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Item 8. Financial Statements and Supplementary Data

2023-02-22 compared with 2022-02-25 · 544 added, 509 removed, 1051 unchanged (50% of the section changed)

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We have audited the accompanying consolidated balance sheets of WillScot Mobile Mini Holdings Corp.

(the Company) as of December 31, 2021 and 2020, the related consolidated statements of operations, comprehensive income (loss) , changes in equity and cash flows for each of the three years in the period ended December 31, 2021, and the related notes (collectively referred to as the “consolidated financial statements”).

(the Company) as of December 31, 2022 and 2021, the related consolidated statements of operations, comprehensive income , changes in equity and cash flows for each of the three years in the period ended December 31, 2022, and the related notes (collectively referred to as the “consolidated financial statements”).

In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2022 and 2021, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2022, in conformity with U.S.

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For example, we compared the days sales outstanding, customer concentration, and days past due as of December 31, 2022, to the Company’s historical experience to evaluate the relevancy of the historical data utilized to estimate the allowance for credit losses.

We also performed a sensitivity analysis of the significant assumptions to evaluate the change in the allowance that would result from changes in assumptions.

We also performed sensitivity analyses of the significant assumptions to evaluate the change in the allowance that would result from changes in assumptions.

/s/ Ernst & Young LLP

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Prepaid expenses and other current assets 31,635 34,935

Assets held for sale 954 12,004

Assets held for sale - current 31,220 60,632

Total current assets 521,041 483,040

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Other non-current assets 6,683 8,138

Assets held for sale - non-current 268,022 571,217

Total long-term assets 5,306,610 5,290,559

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Current portion of long-term debt 13,324 11,968

Liabilities held for sale - current 19,095 45,352

Total current liabilities 561,942 517,645

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Operating lease liabilities - non-current 169,618 169,729

Common stock warrant liabilities — 77,404

Other non-current liabilities 18,537 15,737

Liabilities held for sale - non-current 47,759 96,220

Long-term liabilities 3,700,409 3,259,191

Total liabilities 4,262,351 3,776,836

Commitments and contingencies (see Note 17)

Preferred Stock:

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Other depreciation and amortization 62,380 61,777 35,181

Impairment losses on long-lived assets — — 2,848

Lease impairment expense and other related charges 254 2,888 4,876

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Currency losses (gains), net 886 427 ( 257 )

Other expense (income), net 1,780 ( 1,718 ) ( 2,200 )

Other (income) expense, net ( 6,673 ) 1,715 ( 1,722 )

Operating income 511,482 300,377 161,792

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Loss on extinguishment of debt — 5,999 42,401

Income (loss) before income tax 209,690 23,889 ( 123,356 )

Income tax expense (benefit) 49,546 ( 51,451 ) ( 2,191 )

Net income (loss) 160,144 75,340 ( 121,165 )

Net income (loss) attributable to non-controlling interest, net of tax — 1,213 ( 421 )

Net income (loss) attributable to WillScot Mobile Mini common shareholders $ 160,144 $ 74,127 $ ( 120,744 )

Earnings (loss) per share attributable to WillScot Mobile Mini common shareholders:

Income from continuing operations before income tax 365,204 151,423 3,533

Income tax expense (benefit) from continuing operations 88,863 36,528 ( 56,040 )

Income from continuing operations 276,341 114,895 59,573

Income from continuing operations attributable to non-controlling interest, net of tax — — 1,213

Income from continuing operations attributable to WillScot Mobile Mini common shareholders 276,341 114,895 58,360

Discontinued operations:

Income from discontinued operations before income tax 63,468 58,267 20,356

Income tax expense from discontinued operations 35,725 13,018 4,589

Gain on sale of discontinued operations 35,456 — —

Income from discontinued operations 63,199 45,249 15,767

Net income $ 339,540 $ 160,144 $ 74,127

Earnings per share from continuing operations attributable to WillScot Mobile Mini common shareholders:

Basic $ 1.27 $ 0.51 $ 0.35

Diluted $ 1.25 $ 0.49 $ 0.16

Earnings per share from discontinued operations attributable to WillScot Mobile Mini common shareholders:

Basic $ 0.30 $ 0.20 $ 0.09

Diluted $ 0.28 $ 0.20 $ 0.09

Earnings per share attributable to WillScot Mobile Mini common shareholders:

Basic $ 1.57 $ 0.71 $ 0.44

Diluted $ 1.53 $ 0.69 $ 0.25

Weighted average shares:

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WillScot Mobile Mini Holdings Corp.

Consolidated Statements of Comprehensive Income (Loss)

Consolidated Statements of Comprehensive Income

(in thousands)

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2022 2021 2020

Net income (loss) $ 160,144 $ 75,340 $ ( 121,165 )

Net income $ 339,540 $ 160,144 $ 75,340

Other comprehensive income:

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Comprehensive income (loss) 298,489 168,280 101,995

Comprehensive (loss) income attributable to non-controlling interest — ( 672 ) 105

Total comprehensive income (loss) attributable to WillScot Mobile Mini $ 168,280 $ 102,667 $ ( 115,493 )

Comprehensive loss attributable to non-controlling interest — — ( 672 )

Total comprehensive income attributable to WillScot Mobile Mini $ 298,489 $ 168,280 $ 102,667

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

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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 loss — — — — — — ( 120,744 ) ( 120,744 ) ( 421 ) ( 121,165 )

Other comprehensive income — — — — — 5,251 — 5,251 526 5,777

Adoption of new accounting standards — — — — — — 5,067 5,067 503 5,570

Stock-based compensation and issuance of Common Stock from vesting 229 — — — 6,032 — — 6,032 — 6,032

Issuance of Common Stock from the exercise of options and warrants 81 — — — 1,338 — — 1,338 — 1,338

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 — — — — — — 74,127 74,127 1,213 75,340

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Balance at December 31, 2021 223,940 22 — — 3,616,902 ( 29,071 ) ( 1,591,090 ) 1,996,763 — 1,996,763

Net income — — — — — — 339,540 339,540 — 339,540

Other comprehensive loss — — — — — ( 41,051 ) — ( 41,051 ) — ( 41,051 )

Stock-based compensation and issuance of Common Stock from vesting

594 — — — 29,613 — — 29,613 — 29,613

Repurchase and cancellation of Common Stock and warrants ( 19,836 ) ( 2 ) — — ( 756,906 ) — — ( 756,908 ) — ( 756,908 )

Issuance of Common Stock from the exercise of options and warrants 3,254 1 — — 11,230 — — 11,231 — 11,231

Withholding taxes on net share settlement of stock-based compensation and option exercises — — — — ( 13,888 ) — — ( 13,888 ) — ( 13,888 )

Balance at December 31, 2022 207,952 $ 21 — $ — $ 2,886,951 $ ( 70,122 ) $ ( 1,251,550 ) $ 1,565,300 $ — $ 1,565,300

(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 .

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Operating activities:

Net income (loss) $ 160,144 $ 75,340 $ ( 121,165 )

Adjustments to reconcile net income (loss) to net cash provided by operating activities:

Net income $ 339,540 $ 160,144 $ 75,340

Adjustments to reconcile net income to net cash provided by operating activities:

Depreciation and amortization 343,507 318,202 246,948

Provision for credit losses 34,835 38,191 32,593

Impairment losses on long-lived assets — — 2,848

Gain on sale of discontinued operations ( 35,456 ) — —

Impairment losses on right of use assets — — 57

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Deferred income tax expense (benefit) 100,849 36,563 ( 55,155 )

Unrealized currency losses (gains), net 295 424 ( 745 )

Unrealized currency losses, net 753 295 424

Other 4,081 — —

Changes in operating assets and liabilities, net of effect of businesses acquired:

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Operating lease assets and liabilities 856 473 789

Accrued interest 217 ( 11,877 ) ( 4,217 )

Accounts payable and other accrued expenses 9,443 27,525 ( 27,923 )

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Investing activities:

Proceeds from sale of discontinued operations 325,611 — —

Acquisitions, net of cash acquired ( 220,620 ) ( 147,172 ) 17,173

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Financing activities:

Receipts from issuance of Common Stock from the exercise of options 7,484 10,616 921

Repurchase and cancellation of Common Stock and warrants ( 751,795 ) ( 363,586 ) ( 21,777 )

Receipts from issuance of Common Stock from the exercise of options 11,230 7,484 10,616

Taxes paid on employee stock awards ( 13,888 ) ( 7,177 ) ( 13,473 )

Payment of Common Stock issuance costs — — ( 4,222 )

Receipts from borrowings 964,308 728,677 2,786,793

Payment of financing costs — ( 65,475 ) ( 2,623 )

Repayment of borrowings ( 588,808 ) ( 512,181 ) ( 2,808,370 )

Payment of debt extinguishment premium costs ( 3,705 ) ( 34,610 ) ( 7,152 )

Payment of financing costs ( 8,187 ) — ( 65,475 )

Principal payments on finance lease obligations ( 42,228 ) ( 17,399 ) ( 8,440 )

Taxes paid on employee stock awards ( 7,177 ) ( 13,473 ) ( 654 )

Payment of debt extinguishment premium costs — ( 3,705 ) ( 34,610 )

Net cash used in financing activities ( 429,368 ) ( 167,887 ) ( 158,958 )

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Interest paid $ 130,463 $ 103,795 $ 118,519

$ 103,795 $ 118,519 $ 118,726

Income taxes paid (refunded), net $ 9,855 $ 4,234 $ ( 1,148 )

Income taxes paid, net $ 25,092 $ 9,855 $ 4,234

Capital expenditures accrued or payable $ 21,052 $ 27,667 $ 23,553

1 Includes $ 11,992 , $ 9,779 and $ 3,143 of payments related to the interest rate swap for the years ended December 31, 2021, 2020 and 2019, respectively.

Reconciliation of cash and cash equivalents to the consolidated balance sheet:

Cash and cash equivalents of continuing operations $ 7,390 $ 6,393 $ 5,635

Cash and cash equivalents included in assets held for sale 10,384 6,306 19,302

Total cash and cash equivalents shown in the consolidated statement of cash flows $ 17,774 $ 12,699 $ 24,937

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

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WillScot Mobile Mini Holdings Corp.

(“WillScot Mobile Mini” and, together with its subsidiaries, the “Company”) is a leading business services provider specializing in innovative flexible work 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.

WillScot Corporation, a Delaware corporation (“WillScot”), entered into an Agreement and Plan of Merger, dated as of March 1, 2020, as amended on May 28, 2020 (as so amended, the “Merger Agreement”), by and among WillScot, Mobile Mini, Inc.

(“Mobile Mini”), and Picasso Merger Sub, Inc., a wholly-owned subsidiary of WillScot (“Merger Sub”).

On July 1, 2020, Merger Sub merged with and into Mobile Mini (the “Merger”).

At the effective time of the Merger, the separate corporate existence of Merger Sub ceased, and Mobile Mini continued its existence as the surviving corporation in the Merger and a wholly-owned subsidiary of WillScot.

As a result of the Merger, each issued and outstanding share of Mobile Mini Common Stock, par value $ 0.01 per share (other than treasury shares held by Mobile Mini), was converted automatically into the right to receive 2.405 shares of WillScot’s Class A Common Stock, par value $ 0.0001 per share (the “WillScot Class A Common Stock”), and cash in lieu of any fractional shares.

The Company leases, sells, delivers and installs mobile solutions and storage products through an integrated network of branch locations that spans North America.

On July 1, 2020, a wholly-owned subsidiary of WillScot Corporation, a Delaware corporation, merged with and into Mobile Mini, Inc.

(the “Merger”).

At the effective time of the Merger, Mobile Mini, Inc.

("Mobile Mini") continued its existence as the surviving corporation in the Merger and a wholly-owned subsidiary of WillScot Corporation (“WillScot”).

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”).

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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 on July 1, 2020.

As the Merger closed on July 1, 2020 the preparation of financial statements in accordance with US Generally Accepted Accounting Principles (“GAAP”) requires that our 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

The consolidated financial statements were prepared in conformity with GAAP.

Principles of Consolidation

On September 30, 2022, the Company completed the sale of its former Tank and Pump Solutions ("Tank and Pump") segment.

On December 12, 2022, the Company entered into a Stock Purchase Agreement to sell its United Kingdom Storage Solutions ("UK Storage Solutions") segment.

The Company completed the sale of the UK Storage Solutions segment on January 31, 2023.

The consolidated financial statements present the historical financial results of the former Tank and Pump segment and the UK Storage Solutions segment as income from discontinued operations for all periods presented and the carrying values of the former Tank and Pump segment and the UK Storage Solutions segment assets and liabilities within assets and liabilities held for sale for reporting periods prior to the segments' disposals.

See Note 3 for further discussion.

Basis of Presentation and Principles of Consolidation

The consolidated financial statements were prepared in conformity with accounting principles generally accepted in the US (“GAAP”).

The 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.

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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 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 after a defined period of dormancy.

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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.

The allowance for credit losses reflects 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 is sensitive to 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.

In accordance with the adoption of ASC 842, effective January 1, 2019, and the adoption of ASU 2016-13, Financial Instruments - Credit Losses (Topic 326) ("ASC 326"), effective January 1, 2020, specifically identifiable lease revenue receivables and sales receivables not deemed probable of collection are recorded as a reduction of revenue.

Specifically identifiable lease revenue receivables and sales receivables not deemed probable of collection are recorded as a reduction of revenue.

The remaining provision for credit losses is recorded as selling, general and administrative expenses.

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Balance at end of period $ 57,048 $ 45,773 $ 28,105

(a) For the years ended December 31, 2021, 2020 and 2019, the provision for credit losses includes $ 19.8 million, $ 18.0 million and $ 10.0 million, respectively, recorded as a reduction to revenue for the provision of specific receivables whose collection is not considered probable.

(a) For the years ended December 31, 2022, 2021 and 2020, the provision for credit losses included $ 23.7 million, $ 19.8 million and $ 18.3 million, respectively, recorded as a reduction to revenue for the provision of specific receivables whose collection was not considered probable.

The Company’s trade accounts receivable subject the Company to potential concentrations of credit risk.

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Rental Equipment

Rental equipment is comprised of modular space and portable storage units held for rent or on rent to customers, tank and pump solutions products, which consist primarily of liquid and solid containment units, pumps and filtration equipment, and value-added products and services (“VAPS”) which are in use or available to be used by customers.

Rental equipment is comprised of modular space and portable storage units held for rent or on rent to customers and value-added products and services (“VAPS”) which are in use or available to be used by customers.

Rental equipment is measured at cost less accumulated depreciation and impairment losses.

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Costs of improvements and conversions of rental equipment are capitalized when such costs extend the useful life of the equipment or increase the rental value of the unit.

Costs incurred for equipment to meet a particular customer specification are capitalized and depreciated over the lease term taking in consideration the residual value of the asset.

Costs incurred for equipment to meet a particular customer specification are capitalized and depreciated over the lease term taking into consideration the residual value of the asset.

Maintenance and repair costs are expensed as incurred.

Depreciation is generally computed using the straight-line method over estimated useful lives, as follows:

Depreciation is computed using the straight-line method over estimated useful lives, as follows:

Estimated Useful Life Residual Value

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Portable storage units 30 years

Tank and pump equipment 7 - 25 years

VAPS and other related rental equipment 1 - 8 years

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Maintenance and repair costs are expensed as incurred.

Depreciation is generally computed using the straight-line method over estimated useful lives as follows:

Depreciation is computed using the straight-line method over estimated useful lives as follows:

Estimated Useful Life

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Amortization expense is calculated on a straight-line basis over the contractual term of the cloud computing arrangement and recorded as selling, general and administrative expense.

Goodwill and Annual Goodwill Impairment Test

For acquired businesses, the Company records assets acquired and liabilities assumed at their estimated fair values on the respective acquisition dates.

Based on these values, the excess purchase price over the fair value of the net assets acquired is recorded as goodwill.

Purchase Accounting

The Company accounts for acquisitions of businesses under the acquisition method.

Under the acquisition method of accounting, the Company records assets acquired and liabilities assumed at their respective estimated fair values on the date of acquisition.

Goodwill is measured as the excess of the fair value of the consideration transferred over the fair value of the identifiable net assets and is assigned to the Company's reporting units that are expected to benefit from the acquisition.

When appropriate, our estimates of the fair values of assets and liabilities acquired include assistance from independent third-party valuation firms.

Valuations are finalized as soon as practicable, but not later than one year from the acquisition date.

Any subsequent changes to purchase price allocations result in a corresponding adjustment to goodwill.

Transaction costs are expensed in the acquisition of a business.

Long-lived assets (principally rental equipment), goodwill and other intangible assets generally represent the largest components of our acquisitions.

Rental equipment is valued utilizing a replacement cost approach.

Intangible assets are recognized at their estimated fair values as of the date of acquisition and generally consist of customer relationships and trade names.

Determination of the estimated fair value of intangible assets requires judgment.

The estimated fair value of customer relationships is determined based on estimates and judgments regarding discounted future after-tax earnings and cash flows arising from lease renewals and new lease arrangements expected from customer relationships.

The fair value of trade name intangible assets is determined utilizing the relief from royalty method.

Under this form of the income approach, a royalty rate based on observed market royalties is applied to projected revenue supporting the trade name and discounted to present value.

Acquisitions that do not meet the definition of a business are accounted for as asset acquisitions.

An asset acquisition is accounted for by allocating the cost of the acquisition to the individual assets acquired and liabilities assumed on a relative fair value basis.

Goodwill is not recognized in an asset acquisition.

Any consideration in excess of net assets acquired is allocated to qualifying acquired assets on a relative fair value basis.

The Company measures the fair value of assets acquired utilizing observable market transaction data for comparable assets or recent purchase prices.

Transaction costs are considered a component of the cost of an asset acquisition.

Evaluation of Goodwill Impairment

For acquired businesses, the Company records assets acquired and liabilities assumed at their respective estimated fair values on the date of acquisition.

The Company performs its annual impairment test of goodwill at the reporting unit level as of October 1, as well as during any reporting period in which events or changes in circumstances occur that, in management’s judgment, may constitute triggering events under ASC 350-20, Intangibles – Goodwill and Other, Testing Goodwill for Impairment .

Generally, reporting units are at the operating segment level or one level below the operating segment (the component level), if discrete financial information is prepared and regularly reviewed by segment management.

Goodwill acquired in a business combination is assigned to each of the Company’s reporting units that are expected to benefit from the combination.

The Company performs its annual impairment test of goodwill as of October 1 at the reporting unit level, as well as during any reporting period in which events or changes in circumstances occur that, in management’s judgment, may constitute triggering events under ASC 350-20, Intangibles – Goodwill and Other, Testing Goodwill for Impairment .

The Company performs its assessment of goodwill utilizing either a qualitative or quantitative impairment test.

The qualitative impairment test assesses company-specific, industry, market and general economic factors to determine whether it is more likely than not that the fair value of the reporting unit is less than its carrying amount.

The qualitative

impairment test assesses company-specific, industry, market and general economic factors to determine whether it is more likely than not that the fair value of the reporting unit is less than its carrying amount.

If the Company concludes that it is more likely than not that the fair value of the reporting unit is less than its carrying amount, or elects not to use the qualitative impairment test, a quantitative impairment test is performed.

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The Company’s indefinite-lived intangible assets consist of the Williams Scotsman and Mobile Mini trade names.

The Company performs its assessment of indefinite-lived intangible assets utilizing

either a qualitative or quantitative impairment test.

The Company performs its assessment of indefinite-lived intangible assets utilizing either a qualitative or quantitative impairment test.

When utilizing a quantitative impairment test, the Company calculates fair value using a relief-from-royalty method.

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Amortization is recognized in profit or loss over the estimated useful lives of the intangible asset.

Purchase Accounting

The Company accounts for acquisitions of businesses under the acquisition method.

Under the acquisition method of accounting, the Company records assets acquired and liabilities assumed at their estimated fair value on the date of acquisition.

Goodwill is measured as the excess of the fair value of the consideration transferred over the fair value of the identifiable net assets.