SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)

ý	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
	THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2005

OR

o	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
	THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File Number: 033-68444

WILLIAMS SCOTSMAN, INC.

(Exact name of Registrant as specified in its Charter)

Maryland		52-0665775
(State or other jurisdiction of		(I.R.S. Employer
incorporation or organization)		Identification No.)

8211 Town Center Drive		21236
Baltimore, Maryland		(Zip Code)
(Address of principal executive offices)

(410) 931-6000
(Registrant’s telephone number, including area code)

None
(Former name, former address and former fiscal year - if changed since last report)

Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes o No ý

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Act). Yes o No ý

The Registrant is a 100%-owned subsidiary of Scotsman Holdings, Inc., a Delaware corporation. As of May 13, 2005, Scotsman Holdings, Inc. owned 3,320,000 shares of common stock (“Common Stock”) of the Registrant.

PART I - FINANCIAL INFORMATION

Item 1. Financial Statements.

WILLIAMS SCOTSMAN, INC. AND SUBSIDIARIES

Consolidated Balance Sheets

(In thousands, except share and per share amounts)

	March 31,			December 31,
	2005			2004
	(Unaudited)
Assets

Cash	$	2,203		$	935
Trade accounts receivable, net of allowance for doubtful accounts of $652 in 2005 and $606 in 2004	69,145			76,579
Prepaid expenses and other current assets	37,540			38,330
Rental equipment, net of accumulated depreciation of $261,098 in 2005 and $253,892 in 2004	885,738			880,723
Property and equipment, net of accumulated depreciation of $56,914 in 2005 and $53,935 in 2004	80,561			79,951
Deferred financing costs, net	14,879			16,667
Goodwill, net	171,115			170,423
Other intangible assets, net of accumulated amortization of $3,799 in 2005 and $3,611 in 2004	2,868			2,894
Other assets	20,720			18,105
	$	1,284,769		$	1,284,607

Liabilities and stockholder’s equity

Accounts payable	$	33,092		$	42,225
Accrued expenses	22,825			27,621
Accrued interest	21,071			12,341
Rents billed in advance	21,120			21,375
Revolving credit facility	110,483			102,130
Long-term debt, net	906,953			907,356
Deferred income taxes	155,454			155,951
Total liabilities	1,270,998			1,268,999
Stockholder’s equity:
Common stock, $.01 par value. Authorized 10,000,000 shares; issued and outstanding 3,320,000 shares	33			33
Additional paid-in capital	133,197			133,104
Cumulative foreign currency translation adjustment	13,027			14,079
Accumulated deficit	(132,486		)	(131,608		)

Total stockholder’s equity	13,771			15,608

	$	1,284,769		$	1,284,607

See accompanying notes to consolidated financial statements.

WILLIAMS SCOTSMAN, INC. AND SUBSIDIARIES

Consolidated Statements of Operations

Three months ended March 31, 2005 and 2004

(Unaudited)

	Three months ended March 31,
	2005			2004
	(In thousands except share and per share amounts)
Revenues
Leasing	$	58,783		$	52,827
Sales:
New units	22,491			19,091
Rental equipment	7,033			5,212
Delivery and installation	27,835			20,414
Other	9,959			9,367
Total revenues	126,101			106,911

Cost of sales and services
Leasing:
Depreciation and amortization	12,533			11,780
Other direct leasing costs	12,482			11,088
Sales:
New units	18,918			15,516
Rental equipment	5,679			4,097
Delivery and installation	24,503			18,384
Other	2,207			2,230
Total costs of sales and services	76,322			63,095

Gross profit	49,779			43,816

Selling, general and administrative expenses	22,947			20,759
Other depreciation and amortization	3,910			3,414
Interest, including amortization of deferred financing costs	24,227			22,627

Total operating expenses	51,084			46,800

Loss before income taxes	(1,305		)	(2,984		)
Income tax benefit	(497		)	(1,134		)

Net loss	$	(808	)	$	(1,850	)

Loss per common share	$	(0.24	)	$	(0.56	)
Dividends per common share	$	0.02		$	0.02

Weighted average shares outstanding	3,320,000			3,320,000

See accompanying notes to consolidated financial statements.

WILLIAMS SCOTSMAN, INC. AND SUBSIDIARIES

Consolidated Statements of Cash Flows

(In thousands)

(Unaudited)

	Three months ended March 31,
	2005			2004
Cash flows from operating activities
Net loss	$	(808	)	$	(1,850	)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation and amortization	18,240			16,905
Bond discount amortization	89			89
Provision for bad debts	742			560
Deferred income tax benefit	(497		)	(1,095		)
Non-cash stock option compensation expense	93			115
Gain on sale of rental equipment	(1,354		)	(1,114		)
Gain on sale of fixed assets	—			(7		)
Decrease (increase) in trade accounts receivable	6,844			(161		)
(Decrease) increase in accounts payable and accrued expenses	(5,086		)	9,170
Other	(3,450		)	(1,662		)
Net cash provided by operating activities	14,813			20,950

Cash flows from investing activities
Rental equipment additions	(20,556		)	(12,170		)
Proceeds from sales of rental equipment	7,033			5,212
Purchases of property and equipment, net	(3,167		)	(1,797		)
Acquisition of businesses, net of cash acquired	(4,583		)	—
Purchase of California classroom fleet	—			(43,471		)
Net cash used in investing activities	(21,273		)	(52,226		)

Cash flows from financing activities
Proceeds from debt	131,637			141,335
Repayment of debt	(123,776		)	(109,314		)
Increase in deferred financing costs	(9		)	(50		)
Payment of dividends	(70		)	(36		)
Net cash provided by financing activities	7,782			31,935

Effect of change in exchange rates on cash	(54		)	(75		)

Net increase in cash	1,268			584

Cash at beginning of period	935			387
Cash at end of period	$	2,203		$	971
Supplemental cash flow information:
Cash paid for income taxes	$	186		$	312
Cash paid for interest	$	13,554		$	10,930

See accompanying notes to consolidated financial statements.

WILLIAMS SCOTSMAN, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

(Unaudited)

(Dollars in thousands, except share and per share amounts)

(1) ORGANIZATION AND BASIS OF PRESENTATION

Williams Scotsman, Inc. (the Company) is a 100% owned subsidiary of Scotsman Holdings, Inc. (Holdings), a corporation which was organized in November 1993 for the purpose of acquiring the Company. The Company’s operations include its 100% owned subsidiaries, Willscot Equipment, LLC (Willscot), Williams Scotsman of Canada, Inc., Williams Scotsman Mexico S. De R.L. de C.V. and Williams Scotsman of Europe, S.L. Willscot, a special purpose subsidiary, was formed in May 1997; its operations are limited to the leasing of its mobile office units to the Company under a master lease. Additionally, Willscot has entered into a management agreement with the Company whereby it pays a fee to the Company in an amount equal to the rental and other income (net of depreciation expense) it earns from the Company. Therefore, Willscot earns no net income.

The operations of the Company consist primarily of the leasing and sale of mobile offices, modular buildings and storage products (equipment) and their delivery and installation throughout the United States, Canada, and certain parts of Mexico.

(2) FINANCIAL STATEMENTS

In the opinion of management, the unaudited financial statements contain all adjustments (consisting only of normal, recurring adjustments) necessary to present fairly the Company’s financial position as of March 31, 2005, the consolidated statements of operations for the three month periods ended March 31, 2005 and 2004, and the consolidated statements of cash flows for the three months ended March 31, 2005 and 2004. The results of operations for the period ended March 31, 2005 are not necessarily indicative of the operating results expected for the full year.

The accompanying unaudited consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. It is suggested that these financial statements be read in conjunction with the financial statements and notes thereto included in the Company’s latest Form 10-K. Certain prior year amounts have been reclassified to conform to the current year presentation.

(3) RECENT ACCOUNTING PRONOUNCEMENTS

In December 2004, the Financial Accounting Standards Board (“FASB”) issued SFAS No.123 (revised 2004), “Share-Based Payment” (“SFAS No. 123-R”), which is a revision of SFAS No. 123, Accounting for Stock-Based Compensation. Generally, the approach in SFAS No. 123-R is similar to the approach described in SFAS No. 123. In April 2005, the Securities and Exchange Commission provided for a phased-in implementation of SFAS No. 123-R. Under this revised guidance, the effective date for application of SFAS No. 123-R has been postponed until no later than the beginning of the first fiscal year after June 15, 2005, or January 1, 2006 for the Company. The Company intends to elect the modified prospective method of adopting SFAS No. 123-R, which requires the recognition of expense over the remaining vesting period for the portion of awards not fully vested as of January 1, 2006. As the Company currently applies the fair value method under SFAS No. 123, the Company does not anticipate that the adoption of SFAS No. 123-R will have a material impact on its financial statements.

(4) ACQUISITION OF MOBILE SPACE INC.

On February 24, 2005, the Company acquired Mobile Space Inc., a Chicago-based company that leased and sold modular space units. This purchase resulted in the acquisition of approximately 640 units and the related customer base. The transaction was accounted for under the purchase method of accounting with a purchase price of $4.8 million. The acquisition was financed with borrowings under the Company’s credit facility.

(5) PURCHASE OF CALIFORNIA CLASSROOM UNITS

On March 26, 2004, the Company acquired nearly 3,800 modular DSA classroom units located in the state of California from Transport International Pool, Inc. (d/b/a GE Modular Space) for approximately $43.5 million. The assets were acquired using available funds under the Company’s revolving credit facility.

The acquisition included the purchase of units, equipment associated with these classroom units as well as rights under all outstanding leases related to these classroom units and certain other assets. The Company did not acquire employees, physical facilities, sales force, or other business related items. In addition, the customer base, which is primarily related to public and private educational institutions in the State of California, is similar to, and in many cases duplicative of, the Company’s existing customer base. As a result, the Company considers the purchase of these assets an asset purchase rather than an acquisition of a business.

(6) REVOLVING CREDIT FACILITY AND LONG-TERM DEBT

Debt consists of the following:

	March 31, 2005		December 31, 2004

Borrowings under revolving credit facility	$	110,483	$	102,130
Term loan	205,776		206,307
Capital lease obligations	1,920		1,882
9.875% senior notes, net of unamortized discount of $743 in 2005 and $833 in 2004	549,257		549,167
10.0% senior secured notes	150,000		150,000
	$	1,017,436	$	1,009,486

On April 15, 2005, Holdings, the Company, and the Lenders party to the Credit Agreement, dated as of March 26, 2002 (as amended, restated, modified and/or supplemented through April 14, 2005) (the “Credit Agreement”) and Deutsche Bank Trust Company Americas, as Administrative Agent under the Credit Agreement, entered into a Fifth Amendment (the “Amendment”) to the Credit Agreement. Under the terms of the Amendment, the amount of the Company’s indebtedness which may be evidenced by guarantees, performance bonds and surety bonds has been increased to $100 million from $50 million. The Amendment also provides that the book value of assets securing obligations under such performance and surety bonds cannot exceed $75 million outstanding at any time. In addition, the Amendment increases the letter of credit subfacility available to the Company from $20 million to $40 million.

(7) COMPREHENSIVE LOSS

Total comprehensive loss was $1,860 and $2,546 for the three months ended March 31, 2005 and 2004, respectively, which includes net loss and the change in the foreign currency translation adjustment. A summary of the components of comprehensive loss for the three month periods ended March 31 is presented below:

	2005			2004
Net loss	$	(808	)	$	(1,850	)
Foreign currency translation adjustment	(1,052		)	(696		)
Comprehensive loss	$	(1,860	)	$	(2,546	)

(8) EARNINGS AND DIVIDENDS PER SHARE

Earnings per common share is computed by dividing net income by the weighted average number of common shares outstanding during the periods. Dividends per common share is computed by dividing dividends paid by the weighted average number of common shares outstanding during the periods.

(9) CONTINGENCIES

Currently, the Company is involved in various lawsuits and claims arising out of the normal course of its business. The nature of the Company’s 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. The Company assesses these matters on a case-by-case basis as they arise. Reserves are established, as required, based on the Company’s assessment of its exposure. As noted above, the Company has 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 pending litigation and claims will not have a material adverse effect on the financial position or operating results of the Company.

In May 2002, the Company brought action against a customer to recover approximately $0.2 million allowed to the Company on a construction project. In December 2002, this customer counterclaimed against the Company and filed claims against various subcontractors and suppliers to the project alleging breach of various warranties and negligence among other things. The customer has asserted that it is seeking to recover its direct losses related to this $2.6 million project as well as other damages. The case is currently in discovery. The Company believes that it is reasonably possible that the customer will be awarded some damages from the dispute; however, the amount of such damages cannot be determined at this time. To the extent that the Company is ultimately liable to the customer, the Company believes it has adequate insurance coverage to apply to its portion of the claim. The Company, with its insurance carriers, continues to vigorously defend itself in this matter.

In January 2003, the Company was awarded a contract to construct and renovate classrooms in an elementary school located in New Jersey. The Company contracted with various subcontractors for certain components of the project. During the course of the construction, the modular units were impacted by weather conditions, including torrential rains, from which the units were not properly protected by the subcontractors performing the work. As a result, damage to the units resulted. In order to ensure that these damages would be repaired and completed in advance of the school term, the Company promptly repaired the damage. As of March 31, 2005, the Company expects to be reimbursed for damages totaling approximately $1.6 million. These costs are included in prepaid expenses and other current assets in the Company’s consolidated balance sheet. The Company and its legal counsel have determined that the subcontractors are responsible for the damages, and are currently seeking full recovery for costs incurred from the parties involved. In addition, the Company has builders risk insurance to cover some portion of the claim. The Company is pursuing these claims vigorously and believes that it will recover the amount of its repair costs.

(10) SUPPLEMENTAL CONDENSED CONSOLIDATING FINANCIAL INFORMATION

The 9.875% senior notes are fully and unconditionally guaranteed on a senior unsecured basis by the Company’s 100% owned subsidiaries, Space Master International, Inc., Evergreen Mobile Company, Truck & Trailer Sales, Inc. and Williams Scotsman of Canada, Inc. Willscot has fully and unconditionally guaranteed the 9.875% senior notes on a subordinated basis. The 10.0% senior secured notes are fully and unconditionally guaranteed on a senior secured second lien basis by the Company’s 100% owned subsidiaries. Willscot has fully and unconditionally guaranteed the 10.0% senior secured notes on a subordinated secured second lien basis. These 100% owned subsidiaries (Guarantor Subsidiaries), act as joint and several guarantors of both the 9.875% and 10.0% senior notes.

The following presents condensed consolidating financial information for Williams Scotsman, Inc. (Parent) and its 100% owned Guarantor Subsidiaries. Space Master International, Inc., Evergreen Mobile Company, and Truck & Trailer Sales, Inc. do not have any assets or operations. See Note 1, Organization and Basis of Presentation, for a description of the operations of Willscot.

	As of March 31, 2005
	Parent			Guarantor Subsidiaries		Eliminations			Consolidated
*Balance Sheet*
Assets:
Rental equipment, at cost	$	364,080		$	782,756	$	—		$	1,146,836
Less accumulated depreciation	80,449			180,649		—			261,098
Net rental equipment	283,631			602,107		—			885,738

Property and equipment, net	78,195			2,366		—			80,561
Investment in subsidiaries	531,409			—		(531,409		)	—
Other assets	344,168			21,436		(47,134		)	318,470
Total assets	$	1,237,403		$	625,909	$	(578,543	)	$	1,284,769

Liabilities:
Accounts payable and accrued expenses	$	75,044		$	1,944	$	—		$	76,988
Debt	1,017,436			—		—			1,017,436
Other liabilities	164,464			59,244		(47,134		)	176,574
Total liabilities	1,256,944			61,188		(47,134		)	1,270,998

Equity :	(19,541		)	564,721		(531,409		)	13,771
Total liabilities and stockholder’s equity	$	1,237,403		$	625,909	$	(578,543	)	$	1,284,769

	As of December 31, 2004
	Parent			Guarantor Subsidiaries		Eliminations			Consolidated
*Balance Sheet*
Assets:

Rental equipment, at cost	$	359,175		$	775,440	$	—		$	1,134,615
Less accumulated depreciation	78,076			175,816		—			253,892
Net rental equipment	281,099			599,624		—			880,723

Property and equipment, net	77,619			2,332		—			79,951
Investment in subsidiaries	522,483			—		(522,483		)	—
Other assets	352,366			15,368		(43,801		)	323,933
Total assets	$	1,233,567		$	617,324	$	(566,284	)	$	1,284,607

Liabilities:
Accounts payable and accrued expenses	$	76,433		$	5,754	$	—		$	82,187
Debt	1,009,486			—		—			1,009,486
Other liabilities	164,827			56,300		(43,801		)	177,326
Total liabilities	1,250,746			62,054		(43,801		)	1,268,999

Equity:	(17,179		)	555,270		(522,483		)	15,608
Total liabilities and stockholder’s equity	$	1,233,567		$	617,324	$	(566,284	)	$	1,284,607

	For the Three Months Ended March 31, 2005
	Parent			Guarantor Subsidiaries		Eliminations			Consolidated
*Results of Operations*
Total revenues	$	115,138		$	28,674	$	(17,711	)	$	126,101

Gross profit	45,501			15,795		(11,517		)	49,779

Other expenses	49,384			12,720		(11,517		)	50,587

Net (loss) income	$	(3,883	)	$	3,075	$	—		$	(808	)

	For the Three Months Ended March 31, 2004
	Parent			Guarantor Subsidiaries		Eliminations			Consolidated
*Results of Operations*
Total revenues	$	101,109		$	23,095	$	(17,293	)	$	106,911

Gross profit	40,947			14,135		(11,266		)	43,816

Other expenses	44,426			12,506		(11,266		)	45,666

Net (loss) income	$	(3,479	)	$	1,629	$	—		$	(1,850	)

	For the Three Months Ended March 31, 2005
	Parent			Guarantor Subsidiaries			Eliminations		Consolidated
*Cash Flows*
Cash provided by (used in) operating activities	$	19,567		$	(4,754	)	$	—	$	14,813

Cash (used in) provided by investing activities	(23,858		)	2,585			—		(21,273		)

Cash provided by financing activities	7,782			—			—		7,782
Effect of change in translation rates	(3,359		)	3,305					(54		)
Net change in cash	132			1,136			—		1,268
Cash at beginning of period	828			107			—		935

Cash at end of period	$	960		$	1,243		$	—	$	2,203

	For the Three Months Ended March 31, 2004
	Parent			Guarantor Subsidiaries			Eliminations		Consolidated
*Cash Flows*
Cash provided by operating activities	$	12,049		$	8,901		$	—	$	20,950

Cash used in investing activities	(42,685		)	(9,541		)	—		(52,226		)

Cash provided by financing activities	31,935			—			—		31,935
Effect of change in translation rates	(1,234		)	1,159					(75		)
Net change in cash	65			519			—		584
Cash at beginning of period	386			1			—		387

Cash at end of period	$	451		$	520		$	—	$	971

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

Forward Looking Statements

The following discussion and analysis should be read in conjunction with the unaudited consolidated financial statements included elsewhere in this report. The terms “company,” “we,” “our,” and “us” refer to Williams Scotsman, Inc. and its subsidiaries. The following discussion and analysis contains forward-looking statements that involve risks and uncertainties. Our actual results could differ materially from those anticipated in these forward-looking statements as a result of certain factors, including those contained in our Annual Report on Form 10-K for the year ended December 31, 2004 under the headings “Business”, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and elsewhere in that report. See the Safe Harbor Statement at the beginning of this report.

Critical Accounting Policies and Estimates

General. This discussion and analysis of our financial condition and results of operations is based upon our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent liabilities. (See Note 2 of the Notes to Consolidated Financial Statements.) On an on-going basis, we evaluate estimates, including those related to depreciation of rental equipment, allowance for doubtful accounts, contingencies, goodwill impairment, and income taxes. We base our estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions. We believe the following critical accounting policies affect our more significant judgments and estimates used in the preparation of the consolidated financial statements.

Depreciation of rental equipment. We depreciate rental equipment over its estimated useful life, after giving effect to an estimated salvage value. The useful life of our rental equipment is determined based on our estimate of the period over which the asset will generate revenue (generally 20 years), and the residual value (typically 50% of original cost) is determined based on our estimate of the expected value we could realize from the asset after this period. The lives and residual values are subject to periodic evaluation and may be affected by, among other factors, changes in building codes, legislation, regulations, local permitting and internal factors which may include, but are not limited to, changes in equipment specifications or maintenance policies. If these estimates change in the future, we may be required to recognize increased or decreased depreciation expense for these assets.

Allowance for doubtful accounts. We are required to estimate the collectibility of our trade receivables. Accordingly, allowances for doubtful accounts are maintained for estimated losses resulting from the inability of our customers to make required payments. We evaluate a variety of factors in assessing the ultimate realization of these receivables including the current credit-worthiness of customers. The allowance for doubtful accounts is determined based on historical collection results, days sales outstanding trends, and a review of specific past due receivables. If the financial condition of our customers were to deteriorate, resulting in an impairment of their ability to make payments, additional allowances may be required, resulting in decreased net income.

Contingencies. We maintain insurance coverage for our operations and employees with appropriate aggregate, per occurrence and deductible limits as we reasonably determine is necessary or prudent with current operations and historical experience. The majority of these coverages have large deductible programs which allow for potential improved cash flow benefits based on our loss control efforts. Our current per incident deductibles are $125,000 for employee group health insurance and $500,000 for worker’s compensation, auto, and general liability each. We expense the deductible portion of the individual claims. However, we generally do not know the full amount of our exposure to a deductible in connection with any particular claim during the fiscal period in which the claim is incurred and for which we must make an accrual for the deductible expense. We make these accruals based on a combination of the claims review by our staff and our insurance companies, and, periodically, the accrual is reviewed and adjusted based on our loss experience. A high degree of judgment is required in developing these estimates of amounts to be accrued, as well as in connection with the underlying assumptions. In addition, our assumptions will change as our loss experience is developed. All of these factors have the potential for significantly impacting the amounts we have previously reserved in respect of anticipated deductible expenses, and we may be required in the future to increase or decrease amounts previously accrued.

We are subject to proceedings, lawsuits, and other claims related to environmental, product and other matters, and are

required to assess the likelihood of any adverse judgments or outcomes to these matters as well as potential ranges of probable losses. As noted above, we have insurance policies to cover general liability and workers compensation related claims. A determination of the amount of net reserves required, if any, for these contingencies is made after analysis of each individual matter. The required reserves may change in the future due to new developments in each matter or changes in approach such as a change in settlement strategy in dealing with these matters.

Goodwill Impairment. At March 31, 2005, we had approximately $171.1 million of goodwill. Goodwill is initially measured as the excess of the cost of an acquired business over the fair value of the identifiable net assets acquired. We do not amortize goodwill, but rather review our carrying value for impairment annually, and whenever an impairment indicator is identified. The goodwill impairment test involves a two-step approach. Under the first step, we determine the fair value of each reporting unit to which goodwill has been assigned. The geographic component units of the company for purposes of the impairment test have been aggregated into a single reporting unit because they have similar economic characteristics. We compare the fair value of the reporting unit to its carrying value, including goodwill. We estimate the fair value of our reporting unit by utilizing published market operating data multiples of similar publicly traded companies. If the estimated fair value exceeds the carrying value, no impairment loss is recognized. If the carrying value exceeds the fair value, goodwill is considered potentially impaired and the second step is completed in order to measure the impairment loss. Under the second step, we calculate the implied fair value of goodwill by deducting the fair value of all tangible and intangible net assets, including any unrecognized intangible assets, of the reporting unit from the fair value of the reporting unit as determined in the first step. We then compare the implied fair value of goodwill to the carrying value of goodwill. If the implied fair value of goodwill is less than the carrying value of goodwill, we recognize an impairment loss equal to the difference.

Income Taxes. We are required to estimate income taxes in each of the jurisdictions in which we operate. The process involves estimating actual current tax expense along with assessing temporary differences resulting from differing treatment of items for book and tax purposes. These timing differences result in deferred tax assets and liabilities, which are included in our consolidated balance sheet. We have considered future taxable income and ongoing tax planning strategies in assessing the need for the valuation allowance. Our deferred tax assets consist primarily of future tax benefits associated with our net operating loss carryovers. We have recorded a valuation allowance of $5.2 million based on the pending expiration in the next few years of net operating loss carryovers that we estimate we will not be able to fully use. These net operating loss carryovers for income tax purposes have been largely created by originating deductible temporary differences in depreciation expense of our lease fleet. We expect that our taxable income in future periods will increase significantly as these differences reverse, allowing us to utilize substantially all of our net operating loss carryovers. If our operating results were to deteriorate and our future taxable income was insufficient to utilize these net operating loss carryovers before they expire, we would be required to increase the valuation allowance that we have recorded for our deferred tax assets.

Overview

In the three months ended March 31, 2005, revenues were $126.1 million, a 17.9% increase above the same period of 2004, primarily driven by increased delivery and installation activity, as well as increased leasing and sales of new units. Gross profit for the three months ended March 31, 2005 of $49.8 million represented a 13.6% increase above the same period of 2004 primarily due to increased units on rent, utilization and a 3.3% increase in average rental rates. Operating expenses for the three months ended March 31, 2005 increased $4.3 million, a 9.2% increase over the same period of 2004. Net loss for the three months ended March 31, 2005 was $0.8 million as compared to $1.9 million for the same period of 2004.

Acquisition of Mobile Space, Inc.

On February 24, 2005, we acquired Mobile Space Inc., a Chicago-based company that leased and sold modular space units. This purchase resulted in the acquisition of approximately 640 units and the related customer base. The transaction was accounted for under the purchase method of accounting with a purchase price of $4.8 million. The acquisition was financed with borrowings under our credit facility.

Purchase of California Classroom Units

On March 26, 2004, we acquired nearly 3,800 modular DSA classroom units located in the state of California from Transport International Pool, Inc. (d/b/a GE Modular Space) for approximately $43.5 million. The assets were acquired using available funds under our revolving credit facility. The acquisition included the purchase of units, equipment associated with these classroom units as well as rights under all outstanding leases related to these classroom units and certain other assets. We did not acquire employees, physical facilities, sales force, or other business related items. In addition, the customer base, which is primarily related to public and private educational institutions in the State of California, is similar to, and in many cases duplicative of, our existing customer base. As a result, we consider the purchase of these assets an asset purchase rather than an acquisition of a business.

Results of Operations

Three Months Ended March 31, 2005 Compared with Three Months Ended March 31, 2004.

Revenues in the quarter ended March 31, 2005 were $126.1 million, a $19.2 million or 17.9% increase from revenues of $106.9 million in the same period of 2004. The increase resulted from a $7.4 million or 36.4% increase in delivery and installation revenues, a $6.0 million or 11.3% increase in leasing revenue, a $3.4 million or 17.8% increase in sales of new units, a $1.8 million or 34.9% increase in sales of rental equipment, and a $0.6 million or 6.3% increase in other revenue from the same period of 2004. The increase in delivery and installation is largely due to a continued strength in the education business, particularly in the south central, southeast and western regions of the country, together with increased modular sales activity in the north central region of the country. The 11.3% increase in leasing revenue for the quarter ended March 31, 2005, as compared to the same period of 2004, resulted from an increase of approximately 5,300 units on rent, which includes California classroom units purchased in the first quarter of 2004, and a $9 increase in the average rental rate for the quarter ended March 31, 2005 from $249 to $258. Average fleet utilization of approximately 80% for the quarter ended March 31, 2005 was up approximately 1.6% from the same period of the prior year. New sales revenue increased primarily as a result of sales of workforce housing units in Canada during the quarter as well as increased modular sales activity described above. The 34.9% increase in sales of rental equipment for the quarter ended March 31, 2005 as compared to the same period of 2004 was due primarily to sales of rental units in Canada. The increase in other revenue for the quarter ended March 31, 2005 as compared to the same period of 2004 was driven by various ancillary items, including steps, furniture, insurance waivers, and ramps.

Gross profit for the quarter ended March 31, 2005 was $49.8 million, a $6.0 million or 13.6% increase from the same period of 2004. This increase in gross profit was primarily driven by the increased delivery and installation revenues and leasing revenues described above. Gross margin percentage related to delivery and installation increased 2.0% primarily resulting from higher margins related to projects discussed above. Leasing gross profit margin percentage for the quarter ended March 31, 2005 improved 0.7% over the same period of 2004 as a result of the increased leasing revenue described above, partially offset by increased refurbishment and maintenance costs. Gross margin percentage related to new sales decreased 2.8% as compared to the same period of 2004 primarily due to overall competitive pricing pressures and lower margins on certain modular sales projects. Gross profit margin from sales of rental equipment increased slightly by $0.2 million primarily due to the increased revenues discussed above, substantially offset by lower margin sales experienced during the quarter ended March 31, 2005 resulting from changes in the mix of rental units sold as compared to the same period of 2004.

Selling, general and administrative expenses for the quarter ended March 31, 2005 increased approximately $2.2 million or 10.5% to $22.9 million from $20.8 million in the same period of 2004. This increase is primarily associated with increased employee-related costs, marketing, occupancy and professional fees primarily to support growth of the Company’s revenues and gross profit discussed above.

Interest expense for the quarter ended March 31, 2005 increased by approximately $1.6 million or 7.1% to $24.2 million from $22.6 million in the same period of 2004 due primarily to a $51.4 million or 19.3% increase in average credit facility debt and an approximately 1.1% increase in the effective interest rate over the same period of 2004.

For the quarter ended March 31, 2005 and 2004, income tax benefit was $0.5 million and $1.1 million, respectively. Our effective tax rate for the quarters ended March 31, 2005 and 2004 was approximately 38%.

Contractual Obligations and Commercial Commitments

During the three months ended March 31, 2005, there was no material change in our contractual obligations and commercial commitments outside of the ordinary course of business.

Liquidity and Capital Resources

During the three months ended March 31, 2005, our principal source of funds consisted of cash flow from operating activities of $14.8 million. These funds were largely generated by the rental of units from our lease fleet and sales of new modular space units. During the three months ended March 31, 2004, cash flow from operating activities was $21.0 million. The $6.1 million decrease in cash flow from operating activities was primarily the result of decreased payables and other accrued expenses, partially offset by increased receivable collections and revenue growth for the quarter ended March 31, 2005 in comparison with the same period of 2004. The decrease in accounts payable and other accrued expenses resulted primarily from the timing of related payments. Collections associated with large modular sales projects, as well as increased leasing gross profit, positively impacted cash flow from operating activities during the quarter ended March 31, 2005. See Results of Operations above for additional discussion of leasing gross profit.

Cash used in investing activities was $21.3 million and $52.2 million for the three months ended March 31, 2005 and 2004, respectively. In February 2005, we acquired Mobile Space, Inc., a Chicago-based company, for $4.8 million while in March 2004, we acquired nearly 3,800 modular classrooms located in the state of California for approximately $43.5 million. See Note 3 to the Consolidated Financial Statements for further discussion of the Mobile Space, Inc. acquisition and Note 4 for further discussion of the California fleet purchase. In addition to acquisitions, our primary capital expenditures are for the discretionary purchase of new units for our lease fleet. We seek to maintain our lease fleet in good condition at all times and generally increase the size of our lease fleet only in those local or regional markets experiencing economic growth and established unit demand.

Net cash provided by financing activities of $7.8 million for the three month period ended March 31, 2005 consisted of additional net borrowings under our revolving credit facility, which were used to fund the Mobile Space Inc. acquisition and supplement cash flow from operating activities in the funding of capital expenditures for the three months ended March 31, 2005. Net cash provided by financing activities of $31.9 million for the three month period ended March 31, 2004 consisted of $32.0 million in additional borrowings under our revolving credit facility, which were used to supplement cash flow from operating activities in the funding of capital expenditures for the quarter, as well as the $43.5 million California fleet purchase discussed in Note 4.

Our total credit facility (including the term loan and revolver commitment) was $505.8 million at March 31, 2005. Borrowing base (collateral) availability calculated in accordance with the credit agreement under this facility was $178.6 million at March 31, 2005. Consolidated Leverage Ratio (as defined in the Credit Agreement) covenant restrictions further limited our borrowing availability at March 31, 2005 to $79.6 million. In order to meet our future cash requirements, we intend to use internally generated funds and to borrow under our credit facility. We believe we will have sufficient liquidity under our revolving line of credit and from cash generated from operations to fund our operations for the next 12 months. Our credit facility matures December 2006 and our 9.875% senior notes and 10.0% senior secured notes mature in 2007 and 2008, respectively. It is expected that we will refinance outstanding obligations under these agreements prior to their maturities. Until such time, we expect that funds from operations will be sufficient to satisfy debt service requirements related to these obligations.

On April 15, 2005, Scotsman Holdings Inc. (Holdings), the Company, and the Lenders party to the Credit Agreement, dated as of March 26, 2002 (as amended, restated, modified and/or supplemented through April 14, 2005) and Deutsche Bank Trust Company Americas, as Administrative Agent under the Credit Agreement, entered into a Fifth Amendment (the “Amendment”) to the Credit Agreement. Under the terms of the Amendment, the amount of the Company’s indebtedness which may be evidenced by guarantees, performance bonds and surety bonds has been increased to $100 million from $50 million. The Amendment also provides that the book value of assets securing obligations under such performance and surety bonds cannot exceed $75 million outstanding at any time. In addition, the Amendment increases the letter of credit subfacility available to the Company from $20 million to $40 million.

Our credit agreement contains restrictions on the amount of dividends that we can pay to Holdings and requires compliance with certain financial covenants including capital expenditures, an interest coverage ratio, a leverage ratio and fleet utilization levels. The failure to maintain the required ratios would result in us not being able to borrow under the credit agreement and, if not cured within the grace periods, would result in a default under the credit agreement. For the three months ended March 31, 2005, our actual consolidated leverage ratio was 6.26:1 as compared to the maximum covenant requirement of 6.75:1 and our actual consolidated interest coverage ratio was 1.86:1 as compared to the minimum covenant requirement of 1.70:1. The consolidated interest coverage ratio was calculated by dividing Consolidated EBITDA (as defined in our credit agreement) of approximately $161.6 million for the twelve month period ended March 31, 2005 by cash interest expense of approximately $87.0 million as defined in the credit agreement. The consolidated leverage ratio was calculated by dividing the March 31, 2005 consolidated debt balance of approximately $1,017.4 million by Consolidated EBITDA for the twelve month period ended March 31, 2005. For consolidated leverage ratio calculation purposes Consolidated EBITDA for the twelve months ended March 31, 2005 was approximately $162.5 million, which in accordance with our credit agreement, was adjusted to include approximately $.9 million, relating to entities we acquired during the calculation period. We are currently in compliance with all financial covenants.

Consolidated EBITDA as defined in our credit agreement represents the trailing 12 months consolidated Holdings net income plus consolidated interest, taxes, depreciation and amortization expenses, and excludes gains and losses on sales of fixed assets and any other non-cash items. It is used in determining our compliance with the financial ratios required by our agreement. Consolidated EBITDA should not be considered in isolation or as a substitute to cash flow from operating activities, net income or other measures of performance prepared in accordance with generally accepted accounting principles or as a measure of a company’s profitability or liquidity.

Although not required by our credit agreement, if Holdings’ cash flow from operating activities for the twelve months ended March 31, 2005, the most directly comparable GAAP measure to Consolidated EBITDA, were used in these calculations instead of Consolidated EBITDA, our leverage ratio and interest coverage ratio would have been 20.05:1 and .58:1, respectively.

The table below reconciles Consolidated EBITDA, calculated pursuant to the credit agreement, for the twelve months ended March 31, 2005 to cash flow from operating activities, the most directly comparable GAAP measure (in thousands).

	Twelve Months Ended
	March 31, 2005
Consolidated EBITDA	$	162,521	(a)
Increase in receivables, net	(12,940		)
Increase in accounts payable and accrued expenses	5,250
Interest paid	(87,527		)
Increase in other assets	(8,054		)
Increase in other liabilities	2,473
Gain on sale of rental equipment (including realized gain from hurricanes)	(10,070		)
Pro forma EBITDA impact of acquisitions	(917		)
Cash flow from operating activities-Holdings level	$	50,736	(a)
Plus: Administrative expense at Holdings level	71		(a)
Cash flow from operating activities	$	50,807	(a)

Other Data:
Cash flow used in investing activities	$	(71,984	)
Cash flow provided by financing activities	$	21,955

(a) Note: In accordance with the provisions of the credit agreement, the financial results of Holdings, which includes administrative charges incurred at the parent company level, are to be used in the calculation of the covenant compliance ratios.

PART I - FINANCIAL INFORMATION
Item 1. Financial Statements

Consolidated Balance Sheets at March 31, 2005 and December 31, 2004

Consolidated Statements of Operations for the three months ended March 31, 2005 and 2004

Consolidated Statements of Cash Flows for the three months ended March 31, 2005 and 2004

Notes to Consolidated Financial Statements

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Item 3. Quantitative and Qualitative Disclosures about Market Risk

Item 4. Controls and Procedures

PART II - OTHER INFORMATION

Item 5. Other Information

Item 6. Exhibits

SIGNATURE

(a)		Exhibits.

(10.1)		Fifth Amendment to the Credit Agreement dated as of April 15, 2005, among Scotsman Holdings, Inc., Williams Scotsman, Inc., the lenders from time to time party to the credit agreement and Deutsche Bank Trust Company Americas, as Administrative Agent. (Incorporated by reference to Exhibit 99.1 of Scotsman Holdings, Inc.’s current report on Form 8-K dated April 15, 2005).

(31.1)		Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 for Gerard E. Holthaus, Chief Executive Officer of the Company.

(31.2)		Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 for Robert C. Singer, Chief Financial Officer of the Company.

	WILLIAMS SCOTSMAN, INC.


	By:	/s/ Robert C. Singer
		Robert C. Singer
		Executive Vice President and Chief Financial Officer

SECURITIES AND EXCHANGE COMMISSION

INDEX

PART I - FINANCIAL INFORMATION

Forward Looking Statements

Item 5. Other Information