UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q


☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, ~~2018~~2019
OR
☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ________ to ________


Commission File Number:			001-37552

WILLSCOT CORPORATION

~~(formerly known as Double Eagle Acquisition Corp.)~~

(Exact name of registrant as specified in its charter)


Delaware						82-3430194
(State or other jurisdiction of incorporation)						(I.R.S. Employer Identification No.)

901 S. Bond Street, #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 class	Trading Symbol(s)	Name of each exchange on which registered
Class A common stock, par value $0.0001 per share	WSC	The Nasdaq Capital Market
Warrants to purchase Class A common stock(1)	WSCWW	OTC Markets Group Inc.
Warrants to purchase Class A common stock(2)	WSCTW	OTC 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 every Interactive Data File required to be submitted pursuant to Rule 405 of Regulations S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See 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-accelerated filer ☐			Smaller reporting company ☐
			Emerging growth company ☒

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell ~~company~~company (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: 100,303,156~~outstanding: 108,751,354 shares at ~~November 1, 2018.~~October 31, 2019.

Shares of Class B common stock, par value $0.0001 per share, outstanding: 8,024,419 ~~shares~~shares at ~~November 1, 2018.~~October 31, 2019.

WILLSCOT CORPORATION

Quarterly Report on Form 10-Q

Table of Contents

PART I Financial Information

Item 1

Financial Statements ~~(unaudited)~~(unaudite d , except as noted below )

Condensed Consolidated Balance Sheets as of September 30, ~~2018~~2019 and December 31, ~~2017~~2018 (audited)

Condensed Consolidated Statements of Operations for the Three and Nine Months Ended September 30, ~~2018~~2019 and ~~2017~~2018

~~Condensed~~Condensed Consolidated Statements of Comprehensive Loss for the Three and Nine Months Ended September 30, ~~2018~~2019 and ~~2017~~2018

Condensed Consolidated Statement of Changes in Equity for the Three and Nine Months Ended September 30, 2019 and 2018

~~Condens~~edCondensed Consolidated Statements of Cash Flows for the Nine Months Ended September 30, ~~2018~~2019 and ~~2017~~2018

Notes to the Condensed Consolidated Financial Statements

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

Unregistered Sales of Equity Securities and Use of Proceeds

Item 3

Defaults Upon Senior Securities

Item 4

Mine Safety Disclosures

PART I

ITEM 1. Financial Statements

WillScot Corporation

Condensed Consolidated Balance Sheets

(in thousands, except share data) September 30, 2018 (unaudited) December 31, 2017
Assets
Cash and cash equivalents $ 9,771 $ 9,185
Trade receivables, net of allowances for doubtful accounts at September 30, 2018 and December 31, 2017 of $7,913 and $4,845, respectively 199,461 94,820
Inventories 21,348 10,082
Prepaid expenses and other current assets 20,075 13,696
Total current assets 250,655 127,783
Rental equipment, net 1,949,403 1,040,146
Property, plant and equipment, net 193,154 83,666
Goodwill 267,764 28,609
Intangible assets, net 132,519 126,259
Other non-current assets 4,200 4,279
Total long-term assets 2,547,040 1,282,959
Total assets $ 2,797,695 $ 1,410,742
Liabilities and equity
Accounts payable $ 78,638 $ 57,051
Accrued liabilities 79,721 48,912
Accrued interest 15,613 2,704
Deferred revenue and customer deposits 67,727 45,182
Current portion of long-term debt 1,915 1,881
Total current liabilities 243,614 155,730
Long-term debt 1,651,579 624,865
Deferred tax liabilities 146,086 120,865
Deferred revenue and customer deposits 6,673 5,377
Other non-current liabilities 19,034 19,355
Long-term liabilities 1,823,372 770,462
Total liabilities 2,066,986 926,192
Commitments and contingencies (see Note 13)
Class A common stock: $0.0001 par, 400,000,000 shares authorized at September 30, 2018 and December 31, 2017; 100,303,003 and 84,644,744 shares issued and outstanding at September 30, 2018 and December 31, 2017, respectively 10 8
Class B common stock: $0.0001 par, 100,000,000 shares authorized at September 30, 2018 and December 31, 2017; 8,024,419 shares issued and outstanding at both September 30, 2018 and December 31, 2017 1 1
Additional paid-in-capital 2,390,188 2,121,926
Accumulated other comprehensive loss (52,119) (49,497)
Accumulated deficit (1,673,749) (1,636,819)
Total shareholders' equity 664,331 435,619
Non-controlling interest 66,378 48,931
Total equity 730,709 484,550
Total liabilities and equity $ 2,797,695 $ 1,410,742

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

~~WillScot Corporation~~

~~Condensed Consolidated Statements of Operations~~

~~(Unaudited)~~

Three Months Ended September 30, Nine Months Ended September 30,
(in thousands, except share data) 2018 2017 2018 2017
Revenues:
Leasing and services revenue:
Modular leasing $ 141,660 $ 75,320 $ 340,171 $ 217,261
Modular delivery and installation 46,777 24,627 104,440 66,580
Sales:
New units 20,920 9,609 33,584 24,491
Rental units 9,567 6,606 15,813 17,228
Total revenues 218,924 116,162 494,008 325,560
Costs:
Costs of leasing and services:
Modular leasing 39,215 21,252 93,506 61,694
Modular delivery and installation 42,390 23,932 98,038 64,404
Costs of sales:
New units 15,089 6,916 23,780 17,402
Rental units 5,750 3,784 9,328 10,067
Depreciation of rental equipment 35,534 19,009 82,849 53,203
Gross profit 80,946 41,269 186,507 118,790
Expenses:
Selling, general and administrative 71,897 36,097 164,845 100,510
Other depreciation and amortization 3,720 1,905 7,726 5,736
Restructuring costs 6,137 1,156 7,214 2,124
Currency (gains) losses, net (425) (4,270) 1,171 (12,769)
Other (income) expense, net (594) 1,001 (5,013) 1,592
Operating income 211 5,380 10,564 21,597
Interest expense 43,447 30,106 67,321 84,674
Interest income — (3,659) — (9,752)
Loss from continuing operations before income tax (43,236) (21,067) (56,757) (53,325)
Income tax benefit (6,507) (7,632) (13,572) (17,770)
Loss from continuing operations (36,729) (13,435) (43,185) (35,555)
Income from discontinued operations, net of tax — 5,078 — 11,123
Net loss (36,729) (8,357) (43,185) (24,432)
Net loss attributable to non-controlling interest, net of tax (3,210) — (3,715) —
Total loss attributable to WillScot $ (33,519) $ (8,357) $ (39,470) $ (24,432)
Net loss per share attributable to WillScot – basic and diluted
Continuing operations $ (0.37) $ (0.92) $ (0.48) $ (2.44)
Discontinued operations $ — $ 0.35 $ — $ 0.76
Net loss per share $ (0.37) $ (0.57) $ (0.48) $ (1.68)
Weighted average shares:
Basic and diluted 90,726,920 14,545,833 82,165,909 14,545,833
Cash dividends declared per share $ — $ — $ — $ —


(in thousands, except share data)	September 30, 2019 (unaudited)		December 31, 2018

Assets
Cash and cash equivalents	$	3,951	$	8,958
Trade receivables, net of allowances for doubtful accounts at September 30, 2019 and December 31, 2018 of $15,113 and $9,340, respectively	250,488		206,502
Inventories	15,956		16,218
Prepaid expenses and other current assets	24,684		21,828
Assets held for sale	9,155		2,841
Total current assets	304,234		256,347
Rental equipment, net	1,952,829		1,929,290
Property, plant and equipment, net	186,956		183,750
Goodwill	234,597		247,017
Intangible assets, net	128,103		131,801
Other non-current assets	4,641		4,280
Total long-term assets	2,507,126		2,496,138
Total assets	$	2,811,360	$	2,752,485
Liabilities and equity
Accounts payable	$	101,532	$	90,353
Accrued liabilities	96,395		84,696
Accrued interest	13,386		20,237
Deferred revenue and customer deposits	87,702		71,778
Current portion of long-term debt	2,025		1,959
Total current liabilities	301,040		269,023
Long-term debt	1,710,160		1,674,540
Deferred tax liabilities	67,583		67,384
Deferred revenue and customer deposits	11,265		7,723
Other non-current liabilities	37,373		31,618
Long-term liabilities	1,826,381		1,781,265
Total liabilities	2,127,421		2,050,288
Commitments and contingencies (see Note 15)
Class A common stock: $0.0001 par, 400,000,000 shares authorized at September 30, 2019 and December 31, 2018; 108,751,354 and 108,508,997 shares issued and outstanding at September 30, 2019 and December 31, 2018, respectively	11		11
Class B common stock: $0.0001 par, 100,000,000 shares authorized at September 30, 2019 and December 31, 2018; 8,024,419 shares issued and outstanding at September 30, 2019 and December 31, 2018	1		1
Additional paid-in-capital	2,394,091		2,389,548
Accumulated other comprehensive loss	(68,908)		(68,026)
Accumulated deficit	(1,703,699)		(1,683,319)
Total shareholders' equity	621,496		638,215
Non-controlling interest	62,443		63,982
Total equity	683,939		702,197
Total liabilities and equity	$	2,811,360	$	2,752,485

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

WillScot Corporation

Condensed Consolidated Statements of ~~Comprehensive Loss~~

Operations (Unaudited)

Three Months Ended September 30, Nine Months Ended September 30,
(in thousands) 2018 2017 2018 2017
Net loss $ (36,729) $ (8,357) $ (43,185) $ (24,432)
Other comprehensive income (loss):
Foreign currency translation adjustment, net of income tax expense (benefit) of $80, $698, $(161) and $1,316 for the three and nine months ended September 30, 2018 and 2017, respectively 2,298 3,131

(82) 8,914
Comprehensive loss (34,431) (5,226) (43,267) (15,518)
Comprehensive loss attributable to non-controlling interest (2,967) —

(3,741) —
Total comprehensive loss attributable to WillScot $ (31,464) $ (5,226) $ (39,526) $ (15,518)

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

~~WillScot Corporation~~

~~Condensed Consolidated Statements of Changes in Equity~~

~~(Unaudited)~~

Class A Common Stock Class B Common Stock
Shares Amount Shares Amount Additional Paid in Capital Accumulated Other Comprehensive Income Accumulated Deficit Total Shareholders' Equity Non Controlling Interest Total Equity
Balance at December 31, 2017 84,645 $ 8 8,024 $ 1 $ 2,121,926 $ (49,497) $ (1,636,819) $ 435,619 $ 48,931 $ 484,550
Net loss — — — — — — (39,470) (39,470) (3,715) (43,185)
Other comprehensive loss — — — — — (82) — (82) (26) (108)
Adoption of ASU 2018-02 — — — — — (2,540) 2,540 — — —
Stock-based compensation — — — — 2,225 — — 2,225 — 2,225
Issuance of common stock and contribution of proceeds to WSII 9,200 1 — — 131,544 — — 131,545 7,574 139,119
Acquisition of ModSpace and the effect of the related financing transactions 6,458 1 — — 134,493 — — 134,494 13,614 148,108
Balance at September 30, 2018 100,303 $ 10 8,024 $ 1 $ 2,390,188 $ (52,119) $ (1,673,749) $ 664,331 $ 66,378 $ 730,709

~~WillScot Corporation~~

~~Condensed Consolidated Statements of Cash Flows~~

~~(Unaudited)~~

Nine Months Ended September 30,
(in thousands) 2018 2017
Operating Activities:
Net loss $ (43,185) $ (24,432)
Adjustments for non-cash items:
Depreciation and amortization 91,587 80,897
Provision for doubtful accounts 5,436 3,381
Gain on sale of rental equipment and other property, plant and equipment (11,194) (7,700)
Interest receivable capitalized into notes due from affiliates — (3,915)
Amortization of debt discounts and debt issuance costs 4,801 11,213
Share based compensation expense 2,225 —
Deferred income tax benefit (14,340) (7,683)
Unrealized currency losses (gains) 773 (12,682)
Changes in operating assets and liabilities, net of effect of businesses acquired:
Trade receivables (26,229) (19,228)
Inventories (553) 748
Prepaid and other assets 173 (8,809)
Accrued interest receivable — (6,994)
Accrued interest payable 12,902 15,079
Accounts payable and other accrued liabilities (11,969) 28,243
Deferred revenue and customer deposits 5,153 (1,217)
Net cash provided by operating activities 15,580 46,901
Investing Activities:
Acquisition of a business - ModSpace (1,060,140) —
Acquisition of a business - Tyson (24,006) —
Proceeds from sale of rental equipment 21,593 18,750
Purchase of rental equipment and refurbishments (111,505) (82,276)
Lending on notes due from affiliates — (69,939)
Repayments on notes due from affiliates — 2,151
Proceeds from the sale of property, plant and equipment 681 17
Purchase of property, plant and equipment (3,091) (2,938)
Net cash used in investing activities (1,176,468) (134,235)
Financing Activities:
Receipts from issuance of common stock 147,200 —
Receipts from borrowings 1,184,601 348,609
Receipts on borrowings from notes due to affiliates — 75,000
Payment of financing costs (34,770) (10,648)
Repayment of borrowings (135,537) (319,678)
Principal payments on capital lease obligations (88) (1,606)
Net cash provided by financing activities 1,161,406 91,677
Effect of exchange rate changes on cash and cash equivalents 68 311
Net change in cash and cash equivalents 586 4,654
Cash and cash equivalents at the beginning of the period 9,185 6,162
Cash and cash equivalents at the end of the period $ 9,771 $ 10,816
Supplemental Cash Flow Information:
Interest paid $ 28,721 $ 60,212
Income taxes paid, net of refunds received $ 2,339 $ (400)
Capital expenditures accrued or payable $ 17,478 $ 11,773


	Three Months Ended September 30,						Nine Months Ended September 30,
(in thousands, except share and per share data)	2019		2018		2019		2018
Revenues:
Leasing and services revenue:
Modular leasing	$	191,294	$	141,660	$	557,025	$	340,171
Modular delivery and installation	61,883		46,777		168,643		104,440
Sales revenue:
New units	11,536		20,920		38,064		33,584
Rental units	7,627		9,567		29,741		15,813
Total revenues	272,340		218,924		793,473		494,008
Costs:
Costs of leasing and services:
Modular leasing	58,168		39,215		160,476		93,506
Modular delivery and installation	54,364		42,390		146,175		98,038
Costs of sales:
New units	7,421		15,089		26,298		23,780
Rental units	5,092		5,750		19,608		9,328
Depreciation of rental equipment	43,869		35,534		128,940		82,849
Gross profit	103,426		80,946		311,976		186,507
Expenses:
Selling, general and administrative	68,159		71,897		213,267		164,845
Other depreciation and amortization	3,707		3,720		9,878		7,726
Impairment losses on long-lived assets	—		—		5,076		—
Restructuring costs	1,980		6,137		9,083		7,214
Currency losses (gains), net	234		(425)		(436)		1,171
Other income, net	(1,053)		(594)		(3,293)		(5,013)
Operating income	30,399		211		78,401		10,564
Interest expense	30,857		43,447		95,353		67,321
Loss on extinguishment of debt	—		—		7,244		—
Loss from operations before income tax	(458)		(43,236)		(24,196)		(56,757)
Income tax benefit	(1,220)		(6,507)		(2,022)		(13,572)
Net income (loss)	762		(36,729)		(22,174)		(43,185)
Net income (loss) attributable to non-controlling interest, net of tax	273		(3,210)		(1,449)		(3,715)
Net income (loss) attributable to WillScot	$	489	$	(33,519)	$	(20,725)	$	(39,470)

Net income (loss) per share attributable to WillScot - basic	$	0.00	$	(0.37)	$	(0.19)	$	(0.48)
Net income (loss) per share attributable to WillScot - diluted	0.00		(0.37)		(0.19)		(0.48)

Weighted average shares - basic	108,720,857		90,726,920		108,646,741		82,165,909
Weighted average shares - diluted	112,043,866		90,726,920		108,646,741		82,165,909

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 September 30,						Nine Months Ended September 30,
(in thousands)	2019		2018		2019		2018
Net income (loss)	$	762	$	(36,729)	$	(22,174)	$	(43,185)
Other comprehensive (loss) income:
Foreign currency translation adjustment, net of income tax expense (benefit) of $0, $80, $0 and $(161) for the three and nine months ended September 30, 2019 and 2018, respectively	(2,799)		2,298		5,616		(82)
Net loss on derivatives, net of income tax benefit of $153, $0, $2,016 and $0 for the three and nine months ended September 30, 2019 and 2018, respectively	(500)		—		(6,588)		—
Comprehensive loss	(2,537)		(34,431)		(23,146)		(43,267)
Comprehensive loss attributable to non-controlling interest	(28)		(2,967)		(1,539)		(3,741)
Total comprehensive loss attributable to WillScot	$	(2,509)	$	(31,464)	$	(21,607)	$	(39,526)

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

WillScot Corporation

Condensed Consolidated Statements of Changes in Equity (Unaudited)


Nine Months Ended September 30, 2019
	Class A Common Stock				Class B Common Stock						Additional Paid-in-Capital		Accumulated Other Comprehensive Income		Accumulated Deficit		Total Shareholders' Equity		Non-Controlling Interest	Total Equity
(in thousands)	Shares	Amount		Shares	Amount
Balance at December 31, 2018	108,509	$	11	8,024	$	1	$	2,389,548	$	(68,026)	$	(1,683,319)	$	638,215	$	63,982	$	702,197
Net loss	—	—		—	—		—		—		(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 compensation	184	—		—	—		636		—		—		636		—		636
Balance at March 31, 2019	108,693	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 compensation	6	—		—	—		1,901		—		—		1,901		—		1,901
Balance at June 30, 2019	108,699	11		8,024	1		2,392,085		(65,910)		(1,704,188)		621,999		62,471		684,470
Net income	—	—		—	—		—		—		489		489		273		762
Other comprehensive loss	—	—		—	—		—		(2,998)		—		(2,998)		(301)		(3,299)
Issuance of common stock from the exercise of options	14	—		—	—		194		—		—		194		—		194
Stock-based compensation and issuance of common stock from vesting	38	—		—	—		1,812		—		—		1,812		—		1,812
Balance at September 30, 2019	108,751	$	11	8,024	$	1	$	2,394,091	$	(68,908)	$	(1,703,699)	$	621,496	$	62,443	$	683,939


Nine Months Ended September 30, 2018
	Class A Common Stock				Class B Common Stock						Additional Paid-in-Capital		Accumulated Other Comprehensive Income		Accumulated Deficit		Total Shareholders' Equity		Non-Controlling Interest	Total Equity
(in thousands)	Shares	Amount		Shares	Amount
Balance at December 31, 2017	84,645	$	8	8,024	$	1	$	2,121,926	$	(49,497)	$	(1,636,819)	$	435,619	$	48,931	$	484,550
Net loss	—	—		—	—		—		—		(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, 2018	84,645	8		8,024	1		2,122,047		(51,798)		(1,640,466)		429,792		48,307		478,099
Net income	—	—		—	—		—		—		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, 2018	84,645	8		8,024	1		2,123,101		(54,417)		(1,640,230)		428,463		48,157		476,620
Net loss	—	—		—	—		—		—		(33,519)		(33,519)		(3,210)		(36,729)
Other comprehensive income	—	—		—	—		—		2,298		—		2,298		243		2,541
Stock-based compensation	—	—		—	—		1,050		—		—		1,050		—		1,050
Issuance of common stock and contribution of proceeds to WSII	9,200	1		—	—		131,544		—		—		131,545		7,574		139,119
Acquisition of ModSpace and the related financing transactions including stock and warrants	6,458	1		—	—		134,493		—		—		134,494		13,614		148,108
Balance at September 30, 2018	100,303	$	10	8,024	$	1	$	2,390,188	$	(52,119)	$	(1,673,749)	$	664,331	$	66,378	$	730,709

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

WillScot Corporation

Condensed Consolidated Statements of Cash Flows (Unaudited)


	Nine Months Ended September 30,
(in thousands)	2019		2018
Operating activities:
Net loss	$	(22,174)	$	(43,185)
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	140,712		91,587
Provision for doubtful accounts	11,817		5,436
Impairment losses on long-lived assets	5,076		—
Gain on sale of rental equipment and other property, plant and equipment	(8,553)		(11,194)
Amortization of debt discounts and debt issuance costs	8,732		4,801
Loss on extinguishment of debt	7,244		—
Stock-based compensation expense	5,003		2,225
Deferred income tax benefit	(2,456)		(14,340)
Unrealized currency (gains) losses	(427)		773
Changes in operating assets and liabilities, net of effect of businesses acquired:
Trade receivables	(64,385)		(26,229)
Inventories	284		(553)
Prepaid and other assets	(1,734)		173
Accrued interest	(6,851)		12,902
Accounts payable and other accrued liabilities	7,324		(11,969)
Deferred revenue and customer deposits	19,464		5,153
Net cash provided by operating activities	99,076		15,580
Investing activities:
Acquisition of a business - ModSpace	—		(1,060,140)
Acquisition of a business - Tyson	—		(24,006)
Proceeds from sale of rental equipment	31,504		21,593
Purchase of rental equipment and refurbishments	(160,877)		(111,505)
Proceeds from the sale of property, plant and equipment	13,199		681
Purchase of property, plant and equipment	(6,600)		(3,091)
Net cash used in investing activities	(122,774)		(1,176,468)
Financing activities:
Receipts from issuance of common stock	194		147,200
Receipts from borrowings	489,207		1,184,601
Payment of financing costs	(2,623)		(34,770)
Repayment of borrowings	(461,162)		(135,537)
Principal payments on capital lease obligations	(83)		(88)
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	18,627		1,161,406
Effect of exchange rate changes on cash and cash equivalents	64		68
Net change in cash and cash equivalents	(5,007)		586
Cash and cash equivalents at the beginning of the period	8,958		9,185
Cash and cash equivalents at the end of the period	$	3,951	$	9,771

Supplemental cash flow information:
Interest paid	$	94,908	$	28,721
Income taxes paid, net	$	547	$	2,339
Capital expenditures accrued or payable	$	26,444	$	17,478

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

WillScot Corporation

Notes to the Condensed Consolidated Financial Statements

(Unaudited)

NOTE 1 - Summary of Significant Accounting Policies

Organization and Nature of Operations

WillScot Corporation (“WillScot” 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 Class A common shares are listed on the 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”). WillScot operates and ~~owns~~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 9.0%.

WillScot was incorporated as a Cayman Islands exempt company under the name Double Eagle Acquisition Corporation ("Double Eagle"), on June 26, 2015. Prior to November 29, 2017, Double Eagle was a Nasdaq-listed special purpose acquisition company formed for the purpose of effecting a merger, share exchange, asset acquisition, share purchase, reorganization or similar business combination. On November 29, 2017, Double Eagle indirectly acquired Williams Scotsman International, Inc. (“WSII”) from Algeco Scotsman Global S.à r.l., (together with its subsidiaries, the “Algeco Group”), which is majority owned by an investment fund managed by TDR Capital. As part of the transaction (the “Business Combination”), Double Eagle domesticated to Delaware and changed its name to WillScot Corporation. Additional information about the Business Combination and the Company's operations prior thereto is contained in the consolidated financial statements and notes included in WillScot's Annual Report on Form 10-K for the year ended December 31, 2017.

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with the instructions to Quarterly Report on 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 nine months ended September 30, ~~2018~~2019 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 WillScot'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 WillScot 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 WillScot was the indirect acquirer of WSII for legal purposes, WSII was considered the acquirer for accounting and financial reporting purposes.~~

As a result of WSII being the accounting acquirer, the financial reports filed with the US Securities and Exchange Commission (the “SEC”) by the Company subsequent to the Business Combination are prepared “as if” WSII is the predecessor and legal successor to the Company. The historical operations of WSII are deemed to be those of the Company. Thus, the financial statements included in this report reflect (i) the historical operating results of WSII prior to the Business Combination; (ii) the combined results of WillScot and WSII following the Business Combination on November 29, 2017; (iii) the assets and liabilities of WSII at their historical cost; and (iv) WillScot's equity structure for all periods presented. The recapitalization of the number of shares of common stock attributable to the purchase of WSII in connection with the Business Combination is reflected retroactively to the earliest period presented and is 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 members of the Algeco Group 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 nine

~~months ended September 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 pertain to non-issuers, and as permitted, early adoption dates for non-issuers are indicated.~~

Subject to limited exception, WillScot will cease to be EGC on the earlier (i) the last day of the fiscal year in which WillScot’s annual gross revenues exceed $1.07 billion, (ii) the date on which the Company issues more than $1.0 billion in nonconvertible debt securities during the preceding three-year period, and (iii) the date on which WillScot is deemed to be a large accelerated filer under the SEC’s rules. Based on the recent ModSpace (defined below) acquisition described in Note 2, WillScot anticipates that its 2019 annual gross revenues will exceed $1.07 billion. WillScot also anticipates that, due in part to the amount of Class A common stock issued by WillScot to fund the ModSpace acquisition, WillScot will be deemed to be a large accelerated filer, atand cease to qualify as an EGC, as of December 31, ~~2019 based on the value of its Class A common stock held by non-affiliates at June 30,~~ 2019. WillScot currently foresees remaining an EGC until December 31, 2019, but would lose EGC eligibility immediately if it were to issue additional debt and exceed the debt issuance criteria described above.

Recently Issued Accounting Standards

In ~~May 2014,~~June 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) ~~2014-09,~~2016-13, ~~Revenuefrom Contracts with Customers~~Financial Instruments - Credit Losses (Topic ~~606)~~326), which prescribes that financial assets (or a ~~single comprehensive model~~group 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 and~~standard is effective for ~~annual reporting periods~~the Company for fiscal years beginning after December 15, ~~2018. Early adoption for non-public entities is permitted starting with annual reporting~~2019, including interim periods ~~beginning after December 15, 2016. The core principle contemplated by this new standard was~~within 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 evaluation~~continues to evaluate the impacts of adopting the ~~impact that the updated guidance will have~~standard on the ~~Company’s~~ financial statements and related disclosures. As part of the evaluation process, the Company continues to hold regular meetings with key stakeholders from across the organization to discuss the impact of the standard on its existing contracts. The Company plans to adopt Topic 606 using the modified retrospective transition approach.

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 analyses with respect to revenue stream scoping, performed contract reviews of a representative sample of customer arrangements, developed a gap analysis and evaluated the revised disclosure requirements. The two primary lines of business impacted by the adoption are new and used sales transactions and modular leasing services transactions. The Company has substantially completed its procedures based on the new and used sales and modular leasing service transactions that occurred through the second quarter of 2018 and is not aware of any significant changes based on the work performed to date. The Company has incorporated the recently acquired Modular Space Holdings, Inc. (“ModSpace”) into the project during the third quarter of 2018. As described in Note 2, ModSpace was acquired in August 2018 and the Company has commenced workshops with key stakeholders, detailed contract reviews and a financial statement disclosure gap evaluation specific to revenue streams acquired through the acquisition.

~~After finalizing its procedures during the fourth quarter of 2018, the Company~~ will conclude on the level of impact that the adoption of ASC 606 will have on the consolidated financial statements, including financial statement disclosures. Specific to disclosures, the Company expects to provide additional detail regarding the disaggregation of revenue and contract balances. The Company is required to adopt the standard ~~as of~~effective January 1, ~~2019 and plans to first present financial statements that reflect the adoption in the first quarter of 2019.~~2020.

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 recognize~~establishes 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 as~~balance sheet for ~~initial direct costs. For income statement purposes,~~

~~the new standard retains a dual model similar to ASC 840, requiring~~all leases towith terms longer than twelve months. Leases will be classified as either finance or operating, ~~or finance. Operating~~with classification affecting the pattern of expense recognition in the income statement. This guidance also expands the requirements for lessees to record leases ~~will result~~embedded 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 accounting~~required 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~~is largely unchanged. This guidance is effective for non-public entities for ~~fiscal~~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 will cease to be an EGC as of December 31, 2019, the Company ~~plans to~~will adopt the new standard in the fourth quarter of ~~2019. Adoption of the new standard could be required earlier in~~ 2019 ~~if WillScot loses EGC eligibility earlier than anticipated based on other criteria.~~

~~The guidance includes a number of practical expedients that the Company is evaluating and may elect to apply. The adoption of the new sta~~withndard will require the Company to recognize right-of-use assets and lease liabilities that will be significant to our consolidated balance sheet. The Company will continue to evaluate the impacts of this guidance on its financial position, results of operations, and cash flows. The Company plans to update its systems, processes and internal controls to meet the new reporting and disclosure requirements.

~~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 after the Tax Cuts and Jobs Act (the “Tax Act”) was enacted, the SEC issued Staff Accounting Bulletin No. 118, Income Tax Accounting Implications of the Tax Cuts and Jobs Act (“SAB 118”) which provides guidance on accounting for the Tax Act’s impact. SAB 118 provides a measurement period, which in no case should extend beyond one year from the Tax Act enactment date, during which a company acting in good faith may complete the accounting for the impacts of the Tax Act under ASC Topic 740. Per SAB 118, companies must reflect the income tax effects of the Tax Act in the reporting 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 determine a reasonable estimate for those effects and record a provisional estimate in 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 9) and continues to evaluate the provisions of the Tax Act including guidance from the Department of Treasury and Internal Revenue Service. Additionally, the Company filed 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.

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~~

~~Tyson Acquisition~~

On January 3, 2018, the Company acquired all of the issued and outstanding membership interests of Onsite Space LLC (d/b/a Tyson Onsite (“Tyson”)). Tyson provided modular space rental services in the Midwest, primarily in Indiana, Illinois and Missouri. The acquisition date fair value of the consideration transferred consisted of ~~$24.0 million~~ ~~in cash consideration, net of cash acquired. The transaction was funded by borrowings under the ABL Facility (defined in Note 7).~~

~~Through September 30, 2018, the Company has recorded adjustments to the Tyson opening balance sheet, which increased rental equipment and accrued liabilities by $0.9 million and $0.1 million, respectively and decreased property, plant and equipment by $0.1 million. The offset of these adjustments was recorded to~~ goodwill as detailed in Note 6. 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, property, plant and equipment, intangible assets, deferred tax assets and other accrued tax liabilities will be finalized during the fourth quarter of 2018.

Tyson results were immaterial to the condensed consolidated statements of operations for the three and nine months ended September 30, 2018 and as a result, the Company is not presenting pro-forma information.

~~Acton Acquisition~~a retroactive adoption to January 1, 2019.

~~On December 20, 2017,~~The Company plans to take advantage of the transition package of practical expedients permitted within ASC 842 which allows the Company ~~acquired 100% of~~not to reassess (i) whether any expired or existing lease contracts are or contain leases, (ii) the ~~issued~~historical lease classification for any expired or existing leases and ~~outstanding ownership interests of Acton Mobile Holdings LLC (“Acton”)~~(iii) initial direct costs 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 provides modular space and portable storage rental services across the US. The acquisition was funded by cash on hand and borrowings under the ABL Facility.

~~Through September 30, 2018,~~any existing leases. Upon adoption, the Company ~~recorded adjustments~~currently expects to ~~the Acton opening balance sheet, which increased accrued liabilities, deferred revenue, deferred tax~~record ROU assets ~~and receivables by $0.8 million, $0.6 million, $0.8~~between $135.0 million and ~~$2.4~~$145.0 million, ~~respectively,~~ and ~~decreased rental~~operating lease liabilities between $135.0 million and $145.0 million, as of January 1, 2019, primarily related to its real estate and equipment ~~by $2.1 million. The offset~~leases.In connection with the adoption of ~~these adjustments was recorded to goodwill as detailed~~ASC 842, the Company will also reverse the previous accounting for certain sale-leaseback transactions (as discussed in Note ~~6. As a result of the timing of the transaction, the purchase price allocation for the rental equipment, intangible assets,~~8), and reduce property, plant and equipment ~~deferred tax assets, receivables,~~by $31.0 million, reduce outstanding debt by $36.0 million and ~~other accrued liabilities acquired and assumed are based on preliminary valuations and are subject to change~~increase January 1, 2019 equity by $5.0 million.

Additionally, as discussed in Note 3, 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. There may be changes in the timing of recognition under the new standard, but 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 values assigneddoes not anticipate a significant change to ~~the rental equipment, intangible assets, property, plant~~modular leasing revenue at adoption.

NOTE 2 - Acquisitions and ~~equipment, deferred tax assets, non-indemnified liabilities, and other accrued tax liabilities will be finalized during the fourth quarter of 2018.~~

~~Pro-forma results are presented in aggregate with the ModSpace acquisition below.~~Assets Held for Sale

ModSpace Acquisition

On August 15, 2018, ~~(the "Closing Date"),~~ the Company acquired ~~ModSpace,~~Modular Space Holdings, Inc. ("ModSpace"), a privately-owned national provider of office trailers, portable storage units and modular buildings. The acquisition was consummated by merging a special purpose subsidiary of the Company with and into ModSpace, with ModSpace surviving the merger as a subsidiary of WSII. The Company acquired ModSpace to create long-term shareholder value driven by, among other things, economies of scale, cost synergies and revenue opportunities unique to a combination of WillScot's and ModSpace's operations, and other benefits associated with being an industry-leading specialty rental services provider.

Purchase Price

The aggregate purchase price for ModSpace was $1.2 billion and consisted of (i) $1.1 billion in cash, (ii) 6,458,229 shares of WillScot's Class A common stock (the "Stock Consideration") with a fair market value of $95.8 million and (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 ~~"ModSpace~~"2018 Warrants") with a fair market value of $52.3 million, and (iv) a working capital adjustment of ~~$5.7~~$4.7 million. Of the cash consideration, $3.0 million was deposited into an escrow account to fund any post-closing adjustments from differences between the estimated working capital and the actual working capital of ModSpace at closing. The final working capital of ModSpace at closing is still being evaluated by the Company and the sellers' representative in accordance with the terms of the purchase agreement.

The acquisition was funded by the net proceeds of WillScot's issuance of 9,200,000 shares of Class A common stock, ~~(see~~ ~~Note 8),~~ the net proceeds of WSII’s issuance of $300.0 million in senior secured notes and $200.0 million in senior unsecured notes ~~(see~~(see Note 7)8), and borrowings under the ABL Facility (see Note 7)8).

~~The purchase price has been determined to be as follows:~~

~~Purchase Price~~


~~(in thousands, except for per share amounts)~~	~~Price~~
~~Cash~~	$	~~1,054,416~~
~~Stock consideration (a)~~	~~95,796~~
~~ModSpace warrants (b)~~	~~52,310~~
~~Working capital adjustment (c)~~	~~5,724~~
~~Total purchase price~~	$	~~1,208,246~~

(a) The fair market value of the 6,458,229 shares issued as consideration was determined using the closing price on August 15, 2018, of $15.78 per share less a discount of 6.0%, based on a lock up agreement executed in connection with the acquisition of ModSpace.
~~(b) Warrants were valued assuming a fair market value of $5.23 as estimated using a Black-Scholes valuation model as of August 15, 2018.~~
~~(c) The estimated working capital adjustment as of the Closing Date was $5.7 million. The working capital amount is subject to post-close adjustments.~~

~~The acquisition date fair value~~As of the ~~stock consideration was estimated~~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 ~~estimated~~ fair market value of the Class A shares was determined utilizing the $15.78 per share closing price of the Company's shares on August 15, 2018, discounted by 6.0%, to reflect a lack of marketability based on the lock-up restrictions contemplated by the merger agreement.

The estimated fair values of the Stock Consideration and 2018 Warrants are ~~a level~~Level 3 fair value ~~measurement.~~measurements. The fair value of each share isand warrant was estimated using the Black-Scholes ~~option pricing~~ model with the following assumptions: expected dividend yield, expected stock price volatility, ~~weighted-average~~weighted average risk-free interest rate, ~~and~~the average expected term of the lock up period on the ~~shares.~~shares, and the weighted average expected term of the warrants. The volatility assumption used in the Black-Scholes ~~option-pricing~~ 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. 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~~Company, and over a ~~remaining term equal~~time period equivalent to the ~~Company’s expected term assumption. The Company has never declared or paid a cash dividend on common shares.~~


~~Expected Volatility~~	~~28.6~~	%
~~Risk-free rate of interest~~	~~2.2~~	%
~~Dividend Yield~~	—	%
~~Expected life (years)~~	~~0.5~~

~~The acquisition date fair value of~~lock-up restriction (for the ~~warrants was estimated using a Black-Scholes valuation model. The estimated fair value of~~shares) and the ~~warrants is a level 3 fair value measurement. The fair value of each~~ warrant 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 warrants. The volatility assumption used in the Black-Scholes option-pricing 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.term. The risk-free interest rate used in the Black-Scholes model is based on the implied US Treasury bill yield curve at the date of grant with a remaining term equal to the Company’s expected term assumption. The Company has never declared or paid a cash dividend on common shares.


~~Expected Volatility~~	~~35.0~~	%
~~Risk-free rate of interest~~	~~2.7~~	%
~~Dividend Yield~~	—	%
~~Expected life (years)~~	~~4.3~~

The following table summarizes the ~~preliminary~~key inputs utilized to determine the fair value of the Stock Consideration and 2018 Warrants included within the purchase price of ModSpace.


	Stock Consideration fair value inputs		2018 Warrants fair value inputs
Expected volatility	28.6	%	35.0	%
Risk-free rate of interest	2.2	%	2.7	%
Dividend yield	—	%	—	%
Expected life (years)	0.5		4.3

Opening Balance Sheet

The purchase price of ModSpace was assigned to the 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 Company completed the final assignment of the fair value of the ModSpace acquisition, including the final assignment of goodwill to the Company's reporting units as of August 15, 2019. The following table summarizes the fair values of the assets acquired and liabilities assumed as of the acquisition date, August 15, ~~2018. The Company’s estimated~~2018 and the adjustments made to these balances during the period ended September 30, 2019.


(in thousands)	December 31, 2018		Adjustments		August 15, 2019
Trade receivables, net (a)	$	81,320	$	(8,175)	$	73,145
Prepaid expenses and other current assets	17,342		965		18,307
Inventories	4,757		—		4,757
Rental equipment	853,986		(1,210)		852,776
Property, plant and equipment (b)	110,413		27,248		137,661
Intangible assets:
Favorable leases (c)	3,976		—		3,976
Trade name (c)	3,000		—		3,000
Deferred tax assets, net	1,855		(1,855)		—
Total identifiable assets acquired	$	1,076,649	$	16,973	$	1,093,622

Accrued liabilities	$	31,551	$	1,936	$	33,487
Accounts payable	37,678		421		38,099
Deferred revenue and customer deposits	15,938		—		15,938
Deferred tax liabilities	—		1,154		1,154
Total liabilities assumed	$	85,167	$	3,511	$	88,678

Total goodwill (d)	$	215,764	$	(13,462)	$	202,302

(a) As of the acquisition date, the fair value of ~~ModSpace’s assets acquired~~accounts receivable was $73.1 million and ~~liabilities assumed on~~the gross contractual amount was $89.0 million. The Company analyzed information available at the time of acquisition in estimating uncollectible receivables and the fair value of remaining receivables. The Company's analysis, as of the acquisition date, are determined based on preliminary valuations and analyses. Accordingly, the Company has made provisional estimates for the assets acquired and liabilities assumed. The valuation of intangible assets acquired is based on certain valuation assumptions yet to be finalized, including cash flow projections, discount rates, contributory asset charges and other valuation model inputs. The valuation of tangible long-lived assets acquired is dependent upon, among other things, refinementincluded an assessment of the ~~inputs in~~risk of collectability of receivables by analyzing historical payment trends, the ~~valuation model~~status of collection efforts, and ~~an analysis~~any other pertinent customer specific information that existed as of the condition and estimated remaining useful lives of the assets acquired. In addition to finalizing the valuation of acquired assets, the Company is analyzing complex provisions of tax law regarding treatment of tax attributes upon ModSpace's March 2017 emergence from bankruptcy, implications of the Tax Act as well as scheduling the reversal of deferred tax balances thereof. The Company expects its analysis to be substantially complete by the close of the fourth quarter. Due to the provisional nature of the aforementioned items, the Company has not changed its judgment about the realizability of its pre-existing deferred tax assets as a result of the business combination. The provisional amounts reflected are subject to further adjustment, which may affect the fair values ascribed to goodwill, acquired intangible and tangible assets and the related deferred tax balances. Substantialacquisition date.

(b) Upon completion of the ~~requisite analyses may result~~valuation analysis, the Company recorded a net increase in ~~changes~~property, plant and equipment of $27.2 million related to the finalization of our acquired ~~deferred~~land valuations. The fair value of acquired land was determined using valuations from third party specialists which were based on sales prices for comparable assets at the date of acquisition.

(c) 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.

(d) The goodwill is reflective of ModSpace’s going concern value and operational synergies that the Company expects to achieve that would not be available to other market participants. The goodwill presented on the balance sheet is not deductible for income tax ~~liabilities which thereby may also affect~~purposes. The goodwill is assigned to the ~~Company’s judgment about the realizability of its pre-existing deferred tax assets for which any reductions~~Modular – US and Modular – Other North America segments, defined in Note 16, in the ~~valuation allowance will be reflected separate from the business combination as discrete adjustments to income tax expense (benefit) in the period in which it is determined.~~amounts of $171.3 million and $31.0 million, respectively.

~~Purchase Price~~


~~(in thousands)~~	~~Value~~
~~Trade receivables, net (a)~~	$	~~81,055~~
~~Inventory~~	~~10,483~~
~~Prepaid expenses and other current assets~~	~~6,063~~
~~Rental equipment~~	~~866,801~~
~~Property, plant and equipment~~	~~111,681~~
~~Intangible assets~~
~~Favorable leases (b)~~	~~3,850~~
~~Trade name (b)~~	~~3,000~~

~~Total identifiable assets acquired~~	$	~~1,082,933~~

~~Accounts payable~~	$	~~30,432~~
~~Accrued liabilities~~	~~20,877~~
~~Deferred tax liabilities, net~~	~~42,531~~
~~Deferred revenue and customer deposits~~	~~16,646~~

~~Total liabilities assumed~~	$	~~110,486~~

~~Total goodwill (c)~~	$	~~235,799~~

Pro Forma Information


~~(a)~~			~~The fair value of accounts receivable was $81.1 million and the gross contractual amount was $89.7 million. The Company estimated that $8.6 million is uncollectable.~~
~~(b)~~			~~The trade name has an estimated useful life of three years. The favorable lease asset has an estimated useful life of six years.~~
~~(c)~~			The goodwill is reflective of ModSpace’s going concern value and operational synergies that the Company expects to achieve that would not be available to other market participants. The goodwill is not deductible for income tax purposes. The goodwill is allocated to the Modular – US and Modular – Other North America segments in the amounts of $203.3 million and $32.5 million, respectively.

ModSpace has generated $65.5 million of revenue since the acquisition date, which is included in the condensed consolidated financial statements of operations for the three and nine months ended September 30, 2018.

The ~~pro-forma~~pro forma information below has been prepared using the purchase method of accounting, giving effect to the ~~Acton and~~ ModSpace ~~acquisitions~~acquisition as if ~~they~~it had been completed on January 1, ~~2017.~~2018. The ~~pro-forma~~pro forma information is not necessarily indicative of the Company’s results of operations had the ~~acquisitions~~acquisition been completed on the above ~~dates,~~date, nor is it necessarily indicative of the Company’s future results. The ~~pro-forma~~pro forma information does not reflect any cost savings from operating efficiencies or synergies that could result from the ~~acquisitions,~~acquisition and also does not reflect additional revenue opportunities following the ~~acquisitions.~~acquisition. The tables below present unaudited pro forma consolidated statements of operations information as if ModSpace had been included in the Company’s consolidated results for the nine months ended September 30, 2018:


(in thousands)	Nine Months Ended September 30, 2018
WillScot revenues	$	494,008
ModSpace revenues	312,609
Pro forma revenues	$	806,617

WillScot loss from operations before income tax	$	(56,757)
ModSpace loss from operations before income tax	(7,456)
Loss from operations before income tax before pro forma adjustments	(64,213)
Pro forma adjustments to combined loss from operations before income tax:
Impact of fair value adjustments/useful life changes on depreciation (a)	(10,331)
Intangible asset amortization (b)	(750)
Interest expense (c)	(49,467)
Elimination of ModSpace interest (d)	20,279
Pro forma loss from operations before income tax (e)	(104,482)
Income tax benefit (f)	(24,971)
Pro forma net loss	$	(79,511)

(a) Depreciation of rental equipment and non-rental depreciation were adjusted for the fair value adjustments of equipment acquired in the ModSpace acquisition. The useful lives assigned did not change significantly from the useful lives used by ModSpace.

(b) Amortization of the trade name acquired in ModSpace acquisition.

(c) In connection with the ModSpace acquisition, the Company drew an incremental $419.0 million on the ABL Facility, as defined in Note 8, and issued $300.0 million of secured notes and $200.0 million of unsecured notes. The weighted average interest rate for the aforementioned borrowings was 6.54%. Interest expense includes amortization of related deferred financing fees on debt incurred in conjunction with ModSpace acquisition.

(d) Interest on ModSpace historical debt was eliminated.

(e) Pro forma loss from operations before income tax includes $7.2 million of restructuring expense, $14.9 million of integration costs, and $14.8 million of transaction costs incurred by WillScot for the nine months ended September 30, 2018. Additionally, pro forma loss from operations before income tax for the nine months ended September 30, 2018 also includes $20.5 million of interest expense associated with bridge financing fees incurred in connection with the acquisition of ModSpace.

(f) The pro forma tax rate applied to the ModSpace loss from operations before income tax is the same as the WillScot effective rate for the period.

Transaction and Integration Costs

The Company incurred $5.5 million and $23.9 million in integration costs within selling, general and administrative ("SG&A") expenses for the three and nine months ended September 30, 2019, respectively, related to the ModSpace acquisition. The Company incurred $7.5 million and $14.9 million in integration costs for the three and nine months ended September 30, 2018, respectively, related to the acquisitions of ModSpace, Acton Mobile Holdings LLC (“Acton”) and Onsite Space LLC (d/b/a Tyson Onsite (“Tyson”)).

The Company incurred$10.7 million and $14.8 million in transaction costs for both the three and nine months ended September 30, 2018 related to the ModSpace acquisition.

Assets Held for Sale

In connection with the integration of ModSpace, during the nine months ended September 30, 2019, the Company reclassified 8 branch facilities from property, plant and equipment to held for sale, in addition to the 3 held for sale properties that were recognized at December 31, 2018. During the nine months ended September 30, 2019, an impairment of $2.6 million was recorded related to these properties, and 7 of these properties were sold for net cash proceeds of $12.9 million.

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, a Level 2 measurement.

NOTE 3 - Revenue

Adoption 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 those 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 Company’s historical accounting under ASC 605, Revenue Recognition ("ASC 605"). The ~~tables below present unaudited pro-forma consolidated statements~~implementation of ~~operations information~~ASC 606 did not have a material impact on the Company’s financial results for the period ending September 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 nine months ended September 30, 2019, and 63% and 67% for the three and nine months ended September 30, 2018, respectively) is generated by rental income subject to the guidance of ASC 840. The remaining revenue for 2019 and 2018 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.

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 contractually obligated period, the excess, if ~~ModSpace~~any, between the amount the customer is contractually required to pay over the cumulative amount of revenue recognized to date is recognized as incremental revenue upon return.

Rental equipment is leased primarily under operating leases and, ~~Acton~~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 nine months ended September 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 ~~been included~~total revenue in the ~~Company’s consolidated results~~following geographic areas for the three and nine months ended September 30, ~~2018 and 2017:~~2019:

(in thousands) Three Months Ended September 30, 2018 Nine Months Ended September 30, 2018
WillScot revenues (a) $ 218,924 $ 494,008
ModSpace revenues 81,692 312,609
Pro-forma revenues $ 300,616 $ 806,617
WillScot pretax loss (a) $ (43,236) $ (56,757)
ModSpace pretax loss (11,460) (7,456)
Pretax loss before pro-forma adjustments (54,696) (64,213)
Pro-forma adjustments to combined pretax loss:
Impact of fair value mark-ups/useful life changes on depreciation (b) (132) (395)
Intangible asset amortization (c) (250) (750)
Interest expense (d) (16,495) (49,467)
Elimination of ModSpace interest (e) 4,346 20,279
Pro-forma pretax loss (f) (67,227) (94,546)
Income tax benefit (10,118) (22,608)
Pro-forma net loss $ (57,109) $ (71,938)


	Three Months Ended September 30,						Nine Months Ended September 30,
(in thousands)	2019		2018		2019		2018
US	$	249,108	$	199,771	$	722,322	$	450,874
Canada	19,309		14,351		58,982		31,196
Mexico	3,923		4,802		12,169		11,938
Total revenues	$	272,340	$	218,924	$	793,473	$	494,008


~~(a)~~			~~Excludes historic revenues and pre-tax income from discontinued operations. Post-acquisition ModSpace revenues and pre-tax income results are reflected in WillScot's historic revenue amounts.~~
~~(b)~~			Depreciation of rental equipment and non-rental depreciation were adjusted for the fair value mark-ups of equipment acquired in the ModSpace acquisition. The useful lives assigned to such equipment is preliminary and did not change significantly from the useful lives used by ModSpace.
~~(c)~~			~~Amortization of the trade name acquired in ModSpace acquisition.~~
~~(d)~~			In connection with the ModSpace acquisition, the Company drew an incremental $420.0 million on the ABL Facility and issued $300.0 million of secured notes and $200.0 million of unsecured notes. As of September 30, 2018, the weighted-average interest rate for the aforementioned borrowings was 6.54%. Interest expense includes amortization of related deferred financing fees on debt incurred in conjunction with ModSpace acquisition.
~~(e)~~			~~Interest on ModSpace historic debt was eliminated.~~
~~(f)~~			Pro-forma pretax loss includes $6.1 million and $7.2 million, $7.5 million and $14.9 million, $10.7 million and $14.8 million, of restructuring expense, integration costs, and transactions costs incurred by WillScot for the three and nine months ended September 30, 2018, respectively. Additionally, pro-forma pretax loss for the three and nine month ended September also includes $20.5 million of interest expense associated with bridge financing fees incurred in connection with the acquisition of ModSpace.
~~(g)~~			~~The pro-forma tax rate applied to the ModSpace pretax loss is the same as the William Scotsman effective rate for the period.~~

(in thousands) Three Months Ended September 30, 2017 Nine Months Ended
September 30, 2017
WillScot revenues (a) $ 116,162 $ 325,560
Acton and ModSpace revenues (b) 151,434 407,331
Pro-forma revenues $ 267,596 $ 732,891
WillScot pretax loss (a) $ (21,067) $ (53,325)
Acton and ModSpace pretax income (loss) (b) 6,843 (108,295)
Pro-forma pretax loss (14,224) (161,620)
Pro-forma adjustments to combined pretax loss:
Impact of fair value mark-ups/useful life changes on depreciation (c) (746) (1,959)
Intangible asset amortization (d) (427) (1,281)
Interest expense (e) (19,255) (57,745)
Elimination of Acton and ModSpace interest (f) 8,936 36,702
Pro-forma pretax loss (25,716) (185,903)
Income tax benefit (g) (9,316) (61,950)
Pro-forma loss from continuing operations (h) (16,400) (123,953)
Income from discontinued operations 5,078 11,123
Pro-forma net loss $ (11,322) $ (112,830)
Major Product and Service Lines


~~(a)~~			Excludes historic revenues and pre-tax income from discontinued operations. Includes historic corporate and other SG&A expenses related to Algeco Group costs, which were $7.6 million and $15.7 million for the three and nine months ended September 30, 2017, respectively. Post-acquisition ModSpace revenues and pre-tax income results are reflected in WillScot's historic revenue amounts.
~~(b)~~			Historic Acton revenues were $24.5 million and $71.9 million and historic ModSpace revenues were $126.9 million and $335.4 million, respectively, for the three and nine months ended September 30, 2017. Historic Acton pretax income was $0.9 million and $0.6 million and historic ModSpace pretax income was $5.9 million and pretax loss was $108.9 million, respectively, for the three and nine months ended September 30, 2017.
~~(c)~~			Depreciation of rental equipment and non-rental depreciation were adjusted for the fair value mark-ups of equipment acquired in the Acton and ModSpace acquisitions. The useful lives assigned to such equipment did not change significantly from the useful lives used by Acton and ModSpace.
~~(d)~~			~~Amortization of the trade names acquired in Acton and ModSpace acquisitions.~~
~~(e)~~			In connection with the Acton acquisition, the Company drew $237.1 million on the ABL Facility. As of September 30, 2018, the weighted-average interest rate of ABL borrowings was 4.65%. In connection with the ModSpace acquisition, the Company drew an incremental $420.0 million on the ABL Facility and issued $300.0 million of secured notes and $200.0 million of unsecured notes. The weighted-average interest rate of all ModSpace acquisition borrowings was 6.54%. Interest expense includes amortization of related deferred financing fees on debt incurred in conjunction with ModSpace acquisition.
~~(f)~~			Interest on Acton and ModSpace historic debt was eliminated. Historic Acton interest was $1.4 million and $3.9 million and historic ModSpace interest was $7.5 million and $32.8 million, respectively, for the three and nine months ended, September 30, 2017.
~~(g)~~			~~The pro-forma tax rate applied to the Acton and ModSpace pretax income (loss) are the same as the WillScot effective rate for the period.~~
~~(h)~~			~~Pro-forma pretax loss includes $5.2 million and $6.1 million of Business Combination transactions costs incurred by WillScot for the three and nine months ended September 30, 2017, respectively~~

~~Transaction~~Rental equipment leasing is the Company’s core business, which significantly impacts the nature, timing, and ~~Integration Costs~~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 leasing is complemented by new product sales and sales of rental units. In connection with its leasing and sales activities, the Company provides services including delivery and installation, maintenance and ad hoc services, and removal services at the end of lease transactions.

The ~~Company incurred $7.5 million~~Company’s revenue by major product and ~~$14.9 million in integration costs associated with the Tyson, Acton, and ModSpace acquisitions within selling, general and administrative expenses ("SG&A")~~service line for the three and nine months ended September 30 was as follows:


	Three Months Ended September 30,						Nine Months Ended September 30,
	2019		2018		2019		2018
(in thousands)	Total		Total		Total		Total
Modular space leasing revenue	$	131,555	$	98,793	$	384,580	$	235,652
Portable storage leasing revenue	6,033		5,402		18,295		15,169
VAPS (a)	40,944		28,469		118,005		68,478
Other leasing-related revenue (b)	12,762		8,996		36,145		20,872
Modular leasing revenue	191,294		141,660		557,025		340,171
Modular delivery and installation revenue	61,883		46,777		168,643		104,440
Total leasing and services revenue	253,177		188,437		725,668		444,611
Sale of new units	11,536		20,920		38,064		33,584
Sale of rental units	7,627		9,567		29,741		15,813
Total revenues	$	272,340	$	218,924	$	793,473	$	494,008

(a) Includes $4.0 million and $3.0 million of VAPS service revenue for the three months ended September 30, 2019 and 2018, respectively, and $11.9 million and $7.9 million of VAPS service revenue for the nine months ended September 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 nine months ended September 30, 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 ~~incurred $10.7~~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.

Concentration of credit risk with respect to the Company's receivables is limited because of a large number of geographically diverse customers who operate in a variety of end user markets. The Company's top five customers with the largest open receivables balances represented 2.4% of the total receivables balance as of September 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 nine months ended September 30, 2019, the Company recognized bad debt expenses of $5.5 million and ~~$14.8~~$11.8 million, respectively, within SG&A in ~~transaction costs related to the ModSpace acquisition~~its condensed consolidated statements of income, which included amounts written-off and changes in its allowances for doubtful accounts. During the three and nine months ended September 30, 2018, the Company recognized bad debt expenses of $3.1 million and $5.4 million, respectively.

~~NOTE 3 - Discontinued Operations~~

~~WSII’s Remote Accommodations Business was transferred~~When customers are billed in advance, the Company defers recognition of revenue until the related services are performed, which generally occurs at the end of the contract. As of January 1, 2019, the Company had approximately $32.1 million of deferred revenue that relates to ~~another entity~~removal services for lease transactions and advance billings for sale transactions, which are within the scope of ASC 606. As of September 30, 2019, the Company had approximately $46.3 million of deferred revenue relating to these services which are included in deferred revenue and customer deposits in the ~~Algeco Group prior~~condensed consolidated balance sheets. During the nine months ended September 30, 2019, $8.2 million of previously deferred revenue relating to ~~the Business Combination. WSII~~removal services for lease transactions and advance billings for sale transactions was recognized as revenue.

The Company does not ~~expect to~~ have ~~continuing involvement in the Remote Accommodations Business going forward. Historically, the Remote Accommodations Business leased rental equipment from WSII. After the Business~~material contract assets and it did not recognize any material impairments of any contract assets.

~~Combination, several lease agreements for rental equipment still exist between~~The Company's uncompleted contracts with customers have unsatisfied (or partially satisfied) performance obligations. For the future services revenues that are expected to be recognized within twelve months, the Company has elected to utilize the optional disclosure exemption made available regarding transaction price allocated to unsatisfied (or partially unsatisfied) performance obligations. The transaction price for performance obligations that will be completed in greater than twelve months is variable based on the costs ultimately incurred to provide those services and ~~Target Logistics.~~ therefore the Company is applying the optional exemption to omit disclosure of such amounts.

The ~~lease revenue associated~~primary costs to obtain contracts with ~~these agreements is disclosed in Note 16.~~the Company's customers are commissions. The Company ~~also had~~pays its sales force commissions on the sale of new and rental units. For new and rental unit sales, ~~to Target Logistics during~~ the ~~third quarter which~~period benefited by each commission is ~~disclosed in Note 16.~~

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 ~~transactions discussed above,~~variability noted for services arrangements expected to be performed beyond a twelve month period.

The Company's payment terms vary by the ~~Remote Accommodations segment has been reported as discontinued operations~~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 ~~condensed consolidated statements of operations for the three and nine months ended September 30, 2017 and has no impact on the financial statements in 2018.~~

~~Results from Discontinued Operations~~

~~Income from discontinued operations, net of tax, for the three and nine months ended September 30, 2017 was as follows:~~

(in thousands) Three Months Ended
September 30, 2017 Nine Months Ended
September 30, 2017
Remote accommodations revenue $ 36,767 $ 95,332
Rental unit sales 1,522 1,522
Remote accommodations costs of leasing and services 16,621 41,359
Rental unit cost of sales 885 885
Depreciation of rental equipment 5,653 18,195
Gross profit 15,130 36,415
Selling, general and administrative expenses 3,307 9,838
Other depreciation and amortization 1,255 3,763
Restructuring costs 803 1,573
Other income, net (56) (96)
Operating profit 9,821 21,337
Interest expense 654 2,074
Income from discontinued operations, before income tax 9,167 19,263
Income tax expense 4,089 8,140
Income from discontinued operations, net of tax $ 5,078 $ 11,123

~~Revenues and costs related to the Remote Accommodations Business for the three and nine months ended September 30, 2017 were as follows:~~

(in thousands) Three Months Ended
September 30, 2017 Nine Months Ended
September 30, 2017
Remote accommodations revenue:
Lease revenue $ 14,979 $ 43,556
Service revenue 21,788 51,776
Total remote accommodations revenue $ 36,767 $ 95,332
Remote accommodation costs:
Cost of leases $ 2,329 $ 6,529
Cost of services 14,292 34,830
Total remote accommodations costs of leasing and services $ 16,621 $ 41,359

Cash flows from the Company’s discontinued operations are included in the condensed consolidated statements of cash flows. The significant cash flow items from discontinued operations for the nine months ended September 30, 2017 were as follows:


~~(in thousands)~~	~~September 30, 2017~~
~~Depreciation and amortization~~	$	~~21,958~~
~~Capital expenditures~~	$	~~6,855~~

Company's lease transactions.

NOTE 4 - Inventories

Inventories at the respective balance sheet dates consisted of the following:


(in thousands)	(in thousands)	September 30, 2018		December 31, 2017		(in thousands)	September 30, 2019		December 31, 2018
Raw materials and consumables	Raw materials and consumables	$	19,107	$	10,082	Raw materials and consumables	$	15,956	$	16,022
Work in process	Work in process	2,241		—		Work in process	—		196
Total inventories	Total inventories	$	21,348	$	10,082	Total inventories	$	15,956	$	16,218

NOTE 5 - Rental Equipment, net

Rental equipment, net, at the respective balance sheet dates consisted of the following:


(in thousands)	(in thousands)	September 30, 2018		December 31, 2017		(in thousands)	September 30, 2019		December 31, 2018
Modular units and portable storage	Modular units and portable storage	$	2,326,909	$	1,385,901	Modular units and portable storage	$	2,430,505	$	2,333,776
Value added products	Value added products	88,642		59,566		Value added products	115,762		90,526
Total rental equipment	Total rental equipment	2,415,551		1,445,467		Total rental equipment	2,546,267		2,424,302
Less: accumulated depreciation	Less: accumulated depreciation	(466,148)		(405,321)		Less: accumulated depreciation	(593,438)		(495,012)
Rental equipment, net	Rental equipment, net	$	1,949,403	$	1,040,146	Rental equipment, net	$	1,952,829	$	1,929,290

During the three and nine months ended September 30, 2019, the Company received $1.3 million and $2.4 million, respectively, in insurance proceeds related to assets damaged during Hurricane Harvey and Hurricane Irma. The insurance proceeds exceeded the book value of damaged assets, and the Company recorded gains of $0.4 million and $2.3 million which are reflected in other income, net, on the condensed consolidated statements of operations for three and nine months ended September 30, 2019, respectively.

During the three and nine months ended September 30, 2018, the Company received $0.0 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~~recorded gains of $0.0 million and $4.8 million ~~whic~~hwhich are reflected in other ~~(income) expense,~~income, net, on the condensed consolidated statements of operations for ~~the~~ three and nine months ended September 30, 2018, respectively.

NOTE 6 - Goodwill ~~and Intangible Assets~~

Changes in the carrying amount of goodwill were as follows:

(in thousands) Modular – US
Modular – Other
North America
Total
Balance at January 1, 2017 $ — $ 56,811 $ 56,811
Acquisition of a business 28,609 — 28,609
Effects of movements in foreign exchange rates — 3,932 3,932
Impairment losses — (60,743) (60,743)
Balance at December 31, 2017 28,609 — 28,609
Acquisition of businesses 206,667 32,538 239,205
Changes to preliminary purchase price allocations (396) — (396)
Effects of movements in foreign exchange rates — 346 346
Balance at September 30, 2018 $ 234,880 $ 32,884 $ 267,764


(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	(9,331)		(4,069)		(13,400)
Foreign currency translation	—		980		980
Balance at September 30, 2019	$	203,933	$	30,664	$	234,597

As ~~described~~described in Note 2, the ~~Company~~Company acquired ModSpace in August 2018. ~~A preliminary valuation of the acquired net assets~~The acquisition of ModSpace resulted in the recognition of ~~$203.3~~$171.3 million and ~~$32.5~~$31.0 million of goodwill in the Modular - US segment and Modular - Other North America ~~segmen~~segments, as defined in Note 16.

Impairment Indicator Analysis

~~t, which the Company expects will be non-deductible for income tax purposes.~~ The Company ~~expects to finalize~~had no goodwill impairment during the ~~valuation of the acquired net assets of ModSpace within the one-year measurement period from the date of acquisition.~~

As described in Note 2, the Company acquired Tyson in January 2018. A preliminary valuation of the acquired net assets of Tyson resulted in the recognition of $3.4 million of goodwill in the Modular - US segment, which the Company expects will be deductible for tax purposes. During the three and nine months ended September 30, 2019 and there were no indicators of impairment as of September 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 Company’s stock price, which constituted an indicator of potential impairment in management's judgment. As a result, the Company performed an interim goodwill impairment 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 ~~Company made~~US reporting unit continued to have a ~~$0.3 million~~fair value in excess of carrying value of over 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 ~~$0.7 million adjustment~~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 VAPS, 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 ~~preliminary valuation~~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 ~~acquired net assets of Tyson, including the related goodwill, due to further evaluation of rental equipment and property, plant and equipment, and non-indemnified liabilities.~~reporting unit.

As discussed in further detail in Note 2, the Company acquired Acton 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 14, for the year ended December 31, 2017. During the three months ended September 30, 2018, the Company made a

~~$1.7 million net adjustment that increased the acquired net assets of Acton, primarily due to further evaluation of insurance related receivables.~~
~~During the nine months ended September 30, 2018, the Company made net adjustments of~~

~~$0.3 million~~ that decreased the acquired net assets of Acton, due to further evaluation of rental equipment and non-indemnified liabilities partially offset by changes in insurance-related receivables and deferred tax assets.NOTE 7 - Intangibles

~~The gross carrying amount, accumulated amortization and net book value ("NBV") of the intangible~~Intangible assets at the respective balance sheet dates consisted of the following:


(in thousands)		September 30, 2018										December 31, 2017
															September 30, 2019
(in thousands)	(in thousands)			Gross Carrying Amount		Accumulated Amortization		NBV		Gross Carrying Amount		Accumulated Amortization		NBV		(in thousands)	Weighted average remaining life (in years)			Gross carrying amount			Accumulated amortization			Net book value
														Intangible assets subject to amortization:
Favorable lease rights	Favorable lease rights	$	4,401	$	(60)	$	4,341	$	551	$	—	$	551	Favorable lease rights	4.6			$	1,738		$	(510)		$	1,228
Acton and ModSpace trade names		3,708		(530)		3,178		708		—		708
ModSpace trade name														ModSpace trade name	1.9			3,000			(1,125)			1,875
Total intangible assets subject to amortization	Total intangible assets subject to amortization	$	8,109	$	(590)	$	7,519	$	1,259	$	—	$	1,259	Total intangible assets subject to amortization				4,738			(1,635)			3,103

Indefinite-lived intangible assets:	Indefinite-lived intangible assets:													Indefinite-lived intangible assets:
Trade names		$	125,000	$	—	$	125,000	$	125,000	$	—	$	125,000
Trade name														Trade name				125,000			—			125,000
Total intangible assets other than goodwill	Total intangible assets other than goodwill	$	133,109	$	(590)	$	132,519	$	126,259	$	—	$	126,259	Total intangible assets other than goodwill				$	129,738		$	(1,635)		$	128,103

~~As described in Note 2, the~~


	December 31, 2018
(in thousands)	Weighted average remaining life (in years)	Gross carrying amount		Accumulated amortization		Net book value
Intangible assets subject to amortization:
Favorable lease rights	6.7	$	4,523	$	(347)	$	4,176
ModSpace trade name	2.7	3,000		(375)		2,625
Total intangible assets subject to amortization		7,523		(722)		6,801

Indefinite-lived intangible assets:
Trade name		125,000		—		125,000
Total intangible assets other than goodwill		$	132,523	$	(722)	$	131,801

The Company ~~acquired ModSpace in August 2018, and preliminarily allocated~~assigned $3.0 million and ~~$3.9~~$4.0 million to definite-lived intangible assets, related to the ModSpace trade name and favorable lease rights. The Company allocated $3.9 million and $0.1 million of the favorable lease rights to the Modular - US ~~segment.~~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 ~~asset has an estimated useful~~assets are amortized over the life of ~~six~~ ~~years. The Company expects~~ the leases. These intangibles ~~to be~~are non-deductible for income tax purposes.

The aggregate amortization expense for intangible assets subject to amortization was $0.4 million and $1.2 million for the three and nine months ended September 30, 2019, respectively. For the three months ended September 30, 2019, $0.3 million was recorded in other depreciation and amortization expense and $0.1 million related to the favorable lease rights was recorded in SG&A. For the nine months ended September 30, 2019, $0.8 million was recorded in other depreciation and amortization expense and $0.4 million related to the favorable lease rights was recorded in SG&A. The aggregate amortization expense for intangible assets subject to amortization was $0.2 million and $0.6 million for the three and nine months ended September 30, 2018, respectively. For the three months ended September 30, 2018, $0.2 million was recorded in other depreciation and amortization expense. For the nine months ended September 30, 2018, $0.5 million was recorded in other depreciation and amortization expense and $0.1 million related to the favorable lease rights was recorded in SG&A.

The Company ~~expects to finalize~~recognized a non-cash impairment charge of $2.4 million in impairment losses on long-lived assets during the ~~valuation~~nine months ended September 30, 2019 as a result of the closure of a branch location with a favorable lease asset which was acquired ~~net assets of~~in the ModSpace ~~including the related intangible assets, within the one-year measurement period from the date of~~ acquisition.

NOTE 78 - Debt

The carrying value of debt outstanding at the respective balance sheet dates consisted of the following:


(in thousands, except rates)	(in thousands, except rates)	Interest rate	Year of maturity	September 30, 2018		December 31, 2017		(in thousands, except rates)	Interest rate	Year of maturity	September 30, 2019		December 31, 2018
2022 Secured Notes	2022 Secured Notes	7.875%	2022	$	291,853	$	290,687	2022 Secured Notes	7.875%	2022	$	293,530	$	292,258
2023 Secured Notes	2023 Secured Notes	6.875%	2023	293,637		—		2023 Secured Notes	6.875%	2023	482,344		293,918
Unsecured Notes	Unsecured Notes	10.000%	2023	198,882		—		Unsecured Notes	10.000%	2023	—		198,931
US ABL Facility	US ABL Facility	Varies	2022	830,573		297,323		US ABL Facility	Varies	2022	897,917		853,409
Canadian ABL Facility (a)	Canadian ABL Facility (a)	Varies	2022	—		—		Canadian ABL Facility (a)	Varies	2022	—		—
Capital lease and other financing obligations	Capital lease and other financing obligations			38,549		38,736		Capital lease and other financing obligations			38,394		37,983
Total debt	Total debt			1,653,494		626,746		Total debt			1,712,185		1,676,499
Less: current portion of long-term debt	Less: current portion of long-term debt			(1,915)		(1,881)		Less: current portion of long-term debt			(2,025)		(1,959)
Total long-term debt	Total long-term debt			$	1,651,579	$	624,865	Total long-term debt			$	1,710,160	$	1,674,540

(a) As of September 30, 2018, the Company had $1.5 million of outstanding principal borrowings on the Canadian ABL Facility and $3.3 million of related debt issuance costs. $1.5 million of the related debt issuance costs are recorded as a direct offset against the principal of the Canadian ABL Facility and the remaining $1.8 million, in excess of the principal, has been included in other non-current assets on the condensed consolidated balance sheet. 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~~

~~Prior to~~(a) As of September 30, 2019, the ~~Business Combination, WSII depended~~Company had 0 outstanding principal borrowings remaining on the ~~Algeco Group for financing, which centrally managed all treasury~~Canadian ABL Facility and ~~cash management. In October 2012,~~$2.3 million of related debt issuance costs. As there were 0 principal borrowings outstanding on the ~~Algeco Group entered into a multi-currency asset-based revolving credit~~Canadian ABL Facility, the $2.3 million of debt issuance costs related to that facility ~~(the “Algeco Group Revolver”), which~~are included in other non-current assets on the condensed consolidated balance sheet. As of December 31, 2018, the Company had ~~a maximum aggregate availability~~$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 ~~equivalent~~related debt issuance costs are recorded as a direct offset against the principal of ~~$1.355 billion.~~ 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 ~~maximum borrowing availability~~Company is subject to ~~WSII in US dollars~~various covenants and ~~Canadian dollars (“CAD”) was $760.0 million~~restrictions for the ABL Facility, the 2022 Secured Notes and ~~$175.0 million, respectively.~~

~~Interest expense~~ ~~of $8.7 million~~the 2023 Secured Notes. The Company redeemed the Unsecured Notes on June 19, 2019 and ~~$23.2 million~~has no remaining obligations related to the ~~Algeco Group Revolver~~Unsecured Notes following the redemption. The Company was ~~included~~ in ~~interest expense for the three and nine months ended~~compliance with all covenants related to debt as of September 30, ~~2017.~~2019 and December 31, 2018.

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 ~~provided~~provides a senior secured revolving credit facility ~~in the initial aggregate principal amount of up to $600.0 million. The ABL Facility~~that matures on May 29, 2022.

~~In July and August 2018, the Company entered into three amendments (the "ABL Amendments") to the~~The ABL Facility that, among other things, (i) permitted the ModSpace acquisition and the Company’s financing thereof, (ii) increased the ABL Facility limit to $1.425 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.

~~After giving effect to the ABL Amendments, the ABL Facility, which matures on May 29, 2022,~~ consists of (i) a $1.285 billion asset-backed revolving credit facility (the “US ABL Facility”) for WSII and certain of its domestic subsidiaries (the “US Borrowers”), (ii) a $140.0 million asset-based revolving credit facility (the “Canadian ABL Facility”) for certain Canadian subsidiaries of WSII (the “Canadian 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 $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 under the ABL Facility, at the Borrower’s option, bear interest at an adjusted LIBOR or base rate, in each case plus an applicable margin. At inception~~The obligations of the ~~ABL Facility until March 31, 2018,~~US Borrowers are unconditionally guaranteed by WS Holdings and each existing and subsequently acquired or organized direct or indirect wholly-owned US organized restricted subsidiary of WS Holdings, other than excluded subsidiaries (together with WS Holdings, the ~~applicable margin was fixed at 2.50% for LIBOR borrowings~~"US Guarantors"). The obligations of the Canadian Borrowers are unconditionally guaranteed by the US Borrowers and ~~1.50% for base rate borrowings. Commencing on March 31, 2018,~~ the ~~applicable margins are subject to one step-down~~US Guarantors, and each existing and subsequently acquired or organized direct or indirect wholly-owned Canadian organized restricted subsidiary of ~~0.25% or one step-up of 0.25%, based on excess availability levels~~WS Holdings other than certain excluded subsidiaries (together with ~~respect to~~ the ~~ABL Facility. The ABL Facility requires~~US Guarantors, the ~~payment of an annual commitment fee on the unused available borrowings of between 0.375% and 0.5% per annum.~~ "ABL Guarantors").

At September 30, ~~2018,~~2019, the weighted average interest rate for borrowings under the ABL Facility was ~~4.65%~~4.54%.

~~Borrowing availability under~~ The weighted average interest rate on the ~~US ABL Facility and~~balance outstanding, as adjusted for the Canadian ABL Facility is equal to the lesser of (i) with respect to US Borrowers, $1.285 billion and the US Borrowing Base (defined below) (the “US Line Cap”), and (ii) with respect to the Canadian Borrower, $140.0 million and the Canadian Borrowing Base (defined below) (the “Canadian Line Cap,” together with the US Line Cap, the “Line Cap”).

~~The US Borrowing Base is, at any time of determination, an amount (net of reserves) equal to the sum of:~~

~~◦ 85%~~effects of the ~~net book value of the US Borrowers’ eligible accounts receivable, plus~~

◦ the lesser of (i) 95% of the net book value of the US Borrowers’ eligible rental equipment and (ii) 85% of the net orderly liquidation value of the US Borrowers’ eligible rental equipment, minus

~~◦ customary reserves.~~

~~The Canadian Borrowing Base is, at any time of determination, an amount (net of reserves) equal~~interest rate swap agreements was 4.99%. Refer 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.~~Note 14 for a more detailed discussion on interest rate management.

At September 30, ~~2018, the Line Cap was $1.425 billion and~~2019, the Borrowers had ~~$552.9~~$489.2 million of available borrowing capacity under the ABL Facility, including ~~$414.5~~$354.8 million under the US ABL Facility and ~~$138.4~~$134.4 million under the Canadian ABL Facility. At December 31, ~~2017, prior to the ABL Amendments, the Line Cap was $600.0 million and~~2018, the Borrowers had ~~$281.1~~$532.6 million of available borrowing capacity under the ~~ABL~~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 $75.0 million of standby letters of credit and up to $75.0 million of swingline loans, and borrowing capacity under the Canadian ABL Facility is made available for up to $60.0 million of standby letters of credit, and $50.0 million of swingline loans. Letters of credit and bank guarantees carried

~~fees of 2.625% at September 30, 2018 and December 31, 2017.~~ The Company had ~~issued~~ issu~~$13.0~~ed $12.7 million and ~~$8.9~~$13.0 million of standby letters of credit under the ABL Facility at September 30, ~~2018~~2019 and December 31, ~~2017.~~2018, respectively. At September 30, 2019, letters of credit and guarantees carried fees of 2.625%.

The ABL Facility requires the Borrowers to maintain a (i) minimum interest coverage ratio of 2.00:1.00 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) $135.0 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 of September 30, 2018.~~

~~The Company had $859.0~~had $917.5 million ~~and $310.0~~and $879.4 million in outstanding principal under the ABL Facility at September 30, ~~2018~~2019 and December 31, ~~2017,~~2018, respectively.

~~The ABL Amendments were treated as a debt modification to the ABL Facility under ASC 470-50,~~ ~~Debt, Modifications and Extinguishments~~. All ABL Facility lenders prior to the ABL Amendments are continuing lenders after giving effect to the ABL Amendments. The Company incurred an additional $19.0 million in debt issuance costs and discounts associated with the ABL Amendments that have been deferred and will be amortized through the remaining period until the maturity date of the ABL Facility. Debt issuance costs and discounts ~~of $28.5~~of $19.6 million ~~and $12.7~~and $26.0 million are included in the carrying value of the ABL Facility at September 30, ~~2018~~2019 and December 31, ~~2017,~~2018, respectively.

~~Interest expense~~ ~~of $7.6 million and $15.8 million~~ ~~related to the ABL Facility was included in interest expense for the three and nine months ended September 30, 2018.~~

2022 Senior Secured Notes

In connection with the closing of the Business Combination, WSII ~~has~~issued $300.0 million aggregate principal amount of 7.875% senior secured notes due December 15, 2022 (the “2022 Secured Notes”) under an indenture dated November 29,

2017, ~~which was~~ entered into by and among WSII, the guarantors named therein, and Deutsche Bank Trust Company Americas, as trustee and as collateral agent. Interest is payable semi-annually on June 15 and December 15, beginning June 15, 2018.

Before December 15, 2019, WSII may redeem the 2022 Secured Notes at a redemption price equal to 100% of the principal amount, plus a customary make whole premium for the 2022 Secured Notes being redeemed, plus accrued and unpaid interest, if any, to but not including the redemption date.

The customary make whole premium, with respect to the 2022 Secured Notes on any applicable redemption date, as calculated by the Company, is the greater of (i) 100% of the then outstanding principal amount of the 2022 Secured Notes; 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 2022 Secured Notes 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 2022 Secured Notes.

Before December 15, 2019, WSII may redeem up to 40% of the aggregate principal amount of the 2022 Secured Notes at a price equal to 107.875% of the principal amount of the 2022 Secured Notes being redeemed, plus accrued and unpaid interest, if any, to but not including the redemption date with the net proceeds of certain equity offerings. At any time prior to November 29, 2019, WSII may also redeem up to 10% of the aggregate principal amount of the 2022 Secured 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 2022 Secured Notes.

On or after December 15, 2019, WSII, may redeem the 2022 Secured Notes, in whole or in part, at the redemption prices expressed as percentages of principal amount set forth below, plus accrued and unpaid interest to, but not including, the applicable redemption date (subject to the holders' right 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:

Year Redemption Price
2019 103.938 %
2020 101.969 %
2021 and thereafter 100.000 %

The 2022 Secured 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 WillScot or any restricted subsidiary of WSII; selling, leasing or transferring any of its property or assets to WillScot 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. On August 15, 2018, in conjunction with the ModSpace acquisition and related debt issuances, WSII entered a supplemental indenture to, among other things, join ModSpace and its domestic subsidiaries as guarantors of the 2022 Secured Notes.

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 September 30, 2018 and December 31, 2017.

Unamortized debt issuance costs pertaining to the 2022 Secured Notes was ~~$8.1~~$6.5 million and ~~$9.3~~$7.7 million as of September 30, ~~2018~~2019 and December 31, ~~2017,~~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~~Issuer entered into an indenture dated August 6, 2018 with Deutsche Bank Trust Company Americas, as trustee, ~~(“2023 Secured Notes Indenture”),~~ which governs the terms of the Initial 2023 Secured Notes. In connection with the ModSpace acquisition, the ~~issuer~~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 ~~may redeem~~completed a tack-on offering of $190.0 million in aggregate principal amount to the Initial 2023 Secured Notes ~~at any time before~~(the "Tack-on Notes"). The Tack-on Notes were issued as additional securities under an indenture, dated August ~~15, 2020 at a redemption price equal to 100% of~~6, 2018, by and among the ~~principal amount thereof, plus a customary make whole premium for~~Issuer, the ~~2023 Secured~~guarantors named therein and Deutsche Bank Trust Company Americas, as trustee and collateral agent. The Tack-On Notes ~~being redeemed, plus accrued~~ and ~~unpaid interest, if any, to but not including~~ the redemption date. Before August 15, 2020, WSII may redeem up to 40% of the aggregate principal amount of the 2023 Secured Notes at a price equal to 106.875% of the principal amount of the 2023 Secured Notes being redeemed, plus accrued and unpaid interest, if any, to but not including the redemption date with the net proceeds of certain equity offerings. WSII may also redeem up to 10% of the aggregate principal amount of the 2023 Secured Notes at any time prior to the second anniversary of the closing date of this offering at a redemption price equal to 103% of the principal amount of the 2023 Secured Notes being redeemed during each twelve-month period commencing with the issue date, plus accrued and unpaid interest, if any, to but not including the redemption date. If WSII undergoes a change of control or sells certain of its assets, WSII may be required to offer to repurchase the 2023 Secured Notes.

On and after August 15, 2020, WSII may redeem the 2023 Secured Notes, in whole or in part, at the redemption prices expressed as percentages of principal amount set forth below plus accrued and unpaid interest to but not including the applicable redemption date (subject to the holders' right to receive interest due on an interest payment date falling on or prior to the redemption date), if redeemed during the 12 month period beginning on August 15 of each of the years set forth below.

Year Redemption Price
2020 103.938 %
2021 101.969 %
2022 and thereafter 100.000 %

~~The~~Initial 2023 Secured Notes are ~~unconditionally guaranteed by each~~treated as a single class of WSII’s direct and indirect domestic subsidiaries and WSII’s parent, WS Holdings (collectively the “Note Guarantors”). WillScot is not a guarantor of the 2023 Secured Notes. The Note Guarantors and certain of the Company's non-US subsidiaries are guarantors or borrowersdebt securities under the ~~ABL Facility. These guarantees are secured by a second priority security interest in substantially all of~~indenture (the "2023 Secured Notes") and together with the ~~assets of WSII and~~2022 Secured Notes, the ~~Note Guarantors (subject to customary exclusions) and are subordinated~~"Senior Secured Notes"). The Tack-On Notes have identical terms to the ~~Company's obligations under the ABL Facility.~~

~~The~~Initial 2023 Secured 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~~than with respect to ~~its capital stock; making loans or advances~~the issue date and issue price. WSII incurred a total of $3.0 million in debt issuance costs in connection with the tack-on offering, which were deferred and will be amortized through the August 15, 2023 maturity date. The Tack-on Notes were issued at a premium of $0.5 million which will be amortized through the August 15, 2023 maturity date. The proceeds of the Tack-On Notes were used to ~~WillScot or any restricted subsidiary~~repay a portion of WSII; selling, leasing or transferring any of its property or assets to WillScot 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 September 30, 2018.~~ABL Facility.

~~The Company incurred~~Unamortized debt issuance costs and discounts, net of ~~$6.5 million in connection with~~premium, pertaining to the 2023 Secured ~~Notes. Debt issuance costs~~Notes were $7.7 million and ~~discounts~~$6.1 million as of ~~$6.4 million are included in the carrying value of the debt at~~ September 30, ~~2018.~~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~~Issuer entered into an indenture with Deutsche Bank Trust Company Americas, as trustee, ~~(the “Unsecured Notes Indenture”),~~ which governs the terms and conditions of the Unsecured Notes. In connection with the ModSpace acquisition, the ~~issuer~~Issuer merged with and into WSII and WSII assumed the Unsecured Notes.

~~The~~On June 19, 2019 (the "Redemption Date"), WSII used proceeds from its US ABL Facility to redeem all $200.0 million in aggregate outstanding principal amount of the Unsecured Notes ~~bear~~at a redemption price of 102.0%, plus a make-whole premium of 1.126% and any accrued and unpaid interest to, but not including, the Redemption Date. The Company recorded a loss on extinguishment of $7.2 million, which included $6.2 million of make-whole premiums and $1.0 million related to the write-off of unamortized deferred financing fees.

Prior to the redemption, the Unsecured Notes bore interest at a rate of 10% per annum if paid in cash (or if paid in kind, 11.5% per annum) for any interest period ending on or before February 15, 2021, and thereafter are payable solely in cash at an increased rate per annum of 12.5%.annum. Interest iswas payable semi-annually on February 15 and August 15 of each year, beginning February 15, 2019.

The Unsecured Notes are not prepayable until February 15, 2019. From time to time during the period from February 15, 2019 through August 14, 2019, WSII may redeem the Unsecured Notes, in whole or in part, at a redemption price equal to 100% of the principal amount of the Unsecured Notes, plus the Applicable Premium (as defined in the Unsecured Notes Indenture) as of, and accrued and unpaid interest to, but not including the redemption date (subject to the holders' right to receive interest due on an interest payment date falling on or prior to the redemption date); provided, that if the Unsecured Notes are being redeemed in part, such redemption will not reduce the aggregate principal amount of the Unsecured Notes outstanding below $50.0 million (together with any PIK Interest in respect thereof). If WSII undergoes a change of control or sells certain of its assets, WSII may be required to offer to repurchase the Unsecured Notes.

At any time and from time to time on and after August 15, 2019, WSII, at its option, may redeem the Unsecured 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 (subject to the right of Holders (as defined therein) 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 periods referred to below, beginning on August 15, 2019; provided however, that if the Unsecured Notes are being redeemed in part, such redemption will not reduce the aggregate principal amount of the Unsecured Notes outstanding below $50.0 million (together with any PIK Interest in respect thereof).


~~Year~~	~~Redemption Price~~
~~August 15, 2019 to February 14, 2020~~	~~102.000~~	%
~~February 15, 2020 to February 14, 2021~~	~~104.000~~	%
~~February 15, 2021 and thereafter~~	~~106.000~~	%

The Unsecured Notes are unconditionally guaranteed by each Note Guarantor. These guarantees are senior, unsecured obligations of the Note Guarantors (except that the guarantee of the Unsecured Notes provided by WillScot Equipment II, LLC, which holds certain of WSII’s uncertificated assets in the United States, are subordinated to its obligations under the ABL Facility).

The Unsecured 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 WillScot or any restricted subsidiary of WSII; selling, leasing or transferring any of its property or assets to WillScot 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.

~~grant the US Borrowers continued flexibility to operate and develop their businesses. The Company is in compliance with these covenants and restrictions as of September 30, 2018.~~

~~The Company incurred~~Unamortized debt issuance costs and discounts ~~of $1.1 million in connection with the issuance of the Unsecured Notes. Debt issuance costs and discounts of~~ ~~$1.1 million~~ ~~are included in the carrying value of~~pertaining to the Unsecured Notes ~~at September 30,~~were $1.1 million as of December 31, 2018.

~~Bridge Financing Fees~~

In connection with the ModSpace acquisition, the Company incurred bridge financing fees of $20.5 million, included within interest expense in the condensed consolidated statement of operations, for the three and nine months ended September 30, 2018.

Capital Lease and Other Financing Obligations

The Company’s capital lease and financing obligations primarily consisted of $38.4 million ~~and $38.5~~and $37.9 million under sale-leaseback transactions ~~and $0.1~~and $0.0 million and ~~$0.2~~$0.1 million of capital leases at September 30, ~~2018~~2019 and December 31, ~~2017,~~2018, respectively. The Company’s capital lease and financing obligations are presented net of ~~$1.6~~$1.4 million ~~and $1.8~~and $1.6 million of debt issuance costs at September 30, ~~2018~~2019 and December 31, ~~2017,~~2018, respectively. The Company’s capital leases primarily relate to real estate, equipment and vehicles and have interest rates ranging ~~from~~from 1.2% to 11.9%.

~~The Company has entered into several arrangements in which it has sold branch locations~~In connection with the adoption of ASC 842, the financing obligations under sale-leaseback transactions will be reversed and ~~simultaneously leased~~ the associated ~~properties back from the various purchasers. Due to the terms~~lease liabilities will be recorded as part of the operating lease ~~agreements, these transactions are treated as financing arrangements. These transactions contain non-recourse financing which is a form of continuing involvement~~liabilities.

NOTE 9 – Equity

Common Stock 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%.Warrants

~~Notes Due To and From Affiliates~~Common Stock

In ~~conjunction~~connection with the ~~Business Combination, all notes due to~~stock compensation vesting and ~~from affiliates were settled, and there is no related interest expense or interest income related to~~stock option exercises described in Note 13, the ~~notes due to or from affiliates for~~Company issued 242,357 shares of common stock during the ~~three and~~ nine months ended September 30, ~~2018.~~

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~~Warrants

Double Eagle issued warrants to purchase its common stock as components of ~~$16.7 million~~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 ~~$48.0 million associated~~together with ~~these notes due to affiliates is reflected in interest expense in~~ the ~~consolidated statement of operations for~~Public Warrants, the ~~three and nine months ended~~ "2015 Warrants").

At September 30, ~~2017, respectively. Interest on the notes due to affiliates was payable on a semi-annual basis.~~

Conversely, WSII also distributed borrowings to other entities within the Algeco Group through intercompany loans, and earned interest income on the principal. For the three and nine months ended September 30, 2017, the Company recognized $3.7 million and $9.8 million, respectively, of interest income related to the loans.

2019

~~NOTE 8 – Equity~~

~~Common Stock~~

On July 30, 2018, WillScot closed a public offering of 8,000,000 shares of its Class A common stock at an offering price of $16.00 per share. On August 10, 2018, the underwriters exercised their right to purchase an additional 1,200,000 shares at the public offering price. The net offering proceeds, including the exercise, 24,367,867 of the ~~over-allotment option, were $139.0 million, after deducting discount~~2015 Warrants and ~~offering expenses of $8.2 million. The Company used the proceeds to fund the ModSpace acquisition and to pay related fees and expenses.~~

~~As disclosed in Note 2, on August 15, 2018, WillScot issued 6,458,229 unregistered shares of its Class A common stock, par value $0.0001 per share, to former ModSpace shareholders as part~~9,999,579 of the ~~consideration paid in connection with the ModSpace acquisition. In connection with the issuance, WillScot entered into a registration rights agreement dated July 26,~~ 2018 under which WillScot granted customary registration rights to the holders of the unregistered common shares. Subject to limited exception, the unregistered shares issued to former ModSpace shareholders may not be sold or otherwise transferred prior to the six-month anniversary of the issuance date.

On September 21, 2018, the Company filed a registration statement with the SEC under which 10,373,102 of unregistered shares of WillScot’s Class A common stock would be registered under a retail shelf registration statement. On November 2, 2018, the Company filed an amendment to, among other things, increase the number of registered Class A common shares available for sale by the selling shareholders from 10,373,102 to 61,865,946 shares, approximately 5.8 million of which are subject to transfer restrictions until February 15, 2019.

Warrants were outstanding.

2320

~~Warrants~~

On July 10, 2018, the Company was notified that its public warrants would be delisted from the Nasdaq Capital Market (“Nasdaq”) based on the Company’s failure to satisfy a minimum holder requirement applicable to the warrants. Trading of the public warrants on Nasdaq was suspended on July 12, 2018, and they were removed from Nasdaq listing on October 8, 2018.

As disclosed in Note 2, on August 15, 2018, WillScot issued the ModSpace Warrants to the former shareholders as part of the ModSpace acquisition. Each ModSpace Warrant entitles the holder thereof to purchase one share of WillScot Class A common stock at an exercise price of $15.50 per share, subject to potential adjustment. Subject to limited exception, the ModSpace Warrants are not exercisable or transferable until the six-month anniversary of the issuance date, and the ModSpace Warrants expire on November 29, 2022. Under a registration rights agreement dated July 26, 2018, WillScot agreed to file a registration statement, and to use its reasonable best efforts to cause the registration statement to become effective, by the six-month anniversary of the issuance date.

Accumulated Other Comprehensive Loss

The changes in accumulated other comprehensive loss ("AOCL"), net of tax, for the three andnine months ended September 30, ~~2018~~2019 and ~~2017~~2018 were as follows:


~~(in thousands)~~	~~Foreign Currency Translation Adjustment~~
~~Balance at December 31, 2017~~	$	~~(49,497)~~
~~Total other comprehensive loss~~	~~(82)~~
~~Reclassifications to accumulated deficit~~^(a)	~~(2,540)~~
~~Balance at September 30, 2018~~	$	~~(52,119)~~


(in thousands)	Foreign Currency Translation		Unrealized losses on hedging activities		Total
Balance at December 31, 2018	$	(62,608)	$	(5,418)	$	(68,026)
Total other comprehensive income (loss) prior to reclassifications	4,115		(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 reclassifications	4,300		(4,500)		(200)
Reclassifications to the statements of operations	—		613		613
Less other comprehensive (income) loss attributable to non-controlling interest	(396)		351		(45)
Balance at June 30, 2019	(54,953)		(10,957)		(65,910)
Total other comprehensive loss prior to reclassifications	(2,799)		(1,337)		(4,136)
Reclassifications to the statements of operations	—		837		837
Less other comprehensive loss attributable to non-controlling interest	256		45		301
Balance at September 30, 2019	$	(57,496)	$	(11,412)	$	(68,908)


~~(in thousands)~~	~~Foreign Currency Translation Adjustment~~
~~Balance at December 31, 2016~~	$	~~(56,928)~~
~~Total other comprehensive loss~~	~~8,914~~
~~Balance at September 30, 2017~~	$	~~(48,014)~~


(in thousands)	Foreign Currency Translation		Unrealized losses on hedging activities		Total
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 interest	293		—		293
Balance at June 30, 2018	(54,417)		—		(54,417)
Total other comprehensive income prior to reclassifications	2,541		—		2,541
Less other comprehensive loss attributable to non-controlling interest	(243)		—		(243)
Balance at September 30, 2018	$	(52,119)	$	—	$	(52,119)

(a) In ~~the~~the 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 amounts~~For the three and nine months ended September 30, 2019, $0.8 million and $2.0 million was reclassified from ~~accumulated other comprehensive loss~~AOCL into the condensed consolidated statement of operations within interest expense related to the interest rate swaps discussed in Note 14. For the three and ~~into consolidated net~~nine months ended September 30, 2019, the Company recorded a tax benefit of $0.0 million and $0.1 million, respectively, associated with this reclassification.

NOTE 10 – Income Taxes

The Company recorded an income ~~(loss)~~ tax benefit of $1.2 million and $2.0 million for the three and nine months ended September 30, ~~2018~~2019, respectively, and ~~September 30, 2017.~~

~~Non-Controlling Interest~~$6.5 million and $13.6 million for

~~The changes in~~ the ~~non-controlling interest for the~~three and nine months ended September 30, 2018, ~~were as follows:~~


~~(in thousands)~~	~~Total~~
~~Balance at December 31, 2017~~ respectively.	$	~~48,931~~
~~Net loss attributable to non-controlling interest~~	~~(3,715)~~
~~Other comprehensive loss~~	~~(26)~~
~~Issuance of common stock and contribution of proceeds to WSII~~	~~7,574~~
~~Acquisition of ModSpace and the effect of the related financing transactions~~	~~13,614~~
~~Balance at September 30, 2018~~	$	~~66,378~~

~~As disclosed under Common Stock above, during the three months ended September 30, 2018, WillScot~~ issued 9,200,000 shares of Class A common stock through an underwritten public offering, the proceeds of which were immediately contributed down through WS Holdings to WSII for purposes of funding part of the ModSpace acquisition. Sapphire waived its preemptive right to participate in the public offering and pursuant to the shareholders agreement entered into by WS Holdings' shareholders, Sapphire's ownership in WS Holdings was adjusted from 10% to 9% accordingly. As disclosed in Note 2, the

~~Company closed on the ModSpace Acquisition that resulted in the contribution of ModSpace's net assets of $972.4 million to WSII.~~ The net impact of the transactions above, resulted in a non-recurring adjustment of $21.2 million to additional paid in capital and non-controlling interest on the condensed consolidated balance sheets. Despite the dilution in the non-controlling interest ownership in WS Holdings, the adjustment increases the non-controlling interest equity as a result of the significant increase in net assets from the ModSpace acquisition.

~~NOTE 9 – Income Taxes~~

~~The Company recorded an income~~Company’s effective tax ~~benefit of approximately $6.5 million and $13.6 million~~rate for the three and nine months ended September 30, ~~2018,~~2019 was 266.4% and 8.4%, respectively, and ~~$7.6 million~~15.0% and ~~$17.8 million for~~23.9% for the ~~same~~corresponding periods ~~of 2017.~~

in 2018. The ~~Company’s effective~~Company did not recognize a tax ~~rate (“ETR”)~~benefit on the loss from operations for the three ~~months ended September 30, 2018 and 2017 was 15.0% and 36.2%, respectively, and 23.9% and 33.3% for the~~or nine months ended September 30, ~~2018 and 2017, respectively.~~

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 ~~estimated annual ETR ("EAETR") of 14.8% on the forecasted pre-tax loss is lower than the US statutory~~effective tax rate of 21.0% due to certain offsets to the overall tax benefit, namely: (1) a partial valuation allowance, $8.0 million tax expense, due to the limitation on the deductibility of interest expense estimated for the current year partially offset by reduction to the deferred tax liability, $2.3 million tax benefit, established for the book over tax basis difference for the Company's investment in its Canadian subsidiary and (2) a gross permanent disallowance, $6.6 million, of which $5.7 million relates to the non-deductibility of certain transaction costs in relation to the ModSpace acquisition.

The Company’s ETR for the three months ended September 30, 2018 of 15.0% is comparable to its EAETR due to minimal discrete items for the quarter of $0.6 million, which is primarily attributable to adjustments to deferred taxes for legislation enacted in certain state taxing jurisdictions during the quarter, notably, in New Jersey.

The Company’s ETR for the nine months ended September 30, 2018 of 23.9% is higher than the EAETR due to $5.3 million of discrete tax benefit recorded year to date, of which a $4.3 million tax benefit is attributable to a reduction in our net state deferred tax liability in Maryland due to change in tax law enacted in the second quarter.

~~In addition, to the foregoing, the Company also recognized tax expense of $0.1 million and tax benefit of $0.3 million~~ for the three and nine months ended September 30, ~~2018, respectively, related~~2019 is principally a result of discrete items. The higher effective rate for the three months ended September 30, 2019 is due to ~~foreign currency gains and losses. For~~a smaller pre-tax loss from operations than the prior two quarters.

During the three and nine months ended September 30, ~~2017,~~2019, the Company recognized income tax ~~expense~~benefit of ~~$1.6~~ $1.2 million and ~~$4.8~~$2.0 million, respectively, ~~related~~primarily attributable to ~~foreign currency gains. The Company also adjusted~~(i) enacted legislative changes and (ii) valuation allowance adjustments generated by changes in provisional ModSpace balances recorded in 2019.

During the ~~provisional amounts for the impacts of the Tax Act under SAB 118 reported in its financial statements for the year~~three and nine months ended ~~December 31, 2017. As of~~ September 30, 2018, athe Company recognized income tax benefit of $0.6 million ~~tax benefit has been recorded in relation~~and $5.3 million, respectively, mainly related to ~~tax reform guidance under SAB 118. As noted above, the Company recorded a discrete benefit of $4.3 million~~enacted legislative changes in the second quarter of ~~2018 to reduce its net state deferred tax liability primarily related to the enactment of an apportionment rule change in Maryland.~~2018.

NOTE 1011 - 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:

September 30, 2018 December 31, 2017
Carrying Amount Fair Value Carrying Amount Fair Value
(in thousands) Level 1 Level 2 Level 3 Level 1 Level 2 Level 3
Financial liabilities not measured at fair value
US ABL Facility (a) $ 830,573 $ — $ 857,500 $ — $ 297,323 $ — $ 310,000 $ —
Canadian ABL Facility (a) — — 1,549 — — — — —
2022 Secured Notes (a) 291,853 — 310,416 — 290,687 — 310,410 —
2023 Secured Notes (a) 293,637 — 298,185 — — — — —
Unsecured Notes (a) 198,882 — 204,210 — — — — —
Total $ 1,614,945 $ — $ 1,671,860 $ — $ 588,010 $ — $ 620,410 $ —
(a) See Note 7 - Debt.


	September 30, 2019														December 31, 2018
	Carrying Amount		Fair Value										Carrying Amount		Fair Value
(in thousands)					Level 1		Level 2		Level 3						Level 1		Level 2	Level 3
US ABL Facility	$	897,917	$	—	$	917,500	$	—	$	853,409	$	—	$	878,500	$	—
Canadian ABL Facility	—		—		—		—		—		—		918		—
2022 Secured Notes	293,530		—		314,535		—		292,258		—		297,027		—
2023 Secured Notes	482,344		—		514,318		—		293,918		—		288,633		—
Unsecured Notes	—		—		—		—		198,931		—		197,462		—
Total	$	1,673,791	$	—	$	1,746,353	$	—	$	1,638,516	$	—	$	1,662,540	$	—

~~There were no transfers of financial instruments between the three levels of the fair value hierarchy during the three and nine months ended September 30, 2018 and 2017.~~ The ~~fair~~carrying value of the ~~Company’s~~US ABL Facility, ~~is primarily based upon observable~~the Canadian ABL Facility, the 2022 Secured Notes and the 2023 Secured Notes includes $19.6 million, $0.0 million, $6.5 million and $7.7 million, respectively, of unamortized debt issuance costs as of September 30, 2019, which are presented as a direct reduction of the corresponding liability. The carrying value of the US ABL 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’s~~ 2022 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 1112 - 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~~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 ~~plans designed to streamline operations~~under ASC 420, such as employee training costs, duplicate facility costs, and ~~reduce costs of $6.1 million and $1.2 million and $7.2 million and $2.1 million net of reversals, during the three and nine months ended September 30, 2018 and 2017, respectively.~~ professional services expenses, are included within SG&A.

The following is a summary of the activity in the Company’s restructuring accruals for three and nine months ended September 30, 2019 and 2018:


	Three Months Ended September 30,
(in thousands)	2019										2018
	Employee Costs		Facility Exit Costs		Total		Employee Costs		Facility Exit Costs		Total
Balance at beginning of the period	$	1,143	$	1,764	$	2,907	$	967	$	—	$	967
Charges	321		1,659		1,980		2,715		3,422		6,137
Cash payments	(544)		(730)		(1,274)		(1,161)		(2,500)		(3,661)
Foreign currency translation	(91)		—		(91)		5		—		5
Non-cash movements	—		(324)		(324)		—		—		—
Balance at end of period	$	829	$	2,369	$	3,198	$	2,526	$	922	$	3,448


	Nine Months Ended September 30,
(in thousands)	2019										2018
	Employee Costs		Facility Exit Costs		Total		Employee Costs		Facility Exit Costs		Total
Balance at beginning of the period	$	4,544	$	971	$	5,515	$	227	$	—	$	227
Charges	1,951		7,132		9,083		3,792		3,422		7,214
Cash payments	(5,476)		(3,745)		(9,221)		(1,491)		(2,500)		(3,991)
Foreign currency translation	(190)		—		(190)		(2)		—		(2)
Non-cash movements	—		(1,989)		(1,989)		—		—		—
Balance at end of period	$	829	$	2,369	$	3,198	$	2,526	$	922	$	3,448

The restructuring charges for the three and nine months ended September 30, ~~2018 and 2017:~~

Three Months Ended September 30, Nine Months Ended September 30,
(in thousands) 2018 2017 2018 2017
Balance at beginning of the period $ 967 $ 2,130 $ 227 $ 1,793
Charges during the period 6,137 1,156 7,214 2,124
Cash payments during the period (3,661) (803) (3,991) (1,442)
Effects of movements in foreign exchange rates 5 7 (2) 15
Balance at end of period $ 3,448 $ 2,490 $ 3,448 $ 2,490

~~The restructuring charges for the three and nine months ended September 30, 2018~~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 September 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 end of the first half of 2020.

The restructuring charges for the three and nine months ended September 30, 2018 primarily relate to employee termination costs in connection with the integration of Acton, Tyson and ModSpace. As part of the restructuring ~~plans,~~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 commencement of the restructuring plans to the actual date of termination. ~~The Company anticipates that the remaining actions contemplated under the~~

Segments

T ~~$3.4~~he $2.0 million o ~~accrual as of September 30, 2018, will be substantially completed by the end of the third quarter of 2019.~~

~~The~~f restructuring charges for the three months ended September 30, 2019 includes $1.9 million of charges related to the Modular - US segment and $0.1 million of charges related to the Modular - Other North America segment. The $9.1 million of restructuring charges for the nine months ended September 30, ~~2017 primarily related~~2019 includes $8.5 million of charges pertaining to ~~corporate employee termination costs incurred as part of~~ the ~~Algeco Group.~~

~~Segments~~Modular - US segment and $0.6 million of charges pertaining to the Modular - Other North America segment.

~~The~~The $6.1 ~~million and $1.2~~ million of restructuring charges for the three months ended September 30, 2018 ~~and 2017 includes:~~includes $5.9 ~~million and $0.3~~ million of charges ~~pertaining~~related to the Modular - US ~~segment;~~segment and $0.2 million ~~and $0.0 million~~ of charges ~~pertaining~~related to the Modular - Other North America ~~segment; and $0.0 million and $0.9~~segment. The $7.2 million of ~~charges pertaining to Corporate and other.~~

~~The~~ re~~$7.2 million~~ ~~and $2.1 million of restructuring~~structuring charges for the nine months ended September 30, 2018 ~~and 2017 includes:~~include $7.0 million ~~and $0.2 million of~~ charges pertaining to the Modular - US ~~segment;~~segment and $0.2 ~~million and $0.0~~ million of charges ~~pertaining~~related to the Modular - Other North America ~~segment; and $0.0 million and $1.9 million of charges pertaining to Corporate and other.~~

segment.

2623

NOTE 1213 - 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 three months ended September 30, 2018, no RSAs, RSUs or stock options were granted under the Plan. During the nine months ended September 30, ~~2018, 27,675 RSAs, 921,730~~2019, 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 ~~589,257~~52,755 restricted stock awards ("RSAs") were granted under the WillScot Corporation 2017 Incentive Award Plan (the "Plan"). NaN stock option awards were granted ~~under the Plan. During the three and nine months ended September 30, 2018, 0 and 35,050 RSUs were forfeited.~~

~~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 the Company's 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 September 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 for~~during the nine months ended September 30, ~~2018:~~2019.

Number of Shares Weighted-Average Grant Date Fair Value
Balance, December 31, 2017 — $ —
Granted 27,675 13.60
Forfeited — —
Balance, September 30, 2018 27,675 $ 13.60
During the nine months ended September 30, 2019, 72,053 RSAs, 213,180 Time-Based RSUs, and 147,313 stock options vested in accordance with their terms, resulting in the issuance of 228,590 shares of common stock, net of 56,643 shares withheld to cover taxes. An additional 13,767 shares were issued as a result of the exercise of stock options during the nine months ended September 30, 2019. NaN RSAs were forfeited during the nine months ended September 30, 2019. During the nine months ended September 30, 2019, 46,232 Time-Based RSUs, 7,485 Market-Based RSUs, and 41,302 stock options were forfeited.

At September 30, 2019, 52,755 RSAs, 1,071,721 Time-Based RSUs, 294,697 Market-Based RSUs, and 386,875 stock options were unvested, with weighted average grant date fair values of $14.69, $12.78, $13.22, and $5.51, respectively.

Restricted Stock Awards

Compensation expense for RSAs recognized in SG&A on the condensed consolidated statements of operations was ~~$0.1~~$0.3 million and ~~$0.2~~$0.8 million forfor the three and nine months ended September 30, ~~2018, respectively. At~~2019, respectively, with associated tax benefits of $0.0 million and $0.1 million for the three and nine months ended September 30, ~~2018,~~2019, respectively.

At September 30, 2019, there was $0.6 million of unrecognized compensation cost related to RSAs ~~totaled~~ ~~$0.2 million~~ ~~and~~that is expected to be recognized over the remaining weighted avera~~six-month~~ge vesting ~~period.~~period of 0.7 years.

Time-Based Restricted Stock Units

~~The following table summarizes the Company's RSU award activity~~Compensation expense for ~~the nine months ended September 30, 2018:~~

Number of Shares Weighted-Average Grant Date Fair Value
Balance, December 31, 2017 — $ —
Granted 921,730 13.60
Forfeited (35,050) 13.60
Balance, September 30, 2018 886,680 $ 13.60

~~Compensation expense for~~Time-Based RSUs recognized in SG&A on the condensed consolidated statements of operations was ~~$0.8~~$1.0 million and ~~$1.6~~$2.9 million forfor the three and nine months ended September 30, ~~2018,~~2019, respectively, with associated tax benefits of $0.0 million and $0.2 million ~~and $0.4 million f~~orfor the three and nine months ended September 30, ~~2018,~~2019, respectively.

At September 30, ~~2018,~~2019, unrecognized compensation cost related to Time-Based RSUs ~~totaled $10.5~~totaled $11.4 million and is expected to be recognized over the remaining weighted average vesting period of 2.9 years.

Market-Based Restricted Stock Units

On March 21, 2019, the Company 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.

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 $0.7 million for the three and nine months ended September 30, 2019, respectively, with associated tax benefits of $0.0 million and $0.1 million for the three and nine months ended September 30, 2019, respectively. At September 30, 2019, unrecognized compensation cost related to Market-Based RSUs totaled $3.2 million and is expected to be recognized over the remaining vesting period of ~~3.5~~2.5 years.

Stock Option Awards

~~The following table summarizes the Company's stock option activity for the nine months ended September 30, 2018:~~

Number of Options Weighted-Average Exercise Price per Share ($)
Outstanding options, December 31, 2017 — $ —
Granted 589,257 $ 13.60
Exercised — —
Forfeited — —
Outstanding options, September 30, 2018 589,257 $ 13.60
Fully vested and exercisable options, end of period — $ —

~~Compensation~~Compensation expense for stock option awards, recognized in SG&A on the condensed consolidated statements of operations, was $0.2 million and ~~$0.4~~$0.6 million forfor the three and nine months ended September 30, ~~2018,~~2019, respectively, with associated tax ~~benefits o~~b~~f $0.1~~enefits of $0.0 million and $0.1 million for the three and nine months ended September 30, ~~2018,~~2019, respectively.

At September 30, ~~2018,~~2019, unrecognized compensation cost ~~related~~related to stock option awards to~~taled $2.8~~totaled $1.8 million andand is expected to be recognized over athe remaining vesting period of ~~3.5~~2.5 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 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 nine months ended September 30, 2018.

The following table summarizes the outstanding interest rate swap arrangement as of September 30, 2019:


	Aggregate Notional Amount (in millions)		Receive Rate	Pay Rate		Receive Rate as of September 30, 2019		Receive Rate as of December 31, 2018
US ABL Facility	$	400.0	1 month LIBOR	3.06	%	2.03	%	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 Location	September 30, 2019		December 31, 2018
Cash Flow Hedges:
Interest rate swap	Accrued liabilities	$	4,980	$	1,709
Interest rate swap	Other long-term liabilities	$	11,574	$	6,192

The fair value of ~~each option award at grant date was estimated using~~ the ~~Black-Scholes option-pricing model with~~interest rate swap is based on dealer quotes of market forward rates, a Level 2 input on the ~~following assumptions:~~fair value hierarchy, and reflects the amount that the Company would receive or pay as of September 30, 2019 and December 31, 2018, respectively, for contracts involving the same attributes and maturity dates.


	~~Assumptions~~
~~Expected volatility~~	36		%
~~Expected dividend yield~~	—
~~Risk-free interest rate~~	~~2.73~~		%
~~Expected term (in years)~~	~~6.25~~
~~Exercise price~~	$	~~13.60~~
~~Weighted-average grant date fair value~~	$	~~5.51~~

The interest rate swap, excluding the impact of taxes, resulted in a loss recognized of $0.7 million and $8.6 million in other comprehensive income ("OCI") for the three and nine months ended September 30, 2019, respectively. The Company reclassified $0.8 million and $2.0 million from AOCL into interest expense on the condensed consolidated income statement for the three and nine months ended September 30, 2019, respectively.

Cash flows from derivative instruments are presented within net cash provided by operating activities in the consolidated statements of cash flows.

NOTE 1315 - 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.

NOTE 1416 - Segment Reporting

The Company ~~historically has operated~~operates in ~~two~~1 principal ~~lines~~line 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~~2 operating segments: US and Other North America. The US modular operating segment (“Modular - US”) consists of the contiguous 48 states and Hawaii. The Other North America operating segment (“Modular - Other North America”) consists of Alaska, Canada and Mexico. Corporate and other includes eliminations of costs and revenue between segments and Algeco Group corporate costs not directly attributable to the underlying segments. 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.

~~As discussed in Note 6, the net assets acquired from ModSpace were allocated to both the Modular - US and Modular - Other North America segments.~~ The US operations of ModSpace are included in the Modular - US segment and the Canadian operations of ModSpace are included in the Modular - Other North America segment. The operations and net assets acquired from Acton and Tyson are both included in the Modular - US segment.

~~The Company~~Chief 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.

Reportable Segments

The following tables set forth certain information regarding each of the Company’s reportable segments ~~for~~for the three and nine months ended September 30, 2019 and 2018, respectively.


	Three Months Ended September 30, 2019
(in thousands)	Modular - US		Modular - Other North America		Total
Revenues:
Leasing and services revenue:
Modular leasing	$	173,423	$	17,871	$	191,294
Modular delivery and installation	56,005		5,878		61,883
Sales revenue:
New units	10,774		762		11,536
Rental units	7,499		128		7,627
Total revenues	247,701		24,639		272,340

Costs:
Cost of leasing and services:
Modular leasing	53,601		4,567		58,168
Modular delivery and installation	49,229		5,135		54,364
Cost of sales:
New units	7,016		405		7,421
Rental units	4,315		777		5,092
Depreciation of rental equipment	39,283		4,586		43,869
Gross profit	$	94,257	$	9,169	$	103,426
Other selected data:
Adjusted EBITDA	$	80,424	$	7,953	$	88,377
Selling, general and administrative expense	$	61,484	$	6,675	$	68,159
Other depreciation and amortization	$	3,415	$	292	$	3,707
Purchase of rental equipment and refurbishments	$	44,951	$	2,838	$	47,789


	Three Months Ended September 30, 2018
(in thousands)	Modular - US		Modular - Other North America		Total
Revenues:
Leasing and services revenue:
Modular leasing	$	128,007	$	13,653	$	141,660
Modular delivery and installation	41,830		4,947		46,777
Sales revenue:
New units	19,193		1,727		20,920
Rental units	8,595		972		9,567
Total revenues	197,625		21,299		218,924

Costs:
Cost of leasing and services:
Modular leasing	36,204		3,011		39,215
Modular delivery and installation	37,782		4,608		42,390
Cost of sales:
New units	13,905		1,184		15,089
Rental units	5,025		725		5,750
Depreciation of rental equipment	31,702		3,832		35,534
Gross profit	$	73,007	$	7,939	$	80,946
Other selected data:
Adjusted EBITDA	$	58,454	$	6,164	$	64,618
Selling, general and administrative expense	$	66,102	$	5,795	$	71,897
Other depreciation and amortization	$	3,403	$	317	$	3,720
Purchase of rental equipment and refurbishments	$	43,007	$	3,735	$	46,742


	Nine Months Ended September 30, 2019
(in thousands)	Modular - US		Modular - Other North America		Total
Revenues:
Leasing and services revenue:
Modular leasing	$	506,703	$	50,322	$	557,025
Modular delivery and installation	155,284		13,359		168,643
Sales revenue:
New units	35,204		2,860		38,064
Rental units	20,847		8,894		29,741
Total revenues	718,038		75,435		793,473

Costs:
Cost of leasing and services:
Modular leasing	148,567		11,909		160,476
Modular delivery and installation	132,929		13,246		146,175
Cost of sales:
New units	24,404		1,894		26,298
Rental units	12,845		6,763		19,608
Depreciation of rental equipment	114,957		13,983		128,940
Gross profit	$	284,336	$	27,640	$	311,976
Other selected data:
Adjusted EBITDA	$	238,572	$	23,040	$	261,612
Selling, general and administrative expense	$	192,042	$	21,225	$	213,267
Other depreciation and amortization	$	9,033	$	845	$	9,878
Purchase of rental equipment and refurbishments	$	153,113	$	7,764	$	160,877


	Nine Months Ended September 30, 2018
(in thousands)	Modular - US		Modular - Other North America		Total
Revenues:
Leasing and services revenue:
Modular leasing	$	306,920	$	33,251	$	340,171
Modular delivery and installation	93,190		11,250		104,440
Sales revenue:
New units	30,157		3,427		33,584
Rental units	14,258		1,555		15,813
Total revenues	444,525		49,483		494,008

Costs:
Cost of leasing and services:
Modular leasing	85,766		7,740		93,506
Modular delivery and installation	87,032		11,006		98,038
Cost of sales:
New units	21,347		2,433		23,780
Rental units	8,218		1,110		9,328
Depreciation of rental equipment	72,606		10,243		82,849
Gross profit	$	169,556	$	16,951	$	186,507
Other selected data:
Adjusted EBITDA	$	129,170	$	12,856	$	142,026
Selling, general and administrative expense	$	150,248	$	14,597	$	164,845
Other depreciation and amortization	$	6,962	$	764	$	7,726
Purchase of rental equipment and refurbishments	$	104,462	$	7,043	$	111,505

The following tables present a reconciliation of the Company’s (loss) income from operations before income tax to Adjusted EBITDA by segment for the three and ~~2017,~~nine months ended September 30, 2019 and 2018, respectively:

Three Months Ended September 30, 2018
(in thousands) Modular - US Modular - Other North America Total
Revenues:
Leasing and services revenue:
Modular leasing $ 128,007 $ 13,653 $ 141,660
Modular delivery and installation 41,830 4,947 46,777
Sales:
New units 19,193 1,727 20,920
Rental units 8,595 972 9,567
Total Revenues $ 197,625 $ 21,299 $ 218,924
Costs:
Cost of leasing and services:
Modular leasing $ 36,204 $ 3,011 $ 39,215
Modular delivery and installation 37,782 4,608 42,390
Cost of sales:
New units 13,905 1,184 15,089
Rental units 5,025 725 5,750
Depreciation of rental equipment 31,702 3,832 35,534
Gross profit $ 73,007 $ 7,939 $ 80,946
Adjusted EBITDA $ 58,454 $ 6,164 $ 64,618
Other selected data:
Selling, general and administrative expense $ 66,102 $ 5,795 $ 71,897
Other depreciation and amortization $ 3,403 $ 317 $ 3,720
Capital expenditures for rental fleet $ 43,007 $ 3,735 $ 46,742


	Three Months Ended September 30, 2019
(in thousands)	Modular - US		Modular - Other North America		Total
(Loss) income from operations before income taxes	$	(1,768)	$	1,310	$	(458)
Interest expense	30,253		604		30,857
Depreciation and amortization	42,699		4,877		47,576
Currency losses, net	45		189		234
Restructuring costs	1,886		94		1,980
Integration costs	4,609		874		5,483
Stock compensation expense	1,813		—		1,813
Other expense	887		5		892
Adjusted EBITDA	$	80,424	$	7,953	$	88,377

Three Months Ended September 30, 2017
(in thousands) Modular - US Modular - Other North America Corporate & Other Total
Revenues:
Leasing and services revenue:
Modular leasing $ 66,555 $ 8,920 $ (155) $ 75,320
Modular delivery and installation 22,127 2,503 (3) 24,627
Sales:
New units 9,074 535 — 9,609
Rental units 5,922 765 (81) 6,606
Total Revenues $ 103,678 $ 12,723 $ (239) $ 116,162
Costs:
Cost of leasing and services:
Modular leasing $ 19,000 $ 2,252 $ — $ 21,252
Modular delivery and installation 21,545 2,387 — 23,932
Cost of sales:
New units 6,487 427 2 6,916
Rental units 3,204 580 — 3,784
Depreciation of rental equipment 15,676 3,333 — 19,009
Gross profit (loss) $ 37,766 $ 3,744 $ (241) $ 41,269
Adjusted EBITDA $ 29,177 $ 2,961 $ (2,753) $ 29,385
Other selected data:
Selling, general and administrative expense $ 24,337 $ 4,116 $ 7,644 $ 36,097
Other depreciation and amortization $ 1,298 $ 264 $ 343 $ 1,905
Capital expenditures for rental fleet $ 24,147 $ 1,361 $ — $ 25,508


	Three Months Ended September 30, 2018
(in thousands)	Modular - US		Modular - Other North America		Total
(Loss) income from operations before income taxes	$	(44,519)	$	1,283	$	(43,236)
Interest expense	42,831		616		43,447
Depreciation and amortization	35,105		4,149		39,254
Currency gains, net	(112)		(313)		(425)
Restructuring costs	5,895		242		6,137
Integration costs	7,443		10		7,453
Stock compensation expense	1,050		—		1,050
Transaction costs	10,490		182		10,672
Other expense (income)	271		(5)		266
Adjusted EBITDA	$	58,454	$	6,164	$	64,618


	Nine Months Ended September 30, 2019
(in thousands)	Modular - US		Modular - Other North America		Total
(Loss) income from operations before income taxes	$	(26,866)	$	2,670	$	(24,196)
Loss on extinguishment of debt	7,244		—		7,244
Interest expense	93,354		1,999		95,353
Depreciation and amortization	123,991		14,827		138,818
Currency gains, net	(160)		(276)		(436)
Goodwill and other impairments	4,507		569		5,076
Restructuring costs	8,460		623		9,083
Integration costs	21,221		2,642		23,863
Stock compensation expense	5,003		—		5,003
Other expense (income)	1,818		(14)		1,804
Adjusted EBITDA	$	238,572	$	23,040	$	261,612


	Nine Months Ended September 30, 2018
(in thousands)	Modular - US		Modular - Other North America		Total
Loss from operations before income taxes	$	(55,360)	$	(1,397)	$	(56,757)
Interest expense	65,654		1,667		67,321
Depreciation and amortization	79,568		11,007		90,575
Currency losses, net	159		1,012		1,171
Restructuring costs	6,962		252		7,214
Integration costs	14,858		10		14,868
Stock compensation expense	2,225		—		2,225
Transaction costs	14,539		251		14,790
Other expense	565		54		619
Adjusted EBITDA	$	129,170	$	12,856	$	142,026

Nine Months Ended September 30, 2018
(in thousands) Modular - US Modular - Other North America Total
Revenues:
Leasing and services revenue:
Modular leasing $ 306,920 $ 33,251 $ 340,171
Modular delivery and installation 93,190 11,250 104,440
Sales:
New units 30,157 3,427 33,584
Rental units 14,258 1,555 15,813
Total Revenues $ 444,525 $ 49,483 $ 494,008
Costs:
Cost of leasing and services:
Modular leasing $ 85,766 $ 7,740 $ 93,506
Modular delivery and installation 87,032 11,006 98,038
Cost of sales:
New units 21,347 2,433 23,780
Rental units 8,218 1,110 9,328
Depreciation of rental equipment 72,606 10,243 82,849
Gross profit $ 169,556 $ 16,951 $ 186,507
Adjusted EBITDA $ 129,170 $ 12,856 $ 142,026
Other selected data:
Selling, general and administrative expense $ 150,248 $ 14,597 $ 164,845
Other depreciation and amortization $ 6,962 $ 764 $ 7,726
Capital expenditures for rental fleet $ 104,462 $ 7,043 $ 111,505

Nine Months Ended September 30, 2017
(in thousands) Modular - US Modular - Other North America Corporate & Other Total
Revenues:
Leasing and services revenue:
Modular leasing $ 192,587 $ 25,124 $ (450) $ 217,261
Modular delivery and installation 60,451 6,132 (3) 66,580
Sales:
New units 21,630 2,861 — 24,491
Rental units 14,634 2,675 (81) 17,228
Total Revenues $ 289,302 $ 36,792 $ (534) $ 325,560
Costs:
Cost of leasing and services:
Modular leasing $ 55,713 $ 5,981 $ — $ 61,694
Modular delivery and installation 58,612 5,792 — 64,404
Cost of sales: —
New units 15,172 2,240 (10) 17,402
Rental units 8,240 1,827 — 10,067
Depreciation of rental equipment 44,030 9,173 — 53,203
Gross profit (loss) $ 107,535 $ 11,779 $ (524) $ 118,790
Adjusted EBITDA $ 79,189 $ 8,586 $ (10,197) $ 77,578
Other selected data:
Selling, general and administrative expense $ 72,464 $ 12,393 $ 15,653 $ 100,510
Other depreciation and amortization $ 3,937 $ 755 $ 1,044 $ 5,736
Capital expenditures for rental fleet $ 72,105 $ 3,705 $ — $ 75,810

The following tables present a reconciliation of the Company’s loss from continuing operations before income tax to Adjusted EBITDA by segment for the three and nine months ended September 30, 2018 and 2017, respectively:

Three Months Ended September 30, 2018
(in thousands) Modular - US Modular - Other North America Total
(Loss) income from continuing operations before income taxes $ (44,519) $ 1,283 $ (43,236)
Interest expense, net (a) 42,831 616 43,447
Depreciation and amortization 35,105 4,149 39,254
Currency gains, net (112) (313) (425)
Restructuring costs 5,895 242 6,137
Integration costs 7,443 10 7,453
Stock compensation expense 1,050 — 1,050
Transaction costs 10,490 182 10,672
Other (income) expense 271 (5) 266
Adjusted EBITDA $ 58,454 $ 6,164 $ 64,618
(a) In connection with the ModSpace acquisition, the Company incurred bridge financing fees and upfront commitment fees of $20.5 million, included within interest expense, during the three months ended September 30, 2018.

Three Months Ended September 30, 2017
(in thousands) Modular - US Modular - Other North America Corporate & Other Total
Loss from continuing operations before income taxes $ (1,070) $ (1,684) $ (18,313) $ (21,067)
Interest expense, net 16,790 1,134 8,523 26,447
Depreciation and amortization 16,974 3,597 343 20,914
Currency gains, net (3,834) (104) (332) (4,270)
Restructuring costs 247 17 892 1,156
Transaction costs 69 — 5,164 5,233
Other expense 1 1 970 972
Adjusted EBITDA $ 29,177 $ 2,961 $ (2,753) $ 29,385

Nine Months Ended September 30, 2018
(in thousands) Modular - US Modular - Other North America Total
Loss from continuing operations before income taxes $ (55,360) $ (1,397) $ (56,757)
Interest expense, net (a) 65,654 1,667 67,321
Depreciation and amortization 79,568 11,007 90,575
Currency losses, net 159 1,012 1,171
Restructuring costs 6,962 252 7,214
Integration costs 14,858 10 14,868
Stock compensation expense 2,225 — 2,225
Transaction costs 14,539 251 14,790
Other expense 565 54 619
Adjusted EBITDA $ 129,170 $ 12,856 $ 142,026
(a) In connection with the ModSpace acquisition, the Company incurred bridge financing fees and upfront commitment fees of $20.5 million, included within interest expense, during the nine months ended September 30, 2018.

Nine Months Ended September 30, 2017
(in thousands) Modular - US Modular - Other North America Corporate & Other Total
Loss from continuing operations before income taxes $ (6,280) $ (4,142) $ (42,903) $ (53,325)
Interest expense, net 48,302 3,350 23,270 74,922
Depreciation and amortization 47,967 9,928 1,044 58,939
Currency gains, net (11,233) (585) (951) (12,769)
Restructuring costs 247 17 1,860 2,124
Transaction costs 115 — 5,980 6,095
Other expense 71 18 1,503 1,592
Adjusted EBITDA $ 79,189 $ 8,586 $ (10,197) $ 77,578

NOTE 1517 - Income (Loss) Per Share

Basic income (loss) per share (“EPS”) is calculated by dividing net ~~income (loss)~~loss attributable to WillScot by the weighted average number of ~~its~~ Class A common shares outstanding during the period. The common shares issued as a result of the vesting of RSUs and RSAs as well as the exercise of stock options, were included in EPS based on the weighted average number of days in which they were vested and outstanding during the period. Concurrently with the Business Combination, 12,425,000 of WillScot's Class A common shares were placed into escrow by shareholders and became ineligible to vote or participate in the economic rewards available to the other Class A shareholders. Escrowed shares were therefore excluded from the EPS calculation while deposited in the escrow account. 6,212,500 of the escrowed shares were released to shareholders on January 19, 2018, and the remaining escrowed shares were released to shareholders on August 21, 2018.

~~WillScot's~~ Class B common shares have no rights to dividends or distributions made by the Company and, in turn, are excluded from the EPS calculation.

~~Diluted EPS is computed similarly to basic net income (loss) per share, except that it includes the potential dilution that could occur if di~~lutive securities were exercised. Effects of potentially dilutive securities are presented only in periods in which they are dilutive. Stock options, restricted stock units and restricted stock awards, representing 589,257, 886,680 and 27,675 shares of Class A common stock outstanding for the three and nine months ended September 30, 2018, were excluded from the computation of diluted earnings per share because their effect would have been anti-dilutive. Warrants representing 44,750,000 shares of Class A shares for the three and nine months ended September 30, 2018, were excluded from the computation of diluted earnings per share because their effect would have been anti-dilutive.

Pursuant 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 its shares of WS Holdings into newly issued shares of WillScot’s Class A common stock in a private placement transaction. ~~The impact~~

Diluted EPS is computed similarly to basic EPS, except that it includes the potential dilution that could occur if dilutive securities were exercised. Effects of ~~this exchange has been~~potentially dilutive securities are presented only in periods in which they are dilutive.

Stock options and warrants representing 534,188 and 9,999,579 shares of Class A common stock outstanding for the three months ended September 30, 2019 were excluded from the computation of diluted earnings per share because ~~the~~their effect would have been anti-dilutive. Stock options, Time-Based RSUs, RSAs, and warrants representing 386,875, 1,071,721, 52,755, and 22,183,513 shares of Class A common stock outstanding for the nine months ended September 30, 2019 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 nine months ended September 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.

Stock options, Time-Based RSU, RSAs and warrants representing 589,257, 886,680, 27,675 and 44,750,000 shares of Class A common stock outstanding for the three and nine months ended September 30, 2018, were excluded from the computation of diluted EPS because their effect would have been anti-dilutive.

The following table is a reconciliation of net income (loss) and weighted-average shares of common stock outstanding for purposes of calculating basic and diluted income (loss) per share for the three and nine months ended September 30, 2019 and 2018:


	Three Months Ended September 30,						Nine Months Ended September 30,
(in thousands, except per share numbers)	2019		2018		2019		2018
Numerator
Net income (loss)	$	762	$	(36,729)	$	(22,174)	$	(43,185)
Net income (loss) attributable to non-controlling interest, net of tax	273		(3,210)		(1,449)		(3,715)
Net income (loss) attributable to WillScot	$	489	$	(33,519)	$	(20,725)	$	(39,470)

Denominator
Average shares outstanding - basic	108,720,857		90,726,920		108,646,741		82,165,909
Average effect of dilutive securities:
Warrants	2,828,202		—		—		—
RSAs	5,614		—		—		—
Time-Based RSUs	272,622		—		—		—
Market-Based RSUs	216,571		—		—		—
Average shares outstanding - diluted	112,043,866		90,726,920		108,646,741		82,165,909

Income (loss) per share
Net income (loss) per share attributable to WillScot common shareholders - basic	$	0.00	$	(0.37)	$	(0.19)	$	(0.48)
Net income (loss) per share attributable to WillScot common shareholders - diluted	$	0.00	$	(0.37)	$	(0.19)	$	(0.48)

NOTE 1618 - Related Parties

Related party balances included in the Company’s consolidated balance sheet at September 30, ~~2018~~2019 and December 31, ~~2017,~~2018, consisted of the following:


(in thousands)	(in thousands)	Financial statement line Item	September 30, 2018		December 31, 2017		(in thousands)	Financial statement line Item	September 30, 2019		December 31, 2018
Receivables due from affiliates	Receivables due from affiliates	Prepaid expenses and other current assets	$	66	$	2,863	Receivables due from affiliates	Prepaid expenses and other current assets	$	44	$	122
Amounts due to affiliates	Amounts due to affiliates	Accrued liabilities	(1,465)		(1,235)		Amounts due to affiliates	Accrued liabilities	(147)		(1,379)
		Total related party liabilities, net	$	(1,399)	$	1,628		Total related party liabilities, net	$	(103)	$	(1,257)

On November 29, 2017, in connection with the closing of the Business Combination, the Company, WSII, WS Holdings and the Algeco ~~Global~~Group 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 ~~$0.2 million~~ ~~in accruals and $2.9~~ $0.1 million in ~~receivables~~receivables due from affiliates pertaining to the ~~Transition Services Agreement~~TSA at December 31, 2018.

The Company was reimbursed $0.4 million by an affiliate for claims paid under an insurance program during the nine months ended September 30, ~~2018 and December 31, 2017, respectively.~~2019.

The Company accrued expenses of ~~$0.5 million and~~ $1.2 million a~~t September 30, 2018 and~~at December 31, ~~2017, respectively,~~2018, included in amounts due to affiliates, related to rental equipment purchases from an ~~entity within~~affiliate of the Algeco Group.

Related party transactions included in the Company’s consolidated statement of operations for the three and nine months ended September 30, ~~2018~~2019 and ~~2017,~~2018, respectively, consisted of the following:

Three Months Ended September 30, Nine Months Ended September 30,
(in thousands) Financial statement line item 2018 2017 2018 2017
Leasing revenue from related parties Modular leasing revenue $ (104) $ — $ (629) $ —
Rental unit sales to related parties Rental unit sales (1,548) — (1,548) —
Management fees and recharge income on transactions with affiliates Selling, general & administrative expenses — (1,693) — (1,542)
Interest income on notes due from affiliates Interest income — (3,659) — (9,752)
Interest expense on notes due to affiliates Interest expense — 17,191 — 47,918
Remote accommodations revenue and costs, net from affiliates Income from discontinued operations, net of tax — 1,327 — 1,327
Total related party (income) expense, net $ (1,652) $ 13,166 $ (2,177) $ 37,951

On August 22, 2018, WillScot’s majority stockholder, Sapphire, entered into a margin loan (the "Margin Loan ") under which all of its WillScot Class A common stock was pledged to secure $125.0 of borrowings under the loan agreement. WillScot is not a party to the loan agreement and has no obligations thereunder, but WillScot delivered an issuer agreement to the lenders under which WillScot has agreed to certain obligations relating to the shares pledged by Sapphire and, subject to applicable law and stock exchange rules, not to take any actions that are intended to materially hinder or delay the exercise of any remedies with respect to the pledged shares. In connection with the Margin Loan, on August 24, 2018, WSII entered into a two-year supply agreement with Target Logistics, an affiliate controlled by Sapphire, under which, subject to limited exception, WSII acquired the exclusive right to supply modular units, portable storage units, and other ancillary products ordered by the affiliate in the United States. WillScot's leasing revenue and rental unit sales associated with Target Logistics for the three and nine months ended September 30, 2018 are disclosed above. As of September 30, 2018, the 49,041,906 shares of WillScot Class A common stock pledged by Sapphire represented approximately 48.9% of WillScot’s issued and outstanding Class A shares.


		Three Months Ended September 30,						Nine Months Ended September 30,
(in thousands)	Financial statement line item	2019		2018		2019		2018
Leasing revenue from related parties	Modular leasing revenue	$	81	$	104	$	232	$	629
Rental unit sales to related parties	Rental unit sales	—		1,548		—		1,548
	Total related party income, net	$	81	$	1,652	$	232	$	2,177

The Company had capital expenditures of rental equipment purchased from related party affiliates of ~~$1.2~~$1.1 million and ~~$0.5~~$1.2 million for three months ended September 30, ~~2018~~2019 and ~~2017,~~2018, respectively, and ~~$3.0~~$4.3 million and ~~$1.0~~$3.0 million during the nine months ended September 30, ~~2018~~2019 and ~~2017,~~2018, respectively.

The Company paid ~~$0.1~~$0.6 million and ~~$0.2~~$0.1 million in professional fees to an entity ~~that~~for which two of the Company’s Directors also served in the same role for that entity, during the three months ended September 30, ~~2018~~2019 and ~~2017,~~2018, respectively, and ~~$1.1~~$1.2 million and ~~$0.8~~$1.1 million during the nine months ended September 30, ~~2018~~2019 and ~~2017,~~2018, respectively.

~~NOTE 17 - Subsequent Events~~

On November 6, 2018, WSII entered into an interest rate swap transaction with a financial counterparty that effectively converts $400.0 million in aggregate notional amount of its variable-rate debt into fixed-rate debt. The fixed rate paid by WSII is 3.06% and the variable rate received resets monthly to a one-month LIBOR rate. The swap transaction, which matures on May 29, 2022, was consummated to mitigate the interest rate risk inherent in WSII’s floating-rate credit agreement, which also matures on May 29, 2022, and not for trading or speculative purposes. The master agreement that governs the interest rate swap contains customary representations, warranties and covenants and may be terminated prior to its expiration.

On November 8, 2018, WillScot announced the commencement of an offer to each holder of its public and private warrants to purchase one-half share of Class A common stock, par value of $0.0001 per share, of WillScot for a purchase price of $5.75 (the “Warrants”) to receive 0.1818 common shares in exchange for each Warrant tendered by the holder and exchanged pursuant to the offer (the “Offer”). The warrants issued in connection with the Company's acquisition of ModSpace, each of which is exercisable for one share of WillScot Class A common stock at an exercise price of $15.50 per share, are not subject to the Offer. The Offer is made solely upon the terms and conditions in a Prospectus/Offer to Exchange and other related offering materials that are being distributed to holders of the Warrants. The Offer will be open until 11:59 p.m., Eastern Standard Time, on December 6, 2018, or such later time and date to which WillScot may extend.

3532

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 ~~(“WillScot” 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) WillScot’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 WillScot, and (ii) for periods from and after this date, WillScot’s financial results reflect those of WillScot and its consolidated subsidiaries (including WSII and its subsidiaries) as the successor following the Business Combination.

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~~were prepared in ~~accordance~~conformity 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 the leading provider of modular space and portable storage solutions in the United States (“US”), Canada and Mexico. ~~In the third quarter of 2018, we completed the acquisition of Modular Space Holdings, Inc. (“ModSpace”) for a total purchase price of approximately $1.2 billion. With the addition of ModSpace, as~~As of September 30, ~~2018,~~2019, our branch network included over 120 locations and additional storage lots to service more than 50,000 customers across the US, Canada and Mexico. We offer our customers an extensive selection of “Ready to Work” modular space and portable storage solutions and now manage a fleet of ~~over 132,000~~approximately 130,000 modular space units and over 26,000 portable storage units. We remain 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-added~~value added products and services ~~(“VAPS”~~("VAPS"), and on continually improving the overall customer experience.

~~Subsequent~~Since the end of 2017, we have 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 September 30, 2019 primarily consist of continued real estate exits and the related fleet relocations required to exit these properties. As of September 30, 2019, we have completed approximately 75% of our planned real estate exits, and the ~~close of~~remaining exits will continue during the ModSpace transaction on August 15, 2018, we began the process to integrate ModSpace's operations into our organizational structure, branch footprint, shared services and information technology platform. These efforts are well underway and effective November 1, 2018, our combined sales organization began writing all new contracts (including those associated with legacy ModSpace assets) from WillScot's operating and information technology platform. We anticipate full information technology cut-over from the ModSpace systems in the first quarterremainder of 2019 and ~~will continue our~~into 2020. Five held for sale properties were sold during the three months ended September 30, 2019 for net proceeds of $4.3 million. For the nine months ended September 30, 2019, total net sale proceeds from held for sale properties were $12.9 million. These exits, along with other integration ~~efforts around real estate consolidation and fleet relocation on both the Acton Mobile ("Acton") and ModSpace acquisitions.~~

~~Before announcing the ModSpace acquisition, we secured debt commitments from several financial institutions~~actions taken, have allowed us to fund the acquisition. In the third quarter, we entered into or amended several agreements to fund the cash consideration paid in the acquisition on a permanent basis and to pay related fees and expenses. In particular we:

• upsized our senior secured revolving credit facility (the "ABL Facility") to $1.425 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 a $300.0 million private placement of 6.875% senior secured notes due 2023 (the "2023 Secured Notes");~~

~~• completed a $200.0 million private placement of senior unsecured notes due 2023 (the "Unsecured Notes"); and~~

~~• raised $147.2~~realize approximately $31.2 million of ~~gross proceeds~~cumulative synergies from ~~an underwritten common stock offering.~~these acquisitions. Approximately 70% of the estimated annualized cost synergies from the acquisitions of $70.0 million were in our run rate as of September 30, 2019. These acquisitions, coupled with WillScot's innovative "Ready to Work" solutions and commitment to customer service, have solidified WillScot's market leading position.

For the three months ended September 30, ~~2018,~~2019, key drivers of financial performance ~~include:~~included:

• ~~Increased total~~Total revenues increased by ~~$102.7~~$53.4 million, or ~~88.4%~~24.4%, as compared to the same period in ~~2017,~~2018, driven by a ~~88.4%~~$64.7 million, or 34.3% increase in our core leasing and services revenues from both organic pricing growth, and ~~due to~~ the impact of an additional 1.5 months of contribution from the ~~Acton, Tyson,~~ModSpace acquisition in the third quarter of 2019. Increases in our core leasing and ~~ModSpace acquisitions discussed in Note 2 of our unaudited condensed consolidated financial statements. New~~services revenues were partially offset by new and rental unit sales ~~increased 117.7%~~which decreased by $9.4 million, or 45.0% and ~~45.5%~~by $2.0 million, or 20.8%, respectively, ~~also~~ driven by ~~acquisitions.~~ large sales originating from ModSpace that were completed subsequent to the acquisition in the third quarter of 2018 that did not reoccur in 2019.

–Consolidated modular space average monthly rental rate increased to $630 representing a 12.3% increase year over year.

–Consolidated average modular space units on rent increased 15,820 or 21.0% year over year, driven by an additional 1.5 months of contribution from the ModSpace acquisition, and average modular space utilization decreased 60 basis points (“bps”) year over year to 71.2%.

•On a ~~pro-forma~~pro forma basis, including results of WillScot ~~Acton, Tyson,~~ and ModSpace for all periods presented, ~~total~~

–Modular leasing revenues increased ~~$30.4~~$14.0 million, or ~~11.3%~~7.9%, driven by ~~increases~~a 13.9% year over year increase in ~~core leasing revenues~~modular space average monthly rental rates as a result of ~~rate improvements~~our price optimization tools and ~~due~~processes, as well as by continued growth in our “Ready to Work” solutions and increased VAPS penetration across our customer base.

–Sales revenue declined $41.0 million driven primarily by one large new ~~sales.~~sale recognized in 2018 from ModSpace related to hurricane relief in the amount of $26.3 million in our Modular - US segment.

~~• Increased~~–Total revenues decreased $28.3 million, or 9.4%, as the impact of non-recurring sales in the prior year offset continued strong growth in our core leasing revenues.

–Modular space units on rent decreased 5.2% year over year, and utilization decreased 150 bps.

•Modular - US segment revenues, which ~~represents 90.3%~~represented 91.0% of revenue for the three months ended September 30, ~~2018,~~2019, increased by ~~$93.9~~$50.1 million, or ~~90.5%~~25.4%, as compared to the same period in ~~2017,~~2018, through:

~~- Average modular~~–Modular space average monthly rental rate ~~growth~~ of ~~3.1% to $559~~$632, increased 13.1% year over year including the dilutive impacts of ~~acquisitions primarily through increases in the price~~acquisitions. Improved pricing was driven by a combination of our ~~units. Organic increases on unit pricing~~price optimization tools and processes, as well as by continued growth in our “Ready to Work” solutions and increased VAPS ~~pricing and~~ penetration on the Williams Scotsman legacy fleet were partially offset by lower rates on units acquired from Acton and Tyson and to a lesser extent, ModSpace, and by lower VAPS pricing and penetration on all acquired fleet; andacross our customer base.

~~- Increased average~~–Average modular space units on rent ~~by 31,795 units,~~increased 14,075, or ~~87.9%,~~a 20.7% year over year increase, due to the impact of an additional 1.5 months of contribution from the ~~Acton, Tyson, and~~ ModSpace ~~acquisitions; and~~acquisition in the third quarter of 2019.

- –Average modular space monthly utilization ~~increased 160 basis points (“bps”)~~decreased 60 bps to ~~73.8%~~73.2% for the three months ended September 30, 2018 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 including fleet acquired from Acton and Tyson. However, utilization decreased by 90 bps during the quarter2019, as compared to the three months ended September 30, ~~2017, as a result of lower utilization on acquired fleet from Acton and Tyson; and~~2018.

- –On a ~~pro-forma~~pro forma basis, including results of WillScot ~~Acton,~~ and ModSpace for all periods presented, average modular space monthly rental rate increased ~~13.4% on consistent average~~15.1% year over year, which is the eighth consecutive quarter of double digit growth. Average modular space units on ~~rent.~~rent and utilization declined 1.5% and 90 bps, respectively, for the three months ended September 30, 2019 versus the second quarter of 2019.

• ~~Increased the~~ Modular - Other North America segment revenues which represented ~~9.7%~~9.0% of revenues for the three months ended September 30, ~~2018,~~2019, increased by ~~$8.6~~$3.3 million, or ~~67.7%~~15.5% as compared to the same period in ~~2017.~~2018. Increases were driven primarily by:

- –Average modular space monthly rental rate increased ~~9.5%~~5.3% to ~~$587; and~~ $618.

- –Average modular space units on rent increased by ~~2,154~~1,745 units, or ~~40.8%~~23.5% as compared to the same period in ~~2017 driven primarily by acquired units~~2018 due to the impact of an additional 1.5 months of contribution from the ModSpace ~~transaction, as well as organic increases at Williams Scotsman; and~~ acquisition the third quarter of 2019.

- –Average modular space monthly utilization ~~increased~~decreased by ~~320~~10 bps as compared to the same period in ~~2017~~2018 to ~~57.3%, and increased 20 bps as compared to the three months ended June 30, 2018.~~57.2%.

- –On a ~~pro-forma~~pro forma basis, including results of WillScot and ModSpace for all periods presented, ~~Modular - Other North America segment modular space units on rent decreased 3.6%, however~~ average modular space monthly rental rate increased ~~0.9%.~~6.4% year over year. Average modular space units on rent and utilization increased 1.7% and 90 bps, respectively, for the three months ended September 30, 2019 versus the second quarter of 2019.

•Generated consolidated net income of $0.8 million for the three months ended September 30, 2019, which included $7.5 million of discrete costs expensed in the period related to the ModSpace integration, including $5.5 million of integration costs and $2.0 million of restructuring cost.

•Generated Adjusted EBITDA of ~~$58.5 million and $6.2~~$88.4 million for the three months ended September 30, 2019, representing an increase of $23.8 million or 36.8% as compared to the same period in 2018, which includes the impact of an additional 1.5 months of contribution from the ModSpace acquisition in the third quarter of 2019, as well as continued realization of commercial and cost synergies associated with the ModSpace and Acton acquisitions. Adjusted EBITDA for the Modular - US ~~Segment~~segment and the Modular - Other North America ~~Segment,~~segment, respectively, was $80.4 million and $8.0 million for ~~combined Adjusted EBITDA~~the three months ended September 30, 2019.

•Generated Free Cash Flow of ~~$64.6~~$1.3 million ~~between~~for the ~~Modular - US Segment~~three months ended September 30, 2019, as net cash provided by operating activities of $39.0 million was reinvested primarily in value added products and ~~the Modular - Other North America Segment, representing an increase~~fleet refurbishments to support growth of ~~$32.4 million or 100.6% as compared to the same period~~modular leasing revenues (net cash used in ~~2017, which includes the impact~~investing activities of ~~the Acton, Tyson, and ModSpace acquisitions discussed in Note 2 of the unaudited condensed consolidated financial statements.~~$37.8 million).

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 80% of our revenues in the three months ended September 30, ~~2018, including the customer base from the Acton, Tyson, and ModSpace acquisitions. Market~~2019. We believe market fundamentals underlying these markets remain favorable, and we expect continued modest market growth in the next several years. ~~Potential~~As a result of the potential for increased capital spending ~~as a result~~due 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 continued~~we are confident that we will continue to see demand for our products.

Although only 9.7% of our revenues for the three months ended September 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. Improvement in average modular space monthly rental rates, average modular space units on rent, and average modular space monthly utilization continued in the third quarter 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.

Consolidated Results of Operations

Three Months Ended September 30, ~~2018~~2019 Compared to the Three Months Ended September 30, ~~2017~~ 2018

Our consolidated statements of operations for the three months ended September 30, ~~2018~~2019 and ~~2017~~2018 are presented below:

Three Months Ended September 30, 2018 vs. 2017 $ Change
(in thousands) 2018 2017
Revenues:
Leasing and services revenue:
Modular leasing $ 141,660 $ 75,320 $ 66,340
Modular delivery and installation 46,777 24,627 22,150
Sales:
New units 20,920 9,609 11,311
Rental units 9,567 6,606 2,961
Total revenues 218,924 116,162 102,762
Costs:
Costs of leasing and services:
Modular leasing 39,215 21,252 17,963
Modular delivery and installation 42,390 23,932 18,458
Costs of sales:
New units 15,089 6,916 8,173
Rental units 5,750 3,784 1,966
Depreciation of rental equipment 35,534 19,009 16,525
Gross profit 80,946 41,269 39,677
Expenses:
Selling, general and administrative 71,897 36,097 35,800
Other depreciation and amortization 3,720 1,905 1,815
Restructuring costs 6,137 1,156 4,981
Currency gains, net (425) (4,270) 3,845
Other (income) expense, net (594) 1,001 (1,595)
Operating income 211 5,380 (5,169)
Interest expense 43,447 30,106 13,341
Interest income — (3,659) 3,659
Loss from continuing operations before income tax (43,236) (21,067) (22,169)
Income tax benefit (6,507) (7,632) 1,125
Loss from continuing operations (36,729) (13,435) (23,294)
Income from discontinued operations, net of tax — 5,078 (5,078)
Net loss (36,729) (8,357) (28,372)
Net loss attributable to non-controlling interest, net of tax (3,210) — (3,210)
Total loss attributable to WillScot $ (33,519) $ (8,357) $ (25,162)


	Three Months Ended September 30,						2019 vs. 2018 $ Change
(in thousands)	2019		2018
Revenues:
Leasing and services revenue:
Modular leasing	$	191,294	$	141,660	$	49,634
Modular delivery and installation	61,883		46,777		15,106
Sales revenue:
New units	11,536		20,920		(9,384)
Rental units	7,627		9,567		(1,940)
Total revenues	272,340		218,924		53,416
Costs:
Costs of leasing and services:
Modular leasing	58,168		39,215		18,953
Modular delivery and installation	54,364		42,390		11,974
Costs of sales:
New units	7,421		15,089		(7,668)
Rental units	5,092		5,750		(658)
Depreciation of rental equipment	43,869		35,534		8,335
Gross profit	103,426		80,946		22,480
Expenses:
Selling, general and administrative	68,159		71,897		(3,738)
Other depreciation and amortization	3,707		3,720		(13)
Impairment losses on long-lived assets	—		—		—
Restructuring costs	1,980		6,137		(4,157)
Currency losses (gains), net	234		(425)		659
Other income, net	(1,053)		(594)		(459)
Operating income	30,399		211		30,188
Interest expense	30,857		43,447		(12,590)
Loss from operations before income tax	(458)		(43,236)		42,778
Income tax benefit	(1,220)		(6,507)		5,287
Net income (loss)	762		(36,729)		37,491
Net income (loss) attributable to non-controlling interest, net of tax	273		(3,210)		3,483
Net income (loss) attributable to WillScot	$	489	$	(33,519)	$	34,008

Comparison of Three Months Ended September 30, ~~2018~~2019 and ~~2017~~2018

Revenue: Total revenue increased ~~$102.7~~$53.4 million, or ~~88.4%~~24.4%, to $272.3 million for the three months ended September 30, 2019 from $218.9 million for the three months ended September 30, 2018. The increase was primarily the result of a 34.3% 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 32.3% due to increased transaction volumes and higher revenues per transaction. Average modular space monthly rental rates increased 12.3% to $630 for the three months ended September 30, 2019, and average modular space units on rent increased 15,820 units, or 21.0%, due to the impact of an additional 1.5 months of contribution from the ModSpace acquisition in the third quarter of 2019. 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 partially offset by decreases of $9.4 million, or 45.0%, and $2.0 million, or 20.8%, on new unit and rental unit sales, respectively, as compared to the same period in 2018 driven by large sales originating from ~~$116.2~~ModSpace that were completed subsequent to the acquisition in the third quarter of 2018 that did not reoccur in 2019.

On a pro forma basis, including results of WillScot and ModSpace for all periods presented, total revenues decreased $28.3 million, or 9.4%, year-over-year for the three months ended September 30, 2019. This decline was driven by reduced new sales, which declined $34.7 million, or 75.1%, driven primarily by one large new sale recognized in 2018 in the amount of $26.3 million in our Modular - US segment, and decreased rental unit sales, which declined $6.3 million, or 45.0%. The declines in sales volumes were partially offset by increases in our core modular leasing revenues, which increased $14.0 million, or 7.9%, driven primarily by a 13.9% increase in average modular space monthly rental rates.

Total average units on rent for the three months ended September 30, 2019 and 2018 were 107,649 and 91,194, respectively. The increase is due to the impact of an additional 1.5 months of contribution from the ModSpace acquisition in the third quarter of 2019, with modular space average units on rent increasing 15,820 units, or 21.0%, for the three months ended September 30, 2019. Modular space average monthly rental rates increased 12.3% for the three months ended September 30, 2019. Portable storage average units on rent increased by 635 units, or 4.0%, for the three months ended September 30, 2019. Average portable storage monthly rental rates increased 2.5% for the three months ended September 30, 2019. The average modular space unit utilization rate during the three months ended September 30, 2019 was 71.2%, as compared to 71.8% during the same period in 2018. This decrease was driven by lower average modular space units on rent, partially offset by a lower total modular space unit fleet size. The average portable storage unit utilization rate during the three months ended September 30, 2019 was 63.0%, as compared to 68.0% 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 38.0% and 37.0% for the three months ended September 30, 2019 and 2018, respectively. Our gross profit percentage, excluding the effects of depreciation, was 54.1% and 53.2% for the three months ended September 30, 2019 and 2018, respectively.

Gross profit increased $22.5 million, or 27.8%, to $103.4 million for the three months ended September 30, ~~2017.~~2019 from $80.9 million for the three months ended September 30, 2018. The increase in gross profit is a result of a $30.6 million increase in modular leasing gross profit and increased delivery and installation gross profit of $3.1 million. Increases in modular leasing and services gross profit were primarily as a result of increased revenues due to additional activity and units on rent as a result of the ModSpace acquisition 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 $8.4 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") decreased $3.7 million, or 5.1%, to $68.2 million for the three months ended September 30, 2019, compared to $71.9 million for the three months ended September 30, 2018. The primary driver of the decrease is related to lower discrete costs. Discrete items within SG&A decreased for the three months ended September 30, 2019, compared to the three months ended September 30, 2018, by $12.0 million as transaction and integration costs related to the ModSpace acquisition which closed in the third quarter of 2018 decreased $10.7 million and $2.1 million, respectively, but were partially offset by an increase in stock compensation expense of $0.8 million.

Decreases in discrete items were also offset by increased employee costs of $3.1 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 $0.6 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 75% of redundant real estate locations.

The remaining increases of $4.6 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 incremental cost synergies of approximately $10.0 million related to the Acton and ModSpace acquisitions were realized in the three months ended September 30, 2019, which compares to approximately $2.4 million of synergies realized in the three months ended September 30, 2018, bringing cumulative synergies related to the Acton, Tyson, and ModSpace acquisitions from the dates of the acquisitions to September 30, 2019 to approximately $31.2 million. These cost synergies are 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 of $3.7 million remained flat for the three months ended September 30, 2019, as compared to the three months ended September 30, 2018.

Restructuring Costs: Restructuring costs were $2.0 million for the three months ended September 30, 2019 as compared to $6.1 million for the three months ended September 30, 2018. The restructuring charges relate primarily to employee termination and lease breakage costs related to the ModSpace and Acton acquisitions and integration.

Currency Losses (Gains), net: Currency losses (gains), net decreased by $0.6 million to a $0.2 million loss for the three months ended September 30, 2019 compared to a $0.4 million gain for the three months ended September 30, 2018. The decrease 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 $1.1 million and $0.6 million for the three months ended September 30, 2019 and 2018, respectively. Other income, net of $1.1 million for the three months ended September 30, 2019 was primarily related to $0.9 million of gains on real estate sold during the period and the receipt of $1.3 million of insurance proceeds related to assets damaged during Hurricane Irma in the third quarter, which contributed $0.4 million to other income, net. Other income, net of $0.6 million for the three months ended September 30, 2018 was driven by the receipt of a settlement related to assets damaged during Hurricane Harvey which contributed $0.8 million to other income, net.

Interest Expense: Interest expense decreased $12.5 million, or 28.8%, to $30.9 million for the three months ended September 30, 2019 from $43.4 million for the three months ended September 30, 2018. The interest costs incurred during the three months ended September 30, 2018 included $20.5 million of bridge financing fees and upfront commitment fees related to the financing of the ModSpace acquisition. Interest expense for the three months ended September 30, 2019 includes an additional 1.5 months of expense under our current debt structure as compared to the three months ended September 30, 2018. 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 $200 million of 10% senior unsecured notes (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.

Income Tax Benefit: Income tax benefit decreased $5.3 million to $1.2 million for the three months ended September 30, 2019 compared to $6.5 million for the three months ended September 30, 2018. The decrease in income tax benefit was driven by the discrete benefits recorded in the three months ended September 30, 2018 which did not occur in the three months ended September 30, 2019.

Nine Months Ended September 30, 2019 Compared to the Nine Months Ended September 30, 2018

Our consolidated statements of operations for the nine months ended September 30, 2019 and 2018 are presented below:


	Nine Months Ended September 30,						2019 vs. 2018 $ Change
(in thousands)	2019		2018
Revenues:
Leasing and services revenue:
Modular leasing	$	557,025	$	340,171	$	216,854
Modular delivery and installation	168,643		104,440		64,203
Sales revenue:
New units	38,064		33,584		4,480
Rental units	29,741		15,813		13,928
Total revenues	793,473		494,008		299,465
Costs:
Costs of leasing and services:
Modular leasing	160,476		93,506		66,970
Modular delivery and installation	146,175		98,038		48,137
Costs of sales:
New units	26,298		23,780		2,518
Rental units	19,608		9,328		10,280
Depreciation of rental equipment	128,940		82,849		46,091
Gross profit	311,976		186,507		125,469
Expenses:
Selling, general and administrative	213,267		164,845		48,422
Other depreciation and amortization	9,878		7,726		2,152
Impairment losses on long-lived assets	5,076		—		5,076
Restructuring costs	9,083		7,214		1,869
Currency (gains) losses, net	(436)		1,171		(1,607)
Other income, net	(3,293)		(5,013)		1,720
Operating income	78,401		10,564		67,837
Interest expense	95,353		67,321		28,032
Loss on extinguishment of debt	7,244		—		7,244
Loss from operations before income tax	(24,196)		(56,757)		32,561
Income tax benefit	(2,022)		(13,572)		11,550
Net loss	(22,174)		(43,185)		21,011
Net loss attributable to non-controlling interest, net of tax	(1,449)		(3,715)		2,266
Net loss attributable to WillScot	$	(20,725)	$	(39,470)	$	18,745

Comparison of Nine Months Ended September 30, 2019 and 2018

Revenue: Total revenue increased $299.5 million, or 60.6%, to $793.5 million for the nine months ended September 30, 2019 from $494.0 million for the nine months ended September 30, 2018. The increase was primarily the result of a ~~88.4%~~63.2% increase in leasing and services revenue driven by increased volumes from acquisitions and improved ~~pricing~~pricing. 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 61.5% due to increased transaction volumes and higher revenues per transaction. Average modular space monthly rental rates increased ~~3.7%~~9.0% to ~~$561~~$605 for the ~~three~~nine months ended September 30, ~~2018,~~2019, and average modular space units on rent increased ~~33,949~~31,563 units, or ~~81.9%~~52.0%. Improved pricing was driven by a combination of our price optimization tools and processes, as well as by continued growth in our “Ready to Work” solutions and increased VAPS penetration across our customer base, offset partially by the average modular space monthly rental rates on acquired units for ~~Acton, Tyson, and~~ ModSpace. Improved volumes were driven by units acquired as part of the Acton, Tyson, and ModSpace acquisitions, as well as increased modular delivery and installation revenues on the combined rental fleet of 90.2%. The increase in leasing and services revenue was further complemented by increases of ~~$11.3~~$4.5 million, or ~~117.7%~~13.4%, and ~~$3.0~~$13.9 million, or ~~45.5%~~88.0%, on new unit and rental unit sales, respectively, as compared to the same period in ~~2017. The increase year over year~~2018. Increases in both new ~~sales was primarily driven by a single large sale project within the US. Increases in~~and rental unit sales ~~was~~were primarily a result of our increased scale as a result of the ModSpace acquisition and our larger post-acquisition fleet ~~size.~~size and sales teams.

On a ~~pro-forma~~pro forma basis, including results of WillScot ~~Acton, Tyson,~~ and ModSpace for all periods presented, total revenues ~~increased $30.4~~decreased $13.1 million, or ~~11.3%~~1.6%, year-over-year for the ~~three~~nine months ended September 30, ~~2018. Increases were~~2019. This decline was driven by reduced new sales, which declined $42.6 million, or 52.8%, driven primarily by one large new sale recognized in 2018 in the amount of $26.3 million in our Modular - US segment, and decreased rental unit sales, which declined $6.7 million, or 18.4%. The declines in sales volumes were partially offset by an increase in our core modular leasing ~~and services~~ revenues, which increased $44.3 million, or 8.6%, as a result of a ~~12.0%~~13.5% increase in average modular space monthly rental ~~rates, and due to increased new sales.~~rates.

Total average units on rent for the ~~three~~nine months ended September 30, 2019 and 2018 were 109,138 and ~~2017 were 91,194 and 53,705,~~75,079, respectively. The increase was due to units acquired as part of the ~~Acton, Tyson, and~~ ModSpace ~~acquisitions,~~acquisition, with modular space average units on rent increasing ~~by 33,949~~31,563 units, or ~~81.9%~~52.0%, for the ~~three~~nine months ended September 30, ~~2018.~~2019. Modular space average monthly rental rates increased ~~3.7%~~9.0% for the ~~three~~nine months ended September 30, ~~2018.~~2019. Portable storage average units on rent increased by ~~3,540~~2,496 units, or ~~28.9%~~17.4%, for the ~~three~~nine months ended September 30, ~~2018.~~2019. Average portable storage monthly rental rates ~~increased 2.6%~~decreased 1.6% for the ~~three~~nine months ended September 30, ~~2018.~~2019. The average modular space unit utilization rate during the ~~three~~nine months ended September 30, 2019 was 72.1%, as compared to 70.1% 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 nine months ended September 30, 2018, ~~was 71.8%, as compared to 71.3% during~~which included 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 offleet acquired ~~units at lower utilization rates.~~from Acton and Tyson. The average portable storage unit utilization rate during the ~~three~~nine months ended September 30, ~~2018~~2019 was ~~68.0%~~64.6%, as compared to ~~69.8%~~68.3% during the same period in ~~2017.~~2018. The decrease in average portable storage utilization rate was driven by ~~organic declines~~an increase in the number of portable storage average units on rent in the Modular - US segment.

Gross Profit: Our gross profit percentage was ~~37.0%~~39.3% and ~~35.5%~~37.8% for the ~~three~~nine months ended September 30, ~~2018~~2019 and ~~2017,~~2018, respectively. Our gross profit percentage, excluding the effects of depreciation, was ~~53.0%~~55.6% and ~~52.0%~~54.5% for the ~~three~~nine months ended September 30, ~~2018~~2019 and ~~2017,~~2018, respectively.

Gross profit increased ~~$39.6~~$125.5 million, or ~~95.9%~~67.3%, to ~~$80.9~~$312.0 million for the ~~three~~nine months ended September 30, ~~2018~~2019 from ~~$41.3~~$186.5 million for the ~~three~~nine months ended September 30, ~~2017.~~2018. The increase in gross profit is a result of a ~~$52.0~~$165.8 million increase in modular leasing and services gross profit and increased new unit and rental unit gross profit of ~~$4.1~~$5.6 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.~~units and increased delivery and installation margins driven primarily by higher pricing per transaction. These increases were partially offset by increased depreciation of ~~$16.5~~$46.1 million as a result of additional rental equipment acquired as part of the ~~Acton, Tyson, and~~ ModSpace ~~acquisitions,~~acquisition, as well as continued capital investment in our existing rental equipment.

~~Selling, General and Administrative:~~SG&A: ~~Selling, general and administrative expense (“~~SG~~&A”)~~&A increased ~~$35.8~~$48.5 million, or ~~99.2%~~29.4%, to ~~$71.9~~$213.3 million for the ~~three~~nine months ended September 30, ~~2018,~~2019, compared to ~~$36.1~~$164.8 million for the ~~three~~nine months ended September 30, ~~2017. $13.9~~2018. Employee costs increased $23.3 million driven by the increased size of the ~~SG&A increase was driven by discrete items including~~workforce, net of realized employee cost synergies savings to date achieved as a result of the restructuring activities; and occupancy costs increased ~~transaction costs of $5.4~~$8.2 million ~~related~~largely due to the ~~ModSpace acquisition~~expansion of our branch network and ~~increased~~storage lots, including a portion of the expected cost savings as we have now exited approximately 75% of redundant real estate locations.

Discrete items included in SG&A decreased $3.6 million during the period as integration ~~costs~~cost increases of ~~$7.5~~$8.4 million related to the Acton and ModSpace ~~integrations. Additionally,~~integrations and stock compensation expense ~~increased $1.1~~increases of $2.8 million ~~due~~were fully offset offset by lower transaction costs, which reduced $14.8 million as compared to ~~grants of stock options, restricted stock awards (“RSAs”) and restricted stock units (“RSUs”) to certain employees in~~ the ~~first quarter of 2018.~~ prior year.

The remaining increases in SG&A of ~~$21.9~~$20.7 million are ~~primarily~~ related to ~~$2.4 million of public company costs including outside~~increased professional fees, ~~and increased headcount, occupancy,~~insurance, computer, travel, office, bad debt, and other ~~SG&A cost increases as a result of~~expenses related to operating a larger ~~operation~~business as a result of our recent acquisitions and our expanded employee base and branch network. ~~Cost~~

We estimate cost synergies of approximately ~~$2.4~~$24.8 million related to the Acton and ~~Tyson~~ModSpace acquisitions were realized ~~during~~in the ~~quarter~~nine months ended September 30, 2019, which compares to approximately $3.9 million of synergies realized for the nine months ended September 30, 2018, bringing cumulative synergies related to the Acton, Tyson, and ModSpace acquisitions from the dates of the acquisitions to approximately $31.2 million. This is consistent with our integration plans ~~remain on track. Effective November 1, 2018, our combined sales organization began writing all new contracts (including those associated with legacy ModSpace assets) from WillScot's operating~~ and ~~information technology platform. Exit~~we expect these activities ~~for redundant branch locations, such as preparing units and materials for transport to other locations remain on schedule. These activities are expected~~ to continue through 2019 ~~and~~as we ~~expect additional~~continue our efforts to achieve expected annual recurring cost savings ~~as we execute the established~~of over $70.0 million once our integration plans ~~for Acton~~are fully executed and ~~ModSpace. These increases were partially offset by a reduction of $7.6 million in corporate & other related to Algeco Group costs no longer included~~ in our ~~operations.~~results.

Other Depreciation and Amortization: Other depreciation and amortization increased $2.2 million, or 28.6%, to $9.9 million for the nine months ended September 30, 2019, compared to $7.7 million for the nine months ended September 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 nine months ended September 30, 2019 as compared to $0.0 million for the nine months ended September 30, 2018. In the nine months ended September 30, 2019, 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 because the carrying value of the facilities exceeded the estimated fair value less cost to sell. Additionally, one of the properties exited during the nine months ended September 30, 2019 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.

~~Other Depreciation and Amortization:~~ Other depreciation and amortization increased $1.8 million, or 94.7%, to $3.7 million for the three months ended September 30, 2018, compared to $1.9 million for the three months ended September 30, 2017. The increase was driven primarily by depreciation on property, plant and equipment acquired as part of the Acton and ModSpace acquisitions in the first and third quarters, respectively.

Restructuring Costs: Restructuring costs were ~~$6.1~~$9.1 million for the ~~three~~nine months ended September 30, ~~2018~~2019 as compared to ~~$1.2~~$7.2 million for the ~~three~~nine months ended September 30, ~~2017.~~2018. The ~~2018~~ restructuring charges relate primarily to employee termination and lease breakage costs related to the ~~Acton~~ModSpace and ~~ModSpace~~Acton acquisitions and ~~integrations. The 2017 restructuring charges relate primarily to the Algeco Group corporate function and consist of employee termination costs.~~integration.

Currency (Gains) Losses, ~~(Gains),~~ net: Currency (gains) losses, ~~(gains),~~ net ~~decreased~~increased by ~~$3.9~~$1.6 million to a $0.4 million gain for the ~~three~~nine months ended September 30, ~~2018~~2019 compared to a ~~$4.3~~$1.2 million ~~gain~~loss for the ~~three~~nine months ended September 30, ~~2017.~~2018. The decrease in currency (gains) losses, ~~(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. ~~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,~~Income, Net: Other ~~(income) expense,~~income, net was ~~$0.6~~$3.3 million ~~of other income~~and $5.0 million for the ~~three~~nine months ended September 30, 2019 and 2018, ~~and $1.0~~respectively. Other income, net of $3.3 million ~~of other expense~~ for the ~~three~~nine months ended September 30, ~~2017. The increase~~2019 was primarily related to the receipt of a $0.9 million settlement in the first quarter, the receipt of $1.1 million of insurance proceeds related to assets damaged during Hurricane Harvey in the second quarter, $0.9 million of gains on real estate sold during the third quarter, and the receipt of $1.3 million of insurance proceeds related to assets damaged during Hurricane Irma in the third quarter, which contributed $0.4 million to other income, net. Other income, net of $5.0 million for the nine months ended September 30, 2018 was driven by the receipt of ~~a settlement~~insurance proceeds related to assets damaged during Hurricane Harvey which contributed ~~$0.8~~$4.8 million to other ~~(income) expense, net, for the three months ended September 30, 2018.~~income, net.

Interest Expense: Interest expense increased ~~$13.3~~$28.1 million, or ~~44.2%~~41.8%, to ~~$43.4~~$95.4 million for the ~~three~~nine months ended September 30, 2019 from $67.3 million for the nine months ended September 30, 2018. The interest costs incurred during the nine months ended September 30, 2018 ~~from $30.1~~included $20.5 million of bridge financing fees and upfront commitment fees related to the financing of the ModSpace acquisition. Interest expense for the ~~three~~nine months ended September 30, ~~2017. Upon consummation~~2019 includes an additional 7.5 months of expense under our current debt structure as compared to the Business Combination in November 2017, we issued $300.0 million of 7.875% senior secured notes (the “2022 Secured Notes”) and entered into a new $600.0 million ABL Facility to fund our operations as a stand-alone company.nine months ended September 30, 2018. 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 ~~related~~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 ~~issued~~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 ~~related to~~in aggregate outstanding principal amount of the Unsecured ~~Notes. In connection with~~Notes using proceeds from the ~~ModSpace acquisition, the Company incurred bridge financing fees and upfront commitment fees of $20.5 million in the third quarter, which are not expected to reoccur.~~

The majority of the interest costs incurred during the three months ended September 30, 2017 relate to the previous debt structure of the Company as part of the Algeco Group. The increase in interest expense is driven by our recent debt issuances including the $20.5 million of bridge financing fees and upfront commitment fees.ABL Facility. See Note 78 to the condensed consolidated financial statements for further discussion of our ~~debt, and the additional debt incurred during the third quarter as part of financing the ModSpace acquisition.~~debt.

~~Interest Income:~~Loss on Extinguishment of Debt: ~~Interest income~~Loss on extinguishment of debt increased $7.2 million for the nine months ended September 30, 2019 from $0.0 million for the nine months ended September 30, 2018. The Company redeemed $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 ~~interest earned on~~write-off of unamortized deferred financing fees. This redemption was funded from the ~~principal balance~~use of ~~notes due~~proceeds from ~~affiliates, which were settled upon consummation of~~ the ~~Business Combination in November 2017.~~ABL Facility.

Income Tax Benefit: Income tax benefit decreased ~~$1.1~~$11.6 million to ~~$6.5~~a $2.0 million benefit for the ~~three~~nine months ended September 30, ~~2018~~2019 compared to ~~$7.6~~a $13.6 million benefit for the ~~three~~nine months ended September 30, ~~2017.~~2018. The decrease in income tax benefit was ~~mainly due to a lower statutory income tax rate~~driven by the discrete benefits recorded in the ~~US partially offset by discrete tax benefits recorded at~~nine months ended September 30, 2018 ~~as compared to~~which did not reoccur during the nine months ended September 30, ~~2017.~~ 2019.

~~Nine Months Ended September 30, 2018 Compared to the Nine Months Ended September 30, 2017~~

~~Our consolidated statements of net loss for the nine months ended September 30, 2018 and 2017 are presented below:~~

Nine Months Ended September 30, 2018 vs. 2017 $ Change
(in thousands) 2018 2017
Revenues:
Leasing and services revenue:
Modular leasing $ 340,171 $ 217,261 $ 122,910
Modular delivery and installation 104,440 66,580 37,860
Sales:
New units 33,584 24,491 9,093
Rental units 15,813 17,228 (1,415)
Total revenues 494,008 325,560 168,448
Costs:
Costs of leasing and services:
Modular leasing 93,506 61,694 31,812
Modular delivery and installation 98,038 64,404 33,634
Costs of sales:
New units 23,780 17,402 6,378
Rental units 9,328 10,067 (739)
Depreciation of rental equipment 82,849 53,203 29,646
Gross profit 186,507 118,790 67,717
Expenses:
Selling, general and administrative 164,845 100,510 64,335
Other depreciation and amortization 7,726 5,736 1,990
Restructuring costs 7,214 2,124 5,090
Currency losses (gains), net 1,171 (12,769) 13,940
Other (income) expense, net (5,013) 1,592 (6,605)
Operating income 10,564 21,597 (11,033)
Interest expense 67,321 84,674 (17,353)
Interest income — (9,752) 9,752
Loss from continuing operations before income tax (56,757) (53,325) (3,432)
Income tax benefit (13,572) (17,770) 4,198
Loss from continuing operations (43,185) (35,555) (7,630)
Income from discontinued operations, net of tax — 11,123 (11,123)
Net loss (43,185) (24,432) (18,753)
Net loss attributable to non-controlling interest, net of tax (3,715) — (3,715)
Total loss attributable to WillScot $ (39,470) $ (24,432) $ (15,038)

~~Comparison of Nine Months Ended September 30, 2018 and 2017~~

~~Revenue:~~ Total revenue increased $168.4 million, or 51.7%, to $494.0 million for the nine months ended September 30, 2018 from $325.6 million for the nine months ended September 30, 2017. The increase was primarily the result of a 56.4% increase in leasing and services revenue driven by improved pricing and volumes. Average modular space monthly rental rates increased 4.7% for the nine months ended September 30, 2018, and average modular space units on rent increased 20,047 units, or 49.3%. Improved pricing was driven by a combination of our price optimization tools and processes, as well as by continued growth in our “Ready to Work” solutions and increased VAPS penetration across our customer base, offset partially by the average modular space monthly rental rates on acquired units for Acton, Tyson, and ModSpace. Improved volumes were driven by units acquired as part of the Acton, Tyson, and ModSpace acquisitions and organic unit on rent growth, as well as increased modular delivery and installation revenues on the combined rental fleet of 56.8%. The increase in leasing and services revenues was further complemented by an increase of $9.1 million, or 37.1% in new unit sales as compared to the same period in 2017 primarily driven by a single large sale project in the third quarter within the US. These increases were partially offset by a reduction in rental unit sales of $1.4 million, or 8.1% in rental unit sales as compared to the same period in 2017.

On a pro-forma basis, including results of WillScot, Acton, Tyson, and ModSpace for all periods presented, total revenues increased $67.3 million, or 9.1%, year-over-year for the nine months ended September 30, 2018. Increases were driven by core leasing and services revenues as a result a of a 10.6% increase in average modular space monthly rental rates and a 0.7% increase in average modular space units of rent, and due to increased new sales.

Total average units on rent for the nine months ended September 30, 2018 and 2017 were 75,079 and 53,279, respectively. The increase was due to units acquired as part of the Acton, Tyson, and ModSpace acquisitions and organic improvements in modular space average units on rent, with modular space average units on rent increased by 20,047 units, or 49.3% for the nine months ended September 30, 2018. Modular space average monthly rental rates increased 4.7% for the nine months ended September 30, 2018. Portable storage average units on rent increasing by 1,753 units, or 13.9% for the nine months ended September 30, 2018. Average portable storage monthly rental rates increased 7.9% for the nine months ended September 30, 2018. The average modular space unit utilization rate during the nine months ended September 30, 2018 was 70.1%, 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. The average portable storage unit utilization rate during the nine months ended September 30, 2018 was 68.3%, as compared to 71.4% during the same period in 2017. The decrease in average portable storage utilization rate was driven by organic declines in the number of portable storage average units on rent in the Modular - US segment.

~~Gross Profit:~~ Our gross profit percentage was 38.8% and 36.4% for the nine months ended September 30, 2018 and 2017, respectively. Our gross profit percentage, excluding the effects of depreciation, was 55.0% and 53.0% for the nine months ended September 30, 2018 and 2017, respectively.

Gross profit increased $67.7 million, or 57.0%, to $186.5 million for the nine months ended September 30, 2018 from $118.8 million for the nine months ended September 30, 2017. The increase in gross profit is a result of a $95.3 million increase in modular leasing gross profit and increased new unit and rental unit gross profit of $2.0 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. These increases were partially offset by increased depreciation of $29.6 million as a result of additional rental equipment acquired as part of the Acton, Tyson, and ModSpace acquisitions, as well as continued capital investment in our existing rental equipment.

~~Selling, General and Administrative:~~ SG&A expenses increased $64.3 million, or 64.0%, to $164.8 million for the nine months ended September 30, 2018, compared to $100.5 million for the nine months ended September 30, 2017. $25.8 million of the SG&A expenses increase was driven by discrete items including increased transaction costs of $8.7 million related to the ModSpace acquisition and increased integration costs of $14.9 million related to the Acton and ModSpace integrations. Additionally, stock compensation expense increased by $2.2 million due to grants of stock options, RSAs and RSUs to certain employees in the first quarter of 2018. The remaining increases of $38.5 million are primarily related to $8.6 million of increased public company costs including outside professional fees, and increased headcount, occupancy, and other SG&A cost increases as a result of operating a larger operation as a result of our recent acquisitions and our expanded employee base and branch network. We estimate cost synergies of approximately $3.9 million related to the Acton and Tyson acquisitions have been realized year to date as of the third quarter and our integration plans remain on track. Effective November 1, 2018, we began delivering all units acquired from ModSpace under a combined operating and information technology platform. Exit activities for redundant branch locations, such as preparing units and materials for transport to other locations remain on schedule. These activities are expected to continue through 2019 and we expect additional cost savings as we execute the established integration plans for Acton and ModSpace. These increases were partially offset by a reduction of $15.7 million in corporate & other related to Algeco Group costs no longer included in our operations.

~~Other Depreciation and Amortization:~~ Other depreciation and amortization increased $2.0 million, or 35.1%, to $7.7 million for the nine months ended September 30, 2018, compared to $5.7 million for the nine months ended September 30, 2017. The increase was driven primarily by depreciation on property, plant and equipment acquired as part of the Acton

~~and ModSpace acquisitions in the first and third quarters, respectively.~~

~~Restructuring Costs:~~ Restructuring costs were $7.2 million for the nine months ended September 30, 2018 as compared to $2.1 million for the nine months ended September 30, 2017. The 2018 restructuring charges relate primarily to employee termination and lease breakage costs related to the Acton and ModSpace acquisitions and integrations. 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 $14.0 million to a $1.2 million loss for the nine months ended September 30, 2018 compared to a $12.8 million gain for the nine months ended September 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 $5.0 million of income for the nine months ended September 30, 2018 and $1.6 million of other expense for the nine months ended September 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 nine months ended September 30, 2018.

~~Interest Expense:~~ Interest expense decreased $17.4 million, or 20.5%, to $67.3 million for the nine months ended September 30, 2018 from $84.7 million for the nine months ended September 30, 2017. Upon consummation of the Business Combination in November 2017, we issued the 2022 Secured Notes and entered into the ABL Facility to fund our operations as a stand-alone company. In the third quarter as part of financing the ModSpace acquisition, we upsized our ABL Facility to $1.425 billion, issued the 2023 Secured Notes, and issued the Unsecured Notes. In connection with the ModSpace acquisition, the Company incurred bridge financing fees and upfront commitment fees of $20.5 million in the third quarter, which are not expected to reoccur.

The majority of the interest costs incurred during the nine months ended September 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 average debt balance in 2018 under our new debt structure as compared to the Algeco Group debt structure in place in 2017, partially offset by bridge financing and upfront commitment fees of $20.5 million incurred in connection with the ModSpace acquisition. See Note 7 to the condensed consolidated financial statements for further discussion of our debt, and the additional debt incurred during the third quarter as part of financing the ModSpace acquisition, which we expect will increase our interest expense in future periods.

~~Interest Income:~~ Interest income decreased $9.8 million, or 100.0%, to zero for the nine months ended September 30, 2018 from $9.8 million for the nine months ended September 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 $4.2 million to $13.6 million for the nine months ended September 30, 2018 compared to $17.8 million for the nine months ended September 30, 2017. The decrease in income tax benefit was mainly due to a lower statutory income tax rate in the US partially offset by discrete tax benefits recorded at September 30, 2018 as compared to September 30, 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. The Remote Accommodations Business 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. The Acton and Tyson acquisitions are both included in the Modular - US segment, and ModSpace is included in both Modular segments as ModSpace operated in the United States and Canada. Corporate and other represents primarily SG&A related to the Algeco Group’s corporate costs, which were not incurred by WillScot in 2018.

The following tables and discussion summarize our reportable segment financial information for the three and nine months ended September 30, ~~2018~~2019 and ~~2017.~~2018. Future changes to our organizational structure may result in changes to the segments disclosed.

Comparison of Three Months Ended September 30, ~~2018~~2019 and ~~2017~~ 2018


		Three Months Ended September 30, 2018																Three Months Ended September 30, 2019
(in thousands, except for units on rent and rates)	(in thousands, except for units on rent and rates)	Modular - US			Modular - Other North America			Total			(in thousands, except for units on rent and rates)	Modular - US			Modular - Other North America			Total
Revenue	Revenue	$	197,625		$	21,299		$	218,924		Revenue	$	247,701		$	24,639		$	272,340
Gross profit	Gross profit	$	73,007		$	7,939		$	80,946		Gross profit	$	94,257		$	9,169		$	103,426
Adjusted EBITDA	Adjusted EBITDA	$	58,454		$	6,164		$	64,618		Adjusted EBITDA	$	80,424		$	7,953		$	88,377
Capital expenditures for rental equipment	Capital expenditures for rental equipment	$	43,007		$	3,735		$	46,742		Capital expenditures for rental equipment	$	44,951		$	2,838		$	47,789
Modular space units on rent (average during the period)	Modular space units on rent (average during the period)	67,978			7,435			75,413			Modular space units on rent (average during the period)	82,053			9,180			91,233
Average modular space utilization rate	Average modular space utilization rate	73.8		%	57.3		%	71.8		%	Average modular space utilization rate	73.2		%	57.2		%	71.2		%
Average modular space monthly rental rate	Average modular space monthly rental rate	$	559		$	587		$	561		Average modular space monthly rental rate	$	632		$	618		$	630
Portable storage units on rent (average during the period)	Portable storage units on rent (average during the period)	15,373			408			15,781			Portable storage units on rent (average during the period)	15,993			423			16,416
Average portable storage utilization rate	Average portable storage utilization rate	68.3		%	56.4		%	68.0		%	Average portable storage utilization rate	63.3		%	54.3		%	63.0		%
Average portable storage monthly rental rate	Average portable storage monthly rental rate	$	120		$	101		$	120		Average portable storage monthly rental rate	$	123		$	106		$	123


		Three Months Ended September 30, 2017																						Three Months Ended September 30, 2018
(in thousands, except for units on rent and rates)	(in thousands, except for units on rent and rates)	Modular - US			Modular - Other North America			Corporate & Other			Total			(in thousands, except for units on rent and rates)	Modular - US			Modular - Other North America			Total
Revenue	Revenue	$	103,678		$	12,723		$	(239)		$	116,162		Revenue	$	197,625		$	21,299		$	218,924
Gross profit	Gross profit	$	37,766		$	3,744		$	(241)		$	41,269		Gross profit	$	73,007		$	7,939		$	80,946
Adjusted EBITDA	Adjusted EBITDA	$	29,177		$	2,961		$	(2,753)		$	29,385		Adjusted EBITDA	$	58,454		$	6,164		$	64,618
Capital expenditures for rental equipment	Capital expenditures for rental equipment	$	24,147		$	1,361		$	—		$	25,508		Capital expenditures for rental equipment	$	43,007		$	3,735		$	46,742
Modular space units on rent (average during the period)	Modular space units on rent (average during the period)	36,183			5,281			—			41,464			Modular space units on rent (average during the period)	67,978			7,435			75,413
Average modular space utilization rate	Average modular space utilization rate	74.7		%	54.1		%	—		%	71.3		%	Average modular space utilization rate	73.8		%	57.3		%	71.8		%
Average modular space monthly rental rate	Average modular space monthly rental rate	$	542		$	536		$	—		$	541		Average modular space monthly rental rate	$	559		$	587		$	561
Portable storage units on rent (average during the period)	Portable storage units on rent (average during the period)	11,894			347			—			12,241			Portable storage units on rent (average during the period)	15,373			408			15,781
Average portable storage utilization rate	Average portable storage utilization rate	70.6		%	51.9		%	—		%	69.8		%	Average portable storage utilization rate	68.3		%	56.4		%	68.0		%
Average portable storage monthly rental rate	Average portable storage monthly rental rate	$	117		$	123		$	—		$	117		Average portable storage monthly rental rate	$	120		$	101		$	120

Modular - US Segment

Revenue: Total revenue increased ~~$93.9~~$50.1 million, or ~~90.5%~~25.4%, to $247.7 million for the three months ended September 30, 2019 from $197.6 million for the three months ended September 30, 2018. Modular leasing revenue increased $45.4 million, or 35.5%, driven by improved volumes and pricing. Average modular space units on rent increased 14,075 units, or 20.7%. Average modular space monthly rental rates increased 13.1% for the three months ended September 30, 2019. Volumes improved as a result of units acquired as part of the ModSpace acquisition as well as increased modular delivery and installation revenues on the combined rental fleet of 34.0% due to an additional 1.5 months of contribution from the ModSpace acquisition in the third quarter of 2019. 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 lower average modular space monthly rental rates on acquired units. The increases in leasing and services revenue were partially offset by decreases in sales revenues. New unit sales revenue decreased $8.4 million, or 43.8%, and rental unit sales revenue decreased $1.1 million, or 12.8%. These decreases were driven by large sales originating from ModSpace that were completed subsequent to the acquisition in the third quarter of 2018 that did not reoccur in 2019.

On a pro forma basis, including results of WillScot and ModSpace for all periods presented, total revenues decreased $25.9 million, or 9.5%, year-over-year for the three months ended September 30, 2019. This decline was driven by reduced new sales, which declined $33.6 million, or 75.8%, driven primarily by one large new unit sale recognized in 2018 in the amount of $26.3 million, and decreased rental unit sales, which declined $4.7 million, or 38.5%. The declines in sales volumes

were partially offset by increases in our core modular leasing revenues, which increased $12.9 million, or 8.0%, driven primarily by continued pricing improvement in the third quarter, with increases in pro forma average modular space monthly rental rates of $83, or 15.1%, year over year for the three months ended September 30, 2019. Modular space units on rent decreased 5.6% on a pro forma basis to 82,053 and pro forma utilization for our modular space units decreased to 73.2%, down 170 bps from ~~$103.7~~74.9% for the three months ended September 30, 2018.

Gross Profit: Gross profit increased $21.2 million, or 29.0%, to $94.2 million for the three months ended September 30, ~~2017.~~2019 from $73.0 million for the three months ended September 30, 2018. The increase in gross profit was driven by higher modular leasing and service revenues driven both by organic growth primarily from pricing and by an additional 1.5 months of contribution from the ModSpace acquisition in the third quarter of 2019, as well as due to increased modular space delivery and installation margins. Modular leasing and service gross profit increased $30.8 million, or 32.2%. The increase in gross profit from modular leasing and service revenues for the three months ended September 30, 2019 was partially offset by a $1.9 million decrease in sales gross profit and a $7.6 million increase in depreciation of rental equipment primarily related to units acquired in the ModSpace acquisition, as well as continued capital investment in our existing rental equipment.

Adjusted EBITDA: Adjusted EBITDA increased $22.0 million, or 37.7%, to $80.4 million for the three months ended September 30, 2019 from $58.4 for the three months ended September 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 and other items, of $6.6 million. Discrete and other items within SG&A decreased for the three months ended September 30, 2019, compared to the three months ended September 30, 2018, by $11.2 million as decreases in transaction costs and integration cost related to the ModSpace and Acton acquisitions and integrations of $10.5 million and $3.0 million, respectively, were partially offset by an increase in stock compensation expense of $0.8 million and a $1.6 million increase in other costs. Increases in SG&A, excluding discrete items, primarily related to increased employee costs of $3.1 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 $0.4 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 75% of redundant real estate locations. The remaining increases in SG&A of $3.1 million were 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 $2.0 million, or 4.7%, to $45.0 million for the three months ended September 30, 2019 from $43.0 million for the three months ended September 30, 2018. Net capital expenditures for rental equipment also increased $2.3 million, or 6.7%, to $36.7 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 $3.3 million, or 15.5%, to $24.6 million for the three months ended September 30, 2019 from $21.3 million for the three months ended September 30, 2018. Modular leasing revenue increased ~~$61.4~~$4.1 million, or ~~92.2%~~29.9%, driven by improved volumes and pricing ~~and volumes.~~in the quarter. Average modular space units on rent increased by 1,745 units, or 23.5%, due to an additional 1.5 months of contribution from the ModSpace acquisition in the third quarter of 2019. Average modular space monthly rental rates increased ~~3.1%~~5.3% driven by continued growth in our “Ready to Work” solutions and increased VAPS penetration across the combined post-acquisition customer base. Modular delivery and installation revenues increased $1.0 million, or 20.4%. New unit sales were $0.8 million and $1.7 million, and rental unit sales revenue was $0.1 million and $1.0 million for the three months ended September 30, 2019 and 2018, respectively.

On a pro forma basis, including results of WillScot and ModSpace for all periods presented, total revenues decreased $2.4 million, or 8.9%, year-over-year for the three months ended September 30, 2019. This decline was driven by reduced new and rental unit sales, which declined $1.1 million, or 57.9%, and $1.6 million, or 94.1%, respectively as a result of our focus on the core leasing business. The declines in sales volumes were partially offset by increases in our core modular leasing revenues, which increased $1.1 million, or 6.5%, driven primarily by continued pricing improvement in the third quarter, with increases in pro forma average modular space monthly rental rates of $37, or 6.4%, year-over-year for the three months ended September 30, 2019. Modular space units on rent decreased 0.8% on a pro forma basis to 9,180 and pro forma utilization for our modular space units increased to 57.2%, up 40 bps from 56.8%, for the three months ended September 30, 2018.

Gross Profit: Gross profit increased $1.3 million, or 16.5%, to $9.2 million for the three months ended September 30, 2019 from $7.9 for the three months ended September 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, partially offset by reduced new and rental unit sales gross profit and by increased depreciation of rental equipment of $0.7 million for three months ended September 30, 2019.

Adjusted EBITDA: Adjusted EBITDA increased $1.8 million, or 29.0%, to $8.0 million for the three months ended September 30, 2019 from $6.2 million for the three months ended September 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, partially offset by decreased new and rental unit sales gross profit. Additionally, SG&A, excluding discrete and other items, increased $0.2 million, also driven by the ModSpace acquisition, consisting primarily of increased occupancy costs of $0.2 million.

Capital Expenditures for Rental Equipment: Capital expenditures for rental equipment decreased $0.9 million, or 24.3%, to $2.8 million for the three months ended September 30, 2019 from $3.7 million for the three months ended September 30, 2018. The decrease was driven by reduced spend due to increased unit selection afforded by the larger fleet following the ModSpace acquisition, partially offset by increased spending on VAPS to drive revenue growth. Net capital expenditures of $2.7 million remained flat to the prior year.

Comparison of Nine Months Ended September 30, 2019 and 2018


	Nine Months Ended September 30, 2019
(in thousands, except for units on rent and rates)	Modular - US			Modular - Other North America			Total
Revenue	$	718,038		$	75,435		$	793,473
Gross profit	$	284,336		$	27,640		$	311,976
Adjusted EBITDA	$	238,572		$	23,040		$	261,612
Capital expenditures for rental equipment	$	153,113		$	7,764		$	160,877
Modular space units on rent (average during the period)	83,285			9,014			92,299
Average modular space utilization rate	74.3		%	56.2		%	72.1		%
Average modular space monthly rental rate	$	606		$	592		$	605
Portable storage units on rent (average during the period)	16,427			412			16,839
Average portable storage utilization rate	65.0		%	52.9		%	64.6		%
Average portable storage monthly rental rate	$	121		$	111		$	121


	Nine Months Ended September 30, 2018
(in thousands, except for units on rent and rates)	Modular - US			Modular - Other North America			Total
Revenue	$	444,525		$	49,483		$	494,008
Gross profit	$	169,556		$	16,951		$	186,507
Adjusted EBITDA	$	129,170		$	12,856		$	142,026
Capital expenditures for rental equipment	$	104,462		$	7,043		$	111,505
Modular space units on rent (average during the period)	54,592			6,144			60,736
Average modular space utilization rate	71.9		%	57.1		%	70.1		%
Average modular space monthly rental rate	$	553		$	568		$	555
Portable storage units on rent (average during the period)	13,964			379			14,343
Average portable storage utilization rate	68.6		%	56.5		%	68.3		%
Average portable storage monthly rental rate	$	124		$	111		$	123

Modular - US Segment

Revenue: Total revenue increased $273.5 million, or 61.5%, to $718.0 million for the nine months ended September 30, 2019 from $444.5 million for the nine months ended September 30, 2018. Modular leasing revenue increased $199.9 million, or 65.2%, driven by improved volumes and pricing. Average modular space units on rent increased ~~31,795~~28,693 units, or ~~87.9%~~52.6%. Average modular space monthly rental rates increased 9.6% for the nine months ended September 30, 2019. Improved 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 66.6%. 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 lower average modular space monthly rental rates on acquired units. Improved volumes were driven by units acquired as part of the Acton, Tyson, and ModSpace acquisitions, as well as increased modular delivery and installation revenues on the combined rental fleet of 89.1%. The increases in leasing and services revenue were complemented by increases in sales revenues. New unit sales revenue increased ~~$10.1~~$5.0 million, or ~~111.0%~~16.6% and rental unit sales revenue increased ~~$2.7~~$6.5 million, or ~~45.8%~~45.5%. ~~The increase year-over-year~~Increases in new unit sales ~~was primarily driven by a single large sale project. Increases in~~and rental unit sales ~~was~~were primarily a result of the ModSpace acquisition and our larger post-acquisition sales team and fleet size.

On a ~~pro-forma~~pro forma basis, including results of ~~the~~ WillScot ~~Acton, Tyson,~~ and ModSpace for all periods presented, ~~pricing improvement continued~~total revenues decreased $8.2 million, or 1.1%, year-over-year for the nine months ended September 30, 2019. This decline was driven by reduced new sales, which declined $40.3 million, or 53.4% driven primarily by one large new sale recognized in the third quarter of 2018 in

the amount of $26.3 million, and decreased rental unit sales, which declined $10.0 million, or 32.4%. The declines in sales volumes were partially offset by increases in our core modular leasing revenues, which increased $44.3 million, or 9.6%, driven primarily by continued pricing improvement, with increases in ~~pro-forma~~pro forma average modular space monthly rental rates of ~~$65,~~$77, or ~~13.4%~~14.6%, year over year for the ~~three~~nine months ended September 30, ~~2018.~~2019. Modular space units on rent ~~increased 0.1%~~decreased 3.9% on a ~~pro-forma~~pro forma basis to ~~86,953~~83,285 and ~~pro-forma~~pro forma utilization for our modular space units ~~increased~~decreased to ~~74.9%~~74.3%, ~~up 320~~down 40 bps from ~~71.8%~~74.7% for the ~~three~~nine months ended September 30, ~~2017.~~2018.

Gross Profit: Gross profit increased ~~$35.2~~$114.9 million, or ~~93.1%~~67.8%, to ~~$73.0~~$284.4 million for the ~~three~~nine months ended September 30, ~~2018~~2019 from ~~$37.8 million~~$169.5 million for the ~~three~~nine months ended September 30, ~~2017.~~2018. The increase in gross profit was driven by higher modular leasing and service revenues driven both by organic growth and through the ~~Acton, Tyson~~ModSpace acquisition, as well as due to increased modular space delivery and ~~ModSpace acquisitions.~~installation margins. The increase in gross profit from modular leasing and ~~sales~~service revenues was partially offset by ~~an $16.0~~a $42.4 million increase in depreciation of rental equipment primarily related to units acquired ~~units~~ in the ~~Acton, Tyson, and~~ ModSpace ~~acquisitions~~acquisition for the ~~three~~nine months ended September 30, ~~2018.~~2019, as well as continued capital investment in our existing rental equipment.

Adjusted EBITDA:Adjusted EBITDA increased ~~$29.2~~$109.5 million, or ~~100.0%~~84.8%, to ~~$58.4~~$238.6 million for the ~~three~~nine months ended September 30, ~~2018~~2019 from ~~$29.2~~$129.1 million for the ~~three~~nine months ended September 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 and other items, of ~~$15.5~~$45.9 million. Discrete and other items within SG&A decreased for the nine months ended September 30, 2019, compared to the nine months ended September 30, 2018, by $4.1 million as decreases in transaction costs related to the ModSpace, Acton, and Tyson acquisitions of ~~which $2.4~~$14.6 million ~~represents public company~~were partially offset by increases in integration cost of $5.8 million, an increase in stock compensation expense of $2.8 million, and a $2.0 million increase in other costs. Increases in SG&A, excluding discrete items, primarily relate to increased employee costs ~~including outside professional fees. The majority~~of $21.5 million driven by the increased size of the ~~remaining increase was driven by increased headcount, occupancy, and other SG&A~~workforce, net of realized employee cost ~~increases~~synergies savings to date achieved as a result of the restructuring activities; and increased occupancy costs of $6.4 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 75% of redundant real estate locations. The remaining increases of $18.0 million are primarily related to increased professional fees, insurance, computer, travel, office costs, bad debt and other expenses related to operating a larger ~~operation~~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 ~~$18.9~~$48.6 million, or ~~78.4%~~46.5%, to ~~$43.0~~$153.1 million for the ~~three~~nine months ended September 30, ~~2018~~2019 from ~~$24.1~~$104.5 million for the ~~three~~nine months ended September 30, ~~2017.~~2018. Net capital expenditures for rental equipment also increased ~~$16.2~~$46.0 million, or ~~89.0%~~54.4%, to ~~$34.4~~$130.5 million. The increases for both were driven by increased spend for refurbishments ~~new fleet,~~ and VAPS to drive revenue growth and for maintenance of a larger fleet following our ~~Acton, Tyson, and ModSpace~~recent acquisitions.

Modular - Other North America Segment

Revenue: Total revenue increased ~~$8.6~~$25.9 million, or ~~67.7%~~52.3%, to ~~$21.3~~$75.4 million for the ~~three~~nine months ended September 30, ~~2018~~2019 from ~~$12.7~~$49.5 million for the ~~three~~nine months ended September 30, ~~2017.~~2018. Modular leasing revenue increased ~~$4.8~~$17.0 million, or ~~53.9%~~51.2%, driven by improved ~~pricing~~volumes and ~~volumes~~pricing in the quarter. Average ~~modular space monthly rental rates increased 9.5% and average~~ modular space units on rent increased by ~~2,154~~2,870 units, or ~~40.8%~~46.7%, for the period, ~~resulting in a higher~~and average modular space ~~utilization which~~monthly rental rates increased 4.2%. Improved volumes were driven by ~~320 bps. Improved~~units acquired as part of the ModSpace acquisition and improved pricing was driven ~~by a combination of our price optimization tools and processes, as well as by~~primarily through continued growth in our “Ready to Work” solutions and increased VAPS penetration across ~~our~~the combined post-acquisition customer ~~base, further lifted by the average modular space monthly rental rates on acquired ModSpace units in Canada. Improved volumes were driven by units acquired as part of the ModSpace acquisition.~~base. Modular delivery and installation revenues increased ~~$2.4~~$2.1 million, or ~~96.0%, new~~18.6%. New unit sales ~~revenue increased $1.2~~were $2.9 million ~~or 240.0%~~and $3.4 million, and rental unit sales revenue ~~increased $0.2~~was $8.9 million ~~or 25.0%, all of which were~~and $1.6 million for the nine months ended September 30, 2019 and 2018, respectively. The increase in modular delivery and installation revenues was primarily driven by the ModSpace ~~acquisition.~~acquisition and our larger post-acquisition sales team and fleet size. The increase in rental unit sales revenue was primarily driven by several large rental unit sale projects in the first half of 2019.

On a ~~pro-forma~~pro forma basis, including results of ~~the~~ WillScot and ModSpace for all periods presented, ~~pricing improvement continued~~total revenues decreased $5.1 million, or 6.3%, year-over-year for the nine months ended September 30, 2019. This decline was driven by reduced modular delivery and installation revenues and reduced new unit sales, which declined $6.3 million, or 32.0%, and $2.3 million, or 44.2%, respectively. The decline in modular delivery and installation revenues was driven by several large projects that began or were completed during the ~~third quarter,~~prior year and resulted in large delivery and installation revenues. These declines were partially offset by increases in rental unit sales of $3.3 million, or 58.9%. Core modular leasing revenues increased $0.3 million, or 0.6%, with increases in ~~pro-forma~~pro forma average modular space monthly rental rates of ~~$5,~~$22, or ~~0.9%~~3.9%, for the ~~three~~nine months ended September 30, ~~2018. Modular~~2019, being partially offset by a decrease in modular space units on rent ~~decreased 3.6%~~of 2.3% on a ~~pro-forma~~pro forma basis ~~however,~~ to ~~9,607 and pro-forma~~9,014. Pro forma utilization for our modular space units decreased to ~~56.8%~~56.2%, down ~~110~~40 bps from ~~57.9%~~56.6%, for the ~~three~~nine months ended September 30, ~~2017.~~ 2018.

Gross Profit: Gross profit increased ~~$4.2~~$10.6 million, or ~~113.5%~~62.4%, to ~~$7.9~~$27.6 million for the ~~three~~nine months ended September 30, ~~2018~~2019 from ~~$3.7 million~~$17.0 for the ~~three~~nine months ended September 30, ~~2017.~~2018. The effects of favorable foreign currency movements increased gross profit by less than $0.2 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. Higher modular volumes~~revenues and ~~pricing were complemented by~~margins as a result of higher modular ~~delivery~~space 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 depreciation of rental equipment of ~~$0.5~~$3.7 million for ~~three~~nine months ended September 30, ~~2018.~~2019.

Adjusted EBITDA: Adjusted EBITDA increased ~~$3.2~~$10.1 million, or ~~106.7%~~78.3%, to ~~$6.2~~$23.0 million for the ~~three~~nine months ended September 30, ~~2018~~2019 from ~~$3.0~~$12.9 million for the ~~three~~nine months ended September 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 and increased rental unit sales gross profit, partially offset by increased SG&A, excluding discrete items, of ~~$1.7~~$4.2 million, also driven by the ModSpace ~~acquisition.~~acquisition, consisting primarily of increased employee costs of $1.8 million and increased occupancy costs of $1.8 million.

Capital Expenditures for Rental Equipment: Capital expenditures for rental equipment increased ~~$2.3~~$0.8 million, or ~~164.3%~~11.4%, to ~~$3.7~~$7.8 million for the ~~three~~nine months ended September 30, ~~2018~~2019 from ~~$1.4~~$7.0 million for the ~~three~~nine months ended September 30, ~~2017. Net capital expenditures also increased $2.1 million, or 350.0%, to $2.7 million.~~2018. The ~~increases for both were~~increase was driven by increased spend for ~~refurbishments,~~ new fleet and VAPS to drive revenue growth and for maintenance of a larger fleet following the ModSpace ~~acquisitions.~~

~~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 $2.8 million for the three months ended September 30, 2017, compared to no costs for the three months ended September 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 Nine Months Ended September 30, 2018 and 2017~~

Nine Months Ended September 30, 2018
(in thousands, except for units on rent and rates) Modular - US Modular - Other North America Total
Revenue $ 444,525 $ 49,483 $ 494,008
Gross profit $ 169,556 $ 16,951 $ 186,507
Adjusted EBITDA $ 129,170 $ 12,856 $ 142,026
Capital expenditures for rental equipment $ 104,462 $ 7,043 $ 111,505
Modular space units on rent (average during the period) 54,592 6,144 60,736
Average modular space utilization rate 71.9 % 57.1 % 70.1 %
Average modular space monthly rental rate $ 553 $ 568 $ 555
Portable storage units on rent (average during the period) 13,964 379 14,343
Average portable storage utilization rate 68.6 % 56.5 % 68.3 %
Average portable storage monthly rental rate $ 124 $ 111 $ 123

Nine Months Ended September 30, 2017
(in thousands, except for units on rent and rates) Modular - US Modular - Other North America Corporate & Other Total
Revenue $ 289,302 $ 36,792 $ (534) $ 325,560
Gross profit $ 107,535 $ 11,779 $ (524) $ 118,790
Adjusted EBITDA $ 79,189 $ 8,586 $ (10,197) $ 77,578
Capital expenditures for rental equipment $ 72,105 $ 3,705 $ — $ 75,810
Modular space units on rent (average during the period) 35,679 5,010 — 40,689
Average modular space utilization rate 73.6 % 51.1 % — % 69.8 %
Average modular space monthly rental rate $ 530 $ 532 $ — $ 530
Portable storage units on rent (average during the period) 12,238 352 — 12,590
Average portable storage utilization rate 72.2 % 52.1 % — % 71.4 %
Average portable storage monthly rental rate $ 114 $ 117 $ — $ 114

~~Modular - US Segment~~

~~Revenue:~~ ~~Total revenue increased $155.2~~acquisition. Net capital expenditures decreased $6.5 million, or ~~53.6%~~120.4%, to ~~$444.5~~negative $1.1 million ~~for~~during the nine months ended September 30, 2018 from $289.3 million for the nine months ended September 30, 2017. Modular leasing revenue increased $114.2 million, or 59.3%, driven by improved pricing and volumes. Average modular space monthly rental rates increased 4.3% for the nine months ended September 30, 2018, and average modular space units on rent increased 18,913 units, or 53.0%. 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, Tyson, and ModSpace acquisitions and organic unit on rent growth, as well as increased modular delivery and installation revenues on the combined rental fleet of 54.0%. The increases in leasing and services revenue were further complemented by increases in sales revenues. New unit sales revenue increased $8.6 million, or 39.8% and rental unit sales revenue decreased slightly by $0.3 million, or 2.1%. The increase year-over-year in new sales was primarily driven by a single large sale project in the third quarter.

On a pro-forma basis, including results of the WillScot, Acton, Tyson, and ModSpace for all periods presented, pricing improvement continued in the third quarter, with increases in pro-forma average modular space monthly rental rates of $56, or 11.9% for the nine months ended September 30, 2018. Modular space units on rent increased 787 units, or 0.9% on a pro-forma basis to 85,867 and pro-forma utilization for our modular space units increased to 74.7%, up 380 bps from 70.9% for the nine months ended September 30, 2018.

~~Gross Profit:~~ Gross profit increased $62.0 million, or 57.7%, to $169.5 million for the nine months ended September 30, 2018 from $107.5 million for the nine months ended September 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, Tyson, and ModSpace acquisitions. The increases in gross profit from modular leasing and service revenues were partially offset by a $28.6 million increase in depreciation of rental equipment for the nine months ended September 30, 20182019, as a result of ~~continued capital investment in our fleet, including additional depreciation related to the Acton, Tyson, and ModSpace acquisitions.~~

~~Adjusted EBITDA:~~ ~~Adjusted EBITDA~~ increased $49.9 million, or 63.0%, to $129.1 million for the nine months ended September 30, 2018 from $79.2 million for the nine months ended September 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 million for the nine months ended September 30, 2018. These increases were partially offset by increases in SG&A, excluding discrete items, of $24.7 million, of which $8.6 million represents public company costs including outside professional fees. The majority of the remaining increase was driven by increased headcount, occupancy, and other SG&A cost increases as a result of operating a larger operation as a result of our recent acquisitions and our expanded employee base and branch network.

~~Capital Expenditures for Rental Equipment:~~ Capital expenditures increased $32.4 million, or 44.9%, to $104.5 million for the nine months ended September 30, 2018 from $72.1 million for the nine months ended September 30, 2017. Net capital expenditures increased $27.0 million, or 47.0%, to $84.5 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 maintenance of a larger fleet following our recent acquisitions.

~~Modular - Other North America Segment~~

~~Revenue:~~ Total revenue increased $12.8 million, or 34.8%, to $49.6 million for the nine months ended September 30, 2018 from $36.8 million for the nine months ended September 30, 2017. Modular leasing revenue increased $8.2 million, or 32.7%, driven by improved pricing and volumes. Average modular space monthly rental rates increased 6.8% and average modular space units on rent increased by 1,134 units, or 22.6% for the period driven by organic unit on rent growth as well as due to the ModSpace acquisition in the third quarter. Both of these resulted in a higher modular space utilization which increased by 600 bps. Modular delivery and installation revenues increased $5.2 million, or 85.2%, due primarily to a large camp installation during the second quarter and due to increased deliveries and returns as a result of the ModSpace acquisition. New unit sales revenue increased $0.5 million, or 17.2% and rental unit sales ~~revenue decreased $1.1 million, or 40.7% associated with decreased sale opportunities.~~

On a pro-forma basis, including results of the WillScot and ModSpace for all periods presented, pricing improvement continued, with increases in pro-forma average modular space monthly rental rates of $4, or 0.7% for the nine months ended September 30, 2018, however, pro-forma average modular space units on rent decreased 151 units, or 1.6%. Pro-forma utilization for our modular space units was essentially flat in the period ~~at 56.6%.~~

~~Gross Profit:~~ Gross profit increased $5.2 million, or 44.1%, to $17.0 million for the nine months ended September 30, 2018 from $11.8 million for the nine months ended September 30, 2017.The effects of favorable foreign currency movements increased gross profit by $0.5million 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 rental unit sales as well as increased depreciation of rental equipment of $1.0 million, or 10.9%.

~~Adjusted EBITDA:~~ Adjusted EBITDA increased $4.3 million, or 50.0%, to $12.9 million for the nine months ended September 30, 2018 from $8.6 million for the nine months ended September 30, 2017. This increase was driven by improved leasing and services gross profit, partially offset by increased SG&A of $2.2 million, or 17.7%.

~~Capital Expenditures for Rental Equipment:~~ ~~Capital expenditures increased $3.3 million, or 89.2%, to $7.0 million for the nine months ended September 30, 2018 from $3.7 million for the nine months ended September 30, 2017. Net~~that exceeded capital expenditures ~~increased $4.4 million to $5.4 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.~~

~~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 $10.2 million for the nine months ended September 30, 2017, compared to no costs for the nine months ended September 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.equipment.

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~~income (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),~~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 losses (gains) ~~losses,~~, net: on monetary assets and liabilities denominated in foreign currencies other than the subsidiaries’ functional currency. Substantially all such currency ~~gains (losses)~~losses (gains) 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, including outside professional fees, fleet relocation expenses, employee training costs and other costs.

•Non-cash charges for stock compensation plans.

•Other expense includes consulting expenses related to certain one-time projects, financing costs not classified as interest expense and gains and losses on disposals of property, plant and equipment.

Adjusted EBITDA has limitations as an analytical tool, and you should not consider the measure in isolation or as a substitute for net income (loss), cash flow from operations or other methods of analyzing WillScot’s results as reported under 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 income (loss) to Adjusted EBITDA:


		Three Months Ended September 30,						Nine Months Ended September 30,							Three Months Ended September 30,				Nine Months Ended September 30,
(in thousands)	(in thousands)	2018		2017		2018		2017		(in thousands)	2019		2018		2019		2018
Net loss		$	(36,729)	$	(8,357)	$	(43,185)	$	(24,432)
Income from discontinued operations, net of tax		—		5,078		—		11,123
Loss from continuing operations		(36,729)		(13,435)		(43,185)		(35,555)
Net income (loss)										Net income (loss)	$	762	$	(36,729)	$	(22,174)	$	(43,185)
Income tax benefit	Income tax benefit	(6,507)		(7,632)		(13,572)		(17,770)		Income tax benefit	(1,220)		(6,507)		(2,022)		(13,572)
Loss from continuing operations before income tax		(43,236)		(21,067)		(56,757)		(53,325)
Interest expense, net (a)		43,447		26,447		67,321		74,922
Loss on extinguishment of debt										Loss on extinguishment of debt	—		—		7,244		—
Interest expense										Interest expense	30,857		43,447		95,353		67,321
Depreciation and amortization	Depreciation and amortization	39,254		20,914		90,575		58,939		Depreciation and amortization	47,576		39,254		138,818		90,575
Currency (gains) losses, net		(425)		(4,270)		1,171		(12,769)
Currency losses (gains), net										Currency losses (gains), net	234		(425)		(436)		1,171
Goodwill and other impairments										Goodwill and other impairments	—		—		5,076		—
Restructuring costs	Restructuring costs	6,137		1,156		7,214		2,124		Restructuring costs	1,980		6,137		9,083		7,214
Transaction costs	Transaction costs	10,672		5,233		14,790		6,095		Transaction costs	—		10,672		—		14,790
Integration costs	Integration costs	7,453		—		14,868		—		Integration costs	5,483		7,453		23,863		14,868
Stock compensation expense	Stock compensation expense	1,050		—		2,225		—		Stock compensation expense	1,813		1,050		5,003		2,225
Other expense	Other expense	266		972		619		1,592		Other expense	892		266		1,804		619
Adjusted EBITDA	Adjusted EBITDA	$	64,618	$	29,385	$	142,026	$	77,578	Adjusted EBITDA	$	88,377	$	64,618	$	261,612	$	142,026

(a) Interest expense for the three and nine months ended September 30, 2018 includes $20.5 million of bridge financing fees and commitment fees related to the ModSpace acquisition.

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 measurement~~measurements 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 September 30, Nine Months Ended September 30,
(in thousands) 2018 2017 2018 2017
Gross profit $ 80,946 $ 41,269 $ 186,507 $ 118,790
Depreciation of rental equipment 35,534 19,009 82,849 53,203
Adjusted Gross Profit $ 116,480 $ 60,278 $ 269,356 $ 171,993


	Three Months Ended September 30,									Nine Months Ended September 30,
(in thousands)	2019			2018			2019			2018
Revenue (A)	$	272,340		$	218,924		$	793,473		$	494,008

Gross profit (B)	$	103,426		$	80,946		$	311,976		$	186,507
Depreciation of rental equipment	43,869			35,534			128,940			82,849
Adjusted Gross Profit (C)	$	147,295		$	116,480		$	440,916		$	269,356

Gross Profit Percentage (B/A)	38.0		%	37.0		%	39.3		%	37.8		%
Adjusted Gross Profit Percentage (C/A)	54.1		%	53.2		%	55.6		%	54.5		%

Net ~~Capex~~CAPEX 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 Expenditures~~CAPEX 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.

4946

The following table provides an unaudited reconciliation of purchase of rental equipment to Net ~~Capital Expenditures~~CAPEX for Rental ~~Equipment:~~Equipment and to Net CAPEX:

Three Months Ended September 30, Nine Months Ended September 30,
(in thousands) 2018 2017 2018 2017
Total purchase of rental equipment and refurbishments $ (46,742) $ (28,053) $ (111,505) $ (82,276)
Total purchases of rental equipment from discontinued operations — (2,545) — (6,466)
Total purchases of rental equipment from continuing operations $ (46,742) $ (25,508) $ (111,505) $ (75,810)
Total proceeds from sale of rental equipment $ 9,560 8,128 $ 21,593 $ 18,750
Total proceeds from sale of rental equipment from discontinued operations — (1,522) — (1,522)
Total proceeds from sale of rental equipment from continuing operations $ 9,560 $ 6,606 $ 21,593 $ 17,228
Net Capital Expenditures for Rental Equipment $ (37,182) $ (18,902) $ (89,912) $ (58,582)

~~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 nine months ended September 30, 2018 and 2017:~~

Three Months Ended September 30, 2018
(in thousands) Modular - US Modular - Other North America Corporate & Other Consolidated
Net (loss) income $ (44,519) $ 1,283 $ 6,507 $ (36,729)
Income from discontinued operations, net of tax — — — —
(Loss) income from continuing operations (44,519) 1,283 6,507 (36,729)
Income tax benefit^(a)
— — (6,507) (6,507)
(Loss) income from continuing operations before income tax (44,519) 1,283 — (43,236)
Interest expense, net 42,831 616 — 43,447
Operating (loss) income (1,688) 1,899 — 211
Depreciation and amortization 35,105 4,149 — 39,254
EBITDA 33,417 6,048 — 39,465
Currency gains, net (112) (313) — (425)
Restructuring costs 5,895 242 — 6,137
Transaction costs 10,490 182 — 10,672
Integration costs 7,443 10 — 7,453
Stock compensation expense 1,050 — — 1,050
Other expense (income) 271 (5) — 266
Adjusted EBITDA 58,454 6,164 — 64,618
Less:
Rental unit sales 8,595 972 — 9,567
Rental unit cost of sales 5,025 725 — 5,750
Gross profit on rental unit sales 3,570 247 — 3,817
Gain on insurance proceeds — — — —
Less:
Total capital expenditures 44,412 3,804 — 48,216
Proceeds from rental unit sales 8,588 972 — 9,560
Net Capital Expenditures 35,824 2,832 — 38,656
Adjusted EBITDA less Net CAPEX $ 19,060 $ 3,085 $ — $ 22,145

Three Months Ended September 30, 2017
(in thousands) Modular - US Modular - Other North America Corporate & Other Consolidated
Net loss $ (1,070) $ (1,684) $ (5,603) $ (8,357)
Income from discontinued operations, net of tax^(b)
— — 5,078 5,078
Loss from continuing operations (1,070) (1,684) (10,681) (13,435)
Income tax benefit^(a)
— — (7,632) (7,632)
Loss from continuing operations before income tax (1,070) (1,684) (18,313) (21,067)
Interest expense, net 16,790 1,134 8,523 26,447
Operating income (loss) 15,720 (550) (9,790) 5,380
Depreciation and amortization 16,974 3,597 343 20,914
EBITDA 32,694 3,047 (9,447) 26,294
Currency gains, net (3,834) (104) (332) (4,270)
Restructuring costs 247 17 892 1,156
Transaction costs 69 — 5,164 5,233
Other expense 1 1 970 972
Adjusted EBITDA 29,177 2,961 (2,753) 29,385
Less:
Rental unit sales 5,922 765 (81) 6,606
Rental unit cost of sales 3,204 580 — 3,784
Gross profit (loss) on rental unit sales 2,718 185 (81) 2,822
Less:
Total capital expenditures^(b)
24,896 1,437 2,643 28,976
Total capital expenditures from discontinued operations — — (2,643) (2,643)
Total capital expenditures from continuing operations 24,896 1,437 — 26,333
Proceeds from rental unit sales 5,922 765 1,441 8,128
Proceeds from rental unit sales from discontinued operations — — 1,522 1,522
Proceeds from rental unit sales from continuing operations 5,922 765 (81) 6,606
Net Capital Expenditures 18,974 672 81 19,727
Adjusted EBITDA less Net CAPEX $ 7,485 $ 2,104 $ (2,753) $ 6,836

Nine Months Ended September 30, 2018
(in thousands) Modular - US Modular - Other North America Corporate & Other Consolidated
Net (loss) income $ (55,360) $ (1,397) $ 13,572 $ (43,185)
Income from discontinued operations, net of tax — — — —
(Loss) income from continuing operations (55,360) (1,397) 13,572 (43,185)
Income tax benefit^(a)
— — (13,572) (13,572)
Loss from continuing operations before income tax (55,360) (1,397) — (56,757)
Interest expense, net 65,654 1,667 — 67,321
Operating income 10,294 270 — 10,564
Depreciation and amortization 79,568 11,007 — 90,575
EBITDA 89,862 11,277 — 101,139
Currency losses, net 159 1,012 — 1,171
Restructuring costs 6,962 252 — 7,214
Transaction costs 14,539 251 — 14,790
Integration costs 14,858 10 — 14,868
Stock compensation expense 2,225 — — 2,225
Other expense 565 54 — 619
Adjusted EBITDA 129,170 12,856 — 142,026
Less:
Rental unit sales 14,258 1,555 — 15,813
Rental unit cost of sales 8,218 1,110 — 9,328
Gross profit on rental unit sales 6,040 445 — 6,485
Gain on insurance proceeds 4,765 — — 4,765
Less:
Total capital expenditures 107,359 7,236 — 114,595
Proceeds from rental unit sales 20,038 1,555 — 21,593
Net Capital Expenditures 87,321 5,681 — 93,002
Adjusted EBITDA less Net CAPEX $ 31,044 $ 6,730 $ — $ 37,774

Nine Months Ended September 30, 2017
(in thousands) Modular - US Modular - Other North America Corporate & Other Consolidated
Net loss $ (6,280) $ (4,142) $ (14,010) $ (24,432)
Income from discontinued operations, net of tax^(b)
— — 11,123 11,123
Loss from continuing operations (6,280) (4,142) (25,133) (35,555)
Income tax benefit^(a)
— — (17,770) (17,770)
Loss from continuing operations before income tax (6,280) (4,142) (42,903) (53,325)
Interest expense, net 48,302 3,350 23,270 74,922
Operating income (loss) 42,022 (792) (19,633) 21,597
Depreciation and amortization 47,967 9,928 1,044 58,939
EBITDA 89,989 9,136 (18,589) 80,536
Currency gains, net (11,233) (585) (951) (12,769)
Restructuring costs 247 17 1,860 2,124
Transaction costs 115 — 5,980 6,095
Other expense 71 18 1,503 1,592
Adjusted EBITDA 79,189 8,586 (10,197) 77,578
Less:
Rental unit sales 14,634 2,675 (81) 17,228
Rental unit cost of sales 8,240 1,827 — 10,067
Gross profit on rental unit sales 6,394 848 (81) 7,161
Less:
Total capital expenditures^(b)
74,498 3,860 6,856 85,214
Total capital expenditures from discontinued operations — — (6,855) (6,855)
Total capital expenditures from continuing operations 74,498 3,860 1 78,359
Proceeds from rental unit sales 14,634 2,675 1,441 18,750
Proceeds from rental unit sales from discontinued operations — — 1,522 1,522
Proceeds from rental unit sales from continuing operations 14,634 2,675 (81) 17,228
Net Capital Expenditures 59,864 1,185 82 61,131
Adjusted EBITDA less Net CAPEX $ 12,931 $ 6,553 $ (10,198) $ 9,286
(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.


	Three Months Ended September 30,						Nine Months Ended September 30,
(in thousands)	2019		2018		2019		2018
Total purchases of rental equipment and refurbishments	$	(47,789)	$	(46,742)	$	(160,877)	$	(111,505)
Total proceeds from sale of rental equipment	8,421		9,560		31,504		21,593
Net CAPEX for Rental Equipment	(39,368)		(37,182)		(129,373)		(89,912)
Purchase of property, plant and equipment	(2,701)		(1,475)		(6,600)		(3,091)
Net CAPEX	$	(42,069)	$	(38,657)	$	(135,973)	$	(93,003)

Liquidity and Capital Resources

Overview

WillScot is a holding company that derives all of its operating cash flow from its operating subsidiaries. Our principal sources of liquidity include cash generated by operating activities from our subsidiaries, ~~credit facilities~~borrowings under the 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.~~requirements over the next twelve months.

Our consolidation strategy includes the pursuit of strategic acquisitions that we believe will add value to our existing business. We continue to review available acquisition opportunities with the awareness that any such acquisition may ~~from~~require us to incur additional debt to finance the acquisition and/or to issue shares of our Class A common stock or other equity securities as acquisition consideration or as part of an overall financing plan. From time to time we may also seek to ~~retire~~streamline our capital structure and improve our financial position through refinancing or ~~purchase~~restructuring our ~~warrants through~~existing debt or retiring certain of our securities for 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.~~consideration.

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.

In July and August 2018, the Company entered into three amendments ~~(the "ABL Amendments")~~ to the ABL Facility that, among other things, (i) permitted the ModSpace acquisition and the Company’s financing thereof, (ii) increased the ABL Facility limit to $1.425 billion in the aggregate, with an accordion feature allowing up to $1.8 billion of capacity, and (iii) increased certain thresholds, basket sizes ~~and~~and default and notice triggers to account for the Company’s increased scale following the ModSpace Acquisition.

Borrowings under the ABL Facility, at the Borrower’s option, bear interest at either an adjusted LIBOR or a base rate, in each case, plus an applicable margin. At inception of the ABL Facility until March 31, 2018, the applicable margin was fixed at 2.50% for LIBOR borrowings and 1.50% for base rate borrowings. Commencing on March 31, 2018, 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 to 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. At September 30, 2018, the weighted average interest rate for borrowings under the ABL Facility was 4.65%.

The ABL Facility requires the Borrowers to maintain a (i) minimum interest coverage ratio of 2.00:1.00 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.

At September 30, ~~2018,~~2019, the Borrowers had ~~$552.9~~$489.2 million of available borrowing capacity under the ABL Facility, including ~~$414.5~~$354.8 million under the US ABL Facility and ~~$138.4~~$134.4 million under the Canadian ABL Facility.

~~2022 Senior Secured Notes~~

On November, 29, 2017, WSII issued the 2022 Secured 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 2022 Secured Notes is payable semi-annually on June 15 and December 15 beginning June 15, 2018.

~~2023 Senior Secured Notes~~

On August 6, 2018, a special purpose subsidiary of WSII completed a private offering of $300.0 million in aggregate principal amount of its 6.875% senior secured notes due August 15, 2023. The issuer entered into an indenture dated August 6, 2018 with Deutsche Bank Trust Company Americas, as trustee, which governs the terms of the 2023 Secured Notes. In connection with the ModSpace acquisition, the issuer merged with and into WSII and WSII assumed the 2023 Secured Notes. Interest is payable semi-annually on February 15 and August 15 of each year, beginning February 15, 2019. The net proceeds were used to fund the ModSpace acquisition.

~~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 (the “Unsecured Notes Indenture”), 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 bear interest at a rate of 10% per annum if paid in cash (or if paid in kind, 11.5% per annum) for any interest period ending on or before February 15, 2021, and thereafter are payable solely in cash at an increased rate per annum of 12.5%. Interest is payable semi-annually on February 15 and August 15 of each year, beginning February 15, 2019. The net proceeds were used to fund the ModSpace acquisition.

Cash Flow Comparison of the Nine Months Ended September 30, ~~2018~~2019 and ~~2017~~ 2018

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 ~~flows~~and cash equivalents for the periods ~~presented on an actual currency basis:~~presented:

Nine Months Ended September 30,
(in thousands) 2018 2017
Net cash from operating activities $ 15,580 $ 46,901
Net cash from investing activities (1,176,468) (134,235)
Net cash from financing activities 1,161,406 91,677
Effect of exchange rate changes on cash and cash equivalents 68 311
Net change in cash and cash equivalents $ 586 $ 4,654

The cash flow data for the nine months ended September 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 condensed consolidated financial statements.


	Nine Months Ended September 30,
(in thousands)	2019		2018
Net cash from operating activities	$	99,076	$	15,580
Net cash from investing activities	(122,774)		(1,176,468)
Net cash from financing activities	18,627		1,161,406
Effect of exchange rate changes on cash and cash equivalents	64		68
Net change in cash and cash equivalents	$	(5,007)	$	586

Cash Flows from Operating Activities

Cash ~~provided~~provided by operating activities for the nine months ended September 30, ~~2018~~2019 was ~~$15.6~~$99.1 million as compared to ~~$46.9~~$15.6 million for the nine months ended September 30, ~~2017,~~2018, an increase of $83.5 million. The increase was primarily due to an increase of $108.9 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 nine months of 2019, but is only included for a month and a half in 2018. The increase in net income, adjusted for non-cash items, was partially offset by a decrease of ~~$31.3 million.~~$25.4 million in the net movements of the operating assets and liabilities. The ~~reduction~~decrease related to the operating assets and liabilities was attributable to an increase in accounts receivable and an increase in cash ~~provided~~interest payments in the

first nine months of 2019, partially offset by ~~operating activities was predominantly due to higher use of cash to pay down~~an 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 nine months ended September 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 ~~flows~~Flows from ~~investing activities~~Investing Activities

Cash used in investing activities for the nine months ended September 30, ~~2018 was $1,176.5~~2019 was $122.8 million as compared to ~~$134.2~~$1,176.5 million for the nine months ended September 30, ~~2017, an increase~~2018, a decrease of ~~$1,042.3~~$1,053.7 million. The ~~increase~~decrease in cash used in investing activities was principally the result of the acquisitions of Tyson and ModSpace for cash consideration of $24.0 million and $1,060.1 million during 2018. Additionally, cash used for rental equipment expenditures increased $29.2 million driven ~~primarily by strategic investment in refurbishment of existing fleet, purchase of VAPS, and new fleet purchases to maintain and grow units on rent. The increase in cash used was partially offset~~ by a ~~$69.9~~$1,084.1 million decrease in cash used for business acquisitions, a $9.9 million increase in ~~lending~~proceeds from the sale of rental equipment, and a $12.5 million increase in proceeds from the sale of property, plant, and equipment. The decrease in cash used in business acquisitions was due to ~~affiliates. In~~the acquisition of Acton and ModSpace in the first nine months of 2018 ~~we did not engage in any lending activities~~with no business acquisitions during the same period of 2019. Proceeds from the sale of rental equipment increased due to increased sales volume as a result of the ~~notes due~~acquisition of ModSpace. Proceeds from ~~affiliates were settled~~the sale of property, plant and equipment increased primarily as a result of the sale of seven held for sale properties during the nine months ended September 30, 2019, as part of the ~~Business Combination.~~ongoing integration and consolidation process following the acquisition of ModSpace.

The overall decrease in cash used in investing activities was partially offset by an increase in capital expenditures of $52.9 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.

Cash ~~flows~~Flows from ~~financing activities~~Financing Activities

Cash provided by financing activities for the nine months ended September 30, 2019 was $18.6 million as compared to $1,161.4 million for the nine months ended September 30, 2018, ~~was $1,161.4 million as compared to $91.7 million for the nine months ended September 30, 2017, an increase~~a decrease of ~~$1,069.7~~$1,142.8 million. The ~~increase~~decrease is primarily ~~driven by the increased~~due to a reduction in borrowings, net of ~~$300.0 million, $200.0~~repayments of $1,020.1 million, and ~~$579.1~~a decrease in receipts from the issuance of common stock of $147.0 million primarily related to the financing of the ModSpace acquisition. In connection with the ModSpace acquisition, in the third quarter of 2018, we borrowed an aggregate of $1,079.1 million related to the issuance of the 2023 Secured Notes ~~the issuance of~~and the Unsecured Notes, and ~~additional borrowings on~~through the up-sized ABL ~~Facility to finance the acquisition of ModSpace in the third quarter of 2018.~~Facility. We also received proceeds from the issuance of the Company's Class A common stock of $147.2 ~~million during the third quarter of 2018.~~ million.

The ~~increase~~decrease in cash provided by financing activities was partially offset by ~~$75.0 million~~a decrease in ~~borrowings from notes~~financing fees payments of $32.2 million due to ~~affiliates~~the ModSpace financing activities in 2018.

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 ~~$24.2~~reconciliation of net cash provided by operating activities to Free Cash Flow. Free Cash Flows for the three months ended September 30, 2019 and 2018, are derived by subtracting the cash flows from operating activities and the relevant line items within financing activities for the six months ended June 30, 2019 and 2018, from corresponding items for the nine months ended September 30, 2019 and 2018, respectively.


	Three Months Ended September 30,						Nine Months Ended September 30,
(in thousands)	2019		2018		2019		2018
Net cash provided by operating activities	$	39,022	$	(3,220)	$	99,076	$	15,580
Purchase of rental equipment and refurbishments	(47,789)		(46,742)		(160,877)		(111,505)
Proceeds from sale of rental equipment	8,421		9,560		31,504		21,593
Purchase of property, plant and equipment	(2,701)		(1,475)		(6,600)		(3,091)
Proceeds from the sale of property, plant and equipment	4,308		—		13,199		681
Free Cash Flow	$	1,261	$	(41,877)	$	(23,698)	$	(76,742)

Free Cash Flow for the nine months ended September 30, 2019 was an outflow of $23.7 million as compared to an outflow of $76.7 million for the nine months ended September 30, 2018, an increase in Free Cash Flow of $53.0 million. Free Cash Flow increased year over year principally driven by increases in Adjusted EBITDA of $119.6 million, or 84.2%, for the ~~payment~~nine months ended September 30, 2019 and an increase of ~~financing costs. The notes due~~$12.5 million in proceeds from ~~affiliates were settled in connection with~~ the ~~Business Combination~~sale of property, plant, and equipment as a result of the sale of surplus real estate in the ~~fourth quarter~~period. These increases were partially offset by an increase in integration, restructuring, and transaction costs incurred of ~~2017~~$3.9 million primarily related to the ModSpace integration, increased interest paid during the period of $66.2 million due to increased debt on the US ABL Facility and ~~were driven by~~as a ~~centralized cash management strategy utilized by the Algeco Group. Payments~~result of ~~financing costs increased in connection with~~ the issuance of the 2023 Secured Notes and the Unsecured Notes which only impacted 1.5 months of the ~~amendments to~~nine months ended September 30, 2018, and a Net CAPEX increase of $43.0 million as a result of the ~~ABL Facility,~~increased fleet size and ~~the issuance~~our investment in refurbishments of ~~common stock.~~rental equipment and VAPS.

Contractual Obligations

~~Since~~Other than changes which occur in the ~~issuance~~normal course of ~~our 2017 Form 10-K, our~~business, there were no significant changes to the contractual obligations ~~increased significantly~~reported in our 2018 Form 10-K for the three and nine months ended September 30, 2018. Our contractual obligations have increased in conjunction with the financing transactions related to the ModSpace acquisition. In addition to the existing debt at the acquisition date, the Company incurred $300.0 million of debt for the 2023 Secured Notes, $200.0 million of debt for the Unsecured Notes, and an increase in the ABL balance o~~f $579.1 million as of the date of the ModSpace acquisition, August 15, 2018.~~2019.

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 nine months ended September 30, 2018, we have provided an additional disclosure on~~

~~our stock-based compensation policies as described in Note 12 of this Form 10-Q and regarding our goodwill policy and estimates below. For~~ a complete discussion of our significant critical accounting policies, see the “Critical Accounting Policies and Estimates” section ~~of the MD&A~~ in ~~our 2017 Form 10-K.~~

~~Goodwill~~

We perform our annual goodwill impairment test on October 1. In addition, we perform qualitative impairment tests during any reporting period in which events or changes in circumstances quantitatively indicate that impairment may have occurred. Management judgment is a significant factor in the goodwill impairment evaluation process. The computations require management to make estimates and assumptions. Actual values may differ significantly from these assumptions, particularly if there are significant adverse changes in the operating environmentPart II, Item 7 of our ~~reporting units.~~Annual Report on Form 10-K for the fiscal year ended December 31, 2018.

~~In assessing the fair value~~Other than adoption of reporting units, we consider the market approach, the income approach, or a combination of both. Under the market approach, the fair value of the reporting unit is based on quoted market prices of companies comparablerecent accounting standards as discussed in Note 1 to the ~~reporting unit being valued. While~~notes to our unaudited condensed consolidated financial statements, there were no significant changes to our critical accounting policies during the market prices are not an assumption, a presumption that they provide an indicator of the value of the reporting unit is inherent in the valuation. The initial determination of the comparable companies also involves a degree of judgment.

Under the income approach, the fair value of the reporting unit is based on the present value of estimated cash flows. The income approach relies on the timing and estimates of future cash flows, which are based on management’s estimates of economic and market conditions over the projected period, including growth rates in revenue, operating margins, capital expenditures and tax rates. The cash flows are based on our most recent business operating plans and various growth rates have been assumed for years beyond the current business plan period. The income approach also relies upon the selection of an appropriate discount rate, which is based on a weighted-average cost of capital analysis. The discount rate is affected by changes in short-term interest rates and long-term yield, as well as by variances in the typical capital structure of marketplace participants. Given current economic conditions, it is possible that the discount rate will fluctuate in the near term.

On August 15, 2018 the Company completed its acquisition of ModSpace. The Company has performed a preliminary allocation of assets acquired and liabilities assumed as well an allocation of net assets, including goodwill, amongst its reporting units. As of September 30, 2018 the Company has allocated $203.3 million and $32.5 million of goodwill to the US and Canadian reporting units, respectively. For the quarternine months ended September 30, 2018 the Company completed its interim review for impairment indicators for all reporting units, identifying no events or changes in circumstances that indicate an impairment may have occurred. The Company will perform its annual goodwill impairment test on October 1, 2018. While no indicators of impairment are currently present, due to Company’s historical impairment activity associated with its Canadian reporting unit, it is possible that the annual impairment test may indicate a need to write down the preliminary goodwill balance allocated to the Canadian reporting unit.2019.

Recently Issued Accounting Standards

Refer to Part I, Item 1, Note 1 of the notes to our financial statements included in this Quarterly Report on 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 ~~includes~~contains forward-looking statements within the meaning of the U.S. Private Securities Litigation Reform Act of 1995 and Section ~~27A~~21E 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 21E~~variations of ~~the Exchange Act. These~~these words and similar expressions identify forward-looking statements, which are generally not historical in nature and relate to expectations for future financial performance or business strategies or ~~expectations for~~objectives.

Forward-looking statements are subject to a number of risks, uncertainties, assumptions and other important factors, many of which are outside our control, which could cause actual results or outcomes to differ materially from those discussed in the ~~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~~periodic reports we file with the SEC from time to time (including our Annual Report on Form 10-K for the year ending December 31, 2018), which are available through the SEC’s EDGAR system at www.sec.gov and on our ~~operating results;~~website.

5749

~~• our inability to recognize or use deferred tax assets~~Any forward-looking statement speaks only at the date which it is made, and ~~tax loss carry forwards;~~

~~• our obligations under various laws~~WillScot undertakes no obligation, and ~~regulations;~~

~~• the effect of litigation, judgments, orders or regulatory proceedings on our business;~~

~~• unanticipated changes in our tax obligations;~~

•disclaims 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 ended December 31, 2017.~~

~~We undertake no~~ obligation, to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as ~~may be~~ required by law.

ITEM 3. Quantitative and Qualitative Disclosures about Market Risk

~~There have been no significant~~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 ~~market~~ABL Facility, which bears interest at variable rates based on LIBOR. We had $917.5 million in outstanding principal under the ABL Facility at September 30, 2019.

In order to manage this risk, ~~since December 31, 2017. For~~On 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 ~~discussion~~fixed rate of 3.06% per annum on the outstanding debt in exchange for receiving a variable interest rate based on 1-month LIBOR. The effect is a 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 ~~exposure~~interest rate swaps, would increase our quarter to ~~market risk, refer~~date interest expense by approximately $1.1 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 Report~~foreign subsidiaries in currencies other than their local currencies. These gains and losses are primarily driven by intercompany transactions and rental equipment purchases denominated in currencies other than the functional currency of the purchasing entity. These exposures are included in currency (gains) losses, net, on ~~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

Evaluation of Disclosure Controls and Procedures

~~We carried out an evaluation, under the supervision~~Our 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 ~~(as~~as defined in ~~Rules~~Rule 13a-15(e) ~~and 15d-15(e)~~ under the Exchange ~~Act)~~Act, as of September 30, ~~2018.~~2019. Based upon ~~their~~that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were ~~not~~ effective as of September 30, ~~2018, due to the existence of 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 third quarter ended September 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

As discussed in Note 2 to the condensed consolidated financial statements included in this quarterly report on Form 10-Q, the Company completed its acquisitions in December 2017, January 2018 and August 2018, respectively. During the first and second quarters of 2018, we transitioned all of the business processes of Tyson and Acton, respectively, 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. As permitted by interpretive guidance for newly acquired businesses issued by the SEC Staff, management has excluded the internal control over financial reporting of ModSpace from the evaluation of the Company's effectiveness of its disclosure controls and procedures as of September 30, 2018. Since the date of acquisition on August 15, 2018, ModSpace's financial results are included in the Company's condensed consolidated financial statements and constituted approximately $1.3 billion and $1.2 billion of total and net assets, respectively, as of September 30, 2018, and $65.5 million and $4.2 million of net revenues and net income, respectively, for the three months ended September 30, 2018. As part of our post-closing integration activities, we are engaged in the process of assessing the internal controls of ModSpace. The Company has begun to integrate policies, processes, people, technology and operations for the post-acquisition combined company, and it will continue to evaluate the impact of any related changes to internal control over financial reporting.

~~Other than the items discussed above, there~~There were no changes in our internal control over financial reporting that occurred during our quarter ended September 30, ~~2018~~2019, that materially affected or are reasonably likely to materially affect, our internal control over financial reporting.

5950

PART II

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 September 30, ~~2018,~~2019, there were 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

AsThe Company’s financial position, results of ~~September 30,~~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 other 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, ~~there~~which have ~~been no~~not materially changed other than as reflected below.

Trade policies and changes in trade policies, including the imposition of tariffs, their enforcement and downstream consequences, may have a material ~~updates~~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 able to pass such increased costs on to our ~~risk factors since those described in~~customers, and we may not be able to secure sources of certain products and materials that are not subject to tariffs on a timely basis. Although we actively monitor our ~~Risk Factor in~~procurement policies and practices to avoid undue reliance on foreign-sourced goods subject to tariffs, when practicable, such developments could have a material adverse impact on our ~~Form 10-Q for the period ended June 30, 2018 as filed with the SEC.~~business, financial condition and results of operations.

ITEM 2. Unregistered Sales of Equity Securities

None.

ITEM 3. Defaults Upon Senior Securities

None.

ITEM 4. Mine Safety Disclosures

Not applicable.

ITEM 5. Other Information

None.

6051

ITEM 6. Exhibits


Exhibit No.		Exhibit Description
31.1	*	Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2	*	Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1	**	Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32.2	**	Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
~~4.1~~		Warrant Agreement between WillScot Corporation and Continental Stock Transfer & Trust Company, dated as of August 15, 2018 (incorporated by reference to Exhibit 4.1 to the Company's Current Report on Form 8-K, filed August 16, 2018).
10.1		~~Registration Rights Agreement between WillScot Corporation and each~~Form of ~~the ModSpace Investors defined therein~~Performance-Based RSU Award Agreement (incorporated by reference to Exhibit 10.1 to the Company’s Form 8-K filed ~~August 16, 2018)~~ March 22, 2019)
10.2		~~Third Amendment to the ABL Credit Agreement,~~Amended Employment Letter with Sally Shanks dated as of July 9, 2018, by and among Williams Scotsman International, Inc. (“WSII”), certain subsidiaries of WSII, Williams Scotsman Holdings Corp. (“Holdings”), the lenders party thereto, and Bank of America, N.A., as administrative agent and collateral agentMarch 18, 2019 (incorporated by reference to Exhibit ~~10.2~~10.1 to the Company’s Form 8-K filed ~~August 16, 2018)~~ March 21, 2019)
10.3		~~Supplemental Indenture to be delivered in connection~~Separation and Release Claims Agreement with ~~the escrow merger~~Bradley L. Bacon dated ~~as of August 15, 2018 between William Scotsman International, Inc. and Deutsche Bank Trust Company Americas as trustee~~May 17, 2019 (incorporated by reference to Exhibit ~~10.3~~10.1 to the ~~Company’s~~Company's Form 8-K filed ~~August 16, 2018)~~ May 17, 2019)
10.4		Supplemental Indenture to the 6.875% Senior Secured Notes due 2023 dated as of August 15, 2018 between William Scotsman International, Inc. and Deutsche Bank Trust Company Americas as trustee and collateral agent Employment Agreement with Hezron Timothy Lopez (incorporated by reference to Exhibit ~~10.4~~10.1 to the ~~Company’s~~Company's Form 8-K filed ~~August 16, 2018)~~June 19, 2019)
~~10.5~~101.INS		Supplemental Indenture to the 7.875% Senior Secured Notes due 2022 dated as of August 15, 2018 between William Scotsman International, Inc. and Deutsche Bank Trust Company Americas as trustee and collateral agent (incorporated by reference to Exhibit 10.5 to the Company’s Form 8-K filed August 16, 2018)
~~101.INS~~		XBRL 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.SCH		XBRL Taxonomy Extension Schema Document
101.CAL		XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF		XBRL Taxonomy Extension Definition Linkbase Document
101.LAB		XBRL Taxonomy Extension Label Linkbase Document
101.PRE		XBRL 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

6152

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

By:

/s/ TIMOTHY D. BOSWELL

Dated:

November ~~9, 2018~~ 8, 2019

Timothy D. Boswell

Chief Financial Officer (Principal Financial Officer)

6253


(in thousands, except share data)	September 30, 2018 (unaudited)		December 31, 2017

Assets
Cash and cash equivalents	$	9,771	$	9,185
Trade receivables, net of allowances for doubtful accounts at September 30, 2018 and December 31, 2017 of $7,913 and $4,845, respectively	199,461		94,820
Inventories	21,348		10,082
Prepaid expenses and other current assets	20,075		13,696
Total current assets	250,655		127,783
Rental equipment, net	1,949,403		1,040,146
Property, plant and equipment, net	193,154		83,666
Goodwill	267,764		28,609
Intangible assets, net	132,519		126,259
Other non-current assets	4,200		4,279
Total long-term assets	2,547,040		1,282,959
Total assets	$	2,797,695	$	1,410,742
Liabilities and equity
Accounts payable	$	78,638	$	57,051
Accrued liabilities	79,721		48,912
Accrued interest	15,613		2,704
Deferred revenue and customer deposits	67,727		45,182
Current portion of long-term debt	1,915		1,881
Total current liabilities	243,614		155,730
Long-term debt	1,651,579		624,865
Deferred tax liabilities	146,086		120,865
Deferred revenue and customer deposits	6,673		5,377
Other non-current liabilities	19,034		19,355
Long-term liabilities	1,823,372		770,462
Total liabilities	2,066,986		926,192
Commitments and contingencies (see Note 13)
Class A common stock: $0.0001 par, 400,000,000 shares authorized at September 30, 2018 and December 31, 2017; 100,303,003 and 84,644,744 shares issued and outstanding at September 30, 2018 and December 31, 2017, respectively	10		8
Class B common stock: $0.0001 par, 100,000,000 shares authorized at September 30, 2018 and December 31, 2017; 8,024,419 shares issued and outstanding at both September 30, 2018 and December 31, 2017	1		1
Additional paid-in-capital	2,390,188		2,121,926
Accumulated other comprehensive loss	(52,119)		(49,497)
Accumulated deficit	(1,673,749)		(1,636,819)
Total shareholders' equity	664,331		435,619
Non-controlling interest	66,378		48,931
Total equity	730,709		484,550
Total liabilities and equity	$	2,797,695	$	1,410,742


(in thousands)	Three Months Ended September 30, 2017		Nine Months Ended September 30, 2017
WillScot revenues (a)	$	116,162	$	325,560
Acton and ModSpace revenues (b)	151,434		407,331
Pro-forma revenues	$	267,596	$	732,891

WillScot pretax loss (a)	$	(21,067)	$	(53,325)
Acton and ModSpace pretax income (loss) (b)	6,843		(108,295)
Pro-forma pretax loss	(14,224)		(161,620)
Pro-forma adjustments to combined pretax loss:
Impact of fair value mark-ups/useful life changes on depreciation (c)	(746)		(1,959)
Intangible asset amortization (d)	(427)		(1,281)
Interest expense (e)	(19,255)		(57,745)
Elimination of Acton and ModSpace interest (f)	8,936		36,702
Pro-forma pretax loss	(25,716)		(185,903)
Income tax benefit (g)	(9,316)		(61,950)
Pro-forma loss from continuing operations (h)	(16,400)		(123,953)
Income from discontinued operations	5,078		11,123
Pro-forma net loss	$	(11,322)	$	(112,830)


(in thousands)	Three Months Ended September 30, 2017		Nine Months Ended September 30, 2017
Remote accommodations revenue	$	36,767	$	95,332
Rental unit sales	1,522		1,522
Remote accommodations costs of leasing and services	16,621		41,359
Rental unit cost of sales	885		885
Depreciation of rental equipment	5,653		18,195
Gross profit	15,130		36,415
Selling, general and administrative expenses	3,307		9,838
Other depreciation and amortization	1,255		3,763
Restructuring costs	803		1,573
Other income, net	(56)		(96)
Operating profit	9,821		21,337
Interest expense	654		2,074
Income from discontinued operations, before income tax	9,167		19,263
Income tax expense	4,089		8,140
Income from discontinued operations, net of tax	$	5,078	$	11,123


Year	Redemption Price
2019	103.938	%
2020	101.969	%
2021 and thereafter	100.000	%


	Number of Shares	Weighted-Average Grant Date Fair Value
Balance, December 31, 2017	—	$	—
Granted	27,675	13.60
Forfeited	—	—
Balance, September 30, 2018	27,675	$	13.60


	Number of Options	Weighted-Average Exercise Price per Share ($)
Outstanding options, December 31, 2017	—	$	—
Granted	589,257	$	13.60
Exercised	—	—
Forfeited	—	—
Outstanding options, September 30, 2018	589,257	$	13.60
Fully vested and exercisable options, end of period	—	$	—


	Nine Months Ended September 30, 2017
(in thousands)	Modular - US		Modular - Other North America		Corporate & Other		Total
Revenues:
Leasing and services revenue:
Modular leasing	$	192,587	$	25,124	$	(450)	$	217,261
Modular delivery and installation	60,451		6,132		(3)		66,580
Sales:
New units	21,630		2,861		—		24,491
Rental units	14,634		2,675		(81)		17,228
Total Revenues	$	289,302	$	36,792	$	(534)	$	325,560

Costs:
Cost of leasing and services:
Modular leasing	$	55,713	$	5,981	$	—	$	61,694
Modular delivery and installation	58,612		5,792		—		64,404
Cost of sales:							—
New units	15,172		2,240		(10)		17,402
Rental units	8,240		1,827		—		10,067
Depreciation of rental equipment	44,030		9,173		—		53,203
Gross profit (loss)	$	107,535	$	11,779	$	(524)	$	118,790
Adjusted EBITDA	$	79,189	$	8,586	$	(10,197)	$	77,578
Other selected data:
Selling, general and administrative expense	$	72,464	$	12,393	$	15,653	$	100,510
Other depreciation and amortization	$	3,937	$	755	$	1,044	$	5,736
Capital expenditures for rental fleet	$	72,105	$	3,705	$	—	$	75,810


	Three Months Ended September 30,						2018 vs. 2017 $ Change
(in thousands)	2018		2017
Revenues:
Leasing and services revenue:
Modular leasing	$	141,660	$	75,320	$	66,340
Modular delivery and installation	46,777		24,627		22,150
Sales:
New units	20,920		9,609		11,311
Rental units	9,567		6,606		2,961
Total revenues	218,924		116,162		102,762
Costs:
Costs of leasing and services:
Modular leasing	39,215		21,252		17,963
Modular delivery and installation	42,390		23,932		18,458
Costs of sales:
New units	15,089		6,916		8,173
Rental units	5,750		3,784		1,966
Depreciation of rental equipment	35,534		19,009		16,525
Gross profit	80,946		41,269		39,677
Expenses:
Selling, general and administrative	71,897		36,097		35,800
Other depreciation and amortization	3,720		1,905		1,815
Restructuring costs	6,137		1,156		4,981
Currency gains, net	(425)		(4,270)		3,845
Other (income) expense, net	(594)		1,001		(1,595)
Operating income	211		5,380		(5,169)
Interest expense	43,447		30,106		13,341
Interest income	—		(3,659)		3,659
Loss from continuing operations before income tax	(43,236)		(21,067)		(22,169)
Income tax benefit	(6,507)		(7,632)		1,125
Loss from continuing operations	(36,729)		(13,435)		(23,294)
Income from discontinued operations, net of tax	—		5,078		(5,078)
Net loss	(36,729)		(8,357)		(28,372)
Net loss attributable to non-controlling interest, net of tax	(3,210)		—		(3,210)
Total loss attributable to WillScot	$	(33,519)	$	(8,357)	$	(25,162)