | |
| Loss on extinguishment of debt | 8,755 | | | — | | | — | | | 8,755 | | | | — | |
| Loss from continuing operations before income tax | (13,734) | | | (92,172) | | | (165,398) | | | 78,438 | | | | 73,226 | |
| Income tax benefit | (2,191) | | | (38,600) | | | (936) | | | 36,409 | | | | (37,664) | |
| Loss from continuing operations | (11,543) | | | (53,572) | | | (164,462) | | | 42,029 | | | | 110,890 | |
| Income from discontinued operations, net of tax | — | | | — | | | 14,650 | | | — | | | | (14,650) | |
| Net loss | (11,543) | | | (53,572) | | | (149,812) | | | 42,029 | | | | 96,240 | |
| Net loss attributable to non-controlling interest, net of tax | (421) | | | (4,532) | | | (2,110) | | | 4,111 | | | | (2,422) | |
| Net loss attributable to WillScot | (11,122) | | | (49,040) | | | (147,702) | | | 37,918 | | | | 98,662 | |
| Non-cash deemed dividend related to warrant exchange | — | | | (2,135) | | | — | | | 2,135 | | | | (2,135) | |
| Net loss attributable to WillScot common shareholders | $ | (11,122) | | | $ | (51,175) | | | $ | (147,702) | | | $ | 40,053 | | | | $ | 96,527 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Years Ended December 31, | | 2021 vs. 2020 Change | | 2020 vs 2019 Change |
| 2021 | | 2020 | | 2019 | | |
| Revenues: | | | | | | | | | |
| Leasing and services revenue: | | | | | | | | | |
| Leasing | $ | 1,412,123 | | | $ | 1,001,447 | | | $ | 744,185 | | | $ | 410,676 | | | $ | 257,262 | |
| Delivery and installation | 374,682 | | | 274,156 | | | 220,057 | | | 100,526 | | | 54,099 | |
| Sales revenue: | | | | | | | | | |
| New units | 52,882 | | | 53,093 | | | 59,085 | | | (211) | | | (5,992) | |
| Rental units | 55,210 | | | 38,949 | | | 40,338 | | | 16,261 | | | (1,389) | |
| Total revenues | 1,894,897 | | | 1,367,645 | | | 1,063,665 | | | 527,252 | | | 303,980 | |
| Costs: | | | | | | | | | |
| Costs of leasing and services: | | | | | | | | | |
| Leasing | 317,061 | | | 227,376 | | | 213,151 | | | 89,685 | | | 14,225 | |
| Delivery and installation | 306,861 | | | 220,102 | | | 194,107 | | | 86,759 | | | 25,995 | |
| Costs of sales: | | | | | | | | | |
| New units | 35,377 | | | 34,841 | | | 42,160 | | | 536 | | | (7,319) | |
| Rental units | 29,853 | | | 24,772 | | | 26,255 | | | 5,081 | | | (1,483) | |
| Depreciation of rental equipment | 237,537 | | | 200,581 | | | 174,679 | | | 36,956 | | | 25,902 | |
| Gross profit | 968,208 | | | 659,973 | | | 413,313 | | | 308,235 | | | 246,660 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Expenses: | | | | | | | | | |
| Selling, general and administrative | 511,446 | | | 360,626 | | | 271,004 | | | 150,820 | | | 89,622 | |
| Transaction costs | 1,375 | | | 64,053 | | | — | | | (62,678) | | | 64,053 | |
| Other depreciation and amortization | 78,030 | | | 43,249 | | | 12,395 | | | 34,781 | | | 30,854 | |
| Impairment losses on long-lived assets | — | | | — | | | 2,848 | | | — | | | (2,848) | |
| Lease impairment expense and other related charges | 2,888 | | | 4,876 | | | 8,674 | | | (1,988) | | | (3,798) | |
| Restructuring costs | 11,868 | | | 6,527 | | | 3,755 | | | 5,341 | | | 2,772 | |
| Currency losses (gains), net | 548 | | | (355) | | | (688) | | | 903 | | | 333 | |
| Other expense (income), net | 1,780 | | | (1,718) | | | (2,200) | | | 3,498 | | | 482 | |
| Operating income | 360,273 | | | 182,715 | | | 117,525 | | | 177,558 | | | 65,190 | |
| Interest expense | 117,987 | | | 119,886 | | | 122,504 | | | (1,899) | | | (2,618) | |
| Fair value loss (gain) on common stock warrant liabilities | 26,597 | | | (3,461) | | | 109,622 | | | 30,058 | | | (113,083) | |
| Loss on extinguishment of debt | 5,999 | | | 42,401 | | | 8,755 | | | (36,402) | | | 33,646 | |
| Income (loss) before income tax | 209,690 | | | 23,889 | | | (123,356) | | | 185,801 | | | 147,245 | |
| Income tax expense (benefit) | 49,546 | | | (51,451) | | | (2,191) | | | 100,997 | | | (49,260) | |
| Net income (loss) | 160,144 | | | 75,340 | | | (121,165) | | | 84,804 | | | 196,505 | |
| Net income (loss) attributable to non-controlling interest, net of tax | — | | | 1,213 | | | (421) | | | (1,213) | | | 1,634 | |
| Net income (loss) attributable to WillScot common shareholders | $ | 160,144 | | | $ | 74,127 | | | $ | (120,744) | | | $ | 86,017 | | | $ | 194,871 | |
| | | | | | | | | |
| Cash Flow Data: | | | | | | | | | |
| Net cash from operating activities | $ | 539,902 | | | $ | 304,812 | | | $ | 172,566 | | | $ | 235,090 | | | $ | 132,246 | |
| Net cash from investing activities | $ | (384,047) | | | $ | (125,360) | | | $ | (152,582) | | | $ | (258,687) | | | $ | 27,222 | |
| Net cash from financing activities | $ | (167,887) | | | $ | (158,958) | | | $ | (26,063) | | | $ | (8,929) | | | $ | (132,895) | |
| | | | | | | | | |
| Other Financial Data: | | | | | | | | | |
| Consolidated Adjusted EBITDA(a) | $ | 740,393 | | | $ | 530,307 | | | $ | 356,548 | | | $ | 210,086 | | | $ | 173,759 | |
| Free Cash Flow(a) | $ | 303,027 | | | $ | 162,279 | | | $ | 19,984 | | | $ | 140,748 | | | $ | 142,295 | |
| Adjusted Gross Profit(a) | $ | 1,205,745 | | | $ | 860,554 | | | $ | 587,992 | | | $ | 345,191 | | | $ | 272,562 | |
| Net CAPEX(a) | $ | 236,875 | | | $ | 142,533 | | | $ | 152,582 | | | $ | 94,342 | | | $ | (10,049) | |
| | | | | | | | | |
| Balance Sheet Data (end of year): | | | | | | | | | |
| Cash and cash equivalents | $ | 12,699 | | | $ | 24,937 | | | $ | 3,045 | | | $ | (12,238) | | | $ | 21,892 | |
| Rental equipment, net | $ | 3,080,981 | | | $ | 2,931,646 | | | $ | 1,944,436 | | | $ | 149,335 | | | $ | 987,210 | |
| Total assets | $ | 5,773,599 | | | $ | 5,572,205 | | | $ | 2,897,649 | | | $ | 201,394 | | | $ | 2,674,556 | |
| Total debt, excluding current portion | $ | 2,694,319 | | | $ | 2,453,809 | | | $ | 1,632,589 | | | $ | 240,510 | | | $ | 821,220 | |
| Total shareholders’ equity | $ | 1,996,763 | | | $ | 2,063,873 | | | $ | 490,609 | | | $ | (67,110) | | | $ | 1,573,264 | |
(a) WillScot Mobile Mini presents Adjusted EBITDA, Free Cash Flow, Adjusted Gross Profit and Net CAPEX, which are measurements not calculated in accordance with GAAP and are defined below in the section "Reconciliation of non-GAAP Financial Measures," because they are key metrics used by management to assess financial performance. Our business is capital intensive, and these additional metrics allow management to further evaluate its operating performance. See below for reconciliations of non-GAAP financial measures.
Quarterly Consolidated Results for the Year Ended December 31, 2021
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| (in thousands, except for units on rent and monthly rental rate) | Q1 | | Q2 | | Q3 | | Q4 | | Full Year |
| Revenue | $ | 425,323 | | | $ | 461,102 | | | $ | 490,552 | | | $ | 517,920 | | | $ | 1,894,897 | |
| Gross profit | $ | 213,380 | | | $ | 222,810 | | | $ | 253,549 | | | $ | 278,469 | | | $ | 968,208 | |
| Adjusted EBITDA | $ | 163,585 | | | $ | 175,495 | | | $ | 190,149 | | | $ | 211,164 | | | $ | 740,393 | |
| Net income | $ | 4,447 | | | $ | 20,371 | | | $ | 61,103 | | | $ | 74,223 | | | $ | 160,144 | |
| Net CAPEX | $ | 30,911 | | | $ | 57,481 | | | $ | 51,954 | | | $ | 96,529 | | | $ | 236,875 | |
| Modular space units on rent (average during the period) | 110,349 | | | 110,468 | | | 109,832 | | | 110,961 | | | 110,402 | |
| Average modular space utilization rate | 70.3 | % | | 70.3 | % | | 70.1 | % | | 69.8 | % | | 70.1 | % |
| Average modular space monthly rental rate | $ | 679 | | | $ | 736 | | | $ | 767 | | | $ | 792 | | | $ | 744 | |
| Portable storage units on rent (average during the period) | 145,360 | | | 151,736 | | | 163,248 | | | 185,518 | | | 161,466 | |
| Average portable storage utilization rate | 74.4 | % | | 77.7 | % | | 83.9 | % | | 88.4 | % | | 81.5 | % |
| Average portable storage monthly rental rate | $ | 135 | | | $ | 139 | | | $ | 145 | | | $ | 153 | | | $ | 144 | |
| Average tank and pump solutions rental fleet utilization based on original equipment cost | 67.4 | % | | 71.2 | % | | 74.8 | % | | 75.5 | % | | 72.3 | % |
| Earnings per share - basic | $ | 0.02 | | | $ | 0.09 | | | $ | 0.27 | | | $ | 0.33 | | | $ | 0.71 | |
| Earnings per share - diluted | $ | 0.02 | | | $ | 0.08 | | | $ | 0.26 | | | $ | 0.32 | | | $ | 0.69 | |
| Weighted average shares - basic | 228,293,197 | | 228,406,812 | | 225,998,202 | | 223,436,603 | | 226,518,931 |
| Weighted average shares - diluted | 234,720,295 | | 236,536,713 | | 231,868,397 | | 229,965,703 | | 232,793,902 |
Quarterly Consolidated Results for the Year Ended December 31, 2020
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| (in thousands, except for units on rent and monthly rental rate) | Q1 | | Q2 | | Q3 | | Q4 | | Full Year |
| Revenue | $ | 255,821 | | | $ | 256,862 | | | $ | 417,315 | | | $ | 437,647 | | | $ | 1,367,645 | |
| Gross profit | $ | 106,190 | | | $ | 109,964 | | | $ | 209,564 | | | $ | 234,255 | | | $ | 659,973 | |
| Adjusted EBITDA | $ | 89,544 | | | $ | 97,520 | | | $ | 163,559 | | | $ | 179,684 | | | $ | 530,307 | |
| Net income (loss) | $ | 91,655 | | | $ | (14,130) | | | $ | (6,051) | | | $ | 3,866 | | | $ | 75,340 | |
| Net income (loss) attributable to Willscot Mobile Mini | $ | 91,785 | | | $ | (15,473) | | | $ | (6,051) | | | $ | 3,866 | | | $ | 74,127 | |
| Net CAPEX | $ | 30,540 | | | $ | 36,383 | | | $ | 33,323 | | | $ | 42,287 | | | $ | 142,533 | |
| Modular space units on rent (average during the period) | 87,989 | | | 87,096 | | | 111,227 | | | 111,793 | | | 99,526 | |
| Average modular space utilization rate | 69.2 | % | | 68.5 | % | | 70.6 | % | | 70.9 | % | | 70.2 | % |
| Average modular space monthly rental rate | $ | 653 | | | $ | 669 | | | $ | 640 | | | $ | 670 | | | $ | 658 | |
| Portable storage units on rent (average during the period) | 16,346 | | | 15,869 | | | 143,840 | | | 160,538 | | | 84,148 | |
| Average portable storage utilization rate | 64.1 | % | | 62.5 | % | | 73.2 | % | | 81.2 | % | | 75.9 | % |
| Average portable storage monthly rental rate | $ | 119 | | | $ | 120 | | | $ | 131 | | | $ | 136 | | | $ | 132 | |
| Average tank and pump solutions rental fleet utilization based on original equipment cost | N/A | | N/A | | 58.2 | % | | 65.2 | % | | 61.7 | % |
| Earnings (loss) per share - basic | $ | 0.84 | | | $ | (0.14) | | | $ | (0.03) | | | $ | 0.02 | | | $ | 0.44 | |
| Earnings (loss) per share - diluted | $ | 0.05 | | | $ | (0.14) | | | $ | (0.03) | | | $ | 0.02 | | | $ | 0.25 | |
| Weighted average shares - basic | 109,656,646 | | 110,692,426 | | 226,649,993 | | 228,637,826 | | 169,230,177 |
| Weighted average shares - diluted | 112,672,997 | | 110,692,426 | | 226,649,993 | | 233,625,946 | | 177,268,383 |
Quarterly Consolidated Results for the Year Ended December 31, 2019
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| (in thousands, except for units on rent and monthly rental rate) | Q1 | | Q2 | | Q3 | | Q4 | | Full Year |
| Revenue | $ | 253,685 | | | $ | 263,713 | | | $ | 268,222 | | | $ | 278,045 | | | $ | 1,063,655 | |
| Gross profit | $ | 103,331 | | | $ | 101,484 | | | $ | 99,308 | | | $ | 109,190 | | | $ | 413,313 | |
| Adjusted EBITDA | $ | 83,354 | | | $ | 87,554 | | | $ | 87,424 | | | $ | 98,216 | | | $ | 356,548 | |
| Net loss | $ | (27,574) | | | $ | (56,836) | | | $ | (1,197) | | | $ | (35,558) | | | $ | (121,165) | |
| Net loss attributable to Willscot Mobile Mini | $ | (26,816) | | | $ | (56,004) | | | $ | (1,492) | | | $ | (36,432) | | | $ | (120,744) | |
| Net CAPEX | $ | 41,814 | | | $ | 43,199 | | | $ | 37,761 | | | $ | 29,808 | | | $ | 152,582 | |
| Modular space units on rent (average during the period) | 93,309 | | | 92,300 | | | 91,233 | | | 90,013 | | | 91,682 | |
| Average modular space utilization rate | 72.4 | % | | 71.9 | % | | 71.2 | % | | 70.7 | % | | 72.0 | % |
| Average modular space monthly rental rate | $ | 575 | | | $ | 611 | | | $ | 630 | | | $ | 641 | | | $ | 614 | |
| Portable storage units on rent (average during the period) | 17,419 | | | 16,544 | | | 16,416 | | | 16,944 | | | 16,878 | |
| Average portable storage utilization rate | 66.1 | % | | 63.3 | % | | 63.0 | % | | 66.1 | % | | 65.8 | % |
| Average portable storage monthly rental rate | $ | 119 | | | $ | 121 | | | $ | 123 | | | $ | 118 | | | $ | 120 | |
| Loss per share - basic | $ | (0.25) | | | $ | (0.52) | | | $ | (0.01) | | | $ | (0.33) | | | $ | (1.11) | |
| Loss per share - diluted | $ | (0.25) | | | $ | (0.52) | | | $ | (0.02) | | | $ | (0.33) | | | $ | (1.11) | |
| Weighted average shares - basic | 108,523,269 | | 108,693,924 | | 108,720,857 | | 108,793,847 | | 108,683,820 |
| Weighted average shares - diluted | 108,523,269 | | 108,693,924 | | 109,508,360 | | 108,793,847 | | 108,683,820 |
Comparison of Years Ended December 31, 20192021 and 20182020
Revenue: Total revenue increased $312.3$527.3 million, or 41.6%38.6%, to $1,063.7$1,894.9 million for the year ended December 31, 20192021 from $751.4$1,367.6 million for the year ended December 31, 2018.2020. Leasing revenue increased $410.7 million, or 41.0%, as compared to the same period in 2020 driven by an increase of 88,194, or 48.0%, total average modular space and portable storage units on rent and improved pricing and value-added products in our NA Modular segment. Delivery and installation revenues increased $100.5 million, or 36.7%, due to increased overall activity. New unit sales decreased $0.2 million, or 0.4%, and rental unit sales increased $16.3 million, or 41.9%.
Total average modular space and portable storage units on rent for the years ended December 31, 2021 and 2020 were 271,868 and 183,674, respectively. The increase was due primarily to the result of a 43.3% increase in leasing and services revenue driven by increased volumes from acquisitions and improved pricing. Improved volumes were driven by units acquired as part of the ModSpace acquisition, as well as, increased modular delivery and installation revenuesMerger with Mobile Mini, which closed on the combined rental fleet of 42.4% due to increased transaction volumes and higher revenues per transaction. Average modular space monthly rental rates increased 11.2% for the year ended December 31, 2019, and average modular space units on rent increased 21,425 units, or 30.5%, due to the impact of an additional 8.5 months of contribution from the ModSpace acquisition. Improved pricing was driven by a combination of our price optimization tools and processes, as well as, by continued growth in our “Ready to Work” solutions and increased VAPS penetration across our customer base, offset partially by the average modular space monthly rental rates on acquired units for ModSpace. The increase in leasing and services revenues was further complemented by an increase of $5.5 million, or 10.3%, in new unit sales as compared to 2018. This increase was primarily driven by increased sales as a result of the ModSpace acquisition. Rental unit sales increased $15.3 million, or 61.2%, as compared to 2018.
On a pro forma basis, including results of WillScot and ModSpace for all periods presented,July 1, 2020. In total, revenues decreased $0.4 million, or 0.0%, year-over-year for the year ended December 31, 2019. This decline was driven by reduced new sales, which declined $41.6 million, or 41.3%, as a result of one large sale recognized in 2018 in the amount of $29.0 million in our Modular - US segment, and decreased rental unit sales, which declined $5.3 million, or 11.7%. The declines in sales volumes were nearly offset by an increase in our core modular leasing revenues, which increased $53.4 million, or 7.7%, as a result of a 13.7% increase in average modular space monthly rental rates.
Total average units on rent for the year ended December 31, 2019 and 2018 were 108,560 and 85,737, respectively. The increase was due to units acquired as part of the ModSpace acquisition, with modular space average units on rent increased by 21,42510,876 units, or 30.5%10.9%, for the year ended December 31, 2019.2021 as compared to the year ended December 31, 2020. Modular space average monthly rental rates increased 11.2%13.1% to $744 for the year ended December 31, 2019.2021. Improved pricing was driven by a continuation of the long-term price optimization and VAPS penetration opportunities across our portfolio, partially offset by the dilutive impact of lower rates on the Mobile Mini modular space units due to product mix. Portable storage average units on rent increased by 1,39877,318 units, or 9.0%91.9%, for the year ended December 31, 2019.2021. Average portable storage monthly rental rates increased 0.8% forof $144 represented an increase of $12, or 9.1%, compared to the year ended December 31, 2019.2020. This increase was driven by the accretive impact of higher rates from the Mobile Mini portable storage fleet. The average modular space unit utilization rate forduring the year ended December 31, 20192021 was 72.0%70.1%, as compared to 71.6%70.2% during the same period in 2018. The increase in average modular space utilization rate was driven by a reduction in the combined modular space unit fleet size across the combined WillScot and ModSpace fleet in 2019.2020. The average portable storage unit utilization rate during the year ended December 31, 20192021 was 65.8%81.5%, as compared to 68.9%75.9% during the same period in 2018.2020. The decreaseincrease in average portable storage utilization rate was driven by organic declines inhigher utilization on the number of portable storage average units on rent in the Modular - US segment.acquired Mobile Mini units.
Gross Profit: Our gross profit percentage was 38.9%51.1% and 38.5%48.3% for the years ended December 31, 20192021 and 2018,2020, respectively. Our gross profit percentage, excluding the effects of depreciation ("adjusted gross profit percentage"), was 55.3%63.6% and 54.7%62.9% for the years ended December 31, 20192021 and 2018,2020, respectively.
Gross profit increased $123.9$308.2 million, or 42.8%46.7%, to $413.3$968.2 million for the year ended December 31, 20192021 from $289.4$660.0 million for the year ended December 31, 2018.2020. The increase in gross profit is a result of a $291.5$321.0 million increase in modular leasing gross profit, increased delivery and services revenueinstallation gross profit of $13.7 million, and increased new and rental unit sales gross profitsale margins of $0.2 million, offset by$10.4 million. These increases of $120.2 million in modular leasing and services costs. Increases in modular leasing and services revenues and costs were primarily as a result of increased revenues due to additional units on rent as a result of recent acquisitions as well as increased margins due to favorable average monthly rental rates in the NA Modular segment on modular space units and increased delivery and installation margins driven primarily by higher pricing per transaction.as well as recent acquisitions. These increases were offset partially offset by increased depreciation of $53.3$36.9 million as a result of additional rental equipment acquired as part offleet and capital investments made over the ModSpace acquisition, as well as continued capital investmentpast twelve months in our existing rental equipment.
SG&A Expense: SG&A expense increased $16.1$150.8 million, or 6.3%41.8%, to $271.0 million for the year ended December 31, 2019, compared to $254.9$511.4 million for the year ended December 31, 2018. Employee costs increased $19.52021, compared to $360.6 million driven by the increased size of the workforce, offset partially by employee savings achieved as a result of restructuring activities; and occupancy costs increased $10.3 million largely due to the expansion of our branch network and storage lots, including a portion of the expected cost savings as we have now exited approximately 85% of redundant real estate locations.
Discrete items included in SG&A decreased for the year ended December 31, 2019, compared to2020. The primary driver of the year ended December 31, 2018, by $17.7 million as decreases in transaction and integration costsincrease is related to the ModSpace and Acton acquisitions and subsequent integrations of $20.1 million and $4.0 million, respectively, were partially offset by increases in stock compensation expense and other acquisition-related activities of $3.3 million and $3.1 million, respectively.
The remaining increases of $4.0 million are primarily related to increased professional fees, insurance, computer, travel, office and other expenses related to operating a larger business as a result of our recent acquisitions and our expanded employee base and branch network.
We estimate incremental cost synergies of approximately $36.0 million related to the ModSpace and Acton acquisitions were realized in 2019, which compares to approximately $6.4 million of synergies realized in 2018 related to the Acton and Onsite Space LLC (d/b/a Tyson Onsite (“Tyson”) acquisitions, bringing cumulative synergies related to the Acton, Tyson, and ModSpace acquisitions from the dates of the acquisitions to December 31, 2019 to approximately $42.4 million.
These cost synergies are consistent with our integration plansadditional SG&A expense as a result of operating a larger business due to the Merger. SG&A expense for the NA Storage, UK Storage, and we expectTank and Pump segments totaled $197.4 million for the year ended December 31, 2021.
Transaction Costs: Transaction costs decreased $62.7 million to achieve annual recurring cost savings of over $70.0$1.4 million once our integration plans are fully executed and in our annual results.for the year ended December 31, 2021. Transaction costs were primarily related to the Merger.
Other Depreciation and Amortization: Other depreciation and amortization increased $34.8 million, or 80.6%, to $78.0 million for the year ended December 31, 2021, compared to $43.2 million for the year ended December 31, 2020. The increase was driven by a $21.9 million increase in other depreciation and an $12.9 million increase in amortization of intangible assets primarily as a result of Mobile Mini being included in the 2021 results for a full year as compared to two quarters in 2020.
Lease Impairment Expense and Other Related Charges: Lease impairment expense and other related charges were $2.9 million for the year ended December 31, 2021 as compared to $4.9 million for the year ended December 31, 2020. The decrease in lease impairment expense and other related charges of $2.0 million is a result of fewer closed locations in 2021 as compared to 2020.
Restructuring Costs: Restructuring costs were $11.9 million for the year ended December 31, 2021 as compared to $6.5 million for the year ended December 31, 2020. The restructuring charges in the year ended December 31, 2021 were primarily due to employee terminations costs as a result of the elimination of positions due to the Merger. The restructuring charges in the year ended December 31, 2020 were primarily due to employee terminations costs as a result of the Merger and, to a lesser extent, reductions in force across our branch network in response to COVID-19 economic conditions.
Currency (Gains) Losses, net: Currency (gains) losses, net decreased by $0.9 million to a $0.5 million loss for the year ended December 31, 2021 compared to a $0.4 million gain for the year ended December 31, 2020. The decrease in currency (gains) losses, net, are primarily attributable to the impact of foreign currency exchange rate changes on loans and borrowings and intercompany receivables and payables denominated in a currency other than the subsidiaries’ functional currency.
Other (Income) Expense, Net: Other (income) expense, net was $1.8 million of expense for the year ended December 31, 2021 and $1.7 million of income for the year ended December 31, 2020, primarily related to the reversal of non-operating liabilities of $2.5 million for the year ended December 31, 2020.
Interest Expense: Interest expense decreased $1.9 million, or 6.8%1.6%, to $118.0 million for the year ended December 31, 2021 from $119.9 million for the year ended December 31, 2020. The decrease was driven by the redemption of the 2022 Secured Notes and the 2023 Secured Notes in the third quarter of 2020 and the redemption of $123.5 million of our 2025 Secured Notes during 2021.
Fair Value (Gain) Loss on Common Stock Warrant Liabilities: The fair value of common stock warrant liabilities decreased $30.1 million to a loss of $26.6 million for the year ended December 31, 2021. The decrease was primarily attributable to the change in estimated fair value of common stock warrant liabilities.
Loss on Extinguishment of Debt: We recorded a loss on extinguishment of debt of $6.0 million for the year ended December 31, 2021 related to the redemption premium and write off of unamortized deferred financing costs associated with the redemption of $123.5 million of our 2025 Secured Notes.
For the year ended December 31, 2020, as a result of the Merger and the related financing transactions, we recorded a loss on extinguishment of debt of $42.4 million. This loss on extinguishment of debt was comprised of the redemption premium and write off of unamortized deferred financing costs associated with the following: (i) $15.2 million due to the redemption of the 2022 Secured Notes, (ii) $22.7 million due to the redemption of the 2023 Secured Notes, and (iii) $4.4 million associated with the 2017 ABL Facility.
Income Tax Expense: Income tax expense increased $101.0 million to a $49.5 million expense for the year ended December 31, 2021 compared to a $51.5 million benefit for the year ended December 31, 2020. The increase in income tax expense was a result of higher pre-tax income partially offset by a reduction of reserves for uncertain tax positions of $11.7 million and increased by nondeductible permanent adjustments and a remeasurement of deferred tax liabilities in the UK resulting from the tax rate change in the UK enacted during the year ended December 31, 2021. The income tax benefit recognized in December 31, 2020 was primarily a result of the reversal of our valuation allowance of $56.5 million based on our assessment of deferred tax assets.
Comparison of Years Ended December 31, 2020 and 2019
Revenue: Total revenue increased $303.9 million, or 28.6%, to $1,367.6 million for the year ended December 31, 2020 from $1,063.7 million for the year ended December 31, 2019. The increase was primarily driven by the addition of Mobile Mini's revenues to our consolidated results. The Merger closed on July 1, 2020 and drove $316.5 million of the year over year increase. Leasing revenue increased $257.2 million, or 34.6%, as compared to the same period in 2019 driven by an increase of 75,114 average modular space and portable storage units on rent as a result of the Merger, and improved pricing and value-added products in our NA Modular segment. Delivery and installation revenues increased $54.1 million, or 24.6%, due to increased overall activity as a result of the Merger, but was partially offset by lower delivery volumes due to the impact of new project cancellations and delays in the second and third quarter of 2020 as a result of the COVID-19 pandemic. reduced new unit sales which decreased $6.0 million, or 10.2%, and rental unit sales which decreased $1.4 million, or 3.5%, as a result of lower demand in 2020.
Total average modular space and portable storage units on rent for the years ended December 31, 2020 and 2019 were 183,674 and 108,560, respectively. The increase was due primarily to the units acquired as part of the Merger, partially offset by lower delivery volumes in the NA Modular segment, including reduced demand for new projects as a result of the COVID-19 global pandemic disruption on social and business activities. In total, modular space average units on rent increased 7,844 units, or 8.6%, for the year ended December 31, 2020 as compared to the year ended December 31, 2019. Modular space average monthly rental rates increased 7.2% to $658 for the year ended December 31, 2020. Improved pricing was driven by a continuation of the long-term price optimization and VAPS penetration opportunities across our portfolio, partially offset by the dilutive impact of lower rates on the Mobile Mini modular space units due to product mix. Portable storage average units on rent increased by 67,270 units, or 398.6%, for the year ended December 31, 2020. Average portable storage monthly rental rates of $132 represented an increase of $12, or 10.0%, compared to the year ended December 31, 2019. This increase was driven by the accretive impact of higher rates from the Mobile Mini portable storage fleet. The average modular space unit utilization rate during the year ended December 31, 2020 was 70.2%, as compared to 72.0% during the same period in 2019. This decrease was driven by lower demand as a result of the COVID-19 pandemic, partially offset by higher utilization on units acquired as part of the Merger. The average portable storage unit utilization rate during the year ended December 31, 2020 was 75.9%, as compared to 65.8% during the same period in 2019. The increase in average portable storage utilization rate was driven by higher utilization on the acquired Mobile Mini units.
Gross Profit: Our gross profit percentage was 48.3% and 38.9% for the years ended December 31, 2020 and 2019, respectively. Our gross profit percentage, excluding the effects of depreciation ("adjusted gross profit percentage"), was 62.9% and 55.3% for the years ended December 31, 2020 and 2019, respectively.
Gross profit increased $246.7 million, or 59.7%, to $660.0 million for the year ended December 31, 2020 from $413.3 million for the year ended December 31, 2019. The increase in gross profit is a result of a $243.0 million increase in leasing gross profit, increased delivery and installation gross profit of $28.1 million, and increased new and rental unit sale margins of $1.5 million. These increases were primarily a result of increased revenues due to the Merger and to favorable average monthly rental rates in the NA Modular segment on modular space units, as well as modular leasing cost savings due to lower delivery volumes that were achieved as a result of actions we took to scale back variable labor and material costs in response to lower demand for new project deliveries. These increases were offset partially by lower delivery and installation activity volumes in the NA Modular segment in the second and third quarters of 2020 due to reduced delivery demand and by increased depreciation of $25.9 million as a result of fleet acquired in the Merger and capital investments made over the past twelve months in our existing rental equipment.
SG&A Expense: SG&A expense increased $89.6 million, or 33.1%, to $360.6 million for the year ended December 31, 2020, compared to $271.0 million for the year ended December 31, 2019. The primary driver of the increase is related to additional SG&A expense as a result of operating a larger business due to the Merger. SG&A expense for the NA Storage, UK Storage, and Tank and Pump segments totaled $90.8 million for the year ended December 31, 2020.
Transaction Costs: Transaction costs increased $64.1 million for the year ended December 31, 2020. Transaction costs were related to the Merger.
Other Depreciation and Amortization: Other depreciation and amortization increased $30.8 million, or 248.4%, to $43.2 million for the year ended December 31, 2020, compared to $12.4 million for the year ended December 31, 2019, compared to $13.32019. $18.2 million forof the year ended December 31, 2018. The decrease in other depreciation and amortizationincrease was driven primarily by lowerincreased Other depreciation as a result of the decreaseinclusion of Mobile Mini beginning in property, plantthe third quarter of 2020 and equipment.Property, plant and equipment decreased as a result$13.4 million was driven by the amortization of the transfer of non-producing branches to assets held for sale which are no longer depreciated and the impact of the adoption of ASC 842 which resultedcustomer relationship intangible asset acquired in the reversal of branch assets previously accounted for as failed sale-lease back locations which are compliant sales under ASC 842.
Impairment losses on Goodwill: There were no impairment losses on goodwill for the years ended December 31, 2019 and 2018.Merger.
Impairment losses on Long-Lived Assets:Assets: Impairment losses on long-lived assets were $2.8 million for the year ended December 31, 2019 related to the valuation of properties classified as compared to $1.6 millionassets held for sale as a result of the ModSpace acquisition. No similar impairments occurred during the year ended December 31, 2018. In 2019 and 2018, we reclassified certain branch facilities from property, plant and equipment to assets held for sale and recognized an impairment on these assets as the estimated fair value was less than the carrying value of the facilities.2020.
Lease Impairment Expense and Other Related Charges:Charges: Lease impairment expense and other related charges waswere $4.9 million for the year ended December 31, 2020 as compared to $8.7 million for the year ended December 31, 2019. Effective January 1,2019,The decrease in connection with the adoptionLease impairment expense and other related charges of ASC 842, we recorded $4.2$3.8 million in ROU asset impairments, $2.6 million in rent on2020 is a result of fewer remaining closed locations and $1.9 million in 2020 due to successful lease termination fees.exits related to the ModSpace acquisition.
Restructuring Costs: Restructuring costs were $6.5 million for the year ended December 31, 2020 as compared to $3.8 million for the year ended December 31, 2019 as compared to $15.5 million for2019. The restructuring charges in the year ended December 31, 2018.2020 were primarily due to employee terminations costs as a result of the Merger and, to a lesser extent, reductions in force across our branch network in response to COVID-19 economic conditions. The 2019 restructuring charges in the year ended December 31, 2019 related primarily to employee termination costs as a result of the ModSpace acquisition and integration. The 2018 restructuring charges are comprised of employee termination and lease breakage costs related to the ActonModSpace and ModSpaceActon acquisitions and integrations. Prior to the adoption of ASC 842 effective January 1. 2019, the costs associated with leases exited as a result of a restructuring plan were recorded in restructuring expense.
Currency (Gains) Losses, net: Currency (gains) losses, net weredecreased by $0.3 million to a $0.4 million gain for the year ended December 31, 2020 compared to a $0.7 million gain for the year ended December 31, 2019 compared to a $2.5 million loss for the year ended December 31, 2018.2019. The decrease in currency (gains) losses, wasnet, are primarily attributable to the impact of foreign currency exchange rate changes on loans and borrowings and intercompany receivables and payables denominated in a currency other than the subsidiaries’ functional currency.
Other Income, Net: Other income, net was $1.7 million and $2.2 million forfor the year ended December 31, 2020 and 2019, respectively. Other income, net of $1.7 million for the year ended December 31, 2020 was primarily related to the reversal of non-operating liabilities of $2.5 million. Other income, net of $2.2 million for the year ended December 31, 2019 and $4.6 million for the year ended December 31, 2018. The decrease in other income was driven primarily by the receipt of $3.2 million of insurance proceeds related to assets damaged during Hurricane Harvey and other settlements which contributed $5.6Harvey.
Interest Expense: Interest expense decreased $2.6 million, or 2.1%, to other expense, net$119.9 million for the year ended December 31, 2018,2020 from $122.5 million for the year ended December 31, 2019. The decrease was driven by lower interest rates on our ABL facilities, the repayment of our 10% Unsecured Notes in 2019 and the lower interest rates on our 2025 Secured Notes and 2028 Secured Notes, partially offset by an $800 million increase in debt outstanding as a result of the receiptMerger.
Fair Value (Gain) Loss on Common Stock Warrant Liabilities: The fair value of $2.4common stock warrant liabilities increased $113.1 million, to a $3.5 million gain for the year ended December 31, 2020 from a $109.6 million loss for the year ended December 31, 2019. The increase was primarily attributable to the change in estimated fair value of common stock warrant liabilities.
Loss on Extinguishment of Debt: As a result of the Merger and the related financing transactions, we recorded a loss on extinguishment of debt of $42.4 million in insurance proceedsthe year ended December 31, 2020. This loss on extinguishment of debt was comprised of the redemption premium and write off of unamortized deferred financing costs associated with the following: (i) $15.2 million due to the redemption of the 2022 Secured Notes, (ii) $22.7 million due to the redemption of the 2023 Secured Notes, and (iii) $4.4 million associated with the 2017 ABL Facility. For the year ended December 31, 2019, we recorded $8.8 million of losses on extinguishment of debt consisting of $1.5 million related to the $30 million redemption of the 2022 Secured Notes at a redemption price of 103% and $7.2 million related to the redemption of the 2023 senior unsecured notes at a redemption price of 102.0%, plus a make-whole premium of 1.1%, for total premiums of 3.1%.
Income Tax Benefit:Income tax benefit increased $49.3 million to a $51.5 million benefit for the year ended December 31, 2020 compared to a $2.2 million benefit for the year ended December 31, 2019. The increase in income tax benefit was driven by a reversal of our valuation allowance of $56.5 million based on our assessment of deferred tax assets, damaged during hurricanesa reduction of reserves for uncertain tax positions of $11.2 million, partially offset by tax expense from pre-tax income and non-deductible expense in the receipt of a $0.9 million settlement duringyear ended December 31, 2020 as compared to discrete benefits recorded in the year ended December 31, 2019.
Interest Expense:
Interest expense increased $24.1 million, or 24.5%, to $122.5 million
Business Segments
The Company operates in four reportable segments as follows: NA Modular, NA Storage, UK Storage and Tank and Pump. The NA Modular segment represents the activities of the North America modular business. NA Storage represents the activities of the North America portable storage business. The UK Storage business represents the results of all modular and portable storage operations in the UK. The Tank and Pump segment represents the results of all operations for the year ended December 31, 2019 from $98.4 million for the year ended December 31, 2018. The increase in interest expense is attributableTank and Pump services. Prior to the increased financing costs forthird quarter of 2021, the full year in 2019, as a resultNA Modular segment represented the activities of WillScot historical segments prior to the Merger and the NA Storage, UK Storage and Tank and Pump segments represented the segments reported by Mobile Mini prior to the Merger. During the third quarter of 2021, the majority of the ModSpace acquisition which occurredportable storage product business within the NA Modular segment was transitioned to the NA Storage segment, and associated revenues, expenses, and operating metrics beginning in the third quarter of 2018, offset in part by the one-time bridge financing and upfront commitment fees expensed in 2018 and lower interest costs due2021 were transferred to the redemptionNA Storage segment, representing a shift of our Unsecured Notes in June 2019. In the third quarterapproximately $5.0 million of 2018, as part of financing the ModSpace acquisition, we upsized our ABL Facility to $1.425 billion, issued the 2023 Secured Notes, and issued the Unsecured Notes and incurred bridge financing fees and upfront commitment fees of $20.5 million which were recorded to interest expense.
Income Tax Benefit: Income tax benefit decreased $36.4 million to $2.2 million for the year ended December 31, 2019 compared to $38.6 million for the year ended December 31, 2018. The decrease in tax benefit was driven by the lower loss before income tax for the year ended December 31, 2019, approximately $17.0 million less tax benefit, and discrete tax benefits in 2018 related to a reduction in the valuation allowance, tax benefit of $11.9 million, and a tax benefit of $7.0 million related to a change in the Company asserting indefinite re-investment in certain of its foreign businesses.
Comparison of Years Ended December 31, 2018 and 2017
Revenue: Total revenue increased $305.5 million, or 68.5%, to $751.4 million for the year ended December 31, 2018 from $445.9 million for the year ended December 31, 2017. The increase was primarily the result of a 73.5% increase in leasing and services revenue driven by increased volumes from acquisitions and improved pricing. Improved volumes were driven by units acquired as part of the Acton, Tyson, and ModSpace acquisitions and organic unit on rent growth, as well as increased modular delivery and installation revenues on the combined rental fleet of 72.0% due to increased transaction volumes. Average modular space monthly rental rates increased 2.6% for the year ended December 31, 2018, and average modular space units on rent increased 28,994 units, or 70.3%. Improved pricing was driven by a combination of our price optimization tools and processes, as well as by continued growth in our “Ready to Work” solutions and increased VAPS penetration across our customer base, offset partially by the average modular space monthly rental rates on acquired units for Acton, Tyson, and ModSpace. The increase in leasing and services revenues was further complemented by an increase of
$17.2 million, or 47.3% in new unit sales as compared to 2017 primarily driven by increased sales as a result of the ModSpace acquisition, which historically had higher new sales than WillScot, including a single large sale project serviced by the Modular - US segment that accounted for nearly half of the revenue variance. Rental unit sales increased $3.1 million, or 14.2% as compared to 2017.
Total average units on rent for the year ended December 31, 2018 and 2017 were 85,737 and 53,862, respectively. The increase was due to units acquired as part of the Acton, Tyson, and ModSpace acquisitions and organic improvements in modular space average units on rent, with modular space average units on rent increased by 28,994 units, or 70.3% for the year ended December 31, 2018. Modular space average monthly rental rates increased 2.6% for the year ended December 31, 2018. Portable storage average units on rent increased by 2,881 units, or 22.9% for the year ended December 31, 2018. Average portable storage monthly rental rates increased 2.6% for the year ended December 31, 2018. The average modular space unit utilization rate for the year ended December 31, 2018 was 71.6%, as compared to 70.3% during the same period in 2017. The increase in average modular space utilization rate was driven by a reduction in the combined modular space unit fleet size during the period across the WillScot, ModSpace, Acton and Tyson fleet. The average portable storage unit utilization rate during the year ended December 31, 2018 was 68.9%, as compared to 71.4% during the same period in 2017. The decrease in average portable storage utilization rate was driven by organic declines in the number of portable storage average units on rent in the Modular - US segment.
Gross Profit: Our gross profit percentage was 38.5% and 37.1% for the years ended December 31, 2018 and 2017, respectively. Our gross profit percentage, excluding the effects of depreciation ("adjusted gross profit percentage"), was 54.7% and 53.4% for the years ended December 31, 2018 and 2017, respectively.
Gross profit increased $123.8 million, or 74.8%, to $289.4 million for the year ended December 31, 2018 from $165.6 million for the year ended December 31, 2017. The increase in gross profit is a result of a $285.1 million increase in modular leasing and services revenue and increased new unit sales gross profit of $6.3 million, offset by increases of $118.0 million in modular leasing and services costs. Increases in modular leasing and services revenues and costs were primarily as a result of increased revenues due to additional units on rent as a result of recent acquisitions as well as increased margins due to favorable average monthly rental rates on modular space units. These increases were partially offset by increased depreciation of $48.8 million as a result of additional rental equipment acquired as part ofmargin per quarter from the Acton, Tyson, and ModSpace acquisitions, as well as continued capital investment in our existing rental equipment.
SG&A Expense: SG&A expense increased $92.5 million, or 57.0%, to $254.9 million for the year ended December 31, 2018, compared to $162.4 million for the year ended December 31, 2017. The majority of the increases in the Modular- US andNA Modular – Other North America segments were driven by the acquisitions of Acton and ModSpace during the year, as well as by $50.1 million of integration and transaction costs incurred during 2018 related to these acquisitions. These increases were partially offset by a $45.1 million reduction of costs in Corporate and other related to Algeco Group costs no longer included in our operations.
SG&A expenses in the Modular- US and Modular – Other North America segments increased $137.7 million for the year ended December 31, 2018 as compared to 2017. Integration costs incurred in 2018 were $30.0 million, as compared to no costs in 2017, which include discrete training costs, fleet relocation costs, branch exit costs, and professional service expenses relatedsegment to the Acton and ModSpace integrations. Employee costs increased $43.4 million driven byNA Storage segment. This adjustment was not made to the increased sizehistorical segment results of the workforce before realization of all expected employee savingsprior periods, as we believe such adjustments to be achieved as a result of restructuring activities. Occupancy costs increased $13.8 million largely due to the expansion of our branch network and storage lots before expected savings are realized as we exit redundant locations. Transaction costs, excluding those in Corporate and other, increased $18.3 million primarily related to costs incurred related to the acquisition of ModSpace. Legal and professional fees increased $10.9 million over 2017 before realization of all expected cost savings and due to operating as a public company for all of 2018. The remaining increases of $21.3 million are primarily related to increased insurance, computer, marketing, office, tax and bad debt expenses related to operating a larger operation as a result of our recent acquisitions and our expanded employee base and branch network.
We estimate cost synergies of approximately $6.4 million related to the Acton and Tyson acquisitions were realized in 2018 and our integration plans remain on track. Acton sales and operations were integrated in April of 2018, and effective November 1, 2018, we began delivering all units acquired from ModSpace under a combined operating and information technology platform. Effective January 7, 2019, we completed the ModSpace system integration and all billing activities on existing ModSpace contracts are now fully integrated. Exit activities for redundant branch locations, such as preparing units and materials for transport to other locations remain on schedule. These activities are expected to continue through 2019 and we expect over $60.0 million of annual reoccurring cost savings as we execute the established integration plans for Acton and ModSpace.
Other Depreciation and Amortization: Other depreciation and amortization increased $4.6 million, or 52.9%, to $13.3 million for the years ended December 31, 2018, compared to $8.7 million for the year ended December 31, 2017. The increase was driven primarily by depreciation on property, plant and equipment acquired as part of the Acton and ModSpace acquisitions in December of 2017 and August of 2018, respectively.
Impairment losses on Goodwill: Impairment losses on goodwill were $0.0 million and $60.7 million for the years ended December 31, 2018 and 2017, respectively. The 2017 impairment loss on goodwill relates to our reporting unit in Canada.
Impairment losses on Long-Lived Assets: Impairment losses on long-lived assets were $1.6 million for the year ended December 31, 2018 as compared to $0.0 million for the year ended December 31, 2017. In the fourth quarter of 2018, we reclassified certain branch facilities that we intend to exit from property, plant and equipment to held for sale and recognized an impairment on these assets as the estimated fair value was less than the carrying value of the facilities.
Restructuring Costs: Restructuring costs were $15.5 million for the year ended December 31, 2018 as compared to $2.2 million for the year ended December 31, 2017. The 2018 restructuring charges relate entirely to employee termination and lease breakage costs related to the Acton and ModSpace acquisitions and integrations. The 2017 restructuring charges relate to the Algeco Group corporate function and related employee termination costs.
Currency (Gains) Losses, net: Currency (gains) losses, net were a $2.5 million loss for the year ended December 31, 2018 compared to a $12.9 million gain for the year ended December 31, 2017. The decrease in currency gains was primarily attributable to the impact of foreign currency exchange rate changes on loans and borrowings and intercompany receivables and payables denominated in a currency other than the subsidiaries’ functional currency. The majority of the intercompany receivables and payables contributing to these gains and losses were settled concurrently with the Business Combination.
Other (Income) Expense, Net: Other expense, net was $4.6 million of other income for the year ended December 31, 2018 and $2.8 million of other expense for the year ended December 31, 2017. The increase in other income was driven by the receipt of insurance proceeds related to assets damaged during Hurricane Harvey which contributed $4.8 million and other settlements which contributed $0.8 million to other (income) expense, net, for the year ended December 31, 2018.
Interest Expense: Interest expense decreased $20.9 million, or 17.5%, to $98.4 million for the year ended December 31, 2018 from $119.3 million for the year ended December 31, 2017. Upon consummation of the Business Combination in November 2017, we issued the 2022 Secured Notes and entered into the ABL Facility to fund our operations as a stand-alone company. In the third quarter as part of financing the ModSpace acquisition, we upsized our ABL Facility to $1.425 billion, issued the 2023 Secured Notes, and issued the Unsecured Notes. In connection with the ModSpace acquisition, the Company incurred bridge financing fees and upfront commitment fees of $20.5 million in the third quarter, which are included in interest expense in 2018 and are not expected to reoccur.
The majority of the interest costs incurred during the year ended December 31, 2017 relate to the previous debt structure of WSII as part of the Algeco Group, including $58.4 million of interest expense incurred in 2017 on notes payable to affiliates, which were settled in full in connection with the Algeco Group restructuring that occurred prior to the Business Combination. The decrease in interest expense is driven by our lower average debt and notes payable balances in 2018 under our new debt structure as compared to the Algeco Group debt structure in place in 2017, partially offset by bridge financing and upfront commitment fees of $20.5 million incurred in connection with the ModSpace acquisition and higher average debt balances subsequent to the August of 2018 ModSpace acquisition. See Note 12 to the consolidated financial statements for further discussion of our debt, and the additional debt incurred during the third quarter as part of financing the ModSpace acquisition, which we expect will increase our interest expense in future periods.
Interest Income: Interest income decreased $12.2 million, or 100.0%, to $0.0 million for the year ended December 31, 2018 from $12.2 million for the year ended December 31, 2017. This decrease is due to the decrease in the principal balance of notes due from affiliates, which were settled upon consummation of the Business Combination in November 2017.
Income Tax Benefit: Income tax benefit increased $37.7 million to $38.6 million for the year ended December 31, 2018 compared to $0.9 million for the year ended December 31, 2017. The increase in tax benefit was principally driven by the pre-tax loss tax benefit of $19.4 million, a tax benefit of $11.9 million, related to a reduction in the valuation allowance and a tax benefit of $7.0 million related to a change in the Company asserting indefinite re-investment in certain of its foreign businesses. In 2017, a pre-tax loss tax benefit was reduced by the impairment of Canadian Goodwill, an unfavorable permanent adjustment, with no tax basis which reduces the expected pre-tax loss benefit. In addition, as a result of the Tax Act, the Company remeasured their net deferred tax liabilities and recognized a net tax benefit of $28.1 million which was offset by a $50.5 million valuation allowance at December 22, 2017. Also, refer to Note 14 regarding the Tax Act enacted in the US on December 22, 2017 and additional components of the rate reconciliation.
Business Segments
Our principal line of business is modular leasing and sales. The Company formerly operated a remote accommodations business (the "Remote Accommodations Business"), which consisted of Target Logistics Management LLC and its subsidiaries and Chard Camp Catering Services, that was carved out in connection with the Business Combination and was no longer a part of our business as of December 31, 2017. The Remote Accommodations Business was considered a single reportable segment. Modular leasing and sales comprises two reportable segments: Modular - US and Modular - Other North America. The Modular - US reportable segment includes the contiguous 48 states and Hawaii, and the Modular - Other North America reportable segment includes Alaska, Canada and Mexico.
The following tables and discussion summarize our reportable segment financial information for ththe e years ended December 31, 2019, 20182021, 2020 and 20172019. Consistent with the presentation of our consolidated financial statements, the below segment results only include results from Acton, Tyson, and ModSpaceMobile Mini for the periods subsequent to the respective acquisition datesMerger and do not include any unrealized incremental cost savings, revenue growth or pro forma adjustments that management expects to result from the integrationsintegration of the acquired businesses. Future changesmerged business.
A Summary Business Segment Supplemental Unaudited Pro Forma Financial Information section has been included in this MD&A in order to provide period over period comparable financial information for the NA Storage, UK Storage and Tank and Pump reporting segments as these segments were not included in our organizational structure may result in changes toreported results for the segments disclosed.first six months of 2020.
Business Segment Results
Years Ended December 31, 2019, 20182021, 2020 and 20172019
| | | | | | | | | | | | | | | | | | | Year Ended December 31, 2021 |
| (in thousands, except for units on rent and rates) | (in thousands, except for units on rent and rates) | Modular - US | | Modular - Other North America | | Total | (in thousands, except for units on rent and rates) | NA Modular | | NA Storage | | UK Storage | | Tank and Pump | | Total |
| Year Ended December 31, 2019 | | |
| Revenue | Revenue | $ | 961,683 | | | $ | 101,982 | | | $ | 1,063,665 | | Revenue | $ | 1,164,179 | | | $ | 508,802 | | | $ | 111,025 | | | $ | 110,891 | | | $ | 1,894,897 | |
| Gross profit | Gross profit | $ | 374,859 | | | $ | 38,454 | | | $ | 413,313 | | Gross profit | $ | 496,445 | | | $ | 348,259 | | | $ | 71,242 | | | $ | 52,262 | | | $ | 968,208 | |
Adjusted EBITDA(a) | Adjusted EBITDA(a) | $ | 325,068 | | | $ | 31,480 | | | $ | 356,548 | | Adjusted EBITDA(a) | $ | 423,004 | | | $ | 226,600 | | | $ | 49,039 | | | $ | 41,750 | | | $ | 740,393 | |
| Capital expenditures for rental equipment | $ | 193,453 | | | $ | 11,653 | | | $ | 205,106 | | |
| Modular space units on rent (average during the period) | 82,709 | | | 8,973 | | | 91,682 | | |
| Capex for rental equipment | | Capex for rental equipment | $ | 187,495 | | | $ | 45,426 | | | $ | 27,830 | | | $ | 17,747 | | | $ | 278,498 | |
| Average modular space units on rent | | Average modular space units on rent | 84,524 | | | 16,780 | | | 9,098 | | | — | | | 110,402 | |
| Average modular space utilization rate | Average modular space utilization rate | 74.2 | % | | 56.1 | % | | 72.0 | % | Average modular space utilization rate | 67.6 | % | | 78.5 | % | | 82.0 | % | | — | % | | 70.1 | % |
| Average modular space monthly rental rate | Average modular space monthly rental rate | $ | 617 | | | $ | 590 | | | $ | 614 | | Average modular space monthly rental rate | $ | 809 | | | $ | 582 | | | $ | 434 | | | $ | — | | | $ | 744 | |
| Portable storage units on rent (average during the period) | 16,462 | | | 416 | | | 16,878 | | |
| Average portable storage units on rent | | Average portable storage units on rent | 7,312 | | | 128,463 | | | 25,691 | | | — | | | 161,466 | |
| Average portable storage utilization rate | Average portable storage utilization rate | 66.2 | % | | 53.7 | % | | 65.8 | % | Average portable storage utilization rate | 68.8 | % | | 80.9 | % | | 90.2 | % | | — | % | | 81.5 | % |
| Average portable storage monthly rental rate | Average portable storage monthly rental rate | $ | 120 | | | $ | 111 | | | $ | 120 | | Average portable storage monthly rental rate | $ | 131 | | | $ | 155 | | | $ | 88 | | | $ | — | | | $ | 144 | |
| Average tank and pump solutions rental fleet utilization based on original equipment cost | | Average tank and pump solutions rental fleet utilization based on original equipment cost | N/A | | N/A | | N/A | | 72.3 | % | | 72.3 | % |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Year Ended December 31, 2020 |
| (in thousands, except for units on rent and rates) | NA Modular | | NA Storage | | UK Storage | | Tank and Pump | | Total |
| Revenue | $ | 1,051,162 | | | $ | 221,829 | | | $ | 46,361 | | | $ | 48,293 | | | $ | 1,367,645 | |
| Gross profit | $ | 451,642 | | | $ | 156,785 | | | $ | 27,642 | | | $ | 23,904 | | | $ | 659,973 | |
| Adjusted EBITDA | $ | 394,805 | | | $ | 99,837 | | | $ | 17,822 | | | $ | 17,843 | | | $ | 530,307 | |
| Capex for rental equipment | $ | 153,327 | | | $ | 14,969 | | | $ | 1,693 | | | $ | 2,394 | | | $ | 172,383 | |
| Average modular space units on rent | 86,874 | | | 8,333 | | | 4,319 | | | — | | | 99,526 | |
| Average modular space utilization rate | 68.9 | % | | 80.6 | % | | 80.8 | % | | — | % | | 70.2 | % |
| Average modular space monthly rental rate | $ | 685 | | | $ | 526 | | | $ | 367 | | | $ | — | | | $ | 658 | |
| Average portable storage units on rent | 15,823 | | | 56,415 | | | 11,910 | | | — | | | 84,148 | |
| Average portable storage utilization rate | 63.5 | % | | 78.2 | % | | 85.9 | % | | — | % | | 75.9 | % |
| Average portable storage monthly rental rate | $ | 122 | | | $ | 147 | | | $ | 76 | | | $ | — | | | $ | 132 | |
| Average tank and pump solutions rental fleet utilization based on original equipment cost | N/A | | N/A | | N/A | | 61.7 | % | | 61.7 | % |
| | | | | | | | | | | | | | | | | |
| (in thousands, except for units on rent and rates) | Modular - US | | Modular - Other North America | | Total |
| Year Ended December 31, 2018 | | | | | |
| Revenue | $ | 677,590 | | | $ | 73,822 | | | $ | 751,412 | |
| Gross profit | $ | 264,320 | | | $ | 25,064 | | | $ | 289,384 | |
Adjusted EBITDA(a) | $ | 196,410 | | | $ | 19,123 | | | $ | 215,533 | |
| Capital expenditures for rental equipment | $ | 151,407 | | | $ | 9,476 | | | $ | 160,883 | |
| Modular space units on rent (average during the period) | 63,336 | | | 6,921 | | | 70,257 | |
| Average modular space utilization rate | 73.7 | % | | 56.8 | % | | 71.6 | % |
| Average modular space monthly rental rate | $ | 551 | | | $ | 559 | | | $ | 552 | |
| Portable storage units on rent (average during the period) | 15,089 | | | 391 | | | 15,480 | |
| Average portable storage utilization rate | 69.4 | % | | 55.6 | % | | 68.9 | % |
| Average portable storage monthly rental rate | $ | 119 | | | $ | 108 | | | $ | 119 | |
| | | | | | | | | | | | | | | | | | | | | | | |
| (in thousands, except for units on rent and rates) | Modular - US | | Modular - Other North America | | Corporate and Other | | Total |
| Year Ended December 31, 2017 | | | | | | | |
| Revenue | $ | 392,933 | | | $ | 53,656 | | | $ | (647) | | | $ | 445,942 | |
| Gross profit | $ | 148,685 | | | $ | 17,532 | | | $ | (647) | | | $ | 165,570 | |
Adjusted EBITDA(a) | $ | 110,822 | | | $ | 13,099 | | | $ | (15,112) | | | $ | 108,809 | |
| Capital expenditures for rental equipment | $ | 96,378 | | | $ | 5,832 | | | $ | — | | | $ | 102,210 | |
| Modular space units on rent (average during the period) | 36,166 | | | 5,097 | | | — | | | 41,263 | |
| Average modular space utilization rate | 73.9 | % | | 52.2 | % | | — | % | | 70.3 | % |
| Average modular space monthly rental rate | $ | 538 | | | $ | 532 | | | $ | — | | | $ | 538 | |
| Portable storage units on rent (average during the period) | 12,246 | | | 353 | | | — | | | 12,599 | |
| Average portable storage utilization rate | 72.2 | % | | 52.6 | % | | — | % | | 71.4 | % |
| Average portable storage monthly rental rate | $ | 116 | | | $ | 119 | | | $ | — | | | $ | 116 | |
(a) See “Reconciliation of non-GAAP Financial Measures” in Item 6 of this Annual Report on Form 10-K. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Year Ended December 31, 2019 |
| (in thousands, except for units on rent and rates) | NA Modular | | NA Storage | | UK Storage | | Tank and Pump | | Total |
| Revenue | $ | 1,063,665 | | | $ | — | | | $ | — | | | $ | — | | | $ | 1,063,665 | |
| Gross profit | $ | 413,313 | | | $ | — | | | $ | — | | | $ | — | | | $ | 413,313 | |
| Adjusted EBITDA | $ | 356,548 | | | $ | — | | | $ | — | | | $ | — | | | $ | 356,548 | |
| Capex for rental equipment | $ | 205,106 | | | $ | — | | | $ | — | | | $ | — | | | $ | 205,106 | |
| Average modular space units on rent | 91,682 | | | — | | | — | | | — | | | 91,682 | |
| Average modular space utilization rate | 72.0 | % | | — | % | | — | % | | — | % | | 72.0 | % |
| Average modular space monthly rental rate | $ | 614 | | | $ | — | | | $ | — | | | $ | — | | | $ | 614 | |
| Average portable storage units on rent | 16,878 | | | — | | | — | | | — | | | 16,878 | |
| Average portable storage utilization rate | 65.8 | % | | — | % | | — | % | | — | % | | 65.8 | % |
| Average portable storage monthly rental rate | $ | 120 | | | $ | — | | | $ | — | | | $ | — | | | $ | 120 | |
| Average tank and pump solutions rental fleet utilization based on original equipment cost | N/A | | N/A | | N/A | | — | % | | — | % |
NA Modular - US Segment
Comparison of Years Ended December 31, 20192021 and 20182020
Revenue: Total revenue increased $284.1$113.0 million, or 41.9%10.7%, to $961.7$1,164.2 million for the year ended December 31, 20192021 from $677.6$1,051.2 million for the year ended December 31, 2018. Modular2020. The increase was primarily driven by increased leasing revenue increased $208.2of $94.6 million, or 44.4%12.3%, driven by improved volumescompared to 2020, increased delivery and pricing. Average modular space units on rentinstallation revenue of $11.3 million, or 5.4% compared to 2020 and increased 19,373 units,sales revenue of $7.1 million, or 30.6%,9.8% compared to 82,709 units on rent and resulting modular space utilization increased by 50 bps.2020. Average modular space monthly rental rates in the Modular - US segment increased 12.0%18.1% for the year ended December 31, 20192021 to $617. Improved volumes were$809 driven by units acquired as partcontinuation of the ModSpace acquisition, as well as increased modular deliverylong-term price optimization and installation revenues, which increased $63.2 million, or 45.7%, due to the increased delivery volumes as compared to 2018.VAPS penetration opportunities across our portfolio. Improved pricing was drivenpartially offset by a combination of our price optimization tools and processes,lower volumes as well as by continued growth in our “Ready to Work” solutions and increased VAPS penetration across our customer base, offset partially by the average modular space monthly rental ratesunits on acquired units. New unit sales revenue increased $5.9 million,rent decreased by 2,350 units, or 12.0%, in 2019 and rental unit sales revenue increased $6.8 million, or 32.2%. Increases for both new unit sales and rental unit sales were a result of the ModSpace acquisition and our larger post-acquisition fleet size.
On a pro forma basis, including results of WillScot and ModSpace for all periods presented, total revenues increased $2.4 million, or 0.2%2.7%, year over yearyear. The decrease was driven primarily by lower delivery volumes in the first half of the year.
Gross Profit: Gross profit increased $44.8 million, or 9.9%, to $496.4 million for the year ended December 31, 2019. This increase was driven by modular leasing revenue, which increased $52.82021 from $451.6 million or 8.4%, driven primarily by continued pricing improvement, with increases in pro forma average modular space monthly rental rates of $80, or 14.9%, year over year for the year ended December 31, 2019. Offset by a decline in new sales, which decreased $39.5 million, or 41.9% driven primarily by one large sale recognized in 2018 in the amount of $29.0 million, and decreased rental unit sales, which declined $9.9 million, or 26.2%. Modular space units on rent decreased 4.5% on a pro forma basis to 82,709 and pro forma utilization for our modular space units increased to 74.2% up 40 bps from 73.8% for the year ended December 31, 2018.
Gross Profit: Gross profit increased $110.5 million, or 41.8%, to $374.8 million for the year ended December 31, 2019 from $264.3 million for the year ended December 31, 2018.2020. The increase in gross profit was driven by higher revenuesa $59.9 million increase in leasing gross profit driven both by the ModSpace acquisitionimproved pricing and by organic growth.VAPS. The increase in gross profit from higherleasing revenues was partially offset by a $50.0an $11.9 million or 47.0% increase in depreciation of rental equipment primarily as a result of capital investments made over the past twelve months in our existing rental equipment for the year ended December 31, 2019 primarily related to units acquired in the ModSpace acquisition, and as a result of continued capital investment in our fleet.2021.
Adjusted EBITDA: Adjusted EBITDA increased $128.6 million,$28.2 million, or 65.5%7.1%, to $325.0 $423.0 million for the year ended December 31, 20192021 from $394.8 mil from $196.4 millionlion for the year ended December 31, 2018.2020. The increase was driven by higher revenues andleasing gross profits discussed above, excluding depreciation, partially offset by increases in SG&A, excluding discrete items and other items of $29.7$24.2 million. Discrete and other items within SG&A decreased for the year ended December 31, 2019, compared to the year ended December 31, 2018, by $19.8 million as decreases in transaction costs and integration costs related to the ModSpace and Acton acquisitions and subsequent integrations of $19.8 million and $6.3 million, respectively, were partially offset by increases in stock compensation expense and other acquisition-related activities of $3.2 million and a $3.1 million, respectively. Increases in SG&A, excluding discrete items, primarily related to increased employee costs of $18.1 million driven by the increased size of the workforce offset partially by employee savings achieved as a result of restructuring activities; and occupancy costs increased $7.5 million largely due to the expansion of our branch network and storage lots, including a portion of the expected cost saving as we have exited redundant locations. The remaining increases in SG&A of $4.2 million were primarily related to increased insurance, computer, marketing,increases in variable compensation of $8.5 million, occupancy costs of $4.3 million and office and tax expenses related to operating a larger operation as a resultcosts of our recent acquisitions and our expanded employee base and branch network.$4.0 million.
Capital Expenditures:Capex for rental equipment: Capital expendituresCapex for rental equipment increased $42.0 $34.2 million, or 27.7%22.3%, to $193.4 million for the year ended December 31, 2019 from $151.4$187.5 million for the year ended December 31, 2018.2021 from $153.3 million for the year ended December 31, 2020. Net capital expenditures alsoCAPEX increased $24.4$21.1 million, or 19.0%17.4%, to $152.5$142.4 million. The increases for both wereThe increase was mainly driven by increased spend for refurbishmentsfleet and VAPS to drive revenue growth and for maintenance of a larger fleet following our recent acquisitions.purchases, as well as refurbishments.
Comparison of Years Ended December 31, 20182020 and 20172019
Revenue: Total revenue increased $284.7decreased $12.5 million, or 72.5%1.2%, to $677.6$1,051.2 million for the year ended December 31, 20182020 from $392.9$1,063.7 million for the year ended December 31, 2017. Modular leasing2019. The decrease was primarily driven by declines in new unit sales revenue, increased $205.0which decreased $17.2 million, or 77.6%29.1%, compared to 2019, and by declines in rental unit sales revenue, which decreased $9.4 million, or 23.3%. Additionally, delivery and installation revenues declined $12.0 million, or 5.5%, driven by improvedlower delivery volumes related to the impact of new project cancellations and pricing. Average modular space unitsdelays as a result of COVID-19 global pandemic disruption on rent increased 27,170 units,social and business activities. These declines were partially offset by an increase in leasing revenue of $26.1 million, or 75.1% to 63,336 units on rent and resulting modular space utilization decreased by 20 bps.3.5%. Average modular space monthly rental rates in the Modular - US segment increased 2.4%11.6% for the year ended December 31, 20182020 to $551. Improved volumes were$685 driven by units acquired as partcontinuation of the Acton, Tyson,long-term price optimization and ModSpace acquisitions, as well as increased modular delivery and installation revenues, which increased $57.2 million, or 70.6%, due to the increased delivery volumes as compared to 2017.VAPS penetration opportunities across our portfolio. Improved pricing was drivenpartially offset by a combination of our price optimization tools and processes,lower volumes as well as by continued growth in our “Ready to Work” solutions and increased VAPS penetration across our customer base, offset partially by the average modular space monthly rental ratesunits on acquired units. New unit sales revenue increased $19.7 million,rent decreased by 4,808 units, or 67.2%, nearly half of which5.2% year over year. The decrease was driven primarily by a single large sale project. Rental unit sales revenue increased $2.8 million, or 15.3%, primarilylower delivery volumes, including reduced demand for new projects since mid- March of 2020 as a result of the ModSpace acquisition and our larger post-acquisition fleet size.COVID-19.
Gross Profit:Gross profit increased $115.6$38.3 million, or 77.7%9.3%, to $264.3$451.6 million for the year ended December 31, 20182020 from $148.7$413.3 million for the year ended December 31, 2017.2019. The increase in gross profit was driven by higher revenuesa $44.9 million increase in leasing gross profit driven both by improved pricing and VAPS, as well as by lower modular leasing cost due to lower delivery demand in the Acton, Tysonsecond and ModSpace acquisitionsthird quarter of 2020 and by organic growth.reduced variable costs. The increase in gross profit from higherleasing revenues was partially offset by a $46.1$7.9 million or 76.5% increase in depreciation of rental equipment primarily as a result of capital investments made over the past twelve months in our existing rental equipment for the year ended December 31, 2018 primarily related to acquired units in the Acton, Tyson, and ModSpace acquisitions, and as a result of continued capital investment in our fleet.2020.
Adjusted EBITDA: Adjusted EBITDA increased $85.6$38.3 million, or 77.3%10.7%, to $196.4$394.8 million for the year ended December 31, 20182020 from $110.8$356.5 million for the year ended December 31, 2017.2019. The increase was driven by higher revenues andleasing gross profits discussed above, excluding depreciation, partially offset by increases in SG&A, excluding discrete and other items, of $81.5 million$6.8 million. SG&A increases were primarily related to the acquisitions of Actonincreases in occupancy and ModSpace during the year. Employeeoffice costs, insurance costs, and increased $37.9 million drivenbad debt expense, partially offset by the increased size of the workforce before realization of all expected employee savings to be achieved as a result of the restructuring activities. Occupancydecreased travel and entertainment costs increased $12.7 million largely due to the expansion of our branch network and storage lots before expected savings are realized as we exit redundant locations. Legal and professional fees increased $11.0 million over 2017 before realization of all expected cost savings and due to operating as a public company for all of 2018. The remaining increases of $19.9 million are primarily related to increased insurance, computer, marketing, office, tax and bad debt expenses related to operating a larger operation as a result of our recent acquisitions and our expanded employee base and branch network.COVID-19 pandemic.
Capital Expenditures: Capex for rental equipment:Capital expenditures Capex for rental equipment increased $55.0decreased $51.8 million, or 57.1%25.3%, to $151.4$153.3 million for the year ended December 31, 20182020 from $96.4$205.1 million for the year ended December 31, 2017.2019. Net CAPEX also decreased $31.3 million, or 20.5%, to $121.3 million. The increasesdecreases for both were driven by increaseddecreased spend for new units,refurbishments and VAPS due to less constrained fleet and refurbishmentsreduced demand as a result of the increased fleet sizeCOVID-19 pandemic, and cost improvements experienced over the prior year related to better unit selection and scoping on refurbishments. Decrease to Net CAPEX was also partially driven by lower demand for sales of rental units.
Reconciliation of non-GAAP Financial Measures
In addition to using GAAP financial measurements, we use certain non-GAAP financial measures to evaluate our operating results. As such, we include in this Annual Report on Form 10-K reconciliations to their most directly comparable GAAP financial measures. Set forth below are definitions and reconciliations to the nearest comparable GAAP measure of certain non-GAAP financial measures used in this Annual Report on Form 10-K along with descriptions of why we believe these measures provide useful information to investors as well as a description of the limitations of these measures. Each of these non-GAAP financial measures has limitations as an analytical tool and should not be considered in isolation from, or as a substitute for analysis of, results reported under GAAP. Our measurements of these metrics may not be comparable to similarly titled measures of other companies.
Adjusted EBITDA
We define EBITDA as net income (loss) plus interest (income) expense, income tax expense (benefit), depreciation and amortization. Our adjusted EBITDA ("Adjusted EBITDA") reflects the following further adjustments to EBITDA to exclude certain non-cash items and the effect of what we consider transactions or events not related to our core business operations:
•Currency (gains) losses, net: on monetary assets and liabilities denominated in foreign currencies other than the subsidiaries’ functional currency. Substantially all such currency gains (losses) are unrealized and attributable to financings due to the Acton, Tyson and ModSpace acquisitions. During the year, our modular space unit fleet grew by nearly 125%, and our average modular space unit fleet grew over 70% in 2018 as compared to 2017.from affiliated companies.
Modular - Other North America Segment•Goodwill and other impairment charges related to non-cash costs associated with impairment charges to goodwill, other intangibles, rental fleet and property, plant and equipment.
Comparison•Restructuring costs, lease impairment expense, and other related charges associated with restructuring plans designed to streamline operations and reduce costs including employee and lease termination costs.
•Transaction costs including legal and professional fees and other transaction specific related costs.
•Costs to integrate acquired companies, including outside professional fees, non-capitalized costs associated with system integrations, non-lease branch and fleet relocation expenses, employee training costs, and other costs required to realize cost or revenue synergies.
•Non-cash charges for stock compensation plans.
•Gains and losses resulting from changes in fair value and extinguishment of common stock warrant liabilities.
• YearsOther expense, including consulting expenses related to certain one-time projects, financing costs not classified as interest expense, and gains and losses on disposals of property, plant, and equipment.
Our Chief Operating Decision Maker ("CODM") evaluates business segment performance utilizing Adjusted EBITDA as shown in the reconciliation of the Company’s consolidated net income (loss) to Adjusted EBITDA below. Management believes that evaluating segment performance excluding such items is meaningful because it provides insight with respect to the intrinsic and ongoing operating results of the Company and captures the business performance of the segments, inclusive of indirect costs.
Adjusted EBITDA has limitations as an analytical tool, and you should not consider the measure in isolation or as a substitute for net income (loss), cash flow from operations or other methods of analyzing WillScot Mobile Mini’s results as reported under US GAAP. Some of these limitations are:
•Adjusted EBITDA does not reflect changes in, or cash requirements for our working capital needs;
•Adjusted EBITDA does not reflect our interest expense, or the cash requirements necessary to service interest or principal payments, on our indebtedness;
•Adjusted EBITDA does not reflect our tax expense or the cash requirements to pay our taxes;
•Adjusted EBITDA does not reflect historical cash expenditures or future requirements for capital expenditures or contractual commitments;
•Adjusted EBITDA does not reflect the impact on earnings or changes resulting from matters that we consider not to be indicative of our future operations;
•although depreciation and amortization are non-cash charges, the assets being depreciated and amortized will often have to be replaced in the future and Adjusted EBITDA does not reflect any cash requirements for such replacements; and
•other companies in our industry may calculate Adjusted EBITDA differently, limiting its usefulness as a comparative measure.
Because of these limitations, Adjusted EBITDA should not be considered as discretionary cash available to reinvest in the growth of our business or as measures of cash that will be available to meet our obligations.
The following tables provide an unaudited reconciliation of Net income (loss) to Adjusted EBITDA:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| 2021 | | | | | | | | | |
| (in thousands) | Q1 | | Q2 | | Q3 | | Q4 | | Full Year |
| Net income | $ | 4,447 | | | $ | 20,371 | | | $ | 61,103 | | | $ | 74,223 | | | $ | 160,144 | |
| Income tax expense | 10,481 | | | 18,828 | | | 6,644 | | | 13,593 | | | 49,546 | |
| Income before income tax | 14,928 | | | 39,199 | | | 67,747 | | | 87,816 | | | 209,690 | |
| Loss on extinguishment of debt | 3,185 | | | 2,814 | | | — | | | — | | | 5,999 | |
| Interest expense | 29,964 | | | 29,212 | | | 29,201 | | | 29,610 | | | 117,987 | |
| Fair value loss (gain) on common stock warrant liabilities | 27,207 | | | (610) | | | — | | | — | | | 26,597 | |
| Depreciation and amortization | 74,022 | | | 84,515 | | | 75,276 | | | 81,754 | | | 315,567 | |
| Currency losses, net | 36 | | | 33 | | | 127 | | | 352 | | | 548 | |
| Restructuring costs, lease impairment expense and other related charges | 4,395 | | | 7,434 | | | 2,457 | | | 470 | | | 14,756 | |
| Transaction costs | 844 | | | — | | | 303 | | | 228 | | | 1,375 | |
| Integration costs | 7,342 | | | 7,622 | | | 8,247 | | | 5,213 | | | 28,424 | |
| Stock compensation expense | 3,514 | | | 4,707 | | | 6,259 | | | 4,509 | | | 18,989 | |
| Other | (1,852) | | | 569 | | | 532 | | | 1,212 | | | 461 | |
| Adjusted EBITDA | $ | 163,585 | | | $ | 175,495 | | | $ | 190,149 | | | $ | 211,164 | | | $ | 740,393 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| 2020 | | | | | | | | | |
| (in thousands) | Q1 | | Q2 | | Q3 | | Q4 | | Full Year |
| Net income (loss) | $ | 91,655 | | | $ | (14,130) | | | $ | (6,051) | | | $ | 3,866 | | | $ | 75,340 | |
| Income tax expense (benefit) | 790 | | | (285) | | | (66,675) | | | 14,719 | | | (51,451) | |
| Income (loss) before income tax | 92,445 | | | (14,415) | | | (72,726) | | | 18,585 | | | 23,889 | |
| Loss on extinguishment of debt | — | | | — | | | 42,401 | | | — | | | 42,401 | |
| Interest expense | 28,257 | | | 28,519 | | | 33,034 | | | 30,076 | | | 119,886 | |
| Fair value (gain) loss on common stock warrant liabilities | (95,329) | | | 26,963 | | | 22,303 | | | 42,602 | | | (3,461) | |
| Depreciation and amortization | 49,022 | | | 48,377 | | | 71,704 | | | 74,727 | | | 243,830 | |
| Currency losses (gains), net | 898 | | | (380) | | | (371) | | | (502) | | | (355) | |
| Restructuring costs, lease impairment expense and other related charges | 1,601 | | | 2,143 | | | 4,798 | | | 2,861 | | | 11,403 | |
| Transaction costs | 9,431 | | | 1,619 | | | 52,191 | | | 812 | | | 64,053 | |
| Integration costs | 1,685 | | | 2,153 | | | 7,083 | | | 7,417 | | | 18,338 | |
| Stock compensation expense | 1,787 | | | 2,227 | | | 2,944 | | | 2,921 | | | 9,879 | |
| Other | (253) | | | 314 | | | 198 | | | 185 | | | 444 | |
| Adjusted EBITDA | $ | 89,544 | | | $ | 97,520 | | | $ | 163,559 | | | $ | 179,684 | | | $ | 530,307 | |
Adjusted Gross Profit and Adjusted Gross Profit Percentage
We define Adjusted Gross Profit as gross profit plus depreciation on rental equipment. Adjusted Gross Profit Percentage is defined as Adjusted Gross Profit divided by revenue. Adjusted Gross Profit and Adjusted Gross Profit Percentage are not measurements of our financial performance under GAAP and should not be considered as an alternative to gross profit, gross profit percentage, or other performance measures derived in accordance with GAAP. In addition, our measurement of Adjusted Gross Profit and Adjusted Gross Profit Percentage may not be comparable to similarly titled measures of other companies. Management believes that the presentation of Adjusted Gross Profit and Adjusted Gross Profit Percentage provides useful information regarding our results of operations and assists in analyzing the underlying performance of our business.
The following table provides an unaudited reconciliation of gross profit to Adjusted Gross Profit and Adjusted Gross Profit Percentage:
| | | | | | | | | | | |
| Year Ended December 31, |
| (in thousands) | 2021 | | 2020 |
| Revenue (A) | $ | 1,894,897 | | | $ | 1,367,645 | |
| | | |
| Gross profit (B) | $ | 968,208 | | | $ | 659,973 | |
| Depreciation of rental equipment | 237,537 | | | 200,581 | |
| Adjusted Gross Profit (C) | $ | 1,205,745 | | | $ | 860,554 | |
| | | |
| Gross Profit Percentage (B/A) | 51.1 | % | | 48.3 | % |
| Adjusted Gross Profit Percentage (C/A) | 63.6 | % | | 62.9 | % |
Net Income Excluding Gain/Loss from Warrants
We define Net Income Excluding Gain/Loss from Warrants as net income plus or minus the impact of the change in the fair value of the common stock warrant liability. Management believes that the presentation of our financial statements excluding the impact of the mark-to-market adjustment provides useful information regarding our results of operations and assists in the review of our actual operating performance.
The following tables provide an unaudited reconciliation of Net income (loss) to Net Income (Loss) Excluding Gain Loss from Warrants:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| 2021 | | | |
| (in thousands) | Q1 | | Q2 | | Q3 | | Q4 | | Full Year |
| Net income | $ | 4,447 | | | $ | 20,371 | | | $ | 61,103 | | | $ | 74,223 | | | $ | 160,144 | |
| Fair value loss (gain) on common stock warrant liabilities | 27,207 | | | (610) | | | — | | | — | | | 26,597 | |
| Net Income Excluding Gain/Loss from Warrants | $ | 31,654 | | | $ | 19,761 | | | $ | 61,103 | | | $ | 74,223 | | | $ | 186,741 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| 2020 | | | |
| (in thousands) | Q1 | | Q2 | | Q3 | | Q4 | | Full Year |
| Net income (loss) | $ | 91,655 | | | $ | (14,130) | | | $ | (6,051) | | | $ | 3,866 | | | $ | 75,340 | |
| Fair value (gain) loss on common stock warrant liabilities | (95,329) | | | 26,963 | | | 22,303 | | | 42,602 | | | (3,461) | |
| Net (Loss) Income Excluding Gain/Loss from Warrants | $ | (3,674) | | | $ | 12,833 | | | $ | 16,252 | | | $ | 46,468 | | | $ | 71,879 | |
Net CAPEX
We define Net CAPEX as purchases of rental equipment and refurbishments and purchases of property, plant and equipment (collectively, "Total Capital Expenditures"), less proceeds from the sale of rental equipment and proceeds from the sale of property, plant and equipment (collectively, "Total Proceeds"), which are all included in cash flows from investing activities. Management believes that the presentation of Net CAPEX provides useful information regarding the net capital invested into our rental fleet and property, plant and equipment each year to assist in analyzing the performance of our business.
The following tables provide unaudited reconciliations of Net CAPEX on a historical quarterly basis:
Quarterly Consolidated Results for the Year Ended December 31, 2019 and 20182021
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| (in thousands) | Q1 | | Q2 | | Q3 | | Q4 | | Full Year |
| Total Capital Expenditures | $ | 59,842 | | | $ | 75,425 | | | $ | 63,760 | | | $ | 109,969 | | | $ | 308,996 | |
| Total Proceeds | 28,931 | | | 17,944 | | | 11,806 | | | 13,440 | | | 72,121 | |
| Net CAPEX | $ | 30,911 | | | $ | 57,481 | | | $ | 51,954 | | | $ | 96,529 | | | $ | 236,875 | |
Revenue: Total revenue increased $28.1 million, or 38.1%, to $101.9 millionQuarterly Consolidated Results for the year endedYear Ended December 31, 2019 from $73.8 million2020
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| (in thousands) | Q1 | | Q2 | | Q3 | | Q4 | | Full Year |
| Total Capital Expenditures | $ | 41,166 | | | $ | 41,702 | | | $ | 48,484 | | | $ | 57,485 | | | $ | 188,837 | |
| Total Proceeds | 10,626 | | | 5,319 | | | 15,161 | | | 15,198 | | | 46,304 | |
| Net CAPEX | $ | 30,540 | | | $ | 36,383 | | | $ | 33,323 | | | $ | 42,287 | | | $ | 142,533 | |
Free Cash Flow
We define Free Cash Flow as net cash provided by operating activities, less purchases of, and proceeds from, rental equipment and property, plant and equipment, which are all included in cash flows from investing activities. Management believes that the presentation of Free Cash Flow provides useful additional information concerning cash flow available to fund our capital allocation alternatives.
The following tables provide a reconciliation of net cash provided by operating activities to Free Cash Flow:
Quarterly Consolidated Results for the year endedYear Ended December 31, 2018. Modular leasing revenue increased $17.6 million, or 36.0%, which is primarily driven by improved volumes and pricing. Average modular space units on rent increased by 2,052 units, or 29.6% to 8,973 units on rent, and average modular space monthly rental rates in the Modular - Other North America segment increased 5.5%2021
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| (in thousands) | Q1 | | Q2 | | Q3 | | Q4 | | Full Year |
| Net cash provided by operating activities | $ | 122,071 | | | $ | 139,537 | | | $ | 130,447 | | | $ | 147,847 | | | $ | 539,902 | |
| Purchase of rental equipment and refurbishments | (52,535) | | | (65,282) | | | (60,374) | | | (100,307) | | | (278,498) | |
| Proceeds from sale of rental equipment | 15,202 | | | 15,235 | | | 11,597 | | | 13,176 | | | 55,210 | |
| Purchase of property, plant and equipment | (7,307) | | | (10,143) | | | (3,386) | | | (9,662) | | | (30,498) | |
| Proceeds from the sale of property, plant and equipment | 13,729 | | | 2,709 | | | 209 | | | 264 | | | 16,911 | |
| Free Cash Flow | $ | 91,160 | | | $ | 82,056 | | | $ | 78,493 | | | $ | 51,318 | | | $ | 303,027 | |
Quarterly Consolidated Results for the year endedYear Ended December 31, 2019 to $590. 2020
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| (in thousands) | Q1 | | Q2 | | Q3 | | Q4 | | Full Year |
| Net cash provided by operating activities | $ | 38,348 | | | $ | 75,379 | | | $ | 61,368 | | | $ | 129,717 | | | $ | 304,812 | |
| Purchase of rental equipment and refurbishments | (39,648) | | | (40,034) | | | (42,591) | | | (50,110) | | | (172,383) | |
| Proceeds from sale of rental equipment | 6,786 | | | 5,316 | | | 13,179 | | | 13,668 | | | 38,949 | |
| Purchase of property, plant and equipment | (1,518) | | | (1,668) | | | (5,893) | | | (7,375) | | | (16,454) | |
| Proceeds from the sale of property, plant and equipment | 3,840 | | | 3 | | | 1,982 | | | 1,530 | | | 7,355 | |
| Free Cash Flow | $ | 7,808 | | | $ | 38,996 | | | $ | 28,045 | | | $ | 87,430 | | | $ | 162,279 | |
Improved volumes were driven by units acquired as part of the ModSpace acquisition, as well as increased modular delivery and installation revenues, which increased $2.3 million, or 14.0%, due to increased transaction volumes as a result of the combined company. Improved pricing was driven by a combination of our price optimization tools and processes as well as by continued growth in our “Ready to Work” solutions and increased VAPS penetration across our customer base, as well as by the average modular space monthly rental rates on acquired units. New unit sales revenue decreased $0.4 million, or 8.7%, associated with decreased sale opportunities. Rental unit sales revenue increased $8.6 million, or 220.5%, as a result of several large rental unit sale opportunities during the year.
On a
Supplemental Pro Forma Information
The following pro forma basis, including results offinancial information has been prepared for WillScot and ModSpace for all periods presented, total revenues decreased $2.9 million, or 2.8%, year over yearMobile Mini, for the year ended December 31, 2019.2020. This decline was drivenpro forma statement of operations presents the historical consolidated statement of operations of WillScot Mobile Mini, giving effect to the following items as if they had occurred on January 1, 2019:
(i) the Merger with Mobile Mini;
(ii) borrowings under the Company’s 2025 Secured Notes and the 2020 ABL Facility;
(iii) extinguishment of the Mobile Mini line of credit and senior notes assumed in the Merger and subsequently repaid;
(iv) repayment of the 2017 ABL Facility and the 2022 Secured Notes repaid contemporaneously with the Merger;
(v) the transaction costs incurred in connection with the Merger; and
(vi) elimination of non-controlling interest in connection with the Sapphire Exchange as contemplated by reduced modular deliverythe Merger.
The adjustments presented on the pro forma financial statement have been identified and installation revenuespresented to provide relevant information necessary for an accurate understanding of the combined company following the transactions and reduced new unit sales, which declined $6.1 million, or 24.7%, and $2.2 million, or 33.7%, respectively. The decline in modular delivery and installation revenues was driven by several large projects that began or were completedevents described above. We believe this pro forma financial statement is important for purposes of comparison to the prior period due to the addition of a significant acquisition during the prior yearreported financial reporting periods. This information is used by management to measure the performance of ongoing operations and resultedanalyze our business performance and trends. This
information is also useful to investors in large deliveryorder for them to better understand the combined historical financial results of the legacy businesses for comparative purposes and installation revenues. These declines were partially offset by increased rental unit salesfor the purposes of $4.5 million, or 56.9%. Core modular leasing revenues increased $0.8 million, or 1.3%, with increases indevelopment of future projections and earnings growth prospects.
The pro forma average modular space monthly rental ratesfinancial information set forth below is based upon available information and assumptions that we believe are reasonable and is for illustrative purposes only. The financial results may have been different if the transactions described above had been completed sooner. You should not rely on the pro forma financial information as being indicative of $25,the historical results that would have been achieved if these transactions and events had been completed as of January 1, 2019. The pro forma combined financial information below should be read in conjunction with the consolidated financial statements and related notes of the Company included elsewhere in this Annual Report on Form 10-K. All pro forma adjustments and their underlying assumptions are described more fully in the notes below.
Accounting Policies
During the preparation of this pro forma combined financial statement, we assessed whether there were any material differences between the Company’s accounting policies and Mobile Mini’s accounting policies. The assessment performed did not identify any material differences and, as such, this pro forma combined financial statement does not adjust for or 4.4%,assume any differences in accounting policies between WillScot and Mobile Mini.
Pro forma Presentation
The following pro forma combined financial information and associated notes are based on the historical financial statement of WillScot and Mobile Mini as described below. In preparing the pro forma combined statement of operations for the year ended December 31, 2020, certain historical financial information for Mobile Mini was reclassified to align to the reporting classifications of WillScot.
The pro forma combined statement of operations for the year ended December 31, 2020 is based on, derived from, and should be read in conjunction with, WillScot’s historical financial statement. The aforementioned pro forma financial statement is also based on, derived from, and should be read in conjunction with Mobile Mini's historical financial statement.
| | | | | | | | | | | | | | | | | | | | | | | |
| Year Ended December 31, 2020 |
| (in thousands) | WillScot Mobile Mini Holdings Corp. | Historical Mobile Mini (as reclassified) | | Pro Forma Adjustments | | Pro Forma Combined |
| Revenues: | | | | | | | |
| Leasing and services revenue: | | | | | | | |
| Leasing | $ | 1,001,447 | | | $ | 208,374 | | | $ | — | | | $ | 1,209,821 | |
| Delivery and installation | 274,156 | | | 59,999 | | | — | | | 334,155 | |
| Sales revenue: | | | | | | | |
| New units | 53,093 | | | 8,402 | | | — | | | 61,495 | |
| Rental units | 38,949 | | | 7,465 | | | — | | | 46,414 | |
| Total revenues | 1,367,645 | | | 284,240 | | | — | | | 1,651,885 | |
| Costs: | | | | | | | |
| Costs of leasing and services: | | | | | | | |
| Leasing | 227,376 | | | 28,584 | | | — | | | 255,960 | |
| Delivery and installation | 220,102 | | | 42,476 | | | — | | | 262,578 | |
| Costs of sales: | | | | | | | |
| New units | 34,841 | | | 5,457 | | | — | | | 40,298 | |
| Rental units | 24,772 | | | 4,625 | | | — | | | 29,397 | |
| Depreciation of rental equipment (b) | 200,581 | | | 15,360 | | | 2,334 | | | 218,275 | |
| Gross profit | 659,973 | | | 187,738 | | | (2,334) | | | 845,377 | |
| Expenses: | | | | | | | |
| Selling, general and administrative | 360,626 | | | 96,170 | | | | | 456,796 | |
| Transaction costs (a) | 64,053 | | | 16,799 | | | (80,852) | | | — | |
| Other depreciation and amortization (c) | 43,249 | | | 19,695 | | | 11,397 | | | 74,341 | |
| Lease impairment expense and other related charges | 4,876 | | | — | | | — | | | 4,876 | |
| Restructuring costs | 6,527 | | | — | | | — | | | 6,527 | |
| | | | | | | | | | | | | | | | | | | | | | | |
| Currency (gains) losses, net | (355) | | | 39 | | | — | | | (316) | |
| Other (income) expense, net | (1,718) | | | 186 | | | — | | | (1,532) | |
| Operating income | 182,715 | | | 54,849 | | | 67,121 | | | 304,685 | |
| Interest expense (d) | 119,886 | | | 16,974 | | | (9,808) | | | 127,052 | |
| Fair value gain on common stock warrant liabilities | (3,461) | | | — | | | — | | | (3,461) | |
| Loss on extinguishment of debt (e) | 42,401 | | | — | | | (19,682) | | | 22,719 | |
| Income before income tax | 23,889 | | | 37,875 | | | 96,611 | | | 158,375 | |
| Income tax (benefit) expense (f) | (51,451) | | | 12,330 | | | 73,670 | | | 34,549 | |
| Net income | 75,340 | | | 25,545 | | | 22,941 | | | 123,826 | |
| Net income attributable to non-controlling interest, net of tax (g) | 1,213 | | | — | | | (1,213) | | | — | |
| Net income attributable to WillScot Mobile Mini | $ | 74,127 | | | $ | 25,545 | | | $ | 24,154 | | | $ | 123,826 | |
Notes to Pro Forma Statement
| | | | | |
| (a) | Represents the elimination of non-recurring transaction costs incurred as a result of the Merger. |
| (b) | Represents the adjustment for depreciation of rental fleet relating to the increase in fair value purchase accounting adjustments as a result of the Merger. |
| (c) | Represents the differential in other depreciation and amortization expense related to the fair value purchase accounting adjustments as a result of the Merger. |
| (d) | Reflects the adjustment for interest expense related to our debt structure after the Merger as though the following had occurred on January 1, 2019 (i) borrowings under the 2020 ABL Facility, (ii) borrowings under the 2025 Secured Notes, (iii) repayment of the 2017 ABL Facility, (iv) repayment of the 2022 Secured Notes and repayment of the Mobile Mini debt assumed at the Merger. |
| (e) | Represents the elimination of the one-time loss on extinguishment of debt in connection with the repayment of the 2022 Secured Notes and the 2017 ABL Facility. |
| (f) | Reflects the adjustment to recognize the income tax impacts of the unaudited pro forma adjustments for which a tax expense is recognized using a US federal and state statutory tax rate of 25.5%. This rate may vary from the effective tax rates of the historical and combined businesses. In addition, the year ended December 31, 2020 included an adjustment of $56.8 million to eliminate the reversal of valuation allowance as a result of reassessment of the realizability of deferred tax assets as a result of the Merger. |
| (g) | Reflects the adjustment for the extinguishment of non-controlling interest as a result of the Sapphire Exchange on June 30, 2020. |
The pro forma adjustment to interest expense consists of the following:
| | | | | |
| Year Ended December 31, |
| (in thousands) | 2020 |
| ABL Facility interest | $ | (2,561) | |
| 2022 Secured Notes interest | (10,631) | |
| 2025 Secured Notes interest | 18,247 | |
| Mobile Mini debt interest | (15,921) | |
| Deferred financing fee amortization | 1,058 | |
| Net pro forma adjustment | $ | (9,808) | |
Reconciliation of Pro Forma Adjusted EBITDA
The following unaudited table provides a reconciliation of proforma Net income to pro forma unaudited Adjusted EBITDA:
| | | | | |
| Year Ended December 31, |
| (in thousands) | 2020 |
| Net income | $ | 123,826 | |
| Income tax expense | 34,549 | |
| Loss on extinguishment of debt | 22,719 | |
| Fair value gain on common stock warrant liabilities | (3,461) | |
| Interest expense | 127,052 | |
| Depreciation and amortization | 292,616 | |
| Currency gains, net | (316) | |
| Restructuring costs, lease impairment expense, other related charges | 11,403 | |
| Integration costs | 18,338 | |
| Stock compensation expense | 15,280 | |
| Other | 4,459 | |
| Adjusted EBITDA | $ | 646,465 | |
Summary Business Segment Supplemental Pro Forma Financial Information
As a result of the Merger and the significant related financing transactions, we believe presenting supplemental pro forma financial information is beneficial to the readers of the financial statements as we believe this is a better representation of the go-forward operations of the combined company, and we believe this information is useful to investors in order for them to better understand the combined historical financial results of the legacy businesses for comparative purposes. The following table sets forth key metrics used by management to run the business on a pro forma basis as if the Merger and related financing transactions had occurred on January 1, 2019. Refer to the Supplemental Pro Forma Financial Information section above for the full reconciliation of the statement of operations.
Following the Merger, we modified our management structure and expanded from two reporting segments to four segments: NA Modular, NA Storage, UK Storage and Tank and Pump. Prior to the Merger, WillScot had two reportable segments, US Modular and Other North America Modular. These two segments were combined to create the NA Modular segment, which represented the legacy WillScot operations prior to the third quarter of 2021. Prior to the third quarter of 2021, the other segments, NA Storage, UK Storage, and Tank and Pump aligned to the legacy operations and segments reported by Mobile Mini. During the third quarter of 2021, the majority of the portable storage product business within the NA Modular segment was transitioned to the NA Storage segment, and associated revenues, expenses, and operating metrics beginning in the third quarter of 2021 were transferred to the NA Storage segment. The reporting segments are aligned with how we operate and analyze our business results.
Pro Forma Comparison of Years ended December 31, 2021 and 2020:
| | | | | | | | | | | | | | | | | | | | | | | |
| Pro Forma Combined Year Ended December 31, | | 2021 vs. 2020 |
| (in thousands) | 2021 | | 2020 | | $ Change | | % Change |
| Revenue | $ | 1,894,897 | | | $ | 1,651,885 | | | $ | 243,012 | | | 14.7 | % |
| Selling, general and administrative expenses | $ | 511,446 | | | $ | 456,796 | | | $ | 54,650 | | | 12.0 | % |
| Net income | $ | 160,144 | | | $ | 123,826 | | | $ | 36,318 | | | 29.3 | % |
| Adjusted EBITDA | $ | 740,393 | | | $ | 646,465 | | | $ | 93,928 | | | 14.5 | % |
| | | | | | | |
| Other Financial Data: | | | | | | | |
| Adjusted EBITDA - NA Modular | $ | 423,004 | | | $ | 394,805 | | | $ | 28,199 | | | 7.1 | % |
| Adjusted EBITDA - NA Storage | 226,600 | | 184,601 | | 41,999 | | | 22.8 | % |
| Adjusted EBITDA - UK Storage | 49,039 | | 31,080 | | 17,959 | | | 57.8 | % |
| Adjusted EBITDA - Tank and Pump | 41,750 | | | 35,979 | | | 5,771 | | | 16.0 | % |
Combined Adjusted EBITDA | $ | 740,393 | | | $ | 646,465 | | | $ | 93,928 | | | 14.5 | % |
NA Modular - Quarterly Results
Pro Forma Quarterly Results for the year ended December 31, 2021:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
(in thousands, except for units on rent and
monthly rental rate) | Q1 | | Q2 | | Q3 | | Q4 | | Total |
| Revenue | $ | 266,224 | | | $ | 289,382 | | | $ | 299,051 | | | $ | 309,522 | | | $ | 1,164,179 | |
| Gross profit | $ | 113,002 | | | $ | 116,136 | | | $ | 127,854 | | | $ | 139,453 | | | $ | 496,445 | |
| Adjusted EBITDA | $ | 97,371 | | | $ | 103,545 | | | $ | 106,825 | | | $ | 115,263 | | | $ | 423,004 | |
| Capex for rental equipment | $ | 39,135 | | | $ | 49,364 | | | $ | 31,789 | | | $ | 67,207 | | | $ | 187,495 | |
| Average modular space units on rent | 84,795 | | | 84,754 | | | 84,218 | | | 84,328 | | | 84,524 | |
| Average modular space utilization rate | 67.6 | % | | 67.7 | % | | 67.6 | % | | 67.5 | % | | 67.6 | % |
| Average modular space monthly rental rate | $ | 737 | | | $ | 801 | | | $ | 834 | | | $ | 866 | | | $ | 809 | |
| Average portable storage units on rent | 14,903 | | | 13,301 | | | 493 | | | 552 | | | 7,312 | |
| Average portable storage utilization rate | 60.3 | % | | 69.8 | % | | 48.0 | % | | 62.7 | % | | 68.8 | % |
| Average portable storage monthly rental rate | $ | 124 | | | $ | 133 | | | $ | 179 | | | $ | 228 | | | $ | 131 | |
Pro Forma Quarterly Results for the year ended December 31, 2020:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
(in thousands, except for units on rent and
monthly rental rate) | Q1 | | Q2 | | Q3 | | Q4 | | Total |
| Revenue | $ | 255,821 | | | $ | 256,862 | | | $ | 267,867 | | | $ | 270,612 | | | $ | 1,051,162 | |
| Gross profit | $ | 106,190 | | | $ | 109,964 | | | $ | 112,079 | | | $ | 123,409 | | | $ | 451,642 | |
| Adjusted EBITDA | $ | 89,544 | | | $ | 97,520 | | | $ | 100,281 | | | $ | 107,460 | | | $ | 394,805 | |
| Capex for rental equipment | $ | 39,648 | | | $ | 40,034 | | | $ | 34,249 | | | $ | 39,396 | | | $ | 153,327 | |
| Average modular space units on rent | 87,988 | | | 87,096 | | | 86,400 | | | 86,011 | | | 86,874 | |
| Average modular space utilization rate | 69.2 | % | | 68.5 | % | | 68.3 | % | | 68.2 | % | | 68.9 | % |
| Average modular space monthly rental rate | $ | 653 | | | $ | 669 | | | $ | 693 | | | $ | 724 | | | $ | 685 | |
| Average portable storage units on rent | 16,346 | | | 15,869 | | | 15,473 | | | 15,603 | | | 15,823 | |
| Average portable storage utilization rate | 64.1 | % | | 62.5 | % | | 61.3 | % | | 62.6 | % | | 63.5 | % |
| Average portable storage monthly rental rate | $ | 119 | | | $ | 120 | | | $ | 124 | | | $ | 124 | | | $ | 122 | |
The NA Modular segment represents the activities of WillScot prior to the Merger. As a result, there are no differences between pro forma results and actual results on a reported basis. Please see comparison of results for the years ended December 31, 2021 and 2020 within "Business Segment Results" above.
NA Storage - Quarterly Results
Pro Forma Quarterly Results for the year ended December 31, 2021
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
(in thousands, except for units on rent and
monthly rental rate) | Q1 | | Q2 | | Q3 | | Q4 | | Total |
| Revenue | $ | 107,748 | | | $ | 115,794 | | | $ | 133,897 | | | $ | 151,363 | | | $ | 508,802 | |
| Gross profit | $ | 72,619 | | | $ | 75,721 | | | $ | 92,496 | | | $ | 107,423 | | | $ | 348,259 | |
| Adjusted EBITDA | $ | 46,322 | | | $ | 49,526 | | | $ | 59,123 | | | $ | 71,629 | | | $ | 226,600 | |
| Capex for rental equipment | $ | 3,472 | | | $ | 8,773 | | | $ | 11,920 | | | $ | 21,261 | | | $ | 45,426 | |
| Average modular space units on rent | 16,439 | | | 16,360 | | | 16,316 | | | 18,006 | | | 16,780 | |
| Average modular space utilization rate | 79.4 | % | | 78.4 | % | | 77.6 | % | | 78.8 | % | | 78.5 | % |
| Average modular space monthly rental rate | $ | 535 | | | $ | 573 | | | $ | 602 | | | $ | 617 | | | $ | 582 | |
| Average portable storage units on rent | 105,810 | | | 112,862 | | | 137,123 | | | 158,055 | | | 128,463 | |
| Average portable storage utilization rate | 73.9 | % | | 76.1 | % | | 83.2 | % | | 88.1 | % | | 80.9 | % |
| Average portable storage monthly rental rate | $ | 148 | | | $ | 151 | | | $ | 155 | | | $ | 163 | | | $ | 155 | |
Pro Forma Quarterly Results for the Year ended December 31, 2020:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
(in thousands, except for units on rent and
monthly rental rate) | Q1 | | Q2 | | Q3 | | Q4 | | Total |
| Revenue | $ | 103,495 | | | $ | 92,826 | | | $ | 104,493 | | | $ | 117,336 | | | $ | 418,150 | |
| Gross profit | $ | 71,400 | | | $ | 66,639 | | | $ | 73,384 | | | $ | 83,401 | | | $ | 294,824 | |
| Adjusted EBITDA | $ | 43,994 | | | $ | 40,770 | | | $ | 46,465 | | | $ | 53,372 | | | $ | 184,601 | |
| Capex for rental equipment | $ | 5,200 | | | $ | 7,272 | | | $ | 7,234 | | | $ | 7,735 | | | $ | 27,441 | |
| Average modular space units on rent | 15,509 | | | 15,757 | | | 16,383 | | | 16,948 | | | 16,152 | |
| Average modular space utilization rate | 77.8 | % | | 78.6 | % | | 80.4 | % | | 80.9 | % | | 79.4 | % |
| Average modular space monthly rental rate | $ | 497 | | | $ | 463 | | | $ | 505 | | | $ | 547 | | | $ | 504 | |
| Average portable storage units on rent | 105,441 | | | 101,463 | | | 105,221 | | | 120,439 | | | 108,167 | |
| Average portable storage utilization rate | 73.1 | % | | 70.6 | % | | 73.4 | % | | 83.0 | % | | 75.1 | % |
| Average portable storage monthly rental rate | $ | 146 | | | $ | 143 | | | $ | 145 | | | $ | 150 | | | $ | 146 | |
Pro Forma Comparison of Years ended December 31, 2021 and 2020
NA Storage
Revenue: Total revenue increased $90.6 million, or 21.7%, beingto $508.8 million for the year ended December 31, 2021 from $418.2 million for the year ended December 31, 2020. Leasing revenues for the year ended December 31, increased year-over-year by $73.7 million, or 23.5% to $387.6 million. The average number of portable storage units on rent increased 20,296 units, or 18.8% to 128,463 compared to 108,167 units in 2020. The increase is associated with year over year growth in the broader construction segment and continuous pricing optimization, as well as due to the impact of acquisitions closed in the third and fourth quarter of 2021.
Gross Profit: Gross profit increased $53.5 million, or 18.1%, for the year ended December 31, 2021 to $348.3 million from $294.8 million for the year ended December 31, 2020. This gross profit increase was driven primarily by a $56.7 million, or 20.4%, year-over-year increase within leasing and an increase in delivery and installation gross profit of $2.3 million partially offset by a decrease of $0.3 million in modular space units on rent of 2.5% on a pro forma basissales.
Adjusted EBITDA: Adjusted EBITDA increased $42.0 million, or 22.8%, to 8,973. Pro forma utilization for our modular space units decreased to 56.1%, down 30 bps from 56.4%,$226.6 million for the year ended December 31, 20182021 from $184.6 million for the year ended December 31, 2020 and the margin expanded to 44.5% from 44.1%. Excluding integration and stock-based compensation, SG&A expense increased due to increased costs for personnel of approximately $6.9 million and $1.0 million due to increased travel.
Capex for Rental Equipment: Purchases of rental equipment and refurbishments of $45.4 million for the year ended December 31, 2021 were $18.0 million higher than for the year ended December 31, 2020. Rental fleet expenditures were reduced significantly during the year ended December 31, 2020 in response to COVID-19, especially after the first quarter of 2020, and were primarily to meet demand for specific products, largely ground level offices.
UK Storage - Quarterly Results
Pro Forma Quarterly Results for the year ended December 31, 2021:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
(in thousands, except for units on rent and
monthly rental rate) | Q1 | | Q2 | | Q3 | | Q4 | | Total |
| Revenue | $ | 27,007 | | | $ | 28,432 | | | $ | 28,099 | | | $ | 27,487 | | | $ | 111,025 | |
| Gross profit | $ | 16,493 | | | $ | 17,937 | | | $ | 18,876 | | | $ | 17,936 | | | $ | 71,242 | |
| Adjusted EBITDA | $ | 11,064 | | | $ | 12,328 | | | $ | 13,255 | | | $ | 12,392 | | | $ | 49,039 | |
| Capex for rental equipment | $ | 6,770 | | | $ | 4,226 | | | $ | 11,649 | | | $ | 5,185 | | | $ | 27,830 | |
| Average modular space units on rent | 9,115 | | | 9,354 | | | 9,298 | | | 8,627 | | | 9,098 | |
| Average modular space utilization rate | 83.8 | % | | 84.3 | % | | 83.4 | % | | 76.7 | % | | 82.0 | % |
| Average modular space monthly rental rate | $ | 404 | | | $ | 438 | | | $ | 454 | | | $ | 439 | | | $ | 434 | |
| Average portable storage units on rent | 24,647 | | | 25,573 | | | 25,632 | | | 26,911 | | | 25,691 | |
| Average portable storage utilization rate | 89.2 | % | | 91.8 | % | | 89.1 | % | | 90.6 | % | | 90.2 | % |
| Average portable storage monthly rental rate | $ | 82 | | | $ | 88 | | | $ | 90 | | | $ | 91 | | | $ | 88 | |
Pro Forma Quarterly Results for the year ended December 31, 2020:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
(in thousands, except for units on rent and
monthly rental rate) | Q1 | | Q2 | | Q3 | | Q4 | | Total |
| Revenue | $ | 20,197 | | | $ | 17,154 | | | $ | 21,653 | | | $ | 24,708 | | | $ | 83,712 | |
| Gross profit | $ | 11,372 | | | $ | 10,991 | | | $ | 12,671 | | | $ | 14,971 | | | $ | 50,005 | |
| Adjusted EBITDA | $ | 6,405 | | | $ | 6,853 | | | $ | 8,306 | | | $ | 9,516 | | | $ | 31,080 | |
| Capex for rental equipment | $ | 337 | | | $ | 522 | | | $ | 677 | | | $ | 1,016 | | | $ | 2,552 | |
| Average modular space units on rent | 7,850 | | | 7,912 | | | 8,444 | | | 8,834 | | | 8,262 | |
| Average modular space utilization rate | 74.2 | % | | 74.6 | % | | 79.1 | % | | 82.4 | % | | 77.6 | % |
| Average modular space monthly rental rate | $ | 326 | | | $ | 313 | | | $ | 356 | | | $ | 377 | | | $ | 344 | |
| Average portable storage units on rent | 23,328 | | | 22,870 | | | 23,146 | | | 24,496 | | | 23,462 | |
| Average portable storage utilization rate | 83.7 | % | | 82.2 | % | | 83.2 | % | | 88.6 | % | | 84.4 | % |
| Average portable storage monthly rental rate | $ | 73 | | | $ | 70 | | | $ | 75 | | | $ | 78 | | | $ | 74 | |
Pro Forma Comparison of Years ended December 31, 2021 and 2020
UK Storage
Revenue: Total revenue increased $27.3 million, or 32.6%, to $111.0 million for the year ended December 31, 2021 from $83.7 million for the year ended December 31, 2020. Total Revenue in GBP increased $15.7 million, or 24.1% to $80.7 million for the year ended December 31, 2021 from $65.0 million for the year ended December 31, 2020.Leasing revenues increased 37.5% and delivery and installation revenues increased 44.6%, while sales revenue decreased 33.8%. Within leasing activity, average monthly rental rates for modular space units and portable storage units increased 26.2% and 18.9% year-over-year, respectively. These increases were supplemented by a 10.1% increase in modular space average units on rent and a 9.5% increase in average portable storage units on rent.
Gross Profit: Gross profit increased $13.4$21.2 million, or 53.4%42.4%, to $38.5$71.2 million for the year ended December 31, 20192021 from $25.1$50 million for the year ended December 31, 2018. The effects of favorable foreign currency movements2020. Gross profit on leasing increased gross profit by $0.3 million, as the Canadian Dollar and Mexican Peso strengthened against the US dollar during the year. The increase in gross profit, excluding the effects of foreign currency, was driven by higher revenues as a result of the ModSpace acquisition and organic growth. The increase in gross profit from higher revenues was partially offset by a $3.1 million, or 20.5%, increase in depreciation of39.4% year-over-year. Depreciation on rental equipment for the year ended December 31, 2019 primarily related to units acquired in the ModSpace acquisition.also increased by $3.5 million.
Adjusted EBITDA: Adjusted EBITDA increased $12.4$17.9 million, or 64.9%57.7%, to $31.5$49.0 million for the year ended December 31, 20192021 from $19.1$31.1 million for the year ended December 31, 2018. This2020. and the margin increased to 44.2% from 37.1%. The increase wasresulted primarily driven by higher modular leasing margin due to increased modular volumes and average monthly rental rates, offset by increased SG&A expense, excluding discrete items, of $4.1 million primarily related tofrom the ModSpace acquisition. Employee costs increased $1.5 million as a result of the increased size of our workforce. Occupancy costs increased $2.8 million largely due to the expansion of our branch network and storage lots.favorable gross profit discussed above.
Capital Expenditures:Capex for Rental Equipment: Capital expenditures forPurchases of rental equipment increased $2.2 million, or 23.2%, to $11.7and refurbishments of $27.8 million for the year ended December 31, 2019 from $9.5 2021 were $25.2 million higher than for the year ended December 31, 2020. Rental fleet expenditures were reduced in 2020 in response to COVID-19.
Tank and Pump - Quarterly Results
Pro Forma Quarterly Results for the year ended December 31, 2021:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
(in thousands, except for units on rent and
monthly rental rate) | Q1 | | Q2 | | Q3 | | Q4 | | Total |
| Revenue | $ | 24,344 | | | $ | 27,494 | | | $ | 29,505 | | | $ | 29,548 | | | $ | 110,891 | |
| Gross profit | $ | 11,266 | | | $ | 13,016 | | | $ | 14,323 | | | $ | 13,657 | | | $ | 52,262 | |
| Adjusted EBITDA | $ | 8,828 | | | $ | 10,096 | | | $ | 10,946 | | | $ | 11,880 | | | $ | 41,750 | |
| Capex for rental equipment | $ | 3,158 | | | $ | 2,919 | | | $ | 5,016 | | | $ | 6,654 | | | $ | 17,747 | |
| Average tank and pump solutions rental fleet utilization based on original equipment cost | 67.4 | % | | 71.2 | % | | 74.8 | % | | 75.5 | % | | 72.3 | % |
Pro Forma Quarterly Results for the year ended December 31, 2020:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
(in thousands, except for units on rent and
monthly rental rate) | Q1 | | Q2 | | Q3 | | Q4 | | Total |
| Revenue | $ | 26,884 | | | $ | 23,684 | | | $ | 23,302 | | | $ | 24,991 | | | $ | 98,861 | |
| Gross profit | $ | 13,279 | | | $ | 11,723 | | | $ | 11,430 | | | $ | 12,474 | | | $ | 48,906 | |
| Adjusted EBITDA | $ | 9,477 | | | $ | 8,659 | | | $ | 8,507 | | | $ | 9,336 | | | $ | 35,979 | |
| Capex for rental equipment | $ | 4,514 | | | $ | 941 | | | $ | 431 | | | $ | 1,963 | | | $ | 7,849 | |
| Average tank and pump solutions rental fleet utilization based on original equipment cost | 66.4 | % | | 60.5 | % | | 58.2 | % | | 65.2 | % | | 62.6 | % |
Pro Forma Comparison of Years ended December 31, 2021 and 2020:
Tank and Pump
Revenue: Total revenue increased $12.0 million, or 12.2%, to $110.9 million for the year ended December 31, 2021 from $98.9 million for the year ended December 31, 2018. The2020.
Utilization based on OEC increased from 62.6% for the year ended December 31, 2020 to 72.3% for year ended December 31, 2021 and experienced an increase was driven byin average rental rates compared to the prior-year period. In addition, utilization levels grew sequentially in each quarter, finishing the fourth quarter of 2021 at an average OEC utilization rate of 75.5%. Year-over-year leasing revenue increased spend for new fleet and VAPS to drive revenue growth and for maintenance of a larger fleet following the ModSpace acquisition. Net capital expenditures decreased $5.9$11.7 million, or 98.2%17.9%, while delivery and installation revenue increased $1.0 million, or 3.5%. Sales revenues decreased $0.7 million compared to $0.1the prior-year period.
Gross Profit: Gross profit increased $3.4 million, as a result of increased rental unit sales inor 6.9%, for the period.
Comparison of Years Endedyear ended December 31, 2018 and 2017
Revenue: Total revenue increased $20.12021 to $52.3 million or 37.4%, to $73.8from $48.9 million for the year ended December 31, 2018 from $53.72020. Gross profit for leasing activity increased $6.4 million driven by the increased revenue as discussed above offset by increased costs of $5.3 million, including increased repairs and maintenance of $8.1 million. Gross profit for delivery and installation activity decreased $1.7 million reflecting higher revenues offset by a $2.8 million increase in expense, including $0.7 million higher expense for fuel. Depreciation of rental equipment decreased $1.2 million.
Adjusted EBITDA: Adjusted EBITDA increased $5.8 million, or 16.0%, to $41.8 million for the year ended December 31, 2017. Modular leasing revenue increased $14.8 million, or 43.4%, which is primarily attributable driven by improved volumes and pricing. Average modular space units on rent increased by 1,824 units, or 35.8% to 6,921 units on rent, and average modular space monthly rental rates in the Modular - Other North America segment increased 5.1% for the year ended December 31, 2018 to $559. Improved volumes were driven by units acquired as part of the ModSpace acquisition, as well as increased modular delivery and installation revenues, which increased $7.6 million, or 86.4%, due to increased transaction volumes as a result of the combined company. Improved pricing was driven by a combination of our price optimization tools and processes, as well as by continued growth in our “Ready to Work” solutions and increased VAPS penetration across our customer base, as well as by the average modular space monthly rental rates on acquired units. New unit sales revenue decreased $2.5 million, or 35.2%, associated with decreased sale opportunities. Rental unit sales revenue increased $0.2 million, or 5.4%.
Gross Profit: Gross profit increased $7.6 million, or 43.4%, to $25.12021 from $36.0 million for the year ended December 31, 20182020 and the margin expanded to 37.6% from $17.536.4%. The increase in Adjusted EBITDA was driven by the higher gross profit discussed above, offset by a $1.6 million reduction SG&A expense including $1.7 million in decreased employee costs.
Capex for rental equipment: Purchases of rental equipment and refurbishments were reduced significantly during 2020 due to the unfavorable environment for this segment. For the year ended December 31, 2021, expenditures of $17.7 million were $9.9 million higher than for the year ended December 31, 2017. The effects of favorable foreign currency movements increased gross profit by $0.6 million, as the Canadian Dollar and Mexican Peso strengthened against the US dollar during the year. The increase in gross profit, excluding the effects of foreign currency, was driven by higher revenues as a result of the ModSpace acquisition and organic growth. The increase in gross profit from higher revenues was partially offset by a $2.8 million, or 22.8% increase in depreciation of rental equipment for the year ended December 31, 2018 primarily related to acquired units in ModSpace acquisition.
Adjusted EBITDA: Adjusted EBITDA increased $6.0 million, or 45.8%, to $19.1 million for the year ended December 31, 2018 from $13.1 million for the year ended December 31, 2017. This increase was primarily driven by higher modular leasing margin due to increased modular volumes and average monthly rental rates, offset by increased SG&A expense, excluding discrete items, of $4.3 million primarily related to the ModSpace acquisition during the year. Employee costs increased $2.0 million as a result of the increased size of the workforce and before realization of all expected employee savings as a result of the restructuring to capture operating synergies as a result of integrating these businesses into WillScot. Occupancy costs increased $1.0 million largely due to the expansion of our branch network and storage lots before expected savings are realized as we exit redundant locations. The remaining increases of $1.2 million are primarily related to increased insurance, computer, marketing, office, tax and bad debt expenses related to operating a larger operation as a result of our recent acquisition and our expanded employee base and branch network.
Capital Expenditures: Capital expenditures for rental equipment increased $3.7 million, or 63.8%, to $9.5 million for the year ended December 31, 2018 from $5.8 million for the year ended December 31, 2017. The increase was driven by increased spend for new units, VAPS, and refurbishments as a result of the increased fleet size due to the ModSpace acquisition. During the year, our modular space unit fleet grew by over 65%.
Corporate and Other for the Year Ended December 31, 2017
The Corporate and other segment was discontinued in 2017.
Gross Profit: The Corporate and other adjustments to revenue and gross profit pertain to the elimination of intercompany leasing transactions between the Modular business segments and the legacy Remote Accommodations Business segment, which was carved out in 2017 and is reflected as discontinued operations in our financial statements.
Adjusted EBITDA: Corporate and other costs and eliminations to consolidated Adjusted EBITDA increased $15.1 million or 100.0% to $0.0 million for the year ended December 31, 2018 from a loss of $15.1 million for the year ended December 31, 2017. The 2017 costs related to the Algeco Group operations, which separated from the Company in 2017. Similar costs incurred in 2019 and 2018 by WillScot are included primarily in the Modular - US segment.2020.
Liquidity and Capital Resources
Overview
WillScot Mobile Mini is a holding company that derives all of its operating cash flow from its operating subsidiaries. Our principal sources of liquidity include cash generated by operating activities from our subsidiaries, credit facilities,borrowings under the 2020 ABL Facility, and sales of equity and debt securities.
Our liquidity as of December 31, 2019 consisted of cash and cash equivalents and unused commitments under our ABL Facility which is discussed below. Our practice is to maintain sufficient liquidity through cash from operations and our ABL Facility, to mitigate the impacts of any adverse financial market conditions on our operations. We believe that our liquidity sources and operating cash generatedflows are sufficient to address our operating, debt service and capital requirements over the next twelve months.
We have consistently accessed the debt and equity capital markets both opportunistically and as necessary to support the growth of our business, desired leverage levels, and other capital allocation priorities. Subsequent to the Merger,
from operations, together with amounts available underwe believe we have ample liquidity in the 2020 ABL Facility and are generating substantial free cash flow, which together support both organic operations and other capital allocation priorities as they arise.
We continue to review available acquisition opportunities with the awareness that any such acquisition may require us to incur additional debt to finance the acquisition and/or to issue shares of our Common Stock or other equity securities as acquisition consideration or as part of an overall financing plan. In addition, we will continue to evaluate alternatives to optimize our capital structure, which could include the issuance or repurchase of additional unsecured and secured debt, equity securities and/or equity-linked securities. There can be no assurance as to the timing of any such issuance. If we obtain additional capital by issuing equity, the interests of our existing stockholders will be adequate to permit us to meet our obligations over the next twelve months. However, we cannot assure you that our cash provided by operating activities, cash and cash equivalents or cash available under our ABL Facility, will be sufficient to meet our future needs.diluted. If we incur additional indebtedness, that indebtedness may contain significant financial and other covenants that may significantly restrict our operations. Availability of financing and the associated terms are unableinherently dependent on the debt and equity capital markets and subject to generate sufficient cash flows from operations in the future, and if availability under our ABL Facility is not sufficient, we may have to obtain additional financing.
As of December 31, 2019, we had approximately $1.6 billion of total nominal indebtedness outstanding. A substantial portion of our liquidity needs arise from debt service on our indebtedness and from the funding of our costs of operations and capital expenditures.
We may fromchange. From time to time, we may also seek to retirestreamline our capital structure and improve our financial position through refinancing or restructuring our existing debt or retiring certain of our securities for cash or other considerationconsideration.
In anticipation of the Merger, on June 15, 2020, we completed a private offering of $650.0 million in open market purchases, privately-negotiatedaggregate principal amount of the 2025 Secured Notes. The proceeds from the 2025 Secured Notes of $650.0 million were used to consummate the Merger and the related financing transactions, exchange offers or otherwise. Additionally,which included repayment of the 2022 Secured Notes, repayment of the Mobile Mini senior notes, and payment of certain fees and expenses related to the Merger and the related financing transactions. The 2025 Secured Notes mature on June 15, 2025 and bear interest at a rate of 6.125% per annum. Interest is payable semi-annually on June 15 and December 15 of each year, beginning December 15, 2020. During 2021, we may pursue additional strategic acquisitions. Any such transactions will depend on prevailing market conditions, our liquidity requirements, contractual restrictionsredeemed $123.5 million of the 2025 Secured Notes. This repayment was funded by internally generated cash flow and other factors.lower cost borrowings under the 2020 ABL facility.
Borrowing CapacityOn July 1, 2020, in connection with the completion of the Merger, we entered into the 2020 ABL Facility, which provides for revolving credit facilities in the aggregate principal amount of up to $2.4 billion, consisting of: (i) a senior secured asset-based US dollar revolving credit facility in the aggregate principal amount of $2.0 billion (the “US Facility”) and Availability
(ii) a $400 million senior secured asset-based multicurrency revolving credit facility (the "Multicurrency Facility," and together with the US Facility, the “2020 ABL Facility”). Borrowing availability under the 2020 ABL Facility is equal to the lesser of $1.425$2.4 billion and the applicable borrowing bases (the “Line Cap”).bases. The borrowing bases are a function of, among other things, the value of the assets in the relevant collateral pool. pool of which our rental equipment represents the largest component. On July 1, 2020, in connection with the completion of the Merger, approximately $1.47 billion of proceeds from the 2020 ABL Facility were used to repay the 2017 ABL Facility, repay Mobile Mini's asset-backed lending facility, and pay fees and expenses related to the Merger and the related financing transactions. On August 11, 2020, we redeemed $49.0 million of our 2023 Secured Notes at a redemption price of 103.0% plus accrued and unpaid interest using proceeds from the 2020 ABL Facility. At December 31, 2019, the Line Cap was $1.425 billion and2021, we had $509.1 million$0.7 billion of available borrowing capacity under the 2020 ABL Facility.
See Note 12On August 25, 2020, we completed a private offering of $500.0 million in Part II, Item 8, herein for further discussionaggregate principal amount of WillScot's indebtedness.the 2028 Secured Notes. Proceeds from the 2028 Secured notes were used to repay the $441.0 million remaining outstanding principal of the 2023 Secured Notes at a redemption price of 103.438% plus accrued and unpaid interest. The 2028 Secured Notes mature on August 15, 2028 and bear interest at a rate of 4.625% per annum. Interest is payable semi-annually on August 15 and February 15 of each year, beginning February 25, 2021.
Cash Flows
Significant factors driving our liquidity include cash flows generated from operating activities and capital expenditures for rental equipment. With the exception of 2017 when we incurred significant discrete costs relatedexpenditures. Our ability to the Business Combination, we historically have generated and expect to continuefund our capital needs will be affected by our ongoing ability to generate positive cash flow from operations.
Prioroperations and access to the Business Combination in the fourth quarter of 2017, WSII was subject to a centralized cash management strategy utilized by the Algeco Group. As part of this strategy, significant intercompany notes due to and from Algeco Group affiliates were created to fund the operating needs of certain Algeco Group affiliates as well as to fund the debt obligations of the Algeco Group. The impacts of these notes are included within investing and financing activities in our 2017 consolidated statements of cash flows. Additionally, prior to the Business Combination, the activity of the Remote Accommodations Business, which is no longer part of the Company, is included within the 2017 consolidated statements of cash flows. The significant non-cash activity of the Remote Accommodations Business is discussed further in Note 3 to the consolidated financial statements.capital markets.
The following summarizes our change in cash and cash equivalents cash flows for the periods presented:
| | | Year Ended December 31, | | | Year Ended December 31, |
| (in thousands) | (in thousands) | 2019 | | | 2018 | | | 2017 | | (in thousands) | 2021 | | 2020 | | 2019 |
| Net cash from operating activities | Net cash from operating activities | $ | 172,566 | | | $ | 37,149 | | | $ | (1,362) | | Net cash from operating activities | $ | 539,902 | | | $ | 304,812 | | | $ | 172,566 | |
| Net cash from investing activities | Net cash from investing activities | (152,582) | | | (1,217,202) | | | (392,650) | | Net cash from investing activities | (384,047) | | | (125,360) | | | (152,582) | |
| Net cash from financing activities | Net cash from financing activities | (26,063) | | | 1,180,037 | | | 396,833 | | Net cash from financing activities | (167,887) | | | (158,958) | | | (26,063) | |
| Effect of exchange rate changes on cash and cash equivalents | Effect of exchange rate changes on cash and cash equivalents | 166 | | | (211) | | | 202 | | Effect of exchange rate changes on cash and cash equivalents | (206) | | | 1,398 | | | 166 | |
| Net change in cash and cash equivalents | Net change in cash and cash equivalents | $ | (5,913) | | | $ | (227) | | | $ | 3,023 | | Net change in cash and cash equivalents | $ | (12,238) | | | $ | 21,892 | | | $ | (5,913) | |
Comparison of the Years Ended December 31, 20192021 and 20182020 and December 31, 20182020 and 20172019
Cash Flows from operating activities
Cash provided by operating activities for the year ended December 31, 20192021 was $172.6$539.9 million as compared to $37.1$304.8 million for the year ended December 31, 2018,2020, an increase of $135.5$235.1 million. ThisThe increase in cash provided by operating activities was primarily due to a $159.1driven by an increase of $252.1 million increase inof net income, adjusted for non-cash items, in 2019 as compared to 2018, as a result of the impact of the ModSpace acquisition on operations, which is reflected in our results for all of 2019, but is only included for four and a half months in 2018.items. This increase in net income, adjusted for non-cash items, was partially offset by a decrease of $23.7$17.2 million in the net movements of the operating assets and liabilities. The decrease in operating assets and liabilities, which was primarily attributable to an increase in trade receivables and an increasecash used from accounts receivable of $78.4 million compared to the same period in cash interest payments during the year ended December 31, 2019, partially offset by2020, an increase in accounts payable and other accrued liabilities.liabilities of $43.3 million, an increase in accrued interest of $12.1 million, and an increase of $10.2 million in deferred revenue compared to the same period in 2020.
Cash provided by operating activities for the year ended December 31, 20182020 was $37.1$304.8 million as compared to cash used in operating activities of $1.4$172.6 million for the year ended December 31, 2017,2019, an increase of $38.5$132.2 million. ThisThe increase in cash provided by operating activities was primarily due to a $30.1driven by an increase of $136.7 million increase of net income, adjusted for non-cash items, during 2018 as compared to 2017primarily due to the impact of the Acton, Tyson, and ModSpace acquisitionsMerger on revenuerevenues and gross profit. An $8.5This was partially offset by a decrease of $4.4 million increase in the net movements of the operating assets and liabilities also contributedwhich was primarily attributable to the overall increasea decrease in cash provided by operating activities. This increase was driven by lower interest payments in 2018 compared to 2017, offset partially by higher use of cash
to pay down accounts payable and other accrued liabilities both associated with transaction expenses incurred forof $20.9 million, an increase in prepaid and other assets of $12.7 million, and a decrease in accrued interest of $7.7 million, compared to the Business Combination as well as normal operating liabilities.same period in 2019. This was partially offset by a decrease in cash used from accounts receivable of $36.9 million compared to the same period in 2019.
Cash flows from investing activities
Cash used in investing activities for the year ended December 31, 20192021 was $152.6$384.0 million as compared to $1,217.2$125.4 million for the year ended December 31, 2018,2020, an increase of $258.6 million. The increase in cash used in investing activities was driven by a $164.3 million increase in cash used in acquisitions, net of cash acquired. During 2021, the Company acquired certain assets and liabilities of several smaller entities for $147.2 million in cash. During 2020, $17.2 million of cash was acquired as part of the Merger. The increase in cash used in investing activities was also driven by a $106.1 million increase in cash used for the purchase of rental equipment and refurbishments to support growing demand for new project deliveries across all segments, and a $14.0 million increase in cash used for the purchase of property, plant, and equipment. These increases were partially offset by a $9.5 million increase in proceeds from sale of property, plant and equipment and a $16.3 million increase in proceeds from the sale of rental equipment. Proceeds from sale of rental equipment increased compared to the prior year due to higher sales demand.
Cash used in investing activities for the year ended December 31, 2020 was $125.4 million as compared to $152.6 million for the year ended December 31, 2019, a decrease of $1,064.6$27.2 million. The decrease in cash used in investing activities was driven by a $1,083.1$32.7 million decrease in cash used for business acquisitions,purchase of rental equipment and refurbishments. Cash used for purchase of rental equipment and refurbishments decreased compared to 2019 as fleet was less constrained due to reduced utilization and reduced demand for new project deliveries as a result of the COVID-19 pandemic and the current period impact of prior year spend. Additionally, $17.2 million of cash was acquired as part of the Merger. This increase was partially offset by an $11.3$11.4 million decrease in proceeds from sale of property, plant and equipment, an increase of $8.2 million on purchases of property, plant and equipment and a $3.2 million decrease in proceeds from the sale of rental equipment, and an $18.1 million increase in proceeds from the sale of property, plant, and equipment. The decrease in cash used in business acquisitions was due to the acquisition of ModSpace during the year ended December 31, 2018, with no business acquisitions during the year ended December 31, 2019. Proceeds from the sale of rental equipment increased due to increased sales volume as a result of the acquisition of ModSpace. Proceeds from the sale of property, plant and equipment increased primarily as a result of the sale of non-operating branch locations during the year ended December 31, 2019, as part of the ongoing integration and consolidation process following the acquisition of ModSpace. The overall decrease in cash used in investing activities for the year ended December 31, 2019 was partially offset by an increase in capital expenditures of $44.2 million in 2019, which was primarily driven by increased refurbishments of existing fleet, following our recent acquisitions, and purchases of VAPS to drive revenue growth.
Cash used in investing activities for the year ended December 31, 2018 was $1,217.2 million as compared to $392.7 million for the year ended December 31, 2017, an increase of $824.5 million. This increase was principally the result of an increase in cash used of $846.0 million for the acquisition of businesses and an increase in cash used of $49.2 million for the purchase of rental equipment. In 2018, we acquired ModSpace and Tyson for combined cash consideration of $1,083.1 milliondecreased compared to the acquisition of Acton in 2017 for cash consideration of $237.1 million. We incurred capital expenditures for the purchase of rental equipment of $160.9 million and $111.7 million during the years ended December 31, 2018 and 2017, respectively. The increase in capital expenditures was driven primarily by strategic investment in refurbishment of existing fleet, purchase of VAPS, and new fleet purchasesprior year due to maintain and grow units on rent. The increase in cash used in investing activities was partially offset by a $67.8 million decrease in cash used in lending activities to affiliates. In 2018, we did not engage in any lending activities as the notes due from affiliates were settled as part of the Business Combination in 2017.lower sales demand.
Cash flows from financing activities
Cash used in financing activities for the year ended December 31, 20192021 was $26.1$167.9 million as compared to $1,180.0$159.0 million for the year ended December 31, 2020, an increase of $8.9 million cash used. The increase in cash used in financing activities was driven by an increase of $341.8 million in repurchases of common stock and warrants as well as a $2,058.1 million decrease in receipts from borrowings. This was partially offset by a decrease of $2,296.2 million in repayment of borrowings, a decrease of $65.5 million in payment of financing costs, and a decrease of $30.9 million in payment of debt extinguishment premium costs.
Cash used in financing activities for the year ended December 31, 2020 was $159.0 million as compared to $26.1 million cash provided by financing activities for the year ended December 31, 2018,2019, an increase of $1,206.1$132.9 million cash used. The increase in cash used byin financing activities is primarily due towas driven by an increase of $62.9 million for payment of financing costs, an increase of $27.4 million for payment of debt extinguishment costs, payment of $21.8 million for the repurchase and cancellation of warrants, payment of $4.2 million for Common Stock issuance costs, an increase of $12.8 million of taxes paid on employee stock awards, and an increase of $8.4 million of principal payments on finance lease obligations. Additionally, there was a reductionnet increase of $5.1 million of payments on borrowings, comprised of an increase in borrowings, net of repayments of $1,086.0borrowings of $2,239.7 million a decreasethat was partially offset by an increase receipts from borrowings of $2,234.6 million. The cash used in financing activities was partially offset by an increase in receipts from the issuance of common stock of $146.3 million primarily related to the financing of the ModSpace acquisition and an increase in debt extinguishment costs of $7.1 million. In connection with the ModSpace acquisition, in 2018 we borrowed an aggregate of $1,097.1 million related to the issuance of the 2023 Secured Notes and the Unsecured Notes, and through the up-sized ABL Facility. The 2018 stock issuance was used to finance the acquisition of ModSpace. We paid redemption premium costs of $7.1 million in 2019 as a result of the redemption of the Unsecured Notes and the $30.0 million prepayment on the 2022 Secured Notes. The decrease in cash provided by financing activities was partially offset by a decrease in financing fees payments of $34.0 million due to the significant fees incurred in 2018 as part of the financing activities noted above in connected with the acquisition of ModSpace.
Cash provided by financing activities for the year ended December 31, 2018 was $1,180.0 million as compared to $396.8 million cash provided by financing activities for the year ended December 31, 2017, an increase of $783.2 million. The increase is primarily driven by a $1,093.2 million increase in borrowings net of repayments and a $123.9 million decrease in net repayments on notes due to affiliates. In order to finance the cash consideration for the acquisition of ModSpace in the third quarter of 2018, we issued $300.0 million of 2023 Secured Notes, issued $200.0 million of Unsecured Notes, and borrowed an additional $597.1 million on the up-sized ABL Facility, which drove the overall increase in borrowings, net of repayments. In 2017, in connection with the Business Combination, the obligations under the notes due to affiliates were settled and there was no activity related to these notes in 2018. The increase in cash provided by financing activities was partially offset by a $424.6 million decrease in cash receiptsCommon Stock from the issuanceexercise of common stock. We had cash receiptsoptions and warrants of $147.2 million and $571.8 million from the issuance of common stock during the years ended December 31, 2018 and 2017, respectively. The 2018 stock issuance was used to finance the acquisition of ModSpace and the 2017 stock issuance was made in connection with the Business Combination.
Contractual ObligationsMaterial cash requirements
The Company’s material cash requirements include the following table presents information relatingcontractual and other obligations:
Debt
The Company has outstanding debt related to our contractual obligations and commercial commitments as of December 31, 2019:
| | | | | | | | | | | | | | | | | |
| (in thousands) | Total | Less than 1 year | Between 1 to 3 Years | Between 3 and 5 years | More than 5 years |
Long-term indebtedness, including current portion and interest(a)(b) | $ | 1,965,362 | | $ | 103,505 | | $ | 1,350,802 | | $ | 511,055 | | $ | — | |
| Operating lease liabilities | 185,847 | | 37,648 | | 61,672 | | 38,611 | | 47,916 | |
| Total | $ | 2,151,209 | | $ | 141,153 | | $ | 1,412,474 | | $ | 549,666 | | $ | 47,916 | |
(a) Long-term indebtedness includes borrowings and interest under theits 2020 ABL Facility, 2025 Secured Notes, 2028 Secured Notes, and the Senior Secured Notes.
(b) Includes the obligations under ourfinance leases, including interest, rate swap agreement that effectively convert $400.0 million in aggregate notional amount of variable-rate debt under the Company’s ABL Facility into fixed-rate debt. The future obligations under the interest rate swaps was calculated using the 1-month LIBOR ratetotaling $3.2 billion as of December 31, 2019.2021, $21.8 million of which is obligated to be repaid within the next twelve months. Refer to Note 9 for further information regarding outstanding debt.
At Operating leases
The Company has commitments for future minimum rental payments relating to operating leases, which are primarily for equipment and office space. As of December 31, 2019, in2021, the Company had lease obligations of $290.3 million, with $63.7 million payable within the next twelve months.
In addition to the above contractual obligations,aforementioned cash requirements, the Company had $22.6 millionCompany has a Share Repurchase program authorized by the Board of potential long-term tax liabilities, including interestDirectors in October 2021 which allows the Company to repurchase up to $1.0 billion of outstanding shares of Common Stock and penalties, relatedequivalents. This program does not obligate the Company to uncertain tax positions. Becauserepurchase any specific amount of the high degree of uncertainty regarding the future shares.
The company believes its cash, cash flows associated with these potential long-term tax liabilities,generated from ongoing operations, and continued access to its revolving credit facility as well access to debt markets are sufficient to satisfy its currently anticipated cash requirements for the Company is unable to estimate the years in which settlement will occur with the respective taxing authorities.
Off-Balance Sheet Arrangements
We have no off-balance sheet arrangements that have or are reasonably likely to have a current or future material effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources.foreseeable future.
Critical Accounting Policies and Estimates
Our discussion and analysis of our financial condition, results of operations, liquidity and capital resources is based on our consolidated financial statements, which have been prepared in accordance with GAAP. GAAP requires that we make estimates and judgments that affect the reported amount of assets, liabilities, revenue, expenses and the related disclosure of contingent assets and liabilities. We base these estimates on historical experience and on various other assumptions that we consider reasonable under the circumstances and reevaluate our estimates and judgments as appropriate. The actual results experienced by us may differ materially and adversely from our estimates. We believe that the following critical accounting policies involve a higher degree of judgment or complexity in the preparation of financial statements:
Revenue Recognition
A performance obligation is a promise in a contract to transfer a distinct good or service to the customer. A contract’s transaction price is allocated to each distinct performance obligation and recognized as revenue when, or as, the performance obligation is satisfied.
Modular Leasing and Services Revenue
The majority of revenue is generated by rental income subject to the guidance of Accounting Standard Update ("ASU") 2016-2, Leases (Topic 842) ("ASC 840, Leases ("ASC 840"842") in 2017 and 2018 and ASC 842 in 2019.. The remaining revenue is generated by performance obligations in contracts with customers for services or sale of units subject to the guidance in ASC 605, Revenue ("ASC 605"), in 2017 and 2018 and ASU 2014-09, Revenue from Contracts with Customers (Topic 606) ("ASC 606") in 2019..
Leasing Revenue
Income from operating leases is recognized on a straight-line basis over the lease term. The Company's lease arrangements typicallycan include multiple lease and non-lease components. Examples of lease components include, but are not limited to, the lease of modular space, or portable storage units and examplesVAPS. Examples of non-lease components include, but are not limited to, the delivery, installation, maintenance, and removal services commonly provided in a bundled transaction with the lease components. Arrangement consideration is allocated between lease deliverables and non-lease components based on the relative estimated selling (leasing) price of each deliverable. Estimated selling (leasing) price of the lease deliverables is based upon the estimated stand-alone selling price of the related performance obligations using an adjusted market approach.
When leases and services are billed in advance, recognition of revenue is deferred until services are rendered. If equipment is returned prior to the contractually obligated period, the excess, if any, between the amount the customer is contractually required to pay over the cumulative amount of revenue recognized to date is recognized as incremental revenue upon return.
Rental equipment is leased primarily under operating leases and, from time to time, under sales-type lease arrangements.leases. Operating lease minimum contractual terms within the NA Modular segment generally range from 1 month to 60 months and averaged approximately 1210 months across the Company'sthis segment's rental fleet for the year ended December 31, 2019. There were no material sales-type lease arrangements as of December 31, 2019.
2021.Rental contracts with customers within the NA Storage, UK Storage, and Tank & Pump segments are generally based on a 28-day rate and billing cycle. The adoption of ASC 842 at January 1, 2019, did not have a significant impact onrental continues until cancelled by the recognition of leasing revenue. PerCompany or the requirements of ASC 842 thecustomer. The Company records changes in estimated collectibility,collectability directly against leasing revenue.
The Company may use third parties to satisfy its performance obligations, including both the provision of VAPS and other services. To determine whether it is the principal or agent in the arrangement, the Company reviews each third-party relationship on a contract-by-contract basis. The Company is considered an agent when its role is to arrange for another entity to provide the VAPS and other services to the customer. In these instances, the Company does not control the rental unit or service before it is provided and the risk of performance is held by the third party. The Company is considered the principal when it controls the VAPS or other services prior to transferring control to the customer and retains the risk of performance. WillScot Mobile Mini may be a principal in the fulfillment of some leasing contracts and services elements and an agent for
other elements within the same contract. Revenue is recognized on a gross basis when the Company is the principal in the arrangement and on a net basis when it is the agent.
Services Revenue
The Company generally has three non-lease service-related performance obligations in its contracts with customers:
•Delivery and installation of the modular or portable storage unit;
•Maintenance and other ad hoc services performed during the lease term; and
•Removal services that occur at the end of the lease term.
Consideration is allocated to each of these performance obligations within the contract based upon their estimated relative standalone selling prices using the estimated cost plus a margin approach. Revenue from these activities is recognized as the services are performed.
Sales Revenue
Sales revenue is generated by the sale of new and rental units. Revenue from the sale of new and rental units is generally recognized at a point in time upon the transfer of control to the customer, which occurs when the unit is delivered and installed in accordance with the contract. Sales transactions constitute a single performance obligation.
Other Matters
The Company's non-lease revenues do not include material amounts of variable consideration, other than the variability noted for services arrangements expected to be performed beyond a twelve monthtwelve-month period.
The Company's payment terms vary by the type and location of its customer and the product or services offered. The time between invoicing and when payment is due is not significant. While the Company may bill certain customers in advance, its contracts do not contain a significant financing component based on the short length of time between upfront billings and the performance of contracted services. For certain products, services, or customer types, the Company requires payment before the products or services are delivered to the customer.
Revenue is recognized net of taxes collected fromsales tax billed to customers, which areis subsequently remitted to governmental authorities.
Goodwill and Annual Goodwill Impairment Test
For acquired businesses, the Company records assets acquired and liabilities assumed at their estimated fair values on the respective acquisition dates. Based on these values, the excess purchase price over the fair value of the net assets acquired is recorded as goodwill. Generally, reporting units are at the operating segment level or one level below the operating segment (the component level), if discrete financial information is prepared and regularly reviewed by segment management. Goodwill acquired in a business combination is assigned to each of the Company’s reporting units that are expected to benefit from the combination.
The Company performs its annual impairment test of goodwill as of October 1 at the reporting unit level, as well as during any reporting period in which events or changes in circumstances occur that, in management’s judgment, may constitute triggering events under ASC 350-20,Intangibles – Goodwill and Other, Testing Goodwill for Impairment. The Company performs its assessment of goodwill utilizing either a qualitative or quantitative impairment test. The qualitative impairment test assesses company-specific, industry, market and general economic factors to determine whether it is more likely than not that the fair value of the reporting unit is less than its carrying amount. If the Company concludes that it is more likely than not that the fair value of the reporting unit is less than its carrying amount, or elects not to use the qualitative impairment test, a quantitative impairment test is performed. The quantitative impairment test involves a comparison of the estimated fair value of a reporting unit to its carrying amount. The Company uses an independent valuation specialist for its annualquantitative impairment tests to assist in the valuation.
Determining the fair value of a reporting unit is judgmental in nature and involves the use of significant estimates and assumptions. These estimates and assumptions include revenue growth rates and operating margins used to calculate projected future cash flows, risk-adjusted discount rates, value of net operating losses, future economic and market conditions and determination of appropriate market comparables. Management bases fair value estimates on assumptions it believes to be reasonable but that are unpredictable and inherently uncertain. Actual future results may differ from these estimates.estimates and the estimate is inherently sensitive to any material changes to the inputs noted above; these changes could potentially impact the fair value of reporting units.
If the carrying amount of the reporting unit exceeds the calculated fair value of the reporting unit, an impairment charge would be recognized for the excess, not to exceed the amount of goodwill allocated to that reporting unit.
Purchase AccountingIntangible Assets Other than Goodwill
We accountIntangible assets that are acquired by the Company and determined to have an indefinite useful life are not amortized but are tested for acquisitionsimpairment at least annually. The Company’s indefinite-lived intangible assets consist of businesses under the acquisition method. UnderWilliams Scotsman and Mobile Mini trade names. The Company performs its assessment of indefinite-lived intangible assets utilizing either a qualitative or quantitative impairment test. When utilizing a quantitative impairment test, the acquisition method of accounting, we record assets acquired and liabilities assumed at their estimatedCompany calculates fair value onusing a relief-from-royalty method. This method is used to estimate the datecost savings that accrue to the owner of acquisition. Goodwill is measured as the excess of the fair value of the consideration transferred over the fair value of the identifiable net assets. Estimated fair values of acquired assets and liabilities are provisional and could change as additional information is received. Valuations are finalized as soon as practicable, but not later than one year from the acquisition date. Any subsequent changes to purchase price allocations result in a corresponding adjustment to goodwill.
intangible asset who would otherwise have to pay royalties or license fees on revenues earned through the use of the asset. If the carrying amount of the indefinite-lived intangible asset exceeds its fair value, an impairment charge would be recorded to the extent the recorded indefinite-lived intangible asset exceeds the fair value. The relief-from-royalty method requires the Company to make assumptions regarding future revenue and the appropriate selection of royalty and discount rates. Any material deviation in actual results could affect the calculated fair value of the intangible asset.
Other intangible assets that have finite useful lives are measured at cost less accumulated amortization and impairment losses, if any. Amortization is recognized in profit or loss over the estimated useful lives of the intangible asset.
Rental Equipment
Rental equipment is comprised of modular space and portable storage units held for rent or on rent to customers, tank and VAPSpump solutions products, which consist primarily of liquid and solid containment units, pumps and filtration equipment, and value-added products and services (“VAPS”) which are in use or available to be used by customers. Rental equipment is measured at cost less accumulated depreciation and impairment losses. Cost includes expenditures that are directly attributable to the acquisition of the asset. Costs of improvements and betterments toconversions of rental equipment are capitalized when such costs extend the useful life of the equipment or increase the rental value of the unit. Costs incurred for equipment to meet a particular customer specification are capitalized and depreciated over the lease term taking in consideration the residual value of the asset. Maintenance and repair costs are expensed as incurred.
Depreciation is generally computed using the straight-line method over estimated useful lives, as follows:
| | | | | | | | | | | |
| Estimated Useful Life | | Residual Value |
Modular space and portableunits | 10 - 30 years | | 20 - 55% |
| Portable storage units | 30 years | | 55% |
10 – 20 yearsTank and pump equipment | 7 - 25 years | 20 – 50% | —% |
| VAPS and other related rental equipment | 2 –1 - 8 years | | | 0% | —% |
Trade Receivables and Allowance for Doubtful AccountsCredit Losses
Trade receivables primarily consist. The Company is exposed to credit losses from trade receivables. The Company assesses each customer’s ability to pay for the products it leases or sells by conducting a credit review. The credit review considers expected billing exposure and timing for payment and the customer’s established credit rating. The Company performs its credit review of amountsnew customers at inception of the customer relationship and for existing customers when the customer transacts after a defined period of dormancy. The Company also considers contract terms and conditions, country risk and business strategy in the evaluation.
The Company monitors ongoing credit exposure through an active review of customer balances against contract terms and due from customers fromdates. The Company may employ collection agencies and legal counsel to pursue recovery of defaulted receivables. The allowances for credit losses reflect the lease or saleestimate of rental equipment and their delivery and installation. Trade accounts receivable are recorded net of an allowance for doubtful accounts. The allowance for doubtful accounts is based upon the amount of losses expectedreceivables that the Company will be unable to be incurredcollect based on historical write-off experience and, as applicable, current conditions and reasonable and supportable forecasts that affect collectability. This estimate is sensitive to changing circumstances, including changes in the collectioneconomy or in the particular circumstances of these accounts. These estimated losses are calculated usingindividual customers. Accordingly, the loss rate method based upon a review of outstanding receivables, related aging, including specific accounts if deemed necessary and on historical collection experience. Company may be required to increase or decrease its allowances.
In accordance with the adoption of ASC 842, effective January 1, 2019, and the adoption of ASU 2016-13, Financial Instruments - Credit Losses (Topic 326) ("ASC 326"), effective January 1, 2020, specifically identifiable operating lease revenue receivables and sales receivables not deemed probable of collection are recorded as a reduction of revenue. The remaining provision for doubtful accountscredit losses is recorded as selling, general and administrative expenses. For the years ended December 31, 2018 and 2017, the entire provision for doubtful accounts is recorded as a selling, general and administrative expense.
Warrants
The Company reviewsaccounts for warrants in accordance with applicable accounting guidance provided in ASC 815-40, Contracts in Entity's Own Equity, as either derivative liabilities or as equity instruments depending on the adequacyspecific terms of the allowancewarrant agreements. In periods subsequent to issuance, warrants classified as liabilities are subject to remeasurement at each balance sheet date and transaction date with changes in the estimated fair values of the common stock warrant liabilities and gains and losses on a quarterly basis.extinguishment of common stock warrant liabilities reported in the consolidated statements of operations.
Income Taxes
The Company accounts for income taxes under the asset and liability method, which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements. Under this method, deferred tax assets and liabilities are determined based on the differences between the financial statement and tax basis of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse. The effect of a change in tax rates on deferred tax assets and liabilities is recognized in income in the period that includes the enactment date.
The Company records deferred tax assets to the extent it believes that it is more likely than not that these assets will be realized. In making such determination, the Company considers all available positive and negative evidence, including
scheduled reversals of deferred tax liabilities, projected future taxable income, tax planning strategies and recent results of operations. Valuation allowances are recorded to reduce the deferred tax assets to an amount that will more likely than not be realized.
The Company assesses the likelihood that each of the deferred tax assets will be realized. To the extent management believesconcludes the realization of any deferred tax assets is not more likely than not, the Company establishes a valuation allowance. When a valuation allowance is established or there is an increase in an allowance in a reporting period, tax expense is generally recorded in the Company’s consolidated statement of operations. Conversely, to the extent circumstances indicate that a valuation allowance is no longer necessary, that portion of the valuation allowance is reversed, which generally reduces the Company’s income tax expense.
Deferred tax liabilities are recognized for the income taxes on the undistributed earnings of wholly-owned foreign subsidiaries unless such earnings are permanentlyindefinitely reinvested, or will only be repatriated when possible to do so at minimal additional tax cost. Current income tax relating to items recognized directly in equity is recognized in equity and not in profit (loss) for the year.
In accordance with applicable authoritative guidance, the Company accounts for uncertain income tax positions using a benefit recognition model with a two-step approach; a more-likely-than-not recognition criterion; and a measurement approach that measures the position as the largest amount of tax benefit that is greater than 50% likely of being realized upon ultimate settlement. If it is not more-likely-than-not that the benefit of the tax position will be sustained on its technical merits, no benefit is recorded. Uncertain tax positions that relate only to timing of when an item is included on a tax return are considered to have met the recognition threshold. The Company classifies interest on tax deficiencies and income tax penalties within income tax expense.The evaluation of uncertain tax positions involves judgment in the application of GAAP and complex tax laws.
ITEM 7A. Quantitative and Qualitative Disclosures about Market Risk
We are exposed to certain market risks from changes in foreign currency exchange rates and interest rates. Changes in these factors cause fluctuations in our earnings and cash flows. We evaluate and manage exposure to these market risks as follows:
Interest Rate Risk
We are primarily exposed to interest rate risk through our ABL Facility. As amended by the LIBOR Transition Amendment, borrowings under our ABL Facility which bearsbear interest at variable rates based on LIBOR.(i) the US Prime Rate or the Federal Funds Rate for borrowings denominated in USD, (ii) the Canadian Dollar Bankers' Acceptances average rate or the rate of interest publicly announced by the Bank of America (Canada) as its base rate or the Federal Funds Rate for borrowings denominated in Canadian dollars, (iii) SONIA for borrowings denominated in British Pounds Sterling and (iv) EURIBOR for borrowings denominated in Euros. See “Risk Factors— The uncertainty regarding the potential phase-out of LIBOR may negatively impact our operating results." We had $903.0 million$1.6 billion in outstanding principal under the ABL Facility at December 31, 2019.2021.
In order to manage this risk, on November 6, 2018, WSII entered intowe maintain an interest rate swap agreement that effectively converts $400.0 million in aggregate notional amount of variable-rate debt under our ABL Facility into fixed-rate debt. The swap agreement will terminate on May 29, 2022, at the same time our ABL Facility matures. The swap agreement provides for WillScotus to pay a fixed rate of 3.06% per annum on the outstanding debt in exchange for receiving a variable interest rate based on 1-month LIBOR. The effect is a syntheticsynthetically fixed rate of 5.56%-5.81% 4.94% on the $400.0 million notional amount, when including the current applicable margin.
An increase in interestinterest rates by 100 basis pointspoints on our ABL Facility, inclusive of the impact of our interest rate swaps, would increase annual interest expense by approximately $4.1 million.$9.5 million based on current outstanding borrowings.
Foreign Currency Risk
We currently generate the majority of our consolidated net revenues in the US, and the reporting currency for our consolidated financial statements is the US dollar. However, we are exposed to currency risk through our operations in Canada, Mexico, and the UK. For the operations outside the US we bill customers primarily in their local currency, which is subject to foreign currency rate changes. As our net revenues and expenses generated outside of the US increase, our results of operations could be adversely impacted by changes in foreign currency exchange rates. Since we recognize foreign revenues in local foreign currencies, if the US dollar strengthens, it could have a negative impact on our foreign revenues upon translation of those results into the US dollar for consolidation into our financial statements.
In addition, we are exposed to gains and losses resulting from fluctuations in foreign currency exchange rates on transactions generated by our foreign subsidiaries in currencies other than their local currencies. These gains and losses are primarily driven by intercompany transactions and rental equipment purchases denominated in currencies other than the functional currency of the purchasing entity. These exposures are included in currency (gains) losses, net, on the consolidated statements of operations.
To date, we have not entered into any hedging arrangements with respect to foreign currency risk.
Seasonality
Although demand from certain of our customers is seasonal, our operations as a whole are not impacted in any material respect by seasonality.
Impact of Inflation
Inflationary factors such as increases in the cost of our product and overhead costs may adversely affect our operating results.results if we are unsuccessful in passing such inflationary increases on to our customers in the form of higher prices. We do not believe that inflation has had a material effect on our results of operations.
Item 8. Financial Statements and Supplementary
Data
Report of Independent Registered Public Accounting Firm
To the Shareholders and the Board of Directors of WillScot CorporationMobile Mini Holdings Corp.
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of WillScot CorporationMobile Mini Holdings Corp. (the Company) as of December 31, 20192021 and 2018,2020, the related consolidated statements of operations, comprehensive loss,income (loss), changes in equity and cash flows for each of the three years in the period ended December 31, 2019,2021, and the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 20192021 and 2018,2020, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2019,2021, in conformity with U.S. generally accepted accounting principles.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control over financial reporting as of December 31, 2019,2021, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) and our report dated March 2, 2020February 25, 2021 expressed an unqualified opinion thereon.
Adoption of New Accounting Standard
As discussed in Note 1 to the consolidated financial statements, the Company changed its method of accounting for leases in 2019.
Basis for Opinion
These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a testtest basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit MattersMatter
The critical audit mattersmatter communicated below are mattersis a matter arising from the current period audit of the financial statements that werewas communicated or required to be communicated to the audit committee and that: (1) relaterelates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective or complex judgments. The communication of the critical audit mattersmatter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit mattersmatter below, providing a separate opinionsopinion on the critical audit mattersmatter or on the accounts or disclosures to which they relate.
| | | | | | | | |
| | Valuation of Canadian Reporting Unit Goodwill |
Description of the Matter | | At December 31, 2019, the Company’s goodwill balance was $235.2 million, including $31.2 million related to the Canadian reporting unit. As discussed in Note 1 to the consolidated financial statements, goodwill is quantitatively tested for impairment at least annually as of October 1. When determining the fair value of the reporting units under the impairment test, management uses the assistance of an independent valuation specialist.
Auditing management’s annual goodwill impairment test for the Canadian reporting unit was highly judgmental due to the significant estimation required in determining the fair value of the reporting unit. In particular, management’s conclusion that the fair value of the reporting unit exceeded its carry value was sensitive to changes in significant assumptions, such as the discount rate, revenue growth rates, and forecasted operating margins, which are affected by expectations about future economic and market conditions. |
| | |
How We Addressed the Matter in Our Audit | | We obtained an understanding, evaluated the design and tested the operating effectiveness of controls over the Company’s goodwill impairment review process, including controls over management’s review of the significant assumptions described above.
To test the estimated fair value of the Company’s Canadian reporting unit, we performed audit procedures with the assistance of our valuation specialists that included, among others, assessing the fair value methodology and testing the significant assumptions discussed above and the completeness and accuracy of the underlying data used by the Company in its analyses. We compared the significant assumptions used by management to current industry and economic trends and considered changes in the Company’s business model and the markets in which they operate. We independently determined assumptions for the discount rate and compared these to the rate selected by management. We also compared the implied market multiples from management’s income approach to guideline public company multiples. We assessed the historical accuracy of management’s ability to estimate its future operating results and performed sensitivity analyses of significant assumptions to evaluate whether changes in the fair value of the reporting unit would result from changes in the assumptions and affect management’s conclusions about whether goodwill was impaired.
In addition, we reviewed the reconciliation of the aggregate fair value of the reporting units to the market capitalization of the Company as of the annual impairment date of October 1, 2019. |
| | | | | | | | |
| | Valuation Allowance for Deferred Tax AssetsCredit Losses |
| Description of the Matter | | As discusseddescribed in Note 141 to the consolidated financial statements, atthe Company maintains an allowance for credit losses on trade receivables. At December 31, 20192021 the Company had deferred tax assetsallowance for credit losses was $47.7 million, or 10.6% of gross trade receivables. The allowance for credit losses is estimated based on deductible temporary differenceshistorical write-off experience and, tax loss carryforwards of $366.1 million (net of a $80.2 million valuation allowance). Deferred tax assets are reduced by a valuation allowance if, based uponas applicable, current conditions and reasonable and supportable forecasts that affect collectability. Auditing the weight of all available evidence, it is more likely than not that some portion, or all,Company's estimation of the deferred tax assets will not be realized. Auditing management’s assessmentallowance for credit losses was judgmental due to the subjectivity in assessing the appropriateness of the realizabilityassumptions made by management. The assumptions include an expectation that the Company’s collection of its deferred tax assets involved complex auditor judgment because of the complex interplay between financial accounting for income taxesreceivables will be consistent with historical write-off experience and the application and interpretations of relevant tax law. In particular, the application of the tax law regarding the ordering of the consumption of tax attributes is complex and includes consideration of current or forecasted conditions that may affect the chronology asCompany’s customers' ability to when such attributes arose, any limitations imposed on annual usage and uncertain tax positions.pay outstanding trade receivables.
|
| | |
| How We Addressed the Matter in Our Audit | | We obtained an understanding, evaluated the design, and tested the operating effectiveness of the Company's controls over its estimation of the allowance for credit losses, including internal controls over the Company’s deferred tax asset realizability and valuation allowance process. For example, we tested controls over management’s review ofprocess to develop the scheduling of future taxable income expectedassumptions used to be generated fromestimate credit losses. To test the reversal of existing taxable temporary differences and the evaluation that such reversals are more likely than not expected to result in the realization of existing deferred tax assets. We evaluated the changes in the Company’s valuation allowance for deferred tax assets. Ourcredit losses, we performed audit procedures that included, among others, testing management's process for developing the measurementallowance for credit losses, testing the completeness, accuracy, and relevance of the tax attributes,data used; and evaluating significant assumptions used by management, including assessing the schedulingCompany’s expectation that the collection of future taxable income expectedreceivables will be consistent with historical write-off experience. For example, we compared the days sales outstanding, customer concentration, and days past due as of December 31, 2021, to be generated from the reversal of existing taxable temporary differences. Our audit procedures also included evaluating, withCompany’s historical experience to evaluate the assistance of our income tax professionals, the appropriateness of utilizing such taxable income as a source of future taxable income to support the realizationrelevancy of the Company’s deferred tax assets based on applicable tax laws.historical data utilized to estimate the allowance for credit losses. We also performed a sensitivity analysis of the significant assumptions to evaluate the change in the allowance that would result from changes in assumptions.
|
| | |
/s/ Ernst & Young LLP
We have served as the Company’s auditor since 2017.2017
Baltimore, Maryland
March 2, 2020February 25, 2022
WillScot CorporationMobile Mini Holdings Corp.
Consolidated Balance Sheets
(in thousands, except share data)
| | | | | | | | | | | |
| December 31, | | |
| 2019 | | 2018 |
| Assets | | | |
| Cash and cash equivalents | $ | 3,045 | | | $ | 8,958 | |
| Trade receivables, net of allowances for doubtful accounts at December 31, 2019 and December 31, 2018 of $15,828 and $9,340, respectively | 247,596 | | | 206,502 | |
| Inventories | 15,387 | | | 16,218 | |
| Prepaid expenses and other current assets | 14,621 | | | 21,828 | |
| Assets held for sale | 11,939 | | | 2,841 | |
| Total current assets | 292,588 | | | 256,347 | |
| Rental equipment, net | 1,944,436 | | | 1,929,290 | |
| Property, plant and equipment, net | 147,689 | | | 183,750 | |
| Operating lease assets | 146,698 | | | — | |
| Goodwill | 235,177 | | | 247,017 | |
| Intangible assets, net | 126,625 | | | 131,801 | |
| Other non-current assets | 4,436 | | | 4,280 | |
| Total long-term assets | 2,605,061 | | | 2,496,138 | |
| Total assets | $ | 2,897,649 | | | $ | 2,752,485 | |
| Liabilities and equity | | | |
| Accounts payable | $ | 109,926 | | | $ | 90,353 | |
| Accrued liabilities | 82,355 | | | 84,696 | |
| Accrued interest | 16,020 | | | 20,237 | |
| Deferred revenue and customer deposits | 82,978 | | | 71,778 | |
| Operating lease liabilities - current | 29,133 | | | — | |
| Current portion of long-term debt | — | | | 1,959 | |
| Total current liabilities | 320,412 | | | 269,023 | |
| Long-term debt | 1,632,589 | | | 1,674,540 | |
| Deferred tax liabilities | 70,693 | | | 67,384 | |
| Deferred revenue and customer deposits | 12,342 | | | 7,723 | |
| Operating lease liabilities - non-current | 118,429 | | | — | |
| Other non-current liabilities | 34,229 | | | 31,618 | |
| Long-term liabilities | 1,868,282 | | | 1,781,265 | |
| Total liabilities | 2,188,694 | | | 2,050,288 | |
| Commitments and contingencies (see Note 19) | | | |
| Class A common stock: $0.0001 par, 400,000,000 shares authorized at December 31, 2019 and December 31, 2018; 108,818,854 and 108,508,997 shares issued and outstanding at December 31, 2019 and December 31, 2018, respectively | 11 | | | 11 | |
| Class B common stock: $0.0001 par, 100,000,000 shares authorized at December 31, 2019 and December 31, 2018; 8,024,419 shares issued and outstanding at December 31, 2019 and December 31, 2018 | 1 | | | 1 | |
| Additional paid-in-capital | 2,396,501 | | | 2,389,548 | |
| Accumulated other comprehensive loss | (62,775) | | | (68,026) | |
| Accumulated deficit | (1,689,373) | | | (1,683,319) | |
| Total shareholders' equity | 644,365 | | | 638,215 | |
| Non-controlling interest | 64,590 | | | 63,982 | |
| Total equity | 708,955 | | | 702,197 | |
| Total liabilities and equity | $ | 2,897,649 | | | $ | 2,752,485 | |
| | | | | | | | | | | |
| December 31, |
| 2021 | | 2020 |
| Assets | | | |
| Cash and cash equivalents | $ | 12,699 | | | $ | 24,937 | |
| Trade receivables, net of allowance for credit losses at December 31, 2021 and December 31, 2020 of $47,629 and $29,258, respectively | 399,887 | | | 330,942 | |
| Inventories | 32,739 | | | 23,731 | |
| Prepaid expenses and other current assets | 36,761 | | | 29,954 | |
| Assets held for sale | 954 | | | 12,004 | |
| Total current assets | 483,040 | | | 421,568 | |
| Rental equipment, net | 3,080,981 | | | 2,931,646 | |
| Property, plant and equipment, net | 312,178 | | | 303,650 | |
| Operating lease assets | 247,064 | | | 232,094 | |
| Goodwill | 1,178,806 | | | 1,171,219 | |
| Intangible assets, net | 460,678 | | | 495,947 | |
| Other non-current assets | 10,852 | | | 16,081 | |
| Total long-term assets | 5,290,559 | | | 5,150,637 | |
| Total assets | $ | 5,773,599 | | | $ | 5,572,205 | |
| Liabilities and equity | | | |
| Accounts payable | $ | 118,271 | | | $ | 106,926 | |
| Accrued expenses | 100,195 | | | 91,381 | |
| Accrued employee benefits | 68,414 | | | 50,291 | |
| Deferred revenue and customer deposits | 159,639 | | | 135,485 | |
| Operating lease liabilities - current | 53,005 | | | 48,063 | |
| Current portion of long-term debt | 18,121 | | | 16,521 | |
| Total current liabilities | 517,645 | | | 448,667 | |
| Long-term debt | 2,694,319 | | | 2,453,809 | |
| Deferred tax liabilities | 354,879 | | | 307,541 | |
| Operating lease liabilities - non-current | 194,256 | | | 183,761 | |
| Common stock warrant liabilities | — | | | 77,404 | |
| Other non-current liabilities | 15,737 | | | 37,150 | |
| Long-term liabilities | 3,259,191 | | | 3,059,665 | |
| Total liabilities | 3,776,836 | | | 3,508,332 | |
| Commitments and contingencies (see Note 17) | 0 | | 0 |
| Preferred Stock: $0.0001 par, 1,000,000 shares authorized and zero shares issued and outstanding at December 31, 2021 and 2020 | — | | | — | |
| Common Stock: $0.0001 par, 500,000,000 shares authorized and 223,939,527 and 229,038,158 shares issued and outstanding at December 31, 2021 and December 31, 2020, respectively | 22 | | | 23 | |
| Additional paid-in-capital | 3,616,902 | | | 3,852,291 | |
| Accumulated other comprehensive loss | (29,071) | | | (37,207) | |
| Accumulated deficit | (1,591,090) | | | (1,751,234) | |
| Total shareholders' equity | 1,996,763 | | | 2,063,873 | |
| Total liabilities and shareholders' equity | $ | 5,773,599 | | | $ | 5,572,205 | |
See the accompanying notes which are an integral part of these consolidated financial statements.
WillScot CorporationMobile Mini Holdings Corp.
Consolidated Statements of Operations
(in thousands, except share and per share data)
| | | | | | | | | | | | | | | | | |
| Years Ended December 31, | | | | |
| 2019 | | 2018 | | 2017 |
| Revenues: | | | | | |
| Leasing and services revenue: | | | | | |
| Modular leasing | $ | 744,185 | | | $ | 518,235 | | | $ | 297,821 | |
| Modular delivery and installation | 220,057 | | | 154,557 | | | 89,850 | |
| Sales revenue: | | | | | |
| New units | 59,085 | | | 53,603 | | | 36,371 | |
| Rental units | 40,338 | | | 25,017 | | | 21,900 | |
| Total revenues | 1,063,665 | | | 751,412 | | | 445,942 | |
| Costs: | | | | | |
| Costs of leasing and services: | | | | | |
| Modular leasing | 213,151 | | | 143,120 | | | 83,588 | |
| Modular delivery and installation | 194,107 | | | 143,950 | | | 85,477 | |
| Costs of sales: | | | | | |
| New units | 42,160 | | | 36,863 | | | 26,025 | |
| Rental units | 26,255 | | | 16,659 | | | 12,643 | |
| Depreciation of rental equipment | 174,679 | | | 121,436 | | | 72,639 | |
| Gross profit | 413,313 | | | 289,384 | | | 165,570 | |
| Expenses: | | | | | |
| Selling, general and administrative | 271,004 | | | 254,871 | | | 162,351 | |
| Other depreciation and amortization | 12,395 | | | 13,304 | | | 8,653 | |
| Impairment losses on goodwill | — | | | — | | | 60,743 | |
| Impairment losses on long-lived assets | 2,848 | | | 1,600 | | | — | |
| Lease impairment expense and other related charges | 8,674 | | | — | | | — | |
| Restructuring costs | 3,755 | | | 15,468 | | | 2,196 | |
| Currency (gains) losses, net | (688) | | | 2,454 | | | (12,878) | |
| Other (income) expense, net | (2,200) | | | (4,574) | | | 2,827 | |
| Operating income (loss) | 117,525 | | | 6,261 | | | (58,322) | |
| Interest expense | 122,504 | | | 98,433 | | | 119,308 | |
| Interest income | — | | | — | | | (12,232) | |
| Loss on extinguishment of debt | 8,755 | | | — | | | — | |
| Loss from continuing operations before income tax | (13,734) | | | (92,172) | | | (165,398) | |
| Income tax benefit | (2,191) | | | (38,600) | | | (936) | |
| Loss from continuing operations | (11,543) | | | (53,572) | | | (164,462) | |
| Income from discontinued operations, net of tax | — | | | — | | | 14,650 | |
| Net loss | (11,543) | | | (53,572) | | | (149,812) | |
| Net loss attributable to non-controlling interest, net of tax | (421) | | | (4,532) | | | (2,110) | |
| Net loss attributable to WillScot | (11,122) | | | (49,040) | | | (147,702) | |
| Non-cash deemed dividend related to warrant exchange | — | | | (2,135) | | | — | |
| Net loss attributable to WillScot common shareholders | $ | (11,122) | | | $ | (51,175) | | | $ | (147,702) | |
| (Loss) income per share attributable to WillScot common shareholders - basic and diluted | | | | | |
| Net loss per share attributable to WillScot common shareholders | $ | (0.10) | | | $ | (0.59) | | | $ | (8.21) | |
| Income per share attributable to discontinued operations | $ | 0.00 | | | $ | 0.00 | | | $ | 0.74 | |
| Net loss per share attributable to WillScot common shareholders | $ | (0.10) | | | | $ | (0.59) | | | | $ | (7.47) | |
| | | | | |
| Weighted average shares: basic & diluted | 108,683,820 | | 87,209,605 | | 19,760,189 |
| | | | | | | | | | | | | | | | | |
| Years Ended December 31, |
| 2021 | | 2020 | | 2019 |
| Revenues: | | | | | |
| Leasing and services revenue: | | | | | |
| Leasing | $ | 1,412,123 | | | $ | 1,001,447 | | | $ | 744,185 | |
| Delivery and installation | 374,682 | | | 274,156 | | | 220,057 | |
| Sales revenue: | | | | | |
| New units | 52,882 | | | 53,093 | | | 59,085 | |
| Rental units | 55,210 | | | 38,949 | | | 40,338 | |
| Total revenues | 1,894,897 | | | 1,367,645 | | | 1,063,665 | |
| Costs: | | | | | |
| Costs of leasing and services: | | | | | |
| Leasing | 317,061 | | | 227,376 | | | 213,151 | |
| Delivery and installation | 306,861 | | | 220,102 | | | 194,107 | |
| Costs of sales: | | | | | |
| New units | 35,377 | | | 34,841 | | | 42,160 | |
| Rental units | 29,853 | | | 24,772 | | | 26,255 | |
| Depreciation of rental equipment | 237,537 | | | 200,581 | | | 174,679 | |
| Gross profit | 968,208 | | | 659,973 | | | 413,313 | |
| Expenses: | | | | | |
| Selling, general and administrative | 511,446 | | | 360,626 | | | 271,004 | |
| Transaction costs | 1,375 | | | 64,053 | | | — | |
| Other depreciation and amortization | 78,030 | | | 43,249 | | | 12,395 | |
| Impairment losses on long-lived assets | — | | | — | | | 2,848 | |
| Lease impairment expense and other related charges | 2,888 | | | 4,876 | | | 8,674 | |
| Restructuring costs | 11,868 | | | 6,527 | | | 3,755 | |
| Currency losses (gains), net | 548 | | | (355) | | | (688) | |
| Other expense (income), net | 1,780 | | | (1,718) | | | (2,200) | |
| Operating income | 360,273 | | | 182,715 | | | 117,525 | |
| Interest expense | 117,987 | | | 119,886 | | | 122,504 | |
| Fair value loss (gain) on common stock warrant liabilities | 26,597 | | | (3,461) | | | 109,622 | |
| Loss on extinguishment of debt | 5,999 | | | 42,401 | | | 8,755 | |
| Income (loss) before income tax | 209,690 | | | 23,889 | | | (123,356) | |
| Income tax expense (benefit) | 49,546 | | | (51,451) | | | (2,191) | |
| Net income (loss) | 160,144 | | | 75,340 | | | (121,165) | |
| Net income (loss) attributable to non-controlling interest, net of tax | — | | | 1,213 | | | (421) | |
| Net income (loss) attributable to WillScot Mobile Mini common shareholders | $ | 160,144 | | | $ | 74,127 | | | $ | (120,744) | |
| | | | | |
| Earnings (loss) per share attributable to WillScot Mobile Mini common shareholders: | | | | | |
| Basic | $ | 0.71 | | | $ | 0.44 | | | $ | (1.11) | |
| Diluted | $ | 0.69 | | | $ | 0.25 | | | $ | (1.11) | |
| Weighted average shares: | | | | | |
| Basic | 226,518,931 | | 169,230,177 | | 108,683,620 |
| Diluted | 232,793,902 | | 177,268,383 | | 108,683,620 |
See the accompanying notes which are an integral part of these consolidated financial statements.
WillScot CorporationMobile Mini Holdings Corp.
Consolidated Statements of Comprehensive LossIncome (Loss)
(in thousands)
| | | | | | | | | | | | | | | | | |
| Year Ended December 31, | | | | |
| 2019 | | 2018 | | 2017 |
| Net loss | $ | (11,543) | | | $ | (53,572) | | | $ | (149,812) | |
| Other comprehensive (loss) income: | | | | | |
| Foreign currency translation adjustment, net of income tax expense (benefit) of $0, $(161) and $1,153 for the years ended December 31, 2019, 2018 and 2017, respectively | 10,586 | | | (11,639) | | | 6,768 | |
| Net loss on derivatives, net of income tax benefit of $(1,471), $(1,822) and $0 for the years ended December 31, 2019, 2018 and 2017, respectively | (4,809) | | | (5,955) | | | — | |
| Comprehensive loss | (5,766) | | | (71,166) | | | (143,044) | |
| Comprehensive income (loss) attributable to non-controlling interest | 105 | | | (6,137) | | | (2,118) | |
| Total comprehensive loss attributable to WillScot | $ | (5,871) | | | $ | (65,029) | | | $ | (140,926) | |
| | | | | | | | | | | | | | | | | |
| Years Ended December 31, |
| 2021 | | 2020 | | 2019 |
| Net income (loss) | $ | 160,144 | | | $ | 75,340 | | | $ | (121,165) | |
| Other comprehensive income: | | | | | |
| Foreign currency translation adjustment, net of income tax (benefit) of $(60), $(685) and $0 for the years ended December 31, 2021, 2020 and 2019, respectively | (880) | | | 28,404 | | | 10,586 | |
| Net gain (loss) on derivatives, net of income tax expense (benefit) of $2,661, $(539) and $(1,471) for the years ended December 31, 2021, 2020 and 2019, respectively | 9,016 | | | (1,749) | | | (4,809) | |
| Total other comprehensive income | 8,136 | | | 26,655 | | | 5,777 | |
| Comprehensive income (loss) | 168,280 | | | 101,995 | | | (115,388) | |
| Comprehensive (loss) income attributable to non-controlling interest | — | | | (672) | | | 105 | |
| Total comprehensive income (loss) attributable to WillScot Mobile Mini | $ | 168,280 | | | $ | 102,667 | | | $ | (115,493) | |
See the accompanying notes which are an integral part of these consolidated financial statements.
WillScot CorporationMobile Mini Holdings Corp.
Consolidated Statements of Changes in Equity
(in thousands) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Common Stock(1) | Class B Common Stock | | | | | | |
| Shares | Amount | Shares | Amount | Additional Paid-in Capital | Accumulated Other Comprehensive Income (Loss) | Accumulated Deficit | Total Shareholders' Equity | Non-Controlling Interest | Total Equity |
| Balance at December 31, 2018 | 108,509 | | $ | 11 | | 8,024 | | $ | 1 | | $ | 2,371,363 | | $ | (68,026) | | $ | (1,709,684) | | $ | 593,665 | | $ | 63,982 | | $ | 657,647 | |
| Net loss | — | | — | | — | | — | | — | | — | | (120,744) | | (120,744) | | (421) | | (121,165) | |
| Other comprehensive income | — | | — | | — | | — | | — | | 5,251 | | — | | 5,251 | | 526 | | 5,777 | |
| Adoption of new accounting standards | — | | — | | — | | — | | — | | — | | 5,067 | | 5,067 | | 503 | | 5,570 | |
| Stock-based compensation and issuance of Common Stock from vesting | 229 | | — | | — | | — | | 6,032 | | — | | — | | 6,032 | | — | | 6,032 | |
| Issuance of Common Stock from the exercise of options and warrants | 81 | | — | | — | | — | | 1,338 | | — | | — | | 1,338 | | — | | 1,338 | |
| Balance at December 31, 2019 | 108,819 | | $ | 11 | | 8,024 | | $ | 1 | | $ | 2,378,733 | | $ | (62,775) | | $ | (1,825,361) | | $ | 490,609 | | $ | 64,590 | | $ | 555,199 | |
| Net income | — | | — | | — | | — | | — | | — | | 74,127 | | 74,127 | | 1,213 | | 75,340 | |
| Other comprehensive income | — | | — | | — | | — | | — | | 28,540 | | — | | 28,540 | | (1,885) | | 26,655 | |
| Mobile Mini Merger | 106,427 | | 11 | | — | | — | | 1,348,619 | | — | | — | | 1,348,630 | | — | | 1,348,630 | |
| Sapphire Exchange - See Note 10 | 10,641 | | 1 | | (8,024) | | (1) | | 66,890 | | (2,972) | | — | | 63,918 | | (63,918) | | — | |
| Stock-based compensation and issuance of common stock from vesting | 315 | | — | | — | | — | | 9,879 | | — | | — | | 9,879 | | — | | 9,879 | |
| Repurchase and cancellation of options and warrants | — | | — | | — | | — | | (300) | | — | | — | | (300) | | — | | (300) | |
| Issuance of Common Stock from the exercise of options and warrants | 2,836 | | — | | — | | — | | 35,727 | | — | | — | | 35,727 | | — | | 35,727 | |
| Withholding taxes on net share settlement of stock-based compensation and option exercises | — | | — | | — | | — | | (13,473) | | — | | — | | (13,473) | | — | | (13,473) | |
| Reclassification of 2018 Warrants | | | | | 26,216 | | | | 26,216 | | | 26,216 | |
| Balance at December 31, 2020 | 229,038 | | $ | 23 | | — | | $ | — | | $ | 3,852,291 | | $ | (37,207) | | $ | (1,751,234) | | $ | 2,063,873 | | $ | — | | $ | 2,063,873 | |
| Net Income | — | | — | | — | | — | | — | | — | | 160,144 | | 160,144 | | — | | 160,144 | |
| Other Comprehensive Income | — | | — | | — | | — | | — | | 8,136 | | — | | 8,136 | | — | | 8,136 | |
| Stock-based compensation and issuance of Common Stock from vesting | 485 | | — | | — | | — | | 26,184 | | — | | — | | 26,184 | | — | | 26,184 | |
| Repurchase and cancellation of Common Stock and warrants | (11,851) | | (1) | | — | | — | | (340,375) | | — | | — | | (340,376) | | — | | (340,376) | |
| Issuance of Common Stock from the exercise of options and warrants | 6,268 | | — | | — | | — | | 85,979 | | — | | — | | 85,979 | | — | | 85,979 | |
| Withholding taxes on net share settlement of stock-based compensation and option exercises | — | | — | | — | | — | | (7,177) | | — | | — | | (7,177) | | — | | (7,177) | |
| Balance at December 31, 2021 | 223,940 | | $ | 22 | | — | | $ | — | | $ | 3,616,902 | | $ | (29,071) | | $ | (1,591,090) | | $ | 1,996,763 | | $ | — | | $ | 1,996,763 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Class A Common Stock | | Class B Common Stock | | | | | | | |
| Shares | Amount | Shares | Amount | Additional Paid-in Capital | Accumulated Other Comprehensive Loss | Accumulated Deficit | Total Shareholders' Equity | Non-Controlling Interest | Total Equity |
| Balance at December 31, 2016 | 14,546 | | $ | 1 | | — | | $ | — | | $ | 1,569,175 | | $ | (56,928) | | $ | (1,489,117) | | $ | 23,131 | | $ | — | | $ | 23,131 | |
| Net loss | — | | — | | — | | — | | — | | — | | (147,702) | | (147,702) | | (2,110) | | (149,812) | |
| Other comprehensive income (loss) | — | | — | | — | | — | | — | | 6,768 | | — | | 6,768 | | (8) | | 6,760 | |
| Capital contribution | — | | — | | — | | — | | 6,192 | | — | | — | | 6,192 | | — | | 6,192 | |
| Stock-based compensation | — | | — | | — | | — | | 2,970 | | — | | — | | 2,970 | | — | | 2,970 | |
| Recapitalization transaction | 70,099 | | 7 | | 8,024 | | 1 | | 543,589 | | 663 | | — | | 544,260 | | 51,049 | | 595,309 | |
| Balance at December 31, 2017 | 84,645 | | 8 | | 8,024 | | 1 | | 2,121,926 | | (49,497) | | (1,636,819) | | 435,619 | | 48,931 | | 484,550 | |
| Net loss | — | | — | | — | | — | | — | | — | | (49,040) | | (49,040) | | (4,532) | | (53,572) | |
| Other comprehensive loss | — | | — | | — | | — | | — | | (15,989) | | — | | (15,989) | | (1,605) | | (17,594) | |
| Adoption of ASU 2018-02 | — | | — | | — | | — | | — | | (2,540) | | 2,540 | | — | | — | | — | |
| Stock-based compensation | — | | — | | — | | — | | 3,439 | | — | | — | | 3,439 | | — | | 3,439 | |
| Issuance of common stock and contribution of proceeds to WSII | 9,200 | | 1 | | — | | — | | 131,460 | | — | | — | | 131,461 | | 7,574 | | 139,035 | |
| Acquisition of ModSpace and the related financing transactions including stock and warrants | 6,458 | | 1 | | — | | — | | 134,493 | | — | | — | | 134,494 | | 13,614 | | 148,108 | |
| Common stock issued in warrant exchange | 8,206 | | 1 | | — | | | (1,770) | | — | | — | | (1,769) | | — | | (1,769) | |
| Balance at December 31, 2018 | 108,509 | | 11 | | 8,024 | | 1 | | 2,389,548 | | (68,026) | | (1,683,319) | | 638,215 | | 63,982 | | 702,197 | |
| Net loss | — | | — | | — | | — | | — | | — | | (11,122) | | (11,122) | | (421) | | (11,543) | |
| Other comprehensive income | — | | — | | — | | — | | — | | 5,251 | | — | | 5,251 | | 526 | | 5,777 | |
| Adoption of ASC 606 | — | | — | | — | | — | | — | | — | | 345 | | 345 | | — | | 345 | |
| Adoption of ASC 842 | — | | — | | — | | — | | — | | — | | 4,723 | | 4,723 | | 503 | | 5,226 | |
| Issuance of common stock from the exercise of options and warrants | 81 | | — | | — | | — | | 921 | | — | | — | | 921 | | — | | 921 | |
| Stock-based compensation and issuance of common stock from vesting | 229 | | — | | — | | — | | 6,032 | | — | | — | | 6,032 | | — | | 6,032 | |
| Balance at December 31, 2019 | 108,819 | | $ | 11 | | 8,024 | | $ | 1 | | $ | 2,396,501 | | $ | (62,775) | | $ | (1,689,373) | | $ | 644,365 | | $ | 64,590 | | $ | 708,955 | |
See the accompanying notes which are an integral part of these consolidated financial statements.
WillScot CorporationMobile Mini Holdings Corp.
Consolidated Statements of Cash Flows
(in thousands)
| | | | | | | | | | | | | | | | | |
| Years Ended December 31, | | | | |
| 2019 | | 2018 | | 2017 |
| Operating activities: | | | | | |
| Net loss | $ | (11,543) | | | | $ | (53,572) | | | $ | (149,812) | |
| Adjustments to reconcile net loss to net cash provided by operating activities: | | | | | |
| Depreciation and amortization | 189,436 | | | 136,467 | | | 107,876 | |
| Provision for doubtful accounts | 14,496 | | | 7,656 | | | 5,062 | |
| Impairment losses on goodwill and intangibles | — | | | — | | | 60,743 | |
| Impairment losses on long-lived assets | 2,848 | | | 1,600 | | | — | |
| Impairment on right of use assets | 4,160 | | | — | | | — | |
| Gain on sale of rental equipment and other property, plant and equipment | (11,660) | | | (12,878) | | | (9,310) | |
| Interest receivable capitalized into notes due from affiliates | — | | | — | | | (3,915) | |
| Amortization of debt discounts and debt issuance costs | 11,450 | | | 7,652 | | | 21,887 | |
| Loss on extinguishment of debt | 8,755 | | | — | | | — | |
| Stock-based compensation expense | 6,686 | | | 3,439 | | | 2,970 | |
| Deferred income tax benefit | (2,624) | | | (40,192) | | | 12,959 | |
| Unrealized currency (gains) losses | (745) | | | 1,982 | | | (26,342) | |
| Changes in operating assets and liabilities, net of effect of businesses acquired: | | | | | |
| Trade receivables | (63,648) | | | (36,452) | | | (20,563) | |
| Inventories | 869 | | | (1,241) | | | 682 | |
| Prepaid and other assets | 8,237 | | | 8,416 | | | (11,925) | |
| Operating lease assets and liabilities | (438) | | | — | | | — | |
| Accrued interest receivable | — | | | — | | | (7,725) | |
| Accrued interest | (4,217) | | | 17,526 | | | (20,631) | |
| Accounts payable and other accrued liabilities | 4,865 | | | (14,462) | | | 39,771 | |
| Deferred revenue and customer deposits | 15,639 | | | 11,208 | | | (3,089) | |
| Net cash provided by operating activities | 172,566 | | | 37,149 | | | (1,362) | |
| Investing activities: | | | | | |
| Acquisition of businesses | — | | | (1,083,146) | | | (237,148) | |
| Proceeds from sale of rental equipment | 42,101 | | | 30,761 | | | 28,041 | |
| Purchase of rental equipment and refurbishments | (205,106) | | | (160,883) | | | (111,701) | |
| Lending on notes due from affiliates | — | | | — | | | (69,939) | |
| Repayments on notes due from affiliates | — | | | — | | | 2,151 | |
| Proceeds from the sale of property, plant and equipment | 18,763 | | | 688 | | | 392 | |
| Purchase of property, plant and equipment | (8,340) | | | (4,622) | | | (4,446) | |
| Net cash used in investing activities | (152,582) | | | (1,217,202) | | | (392,650) | |
| Financing activities: | | | | | |
| Receipts from issuance of common stock | 921 | | | 147,201 | | | 571,778 | |
| Receipts from borrowings | 552,230 | | | 1,212,629 | | | 1,155,651 | |
| Receipts on borrowings from notes due to affiliates | — | | | — | | | 75,000 | |
| Payment of financing costs | (2,623) | | | (36,579) | | | (31,316) | |
| Repayment of borrowings | (568,686) | | | (143,094) | | | (1,179,340) | |
| Repayment of notes due to affiliates | — | | | — | | | (198,896) | |
| | | | | | | | | | | | | | | | | |
| Years Ended December 31, |
| 2021 | | 2020 | | 2019 |
| Operating activities: | | | | | |
| Net income (loss) | $ | 160,144 | | | $ | 75,340 | | | $ | (121,165) | |
| Adjustments to reconcile net income (loss) to net cash provided by operating activities: | | | | | |
| Depreciation and amortization | 318,202 | | | 246,948 | | | 189,436 | |
| Provision for credit losses | 38,191 | | | 32,593 | | | 14,496 | |
| Impairment losses on long-lived assets | — | | | — | | | 2,848 | |
| Impairment losses on right of use assets | — | | | 57 | | | 4,160 | |
| Gain on sale of rental equipment and other property, plant and equipment | (26,175) | | | (14,124) | | | (11,660) | |
| Amortization of debt discounts and debt issuance costs | 14,033 | | | 13,085 | | | 11,450 | |
| Fair value loss (gain) on common stock warrant liabilities | 26,597 | | | (3,461) | | | 109,622 | |
| Loss on extinguishment of debt | 5,999 | | | 42,401 | | | 8,755 | |
| Stock-based compensation expense | 26,184 | | | 9,879 | | | 6,686 | |
| Deferred income tax expense (benefit) | 36,563 | | | (55,155) | | | (2,624) | |
| Unrealized currency losses (gains), net | 295 | | | 424 | | | (745) | |
| Changes in operating assets and liabilities, net of effect of businesses acquired: | | | | | |
| Trade receivables | (105,053) | | | (26,723) | | | (63,648) | |
| Inventories | (9,083) | | | 2,775 | | | 869 | |
| Prepaid expenses and other assets | 3,324 | | | (4,547) | | | 8,237 | |
| Operating lease assets and liabilities | 473 | | | 789 | | | (438) | |
| Accrued interest | 217 | | | (11,877) | | | (4,217) | |
| Accounts payable and other accrued expenses | 27,308 | | | (16,046) | | | 4,865 | |
| Deferred revenue and customer deposits | 22,683 | | | 12,454 | | | 15,639 | |
| Net cash provided by operating activities | 539,902 | | | 304,812 | | | 172,566 | |
| Investing activities: | | | | | |
| Acquisitions, net of cash acquired | (147,172) | | | 17,173 | | | — | |
| Proceeds from sale of rental equipment | 55,210 | | | 38,949 | | | 42,101 | |
| Purchase of rental equipment and refurbishments | (278,498) | | | (172,383) | | | (205,106) | |
| Proceeds from the sale of property, plant and equipment | 16,911 | | | 7,355 | | | 18,763 | |
| Purchase of property, plant and equipment | (30,498) | | | (16,454) | | | (8,340) | |
| Net cash used in investing activities | (384,047) | | | (125,360) | | | (152,582) | |
| Financing activities: | | | | | |
| Receipts from issuance of Common Stock from the exercise of options | 7,484 | | | 10,616 | | | 921 | |
| Repurchase and cancellation of Common Stock and warrants | (363,586) | | | (21,777) | | | — | |
| Payment of Common Stock issuance costs | — | | | (4,222) | | | — | |
| Receipts from borrowings | 728,677 | | | 2,786,793 | | | 552,230 | |
| Payment of financing costs | — | | | (65,475) | | | (2,623) | |
| Repayment of borrowings | (512,181) | | | (2,808,370) | | | (568,686) | |
| Payment of debt extinguishment premium costs | (3,705) | | | (34,610) | | | (7,152) | |
| | | | | | | | | | | | | | | | | |
| Principal payments on capital lease obligations | (99) | | | (120) | | | (2,236) | |
| Contribution from Algeco Group | — | | | — | | | 6,192 | |
| Withholding taxes paid on behalf of employees on net settled stock-based awards | (654) | | | | — | | | — | |
| Payment of debt extinguishment premium costs | (7,152) | | | | — | | | — | |
| Net cash (used in) provided by financing activities | (26,063) | | | 1,180,037 | | | 396,833 | |
| Effect of exchange rate changes on cash and cash equivalents | 166 | | | (211) | | | 202 | |
| Net change in cash and cash equivalents | (5,913) | | | (227) | | | 3,023 | |
| Cash and cash equivalents at the beginning of the period | 8,958 | | | 9,185 | | | 6,162 | |
| Cash and cash equivalents at the end of the period | $ | 3,045 | | | $ | 8,958 | | | $ | 9,185 | |
| | | | | |
| Supplemental cash flow information: | | | | | |
| Interest paid | $ | 115,582 | | | $ | 51,986 | | | $ | 115,756 | |
| Income taxes paid (refunded), net | $ | (1,148) | | | $ | 2,617 | | | $ | (1,389) | |
| Capital expenditures accrued or payable | $ | 23,946 | | | $ | 20,785 | | | $ | 11,919 | |
| Non-cash settlements of notes due to/from affiliates and accrued interest | $ | — | | | $ | — | | | $ | 216,278 | |
| Non-cash deemed dividend related to warrant exchange | $ | — | | | $ | 2,135 | | | $ | — | |
| Non-cash acquisition of a business | $ | — | | | $ | 148,108 | | | $ | — | |
| | | | | | | | | | | | | | | | | |
| Principal payments on finance lease obligations | (17,399) | | | (8,440) | | | (99) | |
| Taxes paid on employee stock awards | (7,177) | | | (13,473) | | | (654) | |
| Net cash used in financing activities | (167,887) | | | (158,958) | | | (26,063) | |
| Effect of exchange rate changes on cash and cash equivalents | (206) | | | 1,398 | | | 166 | |
| Net change in cash and cash equivalents | (12,238) | | | 21,892 | | | (5,913) | |
| Cash and cash equivalents at the beginning of the period | 24,937 | | | 3,045 | | | 8,958 | |
| Cash and cash equivalents at the end of the period | $ | 12,699 | | | $ | 24,937 | | | $ | 3,045 | |
| | | | | |
| Supplemental cash flow information: | | | | | |
Interest paid 1 | $ | 103,795 | | | $ | 118,519 | | | $ | 118,726 | |
| Income taxes paid (refunded), net | $ | 9,855 | | | $ | 4,234 | | | $ | (1,148) | |
| Capital expenditures accrued or payable | $ | 27,667 | | | $ | 23,553 | | | $ | 23,946 | |
| | | | | |
1 Includes $11,992, $9,779 and $3,143 of payments related to the interest rate swap for the years ended December 31, 2021, 2020 and 2019, respectively. |
See the accompanying notes which are an integral part of these consolidated financial statements.
WillScot CorporationMobile Mini Holdings Corp.
Notes to the Consolidated Financial Statements
NOTE 1 - Summary of Significant Accounting Policies
Organization and Nature of Operations
WillScot CorporationMobile Mini Holdings Corp. (“WillScot”WillScot Mobile Mini” and, together with its subsidiaries, the “Company”), is a leading business services provider of modularspecializing in innovative flexible work space and portable storage solutions in the United States (“US”), Canada, Mexico and Mexico.the United Kingdom ("UK"). The Company also maintains a fleet of specialty containment products, including liquid and solid containment solutions. The Company leases, sells, delivers and installs mobile offices, modular buildingssolutions and storage products through an integrated network of branch locations that spans North America.America and the UK.
WillScot whoseCorporation, a Delaware corporation (“WillScot”), entered into an Agreement and Plan of Merger, dated as of March 1, 2020, as amended on May 28, 2020 (as so amended, the “Merger Agreement”), by and among WillScot, Mobile Mini, Inc. (“Mobile Mini”), and Picasso Merger Sub, Inc., a wholly-owned subsidiary of WillScot (“Merger Sub”). On July 1, 2020, Merger Sub merged with and into Mobile Mini (the “Merger”). At the effective time of the Merger, the separate corporate existence of Merger Sub ceased, and Mobile Mini continued its existence as the surviving corporation in the Merger and a wholly-owned subsidiary of WillScot. As a result of the Merger, each issued and outstanding share of Mobile Mini Common Stock, par value $0.01 per share (other than treasury shares held by Mobile Mini), was converted automatically into the right to receive 2.405 shares of WillScot’s Class A commonCommon Stock, par value $0.0001 per share (the “WillScot Class A Common Stock”), and cash in lieu of any fractional shares. Immediately following the Merger, WillScot changed its name to “WillScot Mobile Mini Holdings Corp.” and filed an amended and restated certificate of incorporation (the “A&R Charter”), which reclassified all outstanding shares areof WillScot Class A Common Stock and converted such shares into shares of Common Stock, par value $0.0001 per share, of WillScot Mobile Mini (“WillScot Mobile Mini Common Stock”). The WillScot Class A Common Stock was listed on the Nasdaq Capital Market (Nasdaq: WSC), serves up until the Merger, and the WillScot Mobile Mini Common Stock has been listed on the Nasdaq Capital Market (Nasdaq: WSC) since the Merger. As used herein, the term “Common Stock” or “the Company’s Common Stock” refers to WillScot Class A Common Stock prior to filing of the A&R Charter on July 1, 2020 and to WillScot Mobile Mini Common Stock as of and following the holding company forfiling of the Williams Scotsman familyA&R Charter on July 1, 2020.
As the Merger closed on July 1, 2020 the preparation of companies. Allfinancial statements in accordance with US Generally Accepted Accounting Principles (“GAAP”) requires that our consolidated financial statements and most of WillScot's assetsthe disclosures in these Notes be presented on a historical basis. Unless the context otherwise requires, the terms “Company” and operations are owned through Williams Scotsman Holdings Corp. (“WS Holdings”).“WillScot Mobile Mini” as used in these financial statements mean WillScot operates and owns 91.0% of WS Holdings, and Sapphire Holding S.a r.l (“Sapphire”), an affiliate of TDR Capital LLR (“TDR Capital”), owns the remaining 9.0%.
WillScot was incorporated as a Cayman Islands exempt company, under the name Double Eagle Acquisition Corporation (“Double Eagle”), on June 26, 2015. Prior to November 29, 2017, Double Eagle was a Nasdaq-listed special purpose acquisition company formed for the purpose of effecting a merger, share exchange, asset acquisition, share purchase, reorganization or similar business combination. On November 29, 2017, Double Eagle indirectly acquired Williams Scotsman International, Inc. (“WSII”) from Algeco Scotsman S.a r.l., (together with its subsidiaries when referring to periods prior to July 1, 2020 (prior to the “Algeco Group”), which is majority owned by an investment fund managed by TDR Capital. As part of the transaction (the “Business Combination”), Double Eagle domesticated to DelawareMerger) and changed its name to WillScot Corporation.Mobile Mini, when referring to periods on or after July 1, 2020 (after the Merger).
Basis of Presentation
The consolidated financial statements were prepared in conformity with accounting principles generally accepted in the US (“GAAP”).GAAP.
Principles of Consolidation
The consolidated financial statements comprise the financial statements of WillScot Mobile Mini and its subsidiaries that it controls due to ownership of a majority voting interest. Subsidiaries are fully consolidated from the date of acquisition, being the date on which the Company obtains control, and continue to be consolidated until the date when such control ceases. The financial statements of the subsidiaries are prepared for the same reporting period as WillScot.WillScot Mobile Mini. All intercompany balances and transactions are eliminated.
The Business Combination was accounted for as a reverse recapitalization in accordance with Accounting Standard Codification (“ASC”) 805, Business Combinations. Although WillScot was the indirect acquirer of WSII for legal purposes, WSII was considered the acquirer for accounting and financial reporting purposes. As a result of WSII being the accounting acquirer, the financial reports filed with the US Securities and Exchange Commission (the "SEC") by the Company subsequent to the Business Combination are prepared “as if” WSII is the predecessor and legal successor to the Company. The historical operations of WSII are deemed to be those of the Company. Thus, the financial statements included in this report reflect (i) the historical operating results of WSII prior to the Business Combination; (ii) the combined results of the Company and WSII following the Business Combination on November 29, 2017; (iii) the assets and liabilities of WSII at their historical cost; and (iv) WillScot’s equity structure for all periods presented. The recapitalization of the number of shares of common stock attributable to the purchase of WSII in connection with the Business Combination is reflected retroactively to January 1, 2017 and will be utilized for calculating earnings per share in all prior periods presented. No step-up basis of intangible assets or goodwill was recorded in the Business Combination transaction consistent with the treatment of the transaction as a reverse capitalization of WSII.Reclassifications
As described in further detail in Notes 2 and 3, WSII’s remote accommodations business (the “Remote Accommodations Business”) was transferred to other Algeco Group members on November 28, 2017 in a transaction under common control and was not included as part of the Business Combination. The operating results of the Remote Accommodations Business, net of tax,Certain reclassifications have been reported as discontinued operations in the consolidatedmade to prior year financial statements. Amounts previously reported have been reclassifiedstatements to conform to this presentation in accordance with ASC 205, Presentation of Financial Statements, to allow for meaningful comparison of continuing operations.the current year presentation.
Accounting Estimates
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in these consolidated financial statements and accompanying notes. Actual results could differ from those estimates.
Cash and Cash Equivalents
The Company considers all highly liquid instruments with a maturity of three months or less when purchased to be cash equivalents.
Trade Receivables and Allowance for Credit Losses
The Company is exposed to credit losses from trade receivables. The Company assesses each customer’s ability to pay for the products it leases or sells by conducting a credit review. The credit review considers expected billing exposure and
Trade Receivablestiming for payment and Allowancethe customer’s established credit rating. The Company performs its credit review of new customers at inception of the customer relationship and for Doubtful Accountsexisting customers when the customer transacts after a defined period of dormancy. The Company also considers contract terms and conditions, country risk and business strategy in the evaluation.
Trade receivables primarily consistThe Company monitors ongoing credit exposure through an active review of amountscustomer balances against contract terms and due from customers fromdates. The Company may employ collection agencies and legal counsel to pursue recovery of defaulted receivables. The allowances for credit losses reflect the lease or saleestimate of rental equipment and their delivery and installation. Trade accounts receivable are recorded net of an allowance for doubtful accounts. The allowance for doubtful accounts is based upon the amount of losses expectedreceivables that the Company will be unable to be incurredcollect based on historical write-off experience and, as applicable, current conditions and reasonable and supportable forecasts that affect collectability. This estimate is sensitive to changing circumstances, including changes in the collectioneconomy or in the particular circumstances of these accounts. These estimated losses are calculated usingindividual customers. Accordingly, the loss rate method based upon a review of outstanding receivables, related aging, including specific accounts if deemed necessary and on historical collection experience. Company may be required to increase or decrease its allowances.
In accordance with the adoption of ASC 842, effective January 1, 2019, and the adoption of ASU 2016-13, Financial Instruments - Credit Losses (Topic 326) ("ASC 326"), effective January 1, 2020, specifically identifiable operating lease revenue receivables and sales receivables not deemed probable of collection are recorded as a reduction of revenue. The remaining provision for doubtful accountscredit losses is recorded as selling, general and administrative expenses. For the years ended December 31, 2018 and 2017, the entire provision for doubtful accounts is recorded as a selling, general and administrative expense. The Company reviews the adequacy of the allowance on a quarterly basis.
Activity in the allowance for doubtful accountscredit losses for the years ended December 31 was as follows:
| | (in thousands) | (in thousands) | 2019 | | | 2018 | | | 2017 | | (in thousands) | 2021 | | 2020 | | 2019 |
| Balance at beginning of year | $ | 9,340 | | | $ | 4,845 | | | $ | 4,167 | | |
Provision for doubtful accounts(a) | 14,496 | | | 7,656 | | | 4,715 | | |
| Balance at beginning of period | | Balance at beginning of period | $ | 29,258 | | | $ | 15,828 | | | $ | 9,340 | |
Provision for credit losses, net of recoveries(a) | | Provision for credit losses, net of recoveries(a) | 38,191 | | | 31,386 | | | 14,496 | |
| Write-offs | Write-offs | (7,945) | | | (3,089) | | | (3,984) | | Write-offs | (19,791) | | | (18,034) | | | (7,945) | |
| Foreign currency translation and other | Foreign currency translation and other | (63) | | | (72) | | | (53) | | Foreign currency translation and other | (29) | | | 78 | | | (63) | |
| Balance at end of period | Balance at end of period | $ | 15,828 | | | $ | 9,340 | | | $ | 4,845 | | Balance at end of period | $ | 47,629 | | | $ | 29,258 | | | $ | 15,828 | |
(a) For the yearyears ended December 31, 2021, 2020 and 2019, the provision for doubtful accountscredit losses includes $19.8 million, $18.0 million and $10.0 million, respectively, recorded as a reduction to revenue for the provision of specific receivables whose collection is not considered probable.
Concentration of Credit Risk
The Company’s trade accounts receivable subject the Company to potential concentrations of credit risk. The Company performs on-going credit evaluations of its customers. Receivables related to sales are generally secured by the product sold to the customer. The Company generally has the right to repossess its rental units in the event of non-payment of receivables relating to the Company’s leasing operations. The Company’s large number of customers in diverse geographic areas and end markets mitigates the concentration of credit risk. No single customer accounted for more than 1.5% and 1.2% of the Company’s receivables at December 31, 2019 and 2018, respectively. The Company’s top five customers accounted for 4.1% and 3.6% of the receivables at December 31, 2019 and 2018, respectively.
Inventories
Inventories consist of raw materials, parts and supplies, and work in process inventories.finished units for sale. Inventories are measured at the lower of cost or net realizable value based on the weighted-average cost. The cost includes expenditures incurred in acquiring the inventories, production or conversion costs, and other costs incurred in bringing them to their existing location and condition.
Rental Equipment
Rental equipment is comprised of modular space and portable storage units held for rent or on rent to customers, tank and pump solutions products, which consist primarily of liquid and solid containment units, pumps and filtration equipment, and value-added products and services (“VAPS”) which are in use or available to be used by customers. Rental equipment is measured at cost less accumulated depreciation and impairment losses. Cost includes expenditures that are directly attributable to the acquisition of the asset. Costs of improvements and betterments toconversions of rental equipment are capitalized when such costs extend the useful life of the equipment or increase the rental value of the unit. Costs incurred for equipment to meet a particular customer specification are capitalized and depreciated over the lease term taking in consideration the residual value of the asset. Maintenance and repair costs are expensed as incurred.
Depreciation is generally computed using the straight-line method over estimated useful lives, as follows:
| | | | | | | | | | | |
| Estimated Useful Life | | Residual Value |
Modular space and portableunits | 10 - 30 years | | 20 - 55% |
| Portable storage units | 10 – 2030 years | | 20 – 50%55% |
| Tank and pump equipment | 7 - 25 years | | —% |
| VAPS and other related rental equipment | 2 –1 - 8 years | | — | % |
Property, Plant and Equipment
Property, plant and equipment is statedmeasured at cost net ofless accumulated depreciation and impairment losses.
The Company capitalizes external costs and directly attributable internal costs to acquire or create internal use software incurred subsequent to the completion of the preliminary project stage. Costs associated with post-implementation activities are expensed as incurred. The Company evaluates implementation costs incurred in a cloud computing arrangement that is a service contract as described in Cloud Computing Arrangements below.
Land is not depreciated. Leasehold improvements are amortized over the lease term. Assets leased under capital leases are depreciated over the shorter of the lease term or their useful life, unless it is reasonably certain that the Company will obtain ownership by the end of the lease term. Land is not depreciated. Maintenance and repair costs are expensed as incurred.
Depreciation is generally computed using the straight-line method over estimated useful lives as follows:
| | | | | |
Type | Estimated Useful Life |
| Buildings and leasehold improvements | 10 –- 40 years |
MachineryVehicles, machinery, and equipment | 3 – 10- 30 years |
| Furniture and fixtures | 7 –3 - 10 years |
| Software | 3 – 5- 10 years |
Land improvements for owned properties are amortized over 15 years, and are amortized over the lease term for our leased properties.
Held for Sale
Property, plant and equipment to be sold is classified as held for sale in the period in which: (i) the Company has approved and committed to a plan to sell the asset, (ii) the asset is available for immediate sale in its present condition, (iii) an active program to locate a buyer and other actions required to sell the asset have been initiated, (iv) the sale of the asset is probable, (v) the asset is being actively marketed for sale at a price that is reasonable in relation to its current fair value, and (vi) it is unlikely that significant changes to the plan will be made or that the plan will be withdrawn.
Assets held for sale are initially measured at the lower of the carrying value or the fair value less cost to sell. Losses resulting from this measurement are recognized in the period in which the held for sale criteria are met while gains are not recognized until the date of sale. Once designated as held for sale, the Company stops recording depreciation expense on the asset. The Company assesses the fair value less cost to sell of long-lived assets held for sale at each reporting period until it no longer meets this classification.
Impairment of Long LivedLong-Lived Assets
When circumstances indicate the carrying amount of long-lived assets in a held-for-use asset group may not be recoverable, the Company evaluates the assets for potential impairment using internal projections of undiscounted cash flows resulting from the use and eventual disposal of the assets. Events or changes in circumstances that may necessitate a recoverability evaluation include, but are not limited to, adverse changes in the regulatory environment or an expectation it is more likely than not that the asset will be disposed of before the end of its previously estimated useful life. If the carrying amount of the assets exceeds the undiscounted cash flows, an impairment expense is recognized for the amount by which the carrying amount of the asset group exceeds its fair value (subject to the carrying amount not being reduced below fair value for any individual long-lived asset that is determinable without undue cost and effort).
Consistent with the provisions of ASU 2016-02, Leases(Topic 842) ("ASC 842"),842, the Company assesses whether any operating lease assetsset impairment exists in accordance with the measurement guidance in ASCAccounting Standard Codification ("ASC") 360, Property Plant and Equipment.
Cloud Computing Arrangements
In accordance with ASU 2018-15, Goodwill and Other – Internal-Use Software (Subtopic 350-40) (“ASC 350-40"), the Company evaluates implementation costs incurred in a cloud computing arrangement that is a service contract under the internal-use software framework. Costs related to preliminary project activities and post implementation activities are expensed as incurred. Costs incurred in the development stage are generally capitalized as other assets. Amortization expense is calculated on a straight-line basis over the contractual term of the cloud computing arrangement and recorded as selling, general and administrative expense.
Goodwill and Annual Goodwill Impairment Test
For acquired businesses, the Company records assets acquired and liabilities assumed at their estimated fair values on the respective acquisition dates. Based on these values, the excess purchase price over the fair value of the net assets acquired is recorded as goodwill. Generally, reporting units are at the operating segment level or one level below the operating segment (the component level), if discrete financial information is prepared and regularly reviewed by segment management. Goodwill acquired in a business combination is assigned to each of the Company’s reporting units that are expected to benefit from the combination.
The Company performs its annual impairment test of goodwill as of October 1 at the reporting unit level, as well as during any reporting period in which events or changes in circumstances occur that, in management’s judgment, may constitute triggering events under ASC 350-20,Intangibles – Goodwill and Other, Testing Goodwill for Impairment. The Company performs its assessment of goodwill utilizing either a qualitative or quantitative impairment test. The qualitative impairment test assesses company-specific, industry, market and general economic factors to determine whether it is more likely than not that the fair value of the reporting unit is less than its carrying amount. If the Company concludes that it is more likely than not that the fair value of the reporting unit is less than its carrying amount, or elects not to use the qualitative impairment test, a quantitative impairment test is performed. The quantitative impairment test involves a comparison of the estimated fair value of a reporting unit to its carrying amount. The Company uses an independent valuation specialist for its annualquantitative impairment tests to assist in the valuation.
Determining the fair value of a reporting unit is judgmental in nature and involves the use of significant estimates and assumptions. These estimates and assumptions include revenue growth rates and operating margins used to calculate projected future cash flows, risk-adjusted discount rates, value of net operating losses, future economic and market conditions and determination of appropriate market comparables. Management bases fair value estimates on assumptions it believes to be reasonable but that are unpredictable and inherently uncertain. Actual future results may differ from these estimates.
If the carrying amount of the reporting unit exceeds the calculated fair value of the reporting unit, an impairment charge would be recognized for the excess, not to exceed the amount of goodwill allocated to that reporting unit.
Intangible Assets Other than Goodwill
Intangible assets that are acquired by the Company and determined to have an indefinite useful life are not amortized but are tested for impairment at least annually. The Company’s indefinite-lived intangible asset consistsassets consist of the Williams Scotsman and Mobile Mini trade name.names. The Company performs its assessment of indefinite-lived intangible assets utilizing
either a qualitative or quantitative impairment test. When utilizing a quantitative impairment test, the Company calculates fair value using a relief-from-royalty method. This method is used to estimate the cost savings that accrue to the owner of an intangible asset who would otherwise have to pay royalties or license fees on revenues earned through the use of the asset. If the carrying amount of the indefinite-lived intangible asset exceeds its
fair value, an impairment charge would be recorded to the extent the recorded indefinite-lived intangible asset exceeds the fair value.
Other intangible assets that have finite useful lives are measured at cost less accumulated amortization and impairment losses, if any. Amortization is recognized in profit or loss over the estimated useful lives of the intangible asset.
Purchase Accounting
The Company accounts for acquisitions of businesses under the acquisition method. Under the acquisition method of accounting, the Company records assets acquired and liabilities assumed at their estimated fair value on the date of acquisition. Goodwill is measured as the excess of the fair value of the consideration transferred over the fair value of the identifiable net assets. EstimatedWhen appropriate, our estimates of the fair values of acquired assets and liabilities are provisional and could change as additional information is received.acquired include assistance from independent third-party valuation firms. Valuations are finalized as soon as practicable, but not later than one year from the acquisition date. Any subsequent changes to purchase price allocations result in a corresponding adjustment to goodwill. Transaction costs are expensed in the acquisition of a business.
Debt Issuance Costs, Debt DiscountsLong-lived assets (principally rental equipment), goodwill and Debt Premiumsother intangible assets generally represent the largest components of our acquisitions. Rental equipment is valued utilizing a replacement cost approach. Intangible assets are recognized at their estimated fair values as of the date of acquisition and generally consist of customer relationships and trade names. Determination of the estimated fair value of intangible assets requires judgment. The estimated fair value of customer relationships is determined based on estimates and judgments regarding discounted future after-tax earnings and cash flows arising from lease renewals and new lease arrangements expected from customer relationships. The fair value of trade name intangible assets is determined utilizing the relief from royalty method. Under this form of the income approach, a royalty rate based on observed market royalties is applied to projected revenue supporting the trade name and discounted to present value.
Debt issuance costs and debt discounts, netAcquisitions that do not meet the definition of debt premiums,a business are recordedaccounted for as direct deductionsasset acquisitions. An asset acquisition is accounted for by allocating the cost of the acquisition to the corresponding debtindividual assets acquired and liabilities assumed on a relative fair value basis. Goodwill is not recognized in long-term debtan asset acquisition. Any consideration in excess of net assets acquired is allocated to acquired assets on a relative fair value basis. The Company measures the consolidated balance sheets. If no amounts are outstanding under the Company’s ABL credit agreement (the “ABL Facility”) asfair value of a period end, the related debt issuanceassets acquired utilizing observable market transaction data for comparable assets or recent purchase prices. Transaction costs are recorded in other non-current assets in the consolidated balance sheets. Debt issuance costs and debt discounts, net of premiums, are deferred and amortized to interest expense over the termconsidered a component of the respective debt usingcost of the effective interest method or straight-line interest method as appropriate.acquisition in an asset acquisition.
Retirement Benefit Obligation
The Company provides benefits to certain of its employees under defined contribution benefit plans. The Company’s contributions to these plans are generally based on a percentage of employee compensation or employee contributions. These plans are funded on a current basis. For its US and Canada employees, the Company sponsors defined contribution benefit plans that have discretionary matching contribution and profit-sharing features. For the years ended December 31, 2019, 20182021, 2020 and 2017,2019, the Company made matching contributions of $5.4 $11.7 million, $3.8 $7.1 million and $2.7$5.4 million to these plans, respectively. In 2017, the employer contribution match on the US plan increased from a maximum of 2.5% to 4.5% of an employee’s base salary. The Company did not contribute under the profit-sharing feature during 2019, 2018 and 2017.
Stock-Based Compensation
For periods priorPrior to the Business Combination, WSII maintained certain share-based payment plans as partMerger, stock awards were granted under the WillScot Corporation 2017 Incentive Award Plan (the "2017 Incentive Plan"), which included Restricted Stock Awards ("RSAs") and Restricted Stock Units ("RSUs"). On June 24, 2020, WillScot's stockholders approved the WillScot Mobile Mini 2020 Incentive Award Plan ("2020 Incentive Plan") to take effect pending completion of the Algeco Group. Merger and, as a result, all future incentive awards are granted under the 2020 Incentive Plan. The terms of those plans resulted in the awards being treated as liability plans. When the liability was dependent on a performance condition outside of WSII’s control, no accrual was made unless the performance condition was probable. The cost of awards under these plans was measured initially at fair value at the grant date, which was the date at which WSII and the participants had a shared understanding of the terms and conditions of the arrangement. The fair value of awards for which the performance obligation was probable was expensed over the applicable service period with recognition of a corresponding liability. The liability was remeasured to fair value at each reporting date with changes in fair value attributed to vested awards recognized as expense in the period.
On November 16, 2017, the Company’s shareholders approved a new long-term incentive award plan (the “Plan”). The2020 Incentive Plan is administered by the Compensation Committee of WillScot's Board of Directors.Committee. Under the 2020 Incentive Plan, the Compensation Committee may grant an aggregateaggregate of 4,000,0006,488,988 shares of Class A common stockCommon Stock in the form of non-qualified stock options, incentive stock options, stock appreciation rights, restricted stock awards ("RSAs"), restricted stock units, andRSAs, RSUs, performance compensation awards and stock bonus awards. Stock-based payments, including the grant of stock options, restricted stock units,RSAs and RSAsRSUs, are subject to service-based vesting requirements, and expense is recognized on a straight-line basis over the vesting period. Forfeitures are accounted for as they occur.
Stock-based compensation expense includes grants of stock options, time-based restricted stock unitsRSUs ("Time-Based RSUs"), and market-based restricted stock unitsperformance-based RSUs ("Market-BasedPerformance-Based RSUs", and together with the Time-Based RSUs, the "RSUs"), which. RSUs are recognized in the financial statements based on their fair value, andvalue. In addition, stock-based payments to non-executive directors include grants of RSAs. Time-Based RSUs and RSAs are valued based on the intrinsic value of the difference between the exercise price, if any, of the award and the fair market value of WillScot's common stockWillScot Mobile Mini's Common Stock on the grant date. Market-BasedPerformance-Based RSUs wereare valued based on a Monte Carlo simulation model to reflect the impact of the Market-Based RSUPerformance-Based RSUs market condition. The probability of satisfying a market condition is considered in the estimation of the grant-date fair value for Market-BasedPerformance-Based RSUs and the compensation cost is not reversed if the market condition is not achieved, provided the requisite service has been provided.
RSAs cliff vest in a one-year year period. Time-Based RSUs vest ratably over a period of four-year period. Market-Based years. Certain Performance-Based RSUs cliff vest based on achievement of the relative total stockholder return ("TSR") of the Company's common stockCommon Stock as compared to the TSR of the constituents of the Russell 3000in an Index at the grant date over the three-yearperformance period performance period.of three years. For
certain 2021 grants, the TSR of the Company's Common Stock is compared to the TSR of the constituents in the S&P 400 index. The target number of Market-BasedRSUs may be adjusted from 0% to 200% based on the TSR attainment levels defined by the Compensation Committee. The 100% target payout is tied to performance at the 50% percentile, with a payout curve ranging from 0% (for performance less than the 25% percentile) to 200% (for performance at or above the 85% percentile). For grants in 2020 and prior, the TSR of the Company's Common Stock is compared to the TSR of constituents in the Russell 3000 index. The target number of RSUs may be adjusted from 0% to 150% based on the TSR attainment levels defined by the Compensation Committee. The 100% target payout is tied to performance at the 50% percentile, with a payout curve ranging from 0% (for performance less than the 25% percentile) to 150% (for performance at or above the 75% percentile). Vesting is
also subject to continued service requirements through the vesting date. Each Market-Based RSU represents a contingent right to receive one
For 555,790 Performance-Based RSUs granted in 2021, the awards cliff vest based on achievement of specified share upon vestingprices of the Company’s Class A commonCompany's Common Stock at annual measurement dates over performance periods of 4.5 years to 4.8 years. The target number of RSUs may be adjusted from 0 to 1,333,334 based on the stock price attainment levels defined by the Company's Compensation Committee. The 555,790 RSU target payout is tied to a stock price of $47.50, with a payout ranging from 0 RSUs (for a stock price less than $42.50) to 1,333,334 RSUs (for a stock price of $60.00 or its cash equivalent.greater).
Stock options vest in tranches over a period of four years and expire ten years from the grant date. The fair value of each stock option award on the grant date is estimated using the Black-Scholes option-pricing model with the following assumptions: expected dividend yield, expected stock price volatility, weighted-average risk-free interest rate and weighted-average expected term of the options. The volatility assumption used in the Black-Scholes option-pricing model iswas based on a blend of peer group volatility and Company trading history as the Company doesdid not have a sufficient trading history as a stand-alone public company.company to rely exclusively on its own trading history. Future calculations may use the Company trading history. Additionally, due to an insufficient history with respect to stock option activity and post-vesting cancellations, the expected term assumption is based on the simplified method under GAAP, which is based on the vesting period and contractual term for each tranche of awards. The mid-point between the weighted-average vesting term and the expiration date is used as the expected term under this method. The risk-free interest rate used in the Black-Scholes model is based on the implied US Treasury bill yield curve at the date of grant with a remaining term equal to the Company’s expected term assumption. WillScot Mobile Mini has never declared or paid a cash dividend on common shares.
Foreign Currency Translation and Transactions
The Company’s reporting currency is the US Dollar (“USD”). Exchange rate adjustments resulting from foreign currency transactions are recognized in profit or loss, whereas effects resulting from the translation of financial statements are reflected as a component of accumulated other comprehensive loss, which is a component of shareholders’ equity.
The assets and liabilities of subsidiaries whose functional currency is different from the USD are translated into USD at exchange rates at the reporting date and income and expenses are translated using average exchange rates for the respective period.
Exchange rate adjustments resulting from transactions in foreign currencies (currencies other than the Company entities’ functional currencies) are remeasured to the respective functional currencies using exchange rates at the dates of the transactions and are recognized in currency (gains) losses on the consolidated statements of operations.
Foreign exchange gains and losses arising from a receivable or payable to a consolidated Company entity, the settlement of which is neither planned nor anticipated in the foreseeable future, are considered to form part of a net investment in the Company entity and are included within accumulated other comprehensive loss.
Derivative Instruments and Hedging Activities
The Company utilizes derivative financial instruments, specifically interest rate swaps, to manage its exposure to fluctuations in interest rates on variable rate debt. The Company does not use derivatives for trading or speculative purposes.
The Company records derivatives on the balance sheet at fair value within prepaid expenses and other current assets and other non-current assets (if in an unrealized gain position) or within accrued liabilities and other non-current liabilities (if in an unrealized loss position). If a derivative is designated as a cash flow hedge and meets the highly effective threshold, the changes in the fair value of derivatives are recorded in accumulated other comprehensive income (loss). Amounts reported in accumulated other comprehensive income (loss) related to the cash flow hedges are reclassified to earnings within interest expense when the hedged item impacts earnings. For any derivative instruments not designated as hedging instruments, changes in fair value would be recognized in earnings within interest expense in the period that the change occurs. Cash flows from derivative instruments are presented within net cash provided by operating activities in the consolidated statements of cash flows. The Company assesses, both at the inception of the hedge and on an ongoing quarterly basis, whether the derivatives designated as cash flow hedges are highly effective in offsetting the changes in cash flows of the hedged items.
The use of derivative financial instruments carries certain risks, including the risk that the counterparties to these contractual arrangements are not able to perform under the agreements. To mitigate this risk, the Company enters into derivative financial instruments only with counterparties with high credit ratings and with major financial institutions. The Company does not anticipate that any of the counterparties will fail to meet their obligations.
Revenue Recognition
A performance obligation is a promise in a contract to transfer a distinct good or service to the customer. A contract’s transaction price is allocated to each distinct performance obligation and recognized as revenue when, or as, the performance obligation is satisfied.
Modular Leasing and Services Revenue
The majority of revenue is generated by rental income subject to the guidance of Accounting Standard Update ("ASU") 2016-2, Leases (Topic 842) ("ASC 840, Leases ("ASC 840"842") in 2017 and 2018 and ASC 842 in 2019.. The remaining revenue is generated by performance obligations in contracts with customers for services or sale of units subject to the guidance in ASC 605, Revenue ("ASC 605"), in 2017 and 2018 and Accounting Standards Update ("ASU") 2014-09, Revenue from Contracts with Customers (Topic 606) ("ASC 606") in 2019..
Leasing Revenue
Income from operating leases is recognized on a straight-line basis over the lease term. The Company's lease arrangements typicallycan include multiple lease and non-lease components. Examples of lease components include, but are not limited to, the lease of modular space, or portable storage units and examplesVAPS. Examples of non-lease components include, but are not limited to, the delivery, installation,installation, maintenance, and removal services commonly provided in a bundled transaction with the lease components. Arrangement consideration is allocated between lease deliverables and non-lease components based on the relative estimated selling (leasing) price of each deliverable. Estimated selling (leasing) price of the lease deliverables is based upon the estimated stand-alone selling price of the related performance obligations using an adjusted market approach.
When leases and services are billed in advance, recognition of revenue is deferred until services are rendered. If equipment is returned prior to the contractually obligated period, the excess, if any, between the amount the customer is contractually required to pay over the cumulative amount of revenue recognized to date is recognized as incremental revenue upon return.
Rental equipment is leased primarily under operating leases and, from time to time, under sales-type lease arrangements.leases. Operating lease minimum contractual terms within the NA Modular segment, as defined in Note 18, generally range from 1 month to 60 months and averaged approximately 1210 months across the Company'sthis segment's rental fleet for the year ended December 31, 2019. There were no material sales-type lease arrangements as of December 31, 2019.
2021. Rental contracts with customers within the NA Storage, UK Storage, and Tank & Pump segments are generally based on a 28-day rate and billing cycle. The adoption of ASC 842 at January 1, 2019, did not have a significant impact onrental continues until cancelled by the recognition of leasing revenue. PerCompany or the requirements of ASC 842 thecustomer. The Company records changes in estimated collectibility,collectability directly against leasing revenue.
The Company may use third parties to satisfy its performance obligations, including both the provision of VAPS and other services. To determine whether it is the principal or agent in the arrangement, the Company reviews each third-party relationship on a contract-by-contract basis. The Company is considered an agent when its role is to arrange for another entity to provide the VAPS and other services to the customer. In these instances, the Company does not control the rental unit or service before it is provided and the risk of performance is held by the third party. The Company is considered the principal when it controls the VAPS or other services prior to transferring control to the customer and retains the risk of performance. WillScot Mobile Mini may be a principal in the fulfillment of some leasing contracts and services elements and an agent for other elements within the same contract. Revenue is recognized on a gross basis when the Company is the principal in the arrangement and on a net basis when it is the agent.
Services Revenue
The Company generally has three non-lease service-related performance obligations in its contracts with customers:
•Delivery and installation of the modular or portable storage unit;
•Maintenance and other ad hoc services performed during the lease term; and
•Removal services that occur at the end of the lease term.
Consideration is allocated to each of these performance obligations within the contract based upon their estimated relative standalone selling prices using the estimated cost plus a margin approach. Revenue from these activities is recognized as the services are performed.
Sales Revenue
Sales revenue is generated by the sale of new and rental units. Revenue from the sale of new and rental units is generally recognized at a point in time upon the transfer of control to the customer, which occurs when the unit is delivered and installed in accordance with the contract. Sales transactions constitute a single performance obligation.
Other Matters
The Company's non-lease revenues do not include material amounts of variable consideration, other than the variability noted for services arrangements expected to be performed beyond a twelve monthtwelve-month period.
The Company's payment terms vary by the type and location of its customer and the product or services offered. The time between invoicing and when payment is due is not significant. While the Company may bill certain customers in advance, its contracts do not contain a significant financing component based on the short length of time between upfront billings and the performance of contracted services. For certain products, services, or customer types, the Company requires payment before the products or services are delivered to the customer. At December 31, 2021, current deferred revenue and customer
deposits included deferred revenue of $156.9 million and customer deposits of $2.7 million, respectively. At December 31, 2020, current deferred revenue and customer deposits included deferred revenue of $133.2 million and customer deposits of $2.3 million, respectively.
Revenue is recognized net of taxes collected fromsales tax billed to customers, which areis subsequently remitted to governmental authorities.
Leases as Lessee
The Company leases real estate for certain of its branch offices, administrative offices, and rental equipment storage properties, vehicles and equipment, used in its rental and administrative operations. The Company determines if an arrangement is or contains a lease at inception. Leases are classified as either finance or operating at inception of the lease, with classification affecting the pattern of expense recognition in the income statement. Short-term leases, defined as leases with an initial term of 12 months or less, are not recorded on the balance sheet. Lease expense for short-term leases is recognized on a straight-line basis over the lease term.
The Company has leases that contain both lease and non-lease components and has elected, as an accounting policy, to not separate lease components and non-lease components. RightOperating and finance lease right of use ("ROU") assets and operating lease liabilities are recognized at the commencement date based on the present value of lease payments over the lease term. The lease liability is calculated as the present value of the remaining minimum rental payments for existing operating leases using either the rate implicit in the lease or, if none exists, the Company's incremental borrowing rate, as the discount rate. As most of the Company's leases do not provide an implicit rate, theThe Company uses its incremental borrowing rate based on the information available at commencement date in determining the present value of lease payments.payments for those leases where the implicit rate is not known. The Company's incremental borrowing rate is a hypothetical rate based on its understanding of what would be the Company's secured credit rating.
Variable lease payments are expensed in the period in which the obligation for those payments is incurred. Variable lease payments include payments for common area maintenance, real estate taxes, management fees and insurance.
Many of the Company’s real estate lease agreements include options to extend the lease, which are not included in the minimum lease terms unless the Company is reasonably certain it will exercise the option. Many of these leases include one or more options to renew. Additionally, the Company’sCompany’s leases do not generally include options to terminate the lease prior to the end of the lease term. The Company’s lease agreements do not contain any material residual value guarantees or material restrictive covenants.
Advertising and Promotion
Advertising and promotion expense,costs, which isare expensed as incurred, was $4.0were $8.1 million $4.4, $7.3 million and $3.3$4.0 million for the years ended December 31, 2021, 2020 and 2019, 2018 and 2017, respectively.
Shipping Costs
The Company includes third-party costs to deliver rental equipment to customers in costcosts of leasing and services, and cost of sales.
Income Taxes
The Company accounts for income taxes under the asset and liability method, which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements. Under this method, deferred tax assets and liabilities are determined based on the differences between the financial statement and tax basis of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse. The effect of a change in tax rates on deferred tax assets and liabilities is recognized in income in the period that includes the enactment date.
The Company records deferred tax assets to the extent it believes that it is more likely than not that these assets will be realized. In making such determination, the Company considers all available positive and negative evidence, including scheduled reversals of deferred tax liabilities, projected future taxable income, tax planning strategies and recent results of operations. Valuation allowances are recorded to reduce the deferred tax assets to an amount that will more likely than not be realized.
The Company assesses the likelihood that each of the deferred tax assets will be realized. To the extent management believesconcludes the realization of any deferred tax assets is not more likely than not, the Company establishes a valuation allowance. When a valuation allowance is established or there is an increase in an allowance in a reporting period, tax expense is generally recorded in the Company’s consolidated statement of operations. Conversely, to the extent circumstances indicate that a valuation allowance is no longer necessary, that portion of the valuation allowance is reversed, which generally reduces the Company’s income tax expense.
Deferred tax liabilities are recognized for the income taxes on the undistributed earnings of wholly-owned foreign subsidiaries unless such earnings are permanentlyindefinitely reinvested, or will only be repatriated when possible to do so at minimal additional tax cost. Current income tax relating to items recognized directly in equity is recognized in equity and not in profit (loss) for the year.
In accordance with applicable authoritative guidance, the Company accounts for uncertain income tax positions using a benefit recognition model with a two-step approach; a more-likely-than-not recognition criterion; and a measurement
approach that measures the position as the largest amount of tax benefit that is greater than 50% likely of being realized upon ultimate settlement. If it is not more-likely-than-not that the benefit of the tax position will be sustained on its technical merits, no benefit is recorded. Uncertain tax positions that relate only to timing of when an item is included on a tax return are considered to have met the recognition threshold. The Company classifies interest on tax deficiencies and income tax penalties within income tax expense.
The Company accounts for any impacts of the Global Intangible Low-Taxed Income ("GILTI") in the period in which they are incurred.
Fair Value Measurements
The Company maximizes the use of observable inputs and minimizes the use of unobservable inputs when measuring fair value. A financial instrument’s categorization within the fair value hierarchy is based upon the lowest level of input that is significant to the fair value measurement. The inputs are prioritized into three levels that may be used to measure fair value. See further discussion of the levels in Note 16.14.
Warrants
The Company accounts for warrants in accordance with applicable accounting guidance provided in ASC 815-40, Contracts in Entity's Own Equity, as either derivative liabilities or as equity instruments depending on the specific terms of the warrant agreements. In periods subsequent to issuance, warrants classified as liabilities are subject to remeasurement at each balance sheet date and transaction date with changes in the estimated fair values of the common stock warrant liabilities and gains and losses on extinguishment of common stock warrant liabilities reported in the consolidated statements of operations.
Recently Issued and Adopted Accounting Standards
The Company qualified as an emerging growth company (“EGC”) as defined under the Jumpstart Our Business Startups Act (the “JOBS Act”) until December 31, 2019. Using exemptions provided under the JOBS Act, the Company elected to defer compliance with new or revised financial accounting standards until a company that is not an issuer (as defined under section 2(a) of the Sarbanes-Oxley Act) was required to comply with such standards. WillScot ceased to be an EGC as of December 31, 2019, and as such, is required to comply with the standards and compliance dates for large accelerated filers.
Recently Issued Accounting Standards
ASU 2020-04. Reference Rate Reform (Topic 848), Facilitation of the Effects of Reference Rate Reform on Financial Reporting
In June 2016,March 2020, the Financial Accounting Standards Board (“FASB”("FASB") issued ASU 2016-13, 2020-04 “Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Instruments - Credit Losses (Topic 326), which prescribes that financial assets (or a groupReporting.” This update is intended to ease the potential burden in accounting for and recognizing the effects of financial assets) should be measured at amortized costreference rate reform. It provides optional practical expedients and presented at the net amount expectedexceptions for applying U.S. GAAP to be collected. Credit losses relating to available-for-sale debt securities should be recordedcontracts, hedging relationships, and other transactions affected by reference rate reform, if certain criteria are met. This update became effective on March 12, 2020 and is available for use through an allowance for credit losses. The new standard is effective for public entities for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. Early adoption is permitted for all entities for the fiscal years beginning after December 15, 2018, including interim periods within those fiscal years.31, 2022. The Company is currently evaluating the impact of the adoption of the pronouncement on the statements,reference rate reform and intends to prospectively adopt this standard in the first quarter of 2020.
In December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes, which simplifies the accounting for income taxes by removing certain exceptions to the general principles for income taxes. The new standard is effective for fiscal years and interim periods within those fiscal years, beginning after December 15, 2020. Early adoption, including the adoption in any interim period, is permitted for all entities. The Company is currently evaluating the potential impact of adoption of the pronouncementthese elective practical expedients on its consolidated financial statements butand does not expect the impact to be material.
ASU 2021-08. Business Combinations (Topic 815): Accounting for Contract Assets and Contract Liabilities from Contracts with Customers
In October 2021, the FASB issued ASU 2021-08, Business Combinations (Topic 805): Accounting for Contract Assets and Contract Liabilities from Contracts with Customers. ASU 2021-08 requires that an acquirer recognize and measure contract assets and liabilities acquired in a business combination in accordance with ASU 2014-09, Revenue from Contracts with Customers (Topic 606). This standard is effective for annual periods beginning after December 15, 2022, including interim periods therein, with early adoption permitted. The guidance will be applied prospectively to acquisitions occurring on or after the effective date. The Company will continue to evaluate the impact of this guidance, which will depend on the contract assets and liabilities acquired in future business combinations.
Recently Adopted Accounting Standards
From time to time, new accounting pronouncements are issued by the FASB or other standard setting bodies that are adopted by the Company as of the specified effective date.
ASU 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes
In May 2014,December 2019, the FASB issued ASC 606. ASC 606, along with its subsequent related updates prescribe a single comprehensive modelASU 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for entitiesIncome Taxes, which removes certain exceptions to use in the general principles for income taxes and also improves consistent application of accounting for revenue arising from contracts with customers. The core principle contemplated by this new standard was that an entity should recognize revenue to depict the transfer of promised goodsclarifying or services to customers in an amount reflecting the consideration to which the entity expects to be entitled in exchange for those goods or services. New disclosures about the nature, amount, timing and uncertainty of revenue and cash flows arising from contracts with customers are also required.
amending existing guidance. On January 1, 2019,2021, the Company adopted ASC 606 as well as subsequent updates usingASU 2019-12 and the modified retrospective transition approachimpact of adoption was not material to those contracts that were not completed as of January 1, 2019. The comparative financial statement information has not been restated and continues to be reported under the accounting standards in effect for those periods. The adoption of the guidance did not have a material impact on the Company's consolidated balance sheet as of January 1, 2019. The Company's accounting for modular leasing revenue is primarily outside the scope of ASC 606 and is recorded under ASC 842 (defined below).
In February 2016, the FASB issued ASC 842. This guidance revises existing practice related to accounting for leases under ASC 840, for both lessees and lessors. ASC 842 requires that lessees recognize: a) a lease liability, which is a lessee’s obligation to make lease payments arising from a lease, measured on a discounted basis; and b) a ROU asset, which is an asset that represents the lessee’s right to use, or control the use of, a specified asset for the lease term. ASC 842 also requires that the seller recognize any gain or loss (based on the estimated fair value of the asset at the time of sale) when control of the asset is transferred instead of amortizing it over the lease period for qualifying sale-leaseback transactions.
At December 31, 2019, the Company became a large accelerated filer and no longer qualifies as an emerging growth company, at which point the Company was required to retrospectively adopt ASC 842, effective January 1, 2019. In connection with the adoption of ASC 842, the Company reversed the previous accounting for certain failed sale-leaseback transactions, and reduced property, plant and equipment by $31.0 million, reduced outstanding debt by $37.9 million, increased deferred tax liability by $1.8 million and increased January 1, 2019 equity by $5.2 million.financial statements. The Company recognized lease liabilitiesapplied the standard prospectively for intraperiod tax allocation, year-to-date losses that exceed anticipated annual losses and ROU assets of $138.5 million and $141.4 million as of January 1, 2019, primarily related to its real estate and equipment leases.
The adoption of ASC 842 at January 1, 2019, did not have a significant impact on the recognition of leasing revenue. Per the requirements of ASC 842 the Company recordsenacted changes in estimated collectibility, directly against lease income. Such amounts were previously classified as selling, general and administrative expenses. For the year ended December 31, 2019 operating lease receivables not deemed probable of collection and recorded as a reduction of revenue totaled $10.0 million.
The Company elected the package of practical expedients permitted under the transition guidance within the new standard that allows it to not reassess: (a) whether any expired or existing contracts are or contain leases, (b) the lease classification for any expired or existing leases and (c) initial direct costs for any expired or existing leases. Historical financial information was not updated and the financial disclosures required under ASC 842 are not provided for periods prior to January 1, 2019.
tax laws.
NOTE 2 - Business CombinationsCombination and Acquisitions
2017 Business Combination
Background and SummaryMobile Mini Merger
On November 29, 2017,March 1, 2020, the legal predecessor company consummatedCompany, along with its newly formed subsidiary, Merger Sub, entered into the Business Combination pursuantMerger Agreement with Mobile Mini, hereby referred to as the terms“Merger.” The Merger was completed on July 1, 2020 and Merger Sub merged with and into Mobile Mini and the separate corporate existence of Merger Sub ceased, and Mobile Mini continued its existence as the surviving corporation in the Merger and a wholly-owned subsidiary of the Stock Company. Mobile Mini is a leading provider of portable storage solutions in North America and the UK and a leading provider of specialty containment solutions in the US.
Purchase Agreement, dated as of August 21, 2017, as amended on September 6, 2017 and November 6, 2017 (the “Stock Purchase Agreement”), by and among Double Eagle, WS Holdings, Algeco Group and Algeco Scotsman Holdings Kft., a Hungarian limited liability company (“Algeco Holdings” and, together with Algeco Group, the “Sellers”). Double Eagle, through its wholly-owned subsidiary, WS Holdings, acquired allPrice
Upon completion of the Merger, each issued and outstanding share of Mobile Mini Common Stock, par value $0.01 per share, converted to 2.405 shares of the common stock of WSII from the Sellers.
Under theWillScot Class A Common Stock, Purchase Agreement, WS Holdings purchased WSII for $1.1 billion, of which (A) $1.0215 billion was paid in cash and (B) the remaining $78.5 million was paid to the Sellers, on a pro rata basis, in the form of (i) 8,024,419 shares of common stock, par value $0.0001 per share, of WS Holdings, which shares are exchangeable for shares of WillScot’s Class A common stock and (ii) 8,024,419 shares of WillScot’s Class B common stock, par value $0.0001 per share representing a non-economic voting interestcash in WillScot. The Class B common stock shares can only be held by the Sellers or their permitted transferee. Upon conversion or cancellationlieu of any WS Holdings shares, the correspondingfractional shares. The Company issued 106,426,721 shares of Class B commonA Common Stock to Mobile Mini stockholders as consideration for the Merger. The trading price of the Class A Common Stock was $12.53 per share on the closing date. In addition, Mobile Mini stock ofoptions converted into WillScot are automatically canceled for no consideration. The Class B commonMobile Mini stock shares of WillScot have voting rights, but are not entitled to share in dividends or other distributions.options.
The shares of WillScot Class B common stock issuedpurchase price has been determined to the Sellers initially represented 10% of the issued and outstanding WS Holdings common stock at the date of the Business Combination, which is presented in the consolidated balance sheets and statement of changes in equitybe as a non-controlling interest. During the year ended December 31, 2018, the non-controlling interest was diluted to 9% as a result of common stock transactions detailed in Note 13. Further, the portion of net loss attributable to the non-controlling interest is separately stated on the consolidated statement of operations, net of tax. The non-controlling interest was 9% as of December 31, 2019.
The net proceeds from the Business Combination, as reported in the consolidated statements of cash flows for the year ended December 31, 2017 within the financing section are summarized below:follows:
| | | | | |
(in thousands)thousands, except share and per share data) | Net proceeds |
Cash in Double Eagle's Trust (netMobile Mini Common Stock outstanding | 44,252,275 | |
| Share conversion ratio | 2.405 | |
| Common Stock issued | 106,426,721 | |
Common Stock per share price as of redemptions)July 1, 2020 | $ | 288,38112.53 | |
Cash from private placement Fair value of common stock to TDR Capital affiliate | 418,261 | |
Gross cash received byshares of WillScot from Business Combination | 706,642 | |
Less: purchase of WSII's outstanding equity | (125,676) | |
Less: fees to underwriters | (9,188) | |
Net cash received by WillScot in connection with the Business Combination and related financing transactionsClass A Common Stock issued | $ | 571,7781,333,527 | |
| Cash paid for fractional shares | 30 | |
| Fair value of Mobile Mini Options converted to WillScot Mobile Mini Options | 19,279 | |
| Total purchase price | $ | 1,352,836 | |
An additional $300.0 million obtained through WSII’s offeringThe Merger was accounted for using the acquisition method of senior secured notesaccounting, and $190.0 million through WSII’s entry into a new ABL facility are aggregated in receipts from borrowings inWillScot is considered the consolidated statementsaccounting acquirer. Under the acquisition method of cash flows.
Prior to the Business Combination, Double Eagle had 49,704,329 of Class A common stock shares outstanding and $500.8 million held in a trust account. In connection with the Business Combination, 21,128,456 shares of Double Eagle’s common stock were redeemed resulting in a total payment to redeeming shareholders of $212.4 million.
The number of shares of Class A and Class B common stock of WillScot issued and outstanding immediately following the consummation of the Business Combination is summarized as follows:
| | | | | | | | | | | |
| Number of Shares of Class A Common Stock of WillScot | | Number of Shares of Class B Common Stock of WillScot |
| Double Eagle public shares outstanding prior to the Business Combination | 49,704,329 | | | — | |
| Less: Redemption of Double Eagle public shares | 21,128,456 | | | — | |
Plus: Conversion of Double Eagle Class B shares to Double Eagle Class A shares(a) | 12,500,000 | | | — | |
| Total Double Eagle shares outstanding immediately prior to the effective date of the Business Combination | 41,075,873 | | | — | |
| Class B shares issued as part of consideration for WSII purchase | — | | | 8,024,419 | |
| Common shares issued through private placement to TDR Capital affiliate | 43,568,901 | | | — | |
| Total shares of common stock of WillScot outstanding at closing, November 29, 2017 | 84,644,774 | | | 8,024,419 | |
(a) 12,425,000 of the converted Class B ordinary shares were placed into escrow as of the Business Combination date and were subject to the earnout arrangement. All of the escrowed shares were released to shareholders in 2018.
Upon completion of the Business Combination and the other transactions contemplated by the Stock Purchase Agreement, WSII became an indirect subsidiary of WillScot.
The Company incurred transaction costs related to the Business Combination of $22.1 million, which are included in selling, general and administrative expenses on the consolidated statement of operations for the year ended December 31, 2017.
Algeco Group Restructuring Impact on WillScot
Prior to the effective date of the Business Combination, WSII was a wholly owned subsidiary of the Algeco Group, which is majority owned by an investment fund managed by TDR Capital. Subsequent to the Business Combination, a TDR affiliate is the controlling shareholder of the Company’s common stock. Certain transactions between the Algeco Group andaccounting, the Company are treated as transfers between entities under common control.
Prior to the Business Combination, the Algeco Group performed an internal restructuring. As part of this reorganization, WSII’s Remote Accommodations Business, which consisted of Target Logistics Management LLC (“Target”) and its subsidiaries and Chard Camp Catering Services (“Chard”), were transferred to another entity within the Algeco Group. As a result, the operating results of the Remote Accommodations Business have been reported as discontinued operations in the Company’s consolidated financial statements (see Note 3).
Prior to the internal restructuring, WSII owned 100% of the equity in Target and Chard. In the internal restructuring, WSII transferred to Algeco Group entities (a) 100% of the equity and assets in Target and Chard, (b) the outstanding notes due from affiliates and related accrued interest receivable, and (c) intercompany receivables with Algeco Group entities, in exchange for the partial settlement of outstanding notes due to affiliates and related accrued interest and the settlement of intercompany liabilities. The notes due to affiliates and the corresponding accrued interest amounts were fully repaid between the internal restructuring non-cash offsetting transfers and the $226.3 million cash payment made in connection with the Business Combination. As a result of the settlement of notes due to affiliates and the transfer of Target and Chard, there was a $19.9 million difference between book value and fair value of transferred amounts. The Company has recorded these amounts to additional paid-in capital in the consolidated balance sheets and statements of changes in equity in accordance with the guidance in ASC 805, Business Combinations, which states that any difference between the fair value of the proceeds and the book value of the related assets in connection with transfers between two entities under common control should be recognized as an equity transaction.
The fair value of Target and Chard were determined using the using the income approach. The estimate of fair value required the Company to use significant unobservable inputs, representative of a Level 3 fair value measurement, including assumptions related to the future performance of reporting units and the markets in which they operate. The Company used discount rates of 16.0% and 14.5% and terminal growth rates of 3.0% and 3.0% to calculate the present value of estimated future cash flows for Chard and Target, respectively. The fair value of the notes due from affiliates and other intercompany amounts was primarily calculated using the pricing of the Algeco Group’s publicly traded senior notes assuming that the credit quality of each obligor was equal to that of its parent. The estimate is representative of a Level 2 fair value measurement.
As part of the internal restructuring, WSII also transferred certain employees in corporate functions to another entity in the Algeco Group, as they primarily supported the Algeco Group. Liabilities associated with these employees, primarily pertaining to compensation and benefits, of $7.8 million, were transferred to the Algeco Group as part of this transaction. These amounts were also recorded to additional paid-in capital as a deemed capital contribution as the transfer occurred between two entities under common control.
Acton and Tyson Acquisitions
On December 20, 2017, the Company acquired 100% of the issued and outstanding ownership interests of Acton Mobile Holdings LLC (“Acton”) for a cash purchase price of $237.1 million. Additionally, on January 3, 2018, the Company acquired all of the issued and outstanding membership interests of Onsite Space LLC (d/b/a Tyson Onsite (“Tyson”) for $24.0 million in cash consideration, net of cash acquired. The purchase price allocations for both the Acton and Tyson acquisitions were subject to certain adjustments, which were both finalized in the fourth quarter of 2018. The offsets of these adjustments were recorded to goodwill as detailed in Note 10. Pro forma results for Acton are presented in the aggregate with the ModSpace acquisition below.
ModSpace Acquisition
On August 15, 2018, the Company acquired Modular Space Holdings, Inc. ("ModSpace"), a privately-owned national provider of office trailers, portable storage units and modular buildings. The acquisition was consummated by merging a special purpose subsidiary of the Company with and into ModSpace, with ModSpace surviving the merger as a subsidiary of WSII.
Purchase Price
The aggregate purchase price for ModSpace was $1.2 billion and consisted of (i) $1.1 billion in cash, (ii) 6,458,229 shares of WillScot's Class A common stock (the "Stock Consideration") with a fair market value of $95.8 million, (iii) warrants to purchase an aggregate of 10,000,000 shares of WillScot’s Class A common stock at an exercise price of $15.50 per share (the "2018 Warrants") with a fair market value of $52.3 million, and (iv) a working capital adjustment of $4.7 million.
The acquisition was funded by the net proceeds of WillScot's issuance of 9,200,000 shares of Class A common stock (see Note 13), the net proceeds of WSII’s issuance of $300.0 million in senior secured notes and $200.0 million in senior unsecured notes (see Note 12), and borrowings under the ABL Facility (see Note 12).
As of the date of acquisition, the fair market values of the Stock Consideration and 2018 Warrants were $14.83 per share and $5.23 per warrant, respectively, with the warrant values determined using a Black-Scholes valuation model. The fair market value of the Class A shares was determined utilizing the $15.78 per share closing price of the Company's shares on August 15, 2018, discounted by 6.0%, to reflect a lack of marketability based on the lock-up restrictions contemplated by the merger agreement.
The estimated fair values of the Stock Consideration and 2018 Warrants are Level 3 fair value measurements, as defined in Note 16. The fair value of each share and warrant was estimated using the Black-Scholes model with the following assumptions: expected dividend yield, expected stock price volatility, weighted-average risk-free interest rate, the average expected term of the lock-up period on the shares, and the weighted average expected term of the warrants. The volatility assumption used in the Black-Scholes model is derived from the historical daily change in the market price of the Company's common stock, as well as the historical daily changes in the market price of its peer group, based on weighting, as determined by the Company, and over a time period equivalent to the lock-up restriction (for the shares) and the warrant term. The risk-free interest rate used in the Black-Scholes model is based on the implied US Treasury bill yield curve at the date of grant with a remaining term equal to the Company’s expected term assumption. The Company has never declared or paid a cash dividend on common shares.
The following table summarizes the key inputs utilized to determine the fair value of the Stock Consideration and 2018 Warrants included withinassigned the purchase price of ModSpace.
| | | | | | | | | | | |
| Stock Consideration
fair value inputs | | | 2018 Warrants fair value inputs |
| Expected volatility | 28.6 | % | | 35.0 | % |
| Risk-free rate of interest | 2.2 | % | | 2.7 | % |
| Dividend Yield | — | % | | — | % |
| Expected life (years) | 0.5 | | 4.3 |
Opening Balance Sheet
The purchase price of ModSpace was assigned to the underlyingtangible and identifiable intangible assets acquired and liabilities assumed based uponon their fair values at the dateclosing date. The excess of the purchase price over those fair values is recorded as goodwill. The Company's acquisition August 15, 2018. of Mobile Mini represented a non-cash investing outflow activity of $1,352,836 and the related issuance of equity including stock options represented a non-cash financing inflow activity of $1,352,836.
The Company recorded the fair values based on independent valuations, discounted cash flow analyses, quoted market prices, contributory asset charges, and estimates made by management. The following table summarizes the August 15, 2018 preliminaryJuly 1, 2020 fair values of the assets acquired and liabilities assumed at December 31, 2018 and adjustments made between these preliminary balances and the final recorded fair value.assumed.
| | | | | | | | | | | | | | | | | |
| (in thousands) | Preliminary Balance | | Adjustments | | Final Balance
August 15, 2018 |
Trade receivables, net(a) | $ | 81,320 | | | $ | (8,175) | | | $ | 73,145 | |
| Prepaid expenses and other current assets | 17,342 | | | 965 | | | 18,307 | |
| Inventories | 4,757 | | | — | | | 4,757 | |
| Rental equipment | 853,986 | | | (1,210) | | | 852,776 | |
Property, plant and equipment(b) | 110,413 | | | 27,248 | | | 137,661 | |
| Intangible assets | | | | | | |
| Favorable leases | 3,976 | | | — | | | 3,976 | |
| Trade name | 3,000 | | | — | | | 3,000 | |
| Deferred tax assets, net | $ | 1,855 | | | $ | (1,855) | | | $ | — | |
| Total identifiable assets acquired | $ | 1,076,649 | | | $ | 16,973 | | | $ | 1,093,622 | |
| | | | | | |
| Accrued liabilities | $ | 31,551 | | | $ | 1,936 | | | $ | 33,487 | |
| Accounts payable | 37,678 | | | 421 | | | 38,099 | |
| Deferred revenue and customer deposits | 15,938 | | | — | | | 15,938 | |
| Deferred tax liabilities | — | | | 1,154 | | | 1,154 | |
| Total liabilities assumed | $ | 85,167 | | | $ | 3,511 | | | $ | 88,678 | |
| | | | | | | | |
Total goodwill(c) | $ | 215,764 | | | $ | (13,462) | | | $ | 202,302 | |
(a) As of the acquisition date, the fair value of accounts receivable was $73.1 million and the gross contractual amount was $89.0 million. The Company analyzed information available at the time of acquisition in estimating uncollectible receivables and the fair value of remaining receivables. The Company's analysis, as of the acquisition date, included an assessment of the risk of collectibility of receivables by analyzing historical payment trends, the status of collection efforts, and any other pertinent customer specific information that existed as of the acquisition date.Opening Balance Sheet
(b) Upon completion of the valuation analysis, the Company recorded a net increase in property, plant and equipment of $27.2 million related to the finalization of our valuations of acquired land. The fair value of acquired land was determined using valuations from third party specialists which were based on sales prices for comparable assets at the date of acquisition. | | | | | |
| (in thousands) | July 1, 2020 |
| Cash and cash equivalents | $ | 17,203 | |
| Trade receivables | 87,492 | |
| Inventories | 8,987 | |
| Prepaid expenses and other current assets | 13,717 | |
| Rental equipment | 1,032,672 | |
| Property, plant and equipment, net | 160,729 | |
| Operating lease assets | 92,054 | |
| Intangible assets | 374,500 | |
| Goodwill identified | 937,135 | |
| Other non-current assets | 2,520 | |
| Total identifiable assets acquired | 2,727,009 | |
| Accounts payable | (29,797) | |
| Accrued liabilities and interest | (40,335) | |
| Deferred revenue and customer deposits | (38,846) | |
| Operating lease liabilities | (89,968) | |
| Debt and finance lease liabilities | (897,244) | |
| Deferred tax liabilities | (276,555) | |
| Other long-term liabilities | (1,428) | |
| Total liabilities assumed | (1,374,173) | |
| Net assets acquired (purchase price) | $ | 1,352,836 | |
(c) The goodwill is reflective of ModSpace’sMobile Mini's going concern value and operational synergies that the Company expects to achieve that would not be available to other market participants. A portion of the goodwillGoodwill from the ModSpaceMobile Mini acquisition is not deductible for income tax purposes.
Mobile Mini generated $730.7 million of revenue and $147.3 million of pre-tax income in the year ended December 31, 2021, which is included in the consolidated statement of operations. Mobile Mini generated $316.5 million of revenue and $23.1 million of pre-tax income from the acquisition date to December 31, 2020, which is included in the consolidated statement of operations for the year ended December 31, 2020.Pro Forma Information
The unauditedbelow pro forma information below has been prepared using the purchase method of accounting, givingresults give effect to the Acton and ModSpace acquisitionsfollowing as if they had been completedoccurred on January 1, 2017.2019, (i) the Merger, (ii) borrowings under the Company's 2025 Secured Notes and 2020 ABL Facility (terms as defined in Note 9) used to repay certain debt in connection with the Merger, (iii) extinguishment of the Mobile Mini revolving credit facility and senior notes assumed in the Merger and immediately repaid, (iv) extinguishment of WillScot's 2017 ABL Facility and WillScot's 2022 Secured Notes (terms as defined in Note 9) repaid in connection with the Merger and (v) elimination of WillScot's non-controlling interest and WillScot's Class B Common Stock in connection with the Merger. See Note 10 for further details. The pro forma information is not necessarily indicative of the Company’s results of operations had the acquisitionsMerger been completed on the above date,January 1, 2019, nor is it necessarily indicative of the Company’s future results. The pro forma information does not reflect any cost savings from operating efficiencies, synergies, or synergiesrevenue opportunities that could result from the acquisition, and also does not reflect additional revenue opportunities following the acquisition.Merger.
| | | | | | | | | | | | | | |
| (unaudited, in thousands) | Year Ended December 31, 2018(a) | | Year Ended December 31, 2017(a) | |
| WillScot revenues | $ | 751,412 | | | | $ | 445,942 | | (b) | |
| Acton and ModSpace revenues | 312,609 | | | | 537,393 | | (c) | |
| Pro forma revenues | $ | 1,064,021 | | | | $ | 983,335 | | | |
| | | | | | | | |
| WillScot loss from operations before income tax | $ | (92,172) | | | | $ | (165,398) | | (d) | |
| Acton and ModSpace loss from operations before income tax | (7,457) | | | | (111,319) | | (c) | |
| Loss from operations before income tax before pro forma adjustments | (99,629) | | | | (276,717) | | | |
| Pro forma adjustments to combined loss from operations before income tax: | | | | | | | | |
| Impact of fair value adjustments/useful life changes on depreciation | 10,135 | | | | 13,557 | | (e) | |
| Intangible asset amortization | (625) | | (f) | | (1,708) | | (f) | |
| Interest expense | (41,178) | | (g) | | (75,031) | | (h) | |
| Elimination of Acton and ModSpace interest | 20,279 | | (i) | | 45,461 | | (i) | |
| Pro forma loss from operations before income tax | (111,018) | | (j) | | (294,438) | | | |
| Income tax benefit | (43,462) | | (k) | | (34,228) | | (k) | |
| Income from discontinued operations | — | | | 14,650 | | | |
| Pro forma net loss | $ | (67,556) | | | $ | (245,560) | | | |
(a) Pro forma results for the year ended December 31, 2017 reflects both Acton and ModSpace historical activity. Pro forma results for the year ended December 31, 2018 include ModSpace historical activity, but do not reflect any adjustments for Acton, as they were included in WillScot results for the entire year. Post-acquisition ModSpace and Acton revenues and pre-tax income are reflected in WillScot's historical revenue and pre-tax income amounts.
(b) Excludes historical revenues and pre-tax income from discontinued operations.
(c) Historical Acton revenues were $93.9 million and historical ModSpace revenues were $443.5 million, respectively, for the year ended December 31, 2017. Historical Acton pre-tax loss was $3.2 million and historical ModSpace pre-tax loss was $108.1 million, respectively, for the year ended December 31, 2017.
(d) Excludes historical revenues and pre-tax income from discontinued operations. Includes historical Corporate and other selling, general and administrative ("SG&A") expenses related to Algeco Group costs, which were $45.1 million for the year ended December 31, 2017.
(e) Depreciation of rental equipment and non-rental depreciation were adjusted for the fair value mark-ups of equipment acquired in the Acton and ModSpace acquisitions. For the year ended December 31, 2017, Acton had additional depreciation expense of $5.3 million and ModSpace had a reduction of $18.9 million. The useful lives assigned did not change significantly from the useful lives used by ModSpace.
(f) Amortization of the trade names acquired. A value of $0.7 million was assigned to the Acton tradename, which was amortized over one year. The ModSpace tradename was assigned a value of $3.0 million and a life of three years.
(g) In connection with the ModSpace acquisition, the Company drew an incremental $419.0 million on the ABL Facility (see Note 12) and issued $300.0 million of 2023 Secured Notes and $200.0 million of Unsecured Notes (see Note 12). An interest rate of 6.54% was used to calculate pro forma interest expense as a result of the ModSpace acquisition, which represents the weighted-average interest rate for the aforementioned borrowings at December 31, 2018. Interest expense includes amortization of related deferred financing fees on debt incurred in conjunction with the ModSpace acquisition.
(h) In connection with the Acton acquisition, the Company drew $237.1 million on the ABL Facility. The weighted-average interest rate of ABL borrowings was 4.02%. In connection with the ModSpace acquisition, the Company drew an incremental $419.0 million on the ABL Facility and issued $300.0 million of secured notes and $200.0 million of unsecured notes. The weighted-average interest rate of all ModSpace acquisition borrowings was 6.54%. Interest expense includes amortization of related deferred financing fees on debt incurred in conjunction with ModSpace acquisition.
(i) Interest on Acton and ModSpace historical debt was eliminated. Historical Acton interest was $5.1 million and historical ModSpace interest was $40.4 million, respectively, for the year ended December 31, 2017.
(j) Pro forma loss from operations before income taxes includes $15.5 million of restructuring expense, $30.0 million of integration costs, and $20.1 million of transaction costs incurred by WillScot for the year ended December 31, 2018. Additionally, pro forma pre-tax loss for the year
The tables below present unaudited pro forma combined statements of operations information for the years ended December 31, 2018 also includes $20.5 million of interest expense associated with bridge financing fees incurred in connection with the acquisition of ModSpace.2020 and 2019:
(k) As the combined pro forma company was in a tax loss position in 2018 and 2017, all pro forma adjustments for US tax effects are at the federal and state US statutory tax rate of 25.8% since the adjustments represent future deductible or taxable temporary differences.
Transaction and Integration Costs
The Company incurred $26.6 million in integration costs within SG&A expenses for the year ended December 31, 2019 related to the ModSpace acquisition. The Company incurred $30.0 million in integration costs related to the acquisitions of ModSpace, Acton and Tyson in 2018.
The Company incurred $20.1 million in transaction costs during the year ended December 31, 2018 related to the ModSpace acquisition.
NOTE 3 - Discontinued Operations
WSII’s Remote Accommodations Business was transferred to another entity included in the Algeco Group prior to the Business Combination in 2017. Accordingly, the Remote Accommodations segment has been reported as discontinued operations in the condensed consolidated statements of operations for the year ended December 31, 2017.
Significant Accounting Policies Related to Discontinued Operations
Revenue Recognition - Remote Accommodations
Revenue related to the Remote Accommodations Business, such as lodging and related ancillary services, was recognized pursuant to the terms of the contractual relationships with customers in the period in which services were provided. In some contracts, rates varied over the contract term. In these cases, revenue was generally recognized on a straight-line basis over the contract. Certain of the remote accommodations arrangements contained a lease of the lodging facilities and other non-lease services. Arrangement consideration was allocated between lodging and services based on the relative estimated selling price of each deliverable. The estimated price of the lodging and services deliverables was based on the price of lodging and services when sold separately, or based upon the best estimate of selling price method.
Remote Accommodations Business revenue pertained entirely to the Remote Accommodations segment (see Note 20). There were no revenues or costs related to the Remote Accommodations segment for the year ended December 31, 2019 or 2018. Revenues and costs related to the Remote Accommodations Business for the period ended November 28, 2017 were as follows:
| | | | | | | | | | | | | | | | | |
| (unaudited, in thousands) | | Year Ended December 31, 2020 | | Year Ended December 31, 2019 | |
| WillScot revenues | | $ | 1,367,645 | | | $ | 1,063,665 | | |
| Mobile Mini revenues | | 284,240 | | | 620,018 | | |
| Pro forma revenues | | $ | 1,651,885 | | | $ | 1,683,683 | | |
| | | | | |
| WillScot Mobile Mini pretax income (loss) | | $ | 23,889 | | | $ | (123,356) | | (a) |
| Mobile Mini pretax income | | 37,875 | | | 111,705 | | |
| Pro forma pretax income (loss) | | 61,764 | | | (11,651) | | |
| Pro forma adjustments to combined pretax income (loss): | | | | | |
| Elimination of Merger transaction costs | | 80,852 | | | — | | (b) |
| Impact of fair value mark-ups on rental fleet depreciation | | (2,334) | | | (4,667) | | (c) |
| Other depreciation expense and intangible asset amortization | | (11,397) | | | (22,399) | | (d) |
| Interest expense | | (6,113) | | | (1,916) | | (e) |
| Elimination of Mobile Mini interest | | 15,921 | | | 39,672 | | (f) |
| Elimination of loss on extinguishment of debt | | 19,682 | | | 1,512 | | (g) |
| Pro forma pretax income | | 158,375 | | | 551 | | |
| Income tax expense | | (34,549) | | | (28,892) | | (h) |
| Pro forma net income | | $ | 123,826 | | | $ | (28,341) | | |
| | | | | |
(in thousands)(a) | Period Ended November 28, 2017Excludes impact of non-controlling interest which was eliminated as part of the Sapphire Exchange. See Note 10. |
Remote accommodations revenue: | |
Lease revenue(b) | $ | 53,571 | Eliminates discrete Merger transaction costs incurred as a result of the Mobile Mini Merger. |
Service revenue(c) | 67,282 | Depreciation on rental equipment and property, plant and equipment were adjusted for the determination of the fair value of equipment acquired in the Mobile Mini Merger. |
Total remote accommodations revenue(d) | $ | 120,853 | |
| Represents the differential in other depreciation and amortization expense related to the fair value purchase accounting adjustments as a result of the Merger, principally the amortization of the Mobile Mini customer relationship valued at $209.0 million. |
Remote accommodation costs:(e) | In connection with the Merger, the Company entered into a new ABL Facility and drew $1.47 billion at close with an estimated interest rate of 2.046%, issued the 2025 Secured Notes at 6.125%, repaid the 2022 Secured Notes and repaid the 2017 ABL Facility. Interest and amortization of deferred financing fees for the 2020 ABL Facility and the 2025 Secured Notes has been included offset by the removal of interest and amortization of deferred financing fees attributable to the 2022 Secured Notes and the 2017 ABL Facility. See Note 9 for definitions of terms. |
Cost of leases(f) | $ | 7,837 | Interest and amortization of deferred financing fees on the senior notes and line of credit maintained by Mobile Mini which were assumed at acquisition and repaid immediately using proceeds from the 2020 ABL Facility and 2025 Secured Notes was eliminated. See Note 9 for definition of terms. |
Cost(g) | Elimination of services | 46,134 | loss on extinguishment of debt in connection with the redemption premium on the 2022 Secured Notes and unamortized deferred financing costs on the 2022 Secured Notes and 2017 ABL Facility. See Note 9 for definitions of terms. |
Total remote accommodations costs(h) | $ | 53,971 | Reflects the recorded income tax provision plus the adjustment to recognize the income tax impacts of the unaudited pro forma adjustments for which a tax expense is recognized using a US federal and state statutory tax rate of 25.5%. This rate may vary from the effective tax rates of the historical and combined businesses. In addition, eliminates the 2020 reversal of $54.6 million of valuation allowance as a result of reassessment of the realizability of deferred tax assets as a result of the Merger. See Note 12. |
Rental Equipment - Remote AccommodationsAsset Acquisitions
Remote accommodationsDuring 2021, the Company acquired certain assets and liabilities of several smaller entities, which consisted primarily of 15,700 storage units and 5,800 modular units for $147.2 million in cash. The accompanying consolidated financial statements include $142.1 million of rental equipment was measured at cost less accumulated depreciationas a result of these acquisitions.
Transaction and impairment losses. Cost included expenditures that were directly attributableIntegration Costs
The Company recorded $1.4 million and $64.1 million in transaction costs in the years ended December 31, 2021 and 2020, respectively. The Company records integration costs within selling, general and administrative ("SG&A") expense. The Company incurred $28.4 million and $16.6 million in integration costs related to the acquisition ofother acquisitions and the asset. Costs of improvements and betterments to remote accommodations rental equipment were capitalized when such costs extended the useful life of the equipment or increased the rental value of the unit. Costs incurred for remote accommodations equipment to meet a particular customer specification were capitalized and depreciated over the lease term, taking in consideration the residual value of the asset. Maintenance and repair costs were expensed as incurred.
Depreciation was generally computed using the straight-line method over estimated useful life, as follows:
| | | | | | | | | | | |
| Estimated
Useful Life | | | Residual
Value |
Remote accommodations | 15 years | | 0 - 25% |
Results from Discontinued Operations
Income from discontinued operations, net of tax, for the period ended November 28, 2017 was as follows:
| | | | | |
(in thousands) | Period Ended November 28, 2017 |
Remote accommodations revenue | $ | 120,853 | |
Rental unit sales | 1,522 | |
Remote accommodations costs of leasing and services | 53,971 | |
Rental unit cost of sales | 901 | |
Depreciation of rental equipment | 21,995 | |
Gross profit | 45,508 | |
Selling, general and administrative expenses | 11,513 | |
Other depreciation and amortization | 4,589 | |
Restructuring costs | 1,714 | |
Other income | (52) | |
Operating profit | 27,744 | |
Interest expense | 2,444 | |
Income from discontinued operations, before income tax | 25,300 | |
Income tax expense | 10,650 | |
Income from discontinued operations, net of tax | $ | 14,650 | |
Cash flows from the Company’s discontinued operations are included in the consolidated statements of cash flowsMerger for the years ended December 31, 2017.2021 and 2020, respectively. The significant cash flow items from discontinued operationsCompany incurred $26.6 million in integration costs related to the ModSpace acquisition for the yearsthe year ended December 31, 2017 were as follows:
| | | | | |
(in thousands) | 2017 | |
Depreciation and amortization | $ | 26,584 | |
Capital expenditures | $ | 9,890 | |
2019.
NOTE 43 - Revenue
Revenue Disaggregation
Geographic Areas
The Company had total revenue in the following geographic areas for the years ended December 31, as follows:
| | | Year Ended December 31, | | | Year Ended December 31, |
| (in thousands) | (in thousands) | 2019 | | 2018 | | 2017 | (in thousands) | 2021 | | 2020 | | 2019 |
| US | US | | $ | 966,766 | | | $ | 685,350 | | | $ | 396,039 | | US | $ | 1,652,967 | | | $ | 1,227,465 | | | $ | 966,766 | |
| Canada | Canada | 80,514 | | | 50,144 | | | 36,357 | | Canada | 116,070 | | | 79,630 | | | 80,514 | |
| Mexico | Mexico | | 16,385 | | | 15,918 | | | 13,546 | | Mexico | 14,834 | | | 14,190 | | | 16,385 | |
| UK | | UK | 111,026 | | | 46,360 | | | — | |
| Total revenues | Total revenues | $ | 1,063,665 | | | $ | 751,412 | | | $ | 445,942 | | Total revenues | $ | 1,894,897 | | | $ | 1,367,645 | | | $ | 1,063,665 | |
Major Product and Service Lines
ModularEquipment leasing is the Company’sCompany's core business which significantly impactsand the nature, timing, and uncertaintyprimary driver of the Company’sCompany's revenue and cash flows. This includes rental of both modular space, portable space and portable storagetank and pump units along with VAPS, which include furniture, steps, ramps, basic appliances, internet connectivity devices, and other items used by customers in connection with the Company's products. Modular leasingLeasing is complemented by new unit sales and sales of rental units. In connection with its leasing and sales activities, the Company provides services including delivery and installation, maintenance and ad hoc services and removal services at the end of lease transactions.
The Company’s revenue by major product and service line for the years ended December 31, was as follows:
| | | Year Ended December 31, | | | Year Ended December 31, |
| (in thousands) | (in thousands) | | 2019 | | 2018 | | 2017 | (in thousands) | 2021 | | 2020 | | 2019 |
| Modular space leasing revenue | Modular space leasing revenue | | $ | 516,299 | | | $ | 360,240 | | | $ | 206,556 | | Modular space leasing revenue | $ | 736,066 | | | $ | 596,880 | | | $ | 516,299 | |
| Portable storage leasing revenue | Portable storage leasing revenue | | 24,277 | | | 21,682 | | | 17,480 | | Portable storage leasing revenue | 259,308 | | | 125,216 | | | 24,277 | |
VAPS(a) | | 159,327 | | | 104,870 | | | 59,088 | | |
| Tank and pump leasing revenue | | Tank and pump leasing revenue | 71,404 | | | 29,798 | | | — | |
VAPS and third party leasing revenues(a) | | VAPS and third party leasing revenues(a) | 284,901 | | | 202,938 | | | 159,327 | |
Other leasing-related revenue(b) | Other leasing-related revenue(b) | | 44,282 | | | 31,443 | | | 14,697 | | Other leasing-related revenue(b) | 60,444 | | | 46,615 | | | 44,282 | |
| Modular leasing revenue | | 744,185 | | | 518,235 | | | 297,821 | | |
| Modular delivery and installation revenue | | 220,057 | | | 154,557 | | | 89,850 | | |
| Leasing revenue | | Leasing revenue | 1,412,123 | | | 1,001,447 | | | 744,185 | |
| Delivery and installation revenue | | Delivery and installation revenue | 374,682 | | | 274,156 | | | 220,057 | |
| Total leasing and services revenue | Total leasing and services revenue | | 964,242 | | | 672,792 | | | 387,671 | | Total leasing and services revenue | 1,786,805 | | | 1,275,603 | | | 964,242 | |
| New unit sales revenue | New unit sales revenue | | 59,085 | | | 53,603 | | | 36,371 | | New unit sales revenue | 52,882 | | | 53,093 | | | 59,085 | |
| Rental unit sales revenue | Rental unit sales revenue | | 40,338 | | | 25,017 | | | 21,900 | | Rental unit sales revenue | 55,210 | | | 38,949 | | | 40,338 | |
| Total revenues | Total revenues | | $ | 1,063,665 | | | $ | 751,412 | | | $ | 445,942 | | Total revenues | $ | 1,894,897 | | | $ | 1,367,645 | | | $ | 1,063,665 | |
(a) Includes $15.9 $28.5 million $10.8, $18.8 million, and $8.4$15.9 million of VAPS service revenue for the years ended December 31, 2019, 20182021, 2020 and 2017,2019, respectively.
(b) PrimarilyIncludes primarily damage billings, delinquent payment charges, and other processing fees.
Modular Leasing and Services Revenue
The majority of revenue (68%revenue (73%, 68%72%, and 65%68% for the years ended December 31, 2021, 2020 and 2019, 2018 and 2017, respectively) is generated by lease income subject to the guidance of ASC 840, or ASC 842 for periods after January 1, 2019.842. The remaining revenue is generated by performance obligations in contracts with customers for services or sale of units subject to the guidance in ASC 605, or ASC 606 for periods after January 1, 2019.606.
Future committed modular leasing revenues under non-cancelable operating leases with the Company’s customers at December 31, 20192021 for the years ended December 31, 2020 - 20242022 through 2026 and thereafter were as follows:
| | (in thousands) | (in thousands) | Operating Leases | (in thousands) | Operating Leases |
| 2020 | | $ | 215,084 | | |
| 2021 | 73,135 | | |
| 2022 | 2022 | | 28,913 | | 2022 | $ | 284,137 | |
| 2023 | 2023 | 11,727 | | 2023 | 117,363 | |
| 2024 | 2024 | 4,160 | | 2024 | 42,646 | |
| 2025 | | 2025 | 16,778 | |
| 2026 | | 2026 | 8,260 | |
| Thereafter | Thereafter | 2,772 | | Thereafter | 5,431 | |
| Total | Total | $ | 335,791 | | Total | $ | 474,615 | |
Receivables Contract Assets and Liabilities
As reflected above, approximately 68% of the Company's rental revenue is generated by lease income subject to the guidance of ASC 840, or ASC 842 for periods after January 1, 2019. The customers that are responsible for the remaining revenue that is accounted for under ASC 606 (and ASC 605 prior to 2019) are generally the same customers that rent the Company's equipment. The Company manages credit risk associated with its accounts receivables at the customer level. Because the same customers generate the revenues that are accounted for under both ASC 606 and ASC 842, the discussions below on credit risk and the Company's allowance for doubtful accountscredit losses address the Company's total revenues.
Concentration of credit risk with respect to the Company's receivables is limited because of a large number of geographically diverse customers who operate in a variety of end user markets. No single customer accounted for more than 1.5% and 1.2% of the Company’s receivables at December 31, 2021 and 2020, respectively. The Company's top five customers with the largest open receivables balances represented 4.1%represented 5.0% and 4.9% of the total receivables balance as of December 31, 2019.2021 and 2020, respectively. The Company manages credit risk through credit approvals, credit limits, and other monitoring procedures.
The Company's allowance for doubtful accountscredit losses reflects its estimate of the amount of receivables that it will be unable to collect. The estimated losses are based upon a review of outstanding receivables, the related aging, including specific accounts if deemed necessary, and on our historical collection experience. The estimated losses are calculated using the loss rate method based upon a review of outstanding receivables, related aging, and on historical collection experience. The Company's estimates reflect changing circumstances, including changes in the economy or in the particular circumstances of individual customers, and as a result, the Company may be required to increase or decrease its allowance. During the years ended December 31, 2019, 20182021, 2020, and 2017,2019, the Company recognized bad debt expense to reflect changes in the allowance for credit losses of $4.5$17.5 million, $7.7$13.4 million, and $4.7$4.5 million, respectively, within SG&A expense in its consolidated statements of income, which included changes in its allowances foroperations.
doubtful accounts. In accordance with the collectibility provisions of ASC 842, the Company has recorded $10.0 million as a reduction of revenue in 2019 that would have been recorded as bad debt expense prior to the adoption of ASC 842.Contract Assets and Liabilities
When customers are billed in advance for services, the Company defers recognition of revenue until the related services are performed, which generally occurs at the end of the contract. As of January 1, 2019 and upon the implementation of ASC 606, the Company had approximately $32.1 millionThe balance sheet classification of deferred revenue is determined based on the contractual lease term. For contracts that relatescontinue beyond their initial contractual lease term, revenue continues to removalbe deferred until the services for lease transactions and advance billings for sale transactions, which are withinperformed. During the scope of ASC 606. As ofyears ended December 31, 2019, the Company had approximately $42.62021 and 2020, $40.8 million and $37.5 million, respectively, of deferred revenue relating to these services, which are included in deferred revenue and customer deposits in the consolidated balance sheets. During the year endedwas recognized as revenue. At December 31, 2019, $14.02021 and 2020, the Company had approximately $79.4 million and $74.1 million, respectively, of deferred revenue at January 1, 2019, relatingrelated to removal services for lease transactions and advance billings for sale transactions was recognized as revenue.these services.
The Company does not have material contract assets, and it did not recognize any material impairments of any contract assets.
The Company's uncompleted contracts with customers have unsatisfied (or partially satisfied) performance obligations. For the future services revenues that are expected to be recognized within twelve months, the Company has elected to utilize the optional disclosure exemption made available regarding transaction price allocated to unsatisfied (or partially unsatisfied) performance obligations. The transaction price for performance obligations that will be completed in greater than twelve months is variable based on the costs ultimately incurred to provide those services and therefore the Company is applying the optional exemption to omit disclosure of such amounts.
The primary costs to obtain contracts for new and rental unit sales with the Company's customers are commissions. The Company pays its sales force commissions on the sale of new and rental units. For new and rental unit sales, the period benefited by each commission is less than one year. As a result, the Company has applied the practical expedient for incremental costs of obtaining a sales contract and will expenseexpenses commissions as incurred.
NOTE 54 - Leases
As discussed in Note 1, at December 31, 2019, the Company retrospectively adopted ASC 842, effective January 1, 2019. As a result of the retrospective adoption to January 1, 2019, the Company recast the unaudited quarterly results as shown in Note 22.
As of December 31, 2019,2021, the undiscounted future lease payments for operating and finance lease liabilities were as follows:
| | | (in thousands) | |
| 2020 | | $ | 37,648 | | |
| 2021 | | 33,903 | | |
| (in thousands) | | (in thousands) | Operating | | Finance |
| 2022 | 2022 | | 27,769 | | 2022 | $ | 63,679 | | | $ | 21,842 | |
| 2023 | 2023 | | 21,926 | | 2023 | 52,893 | | | 17,665 | |
| 2024 | 2024 | | 16,685 | | 2024 | 44,859 | | | 14,743 | |
| 2025 | | 2025 | 37,850 | | | 14,851 | |
| 2026 | | 2026 | 27,853 | | | 12,839 | |
| Thereafter | Thereafter | | 47,916 | | Thereafter | 63,181 | | | 14,202 | |
| Total lease payments | Total lease payments | | 185,847 | | Total lease payments | 290,315 | | | 96,142 | |
| Less: interest | Less: interest | | (38,285) | | Less: interest | (43,054) | | | (7,092) | |
| Present value of lease liabilities | Present value of lease liabilities | | $ | 147,562 | | Present value of lease liabilities | $ | 247,261 | | | $ | 89,050 | |
As of December 31, 2018, under the prior lease guidance of ASC 840,2020, the undiscounted future lease payments for operating leasesand finance lease liabilities were as follows:
| | | (in thousands) | |
| 2019 | | $ | 38,876 | | |
| 2020 | | 29,797 | | |
(in thousands) | | (in thousands) | Operating | | Finance |
| 2021 | 2021 | | 24,627 | | 2021 | $ | 60,120 | | | $ | 18,252 | |
| 2022 | 2022 | | 18,879 | | 2022 | 51,184 | | | 17,158 | |
| 2023 | 2023 | | 13,467 | | 2023 | 41,074 | | | 13,707 | |
| 2024 | | 2024 | 33,336 | | | 10,786 | |
| 2025 | | 2025 | 26,542 | | | 10,893 | |
| Thereafter | Thereafter | | 25,055 | | Thereafter | 67,421 | | | 13,410 | |
| Total lease payments | Total lease payments | | $ | 150,701 | | Total lease payments | 279,677 | | | 84,206 | |
| Less: interest | | Less: interest | (47,853) | | | (6,332) | |
| Present value of lease liabilities | | Present value of lease liabilities | $ | 231,824 | | | $ | 77,874 | |
The Company’s lease activity during the yearyears ended December 31, 20192021 and 2020 was as follows:
| | | | | | | | |
Financial Statement Line | | (in thousands) |
Operating Lease Expense | | |
Fixed lease expense | | | |
Cost of leasing and services | | $ | 6,737 | |
Selling, general and administrative | | 34,058 |
Lease impairment expense and other related charges | | 2,611 |
Short-term lease expense | | |
Cost of leasing and services | | 29,729 |
Selling, general and administrative | | 2,071 |
Variable lease expense | | |
Cost of leasing and services | | 3,787 |
Selling, general and administrative | | 4,231 |
Total operating lease expense | | $ | 83,224 | |
| | | | | | | | | | | |
| Year Ended December 31, |
Financial Statement Line (in thousands) | 2021 | | 2020 |
| Finance Lease Expense | | | |
| Amortization of finance lease assets | $ | 19,102 | | | $ | 9,556 | |
| Interest on obligations under finance leases | 2,283 | | | 1,081 | |
| Total finance lease expense | $ | 21,385 | | | $ | 10,637 | |
| | | |
| Operating Lease Expense | | | |
| Fixed lease expense | | | |
| Cost of leasing and services | $ | 3,979 | | | $ | 5,723 | |
| Selling, general and administrative | 60,253 | | | 43,482 | |
| Lease impairment expense and other related charges | 2,028 | | | 2,800 | |
| Short-term lease expense | | | |
| Cost of leasing and services | 22,335 | | | 25,576 | |
| Selling, general and administrative | 894 | | | 2,067 | |
| Lease impairment expense and other related charges | — | | | 471 | |
| Variable lease expense | | | |
| Cost of leasing and services | 7,794 | | | 6,981 | |
| Selling, general and administrative | 6,355 | | | 5,436 | |
| Lease impairment expense and other related charges | 492 | | | 855 | |
| Total operating lease expense | $ | 104,130 | | | $ | 93,391 | |
During the year ended December 31, 2019, theThe Company initiated certain restructuring plans associated with the ModSpace2018 acquisition of Modular Space Holdings, Inc. ("ModSpace") and the Merger in order to capture operating synergies as a result of integrating ModSpace into WillScot.these entities. The restructuring activities primarily includeincluded the termination of leases for duplicative branches, equipment, and corporateother facilities. As part of this plan,these plans, certain of its leased locations were vacated and leases were terminated or impaired. The
During the year ended December 31, 2021, the Company recorded $8.7$2.9 million in lease impairment expense and other related charges which is comprised of $0.3 million loss on lease exit and impairment charges and $2.6 million in closed location rent expense. During the year ended December 31, 2020, the Company recorded $4.9 million in lease impairment expense and other related charges which is comprised of $0.7 million loss on lease exit and $4.2 million in closed location rent expense. During the year ended December 31, 2019, the Company recorded $8.7 million in lease impairment expense and other related charges which is comprised of $4.2 million in ROU asset impairment on 4 leasedleased locations no longer used in operations, $1.9 million loss on lease exit and $2.6 million in closed location rent expense.
Rent expense included in the consolidated statement of operations was $31.0 million and $22.0 millionSupplemental cash flow information related to leases for the years ended December 31, 20182021 and 2017, respectively.
Supplemental cash flow information related to operating leases for the year ended December 31, 2019 was2020 were as follows:
| | | | | | | | | | | |
| Year Ended December 31, |
Supplemental Cash Flow Information (in thousands) | 2021 | | 2020 |
| Cash paid for the amounts included in the measurement of lease liabilities: | | | |
| Operating cash outflows from operating leases | $ | 65,101 | | | $ | 45,883 | |
| Operating cash outflows from finance leases | $ | 2,309 | | | $ | 1,058 | |
| Financing cash outflows from finance leases | $ | 17,399 | | | $ | 8,510 | |
| | | |
| Right of use assets obtained in exchange for lease obligations | $ | 70,439 | | | $ | 33,576 | |
| Assets obtained in exchange for finance leases | $ | 27,835 | | | $ | 9,089 | |
| | | | | | | | |
Supplemental Cash Flow Information: | | (in thousands) |
Cash paid for the amounts included in the measurement of lease liabilities | | $ | 42,111 | |
Right of use assets obtained in exchange for lease obligations | | $ | 43,013 | |
Weighted-average remaining operating lease termterms and the weighted average discount raterates as of December 31 2019 were as follows:
| | | | | | | | |
Lease Terms and Discount Rates: | | |
Weighted-average remaining lease term | | 6.51 years |
Weighted-average discount rate | | 7.0 | % |
The Company presents information related to leasing revenues in Note 4 – Revenue. | | | | | | | | | | | |
| Lease Terms and Discount Rates | 2021 | | 2020 |
| Weighted-average remaining lease term - operating leases | 6.1 years | | 6.4 years |
| Weighted-average discount rate - operating leases | 5.0 | % | | 5.7 | % |
| Weighted-average remaining lease term - finance leases | 4.5 years | | 4.6 years |
| Weighted-average discount rate - finance leases | 2.9 | % | | 2.9 | % |
NOTE 65 - Inventories
Inventories at December 31, consisted of the following:
| | | | | | | | | | | |
| (in thousands) | 2019 | | | 2018 | |
| Raw materials and consumables | $ | 15,387 | | | $ | 16,022 | |
| Work in process | — | | | 196 | |
| Total inventories | $ | 15,387 | | | $ | 16,218 | |
| | | | | | | | | | | |
| (in thousands) | 2021 | | 2020 |
| Raw materials | $ | 26,854 | | | $ | 19,560 | |
| Finished units | 5,885 | | | 4,171 | |
| Inventories | $ | 32,739 | | | $ | 23,731 | |
NOTE 7 - Prepaid Expenses and Other Current Assets
Prepaid expenses and other current assets at December 31 consisted of the following:
| | | | | | | | | | | |
| (in thousands) | 2019 | | | 2018 | |
| Prepaid expenses | $ | 5,726 | | | $ | 9,200 | |
| Other current assets | 8,895 | | | 12,506 |
| Receivables due from affiliates | — | | | 122 | |
| Total prepaid expenses and other current assets | $ | 14,621 | | | $ | 21,828 | |
NOTE 86 - Rental Equipment, net
Rental equipment, net at December 31 consisted of the following:
| | (in thousands) | (in thousands) | 2019 | | | 2018 | | (in thousands) | 2021 | | 2020 |
| Modular units and portable storage | $ | 2,455,471 | | | $ | 2,333,776 | | |
| Value-added products | 121,855 | | | 90,526 | | |
| Modular space units | | Modular space units | $ | 3,005,195 | | | $ | 2,796,284 | |
| Portable storage units | | Portable storage units | 758,619 | | | 653,707 | |
| Tank and pump products | | Tank and pump products | 156,112 | | | 132,071 | |
| Value added products | | Value added products | 168,419 | | | 143,652 | |
| Total rental equipment | Total rental equipment | 2,577,326 | | | 2,424,302 | | Total rental equipment | 4,088,345 | | | 3,725,714 | |
| Less: accumulated depreciation | Less: accumulated depreciation | (632,890) | | | (495,012) | | Less: accumulated depreciation | (1,007,364) | | | (794,068) | |
| Rental equipment, net | Rental equipment, net | $ | 1,944,436 | | | $ | 1,929,290 | | Rental equipment, net | $ | 3,080,981 | | | $ | 2,931,646 | |
In 2021, certain of the Company’s rental equipment in Louisiana was adversely impacted by Hurricane Ida. The Company maintains insurance on its rental equipment, generally in the form of replacement cost policies. Such policies are subject to varying deductibles and other conditions. Based on management’s preliminary estimates of potential losses net of insurance recoveries, the estimated impact to our consolidated financial statements will be immaterial.
NOTE 97 – Property, Plant and Equipment, net
Property, plant and equipment, net at December 31 consisted of the following:
| | | | | | | | | | | |
| (in thousands) | 2019 | | | 2018 | |
| Land, buildings and leasehold improvements | $ | 139,861 | | | $ | 185,870 | |
| Manufacturing and office equipment | 62,169 | | | 58,481 | |
| Software and other | 27,342 | | | 29,632 | |
| Total other property, plant and equipment | 229,372 | | | 273,983 | |
| Less: accumulated depreciation | (81,683) | | | (90,233) | |
| Property, plant and equipment, net | $ | 147,689 | | | $ | 183,750 | |
| | | | | | | | | | | |
| (in thousands) | 2021 | | 2020 |
| Land, buildings, and leasehold improvements | $ | 167,132 | | | $ | 154,210 | |
| Vehicles and equipment | 185,918 | | | 171,881 | |
| Office furniture, fixtures and software | 87,613 | | | 75,928 | |
| Total property, plant and equipment | 440,663 | | | 402,019 | |
| Less: accumulated depreciation | (128,485) | | | (98,369) | |
| Property, plant and equipment, net | $ | 312,178 | | | $ | 303,650 | |
Depreciation expense related to property, plant and equipment was $11.4was $50.8 million, $12.2$28.9 million, and $8.7$11.4 million for the years ended December 31, 2019, 20182021, 2020 and 2017,2019, respectively.
As of December 31, 2018,2021 and 2020, the gross cost of property, plant and equipment assets under capitalfinance leases was $0.8$98.6 million and $78.7 million, respectively, with related accumulated depreciation of $0.7 million.$27.4 million and $9.5 million, respectively. The depreciation expense for these assets is presented in other depreciation and amortization in the consolidated statementstatements of operations.
As more fully disclosed in Note 1, the Company had previously entered into various sale-leaseback transactions associated with several of its branches in North America. In connection with the adoption of ASC 842 as of January 1, 2019, the Company reversed the previous accounting and reduced property, plant and equipment by $31.0 million.
Assets Held for Sale
During the year ended December 31, 2019, the Company closed 11 owned branch facilities and reclassified them from property, plant and equipment to assets held for sale and recorded an impairment of $2.9 million in impairment losses on long-lived assets. The Company sold 9 held for sale properties for net cash proceeds of $18.5 million during the year ended December 31, 2019.
During the year ended December 31, 2018, the Company reclassified 3 branch facilities from property, plant and equipment to assets held for sale and recognized an impairment charge of $1.6 million in impairment losses on long-lived assets.
The fair value of the assets held for sale is a Level 2 fair value measure and was calculated using current sales prices for comparable assets in the market.
NOTE 108 - Goodwill and Intangible Assets
Goodwill
Changes in the carrying amount of goodwill were as follows: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| (in thousands) | NA Modular | | NA Storage | | UK Storage | | Tank and Pump | | Total |
| Balance at December 31, 2019 | $ | 235,177 | | | $ | — | | | $ | — | | | $ | — | | | $ | 235,177 | |
| Acquisition of Mobile Mini | — | | | 726,529 | | | 59,183 | | | 143,262 | | | 928,974 | |
| Effects of movements in foreign exchange rates | 651 | | | — | | | 6,417 | | | — | | | 7,068 | |
| Balance at December 31, 2020 | 235,828 | | | 726,529 | | | 65,600 | | | 143,262 | | | 1,171,219 | |
| Changes to Mobile Mini purchase accounting | 285,000 | | | (233,666) | | | — | | | (43,173) | | | 8,161 | |
| Effects of movements in foreign exchange rates | 221 | | | (311) | | | (502) | | | 18 | | | (574) | |
| Balance at December 31, 2021 | $ | 521,049 | | | $ | 492,552 | | | $ | 65,098 | | | $ | 100,107 | | | $ | 1,178,806�� | |
| | | | | | | | | | | | | | | | | |
| Modular – US | | Modular – Other
North America | | Total |
| Balance at December 31, 2017 | $ | 28,609 | | | $ | — | | | $ | 28,609 | |
| Acquisition of businesses | 183,711 | | | 35,128 | | | 218,839 |
| Changes to preliminary purchase price accounting | 944 | | | — | | | 944 | |
| Effects of movements in foreign exchange rates | — | | | (1,375) | | | (1,375) | |
| Balance at December 31, 2018 | 213,264 | | | 33,753 | | | 247,017 | |
| Changes to preliminary purchase price accounting | (9,331) | | | (4,148) | | | (13,479) | |
| Effects of movements in foreign exchange rates | — | | | 1,639 | | | 1,639 | |
| Balance at December 31, 2019 | $ | 203,933 | | | $ | 31,244 | | | $ | 235,177 | |
The Company acquired ModSpace in August 2018 and finalized the valuation of the acquired net assets in the third quarter of 2019. The acquisition of ModSpace resulted in the recognition of $171.3 million of goodwill in the Modular - US segment (as defined in Note 20) which is non-deductible for income tax purposes, and $31.0 million of goodwill in the Modular - Other North America segment (as defined in Note 20), a portion of which is deductible for income tax purposes.
The Company acquired Tyson in January 2018 and Acton in December 2017, and finalized the valuation of the acquired net assets of both Tyson and Acton in the fourth quarter of 2018. The acquisition of Tyson and Acton resulted in the recognition of $3.1 million and $29.5 million of goodwill in the Modular - US segment (as defined in Note 20).
The Company conducted its annual goodwill impairment test by performing a quantitative assessmentof goodwill as of October 1, 2019. After conducting an analysis of the fair value of each reporting unit as of October 1, 2019, the Company2021 and determined that there was no impairment of goodwill identified as a result of the annual impairment analysis.
During the fourth quarter of 2017, the Company recognized a goodwill impairment charge of $60.7 million, equal to the difference between the carrying value and estimated fair value of the Canadian reporting unit. The impairment was primarily driven by a longer expected recovery period in the estimated future cash flows for the reporting unit, specifically as it related to customers in the oil and gas industry.
Accumulated historical goodwill impairment losses were $792.8 million asand pertain to the NA Modular segment prior to Double Eagle Acquisition Corporation's ("DEAC") acquisition of Williams Scotsman International, Inc. ("WSII") from Algeco Scotsman Global S.à r.l. in 2017. There were no goodwill impairments recorded for the years ended December 31, 2019, 20182021, 2020 and 2017. The $792.8 million2019.
Changes to Mobile Mini purchase accounting are largely the result of accumulated impairment losses asthe finalization of December 31, 2019 includes: $726.5 millionthe assignment of losses pertaininggoodwill to the Modular - US segment and $66.3 million of losses pertaining toreporting units during the Modular - Other North America segment, respectively.measurement period.
IntangiblesIntangible Assets
Intangible assets other than goodwill at December 31, consisted of the following:
| | | December 31, 2019 | | | December 31, 2021 |
| (in thousands) | (in thousands) | Weighted average remaining life (in years) | | Gross carrying amount | | Accumulated amortization | | Net book value | (in thousands) | Weighted average remaining life (in years) | | Gross carrying amount | | Accumulated amortization | | Net book value |
| Intangible assets subject to amortization: | Intangible assets subject to amortization: | | Intangible assets subject to amortization: | |
| ModSpace trade name | 1.7 | | $ | 3,000 | | | $ | (1,375) | | | $ | 1,625 | | |
| Total intangible assets subject to amortization | | 3,000 | | | (1,375) | | | 1,625 | | |
| | Mobile Mini customer relationships | | Mobile Mini customer relationships | 6.6 | | $ | 209,000 | | | $ | (38,447) | | | $ | 170,553 | |
| Technology | | Technology | 4.5 | | 1,500 | | | (375) | | | 1,125 | |
| Indefinite-lived intangible assets: | Indefinite-lived intangible assets: | | Indefinite-lived intangible assets: | |
| Trade names | | 125,000 | | | — | | | 125,000 | | |
| Trade name - Mobile Mini | | Trade name - Mobile Mini | | 164,000 | | | — | | | 164,000 | |
| Trade name - WillScot | | Trade name - WillScot | | 125,000 | | | — | | | 125,000 | |
| Total intangible assets other than goodwill | Total intangible assets other than goodwill | | $ | 128,000 | | | $ | (1,375) | | | $ | 126,625 | | Total intangible assets other than goodwill | | $ | 499,500 | | | $ | (38,822) | | | $ | 460,678 | |
| | | | | | | | | | | | | | | | | | | | | | | |
| December 31, 2020 |
| (in thousands) | Weighted average remaining life (in years) | | Gross carrying amount | | Accumulated amortization | | Net book value |
| Intangible assets subject to amortization: | | | | | | | |
| Trade name - ModSpace | 0.7 | | $ | 3,000 | | | $ | (2,375) | | | $ | 625 | |
| Mobile Mini customer relationships | 8.0 | | 217,000 | | | (12,053) | | | 204,947 | |
| Technology | 5.5 | | 1,500 | | | (125) | | | 1,375 | |
| Indefinite-lived intangible assets: | | | | | | | |
| Trade name - Mobile Mini | | | 164,000 | | | — | | | 164,000 | |
| Trade name - WillScot | | | 125,000 | | | — | | | 125,000 | |
| Total intangible assets other than goodwill | | | $ | 510,500 | | | $ | (14,553) | | | $ | 495,947 | |
As discussed further in Note 2, the Company acquired Mobile Mini on July 1, 2020. The Company recorded $164.0 million of indefinite-lived intangible assets and $210.5 million of intangibles subject to amortization, related to Mobile Mini customer relationships and technology.
| | | | | | | | | | | | | | | | | | | | | | | |
| December 31, 2018 | | | | | | |
| (in thousands) | Weighted average remaining life (in years) | | Gross carrying amount | | Accumulated amortization | | Net book value |
| Intangible assets subject to amortization: | | | | | | | |
Favorable lease rights(a) | 6.7 | | $ | 4,523 | | | $ | (347) | | | $ | 4,176 | |
| ModSpace trade name | 2.7 | | 3,000 | | | (375) | | | 2,625 | |
| Total intangible assets subject to amortization | | | 7,523 | | | (722) | | | 6,801 | |
| | | | | | | |
| Indefinite-lived intangible assets: | | | | | | | |
| Trade names | | | 125,000 | | | — | | | 125,000 | |
| Total intangible assets other than goodwill | | | $ | 132,523 | | | $ | (722) | | | $ | 131,801 | |
(a) Following the adoption of ASC 842 as of January 1, 2019, favorable lease assets were combined with ROU assets and the favorable lease assets remaining at the end of 2018 were reclassified to operating lease assets.
In the ModSpace acquisition, the Company allocated $3.0 million and $4.0 million to definite-lived intangible assets, related to the ModSpace trade name and favorable lease rights. The Company allocated $3.9 million and $0.1 million of the favorable lease rights to the Modular - US segment and Modular - Other North America segment, defined in Note 20, respectively. At the time of the acquisition, management estimated that the ModSpace trade name had an estimated useful life of three years and the favorable lease assets were amortized over the life of the leases.
For the yearyears ended December 31, 2019,2021 and 2020, the aggregate amount recorded to depreciation and amortization expense for intangible assets subject to amortization was $1.0 million. For the year ended December 31, 2018, the aggregate amortization expense for intangible assets subject to amortization was $1.4$27.3 million of which $1.1 and $14.4 million, was recorded in depreciation and amortization expense, and $0.3 million related to the favorable lease rights was recorded in SG&A.respectively.
AsAs of December 31, 2019,2021, the expected future amortization expense for intangible assets was $1.6 million, consisting of $1.0 million in 2020 and $0.6 million in 2021.is as follows:
| | | | | |
| (in thousands) | Amortization Expense |
| 2022 | $ | 26,416 | |
| 2023 | 26,416 | |
| 2024 | 26,416 | |
| 2025 | 26,416 | |
| 2026 | 26,179 | |
| Thereafter | 39,835 | |
| Total | $ | 171,678 | |
NOTE 11 - Deferred Revenue and Customer Deposits
Deferred revenue and customer deposits at December 31 consisted of the following:
| | | | | | | | | | | |
| (in thousands) | 2019 | | | 2018 | |
| Current: | | | |
| Deferred revenue | $ | 81,303 | | | $ | 68,398 | |
| Customer deposits | 1,675 | | | 3,380 | |
| Total current deferred revenue and customer deposits | $ | 82,978 | | | $ | 71,778 | |
| | | |
| Long-term: | | | |
| Deferred revenue | $ | 12,342 | | | $ | 7,723 | |
| Total long-term deferred revenue and customer deposits | $ | 12,342 | | | $ | 7,723 | |
NOTE 129 - Debt
The carrying value of debt outstanding at December 31 consisted of the following:
| | | | | | | | | | | | | | | | | | | | | | | |
| (in thousands, except rates) | Interest rate | | Year of maturity | | 2019 | | | 2018 | |
| 2022 Secured Notes | 7.875% | | | 2022 | | | $ | 264,576 | | | $ | 292,258 | |
| 2023 Secured Notes | 6.875% | | | 2023 | | 482,768 | | | 293,918 | |
| Unsecured Notes | 10.00% | | | 2023 | | — | | | 198,931 | |
| US ABL Facility | Varies | | 2022 | | | 885,245 | | | 853,409 | |
Canadian ABL Facility(a) | Varies | | 2022 | | — | | | — | |
Capital lease and other financing obligations(b) | | | | | — | | | 37,983 | |
| Total debt | | | | | 1,632,589 | | | 1,676,499 | |
| Less: current portion of long-term debt | | | | | — | | | (1,959) | |
| Total long-term debt | | | | | $ | 1,632,589 | | | $ | 1,674,540 | |
| | | | | | | | | | | | | | | | | | | | | | | |
| (in thousands, except rates) | Interest rate | | Year of maturity | | 2021 | | 2020 |
| | | | | | | |
| | | | | | | |
| 2025 Secured Notes | 6.125% | | 2025 | | $ | 518,117 | | | $ | 637,068 | |
ABL Facility(a) | Varies | | 2025 | | 1,612,783 | | | 1,263,833 | |
| 2028 Secured Notes | 4.625% | | 2028 | | 492,490 | | | 491,555 | |
| Finance Leases | Varies | | Varies | | 89,050 | | | 77,874 | |
| Total debt | | | | | 2,712,440 | | | 2,470,330 | |
| Less: current portion of long-term debt | | | | | 18,121 | | | 16,521 | |
| Total long-term debt | | | | | $ | 2,694,319 | | | $ | 2,453,809 | |
(a) As of December 31, 2019,2021 and 2020, the Company had 0no outstanding principal borrowings on the Canadian ABLMulticurrency Facility (defined below) and $6.2 million and $2.1$7.9 million, respectively, of related debt issuance costs. NaN No related debt issuance costs were recordedrecorded as a direct offset against the principal ofborrowings on the Canadian ABLMulticurrency Facility, and the $6.2 million and the remaining $2.1$7.9 million in in excess of principal has beenwas included in other non-current assets on the consolidated balance sheet. Assheets as of December 31, 2018,2021 and 2020, respectively.
Maturities of debt, including finance leases, during the Company had $0.9 million of outstanding principal borrowings on the Canadian ABL Facility and $2.9 million of related debt issuance costs. $0.9 million of the related debt issuance costs are recorded as a direct offset against the principal of the Canadian ABL Facility and the remaining $2.0 million, in excess of principal, has been included in other non-current assets on the condensed consolidated balance sheet.
(b) In connection with the adoption of ASC 842, the capital leases and financing obligations and associated deferred financing costs that relatedyears subsequent to the failed sale leaseback transactions were reversed. At December 31, 2019, the Company has no remaining capital leases and other financing obligations.2021 are as follows:
| | | | | |
| (in thousands) | |
| 2022 | $ | 21,842 | |
| 2023 | 17,665 | |
| 2024 | 14,743 | |
| 2025 | 2,185,851 | |
| 2026 | 12,839 | |
| Thereafter | 514,202 | |
| Total | $ | 2,767,142 | |
There are a
ggregate annual principal maturities of debt of $1,173.0 million in 2022 and of $490.0 million in 2023. There are no aggregate annual principal maturities of debt in 2020, 2021, 2024 or thereafter.
The Company has debt discounts, net of premiums, and debt issuance costs recorded as offsets against the carrying value of the related debt.
These debt costs will be amortized and included as part of interest expense over the remaining contractual terms of those debt instruments for each of the next five years as follows:
| | (in thousands) | (in thousands) | Debt discount and debt issuance cost amortization | (in thousands) | Debt issuance cost amortization |
| 2020 | | $ | 11,677 | | |
| 2021 | | 11,982 | | |
| 2022 | 2022 | | 7,435 | | 2022 | $ | 14,012 | |
| 2023 | 2023 | | 1,403 | | 2023 | $ | 14,214 | |
| 2024 and thereafter | | — | | |
| 2024 | | 2024 | $ | 14,429 | |
| 2025 | | 2025 | $ | 7,753 | |
| 2026 | | 2026 | $ | 1,193 | |
| Thereafter | | Thereafter | $ | 2,173 | |
Former Algeco Group Revolver
Prior to the Business Combination, WSII depended on the Algeco Group for financing, which centrally managed all cash management. The Algeco Group maintained a multicurrency asset-based revolving credit facility (the “Algeco Group Revolver”).2020 Asset Backed Lending Facility
On March 31, 2017, the Algeco Group Revolver was amended (the “Amended Algeco Group Revolver”) to provide for a maximum availability of the equivalent of $1.1 billion, with a maturity date of July 10, 2018. As amended, the maximum USD and CAD availability to WSII was reduced to $740.0 million and $100.0 million, respectively. WSII incurred $10.2 million in debt issuance costs1, 2020, in connection with the amendment, which were deferred and amortized through the new maturity date.
Borrowings under the Amended Algeco Group Revolver bore interest payable on the first day of each quarter for the preceding quarter at a variable rate based on LIBOR or another applicable regional bank rate plus a margin of 3.75%. Borrowings were secured by a first lien on tangible assets which comprised substantially all Algeco Group rental equipment, property, plant and equipment and trade receivables in the US, Canada, the United Kingdom, Australia and New Zealand.
On November 29, 2017, the $669.5 million that had been drawn by WSII on the Amended Algeco Group Revolver under the directioncompletion of the Algeco Group’s centralized treasury function was repaid in full, using the proceeds from the Business Combination (see Note 2)Merger, Williams Scotsman Holdings Corp ("Holdings"), and WSII’s properties were released from all liens related to the Amended Algeco Group Revolver.
Interest expense of $29.2 million related to the Algeco Group Revolver was included in the interest expense for the year ended December 31, 2017.
ABL Facility
On November 29, 2017, WS Holdings, WSII, and certain of its subsidiaries, entered into the ABL Facilitya new asset-based credit agreement that provided a senior securedprovides for revolving credit facilityfacilities in the initial aggregate principal amount of up to $600.0 million.
For accounting purposes, the ABL Facility is treated as$2.4 billion, consisting of: (i) a modification of the Amended Algeco Group Revolver. Certain of the lenders under the Amended Algeco Group Revolver are also lenders under the ABL Facility. As the borrowing capacity of each of the continuing lenders in the ABL Facility was greater than the borrowing capacity of the Amended Algeco Group Revolver, any unamortized debt issuance costs of continuing lenders were deferred and amortized through the maturity date of the ABL Facility. The amount of unamortized debt issuance costs pertaining to continuing ABL lenders was $3.5 million as of the date of the modification. Any debt issuance costs from the Amended Algeco Group Revolver that pertain to non-continuing lenders were expensed through interest expense on the consolidated statement of operations as of the modification date. The Company recognized a charge of $2.8 million in interest expense related to the write-off of debt issuance costs pertaining to non-continuing lenders for the year ended December 31, 2017. As a result of entering into the ABL Facility, the Company incurred debt issuance and discounts costs of $11.2 million that are deferred and amortized through the maturity date of the ABL Facility
In July and August 2018, the Company entered into three amendments (the "ABL Amendments") to the ABL Facility that, among other things, (i) permitted the ModSpace acquisition and the Company’s financing thereof, (ii) increased the ABL Facility limit to $1.425 billionsenior secured asset-based US dollar revolving credit facility in the aggregate with an accordion feature allowing upprincipal amount of $2.0 billion (the "US Facility"), available to $1.8 billion of capacity, and (iii) increased certain thresholds, basket sizes and default and notice triggers to account for the Company’s increased scale following the ModSpace acquisition.
After giving effect to the ABL Amendments, the ABL Facility, which matures on May 29, 2022, consists of (i) a $1.285 billion asset-backed revolving credit facility (the “US ABL Facility”) for WSII and certain of its domestic subsidiaries (the “US Borrowers”(collectively, the "US Borrowers"), and (ii) a $140.0$400.0 million senior secured asset-based multicurrency revolving credit facility (the “Canadian ABL Facility”) for certain Canadian subsidiaries of WSII (the “Canadian Borrower,” and"Multicurrency Facility," together with the US Facility, the "2020 ABL Facility"), available to be drawn in US Dollars, Canadian Dollars, British Pounds Sterling or Euros by the US Borrowers and certain of WSII's wholly-owned subsidiaries organized in Canada and in the “Borrowers”UK. On July 1, 2020, in connection with the completion of the Merger, approximately $1.47 billion of proceeds from the 2020 ABL Facility were used to repay an ABL credit agreement entered into by the Company in 2017 (the "2017 ABL Facility") and the asset-backed lending facility assumed in the transaction with Mobile Mini, as well as, to pay fees and expense related to the Merger and the related financing transactions. In connection with the repayment of the 2017 ABL facility, the Company wrote off $4.4 million of deferred financing costs to loss on extinguishment of debt. The 2020 ABL Facility matures on July 1, 2025.
Borrowings under the 2020 ABL Facility initially bore interest at (i) in the case of US Dollars, at WSII's option, either an adjusted LIBOR rate plus 1.875% or an alternative base rate plus 0.875%, (ii) in the case of Canadian Dollars, at WSII's option, either a Canadian BA rate plus 1.875% or Canadian prime rate plus 0.875%, and (iii) in the case of Euros and British Pounds Sterling, an accordion feature that permitsadjusted LIBOR rate plus 1.875%.
On December 13, 2021, due to the upcoming transition of LIBOR, the 2020 ABL Facility was amended to adjust the rate for borrowings denominated in Euros from a LIBOR-based rate to the EURIBOR (Euro Interbank Offered Rate) rate plus 1.875% and to adjust the rate of borrowings denominated in British Pounds Sterling from a LIBOR-based rate to the SONIA (Sterling Overnight Index Average) rate plus 1.9076%.
On December 16, 2021, the 2020 ABL Facility was amended to permit (i) the merger of WSII with and into Williams Scotsman, Inc. ("WSI") and (ii) WSI to assume the duties and obligations of WSII, the administrative borrower of the 2020 ABL Facility.
At December 31, 2021, the weighted average interest rate for borrowings under the 2020 ABL Facility was 1.99%. The weighted average interest rate on the balance outstanding at December 31, 2021, as adjusted for the effects of the interest rate swap agreements was 2.71%. Refer to Note 13 for a more detailed discussion on interest rate management.
Borrowing availability under the US Facility and the Multicurrency Facility is equal to the lesser of (i) the aggregate Revolver Commitments and (ii) the Borrowing Base ("Line Cap"). At December 31, 2021, the Line Cap was $2.4 billion and the Borrowers to increase the lenders’ commitments in an aggregate amount not to exceed $375.0had $743.6 million subject to the satisfaction of customary conditions, plus any voluntary prepayments that are accompanied by permanent commitment reductionsavailable borrowing capacity under the 2020 ABL Facility.
BorrowingsFacility, including $343.6 million under the US ABL Facility and $400.0 million under the Multicurrency Facility. Borrowing capacity under the 2020 ABL Facility is made available for up to $208.1 million of letters of credit and up to $168.5 million of swingline loans. At December 31, 2021, letters of credit and bank guarantees carried fees of 2.0%. The Company had issued $11.9 million of standby letters of credit under the 2020 ABL Facility at the Borrower’s option, bear interest at an adjusted LIBOR or base rate, in each case plus an applicable margin.December 31, 2021. The initial applicable margin was 2.50% for LIBOR borrowings and 1.50% for base rate borrowings. Commencing on March 31, 2018, the applicable margins were subject to one step-down of 0.25% or one step-up of 0.25%, based on excess availability levels with respect to the ABL Facility. The2020 ABL Facility requires the payment of an annual commitment fee on the unused available borrowings of between 0.375% and 0.5%0.225% per annum. At December 31, 2019, the weighted average interest rate for borrowings under the ABL Facility was 4.51%. The weighted average interest rate on the balance outstanding as of year end, as adjusted for the effects of the interest rate swap agreements was 5.10%. Refer to Note 15 for a more detailed discussion on interest rate management.
Borrowing availability under the US ABL Facility and the Canadian ABL Facility is equal to the lesser of (i) with respect to US Borrowers, $1.285 billion and the US Borrowing Base (defined below) (the “US Line Cap”), and (ii) with respect to the Canadian Borrower, $140.0 million and the Canadian Borrowing Base (defined below) (the “Canadian Line Cap,” together with the US Line Cap, the “Line Cap”).
The US Borrowing Base is, at any time of determination, an amount equal to the sum of:
◦85% of the net book value of the US Borrowers’ eligible accounts receivable, plus
◦the lesser of (i) 95% of the net book value of the US Borrowers’ eligible rental equipment and (ii) 85% of the net orderly liquidation value of the US Borrowers’ eligible rental equipment, minus
◦customary reserves.
The Canadian Borrowing Base is, at any time of determination, an amount equal to the sum of:
◦85% of the net book value of the Canadian Borrower’s eligible accounts receivable, plus
◦the lesser of (i) 95% of the net book value of the Canadian Borrower's eligible rental equipment and (ii) 85% of the net orderly liquidation value of the Canadian Borrower's eligible rental equipment, plus
◦portions of the US Borrowing Base that have been allocated to the Canadian Borrowing Base, minus
◦customary reserves.
At December 31, 2019, the Line Cap was $1.425 billion and the Borrowers had $509.1 million of available borrowing capacity under the ABL Facility, including $369.3 million under the US ABL Facility and $139.8 million under the Canadian ABL Facility.
Borrowing capacity under the US ABL Facility is made available for up to $75.0 million of letters of credit and up to $75.0 million of swingline loans, and borrowing capacity under the Canadian ABL Facility is made available for up to $60.0
million of letters of credit, and $50.0 million of swingline loans. At December 31, 2019, letters of credit and bank guarantees carried fees of 2.875%. The Company had issued $12.7 million and $13.0 million of standby letters of credit$1.6 billion outstanding principal under the 2020 ABL Facility at December 31, 2019 and2021. Debt issuance costs of $31.7 million were included in the carrying value of the 2020 ABL Facility at December 31, 2018, respectively.2021.
The obligations of the US Borrowers are unconditionally guaranteed by WS Holdings and each existing and subsequently acquired or organized direct or indirect wholly-owned US organized restricted subsidiary of WS Holdings, other than excluded subsidiaries (together with WS Holdings, the "US Guarantors"). The obligations of the CanadianMulticurrency Borrowers are unconditionally guaranteed by the US Borrowers and the US Guarantors, and each existing and subsequently acquired or organized direct or indirect wholly-owned Canadian organized restricted subsidiary of WS Holdings other than certain excluded subsidiaries.subsidiaries (together with the US Guarantors, the "ABL Guarantors").
The Company had $903.0 million and $879.4 million in outstanding principal under the ABL Facility at December 31, 2019 and December 31, 2018, respectively.
Debt issuance costs and discounts o
f $17.8 million and $26.0 million are included in the carrying value of the ABL Facility at December 31, 2019 and December 31, 2018, respectively.
2022 Senior Secured Notes
In connection with the closing of the Business Combination,2017, WSII issued $300.0 million aggregate principal amount of 7.875% senior secured notes due December 15, 2022 (the “2022 Secured Notes”) under an indenture dated November 29, 2017 (the “Indenture”). The Indenture2017. Interest was entered into by and among WSII, the guarantors named therein (the “Note Guarantors”), and Deutsche Bank Trust Company Americas, as trustee and as collateral agent. Interest is payable semi-annually on June 15 and December 15 beginning June 15, 2018.
Prior to December 15, 2019, WSII was able to redeem the 2022 Secured Notes at a redemption price equal to 100% of the principal amount thereof, plus a customary make whole premium for the 2022 Secured Notes being redeemed, plus accrued and unpaid interest, if any, to but not including the redemption date. On December 13, 2019, the Company completed a partial redemption of $30.0 million of the 2022 Secured Notes at a redemption price of 103% using proceeds from its 2017 ABL Facility. Following the redemption, $270.0 million of 2022 Secured Notes were outstanding as of December 31, 2019. The Company recorded a loss on extinguishment of debt of $1.5 million, which included $0.9 million of an early redemption premium and $0.6 million related to the write-off of unamortized deferred financing fees.
In connection with the Merger and related financing transactions in the third quarter of 2020, using proceeds from the 2025 Secured Notes discussed below, the Company redeemed all of its 2022 Secured Notes and recorded a loss on extinguishment of debt in the consolidated statements of operations of $15.2 million comprised of a redemption premium of $10.6 million and write off of unamortized deferred financing fees of $4.6 million.
2023 Senior Secured Notes
In 2018, WSII issued $300.0 million in aggregate principal amount of 6.875% senior secured notes due August 15, 2023 (the “2023 Secured Notes”). Interest was payable semi-annually on February 15 and August 15 of each year, beginning February 15, 2019.
On May 14, 2019, a tack-on offering of $190.0 million in aggregate principal amount to the initial 2023 Secured Notes (the "Tack-On Notes") was completed. The Tack-On Notes were issued as additional securities under the 2023 Secured Notes indenture. The Tack-On Notes had identical terms to the initial 2023 Secured Notes, other than with respect to the issue date and issue price. WSII incurred a total of $3.0 million in debt issuance costs in connection with the tack-on offering, which were deferred and were being amortized through the August 15, 2023 maturity date. Subsequent to the Tack-On Notes, the Company had $490.0 million of 6.875% 2023 Secured Notes. On August 11, 2020, using borrowings under the Company's 2020 ABL Facility, 10% of the outstanding principal amount of the 2023 Secured Notes, $49.0 million, at a redemption price of 103% plus accrued interest and unpaid interest was redeemed.
On August 25, 2020, the Company completed a private offering of its 2028 Secured Notes, discussed below, and used the offering proceeds to repay, along with expenses, the $441.0 million outstanding principal amount of its 2023 Secured Notes at a redemption price of 103.438% plus accrued interest and unpaid interest. The Company recorded a loss on extinguishment of debt in the consolidated statements of operations of $22.7 million comprised of a redemption premium of $16.6 million and a write off of unamortized deferred financing fees of $6.1 million.
2025 Senior Secured Notes
In anticipation of the Merger, on June 15, 2020, Picasso Finance Sub, Inc., a newly-formed indirect finance subsidiary (the "Finance Sub") of the Company completed a private offering of $650.0 million in aggregate principal amount of its 6.125% senior secured notes due 2025 (the "2025 Secured Notes") to qualified institutional buyers pursuant to Rule 144A of the Securities Act of 1933, as amended ("Rule 144A"). The 2025 Secured Notes contained provisions requiring repayment, without penalty, in the event the Merger was not consummated. The offering proceeds from the 2025 Secured Notes of $650.0 million and $5.1 million of interest due through August 1, 2020 were deposited into an escrow account, pending the closing of the Merger. In connection with the completion of the Merger, on July 1, 2020, the offering proceeds were released and the proceeds were used to repay the 2022 Secured Notes, repay Mobile Mini senior notes assumed in the acquisition and pay certain fees and expenses related to the Merger and the related financing transactions. In addition, Finance Sub was merged into WSII on July 1, 2020. The Company recorded $14.3 million in deferred financing fees related to the 2025 Secured Notes.
On or afterThe 2025 Secured Notes mature on June 15, 2025 and bear interest at a rate of 6.125% per annum. Interest is payable semi-annually on June 15 and December 15 2019,of each year, beginning December 15, 2020. Unamortized deferred financing costs pertaining to the 2025 Secured Notes were WSII, at its option,$8.4 million as of December 31, 2021.
The Company may redeem the 2025 Secured Notes at any time before June 15, 2022 at a redemption price equal to 100% of the principal amount thereof, plus a customary make whole premium for the 2025 Secured Notes being redeemed, plus accrued and unpaid interest, if any, to but not including the redemption date. Before June 15, 2022, the Company may redeem up to 40% of the aggregate principal amount of the 2025 Secured Notes at a price equal to 106.125% of the principal amount of the 2025 Secured Notes being redeemed, plus accrued and unpaid interest, if any, to but not including the redemption date with the net proceeds of certain equity offerings. At any time prior to June 15, 2022, the Company may also redeem up to 10% of the aggregate principal amount of the 2025 Secured Notes at a redemption price equal to 103% of the principal amount of the 2025 Secured Notes being redeemed during each twelve-month period commencing with the issue date, plus accrued and unpaid interest, if any, to but not including the redemption date. If the Company undergoes a change of control or sells certain of its assets, the Company may be required to offer to repurchase the 2025 Secured Notes.
On March 26, 2021, using cash on hand and borrowings on the 2020 ABL Facility, the Company redeemed 10% of the outstanding principal, or $65.0 million, of its 2025 Secured Notes and recorded a loss on extinguishment of debt in the consolidated statement of operations of $3.2 million comprised of a redemption premium of $1.9 million and write- off of unamortized deferred financing fees of $1.3 million in the first quarter of 2021.
On June 16, 2021, using cash on hand and borrowings on the 2020 ABL Facility, the Company redeemed 10% of the outstanding principal, or $58.5 million, of its 2025 Secured Notes and recorded a loss on extinguishment of debt in the
consolidated statement of operations of $2.8 million comprised of a redemption premium of $1.8 million and write-off of unamortized deferred financing fees of $1.0 million in the second quarter of 2021.
On and after June 15, 2022, the Company may redeem the 2025 Secured Notes, in whole or in part, at the redemption prices expressed as percentages of principal amount set forth below plus accrued and unpaid interest to but not including the applicable redemption date, (subjectsubject to the holders' right of 2022 Secured Note holders on the relevant record date to receive interest due on an interest payment date falling on or prior to the redemption date),date, if redeemed during the twelve-monthtwelve-month period beginning on DecemberJune 15 of each of the years set forth below:below.
| | | | | |
| Year | Redemption Price |
| 2019 | 103.938 | % |
| 2020 | 101.969 | % |
| 2021 and thereafter | 100.000 | % |
| | | | | |
| Year | Redemption Price |
| 2022 | 103.063 | % |
| 2023 | 101.531 | % |
| 2024 and thereafter | 100.000 | % |
The 20222025 Secured Notes are unconditionally guaranteed by theeach of WSII's direct and indirect domestic subsidiaries and WSII's parent, Holdings (collectively, "the Note Guarantors.Guarantors"). WillScot Mobile Mini is not a guarantor of the 20222025 Secured Notes. The Note Guarantors, as well as certain of the Company’s non-US subsidiaries, are guarantors or borrowers under the 2020 ABL Facility. To the extent that lenders under the 2020 ABL Facility release the guarantee of any Note Guarantor, such Note Guarantor will also be released from obligations under the 20222025 Secured Notes. These guarantees are secured by a second priority security interest in substantially all of the assets of WSII and the Note Guarantors, subject to customary exclusions. The guarantees of the 20222025 Secured Notes by WillScot Equipment II, LLC, a Delaware limited liability company which holds certain of WSII’s assets in the US, will be subordinated to its obligations under the 2020 ABL Facility.
As On December 23, 2021, in connection with the merger of December 31, 2019WSII with and 2018, unamortized debt issuance costs pertaininginto WSI, WSI entered into the 2025 Notes Supplemental Indenture, pursuant to which WSI assumed all of WSII's obligations and rights related to the 20222025 Secured Notes were $5.4 million and $7.7 million, respectively.Notes.
20232028 Senior Secured Notes
On August 6, 2018, a special purpose subsidiary of WSII25, 2020, the Company completed a private offering of $300.0$500.0 million in aggregate principal amount of its 6.875%4.625% senior secured notes due 2028 (the "2028 Secured Notes") to qualified institutional buyers pursuant to Rule 144A. The 2028 Secured Notes mature on August 15, 2023 (the “Initial 2023 Secured Notes”). The issuer entered into an indenture dated August 6, 2018 with Deutsche Bank Trust Company Americas, as trustee (“2023 Secured Notes Indenture”), which governs the terms2028. They bear interest at a rate of the Initial 2023 Secured Notes. In connection with the ModSpace acquisition, the issuer merged with and into WSII and WSII assumed the Initial 2023 Secured Notes.4.625% per annum. Interest is payable semi-annually on FebruaryAugust 15 and AugustFebruary 15 of each year, beginning February 15, 2019.
On May 14, 2019, WSII completed a tack-on offering of $190.0 million in aggregate principal amount2021. Unamortized deferred financing costs pertaining to the Initial 20232028 Secured Notes (the "Tack-On Notes"). were $7.5 million as of December 31, 2021.
The Tack-on Notes were issued as additional securities under the 2023 Secured Notes Indenture. The Tack-On Notes and the Initial 2023 Secured Notes (the "2023 Secured Notes", and together with the 2022 Secured Notes, the "Senior Secured Notes") are treated as a single class of debt securities under the 2023 Secured Notes Indenture. The Tack-on Notes have identical terms to the Initial 2023 Secured Notes, other than with respect to the issue
date and issue price. WSII incurred a total of $3.0 million in debt issuance costs in connection with the tack-on offering, which were deferred and will be amortized through the August 15, 2023 maturity date. The Tack-On Notes were issued at a premium of $0.5 million which will be amortized through the August 15, 2023 maturity date. The proceeds of the Tack-On Notes were used to repay a portion of the US ABL Facility.
WSIICompany may redeem the 20232028 Secured Notes at any time before August 15, 20202023 at a redemption price equal to 100% of the principal amount thereof, plus a customary make whole premium for the 20232028 Secured Notes being redeemed, plus accrued and unpaid interest, if any, to but not including the redemption date. Before August 15, 2020, WSII2023, the Company may redeem up to 40% of the aggregate principal amount of the 20232028 Secured Notes at a price equal to 106.875%104.625% of the principal amount of the 20232028 Secured Notes being redeemed, plus accrued and unpaid interest, if any, to but not including the redemption date with the net proceeds of certain equity offerings. WSIIAt any time prior to August 15, 2023, the Company may also redeem up to 10% of the aggregate principal amount of the 2023 Secured Notes at any time prior to the second anniversary of the closing date of this offering at a redemption price equal to 103% of the principal amount of the 20232028 Secured Notes being redeemed during each twelve-month period commencing with the issue date, plus accrued and unpaid interest, if any, to but not including the redemption date. If WSIIthe Company undergoes a change of control or sells certain of its assets, WSIIthe Company may be required to offer to repurchase the 20232028 Secured Notes.
On and after August 15, 2020, WSII2023, the Company may redeem the 20232028 Secured Notes, in whole or in part, at the redemption prices expressed as percentages of principal amount set forth below plus accrued and unpaid interest to but not including the applicable redemption date, (subjectsubject to the holders' right to receive interest due on an interest payment date falling on or prior to the redemption date),date, if redeemed during the twelve-month period beginning on August 15 of each of the years set forth below.
| | | | | |
| Year | Redemption Price |
| 2020 | 103.438 | % |
| 2021 | 101.719 | % |
| 2022 and thereafter | 100.000 | % |
| | | | | |
| Year | Redemption Price |
| 2023 | 102.313 | % |
| 2024 | 101.156 | % |
| 2025 and thereafter | 100.000 | % |
The 20232028 Secured Notes are unconditionally guaranteed by the Note Guarantors. WillScot Mobile Mini is not a guarantor of the 20232028 Secured Notes. The Note Guarantors, andas well as certain of the Company'sCompany’s non-US subsidiaries, are guarantors or borrowers under the 2020 ABL Facility. To the extent lenders under the 2020 ABL Facility release the guarantee of any Note Guarantor, such Note Guarantor will also be released from obligations under the 2025 Secured Notes. These guarantees are secured by a second priority security interest in substantially all of the assets of WSII and the Note Guarantors, (subjectsubject to customary exclusions) and areexclusions. The guarantees of the 2028 Secured Notes by WillScot Equipment II, LLC, a Delaware limited liability company which holds certain of WSII’s assets in the US, will be subordinated to the Company'sits obligations under the 2020 ABL Facility. On December 23, 2021, in connection with the merger of WSII with and into WSI, WSI entered into the 2028
Unamortized debt issuance costs
Notes Supplemental Indenture, pursuant to which WSI assumed all of WSII's obligations and discounts, net of premiums, of $7.2 million and $6.1 million are included inrights related to the carrying value of the debt as of December 31, 2019 and 2018, respectively.2028 Secured Notes.
2023 Senior Unsecured Notes
On August 3, 2018, a special purpose subsidiary of WSII completed a private offering ofThe Company had $200.0 million in aggregate principal amount of its senior unsecured notes due November 15, 2023 (the “Unsecured Notes”). The issuer entered into an indenture with Deutsche Bank Trust Company Americas, as trustee, which governed the terms and conditions of the Unsecured Notes. In connection with the ModSpace acquisition, the issuer merged with and into WSII and WSII assumed the Unsecured Notes.
2023. On June 19, 2019 (the "Redemption Date"), WSII used proceeds from its US ABL Facility to redeem all $200.0 million in aggregate outstanding principal amount of the Unsecured Notesunsecured notes at a redemption price of 102.0%, plus a make-whole premium of 1.126% and any accrued and unpaid interest to, but not including, the Redemption Date. The Company recorded a loss on extinguishment of $7.2 million, which included $6.2 million of make-whole premiums and $1.0 million related to the write-off of unamortized deferred financing fees.
Finance Leases
PriorThe Company maintains finance leases primarily related to the redemption, the Unsecured Notes bore interest at a rate of 10% per annum. Interest was payable semi-annually on February 15 and August 15 of each year, beginning February 15, 2019.
Unamortized debt issuance costs and discounts pertaining to the Unsecured Notes were $1.1 million as oftransportation equipment. At December 31, 2018.2021 and December 31, 2020, obligations under the finance leases for certain real property and transportation related equipment were $89.1 million and $77.9 million, respectively.
The Company is in compliance with all debt covenants and restrictions for the aforementioned debt instruments as of December 31, 2019.
Capital Lease and Other Financing Obligations
The Company entered into several arrangements in which they sold branch locations and simultaneously leased the associated properties back from the various purchasers. Due to the terms of the lease agreements, these transactions were treated as financing arrangements. These transactions contain non-recourse financing which was considered a form of continuing involvement and precluded the use of sale-leaseback accounting under ASC 840. In connection with the adoption of ASC 842, these transactions were deemed to comply with sale-leaseback accounting and the associated liabilities under these
agreements were reversed and recorded as part of the entry recorded to retained earnings upon the adoption of ASC 842, retroactive to January 1, 2019. The Company no longer had any other financing obligations as of December 31, 2019.
As of December 31, 2018 and prior to the adoption of ASC 842, the Company’s capital lease and financing obligations primarily consisted of $37.9 million under sale-leaseback transactions and $0.1 million of capital leases. The Company’s financing obligations are presented net of $1.6 million of debt issuance costs for the year ended December 31, 2018. The terms2021.
Mobile Mini Debt
Mobile Mini had $250.0 million in aggregate principal amount of 5.875% senior notes outstanding prior to the financing arrangements rangedMerger. In connection with the Merger, these notes were assumed by WillScot Mobile Mini and subsequently redeemed using proceeds from approximately eighteen months to ten years. The interest rates implicitthe 2025 Secured Notes discussed above.
Mobile Mini had a $1.0 billion first lien senior secured revolving credit facility. At June 30, 2020, Mobile Mini had $563.2 million of outstanding principal on the credit facility. In connection with the Merger, this line of credit was assumed by WillScot Mobile Mini and subsequently repaid in these financing arrangements were approximately 8.0%.full using proceeds from the 2020 ABL Facility discussed above.
NOTE 1310 - Equity
CommonPreferred Stock
WillScot'sWillScot Mobile Mini's certificate of incorporation authorizes the issuance of 400,000,0001,000,000 shares of Class A common stockPreferred Stock with a par value of $0.0001 per share, 100,000,000share. As of December 31, 2021, the Company has zero shares of Class B common stockPreferred Stock issued and outstanding.
Common Stock
WillScot Mobile Mini's certificate of incorporation authorizes the issuance of 500,000,000 shares of Common Stock with a par value of $0.0001 per share and 1,000,000share. The Company has 223,939,527 shares of preferred stock, par value $0.0001 per share. The common shareholders possess the same voting rights, but only Class A shareholders are entitled to dividends or other distributions made by the Company.
On July 30, 2018, WillScot closed a public offering of 8,000,000 shares of its Class A common stock at an offering price of $16.00 per share. On August 10, 2018, the underwriters exercised their right to purchase an additional 1,200,000 shares at the public offering price. The net offering proceeds, including the exercise of the over-allotment option, were $139.0 million, after deducting discount and offering expenses of $8.2 million. The Company used the proceeds to fund the ModSpace acquisition and to pay related fees and expenses.
On August 15, 2018, WillScot issued 6,458,229 unregistered shares of its Class A common stock to former ModSpace shareholders as part of the consideration paid for ModSpace. In connection with the private placement, WillScot entered into a registration rights agreement dated July 26, 2018, under which WillScot granted customary registration rights to the holders of the unregistered common shares. Subject to limited exception, the unregistered shares issued to former ModSpace shareholders could not be sold or otherwise transferred prior to February 15, 2019.
On December 11, 2018 pursuant to the terms of the Warrant Exchange discussed in more detail below, the Company issued 8,205,841 registered Class A common shares.
The Company has 108,818,854 shares of Class A common stock and 8,024,419 shares of Class B common stockCommon Stock issued and outstanding as of December 31, 2019.2021. The outstanding shares of the Company’s common stockCompany's Common Stock are duly authorized, validly issued, fully paid and non-assessable.
On June 30, 2020, as contemplated by the Merger Agreement, Sapphire Holdings exchanged each of its shares of common stock of Holdings for 1.3261 shares of newly issued WillScot Class A Common Stock (the "Sapphire Exchange"). As a result of the Sapphire Exchange, all issued and outstanding shares of WillScot's Class B Common Stock, par value $0.0001 per share, were automatically canceled for no consideration and the existing exchange agreement was automatically terminated. As a result of the Sapphire Exchange, Sapphire Holdings became a wholly-owned subsidiary of WillScot. Sapphire Holdings received 10,641,182 shares of Common Stock of WillScot in the Sapphire Exchange. Prior to the Sapphire Exchange, Sapphire Holdings' ownership of Holdings was recorded as a non-controlling interest in the consolidated financial statements. Subsequent to the Sapphire Exchange, the Company's subsidiaries are each wholly owned and there is no non-controlling interest. As a result of the Sapphire Exchange, non-controlling interest of $63.9 million was reclassified to $66.9 million of additional paid-in-capital and $3.0 million to accumulated other comprehensive loss, on the consolidated balance sheet.
In connection with the Merger on July 1, 2020, the Company issued 106,426,722 shares of Class A Common Stock in exchange for Mobile Mini Common Stock outstanding and subsequently filed an amended and restated certificate of incorporation, which reclassified all outstanding shares of the Class A Common Stock and converted such shares into shares of Common Stock, par value of $0.0001 per share, of WillScot Mobile Mini.
In connection with the Sapphire Exchange described above, stock compensation vesting and stock option exercises described in Note 18,16, and the warrant exercises described below, the Company issued 309,8576,752,647 and 13,792,582 shares of common stockCommon Stock during the yearyears ended December 31, 2019.2021 and 2020, respectively.
Private Placement
On November 29, 2017, in connection with the closing of the Business Combination, Sapphire purchased 43,568,901 shares of WillScot’s Class A common stock at a price of $9.60 per share, for a total purchase price of $418.3 million. The proceeds from the private placement, together with other funds, were used by WillScot to effectuate the transactions contemplated by the Business Combination.
In connection with the private placement, the Company, Sapphire and certain other parties entered into a registration rights agreement that amended and restated a 2015 registration rights agreement between Double Eagle and certain of its initial investors. Under the amended and restated registration rights agreement, WillScot provided to Sapphire and the Double Eagle investors customary demand, shelf and piggyback registration rights for unregistered securities held by the shareholders.
Earnout Arrangement
On November 29, 2017, in connection with the closing of the Business Combination, WillScot, Sapphire, Double Eagle Acquisition LLC (“DEAL”) and Harry E. Sloan (together with DEAL, the “Founders”) entered into an earnout agreement (the “Earnout Agreement”), pursuant to which 12,425,000 shares of WillScot Class A common stock held by the Founders were placed in escrow and 14,550,000 warrants to purchase shares of WillScot Class A common stock owned by the Founders were restricted. The escrowed shares and warrant restrictions were subject to release upon the occurrence of certain triggering events set forth in the Earnout Agreement and associated escrow agreement.
On January 19, 2018, 3,106,250 escrowed shares were released to each of the Founders and Sapphire. The release was triggered when the closing price of WillScot’s Class A shares exceeded $12.50 per share for a period of 20 out of 30 trading days.Stock Repurchase Program
On August 21, 2018,7, 2020, the remaining escrowed shares were released to the Founders and Sapphire, the Founders transferred 4,850,000 warrants to Sapphire, and the restrictions on the Founders’ warrants lapsed. The releases and warrant transfer were triggered whenCompany's Board of Directors approved a stock repurchase program that authorizes the Company completedto repurchase up to $250 million of its outstanding shares of Common Stock and equivalents. On April 29, 2021, the ModSpace acquisition, which constitutedBoard of Directors approved an increase in repurchase authority to $500 million. Subsequently, in October of 2021, the Company's Board of Directors replaced the existing share repurchase program with a “Qualifying Acquisition”new share repurchase program that
underauthorizes the Earnout Agreement.Company to repurchase up to $1.0 billion of its outstanding shares of Common Stock and equivalents. The Earnout Agreement and escrow agreement were effectively terminated uponstock repurchase program does not obligate the releaseCompany to purchase any particular number of the escrowed shares, and warrant restrictions.
Warrants
2015 Warrants
Double Eagle issued warrants to purchase its common stock as componentsthe timing and exact amount of units sold in its initial public offering (the “Public Warrants”). Each Public Warrant entitles the holder to purchase one-half of one share of WillScot Class A common stock at a price of $5.75 per half share (or $11.50 per whole share), subject to adjustment. Public Warrants may be exercised only for a whole number of WillScot Class A sharesany repurchases will depend on various factors, including market pricing, business, legal, accounting, and they expire on November 29, 2022.other considerations. The Company may redeemrepurchase its shares in open market transactions or through privately negotiated transactions in accordance with federal securities laws, at the Public Warrants for $0.01 per warrant ifCompany's discretion. The repurchase program, which has no expiration date, may be increased, suspended, or terminated at any time. The program is expected to be implemented over the closing pricecourse of WillScot’s Class A shares equals or exceeds $18.00 per share for any 20 trading days within a 30-trading day period ending on the third trading day priorseveral years and will be conducted subject to the datecovenants in the Company sends a notice of redemption to the warrant holders, providing for a 30 day notice period. The Company share price performance target was achieved on January 21, 2020 and, on January 24, 2020, the Company issued the notice of its intent to redeem outstanding Public Warrants for $0.01 in 30 days.
Double Eagle also issued warrants to purchase its common stock in a private placement concurrently with its initial public offering (the “Private Warrants,” and together with the Public Warrants, the "2015 Warrants"). The Private Warrants were purchased at a price of $0.50 per unit for an aggregate purchase price of $9.75 million. The Private Warrants are identical to the Public Warrants, except that, if held by Double Eagle’s sponsor or founders (or their permitted assignees), the Private Warrants may be exercised on a cashless basis and are not subject to redemption.
On July 12, 2018, the Public Warrants were suspended from trading on the Nasdaq Capital Market (“Nasdaq”) based on WillScot's failure to satisfy a minimum holder requirement applicable to the warrants. The Public Warrants were delisted on October 8, 2018.agreements governing indebtedness.
During the year ended December 31, 2019, 135,000 of the Public Warrants were exercised, resulting in the issuance of 67,500 shares of Class A common stock and $0.8 million in proceeds.
2018 Warrants
On August 15, 2018, WillScot issued warrants to purchase approximately 10.0 million WillScot Class A common shares (the "2018 Warrants"), to the former shareholders as part of the ModSpace acquisition. Each 2018 Warrant entitles the holder thereof to purchase 1 share of WillScot Class A common stock at an exercise price of $15.50 per share, subject to potential adjustment. Subject to limited exception, the 2018 Warrants were not exercisable or transferable until February 11, 2019. The 2018 Warrants expire on November 29, 2022. Under a registration rights agreement dated July 26, 2018, WillScot agreed to file a registration statement, and to use its reasonable best efforts to cause the registration statement to become effective, by the six-month anniversary of the issuance date.
On December 13, 2019,2021, the Company repurchased 12,878,490 shares of Common Stock and terminated 22,063stock equivalents for $365.9 million. During the year ended December 31, 2020, no shares of Common Stock were repurchased, and 1,728,177 shares of stock equivalents were repurchased for $35.3 million. As of December 31, 2021, $956.7 million of the 2018 Warrants for less than $0.1 million.
Warrant Exchange
On November 8, 2018, WillScot commenced an offer to exchange the 2015 Warrants for shares of its Class A common stock in a cashless transaction (the “Warrant Exchange”). In the tender offer, each warrant holder had the opportunity to receive 0.18182 registered share of Class A common stock in exchange for each warrant tendered by the holder and exchanged pursuant to the offer.
The Warrant Exchange offer expired on December 7, 2018 and a total of 45,131,827 of the outstanding 69,499,694 warrants were tendered and accepted for exchange. Pursuant to the terms of the Warrant Exchange, WillScot issued 8,205,841 shares of Class A common stock on December 11, 2018. In lieu of issuing fractional shares of common stock, WillScot paid $347 in cash to holders of warrants who would otherwise have been entitled to receive fractional shares, after aggregating all such fractional shares of such holder, in an amount equal to such fractional part of a share multiplied by the last sale price of a share of WillScot common stock on December 7, 2018. In connection with the Warrant Exchange, the Company capitalized $1.8 million of offering expenses within additional paid-in capital in December 2018.
As the fair value of the warrants exchanged in the Warrant Exchange offer was less than the fair value of the common stock issued, the Company recorded a non-cash deemed dividend of $2.1 million for the incremental fair value provided to the warrant holders. The fair value of the warrants was determined using the over-the-counter market price on December 7, 2018, a Level 2 fair value input. The fair value of the common stock was determined using the closing market price of the Company's common stock on December 7, 2018, a Level 1 fair value input.
At December 31, 2019, 24,232,867 of the 2015 Warrants and 9,977,516 of the 2018 Warrants were outstanding.
Registration Statements
On February 12, 2019, a shelf registration statement filed by WillScot with the SEC became effective. Under the shelf registration statement, 562,542 shares of WillScot Class A common stock issued to the former ModSpace shareholders,
8,914,969 2018 Warrants and up to 9,999,579 new WillScot Class A shares issuable upon the exercise of the 2018 Warrants were registered for resale.
On November 28, 2018, a registration statement filed by WillScot with the SEC became effective. Under the shelf registration statement, 61,865,946 shares of WillScot Class A common stock issued in private placements to the Founders and certain of their transferees, Sapphire and certain of its transferees, and the former ModSpace shareholders were registered for resale.approved repurchase pool remained available.
Accumulated Other Comprehensive Loss
The changes in accumulated other comprehensive loss ("AOCI"), net of tax, for the years ended December 31, 2019, 20182021, 2020 and 2017,2019, were as follows:
| | (in thousands) | (in thousands) | Foreign Currency Translation | | Unrealized losses on hedging activities | | Total | (in thousands) | Foreign Currency Translation | | Unrealized losses on hedging activities | | Total |
| Balance at December 31, 2016 | $ | (56,928) | | | $ | — | | | $ | (56,928) | | |
| Other comprehensive income before reclassifications | 6,760 | | | — | | | 6,760 | | |
Reclassifications from AOCI to additional paid-in capital(a) | 663 | | | — | | | 663 | | |
| Less other comprehensive income attributable to non-controlling interest | 8 | | | — | | | 8 | | |
| Balance at December 31, 2017 | (49,497) | | | — | | | (49,497) | | |
| Other comprehensive loss before reclassifications | (11,639) | | | (6,240) | | | (17,879) | | |
Reclassifications from AOCI to income(b) | — | | | 285 | | | 285 | | |
Reclassifications from AOCI to retained earnings(c) | (2,540) | | | — | | | (2,540) | | |
| Less other comprehensive income attributable to non-controlling interest | 1,068 | | | 537 | | | 1,605 | | |
| Balance at December 31, 2018 | Balance at December 31, 2018 | (62,608) | | | (5,418) | | | (68,026) | | Balance at December 31, 2018 | $ | (62,608) | | | $ | (5,418) | | | $ | (68,026) | |
| Other comprehensive income (loss) before reclassifications | Other comprehensive income (loss) before reclassifications | 10,586 | | | (7,930) | | | 2,656 | | Other comprehensive income (loss) before reclassifications | 10,586 | | | (7,930) | | | 2,656 | |
Reclassifications from AOCI to income(b)(a) | — | | | 3,121 | | | 3,121 | | |
Reclassifications from AOCI to income (a) | | Reclassifications from AOCI to income (a) | — | | | 3,121 | | | 3,121 | |
| Less other comprehensive (loss) income attributable to non-controlling interest | Less other comprehensive (loss) income attributable to non-controlling interest | (960) | | | 434 | | | (526) | | Less other comprehensive (loss) income attributable to non-controlling interest | (960) | | | 434 | | | (526) | |
| Balance at December 31, 2019 | Balance at December 31, 2019 | $ | (52,982) | | | $ | (9,793) | | | $ | (62,775) | | Balance at December 31, 2019 | (52,982) | | | (9,793) | | | (62,775) | |
| Other comprehensive income (loss) before reclassifications | | Other comprehensive income (loss) before reclassifications | 28,404 | | | (11,874) | | | 16,530 | |
Reclassifications from AOCI to income (a) | | Reclassifications from AOCI to income (a) | — | | | 10,125 | | | 10,125 | |
| Less other comprehensive income attributable to non-controlling interest | | Less other comprehensive income attributable to non-controlling interest | 1,183 | | | 702 | | | 1,885 | |
| Impact of elimination of non-controlling interest on accumulated other comprehensive income | | Impact of elimination of non-controlling interest on accumulated other comprehensive income | (1,299) | | | (1,673) | | | (2,972) | |
| Balance at December 31, 2020 | | Balance at December 31, 2020 | (24,694) | | | (12,513) | | | (37,207) | |
| Other comprehensive loss before reclassifications | | Other comprehensive loss before reclassifications | (880) | | | (2,985) | | | (3,865) | |
Reclassifications from AOCI to income(b)(a) | | Reclassifications from AOCI to income(b)(a) | — | | | 12,001 | | | 12,001 | |
| Balance at December 31, 2021 | | Balance at December 31, 2021 | $ | (25,574) | | | $ | (3,497) | | | $ | (29,071) | |
(a) In connection with the transfer of WSII’s equity interest in Chard as part of the Algeco Group internal restructuring that occurred prior to the Business Combination, $0.6 million was reclassified from accumulated other comprehensive loss into additional paid-in capital in the fourth quarter of 2017.
(b) For the years ended December 31, 2021, 2020 and 2019, and 2018, $3.3$12.0 million, $10.1 million and $0.4$3.3 million, respectively, was reclassifiedreclassified from AOCI into the consolidated statementstatements of operations within interest expenseexpense related to the interest rate swaps discussed in Note 15.13. For the years ended December 31, 20192021, 2020 and 2018,2019, the Company recorded a tax benefitbenefits of $0.8$3.0 million, $2.4 millionand $0.1$0.8 million, respectively, associated with this reclassification, respectively.reclassification.
(c) In
NOTE 11 - Warrants
Warrants
2015 Public Warrants
WillScot was incorporated under the first quartername DEAC on June 26, 2015. On November 29, 2017, DEAC acquired WSII from Algeco Scotsman Global S.à r.l., which was majority owned by an investment fund managed by TDR Capital. DEAC domesticated to Delaware and changed its name to WillScot Corporation.
As part of 2018,its initial public offering, the Company electedissued warrants (the “2015 Public Warrants”). Each 2015 Public Warrant entitled the holder to early adopt ASU 2018-02, Income Statement-Reporting Comprehensive Income (Topic 220) - Reclassificationpurchase one-half of Certain Tax Effects from Accumulated Other Comprehensive Income, which resulted inone share of WillScot Class A Common Stock at a discrete reclassificationprice of $2.5 million from accumulated other comprehensive loss$5.75 per half share (or $11.50 per whole share), subject to accumulated deficit effective January 1, 2018.
Non-Controlling Interest
adjustment. The changes in non-controlling interestCompany was able to redeem the 2015 Public Warrants for $0.01 per warrant if the years ended December 31, 2019 and 2018 were as follows:
| | | | | | | | | | | | | | | | | |
| (in thousands) | 2019 | | 2018 | | 2017 |
| Balance at beginning of period | $ | 63,982 | | | $ | 48,931 | | | $ | — | |
| Net loss attributable to non-controlling interest | (421) | | | (4,532) | | | (2,110) | |
| Other comprehensive income (loss) | 526 | | | (1,605) | | | (8) | |
| Issuance of common stock and contribution of proceeds to WSII | — | | | 7,574 | | | — | |
| Acquisition of ModSpace and the related financing transactions including stock and warrants | — | | | 13,614 | | | — | |
| Adoption of ASC842 | 503 | | | — | | | — | |
| Recapitalization transaction | — | | | — | | | 51,049 | |
| Balance at end of period | $ | 64,590 | | | $ | 63,982 | | | $ | 48,931 | |
Shareholders Agreement
On November 29, 2017,The Company's share price performance target was achieved on January 21, 2020 and, on January 24, 2020, the Company delivered a notice (the "Redemption Notice") to redeem all of its 2015 Public Warrants that remained unexercised on February 24, 2020. As further described in the Redemption Notice and permitted under the warrant agreement, holders of these warrants who exercised them following the date of the Redemption Notice were required to do so on a cashless basis. From January 1, 2020 through January 24, 2020, 796,610 warrants were exercised for cash, resulting in the Company receiving cash proceeds of $4.6 million and the Company issuing 398,305 shares of the Company's Class A Common Stock. After January 24, 2020 through February 24, 2020, 5,836,048 warrants were exercised on a cashless basis. An aggregate of 1,097,162 shares of the Company's Class A Common Stock was issued in connection with these cashless exercises. On February 24, 2020, the closingCompany completed the redemption of 38,509 remaining warrants under the Business Combination, WillScot and the Sellers entered into a shareholders agreement (the “Shareholders Agreement”) that governs the ownership and operation of WS Holdings. The agreement contains, among other things, (i) preemptive rights that permit Sapphire (to whom the Sellers’ interest was assigned in 2017) to avoid dilution and maintain its ownership percentage in WS Holdings on a fully diluted basis upon any future issuance of shares of WS Holdings or WillScot; (ii) customary tag along and drag along provisions; (iii) protective provisions designed to protect Sapphire from changes to WS Holdings’ organizational documents that would have a materially disproportionate effect on Sapphire; and (iv) transfer restrictions on the shares of WillScot Class B common stock held by Sapphire. The Shareholder AgreementRedemption Notice for $0.01 per warrant. At December 31, 2021, no 2015 Public Warrants were outstanding.
2015 Private Warrants
DEAC also provides to WillScot a right of first refusalissued warrants to purchase Sapphire’s shares of WS Holdings, and provides that acquisitions of businesses similar to WSII’s business must be consummated by WS Holdings or one of its wholly-owned subsidiaries.
Exchange Agreement
On November 29, 2017, in connection with the closing of the Business Combination, WillScot, the Sellers and WS Holdings entered into an exchange agreement (the “Exchange Agreement”). Under the agreement, Sapphire (to whom the Sellers’ interest was assigned in 2017) acquired the right at any time prior to November 29, 2022, to exchange all, but not less than all, of its WS Holdings shares into new shares of WillScot Class A common stockCommon Stock in a private placement.placement concurrently with its initial public offering (the “2015 Private Warrants,” and together with the 2015 Public Warrants, the "2015 Warrants"). The 2015 Private Warrants were purchased at a price of $0.50 per unit for an aggregate purchase price of $9.75 million. The 2015 Private Warrants were identical to the 2015 Public Warrants, except that, if held by certain original investors (or their permitted assignees), the 2015 Private Warrants could be exercised on a cashless basis and were not subject to redemption.
Subject to potential adjustment, Sapphire’s commonDuring the year ended December 31, 2020, 4,781,700 of the 2015 Private Warrants were repurchased for $21.6 million and cancelled. Additionally, 70,000 of the 2015 Private Warrants were exercised, resulting in the Company receiving cash proceeds of $0.4 million and issuing 35,000 shares of WS Holdings (representing Sapphire’s then-current ownership percentageCommon Stock. During the year ended December 31, 2021, 3,055,000 of WS Holdings) are exchangeable into new WillScot Class A shares representing an equal ownership percentage of WillScot Class A common stock. The exchange ratio is subject to adjustment based on, among other things, (i) Sapphire’s election to exercise, or to refrain from exercising, its preemptive rights under the Shareholders Agreement2015 Private Warrants were repurchased for $25.5 million and (ii) the dilutive effect of certain issuances of equity securities and derivatives by WS Holdings or WillScot that do not trigger such preemptive rights. Upon Sapphire’s exercise of its exchange right, WillScot will automatically redeem for no consideration all of its Class B common shares owned by Sapphire.
As disclosed above,cancelled. In addition, during the year ended December 31, 2021, 9,655,000 warrants were exercised on a cashless basis, resulting in the issuance of 2,939,898 shares of Common Stock. As a result of these transactions, at December 31, 2021 no 2015 Private Warrants were outstanding.
2018 Warrants
In connection with the ModSpace acquisition in 2018, WillScot issued 9,200,000warrants to purchase approximately 10.0 million shares of WillScot Class A common stock throughCommon Stock (the "2018 Warrants") to former shareholders of ModSpace. Each 2018 Warrant entitles the holder thereof to purchase 1 share of WillScot Class A Common Stock at an underwritten public offering,exercise price of $15.50 per share, subject to potential adjustment. The 2018 Warrants expire on November 29, 2022.
During the proceeds of which were immediately contributed down through WS Holdings to WSII for purposes of funding partyear ended December 31, 2020, 195,410 of the ModSpace acquisition. Sapphire waived its preemptive right to participate2018 warrants were exercised, on a cashless basis, and 38,802 shares of the Company's Common Stock were issued. Also, during the year ended December 31, 2020, the Company repurchased and subsequently cancelled 51,865 of the 2018 warrants for approximately $0.3 million.
During the year ended December 31, 2021, 254,373 of the 2018 Warrants were repurchased for $2.9 million and cancelled. In addition, during the year ended December 31, 2021, 5,397,695 of the 2018 Warrants were exercised on a cashless basis, resulting in the public offering underissuance of 2,835,968 shares of common stock. At December 31, 2021, 4,078,173 of the shareholders agreement and Sapphire's ownership interest in WS Holdings was adjusted from 10% to 9% accordingly. As disclosed in Note 2, the2018 Warrants were outstanding.
The Company closed on the ModSpace acquisition that resultedaccounted for its warrants in the contribution of ModSpace's netfollowing ways: (i) the 2015 Public Warrants assets of $991.5 million to WSII. The net impact liabilities through their final redemption in February 2020, (ii) the 2015 Private Warrants as liabilities through their final repurchase or exercise in May 2021, and (iii) the 2018 Warrants as liabilities until June 30, 2020, the date all issued and outstanding shares of the transactions above, resulted in a non-recurring adjustment of $21.2 millionCompany's Class B Common Stock were cancelled. Subsequent to additional paid-in capital and non-controlling interest onJune 30, 2020, the consolidated balance sheets. Despite2018 Warrants were equity classified.
The Company determined the dilution in the non-controlling interest ownership in WS Holdings, the adjustment increases the non-controlling interest equityfollowing fair values for outstanding warrants recorded as a result of the significant increase in net assets from the ModSpace acquisition.liabilities at December 31:
Under the Exchange Agreement, the non-controlling interest can be exchanged for a 9% interest in WillScot, subject to certain anti-dilution adjustments contemplated by the Exchange Agreement. | | | | | | | | | | | |
| (in thousands) | December 31, 2021 | | December 31, 2020 |
| 2015 Private Warrants | N/A | | $ | 77,404 | |
NOTE 1412 – Income Taxes
The components of income tax (benefit) expense from continuing operations(benefit) for the years ended December 31, 2019, 20182021, 2020 and 20172019 are comprised of the following:
| | (in thousands) | (in thousands) | 2019 | | 2018 | | 2017 | (in thousands) | 2021 | | 2020 | | 2019 |
| US Federal and State | | |
| Current | Current | $ | 827 | | | $ | 668 | | | $ | (1,817) | | Current | |
| Federal | | Federal | $ | — | | | $ | — | | | $ | — | |
| State | | State | 4,645 | | | 1,601 | | | 827 | |
| Foreign | | Foreign | 8,338 | | | 2,104 | | | (395) | |
| Deferred | Deferred | 1,904 | | | (36,149) | | | 3,450 | | Deferred | |
| Outside of US | | |
| Current | (395) | | | 924 | | | (1,422) | | |
| Deferred | (4,527) | | | (4,043) | | | (1,147) | | |
| Total income tax benefit | $ | (2,191) | | | $ | (38,600) | | | $ | (936) | | |
| Federal | | Federal | 31,255 | | | (52,822) | | | 242 | |
| State | | State | (4,144) | | | (5,204) | | | 1,662 | |
| Foreign | | Foreign | 9,452 | | | 2,870 | | | (4,527) | |
| Total income tax expense (benefit) | | Total income tax expense (benefit) | $ | 49,546 | | | $ | (51,451) | | | $ | (2,191) | |
Income tax results from continuing operations differed from the amount computed by applying the US statutory income tax rate of 21%, 21%, and 35% to the loss from continuing operationsincome (loss) before income taxes for the following reasons for the years ended December 31, 2019, 20182021, 2020 and 2017:2019:
| | | | | | | | | | | | | | | | | |
| (in thousands) | 2019 | | 2018 | | 2017 |
| Loss from continuing operations before income tax | | | | | |
| US | $ | (9,477) | | | $ | (80,824) | | | $ | (97,009) | |
| Non-US | (4,257) | | | (11,348) | | | (68,389) | |
| Total loss from continuing operations before income tax | $ | (13,734) | | | $ | (92,172) | | | $ | (165,398) | |
| | | | | |
| US Federal statutory income tax benefit | $ | (2,884) | | | $ | (19,356) | | | $ | (57,889) | |
| Effect of tax rates in foreign jurisdictions | (207) | | | (626) | | | 5,626 | |
| State income tax (benefit) expense, net of federal benefit | 1,829 | | | (2,478) | | | (5,188) | |
| Unremitted foreign earnings | — | | | (6,793) | | | (2,493) | |
| Valuation allowances | 961 | | | (11,871) | | | 59,679 | |
| Non-deductible items | (233) | | | | — | | | | — | |
| Non-deductible executive compensation | 490 | | | | — | | | | — | |
| Non-deductible transaction costs | (12) | | | | 1,134 | | | | 1,297 | |
| Non-deductible goodwill impairment | — | | | — | | | 15,849 | |
| Non-deductible deferred financing fees | — | | | — | | | 2,715 | |
| Non-deductible Stewardship (a) | — | | | — | | | 1,658 | |
| Non-deductible monitoring fee (b) | — | | | — | | | 422 | |
| Tax law changes (excluding valuation allowance) (c) | (2,785) | | | 64 | | | (23,115) | |
| Other | 650 | | | 1,326 | | | 503 | |
| Reported income tax benefit | $ | (2,191) | | | $ | (38,600) | | | $ | (936) | |
| Effective income tax rate | 15.95 | % | | 41.88 | % | | 0.56 | % |
| | | | | | | | | | | | | | | | | |
| (in thousands) | 2021 | | 2020 | | 2019 |
| Income (loss) before income tax | | | | | |
| US | $ | 161,040 | | | $ | 6,597 | | | $ | (119,099) | |
| Foreign | 48,650 | | | 17,292 | | | (4,257) | |
| Total income (loss) before income tax | $ | 209,690 | | | $ | 23,889 | | | $ | (123,356) | |
| | | | | |
| US Federal statutory income tax expense (benefit) | $ | 44,035 | | | $ | 5,017 | | | $ | (25,905) | |
| Effect of tax rates in foreign jurisdictions | 40 | | | 128 | | | (207) | |
| State income tax expense, net of federal benefit | 2,602 | | | 3,962 | | | 1,829 | |
| | | | | |
| Valuation allowances | (3,089) | | | (56,479) | | | 961 | |
| (Non-taxable) non-deductible items | (269) | | | 187 | | | (233) | |
| Non-deductible executive compensation | 2,309 | | | 1,449 | | | 490 | |
| Non-deductible transaction costs | 33 | | | 4,425 | | | (12) | |
| Non-deductible (non-taxable) remeasurement of common stock warrant liabilities | 5,585 | | | (727) | | | 23,021 | |
| Uncertain tax positions | (11,748) | | | (11,166) | | | — | |
| Tax law changes (excluding valuation allowance) (a) | 8,410 | | | 2,523 | | | (2,785) | |
| Other | 1,638 | | | (770) | | | 650 | |
| Reported income tax expense (benefit) | $ | 49,546 | | | $ | (51,451) | | | $ | (2,191) | |
| Effective income tax rate | 23.63 | % | | (215.38) | % | | 1.78 | % |
(a) Prior to the Business Combination, certain expenses incurred by the Company in performing services to its immediate shareholder were not deductible under US tax law.
(b) Prior to the Business Combination, certain fees charged by TDR Capital to the Company were not deductible under US tax law.
(c) Tax law changes includes the following amounts: 2017 and 2018 represent US tax reform items and 2019 represents change in provision tax law in a non-US jurisdiction. | | | | | |
| (a) | Tax law changes primarily represents changes in tax law in foreign jurisdictions. |
Deferred Income Taxes
Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities and their tax bases, as well as from net operating loss and carryforwards. Significant components of the Company’s deferred tax assets and liabilities are as follows:
| | (in thousands) | (in thousands) | 2019 | | 2018 | (in thousands) | 2021 | | 2020 |
| Deferred tax assets | Deferred tax assets | | Deferred tax assets | |
| Loans and borrowings | $ | 138,206 | | | $ | 122,456 | | |
| Deferred interest expense | | Deferred interest expense | $ | 116,339 | | | $ | 128,346 | |
| Employee benefit plans | Employee benefit plans | 1,916 | | | 3,395 | | Employee benefit plans | 4,167 | | | 3,532 | |
| Accrued liabilities | Accrued liabilities | 8,494 | | | 8,715 | | Accrued liabilities | 9,362 | | | 10,692 | |
| Currency losses, net | — | | | 408 | | |
| Deferred revenue | Deferred revenue | 20,951 | | | 16,310 | | Deferred revenue | 37,852 | | | 32,412 | |
| Operating lease liability | Operating lease liability | 37,438 | | | — | | Operating lease liability | 62,502 | | | 58,044 | |
| Other | Other | 7,817 | | | 4,724 | | Other | 18,315 | | | 13,628 | |
| Tax loss carryforwards | Tax loss carryforwards | 231,503 | | | 239,282 | | Tax loss carryforwards | 286,470 | | | 295,326 | |
| Deferred tax assets, gross | Deferred tax assets, gross | 446,325 | | | 395,290 | | Deferred tax assets, gross | 535,007 | | | 541,980 | |
| Valuation allowance | Valuation allowance | (80,241) | | | (79,132) | | Valuation allowance | (10,323) | | | (25,158) | |
| Net deferred income tax asset | Net deferred income tax asset | $ | 366,084 | | | $ | 316,158 | | Net deferred income tax asset | $ | 524,684 | | | $ | 516,822 | |
| | Deferred tax liabilities | Deferred tax liabilities | | Deferred tax liabilities | |
| Rental equipment and other property, plant and equipment | Rental equipment and other property, plant and equipment | $ | (375,682) | | | $ | (360,766) | | Rental equipment and other property, plant and equipment | $ | (710,372) | | | $ | (648,966) | |
| Intangible assets | Intangible assets | (23,690) | | | (22,654) | | Intangible assets | (107,033) | | | (117,403) | |
| ROU asset | ROU asset | (37,218) | | | — | | ROU asset | (62,158) | | | (57,820) | |
| Deferred tax liability | Deferred tax liability | (436,590) | | | (383,420) | | Deferred tax liability | (879,563) | | | (824,189) | |
| Net deferred income tax liability | Net deferred income tax liability | $ | (70,506) | | | $ | (67,262) | | Net deferred income tax liability | $ | (354,879) | | | $ | (307,367) | |
In general, FASB ASC Topic 740, “Income Taxes” (“ASC 740”) requires us to evaluate the realizability of our deferred tax assets and reduce the deferred tax assets by valuation allowances to the extent we determine some or all of our deferred tax assets are not more likely than not realizable. To determine the realizability, ASC 740 requires consideration of sources of available taxable income of the proper character and within the time period before which our deferred tax assets, if any, expire due to the passage of time.
The Company's valuation allowance increased decreased by $1.1$14.8 million from 2018. The2020. An increase is aof $0.1 million adjustment to the valuation allowancewas recorded in purchase accounting for ModSpacethe Merger in relation to state net operating losses deemed not more likely than not to be realized and a change in estimate aboutdecrease of $14.7 million is primarily related to unused capital losses with a corresponding reduction of the realizability of related deferred tax assets for a total amountasset of $1.0$12.3 million. The net tax benefit of $2.2 million recordedis reflected in tax expense.the rate reconciliation table above under valuation allowances.
Tax loss carryforwards atas of December 31, 20192021 are outlined in the table below and include US Federal, US State and non-US (Mexico & Canada)foreign (Canada and Mexico). The availability of these tax losses to offset future income varies by jurisdiction. Furthermore, the ability to utilize the tax losses may be subject to additional limitations upon the occurrence of certain events, such as a change in the ownership of the Company. Some of the Company’s tax attributes are subject to annual limitations due to historical changes in ownership from acquisitions, mergers or other related ownership shift events; however, the Company anticipates that our remaining available net operating losses will be consumed prior to their expiration.
The Company’s tax loss carryforwards are as follows at December 31, 2019 (in millions):2021:
| | | | | | | | | | | |
Jurisdiction | Loss
Carryforward | | Expiration |
US - Federal | $ | 899.5 | | | 2022 – 2037, Indefinite |
US - State | 619.9 | | | 2019 –2039, Indefinite |
Foreign - Mexico & Canada | 20.7 | | | 2021 – 2038 |
Total | $ | 1,540.1 | | | |
| | | | | | | | | | | | | | | | | |
| (in thousands) | Loss
Carryforward | | Deferred Tax | | Expiration |
| Jurisdiction: | | | | | |
| US - Federal | $ | 1,232,717 | | | $ | 250,920 | | | 2022 – 2037, Indefinite |
| US - State | 632,922 | | | 34,332 | | | 2022 –2041, Indefinite |
| Foreign - Canada and Mexico | 3,892 | | | 1,218 | | | 2026 – 2037 |
| Total | $ | 1,869,531 | | | $ | 286,470 | | | |
As of December 31, 2019,2021, the total amount of the basis difference in investments outside the US, which are indefinitely reinvested and for which deferred taxes have not been provided, is approximately $120.0$357.9 million. The tax, if any, associated with the recovery of the basis difference is dependent on the manner in which it is recovered and is not readily determinable.
Unrecognized Tax Positions
The Company is subject to taxation in US, Canada, Mexico, UK, and state jurisdictions. The Company’s tax returns are subject to examination by the applicable tax authorities prior to the expiration of statute of limitations for assessing additional taxes, which generally ranges from two to five years after the end of the applicable tax year. Therefore, asAs of December 31, 2019,2021, generally, tax years for 20132014 through 2019 generally2021 remain subject to examination by the tax authorities. In addition, in certain taxing jurisdictions, in the case of carryover tax attributes to years open for assessment, such attributes may be subject to reduction by taxing authorities.
A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows:
| | (in thousands) | (in thousands) | 2019 | | 2018 | | 2017 | (in thousands) | 2021 | | 2020 | | 2019 |
| Unrecognized tax benefits – January 1, | Unrecognized tax benefits – January 1, | $ | 64,444 | | | $ | 72,660 | | | $ | 64,974 | | Unrecognized tax benefits – January 1, | $ | 54,494 | | | $ | 63,747 | | | $ | 64,444 | |
| Increases based on tax positions related to current period | Increases based on tax positions related to current period | — | | | 1,545 | | | 7,895 | | Increases based on tax positions related to current period | — | | | 1,211 | | | — | |
| Increases based on tax positions related to prior period | Increases based on tax positions related to prior period | 268 | | | — | | | 355 | | Increases based on tax positions related to prior period | 9 | | | — | | | 268 | |
| Decreases based on tax positions related to prior period | Decreases based on tax positions related to prior period | (287) | | | (9,016) | | | (564) | | Decreases based on tax positions related to prior period | — | | | — | | | (287) | |
| Decrease from expiration of statute of limitations | Decrease from expiration of statute of limitations | (678) | | | (745) | | | — | | Decrease from expiration of statute of limitations | (10,189) | | | (10,464) | | | (678) | |
| Unrecognized tax benefits – December 31, | Unrecognized tax benefits – December 31, | $ | 63,747 | | | $ | 64,444 | | | $ | 72,660 | | Unrecognized tax benefits – December 31, | $ | 44,314 | | | $ | 54,494 | | | $ | 63,747 | |
At December 31, 2019, 20182021, 2020 and 2017,2019, respectively, there were $59.3$43.3 million, $60.0$53.2 million and $67.2$59.3 million of unrecognized tax benefits that, if recognized, would affect the annual effective tax rate.
The Company classifies interest on tax deficiencies and income tax penalties within income tax expense. During the years ended December 31, 2019, 20182021, 2020 and 2017,2019, the Company recognized approximately $0.8$(1.0) million, $1.0$(0.9) million, and $0.4$0.8 million in interest and penalties, respectively. The Company hadaccrued approximately $2.4$0.6 million and $1.6$1.5 million for the payment of interest and penalties accrued at December 31, 20192021 and 2018,2020, respectively.
Future tax settlements or statute of limitation expirations could result in a change to the Company’s uncertain tax positions. The Company believes that it is reasonably possible that approximately $10.5$0.9 million of unrecognized tax benefits, as of December 31, 2019,2021, could decrease in the next twelve months as a result of statutethe expiration of statutes of limitation, expirations, audit settlements or resolution of tax uncertainties.
NOTE 1513 - Derivatives
On November 6, 2018, WSIIthe Company entered into an interest rate swap agreement (the “Swap Agreement”) with a financial counterparty that effectively converts $400.0 million in aggregate notional amount of variable-rate debt under the Company’s ABL Facility into fixed-rate debt. The Swap Agreement will terminate on May 29, 2022, at the same time the Company’s ABL Facility matures.2022. Under the terms of the Swap Agreement, the Company receives a floating rate equal to 1 monthone-month LIBOR and makes payments based on a fixed rate of 3.06% on the notional amount. The receive rate under the terms of the Swap Agreement was 1.74% 0.11% and 2.44%0.15% at December 31, 20192021 and 2018,2020, respectively.
The Swap Agreement was designated and qualified as a hedge of the Company’s exposure to changes in interest payment cash flows created by fluctuations in variable interest rates on the ABL Facility.
The location and the fair value of derivative instruments designated as hedges in the consolidated balance sheetsheets as of December 31 was as follows:
| | (in thousands) | (in thousands) | Balance Sheet Location | | 2019 | | 2018 | (in thousands) | Balance Sheet Location | 2021 | | 2020 |
| Cash Flow Hedges: | Cash Flow Hedges: | | Cash Flow Hedges: | |
| Interest rate swap | Interest rate swap | Accrued liabilities | | $ | 5,348 | | | $ | 1,709 | | Interest rate swap | Accrued liabilities | $ | 5,259 | | | $ | 11,619 | |
| Interest rate swap | Interest rate swap | Other long-term liabilities | | $ | 8,943 | | | $ | 6,192 | | Interest rate swap | Other non-current liabilities | $ | — | | | $ | 5,308 | |
The fair value of the interest rate swap is based on dealer quotes of market forward rates, a Level 2 input on the fair value hierarchy, and reflects the amount that the Company would receive or pay as of December 31, 20192021 for contracts involving the same attributes and maturity dates.
The following table discloses the impact of the interest rate swap, excluding the impact of income taxes, on other comprehensive income (“OCI”), AOCI and the Company’s statement of operations for the years ended December 31:
| | | | | | | | | | | |
| (in thousands) | 2019 | | 2018 |
| Loss recognized in OCI | $ | (6,280) | | | $ | (7,777) | |
| Location of loss recognized in income | Interest expense | | Interest expense |
| Loss reclassified from AOCI into income (effective portion) | $ | (3,254) | | | $ | (373) | |
| | | | | | | | | | | | | | | | | |
| (in thousands) | 2021 | | 2020 | | 2019 |
| Gain (loss) recognized in OCI | $ | 11,677 | | | $ | (2,288) | | | $ | (6,280) | |
| Location of loss recognized in income | Interest expense, net | | Interest expense, net | | Interest expense, net |
| Loss reclassified from AOCI into income (effective portion) | $ | (12,001) | | | $ | (10,125) | | | $ | (3,254) | |
NOTE 1614 - Fair Value Measures
The fair value of financial assets and liabilities are included at the amount at which the instrument could be exchanged in a current transaction between willing parties, other than in a forced or liquidation sale.
The Company utilizes the suggested accounting guidance for the three levels of inputs that may be used to measure fair value:
| | | | | |
| Level 1 - | Observable inputs such as quoted prices in active markets for identical assets or liabilities; |
| Level 2 - | Observable inputs, other than Level 1 inputs in active markets, that are observable either directly or indirectly; and |
| Level 3 - | Unobservable inputs for which there is little or no market data, which require the reporting entity to develop its own assumptions |
The Company has assessed that the fair value of cash and short-term deposits, trade receivables, trade payables, capital lease and other financing obligations, and other current liabilities approximate their carrying amounts.
The following table shows the carrying amounts and fair values of financial assets and liabilities, including their levels in the fair value hierarchy:
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| December 31, 2019 | | | | December 31, 2018 | | | |
| Carrying Amount | Fair Value | | | Carrying Amount | Fair Value | | |
| (in thousands) | | Level 1 | Level 2 | Level 3 | | Level 1 | Level 2 | Level 3 |
| Financial liabilities not measured at fair value | | | | | | | | |
US ABL Facility(a) | $ | 885,245 | | $ | — | | $ | 903,000 | | $ | — | | $ | 853,409 | | $ | — | | $ | 878,500 | | $ | — | |
Canadian ABL Facility(a) | — | | — | | — | | — | | — | | — | | 918 | | — | |
2022 Secured Notes(a) | 264,576 | | — | | 282,250 | | — | | 292,258 | | — | | 297,027 | | — | |
2023 Secured Notes(a) | 482,768 | | — | | 517,334 | | — | | 293,918 | | — | | 288,633 | | — | |
Unsecured Notes(a) | — | | — | | — | | — | | 198,931 | | — | | 197,462 | | — | |
| Total | $ | 1,632,589 | | $ | — | | $ | 1,702,584 | | $ | — | | $ | 1,638,516 | | $ | — | | $ | 1,662,540 | | $ | — | |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| December 31, 2021 | December 31, 2020 |
| Carrying Amount | Fair Value | Carrying Amount | Fair Value |
| (in thousands) | Level 1 | Level 2 | Level 3 | Level 1 | Level 2 | Level 3 |
US ABL Facility(a) | $ | 1,612,783 | | $ | — | | $ | 1,644,500 | | $ | — | | $ | 1,263,833 | | $ | — | | $ | 1,304,612 | | $ | — | |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
2025 Secured Notes(a) | 518,117 | | — | | 551,835 | | — | | 637,068 | | — | | 694,876 | | — | |
2028 Secured Notes(a) | 492,490 | | — | | 515,635 | | — | | 491,555 | | — | | 518,820 | | — | |
| Total | $ | 2,623,390 | | $ | — | | $ | 2,711,970 | | $ | — | | $ | 2,392,456 | | $ | — | | $ | 2,518,308 | | $ | — | |
(a) The carrying valuevalues of the US ABL Facility, the Canadian ABL Facility, the 2022 Secured Notes, the 20232025 Secured Notes, and the Unsecured2028 Secured Notes incluincluded des $17.8$31.7 million, $0.0 million, $5.4 million, $7.2$8.4 million, and $0.0$7.5 million of of unamortized debt issuance costs for the year endedas of December 31, 2019,2021, which arewere presented as a direct reduction of the corresponding liability. The carrying valueAs of the 2023 Secured Notes also includes a $0.5 million premium, which is net against the debt issuance costs for the year ended December 31, 2019. The2020, the carrying valuevalues of the US ABL Facility, the Canadian ABL Facility, the 2022 Secured Notes, the 20232025 Secured Notes, and the Unsecured2028 Secured Notes includes $25.1included $40.8 million, $0.9 million, $7.7 million, $6.1$12.9 million, and $1.1$8.4 million of unamortized debt issuance costs for the year ended December 31, 2018, which arewere presented as a direct reduction of the corresponding liability.
There were no transferstransfers of financial instruments between the three levels of the fair value hierarchy during the years ended December 31, 2019 and 2018.2021 and 2020. The carrying value of the ABL Facility, excluding debt issuance costs, approximates fair value as the interest rates are variable and reflective of market rates. The fair value of the 2022 Secured Notes, the 20232025 Secured Notes and the Unsecured2028 Secured Notes is based on their last trading price at the end of each period obtained from a third party. The location and the fair value of derivative assets and liabilities designated as hedges in the consolidated balance sheet are disclosed in Note 15.13.
As part of the Merger, on July 2, 2020, the Company converted Mobile Mini's outstanding fully vested stock options to 7,361,516 WillScot Mobile Mini stock options using a conversion ratio of 2.405 as set by the Merger Agreement. The fair value of these options was valued at $19.3 million and is part of the purchase consideration. The value of the Mobile Mini stock options converted to WillScot Mobile Mini stock options in connection with the Merger, was determined utilizing the Black-Scholes option-pricing model and is affected by several variables, the most significant of which are the expected life of the equity award, the exercise price of the stock option as compared to the fair market value of the Common Stock on the Merger date, and the estimated volatility of the Common Stock over the term of the equity award. The volatility assumption was based on a blend of peer group volatility and Company trading history as the Company did not have a sufficient trading history as a stand-alone public company to rely exclusively on its own trading history. The risk-free interest rate is based on the US Treasury yield curve in effect at the time of the Merger. The key inputs utilized to determine the fair value of the stock options converted included within the purchase price were expected volatility of 51.92%, risk free rate of interest 0.17%, dividend yield of zero and expected life of 2 years.
Prior to their redemption, the Company's 2015 Public Warrants traded in active markets. When classified as liabilities, warrants traded in active markets with sufficient trading volume represent Level 1 financial instruments as they were publicly traded in active markets and thus had observable market prices which were used to estimate the fair value adjustments for the related common stock warrant liabilities. When classified as liabilities, warrants not traded in active markets, or traded with insufficient volume, represent Level 3 financial instruments that are valued using a Black-Scholes option-pricing model to estimate the fair value adjustments for the related common stock warrant liabilities.
The following table shows the carrying amounts and fair values of financial liabilities for which are measured at fair value:
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| December 31, 2021 | December 31, 2020 |
| Carrying Amount | Fair Value | Carrying Amount | Fair Value |
| (in thousands) | Level 1 | Level 2 | Level 3 | Level 1 | Level 2 | Level 3 |
| 2015 Private Warrants | N/A | N/A | N/A | N/A | $ | 77,404 | | $ | — | | $ | — | | $ | 77,404 | |
Level 3 Disclosures
When the 2015 Private Warrants and 2018 Warrants were classified as liabilities, the Company utilized a Black Scholes option-pricing model to value the warrants at each reporting period and transaction date, with changes in fair value recognized in the statements of operations. The estimated fair value of the common stock warrant liability was determined using Level 3 inputs. Inherent in the pricing model were assumptions related to expected share-price volatility, expected life, risk-free interest rate and dividend yield. The volatility assumption was based on a blend of peer group volatility and Company trading history that matched the expected remaining life of the warrants as the Company did not have a sufficient trading history as a stand-alone public company to rely exclusively on its own trading history. The risk-free interest rate was based on the US Treasury zero-coupon yield curve on the grant date for a maturity similar to the expected remaining life of the warrants. The expected life of the warrants was assumed to be equivalent to their remaining contractual term. The dividend rate was based on the historical rate, which the Company anticipated to remain at zero.
The 2018 Warrants were reclassified to equity at June 30, 2020, the date all issued and outstanding shares of the Company's Class B Common Stock were cancelled.
The following table provides quantitative information regarding Level 3 fair value measurements:
| | | | | | | | |
| | December 31, 2020 |
| (in thousands) | | 2015 Private Warrants |
| Stock Price | | $ | 23.17 | |
| Strike Price | | $ | 11.50 | |
| Expected Life | | 1.91 | |
| Volatility | | 41.2 | % |
| Risk Free rate | | 0.13 | % |
| Dividend yield | | — | |
| Fair value of warrants | | $ | 12.17 | |
The following table presents changes in Level 3 liabilities measured at fair value for the year ended December 31, 2021:
| | | | | |
| (in thousands) | 2015 Private Warrants |
| Balance - beginning of year | $ | 77,404 | |
| Exercise or conversion | (78,495) | |
| Measurement adjustment | 25,486 | |
| Repurchases | (24,395) | |
| Balance - end of year | $ | — | |
The following table presents changes in Level 3 liabilities measured at fair value for the year ended December 31, 2020:
| | | | | | | | | | | |
| (in thousands) | 2015 Private Warrants | | 2018 Warrants |
| Balance- beginning of year | $ | 72,705 | | | $ | 58,369 | |
| Exercise or conversion | (359) | | | (416) | |
| Repurchase | (24,970) | | | — | |
| Measurement adjustment | 30,028 | | | (31,737) | |
| Reclassification to equity at June 30, 2020 | — | | | (26,216) | |
| Balance- end of year | $ | 77,404 | | | $ | — | |
NOTE 1715 - Restructuring
Restructuring costs include charges associated with exit or disposal activities that meet the definition of restructuring under FASB ASC Topic 420, Exit or Disposal Cost Obligations (“ASC 420”). The Company's restructuring plans are generally country or region specific and are typically completed within a one yearone-year period. Restructuring costs incurred under these plans include (i) one-time termination benefits related to employee separations, (ii) contract termination costs, and (iii) other non-lease related costs associated with exit or disposal activities including, but not limited to, costs for consolidating or closing facilities. As a result of the adoption of ASC 842, on January 1, 2019 leaseactivities. Lease exit costs related to the termination of leases for duplicative branches and corporate facilities are now recorded in operating lease liabilities and are not part of the restructuring liabilities. Costs related to the integration of acquired businesses that do not meet the definition of restructuring under ASC 420, such as employee training costs, duplicate facility costs, and professional services expenses, are included within SG&A expense.
The Company incurred costs associated with restructuring plans designed to streamline operations and reduce costs of $3.8$11.9 million $15.5, $6.5 million, and $2.2$3.8 million net of reversals, during the years ended December 31, 2019, 20182021, 2020 and 2017,2019, respectively. The following is a summary of the activity in the Company’s restructuring accruals for years ended December 31:
| | (in thousands) | (in thousands) | Year Ended December 31, | | (in thousands) | Year Ended December 31, |
| 2019 | | 2018 | | 2017 | | (in thousands) | 2021 | 2020 | 2019 |
| Employee Costs | Facility Exit Costs | Total | Employee Costs | Facility Exit Costs | Total | Employee Costs | Facility Exit Costs | Total | (in thousands) | Employee Costs | Total | Employee Costs | Facility Exit Costs | Total | Employee Costs | Facility Exit Costs | Total |
| Beginning balance | Beginning balance | $ | 4,544 | | $ | 972 | | $ | 5,516 | | $ | 227 | | $ | — | | $ | 227 | | $ | 1,793 | | $ | — | | $ | 1,793 | | Beginning balance | $ | 1,750 | | $ | 447 | | $ | — | | $ | 447 | | $ | 4,544 | | $ | 5,516 | |
Reclassification of liability to operating lease asset at the adoption of ASC 842(a) | Reclassification of liability to operating lease asset at the adoption of ASC 842(a) | — | | (972) | | (972) | | — | | — | | — | | — | | — | | — | | Reclassification of liability to operating lease asset at the adoption of ASC 842(a) | — | | — | | — | | — | | — | | (972) | | (972) | |
| Charges | Charges | 1,955 | | 1,800 | | 3,755 | | 10,182 | | 5,286 | | 15,468 | | 2,196 | | — | | 2,196 | | Charges | 11,868 | | 11,868 | | 6,510 | | 17 | | 6,527 | | 1,955 | | 1,800 | | 3,755 | |
| Cash payments | Cash payments | (5,694) | | — | | (5,694) | | (5,806) | | (4,314) | | (10,120) | | (1,806) | | — | | (1,806) | | Cash payments | (5,943) | | (5,943) | | (5,356) | | — | | (5,356) | | (5,694) | | — | | (5,694) | |
| Foreign currency translation | Foreign currency translation | (136) | | — | | (136) | | (59) | | — | | (59) | | 12 | | — | | 12 | | Foreign currency translation | — | | — | | 30 | | — | | 30 | | (136) | | — | | (136) | |
| Non-cash movements | Non-cash movements | (222) | | (1,800) | | (2,022) | | — | | — | | — | | (1,968) | | — | | (1,968) | | Non-cash movements | (7,200) | | (7,200) | | 119 | | (17) | | 102 | | (222) | | (1,800) | | (2,022) | |
| Ending balance | Ending balance | $ | 447 | | $ | — | | $ | 447 | | $ | 4,544 | | $ | 972 | | $ | 5,516 | | $ | 227 | | $ | — | | $ | 227 | | Ending balance | $ | 475 | | $ | 475 | | $ | 1,750 | | $ | — | | $ | 1,750 | | $ | 447 | | $ | — | | $ | 447 | |
(a) As a result of the adoption of ASC 842, the January 1, 2019 restructuring liability attributable to “cease-use” locations was reclassified to operating lease assets and 2019 costs related to the termination of leases for duplicative branches and corporate facilities are now recorded in lease impairment charges and other related costs.
The restructuring charges for the year ended December 31, 2021 are driven by employee termination costs as a result of the elimination of positions due to the Merger. The restructuring charges for the year ended December 31, 2020, are driven by termination costs as a result of elimination of positions due to the Merger and reductions in force as a result of COVID-19. The restructuring charges in 2019 relate to the Company initiatedinitiating certain restructuring plans associated with the ModSpace acquisitionprevious acquisitions in order to capture operating synergies as a result of integrating ModSpacethe acquirees into WillScot. The restructuring activities primarily include the termination of employees in connection with the consolidation of overlapping facilities and functions within our existing business. At
The restructuring non-cash movements for the year ended December 31, 2019,2021 primarily represent stock compensation costs recognized as a result of the Company is substantially completemodification of certain equity awards associated with actions related to employee costs.the Transition, Separation and Release Agreement entered into on February 25, 2021 with the Company's former President and Chief Operating Officer.
Segments (as defined in Note 18)
The $11.9 million of restructuring charges for the year ended December 31, 2018 primarily relate2021 included: $1.4 million of charges pertaining to employee termination coststhe NA Modular segment; $3.3 million of charges related to the NA Storage segment; and lease exist costs in connection with the integration$7.2 million of Acton, Tyson, and ModSpace acquisitions in order to capture operating synergies as a result of integrating these businesses into WillScot. The restructuring activities include the termination of leases for 26 duplicative branch and corporate facilities and the termination of employees in connection with the consolidation of these overlapping facilities and functions within our existing business.unallocated charges.
The $6.5 million of restructuring charges for the year ended December 31, 2017 primarily relate to a reduction2020 included: $2.1 million of corporate employees which resulted in employee termination costs. As part of the corporate restructuring plan, certain employees were required to render future service in order to receive their termination benefits. The termination costs associated with these employees was recognized over the period from the date of communication of terminationcharges pertaining to the employee to the earlier of the actual date of termination or the Business Combination date. As part of the Algeco Group internal restructuring that occurred prior to the Business Combination, $2.0NA Modular Segment; $4.0 million of WSII’s restructuring liability, related to employees that were transferred, was transferred to other entities within the Algeco Group. The Company has no remaining liability associated with these employees and does not anticipate incurring future charges under the corporate restructuring plan. The remaining restructuring 2017 charges are employee termination costs related to the Company’s USNA Storage Segment; and Canadian operations.
Segments$0.4 million of charges related to the UK Storage Segment.
The $3.8 million of restructuring charges for the year ended December 31, 2019 includes: $3.3 million ofincluded charges pertaining to the NA Modular - US segment; and $0.5 million of charges pertaining to the Modular - Other North America segment.
The $15.5 million of restructuring charges for the year ended December 31, 2018 includes: $14.0 million of charges pertaining to the Modular - US segment; and $1.5 million of charges pertaining to Modular - Other North America segment.
The $2.2 million of restructuring charges for the year ended December 31, 2017 includes: $0.3 million of charges pertaining to the Modular - US segment and $1.9 million of charges pertaining to Corporate.
NOTE 1816 - Stock-Based Compensation
Former Algeco Long-Term Incentive PlanRestricted Stock Awards
Prior to the Business Combination, certain WSII employees participated in the Algeco Group’s long-term cash incentive plan and equity incentive plans (collectively, the “Algeco LTIP”). In connection with the Business Combination, the participating WSII Employees (i) forfeited their rights to participate in the Algeco LTIP and assigned those rights back to the Algeco Group and (ii) transferred any shares they owned in the Algeco LTIP. In exchange, the WSII employees received $4.2 million in cash, which was paid by WSII and reimbursed by the Algeco Group.
Prior to the Business Combination, WillScot’s non-executive Chairman of the Board served as the non-executive Chairman of WSII and the Algeco Group and participated in the Algeco LTIP. In connection with the Business Combination, he resigned from those positions and entered into a transaction similar to the ones entered into by the participating WSII employees. He received $2.0 million in cash, which was paid by WSII and reimbursed by the Algeco Group, and 300,000 shares of WillScot Class A stock from Sapphire on the closing date of the Business Combination. The fair value of the shares at the time of the award was $9.90 per share or approximately $3.0 million.
The $4.2 million and $2.0 million paid to the participating WSII employees and the non-executive Chairman, respectively, and the $3.0 million of stock compensation are presented in selling, general and administrative expense on the consolidated statement of operations for the year ended December 31, 2017. The corresponding amounts are reflected as a capital contribution and as share-based compensation expense in the changes to additional paid-in capital in the consolidated statements of changes in shareholders’ equity.
WillScot Incentive Stock Plan
On November 16, 2017, the Company’s shareholders approved a long-term incentive award plan (the “Plan”). The Plan is administered by the Compensation Committee of WillScot's Board of Directors. Under the Plan, the Committee may grant an aggregate of 4,000,000 shares of Class A common stock in the form of non-qualified stock options, incentive stock options, stock appreciation rights, RSAs, RSUs, performance compensation awards and stock bonus awards.
RSAs
The following table summarizes the Company’sCompany's RSA activity during the yearyears ended December 31, 2019:
| | | | | | | | | | | |
| RSAs | | Weighted-Average Grant Date Fair Value |
| Outstanding RSAs, December 31, 2018 | 72,053 | | | $ | 15.57 | |
| Granted during 2019 | 52,755 | | $ | 14.69 | |
| Forfeited during 2019 | — | | | | $ | — | |
| Vested during 2019 | (72,053) | | | $ | 15.57 | |
| Outstanding RSAs, December 31, 2019 | 52,755 | | $ | 14.69 | |
| | | | | | | | | | | |
| Number of Shares | | Weighted-Average Grant Date Fair Value |
| Balance, December 31, 2018 | 72,053 | | | $ | 15.57 | |
| Granted | 52,755 | | | $ | 14.69 | |
| Vested | (72,053) | | | $ | 15.57 | |
| Balance December 31, 2019 | 52,755 | | | $ | 14.69 | |
| Granted | 65,959 | | | $ | 11.75 | |
| Vested | (61,266) | | | $ | 14.28 | |
| Balance December 31, 2020 | 57,448 | | | $ | 11.75 | |
| Granted | 44,708 | | | $ | 29.30 | |
| Forfeited | (8,532) | | | $ | 29.30 | |
| Vested | (57,448) | | | $ | 11.75 | |
| Balance December 31, 2021 | 36,176 | | | $ | 29.30 | |
| | | |
| | | |
| | | |
| | | |
CompensationCompensation expense for RSAs recognized in SG&A expense onin the consolidated statements of operations was $1.0$0.8 million, $0.9 million, and $0.5$1.0 million for the years ended December 31, 2021, 2020, and 2019, and 2018, respectively, with associated tax benefits of $0.2 million and $0.1 million.respectively. At December 31, 20192021, there was $0.5 million of unrecognized compensation expensecost related to RSAs totaled $0.4 million and isthat was expected to be recognized over the remaining weighted average remaining vesting period of 0.5 years.
There0.4 years. The total fair value of RSA's vested in 2021, 2020, and 2019 was no compensation expense for RSAs for the years ended December 31, 2017.$1.6 million, $0.9 million, and $0.9 million, respectively.
Time-Based RSUs
The following table summarizes the Company's Time-Based RSU award activity during the yearyears ended December 31, 2019:2021, 2020 and 2019:
| | | | | | | | | | | |
| Time-Based RSUs | | Weighted-Average Grant Date Fair Value |
| Outstanding Time-Based RSUs, December 31, 2018 | 852,733 | | | $ | 13.60 | |
| Granted during 2019 | 478,400 | | | $ | 11.69 | |
| Forfeited during 2019 | (52,648) | | | $ | 12.78 | |
| Vested during 2019 | (213,180) | | | $ | 12.78 | |
| Outstanding Time-Based RSUs, December 31, 2019 | 1,065,305 | | $ | 12.78 | |
| | | | | | | | | | | |
| Number of Shares | | Weighted-Average Grant Date Fair Value |
| Balance, December 31, 2018 | 852,733 | | | $ | 13.60 | |
| Granted | 478,400 | | | $ | 11.69 | |
| Forfeited | (52,648) | | | $ | 12.78 | |
| Vested | (213,180) | | | $ | 12.78 | |
| Balance December 31, 2019 | 1,065,305 | | | $ | 12.78 | |
| Granted | 632,864 | | | $ | 14.37 | |
| Forfeited | (33,558) | | | $ | 13.28 | |
| Vested | (338,749) | | | $ | 13.02 | |
| Balance December 31, 2020 | 1,325,862 | | | $ | 13.46 | |
| Granted | 415,737 | | | $ | 27.25 | |
| Forfeited | (72,505) | | | $ | 17.80 | |
| Vested | (671,643) | | | $ | 13.99 | |
| Balance December 31, 2021 | 997,451 | | | $ | 18.54 | |
| | | |
| | | |
| | | |
| | | |
Compensation expense for Time-Based RSUs recognized in SG&A expense onin the consolidated statements of operationsoperations was $3.9$9.0 million, $5.6 million, and $2.3$3.9 million for the years ended December 31, 2021, 2020, and 2019, respectively. At December 31, 2021, unrecognized compensation cost related to Time-Based RSUs totaled $11.7 millionand 2018, respectively,was expected to be recognized over the remaining weighted average vesting period of 2.0 years. The total fair value of RSU's vested in 2021, 2020, and 2019 was $18.5 million, $2.9 million, and $2.5 million, respectively.
Included in restructuring costs for the year ended December 31, 2021, was expense of approximately $5.9 million recognized as a result of the modification of certain RSUs with associatedthe Transition, Separation and Release Agreement entered into on February 25, 2021, with the Company's former President and Chief Operating Officer.
tax benefits of $0.9 million and $0.5 million, respectively. At December 31, 2019, unrecognized compensation expense related to Time-Based RSUs totaled $10.3 million and is expected to be recognized over a remaining period of 2.6 years.
There was no compensation expense for Time-Based RSUs for the year ended December 31, 2017.
Market-BasedPerformance-Based RSUs
The following table summarizes the Company's Market-BasedPerformance-Based RSU award activity during the yearyears ended December 31, 2021 and 2020 and 2019:
| | | | | | | | | | | |
| Market-Based RSUs | | Weighted-Average Grant Date Fair Value |
| Outstanding Market-Based RSUs, December 31, 2018 | — | | | $ | — | |
| Granted during 2019 | 302,182 | | | $ | 13.22 | |
| Forfeited during 2019 | (13,901) | | | $ | 13.22 | |
| Vested during 2019 | — | | | $ | — | |
| Outstanding Market-Based RSUs, December 31, 2019 | 288,281 | | | $ | 13.22 | |
| | | | | | | | | | | |
| Number of Shares | | Weighted-Average Grant Date Fair Value |
| Balance December 31, 2018 | — | | | $ | — | |
| Granted | 302,182 | | | $ | 13.22 | |
| Forfeited | (13,901) | | | $ | 13.22 | |
| Balance December 31, 2019 | 288,281 | | | $ | 13.22 | |
| Granted | 325,256 | | | $ | 16.35 | |
| Forfeited | (12,700) | | | $ | 14.70 | |
| Vested | (7,449) | | | $ | 16.82 | |
| Balance December 31, 2020 | 593,388 | | | $ | 14.88 | |
| Granted | 977,645 | | | $ | 33.21 | |
| Forfeited | (23,753) | | | $ | 27.92 | |
| Vested | (10,886) | | | $ | 14.70 | |
| Balance December 31, 2021 | 1,536,394 | | | $ | 26.34 | |
| | | |
| | | |
| | | |
| | | |
Compensation expense for Market-BasedPerformance-Based RSUs recognized in SG&A expense onin the condensed consolidated statements of operations waswas $8.3 million, $2.5 million and $1.0 million for the years ended December 31, 2021, 2020, and 2019, respectively. At December 31, 2021, unrecognized compensation cost related to Performance-Based RSUs totaled $27.6 million and was expected to be recognized over the remaining vesting period of 2.5 years.
The total fair value of Performance-Based RSU's vested in 2021 and 2020 was $0.3 million and $0.2 million, respectively. No Performance-Based RSUs vested in 2019. Refer to Note 1 for the details of conditions required for the performance-based RSUs to vest.
Included in restructuring costs for the year ended December 31, 2019,2021, was expense of approximately $1.3 million recognized as a result of the modification of certain Performance-Based RSUs with associated tax benefit of $0.2 million. At December 31, 2019, unrecognized compensation expense related to Market-Based RSUs totaled $2.8 millionthe Transition, Separation and is expected to be recognized over a remaining period of 2.2 years.
There was no compensation expense for Market-Based RSUs forRelease Agreement entered into on February 25, 2021, with the years ended December 31, 2018Company's former President and 2017.Chief Operating Officer.
Stock Option AwardsOptions
The following table summarizes the Company's stock option activity as of December 31, 2019:
| | | | | | | | | | | |
| Options | | Weighted - Average Exercise Price per Share |
| Outstanding stock options, December 31, 2018 | 589,257 | | | $ | 13.60 | |
| Granted during 2019 | — | | | $ | — | |
| Forfeited during 2019 | (41,302) | | | $ | 13.60 | |
| Vested during 2019 | (147,313) | | | $ | 13.60 | |
| Outstanding stock options, December 31, 2019 | 400,642 | | | $ | 13.60 | |
| Exercised during 2019 | (13,767) | | | $ | 13.60 | |
| Vested and exercisable stock options, December 31, 2019 | 133,546 | | | $ | 13.60 | |
Compensation expense for stock options recognized in SG&A expense on the consolidated statements of operations was $0.8 million and $0.6 million forduring the years ended December 31, 20192021, 2020 and 2018, respectively, with associated tax benefits2019:
| | | | | | | | | | | | | | | | | | | | | | | |
| WillScot Options | | Weighted-Average Exercise Price per Share | | Converted
Mobile Mini Options | | Weighted-Average Exercise Price per Share |
| Balance December 31, 2018 | 589,257 | | | $ | 13.60 | | | — | | | $ | — | |
| Forfeited | (41,302) | | | $ | 13.60 | | | — | | | $ | — | |
| Exercised | (13,767) | | | $ | 13.60 | | | — | | | $ | — | |
| Balance December 31, 2019 | 534,188 | | | $ | 13.60 | | | — | | | $ | — | |
| Converted at Merger | — | | | $ | — | | | 7,361,516 | | | $ | 13.52 | |
| Exercised | — | | | $ | — | | | (428,653) | | | $ | 13.07 | |
| Cancelled in settlement, net of taxes | — | | | $ | — | | | (4,901,408) | | | $ | 13.04 | |
| Balance December 31, 2020 | 534,188 | | | $ | 13.60 | | | 2,031,455 | | | $ | 14.78 | |
| Forfeited | — | | | $ | — | | | (6,240) | | | $ | 12.19 | |
| Exercised | — | | | $ | — | | | (497,572) | | | $ | 15.21 | |
| Balance at December 31, 2021 | 534,188 | | | $ | 13.60 | | | 1,527,643 | | | $ | 14.66 | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| Fully vested and exercisable options, December 31, 2021 | 400,641 | | | $ | 13.60 | | | 1,527,643 | | | $ | 14.66 | |
Under our stock option plans, the Company may issue shares on a net basis at the request of $0.2 million and $0.1 million, respectively. the option holder. This occurs by netting the option costs in shares from the shares exercised. No options were granted in the years ended December 31, 2021, 2020, or 2019.
At December 31, 2019, unrecognized compensation expense related to Time-Based RSUs totaled $1.6 million and is expected to be recognized over a remaining period of 2.2 years.
As of December 31, 2019,2021, the total intrinsic value of stock options outstanding and stock options fully vested and currently exercisable was $2.0$54.5 million and $0.7$50.9 million, respectively. NaN stock options were exercised during the years endedAt December 31, 2018 or 2017. 2021, the weighted-average remaining contractual term of options outstanding was 6.2 years for WillScot options and 4.3 years for converted Mobile Mini options. The total pre-tax intrinsic value of stock options exercised during the yearyears ended December 31, 2021, 2020, and 2019 waswere $6.2 million, $30.7 million and less than $0.1 million.million, respectively.
There was no compensationCompensation expense for stock optionsoption awards, recognized in SG&A expense in the consolidated statements of operations was$0.7 million, $0.7 million, and $0.8 million for the yearyears ended December 31, 2017.
The fair value2021, 2020, and 2019, respectively. At December 31, 2021, unrecognized compensation cost related to stock option awards totaled $0.2 million and is expected to be recognized over the remaining vesting period of each option award at grant date was estimated using the Black-Scholes option-pricing model with the following assumptions:
| | | | | | | | |
| | Assumptions0.2 years. |
Expected volatility | | 36.0 | % |
Expected dividend yield | | — | |
Risk-free interest rate | | 2.7 | % |
Expected term (in years) | | 6.25 |
Exercise price | | $ | 13.60 | |
Weighted-average grant date fair value | | $ | 5.51 | |
NOTE 1917 - Commitments and Contingencies
Commitments
At December 31, 2019 and 2018, commitments for the acquisition of rental equipment and property, plant and equipment were $4.5 million and $10.0 million, respectively.
Contingencies - Legal Claims
The Company is involved in various lawsuits, or claims and legal proceedings that arise in the ordinary course of business. Management isThe Company assesses these matters on a case-by-case basis as they arise and establishes reserves as required. As of December 31, 2021, with respect to these outstanding matters, the opinionCompany believes that there is no pending claimthe amount or lawsuit which, if adversely determined, wouldrange of reasonably possible loss will not, either individually or in the aggregate, have a material impactadverse effect on the Company’sconsolidated financial condition,position, results of operations, or cash flows. However, the outcome of such matters is inherently unpredictable and subject to significant uncertainties.
NOTE 2018 - Segment Reporting
The Company has historically operatedoperates in 2 principal lines of business: modular leasing4 reportable segments as follows: North America Modular Solutions ("NA Modular"), North America Storage Solutions ("NA Storage"), United Kingdom Storage Solutions ("UK Storage") and salesTank and remote accommodations, which were managed separately. The Remote Accommodations Business was considered a single operating segment. FollowingPump Solutions ("Tank and Pump"). In connection with the Business Combination, the Remote Accommodations segment is no longer owned byMerger, the Company determined its reportable segments and isretrospectively adjusted prior year's presentation to conform to the current presentation of reportable segments.
Prior to the third quarter of 2021, the NA Modular segment represented the activities of WillScot historical segments prior to the Merger, and the NA Storage, UK Storage and Tank and Pump segments represented the segments reported as discontinued operationsby Mobile Mini prior to the Merger. During the third quarter of 2021, the majority of the portable storage product business within the NA Modular segment was transitioned to the NA Storage segment, and associated revenues, expenses, and operating metrics beginning in the consolidated financial statements. As such,third quarter of 2021 were transferred to the NA Storage segment, was excludedrepresenting a shift of approximately $5.0 million of revenue and gross margin per quarter from the segment information below.
NA Modular leasing and sales is comprised of 2 operating segments: US and other North America. The US modular operating segment (“Modular - US”) consists of the contiguous 48 states and Hawaii. The Other North America operating segment (“Modular - Other North America”) consists of Alaska, Canada and Mexico. Corporate and other includes eliminations of costs and revenue between segments and Algeco Group corporate costs not directly attributable to the underlying segments. FollowingNA Storage segment. This adjustment was not made to the Business Combination, no additional Algeco Group corporate costs were incurred andhistorical segment results of prior periods, as the Company's ongoing corporate costs are included within the Modular - US segment. Company believes such adjustments to be immaterial.
Total assets for each reportable segment are not available because the Company utilizes a centralized approach to working capital management. Transactions between reportable segments are not significant.
As discussed in Note 10, the net assets acquired from ModSpace were allocated to both the Modular - US and Modular - Other North America segments. The US operations of ModSpace are included in the Modular - US segment and the Canadian operations of ModSpace are included in the Modular - Other North America segment. The operations and net assets acquired from Acton and Tyson are both included in the Modular - US segment.
The Company defines EBITDA as net income (loss) income plus interest (income) expense, income tax (benefit) expense, depreciation and amortization. The Company reflects the further adjustments to EBITDA ("(“Adjusted EBITDA"EBITDA”) to exclude certain non-cash items and the effect of what the Company considers transactions or events not related to its core and ongoing business operations. The CompanyIn addition, the Chief Operating Decision Maker ("CODM") evaluates business segment performance onutilizing Adjusted EBITDA as shown in the reconciliation of the Company’s (loss)consolidated net income from operations before income taxes(loss) to Adjusted EBITDA below. Management believes that evaluating segment performance excluding such items is meaningful because it provides insight with respect to the intrinsic and ongoing operating results of the Company.
The Company also regularly evaluates gross profit by segment to assist in the assessment of its operational performance. The Company considers Adjusted EBITDA to be the more important metric because it more fully captures the business performance of the segments, inclusive of indirect costs.
Reportable Segments
The following tables set forth certain information regarding each of the Company’s reportable segments forfor the years ended December 31, 2021, 2020, and 2019, 2018respectively. Consistent with the financial statements, the segment results only include results from Mobile Mini's operations after July 1, 2020, the Merger date. Please refer to the Management Discussion and 2017, respectively:
| | | | | | | | | | | | | | | | | | | | | | | |
| Year Ended December 31, 2019 | | | | | | |
| (in thousands) | Modular - US | | Modular - Other North America | | Corporate and Other | | Total |
| Revenues | | | | | | | |
| Leasing and services revenue: | | | | | | | |
| Modular space leasing | $ | 677,593 | | | $ | 66,592 | | | $ | — | | | $ | 744,185 | |
| Modular space delivery and installation | 201,368 | | | 18,689 | | | — | | | 220,057 | |
| Sales: | | | | | | | |
| New units | 54,851 | | | 4,234 | | | — | | | 59,085 | |
| Rental units | 27,871 | | | 12,467 | | | — | | | 40,338 | |
| Total Revenues | 961,683 | | | 101,982 | | | — | | | 1,063,665 | |
| | | | | | | |
| Costs | | | | | | | |
| Cost of leasing and services: | | | | | | | |
| Modular space leasing | 197,707 | | | 15,444 | | | — | | | 213,151 | |
| Modular space delivery and installation | 176,124 | | | 17,983 | | | — | | | 194,107 | |
| Cost of sales: | | | | | | | |
| New units | 39,343 | | | 2,817 | | | — | | | 42,160 | |
| Rental units | 17,241 | | | 9,014 | | | — | | | 26,255 | |
| Depreciation of rental equipment | 156,409 | | | 18,270 | | | — | | | 174,679 | |
| Gross profit | $ | 374,859 | | | $ | 38,454 | | | $ | — | | | $ | 413,313 | |
| Adjusted EBITDA | $ | 325,068 | | | $ | 31,480 | | | $ | — | | | $ | 356,548 | |
| Other selected data | | | | | | | |
| Selling, general and administrative expense | $ | 242,734 | | | $ | 28,270 | | | $ | — | | | $ | 271,004 | |
| Other depreciation and amortization | $ | 11,542 | | | $ | 853 | | | $ | — | | | $ | 12,395 | |
| Purchase of rental equipment and refurbishments | $ | 193,453 | | | $ | 11,653 | | | $ | — | | | $ | 205,106 | |
| | | Year Ended December 31, 2018 | | | Year Ended December 31, 2021 |
| (in thousands) | (in thousands) | Modular - US | | Modular - Other North America | | Corporate and Other | | Total | (in thousands) | NA Modular | | NA Storage | | UK Storage | | Tank and Pump | | Unallocated Costs | | Total |
| Revenues | | |
| Revenues: | | Revenues: | |
| Leasing and services revenue: | Leasing and services revenue: | | Leasing and services revenue: | |
| Modular space leasing | $ | 469,302 | | | $ | 48,933 | | | $ | — | | | $ | 518,235 | | |
| Modular space delivery and installation | 138,181 | | | 16,376 | | | — | | | 154,557 | | |
| Sales: | | |
| Leasing | | Leasing | $ | 864,923 | | | $ | 387,567 | | | $ | 82,106 | | | $ | 77,527 | | | $ | 1,412,123 | |
| Delivery and installation | | Delivery and installation | 219,385 | | | 101,744 | | | 24,023 | | | 29,530 | | | 374,682 | |
| Sales revenue: | | Sales revenue: | |
| New units | New units | 48,984 | | | 4,619 | | | — | | | 53,603 | | New units | 40,366 | | | 6,628 | | | 3,533 | | | 2,355 | | | 52,882 | |
| Rental units | Rental units | 21,123 | | | 3,894 | | | — | | | 25,017 | | Rental units | 39,505 | | | 12,863 | | | 1,363 | | | 1,479 | | | 55,210 | |
| Total Revenues | 677,590 | | | 73,822 | | | — | | | 751,412 | | |
| Total revenues | | Total revenues | 1,164,179 | | | 508,802 | | | 111,025 | | | 110,891 | | | 1,894,897 | |
| | Costs | | |
| Costs: | | Costs: | |
| Cost of leasing and services: | Cost of leasing and services: | | Cost of leasing and services: | |
| Modular space leasing | 131,846 | | | 11,274 | | | — | | | 143,120 | | |
| Modular space delivery and installation | 127,936 | | | 16,014 | | | — | | | 143,950 | | |
| Leasing | | Leasing | 229,129 | | | 53,447 | | | 17,440 | | | 17,045 | | | 317,061 | |
| Delivery and installation | | Delivery and installation | 196,137 | | | 71,396 | | | 14,271 | | | 25,057 | | | 306,861 | |
| Cost of sales: | Cost of sales: | | | Cost of sales: | |
| New units | New units | 33,484 | | | 3,379 | | | — | | | 36,863 | | New units | 27,415 | | | 3,933 | | | 2,357 | | | 1,672 | | | 35,377 | |
| Rental units | Rental units | 13,650 | | | 3,009 | | | — | | | 16,659 | | Rental units | 20,592 | | | 7,438 | | | 1,287 | | | 536 | | | 29,853 | |
| Depreciation of rental equipment | Depreciation of rental equipment | 106,354 | | | 15,082 | | | — | | | 121,436 | | Depreciation of rental equipment | 194,461 | | | 24,329 | | | 4,428 | | | 14,319 | | | 237,537 | |
| Gross profit | Gross profit | $ | 264,320 | | | $ | 25,064 | | | $ | — | | | $ | 289,384 | | Gross profit | $ | 496,445 | | | $ | 348,259 | | | $ | 71,242 | | | $ | 52,262 | | | $ | 968,208 | |
| Other selected data: | | Other selected data: | | | | | | | | | |
| Adjusted EBITDA | Adjusted EBITDA | $ | 196,410 | | | $ | 19,123 | | | $ | — | | | $ | 215,533 | | Adjusted EBITDA | $ | 423,004 | | | $ | 226,600 | | | $ | 49,039 | | | $ | 41,750 | | | $ | — | | | $ | 740,393 | |
| Other selected data | | | | | | | | |
Selling, general and administrative expense | Selling, general and administrative expense | $ | 232,754 | | | $ | 22,117 | | | $ | — | | | $ | 254,871 | | Selling, general and administrative expense | $ | 266,187 | | | $ | 145,988 | | | $ | 26,630 | | | $ | 24,831 | | | $ | 49,185 | | | $ | 512,821 | |
| Other depreciation and amortization | $ | 12,201 | | | $ | 1,103 | | | $ | — | | | $ | 13,304 | | |
| Purchase of rental equipment and refurbishments | $ | 151,407 | | | $ | 9,476 | | | $ | — | | | $ | 160,883 | | |
| Purchases of rental equipment and refurbishments | | Purchases of rental equipment and refurbishments | $ | 187,495 | | | $ | 45,426 | | | $ | 27,830 | | | $ | 17,747 | | | $ | — | | | $ | 278,498 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Year Ended December 31, 2020 |
| (in thousands) | NA Modular | | NA Storage | | UK Storage | | Tank and Pump | | Unallocated Costs | | Total |
| Revenues: | | | | | | | | | | | |
| Leasing and services revenue: | | | | | | | | | | | |
| Leasing | $ | 770,330 | | | $ | 166,128 | | | $ | 32,633 | | | $ | 32,356 | | | | | $ | 1,001,447 | |
| Delivery and installation | 208,079 | | | 42,655 | | | 9,409 | | | 14,013 | | | | | 274,156 | |
| Sales revenue: | | | | | | | | | | | |
| New units | 41,858 | | | 6,976 | | | 3,124 | | | 1,135 | | | | | 53,093 | |
| Rental units | 30,895 | | | 6,070 | | | 1,195 | | | 789 | | | | | 38,949 | |
| Total Revenues | 1,051,162 | | | 221,829 | | | 46,361 | | | 48,293 | | | | | 1,367,645 | |
| | | | | | | | | | | |
| Costs: | | | | | | | | | | | |
| Cost of leasing and services: | | | | | | | | | | | |
| Leasing | 194,442 | | | 19,925 | | | 7,391 | | | 5,618 | | | | | 227,376 | |
| Delivery and installation | 175,705 | | | 27,029 | | | 6,353 | | | 11,015 | | | | | 220,102 | |
| Cost of sales: | | | | | | | | | | | |
| New units | 27,555 | | | 4,244 | | | 2,301 | | | 741 | | | | | 34,841 | |
| Rental units | 19,213 | | | 4,261 | | | 1,026 | | | 272 | | | | | 24,772 | |
| Depreciation of rental equipment | 182,605 | | | 9,585 | | | 1,648 | | | 6,743 | | | | | 200,581 | |
| Gross profit | $ | 451,642 | | | $ | 156,785 | | | $ | 27,642 | | | $ | 23,904 | | | | | $ | 659,973 | |
| Other selected data: | | | | | | | | | | | |
| Adjusted EBITDA | $ | 394,805 | | | $ | 99,837 | | | $ | 17,822 | | | $ | 17,843 | | | $ | — | | | $ | 530,307 | |
| Selling, general and administrative expense | $ | 242,010 | | | $ | 66,533 | | | $ | 11,468 | | | $ | 12,804 | | | $ | 91,864 | | | $ | 424,679 | |
| Purchases of rental equipment and refurbishments | $ | 153,327 | | | $ | 14,969 | | | $ | 1,693 | | | $ | 2,394 | | | $ | — | | | $ | 172,383 | |
(a) Includes both SG&A expense and Transaction costs from the consolidated statement of operations.
| | | | | | | | | | | | | | | | | | | | | | | |
| Year Ended December 31, 2017 | | | | | | |
| (in thousands) | Modular - US | | Modular - Other North America | | Corporate and Other | | Total |
| Revenues | | | | | | | |
| Leasing and services revenue: | | | | | | | |
| Modular space leasing | $ | 264,351 | | | $ | 34,036 | | | $ | (566) | | | $ | 297,821 | |
| Modular space delivery and installation | 81,036 | | | 8,814 | | | — | | | 89,850 | |
| Sales: | | | | | | | |
| New units | 29,275 | | | 7,096 | | | — | | | 36,371 | |
| Rental units | 18,271 | | | 3,710 | | | (81) | | | 21,900 | |
| Total Revenues | 392,933 | | | 53,656 | | | (647) | | | 445,942 | |
| | | | | | | |
| Costs | | | | | | | |
| Cost of leasing and services: | | | | | | | |
| Modular space leasing | 75,615 | | | 7,973 | | | — | | | 83,588 | |
| Modular space delivery and installation | 77,303 | | | 8,174 | | | — | | | 85,477 | |
| Cost of sales: | | | | | | | | | | |
| New units | 20,919 | | | 5,106 | | | — | | | 26,025 | |
| Rental units | 10,099 | | | 2,544 | | | — | | | 12,643 | |
| Depreciation of rental equipment | 60,312 | | | 12,327 | | | — | | | 72,639 | |
| Gross profit (loss) | $ | 148,685 | | | $ | 17,532 | | | $ | (647) | | | $ | 165,570 | |
| Adjusted EBITDA | $ | 110,822 | | | $ | 13,099 | | | $ | (15,112) | | | $ | 108,809 | |
| Other selected data | | | | | | | |
| Selling, general and administrative expense | $ | 100,427 | | | $ | 16,790 | | | $ | 45,134 | | | $ | 162,351 | |
| Other depreciation and amortization | $ | 5,333 | | | $ | 1,014 | | | $ | 2,306 | | | $ | 8,653 | |
| Purchase of rental equipment and refurbishments | $ | 96,378 | | | $ | 5,832 | | | $ | — | | | $ | 102,210 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Year Ended December 31, 2019 |
| (in thousands) | NA Modular | | NA Storage | | UK Storage | | Tank and Pump | | Unallocated Costs | | Total |
| Revenues: | | | | | | | | | | | |
| Leasing and services revenue: | | | | | | | | | | | |
| Leasing | $ | 744,185 | | | $ | — | | | $ | — | | | $ | — | | | | | $ | 744,185 | |
| Delivery and installation | 220,057 | | | — | | | — | | | — | | | | | 220,057 | |
| Sales revenue: | | | | | | | | | | | |
| New units | 59,085 | | | — | | | — | | | — | | | | | 59,085 | |
| Rental units | 40,338 | | | — | | | — | | | — | | | | | 40,338 | |
| Total revenues | 1,063,665 | | | — | | | — | | | — | | | | | 1,063,665 | |
| | | | | | | | | | | |
| Costs: | | | | | | | | | | | |
| Cost of leasing and services: | | | | | | | | | | | |
| Leasing | 213,151 | | | — | | | — | | | — | | | | | 213,151 | |
| Delivery and installation | 194,107 | | | — | | | — | | | — | | | | | 194,107 | |
| Cost of sales: | | | | | | | | | | | |
| New units | 42,160 | | | — | | | — | | | — | | | | | 42,160 | |
| Rental units | 26,255 | | | — | | | — | | | — | | | | | 26,255 | |
| Depreciation of rental equipment | 174,679 | | | — | | | — | | | — | | | | | 174,679 | |
| Gross profit | $ | 413,313 | | | $ | — | | | $ | — | | | $ | — | | | | | $ | 413,313 | |
| Other selected data: | | | | | | | | | | | |
| Adjusted EBITDA | $ | 356,548 | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | 356,548 | |
| Selling, general and administrative expense | $ | 235,228 | | | $ | — | | | $ | — | | | $ | — | | | $ | 35,776 | | | $ | 271,004 | |
| Purchase of rental equipment and refurbishments | $ | 205,106 | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | 205,106 | |
The following table presentstables present a reconciliation of the Company’s loss before income tax by segmentNet Income (Loss) to Adjusted EBITDA by segment:for the years ended December 31, 2021, 2020, and 2019, respectively:
| | | | | | | | | | | | | | | | | | | | | | | | | Year Ended December 31, |
| (in thousands) | (in thousands) | Modular - US | | Modular - Other North America | | Corporate and Other | | Total | (in thousands) | 2021 | | 2020 | | 2019 |
| 2019 | | |
| (Loss) income from continuing operations before income taxes | $ | (19,883) | | | $ | 6,149 | | | $ | — | | | $ | (13,734) | | |
| Net income (loss) attributable to WillScot Mobile Mini | | Net income (loss) attributable to WillScot Mobile Mini | $ | 160,144 | | | $ | 74,127 | | | $ | (120,744) | |
| Net income (loss) attributable to non-controlling interest, net of tax | | Net income (loss) attributable to non-controlling interest, net of tax | — | | | 1,213 | | | (421) | |
| Loss on extinguishment of debt | Loss on extinguishment of debt | 8,755 | | | — | | | — | | | 8,755 | | Loss on extinguishment of debt | 5,999 | | | 42,401 | | | 8,755 | |
| Income tax expense (benefit) | | Income tax expense (benefit) | 49,546 | | | (51,451) | | | (2,191) | |
| Interest expense | Interest expense | 120,758 | | | 1,746 | | | — | | | 122,504 | | Interest expense | 117,987 | | | 119,886 | | | 122,504 | |
| Depreciation and amortization | Depreciation and amortization | 167,951 | | | 19,123 | | | — | | | 187,074 | | Depreciation and amortization | 315,567 | | | 243,830 | | | 187,074 | |
| Currency gains, net | (267) | | | (421) | | | — | | | (688) | | |
| Fair value loss (gain) on common stock warrant liabilities | | Fair value loss (gain) on common stock warrant liabilities | 26,597 | | | (3,461) | | | 109,622 | |
| Currency losses (gains), net | | Currency losses (gains), net | 548 | | | (355) | | | (688) | |
| Impairment losses on long-lived assets | | Impairment losses on long-lived assets | — | | | — | | | 2,848 | |
| Restructuring costs, lease impairment expense and other related charges | Restructuring costs, lease impairment expense and other related charges | 11,602 | | | 827 | | | — | | | 12,429 | | Restructuring costs, lease impairment expense and other related charges | 14,756 | | | 11,403 | | | 12,429 | |
| Goodwill and other impairments | 2,178 | | | 670 | | | — | | | 2,848 | | |
| Transaction costs | | Transaction costs | 1,375 | | | 64,053 | | | — | |
| Integration costs | Integration costs | 23,580 | | 3,027 | | | — | | | 26,607 | | Integration costs | 28,424 | | | 18,338 | | | 26,607 | |
| Stock compensation expense | Stock compensation expense | 6,686 | | | — | | | — | | | 6,686 | | Stock compensation expense | 18,989 | | | 9,879 | | | 6,686 | |
| Other expense | 3,708 | | | 359 | | | — | | | 4,067 | | |
| Other | | Other | 461 | | | 444 | | | 4,067 | |
| Adjusted EBITDA | Adjusted EBITDA | $ | 325,068 | | | $ | 31,480 | | | $ | — | | | $ | 356,548 | | Adjusted EBITDA | $ | 740,393 | | | $ | 530,307 | | | $ | 356,548 | |
| | 2018 | | |
| Loss from continuing operations before income taxes | $ | (88,206) | | | $ | (3,966) | | | $ | — | | | $ | (92,172) | | |
| Interest expense, net | 96,108 | | | 2,325 | | | — | | | 98,433 | | |
| Depreciation and amortization | 118,555 | | | 16,185 | | | — | | | 134,740 | | |
| Currency losses, net | 509 | | | 1,945 | | | — | | | 2,454 | | |
| Restructuring costs, lease impairment expense and other related charges | 13,930 | | | 1,538 | | | — | | | 15,468 | | |
| Goodwill and other impairments | 1,600 | | | — | | | — | | | 1,600 | | |
| Integration costs | 29,260 | | | 746 | | | — | | | 30,006 | | |
| Stock compensation expense | 3,439 | | | — | | | — | | | 3,439 | | |
| Transaction costs | 19,780 | | | | 271 | | | | — | | | | 20,051 | | |
| Other expense | 1,435 | | | 79 | | | — | | | 1,514 | | |
| Adjusted EBITDA | $ | 196,410 | | | $ | 19,123 | | | $ | — | | | $ | 215,533 | | |
| | 2017 | | |
| Loss from continuing operations before income taxes | $ | (12,345) | | | $ | (64,580) | | | $ | (88,473) | | | $ | (165,398) | | |
| Interest expense, net | 65,709 | | | 4,603 | | | 36,764 | | | 107,076 | | |
| Depreciation and amortization | 65,645 | | | 13,341 | | | 2,306 | | | 81,292 | | |
| Currency gains, net | (10,942) | | | (1,040) | | | (896) | | | (12,878) | | |
| Goodwill and other impairments | — | | | 60,743 | | | — | | | 60,743 | | |
| Restructuring costs, lease impairment expense and other related charges | 326 | | | 10 | | | 1,860 | | | 2,196 | | |
| Transaction costs | 1,841 | | | — | | | 22,040 | | | 23,881 | | |
| Algeco LTIP Expense | 115 | | | | — | | | | 9,267 | | | | 9,382 | | |
| Other expense | 473 | | | 22 | | | 2,020 | | | 2,515 | | |
| Adjusted EBITDA | $ | 110,822 | | | $ | 13,099 | | | $ | (15,112) | | | $ | 108,809 | | |
Included in restructuring costs for the year ended December 31, 2021 was expense of approximately $7.2 million recognized as a result of the modification of certain equity awards associated with the Transition, Separation and Release Agreement entered into on February 25, 2021 with the Company's former President and Chief Operating Officer. For the year ended December 31, 2021, stock-based compensation expense reported in the Statement of Cash Flows included these charges.Assets
As discussed further in Note 2, the Company acquired Mobile Mini on July 1, 2020. Assets related to the Company’s reportable segments include the following:
| | (in thousands) | (in thousands) | Modular - US | | Modular - Other North America | | Corporate and Other | | Total | (in thousands) | NA Modular | | NA Storage | | UK Storage | | Tank and Pump | | Total |
| As of December 31, 2019: | | |
| As of December 31, 2021: | | As of December 31, 2021: | |
| Goodwill | Goodwill | $ | 203,932 | | | $ | 31,245 | | | $ | — | | | $ | 235,177 | | Goodwill | $ | 521,049 | | | $ | 492,552 | | | $ | 65,098 | | | $ | 100,107 | | | $ | 1,178,806 | |
| Intangible assets, net | Intangible assets, net | $ | 126,625 | | | $ | — | | | $ | — | | | $ | 126,625 | | Intangible assets, net | $ | 125,000 | | | $ | 317,875 | | | $ | 9,053 | | | $ | 8,750 | | | $ | 460,678 | |
| Rental equipment, net | Rental equipment, net | $ | 1,652,065 | | | $ | 292,371 | | | $ | — | | | $ | 1,944,436 | | Rental equipment, net | $ | 1,877,978 | | | $ | 899,881 | | | $ | 168,208 | | | $ | 134,914 | | | $ | 3,080,981 | |
| As of December 31, 2018: | | |
| As of December 31, 2020: | | As of December 31, 2020: | |
| Goodwill | Goodwill | $ | 213,264 | | | $ | 33,753 | | | $ | — | | | $ | 247,017 | | Goodwill | $ | 235,828 | | | $ | 726,529 | | | $ | 65,600 | | | $ | 143,262 | | | $ | 1,171,219 | |
| Intangible assets, net | Intangible assets, net | $ | 6,707 | | | $ | 94 | | | $ | 125,000 | | | $ | 131,801 | | Intangible assets, net | $ | 125,625 | | | $ | 329,437 | | | $ | 11,177 | | | $ | 29,708 | | | $ | 495,947 | |
| Rental equipment, net | Rental equipment, net | $ | 1,635,014 | | | $ | 294,276 | | | $ | — | | | $ | 1,929,290 | | Rental equipment, net | $ | 1,886,211 | | | $ | 772,356 | | | $ | 147,720 | | | $ | 125,359 | | | $ | 2,931,646 | |
NOTE 2119 - Related Parties
Related party balances included in the Company’s consolidated balance sheetsheets at December 31, consistedconsisted of the following:
| | (in thousands) | (in thousands) | Financial statement line Item | 2019 | | 2018 | (in thousands) | Financial statement line Item | 2021 | | 2020 |
| Receivables due under TSA | Prepaid expenses and other current assets | $ | — | | | $ | 122 | | |
| Trade receivables due from affiliates | Accounts receivable, net | 26 | | | — | | |
| Receivables due from affiliates | | Receivables due from affiliates | Trade receivables, net of allowances for credit losses | $ | 10 | | | $ | 30 | |
| Amounts due to affiliates | Amounts due to affiliates | Accrued liabilities | (236) | | | (1,379) | | Amounts due to affiliates | Accrued liabilities | (49) | | | (461) | |
| Total related party liabilities, net | $ | (210) | | | $ | (1,257) | | |
| Total related party liabilities, net | | Total related party liabilities, net | | $ | (39) | | | $ | (431) | |
On November 29, 2017, in connection with the closing of the Business Combination, the Company, WSII, WS Holdings and Algeco Global entered into a transition services agreement (the “TSA”). Pursuant to the TSA, each party will provide or cause to be provided to the other party or its affiliates certain services, use of facilities and other assistance on a transitional basis. The services period under the TSA ranges from six months to three years based on the services, but includes early termination clauses. The Company had $0.1 million in receivables due from affiliates pertaining to the TSA for the year ended December 31, 2018.
The Company had accrued expenses of $0.6 million and $1.2 million at December 31, 2019 and December 31, 2018 respectively, included in amounts due to affiliates, related to rental equipment purchases from an entity within the Algeco Group.
Related party transactions included in the Company’s consolidated statementstatements of operations for the yearyears ended December 31, 2019, 2018 and 2017, respectively, consisted of the following:
| | | | | | | | | | | | | | | | | | | | |
| (in thousands) | Financial statement
line item | 2019 | | 2018 | | 2017 |
| Leasing revenue from related parties | Modular leasing revenue | $ | 316 | | | $ | 720 | | | $ | — | |
| Rental unit sales to related parties | Rental unit sales | — | | | 1,548 | | | — | |
| Management fees and recharge income on transactions with affiliates | Selling, general & administrative expenses | — | | | — | | | 1,309 | |
Consulting expense to related party(a) | Selling, general & administrative expenses | (1,029) | | | (3,070) | | | (104) | |
Interest income on notes due from affiliates(b) | Interest income | | — | | | — | | | 12,177 | |
Interest expense on notes due to affiliates(b) | Interest expense | | — | | | — | | | (58,448) | |
| Total related party income (expense), net | | $ | (713) | | | $ | (802) | | | | $ | (45,066) | |
| | | | | | | | | | | | | | | | | | | | |
| (in thousands) | Financial statement line item | 2021 | | 2020 | | 2019 |
| Leasing revenue from related parties | Leasing revenue | $ | 737 | | | $ | 1,066 | | | $ | 316 | |
| Rental unit sales to related parties | Rental unit sales | — | | | 380 | | | — | |
| Consulting expense to related party (a) | Selling, general & administrative expense | (4,187) | | | (5,194) | | | (1,029) | |
| Total related party expense, net | | $ | (3,450) | | | $ | (3,748) | | | $ | (713) | |
(a) Two of the Company's directors also serve on the boardBoard of directors toDirectors of a consulting firm withfrom which the Company incurs professional fees.
(b) Prior toOn June 30, 2020, the Business Combination,Company completed the Algeco Group distributed borrowings from its third party notes through intercompany loans to WSII. WSII recorded these intercompany loans as notes due to affiliates with fixed maturity datesSapphire Exchange, whereby Sapphire Holdings, an affiliate of TDR Capital, exchanged shares of Class B Common Stock for 10,641,182 shares of Class A Common Stock. As a result of the Sapphire Exchange, all issued and interest thatoutstanding shares of WillScot’s Class B Common Stock were automatically canceled for no consideration and the existing exchange agreement was payable on a semi-annual basis. Conversely, WSII also distributed borrowings to other entities within the Algeco Group through intercompany loans, and earned interest income on the principal. In conjunction with the Business Combination, all notes due to and from affiliates were settled.
automatically terminated.On August 22, 2018, WillScot’s majorityprincipal stockholder, Sapphire Holdings, entered into a margin loan (the "Margin Loan") under which all of its shares of WillScot Class A common stock wasMobile Mini Common Stock were pledged to secure borrowings of up to $125.0 million of borrowings under the loan agreement. WillScot isMobile Mini was not a party to the loan agreement and hashad no obligations thereunder but WillScot delivered an issuer agreement to the lenders. On June 29, 2021, Sapphire Holdings repaid all outstanding amounts under which WillScot has agreed to certain obligations relating to the shares pledged by Sapphire and, subject to applicable law and stock exchange rules, not to take any actions that are intended to materially hinder or delay the exercise of any remedies with respect to the pledged shares. In connection with the Margin Loan on August 24, 2018, WSII entered into a two-year supply agreement with Target, an affiliate controlled by Sapphire, under which, subject to limited exception, WSII acquiredproceeds from the exclusive right to supply modular units, portable storage units, and other ancillary products ordered by the affiliate in the US. Assale of December 31, 2019, the 49,053,740certain shares of WillScot Class AMobile Mini and no WillScot Mobile Mini shares remain pledged thereunder.
On March 1, 2021, the Company repurchased from Sapphire Holdings and cancelled 2,750,000 shares of its Common Stock. On June 29, 2021, the Company repurchased from Sapphire Holdings and cancelled an additional 3,900,000 shares of its Common Stock. Following the reduction in Sapphire Holdings’ beneficial ownership of Common Stock resulting from the foregoing repurchases and the underwritten secondary offering by Sapphire Holdings of 16,100,000 shares of Common Stock on June 25, 2021, Gary Lindsay resigned his position as a member of the WillScot Mobile Mini board of directors pursuant to the terms of that certain Shareholders Agreement dated July 1, 2020 between Sapphire Holdings, TDR Capital II Holdings L.P., TDR Capital, L.L.P. and WillScot Mobile Mini (the "Shareholders Agreement").
On September 9, 2021, the Company repurchased from Sapphire Holdings and cancelled an additional 2,379,839 shares of its common stock, pledged byand Sapphire represented approximately 45.1%Holdings sold its remaining 21,410,019 shares through an underwritten secondary offering. Following the reduction in Sapphire Holdings' beneficial ownership of WillScot’s issuedCommon Stock resulting from the foregoing repurchase and outstanding Class A shares.secondary offering, Stephen Robertson resigned his position as a member of the Willscot Mobile Mini board of directors pursuant to the terms of the Shareholder Agreement.
The Company had capital expenditures ofpurchased rental equipment purchased from related party affiliates of $4.7 $2.5 million $4.3, $3.1 million, and $2.1$4.7 million for the years endedended December 31, 2021, 2020, and 2019, 2018 and 2017, respectively.
NOTE 2220 - Quarterly Financial Data
The following tables present certain unaudited consolidated quarterly financial information for each of the eight quarters ended December 31, 2019. This quarterly information has been prepared on the same basis as the consolidated financial statements except for the impact of adoption of ASC 842 further discussed below, and includes all adjustments necessary to state fairly the information for the periods presented.
The quarterly amounts below during 2019 were adjusted for the adoption of ASC 842, effective retroactively to January 1, 2019, of and therefore do not agree to the Quarterly Reports filed on Form 10-Q for the respective periods of 2019.
| | | | | | | | | | | | | | | | | | | | | | | |
| Quarter Ended (unaudited, except per share amounts) | | | | | | |
| 2019 | March 31 | | June 30 | | September 30 | | December 31 |
Leasing and services revenue(a) | $ | 227,292 | | | $ | 241,784 | | | $ | 249,411 | | | $ | 245,755 | |
Total revenue(b) | $ | 253,685 | | | $ | 263,713 | | | $ | 268,222 | | | $ | 278,045 | |
Gross profit(c) | $ | 103,331 | | | $ | 101,484 | | | $ | 99,307 | | | $ | 109,191 | |
Operating income(d) | $ | 21,464 | | | $ | 26,294 | | | $ | 29,781 | | | $ | 39,986 | |
Net (loss) income(e) | $ | (10,029) | | | $ | (11,438) | | | $ | 996 | | | $ | 8,928 | |
Net (loss) income attributable to WillScot common shareholders | $ | (9,271) | | | $ | (10,606) | | | $ | 701 | | | $ | 8,054 | |
| | | | | | | |
| Net (loss) income per share attributable to WillScot - basic | $ | (0.09) | | | $ | (0.10) | | | $ | 0.01 | | | $ | 0.07 | |
| Net (loss) income per share attributable to WillScot - diluted | $ | (0.09) | | | $ | (0.10) | | | $ | 0.01 | | | $ | 0.07 | |
| Average number of common shares outstanding - basic | 108,523,269 | | | 108,693,924 | | | 108,720,857 | | | 108,793,847 | |
| Average number of common shares outstanding - diluted | 108,523,269 | | | 108,693,924 | | | 112,043,866 | | | 114,080,059 | |
The impact of adoption and reconciliation to the amounts previously reported is:
| | | | | | | | | | | | | | | | | |
| Quarter Ended (unaudited) | | | | |
| Change from previously reported 2019 amount | March 31 | | June 30 | | September 30 |
(a)Leasing and services revenue | $ | (1,211) | | | | $ | (2,204) | | | $ | (3,766) | |
(b)Total revenue | $ | (1,323) | | | | $ | (2,412) | | | $ | (4,118) | |
(c)Gross profit | $ | (1,323) | | | | $ | (2,412) | | | $ | (4,118) | |
(d)Operating income | $ | 275 | | | | $ | (519) | | | $ | (618) | |
(e)Net (loss) income | $ | 1,132 | | | | $ | 337 | | | $ | 234 | |
| | | | | | | | | | | | | | | | | | | | | | | |
| Quarter Ended (unaudited, except per share amounts) | | | | | | |
| 2018 | March 31 | | June 30 | | September 30 | | December 31 |
| Leasing and services revenue | $ | 123,512 | | | $ | 132,662 | | | $ | 188,437 | | | $ | 228,181 | |
| Total revenue | $ | 134,751 | | | $ | 140,333 | | | $ | 218,924 | | | $ | 257,404 | |
| Gross profit | $ | 50,921 | | | $ | 54,640 | | | $ | 80,946 | | | $ | 102,877 | |
| Operating income (loss) | $ | 4,464 | | | $ | 5,889 | | | $ | 211 | | | $ | (4,303) | |
Net (loss) income(a) | $ | (6,835) | | | $ | 379 | | | $ | (36,729) | | | $ | (10,387) | |
Net (loss) income attributable to WillScot(a)(b) | $ | (6,187) | | | $ | 236 | | | $ | (33,519) | | | $ | (11,705) | |
| | | | | | | |
| Net (loss) income per share attributable to WillScot – basic and diluted | $ | (0.08) | | | $ | 0.00 | | | $ | (0.37) | | | $ | (0.11) | |
| Average number of common shares outstanding - basic & diluted | 77,189,774 | | | 78,432,274 | | | 90,726,921 | | | 102,176,225 | |
NOTE 23 - LossEarnings (Loss) Per Share
Basic lossearnings (loss) per share (“LPS”EPS”) is calculated by dividing net lossincome (loss) attributable to WillScot Mobile Mini by the weighted average number of Class A common shares of Common Stock outstanding during the period. The common shares of Common Stock issued as a result of the vesting of RSUs and RSAs as well as the exercise of stock options wereor redemption of warrants are included in LPSEPS based on the weighted average number of days in which they were vested and outstanding during the period. Concurrently with
Prior to June 30, 2020, the Business Combination, 12,425,000Company had shares of WillScot's Class A common shares were placed into escrow by shareholders and became ineligible to vote or participate in the economic rewards available to other Class A shareholders. Escrowed shares were therefore excluded from the LPS calculation while deposited in the escrow account. 6,212,500 of the escrowed shares were released to shareholders on January 19, 2018, and the remaining escrowed shares were released to shareholders on August 21, 2018.
Class B common shares haveCommon Stock which had no rights to dividends or distributions made by the Company and, in turn, arewere excluded from the LPSEPS calculation. Pursuant toOn June 30, 2020, the exchange agreement entered into by WS Holding's shareholders, Sapphire has the right, but not the obligation, to exchangeExchange was completed, and all but not less than all, of its shares of WSClass B Common Stock were cancelled, and Sapphire Holdings into newly issuedreceived 10,641,182 shares of WillScot’s Class A common stock in a private placement transaction.Common Stock.
Diluted LPSEPS is computed similarly to basic LPS,EPS, except that it includes the potential dilution that could occur if dilutive securities were exercised. Effects of potentially dilutive securities are presented only in periods in which they are dilutive.
For When liability-classified warrants are in the year ended December 31, 2019, stock options, Time-Based RSUs, Market-Based RSUs,money and RSAs representing 534,188, 1,065,305, 288,281 and 52,755 sharesthe impact of Class Atheir inclusion on diluted EPS is dilutive, diluted EPS also assumes share settlement of such instruments through an adjustment to net income available to common stockholders for the fair value (gain) loss on common stock outstanding were excluded from the computation of diluted LPS because their effect would have been anti-dilutive. Market-Based RSUs can vest at 0% to 150%warrant liabilities and inclusion of the amount granted.number of dilutive shares in the denominator.
The following table reconciles net income (loss) attributable to WillScot Mobile Mini common shareholders and the year ended December 31, 2018, stock options, Time-Based RSUs and RSAs, representing 589,257, 852,733 and 72,053weighted average shares of Class A common stock outstanding were excluded fromfor the computation ofbasic calculation to the weighted average shares outstanding for the diluted LPS because their effect would have been anti-dilutive.
Forcalculation for the years ended December 31, 2019, 2018 and 2017, warrants representing 22,093,950, 22,183,513 31:
and 34,750,000 shares of Class A
| | | | | | | | | | | |
| (in thousands) | 2021 | 2020 | 2019 |
| Numerator: | | | |
| Net income (loss) attributable to common shareholders - basic | $ | 160,144 | | $ | 74,127 | | $ | (120,744) | |
| Fair value gain on common stock warrant liabilities | — | | (30,524) | | — | |
| Net income (loss) attributable to common shareholders - dilutive | $ | 160,144 | | $ | 43,603 | | $ | (120,744) | |
| | | |
| Denominator: | | | |
| Weighted average Common Shares outstanding - basic | 226,519 | | 169,230 | | 108,684 | |
| Dilutive effect of outstanding securities: | | | |
| Warrants | 3,589 | | 752 | | — | |
| RSAs | 24 | | 39 | | — | |
| Time-Based RSUs | 594 | | 778 | | — | |
| Performance-Based and Market-Based RSUs | 955 | | 544 | | — | |
| Stock Options | 1,113 | | 634 | | — | |
| Class B common shares | N/A | 5,291 | | — | |
| Weighted average Common Shares outstanding - dilutive | 232,794 | | 177,268 | | 108,684 | |
The following potential common shares were excluded from the computation of diluted earnings per sharedilutive EPS because their effect would have been anti-dilutive.anti-dilutive:
| | | | | | | | | | | |
| (in thousands) | 2021 | 2020 | 2019 |
| Warrants | — | | 2,366 | | 2,320 | |
| RSAs | — | | — | | 12 | |
| Time-based RSUs | — | | — | | 323 | |
| Performance-based RSUs | 375 | | — | | 274 | |
| Stock Options | — | | — | | 534 | |
| Class B common shares | N/A | — | | 10,641 | |
| | | |
NOTE 24 - Subsequent Events
Warrant Redemption
On January 24, 2020, the Company delivered a notice (the “Redemption Notice”) to redeem all of its outstanding Public Warrants to purchase the Company’s Class A common stock, that were issued under the warrant agreement, dated September 10, 2015, by and between Double Eagle and Continental Stock Transfer & Trust Company, as warrant agent (the “Warrant Agreement”), as part of the units sold in Double Eagle's initial public offering that remain unexercised at 5:00 p.m. New York City time on February 24, 2020. As further described in the Redemption Notice and permitted under the Warrant Agreement, holders of the Public Warrants who exercised such Public Warrants following the date of the Redemption Notice were required to do so on a cashless basis.
From January 1, 2020 through January 24, 2020, 796,610 Public Warrants were exercised for cash, resulting in the Company receiving cash proceeds of $4.6 million in the aggregate. An aggregate of 398,305 shares of the Company's Class A common stock were issued in connection with these exercises.
After January 24, 2020 through February 24, 2020, 5,836,040 Public Warrants were exercised on a cashless basis. An aggregate of 1,097,162 shares of the Company's Class A common stock were issued in connection with these exercises. Thereafter, the Company completed the redemption of 38,509 remaining Public Warrants for $0.01 per warrant.
Following the redemption of the Public Warrants, (i) 17,561,700 Private Warrants, and (ii) 9,966,070 2018 Warrants remain outstanding. As of February 28, 2020, 110,316,368 shares of the Company's Class A common stock were issued and outstanding.
Merger
On March 1, 2020, the Company, along with its newly formed subsidiary, Picasso Merger Sub, Inc. (“Merger Sub”), entered into an Agreement and Plan of Merger (the “Merger Agreement”) with Mobile Mini, Inc. (“Mobile Mini”). The Merger Agreement provides for the merger of Mobile Mini with and into Merger Sub (the “Merger”), with Mobile Mini surviving as a wholly-owned subsidiary of the Company. At the effective time of the Merger, and subject to the terms and subject to the conditions set forth in the Merger Agreement, each outstanding share of the common stock of Mobile Mini shall be converted into the right to receive 2.4050 shares of WillScot Class A common stock.
The Merger has been unanimously approved by the Company and Mobile Mini’s boards of directors. The Merger is subject to customary closing conditions, including receipt of regulatory and stockholder approvals by the Company and Mobile Mini’s stockholders, and is expected to close in third quarter of 2020. Additionally, the transaction also has the support of TDR Capital, the Company's largest shareholder, which has entered into a customary voting agreement in support of the Merger.
In connection with the Merger, the Company entered into a commitment letter (the “Commitment Letter”), dated March 1, 2020, with the lenders party thereto (the “Lenders”). Pursuant to the Commitment Letter, the Lenders have agreed to provide debt financing to refinance the Company’s existing ABL Facility, Mobile Mini’s existing ABL credit facility and Mobile Mini’s outstanding senior notes due 2024 on the terms and conditions set forth in the Commitment Letter.
ITEM 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
None.
ITEM 9A. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
Our management, with participation of our Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of our disclosure controls and procedures as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934 as amended (the “Exchange Act”), as of December 31, 2019.2021. Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective as of December 31, 2019.2021.
Management’s Report on Internal Control over Financial Reporting
As required by SEC rules and regulations, our management is responsible for establishing and maintaining adequate internal control over financial reporting (“ICFR”), as such term is defined in Exchange Act Rule 13a-15(f). Our ICFR is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of our consolidated financial statements for external reporting purposes in accordance with GAAP. Our ICFR includes policies and procedures that: (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the Company’s assets, (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with GAAP, and that receipts and expenditures are being made only in accordance with the authorization of management and directors of the Company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Company’s assets that could have a material effect on the financial statements.
ICFR, no matter how well designed, has inherent limitations and may not prevent or detect misstatements in our consolidated financial statements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Under the supervision of the Chief Executive Officer and Chief Financial Officer, management assessed the effectiveness of the Company's ICFR as of December 31, 20192021 using the criteria set forth in Internal Control - Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 Framework). Based on that assessment, the Company's management believes that, as of December 31, 2019,2021, the Company's ICFR was effective based on those criteria.
The effectiveness of the Company’s ICFR as of December 31, 2021 has been audited by Ernst & Young LLP, an independent registered public accounting firm, as stated in their report appearing below, which expresses an unqualified opinion on the effectiveness of the Company’s internal control over financial reporting as of December 31, 2021.
Changes in Internal ControlControl over Financial Reporting
During the year ended December 31, 2019, thereThere were no changes in our ICFR that haveoccurred during the quarter ended December 31, 2021 that materially affected, or are reasonably likely to materially affect, our ICFR.
Report of Independent Registered Public Accounting Firm
To the Shareholders and the Board of Directors of WillScot CorporationMobile Mini Holdings Corp.
Opinion on Internal Control Over Financial Reporting
We have audited WillScot Corporation’sMobile Mini Holdings Corp.’s internal control over financial reporting as of December 31, 2019,2021, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) (the COSO criteria). In our opinion, WillScot CorporationMobile Mini Holdings Corp. (the Company) maintained, in all material respects, effective internal control over financial reporting as of December 31, 2019,2021, based on the COSO criteria.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the 20192021 consolidated financial statements of the Company and our report dated March 2, 2020February 25, 2022 expressed an unqualified opinion thereon.
Basis for Opinion
The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting included in the accompanying Management’s Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects.
Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.
Definition and Limitations of Internal Control Over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
/s/ Ernst & Young LLP
Baltimore, Maryland
March 2, 2020February 25, 2022
ITEM 9B. Other Information
None.None
PART III
ITEM 10. Directors, Executive Officers and Corporate Governance
The information to be included under the captions “Proposal 1 – Election of Directors. “Section 16(a) Beneficial Ownership Reporting Compliance,“Director Nominee Biographies & Qualifications,” “Codes of Business Conduct and Ethics,” and “Audit Committee”, if applicable,Committee,” in the Company’s definitive proxy statement for the 20202022 annual meeting of stockholders, to be filed with the Securities and Exchange Commission, is hereby incorporated by reference in answer to this item.
ITEM 11. Executive Compensation
The information to be included under the captions “Executive Compensation,” “Compensation Committee Interlocks and Insider Participation,” and “Compensation Committee Report”, if applicable,Report,” in the Company’s definitive proxy statement for the 20202022 annual meeting of stockholders, to be filed with the Securities and Exchange Commission, is hereby incorporated by reference in answer to this item.
ITEM 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
The information to be included under the captions “Equity Compensation Plan Information,”Information” and “Security Ownership of Certain Beneficial Owners and Management”, if applicable,Management,” in the Company’s definitive proxy statement for the 20202022 annual meeting of stockholders, to be filed with the Securities and Exchange Commission, is hereby incorporated by reference in answer to this item.
ITEM 13. Certain Relationships and Related Transactions, and Director Independence
The information to be included under the captions “Certain Relationships and Related Party Transactions” and “Director Independence”, if applicable,Independence,” in the Company’s definitive proxy statement for the 20202022 annual meeting of stockholders, to be filed with the Securities and Exchange Commission, is hereby incorporated by reference in answer to this item.
ITEM 14. Principal Accounting Fees and Services
The information to be included under the caption “Independent Registered Public Accounting Firm Fee Information”,Information,” if applicable, in the Company’s definitive proxy statement for the 20202022 annual meeting of stockholders, to be filed with the Securities and Exchange Commission, is hereby incorporated by reference in answer to this item.
PART IV
ITEM 15. Exhibits and Financial Statement Schedules
The following documents are filed as part of this report:
Consolidated Financial Statements
| | | | | |
| Page Number |
ReportReports of Independent Registered Public Accounting Firm (Ernst & Young, LLP, Baltimore, MD, PCAOB ID: 42) | |
Consolidated Balance SheetSheets as of December 31, 20192021 and December 31, 20182020 | |
Consolidated Statements of Operations for the Years Ended December 31, 2019, 20182021, 2020 and 20172019 | |
Consolidated Statements of Comprehensive LossIncome (Loss) for the Years Ended December 31, 2019, 20182021, 2020 and 20172019 | |
Consolidated Statements of Changes in Equity for the Years Ended December 31, 2018, 20172021, 2020 and 20162019 | |
Consolidated Statements of Cash Flow for the Years Ended December 31, 20192021, 2020 and December 31, 20182019 | |
| Notes to the Audited Consolidated Financial Statements | |
Financial Statement Schedule
All schedules have been omitted because the information required to be set forth therein is not applicable or is shown in the financial statements or notes thereto.
Exhibits
The exhibits listed in the accompanying Exhibit Index are filed or incorporated by reference as part of this Annual Report on Form 10-K.
Exhibit Index
| | | | | | | | |
| Exhibit No. | | Exhibit Description |
| | Stock Purchase Agreement dated August 21, 2017 among Double Eagle Acquisition Corp., Williams Scotsman Holdings Corp. (“Holdings”), Algeco Scotsman Global S.á r.l. and Algeco Scotsman Holdings Kft.,Plan of Merger, dated as of August 21, 2017March 1, 2020, by and among WillScot Corporation, Picasso Merger Sub, Inc. and Mobile Mini, Inc. (incorporated by reference to Exhibit 2.1 ofto the Company’s Current Report on Form 8-K of WillScot Corporation, filed August 21, 2017)March 5, 2020). |
| | Amendment to the Stock Purchase Agreement and Plan of Merger, dated September 6, 2017May 28, 2020, by and among Double Eagle Acquisition Corp., Holdings, Algeco Scotsman Global S.á r.l.WillScot Corporation, Mobile Mini, Inc. and Algeco Scotsman Holdings Kft.Picasso Merger Sub, Inc. (incorporated by reference to Exhibit 2.22.1 to the Current Report on Form 8-K of the Company’s Form S-4,WillScot Corporation, filed September 6, 2017)June 2, 2020). |
2.3 | | Second Amendment to the Stock Purchase Agreement dated November 6, 2017 among Double Eagle Acquisition Corp., Holdings, Algeco Scotsman Global S.á r.l. and Algeco Scotsman Holdings Kft. (incorporated by reference to Exhibit 2.3 of Amendment No. 3 to the Company’s Form S-4, filed November 6, 2017). |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| | Supplemental Indenture, dated July 1, 2020, to the Indenture dated June 15, 2020, by and among Williams Scotsman International, Inc. (as successor to Picasso Finance Sub, Inc.), the guarantors party thereto and Deutsche Bank Trust Company Americas, as trustee (incorporated by reference to Exhibit 4.1 to WillScot Corporation’s Current Report on Form 8-K, filed July 1, 2020). |
| | Indenture, dated November 29, 2017,as of August 25, 2020, by and among WSII,between Williams Scotsman International, Inc., the Guarantors party thereto,guarantors named therein, and the Deutsche Bank Trust Company Americas, as trustee and collateral Agent (incorporated by reference to Exhibit 10.2 of the Company’s4.1 to WillScot Corporation’s Current Report on Form 8-K, filed December 5, 2017).on August 27, 2020. |
| | Supplemental IndentureShareholders Agreement, dated February 15, 2018,July 1, 2020, by and among WSII, the Guarantors party thereto,WillScot Mobile Mini Holdings Corp., Sapphire Holdings, S.á r.l., TDR Capital Holdings L.P. and Deutsche Bank Trust Company Americas as trustee and collateral AgentTDR Capital, L.L.P (incorporated by reference to Exhibit 4.71.1 of the Company’s AnnualCurrent Report on Form 10-K,8-K, filed March 16, 2018)July 1, 2020). |
| | Second Supplemental Indenture, dated August 3, 2018,December 23, 2021, to the Indenture dated November 29, 2017,June 15, 2020, by and among WSII,Williams Scotsman, Inc., the Guarantorsguarantors party thereto and Deutsche Bank Trust Company Americas, as trustee and collateral agent (incorporated by reference to Exhibit 10.34.1 of the Company’s QuarterlyCurrent Report on Form 10-Q,8-K, filed August 8, 2018)December 27, 2021). |
| | First Supplemental Indenture, dated as of August 15, 2018,December 23, 2021, to the Indenture dated November 29, 2017,August 25, 2020, by and among WSII,Williams Scotsman, Inc., the Guarantorsguarantors party thereto and Deutsche Bank Trust Company Americas, as trustee and collateral agent (incorporated by reference to Exhibit 10.5 to4.2 of the Company’s Current Report on Form 8-K, filed August 16, 2018)December 27, 2021). |
| | |
| | |
| | |
| | |
| | |
| | | | | | | | |
| | Private Placement Warrant Purchase Agreement dated September 10, 2015 among Double Eagle Acquisition Corp., Double Eagle Acquisition LLC, Harry E. Sloan, Dennis A. Miller, James M. McNamara, Fredric D. Rosen, the Sara L. Rosen Trust, the Samuel N. Rosen 2015 Trust and the Fredric D. Rosen IRA, (incorporated by reference to Exhibit 10.3 of the Company’s Current Report on Form 8-K, filed September 16, 2015). |
| | |
| | |
| | ABL Credit Agreement, dated November 29, 2017July 1, 2020, by and among WSII, Willscot Equipment II, LLC, Williams Scotsman of Canada, Inc.Holdings Corp., Holdings, andWSII, the lenders named therein (incorporated by reference to Exhibit 10.1 of the Company’s Current Report on Form 8-K, filed December 5, 2017). |
| | First Amendment to the ABL Credit Agreement, dated as of July 9, 2018, by and among WSII, certain subsidiaries of WSII, Holdings,guarantors party thereto, the lenders party thereto, and Bank of America, N.A., as administrative agent and collateral agent (incorporated by reference to Exhibit 10.1 of the Company’s QuarterlyCurrent Report on Form 10-Q,8-K, filed August 8, 2018)July 1, 2020). |
| | |
| | |
| | |
| | Second Amendment to the ABLForm of Performance-Based Restricted Stock Unit Agreement dated as of July 24, 2018, by and among WSII, certain subsidiaries of WSII, Holdings, the lenders party thereto, and Bank of America, N.A., as administrative and collateral agent (incorporated by reference to Exhibit 10.210.5 of the Company’s QuarterlyCurrent Report on Form 10-Q,8-K, filed August 8, 2018)July 1, 2020). |
| | Third Amendment to the ABL CreditAmended and Restated Employment Agreement, dated as of July 9, 2018,September 7, 2021, by and among WSII, certain subsidiaries of WSII, Holdings, the lenders party thereto,between WillScot Corporation and Bank of America, N.A., as administrative agent and collateral agentBradley Soultz (incorporated by reference to Exhibit 10.2 to10.1 of the Company’s Current Report on Form 8-K, filed August 16, 2018)September 8, 2021). |
| | | | | | | | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| | EmploymentThird Amendment to the ABL Credit Agreement, with Hezron Timothy Lopezdated December 16, 2021, by and among Williams Scotsman International, Inc., the other loan parties party thereto and Bank of America, N.A., as administrative agent and collateral agent for itself and the other secured parties (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K, filed June 19, 2019)December 16, 2021). |
| | |
| | | | | | | | |
| | |
| | |
| | |
| | |
| | |
| | |
| 101** | | Inline XBRL Document Set for the consolidated financial statements and accompanying notes in Part II, Item 8, "Financial Statements and Supplementary Data" of this Annual Report on Form 10-K. |
| 104** | | Inline XBRL for the cover page of this Annual Report on Form 10-K, included in the Exhibit 101 Inline XBRL Document Set. |
** Filed herewith
SignatureSignatures
Pursuant to the requirements of the Section 13 or Section 15(d) of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| | | | | | | | | | | |
| | WillScot CorporationMobile Mini Holdings Corp. | |
| | | |
| | By: | /s/ HEZRON TIMOTHY LOPEZCHRISTOPHER J. MINER |
| Date: | March 2, 2020February 25, 2022 | | Hezron Timothy LopezChristopher J. Miner |
| | | Executive Vice President General Counsel & Corporate Secretary Chief Legal Officer |
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
| | | | | | | | | | | | | | |
| Signature | | Title | | Date |
| | | | |
| /s/ BRADLEY L. SOULTZ | | President and Chief Executive Officer and Director (Principal Executive Officer) | | March 2, 2020February 25, 2022 |
| Bradley L. Soultz | | | | |
| | | | |
| /s/ TIMOTHY D. BOSWELL | | President and Chief Financial Officer (Principal Financial Officer) | | March 2, 2020February 25, 2022 |
| Timothy D. Boswell | | | | |
| | | | |
| /s/ SALLY J. SHANKS | | Chief Accounting Officer (Principal
(Principal Accounting Officer) | | March 2, 2020February 25, 2022 |
| Sally J. Shanks | | | | |
| | | | |
/s/ GERARD E. HOLTHAUSERIK OLSSON | | Chairman of the Board | | March 2, 2020February 25, 2022 |
Gerard E. HolthausErik Olsson | | | | |
| | | | |
| /s/ MARK S. BARTLETT | | Director | | March 2, 2020February 25, 2022 |
| Mark S. Bartlett | | | | |
| | | | |
/s/ GARY LINDSAYSARA R. DIAL | | Director | | March 2, 2020February 25, 2022 |
Gary LindsaySara R. Dial | | | | |
| | | | |
| /s/ JEFFREY S. GOBLE | | Director | | February 25, 2022 |
| Jeffrey S. Goble | | | | |
| | | | |
| /s/ GERARD E. HOLTHAUS | | Director | | February 25, 2022 |
| Gerard E. Holthaus | | | | |
| | | | |
| /s/ REBECCA L. OWEN | | Director | | March 2, 2020February 25, 2022 |
| Rebecca L. Owen | | | | |
| | | | |
/s/ STEPHEN ROBERTSONKIMBERLY J. MCWATERS | | Director | | March 2, 2020February 25, 2022 |
Stephen RobertsonKimberly J. McWaters | | | | |
| | | | |
| /s/ JEFF SAGANSKY | | Director | | March 2, 2020February 25, 2022 |
| Jeff Sagansky | | | | |
| | | | |
| /s/ MICHAEL W. UPCHURCH | | Director | | February 25, 2022 |
| Michael W. Upchurch | | | | |
