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~~June 30, ~~2019~~2020
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~~MOBILE MINI HOLDINGS CORP.

(Exact name of registrant as specified in its charter)


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

~~901 S. Bond Street, #600~~4646 E Van Buren St., Suite 400

~~Baltimore, Maryland 21231~~Phoenix, Arizona 85008

(Address, including zip code, of principal executive offices)

~~(410) 931-6000~~

(480) 894-6311

(Registrant’s telephone number, including area code)

(Former Name or Former Address, if Changed Since Last Report)

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
~~Class A common stock,~~Common Stock, par value $0.0001 per share	WSC	The Nasdaq Capital Market
~~Warrants to purchase Class A common stock(1)~~	~~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-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 (as defined in Rule 12b-2 of the Act). Yes ☐ No ☒

Shares of ~~Class A common stock,~~Common Stock, par value $0.0001 per share, outstanding: ~~108,751,354~~227,721,220 shares at ~~October~~July 31, ~~2019.~~

~~Shares of Class B common stock, par value $0.0001 per share, outstanding: 8,024,419 shares at October 31, 2019.~~2020.

WILLSCOT CORPORATION

Quarterly Report on Form 10-Q

Table of Contents

PART I Financial Information

Item 1

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

Condensed Consolidated Balance Sheets as of ~~September~~June 30, ~~2019~~2020 and December 31, ~~2018~~2020 (audited) ~~(audited)~~

Condensed Consolidated Statements of Operations for the Three and ~~Nine~~Six Months Ended ~~September~~June 30, ~~2019~~2020 and ~~2018~~2019

Condensed Consolidated Statements of Comprehensive ~~Loss~~Income (Loss) for the Three and ~~Nine~~Six Months Ended ~~September~~June 30, ~~2019~~2020 and ~~2018~~

2019

Condensed Consolidated Statement of Changes in Equity for the Three and ~~Nine~~Six Months Ended ~~September~~June 30, ~~2019~~2020 and ~~2018~~2019

Condensed Consolidated Statements of Cash Flows for the ~~Nine~~ Six Months Ended ~~September~~June 30, ~~2019~~2020 and ~~2018~~2019

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)	(in thousands, except share data)	September 30, 2019 (unaudited)		December 31, 2018		(in thousands, except share data)	June 30, 2020 (unaudited)		December 31, 2019
											(in thousands, except share data)	June 30, 2020 (unaudited)	December 31, 2019
Assets	Assets					Assets
Cash and cash equivalents	Cash and cash equivalents	$	3,951	$	8,958	Cash and cash equivalents	$	9,061	$	3,045
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
Restricted cash						Restricted cash	655,087		—
Trade receivables, net of allowances for credit losses at June 30, 2020 and December 31, 2019 of $19,183 and $15,828, respectively						Trade receivables, net of allowances for credit losses at June 30, 2020 and December 31, 2019 of $19,183 and $15,828, respectively	231,007		247,596
Inventories	Inventories	15,956		16,218		Inventories	14,800		15,387
Prepaid expenses and other current assets	Prepaid expenses and other current assets	24,684		21,828		Prepaid expenses and other current assets	21,392		14,621
Assets held for sale	Assets held for sale	9,155		2,841		Assets held for sale	9,332		11,939
Total current assets	Total current assets	304,234		256,347		Total current assets	940,679		292,588
Rental equipment, net	Rental equipment, net	1,952,829		1,929,290		Rental equipment, net	1,908,299		1,944,436
Property, plant and equipment, net	Property, plant and equipment, net	186,956		183,750		Property, plant and equipment, net	142,454		147,689
Operating lease assets						Operating lease assets	146,721		146,698
Goodwill	Goodwill	234,597		247,017		Goodwill	233,829		235,177
Intangible assets, net	Intangible assets, net	128,103		131,801		Intangible assets, net	126,125		126,625
Other non-current assets	Other non-current assets	4,641		4,280		Other non-current assets	3,433		4,436
Total long-term assets	Total long-term assets	2,507,126		2,496,138		Total long-term assets	2,560,861		2,605,061
Total assets	Total assets	$	2,811,360	$	2,752,485	Total assets	$	3,501,540	$	2,897,649
Liabilities and equity	Liabilities and equity					Liabilities and equity
Accounts payable	Accounts payable	$	101,532	$	90,353	Accounts payable	$	87,847	$	109,926
Accrued liabilities	Accrued liabilities	96,395		84,696		Accrued liabilities	101,212		82,355
Accrued interest	Accrued interest	13,386		20,237		Accrued interest	16,772		16,020
Deferred revenue and customer deposits	Deferred revenue and customer deposits	87,702		71,778		Deferred revenue and customer deposits	89,258		82,978
Current portion of long-term debt	Current portion of long-term debt	2,025		1,959		Current portion of long-term debt	265,398		—
Operating lease liabilities - current						Operating lease liabilities - current	30,438		29,133
Total current liabilities	Total current liabilities	301,040		269,023		Total current liabilities	590,925		320,412
Long-term debt	Long-term debt	1,710,160		1,674,540		Long-term debt	1,971,010		1,632,589
Deferred tax liabilities	Deferred tax liabilities	67,583		67,384		Deferred tax liabilities	69,044		70,693
Deferred revenue and customer deposits	Deferred revenue and customer deposits	11,265		7,723		Deferred revenue and customer deposits	12,284		12,342
Operating lease liabilities - non-current						Operating lease liabilities - non-current	117,159		118,429
Other non-current liabilities	Other non-current liabilities	37,373		31,618		Other non-current liabilities	36,028		34,229
Long-term liabilities	Long-term liabilities	1,826,381		1,781,265		Long-term liabilities	2,205,525		1,868,282
Total liabilities	Total liabilities	2,127,421		2,050,288		Total liabilities	2,796,450		2,188,694
Commitments and contingencies (see Note 15)	Commitments and contingencies (see Note 15)					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
Class A common stock: $0.0001 par, 400,000,000 shares authorized at June 30, 2020 and December 31, 2019; 121,233,232 and 108,818,854 shares issued and outstanding at June 30, 2020 and December 31, 2019, respectively						Class A common stock: $0.0001 par, 400,000,000 shares authorized at June 30, 2020 and December 31, 2019; 121,233,232 and 108,818,854 shares issued and outstanding at June 30, 2020 and December 31, 2019, respectively	12		11
Class B common stock: 0 shares authorized or outstanding at June 30, 2020 and $0.0001 par, 100,000,000 shares authorized at December 31, 2019; 8,024,419 shares issued and outstanding at December 31, 2019						Class B common stock: 0 shares authorized or outstanding at June 30, 2020 and $0.0001 par, 100,000,000 shares authorized at December 31, 2019; 8,024,419 shares issued and outstanding at December 31, 2019	—		1
Additional paid-in-capital	Additional paid-in-capital	2,394,091		2,389,548		Additional paid-in-capital	2,471,312		2,396,501
Accumulated other comprehensive loss	Accumulated other comprehensive loss	(68,908)		(68,026)		Accumulated other comprehensive loss	(84,807)		(62,775)
Accumulated deficit	Accumulated deficit	(1,703,699)		(1,683,319)		Accumulated deficit	(1,681,427)		(1,689,373)
Total shareholders' equity	Total shareholders' equity	621,496		638,215		Total shareholders' equity	705,090		644,365
Non-controlling interest	Non-controlling interest	62,443		63,982		Non-controlling interest	—		64,590
Total equity	Total equity	683,939		702,197		Total equity	705,090		708,955
Total liabilities and equity	Total liabilities and equity	$	2,811,360	$	2,752,485	Total liabilities and equity	$	3,501,540	$	2,897,649

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,							Three Months Ended June 30,				Six Months Ended June 30,
(in thousands, except share and per share data)	(in thousands, except share and per share data)	2019		2018		2019		2018		(in thousands, except share and per share data)	2020		2019		2020		2019
Revenues:	Revenues:									Revenues:
Leasing and services revenue:	Leasing and services revenue:									Leasing and services revenue:
Modular leasing	Modular leasing	$	191,294	$	141,660	$	557,025	$	340,171	Modular leasing	$	190,143	$	185,818	$	378,495	$	363,110
Modular delivery and installation	Modular delivery and installation	61,883		46,777		168,643		104,440		Modular delivery and installation	51,640		55,966		102,710		105,966
Sales revenue:	Sales revenue:									Sales revenue:
New units	New units	11,536		20,920		38,064		33,584		New units	9,763		11,507		19,376		26,348
Rental units	Rental units	7,627		9,567		29,741		15,813		Rental units	5,316		10,422		12,102		21,974
Total revenues	Total revenues	272,340		218,924		793,473		494,008		Total revenues	256,862		263,713		512,683		517,398
Costs:	Costs:									Costs:
Costs of leasing and services:	Costs of leasing and services:									Costs of leasing and services:
Modular leasing	Modular leasing	58,168		39,215		160,476		93,506		Modular leasing	47,747		55,073		97,556		102,308
Modular delivery and installation	Modular delivery and installation	54,364		42,390		146,175		98,038		Modular delivery and installation	43,523		48,468		87,388		91,811
Costs of sales:	Costs of sales:									Costs of sales:
New units	New units	7,421		15,089		26,298		23,780		New units	6,331		7,999		12,534		18,877
Rental units	Rental units	5,092		5,750		19,608		9,328		Rental units	3,803		6,721		7,609		14,516
Depreciation of rental equipment	Depreciation of rental equipment	43,869		35,534		128,940		82,849		Depreciation of rental equipment	45,494		43,968		91,442		85,071
Gross profit		103,426		80,946		311,976		186,507
Gross Profit										Gross Profit	109,964		101,484		216,154		204,815
Expenses:	Expenses:									Expenses:
Selling, general and administrative	Selling, general and administrative	68,159		71,897		213,267		164,845		Selling, general and administrative	65,272		70,385		140,240		143,704
Other depreciation and amortization	Other depreciation and amortization	3,707		3,720		9,878		7,726		Other depreciation and amortization	2,883		2,949		5,957		5,733
Impairment losses on long-lived assets	Impairment losses on long-lived assets	—		—		5,076		—		Impairment losses on long-lived assets	—		348		—		2,638
Lease impairment expense and other related charges										Lease impairment expense and other related charges	1,394		1,520		3,055		4,605
Restructuring costs	Restructuring costs	1,980		6,137		9,083		7,214		Restructuring costs	749		1,632		689		3,288
Currency losses (gains), net	Currency losses (gains), net	234		(425)		(436)		1,171		Currency losses (gains), net	(380)		(354)		518		(670)
Other income, net	Other income, net	(1,053)		(594)		(3,293)		(5,013)		Other income, net	(1,021)		(1,290)		(745)		(2,241)
Operating income	Operating income	30,399		211		78,401		10,564		Operating income	41,067		26,294		66,440		47,758
Interest expense	Interest expense	30,857		43,447		95,353		67,321		Interest expense	28,519		31,668		56,776		62,783
Loss on extinguishment of debt	Loss on extinguishment of debt	—		—		7,244		—		Loss on extinguishment of debt	—		7,244		—		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)
Income (loss) from operations before income tax										Income (loss) from operations before income tax	12,548		(12,618)		9,664		(22,269)
Income tax (benefit) expense										Income tax (benefit) expense	(285)		(1,180)		505		(802)
Net Income (loss)										Net Income (loss)	12,833		(11,438)		9,159		(21,467)
Net Income (loss) attributable to non-controlling interest, net of tax										Net Income (loss) attributable to non-controlling interest, net of tax	1,343		(832)		1,213		(1,590)
Net Income (loss) attributable to WillScot										Net Income (loss) attributable to WillScot	$	11,490	$	(10,606)	$	7,946	$	(19,877)

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
Earnings (loss) per share attributable to WillScot										Earnings (loss) per share attributable to WillScot
Basic										Basic	$	0.10	$	(0.10)	$	0.07	$	(0.18)
Diluted										Diluted	$	0.10	$	(0.10)	$	0.07	$	(0.18)
Weighted average shares:										Weighted average shares:
Basic										Basic	110,692,426		108,693,924		110,174,536		108,609,068
Diluted										Diluted	111,432,963		108,693,924		112,209,212		108,609,068

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

WillScot Corporation

Condensed Consolidated Statements of Comprehensive ~~Loss~~ Income (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)


	Three Months Ended June 30,						Six Months Ended June 30,
(in thousands)	2020		2019		2020		2019
Net income (loss)	$	12,833	$	(11,438)	$	9,159	$	(21,467)
Other comprehensive income (loss):
Foreign currency translation adjustment, net of income tax expense of $0 for the three and six months ended June 30, 2020 and 2019	7,982		4,321		(13,162)		8,436
Net gain (loss) on derivatives, net of income tax benefit of $0, $1,190 for the three months ended June 30, 2020 and 2019, respectively and $0, and $1,863 for the six months ended June 30, 2020 and 2019, respectively	975		(3,887)		(7,783)		(6,088)
Comprehensive income (loss)	21,790		(11,004)		(11,786)		(19,119)
Comprehensive income (loss) attributable to non-controlling interest	2,161		(786)		(672)		(1,378)
Total comprehensive income (loss) attributable to WillScot	$	19,629	$	(10,218)	$	(11,114)	$	(17,741)

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


Six Months Ended June 30, 2020
	Class A Common Stock				Class B Common Stock						Additional Paid-in-Capital		Accumulated Other Comprehensive Loss		Accumulated Deficit		Total Shareholders' Equity		Non-Controlling Interest	Total Equity
(in thousands)	Shares	Amount		Shares	Amount
Balance at December 31, 2019	108,819	$	11	8,024	$	1	$	2,396,501	$	(62,775)	$	(1,689,373)	$	644,365	$	64,590	$	708,955
Net loss	—	—		—	—		—		—		(3,544)		(3,544)		(130)		(3,674)
Other comprehensive income	—	—		—	—		—		(27,199)		—		(27,199)		(2,703)		(29,902)
Stock-based compensation	239	—		—	—		1,114		—		—		1,114		—		1,114
Common stock issued in warrant exercises and redemptions	1,497	—		—	—		4,580		—		—		4,580		—		4,580
Balance at March 31, 2020	110,555	$	11	8,024	$	1	$	2,402,195	$	(89,974)	$	(1,692,917)	$	619,316	$	61,757	$	681,073
Net income	—	—		—	—		—		—		11,490		11,490		1,343		12,833
Other comprehensive income	—	—		—	—		—		8,139		—		8,139		818		8,957
Stock-based compensation	—	—		—	—		2,227		—		—		2,227		—		2,227
Sapphire Exchange - see Note 10	10,641	1		(8,024)	(1)		66,890		(2,972)		—		63,918		(63,918)		—
Common stock issued in warrant exercises and redemptions	37	—		—	—		—		—		—		—		—		—
Balance at June 30, 2020	121,233	$	12	—	$	—	$	2,471,312	$	(84,807)	$	(1,681,427)	$	705,090	$	—	$	705,090

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


Six Months Ended June 30, 2019
	Class A Common Stock				Class B Common Stock						Additional Paid-in-Capital		Accumulated Other Comprehensive Loss		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	—	—		—	—		—		—		(9,271)		(9,271)		(758)		(10,029)
Other comprehensive income	—	—		—	—		—		1,748		—		1,748		166		1,914
Adoption of ASC 842	—	—		—	—		—		—		4,723		4,723		503		5,226
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)	$	(1,687,522)	$	636,396	$	63,893	$	700,289
Net loss	—	—		—	—		—		—		(10,606)		(10,606)		(832)		(11,438)
Other comprehensive income	—	—		—	—		—		388		—		388		46		434
Stock-based compensation	6	—		—	—		1,901		—		—		1,901		—		1,901
Balance at June 30, 2019	108,699	$	11	8,024	$	1	$	2,392,085	$	(65,890)	$	(1,698,128)	$	628,079	$	63,107	$	691,186

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,							Six Months Ended June 30,
(in thousands)	(in thousands)	2019		2018		(in thousands)	2020		2019
Operating activities:	Operating activities:					Operating activities:
Net loss		$	(22,174)	$	(43,185)
Adjustments to reconcile net income to net cash provided by operating activities:
Net income (loss)						Net income (loss)	$	9,159	$	(21,467)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:						Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation and amortization	Depreciation and amortization	140,712		91,587		Depreciation and amortization	98,917		91,808
Provision for doubtful accounts	Provision for doubtful accounts	11,817		5,436		Provision for doubtful accounts	9,122		6,297
Impairment losses on long-lived assets	Impairment losses on long-lived assets	5,076		—		Impairment losses on long-lived assets	—		2,638
Impairment on right of use assets						Impairment on right of use assets	57		2,439
Gain on sale of rental equipment and other property, plant and equipment	Gain on sale of rental equipment and other property, plant and equipment	(8,553)		(11,194)		Gain on sale of rental equipment and other property, plant and equipment	(4,366)		(5,359)
Amortization of debt discounts and debt issuance costs	Amortization of debt discounts and debt issuance costs	8,732		4,801		Amortization of debt discounts and debt issuance costs	5,899		5,646
Loss on extinguishment of debt	Loss on extinguishment of debt	7,244		—		Loss on extinguishment of debt	—		7,244
Stock-based compensation expense	Stock-based compensation expense	5,003		2,225		Stock-based compensation expense	4,014		3,191
Deferred income tax benefit		(2,456)		(14,340)
Deferred income tax benefit (provision)						Deferred income tax benefit (provision)	608		(1,190)
Unrealized currency (gains) losses	Unrealized currency (gains) losses	(427)		773		Unrealized currency (gains) losses	1,095		(624)
Changes in operating assets and liabilities, net of effect of businesses acquired:
Changes in operating assets and liabilities						Changes in operating assets and liabilities
Trade receivables	Trade receivables	(64,385)		(26,229)		Trade receivables	5,709		(44,492)
Inventories	Inventories	284		(553)		Inventories	520		1,039
Prepaid and other assets	Prepaid and other assets	(1,734)		173		Prepaid and other assets	(6,620)		(784)
Operating lease assets and liabilities						Operating lease assets and liabilities	(64)		935
Accrued interest	Accrued interest	(6,851)		12,902		Accrued interest	753		(4,092)
Accounts payable and other accrued liabilities	Accounts payable and other accrued liabilities	7,324		(11,969)		Accounts payable and other accrued liabilities	(17,767)		3,126
Deferred revenue and customer deposits	Deferred revenue and customer deposits	19,464		5,153		Deferred revenue and customer deposits	6,691		13,699
Net cash provided by operating activities	Net cash provided by operating activities	99,076		15,580		Net cash provided by operating activities	113,727		60,054
Investing activities:	Investing activities:					Investing activities:
Acquisition of a business - ModSpace		—		(1,060,140)
Acquisition of a business - Tyson		—		(24,006)
Proceeds from sale of rental equipment	Proceeds from sale of rental equipment	31,504		21,593		Proceeds from sale of rental equipment	12,102		23,083
Purchase of rental equipment and refurbishments	Purchase of rental equipment and refurbishments	(160,877)		(111,505)		Purchase of rental equipment and refurbishments	(79,682)		(113,088)
Proceeds from the sale of property, plant and equipment	Proceeds from the sale of property, plant and equipment	13,199		681		Proceeds from the sale of property, plant and equipment	3,843		8,891
Purchase of property, plant and equipment	Purchase of property, plant and equipment	(6,600)		(3,091)		Purchase of property, plant and equipment	(3,186)		(3,899)
Net cash used in investing activities	Net cash used in investing activities	(122,774)		(1,176,468)		Net cash used in investing activities	(66,923)		(85,013)
Financing activities:	Financing activities:					Financing activities:
Receipts from issuance of common stock	Receipts from issuance of common stock	194		147,200		Receipts from issuance of common stock	4,580		—
Receipts from borrowings	Receipts from borrowings	489,207		1,184,601		Receipts from borrowings	704,293		461,203
Payment of financing costs	Payment of financing costs	(2,623)		(34,770)		Payment of financing costs	(1,225)		(2,686)
Repayment of borrowings	Repayment of borrowings	(461,162)		(135,537)		Repayment of borrowings	(92,282)		(430,260)
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)		—
Other financing activities						Other financing activities	(673)		(654)
Payment of debt extinguishment premium costs						Payment of debt extinguishment premium costs	—		(6,252)
Net cash provided by financing activities	Net cash provided by financing activities	18,627		1,161,406		Net cash provided by financing activities	614,693		21,351
Effect of exchange rate changes on cash and cash equivalents	Effect of exchange rate changes on cash and cash equivalents	64		68		Effect of exchange rate changes on cash and cash equivalents	(394)		140
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

Net change in cash, cash equivalents, and restricted cash						Net change in cash, cash equivalents, and restricted cash	661,103		(3,468)
Cash, cash equivalents, and restricted cash at the beginning of the period						Cash, cash equivalents, and restricted cash at the beginning of the period	3,045		8,958
Cash, cash equivalents, and restricted cash at the end of the period						Cash, cash equivalents, and restricted cash at the end of the period	$	664,148	$	5,490
Supplemental cash flow information:	Supplemental cash flow information:					Supplemental cash flow information:
Interest paid	Interest paid	$	94,908	$	28,721	Interest paid	$	46,058	$	63,502
Income taxes paid, net		$	547	$	2,339
Income taxes (refunded) paid, net						Income taxes (refunded) paid, net	$	(22)	$	355
Capital expenditures accrued or payable	Capital expenditures accrued or payable	$	26,444	$	17,478	Capital expenditures accrued or payable	$	18,742	$	24,348

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 own~~s 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~~On November 29, 2017, 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 iswas majority owned by an investment fund managed by TDR ~~Capital.~~Capital LLP ("TDR Capital"). As part of the transaction, ~~(the “Business Combination”),~~ Double Eagle domesticated to Delaware and changed its name to WillScot Corporation.

Immediately following the Merger with Mobile Mini Inc. as defined and discussed in Note 2 – Acquisitions and Relating Financing Transactions, on July 1, 2020, WillScot changed its name to “WillScot Mobile Mini Holdings Corp.” (“WillScot Mobile Mini”) and filed an amended and restated certificate of incorporation, which reclassified all outstanding shares of the Class A common stock and converted such shares into shares of common stock, par value $0.0001 per share, of WillScot Mobile Mini (the “Common Stock”). On June 30, 2020, TDR Capital exercised its right to exchange its shares in Williams Scotsman Holding Corp ("Holdings") for 10.6 million of Class A common stock at which point the Company's Class B common stock were automatically canceled. The WillScot Class A common stock was listed on the Nasdaq Capital Market (Nasdaq: WSC) up until the Merger, and the Common Stock has been listed on the Nasdaq Capital Market (Nasdaq: WSC) since the Merger.

As the Merger closed after WillScot’s second quarter 2020, the preparation of financial statements in accordance with U.S. Generally Accepted Accounting Principles (“GAAP”) requires that our Condensed Consolidated Financial Statements and most of the disclosure in these Notes be presented on a historical basis, as of or for the three and six months ended June 30, 2020 or prior periods. Unless the context otherwise requires, the terms “Company” and “WillScot Mobile Mini” as used in these financial statements mean WillScot Corporation and its subsidiaries when referring to periods prior to July 1, 2020 (prior to the Merger) and to WillScot Mobile Mini Holdings Corp., when referring to periods on or after July 1, 2020 (after the Merger).

Basis of Presentation and Principles of Consolidation

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”)~~GAAP for complete financial statements. The accompanying 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 and 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~~On December 31, 2019, the 2019 financial statement amounts were adjusted for the ~~three~~adoption Accounting Standards Update (“ASU”) 2016-02, Leases (Topic 842) ("ASC 842"), effective retroactively to January 1, 2019, and ~~nine months ended September 30, 2019 are~~therefore may not ~~necessarily indicative of~~agree to the ~~results to be expected~~Quarterly Reports filed on Form 10-Q 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, 2018~~.respective periods of 2019.

~~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~~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 results of operations for the six months ended June 30, 2020 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, 2019.

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 it is required to comply with such standards. ~~WillScot will be deemed to be a large accelerated filer, and cease to qualify as an EGC, as of December 31, 2019.~~

Recently Issued Accounting Standards

In ~~June 2016,~~March 2020, the Financial Accounting Standards Board (“FASB”) issued ASU 2020-04, Reference Rate Reform (Topic 848), which is elective, and provides for optional expedients and exceptions for applying GAAP to contracts, hedging relationships, and other transactions affected by reference rate reform if certain criteria are met. The Company is currently evaluating the impact of reference rate reform and potential impact of adoption of these elective practical expedients on its condensed consolidated financial statements and will consider the impact of adoption during its analysis.

Recently Adopted Accounting Standards ~~Update (“ASU”)~~

In June 2016, the FASB issued ASU 2016-13, Financial Instruments - Credit Losses (Topic 326)("ASC 326"), which prescribes that financial assets (or a group of financial assets) should be measured at amortized cost basis to be presented at the net amount expected to be ~~collected.~~collected based on relevant historical information from historical experience, adjusted for current conditions and reasonable and supportable forecasts that affect collectability. Credit losses relating to these financial

assets ~~should be~~are recorded through an allowance for credit losses. The ~~new standard is effective for the~~ Company for fiscal years beginning after December 15, 2019, including interim periods within that fiscal year. The Company continues to evaluate the impacts of adopting the standard on the financial statements and will adopt the standardadopted ASC 326 effective January 1, 2020. The effect of this guidance was immaterial to the Company's consolidated results of operations, financial position and cash flows.

~~In February 2016,~~Impact of COVID-19

On January 30, 2020, the ~~FASB issued ASU 2016-02,~~ ~~Leases (Topic 842)~~ ~~("ASC 842")~~World Health Organization declared an outbreak of a highly contagious form of an upper respiratory infection caused by COVID-19, a novel coronavirus strain commonly referred to as “coronavirus”. ~~This guidance revises existing practice related~~The Company was deemed an essential infrastructure business and has continued to ~~accounting for leases under ASC Topic 840,~~ ~~Leases~~ ~~(“ASC 840”) for both lessees~~supply its customers.

There have been significant changes to the global economic situation and ~~lessors. The new guidance establishes~~to public securities markets as a ~~right-of-use (“ROU”) model~~consequence of the COVID-19 pandemic. If these conditions persist, it is reasonably likely that ~~requires~~this could cause changes to estimates as a ~~lessee~~result of the markets in which the Company operates, the price of the Company’s publicly traded equity and debt in comparison to ~~record a ROU asset and lease liability on~~ the balance sheet for all leases with terms longer than twelve months. Leases will be classified as either finance or operating, with classification affecting the pattern of expense recognition in the income statement. This guidance also expands the requirements for lessees to record leases embedded in other arrangementsCompany’s carrying value, and the ~~required quantitative and qualitative disclosures surrounding leases. Accounting guidance for lessors is largely unchanged. This guidance is effective for non-public entities for fi~~scal years beginning after December 15, 2019 and interim periods within 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 will adopt the new standard in the fourth quarter of 2019 with

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

~~The Company plans to take advantage~~health of the ~~transition package of practical expedients permitted within ASC 842 which allows~~global economy. Such changes to estimates could potentially result in impacts that would be material to the ~~Company not~~consolidated financial statements, particularly with respect to ~~reassess (i) whether any expired or existing lease contracts are or contain leases, (ii)~~ the historical lease classification for any expired or existing leases and (iii) initial direct costs for any existing leases. Upon adoption, the Company currently expects to record ROU assets between $135.0 million and $145.0 million, and operating lease liabilities between $135.0 million and $145.0 million, as of January 1, 2019, primarily related to its real estate and equipment leases.In connection with the adoption of ASC 842, the Company will also reverse the previous accounting for certain sale-leaseback transactions (as discussed in Note 8), and reduce property, plant and equipment by $31.0 million, reduce outstanding debt by $36.0 million and 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~~fair value of the ~~new lease accounting standard ASC 842. There may be changes~~Company’s reporting units in relation to potential goodwill impairment, the ~~timing~~fair value of ~~recognition under~~long-lived assets in relation to potential impairment and the ~~new standard, but the Company does not anticipate a significant change to modular leasing revenue at adoption.~~allowance for doubtful accounts.

NOTE 2 - Acquisitions and ~~Assets Held for Sale~~Related Financing Transactions

~~ModSpace Acquisition~~Mobile Mini Merger

On ~~August 15, 2018,~~March 1, 2020, the Company, ~~acquired Modular Space Holdings,~~along with its newly formed subsidiary, Picasso Merger Sub, Inc. ~~("ModSpace"~~(“Merger Sub”), ~~a privately-owned national provider~~entered into an Agreement and Plan of ~~office trailers, portable storage units and modular buildings.~~Merger (the “Merger Agreement”) with Mobile Mini, Inc. (“Mobile Mini”), the (“Merger”). The ~~acquisition was consummated by merging a special purpose subsidiary~~closing of the ~~Company~~Merger was completed on July 1, 2020 and Merger Sub merged with and into ~~ModSpace, with ModSpace~~Mobile Mini and the separate corporate existence of Merger Sub ceased and Mobile Mini continued its existence, as the surviving corporation in the ~~merger as~~Merger and a wholly-owned subsidiary of ~~WSII.~~WillScot.

~~Purchase Price~~

~~The aggregate purchase price for ModSpace was $1.2 billion~~Upon completion of the Merger, each issued and ~~consisted~~outstanding share of ~~(i) $1.1 billion in cash, (ii) 6,458,229 shares of WillScot's Class A~~Mobile Mini common stock, ~~(the "Stock Consideration") with a fair market~~par value ~~of $95.8 million and (iii) warrants~~$0.01 per share, converted to ~~purchase an aggregate of 10,000,000~~the right to receive 2.4050 shares of WillScot’s Class A common stock, ~~at an exercise~~par value $0.0001 per share, and cash in lieu of any fractional shares.

Approximately 106 million shares of Common Stock were issued to Mobile Mini shareholders following the completion of the Merger and as of July 31, 2020 the Company had 227,721,220 of Common Stock. The trading price of ~~$15.50~~Common Stock was $12.53 per share ~~(the "2018 Warrants") with a~~on the closing date. In addition, Mobile Mini stock options converted into WillScot Mobile Mini stock options. The preliminary purchase price is estimated at $1.4 billion subject to adjustment pending the finalization of preliminary valuation estimates.

The Merger will be accounted for using the acquisition method of accounting, and WillScot will be treated as the accounting acquirer. Under the acquisition method of accounting, we are required to assign the purchase price to tangible and identifiable intangible assets acquired and liabilities assumed based on their fair ~~market value~~values at the closing date. The excess of ~~$52.3~~the purchase price over those fair values will be recorded as goodwill.

The Company expensed $1.6 million and ~~(iv)~~$11.0 million in transaction costs related to the Merger within selling, general and administrative ("SG&A") for the three and six months ended June 30, 2020, respectively. The Company expects to expense within SG&A approximately $51 million in transaction expenses related to the Merger in the third quarter of 2020.

Restricted Cash and 2025 Secured Notes

In anticipation of the Merger, on June 15, 2020, Picasso Finance Sub, Inc., a ~~working capital adjustment~~newly-formed indirect finance subsidiary (the “Finance Sub”) of ~~$4.7 million.~~

~~The acquisition was funded by~~ the ~~net proceeds~~Company, completed a private offering of ~~WillScot's issuance of 9,200,000 shares of Class A common stock, the net proceeds of WSII’s issuance of $300.0~~$650.0 million in aggregate principal amount of its 6.125% senior secured notes due 2025 (the “2025 Secured Notes”). The 2025 secured notes contained provisions requiring repayment without penalty, in the event the Merger was not consummated.The offering proceeds from the 2025 Secured Notes of $650.0 million and ~~$200.0~~$5.1 million of interest due through August 1, 2020 were deposited into an escrow account, pending the closing of the Merger. In connection with completion of the Merger on July 1, 2020, the offering proceeds were released and the proceeds were utilized to repay the 2022 Secured Notes (see Note 9 – Debt), repay Mobile Mini secured notes and pay certain fees and expenses related to the Merger and financing transactions. In addition, Finance Sub was merged into WSII on July 1, 2020. At June 30, 2020 the $655.1 million in ~~senior unsecured notes (see Note 8), and borrowings under~~ the ~~ABL Facility (see Note 8).~~

As of the date of acquisition, August 15, 2018, the fair market values of the Stock Consideration and 2018 Warrants were $14.83 per share and $5.23 per warrant, respectively, with the warrant values determined using a Black-Scholes valuation model. The fair market value of the Class A shares was determined utilizing the $15.78 per share closing price of the Company's shares on August 15, 2018, discounted by 6.0%, to reflect a lack of marketability basedescrow account is reported as restricted cash on the ~~lock-up restrictions contemplated by the merger agreement.~~

The estimated fair values of the Stock Consideration and 2018 Warrants are Level 3 fair value measurements. The fair value of each share and warrant was estimated using the Black-Scholes model with the following assumptions: expected dividend yield, expected stock price volatility, weighted average risk-free interest rate, the average expected term of the lock up period on the shares, and the weighted average expected term of the warrants. The volatility assumption used in the Black-Scholes model is derived from the historical daily change in the market price of the Company's common stock, as well as the historical daily changes in the market price of its peer group, based on weighting, as determined by the Company, and over a time period equivalent to the lock-up restriction (for the shares) and the warrant term. The risk-free interest rate used in the Black-Scholes model is based on the implied US Treasury bill yield curve at the date of grant with a remaining term equal to the Company’s expected term assumption. The Company has never declared or paid a cash dividend on common shares. The following table summarizes the key inputs utilized to determine the fair value of the Stock Consideration and 2018 Warrants included 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
condensed consolidated balance sheet.

New ABL Facility

119

~~Opening Balance Sheet~~

~~The purchase price~~aggregate principal amount 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 fi~~nal 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 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 accounts recei~~vable was $73.1 million and the gross contractual amount was $89.0 million. The Company analyzed information available at the time of acquisition in estimating uncollectible receivables and the fair value of remaining receivables. The Company's analysis, as of the acquisition date, included an assessment of the risk of collectability of receivables by analyzing historical payment trends, the status of collection efforts, and any other pertinent customer specific information that existed as of the acquisition date.

(b) Upon completion of the valuation analysis, the Company recorded a net increase in property, plant and equipment of $27.2 million related to the finalization of our acquired 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~~$2 billion (the “US Facility”), available to ~~other market participants. The goodwill presented on~~WSII and certain of its subsidiaries (collectively, the ~~balance sheet is not deductible for income tax purposes. The goodwill is assigned~~“US Borrowers”), and (ii) a $400 million senior secured asset-based multicurrency revolving credit facility together with the US Facility, the “New ABL Facility”), available to be drawn in US Dollars, Canadian Dollars, British Pounds Sterling or Euros by the ~~Modular –~~ US Borrowers, and ~~Modular – Other North America segments, defined~~certain of WSII’s and Mobile Mini’s wholly-owned subsidiaries organized in ~~Note 16,~~Canada and in the am~~ounts of $171.3 million and $31.0 million, respectively.~~

~~Pro Forma Information~~

~~The pro forma information below has been prepared using the purchase method of accounting, giving effect to the ModSpace acquisition as if it had been completed on January~~United Kingdom. On July 1, 2018. The pro forma information is not necessarily indicative of the Company’s results of operations had the acquisition been completed on the above date, nor is it necessarily indicative of the Company’s future results. The pro forma information does not reflect any cost savings from operating efficiencies or synergies that could result from the acquisition and also does not reflect additional revenue opportunities following the acquisition. The 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 incurred2020, in connection with the ~~acquisition~~completion of ~~ModSpace.~~

~~(f) The pro forma tax rate applied~~the Merger, approximately $1.47 billion of proceeds from the New ABL Facility were used to finance the ~~ModSpace~~ ~~loss from operations before income tax~~ ~~is the same as~~repayment of both the WillScot ~~effective rate for~~ABL facility and the ~~period.~~

~~Transaction~~Mobile Mini ABL facility, as well as to pay fees 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~~Merger and ~~$14.9~~the financing transactions, including $36 million in ~~integration costs for the three and nine months ended September 30, 2018, respectively,~~fees related to the ~~acquisitions~~New ABL Facility upfront fees which will be recorded as deferred financing costs in the third quarter of ~~ModSpace, Acton Mobile Holdings LLC (“Acton”)~~2020. The New ABL Facility matures July 1 2025. Borrowings under the New ABL Facility will initially bear interest at (i) in the case of US Dollars, at WSII’s option, either an adjusted LIBOR rate plus 1.875% or an alternative base rate plus 0.875%, (ii) in the case of Canadian Dollars, at WSII’s option, either a Canadian BA rate plus 1.875% or Canadian prime rate plus 0.875%, and ~~Onsite Space LLC (d/b/a Tyson Onsite (“Tyson”)).~~

~~The Company incurred$10.7 million~~(iii) in the case of Euros 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~~,British Pounds Sterling, 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.~~

13adjusted LIBOR rate plus 1.875%.

NOTE 3 - Revenue

~~Adoption of ASU 2014-09~~Revenue Disaggregation

~~On January 1, 2019,~~Geographic Areas

The Company had total revenue in 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 implementation of ASC 606 did not have a material impact on the Company’s financial resultsfollowing geographic areas for the ~~period ending September~~three and six months ended June 30 ~~2019.~~as follows:


	Three Months Ended June 30,						Six Months Ended June 30,
(in thousands)	2020		2019		2020		2019
US	$	237,613	$	238,087	$	472,941	$	469,554
Canada	16,279		21,405		32,985		39,599
Mexico	2,970		4,221		6,757		8,245
Total revenues	$	256,862	$	263,713	$	512,683	$	517,398

Major Product and Service Lines

The Company’s revenue by major product and service line for the three and six months ended June 30 was as follows:


	Three Months Ended June 30,						Six Months Ended June 30,
	2020		2019		2020		2019
(in thousands)	Total		Total		Total		Total
Modular space leasing revenue	$	132,377	$	129,475	$	263,775	$	253,025
Portable storage leasing revenue	5,716		6,021		11,565		12,262
VAPS^(a)	42,421		39,669		83,423		77,061
Other leasing-related revenue^(b)	9,629		10,653		19,732		20,762
Modular leasing revenue	190,143		185,818		378,495		363,110
Modular delivery and installation revenue	51,640		55,966		102,710		105,966
Total leasing and services revenue	241,783		241,784		481,205		469,076
New unit sales revenue	9,763		11,507		19,376		26,348
Rental unit sales revenue	5,316		10,422		12,102		21,974
Total revenues	$	256,862	$	263,713	$	512,683	$	517,398

(a) Includes $4.3 million and $4.1 million of value added products and services ("VAPS") service revenue for the three months ended June 30, 2020 and 2019, respectively and $8.3 million and $7.9 million of VAPS service revenue for the six months ended June 30 2020, and 2019, respectively.

~~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~~(b) Primarily damage billings, delinquent payment charges, and ~~recognized as revenue when, or as, the performance obligation is satisfied.~~other processing fees.

Modular Leasing and Services Revenue

The majority of revenue ~~(69%~~(72% for ~~both~~ the three and ~~nine~~six months ended ~~September~~June 30, ~~2019~~2020 an,d 69% and ~~63% and 67% for~~for the three and ~~nine~~six months ended ~~September~~June 30, ~~2018, respectively~~2019) is generated by rental income subject to the guidance of ASC ~~840.~~842. The remaining revenue for ~~2019~~the three and ~~2018~~six months ended June 30, 2020 and 2019 is generated by performance obligations in contracts with customers for services or sale of units subject to the guidance in ASU 2014-09, Revenue from Contracts with Customers (Topic 606) ("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 any, between the amount the customer is contractually required to pay over the cumulative amount of revenue recognized to date is recognized as incremental revenue upon return.

Rental equipment is leased primarily under operating leases and, from time to time, under sales-type lease arrangements. 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~~606").

~~Services Revenue (ASC 606)~~

~~The Company generally has three non-lease service-related performance obligations in its contracts with customers:~~

•~~Delivery~~Receivables, Contract Assets and ~~installation of the modular or portable storage unit;~~

•~~Maintenance and other ad hoc services performed during the lease term; and~~

•~~Removal services that occur at the end of the lease term.~~

Consideration is allocated to each of these performance obligations within the contract based upon their estimated relative standalone selling prices using the estimated cost plus margin approach. Revenue from these activities is recognized as the services are performed.

~~Sales Revenue (ASC 606)~~

Sales revenue is generated by the sale of new and used units. Revenue from the sale of new and used units is generally recognized at a point in time upon the transfer of control to the customer, which occurs when the unit is delivered and installed in accordance with the contract. Sales transactions constitute a single performance obligation.

~~Revenue Disaggregation~~

~~Geographic Areas~~

~~The Company had total revenue in the following geographic areas for the three and nine months ended September 30, 2019:~~

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

Liabilities

1410

~~Major Product and Service Lines~~

Rental equipment leasing is the Company’s core business, which significantly impacts the nature, timing, and uncertainty of the Company’s revenue and cash flows. This includes rental of both modular space and portable storage units along with value added products and services ("VAPS"), which include furniture, steps, ramps, basic appliances, internet connectivity devices, and other items used by customers in connection with the Company's products. Rental equipment 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’s revenue by major product and 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%~~72% of the Company's rental revenue is ~~accounted for under~~generated by lease revenue subject to the guidance of ASC ~~840 for both the three and nine months ended September 30, 2019.~~842. The customers that are responsible for the remaining revenue ~~that is~~ accounted for under ASC 606 ~~(and ASC 605 prior to 2019)~~ are generally the same customers that rent the Company's equipment. The Company manages credit risk associated with its accounts receivables at the customer level. ~~Because~~As the same customers generate the revenues that are accounted for under both ASC 606 and ASC ~~840,~~842, the discussions below on credit risk and the Company's allowance for doubtful accounts address ~~the Company's~~its 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%~~ 4.7% of the total receivables balance as of ~~September~~June 30, ~~2019. The Company manages credit risk through credit approvals, credit limits, and other monitoring procedures.~~2020.

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 $11.8 million, respectively, within SG&A in its condensed consolidated statements of income, which included amounts written-off and changes in its allowances for doubtful accounts. During the three and nine months ended September 30, 2018, the Company recognized bad debt expenses of $3.1 million and $5.4 million, respectively.

~~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,~~December 31, 2019, the Company had approximately ~~$32.1~~$42.6 million of deferred revenue that relates to removal services for lease transactions and advance billings for sale transactions, which are within the scope of ASC 606. As of ~~September~~June 30, ~~2019,~~2020, the Company had approximately ~~$46.3~~$47.1 million of deferred revenue relating to these services which are included in deferred revenue and customer deposits in the condensed consolidated balance sheets. During the ~~nine~~three months ended ~~September~~June 30, ~~2019, $8.2~~2020, $9.2 million of previously deferred revenue relating to removal services for lease transactions and advance billings for sale transactions was recognized as revenue.

The Company does not have material contract assets and it did not recognize any material impairments of ~~any~~ contract assets.

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

The primary costs to obtain contracts for new and rental unit sales with the Company's customers are ~~commissions.~~commissions paid to our sales force. The Company pays its sales force commissions on the sale of new and rental units. For new and rental unit sales, the period benefited by each commission is less than one ~~year. As~~year, therefore the commissions are be expensed as incurred.

Credit Losses

The Company is exposed to credit losses from trade receivables generated through its leasing and sales business. The Company assesses each customer’s ability to pay for the products it sells by conducting a ~~result,~~credit review. The credit review considers expected billing exposure and timing for payment and the customer’s established credit rating. The Company performs its credit review of new customers at inception of the customer relationship and for existing customers when the customer transacts new leases after a defined period of dormancy. The Company also considers contract terms and conditions, country risk and business strategy in the evaluation.

The Company monitors ongoing credit exposure through an active review of customer balances against contract terms and due dates. The Company may employ collection agencies and legal counsel to pursue recovery of defaulted receivables. The Company uses a loss-rate method to assess for credit losses. The allowances for credit losses reflect the estimate of the amount of receivables that the Company ~~has applied~~will be unable to collect based on historical write-off experience and, as applicable, current conditions and reasonable and supportable forecasts that affect collectability. This estimate could require change based on changing circumstances, including changes in the ~~practical expedient for incremental costs~~economy or in the particular circumstances of ~~obtaining a sales contract and will expense commissions as incurred.~~

~~Other Matters~~

The Company's ASC 606 revenues do not include material amounts of variable consideration, other than the variability noted for services arrangements expected to be performed beyond a twelve month period.

~~The Company's payment terms vary by the type and location of its customer and the product or services offered. The time between invoicing and when payment is due is not significant. While~~individual customers. Accordingly, 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,be required to increase or ~~customer types, the Company requires payment before the products or services are delivered to the customer.~~decrease our allowances.

~~Revenue is recognized net of taxes collected from customers, which are subsequently remitted to governmental authorities.~~

The most significant estimates and judgments relating to ASC 606 revenues involve the estimation of relative stand-alone selling prices for the purpose of allocating consideration to the performance obligations in the Company's lease transactions.


(in thousands)	Six Months Ended June 30, 2020				Year Ended December 31, 2019
Balance at beginning of year	$	15,828			$	9,340
Net charges to bad debt expense and revenue	9,122				14,496
Write-offs			(5,573)				(7,945)
Foreign currency translation and other			(194)				(63)
Balance at end of period			$	19,183			$	15,828

NOTE 4 - ~~Inventories~~Leases

~~Inventories at~~As of June 30, 2020, the ~~respective balance sheet dates consisted~~undiscounted future lease payments for operating lease liabilities were as follows:


	(in thousands)
2020	$	19,748
2021	36,770
2022	30,487
2023	24,353
2024	19,141
Thereafter	53,540
Total lease payments	184,039
Less: interest	(36,442)
Present value of lease liabilities	$	147,597

The Company’s lease activity during the six months ended June 30, 2020 and 2019 was as follows:


	Six Months Ended June 30,
Financial Statement Line (in thousands)	2020				2019
Operating Lease Expense
Fixed lease expense
Cost of leasing and services			$	3,074			$	3,559
Selling, general and administrative			16,866				16,820
Lease impairment expense and other related charges			1,359				533
Short-term lease expense
Cost of leasing and services			13,603				14,708
Selling, general and administrative			851				1,382
Lease impairment expense and other related charges			466				—
Variable lease expense
Cost of leasing and services			3,657				1,359
Selling, general and administrative			2,131				2,085
Lease impairment expense and other related charges			511				—
Total operating lease expense	$	42,518			$	40,446

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 included the ~~following:~~termination of leases for duplicative branches, equipment and corporate facilities. As part of these plans, certain of its leased locations were vacated and leases were terminated or impaired.

(in thousands) September 30, 2019 December 31, 2018
Raw materials and consumables $ 15,956 $ 16,022
Work in process — 196
Total inventories $ 15,956 $ 16,218
During the sixmonths ended June 30, 2020, the Company recorded $3.1 million in lease impairment expense and other related charges which is comprised of $0.8 million loss on lease exit and impairment charges and $2.3 million in closed location rent expense. During the six months ended June 30, 2019, the Company recorded $4.6 million in lease impairment expense and other related charges which is comprised of $2.4 million in right-of-use ("ROU") asset impairment on leased locations no longer used in operations, $1.7 million loss on lease exit and $0.5 million in closed location rent expense.

Supplemental cash flow information related to operating leases for the six months ended June 30, 2020 was as follows:


	Six Months ended June 30,
Supplemental Cash Flow Information (in thousands)	2020		2019
Cash paid for the amounts included in the measurement of lease liabilities	$	20,271	$	19,692
Right of use assets obtained in exchange for lease obligations	$	19,242	$	16,160

Weighted-average remaining operating lease terms and the weighted average discount rates as of June 30, 2020 and December 31, 2019 were as follows:

Lease Terms and Discount Rates

June 30,
2020

December 31, 2019

Weighted-average remaining lease term

6.41 years

6.51 years

Weighted-average discount rate

6.9

7.0

The Company presents information related to leasing revenues in Note 3.

NOTE 5 - Inventories

Inventories were comprised of raw materials and consumables of $14.8 million and $15.4 million at June 30, 2020 and December 31, 2019, respectively.

NOTE 56 - Rental Equipment, net

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

(in thousands) September 30, 2019 December 31, 2018
Modular units and portable storage $ 2,430,505 $ 2,333,776
Value added products 115,762 90,526
Total rental equipment 2,546,267 2,424,302
Less: accumulated depreciation (593,438) (495,012)
Rental equipment, net $ 1,952,829 $ 1,929,290

~~During the three and nine months ended September 30, 2019,~~ ~~the Company r~~eceived $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 r~~eceived $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 gains of $0.0 million and $4.8 million which are reflected in other income, net, on the condensed consolidated statements of operations for three and nine months ended September 30, 2018, respectively.


(in thousands)	June 30, 2020		December 31, 2019
Modular units and portable storage	$	2,476,963	$	2,455,471
Value added products	130,886		121,855
Total rental equipment	2,607,849		2,577,326
Less: accumulated depreciation	(699,550)		(632,890)
Rental equipment, net	$	1,908,299	$	1,944,436

NOTE 67 - Goodwill

Changes in the carrying amount of goodwill were as follows:

(in thousands) Modular – US
Modular – Other
North America
Total
Balance at January 1, 2018 $ 28,609 $ — $ 28,609
Acquisition of a business 183,711 35,128 218,839
Changes to preliminary purchase price accounting 944 — 944
Foreign currency translation — (1,375) (1,375)
Balance at December 31, 2018 213,264 33,753 247,017
Changes to preliminary purchase price accounting (9,331) (4,069) (13,400)
Foreign currency translation — 980 980
Balance at September 30, 2019 $ 203,933 $ 30,664 $ 234,597


(in thousands)	Modular – US		Modular – Other North America		Total
Balance at December 31, 2018	$	213,264	$	33,753	$	247,017
Changes to preliminary purchase price accounting	(9,331)		(4,148)		(13,479)
Effects of movements in foreign exchange rates	—		1,639		1,639
Balance at December 31, 2019	203,933		31,244		235,177
Effects of movements in foreign exchange rates	—		(1,348)		(1,348)
Balance at June 30, 2020	$	203,933	$	29,896	$	233,829

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

~~Impairment Indicator Analysis~~

The Company had no0 goodwill impairment during the ~~nine~~six months ended ~~September~~June 30, ~~2019 and~~ ~~there were no indicators of impairment as of September 30, 2019. There were indicators of impairment as of~~2020 or the year ended December 31, ~~2018,~~2019.

The Company considered the economic environment resulting from the COVID-19 pandemic 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~~part of its review for indicators of potential impairment and reviewed qualitative information currently available in ~~management's judgment. As a result,~~determining if it was more likely than not that the ~~Company performed an interim goodwill impairment test~~fair values of the Company’s reporting units were less than the carrying amounts as of ~~December 31, 2018. The interim impairment analysis determined that there was no impairment~~June 30, 2020.Based on the Company’s current long-term projections and the extent of ~~goodwill for either the US or Canadian reporting units as of December 31, 2018. As of December 31, 2018, the US reporting unit continued to have a~~ 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~~at the Company's October 1, 2019 annual impairment test date, management concluded that it is not more likely than ~~1% as of December 31, 2018.~~

The fair value of the reporting units at December 31, 2018 was determined based on the income approach, which requires management to make certain estimates and judgments for estimates of economic and market information in the discounted cash flow analyses.

~~There are inherent uncertainties and judgments involved when determining~~not that the fair value of the Company's reporting units ~~because~~were less than their carrying amount during the ~~success~~three and six months ended June 30, 2020 and there were no impairment indicators that would require an interim impairment test.

Due to the uncertain and rapidly evolving nature of the ~~reporting unit depends on~~conditions surrounding 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~~COVID-19 pandemic, changes in ~~determining fair value of the reporting units utilize inputs that are outside the control of management and are dependent on market and~~ economic conditions, such as the discount rate, foreign currency rates, and growth rates. These assumptions are inherently uncertain and deterioration of market and economic conditions would adversely impact the Company's ability to meet its projected results and would affect the fair value of the reporting units.

Of the key assumptions that impact the goodwill impairment test, the expected future cash flows, discount rate and foreign exchange rates are among the most sensitive and are considered to be critical assumptions. If any one of the above inputs changes, it could reduce or increase the estimated fair value of the affected reporting unit. A reduction in the fair value of a reporting unit could result in an impairment charge up to the full amount of goodwill reported.

Although the Company believes that it has sufficient historical and projected information available to test for goodwill impairment, it is possible that actual results could differ from the estimates used in its impairment tests. As a result, the Company continues to monitor actual results versus forecast results and internal and external factors thatoutlook may ~~impact the enterprise value of the reporting unit.~~change our long-term projections.

1713

NOTE 78 - Intangibles

Intangible assets other than goodwill at the respective balance sheet dates consisted of the following:


		September 30, 2019													June 30, 2020
(in thousands)	(in thousands)	Weighted average remaining life (in years)	Gross carrying amount		Accumulated amortization		Net book value		(in thousands)	Remaining life (in years)	Gross carrying amount		Accumulated amortization		Net book value
Intangible assets subject to amortization:	Intangible assets subject to amortization:								Intangible assets subject to amortization:
Favorable lease rights		4.6	$	1,738	$	(510)	$	1,228
ModSpace trade name	ModSpace trade name	1.9	3,000		(1,125)		1,875		ModSpace trade name	1.2	$	3,000	$	(1,875)	$	1,125
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 name	Trade name		125,000		—		125,000		Trade name		125,000		—		125,000
Total intangible assets other than goodwill	Total intangible assets other than goodwill		$	129,738	$	(1,635)	$	128,103	Total intangible assets other than goodwill		$	128,000	$	(1,875)	$	126,125


		December 31, 2018													December 31, 2019
(in thousands)	(in thousands)	Weighted average remaining life (in years)	Gross carrying amount		Accumulated amortization		Net book value		(in thousands)	Remaining life (in years)	Gross carrying amount		Accumulated amortization		Net book value
Intangible assets subject to amortization:	Intangible assets subject to amortization:								Intangible assets subject to amortization:
Favorable lease rights		6.7	$	4,523	$	(347)	$	4,176
ModSpace trade name	ModSpace trade name	2.7	3,000		(375)		2,625		ModSpace trade name	1.7	$	3,000	$	(1,375)	$	1,625
Total intangible assets subject to amortization			7,523		(722)		6,801

Indefinite-lived intangible assets:	Indefinite-lived intangible assets:								Indefinite-lived intangible assets:
Trade name			125,000		—		125,000
Trade names									Trade names		125,000		—		125,000
Total intangible assets other than goodwill	Total intangible assets other than goodwill		$	132,523	$	(722)	$	131,801	Total intangible assets other than goodwill		$	128,000	$	(1,375)	$	126,625

~~The Company assigned~~ ~~$3.0 million and $4.0 million~~ ~~to definite-lived intangible assets, related to~~For both the ~~ModSpace trade name and favorable lease rights. The Company allocated~~ ~~$3.9 million and $0.1 million of the favorable lease rights to the Modular - US segment and Modular - Other North America segments, as defined in Note 16, respectively. The ModSpace trade name has an estimated useful life of~~ ~~three~~ ~~years and the favorable lease assets are amortized over the life of the leases. These intangibles 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~~six months ended ~~September~~June 30, 2020 and 2019, ~~respectively. For~~ the ~~three months ended September 30, 2019, $0.3 million was~~aggregate amount recorded into 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~~ModSpace trade name 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.~~million.

~~The Company recognized a non-cash impairment charge of~~
~~$2.4 million~~ ~~in impairment losses on long-lived assets during the~~ ~~nine months ended September 30, 2019~~ ~~as a result of the closure of a branch location with a favorable lease asset which was acquired in the ModSpace acquisition.~~

1814

NOTE 89 - 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, 2019		December 31, 2018		(in thousands, except rates)	Interest rate	Year of maturity	June 30, 2020		December 31, 2019
2022 Secured Notes	2022 Secured Notes	7.875%	2022	$	293,530	$	292,258	2022 Secured Notes	7.875%	2022	265,398		264,576
2023 Secured Notes		6.875%	2023	482,344		293,918
Unsecured Notes		10.000%	2023	—		198,931
US ABL Facility	US ABL Facility	Varies	2022	897,917		853,409		US ABL Facility	Varies	2022	850,925		885,245
Canadian ABL Facility (a)	Canadian ABL Facility (a)	Varies	2022	—		—		Canadian ABL Facility (a)	Varies	2022	—		—
Capital lease and other financing obligations				38,394		37,983
2023 Secured Notes								2023 Secured Notes	6.875%	2023	483,643		482,768
2025 Senior Notes								2025 Senior Notes	6.125%	2025	636,442		—
Total debt	Total debt			1,712,185		1,676,499		Total debt			$	2,236,408	$	1,632,589
Less: current portion of long-term debt				(2,025)		(1,959)
Less: Current portion								Less: Current portion			265,398		—
Total long-term debt	Total long-term debt			$	1,710,160	$	1,674,540	Total long-term debt			$	1,971,010	$	1,632,589

(a) As of ~~September~~June 30, 2020 and December 31, 2019, the C~~ompany~~Company had 0 o~~utstanding~~outstanding principal borrowings ~~remaining~~ on the Canadian ABL Facility and ~~$2.3~~$1.6 million ofand $2.1 million of related debt issuance ~~costs.~~costs, respectively. As there were 0 principal borrowings outstanding on the Canadian ABL Facility, the ~~$2.3~~ $1.6 million and $2.1 million of debt issuance costs related to that facility are included in other non-current assets on the condensed consolidated balance ~~sheet.~~ sAsheet as of June 30, 2020 and December 31, 2018, the Company had $0.9 million of outstanding principal borrowings on the Canadian ABL Facility and $2.9 million of related debt issuance costs. $0.9 million of the related debt issuance costs are recorded as a direct offset against the principal of the Canadian ABL Facility and the remaining $2.0 million, in excess of principal, has been included in other non-current assets on the condensed consolidated balance sheet.2019, respectively.

The Company is subject to various covenants and restrictions for the ABL Facility, the 2022 Secured Notes and the 2023 Secured Notes. The Company redeemed the Unsecured Notes on June 19, 2019 and has no remaining obligations related to the Unsecured Notes following the redemption.restrictions. The Company was in compliance with all covenants related to debt as of ~~September~~June 30, ~~2019~~2020 and December 31, ~~2018.~~2019. Subsequent to June 30, 2020, and in connection with the Merger and related refinancing described in Note 2, the Company repaid the 2022 Secured Notes and the ABL Facility as described below.

ABL Facility

On November 29, 2017, WS Holdings, WSII and certain of its subsidiaries entered into an ABL credit agreement (the “ABL Facility”), as amended in July and August 2018, that provides a senior secured revolving credit facility that matures on May 29, 2022.

The ABL Facility 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.

Borrowing availability under the ABL Facility is equal to the lesser of $1.425 billion and the applicable borrowing bases (the “Line Cap”). The borrowing bases are a function of, among other things, the value of the assets in the relevant collateral pool. At June 30, 2020, the Line Cap is $1.416 billion.

The obligations of the US Borrowers are unconditionally guaranteed by WS Holdings and each existing and subsequently acquired or organized direct or indirect wholly-owned US organized restricted subsidiary of WS Holdings, other than excluded subsidiaries (together with WS Holdings, the "US Guarantors"). The obligations of the Canadian Borrowers are unconditionally guaranteed by the US Borrowers and the US Guarantors, and each existing and subsequently acquired or organized direct or indirect wholly-owned Canadian organized restricted subsidiary of WS Holdings other than certain excluded subsidiaries (together with the US Guarantors, the "ABL Guarantors").

At ~~September~~June 30, ~~2019,~~2020, the weighted average interest rate for borrowings under the ABL Facility was ~~4.54%~~2.70%. The weighted average interest rate on the balance outstanding, as adjusted for the effects of the interest rate swap agreements was ~~4.99%~~4.03%. Refer to Note 1415 for a more detailed discussion on interest rate management.

At ~~September~~June 30, ~~2019,~~2020, the Borrowers had ~~$489.2~~$540.5 million of available borrowing capacity under the ABL Facility, including ~~$354.8~~$409.6 million under the US ABL Facility and ~~$134.4~~$130.9 million under the Canadian ABL Facility. At December 31, ~~2018,~~2019, the Borrowers had ~~$532.6~~$509.1 million of available borrowing capacity under the ABLABL Facility, including ~~$393.5~~$369.3 million under the US ABL Facility and ~~$139.1~~$139.8 million under the Canadian ABL Facility.

The Company had ~~issued $12.7 million and $13.0~~issued $10.4 million of standby letters of credit under the ABL Facility at ~~September~~June 30, ~~2019~~2020 and December 31, ~~2018, respectively.~~2019. At ~~September~~June 30, ~~2019,~~2020, letters of credit and guarantees carried fees of 2.625%.

The Company hahad ~~d $917.5~~$865.0 million a~~nd $879.4~~ and $903.0 million in outstanding principal under the ABL Facility at ~~September~~June 30, ~~2019~~2020 and December 31, ~~2018,~~2019, respectively.

Debt issuance costs and discounts o~~f $19.6~~of $14.1 million an~~d $26.0~~and $17.8 million are included in the carrying value of the US ABL Facility at ~~September~~June 30, ~~2019~~2020 and December 31, ~~2018,~~2019, respectively.

In connection with the Merger and related financing transactions, on July 1, 2020, the Company entered into the New ABL Facility and repaid the ABL Facility as described in Note 2 – Acquisitions and Related Financings.

2022 Senior Secured Notes

~~In connection with the closing~~As of ~~the Business Combination,~~June 30, 2020, WSII ~~issued $300.0~~had $270.0 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, 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..

Unamortized debt issuance costs pertaining to the 2022 Secured Notes ~~was~~were $~~6.5 million~~ ~~and~~ ~~$7.7~~4.6 million and $5.4 million as of ~~September~~June 30, ~~2019~~2020 and December 31, ~~2018,~~2019, respectively.

In connection with the Merger and related financing transactions, on July 1, 2020, the Company redeemed all of its 2022 Secured Notes and paid a make whole premium of $10.6 million which will be included in the loss from extinguishment expenses recorded in July 2020. The 2022 Secured Notes are classified as current at June 30, 2020 as the Company utilized cash in the escrow account classified as Restricted cash on the condensed consolidated balance sheet to repay these notes.

2023 Senior Secured Notes

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

On May 14, 2019, WSII completed a tack-on offering of $190.0 million in aggregate principal amount to the Initial 2023 Secured Notes (the "Tack-on Notes"). The Tack-on Notes were issued as additional securities under an ~~indenture, dated August 6, 2018, by and among the Issuer, the guarantors named therein and Deutsche Bank Trust Company Americas, as trustee and collateral agent.~~original indenture. The Tack-On Notes and the Initial 2023 Secured Notes are treated as a single class of debt securities under the indenture (the "2023 Secured Notes") and together with the 2022 Secured Notes, the "Senior Secured Notes"). The Tack-On Notes have identical terms to the Initial 2023 Secured Notes, other than with respect to the issue date and issue price. WSII incurred a total of $3.0 million in debt issuance costs in connection with the tack-on offering, which were deferred and ~~will be~~are being amortized through the August 15, 2023 maturity date. The Tack-on Notes were issued at a premium of $0.5 million which ~~will be~~is being amortized through the August 15, 2023 maturity date. ~~The proceeds of the Tack-On Notes were used to repay a portion of the US ABL Facility.~~

Unamortized debt issuance costs and discounts, net of premium, pertaining to the 2023 Secured Notes were ~~$7.7~~ $6.4 million and ~~$6.1~~$7.2 million as of ~~September~~June 30, ~~2019~~2020 and December 31, ~~2018,~~2019, respectively.

2023 Senior Unsecured Notes

~~On August 3, 2018, a special purpose subsidiary of WSII completed a private offering of~~Prior to June 30, 2019, the Company held $200.0 million in aggregate principal amount of ~~its~~ senior unsecured notes due November 15, 2023 (the “Unsecured Notes”). The Issuer entered into an indenture with Deutsche Bank Trust Company Americas, as trustee, which governs the terms and conditions of the Unsecured Notes. In connection with the ModSpace acquisition, the Issuer merged with and into WSII and WSII assumed the Unsecured Notes.

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

~~Prior~~2025 Senior Secured Notes

As more fully described in Note 2 – Acquisitions and Related Financing Transactions, on June 15, 2020, the Company, completed a private offering of $650.0 million in aggregate principal amount of its 6.125% senior secured notes due 2025. The Company recorded $13.6 million in deferred financing fees related to the ~~redemption, the Unsecured Notes bore~~2025 secured notes.

The 2025 secured notes mature on June 15, 2025. They bear interest at a rate of ~~10%~~6.125% per annum. Interest ~~was~~is payable semi-annually on ~~February~~June 15 and ~~August~~December 15 of each year, beginning ~~February~~December 15, ~~2019.~~

~~Unamortized debt issuance costs and discounts pertaining to the Unsecured Notes were $1.1 million as of December 31, 2018.~~

~~Capital Lease and Other Financing Obligations~~

~~The Company’s capital lease and financing obligations primarily consisted of~~ ~~$38.4 million and $37.9 million under sale-leaseback transactions and $0.0 million and~~ ~~$0.1 million of capital leases at September 30, 2019 and December 31, 2018, respectively. The Company’s capital lease and financing obligations are presented~~ ~~net of $1.4 million a~~nd $1.6 million of debt issuance costs at September 30, 2019 and December 31, 2018, respectively. The Company’s capital leases primarily relate to real estate, equipment and vehicles and have interest rates ranging fro~~m 1.2% to 11.9%.~~ In connection with the adoption of ASC 842, the financing obligations under sale-leaseback transactions will be reversed and the associated lease liabilities will be recorded as part of the operating lease liabilities.2020.

NOTE 910 – Equity

Common Stock ~~and Warrants~~

Common Stock

On June 30, 2020, as contemplated by the Merger Agreement, and pursuant to the terms of an exercise notice delivered by Sapphire Holdings, an affiliate of TDR Capital, to WillScot, Sapphire Holdings exchanged each of its shares of common stock, par value $0.0001 per share, of Holdings, pursuant to that certain existing exchange agreement, between WillScot and Sapphire Holdings, for 1.3261 shares of newly issued Class A common stock (the “Sapphire Exchange”). As a result of the Sapphire Exchange, all issued and outstanding shares of WillScot’s Class B common stock, par value $0.0001 per share (the "Class B common stock"), were automatically canceled for no consideration and the existing exchange agreement was automatically terminated. As a result of the Sapphire Exchange, Holdings became a wholly-owned subsidiary of WillScot. Sapphire Holdings received 10,641,182 shares of Class A common stock in the Sapphire Exchange (the “Exchange Shares”).

Prior to the Sapphire Exchange, Sapphire Holdings ownership of Holdings was recorded as a non-controlling interest in the condensed consolidated financial statements. Effective as of June 30, 2020, due to the Sapphire Exchange, the

Company's subsidiaries are each wholly owned and there is no non-controlling interest. As a result of the Sapphire Exchange, non-controlling interest of $63.9 million was reclassified to $66.9 million of additional paid-in-capital and $(3.0) million to accumulated other comprehensive loss, on the condensed consolidated balance sheet.

In connection with the Sapphire Exchange, stock compensation vesting ~~and stock option exercises~~event described in Note ~~13,~~14 and the warrant exercises described below, the Company issued ~~242,357~~12,414,378 shares of Class A common stock during the six months ended June 30, 2020.

In conjunction with the Merger on July 1, 2020, the Company issued 106,428,908 shares of Class A common stock in exchange for Mobile Mini common stock outstanding and subsequently filed an amended and restated certificate of incorporation, which reclassified all outstanding shares of the Class A common stock and converted such shares into shares of common stock, ~~during~~par value $0.0001 per share, of WillScot Mobile Mini. As of July 31, 2020, the ~~nine months ended September 30, 2019.~~Company had 227,721,220 shares of Common Stock.

Warrants

~~Double Eagle issued~~On January 24, 2020, the Company delivered a notice (the “Redemption Notice”) to redeem all of its outstanding warrants to purchase ~~its~~the Company’s Class A common stock, which were issued under the warrant agreement, dated September 10, 2015, by and between Double Eagle and Continental Stock Transfer & Trust Company, as ~~components~~warrant agent (the “Warrant Agreement”), as part of the units sold in ~~its~~Double Eagle's initial public offering ~~(the “Public Warrants”). Double Eagle also~~that remained unexercised on February 24, 2020. As further described in the Redemption Notice and permitted under the Warrant Agreement, holders of these warrants who exercised them following the date of the Redemption Notice were required to do so on a cashless basis. From January 1, 2020 through January 24, 2020, 796,610 warrants were exercised for cash, resulting in the Company receiving cash proceeds of $4.6 million and the Company issued 398,305 shares of the Company's Class A common stock. After January 24, 2020 through February 24, 2020, 5,836,048 warrants ~~to purchase its~~were exercised on a cashless basis. An aggregate of 1,097,162 shares of the Company's Class A common stock was issued in ~~a private placement concurrently~~connection with ~~its initial public offering (the “Private Warrants,” and together with~~these exercises. Thereafter, the ~~Public Warrants,~~Company completed the ~~"2015 Warrants").~~redemption of 38,509 remaining warrants under the Redemption Notice for $0.01 per warrant.

At ~~September~~June 30, ~~2019~~2020, ~~24,367,867~~the Company has 9,782,106 warrants each, exercisable for 1 share, with an exercise price of ~~the 2015 Warrants~~$15.50 and ~~9,999,579~~17,561,700 warrants exercisable for one half share with an exercise price of ~~the 2018 Warrants were~~$5.75 outstanding.

2017

Accumulated Other Comprehensive Loss

The changes in accumulated other comprehensive loss ("AOCL"), net of tax, for the ~~three and~~ ~~nine~~six months ended ~~September~~June 30, ~~2019~~2020 and ~~2018~~2019 were as follows:


(in thousands)	(in thousands)	Foreign Currency Translation		Unrealized losses on hedging activities		Total		(in thousands)	Foreign Currency Translation		Unrealized losses on hedging activities		Total
Balance at December 31, 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)
Balance at December 31, 2019								Balance at December 31, 2019	$	(52,982)	$	(9,793)	$	(62,775)
Total other comprehensive loss prior to reclassifications	Total other comprehensive loss prior to reclassifications	(2,799)		(1,337)		(4,136)		Total other comprehensive loss prior to reclassifications	(21,144)		(10,330)		(31,474)
Reclassifications to the statements of operations	Reclassifications to the statements of operations	—		837		837		Reclassifications to the statements of operations	—		1,572		1,572
Less other comprehensive loss attributable to non-controlling interest	Less other comprehensive loss attributable to non-controlling interest	256		45		301		Less other comprehensive loss attributable to non-controlling interest	1,913		790		2,703
Balance at September 30, 2019		$	(57,496)	$	(11,412)	$	(68,908)
Balance at March 31, 2020								Balance at March 31, 2020	(72,213)		(17,761)		(89,974)
Total other comprehensive income (loss) prior to reclassifications								Total other comprehensive income (loss) prior to reclassifications	7,982		(1,642)		6,340
Reclassifications to the statements of operations								Reclassifications to the statements of operations	—		2,617		2,617
Less other comprehensive income attributable to non-controlling interest								Less other comprehensive income attributable to non-controlling interest	(730)		(88)		(818)
Impact of elimination of non-controlling interest on accumulated other comprehensive income								Impact of elimination of non-controlling interest on accumulated other comprehensive income	(1,299)		(1,673)		(2,972)
Balance at June 30, 2020								Balance at June 30, 2020	$	(66,260)	$	(18,547)	$	(84,807)

(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 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.~~


(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 statements of operations	—		435		435
Less other comprehensive loss (income) 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	4,321		(4,500)		(179)
Reclassifications from AOCI to income	—		613		613
Less other comprehensive loss (income) attributable to non-controlling interest	(397)		351		(46)
Balance at June 30, 2019	$	(54,933)	$	(10,957)	$	(65,890)

For the ~~three and~~ ~~nine~~six months ended ~~September~~June 30, 2020 and 2019, ~~$0.8~~$4.2 million ~~and $2.0~~and $1.2 million, respectively, was reclassified from AOCL into the condensed consolidated statement of operations within interest expense related to the interest rate swaps discussed in Note ~~14.~~15. The Company did 0t record a tax benefit for the three and six months ended June 30, 2020, associated with this reclassification. For the three and ~~nine~~six months ended ~~September~~June 30, 2019, the Company recorded a tax benefit of ~~$0.0~~$1.2 million and ~~$0.1~~$1.9 million, respectively, associated with this reclassification.

NOTE 1011 – Income Taxes

The Company recorded an$(0.3) million and $0.5 million of income tax ~~benefit of~~ ~~$1.2 million and $2.0 million~~ (benefit) expense for the three and ~~nine~~six months ended ~~September~~June 30, ~~2019,~~2020, respectively and ~~$6.5~~$(1.2) million and ~~$13.6~~$(0.8) million for the three and ~~nine~~six months ended ~~September~~June 30, ~~2018,~~2019 respectively.

The Company’s effective tax rate for the three and ~~nine~~six months ended ~~September~~June 30, ~~2019~~2020 was ~~266.4%~~(2.3)%, and ~~8.4%~~5.2%, respectively, and ~~15.0%~~9.4% and ~~23.9% f~~or3.6% for the ~~corresponding~~same periods in ~~2018.~~2019. The ~~Company did not recognize a~~income tax benefit on the loss from operations for the three or nine months ended September 30, 2019 as it is not more likely than not that the benefit is realizable. A tax benefit will be recognized only when there is sufficient income to support realizability. The Company’s effective tax rate(benefit) expense for the three and ~~nine~~six months ended ~~September~~June 30, 2020 is primarily a result of the benefit from reversal of valuation allowance due to pre-tax income offset by net increase in expense for certain discrete items recorded in the respective quarters, mainly driven by legislative enactments. The income tax benefit for the three and six months ended June 30, 2019 is ~~principally a result of~~primarily from discrete ~~items. The higher effective rate for the three months ended September 30, 2019 is due to a smaller pre-tax loss from operations than the prior two quarters.~~

~~During the three and nine months ended September 30, 2019, the Company recognized income tax benefit of~~ ~~$1.2 million and $2.0 million, respectively, primarily attributable to (i) enacted legislative changes and (ii) valuation allowance adjustments generated by changes in provisional ModSpace balances~~items recorded in ~~2019.~~

~~During~~ the ~~three~~respective quarters, including state legislative enactments and ~~nine months ended September 30, 2018, the Company recognized income~~uncertain tax ~~benefit of $0.6 million and $5.3 million, respectively, mainly related to enacted legislative changes in the second quarter of 2018.~~position reversals.

NOTE 1112 - 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, restricted cash, trade receivables, trade payables, ~~capital lease and other financing obligations,~~ and other current liabilities approximate their carrying amounts.

The following table shows the carrying amounts and fair values of financial assets and liabilities, including their levels in the fair value hierarchy:


		September 30, 2019														December 31, 2018															June 30, 2020								December 31, 2019
		Carrying Amount		Fair Value										Carrying Amount		Fair Value											Carrying Amount		Fair Value								Carrying Amount	Fair Value
(in thousands)	(in thousands)					Level 1		Level 2		Level 3						Level 1		Level 2		Level 3		(in thousands)	Carrying Amount						Level 2		Level 3				Carrying Amount	Level 1		Level 3
US ABL Facility	US ABL Facility	$	897,917	$	—	$	917,500	$	—	$	853,409	$	—	$	878,500	$	—	US ABL Facility	$	850,925	$	—			$	—	$	885,245	$	—	$	903,000	$	—
Canadian ABL Facility	Canadian ABL Facility	—		—		—		—		—		—		918		—		Canadian ABL Facility	—		—		—		—		—		—		—		—
2022 Secured Notes	2022 Secured Notes	293,530		—		314,535		—		292,258		—		297,027		—		2022 Secured Notes	265,398		—		281,003		—		264,576		—		282,250		—
2023 Secured Notes	2023 Secured Notes	482,344		—		514,318		—		293,918		—		288,633		—		2023 Secured Notes	483,643		—		505,754		—		482,768		—		517,334		—
Unsecured Notes		—		—		—		—		198,931		—		197,462		—
2025 Secured Notes																		2025 Secured Notes	636,442		—		664,788		—		—		—		—		—
Total	Total	$	1,673,791	$	—	$	1,746,353	$	—	$	1,638,516	$	—	$	1,662,540	$	—	Total	$	2,236,408	$	—	$	2,316,545	$	—	$	1,632,589	$	—	$	1,702,584	$	—

The carrying value of the US ABL Facility, the ~~Canadian ABL Facility,~~2022 Secured Notes, the ~~2022~~2023 Secured Notes, and the ~~2023~~2025 Secured Notes ~~inclu~~includes~~des $19.6~~ $14.1 million ~~$0.0~~, $4.6 million, ~~$6.5~~$6.4 million, and ~~$7.7~~$13.6 million re~~spectively,~~, respectively, of unamortized debt issuance costs as of ~~September~~June 30, ~~2019,~~2020, 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 and the 2023 Secured Notes ~~and the Unsecured Notes~~ includes ~~$25.1~~$17.8 million, ~~$0.9 million, $7.7 million, $6.1~~$5.4 million and ~~$1.1~~$7.2 million, respectively, of unamortized debt issuance costs ~~for the year ended~~as of December 31, ~~2018,~~2019, which are presented as a direct reduction of the corresponding liability.

The carrying value of the US and Canadian ABL ~~Facility,~~Facilities, excluding debt issuance costs, approximates fair value as the interest rates are variable and reflective of market rates. The fair value of the 2022 Secured Notes, the 2023 Secured Notes, and the ~~Unsecured~~2025 Secured Notes is based on their last trading price at the end of each period obtained from a third party. The location and the fair value of derivative assets and liabilities designated as hedges in the condensed consolidated balance sheet are disclosed in Note ~~14.~~

15.

NOTE 1213 - Restructuring

Restructuring costs include charges associated with exit or disposal activities that meet the definition of restructuring under FASB ASC Topic 420, ~~“Exit~~Exit or Disposal Cost ~~Obligations”~~Obligations (“ASC 420”). The Company's restructuring plans are generally country or region specific and are typically completed within a one year period. Restructuring costs incurred under these plans include (i) one-time termination benefits related to employee separations, (ii) contract termination costs, and (iii) ~~other related costs associated with exit or disposal activities including, but not limited to,~~non lease costs for consolidating or closing facilities. Costs related to the integration of acquired businesses that do not meet the definition of restructuring under ASC 420, such as employee training costs, duplicate facility costs, and professional services expenses, are included within SG~~&A.~~&A expense.

The following is a summary of the activity in the Company’s restructuring accruals for the three and ~~nine~~six months ended ~~September~~June 30, ~~2019~~2020 and ~~2018:~~2019:

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


	Three Months Ended June 30,
(in thousands)	2020										2019
	Employee Costs		Facility Exit Costs		Total		Employee Costs		Facility Exit Costs		Total
Balance at beginning of the period - March 31, 2020	$	168	$	—	$	168	$	2,847	$	38	$	2,885
Reclassification of liability to operating lease asset at the adoption of ASC 842(a)	—		—		—		—		(476)		(476)
Charges	743		5		748		123		1,509		1,632
Cash payments	(387)		—		(387)		(1,704)		—		(1,704)
Foreign currency translation	1		—		1		5		—		5
Non-cash movements	—		(5)		(5)		(128)		(1,071)		(1,199)
Balance at end of period	$	525	$	—	$	525	$	1,143	$	—	$	1,143


	Six Months Ended June 30,
(in thousands)	2020										2019
	Employee Costs		Facility Exit Costs		Total		Employee Costs		Facility Exit Costs		Total
Balance at beginning of the period - December 31, 2020	$	447	$	—	$	447	$	4,544	$	972	$	5,516
Reclassification of liability to operating lease asset at the adoption of ASC 842(a)	—		—		—		—		(1,415)		(1,415)
Charges	671		17		688		1,630		1,658		3,288
Cash payments	(594)		—		(594)		(4,932)		—		(4,932)
Foreign currency translation	1		—		1		29		—		29
Non-cash movements	—		(17)		(17)		(128)		(1,215)		(1,343)
Balance at end of period	$	525	$	—	$	525	$	1,143	$	—	$	1,143

The restructuring charges for the three and six months ended June 30, 2020 are primarily driven by termination costs related to reductions in force as a result of COVID-19.

The restructuring charges for the three and ~~nine~~six months ended ~~September~~June 30, 2019 primarily 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~~These costs were 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~~the existing business. At

Segment~~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.s

The ~~restructuring charges for the three and nine months ended September 30, 2018 primarily relate to employee termination costs in connection with the integration~~$0.7 million of Acton, Tyson and ModSpace. As part of the restructuring plan, certain employees were required to render future service in order to receive their termination benefits. The termination costs associated with these employees was recognized over the period from the commencement of the restructuring plans to the actual date of termination.

~~Segments~~

T~~he $2.0 million o~~f restructuring charges for the three months ended ~~September~~June 30, ~~2019~~2020 includes ~~$1.9~~$0.6 million of charges related to the Modular - US segment and less than $0.1 million of charges related to the Modular - Other North America segment.

The $1.6 million of restructuring charges for the three months ended June 30, 2019 includes $1.7 million of charges related to the Modular - US segment, offset by a reversal of $(0.1) million of charges related to the Modular - Other North America segment.

The $~~9.1~~0.7 million of restructuring charges for the ~~nine~~six months ended ~~September~~June 30, ~~2019~~2020 includes ~~$8.5~~$0.6 million of charges pertaining to the Modular - US segment and ~~$0.6~~$0.1 million of charges pertaining to the Modular - Other North America segment.

T~~he $6.1 million of restructuring charges for the three months ended September 30, 2018 includes $5.9 million of charges related to the Modular - US segment and~~ ~~$0.2 million~~ ~~of charges related to the Modular - Other North America segment.~~ The ~~$7.2~~$3.3 million of restructuring charges for the ~~nine~~six months ended ~~September~~June 30, ~~2018~~2019 include ~~$7.0~~$2.9 million charges pertaining to the Modular - US segment and ~~$0.2~~$0.4 million of charges related to the Modular - Other North America segment.

NOTE 1314 - Stock-Based Compensation

During the ~~nine~~six months ended ~~September~~June 30, ~~2019, 478,400~~2020, 174,020 time-based restricted stock units ("Time-Based RSUs"), 65,959 restricted stock awards ("RSAs"), and ~~302,182~~202,923 market-based restricted stock units ("Market-Based RSUs", and together with the Time-Based RSUs, the "RSUs")~~, and 52,755 restricted stock awards ("RSAs")~~ were granted under the WillScot Corporation 2017 Incentive Award Plan (the "Plan"). ~~NaN stock option awards were granted during the nine months ended September 30, 2019.~~

During the ~~nine~~six months ended ~~September~~June 30, ~~2019, 72,053 RSAs, 213,180~~2020, 323,678 Time-Based RSUs, 52,755 RSAs, and ~~147,313~~133,547 stock options vested in accordance with their terms, resulting in the issuance of ~~228,590~~238,927 shares of Class A common stock to participants, net

of ~~56,643~~84,751 shares withheld to cover taxes. ~~An additional 13,767 shares were issued as a result of~~During the ~~exercise of stock options during the nine~~six months ended ~~September~~June 30, ~~2019. NaN RSAs were forfeited during the nine months ended September 30, 2019. During the nine months ended September 30, 2019, 46,232~~2020, 15,106 Time-Based RSUs ~~7,485~~and 12,700 Market-Based RSUs were forfeited.

At June 30, 2020, 65,959 RSAs, 900,541 Time-Based RSUs, 478,504 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~~253,328 stock options were unvested, with weighted average grant date fair values of ~~$14.69, $12.78, $13.22,~~$11.75, $13.49, $14.71, and $5.51, respectively.

~~Restricted Stock Awards~~RSAs

Compensation expense for RSAs recognized in SG&A on the condensed consolidated statements of operations ~~was~~was $0.3 million and ~~$0.8~~$0.2 million for the three ~~and nine~~ months ended ~~September~~June 30, 2020 and 2019, respectively. Compensation expense for RSAs on the condensed consolidated statements of operations was $0.5 million and $0.5 million for the six months ended June 30, 2020 and 2019, respectively, with associated tax benefits of $0.0 million and $0.1 ~~million for the three an~~million. d ~~nine months ended September 30, 2019, respectively.~~

At ~~September~~June 30, ~~2019,~~2020, there was ~~$0.6~~$0.7 million of unrecognized compensation cost related to RSAs that is expected to be recognized over the remaining weighted average vesting p~~eriod~~eriod of ~~0.7 years.~~0.9 years.

Time-Based ~~Restricted Stock Units~~RSUs

Compensation expense for Time-Based RSUs recognized in SG&A on the condensed consolidated statements of operations was ~~$1.0~~$1.2 million and ~~$2.9~~$1.2 million for the three ~~and nine~~ months ended ~~September~~June 30, 2020 and 2019, respectively. Compensation expense for Time-Based RSUs recognized in SG&A on the condensed consolidated statements of operations was $2.2 million and $1.9 million for the six months ended June 30, 2020 and 2019, respectively, with associated tax benefits of $0.0 million and $0.2 ~~million for the three and nine months ended September~~million. At June 30, ~~2019, respectively.~~

~~At September 30, 2019,~~2020, unrecognized compensation cost related to Time-Based RSUs totaled ~~$11.4~~$10.8 million and is expected to be recognized over the remaining weighted average vesting ~~period~~period of ~~2.9 years.~~2.5 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~~$0.6 million and ~~$0.7~~$0.3 million for the three ~~and nine~~ months ended ~~September~~June 30, 2020 and 2019, ~~respectively,~~ respectively. Compensation expense for Market-Based RSUs recognized in SG&A on the condensed consolidated statements of operations was $0.9 million and $0.4 million for the six months ended June 30, 2020 and 2019, respectively, withassociated tax benefits of $0.0 million and $0.1 million ~~for the three and nine months ended September~~. At June 30, ~~2019, respectively. At September 30, 2019,~~2020, unrecognized compensation cost related to Market-Based RSUs totaled ~~$3.2~~$5.1 million and is expected to be recognized over the remaining vesting ~~period~~period of ~~2.5 years.~~2.1 years.

Stock Option Awards

Compensation expense for stock option awards, recognized in SG&A on the condensed consolidated statements of operations, was $0.2 million and ~~$0.6~~$0.2 million for the three months ended June 30, 2020 and 2019, respectively. Compensation expense for stock option awards, recognized in SG&A on the condensed consolidated statements of operations, was $0.4 million and $0.4 million for the ~~three and nine~~six months ended ~~September~~June 30, 2020 and 2019,, respectively, with associated tax b~~enefits~~benefits of $0.0 million ~~and $0.1 million for the three and nine months ended September~~and $0.1 million. At June 30, ~~2019, respectively.~~

~~At September 30, 2019,~~2020, unrecognized compensation cost related to stock option awards totaled ~~$1.8~~$1.3 million and is expected to be recognized over the remaining vesting period ~~of 2.5~~of 1.7 years.

2020 Incentive Plan

On June 24, 2020, WillScot’s stockholders approved the Company’s 2020 Incentive Award Plan (the “2020 Incentive Plan”), subject to completion of the Merger. The plan amends and restates in its entirety the WillScot Corporation 2017 Incentive Award Plan, as amended. As a result, all future incentive awards to the Company’s executive officers, including as contemplated by such officers’ employment agreements, in connection with the completion of the Merger or otherwise as determined by the Company’s compensation committee and the Board, as applicable, will be granted under the 2020 Incentive Plan. On July 2, 2020, the Company issued 122,332 performance based stock units ("PSUs") and 458,841 RSUs under the 2020 Incentive Plan.

2421

NOTE 1415 - 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 current and new ABL Facility into fixed-rate debt. The Swap Agreement will terminate on May 29, ~~2022, at~~2022. Under the ~~same time~~terms of the ~~Company’s ABL Facility matures. The~~ Swap Agreement, ~~contains customary representations, warranties~~the Company receives a floating rate equal to 1 month LIBOR and ~~covenants~~makes payments based on a fixed rate of 3.06% on the notional amount. The receive rate under the terms of the Swap Agreement was 0.18% and ~~may be terminated prior to its expiration.~~1.74% at June 30, 2020 and December 31, 2019, respectively.

The Swap Agreement was designated and qualified as a hedge of the Company’s exposure to changes in interest payment cash flows created by fluctuations in variable interest rates on the ABL Facility. ~~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)	(in thousands)	Balance Sheet Location	September 30, 2019		December 31, 2018		(in thousands)	Balance Sheet Location	June 30, 2020		December 31, 2019
Cash Flow Hedges:	Cash Flow Hedges:						Cash Flow Hedges:
Interest rate swap	Interest rate swap	Accrued liabilities	$	4,980	$	1,709	Interest rate swap	Accrued liabilities	$	11,181	$	5,348
Interest rate swap	Interest rate swap	Other long-term liabilities	$	11,574	$	6,192	Interest rate swap	Other long-term liabilities	$	11,170	$	8,943

The fair value of the interest rate swap is based on dealer quotes of market forward rates, a Level 2 input on the fair value hierarchy, and reflects the amount that the Company would receive or pay as of ~~September~~June 30, ~~2019~~2020 and December 31, ~~2018,~~2019, respectively, for contracts involving the same attributes and maturity dates.

The following table discloses the impact of the interest rate swap, excluding the impact of income taxes, ~~resulted in a loss recognized of $0.7 million and $8.6 million~~ inon other comprehensive income ~~("OCI"~~(“OCI”), AOCI and the Company’s statement of operations for the ~~three and~~ ~~nine~~six 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.~~ending June 30:

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


(in thousands)	2020		2019
Loss recognized in OCI	$	(7,783)	$	(7,951)
Location of loss recognized in income	Interest expense		Interest expense
Loss reclassified from AOCI into income (effective portion)	$	(4,189)	$	(1,181)

NOTE 1516 - Commitments and Contingencies

Commitments

At June 30, 2020 and December 31, 2019, commitments for the acquisition of rental equipment and property, plant and equipment were $4.7 million and $4.5 million, respectively.

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 1617 - Segment Reporting

The Company operates in 1 principal line of business: modular leasing and sales.

Modular leasing and sales is comprised of 2 operating segments: US and Other North America. The US modular operating segment (“Modular - US”) consists of the contiguous 48 states and Hawaii. The Other North America operating segment (“Modular - Other North America”) consists of Alaska, Canada and Mexico. 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 a result of the Merger, the Company will evaluate its operating segments for future reporting.

The Chief Operating Decision Maker ("CODM") evaluates business segment performance onutilizing 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 the 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.

2523

Reportable Segments

The following tables set forth certain information regarding each of the Company’s reportable segments for the three and ~~nine~~six months ended ~~September~~June 30, ~~2019~~2020 and ~~2018,~~2019, respectively.


		Three Months Ended September 30, 2019											Three Months Ended June 30, 2020
(in thousands)	(in thousands)	Modular - US		Modular - Other North America		Total		(in thousands)	Modular - US		Modular - Other North America		Total
Revenues:	Revenues:							Revenues:
Leasing and services revenue:	Leasing and services revenue:							Leasing and services revenue:
Modular leasing	Modular leasing	$	173,423	$	17,871	$	191,294	Modular leasing	$	175,285	$	14,858	$	190,143
Modular delivery and installation	Modular delivery and installation	56,005		5,878		61,883		Modular delivery and installation	47,213		4,427		51,640
Sales revenue:	Sales revenue:							Sales revenue:
New units	New units	10,774		762		11,536		New units	9,406		357		9,763
Rental units	Rental units	7,499		128		7,627		Rental units	4,144		1,172		5,316
Total revenues	Total revenues	247,701		24,639		272,340		Total revenues	236,048		20,814		256,862

Costs:	Costs:							Costs:
Cost of leasing and services:	Cost of leasing and services:							Cost of leasing and services:
Modular leasing	Modular leasing	53,601		4,567		58,168		Modular leasing	44,567		3,180		47,747
Modular delivery and installation	Modular delivery and installation	49,229		5,135		54,364		Modular delivery and installation	39,758		3,765		43,523
Cost of sales:	Cost of sales:							Cost of sales:
New units	New units	7,016		405		7,421		New units	6,160		171		6,331
Rental units	Rental units	4,315		777		5,092		Rental units	2,961		842		3,803
Depreciation of rental equipment	Depreciation of rental equipment	39,283		4,586		43,869		Depreciation of rental equipment	41,651		3,843		45,494
Gross profit	Gross profit	$	94,257	$	9,169	$	103,426	Gross profit	$	100,951	$	9,013	$	109,964
Other selected data:	Other selected data:							Other selected data:
Adjusted EBITDA	Adjusted EBITDA	$	80,424	$	7,953	$	88,377	Adjusted EBITDA	$	90,613	$	6,907	$	97,520
Selling, general and administrative expense	Selling, general and administrative expense	$	61,484	$	6,675	$	68,159	Selling, general and administrative expense	$	59,328	$	5,944	$	65,272
Other depreciation and amortization	Other depreciation and amortization	$	3,415	$	292	$	3,707	Other depreciation and amortization	$	2,704	$	179	$	2,883
Purchase of rental equipment and refurbishments		$	44,951	$	2,838	$	47,789
Purchases of rental equipment and refurbishments								Purchases of rental equipment and refurbishments	$	38,065	$	1,969	$	40,034


	Three Months Ended June 30, 2019
(in thousands)	Modular - US		Modular - Other North America		Total
Revenues:
Leasing and services revenue:
Modular leasing	$	168,826	$	16,992	$	185,818
Modular delivery and installation	52,495		3,471		55,966
Sales revenue:
New units	10,293		1,214		11,507
Rental units	4,888		5,534		10,422
Total revenues	236,502		27,211		263,713

Costs:
Cost of leasing and services:
Modular leasing	51,083		3,990		55,073
Modular delivery and installation	43,949		4,519		48,468
Cost of sales:
New units	7,138		861		7,999
Rental units	2,661		4,060		6,721
Depreciation of rental equipment	39,200		4,768		43,968
Gross profit	$	92,471	$	9,013	$	101,484
Other selected data:
Adjusted EBITDA	$	80,547	$	7,007	$	87,554
Selling, general and administrative expense	$	62,627	$	7,758	$	70,385
Other depreciation and amortization	$	2,743	$	206	$	2,949
Purchases of rental equipment and refurbishments	$	58,241	$	2,974	$	61,215


	Six Months Ended June 30, 2020
(in thousands)	Modular - US		Modular - Other North America		Total
Revenues:
Leasing and services revenue:
Modular leasing	$	347,860	$	30,635	$	378,495
Modular delivery and installation	94,830		7,880		102,710
Sales revenue:
New units	18,673		703		19,376
Rental units	8,549		3,553		12,102
Total revenues	469,912		42,771		512,683

Costs:
Cost of leasing and services:
Modular leasing	91,451		6,105		97,556
Modular delivery and installation	80,464		6,924		87,388
Cost of sales:
New units	12,167		367		12,534
Rental units	5,266		2,343		7,609
Depreciation of rental equipment	83,304		8,138		91,442
Gross profit	$	197,260	$	18,894	$	216,154
Other selected data:
Adjusted EBITDA	$	172,296	$	14,766	$	187,062
Selling, general and administrative expense	$	127,991	$	12,249	$	140,240
Other depreciation and amortization	$	5,581	$	376	$	5,957
Purchase of rental equipment and refurbishments	$	75,071	$	4,611	$	79,682


		Three Months Ended September 30, 2018											Six Months Ended June 30, 2019
(in thousands)	(in thousands)	Modular - US		Modular - Other North America		Total		(in thousands)	Modular - US		Modular - Other North America		Total
Revenues:
Revenues								Revenues
Leasing and services revenue:	Leasing and services revenue:							Leasing and services revenue:
Modular leasing		$	128,007	$	13,653	$	141,660
Modular delivery and installation		41,830		4,947		46,777
Sales revenue:
Modular space leasing								Modular space leasing	$	330,711	$	32,399	$	363,110
Modular space delivery and installation								Modular space delivery and installation	98,501		7,465		105,966
Sales:								Sales:
New units	New units	19,193		1,727		20,920		New units	24,254		2,094		26,348
Rental units	Rental units	8,595		972		9,567		Rental units	13,211		8,763		21,974
Total revenues		197,625		21,299		218,924
Total Revenues								Total Revenues	466,677		50,721		517,398

Costs:
Costs								Costs
Cost of leasing and services:	Cost of leasing and services:							Cost of leasing and services:
Modular leasing		36,204		3,011		39,215
Modular delivery and installation		37,782		4,608		42,390
Modular space leasing								Modular space leasing	94,966		7,342		102,308
Modular space delivery and installation								Modular space delivery and installation	83,700		8,111		91,811
Cost of sales:	Cost of sales:							Cost of sales:
New units	New units	13,905		1,184		15,089		New units	17,388		1,489		18,877
Rental units	Rental units	5,025		725		5,750		Rental units	8,530		5,986		14,516
Depreciation of rental equipment	Depreciation of rental equipment	31,702		3,832		35,534		Depreciation of rental equipment	75,674		9,397		85,071
Gross profit	Gross profit	$	73,007	$	7,939	$	80,946	Gross profit	$	186,419	$	18,396	$	204,815
Other selected data:	Other selected data:							Other selected data:
Adjusted EBITDA	Adjusted EBITDA	$	58,454	$	6,164	$	64,618	Adjusted EBITDA	$	156,490	$	14,415	$	170,905
Selling, general and administrative expense	Selling, general and administrative expense	$	66,102	$	5,795	$	71,897	Selling, general and administrative expense	$	128,557	$	15,147	$	143,704
Other depreciation and amortization	Other depreciation and amortization	$	3,403	$	317	$	3,720	Other depreciation and amortization	$	5,317	$	416	$	5,733
Purchase of rental equipment and refurbishments	Purchase of rental equipment and refurbishments	$	43,007	$	3,735	$	46,742	Purchase of rental equipment and refurbishments	$	108,162	$	4,926	$	113,088

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 income (loss) ~~income~~ from operations before income tax to Adjusted EBITDA by segment for the three and ~~nine~~six months ended ~~September~~June 30, ~~2019~~2020 and ~~2018,~~2019, respectively:


		Three Months Ended September 30, 2019											Three Months Ended June 30, 2020
(in thousands)	(in thousands)	Modular - US		Modular - Other North America		Total		(in thousands)	Modular - US		Modular - Other North America		Total
(Loss) income from operations before income taxes		$	(1,768)	$	1,310	$	(458)
Income (loss) from operations before income taxes								Income (loss) from operations before income taxes	$	9,950	$	2,598	$	12,548
Interest expense	Interest expense	30,253		604		30,857		Interest expense	28,208		311		28,519
Depreciation and amortization	Depreciation and amortization	42,699		4,877		47,576		Depreciation and amortization	44,355		4,022		48,377
Currency losses, net		45		189		234
Restructuring costs		1,886		94		1,980
Currency (gains) losses, net								Currency (gains) losses, net	70		(450)		(380)
Restructuring costs, lease impairment expense and other related charges								Restructuring costs, lease impairment expense and other related charges	1,711		432		2,143
Transaction costs								Transaction costs	1,619		—		1,619
Integration costs	Integration costs	4,609		874		5,483		Integration costs	2,159		(6)		2,153
Stock compensation expense	Stock compensation expense	1,813		—		1,813		Stock compensation expense	2,227		—		2,227
Other expense		887		5		892
Other income								Other income	314		—		314
Adjusted EBITDA	Adjusted EBITDA	$	80,424	$	7,953	$	88,377	Adjusted EBITDA	$	90,613	$	6,907	$	97,520

2927


		Three Months Ended September 30, 2018											Three Months Ended June 30, 2019
(in thousands)	(in thousands)	Modular - US		Modular - Other North America		Total		(in thousands)	Modular - US		Modular - Other North America		Total
(Loss) income from operations before income taxes		$	(44,519)	$	1,283	$	(43,236)
Loss (income) from operations before income taxes								Loss (income) from operations before income taxes	(13,473)		855		(12,618)
Loss on extinguishment of debt								Loss on extinguishment of debt	7,244		—		7,244
Interest expense	Interest expense	42,831		616		43,447		Interest expense	31,214		454		31,668
Depreciation and amortization	Depreciation and amortization	35,105		4,149		39,254		Depreciation and amortization	41,943		4,974		46,917
Currency gains, net	Currency gains, net	(112)		(313)		(425)		Currency gains, net	(75)		(279)		(354)
Restructuring costs		5,895		242		6,137
Restructuring costs, lease impairment expense and other related charges								Restructuring costs, lease impairment expense and other related charges	3,203		(51)		3,152
Goodwill and other impairments								Goodwill and other impairments	268		80		348
Integration costs	Integration costs	7,443		10		7,453		Integration costs	7,260		982		8,242
Stock compensation expense	Stock compensation expense	1,050		—		1,050		Stock compensation expense	1,900		—		1,900
Transaction costs		10,490		182		10,672
Other expense (income)		271		(5)		266
Other income								Other income	1,063		(8)		1,055
Adjusted EBITDA	Adjusted EBITDA	$	58,454	$	6,164	$	64,618	Adjusted EBITDA	$	80,547	$	7,007	$	87,554


		Nine Months Ended September 30, 2019											Six Months Ended June 30, 2020
(in thousands)	(in thousands)	Modular - US		Modular - Other North America		Total		(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
Income (loss) from operations before income taxes								Income (loss) from operations before income taxes	$	5,678	$	3,986	$	9,664
Interest expense	Interest expense	93,354		1,999		95,353		Interest expense	56,136		640		56,776
Depreciation and amortization	Depreciation and amortization	123,991		14,827		138,818		Depreciation and amortization	88,885		8,514		97,399
Currency gains, net		(160)		(276)		(436)
Goodwill and other impairments		4,507		569		5,076
Restructuring costs		8,460		623		9,083
Currency (gains) losses, net								Currency (gains) losses, net	(455)		973		518
Restructuring costs, lease impairment expense and other related charges								Restructuring costs, lease impairment expense and other related charges	3,066		678		3,744
Transaction costs								Transaction costs	11,050		—		11,050
Integration costs	Integration costs	21,221		2,642		23,863		Integration costs	3,855		(16)		3,839
Stock compensation expense	Stock compensation expense	5,003		—		5,003		Stock compensation expense	4,014		—		4,014
Other expense (income)		1,818		(14)		1,804
Other income								Other income	67		(9)		58
Adjusted EBITDA	Adjusted EBITDA	$	238,572	$	23,040	$	261,612	Adjusted EBITDA	$	172,296	$	14,766	$	187,062

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


	Six Months Ended June 30, 2019
(in thousands)	Modular - US		Modular - Other North America		Total
Loss (income) from operations before income taxes	$	(23,520)	$	1,251	$	(22,269)
Loss on extinguishment of debt	7,244		—		7,244
Interest expense	61,796		987		62,783
Depreciation and amortization	80,992		9,812		90,804
Currency gains, net	(205)		(465)		(670)
Restructuring costs, lease impairment expense and other related charges	7,381		512		7,893
Goodwill and other impairments	2,069		569		2,638
Integration costs	16,612		1,768		18,380
Stock compensation expense	3,190		—		3,190
Other income	931		(19)		912
Adjusted EBITDA	$	156,490	$	14,415	$	170,905

3028

NOTE 1718 - Income (Loss) Per Share

Basic income (loss) per share (“EPS”) is calculated by dividing net ~~loss~~income/(loss) attributable to WillScot by the weighted average number of shares of Class A common ~~shares~~stock outstanding during the period. The shares of Class A common ~~shares~~stock issued as a result of the vesting of RSUs and ~~RSAs as well as~~for warrants exercised or redeemed during the ~~exercise of stock options,~~three and six months ended June 30, 2020, 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~~

Shares of WillScot's Class A common shares were placed into escrow by shareholders and became ineligible to vote or participate in the economic rewards available to 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.

Class B common ~~shares~~stock have no rights to dividends or distributions made by the Company and, in turn, are excluded from the EPS calculation. ~~Pursuant to~~As contemplated by the ~~exchange agreement entered into by WS Holding's shareholders,~~Merger Agreement on June 30, 2020, the Sapphire ~~has the right, but not the obligation, to exchange~~Exchange was completed and all ~~but not less than all, of its~~ shares of WSClass B common stock were cancelled and Sapphire Holdings ~~into newly issued~~received 10,641,182 shares of ~~WillScot’s~~ Class A common ~~stock in a private placement transaction.~~stock.

Diluted EPS is computed similarly to basic EPS, except that it includes the potential dilution that ~~could~~would occur if di~~lutive~~dilutive securities were exercised. Effects of 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 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 1819 - Related Parties

Related party balances included in the Company’s consolidated balance ~~sheet~~sheets at ~~September~~June 30, ~~2019~~2020 and December 31, ~~2018,~~2019, consisted of the following:


(in thousands)	(in thousands)	Financial statement line Item	September 30, 2019		December 31, 2018		(in thousands)	Financial statement line Item	June 30, 2020		December 31, 2019
Receivables due from affiliates	Receivables due from affiliates	Prepaid expenses and other current assets	$	44	$	122	Receivables due from affiliates	Accounts receivable, net	$	20	$	26
Amounts due to affiliates(a)	Amounts due to affiliates(a)	Accrued liabilities	(147)		(1,379)		Amounts due to affiliates(a)	Accrued liabilities	(2,174)		(883)
		Total related party liabilities, net	$	(103)	$	(1,257)		Total related party liabilities, net	$	(2,154)	$	(857)

~~On November 29, 2017, in connection with the closing of the Business Combination, the Company, WSII, WS Holdings and the Algeco Group entered into a transition services agreement (the “TSA”).~~(a) The Company had ~~$0.1~~accrued expenses of $0.0 million ~~in receivables due from affiliates pertaining to the TSA~~and $0.6 million at June 30, 2020 and 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, 2019.~~

~~The Company accrued expenses of $1.2 million at December 31, 2018,~~2019, respectively, included in amounts due to affiliates, related to rental equipment purchases from an ~~affiliate~~entity within the Algeco Group. NaN of the ~~Algeco Group.~~Company's directors also serve on the board of directors to a consulting firm with which the Company incurs professional fees.

Related party transactions included in the Company’s condensed consolidated ~~statement~~statements of operations for the three and ~~nine~~six months ended ~~September~~June 30, ~~2019~~2020 and ~~2018,~~2019, respectively, consisted of the following:


			Three Months Ended September 30,						Nine Months Ended September 30,								Three Months Ended June 30,				Six Months Ended June 30,
(in thousands)	(in thousands)	Financial statement line item	2019		2018		2019		2018		(in thousands)	Financial statement line item	2020		2019		2020		2019
Leasing revenue from related parties	Leasing revenue from related parties	Modular leasing revenue	$	81	$	104	$	232	$	629	Leasing revenue from related parties	Modular leasing revenue	$	294	$	76	$	827	$	150
Rental unit sales to related parties		Rental unit sales	—		1,548		—		1,548
Consulting expense to related party^(a)											Consulting expense to related party^(a)	Selling, general & administrative expenses	(2,158)		(229)		(2,996)		(501)
		Total related party income, net	$	81	$	1,652	$	232	$	2,177		Total related party expense, net	$	(1,864)	$	(153)	$	(2,169)	$	(351)

(a) NaN of the Company's directors also serve on the board of directors to a consulting firm with which the Company incurs professional fees.

On August 22, 2018, WillScot’s majority stockholder, Sapphire Holdings, entered into a margin loan (the "Margin Loan") under which all of its WillScot Class A common stock was pledged to secure $125.0 million 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 Holdings 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 Management LLC, an affiliate controlled by Sapphire Holdings, under which, subject to limited exceptions, WSII acquired the exclusive right to supply modular units, portable storage units, and other ancillary products ordered by the affiliate in the US. As of June 30, 2020, the 59,708,536 shares of WillScot Class A common stock pledged by Sapphire Holdings represented approximately 49% of WillScot’s issued and outstanding Class A shares. As of July 31, 2020, Sapphire Holdings represented approximately 26% of WIllScot Mobile Mini's issued and outstanding common stock.

On June 30, 2020, as contemplated by the Merger Agreement, and pursuant to the terms of an exercise notice delivered by Sapphire Holdings to WillScot, Sapphire Holdings exchanged each of its shares of common stock, par value $0.0001, of Holdings, pursuant to that certain existing exchange agreement, between WillScot and Sapphire Holdings, for 1.3261 shares of newly issued Class A Common Stock (the “Sapphire Exchange”). As a result of the Sapphire Exchange, all issued and outstanding shares of WillScot’s Class B common stock, par value $0.0001 per share (the “Class B Common Stock”), were automatically canceled for no consideration and the existing exchange agreement was automatically terminated.

As a result of the Sapphire Exchange, Holdings became a wholly-owned subsidiary of WillScot. Sapphire Holdings received 10,641,182 shares of Class A Common Stock in the Sapphire Exchange (the “Exchange Shares”).

The Company had capital expenditures of rental equipment purchased from related party affiliates of ~~$1.1~~$1.4 million and ~~$1.2~~$1.7 million for three months ended ~~September~~June 30, 2020 and 2019, ~~and 2018, respectively, and $4.3~~respectively. The Company had capital expenditures of rental equipment purchased from related party affiliates of $1.6 million and ~~$3.0~~$3.2 million ~~during the nine~~for six months ended ~~September~~June 30, ~~2019~~2020 and ~~2018, respectively.~~

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

NOTE 20 - Subsequent Events

On July 27, 2020, the Company announced the redemption of $49.0 million of its 2023 Senior Notes. The redemption will take place on August 11, 2020, at a redemption price equal to 103% plus accrued and unpaid interest.

On August 7, 2020, the Board approved a stock repurchase program that authorizes the Company, to deploy up to $250 million of its outstanding shares of common stock. The stock repurchase program does not obligate the Company to purchase any particular number of shares, and the timing and exact amount of any repurchases will depend on various factors, including market pricing and conditions, business, legal, accounting and other considerations.

The Company plans to repurchase its shares in open market transactions from time to time or through privately negotiated transactions in accordance with federal securities laws, at the Company’s discretion. The repurchase program, which has no expiration date, may be increased, suspended or terminated at any time. The program is expected to be implemented over the course of several years and will be conducted subject to the covenants in the agreements governing our indebtedness.

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"), 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. The discussion of results of operations in this MD&A is presented on a historical basis, as of or for the three and six months ended June 30, 2020 or prior periods. As the Merger with Mobile Mini (hereinafter defined) was completed on July 1, 2020, unless the context otherwise requires, the terms “we”, “us”, “our” “Company” and “WillScot Mobile Mini” as used in these financial statements mean WillScot Corporation and its subsidiaries when referring to periods prior to July 1, 2020 (prior to the Merger) and to the combined company WillScot Mobile Mini Holdings Corp. when referring to periods on or after July 1, 2020 (after the Merger).

The consolidated financial statements were prepared in conformity with accounting principles generally accepted in the US (“GAAP”). 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 the Other Non-GAAP Financial Data and Reconciliations section.

On December 31, 2019, the 2019 financial statement amounts were adjusted for the adoption ASU 2016-02, Leases (Topic 842) ("ASC 842"), effective retroactively to January 1, 2019, and therefore may not agree to the Quarterly Reports filed on Form 10-Q for the respective periods of 2019.

Executive Summary and Outlook

We are ~~the~~a leading provider of modular space and portable storage solutions in the United States (“US”), Canada and Mexico. As of ~~September~~June 30, ~~2019,~~2020, our branch network included ~~over~~approximately 120 locations and additional ~~storage~~drop lots to service our 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 approximately 130,000~~with over 125,000 modular space units and over ~~26,000~~25,000 portable storage ~~units.~~ units in our fleet.

Equipment leasing is our core business. Over 90% of new lease orders are on our standard lease agreement, pre-negotiated master lease or national account agreements. The initial lease periods vary, and our leases are customarily renewable on a month-to-month basis after their initial term. Our Modular Lease Revenue is highly predictable due to its reoccurring nature and the underlying stability and diversification of our lease portfolio. Our average minimum contractual lease term at the time of delivery is over 11 months. However, given our customers value flexibility, they consistently extend their leases or renew on a month-to-month basis such that the average effective duration of our lease portfolio is 34 months.

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 products and services ("VAPS"), and on continually improving the overall customer experience.

~~Since~~Our customers operate in a diversified set of 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 ~~end of 2017, we have complemented our already strong organic growth by acquiring~~commercial 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 exitsindustrial segment and the ~~related fleet relocations required to exit these properties. As of September 30, 2019, we have completed~~construction segment, which collectively accounted for approximately ~~75%~~82% of our ~~planned real estate exits, and the remaining exits will continue during the remainder of 2019 and into 2020. Five held~~revenues for ~~sale properties were sold during~~ the three months ended ~~September~~June 30, ~~2019~~2020.

Significant Developments

Mobile Mini Merger

On March 2, 2020, we announced that we entered into an Agreement and Plan of Merger (the "Merger") with Mobile Mini, Inc. (“Mobile Mini”). During the second quarter, we obtained all required regulatory approvals and stockholder approvals from the Company's and Mobile Mini’s stockholders and we closed the Merger on July 1, 2020 at which time Mobile Mini became a wholly-owned subsidiary of WillScot. Concurrent with the closing of the Merger, WillScot changed its name to WillScot Mobile Mini Holdings Corp ("WillScot Mobile Mini"). We believe that the merger will result in strategic and financial benefits by combining the two industry leaders in the complementary modular space and portable storage solutions markets.

Financing Activities

In anticipation of the Merger, on June 15, 2020, we completed a private offering of $650.0 million in aggregate principal amount of 6.125% senior secured notes due 2025 (the “2025 Secured Notes”). The gross offering proceeds from the 2025 Secured Notes of $650.0 million and $5.1 million of interest due through August 1, 2020 were deposited into an escrow account, pending the closing of the Merger. In connection with completion of the Merger on July 1, 2020, the net offering proceeds were released and the proceeds were utilized to repay the 2022 Secured Notes (see Note 9 – Debt), repay Mobile Mini secured notes and pay certain fees and expenses related to the Merger and financing transactions. At June 30, 2020 the $655.1 million in the escrow account is reported as restricted cash on the condensed consolidated balance sheet.

On July 1, 2020, in connection with the completion of the Merger, Williams Scotsman Holdings Corp. (“Holdings”), WSII, and certain of its subsidiaries, including Mobile Mini and certain of its consolidated subsidiaries (the “Mobile Mini Entities”), entered into a new asset-based credit agreement (the "New ABL Facility"), that provides for ~~net~~revolving credit facilities in the aggregate principal amount of up to $2.4 billion. On July 1, 2020, in connection with the completion of the Merger, approximately $1.47 billion of proceeds from the New ABL Facility were used to finance the repayment of ~~$4.3 million. For~~ the ~~nine~~Willscot ABL facility, the Mobile Mini ABL facility, fees and expenses related to the Merger and the financing transactions, including $36 million related to the New ABL Facility upfront fees which will be recorded as deferred financing costs in the third quarter. The New ABL Facility matures July 1 2025 (see Note 9 – Debt).

Upon completion of the aforementioned transactions, WillScot Mobile Mini Holdings Corp. had approximately $2,683.7 million of gross debt and finance leases outstanding and approximately $915 million of availability under its New ABL Facility, and 227,721,220 shares outstanding as of July 31, 2020. On July 27, 2020 the Company announced an opportunistic redemption of $49 million of its 2023 senior secured notes. The redemption will occur on August 11, 2020 and is expected to further optimize our debt structure and reduce future interest expense.

COVID-19 Impact on Business

During the three and six months ended ~~September~~June 30, ~~2019, total net sale proceeds~~2020, financial results for our operations were impacted by the COVID-19 outbreak as we began to experience reduced demand as a portion of new project deliveries from ~~held for sale properties~~our customers were ~~$12.9 million. These exits, along with other integration actions taken, have allowed us to realize approximately $31.2 million of cumulative synergies from these acquisitions. Approximately 70%~~either cancelled or delayed as a result of the ~~estimated annualized cost synergies from~~COVID-19 pandemic and we expect our financial results may continue to be adversely impacted in the ~~acquisitions~~future. During the second quarter of ~~$70.0 million~~2020, our modular space deliveries were down 19% year over year due to reduced demand primarily attributable to the current global economic situation as a consequence of the COVID-19 pandemic. The reduced delivery demand has impacted our modular leasing revenues as well as our delivery and installation revenues. As a result, we have taken significant actions to reduce variable costs and capital spending. Due to the long lease durations in our ~~run rate~~business, the predictability of our cash inflows, and the fact that the majority of our gross profit is from units already out on rent at the beginning of the period, we believe we have forward visibility into our cash flows and are able to plan ahead to adjust for varying demand levels.

Since the outbreak of COVID-19 was designated as a global pandemic by the World Health Organization in March, our operations have generally continued to operate normally, albeit at lower activity levels, with additional safety protocols in place as we have been considered an essential business in most jurisdictions. However, there have been significant changes to the global economic situation as a consequence of ~~September 30, 2019. These acquisitions, coupled~~the COVID-19 pandemic. The global pandemic has resulted in significant global social and business disruption, and in response we have modified the way we communicate and conduct business with ~~WillScot's innovative "Ready~~our customers, suppliers and employees. The following summarizes many of the key actions we have taken in response to ~~Work" solutions~~the pandemic.

Employee Safety and ~~commitment~~Health

The Company has implemented various employee safety measures to contain the spread of COVID-19, including domestic and international travel restrictions, the promotion of social distancing and work-from-home practices, extensive cleaning protocols, daily symptom assessments, and enhanced use of personal protective equipment such as masks. We are closely monitoring all guidance provided by public agencies such as the Centers for Disease Control and Prevention in the US or the Public Health Agency of Canada to ensure the safety of our employees, vendors, and customers as our top priority.

Sales and Leasing Operations

The Company is responding to shelter-in-place and similar government orders, which vary significantly across our geographic markets. As a result of the shelter-in-place orders and increased social distancing measures, some of our markets, such as special events and sports and entertainment, have experienced sustained reductions in demand for new projects. Other sectors such as health care have seen increased demand, and other sectors such as construction have remained active but with varying degrees of project disruption, some of which are quite significant. We are also responding to demand across our end markets from customers in need of additional office space to facilitate social distancing. As the Company serves many critical sectors of the economy, the Company will continue to help support customers who remain operational, as well as those who are actively engaged in the COVID-19 response. We believe that our branch locations are considered essential businesses in most jurisdictions and as such have continued to operate normally with the aforementioned safety protocols in place, while our customer service ~~have solidified WillScot's market leading position.~~and sales teams are working closely with customers to meet current demand. The impact on future demand for new projects will depend greatly on the degree and duration to which governments restrict business and personal activities going forward and when businesses resume normal operations.

Cost Reductions

Early in the second quarter, in anticipation of a potential decline in demand for new projects, the Company implemented a range of actions aimed at temporarily reducing costs and preserving liquidity. These actions include suspending previously planned compensation increases for its corporate and shared services employees until the third quarter of 2020, included putting a temporary freeze on hiring, significant planned reductions to overtime and external variable labor costs, and significant reductions in other discretionary spending including marketing, travel and entertainment, outside professional fees and other aspects of the business. As we saw reduced demand persist through the second quarter, we also implemented several internal labor cost reductions to right-size our operations for these lower demand levels. Lastly, reduced demand for new projects has allowed the Company to reduce or delay capital spending, including new fleet purchases, refurbishments of existing equipment, and improvements to branch infrastructure. The Company continues to monitor new project demand on a daily basis, and given the flexibility in our cost structure, can adjust costs and capital spending rapidly to align with demand levels.

Second Quarter Highlights

For the three months ended ~~September~~June 30, ~~2019,~~2020, key drivers of financial performance included:

•~~Total revenues~~Modular leasing revenue increased by ~~$53.4~~$4.3 million, or ~~24.4%~~2.3%, as compared to the same period in ~~2018,~~2019, however total revenues decreased by $6.8 million, or 2.6%, driven by a ~~$64.7~~$5.1 million, or ~~34.3% increase~~49.0% decrease in our core leasing and services revenues from both organic pricing growth, and the impact of an additional 1.5 months of contribution from the ModSpace acquisition in the third quarter of 2019. Increases in our core leasing and services revenues were partially offset by new and rental unit sales ~~which decreased by $9.4~~revenue, a $4.4 million or ~~45.0%~~7.9% decrease in modular delivery and installation revenue primarily driven by ~~$2.0~~reduced demand for new project deliveries since mid-March of 2020 as a result of new project cancellations and delays as a result of the COVID-19 pandemic, and a $1.7 million or ~~20.8%, respectively, driven by large sales originating from ModSpace that were completed subsequent to the acquisition~~14.8% decrease in ~~the third quarter of 2018 that did not reoccur in 2019.~~new sale revenue. Key modular leasing revenue drivers include:

–Consolidated modular space average monthly rental rate increased to ~~$630~~$669 representing a ~~12.3%~~9.5% increase year over year.

–Consolidated average modular space units on rent ~~increased 15,820~~decreased 5,204 or ~~21.0%~~5.6% year over year, driven by ~~an additional 1.5 months~~lower deliveries, including reduced demand for new project deliveries as a result of ~~contribution from~~ the ~~ModSpace acquisition,~~COVID-19 pandemic, and average modular space utilization decreased 60340 basis points ~~(“bps”)~~ year over year to ~~71.2%~~68.5%.

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

–Modular leasing revenues increased $14.0 million, or 7.9%, driven by a 13.9% year over year increase in modular space average monthly rental rates as a result 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.

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

–~~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 represented ~~91.0%~~91.9% of revenue for the three months ended ~~September~~June 30, ~~2019, increased~~2020, decreased by ~~$50.1~~$0.5 million, or ~~25.4%~~0.2%, as compared to the same period in ~~2018,~~2019 driven primarily by reduced delivery and installation revenues due to reduced demand for new project deliveries, however modular leasing revenues increased $6.5 million, or 3.9% through:

–Modular space average monthly rental rate of ~~$632,~~$681, increased ~~13.1%~~11.3% year over ~~year including the dilutive impacts of acquisitions.~~year. 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.

–Average modular space units on rent ~~increased 14,075,~~decreased 4,780, or a ~~20.7%~~5.7% year over year ~~increase, due to the impact of an additional 1.5 months of contribution from the ModSpace acquisition in the third quarter of 2019.~~decrease.

–Average modular space monthly utilization decreased ~~60 bps~~350 basis points to ~~73.2%~~70.6% for the three months ended ~~September~~June 30, ~~2019,~~2020, as compared to the three months ended ~~September~~June 30, ~~2018.~~

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

•Modular - Other North America segment revenues which represented ~~9.0%~~8.1% of revenues for the three months ended ~~September~~June 30, ~~2019, increased~~2020, decreased by ~~$3.3~~$6.4 million, or ~~15.5%~~23.5% as compared to the same period in ~~2018. Increases~~2019. Decreases were driven primarily ~~by:~~by decreased new and rental unit sales which decreased by $5.2 million. Modular space leasing revenues decreased by $2.1 million, or 12.4%, driven by lower average units on rent

and stronger US dollar in Q2 2020 relative to prior year. These decreases were partially offset by net increases in modular delivery and installation revenues, which supported sequential unit on rent growth within the quarter:

–Average modular space monthly rental rate ~~increased 5.3%~~decreased 6.8% to ~~$618.~~$562, which was significantly impacted by unfavorable foreign currency movements. On a constant currency basis, modular space average rental rate was down 0.8% year over year primarily due to major project timing in Alaska.

–Average modular space units on rent ~~increased~~decreased by ~~1,745~~424 units, or ~~23.5%~~4.7% as compared to the same period in ~~2018 due~~2019, however increased 2.9% sequentially from March to ~~the impact of an additional 1.5 months of contribution from the ModSpace acquisition the third quarter of 2019.~~June 2020.

–Average modular space monthly utilization decreased by ~~10 bps~~260 basis points as compared to the same period in ~~2018~~2019 to ~~57.2%.~~

–~~On a pro forma~~53.7%, however increased 170 basis including results of WillScot and ModSpace for all periods presented, average modular space monthly rental rate increased 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.points from March to June 2020.

•Generated consolidated net income of ~~$0.8~~$12.8 million for the three months ended ~~September~~June 30, ~~2019,~~2020, which included ~~$7.5~~$5.9 million of discrete costs expensed in the period related to acquisition and integration activities, including $1.6 million of transaction costs related to the ~~ModSpace integration, including $5.5~~announced Mobile Mini merger, $2.2 million of integration costs, and ~~$2.0~~$2.1 million of restructuring ~~cost.~~costs, lease impairment expense and other related charges.

•Generated Adjusted EBITDA of ~~$88.4~~$97.5 million for the three months ended ~~September~~June 30, ~~2019,~~2020, representing an increase of ~~$23.8~~$10.0 million, or ~~36.8%~~11.4%, as compared to the same period in ~~2018,~~2019, 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 acquisition, and ~~Acton acquisitions.~~significant cost reductions as a result of actions taken to reduce variable cost in a reduced demand environment as a consequence of the COVID-19 pandemic. Our Adjusted EBITDA ~~for~~Margin of 38.0% in the ~~Modular - US segment and the Modular - Other North America segment, respectively, was $80.4 million and $8.0 million for the three months ended September 30, 2019.~~second quarter increased 480 basis points relative to prior year.

•Generated Free Cash Flow of ~~$1.3~~$39.0 million for the three months ended ~~September~~June 30, 2020, representing an increase of $37.4 million as compared to the same period in 2019, as net cash provided by operating activities of ~~$39.0~~$75.4 million was partially reinvested ~~primarily~~ in value added products and fleet refurbishments ~~to support growth of modular leasing revenues~~ (net cash used in investing activities of ~~$37.8~~$36.4 million).

Our customers operate in a diversified set of 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, 2019. We believe market fundamentals underlying these markets remain favorable, and we expect continued modest market growth in the next several years. As, however, reinvestment was at lower levels than originally planned as a result of ~~the potential for increased~~reduced capital spending 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, we are confident that we will continue to seeneeds given reduced demand for ~~our products.~~new project deliveries.

3433

Consolidated Results of Operations

Three Months Ended ~~September~~June 30, ~~2019~~2020 Compared to the Three Months Ended ~~September~~June 30, ~~2018~~2019

Our consolidated statements of operations for the three months ended ~~September~~June 30, ~~2019~~2020 and ~~2018~~2019 are presented below:


		Three Months Ended September 30,										2019 vs. 2018 $ Change			Three Months Ended June 30,				2020 vs. 2019 $ Change
(in thousands)	(in thousands)	2019		2018				2019 vs. 2018 $ Change		(in thousands)	2020				2019			2020 vs. 2019 $ Change
Revenues:	Revenues:
Leasing and services revenue:	Leasing and services revenue:							Leasing and services revenue:
Modular leasing	Modular leasing	$	191,294	$	141,660	$	49,634	Modular leasing	$	190,143			$	185,818		$	4,325
Modular delivery and installation	Modular delivery and installation	61,883		46,777		15,106		Modular delivery and installation	51,640				55,966			(4,326)
Sales revenue:	Sales revenue:							Sales revenue:
New units	New units	11,536		20,920		(9,384)		New units	9,763				11,507			(1,744)
Rental units	Rental units	7,627		9,567		(1,940)		Rental units	5,316				10,422			(5,106)
Total revenues	Total revenues	272,340		218,924		53,416		Total revenues	256,862				263,713			(6,851)
Costs:	Costs:							Costs:
Costs of leasing and services:	Costs of leasing and services:							Costs of leasing and services:
Modular leasing	Modular leasing	58,168		39,215		18,953		Modular leasing	47,747				55,073			(7,326)
Modular delivery and installation	Modular delivery and installation	54,364		42,390		11,974		Modular delivery and installation	43,523				48,468			(4,945)
Costs of sales:	Costs of sales:							Costs of sales:
New units	New units	7,421		15,089		(7,668)		New units	6,331				7,999			(1,668)
Rental units	Rental units	5,092		5,750		(658)		Rental units	3,803				6,721			(2,918)
Depreciation of rental equipment	Depreciation of rental equipment	43,869		35,534		8,335		Depreciation of rental equipment	45,494				43,968			1,526
Gross profit		103,426		80,946		22,480
Gross Profit								Gross Profit	109,964				101,484			8,480
Expenses:	Expenses:							Expenses:
Selling, general and administrative	Selling, general and administrative	68,159		71,897		(3,738)		Selling, general and administrative	65,272				70,385			(5,113)
Other depreciation and amortization	Other depreciation and amortization	3,707		3,720		(13)		Other depreciation and amortization	2,883				2,949			(66)
Impairment losses on long-lived assets	Impairment losses on long-lived assets	—		—		—		Impairment losses on long-lived assets	—				348			(348)
Lease impairment expense and other related charges								Lease impairment expense and other related charges	1,394				1,520			(126)
Restructuring costs	Restructuring costs	1,980		6,137		(4,157)		Restructuring costs	749				1,632			(883)
Currency losses (gains), net	Currency losses (gains), net	234		(425)		659		Currency losses (gains), net	(380)				(354)			(26)
Other income, net	Other income, net	(1,053)		(594)		(459)		Other income, net	(1,021)				(1,290)			269
Operating income	Operating income	30,399		211		30,188		Operating income	41,067				26,294			14,773
Interest expense	Interest expense	30,857		43,447		(12,590)		Interest expense	28,519				31,668			(3,149)
Loss from operations before income tax		(458)		(43,236)		42,778
Loss on extinguishment of debt								Loss on extinguishment of debt	—				7,244			(7,244)
Income (loss) from operations before income tax								Income (loss) from operations before income tax	12,548				(12,618)			25,166
Income tax benefit	Income tax benefit	(1,220)		(6,507)		5,287		Income tax benefit	(285)				(1,180)			895
Net income (loss)	Net income (loss)	762		(36,729)		37,491		Net income (loss)	12,833				(11,438)			24,271
Net income (loss) attributable to non-controlling interest, net of tax	Net income (loss) attributable to non-controlling interest, net of tax	273		(3,210)		3,483		Net income (loss) attributable to non-controlling interest, net of tax	1,343				(832)			2,175
Net income (loss) attributable to WillScot	Net income (loss) attributable to WillScot	$	489	$	(33,519)	$	34,008	Net income (loss) attributable to WillScot	$	11,490			$	(10,606)		$	22,096

Comparison of Three Months Ended ~~September~~June 30, ~~2019~~2020 and ~~2018~~2019

Revenue: ~~Total~~Total revenue ~~increased $53.4~~decreased $6.8 million, or ~~24.4%~~2.6%, to ~~$272.3~~$256.9 million for the three months ended ~~September~~June 30, ~~2019~~2020 from ~~$218.9~~$263.7 million for the three months ended ~~September~~June 30, ~~2018.~~2019. The ~~increase~~decrease was primarily the result of a ~~34.3% increase~~$5.1 million, or 49.0%, decrease in ~~leasing~~rental unit sales, $1.7 million, or 14.8%, decrease in new unit sales, 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~~$4.4 million, or 7.9%, decrease in 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~~revenue for the three months ended ~~September~~June 30, ~~2019,~~2020 as compared to the same period in 2019. The decline in modular delivery and ~~average modular space units on rent increased 15,820 units, or 21.0%, due~~installation revenues was primarily driven by lower delivery volumes during the quarter related to the impact of new project cancellations and delays as a result of the COVID-19 pandemic. These decreases were partially offset by an ~~additional 1.5~~increase of $4.3 million, or 2.3%, in modular leasing revenue as compared to the same period in 2019 driven by improved pricing and value-added products on modular space units.

Total average units on rent for the three months ended June 30, 2020 and 2019 were 102,965 and 108,844, respectively. The decrease was due primarily to lower delivery volumes, including reduced demand for new projects since mid-March of ~~contribution from~~2020 as a result of COVID-19, with modular space average units on rent decreasing 5,204 units, or 5.6%, for the ~~ModSpace acquisition in~~three months ended June 30, 2020 as compared to the ~~third quarter of~~three months ended June 30, 2019. Modular space average monthly rental rates increased 9.5% to $669 for the three months ended June 30, 2020. 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 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~~base. Portable storage 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 15,820decreased by 675 units, or ~~21.0%~~4.1%, for the three months ended ~~September~~June 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, 2019.2020. Average portable storage monthly rental rates ~~increased 2.5%~~decreased 0.8% to $120 for the three months ended ~~September~~June 30, ~~2019.~~2020. The average modular space unit utilization rate during the three months ended ~~September~~June 30, ~~2019~~2020 was ~~71.2%~~68.5%, as compared to ~~71.8%~~71.9% during the same period in ~~2018.~~2019. 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~~June 30, ~~2019~~2020 was ~~63.0%~~62.5%, as compared to ~~68.0%~~63.3% during the same period in ~~2018.~~2019. 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%~~42.8% and ~~37.0%~~38.5% for the three months ended ~~September~~June 30, ~~2019~~2020 and ~~2018,~~2019, respectively. Our gross profit percentage, excluding the effects of depreciation, w~~as 54.1%~~was 60.5% and ~~53.2%~~55.2% for thethe three months ended ~~September~~June 30, ~~2019~~2020 and ~~2018,~~2019, respectively.

Gross profit increased ~~$22.5~~$8.5 million, or ~~27.8%~~8.4%, to ~~$103.4~~$110.0 million for the three months ended ~~September~~June 30, ~~2019~~2020 from ~~$80.9~~$101.5 million for the three months ended ~~September~~June 30, ~~2018.~~2019. The increase in gross profit is a result of ~~a $30.6~~an $11.7 million increase in modular leasing gross profit and increased delivery and installation gross profit of ~~$3.1~~$0.6 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~~modular leasing cost savings due to lower delivery volumes that were achieved as a result of actions taken by the Company to scale back variable labor and material costs in response to lower demand for new project deliveries. Increased delivery and installation margins were driven ~~primarily~~ by higher pricing per ~~transaction.~~transaction, offset partially by lower activity volumes due to reduced delivery demand. These increases were partially offset by increased depreciation of ~~$8.4~~$1.5 million as a result of ~~additional rental equipment acquired as part of~~capital investments made over the ~~ModSpace acquisition, as well as continued capital investment~~past twelve months in our existing rental ~~equipment.~~equipment and decreased new and rental unit sale margins of $2.2 million due to lower demand.

SG&A: S~~elling,~~Selling, general and administrative ("SG&A") decreased ~~$3.7~~$5.1 million, or ~~5.1%~~7.2%, to ~~$68.2~~$65.3 million for the three months ended ~~September~~June 30, ~~2019,~~2020, compared to ~~$71.9~~$70.4 million for the three months ended ~~September~~June 30, ~~2018.~~2019. The primary driver of the decrease is related to lower discrete costs. Discrete items within SG&A decreased for the three months ended ~~September~~June 30, ~~2019,~~2020, compared to the three months ended ~~September~~June 30, ~~2018,~~2019, by ~~$12.0~~$4.1 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~~$5.6 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~~June 30, ~~2018.~~2019 were only partially offset by transaction costs related to the Merger of $1.6 million. Stock compensation expense increased $0.3 million and other costs decreased $0.4 million as compared to the three months ended June 30, 2019.

Excluding discrete items, SG&A decreased $1.0 million as a result of decreased expenses related to travel and entertainment, which drove a decrease of approximately $1.6 million and professional fees which decreased $1.6 million as compared to the prior year. These decreases were partially offset primarily by increased bad debt expense of $1.7 million compared to the prior year.

~~Restructuring Costs:~~Other Depreciation and Amortization: ~~Restructuring costs were $2.0~~Other depreciation and amortization remained flat at $2.9 million for the three months ended ~~September~~June 30, ~~2019 as compared to $6.1~~2020 and 2019.

Impairment Losses on Long-lived Assets: Impairment losses on long-lived assets were $0.3 million for the three months ended ~~September~~June 30, ~~2018. The~~2019 related to the valuation of properties classified as assets held for sale as a result of the ModSpace acquisition. No similar impairments occurred during the three months ended June 30, 2020.

Lease Impairment expense and Other Related Charges: Lease impairment expense and other related charges was $1.4 million for the three months ended June 30, 2020 as compared to $1.5 million for the three months ended June 30, 2019.

Restructuring Costs: In the three months ended June 30, 2020, the Company had $0.7 million of restructuring ~~charges relate~~costs primarily due to reductions in force across our branch network in response to COVID-19 economic conditions. In the three months ended June 30, 2019, $1.6 million of restructuring costs was recorded primarily related to employee termination ~~and lease breakage~~ costs ~~related to~~as a result of 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~~of $0.4 million gain for the three months ended ~~September~~June 30, ~~2018. The decrease in currency gains in 2019~~2020 was ~~primarily attributable~~flat compared 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.~~three months ended June 30, 2019.

Other Income, Net: Other income, net was ~~$1.1 million and $0.6~~$1.0 million for the three months ended ~~September~~June 30, ~~2019 and 2018, respectively. Other~~2020 compared to income ~~net~~ of ~~$1.1~~$1.3 million for the three months ended ~~September~~June 30, 2019. Other income, net of $1.0 million for the three months ended June 30, 2020 reflects the reversal of a non-income tax liability of $1.3 million. Other income, net of $1.3 million for the three months ended June 30, 2019 was primarily ~~related to $0.9 million of gains on real estate sold during the period and~~driven by the receipt of ~~$1.3~~$1.1 million of insurance proceeds related to assets damaged during Hurricane ~~Irma in the third quarter, which contributed $0.4~~Harvey.

Interest Expense: Interest expense decreased $3.2 million, or 10.1%, to ~~other income, net. Other income, net of $0.6~~$28.5 million for the three months ended ~~September~~June 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~~2020 from $31.7 million for the three months ended ~~September~~June 30, ~~2019 from $43.4 million for the three months ended September 30, 2018.~~2019. The decrease in interest ~~costs incurred during the three months ended September 30, 2018 included $20.5 million of bridge financing fees and upfront commitment fees related~~expense is primarily attributable to the ~~financing~~repayment 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~~the partial redemption of ~~Tack-on Notes~~our 2022 senior secured notes in ~~aggregate principal amount to the 2023 Secured Notes~~December 2019, and ~~used the proceeds to repay a portion of the~~lower interest rates and average balances outstanding on our 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.~~facility. See Note 89 to the condensed consolidated financial statements for further discussion of our debt.

Loss on Extinguishment of Debt: We redeemed $200.0 million in aggregate outstanding principal amount of our senior unsecured notes in the second quarter of 2019 at a redemption price of 102.0%, plus a make-whole premium of 1.1%, for total premiums of 3.1%. As a result, we recorded a loss on extinguishment of debt of $7.2 million, which included $6.2

million of premium and $1.0 million related to the write-off of unamortized deferred financing fees

Income Tax Benefit: Income tax benefit decreased ~~$5.3~~$0.9 million to $0.3 million for the three months ended June 30, 2020 compared to $1.2 million for the three months ended ~~September~~June 30, ~~2019 compared to $6.5 million for the three months ended September 30, 2018.~~ 2019. The decrease in income tax benefit was driven by pre-tax income being offset by a tax benefit from a release of valuation allowance and discrete items in the three months ended June 30, 2020 as compared to discrete benefits recorded in the three months ended ~~September~~June 30, ~~2018 which did~~2019 that were not ~~occur in the three months ended September~~recurring at June 30, ~~2019.~~2020.

Six Months Ended June 30, 2020 Compared to the Six Months Ended June 30, 2019

Our consolidated statements of operations for the six months ended June 30, 2020 and 2019 are presented below:


	Six Months Ended June 30,						2020 vs. 2019 $ Change
(in thousands)	2020		2019
Revenues:
Leasing and services revenue:
Modular leasing	$	378,495	$	363,110	$	15,385
Modular delivery and installation	102,710		105,966		(3,256)
Sales revenue:
New units	19,376		26,348		(6,972)
Rental units	12,102		21,974		(9,872)
Total revenues	512,683		517,398		(4,715)
Costs:
Costs of leasing and services:
Modular leasing	97,556		102,308		(4,752)
Modular delivery and installation	87,388		91,811		(4,423)
Costs of sales:
New units	12,534		18,877		(6,343)
Rental units	7,609		14,516		(6,907)
Depreciation of rental equipment	91,442		85,071		6,371
Gross Profit	216,154		204,815		11,339
Expenses:
Selling, general and administrative	140,240		143,704		(3,464)
Other depreciation and amortization	5,957		5,733		224
Impairment losses on long-lived assets	—		2,638		(2,638)
Lease impairment expense and other related charges	3,055		4,605		(1,550)
Restructuring costs	689		3,288		(2,599)
Currency (gains) losses, net	518		(670)		1,188
Other income, net	(745)		(2,241)		1,496
Operating income	66,440		47,758		18,682
Interest expense	56,776		62,783		(6,007)
Loss on extinguishment of debt	—		7,244		(7,244)
Income from operations before income tax	9,664		(22,269)		31,933
Income tax expense (benefit)	505		(802)		1,307
Net income (loss)	9,159		(21,467)		30,626
Net income (loss) attributable to non-controlling interest, net of tax	1,213		(1,590)		2,803
Net income (loss) attributable to WillScot	$	7,946	$	(19,877)	$	27,823

Comparison of Six Months Ended June 30, 2020 and 2019

Revenue: Total revenue decreased $4.7 million, or 0.9%, to $512.7 million for the six months ended June 30, 2020 from $517.4 million for the six months ended June 30, 2019. The decrease was primarily the result of a $6.9 million, or 26.2%, and $9.9 million, or 45.0%, decrease in new unit and rental unit sales, respectively and a $3.3 million, or 3.1%, decrease in modular delivery and installation revenue. The decline in modular delivery and installation revenues was primarily driven by lower delivery volumes during the second quarter related to the impact of new project cancellations and delays as a result of the COVID-19 pandemic. These decreases were partially offset by an increase of $15.4 million, or 4.2%, in modular leasing revenue for the six months ended June 30, 2020 driven by improved pricing on modular space units.

3736

~~Nine Months Ended September~~Total average units on rent for the six months ended June 30, 2020 and 2019 ~~Compared~~were 103,656 and 109,815, respectively. The decrease was due primarily to lower delivery volumes, including reduced demand for new projects since mid-March of 2020 as a result of COVID-19, with modular space average units on rent decreasing 5,267 units, or 5.7%, for the six months ended June 30, 2020 as compared to the ~~Nine Months Ended September 30, 2018~~

~~Our consolidated statements of operations for the nine~~six months ended ~~September~~June 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 63.2% 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 61.5% due to increased transaction volumes and higher revenues per transaction. Average modular2019. Modular space average monthly rental rates increased ~~9.0%~~11.5% to ~~$605~~$661 for the ~~nine~~six months ended ~~September~~June 30, ~~2019, and average modular space units on rent increased 31,563 units, or 52.0%.~~2020. Improved pricing was driven by a combination of our price optimization tools and processes, as well as by continued growth in our “Ready to Work” solutions and increased VAPS penetration across our customer base, offset partially by the average modular space monthly rental rates on acquired units for ModSpace. The increase in leasing and services revenue was further complemented by increases of $4.5 million, or 13.4%, and $13.9 million, or 88.0%, on new unit and rental unit sales, respectively, as compared to the same period in 2018. Increases in both new and rental unit sales were primarily a result of our increased scale as a result of the ModSpace acquisition and our larger post-acquisition fleet size and sales teams.

On a pro forma basis, including results of WillScot and ModSpace for all periods presented, total revenues decreased $13.1 million, or 1.6%, year-over-year for the nine months ended September 30, 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 revenues, which increased $44.3 million, or 8.6%, as a result of a 13.5% increase in average modular space monthly rental rates.

Total average units on rent for the nine months ended September 30, 2019 and 2018 were 109,138 and 75,079, respectively. The increase was due to units acquired as part of the ModSpace acquisition, with modular space average units on rent increasing 31,563 units, or 52.0%, for the nine months ended September 30, 2019. Modular space average monthly rental rates increased 9.0% for the nine months ended September 30, 2019.base. Portable storage average units on rent ~~increased~~decreased by ~~2,496~~892 units, or ~~17.4%~~5.2%, for the ~~nine~~six months ended ~~September~~June 30, ~~2019.~~2020. Average portable storage monthly rental rates ~~decreased 1.6% for~~of $120 were flat compared to the ~~nine~~six months ended ~~September~~June 30, 2019. The average modular space unit utilization rate during the ~~nine~~six months ended ~~September~~June 30, ~~2019~~2020 was ~~72.1%~~68.9%, as compared to ~~70.1%~~72.2% during the same period in ~~2018.~~2019. This ~~increase~~decrease was driven by ~~higher utilization~~lower average modular space units on ~~the acquired ModSpace~~rent, partially offset by a lower total modular space unit fleet ~~as compared to the overall average utilization for the nine months ended September 30, 2018, which included the fleet acquired from Acton and Tyson.~~size. The average portable storage unit utilization rate during the ~~nine~~six months ended ~~September~~June 30, ~~2019~~2020 was ~~64.6%~~63.5%, as compared to ~~68.3%~~65.0% during the same period in ~~2018.~~2019. The decrease in average portable storage utilization rate was driven by ~~an increase~~a decline in the number of portable storage average units on ~~rent in the Modular - US segment.~~rent.

Gross Profit: Our gross profit percentage was ~~39.3%~~42.2% and ~~37.8%~~39.6% for the ~~nine~~six months ended ~~September~~June 30, ~~2019~~2020 and ~~2018,~~2019, respectively. Our gross profit percentage, excluding the effects of depreciation, was ~~55.6%~~60.0% and ~~54.5%~~56.0% for the ~~nine~~six months ended ~~September~~June 30, ~~2019~~2020 and ~~2018,~~2019, respectively.

Gross profit increased ~~$125.5~~$11.4 million, or ~~67.3%~~5.6%, to ~~$312.0~~$216.2 million for the ~~nine~~six months ended ~~September~~June 30, ~~2019~~2020 from ~~$186.5~~$204.8 million for the ~~nine~~six months ended ~~September~~June 30, ~~2018.~~2019. The increase in gross profit is a result of a ~~$165.8~~$21.2 million increase in modular leasing and services gross ~~profit and increased new unit and rental unit gross profit of $5.6 million.~~profit. 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, as well as due to modular leasing cost savings during the second quarter due to lower delivery volumes that were achieved as a result of actions taken by the Company to scale back variable labor and ~~increased~~material costs in response to lower demand for new project deliveries. Increased delivery and installation margins were driven primarily by higher pricing per ~~transaction.~~transaction, offset partially by lower activity volumes primarily in the second quarter due to reduced delivery demand. These increases were partially offset by increased depreciation of ~~$46.1~~$6.3 million as a result of ~~additional rental equipment acquired as part of~~capital investments made over the ~~ModSpace acquisition, as well as continued capital investment~~past twelve months in our existing rental ~~equipment.~~equipment and decreased new and rental unit sale margins of $3.5 million due to lower demand.

SG&A: SG&A ~~increased $48.5~~decreased $3.5 million, or ~~29.4%~~2.4%, to ~~$213.3~~$140.2 million for the ~~nine~~six months ended ~~September~~June 30, ~~2019,~~2020, compared to ~~$164.8~~$143.7 million for the ~~nine~~six months ended ~~September~~June 30, ~~2018. Employee costs increased $23.3 million driven by the increased size~~2019. The primary driver of the ~~workforce, net~~decrease is related to decreased discrete costs. Discrete items within SG&A decreased for the six months ended June 30, 2020, compared to the six months ended June 30, 2019, by $3.1 million as integration cost savings of ~~realized employee cost synergies savings~~$14.1 million as compared to ~~date achieved~~the six months ended June 30, 2019 were only partially offset by transaction costs related to the Mobile Mini transaction of $11.1 million. Stock compensation expense increased $0.8 million and other costs decreased $0.9 million as compared to the six months ended June 30, 2019.

Excluding discrete items, SG&A decreased $0.4 million as a result of ~~the restructuring activities; and~~decreased expenses related to occupancy costs, ~~increased $8.2~~which decreased $1.2 million, ~~largely due to the expansion of our branch network~~travel and ~~storage lots, including a portion of the expected~~entertainment costs, which decreased $1.3 million, professional fees, which decreased $1.3 million, and tax cost savings ~~as we have now exited~~of approximately ~~75% of redundant real estate locations.~~

Discrete items included in SG&A decreased $3.6 million during the period as integration cost increases of $8.4 million related to the Acton and ModSpace integrations and stock compensation expense increases of $2.8 million were fully offset offset by lower transaction costs, which reduced $14.8$1.0 million as compared to the prior year.

~~The remaining increases in SG&A of $20.7~~ These cost savings were partially offset primarily by increased employee costs, which increased $1.3 million, ~~are related to~~ increased ~~professional fees, insurance, computer, travel, office,~~ bad debt expense of $1.0 million, and ~~other expenses related to operating a larger business as a result~~approximately $2.4 million of ~~our recent acquisitions and our expanded employee base and branch network.~~

~~We estimate~~ cost ~~synergies of approximately $24.8 million~~incurred related to the ~~Acton and ModSpace acquisitions were realized~~bi-annual company meeting held in the 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 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.January 2020.

Other Depreciation and Amortization: Other depreciation and amortization increased ~~$2.2~~$0.3 million, or ~~28.6%~~5.3%, to ~~$9.9~~$6.0 million for the ~~nine~~six months ended ~~September~~June 30, ~~2019,~~2020, compared to ~~$7.7~~$5.7 million for the ~~nine~~six months ended ~~September~~June 30, ~~2018. The increase was driven primarily by depreciation on property, plant and equipment and amortization of the trade name acquired as part of the ModSpace acquisition in the third quarter of 2018.~~2019.

Impairment Losses on Long-Lived Assets: Impairment losses on long-lived assets were ~~$5.1~~$2.6 million for the ~~nine~~six months ended ~~September~~June 30, 2019 related to the valuation of properties classified 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 toassets 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,~~ModSpace acquisition. No similar impairments occurred during the ~~remaining net book value of~~six months ended June 30, 2020.

Lease Impairment expense and Other Related Charges: Lease impairment expense and other related charges were $3.1 million for the ~~favorable lease intangible was deemed impaired, resulting in an impairment charge of $2.4 million.~~six months ended June 30, 2020 as compared to $4.6 million for the six months ended June 30, 2019.

Restructuring Costs: Restructuring costs were ~~$9.1~~$0.7 million for the ~~nine~~six months ended ~~September~~June 30, ~~2019~~2020 as compared to ~~$7.2~~$3.3 million for the ~~nine~~six months ended ~~September~~June 30, ~~2018.~~2019. The restructuring charges ~~relate~~in the six months ended June 30, 2020 were due to reductions in force across our branch network in response to COVID-19 economic conditions. The restructuring charges in the six months ended June 30, 2019 related primarily to employee termination ~~and lease breakage~~ costs related to the ModSpace and Acton acquisitions and ~~integration.~~integrations.

Currency (Gains) Losses, net: Currency (gains) losses, net ~~increased~~fluctuated by ~~$1.6~~$1.2 million to a ~~$0.4~~$0.5 million loss for the six months ended June 30, 2020 compared to a $0.7 million gain for the ~~nine~~six months ended ~~September~~June 30, ~~2019 compared to a $1.2 million loss for the nine months ended September 30, 2018.~~2019. The ~~decrease~~increase in currency (gains) losses, net, in ~~2019~~2020 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,~~Expense (Income), Net: Other income, net was ~~$3.3~~$0.7 million and ~~$5.0~~$2.2 million for the ~~nine~~six months ended ~~September~~June 30, ~~2019~~2020 and ~~2018,~~2019, respectively. Other income, net of ~~$3.3~~$0.7 million for the ~~nine~~six months ended ~~September~~June 30, 2020 was primarily related to the reversal of a non-income tax liability of $1.3 million. Other income, net of $2.2 million for the six months ended June 30, 2019 was driven primarily ~~related to~~by the receipt of a $0.9 million settlement in the first quarter of 2019, and 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 insurance proceeds related to assets damaged during Hurricane Harvey which contributed $4.8 million to other income, net.2019.

Interest Expense: Interest expense ~~increased $28.1~~decreased $6.0 million, or ~~41.8%~~9.6%, to ~~$95.4~~$56.8 million for the ~~nine~~six months ended ~~September~~June 30, ~~2019~~2020 from ~~$67.3~~$62.8 million for the ~~nine~~six months ended ~~September~~June 30, 2018. The interest costs incurred during the nine 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.2019. Interest expense for the ~~nine~~six months ended ~~September~~June 30, 2020 is lower than the same period in 2019 ~~includes an additional 7.5 months of expense under our current debt structure as compared~~due to ~~the nine months ended September 30, 2018. In the third quarter of 2018, as part of financing the ModSpace acquisition, we upsized~~lower rates and average balances outstanding on our ABL ~~Facility to $1.425 billion, issued $300.0 million~~facility and the repayment of our 10% senior ~~secured~~unsecured notes ~~(the "2023 Secured Notes"), and issued the Unsecured Notes. Further,~~ in the second quarter of 2019, ~~we issued~~offset by an increase in borrowings of $190.0 million in the second quarter of ~~Tack-on Notes~~2019 under our 6.875% senior secured notes, which are outstanding for all six months 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.2020.

Loss on Extinguishment of Debt: ~~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~~We redeemed $200.0 million in aggregate outstanding principal amount of ~~the Unsecured Notes~~our senior unsecured notes in the second quarter of 2019 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~~we recorded a loss on extinguishment of debt of $7.2 million, which included $6.2 million of premium and $1.0 million related to the write-off of unamortized deferred financing ~~fees. This redemption was funded from the use of proceeds from the ABL Facility.~~fees

Income Tax ~~Benefit:~~Expense: Income tax ~~benefit decreased $11.6~~expense increased $1.3 million to $0.5 million expense for the six months ended June 30, 2020 compared to a ~~$2.0~~$0.8 million benefit for the ~~nine~~six months ended ~~September~~June 30, ~~2019 compared to a $13.6 million benefit for the nine months ended September 30, 2018.~~2019. The ~~decrease~~increase in income tax ~~benefit~~expense was driven by ~~the~~legislative enacted discrete benefits recorded in the ~~nine~~six months ended ~~September~~June 30, ~~2018~~2019 which did not ~~reoccur during~~occur in the ~~nine~~six months ended ~~September~~June 30, ~~2019.~~2020.

4038

Business Segment Results

Our principal line of business is modular leasing and sales. Modular leasing and sales comprises two reportable segments: Modular - US and Modular - Other North America. The Modular - US reportable segment includes the contiguous 48 states and Hawaii, and the Modular - Other North America reportable segment includes Alaska, Canada and Mexico.

The following tables and discussion summarize our reportable segment financial information for the three and ~~nine~~six months ended ~~September~~June 30, ~~2019~~2020 and ~~2018.~~2019. Future changes to our organizational structure, including those that will result from our Merger with Mobile Mini, may result in changes to the segments disclosed.

Comparison of Three Months Ended ~~September~~June 30, ~~2019~~2020 and ~~2018~~2019


		Three Months Ended September 30, 2019																Three Months Ended June 30, 2020
(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	$	247,701		$	24,639		$	272,340		Revenue	$	236,048		$	20,814		$	256,862
Gross profit	Gross profit	$	94,257		$	9,169		$	103,426		Gross profit	$	100,951		$	9,013		$	109,964
Adjusted EBITDA	Adjusted EBITDA	$	80,424		$	7,953		$	88,377		Adjusted EBITDA	$	90,613		$	6,907		$	97,520
Capital expenditures for rental equipment	Capital expenditures for rental equipment	$	44,951		$	2,838		$	47,789		Capital expenditures for rental equipment	$	38,065		$	1,969		$	40,034
Modular space units on rent (average during the period)	Modular space units on rent (average during the period)	82,053			9,180			91,233			Modular space units on rent (average during the period)	78,493			8,603			87,096
Average modular space utilization rate	Average modular space utilization rate	73.2		%	57.2		%	71.2		%	Average modular space utilization rate	70.6		%	53.7		%	68.5		%
Average modular space monthly rental rate	Average modular space monthly rental rate	$	632		$	618		$	630		Average modular space monthly rental rate	$	681		$	562		$	669
Portable storage units on rent (average during the period)	Portable storage units on rent (average during the period)	15,993			423			16,416			Portable storage units on rent (average during the period)	15,505			364			15,869
Average portable storage utilization rate	Average portable storage utilization rate	63.3		%	54.3		%	63.0		%	Average portable storage utilization rate	63.0		%	47.6		%	62.5		%
Average portable storage monthly rental rate	Average portable storage monthly rental rate	$	123		$	106		$	123		Average portable storage monthly rental rate	$	121		$	98		$	120


		Three Months Ended September 30, 2018																Three Months Ended June 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	$	236,502		$	27,211		$	263,713
Gross profit	Gross profit	$	73,007		$	7,939		$	80,946		Gross profit	$	92,471		$	9,013		$	101,484
Adjusted EBITDA	Adjusted EBITDA	$	58,454		$	6,164		$	64,618		Adjusted EBITDA	$	80,547		$	7,007		$	87,554
Capital expenditures for rental equipment	Capital expenditures for rental equipment	$	43,007		$	3,735		$	46,742		Capital expenditures for rental equipment	$	58,241		$	2,974		$	61,215
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)	83,273			9,027			92,300
Average modular space utilization rate	Average modular space utilization rate	73.8		%	57.3		%	71.8		%	Average modular space utilization rate	74.1		%	56.3		%	71.9		%
Average modular space monthly rental rate	Average modular space monthly rental rate	$	559		$	587		$	561		Average modular space monthly rental rate	$	612		$	603		$	611
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)	16,146			398			16,544
Average portable storage utilization rate	Average portable storage utilization rate	68.3		%	56.4		%	68.0		%	Average portable storage utilization rate	63.6		%	50.8		%	63.3		%
Average portable storage monthly rental rate	Average portable storage monthly rental rate	$	120		$	101		$	120		Average portable storage monthly rental rate	$	121		$	121		$	121

Modular - US Segment

Revenue: Total revenue decreased $0.5 million, or 0.2%, to $236.0 million for the three months ended June 30, 2020 from $236.5 million for the three months ended June 30, 2019. The decrease was primarily the result of a $5.3 million, or 10.1% decrease in modular delivery and installation revenues, $0.9 million, or 8.7%, decrease in new unit sales, and $0.8 million, or 16.3%, decrease in rental unit sales revenue. The decline in modular delivery and installation revenues was primarily driven by lower delivery volumes during the second quarter related to the impact of new project cancellations and delays as a result of the COVID-19 pandemic. The decreases were partially offset by an increase of modular leasing revenue of $6.5 million, or 3.9% driven by improved pricing. Average modular space monthly rental rates increased 11.3% for the three months ended June 30, 2020 to $681 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. Improved pricing was partially offset by lower volumes as average modular space units on rent decreased 4,780 units, or 5.7%. The decrease was driven primarily by lower delivery volumes, including reduced demand for new projects since mid-March of 2020 as a result of COVID-19.

Gross Profit: Gross profit increased $8.5 million, or 9.2%, to $101.0 million for the three months ended June 30, 2020 from $92.5 million for the three months ended June 30, 2019. The increase in gross profit was driven by higher modular leasing gross profit, which increased $13.0 million, or 11.0%, driven equally from improved pricing including VAPS and modular leasing cost savings due to lower delivery volumes that were achieved as a result of actions taken by the Company to scale back variable labor and material costs in response to lower demand for new project deliveries. The increase in gross profit

from modular leasing for the three months ended June 30, 2020 was partially offset by a $1.1 million decrease in sales gross profit, a $1.2 million decrease in modular delivery and installation gross profit due to lower activity volumes due to reduced delivery demand, and a $2.5 million increase in depreciation of rental equipment related to capital investments made in our existing rental equipment over the past twelve months.

Adjusted EBITDA: Adjusted EBITDA increased $10.1 million, or 12.5%, to $90.6 million for the three months ended June 30, 2020 from $80.5 million for the three months ended June 30, 2019. The increase was driven by higher modular leasing gross profit discussed above. SG&A, excluding discrete items, decreased $0.2 million, or 0.3%, for the three months ended June 30, 2020, as compared to the three months ended June 30, 2019. Decreases were related to $1.3 million decrease in travel and entertainment and $1.6 million decrease in professional fees compared to the prior year. Decreases were partially offset by employee costs which increased $0.7 million, occupancy costs which increased $0.4 million, and increased bad debt expense of $1.8 million compared to the prior year.

Capital Expenditures for Rental Equipment: Purchases of rental equipment and refurbishments decreased $20.1 million, or 34.5%, to $38.1 million for the three months ended June 30, 2020 from $58.2 million for the three months ended June 30, 2019. Net CAPEX, as defined below in Item 2. Other Non-GAAP Financial Data and Reconciliations, also decreased $10.1 million, or 22.1%, to $35.5 million. The decreases for both were driven by decreased spending on refurbishments and VAPS due to less constrained fleet and reduced demand as a result of the COVID-19 pandemic, and cost improvements experienced over the prior year related to better unit selection and scoping on refurbishments.

Modular - Other North America Segment

Revenue: Total revenue decreased $6.4 million, or 23.5%, to $20.8 million for the three months ended June 30, 2020 from $27.2 million for the three months ended June 30, 2019. Decreases were driven by rental unit sale decreases of $4.3 million, or 78.2%, reduced modular leasing revenues, which decreased $2.1 million, or 12.4%, and new unit sales decreases of $0.9 million, or 75.0% for the three months ended June 30, 2020. These decreases were partially offset by increased modular delivery and installation revenue, which increased $0.9 million, or 25.7%. Average modular space monthly rental rates decreased 6.8% primarily as a result of unfavorable foreign currency movements (decrease of 0.8% at constant currency) and average modular space units on rent decreased by 424 units, or 4.7%.

Gross Profit: Gross profit of $9.0 million for the three months ended June 30, 2020 was flat compared to the three months ended June 30, 2019. The effects of unfavorable foreign currency movements decreased gross profit by $0.6 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, of $0.6 million was driven primarily by increased modular delivery and installation margins of $1.2 million as a result of higher pricing per transaction and lower variable costs, and lower depreciation of $0.7 million for the three months ended June 30, 2020, partially offset by reduced new and rental unit sales gross profit of $0.7 million and lower modular leasing gross profit of $0.6 million for three months ended June 30, 2020.

Adjusted EBITDA: Adjusted EBITDA decreased $0.1 million, or 1.4%, to $6.9 million for the three months ended June 30, 2020 from $7.0 million for the three months ended June 30, 2019. This decrease was driven by reduced gross profit discussed above, excluding depreciation and including the effects of unfavorable foreign currency movements, partially offset by decreased SG&A, excluding discrete items, which decreased $0.8 million, or 12.2%, for the three months ended June 30, 2020, as compared to the three months ended June 30, 2019. Decreases were primarily related to travel and entertainment decreases of $0.2 million and occupancy costs decreases of $0.4 million as a result of realized cost savings achieved through restructuring activities and by exiting redundant real estate locations over the past year.

Capital Expenditures for Rental Equipment: Purchases of rental equipment and refurbishments decreased $1.0 million, or 33.3%, to $2.0 million for the three months ended June 30, 2020 from $3.0 million for the three months ended June 30, 2019. Net CAPEX, as defined below in Item 2. Other Non-GAAP Financial Data and Reconciliations, increased $3.3 million, or 137.5%, to $0.9 million from negative $2.4 million for the three months ended June 30, 2019 due to reduced rental unit sale activity for the three months ended June 30, 2020.

Comparison of Six Months Ended June 30, 2020 and 2019


	Six Months Ended June 30, 2020
(in thousands, except for units on rent and rates)	Modular - US			Modular - Other North America			Total
Revenue	$	469,912		$	42,771		$	512,683
Gross profit	$	197,260		$	18,894		$	216,154
Adjusted EBITDA	$	172,296		$	14,766		$	187,062
Capital expenditures for rental equipment	$	75,071		$	4,611		$	79,682
Modular space units on rent (average during the period)	78,989			8,553			87,542
Average modular space utilization rate	71.1		%	53.4		%	68.9		%
Average modular space monthly rental rate	$	670		$	580		$	661
Portable storage units on rent (average during the period)	15,738			376			16,114
Average portable storage utilization rate	64.0		%	49.3		%	63.5		%
Average portable storage monthly rental rate	$	120		$	105		$	120


	Six Months Ended June 30, 2019
(in thousands, except for units on rent and rates)	Modular - US			Modular - Other North America			Total
Revenue	$	466,677		$	50,721		$	517,398
Gross profit	$	186,419		$	18,396		$	204,815
Adjusted EBITDA	$	156,490		$	14,415		$	170,905
Capital expenditures for rental equipment	$	108,162		$	4,926		$	113,088
Modular space units on rent (average during the period)	83,873			8,936			92,809
Average modular space utilization rate	74.6		%	55.7		%	72.2		%
Average modular space monthly rental rate	$	594		$	578		$	593
Portable storage units on rent (average during the period)	16,602			404			17,006
Average portable storage utilization rate	65.4		%	51.6		%	65.0		%
Average portable storage monthly rental rate	$	120		$	115		$	120

Modular - US Segment

Revenue: Total revenue increased ~~$50.1~~$3.2 million, or ~~25.4%~~0.7%, to ~~$247.7~~$469.9 million for the ~~three~~six months ended ~~September~~June 30, ~~2019~~2020 from ~~$197.6~~$466.7 million for the ~~three~~six months ended ~~September~~June 30, ~~2018. Modular~~2019. The increase was driven by increased modular leasing ~~revenue~~revenues, which increased ~~$45.4~~$17.2 million, or ~~35.5%~~5.2%, 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%~~12.8% for the ~~three~~six months ended ~~September~~June 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 2019.2020. 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,~~base. Increases in pricing were partially offset ~~partially~~ by ~~the lower~~decreased average modular space ~~monthly rental rates~~units on ~~acquired units.~~rent, which decreased 4,884 units, or 5.8%. The ~~increases~~decrease in units on rent was due primarily to lower delivery volumes, including reduced demand for new projects since mid-March of 2020 as a result of new project cancellations and delays as a result of the COVID-19 pandemic. The increase in leasing ~~and services~~ revenue ~~were~~was partially offset by decreases in delivery and installation revenues driven by lower delivery volumes during the second quarter and lower sales revenues. ~~New~~Delivery and installation revenue decreased $3.7 million, or 3.8%, new unit sales revenue decreased ~~$8.4~~$5.6 million, or ~~43.8%,~~23.0% 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%~~35.6%. ~~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 74.9% for the three months ended September 30, 2018.

Gross Profit: Gross profit increased ~~$21.2~~$10.9 million, or ~~29.0%~~5.8%, to ~~$94.2~~$197.3 million for the ~~three~~six months ended ~~September~~June 30, ~~2019~~2020 from ~~$73.0~~$186.4 million for the ~~three~~six months ended ~~September~~June 30, ~~2018.~~2019. The increase in gross profit was driven by higher modular leasing ~~and service~~ revenues driven ~~both~~ by ~~organic growth primarily from~~improved pricing and ~~by an additional 1.5 months of contribution from the ModSpace acquisition in the third quarter of 2019,~~VAPS, as well as by lower modular leasing cost due to ~~increased modular space~~lower delivery demand in the second quarter and ~~installation margins. Modular leasing and service gross profit increased $30.8 million, or 32.2%.~~reduced variable costs. 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~~as a result of capital investments made over the ~~ModSpace acquisition, as well as continued capital investment~~past twelve months in our existing rental ~~equipment.~~equipment for the six months ended June 30, 2020.

Adjusted EBITDA: Adjusted EBITDA increased ~~$22.0~~$15.8 million, or ~~37.7%~~10.1%, to ~~$80.4~~$172.3 million for the ~~three~~six months ended ~~September~~June 30, ~~2019~~2020 from ~~$58.4~~$156.5 million for the ~~three~~six months ended ~~September~~June 30, ~~2018.~~2019. 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~~$0.8 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~~relate to increased employee costs of ~~$3.1~~$1.5 million, ~~driven~~increased bad debt expense of $1.0 million, and approximately $2.3 million of costs related to the bi-annual company meeting held in January. These increases were partially offset by ~~the increased size~~decreased travel and entertainment of ~~the workforce, net~~$1.1 million, decreased professional fees of ~~realized employee cost synergies savings to date achieved as a result of the restructuring activities; and increased~~$1.2 million, decreased occupancy costs of ~~$0.4~~$0.6 million, ~~largely due to the expansion~~and decreased computer costs 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.$0.7 million.

Capital Expenditures for Rental Equipment: Capital expenditures for rental equipment ~~increased $2.0~~decreased $33.1 million, or ~~4.7%~~30.6%, to ~~$45.0~~$75.1 million for the ~~three~~six months ended ~~September~~June 30, ~~2019~~2020 from ~~$43.0 millio~~n$108.2 million for the ~~three~~six months ended ~~September~~June 30, ~~2018.~~2019. Net ~~capital expenditures for rental equipment~~CAPEX, as defined below in Item 2. Other Non-GAAP Financial Data and Reconciliations, also ~~increased $2.3~~decreased $18.4 million, or ~~6.7%~~21.0%, to ~~$36.7~~$69.4 million. The ~~increases~~decreases for both were driven by ~~increased~~decreased spend for refurbishments and VAPS due to ~~drive revenue growth~~less constrained fleet and ~~for maintenance~~reduced demand as a result of ~~a larger fleet following our recent acquisitions.~~the COVID-19 pandemic, and cost improvements experienced over the prior year related to better unit selection and scoping on refurbishments.

Modular - Other North America Segment

Revenue: Total revenue ~~increased $3.3~~decreased $7.9 million, or ~~15.5%~~15.6%, to ~~$24.6~~$42.8 million for the ~~three~~six months ended ~~September~~June 30, ~~2019~~2020 from ~~$21.3~~$50.7 million for the ~~three~~six months ended ~~September~~June 30, ~~2018.~~2019. Decreases were driven primarily by declines in new unit and rental unit sales, which decreased $1.4 million, or 66.7% and $5.2 million, or 59.1%, respectively, compared to the six months ended June 30, 2019. Modular leasing revenue ~~increased $4.1~~decreased $1.8 million, or ~~29.9%~~5.6%, driven by ~~improved~~declined volumes ~~and pricing~~ in the ~~quarter.~~period. Average modular space units on rent ~~increased~~decreased by ~~1,745~~383 units, or ~~23.5%~~4.3%, ~~due to an additional 1.5 months of contribution from~~for the ~~ModSpace acquisition in the third quarter of 2019. Average~~period, and average modular space monthly rental rates increased ~~5.3% driven by continued growth in our “Ready to Work” solutions and~~ ~~increased VAPS penetration across the combined post-acquisition customer base.~~0.3%. Modular delivery and installation revenues increased ~~$1.0~~$0.4 million, or ~~20.4%~~5.3%. ~~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~~$0.5 million, or ~~16.5%~~2.7%, to ~~$9.2~~$18.9 million for the ~~three~~six months ended ~~September~~June 30, ~~2019~~2020 from ~~$7.9~~$18.4 million for the ~~three~~six months ended ~~September~~June 30, ~~2018.~~2019. The effects of ~~favorable~~unfavorable foreign currency movements ~~increased~~decreased gross profit by ~~less than $0.1~~$0.7 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, of $1.2 million was driven primarily by increased leasing and services ~~revenues and~~ margins of $1.5 million as a result of ~~higher modular space units on rent~~improved delivery and installation margins and increased average monthly rental rates (increase of 4.3% at constant currency) and lower variable costs, and lower depreciation of $1.0 million for the six months ended June 30, 2020, partially offset by reduced new and rental unit sales gross profit ~~and by increased depreciation~~ of ~~rental equipment of $0.7~~$1.3 million for ~~three~~the six months ended ~~September~~June 30, ~~2019.~~2020.

Adjusted EBITDA: Adjusted EBITDA increased ~~$1.8~~$0.4 million, or ~~29.0%~~2.8%, to ~~$8.0~~$14.8 million for the ~~three~~six months ended ~~September~~June 30, ~~2019~~2020 from ~~$6.2~~$14.4 million for the ~~three~~six months ended ~~September~~June 30, ~~2018.~~2019. This increase was driven by ~~increased leasing~~decreased SG&A, excluding discrete items, which decreased $1.1 million for the six months ended June 30, 2020 compared to the six months ended June 30, 2019. Decreases were related primarily to decreased occupancy costs of $0.6 million, decreased employee costs of $0.1 million, and ~~services gross profit as a result~~decreased travel and entertainment of ~~increased modular space volumes and average monthly rental rates,~~$0.1 million, among other cost savings. SG&A savings were partially offset by decreased ~~new~~gross profits as discussed above, excluding depreciation and ~~rental unit sales gross profit. Additionally, SG&A, excluding discrete and other items, increased $0.2 million, also driven by~~including the ~~ModSpace acquisition, consisting primarily~~effects of ~~increased occupancy costs of $0.2 million.~~unfavorable foreign currency movements.

Capital Expenditures for Rental Equipment: Capital expenditures for rental equipment decreased ~~$0.9~~$0.3 million, or ~~24.3%~~6.1%, to ~~$2.8~~$4.6 million for the ~~three~~six months ended ~~September~~June 30, ~~2019~~2020 from ~~$3.7~~$4.9 million for the ~~three~~six 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 28,693 units, or 52.6%. Average modular space monthly rental rates increased 9.6% for the nine months ended SeptemberJune 30, 2019. ~~Improved volumes were driven by units acquired~~Net CAPEX, as ~~part of the ModSpace acquisition, as well as increased modular delivery~~defined below in Item 2. Other Non-GAAP Financial Data 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. The increases in leasing and services revenue were complemented by increases in sales revenues. New unit sales revenue increased $5.0 million, or 16.6% and rental unit sales revenue increased $6.5 million, or 45.5%. Increases in new unit sales and rental unit sales were primarily a result of the ModSpace acquisition and our larger post-acquisition sales team and fleet size.

On a pro forma basis, including results of WillScot and ModSpace for all periods presented, 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 average modular space monthly rental rates of $77, or 14.6%, year over year for the nine months ended September 30, 2019. Modular space units on rent decreased 3.9% on a pro forma basis to 83,285 and pro forma utilization for our modular space units decreased to 74.3%, down 40 bps from 74.7% for the nine months ended September 30, 2018.

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

~~Adjusted EBITDA:~~ Adjusted EBITDA increased $109.5 million, or 84.8%, to $238.6 million for the nine months ended September 30, 2019 from $129.1 million for the nine 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 $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 $14.6 million 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 of $21.5 million driven by the increased size of the workforce, net of realized employee cost synergies savings to date achieved as a result of the restructuring activities; and increased occupancy costs of $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 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 $48.6 million, or 46.5%, to $153.1 million for the nine months ended September 30, 2019 from $104.5 million for the nine months ended September 30, 2018. Net capital expenditures for rental equipment also increased $46.0 million, or 54.4%, to $130.5 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 $25.9 million, or 52.3%, to $75.4 million for the nine months ended September 30, 2019 from $49.5 million for the nine months ended September 30, 2018. Modular leasing revenue increased $17.0 million, or 51.2%, driven by improved volumes and pricing in the quarter. Average modular space units on rent increased by 2,870 units, or 46.7%, for the period, and average modular space monthly rental rates increased 4.2%. Improved volumes were driven by units acquired as part of the ModSpace acquisition and improved pricing was driven primarily through continued growth in our “Ready to Work” solutions and increased VAPS penetration across the combined post-acquisition customer base. Modular delivery and installation revenues increased $2.1 million, or 18.6%. ~~New unit sales were $2.9 million and $3.4 million~~Reconciliations, and rental unit sales revenue was $8.9 million 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 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 basis, including results of WillScot and ModSpace for all periods presented, 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 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 average modular space monthly rental rates of $22, or 3.9%, for the nine months ended September 30, 2019, being partially offset by a decrease in modular space units on rent of 2.3% on a pro forma basis to 9,014. Pro forma utilization for our modular space units decreased to 56.2%, down 40 bps from 56.6%, for the nine months ended September 30, 2018.

~~Gross Profit:~~ Gross profit increased $10.6 million, or 62.4%, to $27.6 million for the nine months ended September 30, 2019 from $17.0 for the nine months ended September 30, 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 and margins as a result of higher modular space units on rent and average monthly rental rates.

Additionally, rental unit sales gross profit increased due to higher volume. These increases were slightly offset by increased depreciation of rental equipment of $3.7 million for nine months ended September 30, 2019.

~~Adjusted EBITDA:~~ Adjusted EBITDA increased $10.1 million, or 78.3%, to $23.0 million for the nine months ended September 30, 2019 from $12.9 million for the nine 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 and increased rental unit sales gross profit, partially offset by increased SG&A, excluding discrete items, of $4.2 million, also driven by the ModSpace 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 $0.8 million, or 11.4%, to $7.8 million for the nine months ended September 30, 2019 from $7.0 million for the nine months ended September 30, 2018. The increase was driven by increased spend for new fleet and VAPS to drive revenue growth and for maintenance of a larger fleet following the ModSpace acquisition. Net capital expenditures decreased $6.5 million, or 120.4%10.7%, to negative ~~$1.1~~$2.5 million during the ~~nine~~six months ended ~~September~~June 30, ~~2019,~~2020, as a result of increased rental unit sales in the period that exceeded capital expenditures for rental equipment. This compared to net capital expenditures of negative $2.8 million for the six months ended June 30, 2019.

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 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 the 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 expense, income tax ~~benefit,~~expense (benefit), depreciation and amortization. Our adjusted EBITDA ("Adjusted ~~EBITDA~~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), net: on monetary assets and liabilities denominated in foreign currencies other than the subsidiaries’ functional currency. Substantially all such currency losses (gains) are unrealized and attributable to financings due to and from affiliated companies.

•~~Non-cash~~Goodwill and other impairment charges related to non-cash costs associated with impairment charges to goodwill, other intangibles, rental fleet and ~~other long-lived assets.~~property, plant and equipment.

•Restructuring costs, lease impairment expense, and other related charges associated with restructuring plans designed to streamline operations and reduce costs including employee and lease termination costs.

•Transaction costs including legal and professional fees and other transaction specific related costs.

•Costs to integrate acquired companies, including outside professional fees, fleet relocation expenses, employee training costs and other costs.

•Non-cash charges for stock compensation plans.

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

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

•Adjusted EBITDA does not reflect changes in, or cash requirements for our working capital needs;

•Adjusted EBITDA does not reflect our interest expense, or the cash requirements necessary to service interest or principal payments, on our indebtedness;

•Adjusted EBITDA does not reflect our tax expense or the cash requirements to pay our taxes;

•Adjusted EBITDA does not reflect historical cash expenditures or future requirements for capital expenditures or contractual commitments;

•Adjusted EBITDA does not reflect the impact on earnings or changes resulting from matters that we consider not to be indicative of our future operations;

•although depreciation and amortization are non-cash charges, the assets being depreciated and amortized will often have to be replaced in the future and Adjusted EBITDA does not reflect any cash requirements for such replacements; and

•other companies in our industry may calculate Adjusted EBITDA differently, limiting its usefulness as a comparative measure.

Because of these limitations, Adjusted EBITDA should not be considered as discretionary cash available to reinvest in the growth of our business or as measures of cash that will be available to meet our obligations. The following table provides an unaudited reconciliation of ~~Net income (loss)~~net loss to Adjusted EBITDA:


		Three Months Ended September 30,						Nine Months Ended September 30,							Three Months Ended June 30,				Six Months Ended June 30,
(in thousands)	(in thousands)	2019		2018		2019		2018		(in thousands)	2020		2019		2020		2019
Net income (loss)		$	762	$	(36,729)	$	(22,174)	$	(43,185)
Income tax benefit		(1,220)		(6,507)		(2,022)		(13,572)
Net Income (loss)										Net Income (loss)	$	12,833	$	(11,438)	$	9,159	$	(21,467)
Loss on extinguishment of debt	Loss on extinguishment of debt	—		—		7,244		—		Loss on extinguishment of debt	—		7,244		—		7,244
Income tax (benefit) expense										Income tax (benefit) expense	(285)		(1,180)		505		(802)
Interest expense	Interest expense	30,857		43,447		95,353		67,321		Interest expense	28,519		31,668		56,776		62,783
Depreciation and amortization	Depreciation and amortization	47,576		39,254		138,818		90,575		Depreciation and amortization	48,377		46,917		97,399		90,804
Currency losses (gains), net	Currency losses (gains), net	234		(425)		(436)		1,171		Currency losses (gains), net	(380)		(354)		518		(670)
Goodwill and other impairments	Goodwill and other impairments	—		—		5,076		—		Goodwill and other impairments	—		348		—		2,638
Restructuring costs		1,980		6,137		9,083		7,214
Restructuring costs, lease impairment expense and other related charges										Restructuring costs, lease impairment expense and other related charges	2,143		3,152		3,744		7,893
Transaction costs	Transaction costs	—		10,672		—		14,790		Transaction costs	1,619		—		11,050		—
Integration costs	Integration costs	5,483		7,453		23,863		14,868		Integration costs	2,153		8,242		3,839		18,380
Stock compensation expense	Stock compensation expense	1,813		1,050		5,003		2,225		Stock compensation expense	2,227		1,900		4,014		3,190
Other expense		892		266		1,804		619
Other income^(a)										Other income^(a)	314		1,055		58		912
Adjusted EBITDA	Adjusted EBITDA	$	88,377	$	64,618	$	261,612	$	142,026	Adjusted EBITDA	$	97,520	$	87,554	$	187,062	$	170,905

(a) Other income represents primarily acquisition-related costs such as advisory, legal, valuation and other professional fees in connection with actual or potential business combinations, which are expensed as incurred, but do not reflect ongoing costs of the business.

Adjusted Gross Profit and Adjusted Gross Profit Percentage

We define Adjusted Gross Profit as gross profit plus depreciation on rental equipment. Adjusted Gross Profit Percentage is defined as Adjusted Gross Profit divided by revenue. Adjusted Gross Profit and Adjusted Gross Profit Percentage are not measurements of our financial performance under GAAP and should not be considered as an alternative to gross profit, gross profit percentage, or other performance 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 and Adjusted Gross Profit Percentage:


		Three Months Ended September 30,									Nine Months Ended September 30,										Three Months Ended June 30,						Six Months Ended June 30,
(in thousands)	(in thousands)	2019			2018			2019			2018			(in thousands)	2020			2019			2020			2019
Revenue (A)	Revenue (A)	$	272,340		$	218,924		$	793,473		$	494,008		Revenue (A)	$	256,862		$	263,713		$	512,683		$	517,398

Gross profit (B)	Gross profit (B)	$	103,426		$	80,946		$	311,976		$	186,507		Gross profit (B)	$	109,964		$	101,484		$	216,154		$	204,815
Depreciation of rental equipment	Depreciation of rental equipment	43,869			35,534			128,940			82,849			Depreciation of rental equipment	45,494			43,968			91,442			85,071
Adjusted Gross Profit (C)	Adjusted Gross Profit (C)	$	147,295		$	116,480		$	440,916		$	269,356		Adjusted Gross Profit (C)	$	155,458		$	145,452		$	307,596		$	289,886

Gross Profit Percentage (B/A)	Gross Profit Percentage (B/A)	38.0		%	37.0		%	39.3		%	37.8		%	Gross Profit Percentage (B/A)	42.8		%	38.5		%	42.2		%	39.6		%
Adjusted Gross Profit Percentage (C/A)	Adjusted Gross Profit Percentage (C/A)	54.1		%	53.2		%	55.6		%	54.5		%	Adjusted Gross Profit Percentage (C/A)	60.5		%	55.2		%	60.0		%	56.0		%

Net CAPEX ~~and Net CAPEX for Rental Equipment~~

We define Net ~~Capital Expenditures~~CAPEX ("Net CAPEX") ~~and Net CAPEX for Rental Equipment~~ as ~~capital expenditures for~~ purchases ~~and capitalized refurbishments~~ of rental equipment and refurbishments and purchases of property, plant and equipment (collectively, "Total Capital Expenditures"), ~~reduced by~~less proceeds from sale of rental equipment and proceeds from the sale of ~~rental equipment. Net CAPEX for Rental Equipment is defined as capital expenditures for purchases~~property, plant and ~~capitalized refurbishments of rental~~ equipment ~~reduced by proceeds~~(collectively, "Total Proceeds"), which are all included in cash flows from ~~the sale of rental equipment.~~investing activities. Our management believes that the presentation of Net CAPEX ~~and Net CAPEX for Rental Equipment~~ provides useful information to investors regarding the net capital invested into our rental fleet and plant, property and equipment each year to assist in analyzing the performance of our business.

4644

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


		Three Months Ended September 30,						Nine Months Ended September 30,							Three Months Ended June 30,				Six Months Ended June 30,
(in thousands)	(in thousands)	2019		2018		2019		2018		(in thousands)	2020		2019		2020		2019
Total purchases of rental equipment and refurbishments	Total purchases of rental equipment and refurbishments	$	(47,789)	$	(46,742)	$	(160,877)	$	(111,505)	Total purchases of rental equipment and refurbishments	$	(40,034)	$	(61,215)	$	(79,682)	$	(113,088)
Total proceeds from sale of rental equipment	Total proceeds from sale of rental equipment	8,421		9,560		31,504		21,593		Total proceeds from sale of rental equipment	5,316		11,482		12,102		23,083
Net CAPEX for Rental Equipment	Net CAPEX for Rental Equipment	(39,368)		(37,182)		(129,373)		(89,912)		Net CAPEX for Rental Equipment	$	(34,718)	$	(49,733)	$	(67,580)	$	(90,005)
Purchase of property, plant and equipment	Purchase of property, plant and equipment	(2,701)		(1,475)		(6,600)		(3,091)		Purchase of property, plant and equipment	(1,668)		(2,270)		(3,186)		(3,899)
Proceeds from sale of property, plant and equipment										Proceeds from sale of property, plant and equipment	$	3	$	8,804	$	3,843	$	8,891
Net CAPEX	Net CAPEX	$	(42,069)	$	(38,657)	$	(135,973)	$	(93,003)	Net CAPEX	$	(36,383)	$	(43,199)	$	(66,923)	$	(85,013)

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, 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 operating, debt service and capital requirements over the next twelve months.

~~Our consolidation strategy includes~~We have been consistently engaged in both the ~~pursuit~~debt and equity capital markets both opportunistically and as necessary to support the growth of ~~strategic acquisitions that~~our business, desired leverage levels, and other capital allocation priorities. Subsequent to the Merger we believe ~~will add value~~we have ample liquidity in the New ABL Facility to ~~our existing business.~~ support both organic operations and other capital allocation priorities as they arise.

We continue to review available acquisition opportunities with the awareness that any such acquisition may require us to incur additional debt to finance the acquisition and/or to issue shares of our ~~Class A~~ common stock or other equity securities as acquisition consideration or as part of an overall financing plan. In addition, we will continue to evaluate options to improve our liquidity, such as the issuance of additional unsecured and secured debt, equity securities and/or equity-linked securities. There can be no assurance as to the timing of any such issuance. If we obtain additional capital by issuing equity, the interests of our existing stockholders will be diluted. If we incur additional indebtedness, that indebtedness may contain significant financial and other covenants that may significantly restrict our operations. We cannot assure you that we could obtain refinancing or additional financing on favorable terms or at all, including as a result of any disruption the COVID-19 pandemic may have on the debt and capital markets. From time to time we may also seek to streamline our capital structure and improve our financial position through refinancing or restructuring our existing debt or retiring certain of our securities for cash or other consideration.

Post-Merger Long-Term Debt

Subsequent to closing of the Merger and related financing transactions, our Company's long term debt is comprised of the following:


(in thousands, except rates)	Interest Rate		Year of maturity	Principal July 3, 2020 (Post Merger)
2023 Secured Notes	6.875	%	2023	$	490,000
2025 Secured Notes	6.125	%	2025	$	650,000
New ABL Facility	Varies		2025	$	1,467,000
Finance Leases	Varies		2022	$	76,697
Total long-term debt				$	2,683,697

After the Merger, we have over $915 million of available borrowing capacity under the New ABL Facility.

ABL Facility

~~On November 29, 2017, WS Holdings, WSII and certain of its subsidiaries entered into~~Borrowing availability under 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~~is equal to the ~~ABL Facility that,~~lesser of $1.425 billion and the applicable borrowing bases (the "Line Cap"). At June 30, 2020, the Line Cap was $1.416 billion. The borrowing bases are a function of, among other things, ~~(i) permitted~~ the ~~ModSpace acquisition and~~value of the ~~Company’s financing thereof, (ii) increased the ABL Facility limit to $1.425 billion~~assets 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.~~relevant collateral pool.

At ~~September~~June 30, ~~2019, the Borrowers~~2020, we had ~~$489.2~~$540.5 million of available borrowing capacity under the ABL Facility, including ~~$354.8~~$409.6 million under the US ABL Facility and ~~$134.4~~$130.9 million under the Canadian ABL Facility.

COVID-19 Impact on Liquidity

Although there is uncertainty related to the anticipated impact of the COVID-19 outbreak on the Company’s future results, we believe our predictable lease revenue streams underpinned by long lease durations combined with recent steps we have taken to reduce costs and capital spending will result in a near-term increase in internally generated free cash flow.Further, the approximately $915 million of availability under our New ABL Facility subsequent to the Merger and related financing transactions, provides additional liquidity if internally generated free cash flow becomes insufficient to meet our operating needs. We continue to manage all aspects of our business including, but not limited to, monitoring the financial health of our customers, suppliers and other third-party relationships, actively managing our cost structure, reducing or delaying capital spending, and developing new opportunities for growth. We believe that the actions we have taken in recent years to increase our scale and competitive position and strengthen our balance sheet have positioned us well to manage through this crisis as it continues to unfold.

Cash Flow Comparison of the ~~Nine~~Six Months Ended ~~September~~June 30, ~~2019~~2020 and ~~2018~~2019

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 and cash equivalents for the periods presented:


		Nine Months Ended September 30,							Six Months Ended June 30,
(in thousands)	(in thousands)	2019		2018		(in thousands)	2020		2019
Net cash from operating activities	Net cash from operating activities	$	99,076	$	15,580	Net cash from operating activities	$	113,727	$	60,054
Net cash from investing activities	Net cash from investing activities	(122,774)		(1,176,468)		Net cash from investing activities	(66,923)		(85,013)
Net cash from financing activities	Net cash from financing activities	18,627		1,161,406		Net cash from financing activities	614,693		21,351
Effect of exchange rate changes on cash and cash equivalents	Effect of exchange rate changes on cash and cash equivalents	64		68		Effect of exchange rate changes on cash and cash equivalents	(394)		140
Net change in cash and cash equivalents	Net change in cash and cash equivalents	$	(5,007)	$	586	Net change in cash and cash equivalents	$	661,103	$	(3,468)

Cash Flows from Operating Activities

Cash ~~provided~~provided by operating activities for the ~~nine~~six months ended ~~September~~June 30, ~~2019~~2020 was ~~$99.1~~$113.7 million as compared to ~~$15.6~~$60.1 million for the ~~nine~~six months ended ~~September~~June 30, ~~2018,~~2019, an increase of ~~$83.5~~$53.6 million. The increase was ~~primarily~~ due to an increase of ~~$108.9~~$33.9 million of net income, adjusted for non-cash items, ~~during 2019 compared~~in addition to ~~2018 due to the impact~~an increase 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 $25.4$19.8 million in the net movements of the operating assets and liabilities. The ~~decrease~~increase related to the net movements of operating assets and liabilities was attributable to an increase in accounts receivable ~~and an increase in cash interest payments~~ in the

first ~~nine~~three months of ~~2019,~~2020, partially offset by an increase in accounts payable and ~~deferred revenue.~~other accrued liabilities.

Cash Flows from Investing Activities

Cash used in investing activities for the ~~nine~~six months ended ~~September~~June 30, ~~2019 was $122.8~~2020 was $66.9 million as compared to ~~$1,176.5~~$85.0 million for the ~~nine~~six months ended ~~September~~June 30, ~~2018,~~2019, a decrease of ~~$1,053.7~~$18.1 million. The decrease in cash used in ~~investing~~investing activities was driven by a ~~$1,084.1~~$33.4 million decrease in cash used for ~~business acquisitions,~~purchase of rental equipment and refurbishments and a ~~$9.9~~$5.1 million increase in proceeds from sale of property, plant and equipment, offset by an $11.0 million decrease in proceeds from the sale of rental equipment. Cash used for purchase of rental equipment and ~~a $12.5 million increase~~refurbishments decreased in ~~proceeds from~~ the ~~sale of property, plant, and equipment. The decrease in cash used in business acquisitions~~six months ended June 30, 2020 compared to 2019 as fleet was less constrained due to ~~the acquisition of Acton~~reduced utilization and ~~ModSpace in the first nine months of 2018 with no business acquisitions during the same period of 2019. Proceeds from the sale of rental equipment increased due to increased sales volume~~reduced demand for new project deliveries as a result of the ~~acquisition~~COVID-19 pandemic and the current period impact of ~~ModSpace.~~prior year spend. Proceeds from ~~the~~ sale of ~~property, plant and~~rental equipment ~~increased primarily as a result of~~decreased compared to the ~~sale of seven held for sale properties during the nine months ended September 30, 2019, as part of the ongoing integration and consolidation process following the acquisition of ModSpace.~~prior yea

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 VAPSr due to ~~drive revenue growth.~~lower sales demand.

Cash Flows from Financing Activities

Cash provided by financing activities forfor the ~~nine~~six months ended ~~September~~June 30, ~~2019~~2020 was ~~$18.6~~$614.7 million as compared to ~~$1,161.4~~$21.4 million of cash provided by financing activities for the ~~nine~~six months ended ~~September~~June 30, ~~2018, a decrease~~2019, an increase of ~~$1,142.8~~$593.3 million. The ~~decrease~~increase is primarily due to a ~~reduction~~decrease of $338.0 million in ~~borrowings, net~~repayment of ~~repayments of $1,020.1 million, and~~borrowings, a decrease in receipts from ~~the~~borrowings of $243.1 million, partially offset by an increase of $4.6 million in receipts from 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 and the Unsecured Notes, and through the up-sized ABL Facility. We also received proceeds from the issuance of the Company's Class A common stock of $147.2 million.

~~The decrease in cash provided by financing activities was partially offset by a decrease in financing fees payments of $32.2 million due to the ModSpace financing activities in 2018.~~stock.

Free Cash Flow

Free Cash Flow is a non-GAAP measure. We define Free Cash Flow ~~is defined~~ as net cash provided by operating activities, less purchases of, and proceeds from, rental equipment and property, plant and equipment, which are all included in cash flows from investing activities. Management believes that the presentation of Free Cash Flow ~~provides useful information to investors regarding our results of operations because it~~ provides useful additional information concerning cash flow available to meet future debt service obligations and working capital requirements. The following table provides a reconciliation of net cash provided by operating activities to Free Cash Flow.


	Six Months Ended June 30,
(in thousands)	2020		2019
Net cash provided by operating activities	$	113,727	$	60,054
Purchase of rental equipment and refurbishments	(79,682)		(113,088)
Proceeds from sale of rental equipment	12,102		23,083
Purchase of property, plant and equipment	(3,186)		(3,899)
Proceeds from the sale of property, plant and equipment	3,843		8,891
Free Cash Flow	$	46,804	$	(24,959)

Free Cash ~~Flows~~Flow for the ~~three~~six months ended ~~September~~June 30, ~~2019 and 2018, are derived by subtracting the cash flows from operating activities and the relevant line items within financing activities~~2020 was an inflow of $46.8 million as compared to an outflow of $25.0 million 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~~$71.8 million. Free Cash Flow increased year over year principally ~~driven~~as a result of reinvesting the $53.6 million increase in cash provided by ~~increases~~operating activities and $33.4 million decrease in ~~Adjusted EBITDA~~cash used in the purchase of ~~$119.6~~rental equipment and refurbishments. The $75.4 million ~~or 84.2%,~~in cash provided by operating activities for the ~~nine~~three months ended ~~September~~June 30, ~~2019~~2020 was reinvested into the business to support the purchase of rental equipment, including VAPS, and ~~an increase of $12.5 million in~~refurbishments, partially offset by the proceeds from the sale of rental equipment and property, plant and equipment as a result of the sale of surplus real estate in the period. These increases were partially offset by an increase in integration, restructuring, and transaction costs incurred of $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 as a result of the issuance of the 2023 Secured Notes and the Unsecured Notes which only impacted 1.5 months of the nine months ended September 30, 2018, and a Net CAPEX increase of $43.0 million as a result of the increased fleet size and our investment in refurbishments of rental equipment and VAPS.equipment.

Contractual Obligations

Other than changes which occur in the normal course of business and those associated with the Merger, there were no significant changes to the contractual obligations reported in our ~~2018~~2019 Form 10-K for the ~~three and nine~~six months ended ~~September~~June 30, ~~2019.~~2020.

Off-Balance Sheet Arrangements

We have no off-balance sheet arrangements other than the completion of the Merger 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.

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 a complete discussion of our significant critical accounting policies, see the “Critical Accounting Policies and Estimates” section in Part II, Item 7 of our Annual Report on Form 10-K for the fiscal year ended December 31, ~~2018.~~2019.

~~Other than adoption of recent accounting standards as discussed in Note 1 to the notes to our unaudited condensed consolidated financial statements, there~~There were no significant changes to our critical accounting policies during the ~~nine~~six months ended ~~September~~June 30, ~~2019.~~2020.

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 contains forward-looking statements within the meaning of the U.S. Private Securities Litigation Reform Act of 1995 and Section 21E of the Securities Act of 1934, as amended. The words “estimates,” “expects,” “anticipates,” “believes,” “forecasts,” “plans,” “intends,” “may,” “will,” “should,” “shall,” “outlook,” “guidance” and variations of these words and similar expressions identify forward-looking statements, which are generally not historical in nature and relate to expectations for future financial performance or business strategies or objectives.

Forward-looking statements are subject to a number of risks, uncertainties, assumptions and other important factors, many of which are outside our control, which could cause actual results or outcomes to differ materially from those discussed in the forward-looking statements. Although 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, 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;

•the effect of economic conditions in the industries and markets in which the Company operates and any changes therein, including financial market conditions, fluctuations in commodity prices, interest rates and foreign currency exchange rates, levels of end market demand in construction, the impact of weather conditions and natural disasters, the impact of the global pandemic related to COVID-19 and the financial condition of the Company’s customers and suppliers;

•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 including Mobile Mini, and achieve desired synergies;

•the effect of changes in state building codes on our ability to remarket our buildings;

•our ability to effectively manage our credit risk, collect on our accounts receivable, or recover our rental equipment;

•foreign currency exchange rate exposure;

•our reliance on third party manufacturers and suppliers;

•our ability to realize anticipated synergies from the Merger with Mobile Mini;

•risks associated with labor relations, labor costs and labor disruptions;

•failure to retain key personnel; and

•such other risks and uncertainties described in the 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)~~2019), which are available through the SEC’s EDGAR system at www.sec.gov and on our website.

Any forward-looking statement speaks only at the date which it is made, and WillScot undertakes no obligation, and disclaims any obligation, to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law.

ITEM 3. Quantitative and Qualitative Disclosures about Market Risk

We are exposed to certain market risks from changes in foreign currency exchange rates and interest rates. Changes in these factors cause fluctuations in our earnings and cash flows. We evaluate and manage exposure to these market risks as follows:

Interest Rate Risk

We are primarily exposed to interest rate risk through our ABL Facility, which bears interest at variable rates based on LIBOR. We had $~~917.5~~865.0 million in outstanding principal under the ABL Facility at ~~September~~June 30, ~~2019.~~2020.

In order to manage this risk, Onon 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 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~~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 interest rate swaps, would increase our quarter to date interest expense by approximately ~~$1.1 million.~~$1.0 million based on current outstanding borrowings.

Foreign Currency Risk

We currently generate the majority of our consolidated net revenues in the US, and the reporting currency for our consolidated financial statements is the US dollar. As our net revenues and expenses generated outside of the US increase, our results of operations could be adversely impacted by changes in foreign currency exchange rates. Since we recognize foreign revenues in local foreign currencies, if the US dollar strengthens, it could have a negative impact on our foreign revenues upon translation of those results into the US dollar for consolidation into our financial statements.

In addition, we are exposed to gains and losses resulting from fluctuations in foreign currency exchange rates on transactions generated by our foreign subsidiaries in currencies other than their local currencies. These gains and losses are primarily driven by intercompany transactions and rental equipment purchases denominated in currencies other than the functional currency of the purchasing entity. These exposures are included in currency (gains) losses, net, on the 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

Our management, with participation of our Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of our disclosure controls and procedures as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934 as amended (the "Exchange Act"), as of ~~September~~June 30, ~~2019.~~2020. Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective as of ~~September~~June 30, ~~2019.~~2020.

Changes in Internal Controls

There were no changes in our internal control over financial reporting that occurred during our quarter ended ~~September~~June 30, ~~2019,~~2020, that materially affected or are reasonably likely to materially affect, our internal control over financial reporting.

PART II

ITEM 1. Legal Proceedings

As of ~~September~~June 30, ~~2019,~~2020, 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

The Company’s financial position, results of operations and cash flows are subject to various risks, many of which are not exclusively within the Company’s control, which may cause actual performance to differ materially from historical or projected future performance. In addition to the 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,~~2019, and Item 1A of our Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2020, which have not materially changed, ~~other than~~except as ~~reflected below.~~noted below, including certain risks applicable to the Company, after giving effect to the completion of the Merger on July 1, 2020, as discussed in Note 2 – Acquisitions and Related Financing Transactions.

~~Trade policies and changes~~

Fluctuations in ~~trade policies, including the imposition of tariffs, their enforcement and downstream consequences,~~fuel costs or oil prices, a reduction in fuel supplies, or a sustained decline in oil prices may have a material adverse ~~impact~~effect on our business and results of ~~operations,~~operations.

In connection with our business, to better serve our customers and ~~outlook.~~

~~Tariffs and/~~limit its capital expenditures, we often move our fleet from branch to branch. In addition, the majority of our customers arrange for delivery and pickup of our units through us. Accordingly, we could be materially adversely affected by significant increases in fuel prices that result in higher costs to us for transporting equipment. In the event of fuel and trucking cost increases, we may not be able to promptly raise our prices to make up for increased costs. A significant or ~~other developments with respect to trade policies, trade agreements, and government regulations~~prolonged price fluctuation or disruption of fuel supplies could have a material adverse ~~impact~~effect on ~~the Company's business,~~our financial condition and results of operations. ~~For example,~~

Additionally, oil prices have been volatile and are subject to fluctuations in response to changes in supply and demand, market uncertainty and a variety of additional factors that are beyond our control. If oil prices remain volatile for an extended period of time or there is a sustained decline in demand for oil, demand for our Tank & Pump Solutions products from refineries and companies engaged in the exploration and production of oil and natural gas could be adversely impacted, which would in turn have an adverse effect on our results of operations and financial condition.

As Department of Transportation regulations change, our operations could be negatively impacted and competition for qualified drivers could increase.

We operate in the United States pursuant to operating authority granted by the U.S. Department of Transportation (the “DOT”). Our drivers must comply with the safety and fitness regulations of the DOT, including those relating to drug and alcohol testing and hours-of-service. Such matters as equipment weight and dimensions are also subject to government ~~has imposed tariffs on steel, aluminum~~regulations. Our safety record could be ranked poorly compared to its peer firms. A poor safety ranking may result in the loss of customers or difficulty attracting and ~~lumber imports from certain countries,~~retaining qualified drivers which could affect our results of operations. Should additional rules be enacted in the future, compliance with such rules could result in ~~increased costs~~additional costs.

Our customer base includes customers operating in a variety of industries which may be subject to changes in their competitive environment as a result of the ~~Company for~~global, national or local economic climate in which they operate and/or economic or financial disruptions to their industry.

Our customer base includes customers operating in a variety of industries, including commercial and industrial, construction, education, energy and natural resources, government, retail and other end markets. Many of these ~~materials. Without limitation, (i) tariffs currently~~customers, across this wide range of industries, are facing economic and/or financial pressure from changes to their industry resulting from the global, national and local economic climate in ~~place~~which they operate and ~~(ii)~~industry-specific economic and financial disruptions, including, in some cases, consolidation and lower sales revenue from physical locations, resulting from the ~~imposition by~~impact of the ~~federal government~~COVID-19 pandemic and the related changes in political, social and economic conditions. These and any future changes to any of ~~new tariffs on imports~~the industries in which our customers operate could cause them to ~~the United States could materially increase (a) the cost~~rent fewer units from us or otherwise be unable to satisfy their obligations to us. In addition, certain of our ~~products that we~~customers are ~~offering for sale~~facing financial pressure and such pressure, from COVID-19 or ~~lease, (b)~~other factors, may result in consolidation in some industries and/or an increase in bankruptcy filings by certain customers. Each of these facts and industry impacts, individually or in the ~~cost of certain products that we source from foreign manufacturers, and (c) the cost of certain raw materials or products that we utilize.~~ aggregate, could have a materially adverse effect on our operating results.

We may not be able to ~~pass such increased costs on~~adequately protect our intellectual property and other proprietary rights that are material to our ~~customers,~~business.

Our ability to compete effectively depends in part upon protection of our rights in trademarks, copyrights and other intellectual property rights we own or license, including patents to the Mobile Mini locking system. Our use of contractual provisions, confidentiality procedures and agreements, and trademark, copyright, unfair competition, trade secret and other laws to protect our intellectual property and other proprietary rights may not be ~~able~~adequate. Litigation may be necessary to ~~secure sources~~enforce our intellectual property rights and protect our proprietary information and patents, or to defend against claims by third parties that our services or our use of ~~certain products~~intellectual property infringe their intellectual property rights. Any litigation or claims brought by or against us could result in substantial costs and materials that are not subject to tariffs on a timely basis. Although we actively monitor our procurement policies and practices to avoid undue reliance on foreign-sourced goods subject to tariffs, when practicable, such developmentsdiversion of its resources. A successful claim of trademark, copyright or other intellectual property infringement against us could ~~have a material adverse impact on~~prevent us from providing services, which could harm our business, financial condition or results of operations. In addition, a breakdown in our internal policies and procedures may lead to an unintentional disclosure of our proprietary, confidential or material non-public information, which could in turn harm our business, financial condition or results of operations.

Our largest stockholder may have the ability to influence our business and matters requiring approval by our stockholders.

Sapphire Holding S.à r.l. (“Sapphire Holding”), which is controlled by TDR Capital LLP (“TDR Capital”), beneficially owns approximately 26% of the issued and outstanding shares of our Common Stock and warrants giving it the right to buy 2,425,000 additional shares of our Common Stock. Pursuant to a stockholders agreement entered into on July 1, 2020, by and among us and TDR Capital and certain of its affiliates, including Sapphire Holding, TDR Capital has the right to nominate two directors to our board of directors, for so long as TDR Capital beneficially owns at least 15% of our Common Stock and one director for so long as TDR Capital beneficially owns at least 5% of our Common Stock. Two directors nominated by Sapphire Holding currently serve on our board of directors. Sapphire Holding may have the ability to influence matters requiring approval by our stockholders, including the election and removal of directors, amendments to our certificate of incorporation and bylaws, any proposed merger, consolidation or sale of all or substantially all of our assets and certain other corporate transactions. Sapphire Holding may have interests that are different from those of other stockholders.

In August 2018, Sapphire Holding pledged all of the shares of WillScot’s Class A Common Stock that it owned as security for a margin loan under which Sapphire Holding borrowed $125.0 million. An event of default under the margin loan could result in the foreclosure on the pledged securities and another stockholder beneficially owning a significant amount of our Common Stock. The margin loan matures on August 23, 2020, and there can be no assurance that Sapphire will be able to extend, repay or refinance the loan on terms acceptable to it or at all.

ITEM 2. Unregistered Sales of Equity Securities

~~None.~~On June 30, 2020, as contemplated by the Merger Agreement, and pursuant to the terms of an exercise notice delivered by Sapphire Holdings to WillScot, Sapphire Holdings exchanged each of its shares of common stock, par value $0.0001, of Holdings, pursuant to that certain existing exchange agreement, between WillScot and Sapphire Holdings, for 1.3261 shares of newly issued Class A Common Stock (the “Sapphire Exchange”). As a result of the Sapphire Exchange, all issued and outstanding shares of WillScot’s Class B common stock, par value $0.0001 per share (the “Class B Common Stock”), were automatically canceled for no consideration and the existing exchange agreement was automatically terminated. As a result of the Sapphire Exchange, Holdings became a wholly-owned subsidiary of WillScot. Sapphire Holdings received 10,641,182 shares of Class A Common Stock in the Sapphire Exchange (the “Exchange Shares”). The Exchange Shares were issued in reliance on an exemption from the registration requirements of the Securities Act, by virtue of Section 4(a)(2) and/or other exemptions therefrom, as promulgated by the SEC under the Securities Act.

ITEM 3. Defaults Upon Senior Securities

None.

ITEM 4. Mine Safety Disclosures

Not applicable.

ITEM 5. Other Information

None.

ITEM 6. Exhibits


Exhibit No.		Exhibit Description
2.1	*	Agreement and Plan of Merger, dated as of March 1, 2020, by and among WillScot Corporation, Picasso Merger Sub, Inc. and Mobile Mini, Inc. (incorporated by reference to Exhibit 2.1 of the Company's Current Report on Form 8-K, filed March 5, 2020).
2.2		Amendment to Agreement and Plan of Merger, dated as of May 28, 2020, by and among WillScot Corporation, Picasso Merger Sub, Inc. and Mobile Mini, Inc. (incorporated by reference to Exhibit 2.1 of the Company's Current Report on Form 8-K, filed June 2, 2020).
3.1(a)		Amendment to Agreement and Plan of Merger, dated as of May 28, 2020, by and among WillScot Corporation, Picasso Merger Sub, Inc. and Mobile Mini, Inc. (incorporated by reference to Exhibit 2.1 of the Company's Current Report on Form 8-K, filed June 2, 2020).
3.1(b)		Amended and Restated Certificate of Incorporation of WillScot Mobile Mini Holdings Corp. (incorporated by reference to Exhibit 3.1(b) of the Company's Current Report on Form 8-K, filed July 1, 2020).
3.2		Amended and Restated Bylaws of WillScot Mobile Mini Holdings Corp. (incorporated by reference to Exhibit 3.2 of the Company's Current Report on Form 8-K, filed July 1, 2020).
4.1		Indenture, dated as of June 15, 2020, by and between Picasso Finance Sub, Inc., and Deutsche Bank Trust Company Americas, as trustee (incorporated by reference to Exhibit 4.1 of the Company's Current Report on Form 8-K, filed June 16, 2020).
4.2		Supplemental Indenture, dated July 1, 2020, to the Indenture dated June 15, 2020, by and among Williams Scotsman International, Inc. (“WSII”) (as successor to Picasso Finance Sub, Inc.), the guarantors party thereto and Deutsche Bank Trust Company Americas, as trustee (incorporated by reference to Exhibit 4.1 of the Company's Current Report on Form 8-K, filed July 1, 2020).
4.3		Supplemental Indenture, dated July 1, 2020, to the Indenture dated August 6, 2018, as supplemented by the First Supplemental Indenture dated August 15, 2018, by and among WSII (as successor to Mason Finance Sub, Inc.), the guarantors party thereto and Deutsche Bank Trust Company Americas, as trustee (incorporated by reference to Exhibit 4.2 of the Company's Current Report on Form 8-K, filed July 1, 2020).
10.1		Sixth Amended and Restated Commitment Letter, dated as of May 26, 2020, by and among WillScot Corporation, Bank of America, N.A., BofA Securities, Inc., Deutsche Bank AG New York Branch, Deutsche Bank Securities Inc., JPMorgan Chase Bank, N.A., ING Capital LLC, BBVA USA, Bank of the West, PNC Bank, National Association, PNC Capital Markets LLC, MUFG Union Bank, N.A., Bank of Montreal, BMO Capital Markets Corp. and M&T Bank
10.2		Shareholders Agreement, dated July 1, 2020, by and among WillScot Mobile Mini Holdings Corp., Sapphire Holdings, S.á r.l., TDR Capital Holdings L.P. and TDR Capital LLP (incorporated by reference to Exhibit 1.1 of the Company's Current Report on Form 8-K, filed July 1, 2020).
10.3		ABL Credit Agreement, dated July 1, 2020, by and among Williams Scotsman Holdings Corp., WSII, the guarantors party thereto, the lenders party thereto, and Bank of America, N.A., as administrative agent and collateral agent (incorporated by reference to Exhibit 10.1 of the Company's Current Report on Form 8-K, filed July 1, 2020).
10.4		WillScot Mobile Mini Holdings Corp. 2020 Incentive Award Plan (incorporated by reference to Exhibit 10.3 of the Company's Current Report on Form 8-K, filed July 1, 2020).
10.5		Form of Indemnification Agreement (incorporated by reference to Exhibit 10.2 of the Company's Current Report on Form 8-K, filed July 1, 2020).
10.6		Form of Restricted Stock Unit Agreement (incorporated by reference to Exhibit 10.4 of the Company's Current Report on Form 8-K, filed July 1, 2020).
10.7		Form of Performance-Based Restricted Stock Unit Agreement (incorporated by reference to Exhibit 10.5 of the Company's Current Report on Form 8-K, filed July 1, 2020).
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
~~10.1~~		~~Form of Performance-Based RSU Award Agreement (incorporated by reference to Exhibit 10.1 to the Company’s Form 8-K filed March 22, 2019)~~
~~10.2~~		~~Amended Employment Letter with Sally Shanks dated March 18, 2019 (incorporated by reference to Exhibit 10.1 to the Company’s Form 8-K filed March 21, 2019)~~
~~10.3~~		~~Separation and Release Claims Agreement with Bradley L. Bacon dated May 17, 2019 (incorporated by reference to Exhibit 10.1 to the Company's Form 8-K filed May 17, 2019)~~
~~10.4~~		~~Employment Agreement with Hezron Timothy Lopez (incorporated by reference to Exhibit 10.1 to the Company's Form 8-K filed June 19, 2019)~~
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

5253

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 8, 2019~~August 10, 2020

Timothy D. Boswell

Chief Financial Officer (Principal Financial Officer)

5354


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


	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


(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


	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	%


	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)