BUSINESS SUMMARY. Fleet Breakdown by Gross Book Value. Adjusted Gross Profit Breakdown

Transcription

1

2 BUSINESS SUMMARY Overview Algeco Scotsman is the leading global business services provider focused on modular space, secure portable storage solutions, and remote workforce accommodation management with a lease fleet consisting of approximately 303,000 modular units and 8,000 fully managed remote accommodation rooms. We have approximately 260 branch and depot locations and operate in 37 countries across five continents. We lease our modular space and portable storage units to customers in diverse end-markets, including energy and natural resources, commercial, industrial, manufacturing, residential and heavy construction, government and education. To enhance our product and service offerings and our gross profit margin, we offer delivery, installation and removal of our lease units and other associated add-ons and value-added products and services, such as damage waivers and extended warranties, and the rental of steps, ramps, furniture, fire extinguishers, air conditioning and wireless internet access points. We provide remote facility management solutions to customers working in remote environments through turnkey lodging, catering, transportation, security and logistical services. We also complement our core leasing business by selling both new and used units, allowing us to leverage our scale, achieve purchasing benefits and lower the average age of our lease fleet. Our modular space and remote accommodation products include offices, classrooms, accommodation/sleeper units, work camp products, special purpose temporary spaces and other self-sufficient multi-unit modular structures, which offer our customers flexible, low cost, high quality and timely solutions to meet their space needs, whether short-, medium- or long-term. For the year ended December 31, 2013, we leased or sold our modular space, portable storage, and remote accommodation units to approximately 70,000 customers, with our top 20 customers accounting for approximately 20% of our leasing and services revenue. We have operations around the globe, serving key markets within EMEA, North America, Asia Pacific and Latin America. In February, 2013, we completed the acquisition of Target Logistics ( Target ), a leading provider of full-service remote workforce accommodation solutions in the United States which further expanded our end-market diversification. In October 2012, we completed the acquisition of Ausco and its subsidiary Portacom, the leading providers of modular space products in Australia and New Zealand, respectively. Our geographic scale and our geographic and end-market diversification increase the stability of our cash flows and provide significant operational advantages, including purchasing efficiencies and the ability to optimize fleet utilization. Our size also allows us to opportunistically transfer our fleet to areas of higher or increasing customer demand to optimize our fleet utilization and redeploy excess fleet to developing markets to extend its useful life. Our presence in developing markets enhances our growth profile and presents us with additional opportunities to expand through value-creating in-market acquisitions. The following charts illustrate the breakdown of our fleet s gross book value between modular space, portable storage, and fully managed remote accommodation products as of December 31, 2013 and our adjusted gross profit (gross profit excluding depreciation on rental equipment) breakdown between our core leasing and services business and our sales business, as well as our revenue mix by geography and end-market. Fleet Breakdown by Gross Book Value Adjusted Gross Profit Breakdown Gross Book Value: $3,235 million Total Adjusted Gross Profit: $892 million 1

3 Revenue Mix by Geography Revenue Mix by End-Market Revenue: $1,799 million Our core leasing model is characterized by recurring revenue driven by long-term leases on long-lived assets that require minimal maintenance capital expenditures. Our average lease duration is approximately 22 months in EMEA, 33 months in North America and 24 months in Asia Pacific. The global average age of our fleet is less than ten years. We typically recoup our initial investment in purchased units in less than three years, which allows us to obtain significant value over the economic life of our units, which can exceed 20 years. The relatively young average age of our fleet compared to its economic life provides us with financial flexibility, allowing us to maintain our cash flow generation during economic downturns by temporarily reducing capital expenditures, without significantly impairing our fleet s value. Our modular space fleet consists of approximately 256,000 units with a gross book value of approximately $2.8 billion as of December 31, Our fleet is generally comprised of standardized, versatile products that can be configured to meet a wide variety of customer needs. All of our modular space units are intended to provide convenient, comfortable space for occupants at a location of their choosing. On a global basis, our next largest competitor is less than a third of our size. We believe that our global footprint and substantial fleet size provide us with significant competitive advantages. In addition, our scale enables us to purchase units on favorable terms or achieve manufacturing scale benefits, providing incremental margin to both our leasing and sales businesses. We continue to seek opportunities to further optimize our profitability and lease economics, including through ongoing procurement and lean operating initiatives. For example, our global procurement and lean organizations coordinate activities and leverage best practices throughout our company in order to optimize procurement and operational productivity. Our remote accommodations business is comprised of approximately 8,000 fully managed rooms, with a gross book value of approximately $0.3 billion as of December 31, Our remote accommodations business provides living and sleeping space solutions, which are typically utilized for workforces in remote locations. The majority of these units offer full suite hotel-like rooms to our customers. In addition to leasing these remote accommodations products to our customers, we also provide remote facility management solutions which include catering services, recreational facilities and on-site property management. Our portable storage fleet consisting of approximately 47,000 units, with a gross book value of approximately $0.1 billion as of December 31, 2013, is primarily comprised of steel containers, which address customers need for secure, temporary, on-site storage on a flexible, low-cost basis. Our portable storage fleet provides a complementary product to cross-sell to our existing modular space customers, as well as new customers. Our sales business complements our core leasing business by allowing us to offer one-stop shopping to customers desiring short-, medium- and long-term space solutions. Our sales business also enhances our core leasing business by allowing us to regularly sell used equipment and replace it with newer equipment. In addition, our ability to consistently sell used units and generate cash flow from such sales allows us to partially offset the cash required for capital expenditures. 2

4 Industry Overview We operate within the modular space, portable storage and remote accommodations markets. We compete in the modular space market in EMEA, North America, Asia Pacific and Latin America. We compete in the remote accommodations market in North America and Asia Pacific. We also have a sizable business in the portable storage market, primarily in the United States and the United Kingdom. Modular Space Market Modular space units are non-residential structures designed to meet federal, provincial, state and local building codes and, in most cases, are designed to be relocatable. Modular space units are constructed offsite, utilizing lean manufacturing techniques to prefabricate single or multi-story whole building solutions in deliverable modular sections. Units can be constructed of wood, steel or concrete and can be permanent or relocatable. The modular space market is highly fragmented and has expanded rapidly over the last 40 years as the number of applications for modular space has increased and the recognition of its value has grown. The two key growth drivers in the modular space market are: Growing need and demand for space growing need and demand for space is driven by general economic activity, including gross domestic product growth, industrial production, mining and resources activity, non-residential construction and urbanization. Other factors such as public and education spending and the scale and frequency of special events also impact demand for modular space. Increasing shift from traditional fixed, on-site built space to modular space solutions the increasing shift from traditional fixed, on-site built space to modular space solutions is driven by the speed of installation, flexibility and lower cost of modular space units. Modular space units are also increasingly associated with high levels of quality, as the units are built indoors in controlled environments based on repeatable models and processes. Remote locations also favor modular space solutions over traditional installations, particularly with respect to work camps and work villages. Demand for modular space relative to fixed speace has strengthened during economic downturns due to the length of typical leases and because modular space units are typically less expensive than fixed, on-site built space. We believe that these growth drivers are particularly relevant in high-growth regions, such as Australia, Canada, Eastern Europe and South America. Modular space units offer several advantages as compared with fixed, on-site built space, including: Quick to install the pre-fabrication of modular space units allows them to be put in place rapidly, providing potential long-term solutions to needs that may have quickly materialized. Flexibility flexible assembly design allows modular space units to be built cost-effectively to suit a customer s needs and allows customers the ability to adjust their space as their requirements change. Cost effectiveness modular space units provide a cost effective solution for temporary and permanent space requirements and allow customers to improve returns on capital in their core business. Quality the pre-fabrication of modular space units is based on a repeatable process in a controlled environment, resulting in more consistent quality. Mobility modular space units can easily be disassembled, transported to a new location and re-assembled. Portable Storage Market The portable storage market is highly fragmented and remains primarily local in nature. Portable storage provides customers with a flexible and low-cost storage alternative to permanent warehouse space and fixed-site self storage. In addition, portable storage addresses the need for security while providing for convenience and immediate accessibility to customers. Remote Accommodations Market Fully managed remote accommodations service energy, oil & gas, mining, infrastructure and construction customers in geographically isolated areas that typically lack traditional hotel-style lodging options. Modular space complexes are designed and installed on temporary or permanent basis in remote locations to provide customers with dormitories, kitchen/dining halls, recreation and fitness centers. The facilities are supported with lodging management, catering and food services, housekeeping, recreation equipment, laundry, as well as water and wastewater treatment, power generation, communications and personnel logistics, where required. This turnkey managed facilities offering allows customers to provide their employees with high quality accommodations and recreation opportunities in a safe, centralized environment to optimize workforce productivity and maximize staff retention. Additionally, this arrangement establishes a single source supplier and allows customers to direct capital to core investment areas such as energy resource development. Demand is driven by resource exploration (drilling & seismic), facilities construction, infrastructure 3

5 development and ongoing operational phases. Medium to long-term duration requirements by customers in North America and Australia are driven by long-life energy reserves in the Western Canada Oil Sands market, North Dakota Bakken Shale Basin, Alaskan on-shore oil market, Texas Permian Basin and Australia s multiple commodity markets (iron ore, liquid natural gas, coal). Products and Services Our products can be used to meet a broad range of customer needs. Our modular space products are used as, among other things, classrooms, construction site offices, temporary and permanent office space, sales offices, accommodation/sleeper units, work camp products and special events headquarters. We have a lease fleet of approximately 303,000 modular space and portable storage units. Our modular space fleet ranges from single-unit facilities to section modular structures, which combine two or more units into one structure for applications that require more space. Units typically range in size from 8 to 14 feet in width and 16 to 70 feet in length and are wood or aluminum framed mounted on a steel chassis. Some units are fitted with axles and hitches and are towed to various locations while others are easily flat-bed trailer mounted and transported by truck. Most units contain materials used in conventional buildings and are equipped with air conditioning and heating, electrical outlets and, where necessary, plumbing facilities. Additionally, we manage 8,000 remote accommodations rooms where we not only provide the facilities, but we also operate the entire workforce camp, providing catering, facility maintenance, housekeeping, utilities, and security. Leasing of modular space and fully managed remote accommodations rooms represented approximately 74% of our revenue during the year ended Sales of new and used modular space and storage units to customers represented approximately 26% of our revenue during the year ended December 31, Our specific product offerings include: Product Offering Approximate Percentage of Fleet (1) Modular space 91% Description Modular space products 87% The majority of our fleet consists of a wide variety of flexible, functional modular space products. Most of these units can be utilized as single units, or assembled into multiple unit buildings. Most of the units can be joined together on any side and can be stacked on top of each other in instances where customers seek to limit their building s footprint. Customers can specify the configuration desired in terms of overall size as well as spacing of interior walls using movable partitions and quantity and spacing of windows and doors. These units have various flooring and lighting alternatives. The units can have air conditioning, heating, ventilation, internet cabling, exterior awnings, and plumbing facilities, as desired. Interiors can be customized to match the customer needs. Our fleet also includes a number of special purpose temporary space units, including portable restroom facilities, generator powered facilities, ticket offices, guard booths, kitchen units and warehouse space. Portable storage products 4% Portable storage products are former shipping containers typically used for secure storage space. Our portable storage units are primarily ground-level entry storage containers of different sizes with swing doors. These units are made of heavy exterior metals for security and water tightness. Remote Accommodations 9% Our accommodation/work camp products provide living and sleeping space solutions and are typically utilized for workforces in remote locations, particularly in the energy and resources end-market. The majority of these units offer full service suite hotel-like rooms, with individual bathroom/shower facilities combined with each bedroom. Additionally, each camp typically includes restaurant/dining options, laundries, camp reception/offices, fitness centers, and indoor/outdoor entertainment/relaxation areas. (1) Based on gross book value as of December 31, We complement our core business, leasing modular space and portable storage units, with the following products and services: Sales of Products. We sell modular space and portable storage units from our branch locations. Generally, we purchase new units from our vendors or assemble new units ourselves for sale. We do not generally purchase new units for resale until we have obtained firm purchase orders (which are generally non-cancelable) for such units. Buying units directly for resale adds scale to our purchasing, which is beneficial to overall supplier relationships and purchasing terms. In the normal course of managing our business, we also sell used units directly from our lease fleet either at fair market value or, to a much lesser extent, pursuant to pre-established lease purchase options included in the terms of our lease agreements. The sale of these in-fleet units has historically been both 4

6 profitable and a cost-effective method to finance replenishing and upgrading our lease fleet. Our sales business includes modifying or customizing units to meet customer requirements. Delivery and Installation. We provide delivery, site-work, installation and other services to our customers as part of our leasing and sales operations, and we charge our customers a separate fee for such services. Revenue from delivery, site-work and installation results from the transportation of units to a customer s location, site-work required prior to installation and installation of the units which have been leased or sold. Typically, units are placed on temporary foundations constructed by our service technicians and service personnel will also generally install our ancillary products. We also derive revenue from disassembling, unhooking and removing units once a lease expires. Other Ancillary Products and Services. We lease furniture, steps, shelving, air conditioners, heaters, fire extinguishers, ramps, internet connectivity devices and other items to our customers for their use in connection with our products. We also offer our lease customers a damage waiver program that protects them in case the leased unit is damaged. For customers who do not select the damage waiver program, we bill them for the cost of any repairs. For the year ended December 31, 2013, approximately 35% of our modular space revenue was derived from delivery and installation and other ancillary products and services. Customers Our operating infrastructure is designed to ensure that we consistently meet or exceed our customers expectations by reacting quickly, efficiently and effectively. As a result, we have established strong relationships with a diverse customer base in North America, EMEA, Asia Pacific and Latin America, ranging from large multi-national companies to local sole proprietors. During the year ended December 31, 2013, we leased or sold our products to approximately 70,000 customers in several industries, including the energy and resources, commercial, industrial, manufacturing, residential and heavy construction, government, education, services and other end-markets. Our top 20 customers accounted for approximately 20% of our leasing and services revenue during such period, with no customer accounting for more than 4% of our leasing revenue during such period. Approximately 71% of our business is done with repeat customers. We believe that our customers prefer our modular space products over fixed, on-site built space because, among other things, modular space products are a quick, flexible, cost-effective and risk-averse solution for expansion and modular space units are built in controlled environments which offer higher quality than on-site builds. Our key customer end-markets include the energy and resources, commercial,/industrial, residential and heavy construction, government, manufacturing, education, and services and other end-markets: Energy and Resources. Our products are leased to companies involved in mining exploration and extraction, electricity generation and transmission, oil and gas exploration, production and distribution and other energy-related services. Units are used as accommodations, meeting rooms, reception and visitor centers, work offices, kitchens, dining halls, entertainment rooms and security offices. Customers in energy and resources end-markets accounted for approximately 25% of our revenue for the year ended December 31, Commercial/Industrial. Customers in this category span a variety of industries and product uses, including entertainment, recreation, retail, fast food and dining establishments, transportation terminals, recycling, chemicals, agriculture and other general commercial and industrial end-markets. Units are used as work offices, meeting rooms and certain industry-specific uses. Customers in commercial/industrial end-markets accounted for approximately 16% of our revenue. Residential and Heavy Construction. We provide office and storage space to a broad array of contractors associated with both residential and non-residential buildings, commercial offices and warehouses; highway, street, bridge and tunnel contractors; water, sewer, communication and power line contractors; and special construction trades, including glass, glazing and demolition. Our construction customer base is characterized by a wide variety of contractors that are associated with original construction as well as capital improvements in the commercial, institutional, residential and municipal arenas. Units are used as temporary offices, breakrooms, accommodations and security offices. Customers in residential and heavy construction end-markets accounted for approximately 10% of our revenue. Government. Governmental customers consist of national, state, provincial and local public sector organizations. Modular space and portable storage solutions are particularly attractive to focused niches such as disaster relief, prisons and jails, courthouses, military installations, national security buildings and temporary offices during building modernization. Customers in government endmarkets accounted for approximately 12% of our revenue. Manufacturing. Customers in the manufacturing end-market consist of small, medium and large manufacturing companies, who use our products for a variety of purposes, including as storage space, work offices, meeting space and security offices. Customers in manufacturing end-markets accounted for approximately 15% of our revenue. 5

7 Education. Rapid shifts in populations within regions often necessitate quick expansion of education facilities particularly in elementary, secondary schools and universities/colleges. Regional and local governmental budgetary pressures, as well as classroom size reduction legislation and refurbishment of existing facilities, have made modular space units, especially multi-sectional units, a convenient and cost-effective way to expand classroom, laboratory and library capacity. In addition, our products are used as temporary classrooms when schools are undergoing large scale modernization, allowing continuous operation of a school while modernization progresses. Customers in education end-markets accounted for approximately 7% of our revenue for the year ended December 31, Services and Other. Customers in this category include special events as well as services industries, including professional services, healthcare and pharmaceuticals. Special events include major events such as international athletic competitions, automobile races and other professional and amateur sporting events. Units are used for a variety of purposes, including accommodations and dressing rooms, offices, media work spaces and temporary restroom facilities. Customers in services and other end-markets accounted for approximately 15% of our revenue. Sales and Marketing Our sales and marketing team consisted of approximately 745 employees as of December 31, Members of our sales group act as our primary customer service representatives and are responsible for fielding calls, visiting customers, developing solutions for customers needs, processing credit applications, quoting prices and negotiating and handling orders. Our marketing group is primarily responsible for developing and coordinating direct mail and other advertising campaigns, producing company literature and creating promotional sales tools. Our support services groups handle billing, collections and other support functions, allowing our sales and marketing team to focus on addressing the needs of our customers. Our marketing programs emphasize the cost-savings and convenience of using our products versus constructing temporary or permanent facilities. Marketing programs also seek to differentiate our products and services from local market competitors. We use a number of marketing tools to generate new business and customers. Through our marketing and sales efforts, we have successfully expanded the uses for our products. We intend to continue to identify and penetrate other industries that would benefit from the use of our products and services. Developing new customers is an integral part of the sales process and is monitored by the management team. In addition to our prospect tracking databases, we conduct direct mail campaigns and use print and electronic advertising, including customer trade publications. We have developed telephone number networks in some countries so that our customers can call and speak to a sales representative in the branch location nearest the site where the call was placed. In addition, we participate in numerous regional and national trade shows, and our sales personnel participate in local trade groups and associations. We also design marketing campaigns targeted at specific market niches. On the national and regional level, our administrative support services and scalable management information systems enhance our service by enabling us to access real-time information on product availability, customer reservations, customer usage history and rates. In addition, we have developed our own proprietary Lean operating system, which is being implemented globally. The system is a set of processes, procedures and tools, as well as a continuous improvement philosophy, which continually monitors and improves productivity, quality, delivery and responsiveness. We believe that this system has enabled us to shorten our lead times and achieve higher levels of on-time delivery, better product quality and faster response times. Due to our broad geographic capabilities, this program allows us to further differentiate ourselves from many of our local competitors by providing consistent service on a national basis. Leases The terms of our leases vary and leases for our units are typically renewable on a month-to-month basis after their expiration, depending on the geographic region as well as the end user. While the initial contractual term of our leases is typically shorter, our average actual lease duration (including month-to-month renewals) is approximately 22 months in EMEA, 33 months in North America and 24 months in Asia Pacific. In addition to the monthly lease rates, our customers are generally responsible for the costs of delivery and set-up, dismantling and pick-up and any loss or damage beyond normal wear and tear. Our leases typically require customers to maintain liability and property insurance covering our units during the lease term and to indemnify us from losses caused by the negligence of the customer or their employees. Branch & Depot Network As a key element to our market leadership strategy, we maintain a network of approximately 260 branches & depots. Because geographic accessibility to customers is a necessity of the modular space and portable storage industry, we believe that our strategy of employing a broad branch and depot network allows us to better serve our existing customers and attract new customers. This network enables us to increase our product availability and customer service within our regional and local markets. Customers benefit because they are provided with improved service availability, reduced time to occupancy, better access to sales representatives, the ability to inspect units prior to rental and lower freight costs which are typically paid by the customer. We benefit because we are able to spread regional overhead and marketing costs over a larger lease base, redeploy units within our branch and depot network to optimize 6

8 utilization, discourage potential competitors by providing ample local supply and offer profitable short-term leases which would not be profitable without a local market presence. We believe that the geographic diversity of our branch and depot network reduces our exposure to changes related to a given region, while presenting us with significant growth opportunities, particularly in regions with significant energy and natural resource activities and in growth markets such as Australia, Canada, Eastern Europe and Brazil. Our branches typically have a sales staff dedicated to the local market, with transportation personnel responsible for delivery and pick-up of our units and yard personnel responsible for loading and unloading units and performing modifications, repairs and maintenance. Our branch staff report to local supervisors and management in their respective regions, who are ultimately supervised by one of our four region heads. Procurement and Maintenance of Fleet We have made significant investments in our lease fleet, which consists of approximately 303,000 modular units and 8,000 fully managed remote accommodation rooms with a gross book value of approximately $3.2 billion as of December 31, The average age of our fleet is less than ten years. We closely monitor fleet capital expenditures, which include fleet purchases and capitalized costs of improving existing units. Generally, fleet purchases are recommended and coordinated by the field organization with capital allocation and capital expenditure approvals managed at the regional, national and corporate level. All fleet purchases are thoroughly reviewed for necessity and to confirm achievement of internal rate of return on capital thresholds. Typically, the timeline from identifying a need for incremental fleet to taking delivery can range from weeks to months depending on the customer urgency, type of product desired and the degree of customization required. We assemble and purchase our units with no significant dependence on any particular supplier. We also maintain a global procurement office in China to assist with procurement of our fleet. We believe that our fleet purchases are flexible and can be adjusted to match business needs and prevailing economic conditions. We are generally not locked in to long-term purchase contracts with manufacturers and can modify our capital spending activities to meet customer demand. In addition, given the long economic life and durability of our rental equipment, we do not have the fleet replacement issues faced by many general equipment leasing companies whose estimated useful life for their fleet assets are generally significantly shorter. Our fleet capital expenditures were $206 million, $228 million and $259 million for the years ended December 31, 2011, 2012 and 2013, respectively. We supplement our fleet spending with acquisitions. Although the timing and amount of acquisitions are difficult to predict, we consider our acquisition strategy to be opportunistic and will adjust our fleet spending patterns as acquisition opportunities become available. We believe that we have attractive geographic expansion opportunities in both existing and new markets where end-market demand for modular space and portable storage units is underdeveloped or is growing rapidly. We plan to selectively pursue geographic expansion acquisitions that enhance, complement or diversify our product lines, enhance our existing customer relationships and leverage our existing scale and infrastructure. For example, during 2010 and 2011, we acquired several modular space providers with operations in the United Kingdom, continental Europe and the United States. In 2012, we completed the acquisition of the Eurobras Group, the leading modular space provider in Brazil and we acquired Ausco and Portacom to establish the leading market position in Asia Pacific. In 2013, we acquired Target which we believe compliments our product lines in the United States. We have a proven track record of efficiently integrating acquisitions and quickly eliminating operational redundancies while maintaining acquired customer relationships. We generally acquire assets and operations similar to our own (including through in-market value-creating acquisitions), and these acquisitions extend our customer base. Each of our leasing units typically undergoes general maintenance at the end of its lease term, such as cleaning and painting, as well as more significant refurbishment during the course of its economic life. We generally have the flexibility to defer certain maintenance to adjust to our needs and the prevailing economic condition, in part due to the durability of our products and the low cost of replacement parts. Fleet Management Information Systems Our proprietary management information systems are instrumental to our management of our fleet which includes approximately 303,000 units across five continents. These systems also empower targeted marketing efforts and allow management to monitor operations at our branches on a daily, weekly and monthly basis. Lease fleet information is updated daily at the branch level and verified through a periodic physical inventory by branch personnel. This provides management with online access to utilization, lease fleet unit levels and rental revenue by branch or geographic region. In addition, an electronic file for each unit showing its lease history and current location/status is maintained in the information system. Branch sales people utilize the system to obtain information regarding unit condition and availability. The database tracks individual units by serial number and provides comprehensive information including cost, condition and other financial and unit specific information. 7

9 Employees As of December 31, 2013, we had approximately 5,130 employees, of whom approximately 1,510 were located in North America, 2,540 in EMEA, 560 in Latin America and 520 in Asia Pacific. Approximately 38% of these employees, principally in EMEA and Asia Pacific, were covered by collective bargaining agreements. Consistent with local legal requirements or market practice, these collective bargaining agreements are typically renewable on an annual or triennial basis. None of our employees in North America are covered by collective bargaining agreements. Management believes that our relationship with our employees is good. Intellectual Property We own a number of trademarks important to our business. Our material trademarks are registered or pending applications for registrations in the U.S. Patent and Trademark Office and various non-u.s. jurisdictions. In each of our markets, we operate under a brand with a strong local history but identify all of our operations as part of Algeco Scotsman. In EMEA, we operate under the names Algeco and Elliott. In North America and Mexico, we operate principally under the Williams Scotsman brand and also operate as Target Logistics and Hawaii Modular Space. In Brazil, we operate under the Eurobras name. In Asia Pacific, we operate as Ausco in Australia and Portacom in New Zealand. Competition Although our competition varies significantly by market, the modular space and remote accommodations industry, in general, is highly competitive and fragmented. We believe that participants in our industry compete on the basis of customer relationships, price, service, delivery speed and breadth and quality of equipment and additional services offered. In several of our markets, we compete with one or more local providers as well as a limited number of large national companies. Some of our competitors may have greater market share in certain areas, less indebtedness, greater pricing flexibility or superior marketing and financial resources. In North America, significant modular space and remote accommodations competitors include McGrath Rentcorp, Modspace, Inc. Mobile Mini, Pac-Van, ATCO, Oil States and Black Diamond. In EMEA, significant modular space and remote accommodations competitors include Touax, Wernick, Mobile Mini, Yves Cougnaud Group, Portakabin and A Plant. In Asia Pacific, significant modular space and remote accommodations competitors include ATCO, OnSite, Coates and Oil States. In Latin America, significant modular space competitors include NHJ, MRC and Multiteiner. In our North American portable storage business, we compete with Mobile Mini, Pac-Van, Eagle Leasing and a number of other national, regional and local companies. With the exception of the United Kingdom, we consider competition in EMEA to be relatively diffuse. In our U.K. portable storage business, we compete primarily with Mobile Mini, Wernick and A-Plant. Regulatory and Environmental Compliance We are subject to certain federal, state, local and foreign environmental, transportation, anti-corruption, import controls, health and safety, and other laws and regulations. We incur significant costs to comply with these laws and regulations, but from time to time we may be subject to additional costs and penalties as a result of non-compliance. The discovery of currently unknown matters or conditions, new laws and regulations or different enforcement or interpretation of existing laws and regulations could materially harm our business or operations in the future. In the United States, we are subject to federal, state and local laws and regulations that govern and impose liability for activities and operations which may have adverse environmental effects, including discharges to air and water, as well as for handling and disposal practices for hazardous substances and other wastes under the Comprehensive Environmental Response, Compensation, and Liability Act, the Resource Conservation and Recovery Act, the Clean Water Act, the Clean Air Act and similar state and local laws and regulations. In the ordinary course of business, we use and generate substances that are regulated or may be hazardous under environmental laws. Environmental laws also may impose liability for conditions and activities such as soil or groundwater contamination and off-site waste disposal, including such contamination or disposal that occurred prior to the acquisition of our businesses. We may incur costs related to alleged environmental damage associated with past or current properties owned or leased by us. In the United Kingdom, our operations are subject to the requirements of the Environmental Protection Act, the Health and Safety at Work Act and the Town and Country Planning Acts, and under these statutes, are subject to regulation by the Environment Agency, the Health and Safety Executive and local government authorities. We are also subject to various other regulations in the other jurisdictions in which we operate. To date, no environmental matter has been material to our operations. Based on our past experience, we believe that any environmental matters relating to us of which we are currently aware will not be material to our overall business or financial condition. Our operations are also subject to anti-bribery laws and regulations, such as the FCPA and the U.K. Bribery Act (the UKBA ). These regulations prevent us, or our officers, employees and agents from making payments to officials and public entities of foreign 8

10 countries to facilitate obtaining new contracts. To the extent we or our officers, employees, and agents are found to have violated, the provisions of the FCPA and/or the UKBA, we may be subject to criminal sanctions and significant monetary penalties. A portion of our units are subject to regulation in certain states under motor vehicle and similar registrations and certificate of title statutes. We believe that we have complied in all material respects with all motor vehicle registration and similar certificate of title statutes in states where such statutes clearly apply to mobile office units. We have not taken actions under such statutes in states where it has been determined that such statutes do not apply to mobile office units. However, in certain states, the applicability of such statutes to our mobile office units is not clear beyond doubt. If additional registration and related requirements are deemed to be necessary in such states or if the laws in such states or other states were to change to require us to comply with such requirements, we could be subject to additional costs, fees and taxes as well as administrative burdens in order to comply with such statutes and requirements. We do not believe that the effect of such compliance will be material to our business and financial condition. Properties Corporate Headquarters. Our headquarters is located in Baltimore, Maryland. Our executive, financial, accounting, legal, administrative, management information systems and human resources functions operate from this single, leased office ensuring effective and efficient management of all central functions. Branch Locations. We operate 210 branches located throughout North America, EMEA, Latin America and Asia Pacific. Collectively, we lease approximately 68% of our branch properties and we own the balance. Depots. We maintain approximately 50 depot locations throughout EMEA. Our depots operate as staging and storage locations for our rental equipment when not on-hire, and typically also include facilities for maintenance and refurbishment of rental equipment between customer leases. Assembly Plants / Manufacturing Sites. Our European operations assemble units with assembly plants in the United Kingdom, France, and the Czech Republic. We lease approximately 40% of our assembly plants and we own the balance. Our Latin American and Asia Pacific operations assemble units with assembly plants located in Brazil, Australia and New Zealand, with 14 such sites in total. We lease all such manufacturing sites. Management believes that none of our properties, on an individual basis, is material to our operations, and we also believe that satisfactory alternative properties could be found in all of our markets if ever necessary. Legal Proceedings and Insurance Currently, we are involved in various lawsuits and claims arising out of the normal course of our business. The nature of our business is such that disputes occasionally arise with vendors including suppliers and subcontractors, and customers over warranties, contract specifications and contract interpretations among other things. We assess these matters on a case-by-case basis as they arise. Reserves are established, as required, based on our assessment of our exposure. We have insurance policies to cover general liability and workers compensation related claims. In the opinion of management, the ultimate amount of liability not covered by insurance, if any, under such pending litigation and claims will not have a material adverse effect on our financial position or results of operations. See our audited consolidated financial statements for additional detail. USE OF NON-IFRS FINANCIAL MEASURES We supplement our consolidated financial statements presented on an IFRS basis by providing additional measures which may be considered "non-ifrs" financial measures. We believe that the disclosure of these non-ifrs financial measures provides additional insight into the ongoing economics of our business and reflects how we manage our business internally. These non-ifrs financial measures are not in accordance with IFRS and should not be viewed in isolation or as a substitute for IFRS financial measures. Reconciliation of Gross Profit to Adjusted Gross Profit: Gross Profit $ 650 Fleet Depreciation & Amortization 242 Adjusted Gross Profit $ 892 9

11 ALGECO SCOTSMAN GLOBAL S.À R.L. MANAGEMENT S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS This discussion of our financial condition and results of operations should be read together with our December 31, 2013 consolidated financial statements and the notes thereto. This discussion contains forwardlooking statements regarding industry outlook, our expectations regarding our future performance, liquidity and capital resources and other non-historical statements that are based on management s current expectations, estimates and projections about our business and operations. Forward-looking statements include statements that are not historical facts and can be identified by forward-looking words such as anticipate, believe, could, estimate, expect, intend, plan, may, should, will, would, project, and similar expressions. Our actual results may differ materially from those contained in or implied by any forward-looking statements. You are cautioned not to place undue reliance on any forward-looking statements, all of which speak only as of the date of this report. Introductory Note Unless the context otherwise requires, all references to we, us, our, the Group and the Company refer to Algeco Scotsman Global S.à r.l., a limited liability company (société à responsabilité limitée) incorporated under the laws of Luxembourg, together with its subsidiaries. Overview We are the leading global business services provider focused on modular space, secure storage solutions and remote accommodations. Our lease fleet consists of approximately 303,000 modular and storage units and we manage approximately 8,000 rooms in our remote accommodations business. We have approximately 260 branch and depot locations and operate in 37 countries across five continents. We seek to capitalize on our breadth and significant scale to focus on geographic market opportunities. Changes in our geographic mix can affect our results of operations due to jurisdictional differences, including those related to the level of economic activity and growth and the competitiveness of a particular market. We lease our modular space and portable storage units to customers in diverse end-markets, including energy and natural resources, commercial, industrial, manufacturing, residential and heavy construction, government and education. To enhance our product and service offerings and our gross profit margin, we offer delivery, installation and removal of our lease units and other associated add-ons and value-added products and services, such as damage waivers and extended warranties, and the rental of steps, ramps, furniture, fire extinguishers, air conditioning and wireless internet access points. We provide remote facility management solutions to customers working in remote environments through turnkey lodging, catering, transportation, security and logistical services. We also complement our core leasing business by selling both new and used units, allowing us to leverage our scale, achieve purchasing benefits and lower the average age of our lease fleet. Our modular space and remote accommodation products include offices, classrooms, accommodation/sleeper units, work camp products, special purpose temporary spaces and other self-sufficient multi-unit modular structures, which offer our customers flexible, low cost, high quality and timely solutions to meet their space needs, whether short-, medium- or long-term. Our core leasing model is characterized by recurring revenue driven by long-term leases on long-lived assets that require minimal maintenance capital expenditures. Our average lease duration is approximately 22 months in EMEA, 33 months in North America and 24 months in Asia Pacific. The global average age of our fleet is approximately ten years. We typically recoup our initial investment in purchased units in less than three years, which allows us to obtain significant value over the economic life of our units, which can exceed 20 years. The relatively young average age of our fleet compared to its economic life provides us with financial flexibility, allowing us to maintain our cash flow generation during economic downturns by temporarily reducing capital expenditures, without significantly impairing our fleet s value. 1

12 Our modular space fleet consists of approximately 256,000 units with a gross book value of approximately $2.8 billion as of December 31, Our fleet is generally comprised of standardized, versatile products that can be configured to meet a wide variety of customer needs. All of our modular space units are intended to provide convenient, comfortable space for occupants at a location of their choosing. On a global basis, our next largest competitor is less than a third of our size. We believe that our global footprint and substantial fleet size provide us with competitive advantages. In addition, our scale enables us to purchase units on favorable terms, providing incremental margin to both our leasing and sales businesses. Our remote accommodations business is comprised of approximately 8,000 fully managed rooms with a gross book value of $0.3 billion as of December 31, Our remote accommodations business provides living and sleeping space solutions, which are typically utilized for workforces in remote locations. The majority of these units offer full suite hotel-like rooms to our customers. In addition to leasing these remote accommodations products to our customers, we also provide remote facility management solutions which include catering services, recreational facilities and on-site property management. Our portable storage fleet of approximately 47,000 units, with a gross book value of approximately $0.1 billion as of December 31, 2013, is primarily comprised of steel containers, which address customers need for secure, temporary, on-site storage on a flexible, low-cost basis. Our portable storage fleet provides a complementary product to cross-sell to our existing modular space customers, as well as new customers. We continue to seek opportunities to further optimize our profitability and lease economics through our ongoing commercial initiatives, procurement and lean operating initiatives. As an example, our global procurement, lean and commercial excellence organizations coordinate activities and leverage best practices throughout our company in order to optimize procurement and operational productivity. Our sales business complements our core leasing business by allowing us to offer one-stop shopping to customers desiring short-, medium- and long-term space solutions. Our sales business also enhances our core leasing business by allowing us to regularly sell used equipment and replace it with newer equipment. In addition, our ability to consistently sell used units and generate cash flow from such sales allows us to partially offset the cash required for capital expenditures. Acquisitions Acquisition of Target Logistics In February 2013, we acquired 100% of the membership interests in Target Logistics Management, LLC ( Target ). Target is a leading provider of full-service remote workforce accommodation solutions in the United States and facilitates our continued strategic expansion in the remote accommodation business. The initial consideration for Target was $201.2 million, which was comprised of $86.7 million in cash, 6,749,269 shares of our ultimate parent, Algeco/Scotsman Holding S.à r.l., ( Holdings ) valued at $92.8 million and contingent consideration with an acquisition date fair value of $21.7 million. We also assumed $76.7 million of indebtedness. Holdings contributed the membership interests in Target that it acquired to us. We incurred $59 million of borrowings under our five year multicurrency asset based revolving credit facility ( ABL Revolver ) to partially fund the cash portion of the consideration. In addition, an earnout agreement entered in connection with the acquisition (the Earnout Agreement ) provides for additional payments (the Target Earnout ) dependent on cumulative value creation to be achieved over the subsequent years between acquisition and Exit Event, as defined in the Earnout Agreement. The Earnout Agreement provided the former owners of Target the opportunity to earn additional value for meeting performance objectives in 2013, however these performance objectives were not met. The Earnout Agreement also provides the former owners of Target the opportunity to earn additional consideration for cumulative value creation to be achieved over the subsequent years between the acquisition and an Exit Event. Amounts payable under the Earnout Agreement are to be paid in shares of Holdings if such cumulative value creation goals are achieved; provided, that if an Exit Event does not occur prior to December 31, 2015, estimated prepayments will be made in cash which will reduce the ultimate payment attributable to cumulative value creation. The maximum amount of cash that can be paid under the Earnout Agreement is $115.0 million. We completed the 2

13 valuation of the Earnout Agreement and recorded the earnout at $21.7 million at purchase. See Note 5 in our consolidated financial statements for additional information regarding the Target acquisition. Acquisition of Chard In November 2013, we acquired Chard Camp Catering Service, Ltd. ( Chard ), a Canadian provider of workforce accommodations that allowed us to continue to expand our remote workforce accommodations presence in Canada. The consideration for this acquisition is comprised of $8.4 million in cash and $1.7 million of assumed indebtedness. The aggregate purchase price was allocated principally to rental equipment ($5.2 million), customer relationship ($0.9 million), and goodwill ($4.6 million). Acquisition of Ausco On October 11, 2012 and in conjunction with our 2012 Refinancing (as defined in Note 18 of our consolidated financial statements), we acquired Ausco Holding S.à r.l. and its subsidiaries ( Ausco ), the leading provider of modular space in Australia and New Zealand from our principal owner TDR Capital LLP ( TDR ) in exchange for shares of Holdings. The acquisition of Ausco from TDR is a transaction among entities under common control. TDR had previously acquired Ausco on June 29, 2011 for cash consideration of $684.8 million. Our acquisition of Ausco is part of our strategy to grow the business through expansion into new geographic territories. We elected to account for this acquisition under the pooling of interest method as permitted by IFRS prospectively from the date on which we took control. Under the pooling of interest method, the assets and liabilities of the combined entities were reflected at their respective carrying values, which reflect a step-up in the basis of the Ausco assets and liabilities to fair value as of the date of acquisition by TDR, and no new identifiable intangible assets or goodwill are recorded. The statements of comprehensive income reflect the income and expenses of the combined entity from October 11, See Note 5 in our consolidated financial statements for additional information regarding the Ausco acquisition. Acquisition of Eurobras In December of 2011, we completed the first part of a two-phased acquisition of the equity interests of several Brazilian entities that have since been consolidated into a single entity ( Eurobras ). In January 2012, we completed the second phase of the acquisition of Eurobras. The combined purchase price of Eurobras was $96.3 million. As the second phase of the Eurobras acquisition was completed in the first week of January 2012, the consolidated statements of comprehensive income for the year ended December 31, 2012 includes a full year of results of operations for Eurobras. See Note 5 in our consolidated financial statements for additional information regarding the Eurobras acquisition. Industry Trends Affecting Our Business We expect that the demand for our products and services will increase due to the following two key growth drivers in the modular space market: growing need and resulting demand for space; and increasing shift from traditional fixed on-site built space to modular space solutions. Our financial performance is generally impacted by several other factors, including: the duration and severity of economic movements, whether globally or within the industry sectors or geographic regions within which we operate; fluctuations in interest rates and foreign currency exchange rates; fluctuations in the costs of raw materials, including gasoline and labor; 3

14 the competitive environment in which we operate; and capital and credit market conditions. Components of Our Historical Results of Operations Revenue Our revenue consists mainly of leasing and services and sales revenue. We derive our modular space leasing revenue primarily from the leasing of our modular space, portable storage units and remote accommodations. Included in our modular space leasing revenue are enhancement services related to leasing such as lease equipment repairs, rentals of fire extinguishers, air conditioning and wireless internet access points and damage waivers and extended warranties. In addition, modular space leasing revenue also includes fees that we charge for the delivery and pick-up of our leasing equipment to and from our customers premises, delivery of equipment we sell to our customers and repositioning our leasing equipment. Our remote accommodations leasing and services revenue is comprised of the leasing and operation of our remote workforce accommodations where we provide housing, catering and transportation to meet our customers requirements. The key drivers of changes in leasing revenue are the number of units in our lease fleet, the average utilization rate of our lease units, the average rental rate per unit, the total number of beds under management in remote accommodations and changes in the level of enhancement services provided. The utilization rate of our lease units is the ratio, at the end of each period, of (i) the number of units in use (which includes units from the time they are on hire to a customer until the time they are returned to us) to (ii) the total number of lease units in our fleet. Our average rental rate per unit for a period is equal to the ratio of (i) our rental income, excluding services and unit enhancements, for that period to (ii) the average number of lease units hired out to customers during that period. The table below sets forth the number of units in our modular space lease fleet, the average utilization of our lease units and the average rental rate per unit for the periods specified below. For comparative purposes, the acquisition of Ausco has been included in these amounts effective January 1, Year Ended December 31, Units on rent (average during the period) 226, , ,850 Average utilization rate 74.2% 75.0% 77.1% Average monthly rental rate $ 260 $ 254 $ 235 In addition to our leasing revenue, we also generate revenue from sales of new and used modular space and portable storage units to our customers as well as delivery, installation, maintenance and removal services and other incidental items related to accommodation services for our customers. Included in our sales revenue are charges for modifying or customizing sales equipment to customers specifications. In addition, we generate revenue from the leasing and operation of remote accommodations in which we provide housing, catering and transportation services. We believe that customers with identified long-term needs for modular space or portable storage solutions prefer to purchase, rather than lease, such units. As a result, shifts in our end-market mix can affect the proportion of our revenue derived from our leasing and sales businesses. Gross Profit Cost of revenues associated with our leasing business includes payroll and payroll-related costs for branch personnel, material and other costs related to the repair, maintenance, storage, and transportation of our rental equipment as well as depreciation expense related to our rental equipment. Cost of revenues associated with our remote accommodations business includes the costs of running our owned and operated facilities, such as employee costs, catering, transportation, occupancy and other facilities and services costs. Cost of revenues associated with 4

15 our new unit sales business include the cost to buy, transport and customize units that are sold. Cost of revenues for our used unit sales consist primarily of the net book value of the unit at date of sale. SG&A Our SG&A expense includes all costs associated with our selling efforts, including marketing costs and salaries and benefits, including commissions of sales personnel. It also includes our overhead costs, such as salaries of our administrative and corporate personnel and the leasing of facilities we occupy. Additionally, SG&A includes non-cash compensation charges related to movements in the fair value of share-based payment incentive plans. Other Depreciation and Amortization Other depreciation and amortization includes depreciation of all assets other than rental equipment and includes amortization of our intangibles assets. Impairment Losses on Goodwill We evaluate goodwill impairment annually, or more frequently where there is an indication that impairment may exist, for our cash generating units to which goodwill has been allocated. If the recoverable amount of a cash generating unit is less than its carrying amount, an impairment loss is recognized. Impairment losses on goodwill represent the excess of the carrying value of the cash generating unit as the recoverable amount which is the higher of fair value less costs to sell or its value in use. Impairment Losses on Rental Equipment and Property, Plant and Equipment Impairment losses on rental equipment and property, plant and equipment represent the excess of the carrying value of the rental equipment or property, plant and equipment being evaluated for impairment and its estimated recoverable amount. Restructuring Costs Restructuring costs include costs associated with certain restructuring plans designed to streamline operations and reduce costs. Our restructuring plans are generally country or region specific and can extend over several fiscal years. The restructuring costs are generally the cash costs to exit locations and reduce the size of the workforce or facilities in impacted areas. Other Expense, Net Our other expense, net primarily includes impairment of rental equipment, impairment of other property, plant and equipment held for sale, net loss on disposal of property, plant and equipment and the change in the estimated fair value of contingent consideration. Use of Constant Currency Fluctuation in foreign currency exchange rate can have a major impact on our financial results. The reporting currency for our consolidated financial statements is the U.S. dollar. The local currency of each country is the functional currency for each of our respective entities operating in that country. Thus, we hold assets, incur liabilities, earn revenue and pay expenses in a variety of currencies other than the U.S. dollar, primarily the euro, the British pound sterling, the Australian dollar, the Canadian dollar and the Brazilian real. Changes in exchange rates have had and may continue to have a significant, and potentially adverse, effect on our results of operations. Our primary risk of loss regarding foreign currency exchange rate risk is caused by fluctuations in the following exchange rates: U.S. dollar/euro, U.S. dollar/british pound sterling, U.S. dollar/canadian dollar, U.S. dollar/australian dollar and U.S. dollar /Brazilian real. We have agreements with certain subsidiaries for repayment of a portion of the investments and advances made to these subsidiaries. We recognize the unrealized gains and losses, including those associated with investments and advances made to our subsidiaries, in foreign currency transaction gain (loss) on the consolidated statements of comprehensive income. The exposure of our income from operations to fluctuations in foreign currency exchange rates is reduced in part because a majority of the costs that we incur in connection with our foreign operations are also denominated in local currencies. We cannot predict the effects of exchange rate fluctuations on our future operating results. We do not currently hedge our currency transaction or translation exposure, nor do we have any current plans to do so. 5

16 We are exposed to financial statement gains and losses as a result of translating the operating results and financial position of our subsidiaries that are not denominated in U.S. dollars. We translate the local currency statements of comprehensive income of our foreign subsidiaries into U.S. dollars using the average exchange rate during the reporting period. Changes in foreign exchange rates affect the reported profits and losses and cash flows of our subsidiaries and may distort comparisons from year to year. As exchange rates are an important factor in understanding period-to-period comparisons, we believe that the presentation of results on a constant currency basis in addition to reported results helps improve investors ability to understand our operating results and evaluate our performance in comparison to prior periods. Constant currency information compares results between periods as if exchange rates had remained constant period-over-period. We use results on a constant currency basis as one measure to evaluate our performance. We calculate constant currency by calculating current period results using prior period foreign currency exchange rates. We generally refer to such amounts calculated on a constant currency basis as excluding or adjusting for the impact of foreign currency. These results should be considered in addition to, not as a substitute for, results reported in accordance with IFRS. Results on a constant currency basis, as we present them, may not be comparable to similarly titled measures used by other companies and are not measures of performance presented in accordance with IFRS. Critical Accounting Policies Our discussion and analysis of our financial condition, results of operations, liquidity and capital resources is based on our consolidated financial statements, which have been prepared in accordance with IFRS. IFRS requires that we make estimates and judgments that affect the reported amount of assets, liabilities, revenue and expenses and the related disclosure of contingent assets and liabilities. We base these estimates on historical experience and on various other assumptions that we consider reasonable under the circumstances. We evaluate our estimates and judgments. Actual results may differ from these estimates. We believe that the following critical accounting policies involve a higher degree of judgment or complexity in the preparation of our consolidated financial statements. Revenue Recognition We generate revenue from leasing modular space, remote accommodation and portable storage units and related products and services (including delivery, installation and removal of our lease units and other associated add-ons and value-added products and services, such as damage waivers and extended warranties, and the rental of steps, ramps, furniture, fire extinguishers, air conditioning and wireless internet access points), and from sales of new and used rental equipment. We enter into various types of lease arrangements with customers. We classify these leases as either operating or finance based on an evaluation of the terms and conditions of the arrangements. Our primary business is conducted through operating leases that we enter into with our customers, but we occasionally enter into finance leases. Judgment is involved in determining whether or not we retain all the significant risks and rewards of ownership, a significant factor in determining classification of each lease. Lease income from operating leases is recognized in income on a straight-line basis over the lease term. Delivery, installation, maintenance, removal, catering, and transportation services associated with rental and remote accommodation activities are recognized upon completion of the related services. For finance leases (i.e., capital leases) where we are a lessor, the revenue recognized at the inception of the lease is the fair value of the asset, or, if lower, the present value of the minimum lease payments accruing to us, computed at a market rate of interest. The finance income earned by us on such arrangements is recognized in interest income over the lease term. Revenue from the sale of new and used units is measured at the fair value of the consideration received or receivable, net of returns and trade discounts. Revenue is recognized when the significant risks and rewards of ownership have been transferred to the buyer, recovery of the consideration is probable, the associated costs and possible return of goods can be estimated reliably, there is no continuing management involvement with the goods and the amount of revenue can be measured. Transfer of risks and rewards occurs when units are delivered and installed. Revenue from delivery and installation services incidental to the sales of rental equipment is recognized upon completion of delivery and installation of sold rental equipment. Some equipment is sold under construction-type contracts. Construction-type contract revenue includes the initial amount agreed in the contract plus any variations in contract work, claims and incentive payments to the 6

17 extent that it is probable that those variations will result in revenue and can be measured reliably. When the outcome of a construction contract can be estimated reliably, contract revenue and expenses are recognized in profit or loss in proportion to the stage of completion of the contract determined by reference to the proportion of the costs incurred to date compared to estimated total costs under the contract. When the outcome of a construction contract cannot be estimated reliably, contract revenue is recognized only to the extent of contract costs incurred that are likely to be recoverable. An expected loss on a contract is recognized immediately in profit or loss. For construction contracts in progress, a single asset (prepaid expense) or liability (deferred revenue) is presented for the total of costs incurred and recognized profits, net of progress payments and recognized losses, in the consolidated statements of financial position. Business Combinations and Goodwill Business combinations are accounted for using the acquisition method, except for transactions among entities under common control, which are accounted for under the pooling of interest method as permitted by IFRS prospectively from the date on which control is taken. The cost of an acquisition is measured as the aggregate of the consideration transferred, measured at acquisition date fair value, and the amount of any non-controlling interest in the acquiree. Goodwill is initially measured at cost, being the excess of the aggregate of the consideration transferred and the amount recognized for non-controlling interest over the net identifiable assets acquired and liabilities assumed. After initial recognition, goodwill is measured at cost less any accumulated impairment losses. Impairment is tested at least annually. For the purpose of impairment testing, we allocate goodwill acquired in a business combination, from the acquisition date, to each of our cash generating units that are expected to benefit from the combination, irrespective of whether other assets or liabilities of the acquiree are assigned to those units. Where goodwill forms part of a cash generating unit and part of the operation within that unit is disposed of, the goodwill associated with the operation disposed of is included in the carrying amount of the operation when determining the gain or loss on disposal of the operation. Goodwill disposed of in this circumstance is measured based on the relative values of the operation disposed of and the portion of the cash generating unit retained. The determination of fair value of assets and liabilities in each of these circumstances is based to a considerable extent on management s judgment. Measurement of the Recoverable Amounts of Asset Groups and of Cash Generating Units or Groups of Cash Generating Units Containing Goodwill As required by International Accounting Standard ( IAS ) 36 Impairment of Assets we regularly monitor the carrying value of our asset groups, including rental equipment, property, plant and equipment and goodwill. Impairment reviews compare the carrying values to the higher of fair value less costs to sell or the present value of future cash flows that are derived from the relevant asset groups, cash generating unit or groups of cash generating units. These reviews, therefore, depend on management estimates and judgments, in particular in relation to the forecasting of future cash flows, the discount rate applied to the cash flows and the selection of relevant market comparable data. Rental Equipment Estimates are used in the determination of useful lives and residual values for rental equipment. Estimates are also used in the determination of the fair value of assets held for sale. Provision for Impairment of Trade Receivables Trade receivables are recognized initially at fair value and carried thereafter at amortized cost using the effective interest rate method, less provisions for doubtful accounts. Provision for impairment of trade receivables is recognized when there is objective evidence that we will not receive the cash flow due since the initial recognition of the receivables terms. Provisions are measured as the difference between the assets carrying amount and the present value of future cash flows discounted at the financial asset s original effective interest rate. Such provisions are stated in the consolidated statements of comprehensive income as selling, general and administrative expenses. The determination of the amount required to provide the provision for impairment of trade receivables requires judgment in evaluating the credit worthiness of customers and in projecting future credit losses on current receivables. 7

18 Provisions and Contingencies We maintain provisions in a number of areas within our consolidated financial statements to provide coverage against exposures that arise in the ordinary course of business. These provisions cover areas such as uninsured losses, termination liabilities, reorganization activities and uncertain tax positions. We recognize a provision when we have a present legal or constructive obligation as a result of a past event, and it is more likely than not that an outflow of resources will be required to settle the obligations and the amount can be reasonably estimated. Significant judgment is involved in determining whether these conditions are met. If we determine these conditions are not met, no provisions are recognized. Provisions are measured at the present value of the expenditures expected to be required to settle the obligation using a pre-tax rate that reflects current market assessments of the time value of money and, if appropriate, the risks specific to the obligation. Significant judgment is involved in assessing the exposures in these areas and hence in setting the level of the required provision. Valuation of Financial Instruments Where the fair value of financial assets and financial liabilities recorded in our consolidated statements of financial position cannot be derived from active markets, they are determined using valuation techniques including the discounted cash flows model. The inputs to these models are taken from observable markets where possible, but where this is not feasible, a degree of judgment is required in establishing fair values. The judgments include considerations of inputs such as liquidity risk, credit risk and volatility. Changes in assumptions about these factors could affect the reported fair value of financial instruments. Share-Based Payments Estimating fair value for share-based payments requires determining the most appropriate valuation model, which is dependent on the terms and conditions of the grant. This also requires determining the most appropriate inputs to the valuation model including the expected life of the option, volatility and dividend yield. The assumptions and models used for estimating fair value for share-based payments are disclosed in Note 23 to our 2013 consolidated financial statements. Income Taxes Uncertainties exist with respect to the interpretation of complex tax regulations, changes in tax laws and the amount and timing of future taxable income. Differences arising between the actual results and the assumptions made in such interpretation, or future changes to such assumptions, could necessitate future adjustments to tax benefit and expense already recorded. We establish provisions, based on reasonable estimates, for possible consequences of audits by the tax authorities of the respective countries in which we operate. The amount of such provisions is based on various factors, such as experience of previous tax audits and differing interpretations of tax regulations by the taxable entity and the responsible tax authority. The ultimate resolution of tax audits and interpretations of tax regulations could necessitate future adjustments to provisions established, which would likely affect our income tax benefit (expense) and profit (loss). Deferred tax assets are recognized for all unused tax losses to the extent that it is probable that taxable profit will be available against which the losses can be utilized. Significant judgment is required to determine the amount of deferred tax assets that can be recognized, based upon the likely timing and the level of future taxable profits together with future tax planning strategies. 8

19 Selected Historical Consolidated Financial Data The following summarizes our operating results for the years ended December 31, 2013, 2012 and 2011, on an actual currency basis. Year Ended December 31, (in thousands) Statement of Comprehensive Income Data: Revenue: Leasing and services revenue: Modular space $ 1,105,959 $ 1,032,796 $ 1,006,900 Remote accommodations 231,722 21,921 Sales: New units 416, , ,763 Rental units 44,766 63,286 80,919 Total revenue 1,798,661 1,447,339 1,353,582 Cost of revenues, excluding depreciation on rental equipment (906,614) (742,878) (682,557) Depreciation on rental equipment (242,042) (237,924) (223,391) Total cost of revenues (1,148,656) (980,802) (905,948) Gross profit 650, , ,634 Selling, general and administrative expense (450,261) (382,417) (347,011) Other depreciation and amortization (62,792) (50,444) (41,331) Impairment losses on goodwill (27,271) (255,110) (275,717) Impairment losses on rental equipment and property, plant and equipment (11,784) (53,473) (12,341) Restructuring costs (24,322) (9,016) (11,952) Other income (expense), net 15,783 (5,978) (1,775) Operating profit (loss) 89,358 (289,901) (242,493) Interest income 566 3,491 4,879 Interest expense (254,114) (255,701) (257,112) Currency gains (losses), net (23,959) 34,198 16,743 Other finance income (expense), net (3,102) 24,149 21,172 Gain on extinguishment of debt 9,424 15,903 Net finance expense (271,185) (177,960) (214,318) Loss before income tax (181,827) (467,861) (456,811) Income tax benefit (expense) (17,772) (14,182) 2,751 Net loss (199,599) (482,043) (454,060) Other comprehensive loss, net of tax (63,871) (20,931) (23,084) Total comprehensive loss $ (263,470) $ (502,974) $ (477,144) 9

20 Results of Operations The following summarized our operating results for the years ended December 31, 2013 and 2012, on a constant currency basis, and our operating results on an actual currency basis. Year Ended December 31, 2013 Compared to the Year Ended December 31, 2012 (in thousands) 2013 Constant Currency Basis Year Ended December 31, % of Revenue 2012 Actual Year Ended December 31, % of % of Revenue 2013 Revenue Revenue: Leasing and services: Modular space $1,109, % $ 1,032, % $ 1,105, % Remote accommodations 237, % 21, % 231, % Sales: New units 423, % 329, % 416, % Rental units 45, % 63, % 44, % Total revenue 1,815, % 1,447, % 1,798, % Cost of revenues, excluding depreciation on rental equipment (917,214) 50.5% (742,878) 51.3% (906,614) 50.4% Depreciation on rental equipment (243,592) 13.4% (237,924) 16.4% (242,042) 13.5% Gross profit 654, % 466, % 650, % Selling, general and administrative expense (453,147) 25.0% (382,417) 26.4% (450,261) 25.0% Other depreciation and amortization (63,240) 3.5% (50,444) 3.5% (62,792) 3.5% Impairment losses on goodwill (29,921) 1.6% (255,110) 17.6% (27,271) 1.5% Impairment losses on rental equipment and property, plant and equipment (11,862) 0.7% (53,473) 3.7% (11,784) 0.7% Restructuring costs (24,600) 1.4% (9,016) 0.6% (24,322) 1.4% Other income (expense), net 15, % (5,978) 0.4% 15, % Operating profit (loss) $ 87, % $ (289,901) 20.0% $ 89, % Revenue: Total revenue, on a constant currency basis, increased $368.4 million, or 25.4%, to $1,815.7 million from $1,447.3 million for the year ended December 31, This increase was primarily a result of significant increases in both the Asia Pacific and North American regions, primarily as a result of our October 2012 acquisition of Ausco and February 2013 acquisition of Target and the effects of lower revenue in the EMEA and Latin American regions. Total revenue, on an actual currency basis, increased $351.4 million, or 24.3%, to $1,798.7 million from $1,447.3 million for the year ended December 31, The North American region s total revenue increased $151.0 million, on a constant currency basis, of which $145.5 million related to the acquisitions of Target and Chard. Excluding the effects of the Target and Chard acquisitions, the North American region s total revenue increased $5.5 million, or 1.2%, on a constant currency basis, primarily due to a $17.7 million increase in leasing revenue, offset, in part, by a $10.2 million decrease in used unit sales revenue and a $2.0 million decrease in new unit sales revenue. The $17.7 million increase in leasing revenue was primarily attributable to an increase in average rental rate from improved pricing and units on rent in Canada and Alaska from customers in the energy sector. The $10.2 million decrease in used unit s revenue was 10

21 driven by fewer favorable sale opportunities in the United States and Canada and a focus on the core leasing business. The $2.0 million decrease in the sales of new units was primarily driven by lower sale opportunities and fewer large projects in the United States. The EMEA region s total revenue decreased $63.1 million, or 7.7%, on a constant currency basis. That reduction was primarily driven by a $55.6 million decrease in leasing revenue and a $10.5 million decrease in sale of used unit, offset, in part, by a $3.0 million increase in the sale of new units. The $55.6 million decrease in leasing revenue was primarily attributable to a reduction in units on rent and a decline in average rental rates in the United Kingdom and Iberia. France and Italy also experienced reductions in units on rent contributing to the decline in lease revenue. The $10.5 million decrease in used unit s revenue was driven by the lower volume of used unit sales in the United Kingdom, France and Belgium. Revenue from sales of new units increased primarily due to an increase in project size and volume in the United Kingdom offset by lower new units sales in Belgium. The Asia Pacific region s total revenue increased $293.1 million, on a constant currency basis, as a result of our acquisition of Ausco in October The Latin America region s total revenue decreased $12.8 million, or 18.2%, on a constant currency basis. The lower revenue was primarily driven by a $10.8 million decrease in the sale of new units, a $1.8 million decrease in leasing revenue and a $0.2 million decrease in the sale of used units. The $10.8 million decrease in the sale of new units is primarily due to lower sale opportunities in Brazil. The $1.8 million decrease in leasing revenue was primarily attributable to a decline in average rental rates and a decrease in delivery and installation services provided in Brazil. Average units on rent at December 31, 2013 and December 31, 2012 were 226,743 and 237,882, respectively. That decrease was mainly due to decreases in units on rent in the United Kingdom and Iberia. Average utilization rate during 2013 was 74.2%, as compared to 75.0% during The decrease in average utilization rate was driven by lower utilization in the United Kingdom and Iberia. The average monthly rental rate increased to $260 from $254, mainly due to an improved average rental rate in Canada and the United States. Average remote accommodations on rent for the years ended December 31, 2013 and 2012 was 5,624 and 2,076, respectively. The increase in average remote accommodations on rent was due to the Target acquisition in Gross Profit: Gross profit, on a constant currency basis, increased $188.4 million, or 40.4%, to $654.9 million from $466.5 million for the year ended December 31, The increase was primarily a result of significant increases in both the Asia Pacific and North American regions, primarily as a result of our October 2012 acquisition of Ausco and February 2013 acquisition of Target, an increase in the EMEA region and declines in the Latin American region. Gross profit increased $183.5 million to $650.0 million from $466.5 million for the year ended December 31, The North America region s gross profit increased $84.0 million, on a constant currency basis, of which $65.1 million related to the acquisitions of Target and Chard. Excluding the effects of the Target and Chard acquisitions, the North American region s gross profit increased $18.9 million, or 11.2%, as a result of lower costs and higher leasing margins in the United States and Canada where units on rent have increased from The EMEA region s gross profit increased $22.6 million, or 10.5%, on a constant currency basis, as a result of lower rental equipment depreciation in the United Kingdom and Iberia due to fewer capital expenditures, which offset the poor performance in the United Kingdom and Iberia as discussed above. The Asia Pacific region s gross profit increased by $98.2 million, on a constant currency basis, due to our acquisition of Ausco in October The Latin American region s gross profit decreased $16.6 million, or 43.0%, on a constant currency basis, primarily due to the decrease in the sale of new units and lower sale opportunities in Brazil. SG&A: SG&A expense, on a constant currency basis, increased $70.7 million, or 18.5%, to $453.1 million compared to $382.4 million for the year ended December 31, $50.5 million of the increase is attributable to the acquisitions of Ausco, Target and Chard. We incurred $8.3 million in 11

22 additional management incentive plan expense in 2013 than in 2012 due to the change in the fair value of the liability awards. Our legal and professional fees increased $6.3 million in 2013 over Bad debt expense also increased in 2013 compared to 2012 by $7.1 million. Other Depreciation and Amortization: Other depreciation and amortization, on a constant currency basis, increased $12.8 million, or 25.3% to $63.2 million compared to $50.4 million for the year ended December 31, 2012 primarily as a result of the acquisitions of Ausco and Target which had an impact of $14.1 million in 2013, partially offset by lower property, plant and equipment depreciation in the current year compared to the prior year for other regions. Impairment Losses on Goodwill: Impairment losses on goodwill, on an actual currency basis, decreased by $227.8 million, or 89.3%, to $27.3 million from $255.1 million for the year ended December 31, In 2013, the impairment loss on goodwill was a result of a decline in operating results and a reevaluation of future growth in Brazil, which generated an impairment of $27.3 million. In 2012, the impairment losses on goodwill was a result of continued lower than expected operating results in the United States and the United Kingdom, which generated an impairment of $169.4 million and $83.8 million, respectively. In addition, we recorded a $1.9 million impairment loss on goodwill in Eastern and Northern Europe due to economic and market conditions in the region. Impairment Losses on Rental Equipment and Property, Plant and Equipment: Impairment losses on rental equipment and property, plant and equipment, on a constant currency basis, decreased $41.6 million, or 77.8%, to $11.9 million compared to $53.5 million for the year ended December 31, The decrease was primarily driven by $41.6 million of impairment expense recognized for Iberia s rental equipment units and other property, plant and equipment in During 2012, our Iberia long-lived asset group experienced a significant decrease in the utilization of its rental equipment as a result of the continued poor economic environment of the region. As a result, we performed an evaluation of the recoverability of the Iberia long-lived asset group compared to its estimated recoverable amount. The value of the Iberia long-lived asset group was $41.6 million less than the recoverable amount. Accordingly, we recorded impairment losses of $41.6 million on certain assets in rental equipment and property, plant and equipment. Restructuring Costs: Restructuring costs, on a constant currency basis, increased $15.6 million, or 172.9%, to $24.6 million compared to $9.0 million for the year ended December 31, 2012 due to restructuring plans in Spain, the United Kingdom and Brazil to streamline operations and reduce costs. Other Income (Expense), Net: Other income (expense), net, on a constant currency basis, decreased $21.5 million to $15.5 million of other income compared to $6.0 million of other expense for the year ended December 31, The increase in other income (expense), net for the year ended December 31, 2013 includes $15.1 million of income associated with the change in the fair value of the contingent liability of the Target Earnout. Net Finance Income (Expense): Net finance expense, on an actual currency basis, increased $93.2 million, or 52.4%, to $271.2 million compared to $178.0 million for the year ended December 31, Interest income decreased $2.9 million, or 83.8% to $0.6 million from $3.5 million for the year ended December 31, 2012 and was attributable to lower interest received on bank deposits. Interest expense decreased $1.6 million, or 0.6% to $254.1 million for year ended December 31, 2013 from $255.7 million for the year ended December 31, As part of the 2012 Refinancing, we issued secured and unsecured bonds that bear interest at fixed rates. See Note 18 to our 2013 consolidated financial statements for additional information regarding the refinancing and our loans and borrowings. Currency gains (losses), net decreased by $58.2 million, or 170.1%, to a $24.0 million loss for the year ended December 31, 2013 from a $34.2 million gain for the year ended December 31, The decrease in currency gains was primarily attributable to the impact of foreign currency exchange rate changes on loans and 12

23 borrowings and intercompany receivables and payables denominated in a currency other than the subsidiaries functional currency. In addition, subsidiaries have changed their functional currency from euros to US dollars, which have led to additional foreign currency exposures in Other finance income, net decreased $27.2 million, or 112.8%, to an expense of $3.1 million for the year ended December 31, 2013 from income of $24.1 million for the year ended December 31, 2012 and was primarily attributable to the change in the fair value of interest rate swap derivatives prior to being terminated as part of the 2012 Refinancing. Gain on extinguishment of debt decreased $6.5 million, or 40.7%, to $9.4 million for the year ended December 31, 2013 from $15.9 million for the year ended December 31, The gain on extinguishment of debt of $9.4 million in 2013 related to a contingent liability owed to a former debt holder which was settled in the second quarter of 2013 by providing $10 million of AS PIK notes to the former debt holder. The gain on extinguishment of debt in 2012 of $15.9 million was related to the exchange of debt for equity resulting in a gain of $66.2 million, partially offset, by $42.4 million of financing expenses for the 2012 Refinancing attributable to lenders who participated in the Senior Facilities Agreement and Mezzanine Facilities Agreement and who continue to be lenders under the new agreements and a $7.9 million write off of unamortized deferred financing fees. Income Tax Benefit (Expense): Income tax expense increased $3.6 million to $17.8 million for the year ended December 31, 2013 compared to $14.2 million for the year ended December 31, This increase was principally due to the decrease in operating loss including the inclusion of Target in our results of operations, legislation enacted at year-end in France which resulted in the disallowance of certain deductions, the write off of deferred tax assets previously recorded for Brazil and the decision not to record tax benefits related to Brazil s operating losses, and by the 2012 tax benefit recorded upon the favorable settlement of an tax examination, offset by the write off in 2012 of deferred tax assets previously recorded in France as a result of legislation generally limiting the ability to utilize tax loss carryovers to 50% of taxable income, the non-deductible goodwill impairment in 2012, and taxes recognized in 2012 in connection with the 2012 Refinancing. 13

24 Year Ended December 31, 2012 Compared to the Year Ended December 31, 2011 The following summarized our operating results for the years ended December 31, 2012 and 2011, on a constant currency basis, and our operating results on an actual currency basis for the year ended December 31, (in thousands) 2012 Constant Currency Basis Year Ended December 31, % of Revenue 2011 Actual Year Ended December 31, % of % of Revenue 2012 Revenue Revenue: Leasing and services: Modular space $1,074, % $ 1,006, % $ 1,032, % Remote accommodations 21, % 0.0% 21, % Sales: New units 338, % 265, % 329, % Rental units 64, % 80, % 63, % Total revenue 1,498, % 1,353, % 1,447, % Cost of revenues, excluding depreciation on rental equipment (765,173) 51.1% (682,557) 50.4% (742,878) 51.3% Depreciation on rental equipment (245,680) 16.4% (223,391) 16.5% (237,924) 16.4% Gross profit 487, % 447, % 466, % Selling, general and administrative expense (397,051) 26.5% (347,011) 25.6% (382,417) 26.4% Other depreciation and amortization (51,912) 3.5% (41,331) 3.1% (50,444) 3.5% Impairment losses on goodwill (253,219) 16.9% (275,717) 20.4% (255,110) 17.6% Impairment losses on rental equipment and property, plant and equipment (54,230) 3.6% (12,341) 0.9% (53,473) 3.7% Restructuring costs (9,170) 0.6% (11,952) 0.9% (9,016) 0.6% Other expense, net (5,711) 0.4% (1,775) 0.1% (5,978) 0.4% Operating loss $ (283,669) 18.9% $ (242,493) 17.9% $ (289,901) 20.0% Revenue: Total revenue, on a constant currency basis, increased $144.9 million, or 10.7%, to $1,498.5 million for the year ended December 31, 2012 from $1,353.6 million for the year ended December 31, This increase was primarily a result of significant increases in both the Asia Pacific and Latin American regions, primarily as a result of our October 2012 acquisition of Ausco and January 2012 acquisition of Eurobras, an increase in the EMEA region and a decline in the North American region. Total revenue, on an actual currency basis, increased $93.7 million to $1,447.3 million for the year ended December 31, 2012 from $1,353.6 million for the year ended December 31, The North American region s total revenue decreased $17.7 million, or 3.7%, on a constant currency basis. That decrease was primarily attributable to a $13.6 million decrease in the new unit sales revenue and a $12.6 million decrease in the used unit sales revenue, offset, in part, by a $8.4 million increase in leasing revenue. The $13.6 million decrease in the sales of new units was primarily driven by lower new sale opportunities and fewer large projects in the United States. The $12.6 million decrease in used unit s revenue was driven by fewer favorable sale opportunities in the United States and Canada and a focus on the core leasing business. The $8.4 million increase in leasing revenue was primarily attributable to an increase in average rental rate and units on rent in Canada s workforce camps. 14

25 The EMEA region s total revenue increased $8.2 million, or 1.0%, on a constant currency basis. That increase was primarily driven by a $26.1 million increase in new unit sales offset, in part, by a $13.7 million decrease in leasing revenue and a $4.2 million decrease in used sale revenue. Revenue from sales of new units increased primarily due to an increase in project size and volume in the United Kingdom and Central Europe. The $13.7 million decline in leasing revenue was primarily attributable to a reduction in units on rent in the United Kingdom and Iberia. The $4.2 million decrease in used unit s revenue was driven by lower used unit sales in the United Kingdom. The Asia Pacific region s total revenue increased $97.7 million, on a constant currency basis, which was attributable to our acquisition of Ausco in October The Latin American region s total revenue increased $56.7 million or 290.6%, on a constant currency basis, which was primarily attributable to an increase in leasing revenue of $38.3 million and an increase in new unit sales of $18.4 million. The increase in leasing revenue and new unit sales was primarily due to our acquisition of Eurobras in Brazil which was completed in early Average units on rent were 237,882 and 232,850 at December 31, 2012 and December 31, 2011, respectively. The increase in units on rent was primarily due to the acquisitions of Ausco and Eurobras, partially offset by decreases in units on rent in the United Kingdom and Iberia. Average utilization rate during 2012 was 75.0%, as compared to 77.1% during The decrease in average utilization rate was driven by decreased utilization in the United Kingdom and Iberia. The average monthly rental rate increased to $254 from $235 due to an improved average rental rate in Canada as well as the acquisition of Ausco which has a higher average rental rate. Gross Profit: Gross profit, on a constant currency basis, increased $40.0 million, or 8.9%, to $487.6 million for the year ended December 31, 2012 from $447.6 million for the year ended December 31, The increase was primarily a result of significant increases in both the Asia Pacific and Latin American regions, primarily as a result of our October 2012 acquisition of Ausco and January 2012 acquisition of Eurobras, partially offset by a decrease in the North American and EMEA regions. Gross profit, on an actual currency basis, increased $18.9 million to $466.5 million for the year ended December 31, 2012 from $447.6 million for the year ended December 31, The North American region s gross profit decreased $0.3 million, or 0.2%, on a constant currency basis, as a result of lower leasing margins attributable to the revenue decline discussed above, partially offset by lower rental equipment depreciation for the year ended December 31, 2012 compared to the year ended December 31, The EMEA region s gross profit decreased $38.6 million, or 14.2%, on a constant currency basis, as a result of higher costs and lower leasing margins in Iberia and the United Kingdom where units on rent decreased from Rental equipment depreciation increased due to certain acquisitions as well as EMEA s increased investment in capital expenditures. The Asia Pacific region s gross profit increased $43.7 million, on a constant currency basis was attributable to our acquisition of Ausco in October The Latin American region s gross profit increased $34.2 million, on a constant currency basis, primarily as a result of our acquisition of Eurobras in Brazil, completed in early SG&A: SG&A expense, on a constant currency basis, increased $50.1 million, or 14.4%, to $397.1 million for the year ended December 31, 2012 compared to $347.0 million for the year ended December 31, $35.3 million of the increase is attributable to the acquisitions of Ausco and Eurobras. We incurred $7.9 million in additional management incentive plan expense in 2012 than in 2011 due to the change in the fair value of the liability awards. Other Depreciation and Amortization: Other depreciation and amortization, on a constant currency basis, increased $10.6 million, or 25.6% to $51.9 million for the year ended December 31, 2012 compared to $41.3 million for the year ended December 31, 2011 primarily as a result of the acquisition of Ausco and Eurobras which had an 15

26 impact of $11.3 million in 2012, partially offset by lower property, plant and equipment depreciation in 2012 as compared to the prior year. Impairment Losses on Goodwill: Impairment losses on goodwill, on an actual currency basis, decreased by $20.6 million, or 7.5%, to $255.1 million for the year ended December 31, 2012 from $275.7 million for the year ended December 31, The impairment losses on goodwill was a result of continued lower than expected operating results in the United States and the United Kingdom, which generated an impairment of $169.4 million and $83.8 million, respectively. In addition, we recorded a $1.9 million impairment loss on goodwill in Eastern and Northern Europe due to economic and market conditions in the region. In 2011, we recorded impairment losses on goodwill in the United States ($185.0 million), United Kingdom ($71.0 million), Iberia ($17.7 million) and Eastern and Northern Europe ($2.0 million) due to economic and market conditions in each country or region. Impairment Losses on Rental Equipment and Property, Plant and Equipment: Impairment losses on rental equipment and property, plant and equipment, on a constant currency basis, increased $41.9 million, or 339.5%, to $54.2 million for the year ended December 31, 2012 compared to $12.3 million for the year ended December 31, The decrease was primarily driven by $41.6 million of impairment expense recognized on Iberia s rental equipment units and other property, plant and equipment in During 2012, our Iberia long-lived asset group experienced a significant decrease in the utilization of its rental equipment as a result of the continued poor economic environment of the region. As a result, we performed an evaluation of the recoverability of the Iberia long-lived asset group compared to its estimated recoverable amount. The value of the Iberia long-lived asset group was $41.6 million less than the recoverable amount. Accordingly, we recorded impairment losses of $41.6 million on certain assets in rental equipment and property, plant and equipment. Restructuring Costs: Restructuring costs, on a constant currency basis, decreased $2.8 million, or 23.3%, to $9.2 million for the year ended December 31, 2012 compared to $12.0 million for the year ended December 31, 2011 due to the winding down of significant restructuring plans that were implemented in 2011 to streamline operations and reduce costs in EMEA. Other Expense, Net: Other expense, on a constant currency basis, increased $3.9 million, or 221.4%, to $5.7 million for the year ended December 31, 2012 compared to $1.8 million for the year ended December 31, The increase was primarily driven by an increase in other expenses in the United Kingdom. Net Finance Income (Expense): Net finance expense, on an actual currency basis, decreased $36.3 million, or 17.0%, to $178.0 million for the year ended December 31, 2012 compared to $214.3 million for the year ended December 31, Interest income decreased $1.4 million, or 28.4% to $3.5 million for the year ended December 31, 2012 from $4.9 million for the year ended December 31, 2011 and was attributable to lower interest received on bank deposits. Interest expense decreased $1.4 million, or 0.5%, to $255.7 million for the year ended December 31, 2012 compared to $257.1 million for the year ended December 31, 2011, which was driven by increases in EURIBOR and LIBOR rates on our loans and borrowings and from an increase in loans and borrowings due to interest that has been added to principal on our loans and borrowings prior to the 2012 Refinancing. As part of the 2012 Refinancing, we issued secured and unsecured bonds that bear interest at fixed rates. See Note 18 to our 2013 consolidated financial statements for additional information regarding the refinancing. Currency gains (losses), net increased by $17.5 million, or 104.3%, to $34.2 million for the year ended December 31, 2012 from $16.7 million for the year ended December 31, The increase in currency gains was primarily attributable to the impact of foreign currency exchange rate changes on loans and borrowings and intercompany receivables and payables denominated in a currency other than the subsidiaries functional currency. Other finance income increased $2.9 million, or 14.1%, to $24.1 million for the year ended December 31, 2012 from $21.2 million for the year ended December 31, 2011 and was attributable to the change in the fair value of interest rate swap derivatives prior to being terminated as part of the 2012 Refinancing. 16

27 Gain on extinguishment of debt increased $15.9 million for the year ended December 31, 2012 due to the 2012 Refinancing. The gain on extinguishment of debt of $15.9 million which is related to the exchange of debt for equity resulting in a gain of $66.2 million, partially offset, by $42.4 million of financing expenses associated with the 2012 Refinancing attributable to lenders who participated in the Senior Facilities Agreement and Mezzanine Facilities Agreement and are also lenders under the new agreements and a $7.9 million write off of unamortized deferred financing fees from prior debt. Income Tax Benefit (Expense): Income tax expense increased $16.9 million to an expense of $14.2 million for the year ended December 31, 2012 from a benefit of $2.7 million for the year ended December 31, This increase was primarily a result of the statutory change in the ability to offset deferred tax liabilities with net operating losses in France, and the inclusion of Eurobras and Ausco in our results of operations. This increase was offset by the reversal of an uncertain tax position reserve and recording of deferred tax assets not previously allowed as a result of the settlement of audits for tax periods. Liquidity and Capital Resources Our principal sources of liquidity are our existing cash and cash equivalents, cash generated from operations and borrowings under our ABL Revolver. Our principal uses of cash will be to fund capital expenditures, provide working capital, meet debt service requirements and finance our strategic plans, including possible acquisitions. We may also seek to finance our capital expenditures under purchase money, capital leases or other debt arrangements that provide liquidity or favorable borrowing terms. Based on our current level of operations and available cash, we believe our cash flows from operations, together with availability under our ABL Revolver, will provide sufficient liquidity to fund our current obligations, projected working capital requirements, debt service requirements and capital spending requirements for the foreseeable future. Cash Provided by (Used in) Operating Activities Cash used in operating activities was $55.2 million as compared to cash provided by operating activities for the year ended December 31, 2012 of $12.4 million, which is a decrease in cash provided by operating activities of $67.6 million. This decrease was primarily a result of an increase of $129.3 million in cash interest paid, an increase in rental equipment purchases of $31.4 million, a reduction in cash received from the sale of rental equipment of $18.5 million and an increase in income taxes paid of $6.0 million. These decreases were partially offset by a decrease in net loss adjusted for non-cash items for the year ended December 31, 2013 compared to December 31, 2012 of $111.1 million and an increase in cash provided by working capital of $6.8 million. Cash provided by operating activities for the year ended December 31, 2012 was $12.4 million as compared to cash used in operating activities for the year ended December 31, 2011 of $35.1 million, which is an increase in cash provided by operating activities of $47.5 million. The increase was primarily a result of an increase in cash provided by working capital of $66.4 million and a $41.2 million decrease in interest paid, partially offset by, an increase in rental equipment purchases of $21.5 million, a decrease in cash received from the sale of rental equipment of $17.6 million and an increase in income taxes paid of $8.5 million. Cash Used in Investing Activities Cash used in investing activities totaled $113.3 million as compared to $53.6 million for the year ended December 31, 2012, an increase of $59.7 million. The increase in cash used in investing activities was principally the result of $94.6 million of cash used for the Target and Chard acquisitions as compared to $33.2 million of cash used for the Eurobras acquisition in Cash used in investing activities for the year ended December 31, 2012 was $53.6 million as compared to $140.6 million for the year ended December 31, 2012, a decrease of $87.0 million. That decrease for the year ended December 31, 2012 was the result of lower cash used for acquisitions in 2012 compared to

28 Cash Flows Provided by Financing Activities Cash provided by financing activities totaled $122.5 million as compared to $30.2 million for the year ended December 31, 2012, an increase of $92.3 million. The increase was due to $82.8 million less in financing costs paid in 2013 compared to 2012, an increase in net borrowings in 2013 of $5.2 million and $4.2 million less in the finance lease repayments. Cash provided by financing activities for the year ended December 31, 2012 was $30.2 million compared to cash used in financing activities of $27.9 million, an increase of $58.1 million. The increase was driven by net proceeds from the 2012 Refinancing and subsequent borrowings on the ABL Revolver in the amount of $123.8 million, partially offset by, and $88.8 million paid in transaction costs associated with the 2012 Refinancing. Capital Expenditures We incurred capital expenditures for the purchase of rental equipment of $259.2 million during the year ended December 31, During the year ended December 31, 2012, we had rental equipment capital expenditures of $227.8 million. The increase is attributable to a $55.3 million increase in capital expenditures associated with the acquired Ausco and Target operations, partially offset by a focus on disciplined capital expenditures in other regions which resulted in a decline in capital expenditures of $23.9 million. During the year ended December 31, 2011, we had rental equipment capital expenditures of $206.3 million. The $21.5 million increase for the year ended December 31, 2012 compared to December 31, 2011 was attributable to the $21.0 million of capital expenditures incurred by Ausco following our acquisition of them. Contractual Obligations The following table presents information relating to our contractual obligations and commercial commitments as of December 31, 2013 (in thousands): Less than Between 1 and 5 More than Total 1 year years 5 years Long-term indebtedness, including current portion and interest (a) $ 4,333,187 $ 208,809 $ 3,319,312 $ 805,066 Contingent consideration (b) 6,567 6,567 Joint venture obligation (c) 14,054 2,521 11,533 Capital lease obligations 15,939 8,432 6,057 1,450 Operating lease obligations 287,286 52, , ,885 $ 4,657,033 $ 271,918 $ 3,475,714 $ 909,401 (a) As more fully disclosed in Note 18 of our consolidated financial statements, long-term indebtedness includes borrowings and interest under our senior secured and unsecured notes and our ABL Revolver. (b) As more fully disclosed in Note 5 of our consolidated financial statements, we have entered into an agreement that requires us to make additional payments to the former owners of Target dependent upon the future earnings of Target. (c) As more fully disclosed in Note 25 of our consolidated financial statements, we have entered into an agreement that will require us to make contributions to acquire an equity interest in a joint venture. The total amount of committed capital contributions to the joint venture are RMB 85.3 million (approximately $14.1 million) which we expect to fund during 2014 through Off-Balance Sheet Arrangements We have no off-balance sheet arrangements that have or are reasonably likely to have a current or future material effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources. 18

29 Seasonality Although demand from certain of our customers is seasonal, our operations, as a whole, are not impacted in any material respect by seasonality. Impact of Inflation We believe that inflation has not had a material effect on our results of operations. Recently Issued Accounting Standards The following are the accounting standards we adopted in 2013: IAS 1 Financial Statement Presentation: Presentation of Items of Other Comprehensive Income The amendments to IAS 1 change the grouping of items presented in other comprehensive income. Items that could be reclassified / (or recycled ) to profit or loss at a future point in time (for example, upon derecognition or settlement) would be presented separately from items that will never be reclassified. The pronouncement affects presentation only and did not have any impact on the financial position or results of operations. IAS 19 Employee Benefits (Amendment) The IASB has issued numerous amendments to IAS 19. These range from fundamental changes such as removing the corridor mechanism and the concept of expected returns on plan assets to simple clarifications and re-wording. In the first quarter of 2013, we retrospectively applied the amendments to IAS 19 and recorded an increase in employee benefit liability of $732 and a corresponding decrease in accumulated deficit of $732 as of January 1, IFRS 7 Financial Instruments: Disclosures Enhanced Derecognition Disclosure Requirements The amendment to IFRS 7 requires an entity to disclosure information about rights of set-off and related arrangements, which allows users of the consolidated financial statements to evaluate the effect of netting arrangements on an entity s financial position. The adoption of this standard did not have an impact on our financial position or results of operations. IFRS 10 Consolidated Financial Statements IFRS 10 replaces the portion of IAS 27 Consolidated and Separate Financial Statements that addresses the accounting for consolidated financial statements. It also includes the issues raised in SIC-12 Consolidation Special Purpose Entities. IFRS 10 establishes a single control model that applies to all entities including special purpose entities. The changes introduced by IFRS 10 requires management to exercise significant judgment to determine which entities are controlled, and therefore, are required to be consolidated by a parent, compared with the requirements that were in IAS 27. The adoption of this standard did not have any impact on our financial position or results of operations. IFRS 11 Joint Arrangements IFRS 11 replaces IAS 31 Interests in Joint Ventures to include only two categories of joint arrangements (joint operation and joint venture) in which the legal form of the joint arrangement must be considered and whether a separate vehicle exists. The adoption of this standard did not have any impact on our financial position or results of operations. 19

30 IFRS 12 Disclosure of Interest in Other Entities IFRS 12 includes all of the disclosures that were previously in IAS 27 related to consolidated financial statements, as well as all of the disclosures that were previously included in IAS 31 and IAS 28. These disclosures relate to an entity s interests in subsidiaries, joint arrangements, associates and structured entities. The adoption of this standard did not have any impact on our financial position or results of operations. IFRS 13 Fair Value Measurement IFRS 13 establishes a single source of guidance under IFRS for all fair value measurements. IFRS 13 does not change when an entity is required to use fair value, but rather provides guidance on how to measure fair value under IFRS when fair value is required or permitted. As a result of the guidance in IFRS 13, we reassessed our policies surrounding the measurement of fair value, but the adoption did not have a material impact on fair value measurements other than the inclusion of fair value information disclosures for financial instruments as set out in Note 24 of our consolidated financial statements. Qualitative and Quantitative Disclosure about Market Risk As part of the 2012 Refinancing our existing interest rate swap agreements were repaid and terminated. Our primary ongoing market risks relate to foreign currency exchange rates and changes in interest rates. Foreign Currency Risk We are primarily exposed to currency risk on sales, purchases and borrowings that are denominated in a currency other than the respective functional currencies of our subsidiaries, the euro, the British pound sterling, the U.S. dollar, the Canadian dollar, the Brazilian real and the Australian dollar. Our exposure to currency risk changed substantially with the 2012 Refinancing as a result of a change in the currency of the majority of our loans and borrowings. Interest Rate Risk Borrowings under our ABL Revolver are variable rate debt. Interest rate changes generally impact the amount of our interest payments and, therefore, our future earnings and cash flows, assuming other factors are held constant. An increase in interest rates by 100 basis points on our variable rate debt would increase annual interest expense by approximately $9.0 million. 20

31 C ONSOLIDATED FINANCIAL STATEMENTS Algeco Scotsman Global S.à r.l. Years Ended December 31, 2013, 2012 and 2011 With Report of Independent Auditors

32 Table of Contents Consolidated statements of comprehensive income... 3 Consolidated statements of financial position... 4 Consolidated statements of changes in equity... 5 Consolidated statements of cash flows Reporting entity Basis of preparation and consolidation Significant accounting policies Significant accounting judgments, estimates and assumptions Acquisitions Revenue Personnel expenses and employee benefits Other income (expense), net Finance income and expense Income taxes Rental equipment Other property, plant and equipment Intangible assets Financial assets and liabilities Inventories Prepaid expenses and other current assets Construction contracts Loans and borrowings Provisions Trade, other payables and accrued expenses Deferred revenue and customer deposits Capital and reserves Share-based payments Financial instruments Commitments and contingencies Related parties Group entities Report of Independent Auditors... 71

33 Consolidated statements of comprehensive income Year ended December 31, Revenues Leasing and services revenue: Modular space $ 1,105,959 $ 1,032,796 $ 1,006,900 Remote accommodations 231,722 21,921 Sales: New units 416, , ,763 Rental units 44,766 63,286 80,919 Total revenues 1,798,661 1,447,339 1,353,582 Cost of revenues Cost of revenues, excluding depreciation on rental equipment (906,614) (742,878) (682,557) Depreciation on rental equipment (242,042) (237,924) (223,391) Total cost of revenues (1,148,656) (980,802) (905,948) Gross profit 650, , ,634 Selling, general and administrative expense (450,261) (382,417) (347,011) Other depreciation and amortization (62,792) (50,444) (41,331) Impairment losses on goodwill (27,271) (255,110) (275,717) Impairment losses on rental equipment and property, plant and equipment (11,784) (53,473) (12,341) Restructuring costs (24,322) (9,016) (11,952) Other income (expense), net 15,783 (5,978) (1,775) Operating profit (loss) 89,358 (289,901) (242,493) Net finance income (expense) Interest income 566 3,491 4,879 Interest expense (254,114) (255,701) (257,112) Currency gains (losses), net (23,959) 34,198 16,743 Other finance income (expense), net (3,102) 24,149 21,172 Gain on extinguishment of debt 9,424 15,903 Net finance expense (271,185) (177,960) (214,318) Loss before income tax (181,827) (467,861) (456,811) Income tax benefit (expense) (17,772) (14,182) 2,751 Net loss (199,599) (482,043) (454,060) Other comprehensive income (loss) Foreign currency translation (62,790) (18,733) (24,626) Defined benefit plan actuarial gain (loss) (1,081) (2,198) 1,542 Other comprehensive loss, net of tax (63,871) (20,931) (23,084) Total comprehensive loss $ (263,470) $ (502,974) $ (477,144) See the accompanying notes which are an integral part of these consolidated financial statements. 3

34 Consolidated statements of financial position December 31, Assets Current assets Cash and cash equivalents $ 60,111 $ 104,037 Trade receivables, net 373, ,456 Inventories 51,345 68,740 Short-term financial assets 7,910 Prepaid expenses and other current assets 44,648 49,666 Total current assets 537, ,899 Non-current assets Rental equipment, net 2,015,608 1,912,682 Other property, plant and equipment, net 221, ,592 Goodwill 993, ,173 Intangible assets, net 304, ,289 Long-term financial assets 20,042 31,113 Other non-current assets 5,125 6,047 Total non-current assets 3,559,837 3,410,896 Total assets $ 4,097,796 $ 4,031,795 Liabilities Current liabilities Trade payables and accrued expenses 295, ,490 Deferred revenue and customer deposits 65,408 44,357 Provisions 20,421 20,181 Loans and borrowings 9,702 5,254 Short-term financial liabilities 10,400 8,731 Current tax liabilities 6,746 12,555 Accrued interest 48,209 50,501 Total current liabilities 456, ,069 Non-current liabilities Deferred revenue and customer deposits 5,715 Provisions 35,632 40,213 Loans and borrowings 3,111,623 2,905,942 Employee benefits 67,691 41,253 Deferred tax liabilities 220, ,393 Total non-current liabilities 3,440,729 3,205,801 Total liabilities 3,897,389 3,651,870 Equity Share capital 737, ,468 Share premium 1,588,345 1,427,100 Non-controlling interests 1,747 1,582 Accumulated other comprehensive gain 3,847 67,539 Accumulated deficit (2,131,363) (1,931,764) Total equity 200, ,925 Total liabilities and equity $ 4,097,796 $ 4,031,795 See the accompanying notes which are an integral part of these consolidated financial statements. 4

35 Consolidated statements of changes in equity Share capital Share premium Actuarial gains / (losses) Foreign currency translation Legal Noncontrolling interests Accumulated deficit Total equity (deficit) Balance at January 1, 2011 $ 657,711 $ 408,579 $ (1,730) $ 138,685 $ 2 $ $ (1,276,096) $ (72,849) Net loss (454,060) (454,060) Other comprehensive income (loss) 1,542 (24,626) (23,084) Total comprehensive loss (477,144) Adoption of amendments to IAS 19R (732) (732) Balance at December 31, , ,579 (188) 114,059 2 (1,730,888) (550,725) Net loss (482,043) (482,043) Other comprehensive loss (2,198) (18,733) (20,931) Total comprehensive loss (502,974) Issue of ordinary shares 157, , ,305 Acquisition of entities under common control 615,849 (25,403) 1, , ,195 Other transactions with Parent (876) (876) Balance at December 31, ,468 1,427,100 (2,386) 69, ,582 (1,931,764) 379,925 Net loss (199,599) (199,599) Other comprehensive loss (1,081) (62,611) (179) (63,871) Total comprehensive loss (263,470) Capital contribution 92,836 92,836 Re-denomination of share capital (77,637) 77,637 Share based payment Other transactions with Parent (9,228) (9,228) Balance at December 31, 2013 $ 737,831 $ 1,588,345 $ (3,467) $ 7,312 $ 2 $ 1,747 $ (2,131,363) $ 200,407 See the accompanying notes which are an integral part of these consolidated financial statements. 5

36 Consolidated statements of cash flows Year ended December 31, Cash flows from operating activities Net loss $ (199,599) $ (482,043) $ (454,060) Adjustments for: Depreciation 264, , ,756 Amortization of intangible assets 40,561 27,953 18,966 Impairment losses on rental equipment and property, plant and equipment 11,784 53,473 12,341 Impairment losses on goodwill 27, , ,717 Purchase of rental equipment (259,212) (227,800) (206,337) Proceeds from sale of rental equipment 44,766 63,286 80,919 Gain on disposal of rental equipment (18,258) (19,856) (11,362) (Gain) loss on disposal of property, plant and equipment (559) 997 1,863 Reduction in earnout agreement liability (15,091) Net finance expense 271, , ,318 Income tax expense (benefit) 17,772 14,182 (2,751) Changes in working capital (net of businesses acquired): Trade and other receivables 38,545 54,358 (59,415) Inventories 18,511 4,666 (17,827) Financial assets (2,481) (4,898) (1,343) Prepaid expenses and other current assets 7,174 24,690 5,801 Trade payables and accrued expenses (41,409) (53,466) 51,558 Deferred revenue and customer deposits (1,932) 2,768 (10,104) Employee benefits and provisions 25,775 9,259 2,334 Cash provided by operating activities 229, , ,374 Interest paid (247,819) (118,537) (159,703) Interest received Income tax paid (36,822) (30,791) (22,273) Net cash provided by (used in) operating activities (55,205) 12,434 (35,139) Cash flows from investing activities Proceeds from the sale of property, plant and equipment 7,690 2,359 3,152 Acquisition of businesses, net of cash acquired (94,600) (33,178) (121,835) Acquisition of property, plant and equipment and other intangible assets (26,411) (22,798) (21,909) Net cash used in investing activities (113,321) (53,617) (140,592) Cash flows from financing activities Receipts from borrowings 868,392 3,284, Payment of transaction costs (5,930) (88,777) Repayment of borrowings (739,375) (3,160,676) (20,335) Payment of finance lease liabilities (621) (4,778) (7,590) Net cash provided by (used in) financing activities 122,466 30,231 (27,889) Net decrease in cash and cash equivalents (46,060) (10,952) (203,620) Cash and cash equivalents at beginning of year 99, , ,696 Effect of exchange rate fluctuations on cash held 375 (2,573) (26,222) Cash and cash equivalents at end of year $ 53,644 $ 99,329 $ 112,854 Cash and cash equivalents, consolidated statements of financial position $ 60,111 $ 104,037 $ 119,239 Bank overdrafts (6,467) (4,708) (6,385) Cash and cash equivalents, consolidated statements of cash flows $ 53,644 $ 99,329 $ 112,854 See the accompanying notes which are an integral part of these consolidated financial statements. 6

37 1. Reporting entity Algeco Scotsman Global S.à r.l. (further referred to as the Company or together with its subsidiaries (the Group ) is a limited liability company (société à responsabilité limitée) incorporated under the laws of Luxembourg on July 6, 2007 under the name Ristretto Group S.à r.l. The Company changed its name in July 2012 to conform with the worldwide branding used by the Group s operating subsidiaries. The main activity of the Company is to carry out all transactions pertaining directly or indirectly to the acquisition of participating interests as well as the financing of subsidiary companies. The Group, through its operating subsidiaries, engages in the leasing and sale of mobile offices, modular buildings and storage products and their delivery and installation throughout Europe, North America, South America and Asia Pacific. The Group also provides full-service remote workforce accommodation solutions. The registered office of the Company is at 20, rue Eugène Ruppert, L-2453 Luxembourg. The Group carries out its business activities principally trading under the names Williams Scotsman and Target Logistics in North America, Algeco in Europe, Elliott in the United Kingdom ( UK ), Eurobras in Brazil, Ausco in Australia and Portacom in New Zealand. The Group s ultimate parent is Algeco/Scotsman Holding S.à r.l. ( Holdings ), a limited liability company (société à responsabilité limitée) incorporated under the laws of Luxembourg, that is principally owned by a group of investment funds managed by TDR Capital LLP ( TDR ), CMI Luxembourg S.à r.l. ( CMI ) and certain former and current lenders. 2. Basis of preparation and consolidation a) Statement of compliance The consolidated financial statements have been prepared in accordance with International Financial Reporting Standards ( IFRS ) as issued by the International Accounting Standards Board ( IASB ). The consolidated financial statements were approved by the Board of Managers of the Company on March 27, b) Basis of measurement The consolidated financial statements have been prepared on the historical cost basis except for assets and liabilities acquired in business combinations, derivative financial instruments and share-based payments accounted for as liabilities which are measured at fair value at each reporting date and long-lived assets where impairment charges have been recorded which are measured at fair value at the impairment date. As more fully discussed in Note 3, the Company changed its functional and presentation currency to United States dollars ( USD ) from Euros on May 14, c) Presentation currency These consolidated financial statements are presented in USD. 7

38 d) Basis of consolidation The consolidated financial statements comprise the financial statements of the Company and its subsidiaries as of December 31, Subsidiaries are fully consolidated from the date of acquisition, being on 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, using consistent accounting policies. All intra-group balances, transactions, unrealized gains and losses resulting from intra-group transactions and dividends are eliminated in full. On an acquisition-by-acquisition basis, the Group recognizes any non-controlling interest in the acquiree either at fair value or at the non-controlling interest s proportion of the share of the acquiree s net assets. Total comprehensive income within a subsidiary is attributable to non-controlling interest when the noncontrolling interest is entitled to share in the results of operations of the Group. e) Reclassifications The following accounts were reclassified in the consolidated statements of financial position at December 31, 2012 to conform to the current presentation. Current deferred revenue and customer deposits liabilities of $35,090 and $9,267, respectively, at December 31, 2012 were reclassified from trade and other payables to current deferred revenue and customer deposits. In addition, $41,533 was reclassified from other property, plant and equipment, net to rental equipment, net at December 31, 2012 for assets that are generating revenue and $3,675 was reclassified between rental equipment, net and other property, plant and equipment, net. Impairment losses on rental equipment and other property plant and equipment of $53,473 and $12,341 for the years December 31, 2012 and 2011, respectively, were reclassified from other income (expense), net to a separate line item in the consolidated statements of comprehensive income. 3. Significant accounting policies a) Cash and cash equivalents The Group considers all highly liquid instruments with a maturity of three months or less when purchased to be cash equivalents. For the purpose of the consolidated statements of cash flows, cash and cash equivalents consist of cash and cash equivalents as defined above, net of outstanding bank overdrafts. b) Inventories Inventories which consist of raw materials, rental equipment in assembly, parts and supplies and rental equipment held for sale, are measured at the lower of cost or net realizable value. The cost of inventories is based on the weighted average principle, and includes expenditures incurred in acquiring the inventories, production or conversion costs and other costs incurred in bringing them to their existing location and condition. In the case of manufactured inventories and work in progress, cost includes an appropriate share of production overheads based on normal operating capacity. 8

39 Net realizable value is the estimated selling price in the ordinary course of business, less the estimated costs of completion and selling expenses. c) Rental equipment Rental equipment ( rental fleet ) is comprised of assets held for rental to customers which are expected to be in use for more than one reporting period and locations for rent within our workforce accommodations business which can include buildings, modular units, site improvements and equipment. Items of rental fleet are measured at cost less accumulated depreciation and impairment losses. Costs include expenditures that are directly attributable to the acquisition of the asset. The cost of self-constructed assets includes the cost of materials, direct labor and any other costs directly attributable to bringing the asset to a working condition for its intended use. Costs of improvements and betterments to rental equipment are capitalized when such costs extend the useful life of the equipment. Costs incurred for equipment to meet a particular lease specification are capitalized and depreciated over the lease term. Rental fleet assets are depreciated on a straight-line basis over their estimated useful lives which generally range from 3 to 20 years with a residual value of 0% to 50%. These useful lives and residual values vary within the Group based on the type of unit and local operating conditions. Depreciation methods, useful lives and residual values are reviewed at each reporting date and adjusted prospectively, if appropriate. d) Other property, plant and equipment Other property, plant and equipment are stated at cost, net of accumulated depreciation and impairment losses. The cost of self-constructed assets includes the cost of materials, direct labor and any other costs directly attributable to bringing the asset to a working condition for its intended use, and the costs of dismantling and removing the items and restoring the site on which they are located. Assets leased under finance leases are depreciated over the shorter of the lease term and their useful lives unless it is reasonably certain that the Group will obtain ownership by the end of the lease term. Purchased software that is integral to the functionality of the related equipment is capitalized as part of that equipment. Land is not depreciated. Maintenance and repair costs are expensed as incurred. Depreciation is computed using the straight-line method over estimated useful lives, as follows: Buildings Machinery and equipment Furniture and fixtures years 3-10 years 3-10 years Depreciation methods, useful lives and residual values are reviewed at each reporting date and adjusted prospectively, if appropriate. 9

40 e) Goodwill and business combinations Goodwill arises upon acquisition of businesses. Goodwill represents the excess of the cost of the acquisition over the Group s interest in the net fair value of the identifiable assets, liabilities and contingent liabilities of the acquiree. Goodwill is considered to have an indefinite life and is not amortized. After initial recognition, goodwill is measured at cost less any accumulated impairment losses. As more fully described below, goodwill is tested for impairment at least annually, or more frequently when there is an indication that the carrying value may be impaired. Business combinations with unrelated entities are accounted for using the acquisition method. The cost of an acquisition is measured as the aggregate of the consideration transferred, measured at acquisition date fair value and the amount of any non-controlling interest in the acquiree. For each business combination, the Group elects whether it measures the non-controlling interest (if any) in the acquiree either at fair value or at the proportionate share of the acquiree s identifiable net assets. Acquisition costs incurred are expensed and included in administrative expenses. When the Group acquires a business, it assesses the financial assets and liabilities assumed for appropriate classification and designation in accordance with the contractual terms, economic circumstances and pertinent conditions as at the acquisition date. If the business combination is achieved in stages, the acquisition date fair value of the acquirer s previously held equity interest in the acquiree is remeasured to fair value at the acquisition date through profit or loss. Any contingent consideration to be transferred by the acquirer will be recognized at fair value at the acquisition date. Subsequent changes to the fair value of the contingent consideration that is deemed to be an asset or liability will be recognized either in profit or loss or as a change to other comprehensive income. If the contingent consideration is classified as equity, it will not be remeasured and subsequent settlement will be accounted for within equity. In instances where the contingent consideration does not fall within the scope of IAS 39, it is measured in accordance with the appropriate IFRS. Goodwill is initially measured at cost, being the excess of the aggregate of the consideration transferred and the amount recognized for non-controlling interest over the net identifiable assets acquired and liabilities assumed. If this consideration is lower than the fair value of the net assets of the subsidiary acquired, the difference is recognized in profit or loss. Business combinations among entities under the common control of the Group s controlling shareholders are accounted for under the pooling of interest method prospectively from the date on which control is taken. 10

41 Where goodwill forms part of a cash generating unit and part of the operation within that unit is disposed of, the goodwill associated with the operation disposed of is included in the carrying amount of the operation when determining the gain or loss on disposal of the operation. Goodwill disposed of in this circumstance is measured based on the relative values of the operation disposed of and the portion of the cash generating unit retained. f) Intangible assets Intangible assets acquired separately are measured on initial recognition at cost. The cost of intangible assets acquired in a business combination is the fair value at the date of acquisition. Intangible assets that are acquired by the Group and determined to have an indefinite useful life are not amortized, but are tested for impairment at least annually. Intangible assets that have finite useful lives are measured at cost less accumulated amortization and impairment losses, if any. Intangible assets in the process of being developed are not amortized until such time as they are placed in use. Amortization is recognized in profit or loss over the useful economic lives of intangible assets from the date that they are available for use. Amortization of intangible assets is included in other depreciation and amortization on the consolidated statements of comprehensive income. The estimated useful lives for these assets are as follows: Customer relationships Software 1-12 years 3-7 years Subsequent expenditures for intangible assets are capitalized only when they increase the future economic benefits embodied in the specific asset to which they relate. g) Impairment of non-financial assets Goodwill For the purpose of impairment testing, goodwill is allocated to cash generating units ( CGUs ) or groups of cash generating units ( CGU Groups ) that are expected to benefit from the synergies of the combination irrespective of whether other assets or liabilities of the acquiree are assigned to those units. CGUs or CGU Groups to which goodwill has been allocated are tested for impairment annually, or more frequently when there is an indication that the carrying value may be impaired. If the recoverable amount of each CGU or CGU Group to which goodwill has been allocated is less than the carrying amount of the unit or group, an impairment loss is recognized in profit or loss. The recoverable amount of a CGU, for the purpose of the annual goodwill impairment test, is the higher of the CGU s fair value less costs to sell, which is determined under the guideline public company method, or its value in use. The guideline public company method is based on market participant comparables with derived multiples of earnings before interest, taxes, depreciation and amortization ( EBITDA ) that are used to develop an estimate of value for the CGU. The value in use was determined using the discounted cash flow method, which involves a projection of the cash flows that the CGU is expected to generate and converting these cash flows into a present value equivalent through discounting. Both of these methods are considered level 3 valuation techniques (see Note 24). 11

42 Impairment losses are allocated first to reduce the carrying amount of any goodwill allocated to the unit or group, then to intangible assets of the unit or group, and lastly to the carrying amount of the other assets in the unit or group on a pro rata basis. Impairment losses relating to goodwill may not be reversed in future periods. The Group performs its annual impairment test for goodwill on October 1 st of each year. Intangible assets with indefinite useful lives Intangible assets with indefinite useful lives are also tested for impairment annually, or more frequently when there is an indication that the carrying value may be impaired. If the recoverable amount of the intangible assets with indefinite useful lives is less than its carrying amount, an impairment loss is recognized in profit or loss. The Group performs its annual impairment test for intangible assets with indefinite useful lives on October 1 st of each year. Other non-financial assets The carrying amounts of the Group s non-financial assets or groups of assets, other than inventories and deferred tax assets, are reviewed at each reporting date to determine whether there is any indication of impairment. If any such indication exists, the asset s or group of assets recoverable amount is estimated. If the asset s estimated recoverable amount is less than its carrying value, an impairment loss is recognized. h) Financial instruments Non-derivative financial instruments Non-derivative financial instruments comprise cash and cash equivalents, trade and other receivables, loans and borrowings and trade and other payables. These non-derivative financial instruments are recognized initially at fair value plus any directly attributable transaction costs. Costs directly attributable to the issuance of a finance liability are offset against that liability and are amortized over the life of that liability using the effective interest rate method. Subsequent to initial recognition, non-derivative financial instruments are measured as shown in Note

43 Derivative financial instruments The Group holds derivative financial instruments to manage its foreign currency and interest rate risk exposures. Derivatives are carried at fair value. Attributable transaction costs are recognized in profit or loss when incurred. Hedge accounting is not applied to these derivative instruments. Changes in the fair value of all derivatives are recognized in profit or loss as part of finance income and expense. Derivatives are carried as financial assets when the fair value is positive and as financial liabilities when the fair value is negative. The fair value of derivative financial instruments is classified as current or non-current based on the maturity of the underlying instrument. Financial assets and liabilities are offset and the net amount is reported in the consolidated statements of financial position when there is an enforceable master netting arrangement and the Group has the intention to settle on a net basis. i) Provisions A provision is recognized when there is a present obligation (legal or constructive) as a result of a past event, in which it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation, and a reliable estimate can be made of the amount of the obligation. If these conditions are not met, no provision is recognized. Provisions are measured at the value of the expenditures expected to be required to settle the obligation. Where the time value of money is material, provisions are discounted using an appropriate rate that takes into account the risks specific to the liability. Uninsured losses are recognized when the underlying event occurs and the value of the expenditures expected to be required to settle the obligation can be determined. Recoveries of amounts claimed from insurers to settle expenses incurred are recognized when it is virtually certain that reimbursement will be received. j) Retirement benefit obligation The Group provides post-employment benefits to certain of its employees under defined benefit plans. The defined benefit obligations are determined annually on December 31 st. The Group s net obligation for defined benefit pension plans is calculated separately for each plan by first estimating the net present value of future benefits that employees have earned in return for their service in the current and prior periods. Any unrecognized past service costs and the fair value of any plan assets are deducted to arrive at the net obligation. The discount rate used in the present value calculation is the yield at the reporting date on AA credit-rated bonds that have maturity dates approximating the terms of the Group s obligations and that are denominated in the same currency in which the benefits are expected to be paid. The calculation is performed annually using the projected unit credit method. When the calculation results in a benefit to the Group, the recognized asset is limited to the net total of any unrecognized past service costs and the present value of any future refunds from the plan or reductions in future contributions to the plan. The Group recognizes actuarial gains and losses related to defined benefit plans in the year they arise in equity as a component of total comprehensive income. 13

44 k) Lease transactions The determination of whether an arrangement is, or contains, a lease is based upon the substance of the arrangement at the inception date or at the acquisition date if the lease was assumed as part of a business combination transaction. The arrangement is assessed for whether fulfillment of the arrangement is dependent on the use of a specific asset or assets or the arrangement conveys a right to use the asset or assets, even if that right is not explicitly specified in the arrangement. Group as lessee Operating lease agreements, for which the Group has a financial commitment but does not bear all of the risks and rewards of ownership, are not reflected in the consolidated statements of financial position. Operating lease payments are recognized as an operating expense in the consolidated statements of comprehensive income on a straight-line basis over the lease term. Leases under which the Group, as a lessee, assumes substantially all the risks and rewards of ownership are classified as finance leases. Upon initial recognition, the leased asset and associated liability are measured at an amount equal to the lower of the leased assets fair value or the present value of the minimum lease payments. Subsequent to initial recognition, the asset is accounted for in accordance with the accounting policy applicable to that asset. Initial direct costs are included in the initial measurement of the lease payable. Minimum lease payments made under finance leases are apportioned between finance expense and the reduction of the outstanding liability. The finance expense is allocated to each period during the lease term so as to produce a constant periodic rate of interest on the remaining balance of the liability. Current lease payments due at the reporting date are classified as part of loans and borrowings in the accompanying consolidated statements of financial position. Group as lessor Leases in which the Group transfers substantially all of the risks and rewards of ownership of an asset are classified as finance leases. All other leases are classified as operating leases. Payments from customers under operating leases are recognized in profit or loss on a straight-line basis over the term of the lease. Deferred revenue includes rents billed to customers in advance. Upon commencement of a finance lease with a customer, the Group records the net investment in the lease, which consists of the sum of the minimum lease term payments and the un-guaranteed residual value (gross investment in lease), less the unearned finance lease income. The difference between the gross investment and its present value is recorded as unearned finance lease income. Finance lease income consists of the amortization of unearned finance lease income. Initial direct costs are included in the initial measurement of the lease receivables. Current lease payments due at the reporting date are classified as receivables under finance lease in the accompanying consolidated statements of financial position. Minimum lease payments received under finance leases are apportioned between finance income 14

45 and a reduction of the outstanding receivable. The finance lease income is allocated to each period during the lease term so as to produce a constant periodic rate of interest on the remaining balance of the receivable. The transfer of the asset to a customer under a finance lease is considered a sale. l) Share capital Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of ordinary shares are recognized as a deduction from equity, net of any tax effects. m) Foreign currency transactions and translation The Group s presentation currency as of May 14, 2013 is the USD which is the Company s functional currency. Prior to May 14, 2013, the Company s functional currency was the Euro. The assets and liabilities of foreign operations where the functional currency is different from the presentation currency are translated from their functional currency to the presentation currency at exchange rates at the reporting date. The income and expenses of foreign operations, where the functional currencies are different from the presentation currency, are translated from the functional currency to the presentation currency at average exchange rates for the period. The Company and certain subsidiaries changed their functional currency from Euros to USD as a result of the issuance of $400 million of USD-denominated payment-in-kind debt ( PIK Debt ) by Algeco Scotsman PIK S.A. ( AS PIK ), a wholly-owned subsidiary of Holdings, on May 14, 2013 and other factors, including an increase in the concentration of the Group s operations in the United States ( US ) and the fact that a majority of Group s debt is denominated in USD. The change in functional currency of these entities was made on May 14, 2013 in accordance with IAS 21, The Effects of Changes in Foreign Exchange Rates. Foreign currency differences from translating foreign operations where the functional currency is a currency other than the presentation currency into the presentation currency are recognized as a component of other comprehensive income. Transactions in foreign currencies (currencies other than the Group entities functional currencies) are translated to the respective functional currencies at exchange rates at the dates of the transactions. Foreign currency differences arising from transactions in foreign currencies are recognized in profit or loss. Monetary assets and liabilities denominated in foreign currencies at the reporting date other than the functional currency are retranslated to the functional currency at the exchange rate at the reporting date. Foreign exchange gains and losses arising from a monetary item receivable from or payable to a consolidated Group entity, the settlement of which is neither planned nor likely in the foreseeable future, are considered to form part of a net investment in the Group entity and are included in the foreign currency translation component of other comprehensive income. 15

46 n) Revenue The Group generates revenue from leasing rental fleet, sales of new and used rental fleet, delivery, installation, maintenance and removal services and other incidental items related to accommodation services. In addition, the Group generates revenue from the leasing and operation of remote accommodations in which the Group provides housing, catering and transportation services. The Group enters into arrangements with a single deliverable (such as goods or services) as well as multiple deliverables. Revenue under arrangements with multiple deliverables is recognized separately for each identifiable component with the arrangement consideration allocated on a relative fair value basis. Modular space Lease income from operating leases is recognized in income on a straight-line basis over the lease term. Delivery, installation, maintenance and removal services associated with rental activities are recognized upon completion of the related services. For finance leases where the Group is a lessor, the revenue recognized at the inception of the lease is the fair value of the asset, or, if lower, the present value of the minimum lease payments accruing to the Group, computed at a market rate of interest. The finance income earned by the Group on such arrangements is recognized in revenue over the lease term. Remote accommodations Revenue from remote accommodations leasing and services is comprised of the leasing and operation of remote workforce accommodations in which the Group provides housing, catering and transportation services. Revenue is recognized when amounts are earned and realizable. Remote accommodations revenue is recognized in the month of occupancy in which services are provided. Catering, transportation and other services revenue are recognized upon the completion of the related services. Sale of units and services rendered Revenue from the sale of goods and the provision of services is measured at the fair value of the consideration received or receivable, net of returns and trade discounts. Revenue is recognized when the significant risks and rewards of ownership have been transferred to the buyer, recovery of the consideration is probable, the associated costs and possible return of goods can be estimated reliably, there is no continuing involvement with the goods, and the amount of revenue can be measured reliably. Transfer of risks and rewards occurs when units are delivered and installed. Revenue from delivery and installation services incidental to the sales of rental equipment is recognized upon completion of delivery and installation of sold rental equipment. Revenue from the provision of services is recognized as services are provided. Certain equipment is sold under construction-type contracts. Construction-type contract revenue includes the initial amount agreed in the contract plus any variations in contract work, claims and incentive payments to the extent that it is probable that those variations will result in revenue and can be measured 16

47 reliably. When the outcome of a construction contract can be estimated reliably, contract revenue and expenses are recognized in profit or loss in proportion to the stage of completion of the contract determined by reference to the proportion of the costs incurred to date compared to estimated total costs under the contract. When the outcome of a construction contract cannot be estimated reliably, contract revenue is recognized only to the extent of contract costs incurred that are likely to be recoverable. An expected loss on a contract is recognized immediately in profit or loss. For construction contracts in progress, a single asset (prepaid expense) or liability (deferred revenue) is presented for the total of costs incurred and recognized profits, net of progress payments and recognized losses, in the consolidated statements of financial position. o) Share-based payments Cash-settled equity plan The cost of awards under a cash-settled plan is measured initially at fair value at the grant date, which is the date at which the Group and the participants have a shared understanding of the terms and conditions of the arrangement. The fair value is expensed over the vesting period with recognition of a corresponding liability. The liability is remeasured to fair value at each reporting date with changes in fair value attributed to vested awards recognized as expense in the period. Equity-settled plan The cost of share grants under an equity-settled plan is measured at the fair value at the grant date, which is the date at which the Group and plan participants have a shared understanding of the terms and conditions of the arrangement. The fair value is determined using a pricing model. The cost is recognized as an employee expense with a corresponding increase in equity over the period during which the relevant plan participant becomes fully entitled to the award. The ultimate expense recognized at each reporting date reflects the extent to which the vesting period has lapsed and the Group s best estimate of the number of shares that will ultimately vest. The expense on the consolidated statements of comprehensive income for a period represents the movement in cumulative expense recognized as of the beginning and end of that period. When the terms of an award are modified, the minimum expense recognized is the expense as if the terms had not been modified. An additional expense is recognized for any modification which increases the total fair value of the award, or is otherwise beneficial to the employee as measured at the date of modification. When an award is cancelled, it is treated as if it had vested on the date of cancellation, and any expense not yet recognized for the award is recognized immediately. However, if a new award is issued and designated as a replacement award on the date that it is granted, the cancelled and new awards are treated as if they were a modification of the original award, as described in the previous paragraph. 17

48 p) Finance income and expenses Finance income comprises interest income on funds invested, dividend income, currency gains and markto-market gains on financial instruments measured at fair value through profit or loss. Interest income is recognized in profit or loss, using the effective interest method. Finance expenses comprise interest expense on borrowings, amortization of deferred financing costs, currency losses and mark-to-market losses on financial instruments measured at fair value through profit or loss. All borrowing costs are recognized in profit or loss using the effective interest method. q) Income tax Current income tax Current income tax assets and liabilities are measured at the amount expected to be recovered from or paid to the taxation authorities. The tax rates and tax laws used to compute the amounts are those that are enacted or substantively enacted, at the reporting date in those jurisdictions in which the Group operates. Current income tax relating to items recognized directly in equity is recognized in equity and not in profit (loss) for the year. Management periodically evaluates positions taken in the tax returns with respect to situations in which applicable tax regulations are subject to interpretation and establishes provisions where appropriate. Deferred tax Deferred tax is provided using the liability method on temporary differences between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes at the reporting date. Deferred tax liabilities are recognized for all taxable temporary differences, except: Deferred tax liabilities that arise from the initial recognition of goodwill or an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss. Taxable temporary differences associated with investments in subsidiaries, associates and interests in joint ventures, when the timing of the reversal of the temporary differences can be controlled and it is probable that the temporary differences will not reverse in the foreseeable future. 18

49 Deferred tax assets are recognized for all deductible temporary differences, the carry forward of unused tax credits and any unused tax losses. Deferred tax assets are recognized to the extent that it is probable that taxable profit will be available against which the deductible temporary differences and the carry forward of unused tax credits and unused tax losses can be utilized, except: Deferred tax assets relating to the deductible temporary difference that arise from the initial recognition of an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss. Deductible temporary differences associated with investments in subsidiaries, associates and interests in joint ventures, deferred tax assets are recognized only to the extent that it is probable that the temporary differences will reverse in the foreseeable future and taxable profit will be available against which the temporary differences can be utilized. The carrying amount of deferred tax assets is reviewed at each reporting date and reduced to the extent that it is no longer probable that sufficient taxable profit will be available to allow all or part of the deferred tax asset to be utilized. Unrecognized deferred tax assets are reassessed at each reporting date and are recognized to the extent that it has become probable that future taxable profits will allow the deferred tax asset to be recovered. Deferred tax assets and liabilities are measured at the tax rates that are expected to apply in the year when the asset is realized or the liability is settled, based on tax rates (and tax laws) that have been enacted or substantively enacted at the reporting date. Deferred tax items are recognized in correlation to the underlying transaction either in other comprehensive income or directly in equity. Deferred tax assets and deferred tax liabilities are offset if a legally enforceable right exists to set off current tax assets against current income tax liabilities and the deferred taxes relate to the same taxable entity and the same taxation authority. Tax benefits acquired as part of a business combination, but not satisfying the criteria for separate recognition at that date, would be recognized subsequently if new information about facts and circumstances changed. The adjustment would either be treated as a reduction to goodwill (as long as it does not exceed goodwill) if it was incurred during the acquisition measurement period or in profit or loss. 19

50 r) New standards and interpretations not yet adopted New and amended standards and interpretations The accounting policies adopted are consistent with those of the previous financial year, except for the following new and amended IFRS and IFRIC interpretations effective as of January 1, 2013: IAS 1 Financial Statement Presentation: Presentation of Items of Other Comprehensive Income The amendments to IAS 1 change the grouping of items presented in other comprehensive income. Items that could be reclassified / (or recycled ) to profit or loss at a future point in time (for example, upon derecognition or settlement) would be presented separately from items that will never be reclassified. The pronouncement affects presentation only and had no impact on the Group s financial position or results of operations. IAS 19 Employee Benefits (Amendment) The IASB has issued numerous amendments to IAS 19. These range from fundamental changes such as removing the corridor mechanism and the concept of expected returns on plan assets to simple clarifications and re-wording. In the first quarter of 2013, the Group retrospectively applied the amendments to IAS 19 and recorded an increase in employee benefit liability of $732 and a corresponding decrease in accumulated deficit of $732 as of January 1, IFRS 7 Financial Instruments: Disclosures Enhanced Derecognition Disclosure Requirements The amendment to IFRS 7 requires an entity to disclose information about rights of set-off and related arrangements, which allows users of the consolidated financial statements to evaluate the effect of netting arrangements on an entity s financial position. The adoption of this standard did not have an impact on the financial position or results of operations of the Group. IFRS 10 Consolidated Financial Statements IFRS 10 replaces the portion of IAS 27 Consolidated and Separate Financial Statements that addresses the accounting for consolidated financial statements. It also includes the issues raised in SIC-12 Consolidation Special Purpose Entities. IFRS 10 establishes a single control model that applies to all entities including special purpose entities. The changes introduced by IFRS 10 requires management to exercise significant judgment to determine which entities are controlled, and therefore, are required to be consolidated by a parent, compared with the requirements that were in IAS 27. The adoption of this standard did not have any impact on the financial position or results of operations of the Group. IFRS 11 Joint Arrangements IFRS 11 replaces IAS 31 Interests in Joint Ventures to include only two categories of joint arrangements (joint operation and joint venture) in which the legal form of the joint arrangement must be considered 20

51 and whether a separate vehicle exists. The adoption of this standard did not have any impact on the financial position or results of operations of the Group. IFRS 13 Fair Value Measurement IFRS 13 establishes a single source of guidance under IFRS for all fair value measurements. IFRS 13 does not change when an entity is required to use fair value, but rather provides guidance on how to measure fair value under IFRS when fair value is required or permitted. As a result of the guidance in IFRS 13, the Group reassessed its policies surrounding the measurement of fair value and concluded that the adoption did not have a material impact of the fair value measurements of the Group other than the inclusion of fair value information disclosures for financial instruments as set out in Note 24. Standards issued but not yet effective Standards issued but not yet effective up to the date of issuance of the Group s consolidated financial statements are listed below. IFRS 9 Financial Instruments IFRS 9 (2009) introduces new requirements for the classification and measurement of financial assets, which are based upon the business model in which they are held and the characteristics of their contractual cash flows. IFRS 9 (2010) introduces additional changes to relating to financial liabilities. IFRS 9 (2010 and 2009) are effective for annual periods beginning on or after January 1, The Group is currently assessing the impact of the adoption of these standards on the Group s financial assets and financial liabilities and does not plan to adopt this standard early. The following standards have been issued but are not yet effective for the Group. The Group has concluded that the adoption of these standards when required will not reasonably have an impact on disclosures, financial position or results of operations when applied: IAS 28 Investments in Associates and Joint Ventures (Amendment) IAS 32 Offsetting Financial Assets and Financial Liabilities (Amendment) 4. Significant accounting judgments, estimates and assumptions The preparation of the Group s consolidated financial statements requires management to make judgments, estimates and assumptions that affect the reported amounts of revenues, expenses, assets and liabilities, and the disclosure of contingent liabilities, at the reporting date. However, uncertainty about these estimates and assumptions could result in outcomes that require a material adjustment to the carrying amount of the asset or liability or the disclosures of contingent liabilities in future periods. 21

52 Judgments Business combinations Goodwill only arises in business combinations. The amount of goodwill initially recognized is dependent on the allocation of the purchase price to the fair value of the identifiable assets acquired and the liabilities assumed. Intangible assets principally arise in business combinations. The amount of intangible assets initially recognized is dependent on various judgments including future revenue estimates, customer attrition rates and market-based royalty rates. The determination of the fair value of the assets, such as rental equipment and intangible assets, and liabilities, such as contingent liabilities, is based to a considerable extent on management s judgment. Provision for impairment of trade receivables The determination of the amount required to provide the provision for impairment of trade receivables requires judgment in evaluating the credit worthiness of customers and in projecting future credit losses on current receivables. Provisions and contingencies The Group maintains provisions for a number of matters associated with exposures that arise in the normal course of business. These provisions cover matters such as uninsured losses, termination liabilities, restructuring activities, litigation and regulatory matters liabilities and uncertain tax positions. Judgment is involved in assessing the exposures in these areas and hence in setting the level of the required provision. Valuation of financial instruments Where the fair value of financial assets and financial liabilities recorded in the consolidated statements of financial position cannot be derived from active markets, they are determined using valuation techniques including the discounted cash flows model. The inputs to these models are taken from observable markets where possible, but where this is not feasible, a degree of judgment is required in establishing fair values. The judgments include considerations of inputs such as liquidity risk, credit risk and volatility. Changes in assumptions about these factors could affect the reported fair value of financial instruments. The fair value of equity instruments of Holdings issued in exchange for debt and subsidiaries (see Note 18) involved significant judgment as there was no observable market for the equity instruments of Holdings. Lease classification The Group enters into various types of lease arrangements with its customers. The Group classifies these leases as either operating or finance based on an evaluation of the terms and conditions of the arrangements. Judgment is involved in determining whether or not the Group retains all the significant risks and rewards of ownership, a significant factor in determining classification of each lease. 22

53 Income taxes Deferred tax assets are recognized for deductible temporary differences, including all unused tax losses, only to the extent that it is probable that taxable profit will be available against which the deductions can be utilized. Significant judgment is required to determine the amount of deferred tax assets that can be recognized, based upon the likely timing and the level of future taxable profits together with future tax planning strategies. Deferred tax liabilities are not established for taxable temporary differences associated with investments in subsidiaries, associates and interests in joint ventures, when the timing of the reversal of the temporary differences can be controlled and it is probable that the temporary differences will not reverse in the foreseeable future. Significant judgment is required to determine if the reversal can be controlled and whether it is probable that such differences will not reverse in the foreseeable future. Reserves for income taxes are established in connection with additional taxes that could be incurred by the Group to the extent it is probable that an examination by applicable taxing authorities would give rise to such additional taxes. Estimates and assumptions The key assumptions concerning the future and other key sources of estimation uncertainty at the reporting date, that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year, are described below. The Group based its assumptions and estimates on parameters available when the consolidated financial statements were prepared. Existing circumstances and assumptions about future developments, however, may change due to market changes or circumstances arising beyond the control of the Group. Such changes are reflected in the assumptions when they occur. Rental equipment Estimates are used in the determination of useful lives and residual values for rental equipment. Estimates are also used in the determination of the fair value of assets held for sale. Measurement of the recoverable amounts of asset groups and of cash generating units or groups of cash generating units containing goodwill The Group regularly monitors the carrying value of its asset groups, including rental equipment and goodwill. Impairment reviews compare the carrying values to the higher of fair value less costs to sell or the present value of future cash flows that are derived from the relevant asset groups, cash generating unit or groups of cash generating units. These reviews, therefore, depend on management estimates and judgments, in particular in relation to the forecasting of future cash flows, the discount rate applied to the cash flows and the selection of relevant market comparable data. 23

54 Measurement of defined benefit obligations The Group exercises judgment in relation to setting the assumptions used by the actuaries in assessing the financial position of each benefit arrangement. The Group determines the assumptions to be adopted in discussion with its actuaries. The application of different assumptions could have a significant effect on the amounts reflected in the consolidated statements of comprehensive income and consolidated statements of financial position for post-employment benefits. Share-based payments Estimating fair value for share-based payment awards requires determining the most appropriate valuation model for a grant of equity instruments, which is dependent on the terms and conditions of the grant. This also requires determining the most appropriate inputs to the valuation model including the expected life of the option, volatility and dividend yield. The assumptions and models used for estimating fair value for share-based payments are disclosed in Note 23. Taxes Uncertainties exist with respect to the interpretation of complex tax regulations, changes in tax laws, and the amount and timing of future taxable income. Differences arising between the actual results and the assumptions made in such interpretation, or future changes to such assumptions, could necessitate future adjustments to amounts previously recorded. The Group establishes provisions, based on reasonable estimates, for possible consequences of audits by the tax authorities of the respective counties in which it operates. The amount of such provisions is based on various factors, such as experience of previous tax audits and differing interpretations of tax regulations by the taxable entity and the responsible tax authority. The ultimate resolution of tax audits and interpretations of tax regulations could necessitate future adjustments to provisions established. 5. Acquisitions Target acquisition In February 2013, the Group acquired 100% of the membership interests in Target Logistics Management, LLC ( Target ). Target is a leading provider of full-service remote workforce accommodation solutions, primarily in the US, and facilitates the Group s continued strategic expansion in the remote accommodation segment. The initial consideration for Target was $201.2 million, which was comprised of $86.7 million in cash, 6,749,269 shares of Holdings valued at $92.8 million and contingent consideration with an acquisition date fair value of $21.7 million. The Group also assumed $76.7 million of indebtedness. Holdings contributed the membership interests of Target that it acquired to the Company. The value of the shares of Holdings was determined using the guideline public company method (a Level 3 technique) to estimate the Enterprise Value ( EV ) of Holdings. The EBITDA multiple calculated was based upon market participant comparables with derived multiples of EBITDA. EBITDA multiples were calculated by 24

55 deriving and averaging the current year observed multiple, the 2013 forward multiple and the 2014 forward multiple of market participant comparables. The calculated multiples of 11.7x, 10.6x and 9.7x were applied to the actual trailing twelve months EBITDA at March 31, 2013, 2013 projected EBITDA and 2014 projected EBITDA, respectively and weighted. The Group incurred $59 million of borrowings under the ABL Revolver (as defined below) to partially fund the cash portion of the consideration. In addition, an earnout agreement entered in connection with the acquisition (the Earnout Agreement ) provides for additional payments (the Target Earnout ) as described in more detail below. The fair value of the identifiable assets and liabilities for Target at the acquisition date were as follows: Fair value recognized on acquisition Assets Cash and cash equivalents $ 538 Trade receivables 13,200 Short-term financial assets 5,699 Prepaid expenses and other current assets 3,570 Rental equipment 163,800 Other property, plant and equipment 3,216 Customer relationships 21,200 Trade name 19,300 Other intangible assets 11, ,214 Liabilities Trade and other payables 18,853 Current taxes payable 171 Deferred revenue and customer deposits 28,091 Provisions 8,494 Loans and borrowings 76,728 Deferred tax liabilities 21, ,028 Total identifiable net assets at fair value 88,186 Goodwill arising on acquisition 113,063 Total purchase consideration $ 201,249 The goodwill of $113,063 is attributable to the Group s expansion of its presence in the US through entering the remote accommodations market. Approximately, $80,100 of goodwill is deductible for tax purposes. The Group recorded $21,200 of customer relationships in the Target acquisition with a weighted average remaining useful life of 7.7 years. A trade name of $19,300 was also acquired and was determined to be an indefinite useful life intangible asset. The loans and borrowings of $76,728 acquired primarily relate to debt assumed that expires within three years. 25

56 The consolidated statement of comprehensive income includes revenues of $144,684, expenses of $92,330 and income before taxes for the year of $52,354 related to Target. The Earnout Agreement provided the former owners of Target the opportunity to earn additional value for meeting performance objectives in 2013; however, these performance objectives were not met. The Earnout Agreement also provides the former owners of Target the opportunity to earn additional consideration for cumulative value creation to be achieved over the subsequent years between acquisition and an Exit Event, as defined in the Earnout Agreement. Amounts payable under the Earnout Agreement are to be paid in shares of Holdings if such cumulative value creation goals are achieved; provided that, if an Exit Event does not occur prior to December 31, 2015, estimated prepayments will be made in cash by a Group subsidiary which will reduce the ultimate payment attributable to cumulative value creation. The maximum amount of cash that can be paid under the Earnout Agreement is $115.0 million. The amount of Holdings shares that can be issued under the Earnout Agreement is not limited. The Group completed the valuation of the Earnout Agreement and recorded a contingent liability for the earnout at $21.7 million at purchase. As more fully disclosed in Note 19, the Group reduced the Earnout Agreement liability to $6.6 million and recorded the $15.1 million reduction in other income (expense), net in the Group s consolidated statement of comprehensive income. The Target Earnout is based on the future amounts of EBITDA and capital expenditures of Target and the future EBITDA exit multiple value of Target or the Group at an Exit Event. A Monte Carlo Simulation approach under a risk-neutral framework is used to simulate the future values of EBITDA, which are then combined with a series of exit event scenarios to estimate the final payout of the Earnout. For each Exit Event scenario estimated, future EBITDA values are simulated using the following assumptions: 1. Volatility Quarterly and annual EBITDA volatilities based on the comparable companies for Target were calculated (over 5 years). 2. Discount Rate Present-value of the expected Target Earnout was discounted using the risk-free rate plus projection risk and the credit spread of the Group. 3. Term The respective term until a specific payment trigger date (including an Exit Event) where EBITDA must be calculated. 4. Starting Value Financial projections were used for the Target Earnout periods and discounted (or calibrated ) to a valuation date using the weighted average cost of capital ( WACC ) of Target implied by the acquisition. A mid-year convention was used to calibrate EBITDA. To corroborate the calculated WACC, an internal rate of return ( IRR ) analysis was also performed. 5. Drift Rate Term-specific risk-free rate plus the implied year over year EBITDA growth rate for each fiscal year. 26

57 The contingent consideration liability is the weighted average Target Earnout payout of the scenarios developed using the above assumptions. At the acquisition date, the following key assumptions, which represent unobservable inputs, were utilized in developing the contingent consideration liability: Unobservable Inputs Range EBITDA volatility 37.0% Discount rate 20.5% Exit multiple 11.7x Estimated years (Term) to exit An increase in the exit multiple of 1.0x at the date of acquisition would have resulted in an increase in the fair value of the contingent consideration of $4.9 million. The contingent consideration liability is revalued at each reporting date with all key assumptions updated for current estimates. Changes in the contingent consideration liability due to changes in assumptions subsequent to acquisition are recorded in the applicable period s net income or loss. Chard acquisition In November 2013, the Group acquired 100% of the outstanding equity of Chard Camp Catering Service, Ltd. ( Chard ), a Canadian provider of workforce accommodations that allowed the Group to continue to expand its remote workforce accommodations presence in Canada. The consideration for this acquisition was comprised of $8.4 million in cash and $1.7 million of assumed indebtedness. The aggregate purchase price was allocated principally to rental equipment ($5.2 million), customer relationship ($0.9 million) and goodwill ($4.6 million). Goodwill related to the Chard acquisition is not deductible for tax purposes. Acquisitions in 2012 Ausco acquisition In 2012, the Group acquired Ausco Holding S.à r.l. and its subsidiaries ( Ausco ), the leading provider of modular space in Australia and New Zealand, from TDR in a transaction among entities under common control. TDR had previously acquired Ausco on June 29, 2011 for cash consideration of $684.8 million. The Group s acquisition of Ausco is part of its strategy to grow the business through expansion into new geographic territories. The Group elected to account for this acquisition under the pooling of interest method as permitted by IFRS prospectively from the date on which the Group took control. Under the pooling of interest method, the assets and liabilities of the combined entities are reflected at their respective carrying values, which reflect a step-up in the basis of the Ausco assets and liabilities to fair value as of the date of acquisition by TDR, and no new identifiable intangible assets or goodwill are recorded. The consolidated statements of comprehensive income reflect the income and expenses of the combined entity from October 11,

58 The carrying values of the identifiable assets and liabilities of Ausco acquired on October 11, 2012 were comprised of the following: Cash and cash equivalents $ 27,258 Trade receivables 74,652 Inventories 14,291 Rental equipment, net 277,534 Other property, plant and equipment, net 51,729 Goodwill 388,948 Customer relationships 16,817 Trade name 22,338 Total assets 873,567 Trade and other payables 84,053 Current tax payable 16,155 Employee benefits 5,282 Provisions 6,511 Loans and borrowings 729,937 Derivative liabilities 10,156 Deferred tax liabilities 8,287 Total liabilities 860,381 Non-controlling interests 1,582 Net equity $ 11,604 The Group acquired $16,817 of customer relationships in the Ausco acquisition with a weighted average remaining useful life of 1.2 years. A $22,338 trade name was also acquired which the Group determined to be an indefinite useful life intangible asset. The loans and borrowings of $729,937 includes external debt that was repaid by the Group and Ausco notes that were contributed to Holdings by TDR as part of the 2012 Refinancing, as defined in Note 18. The Ausco notes were contributed by Holdings to the Group in exchange for equity and are now eliminated within the Group. The consolidated statement of comprehensive income for the year ended December 31, 2012 includes revenues of $100,158, expenses of $103,210 and net loss of $3,052 related to Ausco. Eurobras acquisition In December 2011, the Group completed the first part of a two-phased acquisition of the equity interests of several Brazilian entities that have since been consolidated into a single entity ( Eurobras ). In January 2012, the Group completed the second phase of the acquisition of Eurobras. The combined purchase price of Eurobras was $96.3 million. At the acquisition date, the Group placed $29.0 million of the total purchase price in an escrow account pursuant to the purchase agreement. These funds will either 28

59 be used to pay certain pre-acquisition liabilities for which the seller is responsible, or if such claims do not arise, will be paid directly to the sellers. The fair value of the identifiable assets and liabilities for Eurobras at acquisition were as follows: Fair value recognized on acquisition Assets Rental equipment $ 16,879 Other property, plant and equipment 5,045 Other intangible assets 17,723 Deferred tax assets 688 Inventories 1,670 Trade receivables 4,933 Prepaid expenses and other current assets 4,324 Cash and cash equivalents 1,369 52,631 Liabilities Trade and other payables 2,385 Loans and borrowings 2,174 Current taxes payable 2,498 7,057 Total identifiable net assets at fair value 45,574 Goodwill arising on acquisition 50,772 Total purchase consideration $ 96,346 The goodwill of $50,772 is attributable to the Group s expansion into Brazil as well as the assembled workforce in Brazil where the Group had previously not operated which is not separately recognized. As the second phase of the Eurobras acquisition was completed in the first week of January 2012, the consolidated statements of comprehensive income for the year ended December 31, 2012 includes a full year of results of operations for Eurobras. Acquisitions in 2011 During 2011, the Group completed acquisitions in its existing markets which provided immediate cost and revenue synergies through elimination of operational redundancies and by better serving customers with a larger range of products. The Group also completed acquisitions in 2011 in new higher growth geographic markets which provided the Group with further customer, industry, and geographical diversification. These acquired entities engage in businesses similar to that of the Group and are collectively referred to as the 2011 acquisitions. In February and April 2011, a subsidiary of the Group in the UK acquired certain business assets (principally rental fleet and related contracts) of RBF Farquhar for $17.1 million and Speedy Hire PLC and Speedy Asset Services Limited for $57.6 million. 29

60 In May 2011, the Group acquired the equity interests of A1 Container for $16.9 million. This acquisition expanded the Group s presence in Central and Eastern Europe. Transactions costs Transaction costs of the Target acquisition, Chard acquisition, Eurobras acquisition and the 2011 acquisitions which are included in selling, general and administrative expenses in the consolidated statements of comprehensive income and in cash flows from operating activities in the consolidated statements of cash flows were $3,236 and $4,897 for the years ended December 31, 2013 and 2011, respectively. Transaction costs incurred as part of the Ausco acquisition are not separable from the transaction costs incurred in the 2012 Refinancing, as defined in Note 18, and are included in cash flows from financing activities in the consolidated statements of cash flows for the year ended December 31, Pro-forma effect of acquisitions If the 2013 Target Logistics and Chard acquisitions, the 2012 Ausco acquisition, the Eurobras acquisition and the 2011 acquisitions had taken place at the beginning of the year in which each acquisition was completed, respectively, the revenue, expenses and the net loss for the Group for the years ended December 31, 2013, 2012, and 2011 would have been as follows: Revenue $ 1,818,324 $ 1,823,926 $ 1,422,351 Expenses (2,011,768) (2,279,656) (1,874,221) Net loss (193,444) (455,730) (451,870) 6. Revenue Year ended December 31, Leasing and services revenue: Modular space: Rental income $ 850,596 $ 772,200 $ 759,569 Services (principally delivery and installation) 255, , ,331 Total modular space 1,105,959 1,032,796 1,006,900 Remote accommodations 231,722 21,921 Sales: New units 416, , ,763 Rental units 44,766 63,286 80,919 $ 1,798,661 $ 1,447,339 $ 1,353,582 30

61 7. Personnel expenses and employee benefits Year ended December 31, Wages and salaries $ 292,230 $ 266,347 $ 246,083 Compulsory social security contributions 37,387 33,271 33,764 Defined benefit plans 4,828 5,756 4,108 Share-based payments cash-settled 18,582 11,281 2,829 Defined contribution and profit-sharing plans 5,240 5,426 3,483 $ 358,267 $ 322,081 $ 290,267 a) Defined contribution plan For its US employees, the Group sponsors defined contribution benefit plans that have discretionary matching contribution and profit-sharing features. In 2013, matching contributions paid by the Group to these plans were $1,021 (2012: $986; 2011: $871). The Group did not contribute under the profit-sharing feature during 2013, 2012 and For its European operations the Group also sponsors defined contribution plans. The principal plans are located in the UK and France. In 2013, the total amount of contributions paid by the Group to these plans was $1,690 (2012: $1,261; 2011: $1,288). b) Deferred compensation plan The Group sponsors long service reward plans in France, Germany, Belgium and the Netherlands. At December 31, 2013, the liability recognized in the consolidated statement of financial position in respect of these plans was $1,617 (2012: $1,566). c) Defined benefit plans The Group sponsors various post-employment defined benefit plans. The largest plans are located in France and Germany and are unfunded. In France, the plan provides for the payment of a lump sum at retirement, depending on service and final salary. At December 31, 2013, the liability in respect of the plan in France was $10,753 (2012: $8,066). In Germany, the plans are related to individual pension promises for certain top managers. At December 31, 2013, the liability in respect of those plans was $3,730 (2012: $3,570). At December 31, 2013, the liability in respect of defined benefit plans in various other countries totaled $945 (2012: $931). 31

62 8. Other income (expense), net Year ended December 31, Net gain (loss) on disposal of property, plant and equipment $ 559 $ (997) $ (1,863) Reduction in Earnout Agreement liability 15,091 Other 133 (4,981) 88 $ 15,783 $ (5,978) $ (1,775) 9. Finance income and expense Year ended December 31, Interest income $ 566 $ 3,491 $ 4,879 Interest expense on financial liabilities measured at amortized cost (254,114) (212,783) (202,730) Interest expense on interest rate swap derivatives (42,918) (54,382) Interest expense (254,114) (255,701) (257,112) Foreign exchange gains 177, ,738 50,656 Foreign exchange losses (201,075) (108,540) (33,913) Currency gains / (losses), net (23,959) 34,198 16,743 Change in fair value of interest rate swap derivatives 24,358 21,172 Other finance expense (3,102) (209) Other finance income / (expense) (3,102) 24,149 21,172 Gain on extinguishment of debt 9,424 15,903 Net finance expense recognized in profit or loss $ (271,185) $ (177,960) $ (214,318) Gain on extinguishment of debt is more fully discussed in Note 18 and Note

63 10. Income taxes Income tax benefit (expense) Year ended December 31, Current tax expense $ (32,783) $ (26,108) $ (9,609) Deferred tax benefit 15,011 11,926 12,360 Total income tax benefit (expense) $ (17,772) $ (14,182) $ 2,751 A reconciliation between tax expense and the product of accounting profit multiplied by the Company s domestic tax rate is as follows: Year ended December 31, Reconciliation of effective tax rate Net loss $(199,599) $(482,043) $ (454,060) Total income tax (expense) benefit (17,772) (14,182) 2,751 Loss before income tax $ (181,827) $ (467,861) $ (456,811) Income tax benefit (expense) at statutory rates $ 53, % $ 134, % $ 131, % Effect of tax rates in foreign jurisdictions 1, % 41, % 20, % Effect of change in tax rates 3, % (468) -0.10% 1, % Non -deductible expenses and amounts subject to tax not recognized in income (33,184) % (50,389) % (2,924) -0.64% Income taxed in multiple jurisdictions (12,803) -7.04% (9,638) -2.06% (48,194) % Non-deductible goodwill impairment % (81,174) % (84,419) % Change in recognition of prior year tax losses 9, % (16,983) -3.63% 11, % Current year losses for which no deferred tax asset was recognized (9,781) -5.38% (22,691) -4.85% (15,120) -3.31% Change in unrecognized temporary differences (29,052) % (15,767) -3.37% (11,329) -2.48% Other adjustments (33) -0.02% 7, % % $ (17,772) -9.77% $ (14,182) -3.03% $ 2, % The statutory tax rate for the Company as a resident of Luxembourg was 29.22% for the year ended December 31, 2013 and was 28.80% for the years ended December 31, 2012 and In 2013, the total tax expense includes $6.1 million arising from French legislation enacted at the end of 2013 that resulted in the non-deductibility of certain previously deductible expenses. $2.0 million of additional tax expense was recorded related to the write off of previously recognized deferred tax assets related to the Group s Brazilian operations since it is not probable that such amounts will be recognized. In connection therewith, $16.3 million of deferred tax assets related to the Brazil 2013 operating losses were not recognized. Separately, the 2013 tax expense reflects a tax benefit of $6.7 million related to the 33

64 recordation of previously unrecognized deferred tax assets in the UK, because it is now probable such amounts will be recognized. In 2012, the Group agreed to terms with a tax authority and settled audits for tax periods ending in 2007 through The settlement allowed the Group to release certain reserves for uncertain tax positions in the amount of $5.8 million and record deferred tax assets for the benefit of net operating loss carryforwards that, prior to the settlement, were not likely to be realized in the amount of $12.9 million. The settlement is considered a discrete item and accordingly, the Company recorded the entire $18.7 million benefit from the settlement as an income tax benefit for the year ended December 31, As a result of the acquisition of notes receivable from an entity which was part of Holdings prior to the 2012 Refinancing, as defined in Note 18, the Group derecognized $5.5 million of a deferred tax asset and recorded the amount in income tax expense in Current tax assets and liabilities The current tax payable of $6,746 (2012: $12,555) represents the amount of income taxes payable in respect of the taxable profit for the period as well as tax liabilities related to uncertain tax positions. The current tax receivable of $2,531 (2012: $1,172) represents the amount of income taxes recoverable in respect of current and prior periods. At December 31, 2013 the Group had a net tax liability of $2,584 for tax contingencies related to uncertain income tax positions (2012: $2,371). Deferred tax assets and liabilities Unrecognized deferred tax liabilities Since 2011, the Group has concluded that the undistributed earnings of one of its US subsidiaries are no longer considered reinvested for the foreseeable future, in order to allow greater flexibility in its cash management. In connection therewith, the Group has recorded a deferred tax liability of $48.7 million at December 31, 2013 in connection with the unremitted earnings of the foreign subsidiary. At December 31, 2013, deferred tax liabilities were not recognized for excess book basis differences related to investments in subsidiaries of approximately $249,244. These basis differences consist primarily of undistributed earnings which the Group does not expect to repatriate in the foreseeable future. Upon distribution of the earnings in the form of dividends or otherwise, the Group could be subject to additional income taxes. Determination of the deferred income tax liability on these unremitted earnings is not practicable because such liability, if any, depends on circumstance existing if and when remittance occurs. 34

65 Unrecognized deferred tax assets Deferred tax assets have not been recognized in respect of the following items: December 31, Deductible temporary differences $ 216,416 $ 97,102 Tax losses 1,584,794 1,547,981 $ 1,801,210 $ 1,645,083 Approximately $1,304,879 of the tax loss carryforwards have an indefinite carryforward period. The remaining $279,915 of tax loss carryforward expires between the years 2014 and The availability of the tax losses to offset future income varies by jurisdiction. The deductible temporary differences do not expire under current tax legislation. Deferred tax assets have not been recognized for these items because it is not probable that future taxable profit will be available to allow the Group to utilize the benefits generated. Recognized deferred tax assets and liabilities are attributable to the following at December 31: Assets Liabilities Net Rental equipment and other property, plant and equipment $ 263 $ 9,409 $ (371,406) $ (377,654) $ (371,143) $ (368,245) Intangible assets 4,865 7,220 (94,239) (94,736) (89,374) (87,516) Inventories 1,303 1,435 (105) (12) 1,198 1,423 Loans and borrowings 159, ,240 (4,278) (4,041) 155, ,199 Employee benefit plans 17,901 6,497 (47) (86) 17,854 6,411 Share-based payments 1,668 1,120 (24) 1,668 1,096 Provisions 11,282 15,344 (61) 11,282 15,283 Other items 2,351 1,039 (46,015) (38,022) (43,664) (36,983) Tax loss carry-forwards 97, ,924 97, ,924 Tax assets (liabilities) 296, ,228 (516,090) (514,636) (219,441) (215,408) Set off of tax (296,022) (296,243) 296, ,243 Net tax assets (liabilities) $ 627 $ 2,985 $ (220,068) $ (218,393) $ (219,441) $ (215,408) 35

66 Movements in temporary differences during the year Beginning balance Recognized in profit or loss December 31, 2013 Acquired in business combinations Recognized in equity Ending balance Rental equipment and other property, plant and equipment $ (368,245) $ 14,137 $ (15,661) $ (1,374) $ (371,143) Intangible assets (87,516) 14,946 (9,765) (7,039) (89,374) Inventories 1,423 (285) 60 1,198 Loans and borrowings 135,199 21,002 (5) (475) 155,721 Employee benefit plans 6,411 11,659 (216) 17,854 Share-based payments 1, ,668 Provisions 15,283 (3,465) 126 (662) 11,282 Other items (36,983) (12,806) 2,870 3,255 (43,664) Tax loss carry-forwards 117,924 (30,681) 9,774 97,017 $ (215,408) $ 15,011 $ (22,435) $ 3,391 $ (219,441) Beginning balance Recognized in profit or loss December 31, 2012 Acquired in business combinations Recognized in equity Ending balance Rental equipment and other property, plant and equipment $ (398,755) $ 38,362 $ (2,489) $ (5,363) $ (368,245) Intangible assets (84,284) 7,574 (9,003) (1,803) (87,516) Inventories 247 1, ,423 Loans and borrowings 52,243 (166) 83,720 (598) 135,199 Employee benefit plans 8,793 (6,663) 1,913 2,368 6,411 Share-based payments (7) 1,096 Provisions (378) 14,468 3,691 (2,498) 15,283 Other items (37,455) 5,243 (1,754) (3,017) (36,983) Tax loss carry-forwards 159,437 (48,812) 7, ,924 $ (299,827) $ 11,926 $ 76,078 $ (3,585) $ (215,408) 36

67 Beginning balance Recognized in profit or loss December 31, 2011 Recognized in equity Ending balance Rental equipment and other property, plant and equipment $ (425,564) $ 9,614 $ 17,195 $ (398,755) Intangible assets (97,073) 3,542 9,247 (84,284) Inventories 266 (19) 247 Loans and borrowings 39,843 14,645 (2,245) 52,243 Employee benefit plans 7,962 2,253 (1,422) 8,793 Share-based payments 656 (332) Provisions 5,209 (7,983) 2,396 (378) Other items (23,276) (10,477) (3,702) (37,455) Tax loss carry-forwards 174, (15,585) 159,437 $ (318,053) $ 12,360 $ 5,866 $ (299,827) 11. Rental equipment The changes in the cost and depreciation and impairment losses for rental equipment were as follows: Cost Balance at January 1 st $ 3,045,482 $ 2,568,163 Acquisitions through business combinations 169, ,001 Additions 259, ,800 Disposals (171,444) (141,753) Transfers to rental equipment held for sale and other movements (35,351) (22,416) Effect of movements in foreign exchange rates (32,146) 54,687 Balance at December 31 st $ 3,234,772 $ 3,045,482 Depreciation and impairment losses Balance at January 1 st $ (1,132,800) $ (885,715) Acquisitions through business combinations (39,667) Depreciation (242,042) (237,924) Disposals 144,936 98,323 Impairment losses (8,357) (41,546) Transfers to rental equipment held for sale and other movements 32,885 (1,553) Effect of movements in foreign exchange rates (13,786) (24,718) Balance at December 31 st $ (1,219,164) $ (1,132,800) Carrying amounts At January 1 st $ 1,912,682 $ 1,682,448 At December 31 st $ 2,015,608 $ 1,912,682 37

68 Included in rental equipment are certain assets under finance leases. As of December 31, 2013, assets under finance leases were $34,045 (2012: $22,121) and accumulated depreciation related to assets under finance leases was $12,944 (2012: $12,449). During 2013, the Group impaired certain assets in rental equipment in the amount of $11.8 million. The Group has determined that these assets will no longer be rented and are held for sale or were scrapped. During 2012, the Group s Iberia long-lived asset group experienced a significant decrease in the utilization of its rental equipment as a result of the continued poor economic environment of the region. As a result, the Group performed an evaluation of the recoverability of the Iberia long-lived assets group compared to its estimated recoverable amount. The value of the Iberia long-lived assets group was $41.6 million less than the recoverable amount. Accordingly, the Group recorded impairment losses of $41.6 million on certain assets in rental equipment and property, plant and equipment. 38

69 12. Other property, plant and equipment The changes in cost and depreciation and impairment losses were as follows: Land and buildings Other property, plant and equipment Total Cost Balance at January 1, 2012 $ 250,981 $ 107,982 $ 358,963 Acquisitions through business combinations 17,451 15,397 32,848 Additions 7,521 11,917 19,438 Disposals (5,871) (4,792) (10,663) Other movements (10,209) 1,328 (8,881) Effect of movements in foreign exchange rates 4,482 2,110 6,592 Balance at December 31, , , ,297 Acquisitions through business combinations 2, ,216 Additions 6,751 13,932 20,683 Disposals (11,447) (7,461) (18,908) Other movements (2,154) 2,138 (16) Effect of movements in foreign exchange rates 3,830 (2,033) 1,797 Balance at December 31, 2013 $ 264,323 $ 140,746 $ 405,069 Depreciation and impairment losses Balance at January 1, 2012 $ (78,364) $ (71,887) $ (150,251) Acquisitions through business combinations (1,759) (2,071) (3,830) Depreciation (10,850) (11,641) (22,491) Disposals 2,845 4,462 7,307 Impairment losses (4,532) (4,532) Other movements 5,183 1,351 6,534 Effect of movements in foreign exchange rates (1,713) (1,729) (3,442) Balance at December 31, 2012 (89,190) (81,515) (170,705) Depreciation (10,642) (11,589) (22,231) Disposals 4,570 7,207 11,777 Other movements 3,038 (2,503) 535 Effect of movements in foreign exchange rates (2,355) (865) (3,220) Balance at December 31, 2013 $ (94,579) $ (89,265) $ (183,844) Carrying amounts At January 1, 2012 $ 172,617 $ 36,095 $ 208,712 At December 31, 2012 $ 175,165 $ 52,427 $ 227,592 At December 31, 2013 $ 169,744 $ 51,481 $ 221,225 Included in other property, plant and equipment are certain assets under finance leases. As of December 31, 2013, assets under finance leases were $13,104 (2012: $15,223) and accumulated depreciation related to assets under finance leases was $7,842 (2012: $10,049). 39

70 In 2011, the Group changed its future plans for certain assets in property, plant and equipment. Accordingly, the Group reviewed the value of these assets based on the projected future use and recorded $10.3 million of impairment losses. 13. Intangible assets Customer relationships Trade names Software and other intangible assets Goodwill Total Cost Balance at January 1, 2012 $ 1,472,483 $ 169,660 $ 125,013 $ 47,831 $ 1,814,987 Acquisitions through business combinations 413,140 64,995 22, ,473 Additions 4,622 4,622 Disposals (182) (182) Other Effect of movements in foreign exchange rates 11,459 (2,235) ,072 Balance at December 31, ,897, , ,669 53,749 2,330,920 Acquisitions through business combinations 117,628 22,141 19,300 11, ,760 Additions 6,942 6,942 Disposals (186) (186) Other Effect of movements in foreign exchange rates (37,118) (7,856) (2,966) 893 (47,047) Balance at December 31, 2013 $ 1,977,592 $ 246,705 $ 164,003 $ 73,822 $ 2,462,122 Amortization and impairment losses Balance at January 1, 2012 $ (693,392) $ (56,276) $ $ (29,958) $ (779,626) Acquisitions through business combinations (30,454) (30,454) Amortization charge for the year (26,054) (1,899) (27,953) Impairment losses (255,110) (255,110) Disposals Other Effect of movements in foreign exchange rates (3,407) 3,556 (4,661) (4,512) Balance at December 31, 2012 (951,909) (109,228) (36,321) (1,097,458) Amortization charge for the year (32,836) (7,725) (40,561) Disposals Impairment losses (27,271) (27,271) Other Effect of movements in foreign exchange rates (4,949) 6,285 (816) 520 Balance at December 31, 2013 $ (984,129) $ (135,779) $ $ (44,377) $ (1,164,285) Carrying amounts At January 1, 2012 $ 779,091 $ 113,384 $ 125,013 $ 17,873 $ 1,035,361 At December 31, 2012 $ 945,173 $ 123,192 $ 147,669 $ 17,428 $ 1,233,462 At December 31, 2013 $ 993,463 $ 110,926 $ 164,003 $ 29,445 $ 1,297,837 40

71 As of December 31, 2013, the weighted average remaining useful life of the customer relationships was 6.1 years. The Williams Scotsman trade name in the US, Canada and Mexico, the Target trade name in the US and the Ausco trade name in Australia are the only intangible assets with indefinite useful lives. Impairment test for goodwill In general, the allocation and subsequent monitoring of goodwill follows a grouping of CGU s by geographic area. Carrying amount of goodwill and trade name allocated to significant groups of CGU s follows (in millions): Carrying amount of trade names with indefinite useful Carrying amount of goodwill lives December 31, December 31, US $ 62.0 $ 62.0 $ $ Canada Target Asia Pacific France / Italy Other Total $ $ $ $ At December 31, 2013 and 2012, accumulated impairment losses on goodwill were $984.1 million and $951.9 million, respectively Impairments: The Group recognized goodwill impairment in 2013 associated with the Brazil CGU of $27.3 million as a result of a decline in operating results and a reevaluation of future growth Impairments: The Group recognized goodwill impairment in 2012 associated with the US and UK CGUs of $169.4 million and $83.8 million, respectively. The US CGU impairment was a result of continued declines in operating results associated with the prolonged recovery of the economic downturn that began in The UK CGU impairment also resulted from a decrease in operating results associated with slower than anticipated recovery from the global economic downturn which led to a lower recoverable amount. The Group also recognized a goodwill impairment of $1.9 million in Eastern and Northern Europe due to economic and market conditions in the region Impairments: In 2011, the Group recognized goodwill impairment associated with the US CGU of $185.0 million. This impairment was a result of declines in operating results associated with the prolonged recovery of the economic downturn that began in The Group recorded a goodwill 41

72 impairment associated with the UK CGU of $71.0 million resulting from a decrease in the operating results which led to a lower recoverable amount. The Group also recognized goodwill impairment associated with the Iberia CGU of $17.7 million. The Iberia CGU was impacted by regional economic issues which resulted in lower operating results and negatively impacted recoverable amount. This impairment resulted in the carrying value of Iberia s goodwill being reduced to zero. In addition, the Group recognized a goodwill impairment of $2.0 million in Eastern and Northern Europe due to economic and market conditions in the region. In 2013, all CGUs recoverable values, with the exception of the Brazil and Target CGUs, were calculated using fair value less cost to sell. For the 2013 impairment test, revenue and EBITDA multiples were calculated by deriving and averaging the current year observed multiple and the 2014 forward multiple of the market participant comparables. Each CGUs revenue and EBITDA multiples were adjusted to give consideration to economic uncertainties that create risk within such CGU. The 2013 revenue multiples and EBITDA multiples were applied to each CGUs actual 2013 revenue and EBITDA to determine fair value. The 2014 revenue multiples and EBITDA multiples were applied to each CGUs projected 2014 revenue and EBITDA to determine fair value. An average of the 2013 and 2014 revenue and EBITDA fair value calculations as described above was taken to determine the recoverable amount of each CGU. Revenue multiples ranged from 1.25x to 3.25x for 2013 and 1.00x to 2.75x for EBITDA multiples ranged from 5.50x to 14.00x for 2013 and 5.50x to 11.50x for In 2012, the recoverable amounts for the US, France/Italy, and Asia-Pacific CGUs were calculated using fair value less cost to sell. For the 2012 impairment test, EBITDA multiples were calculated by deriving and averaging the current year observed multiple, the 2013 forward multiple and the 2014 forward multiple of the market participant comparables. For certain geographic regions where economic uncertainty creates higher risk, additional adjustments were applied to give consideration to these risks. The 2012 calculated EBITDA multiples ranged from an average multiple of 6.2x to 9.9x. These multiples were applied to each CGU s actual 2012 EBITDA, 2013 projected EBITDA and 2014 projected EBITDA. Key assumptions used in fair value less costs to sell calculations The calculation of fair value less costs to sell is most sensitive to the following assumptions: Revenue Multiple The revenue multiple calculated is based upon market participant comparables with derived multiples of revenue that are used to develop an estimate of value for the CGU. The market participant comparables were companies operating in North America, Europe, Latin America and Asia Pacific that management believes are peer companies based on industry, geographic reach and financial metrics. EBITDA Multiple The EBITDA multiple calculated is based upon market participant comparables with derived multiples of EBITDA that are used to develop an estimate of value for the CGU. The market participant comparables used were companies operating in North America, Europe, Latin America and Asia Pacific that management believes are peer companies based on industry, geographic reach and financial metrics. 42

73 Cost to Sell The fair value is adjusted for a 1.5% estimate of cost to sell. This estimate is based upon management s experience of other similar transactions in the industry. The following is the recoverable amount developed using the fair value less costs to sell calculation in 2013 (in millions): Sensitivity of fair value less costs to sell calculations Recoverable Amount United States $ Canada Asia Pacific France /Italy Others The estimates of fair value less costs to sell are sensitive to actual and estimated EBITDA for each CGU and factors which can impact the EBITDA multiple derived from the market participant comparables such as actual performance, market expectations and investor outlook. Key assumptions used in value in use calculations The calculation of value in use is most sensitive to the following assumptions: Cash flow projections Management has projected cash flows based on financial budgets and forecasts over a five year period. Growth rate The growth rate was determined by management in consideration of external sources of information, such as industry research and government studies. A growth rate was used to extrapolate cash flow projections beyond the cash flow projection periods. The growth rate for CGU s where the recoverable value was determined by value in use ranged from 3.0% to 4.0% (2012: 3.5%). Discount rate Discount rates were determined by calculating the weighted average cost of capital, which required an analysis of the cost of equity and the cost of debt adjusted for geographic specific risk factors. The discount rates varied by geography with the higher rates used in those geographies with higher economic volatility. A discount rate ranging from 12.0% to 14.5% (2012: 9.5% to 15.0%) was utilized in cash flow projections for CGU s where recoverable amount was determined by value in use. 43

74 The following is the recoverable amount developed using the value in use calculation in 2013 (in millions): Recoverable Amount Target $ Other 53.5 In 2012, the recoverable amount for the Canada, UK, Brazil and Mexico CGUs were determined based on the value in use. Sensitivity of value in use calculations The estimates of value in use as determined by the calculation of the discounted cash flows are sensitive to changes in the growth rate and discount rate, and factors which can impact these rates, such as the capital structures derived from the market participant comparables, actual performance, market expectations and investor outlook. For the Brazil CGU, a decline in growth rate, increase in discount rate or lower future projected cash flows would result in an additional impairment of goodwill. Remaining goodwill associated with the Brazil CGU is $12.1 million. Impairment test for trade names The recoverable amounts of trade names were determined based on a value in use calculation using the relief from royalty method. This method is used to estimate the cost savings that accrue to the owner of an intangible asset who would otherwise have to pay royalties or license fees on revenues earned through the use of the asset. The royalty rate was derived using a traditional profit split analysis looking at splits of earnings before interest and taxes ( EBIT ). Using this method, EBIT calculated splits of profits derived from the trade names only were estimated. The trade names were ascribed royalty rates of 0.8% (Australia), 2.0% (Target) and 3.5% (US), which were further supported by comparable third party licensing agreements. No trade names were impaired as a result of the impairment test. 44

75 14. Financial assets and liabilities December 31, Current assets At amortized cost: Loans and receivables due from affiliates $ 1,334 $ - Restricted cash 3,646 - Receivable from escrow account 2,930 - $ 7,910 $ - Non-current assets At amortized cost: Loans and receivables $ 6,633 $ 7,198 Receivable from escrow account 13,409 23,915 $ 20,042 $ 31,113 Current liabilities At amortized cost: Bank overdrafts $ 6,467 $ 4,708 Loans and payables due to affiliates 3,933 4,023 $ 10,400 $ 8,731 The Group s exposure to credit, currency and interest rate risks related to other investments is disclosed in Note 24. Fair value hierarchy The Group uses the following hierarchy for determining and disclosing the fair value of financial instruments by valuation technique: Level 1: quoted (unadjusted) prices in active markets for identical assets or liabilities Level 2: other techniques for which all inputs which have a significant effect on the recorded fair value are observable, either directly or indirectly Level 3: techniques which use inputs which have a significant effect on the recorded fair value that are not based on observable market data At December 31, 2013 and December 31, 2012, the Group did not hold any financial instruments measured at fair value. 45

76 15. Inventories The classification of inventories at the end of each year was as follows: Raw materials and consumables $ 33,841 $ 32,698 Work in progress 4,953 12,429 Finished goods 9,370 11,702 Rental equipment held for sale 3,181 11,911 $ 51,345 $ 68,740 In 2013 raw materials, consumables and changes in finished goods and work in progress recognized as cost of revenues amounted to $203,206 (2012: $165,502). 16. Prepaid expenses and other current assets Prepaid expenses and other current assets at the end of each year include the following: Prepaid insurance $ 3,352 $ 3,484 Costs in excess of billing 4,166 3,898 Prepaid taxes 4,242 6,876 Deferred leasing cost 3,565 6,781 Prepaid rent 2,658 3,439 Property, plant and equipment held for sale - 4,524 Receivables under finance lease 3,700 2,639 Current tax assets 2,531 1,172 Other prepaid expenses 20,434 16,853 $ 44,648 $ 49,666 46

77 17. Construction contracts December 31, Construction in progress at the reporting date Construction costs incurred plus profits less losses recognized to date $ 172,526 $ 106,424 Less: Progress billings (141,953) (92,896) $ 30,573 $ 13,528 Recognized and included in the financial statements as amounts due: From customers under construction contracts $ 36,409 $ 22,965 To customers under construction contracts (5,836) (9,437) $ 30,573 $ 13,528 Retentions held by customers for contract work $ 1,166 $ 880 Advances received from customers for contract work $ 1,300 $ 2,146 The Group recognized $219,651 in construction contract revenue in 2013 (2012: $114,712; 2011: $81,587) of which $218,604 was recognized using the percentage of completion method (2012: $114,052; 2011: $77,111). 47

78 18. Loans and borrowings For more information about the Group s exposure to interest rate, foreign currency and liquidity risk, see Note 24. Debt outstanding December 31, 2013 (the carrying amount includes deferred financing fees) December 31, 2013 December 31, 2012 Debt Description Nominal Interest Rate Year of Maturity Principal Carrying Amount Principal Carrying Amount Senior secured notes USD 8.50% 2018 $ 1,075,000 $ 1,063,521 $ 1,075,000 $ 1,061,928 Senior secured notes EURO 9.00% , , , ,291 Senior unsecured notes USD 10.75% , , , ,359 ABL facility - USD varies , , , ,865 ABL facility CAD varies ,450 76,772 70,470 67,398 ABL facility GBP varies , , , ,537 ABL facility EURO varies ,334 5,335 ABL facility - AUD varies ,741 93, , ,428 Other debt 45,675 45,675 2,879 2,879 Finance lease liabilities 12,979 12,979 6,176 6,176 Total loans and borrowings $ 3,160,742 $ 3,121,325 $ 2,953,442 $ 2,911,196 Classification - loans and borrowings: Current Non-current Current Non-current Senior secured notes $ $ 1,437,642 $ $ 1,420,219 Senior unsecured notes 742, ,359 ABL facility 882, ,563 Other debt 2,398 43, ,903 Finance lease liabilities 7,304 5,675 4,278 1,898 Total loans and borrowings $ 9,702 $ 3,111,623 $ 5,254 $ 2,905,942 On October 11, 2012, the Group completed a refinancing of its loans and obligations (the 2012 Refinancing ). As part of the 2012 Refinancing, the Group (i) issued approximately $2.2 billion in aggregate principal amount of senior secured and senior unsecured notes, (ii) entered into a five year multicurrency asset based revolving credit facility (the ABL Revolver ) with a maximum availability of the equivalent of $1.2 billion and borrowed the equivalent of $713.3 million under the ABL Revolver, (iii) repaid $2.3 billion of secured bank facilities, (iv) exchanged shares of Holdings to extinguish $719.7 million principal of secured bank facilities and Senior B3 debt and (v) terminated existing interest rate swap agreements for a cash payment of $78.9 million. Substantially concurrent with the 2012 Refinancing, the Group completed the acquisition of 100% of the ownership of Ausco from TDR in exchange for shares of Holdings. At the time of the acquisition of Ausco, $357.0 million of Ausco debt was also repaid. In addition, certain other indebtedness with related parties was eliminated through the contribution of the entities holding this debt to the Group by Holdings. Where shares of Holdings were used to effect the above transactions, Holdings further contributed the debt or asset to the Group through the Group s share capital. 48

79 During the 2012 Refinancing, the Group, through a newly formed subsidiary, issued $1,075.0 million (the USD tranche ) and million (the EURO tranche ) of fixed rate senior secured notes due October 15, 2018 (the Senior Secured Notes ). The Group, through the newly formed subsidiary, also issued $745.0 million of fixed rate senior unsecured notes due October 15, 2019 (the Senior Unsecured Notes ). The Senior Secured Notes and Senior Unsecured Notes bear interest payable semi-annually. Certain of the Company s subsidiaries organized in Australia, Canada, Hungary, New Zealand, the UK, the US, France, Germany, Luxembourg and Spain guarantee the Senior Secured Notes. Certain of the Company s subsidiaries in the US, Canada, the UK, Australia and New Zealand are borrowers (the Borrowers ) under the ABL Revolver. The amount which the Group can borrow is based on a defined formula of available assets, principally tangible assets calculated monthly (the borrowing base ). The ABL Revolver is secured by a first lien on these tangible assets which comprise substantially all rental equipment, property, plant and equipment and trade receivables in the US, Canada, the UK, Australia and New Zealand. The borrowing base at December 31, 2013 was the equivalent of $1,134.3 million. The ABL Revolver includes certain financial covenants, a leverage ratio and a fixed charge coverage ratio, calculated on a Group level. These financial covenants are only subject to monitoring in the event that the Group s borrowings under the ABL have exceeded 90% of the available facility. Remaining availability under the ABL Revolver was $206.9 million prior to consideration of the 90% covenant threshold and $86.9 million after consideration of the 90% covenant threshold at December 31, The Group expects to have greater than 10% availability under the borrowing base in 2014; as such, the Group does not expect to be subject to the financial covenants. Borrowings under the ABL Revolver bear interest payable on the first day of each quarter for the preceding quarter at a variable rate based on LIBOR or another applicable regional bank rate plus a margin. The margin varies based on the amount of total borrowings under the ABL Revolver with the margin increasing as borrowings increase. At December 31, 2013, the weighted average interest rate for borrowings under the ABL Revolver was 3.36%. The ABL Revolver requires the payment of an annual commitment fee on the unused available borrowings of between 0.25% and 0.5% per annum. At December 31, 2013, the Group had issued letters of credit under the ABL Revolver in the amount of $23.3 million in support of insurance programs in the US and performance guarantees in Australia and in the UK. Letters of credit and bank guarantees carry fees of 2.625% of the outstanding balance and reduce the amount of available borrowings. The proceeds from the Senior Secured Notes, Senior Unsecured Notes and the ABL Revolver were used to repay $2,367.7 million principal and interest of secured bank facilities, repay the indebtedness of Ausco in the amount of $356.6 million, terminate and pay the Group s interest rate swap obligation of $78.9 million and pay financing fees of $67.2 million. The remaining obligations of the Group (the $215.5 million of the secured bank facilities, $315.8 million of Senior B3 and $188.6 million of Senior D) under its secured bank facilities were exchanged for equity of Holdings. Obligations of the Group owed to affiliates ($310.3 million) were eliminated by conversion to equity. The Group determined under IAS 39, Financial Instruments, Recognition and Measurement, that the 2012 Refinancing was a debt extinguishment of the Senior Facilities Agreement ( SFA ) and the 49

80 Mezzanine Facility Agreement ( MFA ) that the Group entered on October 6, 2007 and restructured on December 22, The Group recorded a gain on extinguishment of debt of $15,903. This gain is comprised of the gain related to the exchange of debt for equity of $66,173, as a result of the fair value of equity given up being less than the carrying value of the debt exchanged; the write off of $42,351 of financing expenses for the 2012 Refinancing attributable to lenders who participated in the SFA and MFA and are also lenders under the new agreements; and the write-off of $7,919 for Ausco s unamortized deferred financing fees associated with debt that was repaid in the 2012 Refinancing. Fair Value of Considerations in the 2012 Refinancing In connection with the 2012 Refinancing, Holdings issued shares and convertible preferred equity certificates convertible into shares to existing and current debt holders. The Group issued 122,529,778 shares to Holdings in exchange for the extinguishment of senior secured bank facilities in the UK, Senior D debt, and Senior B3 debt. The fair value of the Company s shares issued as part of the 2012 Refinancing has been determined based upon the equity instruments given up by Holdings. Holdings issued 12,318,840 in ordinary shares and 2,597,543 in convertible preferred equity certificates to previous debt holders for the contribution of the secured bank facilities of $215.5 million in the UK. Holdings issued 8,143,490 ordinary shares and 8,143,490 convertible preferred equity certificates to previous debt holders for the contribution of Senior D debt of $188.6 million. Holdings issued 5,590,009 of ordinary shares to previous Senior B3 debt holders. The issuance of these shares resulted in a gain on extinguishment of debt being recorded as the fair value of the equity given up was less than the carrying value of the debt exchanged. Additionally, Holdings issued 23,374,332 in ordinary shares to TDR in exchange for the contribution of Senior B3 debt of $315.8 million. The exchange of the Senior B3 debt held by TDR for equity of Holdings was recorded as a transaction among entities under common control, thus no gain on extinguishment of debt was recorded. The gain on extinguishment recognized at the Holdings level was carried down to the Group s consolidated financial statements. The value of the ordinary shares of Holdings was based upon the total implied equity determined by fair value less cost to sell using the guideline public company method in conjunction with the valuation of the Group s CGU Groups for the purpose of testing goodwill for impairment. Accordingly, for assumptions regarding EBITDA, EBITDA multiple and cost to sell, see Note 13. As the shareholders exchanging debt for equity other than TDR are minority shareholders, no control premium was included in the share price used to determine the gain on extinguishment of debt. The convertible preferred equity certificates issued were determined to have an equivalent fair value to ordinary shares as they are convertible at the option of the holder with the same rights and privileges as other holders of that class of stock. The convertible preferred equity certificates were converted into ordinary shares of Holdings in

81 2013 ABL Amendment On December 19, 2013, the Borrowers entered into an amendment and restatement of the ABL Revolver which provides for an upsizing of the credit facility ( ABL Amendment ) subject to the repayment of certain other third-party debt obligations. On an aggregate basis, the ABL Revolver s capacity increased from $1.2 billion to $1.355 billion with the entire increase being isolated to the US. The ABL Revolver, as amended, also provides, among other things, that Target and its subsidiaries and Chard may, at the option of the Company and upon the termination of certain borrowings, become Borrowers and have their assets included in the applicable borrowing base calculations. In January 2014, the borrowing base increased approximately $100 million as a result of the ABL Amendment and the inclusion of Target and Chard assets in the borrowing base. Other The Group s other debt was primarily associated with financing provided for equipment in which the equipment serves as collateral for the borrowings. As discussed above, the Group repaid this financing of equipment in January 2014, which has allowed Target to become a borrower under the ABL Revolver. The Company recorded this debt as non-current at December 31, 2013, although a portion of the debt was due to mature in 2014 due to the Company s the intent and ability as of December 31, 2013 to refinance the current portion of the debt on a long-term basis as evident by Target becoming a borrowing under the ABL Revolver. The Group is obligated under non-cancelable leases for certain equipment, vehicles and parcels of land. The approximate future minimum rental payments and the present value of minimum payments for financing lease obligations at December 31, 2013 and 2012 are disclosed in Note 24. Prior to the 2012 Refinancing, the Group had interest rate swap agreements in place with a notional amount of USD 685,000 set to expire on December 22, Under the swaps, the Group paid a fixed rate of interest of 4.445% and received a variable rate equal to USD LIBOR on the notional amount with settlement quarterly. The Group had interest rate swap agreements in place with a notional amount of 755,000 set to expire on December 22, Under the swaps, the Group paid a fixed rate of interest of 3.735% and received a variable rate equal to EURIBOR on the notional amount with settlement quarterly. All existing interest rate swap agreements were settled through cash payment at the time of the 2012 Refinancing. 51

82 19. Provisions Warranties Insurance Legal Other Total Balance at January 1, 2013 $ 10,555 $ 8,655 $ 2,970 $ 38,214 $ 60,394 Acquisitions through business combinations ,265 30,152 Provisions made during the period 3,205 10, ,576 41,138 Provisions used during the period (2,168) (11,364) (437) (27,678) (41,647) Provisions reversed during the period (3,619) (6) (528) (1,095) (5,248) Reduction in the Earnout Agreement liability (15,091) (15,091) Other 338 (694) (23) (13,266) (13,645) Balance at December 31, 2013 $ 8,311 $ 7,171 $ 3,646 $ 36,925 $ 56,053 Current $ 2,963 $ 7,171 $ 3,577 $ 6,710 $ 20,421 Non-current 5, ,215 35,632 Warranties The provision for warranties relates mainly to the modular space units sold and rented. The provision is based on estimates made from historical warranty data associated with similar products and services. Insurance The Group maintains insurance coverage for its operations and employees with aggregate, per occurrence and deductible limits deemed by management to be necessary or prudent based upon current operations and historical experience. These coverages generally have high deductible amounts. The Group expenses the deductible portion of all individual claims. However, the Group generally does not know the full amount of its exposure under the deductible in connection with any particular claim during the fiscal period in which the claim is incurred and therefore must make an estimated accrual for the deductible expense. The Group makes these accruals based on a combination of the claims review by its staff and insurance companies. Periodically the accrual is reviewed and adjusted based on the Group s loss experience. Judgment is required in developing the estimates of amounts to be accrued. In addition, the Group s estimated accruals will change as further loss experience is developed. All of these factors have the potential to significantly impact the amount the Group has previously reserved in respect of its estimated deductible expenses, and therefore the Group may be required to increase or decrease amounts previously accrued in future periods. 52

83 Legal The Group is involved in various lawsuits and claims arising in the ordinary course of its business. The Group assesses these matters on a case-by-case basis and provisions are recorded for the matters in which the future payment by the Group is more likely than not and can be measured reliably. See Note 25 for additional information on the Group s legal claims. Other provisions Other provisions principally include provisions relating to the Group s restructuring plans, indemnified matters associated with acquisitions and the Earnout Agreement associated with the Target acquisition. At December 31, 2013, other provisions included $10,797 of remaining provisions incurred under the Group s restructuring plans. In 2013, a provision of $24,322 (2012: $9,016; 2011: $11,952) was made to cover the costs associated with restructuring plans designed to streamline operations and reduce costs. Estimated restructuring costs relate primarily to the Group s European operations, most significantly in France, Spain, Germany and the UK, and consist mainly of employee termination benefits in 2013 of $9,758 (2012: $5,703; 2011: $5,656) as well as termination of lease costs of $14,564. Other provisions also include $13,409 at December 31, 2013 associated with the acquisition of Eurobras where settlement will be funded by the portion of the purchase price placed in an escrow account. In connection with the Target acquisition, the Group recorded a liability associated with the Earnout Agreement of $21,658 which is classified in other provisions. During 2013, the Group reduced the Earnout Agreement provision to $6,567 and recorded the $15,091 reduction in the liability in other income (expense), net on the Group s consolidated statement of comprehensive income. At December 31, 2013, the following key assumptions, which represent unobservable inputs, were utilized in developing the contingent consideration liability: Unobservable Inputs Range EBITDA volatility 35.0% Discount rate 21.4% Exit multiple 12.0x Estimated years (Term) to exit An increase in the exit multiple of 1.0x at December 31, 2013 would result in an increase in the fair value of the contingent consideration of $2.2 million. The above assumptions represent management s best estimate as of December 31, The Earnout Agreement liability will be revalued at each reporting date with all key assumptions updated for the current estimates. 53

84 20. Trade, other payables and accrued expenses December 31, Trade payables due to third party suppliers $ 157,803 $ 201,159 Non-trade payables and accrued expenses 137, ,331 $ 295,774 $ 304, Deferred revenue and customer deposits The movement in deferred revenue during the year and the amount of customer deposits was as follows: December 31, Deferred revenue Balance at January 1 $ 35,090 $ 28,841 Acquisitions through business combinations 28,091 Deferred during the year 81,142 64,241 Released to the statement of comprehensive income (89,444) (58,372) Effect of movements in foreign exchange rates Balance at December 31 $ 55,318 $ 35,090 Current $ 52,978 $ 35,090 Non-current $ 2,340 $ Customer deposits Current $ 12,430 $ 9,267 Non-current $ 3,375 $ 22. Capital and reserves Subscribed capital The following movement occurred during the year in total ordinary shares: Balance at January 1 213,289,086 90,759,308 Issue of shares for non-cash consideration - 122,529,778 Balance at December ,289, ,289,086 As part of the 2012 Refinancing, the Company issued 122,529,778 shares with a per share par value of 1 to Holdings for non cash considerations. The Company issued 122,529,775 shares to Holdings for the contribution of the Senior B3 debt receivables, one share to Holdings for the acquisition of

85 Algeco/Scotsman Global Finance Holding S.à r.l,, one share to Holdings for the contribution of the Senior D debt receivables and one share of Holdings for the contribution of the Senior E and Mezzanine debt receivables. During the quarter ended December 31, 2013, the Company recapitalized the ordinary shares of the Company into ten classes of alphabet shares (Classes A-J). Each shareholder s percentage of ownership did not change as a result of the recapitalization of the Company s ordinary shares, but each class of alphabet shares has different dividend rights attached to them. The Company also changed the par value of its shares from Euro to USD. Each Euro share was exchanged for a USD share. The difference in share capital in Euros compared to the share capital in USD was allocated to share premium in the amount of $77,637. The Company s issued and outstanding shares are pledged to secure the obligations of AS PIK under the PIK Debt. Translation reserve The translation reserve comprises all foreign currency differences arising from the translation of the consolidated financial statements of foreign operations. Legal reserve Under Luxembourg law, 5% of the net profit of the year must be allocated to a legal reserve until such reserve equals 10% of the issued share capital. This reserve is not available for dividend distribution. By resolution, the Company reduced the legal reserve to $2 in Share-based payments The Group implemented a management incentive plan (the Plan ) in October Participants in the Plan include participants in a previous plan who exchanged shares in that plan for B and/or D shares in the Plan and new participants ( Joiners ) who received C or E shares. These participants received shares of Algeco Scotsman Management S.C.A. ( ASM ), a subsidiary of Holdings. Participants in the Plan are entitled to a payout, the amount of which depends on the Enterprise Value ( EV ) of the Group at Exit, as defined in the Subscription and Shareholders Deed ( Shareholder Agreement ). Exit is defined as a change of control in the Group. The payout increases as the EV increases and is payable in either cash or shares depending on the level of EV. The Group has concluded that the most likely payout will be principally in cash and that this payout will most likely be made directly by the Group. Therefore, the share-based payment awards under the Plan are considered to be cash-settled awards of the Group. The fair values of the share-based payment awards as of the grant date were determined using a Monte Carlo simulation (a Level 3 technique) to estimate the EV upon an Exit Event and therefore the amount of the payout. The EV upon an Exit Event is based on the total implied equity of the group at the measurement date determined by the fair value less cost to sell using the guideline public company 55

86 method projected forward to an estimated Exit Event date. EBITDA multiples were calculated by deriving and averaging the current year observed multiple, the 2013 forward multiple and the 2014 forward multiple of the market participant comparables. Other key estimates in the determination of the fair value of the share-based payment awards at each measurement date are estimated time to an Exit Event, discounts or premiums for lack of transferability, forfeitures for employees who leave the Group and discounts for time value. Participants with B shares vested in their benefit over three years beginning January 1, 2010 and were fully vested at December 31, Joiners who have C shares or E shares vest over four years beginning January 1, 2010 or from the date of employment or promotion, whichever is later. Other than the payout, holders of shares of ASM have no rights and all shares of ASM are cancelled upon payout. At each reporting date, the estimated fair value of the awards is determined. Expense for the period is comprised of the amortization of the initial expense for current period vesting and adjustments to previously recorded expense for changes in the estimate of the fair value of the award. While expense will primarily be recognized over the vesting period, the estimate of the fair value of the awards will be updated at each reporting date until payout. Changes in the estimate of the fair value will result in changes to the cumulative expense recognized subsequent to the vesting dates. Fair value of the awards under the Plan using the Monte Carlo simulation was calculated using a range of key assumptions as follows: December 31, 2013 December 31, 2012 December 31, 2011 Averaged multiple 11.3x 10.1x 9.5x Expected time to Exit 1.0 year 2.5 years 1.5 years 3.0 years 1.0 year -3.0 years Expected volatility 18.4% % 20.0% % 21.8% % Expected dividend yield 0% 0% 0% Risk free rate (Euro) 0.17% % 0.05% % 0.23% % Discount for lack of transferability 9.07% % 13.61% % 24.69% % Expected volatility was determined by reference to the historical volatility of a comparable peer group. Expected life is management s estimate of time to exit at the grant date. 56

87 Other The movement in the number of shares for share-based payment awards was as follows: Class B Class C Class D Class E Balance outstanding at January 1, ,967 20,737 8,557 15,000 Granted ,325 Forfeited (1,392) (5,563) Balance at December 31, ,962 25,499 8,557 15,000 Granted 1,375 Repurchased (15,000) Forfeited (1,049) (1,525) Balance at December 31, ,913 25,349 8,557 Granted 1,000 15,000 Repurchased (4,250) (1,500) Forfeited (1,250) (1,174) Balance at December 31, ,413 23,675 8,557 15,000 The movement in the liabilities associated with share-based payment awards was as follows: Class B Class C Class D Class E Total Balance at January 1, 2011 $ 7,215 $ 690 $ 1,381 $ 2,485 $ 11,771 Expense recognized for current year service 3,235 2, ,498 7,504 Change in fair value of liability (2,835) (368) (619) (853) (4,675) Effect of movements in foreign exchange rates (647) (282) (99) (282) (1,310) Balance at December 31, ,968 2,326 1,148 2,848 13,290 Expense recognized for current year service 1,913 3, ,579 Change in fair value of liability 4,032 2, (896) 5,702 Repurchased (1,980) (1,980) Effect of movements in foreign exchange rates Balance at December 31, ,238 7,843 2,120 23,201 Expense recognized for current year service 3, ,208 13,886 Change in fair value of liability 4,279 2, (2,589) 4,696 Repurchased (770) (199) (969) Effect of movements in foreign exchange rates 1, ,001 Balance at December 31, 2013 $ 18,004 $ 14,545 $ 3,118 $ 8,148 $ 43,815 57

88 At December 31, 2013, the total estimated fair market value of the awards of under the Plan was $51,222 (2012: $26,042). The remaining expense, adjusted to fair value at each subsequent reporting date will be recognized over the next year except for joiners since inception. The liability will be adjusted annually to reflect changes in its fair value. The liability for share-based payment awards is included in Employee Benefits in the consolidated statements of financial position. Ausco plan On July 29, 2011, Ausco established a Management Share Plan. Ausco Holdings Pty Limited (Ausco Pty), a subsidiary of Ausco entered into a share deed whereby Ausco Pty issues management shares in Ausco Pty to various members of Ausco management. On January 8, 2012, a further grant under the plan of $177 on similar items was offered to key management and senior employees. During 2013, the plan was amended to include a group deemed exit value multiple and an amended money multiple in determine the share plan proceeds. The effect of this amendment was not significant. The Management Share Plan is included in Non-controlling interests on the consolidated statements of financial position. The terms and conditions relating to this issue were as follows: Issue price The total issue price for the grants under the Ausco plan was $1,971. Employees were required to pay the allotted issue price, either by cash, or by a financial assistance provided by Ausco Pty in order to participate in the plan. On inception, Ausco Pty recognized $72 as a share based liability out of the initial grant for awards under the scheme not expected to vest. Issuance of shares has been deemed to be issued at a discount to fair value. An independent valuation of these shares indicated a fair value of AUD 1.25 each compared to an issue price of AUD 1 each. Over the duration of the vesting period, the equity value is incrementally adjusted based upon a combination of factors including the portion of vesting and expected forfeiture for services. Financial assistance Ausco Pty provided an option for employees to receive a non-recourse loan to pay the issue price. Payments are allowed at any time during the vesting period; however, conditions exist within the plan for repayment on the earlier of specified dates or on the receipt of proceeds from any exit event. Loans to management at December 31, 2013 amount to $21 (2012: $508) at nominal value and fair valued at $21 (2012: $472). These loans are included in Non-controlling interests on the consolidated statements of financial position. Exit event and conversion Management shares are subject to time-vesting, which relates to the period that the employees are employed by Ausco Pty from issuance. 25% of the total management shares vest on the first year of 58

89 issuance with the remaining shares vesting 1/36 th each month for the next 3 years or until an exit event occurs. An exit event is deemed to be a sale of the business by the ultimate parent entity, either by trade sale or IPO. Conversion under an exit event entitles each participant a conversion into a number of common shares, as determined by a formula based on a percentage of the exit event. A cash-out of equity ratchet option is available to Ausco Pty in lieu of conversion. Leaver provisions are defined within the Management Share Plan. The classification of how employees are deemed to have separated from Ausco Pty during the vesting period and before an exit event will determine the conversion value they may be entitled to upon an exit event. The expense recognized in relation to the Ausco Management Share Plan for the year ended December 31, 2013 was $80 (2012: $48). 24. Financial instruments The Group has exposure to credit risk, liquidity risk and market risk that result from its use of financial instruments. Management of the Group has overall responsibility for the establishment and oversight of the Group s risk management framework. The Group s risk management policies are established to identify and analyze the risks faced by the Group, to set appropriate risk limits and controls, and to monitor risks and adherence to limits. Risk management policies and systems are reviewed regularly to reflect changes in market conditions and the Group s activities. The Group, through its training and management standards and procedures, aims to develop a disciplined and constructive control environment in which all employees understand their roles and obligations. Senior management oversees compliance with the Group s risk management policies and procedures and reviews the adequacy of the risk management framework in relation to the risks faced by the Group. Credit risk Credit risk is the risk that a counterparty to a financial instrument will cause a financial loss to the Group by failing to discharge its obligation. For cash and cash equivalents and trade receivables, credit risk represents the carrying amount on the consolidated statements of financial position. Management has a credit policy in place and the exposure to credit risk is monitored on an ongoing basis. Credit evaluations are performed on all customers requiring credit over a certain amount. The Group does not require collateral in respect of financial assets. Transactions involving derivative financial instruments were with counterparties who have sound credit ratings and with whom the Group had a signed netting agreement. Given their high credit ratings, no counterparty failed to meet its obligations. At the reporting date there were no significant concentrations of credit risk other than the receivables with public administration customers discussed below. The maximum exposure to credit risk is represented by 59

90 the carrying amount of each financial asset, including derivative financial instruments, in the consolidated statements of financial position. Exposure to credit risk The carrying amount of financial assets represents the maximum credit exposure. The maximum exposure to credit risk at the reporting date was: Carrying amount at December 31, Trade and loans receivables $ 389,673 $ 410,918 Cash and cash equivalents 60, ,037 $ 449,784 $ 514,955 Impairment losses The aging of trade receivables at the reporting date was: December 31, Not past due $ 208,786 $ 205,760 Past due 0-30 days 67,744 97,327 Past due days 28,133 32,485 Past due days 14,269 13,883 More than 90 days 93,056 82, , ,641 Provision for impairment (38,043) (33,185) Net trade receivables $ 373,945 $ 398,456 The movement in the provision for impairment of trade receivables during the year was as follows: December 31, Balance at January 1 $ (33,185) $ (22,804) Impairment loss recognized, net (19,437) (12,227) Fx and other, net 14,579 1,846 Balance at December 31 $ (38,043) $ (33,185) Estimated impairment losses are based on historical collection experience, days sales outstanding trends and a review of specific receivables. During the year ended December 31, 2013, the Group collected $16,900 in trade receivables from public administration customers in Spain. As of December 31, 2013, 60

91 the Group has $27,600 (2012: $22,817) in trade receivables with public administration customers (comprised principally of governmental and pseudo-governmental agencies) in Spain of which $7,700 (2012: $8,441) is over 90 days and $9,600 (2012: $2,506) is over 360 days. The Group does not maintain a provision for impairment on public administration customers. Included in the 2013 Governmental Payment Plan is $16,500 in receivables outstanding at December 31, 2013 that is expected to be paid in the first quarter of Liquidity risk Liquidity risk is the risk that the Group will encounter difficulty in meeting obligations associated with financial liabilities. The Group mitigates liquidity risk through its access to the capital markets, cash flow generated through operations and its forecasting of its use of liquidity and the capital requirements of our rental equipment, through the careful monitoring of our rental equipment additions. The following are the contractual maturities of financial liabilities, including estimated interest payments and excluding the impact of netting agreements: Carrying amount Contractual cash flows 6 months or less 6-12 months 1-2 years 2-5 years More than 5 years December 31, 2013 Non-derivative financial liabilities Senior notes $ 2,180,176 $ 3,253,992 $ 102,737 $ 102,737 $ 205,474 $ 2,037,978 $ 805,066 ABL facility 882,495 1,033,520 1,033,520 Other debt 45,675 45,675 2, ,141 Finance lease liabilities 12,979 15,939 3,111 5,321 2,278 3,779 1,450 Trade and other payables 274, , ,590 6,435 Bank overdraft 6,467 6,467 6,467 Contingent consideration 6,567 6,567 6,567 Deposits from customers 15,805 16,757 9,520 1,548 2, ,796 $ 3,424,189 $ 4,652,942 $ 392,386 $ 116,415 $ 210,206 $3,124,623 $ 809,312 Carrying amount Contractual cash flows 6 months or less 6-12 months 1-2 years 2-5 years More than 5 years December 31, 2012 Non-derivative financial liabilities Senior notes $ 2,162,578 $ 3,490,478 $ 105,115 $ 102,052 $ 204,106 $ 612,316 $ 2,466,889 ABL facility 739, , ,863 Other debt 2,879 2,879 1, Finance lease liabilities 6,176 6,635 1,703 2, Trade and other payables 256, , ,428 Bank overdraft 4,708 4,708 4,708 Deposits from customers 9,267 9,267 3,523 1,422 2, ,631 $ 3,181,599 $ 4,689,258 $ 372,540 $ 106,833 $ 207,726 $ 1,533,445 $ 2,468,714 61

92 Market risk Market risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market prices. The Group is exposed to market risks, including changes in foreign currency exchange rates and interest rates. Exposure to market risks related to operating activities is managed through the Group s regular operating and financing activities. Currency risk The Group is exposed to currency risk on sales, purchases and borrowings that are denominated in a currency other than the respective functional currencies of Group entities, primarily the EUR, USD, sterling ( GBP ), Canadian dollar ( CAD ), beginning in late 2011, the Brazilian real ( BRL ), and beginning in October 2012, the Australian dollar ( AUD ). In addition, the Group s investments in foreign subsidiaries are sensitive to fluctuations in foreign currency exchange rates. Prior to the change in functional currency, as discussed in Note 3, the Group was exposed to foreign currency risk on external debt denominated in USD in the amount of $1,820 million versus the Euro. Translation of these amounts from USD to the Euro generated foreign currency gains or losses each period. Subsequent to the change in functional currency, the USD denominated debt no longer generates foreign currency gains or losses; however, the Group is exposed to foreign currency risk on external debt denominated in Euros in the amount of 275 million. Translation of these amounts from Euro to USD functional currency generates foreign currency gains and losses. In addition, the Group also has certain intercompany loans whose currency gains and losses which were impacted by the change in functional currency. The Group s exposure to foreign currency risk, based on notional amounts, was as follows: December 31, 2013 EUR USD GBP BRL AUD Loans and borrowings 280,706 $ R$ $ Net intercompany payable (receivables) (208,744) 1,158,333 (34,978) (100,837) (406,595) Net exposure 71,962 $ 1,158,333 (34,978) R$ (100,837) $ (406,595) December 31, 2012 EUR USD GBP BRL AUD Loans and borrowings 4,045 $ 1,859,055 R$ $ Net intercompany receivables (205,643) (1,039,451) (276,487) (64,182) (253,544) Net exposure (201,598) $ 819,604 (276,487) R$ (64,182) $ (253,544) 62

93 The following significant exchange rates were applied during the year: Average rate Reporting date rate USD for 1: GBP EUR BRL CAD AUD Sensitivity analysis A 10 percent hypothetical strengthening of the USD against the following currencies at December 31 would have increased (decreased) profit or loss by the amounts shown below. This analysis assumes that all other variables, in particular interest rates, remain constant. 10% strengthening of the USD Profit or Loss GBP $ (50,391) $ (4,642) $ EUR $ (47,976) $ (109,922) $ 32,177 BRL $ (4,270) $ $ AUD $ (62,492) $ $ A 10 percent hypothetical weakening of the USD at December 31 would be equal but opposite to the amounts shown above, on the basis that all other variables remain constant. Interest rate risk At the reporting date, the interest rate profile of the Group s interest-bearing financial instruments based upon their principal amounts was: December 31, Fixed rate instruments Financial assets $ 7,761 $ 5,264 Financial liabilities (2,255,818) (2,189,935) $ (2,248,057) $ (2,184,671) Variable rate instruments Financial liabilities $ (904,931) $ (763,507) 63

94 Fair value sensitivity analysis for fixed rate instruments The Group does not account for any fixed rate financial assets and liabilities at fair value through profit or loss; therefore, a change in interest rates at the reporting date would not affect profit or loss relating to these items. Interest rate swaps of the Group were measured at fair value with changes in fair value recognized in profit or loss. There were no interest rate swaps outstanding as of December 31, 2013 or A hypothetical change of 100 basis points ( bps ) in interest rates for fixed rate instruments measured at fair value at December 31, 2011 would have increased (decreased) profit and loss by the amounts shown below. This analysis assumes that all other variables, in particular foreign currency rates, remain constant. 100 bps increase bps decrease Interest rate swap $ 35,257 $ (31,363) Cash flow sensitivity analysis for variable rate instruments A hypothetical increase of 100 basis points in interest rates prevailing over the reporting period for variable rate financial instruments that existed at the end of the reporting date would have increased (decreased) profit or loss by the amounts shown below. This analysis assumes that all other variables, in particular foreign currency rates, remain constant bps 100 bps 100 bps increase increase increase Variable rate instruments $ (9,042) $ (7,787) $ (31,387) Interest rate swap 18,076 Cash flow sensitivity (net) $ (9,042) $ (7,787) $ (13,311) The effect of a 100 basis points decrease would be equal but opposite, assuming all other variables remain constant. Fair values The fair value of the 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 Group has assessed that the fair value of cash and short-term deposits, trade receivables, trade payables, bank overdrafts and other current liabilities approximate their carrying amounts largely due to the short-term maturities of these instruments. 64

95 The fair value of the quoted notes is based upon quoted market prices at the reporting date. The fair value of contingent consideration is described in Note 19. The following table shows the carrying amounts and fair values of financial liabilities, including their levels in the fair value hierarchy. Carrying amount Fair value December 31, 2013 Level 1 Level 2 Level 3 Financial liabilities measured at fair value Contingent consideration $ 6,567 $ $ $ 6,567 $ 6,567 $ $ $ 6,567 Financial liabilities not measured at fair value Senior notes $ 2,180,176 $ $ 1,714,703 $ ABL facility 882, ,185 $ 3,062,671 $ $ 2,618,888 $ Carrying amount Fair value December 31, 2012 Level 1 Level 2 Level 3 Financial liabilities not measured at fair value Senior notes $ 2,162,578 $ $ 2,216,946 $ ABL facility 739, ,691 $ 2,902,141 $ $ 2,978,637 $ Capital management The Group s objectives when managing capital are to safeguard the ability to continue as a going concern, provide shareholder returns and provide appropriate benefits for stakeholders. The Group seeks to maintain an optimal debt and equity structure to minimize the overall cost of capital. To maintain or adjust the capital structure, Group entities may issue new shares or acquire/sell assets to adjust debt levels where appropriate. The Company is privately held. Issued share capital is detailed in Note

96 25. Commitments and contingencies Operating Leases: Group as lessee The Group is obligated under non-cancellable operating leases for certain properties, equipment, vehicles and parcels of land. The rentals for these operating leases are payable as follows: December 31, Less than one year $ 52,156 $ 52,794 Between one and five years 132, ,888 More than five years 102,885 74,351 $ 287,286 $ 247,033 In 2013, $77,066 (2012: $51,033; 2011: $69,260) of rent expense was recognized in respect of operating leases. Operating leases: Group as lessor Equipment is leased generally under operating and occasionally under sales type leases. Operating lease terms generally range from 1 to 60 months, and contractually averaged approximately 12 months at December 31, 2013 (2012: 7 months). Finance leases: Group as lessee The Group is obligated under non-cancellable finance leases for certain property, equipment and vehicles. The fair value of receivables under finance leases is determined by applying the present value method and the customary market interest rates at which the property would be completely refinanced. The total minimum future lease payments under these finance leases are as follows: Future minimum lease payments December 31, 2013 December 31, 2012 Present value of Future minimum minimum lease lease Interest payments payments Interest Present value of minimum lease payments Less than one year $ 8,432 $ 1,141 $ 7,291 $ 4,500 $ 235 $ 4,265 Between one and five years 6,057 1,318 4,739 1, ,737 More than five years 1, $ 15,939 $ 2,960 $ 12,979 $ 6,635 $ 459 $ 6,176 66

97 Finance leases: Group as lessor The Group leases out its rental equipment under finance leases. The fair value of receivables under finance leases is determined by applying the present value method and the customary market interest rates at which the property would be completely refinanced. Rental equipment and other property, plant and equipment As of December 31, 2013, commitments for the acquisition of rental equipment and property, plant and equipment were $20,172 (2012: $40,119). China Joint Venture On April 11, 2013, the Company signed a joint venture agreement with Beijing Chengdong International Modular Housing Company, Ltd. In March 2014, the Company was issued its business license for lease and wholesale of modular space solutions under the brand name Algeco Chengdong. The Company is required to make an initial contribution in the USD-equivalent amount of RMB 15.3 million (approximately $2.5 million), representing a 51% equity interest in the joint venture and, within twelve months following the joint venture s establishment, the Company will be required to contribute an amount equal to the USD-equivalent of RMB 29.0 million (approximately $4.8 million) and the Company s equity interest will be increased to 60%. Within thirty months following the joint venture s establishment, the Company will be required to contribute an amount equal to the USD-equivalent of RMB 41.0 million (approximately $6.8 million) and the Company s equity interest will be increased to 65%. Legal Claims The Group is in the preliminary stages of resolving certain issues involving compliance with laws in certain jurisdictions. While the Group believes that these matters will be resolved within a reasonable timeframe for such matters with no monetary settlement and accordingly no reserve has been recorded, the ultimate outcome of these matters is uncertain. In the event of an adverse resolution, the Group estimates that based on current information, exposure in the range of $12.0 million to $59.0 million is possible. The Group does not believe that the resolution of these matters will be material to its financial position or results of operations. In 2011, certain shareholders of Algeco/Scotsman Group S.à r.l., a subsidiary of the Company, filed a summons in the District Court of Luxembourg against nine defendants, including certain Group subsidiaries. The claimants allege abuse of authority by the majority shareholders in transferring shares into a new legal entity and allege damages in excess of $25 million. The Group does not believe there is any merit to the claim and no provision has been made in the consolidated financial statements. The Group is actively defending against the claim. 67

98 26. Related parties The ultimate parent of the Company is Holdings and the ultimate controlling shareholder of the Company is TDR. During 2013, TDR charged the Group $8,570 for monitoring fees and consulting and management advisory services (2012: $4,138; 2011: $3,836) and was reimbursed by the Group for $1,565 in fees that TDR incurred during the 2012 Refinancing. As part of the 2012 Refinancing, Algeco Scotsman FS Co S.à r.l., a subsidiary of TDR, was contributed to Holdings in exchange for the issuance of equity instruments. Holdings subsequently contributed Algeco Scotsman FS Co S.à r.l to the Company for one share. Algeco Finance Mezz Sp. z o.o. and Algeco Finance 2L Sp. z o.o., subsidiaries of Holdings, were contributed to the Group by Holdings for one share. The Group had previously received 50,000 and issued non-interest bearing loan due in 2060 to Holdings that was effectively settled in exchange for equity of the Group as part of the 2012 Refinancing. The Group previously had interest bearing loans from its parent Algeco/Scotsman Group S.à r.l. and its ultimate parent Holdings in the amount of 12,277 and 9,861, respectively. These interest bearing loans were settled as part of the 2012 Refinancing through their conversion into equity. As part of the 2012 Refinancing, certain other related party amounts were effectively settled in exchange for equity of Holdings as well see Note 18. Interest expense on aggregate borrowings due to related parties was $61,624 and $71,727 for the year ended December 31, 2012 and December 31, 2011, respectively. On May 1, 2013, Holdings, through a newly formed wholly-owned subsidiary, AS PIK, entered into the PIK Debt, a $400.0 million loan agreement intended to fund a partial redemption of capital, net of transaction fees and expenses, to Holdings shareholders. Neither the Company nor any of its subsidiaries are obligors or guarantors under the PIK Debt. However, to secure the obligations of AS PIK under the PIK Debt, Holdings and certain of its subsidiaries that also hold minority interests in the Company granted a pledge over all of the issued and outstanding shares of the Company. The Company recorded a $9.4 million gain on extinguishment of debt related to a contingent liability owed to a former debt holder which was settled in the second quarter of 2013 by providing $10.0 million of AS PIK notes to the former debt holder. A subsidiary of the Company leases office space for its corporate headquarters from a shareholder of Holdings. Rent expense associated with the lease was approximately $311 for the year ended December 31,

99 The remuneration of key management personnel of the Group is set out below in aggregate for each of the categories specified in IAS 24, Related Party Disclosures. Salaries and short-term employee benefits include wages, salaries and social security costs. Year ended December 31, Key management compensation Salaries and short-term benefits $ 5,452 $ 4,220 $ 6,605 Post-employment benefits Termination benefits 542 1,611 Share-based compensation 4,954 2,131 1,946 $ 11,039 $ 8,011 $ 8, Group entities These consolidated financial statements include the financial statements of the Company and the subsidiaries listed below. Entity Name Country Percentage of interest Algeco Scotsman Global S.à r.l. Luxembourg Parent Algeco Scotsman Global Finance Holding S.à r.l. Luxembourg 100% Algeco Scotsman Global Finance plc United Kingdom 100% Algeco Finance 2L Sp. z o.o. Poland 100% Algeco Finance Mezz Sp. z o.o. Poland 100% Algeco Scotsman Technology (Shenzhen) Co. Ltd. China 100% Algeco Scotsman Group Kft. Hungary 100% Algeco Scotsman Holdings Kft. Hungary 100% Algeco Scotsman Finance NV Belgium 100% Algeco LLC Russia 100% Algeco Ukraine LLC Ukraine 100% Algeco Holdings (Austria) GmbH Austria 100% Algeco Holdings B.V. Netherlands 100% Algeco B.V. Netherlands 100% Ristretto Investissements SAS France 99% Algeco SAS France 99% Algeco Holdings, S.L. Spain 99% Algeco Construcciones Modulares, S.A. Spain 99% Perfilados Olmedo, S.A. Spain 99% Algeco Construçoes Pré-Fabricadas, S.A. Portugal 99% Algeco S.p.A. Italy 99% Algeco Belgium NV Belgium 99% MBM Mietsystem fur Bau and Industrie GmbH Germany 100% Algeco Schweiz AG Switzerland 100% Algeco GmbH Germany 100% Algeco Sp.z.o.o Poland 100% Algeco s.r.o. Czech Republic 100% Algeco S.R.L. Romania 100% 69

100 Entity Name Country Percentage of interest Algeco Oy Finland 100% A1 Container Austria GmbH Austria 100% Algeco Kft. Hungary 100% A1 Container Slovenia d.o.o. Slovenia ` 100% Ausco Holdings Pty Limited Australia 100% Ausco Acquisitions Pty Limited Australia 100% Ausco Asia Pty Limited Australia 100% Portacom New Zealand Limited New Zealand 100% Ausco Modular Pty Limited Australia 100% Ausco Properties Pty Ltd Australia 100% Ausco Finance Limited Australia 100% Ausco Holding S.à r.l. Luxembourg 100% Chard Camp Catering Service Ltd. Canada 100% Elliott Group Holdings (UK) Limited United Kingdom 100% Elliott Group Holdings Limited United Kingdom 100% Elliott Group Limited United Kingdom 100% Eurobrás Construções Metálicas Moduladas Ltda. Brazil 100% Target Logistics Management, LLC United States 100% Target Management Canada, Ltd Canada 100% TL Provdeeduria Y Servicios de rl de cv Mexico 100% Target H20, LLC United States 100% Target Logistics Holdings Tioga, LLC United States 100% Target Logistics Holdings Williston, LLC United States 100% Target Logistics Holdings Stanley, LLC United States 100% Target Logistics Holdings Dickinson, LLC United States 100% Target Logistics Southwest, LLC United States 100% Target Logistics Holdings Minot, LLC United States 100% Target Logistics Management Pty Limited Australia 100% Williams Scotsman International, Inc. United States 100% Williams Scotsman, Inc. United States 100% Williams Scotsman, LLC United States 100% Willscot Equipment, LLC United States 100% Williams Scotsman of Canada, Inc. Canada 100% Williams Scotsman Mexico S. de R.L. de C.V. Mexico 100% WS Servicios de Mexico, S. de R.L. de C.V. Mexico 100% The Company also owns dormant companies not mentioned in the table above as they no longer have any activity. 70

101 Ernst & Young LLP 621 East Pratt Street Baltimore, Maryland Tel: Fax: Report of Independent Auditors To the Shareholders of Algeco Scotsman Global S.à r.l. Report on the Financial Statements We have audited the accompanying consolidated financial statements of Algeco Scotsman Global S.à r.l. (formerly Ristretto Group S.à r.l.) and subsidiaries, which comprise the consolidated statement of financial position as of December 31, 2013 and 2012, and the related consolidated statements of comprehensive income, changes in equity and cash flows for each of the three years in the period ended December 31, 2013, and the related notes to the consolidated financial statements. Management s Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of these financial statements in conformity with International Financial Reporting Standards as issued by the International Accounting Standards Board; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free of material misstatement, whether due to fraud or error. Auditor s Responsibility Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity s internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. A member firm of Ernst & Young Global Limited 71

102 Opinion In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Algeco Scotsman Global S.à r.l. and subsidiaries at December 31, 2013 and 2012, and the consolidated results of their operations and their cash flows for each of the three years in the period ended December 31, 2013 in conformity with International Financial Reporting Standards. March 27, 2014 A member firm of Ernst & Young Global Limited 72

103 Statement of EBITDA and Adjusted EBITDA Amounts in Thousands Year Ended December 31, 2013 Net loss $ (199,599) Income tax expense 17,772 Net finance expense 271,185 Depreciation and amortization 304,834 EBITDA 394,192 Non-cash compensation from equity plans 18,582 Non-cash impairment charges and (gain) loss on disposals 38,496 Sponsor management fees 8,570 Restructuring charges under IFRS 24,322 Acquisition costs, including change in FMV of earn-out (11,624) Other non-recurring items 12,979 Adjusted EBITDA $ 485,517 Note: EBITDA and Adjusted EBITDA may be considered "non-ifrs" financial measures. We believe that the disclosure of these non-ifrs financial measures provides additional insight into the ongoing economics of our business and reflects how we manage our business internally. These non-ifrs financial measures are not in accordance with IFRS and should not be viewed in isolation or as a substitute for IFRS financial measures.

104