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 | |||||
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: | |||||
(Exact name of registrant as specified in its charter)
| (State or other jurisdiction of incorporation) | (I.R.S. Employer Identification No.) | |||||||
(Address, including zip code, of principal executive offices)
(410 ) 931-6000
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||||||
The | ||||||||
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.
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, par value $0.0001 per share, outstanding: 110,555,295 shares at May 1, 2020.
Shares of Class B common stock, par value $0.0001 per share, outstanding: 8,024,419 shares at May 1, 2020.
1
WILLSCOT CORPORATION
Quarterly Report on Form 10-Q
Table of Contents
PART I Financial Information | |||||||||||
PART I
ITEM 1. Financial Statements
2
WillScot Corporation
Condensed Consolidated Balance Sheets
(in thousands, except share data) | March 31, 2020 (unaudited) | December 31, 2019 | |||||||||
| Assets | |||||||||||
| Cash and cash equivalents | $ | $ | |||||||||
Trade receivables, net of allowances for doubtful accounts at March 31, 2020 and December 31, 2019 of $ | |||||||||||
| Inventories | |||||||||||
| Prepaid expenses and other current assets | |||||||||||
| Assets held for sale | |||||||||||
| Total current assets | |||||||||||
| Rental equipment, net | |||||||||||
| Property, plant and equipment, net | |||||||||||
| Operating lease assets | |||||||||||
| Goodwill | |||||||||||
| Intangible assets, net | |||||||||||
| Other non-current assets | |||||||||||
| Total long-term assets | |||||||||||
| Total assets | $ | $ | |||||||||
| Liabilities and equity | |||||||||||
| Accounts payable | $ | $ | |||||||||
| Accrued liabilities | |||||||||||
| Accrued interest | |||||||||||
| Deferred revenue and customer deposits | |||||||||||
| Operating lease liabilities - current | |||||||||||
| Total current liabilities | |||||||||||
| Long-term debt | |||||||||||
| Deferred tax liabilities | |||||||||||
| Deferred revenue and customer deposits | |||||||||||
| Operating lease liabilities - non-current | |||||||||||
| Other non-current liabilities | |||||||||||
| Long-term liabilities | |||||||||||
| Total liabilities | |||||||||||
| Commitments and contingencies (see Note 15) | |||||||||||
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 | |||||||||||
| Total liabilities and equity | $ | $ | |||||||||
See the accompanying notes which are an integral part of these condensed consolidated financial statements.
3
WillScot Corporation
Condensed Consolidated Statements of Operations
(Unaudited)
| Three Months Ended March 31, | |||||||||||
(in thousands, except share and per share data) | 2020 | 2019 | |||||||||
| Revenues: | |||||||||||
| Leasing and services revenue: | |||||||||||
| Modular leasing | $ | $ | |||||||||
| Modular delivery and installation | |||||||||||
| Sales revenue: | |||||||||||
| New units | |||||||||||
| Rental units | |||||||||||
| Total revenues | |||||||||||
| Costs: | |||||||||||
| Costs of leasing and services: | |||||||||||
| Modular leasing | |||||||||||
| Modular delivery and installation | |||||||||||
| Costs of sales: | |||||||||||
| New units | |||||||||||
| Rental units | |||||||||||
| Depreciation of rental equipment | |||||||||||
| Gross Profit | |||||||||||
| Expenses: | |||||||||||
| Selling, general and administrative | |||||||||||
| Other depreciation and amortization | |||||||||||
| Impairment losses on long-lived assets | |||||||||||
| Lease impairment expense and other related charges | |||||||||||
| Restructuring costs | ( | ||||||||||
| Currency losses (gains), net | ( | ||||||||||
| Other expense (income), net | ( | ||||||||||
| Operating income | |||||||||||
| Interest expense | |||||||||||
| Loss from operations before income tax | ( | ( | |||||||||
| Income tax expense | |||||||||||
| Net loss | ( | ( | |||||||||
| Net loss attributable to non-controlling interest, net of tax | ( | ( | |||||||||
| Net loss attributable to WillScot | $ | ( | $ | ( | |||||||
| Net loss per share attributable to WillScot - basic and diluted | $ | ( | $ | ( | |||||||
| Weighted average shares - basic and diluted | |||||||||||
See the accompanying notes which are an integral part of these condensed consolidated financial statements.
4
WillScot Corporation
Condensed Consolidated Statements of Comprehensive Loss
(Unaudited)
| Three Months Ended March 31, | |||||||||||
(in thousands) | 2020 | 2019 | |||||||||
| Net loss | $ | ( | $ | ( | |||||||
| Other comprehensive (loss) income: | |||||||||||
Foreign currency translation adjustment, net of income tax expense of $ | ( | ||||||||||
Net loss on derivatives, net of income tax benefit of $ | ( | ( | |||||||||
| Comprehensive loss | ( | ( | |||||||||
| Comprehensive loss attributable to non-controlling interest | ( | ( | |||||||||
| Total comprehensive loss attributable to WillScot | $ | ( | $ | ( | |||||||
See the accompanying notes which are an integral part of these condensed consolidated financial statements.
5
WillScot Corporation
Condensed Consolidated Statements of Changes in Equity
(Unaudited)
| Three Months Ended March 31, 2020 | ||||||||||||||||||||||||||||||||
| 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, 2019 | $ | $ | $ | $ | ( | $ | ( | $ | $ | $ | ||||||||||||||||||||||
| Net loss | — | — | — | — | — | — | ( | ( | ( | ( | ||||||||||||||||||||||
| Other comprehensive loss | — | — | — | — | — | ( | — | ( | ( | ( | ||||||||||||||||||||||
| Stock-based compensation | — | — | — | — | — | — | ||||||||||||||||||||||||||
| Common stock issued in warrant exercises and redemptions | — | — | — | — | — | |||||||||||||||||||||||||||
| Balance at March 31, 2020 | $ | $ | $ | $ | ( | $ | ( | $ | $ | $ | ||||||||||||||||||||||
| Three Months Ended March 31, 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 | $ | $ | $ | $ | ( | $ | ( | $ | $ | $ | ||||||||||||||||||||||
| Net loss | — | — | — | — | — | — | ( | ( | ( | ( | ||||||||||||||||||||||
| Other comprehensive income | — | — | — | — | — | — | ||||||||||||||||||||||||||
| Adoption of ASC 842 | — | — | — | — | — | — | ||||||||||||||||||||||||||
| Adoption of ASC 606 | — | — | — | — | — | — | — | |||||||||||||||||||||||||
| Stock-based compensation | — | — | — | — | — | — | ||||||||||||||||||||||||||
| Balance at March 31, 2019 | $ | $ | $ | $ | ( | $ | ( | $ | $ | $ | ||||||||||||||||||||||
See the accompanying notes which are an integral part of these condensed consolidated financial statements.
6
WillScot Corporation
Condensed Consolidated Statements of Cash Flows (Unaudited)
| Three Months Ended March 31, | |||||||||||
(in thousands) | 2020 | 2019 | |||||||||
| Operating activities: | |||||||||||
| Net loss | $ | ( | $ | ( | |||||||
| Adjustments to reconcile net loss to net cash provided by operating activities: | |||||||||||
| Depreciation and amortization | |||||||||||
| Provision for doubtful accounts | |||||||||||
| Impairment losses on long-lived assets | |||||||||||
| Impairment on right of use assets | |||||||||||
| Gain on sale of rental equipment and other property, plant and equipment | ( | ( | |||||||||
| Amortization of debt discounts and debt issuance costs | |||||||||||
| Stock-based compensation expense | |||||||||||
| Deferred income tax benefit | |||||||||||
| Unrealized currency (gains) losses | ( | ||||||||||
| Changes in operating assets and liabilities | |||||||||||
| Trade receivables | ( | ||||||||||
| Inventories | ( | ||||||||||
| Prepaid and other assets | ( | ( | |||||||||
| Operating lease assets and liabilities | ( | ||||||||||
| Accrued interest | ( | ( | |||||||||
| Accounts payable and other accrued liabilities | ( | ||||||||||
| Deferred revenue and customer deposits | |||||||||||
| Net cash provided by operating activities | |||||||||||
| Investing activities: | |||||||||||
| Proceeds from sale of rental equipment | |||||||||||
| Purchase of rental equipment and refurbishments | ( | ( | |||||||||
| Proceeds from the sale of property, plant and equipment | |||||||||||
| Purchase of property, plant and equipment | ( | ( | |||||||||
| Net cash used in investing activities | ( | ( | |||||||||
| Financing activities: | |||||||||||
| Receipts from issuance of common stock | |||||||||||
| Receipts from borrowings | |||||||||||
| Payment of financing costs | ( | ||||||||||
| Repayment of borrowings | ( | ( | |||||||||
| Principal payments on capital lease obligations | ( | ||||||||||
| Withholding taxes paid on behalf of employees on net settled stock-based awards | ( | ( | |||||||||
| Net cash (used in) provided by financing activities | ( | ||||||||||
| Effect of exchange rate changes on cash and cash equivalents | ( | ||||||||||
| Net change in cash and cash equivalents | |||||||||||
| Cash and cash equivalents at the beginning of the period | |||||||||||
| Cash and cash equivalents at the end of the period | $ | $ | |||||||||
| Supplemental cash flow information: | |||||||||||
| Interest paid | $ | $ | |||||||||
| Income taxes paid (refunded), net | $ | $ | ( | ||||||||
| Capital expenditures accrued or payable | $ | $ | |||||||||
See the accompanying notes which are an integral part of these condensed consolidated financial statements.
7
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 was incorporated as a Cayman Islands exempt company under the name Double Eagle Acquisition Corporation ("Double Eagle") on June 26, 2015. Prior to November 29, 2017, Double Eagle was a Nasdaq-listed special purpose acquisition company formed for the purpose of effecting a merger, share exchange, asset acquisition, share purchase, reorganization or similar business combination. On November 29, 2017, Double Eagle indirectly acquired Williams Scotsman International, Inc. (“WSII”) from Algeco Scotsman Global S.à r.l. (together with its subsidiaries, the “Algeco Group”), which was majority owned by an investment fund managed by TDR Capital LLP ("TDR Capital"). As part of the transaction, Double Eagle domesticated to Delaware and changed its name to WillScot Corporation.
WillScot, whose Class A common shares are listed on the Nasdaq Capital Market (Nasdaq: WSC), serves as the holding company for the Williams Scotsman family of companies. All of the Company’s assets and operations are owned through Williams Scotsman Holdings Corp. (“WS Holdings”). WillScot operates and owns 91.0 % of WS Holdings, and Sapphire Holding S.à r.l. (“Sapphire”), an affiliate of TDR Capital, owns the remaining 9.0 %.
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”) 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.
On December 31, 2019, the 2019 financial statement amounts were adjusted for the adoption Accounting Standards Update (“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.
Subsidiaries are fully consolidated from the date of acquisition, being the date on which the Company obtains control, and continue to be consolidated until the date when such control ceases. The financial statements of the subsidiaries are prepared for the same reporting period as the Company. All intercompany balances and transactions are eliminated.
The results of operations for the three months ended March 31, 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
Recently Issued Accounting Standards
In 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
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 based on relevant historical information from historical experience, adjusted for current conditions and reasonable and supportable forecasts that affect collectibility. Credit losses relating to these financial assets are recorded through an allowance for credit losses. The Company adopted 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.
Impact of COVID-19
8
There have been significant changes to the global economic situation and to public securities markets as a consequence of the COVID-19 pandemic. It is reasonably likely that this could cause changes to estimates as a result of the markets in which the Company operates, the price of the Company’s publicly traded equity and debt in comparison to the Company’s carrying value, and the health of the global economy. Such changes to estimates could potentially result in impacts that would be material to the consolidated financial statements, particularly with respect to the fair value of the Company’s reporting units in relation to potential goodwill impairment, the fair value of long-lived assets in relation to potential impairment and the allowance for doubtful accounts.
On March 27, 2020, President Trump signed into law the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”). The CARES Act provides several employer and corporate incentives designed to assist businesses with liquidity and support employee retention. The Company continues to assess the implications of the CARES Act to its business and believes that relevant components of the CARES Act are not material to its financial statements as a whole.
NOTE 2 - Acquisitions and Assets Held for Sale
Pending Mobile Mini Merger
On March 1, 2020, the Company, along with its newly formed subsidiary, Picasso Merger Sub, Inc. (“Merger Sub”), entered into an Agreement and Plan of Merger (the “Merger Agreement”) with Mobile Mini, Inc. (“Mobile Mini”). The Merger Agreement provides for the merger of Mobile Mini with and into Merger Sub (the “Merger”), with Mobile Mini surviving as a wholly-owned subsidiary of the Company. At the effective time of the Merger, and subject to the terms and conditions set forth in the Merger Agreement, each outstanding share of the common stock of Mobile Mini shall be converted into the right to receive 2.4050 shares of WillScot Class A common stock.
The Merger has been approved by the boards of directors of the Company and Mobile Mini. The Merger is subject to customary closing conditions, including receipt of regulatory approval and approval by the stockholders of the Company and Mobile Mini and is expected to close in the third quarter of 2020. Additionally, the transaction has the support of TDR Capital, the Company's largest stockholder, which has entered into a voting agreement in support of the Merger.
In connection with the Merger, the Company entered into a commitment letter (the “Commitment Letter”), dated March 1, 2020, as amended and restated on March 24, 2020, and further amended and restated on May 5, 2020, with the lenders party thereto (the “Lenders”). Pursuant to the Commitment Letter, the Lenders have agreed to provide debt financing to refinance the Company’s existing ABL Facility (as defined in Note 9), Mobile Mini’s existing ABL credit facility and Mobile Mini’s outstanding senior notes due 2024 on the terms and conditions set forth in the Commitment Letter.
The Company expensed $9.4 million in transaction costs related to the Merger within selling, general and administrative ("SG&A") for the three months ended March 31, 2020.
Assets Held for Sale
As part of the Modular Space Holdings, Inc. ("ModSpace") acquisition in 2018, the Company implemented a plan to right size its branch network and dispose of unused properties.
As of March 31, 2020, the Company had five properties totaling $8.5 million included in assets held for sale. During the three months ended March 31, 2020, the Company recorded no impairment related to these assets. As of March 31, 2019, the Company had ten properties totaling $21.0 million included in assets held for sale. During the three months ended March 31, 2019, the Company recorded an impairment of $2.3 million related to assets held for sale.
The fair value of the assets held for sale was determined using valuations from third party brokers, which were based on current sales prices for comparable assets, a Level 2 measurement.
NOTE 3 - Revenue
Revenue Disaggregation
Geographic Areas
The Company had total revenue in the following geographic areas for the three months ended March 31 as follows:
| Three Months Ended March 31, | |||||||||||
| (in thousands) | 2020 | 2019 | |||||||||
| US | $ | $ | |||||||||
| Canada | |||||||||||
| Mexico | |||||||||||
| Total revenues | $ | $ | |||||||||
9
Major Product and Service Lines
The Company’s revenue by major product and service line for the three months ended March 31 was as follows:
| Three Months Ended March 31, | |||||||||||
| 2020 | 2019 | ||||||||||
| (in thousands) | Total | Total | |||||||||
| Modular space leasing revenue | $ | $ | |||||||||
| Portable storage leasing revenue | |||||||||||
VAPS(a) | |||||||||||
Other leasing-related revenue(b) | |||||||||||
| Modular leasing revenue | |||||||||||
| Modular delivery and installation revenue | |||||||||||
| Total leasing and services revenue | |||||||||||
| New unit sales revenue | |||||||||||
| Rental unit sales revenue | |||||||||||
| Total revenues | $ | $ | |||||||||
(a) Includes $4.0 million and $3.8 million of value added products and services ("VAPS") service revenue for the three months ended March 31, 2020 and 2019, respectively.
(b) Primarily damage billings, delinquent payment charges, and other processing fees.
Modular Leasing and Services Revenue
The majority of revenue (72 68 % for the three months ended March 31, 2019) is generated by rental income subject to the guidance of ASC 842. The remaining revenue for the three months ended March 31, 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").
Receivables, Contract Assets and Liabilities
As reflected above, approximately 72 4.7 % of the total receivables balance as of March 31, 2020.
As of December 31, 2019, the Company had approximately $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 March 31, 2020, the Company had approximately $44.6 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 three months ended March 31, 2020, $7.9 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.
The primary costs to obtain contracts for new and rental unit sales with the Company's customers are commissions. The Company pays its sales force commissions on the sale of new and rental units. For new and rental unit sales, the period benefited by each commission is less than one year. As a result, the Company has applied the practical expedient for incremental costs of obtaining a sales contract and will expense commissions 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 credit review. The credit review considers expected billing exposure and timing for payment and the customer’s established credit rating. The Company
10
performs its credit review of new customers at inception and for existing customers when they transact new leases after a 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's activities include timely account reconciliations, dispute resolution and payment confirmations. 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.
| (in thousands) | Three Months Ended March 31, 2020 | Year Ended December 31, 2019 | ||||||||||||
| Balance at beginning of year | $ | $ | ||||||||||||
| Net charges to bad debt expense and revenue | ||||||||||||||
| Write-offs | ( | ( | ||||||||||||
| Foreign currency translation and other | ( | ( | ||||||||||||
| Balance at end of period | $ | $ | ||||||||||||
NOTE 4 - Leases
As of March 31, 2020, the undiscounted future lease payments for operating lease liabilities were as follows:
| (in thousands) | ||||||||
| 2020 | $ | |||||||
| 2021 | ||||||||
| 2022 | ||||||||
| 2023 | ||||||||
| 2024 | ||||||||
| Thereafter | ||||||||
| Total lease payments | ||||||||
| Less: interest | ( | |||||||
| Present value of lease liabilities | $ | |||||||
The Company’s lease activity during the three months ended March 31, 2020 and 2019 was as follows:
| Three Months Ended March 31, | ||||||||||||||
Financial Statement Line (in thousands) | 2020 | 2019 | ||||||||||||
| Operating Lease Expense | ||||||||||||||
| Fixed lease expense | ||||||||||||||
| Cost of leasing and services | $ | $ | ||||||||||||
| Selling, general and administrative | ||||||||||||||
| Lease impairment expense and other related charges | ||||||||||||||
| Short-term lease expense | ||||||||||||||
| Cost of leasing and services | ||||||||||||||
| Selling, general and administrative | ||||||||||||||
| Lease impairment expense and other related charges | ||||||||||||||
| Variable lease expense | ||||||||||||||
| Cost of leasing and services | ||||||||||||||
| Selling, general and administrative | ||||||||||||||
| Lease impairment expense and other related charges | ||||||||||||||
| Total operating lease expense | $ | $ | ||||||||||||
The Company initiated certain restructuring plans associated with the ModSpace acquisition in order to capture operating synergies as a result of integrating ModSpace into WillScot. The restructuring activities primarily include the termination of leases for duplicative branches, equipment and corporate facilities. As part of these plans, certain of its leased locations were vacated and leases were terminated or impaired. During the three months ended March 31, 2020, the Company recorded $1.7 million in lease impairment expense and other related charges which are comprised of $0.5 million
11
loss on lease exit and $1.2 million in closed location rent expense. During the three months ended March 31, 2019, the Company recorded $3.1 million in lease impairment expense and other related charges which are comprised of $2.4 million in right-of-use ("ROU") asset impairment on leased locations no longer used in operations, $0.4 million loss on lease exit and $0.3 million in closed location rent expense.
Supplemental cash flow information related to operating leases for the three months ended March 31, 2020 was as follows:
| Three Months Ended March 31, | ||||||||||||||
Supplemental Cash Flow Information (in thousands) | 2020 | 2019 | ||||||||||||
| Cash paid for the amounts included in the measurement of lease liabilities | $ | $ | ||||||||||||
| Right of use assets obtained in exchange for lease obligations | $ | $ | ||||||||||||
Weighted-average remaining operating lease terms and the weighted average discount rates as of March 31, 2020 and December 31, 2019 were as follows:
| Lease Terms and Discount Rates | March 31, 2020 | December 31, 2019 | ||||||||||||
| Weighted-average remaining lease term | ||||||||||||||
| Weighted-average discount rate | % | % | ||||||||||||
The Company presents information related to leasing revenues in Note 3.
NOTE 5 - Inventories
NOTE 6 - Rental Equipment, net
Rental equipment, net, at the respective balance sheet dates consisted of the following:
(in thousands) | March 31, 2020 | December 31, 2019 | |||||||||
| Modular units and portable storage | $ | $ | |||||||||
| Value added products | |||||||||||
| Total rental equipment | |||||||||||
| Less: accumulated depreciation | ( | ( | |||||||||
| Rental equipment, net | $ | $ | |||||||||
NOTE 7 - Goodwill
Changes in the carrying amount of goodwill were as follows:
(in thousands) | Modular – US | Modular – Other North America | Total | ||||||||||||||
| Balance at December 31, 2018 | $ | $ | $ | ||||||||||||||
| Changes to preliminary purchase price accounting | ( | ( | ( | ||||||||||||||
| Effects of movements in foreign exchange rates | |||||||||||||||||
| Balance at December 31, 2019 | |||||||||||||||||
| Effects of movements in foreign exchange rates | ( | ( | |||||||||||||||
| Balance at March 31, 2020 | $ | $ | $ | ||||||||||||||
The Company had no
The Company considered the economic environment resulting from the COVID-19 pandemic as part of its review for indicators of potential impairment and reviewed qualitative information currently available in determining if it was more likely than not that the fair values of the Company’s reporting units were less than the carrying amounts as of March 31, 2020. Based on the Company’s current long-term projections and the extent of fair value in excess of carrying value at the Company's October 1, 2019 annual impairment test date, management concluded that it is not more likely than not that the fair value of the Company's reporting units were less than their carrying amount during the three months ended March 31, 2020 and therefore no impairment occurred.
12
NOTE 8 - Intangibles
Intangible assets other than goodwill at the respective balance sheet dates consisted of the following:
| March 31, 2020 | |||||||||||||||||||||||
| (in thousands) | Remaining life (in years) | Gross carrying amount | Accumulated amortization | Net book value | |||||||||||||||||||
| Intangible assets subject to amortization: | |||||||||||||||||||||||
| ModSpace trade name | $ | $ | ( | $ | |||||||||||||||||||
| Indefinite-lived intangible assets: | |||||||||||||||||||||||
| Trade name | — | ||||||||||||||||||||||
| Total intangible assets other than goodwill | $ | $ | ( | $ | |||||||||||||||||||
| December 31, 2019 | |||||||||||||||||||||||
| (in thousands) | Remaining life (in years) | Gross carrying amount | Accumulated amortization | Net book value | |||||||||||||||||||
| Intangible assets subject to amortization: | |||||||||||||||||||||||
| ModSpace trade name | $ | $ | ( | $ | |||||||||||||||||||
| Indefinite-lived intangible assets: | |||||||||||||||||||||||
| Trade names | — | ||||||||||||||||||||||
| Total intangible assets other than goodwill | $ | $ | ( | $</ | |||||||||||||||||||