WillScot Holdings Corp 10-Q

ITEM 1. Financial Statements WillScot Mobile Mini Holdings Corp. Condensed Consolidated Balance Sheets (in thousands, except share data) September 30, 2021 (unaudited) December 31, 2020 Assets Cash and cash equivalents $ 11,317 $ 24,937 Trade receivables, net of allowances for credit losses at September 30, 2021 and December 31, 2020 of $ 41,867 and $ 29,258 , respectively 398,350 330,942 Inventories 30,943 23,731 Prepaid expenses and other current assets 35,940 29,954 Assets held for sale 962 12,004 Total current assets 477,512 421,568 Rental equipment, net 2,968,895 2,931,646 Property, plant and equipment, net 307,253 303,650 Operating lease assets 233,800 232,094 Goodwill 1,178,290 1,171,219 Intangible assets, net 467,289 495,947 Other non-current assets 11,142 16,081 Total long-term assets 5,166,669 5,150,637 Total assets $ 5,644,181 $ 5,572,205 Liabilities and equity Accounts payable $ 145,320 $ 106,926 Accrued expenses 163,339 141,672 Deferred revenue and customer deposits 163,977 135,485 Operating lease liabilities - current 50,552 48,063 Current portion of long-term debt 18,652 16,521 Total current liabilities 541,840 448,667 Long-term debt 2,598,300 2,453,809 Deferred tax liabilities 346,687 307,541 Operating lease liabilities - non-current 183,035 183,761 Common stock warrant liabilities — 77,404 Other non-current liabilities 17,735 37,150 Long-term liabilities 3,145,757 3,059,665 Total liabilities 3,687,597 3,508,332 Commitments and contingencies (see Note 17) Preferred Stock: $ 0.0001 par, 1,000,000 shares authorized and zero shares issued and outstanding at September 30, 2021 and December 31, 2020 — — Common Stock: $ 0.0001 par, 500,000,000 shares authorized and 223,665,627 and 229,038,158 shares issued and outstanding at September 30, 2021 and December 31, 2020, respectively 23 23 Additional paid-in-capital 3,655,587 3,852,291 Accumulated other comprehensive loss ( 33,713 ) ( 37,207 ) Accumulated deficit ( 1,665,313 ) ( 1,751,234 ) Total shareholders' equity 1,956,584 2,063,873 Total liabilities and equity $ 5,644,181 $ 5,572,205 See the accompanying notes which are an integral part of these condensed consolidated financial statements. 3 WillScot Mobile Mini Holdings Corp. Condensed Consolidated Statements of Operations (Unaudited) Three Months Ended September 30, Nine Months Ended September 30, (in thousands, except share and per share data) 2021 2020 2021 2020 Revenues: Leasing and services revenue: Leasing $ 363,396 $ 300,082 $ 1,022,237 $ 678,577 Delivery and installation 99,699 84,694 274,883 187,404 Sales revenue: New units 15,860 19,360 37,823 38,736 Rental units 11,597 13,179 42,034 25,281 Total revenues 490,552 417,315 1,376,977 929,998 Costs: Costs of leasing and services: Leasing 82,448 64,788 235,375 162,344 Delivery and installation 80,991 66,354 228,280 153,742 Costs of sales: New units 11,499 12,935 25,660 25,469 Rental units 5,603 8,837 22,870 16,446 Depreciation of rental equipment 56,462 54,837 175,053 146,279 Gross profit 253,549 209,564 689,739 425,718 Expenses: Selling, general and administrative 133,424 112,079 372,296 241,269 Transaction costs 303 52,191 1,147 63,241 Other depreciation and amortization 18,814 16,867 58,760 22,824 Lease impairment expense and other related charges 601 944 2,328 3,999 Restructuring costs 1,856 3,854 11,958 4,543 Currency losses (gains), net 127 ( 371 ) 196 147 Other expense (income), net 1,476 ( 1,012 ) 207 ( 1,757 ) Operating income 96,948 25,012 242,847 91,452 Interest expense 29,201 33,034 88,377 89,810 Fair value loss (gain) on common stock warrant liabilities — 22,303 26,597 ( 46,063 ) Loss on extinguishment of debt — 42,401 5,999 42,401 Income (loss) before income tax 67,747 ( 72,726 ) 121,874 5,304 Income tax expense (benefit) 6,644 ( 66,675 ) 35,953 ( 66,170 ) Net income (loss) 61,103 ( 6,051 ) 85,921 71,474 Net income attributable to non-controlling interest, net of tax — — — 1,213 Net income (loss) attributable to WillScot Mobile Mini $ 61,103 $ ( 6,051 ) $ 85,921 $ 70,261 Earnings (loss) per share attributable to WillScot Mobile Mini common shareholders Basic $ 0.27 $ ( 0.03 ) $ 0.38 $ 0.47 Diluted $ 0.26 $ ( 0.03 ) $ 0.37 $ 0.15 Weighted average shares: Basic 225,998,202 226,649,993 227,557,664 149,283,083 Diluted 231,868,397 226,649,993 234,084,800 152,432,945 See the accompanying notes which are an integral part of these condensed consolidated financial statements. 4 WillScot Mobile Mini Holdings Corp. Condensed Consolidated Statements of Comprehensive Income (Loss) (Unaudited) Three Months Ended September 30, Nine Months Ended September 30, (in thousands) 2021 2020 2021 2020 Net income (loss) $ 61,103 $ ( 6,051 ) $ 85,921 $ 71,474 Other comprehensive income (loss): Foreign currency translation adjustment, net of income tax expense of $ 0 and $ 60 for the three and nine months ended September 30, 2021, respectively, and $ 0 for the three and nine months ended September 30, 2020 ( 11,162 ) 14,619 ( 3,035 ) 1,457 Net gain (loss) on derivatives, net of income tax expense (benefit) of $ 676 and $( 1,183 ) for the three months ended September 30, 2021 and 2020, respectively, and $ 1,999 and $( 1,183 ) for the nine months ended September 30, 2021 and 2020, respectively 2,206 3,905 6,529 ( 3,878 ) Total other comprehensive income (loss) ( 8,956 ) 18,524 3,494 ( 2,421 ) Comprehensive income 52,147 12,473 89,415 69,053 Comprehensive loss attributable to non-controlling interest — — — ( 672 ) Total comprehensive income attributable to WillScot Mobile Mini $ 52,147 $ 12,473 $ 89,415 $ 69,725 See the accompanying notes which are an integral part of these condensed consolidated financial statements. 5 WillScot Mobile Mini Holdings Corp. Condensed Consolidated Statements of Changes in Equity (Unaudited) Nine Months Ended September 30, 2021 Common Stock Additional Paid-in-Capital Accumulated Other Comprehensive Income (Loss) Accumulated Deficit Total Shareholders' Equity (in thousands) Shares Amount Balance at December 31, 2020 229,038 $ 23 $ 3,852,291 $ ( 37,207 ) $ ( 1,751,234 ) $ 2,063,873 Net income — — — — 4,447 4,447 Other comprehensive income — — — 7,211 — 7,211 Stock-based compensation and issuance of Common Stock from vesting 229 — 4,951 — — 4,951 Repurchase and cancellation of Common Stock and warrants ( 2,793 ) — ( 76,788 ) — — ( 76,788 ) Issuance of Common Stock from the exercise of options and warrants 341 — 5,414 — — 5,414 Withholding taxes on net share settlement of stock-based compensation — — ( 3,219 ) — — ( 3,219 ) Balance at March 31, 2021 226,815 $ 23 $ 3,782,649 $ ( 29,996 ) $ ( 1,746,787 ) $ 2,005,889 Net income — — — — 20,371 20,371 Other comprehensive income — — — 5,239 — 5,239 Stock-based compensation and issuance of Common Stock from vesting 60 — 9,038 — — 9,038 Repurchase and cancellation of Common Stock and warrants ( 4,100 ) — ( 35,508 ) — — ( 35,508 ) Issuance of Common Stock from the exercise of options and warrants 4,058 — 384 — — 384 Balance at June 30, 2021 226,833 $ 23 $ 3,756,563 $ ( 24,757 ) $ ( 1,726,416 ) $ 2,005,413 Net income — — — — 61,103 61,103 Other comprehensive income — — — ( 8,956 ) — ( 8,956 ) Stock-based compensation and issuance of Common Stock from vesting 192 — 7,686 — — 7,686 Repurchase and cancellation of Common Stock and warrants ( 3,752 ) — ( 106,264 ) — — ( 106,264 ) Issuance of Common Stock from the exercise of options and warrants 393 — 1,517 — — 1,517 Withholding taxes on net share settlement of stock-based compensation — — ( 3,915 ) — — ( 3,915 ) Balance at September 30, 2021 223,666 $ 23 $ 3,655,587 $ ( 33,713 ) $ ( 1,665,313 ) $ 1,956,584 See the accompanying notes which are an integral part of these condensed consolidated financial statements. 6 WillScot Mobile Mini Holdings Corp. Condensed Consolidated Statements of Changes in Equity (continued) (Unaudited) Nine Months Ended September 30, 2020 Class A Common Stock (1) Class B Common Stock Additional Paid-in-Capital Accumulated Other Comprehensive Income (Loss) Accumulated Deficit Total Shareholders' Equity Non-Controlling Interest Total Equity (in thousands) Shares Amount Shares Amount Balance at December 31, 2019 108,819 $ 11 8,024 $ 1 $ 2,378,733 $ ( 62,775 ) $ ( 1,825,361 ) $ 490,609 $ 64,590 $ 555,199 Net income (loss) — — — — — — 91,785 91,785 ( 130 ) 91,655 Other comprehensive loss — — — — — ( 27,199 ) — ( 27,199 ) ( 2,703 ) ( 29,902 ) Stock-based compensation and issuance of Common Stock from vesting 239 — — — 1,787 — — 1,787 — 1,787 Issuance of Common Stock from the exercise of warrants 1,497 — — — 28,958 — — 28,958 — 28,958 Withholding taxes on net share settlement of stock-based compensation — — — — ( 673 ) — — ( 673 ) — ( 673 ) Balance at March 31, 2020 110,555 $ 11 8,024 $ 1 $ 2,408,805 $ ( 89,974 ) $ ( 1,733,576 ) $ 585,267 $ 61,757 $ 647,024 Net (loss) income — — — — — — ( 15,473 ) ( 15,473 ) 1,343 ( 14,130 ) Other comprehensive income — — — — — 8,139 — 8,139 818 8,957 Reclassification of ModSpace Warrants — — — — 26,216 — — 26,216 — 26,216 Stock-based compensation and issuance of Common Stock from vesting — — — — 2,227 — — 2,227 — 2,227 Sapphire Exchange - see Note 10 10,641 1 ( 8,024 ) ( 1 ) 66,890 ( 2,972 ) — 63,918 ( 63,918 ) — Issuance of Common Stock from the exercise of warrants 37 — — — 374 — — 374 — 374 Balance at June 30, 2020 121,233 $ 12 — $ — $ 2,504,512 $ ( 84,807 ) $ ( 1,749,049 ) $ 670,668 $ — $ 670,668 Net loss — — — — — — ( 6,051 ) ( 6,051 ) — ( 6,051 ) Other comprehensive income — — — — — 18,524 — 18,524 — 18,524 Mobile Mini Merger 106,427 11 — — 1,348,570 — — 1,348,581 — 1,348,581 Stock-based compensation 321 — — — 6,058 — — 6,058 — 6,058 Balance at September 30, 2020 227,981 $ 23 — $ — $ 3,859,140 $ ( 66,283 ) $ ( 1,755,100 ) $ 2,037,780 $ — $ 2,037,780 (1) See Note 1 for information regarding the Company's conversion of Class A Common Stock to Common Stock on July 1, 2020 concurrent with the Merger. See the accompanying notes which are an integral part of these condensed consolidated financial statements. 7 WillScot Mobile Mini Holdings Corp. Condensed Consolidated Statements of Cash Flows (Unaudited) Nine Months Ended September 30, (in thousands) 2021 2020 Operating activities: Net income $ 85,921 $ 71,474 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 235,536 171,425 Provision for credit losses 26,661 22,184 Impairment losses on right of use assets — 57 Gain on sale of rental equipment and other property, plant and equipment ( 25,327 ) ( 8,756 ) Amortization of debt discounts and debt issuance costs 10,554 9,547 Fair value loss (gain) on common stock warrant liabilities 26,597 ( 46,063 ) Loss on extinguishment of debt 5,999 42,401 Stock-based compensation expense 21,674 6,958 Deferred income tax expense (benefit) 28,140 ( 67,324 ) Unrealized currency losses, net 34 897 Changes in operating assets and liabilities: Trade receivables ( 93,592 ) ( 15,274 ) Inventories ( 7,311 ) 1,440 Prepaid expenses and other assets 3,118 2,215 Operating lease assets and liabilities 59 584 Accrued interest 2,468 ( 7,657 ) Accounts payable and other accrued expenses 45,868 ( 19,090 ) Deferred revenue and customer deposits 25,656 10,077 Net cash provided by operating activities 392,055 175,095 Investing activities: Acquisition of businesses, net of cash acquired ( 56,244 ) 17,173 Proceeds from sale of rental equipment 42,034 25,281 Purchase of rental equipment and refurbishments ( 178,191 ) ( 122,273 ) Proceeds from the sale of property, plant and equipment 16,647 5,825 Purchase of property, plant and equipment ( 20,836 ) ( 9,079 ) Net cash used in investing activities ( 196,590 ) ( 83,073 ) Financing activities: Receipts from issuance of Common Stock from the exercise of options 7,315 7,694 Repurchase and cancellation of Common Stock and warrants ( 320,562 ) — Payment of Common Stock issuance costs — ( 4,222 ) Receipts from borrowings 551,063 2,735,793 Payment of financing costs — ( 64,552 ) Repayment of borrowings ( 423,591 ) ( 2,715,042 ) Payment of debt extinguishment premium costs ( 3,705 ) ( 34,610 ) Principal payments on finance lease obligations ( 12,321 ) — Taxes paid on employee stock awards ( 7,134 ) ( 673 ) Net cash used in financing activities ( 208,935 ) ( 75,612 ) Effect of exchange rate changes on cash and cash equivalents ( 150 ) 542 Net change in cash and cash equivalents ( 13,620 ) 16,952 Cash and cash equivalents at the beginning of the period 24,937 3,045 Cash and cash equivalents at the end of the period $ 11,317 $ 19,997 Supplemental cash flow information: Interest paid $ 66,437 $ 80,558 Income taxes paid, net $ 6,124 $ 1,276 Capital expenditures accrued or payable $ 35,819 $ 24,179 See the accompanying notes which are an integral part of these condensed consolidated financial statements. 8 WillScot Mobile Mini Holdings Corp. Notes to the Condensed Consolidated Financial Statements (Unaudited) NOTE 1 - Summary of Significant Accounting Policies Organization and Nature of Operations WillScot Mobile Mini Holdings Corp. (“WillScot Mobile Mini” and, together with its subsidiaries, the “Company”) is a leading provider of modular space and portable storage solutions in the United States (“US”), Canada, Mexico and the United Kingdom ("UK"). The Company also maintains a fleet of specialty containment products, including liquid and solid containment solutions. The Company leases, sells, delivers and installs mobile solutions and storage products through an integrated network of branch locations that spans North America and the UK. On July 1, 2020, WillScot Corporation, a Delaware corporation (“WillScot”), and Mobile Mini, Inc. (“Mobile Mini”) merged (the “Merger”). Immediately following the Merger, WillScot changed its name to “WillScot Mobile Mini Holdings Corp.” and filed an amended and restated certificate of incorporation (the "A&R Charter"), which reclassified all outstanding shares of WillScot Class A Common Stock and converted such shares into shares of Common Stock, par value $ 0.0001 per share, of WillScot Mobile Mini ("WillScot Mobile Mini Common Stock"). The WillScot Class A Common Stock was listed on the Nasdaq Capital Market (Nasdaq: WSC) up until the Merger, and the WillScot Mobile Mini Common Stock has been listed on the Nasdaq Capital Market (Nasdaq: WSC) since the Merger. As used herein, the term “Common Stock” or “the Company’s Common Stock” refers to WillScot Class A Common Stock prior to filing of the A&R Charter on July 1, 2020 and to WillScot Mobile Mini Common Stock as of and following the filing of the A&R Charter July 1, 2020. The preparation of financial statements in accordance with US Generally Accepted Accounting Principles (“GAAP”) requires that our condensed consolidated financial statements and most of the disclosures in these notes be presented on a historical basis. Unless the context otherwise requires, the terms “Company” and “WillScot Mobile Mini” as used in these financial statements mean WillScot and its subsidiaries when referring to periods prior to July 1, 2020 (prior to the Merger) and to WillScot Mobile Mini, when referring to periods on or after July 1, 2020 (after the Merger). Basis of Presentation and Principles of Consolidation The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with the instructions to Quarterly Report on Form 10-Q and do not include all the information and notes required by GAAP for complete financial statements. The accompanying unaudited condensed consolidated financial statements comprise the financial statements of WillScot Mobile Mini 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, results of operations and cash flows for the interim periods presented. Subsidiaries are fully consolidated from the dat e 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 nine months ended September 30, 2021 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 the Company's Annual Report on Form 10-K/A for the year ended December 31, 2020. Reclassifications Certain reclassifications have been made to prior year financial statements to conform to the current year presentation. Recently Issued and Adopted Accounting Standards Recently Issued Accounting Standards In March 2020, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update ("ASU") 2020-04, Reference Rate Reform (Topic 848) , which is elective, and provides for optional expedients and exceptions for applying GAAP to contracts, hedging relationsh ips, 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 the potential impact of adoption of these elective practical expedients on its consolidated financial statements and does not expect the impact to be material. In August 2020, the FASB issued ASU 2020-06, Debt - Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging – Contracts in Entity’s Own Equity (Subtopic 815-40) . The new ASU eliminates the beneficial conversion and cash conversion accounting models for convertible instruments. It also amends the accounting for certain contracts in an entity’s own equity that are currently accounted for as derivatives because of specific settlement provisions. In addition, the new guidance modifies how particular convertible instruments and certain contracts that may be settled in cash or shares impact the diluted EPS computation. The amendments in the ASU are effective for public entities for fiscal years beginning after December 15, 2021, including interim periods within those fiscal years. The Company does not expect the adoption of this pronouncement to have a material impact on its consolidated financial statements. 9 Recently Adopted Accounting Standards In December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes , which removes certain exceptions to the general principles for income taxes and also improves consistent application of accounting by clarifying or amending existing guidance. On January 1, 2021, the Company adopted ASU 2019-12 and the impact of adoption was not material to the Company's consolidated financial statements. The Company applied the standard prospectively for intraperiod tax allocation, year-to-date losses that exceed anticipated annual losses and enacted changes in tax laws. NOTE 2 - Acquisitions Mobile Mini Merger Purchase Price Upon completion of the Merger on July 1, 2020, each issued and outstanding share of Mobile Mini Common Stock, par value $ 0.01 per share, converted to 2.405 shares of WillScot Class A Common Stock, par value $ 0.0001 per share, and cash in lieu of any fractional shares. The Company issued 106,426,721 shares of Class A Common Stock to Mobile Mini stockholders as consideration for the Merger. The trading price of the Class A Common Stock was $ 12.53 per share on the closing date. In addition, Mobile Mini stock options converted into WillScot Mobile Mini stock options. The purchase price was determined as follows: (in thousands, except share and per share data) July 1, 2020 Mobile Mini Common Stock outstanding 44,252,275 Share conversion ratio 2.405 Common Stock issued 106,426,721 Common Stock per share price as of July 1, 2020 $ 12.53 Fair value of shares of WillScot Class A Common Stock issued $ 1,333,527 Cash paid for fractional shares 30 Fair value of Mobile Mini Options converted to WillScot Mobile Mini Options 19,279 Total purchase price $ 1,352,836 The Merger was accounted for using the acquisition method of accounting, and WillScot was considered the accounting acquirer. Under the acquisition method of accounting, the Company assigned the purchase price to tangible and identifiable intangible assets acquired and liabilities assumed based on their fair values at the closing date. The excess of the purchase price over those fair values was recorded as goodwill. The Company recorded the fair values based on independent valuations, discounted cash flow analyses, quoted market prices, contributory asset charges, and estimates made by management. The following table summarizes the July 1, 2020 fair values of the assets acquired and liabilities assumed. 10 Opening Balance Sheet (in thousands) July 1, 2020 Cash and cash equivalents $ 17,203 Trade receivables 87,492 Inventories 8,987 Prepaid expenses and other current assets 13,717 Rental equipment 1,032,672 Property, plant and equipment 160,729 Operating lease assets 92,054 Intangible assets 374,500 Goodwill identified 937,135 Other non-current assets 2,520 Total identifiable assets acquired 2,727,009 Accounts payable ( 29,797 ) Accrued expenses ( 40,335 ) Deferred revenue and customer deposits ( 38,846 ) Operating lease liabilities ( 89,968 ) Debt and finance lease liabilities ( 897,244 ) Deferred tax liabilities ( 276,555 ) Other long-term liabilities ( 1,428 ) Total liabilities assumed ( 1,374,173 ) Purchase Price $ 1,352,836 Mobile Mini generated $ 522.3 million of revenue and $ 94.3 million of pre-tax income in the nine months ended September 30, 2021, which is included in the condensed consolidated statements of operations. The pro forma results presented below give effect to the following as if they occurred on January 1, 2019: (i) The Merger; (ii) Borrowings under the Company's 2025 Secured Notes and 2020 ABL Facility (both as defined in Note 9) used to repay certain debt in connection with the Merger; (iii) Extinguishment of the Mobile Mini revolving credit facility and senior notes assumed in the Merger and immediately repaid; (iv) Extinguishment of WillScot's 2017 ABL Facility and WillScot's 2022 Secured Notes (both as defined in Note 9) repaid in connection with the Merger; (v) Transaction costs incurred in connection with the Merger; and (vi) Elimination of WillScot's non-controlling interest and WillScot's Class B common stock in connection with the Merger. See Note 10 for further details. The pro forma information is not necessarily indicative of the Company’s results of operations had the Merger been completed on January 1, 2019, nor is it necessarily indicative of the Company’s future results. The pro forma information does not reflect any cost savings from operating efficiencies, synergies, or revenue opportunities that could result from the Merger. The Company's results of operations for the three and nine months ended September 30, 2021 and the three months ended September 30, 2020 represent the activities of the Company after the Merger. As a result, there were no differences between pro forma results and actual results on a reported basis. 11 The tables below present unaudited pro forma condensed combined statement of operations information for the nine months ended September 30, 2020: (in thousands) Nine Months Ended September 30, 2020 WillScot revenues $ 929,998 Mobile Mini revenues 284,240 Pro forma revenues $ 1,214,238 WillScot Mobile Mini income before income tax $ 5,304 (a) Mobile Mini income before income tax 37,875 Pro forma income before income tax 43,179 Pro forma adjustments to combined income before income tax: Elimination of Merger transaction costs 80,040 (b) Impact of fair value mark-ups on rental fleet depreciation ( 2,334 ) (c) Other depreciation expense and intangible asset amortization ( 11,397 ) (d) Interest expense ( 6,113 ) (e) Elimination of Mobile Mini interest expense 15,921 (f) Elimination of loss on extinguishment of debt 19,682 (g) Pro forma income before income tax 138,978 Income tax expense 22,300 (h) Pro forma net income $ 116,678 (a) Excludes impact of non-controlling interest which was eliminated as part of the Sapphire Exchange. See Note 10. (b) Eliminates discrete transaction costs incurred as a result of the Mobile Mini Merger. (c) Depreciation on rental equipment and property, plant and equipment were adjusted for the determination of the fair value of equipment acquired in the Mobile Mini Merger. (d) Represents the differential in other depreciation and amortization expense related to the fair value purchase accounting adjustments as a result of the Merger, principally the amortization of the Mobile Mini customer relationship valued at $ 209.0 million. (e) In connection with the Merger, the Company entered into a new ABL Facility and drew $ 1.47 billion at close with an estimated interest rate of 2.046 %, issued the 2025 Secured Notes at 6.125 %, repaid the 2022 Secured Notes and repaid the 2017 ABL Facility. Interest and amortization of deferred financing fees for the 2020 ABL Facility and the 2025 Secured Notes has been included offset by the removal of interest and amortization of deferred financing fees attributable to the 2022 Secured Notes and the 2017 ABL Facility. See Note 9 for definitions of terms. (f) Interest and amortization of deferred financing fees on the senior notes and line of credit maintained by Mobile Mini which were assumed at acquisition and repaid immediately using proceeds from the 2020 ABL Facility and 2025 Secured Notes was eliminated. (g) Elimination of loss on extinguishment of debt in connection with the redemption premium on the 2022 Secured Notes and unamortized deferred financing costs on the 2022 Secured Notes and 2017 ABL Facility. See Note 9 for definitions of terms. (h) Reflects the recorded income tax provision plus the adjustment to recognize the income tax impacts of the unaudited pro forma adjustments for which a tax expense is recognized using a US federal and state statutory tax rate of 25.5 %. This rate may vary from the effective tax rates of the historical and combined businesses. In addition, the three and nine months ended September 30, 2020 included adjustments of $ 54.1 million and $ 56.8 million, respectively, to eliminate the reversal of valuation allowance as a result of reassessment of the realizability of deferred tax assets as a result of the Merger. Other Acquisitions On September 17, 2021, the Company acquired certain assets and liabilities of Equipe Container Services, Inc., Saf-T-Box, LP and American Mobile Leasing, LLC, which consisted primarily of approximately 11,000 storage units and 400 modular units, for $ 56.3 million in cash. Based on a preliminary allocation, the accompanying financial statements include approximately $ 53.0 million and $ 3.0 million of rental equipment and land, respectively, as a result of these acquisitions. The amount of revenue and earnings the acquirees included in the consolidated statements of operations for the three and nine-months ended September 30, 2021 is not material to the financial statements. The pre-acquisition revenue and earnings for the acquirees as a percentage of the Company's 2020 Pro Forma results disclosed above and as a percentage of the Company's actual results for the year ended December 31, 2020 were not significant. 12 Transaction and Integration Costs The Company recorded $ 0.3 million and $ 52.2 million in transaction costs related to the Merger and other acquisitions during the three months ended September 30, 2021 and 2020, respectively, and $ 1.1 million and $ 63.2 million in transaction costs related to the Merger and other acquisitions in the nine months ended September 30, 2021 and 2020, respectively. The Company also recorded $ 8.2 million and $ 7.1 million in integration costs related to the Merger within selling, general and administrative ("SG&A") expense during the three months ended September 30, 2021 and 2020, respectively, and $ 23.2 million and $ 9.4 million during the nine months ended September 30, 2021 and 2020, respectively. NOTE 3 - Revenue Revenue Disaggregation Geographic Areas The Company had total revenue in the following geographic areas for the three and nine months ended September 30, 2020 as follows: Three Months Ended September 30, Nine Months Ended September 30, (in thousands) 2021 2020 2021 2020 US $ 427,251 $ 368,285 $ 1,197,800 $ 841,227 Canada 31,536 24,098 84,663 57,083 Mexico 3,666 3,279 10,977 10,035 UK 28,099 21,653 83,537 21,653 Total revenues $ 490,552 $ 417,315 $ 1,376,977 $ 929,998 Major Product and Service Lines Equipment leasing is the Company's core business. This includes rental modular space, portable space and tank and pump units along with value added products and services ("VAPS"), which include furniture, steps, ramps, basic appliances, internet connectivity devices, and other items used by customers in connection with the Company's products. Leasing is complemented by new unit sales and sales of rental units. In connection with its leasing and sales activities, the Company provides services including delivery and installation, maintenance and ad hoc services and removal services at the end of lease transactions. The Company’s revenue by major product and service line for the three and nine months ended September 30, 2021 was as follows: Three Months Ended September 30, Nine Months Ended September 30, (in thousands) 2021 2020 2021 2020 Modular space leasing revenue $ 188,507 $ 163,635 $ 539,835 $ 427,409 Portable storage leasing revenue 66,184 52,941 179,645 64,506 Tank and pump leasing revenue 19,040 14,112 51,909 14,112 VAPS and third party leasing revenues (a) 73,517 56,330 206,823 139,754 Other leasing-related revenue (b) 16,148 13,064 44,025 32,796 Leasing revenue 363,396 300,082 1,022,237 678,577 Delivery and installation revenue 99,699 84,694 274,883 187,404 Total leasing and services revenue 463,095 384,776 1,297,120 865,981 New unit sales revenue 15,860 19,360 37,823 38,736 Rental unit sales revenue 11,597 13,179 42,034 25,281 Total revenues $ 490,552 $ 417,315 $ 1,376,977 $ 929,998 (a) Includes $ 7.2 million and $ 5.6 million of service revenue for the three months ended September 30, 2021 and 2020, respectively, and $ 21.2 million and $ 13.9 million of service revenue for the nine months ended September 30, 2021 and 2020, respectively. (b) Includes primarily damage billings, delinquent payment charges, and other processing fees. 13 Leasing and Services Revenue The majority of r evenue ( 73 % for the three and nine months ended September 30, 2021 and 71 % for the three and nine months ended September 30, 2020) is generated by rental income subject to the guidance of ASU 2018-11, Leases (Topic 842) ("ASC 842"). The remaining revenue for the three and nine months ended September 30, 2021 and 2020 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 73 % of the Company's rental revenue is generated by lease revenue subject to the guidance in ASC 842. The customers that are respo nsible for the remaining revenue accounted for under ASC 606 are generally the same customers that rent the Company's equipment. The Company manages credit risk associated with its accounts receivables at the customer level. As the same customers generate the revenues that are accounted for under both ASC 606 and ASC 842, the discussions below on credit risk and the Company's allowance for credit losses address its total revenues. The Company's top five customers with the largest open receivables balances represente d 4.7 % of the total receivables balance as of September 30, 2021. As of September 30, 2021 and December 31, 2020, the Company had approximately $ 78.8 million and $ 74.1 million, respectively, 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 and are included in deferred revenue and customer deposits in the condensed consolidated balance sheets. During the three months ended September 30, 2021, $ 20.9 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 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. The primary costs to obtain contracts for new and rental unit sales with the Company's customers are commissions paid to its sales force. The Company pays its sales force commissions on the sale of new and rental units. For new and rental unit sales, the period benefited by each commission is less than one year, therefore the commissions are expensed as incurred. Credit Losses The Company is exposed to credit losses from trade receivables generated through its leasing and sales business. The Company assesses each customer’s ability to pay for the products it leases or 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 performs its credit review of new customers at inception of the customer relationship and for existing customers when the customer transacts new leases after a defined period of dormancy. The Company also considers contract terms and conditions, country risk and business strategy in the evaluation. The Company monitors ongoing credit exposure through an active review of customer balances against contract terms and due dates. The Company may employ collection agencies and legal counsel to pursue recovery of defaulted receivables. The allowances for credit losses reflect the estimate of the amount of receivables that the Company will be unable to collect based on historical write-off experience and, as applicable, current conditions and reasonable and supportable forecasts that affect collectability. This estimate could require change based on changing circumstances, including changes in the economy or in the particular circumstances of individual customers. Accordingly, the Company may be required to increase or decrease its allowances. Activity in the allowance for credit losses was as follows: Three Months Ended September 30, Nine Months Ended September 30, (in thousands) 2021 2020 2021 2020 Balance at beginning of period $ 36,785 $ 19,183 $ 29,258 $ 15,828 Net charges to bad debt expense and revenue 9,751 13,062 26,661 22,184 Write-offs ( 4,543 ) ( 6,822 ) ( 14,415 ) ( 12,395 ) Foreign currency translation and other ( 126 ) ( 1,237 ) 363 ( 1,431 ) Balance at end of period $ 41,867 $ 24,186 $ 41,867 $ 24,186 14 NOTE 4 - Leases As of September 30, 2021, the undiscounted future lease payments for operating and finance lease liabilities were as follows: (in thousands) Operating Finance 2021 (remaining) $ 16,246 $ 5,520 2022 60,038 20,012 2023 49,165 16,561 2024 40,555 13,639 2025 33,371 13,747 Thereafter 76,957 22,841 Total lease payments 276,332 92,320 Less: interest ( 42,745 ) ( 6,720 ) Present value of lease liabilities $ 233,587 $ 85,600 Finance lease liabilities are included within long-term debt and current portion of long-term debt on the condensed consolidated balance sheets. The Company’s lease activity during the nine months ended September 30, 2021 and 2020 was as follows: (in thousands) Nine Months Ended September 30, Financial Statement Line 2021 2020 Finance Lease Expense Amortization of finance lease assets $ 14,231 $ 4,360 Interest on obligations under finance leases 1,674 512 Total finance lease expense $ 15,905 $ 4,872 Operating Lease Expense Fixed lease expense Cost of leasing and services $ 3,019 $ 4,444 Selling, general and administrative 44,732 29,682 Lease impairment expense and other related charges 1,571 2,103 Short-term lease expense Cost of leasing and services 17,751 19,765 Selling, general and administrative 680 1,612 Lease impairment expense and other related charges 0 471 Variable lease expense Cost of leasing and services 5,442 5,277 Selling, general and administrative 5,702 3,645 Lease impairment expense and other related charges 402 666 Total operating lease expense $ 79,299 $ 67,665 Lease impairment expense and other related charges relate to closed locations that are no longer used in operations as a result of consolidation activities within the Company. During the nine months ended September 30, 2021, the Company recorded $ 2.3 million in lease impairment expense and other related charges which is comprised of $ 0.3 million loss on lease exit and impairment charges and $ 2.0 million in closed location rent expense. During the nine months ended September 30, 2020, the Company recorded $ 4.0 million in lease impairment expense and other related charges which is comprised of $ 0.7 million loss on lease exit and $ 3.3 million in closed location rent expense. 15 Supplemental cash flow information related to leases for the nine months ended September 30, 2021 and 2020 was as follows: (in thousands) Nine Months Ended September 30, Supplemental Cash Flow Information 2021 2020 Cash paid for the amounts included in the measurement of lease liabilities: Operating cash outflows from operating leases $ 48,403 $ 35,065 Operating cash outflows from finance leases $ 1,669 $ 491 Financing cash outflows from finance leases $ 12,388 $ 3,434 Right of use assets obtained in exchange for lease obligations $ 43,448 $ 26,727 Assets obtained in exchange for finance leases $ 19,947 $ 6,322 Weighted-average remaining operating lease terms and the weighted average discount rates as of September 30, 2021 and December 31, 2020 were as follows: Lease Terms and Discount Rates September 30, 2021 December 31, 2020 Weighted-average remaining lease term - operating leases 6.0 years 6.4 years Weighted-average discount rate - operating leases 5.3 % 5.7 % Weighted-average remaining lease term - finance leases 4.5 years 4.6 years Weighted-average discount rate - finance leases 2.9 % 2.9 % The Company presents information related to leasing revenues in Note 3. NOTE 5 - Inventories Inventories at the respective balance sheet dates consisted of the following: (in thousands) September 30, 2021 December 31, 2020 Raw materials $ 24,472 $ 19,560 Finished units 6,471 4,171 Inventories $ 30,943 $ 23,731 NOTE 6 - Rental Equipment, net Rental equipment, net at the respective balance sheet dates consisted of the following: (in thousands) September 30, 2021 December 31, 2020 Modular space units $ 2,901,998 $ 2,796,284 Portable storage units 716,033 653,707 Tank and pump products 149,123 132,071 Value added products 158,336 143,652 Total rental equipment 3,925,490 3,725,714 Less: accumulated depreciation ( 956,595 ) ( 794,068 ) Rental equipment, net $ 2,968,895 $ 2,931,646 During the third quarter of 2021, certain of the Company’s rental equipment in Louisiana was adversely impacted by Hurricane Ida. The Company maintains insurance on its rental equipment, generally in the form of replacement cost policies. Such policies are subject to varying deductibles and other conditions. Based on management’s preliminary estimates of potential losses net of insurance recoveries, the impact to our financial statements in Q3 is immaterial. 16 NOTE 7 - Goodwill Changes in the carrying amount of goodwill were as follows: (in thousands) NA Modular NA Storage UK Storage Tank and Pump Total Balance at December 31, 2019 $ 235,177 $ — $ — $ — $ 235,177 Acquisition of Mobile Mini — 726,529 59,183 143,262 928,974 Effects of movements in foreign exchange rates 651 — 6,417 — 7,068 Balance at December 31, 2020 235,828 726,529 65,600 143,262 1,171,219 Changes to Mobile Mini purchase accounting 285,000 ( 233,666 ) — ( 43,173 ) 8,161 Effects of movements in foreign exchange rates 113 ( 311 ) ( 910 ) 18 ( 1,090 ) Balance at September 30, 2021 $ 520,941 $ 492,552 $ 64,690 $ 100,107 $ 1,178,290 The Company had no goodwill impairment during the nine months ended September 30, 2021 or the year ended December 31, 2020. Changes to Mobile Mini purchase accounting are largely the result of the finalization of the assignment of goodwill to the reporting units during the measurement period. NOTE 8 - Intangibles Intangible assets other than goodwill at the respective balance sheet dates consisted of the following: September 30, 2021 (in thousands) Weighted average remaining life (in years) Gross carrying amount Accumulated amortization Net book value Intangible assets subject to amortization: Trade name - ModSpace — $ 3,000 $ ( 3,000 ) $ — Mobile Mini customer relationships 6.8 209,000 ( 31,898 ) 177,102 Technology 4.8 1,500 ( 313 ) 1,187 Indefinite-lived intangible assets: Trade name - Mobile Mini 164,000 — 164,000 Trade name - WillScot 125,000 — 125,000 Total intangible assets other than goodwill $ 502,500 $ ( 35,211 ) $ 467,289 December 31, 2020 (in thousands) Weighted average remaining life (in years) Gross carrying amount Accumulated amortization Net book value Intangible assets subject to amortization: Trade name - ModSpace 0.7 $ 3,000 $ ( 2,375 ) $ 625 Mobile Mini customer relationships 8.0 217,000 ( 12,053 ) 204,947 Technology 5.5 1,500 ( 125 ) 1,375 Indefinite-lived intangible assets: Trade name - Mobile Mini 164,000 — 164,000 Trade name - WillScot 125,000 — 125,000 Total intangible assets other than goodwill $ 510,500 $ ( 14,553 ) $ 495,947 Amortization expense related to intangible assets was $ 6.8 million and $ 5.4 million for the three months ended September 30, 2021 and 2020, respectively, and $ 20.6 million and $ 5.9 million for the nine months ended September 30, 2021 and 2020, respectively. As discussed in Note 2, the Company acquired Mobile Mini on July 1, 2020. The Company recorded $ 164.0 million to indefinite-lived intangible assets related to the Mobile Mini trade name and $ 210.5 million of intangibles subject to amortization related to Mobile Mini customer relationships and technology. 17 Based on the carrying value at September 30, 2021, future amortization of intangible assets is expected to be as follows for the years ended December 31: (in thousands) 2021 (remaining) $ 6,604 2022 26,416 2023 26,416 2024 26,416 2025 26,416 Thereafter 66,021 Total $ 178,289 NOTE 9 - Debt The carrying value of debt outstanding at the respective balance sheet dates consisted of the following: (in thousands, except rates) Interest rate Year of maturity September 30, 2021 December 31, 2020 2025 Secured Notes 6.125 % 2025 $ 517,581 $ 637,068 ABL Facility (a) Varies 2025 1,521,518 1,263,833 2028 Secured Notes 4.625 % 2028 492,253 491,555 Finance Leases Varies Varies 85,600 77,874 Total debt 2,616,952 2,470,330 Less: current portion of long-term debt 18,652 16,521 Total long-term debt $ 2,598,300 $ 2,453,809 (a) As of both September 30, 2021 and December 31, 2020, the Company had no outstanding principal borrowings on the Multicurrency Facility and $ 6.6 million and $ 7.9 million, respectively, of related debt issuance costs. No related debt issuance costs were recorded as a direct offset against the principal borrowings on the Multicurrency Facility, and the $ 6.6 million and $ 7.9 million in excess of principal was included in other non-current assets on the condensed consolidated balance sheets. Asset Backed Lending Facilities ("ABL Facility") On November 29, 2017, Williams Scotsman Holdings Corp ("Holdings"), Williams Scotsman International, Inc. ("WSII") and certain of its subsidiaries entered into an ABL credit agreement (the “2017 ABL Facility”), as amended, that provided a senior secured revolving credit facility that matured on May 29, 2022. The 2017 ABL Facility consisted of (i) a $ 1.3 billion asset-backed revolving credit facility for WSII and certain of its domestic subsidiaries (the "2017 US ABL Facility"), (ii) a $ 140.0 million asset-based revolving credit facility (the "2017 Canadian ABL Facility") for certain Canadian subsidiaries of WSII, and (iii) an accordion feature that permitted the borrowers to increase the lenders’ commitments in an aggregate amount not to exceed $ 375.0 million, subject to the satisfaction of customary conditions and lender approval, plus any voluntary prepayments that are accompanied by permanent commitment reductions under the 2017 ABL Facility. On July 1, 2020, in connection with the completion of the Merger, Holdings, WSII, and certain of its subsidiaries, entered into a new asset-based credit agreement, that provides for revolving credit facilities in the aggregate principal amount of up to $ 2.4 billion, consisting of: (i) a senior secured asset-based US dollar revolving credit facility in the aggregate principal amount of $ 2.0 billion (the “US Facility”), available to WSII and certain of its subsidiaries (collectively, the “US Borrowers”), and (ii) a $ 400.0 million senior secured asset-based multicurrency revolving credit facility (the "Multicurrency Facility" together with the US Facility, the “2020 ABL Facility”), available to be drawn in US Dollars, Canadian Dollars, British Pounds Sterling or Euros by the US Borrowers, and certain of WSII’s wholly-owned subsidiaries organized in Canada and in the UK. On July 1, 2020, in connection with the completion of the Merger, approximately $ 1.5 billion of proceeds from the 2020 ABL Facility were used to repay the 2017 ABL Facility and the asset-backed lending facility assumed in the transaction with Mobile Mini, as well as to pay fees and expenses related to the Merger and the debt financing transactions. In connection with the repayment of the 2017 ABL facility, the Company wrote off $ 4.4 million of deferred financing costs to loss on extinguishment of debt in the third quarter of 2020. The 2020 ABL Facility matures July 1, 2025. 18 Borrowings under the 2020 ABL Facility initially bear interest at (i) in the case of US Dollars, at WSII’s option, either an adjusted LIBOR rate plus 1.875 % or an alternative base rate plus 0.875 %, (ii) in the case of Canadian Dollars, at WSII’s option, either a Canadian BA rate plus 1.875 % or Canadian prime rate plus 0.875 %, and (iii) in the case of Euros and British Pounds Sterling, an adjusted LIBOR rate plus 1.875 %. The 2020 ABL Facility requires the payment of an annual commitment fee on the unused available borrowings of 0.225 % per annum . At September 30, 2021 , t he weighted average interest rate for borrowings under the 2020 ABL Faci lity was 1.97 %. T he weighted average interest rate on the balance outstanding as of September 30, 2021, as adjusted for the effects of the interest rate swap agreements, was 2.73 %. Refer to Note 16 for a more detailed discussion on interest rate management. Borrowing availability under the US Facility and the Multicurrency Facility is equal to the lesser of (i) the aggregate Revolver Commitments and (ii) the Line Cap. At September 30, 2021, the Line Cap was $ 2.4 billion and the Borrowers had $ 831.6 million of available borrowing capacity under the 2020 ABL Facility, including $ 431.6 million under the US Facility and $ 400.0 million under the Multicurrency Facility. At September 30, 2021, borrowing capacity under the 2020 ABL Facility allowed for up to $ 207.1 million of letters of credit and up to $ 170.0 million of swingline loans. At September 30, 2021, letters of credit and bank guarantees carried fees of 2.00 %. The Company had issued $ 12.9 million of standby letters of credit under the 2020 ABL Facility at September 30, 2021. The Company had $ 1.6 billion outstanding principal under the 2020 ABL Facility at September 30, 2021. Debt issuance costs of $ 34.0 million were included in the carrying value of the 2020 ABL Facility at September 30, 2021. 2022 Senior Secured Notes WSII had $ 270.0 million aggregate principal amount of 7.875 % senior secured notes due December 15, 2022 (the “2022 Secured Notes”). In connection with the Merger and related financing transactions in the third quarter of 2020, using proceeds from the 2025 Secured Notes discussed below, the Company redeemed all of its 2022 Secured Notes. 2023 Senior Secured Notes WSII had $ 490.0 million of 6.875 % senior secured notes due August 15, 2023 (the “2023 Secured Notes”). On August 11, 2020, WSII redeemed 10 % of the outstanding principal amount of the 2023 Secured Notes, $ 49.0 million. On August 25, 2020, the Company completed a private offering of its 2028 Secured Notes, discussed below, and used the offering proceeds to repay, along with expenses, the $ 441.0 million outstanding principal amount of its 2023 Secured Notes. 2025 Senior Secured Notes In anticipation of the Merger, on June 15, 2020, Picasso Finance Sub, Inc., a newly-formed indirect finance subsidiary (the “Finance Sub”) of the Company, completed a private offering of $ 650.0 million in aggregate principal amount of its 6.125 % senior secured notes due 2025 (the “2025 Secured Notes”). Finance Sub was merged into WSII on July 1, 2020. The offering proceeds were used to repay the 2022 Secured Notes, repay Mobile Mini senior notes assumed in the acquisition and pay certain fees and expenses related to the Merger and the related financing transactions. On March 26, 2021, using cash on hand and borrowings on the 2020 ABL Facility, the Company redeemed 10 % of the outstanding principal, or $ 65.0 million, of its 2025 Secured Notes and recorded a loss on extinguishment of debt in the condensed consolidated statement of operations of $ 3.2 million comprised of a redemption premium of $ 1.9 million and write- off of unamortized deferred financing fees of $ 1.3 million in the first quarter of 2021. On June 16, 2021, using cash on hand and borrowings on the 2020 ABL Facility, the Company redeemed 10 % of the outstanding principal, or $ 58.5 million, of its 2025 Secured Notes and recorded a loss on extinguishment of debt in the condensed consolidated statement of operations of $ 2.8 million comprised of a redemption premium of $ 1.8 million and write-off of unamortized deferred financing fees of $ 1.0 million in the second quarter of 2021. The 2025 Secured Notes mature on June 15, 2025 and bear interest at a rate of 6.125 % per annum. Interest is payable semi-annually on June 15 and December 15 of each year, beginning December 15, 2020. Unamortized deferred financing costs pertaining to the 2025 Secured Notes were $ 8.9 million as of September 30, 2021. 2028 Senior Secured Notes On August 25, 2020, the Company, completed a private offering of $ 500.0 million in aggregate principal amount of 4.625 % senior secured notes due 2028 (the “2028 Secured Notes”). The 2028 Secured Notes mature on August 15, 2028. They bear interest at a rate of 4.625 % per annum. Interest is payable semi-annually on August 15 and February 15 of each year, beginning February 15, 2021. Unamortized deferred financing cost pertaining to the 2028 Secured Notes were $ 7.7 million as of September 30, 2021. Finance Leases The Company maintains finance leases primarily related to transportation equipment. At September 30, 2021 and December 31, 2020, obligations under finance leases for certain real property and transportation related equipment were $ 85.6 million and $ 77.9 million, respectively. Refer to Note 4 for further information. The Company is in compliance with all debt covenants and restrictions for the aforementioned debt instruments as of September 30, 2021 and December 31, 2020. 19 NOTE 10 – Equity Common Stock On June 30, 2020, as contemplated by the merger agreement, Sapphire Holding S.à r.l. ("Sapphire Holdings"), an affiliate of TDR Capital LLP (“TDR Capital”), exchanged each of its shares of common stock of Holdings for 1.3261 shares of newly issued WillScot Class A Common Stock (the "Sapphire Exchange"). As a result of the Sapphire Exchange, all issued and outstanding shares of WillScot’s Class B Common Stock, par value $ 0.0001 per share (the "Class B Common Stock"), were automatically canceled for no consideration and the existing exchange agreement was automatically terminated. As a result of the Sapphire Exchange, Holdings became a wholly-owned subsidiary of WillScot. Sapphire Holdings received 10,641,182 shares of Common Stock of WillScot in the Sapphire Exchange. Prior to the Sapphire Exchange, Sapphire Holdings' ownership of Holdings was recorded as a non-controlling interest in the consolidated financial statements. Subsequent to the Sapphire Exchange, the Company's subsidiaries are each wholly owned and there is no non-controlling interest. As a result of the Sapphire Exchange, non-controlling interest of $ 63.9 million was reclassified to $ 66.9 million of additional paid-in-capital and $ 3.0 million to accumulated other comprehensive loss, on the condensed consolidated balance sheet. In connection with the Merger on July 1, 2020, the Company issued 106,426,722 shares of Class A Common Stock in exchange for Mobile Mini Common Stock outstanding and subsequently filed an amended and restated certificate of incorporation, which reclassified all outstanding shares of the Class A Common Stock and converted such shares into shares of Common Stock, par value $ 0.0001 per share, of WillScot Mobile Mini. In connection with the stock compensation vesting events and stock option exercises described in Note 15, and the warrant exercises described below, the Company issued 5,273,466 shares of Common Stock during the nine months ended September 30, 2021. Stock Repurchase Program On August 7, 2020, the Company's Board of Directors approved a stock repurchase program that authorizes the Company to repurchase up to $ 250 million of its outstanding shares of Common Stock. On April 29, 2021, the Board of Directors approved an increase in repurchase authority to $ 500 million. The stock repurchase program does not obligate the Company to purchase any particular number of shares, and the timing and exact amount of any repurchases will depend on various factors, including market pricing and conditions, business, legal, accounting, and other considerations. The Company may repurchase its shares in open market transactions from time to time or through privately negotiated transactions in accordance with federal securities laws, at the Company's discretion. The repurchase program, which has no expiration date, may be increased, suspended, or terminated at any time. The program is expected to be implemented over the course of several years and is conducted subject to the covenants in the agreements governing the Company's indebtedness. During the nine months ended September 30, 2021, the Company repurchased 11,656,552 shares of Common Stock and stock equivalents for $ 322.6 million. As of September 30, 2021, $ 142.2 million of the approved repurchase pool remained available. In October of 2021, the Company's Board of Directors replaced the existing share repurchase program with a new share repurchase program that authorizes the Company to repurchase up to $ 1.0 billion of its outstanding shares of Common Stock and equivalents. Accumulated Other Comprehensive Loss The changes in accumulated other comprehensive income (loss) ("AOCI"), net of tax, for the nine months ended September 30, 2021 and 2020 were as follows: (in thousands) Foreign currency translation Unrealized losses on hedging activities Total Balance at December 31, 2020 $ ( 24,694 ) $ ( 12,513 ) $ ( 37,207 ) Other comprehensive income (loss) before reclassifications 5,034 ( 760 ) 4,274 Reclassifications from AOCI to income — 2,937 2,937 Balance at March 31, 2021 ( 19,660 ) ( 10,336 ) ( 29,996 ) Other comprehensive income (loss) before reclassifications 3,093 ( 848 ) 2,245 Reclassifications from AOCI to income — 2,994 2,994 Balance at June 30, 2021 ( 16,567 ) ( 8,190 ) ( 24,757 ) Other comprehensive loss before reclassifications ( 11,162 ) ( 830 ) ( 11,992 ) Reclassifications from AOCI to income — 3,036 3,036 Balance at September 30, 2021 $ ( 27,729 ) $ ( 5,984 ) $ ( 33,713 ) 20 (in thousands) Foreign currency translation Unrealized losses on hedging activities Total Balance at December 31, 2019 $ ( 52,982 ) $ ( 9,793 ) $ ( 62,775 ) Other comprehensive loss before reclassifications ( 21,144 ) ( 10,330 ) ( 31,474 ) Reclassifications from AOCI to income — 1,572 1,572 Less other comprehensive loss attributable to non-controlling interest 1,913 790 2,703 Balance at March 31, 2020 ( 72,213 ) ( 17,761 ) ( 89,974 ) Other comprehensive income (loss) before reclassifications 7,982 ( 1,642 ) 6,340 Reclassifications from AOCI to income — 2,617 2,617 Less other comprehensive income attributable to non-controlling interest ( 730 ) ( 88 ) ( 818 ) Impact of elimination of non-controlling interest on accumulated other comprehensive income ( 1,299 ) ( 1,673 ) ( 2,972 ) Balance at June 30, 2020 ( 66,260 ) ( 18,547 ) ( 84,807 ) Other comprehensive income prior to reclassifications 14,619 947 15,566 Reclassifications from AOCI to income — 2,958 2,958 Balance at September 30, 2020 $ ( 51,641 ) $ ( 14,642 ) $ ( 66,283 ) For the nine months ended September 30, 2021 and 2020 , $ 9.0 million an d $ 7.1 million , respectively, was reclassified from AOCI into the condensed consolidated statements of operations within interest expense related to the interest rate swaps discussed in Note 16. T he Company recorded a tax expense of $ 0.7 million and $ 2.0 million for the three and nine months ended September 30, 2021, respectively, and an income tax benefit of $ 1.2 million for the three and nine months ended September 30, 2020 associated with this reclassification. NOTE 11 – Warrants Warrants 2015 Public Warrants WillScot was incorporated under the name Double Eagle Acquisition Corporation ("DEAC") on June 26, 2015. On November 29, 2017, DEAC acquired WSII from Algeco Scotsman Global S.à.r.l., which is majority owned by an investment fund managed by TDR Capital, and DEAC domesticated to Delaware and changed its name to WillScot Corporation. As part of its initial public offering, DEAC issued warrants (the “2015 Public Warrants”). Each 2015 Public Warrant entitled the holder to purchase one-half of one share of Common Stock at a price of $ 5.75 per half share (or $ 11.50 per whole share), subject to adjustment. On January 24, 2020, the Company delivered a notice (the "Redemption Notice") to redeem all of its 2015 Public Warrants that remained unexercised on February 24, 2020. As further described in the Redemption Notice and permitted under the Warrant Agreement, holders of these warrants who exercised them following the date of the Redemption Notice were required to do so on a cashless basis. From January 1, 2020 through January 24, 2020, 796,610 warrants were exercised for cash, resulting in the Company receiving cash proceeds of $ 4.6 million and the Company issuing 398,305 shares of the Company's Class A Common Stock. After January 24, 2020 through February 24, 2020, 5,836,048 warrants were exercised on a cashless basis. An aggregate of 1,097,162 shares of the Company's Class A Common Stock was issued in connection with these exercises. On February 24, 2020, the Company completed the redemption of 38,509 remaining warrants under the Redemption Notice for $ 0.01 per warrant. No Public Warrants remain outstanding. 2015 Private Warrants DEAC also issued warrants to purchase its Common Stock in a private placement concurrently with its initial public offering (the “2015 Private Warrants”). Each 2015 Private Warrant entitled the holder to purchase one-half of one share of Common Stock at a price of $ 5.75 per half share (or $ 11.50 per whole share), subject to adjustment. Additionally, if held by certain original investors (or their permitted assignees), the 2015 Private Warrants could be exercised on a cashless basis and are not subject to redemption. During the six months ended June 30, 2021, 3,055,000 2015 Private Warrants were repurchased for $ 25.5 million and cancelled. In addition, during the six months ended June 30, 2021, 9,655,000 warrants were exercised on a cashless basis, resulting in the issuance of 2,939,898 shares of Common Stock. As a result of these transactions, no 2015 private warrants remain outstanding. 21 2018 Warrants In connection with the Modular Space Holdings ("ModSpace") acquisition in 2018, WillScot issued warrants to purchase approximately 10.0 million shares of Common Stock (the "2018 Warrants") to former shareholders of ModSpace. Each 2018 Warrant entitles the holder thereof to purchase one share of Common Stock at an exercise price of $ 15.50 per share, subject to potential adjustment. The 2018 Warrants expire on November 29, 2022. During the nine months ended September 30, 2021, 223,310 of these 2018 Warrants were repurchased for $ 2.3 million and cancelled. In addition, during the nine months ended September 30, 2021, 2,981,195 2018 Warrants were exercised on a cashless basis, resulting in the issuance of 1,372,548 shares of common stock. At September 30, 2021, 6,525,736 2018 Warrants were outstanding. The Company accounted for its warrants in the following ways: (i) the 2015 Public Warrants as liabilities through their final redemption in February 2020, (ii) the 2015 Private Warrants as liabilities through their final repurchase or exercise in May 2021, and (iii) the 2018 Warrants as liabilities until June 30, 2020, the date all issued and outstanding shares of the Company's Class B Common Stock were cancelled. Subsequent to June 30, 2020, the 2018 Warrants were equity classified. The Company determined the following fair values for the outstanding common stock warrants recorded as liabilities: (in thousands) September 30, 2021 December 31, 2020 2015 Private Warrants N/A $ 77,404 NOTE 12 – Income Taxes The Company recorded $ 6.6 million and $ 36.0 million of income tax expense for the three and nine months ended September 30, 2021, respectively, and $ 66.7 million and $ 66.2 million of income tax benefit for the three and nine months ended September 30, 2020, respectively. The Company’s effective tax rate for the three and nine months ended September 30, 2021 was 9.8 % and 29.5 %, respectively. The Company's effective tax rate for the three and nine months ended September 30, 2020 was 91.7 % and ( 1,247.5 )%, respectively. The effective tax rate for the three months ended September 30, 2021 differs from the US federal statutory rate of 21% primarily due to the reversal of approximately $ 12.8 million in reserves for uncertain tax positions (“UTP”) due to the expiration of relevant statutes of limitation. The effective tax rate for the nine months ended September 30, 2021 differs from the US federal statutory rate of 21% primarily due to the permanent add-backs related to fair value accounting on the Company’s warrants and executive compensation with an offset related to the discrete tax benefit from the reversal of reserves for UTP. The effective tax rate for the three months ended September 30, 2020 is different from the US statutory rate of 21% primarily as a result of a pre-tax loss approximately equal to the discrete tax benefit from the reversal of the Company’s valuation allowance on net operating losses prior to the merger with Mobile Mini and the reversal of reserves for UTP due to the expiration of statutes of limitations. The effective tax rate for the nine months ended September 30, 2020 is different from the US statutory rate of 21% primarily as a result of discrete benefits from the reversal of valuation allowances and reserves for UTP. NOTE 13 - Fair Value Measures The fair value of financial assets and liabilities are included at the amount at which the instrument could be exchanged in a current transaction between willing parties, other than in a forced or liquidation sale. The Company utilizes the suggested accounting guidance for the three levels of inputs that may be used to measure fair value: Level 1 - Observable inputs such as quoted prices in active markets for identical assets or liabilities; Level 2 - Observable inputs, other than Level 1 inputs in active markets, that are observable either directly or indirectly; and Level 3 - Unobservable inputs for which there is little or no market data, which require the reporting entity to develop its own assumptions The Company has assessed that the fair value of cash and cash equivalents, trade receivables, trade payables, and other current liabilities approximate their carrying amounts. Based on the borrowing rates currently available for bank loans with similar terms and average maturities, the fair value of finance leases at September 30, 2021 approximate their respective book values. Prior to their redemption, the Company’s 2015 Public Warrants traded in active markets. When classified as liabilities, warrants traded in active markets with sufficient trading volume represent Level 1 financial instruments as they are publicly traded in active markets and thus have observable market prices which are used to estimate the fair value adjustments for the related common stock warrant liabilities. When classified as liabilities, warrants not traded in active markets, or traded with insufficient volume, represent Level 3 financial instruments that are valued using a Black-Scholes option-pricing model to estimate the fair value adjustments for the related common stock warrant liabilities. 22 The following table shows the carrying amounts and fair values of financial liabilities which are disclosed, but not measured, at fair value, including their levels in the fair value hierarchy: September 30, 2021 December 31, 2020 Carrying Amount Fair Value Carrying Amount Fair Value (in thousands) Level 1 Level 2 Level 3 Level 1 Level 2 Level 3 ABL Facilities $ 1,521,518 $ — $ 1,555,500 $ — $ 1,263,833 $ — $ 1,304,612 $ — 2025 Secured Notes 517,581 — 556,374 — 637,068 — 694,876 — 2028 Secured Notes 492,253 — 521,435 — 491,555 — 518,820 — Total $ 2,531,352 $ — $ 2,633,309 $ — $ 2,392,456 $ — $ 2,518,308 $ — As of September 30, 2021, the carrying values of the ABL Facilities, the 2025 Secured Notes, and the 2028 Secured Notes include $ 34.0 million, $ 8.9 million, and $ 7.7 million, respectively, of unamortized debt issuance costs, which are presented as a direct reduction of the corresponding liability. As of December 31, 2020, the carrying value of the ABL Facilities, the 2025 Secured Notes, and the 2028 Secured Notes includes $ 40.8 million, $ 12.9 million, and $ 8.4 million, respectively, of unamortized debt issuance costs, which are presented as a direct reduction of the corresponding liability. The carrying value of the ABL Facilities, excluding debt issuance costs, approximates fair value as the interest rates are variable and reflective of current market rates. The fair value of the 2025 Secured Notes and the 2028 Secured Notes is based on their last trading price at the end of each period obtained from a third party. The classification and the fair value of derivative assets and liabilities designated as hedges in the condensed consolidated balance sheets are disclosed in Note 16. The following table shows the carrying amounts and fair values of financial liabilities which are measured at fair value: September 30, 2021 December 31, 2020 Carrying Amount Fair Value Carrying Amount Fair Value (in thousands) Level 1 Level 2 Level 3 Level 1 Level 2 Level 3 2015 Private warrants N/A N/A N/A N/A $ 77,404 $ — $ — $ 77,404 Total $ — $ — $ — $ — $ 77,404 $ — $ — $ 77,404 Level 3 Disclosures When the 2015 Private Warrants and 2018 Warrants were classified as liabilities, the Company utilized a Black Scholes option-pricing model to value the warrants at each reporting period and transaction date, with changes in fair value recognized in the statements of operations. The estimated fair value of the common stock warrant liability was determined using Level 3 inputs. Inherent in the pricing model were assumptions related to expected share-price volatility, expected life, risk-free interest rate and dividend yield. The Company estimated the volatility of its ordinary shares based on historical volatility that matched the expected remaining life of the warrants. The risk-free interest rate was based on the U.S. Treasury zero-coupon yield curve on the grant date for a maturity similar to the expected remaining life of the warrants. The expected life of the warrants was assumed to be equivalent to their remaining contractual term. The dividend rate was based on the historical rate, which the Company anticipates to remain at zero. The 2018 Warrants were reclassified to equity at June 30, 2020, the date all issued and outstanding shares of the Company's Class B Common Stock were cancelled. The following table provides quantitative information regarding Level 3 fair value measurements: December 31, 2020 (in thousands) 2015 Private Warrants Stock Price $ 23.17 Strike Price $ 11.50 Expected Life 1.91 Volatility 41.2 % Risk Free rate 0.13 % Dividend yield — Fair value of warrants $ 12.17 23 The following table presents changes in Level 3 liabilities measured at fair value for the three months ended September 30, 2020: (in thousands) 2015 Private Warrants Balance - June 30, 2020 $ 34,421 Measurement adjustment 22,303 Balance - September 30, 2020 $ 56,724 The following table presents changes in Level 3 liabilities measured at fair value for the nine months ended September 30, 2021 and September 30, 2020. (in thousands) 2015 Private Warrants Balance - December 31, 2020 $ 77,404 Exercise or conversion ( 78,495 ) Measurement adjustment 25,486 Repurchases ( 24,395 ) Balance - September 30, 2021 $ — (in thousands) 2015 Private Warrants 2018 Warrants Balance - December 31, 2019 $ 72,705 $ 58,369 Exercise or conversion — ( 416 ) Measurement adjustment ( 15,981 ) ( 31,737 ) Reclassification to equity at June 30, 2020 — ( 26,216 ) Balance - September 30, 2020 $ 56,724 $ — NOTE 14 - Restructuring Restructuring costs include charges associated with exit or disposal activities that meet the definition of restructuring under FASB ASC Topic 420, Exit or Disposal Cost Obligations (“ASC 420”). The Company's restructuring plans are generally country or region specific and are typically completed within a one-year period. Restructuring costs incurred under these plans include (i) one-time termination benefits related to employee separations, (ii) contract termination costs, and (iii) other related costs associated with exit or disposal activities, including but not limited to, costs for consolidating or closing facilities other than lease costs accounted for under ASC 842. Costs related to the integration of acquired businesses that do not meet the definition of restructuring under ASC 420, such as employee training costs, duplicate facility costs and professional services expenses, are included within SG&A expense. The following is a summary of the activity in the Company’s restructuring accruals for the three and nine months ended September 30, 2021 and 2020, which primarily relate to employee costs: Three Months Ended Nine Months Ended September 30, September 30, (in thousands) 2021 2020 2021 2020 Beginning balance $ 4,380 $ 525 $ 1,750 $ 447 Charges 1,856 3,854 11,958 4,543 Cash payments ( 3,845 ) ( 2,432 ) ( 5,548 ) ( 3,027 ) Foreign currency translation — 2 — 3 Non-cash movements ( 1,442 ) 133 ( 7,211 ) 116 Ending balance $ 949 $ 2,082 $ 949 $ 2,082 The restructuring charges during the three and nine months ended September 30, 2021 are driven by employee termination costs as a result of the elimination of positions due to the Merger. The restructuring charges during the three months ended September 30, 2020 are primarily driven by termination costs as a result of the Merger, and restructuring charges for the nine months ended September 30, 2020 are primarily driven by employee termination costs due to reductions in force in response to the COVID-19 pandemic and termination costs as a result of the Merger. 24 The restructuring non-cash movements during the three and nine months ended September 30, 2021 primarily represent stock compensation costs recognized as a result of the modification of certain equity awards associated with the Transition, Separation and Release Agreement entered into on February 25, 2021 with the Company's former President and Chief Operating Officer. Segments ( as defined in Note 18 ) The $ 1.9 million of restructuring charges for the three months ended September 30, 2021 includes $ 0.1 million of charges related to the NA Modular segment, $ 0.4 million of charges related to the NA Storage segment, and $ 1.4 million of unallocated charges. The $ 3.9 million of restructuring charges for the three months ended September 30, 2020 includes $ 0.3 million of charges related to the NA Modular segment, $ 3.3 million of charges related to the NA Storage segment and $ 0.3 million of charges related to the UK Storage segment. The $ 12.0 million of restructuring charges for the nine months ended September 30, 2021 includes $ 1.6 million of charges related to the NA Modular segment, $ 3.2 million of charges related to the NA Storage segment, and $ 7.2 million of unallocated charges. The $ 4.5 million of restructuring charges for the nine months ended September 30, 2020 includes $ 0.9 million of charges pertaining to the NA Modular segment, $ 3.3 million of charges related to the NA Storage segment and $ 0.3 million of charges related to the UK Storage segment. NOTE 15 - Stock-Based Compensation Prior to the Merger, stock awards were granted under the WillScot Corporation 2017 Incentive Award Plan (the "2017 Incentive Plan"), which included Restricted Stock Awards ("RSAs") and Restricted Stock Units ("RSUs"). On June 24, 2020, WillScot's stockholders approved the WillScot Mobile Mini 2020 Incentive Award Plan ("2020 Incentive Plan") to take effect pending completion of the Merger. The plan amended and restated in its entirety the 2017 Incentive Plan. As a result, all historical and future incentive awards to the Company's Board of Directors, executive officers and employees, as determined by the Company's Compensation Committee ("the Comp Committee"), are granted under the 2020 Incentive Plan. The 2020 Incentive Plan is administered by the Comp Committee. Under the 2020 Incentive Plan, the Comp Committee may grant an aggregate of 6,488,988 shares of Common Stock in the form of non-qualified stock options, incentive stock options, stock appreciation rights, RSAs, RSUs, performance compensation awards and stock bonus awards. Stock-based payments, including the grant of stock options, RSAs and RSUs, are subject to service-based vesting requirements, and expense is recognized on a straight-line basis over the vesting period. Forfeitures are accounted for as they occur. Stock-based compensation expense includes grants of stock options, time-based RSUs ("Time-Based RSUs") and performance-based RSUs ("Performance-Based RSUs", together with Time-Based RSUs, the "RSUs"). The 2020 Incentive Plan continues the former Market-Based RSUs renamed as "Performance-Based RSUs." RSUs are recognized in the financial statements based on their fair value. In addition, stock-based payments to non-executive directors include grants of RSAs. Time-Based RSUs and RSAs are valued based on the intrinsic value of the difference between the exercise price, if any, of the award and the fair market value of WillScot Mobile Mini's Common Stock on the grant date. Performance-Based RSUs are valued based on a Monte Carlo simulation model to reflect the impact of the Performance-Based RSUs market condition. The probability of satisfying a market condition is considered in the estimation of the grant-date fair value for Performance-Based RSUs and the compensation cost is not reversed if the market condition is not achieved, provided the requisite service has been provided. Restricted Stock Awards The following table summarizes the Company's RSA activity as of September 30 ,: 2021 2020 Number of Shares Weighted-Average Grant Date Fair Value Number of Shares Weighted-Average Grant Date Fair Value Balance December 31, 57,448 $ 11.75 52,755 $ 14.69 Granted 44,708 29.30 65,959 11.75 Forfeited ( 8,532 ) 29.30 — — Vested ( 57,448 ) 11.75 ( 61,266 ) 14.28 Balance September 30, 36,176 $ 29.30 57,448 $ 11.75 Compensation expense for RSAs recognized in SG&A on the condensed consolidated statements of operations was $ 0.3 million for each of the three months ended September 30, 2021 and 2020. Compensation expense for RSAs recognized in SG&A on the condensed consolidated statements of operations was $ 0.6 million and $ 0.7 million for the nine months ended 25 September 30, 2021 and 2020, respectively. At September 30, 2021, there was $ 0.7 million of unrecognized compensation cost related to RSAs that is expected to be recognized over the remaining weighted average vesting period of 0.7 years. Time-Based RSUs The following table summarizes the Company's Time-Based RSU activity as of September 30 ,: 2021 2020 Number of Shares Weighted-Average Grant Date Fair Value Number of Shares Weighted-Average Grant Date Fair Value Balance December 31, 1,125,766 $ 13.44 1,065,305 $ 12.78 Granted 415,737 27.25 632,864 14.37 Forfeited ( 65,153 ) 16.74 ( 22,728 ) 13.45 Vested ( 467,055 ) 14.14 ( 323,678 ) 12.93 Balance September 30, 1,009,295 $ 18.59 1,351,763 $ 13.48 Compensation expense for Time-Based RSUs recognized in SG&A on the condensed consolidated statements of operations was $ 3.2 million and $ 1.6 million for the three months ended September 30, 2021 and 2020, respectively. Compensation expense for RSUs recognized in SG&A on the condensed consolidated statements of operations was $ 7.5 million and $ 3.9 million for the nine months ended September 30, 2021 and 2020, respectively. At September 30, 2021, unrecognized compensation cost related to Time-Based RSUs totaled $ 13.5 million and is expected to be recognized over the remaining weighted average vesting period of 2.3 years. Included in restructuring costs for the three and nine months ended September 30, 2021 was expense of approximately $ 1.1 million and $ 5.9 million, respectively, recognized as a result of the modification of certain RSUs associated with the Transition, Separation and Release Agreement entered into on February 25, 2021 with the Company's former President and Chief Operating Officer. Performance-Based RSUs The following table summarizes the Company's Performance-Based RSU award activity as of September 30 ,: 2021 2020 Number of Shares Weighted-Average Grant Date Fair Value Number of Shares Weighted-Average Grant Date Fair Value Balance December 31, 593,388 $ 14.88 288,281 $ 13.22 Granted 977,645 33.21 325,256 16.35 Forfeited ( 20,077 ) 25.87 ( 12,700 ) 14.70 Balance September 30, 1,550,956 $ 26.29 600,837 $ 14.88 Compensation expense for Performance-Based RSUs recognized in SG&A on the condensed consolidated statements of operations was $ 2.7 million and $ 0.8 million for the three months ended September 30, 2021 and 2020, respectively. Compensation expense for Performance-Based RSUs recognized in SG&A on the condensed consolidated statements of o perations was $ 5.8 million and $ 1.7 million for the nine months ended September 30, 2021 and 2020, respectively. At September 30, 2021, unrecognized compensation cost related to Performance-Based RSUs totaled $ 30.3 million and is expected to be recognized over the remaining vesting period of 2.7 years. Included in restructuring costs for the three and nine months ended September 30, 2021 was expense of approximate ly $ 0.3 million and $ 1.3 million, respectively, recognized as a result of the modification of certain Performance-Based RSUs associated with the Transition, Separation and Release Agreement entered into on February 25, 2021 with the Company's former President and Chief Operating Officer. Certain Performance-Based RSUs cliff vest based on achievement of the relative total stockholder return ("TSR") of the Company's Common Stock as compared to the TSR of the constituents in an index at the grant date over the performance period of three years. For certain 2021 grants, the TSR of the Company's Common Stock is compared to the TSR of the constituents in the S&P 400 Index. The target number of RSUs may be adjusted from 0 % to 200 % based on the TSR attainment levels defined by the Company's Compensation Committee. The 100 % target payout is tied to performance at the 50 % percentile, with a payout curve ranging from 0 % (for performance less than the 25 % percentile) to 200 % (for performance above the 85 % percentile). For grants in 2020 and prior, the TSR of the Company's Common Stock is compared to the TSR of constituents in the Russell 3000 Index. The target number of RSUs may be adjusted from 0 % to 150 % based on the TSR attainment levels defined by the Company's Compensation Committee. The 100 % target payout is tied to performance at the 26 50 % percentile, with a payout curve ranging from 0 % (for performance less than the 25 % percentile) to 150 % (for performance at or above the 75 % percentile). For 555,790 Performance-Based RSUs granted in 2021, the awards cliff vest based on achievement of specified share prices of the Company's Common Stock at annual measurement dates over performance periods of 4.5 to 4.8 years. The target number of RSUs may be adjusted from 0 to 1,333,334 based on the stock price attainment levels defined by the Company's Compensation Committee. The 555,790 RSU target payout is tied to a stock price of $ 47.50 , with a payout ranging from 0 RSUs (for a stock price less than $ 42.50 ) to 1,333,334 RSUs (for a stock price of $ 60.00 or greater). Stock Options The following table summarizes the Company's stock option activity as of September 30, 2021 : WillScot Options Weighted-Average Exercise Price per Share Converted Mobile Mini Options Weighted-Average Exercise Price per Share Balance December 31 , 2020 534,188 $ 13.60 2,031,455 $ 14.78 Forfeited — — ( 6,240 ) 12.19 Exercised — — ( 484,986 ) 15.26 Balance September 30, 2021 534,188 $ 13.60 1,540,229 $ 14.65 Fully vested and exercisable options, September 30, 2021 400,641 $ 13.60 1,540,229 $ 14.65 The following table summarizes the Company's stock option activity as of September 30, 2020 : WillScot Options Weighted-Average Exercise Price per Share Converted Mobile Mini Options Weighted-Average Exercise Price per Share Balance, December 31, 2019 534,188 $ 13.60 — $ — Converted at Merger — — 7,361,516 13.52 Exercised — — ( 259,708 ) 11.99 Balance at September 30, 2020 534,188 $ 13.60 7,101,808 $ 13.58 Fully vested and exercisable options, September 30, 2020 267,094 $ 13.60 7,101,808 $ 13.58 WillScot Options Compensation expense for stock option awards, recognized in SG&A on the condensed consolidated statements of operations, was $ 0.2 million for each of the three months ended September 30, 2021 and 2020. Compensation expense for stock option awards, recognized in SG&A on the condensed consolidated statements of operations, was $ 0.6 million for each of the nine months ended September 30, 2021 and 2020. At September 30, 2021, unrecognized compensation cost related to stock option awards totaled $ 0.3 million and is expected to be recognized over the remaining vesting period of 0.5 years. NOTE 16 - Derivatives On November 6, 2018, the Company entered into an interest rate swap agreement (the “Swap Agreement”) with a financial counterparty that effectively converts $ 400.0 million in aggregate notional amount of variable-rate debt under the Company’s ABL Facility into fixed-rate debt. The Swap Agreement will terminate on May 29, 2022. Under the terms of the Swap Agreement, the Company receives a floating rate equal to one-month LIBOR and makes payments based on a fixed rate of 3.06 % on the notional amount. The receive rate under the terms of the Swap Agreement was 0.08 % and 0.15 % at September 30, 2021 and December 31, 2020, respectively. The Swap Agreement was designated and qualified as a hedge of the Company’s exposure to changes in interest payment cash flows created by fluctuations in variable interest rates on the ABL Facility. 27 The location and the fair value of derivative instruments designated as hedges, at the respective balance sheet dates, were as follows: (in thousands) Balance Sheet Account September 30, 2021 December 31, 2020 Cash Flow Hedges: Interest rate swap Accrued expenses $ 8,380 $ 11,619 Interest rate swap Other non-current liabilities $ — $ 5,308 The fair value of the interest rate swap is based on dealer quotes of market forward rates, a Level 2 input on the fair value hierarchy, and reflects the amount that the Company would receive or pay as of September 30, 2021 and December 31, 2020, respectively, for contracts involving the same attributes and maturity dates. The following table discloses the impact of the interest rate swap, excluding the impact of income taxes, on other comprehensive income (“OCI”), AOCI and the Company’s statements of operations for the nine months ended September 30,: (in thousands) 2021 2020 Gain (loss) recognized in OCI $ 8,528 $ ( 5,061 ) Location of gain (loss) recognized in income Interest expense Interest expense Loss reclassified from AOCI into income (effective portion) $ ( 8,967 ) $ ( 7,147 ) NOTE 17 - Commitments and Contingencies The Company is involved in various lawsuits, claims and legal proceedings that arise in the ordinary course of business. The Company assesses these matters on a case-by-case basis as they arise and establishes reserves as required. As of September 30, 2021, with respect to these outstanding matters, the Company believes that the amount or range of reasonably possible loss will not, either individually or in the aggregate, have a material adverse effect on the consolidated financial position, results of operations, or cash flows. However, the outcome of such matters is inherently unpredictable and subject to significant uncertainties. NOTE 18 - Segment Reporting The Company operates in four reportable segments as follows: North America Modular Solutions ("NA Modular"), North America Storage Solutions ("NA Storage"), United Kingdom Storage Solutions ("UK Storage") and Tank and Pump Solutions ("Tank and Pump"). Total assets for each reportable segment are not available because the Company utilizes a centralized approach to working capital management. Transactions between reportable segments are not significant. In connection with the Merger, the Company determined its reportable segments as discussed above and retrospectively adjusted prior year's presentation to conform to the current presentation of reportable segments. The Company defines EBITDA as net income (loss) plus interest (income) expense, income tax (benefit) expense, depreciation and amortization. The Company reflects the further adjustments to EBITDA ("Adjusted EBITDA") to exclude certain non-cash items and the effect of what the Company considers transactions or events not related to its core business operations. The Chief Operating Decision Maker ("CODM") evaluates business segment performance utilizing Adjusted EBITDA as shown in the reconciliation of the Company’s consolidated net income (loss) to Adjusted EBITDA below. Management believes that evaluating segment performance excluding such items is meaningful because it provides insight with respect to the intrinsic operating results of the Company. The Company also regularly evaluates gross profit by segment to assist in the assessment of its operational performance. The Company considers Adjusted EBITDA to be the more important metric because it more fully captures the business performance of the segments, inclusive of indirect costs. Reportable Segments The following tables set forth certain information regarding each of the Company’s reportable segments fo r the three and nine months ended September 30, 2021 and 2020, respectively. Consistent with the financial statements, the segment results do not include Mobile Mini's operations prior to July 1, 2020. Please refer to the Management Discussion & Analysis of Financial Condition and Results of Operations included in this document, for pro forma results inclusive of Mobile Mini's financial results for periods prior to the Merger date. 28 Three Months Ended September 30, 2021 (in thousands) NA Modular NA Storage UK Storage Tank and Pump Unallocated Costs Total Revenues: Leasing and services revenue: Leasing $ 219,736 $ 101,172 $ 21,691 $ 20,797 $ 363,396 Delivery and installation 58,017 28,330 5,563 7,789 99,699 Sales revenue: New units 13,483 1,307 580 490 15,860 Rental units 7,815 3,088 265 429 11,597 Total revenues 299,051 133,897 28,099 29,505 490,552 Costs: Cost of leasing and services: Leasing 59,260 14,393 4,314 4,481 82,448 Delivery and installation 51,655 19,328 3,238 6,770 80,991 Cost of sales: New units 10,080 727 368 324 11,499 Rental units 3,636 1,587 245 135 5,603 Depreciation of rental equipment 46,566 5,366 1,058 3,472 56,462 Gross profit $ 127,854 $ 92,496 $ 18,876 $ 14,323 $ 253,549 Other selected data: Adjusted EBITDA $ 106,825 $ 59,123 $ 13,255 $ 10,946 $ — $ 190,149 Selling, general and administrative expense (a) $ 66,529 $ 38,740 $ 6,680 $ 6,955 $ 14,823 $ 133,727 Purchases of rental equipment and refurbishments $ 31,789 $ 11,920 $ 11,649 $ 5,016 $ — $ 60,374 (a) Includes both SG&A expense and Transaction costs from the condensed consolidated statement of operations. 29 Three Months Ended September 30, 2020 (in thousands) NA Modular NA Storage UK Storage Tank and Pump Unallocated Costs Total Revenues: Leasing and services revenue: Leasing $ 192,243 $ 77,041 $ 15,399 $ 15,399 $ 300,082 Delivery and installation 52,144 20,868 4,744 6,938 84,694 Sales revenue: New units 14,024 3,783 1,011 542 19,360 Rental units 9,456 2,801 499 423 13,179 Total revenues 267,867 104,493 21,653 23,302 417,315 Costs: Cost of leasing and services: Leasing 49,516 9,260 3,382 2,630 64,788 Delivery and installation 44,465 13,120 3,240 5,529 66,354 Cost of sales: New units 9,484 2,351 726 374 12,935 Rental units 6,356 1,930 466 85 8,837 Depreciation of rental equipment 45,967 4,448 1,168 3,254 54,837 Gross profit $ 112,079 $ 73,384 $ 12,671 $ 11,430 $ 209,564 Other selected data: Adjusted EBITDA $ 100,281 $ 46,465 $ 8,306 $ 8,507 $ — $ 163,559 Selling, general and administrative expense (a) $ 58,935 $ 31,368 $ 5,533 $ 6,177 $ 62,257 $ 164,270 Purchases of rental equipment and refurbishments $ 34,249 $ 7,234 $ 677 $ 431 $ — $ 42,591 (a) Includes both SG&A expense and Transaction costs from the condensed consolidated statement of operations. 30 Nine Months Ended September 30, 2021 (in thousands) NA Modular NA Storage UK Storage Tank and Pump Unallocated Costs Total Revenues: Leasing and services revenue: Leasing $ 636,979 $ 267,489 $ 61,426 $ 56,343 $ 1,022,237 Delivery and installation 161,548 73,214 18,152 21,969 274,883 Sales revenue: New units 27,814 5,355 2,746 1,908 37,823 Rental units 28,316 11,381 1,214 1,123 42,034 Total revenues 854,657 357,439 83,538 81,343 1,376,977 Costs: Cost of leasing and services: Leasing 172,108 37,300 13,339 12,628 235,375 Delivery and installation 147,514 51,811 10,638 18,317 228,280 Cost of sales: New units 19,330 3,190 1,802 1,338 25,660 Rental units 14,611 6,667 1,163 429 22,870 Depreciation of rental equipment 144,102 17,635 3,290 10,026 175,053 Gross profit $ 356,992 $ 240,836 $ 53,306 $ 38,605 $ 689,739 Other selected data: Adjusted EBITDA $ 307,741 $ 154,971 $ 36,647 $ 29,870 $ — $ 529,229 Selling, general and administrative expense (a) $ 192,285 $ 103,501 $ 19,949 $ 18,868 $ 38,840 $ 373,443 Purchases of rental equipment and refurbishments $ 120,288 $ 24,165 $ 22,645 $ 11,093 $ — $ 178,191 (a) Includes both SG&A expense and Transaction costs from the consolidated statement of operations. 31 Nine Months Ended September 30, 2020 (in thousands) NA Modular NA Storage UK Storage Tank and Pump Unallocated Costs Total Revenues: Leasing and services revenue: Leasing $ 570,738 $ 77,041 $ 15,399 $ 15,399 $ 678,577 Delivery and installation 154,854 20,868 4,744 6,938 187,404 Sales revenue: New units 33,400 3,783 1,011 542 38,736 Rental units 21,558 2,801 499 423 25,281 Total revenues 780,550 104,493 21,653 23,302 929,998 Costs: Cost of leasing and services: Leasing 147,072 9,260 3,382 2,630 162,344 Delivery and installation 131,853 13,120 3,240 5,529 153,742 Cost of sales: New units 22,018 2,351 726 374 25,469 Rental units 13,965 1,930 466 85 16,446 Depreciation of rental equipment 137,409 4,448 1,168 3,254 146,279 Gross profit $ 328,233 $ 73,384 $ 12,671 $ 11,430 $ 425,718 Other selected data: Adjusted EBITDA $ 287,345 $ 46,465 $ 8,306 $ 8,507 $ — $ 350,623 Selling, general and administrative expense (a) $ 180,791 $ 31,368 $ 5,533 $ 6,177 $ 80,641 $ 304,510 Purchases of rental equipment and refurbishments $ 113,931 $ 7,234 $ 677 $ 431 $ — $ 122,273 (a) Includes both SG&A expense and Transaction costs from the condensed consolidated statement of operations. 32 The following tables present a reconciliation of the Company’s income (loss) from operations to Adjusted EBITDA for the three and nine months ended September 30, 2021 and 2020, respectively: Three Months Ended September 30, Nine Months Ended September 30, (in thousands) 2021 2020 2021 2020 Net income (loss) $ 61,103 $ ( 6,051 ) $ 85,921 $ 71,474 Income tax expense (benefit) 6,644 ( 66,675 ) 35,953 ( 66,170 ) Loss on extinguishment of debt — 42,401 5,999 42,401 Fair value loss (gain) on common stock warrant liabilities — 22,303 26,597 ( 46,063 ) Interest expense 29,201 33,034 88,377 89,810 Depreciation and amortization 75,276 71,704 233,813 169,103 Currency losses (gains), net 127 ( 371 ) 196 147 Restructuring costs, lease impairment expense and other related charges 2,457 4,798 14,286 8,542 Transaction costs 303 52,191 1,147 63,241 Integration costs 8,247 7,083 23,211 10,921 Stock compensation expense 6,259 2,944 14,480 6,958 Other 532 198 ( 751 ) 259 Adjusted EBITDA $ 190,149 $ 163,559 $ 529,229 $ 350,623 Included in restructuring costs for the three and nine months ended September 30, 2021 was expense of approximately $ 1.4 million and $ 7.2 million, respectively, recognized as a result of the modification of certain equity awards associated with the Transition, Separation and Release Agreement entered into on February 25, 2021 with the Company's former President and Chief Operating Officer. For the nine months ended September 30, 2021, stock-based compensation expense reported in the Statement of Cash Flows included these charges. NOTE 19 - Earnings (Loss) Per Share Basic earnings (loss) per share (“EPS”) is calculated by dividing net income (loss) attributable to WillScot Mobile Mini by the weighted average number of shares of Common Stock outstanding during the period. The shares of Common Stock issued as a result of the vesting of RSUs and RSAs as well as the exercise of stock options or redemption of warrants were included in EPS based on the weighted average number of days in which they were vested and outstanding during the period. Prior to June 30, 2020, the Company had shares of Class B Common Stock which had no rights to dividends or distributions made by the Company and, in turn, were excluded from the EPS calculation. On June 30, 2020, the Sapphire Exchange was completed, and all shares of Class B Common Stock were cancelled, and Sapphire Holdings received 10,641,182 shares of Common Stock. Diluted EPS is computed similarly to basic EPS, except that it includes the potential dilution that would occur if dilutive securities were exercised. Effects of potentially dilutive securities are presented only in periods in which they are dilutive. When liability-classified warrants are in the money and the impact of their inclusion on diluted EPS is dilutive, diluted EPS also assumes share settlement of such instruments through an adjustment to net income available to common stockholders for the fair value (gain) loss on common stock warrant liabilities and inclusion of the number of dilutive shares in the denominator. 33 The following table reconciles net income attributable to WillScot Mobile Mini common shareholders and the weighted average shares outstanding for the basic calculation to the weighted average shares outstanding for the diluted calculation: Three Months Ended Nine Months Ended September 30 September 30 (in thousands) 2021 2020 2021 2020 Numerator: Net income (loss) attributable to common shareholders - basic $ 61,103 $ ( 6,051 ) $ 85,921 $ 70,261 Fair value gain on common stock warrant liabilities — — — ( 47,718 ) Net income (loss) attributable to common shareholders - dilutive $ 61,103 $ ( 6,051 ) $ 85,921 $ 22,543 Denominator: Weighted average Common Shares outstanding - basic 225,998 226,650 227,558 149,283 Dilutive effect of shares outstanding Warrants 3,722 — 4,112 2,122 RSAs 4 — 25 31 Time-based RSUs 476 — 573 314 Performance-based RSUs 618 — 751 272 Stock Options 1,050 — 1,066 411 Weighted average Common Shares outstanding - dilutive 231,868 226,650 234,085 152,433 The following potential common shares were excluded from the computation of dilutive EPS because their effect would have been anti-dilutive: Three Months Ended Nine Months Ended September 30 September 30 (in thousands) 2021 2020 2021 2020 Warrants — 18,758 — — RSAs — 57 — — Time-based RSUs — 1,352 — — Performance-based RSUs — 184 — — Stock Options — 7,630 — — 34 NOTE 20 - Related Parties Related party balances included in the Company’s condensed consolidated balance sheets at September 30, 2021 and December 31, 2020, consisted of the following: (in thousands) Financial Statement Line Item September 30, 2021 December 31, 2020 Receivables due from affiliates Trade receivables, net of allowances for credit losses $ 433 $ 30 Amounts due to affiliates Accrued expenses ( 392 ) ( 461 ) Total related party liabilities, net $ 41 $ ( 431 ) Related party transactions included in the Company’s condensed consolidated statements of operations for the three and nine months ended September 30, 2021 and 2020, respectively, consisted of the following: Three Months Ended September 30, Nine Months Ended September 30, (in thousands) Financial Statement Line Item 2021 2020 2021 2020 Leasing revenue from related parties Leasing revenue $ 541 $ 504 $ 706 $ 1,330 Consulting expense to related party Selling, general & administrative expense ( 1,511 ) ( 1,738 ) ( 3,660 ) ( 4,733 ) Total related party expense, net $ ( 970 ) $ ( 1,234 ) $ ( 2,954 ) $ ( 3,403 ) On June 30, 2020, the Company completed the Sapphire Exchange, whereby Sapphire Holdings, an affiliate of TDR Capital, exchanged shares of Class B Common Stock for 10,641,182 shares of Class A Common Stock. As a result of the Sapphire Exchange, all issued and outstanding shares of WillScot’s Class B Common Stock were automatically canceled for no consideration and the existing exchange agreement was automatically terminated. On August 22, 2018, WillScot’s principal stockholder, Sapphire Holdings, entered into a margin loan (the "Margin Loan") under which all of its shares of WillScot Mobile Mini Common Stock were pledged to secure borrowings of up to $ 125.0 million under the loan agreement. WillScot Mobile Mini was not a party to the loan agreement and had no obligations thereunder . On June 29, 2021, Sapphire Holdings repaid all outstanding amounts under the Margin Loan with proceeds from the sale of certain shares of WillScot Mobile Mini and no WillScot Mobile Mini shares remain pledged thereunder. On March 1, 2021, the Company repurchased from Sapphire Holdings and cancelled 2,750,000 shares of its Common Stock. On June 29, 2021, the Company repurchased from Sapphire Holdings and cancelled an additional 3,900,000 shares of its Common Stock. Following the reduction in Sapphire Holdings’ beneficial ownership of Common Stock resulting from the foregoing repurchases and the underwritten secondary offering by Sapphire Holdings of 16,100,000 shares of Common Stock on June 25, 2021, Gary Lindsay resigned his position as a member of the WillScot Mobile Mini board of directors pursuant to the terms of the shareholders agreement dated July 1, 2020 between Sapphire Holdings, TDR Capital II Holdings L.P., TDR Capital, L.L.P. and WillScot Mobile Mini. On September 9, 2021, the Company repurchased from Sapphire Holdings and cancelled an additional 2,379,839 shares of its common stock, and Sapphire Holdings sold its remaining 21,410,019 shares through an underwritten secondary offering. Following the reduction in Sapphire Holdings' beneficial ownership of Common Stock resulting from the foregoing repurchase and secondary offering, Stephen Robertson resigned his position as a member of the Willscot Mobile Mini board of directors pursuant to the aforementioned shareholders agreement dated July 1, 2020, and Sapphire Holdings, TDR Capital II Holdings L.P. and TDR Capital, L.L.P. ceased to be related parties of WillScot Mobile Mini. The Company purchased rental equipment from former related party affiliates for $ 1.0 million for the three months ended September 30, 2020. The Company purchased rental equipment from related party affiliates of $ 2.5 million and $ 2.6 million for the nine months ended September 30, 2021 and 2020, respectively . 35