UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934

(Mark One)
☒QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 20182019
OR
☐TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ________ to ________


williamsscotsmanlogocolora01.jpg
Commission File Number: 001-37552 
wsc-20190630_g1.jpg
WILLSCOT CORPORATION
(formerly known as Double Eagle Acquisition Corp.)
(Exact name of registrant as specified in its charter)
Delaware001-3755282-3430194
(State or other jurisdiction of incorporation)(Commission File Number)(I.R.S. Employer Identification No.)
901 S. Bond Street, #600
Baltimore, Maryland 21231
(Address, including zip code, of principal executive offices)
(410) 931-6000
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of each exchange on which registered
Class A common stock, par value $0.0001 per shareWSCThe Nasdaq Capital Market
Warrants to purchase Class A common stock(1)WSCWWOTC Markets Group Inc.
Warrants to purchase Class A common stock(2)WSCTWOTC Markets Group Inc.
(1) Issued in connection with the initial public offering of Double Eagle Acquisition Corp., the registrant’s legal predecessor company, in September 2015, which are exercisable for one-half of one share of the registrant’s Class A common stock for an exercise price of $5.75.
(2) 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 Class A common stock at an exercise price of $15.50 per share.
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 and posted on its corporate Website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulations S‑TS-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‑acceleratednon-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b‑212b-2 of the Exchange Act.
Large accelerated filer ☐
Accelerated filer ☒
Non‑acceleratedNon-accelerated filer ☐
Smaller reporting company ☐
(Do not check if a smaller reporting company)
Emerging growth company ☒
1


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 is a shell companycompany (as defined in Rule 12b‑212b-2 of the Act). Yes ☐ No ☒
Shares of Class A common stock, par value $0.0001 per share, outstanding: 92,644,774108,699,126 shares at August 1, 2018.July 25, 2019.
Shares of Class B common stock, par value $0.0001 per share, outstanding: 8,024,419 shares at August 1, 2018.
July 25, 2019.




2


WILLSCOT CORPORATION
Quarterly Report on Form 10-Q
Table of Contents


PART I Financial Information
Item 1
Financial Statements (unaudited)
Condensed Consolidated Balance Sheets as of June 30, 20182019 and December 31, 20172018
Condensed Consolidated Statements of Operations for the Three and Six Months Ended June 30, 20182019 and 20172018
Condensed Consolidated Statements of Comprehensive Loss for the Three and Six Months Ended June 30, 2019 and 2018
Condensed Consolidated Statements of Cash Flows for the Six Months EndedJune 30 2018, 2019 and 20172018
Notes to the Condensed Consolidated Financial StatementsStatements
Item 2
Management’s Discussion and Analysis of Financial Condition and Results of Operations
Item 3
Quantitative and Qualitative Disclosures About Market Risk
Item 4
Controls and Procedures
PART II Other Information
Item 1
Legal Proceedings
Item 1A
Risk Factors
Item 2
Unregistered Sales of Equity Securities and Use of Proceeds
Item 3
Defaults Upon Senior Securities
Item 4
Mine Safety Disclosures
Item 5
Other Information
Item 6
Exhibits
SIGNATURE


3


PART I
ITEM 1.Financial Statements
ITEM 1. Financial Statements
WillScot Corporation
Condensed Consolidated Balance Sheets
 (in thousands, except share data)June 30, 2018 (unaudited) December 31, 2017
 
 Assets   
 Cash and cash equivalents$8,181
 $9,185
 Trade receivables, net of allowances for doubtful accounts at June 30, 2018 and December 31, 2017 of $5,631 and $4,845, respectively104,013
 94,820
 Raw materials and consumables9,829
 10,082
 Prepaid expenses and other current assets14,137
 13,696
 Total current assets136,160
 127,783
 Rental equipment, net1,075,040
 1,040,146
 Property, plant and equipment, net82,361
 83,666
 Goodwill33,570
 28,609
 Intangible assets, net125,864
 126,259
 Other non-current assets4,038
 4,279
 Total long-term assets1,320,873
 1,282,959
 Total assets$1,457,033
 $1,410,742
 Liabilities   
 Accounts payable58,370
 57,051
 Accrued liabilities45,606
 48,912
 Accrued interest1,802
 2,704
 Deferred revenue and customer deposits50,382
 45,182
 Current portion of long-term debt1,883
 1,881
 Total current liabilities158,043
 155,730
 Long-term debt684,641
 624,865
 Deferred tax liabilities111,924
 120,865
 Deferred revenue and customer deposits6,696
 5,377
 Other non-current liabilities19,109
 19,355
 Long-term liabilities822,370
 770,462
 Total liabilities980,413
 926,192
 Commitments and contingencies (see Note 12)

 

 Class A common stock: $0.0001 par, 400,000,000 shares authorized at June 30, 2018 and December 31, 2017; 84,644,744 shares issued and outstanding at both June 30, 2018 and December 31, 20178
 8
 Class B common stock: $0.0001 par, 100,000,000 shares authorized at June 30, 2018 and December 31, 2017; 8,024,419 shares issued and outstanding at both June 30, 2018 and December 31, 20171
 1
 Additional paid-in-capital2,123,101
 2,121,926
 Accumulated other comprehensive loss(54,417) (49,497)
 Accumulated deficit(1,640,230) (1,636,819)
 Total shareholders' equity428,463
 435,619
 Non-controlling interest48,157
 48,931
 Total equity476,620
 484,550
 Total liabilities and equity$1,457,033
 $1,410,742
(in thousands, except share data)June 30, 2019 (unaudited) December 31, 2018
Assets 
Cash and cash equivalents $5,490 $8,958 
Trade receivables, net of allowances for doubtful accounts at June 30, 2019 and December 31, 2018 of $13,125 and $9,340, respectively242,730 206,502 
Inventories 15,215 16,218 
Prepaid expenses and other current assets 22,678 21,828 
Assets held for sale 12,906 2,841 
Total current assets 299,019 256,347 
Rental equipment, net 1,953,857 1,929,290 
Property, plant and equipment, net 164,759 183,750 
Goodwill 245,828 247,017 
Intangible assets, net 128,456 131,801 
Other non-current assets 4,357 4,280 
Total long-term assets 2,497,257 2,496,138 
Total assets $2,796,276 $2,752,485 
Liabilities and equity 
Accounts payable $96,031 $90,353 
Accrued liabilities 90,612 84,696 
Accrued interest 16,145 20,237 
Deferred revenue and customer deposits 83,081 71,778 
Current portion of long-term debt 2,026 1,959 
Total current liabilities 287,895 269,023 
Long-term debt 1,709,523 1,674,540 
Deferred tax liabilities 66,594 67,384 
Deferred revenue and customer deposits 10,210 7,723 
Other non-current liabilities 37,584 31,618 
Long-term liabilities 1,823,911 1,781,265 
Total liabilities 2,111,806 2,050,288 
Commitments and contingencies (see Note 15) 
Class A common stock: $0.0001 par, 400,000,000 shares authorized at June 30, 2019 and December 31, 2018; 108,699,126 and 108,508,997 shares issued and outstanding at June 30, 2019 and December 31, 2018, respectively11 11 
Class B common stock: $0.0001 par, 100,000,000 shares authorized at June 30, 2019 and December 31, 2018; 8,024,419 shares issued and outstanding at June 30, 2019 and December 31, 20181 1 
Additional paid-in-capital 2,392,085 2,389,548 
Accumulated other comprehensive loss (65,910)(68,026)
Accumulated deficit (1,704,188)(1,683,319)
Total shareholders' equity 621,999 638,215 
Non-controlling interest 62,471 63,982 
Total equity 684,470 702,197 
Total liabilities and equity $2,796,276 $2,752,485 
See the accompanying notes which are an integral part of these condensed consolidated financial statements.

4


WillScot Corporation
Condensed Consolidated Statements of Operations
(Unaudited)
 Three Months Ended June 30, Six Months Ended June 30,
(in thousands, except share data)2018 2017 2018 2017
Revenues:       
Leasing and services revenue:       
Modular leasing$101,249

$72,954
 $198,511
 $141,941
Modular delivery and installation31,413

22,949
 57,663
 41,953
Sales:       
New units5,236

9,396
 12,664
 14,882
Rental units2,435

4,778
 6,246
 10,622
Total revenues140,333

110,077
 275,084
 209,398
Costs:       
Costs of leasing and services:       
Modular leasing27,129

21,340
 54,291
 40,442
Modular delivery and installation30,127

22,339
 55,648
 40,472
Costs of sales:       
New units3,704

6,766
 8,691
 10,486
Rental units1,263

2,575
 3,578
 6,283
Depreciation of rental equipment23,470

17,474
 47,315
 34,194
Gross profit54,640

39,583
 105,561
 77,521
Expenses:       
Selling, general and administrative47,734

31,652
 92,948
 64,413
Other depreciation and amortization1,570

1,890
 4,006
 3,831
Restructuring costs449

684
 1,077
 968
Currency losses (gains), net572

(6,497) 1,596
 (8,499)
Other (income) expense, net(1,574)
461
 (4,419) 591
Operating income5,889

11,393
 10,353
 16,217
Interest expense12,155

29,907
 23,874
 54,568
Interest income—

(3,509) —
 (6,093)
Loss from continuing operations before income tax(6,266)
(15,005) (13,521) (32,258)
Income tax benefit(6,645)
(5,269) (7,065) (10,138)
Income (loss) from continuing operations379

(9,736) (6,456) (22,120)
Income from discontinued operations, net of tax—

3,840
 —
 6,045
Net income (loss)379

(5,896) (6,456) (16,075)
Net income (loss) attributable to non-controlling interest, net of tax143

—
 (505) —
Total income (loss) attributable to WSC$236

$(5,896) $(5,951) $(16,075)
        
Net income (loss) per share attributable to WSC – basic       
Continuing operations - basic$0.00

$(0.67) $(0.08) $(1.53)
Discontinued operations - basic$0.00

$0.26
 $0.00
 $0.42
Net income (loss) per share - basic$0.00

$(0.41) $(0.08) $(1.11)
        
Net income (loss) per share attributable to WSC – diluted  

    
Continuing operations - diluted$0.00
 $(0.67) $(0.08) $(1.53)
Discontinued operations - diluted$0.00
 $0.26
 $0.00
 $0.42
Net income (loss) per share - diluted$0.00
 $(0.41) $(0.08) $(1.11)
        
Weighted average shares:       
Basic78,432,274

14,545,833
 77,814,456
 14,545,833
Diluted82,180,086
 14,545,833
 77,814,456
 14,545,833
        
Cash dividends declared per share$—

$—
 $—
 $—
See the accompanying notes which are an integral part of these condensed consolidated financial statements.

WillScot Corporation
Condensed Consolidated Statements of Comprehensive Loss
(Unaudited)
 Three Months Ended June 30, Six Months Ended June 30,
(in thousands)2018 2017 2018 2017
Net income (loss)$379
 $(5,896) $(6,456) $(16,075)
Other comprehensive (loss) income:       
Foreign currency translation adjustment, net of income tax (benefit) expense of ($93), $462, ($241) and $618 for the three and six months ended June 30, 2018 and 2017, respectively(2,619) 3,102
 (2,380) 5,783
Comprehensive loss(2,240) (2,794) (8,836) (10,292)
Comprehensive loss attributable to non-controlling interest(150) —
 (774) —
Total comprehensive loss attributable to WSC$(2,090) $(2,794) $(8,062) $(10,292)
Three Months Ended June 30, Six Months Ended June 30, 
(in thousands, except share and per share data)2019201820192018
Revenues: 
Leasing and services revenue: 
Modular leasing $187,509 $101,249 $365,731 $198,511 
Modular delivery and installation 56,479 31,413 106,760 57,663 
Sales revenue: 
New units 11,624 5,236 26,528 12,664 
Rental units 10,513 2,435 22,114 6,246 
Total revenues 266,125 140,333 521,133 275,084 
Costs: 
Costs of leasing and services: 
Modular leasing 55,073 27,129 102,308 54,291 
Modular delivery and installation 48,468 30,127 91,811 55,648 
Costs of sales: 
New units 7,999 3,704 18,877 8,691 
Rental units 6,721 1,263 14,516 3,578 
Depreciation of rental equipment 43,968 23,470 85,071 47,315 
Gross profit 103,896 54,640 208,550 105,561 
Expenses: 
Selling, general and administrative 71,623 47,734 145,108 92,948 
Other depreciation and amortization 3,167 1,570 6,171 4,006 
Impairment losses on long-lived assets 2,786 — 5,076 — 
Restructuring costs 1,150 449 7,103 1,077 
Currency (gains) losses, net (354)572 (670)1,596 
Other income, net (1,289)(1,574)(2,240)(4,419)
Operating income 26,813 5,889 48,002 10,353 
Interest expense 32,524 12,155 64,496 23,874 
Loss on extinguishment of debt 7,244 — 7,244 — 
Loss from operations before income tax (12,955)(6,266)(23,738)(13,521)
Income tax benefit (1,180)(6,645)(802)(7,065)
Net (loss) income (11,775)379 (22,936)(6,456)
Net (loss) income attributable to non-controlling interest, net of tax (862)143 (1,722)(505)
Net (loss) income attributable to WillScot $(10,913)$236 $(21,214)$(5,951)
Net (loss) income per share attributable to WillScot
Basic $(0.10)$0.00 $(0.20)$(0.08)
Diluted $(0.10)$0.00 $(0.20)$(0.08)
Weighted average shares 
Basic 108,693,924 78,432,274 108,609,068 77,814,456 
Diluted 108,693,924 82,180,086 108,609,068 77,814,456 
See the accompanying notes which are an integral part of these condensed consolidated financial statements.

5


WillScot Corporation
Condensed Consolidated Statements of Cash Flows
Comprehensive Loss (Unaudited)
 Six Months Ended June 30,
(in thousands)2018 2017
Operating Activities:   
Net loss$(6,456) $(16,075)
Adjustments for non-cash items:   
Depreciation and amortization51,941
 53,075
Provision for doubtful accounts2,282
 2,276
Gain on sale of rental equipment and other property, plant and equipment(7,429) (4,237)
Interest receivable capitalized into notes due from affiliates—
 (3,915)
Amortization of debt discounts and debt issuance costs2,522
 7,326
Share based compensation expense1,175
 —
Deferred income tax benefit(7,066) (5,073)
Unrealized currency losses (gains)1,378
 (8,356)
Changes in operating assets and liabilities, net of effect of businesses acquired:   
Trade receivables(11,624) (3,847)
Inventories442
 610
Prepaid and other assets(282) (7,715)
Accrued interest receivable—
 (3,214)
Accrued interest payable(909) (1,524)
Accounts payable and other accrued liabilities(11,841) 14,099
Deferred revenue and customer deposits4,667
 694
Net cash provided by operating activities18,800
 24,124
Investing Activities:   
Acquisition of a business(24,006) —
Proceeds from sale of rental equipment12,033
 10,622
Purchase of rental equipment and refurbishments(64,763) (54,223)
Lending on notes due from affiliates—
 (67,939)
Repayments on notes due from affiliates—
 2,151
Proceeds from the sale of property, plant and equipment681
 11
Purchase of property, plant and equipment(1,616) (2,015)
Net cash used in investing activities(77,671) (111,393)
Financing Activities:   
Receipts from borrowings61,792
 222,129
Receipts on borrowings from notes due to affiliates—
 75,000
Payment of financing costs—
 (10,919)
Repayment of borrowings(3,770) (198,580)
Principal payments on capital lease obligations(59) (785)
Net cash provided by financing activities57,963
 86,845
Effect of exchange rate changes on cash and cash equivalents(96) 254
Net change in cash and cash equivalents(1,004) (170)
Cash and cash equivalents at the beginning of the period9,185
 6,162
Cash and cash equivalents at the end of the period$8,181
 $5,992
    
Supplemental Cash Flow Information:   
Interest paid$22,004
 $50,404
Income taxes paid, net of refunds received$1,000
 $(437)
Capital expenditures accrued or payable$16,828
 $8,992
Three Months Ended June 30, Six Months Ended June 30, 
(in thousands)2019201820192018
Net (loss) income $(11,775)$379 $(22,936)$(6,456)
Other comprehensive income (loss): 
Foreign currency translation adjustment, net of income tax expense (benefit) of $0, $(93), $0 and $(241) for the three and six months ended June 30, 2019 and 2018, respectively4,300 (2,619)

8,415 (2,380)
Net loss on derivatives, net of income tax benefit of $1,190, $0, $1,863 and $0 for the three and six months ended June 30, 2019 and 2018, respectively(3,887)— (6,088)— 
Comprehensive loss (11,362)(2,240)(20,609)(8,836)
Comprehensive loss attributable to non-controlling interest (817)(150)

(1,511)(774)
Total comprehensive loss attributable to WillScot $(10,545)$(2,090)$(19,098)$(8,062)
See the accompanying notes which are an integral part of these condensed consolidated financial statements.

6


WillScot Corporation
Condensed Consolidated Statements of Changes in Equity (Unaudited)

Six Months Ended June 30, 2019
Class A Common Stock Class B Common Stock Additional Paid-in-CapitalAccumulated Other Comprehensive Income Accumulated Deficit Total Shareholders' Equity Non-Controlling InterestTotal Equity 
(in thousands)Shares Amount Shares Amount 
Balance at December 31, 2018108,509 $11 8,024 $1 $2,389,548 $(68,026)$(1,683,319)$638,215 $63,982 $702,197 
Net loss— — — — — — (10,301)(10,301)(860)(11,161)
Other comprehensive income— — — — — 1,748 — 1,748 166 1,914 
Adoption of ASC 606— — — — — — 345 345 — 345 
Stock-based compensation184 — — — 636 — — 636 — 636 
Balance at March 31, 2019108,693 11 8,024 1 2,390,184 (66,278)(1,693,275)630,643 63,288 693,931 
Net loss— — — — — — (10,913)(10,913)(862)(11,775)
Other comprehensive income— — — — — 368 — 368 45 413 
Stock-based compensation6 — — — 1,901 — — 1,901 — 1,901 
Balance at June 30, 2019108,699 $11 8,024 $1 $2,392,085 $(65,910)$(1,704,188)$621,999 $62,471 $684,470 

Six Months Ended June 30, 2018
Class A Common Stock Class B Common Stock Additional Paid-in-CapitalAccumulated Other Comprehensive Income Accumulated Deficit Total Shareholders' Equity Non-Controlling InterestTotal Equity 
(in thousands)Shares Amount Shares Amount 
Balance at December 31, 201784,645 $8 8,024 $1 $2,121,926 $(49,497)$(1,636,819)$435,619 $48,931 $484,550 
Net loss— — — — — — (6,187)(6,187)(648)(6,835)
Other comprehensive income— — — — — 239 — 239 24 263 
Adoption of ASU 2018-02— — — — — (2,540)2,540 — — — 
Stock-based compensation— — — — 121 — — 121 — 121 
Balance at March 31, 201884,645 8 8,024 1 2,122,047 (51,798)(1,640,466)429,792 48,307 478,099 
Net loss— — — — — — 236 236 143 379 
Other comprehensive loss— — — — — (2,619)— (2,619)(293)(2,912)
Stock-based compensation— — — — 1,054 — — 1,054 — 1,054 
Balance at June 30, 201884,645 $8 8,024 $1 $2,123,101 $(54,417)$(1,640,230)$428,463 $48,157 $476,620 

See the accompanying notes which are an integral part of these condensed consolidated financial statements.
7


WillScot Corporation
Condensed Consolidated Statements of Cash Flows (Unaudited)
Six Months Ended June 30, 
(in thousands)20192018
Operating activities: 
Net loss$(22,936)$(6,456)
Adjustments to reconcile net income to net cash provided by operating activities: 
Depreciation and amortization 92,477 51,941 
Provision for doubtful accounts 6,297 2,282 
Impairment losses on long-lived assets 5,076 — 
Gain on sale of rental equipment and other property, plant and equipment (5,359)(7,429)
Amortization of debt discounts and debt issuance costs 5,767 2,522 
Loss on extinguishment of debt 7,244 — 
Stock-based compensation expense 3,191 1,175 
Deferred income tax benefit (1,190)(7,066)
Unrealized currency (gains) losses (624)1,378 
Changes in operating assets and liabilities, net of effect of businesses acquired: 
Trade receivables (44,184)(11,624)
Inventories 1,039 442 
Prepaid and other assets (720)(282)
Accrued interest  (4,092)(909)
Accounts payable and other accrued liabilities 4,369 (11,841)
Deferred revenue and customer deposits 13,699 4,667 
Net cash provided by operating activities 60,054 18,800 
Investing activities: 
Acquisition of a business — (24,006)
Proceeds from sale of rental equipment 23,083 12,033 
Purchase of rental equipment and refurbishments (113,088)(64,763)
Proceeds from the sale of property, plant and equipment 8,891 681 
Purchase of property, plant and equipment (3,899)(1,616)
Net cash used in investing activities (85,013)(77,671)
Financing activities: 
Receipts from borrowings 461,203 61,792 
Payment of financing costs (2,686)— 
Repayment of borrowings (430,199)(3,770)
Principal payments on capital lease obligations (61)(59)
Withholding taxes paid on behalf of employees on net settled stock-based awards (654)— 
Payment of make-whole premium on Unsecured Notes redemption (6,252)— 
Net cash provided by financing activities 21,351 57,963 
Effect of exchange rate changes on cash and cash equivalents 140 (96)
Net change in cash and cash equivalents(3,468)(1,004)
Cash and cash equivalents at the beginning of the period8,958 9,185 
Cash and cash equivalents at the end of the period$5,490 $8,181 
Supplemental cash flow information: 
Interest paid $65,023 $22,004 
Income taxes paid, net $355 $1,000 
Capital expenditures accrued or payable $24,348 $16,828 
See the accompanying notes which are an integral part of these condensed consolidated financial statements.
8


WillScot Corporation
Notes to the Condensed Consolidated Financial Statements
(Unaudited)
NOTE 1 - Summary of Significant Accounting Policies
Organization and Nature of Operations
WillScot Corporation (“WSC” or alongWillScot” and, together with its subsidiaries, the “Company”), is a leading provider of modular space and portable storage solutions in the United States (“US”), Canada and Mexico. The Company leases, sells, delivers and installs mobile offices, modular buildings and storage products through an integrated network of branch locations that spans North America.
WillScot, whose securitiesClass A common shares are listed on Thethe Nasdaq Capital Market (Nasdaq: WSC), serves as the holding company for the Williams Scotsman family of companies. All of the Company’s assets and operations are owned through Williams Scotsman Holdings Corp. (“WS Holdings”). The CompanyWillScot operates and owns 90%owns 91.0% of WS Holdings, and Sapphire Holding S.à r.l. (“Sapphire”), an affiliate of TDR Capital LLP (“TDR Capital”), owns the remaining 10%9.0%.
The CompanyWillScot was originally incorporated on June 26, 2015as a Cayman Islands exempt company under the name Double Eagle Acquisition Corporation (“("Double Eagle”Eagle") ason June 26, 2015. Prior to November 29, 2017, Double Eagle was a Cayman Islands exempt,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 with one or more businesses.combination. On November 29, 2017 the Company, through its subsidiary, WS Holdings,Double Eagle indirectly acquired all of the equity interest of Williams Scotsman International, Inc. (“WSII”), from Algeco Scotsman Global S.à r.l., (together with its subsidiaries, the “Algeco Group”). The Algeco Group, which is majority owned by an investment fund managed by TDR Capital. As part of the transaction (the “Business Combination”), the Company redomesticatedDouble Eagle domesticated to Delaware and changed its name to WillScot Corporation. For further information on the organization of the Company, refer to the consolidated financial statements and notes included in our Annual Report on Form 10-K for the year ended December 31, 2017.
WSII engages in the leasing and sale of mobile offices, modular buildings and storage products and their delivery and installation throughout North America.
Basis of Presentation
The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with the instructions to Form 10-Q and do not include all the information and notes required by accounting principles generally accepted in the US (“GAAP”) for complete financial statements. The accompanying unaudited condensed consolidated financial statements contain all adjustments, which are of a normal and recurring nature, necessary to present fairly the financial position, the results of operations and cash flows for the interim periods presented.
The results of operations for the interim periods presented.
The results of consolidated operations for the three and six months ended June 30, 20182019 are not necessarily indicative of the results to be expected for the full year. For further information, refer to the consolidated financial statements and notes included in ourWillScot's Annual Report on Form 10-K for the year ended December 31, 2017.2018.
Principles of Consolidation
The unaudited condensed consolidated financial statements comprise the financial statements of the CompanyWillScot 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 the Company. 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 WSC 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) WSC’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 the earliest period presented 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. WSII’s remote accommodations business, which consisted of Target Logistics Management LLC (“Target Logistics”) and its subsidiaries and Chard Camp Catering Services (“Chard,” and together with Target Logistics, 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, for the three and six months ended June 30, 2017 have been reported as discontinued operations in the condensed consolidated financial statements.

Recently Issued and Adopted Accounting Standards
The Company qualifies as an emerging growth company (“EGC”) as defined under the Jumpstart Our Business Startups Act (the “JOBS Act”). Using exemptions provided under the JOBS Act provided to EGCs, the Company has 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 of 2002)it is required to comply with such standards. As such, compliance dates included below pertainWillScot will be deemed to non-issuers, andbe a large accelerated filer as permitted, early adoption dates for non-issuers are indicated.of December 31, 2019.
Recently Issued Accounting Standards
In May 2014,June 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2014-09, Revenuefrom Contracts with Customers2016-13, Financial Instruments - Credit Losses (Topic 606)326), which prescribes that financial assets (or a single comprehensive modelgroup of financial assets) should be measured at amortized cost basis to be presented at the net amount expected to be collected. Credit losses relating to these financial assets should be recorded through an allowance for entities to use in the accounting for revenue arising from contracts with customers.credit losses. The new guidance will supersede virtually all existing revenue guidance under GAAP andstandard is effective for annual reporting periodsthe Company for fiscal years beginning after December 15, 2018. Early adoption for non-public entities is permitted starting with annual reporting2019, including interim periods beginning after December 15, 2016. The core principle contemplated by this new standard waswithin that an entity should recognize revenue to depict the transfer of promised goods 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. In April and May 2016, the FASB also issued clarifying updates to the new standard specifically to address certain core principles including the identification of performance obligations, licensing guidance, the assessment of the collectability criterion, the presentation of taxes collected from customers, non-cash considerations, contract modifications and completed contracts at transition.
fiscal year. The Company is currently finalizing its evaluationcontinues to evaluate the impacts of adopting the impact that the updated guidance will havestandard on the Company’s financial statements and related disclosures. As part of the evaluation process, the Company is holding regular meetings with key stakeholders from across the organization to discuss the impact ofwill adopt the standard on its existing contracts. The Company plans to adopt Topic 606 usingwithin the modified retrospective transition approach.required adoption period.
The Company is utilizing a bottom-up approach to analyze the impact of the standard on its portfolio of contracts by reviewing the Company’s current accounting policies and practices to identify potential differences that would result from applying the requirements of the new standard to the Company’s existing revenue contracts. As part of its implementation project, the Company has prepared analysis with respect to revenue stream scoping, performed contract reviews, developed an preliminary gap analysis and evaluated the revised disclosure requirements. The Company intends to determine the preliminary impact on the Company’s financial statements during the third quarter of 2018.    
In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842) ("ASC 842"). This guidance revises existing practice related to accounting for leases under ASC Topic 840, Leases (“ASC 840”) for both lessees and lessors. The new guidance requires lessees to recognizeestablishes a right-of-use (“ROU”) model that requires a lessee to record a ROU asset and a lease liability for virtually all of their leases (other than leases that meet the definition of a short-term lease). The lease liability will be equal to the present value of lease payments and the right-of-use asset will be based on the lease liability, subject to adjustment such asbalance sheet for initial direct costs. For income statement purposes, the new standard retains a dual model similar to ASC 840, requiringall leases towith terms longer than twelve months. Leases will be classified as either finance or operating, or finance. Operatingwith classification affecting the pattern of expense recognition in the income statement. This guidance also expands the requirements for lessees to record leases will resultembedded in straight-line expense (similar to current accounting by lessees for operating leases under ASC 840) while finance leases will result in a front-loaded expense pattern (similar to current accounting by lessees for capital leases under ASC 840). Whileother arrangements and the new standard maintains similar accountingrequired quantitative and qualitative disclosures surrounding leases. Accounting guidance for lessors as under ASC 840, the new standard reflects updates to, among other things, align with certain changes to the lessee model. The new standard will beis largely unchanged. This guidance is effective for non-public entities for fiscal years beginning after December 15, 2019 and interim periods within fiscal years beginning after December 15, 2020.those annual periods using a modified retrospective transition approach. Early adoption is permitted for all entities. However, based on WillScot's expectation that it
9


will cease to be an EGC as of December 31, 2019, the Company plans to adopt the new standard no later than in the fourth quarter of 2019.
The guidance includes a numberCompany plans to take advantage of the transition package of practical expedients thatpermitted within ASC 842 which allows the Company may electnot to apply. The impact of adopting Topic 842 will depend onreassess (i) whether any expired or existing lease contracts are or contain leases, (ii) the Company’shistorical lease portfolio as of the adoption date.classification for any expired or existing leases and (iii) initial direct costs for any existing leases. The Company will continue to evaluateis in the impactsprocess of assessing the potential impact this guidance may have on its financial position, results, including which of operations,its existing lease arrangements will be impacted by the new guidance and cash flows. Thewhether other arrangements that are not currently classified as leases may become subject to the guidance. Additionally, the Company is planningfinalizing the implementation of a lease management system to updateassist in the accounting and is implementing additional changes to its systems, processes and internal controls to meetensure the new reporting and disclosure requirements.requirements are met upon adoption.
Additionally, as discussed in Note 3, most of the Company's equipment rental revenues will be accounted for under the current lease accounting standard, ASC 840, until the adoption of the new lease accounting standard ASC 842. The Company is continuing to evaluate the impact of adopting ASC 842 on the Company's accounting for equipment rental revenue.
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.
During December 2017, shortly afterIn August 2018 the Tax CutsFASB issued ASU 2018-13, Fair Value Measurement Topic 820 ("ASU 2018-13"). This guidance modifies the disclosure requirements for fair value measurements by removing the requirements to disclose the amount and Jobs Act (the “Tax Act”) was enacted, the SEC issued Staff Accounting Bulletin No. 118, Income Tax Accounting Implicationsreasons for transfers between Level 1 and Level 2 of the Tax Cutsfair value hierarchy, the policy for the timing of transfers between levels of the fair value hierarchy, and Jobs Act (“SAB 118”) which providesthe valuation processes for Level 3 fair value measurements. ASU 2018-13 also adds requirements to disclose the changes in unrealized gains and losses for the period included in other comprehensive income for recurring Level 3 fair value measurements held at the end of the reporting period, as well as requires the range and weighted average of significant unobservable inputs used in developing Level 3 fair value measurements. The guidance is effective for the Company for annual reporting periods and interim periods within those fiscal years, beginning after December 15, 2019. The amendments on changes in unrealized gains and losses, the range and weighted average of significant unobservable inputs used to develop Level 3 fair value measurements, and the narrative description of measurement uncertainty should be applied prospectively for only the most recent interim or annual period presented in the initial fiscal year of adoption. All other amendments should be applied retrospectively to all periods presented upon their effective date. Early adoption is permitted for all entities. The Company elected to adopt this guidance on accounting fora retrospective basis with no material impact to the Tax Act’s impact. SAB 118 provides a measurement period, which in no case should extend beyond one year fromfinancial statements as of June 30, 2019.
In August 2018, the Tax Act enactment date, during which a company acting in good faith may completeFASB issued ASU 2018-15, Intangibles—Goodwill and Other - Internal-Use Software (Subtopic 350-40) ("ASU 2018-15"). This guidance clarifies the accounting for implementation costs of a hosting arrangement that is a service contract, to align the impactsrequirements for capitalizing implementation costs for hosting arrangements, regardless of whether they convey a license to the Tax Act under ASC Topic 740. Per SAB 118, companies must reflecthosted software. The guidance is effective for the income tax effects of the Tax ActCompany for annual reporting periods beginning after December 15, 2020, and interim periods within annual periods beginning after December 15, 2021. Early adoption is permitted, including adoption in the reportingany interim period, in which the accounting under ASC Topic 740 is complete. To the extent the accounting for certain income tax effects of the Tax Act is incomplete, companies can determineall entities. The Company elected to adopt this guidance on a reasonable estimate for those effects and record a provisional estimate inprospective basis with no material impact to the financial statements in the first reporting period in which a reasonable estimate can be determined. If a company cannot determine a provisional estimate to be included in the financial statements, it should continue to apply ASC 740 based on the provisions of the tax laws that were in effect immediately prior to the Tax Act being enacted. If a company is unable to provide a reasonable estimate of the impacts of the Tax Act in a reporting period, a provisional amount must be recorded in the first reporting period in which a reasonable estimate can be determined. As a result of the Tax Act, in 2017, the Company

remeasured its net deferred tax liabilities and recognized a provisional net benefit of $28.1 million. In addition, based on information currently available, the Company recorded a provisional income tax expense of $2.4 million in 2017 related to the deemed repatriation of foreign earnings. The Company recorded a minor adjustment in 2018 to the provisional amounts recorded in its financial statements for the year ended December 31, 2017 (see Note 8) and continues to evaluate the provisions of the Tax Act including guidance from the Department of Treasury and Internal Revenue Service. Additionally, the Company expects to file its US tax return for 2017 during the fourth quarter of 2018 and any changes to the estimates used to the final tax positions for temporary differences, earnings and profits will result in adjustments of the remeasurement amounts for the Tax Act recorded as of December 31, 2017.June 30, 2019.
The Company continues to evaluate the impact of the Global Low Taxed Intangible Income (“GILTI”) provision of the Tax Act. The Company is required to make an accounting policy election of either (1) treating GILTI as a current period expense when incurred or (2) factoring such amounts into the Company’s measurement of its deferred taxes. The Company has not completed its analysis and has not made a determination of its accounting policy for GILTI.
NOTE 2 - Acquisitions and Assets Held for Sale
TysonModSpace Acquisition
On January 3,August 15, 2018, the Company acquired allModular Space Holdings, Inc. ("ModSpace"), a privately-owned national provider of office trailers, portable storage units and modular buildings (the "Business Combination"). The acquisition was consummated by merging a special purpose subsidiary of the issuedCompany with and outstanding membership interests of Onsite Space LLC (d/b/a Tyson Onsite (“Tyson”)). Tyson provided modular space rental services ininto ModSpace, with ModSpace surviving the Midwest, primarily in Indiana, Illinois and Missouri. The Company expects to realize synergies and cost savings related to this acquisitionmerger as a resultsubsidiary of purchasingWSII.
Purchase Price
The aggregate purchase price for ModSpace was $1.2 billion and procurement economiesconsisted of scale(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 and general(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 administrative expense savings, particularly with respect to the consolidation(iv) a working capital adjustment of corporate related functions and elimination of redundancies. $4.7 million.
The acquisition date fair valuewas funded by the net proceeds of WillScot's issuance of 9,200,000 shares of Class A common stock, the consideration transferred consistednet proceeds of $24.0WSII’s issuance of $300.0 million in cash consideration, net of cash acquired. The transaction was fully funded by borrowings under the ABL Facility (definedsenior secured notes and $200.0 million in senior unsecured notes (see Note 6).
During the three months ended June 30, 2018, the Company recorded adjustments to the Tyson opening balance sheet, which increased rental fleet by $0.6 million and accrued liabilities by $0.2 million. This increase resulted in an equal increase in goodwill as detailed in Note 5. Increases or decreases in the estimated fair values of the net assets acquired may impact the Company’s statements of operations in future periods. The Company expects that the preliminary values assigned to the rental fleet, intangible assets, deferred tax assets and other accrued tax liabilities will be finalized during the third quarter of 2018.
Tyson results were immaterial to the condensed consolidated statements of operations for the three and six months ended June 30, 2018 and as a result, the Company is not presenting pro-forma information.
Acton Acquisition
On December 20, 2017, WSII acquired 100% of the issued and outstanding ownership interests of Acton Mobile Holdings LLC (“Acton”) for a cash purchase price of $237.1 million, subject to certain adjustments. Acton owns all of the issued and outstanding membership interests of New Acton Mobile Industries, which provided modular space and portable storage rental services across the US. WSII funded the acquisition with cash on hand8), and borrowings under the ABL Facility (defined(see Note 8).
As of the date of acquisition, August 15, 2018, 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.
10


The estimated fair values of the Stock Consideration and 2018 Warrants are Level 3 fair value measurements. 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 Note 6).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 incurred $4.8 millionhas 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 $7.4 million in integration fees associated2018 Warrants included within the Actonpurchase 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 underlying assets acquired and liabilities assumed based upon their estimated fair values at the date of acquisition, August 15, 2018. The Company estimated the fair values based on independent valuations, discounted cash flow analyses, quoted market prices, contributory asset charges, and estimates made by management. The final assignment of the fair value of the ModSpace acquisition, including the final assignment of goodwill to the Company's reporting units was not complete as of June 30, 2019, but will be finalized within selling, general,the allowable one year measurement period. The following table summarizes the preliminary fair values of the assets acquired and administrative expenses (“SG&A”) forliabilities assumed as of the threeacquisition date, August 15, 2018 and the adjustments made to these balances during the six months ended June 30, 2018, respectively.2019.
Through June 2018,
(in thousands)Balance at December 31, 2018AdjustmentsBalance at June 30, 2019
Trade receivables, net (a)$81,320 $(2,296)$79,024 
Prepaid expenses and other current assets17,342 305 17,647 
Inventories4,757 — 4,757 
Rental equipment853,986 (321)853,665 
Property, plant and equipment110,413 4,388 114,801 
Intangible assets:
 Favorable leases (b)3,976 — 3,976 
Trade name (b)3,000 — 3,000 
Deferred tax assets, net1,855 — 1,855 
Total identifiable assets acquired$1,076,649 $2,076 $1,078,725 
Accrued liabilities$31,551 $(793)$30,758 
Accounts payable37,678 323 38,001 
Deferred revenue and customer deposits15,938 — 15,938 
Total liabilities assumed$85,167 $(470)$84,697 
Total goodwill (c)$215,764 $(2,547)$213,217 
(a) The fair value of accounts receivable was $79.0 million and the gross contractual amount was $86.5 million. The Company estimated that $7.5 million is uncollectible.
(b) The trade name has an estimated useful life of 3 years. The favorable lease assets have an estimated useful life equivalent to the term of the lease.
(c) The goodwill is reflective of ModSpace’s going concern value and operational synergies that the Company recorded adjustmentsexpects to achieve that would not be available to other market participants. The goodwill represented on the Acton opening balance sheet which increased accrued liabilities by $2.0 million due to further evaluation of unindemnified liabilities. This increase resulted in an equal increase inis not deductible for income tax purposes. The goodwill as detailed in Note 5. As a result of the timing of the transaction, the purchase price allocation for the rental equipment, intangible assets, property, plant and equipment, deferred tax assets, receivables, and other accrued liabilities acquired and assumed are based on preliminary valuations and are subject to change as the Company obtains additional information during the acquisition measurement period. Increases or decreases in the estimated fair values of the net assets acquired may impact the Company’s statements of operations in future periods. The Company expects that the preliminary valuesis assigned to the rental equipment, intangible assets, property, plantModular – US and equipment, deferred tax assets,Modular – Other North America segments, defined in Note 16, in the amounts of $178.3 million and other accrued tax liabilities will be finalized during the one-year measurement period following the acquisition date.$34.9 million, respectively.

11


Pro Forma Information  
The pro-formapro forma information below has been prepared using the purchase method of accounting, giving effect to the ActonModSpace acquisition as if it had been completed on January 1, 2017 (the “pro-forma acquisition date”).2018. The pro-formapro forma information is not necessarily indicative of the Company’s results of operations had the acquisition been completed on the above date, nor is it necessarily indicative of the Company’s future results. The pro-formapro forma information does not reflect any cost savings from operating efficiencies or synergies that could result from the acquisition and also does not reflect additional revenue opportunities following the acquisition.

The tabletables below presentspresent unaudited pro-formapro forma consolidated statements of operations information as if ActonModSpace had been included in the Company’s consolidated results for the six months ended June 30, 2017:2018:
(in thousands)Six Months Ended
June 30, 2017
WSC historic revenues (a)$209,398
Acton historic revenues47,388
Pro-forma revenues$256,786
  
WSC historic pretax loss (a)$(32,258)
Acton historic pretax loss(275)
Pro-forma pretax loss(32,533)
Pro-forma adjustments to combined pretax loss: 
Impact of fair value mark-ups/useful life changes on depreciation (b)(1,272)
Intangible asset amortization (c)(354)
Interest expense (d)(5,431)
Elimination of historic Acton interest (e)2,514
Pro-forma pretax loss(37,076)
Income tax benefit(11,652)
Pro-forma loss from continuing operations(25,424)
Income from discontinued operations6,045
Pro-forma net loss$(19,379)
(in thousands) Six Months Ended
June 30, 2018 
WillScot revenues $275,084 
ModSpace revenues 230,917 
Pro forma revenues $506,001 
WillScot pre-tax loss $(13,521)
ModSpace pre-tax income 4,004 
Pre-tax loss before pro forma adjustments (9,517)
Pro forma adjustments to combined pre-tax loss: 
Impact of fair value mark-ups/useful life changes on depreciation (a) (6,579)
Intangible asset amortization (b) (500)
Interest expense (c) (32,871)
Elimination of ModSpace interest (d) 15,933 
Pro forma pre-tax loss (e) (33,534)
Income tax benefit (f) (17,522)
Pro forma net loss  $(16,012)
(a) Excludes historic revenues and pre-tax income from discontinued operations
(b) Depreciation of rental equipment and non-rental depreciation were adjusted for the fair value mark-ups of equipment acquired in
the ActonModSpace acquisition. The useful lives assigned to such equipment did not change significantly from the useful lives used by Acton.ModSpace.
(c)(b) Amortization of the trade name acquired in ActonModSpace acquisition.
(d)(c) In connection with the ActonModSpace acquisition, the Company drew $237.1an incremental $419.0 million on the ABL Facility. AsFacility, as defined in Note 8, and issued $300.0 million of June 30, 2018, the weighted-
secured notes and $200.0 million of unsecured notes. The weighted average interest rate of ABLfor the aforementioned borrowings was 4.58%6.54%. Interest expense includes amortization of related deferred financing fees on debt incurred in conjunction with ModSpace acquisition.
(e)(d) Interest on Acton historicModSpace historical debt was eliminated.
(e) Pro forma pre-tax loss includes $1.1 million of restructuring expense and $7.4 million of integration costs incurred by WillScot for the six months ended June 30, 2018.
(f) The pro forma tax rate applied to the ModSpace Acquisition
On June 21, 2018,pre-tax loss is the Company and its newly-formed acquisition subsidiary, Mason Merger Sub, Inc. (“Merger Sub”), entered into an Agreement and Plan of Merger (the “Merger Agreement”) with Modular Space Holdings Space, Inc. (“ModSpace”), a privately-owned provider of office trailers, portable storage units and modular buildings, and NANOMA LLC, solely in its capacitysame as the representative ofWillScot effective rate for the Holders (as defined therein), pursuant to which Merger Sub will merge withperiod.
Transaction and into ModSpace with ModSpace as the surviving entity and continuing as an indirect subsidiary of the Company (the “ModSpace Acquisition”). Subject to potential adjustment under the Merger Agreement, the aggregate consideration payable to the sellers under the Merger Agreement consists of (i) $1,063,750,000 in cash, (ii) 6,458,500 shares of the Company’s Class A common stock and (iii) warrants to purchase an aggregate of 10,000,000 shares of the Company’s Class A common stock at an exercise price of $15.50 per share.Integration Costs
The ModSpace sellers who receive Class A common shares and warrants will receive customary registration rights, and will be subject to a six-month lock-up arrangement, under a registration rights agreement to be entered into on the closing date. The warrants issuable to the sellers are not redeemable and will expire on November 29, 2022.
The closing of the merger is subject to certain closing conditions, including a Canadian regulatory approval; the continuing accuracy of each party’s representations and warranties; the performance of certain obligations; and, the satisfaction of other customary conditions. The Merger Agreement may be terminated by the Company or ModSpace under certain circumstances. If the ModSpace Acquisition does not close due to the occurrence of certain regulatory events, we may be required to pay to ModSpace a $35.0 million termination fee.
The Company incurred $4.1incurred $8.2 million and $18.4 million in transactionintegration costs within selling, general and administrative ("SG&A") expenses for the three and six months ended June 30, 2019, respectively, related to the ModSpace Acquisitionacquisition. The Company incurred $4.8 million and $7.4 million in integration costs for the three and six months ended June 30, 2018, respectively, related to the acquisitions of Acton Mobile Holdings LLC (“Acton”) and Onsite Space LLC (d/b/a Tyson Onsite (“Tyson”)).
The Company incurred no transaction costs for the three and six months ended June 30, 2019. The Company incurred $4.1 million in transaction costs for both the three and six months ended June 30, 2018.

Assets Held for Sale
In connection with the integration of ModSpace, during the six months ended June 30, 2019, the Company reclassified eight legacy ModSpace branch facilities, from property, plant and equipment to held for sale, in addition to the three held for sale properties that were recognized at December 31, 2018. During the six months ended June 30, 2019, an impairment of $2.6 million was recorded related to these properties and two of these properties were sold for net cash proceeds of $8.6 million with no material gain or loss.
The fair value of the assets held for sale was determined using valuations from third party brokers, which were based on current sales prices for comparable assets in the market, a Level 2 measurement.


12


NOTE 3 - Discontinued OperationsRevenue
WSII’s Remote Accommodations Business was transferredAdoption of ASU 2014-09
On January 1, 2019, the Company adopted ASU 2014-09, Revenue from Contracts with Customers (Topic 606) ("ASC 606") as well as subsequent updates using the modified retrospective method applied to another entity includedthose contracts that were not completed as of January 1, 2019. Results for reporting periods beginning after January 1, 2019 are presented under the guidance required by ASC 606, while prior period amounts are not adjusted and continue to be reported in accordance with the Algeco GroupCompany’s historical accounting under ASC 605, Revenue Recognition ("ASC 605"). The implementation of ASC 606 did not have a material impact on the Company’s financial results for the period ending June 30, 2019.
Revenue Recognition Policy
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 (69% for both the three and six months ended June 30, 2019, and 70% for both the three and six months ending June 30, 2018) is generated by rental income subject to the guidance of ASC 840. The remaining revenue is generated by performance obligations in contracts with customers for services or sale of units subject to the guidance in ASC 606 or ASC 605 for 2019 and 2018, respectively.
Leasing Revenue (ASC 840)
Income from operating leases is recognized on a straight-line basis over the lease term. The Company's lease arrangements typically 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 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 Business Combination. WSII does not expectcontractually obligated period, the excess, if any, between the amount the customer is contractually required to have continuing involvementpay 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. Operating lease minimum contractual terms generally range from 1 month to 60 months and averaged approximately 10 months across the Company's rental fleet for the six months ended June 30, 2019.
Services Revenue (ASC 606)
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 margin approach. Revenue from these activities is recognized as the services are performed.
Sales Revenue (ASC 606)
Sales revenue is generated by the sale of new and used units. Revenue from the sale of new and used 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.
Revenue Disaggregation
Geographic Areas
The Company had total revenue in the Remote Accommodations Business going forward. Historically,following geographic areas for the Remote Accommodations Business leasedthree and six months ended June 30:
Three Months Ended June 30,Six Months Ended June 30,
(in thousands)2019201820192018
US $240,447 $127,983 473,214 $251,103 
Canada21,456 8,678 39,673 16,845 
Mexico 4,222 3,672 8,246 7,136 
Total revenues$266,125 $140,333 521,133 $275,084 

13


Major Product and Service Lines
Rental equipment leasing is the Company’s core business, which significantly impacts the nature, timing, and uncertainty of the Company’s revenue and cash flows. This includes rental of both modular space and portable storage units along with value added products and services ("VAPS"), which include furniture, steps, ramps, basic appliances, internet connectivity devices, and other items used by customers in connection with the Company's products. Rental equipment from WSII. After the Business Combination, several lease agreements forleasing is complemented by new product sales and sales of rental equipment still exist betweenunits. In connection with its leasing and sales activities, the Company provides services including delivery and Target Logistics. installation, maintenance and ad hoc services, and removal services at the end of lease transactions.
The leaseCompany’s revenue associated with these agreements is disclosed in Note 15.
As a result of the transactions discussed above, the Remote Accommodations segment has been reported as discontinued operations in the condensed consolidated statements of operationsby major product and service line for the three and six months ended June 30 2017.is as follows:
Results from Discontinued Operations
Three Months Ended June 30,Six Months Ended June 30,
2019201820192018
(in thousands)TotalTotalTotalTotal
Modular space leasing revenue$129,473 $69,616 $253,025 $136,860 
Portable storage leasing revenue6,022 4,835 12,262 9,767 
VAPS (a)39,669 20,560 77,061 40,009 
Other leasing-related revenue (b)12,345 6,238 23,383 11,875 
Modular leasing revenue187,509 101,249 365,731 198,511 
Modular delivery and installation revenue56,479 31,413 106,760 57,663 
Total leasing and services revenue243,988 132,662 472,491 256,174 
Sale of new units11,624 5,236 26,528 12,664 
Sale of rental units10,513 2,435 22,114 6,246 
Total revenues$266,125 $140,333 $521,133 $275,084 
Income from discontinued operations, net(a) Includes $4.1 million and $2.6 million of tax,VAPS service revenue for the three months ended June 2019 and 2018, respectively, and $7.9 million and $4.9 million of VAPS service revenue for the six months ended June 30, 2019 and 2018, respectively.
(b) Primarily damage billings, delinquent payment charges, and other processing fees.
Receivables, Contract Assets and Liabilities
As reflected above, approximately 69% of the Company's rental revenue is accounted for under ASC 840 for both the three and six months ended June 30, 2017 was as follows: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 840, the discussions below on credit risk and the Company's allowance for doubtful accounts address the Company's total revenues.
(in thousands)Three Months Ended
June 30, 2017		 Six Months Ended
June 30, 2017
Remote accommodations revenue$31,487
 $58,565
Remote accommodations costs of leasing and services13,163
 24,738
Depreciation of rental equipment6,119
 12,542
Gross profit12,205
 21,285
Selling, general and administrative expenses3,499
 6,531
Other depreciation and amortization1,257
 2,508
Restructuring costs380
 770
Other income, net(37) (40)
Operating profit7,106
 11,516
Interest expense739
 1,420
Income from discontinued operations, before income tax6,367
 10,096
Income tax expense2,527
 4,051
Income from discontinued operations, net of tax$3,840
 $6,045
Revenues and costs relatedConcentration of credit risk with respect to the Remote Accommodations BusinessCompany's receivables is limited because of a large number of geographically diverse customers who operate in a variety of end user markets. The Company's top five customers with the largest open receivables balances represented 2.6% of the total receivables balance as of June 30, 2019. The Company manages credit risk through credit approvals, credit limits, and other monitoring procedures.
The Company's allowance for doubtful accounts reflects its estimate of the amount of receivables that it will be unable to collect based on specific customer risk and historical write-off experience. The Company's estimates reflect changing circumstances, including changes in the economy or in the particular circumstances of individual customers. Accordingly, the Company may be required to increase or decrease its allowance. During the three and six months ended June 30, 2017 were as follows:2019, the Company recognized bad debt expenses of $3.4 million and $6.3 million, respectively, within SG&A in its condensed consolidated statements of income, which included amounts written-off and changes in its allowances for doubtful accounts. During the three and six months ended June 30, 2018, the Company recognized bad debt expenses of $0.7 million and $2.3 million, respectively.
(in thousands)Three Months Ended
June 30, 2017		 Six Months Ended
June 30, 2017
Remote accommodations revenue:   
Lease revenue$14,613
 $28,577
Service revenue16,874
 29,988
Total remote accommodations revenue$31,487
 $58,565
    
Remote accommodation costs:   
Cost of leases$2,023
 $4,200
Cost of services11,140
 20,538
Total remote accommodations costs$13,163
 $24,738
Cash flows fromWhen customers are billed in advance, the Company’s discontinued operationsCompany defers recognition of revenue and reflects unearned revenue at the end of the period. As of January 1, 2019, the Company had approximately $32.1 million of deferred revenue that relates to removal services for lease transactions and advance billings for sale transactions, which are within the scope of ASC 606. As of June 30, 2019, the Company had approximately $44.9 million of deferred revenue relating to these services. These items are included in deferred revenue and customer deposits in the condensed consolidated statements of cash flows. The significant cash flow items from discontinued operations forbalance sheets. During the six months ended June 30, 2017 were2019, $7.2 million of previously deferred revenue relating to removal services for lease transactions and advance billings for sale transactions was recognized as follows:revenue.
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
14


(in thousands)June 30, 2017
Depreciation and amortization$15,050
Capital expenditures$4,213
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 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 expense commissions as incurred.
Other Matters
The Company's ASC 606 revenues do not include material amounts of variable consideration, other than the variability noted for services arrangements expected to be performed beyond a twelve 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 from customers, which are subsequently remitted to governmental authorities.
The most significant estimates and judgments relating to ASC 606 revenues involve the estimation of relative stand-alone selling prices for the purpose of allocating consideration to the performance obligations in the Company's lease transactions.

NOTE 4 - Inventories
Inventories at the respective balance sheet dates consisted of the following:
(in thousands) June 30, 2019December 31, 2018
Raw materials and consumables $15,215 $16,022 
Work in process — 196 
Total inventories $15,215 $16,218 

NOTE 45 - Rental Equipment, net
Rental equipment, net, at the respective balance sheet dates consisted of the following:
(in thousands)June 30, 2019 December 31, 2018
Modular units and portable storage $2,410,291 $2,333,776 
Value added products 107,940 90,526 
Total rental equipment 2,518,231 2,424,302 
Less: accumulated depreciation (564,374)(495,012)
Rental equipment, net $1,953,857 $1,929,290 
(in thousands)June 30, 2018 December 31, 2017
Modular units and portable storage$1,445,769
 $1,385,901
Value added products and services66,834
 59,566
Total rental equipment1,512,603
 1,445,467
Less: accumulated depreciation(437,563) (405,321)
Rental equipment, net$1,075,040
 $1,040,146
During the three and six months ended June 30, 2018, the Company receivedreceived $1.8 million and $9.3 million, respectively, in insurance proceeds related to assets damaged during Hurricane Harvey. The insurance proceeds exceeded the book value of damaged assets, and the Company recorded gains of $1.8 million and $4.8 million which are reflected in other (income) expense,income, net, on the condensed consolidated statements of operations for the three and six months ended June 30, 2018, respectively. The Company received an additional $1.1 million in insurance proceeds during the three months ended June 30, 2019, which represented the final settlement related to the Hurricane Harvey insurance claim. As the claim was closed during the three months ended June 30, 2019, the Company recognized a final gain of $1.9 million in other income, net.

15


NOTE 56 - Goodwill
Changes in the carrying amount of goodwill were as follows:
(in thousands)Modular – US
Modular – Other
North America
Total
Balance at January 1, 2018 $28,609 $— $28,609 
Acquisition of a business 183,711 35,128 218,839 
Changes to preliminary purchase price accounting 944 — 944 
Foreign currency translation — (1,375)(1,375)
Balance at December 31, 2018 213,264 33,753 247,017 
Changes to preliminary purchase price accounting (2,306)(241)(2,547)
Foreign currency translation — 1,358 1,358 
Balance at June 30, 2019 $210,958 $34,870 $245,828 
(in thousands)Modular – US Modular – Other
North America		 Total
Balance at January 1, 2017$—
 $56,811
 $56,811
Acquisition of a business28,609
 —
 28,609
Effects of movements in foreign exchange rates—
 3,932
 3,932
Impairment losses—
 (60,743) (60,743)
Balance at December 31, 201728,609
 —
 28,609
Acquisition of a business3,406
 —
 3,406
Changes to preliminary purchase price allocations1,555
 —
 1,555
Balance at June 30, 2018$33,570
 $—
 $33,570
As discussed in further detaildescribed in Note 2, the Company acquired ActonModSpace in December 2017. A preliminary valuation of the acquired net assets of Acton resulted in the recognition of $28.6 million of goodwill to the Modular - US segment, as defined in Note 13, for the year ended December 31, 2017. During the three and six months ended June 30, 2018, respectively, the Company made a $1.0 million and $2.0 million adjustment to the preliminary valuation of the acquired net assets of Acton including the related goodwill, due to further evaluation of unindemnified liabilities.
Additionally, as discussed in further detail in Note 2, the Company acquired Tyson in JanuaryAugust 2018. A preliminary valuation of the acquired net assets of TysonModSpace, as adjusted, resulted in the recognition of $3.4$178.3 million and $34.9 million of goodwill in the Modular - US segment which theand Modular - Other North America segments, as defined in Note 16. The Company expects will be deductible for tax purposes. Duringto finalize the three and six months ended June 30, 2018, the Company made a $0.4 million adjustment to the preliminary valuation of the acquired net assets of Tyson,ModSpace within the one year measurement period from the date of acquisition.
Impairment Indicator Analysis
The Company had no goodwill impairment during the six months ended June 30, 2019. There were no indicators of impairment as of June 30, 2019. There were indicators of impairment as of December 31, 2018, as detailed below.
In December 2018, there was a significant decline in the debt and equity capital markets, including the relatedCompany’s stock price, which constituted an indicator of potential impairment in management's judgment. As a result, the Company performed an interim goodwill dueimpairment test as of December 31, 2018. The interim impairment analysis determined that there was no impairment of goodwill for either the US or Canadian reporting units as of December 31, 2018. As of December 31, 2018, the US reporting unit continued to further evaluationhave a fair value in excess of rental equipment and property, plant and equipment, and unindemnified liabilities.

NOTE 6 - Debt
The carrying value of debt outstandingover 100%. The Canadian reporting unit was determined to have a fair value in excess of carrying value of less than 1% as of December 31, 2018.
The fair value of the reporting units at December 31, 2018 was determined based on the income approach, which requires management to make certain estimates and judgments for estimates of economic and market information in the discounted cash flow analyses.
There are inherent uncertainties and judgments involved when determining the fair value of the reporting units because the success of the reporting unit depends on the achievement of key assumptions developed by management including, but not limited to (i) achieving revenue growth through pricing, increased units on rent, increased penetration of value-added products and services, and other commercial strategies, (ii) efficient management of the Company's operations and the Company's fleet through maintenance and capital investment, and (iii) achieving margin expectations, including integration synergies with acquired companies.
In addition, some of the estimates and assumptions used in determining fair value of the reporting units utilize inputs that are outside the control of management and are dependent on market and economic conditions, such as the discount rate, foreign currency rates, and growth rates. These assumptions are inherently uncertain and deterioration of market and economic conditions would adversely impact the Company's ability to meet its projected results and would affect the fair value of the reporting units.
Of the key assumptions that impact the goodwill impairment test, the expected future cash flows, discount rate and foreign exchange rates are among the most sensitive and are considered to be critical assumptions. If any one of the above inputs changes, it could reduce or increase the estimated fair value of the affected reporting unit. A reduction in the fair value of a reporting unit could result in an impairment charge up to the full amount of goodwill reported.
Although the Company believes that it has sufficient historical and projected information available to test for goodwill impairment, it is possible that actual results could differ from the estimates used in its impairment tests. As a result, the Company continues to monitor actual results versus forecast results and internal and external factors that may impact the enterprise value of the reporting unit.


16


NOTE 7 - Intangibles
Intangible assets at the respective balance sheet dates consisted of the following:
June 30, 2019
(in thousands)Weighted average remaining life (in years)Gross carrying amountAccumulated amortizationNet book value
Intangible assets subject to amortization:
Favorable lease rights3.4$1,738 $(407)$1,331 
ModSpace trade name2.23,000 (875)2,125 
Total intangible assets subject to amortization4,738 (1,282)3,456 
Indefinite-lived intangible assets:
Trade name125,000 — 125,000 
Total intangible assets other than goodwill$129,738 $(1,282)$128,456 
(in thousands, except rates)Interest rate Year of maturity June 30, 2018 December 31, 2017
Senior secured notes7.875% 2022 $291,456
 $290,687
US ABL FacilityVaries 2022 356,759
 297,323
Canadian ABL Facility (a)Varies 2022 —
 —
Capital lease and other financing obligations    38,309
 38,736
Total debt    686,524
 626,746
Less: current portion of long-term debt    (1,883) (1,881)
Total long-term debt    $684,641
 $624,865
(a)At June 30, 2018, the Company had no outstanding borrowings on the Canadian ABL Facility and $1.5 million of related debt issuance costs. As there were no principal borrowings outstanding on the Canadian ABL Facility as of December 31, 2017, $1.8 million of debt issuance costs related to that facility are included in other non-current assets on the condensed consolidated balance sheet.
ABL Facilities
Former Algeco Group Revolver
December 31, 2018
(in thousands)Weighted average remaining life (in years)Gross carrying amountAccumulated amortizationNet book value
Intangible assets subject to amortization:
Favorable lease rights6.7$4,523 $(347)$4,176 
ModSpace trade name2.73,000 (375)2,625 
Total intangible assets subject to amortization7,523 (722)6,801 
Indefinite-lived intangible assets:
Trade name125,000 — 125,000 
Total intangible assets other than goodwill$132,523 $(722)$131,801 
Prior to the Business Combination, WSII depended on the Algeco Group for financing, which centrally managed all treasury and cash management. In October 2012, the Algeco Group entered into a multi-currency asset-based revolving credit facility (the “Algeco Group Revolver”), which had a maximum aggregate availability of the equivalent of $1.355 billion. The maximum borrowing availability to WSII in US dollars and Canadian dollars (“CAD”) was $760.0Company preliminarily assigned $3.0 million and $175.0$4.0 million respectively.
Interest expense of $8.3 million and $14.5 million millionto definite-lived intangible assets, related to the Algeco Group RevolverModSpace trade name and favorable lease rights, respectively. 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 segments, as defined in Note 16, respectively. The ModSpace trade name has an estimated useful life of three years and the favorable lease assets are amortized over the life of the leases. The Company expects the intangibles to be non-deductible for income tax purposes.
The aggregate amortization expense for intangible assets subject to amortization was included in interest expense$0.3 million and $0.8 million for the three and six months ended June 30, 2017.2019, respectively. For the three months ended June 30, 2019, $0.3 million was recorded in other depreciation and amortization expense. For the six months ended June 30, 2019, $0.5 million was recorded in other depreciation and amortization expense and $0.3 million related to the favorable lease rights was recorded in SG&A, respectively. The aggregate amortization expense for intangible assets subject to amortization was $0.2 million and $0.4 million for the three and six months ended June 30, 2018, which was recorded in other depreciation and amortization expense.
The Company recognized an impairment charge of $2.4 million in impairment losses on long-lived assets during the three months ended June 30, 2019 as a result of the closure of a branch location with a favorable lease asset which was acquired in the ModSpace acquisition.
17


NOTE 8 - Debt
The carrying value of debt outstanding at the respective balance sheet dates consisted of the following:
(in thousands, except rates)Interest rateYear of maturityJune 30, 2019 December 31, 2018 
2022 Secured Notes 7.875%  2022 $293,097 $292,258 
2023 Secured Notes 6.875%  2023 481,864 293,918 
Unsecured Notes 10.000%  2023 — 198,931 
US ABL Facility Varies 2022 898,081 853,409 
Canadian ABL Facility (a) Varies 2022 — — 
Capital lease and other financing obligations 38,507 37,983 
Total debt 1,711,549 1,676,499 
Less: current portion of long-term debt (2,026)(1,959)
Total long-term debt $1,709,523 $1,674,540 
(a) As of June 30, 2019, the Company had $1.0 million outstanding principal borrowings remaining on the Canadian ABL Facility and $2.5 million of related debt issuance costs. $1.0 million of the related debt issuance costs are recorded as a direct offset against the principal of the Canadian ABL Facility and the remaining $1.5 million, in excess of principal, has been included in other non-current assets on the condensed consolidated balance sheet. As of December 31, 2018, 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.
The Company is subject to various covenants and restrictions for the ABL Facility, the 2022 Secured Notes and the 2023 Secured Notes, as defined below. The Company redeemed the Unsecured Notes on June 19, 2019 and has no remaining obligations related to the Unsecured Notes as of June 30, 2019. The Company was in compliance with all covenants related to debt as of June 30, 2019 and December 31, 2018, respectively.
ABL Facility
On November 29, 2017, WS Holdings, WSII and certain of its subsidiaries entered into an ABL credit agreement (the “ABL Facility”), as amended in July and August 2018, that provides a senior secured revolving credit facility in the aggregate principal amount of up to $600.0 million. The ABL Facility, whichthat matures on May 29, 2022,2022.
The ABL Facility consists of (i) a $530.0 million$1.285 billion asset-backed revolving credit facility (the “US ABL Facility”) for WSII and certain of its domestic subsidiaries (the “US Borrowers”), (ii) a $70.0$140.0 million asset-based revolving credit facility (the “Canadian ABL Facility”) for Williams Scotsmancertain Canadian subsidiaries of Canada, Inc.WSII (the “Canadian Borrower,Borrowers,” and together with the US Borrowers, the “Borrowers”), and (iii) an accordion feature that permits the Borrowers to increase the lenders’ commitments in an aggregate amount not to exceed $300.0$375.0 million, subject to the satisfaction of customary conditions and lender approval, plus any voluntary prepayments that are accompanied by permanent commitment reductions under the ABL Facility.
Borrowings underThe obligations of the ABL Facility, atUS 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 Borrower’s option, bear interest at an adjusted LIBOR"US Guarantors"). The obligations of the Canadian Borrowers are unconditionally guaranteed by the US Borrowers and the US Guarantors, and each existing and subsequently acquired or base rate, in each case plus an applicable margin. The applicable margin is fixed at 2.50% for LIBOR borrowings and 1.50% for base rate borrowings up until March 31, 2018. Commencing on March 31, 2018,organized direct or indirect wholly-owned Canadian organized restricted subsidiary of WS Holdings other than certain excluded subsidiaries (together with the applicable margins are subject to one step-down of 0.25% or one step-up of 0.25%, based on excess availability levels with respect toUS Guarantors, the ABL Facility. The ABL Facility requires the payment of an annual commitment fee on the unused available borrowings of between 0.375% and 0.5% per annum. "ABL Guarantors").
At June 30, 2018,2019, the weighted average interest rate for borrowings under the ABL Facility was 4.58%4.90%.
Borrowing availability under The weighted average interest rate on the US ABL Facility andbalance outstanding, as adjusted for the Canadian ABL Facility is equal to the lesser of (i) with respect to US Borrowers, $530.0 million and the US Borrowing Base (defined below) (the “US Line Cap”), and (ii) with respect to the Canadian Borrower, $70.0 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 (net of reserves) equal to the sum of:
85%effects of the net book value of the US Borrowers’ eligible accounts receivable, plusinterest rate swap agreements was 5.18%. Refer to Note 14 for a more detailed discussion on interest rate management.
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 (net of reserves) equal to the sum of:
85% of the net book value of the Canadian Borrowers’ eligible accounts receivable, plus
the lesser of (i) 95% of the net book value of the Canadian Borrowers’ eligible rental equipment and (ii) 85% of the net orderly liquidation value of the Canadian Borrowers’ eligible rental equipment, plus
portions of the US Borrowing Base that have been allocated to the Canadian Borrowing Base, minus
customary reserves.
At June 30, 2018, the Line Cap was $600.0 million and2019, the Borrowers had $219.6$486.9 million of available borrowing capacity under the ABL Facility, including $153.1$352.5 million under the US ABL Facility and $66.5$134.4 million under the Canadian ABL Facility. At December 31, 2017, the Line Cap was $600.0 million and2018, the Borrowers had $281.1$532.6 million of available borrowing capacity under the ABL Facility, including $211.1$393.5 million under the US ABL Facility and $70.0$139.1 million under the Canadian ABL Facility.

Borrowing capacity under the US ABL Facility is made available for up to $60.0 million of standby letters of credit and up to $50.0 million of swingline loans, and borrowing capacity under the Canadian ABL Facility is made available for up to $30.0 million of standby letters of credit, and $25.0 million of swingline loans. Letters of credit and bank guarantees carried fees of 2.625% at June 30, 2018 and December 31, 2017, respectively. The Company had issued $8.9$13.0 million ofof standby letters of credit under the ABL Facility at June 30, 20182019 and December 31, 2017.
The ABL Facility requires the Borrowers to maintain a (i) minimum fixed charge coverage ratio of 1.00:1.00 and (ii) maximum total net leverage ratio of 5.50:1.00, in each case, at any time when the excess availability under the ABL Facility is less than the greater of (a) $50.0 million and (b) an amount equal to 10% of the Line Cap.
The ABL Facility also contains a number of customary negative covenants. Such covenants, among other things, may limit or restrict the ability of each of the Borrowers, their restricted subsidiaries, and where applicable, WS Holdings, to: incur additional indebtedness, issue disqualified stock and make guarantees; incur liens; engage in mergers or consolidations or fundamental changes; sell assets; pay dividends and repurchase capital stock; make investments, loans and advances, including acquisitions; amend organizational documents and master lease documents; enter into certain agreements that would restrict the ability to pay dividends or incur liens on assets; repay certain junior indebtedness; enter into sale and leaseback transactions; and change the conduct of its business.
The aforementioned restrictions are subject to certain exceptions including (i) the ability to incur additional indebtedness, liens, investments, dividends, and prepayments of junior indebtedness subject, in each case, to compliance with certain financial metrics and certain other conditions and (ii) a number of other traditional exceptions that grant the Borrowers continued flexibility to operate and develop their businesses. The ABL Facility also contains customary representations and warranties, affirmative covenants and events of default. The Company is in compliance with these covenants and restrictions as of2018. At June 30, 2018.2019, letters of credit and guarantees carried fees of 2.625%.
The Company had $368.0$920.5 million and $310.0$879.4 million in outstanding principal under the ABL Facility at June 30, 20182019 and December 31, 2017,2018, respectively.
Debt issuance costs and discounts of $11.2$22.4 million and $12.7$26.0 million are included in the carrying value of debtthe ABL Facility at June 30, 20182019 and December 31, 2017,2018, respectively.
2022 Senior Secured Notes
In July 2018, the Company and certain of its subsidiaries entered into amendments to the ABL Facility that will, among other things, (i) permit the ModSpace Acquisition (as defined in Note 16) and the financing thereof, (ii) increase the ABL Facility limit to $1.35 billion in the aggregate, and (iii) increase certain thresholds, basket sizes and default and notice triggers set forth in the ABL Facility to account for the increased size of the Company’s business following the ModSpace Acquisition. The amendments will become effective uponconnection with the closing of the ModSpace Acquisition. See Note 16 for additional information on the amendments.
Senior Secured Notes
Business Combination, WSII hasissued $300.0 million aggregate principal amount of 7.875% senior secured notes due December 15, 2022 (the “Notes”“2022 Secured Notes”) under an indenture dated November 29, 2017, which was entered into by and among WSII, the guarantors named therein (the "Note Guarantors"), and Deutsche Bank Trust
18


Company Americas, as trustee and as collateral agent. Interest is payable semi-annually on June 15 and December 15, beginning June 15, 2018. For
Unamortized debt issuance costs pertaining to the three2022 Secured Notes was $6.9 million and $7.7 million as of June 30, 2019 and December 31, 2018, respectively.
2023 Senior Secured Notes
On August 6, 2018, a special purpose subsidiary of WSII (the "Issuer") completed a private offering of $300.0 million in aggregate principal amount of its 6.875% senior secured notes due 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, which governs the terms 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. Interest is payable semi-annually on February 15 and August 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 amount to the Initial 2023 Secured Notes (the "Tack-on Notes"). The Tack-on Notes were issued as additional securities under an indenture, dated August 6, 2018, by and among the Issuer, the guarantors named therein and Deutsche Bank Trust Company Americas, as trustee and collateral agent. The Tack-On Notes and the Initial 2023 Secured Notes are treated as a single class of debt securities under the indenture (the "2023 Secured Notes") and together with the 2022 Secured Notes, the "Senior Secured Notes"). 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 $3.1 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.
Unamortized debt issuance costs and discounts, net of premium, pertaining to the 2023 Secured Notes were $8.1 million and $6.1 million as of June 30, 2019 and December 31, 2018, respectively.
2023 Senior Unsecured Notes
On August 3, 2018, a special purpose subsidiary of WSII completed a private offering of $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 governs 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.
The Unsecured Notes bore interest at a rate of 10% per annum for the six months ended June 30, 2018,2019. Interest was payable semi-annually on February 15 and August 15 of each year, beginning February 15, 2019.
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 Company incurred $5.9 million and $11.7 million, respectively, of interest expense related to the Notes.
Before December 15, 2019, WSII may redeem theUnsecured Notes at a redemption price equal to 100% of the principal amount,102.0%, plus a customary make wholemake-whole premium for the Notes being redeemed, plus accruedof 1.126% and unpaid interest, if any to but not including the redemption date.
The customary make whole premium, with respect to any Note on any applicable redemption date, as calculated by the Company, is the greater of (i) 100% of the then outstanding principal amount of the Note; and (ii) the excess of (a) the present value at such redemption date of (i) the redemption price set on or after December 15, 2019 plus (ii) all required interest payments due on the Note through December 15, 2019, excluding accrued but unpaid interest to the redemption date, in each case, computed using a discount rate equal to the Treasury Rate as of such redemption date plus 50 basis points; over (b) the then outstanding principal amount of the Note.
Before December 15, 2019, WSII may redeem up to 40% of the aggregate principal amount of the Notes at a price equal to 107.875% of the principal amount of the 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 November 29, 2019, WSII may also redeem up to 10% of the aggregate principal amount of the Notes at a redemption price equal to 103% of the principal amount of the Notes being redeemed during each twelve-month period commencing with the closing date, plus accrued and unpaid interest, if any, to but not including the redemption date. If WSII undergoes a change of control or sells certain of its assets, WSII may be required to offer to repurchase the Notes.
On or after December 15, 2019, WSII, at its option, may redeem the 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 (subjectRedemption 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 rightwrite-off of Note holders on the relevant record date to receive interest due on an interest payment date falling on or prior to the redemption date), if redeemed during the twelve month period beginning on December 15 of each of the years set forth below:

YearRedemption Price
2019103.938%
2020101.969%
2021 and thereafter100.000%
The Notes contain certain negative covenants, including limitations that may restrict WSII’s ability and the ability of certain of its subsidiaries, to directly or indirectly, create additional financial obligations. With certain specified exceptions, these negative covenants prohibit WSII and certain of its subsidiaries from: creating or incurring additional debt; paying dividends or making any other distributions with respect to its capital stock; making loans or advances to WSC or any restricted subsidiary of WSII; selling, leasing or transferring any of its property or assets to WSC or any restricted subsidiary of WSII; directly or indirectly creating, incurring or assuming any lien of any kind securing debt on the collateral; or entering into any sale and leaseback transaction.
The aforementioned restrictions are subject to certain exceptions including (i) the ability to incur additional indebtedness, liens, investments, dividends and distributions, and prepayments of junior indebtedness subject, in each case, to compliance with certain financial metrics and certain other conditions and (ii) a number of other traditional exceptions that grant the US Borrowers continued flexibility to operate and develop their businesses. The Company is in compliance with these covenants and restrictions as of June 30, 2018 and December 31, 2017.unamortized deferred financing fees.
Unamortized debt issuance costs and discounts pertaining to the Unsecured Notes was $8.5 million and $9.3were $1.1 million as of June 30, 2018 and December 31, 2017, respectively.2018.
Capital Lease and Other Financing Obligations
The Company’s capital lease and financing obligations primarily consisted of $38.1$38.5 million and $38.5$37.9 million under sale-leaseback transactions and $0.2$0.0 million and $0.2$0.1 million of capital leases at June 30, 20182019 and December 31, 2017,2018, respectively. The Company’s capital lease and financing obligations are presented net of $1.7$1.4 million and $1.8$1.6 million of debt issuance costs at June 30, 20182019 and December 31, 2017,2018, respectively. The Company’s capital leases primarily relate to real estate, equipment and vehicles and have interest rates ranging fromfrom 1.2% to 11.9%.
The
NOTE 9 – Equity
Common Stock and Warrants
Common Stock
In connection with the stock compensation vesting described in Note 13, the Company has entered into several arrangements in which it has sold branch locations and simultaneously leasedissued 190,129 shares of common stock during the associated properties back from the various purchasers. Due to the terms of the lease agreements, these transactions are treated as financing arrangements. These transactions contain non-recourse financing which is a form of continuing involvement and precludes the use of sale-lease back accounting. The terms of the financing arrangements range from approximately eighteen months to ten years. The interest rates implicit in these financing arrangements is approximately 8.0%.
Notes Due To and From Affiliates
Prior to the Business Combination, the Algeco Group distributed borrowings from its third party notes to entities within the Algeco Group, including WSII, through intercompany loans. WSII previously recorded these intercompany loans as notes due to affiliates with maturity dates of June 30, 2018 and October 15, 2019.
Interest expense of $16.6 million and $31.3 million associated with these notes due to affiliates is reflected in interest expense in the consolidated statement of operations for the three and six months ended June 30, 2017, respectively. Interest on2019.
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 notes due to affiliates was payable on a semi-annual basis.Public Warrants, the "2015 Warrants").
Conversely, WSII also distributed borrowings to other entities within the Algeco Group through intercompany loans, and earned interest income on the principal. For the three and six months ended At June 30, 2017,2019, 24,367,867 of the Company recognized $3.5 million2015 Warrants and $6.1 million, respectively,9,999,579 of interest income related to the loans.2018 Warrants were outstanding.
In conjunction with the Business Combination, all notes due to and from affiliates were settled, and there is no related interest expense or interest income related to the notes due to or from affiliates for the three and six months ended June 30, 2018.


NOTE 7 – Equity
19


Accumulated Other Comprehensive Loss
The changes in accumulated other comprehensive loss ("AOCL"), net of tax, for the three andsix months ended June 30, 20182019 and 20172018 were as follows:
(in thousands)Foreign Currency TranslationUnrealized losses on hedging activitiesTotal
Balance at December 31, 2018 $(62,608)$(5,418)$(68,026)
Total other comprehensive income (loss) prior to reclassifications4,115 (2,636)1,479 
Reclassifications to the statements of operations— 435 435 
Less other comprehensive (income) loss attributable to non-controlling interest(364)198 (166)
Balance at March 31, 2019 (58,857)(7,421)(66,278)
Total other comprehensive income (loss) prior to reclassifications4,300 (4,500)(200)
Reclassifications to the statements of operations— 613 613 
Less other comprehensive (income) loss attributable to non-controlling interest(396)351 (45)
Reclassifications to accumulated deficit— — — 
Balance at June 30, 2019 $(54,953)$(10,957)$(65,910)
(in thousands) Foreign Currency Translation Adjustment Total
Balance at December 31, 2017 $(49,497) $(49,497)
Total other comprehensive loss (2,380) (2,380)
Reclassifications to accumulated deficit(a)
 (2,540) (2,540)
Balance at June 30, 2018 $(54,417) $(54,417)

(in thousands)Foreign Currency TranslationUnrealized losses on hedging activitiesTotal
Balance at December 31, 2017 $(49,497)$— $(49,497)
Total other comprehensive income prior to reclassifications 263 — 263 
Reclassifications to accumulated deficit(a)
(2,540)— (2,540)
Less other comprehensive income attributable to non-controlling interest(24)— (24)
Balance at March 31, 2018 (51,798)— (51,798)
Total other comprehensive loss prior to reclassifications (2,912)— (2,912)
Less other comprehensive loss attributable to non-controlling interest293 — 293 
Balance at June 30, 2018 $(54,417)$— $(54,417)
(in thousands) Foreign Currency Translation Adjustment Total
Balance at December 31, 2016 $(56,928) $(56,928)
Total other comprehensive loss 5,783
 5,783
Balance at June 30, 2017 $(51,145) $(51,145)
(a) In thethe first quarter of 2018, the Company elected to early adopt ASU 2018-02, Income Statement-Reporting Comprehensive Income (Topic 220) - Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income, which resulted in a discrete reclassification of $2.5 million from accumulated other comprehensive loss to accumulated deficit effective January 1, 2018.
There were no material amountsFor the three and six months ended June 30, 2019, $0.6 million and $1.2 million was reclassified from accumulated other comprehensive lossAOCL into the condensed consolidated statement of operations within interest expense related to the interest rate swaps discussed in Note
20


14. The Company recorded a tax benefit of $0.0 million and into consolidated net income (loss)$0.1 million, for the three and six months ended June 30, 2018 and 2017.2019, respectively, associated with this reclassification.
Non-Controlling Interest
The changes in the non-controlling interest for the three and six months ended June 30, 2019 and 2018 werewere as follows:
(in thousands)20192018
Balance at January 1, $63,982 $48,931 
Net loss attributable to non-controlling interest (860)(648)
Other comprehensive income 166 24 
Balance at March 31, 63,288 $48,307 
Net (loss) income attributable to non-controlling interest (862)143 
Other comprehensive income (loss) 45 (293)
Balance at June 30, $62,471 $48,157 
(in thousands) Total
Balance at December 31, 2017 $48,931
Net loss attributable to non-controlling interest (505)
Other comprehensive loss (269)
Balance at June 30, 2018 $48,157

NOTE 810 – Income Taxes
The Company recorded income tax benefit of approximately$1.2 million and $0.8 million for the three and six months ended June 30, 2019, respectively, and $6.6 million and $7.1 million for the three and six months ended June 30, 2018, respectively, and $5.3 million and $10.1 million for the same periods of 2017.respectively.
The Company’s effective tax rate (“ETR”) for the three months ended June 30, 2018 and 2017 was 106.1% and 24.3%, respectively and 52.3% and 24.8% for the six months ended June 30, 20182019 was 9.1% and 2017, respectively.3.4%, respectively, and 106.1% and 52.3% for the same periods of 2018. The Company did not recognize a tax benefit for loss from operations for the three or six months ended June 30, 2019 as it is not more likely than not that the benefit is realizable. A tax benefit will be recognized only when there is sufficient income to support realizability. The Company’s ETReffective tax rate for the three and six months ended June 30, 2018 is materially driven by discrete items, of which a $4.2 million tax benefit relates to a reduction in our net state deferred tax liability driven by the Maryland apportionment rule that was enacted in the second quarter.items.
The Company’s annual ETR used to determine the tax benefit for the quarter of approximately 19.8% is lower than the US statutory rate of 21.0% due to: (1) mix of earnings between tax paying components, notably forecasted losses in Canada which result in higher tax benefit due to a higher statutory tax rate, (2) reduction to the deferred tax liability established for the book over tax basis difference for our investment in our Canadian subsidiary and offset by (3) a partial valuation allowance due to limitations on the deductibility of interest expense estimated for the current year. Due to the foregoing, changes to our forecast of pre-tax book income and the mix of earnings between tax paying components that may occur due to changes in our business in subsequent periods may have a significant effect on our annual effective tax rate and consequently, tax expense (benefit) recorded in subsequent interim periods.
In addition, the Company also recognized tax benefit of $0.2 million and $0.4 million for the three and six months ended June 30, 2019 and 2018 of $1.2 million and $0.8 million, and $4.4 million and $4.7 million, respectively, mainly related to foreign currency losses. For the three and six months ended June 30, 2017, the Company recognized tax expense of $2.5 million and $3.1 million related to foreign currency gains. The Company also adjusted the provisional amounts

for the impacts of the Tax Act under SAB 118 reported in its financial statements for the year ended December 31, 2017, with an adjustment in the current quarter due to a change in state law for a tax benefit of $0.3 million which is incremental to the $0.3 million benefit recorded in the first quarter. As noted above, the Company recorded a discrete benefit of $4.2 millionenacted legislative changes in the second quarter of 2019 and 2018, to reduce its net state deferred tax liability primarily relateddiscrete to the enactment of an apportionment rule change in Maryland.quarter.

NOTE 911 - 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 cash equivalents, trade receivables, trade payables, capital lease and other financing obligations, and other current liabilities approximate their carrying amounts largely due to the short-term maturities of these instruments.amounts.
The following table shows the carrying amounts and fair values of financial assets and liabilities, including their levels in the fair value hierarchy:
June 30, 2019December 31, 2018
Carrying AmountFair ValueCarrying AmountFair Value
(in thousands)Level 1Level 2Level 3Level 1Level 2Level 3
US ABL Facility $898,081 $— $919,500 $— $853,409 $— $878,500 $— 
Canadian ABL Facility — — 955 — — — 918 — 
2022 Secured Notes 293,097 — 314,205 — 292,258 — 297,027 — 
2023 Secured Notes 481,864 — 509,153 — 293,918 — 288,633 — 
Unsecured Notes — — — — 198,931 — 197,462 — 
Total $1,673,042 $— $1,743,813 $— $1,638,516 $— $1,662,540 $— 
 June 30, 2018December 31, 2017
 Carrying AmountFair ValueCarrying AmountFair Value
(in thousands)Level 1Level 2Level 3Level 1Level 2Level 3
Financial liabilities not measured at fair value        
ABL Facility (see Note 6)$356,759
$—
$368,000
$—
$297,323
$—
$310,000
$—
Notes (see Note 6)291,456
—
312,567
—
290,687
—
310,410
—
Total$648,215
$—
$680,567
$—
$588,010
$—
$620,410
$—
There were no transfers of financial instruments between the three levels of the fair value hierarchy during the three and six months ended June 30, 2018 and 2017. The faircarrying value of the Company’sUS ABL Facility, is primarily based upon observablethe Canadian ABL Facility, the 2022 Secured Notes and the 2023 Secured Notes includes $21.4 million, $1.0 million, $6.9 million and $8.1 million, respectively, of unamortized debt issuance costs as of June 30, 2019, which are presented as a direct reduction of the corresponding liability. The carrying value of the US ABL
21


Facility, the Canadian ABL Facility and the 2022 Secured Notes, the 2023 Secured Notes and the Unsecured Notes includes $25.1 million, $0.9 million, $7.7 million, $6.1 million and $1.1 million, respectively of unamortized debt issuance costs for the year ended December 31, 2018, which are presented as a direct reduction of the corresponding liability.
The carrying value of the US and Canadian ABL Facility, excluding debt issuance costs, approximates fair value as the interest rates are variable and reflective of market data such as market interest rates. The fair value of the Company’s2022 Secured Notes, the 2023 Secured Notes and the Unsecured 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 condensed consolidated balance sheet are disclosed in Note 14.

NOTE 1012 - 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 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 related costs associated with exit or disposal activities including, but not limited to, costs for consolidating or closing facilities. 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.
The Company incurred costs associated with restructuring plans designed to streamline operations and reduce costs of $1.2 million and $7.1 million, net of reversals, during the three and six months ended June 30, 2019, and $0.4 million and $0.7 million and $1.1 million and $1.0 million, net of reversals, during the three and six months ended June 30, 2018, and 2017. respectively.
The following is a summary of the activity in the Company’s restructuring accruals for thethree and six months ended June 30, 20182019 and 2017:2018:
Three Months Ended June 30, 
(in thousands)2019 2018 
Employee Costs Facility Exit Costs Total Employee Costs Facility Exit Costs Total 
Balance at beginning of the period $2,847 $4,252 $7,099 $755 $— $755 
Charges123 1,027 1,150 449 — 449 
Cash payments(1,704)(1,871)(3,575)(234)— (234)
Foreign currency translation(123)— (123)(3)— (3)
Non-cash movements — (1,644)(1,644)— — — 
Balance at end of period $1,143 $1,764 $2,907 $967 $— $967 
Three Months Ended June 30, Six Months Ended June 30,Six Months Ended June 30, 
(in thousands)2018 2017 2018 2017(in thousands)20192018
Employee Costs Facility Exit Costs Total Employee Costs Facility Exit Costs Total 
Balance at beginning of the period$755
 $1,726
 $227
 $1,793
Balance at beginning of the period $4,544 $971 $5,515 $227 $— $227 
Charges during the period449
 684
 1,077
 968
Cash payments during the period(234) (286) (330) (639)
Currency(3) 6
 (7) 8
ChargesCharges1,630 5,473 7,103 1,077 — 1,077 
Cash paymentsCash payments(4,932)(3,015)(7,947)(330)— (330)
Foreign currency translationForeign currency translation(99)— (99)(7)— (7)
Non-cash movements Non-cash movements — (1,665)(1,665)— — — 
Balance at end of period$967
 $2,130
 $967
 $2,130
Balance at end of period $1,143 $1,764 $2,907 $967 $— $967 
The restructuring charges for the three and six months ended June 30, 2019 relate primarily to employee termination costs and lease exit costs in connection with the integration of ModSpace. The Company initiated certain restructuring plans associated with the ModSpace acquisition in order to capture operating synergies as a result of integrating ModSpace into WillScot. The restructuring activities primarily include the termination of leases for duplicative branches and corporate facilities and the termination of employees in connection with the consolidation of these overlapping facilities and functions within our existing business. At June 30, 2019, the Company is substantially complete with actions related to employee costs. The Company is still in the process of evaluating and closing acquired facilities and anticipates that all actions will be taken by the first quarter of 2020.
The restructuring charges for the three and six months ended June 30, 2018 primarily relate primarily to employee termination costs in connection with the integration of Tyson and Acton, which the Company acquired in the fourth quarter of 2017 and Tyson.first quarter of 2018. As part of the 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
22


date of communication of termination to the employee to the actual date of termination. The Company anticipates that the remaining actions contemplated under the $1.0 million accrual as of June 30, 2018, will be substantially completed by the end of the fourth quarter of 2018.

Segments
The $1.2 million of restructuring charges for the three andmonths ended June 30, 2019 includes $1.3 million of charges related to the Modular - US segment, offset by a reversal of $0.1 million related to the Modular - Other North America segment. The $7.1 million of restructuring charges for the six months ended June 30, 2017 related2019 includes $6.6 million of charges pertaining to corporate employee termination costs incurred as partthe Modular - US segment and $0.5 million of charges pertaining to the Algeco Group.
SegmentsModular - Other North America segment.
The $0.4 million and $1.1 million of restructuring charges for the three and six months ended June 30, 2018 all pertaininclude charges pertaining to the Modular - US segment. The $0.7 million and $1.0 million of restructuring charges for the three and six months ended June 30, 2017 all pertain to Corporate and other.


23


NOTE 1113 - Stock-Based Compensation
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 the Company’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, restricted stock awards (“RSAs”), restricted stock units (“RSUs”), performance compensation awards and stock bonus awards. Stock-based payments including the grant of stock options, RSUs, and RSAs 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. During the six months ended June 30, 2018, 27,675 RSAs, 921,7302019, 478,400 time-based restricted stock units ("Time-Based RSUs") and 302,182 market-based restricted stock units ("Market-Based RSUs", and together with the Time-Based RSUs, the "RSUs"), and 589,25752,755 restricted stock awards ("RSAs") were granted under the WillScot Corporation 2017 Incentive Award Plan (the "Plan"). No stock option awards were granted under the Plan, while 35,050 RSUs were forfeited during the three and six months ended June 30, 2018.
Stock-based payments to employees include grants of stock options and RSUs, which are recognized in the financial statements based on their fair value.
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 our common stock on the grant date. RSAs vest over a one-year period and RSUs vest over a four-year period.
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 is based on peer group volatility as the Company does not have a sufficient trading history as a stand-alone public company. 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. The Company has never declared or paid a cash dividend on common shares.
As of June 30, 2018, none of the granted RSAs, RSUs or stock options had vested.
Restricted Stock Awards
The following table summarizes the Company’s RSA activity forDuring the six months ended June 30, 2018:2019, 33,592 RSAs, 213,180 Time-Based RSUs, and 147,313 stock options vested in accordance with their terms, resulting in the issuance of 190,129 shares of common stock, net of 56,643 shares withheld to cover taxes. No RSAs were forfeited during the six months ended June 30, 2019. During the six months ended June 30, 2019, 34,191 Time-Based RSUs, 7,485 Market-Based RSUs, and 41,302 stock options were forfeited.
At June 30, 2019, 91,216 RSAs, 1,083,762 Time-Based RSUs, 294,697 Market-Based RSUs, and 400,642 stock options were unvested, with weighted average grant date fair values of $15.58, $12.77, $13.22, and $5.51, respectively.
 Number of Shares Weighted-Average Grant Date Fair Value
Balance, December 31, 2017—
 $—
Granted27,675
 13.60
Forfeited—
 —
Balance, June 30, 201827,675
 $13.60
Restricted Stock Awards
Compensation expense for RSAs recognized in SG&A on the condensed consolidated statements of operations was $0.2 million and $0.5 million for the three and six months ended June 30, 2019, respectively, with associated tax benefits of $0.0 million and $0.1 million for the three and six months ended June 30, 2019, respectively.
At June 30, 2019, there was $0.9 million of unrecognized compensation cost related to RSAs that is expected to be recognized over the remaining weighted average vesting period of 0.6 years.
Time-Based Restricted Stock Units
Compensation expense for Time-Based RSUs recognized in SG&A on the condensed consolidated statements of operations was $1.2 million and $1.9 million for the three and six months ended June 30, 2019, respectively, with associated tax benefits of $0.0 million and $0.2 million for the three and six months ended June 30, 2019 respectively.
At June 30, 2019, unrecognized compensation cost related to Time-Based RSUs totaled $12.5 million and is expected to be recognized over the remaining weighted average vesting period of 3.2 years.
Market-Based Restricted Stock Units
On March 21, 2019, the Compensation Committee of the Board of Directors granted 302,182 Market-Based RSUs, which vest based on achievement of the relative total stockholder return ("TSR") of The Company's common stock as compared to the TSR of the constituents of the Russell 3000 Index at grant date over the three-year period performance period. The target number of Market-Based 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 share upon vesting of the Company’s Class A common stock, or its cash equivalent, as determined by the Compensation Committee.
The Market-Based RSUs were valued based on a Monte Carlo simulation model to reflect the impact of the Market-Based RSU market condition, resulting in a grant-date fair value per Market-Based RSU of $13.22. The probability of satisfying a market condition is considered in the estimation of the grant-date fair value for Market-Based RSUs and the compensation cost is not reversed if the market condition is not achieved, provided the requisite service has been provided.
Compensation expense for Market-Based RSUs recognized in SG&A on the condensed consolidated statements of operations was $0.3 million and $0.4 million for the three and six months ended June 30, 2019, respectively, with an associated tax benefit of $0.0 million and $0.1 million for the three and six months ended June 30, 2018,2019, respectively. At June 30, 2018,2019, unrecognized compensation cost related to RSAsMarket-Based RSUs totaled $0.3$3.5 million and is expected to be recognized over the remaining nine-month period.
Restricted Stock Units
The following table summarizes the Company's RSU award activity for the six months ended June 30, 2018:
 Number of Shares Weighted-Average Grant Date Fair Value
Balance, December 31, 2017—
 $—
Granted921,730
 13.60
Forfeited(35,050) 13.60
Balance, June 30, 2018886,680
 $13.60

Compensation expense for RSUs recognized in SG&A on the condensed consolidated statements of operations was $0.6 million and $0.8 million for the three and six months ended June 30, 2018, respectively, with associated tax benefits of $0.2 million and $0.2 million for the three and six months ended June 30, 2018, respectively. At June 30, 2018, unrecognized compensation cost related to RSUs totaled $11.2 million and is expected to be recognized over a remainingvesting period of 3.752.7 years.
Stock Option Awards
The following table summarizes the Company's stock option activity for the six months ended June 30, 2018:
 Number of Options Weighted-Average Exercise Price per Share ($)
Outstanding options, December 31, 2017—
 $—
Granted589,257
 13.60
Exercised—
 —
Forfeited—
 —
Outstanding options, June 30, 2018589,257
 $13.60
Fully vested and exercisable options, end of period—
 $—
Compensation expense for stock option awards, recognized in SG&A on the condensed consolidated statements of operations, was $0.2 million and $0.2$0.4 million for the three and sixsix months ended June 30, 2018,2019, respectively, with an associated tax benefitsbenefit of $0.0 million and $0.1 million for the three and six months ended June 30, 2018,2019, respectively.
At June 30, 2018,2019, unrecognized compensation costcost related to stock option awards totaled $3.0totaled $2.0 million andand is expected to be recognized over athe remaining vesting period of 3.752.7 years.

NOTE 14 - Derivatives
On November 6, 2018, WSII 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. The Swap Agreement contains customary representations, warranties and covenants and may be terminated prior to its expiration.
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. Although no significant ineffectiveness
24


is expected with this hedging strategy, the effectiveness of the interest rate swaps is evaluated on a quarterly basis. The Company did not have any derivative financial instruments for the three and six months ended June 30, 2018.
The following table summarizes the outstanding interest rate swap arrangement as of June 30, 2019:
Aggregate Notional Amount (in millions)Receive RatePay RateReceive Rate as of June 30, 2019Receive Rate as of December 31, 2018
US ABL Facility$400.0 1 month LIBOR3.06 %2.40 %2.44 %

The location and the fair value of derivative instruments designated as hedges, at the respective balance sheet dates, were as follows:
(in thousands)Balance Sheet LocationJune 30, 2019December 31, 2018
Cash Flow Hedges:
Interest rate swapAccrued liabilities$4,080 $1,709 
Interest rate swapOther long-term liabilities$11,772 $6,192 

The fair value of each option award at grant date was estimated using the Black-Scholes option-pricing model withinterest 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 June 30, 2019 and December 31, 2018, respectively, for contracts involving the same attributes and maturity dates.
following assumptions:The interest rate swap, excluding the impact of taxes, resulted in a loss recognized of $5.1 million and $8.0 million in other comprehensive income ("OCI") for the three and six months ended June 30, 2019, respectively. The Company reclassified $0.6 million and $1.2 million from AOCL into interest expense on the condensed consolidated income statement for the three and six months ended June 30, 2019, respectively.
Cash flows from derivative instruments are presented within net cash provided by operating activities in the consolidated statements of cash flows.

 Assumptions
Expected volatility36%
Expected dividend yield—
Risk-free interest rate2.73%
Expected term (in years)6.25
Exercise price$13.60
Weighted-average grant date fair value$5.51
NOTE 1215 - Commitments and Contingencies
The Company is involved in various lawsuits or claims in the ordinary course of business. Management is of the opinion that there is no pending claim or lawsuit which, if adversely determined, would have a material effect on the Company’s financial condition, results of operations or cash flows.
As discussed in more detail in Note 2, the Merger Agreement may be terminated by the Company or ModSpace under certain circumstances. If the ModSpace Acquisition does not close due to the occurrence of certain regulatory events, we may be required to pay to ModSpace a $35.0 million termination fee.
NOTE 1316 - Segment Reporting
TheSubsequent to the Business Combination, the Company historically has operated in twoone principal linesline of business;business: modular leasing and sales and remote accommodations, which were managed separately. The Remote Accommodations Business was considered a single operating segment. As part of the Business Combination, the Remote Accommodations segment is no longer owned by the Company and is reported as discontinued operations in the condensed consolidated financial statements. As such, the segment was excluded from the segment information below.sales.
Modular leasing and sales is comprised of two operating segments: US and Other North America. The US modular operating segment (“Modular - US”) consists of the 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. 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.

The CompanyChief Operating Decision Maker ("CODM") evaluates business segment performance on Adjusted EBITDA, which excludes certain items as shown in the reconciliation of the Company’s consolidated net loss before tax to Adjusted EBITDA below. Management believes that evaluating segment performance excluding such items is meaningful because it provides insight with respect to intrinsic 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.

25


Reportable Segments
The following tables set forth certain information regarding each of the Company’s reportable segments forfor the three and six months ended June 30, 2019 and 2018, and 2017, respectively:respectively.
Three Months Ended June 30, 2019 
(in thousands)Modular - US Modular - Other North America Total 
Revenues:
Leasing and services revenue:
Modular leasing$170,480 $17,029 $187,509 
Modular delivery and installation52,997 3,482 56,479 
Sales revenue:
New units10,407 1,217 11,624 
Rental units4,977 5,536 10,513 
Total Revenues238,861 27,264 266,125 
Costs:
Cost of leasing and services:
Modular leasing51,083 3,990 55,073 
Modular delivery and installation43,949 4,519 48,468 
Cost of sales:
New units7,138 861 7,999 
Rental units2,661 4,060 6,721 
Depreciation of rental equipment39,201 4,767 43,968 
Gross profit$94,829 $9,067 $103,896 
Other selected data:
Adjusted EBITDA$81,380 $7,347 $88,727 
Selling, general and administrative expense$64,153 $7,470 $71,623 
Other depreciation and amortization$2,892 $275 $3,167 
Purchase of rental equipment and refurbishments$58,241 $2,974 $61,215 


26


Three Months Ended June 30, 2018Three Months Ended June 30, 2018 
(in thousands)Modular - US Modular - Other North America Total(in thousands)Modular - US Modular - Other North America Total 
Revenues:     Revenues:
Leasing and services revenue:     Leasing and services revenue:
Modular leasing$90,965
 $10,284
 $101,249
Modular leasing$90,965 $10,284 $101,249 
Modular delivery and installation27,390
 4,023
 31,413
Modular delivery and installation27,390 4,023 31,413 
Sales:     
Sales revenue:Sales revenue:
New units4,149
 1,087
 5,236
New units4,149 1,087 5,236 
Rental units2,309
 126
 2,435
Rental units2,309 126 2,435 
Total Revenues$124,813
 $15,520
 $140,333
Total Revenues124,813 15,520 140,333 
     
Costs:     Costs:
Cost of leasing and services:     Cost of leasing and services:
Modular leasing$24,505
 $2,624
 $27,129
Modular leasing24,505 2,624 27,129 
Modular delivery and installation26,310
 3,817
 30,127
Modular delivery and installation26,310 3,817 30,127 
Cost of sales:     Cost of sales:
New units2,876
 828
 3,704
New units2,876 828 3,704 
Rental units1,164
 99
 1,263
Rental units1,164 99 1,263 
Depreciation of rental equipment20,217
 3,253
 23,470
Depreciation of rental equipment20,217 3,253 23,470 
Gross profit$49,741
 $4,899
 $54,640
Gross profit$49,741 $4,899 $54,640 
Other selected data:Other selected data:
Adjusted EBITDA$38,104
 $3,812
 $41,916
Adjusted EBITDA$38,104 $3,812 $41,916 
Other selected data:     
Selling, general and administrative expense$43,325
 $4,409
 $47,734
Selling, general and administrative expense$43,325 $4,409 $47,734 
Other depreciation and amortization$1,354
 $216
 $1,570
Other depreciation and amortization$1,354 $216 $1,570 
Capital expenditures for rental fleet$30,931
 $1,748
 $32,679
Purchase of rental equipment and refurbishmentsPurchase of rental equipment and refurbishments$30,931 $1,748 $32,679 




27


Three Months Ended June 30, 2017Six Months Ended June 30, 2019 
(in thousands)Modular - US Modular - Other North America Corporate & Other Total(in thousands)Modular - US Modular - Other North America Total 
Revenues:       Revenues:
Leasing and services revenue:       Leasing and services revenue:
Modular leasing$64,854
 $8,242
 $(142) $72,954
Modular leasing$333,280 $32,451 $365,731 
Modular delivery and installation20,970
 1,979
 —
 22,949
Modular delivery and installation99,279 7,481 106,760 
Sales:       
Sales revenue:Sales revenue:
New units8,550
 846
 —
 9,396
New units24,430 2,098 26,528 
Rental units3,835
 943
 —
 4,778
Rental units13,348 8,766 22,114 
Total Revenues$98,209
 $12,010
 $(142) $110,077
Total Revenues470,337 50,796 521,133 
       
Costs:       Costs:
Cost of leasing and services:       Cost of leasing and services:
Modular leasing$19,338
 $2,002
 $—
 $21,340
Modular leasing94,966 7,342 102,308 
Modular delivery and installation20,393
 1,946
 —
 22,339
Modular delivery and installation83,700 8,111 91,811 
Cost of sales:      
Cost of sales:
New units6,072
 696
 (2) 6,766
New units17,388 1,489 18,877 
Rental units1,923
 652
 —
 2,575
Rental units8,530 5,986 14,516 
Depreciation of rental equipment14,529
 2,945
 —
 17,474
Depreciation of rental equipment75,674 9,397 85,071 
Gross profit (loss)$35,954
 $3,769
 $(140) $39,583
Gross profitGross profit$190,079 $18,471 $208,550 
Other selected data:Other selected data:
Adjusted EBITDA$26,329
 $2,506
 $(2,588) $26,247
Adjusted EBITDA$158,148 $15,087 $173,235 
Other selected data:       
Selling, general and administrative expense$24,181
 $4,223
 $3,248
 $31,652
Selling, general and administrative expense$130,558 $14,550 $145,108 
Other depreciation and amortization$1,301
 $244
 $345
 $1,890
Other depreciation and amortization$5,618 $553 $6,171 
Capital expenditures for rental fleet$25,909
 $1,716
 $—
 $27,625
Purchase of rental equipment and refurbishmentsPurchase of rental equipment and refurbishments$108,162 $4,926 $113,088 
28


Six Months Ended June 30, 2018Six Months Ended June 30, 2018 
(in thousands)Modular - US Modular - Other North America Total(in thousands)Modular - USModular - Other North AmericaTotal
Revenues:     Revenues:
Leasing and services revenue:     Leasing and services revenue:
Modular leasing$178,913
 $19,598
 $198,511
Modular leasing$178,913 $19,598 $198,511 
Modular delivery and installation51,360
 6,303
 57,663
Modular delivery and installation51,360 6,303 57,663 
Sales:     
Sales revenue: Sales revenue:
New units10,964
 1,700
 12,664
New units10,964 1,700 12,664 
Rental units5,663
 583
 6,246
Rental units5,663 583 6,246 
Total Revenues$246,900
 $28,184
 $275,084
Total Revenues246,900 28,184 275,084 
     
Costs:     Costs:
Cost of leasing and services:     Cost of leasing and services:
Modular leasing$49,562
 $4,729
 $54,291
Modular leasing49,562 4,729 54,291 
Modular delivery and installation49,250
 6,398
 55,648
Modular delivery and installation49,250 6,398 55,648 
Cost of sales:    —
Cost of sales:
New units7,442
 1,249
 8,691
New units7,442 1,249 8,691 
Rental units3,193
 385
 3,578
Rental units3,193 385 3,578 
Depreciation of rental equipment40,904
 6,411
 47,315
Depreciation of rental equipment 40,904 6,411 47,315 
Gross profit$96,549
 $9,012
 $105,561
Gross profit$96,549 $9,012 $105,561 
Other selected data: Other selected data:
Adjusted EBITDA$70,716
 $6,692
 $77,408
Adjusted EBITDA $70,716 $6,692 $77,408 
Other selected data:     
Selling, general and administrative expense$84,146
 $8,802
 $92,948
Selling, general and administrative expense $84,146 $8,802 $92,948 
Other depreciation and amortization$3,559
 $447
 $4,006
Other depreciation and amortization $3,559 $447 $4,006 
Capital expenditures for rental fleet$61,455
 $3,308
 $64,763
Purchase of rental equipment and refurbishments Purchase of rental equipment and refurbishments $61,455 $3,308 $64,763 

 Six Months Ended June 30, 2017
(in thousands)Modular - US Modular - Other North America Corporate & Other Total
Revenues:       
Leasing and services revenue:       
Modular leasing$126,032
 $16,204
 $(295) $141,941
Modular delivery and installation38,324
 3,629
 —
 41,953
Sales:       
New units12,556
 2,326
 —
 14,882
Rental units8,712
 1,910
 —
 10,622
Total Revenues$185,624
 $24,069
 $(295) $209,398
        
Costs:       
Cost of leasing and services:       
Modular leasing$36,713
 $3,729
 $—
 $40,442
Modular delivery and installation37,067
 3,405
 —
 40,472
Cost of sales:      —
New units8,685
 1,813
 (12) 10,486
Rental units5,036
 1,247
 —
 6,283
Depreciation of rental equipment28,354
 5,840
 —
 34,194
Gross profit (loss)$69,769
 $8,035
 $(283) $77,521
Adjusted EBITDA$50,012
 $5,625
 $(7,444) $48,193
Other selected data:       
Selling, general and administrative expense$48,127
 $8,277
 $8,009
 $64,413
Other depreciation and amortization$2,639
 $491
 $701
 $3,831
Capital expenditures for rental fleet$47,958
 $2,344
 $—
 $50,302

The following tables present a reconciliation of the Company’s loss(loss) income from continuing operations before income tax to Adjusted EBITDA by segment for the three and six months ended June 30, 20182019 and 2017,2018, respectively:
Three Months Ended June 30, 2019 
(in thousands)Modular - USModular - Other North AmericaTotal
(Loss) income from operations before income taxes $(13,976)$1,021 $(12,955)
Loss on extinguishment of debt 7,244 — 7,244 
Interest expense 31,865 659 32,524 
Depreciation and amortization 42,093 5,042 47,135 
Currency gains, net (75)(279)(354)
Goodwill and other impairments 2,706 80 2,786 
Restructuring costs 1,300 (150)1,150 
Integration costs 7,260 982 8,242 
Stock compensation expense 1,900 — 1,900 
Other expense (income) 1,063 (8)1,055 
Adjusted EBITDA $81,380 $7,347 $88,727 

29


Three Months Ended June 30, 2018Three Months Ended June 30, 2018 
(in thousands)Modular - US Modular - Other North America Total(in thousands)Modular - USModular - Other North AmericaTotal
Loss from continuing operations before income taxes$(5,533) $(733) $(6,266)
Interest expense, net11,663
 492
 12,155
Loss from operations before income taxes Loss from operations before income taxes $(5,533)$(733)$(6,266)
Interest expense Interest expense 11,663 492 12,155 
Depreciation and amortization21,571
 3,469
 25,040
Depreciation and amortization 21,571 3,469 25,040 
Currency losses, net114
 458
 572
Currency losses, net 114 458 572 
Restructuring costs449
 —
 449
Restructuring costs 449 — 449 
Integration costs4,785
 —
 4,785
Integration costs 4,785 — 4,785 
Stock compensation expense1,054
 —
 1,054
Stock compensation expense 1,054 — 1,054 
Transaction fees4,049
 69
 4,118
Transaction costs Transaction costs 4,049 69 4,118 
Other (income) expense(48) 57
 9
Other (income) expense (48)57 9 
Adjusted EBITDA$38,104
 $3,812
 $41,916
Adjusted EBITDA $38,104 $3,812 $41,916 


Six Months Ended June 30, 2019 
(in thousands)Modular - USModular - Other North AmericaTotal
(Loss) income from operations before income taxes $(25,098)$1,360 $(23,738)
Loss on extinguishment of debt7,244 — 7,244 
Interest expense 63,101 1,395 64,496 
Depreciation and amortization 81,292 9,950 91,242 
Currency (gains), net (205)(465)(670)
Goodwill and other impairments 4,507 569 5,076 
Restructuring costs 6,574 529 7,103 
Integration costs 16,612 1,768 18,380 
Stock compensation expense 3,190 — 3,190 
Other expense (income) 931 (19)912 
Adjusted EBITDA $158,148 $15,087 $173,235 

Six Months Ended June 30, 2018 
(in thousands)Modular - USModular - Other North AmericaTotal
Loss from operations before income taxes $(10,841)$(2,680)$(13,521)
Interest expense 22,823 1,051 23,874 
Depreciation and amortization 44,463 6,858 51,321 
Currency losses, net 271 1,325 1,596 
Restructuring costs 1,067 10 1,077 
Integration costs 7,415 — 7,415 
Stock compensation expense 1,175 — 1,175 
Transaction costs 4,049 69 4,118 
Other expense 294 59 353 
Adjusted EBITDA $70,716 $6,692 $77,408 


30

 Three Months Ended June 30, 2017
(in thousands)Modular - US Modular - Other North America Corporate & Other Total
Loss from continuing operations before income taxes$320
 $(1,442) $(13,883) $(15,005)
Interest expense, net15,953
 1,038
 9,407
 26,398
Depreciation and amortization15,830
 3,189
 345
 19,364
Currency gains, net(5,800) (294) (403) (6,497)
Restructuring costs—
 —
 684
 684
Transaction fees46
 —
 730
 776
Other expense(20) 15
 532
 527
Adjusted EBITDA$26,329
 $2,506
 $(2,588) $26,247

 Six Months Ended June 30, 2018
(in thousands)Modular - US Modular - Other North America Total
Loss from continuing operations before income taxes$(10,841) $(2,680) $(13,521)
Interest expense, net22,823
 1,051
 23,874
Depreciation and amortization44,463
 6,858
 51,321
Currency losses, net271
 1,325
 1,596
Restructuring costs1,067
 10
 1,077
Integration costs7,415
 —
 7,415
Stock compensation expense1,175
 —
 1,175
Transaction fees4,049
 69
 4,118
Other expense294
 59
 353
Adjusted EBITDA$70,716
 $6,692
 $77,408
 Six Months Ended June 30, 2017
(in thousands)Modular - US Modular - Other North America Corporate & Other Total
Loss from continuing operations before income taxes$(5,210) $(2,458) $(24,590) $(32,258)
Interest expense, net31,512
 2,216
 14,747
 48,475
Depreciation and amortization30,993
 6,331
 701
 38,025
Currency gains, net(7,399) (481) (619) (8,499)
Restructuring costs—
 —
 968
 968
Transaction fees46
 —
 816
 862
Other expense70
 17
 533
 620
Adjusted EBITDA$50,012
 $5,625
 $(7,444) $48,193
NOTE 1417 - Income (Loss)Loss Per Share
Basic income (loss)loss per share (“EPS”LPS”) is calculated by dividing net income (loss)loss attributable to WSCWillScot by the weighted average number of Class A common stock shares outstanding during the period. The common shares issued a result of the vesting of RSUs and RSAs as of June 30, 2019, were included in LPS based on the weighted average number of days in which they were vested and outstanding during the period. Concurrently with the Business Combination,12,425,000Combination, 12,425,000 of WillScot's Class A common shares were placed into escrow by shareholders and were not entitledbecame ineligible to vote or participate in the economic rewards available to the other Class A shareholders. On January 19, 2018, 6,212,500Escrowed shares of WSC Class A common stock were releasedtherefore excluded from the LPS calculation while deposited in the escrow account. The remaining 6,212,500 shares of WSC Class A common stock in escrow are not included in the LPS calculation. In July 2018, certain contingencies were satisfied that under the earnout agreement governing the release of the escrowed shares will result in the release ofwere released to shareholders on January 19, 2018, and the remaining escrowed shares were released to Double Eagle, Harry E. Sloan and Sapphire upon the delivery of release instructions to the escrow agent.

shareholders on August 21, 2018.
Class B common shares have no rights to dividends or distributions made by the Company and, in turn, are excluded from the LPS calculation.
Diluted EPSLPS is computed similarly to basic net income (loss) per share,LPS, except that it includes the potential dilution that could occur if dilutivedilutive securities were exercised. Effects of potentially dilutive securities are presented only in periods in which they are dilutive. Stock options, Time-Based RSUs, and RSAs, representing 400,642, 1,083,762, and 91,216 shares of Class A common stock outstanding for the three and six months ended June 30, 2019, respectively, were excluded from the computation of diluted earnings per share because their effect would have been anti-dilutive. Market-based RSUs representing 294,697 shares of Class A common stock outstanding for the three and six months ended June 30, 2019, which can vest at 0% to 150% of the amount granted, were excluded from the computation of diluted earnings per share because their effect would have been anti-dilutive. Warrants representing 22,183,513 shares of Class A shares for the three and six months ended June 30, 2019, were excluded from the computation of diluted earnings per share because their effect would have been anti-dilutive.
Stock options and restricted stock units, representing 589,257and 886,680 shares of Class A common stock outstanding for the three and six months ended June 30, 2018, were excluded from the computation of diluted earnings per share because their effect would have been anti-dilutive.
The following table is a reconciliationPursuant to the exchange agreement entered into by WS Holding's shareholders, Sapphire has the right, but not the obligation, to exchange all, but not less than all, of net income (loss) and weighted-averageits shares of WS Holdings into newly issued shares of WillScot’s Class A common stock outstanding for purposesin a private placement transaction. The impact of calculating basic andthis exchange has been excluded from the computation of diluted income (loss)earnings per share forbecause the three and six months ended June 30, 2018 and 2017:effect would have been anti-dilutive.
Three Months Ended June 30, Six Months Ended June 30, 
(in thousands, except per share numbers)2019201820192018
Numerator
Net (loss) income$(11,775)$379 $(22,936)$(6,456)
Net (loss) income attributable to non-controlling interest, net of tax(862)143 (1,722)(505)
Net (loss) income attributable to WSC$(10,913)$236 $(21,214)$(5,951)
Denominator
Average shares outstanding - basic108,693,924 78,432,274 108,609,068 77,814,456 
Average effect of dilutive securities:
Warrants— 3,745,030 — — 
Restricted stock awards— 2,782 — — 
Average shares outstanding - diluted108,693,924 82,180,086 108,609,068 77,814,456 
Loss per share
Net loss per share attributable to WillScot common shareholders - basic$(0.10)$0.00 $(0.20)$(0.08)
Net loss per share attributable to WillScot common shareholders - diluted$(0.10)$0.00 $(0.20)$(0.08)

31

 Three Months Ended June 30, Six Months Ended June 30,
(in thousands, except per share numbers)2018 2017 2018 2017
Numerator       
Income (loss) from continuing operations$379
 $(9,736) $(6,456) $(22,120)
Income from discontinued operations, net of tax—
 3,840
 —
 6,045
Net income (loss)379
 (5,896) (6,456) (16,075)
Net income (loss) attributable to non-controlling interest, net of tax143
 —
 (505) —
Total income (loss) attributable to WSC$236
 $(5,896) $(5,951) $(16,075)
        
Denominator       
Average shares outstanding - basic78,432,274
 14,545,833
 77,814,456
 14,545,833
Average effect of dilutive securities:
 


 
Warrants3,745,030
 —
 —
 —
Restricted stock awards2,782
 —
 —
 —
Average shares outstanding - diluted$82,180,086
 $14,545,833
 $77,814,456
 $14,545,833
        
Income (loss) per share - basic       
Continuing operations - basic$0.00
 $(0.67) $(0.08) $(1.53)
Discontinued operations - basic$0.00
 $0.26
 $0.00
 $0.42
Net income (loss) per share - basic$0.00
 $(0.41) $(0.08) $(1.11)
        
Income (loss) per share - diluted       
Continuing operations - basic$0.00
 $(0.67)
$(0.08) $(1.53)
Discontinued operations - basic$0.00
 $0.26

$0.00
 $0.42
Net income (loss) per share - basic$0.00
 $(0.41)
$(0.08) $(1.11)

NOTE 1518 - Related Parties
Related party balances included in the Company’s consolidated balance sheet at June 30, 20182019 and December 31, 2017,2018, consisted of the following:
(in thousands)Financial statement line Item June 30, 2019December 31, 2018
Receivables due from affiliates Prepaid expenses and other current assets $24 $122 
Amounts due to affiliates Accrued liabilities (982)(1,379)
Total related party liabilities, net $(958)$(1,257)
(in thousands)Financial statement line ItemJune 30, 2018 December 31, 2017
Receivables due from affiliatesPrepaid expenses and other current assets$180
 $2,863
Amounts due to affiliatesAccrued liabilities(873) (1,235)
 Total related party liabilities, net$(693) $1,628

On November 29, 2017, in connection with the closing of the Business Combination, the Company, WSII, WS Holdings and the Algeco GlobalGroup entered into a transition services agreement (the “TSA”). The purpose of the TSA is to ensure an orderly transition of WSII’s business and effectuate the Business Combination. 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 and $2.9 million in receivables due from affiliates pertaining to the Transition Services AgreementTSA at June 30, 2018 and December 31, 2017, respectively.2018.
The Company was reimbursed $0.4 million by an affiliate for claims paid under an insurance program.
The Company accrued expenses of $0.5$0.8 million and $1.2 million at June 30, 20182019 and December 31, 2017,2018, respectively, included in amounts due to affiliates, related to rental equipment purchases from an entity withinaffiliate of the Algeco Group.
Related party transactions included in the Company’s consolidated statement of operations for the three and six months ended June 30, 20182019 and 2017,2018, respectively, consisted of the following:
  Three Months Ended June 30, Six Months Ended June 30,
(in thousands)Financial statement line item2018 2017 2018 2017
Leasing revenue from related partiesModular leasing revenue$(233) $—
 $(525) $—
Management fees and recharge income on transactions with affiliatesSelling, general & administrative expenses—
 1,502
 —
 151
Interest income on notes due from affiliatesInterest income—
 (3,509) —
 (6,093)
Interest expense on notes due to affiliatesInterest expense—
 15,990
 —
 30,727
 Total related party (income) expense, net$(233) $13,983
 $(525) $24,785
Three Months Ended June 30, Six Months Ended June 30, 
(in thousands)Financial statement line item 2019201820192018
Leasing revenue from related parties Modular leasing revenue $76 $233 $150 $525 
The Company had capital expenditures of rental equipment purchased from related party affiliates of $0.4$1.7 million and $0.2$0.4 million for three months ended June 30, 20182019 and 2017,2018, respectively, and $1.7$3.2 million and $0.5$1.7 million during the six months ended June 30, 20182019 and 2017,2018, respectively.
The Company paid $0.4$0.0 million and $0.0$0.4 million in professional fees to an entity thatfor which two of the Company’s Directors also served in the same role for that entity, during the three months ended June 30, 20182019 and 2017,2018, respectively, and $1.0$0.6 million and $0.6$1.0 million during the six months ended June 30, 20182019 and 2017,2018, respectively.

NOTE 16 - Subsequent Events
ModSpace Acquisition
As described in Note 2, on June 21, 2018, the Company entered into a definitive agreement to acquire ModSpace, a privately-owned provider of office trailers, portable storage units and modular buildings. Subject to potential adjustment under the Merger Agreement, the aggregate consideration payable by the Company to the sellers includes (i) $1,063,750,000 in cash, (ii) 6,458,500 shares of the Company’s Class A common stock and (iii) warrants to purchase an aggregate of 10,000,000 shares of the Company’s Class A common stock at an exercise price of $15.50 per share.
On July 16, 2018, the Canadian Competition Bureau issued a no-action letter relating to the ModSpace Acquisition. The no-action letter satisfied the Company’s obligation under the Merger Agreement to clear Competition Bureau review under Canada’s Competition Act.
32
The Company expects to close the acquisition in August 2018.
Amended ABL Facility

In July and August 2018, the Company entered into amendments to the ABL Facility that, among other things, (i) permit the ModSpace Acquisition and the Company’s financing thereof (including, without limitation, incremental borrowings under the ABL Facility and the senior unsecured notes described below), (ii) increase the ABL Facility limit to $1.35 billion in the aggregate, and increase the amount of the facility’s accordion feature to $450.0 million, and (iii) increase certain thresholds, basket sizes and default and notice triggers to account for the Company’s increased scale business following the ModSpace Acquisition. The amendments, copies of which is filed as an exhibits to this Form 10-Q, will become effective upon the closing of the ModSpace Acquisition and the satisfaction of other customary closing conditions.

Under the amended ABL Facility, (i) the borrowing limits of the US ABL Facility and the Canadian ABL Facility will be $1,200.0 million and $150.0 million, respectively, (ii) the borrowing capacity for standby letters of credit under the US ABL Facility and the Canadian ABL Facility will be $75.0 million and $60.0 million, respectively, and (iii) the borrowing capacity for swingline loans under the US ABL Facility and the Canadian ABL Facility will be $75.0 million and $50.0 million, respectively. As amended, the US Line Cap will equal the lesser of $1,200.0 million and the US Borrowing Base, and the Canadian Line Cap will equal the lessor of $150.0 million and the Canadian Borrowing Base.
The amended ABL Facility requires the Borrowers to maintain a (i) minimum fixed charge coverage ratio of 1.00:1.00 and (ii) maximum total net leverage ratio of 5.50:1.00, in each case, at any time when the excess availability under the amended ABL Facility is less than the greater of (a) $135.0 million and (b) an amount equal to 10% of the Line Cap.
ModSpace Acquisition Financing
Equity Offering
On July 25, 2018, the Company entered into an underwriting agreement with certain financial institutions under which the Company agreed to sell, and the underwriters agreed to purchase, 8.0 million shares of the Company’s Class A common stock at a public offering price of $16.00 per share. The Company granted to the underwriters an option to purchase up to 1.2 million additional Class A common shares at a public offering price of $16.00 per share less the underwriting discount (which would raise an additional $19.2 million of gross proceeds for the Company).
On July 30, 2018, the Company closed the underwritten public stock offering. The net offering proceeds to the Company were approximately $121.9 million. The Company plans to use the proceeds to fund the ModSpace Acquisition and to pay related fees and expenses or, if the ModSpace Acquisition is not consummated, for general corporate purposes.
2023 Senior Secured Notes
On July 31, 2018, a wholly-owned subsidiary of WSII, Mason Finance Sub, Inc. (“Finance Sub”), entered into a purchase agreement with certain financial institutions under which the initial purchasers agreed to purchase $300.0 million in aggregate principal amount of 6.875% senior secured notes due 2023 (the “2023 Secured Notes”) to be issued by Finance Sub. The proceeds are expected to fund the ModSpace Acquisition and to pay related fees and expenses. The 2023 Secured Notes were offered only to qualified institutional buyers pursuant to Rule 144A under the Securities Act and to persons outside the United States pursuant to Regulation S under the Securities Act.
On August 6, 2018, Finance Sub closed the private placement and the initial purchasers deposited$300.0 millionof gross offering proceeds into an escrow account. Upon consummation of the ModSpace Acquisition and the satisfaction of other conditions, the escrowed proceeds will be released to fund a portion of the cash consideration payable by WSII in the ModSpace Acquisition and to pay related fees and expenses. Upon the closing the ModSpace Acquisition, Finance Sub will merge with and into WSII, with WSII continuing as the surviving corporation, and WSII will assume the obligations of Finance Sub under the 2023 Secured Notes and the indenture governing the notes. If the ModSpace Acquisition is not completed by a specified date or certain other events occur, the 2023 Secured Notes will be subject to a special mandatory redemption.
The 2023 Secured Notes mature on August 15, 2023. The notes bear interest at a rate of 6.875% per annum, payable semi-annually on February 15 and August 15 of each year beginning February 15, 2019.
WSII may redeem the 2023 Secured Notes, in whole or in part, at a redemption price equal to (i) prior to August 15, 2020, 100% of the principal amount of the notes to be redeemed plus a make-whole premium; (ii) during the period from August 15, 2020 through August 14, 2021, 103.438% of the principal amount of the notes to be redeemed, plus accrued and unpaid interest, (iii) during the period from August 15, 2021 through August 14, 2022, 101.719% of the principal amount of the notes to be redeemed, plus accrued and unpaid interest; and, (iv) from and after August 15, 2022, 100% of the principal amount of the notes to be redeemed, plus accrued and unpaid interest. WSII may also redeem, prior to August 15, 2020, up to 40% of the principal amount of the 2023 Senior Notes at a redemption price equal to 106.875% of the principal amount of the notes to be redeemed, plus accrued and unpaid interest, with the net proceeds of certain equity offerings.
Additional information regarding the 2023 Secured Notes and the indenture governing the notes is contained in the Form 8-K filed by the Company with the SEC on August 7, 2018.
2023 Senior Unsecured Notes
On July 28, 2018, the Company entered into a note purchase agreement with certain financial institutions under which the initial purchasers agreed to purchase $200.0 million in aggregate principal amount of senior unsecured notes due 2023 (the “Unsecured Notes”) to be issued by Finance Sub. The proceeds are expected to fund the ModSpace Acquisition and to pay related fees and expenses. The Unsecured Notes were offered only to qualified institutional buyers pursuant to Rule 144A under the Securities Act.
On August 3, 2018, Finance Sub closed the private placement and the initial purchasers deposited $200.0 million of gross offering proceeds into an escrow account. Upon consummation of the ModSpace Acquisition and the satisfaction of other conditions, the escrowed proceeds will be released to fund a portion of the cash consideration payable by WSII in the ModSpace Acquisition and to pay related fees and expenses. Upon the closing the ModSpace Acquisition, Finance Sub will merge with and into WSII, with WSII continuing as the surviving corporation, and WSII will assume the obligations of Finance Sub under the

Unsecured Notes and the indenture governing the notes. If the ModSpace Acquisition is not completed by a specified date or certain other events occur, the Unsecured Notes will be subject to a special mandatory redemption.
The Unsecured Notes, which mature on November 15, 2023, will bear interest at a rate of 10.0% per annum if paid in cash (or if paid in kind, 11.5% per annum) for any interest period ending on or prior to February 15, 2021, increasing thereafter to 12.5% per annum with no paid in kind option, in each case, payable semi-annually on February 15 and August 15 of each year beginning February 15, 2019.
The Unsecured Notes are not redeemable before February 15, 2019. WSII may redeem the Unsecured Notes, in whole or in part, at a redemption price equal to (i) during the period from February 15, 2019 through August 14, 2019, 100% of the principal amount of the notes to be redeemed plus a make-whole premium; (ii) during the period from August 15, 2019 through February 14, 2020, 102% of the principal amount of the notes to be redeemed, plus accrued and unpaid interest; (iii) during the period from February 15, 2020 through February 14, 2021, 104% of the principal amount of the notes to be redeemed, plus accrued and unpaid interest, and (iv) thereafter, 106% of the principal amount of the notes to be redeemed, plus accrued and unpaid interest.
Additional information regarding the Unsecured Notes and the indenture governing the notes is contained in the Form 8-K filed by the Company with the SEC on August 7, 2018.
Warrants Delisting
In February 2018, a hearings panel of The Nasdaq Stock Market LLC (“Nasdaq”) established a July 3, 2018 deadline for the Company to comply with the minimum holder requirement applicable to the Company’s warrants. On July 10, 2018, the Company was notified that its warrants would be delisted from The Nasdaq Capital Market based on the Company’s failure to satisfy a minimum holder requirement applicable to the warrants. Trading for the Company’s warrants was suspended at the opening of business on July 12, 2018, and a Form 25-NSE will be filed with the Securities and Exchange Commission to remove the warrants from listing and registration on Nasdaq.

ITEM 2.Management’s Discussion and Analysis of Financial Condition and Results of Operations
ITEM 2. 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 Corporation (“WSC” or the “Company”("WillScot"), our operations and our present business environment. Unless the context otherwise requires, “we,” “us,” “our” and the “Company” refers to WillScot and its subsidiaries. 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 I, Item 1 of this report.
On November 29, 2017, the Company, through its subsidiary, Williams Scotsman Holdings Corp. (“WS Holdings”), acquired all of the equity interest of Williams Scotsman International, Inc. (“WSII”) via a reverse recapitalization (the “Business Combination”). As a result of the Business Combination, (i) WSC’s consolidated financial results for periods prior to November 29, 2017 reflect the financial results of WSII and its consolidated subsidiaries, as the accounting predecessor to WSC, and (ii) for periods from and after this date, WSC’s financial results reflect those of WSC and its consolidated subsidiaries (including WSII and its subsidiaries) as the successor following the Business Combination.
Prior to the completion of the Business Combination, WSII also provided full-service remote workforce accommodation solutions in their remote accommodations business, which consisted of Target Logistics Management LLC (“Target Logistics”) and its subsidiaries and Chard Camp Catering Services (“Chard,” and together with Target Logistics, the “Remote Accommodations Business”). A parent company of WSII’s former owners, Algeco Scotsman Global S.à r.l., (together with its subsidiaries, the “Algeco Group”), undertook an internal restructuring (the “Carve-Out Transaction”) whereby certain assets related to WSII’s historical Remote Accommodations Business were transferred from WSII to other entities owned by the Algeco Group. This Remote Accommodations Business segment in its entirety is presented as discontinued operations in the condensed consolidated financial statements.
The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with the instructions to Form 10-Q and do not include all the information and notes required by accounting principles generally accepted in the US (“GAAP”) for complete financial statements. We use certain non-GAAP financial information that we believe is important for purposes of comparison to prior periods and development of future projections and earnings growth prospects. This information is also used by management to measure the profitability of our ongoing operations and analyze our business performance and trends. Reconciliations of non-GAAP measures are provided in this section where presented.the Other Non-GAAP Financial Data and Reconciliations section.
Executive Summary and Outlook
We are athe leading provider of modular space and portable storage solutions in the United States (“US”), Canada and Mexico. As of June 30, 2018,2019, our branch network included over 100120 locations and additional dropstorage lots to better service our more than 35,00050,000 customers across the US, Canada and Mexico. We offer our customers an extensive selection of “Ready to Work” modular space and portable storage solutions with over 77,000and now manage a fleet of approximately 130,000 modular space units and nearly 20,000over 26,000 portable storage units in our fleet.
In the second quarter of 2018, the integration of Acton Mobile (“Acton”) continued as planned, achieving full information technology system cut-over to Williams Scotsman’s operating platform.units. We also executed on cost savings measures in the quarter related to the Acton integration that will provide future savings. As of June 30, 2018, we had ceased production activities and began exit activities at 90% of the locations in overlapping markets. 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 the rest of the year and into early 2019 as we execute the established integration plan.
On June 22, 2018, we announced our agreement to acquire Modular Space Holdings, Inc. (“ModSpace”), which is the largest privately held provider of office trailers, portable storage units and modular buildings in the US and Canada, with over 80 operating locations. This transformative acquisition will position our company as the clear leader in the special rental services industry, with approximately $1.0 billion of annual revenue and over 160,000 rental units across North America. The Acton integration and ModSpace announcement demonstrate our ongoing commitment and ability to execute on our consolidation strategy while remaining focused on our core priorities of growing modular 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 value-addedvalue added products and services (“VAPS”("VAPS"), and focusing on continually improving the overall customer experience. During July,
Since the end of 2017, we received a No Action Letter from the Canadian Competition Bureau, the receipthave complemented our already strong organic growth by acquiring and integrating regional and national competitors in Acton Mobile Holdings LLC (“Acton”) (acquired in December 2017) and Modular Space Holdings, Inc. ("ModSpace") (acquired in August 2018). The remaining integration activities for these acquisitions as of which was a closing condition for the ModSpace acquisition,June 30, 2019 primarily consist of continued real estate exits and the transaction is now expectedrelated fleet relocations required to close in mid-August.
Prior to the ModSpace announcement, we secured debt commitments from several financial institutions to fund the acquisition. Subsequent toexit these properties. As of June 30, 2018,2019, we have completed approximately 65% of our planned real estate exits, and the Company enteredremaining exits will continue during the remainder of 2019 and into or amended several agreements2020. Two held for sale properties were also sold during the second quarter for net proceeds of $8.6 million. These exits, along with other integration actions to fund the cash consideration payable in the ModSpace acquisition on a permanent basis anddate, have allowed us to pay related fees and expenses:
Upsized our revolving credit agreement to $1.35 billion (expandable to $1.8 billion through an accordion feature) and obtained the amendments required to finance the acquisition and to give effect to our greater scale thereafter.

Completed $300.0 million private placement of 6.875% senior secured notes due 2023.
Completed $200.0 million private placement of senior unsecured notes due 2023.
Raised $128.0realize approximately $21.2 million of gross proceeds from an underwritten common stock offering, subjectsynergies to date. Approximately 49% of the underwriters' rightannualized forecasted cost synergies of $70 million were in our run rate as of June 30, 2019. These acquisitions, coupled with WillScot's innovative "Ready to purchase an additional 1.2 million shares (which could raise an additional $19.2 million of gross proceeds).
See Note 16Work" solutions and commitment to the condensed consolidated financial statements for further discussion of subsequent events.

customer service, have solidified WillScot's market leading position.
For the three months ended June 30, 2018,2019, key drivers of financial performance include:
•Increased total revenues by $30.2$125.8 million, or 27.4%89.7%, as compared to the same period in 2017,2018, driven by a 38.2%$111.4 million, or 84.0% increase in our core leasing and services revenues from both organic pricing growth, and due to the impact of the Acton and Tyson acquisitionsModSpace acquisition discussed in Note 2 of our unaudited condensed consolidated financial statements. The increase in our core leasing and services business was partially offset by decreases of 44.7% and 48.9% in our newNew and rental unit sales.sales increased 123.1% and 337.5%, respectively, also driven by acquisitions, and by several large rental unit sales in the Modular - Other North America segment in the current year.
–Consolidated modular space average monthly rental rate increased to $611 representing a 10.9% increase year over year.
–Consolidated modular space units on rent increased 37,779 or 69.3% year over year, driven by the ModSpace acquisition, and average modular space utilization increased 160 basis points (“bps”) year over year to 71.9%.
•On a pro-formapro forma basis, including results of Williams Scotsman, Acton,WillScot and TysonModSpace for all periods presented, core leasing and servicestotal revenues increased $12.8$4.2 million, or 10.7% in the second quarter1.6%, as compared to the same period in 2017.2018, driven by increases in core leasing revenues as a result of continued rate improvements that drove pro forma modular leasing revenues to increase $15.8 million, or 9.2%. Increases in pro forma modular leasing revenues were partially offset by decreased delivery and installation revenues of $6.1 million, or 9.7%, reduced new sales, which declined $4.8 million, or 29.4%, and decreased rental unit sales, which declined $0.7 million, or 6.5%.
–Pro forma average monthly rental rates increased 15.1% year over year, pro forma units on rent decreased 4.1% year over year, and pro forma utilization was flat on a consolidated basis.

33


•Increased the Modular - US segment revenues, which represents 89.0%represent 89.8% of revenue for the three months ended June 30, 2018,2019, by $26.6$114.1 million, or 27.1%91.4%, as compared to the same period in 2017,2018, through:
–Average modular space monthly rental rate growth of 2.6% to $549 through increases both in the price of our units, as well as increased VAPS pricing and penetration. Organic increases on the Williams Scotsman legacy fleet were partially offset by lower rates on units acquired from Acton and Tyson; and
–
–Modular space average monthly rental rate of $612, increased 11.5% year over year including the dilutive impacts of acquisitions. 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; and
–Average modular space units on rent increased 34,276, or a 70.0% year over year increase, due to the ModSpace acquisition; and
–Average modular space monthly utilization increased 190 basis points (“bps”) to 74.1% for the three months ended June 30, 2019 as compared to the three months ended June 30, 2018. This increase was driven by higher utilization on the acquired ModSpace fleet as compared to the overall average utilization for the three months ended June 30, 2018, which included the fleet recently acquired from Acton and Onsite Space LLC (d/b/a Tyson Onsite (“Tyson”)).
–On a pro forma basis, including results of WillScot and ModSpace for all periods presented, average modular space monthly rental rate increased 16.1%, which is the seventh consecutive quarter of double digit growth. Average modular space units on rent were down 4.2% versus the prior year, however, the performance of pricing and VAPS revenue have more than offset these declines. Pro forma average modular space monthly utilization increased 20 bps to 74.1% for the three months ended June 30, 2019.
•Increased average modular space units on rent by 13,217 units, or 36.9%, primarily due to the Acton and Tyson acquisitions; and
–
Average modular space monthly utilization increased 30 basis points (“bps”) to 72.2% for the three months ended June 30, 2018, as compared to the three months ended March 31, 2018, though decreased by 160 bps during the quarter as compared to the three months ended June 30, 2017, as a result of lower utilization on acquired fleet from Acton and Tyson; and
–On a pro-forma basis, including results of Williams Scotsman, Acton, and Tyson for all periods presented, core leasing and services revenues in the Modular - US segment increased $8.7 million, or 8.0%, primarily reflecting a 1.6% increase in average modular space units on rent and by a 9.8% increase in average modular space monthly rental rate. Total pro-forma revenues in the Modular - US segment decreased $0.6 million, or 0.5% as compared to the same period in 2017 driven by a $9.3 million, or 58.9% decrease year over year in new and rental unit sales as a result of lower volumes of sales opportunities and increased focus on our higher margin modular leasing business.
Increased the Modular - Other North America segment revenues which represented 11.0%10.2% of revenues for the three months ended June 30, 2018,2019, by $3.5$11.8 million, or 29.2%76.1% as compared to the same period in 2017.2018. Increases were driven primarily by:
–
Average modular space monthly rental rate increased 7.3% to $573
–
Average modular space units on rent increased by 624 units, or 12.7% as compared to the same period in 2017
–Average modular space monthly utilization increased by 710 bps as compared to the same period in 2017 to 57.1%
–Average modular space monthly rental rate increased 5.2% to $603; and
–Average modular space units on rent increased by 3,503 units, or 63.4% as compared to the same period in 2018 driven primarily by acquired units from the ModSpace transaction; and
–Average modular space monthly utilization decreased by 80 bps as compared to the same period in 2018 to 56.3%.
–On a pro forma basis, including results of WillScot and ModSpace for all periods presented, average modular space monthly rental rate increased 5.6% and average modular space units on rent decreased 2.4%. Pro forma average modular space monthly utilization decreased 50 bps to 56.3% for the three months ended June 30, 2019.
•Generated combineda consolidated net loss of $11.8 million for the three months ended June 30, 2019, which included $19.4 million of discrete costs expensed in the period related to the ModSpace integration and loss on extinguishment of debt related to the redemption of our 10% senior unsecured notes (the "Unsecured Notes"). Discrete costs of $19.4 million in the period included $8.2 million of integration costs, a $7.2 million loss on extinguishment of debt related to the redemption of our senior unsecured notes, $2.8 million of impairment losses on long-lived assets associated with real estate consolidations, and $1.2 million of restructuring cost. This compares to a consolidated net loss of $0.4 million for same period in 2018, which included $0.4 million of restructuring cost and $4.8 million of integration cost related to the Acton and Tysonacquisitions.
•Generated Adjusted EBITDA of $41.9$88.7 million betweenfor the three months ended June 30, 2019, representing an increase of $46.8 million or 111.7% as compared to the same period in 2018, which includes the impact of the ModSpace acquisition, as well as partial realization of commercial and cost synergies associated with the Acton, Tyson, and ModSpace acquisitions. Adjusted EBITDA for the Modular - US Segmentsegment and the Modular - Other North America Segment, representing an increasesegment, respectively, was $81.4 million and $7.3 million for the three months ended June 30, 2019.
•Continued our efforts to optimize our capital structure by completing a tack-on offering of $13.1$190 million or 45.5% as comparedin aggregate principal amount to our 6.875% senior secured notes due 2023 (the "Tack-on Notes"), using the same periodnet proceeds to repay a portion of outstanding borrowings under our asset-backed revolving credit facility (the “ABL Facility”). Subsequently in 2017, which includes the quarter, we redeemed all $200 million in aggregate principal amount of our outstanding Unsecured Notes. The resulting impact of the Acton and Tyson acquisitions discussed in Note 2 of the unaudited condensed consolidated financial statements.these actions is expected to reduce our go-forward interest expense by approximately $6.0 million annually.
Our customers operate in a diversified set of end markets,end-markets, including commercial and industrial, construction, education, energy and natural resources, government and other end-markets. We track several market leading indicators including those related to our two largest end markets, the commercial and industrial segment and the construction segment, which collectively accounted for approximately 83%84% of our revenues in the three months ended June 30, 2018, including the customer base from the Acton and Tyson acquisitions. Market2019. We believe market fundamentals underlying these markets are currentlyremain favorable, and we expect continued modest market growth in the next several years. PotentialAs a result of the potential for increased capital spending as a resultdue to tax reform in the US, discussions of increased infrastructure spending, and rebuilding in areas impacted by natural disasters in 2017 and 2018 across the US, also provide us confidence in continuedwe are confident that we will continue to see demand for our products.


Although only 11.0% of our revenues for the three months ended June 30, 2018 were from the Modular - Other North America segment, markets in Canada, including Alaska, and Mexico, show continued improvement despite declines experienced over the last several years related to the energy markets. This segment saw significant improvement in average modular space monthly rental rates, average modular space units on rent, and average modular space monthly utilization as compared to the same period in 2017. However, competitive pressures in these markets may continue to depress pricing given current levels of supply in the market until utilization across the industry improves.
34


Consolidated Results of Operations
Three Months Ended June 30, 20182019 Compared to the Three Months Ended June 30, 20172018
Our consolidated statements of operations for the three months ended June 30, 20182019 and 20172018 are presented below:
Three Months Ended June 30,2018 vs. 2017 $ ChangeThree Months Ended June 30, 2019 vs. 2018 $ Change
(in thousands)2018 2017 (in thousands)201920182019 vs. 2018 $ Change
Revenues:     Revenues:
Leasing and services revenue:     Leasing and services revenue:
Modular leasing$101,249
 $72,954
 $28,295
Modular leasing $187,509 $101,249 $86,260 
Modular delivery and installation31,413
 22,949
 8,464
Modular delivery and installation 56,479 31,413 25,066 
Sales:     
Sales revenue: Sales revenue:
New units5,236
 9,396
 (4,160)New units 11,624 5,236 6,388 
Rental units2,435
 4,778
 (2,343)Rental units 10,513 2,435 8,078 
Total revenues140,333
 110,077
 30,256
Total revenues 266,125 140,333 125,792 
Costs:     Costs:
Costs of leasing and services:     Costs of leasing and services:
Modular leasing27,129
 21,340
 5,789
Modular leasing 55,073 27,129 27,944 
Modular delivery and installation30,127
 22,339
 7,788
Modular delivery and installation 48,468 30,127 18,341 
Costs of sales:     Costs of sales:
New units3,704
 6,766
 (3,062)New units 7,999 3,704 4,295 
Rental units1,263
 2,575
 (1,312)Rental units 6,721 1,263 5,458 
Depreciation of rental equipment23,470
 17,474
 5,996
Depreciation of rental equipment 43,968 23,470 20,498 
Gross profit54,640
 39,583
 15,057
Gross profit 103,896 54,640 49,256 
Expenses:     Expenses:
Selling, general and administrative47,734
 31,652
 16,082
Selling, general and administrative 71,623 47,734 23,889 
Other depreciation and amortization1,570
 1,890
 (320)Other depreciation and amortization 3,167 1,570 1,597 
Impairment losses on long-lived assets Impairment losses on long-lived assets 2,786 — 2,786 
Restructuring costs449
 684
 (235)Restructuring costs 1,150 449 701 
Currency losses (gains), net572
 (6,497) 7,069
Other (income) expense, net(1,574) 461
 (2,035)
Currency (gains) losses, net Currency (gains) losses, net (354)572 (926)
Other income, net Other income, net (1,289)(1,574)285 
Operating income5,889
 11,393
 (5,504)Operating income 26,813 5,889 20,924 
Interest expense12,155
 29,907
 (17,752)Interest expense 32,524 12,155 20,369 
Interest income—
 (3,509) 3,509
Loss from continuing operations before income tax(6,266) (15,005) 8,739
Loss on extinguishment of debt Loss on extinguishment of debt 7,244 — 7,244 
Loss from operations before income tax Loss from operations before income tax (12,955)(6,266)(6,689)
Income tax benefit(6,645) (5,269) (1,376)Income tax benefit (1,180)(6,645)5,465 
Income (loss) from continuing operations379
 (9,736) 10,115
Income from discontinued operations, net of tax—
 3,840
 (3,840)
Net income (loss)379
 (5,896) 6,275
Net income attributable to non-controlling interest, net of tax143
 —
 143
Total income (loss) attributable to WSC$236
 $(5,896) $6,132
Net (loss) income Net (loss) income (11,775)379 (12,154)
Net (loss) income attributable to non-controlling interest, net of tax Net (loss) income attributable to non-controlling interest, net of tax (862)143 (1,005)
Net (loss) income attributable to WillScot Net (loss) income attributable to WillScot $(10,913)$236 $(11,149)
Comparison of Three Months Ended June 30, 20182019 and 20172018
Revenue: Total revenue increased $30.2$125.8 million, or 27.4%89.7%, to $266.1 million for the three months ended June 30, 2019 from $140.3 million for the three months ended June 30, 2018. The increase was primarily the result of an 84.0% increase in leasing and services revenue driven by increased volumes from acquisitions and improved pricing. Increased volumes were driven by units acquired as part of the ModSpace acquisition, as well as increased modular delivery and installation revenues on the combined rental fleet of 79.9% due to increased transaction volumes and higher revenues per transaction. Average modular space monthly rental rates increased 10.9% to $611 for the three months ended June 30, 2019, and average modular space units on rent increased 37,779 units, or 69.3%. 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 lower average modular space monthly rental rates on acquired units for ModSpace. The increase in leasing and services revenue was further complemented by increases of $6.4 million, or 123.1%, and $8.1 million, or 337.5%, on new unit and rental unit sales, respectively, as compared to the same period in 2018. Increases in both new and rental unit sales were primarily a result of our increased scale as a result of the ModSpace acquisition and our larger post-acquisition fleet size and sales teams. The large increase in rental unit sales was driven by the
35


Modular - Other North America segment.
On a pro forma basis, including results of WillScot and ModSpace for all periods presented, total revenues increased $4.2 million, or 1.6%, year-over-year for the three months ended June 30, 2019. Increases were driven by core leasing revenues, which increased $15.8 million, or 9.2%, as a result of a 15.1% increase in average modular space monthly rental rates. These increases were partially offset by decreased delivery and installation revenues of $6.1 million, or 9.7%, reduced new sales, which declined $4.8 million, or 29.4%, and decreased rental unit sales, which declined $0.7 million, or 6.5%.
Total average units on rent for the three months ended June 30, 2019 and 2018 were 108,844 and 68,017, respectively. The increase is due to units acquired as part of the ModSpace acquisition, with modular space average units on rent increasing 37,779 units, or 69.3%, for the three months ended June 30, 2019. Modular space average monthly rental rates increased 10.9% for the three months ended June 30, 2019. Portable storage average units on rent increased by 3,048 units, or 22.6%, for the three months ended June 30, 2019. Average portable storage monthly rental rates increased 1.7% for the three months ended June 30, 2019. The average modular space unit utilization rate during the three months ended June 30, 2019 was 71.9%, as compared to 70.3% during the same period in 2018. This increase was driven by higher utilization on the acquired ModSpace fleet as compared to the overall average utilization for the three months ended June 30, 2018, which included the fleet acquired from $110.1Acton and Tyson. The average portable storage unit utilization rate during the three months ended June 30, 2019 was 63.3%, as compared to 68.1% during the same period in 2018. The decrease in average portable storage utilization rate was driven by organic declines in the number of portable storage average units on rent.
Gross Profit: Our gross profit percentage was 39.0% and 38.9% for the three months ended June 30, 2019 and 2018, respectively. Our gross profit percentage, excluding the effects of depreciation, was 55.6% and 55.7% for the three months ended June 30, 2019 and 2018, respectively.
Gross profit increased $49.3 million, or 90.3%, to $103.9 million for the three months ended June 30, 2017.2019 from $54.6 million for the three months ended June 30, 2018. The increase in gross profit is a result of a $65.0 million increase in modular leasing and services gross profit and increased new unit and rental unit gross profit of $4.8 million. Increases in modular leasing and services gross profit 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 and increased delivery and installation margins driven primarily by higher pricing per transaction. These increases were partially offset by increased depreciation of $20.5 million as a result of additional rental equipment acquired as part of the ModSpace acquisition, as well as continued capital investment in our existing rental equipment.
SG&A: Selling, general and administrative ("SG&A") increased $23.9 million, or 50.1%, to $71.6 million for the three months ended June 30, 2019, compared to $47.7 million for the three months ended June 30, 2018. The primary drivers of the increases are related to increased employee costs of $10.3 million driven by the increased size of the workforce, net of realized employee cost synergies savings to date achieved as a result of the restructuring activities; and increased occupancy costs of $3.3 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 65% of redundant real estate locations.
Discrete items with SG&A decreased for the three months ended June 30, 2019, compared to the three months ended June 30, 2018, by $0.3 million as an increase in integration cost of $3.0 million related to the Acton and ModSpace integrations and an increase in stock compensation expense of $0.8 million, were fully offset by a decrease of $4.1 million in transaction costs.
The remaining increases of $10.6 million are related to increased professional fees, insurance, computer, travel, office, bad debt, 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 cost synergies of approximately $7.5 million related to the Acton and ModSpace acquisitions were realized in the three months ended June 30, 2019, which compares to approximately $1.3 million of synergies realized in three months ended June 30, 2018, bringing cumulative synergies related to the Acton, Tyson, and ModSpace acquisitions as of June 30, 2019 to approximately $21.2 million. This is consistent with our integration plans and we expect these activities to continue through 2019 as we continue our efforts to achieve expected annual recurring cost savings of over $70.0 million once our integration plans are fully executed and in our results.
Other Depreciation and Amortization:Other depreciation and amortization increased $1.6 million, or 100.0%, to $3.2 million for the three months ended June 30, 2019, compared to $1.6 million for the three months ended June 30, 2018. The increase was driven primarily by depreciation on property, plant and equipment and amortization of the trade name acquired as part of the ModSpace acquisition in the third quarter of 2018.
Impairment losses on Long-Lived Assets: Impairment losses on property, plant and equipment were $2.8 million for the three months ended June 30, 2019 as compared to $0.0 million for the three months ended June 30, 2018. In the current period, we reclassified a branch facility that we intend to exit to held for sale and recognized an impairment on the related assets as the carrying value of the assets exceeded the estimated fair value less cost to sell. Additionally, one of the properties exited during the period was acquired as part of the ModSpace acquisition and had a favorable lease intangible. As a result of the exit of this property, the remaining net book value of the favorable lease intangible was deemed impaired, resulting in an impairment charge of $2.4 million.
Restructuring Costs: Restructuring costs were $1.2 million for the three months ended June 30, 2019 as compared to $0.4 million for the three months ended June 30, 2018. The 2019 restructuring charges relate primarily to employee
36


termination and lease breakage costs related to the ModSpace acquisition and integration. The 2018 restructuring charges relate primarily to employee termination and lease breakage costs related to the Acton and Tyson acquisitions and integrations.
Currency (Gains) Losses, net: Currency gains, net increased by $1.0 million to a $0.4 million gain for the three months ended June 30, 2019 compared to a $0.6 million loss for the three months ended June 30, 2018. The increase in currency gains in 2019 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.
Other Income, Net: Other income, net was $1.3 million and $1.6 million for the three months ended June 30, 2019 and 2018, respectively. Other income, net of $1.3 million for the three months ended June 30, 2019 was related to the receipt of $1.1 million of insurance proceeds related to assets damaged during Hurricane Harvey in the second quarter. Other income, net of $1.6 million for the three months ended June 30, 2018 was also driven by the receipt of insurance proceeds related to assets damaged during Hurricane Harvey and contributed $1.8 million to other income, net, for the three months ended June 30, 2018.
Interest Expense: Interest expense increased $20.3 million, or 166.4%, to $32.5 million for the three months ended June 30, 2019 from $12.2 million for the three months ended June 30, 2018. The interest costs incurred during the three months ended June 30, 2018 relate to the change in the debt structure of the Company as a result of the ModSpace acquisition. In the third quarter of 2018, as part of financing the ModSpace acquisition, we upsized our ABL Facility to $1.425 billion, issued $300.0 million of senior secured notes (the "2023 Secured Notes"), and issued the Unsecured Notes. Further, in the second quarter of 2019 we issued $190.0 million of Tack-on Notes in aggregate principal amount to the 2023 Secured Notes and used the proceeds to repay a portion of the ABL Facility. Subsequent to the issuance of the Tack-on Notes, we redeemed all $200.0 million in aggregate outstanding principal amount of the Unsecured Notes using proceeds from the ABL Facility. See Note 8 to the condensed consolidated financial statements for further discussion of our debt.
Loss on Extinguishment of Debt: Loss on extinguishment of debt increased $7.2 million, for the three months ended June 30, 2019 from $0.0 million for the three months ended June 30, 2018. This loss is attributable to the repayment of $200.0 million in aggregate outstanding principal of the Unsecured Notes in the second quarter at a redemption price of 102.0%, plus a make-whole premium of 1.1%, for total premiums of 3.1%. As a result, the Company recorded a loss on extinguishment of $7.2 million, which included $6.2 million of premium and $1.0 million related to the write-off of unamortized deferred financing fees. This redemption was funded from the use of proceeds from the ABL Facility.
Income Tax Benefit: Income tax benefit decreased $5.4 million to $1.2 million for the three months ended June 30, 2019 compared to $6.6 million for the three months ended June 30, 2018. The decrease in income tax benefit was driven by the discrete benefits recorded in the three months ended June 30, 2018 which did not occur in the three months ended June 30, 2019.

37


Six Months Ended June 30, 2019 Compared to the Six Months Ended June 30, 2018
Our consolidated statements of operations for the six months ended June 30, 2019 and 2018 are presented below:
Six Months Ended June 30, 2019 vs. 2018 $ Change
(in thousands)20192018
Revenues: 
Leasing and services revenue: 
Modular leasing $365,731 $198,511 $167,220 
Modular delivery and installation 106,760 57,663 49,097 
Sales revenue: 
New units 26,528 12,664 13,864 
Rental units 22,114 6,246 15,868 
Total revenues 521,133 275,084 246,049 
Costs: 
Costs of leasing and services: 
Modular leasing 102,308 54,291 48,017 
Modular delivery and installation 91,811 55,648 36,163 
Costs of sales: 
New units 18,877 8,691 10,186 
Rental units 14,516 3,578 10,938 
Depreciation of rental equipment 85,071 47,315 37,756 
Gross profit 208,550 105,561 102,989 
Expenses: 
Selling, general and administrative 145,108 92,948 52,160 
Other depreciation and amortization 6,171 4,006 2,165 
Impairment losses on long-lived assets 5,076 — 5,076 
Restructuring costs 7,103 1,077 6,026 
Currency (gains) losses, net (670)1,596 (2,266)
Other income, net (2,240)(4,419)2,179 
Operating income 48,002 10,353 37,649 
Interest expense 64,496 23,874 40,622 
Loss on extinguishment of debt 7,244 — 7,244 
Loss from operations before income tax (23,738)(13,521)(10,217)
Income tax benefit (802)(7,065)6,263 
Net loss (22,936)(6,456)(16,480)
Net loss attributable to non-controlling interest, net of tax (1,722)(505)(1,217)
Net loss attributable to WillScot $(21,214)$(5,951)$(15,263)
Comparison of Six Months Ended June 30, 2019 and 2018
Revenue: Total revenue increased $246.0 million, or 89.4%, to $521.1 million for the six months ended June 30, 2019 from $275.1 million for the six months ended June 30, 2018. The increase was primarily the result of a 38.2%an 84.4% increase in leasing and services revenue driven by increased volumes from acquisitions and improved pricingpricing. Increased volumes were driven by units acquired as part of the ModSpace acquisition, as well as increased modular delivery and volumes.installation revenues on the combined rental fleet of 85.1% due to increased transaction volumes and higher revenues per transaction. Average modular space monthly rental rates increased 3.2%9.2% to $551$593 for the threesix months ended June 30, 2018,2019, and average modular space units on rent increased 13,84138,481 units, or 34.0%70.8%. 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 revenue was further complemented by increases of $13.8 million, or 108.7%, and $15.9 million, or 256.5%, on new unit and rental unit sales, respectively, as compared to the same period in 2018. Increases in both new and rental unit sales were primarily a result of our increased scale as a result of the ModSpace acquisition and our larger post-acquisition fleet size and sales teams. The large increase in rental unit sales was driven by the Modular - Other North America segment.
38


On a pro forma basis, including results of WillScot and ModSpace for all periods presented, total revenues increased $15.1 million, or 3.0%, year-over-year for the six months ended June 30, 2019. Increases were driven by core leasing revenues, which increased $30.3 million, or 9.0%, as a result of a 13.6% increase in average modular space monthly rental rates. These increases were partially offset by decreased delivery and installation revenues of $6.9 million, or 6.1%, reduced new sales, which declined $7.9 million, or 23.0%, and decreased rental unit sales, which declined $0.4 million, or 1.7%.
Total average units on rent for the six months ended June 30, 2019 and 2018 were 109,815 and 68,126, respectively. The increase was due to units acquired as part of the ModSpace acquisition, with modular space average units on rent increasing 38,481 units, or 70.8%, for the six months ended June 30, 2019. Modular space average monthly rental rates increased 9.2% for the six months ended June 30, 2019. Portable storage average units on rent increased by 3,208 units, or 23.2%, for the six months ended June 30, 2019. Average portable storage monthly rental rates increased 1.7% for the six months ended June 30, 2019. The average modular space unit utilization rate during the six months ended June 30, 2019 was 72.2%, as compared to 70.3% during the same period in 2018. This increase was driven by higher utilization on the acquired ModSpace fleet as compared to the overall average utilization for the six months ended June 30, 2018, which included the fleet acquired from Acton and Tyson. The average portable storage unit utilization rate during the six months ended June 30, 2019 was 65.0%, as compared to 69.4% during the same period in 2018. The decrease in average portable storage utilization rate was driven by an increase in the number of portable storage average units on rent in the Modular - US segment.
Gross Profit: Our gross profit percentage was 40.0% and 38.4% for the six months ended June 30, 2019 and 2018, respectively. Our gross profit percentage, excluding the effects of depreciation, was 56.3% and 55.6% for the six months ended June 30, 2019 and 2018, respectively.
Gross profit increased $103.0 million, or 97.5%, to $208.6 million for the six months ended June 30, 2019 from $105.6 million for the six months ended June 30, 2018. The increase in gross profit is a result of a $132.1 million increase in modular leasing and services gross profit and increased new unit and rental unit gross profit of $8.6 million. Increases in modular leasing and services gross profit 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 and increased delivery and installation margins driven primarily by higher pricing per transaction. These increases were partially offset by increased depreciation of $37.8 million as a result of additional rental equipment acquired as part of the ModSpace acquisition, as well as continued capital investment in our existing rental equipment.
SG&A: SG&A increased $52.2 million, or 56.2%, to $145.1 million for the six months ended June 30, 2019, compared to $92.9 million for the six months ended June 30, 2018. $8.4 million of the SG&A increase was driven by discrete items during the period as integration cost increases of $10.5 million related to the Acton and ModSpace integrations and stock compensation expense increases of $2.0 million were partially offset by lower transaction costs, which reduced $4.1 million as compared to the prior year. Other drivers of the increase relate to increased employee costs of $20.2 million driven by the increased size of the workforce, net of realized employee cost synergies savings to date achieved as a result of the restructuring activities; and increased occupancy costs of $7.6 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 65% of redundant real estate locations. The remaining increases of $16.0 million are related to increased professional fees, insurance, computer, travel, office, bad debt, 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 cost synergies of approximately $14.8 million related to the Acton and ModSpace acquisitions were realized in the six months ended June 30, 2019, which compares to approximately $1.5 million of synergies realized for the six months ended June 30, 2018, bringing cumulative synergies related to the Acton, Tyson, and ModSpace acquisitions as of June 30, 2019 to approximately $21.2 million. This is consistent with our integration plans and we expect these activities to continue through 2019 as we continue our efforts to achieve expected annual reoccurring cost savings of over $70.0 million once our integration plans are fully executed and in our results.
Other Depreciation and Amortization: Other depreciation and amortization increased $2.2 million, or 55.0%, to $6.2 million for the six months ended June 30, 2019, compared to $4.0 million for the six months ended June 30, 2018. The increase was driven primarily by depreciation on property, plant and equipment and amortization of the trade name acquired as part of the ModSpace acquisition in the third quarter of 2018.
Impairment losses on Long-Lived Assets: Impairment losses on long-lived assets were $5.1 million for the six months ended June 30, 2019 as compared to $0.0 million for the six months ended June 30, 2018. In the current period, 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 less cost to sell was exceeded by the carrying value of the facilities. Additionally, one of the properties exited during the period was acquired as part of the ModSpace acquisition and had a favorable lease intangible. As a result of the exit of this property, the remaining net book value of the favorable lease intangible was deemed impaired, resulting in an impairment charge of $2.4 million.
Restructuring Costs: Restructuring costs were $7.1 million for the six months ended June 30, 2019 as compared to $1.1 million for the six months ended June 30, 2018. The 2019 restructuring charges relate primarily to employee termination and lease breakage costs related to the ModSpace acquisition and integration. The 2018 restructuring charges relate primarily to employee termination and lease breakage costs related to the Acton and Tyson acquisitions and integrations.

39


Currency (Gains) Losses, net: Currency gains, net increased by $2.3 million to a $0.7 million gain for the six months ended June 30, 2019 compared to a $1.6 million loss for the six months ended June 30, 2018. The increase in currency gains, net, in 2019 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.
Other Income, Net: Other income, net was $2.2 million and $4.4 million for the six months ended June 30, 2019 and 2018, respectively. Other income, net of $2.2 million for the six months ended June 30, 2019 was primarily related to the receipt of a $0.9 million settlement in the first quarter and the receipt of $1.1 million of insurance proceeds related to assets damaged during Hurricane Harvey in the second quarter. Other income, net of $4.4 million for the six months ended June 30, 2018 was also driven by the receipt of insurance proceeds related to assets damaged during Hurricane Harvey and contributed $4.8 million to other income, net, for the six months ended June 30, 2018.
Interest Expense: Interest expense increased $40.6 million, or 169.9%, to $64.5 million for the six months ended June 30, 2019 from $23.9 million for the six months ended June 30, 2018. The interest costs incurred during the six months ended June 30, 2018 relate to the change in the debt structure of the Company as a result of the ModSpace acquisition. In the third quarter of 2018, as part of financing the ModSpace acquisition, we upsized our ABL Facility to $1.425 billion, issued $300.0 million of 2023 Secured Notes, and issued $200.0 million of Unsecured Notes. Further, in the second quarter of 2019 we issued $190.0 million of Tack-on Notes in aggregate principal amount to the 2023 Secured Notes and used the proceeds to repay a portion of the ABL Facility. Subsequent to the issuance of the Tack-on Notes, we redeemed all $200.0 million in aggregate outstanding principal amount of the Unsecured Notes using proceeds from the ABL Facility. See Note 8 to the condensed consolidated financial statements for further discussion of our debt.
Loss on Extinguishment of Debt: Loss on extinguishment of debt increased $7.2 million, for the six months ended June 30, 2019 from $0.0 million for the six months ended June 30, 2018. This Company redeemed of $200.0 million in aggregate outstanding principal amount of the Unsecured Notes in the second quarter at a redemption price of 102.0%, plus a make-whole premium of 1.1%, for total premiums of 3.1%. As a result, the Company recorded a loss on extinguishment of $7.2 million, which included $6.2 million of premium and $1.0 million related to the write-off of unamortized deferred financing fees. This redemption was funded from the use of proceeds from the ABL Facility.
Income Tax Benefit: Income tax benefit decreased $6.3 million to $0.8 million benefit for the six months ended June 30, 2019 compared to a $7.1 million benefit for the six months ended June 30, 2018. The decrease in income tax benefit was driven by the discrete benefits recorded in the six months ended June 30, 2018 which did not occur in the six months ended June 30, 2019.

Business Segment Results
Our principal line of business is modular leasing and sales. 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 the three and six months ended June 30, 2019 and 2018. Future changes to our organizational structure may result in changes to the segments disclosed.
Comparison of Three Months Ended June 30, 2019 and 2018
Three Months Ended June 30, 2019 
(in thousands, except for units on rent and rates)Modular - USModular - Other North AmericaTotal
Revenue $238,861 $27,264 $266,125 
Gross profit $94,829 $9,067 $103,896 
Adjusted EBITDA $81,380 $7,347 $88,727 
Capital expenditures for rental equipment $58,241 $2,974 $61,215 
Modular space units on rent (average during the period) 83,273 9,027 92,300 
Average modular space utilization rate 74.1 %56.3 %71.9 %
Average modular space monthly rental rate $612 $603 $611 
Portable storage units on rent (average during the period) 16,146 398 16,544 
Average portable storage utilization rate 63.6 %50.8 %63.3 %
Average portable storage monthly rental rate $121 $121 $121 

40


Three Months Ended June 30, 2018 
(in thousands, except for units on rent and rates) Modular - US Modular - Other North America Total 
Revenue $124,813 $15,520 $140,333 
Gross profit $49,741 $4,899 $54,640 
Adjusted EBITDA $38,104 $3,812 $41,916 
Capital expenditures for rental equipment $30,931 $1,748 $32,679 
Modular space units on rent (average during the period) 48,997 5,524 54,521 
Average modular space utilization rate 72.2 %57.1 %70.3 %
Average modular space monthly rental rate $549 $573 $551 
Portable storage units on rent (average during the period) 13,127 369 13,496 
Average portable storage utilization rate 68.5 %57.4 %68.1 %
Average portable storage monthly rental rate $120 $116 $119 
Modular - US Segment
Revenue: Total revenue increased $114.1 million, or 91.4%, to $238.9 million for the three months ended June 30, 2019 from $124.8 million for the three months ended June 30, 2018. Modular leasing revenue increased $79.5 million, or 87.4%, driven by improved volumes and pricing. Average modular space units on rent increased 34,276 units, or 70.0%. Average modular space monthly rental rates increased 11.5% for the three months ended June 30, 2019. Units acquired as part of the ModSpace acquisition helped drive improved volumes as well as increased modular delivery and installation revenues on the combined rental fleet of 93.4%. 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. The increases in leasing and services revenue were complemented by increases in sales revenues. New unit sales revenue increased $6.3 million, or 153.7%, and rental unit sales revenue increased $2.7 million, or 117.4%. The increase year-over-year in new sales was primarily driven by a single large sale project. Increases in rental unit sales were primarily a result of the ModSpace acquisition and our larger post-acquisition sales team and fleet size.
On a pro forma basis, including results of the WillScot and ModSpace for all periods presented, pricing improvement continued in the second quarter, with increases in pro forma average modular space monthly rental rates of $85, or 16.1%, year over year for the three months ended June 30, 2019. Modular space units on rent decreased 4.2% on a pro forma basis to 83,273 and pro forma utilization for our modular space units increased to 74.1%, up 20 bps from 73.9% for the three months ended June 30, 2018.
Gross Profit: Gross profit increased $45.1 million, or 90.7%, to $94.8 million for the three months ended June 30, 2019 from $49.7 million for the three months ended June 30, 2018. The increase in gross profit was driven by higher modular leasing and service revenues driven both by organic growth and through the ModSpace acquisition, as well as due to increased modular space leasing and modular space delivery and installation margins. The increase in gross profit from modular leasing and service revenues for the three months ended June 30, 2019 was partially offset by a $19.0 million increase in depreciation of rental equipment primarily related to units acquired in the ModSpace acquisition.
Adjusted EBITDA: Adjusted EBITDA increased $43.3 million, or 113.6%, to $81.4 million for the three months ended June 30, 2019 from $38.1 for the three months ended June 30, 2018. The increase was driven by higher modular leasing and services gross profits discussed above, partially offset by increases in SG&A, excluding discrete items, of $21.4 million. Increases in SG&A, excluding discrete items, primarily related to increased employee costs of $9.5 million driven by the increased size of the workforce, net of realized employee cost synergies savings to date achieved as a result of the restructuring activities; and increased occupancy costs of $2.5 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 65% of redundant real estate locations. The remaining increases in SG&A of $9.4 million are primarily related to increased professional fees, insurance, computer, travel, office costs, bad debt and other expenses related to operating a larger business as a result of our recent acquisitions and our expanded employee base and branch network.
Capital Expenditures for Rental Equipment: Capital expenditures for rental equipment increased $27.2 million, or 87.7%, to $58.2 million for the three months ended June 30, 2019 from $31.0 million for the three months ended June 30, 2018. Net capital expenditures for rental equipment also increased $25.0 million, or 91.9%, to $52.2 million. The increases for both were driven by increased spend for refurbishments and VAPS to drive revenue growth and for maintenance of a larger fleet following our recent acquisitions.
Modular - Other North America Segment
Revenue: Total revenue increased $11.8 million, or 76.1%, to $27.3 million for the three months ended June 30, 2019 from $15.5 million for the three months ended June 30, 2018. Modular leasing revenue increased $6.8 million, or 66.0%, driven by improved volumes and pricing in the quarter. Average modular space units on rent increased by 3,503 units, or 63.4%, for the period, and average modular space monthly rental rates increased 5.2%. Improved volumes were driven by
41


units acquired as part of the ModSpace acquisition and improved pricing was driven primarily through continued growth in our “Ready to Work” solutions and increased VAPS penetration across the combined post-acquisition customer base. Modular delivery and installation revenues decreased $0.5 million, or 12.5%. New unit sales were $1.2 million and $1.1 million, and rental unit sales revenue was $5.5 million and $0.1 million for the three months ended June 30, 2019 and 2018, respectively.  The increases in new unit sales and rental unit sales were primarily driven by the ModSpace acquisition, a single large rental unit sale project and our larger post-acquisition sales team and fleet size.
On a pro forma basis, including results of WillScot and ModSpace for all periods presented, pro forma average modular space monthly rental rates increased $32, or 5.6%, for the three months ended June 30, 2019. Modular space units on rent decreased 2.4% on a pro forma basis to 9,027 and pro forma utilization for our modular space units decreased to 56.3%, down 50 bps from 56.8%, for the three months ended June 30, 2018.
Gross Profit: Gross profit increased $4.2 million, or 85.7%, to $9.1 million for the three months ended June 30, 2019 from $4.9 for the three months ended June 30, 2018. The effects of favorable foreign currency movements increased gross profit by less than $0.1 million related to changes in the Canadian dollar and Mexican peso in relation to the US dollar. The increase in gross profit, excluding the effects of foreign currency, was driven primarily by increased leasing and services revenues and margins as a result of higher modular space units on rent and average monthly rental rates. Additionally, rental unit sales gross profit increased due to higher volume. These increases were slightly offset by increased depreciation of rental equipment of $1.5 million for three months ended June 30, 2019.
Adjusted EBITDA: Adjusted EBITDA increased $3.5 million, or 92.1%, to $7.3 million for the three months ended June 30, 2019 from $3.8 million for the three months ended June 30, 2018. This increase was driven by increased leasing and services gross profit as a result of increased modular space volumes and average monthly rental rates, increased rental unit sales gross profit, partially offset by increased SG&A, excluding discrete items, of $2.1 million, also driven by the ModSpace acquisition, consisting primarily of increased employee costs of $0.8 million and increased occupancy costs of $0.8 million.
Capital Expenditures for Rental Equipment: Capital expenditures for rental equipment increased $1.3 million, or 76.5%, to $3.0 million for the three months ended June 30, 2019 from $1.7 million for the three months ended June 30, 2018. The increase was driven by 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 $4.1 million, or 256.3%, to negative $2.5 million as a result of increased rental unit sales in the period that exceeded capital expenditures for rental equipment.
Comparison of Six Months Ended June 30, 2019 and 2018
Six Months Ended June 30, 2019 
(in thousands, except for units on rent and rates)Modular - USModular - Other North AmericaTotal
Revenue $470,337 $50,796 $521,133 
Gross profit $190,079 $18,471 $208,550 
Adjusted EBITDA $158,148 $15,087 $173,235 
Capital expenditures for rental equipment $108,162 $4,926 $113,088 
Modular space units on rent (average during the period) 83,873 8,936 92,809 
Average modular space utilization rate 74.6 %55.7 %72.2 %
Average modular space monthly rental rate $594 $578 $593 
Portable storage units on rent (average during the period) 16,602 404 17,006 
Average portable storage utilization rate 65.4 %51.6 %65.0 %
Average portable storage monthly rental rate $120 $115 $120 

42


Six Months Ended June 30, 2018 
(in thousands, except for units on rent and rates) Modular - US Modular - Other North America Total 
Revenue $246,900 $28,184 $275,084 
Gross profit $96,549 $9,012 $105,561 
Adjusted EBITDA $70,716 $6,692 $77,408 
Capital expenditures for rental equipment $61,455 $3,308 $64,763 
Modular space units on rent (average during the period) 48,841 5,487 54,328 
Average modular space utilization rate 72.2 %57.0 %70.3 %
Average modular space monthly rental rate $541 $557 $543 
Portable storage units on rent (average during the period) 13,434 364 13,798 
Average portable storage utilization rate 69.8 %56.4 %69.4 %
Average portable storage monthly rental rate $118 $116 $118 
Modular - US Segment
Revenue: Total revenue increased $223.4 million, or 90.5%, to $470.3 million for the six months ended June 30, 2019 from $246.9 million for the six months ended June 30, 2018. Modular leasing revenue increased $154.5 million, or 86.4%, driven by improved volumes and pricing. Average modular space units on rent increased 35,032 units, or 71.7%. Average modular space monthly rental rates increased 9.8% for the six months ended June 30, 2019. Improved volumes were driven by units acquired as part of the Acton and Tyson acquisitions and organic unit on rent growth,ModSpace acquisition, as well as increased modular delivery and installation revenues on the combined rental fleet of 37.1%. The increase in leasing and services revenue was partially offset by decreases of $4.2 million, or 44.7%, and $2.3 million, or 48.9% in new unit and rental unit sales, respectively, as compared to the same period in 2017. The decrease year over year in new and rental unit sales was as a result of lower volumes of sales opportunities and increased focus on our higher margin modular leasing business.
On a pro-forma basis, including results of the Company, Acton, and Tyson for all periods presented, total revenues increased $2.8 million, or 2.1%, year-over-year for the three months ended June 30, 2018. Core leasing and services revenues increased $12.8 million, or 10.7%, primarily reflecting a 2.6% increase in average modular space units on rent and a 9.8% increase in average modular space monthly rental rate. The increase in leasing and services revenues was partially offset by a $10.0 million, or 56.5% decrease year over year in new and rental unit sales.
Total average units on rent for the three months ended June 30, 2018 and 2017 were 68,017 and 53,019, respectively. The increase was due to units acquired as part of the Acton and Tyson acquisitions and organic improvements in modular space average units on rent, with modular space average units on rent increasing by 13,841 units, or 34.0% for the three months ended June 30, 2018. Modular space average monthly rental rates increased 3.2% for the three months ended June 30, 2018. Portable storage average units on rent increased by 1,157 units, or 9.4% for the three months ended June 30, 2018. Average portable storage monthly rental rates increased 4.4% for the three months ended June 30, 2018. The average modular space unit utilization rate during the three months ended June 30, 2018 was 70.3%, as compared to 69.8% during the same period in 2017. The increase in average modular space utilization rate was driven by improvement in the modular space average units on rent in the Modular - Other North America business segment, slightly offset by declines in the Modular - US business segment as a result of acquired units at lower utilization rates. The average portable storage unit utilization rate during the three months ended June 30, 2018 was 68.1%, as compared to 70.0% 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 38.9% and 36.0% for the three months ended June 30, 2018 and 2017, respectively. Our gross profit percentage, excluding the effects of depreciation, was 56.0% and 52.0% for the three months ended June 30, 2018 and 2017, respectively.
Gross profit increased $15.0 million, or 37.9%, to $54.6 million for the three months ended June 30, 2018 from $39.6 million for the three months ended June 30, 2017. The increase in gross profit is a result of a $23.2 million increase in modular leasing and services gross profit primarily as a result of increased revenues 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 $6.0 million as a result of continued capital investment in rental equipment, including additional depreciation related to the Acton and Tyson acquisitions, and decreased new unit and rental unit gross profit of $2.2 million due to lower revenues.
Selling, General and Administrative: Selling, general and administrative expense (“SG&A”) increased $16.0 million, or 50.5%, to $47.7 million for the three months ended June 30, 2018, compared to $31.7 million for the three months ended June 30, 2017. $9.2 million of the SG&A increase was driven by discrete items including increased transaction fees of $3.3 million related to the pending ModSpace acquisition, increased integration costs of $4.8 million related primarily to the Acton integration, and increased stock compensation expense of $1.1 million. The remaining increases of $6.8 million are primarily related to $2.7 million of increased public company costs including outside professional fees, and increased headcount, occupancy, and indirect tax costs all of which are partially driven by the Acton and Tyson acquisitions and our expanded employee base and branch network. Cost synergies related to the Acton integration plan are on track. As of June 30, 2018, we had ceased production activities and began exit activities at 90% of the Acton locations in overlapping markets. 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 the rest of the year and into early 2019 and we expect additional cost savings as we execute the established integration plan. These increases were partially offset by a reduction of $3.2 million in corporate & other related to Algeco Group costs no longer included in our operations.
Other Depreciation and Amortization: Other depreciation and amortization decreased $0.3 million, or 15.8%, to $1.6 million for the three months ended June 30, 2018, compared to $1.9 million for the three months ended June 30, 2017.
Restructuring Costs: Restructuring costs were $0.4 million for the three months ended June 30, 2018 as compared to $0.7 million for the three months ended June 30, 2017. The 2018 restructuring charges relate primarily to employee termination costs related to the Acton acquisition. The 2017 restructuring charges relate primarily to the Algeco Group corporate function and consist of employee termination costs.

Currency Losses (Gains), net: Currency losses (gains), net decreased by $7.1 million to a $0.6 million loss for the three months ended June 30, 2018 compared to a $6.5 million gain for the three months ended June 30, 2017. The decrease in currency losses (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 Carve-Out Transaction and Business Combination in November 2017.
Other (Income) Expense, Net: Other (income) expense, net was $1.6 million of other income for the three months ended June 30, 2018 and $0.5 million of other expense for the three months ended June 30, 2017. The increase in other income was driven by insurance proceeds related to assets damaged during Hurricane Harvey which contributed $1.8 million to other (income) expense, net, for the three months ended June 30, 2018.
Interest Expense: Interest expense decreased $17.7 million, or 59.2%, to $12.2 million for the three months ended June 30, 2018 from $29.9 million for the three months ended June 30, 2017. Upon consummation of the Business Combination in November 2017, we issued $300.0 million of 7.875% senior secured notes (the “Notes”) and entered into a new $600.0 million ABL credit agreement (the “ABL Facility”) to fund our operations as a stand-alone company. The majority of the interest costs incurred during the three months ended June 30, 2017 relate to the previous debt structure of the Company as part of the Algeco Group. The decrease in interest expense is driven by our lower debt balance in 2018 under our new debt structure as compared to the Algeco Group debt structure in place in 2017. See Note 6 to the condensed consolidated financial statements for further discussion of our debt.
Interest Income: Interest income decreased $3.5 million, or 100.0%, to $0.0 million for the three months ended June 30, 2018 from $3.5 million for the three months ended June 30, 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 $1.3 million to $6.6 million for the three months ended June 30, 2018 compared to $5.3 million for the three months ended June 30, 2017. The increase in income tax benefit was principally due to discrete benefits related to state enacted laws in the three months ended June 30, 2018, which were partially offset by a smaller pre-tax loss. 


Six Months Ended June 30, 2018 Compared to the Six Months Ended June 30, 2017
Our consolidated statements of net loss for the six months ended June 30, 2018 and 2017 are presented below:
 Six Months Ended June 30,2018 vs. 2017 $ Change
(in thousands)2018 2017 
Revenues:     
Leasing and services revenue:     
Modular leasing$198,511
 $141,941
 $56,570
Modular delivery and installation57,663
 41,953
 15,710
Sales:     
New units12,664
 14,882
 (2,218)
Rental units6,246
 10,622
 (4,376)
Total revenues275,084
 209,398
 65,686
Costs:     
Costs of leasing and services:     
Modular leasing54,291
 40,442
 13,849
Modular delivery and installation55,648
 40,472
 15,176
Costs of sales:     
New units8,691
 10,486
 (1,795)
Rental units3,578
 6,283
 (2,705)
Depreciation of rental equipment47,315
 34,194
 13,121
Gross profit105,561
 77,521
 28,040
Expenses:     
Selling, general and administrative92,948
 64,413
 28,535
Other depreciation and amortization4,006
 3,831
 175
Restructuring costs1,077
 968
 109
Currency losses (gains), net1,596
 (8,499) 10,095
Other (income) expense, net(4,419) 591
 (5,010)
Operating income10,353
 16,217
 (5,864)
Interest expense23,874
 54,568
 (30,694)
Interest income—
 (6,093) 6,093
Loss from continuing operations before income tax(13,521) (32,258) 18,737
Income tax benefit(7,065) (10,138) 3,073
Loss from continuing operations(6,456) (22,120) 15,664
Income from discontinued operations, net of tax—
 6,045
 (6,045)
Net loss(6,456) (16,075) 9,619
Net loss attributable to non-controlling interest, net of tax(505) —
 (505)
Total loss attributable to WSC$(5,951) $(16,075) $10,124

Comparison of Six Months Ended June 30, 2018 and 2017
Revenue: Total revenue increased $65.7 million, or 31.4%, to $275.1 million for the six months ended June 30, 2018 from $209.4 million for the six months ended June 30, 2017. The increase was primarily the result of a 39.1% increase in leasing and services revenue driven by improved pricing and volumes. Average modular space monthly rental rates increased 3.6% for the six months ended June 30, 2018, and average modular space units on rent increased 14,022 units, or 34.8%93.2%. 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. Improved volumes were driven by units acquired as part of the Acton and Tyson acquisitions and organic unit on rent growth, as well as increased modular delivery and installation revenues on the combined rental fleet of 37.4%. The increaseincreases in leasing and services revenue was partially offsetwere complemented by decreases of $2.2increases in sales revenues. New unit sales revenue increased $13.4 million, or 14.8% and $4.4 million, or 41.5% in new unit121.8% and rental unit sales respectively, as compared to the same periodrevenue increased $7.6 million, or 133.3%. Increases in 2017. The decrease year over year in new unit sales and rental unit sales was asprimarily a result of lower volumes ofthe ModSpace acquisition and our larger post-acquisition sales opportunitiesteam and increased focus on our higher margin modular leasing business.fleet size.
On a pro-formapro forma basis, including results of the Company, Acton,WillScot and TysonModSpace for all periods presented, total revenues increased $14.1 million,pricing improvement continued in the second quarter, with increases in pro forma average modular space monthly rental rates of $76, or 5.4%, year-over-year14.7% year over year for the six months ended June 30, 2018. Core leasing and services revenues increased $25.8 million, or 11.2%, primarily reflecting a 3.5% increase in average modular2019. Modular space units on rent decreased 3.1% on a pro forma basis to 83,873 and a 9.3% increase in averagepro forma utilization for our modular space monthly rental rate. The increase in leasing and services revenues was partially offset by a $11.7 million, or 38.2% decrease year over year in new and rental unit sales.
Total average units on rentincreased to 74.6%, up 100 bps from 73.6% for the six months ended June 30, 2018 and 2017 were 68,126 and 53,055, respectively. The increase was due to units acquired as part of the Acton and Tyson acquisitions and organic improvements in modular space average units on rent, with modular space average units on rent increased by 14,022 units, or 34.8% for the six months ended June 30, 2018. Modular space average monthly rental rates increased 3.6% for the six months ended June 30, 2018. Portable storage average units on rent increasing by 1,049 units, or 8.2% for the six months ended June 30, 2018. Average portable storage monthly rental rates increased 4.4% for the six months ended June 30, 2018. The average modular space unit utilization rate during the six months ended June 30, 2018 was 70.3%, as compared to 69.1% during the same period in 2017. The increase in average modular space utilization rate was driven by improvement in the modular space average units on rent in the Modular - Other North America business segment. The average portable storage unit utilization rate during the six months ended June 30, 2018 was 69.4%, as compared to 72.1% 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 39.3% and 38.1% for the six months ended June 30, 2018 and 2017, respectively. Our gross profit percentage, excluding the effects of depreciation, was 56.0% and 53.0% for the six months ended June 30, 2018 and 2017, respectively.
Gross profit increased $28.1$93.5 million, or 36.3%96.8%, to $105.6$190.1 million for the six months ended June 30, 20182019 from $77.5$96.6 million for the six months ended June 30, 2017. The increase in gross profit is a result of a $43.3 million increase in modular leasing gross profit primarily as a result of increased revenues 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 $13.1 million as a result of continued capital investment in rental equipment, including additional depreciation related to the Acton and Tyson acquisitions, and decreased new unit and rental unit gross profit of $2.1 million due to lower revenues.
Selling, General and Administrative: Selling, general and administrative expense (“SG&A”) increased $28.5 million, or 44.3%, to $92.9 million for the six months ended June 30, 2018, compared to $64.4 million for the six months ended June 30, 2017. $11.8 million of the SG&A increase was driven by discrete items including increased transaction fees of $3.3 million related to the pending ModSpace acquisition, increased integration costs of $7.4 million related to the Acton and Tyson integrations, and increased stock compensation expense of $1.2 million. The remaining increases of $16.7 million are primarily related to $6.2 million of increased public company costs including outside professional fees, and increased headcount, occupancy, and indirect tax costs all of which are partially driven by the Acton and Tyson acquisitions and our expanded employee base and branch network. Cost synergies related to the Acton integration plan are on track. As of June 30, 2018, we had ceased production activities and began exit activities at 90% of the Acton locations in overlapping markets. 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 the rest of the year and into early 2019 and we expect additional cost savings as we execute the established integration plan. These increases were partially offset by a reduction of $8.0 million in corporate and other related to Algeco Group costs no longer included in our operations.
Other Depreciation and Amortization: Other depreciation and amortization increased $0.2 million, or 5.3%, to $4.0 million for the six months ended June 30, 2018, compared to $3.8 million for the six months ended June 30, 2017. The increase was driven primarily by depreciation on property, plant and equipment acquired as part of the Acton acquisition in the first quarter, partially offset by a reduction in total property, plant and equipment for the six months ended June 30, 2018.
Restructuring Costs: Restructuring costs were $1.1 million for the six months ended June 30, 2018 as compared to $1.0 million for the six months ended June 30, 2017. The 2018 restructuring charges relate primarily to employee termination costs related to the Acton and Tyson acquisitions. The 2017 restructuring charges relate primarily to the Algeco Group corporate function and consist of employee termination costs.

Currency Losses (Gains), net: Currency losses (gains), net decreased by $10.1 million to a $1.6 million loss for the six months ended June 30, 2018 compared to a $8.5 million gain for the six months ended June 30, 2017. The decrease in currency losses (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 Carve-Out Transaction and Business Combination.
Other (Income) Expense, net: Other (income) expense, net was $4.4 million of income for the six months ended June 30, 2018 and $0.6 million of other expense for the six months ended June 30, 2017. The decrease in other (income) expense was driven by income from insurance proceeds related to assets damaged during Hurricane Harvey which contributed $4.8 million to other (income) expense, net, for the six months ended June 30, 2018.
Interest Expense: Interest expense decreased $30.7 million, or 56.2%, to $23.9 million for the six months ended June 30, 2018 from $54.6 million for the six months ended June 30, 2017. Upon consummation of the Business Combination in November 2017, we issued the Notes and entered into the ABL Facility to fund our operations as a stand-alone company. The majority of the interest costs incurred during the six months ended June 30, 2017 relate to the previous debt structure of the Company as part of the Algeco Group. The decrease in interest expense is driven by our lower debt balance in 2018 under our new debt structure as compared to the Algeco Group debt structure in place in 2017. See Note 6 to the condensed consolidated financial statements for further discussion of our debt.
Interest Income: Interest income decreased $6.1 million, or 100.0%, to zero for the six months ended June 30, 2018 from $6.1 million for the six months ended June 30, 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 decreased $3.0 million to $7.1 million for the six months ended June 30, 2018 compared to $10.1 million for the six months ended June 30, 2017. The decrease in income tax benefit was principally due to a smaller pre-tax loss and the reduction to the corporate tax rate from 35% to 21% under the 2017 Tax Act enacted on December 22, 2017.
Business Segment Results
Our principal line of business is modular leasing and sales. The Company formerly operated a Remote Accommodations Business, which was considered a single reportable segment, and was transferred to another entity included in the Algeco Group in connection with the Business Combination in November 2017 and is no longer a part of our business. 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. Corporate and other represents primarily SG&A related to the Algeco Group’s corporate costs, which were not incurred by WSC in 2018.
The following tables and discussion summarize our reportable segment financial information for the three and six months ended June 30, 2018 and 2017. Future changes to our organizational structure may result in changes to the segments disclosed.
Comparison of Three Months Ended June 30, 2018 and 2017
 Three Months Ended June 30, 2018
(in thousands, except for units on rent and rates)Modular - US Modular - Other North America Total
Revenue$124,813
 $15,520
 $140,333
Gross profit$49,741
 $4,899
 $54,640
Adjusted EBITDA$38,104
 $3,812
 $41,916
Capital expenditures for rental equipment$30,931
 $1,748
 $32,679
Modular space units on rent (average during the period)48,997
 5,524
 54,521
Average modular space utilization rate72.2% 57.1% 70.3%
Average modular space monthly rental rate$549
 $573
 $551
Portable storage units on rent (average during the period)13,127
 369
 13,496
Average portable storage utilization rate68.5% 57.4% 68.1%
Average portable storage monthly rental rate$120
 $116
 $119

 Three Months Ended June 30, 2017
(in thousands, except for units on rent and rates)Modular - US Modular - Other North America Corporate & Other Total
Revenue$98,209
 $12,010
 $(142) $110,077
Gross profit$35,954
 $3,769
 $(140) $39,583
Adjusted EBITDA$26,329
 $2,506
 $(2,588) $26,247
Capital expenditures for rental equipment$25,909
 $1,716
 $—
 $27,625
Modular space units on rent (average during the period)35,780
 4,900
 —
 40,680
Average modular space utilization rate73.8% 50.0% —% 69.8%
Average modular space monthly rental rate$535
 $534
 $—
 $534
Portable storage units on rent (average during the period)11,988
 351
 —
 12,339
Average portable storage utilization rate70.7% 51.8% —% 70.0%
Average portable storage monthly rental rate$114
 $118
 $—
 $114
Modular - US Segment
Revenue: Total revenue increased $26.6 million, or 27.1%, to $124.8 million for the three months ended June 30, 2018 from $98.2 million for the three months ended June 30, 2017. Modular leasing revenue increased $26.2 million, or 40.4%, driven by improved pricing and volumes. Average modular space monthly rental rates increased 2.6% for the three months ended June 30, 2018, and average modular space units on rent increased 13,217 units, or 36.9%. 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. Improved volumes were driven by units acquired as part of the Acton and Tyson acquisitions and organic unit on rent growth, as well as increased modular delivery and installation revenues on the combined rental fleet of 30.5%. The increases in leasing and services revenue were partially offset by decreases in sales revenues. New unit sales revenue decreased $4.5 million, or 52.3% and rental unit sales revenue decreased $1.5 million, or 39.5%. The decrease year over year in new and rental unit sales was as a result of lower volumes of sales opportunities and increased focus on our higher margin modular leasing business.
On a pro-forma basis, including results of the Company, Acton, and Tyson for all periods presented, total revenues decreased $0.6 million, or 0.5% year-over-year driven by a $9.3 million or 58.9% decline in new and rental unit sales, offset by an $8.7 million, or 8.0% increase in our core leasing and services revenue. This increase was driven by continued improved pricing and volumes. Pro-forma average modular space monthly rental rates increased $49, or 9.8% for the three months ended June 30, 2018, and pro-forma average modular space units on rent increased 765 units, or 1.6%. Pro-forma utilization for our modular space units increased to 72.2%, up 170 bps from 70.5% for the three months ended June 30, 2017.
Gross Profit: Gross profit increased $13.8 million, or 38.4%, to $49.7 million for the three months ended June 30, 2018 from $35.9 million for the three months ended June 30, 2017. The increase in gross profit was driven by higher modular leasing and service revenues driven both by organic growth and through the ActonModSpace acquisition, as well as due to increased modular space leasing and Tyson acquisitions.modular space delivery and installation margins. The increase in gross profit from modular leasing and salesservice revenues was partially offset by an $5.7$34.8 million increase in depreciation of rental equipment primarily related to units acquired units in the Acton and Tyson acquisitions, as well as decreased gross profit of $2.0 million related to new and rental unit salesModSpace acquisition for the threesix months ended June 30, 2018.2019.
Adjusted EBITDA:Adjusted EBITDA increased $11.8$87.4 million, or 44.9%123.6%, to $38.1$158.1 million for the threesix months ended June 30, 20182019 from $26.3$70.7 million for the threesix months ended June 30, 2017.2018. The increase was driven by higher modular leasing and services gross profits discussed above, partially offset by increases in SG&A, excluding discrete items, of $9.5$39.4 million, primarily related to increased employee costs of which $2.7 was driven by increased public company costs including outside professional fees. The majority of the remaining increase was driven by increased headcount, occupancy, and indirect tax costs all of which are partially$18.4 million driven by the Actonincreased size of the workforce, net of realized employee cost synergies savings to date achieved as a result of the restructuring activities; and Tysonincreased occupancy costs of $6.0 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 65% of redundant real estate locations. The remaining increases of $15.0 million are primarily related to increased professional fees, insurance, computer, travel, office costs, bad debt and other expenses related to operating a larger business as a result of our recent acquisitions and our expanded employee base and branch network. Additionally, a gain recognized from the receipt of insurance proceeds related
Capital Expenditures for Rental Equipment: Capital expenditures for rental equipment increased $46.7 million, or 75.9%, to assets damaged during Hurricane Harvey contributed $1.8$108.2 million to Adjusted EBITDA for the threesix months ended June 30, 2018.
Capital Expenditures for Rental Equipment: Capital expenditures increased $5.1 million, or 19.7%, to $31.02019 from $61.5 million for the threesix months ended June 30, 2018 from $25.9 million for the three months ended June 30, 2017.2018. Net capital expenditures for rental equipment also increased $5.1$43.9 million, or 23.1%87.8%, to $27.2$93.9 million. The increases for both were driven by increased spend for refurbishments new fleet, and VAPS to drive modular space unit on rent and revenue growth and for maintenance of a larger fleet following our Acton and Tysonrecent acquisitions.

Modular - Other North America Segment
Revenue: Total revenue increased $3.5$22.6 million, or 29.2%80.1%, to $15.5$50.8 million for the threesix months ended June 30, 20182019 from $12.0$28.2 million for the threesix months ended June 30, 2017.2018. Modular leasing revenue increased $2.0$12.8 million, or 24.1%65.3%, driven by improved pricingvolumes and volumespricing in the quarter. Average modular space monthly rental rates increased 7.3% and average modular space units on rent increased by 6243,449 units, or 12.7%62.9%, for the period, resulting in a higherand average modular space utilization whichmonthly rental rates increased 3.8%. Improved volumes were driven by 710 bps.units acquired as part of the ModSpace acquisition and improved pricing was driven primarily through continued growth in our “Ready to
43


Work” solutions and increased VAPS penetration across the combined post-acquisition customer base. Modular delivery and installation revenues increased $2.0$1.2 million, or 100.0%, due primarily to a large camp installation during the quarter.19.0%. New unit sales revenue increased $0.3were $2.1 million or 37.5%. Rentaland $1.7 million, and rental unit sales revenue decreased $0.8was $8.8 million or 88.9%.
Gross Profit: Gross profit increased $1.1 million, or 28.9%, to $4.9and $0.6 million for the threesix months ended June 30, 2019 and 2018, from $3.8 millionrespectively. The increase in modular delivery and installation revenues, new unit sales, and rental unit sales were primarily driven by the ModSpace acquisition and our larger post-acquisition sales team and fleet size.
On a pro forma basis, including results of the WillScot and ModSpace for all periods presented, pro forma average modular space monthly rental rates increased $13, or 2.3%, for the threesix months ended June 30, 2017. The effects of favorable foreign currency movements2019. Modular space units on rent decreased 2.9% on a pro forma basis to 8,936 and pro forma utilization for our modular space units decreased to 55.7%, down 90 bps from 56.6% for the six months ended June 30, 2018.
Gross Profit: Gross profit increased gross profit by $0.1$9.5 million, relatedor 105.6%, to changes in$18.5 million for the Canadian dollar and Mexican peso in relation tosix months ended June 30, 2019 from $9.0 for the US dollar.six months ended June 30, 2018. The increase in gross profit, excluding the effects of foreign currency, was driven primarily by increased leasing and services revenues. Higher modular volumesrevenues and pricing were complimented bymargins as a result of higher modular deliveryspace units on rent and installation margins.average monthly rental rates. Additionally, rental unit sales gross profit increased due to higher volume. These increases were slightly offset by increased deprecationdepreciation of rental equipment of $0.4$3.0 million for threesix months ended June 30, 2018.2019.
Adjusted EBITDA: Adjusted EBITDA increased $1.3$8.4 million, or 52.0%125.4%, to $3.8$15.1 million for the threesix months ended June 30, 20182019 from $2.5$6.7 million for the threesix months ended June 30, 2017.2018. This increase was driven by increased leasing and services gross profit as a result of increased modular space volumes and average monthly rental rates.rates, increased rental unit sales gross profit, partially offset by increased SG&A, excluding discrete items, of $4.1 million, also driven by the ModSpace acquisition, consisting primarily of increased employee costs of $1.8 million and increased occupancy costs of $1.6 million.
Capital Expenditures for Rental Equipment: Capital expenditures of $1.7 million for the three months ended June 30, 2018 were flat compared to the three months ended June 30, 2017. Net capital expendituresrental equipment increased $0.8 million to $1.6 million, driven by the decrease of $0.8 million of proceeds from rental unit sales.
Corporate and Other
Gross Profit: The Corporate and other adjustments to revenue and gross profit pertain to the elimination of intercompany leasing transactions between the business segments.
Adjusted EBITDA: Corporate and other costs and eliminations to consolidated Adjusted EBITDA were a loss of $2.6 million for the three months ended June 30, 2017, compared to no costs for the three months ended June 30, 2018. In 2017, Corporate and other represented primarily SG&A costs related to the Algeco Group’s corporate costs, which were not incurred by the Company in 2018.
Comparison of Six Months Ended June 30, 2018 and 2017
 Six Months Ended June 30, 2018
(in thousands, except for units on rent and rates)Modular - US Modular - Other North America Total
Revenue$246,900
 $28,184
 $275,084
Gross profit$96,549
 $9,012
 $105,561
Adjusted EBITDA$70,716
 $6,692
 $77,408
Capital expenditures for rental equipment$61,455
 $3,308
 $64,763
Modular space units on rent (average during the period)48,841
 5,487
 54,328
Average modular space utilization rate72.2% 57.0% 70.3%
Average modular space monthly rental rate$541
 $557
 $543
Portable storage units on rent (average during the period)13,434
 364
 13,798
Average portable storage utilization rate69.8% 56.4% 69.4%
Average portable storage monthly rental rate$118
 $116
 $118

 Six Months Ended June 30, 2017
(in thousands, except for units on rent and rates)Modular - US Modular - Other North America Corporate & Other Total
Revenue$185,624
 $24,069
 $(295) $209,398
Gross profit$69,769
 $8,035
 $(283) $77,521
Adjusted EBITDA$50,012
 $5,625
 $(7,444) $48,193
Capital expenditures for rental equipment$47,958
 $2,344
 $—
 $50,302
Modular space units on rent (average during the period)35,438
 4,868
 —
 40,306
Average modular space utilization rate73.0% 49.6% —% 69.1%
Average modular space monthly rental rate$524
 $531
 $—
 $524
Portable storage units on rent (average during the period)12,394
 355
 —
 12,749
Average portable storage utilization rate72.9% 52.2% —% 72.1%
Average portable storage monthly rental rate$113
 $114
 $—
 $113
Modular - US Segment
Revenue: Total revenue increased $61.3 million, or 33.0%48.5%, to $246.9$4.9 million for the six months ended June 30, 20182019 from $185.6 million for the six months ended June 30, 2017. Modular leasing revenue increased $52.8 million, or 41.9%, driven by improved pricing and volumes. Average modular space monthly rental rates increased 3.2% for the six months ended June 30, 2018, and average modular space units on rent increased 13,403 units, or 37.8%. 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. Improved volumes were driven by units acquired as part of the Acton and Tyson acquisitions and organic unit on rent growth, as well as increased modular delivery and installation revenues on the combined rental fleet of 34.2%. The increases in leasing and services revenue were partially offset by decreases in sales revenues. New unit sales revenue decreased $1.6 million, or 12.7% and rental unit sales revenue decreased $3.0 million, or 34.5%. The decrease year over year in new and rental unit sales was as a result of lower volumes of sales opportunities and increased focus on our higher margin modular leasing business.
On a pro-forma basis, including results of Williams Scotsman, Acton, and Tyson for all periods presented, total revenues increased $10.2 million, or 4.3% year-over-year driven by organic growth in leasing and services revenues of $19.8 million, or 9.4%, driven by improved pricing and volumes. Pro-forma average modular space monthly rental rates increased $48, or 9.7% for the six months ended June 30, 2018, and pro-forma average modular space units on rent increased 1,195 units, or 2.5%. Pro-forma utilization for our modular space units increased to 72.2%, up 260 bps from 69.6% for the six months ended June 30, 2018. These increases were partially offset by an $9.6 million, or 36.5% decrease in our new and rental unit sales.
Gross Profit: Gross profit increased $26.8 million, or 38.4%, to $96.6 million for the six months ended June 30, 2018 from $69.8 million for the six months ended June 30, 2017. The increase in gross profit was driven by higher modular leasing and service revenues driven both by organic growth and through the Acton and Tyson acquisitions. The increases in gross profit from modular leasing and service revenues were partially offset by a $12.5 million increase in depreciation of rental equipment for the six months ended June 30, 2018 as a result of continued capital investment in our fleet, including additional depreciation related to the Acton and Tyson acquisitions.
Adjusted EBITDA: Adjusted EBITDA increased $20.7 million, or 41.4%, to $70.7 million for the six months ended June 30, 2018 from $50.0 million for the six months ended June 30, 2017. The increase was driven by higher modular leasing and services gross profits discussed above, as well as a gain recognized from the receipt of insurance proceeds related to assets damaged during Hurricane Harvey of $4.8$3.3 million for the six months ended June 30, 2018. These increases were partially offset by increases in SG&A, excluding discrete items, of $23.1 million, of which $6.2 million was driven by increased public company costs including outside professional fees. The majority of the remaining increase was driven by increased headcount, occupancy, and indirect tax costs all of which are partially driven by the Acton and Tyson acquisitions and our expanded employee base and branch network.
Capital Expenditures for Rental Equipment: Capital expenditures increased $13.5 million, or 28.1%, to $61.5 million for the six months ended June 30, 2018 from $48.0 million for the six months ended June 30, 2017. Net capital expenditures increased $10.7 million, or 27.2%, to $50.0 million. The increases for both were driven by increased spend for refurbishments, new fleet and VAPS to drive modular space unit on rent and revenue growth and for maintenance of a larger fleet following our Acton and Tyson acquisitions.

Modular - Other North America Segment
Revenue: Total revenue increased $4.2the ModSpace acquisition. Net capital expenditures decreased $6.6 million, or 17.5%244.4%, to $28.2negative $3.9 million for the six months ended June 30, 2018 from $24.0 million for the six months ended June 30, 2017. Modular leasing revenueas a result of increased $3.4 million, or 21.0%, driven by improved pricing and volumes. Average modular space monthly rental rates increased 4.9% and average modular space units on rent increased by 619 units, or 12.7% for the period, resulting in a higher modular space utilization which increased by 740 bps. Modular delivery and installation revenues increased $2.7 million, or 75.0%, due primarily to a large camp installation during the second quarter. New unit sales revenue decreased $0.6 million, or 26.1% and rental unit sales revenue decreased $1.3 million, or 68.4% associated with decreased sale opportunities.
Gross Profit: Gross profit increased $1.0 million, or 12.5%, to $9.0 million for the six months ended June 30, 2018 from $8.0 million for the six months ended June 30, 2017.The effects of favorable foreign currency movements increased gross profit by $0.3 million related to changes in the Canadian dollar and Mexican peso in relation to the US dollar. The increase in gross profit, excluding the effects of foreign currency, was driven primarily by higher leasing and services gross profits partially offset by lower new and rental unit sales as well as increased depreciation of rental equipment of $0.6 million, or 10.3%.
Adjusted EBITDA: Adjusted EBITDA increased $1.1 million, or 19.6%, to $6.7 million for the six months ended June 30, 2018 from $5.6 million for the six months ended June 30, 2017. This increase was driven by improved leasing and services gross profit, partially offset by increased SG&A of $0.5 million, or 6.0%.
Capital Expenditures for Rental Equipment: Capital expenditures increased $1.0 million, or 43.5%, to $3.3 million for the six months ended June 30, 2018 from $2.3 million for the six months ended June 30, 2017. Netperiod that exceeded capital expenditures increased $2.3 million to $2.7 million. The increases for both were driven primarily by investments in refurbishments of existing lease fleet and VAPS. A reduction in rental unit sales drove the remaining increase to net capital expenditures.equipment.
Corporate and Other
Gross Profit: The Corporate and other adjustments to revenue and gross profit pertain to the elimination of intercompany leasing transactions between the business segments.
Adjusted EBITDA: Corporate and other costs and eliminations to consolidated Adjusted EBITDA were a loss of $7.4 million for the six months ended June 30, 2017, compared to no costs for the six months ended June 30, 2018. In 2017, Corporate and other represented primarily SG&A costs related to the Algeco Group’s corporate costs, which were not incurred by the Company in 2018.
Other Non-GAAP Financial Data and Reconciliations
We use certain non-GAAP financial information that we believe is important for purposes of comparison to prior periods and development of future projections and earnings growth prospects. This information is also used by management to measure the profitability of our ongoing operations and analyze our business performance and trends.
We evaluate business segment performance on Adjusted EBITDA, a non-GAAP measure that excludes certain items as described in the reconciliation of our consolidated net loss to Adjusted EBITDA reconciliation below. We believe that evaluating segment performance excluding such items is meaningful because it provides insight with respect to intrinsic operating results of the Company.
We also regularly evaluate gross profit by segment to assist in the assessment of the operational performance of each operating segment. We consider Adjusted EBITDA to be the more important metric because it more fully captures the business performance of the segments, inclusive of indirect costs.
Management also evaluates Free Cash Flow as defined in Item 2, Liquidity and Capital Resources, as it provides useful additional information concerning cash flow available to meet future debt service obligations and working capital requirements.
Adjusted EBITDA
We define EBITDA as net income (loss) plus interest (income) expense, income tax expense (benefit), depreciation and amortization. Our 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•Non-cash impairment charges associated with 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.
long-lived assets.
•Restructuring costs 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.
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.

44



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 WSC’sWillScot’s results as reported under 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.
Adjusted EBITDA
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 table provides an unaudited reconciliation of Net (loss) income (loss) to Adjusted EBITDA:
Three Months Ended June 30, Six Months Ended June 30,Three Months Ended June 30, Six Months Ended June 30, 
(in thousands)2018 2017 2018 2017(in thousands)2019201820192018
Net income (loss)$379
 $(5,896) $(6,456) $(16,075)
Income from discontinued operations, net of tax—
 3,840
 —
 6,045
Income (loss) from continuing operations379
 (9,736) (6,456) (22,120)
Net (loss) income Net (loss) income $(11,775)$379 $(22,936)$(6,456)
Income tax benefit(6,645) (5,269) (7,065) (10,138)Income tax benefit (1,180)(6,645)(802)(7,065)
Loss from continuing operations before income tax(6,266) (15,005) (13,521) (32,258)
Interest expense, net12,155
 26,398
 23,874
 48,475
Loss on extinguishment of debt Loss on extinguishment of debt 7,244 — 7,244 — 
Interest expense Interest expense 32,524 12,155 64,496 23,874 
Depreciation and amortization25,040
 19,364
 51,321
 38,025
Depreciation and amortization 47,135 25,040 91,242 51,321 
Currency losses (gains), net572
 (6,497) 1,596
 (8,499)
Currency (gains) losses, net Currency (gains) losses, net (354)572 (670)1,596 
Goodwill and other impairments Goodwill and other impairments 2,786 — 5,076 — 
Restructuring costs449
 684
 1,077
 968
Restructuring costs 1,150 449 7,103 1,077 
Transaction fees4,118
 776
 4,118
 862
Transaction costs Transaction costs — 4,118 — 4,118 
Integration costs4,785
 —
 7,415
 —
Integration costs 8,242 4,785 18,380 7,415 
Stock compensation expense1,054
 —
 1,175
 —
Stock compensation expense 1,900 1,054 3,190 1,175 
Other expense9
 527
 353
 620
Other expense 1,055 9 912 353 
Adjusted EBITDA$41,916
 $26,247
 $77,408
 $48,193
Adjusted EBITDA $88,727 $41,916 $173,235 $77,408 
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 a measurementmeasurements of our financial performance under GAAP and should not be considered as an alternative to gross profit, gross profit percentage, or other performance measure 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 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:Profit and Adjusted Gross Profit Percentage:
Three Months Ended June 30, Six Months Ended June 30, 
(in thousands)2019201820192018
Revenue (A)$266,125 $140,333 $521,133 $275,084 
Gross profit (B)$103,896 $54,640 $208,550 $105,561 
Depreciation of rental equipment43,968 23,470 85,071 47,315 
Adjusted Gross Profit (C)$147,864 $78,110 $293,621 $152,876 
Gross Profit Percentage (B/A)39.0 %38.9 %40.0 %38.4 %
Adjusted Gross Profit Percentage (C/A)55.6 %55.7 %56.3 %55.6 %

45

 Three Months Ended June 30, Six Months Ended June 30,
(in thousands)2018 2017 2018 2017
Gross profit$54,640
 $39,583
 $105,561
 $77,521
Depreciation of rental equipment23,470
 17,474
 47,315
 34,194
Adjusted Gross Profit$78,110
 $57,057
 $152,876
 $111,715


Net CapexCAPEX and Net CAPEX for Rental Equipment
We define Net Capital Expenditures ("Net CAPEX") and Net CAPEX for Rental Equipment as capital expenditures for purchases and capitalized refurbishments of rental equipment and purchases of property, plant and equipment (collectively "Total Capital Expenditures"), reduced by proceeds from the sale of rental equipment. Net CAPEX for Rental Equipment is defined as capital expenditures for purchases and capitalized refurbishments of rental equipment, reduced by proceeds from the sale of rental equipment. Our management believes that the presentation of Net Capital ExpendituresCAPEX and Net CAPEX for Rental Equipment provides useful information to investors regarding the net capital invested into our rental fleet each year to assist in analyzing the performance of our business.
The following table provides an unaudited reconciliation of purchase of rental equipment to Net Capital ExpendituresCAPEX and to Net CAPEX for Rental Equipment:
Three Months Ended June 30, Six Months Ended June 30, 
(in thousands)2019201820192018
Total purchases of rental equipment and refurbishments$(61,215)$(32,679)$(113,088)$(64,763)
Total proceeds from sale of rental equipment  11,482 3,905 23,083 12,033 
Net Capital Expenditures for Rental Equipment(49,733)(28,774)(90,005)(52,730)
Purchase of property, plant and equipment (2,270)(616)(3,899)(1,616)
Net Capital Expenditures$(52,003)$(29,390)$(93,904)$(54,346)
 Three Months Ended June 30, Six Months Ended June 30,
(in thousands)2018 2017 2018 2017
Total purchase of rental equipment and refurbishments$(32,679) $(29,326) $(64,763) $(54,223)
Total purchases of rental equipment from discontinued operations—
 (1,701) —
 (3,921)
Total purchases of rental equipment from continuing operations(32,679) (27,625) (64,763) (50,302)
Proceeds from sale of rental equipment$3,905
 $4,778
 $12,033
 $10,622
Net Capital Expenditures for Rental Equipment$(28,774) $(22,847) $(52,730) $(39,680)

Adjusted EBITDA less Net CAPEX
We define Adjusted EBITDA less Net CAPEX as Adjusted EBITDA less the gross profit on sale of rental units, less Net Capital Expenditures. Adjusted EBITDA less Net CAPEX is not a measurement of our financial performance under GAAP and should not be considered as an alternative to net income (loss) or other performance measure derived in accordance with GAAP. In addition, our measurement of Adjusted EBITDA less Net CAPEX may not be comparable to similarly titled measures of other companies. Our management believes that the presentation of Adjusted EBITDA less Net CAPEX provides useful information to investors regarding our results of operations because it assists in analyzing the performance of our business.

The following tables provide unaudited reconciliations of Net (loss) income to Adjusted EBITDA less Net CAPEX on a segment basis for the three and six months ended June 30, 2018 and 2017:
 Three Months Ended June 30, 2018
(in thousands)Modular - US Modular - Other North America Corporate & Other Consolidated
Net (loss) income$(5,533) $(733) $6,645
 $379
Income from discontinued operations, net of tax—
 —
 —
 —
Loss from continuing operations(5,533) (733) 6,645
 379
Income tax benefit(a)
—
 —
 (6,645) (6,645)
Loss from continuing operations before income tax(5,533) (733) —
 (6,266)
Interest expense, net11,663
 492
 —
 12,155
Operating income (loss)6,130
 (241) —
 5,889
Depreciation and amortization21,571
 3,469
 —
 25,040
EBITDA27,701
 3,228
 —
 30,929
Currency losses, net114
 458
 —
 572
Restructuring costs449
 —
 —
 449
Transaction Fees4,049

69

—

4,118
Integration costs4,785
 —
 —
 4,785
Stock compensation expense1,054
 —
 —
 1,054
Other (income) expense(48) 57
 —
 9
Adjusted EBITDA38,104
 3,812
 —
 41,916
Less:       
Rental unit sales2,309
 126
 —
 2,435
Rental unit cost of sales1,164
 99
 —
 1,263
Gross profit on rental unit sales1,145
 27
 —
 1,172
Gain on insurance proceeds1,765
 —
 —
 1,765
Less:       
Total capital expenditures31,438
 1,857
 —
 33,295
Proceeds from rental unit sales3,779
 126
 —
 3,905
Net Capital Expenditures27,659
 1,731
 —
 29,390
Adjusted EBITDA less Net CAPEX$7,535
 $2,054
 $—
 $9,589

 Three Months Ended June 30, 2017
(in thousands)Modular - US Modular - Other North America Corporate & Other Consolidated
Net loss320
 (1,442) (4,774) (5,896)
Income from discontinued operations, net of tax(b)
—
 —
 3,840
 3,840
Loss from continuing operations320
 (1,442) (8,614) (9,736)
Income tax benefit(a)
—
 —
 (5,269) (5,269)
Loss from continuing operations before income tax320
 (1,442) (13,883) (15,005)
Interest expense, net15,953
 1,038
 9,407
 26,398
Operating income (loss)16,273
 (404) (4,476) 11,393
Depreciation and amortization15,830
 3,189
 345
 19,364
EBITDA32,103
 2,785
 (4,131) 30,757
Currency gains, net(5,800) (294) (403) (6,497)
Restructuring costs—
 —
 684
 684
Transaction fees46
 —
 730
 776
Other (income) expense(20) 15
 532
 527
Adjusted EBITDA26,329
 2,506
 (2,588) 26,247
Less:       
Rental unit sales3,835
 943
 —
 4,778
Rental unit cost of sales1,923
 652
 —
 2,575
Gross profit on rental unit sales1,912
 291
 —
 2,203
Less:       
Total capital expenditures(b)
26,923
 1,783
 1,992
 30,698
Total capital expenditures from discontinued operations—
 —
 (1,992) (1,992)
Total capital expenditures from continuing operations26,923
 1,783
 —
 28,706
Proceeds from rental unit sales3,835
 943
 —
 4,778
Proceeds from rental unit sales from discontinued operations—
 —
 —
 —
Proceeds from rental unit sales from continuing operations3,835
 943
 —
 4,778
Net Capital Expenditures23,088
 840
 —
 23,928
Adjusted EBITDA less Net CAPEX$1,329
 $1,375
 $(2,588) $116

 Six Months Ended June 30, 2018
(in thousands)Modular - US Modular - Other North America Corporate & Other Consolidated
Net (loss) income$(10,841) $(2,680) $7,065
 $(6,456)
Income from discontinued operations, net of tax—
 —
 —
 —
Loss from continuing operations(10,841) (2,680) 7,065
 (6,456)
Income tax benefit(a)
—
 —
 (7,065) (7,065)
Loss from continuing operations before income tax(10,841) (2,680) —
 (13,521)
Interest expense, net22,823
 1,051
 —
 23,874
Operating income (loss)11,982
 (1,629) —
 10,353
Depreciation and amortization44,463
 6,858
 —
 51,321
EBITDA56,445
 5,229
 —
 61,674
Currency losses, net271
 1,325
 —
 1,596
Restructuring costs1,067
 10
 —
 1,077
Transaction Fees4,049
 69
 —
 4,118
Integration costs7,415
 —
 —
 7,415
Stock compensation expense1,175
 —
 —
 1,175
Other expense294
 59
 —
 353
Adjusted EBITDA70,716
 6,692
 —
 77,408
Less:       
Rental unit sales5,663
 583
 —
 6,246
Rental unit cost of sales3,193
 385
 —
 3,578
Gross profit on rental unit sales2,470
 198
 —
 2,668
Gain on insurance proceeds4,765
 —
 —
 4,765
Less:       
Total capital expenditures62,947
 3,432
 —
 66,379
Proceeds from rental unit sales11,450
 583
 —
 12,033
Net Capital Expenditures51,497
 2,849
 —
 54,346
Adjusted EBITDA less Net CAPEX$11,984
 $3,645
 $—
 $15,629

 Six Months Ended June 30, 2017
(in thousands)Modular - US Modular - Other North America Corporate & Other Consolidated
Net loss(5,210) (2,458) (8,407) (16,075)
Income from discontinued operations, net of tax(b)
—
 —
 6,045
 6,045
Loss from continuing operations(5,210) (2,458) (14,452) (22,120)
Income tax benefit(a)
—
 —
 (10,138) (10,138)
Loss from continuing operations before income tax(5,210) (2,458) (24,590) (32,258)
Interest expense, net31,512
 2,216
 14,747
 48,475
Operating income (loss)26,302
 (242) (9,843) 16,217
Depreciation and amortization30,993
 6,331
 701
 38,025
EBITDA57,295
 6,089
 (9,142) 54,242
Currency gains, net(7,399) (481) (619) (8,499)
Restructuring costs—
 —
 968
 968
Transaction costs46
 —
 816
 862
Other expense70
 17
 533
 620
Adjusted EBITDA50,012
 5,625
 (7,444) 48,193
Less:       
Rental unit sales8,712
 1,910
 —
 10,622
Rental unit cost of sales5,036
 1,247
 —
 6,283
Gross profit on rental unit sales3,676
 663
 —
 4,339
Less:       
Total capital expenditures(b)
49,602
 2,424
 4,212
 56,238
Total capital expenditures from discontinued operations—
 —
 (4,212) (4,212)
Total capital expenditures from continuing operations49,602
 2,424
 —
 52,026
Proceeds from rental unit sales8,712
 1,910
 —
 10,622
Proceeds from rental unit sales from discontinued operations—
 —
 —
 —
Proceeds from rental unit sales from continuing operations8,712
 1,910
 —
 10,622
Net Capital Expenditures40,890
 514
 —
 41,404
Adjusted EBITDA less Net CAPEX$5,446
 $4,448
 $(7,444) $2,450
(a) The Company does not allocate expenses on a segment level. As such, we have included tax income benefit in Corporate and other for the purpose of this reconciliation.
(b) For the purpose of this reconciliation, the Company has included income and capital expenditures related to discontinued operations in Corporate and other as it all pertained to the Remote Accommodations segment which was discontinued as of November 29, 2017.
Liquidity and Capital Resources
Overview
WSCWillScot 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 facilitiesborrowings under the ABL Facility, and sales of equity and debt securities. We believe that our liquidity sources and operating cash flows are sufficient to address our future operating, debt service and capital requirements.
We may from time to time seek to retire or purchase our warrants through cash purchases and/or exchanges for equity securities, in open market purchases, privately-negotiated transactions, exchange offers or otherwise. Any such transactions will depend on prevailing market conditions, our liquidity requirements contractual restrictions and other factors.over the next twelve months.
ABL Facility 
On November 29, 2017, WS Holdings, WSII and certain of its subsidiaries entered into the ABL Facility with an aggregate principal amount of up to $600.0 million. The ABL Facility, which matures on May 29, 2022, comprises (i) a $530 million asset-

based revolving credit facility for WSIIIn July and certain of its domestic subsidiaries and (ii) a $70 million asset-based revolving credit facility for Williams Scotsman of Canada, Inc.
Borrowings underAugust 2018, the Company entered into three amendments to the ABL Facility atthat, among other things, (i) permitted the Borrower’s option, bear interest at either an adjusted LIBOR or a base rate, in each case, plus an applicable margin. The applicable margin is 2.50% for LIBOR borrowingsModSpace acquisition and 1.50% for base rate borrowings. The ABL Facility requires the payment of an annual commitment fee on the unused available borrowings of between 0.375% and 0.5% per annum. At June 30, 2018, the weighted average interest rate for borrowings underCompany’s financing thereof, (ii) increased the ABL Facility was 4.58%.limit to $1.425 billion in the aggregate, with an accordion feature allowing up 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.
At June 30, 2018,2019, the Borrowers had $219.6$486.9 million of available borrowing capacity under the ABL Facility, including $153.1$352.5 million of available capacity under the US facilityABL Facility and $66.5$134.4 million of available capacity under the Canadian facility.ABL Facility.
Senior Secured Notes 
On November, 29, 2017, WSII issued the Notes with a $300.0 million aggregate principal amount that bear interest at 7.875% and mature on December 15, 2022. The net proceeds, along with other funding obtained in connection with the Business Combination, were used to repay $669.5 million outstanding under WSII’s former credit facility, to repay $226.3 million of notes due to affiliates and related accrued interest, and to pay $125.7 million of the cash consideration paid for 100% of the outstanding equity of WSII. Interest on the Notes is payable semi-annually on June 15 and December 15 beginning June 15, 2018.
Cash Flow Comparison of the Six Months Ended June 30, 20182019 and 20172018
Significant factors driving our liquidity position include cash flows generated from operating activities and capital expenditures. Our ability to fund our capital needs will be affected by our ongoing ability to generate cash from operations and access to capital markets.
The following summarizes our change in cash flowsand cash equivalents for the periods presented on an actual currency basis:presented:
 Six Months Ended June 30,
(in thousands)2018 2017
Net cash from operating activities$18,800
 $24,124
Net cash from investing activities(77,671) (111,393)
Net cash from financing activities57,963
 86,845
Effect of exchange rate changes on cash and cash equivalents(96) 254
Net change in cash and cash equivalents$(1,004) $(170)
The cash flow data for the six months ended June 30, 2017 includes the activity of the Remote Accommodations Business, which is no longer a part of the company following the Carve-out Transaction, and is presented as discontinued operations in the the condensed consolidated financial statements.
Six Months Ended June 30, 
(in thousands)2019 2018 
Net cash from operating activities$60,054 $18,800 
Net cash from investing activities(85,013)(77,671)
Net cash from financing activities21,351 57,963 
Effect of exchange rate changes on cash and cash equivalents140 (96)
Net change in cash and cash equivalents$(3,468)$(1,004)
Cash Flows from Operating Activities
Cash provided by operating activities for the six months ended June 30, 20182019 was $18.8$60.1 million as compared to $24.1$18.8 million for the six months ended June 30, 2017,2018, an increase of $41.3 million. The increase was primarily due to an increase of $51.6 million of net income, adjusted for non-cash items, during 2019 compared to 2018 due to the impact of the ModSpace acquisition on revenue and gross profit, which is reflected in the first half of 2019, but is not included in 2018. The increase in net income, adjusted for non-cash items, was partially offset by a decrease of $5.3 million.$10.3 million in the net movements
46


of the operating assets and liabilities. The reductiondecrease related to the operating assets and liabilities was attributable to an increase in accounts receivable and an increase in cash providedinterest payments in the first six months of 2019, partially offset by operating activities was predominantly due to higher use of cash to pay downan increase in accounts payable and accrued liabilities associated both to transaction expenses incurred for the Business Combination as well as normal operating liabilities. Additionally, the cash flow from operating activities for the six months ended June 30, 2017 include cash generated from the Remote Accommodations Business which is no longer a part of the Company following the Carve-out Transaction that occurred in the fourth quarter of 2017.deferred revenue.
Cash flowsFlows from investing activitiesInvesting Activities
Cash used in investing activities for the six months ended June 30, 2018 was $77.72019 was $85.0 million as compared to $111.4$77.7 million for the six months ended June 30, 2017, a decrease2018, an increase of $33.7$7.3 million. The reductionoverall increase in cash used in investing activities was principally thedriven by an increase in capital expenditures of $50.6 million in 2019 that was primarily a result of increased refurbishments of existing fleet, following our recent acquisitions, and purchases of VAPS to drive revenue growth. The increase in cash used in investing activities was partially offset by a $67.9$24.0 million decrease in cash used in lending to affiliates, a $1.4for business acquisitions, an $11.1 million increase in proceeds from the sale of rental equipment, and a $0.7an $8.2 million increase in proceeds from the sale of property, plant, and equipment, which was partially offset byequipment. The decrease in cash used in business acquisitions is due to the $24.0 million purchaseacquisition of Tyson and an increasein the first half of $10.6 million2018 with no business acquisitions during the first half 2019. Proceeds from the sale of rental equipment capital expenditures. In 2018, we did not engage in any lending activitiesincreased due to increased sales volume as a result of the notes dueacquisition of ModSpace. Proceeds from affiliates were settledthe sale of property, plant and equipment increased primarily as a result of the sale of two held for sale properties during the second quarter of 2019 as part of the Business Combination. The increase in proceeds for rental equipmentongoing integration and property, plant and equipment was driven byconsolidation process following the receiptacquisition of insurance proceeds for assets damaged during Hurricane Harvey. The increase in capital expenditures was driven primarily by strategic investment in refurbishment of existing fleet, purchase of VAPS, and new fleet purchases to maintain and grow units on rent.ModSpace.
Cash flowsFlows from financing activitiesFinancing Activities
Cash provided by financing activities for the six months ended June 30, 2019 was $21.4 million as compared to $58.0 million for the six months ended June 30, 2018, a decrease of $36.6 million. The decrease is primarily driven by the repayment of the $200.0 million Unsecured Notes and the corresponding $6.2 million of premium payments, $17.0 million of decreased borrowings, net of repayments, on the Company's ABL Facility during 2019, and $2.7 million of payments of financing costs, net of premiums received, related to the Tack-on Notes. We borrowed $24.0 million on the ABL Facility to purchase Tyson in the first quarter of 2018, and did not have any acquisitions in 2019, which drove the overall decrease in borrowings on the ABL Facility. The decrease in cash provided by financing activities was $58.0partially offset by the issuance of $190.0 million of Tack-On Notes in the second quarter of 2019.
Free Cash Flow
Free Cash Flow is a non-GAAP measure. Free Cash Flow is defined 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. The following table provides a reconciliation of Net cash provided by operating activities to Free Cash Flow.
Six Months Ended June 30, 
(in thousands)20192018
Net cash provided by operating activities$60,054 $18,800 
Purchase of rental equipment and refurbishments(113,088)(64,763)
Proceeds from sale of rental equipment23,083 12,033 
Purchase of property, plant and equipment(3,899)(1,616)
Proceeds from the sale of property, plant and equipment8,891 681 
Free Cash Flow$(24,959)$(34,865)
Free Cash Flow for the six months ended June 30, 2019 was an outflow of $25.0 million as compared to $86.8an outflow of $34.9 million for the six months ended June 30, 2017, a decrease2018, an increase in Free Cash Flow of $28.8$9.9 million. The reduction in cash provided by financing activities is primarilyFree Cash Flow increased year over year principally driven by $75.0increases in Adjusted EBITDA of $95.8 million, decreaseor 123.8%, for the six months ended June 30, 2018 and an increase of $8.2 million in borrowingsproceeds from notes due to affiliates. The notes due from affiliates were settled in connection with the Business Combination in the fourth quartersale of 2017property, plant, and were driven by a centralized cash management strategy utilized by the Algeco Group. The reduction in cash used in financing activities was partially offset by a $34.5 million increase in borrowings, net of repayments,equipment as a result of drawingthe sale of surplus real estate in the period. These increases were partially offset by an increase in integration, restructuring, and transaction costs incurred of $12.9 million primarily related to the ModSpace integration, increased interest paid during the period of $43.0 million due to increased debt on the US ABL Facility during 2018 to purchase Tyson and $10.9 million in financing cost payments in the first quarter of 2017 associated with an amendmentas a result of the revolving credit facility that WSII was party to as partissuance of the Algeco Group, prior to2023 Secured Notes and the Business Combination.Unsecured Notes which were not in place during the six months ended June 30, 2018, and a Net CAPEX increase of $39.6 million as a result of the increased fleet size and our investment in refurbishments of rental equipment and VAPS.


Contractual Obligations
Other than changes which occur in the normal course of business, there were no significant changes to the contractual obligations reported in our 20172018 Form 10-K as updated in our Form 10-Q for the three and six months ended June 30, 2018.2019.


47


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.

Critical Accounting Policies and Estimates
Our discussion and analysis of our financial condition, results of operations, liquidity and capital resources is based on our condensed 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.
Our significant accounting policies are described in Note 1 of the audited consolidated financial statements included in our 2017 Form 10-K. The US Securities and Exchange Commission (the “SEC”) suggests companies provide additional disclosure on those accounting policies considered most critical. The SEC considers an accounting policy to be critical if it is important to our financial condition and results of operations and requires significant judgments and estimates on the part of management in its application. For the six months ended June 30, 2018, we have provided an additional disclosure on our stock-based compensation policies as described in Note 11 of this Form 10-Q.application. For a complete discussion of our significant critical accounting policies, see the “Critical Accounting Policies and Estimates” section in Part II, Item 7 of our Annual Report on Form 10-K for the MD&Afiscal year ended December 31, 2018.
Other than adoption of recent accounting standards as discussed in Note 1 to the notes to our 2017 Form 10-K.unaudited condensed consolidated financial statements, there were no significant changes to our critical accounting policies during the six months ended June 30, 2019.

Recently Issued Accounting Standards
Refer to Part I, Item 1, Note 1 of the notes to our financial statements included in this Form 10-Q for our assessment of recently issued and adopted accounting standards.

Cautionary Note Regarding Forward-Looking Statements
This Quarterly Report on Form 10-Q includescontains forward-looking statements within the meaning of the U.S. Private Securities Litigation Reform Act of 1995 and Section 27A21E of the Securities Act of 1933,1934, as amended (the “Securities Act”),amended. The words “estimates,” “expects,” “anticipates,” “believes,” “forecasts,” “plans,” “intends,” “may,” “will,” “should,” “shall,” “outlook,” “guidance” and Section 21Evariations of the Exchange Act. Thesethese 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 expectations forobjectives.
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 post-combination business. Specifically,forward-looking statements. Although WillScot believes 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, statements relating to: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;operations and achieve desired synergies;
market conditions and economic factors beyond our control;
our ability to properly design, manufacture, repair and maintain our rental equipment;
our operating results or financial estimates fail to meet or exceed our expectations;
operational, economic, political and regulatory risks;
•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;
increases in raw material and labor costs;
•our reliance on third party manufacturers and suppliers;
•risks associated with labor relations, labor costs and labor disruptions;
•failure to retain key personnel;
•and such other risks and uncertainties described in the effect of impairment charges onperiodic reports we file with the SEC from time to time (including our operating results;
our inability to recognize or use deferred tax assets and tax loss carry forwards;
our obligations under various laws and regulations;
the effect of litigation, judgments, orders or regulatory proceedings on our business;
unanticipated changes in our tax obligations;
any failure of our management information systems;
our ability to design, implement and maintain effective internal controls, including disclosure controls and controls over financial reporting;
natural disasters and other business disruptions;
our exposure to various possible claims and the potential inadequacy of our insurance;
our ability to deploy our units effectively, including our ability to close projected unit sales;

any failure by our prior owner or its affiliates to perform under or comply with our transition services and intellectual property agreements;
our ability to fulfill our public company obligations;
our subsidiaries’ ability to meet their debt service requirements and obligations;
our subsidiaries’ ability to take certain actions, or to permit us to take certain actions, under the agreements governing their indebtedness; and
other factors detailed under the section entitled “Risk Factors” in Part I, Item 1A of our Annual Report on Form 10-K for the fiscal year endedending December 31, 2017.2018), which are available through the SEC’s EDGAR system at www.sec.gov and on our website.
We undertakeAny forward-looking statement speaks only at the date which it is made, and WillScot undertakes no obligation, and disclaims 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.


48


ITEM 3.Quantitative and Qualitative Disclosures about Market Risk
There have been no significantITEM 3. 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 marketABL Facility, which bears interest at variable rates based on LIBOR. We had $920.5 million in outstanding principal under the ABL Facility at June 30, 2019.
In order to manage this risk, since December 31, 2017. ForOn November 6, 2018, WSII entered into 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 provides for WillScot to pay a discussionfixed 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 synthetically fixed rate of 5.56% on the $400.0 million notional amount, when including the current applicable margin.
An increase in interest rates by 100 basis points on our ABL Facility, inclusive of the impact of our exposureinterest rate swaps, would increase our quarter to market risk, referdate interest expense by approximately $2.3 million.
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. 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 Annual Reportforeign 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 Form 10-K for the year ended December 31, 2017.condensed consolidated statements of operations.
To date, we have not entered into any hedging arrangements with respect to foreign currency risk.

ITEM 4.Controls and Procedures
ITEM 4. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
We carried out an evaluation, under the supervisionOur management, with participation of our Chief Executive Officer and Chief Financial Officer, ofhas evaluated the effectiveness of the design and operation of our disclosure controls and procedures (asas defined in RulesRule 13a-15(e) and 15d-15(e) under the Exchange Act)Act, as of June 30, 2018.2019. Based upon theirthat evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were not effective as of June 30, 2018, due to the existence of a previously reported material weaknesses in our internal control over financial reporting.
Notwithstanding a material weakness in internal control over financial reporting, our management concluded that our condensed consolidated financial statements in this quarterly report on Form 10-Q present fairly, in all material respects, the Company’s consolidated financial position, results of operations and cash flows as of the dates, and for the periods presented, in conformity with generally accepted accounting principles.
Description of Material Weakness as of December 31, 2017
As disclosed in further detail in “Part II - Item 9A - Controls and Procedures” of the 2017 Annual Report, we and our independent registered public accounting firm identified material weaknesses in our internal control over financial reporting - specifically, ineffective controls over accounting for income taxes and reverse acquisition accounting. These control deficiencies resulted in numerous adjustments and disclosures that were corrected prior to the issuance of our 2017 financial statements.
Remediation Plans
During our second quarter ended June 30, 2018, we continued to implement a remediation plan that addresses the material weaknesses in internal control over financial reporting through the following actions:
Increased involvement on a quarterly basis of our third-party consultants dedicated to determining the appropriate accounting for material and complex tax and unique business transactions;
Review of the tax accounting process to identify and implement enhanced processes and related internal control review procedures; and
Adding additional review controls to approve complex accounting and related calculations.
Under the direction of the Audit Committee, management will continue to review and make necessary changes to the overall design of the Company’s internal control environment, as well as policies and procedures to improve the overall effectiveness of internal control over financial reporting.
We believe the measures described above will remediate the control deficiencies identified and will strengthen our internal control over financial reporting. As management continues to evaluate and work to improve internal control over financial reporting, we may take additional measures to address control deficiencies or determine to modify, or in appropriate circumstances not to complete, certain of the remediation measures described above. These controls must be in place and operating effectively for a sufficient period of time in order to validate the full remediation of the material weaknesses. We expect that the remediation of the material weaknesses will be complete as of December 31, 2018.2019.
Changes in Internal Controls
In December 2017 and January 2018 we acquired Acton and Tyson for $237.1 million and $24.0 million, respectively (see Note 2 to the accompanying financial statements). During the second quarter of 2018, we transitioned all the business

processes of the acquired companies onto our existing platforms. We are continuing to integrate Acton and Tyson into our existing control procedures, but we do not expect changes to significantly affect our internal control over financial reporting.
Other than the items discussed above, thereThere were no changes in our internal control over financial reporting that occurred during during our quarter ended June 30, 20182019, that materially affected or are reasonably likely to materially affect, our internal control over financial reporting.


49


PART II
ITEM 1.
ITEM 1. Legal Proceedings
We are 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 assess these matters on a case-by-case basis as they arise and establish reserves as required.    
As of June 30, 2018,2019, there waswere no material pending legal proceedings in which we or any of our subsidiaries are a party or to which any of our property is subject.

ITEM 1A.Risk Factors
Risks relatedITEM 1A. Risk Factors
The Company’s financial position, results of operations and cash flows are subject to various risks, many of which are not exclusively within the Company’s control, which may cause actual performance to differ materially from historical or projected future performance. In addition to the ModSpace Acquisitionother information set forth in this report, you should carefully consider the risk factors discussed in Item 1A. of our Annual Report on Form 10-K for the year ended December 31, 2018, which have not materially changed other than as reflected below.
The ModSpace AcquisitionTrade policies and changes in trade policies, including the imposition of tariffs, their enforcement and downstream consequences, may have a material adverse impact on our business, results of operations, and outlook.
Tariffs and/or other developments with respect to trade policies, trade agreements, and government regulations could have a material adverse impact on the Company's business, financial condition and results of operations. For example, the United States government has imposed tariffs on steel, aluminum and lumber imports from certain countries, which could result in increased costs to the Company 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 United States 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 completed within the expected timeframe, if at all,able to pass such increased costs on to our customers, and the failure to complete the acquisition may negatively affect the price of our common stock and could adversely affect our financial results.
The ModSpace Acquisition is subject to risks and uncertainties, including: (i) the risk that it may not be completed, or completed within the expected timeframe, including as a result of the possibility that a governmental entity may prohibit, delay or refuse an approval required to complete the acquisition; or (ii) costs relating to the acquisition, including the financing thereof, may be greater than expected. If the acquisition is not completed, or there are significant delays in completing it, the trading price of our common stock could be negatively impacted and our business and financial results may be adversely affected. The failure to consummate the acquisition could also result in a negative reaction from the financial markets, particularly if the current market prices reflect market assumptions that the acquisition will be completed, which could cause the value of our common stock to decline. If the ModSpace Acquisition does not close due to the occurrence of certain regulatory events, we may be required to pay to ModSpace a $35.0 million termination fee.
We may not realize the anticipated cost synergies from the ModSpace Acquisition.
The anticipated benefits of the ModSpace Acquisition, including anticipated annual cost savings, will depend on our ability to realize anticipated synergies. Our success in realizing these cost synergies, and the timing thereof, will depend our ability to integrate ModSpace successfully. See "We may fail to realize the anticipated benefits of the ModSpace Acquisition or those benefits may take longer to realize than expected."
Even if we integrate ModSpace successfully, we may not realize the full benefits of the anticipated cost synergies, and we cannot guarantee that these benefits will be achieved within anticipated timeframes or at all. For example, we may not be able to eliminate duplicative costs. Moreover,secure sources of certain products and materials that are not subject to tariffs on a timely basis. Although we may incur unanticipated expenses in connection with the integration. While it is anticipated that certain expenses will be incurredactively monitor our procurement policies and practices to achieve cost synergies,avoid undue reliance on foreign-sourced goods subject to tariffs, when practicable, such expenses are difficult to estimate accurately and may exceed current estimates. Accordingly, the benefits from the ModSpace Acquisition may be offset by costs incurred to, or delays in, integrating the businesses.
We may fail to realize the anticipated benefits of the ModSpace Acquisition or those benefits may take longer to realize than expected.
Our ability to realize the anticipated benefits of the ModSpace Acquisition (including realizing revenue growth opportunities, annual cost savings and certain tax benefits) will dependdevelopments could have a material adverse impact on our ability to integrate ModSpace's business with our business, which is a complex, costly and time-consuming process. We will be required to devote significant management attention and resources to integrate the business practices and operations of Williams Scotsman and ModSpace. The integration process may disrupt our business and, if implemented ineffectively, could restrict the realization of the forecast benefits. The failure to meet the challenges involved in the integration process and to realize the anticipated benefits of the ModSpace Acquisition could cause an interruption of, or a loss of momentum in, our operations and could adversely affect our business, financial condition and results of operations.
The integration may also result in material unanticipated problems, expenses, liabilities, competitive responses, loss of customers and other business relationships. Additional integration challenges include:
diversion of management's attention to integration matters;
difficulties in achieving anticipated cost savings, synergies, business opportunities and growth prospects from the acquisition; 
difficulties in the integration of operations and systems;
difficulties in conforming standards, controls, procedures and accounting and other policies, business cultures and compensation structures; 
difficulties in the assimilation of employees; 
duplicate and competing products; 
difficulties in managing the expanded operations of a significantly larger and more complex company; 

challenges in keeping existing customers and obtaining new customers, including customers that may not consent to the assignment of their contracts or agree to enter into a new contract with us; 
challenges in attracting and retaining key personnel; 
the impact of potential liabilities we may be inheriting from ModSpace; and 
coordinating a geographically dispersed organization.
Many of these factors will be outside of our control. Any one of them could result in increased costs and decreases in the amount of expected revenues and diversion of management's time and energy (which, in turn, could adversely affect our business, financial condition and results of operations), and they could subject us to litigation. In addition, even if ModSpace is integrated successfully, the anticipated benefits of the acquisition may not be realized, including the sales or growth opportunities that are anticipated. These benefits may not be achieved within the anticipated time frame, if at all. Moreover, additional unanticipated costs may be incurred in the integration process. All of these factors could cause reductions in our earnings per share, decrease or delay the expected accretive effect of the ModSpace Acquisition and negatively impact the price of our common stock. As a result, it cannot be assured that the ModSpace Acquisition will result in the realization of the anticipated benefits, in whole or in part.
The ModSpace Acquisition could be subject to review by antitrust authorities in the United States.
We believe the ModSpace Acquisition is exempt from notification under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, in the United States. However, we cannot provide assurances that the acquisition will not be subject to antitrust review in the United States. To the extent the acquisition is subject to such antitrust review, we can provide no assurances that (i) the review will not delay or render us unable to complete the acquisition or (ii) we would not be subject to asset divestitures or other remedial measures.
The pendency of the ModSpace Acquisition could adversely affect our business, financial results and operations, and the market price of shares of our Class A common stock.
The announcement and pendency of the ModSpace Acquisition could cause disruptions and create uncertainty surrounding our business and affect our relationships with our customers and employees. We have also diverted, and will continue to divert, significant management resources to complete the acquisition, which could have a negative impact on our ability to manage existing operations or pursue alternative strategic transactions, which could adversely affect our business, financial condition and results of operations. Until we complete the ModSpace Acquisition, holders of our Class A shares will be exposed to the risks faced by our existing business without any of the potential benefits from the acquisition. As a result of investor perceptions about the terms or benefits of the ModSpace Acquisition, the price of our Class A shares may decline.
If the ModSpace Acquisition is completed, ModSpace may underperform relative to our expectations.
Following the acquisition, we may not be able to maintain the growth rate, levels of revenue, earnings or operating efficiency that Williams Scotsman and ModSpace have achieved or might achieve separately. The business and financial performance of ModSpace are subject to certain risks and uncertainties. Our failure to do so could have a material adverse effect on our financial condition and results of operations.
Our credit ratings may be impacted by the additional indebtedness we expect to incur in connection with the ModSpace Acquisition and any negative impact on our credit ratings may impact the cost and availability of future borrowings and, accordingly, our cost of capital.
Our credit ratings at any time will reflect each rating organization's then opinion of our financial strength, operating performance and ability to meet our debt obligations. We anticipate that the additional indebtedness we expect to incur in connection with the ModSpace Acquisition may result in a negative change to our credit ratings, including a potential downgrading. Any reduction in our credit ratings may limit our ability to borrow at interest rates consistent with the interest rates that have been available to us prior to the ModSpace Acquisition and the financing thereof. If our credit ratings are further downgraded or put on watch for a potential downgrade, we may not be able to sell additional debt securities or borrow money in the amounts, at the times or interest rates or upon the more favorable terms and conditions that might be available if our current credit ratings were maintained.
We expect to incur significant costs and significant indebtedness in connection with the ModSpace Acquisition and the financing thereof, and the integration of ModSpace into our business, including legal, accounting, financial advisory and other costs.
We expect to incur significant costs in connection with integrating the operations, products and personnel of ModSpace into our business, and the debt and equity transactions to finance the ModSpace Acquisition. These costs may include costs for, among other things, (i) employee retention, redeployment, relocation or severance; (ii) integration, including of people, technology, operations, marketing, and systems and processes; and (iii) maintenance and management of customers and other assets.
We also expect to incur significant non-recurring costs associated with integrating and combining the operations of ModSpace and its subsidiaries, which cannot be estimated accurately at this time. While we expect to incur a significant amount of transaction fees and other one-time costs related to the consummation of the debt and equity transactions undertaken to finance the ModSpace Acquisition. Any expected elimination of duplicative costs, as well as the expected realization of other efficiencies related to the integration of our operations with those of ModSpace, that may offset incremental transaction and transaction-related costs over time, may not be achieved in the near term, or at all.

The ModSpace Acquisition will significantly increase our goodwill and other intangible assets.
We have a significant amount, and following the ModSpace Acquisition will have an additional amount, of goodwill and other intangible assets on our consolidated financial statements that are subject to impairment based upon future adverse changes in our business or prospects. The impairment of any goodwill and other intangible assets may have a negative impact on our consolidated results of operations.
Our ability to use ModSpace's net operating loss carryforwards and other tax attributes may be limited.
As of June 30, 2018, we had US net operating loss ("NOL") carryforwards of approximately $269.9 million for US federal income tax and state tax purposes available to offset future taxable income, prior to consideration of annual limitations that may be imposed under Section 382 ("Section 382") of the Internal Revenue Code of 1986, as amended (the "Code"). The US NOL carryforwards begin to expire in 2028 if not utilized. In addition, we had foreign NOLs of $9.9 million as a result of our operations in Mexico. The Mexico NOL carryforwards begin to expire in 2020 if not utilized.
As of September 30, 2017, ModSpace had US NOL carryforwards of approximately $655.0 million, gross, for US federal income tax and state tax purposes available to offset future taxable income, prior to consideration of annual limitations that may be imposed under Section 382. ModSpace's US NOL carryforwards begin to expire in 2022 if not utilized. As of September 30, 2017, ModSpace also recorded a net of tax amount of $104.9 million of a valuation allowance on its US federal and state NOL carryforwards which does not take into account the impacts of Tax Cuts and Jobs Act of 2017, specifically the impacts of the reduced federal rate of 21%.
We may be unable to fully use ModSpace's NOL carryforwards, if at all. Under Section 382 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 pre-change US NOLs and other applicable pre-change tax attributes, such as research and development tax credits, to offset its post-change income may be limited. We have not completed a Section 382 analysis and therefore cannot forecast or otherwise determine our ability to derive any benefit from our various federal or state tax attribute carryforwards at this time. As a result, if we earn net taxable income, our ability to use our pre-change 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.
Risks Related to Our Structure
Our principal stockholder controls a majority of our common stock, and it may take actions or have interests that may be adverse to or conflict with those of our other stockholders.
As of August 1, 2018, Sapphire Holding S.à r.l. ("Sapphire"), an entity controlled by TDR Capital, beneficially owned approximately 50.1% of our Class A common stock and 100% of our Class B common stock. Pursuant to earnout and escrow agreements entered into at the time of our Business Combination, Sapphire may receive additional Class A shares upon their release from escrow.
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 majority 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 common stock, including any pledge or other use of its share of our stock in connection with a loan. In the case of any pledge of its shares of our common stock in connection with a loan, in the event of a default, lenders could foreclose upon any or all of the pledged shares. The sale of a significant amount of shares of our common stock at any given time or the perception that such sales could occur, including sales of any pledged shares that are foreclosed upon, could adversely affect the prevailing market price of our Class A shares. 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 our financing arrangements (including the indentures governing our notes and credit agreement), and future agreements that may we enter into, even when such a change may not be in the best interest of our stockholders. Such a sale of the pledged shares of our common stock may also result in another shareholder 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 shareholder's interests may be different from or conflict with those of our other shareholders.
In addition, TDR Capital is in the business of making investments in companies and may, from time to time, acquire interests in businesses that directly or indirectly compete with our business, as well as businesses that are significant existing or potential customers. TDR Capital may acquire or seek to acquire assets that we seek to acquire and, as a result, those acquisition opportunities may not be available to us or may be more expensive for us to pursue, and as a result, the interests of TDR Capital may not coincide and may even conflict with the interests of our other stockholders.

ITEM 2.Unregistered Sales of Equity Securities
ITEM 2. Unregistered Sales of Equity Securities
None.

ITEM 3.Defaults Upon Senior Securities
ITEM 3. Defaults Upon Senior Securities
None.

ITEM 4.Mine Safety Disclosures
ITEM 4. Mine Safety Disclosures
Not applicable.

ITEM 5.Other Information
ITEM 5. Other Information
None.


50


ITEM 6. Exhibits
ITEM 6.Exhibits
Exhibit No.Exhibit Description
31.1
*
31.2
*
32.1
**
32.2
**
1.110.1
Underwriting
10.110.2
*First Amendment to the ABL Credit Agreement,
10.2
*Second Amendment to the ABL 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
10.3
*Supplemental Indenture dated August 3, 2018, to the Indenture, dated November 29, 2017, by and among WSII, the Guarantors party thereto, and Deutsche Bank Trust Company Americas, as Trustee and Collateral Agent
10.4
Indenture dated August 3, by and among Mason Finance Sub, Inc., the Guarantors party thereto, and Deutsche Bank Trust Company Americas, as TrusteeMarch 18, 2019 (incorporated by reference to Exhibit 1.110.1 to the Company’s Form 8-K filed August 7, 2018)March 21, 2019)
10.510.3
Indenture
101.INS
10.4
101.INSXBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document 
101.SCHXBRL Taxonomy Extension Schema Document
101.CALXBRL Taxonomy Extension Calculation Linkbase Document
101.DEFXBRL Taxonomy Extension Definition Linkbase Document
101.LABXBRL Taxonomy Extension Label Linkbase Document
101.PREXBRL Taxonomy Extension Presentation Linkbase Document
*Filed herewith
**Furnished (and not filed) herewith pursuant to Item 601(b)(32)(ii) of Regulation S-K under the Exchange Act



51


Signature
Pursuant to the requirements 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 Corporation
WillScot Corporation
By:
/s/ TIMOTHY D. BOSWELL
Dated:August 8, 20182, 2019 Timothy D. Boswell
Chief Financial Officer (Principal Financial Officer)







55
52