WillScot Holdings Corp. — 2017 Q3 10-Q summary
Important entity note: The supplied filing is for Double Eagle Acquisition Corp., a blank-check company that proposed acquiring Williams Scotsman International, Inc. It does not report the operating results of WillScot or Williams Scotsman.
Business context and reporting period
The unaudited 10-Q covers the quarter and nine months ended September 30, 2017. Double Eagle was formed to complete a business combination and reported no operating revenue. On August 21, 2017, it agreed to acquire Williams Scotsman; the agreement was amended, including on November 6, 2017. Shareholder approval was scheduled for November 16, 2017, and the business-combination deadline had been extended to December 31, 2017.
Financial performance and liquidity
- Revenue: $0 in both the three- and nine-month periods.
- Operating expenses and loss: General and administrative expense was $1.03 million for Q3 2017, versus $137,376 in Q3 2016. Nine-month expense was $2.23 million, versus $542,401. These amounts were also the reported operating losses.
- Net income: $116,321 for Q3 2017, versus $190,937; $235,582 for the first nine months, versus $285,396. Trust-account interest income was $1.14 million for Q3 and $2.47 million for the nine months.
- Cash flow: Operating cash flow was $1.91 million for the first nine months, primarily reflecting a $1.63 million increase in accounts payable. Cash declined by $174,737 to $13,326. Investing cash flow was positive $512,356, including $2.98 million withdrawn from trust for shareholder redemptions; financing cash flow was negative $2.60 million, including those redemptions and $380,000 of sponsor advances.
- Assets and liquidity: At September 30, cash outside the trust was $13,326; trust assets were $500.83 million; total assets were $500.87 million. Current liabilities were approximately $2.08 million, and management reported a working-capital deficit of $2.04 million.
- Debt and obligations: The filing reports no long-term debt for the SPAC. It had $19.5 million of deferred underwriting compensation payable only if a business combination closes, plus $380,000 in non-interest-bearing sponsor advances due on demand.
- Margins: Not meaningful because the SPAC had no revenue or operating business.
Material changes versus the prior comparable period
- Quarterly and year-to-date general and administrative expenses and operating losses increased substantially year over year, reflecting acquisition-related activity and costs.
- Trust interest income rose to $2.47 million for the first nine months from $827,797 in 2016, while nine-month net income declined to $235,582 from $285,396 as expenses increased.
- On September 15, shareholders approved extending the business-combination deadline from September 16 to December 31, 2017. Holders redeemed 295,671 shares for $2.98 million, approximately $10.05 per share.
Transaction outlook, risks, and unusual items
- The proposed purchase price was $1.1 billion, including $1.0215 billion cash consideration and $78.5 million in stock consideration. The cash was expected to be funded with debt, TDR Capital equity, and $250 million to $500 million from the trust account.
- Closing conditions included at least $490 million of gross debt financing, required TDR equity, shareholder approval, completion of a carve-out transaction, lender consents, at least $250 million remaining in trust after redemptions, and at least $125 million of pro forma cash. The filing describes a $600 million revolving facility and potential bridge loans, subject to the commitment terms.
- Public shareholders could redeem shares in connection with the transaction, subject to the company’s $5,000,001 net tangible asset minimum. Significant redemptions could affect available transaction funds.
- If no business combination closed by December 31, 2017, the company would wind up and redeem public shares from the trust. The filing states this deadline creates substantial doubt about the company’s ability to continue as a going concern.
- Management warned that funding ordinary expenses before closing might require further sponsor or other financing, which was not assured. The filing also cites potential dilution and risks from debt, including repayment, covenant, and financing constraints.
- The filing reported effective disclosure controls and no material change in internal control over financial reporting during the quarter. It reported no legal proceedings.
Most important facts for investors to verify
- Confirm the filing entity: this is Double Eagle Acquisition Corp., not an operating-company 10-Q for WillScot.
- Review the definitive transaction terms and Williams Scotsman operating financials in the related Form S-4 and other filings; those operating results are not provided here.
- Verify whether the transaction closed and whether its financing, carve-out, lender-consent, cash, and shareholder-approval conditions were satisfied or waived.
- Check actual shareholder redemptions and the trust balance available at closing, given the transaction’s minimum cash requirements.
- Assess the final debt and equity funding structure, dilution, and any deferred fees or transaction costs against the commitments described in this filing.