SEC Filing | Investor Relations | WillScot

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 


 

FORM 8-K

 


 

CURRENT REPORT

 

PURSUANT TO SECTION 13 OR 15(d) OF THE

SECURITIES EXCHANGE ACT OF 1934

 

Date of Report (Date of earliest event reported): November 19, 2018

 

WILLSCOT CORPORATION

(Exact name of registrant as specified in its charter)

 

Delaware

 

001-37552

 

82-3430194

(State or other jurisdiction of
incorporation)

 

(Commission File Number)

 

(I.R.S. Employer Identification No.)

 

901 S. Bond Street, #600

Baltimore, Maryland 21231

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

 

(410) 931-6000

(Registrant’s telephone number, including area code)

 

 

(Former name or former address, if changed since last report)

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

 

o                    Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

o                    Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

o                    Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

o                    Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).

 

Emerging growth company x

 

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. o

 

 

 


 

Item 8.01                                           Other Events

 

On November 8, 2018, WillScot Corporation, a Delaware corporation (the “Company”), commenced its offer (the “Exchange Offer”) to each holder of its public and private warrants (together, the “Warrants”) that were issued under a warrant agreement dated September 10, 2015 by and between Double Eagle Acquisition Corp. and Continental Stock Transfer & Trust Company, as warrant agent, to receive 0.18182 shares of the Company’s Class A Common Stock, par value $0.0001 per share, for each Warrant tendered by the holder and exchanged pursuant to the Exchange Offer.

 

This Current Report on Form 8-K is being filed in connection with the Exchange Offer to provide certain pro forma financial information of the Company giving effect to the consummation of the Company’s acquisition (the “ModSpace Acquisition”) of Modular Space Holdings Corp., a Delaware corporation (“ModSpace”), and related transactions as set forth under Item 9.01 below, which is incorporated herein by reference. The ModSpace Acquisition closed on August 15, 2018, and  balance sheet information with respect to ModSpace is reflected in the Company’s balance sheet as of September 30, 2018 included in the Company’s Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2018. Accordingly, no pro forma condensed combined balance sheet information as of September 30, 2018 is provided.

 

Item 9.01                                           Financial Statements and Exhibits.

 

(b) Pro forma financial information

 

The following unaudited pro forma financial information is filed as Exhibit 99.1 hereto and is incorporated herein by reference.

 

·                      Unaudited Pro Forma Condensed Combined Income Statement for the fiscal year ended December 31, 2017;

 

·                      Unaudited Pro Forma Condensed Combined Income Statement for the nine months ended September 30, 2018; and

 

·                      Notes to the Unaudited Pro Forma Condensed Combined Financial Statements.

 

(d) Exhibits

 

Exhibit
Number

 

Description

 

 

 

99.1

 

Unaudited Pro Forma Condensed Combined Financial Information.

 

2


 

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, hereunto duly authorized.

 

 

WillScot Corporation

 

 

 

 

By:

/s/ Bradley Bacon

Dated: November 19, 2018

 

Name: Bradley Bacon

 

 

Title: Vice President, General Counsel & Corporate Secretary

 

3


Exhibit 99.1

 

UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION

 

The following unaudited pro forma condensed combined financial information sets forth selected pro forma consolidated financial information for WillScot Corporation (the “Company,” “WillScot,” or “we,” “us,” or “our”) for the year ended December 31, 2017 and the nine months ended September 30, 2018 and is derived from and should be read in conjunction with, the consolidated financial statements and related notes in our Annual Report on Form 10-K for the year ended December 31, 2017 (the “2017 10-K”), the consolidated financial statements and related notes in our Quarterly Report on Form 10-Q for the quarter ended September 30, 2018 (the “Q3 2018 10-Q”), and ModSpace Holdings, Inc.’s (“ModSpace”) historical consolidated financial statements included as Exhibits 99.1 and 99.2 to our Current Report on Form 8-K filed on July 24, 2018 and ModSpace’s historical consolidated financial statements included as Exhibit 99.1 and Exhibit 99.2 to our Current Report on Form 8-K/A filed on September 17, 2018.

 

On August 15, 2018, pursuant to the terms of that certain Agreement and Plan of Merger (the “Merger Agreement”) dated as of June 21, 2018, by and among WillScot, the Company’s newly-formed acquisition subsidiary, Mason Merger Sub, Inc., a Delaware corporation (“Merger Sub”), ModSpace, and NANOMA LLC, solely in its capacity as the representative of the Holders (as defined therein), Merger Sub merged with and into ModSpace (the “Merger”) with ModSpace as the surviving entity and continuing as an indirect subsidiary of the Company (the “ModSpace Acquisition”). The unaudited pro forma condensed combined financial information set forth below has been prepared to reflect adjustments to our financial condition and results of operations to give effect to the following items:

 

i.                  the consummation of the ModSpace Acquisition, including our issuance of shares of our Class A common stock, par value $0.0001 per share (“Common Stock”), and warrants to purchase shares of Common Stock (the “ModSpace Warrants”) to the sellers of ModSpace;

 

ii.               the Financing Transactions (as defined and discussed below),

 

iii.            the effects of the acquisition of Acton Mobile Holdings, LLC (“Acton”), which closed on December 20, 2017 (the “Acton Acquisition”);

 

iv.           the effects of the business combination of Double Eagle Acquisition Corp. and Williams Scotsman International, Inc., which we completed on November 29, 2017 (the “Business Combination”), on the historical capital structure; and

 

v.              Transaction costs incurred in connection with the ModSpace Acquisition and Financing Transactions.

 

As referred to above, the “Financing Transactions” include:

 

·                    our issuance of 9,200,000 shares of our Common Stock in an underwritten public offering at $16.00 per share (the “Equity Offering”);

 

·                    the entry by our indirect subsidiary, Williams Scotsman International, Inc. (“WSII”) and certain of its subsidiaries into amendments (the “Amended ABL Facility”) to the ABL Credit Agreement, dated as of November 29, 2017 (the “ABL Facility”) among WSII, the guarantors party thereto, the lenders party thereto and Bank of America, N.A., as agent and collateral agent. The Amended ABL Facility became effective upon the closing of the ModSpace Acquisition and increased borrowing capacity under the ABL Facility from $600.0 million to $1.425 billion, with an accordion feature allowing aggregate borrowing capacity of up to $1.8 billion. As of the closing date of the ModSpace Acquisition, we had total borrowings of $841.1 million under the ABL Facility;

 

·                    WSII’s issuance of $300.0 million in aggregate principal amount of senior secured notes to qualified institutional buyers pursuant to Rule 144A and Regulation S under the Securities Act of 1933, as amended (the “Securities Act”) (the “Secured Notes Offering”); and

 

·                    WSII’s issuance of $200.0 million in aggregate principal amount of senior unsecured notes (the “Unsecured Notes”) in a private placement transaction (the “Unsecured Financing”).

 

We refer to the entry into the Amended ABL Facility and the amounts funded thereunder, the Secured Notes Offering and the Unsecured Financing collectively as the “Other Financing Transactions.” We refer to the Equity Offering and the Other Financing Transactions collectively as the “Financing Transactions.” We refer to the ModSpace Acquisition, the Acton Acquisition, the Business Combination and the Financing Transactions collectively as the “Transactions.”

 


 

In connection with our entry into the Merger Agreement and pursuant to an amended and restated commitment letter (as amended, the “ABL/Bridge Debt Commitment Letter”), dated July 5, 2018, by and among Bank of America, N.A., Deutsche Bank AG New York Branch, Barclays Bank PLC, Morgan Stanley Senior Funding, Inc., Credit Suisse AG and ING Capital LLC (collectively, with certain of their respective affiliates, the “Lenders”) and us, as amended, the Lenders provided (i) an incremental ABL Facility in an aggregate principal amount of up to $825.0 million); (ii) a senior secured bridge loan facility in an aggregate principal amount of up to $285.6 million) (the “Secured Bridge Facility”); and (iii) a senior unsecured bridge loan facility in an aggregate principal amount of up to $326.4 million) (the “Unsecured Bridge Facility”), on the terms and subject to the conditions set forth in the ABL/Bridge Debt Commitment Letter, to fund a portion of the cash consideration for the ModSpace Acquisition and to pay related fees and expenses. We did not make any borrowings under the Unsecured Bridge Facility or the Secured Bridge Facility.

 

In connection with our entry into the Merger Agreement on July 31, 2018, a wholly-owned subsidiary of WSII, Mason Finance Sub, Inc. (“Finance Sub”), entered into a purchase agreement with certain financial institutions under which the initial purchasers agreed to purchase $300.0 million in aggregate principal amount of 6.875% senior secured notes due 2023 (the “2023 Secured Notes”) to be issued by Finance Sub. On August 6, 2018, Finance Sub closed the private placement and the initial purchasers deposited $300.0 million of gross offering proceeds into an escrow account. Upon consummation of the ModSpace Acquisition and the satisfaction of other conditions, the escrowed proceeds were released to fund a portion of the cash consideration payable by WSII in the ModSpace Acquisition and to pay related fees and expenses. Upon the closing the ModSpace Acquisition, Finance Sub merged with and into WSII, with WSII continuing as the surviving corporation, and WSII assumed the obligations of Finance Sub under the 2023 Secured Notes and the indenture governing the notes. The 2023 Secured Notes mature on August 15, 2023. The notes bear interest at a rate of 6.875% per annum, payable semi-annually on February 15 and August 15 of each year beginning February 15, 2019.

 

In connection with our entry into the Merger Agreement and pursuant to a commitment letter (the “Unsecured Debt Commitment Letter”), dated July 24, 2018, by and among AlbaCore Capital LLP, Canyon Value Realization Fund, L.P. (collectively, with certain of their respective affiliated or managed funds or accounts, the “Unsecured Lenders”) and us, the Unsecured Lenders purchased the Unsecured Notes in an aggregate principal amount of $200.0 million, on the terms and subject to the conditions set forth in the Unsecured Debt Commitment Letter, to fund a portion of the cash consideration for the ModSpace Acquisition and to pay related fees and expenses. The Unsecured Notes will mature on November 15, 2023. The Unsecured Notes will bear interest at a rate of 10.0% per annum if paid in cash (or if paid in kind, 11.5% per annum) for any interest period ending on or prior to February 15, 2021, increasing thereafter to 12.5% per annum with no paid in kind option, in each case payable semi-annually on February 15 and August 15 of each year beginning February 15, 2019. The Unsecured Notes are WSII’s general unsecured obligations and rank pari passu in right of payment with all of WSII’s existing and future senior indebtedness, effectively junior to all of WSII’s existing and future secured indebtedness, including the Amended ABL Facility, WSII’s existing 7.875% senior secured notes due 2022 (the “2022 Secured Notes”) and the 2023 Secured Notes (collectively, the “Secured Notes”), to the extent of the value of the collateral securing such indebtedness, and senior in right of payment to any of WSII’s future unsecured subordinated indebtedness.

 

In connection with the Other Financing Transactions and the ModSpace Acquisition, we and the Lenders entered into three amendments to the credit agreement governing our ABL Facility to effectuate, among other things, (i) the amendments contemplated by the ABL/Bridge Debt Commitment Letter, (ii) the syndication of the upsized ABL Facility, and (iii) the closing of the ModSpace Acquisition, including the release of escrowed proceeds from the Secured Notes Offering and Unsecured Financing for purposes of funding the cash consideration payable in the Merger and transaction costs related thereto.

 

The following unaudited pro forma condensed combined financial information is based on the historical financial statements of WillScot, Acton and ModSpace described below. Our fiscal year is different than ModSpace’s historical fiscal year. Our fiscal year ends on December 31, while ModSpace’s historical fiscal year ends on September 30. In preparing the unaudited pro forma condensed combined statement of operations for the year ended December 31, 2017, certain historical financial information for ModSpace was reclassified to align with WillScot’s annual reporting period. To adjust the historical operating results of ModSpace’s September 30 fiscal year, we added the operating results for the three months ended December 31, 2017 (Successor), and subtracted the operating results for the three months ended December 31, 2016 (Predecessor) from the year ended September 30, 2017 for the ModSpace statement of operations, to arrive at the reclassified statement of operations for the twelve months ended December 31, 2017 for ModSpace. To derive the historical operating results of ModSpace for the period  ended August 15, 2018, we subtracted the operating results for the three months ended December 31, 2017 (Successor) from the nine months ended June 30, 2018 for the ModSpace statement of operations as filed in our Current Report on Form 8-K/A

 


 

on September 17, 2018, to arrive at the reclassified statement of operations for the six months ended June 30, 2018 and added the results of operations from the period of July 1, 2018 to August 15, 2018 (“Stub period”) to arrive at the Modspace results of operations from the period January 1, 2018 to August 15, 2018, the date of the Modspace Acquisition. The ModSpace operating results for the three months ended December 31, 2017 are derived from the historical unaudited interim financial statements of ModSpace included in our Current Report on Form 8-K filed on July 24, 2018. The three month period was derived by taking the ModSpace historical unaudited statement of operations for the six months ended March 31, 2018, and subtracting the three months ended March 31, 2018. In addition, certain reclassifications were made to the reported financial information of ModSpace to conform to the reporting classifications of WillScot.

 

The unaudited pro forma condensed combined statement of operations for the year ended December 31, 2017 combines:

 

·                    the audited historical consolidated statement of operations of WillScot for the year ended December 31, 2017;

·                    the reclassified unaudited historical consolidated statement of operations of ModSpace for the twelve months ended December 31, 2017; and

·                    the unaudited historical consolidated statement of operations of Acton for the period from January 1, 2017 to December 20, 2017.

 

The unaudited pro forma condensed combined statement of operations for the nine months ended September 30, 2018 combines:

 

·                    the unaudited historical condensed consolidated statement of operations of WillScot for the nine months ended September 30, 2018 (historical statements include Acton operating results as it was a wholly owned subsidiary of WillScot during this period); and

·                    the reclassified unaudited historical consolidated statement of operations of ModSpace for the period from January 1, 2018 through August 15, 2018 (the ModSpace operating results from August 16, 2018 to September 30, 2018 are included in the WillScot historical financial statements as it was a wholly owned subsidiary of WillScot during that period)

 

An unaudited pro forma condensed combined balance sheet as of September 30, 2018 is not required as the Transactions described above have been reflected in the historical balance sheet of WillScot as of September 30, 2018 in the Company’s Q3 2018 10-Q.

 

The unaudited pro forma condensed combined statement of operations for the year ended December 31, 2017 is based on, derived from, and should be read in conjunction with, our historical audited financial statements as set forth in our 2017 10-K. The unaudited pro forma condensed combined statement of operations for the year ended December 31, 2017 is also based on, derived from, and reclassified from ModSpace’s historical audited financial statements for the fiscal year ended September 30, 2017 and should be read in conjunction with ModSpace’s historical audited financial statements included in our Current Report on Form 8-K filed on July 24, 2018, as adjusted to conform to our calendar year end. The unaudited pro forma condensed statement of operations for the year ended December 31, 2017 does not include the operating results of Tyson Onsite (“Tyson”), which we acquired on January 3, 2018.

 

Our statement of operations for the nine months ended September 30, 2018 is based on, derived from, and should be read in conjunction with, our historical unaudited financial statements, included in our 10-Q for the quarter ended September 30, 2018.  ModSpace’s statement of operations for the period from January 1, 2018 to August 15, 2018 is based on, and derived from, ModSpace’s historical unaudited financial statements, and should be read in conjunction with, ModSpace’s historical unaudited financial statements for the six months ended March 31, 2018 and the nine months ended June 30, 2018, included in our Current Report on Form 8-K filed on July 24, 2018 and our Current Report on Form 8-K/A filed on September 17, 2018, respectively. The ModSpace financial information for the period from July 1, 2018 to August 15, 2018 is included within the notes to these unaudited condensed combined pro forma financial statements.

 

The unaudited pro forma condensed combined statements of operations for the year ended December 31, 2017, and the nine months ended September 30, 2018 assume that the Transactions occurred on January 1, 2017. The unaudited pro forma condensed combined financial information has been prepared by management for illustrative purposes only and is not necessarily indicative of the consolidated financial position or results of operations that would have been realized had the Transactions occurred as of the dates indicated, nor is it meant to be indicative of any anticipated consolidated financial position or future results of operations of the combined company. In addition, the accompanying unaudited pro forma condensed

 


 

combined statements of operations do not include any expected cost savings or restructuring actions which may be achievable or which may occur subsequent to the ModSpace Acquisition, or the costs to achieve these cost savings or restructuring actions. The pro forma financial information also does not include the impact of any non-recurring activity and one-time transaction-related costs. The historical consolidated financial information has been adjusted in the accompanying unaudited pro forma condensed combined financial statements to give effect to pro forma events that are (i) directly attributable to the Transactions related thereto, (ii) factually supportable and (iii) with respect to the unaudited pro forma condensed combined statements of operations, are expected to have a continuing impact on the combined results. Please see Note 3 below for further discussion of the pro forma adjustments.

 

The ModSpace Acquisition is accounted for as a business combination using the acquisition method of accounting under the provisions of Accounting Standard Codification No. 805, “Business Combinations,” (“ASC 805”) and applying the pro forma assumptions and adjustments described in the accompanying notes to the unaudited pro forma condensed combined financial statements. Under ASC 805, the Company values assets acquired and liabilities assumed in a business combination at their fair values as of the acquisition date. Fair value measurements can be highly subjective and the reasonable application of measurement principles may result in a range of alternative estimates using the same facts and circumstances. The process for estimating the fair values of identifiable intangible assets and certain tangible assets requires the use of significant estimates and assumptions by management, including estimating future cash flows, and developing appropriate discount rates. Under ASC 805, transaction costs are not included as a component of consideration transferred, and are expensed as incurred. The final valuation is expected to be completed as soon as practicable but no later than one year after the consummation of the ModSpace Acquisition. The purchase price allocation is subject to completion of the Company’s final analysis of the fair value of the assets and liabilities of ModSpace as of the effective date of the ModSpace Acquisition. Accordingly, the purchase price allocation in the unaudited pro forma condensed combined financial statements is preliminary. Adjustments to the preliminary purchase price allocation could be material. The Company believes the fair values assigned to the assets to be acquired and liabilities to be assumed are based on reasonable estimates and assumptions using currently available data.

 

This unaudited pro forma condensed combined financial information has been prepared in accordance with Article 11 of Regulation S-X.  The unaudited pro forma condensed combined financial information is presented for informational purposes only and does not purport to represent what the Company’s results of operations would actually have been if the Transactions had occurred on the dates indicated nor do they purport to project the Company’s results of operations for any future period.

 


 

WILLSCOT CORPORATION

UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS

FOR NINE MONTHS ENDED SEPTEMBER 30, 2018

(In thousands, except loss per share data)

 

 

 

Historical
WillScot for
the nine
months
ended
September
30, 2018

 

Historical
ModSpace
reclassified
for the period
from January
1, 2018 to
August 15,
2018
(Successor)

 

ModSpace
Acquisition
Adjustments

 

Other
Financing
Transaction
Adjustments

 

Pro Forma
Combined

 

Revenues:

 

 

 

 

 

 

 

 

 

 

 

Leasing and service revenue:

 

 

 

 

 

 

 

 

 

 

 

Modular leasing

 

$

340,171

 

$

172,572

 

$

 

$

 

$

512,743

 

Modular delivery and installation

 

104,440

 

72,285

 

 

 

176,725

 

Sales:

 

 

 

 

 

 

 

 

 

 

 

New units

 

33,584

 

47,087

 

 

 

80,671

 

Rental units

 

15,813

 

20,665

 

 

 

36,478

 

Total revenues

 

494,008

 

312,609

 

 

 

806,617

 

 

 

 

 

 

 

 

 

 

 

 

 

Costs:

 

 

 

 

 

 

 

 

 

 

 

Cost of leasing and services:

 

 

 

 

 

 

 

 

 

 

 

Modular leasing

 

93,506

 

45,653

 

 

 

139,159

 

Modular delivery and installation

 

98,038

 

57,663

 

 

 

155,701

 

Cost of sales:

 

 

 

 

 

 

 

 

 

 

 

New units

 

23,780

 

35,891

 

 

 

59,671

 

Rental units

 

9,328

 

13,818

 

 

 

23,146

 

Depreciation of rental equipment

 

82,849

 

30,203

 

(6,014

)(3a)

 

107,038

 

Gross profit

 

186,507

 

129,381

 

6,014

 

 

321,902

 

 

 

 

 

 

 

 

 

 

 

 

 

Expenses:

 

 

 

 

 

 

 

 

 

 

 

Selling, general and administrative

 

164,845

 

108,690

 

(28,933

)(3b)

 

244,602

 

Other depreciation and amortization

 

7,726

 

6,894

 

(4,317

)(3c)

 

10,303

 

Impairment losses on goodwill

 

 

 

 

 

 

Restructuring costs

 

7,214

 

 

 

 

7,214

 

Currency losses, net

 

1,171

 

 

 

 

1,171

 

Other (income) expense, net

 

(5,013

)

975

 

 

 

(4,038

)

Operating income (loss)

 

10,564

 

12,822

 

39,264

 

 

62,650

 

Interest expense

 

67,321

 

20,279

 

 

649

(3f)

88,249

 

Interest income

 

 

 

 

 

 

Income (loss) from continuing operations before income tax

 

(56,757

)

(7,457

)

39,264

 

(649

)

(25,599

)

Income tax (benefit) expense

 

(13,572

)

574

 

7,191

(3d)

(167

)(3g)

(5,974

)

(Loss) income from continuing operations

 

(43,185

)

(8,031

)

32,073

 

(482

)

(19,625

)

Income from discontinued operations, net of tax

 

 

 

 

 

 

Net (loss) income

 

(43,185

)

(8,031

)

32,073

 

(482

)

(19,625

)

Less net (loss) income attributable to non-controlling interest, net of tax

 

(3,715

)

 

1,954

(3e)

 

(1,761

)

Total (loss) income attributable to WillScot

 

$

(39,470

)

$

(8,031

)

$

30,119

 

$

(482

)

$

(17,864

)

 

 

 

 

 

 

 

 

 

 

 

 

Historical per share information

 

 

 

 

 

 

 

 

 

 

 

Net loss per share attributable to WillScot - basic and diluted (3h)

 

 

 

 

 

 

 

 

 

 

 

Continuing operations

 

$

(0.48

)

 

 

 

 

 

 

$

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average shares

 

 

 

 

 

 

 

 

 

 

 

Basic and diluted

 

82,165,910

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Pro forma loss per share data (3h)

 

 

 

 

 

 

 

 

 

 

 

Pro forma net loss per share

 

$

(0.44

)

 

 

 

 

 

 

$

(0.19

)

 

 

 

 

 

 

 

 

 

 

 

 

Pro forma weighted average shares

 

 

 

 

 

 

 

 

 

 

 

Basic and diluted

 

89,291,184

 

 

 

 

 

 

 

96,313,534

 

 

See notes to unaudited pro forma condensed combined statement of operations

 


 

WILLSCOT CORPORATION

UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS

FOR THE YEAR ENDED DECEMBER 31, 2017

(In thousands, except loss per share data)

 

 

 

Historical

 

 

 

Historical

 

 

 

 

 

Historical ModSpace (Reclassified)

 

 

 

 

 

 

 

 

 

WillScot for
the twelve
months ended
December 31,
2017

 

Business
Combination
Adjustment

 

Acton from
January 1,
2017 to
December 20,
2017

 

Acton
Acquisition
Adjustment

 

Pro Forma
As Adjusted

 

January 1,
2017 to
March 2,
2017
(Predecessor)

 

March 3,
2017 to
December 31,
2017
(Successor)

 

ModSpace
Acquisition
Adjustments

 

Other
Financing
Transaction
Adjustments

 

Pro Forma
Combined

 

Revenues:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Leasing and service revenue:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Modular leasing

 

$

297,821

 

$

 

$

47,091

 

$

 

$

344,912

 

$

41,493

 

$

209,237

 

$

 

$

 

$

595,642

 

Modular delivery and installation

 

89,850

 

 

38,460

 

 

128,310

 

16,961

 

95,547

 

 

 

240,818

 

Sales:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

New units

 

36,371

 

 

4,869

 

 

41,240

 

7,924

 

40,402

 

 

 

89,566

 

Rental units

 

21,900

 

 

3,493

 

 

25,393

 

4,405

 

27,510

 

 

 

57,308

 

Total revenues

 

445,942

 

 

93,913

 

 

539,855

 

70,783

 

372,696

 

 

 

983,334

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Costs:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cost of leasing and services:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Modular leasing

 

83,588

 

 

16,152

 

 

99,740

 

11,414

 

61,347

 

 

 

172,501

 

Modular delivery and installation

 

85,477

 

 

22,394

 

 

107,871

 

14,652

 

78,511

 

 

 

201,034

 

Cost of sales:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

New units

 

26,025

 

 

3,733

 

 

29,758

 

6,445

 

31,676

 

 

 

67,879

 

Rental units

 

12,643

 

 

1,633

 

 

14,276

 

3,356

 

19,346

 

 

 

36,978

 

Depreciation of rental equipment

 

72,639

 

 

12,438

 

5,664

(5a)

90,741

 

10,808

 

41,678

 

(13,784

)(3a)

 

129,443

 

Gross profit

 

165,570

 

 

37,563

 

(5,664

)

197,469

 

24,108

 

140,138

 

13,784

 

 

375,499

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Selling, general and administrative

 

162,351

 

 

33,157

 

(5,410

)(5b)(5c)

190,098

 

18,209

 

101,304

 

 

 

309,611

 

Other depreciation and amortization

 

8,653

 

 

2,608

 

374

(5d)

11,635

 

1,383

 

8,158

 

(6,105

)(3c)

 

15,071

 

Impairment losses on goodwill

 

60,743

 

 

 

 

60,743

 

 

 

 

 

60,743

 

Restructuring costs

 

2,196

 

 

 

 

2,196

 

3,164

 

3,939

 

 

 

9,299

 

Currency (gains) losses, net

 

(12,878

)

10,830

(4a)

 

 

(2,048

)

 

 

 

 

(2,048

)

Other expense (income), net

 

2,827

 

 

 

 

2,827

 

(227

)

3,522

 

 

 

6,122

 

Loss on reorganization items, net

 

 

 

 

 

 

92,450

 

 

 

 

92,450

 

Operating (loss) income

 

(58,322

)

(10,830

)

1,798

 

(628

)

(67,982

)

(90,871

)

23,215

 

19,889

 

 

(115,749

)

Interest expense

 

119,308

 

(77,373

)(4b)

5,049

 

4,199

(5e)

51,183

 

15,275

 

25,137

 

 

29,889

(3f)

121,484

 

Interest income

 

(12,232

)

12,177

(4b)

 

 

(55

)

 

 

 

 

(55

)

(Loss) income from continuing operations before income tax

 

(165,398

)

54,366

 

(3,251

)

(4,827

)

(119,110

)

(106,146

)

(1,922

)

19,889

 

(29,889

)

(237,178

)

Income tax (benefit) expense

 

(936

)

14,026

(4c)

 

(2,084

)(5f)

11,006

 

(9,516

)

(9,023

)

5,131

(3d)

(7,711

)(3g)

(10,113

)

(Loss) income from continuing operations

 

(164,462

)

40,340

 

(3,251

)

(2,743

)

(130,116

)

(96,630

)

7,101

 

14,758

 

(22,178

)

(227,065

)

Income from discontinued operations, net of tax

 

14,650

 

 

 

 

14,650

 

 

 

 

 

14,650

 

Net (loss) income

 

(149,812

)

40,340

 

(3,251

)

(2,743

)

(115,466

)

(96,630

)

7,101

 

14,758

 

(22,178

)

(212,415

)

Less net loss attributable to non-controlling interest, net of tax

 

(2,110

)

 

 

 

(2,110

)

 

 

(18,261

)(3e)

 

(20,371

)

Total (loss) income attributable to WillScot

 

$

(147,702

)

$

40,340

 

$

(3,251

)

$

(2,743

)

$

(113,356

)

$

(96,630

)

$

7,101

 

$

33,019

 

$

(22,178

)

$

(192,044

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss per share attributable to WillScot - basic and diluted (3h)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Continuing operations

 

$

(8.21

)

 

 

 

 

 

 

$

(1.77

)

 

 

 

 

 

 

 

 

$

(2.29

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted Average Shares

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic and diluted

 

19,760,189

 

52,459,585

 

 

 

 

 

72,219,774

 

 

 

 

 

 

 

 

 

 

Total pro forma shares outstanding

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

89,878,073

 

 

See notes to unaudited pro forma condensed combined statement of operations

 


 

NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION

(in thousands, except share and per share data)

 

1. ModSpace Acquisition

 

On August 15, 2018, pursuant to the terms of the Merger Agreement, we completed the ModSpace Acquisition. The values presented as “Historical WillScot” in the unaudited pro forma condensed combined statement of operations for the nine months ended September 30, 2018 include the results of operations of ModSpace from August 15, 2018 to September 30, 2018. Additionally, the values presented as “Historical WillScot” in the unaudited pro forma condensed combined statement of operations for the year ended December 31, 2017 do not include the results of operations of ModSpace. For a description of the ModSpace Acquisition, see Note 2 of the Company’s consolidated financial statements for the nine months ended September 30, 2018 included in the Company’s Q3 2018 10-Q.

 

2. Accounting Policies and Reclassifications

 

During the preparation of these unaudited pro forma condensed combined financial statements, the Company made a preliminary assessment as to any material differences between the Company’s accounting policies and ModSpace’s accounting policies. The preliminary assessment performed did not identify any material differences and as such, these unaudited pro forma condensed combined financial statements do not adjust for or assume any differences in accounting policies between WillScot and ModSpace. An assessment of the Acton accounting policies was done in conjunction with the Acton Acquisition. No material differences between the Company’s accounting policies and the Acton accounting policies were noted, and the Acton results for the period from January 1, 2017 to December 20, 2017 do not adjust for or assume any material differences in accounting policies between the Company and Acton.

 

Following the ModSpace Acquisition, ModSpace conforms to the Company’s accounting policies and financial statement presentation classifications.  The Company has evaluated areas of operations in which ModSpace had an accounting policy for which the Company does not have an accounting policy. For these matters, the Company has made an accounting policy election post transaction close, as appropriate, to reflect any material changes in operating practices for the post-close period.

 

Financial information presented in the “Historical ModSpace” column in the unaudited pro forma statement of operations has been reclassified to conform to the Company’s historical presentation as follows (all numbers are stated in thousands unless explicitly stated):

 


 

Historical ModSpace Statement of Operations for the Six Months Ended June 30, 2018

 

 

 

Historical
ModSpace for
the nine months
ended June 30,
2018
(Successor)

 

Historical
ModSpace as
reclassified for
the nine months
ended June 30,
2018
[A]
(Successor)

 

Historical
ModSpace for
the three
months ended
December 31,
2017
(Successor)

 

Historical
ModSpace as
reclassified
for the three
months ended
December 31,
2017
[B]
(Successor)

 

Historical
ModSpace as
reclassified for
the six months
ended June 30,
2018
[A] - [B]
(Successor)

 

Revenues:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Modular leasing

 

$

 

$

202,886

 

$

 

$

65,975

 

$

136,911

 

Modular delivery and installation

 

 

80,294

 

 

24,317

 

55,977

 

Leasing

 

194,496

 

 

63,728

 

 

 

Sales:

 

 

 

 

 

 

 

 

 

 

 

New units

 

29,465

 

30,427

 

8,573

 

8,657

 

21,770

 

Rental units

 

 

25,389

 

 

9,130

 

16,259

 

Lease units

 

25,389

 

 

9,130

 

 

 

Delivery, installation and site services

 

89,699

 

 

26,682

 

 

 

Total revenues

 

339,049

 

338,996

 

108,113

 

108,079

 

230,917

 

 

 

 

 

 

 

 

 

 

 

 

 

Costs:

 

 

 

 

 

 

 

 

 

 

 

Cost of leasing and services:

 

 

 

 

 

 

 

 

 

 

Modular leasing

 

 

52,707

 

 

17,393

 

35,314

 

Modular delivery and installation

 

 

65,008

 

 

19,840

 

45,168

 

Delivery, installation and site services

 

65,748

 

 

19,970

 

 

 

Cost of sales:

 

 

 

 

 

 

 

 

 

 

 

New units

 

23,424

 

23,630

 

6,960

 

7,000

 

16,630

 

Rental units

 

 

16,731

 

 

6,004

 

10,727

 

Lease units

 

16,731

 

 

6,004

 

 

 

Depreciation of rental equipment

 

 

36,001

 

 

11,867

 

24,134

 

Depreciation

 

36,001

 

 

11,867

 

 

 

Maintenance and other

 

65,800

 

 

20,531

 

 

 

Gross profit

 

131,345

 

144,919

 

42,781

 

45,975

 

98,944

 

 

 

 

 

 

 

 

 

 

 

 

 

Expenses:

 

 

 

 

 

 

 

 

 

 

 

Selling, general and administrative

 

98,285

 

110,061

 

32,089

 

34,790

 

75,271

 

Other depreciation and amortization

 

 

8,281

 

 

2,722

 

5,559

 

Other (income) expense, net

 

 

(1,834

)

 

(12

)

(1,822

)

Restructuring costs

 

4,649

 

 

2,217

 

 

 

Operating income

 

28,411

 

28,411

 

8,475

 

8,475

 

19,936

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest expense

 

 

23,554

 

 

7,621

 

15,933

 

Interest, including amortization of deferred financing costs

 

23,554

 

 

7,621

 

 

 

Income from continuing operations before income tax

 

4,857

 

4,857

 

854

 

854

 

4,003

 

Income tax (benefit) expense

 

(4,617

)

(4,617

)

(5,189

)

(5,189

)

572

 

Income from continuing operations

 

9,474

 

9,474

 

6,043

 

6,043

 

3,431

 

Income from discontinued operations, net of tax

 

 

 

 

 

 

Net Income

 

9,474

 

9,474

 

6,043

 

6,043

 

3,431

 

Less net income attributable to non-controlling interest, net of tax

 

 

 

 

 

 

Total income attributable to WillScot

 

$

9,474

 

$

9,474

 

$

6,043

 

$

6,043

 

$

3,431

 

 


 

Historical ModSpace Statement of Operations for the Nine Months Ended September 30, 2018

 

 

 

Historical ModSpace
As Reclassified for
the six months ended
June 30, 2018
[As reported in Pro
Forma]
(Successor)

 

Plus: Historical
ModSpace for the
period 7/1/18 to
8/15/18
(Successor)

 

Period ended
August 15, 2018
adjusted for
reclassification
(Successor)

 

Revenues:

 

 

 

 

 

 

 

Leasing and Service Revenue 

 

 

 

 

 

 

 

Modular leasing

 

$

136,911

 

$

35,661

 

$

172,572

 

Modular delivery and installation

 

55,977

 

16,308

 

72,285

 

Leasing

 

 

 

 

Sales:

 

 

 

 

 

 

 

New units

 

21,770

 

25,317

 

47,087

 

Rental units

 

16,259

 

4,406

 

20,665

 

Lease units

 

 

 

 

Delivery, installation and site services

 

 

 

 

Total revenues

 

230,917

 

81,692

 

312,609

 

 

 

 

 

 

 

 

 

Costs:

 

 

 

 

 

 

 

Cost of leasing and services:

 

 

 

 

 

 

 

Modular leasing

 

35,314

 

10,339

 

45,653

 

Modular delivery and installation

 

45,168

 

12,495

 

57,663

 

Delivery, installation and site services

 

 

 

 

Cost of sales:

 

 

 

 

 

 

 

New units

 

16,630

 

19,261

 

35,891

 

Rental units

 

10,727

 

3,091

 

13,818

 

Lease units

 

 

 

 

Depreciation of rental equipment

 

24,134

 

6,069

 

30,203

 

Depreciation

 

 

 

 

Maintenance and other

 

 

 

 

Gross profit

 

98,944

 

30,437

 

129,381

 

 

 

 

 

 

 

 

 

Expenses:

 

 

 

 

 

 

 

Selling, general and administrative

 

75,271

 

33,419

 

108,690

 

Other depreciation and amortization

 

5,559

 

1,335

 

6,894

 

Other (income) expense, net

 

(1,822

)

2,797

 

975

 

Restructuring costs

 

 

 

 

Operating income (loss)

 

19,936

 

(7,114

)

12,822

 

 

 

 

 

 

 

 

 

Interest expense

 

15,933

 

4,346

 

20,279

 

Interest, including amortization of deferred financing costs

 

 

 

 

Income (loss) from continuing operations before income tax

 

4,003

 

(11,460

)

(7,457

)

Income tax expense

 

572

 

2

 

574

 

Income (loss) from continuing operations

 

3,431

 

(11,462

)

(8,031

)

Income from discontinued operations, net of tax

 

 

 

 

Net Income (loss)

 

3,431

 

(11,462

)

(8,031

)

Less net loss attributable to non-controlling interest, net of tax

 

 

 

 

Total income (loss) attributable to WillScot

 

$

3,431

 

$

(11,462

)

$

(8,031

)

 


 

Historical ModSpace Statement of Operations for the Year Ended December 31, 2017

 

 

 

Historical
ModSpace
from March
3, 2017 to
September
30, 2017
(Successor)

 

Historical
ModSpace as
reclassified
from March
3, 2017 to
September
30, 2017
(Successor)
[A]

 

Historical
ModSpace
from
October 1,
2017 to
December
31, 2017
(Successor)

 

Historical
ModSpace
as
reclassified
from
October 1,
2017 to
December
31, 2017
(Successor)
[B]

 

Historical
ModSpace
as reclassified
from March
3, 2017 to
December
31, 2017
(Successor)
[A] + [B]

 

Historical
ModSpace
from January
1, 2017 to
March 2, 2017
(Predecessor)

 

Historical
ModSpace as
reclassified
from
January 1,
2017 to
March
2, 2017
(Predecessor)
[C]

 

Revenues:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Leasing and service revenues:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Modular leasing

 

$

 

$

143,262

 

$

 

$

65,975

 

$

209,237

 

$

 

$

41,493

 

Modular delivery and installation

 

 

71,230

 

 

24,317

 

95,547

 

 

16,961

 

Leasing

 

134,521

 

 

63,728

 

 

 

39,110

 

 

Sales:

 

 

 

 

 

 

 

 

New units

 

31,788

 

31,745

 

8,573

 

8,657

 

40,402

 

7,944

 

7,924

 

Rental units

 

 

18,380

 

 

9,130

 

27,510

 

 

4,405

 

Lease units

 

18,380

 

 

9,130

 

 

 

4,405

 

 

Delivery, installation and removal

 

79,924

 

 

26,682

 

 

 

19,307

 

 

Total revenues

 

264,613

 

264,617

 

108,113

 

108,079

 

372,696

 

70,766

 

70,783

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Costs:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cost of leasing and services:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Modular leasing

 

 

43,954

 

 

17,393

 

61,347

 

 

11,414

 

Modular delivery and installation

 

 

58,671

 

 

19,840

 

78,511

 

 

14,652

 

Delivery, installation and removal

 

59,643

 

 

19,970

 

 

 

14,941

 

 

Cost of sales:

 

 

 

 

 

 

 

 

New units

 

24,724

 

24,676

 

6,960

 

7,000

 

31,676

 

6,445

 

6,445

 

Rental units

 

 

13,342

 

 

6,004

 

19,346

 

 

3,356

 

Lease units

 

13,342

 

 

6,004

 

 

 

3,356

 

 

Depreciation of rental equipment

 

 

29,811

 

 

11,867

 

41,678

 

 

10,808

 

Depreciation

 

29,811

 

 

11,867

 

 

 

10,808

 

 

Maintenance and other

 

49,763

 

 

20,531

 

 

 

14,181

 

 

Gross profit

 

87,330

 

94,163

 

42,781

 

45,975

 

140,138

 

21,035

 

24,108

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Selling, general and administrative

 

70,868

 

68,731

 

32,089

 

32,573

 

101,304

 

16,292

 

18,209

 

Other depreciation and amortization

 

 

5,436

 

 

2,722

 

8,158

 

 

1,383

 

Impairment losses on goodwill

 

 

 

 

 

 

 

 

Goodwill impairment charge

 

 

 

 

 

 

 

 

Currency (gains) losses, net

 

 

 

 

 

 

 

 

Other expense (income), net

 

 

3,534

 

 

(12

)

3,522

 

 

(227

)

Restructuring costs

 

1,722

 

1,722

 

2,217

 

2,217

 

3,939

 

3,164

 

3,164

 

Loss on reorganization items, net

 

 

 

 

 

 

92,450

 

92,450

 

Operating income (loss)

 

14,740

 

14,740

 

8,475

 

8,475

 

23,215

 

(90,871

)

(90,871

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest expense

 

 

17,516

 

 

7,621

 

25,137

 

 

15,275

 

Interest income

 

 

 

 

 

 

 

 

Interest, including amortization of deferred financing costs

 

17,516

 

 

7,621

 

 

 

15,275

 

 

(Loss) income from continuing operations before income tax

 

(2,776

)

(2,776

)

854

 

854

 

(1,922

)

(106,146

)

(106,146

)

Income tax benefit

 

(3,834

)

(3,834

)

(5,189

)

(5,189

)

(9,023

)

(9,516

)

(9,516

)

Income (loss) from continuing operations

 

1,058

 

1,058

 

6,043

 

6,043

 

7,101

 

(96,630

)

(96,630

)

Income (loss) from discontinued operations, net of tax

 

 

 

 

 

 

 

 

Net income (loss)

 

1,058

 

1,058

 

6,043

 

6,043

 

7,101

 

(96,630

)

(96,630

)

Less net loss attributable to non-controlling interest, net of tax

 

 

 

 

 

 

 

 

Total income (loss) attributable to WillScot

 

$

1,058

 

$

1,058

 

$

6,043

 

$

6,043

 

$

7,101

 

$

(96,630

)

$

(96,630

)

 


 

Historical Acton Statement of Operations for the Year Ended December 31, 2017

 

Financial information presented in the “Historical Acton” column in the unaudited condensed statement of operations has been reclassified to conform to the Company’s historical presentation. Transaction costs of $5,480 in Acton’s historical statement of operations for the year ended December 31, 2017 was reclassified to selling, general and administrative (“SG&A”) expense to conform to the Company’s historical presentation.

 

3. Unaudited Pro Forma Statement of Operations Adjustments:

 

a)                                     Represents the differential in depreciation expense relating to the provisional fair value purchase accounting adjustments for the Acquisition, as follows:

 

 

 

Fair value

 

Estimated
useful life

 

Nine months ended
September 30,
2018

 

Year ended
December 31,
2017

 

Rental equipment, net (fleet) (1)

 

855,245

 

13.8 years

 

$

20,717

 

$

33,148

 

Value added products

 

11,108

 

2 years

 

3,472

 

5,554

 

Less: historical depreciation

 

 

 

 

 

(30,203

)

(52,486

)

Net pro forma adjustment

 

 

 

 

 

$

(6,014

)

$

(13,784

)

 

(1)         Excludes $448 of Rental Equipment held for sale on the ModSpace opening balance sheet.

 

b)             Represents the elimination of $14,790 of non-recurring transaction costs expensed by WillScot as part of the ModSpace Acquisition during the nine months ended September 30, 2018 and $14,143 of non-recurring transaction costs incurred by ModSpace as part of the ModSpace Acquisition for the period from January 1, 2018 to September 30, 2018.

 

c)              Represents the differential in expense relating to the provisional fair value purchase accounting adjustments for the ModSpace Acquisition, as follows:

 


 

 

 

Estimated
useful
life

 

Estimated
fair value

 

Nine months
ended
September 30,
2018

 

Year ended
December 31,
2017

 

Trade names and trademarks

 

3 years

 

$

3,000

 

$

750

 

$

1,000

 

 

 

 

 

 

 

 

 

 

 

Leasehold interest (1)

 

6 years

 

(302

)

(37

)

(49

)

Other property and equipment, net (2)

 

Varies

 

19,311

 

1,864

 

2,485

 

Less: historical amortization

 

 

 

 

 

(6,894

)

(9,541

)

Net pro forma adjustment

 

 

 

 

 

$

(4,317

)

$

(6,105

)

 

(1)         Excludes acquired leasehold interest intangible assets of $3,850 that have historical book values equal to the provisional fair value.

(2)         Excludes $92,370 of land and non-depreciating assets that are included on ModSpace opening balance sheet.

 

d)             This adjustment reflects the income tax expense/benefit effects of the unaudited pro forma adjustments based on applicable statutory tax rates for the jurisdictions associated with the respective pro forma adjustments. Because the tax rates used for these unaudited pro forma condensed combined financial statements are an estimate, the blended rate will likely vary from the actual effective rate in periods subsequent to completion of the ModSpace Acquisition. Further, the combined company’s ability to use net operating loss carryforwards to offset future taxable income for United States (“US”)  federal income tax purposes is subject to limitations. In general, under Section 382 of the Internal Revenue Code (“Code”), a corporation that undergoes an “ownership change” is subject to limitations on its ability to utilize its pre-change net operating losses (referred to as “NOLs”) to offset future taxable income.  Tax related adjustments included in the unaudited pro forma condensed combined financial information are based on the tax law in effect during the annual period for which the unaudited pro forma condensed combined statements of operations is being presented, and therefore incorporates effects of the Tax Cuts and Jobs Act of 2017 (the “2017 Tax Act”) signed on December 22, 2017. Provisional amounts based on management’s reasonable estimates of the effects of the 2017 Tax Act have been reflected in the unaudited pro forma condensed combined financial information, as the full determination of the accounting implications of the 2017 Tax Act has not yet been completed.  Because the combined company will be in tax loss position in 2017, all pro forma adjustments for US tax effects are at the US (federal and state) statutory tax rate of 25.8% since the adjustments represent future deductible or taxable temporary differences.

 

e)              Reflects the pro forma adjustment for the change in non-controlling interest as a result of dilution from the issuance of additional WS Holdings shares issued as referenced in Note 3(h). The non-controlling interest was reduced from 10% to approximately 9.0%. In connection with the Business Combination, the non-controlling interest holder (“Sapphire”), an affiliate of the Company’s controlling stockholder, was issued (i) 8,024,419 shares of WS Holdings common stock, which shares are exchangeable for shares of the Company’s Common Stock and (ii) 8,024,419 shares of the Company’s Class B common stock, par value $0.0001 per share (the “Class B Common Stock”), representing a non-economic voting interest in the Company. Upon conversion or cancellation of any WS Holdings shares, the corresponding shares of the Company’s Class B Common Stock are automatically canceled for no consideration. Each share of common stock of WS Holdings shall be converted upon exchange into that number of shares of the Company’s Common Stock as determined by an exchange ratio which shall be calculated based on (1) the aggregate ownership percentage of the exchanging holder of common stock of WS Holdings issued and outstanding on the date of the exercise notice and (2) the aggregate number of shares of the Company’s Common Stock issued and outstanding as of the same date.  In determining such calculation, the following factors shall be taken into account: (i) any exercise or failure to exercise preemptive rights, (ii) any stock split, dividend, recapitalization or similar change in the Company’s Common Stock or the common stock of WS Holdings, (iii) any issuance of the Company’s Common Stock in connection with an acquisition transaction or debt financing or (iv) issuance of equity in connection with certain dilutive events under the WS Holdings shareholders agreement.  In addition, the exchange ratio shall be adjusted to eliminate the dilutive effects of the release of escrowed Common Stock pursuant to the Earnout Agreement (as defined below), the existence of any outstanding warrants, the termination of any lock-up on the warrants exercisable for the Common Stock, and the issuance of any shares of Common Stock upon exercise of warrants.

 

f)               Reflects the incremental interest expense related to the Company’s debt structure after the ModSpace Acquisition as though such instruments had been issued January 1, 2017, comprised of the indebtedness represented by the Secured Notes, the Unsecured Notes and the borrowings under the Amended ABL Facility and adjusted to remove non-recurring financing fees incurred for undrawn bridge commitments as follows:

 


 

 

 

Nine months
ended
September 30,
2018

 

Year ended
December 31,
2017

 

Interest on incremental borrowings under the Amended ABL Facility

 

$

13,545

 

$

23,244

 

Interest on the 2023 Secured Notes

 

13,097

 

20,625

 

Interest on the Unsecured Notes

 

11,894

 

20,000

 

Amortization of debt issuance costs

 

2,892

 

6,432

 

Reversal of non-recurring WillScot historical financing charges

 

(20,500

)

 

Reversal of ModSpace historical interest

 

(20,279

)

(40,412

)

Net pro forma adjustment

 

$

649

 

$

29,889

 

 

The pro forma combined interest expense for the year ended December 31, 2017 and nine months end September 30, 2018 is comprised as follows:

 

 

 

 

 

Nine Months
Ended
September 30,
2018

 

Year Ended
December 31,
2017

 

Amended ABL Facility (1)

 

Interest expense

 

$

29,335

 

$

39,111

 

 

 

Debt issuance cost amortization

 

6,164

 

8,219

 

7.875% 2022 Secured Notes (1)

 

Interest expense

 

17,653

 

23,625

 

 

 

Debt issuance cost amortization

 

1,262

 

1,569

 

6.875% 2023 Secured Notes

 

Interest expense

 

15,469

 

20,625

 

 

 

Debt issuance cost amortization

 

838

 

1,034

 

10.0% Unsecured Notes

 

Interest expense

 

15,000

 

20,000

 

 

 

Debt issuance cost amortization

 

141

 

170

 

Sale-leaseback, capital lease, and other financing obligations

 

Interest expense

 

2,204

 

3,050

 

 

Debt issuance cost amortization

 

183

 

331

 

Bridge take-out fee

 

Bridge financing fees

 

 

3,750

 

 

 

Total pro forma interest expense

 

$

88,249

 

$

121,484

 

 

(1)         For the year ended December 31, 2017, the historical interest expense reflects one month of actual interest expense for the 2022 Senior Secured Notes and ABL Facility as a result of the Business Combination. The pro forma adjustment for the year ended December 31, 2017 reflects an increase in interest expense as if these instruments had been outstanding for the full twelve month period. The weighted average interest rate for borrowings under the ABL Facility and Amended ABL Facility was 4.65%.

 

Interest on outstanding borrowings under the Amended ABL Facility are based off the London Interbank Offered Rate (LIBOR) depending upon the date of borrowing. The 4.65% per annum rate used in the above calculation represents the current interest rate WSII is paying on the $859,049 of outstanding borrowings under the ABL Facility as of September 30, 2018.  A 1/8% change in interest rate to the drawn portion of the ABL Facility which is subject to a variable interest rate would increase or decrease the pro forma cash interest expense on the $841,125 of outstanding borrowings at August 15, 2018, the date of the ModSpace Acquisition, by approximately $1,051 annually and $789 for the nine months ended September 30, 2018.

 

g)              This adjustment reflects the income tax expense/benefit effects of the unaudited pro forma Financing Adjustments based on applicable statutory tax rates for the jurisdictions associated with the respective pro forma adjustments. As the tax rates used for these unaudited pro forma condensed combined financial statements are an estimate, the blended rate will likely vary from the actual effective rate in periods subsequent to completion of the ModSpace Acquisition. Provisional amounts

 


 

are based on management’s reasonable estimates of the effects of the 2017 Tax Act have been reflected in the unaudited pro forma condensed combined financial information, as the full determination of the accounting implications of the 2017 Tax Act has not yet been completed.  As the combined pro forma company will be in tax loss position in 2017, all pro forma adjustments for US tax effects are at the federal and state US statutory tax rate of 25.8% since the adjustments represent future deductible or taxable temporary differences.

 

h)             Pro forma loss per common share for the year ended December 31, 2017, and nine months ended September 30, 2018 has been calculated based on the estimated weighted average number of common shares outstanding on a pro forma basis, as described below. The pro forma weighted average number of common shares outstanding has been calculated as if the shares issued in the Equity Offering and for the Common Stock Consideration had been issued and outstanding on January 1, 2017. Diluted shares has not been presented due to the anti-dilutive impact on net losses for periods presented.

 

The following table sets forth the computation of weighted average common and diluted shares outstanding:

 

 

 

Nine months
ended
September 30,
2018

 

Year ended
December 31,
2017

 

 

 

 

 

 

 

Historical WillScot weighted average shares

 

82,165,910

 

19,760,189

 

Recapitalization as a result of the Business Combination (1)

 

 

52,459,585

 

Adjusted weighted average shares as a result of the Business Combination

 

82,165,910

 

72,219,774

 

 

 

 

 

 

 

Weighted average shares for the Equity Offering

 

7,125,275

 

9,200,000

 

Adjusted weighted average shares as a result of the Offering

 

89,291,185

 

81,419,774

 

 

 

 

 

 

 

Common Stock Consideration for the ModSpace Acquisition

 

5,322,716

 

6,458,299

 

Release of founders shares upon Qualifying Acquisition (2)

 

1,699,633

 

2,000,000

 

Pro forma weighted average shares outstanding

 

96,313,534

 

89,878,073

 

 


(1)         Represents the incremental shares to reflect the weighted average shares outstanding calculation as if the Business Combination had occurred as of January 1, 2017. As the Business Combination occurred in November 2017 the historical weighted average share calculation only includes those shares for part of the year.

 

(2)         The ModSpace Acquisition constituted a Qualifying Acquisition as defined under the terms of the earnout agreement entered in by and among Double Eagle Acquisition LLC (“DEAL”) and Harry E. Sloan (together with DEAL, the “Founders”) and Sapphire (the “Earnout Agreement”) at the closing of the Business Combination. The occurrence of the Qualifying Acquisition resulted in (i) the release of the founder shares escrowed pursuant to, and the termination of the lock-up restrictions imposed on private warrants by, the Earnout Agreement, and (ii) the termination of the Earnout Agreement and associated escrow agreement

 

The unaudited pro forma condensed combined statement of operations do not give effect to the elimination of non-recurring reorganization gains, synergies as a result of restructuring, losses, or expenses incurred in connection with ModSpace’s exit from bankruptcy in March 2017. In addition, included within the Company’s historical statement of operations for the year ended December 31, 2017 are the following costs; (i) $15,112 from related to corporate and o