e10vq
U. S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
Form 10-Q
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þ |
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended June 30, 2009
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o |
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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 1-12804
(Exact name of registrant as specific in its charter)
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Delaware
(State or other jurisdiction of
incorporation or organization)
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86-0748362
(IRS Employer
Identification No.) |
7420 S. Kyrene Road, Suite 101
Tempe, Arizona 85283
(Address of principal executive offices)
(480) 894-6311
(Registrants 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 þ No o
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 (§232.405 of this chapter) during the preceding 12 months
(or for such shorter period that the registrant was required to submit and post such files). Yes o No o
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 the definitions of large
accelerated filer, accelerated filer and smaller reporting company in Rule 12b-2 of the
Exchange Act. (Check one):
Large accelerated filer þ |
Accelerated filer o |
Non-accelerated filer o (Do not check if a smaller reporting company) |
Smaller reporting company o |
Indicate by check mark whether the registrant is a shell company (as defined by Rule 12b-2 of
the Securities Exchange Act of
1934) Yes o No þ
At July 31, 2009, there were outstanding 35,470,957 shares of the issuers common stock.
MOBILE MINI, INC.
INDEX TO FORM 10-Q FILING
FOR THE QUARTER ENDED JUNE 30, 2009
TABLE OF CONTENTS
2
PART I. FINANCIAL INFORMATION
ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS
MOBILE MINI, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands except per share data)
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December 31, 2008 |
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June 30, 2009 |
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(See Note A) |
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(unaudited) |
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ASSETS |
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Cash and cash equivalents |
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$ |
3,184 |
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$ |
3,871 |
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Receivables, net of allowance for doubtful accounts of $7,193 and $5,681 at
December 31, 2008 and June 30, 2009, respectively |
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61,424 |
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44,864 |
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Inventories |
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26,577 |
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24,327 |
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Lease fleet, net |
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1,078,156 |
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1,069,758 |
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Property, plant and equipment, net |
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88,509 |
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85,893 |
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Deposits and prepaid expenses |
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13,287 |
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10,951 |
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Other assets and intangibles, net |
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35,063 |
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31,038 |
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Goodwill |
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492,657 |
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515,558 |
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Total assets |
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$ |
1,798,857 |
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$ |
1,786,260 |
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LIABILITIES AND STOCKHOLDERS EQUITY |
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Liabilities: |
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Accounts payable |
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$ |
21,433 |
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$ |
16,686 |
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Accrued liabilities |
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86,214 |
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71,899 |
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Lines of credit |
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554,532 |
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521,672 |
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Notes payable |
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1,380 |
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673 |
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Obligations under capital leases |
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5,497 |
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4,783 |
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Senior notes, net |
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345,797 |
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346,163 |
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Deferred income taxes |
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134,786 |
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145,233 |
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Total liabilities |
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1,149,639 |
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1,107,109 |
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Commitments and contingencies |
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Convertible preferred stock; $.01 par value, 20,000 shares authorized,
8,556 issued and outstanding at December 31, 2008 and June 30, 2009,
respectively, stated at liquidity preference values |
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153,990 |
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153,990 |
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Stockholders equity: |
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Common stock $.01 par value: 95,000 shares authorized, 37,489 issued and
35,314 outstanding at December 31, 2008 and 37,646 issued and 35,471
outstanding at
June 30, 2009, respectively |
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375 |
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376 |
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Additional paid-in capital |
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328,696 |
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332,459 |
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Retained earnings |
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242,935 |
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256,629 |
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Accumulated other comprehensive loss |
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(37,478 |
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(25,003 |
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Treasury stock, at cost, 2,175 shares |
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(39,300 |
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(39,300 |
) |
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Total stockholders equity |
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495,228 |
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525,161 |
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Total liabilities and stockholders equity |
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$ |
1,798,857 |
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$ |
1,786,260 |
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See accompanying notes to the condensed consolidated financial statements.
3
MOBILE MINI, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(In thousands except per share data)
(unaudited)
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Three Months Ended June 30, |
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2008 |
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2009 |
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Revenues: |
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Leasing |
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$ |
72,849 |
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$ |
84,397 |
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Sales |
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7,825 |
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9,858 |
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Other |
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411 |
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669 |
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Total revenues |
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81,085 |
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94,924 |
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Costs and expenses: |
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Cost of sales |
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5,358 |
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6,620 |
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Leasing, selling and general expenses |
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43,796 |
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49,075 |
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Integration, merger and restructuring expenses |
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11,609 |
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5,629 |
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Depreciation and amortization |
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5,747 |
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10,434 |
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Total costs and expenses |
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66,510 |
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71,758 |
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Income from operations |
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14,575 |
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23,166 |
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Other income (expense): |
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Interest income |
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29 |
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3 |
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Interest expense |
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(6,419 |
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(14,966 |
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Foreign currency exchange gain |
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3 |
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8 |
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Income before provision for income taxes |
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8,188 |
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8,211 |
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Provision for income taxes |
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3,327 |
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2,984 |
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Net income |
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4,861 |
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5,227 |
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Earnings allocable to preferred stock |
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(40 |
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(1,041 |
) |
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Net income available to common stockholders |
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$ |
4,821 |
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$ |
4,186 |
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Earnings per share: |
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Basic |
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$ |
0.14 |
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$ |
0.12 |
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Diluted |
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$ |
0.14 |
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$ |
0.12 |
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Weighted average number of common and common share equivalents outstanding: |
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Basic |
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34,115 |
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34,390 |
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Diluted |
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34,969 |
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43,111 |
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See accompanying notes to the condensed consolidated financial statements.
4
MOBILE MINI, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(In thousands except per share data)
(unaudited)
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Six Months Ended June 30, |
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2008 |
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2009 |
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Revenues: |
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Leasing |
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$ |
142,885 |
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$ |
173,913 |
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Sales |
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15,923 |
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19,918 |
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Other |
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818 |
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1,257 |
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Total revenues |
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159,626 |
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195,088 |
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Costs and expenses: |
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Cost of sales |
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10,991 |
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13,489 |
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Leasing, selling and general expenses |
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87,266 |
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100,647 |
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Integration, merger and restructuring expenses |
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11,609 |
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7,843 |
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Depreciation and amortization |
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11,416 |
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20,687 |
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Total costs and expenses |
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121,282 |
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142,666 |
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Income from operations |
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38,344 |
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52,422 |
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Other income (expense): |
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Interest income |
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62 |
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6 |
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Interest expense |
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(12,564 |
) |
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(30,207 |
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Foreign currency exchange loss |
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(8 |
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(75 |
) |
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Income before provision for income taxes |
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25,834 |
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22,146 |
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Provision for income taxes |
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10,315 |
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8,453 |
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Net income |
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15,519 |
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13,693 |
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Earnings allocable to preferred stock |
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(40 |
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(2,729 |
) |
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Net income available to common stockholders |
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$ |
15,479 |
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$ |
10,964 |
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Earnings per share: |
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Basic |
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$ |
0.45 |
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$ |
0.32 |
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Diluted |
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$ |
0.45 |
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$ |
0.32 |
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Weighted average number of common and common share equivalents outstanding: |
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Basic |
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34,100 |
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34,367 |
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Diluted |
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34,655 |
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43,047 |
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See accompanying notes to the condensed consolidated financial statements.
5
MOBILE MINI, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(unaudited)
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Six Months Ended June 30, |
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2008 |
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2009 |
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Cash Flows From Operating Activities: |
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Net income |
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$ |
15,519 |
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$ |
13,693 |
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Adjustments to reconcile income to net cash provided by operating activities: |
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Provision for doubtful accounts |
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750 |
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1,463 |
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Amortization of deferred financing costs |
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669 |
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2,594 |
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Share-based compensation expense |
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2,364 |
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3,281 |
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Depreciation and amortization |
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11,416 |
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20,687 |
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Gain on sale of lease fleet units |
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(3,094 |
) |
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(5,779 |
) |
Loss on disposal of property, plant and equipment |
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29 |
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36 |
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Deferred income taxes |
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10,237 |
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7,824 |
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Foreign currency transaction loss |
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8 |
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75 |
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Changes in certain assets and liabilities, net of effect of businesses acquired: |
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Receivables |
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(3,014 |
) |
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16,100 |
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Inventories |
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(3,570 |
) |
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1,639 |
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Deposits and prepaid expenses |
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900 |
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2,435 |
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Other assets and intangibles |
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99 |
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(441 |
) |
Accounts payable |
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(3,714 |
) |
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(3,871 |
) |
Accrued liabilities |
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12,942 |
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(12,900 |
) |
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Net cash provided by operating activities |
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41,541 |
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46,836 |
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Cash Flows From Investing Activities: |
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Cash paid for businesses acquired |
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(21,273 |
) |
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Additions to lease fleet, excluding acquisitions |
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(34,613 |
) |
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(10,879 |
) |
Proceeds from sale of lease fleet units |
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9,057 |
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16,929 |
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Additions to property, plant and equipment |
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(4,842 |
) |
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(4,774 |
) |
Proceeds from sale of property, plant and equipment |
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59 |
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|
243 |
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Other |
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112 |
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Net cash (used in) provided by investing activities |
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(51,612 |
) |
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1,631 |
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Cash Flows From Financing Activities: |
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Net borrowings (repayments) under lines of credit |
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140,763 |
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(32,861 |
) |
Deferred financing costs |
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(14,555 |
) |
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Principal payments on notes payable |
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(113,101 |
) |
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(715 |
) |
Principal payments on capital lease obligations |
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(7 |
) |
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(714 |
) |
Issuance of common stock, net |
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1,053 |
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|
274 |
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Net cash provided by (used in) financing activities |
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14,153 |
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(34,016 |
) |
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Effect of exchange rate changes on cash |
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(240 |
) |
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|
(13,764 |
) |
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Net increase in cash |
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|
3,842 |
|
|
|
687 |
|
Cash at beginning of period |
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|
3,703 |
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|
3,184 |
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Cash at end of period |
|
$ |
7,545 |
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$ |
3,871 |
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Supplemental Disclosure of Cash Flow Information: |
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Interest rate swap changes in fair value charged (credited) to equity |
|
$ |
208 |
|
|
$ |
(1,246 |
) |
|
|
|
|
|
|
|
See accompanying notes to the condensed consolidated financial statements.
6
MOBILE MINI, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
NOTE A Basis of Presentation
The accompanying unaudited condensed consolidated financial statements have been prepared in
conformity with U.S. generally accepted accounting principles applicable to interim financial
information and the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they
do not include all the information and footnotes required by accounting principles generally
accepted in the United States for complete financial statements. In the opinion of management of
Mobile Mini, Inc. (Mobile Mini or the Company), all adjustments (which include normal recurring
adjustments) necessary to present fairly the financial position, results of operations, and cash
flows for all periods presented have been made. All significant inter-company balances and
transactions have been eliminated.
The local currency of the Companys foreign operations is converted to U.S. currency for the
Companys condensed consolidated financial statements for each period being presented and the
Company is subject to foreign exchange rate fluctuations in connection with the Companys European
and Canadian operations.
The condensed consolidated balance sheet at December 31, 2008, has been derived from the audited
consolidated financial statements at that date but does not include all of the information and
footnotes required by accounting principles generally accepted in the United States for complete
financial statements.
The results of operations for the six month period ended June 30, 2009, are not necessarily
indicative of the operating results that may be expected for the entire year ending December 31,
2009. Historically, Mobile Mini experiences some seasonality each year which has caused lower
utilization rates for the Companys lease fleet and a marginal decrease in cash flow during the
first half of the year. These condensed consolidated financial statements should be read in
conjunction with the Companys December 31, 2008, consolidated financial statements and
accompanying notes thereto, which are included in the Companys Annual Report on Form 10-K filed
with the Securities and Exchange Commission (SEC) on March 2, 2009.
Mobile Mini has evaluated subsequent events through the day preceding the date (August 10, 2009) it
filed its report on Form 10-Q with the SEC for the quarter ended June 30, 2009.
NOTE B Acquisition of Mobile Storage Group
On June 27, 2008, the Company acquired Mobile Storage Group, Inc. (MSG) and its subsidiaries (the
Merger). The discussion of the Companys business, financial condition and results of operations
includes the results of the combined operations with MSG since June 27, 2008.
The fair value of the assets acquired and liabilities assumed have been adjusted in 2009 as follows
in thousands:
|
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|
|
|
Receivables |
|
$ |
(619 |
) |
Inventories |
|
|
(184 |
) |
Lease fleet, net |
|
|
(13,100 |
) |
Property, plant and equipment, net |
|
|
(2,388 |
) |
Deposits, prepaid expenses and other assets |
|
|
(65 |
) |
Liabilities |
|
|
1,590 |
|
|
|
|
|
|
|
$ |
(14,766 |
) |
|
|
|
|
NOTE C Recent Accounting Pronouncements
In December 2007, the Financial Accounting Standards Board (FASB) issued SFAS No. 141 (revised
2007), Business Combinations (SFAS No. 141(R)) which establishes principles and requirements for
how an acquirer recognizes and measures in its financial statements the identifiable assets
acquired, the liabilities assumed and any noncontrolling interest in an acquiree, including the
recognition and measurement of goodwill acquired in a business combination. Certain forms of
contingent consideration and certain acquired contingencies will be recorded at fair value at the
acquisition date. SFAS No. 141(R) also provides that acquisition costs will
7
MOBILE MINI, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited) Continued
generally be expensed as incurred and restructuring costs will be expensed in periods after the
acquisition date. In April 2009, the FASB issued FSP FAS 141(R)-1, Accounting for Assets Acquired
and Liabilities Assumed in a Business Combination That Arise from Contingencies (FSP FAS 141(R)-1).
FSP FAS 141(R)-1 amends and clarifies SFAS No. 141(R) to address application issues on initial
recognition and measurement, subsequent measurement and accounting and disclosure of assets and
liabilities arising from contingencies in a business combination. FSP FAS 141(R)-1 is effective
for assets or liabilities rising from contingencies in business combinations for which the
acquisition date is on or after the beginning of the first annual reporting period beginning on or
after December 15, 2008. The Company adopted SFAS No. 141(R) and FSP FAS 141(R)-1 on January 1,
2009 and will apply both prospectively to future business combinations. The impact of the adoption
of SFAS No. 141(R) and FSP FAS 141(R)-1 will depend on the nature of future acquisitions completed
by the Company.
In December 2007, the FASB issued SFAS No. 160, Noncontrolling Interests in Consolidated Financial
Statements An Amendment of ARB No. 51 (SFAS No. 160). SFAS No. 160 amends Accounting Research
Bulletin ARB No. 51, Consolidated Financial Statements, to establish accounting and reporting
standards for the noncontrolling interest in a subsidiary and for the deconsolidation of a
subsidiary. The Company adopted SFAS No. 160 on January 1, 2009. As there are no noncontrolling
interests in any of the Companys consolidated subsidiaries; the adoption of SFAS No. 160 did not
have an impact on the Companys results of operations or financial condition.
In March 2008, the FASB issued SFAS No. 161, Disclosures about Derivative Instruments and Hedging
Activities An Amendment of FASB Statement No. 133 (SFAS No. 161). SFAS No. 161 requires
qualitative disclosures about objectives and strategies for using derivatives, quantitative data
about the fair value of and gains and losses on derivative contracts and details of
credit-risk-related contingent features in hedged positions. The statement also requires enhanced
disclosures regarding how and why entities use derivative instruments, how derivative instruments
and related hedged items are accounted and how derivative instruments and related hedged items
affect entities financial position, financial performance and cash flows. The Company adopted
SFAS No. 161 on January 1, 2009 with no effect on the Companys results of operations or financial
condition.
In November 2008, the FASB ratified EITF Issue No. 08-7, Accounting for Defensive Intangible Assets
(EITF No. 08-7). EITF No. 08-7 applies to defensive intangible assets, which are acquired
intangible assets that the acquirer does not intend to actively use but intends to hold to prevent
its competitors from obtaining access to them. As these assets are separately identifiable, EITF
No. 08-7 requires an acquiring entity to account for defensive intangible assets as a separate unit
of accounting. Defensive intangible assets must be recognized at fair value in accordance with
SFAS No. 141(R) and SFAS No. 157. The Company adopted EITF No. 08-7 on January 1, 2009. EITF No.
08-7 could have a material effect on the Companys results of operations or financial position for
future periods but its effects will depend on the nature of future acquisitions completed by the
Company.
In April 2009, the FASB issued FSP FAS 107-1 and APB 28-1, Interim Disclosure about Fair Value of
Financial Instruments (FSF FAS 107-1 and APB 28-1). FSP FAS 107-1 and APB 28-1 amends SFAS No.
107, Disclosures about Fair Value of Financial Instruments, to require disclosures about fair value
of financial instruments for interim reporting periods of publicly traded companies as well as in
annual financial statements. The FSP also amends APB Opinion No. 28, Interim Financial Reporting,
to require those disclosures in summarized financial information at interim reporting periods. FSP
FAS 107-1 and APB 28-1 is effective for interim reporting periods ending after June 15, 2009 with
early adoption permitted for periods ending after March 15, 2009. The Company early adopted FSP
FAS 107-1 and APB 28-1 for the interim period ended March 31, 2009, and its adoption did not have
an impact on the Companys condensed consolidated financial statements.
In May 2009, the FASB issued SFAS No. 165, Subsequent Events (SFAS No. 165). SFAS No. 165
establishes general standards of accounting for and disclosure of events that occur after the
balance sheet date but before the financial statements are issued or are available to be issued.
SFAS No. 165 provides guidance on the period after the balance sheet date during which management
of a reporting entity should evaluate events or transactions that may occur for potential
recognition or disclosure in the financial statements, the circumstances under which an entity
should recognize events or transactions occurring after the balance sheet date in its financial
statements and the disclosures that an entity should make about events or transactions that
occurred after the balance sheet date. The Company adopted SFAS No. 165 during the interim period ended June 30, 2009, and its
adoption did not have an impact on the Companys condensed consolidated financial statements.
8
MOBILE MINI, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited) Continued
NOTE D Fair Value Measurements
The Company adopted SFAS No. 157, Fair Value Measurements (SFAS No. 157) on January 1, 2008. SFAS
No. 157 defines fair value as the price that would be received from selling an asset or paid to
transfer a liability in an orderly transaction between market participants. As such, fair value is
a market-based measurement that should be determined based on assumptions that market participants
would use in pricing an asset or liability. As a basis for considering such assumptions, SFAS No.
157 establishes three levels of inputs that may be used to measure fair value:
Level 1 |
|
Observable inputs such as quoted prices in active markets for identical assets or liabilities; |
|
Level 2 |
|
Observable inputs, other than Level 1 inputs in active markets, that are observable either directly or indirectly; and |
|
Level 3 |
|
Unobservable inputs for which there is little or no market data, which require the reporting entity to develop its
own assumptions. |
Assets and liabilities measured at fair value on a recurring basis are as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quoted |
|
|
|
|
|
|
|
|
|
|
|
|
Prices in |
|
|
|
|
|
|
|
|
|
|
|
|
Active Markets for |
|
Significant |
|
Significant |
|
|
|
|
|
|
|
|
Identical |
|
Other Observable |
|
Unobservable |
|
|
|
|
|
|
|
|
Assets |
|
Inputs |
|
Inputs |
|
Valuation |
|
|
Fair Value |
|
(Level 1) |
|
(Level 2) |
|
(Level 3) |
|
Technique |
June 30, 2009: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest rate swap agreements |
|
$ |
(9,493 |
) |
|
$ |
|
|
|
$ |
(9,493 |
) |
|
$ |
|
|
|
|
(1 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2008: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest rate swap agreements |
|
$ |
(11,532 |
) |
|
$ |
|
|
|
$ |
(11,532 |
) |
|
$ |
|
|
|
|
(1 |
) |
|
|
|
(1) |
|
The Companys interest rate swap agreements are not traded on a market exchange;
therefore, the fair values are determined using valuation models which include assumptions
about the LIBOR yield curve at the reporting dates as well as counter party credit risk and
the Companys own non-performance risk. The Company has consistently applied these
calculation techniques to all periods presented. At June 30, 2009, the fair value of
interest rate swap agreements is recorded in accrued liabilities in the Companys condensed
consolidated balance sheet. |
NOTE E Fair Value of Financial Instruments
The Company determines the estimated fair value of financial instruments using available market
information and valuation methodologies. Considerable judgment is required in estimating fair
values. Accordingly, the estimates may not be indicative of the amounts it could realize in
current market exchange.
The carrying amounts of cash, receivables, accounts payable and accrued liabilities approximate
fair values based on the liquidity of these financial instruments or based on their short-term
nature. The carrying amounts of the Companys borrowings under its credit facility and notes
payable approximate fair value. The fair values of the Companys notes payable and credit facility
are estimated using discounted cash flow analyses, based on the Companys current incremental
borrowing rates for similar types of borrowing arrangements. Based on the borrowing rates
currently available to the Company for bank loans with similar terms and average maturities, the
fair value of the Companys notes payable and credit facility debt at December 31, 2008 and June
30, 2009, approximated their respective book values. The fair value of the Companys Senior Notes
at December 31, 2008 ($345.8 million principal amount outstanding) and June 30, 2009 ($346.2
million principal amount outstanding), was approximately $244.0 million and $316.4 million,
respectively. The determination for fair value is based on the latest sales price at the end of
each period obtained from a third-party institution.
9
MOBILE MINI, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited) Continued
Note F Earnings Per Share
As a result of issuing the Preferred Stock, which participates in distributions of earnings on the
same basis as shares of common stock, the Company has applied the provisions of EITF Issue No.
03-6, Participating Securities and the Two-Class Method under FASB Statement 128 (EITF No. 03-6).
This issue established standards regarding the computation of earnings per share (EPS) by companies
that have issued securities other than common stock that contractually entitle the holder to
participate in dividends and earnings of the company. EITF No. 03-6 requires earnings for the
period to be allocated between the common and preferred shareholders based on their respective
rights to receive dividends. Basic net income per share is then calculated by dividing income
allocable to common stockholders by the weighted-average number of common shares outstanding, net
of shares subject to repurchase by the Company, during the period. EITF No. 03-6 does not require
the presentation of basic and diluted net income (loss) per share for securities other than common
stock; therefore, the following net income per share amounts only pertain to the Companys common
stock. The Company calculates diluted net income per share under the if-converted method unless
the conversion of the preferred stock is anti-dilutive to basic net income per share. To the
extent the inclusion of preferred stock is anti-dilutive, the Company calculates diluted net income
per share under the two-class method. Potential common shares include restricted common stock,
which is subject to risk of forfeiture, and incremental shares of common stock issuable upon the
exercise of stock options and convertible preferred stock using the treasury stock method.
The following is a reconciliation of net income and weighted-average shares of common stock
outstanding for purposes of calculating basic and diluted earnings per share for the three month
and six month periods ended June 30:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30, |
|
|
Six Months Ended June 30, |
|
|
|
2008 |
|
|
2009 |
|
|
2008 |
|
|
2009 |
|
|
|
(In thousands except earnings per share data) |
|
Historical net income per share: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Numerator: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
|
$ |
4,861 |
|
|
$ |
5,227 |
|
|
$ |
15,519 |
|
|
$ |
13,693 |
|
Less: Earnings allocable to preferred stock |
|
|
(40 |
) |
|
|
(1,041 |
) |
|
|
(40 |
) |
|
|
(2,729 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income available to common stockholders |
|
$ |
4,821 |
|
|
$ |
4,186 |
|
|
$ |
15,479 |
|
|
$ |
10,964 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic EPS Denominator: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock outstanding beginning of period |
|
|
34,091 |
|
|
|
34,371 |
|
|
|
34,041 |
|
|
|
34,324 |
|
Effect of weighting shares: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted shares issued during the period ended June 30, |
|
|
24 |
|
|
|
19 |
|
|
|
59 |
|
|
|
43 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Denominator for basic net income per share |
|
|
34,115 |
|
|
|
34,390 |
|
|
|
34,100 |
|
|
|
34,367 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted EPS Denominator: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock outstanding beginning of period |
|
|
34,091 |
|
|
|
34,371 |
|
|
|
34,041 |
|
|
|
34,324 |
|
Effect of weighting shares: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted shares issued during the period ended June 30, |
|
|
24 |
|
|
|
19 |
|
|
|
59 |
|
|
|
43 |
|
Dilutive effect of employee stock options and
nonvested share-awards assumed converted during the
period ended June 30, |
|
|
572 |
|
|
|
165 |
|
|
|
414 |
|
|
|
124 |
|
Dilutive effect of convertible preferred stock assumed
converted during the period ended June 30 |
|
|
282 |
|
|
|
8,556 |
|
|
|
141 |
|
|
|
8,556 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Denominator for diluted net income per share |
|
|
34,969 |
|
|
|
43,111 |
|
|
|
34,655 |
|
|
|
43,047 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic net income per share |
|
$ |
0.14 |
|
|
$ |
0.12 |
|
|
$ |
0.45 |
|
|
$ |
0.32 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted net income per share |
|
$ |
0.14 |
|
|
$ |
0.12 |
|
|
$ |
0.45 |
|
|
$ |
0.32 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the three months ended June 30, 2008 and 2009, employee stock options to purchase 507,330 and
1,394,700 shares of stock, respectively, were excluded from the calculation of diluted earnings per
share because they were anti-dilutive. For the six months ended June 30, 2008 and 2009, employee
stock options to purchase 564,400 and 1,429,700 shares of stock, respectively, were excluded from
the calculation of diluted earnings per share because they were anti-dilutive. Basic weighted
average number of common shares outstanding as of June 30, 2008 and 2009 does not include 683,182
and 1,035,191, respectively, of share-awards
10
MOBILE MINI, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited) Continued
because the awards had not then vested. For the three months ended June 30, 2008 and 2009, 45,663
and 340,628, respectively, of nonvested share-awards were not included in the computation of
diluted earnings per share because the effect would have been anti-dilutive. For the six months
ended June 30, 2008 and 2009, 320,312 and 475,104, respectively, of nonvested share-awards were not
included in the computation of diluted earnings per share because the effect would have been
anti-dilutive. The nonvested stock could potentially dilute future earnings per share.
NOTE G Share-Based Compensation
At June 30, 2009, the Company had three active share-based employee compensation plans. Stock
option awards under these plans are granted with an exercise price per share equal to the fair
market value of the Companys common stock on the date of grant. Each option must expire no more
than 10 years from the date it is granted and, historically, options are granted with vesting over
a 4.5 year period.
In 2005, the Company began awarding nonvested shares under the existing share-based compensation
plans. The majority of the Companys nonvested share-awards typically vest in equal annual
installments over a five year period. The total value of these awards is expensed on a
straight-line basis over the service period of the employees receiving the awards. The service
period is the time during which the employees receiving awards must remain employees for the
shares granted to fully vest.
Starting in December 2006, the Company awarded nonvested share-awards to certain executive officers
with vesting subject to a performance condition. Vesting of these share-awards is dependent upon
the officers fulfilling the service period requirements as well as the Company achieving certain
EBITDA targets in each of the subsequent four years. The 2009 target was established by the
Companys Board of Directors on January 20, 2009, at which point the value of each nonvested
share-award was $12.31. The Company is required to assess the probability that the performance
conditions will be met. If the likelihood of the performance conditions being met is deemed
probable, the Company will recognize the expense using the accelerated attribution method. The
accelerated attribution method could result in as much as 50% of the total value of the shares
being recognized in the first year of the service period if each of the four future targets is
assessed as probable of being met. For performance based awards granted in 2006, 2007 and 2009,
the accelerated attribution method has been used to recognize the expense.
In June 2008, in conjunction with the Merger and the hiring of Mobile Storage Group employees, the
Company awarded nonvested share-awards for an aggregate of 157,535 shares with an aggregate fair
value of $3.2 million. These awards vest over a period of between one and five years. The total
value of these awards is expensed on a straight-line basis over the service period.
As of June 30, 2009, the total amount of unrecognized compensation cost related to share-awards was
approximately $18.6 million, which is expected to be recognized over a weighted-average period of
approximately 3.4 years.
The total value of the stock option awards is expensed over the related employees service period
on a straight-line basis. As of June 30, 2009, total unrecognized compensation cost related to
stock option grants was approximately $1.5 million, which is expected to be recognized over a
weighted-average period of approximately 1.3 years.
The following table summarizes the share-based compensation expense and capitalized amounts for the
three months and six months ended June 30:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
Six Months Ended |
|
|
|
June 30, |
|
|
June 30, |
|
|
|
2008 |
|
|
2009 |
|
|
2008 |
|
|
2009 |
|
|
|
(In thousands) |
|
Gross share-based compensation |
|
$ |
1,602 |
|
|
$ |
1,725 |
|
|
$ |
2,848 |
|
|
$ |
3,476 |
|
Capitalized share-based compensation |
|
|
(226 |
) |
|
|
(65 |
) |
|
|
(484 |
) |
|
|
(195 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Share-based compensation expense |
|
$ |
1,376 |
|
|
$ |
1,660 |
|
|
$ |
2,364 |
|
|
$ |
3,281 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
11
MOBILE MINI, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited) Continued
A summary of stock option activity within the Companys share-based compensation plans and changes
for the six months ended June 30, 2009 is as follows:
|
|
|
|
|
|
|
|
|
|
|
Number of |
|
Weighted |
|
|
Shares |
|
Average |
|
|
(In thousands) |
|
Exercise Price |
Balance at December 31, 2008 |
|
|
1,750 |
|
|
$ |
17.45 |
|
Exercised |
|
|
(28 |
) |
|
$ |
9.88 |
|
Canceled/expired |
|
|
(82 |
) |
|
$ |
25.66 |
|
|
|
|
|
|
|
|
|
|
Balance at June 30, 2009 |
|
|
1,640 |
|
|
$ |
17.20 |
|
|
|
|
|
|
|
|
|
|
The intrinsic value of options exercised during the six months ended June 30, 2009 was
approximately $102,000.
A summary of nonvested share-awards activity within the Companys share-based compensation plans
and changes for the six months ended June 30, 2009 is as follows:
|
|
|
|
|
|
|
|
|
|
|
Number of |
|
|
Weighted Average |
|
|
|
Shares |
|
|
Grant Date Fair |
|
|
|
(In thousands) |
|
|
Value |
|
Nonvested at December 31, 2008 |
|
|
990 |
|
|
$ |
18.03 |
|
Awarded |
|
|
202 |
|
|
|
11.93 |
|
Released |
|
|
(83 |
) |
|
|
21.59 |
|
Forfeited |
|
|
(74 |
) |
|
|
19.55 |
|
|
|
|
|
|
|
|
Nonvested at June 30, 2009 |
|
|
1,035 |
|
|
$ |
16.71 |
|
|
|
|
|
|
|
|
A summary of fully-vested stock options and stock options expected to vest, as June 30, 2009, is as
follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted |
|
|
|
|
Number of |
|
Weighted |
|
Average |
|
Aggregate |
|
|
Shares |
|
Average |
|
Remaining |
|
Intrinsic |
|
|
(In |
|
Exercise |
|
Contractual |
|
Value (In |
|
|
thousands) |
|
Price |
|
Term |
|
thousands) |
Outstanding |
|
|
1,640 |
|
|
$ |
17.20 |
|
|
|
4.4 |
|
|
$ |
1,784 |
|
Vested and expected to vest |
|
|
1,575 |
|
|
$ |
16.82 |
|
|
|
4.3 |
|
|
$ |
1,784 |
|
Exercisable |
|
|
1,534 |
|
|
$ |
16.54 |
|
|
|
4.2 |
|
|
$ |
1,784 |
|
The fair value of each stock option award is estimated on the date of the grant using the
Black-Scholes option pricing model.
No stock options were granted during the six months ended June 30, 2009.
NOTE H Inventories
Inventories are valued at the lower of cost (principally on a standard cost basis which
approximates the first-in, first-out (FIFO) method) or market. Market is the lower of replacement
cost or net realizable value. Inventories primarily consist of raw materials, supplies,
work-in-process and finished goods, all related to the manufacturing, remanufacturing and
maintenance of portable storage units and office units, primarily for the Companys lease fleet and
the Companys units held for sale. Raw materials principally consist of raw steel, wood, glass,
paint, vinyl and other assembly components used in manufacturing and refurbishing processes.
Work-in-process primarily represents partially built units being completed at the Maricopa facility
that primarily will be added to the Companys lease fleet upon completion or sold. Finished
portable storage units primarily represents ISO (the International Organization for
Standardization) containers held in inventory until the containers are either sold as is,
remanufactured and sold, or units in the process of being remanufactured to be compliant with the
Companys lease fleet standards before transferring the units into the Companys lease fleet.
There is no certainty when the Company purchases the containers whether they will ultimately be
sold, refurbished and sold, or remanufactured and moved into the Companys lease fleet. Units that
the Company adds to its lease fleet undergo an extensive remanufacturing process that includes
installing the Companys proprietary locking system, signage, painting and sometimes adding the
Companys proprietary security doors.
12
MOBILE MINI, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited) Continued
|
|
|
|
|
|
|
|
|
|
|
December 31, 2008 |
|
|
June 30, 2009 |
|
|
|
(In thousands) |
|
Raw material and supplies |
|
$ |
16,991 |
|
|
$ |
17,244 |
|
Work-in-process |
|
|
1,611 |
|
|
|
709 |
|
Finished portable storage units |
|
|
7,975 |
|
|
|
6,374 |
|
|
|
|
|
|
|
|
|
|
$ |
26,577 |
|
|
$ |
24,327 |
|
|
|
|
|
|
|
|
NOTE I Income Taxes
The Company adopted the provision of FIN 48, Accounting for Uncertainty in Income Taxes-an
interpretation of FASB Statement No. 109 on January 1, 2007. FIN 48 contains a two-step approach
to recognizing and measuring uncertain tax positions accounted for in accordance with SFAS No. 109,
Accounting for Income Taxes. The first step is to evaluate the tax position for recognition by
determining if the weight of available evidence indicates that it is more likely than not that the
position will be sustained on audit, including resolution of related appeals or litigation
processes, if any. The second step is to measure the tax benefit as the largest amount that is
more than 50% likely of being realized upon ultimate settlement.
The Company files U.S. federal tax returns, U.S. State tax returns, and foreign tax returns. The
Company has identified the Companys U.S. Federal tax return as the Companys major tax
jurisdiction. Our tax year for 2005 is subject to tax examination by the U. S. Internal Revenue
Service (IRS) through September 15, 2009. The IRS has concluded the audit of our consolidated U.S.
Federal return for 2006 and 2007. There were no adjustments which resulted in a material change to
the Companys financial position. No reserves for uncertain income tax positions have been
recorded pursuant to FIN 48. In addition, the Company did not record a cumulative effect
adjustment related to the adoption of FIN 48. The Company does not anticipate that the total
amount of unrecognized tax benefit related to any particular tax position will change significantly
within the next 12 months.
The Companys policy for recording interest and penalties associated with audits is to record such
items as a component of income before taxes. Penalties and associated interest costs are recorded
in leasing, selling and general expenses in the Condensed Consolidated Statements of Income.
NOTE J Property, Plant and Equipment
Property, plant and equipment are stated at cost, net of accumulated depreciation. Depreciation is
calculated using the straight-line method over the assets estimated useful lives. Residual values
are determined when the property is constructed or acquired and range up to 25%, depending on the
nature of the asset. In the opinion of management, estimated residual values do not cause carrying
values to exceed net realizable value. Normal repairs and maintenance to property, plant and
equipment are expensed as incurred. When property or equipment is retired or sold, the net book
value of the asset, reduced by any proceeds, is charged to gain or loss on the retirement of fixed
assets. Property, plant and equipment consist of the following at:
|
|
|
|
|
|
|
|
|
|
|
December 31, 2008 |
|
|
June 30, 2009 |
|
|
|
(In thousands) |
|
Land |
|
$ |
10,978 |
|
|
$ |
11,190 |
|
Vehicles and equipment |
|
|
78,592 |
|
|
|
79,755 |
|
Buildings and improvements |
|
|
13,868 |
|
|
|
14,192 |
|
Office fixtures and equipment |
|
|
20,948 |
|
|
|
23,038 |
|
|
|
|
|
|
|
|
|
|
|
124,386 |
|
|
|
128,175 |
|
Less accumulated depreciation |
|
|
(35,877 |
) |
|
|
(42,282 |
) |
|
|
|
|
|
|
|
Total property, plant and equipment |
|
$ |
88,509 |
|
|
$ |
85,893 |
|
|
|
|
|
|
|
|
13
MOBILE MINI, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited) Continued
NOTE K Lease Fleet
Mobile Mini has a lease fleet primarily consisting of remanufactured and differentiated steel
portable storage containers and manufactured mobile offices that are leased to customers under
short-term operating lease agreements with varying terms. Depreciation is calculated using the
straight-line method over the Companys units estimated useful life, after the date that the
Company put the unit in service, and are depreciated down to their estimated residual values. The
Companys steel units are depreciated over 30 years with an estimated residual value of 55%. Wood
office units are depreciated over 20 years with an estimated residual value of 50%. Van trailers,
which are a small part of the Companys fleet, are depreciated over seven years to a 20% residual
value. Van trailers are only added to the fleet in connection with acquisitions of portable
storage businesses, and then only when van trailers are a part of the business acquired.
In 2009, some of the steel units in the Companys lease fleet were older than the 25 year
originally assigned useful life. In April 2009, the Company evaluated its depreciation policy on
steel units and changed their estimated useful life to 30 years with an estimated residual value of
55%, which effectively results in continual depreciation on these units at the same annual rate of
book value as the Companys previous depreciation policy of 25 year life and 62.5% residual value.
This change had an immaterial impact on the consolidated financial statements at the date of the
change in estimate.
In the opinion of management, estimated residual values do not cause carrying values to exceed net
realizable value. The Company continues to evaluate these depreciation policies as more
information becomes available from other comparable sources and the Companys own historical
experience.
Normal repairs and maintenance to the portable storage and mobile office units are expensed as
incurred. As of December 31, 2008 and June 30, 2009, the lease fleet totaled $1.2 billion before
accumulated depreciation of $79.6 and $90.1 million, respectively.
Lease fleet consists of the following at:
|
|
|
|
|
|
|
|
|
|
|
December 31, 2008 |
|
|
June 30, 2009 |
|
|
|
(In thousands) |
|
Steel storage containers |
|
$ |
616,750 |
|
|
$ |
619,261 |
|
Offices |
|
|
523,242 |
|
|
|
530,510 |
|
Van trailers |
|
|
15,610 |
|
|
|
7,283 |
|
Other |
|
|
2,161 |
|
|
|
2,793 |
|
|
|
|
|
|
|
|
|
|
|
1,157,763 |
|
|
|
1,159,847 |
|
Accumulated depreciation |
|
|
(79,607 |
) |
|
|
(90,089 |
) |
|
|
|
|
|
|
|
|
|
$ |
1,078,156 |
|
|
$ |
1,069,758 |
|
|
|
|
|
|
|
|
NOTE L Derivatives
In the normal course of business, the Companys operations are exposed to fluctuations in interest
rates. The Company addresses a portion of these risks through a controlled program of risk
management that includes the use of derivative financial instruments. The objective of controlling
these risks is to limit the impact of fluctuations in interest rates on earnings.
The Companys primary interest rate exposure results in changes in short-term U.S. dollar interest
rates. In an effort to manage variable interest rate exposures, the Company may enter into
interest rate swap agreements, which convert its floating rate debt to a fixed-rate and which it
designates as cash flow hedges. Interest expense on the notional amounts under these agreements is
accrued using the fixed rates identified in the swap agreements.
The Company had interest rate swap agreements totaling $200.0 million at June 30, 2009. The fixed
interest rate on the Companys eight swap agreements range from 3.25% to 4.71%, averaging 4.03%.
Three swap agreements mature in 2010 and five swap agreements mature in 2011.
14
MOBILE MINI, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited) Continued
The following tables summarize information related to the Companys derivatives. All of the
Companys derivatives are designated as effective hedging instruments.
|
|
|
|
|
|
|
|
|
Derivatives in Statement 133 Fair Value |
|
|
|
|
|
Fair Value |
Hedging Relationships |
|
Balance Sheet Location |
|
(in thousands) |
|
|
|
|
|
|
|
|
|
December 31, 2008: |
|
|
|
|
|
|
|
|
Interest rate swap agreements |
|
Accrued liabilities |
|
$ |
(11,532 |
) |
|
|
|
|
|
|
|
|
|
June 30, 2009: |
|
|
|
|
|
|
|
|
Interest rate swap agreements |
|
Accrued liabilities |
|
$ |
(9,493 |
) |
|
|
|
|
|
|
|
Amount of Gain or |
|
|
(Loss) Recognized |
|
|
in OCI on |
Derivatives in Statement 133 Fair Value |
|
Derivative |
Hedging Relationships |
|
(In thousands) |
|
|
|
|
|
Three months ended June 30, 2008: |
|
|
|
|
Interest
rate swap agreements, (net of applicable income taxes of $0.8 million) |
|
$ |
1,278 |
|
|
|
|
|
|
Three months ended June 30, 2009: |
|
|
|
|
Interest rate swap agreements, (net of applicable income taxes of $0.7 million) |
|
$ |
1,172 |
|
|
|
|
|
|
Six months ended June 30, 2008: |
|
|
|
|
Interest rate swap agreements, (net of income tax benefit of $130,000) |
|
$ |
(208 |
) |
|
|
|
|
|
Six months ended June 30, 2009: |
|
|
|
|
Interest rate swap agreements, (net of applicable income taxes of $0.8 million) |
|
$ |
1,246 |
|
NOTE M Segment Reporting
The Financial Accounting Standards Board (FASB) issued SFAS No. 131, Disclosures about Segments of
an Enterprise and Related Information, which establishes the standards for companies to report
information about operating segments. The Company has operations in the United States, Canada, the
United Kingdom and The Netherlands. All of the Companys branches operate in their local currency
and although the Company is exposed to foreign exchange rate fluctuation in other foreign markets
where the Company leases and sells the Companys products, the Company does not believe this will
have a significant impact on the Companys results of operations. Currently, the Companys branch
operation is the only segment that concentrates on the Companys core business of leasing. Each
branch has similar economic characteristics covering all products leased or sold, including the
same customer base, sales personnel, advertising, yard facilities, general and administrative costs
and the branch management. Managements allocation of resources, performance evaluations and
operating decisions are not dependent on the mix of a branchs products. The Company does not
attempt to allocate shared revenue nor general, selling and leasing expenses to the different
configurations of portable storage and office products for lease and sale. The branch operations
include the leasing and sales of portable storage units, portable offices and combination units
configured for both storage and office space. The Company leases to businesses and consumers in
the general geographic area surrounding each branch. Historically, the operation included the
Companys manufacturing facilities, which was responsible for the purchase, manufacturing and
refurbishment of products for leasing and sale, as well as for manufacturing certain delivery
equipment.
In managing the Companys business, management focuses on earnings per share and growing leasing
revenues, particularly in existing markets where we can take advantage of the operating leverage
inherent in our business model. The Companys goal is to maintain a stable growth rate.
15
MOBILE MINI, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited) Continued
Discrete financial data on each of the Companys products is not available and it would be
impractical to collect and maintain financial data in such a manner; therefore, based on the
provisions of SFAS No. 131, reportable segment information is the same as contained in the
Companys Condensed Consolidated Financial Statements.
The tables below represent the Companys revenue and long-lived assets, consisting of lease fleet
and property, plant and equipment, as attributed to geographic locations (in thousands):
Revenue from external customers:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
Six Months Ended |
|
|
|
June 30, |
|
|
June 30, |
|
|
|
(In thousands) |
|
|
|
2008 |
|
|
2009 |
|
|
2008 |
|
|
2009 |
|
North America |
|
$ |
73,615 |
|
|
$ |
80,225 |
|
|
$ |
145,429 |
|
|
$ |
165,656 |
|
United Kingdom |
|
|
5,670 |
|
|
|
13,821 |
|
|
|
10,834 |
|
|
|
27,691 |
|
The Netherlands |
|
|
1,800 |
|
|
|
878 |
|
|
|
3,363 |
|
|
|
1,741 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenues |
|
$ |
81,085 |
|
|
$ |
94,924 |
|
|
$ |
159,626 |
|
|
$ |
195,088 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-lived assets:
|
|
|
|
|
|
|
|
|
|
|
December 31, 2008 |
|
|
June 30, 2009 |
|
|
|
(In thousands) |
|
North America |
|
$ |
1,041,540 |
|
|
$ |
1,015,225 |
|
United Kingdom |
|
|
120,914 |
|
|
|
136,138 |
|
The Netherlands |
|
|
4,211 |
|
|
|
4,288 |
|
|
|
|
|
|
|
|
Total long-lived assets |
|
$ |
1,166,665 |
|
|
$ |
1,155,651 |
|
|
|
|
|
|
|
|
NOTE N Comprehensive Income
Comprehensive income, net of tax, consisted of the following at:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
Six Months Ended |
|
|
|
June 30, |
|
|
June 30, |
|
|
|
2008 |
|
|
2009 |
|
|
2008 |
|
|
2009 |
|
|
|
(In thousands) |
|
Net income |
|
$ |
4,861 |
|
|
$ |
5,227 |
|
|
$ |
15,519 |
|
|
$ |
13,693 |
|
Net unrealized holding gain (loss) on derivatives |
|
|
1,278 |
|
|
|
1,172 |
|
|
|
(208 |
) |
|
|
1,246 |
|
Foreign currency translation adjustment |
|
|
817 |
|
|
|
13,247 |
|
|
|
783 |
|
|
|
11,229 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total comprehensive income |
|
$ |
6,956 |
|
|
$ |
19,646 |
|
|
$ |
16,094 |
|
|
$ |
26,168 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The components of accumulated other comprehensive loss, net of tax, were as follows:
|
|
|
|
|
|
|
|
|
|
|
December 31, 2008 |
|
|
June 30, 2009 |
|
|
|
(In thousands) |
|
Accumulated net unrealized holding gain on derivatives |
|
$ |
(7,068 |
) |
|
$ |
(5,822 |
) |
Foreign currency translation adjustment |
|
|
(30,410 |
) |
|
|
(19,181 |
) |
|
|
|
|
|
|
|
Total accumulated other comprehensive loss |
|
$ |
(37,478 |
) |
|
$ |
(25,003 |
) |
|
|
|
|
|
|
|
NOTE O Integration, Merger and Restructuring Expenses
In connection with the Merger, the Company incurred costs to exit overlapping Mobile Storage Group
leased properties, property shut down costs, costs of Mobile Storage Groups severance agreements,
resolve outstanding obligations, costs for asset verification and for damaged assets.
16
MOBILE MINI, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited) Continued
In addition, as a result of the Merger and the economic environment, the Company leveraged the
combined fleet and restructured the manufacturing operations and reduced overhead and capital
expenditures for the lease fleet. In connection with these activities, the Company recorded costs
for severance agreements and recorded impairment charges to write down to certain assets previously
used in conjunction with the manufacturing operations and inventories.
The following table details accrued integration, merger and restructuring obligations (included in
accrued liabilities in the Condensed Consolidated Balance Sheet) and related activity for the
period ended June 30, 2009:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Lease |
|
|
|
|
|
|
|
|
|
Severance and |
|
|
Abandonment |
|
|
Acquisition |
|
|
|
|
|
|
Benefits |
|
|
Costs |
|
|
Integration |
|
|
Total |
|
|
|
(In thousands) |
|
Accrued obligations as of December 31, 2008 |
|
$ |
2,009 |
|
|
$ |
8,411 |
|
|
$ |
1,143 |
|
|
$ |
11,563 |
|
Integration, merger and restructuring expenses |
|
|
3,229 |
|
|
|
26 |
|
|
|
4,588 |
|
|
|
7,843 |
|
Cash paid |
|
|
(4,250 |
) |
|
|
(1,586 |
) |
|
|
(5,714 |
) |
|
|
(11,550 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Accrued obligations as of June 30, 2009 |
|
$ |
988 |
|
|
$ |
6,851 |
|
|
$ |
17 |
|
|
$ |
7,856 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
These accrued obligations are expected to be paid out through the year 2014.
The following amounts are included in integration, merger and restructuring expenses for the three
months and six months ended
June 30, 2009:
|
|
|
|
|
|
|
|
|
|
|
Three Months |
|
|
Six Months |
|
|
|
Ended June 30, |
|
|
Ended June 30, |
|
|
|
2009 |
|
|
2009 |
|
|
|
(In thousands) |
|
Severance and benefits |
|
$ |
2,423 |
|
|
$ |
3,229 |
|
Lease abandonment costs |
|
|
26 |
|
|
|
26 |
|
Acquisition integration |
|
|
3,180 |
|
|
|
4,588 |
|
|
|
|
|
|
|
|
Integration, merger and restructuring expenses |
|
$ |
5,629 |
|
|
$ |
7,843 |
|
|
|
|
|
|
|
|
NOTE P Supplemental Pro Forma Information
The following table summarizes Mobile Minis unaudited condensed consolidated statements of income
as if the acquisition of MSG WC Holdings Corp., the ultimate parent company of Mobile Storage
Group, occurred on January 1, 2008:
|
|
|
|
|
|
|
|
|
|
|
Three Months |
|
Six Months |
|
|
Ended June 30, |
|
Ended June 30, |
|
|
2008 |
|
2008 |
|
|
(In thousands) |
Total revenue |
|
$ |
140,748 |
|
|
$ |
279,504 |
|
Net income |
|
$ |
6,357 |
|
|
$ |
18,140 |
|
Diluted earnings per share |
|
$ |
0.15 |
|
|
$ |
0.42 |
|
The above tables, for the periods presented, include integration, merger and restructuring expenses
of $11.6 million.
The unaudited pro forma financial information is presented for informational purposes only and is
not indicative, and should not be relied upon as being indicative of the results of operations that
would have been achieved if the acquisition had actually taken place at the beginning of each of
the periods presented.
17
MOBILE MINI, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited) Continued
NOTE Q Condensed Consolidating Financial Information
Mobile Mini Supplemental Indenture
In connection with the acquisition of MSG, Mobile Mini entered into Mobile Mini Supplemental
Indenture pursuant to which the New Mobile Mini Guarantors became Guarantors under the Mobile
Mini Indenture relating to the Senior Notes. Mobile Mini also entered into the MSG Supplemental
Indenture pursuant to which Mobile Mini became an Issuer under the MSG Indenture and the New MSG
Guarantors became Guarantors under the MSG Indenture. As a result of the Supplemental
Indentures, the same subsidiaries of the Company are guarantors under each of the MSG Notes and the
Senior Notes.
The following tables present the condensed consolidating financial information of Mobile Mini,
Inc., representing the subsidiaries of the Guarantors of the Senior Notes and MSG Notes and the
Non-Guarantor Subsidiaries. Separate financial statements of the subsidiary guarantors are not
presented because the guarantee by each 100% owned subsidiary guarantor is full and unconditional,
joint and several, and management has determined that such information is not material to
investors.
18
MOBILE MINI, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited) Continued
MOBILE MINI, INC.
CONDENSED CONSOLIDATING BALANCE SHEETS
As of June 30, 2009
(In thousands)
(unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non- |
|
|
|
|
|
|
|
|
|
Guarantors |
|
|
Guarantors |
|
|
Eliminations |
|
|
Consolidated |
|
ASSETS |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents |
|
$ |
2,764 |
|
|
$ |
1,107 |
|
|
$ |
|
|
|
$ |
3,871 |
|
Receivables, net |
|
|
31,741 |
|
|
|
13,123 |
|
|
|
|
|
|
|
44,864 |
|
Inventories |
|
|
21,765 |
|
|
|
2,611 |
|
|
|
(49 |
) |
|
|
24,327 |
|
Lease fleet, net |
|
|
948,066 |
|
|
|
121,692 |
|
|
|
|
|
|
|
1,069,758 |
|
Property, plant and equipment, net |
|
|
67,159 |
|
|
|
18,734 |
|
|
|
|
|
|
|
85,893 |
|
Deposits and prepaid expenses |
|
|
9,458 |
|
|
|
1,493 |
|
|
|
|
|
|
|
10,951 |
|
Other assets and intangibles, net |
|
|
24,463 |
|
|
|
6,575 |
|
|
|
|
|
|
|
31,038 |
|
Goodwill |
|
|
447,061 |
|
|
|
68,497 |
|
|
|
|
|
|
|
515,558 |
|
Intercompany |
|
|
131,909 |
|
|
|
36,519 |
|
|
|
(168,428 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets |
|
$ |
1,684,386 |
|
|
$ |
270,351 |
|
|
$ |
(168,477 |
) |
|
$ |
1,786,260 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS EQUITY |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts payable |
|
$ |
9,229 |
|
|
$ |
7,457 |
|
|
$ |
|
|
|
$ |
16,686 |
|
Accrued liabilities |
|
|
68,430 |
|
|
|
3,469 |
|
|
|
|
|
|
|
71,899 |
|
Lines of credit |
|
|
402,186 |
|
|
|
119,486 |
|
|
|
|
|
|
|
521,672 |
|
Notes payable |
|
|
616 |
|
|
|
57 |
|
|
|
|
|
|
|
673 |
|
Obligations under capital leases |
|
|
4,782 |
|
|
|
1 |
|
|
|
|
|
|
|
4,783 |
|
Senior notes, net |
|
|
346,163 |
|
|
|
|
|
|
|
|
|
|
|
346,163 |
|
Deferred income taxes |
|
|
134,223 |
|
|
|
11,525 |
|
|
|
(515 |
) |
|
|
145,233 |
|
Intercompany |
|
|
23 |
|
|
|
31,606 |
|
|
|
(31,629 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities |
|
|
965,652 |
|
|
|
173,601 |
|
|
|
(32,144 |
) |
|
|
1,107,109 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commitments and contingencies |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Convertible preferred stock |
|
|
153,990 |
|
|
|
|
|
|
|
|
|
|
|
153,990 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stockholders equity: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock |
|
|
376 |
|
|
|
18,433 |
|
|
|
(18,433 |
) |
|
|
376 |
|
Additional paid-in capital |
|
|
332,459 |
|
|
|
119,165 |
|
|
|
(119,165 |
) |
|
|
332,459 |
|
Retained earnings |
|
|
277,485 |
|
|
|
(22,121 |
) |
|
|
1,265 |
|
|
|
256,629 |
|
Accumulated other comprehensive loss |
|
|
(6,276 |
) |
|
|
(18,727 |
) |
|
|
|
|
|
|
(25,003 |
) |
Treasury stock, at cost |
|
|
(39,300 |
) |
|
|
|
|
|
|
|
|
|
|
(39,300 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Total stockholders equity |
|
|
564,744 |
|
|
|
96,750 |
|
|
|
(136,333 |
) |
|
|
525,161 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities and stockholders equity |
|
$ |
1,684,386 |
|
|
$ |
270,351 |
|
|
$ |
(168,477 |
) |
|
$ |
1,786,260 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
19
MOBILE MINI, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited) Continued
MOBILE MINI, INC.
CONDENSED CONSOLIDATING BALANCE SHEETS
As of December 31, 2008
(In thousands)
(unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non- |
|
|
|
|
|
|
|
|
|
Guarantors |
|
|
Guarantors |
|
|
Eliminations |
|
|
Consolidated |
|
ASSETS |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash |
|
$ |
2,208 |
|
|
$ |
976 |
|
|
$ |
|
|
|
$ |
3,184 |
|
Receivables, net |
|
|
45,827 |
|
|
|
15,597 |
|
|
|
|
|
|
|
61,424 |
|
Inventories |
|
|
23,644 |
|
|
|
2,982 |
|
|
|
(49 |
) |
|
|
26,577 |
|
Lease fleet, ne |
|
|
969,432 |
|
|
|
108,724 |
|
|
|
|
|
|
|
1,078,156 |
|
Property, plant and equipment, net |
|
|
72,108 |
|
|
|
16,401 |
|
|
|
|
|
|
|
88,509 |
|
Deposits and prepaid expenses |
|
|
12,130 |
|
|
|
1,157 |
|
|
|
|
|
|
|
13,287 |
|
Other assets and intangibles, net |
|
|
28,144 |
|
|
|
6,919 |
|
|
|
|
|
|
|
35,063 |
|
Goodwill |
|
|
435,450 |
|
|
|
57,207 |
|
|
|
|
|
|
|
492,657 |
|
Intercompany |
|
|
131,257 |
|
|
|
35,782 |
|
|
|
(167,039 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets |
|
$ |
1,720,200 |
|
|
$ |
245,745 |
|
|
$ |
(167,088 |
) |
|
$ |
1,798,857 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS EQUITY |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts payable |
|
$ |
12,361 |
|
|
$ |
9,072 |
|
|
$ |
|
|
|
$ |
21,433 |
|
Accrued liabilities |
|
|
81,146 |
|
|
|
5,068 |
|
|
|
|
|
|
|
86,214 |
|
Lines of credit |
|
|
450,053 |
|
|
|
104,479 |
|
|
|
|
|
|
|
554,532 |
|
Notes payable |
|
|
1,306 |
|
|
|
74 |
|
|
|
|
|
|
|
1,380 |
|
Obligations under capital leases |
|
|
5,495 |
|
|
|
2 |
|
|
|
|
|
|
|
5,497 |
|
Senior notes |
|
|
345,797 |
|
|
|
|
|
|
|
|
|
|
|
345,797 |
|
Deferred income taxes |
|
|
124,858 |
|
|
|
10,363 |
|
|
|
(435 |
) |
|
|
134,786 |
|
Intercompany |
|
|
23 |
|
|
|
29,626 |
|
|
|
(29,649 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities |
|
|
1,021,039 |
|
|
|
158,684 |
|
|
|
(30,084 |
) |
|
|
1,149,639 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commitments and contingencies |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Convertible preferred stock |
|
|
153,990 |
|
|
|
|
|
|
|
|
|
|
|
153,990 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stockholders equity: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock |
|
|
375 |
|
|
|
18,433 |
|
|
|
(18,433 |
) |
|
|
375 |
|
Additional paid-in capital |
|
|
328,696 |
|
|
|
119,165 |
|
|
|
(119,165 |
) |
|
|
328,696 |
|
Retained earnings |
|
|
263,498 |
|
|
|
(21,157 |
) |
|
|
594 |
|
|
|
242,935 |
|
Accumulated other comprehensive loss |
|
|
(8,098 |
) |
|
|
(29,380 |
) |
|
|
|
|
|
|
(37,478 |
) |
Treasury stock, at cost |
|
|
(39,300 |
) |
|
|
|
|
|
|
|
|
|
|
(39,300 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Total stockholders equity |
|
|
545,171 |
|
|
|
87,061 |
|
|
|
(137,004 |
) |
|
|
495,228 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities and stockholders equity |
|
$ |
1,720,200 |
|
|
$ |
245,745 |
|
|
$ |
(167,088 |
) |
|
$ |
1,798,857 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
20
MOBILE MINI, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited) Continued
MOBILE MINI, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
Three Months Ended June 30, 2009
(In thousands)
(unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non- |
|
|
|
|
|
|
|
|
|
Guarantors |
|
|
Guarantors |
|
|
Eliminations |
|
|
Consolidated |
|
Revenues: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Leasing |
|
$ |
72,008 |
|
|
$ |
12,389 |
|
|
$ |
|
|
|
$ |
84,397 |
|
Sales |
|
|
7,786 |
|
|
|
2,072 |
|
|
|
|
|
|
|
9,858 |
|
Other |
|
|
431 |
|
|
|
238 |
|
|
|
|
|
|
|
669 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenues |
|
|
80,225 |
|
|
|
14,699 |
|
|
|
|
|
|
|
94,924 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Costs and expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of sales |
|
|
4,922 |
|
|
|
1,698 |
|
|
|
|
|
|
|
6,620 |
|
Leasing, selling and general expenses |
|
|
39,301 |
|
|
|
9,774 |
|
|
|
|
|
|
|
49,075 |
|
Integration, merger and restructuring expenses |
|
|
5,316 |
|
|
|
313 |
|
|
|
|
|
|
|
5,629 |
|
Depreciation and amortization |
|
|
8,515 |
|
|
|
1,919 |
|
|
|
|
|
|
|
10,434 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total costs and expenses |
|
|
58,054 |
|
|
|
13,704 |
|
|
|
|
|
|
|
71,758 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from operations |
|
|
22,171 |
|
|
|
995 |
|
|
|
|
|
|
|
23,166 |
|
Other income (expense): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest income |
|
|
448 |
|
|
|
3 |
|
|
|
(448 |
) |
|
|
3 |
|
Interest expense |
|
|
(13,960 |
) |
|
|
(1,454 |
) |
|
|
448 |
|
|
|
(14,966 |
) |
Foreign currency exchange |
|
|
|
|
|
|
8 |
|
|
|
|
|
|
|
8 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) before provision for (benefit from) income taxes |
|
|
8,659 |
|
|
|
(448 |
) |
|
|
|
|
|
|
8,211 |
|
Provision for (benefit from) income taxes |
|
|
3,343 |
|
|
|
(326 |
) |
|
|
(33 |
) |
|
|
2,984 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) |
|
$ |
5,316 |
|
|
$ |
(122 |
) |
|
$ |
33 |
|
|
$ |
5,227 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
21
MOBILE MINI, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited) Continued
MOBILE MINI, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
Three Months Ended June 30, 2008
(In thousands)
(unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non- |
|
|
|
|
|
|
|
|
|
Guarantors |
|
|
Guarantors |
|
|
Eliminations |
|
|
Consolidated |
|
Revenues: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Leasing |
|
$ |
67,731 |
|
|
$ |
5,118 |
|
|
$ |
|
|
|
$ |
72,849 |
|
Sales |
|
|
5,612 |
|
|
|
2,224 |
|
|
|
(11 |
) |
|
|
7,825 |
|
Other |
|
|
272 |
|
|
|
139 |
|
|
|
|
|
|
|
411 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenues |
|
|
73,615 |
|
|
|
7,481 |
|
|
|
(11 |
) |
|
|
81,085 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Costs and expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of sales |
|
|
3,524 |
|
|
|
1,842 |
|
|
|
(8 |
) |
|
|
5,358 |
|
Leasing, selling and general expenses |
|
|
38,384 |
|
|
|
5,412 |
|
|
|
|
|
|
|
43,796 |
|
Integration and merger expenses |
|
|
11,293 |
|
|
|
316 |
|
|
|
|
|
|
|
11,609 |
|
Depreciation and amortization |
|
|
5,139 |
|
|
|
608 |
|
|
|
|
|
|
|
5,747 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total costs and expenses |
|
|
58,340 |
|
|
|
8,178 |
|
|
|
(8 |
) |
|
|
66,510 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from operations |
|
|
15,275 |
|
|
|
(697 |
) |
|
|
(3 |
) |
|
|
14,575 |
|
Other income (expense): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest income |
|
|
348 |
|
|
|
25 |
|
|
|
(344 |
) |
|
|
29 |
|
Interest expense |
|
|
(5,679 |
) |
|
|
(1,084 |
) |
|
|
344 |
|
|
|
(6,419 |
) |
Foreign currency exchange |
|
|
|
|
|
|
3 |
|
|
|
|
|
|
|
3 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) before provision for (benefit from) income taxes |
|
|
9,944 |
|
|
|
(1,753 |
) |
|
|
(3 |
) |
|
|
8,188 |
|
Provision for (benefit from) income taxes |
|
|
3,808 |
|
|
|
(447 |
) |
|
|
(34 |
) |
|
|
3,327 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) |
|
$ |
6,136 |
|
|
$ |
(1,306 |
) |
|
$ |
31 |
|
|
$ |
4,861 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
22
MOBILE MINI, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited) Continued
MOBILE MINI, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
Six Months Ended June 30, 2009
(In thousands)
(unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non- |
|
|
|
|
|
|
|
|
|
Guarantors |
|
|
Guarantors |
|
|
Eliminations |
|
|
Consolidated |
|
Revenues: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Leasing |
|
$ |
148,637 |
|
|
$ |
25,276 |
|
|
$ |
|
|
|
$ |
173,913 |
|
Sales |
|
|
16,121 |
|
|
|
3,797 |
|
|
|
|
|
|
|
19,918 |
|
Other |
|
|
898 |
|
|
|
359 |
|
|
|
|
|
|
|
1,257 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenues |
|
|
165,656 |
|
|
|
29,432 |
|
|
|
|
|
|
|
195,088 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Costs and expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of sales |
|
|
10,399 |
|
|
|
3,090 |
|
|
|
|
|
|
|
13,489 |
|
Leasing, selling and general expenses |
|
|
80,909 |
|
|
|
19,738 |
|
|
|
|
|
|
|
100,647 |
|
Integration, merger and restructuring expenses |
|
|
7,495 |
|
|
|
348 |
|
|
|
|
|
|
|
7,843 |
|
Depreciation and amortization |
|
|
16,880 |
|
|
|
3,807 |
|
|
|
|
|
|
|
20,687 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total costs and expenses |
|
|
115,683 |
|
|
|
26,983 |
|
|
|
|
|
|
|
142,666 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from operations |
|
|
49,973 |
|
|
|
2,449 |
|
|
|
|
|
|
|
52,422 |
|
Other income (expense): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest income |
|
|
862 |
|
|
|
5 |
|
|
|
(861 |
) |
|
|
6 |
|
Interest expense |
|
|
(28,018 |
) |
|
|
(3,050 |
) |
|
|
861 |
|
|
|
(30,207 |
) |
Foreign currency exchange |
|
|
|
|
|
|
(75 |
) |
|
|
|
|
|
|
(75 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) before provision for (benefit from) income taxes |
|
|
22,817 |
|
|
|
(671 |
) |
|
|
|
|
|
|
22,146 |
|
Provision for (benefit from) income taxes |
|
|
8,830 |
|
|
|
(296 |
) |
|
|
(81 |
) |
|
|
8,453 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) |
|
$ |
13,987 |
|
|
$ |
(375 |
) |
|
$ |
81 |
|
|
$ |
13,693 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
23
MOBILE MINI, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited) Continued
MOBILE MINI, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
Six Months Ended June 30, 2008
(In thousands)
(unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non- |
|
|
|
|
|
|
|
|
|
Guarantors |
|
|
Guarantors |
|
|
Eliminations |
|
|
Consolidated |
|
Revenues: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Leasing |
|
$ |
133,073 |
|
|
$ |
9,812 |
|
|
$ |
|
|
|
$ |
142,885 |
|
Sales |
|
|
11,822 |
|
|
|
4,120 |
|
|
|
(19 |
) |
|
|
15,923 |
|
Other |
|
|
534 |
|
|
|
284 |
|
|
|
|
|
|
|
818 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenues |
|
|
145,429 |
|
|
|
14,216 |
|
|
|
(19 |
) |
|
|
159,626 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Costs and expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of sales |
|
|
7,610 |
|
|
|
3,396 |
|
|
|
(15 |
) |
|
|
10,991 |
|
Leasing, selling and general expenses |
|
|
76,977 |
|
|
|
10,289 |
|
|
|
|
|
|
|
87,266 |
|
Integration and merger expenses |
|
|
11,293 |
|
|
|
316 |
|
|
|
|
|
|
|
11,609 |
|
Depreciation and amortization |
|
|
10,214 |
|
|
|
1,202 |
|
|
|
|
|
|
|
11,416 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total costs and expenses |
|
|
106,094 |
|
|
|
15,203 |
|
|
|
(15 |
) |
|
|
121,282 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from operations |
|
|
39,335 |
|
|
|
(987 |
) |
|
|
(4 |
) |
|
|
38,344 |
|
Other income (expense): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest income |
|
|
678 |
|
|
|
46 |
|
|
|
(662 |
) |
|
|
62 |
|
Interest expense |
|
|
(11,158 |
) |
|
|
(2,069 |
) |
|
|
663 |
|
|
|
(12,564 |
) |
Foreign currency exchange |
|
|
|
|
|
|
(8 |
) |
|
|
|
|
|
|
(8 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) before provision for (benefit from) income taxes |
|
|
28,855 |
|
|
|
(3,018 |
) |
|
|
(3 |
) |
|
|
25,834 |
|
Provision for (benefit from) income taxes |
|
|
11,136 |
|
|
|
(754 |
) |
|
|
(67 |
) |
|
|
10,315 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) |
|
$ |
17,719 |
|
|
$ |
(2,264 |
) |
|
$ |
64 |
|
|
$ |
15,519 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
24
MOBILE MINI, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited) Continued
MOBILE MINI, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
Six Months Ended June 30, 2009
(In thousands)
(unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non- |
|
|
|
|
|
|
|
|
|
Guarantors |
|
|
Guarantors |
|
|
Eliminations |
|
|
Consolidated |
|
Cash Flows From Operating Activities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) |
|
$ |
13,987 |
|
|
$ |
(375 |
) |
|
$ |
81 |
|
|
$ |
13,693 |
|
Adjustments to reconcile income to net cash provided by
(used in) operating activities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Provision for doubtful accounts |
|
|
1,382 |
|
|
|
81 |
|
|
|
|
|
|
|
1,463 |
|
Amortization of deferred financing costs |
|
|
2,594 |
|
|
|
|
|
|
|
|
|
|
|
2,594 |
|
Share-based compensation expense |
|
|
2,953 |
|
|
|
328 |
|
|
|
|
|
|
|
3,281 |
|
Depreciation and amortization |
|
|
16,880 |
|
|
|
3,807 |
|
|
|
|
|
|
|
20,687 |
|
Gain on sale of lease fleet units |
|
|
(5,401 |
) |
|
|
(378 |
) |
|
|
|
|
|
|
(5,779 |
) |
Loss on disposal of property, plant and equipment |
|
|
32 |
|
|
|
4 |
|
|
|
|
|
|
|
36 |
|
Deferred income taxes |
|
|
8,242 |
|
|
|
(264 |
) |
|
|
(154 |
) |
|
|
7,824 |
|
Foreign currency exchange loss |
|
|
|
|
|
|
75 |
|
|
|
|
|
|
|
75 |
|
Changes in certain assets and liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Receivables |
|
|
11,721 |
|
|
|
4,379 |
|
|
|
|
|
|
|
16,100 |
|
Inventories |
|
|
1,044 |
|
|
|
595 |
|
|
|
|
|
|
|
1,639 |
|
Deposits and prepaid expenses |
|
|
2,662 |
|
|
|
(227 |
) |
|
|
|
|
|
|
2,435 |
|
Other assets and intangibles |
|
|
(441 |
) |
|
|
|
|
|
|
|
|
|
|
(441 |
) |
Accounts payable |
|
|
(1,224 |
) |
|
|
(2,647 |
) |
|
|
|
|
|
|
(3,871 |
) |
Accrued liabilities |
|
|
(10,753 |
) |
|
|
(2,147 |
) |
|
|
|
|
|
|
(12,900 |
) |
Intercompany |
|
|
(878 |
) |
|
|
380 |
|
|
|
498 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by operating activities |
|
|
42,800 |
|
|
|
3,611 |
|
|
|
425 |
|
|
|
48,836 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash Flows From Investing Activities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Additions to lease fleet units |
|
|
(6,804 |
) |
|
|
(4,075 |
) |
|
|
|
|
|
|
(10,879 |
) |
Proceeds from sale of lease fleet units |
|
|
14,890 |
|
|
|
2,029 |
|
|
|
10 |
|
|
|
16,929 |
|
Additions to property, plant and equipment |
|
|
(3,007 |
) |
|
|
(1,767 |
) |
|
|
|
|
|
|
(4,774 |
) |
Proceeds from sale of property, plant and equipment |
|
|
151 |
|
|
|
92 |
|
|
|
|
|
|
|
243 |
|
Other |
|
|
112 |
|
|
|
|
|
|
|
|
|
|
|
112 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used in) investing activities |
|
|
5,342 |
|
|
|
(3,721 |
) |
|
|
10 |
|
|
|
1,631 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash Flows From Financing Activities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (repayments) borrowings under lines of credit |
|
|
(47,867 |
) |
|
|
252 |
|
|
|
14,754 |
|
|
|
(32,861 |
) |
Principal payments on notes payable |
|
|
(690 |
) |
|
|
(25 |
) |
|
|
|
|
|
|
(715 |
) |
Principal payments on capital lease obligations |
|
|
(714 |
) |
|
|
|
|
|
|
|
|
|
|
(714 |
) |
Issuance of common stock, net |
|
|
274 |
|
|
|
|
|
|
|
|
|
|
|
274 |
|
Intercompany |
|
|
588 |
|
|
|
(616 |
) |
|
|
28 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash (used in) provided by financing activities |
|
|
(48,409 |
) |
|
|
(389 |
) |
|
|
14,782 |
|
|
|
(34,016 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Effect of exchange rate changes on cash |
|
|
823 |
|
|
|
630 |
|
|
|
(15,217 |
) |
|
|
(13,764 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net increase in cash |
|
|
556 |
|
|
|
131 |
|
|
|
|
|
|
|
687 |
|
Cash at beginning of period |
|
|
2,208 |
|
|
|
976 |
|
|
|
|
|
|
|
3,184 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash at end of period |
|
$ |
2,764 |
|
|
$ |
1,107 |
|
|
$ |
|
|
|
$ |
3,871 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
25
MOBILE MINI, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited) Continued
MOBILE MINI, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
Six Months Ended June 30, 2008
(In thousands)
(unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non- |
|
|
|
|
|
|
|
|
|
Guarantors |
|
|
Guarantors |
|
|
Eliminations |
|
|
Consolidated |
|
Cash Flows From Operating Activities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) |
|
$ |
17,719 |
|
|
$ |
(2,264 |
) |
|
$ |
64 |
|
|
$ |
15,519 |
|
Adjustments to reconcile income to net cash provided by
(used in) operating activities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Provision for doubtful accounts |
|
|
573 |
|
|
|
177 |
|
|
|
|
|
|
|
750 |
|
Amortization of deferred financing costs |
|
|
669 |
|
|
|
|
|
|
|
|
|
|
|
669 |
|
Share-based compensation expense |
|
|
2,095 |
|
|
|
269 |
|
|
|
|
|
|
|
2,364 |
|
Depreciation and amortization |
|
|
10,214 |
|
|
|
1,202 |
|
|
|
|
|
|
|
11,416 |
|
Gain on sale of lease fleet units |
|
|
(2,750 |
) |
|
|
(344 |
) |
|
|
|
|
|
|
(3,094 |
) |
Loss on disposal of property, plant and equipment |
|
|
29 |
|
|
|
|
|
|
|
|
|
|
|
29 |
|
Other income |
|
|
(662 |
) |
|
|
|
|
|
|
662 |
|
|
|
|
|
Deferred income taxes |
|
|
11,057 |
|
|
|
(753 |
) |
|
|
(67 |
) |
|
|
10,237 |
|
Foreign currency exchange loss |
|
|
|
|
|
|
8 |
|
|
|
|
|
|
|
8 |
|
Changes in certain assets and liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Receivables |
|
|
(3,151 |
) |
|
|
137 |
|
|
|
|
|
|
|
(3,014 |
) |
Inventories |
|
|
(4,519 |
) |
|
|
949 |
|
|
|
|
|
|
|
(3,570 |
) |
Deposits and prepaid expenses |
|
|
1,337 |
|
|
|
(437 |
) |
|
|
|
|
|
|
900 |
|
Other assets and intangibles |
|
|
100 |
|
|
|
(1 |
) |
|
|
|
|
|
|
99 |
|
Accounts payable |
|
|
(3,715 |
) |
|
|
1 |
|
|
|
|
|
|
|
(3,714 |
) |
Accrued liabilities |
|
|
12,726 |
|
|
|
216 |
|
|
|
|
|
|
|
12,942 |
|
Intercompany |
|
|
31 |
|
|
|
457 |
|
|
|
(488 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used in) operating activities |
|
|
41,753 |
|
|
|
(383 |
) |
|
|
171 |
|
|
|
41,541 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash Flows From Investing Activities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash paid for businesses acquired |
|
|
(24,485 |
) |
|
|
3,212 |
|
|
|
|
|
|
|
(21,273 |
) |
Additions to lease fleet units |
|
|
(24,375 |
) |
|
|
(10,238 |
) |
|
|
|
|
|
|
(34,613 |
) |
Proceeds from sale of lease fleet units |
|
|
7,299 |
|
|
|
1,759 |
|
|
|
(1 |
) |
|
|
9,057 |
|
Additions to property, plant and equipment |
|
|
(3,768 |
) |
|
|
(1,074 |
) |
|
|
|
|
|
|
(4,842 |
) |
Proceeds from sale of property, plant and equipment |
|
|
59 |
|
|
|
|
|
|
|
|
|
|
|
59 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash used in investing activities |
|
|
(45,270 |
) |
|
|
(6,341 |
) |
|
|
(1 |
) |
|
|
(51,612 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash Flows From Financing Activities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net borrowings (repayments) under lines of credit |
|
|
130,860 |
|
|
|
9,934 |
|
|
|
(31 |
) |
|
|
140,763 |
|
Deferred financing costs |
|
|
(14,555 |
) |
|
|
|
|
|
|
|
|
|
|
(14,555 |
) |
Principal payments on notes payable |
|
|
(113,101 |
) |
|
|
|
|
|
|
|
|
|
|
(113,101 |
) |
Principal payments on capital lease obligations |
|
|
(6 |
) |
|
|
(1 |
) |
|
|
|
|
|
|
(7 |
) |
Issuance of common stock, net |
|
|
1,053 |
|
|
|
|
|
|
|
|
|
|
|
1,053 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided (used in) by financing activities |
|
|
4,251 |
|
|
|
9,933 |
|
|
|
(31 |
) |
|
|
14,153 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effect of exchange rate changes on cash |
|
|
(377 |
) |
|
|
276 |
|
|
|
(139 |
) |
|
|
(240 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net increase in cash |
|
|
357 |
|
|
|
3,485 |
|
|
|
|
|
|
|
3,842 |
|
Cash at beginning of period |
|
|
2,033 |
|
|
|
1,670 |
|
|
|
|
|
|
|
3,703 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash at end of period |
|
$ |
2,390 |
|
|
$ |
5,155 |
|
|
$ |
|
|
|
$ |
7,545 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
26
ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion of our financial condition and results of operations should be read
together with our December 31, 2008 consolidated financial statements and the accompanying notes
thereto which are included in our Annual Report on Form 10-K filed with the Securities and Exchange
Commission on March 2, 2009. This discussion contains forward-looking statements. Forward-looking
statements are based on current expectations and assumptions that involve risks and uncertainties.
Our actual results may differ materially from those anticipated in forward-looking statements.
The following discussion takes into account our merger transaction with Mobile Storage Group, Inc.
on June 27, 2008. Our operating results for the reporting periods ended June 30, 2009 reflect the
results of the acquired operations of Mobile Storage Group, whereas our operating results for the
reporting periods ended June 30, 2008, reflect the results of the acquired operations of Mobile
Storage Group since June 27, 2008 and include certain estimated expenses related to the integration
and merger in connection with the acquisition.
Overview
General
We are the largest provider of portable storage solutions in North America and the United Kingdom,
through a total lease fleet of approximately 264,000 portable storage and mobile office units at June 30,
2009. We offer a wide range of portable storage products in varying lengths and widths with an
assortment of differentiated features such as our patented locking systems, multiple doors,
electrical wiring and shelving.
We derive most of our revenues from the leasing of portable storage containers and mobile offices.
In addition to our leasing business, we also sell portable storage containers and occasionally sell
mobile office units. Our sales revenues represented 10.0% and 10.2% of total revenues for the six
months ended June 30, 2008 and 2009, respectively.
On June 27, 2008, we acquired the outstanding shares of Mobile Storage Group through a merger of a
wholly-owned subsidiary of Mobile Mini into Mobile Storage Groups ultimate parent, MSG WC Holdings
Corp. Immediately thereafter, each of MSG WC Holdings Corp. and two of its direct subsidiaries
merged with and into Mobile Mini and Mobile Storage Group became a wholly-owned subsidiary of
Mobile Mini. We refer to this transaction as the Merger or the acquisition throughout this
report.
The Merger was the largest acquisition we have completed and it increased the scope of our
operations in both the U.S. and the U.K. Our condensed consolidated statements of income for the
periods ended June 30, 2008 and 2009 include certain expenses incurred related to integration of
the business acquired in the Merger. See the Notes to Condensed Consolidated Financial Statements
included herein for additional information regarding the Merger.
Prior to acquiring MSG, Mobile Mini grew through both organic growth and smaller acquisitions,
which we use to gain a presence in new markets. Typically, we enter a new market through the
acquisition of the business of a smaller local competitor and then apply our business model, which
is usually much more customer service and marketing focused than the business we are buying or its
competitors in the market. If we cannot find a desirable acquisition opportunity in a market we
wish to enter, we establish a new location from the ground up. As a result, a new branch location
will typically have fairly low operating margins during its early years, but as our marketing
efforts help us penetrate the new market and we increase the number of units on rent at the new
branch, we take advantage of operating efficiencies to improve operating margins at the branch and
typically reach company average levels after several years. When we enter a new market, we incur
certain costs in developing an infrastructure. For example, advertising and marketing costs will
be incurred and certain minimum levels of staffing and delivery equipment will be put in place
regardless of the new markets revenue base. Once we have achieved revenues during any period that
are sufficient to cover our fixed expenses, we generate high margins on incremental lease revenues.
Therefore, each additional unit rented in excess of the break-even level, contributes
significantly to profitability. Conversely, additional fixed expenses that we incur require us to
achieve additional revenue as compared to the prior period to cover the additional expense.
As a result of the Merger, we have been implementing our business model across the newly acquired
MSG branches. While we have
been able to realize significant cost reductions as a result of the combination of two companies,
costs of implementing our business
model at the branches we acquired offset some of the cost reductions.
27
The level of non-residential construction activity is an important external factor that we examine
to determine the direction of our business. Customers in the construction industry represented
approximately 36% and 43% of our units on rent at December 31, 2008 and 2007, respectively, and
because of the degree of operating leverage we have, increases or decreases in non-residential
construction activity can have a significant effect on our operating margins and net income. In
2007, after three years of very strong growth in non-residential construction activity in the U.S,
this sector began to moderate and then decline and the level of our construction
related business began to slow down and then decline. This decline continues to adversely affect
our results of operations into 2009.
In managing our business, we focus on growing leasing revenues, particularly in existing markets
where we can take advantage of the operating leverage inherent in our business model. Our goal is
to maintain a stable growth rate.
We are a capital-intensive business, more historically than we currently are, so in addition to
focusing on earnings per share, we focus on adjusted EBITDA to measure our results. We calculate
this number by first calculating EBITDA, which we define as net income before interest expense,
debt restructuring or extinguishment expense (if applicable), provision for income taxes,
depreciation and amortization. This measure eliminates the effect of financing transactions that
we enter into and this measure provides us with a means to track internally generated cash from
which we can fund our interest expense and our lease fleet growth. In comparing EBITDA from year
to year, we typically further adjust EBITDA to ignore the effect of what we consider non-recurring
events not related to our core business operations.
Because EBITDA is a non-GAAP financial measure, as defined by the SEC, we include below in this
report reconciliations of EBITDA to the most directly comparable financial measures calculated and
presented in accordance with accounting principles generally accepted in the United States.
We present EBITDA because we believe it provides useful information regarding our ability to meet
our future debt payment requirements, capital expenditures and working capital requirements and
that it provides an overall evaluation of our financial condition. In addition, EBITDA is a
component of certain financial covenants under our revolving credit facility and is used to
determine our available borrowing capacity and the facilitys applicable interest rate in effect at
any point in time. EBITDA has certain limitations as an analytical tool and should not be used as a
substitute for net income, cash flows or other consolidated income or cash flow data prepared in
accordance with generally accepted accounting principles in the United States or as a measure of
our profitability or our liquidity. In particular, EBITDA, as defined, does not include:
|
|
|
Interest expense because we borrow money to partially finance our capital
expenditures, primarily related to the expansion of our lease fleet, interest expense is a
necessary element of our cost to secure this financing to continue generating additional
revenues. |
|
|
|
|
Debt restructuring or extinguishment expense as historically defined in our revolving
credit facility, debt restructuring or debt extinguishment expenses are not deducted in our
various calculations made under our facility and are treated no differently than interest
expense. As discussed above, interest expense is a necessary element of our cost to finance
a portion of the capital expenditures needed for the growth of our business. |
|
|
|
|
Income taxes EBITDA, as defined, does not reflect income taxes or the requirements for
any tax payments. |
|
|
|
|
Depreciation and amortization because we are a leasing company, our business is very
capital intensive and we hold acquired assets for a period of time before they generate
revenues, cash flow and earnings; therefore, depreciation and amortization expense is a
necessary element of our business. |
When evaluating EBITDA as a performance measure, and excluding the above-noted charges, all of
which have material limitations, investors should consider, among other factors, the following:
|
|
|
increasing or decreasing trends in EBITDA; |
|
|
|
|
how EBITDA compares to levels of debt and interest expense; and
|
28
|
|
|
whether EBITDA historically has remained at positive levels. |
Because EBITDA, as defined, excludes some but not all items that affect our cash flow from
operating activities, EBITDA may not be comparable to a similarly titled performance measure
presented by other companies.
The table below is a reconciliation of EBITDA to net cash provided by operating activities for the
periods indicated:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
Six Months Ended |
|
|
|
June 30, |
|
|
June 30, |
|
|
|
2008 |
|
|
2009 |
|
|
2008 |
|
|
2009 |
|
|
|
(In thousands) |
|
EBITDA |
|
$ |
20,354 |
|
|
$ |
33,611 |
|
|
$ |
49,814 |
|
|
$ |
73,040 |
|
Interest paid |
|
|
(3,712 |
) |
|
|
(11,573 |
) |
|
|
(6,990 |
) |
|
|
(27,702 |
) |
Income and franchise taxes paid |
|
|
(327 |
) |
|
|
(728 |
) |
|
|
(429 |
) |
|
|
(872 |
) |
Share-based compensation expense |
|
|
1,376 |
|
|
|
1,660 |
|
|
|
2,364 |
|
|
|
3,281 |
|
Gain on sale of lease fleet units |
|
|
(1,603 |
) |
|
|
(2,934 |
) |
|
|
(3,094 |
) |
|
|
(5,779 |
) |
Loss on disposal of property, plant and equipment |
|
|
|
|
|
|
11 |
|
|
|
29 |
|
|
|
36 |
|
Changes in certain assets and liabilities, net
of effects of businesses acquired: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Receivables |
|
|
(4,898 |
) |
|
|
5,836 |
|
|
|
(2,264 |
) |
|
|
17,563 |
|
Inventories |
|
|
(3,067 |
) |
|
|
1,209 |
|
|
|
(3,570 |
) |
|
|
1,639 |
|
Deposits and prepaid expenses |
|
|
357 |
|
|
|
2,105 |
|
|
|
900 |
|
|
|
2,435 |
|
Other assets and intangibles |
|
|
4,430 |
|
|
|
(260 |
) |
|
|
99 |
|
|
|
(441 |
) |
Accounts payable and accrued liabilities |
|
|
7,701 |
|
|
|
(2,701 |
) |
|
|
4,682 |
|
|
|
(16,364 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by operating activities |
|
$ |
20,611 |
|
|
$ |
26,236 |
|
|
$ |
41,541 |
|
|
$ |
46,836 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EBITDA is calculated as follows, without further adjustment, for the periods indicated:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
Six Months Ended |
|
|
|
June 30, |
|
|
June 30, |
|
|
|
2008 |
|
|
2009 |
|
|
2008 |
|
|
2009 |
|
|
|
(In thousands except percentages) |
|
Net income |
|
$ |
4,861 |
|
|
$ |
5,227 |
|
|
$ |
15,519 |
|
|
$ |
13,693 |
|
Interest expense |
|
|
6,419 |
|
|
|
14,966 |
|
|
|
12,564 |
|
|
|
30,207 |
|
Provision for income taxes |
|
|
3,327 |
|
|
|
2,984 |
|
|
|
10,315 |
|
|
|
8,453 |
|
Depreciation and amortization |
|
|
5,747 |
|
|
|
10,434 |
|
|
|
11,416 |
|
|
|
20,687 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EBITDA |
|
$ |
20,354 |
|
|
$ |
33,611 |
|
|
$ |
49,814 |
|
|
$ |
73,040 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EBITDA margin(1) |
|
|
25.1 |
% |
|
|
35.4 |
% |
|
|
31.2 |
% |
|
|
37.4 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
EBITDA and EBITDA margin(1)
excluding integration,
merger and restructuring
expenses: |
|
$ |
31,963 |
|
|
$ |
39,240 |
|
|
$ |
61,423 |
|
|
$ |
80,883 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
39.4 |
% |
|
|
41.3 |
% |
|
|
38.5 |
% |
|
|
41.5 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
EBITDA margin is calculated as EBITDA divided by total revenues expressed as a percentage. |
In managing our business, we routinely compare our EBITDA margins from year to year and based upon
size of branch. We define this margin as EBITDA divided by our total revenues, expressed as a
percentage. We use this comparison, for example, to study internally the effect that increased
costs have on our margins. As capital is invested in our established branch locations, we achieve
higher EBITDA margins on that capital than we achieve on capital invested to establish a new
branch, because our fixed costs are already in place in connection with the established branches.
The fixed costs are those associated with yard and delivery equipment, as well as advertising,
sales, marketing and office expenses. With a new market or branch, we must first fund and absorb
the startup costs for setting up the new branch facility, hiring and developing the management and
sales team and developing our marketing and advertising programs. A new branch will have low
EBITDA margins in its early years until the number of units on rent increases. Because of our high
operating margins on incremental lease revenue, which we realize on a branch-by-branch basis when
the branch achieves leasing revenues sufficient to cover the branchs fixed costs, leasing revenues
in excess of the break-even amount produce large increases in profitability. Conversely, absent
significant growth in leasing revenues, the EBITDA margin at a branch would be expected to remain
relatively flat on a period-by-period comparative basis.
29
Accounting and Operating Overview
Our leasing revenues include all rent and ancillary revenues we receive for our portable storage,
combination storage/office and mobile office units. Our sales revenues include sales of these
units to customers. Our other revenues consist principally of charges for the delivery of the
units we sell. Our principal operating expenses are (1) cost of sales; (2) leasing, selling and
general expenses; and (3) depreciation and amortization, primarily depreciation of the portable
storage units and portable offices in our lease fleet. Cost of sales is the cost of the units that
we sold during the reported period and includes both our cost to buy, transport, remanufacture and
modify used ocean-going containers and our cost to manufacture portable storage units and other
structures. Leasing, selling and general expenses include among other expenses, advertising and
other marketing expenses, real property lease expenses, commissions, repair and maintenance costs
of our lease fleet and transportation equipment and corporate expenses for both our leasing and
sales activities. Our repairs on wood offices require more
maintenance cost than our portable storage units and have become a
larger part of our lease fleet repair and maintenance expense over
the past several years. Annual repair and maintenance expenses on our leased units over the last three
fiscal years have averaged approximately 4.3% of lease revenues and are included in leasing,
selling and general expenses. We expense our normal repair and maintenance costs as incurred
(including the cost of periodically repainting units).
Our principal asset is our lease fleet, which has historically maintained value close to its
original cost. The steel units in our lease fleet (other than van trailers) are depreciated on the
straight-line method over our units estimated useful life of 30 years after the date the unit is
placed in service, with an estimated residual value of 55%. The depreciation policy is supported
by our historical lease fleet data which shows that we have been able to obtain comparable rental
rates and sales prices irrespective of the age of our container lease fleet. Our wood mobile
office units are depreciated over 20 years to 50% of original cost. Van trailers, which constitute
a small part of our fleet, are depreciated over seven years to a 20% residual value.
In connection with the MSG acquisition, we also acquired non-core assets that were not part of our
principal lease fleet. These assets include timber units which are older wood constructed mobile
offices in the U.K. that are depreciated over 5 years to 10% of their assigned value. Other
non-core units include portable toilets. Steel portable toilets are depreciated over 30 years to
55% of their residual value, wood timber portable toilets are depreciated over 5 years to 10% of
their residual value and fiberglass portable toilets are depreciated over 3 years to 30% of their
residual value.
The table below summarizes those transactions that effectively maintained the net book value of our
lease fleet at $1.1 billion at December 31, 2008, and at June 30, 2009:
|
|
|
|
|
|
|
|
|
|
|
Dollars |
|
|
Units |
|
|
|
(In thousands) |
|
|
|
|
|
Lease fleet at December 31, 2008, net |
|
$ |
1,078,156 |
|
|
|
273,748 |
|
Purchases: |
|
|
|
|
|
|
|
|
Container purchases and containers, including freight |
|
|
532 |
|
|
|
217 |
|
Manufactured units: |
|
|
|
|
|
|
|
|
Steel storage containers, combination storage/office combo units and steel security offices |
|
|
568 |
|
|
|
45 |
|
Wood mobile offices |
|
|
110 |
|
|
|
4 |
|
Remanufacturing and customization (3): |
|
|
|
|
|
|
|
|
Remanufacturing or customization of units purchased or acquired in the current year |
|
|
177 |
|
|
|
31 |
|
Remanufacturing or customization of 130 units purchased in a prior year |
|
|
5,062 |
|
|
|
58 |
(1) |
Remanufacturing or customization of 5,272 units obtained through acquisition in a prior year |
|
|
3,981 |
|
|
|
477 |
(2) |
Other |
|
|
(4,345 |
) |
|
|
(3,388 |
)(4) |
Adjustments to valuations on acquired MSG trailers |
|
|
(8,387 |
) |
|
|
|
|
Cost of sales from lease fleet |
|
|
(11,181 |
) |
|
|
(7,092 |
) |
Effect of exchange rate changes |
|
|
15,219 |
|
|
|
|
|
Depreciation |
|
|
(10,134 |
) |
|
|
|
|
|
|
|
|
|
|
|
Lease fleet at June 30, 2009, net |
|
$ |
1,069,758 |
|
|
|
264,100 |
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
These units include the net additional units that were the result of splitting steel
containers into one or more shorter units, such as splitting a 40-foot container into two
20-foot units, or one 25-foot unit and one 15-foot unit. |
|
(2) |
|
Includes units moved from finished goods to lease fleet. |
|
(3) |
|
Does not include any routine maintenance, which is expensed as incurred. |
30
|
|
|
(4) |
|
Includes net units transferred in and out of the lease fleet. |
The table below outlines the composition of our lease fleet (by book value and unit count) at June
30, 2009:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of |
|
|
Percentage |
|
|
|
Book Value |
|
|
Units |
|
|
of Units |
|
|
|
(In thousands) |
|
|
|
|
|
|
|
|
|
Steel storage containers |
|
$ |
619,261 |
|
|
|
210,399 |
|
|
|
80 |
% |
Mobile offices |
|
|
530,510 |
|
|
|
42,614 |
|
|
|
16 |
% |
Van trailers |
|
|
7,283 |
|
|
|
11,087 |
|
|
|
4 |
% |
Other, primarily chassis |
|
|
2,793 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,159,847 |
|
|
|
|
|
|
|
|
|
Accumulated depreciation |
|
|
(90,089 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
1,069,758 |
|
|
|
264,100 |
|
|
|
100 |
% |
|
|
|
|
|
|
|
|
|
|
Appraisals on our fleet are conducted on a regular basis by an independent appraiser selected by
our lenders and the appraiser does not differentiate in value based upon the age of the container
or the length of time it has been in our fleet. As of June 30, 2009, based on this orderly
liquidation value appraisal, on which our borrowings under our revolving credit facility are based,
our lease fleet liquidation appraisal value is approximately $916.8 million, which equates to 85.7%
of our lease fleet net book value of $1.1 billion at June 30, 2009.
Our expansion program and other factors can affect our overall lease fleet asset utilization rate.
During the last five fiscal years, our annual utilization levels averaged 80.2%, and ranged from a
low of 75.0% in 2008 to a high of 82.9% in 2005. Our utilization is somewhat seasonal,
historically with the low normally being realized in the first quarter and the high realized in the
fourth quarter. However, with the challenging economic business environment, especially in the
non-residential construction industry, we have seen a decline in our utilization rates compared to
the same period in the prior year. We ended the 2008 year with an average lease fleet utilization
rate of 75.0%. Our average utilization rate for the second quarter of 2009 was 59.5% as compared
to 64.6% in the first quarter of 2009 and as compared to 75.4% in the second quarter of 2008.
31
RESULTS OF OPERATIONS
Three Months Ended June 30, 2009, Compared to
Three Months Ended June 30, 2008
Total revenues for the quarter ended June 30, 2009 increased by $13.8 million, or 17.1%, to $94.9
million from $81.1 million for the same period in 2008. The increase in total revenues is
primarily due to the acquisition of MSG. Leasing revenues for the quarter increased by $11.6
million, or 15.9%, to $84.4 million from $72.8 million for the same period in 2008. The increase
in leasing revenue growth is primarily due to the acquisition, but was offset in part by a
reduction in business activity due to the economic recession and a change in foreign currency
exchange rates. Our sales of portable storage and office units for the quarter ended June 30, 2009
increased by 26.0%, to $9.9 million from $7.8 million during the same period in 2008. Leasing
revenues, as a percentage of total revenues for the quarters ended June 30, 2009 and 2008, were
88.9% and 89.8%, respectively. Our leasing business continues to be our primary focus and leasing
revenues have been the predominant part of our revenue mix over the past several years.
Cost of sales is the cost related to our sales revenues only. Cost of sales was 67.1% and 68.5% of
sales revenue for the quarters ended June 30, 2009 and 2008, respectively. Our gross margins
remained relatively high, at 32.8% for the quarter ended June 30, 2009 and 31.5% for the same
period in 2008.
Leasing, selling and general expenses increased $5.3 million, or 12.1%, to $49.1 million for the
quarter ended June 30, 2009, from $43.8 million for the same period in 2008. Leasing, selling and
general expenses, as a percentage of total revenues, decreased to 51.7% for the quarter ended June
30, 2009, from 54.0% for the same period in 2008, primarily due to the cost synergies achieved in
the acquisition and our cost cutting measures during the current year. This cost cutting was
primarily reductions in our workforce including migrating a number of our branches into operational
yards. These operational yards do not have all the headcount and overhead associated with a fully
staffed branch. In addition to a reduction in payroll costs, we benefited from lower repair and
maintenance expenses related to our lease fleet, lower fuel costs and third-party haulers as
compared to the prior period.
Integration, merger and restructuring expenses for the quarter ended June 30, 2009 were $5.6
million and primarily represent costs for repositioning assets to their intended location and costs
associated with further reductions to our workforce. Other continuing costs related to integration,
merger and restructuring will be expensed as incurred and may include additional repositioning of
assets and further reductions in our workforce.
EBITDA increased $13.2 million, or 65.1%, to $33.6 million, as compared to $20.4 million for the
same period in 2008 and EBITDA margins were 35.4% and 25.1% of total revenues for the quarters
ended June 30, 2009 and 2008, respectively. EBITDA, excluding integration, merger and
restructuring expenses, increased $7.2 million, or 22.8%, to $39.2 million compared to $32.0
million for the same period in 2008. EBITDA margins, excluding integration, merger and
restructuring expenses were 41.3% and 39.4% of total revenues for the three months ended June 30,
2009 and 2008, respectively.
Depreciation and amortization expenses increased $4.7 million, or 81.6%, to $10.4 million in the
quarter ended June 30, 2009, as compared to $5.7 million during the same period in 2008. The
increase is primarily due to the acquisition, investment in additional technology and communication
equipment and some growth in lease fleet, (primarily acquired in 2008) and related delivery
equipment.
Interest expense increased $8.6 million to $15.0 million for the quarter ended June 30, 2009 as
compared to $6.4 million for the same period in 2008. This increase is primarily due to the debt
assumed in the acquisition. Our average borrowing rate increased slightly during the second
quarter of 2009 from the prior year level, including the effect of the assumption of Mobile
Storages $200.0 million 9.75% Senior Notes. The weighted average interest rate on our debt for
the three months ended June 30, 2009 was 6.1% compared to 5.8% for the three months ended June 30,
2008, excluding amortization of debt issuance costs. Taking into account the amortization of debt
issuance costs, the weighted average interest rate was 6.6% in the 2009 quarter and was
6.3% in the 2008 quarter.
Provision for income taxes was based on our annual estimated effective tax rate. The tax rate for
the quarter ended June 30, 2009 was 36.3%, as compared to 40.6% during the same period in 2008.
The 4.3% decrease is attributed to our United Kingdom operations related to favorable tax treatment
on certain expenses resulting from the Merger, which were clarified in the second quarter of 2009
as being deductible for tax accounting. Our consolidated tax provision includes the expected tax
rates for our operations in the United States, Canada, United Kingdom and The Netherlands.
32
Net income for the three months ended June 30, 2009, was $5.2 million compared to net income of
$4.9 million for the same period in 2008. Our second quarter net income results include
integration, merger and restructuring expenses of $5.6 million and $11.6 million, (approximately
$3.5 million and $7.2 million after tax, respectively) for the three months ended June 30, 2009 and
2008, respectively.
Six Months Ended June 30, 2009, Compared to
Six Months Ended June 30, 2008
Total revenues for the six months ended June 30, 2009 increased by $35.5 million, or 22.2%, to
$195.1 million from $159.6 million for the same period in 2008. The increase in total revenues is
primarily due to the acquisition of MSG. Leasing revenues for the six months increased by $31.0
million, or 21.7%, to $173.9 million from $142.9 million for the same period in 2008. The increase
in leasing revenue growth is primarily due to the acquisition of MSG, but was offset in part by a
reduction in business activity due to the economic recession and a change in foreign currency
exchange rates. Our sales of portable storage and office units for the six months ended June 30,
2009 increased by 25.1%, to $19.9 million from $15.9 million during the same period in 2008.
Leasing revenues, as a percentage of total revenues for the six months ended June 30, 2009 and
2008, were 89.1% and 89.5%, respectively. Our leasing business continues to be our primary focus
and leasing revenues have been the predominant part of our revenue mix over the past several years.
Cost of sales is the cost related to our sales revenues only. Cost of sales was 67.7% and 69.0% of
sales revenue for the six months ended June 30, 2009 and 2008, respectively. Our gross margins
remained relatively high, at 32.3% for the six months ended June 30, 2009 and 31.0% for the same
period in 2008.
Leasing, selling and general expenses increased $13.4 million, or 15.3%, to $100.7 million for the
six months ended June 30, 2009, from $87.3 million for the same period in 2008. Leasing, selling
and general expenses, as a percentage of total revenues, decreased to 51.6% for the six months
ended June 30, 2009, from 54.7% for the same period in 2008, primarily due cost synergies achieved
in the acquisition and our cost cutting measures in the current quarter. This cost cutting was
primarily reductions in our workforce including migrating a number of our branches into operational
yards. These operational yards do not have all the headcount and overhead associated with a fully
staffed branch. In addition, we benefited from lower repair and maintenance expenses related to
our lease fleet, lower fuel costs and third-party haulers as compared to the prior period.
Integration, merger and restructuring expenses for the six months ended June 30, 2009 were $7.8
million and primarily represent costs for repositioning assets to their intended location and costs
associated with further reductions to our workforce. Other continuing costs related to integration,
merger and restructuring will be expensed as incurred and may include additional repositioning of
assets and further reductions in our workforce.
EBITDA increased $23.2 million, or 46.6%, to $73.0 million, as compared to $49.8 million for the
same period in 2008 and EBITDA margins were 37.4% and 31.2% of total revenues for the six months
ended June 30, 2009 and 2008, respectively. EBITDA, excluding integration, merger and
restructuring expenses, increased $19.5 million, or 31.7%, to $80.9 million compared to $61.4
million for the same period in 2008. EBITDA margins, excluding integration, merger and
restructuring expenses were 41.5% and 38.5% of total revenues for the six months ended June 30,
2009 and 2008, respectively.
Depreciation and amortization expenses increased $9.3 million, or 81.2%, to $20.7 million in the
six month ended June 30, 2009, as compared to $11.4 million during the same period in 2008. The
increase is primarily due to the acquisition, investment in additional technology and communication
equipment and some growth in lease fleet (primarily acquired in 2008) and related delivery
equipment.
Interest expense increased $17.6 million to $30.2 million for the six months ended June 30, 2009 as
compared to $12.6 million for the same period in 2008. This increase is primarily due to the debt
assumed in the acquisition. Our average borrowing rate increased slightly during the second
quarter of 2009 from the prior year level, including the effect of the assumption of Mobile
Storages $200.0 million of 9.75% Senior Notes. The weighted average interest rate on our debt for
the six months ended June 30, 2009 was 6.2% compared to 6.0% for the six months ended June 30,
2008, excluding amortization of debt issuance costs. Taking into account the amortization of debt
issuance costs, the weighted average interest rate was 6.7% in 2009 and 6.3% in 2008.
33
Provision for income taxes was based on our annual effective tax rate of approximately 38.2% in the
six months ended June 30, 2009, as compared to 39.9% during the same period in 2008. Our
consolidated tax provision includes the expected tax rates for our operations in the United States,
Canada, United Kingdom and The Netherlands.
Net income for the six months ended June 30, 2009, was $13.7 million compared to net income of
$15.5 million for the same period in 2008. Our 2009 net income results include integration, merger
and restructuring expenses of $7.8 million and $11.6 million, (approximately $4.9 million and $7.2
million after tax, respectively) for the six months ended June 30, 2009 and 2008, respectively.
LIQUIDITY AND CAPITAL RESOURCES
Leasing is a capital-intensive business that requires us to acquire assets before they generate
revenues, cash flow and earnings. The assets which we lease have very long useful lives and
require relatively little recurrent maintenance expenditures. Most of the capital we deploy into
our leasing business historically has been used to expand our operations geographically, to
increase the number of units available for lease at our leasing locations, and to add to the mix of
products we offer. During recent years, our operations have generated annual cash flow that
exceeds our pre-tax earnings, particularly due to the deferral of income taxes caused by
accelerated depreciation that is used for tax accounting. In 2008, we were cash flow positive
(after capital expenditures but excluding acquisitions) for the first time in our operating
history. This continued for the six month period ended June 30, 2009.
During the past three years, our capital expenditures and acquisitions have been funded by our
operating cash flow, a public offering of shares of our common stock in March 2006, our offering of
Senior Notes in May 2007 and through borrowings under our revolving credit facility. Our operating
cash flow is generally weakest during the first quarter of each fiscal year, when customers who
leased containers for holiday storage return the units and a result of seasonal weather in some of
our markets. During 2008 and the six months ended June 30, 2009, we cut back significantly on our
capital expenditures and were able to fund the growth of our lease fleet and fixed assets with cash
provided by operating activities. We currently expect this trend to continue throughout 2009. In
addition to cash flow generated by operations, our principal current source of liquidity is our
revolving credit facility described below.
Revolving Credit Facility. In connection with the Merger, we expanded our revolving credit facility
to $900.0 million and included the combined assets of both Mobile Mini and Mobile Storage Group as
security for our obligations under the facility.
On June 27, 2008, we entered into an ABL Credit Agreement (the Credit Agreement) with Deutsche Bank
AG New York Branch and the other lenders party thereto. The Credit Agreement provides for a $900.0
million revolving credit facility. All amounts outstanding under the Credit Agreement are due on
June 27, 2013. The obligations of Mobile Mini and our subsidiary guarantors under the Credit
Agreement are secured by a blanket lien on substantially all of our assets. At June 30, 2009, we
had approximately $521.7 million of borrowings outstanding and $302.2 million of additional
borrowing availability under the Credit Agreement, based upon borrowing base calculations as of
such date. We were in compliance with all the covenants under the terms of the Credit Agreement as
of June 30, 2009.
Amounts borrowed under the Credit Agreement and repaid during the term may be reborrowed.
Outstanding amounts under the Credit Agreement will bear interest, at the our option, at either (i)
LIBOR plus a defined margin, or (ii) the Agent banks prime rate plus a margin. LIBOR loans
initially bore interest at LIBOR plus 2.5% and base rate loans initially bore interest at the Agent
banks prime rate plus 1.0%. Beginning after the quarter ended June 30, 2009, the applicable
margins for each type of loan will range from 2.25% to 2.75% for LIBOR loans and 0.75% to 1.25% for
base rate loans depending upon our debt ratio, as defined in the Agreement, at the measurement
date. As of June 30, 2009, based on our debt ratio, our applicable interest rate margins remain
unchanged until the next measurement date.
The Credit Agreement provides for U.K. borrowings, denominated in either Pounds Sterling or Euros,
by the Companys subsidiary Mobile Mini U.K. Limited, based upon a U.K. borrowing base and
additionally supported by the U.S. and Canada borrowing base, if necessary. For U.S. borrowings,
which are denominated in Dollars, by Mobile Mini, the borrowing base is based upon a U.S. and
Canada borrowing base.
Availability of borrowings under the Credit Agreement is subject to a borrowing base calculation
based upon a valuation of the our eligible accounts receivable, eligible container fleet, eligible
inventory (including containers held for sale, work-in-process and raw materials), machinery and
equipment and real property, each multiplied by an applicable advance rate or limit.
34
Operating Activities. Our operations provided net cash flow of $46.8 million for the six months
ended June 30, 2009, compared to $41.5 million during the same period in 2008. The $5.3 million
increase in cash provided by operations primarily resulted from increases in net income, after
giving effect to non-cash items. Decreases in accounts receivable, inventories and deposits and
prepaid expenses were offset by a decrease in accrued liabilities.
Investing Activities. Net cash provided by investing activities was $1.6 million for the six months
ended June 30, 2009, compared to a use of cash of $51.6 million for the same period in 2008. Cash
paid for businesses acquired, which related solely to the MSG acquisition, was $21.3 million in
2008. Capital expenditures for our lease fleet were $10.9 million and proceeds from sale of lease
fleet units were $16.9 million for the six months ended June 30, 2009, compared to net expenditures
of $25.6 million for the same period in 2008. Our capital expenditures for our lease fleet
decreased 68.6% in the first six months of 2009 compared to the same period in 2008, as we required
fewer units due to the economic slow down. Proceeds from sale of lease fleet units increased 86.9%
compared to the same period in 2008. At the end of 2008, we restructured our manufacturing
operations to right-size our manufacturing requirements considering the large lease fleet we
acquired in the MSG transaction. As a result of the acquisition and the current economic
conditions, we anticipate our near-term investing activities will be primarily focused on
remanufacturing units acquired in acquisitions to meet our lease fleet standards as these units are
placed on-rent. Capital expenditures for property, plant and equipment, net of proceeds from sales
of property, plant and equipment, were $4.5 million for the six months ended June 30, 2009 compared
to $4.8 million for the same period in 2008. The majority of the 2009 expenditures were for
technology and communication improvements for our telephone and computer systems, delivery
equipment (trucks, trailers and forklifts) and improvements to our branch locations. The amount of
cash that we use during any period in investing activities is almost entirely within managements
discretion. We have no contracts or other arrangements pursuant to which we are required to
purchase a fixed or minimum amount of goods or services in connection with any portion of our
business.
Financing Activities. Net cash used in financing activities was $34.0 million during the six months
ended June 30, 2009, as compared to net cash provided by financing activities of $14.1 million for
the same period in 2008. During the six months ended June 20, 2009, we reduced borrowings
outstanding under our revolving credit facility by $32.9 million. This decrease in borrowings
outstanding under the current credit facility was negatively impacted during the period
by currency exchange rates which caused an increase to amount of borrowings outstanding under the
credit facility of approximately $14.7 million.
At June 30, 2009, we have interest rate swap agreements under which we effectively fixed the
interest rate payable on $200.0 million of borrowings under our Credit Agreement so that the rate
is based upon a spread from a fixed rate, rather than a spread from the LIBOR rate. We account for
the swap agreements in accordance with SFAS No. 133, which resulted in amounts being recognized in
other comprehensive income for the six months ended June 30, 2009, of $1.2 million net of
applicable income taxes of $0.8 million.
CONTRACTUAL OBLIGATIONS AND COMMITMENTS
Our contractual obligations primarily consist of our outstanding balance under our revolving credit
facility and $350.0 million of Senior Notes, together with other, primarily unsecured notes payable
obligations and obligations under capital leases. We also have operating lease commitments for: (1)
real estate properties for the majority of our branches with remaining lease terms typically
ranging from 1 to 11 years; (2) delivery, transportation and yard equipment, typically under a
five-year lease with purchase options at the end of the lease term at a stated or fair market value
price; and (3) office related equipment.
At June 30, 2009, primarily in connection with the issuance of our insurance policies, we provided
certain insurance carriers and others with approximately $12.2 million in letters of credit.
We currently do not have any obligations under purchase agreements or commitments. Historically, we
enter into capitalized lease obligations from time to time to purchase delivery, transportation and
yard equipment and currently, as a result of the Merger, have commitments for $4.8 million in
remaining capital lease obligations at June 30, 2009.
35
OFF-BALANCE SHEET TRANSACTIONS
We do not maintain any off-balance sheet transactions, arrangements, obligations or other
relationships with unconsolidated entities or others that are reasonably likely to have a material
current or future effect on our financial condition, changes in financial condition, revenues or
expenses, results of operations, liquidity, capital expenditures or capital resources.
SEASONALITY
Demand from some of our customers is somewhat seasonal. Demand for leases of our portable storage
units by large retailers is stronger from September through December because these retailers need
to store more inventories for the holiday season. Our retail customers usually return these leased
units to us early in the following year. Other than when in a challenging economic environment,
this has caused lower utilization rates for our lease fleet and a marginal decrease in cash flow
during the first quarter of the year. Over the last few years, we have reduced the percentage of
our units we reserve for this seasonal business from the levels we allocated in earlier years,
decreasing our seasonality.
EFFECTS OF INFLATION
Our results of operations for the periods discussed in this report have not been significantly
affected by inflation.
CRITICAL ACCOUNTING POLICIES, ESTIMATES AND JUDGMENTS
Our significant accounting policies are disclosed in Note 1 to our consolidated financial
statements included in our Annual Report on Form 10-K. The following discussion addresses our most
critical accounting policies, some of which require significant judgment.
Mobile Minis consolidated financial statements have been prepared in accordance with accounting
principles generally accepted in the U.S. The preparation of these consolidated financial
statements requires us to make estimates and assumptions that affect the reported amounts of
assets, liabilities, revenues and expenses during the reporting period. These estimates and
assumptions are based upon our evaluation of historical results and anticipated future events, and
these estimates may change as additional information becomes available. The Securities and
Exchange Commission defines critical accounting policies as those that are, in managements view,
most important to our financial condition and results of operations and those that require
significant judgments and estimates. Management believes that our most critical accounting
policies relate to:
Revenue Recognition. Lease and leasing ancillary revenues and related expenses generated under
portable storage and mobile office units are recognized on a straight-line basis. Delivery and
hauling revenues and expenses from our portable storage and mobile office units are recognized when
these services are earned, in accordance with SAB No. 104. We recognize revenues from sales of
containers and mobile office units upon delivery when the risk of loss passes, the price is fixed
and determinable and collectability is reasonably assured. We sell our products pursuant to sales
contracts stating the fixed sales price with our customers.
Share-Based Compensation. Prior to 2006, we accounted for share-based compensation plans under the
recognition and measurement provisions of Accounting Principles Board (APB) Opinion No. 25.
Effective January 1, 2006, we adopted the provisions of SFAS 123(R) using the
modified-prospective-transition method. SFAS 123(R) requires companies to recognize the fair-value
of share-based compensation transactions in the statement of income. The fair value of our
share-based awards is estimated at the date of grant using the Black-Scholes option pricing model.
The Black-Scholes valuation calculation requires us to estimate key assumptions such as future
stock price volatility, expected terms, risk-free rates and dividend yield. Expected stock price
volatility is based on the historical volatility of our stock. We use historical data to estimate
option exercises and employee terminations within the valuation model. The expected term of
options granted is derived from an analysis of historical exercises and remaining contractual life
of stock options, and represents the period of time that options granted are expected to be
outstanding. The risk-free interest rate is based on the U.S. Treasury yield in effect at the time
of grant. We historically have not paid cash dividends, and do not currently intend to pay cash
dividends, and thus have assumed a 0% dividend rate. If our actual experience differs
significantly from the assumptions used to compute our share-based compensation cost, or if
different assumptions had been used, we may have recorded too much or too little share-based
compensation cost. For stock options and nonvested share-awards subject solely to service
conditions, we recognize expense using the straight-line method. For nonvested share-awards
subject to service and performance conditions, we are required to assess the probability that such
performance conditions will be met. If the likelihood of the performance condition being met is
deemed probable, we will recognize the expense using accelerated attribution method. In addition,
for both stock options and
36
nonvested share-awards, we are required to estimate the expected
forfeiture rate of our stock grants and only recognize the expense for those shares expected to
vest. If the actual forfeiture rate is materially different from our estimate, our share-based
compensation expense could be materially different. We had approximately $1.5 million of total
unrecognized compensation costs related to stock options at June 30, 2009 that are expected to be
recognized over a weighted-average period of 1.3 years and $18.6 million of total unrecognized
compensation costs related to nonvested share-awards at June 30, 2009 that are expected to be
recognized over a weighted-average period of 3.4 years. See Note G to the Condensed Consolidated
Financial Statements for a further discussion on share-based compensation.
Allowance for Doubtful Accounts. We maintain allowances for doubtful accounts for estimated losses
resulting from the inability of our customers to make required payments. We establish and maintain
reserves against estimated losses based upon historical loss experience and evaluation of past due
accounts agings. Management reviews the level of the allowances for doubtful accounts on a regular
basis and adjusts the level of the allowances as needed. If we were to increase the factors used
for our reserve estimates by 25%, it would have the following approximate effect on our net income
and diluted earnings per share as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
Six Months Ended |
|
|
June 30, |
|
June 30, |
|
|
2008 |
|
2009 |
|
2008 |
|
2009 |
|
|
(In thousands except per share data) |
As Reported: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
|
$ |
4,861 |
|
|
$ |
5,227 |
|
|
$ |
15,519 |
|
|
$ |
13,693 |
|
Diluted earnings per share |
|
$ |
0.14 |
|
|
$ |
0.12 |
|
|
$ |
0.45 |
|
|
$ |
0.32 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As adjusted for change in estimates: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
|
$ |
4,834 |
|
|
$ |
5,166 |
|
|
$ |
15,406 |
|
|
$ |
13,467 |
|
Diluted earnings per share |
|
$ |
0.14 |
|
|
$ |
0.12 |
|
|
$ |
0.44 |
|
|
$ |
0.31 |
|
If the financial condition of our customers were to deteriorate, resulting in an impairment of
their ability to make payments, additional allowances may be required.
Impairment of Goodwill. We assess the impairment of goodwill and other identifiable intangibles on
an annual basis or whenever events or changes in circumstances indicate that the carrying value may
not be recoverable. Some factors we consider important which could trigger an impairment review
include the following:
|
|
|
significant under-performance relative to historical, expected or projected future
operating results; |
|
|
|
|
significant changes in the manner of our use of the acquired assets or the strategy for
our overall business; |
|
|
|
|
our market capitalization relative to net book value; and |
|
|
|
|
significant negative industry or general economic trends. |
Pursuant to SFAS No. 142, Goodwill and Other Intangible Assets, we operate on one reportable
segment, which is comprised of three reporting units (North America, U.K. and The Netherlands). All
of our goodwill was allocated between these three reporting units. We perform an annual impairment
test on goodwill at December 31 using the two-step process prescribed in SFAS No. 142. The first
step is a screen for potential impairment, while the second step measures the amount of the
impairment, if any. In addition, we will perform impairment tests during any reporting period in
which events or changes in circumstances indicate that an impairment may have incurred. At June
30, 2009 there were no significant negative changes to the future projected cash flows or to the
general or specific economic trends since the last annual test indicating the need for testing
goodwill recoverability. At December 31, 2008, we performed the first step of the two-step
impairment test and compared the fair value of each reporting unit to its carrying value. In
assessing the fair value of the reporting units, we considered both the market approach and the
income approach. Under the market approach, the fair value of the reporting unit is based on
quoted market prices of companies comparable to the reporting unit being valued. Under the income
approach, the fair value of the reporting unit is based on the present value of estimated cash
flows. The income approach is dependent on a number of significant management assumptions,
including estimated future revenue growth rates, gross margins on sales, operating margins, capital
expenditures and discount rates. Each approach was given equal weight in arriving
at the fair value of the reporting unit. We determined the fair values of the U.K. and The
Netherlands reporting units were less than the carrying values of the net assets of these reporting
units, thus we performed step two of the impairment test for these two reporting units.
37
In step two of the impairment test, we are required to determine the implied fair value of the
goodwill and compare it to the carrying value of the goodwill. We allocated the fair value of the
reporting units to the respective assets and liabilities of each reporting unit as if the reporting
units had been acquired in separate and individual business combinations and the fair value of the
reporting units was the price paid to acquire the reporting units. The excess of the fair value of
the reporting units over the amounts assigned to their respective assets and liabilities is the
implied fair value of goodwill. For both reporting units in the step two testing, the implied
value of goodwill was less than the carrying value of goodwill, resulting in an impairment charge
of $13.7 million in the fourth quarter of 2008. We reconciled the fair values of our three
reporting units in the aggregate to our market capitalization at December 31, 2008.
Impairment Long-Lived Assets. We review property, plant and equipment and intangibles with finite
lives (those assets resulting from acquisitions) for impairment when events or circumstances
indicate these assets might be impaired. We test impairment using historical cash flows and other
relevant facts and circumstances as the primary basis for its estimates of future cash flows. This
process requires the use of estimates and assumptions, which are subject to a high degree of
judgment. If these assumptions change in the future, whether due to new information or other
factors, we may be required to record impairment charges for these assets.
Depreciation Policy. Our depreciation policy for our lease fleet uses the straight-line method
over our units estimated useful life, after the date that we put the unit in service. Our steel
units are depreciated over 30 years with an estimated residual value of 55%. Wood offices units are
depreciated over 20 years with an estimated residual value of 50%. Van trailers, which are a small
part of our fleet, are depreciated over 7 years to a 20% residual value. We have other non-core
products that have various other measures of useful lives and residual values. Van trailers and
other non-core products are only added to the fleet as a result of acquisitions of portable storage
businesses.
In April 2009, we evaluated our depreciation policy on our steel units and changed the estimated
useful life to 30 years (from 25 years) and decreased the residual value to 55% from 62.5%. This
results in continual depreciation on steel units for five additional years at the same annual rate
of 1.5% of book value. This change had an immaterial impact on the consolidated financial
statements at the date of the change in estimate.
We made this change because some of our steel units have been in our lease fleet longer than 25
years and these units continue to be effective income producing assets that do not show signs of
realizing the end of their useful life. Our historical lease fleet data on our steel units shows
we have retained comparable rental rates and sales prices irrespective of the age of the steel
units in our lease fleet.
We periodically review our depreciation policy against various factors, including the results of
our lenders independent appraisal of our lease fleet, practices of the larger competitors in our
industry, profit margins we are achieving on sales of depreciated units and lease rates we obtain
on older units. If we were to change our depreciation policy on our steel units from 55% residual
value and a
30-year life to a lower or higher residual and a shorter or longer useful life, such change could
have a positive, negative or neutral effect on our earnings, with the actual effect being
determined by the change. For example, a change in our estimates used in our residual values and
useful life would have the following approximate effect on our net income and diluted earnings per
share as reflected in the table below.
38
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Useful |
|
Three Months Ended |
|
Six Months Ended |
|
|
Salvage |
|
Life in |
|
June 30, |
|
June 30, |
|
|
Value |
|
Years |
|
2008 |
|
2009 |
|
2008 |
|
2009 |
|
|
(In thousands except per share data) |
As reported (1): |
|
|
55 |
% |
|
|
30 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
|
|
|
|
|
|
|
|
|
$ |
N/A |
|
|
$ |
5,227 |
|
|
$ |
N/A |
|
|
$ |
13,693 |
|
Diluted earnings per share |
|
|
|
|
|
|
|
|
|
$ |
N/A |
|
|
$ |
0.12 |
|
|
$ |
N/A |
|
|
$ |
0.32 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As adjusted for change in estimates: |
|
|
70 |
% |
|
|
20 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
|
|
|
|
|
|
|
|
|
$ |
4,861 |
|
|
$ |
5,227 |
|
|
$ |
15,519 |
|
|
$ |
13,693 |
|
Diluted earnings per share |
|
|
|
|
|
|
|
|
|
$ |
0.14 |
|
|
$ |
0.12 |
|
|
$ |
0.45 |
|
|
$ |
0.32 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As adjusted for change in estimates (2): |
|
|
62.5 |
% |
|
|
25 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
|
|
|
|
|
|
|
|
|
$ |
4,861 |
|
|
$ |
5,227 |
|
|
$ |
15,519 |
|
|
$ |
13,693 |
|
Diluted earnings per share |
|
|
|
|
|
|
|
|
|
$ |
0.14 |
|
|
$ |
0.12 |
|
|
$ |
0.45 |
|
|
$ |
0.32 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As adjusted for change in estimates: |
|
|
50 |
% |
|
|
20 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
|
|
|
|
|
|
|
|
|
$ |
3,800 |
|
|
$ |
3,754 |
|
|
$ |
13,389 |
|
|
$ |
10,827 |
|
Diluted earnings per share |
|
|
|
|
|
|
|
|
|
$ |
0.11 |
|
|
$ |
0.09 |
|
|
$ |
0.39 |
|
|
$ |
0.25 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As adjusted for change in estimates: |
|
|
40 |
% |
|
|
40 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
|
|
|
|
|
|
|
|
|
$ |
4,861 |
|
|
$ |
5,227 |
|
|
$ |
15,519 |
|
|
$ |
13,693 |
|
Diluted earnings per share |
|
|
|
|
|
|
|
|
|
$ |
0.14 |
|
|
$ |
0.12 |
|
|
$ |
0.45 |
|
|
$ |
0.32 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As adjusted for change in estimates: |
|
|
30 |
% |
|
|
25 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
|
|
|
|
|
|
|
|
|
$ |
3,481 |
|
|
$ |
3,312 |
|
|
$ |
12,750 |
|
|
$ |
9,968 |
|
Diluted earnings per share |
|
|
|
|
|
|
|
|
|
$ |
0.10 |
|
|
$ |
0.08 |
|
|
$ |
0.37 |
|
|
$ |
0.23 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As adjusted for change in estimates: |
|
|
25 |
% |
|
|
25 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
|
|
|
|
|
|
|
|
|
$ |
3,269 |
|
|
$ |
3,017 |
|
|
$ |
12,324 |
|
|
$ |
9,395 |
|
Diluted earnings per share |
|
|
|
|
|
|
|
|
|
$ |
0.09 |
|
|
$ |
0.07 |
|
|
$ |
0.36 |
|
|
$ |
0.22 |
|
|
|
|
(1) |
|
Effective April 2009 |
|
(2) |
|
Prior to April 2009 |
Insurance Reserves. Our workers compensation, auto and general liability insurance are purchased
under large deductible programs. Our current per incident deductibles are: workers compensation
$250,000, auto $250,000 and general liability $100,000. We provide for the estimated expense
relating to the deductible portion of the individual claims. However, we generally do not know the
full amount of our exposure to a deductible in connection with any particular claim during the
fiscal period in which the claim is incurred and for which we must make an accrual for the
deductible expense. We make these accruals based on a combination of the claims development
experience of our staff and our insurance companies, and, at year end, the accrual is reviewed and
adjusted, in part, based on an independent actuarial review of historical loss data and using
certain actuarial assumptions followed in the insurance industry. A high degree of judgment is
required in developing these estimates of amounts to be accrued, as well as in connection with the
underlying assumptions. In addition, our assumptions will change as our loss experience is
developed. All of these factors have the potential for significantly impacting the amounts we have
previously reserved in respect of anticipated deductible expenses, and we may be required in the
future to increase or decrease amounts previously accrued.
Our health benefit programs are considered to be self insured products; however, we buy excess
insurance coverage that limits our medical liability exposure. Additionally, our medical program
includes a total aggregate claim exposure and we are currently accruing and reserving to the total
projected losses.
Contingencies. We are a party to various claims and litigations in the normal course of business.
We do not anticipate that the resolution of such matters, known at this time, will have a material
adverse effect on our business or consolidated financial position.
39
Deferred Taxes. In preparing our consolidated financial statements, we recognize income taxes in
each of the jurisdictions in which we operate. For each jurisdiction, we estimate the actual
amount of taxes currently payable or receivable as well as deferred tax assets and liabilities
attributable to temporary differences between the financial statement carrying amounts of existing
assets and liabilities and their respective tax bases. Deferred income tax assets and liabilities
are measured using enacted tax rates expected to apply to taxable income in the years in which
these temporary differences are expected to be recovered or settled. The effect on deferred tax
assets and liabilities of a change in tax rates is recognized in income in the period that includes
the enactment date.
A valuation allowance is provided for those deferred tax assets for which it is more likely than
not that the related benefits will not be realized. In determining the amount of the valuation
allowance, we consider estimated future taxable income as well as feasible tax planning strategies
in each jurisdiction. If we determine that we will not realize all or a portion of our deferred
tax assets, we will increase our valuation allowance with a charge to income tax expense or offset
goodwill if the deferred tax asset was acquired in a business combination. Conversely, if we
determine that we will ultimately be able to realize all or a portion of the related benefits for
which a valuation allowance has been provided, all or a portion of the related valuation allowance
will be reduced with a credit to income tax expense except if the valuation allowance was created
in conjunction with a tax asset in a business combination.
Purchase Accounting. We account for acquisitions, under the purchase method as required by SFAS
No. 141(R). In accordance with the purchase method of accounting, the price paid by us, including
the value of the redeemable convertible preferred stock, was allocated to the assets acquired and
liabilities assumed based upon the estimated fair values of the assets and liabilities acquired and
the fair value of the convertible redeemable participating preferred stock issued at the date of
acquisition. The excess of the purchase price over the fair value of the net assets acquired
represents goodwill that will be subject to annual impairment testing.
The estimated fair values of assets acquired, liabilities assumed and convertible redeemable
participating preferred stock issued were based on internal estimates and are subject to change.
The difference between the purchase price and the preliminary fair value of net identifiable assets
and liabilities acquired was recorded as goodwill.
Earnings Per Share. Basic net income per share is calculated by dividing income allocable to common
stockholders by the weighted-average number of common shares outstanding, net of shares subject to
repurchase by us during the period. Income allocable to common stockholders is net earnings net of
the undistributed earnings allocable to preferred stock. Diluted net income per share is
calculated under the if-converted method unless the conversion of the preferred stock is
anti-dilutive to basic net income per share. To the extent the inclusion of preferred stock is
anti-dilutive, we calculate diluted net income per share under the two-class method. Potential
common shares include restricted common stock and incremental shares of common stock issuable upon
the exercise of stock options and vesting of nonvested stock awards and convertible preferred stock
using the treasury stock method.
There have been no other significant changes in our critical accounting policies, estimates and
judgments during the six month period ended June 30, 2009.
RECENT ACCOUNTING PRONOUNCEMENTS
In December 2007, the Financial Accounting Standards Board (FASB) issued SFAS No. 141 (revised
2007), Business Combinations (SFAS No. 141(R)) which establishes principles and requirements for
how an acquirer recognizes and measures in its financial statements the identifiable assets
acquired, the liabilities assumed and any noncontrolling interest in an acquiree, including the
recognition and measurement of goodwill acquired in a business combination. Certain forms of
contingent consideration and certain acquired contingencies will be recorded at fair value at the
acquisition date. SFAS No. 141(R) also provides that acquisition costs will generally be expensed
as incurred and restructuring costs will be expensed in periods after the acquisition date. In
April 2009, the FASB issued FSP FAS 141(R)-1, Accounting for Assets Acquired and Liabilities
Assumed in a Business Combination That Arise from Contingencies (FSP FAS 141(R)-1). FSP FAS
141(R)-1 amends and clarifies SFAS No. 141(R) to address application issues on initial recognition
and measurement, subsequent measurement and accounting and disclosure of assets and liabilities
arising from contingencies in a business combination. FSP FAS 141(R)-1 is effective for assets or
liabilities rising from contingencies in business combinations for which the acquisition date is on
or after the beginning of the first annual reporting period beginning on or after December 15,
2008. The Company adopted SFAS No. 141(R) and FSP FAS 141(R)-1 on January 1, 2009 and will apply
both prospectively to future business combinations. The impact of the adoption of SFAS No. 141(R)
(and FSP FAS 141(R)-1) will depend on the nature of future acquisitions completed by the Company.
40
In December 2007, the FASB issued SFAS No. 160, Noncontrolling Interests in Consolidated Financial
Statements An Amendment of ARB No. 51 (SFAS No. 160). SFAS No. 160 amends Accounting Research
Bulletin ARB No. 51, Consolidated Financial Statements, to establish accounting and reporting
standards for the noncontrolling interest in a subsidiary and for the deconsolidation of a
subsidiary. The Company adopted SFAS No. 160 on January 1, 2009. As there are no noncontrolling
interests in any of the Companys consolidated subsidiaries; the adoption of SFAS No. 160 did have
an impact on the Companys results of operations or financial condition.
In March 2008, the FASB issued SFAS No. 161, Disclosures about Derivative Instruments and Hedging
Activities An Amendment of FASB Statement No. 133 (SFAS No. 161). SFAS No. 161 requires
qualitative disclosures about objectives and strategies for using derivatives, quantitative data
about the fair value of and gains and losses on derivative contracts and details of
credit-risk-related contingent features in hedged positions. The statement also requires enhanced
disclosures regarding how and why entities use derivative instruments, how derivative instruments
and related hedged items are accounted and how derivative instruments and related hedged items
affect entities financial position, financial performance and cash flows. The Company adopted
SFAS No. 161 on January 1, 2009 with no effect on the Companys results of operations or financial
condition.
In November 2008, the FASB ratified EITF Issue No. 08-7, Accounting for Defensive Intangible Assets
(EITF No. 08-7). EITF No. 08-7 applies to defensive intangible assets, which are acquired
intangible assets that the acquirer does not intend to actively use but intends to hold to prevent
its competitors from obtaining access to them. As these assets are separately identifiable, EITF
No. 08-7 requires an acquiring entity to account for defensive intangible assets as a separate unit
of accounting. Defensive intangible assets must be recognized at fair value in accordance with
SFAS No. 141(R) and SFAS No. 157. The Company adopted EITF No. 08-7 on January 1, 2009. EITF No.
08-7 could have a material effect on the Companys results of operations or financial position in
future periods but its effects will depend on the nature of future acquisitions completed by the
Company.
In April 2009, the FASB issued FSP FAS 107-1 and APB 28-1, Interim Disclosure about Fair Value of
Financial Instruments (FSF FAS 107-1 and APB 28-1). FSP FAS 107-1 and APB 28-1 amends SFAS No.
107, Disclosures about Fair Value of Financial Instruments, to require disclosures about fair value
of financial instruments for interim reporting periods of publicly traded companies as well as in
annual financial statements. The FSP also amends APB Opinion No. 28, Interim Financial Reporting,
to require those disclosures in summarized financial information at interim reporting periods. FSP
FAS 107-1 and APB 28-1 is effective for interim reporting periods ending after June 15, 2009 with
early adoption permitted for periods ending after March 15, 2009. The Company early adopted FSP
FAS 107-1 and APB 28-1 for the interim period ended March 31, 2009, and its adoption did not have
an impact on the Companys condensed consolidated financial statements.
In May 2009, the FASB issued SFAS No. 165, Subsequent Events (SFAS No. 165). SFAS No. 165
establishes general standards of accounting for and disclosure of events that occur after the
balance sheet date but before the financial statements are issued or are available to be issued.
SFAS No. 165 provides guidance on the period after the balance sheet date during which management
of a reporting entity should evaluate events or transactions for potential recognition or
disclosure in the financial statements, the circumstances under which an entity should recognize
events or transactions occurring after the balance sheet date in its financial statements and the
disclosures that an entity should make about events or transactions that occurred after the balance
sheet date. The Company adopted SFAS No. 165 during the interim period ended June 30, 2009, and
its adoption did not have an impact on the Companys condensed consolidated financial statements.
41
CAUTIONARY STATEMENTS REGARDING FORWARD-LOOKING STATEMENTS
This section as well as other sections of this report contains forward-looking information about
our financial results and estimates and our business prospects that involve substantial risks and
uncertainties. From time to time, we also may provide oral or written forward-looking statements
in other materials we release to the public. Forward-looking statements are expressions of our
current expectations or forecasts of future events. You can identify these statements buy the fact
that they do not relate strictly to historic or current facts. They include words such as
anticipate, estimate, expect, project, intend, plan, believe, will, and other words
and terms of similar meaning in connection with any discussion of future operating or financial
performance. In particular, these include statements relating to future actions, synergies and
other expected results relating to our acquisition of Mobile Storage Group, future performance or
results, expenses, the outcome of contingencies, such as legal proceedings and financial results.
Among the factors that could cause actual results to differ materially are the following:
|
|
|
a continued economic slowdown in the U.S. and/or the U.K. that affects any significant
portion of our customer base, including an economic slowdown in certain geographic regions
where we operate in those countries |
|
|
|
|
our ability to manage our planned growth, both internally and at new branches |
|
|
|
|
our European operations may divert our resources from other aspects of our business |
|
|
|
|
our ability to obtain borrowings under our credit facility or additional debt or equity
financing on acceptable terms |
|
|
|
|
changes in the supply and price of used ocean-going containers |
|
|
|
|
changes in the supply and cost of the raw materials we use in refurbishing or
remanufacturing storage units |
|
|
|
|
competitive developments affecting our industry, including pricing pressures in newer
markets |
|
|
|
|
the timing and number of new branches that we open or acquire |
|
|
|
|
our ability to protect our patents and other intellectual property |
|
|
|
|
currency exchange and interest rate fluctuations |
|
|
|
|
governmental laws and regulations affecting domestic and foreign operations, including
tax obligations, union formation and zoning laws |
|
|
|
|
changes in generally accepted accounting principles |
|
|
|
|
any changes in business, political and economic conditions due to the threat of future
terrorist activity in the U.S. and other parts of the world and related U.S. military action
overseas |
|
|
|
|
increases in costs and expenses, including cost of raw materials and employment costs |
We cannot guarantee that any forward-looking statement will be realized, although we believe we
have been prudent in our plans and assumptions. Achievement of future results is subject to risks,
uncertainties and inaccurate assumptions. Should known or unknown risks or uncertainties
materialize, or should underlying assumptions prove inaccurate, actual results could vary
materially from past results and those anticipated, estimated or projected. Investors should bear
this in mind as they consider forward-looking statements. We undertake no obligation to publicly
update forward-looking statements, whether as a result of new information, future events or
otherwise. You are advised, however, to consult any further disclosures we make on related
subjects in our Form 10-Q, 8-K and 10-K reports to the Securities and Exchange Commission. Our
Form 10-K filing for the fiscal year ended December 31, 2008, listed various important factors that
could cause actual results to differ materially from expected and historic results. We note these
factors for investors as permitted by the Private Securities Litigation Reform Act of 1995. Readers
can find them in Item 1A of that filing and this filing under the heading Risk Factors. You may
obtain a copy of our Form 10-K by requesting it from the Companys Investor Relations Department at
(480) 894-6311 or by mail to Mobile Mini, Inc., 7420 S. Kyrene Rd., Suite 101, Tempe, Arizona
85283. Our
42
filings with the SEC, including the Form 10-K, may be accessed through Mobile Minis website at
www.mobilemini.com, and at the SECs website at http:/www.sec.gov. Material on our website
is not incorporated in this report, except by express incorporation by reference herein.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Interest Rate Swap Agreement. We seek to reduce earnings and cash flow volatility associated with
changes in interest rates through a financial arrangement intended to provide a hedge against a
portion of the risks associated with such volatility. We continue to have exposure to such risks
to the extent they are not hedged.
Interest rate swap agreements are the only instruments we use to manage interest rate fluctuations
affecting our variable rate debt. At June 30, 2009, we had interest rate swap agreements under
which we pay a fixed rate and receive a variable interest rate on a notional amount of $200.0
million. For the six months ended June 30, 2009, in accordance with SFAS No. 133, comprehensive
income included $1.2 million, net of applicable income taxes of $0.8 million, related to the fair
value of our interest rate swap agreements.
Impact of Foreign Currency Rate Changes. We currently have branch operations outside the United
States and we bill those customers primarily in their local currency which is subject to foreign
currency rate changes. Our operations in Canada are billed in the Canadian Dollar, operations in
the United Kingdom are billed in Pound Sterling and operations in The Netherlands are billed in the
Euro. We are exposed to foreign exchange rate fluctuations as the financial results of our
non-United States operations are translated into U.S. Dollars. The impact of foreign currency rate
changes has historically been insignificant with our Canadian operations, but we have more exposure
to volatility with our European operations. In order to help minimize our exchange rate gain and
loss volatility, we finance our European entities through our revolving credit facility which
allows us to also borrow those funds locally in Pound Sterling denominated debt.
ITEM 4. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures.
Under the supervision and with the participation of our management, including our Chief Executive
Officer and Chief Financial Officer, we conducted an evaluation of the effectiveness of the design
and operation of our disclosure controls and procedures, as such term is defined under Rule
13a-15(e) and 15d-15(e) promulgated under the Securities Exchange Act of 1934, as amended (the
Exchange Act). Based on this evaluation, our Chief Executive Officer and our Chief Financial
Officer concluded that our disclosure controls and procedures, subject to the limitations as noted
below, were effective during the period and as of the end of the period covered by this report.
Because of inherent limitations, our disclosure controls and procedures may not prevent or detect
misstatements. A control system, no matter how well conceived and operated, can provide only
reasonable, not absolute, assurance that the objectives of the controls system are met. Because of
the inherent limitations in all controls systems, no evaluation of controls can provide absolute
assurance that all controls issues and instances of fraud, if any, have been detected.
Changes in Internal Controls.
There were no changes in our internal controls over financial reporting that have occurred during
our most recent fiscal quarter that have materially affected, or are reasonably likely to
materially affect, our internal control over financial reporting.
In connection with the integration of Mobile Storage Group, we are working to implement our
internal controls and procedures throughout the former Mobile Storage Group operations in the
United Kingdom.
PART II. OTHER INFORMATION
ITEM 1A. RISK FACTORS
We refer you to documents filed by us with the SEC, specifically Item 1A. Risk Factors in our
most recent annual report on Form 10-K for the fiscal year ended December 31, 2008 which identify
important risk factors that could materially affect our business,
43
financial condition and future results. We also refer you to the factors and cautionary language
set forth in the section entitled Cautionary Statements Regarding Forward-looking Statements in
Managements Discussion & Analysis of this quarterly report on Form 10-Q. This Quarterly Report on
Form 10-Q, including the condensed consolidated financial statements and related notes should be
read in conjunction with such risks and other factors for a full understanding our operations and
financial condition. The risks described in our Form 10-K and herein are not the only risks facing
our company. Additional risks and uncertainties not currently known to us or that we currently
deem to be immaterial also may materially adversely affect our business, financial condition or
operating results. The risk factors included in our Annual Report on Form 10-K for the fiscal year
ended December 31, 2008 have not materially changed.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Our annual meeting of stockholders was held on June 24, 2009, in Phoenix, Arizona. Stockholders of
record at the close of business on April 27, 2009 were entitled to vote at the meeting on the basis
of one vote for each share held. On April 27, 2009, there were 35,466,553 shares of common stock
outstanding and 8,555,556 shares of Series A Convertible Redeemable Participating Preferred Stock
outstanding. The Series A Preferred Stock votes on an as converted basis, and is entitled to one
vote per share. On all matters before the stockholders at the Annual Meeting, the common stock and
the Series A Preferred Stock vote as a single class.
|
|
|
|
|
|
|
|
|
|
|
Number of Shares Voted: |
|
|
For |
|
Withheld |
Elect three members of the Board of Directors, for the terms indicated below: |
|
|
|
|
|
|
|
|
Stephen A McConnell (three year term) |
|
|
37,874,117 |
|
|
|
1,599,237 |
|
Jeffrey S. Goble (three year term) |
|
|
38,434,506 |
|
|
|
1,038,848 |
|
Michael E. Donovan (term ends December 31, 2009) |
|
|
38,458,655 |
|
|
|
1,014,699 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Broker |
|
|
For |
|
Against |
|
Abstain |
|
Non-Votes |
Ratify the
selection of Ernst
& Young LLP as our
independent
registered public
accounting firm for
the year ending
December 31, 2009 |
|
|
39,146,332 |
|
|
|
177,840 |
|
|
|
149,182 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Approve an
amendment to our
2006 Equity
Incentive Plan to
increase the
maximum number of
shares that may be
issued pursuant to
the Plan from
1,200,000 by an
additional
3,000,000 shares |
|
|
22,938,038 |
|
|
|
11,441,014 |
|
|
|
147,185 |
|
|
|
4,947,117 |
|
In addition to the election of three directors at the annual meeting, the terms of five directors
continued after the meeting. The continuing directors are Steven G. Bunger, Lawrence Trachtenberg,
Michael L. Watts, Frederick G. McNamee and Sanjay Swani.
ITEM 6. EXHIBITS
Exhibits (all filed herewith):
|
|
|
Number |
|
Description |
|
|
|
10.3.1
|
|
Mobile Mini, Inc. 2006 Equity Incentive Plan, as amended and approved by stockholders
at the 2009 Annual Meeting (Incorporated by reference to Exhibit A of the Registrants
Definitive Proxy Statement for its 2009 Annual Meeting of Stockholders filed on April
30, 2009 under cover of Schedule 14A). |
|
|
|
31.1
|
|
Certification of Chief Executive Officer pursuant to Item 601(b)(31) of Regulation S-K. |
|
|
|
31.2
|
|
Certification of Chief Financial Officer pursuant to Item 601(b)(31) of Regulation S-K. |
|
|
|
32.1
|
|
Certification of Chief Executive Officer and Chief Financial Officer pursuant to item
601(b)(32) of Regulation S-K. |
44
SIGNATURES
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.
|
|
|
|
|
|
MOBILE MINI, INC.
|
|
Date: August 10, 2009 |
/s/ Mark E. Funk
|
|
|
Mark E. Funk |
|
|
Chief Financial Officer &
Executive Vice President |
|
|
45