BakerCorp International, Inc. - FORM 10-Q - September 11, 2015

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EX-31.2 - EXHIBIT 31.2 - BakerCorp International, Inc.bakercorpexhibit312-731201.htm
EX-32 - EXHIBIT 32 - BakerCorp International, Inc.bakercorpexhibit32-7312015.htm
EX-31.1 - EXHIBIT 31.1 - BakerCorp International, Inc.bakercorpexhibit311-731201.htm

 
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
___________________________________________________
 FORM 10-Q
___________________________________________________
ý
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended July 31, 2015
OR
 
¨
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: 333-181780
 ___________________________________________________
BAKERCORP INTERNATIONAL, INC.
(Exact name of registrant as specified in its charter)
___________________________________________________
Delaware
 
13-4315148
(State or other jurisdiction of
incorporation or organization)
 
(I.R.S. Employer
Identification No.)
 
 
 
7800 N. Dallas Parkway, Suite 500, Plano, Texas
 
75024
(Address of principal executive offices)
 
(Zip Code)

(888) 882-4895
(Registrant’s telephone number, including area code)
 ___________________________________________________

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  ¨    No  ý*

* The registrant is a voluntary filer of reports required to be filed by certain companies under Section 13 or 15(d) of the Securities Exchange Act of 1934 and has filed all reports that would have been required during the preceding 12 months, had it been subject to such filing requirements.

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes  ý    No  ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definition of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer
 
¨
  
Accelerated filer
 
¨
Non-accelerated filer
 
x  (Do not check if a smaller reporting company)
  
Smaller reporting company
 
¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  ¨    No  ý

There is no public market for the registrant’s common stock. There were 100 shares of the registrant’s common stock, par value $0.01 per share, outstanding on September 4, 2015.
 


TABLE OF CONTENTS
 


PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

BakerCorp International, Inc. and Subsidiaries
Consolidated Condensed Balance Sheets
(In thousands, except share and per share amounts)

 
July 31,
2015
 
January 31,
2015
 
(unaudited)
 
 
Assets
 
 
 
Current assets:
 
 
 
Cash and cash equivalents
$
23,900

 
$
18,665

Accounts receivable, less allowance for doubtful accounts of $3,545 and $2,981 on July 31, 2015 and January 31, 2015, respectively
69,645

 
70,758

Inventories, net
9,552

 
7,337

Prepaid expenses and other current assets
5,344

 
5,905

Deferred tax assets
5,776

 
5,776

Total current assets
114,217

 
108,441

Property and equipment, net
354,496

 
368,299

Goodwill
308,228

 
309,714

Other intangible assets, net
421,372

 
430,223

Deferred financing costs, net
527

 
635

Other long-term assets
552

 
541

Total assets
$
1,199,392

 
$
1,217,853

Liabilities and shareholder’s equity
 
 
 
Current liabilities:
 
 
 
Accounts payable
$
17,242

 
$
21,189

Accrued expenses
19,874

 
20,389

Current portion of long-term debt (net of deferred financing costs of $2,620 and $2,543 on July 31, 2015 and January 31, 2015, respectively)
1,543

 
1,618

Total current liabilities
38,659

 
43,196

Long-term debt, net of current portion (net of deferred financing costs of $7,676 and $9,002 on July 31, 2015 and January 31, 2015, respectively)
637,145

 
637,903

Deferred tax liabilities
183,379

 
186,780

Fair value of interest rate swap liabilities
1,879

 
2,725

Share-based compensation liability
2,395

 
2,836

Other long-term liabilities
2,091

 
2,165

Total liabilities
865,548

 
875,605

Commitments and contingencies
—

 
—

Shareholder’s equity:
 
 
 
Common stock, $0.01 par value; 100,000 shares authorized; 100 shares issued and outstanding on July 31, 2015 and January 31, 2015
—

 
—

Additional paid-in capital
391,676

 
390,829

Accumulated other comprehensive loss
(39,023
)
 
(35,774
)
Accumulated deficit
(18,809
)
 
(12,807
)
Total shareholder’s equity
333,844

 
342,248

Total liabilities and shareholder’s equity
$
1,199,392

 
$
1,217,853


The accompanying notes are an integral part of these consolidated condensed financial statements. 
        

1

BakerCorp International, Inc. and Subsidiaries
Consolidated Condensed Statements of Operations (unaudited)
(In thousands)
 
Three Months Ended
 
Six Months Ended
 
July 31, 2015
 
July 31, 2014
 
July 31, 2015
 
July 31, 2014
Revenue:
 
 
 
 
 
 
 
Rental revenue
$
62,524

 
$
66,143

 
$
124,377

 
$
129,145

Sales revenue
4,518

 
5,653

 
9,461

 
11,813

Service revenue
11,165

 
11,150

 
23,138

 
21,357

Total revenue
78,207

 
82,946

 
156,976

 
162,315

Operating expenses:
 
 
 
 
 
 
 
Employee related expenses
26,202

 
27,993

 
57,466

 
54,663

Rental expenses
10,287

 
9,673

 
20,747

 
20,907

Repair and maintenance
2,867

 
3,645

 
5,821

 
7,295

Cost of goods sold
2,744

 
3,905

 
5,729

 
7,508

Facility expenses
6,847

 
6,894

 
14,275

 
13,494

Professional fees
821

 
1,005

 
1,695

 
2,608

Management fees
132

 
154

 
272

 
303

Other operating expenses
3,740

 
4,845

 
7,938

 
9,167

Depreciation and amortization
16,399

 
15,910

 
32,718

 
33,109

Gain on sale of equipment
(642
)
 
(686
)
 
(1,163
)
 
(1,085
)
Impairment of long-lived assets
—

 
—

 
319

 
1,273

Total operating expenses
69,397

 
73,338

 
145,817

 
149,242

Income from operations
8,810

 
9,608

 
11,159

 
13,073

Other expenses:
 
 
 
 
 
 
 
Interest expense, net
10,643

 
10,686

 
21,114

 
21,210

Foreign currency exchange loss (gain)
376

 
(247
)
 
(284
)
 
(488
)
Other expense, net
—

 
91

 
—

 
91

Total other expenses, net
11,019

 
10,530

 
20,830

 
20,813

Loss before income tax benefit
(2,209
)
 
(922
)
 
(9,671
)
 
(7,740
)
Income tax benefit
(831
)
 
(2,106
)
 
(3,669
)
 
(4,565
)
Net (loss) income
$
(1,378
)
 
$
1,184

 
$
(6,002
)
 
$
(3,175
)

The accompanying notes are an integral part of these consolidated condensed financial statements.


2

BakerCorp International, Inc. and Subsidiaries
Consolidated Condensed Statements of Comprehensive Income (Loss) (unaudited)
(In thousands)
 
 
Three Months Ended
 
Six Months Ended
 
July 31,
2015
 
July 31,
2014
 
July 31,
2015
 
July 31,
2014
Net (loss) income
$
(1,378
)
 
$
1,184

 
$
(6,002
)
 
$
(3,175
)
Other comprehensive income (loss), net of tax
 
 
 
 
 
 
 
Unrealized gain on interest rate swap agreements, net of tax expense of $172, $135, $328 and $289, respectively
268

 
217

 
518

 
490

Change in foreign currency translation adjustments
(3,538
)
 
(4,594
)
 
(3,767
)
 
(1,285
)
Other comprehensive loss
(3,270
)
 
(4,377
)
 
(3,249
)
 
(795
)
Total comprehensive loss
$
(4,648
)
 
$
(3,193
)
 
$
(9,251
)
 
$
(3,970
)

The accompanying notes are an integral part of these consolidated condensed financial statements.


3

BakerCorp International, Inc. and Subsidiaries
Consolidated Condensed Statements of Cash Flows (unaudited)
(In thousands)
 
 
Six Months Ended
 
July 31,
2015
 
July 31,
2014
Operating activities
 
 
 
Net loss
$
(6,002
)
 
$
(3,175
)
Adjustments to reconcile net loss to net cash provided by operating activities:
 
 
 
Provision for doubtful accounts
582

 
93

Provision for excess and obsolete inventory
7

 
19

Share-based compensation expense
517

 
638

Loss on sale of subsidiary
—

 
99

Gain on sale of equipment
(1,163
)
 
(1,085
)
Depreciation and amortization
32,718

 
33,109

Amortization of deferred financing costs
1,352

 
1,281

Deferred income taxes
(3,494
)
 
(3,722
)
Amortization of above-market lease
(237
)
 
(346
)
Impairment of long-lived assets
319

 
1,273

Changes in assets and liabilities:
 
 
 
Accounts receivable
337

 
(4,969
)
Inventories
(2,226
)
 
(1,825
)
Prepaid expenses and other assets
483

 
(672
)
Accounts payable and other liabilities
(4,294
)
 
(10,615
)
Net cash provided by operating activities
18,899

 
10,103

Investing activities
 
 
 
Purchases of property and equipment
(12,944
)
 
(20,285
)
Proceeds from sale of equipment
1,823

 
1,531

Proceeds from sale of subsidiary
—

 
100

Net cash used in investing activities
(11,121
)
 
(18,654
)
Financing activities
 
 
 
Repayment of long-term debt
(2,081
)
 
(2,081
)
Return of capital to BakerCorp International Holdings, Inc.
(51
)
 
(1,039
)
Net cash used in financing activities
(2,132
)
 
(3,120
)
Effect of foreign currency translation on cash
(411
)
 
(558
)
Net increase (decrease) in cash and cash equivalents
5,235

 
(12,229
)
Cash and cash equivalents, beginning of period
18,665

 
25,536

Cash and cash equivalents, end of period
$
23,900

 
$
13,307

 
 
 
 
Supplemental disclosure of cash flow information
 
 
 
Cash paid during the period for:
 
 
 
Interest
$
18,163

 
$
19,943

Income taxes
$
942

 
$
638

Non-cash financing and investing activities:
 
 
 
Return of capital to BakerCorp International Holdings, Inc. related to a settlement of options for shares of common stock in BakerCorp International Holdings Inc.
$
59

 
$
—


The accompanying notes are an integral part of these consolidated condensed financial statements.


4

BakerCorp International, Inc. and Subsidiaries
Notes to Consolidated Condensed Financial Statements (unaudited)

Note 1. Organization, Description of Business, and Basis of Presentation
We are a provider of liquid and solid containment solutions, operating within a specialty sector of the broader industrial services industry. Our revenue is generated by providing rental equipment, customized solutions, and a comprehensive suite of services to our customers. We provide a wide variety of steel and polyethylene temporary storage tanks, roll-off containers, pumps, filtration, pipes, hoses and fittings, shoring, and related products to a broad range of customers for a number of applications. Tank and roll-off container applications include the storage of water, chemicals, waste streams, and solid waste. Pump applications include the pumping of groundwater, municipal waste, and other fluids. Filtration applications include the separation of various solids from liquids. We have branches within 24 states in the United States as well as branches in Canada, France, Germany, the Netherlands, the United Kingdom and Poland. For reporting purposes, a branch is defined as a location with at least one employee. As used herein, the terms “Company,” “we,” “us,” and “our” refer to BakerCorp International, Inc. and its subsidiaries, unless the context indicates to the contrary.

Basis of Presentation
The accompanying consolidated condensed financial statements have been prepared in accordance with accounting principles generally accepted in the United States (“U.S. GAAP”) for interim financial information and the instructions to Securities and Exchange Commission (“SEC”) Form 10-Q and Article 10 of SEC Regulation S-X. They do not include all of the information and footnotes required by U.S. GAAP for complete financial statements. Therefore, these financial statements should be read in conjunction with our audited consolidated financial statements and notes thereto for the year ended January 31, 2015, included in our 2015 Annual Report on Form 10-K filed with the SEC on April 20, 2015, referred to as our 2015 Annual Report. Certain prior-period amounts have been reclassified to conform to the current financial presentation.

The interim condensed consolidated financial statements included herein are unaudited; however, they contain all normal recurring accruals and adjustments that, in the opinion of management, are necessary to present fairly our results of operations and financial position for the interim periods. The results of operations for the three and six months ended July 31, 2015 are not necessarily indicative of the results to be expected for future quarters or the full year.

Principles of Consolidation
The consolidated condensed financial statements include our accounts and those of our wholly-owned subsidiaries. All intercompany accounts and transactions with our subsidiaries have been eliminated.

Use of Estimates
The preparation of financial statements in conformity with U.S. GAAP requires us to make a number of estimates, judgments, and assumptions that affect the reported amounts of assets and liabilities on the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. On an ongoing basis, we evaluate our estimates, judgments, and assumptions, including those related to revenue recognition, allowances for doubtful accounts, warranties, inventory valuation, customer rebates, sales allowances, medical insurance claims, litigation accruals, impairment of long-lived assets, intangible assets and goodwill, income taxes, share-based compensation (expense and liability), and derivatives. Our estimates, judgments, and assumptions are based on historical experience, future expectations, and other factors which we believe to be reasonable. Actual results may differ from our expectations. Based on our evaluation, our estimates, judgments, and assumptions may be adjusted as more information becomes available. Any adjustment may be material.


5

Note 2. Accounting Pronouncements
Recently Issued Accounting Pronouncements
In July 2015, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2015-11, “Simplifying the Measurement of Inventory” (“ASU No. 2015-11”). ASU No. 2015-11 requires inventory to be measured “at the lower of cost and net realizable value.” Net realizable value is defined as estimated selling prices in the ordinary course of business, less reasonably predictable costs of completion, disposal and transportation. For nonpublic business entities, ASU No. 2015-11 is effective prospectively for annual periods beginning after December 15, 2016, and interim periods within fiscal years beginning after December 15, 2017. Early adoption is permitted. We are currently evaluating the impact that the adoption of these provisions will have on our consolidated financial statements.
    
In April 2015, the FASB issued ASU No. 2015-05, “Customer’s Accounting for Fees Paid in a Cloud Computing Arrangement” (“ASU No. 2015-05”). ASU No. 2015-05 amends ASC 350, “Intangibles - Goodwill and Other.” The amendments provide guidance as to whether a cloud computing arrangement includes a software license and, based on that determination, how to account for such arrangements. The amendments may be applied on either a prospective or retrospective basis. The provisions are effective for annual periods beginning after December 15, 2015, and interim periods in annual periods beginning after December 31, 2016. Early adoption is permitted. We are currently evaluating the impact that the adoption of these provisions will have on our consolidated financial statements.

In April 2015, the FASB issued ASU No. 2015-03, “Interest—Imputation of Interest (Subtopic 835-30): Simplifying the Presentation of Debt Issuance Costs” (“ASU No. 2015-03”). ASU No. 2015-03 requires debt issuance costs to be presented in the balance sheet as a direct deduction from the debt liability rather than as an asset. The update requires retrospective application and represents a change in accounting principle. The standard is effective for nonpublic entities for annual periods beginning after December 15, 2015 and interim periods within annual periods beginning after December 15, 2016. Early adoption is permitted. Other than the revised balance sheet presentation of debt issuance costs from an asset to a deduction from the carrying amount of the debt liability and related disclosures, the adoption of ASU 2015-03 is not expected to have an impact on our consolidated financial statements.

During May 2014, the FASB issued ASU No. 2014-09, “Revenue from Contracts with Customers (Topic 606)” (“ASU No. 2014-09”). ASU No. 2014-09 will require companies to recognize revenue when it transfers promised goods or services to customers in an amount that reflects the consideration to which the company expects to be entitled in exchange for those goods or services. ASU No. 2014-09 creates a five-step model that requires companies to exercise judgment when considering the terms of the contract(s) which include (i) identifying the contract(s) with the customer, (ii) identifying the separate performance obligations in the contract, (iii) determining the transaction price, (iv) allocating the transaction price to the separate performance obligations, and (v) recognizing revenue when each performance obligation is satisfied. ASU No. 2014-09 allows for either full retrospective adoption, meaning the standard is applied to all of the periods presented, or modified retrospective adoption, meaning the standard is applied only to the most current period presented in the financial statements. A decision about which method to use will affect a company’s implementation plans. The standard is effective for non-public entities for annual periods beginning after December 15, 2018 and interim periods within annual periods beginning after December 15, 2019. Early adoption is permitted. We are currently assessing the impact the adoption of ASU No. 2014-09 will have on our consolidated financial statements.

Note 3. Changes in Accumulated Other Comprehensive Loss

The following table includes the components of accumulated other comprehensive loss, net of tax, for the three months ended July 31, 2015:
(In thousands)
Unrealized Loss
on Interest
Rate Swap
Agreements (1)
 
Change in
Foreign
Currency
Translation
Adjustments
 
Total
Balance at April 30, 2015
$
(1,426
)
 
$
(34,327
)
 
$
(35,753
)
Other comprehensive income (loss) before reclassifications
268

 
(3,538
)
 
(3,270
)
Net other comprehensive income (loss)
268

 
(3,538
)
 
(3,270
)
Balance at July 31, 2015
$
(1,158
)
 
$
(37,865
)
 
$
(39,023
)
(1)     Unrealized income on interest rate swap agreements is net of tax expense of $172 for the three months ended July 31, 2015.
    

6

The following table includes the components of accumulated other comprehensive loss, net of tax, for the three months ended July 31, 2014:
(In thousands)
Unrealized Loss
on Interest
Rate Swap
Agreements (1)
 
Change in
Foreign
Currency
Translation
Adjustments
 
Total
Balance at April 30, 2014
$
(2,188
)
 
$
(4,938
)
 
$
(7,126
)
Other comprehensive income (loss) before reclassifications
217

 
(4,594
)
 
(4,377
)
Net other comprehensive income (loss)
217

 
(4,594
)
 
(4,377
)
Balance at July 31, 2014
$
(1,971
)
 
$
(9,532
)
 
$
(11,503
)
(1)     Unrealized income on interest rate swap agreements is net of tax expense of $135 for the three months ended July 31, 2014.

The following table includes the components of accumulated other comprehensive loss, net of tax, for the six months ended July 31, 2015:
(In thousands)
Unrealized Loss
on Interest
Rate Swap
Agreements (1)
 
Change in
Foreign
Currency
Translation
Adjustments
 
Total
Balance at January 31, 2015
$
(1,676
)
 
$
(34,098
)
 
$
(35,774
)
Other comprehensive income (loss) before reclassifications
518

 
(3,767
)
 
(3,249
)
Net other comprehensive income (loss)
518

 
(3,767
)
 
(3,249
)
Balance at July 31, 2015
$
(1,158
)
 
$
(37,865
)
 
$
(39,023
)
(1)     Unrealized income on interest rate swap agreements is net of tax expense of $328 for the six months ended July 31, 2015.
    
The following table includes the components of accumulated other comprehensive loss, net of tax, for the six months ended July 31, 2014:
(In thousands)
Unrealized Loss
on Interest
Rate Swap
Agreements (1)
 
Change in
Foreign
Currency
Translation
Adjustments
 
Total
Balance at January 31, 2014
$
(2,461
)
 
$
(8,247
)
 
$
(10,708
)
Other comprehensive income (loss) before reclassifications
490

 
(1,285
)
 
(795
)
Net other comprehensive income (loss)
490

 
(1,285
)
 
(795
)
Balance at July 31, 2014
$
(1,971
)
 
$
(9,532
)
 
$
(11,503
)
(1)     Unrealized income on interest rate swap agreements is net of tax expense of $289 for the six months ended July 31, 2014.

Note 4. Inventories, Net

Inventories, net consisted of the following on July 31, 2015 and January 31, 2015:
(In thousands)
July 31,
2015
 
January 31,
2015
Finished goods
$
4,929

 
$
4,733

Work-in-process
1,194

 
595

Components
4,099

 
2,672

Less: inventory reserve
(670
)
 
(663
)
Inventories, net
$
9,552

 
$
7,337



7

Note 5. Property and Equipment, Net

Property and equipment, net consisted of the following on July 31, 2015:
(In thousands)
Cost
 
Accumulated
Depreciation
 
Net
Carrying Amount
Assets held for rent:
 
 
 
 
 
Secondary containment
$
4,678

 
$
(3,552
)
 
$
1,126

Boxes
27,976

 
(11,330
)
 
16,646

Filtration
10,885

 
(4,778
)
 
6,107

Generators and light towers
274

 
(249
)
 
25

Pipes, hoses and fittings
18,101

 
(13,114
)
 
4,987

Non-steel containment
7,135

 
(1,931
)
 
5,204

Pumps
54,585

 
(27,941
)
 
26,644

Shoring
3,800

 
(2,676
)
 
1,124

Steel containment
333,260

 
(67,265
)
 
265,995

Tank trailers
1,854

 
(1,455
)
 
399

Construction in progress
879

 
—

 
879

Total assets held for rent
463,427

 
(134,291
)
 
329,136

Assets held for use:
 
 
 
 
 
Leasehold improvements
3,372

 
(2,004
)
 
1,368

Machinery and equipment
37,660

 
(22,572
)
 
15,088

Office furniture and equipment
5,982

 
(4,131
)
 
1,851

Software
9,944

 
(4,452
)
 
5,492

Construction in progress
1,561

 
—

 
1,561

Total assets held for use
58,519

 
(33,159
)
 
25,360

Total
$
521,946

 
$
(167,450
)
 
$
354,496


8

    
Property and equipment, net consisted of the following on January 31, 2015:
(In thousands)
Cost
 
Accumulated
Depreciation
 
Net
Carrying Amount
Assets held for rent:
 
 
 
 
 
Secondary containment
$
4,594

 
$
(3,212
)
 
$
1,382

Boxes
26,318

 
(10,061
)
 
16,257

Filtration
9,903

 
(4,159
)
 
5,744

Generators and light towers
279

 
(230
)
 
49

Pipes, hoses and fittings
16,677

 
(11,994
)
 
4,683

Non-steel containment
6,851

 
(1,668
)
 
5,183

Pumps
52,804

 
(24,742
)
 
28,062

Shoring
4,068

 
(2,670
)
 
1,398

Steel containment
331,940

 
(59,258
)
 
272,682

Tank trailers
1,856

 
(1,303
)
 
553

Construction in progress
5,890

 
—

 
5,890

Total assets held for rent
461,180

 
(119,297
)
 
341,883

Assets held for use:
 
 
 
 
 
Leasehold improvements
3,001

 
(1,786
)
 
1,215

Machinery and equipment
35,949

 
(20,440
)
 
15,509

Office furniture and equipment
5,439

 
(3,626
)
 
1,813

Software
7,163

 
(3,247
)
 
3,916

Construction in progress
3,963

 
—

 
3,963

Total assets held for use
55,515

 
(29,099
)
 
26,416

Total
$
516,695

 
$
(148,396
)
 
$
368,299


We evaluate long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying value of an asset may not be recoverable. If the estimated future cash flows (undiscounted and without interest charges) are less than the carrying value, a write-down would be recorded to reduce the related carrying value of the asset to its estimated fair value.

During the three months ended April 30, 2015, we reassessed our plans for the use of an internally developed software and decided to shift to a different platform which will provide the same services at a lower maintenance cost. We wrote down the value of the internally developed software as no future benefits were expected to be realized. Consequently, during the three months ended April 30, 2015, we recorded an impairment charge of $0.3 million in our North American segment, which represented the remaining net book value of the internally developed software.

Depreciation and amortization expense related to property and equipment for the three months ended July 31, 2015 and July 31, 2014 was $12.3 million and $11.8 million, respectively. Depreciation and amortization expense related to property and equipment for the six months ended July 31, 2015 and July 31, 2014 was $24.5 million and $24.9 million, respectively.

9

Note 6. Goodwill and Other Intangible Assets, Net

Goodwill

Goodwill by reportable segment and reporting units on July 31, 2015 and January 31, 2015 and the changes in the carrying amount of goodwill during the six months ended July 31, 2015 were the following:
(In thousands)
North America
 
Europe
 
Total
Balance at January 31, 2015
$
257,052

 
$
52,662

 
$
309,714

Adjustments (1)
—

 
(1,486
)
 
(1,486
)
Balance at July 31, 2015
$
257,052

 
$
51,176

 
$
308,228

(1)
The adjustments to goodwill were the result of fluctuations in foreign currency exchange rates used to translate the balance into U.S. dollars.
    
We evaluate the carrying value of goodwill annually during the fourth quarter of each fiscal year and more frequently if we believe indicators of impairment exist. In evaluating goodwill, a two-step goodwill impairment test is applied to each reporting unit.

In the first step of the impairment test, we compare the estimated fair value of the reporting unit to which the goodwill is assigned to the reporting unit’s carrying amount, including goodwill. We estimate the fair value of our reporting units based on income and market approaches. If the carrying amount of a reporting unit exceeds its fair value, the amount of the impairment loss must be measured (the second step).

During the three months ended July 31, 2015, we determined that based upon projected operating results and negative industry trends, there were potential indicators of impairment of goodwill. We determined that these indicators were sufficient to perform an interim impairment analysis of goodwill. Based on the results of the analysis, we concluded that for each reporting unit, fair value exceeded its carrying amount. Therefore, goodwill for each reporting unit was not considered to be impaired on July 31, 2015, and the second step of the goodwill impairment test was not required. Any change in the assumptions input into the fair value model, which include market-driven assumptions, could result in future impairments.
    
Other Intangible Assets, Net

The components of other intangible assets, net on July 31, 2015 and January 31, 2015 were the following:
 
July 31, 2015
 
 
January 31, 2015
(In thousands)
Gross (1)
 
Accumulated
Amortization
 
Net
 
 
Gross (1)
 
Accumulated
Amortization
 
Net
Carrying amount:
 
 
 
 
 
 
 
 
 
 
 
 
Customer relationships (25 years)
$
400,889

 
$
(66,815
)
 
$
334,074

 
 
$
401,403

 
$
(58,873
)
 
$
342,530

Customer backlog (2 years)
200

 
(200
)
 
—

 
 
200

 
(120
)
 
80

Developed technology (11 years)
1,640

 
(245
)
 
1,395

 
 
1,647

 
(171
)
 
1,476

Trade name (Indefinite)
85,903

 
—

 
85,903

 
 
86,137

 
—

 
86,137

Total carrying amount
$
488,632

 
$
(67,260
)
 
$
421,372

 
 
$
489,387

 
$
(59,164
)
 
$
430,223

(1)
The decrease in the gross intangible assets balance on July 31, 2015 compared to January 31, 2015 was the result of fluctuations in the foreign currency exchange rates used to translate foreign intangible asset balances into U.S. dollars.

We evaluate the carrying value of our indefinite-lived intangible assets (trade name) annually during the fourth quarter of each fiscal year and more frequently if we believe indicators of impairment exist. To test indefinite-lived intangible assets for impairment, we compare the fair value of our indefinite-lived intangible assets to carrying value. We estimate the fair value using an income approach, using the asset’s projected discounted cash flows. We recognize an impairment loss when the estimated fair value of the indefinite-lived intangible asset is less than the carrying value.


10

We assess the impairment of definite-lived intangible assets whenever events or changes in circumstances indicate that the carrying value may not be recoverable. The asset is impaired if its carrying value exceeds the undiscounted cash flows expected to result from the use and eventual disposition of the asset. In assessing recoverability, we must make assumptions regarding estimated future cash flows and other factors. The impairment loss is the amount by which the carrying value of the asset exceeds its fair value. We estimate fair value utilizing the projected discounted cash flow method and a discount rate determined by our management to be commensurate with the risk inherent in our current business model. When calculating fair value, we must make assumptions regarding estimated future cash flows, discount rates and other factors.

Based upon projected operating results and negative industry trends during the three months ended July 31, 2015, we performed an interim impairment analysis of our other intangible assets. Based on the results of the analysis, we concluded that the fair value of our other intangible assets exceeded their carrying value, so the assets were not impaired on July 31, 2015.

Amortization expense related to intangible assets for the three months ended July 31, 2015 and July 31, 2014 was $4.1 million and $4.1 million, respectively. Amortization expense related to intangible assets for the six months ended July 31, 2015 and July 31, 2014 was $8.2 million and $8.2 million, respectively. Estimated amortization expense for the fiscal periods ending January 31 is as follows:
(In thousands)
Estimated 
Amortization
Expense
Remainder of the fiscal year ending January 31, 2016
$
8,093

2017
16,185

2018
16,185

2019
16,185

2020
16,185

Thereafter
262,636

Total
$
335,469



Note 7. Accrued Expenses
Accrued expenses consisted of the following:
(In thousands)
July 31,
2015
 
January 31,
2015
Accrued compensation
$
10,631

 
$
11,732

Accrued insurance
582

 
29

Accrued interest
3,293

 
3,350

Accrued professional fees
384

 
382

Accrued taxes
3,935

 
4,011

Accrued above market lease liability
164

 
325

Other accrued expenses
885

 
560

Total accrued expenses
$
19,874

 
$
20,389



11


Note 8. Fair Value Measurements

Instruments Measured at Fair Value on a Recurring Basis
Instruments measured at fair value on a recurring basis are summarized below:
 
 
 
July 31, 2015
(In thousands)
Total
 
Level 1
 
Level 2
 
Level 3
Liabilities
 
 
 
 
 
 
 
Interest rate swap liabilities
$
1,879

 
$
—

 
$
1,879

 
$
—

Share-based compensation liability
2,395

 
—

 
—

 
2,395

Total
$
4,274

 
$
—

 
$
1,879

 
$
2,395

 
 
 
 
January 31, 2015
(In thousands)
Total
 
Level 1
 
Level 2
 
Level 3
Liabilities
 
 
 
 
 
 
 
Interest rate swap liabilities
$
2,725

 
$
—

 
$
2,725

 
$
—

Share-based compensation liability
2,836

 
—

 
—

 
2,836

Total
$
5,561

 
$
—

 
$
2,725

 
$
2,836


As discussed in Note 10, “Derivatives,” we had interest rate swap contracts with a total notional principal of $214.0 million outstanding on July 31, 2015. The fair value of interest rate swap contracts is calculated based on the fixed rate, notional principal, settlement date, present value of the future cash flows, terms of the agreement, and future floating interest rates as determined by a future interest rate yield curve. Our interest rate swap contracts are recorded at fair value utilizing Level 2 inputs such as trade data, broker/dealer quotes, observable market prices for similar securities, and other available data. Although readily observable data is utilized in the valuations, different valuation methodologies could have an effect on the estimated fair value. Accordingly, the inputs utilized to determine the fair value of the interest rate swap contracts are categorized as Level 2. During the six months ended July 31, 2015, there were no transfers in or out of Level 1, Level 2, or Level 3 financial instruments.

On July 31, 2015 and January 31, 2015, the weighted average fixed interest rate of our interest rate swap contracts were 2.1% and 2.1%, respectively, and the weighted average remaining life was 1.0 years and 1.5 years, respectively. Interest expense related to our interest rate swap contracts during the three months ended July 31, 2015 and July 31, 2014 was $0.5 million and $0.3 million, respectively, and during the six months ended July 31, 2015 and July 31, 2014 was $1.0 million and $0.8 million, respectively.

Level 3 Valuations
    
When at least one significant valuation model assumption or input used to measure the fair value of financial assets or liabilities is unobservable in the market, they are deemed to be measured using Level 3 inputs. These Level 3 inputs may include pricing models, discounted cash flow methodologies or similar techniques where at least one significant model assumption or input is unobservable. We use Level 3 inputs to value our share-based compensation liability, which were based upon internal valuations, considering input from third parties, utilizing the following assumptions (See Note 12, “Stockholder's Equity”):
•
Current Common Stock Value - We operate as a privately-owned company, and our stock does not and has not been traded on a market or an exchange. As such, we estimate the value of BCI Holdings on a quarterly basis. If there have been no significant changes such as acquisitions, disposals, or loss of a major customer, etc. between our valuation analysis and the grant date of a stock option, we will continue to use that valuation. We determined the fair value of BCI Holdings common stock based on an analysis of the market approach and the income approach. Under the market approach, we estimated the fair value based on market multiples of EBITDA for comparable public companies.
•
Expected Volatility - Management determined that historical volatility of comparable publicly traded companies is the best indicator of our expected volatility and future stock price trends.
•
Expected Dividends -We historically have not paid cash dividends, and do not currently intend to pay cash dividends, and thus have assumed a 0% dividend rate.

12

•
Expected Term - For options granted “at-the-money,” we used the simplified method to estimate the expected term for the stock options as we do not have enough historical exercise data to provide a reasonable estimate. For stock options granted “out-of-the-money,” we used an adjusted simplified method that considers the probability of the stock options becoming “in-the-money.”
•
Risk-Free Rate - The risk-free interest rate was based on the U.S. Treasury yield with a maturity date closest to the expiration date of the stock option grant.

We determined that a +/-10% change in the above assumptions would have a $0.4 million increase or decrease to our reported net loss for the three months ended July 31, 2015.
        
The following table provides a reconciliation of the beginning and ending balance of our share-based compensation liability measured at fair value on a recurring basis using significant unobservable inputs (Level 3) for the three and six months ended July 31, 2015:
 
 
Three Months Ended
 July 31, 2015
 
 
Level 3
(In thousands)
 
Share-based Compensation Liability
Beginning balance on April 30, 2015
 
$
2,712

Total income included in operating expense
 
(317
)
Balance at July 31, 2015
 
$
2,395


 
 
Six Months Ended
 July 31, 2015
 
 
Level 3
(In thousands)
 
Share-based Compensation Liability
Beginning balance on January 31, 2015
 
$
2,836

Total income included in operating expense
 
(441
)
Balance at July 31, 2015
 
$
2,395


Instruments Not Recorded at Fair Value on a Recurring Basis
Some of our financial instruments are not measured at fair value on a recurring basis but are recorded at amounts that approximate fair value due to their liquid or short-term nature. Such financial assets and financial liabilities include cash and cash equivalents, accounts receivables, inventories, certain other assets, accounts payable, and accrued expenses.
Our long-term debt is not recorded at fair value on a recurring basis but is measured at fair value for disclosure purposes. The fair value of our long-term debt is estimated based on the latest sales price for similar instruments obtained from a third party (Level 2 inputs). On July 31, 2015 and January 31, 2015, the fair values of our senior notes and senior term loan were $201.6 million and $394.7 million, respectively, and $182.4 million and $380.2 million, respectively.

Assets and Liabilities Recorded at Fair Value on a Non-Recurring Basis
We reduce the carrying amounts of our goodwill, intangible assets, and long-lived assets to fair value when held for sale or determined to be impaired. The categorization of the fair value of the assets is considered Level 3 due to the subjective nature of the unobservable inputs utilized. See Note 5 for discussion of fair value measurements of long-lived assets.


13

Note 9. Debt

Long-term debt consisted of the following:
(In thousands)
July 31,
2015
 
January 31,
2015
Senior term loan (LIBOR margin of 3.0%, and interest rate of 4.25%)
$
408,984

 
$
411,066

Revolving loan
—

 
—

Senior unsecured notes
240,000

 
240,000

Total debt
648,984

 
651,066

Less deferred financing costs
(10,296
)
 
(11,545
)
Total debt less deferred financing costs
638,688

 
639,521

Less current portion (net of current portion of deferred financing costs of $2,620 and $2,543, respectively)
(1,543
)
 
(1,618
)
Long-term debt, net of current portion (net of long-term portion of deferred financing costs of $7,676 and $9,002, respectively)
$
637,145

 
$
637,903


On June 1, 2011, we (i) entered into a $435.0 million senior secured credit facility (the “Credit Facility”), consisting of a $390.0 million term loan facility (the “Senior Term Loan”) and a $45.0 million revolving credit facility (the “Revolving Credit Facility”) ($45.0 million available on July 31, 2015) and (ii) issued $240.0 million in aggregate principal amount of senior unsecured notes due 2019 (the “Notes”).

Credit Facility
On February 7, 2013, we entered into a first amendment to our Credit Facility (the “First Amendment”), to refinance our Credit Facility. Pursuant to the First Amendment, we borrowed $384.2 million of term loans (the “Amended Senior Term Loan”) to refinance a like amount of term loans (the “Original Term Loan”) under the Credit Facility. Borrowings under the Credit Facility bear interest at a rate equal to LIBOR plus an applicable margin, subject to a LIBOR floor of 1.25%. The LIBOR margin applicable to the Amended Senior Term Loan is 3.00%, which is 0.75% less than the LIBOR margin applicable to the Original Term Loan. In addition, pursuant to the First Amendment, among other things, (i) the Senior Term Loan maturity date was extended to February 7, 2020, provided that the maturity will be March 2, 2019 if the Amended Senior Term Loan is not repaid or refinanced on or prior to March 2, 2019, (ii) the Revolving Credit Facility maturity date was extended to February 7, 2018, and (iii) we obtained increased flexibility with respect to certain covenants and restrictions relating to our ability to incur additional debt, make investments, debt prepayments, and acquisitions. Principal on the Senior Term Loan is payable in quarterly installments of $1.0 million. Furthermore, the excess cash flow prepayment requirement is in effect until the maturity date.
On November 13, 2013, we entered into a second amendment to our Credit Facility (the “Second Amendment”). Pursuant to the Second Amendment, the Company borrowed $35.0 million of incremental term loans (the “Incremental Term Loans”), which may be used for general corporate purposes, including to finance permitted acquisitions. The terms applicable to the Incremental Term Loans are the same as those applicable to the term loans under the Credit Facility.

The Credit Facility, as amended in February 2013 and November 2013, places certain limitations on our (and all of our U.S. subsidiaries’) ability to incur additional indebtedness, pay dividends or make other distributions, repurchase capital stock, make certain investments, enter into certain types of transactions with affiliates, utilize assets as security in other transactions, and sell certain assets or merge with or into other companies. In addition, under the Credit Facility, we may be required to satisfy and maintain a total leverage ratio if there is an outstanding balance on the revolving loan of 25% or more of the committed amount on any quarter end.

On July 31, 2015, we did not have an outstanding balance on the Revolving Credit Facility; therefore, on July 31, 2015, we were not subject to a leverage test. Additionally, on July 31, 2015, we were in compliance with all of our requirements and covenant tests under the Credit Facility.


14

Senior Unsecured Notes Due 2019
On June 1, 2011, we issued $240.0 million of fixed rate 8.25% Notes due June 1, 2019. We may redeem all or any portion of the Notes at the redemption prices set forth in the applicable indenture, plus accrued and unpaid interest. Upon a change of control, we are required to make an offer to redeem all of the Notes from the holders at a redemption price equal to 101% of the aggregate principal amount thereof plus accrued and unpaid interest, if any, to the date of the repurchase. The Notes are fully and unconditionally guaranteed, jointly and severally, on a senior unsecured basis by our direct and indirect existing and future wholly-owned domestic restricted subsidiaries.

Interest and Fees
Costs related to debt financing are deferred and amortized to interest expense over the term of the underlying debt instruments utilizing the straight-line method for our revolving credit facility and the effective interest method for our senior term and revolving loan facilities. We amortized $0.7 million and $0.7 million of deferred financing costs during three months ended July 31, 2015 and July 31, 2014, respectively, and $1.4 million and $1.3 million during the six months ended July 31, 2015 and July 31, 2014, respectively.
Interest and fees related to our Credit Facility and the Notes were as follows:
 
Three Months Ended
 
 
 
Six Months Ended
(In thousands)
July 31, 2015
 
July 31, 2014
 
 
 
July 31, 2015
 
July 31, 2014
Credit Facility interest and fees(1)
$
4,901

 
$
3,421

 
 
 
$
9,651

 
$
8,203

Notes interest and fees (2)
5,246

 
6,737

 
 
 
10,486

 
11,952

Total interest and fees
$
10,147

 
$
10,158

 
 
 
$
20,137

 
$
20,155

(1)    Interest on the Amended Term Loan is payable quarterly based upon an interest rate of 4.25%.
(2)    Interest on the Notes is payable semi-annually based upon a fixed annual rate of 8.25%.

Principal Payments on Debt
On July 31, 2015, the schedule of minimum required principal payments relating to the Amended Senior Term Loan and the Notes for each of the twelve months ending January 31 are due according to the table below:
(In thousands)
Principal 
Payments on
Debt
Remainder of the fiscal year ending January 31, 2016
$
2,081

2017
4,163

2018
4,163

2019
4,163

2020
634,414

Total
$
648,984



15

Note 10. Derivatives

Cash Flow Hedges
We utilize interest rate derivative contracts to hedge cash flows related to the variable interest rate exposure on our debt. Our use of interest rate derivative contracts is not intended or designed to be used for trading or speculative purposes. For these interest rate swap contracts, we have agreed to pay fixed interest rates while receiving a floating LIBOR. The purpose of holding these interest rate swap contracts is to hedge against the upward movement of LIBOR and the associated interest we pay on our external variable rate credit facilities.

The fair value of the potential termination obligations related to our interest rate swaps, which were recorded within the “Fair value of interest rate swap liabilities” caption of our consolidated condensed balance sheets, were as follows:
(In thousands)
 
Notional
Amount
 
Interest Rate
 
July 31,
2015
 
January 31,
2015
Interest rate swaps effective July 2011, expires July 2016 (1)
 
150,000

 
2.346%
 
$
1,637

 
$
2,380

Interest rate swap, effective July 2014, expires July 2016 (1)(2)
 
64,000

 
1.639%
 
242

 
345

 
 
 
 
 
 
$
1,879

 
$
2,725

(1)
These interest rate swaps require a fixed rate of interest in exchange for a variable interest rate based on a three-month LIBOR, subject to a 1.25% floor.
(2)
The original notional amount of $71.0 million was reduced to $64.0 million on July 31, 2015.

The interest rate swap agreements have been designated as cash flow hedges of our interest rate risk and recorded at estimated fair values on July 31, 2015 and January 31, 2015. The fair value of the interest rate hedges reflect the estimated amount that we would receive or pay to terminate the contracts at each reporting date (See Note 8, “Fair Value Measurements”).

We determined that the interest rate swap agreements are highly effective in offsetting future variable interest payments associated with the hedged portion of our term loans. During the six months ended July 31, 2015, no ineffectiveness was recorded into current period earnings. We do not expect to reclassify any material amount from OCI into earnings within the next 12 months.

The effective portion of the unrealized gain (loss) recognized in OCI for our derivative instruments designated as cash flow hedges was the following:
 
Three Months Ended
 
 
 
Six Months Ended
(In thousands)
July 31, 2015
 
July 31, 2014
 
 
 
July 31, 2015
 
July 31, 2014
Unrealized gain, before income tax expense
$
440

 
$
352

 
 
 
$
846

 
$
779

Income tax expense
172

 
135

 
 
 
328

 
289

Total
$
268

 
$
217

 
 
 
$
518

 
$
490



16

Note 11. Income Taxes
The income tax benefit for the three and six months ended July 31, 2015 and July 31, 2014 is based on the estimated effective tax rate for the entire fiscal year. The estimated effective tax rate is subject to adjustment in subsequent quarterly periods as our estimates of pre-tax income and loss for the year fluctuate, including changes in the geographic mix of pre-tax income and loss.
 
The effective income tax rates for the three and six months ended July 31, 2015 were a benefit of 37.6% and 37.9%, respectively, compared to a benefit for the three and six months ended July 31, 2014 of 228.4% and 59.0% for the three and six months ended July 31, 2014. The effective tax rates differ from the U.S. federal statutory rate primarily due to income taxed in foreign jurisdictions, state taxes, non-deductible meals and entertainment expenses, and discrete items. The difference in effective income tax rates for the three and six months ended July 31, 2015 and July 31, 2014 primarily relates to a change in the estimated forecast of pre-tax book income and loss for each respective jurisdiction and discrete items primarily related to a future benefit of bad debt impairment recorded during the three months ended July 31, 2014.
 
Deferred income taxes are provided for the temporary differences between the financial reporting basis and the tax basis of our assets and liabilities. A valuation allowance is recorded for deferred income tax assets when management determines it is more likely than not that such assets will not be realized. The majority of our deferred tax assets relate to federal net operating loss carry-forwards. Management believes we will realize the benefit of existing deferred tax assets based on the scheduled reversal of U.S. deferred tax liabilities, related to depreciation and amortization expenses not deductible for tax purposes, which is ordinary income and therefore of the same character as the temporary differences giving rise to the deferred tax assets. This reversal will occur in substantially similar time periods and in the same jurisdictions as the deferred tax assets. As such, the deferred tax liabilities are considered a source of income sufficient to support our U.S. deferred tax assets; therefore, a valuation allowance is not required on July 31, 2015.
 
We recognize a tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position. Tax benefits recognized from such a position are measured based on whether the benefit has a greater than 50% likelihood of being realized upon ultimate resolution. We do not believe there will be any material unrecognized tax positions over the next 12 months.

The Federal examination by the Internal Revenue Service for the fiscal years ended January 31, 2011 through January 31, 2012 was completed during the three months ended July 31, 2015. Any impact from the audit, including reversal of previously accrued unrecognized tax benefit and associated interest and penalties, was included in the financial statements for the three months ended July 31, 2015.
 
We believe appropriate provisions for all outstanding issues have been made for all jurisdictions and all open years. However, due to the risk that audit outcomes and the timing of audit settlements are subject to significant uncertainty and as we continue to evaluate such uncertainties in light of current facts and circumstances, our current estimate of the total amounts of unrecognized tax benefits could increase or decrease for all open tax years. As of the date of this report, we do not anticipate that there will be any material change in the unrecognized tax benefits associated with these audits within the next twelve months.


17

Note 12. Stockholder’s Equity

Share-based Compensation
During June 2011, BakerCorp International Holdings (“BCI Holdings”) adopted a share-based compensation plan, the BakerCorp International Holdings, Inc. 2011 Equity Incentive Plan (the “2011 Plan”). On September 12, 2013, the BCI Holdings’ Board of Directors amended the 2011 Plan by resolution to increase the number of shares of BCI Holdings common stock authorized for issuance under the 2011 Plan to 1,001,339 shares. On July 31, 2015, there were 144,440 shares available for grant. The amended 2011 Plan permits the granting of BCI Holdings stock options, nonqualified stock options and restricted stock to eligible employees and non-employee directors and consultants.

The following table summarizes stock option activity during the six months ended July 31, 2015:
 
Number of
Options
 
Weighted
Average
Exercise 
Price
 
Aggregate
Intrinsic 
Value
(in thousands)(1)
 
Weighted
Average 
Term
Remaining
(in years)
 
Weighted
Average 
Grant
Date Fair 
Value
Outstanding, January 31, 2015
886,209

 
$
201.22

 
$
6,330

 
7.6
 
 
Granted
5,000

 
$
176.00

 
 
 
 
 
$
35.79

Exercised
(2,373
)
 
$
62.75

 
$
95

 
 
 
 
Forfeited/cancelled/expired
(10,690
)
 
$
190.00

 
 
 
 
 
 
Outstanding, July 31, 2015
878,146

 
$
201.59

 
$
4,733

 
7.1
 
 
Vested and expected to vest, July 31, 2015
429,783

 
$
149.48

 
$
4,728

 
5.8
 
 
Exercisable, July 31, 2015
289,544

 
$
135.38

 
$
4,689

 
5.2
 
 
 
(1)
Aggregate intrinsic value in the table above represents the total pre-tax value that option holders would have received had all option holders exercised their options on July 31, 2015. The aggregate intrinsic value is the difference between the estimated fair market value of the BCI Holdings common stock at the end of the period and the option exercise price, multiplied by the number of in-the-money options. This amount will change based on the fair market value of the BCI Holdings common stock.

As of July 31, 2015, there was $3.7 million of unrecognized pre-tax share-based compensation expense, excluding the options granted to the CEO, related to non-vested stock options, which we expect to recognize over a weighted average period of 3.0 years. The total fair value of options vested during the three and six months ended July 31, 2015 is $0.5 million and $1.1 million, respectively. The total fair value of options vested during the three and six months ended July 31, 2014 is $0.5 million and $1.2 million, respectively. On July 31, 2015, the total unrecognized share-based compensation expense for the CEO’s options was $10.6 million. During the six months ended July 31, 2015, we did not recognize any share-based compensation expense related to the CEO’s options.

The share-based compensation expense included within employee related expenses in our consolidated statement of operations was the following:
 
Three Months Ended
 
 
 
Six Months Ended
(In thousands)
July 31, 2015
 
July 31, 2014
 
 
 
July 31, 2015
 
July 31, 2014
Non-cash share-based compensation expense (1)
$
129

 
$
565

 
 
 
$
517

 
$
638

(1)
We remeasured certain options classified as liability awards and recorded decreases to non-cash share-based compensation expense of $0.3 million and $0.4 million during the three and six months ended July 31, 2015, respectively, and $0.5 million during the six months ended July 31, 2014. During the three months ended July 31, 2014, we recorded a de minimis charge to non-cash share-based compensation as a result of our quarterly remeasurement of certain options classified as liability awards.

The fair value of BCI Holdings stock options issued and classified as equity awards was determined using the Black-Scholes options pricing model utilizing the following weighted-average assumptions for each respective period:
 
Six Months Ended
 
July 31, 2015
 
July 31, 2014
Expected volatility
45
%
 
50
%
Expected dividends
—
%
 
—
%
Expected term
6.4 years

 
6.6 years

Risk-free interest rate
1.6
%
 
2.1
%

18


    
Liability Awards

We account for certain option awards as liability awards, as we determined cash settlement upon exercise is probable. We remeasured the fair value of these options on July 31, 2015 and decreased our liability to $2.4 million from the $2.8 million recognized on January 31, 2015. The quarterly re-measurement resulted in a decrease to our non-cash share-based compensation expense of $0.3 million and $0.4 million during the three and six months ended July 31, 2015, respectively.

The fair value of BCI Holdings stock options accounted for as liability awards were determined using the Black-Scholes option pricing model utilizing the following assumption for each respective period:
 
Six Months Ended
 
July 31, 2015
 
July 31, 2014
Expected volatility
50
%
 
50
%
Expected dividends
—
%
 
—
%
Expected term
3.0 years

 
3.4 years

Risk-free interest rate
1.0
%
 
1.1
%

Note 13. Segment Reporting

We conduct our operations through entities located in the United States, Canada, France, Germany, the Netherlands, the United Kingdom and Poland. We transact business using the local currency within each country where we perform the service or provide the rental equipment.

Our operating and reportable segments are North America and Europe. Within each operating segment, there are common customers, common pricing structures, the ability and history of sharing equipment and resources, operational compatibility, commonality among regulatory environments, and relative geographic proximity. Our operating segments consist of the following:

•
the North American segment consists of branches located in the United States and Canada that provide equipment and services suitable across both of these North American countries.
•
the European segment consists of branches located in France, Germany, the Netherlands, the United Kingdom and Poland that provide equipment and services to customers in a number of European countries.


19

Selected statement of operations information for our reportable segments is the following:
 
Three Months Ended
 
 
Six Months Ended
(In thousands)
July 31, 2015
 
July 31, 2014
 
 
July 31, 2015
 
July 31, 2014
Revenue
 
 
 
 
 
 
 
 
United States
$
67,973

 
$
71,528

 
 
$
137,684

 
$
141,862

Other North America
1,795

 
2,165

 
 
3,362

 
3,807

North America
69,768

 
73,693

 
 
141,046

 
145,669

Europe
8,439

 
9,253

 
 
15,930

 
16,646

Total revenue
$
78,207

 
$
82,946

 
 
$
156,976

 
$
162,315

Depreciation and amortization
 
 
 
 
 
 
 
 
North America
$
15,251

 
$
14,609

 
 
$
30,451

 
$
30,560

Europe
1,148

 
1,301

 
 
2,267

 
2,549

Total depreciation and amortization
$
16,399

 
$
15,910

 
 
$
32,718

 
$
33,109

Interest expense, net
 
 
 
 
 
 
 
 
North America
$
10,643

 
$
10,686

 
 
$
21,114

 
$
21,210

Europe
—

 
—

 
 
—

 
—

Total interest expense, net
$
10,643

 
$
10,686

 
 
$
21,114

 
$
21,210

Income tax (benefit) expense
 
 
 
 
 
 
 
 
North America
$
(1,201
)
 
$
(2,498
)
 
 
$
(4,201
)
 
$
(4,892
)
Europe
370

 
392

 
 
532

 
327

Total income tax benefit
$
(831
)
 
$
(2,106
)
 
 
$
(3,669
)
 
$
(4,565
)
Net (loss) income
 
 
 
 
 
 
 
 
North America (1)
$
(2,471
)
 
$
(213
)
 
 
$
(8,137
)
 
$
(5,292
)
Europe (1)
1,093

 
1,397

 
 
2,135

 
2,117

Total net (loss) income
$
(1,378
)
 
$
1,184

 
 
$
(6,002
)
 
$
(3,175
)
 
(1)
During the three and six months ended July 31, 2015 and July 31, 2014, we included $1.7 million and $1.9 million, respectively, and $2.8 million and $2.9 million, respectively, of intersegment expense allocations from North America to Europe.
    
Total asset and long-lived asset information is the following:
(In thousands)
July 31,
2015
 
January 31,
2015
Total assets
 
 
 
United States
$
1,076,204

 
$
1,093,824

Other North America
10,431

 
10,707

North America
1,086,635

 
1,104,531

Europe
112,757

 
113,322

Total assets
$
1,199,392

 
$
1,217,853

Long-lived assets
 
 
 
United States
$
295,839

 
$
307,655

Other North America
12,176

 
12,295

North America
308,015

 
319,950

Europe
46,481

 
48,349

Total long-lived assets
$
354,496

 
$
368,299



20

Note 14. Related Party Transactions

From time to time, we may enter into transactions with related parties. We believe that such transactions have terms consistent with terms offered in the ordinary course of business. The accounting policies that we apply to our transactions with related parties are consistent with those applied in transactions with independent third parties.

Pursuant to a professional services agreement between us and Permira Advisers L.L.C. (the “Sponsor”), we agreed to pay the Sponsor an annual management fee of $0.5 million, payable quarterly, plus reasonable out-of-pocket expenses, in connection with the planning, strategy, and oversight support provided to management. We recorded aggregate management fees and expenses to the Sponsor of $0.1 million and $0.2 million during the three months ended July 31, 2015 and July 31, 2014, respectively, and $0.3 million and $0.3 million during the six months ended July 31, 2015 and July 31, 2014, respectively.

Note 15. Commitments and Contingencies
Litigation
We are involved in various legal actions arising in the ordinary course of conducting our business. These include claims relating to (i) personal injury or property damage involving equipment rented or sold by us, (ii) motor vehicle accidents involving our vehicles and our employees, (iii) employment-related matters, and (iv) environmental matters. We do not believe that the ultimate disposition of these matters will have a material adverse effect on our consolidated financial position, results of operations, or cash flow. We expense legal fees in the period in which they are incurred.

Note 16. Condensed Consolidating Financial Information
Our Notes are guaranteed by all of our U.S. subsidiaries (the “guarantor subsidiaries”). This indebtedness is not guaranteed by BCI Holdings or our foreign subsidiaries (together, the “non-guarantor subsidiaries”). The guarantor subsidiaries are all one hundred percent owned, and the guarantees are made on a joint and several basis and are full and unconditional (subject to subordination provisions and subject to customary release provisions and a standard limitation, which provides that the maximum amount guaranteed by each guarantor will not exceed the maximum amount that may be guaranteed without making the guarantee void under fraudulent conveyance laws). The following condensed consolidating financial information presents the financial position, results of operations, and cash flows of the parent, guarantors, and non-guarantor subsidiaries of the Company and the eliminations necessary to arrive at the information on a consolidated basis for the periods indicated. The parent referenced in the condensed financial statements is BakerCorp International, Inc., the issuer.

We conduct substantially all of our business through our subsidiaries. To make the required payments on our Notes and other indebtedness, and to satisfy our other liquidity requirements, we will rely, in large part, on cash flows from these subsidiaries, mainly in the form of dividends, royalties, and advances, or the payment of intercompany loan arrangements. The ability of these subsidiaries to make dividend payments to us will be affected by, among other factors, the obligations of these entities to their creditors, requirements of corporate and other law, and restrictions contained in agreements entered into by or relating to these entities.

The parent and the guarantor subsidiaries have each reflected investments in their respective subsidiaries under the equity method of accounting. There are no restrictions limiting the transfer of cash from guarantor subsidiaries and non-guarantor subsidiaries to the parent.    


21

Immaterial Error Corrections
During the fourth quarter of fiscal year 2015, we identified errors related to our previously reported condensed consolidating cash flows presented in our notes to the consolidated financial statements. In accordance with Accounting Standards Codification Topic No. 250, “Accounting Changes and Error Corrections” (“ASC No. 250”), we evaluated the materiality of the errors from quantitative and qualitative perspectives and concluded that the errors were not material to any of our prior period financial statements. In accordance with ASC No. 250, we adjusted for these errors by revising our condensed consolidating statements of cash flows for the six months ended July 31, 2014. There was no effect on the consolidated financial statements other than the notes to the consolidated financial statements as disclosed below. The effect of the immaterial error corrections on the condensed consolidating statements of cash flows for the six months ended July 31, 2014 is summarized below.
(in thousands)
Parent
 
Guarantors
 
Non-
Guarantor
Subsidiaries
 
Eliminations
 
Total
For the Six Months Ended July 31, 2014
 
 
 
 
 
 
 
 
 
Net cash flows provided by (used in) operating activities as previously reported
$
13,132

 
$
34,177

 
$
330

 
$
(37,536
)
 
$
10,103

Adjustments:
 
 
 
 
 
 
 
 
 
Equity in net earnings of subsidiaries, net of taxes
(32,916
)
 
(4,620
)
 
—

 
37,536

 
—

Net cash flows (used in) provided by operating activities as adjusted
(19,784
)
 
29,557

 
330

 
—

 
10,103

Net cash flows used in investing activities as previously and currently reported (no change)
—

 
(14,119
)
 
(4,535
)
 
—

 
(18,654
)
Net cash flows (used in) provided by financing activities as previously reported
(13,132
)
 
(31,959
)
 
4,122

 
37,849

 
(3,120
)
Adjustments:
 
 
 
 
 
 
 
 
 
Intercompany investments and loans
32,916

 
4,620

 
—

 
(37,536
)
 
—

Net cash flows provided by (used in) financing activities as adjusted
19,784

 
(27,339
)
 
4,122

 
313

 
(3,120
)
Effect of foreign currency translation on cash as previously and currently reported (no change)
—

 
—

 
(245
)
 
(313
)
 
(558
)
Net change in cash and cash equivalents as previously and currently reported (no change)
$
—

 
$
(11,901
)
 
$
(328
)
 
$
—

 
$
(12,229
)



22


Condensed Consolidating Balance Sheet
July 31, 2015 (unaudited)
(In thousands)
 
 
Parent
 
Guarantors
 
Non-
Guarantor
Subsidiaries
 
Eliminations
 
Total
Assets
 
 
 
 
 
 
 
 
 
Current assets
 
 
 
 
 
 
 
 
 
Cash and cash equivalents
$
—

 
$
15,326

 
$
8,574

 
$
—

 
$
23,900

Accounts receivable, net
—

 
58,488

 
11,157

 
—

 
69,645

Inventories, net
—

 
9,479

 
73

 
—

 
9,552

Prepaid expenses and other current assets
285

 
3,568

 
1,491

 
—

 
5,344

Deferred tax assets
—

 
5,776

 
—

 
—

 
5,776

Total current assets
285

 
92,637

 
21,295

 
—

 
114,217

Property and equipment, net
—

 
295,839

 
58,657

 
—

 
354,496

Goodwill
—

 
257,052

 
51,176

 
—

 
308,228

Other intangible assets, net
—

 
398,353

 
23,019

 
—

 
421,372

Deferred tax assets
33,458

 
51,668

 
172

 
(85,298
)
 
—

Deferred financing costs, net
527

 
—

 
—

 
—

 
527

Other long-term assets
—

 
411

 
141

 
—

 
552

Investment in subsidiaries
574,695

 
109,811

 
—

 
(684,506
)
 
—

Total assets
$
608,965

 
$
1,205,771

 
$
154,460

 
$
(769,804
)
 
$
1,199,392

Liabilities and shareholder’s equity
 
 
 
 
 
 
 
 
 
Current liabilities:
 
 
 
 
 
 
 
 
 
Accounts payable
$
15

 
$
16,015

 
$
1,212

 
$
—

 
$
17,242

Accrued expenses
3,299

 
14,477

 
2,098

 
—

 
19,874

Current portion of long-term debt, net
1,543

 
—

 
—

 
—

 
1,543

Intercompany balances
(370,715
)
 
337,839

 
32,876

 
—

 
—

Total current liabilities
(365,858
)
 
368,331

 
36,186

 
—

 
38,659

Long-term debt, net of current portion
637,145

 
—

 
—

 
—

 
637,145

Deferred tax liabilities
1,955

 
258,310

 
8,412

 
(85,298
)
 
183,379

Fair value of interest rate swap liabilities
1,879

 
—

 
—

 
—

 
1,879

Share-based compensation liability
—

 
2,395

 
—

 
—

 
2,395

Other long-term liabilities
—

 
2,040

 
51

 
—

 
2,091

Total liabilities
275,121

 
631,076

 
44,649

 
(85,298
)
 
865,548

Total shareholder’s equity
333,844

 
574,695

 
109,811

 
(684,506
)
 
333,844

Total liabilities and shareholder’s equity
$
608,965

 
$
1,205,771

 
$
154,460

 
$
(769,804
)
 
$
1,199,392


23


Condensed Consolidating Balance Sheet
January 31, 2015
(In thousands)
 
 
Parent
 
Guarantors
 
Non-
Guarantor
Subsidiaries
 
Eliminations
 
Total
Assets
 
 
 
 
 
 
 
 
 
Current assets
 
 
 
 
 
 
 
 
 
Cash and cash equivalents
$
—

 
$
14,407

 
$
4,258

 
$
—

 
$
18,665

Accounts receivable, net
—

 
61,640

 
9,118

 
—

 
70,758

Inventories, net
—

 
7,333

 
4

 
—

 
7,337

Prepaid expenses and other current assets
227

 
2,313

 
3,365

 
—

 
5,905

Deferred tax assets
—

 
5,776

 
—

 
—

 
5,776

Total current assets
227

 
91,469

 
16,745

 
—

 
108,441

Property and equipment, net
—

 
307,655

 
60,644

 
—

 
368,299

Goodwill
—

 
257,052

 
52,662

 
—

 
309,714

Other intangible assets, net
—

 
406,160

 
24,063

 
—

 
430,223

Deferred tax assets
31,762

 
50,198

 
176

 
(82,136
)
 
—

Deferred financing costs, net
635

 
—

 
—

 
—

 
635

Other long-term assets
—

 
396

 
145

 
—

 
541

Investment in subsidiaries
576,966

 
110,967

 
—

 
(687,933
)
 
—

Total assets
$
609,590

 
$
1,223,897

 
$
154,435

 
$
(770,069
)
 
$
1,217,853

Liabilities and shareholder’s equity
 
 
 
 
 
 
 
 
 
Current liabilities:
 
 
 
 
 
 
 
 
 
Accounts payable
$
56

 
$
19,887

 
$
1,246

 
$
—

 
$
21,189

Accrued expenses
3,359

 
14,483

 
2,547

 
—

 
20,389

Current portion of long-term debt, net
1,618

 
—

 
—

 
—

 
1,618

Intercompany balances
(380,274
)
 
349,296

 
30,978

 
—

 
—

Total current liabilities
(375,241
)
 
383,666

 
34,771

 
—

 
43,196

Long-term debt, net of current portion
637,903

 
—

 
—

 
—

 
637,903

Deferred tax liabilities
1,955

 
258,309

 
8,652

 
(82,136
)
 
186,780

Fair value of interest rate swap liabilities
2,725

 
—

 
—

 
—

 
2,725

Share-based compensation liability
—

 
2,836

 
—

 
—

 
2,836

Other long-term liabilities
—

 
2,120

 
45

 
—

 
2,165

Total liabilities
267,342

 
646,931

 
43,468

 
(82,136
)
 
875,605

Total shareholder’s equity
342,248

 
576,966

 
110,967

 
(687,933
)
 
342,248

Total liabilities and shareholder’s equity
$
609,590

 
$
1,223,897

 
$
154,435

 
$
(770,069
)
 
$
1,217,853


24


Condensed Consolidating Statement of Operations
For the Three Months Ended July 31, 2015 (unaudited)
(In thousands)
 
 
Parent
 
Guarantors
 
Non-
Guarantor
Subsidiaries
 
Eliminations
 
Total
Revenue
$
—

 
$
67,975

 
$
10,232

 
$
—

 
$
78,207

Operating expenses:
 
 
 
 
 
 
 
 
 
Employee related expenses
35

 
23,313

 
2,854

 
—

 
26,202

Rental expense
—

 
9,303

 
984

 
—

 
10,287

Repair and maintenance
—

 
2,706

 
161

 
—

 
2,867

Cost of goods sold
—

 
2,649

 
95

 
—

 
2,744

Facility expense
8

 
6,078

 
761

 
—

 
6,847

Professional fees
9

 
792

 
20

 
—

 
821

Management fees
—

 
132

 
—

 
—

 
132

Other operating expenses
154

 
1,158

 
2,428

 
—

 
3,740

Depreciation and amortization
—

 
14,950

 
1,449

 
—

 
16,399

Gain on sale of equipment
—

 
(582
)
 
(60
)
 
—

 
(642
)
Impairment of long-lived assets
—

 
—

 
—

 
—

 
—

Total operating expenses
206

 
60,499

 
8,692

 
—

 
69,397

(Loss) income from operations
(206
)
 
7,476

 
1,540

 
—

 
8,810

Other expenses:
 
 
 
 
 
 
 
 


Interest expense, net
10,638

 
5

 
—

 
—

 
10,643

Foreign currency exchange loss (gain)
—

 
424

 
(48
)
 
—

 
376

Total other expenses, net
10,638

 
429

 
(48
)
 
—

 
11,019

(Loss) income before income tax (benefit) expense
(10,844
)
 
7,047

 
1,588

 
—

 
(2,209
)
Income tax (benefit) expense
(1,036
)
 
(168
)
 
373

 
—

 
(831
)
(Loss) income before equity in net earnings of subsidiaries
(9,808
)
 
7,215

 
1,215

 
—

 
(1,378
)
Equity in net earnings of subsidiaries
8,430

 
1,215

 
—

 
(9,645
)
 
—

Net (loss) income
$
(1,378
)
 
$
8,430

 
$
1,215

 
$
(9,645
)
 
$
(1,378
)

25


Condensed Consolidating Statement of Operations
For the Three Months Ended July 31, 2014 (unaudited)
(In thousands)
 
 
Parent
 
Guarantors
 
Non-
Guarantor
Subsidiaries
 
Eliminations
 
Total
Revenue
$
—

 
$
71,466

 
$
11,480

 
$
—

 
$
82,946

Operating expenses:
 
 
 
 
 
 
 
 
 
Employee related expenses
41

 
24,954

 
2,998

 
—

 
27,993

Rental expense
—

 
8,587

 
1,086

 
—

 
9,673

Repair and maintenance
—

 
3,385

 
260

 
—

 
3,645

Cost of goods sold
—

 
3,865

 
40

 
—

 
3,905

Facility expense
6

 
6,042

 
846

 
—

 
6,894

Professional fees
16

 
961

 
28

 
—

 
1,005

Management fees
—

 
154

 
—

 
—

 
154

Other operating expenses
145

 
2,197

 
2,503

 
—

 
4,845

Depreciation and amortization
—

 
14,301

 
1,609

 
—

 
15,910

Gain on sale of equipment
—

 
(639
)
 
(47
)
 
—

 
(686
)
Impairment of long-lived assets
—

 
—

 
—

 
—

 
—

Total operating expenses
208

 
63,807

 
9,323

 
—

 
73,338

(Loss) income from operations
(208
)
 
7,659

 
2,157

 
—

 
9,608

Other expenses:
 
 
 
 
 
 
 
 
 
Interest expense (income), net
10,644

 
45

 
(3
)
 
—

 
10,686

Foreign currency exchange gain, net
—

 
(50
)
 
(197
)
 
—

 
(247
)
Other expense, net
—

 
91

 
—

 
—

 
91

Total other expenses, net
10,644

 
86

 
(200
)
 
—

 
10,530

(Loss) income before income tax (benefit) expense
(10,852
)
 
7,573

 
2,357

 
—

 
(922
)
Income tax (benefit) expense
(990
)
 
(1,548
)
 
432

 
—

 
(2,106
)
(Loss) income before equity in net earnings of subsidiaries
(9,862
)
 
9,121

 
1,925

 
—

 
1,184

Equity in net earnings of subsidiaries
11,046

 
1,925

 
—

 
(12,971
)
 
—

Net income
$
1,184

 
$
11,046

 
$
1,925

 
$
(12,971
)
 
$
1,184



26



Condensed Consolidating Statement of Operations
For the Six Months Ended July 31, 2015 (unaudited)
(In thousands)
 
 
Parent
 
Guarantors
 
Non-
Guarantor
Subsidiaries
 
Eliminations
 
Total
Revenue
$
—

 
$
137,685

 
$
19,291

 
$
—

 
$
156,976

Operating expenses:
 
 
 
 
 
 
 
 
 
Employee related expenses
71

 
51,505

 
5,890

 
—

 
57,466

Rental expense
—

 
18,859

 
1,888

 
—

 
20,747

Repair and maintenance
—

 
5,459

 
362

 
—

 
5,821

Cost of goods sold
—

 
5,561

 
168

 
—

 
5,729

Facility expense
15

 
12,798

 
1,462

 
—

 
14,275

Professional fees
18

 
1,576

 
101

 
—

 
1,695

Management fees
—

 
272

 
—

 
—

 
272

Other operating expenses
289

 
3,630

 
4,019

 
—

 
7,938

Depreciation and amortization
—

 
29,840

 
2,878

 
—

 
32,718

Gain on sale of equipment
—

 
(1,088
)
 
(75
)
 
—

 
(1,163
)
Impairment of long-lived assets
—

 
319

 
—

 
—

 
319

Total operating expenses
393

 
128,731

 
16,693

 
—

 
145,817

(Loss) income from operations
(393
)
 
8,954

 
2,598

 
—

 
11,159

Other expenses:
 
 
 
 
 
 
 
 


Interest expense, net
21,103

 
11

 
—

 
—

 
21,114

Foreign currency exchange loss (gain)
—

 
138

 
(422
)
 
—

 
(284
)
Total other expenses, net
21,103

 
149

 
(422
)
 
—

 
20,830

(Loss) income before income tax (benefit) expense
(21,496
)
 
8,805

 
3,020

 
—

 
(9,671
)
Income tax (benefit) expense
(2,025
)
 
(2,141
)
 
497

 
—

 
(3,669
)
(Loss) income before equity in net earnings of subsidiaries
(19,471
)
 
10,946

 
2,523

 
—

 
(6,002
)
Equity in net earnings of subsidiaries
13,469

 
2,523

 
—

 
(15,992
)
 
—

Net (loss) income
$
(6,002
)
 
$
13,469

 
$
2,523

 
$
(15,992
)
 
$
(6,002
)

27


Condensed Consolidating Statement of Operations
For the Six Months Ended July 31, 2014 (unaudited)
(In thousands)
 
 
Parent
 
Guarantors
 
Non-
Guarantor
Subsidiaries
 
Eliminations
 
Total
Revenue
$
—

 
$
141,862

 
$
20,453

 
$
—

 
$
162,315

Operating expenses:
 
 
 
 
 
 
 
 
 
Employee related expenses
84

 
48,587

 
5,992

 
—

 
54,663

Rental expense
—

 
19,010

 
1,897

 
—

 
20,907

Repair and maintenance
—

 
6,770

 
525

 
—

 
7,295

Cost of goods sold
—

 
7,461

 
47

 
—

 
7,508

Facility expense
11

 
11,788

 
1,695

 
—

 
13,494

Professional fees
60

 
2,451

 
97

 
—

 
2,608

Management fees
—

 
303

 
—

 
—

 
303

Other operating expenses
323

 
4,872

 
3,972

 
—

 
9,167

Depreciation and amortization
—

 
29,984

 
3,125

 
—

 
33,109

Gain on sale of equipment
—

 
(1,297
)
 
212

 
—

 
(1,085
)
Impairment of long-lived assets
—

 
789

 
484

 
—

 
1,273

Total operating expenses
478

 
130,718

 
18,046

 
—

 
149,242

(Loss) income from operations
(478
)
 
11,144

 
2,407

 
—

 
13,073

Other expenses:
 
 
 
 
 
 
 
 
 
Interest expense (income), net
21,112

 
103

 
(5
)
 
—

 
21,210

Foreign currency exchange gain, net
—

 
(238
)
 
(250
)
 
—

 
(488
)
Other expense, net
—

 
91

 
—

 
—

 
91

Total other expenses, net
21,112

 
(44
)
 
(255
)
 
—

 
20,813

(Loss) income before income tax benefit
(21,590
)
 
11,188

 
2,662

 
—

 
(7,740
)
Income tax (benefit) expense
(1,957
)
 
(2,960
)
 
352

 
—

 
(4,565
)
(Loss) income before equity in net earnings of subsidiaries
(19,633
)
 
14,148

 
2,310

 
—

 
(3,175
)
Equity in net earnings of subsidiaries
16,458

 
2,310

 
—

 
(18,768
)
 
—

Net (loss) income
$
(3,175
)
 
$
16,458

 
$
2,310

 
$
(18,768
)
 
$
(3,175
)


28


Condensed Consolidating Statement of Comprehensive (Loss) Income
For the Three Months Ended July 31, 2015 (unaudited)
(In thousands)
 
 
Parent
 
Guarantors
 
Non-
Guarantor
Subsidiaries
 
Eliminations
 
Total
Net (loss) income
$
(1,378
)
 
$
8,430

 
$
1,215

 
$
(9,645
)
 
$
(1,378
)
Other comprehensive income (loss), net of tax:
 
 
 
 
 
 
 
 
 
Unrealized gain on interest rate swap agreements, net of tax expense of $172
268

 
—

 
—

 
—

 
268

Change in foreign currency translation adjustments
—

 
—

 
(3,538
)
 
—

 
(3,538
)
Other comprehensive income (loss)
268

 
—

 
(3,538
)
 
—

 
(3,270
)
Total comprehensive (loss) income
$
(1,110
)
 
$
8,430

 
$
(2,323
)
 
$
(9,645
)
 
$
(4,648
)

29


Condensed Consolidating Statement of Comprehensive (Loss) Income
For the Three Months Ended July 31, 2014 (unaudited)
(In thousands)
 
 
Parent
 
Guarantors
 
Non-
Guarantor
Subsidiaries
 
Eliminations
 
Total
Net income
$
1,184

 
$
11,046

 
$
1,925

 
$
(12,971
)
 
$
1,184

Other comprehensive income (loss), net of tax:
 
 
 
 
 
 
 
 
 
Unrealized gain on interest rate swap agreements, net of tax expense of $135
217

 
—

 
—

 
—

 
217

Change in foreign currency translation adjustments
—

 
—

 
(4,594
)
 
—

 
(4,594
)
Other comprehensive income (loss)
217

 
—

 
(4,594
)
 
—

 
(4,377
)
Total comprehensive income (loss)
$
1,401

 
$
11,046

 
$
(2,669
)
 
$
(12,971
)
 
$
(3,193
)



30

Condensed Consolidating Statement of Comprehensive (Loss) Income
For the Six Months Ended July 31, 2015 (unaudited)
(In thousands)
 
 
Parent
 
Guarantors
 
Non-
Guarantor
Subsidiaries
 
Eliminations
 
Total
Net (loss) income
$
(6,002
)
 
$
13,469

 
$
2,523

 
$
(15,992
)
 
$
(6,002
)
Other comprehensive income (loss), net of tax:
 
 
 
 
 
 
 
 
 
Unrealized gain on interest rate swap agreements, net of tax expense of $328
518

 
—

 
—

 
—

 
518

Change in foreign currency translation adjustments
—

 
—

 
(3,767
)
 
—

 
(3,767
)
Other comprehensive income (loss)
518

 
—

 
(3,767
)
 
—

 
(3,249
)
Total comprehensive (loss) income
$
(5,484
)
 
$
13,469

 
$
(1,244
)
 
$
(15,992
)
 
$
(9,251
)

31


Condensed Consolidating Statement of Comprehensive (Loss) Income
For the Six Months Ended July 31, 2014 (unaudited)
(In thousands)
 
 
Parent
 
Guarantors
 
Non-
Guarantor
Subsidiaries
 
Eliminations
 
Total
Net (loss) income
$
(3,175
)
 
$
16,458

 
$
2,310

 
$
(18,768
)
 
$
(3,175
)
Other comprehensive income (loss), net of tax:
 
 
 
 
 
 
 
 
 
Unrealized gain on interest rate swap agreements, net of tax expense of $289
490

 
—

 
—

 
—

 
490

Change in foreign currency translation adjustments
—

 
—

 
(1,285
)
 
—

 
(1,285
)
Other comprehensive income (loss)
490

 
—

 
(1,285
)
 
—

 
(795
)
Total comprehensive (loss) income
$
(2,685
)
 
$
16,458

 
$
1,025

 
$
(18,768
)
 
$
(3,970
)


32


Condensed Consolidating Statement of Cash Flows
For the Six Months Ended July 31, 2015 (unaudited)
(In thousands)
 
Parent
 
Guarantors
 
Non-
Guarantor
Subsidiaries
 
Eliminations
 
Total
Operating activities
 
 
 
 
 
 
 
 
 
Net (loss) income
$
(6,002
)
 
$
13,469

 
$
2,523

 
$
(15,992
)
 
$
(6,002
)
Adjustments to reconcile net (loss) income to net cash (used in) provided by operating activities:
 
 
 
 
 
 
 
 
 
Provision for doubtful accounts
—

 
570

 
12

 
—

 
582

Provision for excess and obsolete inventory
—

 
7

 
—

 
—

 
7

Share-based compensation expense
71

 
446

 
—

 
—

 
517

Gain on sale of equipment
—

 
(1,088
)
 
(75
)
 
—

 
(1,163
)
Depreciation and amortization
—

 
29,840

 
2,878

 
—

 
32,718

Amortization of deferred financing costs
1,352

 
—

 
—

 
—

 
1,352

Deferred income taxes
(2,024
)
 
(1,470
)
 
—

 
—

 
(3,494
)
Amortization of above market lease
—

 
(237
)
 
—

 
—

 
(237
)
Impairment of long-lived assets
—

 
319

 
—

 
—

 
319

Equity in net earnings of subsidiaries, net of taxes
(13,469
)
 
(2,523
)
 
—

 
15,992

 
—

Changes in assets and liabilities:
 
 
 
 
 
 
 
 

Accounts receivable
—

 
2,582

 
(2,245
)
 
—

 
337

Inventories
—

 
(2,153
)
 
(73
)
 
—

 
(2,226
)
Prepaid expenses and other assets
(55
)
 
(1,271
)
 
1,809

 
—

 
483

Accounts payable and other liabilities
(99
)
 
(3,782
)
 
(413
)
 
—

 
(4,294
)
Net cash (used in) provided by operating activities
(20,226
)
 
34,709

 
4,416

 
—

 
18,899

Investing activities
 
 
 
 
 
 
 
 
 
Purchases of property and equipment
—

 
(11,498
)
 
(1,446
)
 
—

 
(12,944
)
Proceeds from sale of equipment
—

 
1,663

 
160

 
—

 
1,823

Net cash used in investing activities
—

 
(9,835
)
 
(1,286
)
 
—

 
(11,121
)
Financing activities
 
 
 
 
 
 
 
 
 
Intercompany investments and loans
22,358

 
(23,955
)
 
843

 
754

 
—

Repayments of long-term debt
(2,081
)
 
—

 
—

 
—

 
(2,081
)
Return of capital to BakerCorp International Holdings, Inc.
(51
)
 
—

 
—

 
—

 
(51
)
Net cash provided by (used in) financing activities
20,226

 
(23,955
)
 
843

 
754

 
(2,132
)
Effect of foreign currency translation on cash
—

 
—

 
343

 
(754
)
 
(411
)
Net increase in cash and cash equivalents
—

 
919

 
4,316

 
—

 
5,235

Cash and cash equivalents, beginning of period
—

 
14,407

 
4,258

 
—

 
18,665

Cash and cash equivalents, end of period
$
—

 
$
15,326

 
$
8,574

 
$
—

 
$
23,900


33


Condensed Consolidating Statement of Cash Flows
For the Six Months Ended July 31, 2014 (unaudited)
(In thousands)
 
 
Parent (1)
 
Guarantors (1)
 
Non-
Guarantor
Subsidiaries
 
Eliminations (1)
 
Total
Operating activities
 
 
 
 
 
 
 
 
 
Net (loss) income
$
(3,175
)
 
$
16,458

 
$
2,310

 
$
(18,768
)
 
$
(3,175
)
Adjustments to reconcile net (loss) income to net cash (used in) provided by operating activities:
 
 
 
 
 
 
 
 
 
Provision for (recovery of) doubtful accounts
—

 
264

 
(171
)
 
—

 
93

Provision for excess and obsolete inventory
—

 
19

 
—

 
—

 
19

Share-based compensation expense
84

 
554

 
—

 
—

 
638

Loss on sale of subsidiary
—

 
99

 
—

 
—

 
99

(Gain) loss on sale of equipment
—

 
(1,297
)
 
212

 
—

 
(1,085
)
Depreciation and amortization
—

 
29,984

 
3,125

 
—

 
33,109

Amortization of deferred financing costs
1,281

 
—

 
—

 
—

 
1,281

Deferred income taxes
(1,958
)
 
(1,603
)
 
(161
)
 
—

 
(3,722
)
Amortization of above market lease
—

 
(346
)
 
—

 
—

 
(346
)
Impairment of long-lived assets
—

 
789

 
484

 
—

 
1,273

Equity in net earnings of subsidiaries, net of taxes
(16,458
)
 
(2,310
)
 
—

 
18,768

 
—

Changes in assets and liabilities:
 
 
 
 
 
 
 
 

Accounts receivable
—

 
(3,641
)
 
(1,328
)
 
—

 
(4,969
)
Inventories
—

 
(1,814
)
 
(11
)
 
 
 
(1,825
)
Prepaid expenses and other current assets
(34
)
 
(628
)
 
(10
)
 
—

 
(672
)
Accounts payable and other liabilities
476

 
(6,971
)
 
(4,120
)
 
—

 
(10,615
)
Net cash (used in) provided by operating activities
(19,784
)
 
29,557

 
330

 
—

 
10,103

Investing activities
 
 
 
 
 
 
 
 
 
Purchases of property and equipment
—

 
(15,639
)
 
(4,646
)
 
—

 
(20,285
)
Proceeds from sale of equipment
—

 
1,420

 
111

 
—

 
1,531

Proceeds from sale of subsidiary
—

 
100

 
—

 
—

 
100

Net cash used in investing activities
—

 
(14,119
)
 
(4,535
)
 
—

 
(18,654
)
Financing activities
 
 
 
 
 
 
 
 
 
Intercompany investments and loans
22,904

 
(27,339
)
 
4,122

 
313

 
—

Repayment of long-term debt
(2,081
)
 
—

 
—

 
—

 
(2,081
)
Return of capital to BakerCorp International Holdings, Inc.
(1,039
)
 
—

 
—

 
—

 
(1,039
)
Net cash provided by (used in) financing activities
19,784

 
(27,339
)
 
4,122

 
313

 
(3,120
)
Effect of foreign currency translation on cash
—

 
—

 
(245
)
 
(313
)
 
(558
)
Net decrease in cash and cash equivalents
—

 
(11,901
)
 
(328
)
 
—

 
(12,229
)
Cash and cash equivalents, beginning of period
—

 
20,930

 
4,606

 
—

 
25,536

Cash and cash equivalents, end of period
$
—

 
$
9,029

 
$
4,278

 
$
—

 
$
13,307

(1)
Amounts have been adjusted to reflect the effect of immaterial error corrections.

34

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

The following discussion and analysis includes historical and forward-looking information that should be read in conjunction with the accompanying consolidated condensed financial statements included in this quarterly report and our consolidated financial statements included in the Annual Report on Form 10-K for the fiscal year ended January 31, 2015. The following tables show our selected consolidated historical financial data for the stated periods. The financial information presented may not be indicative of our future performance. The following discussion and analysis provides information we believe is relevant to assess and understand our consolidated results of operations and financial condition. The discussion includes the following:
 
•
Overview;
•
Results of Operations;
•
Liquidity and Capital Resources; and
•
Critical Accounting Policies, Estimates, and Judgments.

Overview

Business
We are a provider of liquid and solid containment solutions operating within the specialty sector of the broader industrial services industry. We provide equipment rental, service and sales to our customers through a solution-oriented approach often involving multiple products. We provide our containment solutions within the United States through a national network with the capability to serve customers in all 50 states as well as a growing number of international locations in Europe and Canada. We maintain one of the largest and most diverse liquid and solid containment rental fleets in the industry consisting of more than 24,500 units, including steel tanks, polyethylene tanks, modular tanks, roll-off boxes, pumps, pipes, hoses and fittings, filtration units, tank trailers, berms, and trench shoring equipment.

We serve customers in over 15 industries, including oil and gas, industrial and environmental services, environmental remediation, construction, chemicals, transportation, power, and municipal works. During the six months ended July 31, 2015, no single customer accounted for more than 10% of our total revenue.

Revenue growth is generated primarily by increasing the efficiency, scope and scale of our rental fleet and related services to meet demand. Our key business objectives are the following:
•
Increase the utilization of our equipment, which we measure using the ratio of the number of days that our rental fleet is on rent to the total number of days in the period. Utilization reflects the demand for our products in relation to the level of equipment available to service our customers’ needs.
•
Increase the size and scope of our rental fleet. Although our equipment has relatively long useful lives, we need to invest in equipment to replace units that have been retired and purchase additional equipment to address increasing demand of our products and services.
•
Improve the average daily rental rate that we earn from our products and services by acting as a solution provider with customers.
•
Provide additional ancillary services related to our rental activity to differentiate our offerings.
•
Increase our market share in the markets we currently serve by expanding our customer base, improving our share with current customers, and expanding our existing product lines across our branch network.
•
Evaluate additional product lines and service offerings that complement and enhance our current capabilities.
•
Expand our market presence domestically and into new markets internationally. We will seek to expand our market presence which may require an upfront investment in equipment, facilities, and new staff. These investments may initially impact our near-term profitability, utilization, and other financial metrics.
•
Acquire organizations that possess products and services that will complement those of our Company and accelerate our entry into new markets, reach new customers, and enhance our product and service capabilities.
•
Evaluate the branch and product line structure and profitability to determine whether customers at certain locations may be served in a more profitable manner.


35

Geographic Operating Performance

Our branches and employees by reportable segment on July 31, 2015 and July 31, 2014 were the following:
 
July 31,
2015
 
July 31,
2014
 
Change
Branches:
 
 
 
 
 
Number of branches-North American Segment (1)
52

 
67

 
(15
)
Number of branches-European Segment
12

 
11

 
1

Total branches
64

 
78

 
(14
)
Employees:
 
 
 
 
 
Number of employees-North American Segment
883

 
908

 
(25
)
Number of employees-European Segment
113

 
92

 
21

Total employees
996

 
1,000

 
(4
)
(1) 
Of the total decrease of 15 branches in the North American Segment from 67 as of July 31, 2014 to 52 as of July 31, 2015, 12 branches were consolidated into other branches for reporting purposes and 3 branches were closed.

Our operations are managed from our corporate headquarters, which is located in Plano, Texas. The majority of our operations, resources, property, and equipment are located in North America, and predominantly in the United States. The United States and Canada comprise our North American segment. We had four branches in Canada on July 31, 2015. Our equipment has the capability to be utilized for multiple applications within North America. We incentivize our local managers to maximize return on assets under their control and have provided systems to enable equipment and resource sharing. As a result, equipment in the U.S. and Canada is readily moved and shared by the local branch managers. The process of equipment and resource sharing within our reportable segments enables us to maximize our efficiency and respond to shifts in customer demand. On July 31, 2015, we had $308.0 million of net property and equipment located in North America.

We serve customers in our European segment from branches located in the Netherlands, Germany, France, the United Kingdom and Poland. Our European operations are headquartered in the Netherlands. Our equipment is transferred between European countries to serve customers as demand dictates. On July 31, 2015, we had $46.5 million of net property and equipment located in Europe.

Rental Revenue Metrics
We evaluate rental revenue, the largest portion of our revenue, utilizing the following metrics:
•
Rental Activity – The change in rental activity is measured by the impact of several items, including the utilization of rental equipment that we individually track, volume of rental revenue on bulk items not individually tracked (which includes primarily pipes, hoses, fittings, and shoring), and volume of re-rent revenue, resulting from the rental of equipment which we do not own.
•
Pricing – The impact of changes in pricing is measured by the increase or decline in the average daily rental rates on rental equipment that we specifically track.
•
Available Rental Fleet – The available rental fleet, as we define it, is the average number of equipment items within our fleet that we individually track.

Seasonality
Demand from our customers has historically been higher during the second half of our fiscal year compared to the first half of the year. The peak demand period for our products and services typically occurs during the months of August through November. This peak demand period is driven by certain customers that need to complete maintenance work and other specific projects before the onset of colder weather. Because much of our revenue is derived from storing or moving liquids, the impact of weather may hinder the ability of our customers to fully utilize our equipment. This is particularly the case for customers with project locations in regions that are subject to freezing temperatures during winter.


36

Consolidated Condensed Statements of Operations (unaudited)

The following table presents our results for the three and six months ended July 31, 2015 and July 31, 2014:
 
 
Three Months Ended
 
 
Six Months Ended
 
July 31, 2015
 
July 31, 2014
 
 
July 31, 2015
 
July 31, 2014
(In thousands, except percentages)
Amount
 
% of
Revenue
 
Amount
 
% of
Revenue
 
 
Amount
 
% of
Revenue
 
Amount
 
% of
Revenue
Revenue:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Rental revenue
$
62,524

 
79.9
 %
 
$
66,143

 
79.7
 %
 
 
$
124,377

 
79.2
 %
 
$
129,145

 
79.6
 %
Sales revenue
4,518

 
5.8
 %
 
5,653

 
6.8
 %
 
 
9,461

 
6.0
 %
 
11,813

 
7.3
 %
Service revenue
11,165

 
14.3
 %
 
11,150

 
13.5
 %
 
 
23,138

 
14.8
 %
 
21,357

 
13.1
 %
Total revenue
78,207

 
100.0
 %
 
82,946

 
100.0
 %
 
 
156,976

 
100.0
 %
 
162,315

 
100.0
 %
Operating expenses:
 
 
 
 
 
 
 
 
 
 
 


 
 
 

Employee related expenses
26,202

 
33.5
 %
 
27,993

 
33.7
 %
 
 
57,466

 
36.6
 %
 
54,663

 
33.7
 %
Rental expenses
10,287

 
13.2
 %
 
9,673

 
11.7
 %
 
 
20,747

 
13.2
 %
 
20,907

 
12.9
 %
Repair and maintenance
2,867

 
3.7
 %
 
3,645

 
4.4
 %
 
 
5,821

 
3.7
 %
 
7,295

 
4.5
 %
Cost of goods sold
2,744

 
3.5
 %
 
3,905

 
4.7
 %
 
 
5,729

 
3.6
 %
 
7,508

 
4.6
 %
Facility expenses
6,847

 
8.8
 %
 
6,894

 
8.3
 %
 
 
14,275

 
9.1
 %
 
13,494

 
8.3
 %
Professional fees
821

 
1.0
 %
 
1,005

 
1.2
 %
 
 
1,695

 
1.1
 %
 
2,608

 
1.6
 %
Management fees
132

 
0.1
 %
 
154

 
0.2
 %
 
 
272

 
0.2
 %
 
303

 
0.2
 %
Other operating expenses
3,740

 
4.8
 %
 
4,845

 
5.8
 %
 
 
7,938

 
5.1
 %
 
9,167

 
5.6
 %
Depreciation and amortization
16,399

 
21.0
 %
 
15,910

 
19.2
 %
 
 
32,718

 
20.8
 %
 
33,109

 
20.4
 %
Gain on sale of equipment
(642
)
 
(0.8
)%
 
(686
)
 
(0.8
)%
 
 
(1,163
)
 
(0.7
)%
 
(1,085
)
 
(0.7
)%
Impairment of long-lived assets
—

 
—
 %
 
—

 
—
 %
 
 
319

 
0.2
 %
 
1,273

 
0.8
 %
Total operating expenses
69,397

 
88.8
 %
 
73,338

 
88.4
 %
 
 
145,817

 
92.9
 %
 
149,242

 
91.9
 %
Income from operations
8,810

 
11.2
 %
 
9,608

 
11.6
 %
 
 
11,159

 
7.1
 %
 
13,073

 
8.1
 %
Other expense:
 
 
 
 
 
 
 
 
 
 
 


 
 
 

Interest expense, net
10,643

 
13.6
 %
 
10,686

 
12.9
 %
 
 
21,114

 
13.4
 %
 
21,210

 
13.1
 %
Foreign currency exchange loss (gain)
376

 
0.5
 %
 
(247
)
 
(0.3
)%
 
 
(284
)
 
(0.2
)%
 
(488
)
 
(0.2
)%
Other expense, net
—

 
—
 %
 
91

 
0.1
 %
 
 
—

 
—
 %
 
91

 
—
 %
Total other expenses, net
11,019

 
14.1
 %
 
10,530

 
12.7
 %
 
 
20,830

 
13.2
 %
 
20,813

 
12.9
 %
Loss before income taxes
(2,209
)
 
(2.9
)%
 
(922
)
 
(1.1
)%
 
 
(9,671
)
 
(6.1
)%
 
(7,740
)
 
(4.8
)%
Income tax benefit
(831
)
 
(1.1
)%
 
(2,106
)
 
(2.5
)%
 
 
(3,669
)
 
(2.3
)%
 
(4,565
)
 
(2.8
)%
Net (loss) income
$
(1,378
)
 
(1.8
)%
 
$
1,184

 
1.4
 %
 
 
$
(6,002
)
 
(3.8
)%
 
$
(3,175
)
 
(2.0
)%


37

Non-U.S. GAAP Financial Measures

The following is a reconciliation of our net loss to EBITDA and Adjusted EBITDA for the three and six months ended July 31, 2015 and July 31, 2014:
 
 
Three Months Ended
 
Six Months Ended
(In thousands)
July 31, 2015
 
July 31, 2014
 
July 31, 2015
 
July 31, 2014
Net (loss) income
$
(1,378
)
 
$
1,184

 
$
(6,002
)
 
$
(3,175
)
Interest expense, net
10,643

 
10,686

 
21,114

 
21,210

Income tax benefit
(831
)
 
(2,106
)
 
(3,669
)
 
(4,565
)
Depreciation and amortization
16,399

 
15,910

 
32,718

 
33,109

EBITDA
$
24,833

 
$
25,674

 
$
44,161

 
$
46,579

Foreign currency exchange loss (gain)
376

 
(247
)
 
(284
)
 
(488
)
Financing related costs
24

 
33

 
51

 
78

Severance related costs
—

 
166

 
712

 
595

Sponsor management fees
132

 
154

 
272

 
303

Share-based compensation expense
129

 
565

 
517

 
638

Impairment of long-lived assets
—

 
—

 
319

 
1,273

Branch closure and consolidation costs
236

 
—

 
508

 
—

Software license fees related to impaired asset
180

 
—

 
360

 
—

Other (3)
327

 
384

 
721

 
766

Adjusted EBITDA (1)(2)(3)
$
26,237

 
$
26,729

 
$
47,337

 
$
49,744

Adjusted EBITDA margin
33.5
%
 
32.2
%
 
30.2
%
 
30.6
%
(1)
We define EBITDA as earnings before deducting interest, income taxes and depreciation and amortization. We define Adjusted EBITDA as EBITDA excluding certain expenses detailed within the net loss to Adjusted EBITDA reconciliation above. EBITDA and Adjusted EBITDA, which are used by management to measure performance, are non-GAAP financial measures. Management believes that EBITDA and Adjusted EBITDA are useful to investors. EBITDA is commonly utilized in our industry to evaluate operating performance, and Adjusted EBITDA is used to determine our compliance with financial covenants related to our debt instruments and is a key metric used to determine incentive compensation for certain of our employees, including members of our executive management team. Both EBITDA and Adjusted EBITDA are included as a supplemental measure of our operating performance because in the opinion of management they eliminate items that have less bearing on our operating performance and highlight trends in our core business that may not otherwise be apparent when relying solely on U.S. GAAP financial measures. In addition, Adjusted EBITDA is one of the primary measures management uses for the planning and budgeting processes and to monitor and evaluate our operating results. EBITDA and Adjusted EBITDA are not recognized items under U.S. GAAP and do not purport to be an alternative to measures of our financial performance as determined in accordance with U.S. GAAP, such as net loss. Because other companies may calculate EBITDA and Adjusted EBITDA differently than we do, EBITDA may not be, and Adjusted EBITDA as presented herein is not, comparable to similarly titled measures reported by other companies.
(2)
Because EBITDA and Adjusted EBITDA are non-U.S. GAAP financial measures, as defined by the SEC, we include reconciliations of EBITDA and Adjusted EBITDA to the most directly comparable financial measures calculated and presented in accordance with U.S. GAAP.
(3)
Beginning in the fourth quarter of fiscal year 2015, Adjusted EBITDA excludes the impact of certain foreign business taxes, which are included in “Other.” Adjusted EBITDA for the three and six months ended July 31, 2014 has been restated to conform to the presentation for the three and six months ended July 31, 2015 and includes the impact from $31,000 and $47,000 of additional foreign business taxes, respectively.

38



Results of Operations
Three Months Ended - July 31, 2015 compared to July 31, 2014

 
Three Months Ended
 
 
 
 
(In thousands, except Operating Data)
July 31, 2015
 
July 31, 2014
 
$ Change
 
% Change
North America
 
 
 
 
 
 
 
Rental revenue
$
54,744

 
$
57,633

 
$
(2,889
)
 
(5.0
)%
Sales revenue
4,518

 
5,651

 
(1,133
)
 
(20.0
)%
Service revenue
10,506

 
10,409

 
97

 
0.9
 %
Total North America revenue
69,768

 
73,693

 
(3,925
)
 
(5.3
)%
Europe
 
 
 
 
 
 
 
Rental revenue
7,780

 
8,510

 
(730
)
 
(8.6
)%
Sales revenue
—

 
2

 
(2
)
 
(100.0
)%
Service revenue
659

 
741

 
(82
)
 
(11.1
)%
Total European revenue
8,439

 
9,253

 
(814
)
 
(8.8
)%
Total Consolidated Revenue
$
78,207

 
$
82,946

 
$
(4,739
)
 
(5.7
)%
 
 
 
 
 
 
 
 
Operating Data:
 
 
 
 
 
 
 
North America
 
 
 
 
 
 
 
Average utilization (1)
53.2
%
 
55.1
%
 
(190
) bps
 
 
Average daily rental rate (2)
$
31.97

 
$
33.83

 
$
(1.86
)
 
(5.5
)%
Average number of rental units
23,280

 
24,079

 
(799)

 
(3.3
)%
Europe
 
 
 
 
 
 
 
Average utilization (1)
46.2
%
 
49.6
%
 
(340
) bps
 
 
Average daily rental rate (2)
$
90.97

 
$
114.26

 
$
(23.29
)
 
(20.4
)%
Average number of rental units
1,360

 
1,253

 
107

 
8.5
 %
Consolidated
 
 
 
 
 
 
 
Average utilization (1)
52.9
%
 
54.8
%
 
(190
) bps
 
 
Average daily rental rate (2)
$
34.79

 
$
37.45

 
$
(2.66
)
 
(7.1
)%
Average number of rental units
24,640

 
25,332

 
(692)

 
(2.7
)%
(1)
The average utilization of rental fleet is a measure of efficiency used by management; it represents the percentage of time a unit of equipment is on-rent during a given period. It is not a U.S. GAAP financial measure.
(2)
The average daily rental rate is used by management to gauge the daily rate of rental equipment that we specifically track during a given period. It is not a U.S. GAAP financial measure.

Revenue
 
Consolidated Revenue
Total revenue decreased $4.7 million, or 5.7% from $82.9 million during the three months ended July 31, 2014 to $78.2 million during the three months ended July 31, 2015. Revenue from oil and gas customers decreased by $3.4 million, or 21.8%, during the three months ended July 31, 2015 compared to the three months ended July 31, 2014. Consolidated revenue, excluding oil and gas customers, decreased by $1.3 million, or 2.0%, during the three months ended July 31, 2015 compared to the three months ended July 31, 2014 due to decreases in revenue related to our construction and environmental customers, partially offset by an increase in revenue related to our maintenance customers.

 
Revenue by reportable segment for three months ended July 31, 2015 is discussed in detail below.


39

North America
Our North American segment revenue decreased $3.9 million, or 5.3%, during the three months ended July 31, 2015 compared to the three months ended July 31, 2014. Revenue from oil and gas customers decreased by $3.2 million, or 22.4%, during the three months ended July 31, 2015 compared to the three months ended July 31, 2014. Revenue, excluding oil and gas customers, decreased by $0.7 million, or 1.2%, during the three months ended July 31, 2015 compared to the three months ended July 31, 2014 due to decreases in revenue related to our construction and environmental customers, partially offset by an increase in revenue related to our maintenance customers.

Rental Revenue
Rental revenue decreased $2.9 million, or 5.0%, during the three months ended July 31, 2015 compared to the three months ended July 31, 2014. The decrease in rental revenue was primarily driven by a 5.5% decrease in average daily rental rate, a 3.3% decrease in the average number of rental units, and a 190 basis point decrease in average utilization, partially offset by a $1.5 million increase in re-rent revenue. The decrease in the average daily rate was negatively impacted in part from a higher portion of our rental revenue being driven by equipment with lower rental rates. The average number of rental units decreased 799 units, or 3.3%, to 23,280 units during the three months ended July 31, 2015 from 24,079 units during the three months ended July 31, 2014 primarily due to a decrease in our capital expenditures. During the twelve months ended July 31, 2015, we made $28.5 million of capital expenditures in our North American Segment, compared to $47.4 million in the prior fiscal period.

Sales Revenue
Sales revenue decreased by $1.1 million, or 20.0%, during the three months ended July 31, 2015 compared to the three months ended July 31, 2014 as a result of decreased sales of pumps and filtration media.

Service Revenue
Service revenue increased by $0.1 million, or 0.9%, during the three months ended July 31, 2015 compared to the three months ended July 31, 2014. The increase in service revenue was primarily driven by an increase in labor and other services performed in conjunction with projects relating to pumps.

Europe
Total revenue from our European segment decreased by $0.8 million, or 8.8%, during the three months ended July 31, 2015 compared to the three months ended July 31, 2014. Excluding a $1.8 million unfavorable impact on revenue as a result of the dollar strengthening against the Euro and the British Pound Sterling, revenue from our European segment increased by $1.0 million, or 10.7%, during the three months ended July 31, 2015 compared to the three months ended July 31, 2014.
 
Rental Revenue
Rental revenue decreased by $0.7 million, or 8.6%, during the three months ended July 31, 2015 compared to the three months ended July 31, 2014. Excluding a $1.6 million unfavorable impact on revenue as a result of the dollar strengthening against the Euro and the British Pound Sterling, revenue from our European segment increased by $0.9 million, or 10.2%, during the three months ended July 31, 2015 compared to the three months ended July 31, 2014. Excluding the impact of the change in foreign currency translation rates, the increase in rental revenue was primarily due to the impact from a 8.5% increase in the average number of rental units, partially offset by a 340 basis point decrease in average utilization and a 2.5% decrease in the average daily rate. The decrease in average utilization was driven by the increase in the number of rental units. The available number of rental units increased by 107 units to 1,360 units during the three months ended July 31, 2015 from 1,253 units during the three months ended July 31, 2014, as we continue to invest capital to improve market penetration. The decrease in the average daily rate was primarily due to a higher portion of our rental revenue being driven by equipment with lower rental rates.

Sales Revenue
Sales revenue for Europe was not significant in either period.

Service Revenue
Service revenue for Europe decreased $0.1 million, or 11.1%, during the three months ended July 31, 2015 compared to the three months ended July 31, 2014. The decrease in service revenue was primarily due to a decrease in hauling services performed in conjunction with steel tank-related projects.


40

Operating Expenses

Consolidated Operating Expenses
Total operating expenses during the three months ended July 31, 2015 decreased by $3.9 million, or 5.4%, compared to the three months ended July 31, 2014. The decrease was primarily attributable to decreased operating expenses of $3.5 million, or 5.3%, in North America which is discussed below. The decrease in North American operating expenses was compounded by our European segment which decreased operating expenses by $0.4 million, or 6.8%, compared to the three months ended July 31, 2014. The North American and European segments do not include an allocation of all inter-segment expenses.
 
North America
Total operating expenses during the three months ended July 31, 2015 were $63.9 million, a decrease of $3.5 million, or 5.3%, compared to the three months ended July 31, 2014. The decrease was primarily attributable to the following:
•
$1.8 million decrease in employee related expenses primarily due to a $0.9 million decrease in payroll and payroll-related costs, a $0.5 million decrease in insurance expenses, a $0.2 million decrease in severance expense, and a $0.4 million decrease in share-based compensation expense, partially offset by a $0.2 million increase in bonus expense. The decrease in payroll and payroll-related costs was primarily driven by corporate cost reduction programs impacting certain employee benefits and overtime pay. The decrease in insurance expense was driven by lower workers’ compensation rates and a premium decrease as a result of changing from fully-insured to self-insured health plans. The decrease in severance expense was driven by the decrease in costs for former members of management who left the Company during the prior fiscal period. The decrease in share-based compensation expense was due to the remeasurement of our stock options accounted for as liability awards. The increase in bonus expense was the result of our operating results, which were closer to plan.
•
$0.7 million decrease in repair and maintenance expenses primarily due to the reduction of refurbishment efforts for certain aged equipment.
•
$1.2 million decrease in cost of goods sold driven by the decrease in sales revenue.
•
$1.0 million decrease in other operating expenses primarily due to a reduction in advertising and travel expenses. The decrease in advertising expense was driven by lower levels of advertising and promotion. The decrease in travel expense was due to the expansion of Canada and corporate initiatives during the three months ended July 31, 2014.

The decreases in operating expenses detailed above were partially offset by the following:
•
$0.6 million increase within rental expense due to a $1.1 million increase in re-rent expense driven by an increase in re-rent revenue, partially offset by a $0.5 million decrease in fuel expense due to reduced rental fleet activity.
•
$0.6 million increase in depreciation and amortization as we increased our investment in rental fleet during the prior twelve months.

Europe
Operating expenses for the European segment during the three months ended July 31, 2015 were $5.5 million, a decrease of $0.4 million, or 6.8%, compared to the three months ended July 31, 2014. Excluding a $1.2 million favorable impact on operating expenses as a result of the dollar strengthening against the Euro and the British Pound Sterling, operating expenses from our European segment increased by $0.8 million, or 13.7%, during the three months ended July 31, 2015 compared to the three months ended July 31, 2014. Excluding the impact of the change in foreign currency translation rates, the increase in operating expenses was primarily due to increases of $0.5 million and $0.2 million in employee related expenses and rental expenses, respectively. Employee related expenses increased primarily due to higher payroll and payroll-related costs driven by an increase in headcount of 21 employees, or 22.8%, from 92 employees on July 31, 2014 to 113 employees on July 31, 2015. Rental expenses increased due to an increase in rental activity.



41

 Other Expenses, Net

Consolidated
Other expenses, net during the three months ended July 31, 2015 increased by $0.5 million, or 4.6%, to $11.0 million from $10.5 million during the three months ended July 31, 2014, primarily due to a $0.6 million increase in foreign currency exchange losses driven by the effect that unfavorable foreign currency exchange rate changes had on the revaluation of obligations denominated in Canadian dollars.

Income Tax Benefit
Income tax benefit during the three months ended July 31, 2015 decreased by $1.3 million to $0.8 million from $2.1 million during the three months ended July 31, 2014. The tax benefit decrease was primarily due to a change in the estimated forecast of pre-tax book income and loss for each respective jurisdiction and discrete items related to a future benefit of bad debt impairment recorded during the three months ended July 31, 2014.

42

Results of Operations
Six Months Ended - July 31, 2015 compared to July 31, 2014

 
Six Months Ended
 
 
 
 
(In thousands, except Operating Data)
July 31, 2015
 
July 31, 2014
 
$ Change
 
% Change
North America
 
 
 
 
 
 
 
Rental revenue
$
109,767

 
$
113,891

 
$
(4,124
)
 
(3.6
)%
Sales revenue
9,454

 
11,811

 
(2,357
)
 
(20.0
)%
Service revenue
21,825

 
19,967

 
1,858

 
9.3
 %
Total North America revenue
141,046

 
145,669

 
(4,623
)
 
(3.2
)%
Europe
 
 
 
 
 
 
 
Rental revenue
14,610

 
15,254

 
(644
)
 
(4.2
)%
Sales revenue
7

 
2

 
5

 
250.0
 %
Service revenue
1,313

 
1,390

 
(77
)
 
(5.5
)%
Total European revenue
15,930

 
16,646

 
(716
)
 
(4.3
)%
Total Consolidated Revenue
$
156,976

 
$
162,315

 
$
(5,339
)
 
(3.3
)%
 
 
 
 
 
 
 
 
Operating Data:
 
 
 
 
 
 
 
North America
 
 
 
 
 
 
 
Average utilization (1)
54.1
%
 
54.8
%
 
(70
) bps
 
 
Average daily rental rate (2)
$
31.81

 
$
34.03

 
$
(2.22
)
 
(6.5
)%
Average number of rental units
23,858

 
23,870

 
(12)

 
(0.1
)%
Europe
 
 
 
 
 
 
 
Average utilization (1)
44.6
%
 
44.8
%
 
(20
) bps
 
 
Average daily rental rate (2)
$
90.47

 
$
118.43

 
$
(27.96
)
 
(23.6
)%
Average number of rental units
1,339

 
1,242

 
97

 
7.8
 %
Consolidated
 
 
 
 
 
 
 
Average utilization (1)
53.6
%
 
54.3
%
 
(70
) bps
 
 
Average daily rental rate (2)
$
34.43

 
$
37.48

 
$
(3.05
)
 
(8.1
)%
Average number of rental units
25,196

 
25,112

 
84

 
0.3
 %
(1)
The average utilization of rental fleet is a measure of efficiency used by management; it represents the percentage of time a unit of equipment is on-rent during a given period. It is not a U.S. GAAP financial measure.
(2)
The average daily rental rate is used by management to gauge the daily rate of rental equipment that we specifically track during a given period. It is not a U.S. GAAP financial measure.

Revenue
 
Consolidated Revenue
Total revenue decreased $5.3 million, or 3.3% from $162.3 million during the six months ended July 31, 2014 to $157.0 million during the six months ended July 31, 2015. Revenue from oil and gas customers decreased by $5.3 million, or 16.3%, during the six months ended July 31, 2015 compared to the six months ended July 31, 2014. Consolidated revenue, excluding oil and gas customers, decreased slightly during the six months ended July 31, 2015 compared to the six months ended July 31, 2014. The net decrease in consolidated revenue, excluding oil and gas customers, was due to decreases in revenue related to our construction and environmental customers, partially offset by an increase in revenue related to our maintenance customers.

 
Revenue by reportable segment for six months ended July 31, 2015 is discussed in detail below.


43

North America
Our North American segment revenue decreased $4.6 million, or 3.2%, during the six months ended July 31, 2015 compared to the six months ended July 31, 2014. Revenue from oil and gas customers decreased by $5.0 million, or 16.3%, during the six months ended July 31, 2015 compared to the six months ended July 31, 2014. Revenue, excluding oil and gas customers, increased by $0.4 million, or 0.3%, during the six months ended July 31, 2015 compared to the six months ended July 31, 2014 due to an increase in revenue related to our maintenance customers, partially offset by decreases in revenue related to our construction customers.

Rental Revenue
Rental revenue decreased $4.1 million, or 3.6%, during the six months ended July 31, 2015 compared to the six months ended July 31, 2014. The decrease in rental revenue was primarily driven by a 6.5% decrease in average daily rental rate, a 0.1% decrease in the average number of rental units, and a 70 basis point decrease in average utilization, partially offset by a $2.3 million increase in re-rent revenue. The decrease in the average daily rate was negatively impacted in part from a higher portion of our rental revenue being driven by equipment with lower rental rates. The average number of rental units decreased 12 units, or 0.1%, to 23,858 units during the six months ended July 31, 2015 from 23,870 units during the six months ended July 31, 2014 primarily due to a decrease in our capital expenditures. During the twelve months ended July 31, 2015, we made $28.5 million of capital expenditures in our North American Segment, compared to $47.4 million in the prior fiscal period.

Sales Revenue
Sales revenue decreased by $2.4 million, or 20.0%, during the six months ended July 31, 2015 compared to the six months ended July 31, 2014 as a result of a decrease in pumps and media sales.

Service Revenue
Service revenue increased by $1.9 million, or 9.3%, during the six months ended July 31, 2015 compared to the six months ended July 31, 2014. The increase in service revenue was primarily driven by an increase in labor and other services performed in conjunction with pump-related projects.

Europe
Total revenue from our European segment decreased by $0.7 million, or 4.3%, during the six months ended July 31, 2015 compared to the six months ended July 31, 2014. Excluding a $3.6 million unfavorable impact on revenue as a result of the dollar strengthening against the Euro and the British Pound Sterling, revenue from our European segment increased by $2.9 million, or 17.3%, during the six months ended July 31, 2015 compared to the six months ended July 31, 2014.
 
Rental Revenue
Rental revenue decreased by $0.6 million, or 4.2%, during the six months ended July 31, 2015 compared to the six months ended July 31, 2014. Excluding a $3.3 million unfavorable impact on revenue as a result of the dollar strengthening against the Euro and the British Pound Sterling, rental revenue from our European segment increased by $2.7 million, or 17.4%, during the six months ended July 31, 2015 compared to the six months ended July 31, 2014. Excluding the impact of the change in foreign currency translation rates, the increase in rental revenue was primarily due to a 7.8% increase in the average number of rental units, partially offset by a 5.3% decrease in the average daily rate and a 20 basis point decrease in average utilization. The decrease in average utilization was driven by the increase in the number of rental units. The average number of rental units increased by 97 units to 1,339 units during the six months ended July 31, 2015 from 1,242 units during the six months ended July 31, 2014, as we continue to invest capital to improve market penetration. We made $4.0 million of capital expenditures in our European Segment during the twelve months ended July 31, 2015. The decrease in the average daily rate was primarily due to a higher portion of our rental revenue being driven by equipment with lower rental rates.

Sales Revenue
Sales revenue for Europe increased slightly during the six months ended July 31, 2015 compared to the six months ended July 31, 2014. As a result, sales revenue did not contribute significantly to the change in total European revenue.


44

Service Revenue
Service revenue for Europe decreased $0.1 million, or 5.5%, during the six months ended July 31, 2015 compared to the six months ended July 31, 2014. Excluding a $0.3 million unfavorable impact on revenue as a result of the dollar strengthening against the Euro and the British Pound Sterling, service revenue from our European segment increased by $0.2 million, or 16.0%, during the six months ended July 31, 2015 compared to the six months ended July 31, 2014. Excluding the impact of the change in foreign currency translation rates, the increase in service revenue was primarily due to an increase in hauling services performed in conjunction with steel tank-related projects.

Operating Expenses

Consolidated Operating Expenses
Total operating expenses during the six months ended July 31, 2015 decreased by $3.4 million, or 2.3%, compared to the six months ended July 31, 2014. The decrease was primarily attributable to decreased operating expenses of $2.8 million, or 2.0%, in North America which is discussed below. The decrease in North American operating expenses was compounded by our European segment which decreased operating expenses by $0.6 million, or 5.3%, compared to the six months ended July 31, 2014. The North American and European segments do not include an allocation of all inter-segment expenses.
 
North America
Total operating expenses during the six months ended July 31, 2015 were $134.9 million, a decrease of $2.8 million, or 2.0%, compared to the six months ended July 31, 2014. The decrease was primarily attributable to the following:
•
$1.3 million decrease in repair and maintenance expenses primarily due to the reduction of certain regulatory compliance costs and refurbishment efforts for certain aged equipment during the six months ended July 31, 2014.
•
$1.8 million decrease in cost of goods sold driven by the decrease in sales revenue.
•
$0.9 million decrease in professional and legal fees as a result of the resolution of several legal matters during fiscal year 2015 and lower consulting costs.
•
$1.2 million decrease in other operating expenses primarily due to decreases of $0.7 million in advertising expense and $0.4 million in travel expense. The decrease in advertising expense was driven by reduced advertising and trade show costs. The decrease in travel expense was due to the expansion of Canada and corporate initiatives during the six months ended July 31, 2014.
•
Impairment of long-lived assets decreased by $1.0 million from $1.3 million during the six months ended July 31, 2014 to $0.3 million during the six months ended July 31, 2015. During the six months ended July 31, 2014, we wrote down certain assets by $1.3 million driven by our decision to sell our wholly-owned subsidiary in Mexico. During the six months ended July 31, 2015, we reassessed our plans for the use of an internally developed software and decided to shift to a different platform which would provide the same services at a lower maintenance cost. We wrote down the value of the internally developed software as no future benefits were expected to be realized. We recorded an impairment charge of $0.3 million in our North American segment, which represented the remaining net book value of the internally developed software.

The decreases in operating expenses detailed above were partially offset by the following:
•
$2.6 million increase in employee related expenses primarily due to a $1.4 million increase in payroll and payroll-related costs, a $0.6 million increase in insurance expense, a $0.6 million increase in bonus expense, and a $0.2 million increase in severance expense, partially offset by a $0.1 million decrease in share-based compensation expense. The increase in payroll and payroll-related costs was driven primarily by an increase in average headcount of 31 additional employees, or 3.5%, from 891 employees during the six months ended July 31, 2014 to 922 employees during the six months ended July 31, 2015. The increase in insurance expense was driven by higher costs due to a change from self-insured to fully-insured health plans on July 1, 2014 and the associated premium increase. We reverted to a self-insured employee medical program effective July 1, 2015. The increase in bonus expense was the result of our operating results, which were closer to plan. The increase in severance expense was due to the termination of certain employees during the three months ended April 30, 2015. The decrease in share-based compensation expense was due to the remeasurement of our stock options accounted for as liability awards.
•
$1.0 million increase in facility expenses due to increases in rent and property taxes of $0.5 million and $0.3 million, respectively, and various other expenses of $0.2 million.


45

Europe
Operating expenses for the European segment during the six months ended July 31, 2015 were $10.9 million, a decrease of $0.6 million, or 5.3%, compared to the six months ended July 31, 2014. Excluding a $2.5 million favorable impact on operating expenses as a result of the dollar strengthening against the Euro and the British Pound Sterling, operating expenses from our European segment increased by $1.9 million, or 16.3%, during the six months ended July 31, 2015 compared to the six months ended July 31, 2014. Excluding the impact of the change in foreign currency translation rates, the increase in operating expenses was primarily due to increases of $1.3 million and $0.5 million in employee related expenses and rental expenses, respectively. Employee related expenses increased primarily due to a $1.1 million increase in payroll and payroll-related costs and a $0.4 million increase in bonus expense. The increase in payroll and payroll-related costs was driven by an increase in average headcount of 26 employees, or 30.6%, from 85 employees during the six months July 31, 2014 to 111 employees during the six months ended July 31, 2015. The increase in bonus expense was due to our operating results, which were closer to plan. Rental expenses increased due to an increase in rental activity.

 Other Expenses, Net

Consolidated
Other expenses, net increased slightly during the six months ended July 31, 2015. As a result, other expenses, net did not contribute significant to the change in our consolidated net loss.

Income Tax Benefit
Income tax benefit during the six months ended July 31, 2015 decreased by $0.9 million to $3.7 million from $4.6 million during the six months ended July 31, 2014. The tax benefit decrease was primarily due to a change in the estimated forecast of pre-tax book income and loss for each respective jurisdiction and discrete items primarily related to a future benefit of bad debt impairment recorded during the three months ended July 31, 2014.


46

Liquidity and Capital Resources

Liquidity Summary
We have a history of generating higher cash flow from operations than net income recorded during the same period. The cash flow to fund our business has historically been generated from operations. We utilize this cash flow to invest in property and equipment that are core to our business and to reduce debt. We invest in assets that have relatively long useful lives.

On July 31, 2015 and January 31, 2015, our cash and cash equivalents by geography were the following:
(In thousands)
July 31,
2015
 
January 31,
2015
 
$ Change
 
% Change
United States
$
15,326

 
$
14,407

 
$
919

 
6.4
%
Europe
7,695

 
3,482

 
4,213

 
121.0
%
Canada
879

 
776

 
103

 
13.3
%
Total cash and cash equivalents
$
23,900

 
$
18,665

 
$
5,235

 
28.0
%
    
Our cash held outside the United States may be repatriated to the United States but, under current law, may be subject to United States federal income taxes, less applicable foreign tax credits. We do not plan to repatriate cash balances from our foreign subsidiaries to fund our operations within the United States. We have not provided for the United States federal tax liability on these amounts as this cash is considered permanently reinvested outside of the United States. We utilize a variety of cash planning strategies in an effort to ensure that our worldwide cash is available in the locations in which it is needed. Our intent is to meet our domestic liquidity needs through ongoing cash flow, external borrowings, or both.

Our business requires ongoing investment in equipment to maintain the size of our rental fleet. Most of our assets, if properly maintained, may generate a level of revenue similar to new assets of the same type over the assets’ useful lives. There is not a well-defined secondary or resale market for the majority of our assets; therefore, we rent our assets for as long as they may safely be employed to meet our customers’ needs. We invest capital in additional equipment with the expectation of generating revenue on that investment within a relatively short period of time.

We invest in new equipment for several reasons, including:
•
to expand our current product lines within markets where we already operate;
•
to enter new geographic regions;
•
to add additional product offerings in response to customer or market demands; and
•
to replace equipment that has been retired because it is no longer functional.

We have not made long-term commitments to purchase equipment. Additionally, the period of time between when we place an order for equipment and when we begin to receive it is typically two to four months. This ordering process enables us to quickly reduce our capital spending during periods of economic slowdown. During periods of expansion, we fund our investments in equipment utilizing our cash flow from operations or borrowings. Management believes our cash flow from operations and our Credit Facility will be sufficient to fund our current operating needs and capital expenditures for at least the next 12 months.


47

Debt
On June 1, 2011, we (i) entered into a $435.0 million senior secured credit facility (the “Credit Facility”), consisting of a $390.0 million term loan facility (the “Senior Term Loan”) and a $45.0 million revolving credit facility (the “Revolving Credit Facility”) ($45.0 million available on July 31, 2015) and (ii) issued $240.0 million in aggregate principal amount of senior unsecured notes due 2019 (the “Notes”). (Refer to Note 9, “Debt” of the notes to the consolidated condensed financial statements for further details.)

Credit Facility

On February 7, 2013, we entered into a first amendment to our Credit Facility (the “First Amendment”), to refinance our Credit Facility. Pursuant to the First Amendment, we borrowed $384.2 million of term loans (the “Amended Senior Term Loan”) to refinance a like amount of term loans (the “Original Term Loan”) under the Credit Facility. Borrowings under the Credit Facility bear interest at a rate equal to LIBOR plus an applicable margin, subject to a LIBOR floor of 1.25%. The LIBOR margin applicable to the Amended Senior Term Loan is 3.00%, which is 0.75% less than the LIBOR margin applicable to the Original Term Loan. In addition, pursuant to the First Amendment, among other things, (i) the Senior Term Loan maturity date was extended to February 7, 2020, provided that the maturity will be March 2, 2019 if the Amended Senior Term Loan is not repaid or refinanced on or prior to March 2, 2019, (ii) the Revolving Credit Facility maturity date was extended to February 7, 2018, and (iii) we obtained increased flexibility with respect to certain covenants and restrictions relating to the Company’s ability to incur additional debt, make investments, debt prepayments, and acquisitions. Principal on the Senior Term Loan is payable in quarterly installments of $1.0 million. Furthermore, the excess cash flow prepayment requirement is in effect until the maturity date.

On November 13, 2013, we entered into a second amendment to the Credit Facility (the “Second Amendment”). Pursuant to the Second Amendment, the Company borrowed $35.0 million of incremental term loans (the “Incremental Term Loans”), which may be used for general corporate purposes, including to finance permitted acquisitions. The terms applicable to the Incremental Term Loans are the same as those applicable to the term loans under the Credit Facility.

The Credit Facility, as amended in February 2013 and November 2013, places certain limitations on our (and all of our U.S. subsidiaries’) ability to incur additional indebtedness, pay dividends or make other distributions, repurchase capital stock, make certain investments, enter into certain types of transactions with affiliates, utilize assets as security in other transactions, and sell certain assets or merge with or into other companies.

Under the Credit Facility, we may be required to satisfy and maintain a total leverage ratio not in excess of the leverage ratio specified in the table below if there is an outstanding balance on the Revolving Credit Facility of 25% or more of the committed amount on any quarter end:
October 2015
6.50:1.00
Thereafter
6.00:1.00

The total leverage ratio is calculated as our net debt (total debt less cash and cash equivalents) divided by our trailing twelve months’ adjusted EBITDA.

On July 31, 2015, we did not have an outstanding balance on the Revolving Credit Facility; therefore, on July 31, 2015, we were not subject to a leverage test. Additionally, on July 31, 2015, we were in compliance with all of our requirements and covenant tests under the Credit Facility.

The Credit Facility, as amended during February 2013 and November 2013, contains certain restrictive covenants (in each case, subject to exclusions) that limit, among other things, our ability and the ability of our restricted subsidiaries to: (1) create, incur, assume, or permit to exist, any liens; (2) create, incur, assume, or permit to exist, directly or indirectly, any additional indebtedness; (3) consolidate, merge, amalgamate, liquidate, wind up, or dissolve themselves; (4) convey, sell, lease, license, assign, transfer, or otherwise dispose of assets; (5) make certain restricted payments; (6) make certain investments; (7) make any optional prepayment, repayment, or redemption with respect to, or amend or otherwise alter the terms of documents related to, certain subordinated indebtedness; (8) enter into sale leaseback transactions; (9) enter into transactions with affiliates; (10) change our fiscal year end date or the method of determining fiscal quarters; (11) enter into contracts that limit our ability to incur any lien to secure our obligations under the Credit Facility; (12) create any encumbrance or restriction on the ability of any restricted subsidiary to make certain distributions; and (13) engage in certain lines of business. The Credit Facility also contains other customary restrictive covenants. The covenants are subject to various baskets and materiality thresholds.

48


Costs related to debt financing are deferred and amortized to interest expense over the term of the underlying debt instruments utilizing the straight-line method for our revolving credit facility and the effective interest method for our senior term and revolving loan facilities. We amortized $0.7 million and $0.7 million of deferred financing costs during three months ended July 31, 2015 and July 31, 2014, respectively, and $1.4 million and $1.3 million during the six months ended July 31, 2015 and July 31, 2014, respectively.

Senior Unsecured Notes due 2019
On June 1, 2011, we issued $240.0 million of fixed rate 8.25% senior unsecured notes due June 1, 2019. We may redeem all or any portion of the Notes at the redemption prices set forth in the applicable indenture, plus accrued and unpaid interest. Upon a change of control, we are required to make an offer to redeem all of the Notes from the holders at a redemption price equal to 101% of the aggregate principal amount thereof plus accrued and unpaid interest, if any, to the date of the repurchase. The Notes are fully and unconditionally guaranteed, jointly and severally, on a senior unsecured basis by our direct and indirect existing and future wholly-owned domestic restricted subsidiaries.

Interest and Fees
Interest and fees related to our Credit Facility and the Notes were as follows: 
 
Three Months Ended
 
 
Six Months Ended
(In thousands)
July 31, 2015
 
July 31, 2014
 
 
July 31, 2015
 
July 31, 2014
Credit Facility interest and fees(1)
$
4,901

 
$
3,421

 
 
$
9,651

 
$
8,203

Notes interest and fees (2)
5,246

 
6,737

 
 
10,486

 
11,952

Total interest and fees
$
10,147

 
$
10,158

 
 
$
20,137

 
$
20,155

(1)
Interest on the Amended Term Loan is payable quarterly based upon an interest rate of 4.25%.
(2)
Interest on the Notes is payable semi-annually based upon a fixed annual rate of 8.25%.

Principal Payments on Debt
On July 31, 2015, the schedule of minimum required principal payments relating to the Credit Facility and the Notes for each of the twelve months ending January 31 are due according to the table below:
 
(In thousands)
Principal 
Payments on
Debt
Remainder of the fiscal year ending January 31, 2016
$
2,081

2017
4,163

2018
4,163

2019
4,163

2020
634,414

Total
$
648,984




49

Sources and Uses of Cash
Our sources and uses of cash for selected line items in our consolidated condensed statement of cash flows were as follows:
 
Six Months Ended July 31, 2015
(In thousands)
July 31, 2015
 
July 31, 2014
 
$ Change
Net loss
$
(6,002
)
 
$
(3,175
)
 
$
(2,827
)
Adjustments to reconcile net loss to net cash provided by operating activities:
 
 
 
 
 
Provision for doubtful accounts
582

 
93

 
489

Provision for excess and obsolete inventory
7

 
19

 
(12
)
Share-based compensation expense
517

 
638

 
(121
)
Loss on sale of subsidiary
—

 
99

 
(99
)
Gain on sale of equipment
(1,163
)
 
(1,085
)
 
(78
)
Depreciation and amortization
32,718

 
33,109

 
(391
)
Amortization of deferred financing costs
1,352

 
1,281

 
71

Deferred income taxes
(3,494
)
 
(3,722
)
 
228

Amortization of above-market lease
(237
)
 
(346
)
 
109

Impairment of long-lived assets
319

 
1,273

 
(954
)
Changes in assets and liabilities:
 
 
 
 

Accounts receivable
337

 
(4,969
)
 
5,306

Inventories
(2,226
)
 
(1,825
)
 
(401
)
Prepaid expenses and other assets
483

 
(672
)
 
1,155

Accounts payable and other liabilities
(4,294
)
 
(10,615
)
 
6,321

Cash provided by operating activities
18,899

 
10,103

 
8,796

Cash used in investing activities
(11,121
)
 
(18,654
)
 
7,533

Cash used in financing activities
(2,132
)
 
(3,120
)
 
988

Effect of foreign currency translation on cash
(411
)
 
(558
)
 
147

Net increase (decrease) in cash and cash equivalents
$
5,235

 
$
(12,229
)
 
$
17,464


Cash Provided by Operating Activities
Cash flow from operations during the six months ended July 31, 2015 totaled $18.9 million, an increase of $8.8 million compared to the six months ended July 31, 2014. This increase was primarily related to the following:
•
The change in accounts receivable resulted in a $5.3 million increase to cash provided by operating activities primarily due to an increase in accounts receivable due to higher sales during the prior fiscal period and slower collections. Our days-sales outstanding during the three months ended July 31, 2015 and July 31, 2014, were 81.0 and 76.6, respectively.
•
The change in accounts payable and other liabilities resulted in a $6.3 million increase to cash provided by operating activities primarily due to reduced capital expenditures compared to the prior fiscal period.
•
The change in prepaid expenses and other assets resulted in a $1.2 million increase to cash provided by operating activities primarily as a result of cash received for income and other taxes during the six months ended July 31, 2015.

The increases above were partially offset by the following:
•
Net loss increased $2.8 million from a net loss of $3.2 million during the six months ended July 31, 2014 to a net loss of $6.0 million during the six months ended July 31, 2015.
•
The impairment of long-lived assets resulted in a $1.0 million decrease. See Note 5, “Property and Equipment, Net” of the notes to the consolidated condensed financial statements for further information.

 

50

Cash Used In Investing Activities
Cash used in investing activities consists of cash used to purchase property and equipment, partially offset by proceeds from the sale of equipment from our rental fleet. Purchases of property and equipment totaled $12.9 million and $20.3 million during the six months ended July 31, 2015 and July 31, 2014, respectively. Proceeds from equipment sales totaled $1.8 million and $1.5 million during the six months ended July 31, 2015 and July 31, 2014, respectively. We will continue to monitor our capital expenditures to support our branch expansion and to address demand in our key markets.

Cash Used In Financing Activities
Cash used in financing activities during the six months ended July 31, 2015 decreased $1.0 million compared to the six months ended July 31, 2014 primarily due to fewer stock option exercises. We returned $1.0 million of capital to BakerCorp International Holdings, Inc. for stock options exercised during the six months ended July 31, 2014.

Effect of Exchange Rate Changes on Cash
The effect of foreign currency translation on cash resulted in decreases of $0.4 million and $0.6 million to cash and cash equivalents during the six months ended July 31, 2015 and the six months ended July 31, 2014, respectively. The Euro/USD, the British Pound Sterling/USD and Canadian dollar/USD spot rates decreased from 1.339, 1.689, and 0.918, respectively, on July 31, 2014 to 1.097, 1.558, and 0.766, respectively, on July 31, 2015.

Hedging Activities
We use interest rate swap agreements to effectively convert a portion of our debt with variable interest rates into a fixed interest rate obligation. Under our interest rate swap agreements, we typically agree to pay the counterparty a fixed interest rate in exchange for receiving interest payments based on an interest rate that will vary similarly to the rate on the debt that we are attempting to hedge. We have historically conducted our swaps with large well-capitalized counterparties whom we determined to be creditworthy.
    
We document all relationships between hedging instruments and hedged items, the risk management objective and strategy for undertaking various hedge transactions, the forecasted transaction that has been designated as the hedged item, and how the hedging instrument is expected to reduce the risks related to the hedged item. We analyze our interest rate swaps quarterly to determine if the hedged transaction remains effective or ineffective. We may discontinue hedge accounting for interest rate swaps prospectively if certain criteria are no longer met, the interest rate swap is terminated or exercised, or if we elect to remove the cash flow hedge designation. If hedge accounting is discontinued and the forecasted hedged transaction remains probable of occurring, the previously recognized gain or loss on the interest rate swaps will remain in accumulated other comprehensive income and will be reclassified into earnings during the same period the forecasted hedged transaction affects earnings. Our determination of the fair value of our interest rate swaps was calculated using a discounted cash flow analysis based on the terms of the swap contracts and the observable interest rate curve. We adjust a liability on our balance sheet when the market value of the interest rate swap is different from our basis in the interest rate swap agreements. When an interest rate swap agreement qualifies for hedge accounting under generally accepted accounting principles, we record a charge or credit to other comprehensive income. When an interest rate swap agreement has not been designated as a hedge, or does not meet all of the criteria to be classified as a hedge, we record a net unrealized gain or loss within our consolidated condensed statement of operations.

On July 31, 2015, there were seven swap agreements with a total notional amount of $214.0 million outstanding, six with a five-year term and a notional value totaling $150.0 million with a fixed rate of 2.35%, and one with a three-year term and a notional amount totaling $64.0 million with a fixed rate of 1.64%. On July 31, 2015 and January 31, 2015, the liability recorded related to interest rate swaps was $1.9 million and $2.7 million, respectively, with no unrealized gain or loss recorded in the consolidated condensed statements of operations for the ineffective portion of the change in fair value of the interest rate swap agreements.

Contractual Obligations
There has been no material change to our contractual obligations as disclosed in our 2015 Annual Report.


51

Off-Balance Sheet Arrangements
    On July 31, 2015, we did not have any off-balance sheet arrangements, as defined in Item 303(a)(4)(ii) of Regulation S-K promulgated by the SEC, that have or are reasonably likely to have a material current or future effect on our financial condition, changes in our financial condition, revenues, or expenses, results of operations, liquidity, capital expenditures, or capital resources.

Critical Accounting Policies, Estimates, and Judgments
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires us to make estimates and judgments that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. On an ongoing basis, we evaluate our estimates, judgments and assumptions, including those related to revenue recognition, allowances for doubtful accounts, warranties, inventory valuation, customer rebates, sales allowances, medical insurance claims, litigation accruals, impairment of long-lived assets, intangible assets and goodwill, income taxes, share-based compensation (expense and liability), and derivatives. We believe our estimates, judgments and assumptions are reasonable; however, actual results may differ from these judgments and estimates, and they may be adjusted as more information becomes available. Any adjustment may be significant.

An accounting policy is deemed to be critical if it requires an accounting estimate to be made based on assumptions about matters that are highly uncertain at the time the estimate is made, if different estimates reasonably may have been used, or if changes in the estimate that are reasonably likely to occur may materially impact the financial statements. We do not believe that there have been any significant changes during the six months ended July 31, 2015 to the items that we disclosed as our critical accounting policies, estimates, and judgments included in the Annual Report on Form 10-K for the fiscal year ended January 31, 2015.

Recent Accounting Pronouncements
Refer to Note 2, “Accounting Pronouncements” of the notes to the consolidated condensed financial statements for a discussion of new accounting guidance.

Forward-Looking Statements
This quarterly report contains forward-looking statements as defined by the Private Securities Litigation Reform Act of 1995. Our expectations, beliefs, and projections are expressed in good faith, and we believe we have a reasonable basis to make these statements through our management’s examination of historical operating trends, data contained in our records, and other data available from third parties, but there can be no assurance that our management’s expectations, beliefs, or projections will be achieved.

The discussions of our financial condition and results of operations may include various forward-looking statements about future costs and prices of commodities, production volumes, industry trends, demand for our products and services, and projected results of operations and our projected capital resources and liquidity. Statements that are not historical in nature are considered to be forward-looking statements. They include statements regarding our expectations, hopes, beliefs, estimates, intentions, or strategies regarding the future. The words “believe,” “expect,” “anticipate,” “intend,” “estimate,” “will,” “look forward to,” and similar expressions are intended to identify forward-looking statements.


52

The forward-looking statements set forth in this quarterly report regarding, among other things, achievement of revenue, profitability and net income in future quarters, future prices and demand for our products and services, and estimated cash flows and sufficiency of cash flows to fund capital expenditures, reflect only our expectations regarding these matters. Important factors that could cause actual results to differ materially from the forward-looking statements include, but are not limited to, the following.
 
•
Our substantial leverage could adversely affect our ability to raise additional capital to fund our operations, limit our ability to react to changes in the economy or our industry, expose us to interest rate risk to the extent of our variable rate debt and prevent us from meeting our debt obligations.
•
Our debt agreements contain restrictions that limit our flexibility in operating our business.
•
Our business is subject to the general health of the economy, and accordingly any slowdown in the current economy or decrease in general economic activity could materially adversely affect our revenue and operating results.
•
Continuing or sustained decline in oil prices and/or natural gas prices at or below current levels could have a negative impact on our operating results.
•
Ongoing government review of hydraulic fracturing and its environmental impact could lead to changes to this activity or its substantial curtailment, which could materially adversely affect our revenue and results of operations.
•
We intend to expand our business into new geographic markets, and this expansion may be costly and may not be successful.
•
Our growth strategy includes evaluating selective acquisitions, which entails certain risks to our business and financial performance.
•
We intend to expand into new product lines, which may be costly and may not ultimately be successful.
•
We depend on our suppliers for the equipment we rent to customers.
•
As our rental equipment ages, we may face increased costs to maintain, repair, and replace that equipment and new equipment could become more expensive.
•
The short term nature of our rental arrangements exposes us to redeployment risks and means that we could experience rapid fluctuations in revenue in response to market conditions.
•
Our customers may decide to begin providing their own liquid and solid containment solutions rather than sourcing those products from us.
•
Our industry is highly competitive, and competitive pressures could lead to a decrease in our market share or in the prices that we may charge.
•
We lease all of our branch locations, and accordingly are subject to the risk of substantial changes to the real estate rental markets and our relationships with our landlords.
•
Our business is subject to numerous environmental and safety regulations. If we are required to incur significant compliance or remediation costs, our liquidity and operating results could be materially adversely affected.
•
Changes in the many laws and regulations to which we are subject in the United States, Europe and Canada, or our failure to comply with them, could materially adversely affect our business.
•
We have operations outside the United States. As a result, we may incur losses from currency fluctuations.
•
Turnover of our management and our ability to attract and retain other key personnel may affect our ability to efficiently manage our business and execute our strategy.
•
If our employees should unionize, this could impact our costs and ability to administer our business.
•
We are exposed to a variety of claims relating to our business, and our insurance may not fully cover them.
•
Disruptions in our information technology systems could materially adversely affect our operating results by limiting our capacity to effectively monitor and control our operations and provide effective services to our customers.
•
Fluctuations in fuel costs or reduced supplies of fuel could harm our business.
•
If we are unable to collect on contracts with customers, our operating results would be materially adversely affected.
•
Climate change, climate change regulations, and greenhouse effects may materially adversely impact our operations and markets.
•
Existing trucking regulations and changes in trucking regulations may increase our costs and negatively impact our results of operations.

Additional risks, uncertainties, and other factors that may cause our actual results, performance, or achievements to be different from those expressed or implied in our written or oral forward-looking statements may be found under “Risk Factors” contained in this quarterly report.


53

These factors and other risk factors disclosed in this quarterly report and elsewhere are not necessarily all of the important factors that could cause our actual results to differ materially from those expressed in any of our forward-looking statements. Other unknown or unpredictable factors could also harm our results. Consequently, there can be no assurance that the actual results or developments anticipated by us will be realized or, even if substantially realized, that they will have the expected consequences to, or effects on, us. Additionally, there can be no assurance provided that future operating performance will be consistent with the past performance of the Company. Given these uncertainties, you are cautioned not to place undue reliance on such forward-looking statements.

The forward-looking statements contained in this quarterly report are made only on the date of this quarterly report. Except to the extent required by law, we do not undertake, and specifically decline any obligation, to update any forward-looking statements or to publicly announce the results of any revisions to any of such statements to reflect future events or developments.


54

Item 3. Quantitative and Qualitative Disclosures about Market Risk

Interest Rate Swap Agreements
We seek to reduce earnings and cash flow volatility associated with changes in interest rates through financial arrangements intended to provide a hedge against a portion of the risks associated with such volatility. These financial arrangements, or interest rate swap agreements, are the only instruments we use to manage interest rate fluctuations affecting our variable rate debt. We enter into derivative financial arrangements only to the extent that the arrangement meets the objectives described, and we do not engage in such transactions for speculative purposes.

Impact of Foreign Currency Rate Changes
We currently have branch operations outside the United States, and our foreign subsidiaries conduct their business in local currency. Our operations in Canada are denominated in the Canadian dollar, operations in the Netherlands, Germany and France are denominated in the Euro, operations in the United Kingdom are denominated in the British Pound Sterling, and operations in Poland are denominated in the Polish Zloty. Likewise, we pay our expenses in the local currencies, described above, in the areas in which we operate. We are exposed to foreign exchange rate fluctuations as the financial results of our non-United States operations are translated into U.S. dollars. Based upon the financial results of our international operations during the period relative to the Company as a whole, a 10% change in the exchange rates would not have a material impact on our after-tax earnings.

Counterparty Risk
Our interest rate swap financial instruments contain credit risk to the extent that our interest rate swap counterparties may be unable to meet the terms of the agreements. We minimize this risk by limiting our counterparties to highly rated, major financial institutions with good credit ratings. Although possible, management does not expect any material losses as a result of default by other parties. Neither the Company nor the counterparty requires any collateral for the derivative agreements. In estimating the fair value of our derivatives, management considered, among other factors, a valuation analysis performed by an independent third party with extensive expertise and experience.

Item 4. Controls and Procedures
The Company under the supervision and with the participation of the Company’s management, including the Chief Executive Officer (its principal executive officer) and the Chief Financial Officer (its principal financial officer), evaluated the effectiveness of the design and operation of the Company’s disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934, as amended) as of the end of the period covered by this report. Based upon that evaluation, our management, including our Chief Executive Officer and our Chief Financial Officer, concluded that the Company’s disclosure controls and procedures were effective as of July 31, 2015. There have been no changes in our internal control over financial reporting during the three months ended July 31, 2015 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.


55

PART II. OTHER INFORMATION

Item 1. Legal Proceedings

The information set forth above under Note 15, “Commitments and Contingencies – Litigation”, contained in the notes to the consolidated condensed financial statements is incorporated herein by reference.

Item 1A. Risk Factors

The reader should carefully consider, in connection with the other information in this report, the factors discussed in Part I, “Item 1A: Risk Factors” of the Company’s Annual Report on Form 10-K for the fiscal year ended January 31, 2015. These factors may cause our actual results to differ materially from those stated in forward-looking statements or otherwise contained in this document and elsewhere.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

Not applicable

Item 3. Defaults upon Senior Securities

Not applicable

Item 4. Mine Safety Disclosures

Not applicable

Item 5. Other Information

Not applicable

Item 6. Exhibits

See the Exhibit Index following the signature page to this Quarterly Report on Form 10-Q for a list of exhibits filed or furnished with this report, which Exhibit Index is incorporated herein by reference.


56

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
 
 
 
BAKERCORP INTERNATIONAL, INC.
 
 
 
 
Date:
September 14, 2015
By:
/s/ Robert Craycraft
 
 
 
Robert Craycraft
 
 
 
President and Chief Executive Officer
 
 
 
 
 
 
By:
/s/ Raymond Aronoff
 
 
 
Raymond Aronoff
 
 
 
Chief Operating Officer and Chief Financial Officer

57

EXHIBIT INDEX
 
Exhibit
Number
 
Description
31.1
 
Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2
 
Certification of Principal Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32
 
Certification of Chief Executive Officer and Principal Financial Officer Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101.INS
 
XBRL Instance Document
101.SCH
 
XBRL Taxonomy Extension Schema Document
101.CAL
 
XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF
 
XBRL Taxonomy Extension Definition Linkbase Document
101.LAB
 
XBRL Taxonomy Extension Label Linkbase Document
101.PRE
 
XBRL Taxonomy Extension Presentation Linkbase Document

58

BakerCorp International, Inc. Reports