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Edited Transcript of Algeco Scotsman Global SARL earnings conference call or presentation 3-Apr-17 2:00pm GMT

Thomson Reuters StreetEvents

Q4 2016 Algeco Scotsman Global SARL Earnings Call

Apr 3, 2017 (Thomson StreetEvents) -- Edited Transcript of Algeco Scotsman Global SARL earnings conference call or presentation Monday, April 3, 2017 at 2:00:00pm GMT

TEXT version of Transcript

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Corporate Participants

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* Diarmuid Cummins

Algeco Scotsman Global S.a.r.l. - CEO

* Scott Shaughnessy

Algeco Scotsman, Inc. - VP of IR

* Stephen P. Bishop

Algeco Scotsman Global S.a.r.l. - CFO and EVP

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Conference Call Participants

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* Marc DuBois

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Presentation

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Operator [1]

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Good morning, and welcome to the Algeco Scotsman Fourth Quarter 2016 Investor Call. My name is Brandon, and I'll be your operator for today. (Operator Instructions) Please note, this conference is being recorded.

And I will now turn it over to Scott Shaughnessy. You may begin, sir.

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Scott Shaughnessy, Algeco Scotsman, Inc. - VP of IR [2]

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Thank you, Brandon. Good morning, good afternoon and good evening, everyone, and thank you for joining Algeco Scotsman's Fourth Quarter 2016 Earnings Call. Diarmuid Cummins, our Chief Executive Officer, will begin with an introduction and business update; Steve Bishop, our Chief Financial Officer, will cover Q4 highlights and other recent events; and I will review Algeco Scotsman's Q4 and full year 2016 results.

Consistent with previous earnings calls, I want to remind everyone to review the safe harbor statements on Pages 2 and 3 of today's presentation. There are several important disclosures that we ask you to read that are included within the safe harbor statement, including those regarding forward-looking statements, our use of non-GAAP financial measures, the basis of presentation and the use of constant currency. Any forward-looking statement involve risks and uncertainty and is not a guarantee of future performance. Actual results may differ materially from those projected in the forward-looking statements due to a variety of factors. We do not undertake any obligation to update forward-looking statements. Finally, you will find all of the materials for today's call, including a reconciliation of non-GAAP measures, posted to the Investors section of our website.

With that, I'll turn it over to Diarmuid.

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Diarmuid Cummins, Algeco Scotsman Global S.a.r.l. - CEO [3]

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Thanks, Scott. Good morning, good afternoon, good evening, everyone, and thank you for participating in our Q4 earnings call today.

When I last spoke, I told you that Algeco Scotsman is a good business with great people, that it has a few issues that need to be resolved. As you'll hear later in this call, we are well on our way to resolving those issues, but there are still more to do. You will also hear how our owners have supported our business throughout the period and how they and we are working to right size our balance sheet for the future. But before we speak about these things, let's first discuss how the business performed over the last quarter of 2016.

Starting on Page 4, there's an overview of our 2016 fourth quarter. For the quarter, adjusted EBITDA at constant currency was $88.6 million, which was down $21.5 million versus the same period last year, and adjusted EBITDA at actual FX was $86.3 million, which is down over last year by $23.8 million. Expanding on this a bit, the year-over-year EBITDA decline was driven by 3 discrete factors: $4 million negative impact from the off-rent of a large oil and gas-related contract in Alaska; a decrease of $9 million relating to the extension of the South Texas Family Residential Center, which we discussed late last quarter; and a decrease of $11 million, driven by the increased Europe SG&A, $5 million of which was related to the continued buildup of the European shared services and sales support infrastructure, and $6 million of which should be considered more nonrecurring-type charges. Scott and Steve will provide more color on these later in the call, but from my perspective, these items hide the solid underlying performance of the group.

Leasing revenues and total revenues were both up year-on-year and -- but for the items I've just described, our profits would have been $2 million to $3 million up when compared to the prior year, which isn't bad in an environment where all the markets we're operating in weren't firing all cylinders and where tough U.S. election created material commercial uncertainty.

In our leasing operations, we continue to see strong commercial momentum in Europe and the core U.S. and Asia-Pacific is stabilizing. Canada remains a weak spot for our industry, but we believe that the bottom has been reached. Our remote accommodation business in North America is also seeing a change in customer sentiment, although this is yet to drop to our bottom line in Q4. As we recently announced, we launched our PIK Exchange offer in early February, and it was very successful with over 90% of the PIK holders by dollars accepting the offer. We will be using an English scheme arrangement to close out the transaction. Additionally, we are very happy to announce that we have extended our ABL facility until July 2018. Steve will go into greater detail on both of these transactions later in the call, but we view these as critical first steps to achieving our liability management objective.

On Page 5, you'll see our overview of Algeco Scotsman worldwide network and the markets we operate in. We have physical presence in 25 countries and operate 235 branches. We own and lease a fleet of approximately 274,000 modular storage units, as well as 10,500 remote accommodation rooms. On Page 6, you can see the graph, which depicts our graphic revenue mix as well as our revenues by business sector.

On Page 7, we've recapped the company's strategic objectives and priorities. Our strategy has not changed significantly from that which we presented previously. We continue to optimize price globally, as well as increase the amount and percentages of revenues that are derived from our value-added products and services. These services are highly valued by our customers, and we are focused on continuing to drive VAPS growth globally.

We continue to see good market conditions in our 4 core markets, specifically the U.S., France, United Kingdom and Germany. In these countries, our modular lease revenues continues to increase due to focused sales efforts, targeted pricing and increased penetration of our value-added products and services.

As you may recall, we have been working hard to improve utilization of our assets. At the end of 2015, we had reached 75%, and that positive trend continues as we finish the fourth quarter 2016 with utilization of 77.3%.

We continue to manage our costs aggressively. But in markets with strong growth, we are beginning to see some volume-related increases as we stack up to address and capture as many revenue opportunities as possible. We also continue to manage our capital aggressively, and our investments are being made primarily in core markets. In markets where the economy is weak, we've cut costs and rightsized our workforce.

I'll now turn it over to Steve for the Q4 highlights.

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Stephen P. Bishop, Algeco Scotsman Global S.a.r.l. - CFO and EVP [4]

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Thank you, Diarmuid. On to Page 9 and Q4 highlights. Our Q4 revenue was up approximately 2% because of increased modular space growth in Europe and higher new sales volume in Asia Pacific, were partially offset by lower remote accommodations in the Americas, driven by the South Texas Family Residential Center and decreased new sales volume in Europe.

Modular space pricing decreased globally by 2% from the same quarter last year. The decline was due to energy sector-related pricing pressure in Australia, Canada and Alaska. As we've mentioned in previous earnings calls, we increased our focus on value-added products and services, and that increased focus has led to solid improvements in VAPS revenue and related EBITDA.

In the quarter, we saw VAPS revenue grow 18%, both year-over-year and on a per unit basis. Utilization increased 230 basis points from the same quarter last year to 77.3%, driven by an increase in most of our core markets.

Our SG&A increased by $11.3 million as cost saving actions in Canada and corporate were offset by increases in Europe. We continue the process of decentralizing, and functions that used to be done at corporate are being done in the regions. As a result, our corporate costs are going down, but that is leading to increased cost in some of those regions, particularly in Europe. In Europe, we have increased our investment in shared services, accounting and finance and administration as well as sales support infrastructure. The full impact of these cost increases is now in the Q4 2016 run rate, and we do not expect material increases from the current run rate for Europe. Additionally in Q4, there were $6 million of nonrecurring costs in Europe, driven by a number of items, ranging from severance to relocation of a large branch in the United Kingdom.

Our adjusted EBITDA declined by 21.5%, as decreased Europe modular space leasing was offset by remote accommodations in modular space leasing declines in the Americas, lower new sales volume in Europe and higher SG&A.

For the full year 2016, gross capital expenditures were $206 million, down $73 million from the prior year. The investments we made in Q4 were primarily for U.S., France and U.K. fleet refurbishments as well as additional fleet purchases in both Germany and France. Given that we are operating in a liquidity-constrained environment, we're only investing in projects and countries that have the highest return on investment. Scott will make a few additional comments on 2016 CapEx later on.

Over the next couple of slides, I'll review some of the metrics that we consider are important. On Page 10, our average rental rate declined as we continued to see pricing pressures in Australia and Canada. Our strategic focus on value-added products and service continues to be successful, and has been an area where we differentiate from our competitors.

The incremental revenue per unit was $54 per unit 2 years ago and reached $72 per unit in Q4 2016. That's an increase of 33%. This has been and will continue to be a strategic priority for us.

We continue to be pleased that our customers value the products and services that we're offering, and we are planning to continue this focus on [indiscernible solutions for our customers for the foreseeable future

On Page 11, our worldwide utilization for the fourth quarter was up year-over-year from 75% to 77.3%. Year-over-year, our average units on rent decreased modestly, but if we adjust for the Q4 2015 sale of Brazil, units and rent would have actually increased by about 400 units.

The metrics for remote accommodations are listed on Page 12. First, our average daily rate is currently $85, down from $100 a year ago, and our average number of rooms on rent was down about 1,300 rooms from the same quarter last year. The reduction in average daily rate is primarily a result of new contract terms for the South Texas Family Residential Center. The reduced rooms on rent is attributed to the U.S. and Australian commodities-driven workforce camps.

So with that, I'm going to turn it over to Scott to walk us through the fourth quarter and full year financials.

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Scott Shaughnessy, Algeco Scotsman, Inc. - VP of IR [5]

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Thank you, Steve. Consistent with presentations from previous conference calls, all numbers that we review are prepared on a constant currency basis, which we believe our investors to have the best view of the actual operating performance of the company. Our statements showing reported currency are posted on our website, which is www.algecoscotsman.com. So with that, we're going to start on Page 13, and I'll do a quick recap of the fourth quarter financials.

As we can see, leasing and services revenue was down $9.2 million, as modular space increases in Europe were offset by remote accommodations declines in both the U.S. and Asia Pacific. Adjusted gross profit decreased 350 basis points, as increases in Europe and the Americas were offset by declines in the Asia Pacific. As Steve mentioned earlier, SG&A costs increased $11.3 million as cost savings in Canada and corporate were offset by the increases in Europe. Adjusted EBITDA declined $21.5 million as increased Europe modular space leasing was offset by declines in Americas and Asia Pacific remote accommodations and modular space leasing, lower Europe new sales and higher SG&A. Excluding the $9 million decline in the South Texas Family Residential contract extension, remote accommodations would have been flat to prior year.

On Page 14, regarding the Americas, the U.S. economy is still doing well. Mexico is stable, but our business in Canada continues to be negatively impacted by oil and gas.

Starting with revenue, the top line declined from $152.8 million to $135.8 million. Increased revenue from core U.S. modular was offset by decreases in Canada and Alaska modular space, as well as from the impacts of the South Texas Family Residential Center contract extension.

Additionally, you may recall, we sold our business in Brazil in late October 2015, and the sale has had a negative impact on revenue as well, but a positive impact on most other metrics. We continue to see strong growth in the core U.S. modular leasing, but that was more than offset by the lower units on rent and pricing in Canada and Alaska. As Diarmuid mentioned earlier, at the end of Q3, we had a large oil and gas-related contract offering in Alaska that has very good profitability. And while this has had a negative impact on our Q4 results, it will remain a headwind for 2017. We believe these units will go back out on rent, and when they do, it will be very accretive to earnings.

Adjusted EBITDA declined $13.8 million as increased core U.S. modular leasing volume was offset by lower modular space volume in Canada, the $9 million impact of the South Texas Family Residential Center contract extension and the $4 million decrease related to the Alaska contract offering.

In terms of CapEx, Q4 2016 CapEx of $22.3 million was $11.9 million, down from $34.2 million last year. We've continued to invest in our U.S. fleet, but we moderate these investments with managing our available liquidity. Average modular units on rent are down, primarily due to Brazil, Canada and Alaska. In Canada, they're working to mitigate the impact of the units returned from oil and gas customers, but it will continue to be a drag for several quarters. The average modular rate was down year-over-year, as increases in the U.S. were offset by pricing pressure in both Canada and Alaska.

As previously announced, we've modified and extended the South Texas Family Residential leasing and services agreement with CoreCivic. The modified contract provides for a lower monthly payment with a new term extending 5 additional years through September 2021. As the new contract commenced in October 2016, the revised terms and lower rates are driving the drop in average daily rate. Excluding the South Texas Family Residential Center, Q4 2016 average daily rate would have been flat sequentially and up $10 over prior year.

Also, as a reminder, when comparing full year 2017 versus full year 2016, the impacts of the South Texas Family Residential contract extension would be a $31 million reduction to EBITDA, $20 million of which is cash and $11 million of which is deferred revenue or noncash.

Moving on to Page 15, there's a chart that shows the U.S. modular spaces leasing revenue. In Q4, modular space leasing revenue declined $1.3 million. But if you excluded Alaska, it would have increased $2.9 million or 5%. On a full year basis, excluding Alaska, core U.S. modular space leasing increased $15.6 million or 7%. The U.S. business achieved record sales productivity in 2016, primarily by driving rental rates in cross-selling and expanded offering of value-added products and services to our customers. In early 2016, the U.S. deployed a best-in-class pricing optimization tool as part of a multiyear plan to optimize pricing. We've been pleased with the results, and these changes in Q4 core U.S.-delivered spot rates were up 14% year-over-year.

Additionally, the continued expansion of the U.S. VAPS program has resulted in a 25% year-over-year increase in VAPS dollars per unit. We consider these initiatives a key differentiator relative to our competition and an attractive source of capital efficient growth and profitability. As we've discussed on previous calls, we've continued our investment in the U.S. fleet to meet market demand, and that investment, combined with the continued focus on pricing optimization and VAPS expansion, are driving higher revenue and EBITDA.

Moving on to Page 16 regarding Europe. No real change in the market, although I would note demand for asylum seeker housing has had a positive impact on Germany in 2016, both

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and France, and better revenue contribution from VAPS across Europe. Sales was down $9.1 million, driven by the timing of new unit sales projects in France and the U.K., partially offset by increased volume in Germany. Adjusted EBITDA decreased $7.2 million, as increased modular space volume was offset by lower new sales and increased SG&A. As Steve mentioned earlier, the $11 million SG&A increase is driven by a $6 million in what we would consider nonrecurring cost, and $5 million is related to shared services and sales support infrastructure. As revenue continues to grow in core European markets, we've expanded our selling and sales support-related investments. Utilization continues to be strong in the region at 80%, which is up from 78% the same quarter last year. We are seeing strong pricing improvement, driven by both Germany and France, and overall pricing throughout the rest of Europe is solid as well.

In terms of CapEx, we've continued to increase our investment in Germany, France and the U.K. in order to meet market demand.

On Page 17, I'm going to provide an update on the European asylum seeker housing opportunity. As we've mentioned during the last 2 investor calls, with the need for asylum-related temporary accommodations beginning to lessen, the demand seems to have shifted to more permanent construction versus temporary space or leasing. At the end of the quarter, we had approximately 4,400 units on rent, which is a decrease of 350 units from the end of Q3. As for new sales, we have sold 3,300 units to date, with 900 being sold in Q4.

Going forward, we don't expect the asylum seeker housing opportunities will be driving revenues. As such, we don't believe that it's necessary or helpful to investors for us to continue providing information breaking out this market niche. The asylum opportunity has been very accretive to our business and unit on rent run rate. But in 2017, we would expect demand will shift from asylum seeker housing to more infrastructure and education opportunity. Though clearly, some of these opportunities could end up further supporting people who are once asylum seekers.

While market conditions continue to be very good in Europe, they are likely to trend back to more normal market conditions as the accelerated asylum seeker-related growth has slowed. We expect the performance of the European business for 2017 to be very solid, which will be attributable to a combination of strong operating results from Germany, France and the U.K. and stability from the rest of Europe.

Now on Page 18, I'll quickly review Asia Pacific. On a constant currency basis, total revenue was up year-over-year for the third quarter in a row. Leasing and services revenue increased $1 million, as higher VAPS and modular space leasing and delivery and installation were partially offset by lower remote accommodations. Average modular units on rent were up 1,744 units over Q4 2015. Though unfortunately, the increased units on rent was not enough to offset the continued pressure on rates.

Sales revenue was up $23.5 million, driven by higher volumes in Australia, New Zealand and China. Adjusted EBITDA declined -- decreased $2.2 million, as increased new sales margins in New Zealand and China were offset by lower remote accommodations volume and new sales margins in Australia. After 4 sequential quarters of flat EBITDA in 2016, we feel the Asia Pacific business has finally plateaued. We are looking at additional cost reductions in Australia, and we may exit some locations. It is clearly a smaller business today and they will need to focus on fewer, more profitable business segments and opportunities.

Now with that, I'll spend a few slides reviewing our full year 2016 results. Starting on Page 19, there's an overview of our full year 2016. For the year, adjusted EBITDA at constant currency was $410.1 million, which was up $0.1 million versus same period last year, and adjusted EBITDA at actual FX was $402.8 million, which was down by $7.2 million.

When looking at full year adjusted EBITDA growth, if we pro forma for the Alaska contract offering, the Europe nonrecurring cost and the impact of the South Texas Family Residential Center contract extension, adjusted EBITDA would have increased approximately $19 million or 5%. On Page 20, I'll do a quick recap of the full year 2016 financials. As you can see, leasing and services revenue was down $10 million, as increased modular space in Europe and the U.S. were offset by remote accommodation declines in both the U.S. and Asia Pacific. New unit sales were up $8.5 million as increases in Asia Pacific were offset by declines in Europe and Americas. Rental unit sales were up $7.5 million as the U.S. has continued to accelerate the sale of noncore older assets in weaker markets. Adjusted gross profit was essentially flat as increases in Europe and the Americas were offset by declines in Asia Pacific.

SG&A increased $1.7 million as the increases in Europe discussed earlier were offset by cost savings in Canada, Australia and corporate. Full year adjusted EBITDA was flat as increased modular space leasing in Europe and the U.S. were offset by decreased U.S. and Asia Pacific remote accommodations and lower new unit sales. As mentioned earlier, adjusting for the Alaska offering, the impact of the South Texas Family Residential Center and the Europe nonrecurring cost, adjusted EBITDA would have increased approximately $19 million.

On Page 21, we're showing pro forma Americas and Europe year-over-year EBITDA growth adjusted for the 3 factors mentioned earlier. For the Americas, if we pro forma the Alaska contract offering and the South Texas Family Residential facility, EBITDA would have grown $10 million or 4%. For Europe, if we pro forma the nonrecurring cost, EBITDA would have grown $20 million or 11%. Either way, given all the ins and outs, and not to mention the long-term benefit of extending the South Texas Family Residential Center, 2016 was a very good year for both the Americas and Europe.

Moving on to Page 22, you can see our gross CapEx for full year 2016 was $206 million. It is down approximately $73 million from the prior year, as increased investment in Europe was partially offset by lower spend in the Americas.

As you may recall, in the first half of 2015, we spent $40 million related to the South Texas Family Residential Center. And excluding that 2015 investment, 2016 would have only been down $30 million. We continue to manage our CapEx very closely and we continue to do so with limited liquidity in 2017.

Given the nature of our CapEx investment with very short lead times, we can reduce or increase CapEx spend if demand or market conditions change. And with that, I'll turn it back over to Steve, who's going to make some comments on our debt structure and recent events.

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Stephen P. Bishop, Algeco Scotsman Global S.a.r.l. - CFO and EVP [6]

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Thanks, Scott. So on Page 23, a quick review of our debt structure. As of December 31, total net debt was $3.1 billion, net leverage was 7.6x, our net interest coverage was 1.7x. Availability in the ABL facility was approximately $51 million after consideration of the 90% covenant threshold. As I'll mention a little bit later, we've amended our ABL agreement -- amended and extended our ABL agreement, so the ABL availability of the new agreement would have been $41 million. Total liquidity at year-end was $121 million, and that consists of $70 million in cash and $51 million of ABL availability.

On Page 24, there's an overview of the ABL borrowing base. The borrowing base contains certain assets of the U.S., Canada, U.K., Australia and New Zealand. And the ABL advance rates are set semiannually. The borrowing base at year-end was $1,066,000,000, which was down $25 million from Q3 2016. Until recently, most of the decline in the borrowing base has been due to the impact of foreign exchange. But during our last appraisal, the advance rates in most jurisdictions were lowered, and the resulting impact in 2016 drove most of the $25 million in reduction. In February 2017, the final results of the appraisal were known, and the borrowing base was reduced by an additional $27 million, which was the final result of the appraisal. So the total impact of the appraisal-related borrowing base adjustments for the year was $52 million.

Next, I'd like to provide an update on some recent events we believe are important to our investors. So if you turn to Page 25. And as most of you know, in early February, we announced the launch of the PIK Exchange offer. For the terms of the exchange, holders of the PIK loans will exchange their PIK loans for a pro rata share of $95 million in cash as well as Class B limited partnership interest. Additionally, an affiliate of the TDR has committed to invest an additional $250 million in AS Global in the form of cash, indebtedness of the AS group or other investments as agreed with the majority of the Class B and limited partnership holders.

We view that the PIK Exchange is a key first step in addressing the company's capital structure. A successful PIK Exchange will leave AS Global the PIK loan debt burden in the future maturity overhead. From PIK holder's point of view, it provides lenders with a cash return and participation in future upside.

Moving on to Page 26, I'll quickly update everyone where we are in the PIK process. As mentioned earlier, the PIK Exchange was launched in early February, and the offering expired on March 21. The initial offering was very successful, with over 90% participation. Now an English scheme of arrangement will be used to implement the terms of the PIK Exchange, such that it'll be binding on 100% of the PIK lenders. We've planned to complete this process as quickly as possible.

Turning to Page 27, we're happy to announce that our ABL credit facility has been extended until July 2018. After the PIK offering, extending the ABL was the next natural step as we progressed with our liability management objective. The size of the new ABL facility was reduced from $1.355 billion to $1.1 billion, which reflects the fact that we've been focusing on generating more EBITDA from our assets and have been gradually reducing our asset base. We believe the size of the current ABL will be adequate to meet our needs for the remaining term of the ABL credit agreement.

We replaced the previous spring covenants with financial covenants from minimum LTM EBITDA as well as the requirement for excess availability and a minimum cash requirements. As I previously mentioned, we are working to compete the PIK Exchange as quickly as possible. And doing so, before October 2017 is the required condition on the ABL extension. Our lenders were supportive throughout the process, and we believe we are now well positioned to move forward.

With that, I'll turn it back to Diarmuid for some closing remarks.

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Diarmuid Cummins, Algeco Scotsman Global S.a.r.l. - CEO [7]

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Thanks, Steve. So in closing, look, I'm relatively pleased with the performance of the group over the quarter, notwithstanding the items we discussed to the outset that have pulled down the earnings from the quarter. The continued strength of our operations in Europe and U.S. are leading the way, and the ongoing headwinds in commodity-exposed geographies, I think, are starting to abate. That said, we're nowhere near the level of earnings that this group is capable of, and the strength of the U.S. dollar continues to cause us earnings volatility. But I think we're heading in the right direction.

Our global deployment of fleet continues to improve, and in many countries, unit pricing has remained strong. As of Q3 2016, we have seen this improvement offset by continued weakness in utilization and pricing in commodity-exposed parts of Canada and Australia, but as I mentioned earlier, even Australia is starting to see an improvement in leasing conditions.

As we confirmed on previous calls, the business has taken steps to ensure that resources are only deployed where they have the most benefit and drive the greatest returns, so I'm comfortable that we are doing all we can to improve the outlook for the group. We've had some good wins this year, but we've also got to recognize that some of those wins are one-offs, and therefore, need to be replaced by other activities going forward. And as I said at the beginning, this is a good business with great people, so I'm confident that we all, as a group, will be able to capture every opportunity that arises.

You've also heard that we have now executed -- started to execute the steps needed to reset our balance sheet. We aren't finished yet, but we are well on our way. And I'd like to thank our creditors, our owners and our employees working so diligently and collectively for the betterment of our group. We've proven that we can manage our CapEx, and we're operating expenses and working capital despite the tight liquidity, and we continue to find creative ways to improve our liquidity and available cash.

As I say, there's still work to be done organically, and with the help of our stakeholders, I'm confident the group will succeed. We've said on previous calls that we'll continue to work hard on behalf of our investors and owners, and that's the code we live by. So with that, Brandon, I think we're ready to take some questions. If you'd open up the call for the questions, that would be appreciated.

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Questions and Answers

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Operator [1]

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(Operator Instructions) And from Venor Capital, we have Marc DuBois online.

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Marc DuBois, [2]

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The first one, just on the European business. I know you guys alluded to the timing of new sales volumes in France and U.K. not coming in the quarter. I guess, if you could just allude to what is the incremental impact that would have been on both revenue and EBITDA if you had that in Q4?

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Scott Shaughnessy, Algeco Scotsman, Inc. - VP of IR [3]

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It's hard to say. I mean, year-over-year, new sales margins are typically 10% to 15%. So if we said $9 million down, I mean, it's not a huge number, but I mean, the thing about new sales is it really is -- can be very lumpy. It's hard to really project one quarter over another or sequential quarters because, especially when you're at a year-end into a new year, it can really -- projects can easily close out or not and time into the next year.

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Marc DuBois, [4]

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Got it. And then separately, I know modular pricing was down 2% year-over-year in the quarter. I guess, if you incorporated VAPS into that number, it becomes, call it, plus 2% year-over-year. Is there any reason to expect that, that growth on a blended VAPS and modular pricing basis doesn't continue in '17?

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Scott Shaughnessy, Algeco Scotsman, Inc. - VP of IR [5]

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What are you referring to, total AS, Europe, or just Europe?

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Marc DuBois, [6]

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Total. So modular pricing, overall, for the company was down 2% year-over-year. But if you incorporate VAPS into that, I think my numbers were getting plus 2% year-over-year.

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Scott Shaughnessy, Algeco Scotsman, Inc. - VP of IR [7]

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Yes, I mean, clearly, the VAPS numbers are growing very strongly across in most countries, yes, and ARR is down slightly because of -- as we've mentioned, the commodity-driven reasons.

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Marc DuBois, [8]

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Right. My question is that plus 2%, if you incorporate VAPS, is there any reason to expect that doesn't continue in full year '17?

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Stephen P. Bishop, Algeco Scotsman Global S.a.r.l. - CFO and EVP [9]

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No.

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Marc DuBois, [10]

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Got it. And then last question, just on [ Keystone ]. Like where are you guys in the process of renegotiating that or kind of where does that stand from year-end?

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Diarmuid Cummins, Algeco Scotsman Global S.a.r.l. - CEO [11]

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Well, it's -- we've -- Scott do it with TransCanada, they are -- they're getting ready for implementation, but obviously, they have not gotten -- laid the full [ greenlight ] yet. So it's not -- we're not in a position to say when it will be up and running. Obviously, you know as much as we do as far as where the new administration is and the support for it locally. So we still continue to view it as a positive, and we expect to see -- given where we are today, do I expect to see it in the short term? Probably not. It's going to -- it probably will take some time to get all the [ consensus ] in place, I would've thought.

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Operator [12]

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(Operator Instructions) And it looks like we have no further questions at the moment.

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Diarmuid Cummins, Algeco Scotsman Global S.a.r.l. - CEO [13]

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Okay. Well, thank you all for joining our call. And I hope everyone has a good rest of the day. Thank you for joining.

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Operator [14]

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Okay. Thank you, ladies and gentlemen. This concludes today's conference. Thank you for joining. You may now disconnect.