e10vk
U.S. SECURITIES AND EXCHANGE
COMMISSION
Washington, D.C.
20549
Form 10-K
ANNUAL REPORT PURSUANT TO
SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT
OF 1934
For the fiscal year ended December 31, 2009
Commission File Number 1-12804
(Exact name of registrant as
specified in its charter)
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Delaware
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86-0748362
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(State or other jurisdiction
of
incorporation or organization)
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(IRS Employer
Identification No.)
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7420 S. Kyrene
Road, Suite 101
Tempe, Arizona 85283
(Address of principal executive
offices)
(480) 894-6311
(Registrants telephone
number, including area code)
Securities Registered pursuant to Section 12(b) of the
Act:
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Title of Class
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Name of Each Exchange on Which Registered
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Common Stock, $.01 par value
Preferred Share Purchase Rights
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Nasdaq Global Select Market
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Securities registered pursuant to Section 12(g) of the
Act:
None
Indicate by check mark if the registrant is a well-known
seasoned issuer, as defined in Rule 405 of the Securities
Act. Yes o No þ
Indicate by check mark if the registrant is not required to file
reports pursuant to Section 13 or Section 15(d) of the
Act. Yes o No þ
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 Website, if any,
every Interactive Data File required to be submitted and posted
pursuant to Rule 405 of
Regulation S-T
during the preceding 12 months (or for such shorter period
that the registrant was required to submit and post such
files). Yes o No o
Indicate by check mark if disclosure of delinquent filers
pursuant to Item 405 of
Regulation S-K
is not contained herein, and will not be contained, to the best
of registrants knowledge, in definitive proxy or
information statements incorporated by reference in
Part III of this
Form 10-K
or any amendment to this
Form 10-K. 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):
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Large accelerated filer þ
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Accelerated filer o
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Non-accelerated filer o
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Smaller reporting company o
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(Do not check if a smaller reporting company)
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Indicate by check mark whether the registrant is a shell company
(as defined in
Rule 12b-2
of the
Act). Yes o No þ
The aggregate market value on June 30, 2009 of the voting
stock owned by non-affiliates of the registrant was
approximately $508 million.
As of February 19, 2010, there were outstanding
36,258,593 shares of the registrants common stock,
par value $.01.
DOCUMENTS
INCORPORATED BY REFERENCE:
Portions of the Proxy Statement for the registrants 2010
Annual Meeting of Stockholders are incorporated herein by
reference in Part III of this
Form 10-K
to the extent stated herein. Certain exhibits are incorporated
in Item 15 of this Report by reference to other reports and
registration statements of the registrant which have been filed
with the Securities and Exchange Commission.
MOBILE
MINI, INC.
2009
FORM 10-K
ANNUAL REPORT
TABLE OF
CONTENTS
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Cautionary
Statement about Forward Looking Statements
Our discussion and analysis in this Annual Report, in other
reports that we file with the Securities and Exchange
Commission, in our press releases and in public statements of
our officers and corporate spokespersons contain forward-looking
statements. Forward-looking statements give our current
expectations or forecasts of future events. You can identify
these statements by the fact that they do not relate strictly to
historical or current events. They include words such as
may, plan, seek,
will, expect, intend,
estimate, anticipate,
believe or continue or the negative
thereof or variations thereon or similar terminology. These
forward-looking statements include statements regarding, among
other things, our future actions; financial position; management
forecasts; efficiencies; cost savings, synergies and
opportunities to increase productivity and profitability; income
and margins; liquidity; anticipated growth; the economy;
business strategy; budgets; projected costs and plans and
objectives of management for future operations; sales efforts;
taxes; refinancing of existing debt; and the outcome of
contingencies such as legal proceedings and financial results.
Forward-looking statements may turn out to be wrong. They can be
affected by inaccurate assumptions or by known or unknown risks
and uncertainties. We undertake no obligation to update or
revise any forward-looking statements, whether as a result of
new information, future events or otherwise. Important factors
that could cause actual results to differ materially from our
expectations are set forth below and are disclosed under
Risk Factors and elsewhere in this Annual Report,
including, without limitation, in conjunction with the
forward-looking statements included in this Annual Report. These
are factors that we think could cause our actual results to
differ materially from expected and historical results. Mobile
Mini could also be adversely affected by other factors besides
those listed. All subsequent written and oral forward-looking
statements attributable to us, or persons acting on our behalf,
are expressly qualified in their entirety by the cautionary
statements, factors and risks identified herein.
ii
PART I
Mobile
Mini, Inc.
We are the worlds leading provider of portable storage
solutions. 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, premium doors,
electrical wiring and shelving. At December 31, 2009, we
operated through a network of 118 locations in the United
States, Canada, the United Kingdom and The Netherlands. Our
portable units provide secure, accessible temporary storage for
a diversified client base of customers, including large and
small retailers, construction companies, medical centers,
schools, utilities, manufacturers and distributors, the
U.S. and U.K. military, hotels, restaurants, entertainment
complexes and households. Our customers use our products for a
wide variety of storage applications, including retail and
manufacturing supplies and inventory, temporary offices,
construction materials and equipment, documents and records and
household goods.
We derive most of our revenues from the leasing of portable
storage containers, security offices and mobile offices. In
addition to our leasing business, we also sell portable storage
containers and mobile office units. Our sales revenues
represented 9.9% and 10.3% of total revenues for the twelve
months ended December 31, 2008 and 2009, respectively.
We were founded in 1983 and follow a strategy of focusing on
leasing rather than selling our portable storage units. Leasing
revenues represented approximately 89.1% of total revenues for
the year ended December 31, 2009. We believe our leasing
strategy is highly effective because the vast majority of our
fleet consists of steel portable storage units which:
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provide predictable, recurring revenues from leases with an
average duration of approximately 32 months;
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have average monthly lease rates that recoup our current
investment on our remanufactured units within an average of
35 months; and
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have long useful lives exceeding 30 years, relatively low
maintenance and high residual values.
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Our total lease fleet has grown significantly over the years to
more than 257,000 units at December 31, 2009. We
experienced a significant lease fleet unit increase in 2008 due
to our acquisition of Mobile Storage Group in 2008. As a result
of our focus on leasing, we have achieved substantial increases
in our revenues, margins and profitability over the years prior
to the recent economic recession. In addition to our leasing
operations, we sell new and used portable storage units and
provide delivery, installation and other ancillary products and
services.
Our fleet is primarily comprised of remanufactured and
differentiated steel portable storage containers that were built
according to standards developed by the International
Organization for Standardization (ISO), other steel containers
and steel offices that we manufactured and mobile offices. We
remanufacture and customize our purchased ISO containers by
adding our proprietary locking and easy-opening premium door
systems and steel security offices. Given their steel nature,
these assets are characterized by low risk of obsolescence,
extreme durability, relatively low maintenance, long useful
lives and a history of high-value retention. We also have wood
mobile office units in our lease fleet to complement our core
steel portable storage products and steel security offices. We
maintain our steel containers and offices on a regular basis.
Repair and maintenance expense for our fleet has averaged 3.4%
of lease revenues over the past three fiscal years and is
expensed as incurred. We believe our historical experience with
leasing rates and sales prices for these assets demonstrates
their high-value retention. We are able to lease our portable
storage containers at similar rates without regard to the age of
the container. In addition, we have sold containers and steel
security offices from our lease fleet at an average of 145% of
original cost from 1997 through 2009.
Industry
Overview
The storage industry includes two principal segments, fixed
self-storage and portable storage. The fixed self-storage
segment consists of permanent structures located away from
customer locations used primarily by consumers to temporarily
store excess household goods. We do not participate in the fixed
self-storage segment.
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We do offer non-fixed self-storage in secure containers from our
fleet at some of our locations in the U.S. and the U.K.
The portable storage segment in which our business operates
differs from the fixed self-storage segment in that it brings
the storage solution to the customers location and
addresses the need for secure, temporary storage with immediate
access to the storage unit. The advantages of portable storage
include convenience, immediate accessibility, better security
and lower price. In contrast to fixed self-storage, the portable
storage segment is primarily used by businesses. This segment of
the storage industry is highly fragmented and remains primarily
local in nature. We believe the portable storage market in the
U.S. exceeds $1.5 billion in revenue annually.
Portable storage solutions include containers, record vaults,
van trailers and roll-off units. Although there are no published
estimates of the size of the portable storage segment, we
believe portable storage containers are achieving increased
storage market share compared to other storage options and that
this segment is expanding because of an increasing awareness
that only containers provide ground level access and better
protect against damage caused by wind or water than do other
portable storage alternatives. As a result, containers can meet
the needs of a diverse range of customers. Portable storage
units such as ours provide ground level access, higher security
and improved aesthetics compared with certain other portable
storage alternatives such as van trailers.
Our products also serve the mobile office industry. This
industry provides mobile offices and other modular structures
and we believe this industry generates approximately
$5 billion in revenue annually in North America. We offer
combined steel storage/office units and mobile offices in
varying lengths and widths to serve the various requirements of
our customers.
We also offer portable record storage units and many of our
regular storage units are used for document and record storage.
We believe the documents and records storage industry will
continue to grow as businesses continue to generate substantial
paper records that must be kept for extended periods.
Our goal is to continue to be the leading provider of portable
storage solutions in North America and the U.K. We believe our
competitive strengths and business strategy will enable us to
achieve this goal.
Competitive
Strengths
Our competitive strengths include the following:
Market Leadership. At December 31, 2009,
we maintained a total lease fleet of more than
257,000 units and we are the largest provider of portable
storage solutions in North America and the U.K. We believe we
are creating brand awareness and the name Mobile
Mini is associated with high quality portable storage
products, superior customer service and value-added storage
solutions. We have historically achieved significant growth in
new and existing markets by capturing market share from
competitors and by creating demand among businesses and
consumers who were previously unaware of the availability of our
products to meet their storage needs.
Superior, Differentiated Products. We offer
the industrys broadest range of portable storage products,
with many features that differentiate our products from those of
our competition. We remanufacture used ISO containers and have
designed and manufactured our own portable storage units. These
capabilities allow us to offer a wide range of products and
proprietary features to better meet our customers needs,
charge premium lease rates and gain market share from our
competitors, who offer more limited product selections. Our
portable storage units vary in size from 5 to 48 feet in
length and 8 to 10 feet in width. The 10-foot wide units we
manufacture provide 40% more usable storage space than the
standard eight-foot-wide ISO containers offered by our
competitors. The vast majority of our products have our patented
locking system and multiple door options, including easy-open
door systems. In addition, we offer portable storage units with
electrical wiring, shelving and other customized features. This
differentiation allows us to charge premium rental rates
compared to the rates charged by our competition.
Sales and Marketing Emphasis. We target a
diverse customer base and, unlike most of our competitors, have
developed sophisticated sales and marketing programs enabling us
to expand market awareness of our products and generate strong
internal growth. We have a dedicated commissioned sales team and
we assist
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them by providing them with our highly customized contact
management system and intensive sales training programs. We
monitor our salespersons effectiveness through our
extensive sales calls monitoring and sales mentoring and
training programs. On-line, yellow pages and direct-mail
advertising are integral parts of our sales and marketing
approach. Our website includes value added features such as
product video tours, online payment capabilities and online real
time sales inquiries, enabling customers to chat live with our
salespeople.
National Presence with Local Service. We have
the largest national network for portable storage solutions in
the U.S. and the U.K. and believe it would be difficult to
replicate. We have invested significant capital developing a
national network of locations that serves most major
metropolitan areas in the U.S. and the U.K. We have
differentiated ourselves from our local competitors and made
replication of our presence difficult by developing our branch
network through both opening branches in multiple cities and
purchasing competitors in key markets. The difficulty and time
required to obtain the number of units and locations necessary
to support a national operation would make establishing a large
competitor difficult. In addition, there are difficulties
associated with recruiting and hiring an experienced management
team such as ours that has strong industry knowledge and local
relationships with customers. Our network of local branches and
operational yards allows us to develop and maintain
relationships with our local customers, while providing a level
of service to regional and national companies that is made
possible by our nationwide presence. Our local managers, sales
force and delivery drivers develop and maintain critical
personal relationships with the customers that benefit from
access to our wide selection of products that we offer.
Geographic and Customer Diversification. At
December 31, 2009, we operated from 118 locations of which
95 were located in the U.S, 3 in Canada, 19 in the U.K., and 1
in The Netherlands. We served approximately 101,000 customers
from a wide range of industries in 2009. Our customers include
large and small retailers, construction companies, medical
centers, schools, utilities, manufacturers and distributors, the
U.S. and U.K. militaries, government agencies, hotels,
restaurants, entertainment complexes and households. Our diverse
customer base demonstrates the broad applications for our
products and our opportunity to create future demand through
targeted marketing. In 2009, our largest and our second-largest
customers accounted for 1.7% and 0.7% of our leasing revenues,
respectively, and our twenty largest customers accounted for
approximately 6.1% of our leasing revenues. During 2009,
approximately 60.8% of our customers rented a single unit. We
believe this diversity also helps us to better weather economic
downturns in individual markets and the industries in which our
customers operate.
Customer Service Focus. We believe the
portable storage industry is particularly service intensive. Our
entire organization is focused on providing high levels of
customer service, and we have salespeople both at the national
level and at our branch locations to better understand our
customers needs. We have trained our sales force to focus
on all aspects of customer service from the sales call onward.
We differentiate ourselves by providing security, convenience,
high product quality, differentiated and broad product selection
and availability, and competitive lease rates. We conduct
training programs for our sales force to assure high levels of
customer service and awareness of local market competitive
conditions. Additionally, we use a Net Promoter Score (NPS)
system to measure and enhance our customer service. We use NPS
to measure customer satisfaction each month,
rental-by-rental,
in real time through surveys conducted by a third party. We then
use customer feedback to drive service improvements across the
company, from our branches to our corporate headquarters. Our
customized Enterprise Resource Planning (ERP) system also
increases our responsiveness to customer inquiries and enables
us to efficiently monitor our sales forces performance.
Approximately 56.8% of our 2009 leasing revenues were derived
from repeat customers, which we believe is a result of our
superior customer service.
Customized Enterprise Resource Planning
System. We have made significant investments in
an ERP system for our U.S. and U.K. operations. These
investments enable us to optimize fleet utilization, control
pricing, capture detailed customer data, easily evaluate credit
approval while approving it quickly, audit company results
reports, gain efficiencies in internal control compliance and
support our growth by projecting near-term capital needs. In
addition, we believe this system gives us a competitive
advantage over smaller and less sophisticated local and regional
competitors. Our ERP system allows us to carefully monitor, on a
real time basis, the size, mix, utilization and lease rates of
our lease fleet branch by branch. Our systems also capture
relevant customer demographic and usage information, which we
use to target new customers within our existing and new markets.
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Business
Strategy
Our business strategy consists of the following:
Focus on Core Portable Storage Leasing
Business. We focus on growing our core storage
leasing business, which accounted for 81% of our fleet at
December 31, 2009, because it provides recurring revenue
and high margins. We believe that we can continue to generate
substantial demand for our portable storage units throughout
North America and in the U.K. and The Netherlands.
Maintain Strong EBITDA Margins. One of the
tools we use internally to measure our financial performance is
EBITDA margins. 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. In
comparing EBITDA from year to year, we may further adjust EBITDA
to exclude the effect of what we consider transactions or events
not related to our core business operations to arrive at
adjusted EBITDA. We define our EBITDA margins as EBITDA or
adjusted EBITDA, divided by our total revenues, expressed as a
percentage. We continue to manage this margin even during the
recent downturn in the economic environment. Our objective is to
maintain a relatively stable EBITDA margin through adjustments
to our cost structure as revenues change.
Generate Strong Internal Growth. We focus on
increasing the number of portable storage units we lease at our
existing branches to both new and repeat customers. We have
historically generated strong internal growth within our
existing markets through sophisticated sales and marketing
programs aimed to increase brand recognition, expand market
awareness of the uses of portable storage and differentiate our
superior products from our competitors. We define internal
growth as growth in lease revenues on a
year-over-year
basis at our branch locations in operation for at least one
year, excluding leasing revenue attributed to same-market
acquisitions. Prior to the current recession, our internal
growth rate historically was positive every quarter. Due to the
acquisition of MSG, we were able to close locations and combine
branch management in each of the cities with overlapping
branches and reposition our lease fleet at our resulting branch
locations to align with customer demand. As a result, comparing
internal growth by branch for periods after this acquisition to
periods before this acquisition is difficult.
Opportunistic Branch Expansion. We believe we
have attractive geographic expansion opportunities, and we have
developed a new market entry strategy, which we replicate in
each new market we enter in the U.S. and Europe. We
typically enter a new market by acquiring the lease fleet assets
of a small local portable storage business to minimize
start-up
costs and then overlay our business model onto the new branch.
Our business model consists of significantly expanding our fleet
inventory with our differentiated products, introducing our
sophisticated sales and marketing program supported by increased
advertising and direct marketing expenditures, adding
experienced Mobile Mini personnel and implementing our
customized ERP system. This implementation of our business model
has generally enabled our new branches to achieve strong organic
growth, including during their first several years of operation.
In 2008, we dramatically expanded our geographic locations in
both the U.S. and the U.K. and we expanded our presence in
some of our existing markets through the acquisition of MSG and
four other smaller acquisitions. We have also identified other
markets where we believe demand for portable storage units is
underdeveloped. Typically, these markets are served by small,
local competitors. Given the current economic environment,
however, we are currently focused on optimizing our existing
markets and entering new markets through greenfield operational
yards. These greenfield operational yards are new
start-up
locations that do not have all the overhead associated with a
fully staffed branch. They typically have drivers and yard
personnel to handle deliveries and
pick-ups.
Continue to Enhance Product Offering. We
continue to enhance our existing products to meet our
customers needs and requirements. We have historically
been able to introduce new products and features that expand the
applications and overall market for our storage products. For
example, over the years we introduced a number of innovative
products including a 10-foot-wide storage unit, a record storage
unit and a 10-by-30-foot steel combination storage/office unit
to our fleet. The record storage unit provides highly secure,
on-site and
easy access to archived business records close at hand. In
addition to our steel container and steel security offices, we
have also added wood mobile offices as a complementary product
to better serve our customers. We have also
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made continuous improvements (i.e., making it easier to use in
colder climates) to our patented locking system over the years.
Currently, the 10-foot-wide unit, the record storage unit and
the 10-by-30-foot steel combination storage/office unit are
exclusively offered by Mobile Mini. We believe our design and
manufacturing capabilities increase our ability to service our
customers needs and expand demand for our portable storage
solutions.
Products
We provide a broad range of portable storage products to meet
our customers varying needs. Our products are managed and
our customers are serviced locally by our employee team at each
of our branches, including management, sales personnel and yard
facility employees. Some features of our different products are
listed below:
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Remanufactured and Modified Steel Storage
Units. We purchase used ISO containers from
leasing companies, shipping lines and brokers. These containers
were originally built to ISO standards and are eight feet wide,
86 to 96 high and 20, 40 or 45 feet
long. After acquisition, we remanufacture and modify these ISO
containers. Remanufacturing typically involves cleaning,
removing rust and dents, repairing floors and sidewalls,
painting, adding our signs and installing new doors and our
proprietary locking system. Modification typically involves
splitting some containers into 5-, 10-, 15-, 20- or 25-foot
lengths. We have also manufactured portable steel storage units
for our lease fleet and for sale, including our ten foot wide
units.
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We generally purchase used ISO containers when they are 10 to
12 years old, a time at which their useful life as an ISO
shipping container is over according to the standards
promulgated by the International Organization for
Standardization. Because we do not have the same stacking and
strength requirements that apply in the ISO shipping industry,
we have no need for these containers to meet ISO standards. We
purchase these containers, truck them to our locations,
remanufacture them by removing any rust, paint them with a rust
inhibiting paint, and further customize them, typically by
adding our proprietary easy-opening door system and our patented
locking system. If we need to purchase ISO containers, as we had
in the past, we believe we would be able to procure them at
competitive prices because of our volume purchasing power.
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Steel Security Office and Steel Security Office/Storage
Units. We buy and historically have manufactured
steel combination office/security and security office units that
range from 10 to 40 feet in length. We offer these units in
various configurations, including office and storage combination
units that provide a 10- or 15-foot office with the remaining
area available for storage. We believe our office units provide
the advantage of ground accessibility for ease of access and
high security in an all-steel design. Our European products
include canteen units and drying rooms for the construction
industry. For customers with space limitations, the
office/canteen units can also be stacked two high with stairs
for access to the top unit. These office units are equipped with
electrical wiring, heating and air conditioning, phone jacks,
carpet or tile, high security doors and windows with security
bars or shutters. Some of these offices are also equipped with
sinks, hot water heaters, cabinets and restrooms.
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Wood Mobile Office Units. We offer mobile
office units, which range from 8 to 24 feet in width and 20
to 60 feet in length, and which we purchase from
manufacturers. These units have a wide range of exterior and
interior options, including exterior stairs or ramps, awnings
and skirting. These units are equipped with electrical wiring,
heating and air conditioning, phone jacks, carpet or tile and
windows with security bars. Many of these units contain
restrooms.
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Steel Records Storage Units. We market
proprietary portable records storage units that enable customers
to store documents at their location for easy access, or at one
of our facilities. Our units are 10.5 feet wide and are
available in 12 and 23-foot lengths. The units feature
high-security doors and locks, electrical wiring, shelving,
folding work tables and air filtration systems. We believe our
product is a cost-effective alternative to mass warehouse
storage, with a high level of fire and water damage protection.
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Van Trailers Non-Core Storage
Units. Our acquisitions typically entail the
purchase of small companies with lease fleets primarily
comprised of standard ISO containers. However, many of these
companies also have van trailers and other manufactured storage
products, which we believe do not have the same advantages as
standard containers. It is our goal to dispose of these units
from our fleet either as their initial rental period ends or
within a few years. We do not remanufacture these products. See
Product Lives
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and Durability Van Trailers Non-Core
Storage Units below. At December 31, 2009, van
trailers comprised less than 0.4% of our lease fleet net book
value.
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Timber Units Non-Core Units. In
connection with the MSG transaction, we acquired assets that
were not part of our principal lease fleet. These assets include
timber units in the U.K., which are older wood constructed
mobile offices. We dispose of these non-core assets as
opportunities permit.
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Portable Toilets Non-Core
Units. Other units acquired in the MSG
transaction include portable toilets, which are typically leased
in conjunction with office unit leases in the U.K.
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We protect our products and brands through the use of trademarks
and patents. In particular, we have patented our proprietary
door locking system. In 2003 and 2006, we were issued United
States patents in connection with our Container Guard Lock and
our tri-cam locking system design. In 2006, we applied in
several countries for patents for improvements or modifications
to our tri-cam locking systems. These applications have been
approved in Europe and China and are still pending in the United
States and other countries.
Product
Lives and Durability
We believe our steel portable storage units, steel security
offices, and wood mobile offices have estimated useful lives of
30 years, 30 years, and 20 years, respectively,
from the date we build or acquire and remanufacture them, with
residual values of our
per-unit
investment ranging from 50% for our mobile offices to 55% for
our core steel products. Van trailers, which comprised 0.4% of
the net book value of our lease fleet at December 31, 2009,
are depreciated over seven years to a 20% residual value. For
the past three fiscal years, our cost to repair and maintain our
lease fleet units averaged approximately 3.4% of our lease
revenues. Repainting the outside of storage units is the most
common maintenance item.
We maintain our steel containers on a regular basis by painting
them, removing rust, and occasionally replacing the wooden floor
or a rusted panel as they come off rent and are ready to be
leased again. This periodic maintenance keeps the container in
essentially the same condition as after we initially
remanufactured it and is designed to maintain the units
value and rental rates comparable to new units.
Approximately 10.3% of our 2009 revenue was derived from sales
of our units. Because the containers in our lease fleet do not
significantly depreciate in value, we have no systematic program
in place to sell lease fleet containers as they reach a certain
age. Instead, most of our U.S. container sales involve
either highly customized containers that would be difficult to
lease on a recurring basis, or containers that we have not
remanufactured. In addition, due primarily to availability of
inventory at various locations at certain times of the year, we
sell a certain portion of containers and offices from the lease
fleet. Our gross margins increase for containers that have been
in our lease fleet for greater lengths of time prior to sale,
because although these units have been depreciated based upon a
30 year useful life and 55% residual value (1.5% per year),
in most cases fair value may not decline by nearly that amount
due to the nature of the assets and our maintenance policy.
The following table shows the gross margin on containers and
steel security offices sold from inventory (which we call our
sales fleet) and from our lease fleet from 1997 through 2009
based on the length of time in the lease fleet.
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Sales
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Sales
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Revenue as a
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Revenue as a
|
|
|
Number of
|
|
Sales
|
|
Original
|
|
Percentage of
|
|
Percentage of
|
|
|
Units Sold
|
|
Revenue
|
|
Cost(1)
|
|
Original Cost
|
|
Net Book Value
|
|
|
(Dollars in thousands)
|
|
Sales fleet(2)
|
|
|
38,437
|
|
|
$
|
123,100
|
|
|
$
|
81,325
|
|
|
|
151
|
%
|
|
|
151
|
%
|
Lease fleet, by period held before sale:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Less than 5 years
|
|
|
27,622
|
|
|
$
|
86,766
|
|
|
$
|
59,768
|
|
|
|
145
|
%
|
|
|
151
|
%
|
5 to 10 years
|
|
|
4,840
|
|
|
$
|
21,535
|
|
|
$
|
14,742
|
|
|
|
146
|
%
|
|
|
162
|
%
|
10 to 15 years
|
|
|
1,195
|
|
|
$
|
4,795
|
|
|
$
|
3,361
|
|
|
|
143
|
%
|
|
|
168
|
%
|
15 to 20 years
|
|
|
188
|
|
|
$
|
617
|
|
|
$
|
439
|
|
|
|
141
|
%
|
|
|
176
|
%
|
20+ years
|
|
|
9
|
|
|
$
|
33
|
|
|
$
|
29
|
|
|
|
111
|
%
|
|
|
161
|
%
|
6
|
|
|
(1) |
|
Original cost for purposes of this table includes
(i) the price we paid for the unit, plus (ii) the cost
of our manufacturing or remanufacturing, which includes both the
cost of customizing units incurred, plus (iii) the freight
charges to our branch when the unit is first placed in service.
For manufactured units, cost includes our manufacturing cost and
the freight charges to the branch location where the unit is
first placed into service. |
|
(2) |
|
Includes sales of raw ISO containers. |
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
December 31, 2009, based on the latest orderly liquidation
value appraisal in May 2009, on which our borrowings under our
revolving credit facility are based, our lease fleet liquidation
appraisal value is approximately $911.6 million, which
equates to 86.4% of our lease fleet net book value of
$1.1 billion at year end. At December 31, 2008, our
orderly liquidation value equated to 85.3% of the lease fleet
net book value.
Because steel storage containers substantially keep their value
when properly maintained, we are able to lease containers that
have been in our lease fleet for various lengths of time at
similar rates, without regard to the age of the container. Our
lease rates vary by the size and type of unit leased, length of
contractual term, custom features and the geographic location of
our branch at which the lease is originated. While we focus on
service and security as a main differentiation of our products
from our competitors, pricing competition, market conditions and
other factors can influence our leasing rates.
The following chart shows the average monthly lease rate that we
currently receive for various types of containers that have been
in our lease fleet for various periods of time. We have added
our 10-foot-wide containers and security offices to the fleet
and those types of units are not included in this chart. This
chart includes the eight major types of containers in the fleet,
but specific details of such type of unit are not provided due
to competitive considerations.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Age of Containers
|
|
|
|
|
|
|
(By Number of Years in Our Lease Fleet)
|
|
Total Number/
|
|
|
|
|
0 5
|
|
6 10
|
|
11 15
|
|
16 20
|
|
Over 21
|
|
Average Dollar
|
|
Type 1
|
|
Number of units
|
|
|
6,034
|
|
|
|
1,438
|
|
|
|
2,020
|
|
|
|
123
|
|
|
|
6
|
|
|
|
9,621
|
|
|
|
Average monthly rent
|
|
$
|
68.02
|
|
|
$
|
83.43
|
|
|
$
|
85.22
|
|
|
$
|
80.80
|
|
|
$
|
78.54
|
|
|
$
|
74.10
|
|
Type 2
|
|
Number of units
|
|
|
892
|
|
|
|
630
|
|
|
|
483
|
|
|
|
71
|
|
|
|
5
|
|
|
|
2,081
|
|
|
|
Average monthly rent
|
|
$
|
85.27
|
|
|
$
|
87.29
|
|
|
$
|
86.06
|
|
|
$
|
81.17
|
|
|
$
|
87.32
|
|
|
$
|
85.93
|
|
Type 3
|
|
Number of units
|
|
|
17,530
|
|
|
|
2,344
|
|
|
|
1,701
|
|
|
|
519
|
|
|
|
87
|
|
|
|
22,181
|
|
|
|
Average monthly rent
|
|
$
|
67.03
|
|
|
$
|
83.61
|
|
|
$
|
85.42
|
|
|
$
|
84.19
|
|
|
$
|
83.11
|
|
|
$
|
70.66
|
|
Type 4
|
|
Number of units
|
|
|
264
|
|
|
|
268
|
|
|
|
491
|
|
|
|
64
|
|
|
|
6
|
|
|
|
1,093
|
|
|
|
Average monthly rent
|
|
$
|
106.54
|
|
|
$
|
102.34
|
|
|
$
|
106.63
|
|
|
$
|
100.88
|
|
|
$
|
96.06
|
|
|
$
|
105.16
|
|
Type 5
|
|
Number of units
|
|
|
480
|
|
|
|
275
|
|
|
|
709
|
|
|
|
25
|
|
|
|
1
|
|
|
|
1,490
|
|
|
|
Average monthly rent
|
|
$
|
103.89
|
|
|
$
|
114.50
|
|
|
$
|
124.03
|
|
|
$
|
118.69
|
|
|
$
|
119.17
|
|
|
$
|
115.69
|
|
Type 6
|
|
Number of units
|
|
|
6,164
|
|
|
|
5,021
|
|
|
|
2,389
|
|
|
|
258
|
|
|
|
20
|
|
|
|
13,852
|
|
|
|
Average monthly rent
|
|
$
|
124.19
|
|
|
$
|
124.60
|
|
|
$
|
131.11
|
|
|
$
|
127.02
|
|
|
$
|
125.07
|
|
|
$
|
125.59
|
|
Type 7
|
|
Number of units
|
|
|
20,151
|
|
|
|
9,522
|
|
|
|
2,349
|
|
|
|
100
|
|
|
|
41
|
|
|
|
32,163
|
|
|
|
Average monthly rent
|
|
$
|
111.52
|
|
|
$
|
111.89
|
|
|
$
|
121.22
|
|
|
$
|
125.20
|
|
|
$
|
112.67
|
|
|
$
|
112.38
|
|
Type 8
|
|
Number of units
|
|
|
301
|
|
|
|
281
|
|
|
|
326
|
|
|
|
22
|
|
|
|
6
|
|
|
|
936
|
|
|
|
Average monthly rent
|
|
$
|
164.46
|
|
|
$
|
161.26
|
|
|
$
|
166.85
|
|
|
$
|
156.30
|
|
|
$
|
170.99
|
|
|
$
|
164.18
|
|
We believe fluctuations in rental rates based on container age
are primarily a function of the location of the branch from
which the container was leased rather than age of the container.
Some of the units added to our lease fleet during recent years
through our acquisitions program have lower lease rates than the
rates we typically obtain because the units remain on lease
under terms (including lower rental rates) that were in place
when we obtained the units in acquisitions.
7
We periodically review our depreciation policy against various
factors, including the following:
|
|
|
|
|
results of our lenders independent appraisal of our lease
fleet;
|
|
|
|
practices of the major competitors in our industry;
|
|
|
|
our experience concerning useful life of the units;
|
|
|
|
profit margins we are achieving on sales of depreciated
units; and
|
|
|
|
lease rates we obtain on older units.
|
In 2009, some of the steel units in our lease fleet were older
than the 25 year originally assigned useful life. In April
2009, we evaluated our 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 our previous depreciation policy of 25 year
life and 62.5% residual value. This change had an immaterial
impact on our consolidated financial statements at the date of
the change in estimate.
Our depreciation policy for our lease fleet uses the
straight-line method over the units estimated useful life,
after the date we put the unit in service, and the units are
depreciated down to their estimated residual values.
Steel Storage, Steel Office and Combination
Units. Our steel products are our core leasing
units and include portable storage units, whether manufactured
or remanufactured ISO containers, steel security office and
storage/office
combination units. Our steel units are depreciated over
30 years with an estimated residual value of 55%.
Wood Mobile Office Units. Because of the wood
structure of these units, they are more susceptible to wear and
tear than steel units. We depreciate these units over
20 years down to a 50% residual value (2.5% per year),
which we believe to be consistent with most of our major
competitors in this industry. Wood mobile office units lose
value over time and we may sell older units from time to time.
At the end of 2009, our wood mobile offices were all less than
ten years old. These units, excluding those units acquired in
acquisitions, are also more expensive than our storage units,
causing an increase in the average carrying value per unit in
the lease fleet over the last nine years.
The operating margins on mobile offices are lower than the
margins on steel containers. However, these mobile offices are
rented using our existing infrastructure and therefore provide
incremental returns far in excess of our fixed expenses. These
returns add to our overall profitability and operating margins.
Van Trailers Non-Core Storage
Units. At December 31, 2009, van trailers
made up less than 0.4% of the net book value of our lease fleet.
When we acquire businesses in our industry, the acquired
businesses often have van trailers and other manufactured
storage products which we believe do not offer customers the
same advantages as our core steel container storage product. We
depreciate our van trailers over 7 years to a 20% residual
value. We often attempt to sell most of these units from our
fleet as they come off rent or within a few years after we
acquire them. We do not utilize our resources to remanufacture
these products and instead resell them.
Timber Units Non-Core Units. These
units are older wood constructed mobile offices in the U.K. and
are depreciated over 5 years to 10% of their assigned value.
Portable Toilets Non-Core
Units. 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 we used to have fiberglass portable
toilets that were depreciated over 3 years to 30% of their
residual value.
Lease
Fleet Configuration
Our lease fleet is comprised of over 100 different
configurations of units. Throughout the year we add units to our
fleet through purchases of used ISO containers and containers
obtained through acquisitions, both of which we remanufacture
and customize. We also purchase new manufactured mobile offices
in various configurations and sizes, and manufacture our own
custom steel units. Due to the number of units acquired in the
MSG transaction and the current economic environment, we do not
anticipate needing to purchase or acquire containers or offices
to remanufacture or customize until the operating environment
significantly improves. Our initial cost basis of an ISO
container includes the purchase price from the seller, the cost
of remanufacturing, which can include removing rust
8
and dents, repairing floors, sidewalls and ceilings, painting,
signage and installing new doors, seals and a locking system.
Additional modifications may involve the splitting of a unit to
create several smaller units and adding customized features. The
restoring and modification processes do not necessarily occur in
the same year the units are purchased or acquired. We procure
larger containers, typically 40-foot units, and split them into
two 20-foot units or one 25-foot and one 15-foot unit, or other
configurations as needed, and then add new doors along with our
patented locking system and sometimes add custom features. We
also will sell units from our lease fleet to our customers.
The table below outlines those transactions that effectively
maintained the net book value of our lease fleet at
$1.1 billion at December 31, 2008 and
December 31, 2009:
|
|
|
|
|
|
|
|
|
|
|
Dollars
|
|
|
Units
|
|
|
|
(Dollars in thousands)
|
|
|
Lease fleet at December 31, 2008, net
|
|
$
|
1,078,156
|
|
|
|
273,748
|
|
Purchases:
|
|
|
|
|
|
|
|
|
Container purchases including freight
|
|
|
694
|
|
|
|
307
|
|
Manufactured units:
|
|
|
|
|
|
|
|
|
Steel containers, combination storage/office combo units and
steel security offices
|
|
|
1,048
|
|
|
|
67
|
|
Wood mobile offices
|
|
|
41
|
|
|
|
2
|
|
Remanufacturing and customization of units purchased or obtained
through acquisitions(1)
|
|
|
17,282
|
|
|
|
1,089
|
(3)
|
Other(2)
|
|
|
(10,707
|
)
|
|
|
(3,291
|
)(4)
|
Cost of sales from lease fleet
|
|
|
(21,896
|
)
|
|
|
(14,714
|
)
|
Effect of exchange rate changes
|
|
|
10,122
|
|
|
|
|
|
Depreciation
|
|
|
(19,412
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Lease fleet at December 31, 2009, net
|
|
$
|
1,055,328
|
|
|
|
257,208
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Does not include any routine maintenance, which is expensed as
incurred. |
|
(2) |
|
Includes adjustments to valuation on acquired MSG units,
primarily trailers, additional cost on splitting units and net
transfers from finished goods. |
|
(3) |
|
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 and includes
units moved from finished goods to lease fleet |
|
(4) |
|
Includes net units transferred in and out of lease fleet. |
The table below outlines the composition of our lease fleet at
December 31, 2009:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Percentage of
|
|
|
|
Lease Fleet
|
|
|
Number of Units
|
|
|
Units
|
|
|
|
(In thousands)
|
|
|
Steel storage containers
|
|
$
|
621,466
|
|
|
|
206,925
|
|
|
|
81
|
%
|
Offices
|
|
|
526,951
|
|
|
|
41,946
|
|
|
|
16
|
%
|
Van trailers
|
|
|
5,557
|
|
|
|
8,337
|
|
|
|
3
|
%
|
Other (chassis and ancillary products)
|
|
|
2,651
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,156,625
|
|
|
|
|
|
|
|
|
|
Accumulated depreciation
|
|
|
(101,297
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
1,055,328
|
|
|
|
257,208
|
|
|
|
100
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
9
Branch
Operations
Our senior management analyzes and manages the business as one
business segment and our operations across all branches
concentrate on the same core business of leasing, using products
that are substantially the same in each market. In order to
effectively manage this business across different geographic
areas, we divide our one business segment into smaller
management areas we call divisions, regions and branches. Each
of our branches generally has similar economic characteristics
covering all products leased or sold, including similar customer
base, sales personnel, advertising, yard facilities, general and
administrative costs and branch management. Further financial
information by geography is provided in Note 17 to the
consolidated financial statements appearing in Item 8 of
this report.
In the U.S. particularly, we locate our branches in markets
with attractive demographics and strong growth prospects. Within
each market, we have located our branches in areas that allow
for easy delivery of portable storage units to our customers
over a wide geographic area. In addition, when cost effective,
we seek locations that are visible from high traffic roads in
order to advertise our products and our name. Our branches
maintain an inventory of portable storage units available for
lease, and some of our older branches also provide storage of
units under lease at the branch
(on-site
storage).
At December 31, 2009, we operated from 118 locations of
which 95 were located in the U.S, 3 in Canada, 19 in the U.K.,
and 1 in The Netherlands. We currently have 67 branches in the
U.S., 1 branch in Canada, 17 branches in the U.K. and 1 branch
in The Netherlands. Additionally, we have properties we call
operational yards from which we can service a local market and
store and maintain our products and equipment. We currently have
32 operational yards. We continue to evaluate our branch
operations and where it becomes operationally feasible, we
convert some of our branches to operational yards to further
reduce expenses. These operational yards do not have branch
managers or sales people, but typically have a dispatcher and
drivers assigned to them.
Each branch has a branch manager who has overall supervisory
responsibility for all activities of the branch. Many branch
managers also oversee our operational yards that reside within
their geographic area. Branch managers report to regional
managers who each generally oversee multiple branches. Our
regional managers, in turn, report to one of our operational
senior vice presidents (called a managing director in Europe).
Performance based incentive bonuses are a substantial portion of
the compensation for these senior vice presidents and regional
and branch managers.
Each branch has its own sales force and a transportation
department that delivers and picks up portable storage units
from customers. Each branch has delivery trucks and forklifts to
load, transport and unload units and a storage yard staff
responsible for unloading and stacking units. Steel units can be
stored by stacking them to maximize usable ground area. Some of
our larger branches also have a fleet maintenance department to
maintain the branchs trucks, forklifts and other
equipment. Our other branches perform preventive maintenance
tasks but outsource major repairs and other maintenance
requirements.
Sales and
Marketing
We have implemented a hybrid sales model consisting of a
dedicated sales staff at all our branch locations as well as at
our national sales center. Our local sales staff builds and
strengthens relationships with local customers in each market
with particular emphasis on contractors and construction-related
customers, who tend to demand local salesperson presence. Our
dedicated national sales center handles primarily in-bound calls
from new customers as well as existing customers not serviced by
branch sales personnel. Our sales staff at the national sales
center work with our local branch managers, dispatchers and
sales personnel to ensure customers receive integrated first
class service from initial call to delivery. Our branch sales
staff, national sales center and sales management team at our
headquarters and other locations conduct sales and marketing on
a full-time basis. We believe that offering local salesperson
presence for customers along with the efficiencies of a
centralized sales operation for customers not needing a local
sales contact will continue to allow us to provide high levels
of customer service and serve all of our customers in a
dedicated, efficient manner.
Our sales force handles all of our products and we do not
maintain separate sales forces for our various product lines.
Our sales and marketing force provides information about our
products to prospective customers by handling inbound calls and
by initiating cold calls. We have ongoing sales and marketing
training programs covering all
10
aspects of leasing and customer service. Our branches
communicate with one another and with corporate headquarters
through our ERP system and our customer relationship management
software and tools. This enables the sales and marketing team to
share leads and other information and permits management to
monitor and review sales and leasing productivity on a
branch-by-branch
basis. We improve our sales efforts by recording and rating the
sales calls made and received by our trained sales force. Our
sales and marketing employees are compensated primarily on a
commission basis.
Our nationwide presence in the U.S. and the U.K. allows us
to offer our products to larger customers who wish to centralize
the procurement of portable storage on a multi-regional or
national basis. We are well equipped to meet these
customers needs through our National Account Program,
which centralizes and simplifies the procurement, rental and
billing process for those customers. Approximately 1,100
U.S. customers and 60 European customers currently
participate in our National Account Program. We also provide our
national account customers with service guarantees which assure
them they will receive the same high level of customer service
from any of our branch locations. This program has helped us
succeed in leveraging customer relationships developed at one
branch throughout our branch system.
We focus an increasing portion of our marketing expenditures on
internet-based initiatives with web-based products and services
for both existing customers and potential customers. We also
advertise our products in the yellow pages and use a targeted
direct mail program. In 2009, we mailed approximately
2.8 million product brochures to existing and prospective
customers. These brochures describe our products and features
and highlight the advantages of portable storage.
Customers
During 2009, approximately 101,000 customers leased our portable
storage, combination storage/office and mobile office units,
compared to approximately 118,000 in 2008. Our customer base is
diverse and consists of businesses in a broad range of
industries. Our largest single leasing customer accounted for
only 1.8% of our leasing revenues in 2008 and 1.7% in 2009. Our
next largest customer accounted for approximately 0.7% of our
leasing revenues in both 2008 and 2009. Our twenty largest
customers combined accounted for approximately 5.2% of our lease
revenues in 2008 and approximately 6.1% of our lease revenues in
2009. Approximately 60.8% of our customers rented a single unit
during 2009.
Based on an independent market study, we believe our customers
are engaged in a vast majority of the industries identified in
the four-digit SIC (Standard Industrial Classification) manual
published by the U.S. Bureau of the Census.
11
We target customers who can benefit from our portable storage
solutions either for seasonal, temporary or long-term storage
needs. Customers use our portable storage units for a wide range
of purposes. The following table provides an overview of our
customers and how they use our portable storage, combination
storage/office and mobile office units as of December 31,
2009:
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Approximate
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Percentage of
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Representative
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Business
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Units on Lease
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Customers
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Typical Application
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Consumer service and retail businesses
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33.5%
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Department, drug, grocery and strip mall stores, hotels,
restaurants, dry cleaners and service stations
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Inventory storage, record storage and seasonal needs
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Construction
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27.9%
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General, electrical, plumbing and mechanical contractors,
landscapers, residential homebuilders and equipment rental
companies
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Equipment and materials storage and job offices
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Industrial and commercial
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21.5%
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Distributors, trucking and utility companies, finance and
insurance companies and film production companies
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Raw materials, equipment, record storage, in-plant office and
seasonal needs
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Government and Institutions
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10.1%
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Schools, hospitals, medical centers, military, Native American
tribal governments and reservations and national, state, county
and local governmental agencies
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Athletic equipment, military storage, disaster preparedness,
supplier, record storage, security office, supplies, equipment
storage, temporary office space and seasonal needs
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Consumers
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6.0%
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Homeowners
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Backyard storage and storage of household goods during
relocation or renovation; storage at our location
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Other
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1.0%
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Remanufacturing
Historically, we have built new steel portable storage units,
steel security offices and other custom-designed steel
structures as well as remanufactured used ISO containers at our
Maricopa, Arizona facility. We continue to remanufacture used
ISO containers by adding our proprietary locking and
easy-opening door systems at some of our branch locations. Our
differentiated product offering allows us to provide a broad
selection of products to our customers and distinguishes our
products from our competitors. If needed in the remanufacturing
process, we purchase raw materials such as steel, vinyl, wood,
glass and paint, which we use in our remanufacturing and
restoring operations. We typically buy these raw materials on a
purchase order basis. We do not have long-term contracts with
vendors for the supply of any raw materials. After integrating
the assets and operations we acquired in the MSG acquisition, we
leveraged our combined fleet and restructured our manufacturing
operations, reducing overhead and capital expenditures for our
lease fleet. We accomplished this primarily by reducing our work
force at our Maricopa, Arizona manufacturing facility in
December 2008 by approximately 90%, in addition to reducing
manufacturing and remanufacturing staff at other locations.
Additionally, we essentially halted new production activities
other than completing existing work in process assignments. For
the near future, we expect our Maricopa, Arizona facility, with
a limited staff, will predominately be used for remanufacturing
and rebranding units acquired in acquisitions to be compliant
with our lease fleet standards and for repairs and maintenance
on our existing lease fleet.
12
Vehicles
At December 31, 2009, we had a fleet of 734 delivery
trucks, of which 574 were owned and 160 were leased. We use
these trucks to deliver and pick up containers at customer
locations. We supplement our delivery fleet by outsourcing
delivery services to independent haulers when appropriate.
Enterprise
Resource Planning and Customer Relationship Management (CRM)
Systems
We use a customized ERP system to improve and optimize lease
fleet utilization, improve the effectiveness of our sales and
marketing programs and to allow international growth using the
same ERP system throughout the company. This system consists of
a wide-area network that connects our headquarters and all of
our branches. Our Tempe, Arizona corporate headquarters and each
branch can enter data into the system and access data on a
real-time basis. We generate weekly management reports by branch
with leasing volume, fleet utilization, lease rates and fleet
movement. These reports allow management to monitor each
branchs performance on a daily, weekly and monthly basis.
We track each portable storage unit by its serial number. Lease
fleet and sales information are entered in the system daily at
the branch level and verified through monthly physical
inventories by branch or corporate employees. Branch salespeople
also use the CRM system to track customer leads and other sales
data, including information about current and prospective
customers. We have made significant investments to our ERP and
CRM systems over the years, and we intend to continue that
investment to further optimize the features of this system for
both our North American and European operations.
Lease
Terms
Under our lease agreements, each lease has an original intended
length of term at inception. However, if the customer keeps the
leased unit beyond the original intended term, the lease
continues on a
month-to-month
basis until cancelled by the customer. At the end of 2009, our
steel storage containers initially have an average intended term
of approximately 8 months at inception, however the average
duration for these leases that have fulfilled their term
agreement was 32 months to date. The average monthly rental
rate on these units was approximately $104 per month. Our
security, security/storage and mobile offices typically have an
average intended lease term of approximately 11 months. The
average duration of all office leases that have fulfilled their
term agreement was 23 months in 2009. Our leases provide
that the customer is responsible for the cost of delivery and
pickup at lease inception. Our leases specify that the customer
is liable for any damage done to the unit beyond ordinary wear
and tear. However, our customers may purchase a damage waiver
from us to avoid this liability in certain circumstances. This
provides us with an additional source of recurring revenue. The
customers possessions stored within the portable storage
unit are typically the responsibility of the customer.
Competition
We face competition from several local and regional companies,
as well as from national companies, in all of our current
markets. We compete with several large national and
international companies in our mobile office product line. Our
competitors include lessors of storage units, mobile offices,
used van trailers and other structures used for portable
storage. We also compete with conventional fixed self-storage
facilities. We compete primarily in terms of security,
convenience, product quality, broad product selection and
availability, lease rates and customer service. In our core
portable storage business, we typically compete with Williams
Scotsman, Elliot Hire, PODS, Pac-Van, 1-800-PAC-RAT, LLC,
Haulaway Storage Containers, Inc., Moveable Cubicle, Speedy
Hire, and a number of other national, regional and local
competitors. In the mobile office business, we typically compete
with ModSpace, Williams Scotsman, McGrath RentCorp and other
national, regional and local companies.
13
Employees
As of December 31, 2009, we employed approximately
1,475 full-time employees in the following major categories:
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Management
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160
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Administrative
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355
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Sales and marketing
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270
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Manufacturing
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165
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Drivers and storage unit handling
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525
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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 seasonality 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
reduced the percentage of our units we reserve for this seasonal
business from the levels we allocated in earlier years,
decreasing the impact of this seasonality on our operations.
Access to
Information
Our Internet address is www.mobilemini.com. We make
available at this address, free of charge, our annual report on
Form 10-K,
quarterly reports on
Form 10-Q,
current reports on
Form 8-K
and amendments to those reports filed or furnished pursuant to
Section 13(a) or 15(d) of the Securities Exchange Act of
1934, as soon as reasonably practicable after we electronically
file such material with, or furnish it to, the Securities and
Exchange Commission. In addition to this
Form 10-K,
we incorporate by reference as identified herein, certain
information from parts of our proxy statement for the 2010
Annual Meeting of Stockholders, which we expect to file with the
SEC on or about April 30, 2010, which will also be
available free of charge on our website. Reports of our
executive officers, directors and any other persons required to
file securities ownership reports under Section 16(a) of
the Securities Exchange Act of 1934 are also available through
our web site. Information contained on our web site is not part
of this Annual Report.
A
continued economic slowdown, particularly in the non-residential
construction sector of the economy, could reduce demand from
some of our customers, which could negatively impact our
financial results.
The current recession has caused disruptions and extreme
volatility in global financial markets and increased rates of
default and bankruptcy, and has reduced demand for portable
storage and mobile offices. These events have also caused
substantial volatility in the stock market and layoffs and other
restrictions on spending by companies in almost every business
sector. These events could have a number of different effects on
our business, including:
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reduction in consumer and business spending, which would result
in a reduction in demand for our products;
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a negative impact on the ability of our customers to timely pay
their obligations to us or our vendors to timely supply
services, thus reducing our cash flow; and
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an increase in counterparty risk.
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Additionally, at the end of 2008 and 2009, customers in the
construction industry, primarily in non-residential
construction, accounted for approximately 36% and 28%,
respectively, of our leased units. If the current economic
slowdown in the non-residential construction sector continues,
we may continue to experience less demand for leases and sales
of our products. Because most of the cost of our leasing
business is either fixed or semi-
14
variable, our margins will contract if revenue continues to fall
without similar changes in expenses, which may be difficult to
achieve, and which ultimately may result in having a material
adverse effect on our financial condition.
Global
capital and credit markets conditions could have an adverse
effect on our ability to access the capital and credit markets,
including via our credit facility.
Due to the disruptions in the global credit markets in 2009,
liquidity in the debt markets has been materially impacted,
making financing terms for borrowers less attractive or, in some
cases, unavailable altogether. Renewed disruptions in the global
credit markets or the failure of additional lending institutions
could result in the unavailability of certain types of debt
financing, including access to revolving lines of credit.
We monitor the financial strength of our larger customers,
derivative counterparties, lenders and insurance carriers on an
on-going basis using publicly available information in order to
evaluate our exposure to those who have or who we believe may
likely experience significant threats to their ability to
adequately service our needs. While we engage in borrowing and
repayment activities under our revolving credit facility on an
almost daily basis and have not had any disruption in our
ability to access our revolving credit facility as needed, the
current credit market conditions could eventually increase the
likelihood that one or more of our lenders may be unable to
honor its commitments under our revolving credit facility, which
could have an adverse effect on our business, financial
condition and results of operations.
Additionally, in the future we may need to raise additional
funds to, among other things, fund our existing operations,
improve or expand our operations, respond to competitive
pressures, or make acquisitions. If adequate funds are not
available on acceptable terms, we may be unable to meet our
business or strategic objectives or compete effectively. If we
raise additional funds by issuing equity securities,
stockholders may experience dilution of their ownership
interests, and the newly issued securities may have rights
superior to those of the common stock. If we raise additional
funds by issuing debt, we may be subject to further limitations
on our operations arising out of the agreements governing such
debt. If we fail to raise capital when needed, our business will
be negatively affected.
We
face intense competition that may lead to our inability to
increase or maintain our prices, which could have a material
adverse impact on our results of operations.
The portable storage and mobile office industries are highly
competitive and highly fragmented. Many of the markets in which
we operate are served by numerous competitors, ranging from
national companies like ourselves, to smaller multi-regional
companies and small, independent businesses with a limited
number of locations. See Business
Competition. Some of our principal competitors are less
leveraged than we are and have lower fixed costs and may be
better able to withstand adverse market conditions within the
industry. We generally compete on the basis of, among other
things, quality and breadth of service, expertise, reliability,
and the price, size, and attractiveness of our rental units. Our
competitors are competing aggressively on the basis of pricing
and may continue to drive prices further down. To the extent
that we choose to match our competitors declining prices,
it could harm our results of operations. To the extent that we
choose not to match or remain within a reasonable competitive
distance from our competitors pricing, it could also harm
our results of operations, as we may lose rental volume.
Unionization
by some or all of our employees could cause increases in
operating costs.
None of our employees are presently covered by collective
bargaining agreements. However, from time to time various unions
have attempted to organize some of our employees. We cannot
predict the outcome of any continuing or future efforts to
organize our employees, the terms of any future labor
agreements, or the effect, if any, those agreements might have
on our operations or financial performance.
We believe that a unionized workforce would generally increase
our operating costs, divert the attention of management from
servicing customers and increase the risk of work stoppages, all
of which could have a material adverse effect on our business,
results of operations or financial condition.
15
We
operate with a high amount of debt and we may incur significant
additional indebtedness.
Our operations are capital intensive, and we operate with a high
amount of debt relative to our size. In May 2007, we issued
$150.0 million in aggregate principal amount of
6.875% Senior Notes. These notes were issued at 99.548% of
par value. In connection with our acquisition of Mobile Storage
Group, we assumed approximately $544.9 million of Mobile
Storage Groups indebtedness with an acquisition date fair
value of $540.9 million. On June 27, 2008, we entered
into an ABL Credit Agreement under which we may borrow up to
$900.0 million on a revolving loan basis, which means that
amounts repaid may be reborrowed. At December 31, 2009, we
had approximately $824.2 million of indebtedness. Our
substantial indebtedness could have adverse consequences. For
example, it could:
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require us to dedicate a substantial portion of our cash flow
from operations to payments on our indebtedness, which could
reduce the availability of our cash flow to fund future working
capital, capital expenditures, acquisitions and other general
corporate purposes;
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make it more difficult for us to satisfy our obligations with
respect to our Senior Notes;
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expose us to the risk of increased interest rates, as certain of
our borrowings will be at variable rates of interest;
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require us to sell assets to reduce indebtedness or influence
our decisions about whether to do so;
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increase our vulnerability to general adverse economic and
industry conditions;
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limit our flexibility in planning for, or reacting to, changes
in our business and our industry;
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restrict us from making strategic acquisitions or pursuing
business opportunities; and
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limit, along with the financial and other restrictive covenants
in our indebtedness, among other things, our ability to borrow
additional funds. Failing to comply with those covenants could
result in an event of default which, if not cured or waived,
could have a material adverse effect on our business, financial
condition and results of operations.
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Covenants
in our debt instruments restrict or prohibit our ability to
engage in or enter into a variety of transactions.
The indentures governing our 6.875% Senior Notes and the
9.75% Senior Notes originally issued by MSG, which we
assumed as part of our acquisition of Mobile Storage Group and,
to a lesser extent our revolving credit facility agreement,
contain various covenants that limit our discretion in operating
our business. In particular, we are limited in our ability to
merge, consolidate or transfer substantially all of our assets,
issue preferred stock of subsidiaries and create liens on our
assets to secure debt. In addition, if there is default, and we
do not maintain borrowing availability in excess of certain
pre-determined levels, we may be unable to incur additional
indebtedness, make restricted payments (including paying cash
dividends on our capital stock) and redeem or repurchase our
capital stock. Our Senior Notes do not contain financial
maintenance covenants and the financial maintenance covenants
under our revolving credit facility are not applicable unless we
fall below $100 million in borrowing availability.
Our revolving credit facility requires us, under certain limited
circumstances, to maintain certain financial ratios and limits
our ability to make capital expenditures. These covenants and
ratios could have an adverse effect on our business by limiting
our ability to take advantage of financing, merger and
acquisition or other corporate opportunities and to fund our
operations. Breach of a covenant in our debt instruments could
cause acceleration of a significant portion of our outstanding
indebtedness. Any future debt could also contain financial and
other covenants more restrictive than those imposed under the
indentures governing the Senior Notes, and the revolving credit
facility.
A breach of a covenant or other provision in any debt instrument
governing our current or future indebtedness could result in a
default under that instrument and, due to cross-default and
cross-acceleration provisions, could result in a default under
our other debt instruments. Upon the occurrence of an event of
default under the revolving credit facility or any other debt
instrument, the lenders could elect to declare all amounts
outstanding to be
16
immediately due and payable and terminate all commitments to
extend further credit. If we were unable to repay those amounts,
the lenders could proceed against the collateral granted to
them, if any, to secure the indebtedness. If the lenders under
our current or future indebtedness accelerate the payment of the
indebtedness, we cannot assure you that our assets or cash flow
would be sufficient to repay in full our outstanding
indebtedness, including the Senior Notes.
The amount we can borrow under our revolving credit facility
depends in part on the value of the portable storage units in
our lease fleet. If the value of our lease fleet declines under
appraisals our lenders receive, we cannot borrow as much. We are
required to satisfy several covenants with our lenders that are
affected by changes in the value of our lease fleet. We would be
in breach of certain of these covenants if the value of our
lease fleet drops below specified levels. If this happens, we
may not be able to borrow the amounts we need to expand our
business, and we may be forced to liquidate a portion of our
existing fleet.
We may
not be able to generate sufficient cash to service all of our
debt, and may be forced to take other actions to satisfy our
obligations under such indebtedness, which may not be
successful.
Our ability to make scheduled payments on or to refinance our
obligations under, our debt will depend on our financial and
operating performance and that of our subsidiaries, which, in
turn, will be subject to prevailing economic and competitive
conditions and to the financial and business factors, many of
which may be beyond our control. See the table under
Managements Discussion and Analysis of Financial
Condition and Results of Operations Liquidity and
Capital Resources Contractual Obligations for
disclosure regarding the amount of cash required to service our
debt.
We may not maintain a level of cash flow from operating
activities sufficient to permit us to pay the principal,
premium, if any, and interest on our indebtedness. If our cash
flow and capital resources are insufficient to fund our debt
service obligations, we may be forced to reduce or delay capital
expenditures, sell assets, seek to obtain additional equity
capital or restructure our debt. In the future, our cash flow
and capital resources may not be sufficient for payments of
interest on and principal of our debt, and such alternative
measures may not be successful and may not permit us to meet our
scheduled debt service obligations. We may not be able to
refinance any of our indebtedness or obtain additional
financing, particularly because of our anticipated high levels
of debt and the debt incurrence restrictions imposed by the
agreements governing our debt, as well as prevailing market
conditions. In the absence of such operating results and
resources, we could face substantial liquidity problems and
might be required to dispose of material assets or operations to
meet our debt service and other obligations. The instruments
governing our indebtedness restrict our ability to dispose of
assets and use the proceeds from any such dispositions. We may
not be able to consummate those sales, or if we do, at an
opportune time, or the proceeds that we realize may not be
adequate to meet debt service obligations when due.
The
market price of our common stock has been volatile and may
continue to be volatile and the value of your investment may
decline.
The market price of our common stock has been volatile and may
continue to be volatile. This volatility may cause wide
fluctuations in the price of our common stock on The Nasdaq
Global Select Market. The market price of our common stock is
likely to be affected by:
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changes in general conditions in the economy, geopolitical
events or the financial markets;
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variations in our quarterly operating results;
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changes in financial estimates by securities analysts;
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other developments affecting us, our industry, customers or
competitors;
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changes in demand for our products or the prices we charge due
to changes in economic conditions, competition or other factors;
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general economic conditions in the markets where we operate;
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the cyclical nature of our customers businesses,
particularly those operating in the construction sectors;
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17
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rental rate changes in response to competitive factors;
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bankruptcy or insolvency of our customers, thereby reducing
demand for our used units;
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seasonal rental patterns, with rental activity tending to be
lowest in the first quarter of the year;
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timing of acquisitions of companies and new location openings
and related costs;
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labor shortages, work stoppages or other labor difficulties;
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possible unrecorded liabilities of acquired companies;
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possible write-offs or exceptional charges due to changes in
applicable accounting standards, goodwill impairment, or
impairment of assets;
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the operating and stock price performance of companies that
investors deem comparable to us; and
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the number of shares available for resale in the public markets
under applicable securities laws.
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Fluctuations
between the British pound and U.S. dollar could adversely affect
our results of operations.
We derived approximately 14.7% of our total revenues in 2009
from our operations in the U.K. The financial position and
results of operations of our U.K. subsidiaries are measured
using the British pound as the functional currency. As a result,
we are exposed to currency fluctuations both in receiving cash
from our U.K. operations and in translating our financial
results back into U.S. dollars. We believe the impact on us
of currency fluctuations from an operations perspective is
mitigated by the fact that the majority of our expenses, capital
expenditures and revenues in the U.K. are in British pounds. We
do, however, have significant currency exposure as a result of
translating our financial results from British pounds into
U.S. dollars for purposes of financial reporting. Assets
and liabilities of our U.K. subsidiary are translated at the
period end exchange rate in effect at each balance sheet date.
Our income statement accounts are translated at the average rate
of exchange prevailing during each month. Translation
adjustments arising from differences in exchange rates from
period to period are included in the accumulated other
comprehensive income (loss) in stockholders equity. A
strengthening of the U.S. dollar against the British pound
reduces the amount of income or loss we recognize on a
consolidated basis from our U.K. business. In 2007, the British
pound was at or near a multi-year high against the
U.S. dollar, and we cannot predict the effects of further
exchange rate fluctuations on our future operating results. We
are also exposed to additional currency transaction risk when
our U.S. operations incur purchase obligations in a
currency other than in U.S. dollars and our U.K. operations
incur purchase obligations in a currency other than in British
pounds. As exchange rates vary, our results of operations and
profitability may be harmed. We do not currently hedge our
currency transaction or translation exposure, nor do we have any
current plans to do so. The risks we face in foreign currency
transactions and translation may continue to increase as we
further develop and expand our U.K. operations. Furthermore, to
the extent we expand our business into other countries, we
anticipate we will face similar market risks related to foreign
currency translation caused by exchange rate fluctuations
between the U.S. dollar and the currencies of those
countries.
If we
determine that our goodwill has become impaired, we may incur
significant charges to our pre-tax income.
At December 31, 2009, we had $513.2 million of
goodwill on our consolidated balance sheets after the impairment
charges discussed below. Goodwill represents the excess of cost
over the fair value of net assets acquired in business
combinations. In the future, goodwill and intangible assets may
increase as a result of future acquisitions. Goodwill and
intangible assets are reviewed at least annually for impairment.
Impairment may result from, among other things, deterioration in
the performance of acquired businesses, adverse market
conditions, stock price, and adverse changes in applicable laws
or regulations, including changes that restrict the activities
of the acquired business.
In 2008, we recognized an impairment of approximately
$13.7 million primarily relating to our operations in the
U.K. In 2009, we did not recognize any impairment. For more
information, see the Notes to Consolidated Financial Statements
included in our financial statements contained in this Annual
Report.
18
We are
subject to environmental regulations and could incur costs
relating to environmental matters.
We are subject to various federal, state, and local
environmental protection and health and safety laws and
regulations governing, among other things:
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the emission and discharge of hazardous materials into the
ground, air, or water;
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the exposure to hazardous materials; and
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the generation, handling, storage, use, treatment,
identification, transportation, and disposal of industrial
by-products,
waste water, storm water, oil/fuel and other hazardous materials.
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We are also required to obtain environmental permits from
governmental authorities for certain of our operations. If we
violate or fail to obtain or comply with these laws,
regulations, or permits, we could be fined or otherwise
sanctioned by regulators. We could also become liable if
employees or other parties are improperly exposed to hazardous
materials.
Under certain environmental laws, we could be held responsible
for all of the costs relating to any contamination at, or
migration to or from, our or our predecessors past or
present facilities. These laws often impose liability even if
the owner, operator or lessor did not know of, or was not
responsible for, the release of such hazardous substances.
Environmental laws are complex, change frequently, and have
tended to become more stringent over time. The costs of
complying with current and future environmental and health and
safety laws, and our liabilities arising from past or future
releases of, or exposure to, hazardous substances, may adversely
affect our business, results of operations, or financial
condition.
The
supply and cost of used ISO containers fluctuates, which can
affect our pricing and our ability to grow.
As needed, we purchase, remanufacture and modify used ISO
containers in order to expand our lease fleet. If used ISO
container prices increase substantially, we may not be able to
manufacture enough new units to grow our fleet. These price
increases also could increase our expenses and reduce our
earnings, particularly if we are not able (due to competitive
reasons or otherwise) to raise our rental rates to absorb this
increased cost. Conversely, an oversupply of used ISO containers
may cause container prices to fall. Our competitors may then
lower the lease rates on their storage units. As a result, we
may need to lower our lease rates to remain competitive. These
events would cause our revenues and our earnings to decline.
The
supply and cost of raw materials we use in manufacturing
fluctuates and could increase our operating costs.
As needed, we manufacture portable storage units to add to our
lease fleet and for sale. In our manufacturing process, we
purchase steel, vinyl, wood, glass and other raw materials from
various suppliers. We cannot be sure that an adequate supply of
these materials will continue to be available on terms
acceptable to us. The raw materials we use are subject to price
fluctuations that we cannot control. Changes in the cost of raw
materials can have a significant effect on our operations and
earnings. Rapid increases in raw material prices are often
difficult to pass through to customers, particularly to leasing
customers. If we are unable to pass on these higher costs, our
profitability could decline. If raw material prices decline
significantly, we may have to write down our raw materials
inventory values. If this happens, our results of operations and
financial condition will decline.
Some
zoning laws in the U.S. and Canada and temporary planning
permission regulations in Europe restrict the use of our
portable storage and office units and therefore limit our
ability to offer our products in all markets.
Most of our customers use our storage units to store their goods
on their own properties. Local zoning laws and temporary
planning permission regulations in some of our markets do not
allow some of our customers to keep portable storage and office
units on their properties or do not permit portable storage
units unless located out of sight from the street. If local
zoning laws or planning permission regulations in one or more of
our markets no longer allow our units to be stored on
customers sites, our business in that market will suffer.
19
If we
fail to retain key management and personnel, we may be unable to
implement our business plan.
One of the most important factors in our ability to profitably
execute our business plan is our ability to attract, develop and
retain qualified personnel, including our CEO and operational
management. Our success in attracting and retaining qualified
people is dependent on the resources available in individual
geographic areas and the impact on the labor supply due to
general economic conditions, as well as our ability to provide a
competitive compensation package, including the implementation
of adequate drivers of retention and rewards based on
performance, and work environment. The departure of any key
personnel and our inability to enforce non-competition
agreements could have a negative impact on our business.
We may
not be able to successfully acquire new operations or integrate
future acquisitions, which could cause our business to
suffer.
We may not be able to successfully complete potential strategic
acquisitions if we cannot reach agreement on acceptable terms or
for other reasons. If we buy a company, we may experience
difficulty integrating that companys personnel and
operations, which could negatively affect our operating results.
In addition:
|
|
|
|
|
the key personnel of the acquired company may decide not to work
for us;
|
|
|
|
we may experience business disruptions as a result of
information technology systems conversions;
|
|
|
|
we may experience additional financial and accounting challenges
and complexities in areas such as tax planning, treasury
management, and financial reporting;
|
|
|
|
we may be held liable for environmental risks and liabilities as
a result of our acquisitions, some of which we may not have
discovered during our due diligence;
|
|
|
|
our ongoing business may be disrupted or receive insufficient
management attention; and
|
|
|
|
we may not be able to realize the cost savings or other
financial benefits we anticipated.
|
In connection with future acquisitions, we may assume the
liabilities of the companies we acquire. These liabilities,
including liabilities for environmental-related costs, could
materially and adversely affect our business. We may have to
incur debt or issue equity securities to pay for any future
acquisition, the issuance of which could involve the imposition
of restrictive covenants or be dilutive to our existing
stockholders.
If we do not manage new markets effectively, some of our new
branches and acquisitions may lose money or fail, and we may
have to close unprofitable locations. Closing a branch in such
circumstances would likely result in additional expenses that
would cause our operating results to suffer.
In connection with expansion outside of the U.S., we face
fluctuations in currency exchange rates, exposure to additional
regulatory requirements, including certain trade barriers,
changes in political and economic conditions, and exposure to
additional and potentially adverse tax regimes. Our success in
Europe will depend, in part, on our ability to anticipate and
effectively manage these and other risks. Our failure to manage
these risks may adversely affect our growth, in Europe and
elsewhere, and lead to increased administrative costs.
We are
exposed to various possible claims relating to our business and
our insurance may not fully protect us.
We are exposed to various possible claims relating to our
business. These possible claims include those relating to
(1) personal injury or death caused by containers, offices
or trailers rented or sold by us, (2) motor vehicle
accidents involving our vehicles and our employees,
(3) employment-related claims, (4) property damage,
and (5) commercial claims. Our insurance policies have
deductibles or self-insured retentions which would require us to
expend amounts prior to taking advantage of coverage limits.
Currently, we believe that we have adequate insurance coverage
for the protection of our assets and operations. However, our
insurance may not fully protect us for certain types of claims,
such as claims for punitive damages or for damages arising from
intentional misconduct, which are often alleged in third party
lawsuits. In addition, we may be exposed to uninsured liability
at levels in excess of our policy limits.
If we are found liable for any significant claims that are not
covered by insurance, our liquidity and operating results could
be materially adversely affected. It is possible that our
insurance carrier may disclaim coverage for any
20
class action and derivative lawsuits against us. It is also
possible that some or all of the insurance that is currently
available to us will not be available in the future on
economically reasonable terms or not available at all. In
addition, whether we are covered by insurance or not, certain
claims may have the potential for negative publicity surrounding
such claims, which may lead to lower revenues, as well as
additional similar claims being filed.
We may
not be able to adequately protect our intellectual property and
other proprietary rights that are material to our
business.
Our ability to compete effectively depends in part upon
protection of our rights in trademarks, copyrights and other
intellectual property rights we own or license, including
patents to our locking system. Our use of contractual
provisions, confidentiality procedures and agreements, and
trademark, copyright, unfair competition, trade secret and other
laws to protect our intellectual property and other proprietary
rights may not be adequate. Litigation may be necessary to
enforce our intellectual property rights and protect our
proprietary information and patents, or to defend against claims
by third parties that our services or our use of intellectual
property infringe their intellectual property rights. Any
litigation or claims brought by or against us could result in
substantial costs and diversion of our resources. A successful
claim of trademark, copyright or other intellectual property
infringement against us could prevent us from providing
services, which could harm our business, financial condition or
results of operations. In addition, a breakdown in our internal
policies and procedures may lead to an unintentional disclosure
of our proprietary, confidential or material non-public
information, which could in turn harm our business, financial
condition or results of operations.
|
|
ITEM 1B.
|
UNRESOLVED
STAFF COMMENTS.
|
We have received no written comments regarding our periodic or
current reports from the staff of the SEC that were issued
180 days or more preceding the end of our 2009 fiscal year
and that remain unresolved.
We own several properties in the U.S., including our facility in
Maricopa, Arizona, approximately 30 miles south of Phoenix.
In the U.K., we own two locations. We lease all of our other
locations. All of our major leased properties have remaining
lease terms of between 1 and 16 years and we believe that
satisfactory alternative properties can be found in all of our
markets if we do not renew these existing leased properties. The
properties we lease for our branch locations are generally
located in industrial areas so that we can stack containers,
store large amounts of containers and offices and operate our
delivery trucks. These properties tend to be 1 to 16 acre
sites with little development needed for us to use them, other
than a paved or hard-packed surface, utilities and proper zoning.
Four of our leased properties are with related persons and the
terms of these related persons lease agreements have been
reviewed and approved by the independent directors who comprise
a majority of the members of our Board of Directors.
Our Maricopa facility is on approximately 43 acres. The
facility housed our manufacturing, assembly, restoring, painting
and vehicle maintenance operations. At the end of 2008, we
restructured our manufacturing operations, and as a result, this
facility for the near future will be primarily used to rebrand,
remanufacture and do repairs and maintenance on our existing
lease fleet and to store any excess units in our fleet.
We lease our corporate and administrative offices in Tempe,
Arizona. These offices have approximately 35,000 square
feet of office space. The lease term expires in December 2014.
Our European headquarters is located in
Stockton-on-Tees,
United Kingdom where we lease approximately 10,000 square
feet of office space. The term on this lease expires in July,
2017.
|
|
ITEM 3.
|
LEGAL
PROCEEDINGS.
|
We are party from time to time to various claims and lawsuits
which arise in the ordinary course of business, including claims
related to employment matters, contractual disputes, personal
injuries and property damage. In addition, various legal
actions, claims and governmental inquiries and proceedings are
pending or may be instituted or asserted in the future against
us and our subsidiaries.
Litigation is subject to many uncertainties, and the outcome of
the individual litigated matters is not predictable with
assurance. It is possible that certain of the actions, claims,
inquiries or proceedings, including those discussed above, could
be decided unfavorably to us or any of our subsidiaries
involved. Although we cannot
21
predict with certainty the ultimate resolution of lawsuits,
investigations and claims asserted against us, we do not believe
that the ultimate resolution of these claims or lawsuits will
have a material adverse effect on our business, financial
condition, results of operations or cash flows.
In 2009, in order to avoid the uncertainties of litigation, we
agreed to settle a purported class action claim relating to
California wage and hour laws. Under the proposed settlement, we
will pay at least $467,000 to settle claims relating to certain
California employees. Under the settlement agreement, we may be
liable for up to a maximum of $660,000 in claims. We believe the
settlement will be approved by the California court and payments
will be made in 2010.
PART II
|
|
ITEM 5.
|
MARKET
FOR COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER
PURCHASES OF EQUITY SECURITIES.
|
Common
Stock Prices
Our common stock trades on The Nasdaq Global Select Market under
the symbol MINI. The following are the high and low
sale prices for the common stock during the periods indicated as
reported by the Nasdaq Stock Market.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2008
|
|
|
2009
|
|
|
|
High
|
|
|
Low
|
|
|
High
|
|
|
Low
|
|
|
Quarter ended March 31,
|
|
$
|
20.13
|
|
|
$
|
14.07
|
|
|
$
|
15.79
|
|
|
$
|
8.26
|
|
Quarter ended June 30,
|
|
$
|
25.31
|
|
|
$
|
18.61
|
|
|
$
|
15.18
|
|
|
$
|
11.02
|
|
Quarter ended September 30,
|
|
$
|
26.14
|
|
|
$
|
15.00
|
|
|
$
|
18.25
|
|
|
$
|
13.85
|
|
Quarter ended December 31,
|
|
$
|
19.37
|
|
|
$
|
10.88
|
|
|
$
|
17.96
|
|
|
$
|
13.77
|
|
We had 87 holders of record of our common stock on
February 16, 2010, and we estimate that we have more than
4,300 beneficial owners of our common stock.
Mobile Mini has not paid cash dividends on its common stock and
does not expect to do so in the foreseeable future, as it
intends to retain all earnings to provide funds for the
operation and expansion of its business. Further, our revolving
credit agreement restricts our ability to pay dividends or other
distributions on our common stock.
Sales of
Unregistered Securities; Repurchases of Securities
On June 27, 2008, as part of the consideration for the
acquisition of Mobile Storage Group, we issued 8.6 million
shares of our Series A Convertible Redeemable Participating
Preferred Stock to the former stockholders of Mobile Storage
Group. This issuance was made pursuant to an exemption from
registration under Regulation D of the Securities Act of
1933, as amended.
The preferred stock is convertible into 8.6 million shares
of our common stock at any time at the option of the holders,
representing an initial conversion price of $18.00 per common
share. The preferred stock will be mandatorily convertible into
our common stock if, after the first anniversary of the issuance
of the preferred stock, our common stock trades above $23.00 per
share for a period of 30 consecutive days. For additional
information, see Notes to Consolidated Financial
Statements Preferred Stock.
On August 8, 2007, our Board of Directors approved a common
stock repurchase program authorizing up to $50.0 million of
our outstanding shares to be repurchased over a six-month period
which expired in February 2008. We had repurchased
2.2 million shares for approximately $39.3 million
under this authorization prior to December 31, 2007.
22
Stock
Performance Graph
The following Performance Graph and related information shall
not be deemed soliciting material or
filed with the SEC, nor should such information be
incorporated by reference into any future filings under the
Securities Act of 1933 or the Securities Exchange Act of 1934,
each as amended, except to the extent that Mobile Mini
specifically incorporates it by reference in such filing.
The following graph compares the five-year cumulative total
return on our common stock with the cumulative total returns
(assuming reinvestment of dividends) on the Standard and
Poors SmallCap 600 and the Nasdaq Composite Index if $100
were invested in our common stock and each index on
December 31, 2004.
STOCK
PERFORMANCE GRAPH
Mobile Mini, Inc.
At December 31, 2009
Total Return* Performance
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Period Ended December 31,
|
Index
|
|
2004
|
|
2005
|
|
2006
|
|
2007
|
|
2008
|
|
2009
|
Mobile Mini, Inc.
|
|
$
|
100.0
|
|
|
$
|
143.46
|
|
|
$
|
163.08
|
|
|
$
|
112.23
|
|
|
$
|
87.29
|
|
|
$
|
85.29
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Standard & Poors SmallCap 600
|
|
$
|
100.0
|
|
|
$
|
107.68
|
|
|
$
|
123.96
|
|
|
$
|
123.59
|
|
|
$
|
85.19
|
|
|
$
|
106.97
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nasdaq Stock Market Index (U.S.)
|
|
$
|
100.0
|
|
|
$
|
102.13
|
|
|
$
|
112.19
|
|
|
$
|
121.68
|
|
|
$
|
58.64
|
|
|
$
|
84.28
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
* |
|
Total Return based on $100 initial investment and reinvestment
of dividends. |
23
|
|
ITEM 6.
|
SELECTED
FINANCIAL DATA.
|
The following table shows our selected consolidated historical
financial data for the stated periods. Amounts include the
effect of rounding. You should read this material with
Managements Discussion and Analysis of Financial
Condition and Results of Operations and the financial
statements and related footnotes included elsewhere in this
Annual Report.
On February 22, 2006, our Board of Directors approved a
two-for-one
stock split in the form of a 100 percent stock dividend
effected on March 10, 2006. Per share amounts, share
amounts and weighted numbers of shares outstanding give effect
for this
two-for-one
stock split in the below tables for all periods presented.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
2005
|
|
|
2006
|
|
|
2007
|
|
|
2008
|
|
|
2009
|
|
|
|
(In thousands, except per share and operating data)
|
|
|
Consolidated Statements of Income Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Leasing
|
|
$
|
188,578
|
|
|
$
|
245,105
|
|
|
$
|
284,638
|
|
|
$
|
371,560
|
|
|
$
|
333,521
|
|
Sales
|
|
|
17,499
|
|
|
|
26,824
|
|
|
|
31,644
|
|
|
|
41,267
|
|
|
|
38,605
|
|
Other
|
|
|
1,093
|
|
|
|
1,434
|
|
|
|
2,020
|
|
|
|
2,577
|
|
|
|
2,335
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenues
|
|
|
207,170
|
|
|
|
273,363
|
|
|
|
318,302
|
|
|
|
415,404
|
|
|
|
374,461
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Costs and expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of sales
|
|
|
10,845
|
|
|
|
17,186
|
|
|
|
21,651
|
|
|
|
28,044
|
|
|
|
25,795
|
|
Leasing, selling and general expenses
|
|
|
109,257
|
|
|
|
139,906
|
|
|
|
166,994
|
|
|
|
212,335
|
|
|
|
192,861
|
|
Integration, merger and restructuring expense
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
24,427
|
|
|
|
11,305
|
|
Goodwill impairment
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
13,667
|
|
|
|
|
|
Depreciation and amortization
|
|
|
12,854
|
|
|
|
16,741
|
|
|
|
21,149
|
|
|
|
31,767
|
|
|
|
39,082
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total costs and expenses
|
|
|
132,956
|
|
|
|
173,833
|
|
|
|
209,794
|
|
|
|
310,240
|
|
|
|
269,043
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from operations
|
|
|
74,214
|
|
|
|
99,530
|
|
|
|
108,508
|
|
|
|
105,164
|
|
|
|
105,418
|
|
Other income (expense):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest income
|
|
|
11
|
|
|
|
437
|
|
|
|
101
|
|
|
|
135
|
|
|
|
29
|
|
Other income
|
|
|
3,160
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense
|
|
|
(23,177
|
)
|
|
|
(23,681
|
)
|
|
|
(24,906
|
)
|
|
|
(48,146
|
)
|
|
|
(59,504
|
)
|
Debt extinguishment expense
|
|
|
|
|
|
|
(6,425
|
)
|
|
|
(11,224
|
)
|
|
|
|
|
|
|
|
|
Foreign currency exchange gains (loss)
|
|
|
|
|
|
|
66
|
|
|
|
107
|
|
|
|
(112
|
)
|
|
|
(88
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before provision for income taxes
|
|
|
54,208
|
|
|
|
69,927
|
|
|
|
72,586
|
|
|
|
57,041
|
|
|
|
45,855
|
|
Provision for income taxes
|
|
|
20,220
|
|
|
|
27,151
|
|
|
|
28,410
|
|
|
|
28,000
|
|
|
|
18,057
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
|
33,988
|
|
|
|
42,776
|
|
|
|
44,176
|
|
|
|
29,041
|
|
|
|
27,798
|
|
Earnings allocable to preferred stock
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(2,739
|
)
|
|
|
(5,431
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income available to common stockholders
|
|
$
|
33,988
|
|
|
$
|
42,776
|
|
|
$
|
44,176
|
|
|
$
|
26,302
|
|
|
$
|
22,367
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
1.14
|
|
|
$
|
1.25
|
|
|
$
|
1.24
|
|
|
$
|
0.77
|
|
|
$
|
0.65
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted
|
|
$
|
1.10
|
|
|
$
|
1.21
|
|
|
$
|
1.22
|
|
|
$
|
0.75
|
|
|
$
|
0.64
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average number of common and common share equivalents
outstanding:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
29,867
|
|
|
|
34,243
|
|
|
|
35,489
|
|
|
|
34,155
|
|
|
|
34,597
|
|
Diluted
|
|
|
30,875
|
|
|
|
35,425
|
|
|
|
36,296
|
|
|
|
38,875
|
|
|
|
43,252
|
|
Other Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EBITDA(1)
|
|
$
|
90,239
|
|
|
$
|
116,774
|
|
|
$
|
129,865
|
|
|
$
|
136,954
|
|
|
$
|
144,441
|
|
Net cash provided by operating activities
|
|
|
69,249
|
|
|
|
76,884
|
|
|
|
91,299
|
|
|
|
98,518
|
|
|
|
86,770
|
|
Net cash (used in) provided by investing activities
|
|
|
(113,275
|
)
|
|
|
(192,763
|
)
|
|
|
(138,682
|
)
|
|
|
(97,913
|
)
|
|
|
3,048
|
|
Net cash provided by (used in) financing activities
|
|
|
43,282
|
|
|
|
116,966
|
|
|
|
48,427
|
|
|
|
(6,689
|
)
|
|
|
(82,999
|
)
|
Operating Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of branches (at year end)
|
|
|
51
|
|
|
|
62
|
|
|
|
66
|
|
|
|
94
|
|
|
|
91
|
|
Lease fleet units (at year end)
|
|
|
116,317
|
|
|
|
149,615
|
|
|
|
160,116
|
|
|
|
273,748
|
|
|
|
257,208
|
|
Lease fleet covenant utilization (annual average)
|
|
|
82.9
|
%
|
|
|
82.7
|
%
|
|
|
79.6
|
%
|
|
|
75.0
|
%
|
|
|
59.2
|
%
|
Lease revenue growth (reduction) from prior year
|
|
|
25.8
|
%
|
|
|
30.0
|
%
|
|
|
16.1
|
%
|
|
|
30.5
|
%
|
|
|
(10.2
|
)%
|
Operating margin
|
|
|
35.8
|
%
|
|
|
36.4
|
%
|
|
|
34.1
|
%
|
|
|
25.3
|
%
|
|
|
28.2
|
%
|
Net income margin
|
|
|
16.4
|
%
|
|
|
15.6
|
%
|
|
|
13.9
|
%
|
|
|
7.0
|
%
|
|
|
7.4
|
%
|
EBITDA margin(3)
|
|
|
43.6
|
%
|
|
|
42.7
|
%
|
|
|
40.8
|
%
|
|
|
33.0
|
%
|
|
|
38.6
|
%
|
24
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At December 31,
|
|
|
|
2005
|
|
|
2006
|
|
|
2007
|
|
|
2008
|
|
|
2009
|
|
|
|
(In thousands)
|
|
|
Consolidated Balance Sheet Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Lease fleet, net
|
|
$
|
550,464
|
|
|
$
|
697,439
|
|
|
$
|
802,923
|
|
|
$
|
1,078,156
|
|
|
$
|
1,055,328
|
|
Total assets
|
|
|
704,957
|
|
|
|
900,030
|
|
|
|
1,028,851
|
|
|
|
1,798,857
|
|
|
|
1,754,039
|
|
Total debt
|
|
|
308,585
|
|
|
|
302,045
|
|
|
|
387,989
|
|
|
|
907,206
|
|
|
|
824,246
|
|
Stockholders equity
|
|
|
267,975
|
|
|
|
442,004
|
|
|
|
457,890
|
|
|
|
495,228
|
|
|
|
547,624
|
|
Reconciliations of EBITDA to net cash provided by operating
activities, the most directly comparable GAAP measure:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
2005
|
|
|
2006
|
|
|
2007
|
|
|
2008
|
|
|
2009
|
|
|
|
(In thousands)
|
|
|
EBITDA(1)
|
|
$
|
90,239
|
|
|
$
|
116,774
|
|
|
$
|
129,865
|
|
|
$
|
136,954
|
|
|
$
|
144,441
|
|
Senior Note redemption premiums
|
|
|
|
|
|
|
(4,987
|
)
|
|
|
(8,926
|
)
|
|
|
|
|
|
|
|
|
Interest paid
|
|
|
(21,727
|
)
|
|
|
(24,770
|
)
|
|
|
(27,896
|
)
|
|
|
(33,032
|
)
|
|
|
(54,817
|
)
|
Income and franchise taxes paid
|
|
|
(495
|
)
|
|
|
(733
|
)
|
|
|
(797
|
)
|
|
|
(667
|
)
|
|
|
(1,055
|
)
|
Provision for loss from natural disasters
|
|
|
1,710
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Provision for restructuring charge
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5,626
|
|
|
|
(19
|
)
|
Goodwill impairment
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
13,667
|
|
|
|
|
|
Share-based compensation expense
|
|
|
19
|
|
|
|
3,066
|
|
|
|
4,028
|
|
|
|
5,656
|
|
|
|
5,782
|
|
Gain on sale of lease fleet units
|
|
|
(3,529
|
)
|
|
|
(4,922
|
)
|
|
|
(5,560
|
)
|
|
|
(9,849
|
)
|
|
|
(11,661
|
)
|
Loss on disposal of property, plant and equipment
|
|
|
704
|
|
|
|
454
|
|
|
|
203
|
|
|
|
567
|
|
|
|
71
|
|
Change in certain assets and liabilities, net of effect of
business acquired:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Receivables
|
|
|
(5,371
|
)
|
|
|
(6,580
|
)
|
|
|
(2,119
|
)
|
|
|
2,201
|
|
|
|
21,327
|
|
Inventories
|
|
|
(4,823
|
)
|
|
|
628
|
|
|
|
(610
|
)
|
|
|
7,655
|
|
|
|
3,691
|
|
Deposits and prepaid expenses
|
|
|
(480
|
)
|
|
|
(1,446
|
)
|
|
|
(1,754
|
)
|
|
|
177
|
|
|
|
3,412
|
|
Other assets and intangibles
|
|
|
(19
|
)
|
|
|
(4
|
)
|
|
|
318
|
|
|
|
105
|
|
|
|
(845
|
)
|
Accounts payable and accrued liabilities
|
|
|
13,021
|
|
|
|
(596
|
)
|
|
|
4,547
|
|
|
|
(30,542
|
)
|
|
|
(23,557
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by operating activities
|
|
$
|
69,249
|
|
|
$
|
76,884
|
|
|
$
|
91,299
|
|
|
$
|
98,518
|
|
|
$
|
86,770
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
25
Reconciliation of net income to EBITDA and adjusted EBITDA:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
2005
|
|
|
2006
|
|
|
2007
|
|
|
2008
|
|
|
2009
|
|
|
|
(In thousands except percentages)
|
|
|
Net income
|
|
$
|
33,988
|
|
|
$
|
42,776
|
|
|
$
|
44,176
|
|
|
$
|
29,041
|
|
|
$
|
27,798
|
|
Interest expense
|
|
|
23,177
|
|
|
|
23,681
|
|
|
|
24,906
|
|
|
|
48,146
|
|
|
|
59,504
|
|
Income taxes
|
|
|
20,220
|
|
|
|
27,151
|
|
|
|
28,410
|
|
|
|
28,000
|
|
|
|
18,057
|
|
Depreciation and amortization
|
|
|
12,854
|
|
|
|
16,741
|
|
|
|
21,149
|
|
|
|
31,767
|
|
|
|
39,082
|
|
Debt restructuring/extinguishment expense
|
|
|
|
|
|
|
6,425
|
|
|
|
11,224
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EBITDA(1)
|
|
|
90,239
|
|
|
|
116,774
|
|
|
|
129,865
|
|
|
|
136,954
|
|
|
|
144,441
|
|
Hurricane Katrina expense(4)
|
|
|
1,710
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other income(5)
|
|
|
(3,160
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Integration, merger and restructuring expense(6)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
24,427
|
|
|
|
11,305
|
|
Goodwill impairment(7)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
13,667
|
|
|
|
|
|
Class action settlement, other(8)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
835
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted EBITDA(2)
|
|
$
|
88,789
|
|
|
$
|
116,774
|
|
|
$
|
129,865
|
|
|
$
|
175,048
|
|
|
$
|
156,581
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EBITDA margin(3)
|
|
|
43.6
|
%
|
|
|
42.7
|
%
|
|
|
40.8
|
%
|
|
|
33.0
|
%
|
|
|
38.6
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted EBITDA margin(3)
|
|
|
42.9
|
%
|
|
|
42.7
|
%
|
|
|
40.8
|
%
|
|
|
42.1
|
%
|
|
|
41.8
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
EBITDA, as further discussed below, is defined as net income
before interest expense, income taxes, depreciation and
amortization, and debt restructuring or extinguishment expense.
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 the
end of each measurement period. |
|
|
|
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
U.S. 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.
|
|
|
|
Income taxes because we operate in
jurisdictions subject to income taxation, income tax expense is
a necessary element of our costs to operate.
|
|
|
|
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.
|
|
|
|
Debt restructuring or extinguishment
expense debt restructuring and extinguishment
expenses are not deducted in our various calculations made under
our prior credit agreements 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.
|
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
|
|
|
|
whether EBITDA historically has remained at positive
levels.
|
26
|
|
|
|
|
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. |
|
(2) |
|
Adjusted EBITDA represents EBITDA plus the sum of certain
transactions that are excluded when internally evaluating our
operating performance. Management believes adjusted EBITDA is a
more meaningful evaluation and comparison of our core business
when comparing period over period results without regard to
transactions that potentially distort the performance of our
core business operating results. |
|
(3) |
|
EBITDA and adjusted EBITDA margins are calculated as EBITDA and
adjusted EBITDA divided by total revenues expressed as a
percentage. The GAAP financial measure that is most directly
comparable to EBITDA margin is operating margin, which
represents operating income divided by revenues. EBITDA margin
is presented along with the operating margin in the selected
financial data under Operating Data so as not to
imply that more emphasis be placed on this measure than the
corresponding GAAP measure. |
|
(4) |
|
Hurricane Katrina expense represents the damages we sustained
based on our assessment, primarily at our New Orleans, Louisiana
branch and to units at our customer locations. |
|
(5) |
|
Other income represents our net proceeds to a settlement
agreement to which a third party reimbursed us for a portion of
losses sustained in two lawsuits. |
|
(6) |
|
Integration, merger and restructuring expense represents costs
we incurred or accrued in connection with the merger with MSG
and the costs in connection with the restructuring of our
manufacturing operations as a result of the MSG merger. |
|
(7) |
|
Goodwill impairment represents a non-cash charge for a portion
of our goodwill relating to our United Kingdom and The
Netherlands operations. |
|
(8) |
|
Class action settlement expense represents costs incurred and
the estimated settlement cost of a purported class action
lawsuit that management decided to settle in order to avoid the
uncertainties and cost of continued litigation and other
non-core leasing expenses. |
|
|
ITEM 7.
|
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 the
consolidated financial statements and the accompanying notes
included elsewhere in this Annual Report. This discussion
contains forward-looking statements that involve risks and
uncertainties. Our actual results may differ materially from
those anticipated in those forward-looking statements as a
result of certain factors, including, but not limited to, those
described under Item 1A, Risk Factors.
The following discussion takes into consideration our
acquisition of Mobile Storage Group on June 27, 2008. The
operations of Mobile Storage Group are included in our operating
results for only six months of the twelve months ended
December 31, 2008. There were no acquisitions consummated
in 2009. Additionally, in 2008, the results of operations
include four other acquisitions (beyond Mobile Storage Group) we
completed during 2008. The results of operations for 2007 also
include four acquisitions and one
start-up
location that we completed in 2007.
Executive
Summary
2009 was a challenging year for us globally with the
economic recession still significantly impacting all aspects of
business industries and consumers. Although our total revenue
decreased approximately 9.9% from the 2008 level, we continued
to take the necessary measures in 2009 to keep the business
right-sized, primarily by further reducing headcount and
reductions in other areas of non-essential expenses. These and
other cost measures allowed us to increase our operating margin
to 28.2% of total revenues from 25.3% in 2008. We continued to
be cash flow positive (after capital expenditures) in 2009.
In the third quarter of 2008, we enacted a selective price
increase focusing on customers who have had units out on rent
for an extended period of time and those revenue benefits were
realized in 2009. Additionally, we did another selective rate
increase in the second quarter of 2009. To date, we have
observed no measurable difference in the attrition rates for the
affected customers.
27
We are also investing in our business with the adoption of a
hybrid sales model incorporating a local as well as centralized
component, with both groups incentivized on the basis of
performance. The salespeople at the branches continue to be
focused on large
multi-unit
local customers that benefit from local service such as
construction customers, while those in our new National Sales
Center (NSC) in Tempe, Arizona are targeting our
other customers, primarily non-contractors. While we have
reduced salespeople at the branches and are hiring for the NSC,
because of the expected efficiencies in our approach and
team-design of the NSC, this hybrid approach will result in a
net salesperson headcount reduction. A similar program is
underway in Europe.
The recession and credit crisis in the U.S. and the U.K.
continued to curtail non-residential construction activity
throughout 2009 and we expect these factors to continue to
negatively affect our consolidated revenues at least through the
second quarter of 2010. In late 2008, we restructured our
manufacturing operations to reduce costs and implemented two
rounds of company-wide reductions which together resulted in
cost savings in 2009 in addition to further headcount reductions
we made in 2009. We continually monitor activity levels through
a variety of metrics we use to find efficiencies in the number
of drivers, dispatchers, managers, salespeople and corporate
staff needed in the evolving business environment. As a result,
we have continued to reduce headcount in 2010 in areas where we
believe we can find efficiencies without negatively impacting
customer service and sales activity levels.
In 2009, we continued to identify certain branch operations that
we converted to operational yards which operate at a lower cost
structure than traditional branches. We monitor the
effectiveness of our branches and where possible, we will
continue to migrate some of our branches to operational yards in
2010.
We believe these continued efforts, coupled with only nominal
fleet purchases and maintenance expense, will allow us to
continue to generate free cash flow in 2010 and pay down debt,
which remains a top corporate priority. We have reduced
borrowings under our $900.0 million asset based revolving
credit facility from $554.5 million at December 31,
2008 to $473.7 million at December 31, 2009, leaving
us with $342.7 million of unused borrowing capacity under
our facility. This $80.8 million in debt reduction was
negatively impacted by unfavorable foreign exchange rates that
effectively increased our borrowings on the line of credit by
approximately $10.5 million. Our senior notes do not
contain financial maintenance covenants and the financial
maintenance covenants under our revolving credit facility are
not applicable unless we fall below $100.0 million in
borrowing availability.
At the same time we are reducing costs, we are increasing our
internal efforts on sales growth to our core customers and have
refocused our efforts to gain business through government
projects at the federal, state and local levels. We are doing
this in part through increasing salesperson accountability
through our disciplined sales processes which we believe has
traditionally given us a significant competitive advantage.
General
We are the worlds leading provider of portable storage
solutions, through a total lease fleet of more than 257,000
portable storage and mobile office units at December 31,
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 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. We also sell non-core
assets, in particular van trailers and timber units, when the
opportunity arises. Our sales revenues as a percentage of total
revenues represented 10.3% of revenues in 2009.
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 document.
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 consolidated statements of income for the reporting
periods ended December 31, 2008 and 2009, include certain
estimated expenses expected to be incurred related to
integration of the business acquired
28
in the Merger and restructuring charges related to restructuring
of our manufacturing operations as a result of 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
acquired 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 require us
to achieve additional revenue in order to maintain our margins.
When we refer to our operating leverage in this discussion, we
are describing the impact on margins once we either cover our
fixed costs or if we incur additional fixed costs.
Following the Merger, we implemented our business model across
the newly acquired MSG branches. While we realized significant
cost reductions as a result of the combination of the two
companies, costs of implementing our business model at the
branches we acquired offset some of the cost reductions.
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 28% and 36% of our units on
rent at December 31, 2009 and December 31, 2008,
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 continued and adversely affected our
results of operations in 2009 and we anticipate it will continue
at least through the second quarter of 2010.
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 operating margin and, after the economy
returns to normalized conditions, a steady growth rate in
leasing revenues.
We are a capital-intensive business, 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 it 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 exclude the effect of what
we consider transactions or events not related to our core
business operations to arrive at what we define as adjusted
EBITDA. For 2009, adjusted EBITDA does not include the
integration, merger and restructuring expenses related to the
MSG acquisition and non-core leasing expenses.
In managing our business, we measure our EBITDA margins from
year to year based on the size of the 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
29
number of units on rent increases. Because this operating
leverage creates higher 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 growth in leasing revenues, the EBITDA margin
at a branch will be expected to remain relatively flat on a
period-by-period
comparative basis if expenses remained the same or would
decrease if fixed costs increased.
Because EBITDA, adjusted EBITDA, EBITDA margin and adjusted
EBITDA margin are non-GAAP financial measures, as defined by the
SEC, we include in this Annual Report reconciliations of EBITDA
to the most directly comparable financial measures calculated
and presented in accordance with accounting principles generally
accepted in the U.S. These reconciliations are included in
Item 6, Selected Financial Data.
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 mobile 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 ISO 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,
stock-based compensation expense and corporate expenses for both
our leasing and sales activities. Annual repair and maintenance
expenses on our leased units over the last three years have
averaged approximately 3.4% 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 using an 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
7 years to a 20% residual value. Van trailers, which are
only added to the fleet as a result of acquisitions of portable
storage businesses, are of much lower quality than storage
containers and consequently depreciate more rapidly. We also
have other non-core products that are added to our fleet as a
result of acquisitions that have various other measures of
useful lives and residual values. See Item 1.
Business Product Lives and Durability.
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 75.9% and ranged
from a low of 59.2% in 2009 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 2009 year with an average lease fleet utilization rate
of 59.2%, compared to 75.0% for 2008.
30
Results
of Operations
The following table shows the percentage of total revenues
represented by the key items that make up our statements of
income; certain amounts may not add due to rounding:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
2005
|
|
|
2006
|
|
|
2007
|
|
|
2008
|
|
|
2009
|
|
|
Revenues:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Leasing
|
|
|
91.0
|
%
|
|
|
89.7
|
%
|
|
|
89.4
|
%
|
|
|
89.5
|
%
|
|
|
89.1
|
%
|
Sales
|
|
|
8.5
|
|
|
|
9.8
|
|
|
|
9.9
|
|
|
|
9.9
|
|
|
|
10.3
|
|
Other
|
|
|
0.5
|
|
|
|
0.5
|
|
|
|
0.7
|
|
|
|
0.6
|
|
|
|
0.6
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenues
|
|
|
100.0
|
|
|
|
100.0
|
|
|
|
100.0
|
|
|
|
100.0
|
|
|
|
100.0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Costs and expenses:
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of sales
|
|
|
5.2
|
|
|
|
6.3
|
|
|
|
6.8
|
|
|
|
6.8
|
|
|
|
6.9
|
|
Leasing, selling and general expenses
|
|
|
52.8
|
|
|
|
51.2
|
|
|
|
52.5
|
|
|
|
51.1
|
|
|
|
51.5
|
|
Integration, merger and restructuring expense
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5.9
|
|
|
|
3.0
|
|
Goodwill impairment
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3.3
|
|
|
|
0.0
|
|
Depreciation and amortization
|
|
|
6.2
|
|
|
|
6.1
|
|
|
|
6.6
|
|
|
|
7.6
|
|
|
|
10.5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total costs and expenses
|
|
|
64.2
|
|
|
|
63.6
|
|
|
|
65.9
|
|
|
|
74.7
|
|
|
|
71.9
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from operations
|
|
|
35.8
|
|
|
|
36.4
|
|
|
|
34.1
|
|
|
|
25.3
|
|
|
|
28.1
|
|
Other income (expense):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest income
|
|
|
|
|
|
|
0.2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other income
|
|
|
1.6
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense
|
|
|
(11.2
|
)
|
|
|
(8.7
|
)
|
|
|
(7.8
|
)
|
|
|
(11.6
|
)
|
|
|
(15.9
|
)
|
Debt extinguishment expense
|
|
|
|
|
|
|
(2.4
|
)
|
|
|
(3.5
|
)
|
|
|
|
|
|
|
|
|
Foreign currency exchange
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before provision for income taxes
|
|
|
26.2
|
|
|
|
25.5
|
|
|
|
22.8
|
|
|
|
13.7
|
|
|
|
12.2
|
|
Provision for income taxes
|
|
|
9.8
|
|
|
|
9.9
|
|
|
|
8.9
|
|
|
|
6.7
|
|
|
|
4.8
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
|
16.4
|
%
|
|
|
15.6
|
%
|
|
|
13.9
|
%
|
|
|
7.0
|
%
|
|
|
7.4
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Twelve
Months Ended December 31, 2009 Compared to Twelve Months
Ended December 31, 2008
Total revenues in 2009 decreased $40.9 million, or 9.9%, to
$374.5 million from $415.4 million in 2008. Leasing,
our primary revenue focus, accounted for approximately 89.1% of
total revenues during 2009. Leasing revenues in 2009 decreased
$38.0 million, or 10.2%, to $333.5 million from
$371.5 million in 2008. This decrease in leasing revenues
resulted from a 3.5% decrease in the average number of units on
lease, and a 7.0% decrease in yield. Yield was primarily driven
by lower ancillary revenues and the mix of the type of units on
lease, while the average rental rate per unit remained virtually
unchanged. In 2009, decline in both leasing and sales revenues
was primarily the result of a reduction in business activity
level due to a continued decline in non-residential construction
activity and the economic recession. Our leasing revenues
declined in the last two quarters of 2009 from the 2008 levels.
Leasing revenues increased in the first two quarters of 2009
because the comparable quarters in 2008 excluded the MSG merger.
Our leasing revenue growth, or decline, rate in 2009 over the
same period in the prior year was 27.8%, 15.9%, (31.2)% and
(29.1)% for the first, second, third and fourth quarters,
respectively. Our revenues from the sale of units decreased
$2.7 million, or 6.5%, to $38.6 million in 2009 from
$41.3 million in 2008. Other revenues are primarily related
to transportation charges for the delivery of units sold and the
sale of ancillary products and represented 0.6% of total
revenues in both 2009 and 2008.
Cost of sales relate to our sales revenue and as a percentage of
sales revenue decreased slightly to 66.8% in 2009 from 68.0% in
2008, thus the gross profit margin on sales improved 1.2% in
2009 over 2008 levels.
31
Leasing, selling and general expenses decreased
$19.4 million, or 9.2% to $192.9 million in 2009 from
$212.3 million in 2008. Leasing, selling and general
expenses, as a percentage of total revenues, were 51.5% and
51.1% in 2009 and 2008, respectively. This slight increase as a
percentage of revenues is due to a decline in leasing revenues,
which were partially offset by the cost savings achieved in
2009. The $19.4 million decrease in 2009 is the result of
cost synergies achieved in the MSG acquisition in addition to
our cost cutting measures on the reduced revenue levels. These
cost cutting measures primarily involved reductions in our
workforce and migrating a number of our branches to operational
yards. These operational yards do not have all the personnel and
overhead expenses associated with a fully staffed branch. The
major decreases in leasing, selling and general expenses for
2009 were: (1) delivery and freight costs, including fuel,
which decreased $9.5 million, and were related to the pick
up and delivery of containers by our drivers or third-party
vendors, which were used for the delivery of our units, mainly
wood modular offices; (2) payroll and related payroll
costs, which decreased by $8.6 million primarily in
connection with reductions in our workforce; and
(3) repairs and maintenance expenses, which decreased
$7.2 million, and which includes the costs of repairing and
maintaining our lease fleet as well as our delivery equipment,
primarily our trucks, trailers and forklifts. Fixed costs for
building and land leases for our locations, including real
property taxes, increased $4.2 million, due to the
assumption of leases utilized by the locations added in the
Merger and contractual rate increases at many of these locations.
Integration, merger and restructuring expenses for 2009 were
$11.3 million as compared to $24.4 million in 2008. In
2009, these costs primarily represent costs related to
reductions to our work force and the repositioning of fleet to
their intended location. In 2008, these costs primarily
represented estimated costs for exiting targeted Mobile Mini
branch operations that overlapped with Mobile Storage
Groups properties, repositioning and relocating assets to
their intended location and other costs associated with
personnel and office expenses associated with the integration of
the companies. Also included in the 2008 expense was our
estimated cost for restructuring our manufacturing operations
including severance, related benefit costs and asset impairment
charges for the disposal of manufacturing equipment and
inventories that were not used in the restructured environment.
Goodwill impairment in 2008 represented a non-cash charge for a
portion of our goodwill related to our U.K. and The Netherlands
operations. There were no goodwill impairment charges recorded
in 2009. See Notes to Consolidated Financial Statements included
in Item 8 in this report for a more detailed discussion.
EBITDA increased $7.4 million, or 5.5%, to
$144.4 million, as compared to $137.0 million for the
same period in 2008 and EBITDA margins were 38.6% and 33.0% of
total revenues for 2009 and 2008, respectively. Adjusted EBITDA
was $156.6 million in 2009 as compared to
$175.0 million in 2008 and adjusted EBITDA margins were
41.8% and 42.1% of total revenues for 2009 and 2008,
respectively.
Depreciation and amortization expenses increased
$7.3 million, or 23.0%, to $39.1 million in 2009 from
$31.8 million in 2008. The higher depreciation expense is
primarily due to the depreciation of units acquired through
prior years acquisitions. It also includes wood modular
offices which have a higher depreciation rate than our steel
units. Depreciation expense also includes the related
depreciation on the additions to property, plant and equipment,
primarily trucks, forklifts and trailers, to support the lease
fleet, and the customized ERP, CRM and other software systems to
enhance our reporting environment. Depreciation and amortization
expense also includes the amortization of customer relationships
and trade name valuation that were associated with the MSG
Merger. Since December 31, 2008, our lease fleet cost basis
for depreciation increased only by $1.1 million. See
Critical Accounting Policies, Estimates and
Judgments within this Item 7.
Interest expense increased $11.4 million, or 23.6%, to
$59.5 million in 2009 from $48.1 million in 2008. This
increase is primarily due to the $540.9 million of debt we
assumed in the Merger. Although at the time of the Merger, we
assumed Mobile Storages $200.0 million of
9.75% senior notes and our interest rate spread under our
revolving credit facility increased from LIBOR + 1.25% to LIBOR
+ 2.50%, our average borrowing rate declined slightly in 2009,
due to lower prevailing LIBOR rates. The monthly weighted
average interest rate on our debt was 6.2% for 2009 compared to
6.8% for 2008, excluding amortizations of debt issuance and
other costs. Taking into account the amortization of debt
issuance and other costs, the monthly weighted average interest
rate was 6.8% in 2009 and 7.2% in 2008.
Provision for income taxes was based on an annual effective tax
rate of 39.4% for 2009 as compared to an annual effective tax
rate of 49.1% for 2008. Our 2008 effective tax rate was
negatively affected by the goodwill
32
impairment charge of $13.7 million related to our European
operations which was not tax deductible. Our 2009 consolidated
tax provision includes the expected tax rates for our operations
in the U.S., Canada, U.K. and The Netherlands. At
December 31, 2009, we had a federal net operating loss
carryforward of approximately $216.8 million, which expires
if unused from 2017 to 2029. In addition, we had net operating
loss carryforwards in the various states in which we operate. We
believe, based on internal projections, that we will generate
sufficient taxable income needed to realize the corresponding
federal and state deferred tax assets to the extent they are
recorded as deferred tax assets in our balance sheet.
Net income in 2009 was $27.8 million, as compared to
$29.0 million in 2008. Our 2009 net income results
were primarily achieved by maintaining our operating margins.
The 2009 year was negatively affected by the
$11.3 million ($7.0 million after tax), charge related
to the integration, merger and restructuring expense. The
2008 year was negatively affected by the $24.4 million
($15.3 million after tax), charge related to the
integration, merger and restructuring expense in addition to
$13.7 million after tax charge for goodwill impairment.
Twelve
Months Ended December 31, 2008 Compared to Twelve Months
Ended December 31, 2007
Total revenues in 2008 increased $97.1 million, or 30.5%,
to $415.4 million from $318.3 million in 2007.
Leasing, our primary revenue focus, accounted for approximately
89.5% of total revenues during 2008. Leasing revenues in 2008
increased $86.9 million, or 30.5%, to $371.5 million
from $284.6 million in 2007. This increase in revenues
resulted from a 32.0% increase in the average number of units on
lease as a result of the Merger in June 2008, offset by a 1.5%
decrease due to unfavorable foreign currency exchange rates and
virtually no change in average rental yield per unit (price). In
2008, our leasing revenue growth rate was 30.5% as compared to
16.1% in 2007. The increased growth rate in 2008 was due to the
Merger, but was offset in part by a reduction in business
activity due to a decline in non-residential construction
activity and the economic recession. Our leasing revenue growth
rate in 2008 over the same period in the prior year was 6.0%,
3.5%, 61.3%, and 47.3% for the first, second, third and fourth
quarters, respectively. Our leasing revenues would have declined
in the third and fourth quarters of 2008 without the MSG Merger.
As a result of the Merger, we added 29 new branches in 2008 (18
branches in the U.S. and 11 in the U.K.). We also completed
four smaller acquisitions in 2008, three where we combined
acquired businesses in cities in which we already had existing
operations and one in Hartford, Connecticut. Our sales of units
accounted for 9.9% of total revenues in both 2008 and 2007. Our
revenues from the sale of units increased $9.7 million, or
30.4%, to $41.3 million in 2008 from $31.6 million in
2007. This increase is related to the higher level of sales
activity at our newer locations both in the U.S. and in the
U.K. added as a result of the MSG Merger. Other revenues are
primarily related to transportation charges for the delivery of
units sold and the sale of ancillary products and represented
approximately 0.6% of total revenues in 2008 and 0.7% in 2007.
Cost of sales relate to our sales revenue and as a percentage of
sales revenue decreased slightly to 68.0% in 2008 from 68.4% in
2007.
Leasing, selling and general expenses increased
$45.3 million, or 27.2%, to $212.3 million in 2008
from $167.0 million in 2007. Leasing, selling and general
expenses, as a percentage of total revenues, were 51.1% and
52.5% in 2008 and 2007, respectively. This decrease as a
percentage of revenues is due to the operating leverage
associated with our leasing activities and in part, due to cost
saving synergies related to the Merger that we realized during
the last two quarters of 2008. The increase in 2008 of
$45.3 million is primarily the result of the Merger, as the
majority of our leasing, selling and general expenses increase
occurred during the third and fourth quarters. The major
increases in leasing, selling and general expenses for 2008
were: (1) payroll and related payroll costs, which
increased by $22.0 million primarily in connection with the
additional locations such as staffing for branch managers, sales
and office personnel and yard personnel, including drivers, fork
lift operators and dispatchers; (2) delivery and freight
costs, which increased $10.0 million related to the
increased delivery and
pick-up of
our rental fleet as well as the trucks we added at our newly
acquired locations; and (3) building and land lease costs
for our locations, which increased $2.5 million, including
the assumption of leases utilized by the locations added in the
Merger and contractual rate increases at our existing locations.
The increased delivery and freight costs includes higher fuel
costs, primarily during the first three quarters of 2008, and an
increase in third-party vendors which we used for the delivery
of our units, mainly wood modular offices. Part of the increased
costs was passed on to our customers in the form of higher
trucking rates.
33
Integration, merger and restructuring expenses in 2008 represent
the costs for exiting Mobile Mini branch operations that
overlapped with MSGs properties, repositioning and
relocating assets to their intended location, and other
integration costs associated with personnel and office expenses.
Also included in this expense is our cost for restructuring our
manufacturing operations and includes severance, related benefit
costs and asset impairment charges for the disposal of
manufacturing equipment and inventories that are not being used
in the restructured environment.
Goodwill impairment in 2008 represents a non-cash charge for a
portion of our goodwill related to our U.K. and The Netherlands
operations as more fully described in the Notes to Consolidated
Financial Statements included in Item 8 in this report.
EBITDA increased $7.1 million, or 5.5%, to
$137.0 million in 2008 from $129.9 million in 2007.
EBITDA in 2008 includes integration, merger and restructuring
expenses of $24.4 million and a charge for goodwill
impairment of $13.7 million, both as described above.
Depreciation and amortization expenses increased
$10.6 million, or 50.2%, to $31.8 million in 2008 from
$21.1 million in 2007. The higher depreciation expense is
primarily due to the increase in our lease fleet over the prior
year including the depreciation of units acquired through
acquisitions. It also includes the lease fleet of additional
wood modular offices, which have a higher depreciation rate than
our steel units. Depreciation expense also includes the related
depreciation on the additions to property, plant and equipment,
primarily trucks, forklifts and trailers, to support the lease
fleet, and the customized ERP system to enhance our reporting
environment. In 2008, depreciation and amortization expense
includes the amortization of customer relationships and trade
name valuation that were associated with the MSG Merger. Since
December 31, 2007, our lease fleet cost basis for
depreciation increased by $292.2 million. See
Critical Accounting Policies, Estimates and
Judgments within this Item 7.
Interest expense increased $23.2 million, or 93.3%, to
$48.1 million in 2008 from $24.9 million in 2007. This
increase is primarily due to the $540.9 million of debt we
assumed in the Merger. Although we assumed Mobile Storages
$200.0 million of 9.75% senior notes and the interest
rate spread under our revolving credit facility increased from
LIBOR + 1.25% to LIBOR + 2.50%, our average borrowing rate
declined slightly in 2008, due to lower prevailing LIBOR rates.
The monthly weighted average interest rate on our debt was 6.8%
for 2008 compared to 7.0% for 2007, excluding amortization of
debt issuance costs. Taking into account the amortization of
debt issuance costs, the monthly weighted average interest rate
was 7.2% in 2008 and 7.3% in 2007.
Debt extinguishment expense for 2007 resulted from the write-off
of the remaining unamortized deferred loan costs and the
redemption premium on $97.5 million aggregate principal
amount of outstanding 9.5% Senior Notes redeemed in the
second quarter of 2007.
Provision for income taxes was based on an annual effective tax
rate of 49.1% for 2008 as compared to an annual effective tax
rate of 39.1% for 2007. Our 2008 consolidated tax provision
includes the expected tax rates for our operations in the U.S.,
Canada, the U.K. and The Netherlands. Our 2008 effective tax
rate was negatively affected by the goodwill impairment charge
of $13.7 million related to our European operations, which was
not tax deductible. At December 31, 2008, we had a federal
net operating loss carryforward of approximately
$206.1 million, which expires if unused from 2017 to 2028.
In addition, we had net operating loss carryforwards in the
various states in which we operate. We believe, based on
internal projections, that we will generate sufficient taxable
income needed to realize the corresponding federal and state
deferred tax assets to the extent they are recorded as deferred
tax assets in our balance sheet.
Net income in 2008 was $29.0 million, as compared to
$44.2 million in 2007. Our 2008 net income results
were primarily achieved by our 30.5% increase in revenues and
the operating leverage associated with this growth and synergies
achieved in the last six months of 2008 as a result of the
Merger. The 2008 year was negatively affected by the
$24.4 million ($15.3 million after tax), charge
related to the integration, merger and restructuring expense in
addition to $13.7 million after tax charge for goodwill
impairment. In 2007, net income was unfavorably affected by the
$11.2 million, ($6.9 million after tax) charge for
debt extinguishment expense related to the redemption of our
then outstanding 9.5% Senior Notes.
34
Liquidity
and Capital Resources
Liquidity
Summary
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 our cash flow from operations and the
deferral of income taxes caused by accelerated depreciation of
our fixed assets in our tax return filings. In 2008, we were
cash flow positive (after capital expenditures but excluding the
Merger) for the first time in our operating history. This
positive cash flow continued in 2009.
During the past three years, our capital expenditures and
acquisitions have been funded by our operating cash flow, our
Senior Notes offering 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 2009, we significantly reduced our
capital expenditures and were able to fund capital expenditures
for our lease fleet and fixed assets with cash flow from
operations. We expect this trend to continue in 2010. 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
increase our borrowing limit and to include the combined assets
of both Mobile Mini and Mobile Storage Group as security for 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 December 31,
2009, we had approximately $473.7 million of borrowings
outstanding and $342.7 million of additional borrowing
availability under the Credit Agreement, based upon borrowing
base calculations as of such date. We were in compliance with
the terms of the Credit Agreement as of December 31, 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 our option, at either
(i) LIBOR plus a defined margin, or (ii) the Agent
banks prime rate plus a margin. 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.
Based on our debt ratio at December 31, 2009, our applicable
interest rate margins for LIBOR loans will be LIBOR plus 2.75%
and prime plus 1.25% for base rate loans until the next
measurement date which is the end of each fiscal quarter and
becomes effective the month following managements
communication to their lenders.
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, 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 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. As of
December 31, 2009, we had $342.7 million of excess
availability under the Credit Agreement.
35
The Credit Agreement does contain certain financial maintenance
covenants, but these maintenance covenants are not applicable
unless we have less than $100.0 million in borrowing
availability under the facility. The Credit Agreement also
contains customary negative covenants applicable to us and our
subsidiaries, including covenants that restrict their ability
to, among other things, (i) make capital expenditures in
excess of defined limits, (ii) allow certain liens to
attach to us or our subsidiary assets, (iii) repurchase or
pay dividends or make certain other restricted payments on
capital stock and certain other securities, or prepay certain
indebtedness, (iv) incur additional indebtedness or engage
in certain other types of financing transactions, and
(v) make acquisitions or other investments.
We believe our cash provided by operating activities will
provide for our normal capital needs for the next
12 months. If not, we have sufficient borrowings available
under our revolving credit facility to meet any additional
funding requirements. We monitor the financial strength of our
lenders on an on-going basis using publicly-available
information. Based upon that information, we do not presently
think that there is a likelihood that any of our lenders might
not be able to honor its commitments under the Credit Agreement.
Operating Activities. Our operations provided
net cash flow of $86.8 million in 2009 as compared to
$98.5 million in 2008 and $91.3 million in 2007. The
$11.7 million decrease in 2009 over 2008 in cash provided
by operating activities resulted from a decrease in net income,
after giving effect to non-cash items, partially offset by a
decrease in working capital. In 2009, there were decreases in
receivables, inventories and deposits and prepaid expenses which
were partially offset by decreases in accounts payable and
accrued liabilities. The decreases are primarily due to the
weakened economy, our restructured manufacturing operations and
reduction of certain liabilities associated with the Merger. In
2008, there were decreases in both inventories and deposits and
prepaid expenses providing positive cash flows, which were
offset by decreases in accounts payable and accrued liabilities.
These decreases were primarily a result of the Merger and the
decrease in purchases of inventories due to the restructuring of
our manufacturing operations in late 2008. In 2007, cash
provided by operating activities was negatively affected by debt
restructuring expense, which included a $8.9 million
premium paid in connection with redeeming $97.5 million of
our 9.5% Senior Notes, negatively impacted by increases in
accounts receivable which was due to the general growth in our
leasing activities by an increase in our sales activity related
to our newly acquired European operations, and by an increase in
deposits and prepaid expenses. Cash provided by operating
activities is enhanced by the deferral of most income taxes due
to the rapid tax depreciation rate of our assets and our federal
and state net operating loss carryforwards. At December 31,
2009, we had a federal net operating loss carryforward of
approximately $216.8 million and a net deferred tax
liability of $155.7 million.
Investing Activities. Net cash provided by
investing activities was $3.0 million in 2009, compared to
net cash used of $97.9 million in 2008 and
$138.7 million in 2007. In 2009, we did not acquire any
businesses, compared to cash payments for acquisitions of
$33.3 million in 2008 and $9.7 million in 2007.
Capital expenditures for our lease fleet, net of proceeds from
sale of lease fleet units, provided net cash of
$12.0 million in 2009 compared to a use of cash of
$48.3 million in 2008 and $110.6 million in 2007.
Capital expenditures for our lease fleet were $21.5 million
and proceeds from sale of lease fleet units were
$33.5 million for 2009, compared to net expenditures of
$48.3 million in 2008. Our capital expenditures for our
lease fleet decreased 71.9% in 2009 compared to 2008 as we
acquired fewer units due to the economic slowdown. Proceeds from
sale of lease fleet units increased 18.2% as compared to 2008.
Additions to the lease fleet primarily included remanufacturing
of prior acquisition units and manufactured or purchased steel
and wood offices. During the past several years we have
increased the customization of our fleet, enabling us to
differentiate our product from our competitors product,
and we have complimented our lease fleet by adding wood mobile
offices. 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 prior 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 any sale of
property, plant and equipment, were $9.0 million in 2009,
$16.4 million in 2008 and $18.4 million in 2007.
Expenditures for property, plant and equipment in 2009 were
primarily for technology and communication improvements for our
telephone, GPS handheld devices and computer systems, delivery
equipment 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
36
required to purchase a fixed or minimum amount of goods or
services in connection with any portion of our business.
Maintenance capital expenditures is the cost to replace old
forklifts, trucks and trailers that we use to move and deliver
our products to our customers, and for enhancements to our
computer information and communication systems. Our maintenance
capital expenditures were approximately $0.1 million in
2009, $3.0 million in 2008 and $0.8 million in 2007.
Financing Activities. Net cash used in
financing activities was $83.0 million in 2009 as compared
to $6.7 million in 2008 and net cash provided by financing
activities of $48.4 million in 2007. In 2009, we reduced
our net borrowings under our revolving credit facility by
$80.9 million and other net debt obligations of
$1.7 million in addition to redeeming $1.1 million
principal amount of 9.75% Senior Notes. In 2008, we
increased our borrowings under our revolving credit facility by
$316.7 million, which we used primarily to fund the Merger,
as well as other related expenses and costs associated with the
credit agreement. In connection with the Merger we also assumed
debt obligations, some requiring monthly installment payments.
In 2007, we redeemed $97.5 million principal amount of
outstanding 9.5% Senior Notes and completed an offering of
$150.0 million principal amount 6.875% Senior Notes.
Also in 2007, under a common stock repurchase program, we
redeemed $39.3 million of our outstanding shares.
Additionally, we received $0.3 million, $1.1 million
and $5.6 million from the exercises of employee stock
options and the related tax benefits in 2009, 2008 and 2007,
respectively. As of December 31, 2009, we had
$473.7 million of borrowings outstanding under our
revolving credit facility, and approximately $342.7 million
of additional borrowings were available to us under the facility.
Hedging Activities. At December 31, 2009,
we had eight interest rate swap agreements in place to fix
interest rates paid on a total of $200.0 million of our
outstanding debt. We entered into interest rate swap agreements
that effectively fixed the interest rate so that the rate is
payable based upon a spread from fixed rates, rather than a
spread from the LIBOR rate. At December 31, 2009,
$550.6 million of our outstanding indebtedness bears
interest at fixed rates (or the rate is effectively fixed due to
a swap agreement), and approximately $273.7 million of
borrowings under our credit facility are variable rate.
Contractual
Obligations and Commitments
Our contractual obligations primarily consist of our outstanding
balance under our revolving credit facility and
$348.9 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
16 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 December 31, 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 entered into
capitalized lease obligations from time to time and as a result
of the Merger, have commitments for $4.1 million in
remaining capital lease obligations.
37
The table below provides a summary of our contractual
commitments as of December 31, 2009. The operating lease
amounts include certain real estate leases that expire in 2010,
but have lease renewal options that we currently anticipate to
exercise in 2010 at the end of the initial lease period.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Payments Due by Period
|
|
|
|
|
|
|
Less Than
|
|
|
|
|
|
|
|
|
More Than
|
|
|
|
Total
|
|
|
1 Year
|
|
|
1-3 Years
|
|
|
3-5 Years
|
|
|
5 Years
|
|
|
|
(In thousands)
|
|
|
Revolving credit facility
|
|
$
|
473,655
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
473,655
|
|
|
$
|
|
|
Scheduled interest payment obligations under our revolving
credit facility(1)
|
|
|
31,174
|
|
|
|
13,277
|
|
|
|
17,897
|
|
|
|
|
|
|
|
|
|
Senior Notes
|
|
|
348,850
|
|
|
|
|
|
|
|
|
|
|
|
198,850
|
|
|
|
150,000
|
|
Scheduled interest payment obligations under our Senior Notes(2)
|
|
|
153,656
|
|
|
|
29,700
|
|
|
|
59,400
|
|
|
|
59,400
|
|
|
|
5,156
|
|
Other long-term debt (insurance financing)
|
|
|
955
|
|
|
|
955
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Scheduled interest payment obligations under our long-term
debt(2)
|
|
|
12
|
|
|
|
12
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Notes payable
|
|
|
173
|
|
|
|
163
|
|
|
|
10
|
|
|
|
|
|
|
|
|
|
Scheduled interest payment obligations under our notes payable(2)
|
|
|
1
|
|
|
|
1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Obligations under capital leases
|
|
|
4,061
|
|
|
|
1,484
|
|
|
|
2,135
|
|
|
|
442
|
|
|
|
|
|
Scheduled interest payment obligations under our capital
leases(3)
|
|
|
492
|
|
|
|
254
|
|
|
|
209
|
|
|
|
29
|
|
|
|
|
|
Operating leases(4)
|
|
|
73,898
|
|
|
|
17,658
|
|
|
|
25,693
|
|
|
|
17,198
|
|
|
|
13,349
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total contractual obligations
|
|
$
|
1,086,927
|
|
|
$
|
63,504
|
|
|
$
|
105,344
|
|
|
$
|
749,574
|
|
|
$
|
168,505
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Scheduled interest rate obligations under our revolving credit
facility were calculated using our weighted average rate of 2.8%
at December 31, 2009. Our revolving credit facility is
subject to a variable rate of interest. The weighted average
interest rate is inclusive of our fixed rate swap agreements. |
|
(2) |
|
Scheduled interest rate obligations under our Senior Notes and
other long-term debt were calculated using stated rates. |
|
(3) |
|
Scheduled interest rate obligations under capital leases were
calculated using imputed rates ranging from 5.7% to 8.5%. |
|
(4) |
|
Operating lease obligations include operating commitments and
restructuring related commitments and are net of
sub-lease
income. For further discussion see Note 12 to our
Consolidated Financial Statements. |
Off-Balance
Sheet Transactions
Mobile Mini does 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 Mobile
Minis 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
38
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 seasonality 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 reduced the percentage of our
units we reserve for this seasonal business from the levels we
allocated in earlier years, decreasing our seasonality.
Critical
Accounting Policies, Estimates and Judgments
Our significant accounting policies are disclosed in Note 1
to our consolidated financial statements. 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 SEC 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. 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. We account for
share-based compensation using the
modified-prospective-transition method and 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. In the past we have issued stock
options and restricted stock, which we also refer to as
nonvested shares. 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. In
2009 the share-based compensation expense was reduced by
$1.4 million to reflect anticipated shortfalls related to
share-awards with vesting subject to a performance conditions.
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
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 $0.9 million of total unrecognized
compensation costs related to stock options at December 31,
2009 that are expected to be recognized over a weighted-average
period of 0.8 years and $20.0 million of total
unrecognized compensation costs related to nonvested
share-awards at December 31, 2009 that are expected to be
recognized over a weighted-average period of 3.5 years. See
Note 10 to the Consolidated Financial Statements for a
further discussion on share-based compensation.
39
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 at December 31, as follows:
|
|
|
|
|
|
|
|
|
|
|
Years Ended
|
|
|
December 31,
|
|
|
2008
|
|
2009
|
|
|
(In thousands except per share data)
|
|
As reported:
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
29,041
|
|
|
$
|
27,798
|
|
Diluted earnings per share
|
|
$
|
0.75
|
|
|
$
|
0.64
|
|
As adjusted for hypothetical change in reserve estimates:
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
28,245
|
|
|
$
|
27,390
|
|
Diluted earnings per share
|
|
$
|
0.73
|
|
|
$
|
0.63
|
|
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.
|
We operate in one reportable segment, which is comprised of
three operating segments that also represent our reporting units
(North America, the 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 a two-step process. 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 December 31, 2009, 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, tax payments and discount rates. Each
approach was given equal weight in arriving at the fair value of
the reporting unit. As of December 31, 2008, 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. As of December 31,
2009, neither of the reporting units with goodwill had estimated
fair values less than their individual net asset carrying
values, therefore step two was not required at December 31,
2009.
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
40
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. We reconciled the fair values of our three
reporting units in the aggregate to our market capitalization at
December 31, 2009.
The performance of our 2009 annual impairment analyses resulted
in no impairment charges to the North America or U.K. reporting
units, where all of our goodwill is recorded. The fair value of
the North America and U.K. reporting units exceeded the carrying
value at December 31, 2009 by 13% and 26%, respectively. At
December 31, 2009, $447.2 million of our goodwill
relates to the North America reporting unit and
$66.0 million relates to the U.K. reporting unit.
The discount rates utilized in the 2009 analyses ranged from 13%
to 14% while the terminal growth rates used in the discounted
cash flow analysis were approximately 2%.
Impairment of 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.
41
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 on our steel units would
have the following approximate effect on our net income and
diluted earnings per share as reflected in the table below.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Useful
|
|
|
|
|
|
|
|
|
|
Residual
|
|
|
Life in
|
|
|
|
|
|
|
|
|
|
Value
|
|
|
Years
|
|
|
2008
|
|
|
2009
|
|
|
|
(In thousands except per share data)
|
|
|
As Reported(1):
|
|
|
55
|
%
|
|
|
30
|
|
|
|
|
|
|
|
|
|
Net income
|
|
|
|
|
|
|
|
|
|
$
|
n/a
|
|
|
$
|
27,798
|
|
Diluted earnings per share
|
|
|
|
|
|
|
|
|
|
$
|
n/a
|
|
|
$
|
0.64
|
|
As adjusted for change in estimates:
|
|
|
70
|
%
|
|
|
20
|
|
|
|
|
|
|
|
|
|
Net income
|
|
|
|
|
|
|
|
|
|
$
|
29,041
|
|
|
$
|
27,798
|
|
Diluted earnings per share
|
|
|
|
|
|
|
|
|
|
$
|
0.75
|
|
|
$
|
0.64
|
|
As adjusted for change in estimates(2):
|
|
|
62.5
|
%
|
|
|
25
|
|
|
|
|
|
|
|
|
|
Net income
|
|
|
|
|
|
|
|
|
|
$
|
29,041
|
|
|
$
|
27,798
|
|
Diluted earnings per share
|
|
|
|
|
|
|
|
|
|
$
|
0.75
|
|
|
$
|
0.64
|
|
As adjusted for change in estimates:
|
|
|
50
|
%
|
|
|
20
|
|
|
|
|
|
|
|
|
|
Net income
|
|
|
|
|
|
|
|
|
|
$
|
25,038
|
|
|
$
|
22,190
|
|
Diluted earnings per share
|
|
|
|
|
|
|
|
|
|
$
|
0.64
|
|
|
$
|
0.51
|
|
As adjusted for change in estimates:
|
|
|
40
|
%
|
|
|
40
|
|
|
|
|
|
|
|
|
|
Net income
|
|
|
|
|
|
|
|
|
|
$
|
29,041
|
|
|
$
|
27,798
|
|
Diluted earnings per share
|
|
|
|
|
|
|
|
|
|
$
|
0.75
|
|
|
$
|
0.64
|
|
As adjusted for change in estimates:
|
|
|
30
|
%
|
|
|
25
|
|
|
|
|
|
|
|
|
|
Net income
|
|
|
|
|
|
|
|
|
|
$
|
23,837
|
|
|
$
|
20,508
|
|
Diluted earnings per share
|
|
|
|
|
|
|
|
|
|
$
|
0.61
|
|
|
$
|
0.47
|
|
As adjusted for change in estimates:
|
|
|
25
|
%
|
|
|
25
|
|
|
|
|
|
|
|
|
|
Net income
|
|
|
|
|
|
|
|
|
|
$
|
23,037
|
|
|
$
|
19,386
|
|
Diluted earnings per share
|
|
|
|
|
|
|
|
|
|
$
|
0.59
|
|
|
$
|
0.45
|
|
|
|
|
(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
$500,000 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.
42
Contingencies. We are a party to various
claims and litigation in the normal course of business.
Managements current estimated range of liability related
to various claims and pending litigation is based on claims for
which our management can determine that it is probable that a
liability has been incurred and the amount of loss can be
reasonably estimated. Because of the uncertainties related to
both the probability of incurred and possible range of loss on
pending claims and litigation, management must use considerable
judgment in making reasonable determination of the liability
that could result from an unfavorable outcome. As additional
information becomes available, we will assess the potential
liability related to our pending litigation and revise our
estimates. Such revisions in our estimates of the potential
liability could materially impact our results of operation. We
do not anticipate the resolution of such matters known at this
time will have a material adverse effect on our business or
consolidated financial position.
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.
At December 31, 2009, we have a $1.1 million valuation
allowance and have $109.1 million of deferred tax assets
included within the net deferred tax liability on our balance
sheet. The majority of the deferred tax asset relates to federal
net operating loss carryforwards that have future expiration
dates. Management currently believes that adequate future
taxable income will be generated through future operations and,
or through available tax planning strategies to recover these
assets. However, given that these federal net operating loss
carryforwards that give rise to the deferred tax asset expire
over 12 years beginning in 2017, there could be changes in
managements judgment in future periods with respect to the
recoverability of these assets. As of December 31, 2009,
management believes that it is more likely than not that the
unreserved portion of these deferred tax assets will be
recovered.
Recent
Accounting Pronouncements
Accounting Standards Codification. Effective
July 1, 2009, the Financial Accounting Standards
Boards (FASB) Accounting Standards Codification (ASC)
became the single official source of authoritative,
nongovernmental generally accepted accounting principles (GAAP)
in the United States. The historical GAAP hierarchy was
eliminated and the ASC became the only level of authoritative
GAAP, other than guidance issued by the SEC. The codification
was effective for interim and annual reporting periods ending
after September 15, 2009, except for certain nonpublic
nongovernmental entities. Our accounting policies were not
affected by the conversion to ASC.
Fair Value Measurements. In September 2006,
the FASB issued guidance which defines fair value, establishes a
framework for measuring fair value and expands disclosures about
fair value measurements. In February 2008, the FASB issued
additional guidance which deferred the effective date for the
Company to January 1, 2009 for all nonfinancial assets and
liabilities, except for those that are recognized or disclosed
at fair value on a recurring basis (that is, at least annually).
We adopted the deferred provisions of this guidance on
January 1, 2009. The adoption of these provisions did not
have a material effect on our consolidated financial statements.
Business Combinations. On January 1,
2009, we adopted new accounting guidance for business
combinations as issued by the FASB. The new accounting guidance
establishes principles and requirements for how an
43
acquirer in a business combination recognizes and measures in
its financial statements the identifiable assets acquired,
liabilities assumed, and any noncontrolling interests in the
acquiree, as well as the goodwill acquired. Significant changes
from previous guidance resulting from this new guidance include
the expansion of the definitions of a business and a
business combination. For all business combinations
(whether partial, full or step acquisitions), the acquirer will
record 100% of all assets and liabilities of the acquired
business, including goodwill, generally at their fair values;
contingent consideration will be recognized at its fair value on
the acquisition date and; for certain arrangements, changes in
fair value will be recognized in earnings until settlement; and
acquisition-related transaction and restructuring costs will be
expensed rather than treated as part of the cost of the
acquisition. The new accounting guidance also establishes
disclosure requirements to enable users to evaluate the nature
and financial effects of the business combination. Because the
majority of the provisions of the new accounting guidance are
applicable to future transactions, the adoption of this guidance
did not have a material impact on our consolidated financial
statements.
On January 1, 2009, we adopted new accounting guidance for
assets acquired and liabilities assumed in a business
combination as issued by the FASB. The new guidance amends the
provisions previously issued by the FASB related to the initial
recognition and measurement, subsequent measurement and
accounting and disclosures for assets and liabilities arising
from contingencies in business combinations. The new guidance
eliminates the distinction between contractual and
non-contractual contingencies, including the initial recognition
and measurement. The adoption of this accounting guidance did
not have a material impact on our consolidated financial
statements.
Determining the Useful Life of Intangible
Assets. On January 1, 2009, we adopted new
accounting guidance for the determination of the useful life of
intangible assets as issued by the FASB. The new guidance amends
the factors that should be considered in developing the renewal
or extension assumptions used to determine the useful life of a
recognized intangible asset. The new guidance also requires
expanded disclosure regarding the determination of intangible
asset useful lives. Because this accounting guidance is
applicable to future transactions, the adoption of this
accounting guidance did not have an impact on our consolidated
financial statements.
Subsequent Events. On April 1, 2009 we
adopted new accounting guidance related to subsequent events as
issued by the FASB. The new requirement establishes the
accounting for and disclosure of events that occur after the
balance sheet date but before financial statements are issued.
The adoption of these provisions did not have a material effect
on our consolidated financial statements.
Transfers of Financial Assets. In June 2009,
the FASB issued guidance that changes the information a
reporting entity provides in its financial statements about the
transfer of financial assets and continuing interests held in
transferred financial assets. The standard amends previous
accounting guidance by removing the concept of qualified special
purpose entities. This accounting standard is effective for the
Company for transfers occurring on or after January 1,
2010. We do not expect the adoption of this accounting standard
to have a material effect on our consolidated financial
statements and related disclosures.
Fair Value Measurement of Liabilities. In
August 2009, FASB issued guidance providing clarification that
in circumstances in which a quoted price in an active market for
the identical liability is not available, a reporting entity is
required to measure fair value using one or more of the
following techniques:
1. A valuation technique that uses:
a. The quoted price of the identical liability when traded
as an asset.
b. Quoted prices for similar liabilities or similar
liabilities when traded as assets.
2. Another valuation technique that is consistent with the
principles in the FASBs guidance (two examples would be an
income approach or a market approach).
This guidance also clarifies that (i) when estimating fair
value of a liability, a reporting entity is not required to
include a separate input or adjustment to other inputs relating
to the existence of a restriction that prevents the
44
transfer of the liability and (ii) both a quoted price in
an active market for the identical liability at the measurement
date and the quoted price for the identical liability when
traded as an asset in an active market when no adjustments to
the quoted price of the asset are required are Level 1 fair
value measurements. This guidance is effective for the first
reporting period (including interim periods) beginning after
issuance. This accounting guidance did not have a material
impact on our financial statements and disclosures.
Multiple Element Arrangements. In September
2009, the FASB issued new accounting guidance related to the
revenue recognition of multiple element arrangements. The new
guidance states that if vendor specific objective evidence or
third party evidence for deliverables in an arrangement cannot
be determined, companies will be required to develop a best
estimate of the selling price to separate deliverables and
allocate arrangement consideration using the relative selling
price method. This guidance is effective for the Company for
arrangements entered into after January 1, 2010. We
currently do not expect this guidance to have a material impact
on our financial statements and disclosures.
|
|
ITEM 7A.
|
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 December 31, 2009, we had eight interest rate swap
agreements under which we pay a fixed rate and receive a
variable interest rate on a notional amount of $200 million
of debt. In 2009, comprehensive income included
$2.3 million, net of income tax expense of
$1.5 million, related to the fair value of our interest
rate swap agreements. We enter into derivative financial
arrangements only to the extent that the arrangement meets the
objectives described, and we do not engage in such transactions
for speculative purposes.
The following table sets forth the scheduled maturities and the
total fair value of our debt portfolio:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total at
|
|
Total Fair Value
|
|
|
At December 31,
|
|
December 31,
|
|
at December 31,
|
|
|
2010
|
|
2011
|
|
2012
|
|
2013
|
|
2014
|
|
Thereafter
|
|
2009
|
|
2009
|
|
|
(In thousands, except percentages)
|
|
Debt:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fixed rate
|
|
$
|
2,602
|
|
|
$
|
1,298
|
|
|
$
|
847
|
|
|
$
|
289
|
|
|
$
|
199,003
|
|
|
$
|
150,000
|
|
|
$
|
354,039
|
|
|
$
|
353,743
|
|
Average interest rate
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
8.48
|
%
|
|
|
|
|
Floating rate(1)
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
473,655
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
473,655
|
|
|
$
|
473,655
|
|
Average interest rate
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2.80
|
%
|
|
|
|
|
Operating leases:
|
|
$
|
17,658
|
|
|
$
|
14,152
|
|
|
$
|
11,541
|
|
|
$
|
9,751
|
|
|
$
|
7,447
|
|
|
$
|
13,349
|
|
|
$
|
73,898
|
|
|
|
|
|
|
|
|
(1) |
|
Included in our floating rate line of credit facility are
$200 million of fixed-rate swap agreements with a weighted
average interest rate of 4.0275% that mature in 2010 and 2011. |
Impact of Foreign Currency Rate Changes. We
currently have branch operations outside the U.S. 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 U.K.
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-U.S. 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 line of credit which allows us to
also borrow those funds in Pound Sterling denominated debt.
45
|
|
ITEM 8.
|
FINANCIAL
STATEMENTS AND SUPPLEMENTARY DATA.
|
INDEX TO
CONSOLIDATED FINANCIAL STATEMENTS AND SCHEDULE
46
Report of
Independent Registered Public Accounting Firm
The Board of Directors and Stockholders of Mobile Mini, Inc.
We have audited the accompanying consolidated balance sheets of
Mobile Mini, Inc. as of December 31, 2008 and 2009, and the
related consolidated statements of income, preferred stock and
stockholders equity, and cash flows for each of the three
years in the period ended December 31, 2009. Our audits
also included the financial statement schedule listed in the
Index at Item 15(a). These financial statements and
schedule are the responsibility of the Companys
management. Our responsibility is to express an opinion on these
financial statements and schedule based on our audits.
We conducted our audits in accordance with the standards of the
Public Company Accounting Oversight Board (United States). Those
standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in
the financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by
management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above
present fairly, in all material respects, the consolidated
financial position of Mobile Mini, Inc. at December 31,
2008 and 2009, and the consolidated results of its operations
and its cash flows for each of the three years in the period
ended December 31, 2009, in conformity with
U.S. generally accepted accounting principles. Also, in our
opinion, the related financial statement schedule, when
considered in relation to the basic financial statements taken
as a whole, presents fairly in all material respects the
information set forth therein.
We also have audited, in accordance with the standards of the
Public Company Accounting Oversight Board (United States),
Mobile Mini, Inc.s internal control over financial
reporting as of December 31, 2009, based on criteria
established in Internal Control-Integrated Framework issued by
the Committee of Sponsoring Organizations of the Treadway
Commission and our report dated March 1, 2010 expressed an
unqualified opinion thereon.
Phoenix, Arizona
March 1, 2010
47
MOBILE
MINI, INC.
(In
thousands except per share data)
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
|
2008
|
|
|
2009
|
|
|
ASSETS
|
Cash
|
|
$
|
3,184
|
|
|
$
|
1,740
|
|
Receivables, net of allowance for doubtful accounts of $7,193
and $3,715, respectively
|
|
|
61,424
|
|
|
|
40,867
|
|
Inventories
|
|
|
26,577
|
|
|
|
22,147
|
|
Lease fleet, net
|
|
|
1,078,156
|
|
|
|
1,055,328
|
|
Property, plant and equipment, net
|
|
|
88,509
|
|
|
|
84,160
|
|
Deposits and prepaid expenses
|
|
|
13,287
|
|
|
|
9,916
|
|
Other assets and intangibles, net
|
|
|
35,063
|
|
|
|
26,643
|
|
Goodwill
|
|
|
492,657
|
|
|
|
513,238
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
1,798,857
|
|
|
$
|
1,754,039
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS EQUITY
|
Liabilities:
|
|
|
|
|
|
|
|
|
Accounts payable
|
|
$
|
21,433
|
|
|
$
|
14,130
|
|
Accrued liabilities
|
|
|
86,214
|
|
|
|
64,915
|
|
Line of credit
|
|
|
554,532
|
|
|
|
473,655
|
|
Notes payable
|
|
|
1,380
|
|
|
|
1,128
|
|
Obligations under capital leases
|
|
|
5,497
|
|
|
|
4,061
|
|
Senior notes, net of discount of $4,203 and $3,448 at
December 31, 2008 and December 31, 2009, respectively
|
|
|
345,797
|
|
|
|
345,402
|
|
Deferred income taxes
|
|
|
134,786
|
|
|
|
155,697
|
|
|
|
|
|
|
|
|
|
|
Total liabilities
|
|
|
1,149,639
|
|
|
|
1,058,988
|
|
|
|
|
|
|
|
|
|
|
Commitments and contingencies
|
|
|
|
|
|
|
|
|
Convertible preferred stock: $.01 par value,
20,000 shares authorized, 8,556 issued and outstanding at
December 31, 2008 and 8,191 outstanding at
December 31, 2009, stated at its liquidity preference values
|
|
|
153,990
|
|
|
|
147,427
|
|
Stockholders equity:
|
|
|
|
|
|
|
|
|
Common stock: $.01 par value, 95,000 shares authorized
37,489 issued and 35,314 outstanding at December 31, 2008
and 38,451 issued and 36,276 outstanding at December 31,
2009, respectively
|
|
|
375
|
|
|
|
385
|
|
Additional paid-in capital
|
|
|
328,696
|
|
|
|
341,597
|
|
Retained earnings
|
|
|
242,935
|
|
|
|
270,733
|
|
Accumulated other comprehensive loss
|
|
|
(37,478
|
)
|
|
|
(25,791
|
)
|
Treasury stock, at cost, 2,175 shares
|
|
|
(39,300
|
)
|
|
|
(39,300
|
)
|
|
|
|
|
|
|
|
|
|
Total stockholders equity
|
|
|
495,228
|
|
|
|
547,624
|
|
|
|
|
|
|
|
|
|
|
Total liabilities and stockholders equity
|
|
$
|
1,798,857
|
|
|
$
|
1,754,039
|
|
|
|
|
|
|
|
|
|
|
See accompanying notes.
48
MOBILE
MINI, INC.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Years Ended December 31,
|
|
|
|
2007
|
|
|
2008
|
|
|
2009
|
|
|
|
(In thousands except per share data)
|
|
|
Revenues:
|
|
|
|
|
|
|
|
|
|
|
|
|
Leasing
|
|
$
|
284,638
|
|
|
$
|
371,560
|
|
|
$
|
333,521
|
|
Sales
|
|
|
31,644
|
|
|
|
41,267
|
|
|
|
38,605
|
|
Other
|
|
|
2,020
|
|
|
|
2,577
|
|
|
|
2,335
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenues
|
|
|
318,302
|
|
|
|
415,404
|
|
|
|
374,461
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Costs and expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of sales
|
|
|
21,651
|
|
|
|
28,044
|
|
|
|
25,795
|
|
Leasing, selling and general expenses
|
|
|
166,994
|
|
|
|
212,335
|
|
|
|
192,861
|
|
Integration, merger and restructuring expenses
|
|
|
|
|
|
|
24,427
|
|
|
|
11,305
|
|
Goodwill impairment
|
|
|
|
|
|
|
13,667
|
|
|
|
|
|
Depreciation and amortization
|
|
|
21,149
|
|
|
|
31,767
|
|
|
|
39,082
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total costs and expenses
|
|
|
209,794
|
|
|
|
310,240
|
|
|
|
269,043
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from operations
|
|
|
108,508
|
|
|
|
105,164
|
|
|
|
105,418
|
|
Other income (expense):
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest income
|
|
|
101
|
|
|
|
135
|
|
|
|
29
|
|
Interest expense
|
|
|
(24,906
|
)
|
|
|
(48,146
|
)
|
|
|
(59,504
|
)
|
Debt extinguishment expense
|
|
|
(11,224
|
)
|
|
|
|
|
|
|
|
|
Foreign currency exchange gains (loss)
|
|
|
107
|
|
|
|
(112
|
)
|
|
|
(88
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before provision for income taxes
|
|
|
72,586
|
|
|
|
57,041
|
|
|
|
45,855
|
|
Provision for income taxes
|
|
|
28,410
|
|
|
|
28,000
|
|
|
|
18,057
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
|
44,176
|
|
|
|
29,041
|
|
|
|
27,798
|
|
Earnings allocable to preferred stock
|
|
|
|
|
|
|
(2,739
|
)
|
|
|
(5,431
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income available to common stockholders
|
|
$
|
44,176
|
|
|
$
|
26,302
|
|
|
$
|
22,367
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
1.24
|
|
|
$
|
0.77
|
|
|
$
|
0.65
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted
|
|
$
|
1.22
|
|
|
$
|
0.75
|
|
|
$
|
0.64
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average number of common and common share equivalents
outstanding:
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
35,489
|
|
|
|
34,155
|
|
|
|
34,597
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted
|
|
|
36,296
|
|
|
|
38,875
|
|
|
|
43,252
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See accompanying notes.
49
MOBILE
MINI, INC.
For
the years ended December 31, 2007, 2008 and
2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Preferred Stock
|
|
|
Stockholders Equity
|
|
|
|
Series A
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated
|
|
|
|
|
|
|
|
|
|
Convertible
|
|
|
Shares of
|
|
|
|
|
|
Additional
|
|
|
|
|
|
Other
|
|
|
|
|
|
|
|
|
|
Preferred Stock
|
|
|
Common
|
|
|
Common
|
|
|
Paid-In
|
|
|
Retained
|
|
|
Comprehensive
|
|
|
Treasury
|
|
|
Stockholders
|
|
|
|
Shares
|
|
|
Amount
|
|
|
Stock
|
|
|
Stock
|
|
|
Capital
|
|
|
Earnings
|
|
|
Income (Loss)
|
|
|
Stock
|
|
|
Equity
|
|
|
|
(In thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, December 31, 2006
|
|
|
|
|
|
$
|
|
|
|
|
35,898
|
|
|
$
|
359
|
|
|
$
|
268,456
|
|
|
$
|
169,718
|
|
|
$
|
3,471
|
|
|
$
|
|
|
|
$
|
442,004
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
44,176
|
|
|
|
|
|
|
|
|
|
|
|
44,176
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair value change in derivatives, (net of income tax benefit of
$816)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1,293
|
)
|
|
|
|
|
|
|
(1,293
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign currency translation, (net of income tax expense of $724)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,158
|
|
|
|
|
|
|
|
2,158
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
45,041
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercise of stock options
|
|
|
|
|
|
|
|
|
|
|
519
|
|
|
|
5
|
|
|
|
5,602
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5,607
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Tax benefit shortfall on stock option exercises
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(46
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(46
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchase of treasury stock, at cost
|
|
|
|
|
|
|
|
|
|
|
(2,175
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(39,300
|
)
|
|
|
(39,300
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Restricted stock grants
|
|
|
|
|
|
|
|
|
|
|
331
|
|
|
|
3
|
|
|
|
(3
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Share-based compensation
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,584
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,584
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, December 31, 2007
|
|
|
|
|
|
|
|
|
|
|
34,573
|
|
|
|
367
|
|
|
|
278,593
|
|
|
|
213,894
|
|
|
|
4,336
|
|
|
|
(39,300
|
)
|
|
|
457,890
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
29,041
|
|
|
|
|
|
|
|
|
|
|
|
29,041
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair value change in derivatives, (net of income tax benefit of
$3,982)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(6,299
|
)
|
|
|
|
|
|
|
(6,299
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign currency translation, (net of income tax benefit of
$1,351)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(35,515
|
)
|
|
|
|
|
|
|
(35,515
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive loss
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(12,773
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercise of stock options
|
|
|
|
|
|
|
|
|
|
|
134
|
|
|
|
2
|
|
|
|
1,470
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,472
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Tax benefit shortfall on stock option exercises
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(407
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(407
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of Series A Convertible Preferred Stock related to
MSG Merger (net of registration and issuance costs of $85)
|
|
|
8,556
|
|
|
|
153,990
|
|
|
|
|
|
|
|
|
|
|
|
42,525
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
42,525
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Restricted stock grants
|
|
|
|
|
|
|
|
|
|
|
607
|
|
|
|
6
|
|
|
|
(6
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Share-based compensation
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6,521
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6,521
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, December 31, 2008
|
|
|
8,556
|
|
|
|
153,990
|
|
|
|
35,314
|
|
|
|
375
|
|
|
|
328,696
|
|
|
|
242,935
|
|
|
|
(37,478
|
)
|
|
|
(39,300
|
)
|
|
|
495,228
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
27,798
|
|
|
|
|
|
|
|
|
|
|
|
27,798
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair value change in derivatives, (net of income tax expense of
$1,493)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,335
|
|
|
|
|
|
|
|
2,335
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign currency translation, (net of income tax expense of $926)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
9,352
|
|
|
|
|
|
|
|
9,352
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
39,485
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercise of stock options
|
|
|
|
|
|
|
|
|
|
|
77
|
|
|
|
1
|
|
|
|
799
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
800
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Tax benefit shortfall on stock option exercises
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(542
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(542
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Preferred stock converted to common stock
|
|
|
(365
|
)
|
|
|
(6,563
|
)
|
|
|
365
|
|
|
|
4
|
|
|
|
6,559
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6,563
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Restricted stock grants
|
|
|
|
|
|
|
|
|
|
|
520
|
|
|
|
5
|
|
|
|
(5
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Share-based compensation
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6,090
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6,090
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, December 31, 2009
|
|
|
8,191
|
|
|
$
|
147,427
|
|
|
|
36,276
|
|
|
$
|
385
|
|
|
$
|
341,597
|
|
|
$
|
270,733
|
|
|
$
|
(25,791
|
)
|
|
$
|
(39,300
|
)
|
|
$
|
547,624
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See accompanying notes.
50
MOBILE
MINI, INC.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Years Ended December 31,
|
|
|
|
2007
|
|
|
2008
|
|
|
2009
|
|
|
|
(In thousands)
|
|
|
Cash Flows From Operating Activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
44,176
|
|
|
$
|
29,041
|
|
|
$
|
27,798
|
|
Adjustments to reconcile net income to net cash provided by
operating activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Debt extinguishment expense
|
|
|
2,298
|
|
|
|
|
|
|
|
|
|
Provision for doubtful accounts
|
|
|
1,869
|
|
|
|
5,261
|
|
|
|
2,701
|
|
Provision for restructuring charge
|
|
|
|
|
|
|
5,626
|
|
|
|
(19
|
)
|
Goodwill impairment
|
|
|
|
|
|
|
13,667
|
|
|
|
|
|
Amortization of deferred financing costs
|
|
|
929
|
|
|
|
2,455
|
|
|
|
4,456
|
|
Amortization of long term liabilities
|
|
|
56
|
|
|
|
418
|
|
|
|
906
|
|
Share-based compensation expense
|
|
|
4,028
|
|
|
|
5,656
|
|
|
|
5,782
|
|
Depreciation and amortization
|
|
|
21,149
|
|
|
|
31,767
|
|
|
|
39,082
|
|
Gain on sale of lease fleet units
|
|
|
(5,560
|
)
|
|
|
(9,849
|
)
|
|
|
(11,661
|
)
|
Loss on disposal of property, plant and equipment
|
|
|
203
|
|
|
|
567
|
|
|
|
71
|
|
Deferred income taxes
|
|
|
27,356
|
|
|
|
27,923
|
|
|
|
17,201
|
|
Foreign currency (gain) loss
|
|
|
(107
|
)
|
|
|
112
|
|
|
|
88
|
|
Changes in certain assets and liabilities, net of effect of
businesses acquired:
|
|
|
|
|
|
|
|
|
|
|
|
|
Receivables
|
|
|
(3,988
|
)
|
|
|
(3,060
|
)
|
|
|
18,626
|
|
Inventories
|
|
|
(610
|
)
|
|
|
7,655
|
|
|
|
3,691
|
|
Deposits and prepaid expenses
|
|
|
(1,754
|
)
|
|
|
177
|
|
|
|
3,412
|
|
Other assets and intangibles
|
|
|
318
|
|
|
|
105
|
|
|
|
(845
|
)
|
Accounts payable
|
|
|
2,691
|
|
|
|
(15,731
|
)
|
|
|
(6,293
|
)
|
Accrued liabilities
|
|
|
(1,755
|
)
|
|
|
(3,272
|
)
|
|
|
(18,226
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by operating activities
|
|
|
91,299
|
|
|
|
98,518
|
|
|
|
86,770
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash Flows From Investing Activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash paid for businesses acquired
|
|
|
(9,734
|
)
|
|
|
(33,250
|
)
|
|
|
|
|
Additions to lease fleet, excluding acquisitions
|
|
|
(126,733
|
)
|
|
|
(76,622
|
)
|
|
|
(21,517
|
)
|
Proceeds from sale of lease fleet units
|
|
|
16,181
|
|
|
|
28,338
|
|
|
|
33,495
|
|
Additions to property, plant and equipment
|
|
|
(18,522
|
)
|
|
|
(16,874
|
)
|
|
|
(10,294
|
)
|
Proceeds from sale of property, plant and equipment
|
|
|
126
|
|
|
|
495
|
|
|
|
1,252
|
|
Other
|
|
|
|
|
|
|
|
|
|
|
112
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash (used in) provided by investing activities
|
|
|
(138,682
|
)
|
|
|
(97,913
|
)
|
|
|
3,048
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash Flows From Financing Activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Net borrowings under lines of credit
|
|
|
34,128
|
|
|
|
120,341
|
|
|
|
(80,877
|
)
|
Redemption of 9.5% Senior Notes
|
|
|
(97,500
|
)
|
|
|
|
|
|
|
|
|
Redemption of 9.75% Senior Notes
|
|
|
|
|
|
|
|
|
|
|
(1,150
|
)
|
Proceeds from issuance of 6.875% Senior Notes
|
|
|
149,322
|
|
|
|
|
|
|
|
|
|
Deferred financing costs
|
|
|
(3,768
|
)
|
|
|
(15,166
|
)
|
|
|
(75
|
)
|
Proceeds from issuance of notes payable
|
|
|
1,216
|
|
|
|
1,249
|
|
|
|
1,272
|
|
Principal payments on notes payable
|
|
|
(1,254
|
)
|
|
|
(113,881
|
)
|
|
|
(1,533
|
)
|
Principal payments on capital lease obligations
|
|
|
(24
|
)
|
|
|
(704
|
)
|
|
|
(1,436
|
)
|
Issuance of common stock, net
|
|
|
5,607
|
|
|
|
1,472
|
|
|
|
800
|
|
Purchase of treasury stock, at cost
|
|
|
(39,300
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used in) financing activities
|
|
|
48,427
|
|
|
|
(6,689
|
)
|
|
|
(82,999
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effect of exchange rate changes on cash
|
|
|
1,289
|
|
|
|
5,565
|
|
|
|
(8,263
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net increase (decrease) in cash
|
|
|
2,333
|
|
|
|
(519
|
)
|
|
|
(1,444
|
)
|
Cash at beginning of year
|
|
|
1,370
|
|
|
|
3,703
|
|
|
|
3,184
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash at end of year
|
|
$
|
3,703
|
|
|
$
|
3,184
|
|
|
$
|
1,740
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplemental Disclosure of Cash Flow Information:
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash paid during the year for interest
|
|
$
|
27,896
|
|
|
$
|
33,032
|
|
|
$
|
54,817
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash paid during the year for income and franchise taxes
|
|
$
|
797
|
|
|
$
|
667
|
|
|
$
|
1,055
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest rate swap changes in value charged to equity
|
|
$
|
1,293
|
|
|
$
|
6,299
|
|
|
$
|
2,335
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See accompanying notes.
51
MOBILE
MINI, INC.
|
|
(1)
|
Mobile
Mini, its Operations and Summary of Significant Accounting
Policies:
|
Organization
and Special Considerations
Mobile Mini, Inc., a Delaware corporation, is a leading provider
of portable storage solutions. In these notes, the terms
Mobile Mini and the Company, means
Mobile Mini, Inc. At December 31, 2009, Mobile Mini has a
fleet of portable storage and office units, and operates
throughout the U.S., in Canada, the U.K. and The Netherlands.
The Companys portable storage products offer secure,
temporary storage with immediate access. The Company has a
diversified customer base, including large and small retailers,
construction companies, medical centers, schools, utilities,
distributors, the military, hotels, restaurants, entertainment
complexes and households. The Companys customers use its
products for a wide variety of applications, including the
storage of retail and manufacturing inventory, construction
materials and equipment, documents and records and other goods.
On June 27, 2008, we acquired Mobile Storage Group, Inc.
(MSG) and the discussion in this Annual Report of the
Companys business includes the results of its combined
operations with Mobile Storage Group since June 27, 2008.
Principles
of Consolidation
The consolidated financial statements include the accounts of
Mobile Mini, Inc. and its wholly owned subsidiaries. The Company
does not have any subsidiaries in which it does not own 100% of
the outstanding stock. All significant intercompany balances and
transactions have been eliminated.
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 portable storage and mobile office
units are recognized when these services are earned. The Company
recognizes 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.
The Company sells its products pursuant to sales contracts
stating the fixed sales price with its customers.
Cost
of Sales
Cost of sales in the Companys consolidated statements of
income includes only the costs for units it sells. Similar costs
associated with the portable storage units that it leases are
capitalized on its balance sheet under Lease fleet.
Advertising
Costs
All non direct-response advertising costs are expensed as
incurred. Direct-response advertising costs, principally yellow
page advertising, are capitalized when paid and amortized over
the period in which the benefit is derived. At December 31,
2008 and 2009, prepaid advertising costs were approximately
$4.0 million and $2.3 million, respectively. The
amortization period of the prepaid balance never exceeds
12 months. The Companys direct-response advertising
costs are monitored by each branch through call logs and
advertising source codes in a contact enterprise resource
planning system. Advertising expense was $10.1 million,
$12.5 million and $11.4 million in 2007, 2008 and
2009, respectively.
52
MOBILE
MINI, INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Receivables
and Allowance for Doubtful Accounts
Receivables primarily consist of amounts due from customers from
the lease or sale of containers throughout the U.S., Canada, the
U.K. and The Netherlands. Mobile Mini records an estimated
provision for bad debts through a charge to operations in
amounts of its estimated losses expected to be incurred in the
collection of these accounts. The Company reviews the provision
for adequacy monthly. The estimated losses are based on
historical collection experience and evaluation of past-due
account agings. Specific accounts are written off against the
allowance when management determines the account is
uncollectible. The Company requires a security deposit on most
leased office units to cover the cost of damages or unpaid
balances, if any.
Concentration
of Credit Risk
Financial instruments which potentially expose the Company to
concentrations of credit risk consist primarily of receivables.
Concentration of credit risk with respect to receivables is
limited due to the Companys large number of customers
spread over a broad geographic area in many industry segments.
No single customer accounts for more than 10% of our receivables
at December 31, 2008 and December 31, 2009.
Receivables related to its sales operations are generally
secured by the product sold to the customer. Receivables related
to its leasing operations are primarily small
month-to-month
amounts. The Company has the right to repossess leased portable
storage units, including any customer goods contained in the
unit, following non-payment of rent.
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, primarily for the
Companys lease fleet and its units held for sale. Raw
materials principally consist of raw steel, wood, glass, paint,
vinyl and other assembly components used in manufacturing and
remanufacturing processes.
Work-in-process
primarily represents units being built that are either pre-sold
or being built to add to its lease fleet upon completion.
Finished portable storage units primarily represent ISO
(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 to its lease
fleet. There is no certainty when the Company purchases the
containers whether they will ultimately be sold, remanufactured
and sold, or remanufactured and moved into its lease fleet.
Units that are determined to go into the Companys lease
fleet undergo an extensive remanufacturing process that includes
installing its proprietary locking system, signage, painting and
sometimes its proprietary security doors.
Inventories at December 31, consist of the following:
|
|
|
|
|
|
|
|
|
|
|
2008
|
|
|
2009
|
|
|
|
(In thousands)
|
|
|
Raw materials and supplies
|
|
$
|
16,991
|
|
|
$
|
15,750
|
|
Work-in-process
|
|
|
1,611
|
|
|
|
589
|
|
Finished portable storage units
|
|
|
7,975
|
|
|
|
5,808
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
26,577
|
|
|
$
|
22,147
|
|
|
|
|
|
|
|
|
|
|
In 2008, the Company wrote down inventory cost by
$4.5 million for raw materials and supplies it no longer
intended to use in connection with the restructuring of its
manufacturing operations.
53
MOBILE
MINI, INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Property,
Plant and Equipment
Property, plant and equipment are stated at cost, net of
accumulated depreciation. Depreciation is provided 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. The Companys depreciation expense
related to property, plant and equipment for 2007, 2008 and 2009
was $5.6 million, $9.4 million and $12.1 million,
respectively. 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 and is included in leasing, selling
and general expenses with consolidated statements of income.
In 2008, in connection with the Companys restructuring of
its manufacturing operations, it recorded an impairment charge
of $1.2 million to write-down equipment it no longer
intended to use and was included in integration, merger and
restructuring expense in the consolidated statements of income.
Property, plant and equipment at December 31, consist of
the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Estimated
|
|
|
|
|
|
|
Useful Life in
|
|
|
|
|
|
|
Years
|
|
2008
|
|
2009
|
|
|
(In thousands)
|
|
Land
|
|
|
|
|
|
$
|
10,978
|
|
|
$
|
11,129
|
|
Vehicles and machinery
|
|
|
5 to 20
|
|
|
|
78,592
|
|
|
|
76,037
|
|
Buildings and improvements(1)
|
|
|
30
|
|
|
|
13,868
|
|
|
|
15,012
|
|
Office fixtures and equipment
|
|
|
5
|
|
|
|
20,948
|
|
|
|
26,404
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
124,386
|
|
|
|
128,582
|
|
Less accumulated depreciation
|
|
|
|
|
|
|
(35,877
|
)
|
|
|
(44,422
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total property, plant and equipment
|
|
|
|
|
|
$
|
88,509
|
|
|
$
|
84,160
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Improvements made to leased properties are depreciated over the
lesser of the estimated remaining life or the remaining term of
the respective lease. |
Other
Assets and Intangibles
Other assets and intangibles primarily represent deferred
financing costs and intangible assets from acquisitions of
$43.3 million at December 31, 2008 and
$44.8 million at December 31, 2009, excluding
accumulated amortization of $8.3 million at
December 31, 2008 and $18.2 million at
December 31, 2009. Deferred financing costs are amortized
over the term of the agreement, and intangible assets are
amortized either on a straight-line basis, typically over a
five-year period, or on an accelerated basis for intrinsic
values assigned to customer relationships and trade names.
54
MOBILE
MINI, INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
The following table reflects balances related to other assets
and intangible assets for the years ended December 31, 2008
and 2009 (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2008
|
|
|
December 31, 2009
|
|
|
|
Gross
|
|
|
|
|
|
Net
|
|
|
Gross
|
|
|
|
|
|
|
|
|
|
Carrying
|
|
|
Accumulated
|
|
|
Carrying
|
|
|
Carrying
|
|
|
Accumulated
|
|
|
Net Carrying
|
|
|
|
Amount
|
|
|
Amortization
|
|
|
Amount
|
|
|
Amount
|
|
|
Amortization
|
|
|
Amount
|
|
|
Deferred financing costs
|
|
$
|
21,756
|
|
|
$
|
(4,263
|
)
|
|
$
|
17,493
|
|
|
$
|
21,831
|
|
|
$
|
(7,977
|
)
|
|
$
|
13,854
|
|
Customer relationships
|
|
|
20,166
|
|
|
|
(3,454
|
)
|
|
|
16,712
|
|
|
|
21,572
|
|
|
|
(9,266
|
)
|
|
|
12,306
|
|
Trade names/trademarks
|
|
|
864
|
|
|
|
(343
|
)
|
|
|
521
|
|
|
|
943
|
|
|
|
(750
|
)
|
|
|
193
|
|
Non-compete agreements
|
|
|
330
|
|
|
|
(120
|
)
|
|
|
210
|
|
|
|
273
|
|
|
|
(123
|
)
|
|
|
150
|
|
Patents and other
|
|
|
211
|
|
|
|
(84
|
)
|
|
|
127
|
|
|
|
218
|
|
|
|
(78
|
)
|
|
|
140
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
43,327
|
|
|
$
|
(8,264
|
)
|
|
$
|
35,063
|
|
|
$
|
44,837
|
|
|
$
|
(18,194
|
)
|
|
$
|
26,643
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortization expense for intangibles was approximately
$1.0 million, $3.6 million and $5.5 million in
2007, 2008 and 2009, respectively. Based on the carrying value
at December 31, 2009, and assuming no subsequent impairment
of the underlying assets, the annual amortization expense is
expected to be $4.0 million in 2010, $2.9 million in
2011, $2.1 million in 2012, $1.4 million in 2013,
$0.9 million in 2014 and $1.4 million thereafter.
Income
Taxes
Mobile Mini utilizes the liability method of accounting for
income taxes where deferred taxes are determined based on the
difference between the financial statement and tax basis of
assets and liabilities using enacted tax rates in effect in the
years in which the differences are expected to reverse.
Valuation allowances are established, when necessary, to reduce
deferred tax assets to the amount expected to be realized.
Income tax expense includes both taxes payable for the period
and the change during the period in deferred tax assets and
liabilities.
Earnings
per Share
The Companys preferred stock participates in distributions
of earnings on the same basis as shares of common stock.
Earnings for the period are 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.
The Company is not required to present 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
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.
55
MOBILE
MINI, INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
The following table 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
years ended December 31:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2007
|
|
|
2008
|
|
|
2009
|
|
|
|
(In thousands except earnings per share)
|
|
|
Historical net income per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
Numerator:
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
44,176
|
|
|
$
|
29,041
|
|
|
$
|
27,798
|
|
Less: Earnings allocable to preferred stock
|
|
|
|
|
|
|
(2,739
|
)
|
|
|
(5,431
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income available to common stockholders
|
|
$
|
44,176
|
|
|
$
|
26,302
|
|
|
$
|
22,367
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic EPS Denominator:
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock outstanding beginning of period
|
|
|
35,640
|
|
|
|
34,041
|
|
|
|
34,324
|
|
Effect of weighted shares:
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted shares issued during the period ended December 31,
|
|
|
302
|
|
|
|
114
|
|
|
|
273
|
|
Weighted shared purchased during the period ended
December 31,
|
|
|
(453
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Denominator for basic net income per share
|
|
|
35,489
|
|
|
|
34,155
|
|
|
|
34,597
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted EPS Denominator:
|
|
|
|
|
|
|
|
|
|
|
|
|
Common shares outstanding, beginning of year
|
|
|
35,640
|
|
|
|
34,041
|
|
|
|
34,324
|
|
Effect of weighting shares:
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted common shares issued during the period ended
December 31,
|
|
|
302
|
|
|
|
114
|
|
|
|
273
|
|
Weighted common shares purchased during the period ended
December 31,
|
|
|
(453
|
)
|
|
|
|
|
|
|
|
|
Dilutive effect of employee stock options on nonvested
share-awards assumed converted during the period ended
December 31,
|
|
|
807
|
|
|
|
372
|
|
|
|
257
|
|
Dilutive effect of convertible preferred stock assumed converted
during the period ended December 31,
|
|
|
|
|
|
|
4,348
|
|
|
|
8,398
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Denominator for diluted net income per share
|
|
|
36,296
|
|
|
|
38,875
|
|
|
|
43,252
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic net income per share
|
|
$
|
1.24
|
|
|
$
|
0.77
|
|
|
$
|
0.65
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted net income per share
|
|
$
|
1.22
|
|
|
$
|
0.75
|
|
|
$
|
0.64
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Employee stock options to purchase 0.6 million,
0.6 million 1.4 million shares were issued or
outstanding during 2007, 2008 and 2009, respectively, but were
not included in the computation of diluted earnings per share
because the effect would have been anti-dilutive. The
anti-dilutive options could potentially dilute future earnings
per share. Basic weighted average number of common shares
outstanding in 2007, 2008 and 2009 does not include
0.5 million, 1.0 million and 1.2 million
nonvested share-awards, respectively, as the stock is not
vested. During 2007, 2008 and 2009, an immaterial amount 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.
56
MOBILE
MINI, INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Long-Lived
Assets
Mobile Mini reviews long-lived assets for impairment whenever
events or changes in circumstances indicate the carrying amount
of such assets may not be fully recoverable. If this review
indicates the carrying value of these assets will not be
recoverable, as measured based on estimated undiscounted cash
flows over their remaining life, the carrying amount would be
adjusted to fair value. The cash flow estimates contain
managements best estimates, using appropriate and
customary assumptions and projections at the time. The Company
recognized impairment losses of $1.2 million the year ended
December 31, 2008 related to the restructuring of the
Companys manufacturing operations for vehicles and
equipment. The Company did not recognize any impairment losses
in the year ended December 31, 2009.
Goodwill
Purchase prices of acquired businesses have been allocated to
the assets and liabilities acquired based on the estimated fair
values on the respective acquisition dates. Based on these
values, the excess purchase prices over the fair value of the
net assets acquired were allocated to goodwill. In 2008, the
Company completed the Merger by which MSG became a wholly-owned
subsidiary of Mobile Mini, Inc. Three other acquisitions of
businesses were asset purchases which results in the goodwill
relating to business acquisitions executed under asset purchase
agreements being deductible for income tax purposes over
15 years even though goodwill is not amortized for
financial reporting purposes. Our other acquisition in 2008 was
a stock purchase. The Company did not have any acquisitions in
2009.
The Company evaluates goodwill periodically to determine whether
events or circumstances have occurred that would indicate
goodwill might be impaired. The Company has assigned its
goodwill to each of its three reporting units (North America,
the U.K. and The Netherlands). The Company performs an annual
impairment test on goodwill at December 31 using the two-step
process. The first step is a screen for potential impairment,
while the second step measures the amount of the impairment, if
any. In addition, the Company will perform impairment tests
during any reporting period in which events or changes in
circumstances indicate that an impairment may have incurred. At
December 31, 2009, the Company 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, the Company considered both the
market and income approaches. 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 expenditure, tax payments and discount rates. Each
approach was given equal weight in arriving at the fair value of
the reporting unit. As of December 31, 2008, the Company
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 the Company performed step
two of the impairment test for these two reporting units. As of
December 31, 2009, neither of the Companys reporting
units with goodwill had estimated fair values less than the
reporting units individual net asset carrying values, and
therefore, step two of the impairment test was not required at
December 31, 2009.
In step two of the impairment test, the Company is required to
determine the implied fair value of the goodwill and compare it
to the carrying value of the goodwill. The Company 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. In
2008, the Company recognized an impairment charge of
$13.7 million. The Company reconciled the fair values of
its three reporting units in the aggregate to its market
capitalization at December 31, 2009. At December 31,
2009, $447.2 million of the goodwill relates to the North
57
MOBILE
MINI, INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
America reporting unit, and $66.0 million relates to the
U.K. reporting unit. The fair value of the North America
and U.K. reporting units exceeded the carrying value at
December 31, 2009 by 13% and 26%, respectively.
The Company did not record a goodwill impairment prior to 2008.
The following table shows the activity and balances related to
goodwill from January 1, 2008 to December 31, 2009 (in
thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross goodwill
|
|
|
Impairments
|
|
|
Net goodwill
|
|
Balance at January 1, 2008
|
|
$
|
79,790
|
|
|
$
|
|
|
|
$
|
79,790
|
|
Acquisitions
|
|
|
452,607
|
|
|
|
|
|
|
|
452,607
|
|
Impairment(1)
|
|
|
|
|
|
|
(13,667
|
)
|
|
|
(13,667
|
)
|
Foreign currency(2)
|
|
|
(26,073
|
)
|
|
|
|
|
|
|
(26,073
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2008
|
|
|
506,324
|
|
|
|
(13,667
|
)
|
|
|
492,657
|
|
Adjustments(3)
|
|
|
14,735
|
|
|
|
|
|
|
|
14,735
|
|
Foreign currency(2)
|
|
|
5,846
|
|
|
|
|
|
|
|
5,846
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2009
|
|
$
|
526,905
|
|
|
$
|
(13,667
|
)
|
|
$
|
513,238
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Represents goodwill impairment of approximately
$12.8 million related to the U.K. reporting unit and
$0.9 million related to The Netherlands reporting unit. |
|
(2) |
|
Represents foreign currency translation adjustments related to
the U.K. and The Netherlands reporting units. |
|
(3) |
|
Represents purchase price allocation adjustments related to the
North America and U.K. reporting units. |
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 a 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 its 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 fixed rate notes payable at December 31, 2008 and 2009,
approximated the book values. The fair value of the
Companys Senior Notes at December 31, 2008
($345.8 million principal amount outstanding) and 2009
($345.4 million principal amount outstanding), was
approximately $244.0 million and $348.5 million,
respectively. The determination for fair value is based on the
latest sales price at the end of each fiscal year obtained from
a third-party institution.
Deferred
Financing Costs
Included in other assets and intangibles are deferred financing
costs of approximately $17.5 million and
$13.9 million, net of accumulated amortization of
$4.3 million and $8.0 million, at December 31,
2008 and 2009, respectively. Costs of obtaining long-term
financing, including the Companys amended credit facility,
are amortized over the term of the related debt, using the
straight-line method. Amortizing the deferred financing costs
using the straight-line method approximates the effective
interest method.
58
MOBILE
MINI, INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
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 risk exposure results
from changes in short-term U.S. dollar interest rates. In
an effort to manage 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.
Mobile Mini had interest rate swap agreements totaling
$200.0 million at December 31, 2008 and 2009. The
fixed interest rate on the Companys eight swap agreements
at December 31, 2009 range from 3.25% to 4.71%, averaging
4.03% plus the spread. Three swap agreements mature in 2010 and
five swap agreements mature in 2011.
The following tables summarize information related to the
Companys derivatives. All of the Companys
derivatives are designated as effective hedging instruments.
|
|
|
|
|
|
|
Interest Rate Swap Agreements
|
Derivatives Fair Value
|
|
|
|
|
Hedging Relationships
|
|
Balance Sheet Location
|
|
Fair Value
|
|
|
|
|
(In thousands)
|
|
December 31, 2008
|
|
Accrued liabilities
|
|
$
|
(11,532
|
)
|
December 31, 2009
|
|
Accrued liabilities
|
|
$
|
(7,703
|
)
|
|
|
|
|
|
Interest Rate Swap Agreements
|
|
|
Amount of Gain or
|
|
|
(Loss) Recognized
|
Derivatives Fair Value
|
|
in OCI on
|
Hedging Relationships
|
|
Derivative
|
|
|
(In thousands)
|
|
December 31, 2008 (net of income tax benefit of
$4.0 million)
|
|
$
|
(6,299
|
)
|
December 31, 2009 (net of income taxes of $1.5 million)
|
|
$
|
2,335
|
|
Share-Based
Compensation
At December 31, 2009, the Company had one active
share-based employee compensation plan. There are two expired
compensation plans, one of which still has outstanding options
subject to exercise or termination. No additional options can be
granted under the expired 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.
The Company uses the modified prospective method and does not
recognize a deferred tax asset for an excess tax benefit that
has not been realized related to stock-based compensation
deductions. The Company adopted the
with-and-without
approach with respect to the ordering of tax benefits realized.
In the
with-and-without
approach, the excess tax benefit related to stock-based
compensation deductions will be recognized in additional paid-in
capital only if an incremental tax benefit would be realized
after considering all other tax benefits presently available to
us. Therefore, the Companys net operating loss
carryforward will offset current taxable income prior to the
recognition of the tax benefit related to stock-based
compensation deductions. In 2007 and 2008 there were
$3.4 million and $0.4 million, respectively, of excess
tax benefits related to stock-based compensation, which were not
realized under this approach. In 2009, no excess tax benefit was
generated, as instead a $1.8 million tax deduct shortfall
occurred, which was applied against previously recognized
benefits. Once the Companys net operating
59
MOBILE
MINI, INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
loss carryforward is utilized, these excess tax benefits,
totaling $5.5 million, may be recognized in additional
paid-in capital.
Foreign
Currency Translation and Transactions
For Mobile Minis
non-U.S. operations,
the local currency is the functional currency. All assets and
liabilities are translated into dollars at period-end exchange
rates and all income statement amounts are translated at the
average exchange rate for each month within the year.
Use of
Estimates
The preparation of financial statements in conformity with
accounting principles generally accepted in the
U.S. requires management to make estimates and assumptions
that affect the amounts reported in the accompanying
consolidated financial statements and the notes to those
statements. Actual results could differ from those estimates.
The most significant estimates included within the financial
statements are the allowance for doubtful accounts, the
estimated useful lives and residual values on the lease fleet
and property, plant and equipment and goodwill and other asset
impairments.
Impact
of Recently Issued Accounting Standards
Accounting Standards Codification. Effective
July 1, 2009, the Financial Accounting Standards
Boards (FASB) Accounting Standards Codification (ASC)
became the single official source of authoritative,
nongovernmental generally accepted accounting principles (GAAP)
in the United States. The historical GAAP hierarchy was
eliminated and the ASC became the only level of authoritative
GAAP, other than guidance issued by the Securities and Exchange
Commission. The codification was effective for interim and
annual reporting periods ending after September 15, 2009,
except for certain nonpublic nongovernmental entities. The
Companys accounting policies were not affected by the
conversion to ASC.
Fair Value Measurements. In September 2006,
the FASB issued guidance which defines fair value, establishes a
framework for measuring fair value and expands disclosures about
fair value measurements. In February 2008, the FASB issued
additional guidance which deferred the effective date for the
Company to January 1, 2009 for all nonfinancial assets and
liabilities, except for those that are recognized or disclosed
at fair value on a recurring basis (that is, at least annually).
The Company adopted the deferred provisions of this guidance on
January 1, 2009. The adoption of these provisions did not
have a material effect on the Companys consolidated
financial statements.
Business Combinations. On January 1,
2009, the Company adopted new accounting guidance for business
combinations as issued by the FASB. The new accounting guidance
establishes principles and requirements for how an acquirer in a
business combination recognizes and measures in its financial
statements the identifiable assets acquired, liabilities
assumed, and any noncontrolling interests in the acquiree, as
well as the goodwill acquired. Significant changes from previous
guidance resulting from this new guidance include the expansion
of the definitions of a business and a
business combination. For all business combinations
(whether partial, full or step acquisitions), the acquirer will
record 100% of all assets and liabilities of the acquired
business, including goodwill, generally at their fair values;
contingent consideration will be recognized at its fair value on
the acquisition date and; for certain arrangements, changes in
fair value will be recognized in earnings until settlement; and
acquisition-related transaction and restructuring costs will be
expensed rather than treated as part of the cost of the
acquisition. The new accounting guidance also establishes
disclosure requirements to enable users to evaluate the nature
and financial effects of the business combination. Because the
majority of the provisions of the new accounting guidance are
applicable to future transactions, the adoption of this guidance
did not have a material impact on the Companys
consolidated financial statements.
On January 1, 2009, the Company adopted new accounting
guidance for assets acquired and liabilities assumed in a
business combination as issued by the FASB. The new guidance
amends the provisions previously
60
MOBILE
MINI, INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
issued by the FASB related to the initial recognition and
measurement, subsequent measurement and accounting and
disclosures for assets and liabilities arising from
contingencies in business combinations. The new guidance
eliminates the distinction between contractual and
non-contractual contingencies, including the initial recognition
and measurement. The adoption of this accounting guidance did
not have a material impact on the Companys consolidated
financial statements.
Determining the Useful Life of Intangible
Assets. On January 1, 2009, the Company
adopted new accounting guidance for the determination of the
useful life of intangible assets as issued by the FASB. The new
guidance amends the factors that should be considered in
developing the renewal or extension assumptions used to
determine the useful life of a recognized intangible asset. The
new guidance also requires expanded disclosure regarding the
determination of intangible asset useful lives. Because this
accounting guidance is applicable to future transactions, the
adoption of this accounting guidance did not have an impact on
the Companys consolidated financial statements.
Subsequent Events. On April 1, 2009, the
Company adopted new accounting guidance related to subsequent
events as issued by the FASB. The new requirement establishes
the accounting for and disclosure of events that occur after the
balance sheet date but before financial statements are issued.
The adoption of these provisions did not have a material effect
on the Companys consolidated financial statements.
Transfers of Financial Assets. In June 2009,
the FASB issued guidance that changes the information a
reporting entity provides in its financial statements about the
transfer of financial assets and continuing interests held in
transferred financial assets. The standard amends previous
accounting guidance by removing the concept of qualified special
purpose entities. This accounting standard is effective for the
Company for transfers occurring on or after January 1,
2010. The Company does not expect the adoption of this
accounting standard to have a material effect on its
consolidated financial statements and related disclosures.
Fair Value Measurement of Liabilities. In
August 2009, FASB issued guidance providing clarification that
in circumstances in which a quoted price in an active market for
the identical liability is not available, a reporting entity is
required to measure fair value using one or more of the
following techniques:
1. A valuation technique that uses:
a. The quoted price of the identical liability when traded
as an asset.
b. Quoted prices for similar liabilities or similar
liabilities when traded as assets.
2. Another valuation technique that is consistent with the
principles in the FASBs guidance (two examples would be an
income approach or a market approach).
This guidance also clarifies that (i) when estimating fair
value of a liability, a reporting entity is not required to
include a separate input or adjustment to other inputs relating
to the existence of a restriction that prevents the transfer of
the liability and (ii) both a quoted price in an active
market for the identical liability at the measurement date and
the quoted price for the identical liability when traded as an
asset in an active market when no adjustments to the quoted
price of the asset are required are Level 1 fair value
measurements. This guidance is effective for the first reporting
period (including interim periods) beginning after issuance.
This accounting guidance did not have a material impact on its
financial statements and disclosures.
Multiple Element Arrangements. In September
2009, the FASB issued new accounting guidance related to the
revenue recognition of multiple element arrangements. The new
guidance states that if vendor specific objective evidence or
third party evidence for deliverables in an arrangement cannot
be determined, companies will be required to develop a best
estimate of the selling price to separate deliverables and
allocate arrangement consideration using the relative selling
price method. This guidance is effective for the Company for
arrangements entered into after January 1, 2010. The
Company currently does not expect this guidance to have a
material impact on its financial statements and disclosures
61
MOBILE
MINI, INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
|
|
(2)
|
Fair
Value Measurements
|
The Company 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. Fair
value is a market-based measurement that should be determined
based on assumptions that market participants would use in
pricing an asset liability. As a basis for considering such
assumptions, the Company established three levels of inputs that
may be used to measure fair value:
Level 1 Observable input 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:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quoted
|
|
|
|
|
|
|
|
|
|
|
Prices in
|
|
|
|
|
|
|
|
|
|
|
Active Markets for
|
|
Significant
|
|
Significant
|
|
|
|
|
|
|
Identical
|
|
Other Observable
|
|
Unobservable
|
|
|
|
|
|
|
Assets
|
|
Inputs
|
|
Inputs
|
|
Valuation
|
Interest Swap Agreements.
|
|
Fair Value
|
|
(Level 1)
|
|
(Level 2)
|
|
(Level 3)
|
|
Technique
|
|
|
(In thousands)
|
|
December 31, 2008
|
|
$
|
(11,532
|
)
|
|
$
|
|
|
|
$
|
(11,532
|
)
|
|
$
|
|
|
|
|
(1
|
)
|
December 31, 2009
|
|
$
|
(7,703
|
)
|
|
$
|
|
|
|
$
|
(7,703
|
)
|
|
$
|
|
|
|
|
(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 counterparty
credit risk and the Companys own non-performance risk. The
Company has consistently applied these calculation techniques to
all periods presented. At December 31, 2008 and 2009, the
fair value of interest rate swap agreements is recorded in
accrued liabilities in the Companys consolidated balance
sheet. |
Mobile Minis lease fleet primarily consists of
remanufactured, modified and manufactured portable storage and
office units that are leased to customers under short-term
operating lease agreements with varying terms. Depreciation is
provided using the straight-line method over the units
estimated useful life, after the date the Company put the unit
in service, and are depreciated down to their estimated residual
values. The Companys depreciation policy on its steel
units uses an estimated useful life of 30 years with an
estimated residual value of 55%. Prior to April 2009, the
Companys depreciation policy on its steel units used an
estimated useful life of 25 years with an estimated
residual value of 62.5%. Wood mobile office units are
depreciated over 20 years down to a 50% residual value. Van
trailers, which are a small part of the Companys fleet,
are depreciated over 7 years to a 20% residual value. Van
trailers and other non-core assets are only added to the fleet
in connection with acquisitions of portable storage businesses.
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 its own historical experience. The Companys
depreciation expense related to lease fleet for 2007, 2008 and
2009 was $14.5 million, $18.9 million and
$21.4 million, respectively. At December 31, 2008 and
2009, all of the Companys lease fleet units were pledged
as collateral under the credit facility (see Note 4).
Normal repairs and maintenance to the portable storage and
mobile office units are expensed as incurred
62
MOBILE
MINI, INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Lease fleet at December 31, consists of the following:
|
|
|
|
|
|
|
|
|
|
|
2008
|
|
|
2009
|
|
|
|
(In thousands)
|
|
|
Steel storage containers
|
|
$
|
616,750
|
|
|
$
|
621,466
|
|
Offices
|
|
|
523,242
|
|
|
|
526,951
|
|
Van trailers
|
|
|
15,610
|
|
|
|
5,557
|
|
Other (chassis and ancillary products)
|
|
|
2,161
|
|
|
|
2,651
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,157,763
|
|
|
|
1,156,625
|
|
Accumulated depreciation
|
|
|
(79,607
|
)
|
|
|
(101,297
|
)
|
|
|
|
|
|
|
|
|
|
|
|
$
|
1,078,156
|
|
|
$
|
1,055,328
|
|
|
|
|
|
|
|
|
|
|
In connection with the Merger in 2008, Mobile Mini expanded its
revolving credit facility to increase its borrowing limit and to
include the combined assets of both Mobile Mini and Mobile
Storage Group as security for the facility.
On June 27, 2008, Mobile Mini and its subsidiaries,
(including Mobile Storage Group and its subsidiaries) entered
into an ABL Credit Agreement (the Credit Agreement) with
Deutsche Bank AG New York Branch and other lenders party
thereto. The Credit Agreement provides for a five-year,
$900.0 million revolving credit facility. Amounts borrowed
under the Credit Agreement and repaid or prepaid during the term
may be reborrowed. Outstanding amounts under the Credit
Agreement bear interest at the Companys option at either
(i) LIBOR plus a defined margin, or (ii) the Agent
banks prime rate plus a margin. 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 the
Companys debt ratio at each measurement date. All amounts
outstanding under the Credit Agreement are due on June 27,
2013.
Availability of borrowings under the Credit Agreement is subject
to a borrowing base calculation based upon a valuation of the
Companys eligible accounts receivable, eligible container
fleet (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. The
lease fleet is appraised at least once annually by a third-party
appraisal firm and up to 90% of the lesser of cost or appraised
orderly liquidation value, as defined, may be included in the
borrowing base to determine how much the Company may borrow
under this facility.
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 for U.S. borrowings, which are denominated in
U.S. Dollars, by Mobile Mini based upon a U.S. and
Canada borrowing base.
The Companys obligations and those of its subsidiaries
under the Credit Agreement are secured by a blanket lien on
substantially all of the Companys assets.
The Credit Agreement also contains customary negative covenants
applicable to Mobile Mini and its subsidiaries, including
covenants that restrict their ability to, among other things,
(i) make capital expenditures in excess of defined limits,
(ii) allow certain liens to attach to the Company or its
subsidiary assets, (iii) repurchase or pay dividends or
make certain other restricted payments on capital stock and
certain other securities, or prepay certain indebtedness,
(iv) incur additional indebtedness or engage in certain
other types of financing transactions, and (v) make
acquisitions or other investments.
Mobile Mini also must comply with specified financial covenants
and affirmative covenants. Only if the Company falls below
specified borrowing availability levels are financial
maintenance covenants applicable, with set maximum permitted
values for its leverage ratio (as defined), fixed charge
coverage ratios and its minimum
63
MOBILE
MINI, INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
required utilization rates. At December 31, 2008 and
December 31, 2009, the Company was above the minimum
borrowing availability threshold and therefore not subject to
these financial maintenance covenants.
The weighted average interest rate under the line of credit,
including the effect of applicable interest rate swap
agreements, was approximately 5.8% in 2008 and 4.4% in 2009. The
average balance outstanding during 2008 and 2009 was
approximately $416.2 million and $531.9 million,
respectively.
Mobile Mini has interest rate swap agreements under which it
effectively fixed the interest rate payable on
$200.0 million of borrowings under the Companys
credit facility so that the interest rate is based on a spread
from a fixed rate rather than a spread from the LIBOR rate. The
aggregate change in the fair value of the interest rate swap
agreements resulted in comprehensive income for the year ended
December 31, 2009 of $2.3 million, net of applicable
income taxes of $1.5 million.
In 2008, when the Company evaluated the expansion of its
revolving credit facility, the new borrowing capacity under the
Credit Agreement exceeded that under the original revolving
credit facility; therefore unamortized deferred financing costs
were added to the costs incurred as part of the Credit Agreement.
Notes payable at December 31, consist of the following:
|
|
|
|
|
|
|
|
|
|
|
2008
|
|
|
2009
|
|
|
|
(In thousands)
|
|
|
Notes payable to financial institution, interest at 2.98%
payable in fixed monthly installments, maturing September 2010,
unsecured
|
|
$
|
|
|
|
$
|
955
|
|
Notes payable to financial institution, interest at 4.81%
payable in fixed monthly installments, matured September 2009,
unsecured
|
|
|
1,026
|
|
|
|
|
|
Other notes payable, maturing through 2011
|
|
|
354
|
|
|
|
173
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
1,380
|
|
|
$
|
1,128
|
|
|
|
|
|
|
|
|
|
|
|
|
(6)
|
Obligations
Under Capital Leases:
|
At December 31, 2008 and 2009, obligations under capital
leases for certain forklifts, storage containers and office
related equipment were $5.5 million and $4.1 million,
respectively. The lease agreements provide the Company with a
purchase option at the end of the lease term. The leases have
been capitalized using interest rates ranging from approximately
5.7% to 8.5%. The leases are secured by the equipment under
lease. Assets recorded under capital lease obligations totaled
approximately $6.0 million as of December 31, 2008 and
$6.9 million as of December 31, 2009. Related
accumulated amortization totaled approximately $300,000 as of
December 31, 2008 and $700,000 as of December 31,
2009. The assets acquired under capital leases and related
accumulated amortization is included in property, plant and
equipment, net, and lease fleet, net, in the consolidated
balance sheets. The related amortization is included in
depreciation and amortization expense in the Consolidated
Statements of Income.
64
MOBILE
MINI, INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Future minimum capital lease payments at December 31, 2009
are as follows (in thousands):
|
|
|
|
|
2010
|
|
$
|
1,738
|
|
2011
|
|
|
1,432
|
|
2012
|
|
|
912
|
|
2013
|
|
|
314
|
|
2014
|
|
|
157
|
|
|
|
|
|
|
Total
|
|
|
4,553
|
|
Amount representing interest
|
|
|
(492
|
)
|
|
|
|
|
|
Present value of minimum lease payments
|
|
$
|
4,061
|
|
|
|
|
|
|
|
|
(7)
|
Equity
and Debt Issuances:
|
Mobile
Mini Supplemental Indenture
In connection with the Merger, Mobile Mini entered into a
Supplemental Indenture, dated as of June 27, 2008 (the
Mobile Mini Supplemental Indenture), with Mobile Storage Group,
Inc., a Delaware corporation, A Better Mobile Storage Company, a
California corporation and Mobile Storage Group (Texas), LP, a
Texas limited partnership (collectively, the New Mobile Mini
Guarantors), the guarantors (the Existing Mobile Mini
Guarantors) party to the Mobile Mini Indenture and Law Debenture
Trust Company of New York, as trustee (LDTC), pursuant to
which the New Mobile Mini Guarantors became
Guarantors for all purposes under the Mobile Mini
Indenture. Mobile Mini, the Existing Mobile Mini guarantors and
LDTC previously entered into an Indenture (the Mobile Mini
Indenture), dated as of May 7, 2007, pursuant to which
Mobile Mini issued $150.0 million in aggregate principal
amount of its 6.875% Senior Notes due 2015 (the Mobile Mini
Notes).
MSG
Supplemental Indenture
In connection with the Merger, Mobile Mini entered into a
Supplemental Indenture, dated as of June 27, 2008 (the MSG
Supplemental Indenture), with Mobile Mini of Ohio LLC, a
Delaware limited liability company, Mobile Mini, LLC, a
California limited liability company, Mobile Mini, LLC, a
Delaware limited liability company, Mobile Mini I, Inc., an
Arizona corporation, A Royal Wolf Portable Storage, Inc., a
California corporation, Temporary Mobile Storage, Inc., a
California corporation, Mobile Mini Dealer, Inc. (formally
Delivery Design Systems, Inc.), an Arizona corporation, Mobile
Mini Texas Limited Partnership, LLP, a Texas limited liability
partnership (collectively, the New MSG Guarantors), A Better
Mobile Storage Company, a California corporation, and Mobile
Storage Group (Texas), LP, a Texas limited partnership (the
Existing MSG Guarantors), Mobile Storage Group, Inc., a Delaware
corporation, and Wells Fargo Bank, N.A., as trustee (Wells
Fargo), pursuant to which Mobile Mini became an
Issuer for all purposes under the MSG Indenture (as
defined below) and the New MSG Guarantors became
Guarantors for all purposes under the MSG Indenture.
Mobile Storage Group, Inc. and Mobile Services Group, Inc., a
Delaware corporation (the Original Issuers), the Existing MSG
Guarantors and Wells Fargo previously entered into an Indenture
(the MSG Indenture), dated as of August 1, 2006, pursuant
to which the Original Issuers issued $200.0 million in
aggregate principal amount of 9.75% Senior Notes due 2014
(the MSG Notes). The MSG Indenture includes covenants,
indemnities and events of default that are customary for
indentures of this type, including restrictions on the
incurrence of additional debt, sales of assets and payment of
dividends.
65
MOBILE
MINI, INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Future
Debt Obligations
The scheduled maturity for debt obligations under Mobile
Minis revolving line of credit, notes payable, obligations
under capital leases and Senior Notes for balances outstanding
at December 31, 2009 are as follows (in thousands):
|
|
|
|
|
2010
|
|
$
|
2,602
|
|
2011
|
|
|
1,298
|
|
2012
|
|
|
847
|
|
2013
|
|
|
473,944
|
|
2014
|
|
|
199,003
|
|
Thereafter
|
|
|
150,000
|
|
|
|
|
|
|
|
|
$
|
827,694
|
|
|
|
|
|
|
Preferred
Stock
As part of the consideration for the Merger, Mobile Mini issued
8.6 million shares of its Series A Convertible
Redeemable Participating Preferred Stock, to the former
MSGs stockholders. The shares were determined to have an
initial fair value of $196.6 million based upon a third
party valuation. The shares had a liquidation preference of
$154.0 million at December 31, 2008 and $147.4 at
December 31, 2009.
The preferred stock votes with Mobile Minis common stock
as a single class. It ranks senior to the common stock only with
respect to distributions upon the occurrence of the bankruptcy,
liquidation, dissolution or winding up of Mobile Mini. Holders
of a majority of the shares of preferred stock, may require the
Company to redeem all of the outstanding preferred stock
(i) if the Company enters into a binding agreement in
respect of a sale of the Company (as defined in the Certificate
of Designation for the preferred stock) at a sale price of less
than $23.00 per share or (ii) at any time after the tenth
anniversary of the preferred stock issuance date. If such
majority holders do not exercise their redemption rights
following either of these events, the Company at its option may
redeem the preferred stock. The preferred stock is convertible
into 8.6 million shares of the Companys common stock
at any time at the option of the holders, representing an
initial conversion price of $18.00 per common share. The
preferred stock will be mandatorily convertible into the
Companys common stock if, after the first anniversary of
the issuance of the preferred stock, its common stock trades
above $23.00 per share for a period of 30 consecutive days. In
2009, 364,587 shares of preferred stock were converted to
an equal number of shares of common stock. The preferred stock
will not have any cash or
payment-in-kind
dividends (unless and until a dividend is paid with respect to
the common stock, in which case dividends will be paid on an
equal basis with the common stock, on an as-converted basis) and
does not impose any financial covenants upon the Company.
Under a Stockholders Agreement entered into with the sellers of
MSG, Mobile Mini filed a registration statement on
Form S-3
under the Securities Act of 1933, as amended, on April 28,
2009, as amended on June 19, 2009, covering all of the
shares of Mobile Mini common stock issuable upon conversion of
the preferred stock and any shares of its common stock received
in respect of the preferred stock (called the registrable
securities) then held by any Mobile Storage Group stockholders
party to the Stockholders Agreement to enable the resale of such
registrable securities after June 27, 2009.
The registration rights granted in the Stockholders Agreement
are subject to customary restrictions such as blackout periods
and limitations on the number of shares to be included in any
underwritten offering imposed by the managing underwriter. In
addition, the Stockholders Agreement contains other limitations
on the timing and ability of the holders of registrable
securities to exercise demands.
66
MOBILE
MINI, INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Income (loss) before taxes for the years ended December 31
consisted of the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2007
|
|
|
2008
|
|
|
2009
|
|
|
|
(In thousands)
|
|
|
U.S.
|
|
$
|
75,355
|
|
|
$
|
70,534
|
|
|
$
|
44,362
|
|
Other Nations
|
|
|
(2,769
|
)
|
|
|
(13,493
|
)
|
|
|
1,493
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
72,586
|
|
|
$
|
57,041
|
|
|
$
|
45,855
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The provision (benefit) for income taxes for the years ended
December 31, consisted of the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2007
|
|
|
2008
|
|
|
2009
|
|
|
|
(In thousands)
|
|
|
Current:
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Federal
|
|
$
|
|
|
|
$
|
|
|
|
$
|
(262
|
)
|
State
|
|
|
413
|
|
|
|
210
|
|
|
|
333
|
|
Other Nations
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
413
|
|
|
|
210
|
|
|
|
71
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred:
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Federal
|
|
|
24,845
|
|
|
|
26,549
|
|
|
|
16,574
|
|
State
|
|
|
3,978
|
|
|
|
2,662
|
|
|
|
1,661
|
|
Other Nations
|
|
|
(826
|
)
|
|
|
(1,421
|
)
|
|
|
(249
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
27,997
|
|
|
|
27,790
|
|
|
|
17,986
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
28,410
|
|
|
$
|
28,000
|
|
|
$
|
18,057
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The components of the net deferred tax liability at
December 31, are approximately as follows:
|
|
|
|
|
|
|
|
|
|
|
2008
|
|
|
2009
|
|
|
|
(In thousands)
|
|
|
Deferred tax assets:
|
|
|
|
|
|
|
|
|
Net operating loss carryforwards
|
|
$
|
88,178
|
|
|
$
|
92,588
|
|
Deferred revenue and expenses
|
|
|
7,950
|
|
|
|
5,941
|
|
Accrued compensation and other benefits
|
|
|
4,454
|
|
|
|
2,861
|
|
Allowance for doubtful accounts
|
|
|
2,185
|
|
|
|
1,116
|
|
Other
|
|
|
4,542
|
|
|
|
6,545
|
|
|
|
|
|
|
|
|
|
|
Total deferred tax assets
|
|
|
107,309
|
|
|
|
109,051
|
|
Valuation allowance
|
|
|
(1,126
|
)
|
|
|
(1,126
|
)
|
|
|
|
|
|
|
|
|
|
Net deferred tax assets
|
|
|
106,183
|
|
|
|
107,925
|
|
|
|
|
|
|
|
|
|
|
Deferred tax liabilities:
|
|
|
|
|
|
|
|
|
Accelerated tax depreciation
|
|
|
(239,794
|
)
|
|
|
(254,977
|
)
|
Accelerated tax amortization
|
|
|
(1,067
|
)
|
|
|
(3,253
|
)
|
Other
|
|
|
(108
|
)
|
|
|
(5,392
|
)
|
|
|
|
|
|
|
|
|
|
Total deferred tax liabilities
|
|
|
(240,969
|
)
|
|
|
(263,622
|
)
|
|
|
|
|
|
|
|
|
|
Net deferred tax liabilities
|
|
$
|
(134,786
|
)
|
|
$
|
(155,697
|
)
|
|
|
|
|
|
|
|
|
|
67
MOBILE
MINI, INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
A deferred U.S. tax liability has not been provided on the
undistributed earnings of certain foreign subsidiaries because
it is Mobile Minis intent to permanently reinvest such
earnings. Undistributed earnings of foreign subsidiaries, which
have been, or are intended to be, permanently invested,
aggregated approximately $0.1 million and $0.1 million
as of December 31, 2008 and 2009, respectively. A net
deferred tax liability of approximately $11.1 million
related to the Companys U.K. and The Netherlands
operations have been combined with the net deferred tax
liabilities of its U.S. operations in its consolidated
balance sheet at December 31, 2009.
A reconciliation of the U.S. federal statutory rate to
Mobile Minis effective tax rate for the years ended
December 31, is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2007
|
|
|
2008
|
|
|
2009
|
|
|
U.S. federal statutory rate
|
|
|
35.0
|
%
|
|
|
35.0
|
%
|
|
|
35.0
|
%
|
State taxes, net of federal benefit
|
|
|
3.5
|
|
|
|
3.5
|
|
|
|
3.5
|
|
Non deductible expenses-other
|
|
|
0.6
|
|
|
|
1.6
|
|
|
|
0.5
|
|
Goodwill impairments
|
|
|
|
|
|
|
6.7
|
|
|
|
|
|
Foreign loss rate differential
|
|
|
|
|
|
|
2.3
|
|
|
|
0.4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
39.1
|
%
|
|
|
49.1
|
%
|
|
|
39.4
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At December 31, 2009, Mobile Mini had a U.S. federal
net operating loss carryforward of approximately
$216.8 million, which expires if unused from 2017 to 2029.
At December 31, 2009, the Company had net operating loss
carryforwards in the various states in which it operates
totaling $155.9 million, which expire if unused from 2009
to 2029. At December 31, 2008 and 2009, the Companys
deferred tax assets do not include $7.4 million and
$5.5 million of excess tax benefits from employee stock
option exercises that are a component of its net operating loss
carryforward. Additional paid in capital will be increased by
$5.5 million if and when such excess tax benefits are
realized. Management evaluates the ability to realize its
deferred tax assets on a quarterly basis and adjusts the amount
of its valuation allowance if necessary. There has been no
change recorded in 2009 on the $1.1 million valuation
allowance relating to Royal Wolf tax attribute carryforwards.
Accelerated tax amortization primarily relates to amortization
of goodwill for income tax purposes.
On January 1, 2007, Mobile Mini adopted a two-step approach
to recognizing and measuring uncertain tax positions. 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
process, 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
its U.S. Federal tax return as its major tax
jurisdiction. For the U.S. Federal return, the year 2008 is
subject to tax examination by the U.S. Internal Revenue
Service. During 2009 the IRS concluded the audit of the
Companys 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 and the
Company did not record a cumulative effect adjustment. 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 its
consolidated statements of income.
As a result of stock ownership changes during the years
presented, it is possible that the Company has undergone a
change in ownership for federal income tax purposes, which can
limit the amount of net operating loss
68
MOBILE
MINI, INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
currently available as a deduction. Management has determined
that even if such an ownership change has occurred, it would not
impair the realization of the deferred tax asset resulting from
the federal net operating loss carryover.
Mobile Mini paid income taxes of approximately
$0.8 million, $0.7 million and $0.9 million in
2007, 2008 and 2009, respectively. These amounts are lower than
the recorded expense in the years due to net operating loss
carryforwards and general business credit utilization.
|
|
(9)
|
Transactions
with Related Persons:
|
When Mobile Mini was a private company prior to 1994, it leased
some of its properties from entities originally controlled by
its founder, Richard E. Bunger, and his family members. These
related party leases remain in effect. The Company leases a
portion of the property comprising its Phoenix location and the
property comprising its Tucson location from entities owned by
Steven G. Bunger and his siblings. Steven G. Bunger is Mobile
Minis President and Chief Executive Officer and has served
as its Chairman of the Board since February 2001. Annual lease
payments under these leases totaled approximately $94,000,
$98,000 and $178,000 in 2007, 2008 and 2009, respectively. The
term of each of these leases expire on December 31, 2013.
Mobile Mini leases its Rialto, California facility from Mobile
Mini Systems, Inc., a corporation wholly owned by Barbara M.
Bunger, the mother of Steven G. Bunger. Annual lease payments in
2007, 2008 and 2009 under this lease were approximately
$282,000, $295,000 and $307,000, respectively. The Rialto lease
expires on April 1, 2016. Management believes that the
rental rates reflect the fair market rental value of these
properties or were less than the fair market rental value. The
terms of these related persons lease agreements have been
reviewed and approved by the independent directors who comprise
a majority of the members of the Companys Board of
Directors.
It is Mobile Minis intention not to enter into any
additional related person transactions other than extensions of
these lease agreements.
|
|
(10)
|
Share-Based
Compensation:
|
Prior to January 1, 2006, the Company accounted for
share-based employee compensation, where no compensation cost
was recognized, and a disclosure was made regarding the pro
forma effect on net earnings assuming compensation cost had been
recognized. Effective January 1, 2006, the Company started
using the modified prospective method for recognizing
share-based compensation expense.
In 2005, the Company began awarding nonvested shares under the
existing share-based compensation plans. The majority of the
Companys nonvested share-awards 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 grants. The service
period is the time during which the employees receiving
grants must remain employees for the shares granted to fully
vest. In December 2007, the Company began granting its executive
officers nonvested share-awards with vesting subject to a
performance conditions. Vesting for these share-awards is
dependent upon the officers fulfilling the service period
requirements, as well as the Company meeting certain EBITDA
targets in each of the next four years. The Company is required
to assess the probability that such performance conditions will
be met. If the likelihood of the performance condition being met
is deemed probable, the Company will recognize the expense using
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. In 2009, the share-based compensation expense was
reduced by $1.4 million to reflect anticipated shortfalls
related to share-awards with vesting subject to a performance
conditions. Share-based payment expense related to the vesting
of share-awards during the year ended December 31, 2008,
was approximately $3.5 million, and approximately
$4.3 million during the year ended December 31, 2009.
As of December 31, 2009, the unrecognized compensation cost
related to share-awards was approximately $20.0 million,
which is expected to be recognized over a weighted-average
period of approximately 3.5 years.
69
MOBILE
MINI, INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
The total value of the stock option awards is expensed on a
straight-line basis over the service period of the employees
receiving the awards. As of December 31, 2009, total
unrecognized compensation cost related to stock option awards
was approximately $0.9 million and the related
weighted-average period over which it is expected to be
recognized is approximately 0.8 years.
The cash flows resulting from the tax benefits arising from tax
deductions in excess of the compensation cost recognized from
the exercise of stock options (excess tax benefits) are
classified as financing cash flows. As of December 31,
2009, the Company had no tax benefits arising from tax
deductions in excess of the compensation cost recognized because
the benefit has not been realized given that the
Company currently has net operating loss carryforwards and
follow the
with-and-without
approach with respect to the ordering of tax benefits realized.
The following table summarizes the share-based compensation
expense and capitalized amounts for the years ending December 31:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2007
|
|
|
2008
|
|
|
2009
|
|
|
|
(In thousands)
|
|
|
Gross share-based compensation
|
|
$
|
4,584
|
|
|
$
|
6,521
|
|
|
$
|
6,090
|
|
Capitalized share-based compensation
|
|
|
(556
|
)
|
|
|
(865
|
)
|
|
|
(308
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Share-based compensation expense
|
|
$
|
4,028
|
|
|
$
|
5,656
|
|
|
$
|
5,782
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The following table summarizes the activities under the
Companys stock option plans for the years ended December
31 (number of shares in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2007
|
|
|
2008
|
|
|
2009
|
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
|
Average
|
|
|
|
|
|
Average
|
|
|
|
|
|
Average
|
|
|
|
Number of
|
|
|
Exercise
|
|
|
Number of
|
|
|
Exercise
|
|
|
Number of
|
|
|
Exercise
|
|
|
|
Shares
|
|
|
Price
|
|
|
Shares
|
|
|
Price
|
|
|
Shares
|
|
|
Price
|
|
|
Options outstanding, beginning of year
|
|
|
2,609
|
|
|
$
|
15.86
|
|
|
|
2,028
|
|
|
$
|
17.03
|
|
|
|
1,750
|
|
|
$
|
17.51
|
|
Granted
|
|
|
9
|
|
|
|
30.47
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Canceled/Expired
|
|
|
(71
|
)
|
|
|
(21.67
|
)
|
|
|
(144
|
)
|
|
|
(17.46
|
)
|
|
|
(114
|
)
|
|
|
(25.74
|
)
|
Exercised
|
|
|
(519
|
)
|
|
|
(10.80
|
)
|
|
|
(134
|
)
|
|
|
(10.98
|
)
|
|
|
(77
|
)
|
|
|
(10.98
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options outstanding, end of year
|
|
|
2,028
|
|
|
$
|
17.02
|
|
|
|
1,750
|
|
|
$
|
17.45
|
|
|
|
1,559
|
|
|
$
|
17.20
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options exercisable, end of year
|
|
|
1,344
|
|
|
$
|
15.63
|
|
|
|
1,426
|
|
|
$
|
16.39
|
|
|
|
1,467
|
|
|
$
|
16.62
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options and awards available for grant, end of year
|
|
|
958
|
|
|
|
|
|
|
|
399
|
|
|
|
|
|
|
|
2,788
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
70
MOBILE
MINI, INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
A summary of nonvested share-awards activity within the
Companys share-based compensation plans and changes is as
follows (share amounts in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
|
Average
|
|
|
|
|
|
|
Grant Date
|
|
|
|
Shares
|
|
|
Fair Value
|
|
|
Nonvested at January 1, 2007
|
|
|
259
|
|
|
$
|
27.61
|
|
Awarded
|
|
|
339
|
|
|
|
19.47
|
|
Released
|
|
|
(58
|
)
|
|
|
27.26
|
|
Forfeited
|
|
|
(8
|
)
|
|
|
27.67
|
|
|
|
|
|
|
|
|
|
|
Nonvested at December 31, 2007
|
|
|
532
|
|
|
$
|
22.46
|
|
|
|
|
|
|
|
|
|
|
Awarded
|
|
|
673
|
|
|
|
15.78
|
|
Released
|
|
|
(149
|
)
|
|
|
22.16
|
|
Forfeited
|
|
|
(66
|
)
|
|
|
21.49
|
|
|
|
|
|
|
|
|
|
|
Nonvested at December 31, 2008
|
|
|
990
|
|
|
$
|
18.03
|
|
|
|
|
|
|
|
|
|
|
Awarded
|
|
|
607
|
|
|
|
14.21
|
|
Released
|
|
|
(297
|
)
|
|
|
18.76
|
|
Forfeited
|
|
|
(87
|
)
|
|
|
18.29
|
|
|
|
|
|
|
|
|
|
|
Nonvested at December 31, 2009
|
|
|
1,213
|
|
|
$
|
16.05
|
|
|
|
|
|
|
|
|
|
|
The total fair value of share-awards vested in 2008 and 2009
were $3.3 million and $5.6 million, respectively.
Options outstanding and exercisable by price range as of
December 31, 2009 are as follows, (number of shares in
thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options Outstanding
|
|
|
Options Exercisable
|
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average
|
|
|
Weighted
|
|
|
|
|
|
Weighted
|
|
Range of
|
|
|
|
|
Remaining
|
|
|
Average
|
|
|
|
|
|
Average
|
|
Exercise
|
|
Options
|
|
|
Contractual
|
|
|
Exercise
|
|
|
Options
|
|
|
Exercise
|
|
Prices
|
|
Outstanding
|
|
|
Life
|
|
|
Price
|
|
|
Exercisable
|
|
|
Price
|
|
|
$ 7.33
|
|
|
60
|
|
|
|
2.90
|
|
|
$
|
7.33
|
|
|
|
60
|
|
|
$
|
7.33
|
|
9.93
|
|
|
188
|
|
|
|
3.87
|
|
|
|
9.93
|
|
|
|
188
|
|
|
|
9.93
|
|
10.51
|
|
|
24
|
|
|
|
0.95
|
|
|
|
10.51
|
|
|
|
24
|
|
|
|
10.51
|
|
14.11
|
|
|
344
|
|
|
|
4.83
|
|
|
|
14.11
|
|
|
|
344
|
|
|
|
14.11
|
|
16.46
|
|
|
533
|
|
|
|
1.95
|
|
|
|
16.46
|
|
|
|
533
|
|
|
|
16.46
|
|
16.82 - 20.55
|
|
|
35
|
|
|
|
5.27
|
|
|
|
20.18
|
|
|
|
35
|
|
|
|
20.18
|
|
24.65
|
|
|
237
|
|
|
|
5.77
|
|
|
|
24.65
|
|
|
|
184
|
|
|
|
24.65
|
|
27.56 - 30.44
|
|
|
116
|
|
|
|
6.71
|
|
|
|
28.89
|
|
|
|
82
|
|
|
|
29.01
|
|
31.10
|
|
|
1
|
|
|
|
6.63
|
|
|
|
31.10
|
|
|
|
1
|
|
|
|
31.10
|
|
33.98
|
|
|
21
|
|
|
|
6.34
|
|
|
|
33.98
|
|
|
|
16
|
|
|
|
33.98
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,559
|
|
|
|
|
|
|
|
|
|
|
|
1,467
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
71
MOBILE
MINI, INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
A summary of stock option activity, as of December 31,
2009, is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
|
|
|
Average
|
|
|
|
|
|
|
Weighted
|
|
Remaining
|
|
|
|
|
|
|
Average
|
|
Contractual
|
|
Aggregate
|
|
|
Number
|
|
Exercise
|
|
Term
|
|
Intrinsic
|
|
|
of Shares
|
|
Price
|
|
(In Years)
|
|
Value
|
|
|
(In thousands)
|
|
|
|
|
|
(In thousands)
|
|
Outstanding
|
|
|
1,559
|
|
|
$
|
17.20
|
|
|
|
3.91
|
|
|
$
|
1,276
|
|
Vested and expected to vest
|
|
|
1,501
|
|
|
$
|
16.85
|
|
|
|
3.82
|
|
|
$
|
1,276
|
|
Exercisable
|
|
|
1,467
|
|
|
$
|
16.62
|
|
|
|
3.75
|
|
|
$
|
1,276
|
|
The aggregate intrinsic value of options exercised during the
period ended December 31, 2007, 2008 and 2009 was
$10.0 million, $1.3 million and $0.4 million,
respectively.
The fair value of each stock option award is estimated on the
date of the grant using the Black-Scholes option pricing model.
The following are the weighted average assumptions used for the
periods noted:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
|
2007
|
|
|
2008
|
|
|
2009
|
|
|
Risk-free interest rate
|
|
|
4.59
|
%
|
|
|
n/a
|
|
|
|
n/a
|
|
Expected holding period (years)
|
|
|
3.0
|
|
|
|
n/a
|
|
|
|
n/a
|
|
Expected stock volatility
|
|
|
33.2
|
%
|
|
|
n/a
|
|
|
|
n/a
|
|
Expected dividend rate
|
|
|
0.0
|
%
|
|
|
n/a
|
|
|
|
n/a
|
|
The Black-Scholes option valuation model was developed for use
in estimating the fair value of short-traded options that have
no vesting restrictions and are fully transferable. In addition,
option valuation models require the input of assumptions
including expected stock price volatility. The risk-free
interest rate is based on the U.S. treasury security rate
in effect at the time of the grant. The expected holding period
of options and volatility rates are based on the Companys
historical data. The Company did not anticipate paying a
dividend, and therefore no expected dividend yield was used.
The weighted average fair value of stock options granted was
$8.56 for 2007. There were no stock options granted in 2008 or
2009.
Stock
Option and Equity Incentive Plans
In August 1994, Mobile Minis Board of Directors adopted
the Mobile Mini, Inc. 1994 Stock Option Plan, which was amended
in 1998 and expired (with respect to granting additional
options) in 2003. At December 31, 2009, there were no
outstanding options to acquire shares under the 1994 Plan. In
August 1999, the Companys Board of Directors approved the
Mobile Mini, Inc. 1999 Stock Option Plan, which expired (with
respect to granting additional options) in August 2009. As of
December 31, 2009, there were outstanding options to
acquire 1.53 million shares under the 1999 Plan. Both plans
and amendments were approved by the stockholders at annual
meetings. Awards granted under the 1999 Plan may be incentive
stock options, which are intended to meet the requirements of
Section 422 of the Internal Revenue Code, nonstatutory
stock options or shares of restricted stock awards. Incentive
stock options may be granted to the Companys officers and
other employees. Nonstatutory stock options may be granted to
directors and employees, and to non-employee service providers
and share-awards may be made to officers and other employees.
In February 2006, Mobile Minis Board of Directors approved
the 2006 Equity Incentive Plan that was subsequently approved by
the stockholders at the Companys 2006 Annual Meeting. At
the Annual Stockholders Meeting in June 2009, the
stockholders approved an amendment to the 2006 Equity Incentive
Plan to increase the
72
MOBILE
MINI, INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
maximum number of shares that could be issued by an additional
3.0 million shares. The 2006 Plan is an omnibus
stock plan permitting a variety of equity programs designed to
provide flexibility in implementing equity and cash awards,
including incentive stock options, nonqualified stock options,
nonvested share-awards, restricted stock units, stock
appreciation rights, performance stock, performance units and
other stock-based awards. Participants in the 2006 Plan may be
granted any one of the equity awards or any combination of them,
as determined by the Board of Directors or the Compensation
Committee. The 2006 Plan, as amended, has reserved
4.2 million shares of common stock for issuance. As of
December 31, 2009, there were outstanding options to
acquire 29,000 shares under the 2006 Plan.
The purpose of these plans is to attract and retain the best
available personnel for positions of substantial responsibility
and to provide incentives to, and to encourage ownership of
stock by, Mobile Minis management and other employees. The
Board of Directors believes that stock options and other
share-based awards are important to attract and to encourage the
continued employment and service of officers and other employees
and encourage them to devote their best efforts to the
Companys business, thereby advancing the interest of its
stockholders.
The option exercise price for all options granted under these
plans may not be less than 100% of the fair market value of the
common stock on the date of grant of the option (or 110% in the
case of an incentive stock option granted to an optionee
beneficially owning more than 10% of the outstanding common
stock). The maximum option term is ten years (or five years in
the case of an incentive stock option granted to an optionee
beneficially owning more than 10% of the outstanding common
stock). Payment for shares purchased under these plans is made
in cash. Options may, if permitted by the particular option
agreement, be exercised by directing that certificates for the
shares purchased be delivered to a licensed broker as agent for
the optionee, provided that the broker tenders to Mobile Mini,
cash or cash equivalents equal to the option exercise price.
The plans are administered by the Compensation Committee of
Mobile Minis Board of Directors. The Compensation
Committee is comprised of independent directors. They determine
whether options will be granted, whether options will be
incentive stock options, nonstatutory option, restricted stock,
or performance stock, which officers, employees and service
providers will be granted options, the vesting schedule for
options and the number of options to be granted. Each option
granted must expire no more than 10 years from the date it
is granted and historically have vested over a 4.5 year
period. Each non-employee director serving on the Companys
Board of Directors receives an automatic award of shares of
Mobile Minis common stock equivalent to $82,500 based on
the closing price of the Companys common stock on August 1
of that year, or the following trading day if August 1 is not a
trading day. These awards vest 100% when granted.
The Board of Directors may amend the plans at any time, except
that approval by Mobile Minis stockholders may be required
for an amendment that increases the aggregate number of shares
which may be issued pursuant to each plan, changes the class of
persons eligible to receive incentive stock options, modifies
the period within which options may be granted, modifies the
period within which options may be exercised or the terms upon
which options may be exercised, or increases the material
benefits accruing to the participants under each plan. The Board
of Directors may terminate or suspend the plans at any time.
Unless previously terminated, the 2006 Plan will expire in
February 2016. Any option granted under a plan will continue
until the option expiration date, notwithstanding earlier
termination of the plan under which the option was granted.
In 2005, the Company began awarding nonvested shares under the
existing share-based compensation plans. These nonvested shares
vest in equal annual installments on each of the first four or
five annual anniversaries of the award date, unless the person
to whom the award was made is not then employed by Mobile Mini
(or one of its subsidiaries). In 2006, 2007 and 2009, certain
officers of the Company received performance based nonvested
shares. The Company did not grant performance based shares in
2008. If employment terminates, the nonvested shares are
forfeited by the former employee.
In June 2008, in conjunction with the Merger and the hiring of
Mobile Storage Groups employees, the Company awarded
nonvested share-awards for an aggregate of 157,535 shares
with an aggregate fair value of
73
MOBILE
MINI, INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
$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.
401(k)
and Retirement Plans
In 1995, the Company established a contributory retirement plan
in the U.S., the 401(k) Plan, covering eligible employees with
at least one year of service. The 401(k) Plan is designed to
provide tax-deferred retirement benefits to employees in
accordance with the provisions of Section 401(k) of the
Internal Revenue Code.
The 401(k) Plan provides that each participant may annually
contribute a fixed amount or a percentage of his or her salary,
not to exceed the statutory limit. Mobile Mini may make a
qualified non-elective contribution in an amount it determines.
Under the terms of the 401(k) Plan, Mobile Mini may also make
discretionary profit sharing contributions. Profit sharing
contributions are allocated among participants based on their
annual compensation. Each participant has the right to direct
the investment of their funds among certain named plans. Mobile
Mini contributes 25% of its employees first 4% of
contributions up to a maximum of $2 thousand per employee. The
Company has a similar plan as governed and regulated by Canadian
law, where the Company makes matching contributions with the
same limitations as its 401(k) plan, to its Canadian employees.
In the U.K., the Companys employees are covered by a
defined contribution program. The employees become eligible to
participate three months after they begin employment. The plan
is designed as a retirement benefit program into which the
Company pays a fixed 7% of the annual employees salary
into the plan. Each employee has the election to make further
contributions if they so elect. The participants have the right
to direct the investment of their funds among certain named
plans. A charge of 1% is deducted annually from each
employees fund to cover the administrative costs of this
program.
In The Netherlands, the Companys employees are covered by
a defined contribution program. All employees become eligible
after one month of employment. Contributions are based on a
pre-defined percentage of the employees earnings. The
percentage contribution is based on the employees age,
with two-thirds of the contribution made by the Company and
one-third made by the employee. The Company does not incur any
administrative costs for this plan in 2008.
Mobile Mini made contributions to these plans of approximately
$0.4 million, $0.7 million and $0.5 million in
2007, 2008 and 2009, respectively. Additionally, the Company
incurred $5,000 in each of those three years for administrative
costs for these programs.
|
|
(12)
|
Commitments
and Contingencies:
|
Leases
As discussed more fully in Note 9, Mobile Mini is obligated
under four noncancelable operating leases with related parties.
The Company also leases its corporate offices and other
properties and operating equipment from third parties under
noncancelable operating leases. Rent expense under these
agreements was approximately $10.2 million,
$12.3 million and $16.4 million for the years ended
December 31, 2007, 2008 and 2009, respectively.
74
MOBILE
MINI, INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
As of December 31, 2009, contractual commitments associated
with indebtedness, lease obligations and restructuring are as
follows (in thousands).
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Restructuring
|
|
|
Restructuring
|
|
|
|
|
|
|
Lease
|
|
|
Related Lease
|
|
|
Sub-lease
|
|
|
|
|
|
|
Commitments
|
|
|
Commitments
|
|
|
Income
|
|
|
Total
|
|
|
|
(In thousands)
|
|
|
2010
|
|
$
|
15,314
|
|
|
$
|
3,138
|
|
|
$
|
(794
|
)
|
|
$
|
17,658
|
|
2011
|
|
|
12,532
|
|
|
|
2,276
|
|
|
|
(656
|
)
|
|
|
14,152
|
|
2012
|
|
|
10,339
|
|
|
|
1,782
|
|
|
|
(580
|
)
|
|
|
11,541
|
|
2013
|
|
|
8,929
|
|
|
|
1,365
|
|
|
|
(543
|
)
|
|
|
9,751
|
|
2014
|
|
|
6,883
|
|
|
|
1,076
|
|
|
|
(512
|
)
|
|
|
7,447
|
|
Thereafter
|
|
|
12,150
|
|
|
|
1,199
|
|
|
|
|
|
|
|
13,349
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
66,147
|
|
|
$
|
10,836
|
|
|
$
|
(3,085
|
)
|
|
$
|
73,898
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Future minimum lease payments under restructured non-cancelable
operating leases as of December 31, 2009, are included in
accrued liabilities in the consolidated balance sheet. See
Note 15 for a further discussion on restructuring related
commitments.
Insurance
The Company maintains insurance coverage for its operations and
employees with appropriate aggregate, per occurrence and
deductible limits as the Company reasonably determines is
necessary or prudent with current operations and historical
experience. The majority of these coverages have large
deductible programs which allow for potential improved cash flow
benefits based on its loss control efforts.
The Companys employee group health insurance program is a
self-insured program with an aggregate stop loss limit. The
insurance provider is responsible for funding all claims in
excess of the calculated monthly maximum liability. This
calculation is based on a variety of factors including the
number of employees enrolled in the plan. This plan allows for
some cash flow benefits while guarantying a maximum premium
liability. Actual results may vary from estimates based on the
Companys actual experience at the end of the plan policy
periods based on the carriers loss predictions and its
historical claims data.
The Companys workers compensation, auto and general
liability insurance are purchased under large deductible
programs. The Companys current per incident deductibles
are: workers compensation $250,000, auto $500,000 and
general liability $100,000. The Company expenses the deductible
portion of the individual claims. However, the Company generally
does not know the full amount of its exposure to a deductible in
connection with any particular claim during the fiscal period in
which the claim is incurred and for which it must make an
accrual for the deductible expense. The Company makes these
accruals based on a combination of the claims development
experience of its staff and its 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, the
Companys assumptions will change as its loss experience is
developed. All of these factors have the potential for
significantly impacting the amounts the Company has previously
reserved in respect of anticipated deductible expenses and the
Company may be required in the future to increase or decrease
amounts previously accrued. Under the Companys various
insurance programs, it has collective reserves recorded in
accrued liabilities of $11.6 million and $10.7 million
at December 31, 2008 and 2009, respectively.
As of December 31, 2009, in connection with the issuance of
our insurance policies, Mobile Mini has provided its various
insurance carriers approximately $12.0 million in letters
of credit.
75
MOBILE
MINI, INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
General
Litigation
The Company is a party to routine claims incidental to its
business. Most of these routine claims involve alleged damage to
customers property while stored in units leased from
Mobile Mini and damage alleged to have occurred during delivery
and pick-up
of containers. The Company carries insurance to protect it
against loss from these types of claims, subject to deductibles
under the policy. The Company does not believe that any of these
incidental claims, individually or in the aggregate, is likely
to have a material adverse effect on its business or results of
operations.
|
|
(13)
|
Stockholders
Equity:
|
On August 8, 2007, Mobile Minis Board of Directors
approved a common stock repurchase program authorizing up to
$50.0 million of its outstanding shares to be repurchased
over a six-month period. As of December 31, 2007, the
Company had repurchased 2.2 million shares for
approximately $39.3 million under this authorization, and
it did not repurchase any additional shares prior to the
expiration of this authorization in February 2008.
|
|
(14)
|
Mergers
and Acquisitions:
|
The Company enters new markets in one of two ways, either by a
new branch
start-up or
through acquiring a business consisting of the portable storage
assets and related leases of other companies. An acquisition
generally provides the Company with cash flow which enables the
Company to immediately cover the overhead cost at a new branch.
On occasion, the Company also purchases portable storage
businesses in areas where the Company has existing small
branches either as part of multi-market acquisitions or in order
to increase the Companys operating margins at those
branches.
On June 27, 2008, the Company completed the Merger by which
MSG became a wholly-owned subsidiary of Mobile Mini, Inc.
The results of operations for MSG are included herein from the
effective date of the Merger, June 27, 2008. The
Companys consolidated statements of income were impacted
by the estimated expenses accrued or incurred related to
integration, merger and restructuring costs recorded for the
periods ended December 31, 2008 and 2009. This expense
primarily relates to costs, incurred or estimated to be
incurred, for the closing of overlapping Mobile Mini lease
properties and the repositioning of assets between the two
entities locations and personnel relocation costs. Also in
2008, as a result of the Merger, the Company recorded a
restructuring expense relating to its manufacturing operations.
Certain other continuing costs, primarily related to Mobile
Minis personnel closing bonuses and severance agreements
and certain corporate costs incurred during the integration are
expensed as integration, merger and restructuring expense as
incurred.
In 2008, the Company also acquired four other portable storage
businesses, three through asset purchase agreements and one as a
stock purchase: (1) International Equipment Services, Inc.,
operating in Oakland and Los Angeles, California,
(2) Advantage Container Corporation, operating in Dallas,
Texas, (3) J. Staal Enterprises, LLC, operating in
Santa Barbara, California, and (4) Kelly Containers,
Inc., operating in Hartford, Connecticut.
The Merger and other acquisitions were accounted for as the
purchase of a business with the purchased assets and assumed
liabilities recorded at their estimated fair values at the date
of each acquisition.
76
MOBILE
MINI, INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
The aggregate purchase price of the assets and operations
acquired consists of the following for the year ended
December 31, 2008:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
|
|
|
|
|
|
|
MSG
|
|
|
Acquisitions
|
|
|
Total
|
|
|
|
(In thousands)
|
|
|
Cash
|
|
$
|
17,927
|
|
|
$
|
15,323
|
|
|
$
|
33,250
|
|
Assumption of debt
|
|
|
540,887
|
|
|
|
|
|
|
|
540,887
|
|
Issuance of convertible preferred stock, As initially valued
|
|
|
196,600
|
|
|
|
|
|
|
|
196,600
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
755,414
|
|
|
$
|
15,323
|
|
|
$
|
770,737
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash of $33.3 million represents cash paid of
$38.8 million, net of cash acquired of $5.5 million,
and includes $19.3 million of costs. In 2009, cash acquired
was adjusted by $112,000, resulting in a net cash paid for
acquisition of $33.2 million.
The Company did not enter into any mergers or acquisitions in
2009.
The fair value of the assets acquired and liabilities assumed in
2008 has been adjusted as follows for the year ended
December 31, 2009:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Original Allocation
|
|
|
2009
|
|
|
|
|
|
|
Other
|
|
|
|
|
|
|
|
|
|
MSG
|
|
|
Acquisitions
|
|
|
Total
|
|
|
Adjustments
|
|
|
|
(In thousands)
|
|
|
Receivables
|
|
$
|
31,942
|
|
|
$
|
65
|
|
|
$
|
32,007
|
|
|
$
|
(619
|
)
|
Inventories
|
|
|
9,164
|
|
|
|
886
|
|
|
|
10,050
|
|
|
|
(189
|
)
|
Lease fleet, net
|
|
|
268,259
|
|
|
|
5,396
|
|
|
|
273,655
|
|
|
|
(13,178
|
)
|
Property, plant and equipment, net
|
|
|
34,045
|
|
|
|
538
|
|
|
|
34,583
|
|
|
|
(2,386
|
)
|
Deposits, prepaid expenses and other assets
|
|
|
2,581
|
|
|
|
|
|
|
|
2,581
|
|
|
|
(74
|
)
|
Intangible assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Customer relationships
|
|
|
17,587
|
|
|
|
1,094
|
|
|
|
18,681
|
|
|
|
|
|
Trade names
|
|
|
943
|
|
|
|
|
|
|
|
943
|
|
|
|
|
|
Non-compete agreements
|
|
|
|
|
|
|
100
|
|
|
|
100
|
|
|
|
|
|
Goodwill
|
|
|
445,150
|
|
|
|
7,457
|
|
|
|
452,607
|
|
|
|
14,735
|
|
Liabilities and other
|
|
|
(62,145
|
)
|
|
|
(250
|
)
|
|
|
(62,395
|
)
|
|
|
1,599
|
|
Deferred taxes
|
|
|
7,888
|
|
|
|
37
|
|
|
|
7,925
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
755,414
|
|
|
$
|
15,323
|
|
|
$
|
770,737
|
|
|
$
|
(112
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The applicable purchase price for the Merger and the
acquisitions was initially allocated to the assets acquired and
liabilities assumed, based upon estimated fair values as of the
acquisition date. The allocation is finalized and amounts are
not subject to change. Adjustments to the allocation of the
purchase prices and the reserves did not have a material effect
on the Companys results of operations or financial
position.
In connection with the MSG Merger, the Company identified
additional remaining costs expected to be incurred to exit
overlapping Mobile Storage Groups lease properties,
property shut down costs, costs of Mobile Storage Groups
severance agreements, costs for asset verifications and for
damaged assets and initially recorded accrued liabilities and
reserves. The reserve related to any leased property that is
subsequently
sub-leased
or negotiated to terminate will be adjusted as each such
agreement is consummated. See Note 15 below for additional
information on restructuring accruals.
77
MOBILE
MINI, INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Included in other assets and intangibles are:
(1) non-compete agreements that are amortized over the life
of the agreement, typically over 5 years, using the
straight-line method with no residual value, (2) values
associated with trade names are amortized on a straight-line
basis over 2 years with no residual value and
(3) values associated with customer relationships are
amortized on an accelerated basis over 14 to 15 years with
no residual value.
|
|
(15)
|
Integration,
Merger and Restructuring Costs:
|
In connection with the Merger, the Company recorded accruals for
costs to be incurred to exit overlapping Mobile Storage Group
lease properties, property shut down costs, costs of Mobile
Storage Groups severance agreements, costs for asset
verification and for damaged assets.
In connection with the Merger, 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 Consolidated Balance Sheet) and related activity for the
years ended December 31, 2008 and 2009:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Lease
|
|
|
|
|
|
|
|
|
|
Severance and
|
|
|
Abandonment
|
|
|
Acquisition
|
|
|
|
|
|
|
Benefits
|
|
|
Costs
|
|
|
Integration
|
|
|
Total
|
|
|
|
(In thousands)
|
|
|
Accrued obligations as of December 31, 2007
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
Restructuring costs accrued in purchase price allocation
|
|
|
1,811
|
|
|
|
5,328
|
|
|
|
|
|
|
|
7,139
|
|
Integration, merger and restructuring expenses
|
|
|
7,705
|
|
|
|
5,788
|
|
|
|
5,307
|
|
|
|
18,800
|
|
Cash paid
|
|
|
(7,507
|
)
|
|
|
(2,705
|
)
|
|
|
(4,164
|
)
|
|
|
(14,376
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accrued obligations as of December 31, 2008
|
|
|
2,009
|
|
|
|
8,411
|
|
|
|
1,143
|
|
|
|
11,563
|
|
Integration, merger and restructuring expense
|
|
|
4,612
|
|
|
|
33
|
|
|
|
6,781
|
|
|
|
11,426
|
|
Cash paid
|
|
|
(6,156
|
)
|
|
|
(2,702
|
)
|
|
|
(7,921
|
)
|
|
|
(16,779
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accrued obligations as of December 31, 2009
|
|
$
|
465
|
|
|
$
|
5,742
|
|
|
$
|
3
|
|
|
$
|
6,210
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The following amounts are included in integration, merger and
restructuring expense for the year ended December 31:
|
|
|
|
|
|
|
|
|
|
|
2008
|
|
|
2009
|
|
|
|
(In thousands)
|
|
|
Severance and benefits
|
|
$
|
7,705
|
|
|
$
|
4,612
|
|
Lease abandonment costs
|
|
|
5,788
|
|
|
|
33
|
|
Acquisition integration
|
|
|
5,307
|
|
|
|
6,781
|
|
Long-lived asset and inventory impairment charges
|
|
|
5,627
|
|
|
|
(121
|
)
|
|
|
|
|
|
|
|
|
|
Integration, merger and restructuring expenses
|
|
$
|
24,427
|
|
|
$
|
11,305
|
|
|
|
|
|
|
|
|
|
|
78
MOBILE
MINI, INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
|
|
(16)
|
Other
Comprehensive Income:
|
The components of accumulated other comprehensive income, net of
tax, were as follows at December 31:
|
|
|
|
|
|
|
|
|
|
|
2008
|
|
|
2009
|
|
|
|
(In thousands)
|
|
|
Accumulated net unrealized holding loss on derivatives
|
|
$
|
(7,068
|
)
|
|
$
|
(4,733
|
)
|
Foreign currency translation adjustment
|
|
|
(30,410
|
)
|
|
|
(21,058
|
)
|
|
|
|
|
|
|
|
|
|
Accumulated other comprehensive loss
|
|
$
|
(37,478
|
)
|
|
$
|
(25,791
|
)
|
|
|
|
|
|
|
|
|
|
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. Financial results of geographic regions are
aggregated into one reportable segment since their operations
have similar economic characteristics. Each branch has similar
economic characteristics covering all products leased or sold,
including similar products and services, processes for
delivering these services, customer base, sales personnel,
advertising, yard facilities, general and administrative costs
and the method of 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
growing leasing revenues, particularly in existing markets where
it can take advantage of the operating leverage inherent in its
business model, EBITDA and earnings per share.
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, 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.
Revenue from external customers:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2007
|
|
|
2008
|
|
|
2009
|
|
|
|
(In thousands)
|
|
|
North America(1)
|
|
$
|
292,964
|
|
|
$
|
356,303
|
|
|
$
|
316,177
|
|
United Kingdom
|
|
|
19,109
|
|
|
|
53,126
|
|
|
|
55,024
|
|
The Netherlands
|
|
|
6,229
|
|
|
|
5,975
|
|
|
|
3,260
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenues
|
|
$
|
318,302
|
|
|
$
|
415,404
|
|
|
$
|
374,461
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Includes revenues in the United States of $290.2 million,
$352.2 million and $313.0 million for the fiscal years
2007, 2008 and 2009, respectively. |
79
MOBILE
MINI, INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Long-lived assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2007
|
|
|
2008
|
|
|
2009
|
|
|
|
(In thousands
|
|
|
North America(1)
|
|
$
|
810,573
|
|
|
$
|
1,041,540
|
|
|
$
|
1,002,675
|
|
United Kingdom
|
|
|
43,984
|
|
|
|
120,914
|
|
|
|
132,356
|
|
The Netherlands
|
|
|
3,729
|
|
|
|
4,211
|
|
|
|
4,457
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total long-lived assets
|
|
$
|
858,286
|
|
|
$
|
1,166,665
|
|
|
$
|
1,139,488
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Includes long-lived assets of $798.2 million,
$1,028.2 million and $988.9 million in the United
States for the fiscal years 2007, 2008 and 2009, respectively. |
|
|
(18)
|
Selected
Consolidated Quarterly Financial Data (unaudited):
|
The following table sets forth certain unaudited selected
consolidated financial information for each of the four quarters
in the years ended December 31, 2008 and 2009. In
managements opinion, this unaudited consolidated quarterly
selected information has been prepared on the same basis as the
audited consolidated financial statements and includes all
necessary adjustments, consisting only of normal recurring
adjustments, which management considers necessary for a fair
presentation when read in conjunction with the Consolidated
Financial Statements and notes. The Company believes these
comparisons of consolidated quarterly selected financial data
are not necessarily indicative of future performance.
Quarterly earnings per share may not total to the fiscal year
earnings per share due to the weighted average number of shares
outstanding at the end of each period reported and rounding.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
First Quarter
|
|
|
Second Quarter
|
|
|
Third Quarter
|
|
|
Fourth Quarter
|
|
|
|
(In thousands except earnings per share)
|
|
|
2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Leasing revenues
|
|
$
|
70,036
|
|
|
$
|
72,849
|
|
|
$
|
119,323
|
|
|
$
|
109,352
|
|
Total revenues
|
|
|
78,541
|
|
|
|
81,085
|
|
|
|
132,752
|
|
|
|
123,026
|
|
Gross profit margin on sales
|
|
|
2,465
|
|
|
|
2,467
|
|
|
|
3,957
|
|
|
|
4,334
|
|
Income from operations(1)
|
|
|
23,769
|
|
|
|
14,575
|
|
|
|
39,951
|
|
|
|
26,869
|
|
Net income(1)
|
|
|
10,658
|
|
|
|
4,861
|
|
|
|
13,276
|
|
|
|
246
|
|
Earnings per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
0.31
|
|
|
$
|
0.14
|
|
|
$
|
0.31
|
|
|
$
|
0.01
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted(1)
|
|
$
|
0.31
|
|
|
$
|
0.14
|
|
|
$
|
0.31
|
|
|
$
|
0.01
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Leasing revenues
|
|
$
|
89,516
|
|
|
$
|
84,397
|
|
|
$
|
82,098
|
|
|
$
|
77,510
|
|
Total revenues
|
|
|
100,164
|
|
|
|
94,924
|
|
|
|
92,086
|
|
|
|
87,287
|
|
Gross profit margin on sales
|
|
|
3,191
|
|
|
|
3,238
|
|
|
|
3,273
|
|
|
|
3,108
|
|
Income from operations(2)
|
|
|
29,256
|
|
|
|
23,166
|
|
|
|
27,752
|
|
|
|
25,244
|
|
Net income(2)
|
|
|
8,466
|
|
|
|
5,227
|
|
|
|
8,120
|
|
|
|
5,985
|
|
Earnings per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
0.20
|
|
|
$
|
0.12
|
|
|
$
|
0.19
|
|
|
$
|
0.14
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted(2)
|
|
$
|
0.20
|
|
|
$
|
0.12
|
|
|
$
|
0.19
|
|
|
$
|
0.14
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
80
MOBILE
MINI, INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
|
|
|
(1) |
|
Includes integration, merger and restructuring expense of
$24.4 million ($15.3 million after tax), or $0.39 per
diluted share during the fiscal year 2008 and a non-cash
goodwill impairment charge of $13.7 million, both pre-tax
and after tax, or $0.35 per diluted share for fiscal year 2008. |
|
(2) |
|
Includes integration, merger and restructuring expense of
$11.3 million ($7.0 after tax), or $0.17 per diluted share
during the fiscal year 2009 and non-core leasing expense of
$0.8 million ($0.5 million after tax), or $0.01 per
diluted share during the fiscal year 2009. |
|
|
(19)
|
Condensed
Consolidating Financial Information
|
Mobile Mini Supplemental Indenture
In connection with the Merger, Mobile Mini entered into the
Mobile Mini Supplemental Indenture described in Note 7
pursuant to which the New Mobile Mini Guarantors became
Guarantors under the Mobile Mini Indenture relating
to the Senior Notes.
In connection with the Merger, Mobile Mini also entered into the
MSG Supplemental Indenture described in Note 7 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 described above, 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.
81
MOBILE
MINI, INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
MOBILE
MINI, INC.
CONDENSED
CONSOLIDATING BALANCE SHEETS
As of
December 31, 2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-
|
|
|
|
|
|
|
|
|
|
Guarantors
|
|
|
Guarantors
|
|
|
Eliminations
|
|
|
Consolidated
|
|
|
|
(In thousands)
|
|
|
ASSETS
|
Cash
|
|
$
|
2,208
|
|
|
$
|
976
|
|
|
$
|
|
|
|
$
|
3,184
|
|
Receivables
|
|
|
45,827
|
|
|
|
15,597
|
|
|
|
|
|
|
|
61,424
|
|
Inventories
|
|
|
23,644
|
|
|
|
2,982
|
|
|
|
(49
|
)
|
|
|
26,577
|
|
Lease fleet, net
|
|
|
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
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
82
MOBILE
MINI, INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
MOBILE
MINI, INC.
CONDENSED
CONSOLIDATING BALANCE SHEETS
As of
December 31, 2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-
|
|
|
|
|
|
|
|
|
|
Guarantors
|
|
|
Guarantors
|
|
|
Eliminations
|
|
|
Consolidated
|
|
|
|
(In thousands)
|
|
|
ASSETS
|
Cash
|
|
$
|
582
|
|
|
$
|
1,158
|
|
|
$
|
|
|
|
$
|
1,740
|
|
Receivables
|
|
|
29,152
|
|
|
|
11,715
|
|
|
|
|
|
|
|
40,867
|
|
Inventories
|
|
|
20,169
|
|
|
|
2,027
|
|
|
|
(49
|
)
|
|
|
22,147
|
|
Lease fleet, net
|
|
|
936,366
|
|
|
|
118,962
|
|
|
|
|
|
|
|
1,055,328
|
|
Property, plant and equipment, net
|
|
|
66,309
|
|
|
|
17,851
|
|
|
|
|
|
|
|
84,160
|
|
Deposits and prepaid expenses
|
|
|
8,593
|
|
|
|
1,323
|
|
|
|
|
|
|
|
9,916
|
|
Other assets and intangibles, net
|
|
|
21,288
|
|
|
|
5,355
|
|
|
|
|
|
|
|
26,643
|
|
Goodwill
|
|
|
447,196
|
|
|
|
66,042
|
|
|
|
|
|
|
|
513,238
|
|
Intercompany
|
|
|
140,692
|
|
|
|
36,365
|
|
|
|
(177,057
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
1,670,347
|
|
|
$
|
260,798
|
|
|
$
|
(177,106
|
)
|
|
$
|
1,754,039
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS EQUITY
|
Liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts payable
|
|
$
|
8,605
|
|
|
$
|
5,525
|
|
|
$
|
|
|
|
$
|
14,130
|
|
Accrued liabilities
|
|
|
61,410
|
|
|
|
3,505
|
|
|
|
|
|
|
|
64,915
|
|
Lines of credit
|
|
|
366,150
|
|
|
|
107,505
|
|
|
|
|
|
|
|
473,655
|
|
Notes payable
|
|
|
1,100
|
|
|
|
28
|
|
|
|
|
|
|
|
1,128
|
|
Obligations under capital leases
|
|
|
4,060
|
|
|
|
1
|
|
|
|
|
|
|
|
4,061
|
|
Senior notes, net of discount
|
|
|
345,402
|
|
|
|
|
|
|
|
|
|
|
|
345,402
|
|
Deferred income taxes
|
|
|
145,157
|
|
|
|
11,144
|
|
|
|
(604
|
)
|
|
|
155,697
|
|
Intercompany
|
|
|
23
|
|
|
|
39,425
|
|
|
|
(39,448
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities
|
|
|
931,907
|
|
|
|
167,133
|
|
|
|
(40,052
|
)
|
|
|
1,058,988
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commitments and contingencies
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Convertible preferred stock
|
|
|
147,427
|
|
|
|
|
|
|
|
|
|
|
|
147,427
|
|
Stockholders equity:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock
|
|
|
385
|
|
|
|
18,434
|
|
|
|
(18,434
|
)
|
|
|
385
|
|
Additional paid-in capital
|
|
|
341,597
|
|
|
|
119,175
|
|
|
|
(119,175
|
)
|
|
|
341,597
|
|
Retained earnings
|
|
|
292,408
|
|
|
|
(22,230
|
)
|
|
|
555
|
|
|
|
270,733
|
|
Accumulated other comprehensive loss
|
|
|
(4,077
|
)
|
|
|
(21,714
|
)
|
|
|
|
|
|
|
(25,791
|
)
|
Treasury stock, at cost
|
|
|
(39,300
|
)
|
|
|
|
|
|
|
|
|
|
|
(39,300
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total stockholders equity
|
|
|
591,013
|
|
|
|
93,665
|
|
|
|
(137,054
|
)
|
|
|
547,624
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities and stockholders equity
|
|
$
|
1,670,347
|
|
|
$
|
260,798
|
|
|
$
|
(177,106
|
)
|
|
$
|
1,754,039
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
83
MOBILE
MINI, INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
MOBILE
MINI, INC.
CONDENSED
CONSOLIDATED STATEMENTS OF INCOME
Twelve
Months Ended December 31, 2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-
|
|
|
|
|
|
|
|
|
|
Guarantors
|
|
|
Guarantors
|
|
|
Eliminations
|
|
|
Consolidated
|
|
|
|
(In thousands)
|
|
|
Revenues:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Leasing
|
|
$
|
267,718
|
|
|
$
|
16,920
|
|
|
$
|
|
|
|
$
|
284,638
|
|
Sales
|
|
|
23,648
|
|
|
|
8,055
|
|
|
|
(59
|
)
|
|
|
31,644
|
|
Other
|
|
|
1,598
|
|
|
|
422
|
|
|
|
|
|
|
|
2,020
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenues
|
|
|
292,964
|
|
|
|
25,397
|
|
|
|
(59
|
)
|
|
|
318,302
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Costs and expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of sales
|
|
|
15,242
|
|
|
|
6,460
|
|
|
|
(51
|
)
|
|
|
21,651
|
|
Leasing, selling and general expenses
|
|
|
148,876
|
|
|
|
18,118
|
|
|
|
|
|
|
|
166,994
|
|
Depreciation and amortization
|
|
|
19,034
|
|
|
|
2,115
|
|
|
|
|
|
|
|
21,149
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total costs and expenses
|
|
|
183,152
|
|
|
|
26,693
|
|
|
|
(51
|
)
|
|
|
209,794
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from operations
|
|
|
109,812
|
|
|
|
(1,296
|
)
|
|
|
(8
|
)
|
|
|
108,508
|
|
Other income (expense):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest income
|
|
|
2,391
|
|
|
|
64
|
|
|
|
(2,354
|
)
|
|
|
101
|
|
Interest expense
|
|
|
(23,066
|
)
|
|
|
(4,195
|
)
|
|
|
2,355
|
|
|
|
(24,906
|
)
|
Debt extinguishment expense
|
|
|
(11,224
|
)
|
|
|
|
|
|
|
|
|
|
|
(11,224
|
)
|
Foreign currency exchange
|
|
|
|
|
|
|
107
|
|
|
|
|
|
|
|
107
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) before provision for (benefit from) income taxes
|
|
|
77,913
|
|
|
|
(5,320
|
)
|
|
|
(7
|
)
|
|
|
72,586
|
|
Provision for (benefit from) income taxes
|
|
|
30,125
|
|
|
|
(1,463
|
)
|
|
|
(252
|
)
|
|
|
28,410
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
$
|
47,788
|
|
|
$
|
(3,857
|
)
|
|
$
|
245
|
|
|
$
|
44,176
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
84
MOBILE
MINI, INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
MOBILE
MINI, INC.
CONDENSED
CONSOLIDATED STATEMENTS OF INCOME
Twelve
Months Ended December 31, 2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-
|
|
|
|
|
|
|
|
|
|
Guarantors
|
|
|
Guarantors
|
|
|
Eliminations
|
|
|
Consolidated
|
|
|
|
(In thousands)
|
|
|
Revenues:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Leasing
|
|
$
|
322,473
|
|
|
$
|
49,087
|
|
|
$
|
|
|
|
$
|
371,560
|
|
Sales
|
|
|
32,159
|
|
|
|
9,128
|
|
|
|
(20
|
)
|
|
|
41,267
|
|
Other
|
|
|
1,671
|
|
|
|
906
|
|
|
|
|
|
|
|
2,577
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenues
|
|
|
356,303
|
|
|
|
59,121
|
|
|
|
(20
|
)
|
|
|
415,404
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Costs and expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of sales
|
|
|
20,765
|
|
|
|
7,295
|
|
|
|
(16
|
)
|
|
|
28,044
|
|
Leasing, selling and general expenses
|
|
|
171,712
|
|
|
|
40,623
|
|
|
|
|
|
|
|
212,335
|
|
Integration, merger and restructuring expenses
|
|
|
21,676
|
|
|
|
2,751
|
|
|
|
|
|
|
|
24,427
|
|
Goodwill impairment
|
|
|
|
|
|
|
13,667
|
|
|
|
|
|
|
|
13,667
|
|
Depreciation and amortization
|
|
|
26,402
|
|
|
|
5,365
|
|
|
|
|
|
|
|
31,767
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total costs and expenses
|
|
|
240,555
|
|
|
|
69,701
|
|
|
|
(16
|
)
|
|
|
310,240
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from operations
|
|
|
115,748
|
|
|
|
(10,580
|
)
|
|
|
(4
|
)
|
|
|
105,164
|
|
Other income (expense):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest income
|
|
|
1,743
|
|
|
|
62
|
|
|
|
(1,670
|
)
|
|
|
135
|
|
Interest expense
|
|
|
(41,977
|
)
|
|
|
(7,839
|
)
|
|
|
1,670
|
|
|
|
(48,146
|
)
|
Foreign currency exchange
|
|
|
|
|
|
|
(112
|
)
|
|
|
|
|
|
|
(112
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) before provision for (benefit from) income taxes
|
|
|
75,514
|
|
|
|
(18,469
|
)
|
|
|
(4
|
)
|
|
|
57,041
|
|
Provision for (benefit from) income taxes
|
|
|
29,421
|
|
|
|
(1,250
|
)
|
|
|
(171
|
)
|
|
|
28,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
$
|
46,093
|
|
|
$
|
(17,219
|
)
|
|
$
|
167
|
|
|
$
|
29,041
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
85
MOBILE
MINI, INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
MOBILE
MINI, INC.
CONDENSED
CONSOLIDATED STATEMENTS OF INCOME
Twelve
Months Ended December 31, 2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-
|
|
|
|
|
|
|
|
|
|
Guarantors
|
|
|
Guarantors
|
|
|
Eliminations
|
|
|
Consolidated
|
|
|
|
(In thousands)
|
|
|
Revenues:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Leasing
|
|
$
|
283,106
|
|
|
$
|
50,415
|
|
|
$
|
|
|
|
$
|
333,521
|
|
Sales
|
|
|
31,329
|
|
|
|
7,297
|
|
|
|
(21
|
)
|
|
|
38,605
|
|
Other
|
|
|
1,742
|
|
|
|
593
|
|
|
|
|
|
|
|
2,335
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenues
|
|
|
316,177
|
|
|
|
58,305
|
|
|
|
(21
|
)
|
|
|
374,461
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Costs and expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of sales
|
|
|
20,163
|
|
|
|
5,653
|
|
|
|
(21
|
)
|
|
|
25,795
|
|
Leasing, selling and general expenses
|
|
|
154,261
|
|
|
|
38,600
|
|
|
|
|
|
|
|
192,861
|
|
Integration, merger and restructuring expenses
|
|
|
10,457
|
|
|
|
848
|
|
|
|
|
|
|
|
11,305
|
|
Depreciation and amortization
|
|
|
31,562
|
|
|
|
7,520
|
|
|
|
|
|
|
|
39,082
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total costs and expenses
|
|
|
216,443
|
|
|
|
52,621
|
|
|
|
(21
|
)
|
|
|
269,043
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from operations
|
|
|
99,734
|
|
|
|
5,684
|
|
|
|
|
|
|
|
105,418
|
|
Other income (expense):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest income
|
|
|
1,808
|
|
|
|
7
|
|
|
|
(1,786
|
)
|
|
|
29
|
|
Interest expense
|
|
|
(55,394
|
)
|
|
|
(5,896
|
)
|
|
|
1,786
|
|
|
|
(59,504
|
)
|
Dividend income
|
|
|
1,255
|
|
|
|
|
|
|
|
(1,255
|
)
|
|
|
|
|
Foreign currency exchange
|
|
|
|
|
|
|
(88
|
)
|
|
|
|
|
|
|
(88
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) before provision for (benefit from) income taxes
|
|
|
47,403
|
|
|
|
(293
|
)
|
|
|
(1,255
|
)
|
|
|
45,855
|
|
Provision for (benefit from) income taxes
|
|
|
18,491
|
|
|
|
(266
|
)
|
|
|
(168
|
)
|
|
|
18,057
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
$
|
28,912
|
|
|
$
|
(27
|
)
|
|
$
|
(1,087
|
)
|
|
$
|
27,798
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
86
MOBILE
MINI, INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
MOBILE
MINI, INC.
CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS
Twelve
Months Ended December 31, 2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-
|
|
|
|
|
|
|
|
|
|
Guarantors
|
|
|
Guarantors
|
|
|
Eliminations
|
|
|
Consolidated
|
|
|
|
(In thousands)
|
|
|
Cash Flows From Operating Activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
$
|
47,788
|
|
|
$
|
(3,857
|
)
|
|
$
|
245
|
|
|
$
|
44,176
|
|
Adjustments to reconcile income to net cash provided by
operating activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Debt extinguishment expense
|
|
|
2,298
|
|
|
|
|
|
|
|
|
|
|
|
2,298
|
|
Provision for doubtful accounts
|
|
|
1,478
|
|
|
|
391
|
|
|
|
|
|
|
|
1,869
|
|
Amortization of deferred financing costs
|
|
|
985
|
|
|
|
|
|
|
|
|
|
|
|
985
|
|
Share-based compensation expense
|
|
|
3,616
|
|
|
|
405
|
|
|
|
7
|
|
|
|
4,028
|
|
Depreciation and amortization
|
|
|
19,034
|
|
|
|
2,115
|
|
|
|
|
|
|
|
21,149
|
|
Gain on sale of lease fleet units
|
|
|
(4,929
|
)
|
|
|
(631
|
)
|
|
|
|
|
|
|
(5,560
|
)
|
Loss on disposal of property, plant and equipment
|
|
|
203
|
|
|
|
|
|
|
|
|
|
|
|
203
|
|
Deferred income taxes
|
|
|
28,885
|
|
|
|
(1,459
|
)
|
|
|
(70
|
)
|
|
|
27,356
|
|
Foreign currency gain
|
|
|
|
|
|
|
(107
|
)
|
|
|
|
|
|
|
(107
|
)
|
Changes in certain assets and liabilities, net of effect of
businesses acquired:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Receivables
|
|
|
(1,255
|
)
|
|
|
(2,733
|
)
|
|
|
|
|
|
|
(3,988
|
)
|
Inventories
|
|
|
(751
|
)
|
|
|
141
|
|
|
|
|
|
|
|
(610
|
)
|
Deposits and prepaid expenses
|
|
|
(1,618
|
)
|
|
|
(136
|
)
|
|
|
|
|
|
|
(1,754
|
)
|
Other assets and intangibles
|
|
|
318
|
|
|
|
|
|
|
|
|
|
|
|
318
|
|
Accounts payable
|
|
|
1,192
|
|
|
|
1,499
|
|
|
|
|
|
|
|
2,691
|
|
Accrued liabilities
|
|
|
(2,910
|
)
|
|
|
1,155
|
|
|
|
|
|
|
|
(1,755
|
)
|
Intercompany
|
|
|
(2,252
|
)
|
|
|
2,037
|
|
|
|
215
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used in) operating activities
|
|
|
92,082
|
|
|
|
(1,180
|
)
|
|
|
397
|
|
|
|
91,299
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash Flows From Investing Activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash paid for businesses acquired
|
|
|
(9,734
|
)
|
|
|
|
|
|
|
|
|
|
|
(9,734
|
)
|
Additions to lease fleet units, excluding acquisitions
|
|
|
(107,329
|
)
|
|
|
(19,404
|
)
|
|
|
|
|
|
|
(126,733
|
)
|
Proceeds from sale of lease fleet units
|
|
|
13,593
|
|
|
|
2,586
|
|
|
|
2
|
|
|
|
16,181
|
|
Additions to property, plant and equipment
|
|
|
(11,638
|
)
|
|
|
(6,884
|
)
|
|
|
|
|
|
|
(18,522
|
)
|
Proceeds from sale of property, plant and equipment
|
|
|
126
|
|
|
|
|
|
|
|
|
|
|
|
126
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash (used in) provided by investing activities
|
|
|
(114,982
|
)
|
|
|
(23,702
|
)
|
|
|
2
|
|
|
|
(138,682
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash Flows From Financing Activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net borrowings under lines of credit
|
|
|
8,429
|
|
|
|
25,619
|
|
|
|
80
|
|
|
|
34,128
|
|
Redemption of 9.5% Senior Notes
|
|
|
(97,500
|
)
|
|
|
|
|
|
|
|
|
|
|
(97,500
|
)
|
Proceeds from issuance of 6.875% Senior Notes
|
|
|
149,322
|
|
|
|
|
|
|
|
|
|
|
|
149,322
|
|
Deferred financing costs
|
|
|
(3,768
|
)
|
|
|
|
|
|
|
|
|
|
|
(3,768
|
)
|
Proceeds from issuance of notes payable
|
|
|
1,216
|
|
|
|
|
|
|
|
|
|
|
|
1,216
|
|
Principal payments of notes payable
|
|
|
(1,254
|
)
|
|
|
|
|
|
|
|
|
|
|
(1,254
|
)
|
Principal payments on capital lease obligations
|
|
|
(23
|
)
|
|
|
(1
|
)
|
|
|
|
|
|
|
(24
|
)
|
Issuance of common stock, net
|
|
|
5,607
|
|
|
|
|
|
|
|
|
|
|
|
5,607
|
|
Purchase of treasury stock, at cost
|
|
|
(39,300
|
)
|
|
|
|
|
|
|
|
|
|
|
(39,300
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by financing activities
|
|
|
22,729
|
|
|
|
25,618
|
|
|
|
80
|
|
|
|
48,427
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effect of exchange rate changes on cash
|
|
|
1,549
|
|
|
|
219
|
|
|
|
(479
|
)
|
|
|
1,289
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net increase in cash
|
|
|
1,378
|
|
|
|
955
|
|
|
|
|
|
|
|
2,333
|
|
Cash at beginning of year
|
|
|
655
|
|
|
|
715
|
|
|
|
|
|
|
|
1,370
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash at end of year
|
|
$
|
2,033
|
|
|
$
|
1,670
|
|
|
$
|
|
|
|
$
|
3,703
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
87
MOBILE
MINI, INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
MOBILE
MINI, INC.
CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS
Twelve
Months Ended December 31, 2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-
|
|
|
|
|
|
|
|
|
|
Guarantors
|
|
|
Guarantors
|
|
|
Eliminations
|
|
|
Consolidated
|
|
|
|
(In thousands)
|
|
|
Cash Flows From Operating Activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
$
|
46,093
|
|
|
$
|
(17,219
|
)
|
|
$
|
167
|
|
|
$
|
29,041
|
|
Adjustments to reconcile income to net cash provided by (used
in) operating activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Provision for doubtful accounts
|
|
|
4,351
|
|
|
|
912
|
|
|
|
(2
|
)
|
|
|
5,261
|
|
Provision for restructuring charge
|
|
|
5,626
|
|
|
|
|
|
|
|
|
|
|
|
5,626
|
|
Goodwill impairment
|
|
|
|
|
|
|
13,667
|
|
|
|
|
|
|
|
13,667
|
|
Amortization of deferred financing costs
|
|
|
2,455
|
|
|
|
|
|
|
|
|
|
|
|
2,455
|
|
Amortization of long-term liabilities
|
|
|
418
|
|
|
|
|
|
|
|
|
|
|
|
418
|
|
Share-based compensation expense
|
|
|
4,627
|
|
|
|
512
|
|
|
|
5
|
|
|
|
5,656
|
|
Depreciation and amortization
|
|
|
26,402
|
|
|
|
5,365
|
|
|
|
|
|
|
|
31,767
|
|
Gain on sale of lease fleet units
|
|
|
(8,977
|
)
|
|
|
(888
|
)
|
|
|
16
|
|
|
|
(9,849
|
)
|
Loss on disposal of property, plant and equipment
|
|
|
566
|
|
|
|
1
|
|
|
|
|
|
|
|
567
|
|
Deferred income taxes
|
|
|
29,273
|
|
|
|
(1,381
|
)
|
|
|
31
|
|
|
|
27,923
|
|
Foreign currency loss
|
|
|
|
|
|
|
112
|
|
|
|
|
|
|
|
112
|
|
Changes in certain assets and liabilities, net of effect of
businesses acquired:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Receivables
|
|
|
(2,031
|
)
|
|
|
(1,029
|
)
|
|
|
|
|
|
|
(3,060
|
)
|
Inventories
|
|
|
7,655
|
|
|
|
|
|
|
|
|
|
|
|
7,655
|
|
Deposits and prepaid expenses
|
|
|
(698
|
)
|
|
|
875
|
|
|
|
|
|
|
|
177
|
|
Other assets and intangibles
|
|
|
105
|
|
|
|
|
|
|
|
|
|
|
|
105
|
|
Accounts payable
|
|
|
(11,469
|
)
|
|
|
(4,262
|
)
|
|
|
|
|
|
|
(15,731
|
)
|
Accrued liabilities
|
|
|
(1,432
|
)
|
|
|
(1,840
|
)
|
|
|
|
|
|
|
(3,272
|
)
|
Intercompany
|
|
|
(2,502
|
)
|
|
|
4,025
|
|
|
|
(1,523
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used in) operating activities
|
|
|
100,974
|
|
|
|
(1,150
|
)
|
|
|
(1,306
|
)
|
|
|
98,518
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash Flows From Investing Activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash paid for businesses acquired
|
|
|
(36,448
|
)
|
|
|
3,198
|
|
|
|
|
|
|
|
(33,250
|
)
|
Additions to lease fleet units, excluding acquisitions
|
|
|
(58,016
|
)
|
|
|
(18,606
|
)
|
|
|
|
|
|
|
(76,622
|
)
|
Proceeds from sale of lease fleet units
|
|
|
24,652
|
|
|
|
3,758
|
|
|
|
(72
|
)
|
|
|
28,338
|
|
Additions to property, plant and equipment
|
|
|
(11,614
|
)
|
|
|
(5,260
|
)
|
|
|
|
|
|
|
(16,874
|
)
|
Proceeds from sale of property, plant and equipment
|
|
|
492
|
|
|
|
3
|
|
|
|
|
|
|
|
495
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash used in investing activities
|
|
|
(80,934
|
)
|
|
|
(16,907
|
)
|
|
|
(72
|
)
|
|
|
(97,913
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash Flows From Financing Activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net borrowings under lines of credit
|
|
|
109,975
|
|
|
|
19,376
|
|
|
|
(9,010
|
)
|
|
|
120,341
|
|
Deferred financing costs
|
|
|
(15,166
|
)
|
|
|
|
|
|
|
|
|
|
|
(15,166
|
)
|
Proceeds from notes payable
|
|
|
1,249
|
|
|
|
|
|
|
|
|
|
|
|
1,249
|
|
Principal payments on notes payable
|
|
|
(113,851
|
)
|
|
|
|
|
|
|
|
|
|
|
(113,881
|
)
|
Principal payments on capital lease obligations
|
|
|
(702
|
)
|
|
|
(2
|
)
|
|
|
|
|
|
|
(704
|
)
|
Issuance of common stock, net
|
|
|
1,472
|
|
|
|
|
|
|
|
|
|
|
|
1,472
|
|
Intercompany
|
|
|
209
|
|
|
|
(253
|
)
|
|
|
44
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash (used in) provided by financing activities
|
|
|
(16,814
|
)
|
|
|
19,091
|
|
|
|
(8,966
|
)
|
|
|
(6,689
|
)
|
Effect of exchange rate changes on cash
|
|
|
(3,051
|
)
|
|
|
(1,728
|
)
|
|
|
10,344
|
|
|
|
5,565
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net increase (decrease) in cash
|
|
|
175
|
|
|
|
(694
|
)
|
|
|
|
|
|
|
(519
|
)
|
Cash at beginning of year
|
|
|
2,033
|
|
|
|
1,670
|
|
|
|
|
|
|
|
3,703
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash at end of year
|
|
$
|
2,208
|
|
|
$
|
976
|
|
|
$
|
|
|
|
$
|
3,184
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
88
MOBILE
MINI, INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
MOBILE
MINI, INC.
CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS
Twelve
Months Ended December 31, 2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-
|
|
|
|
|
|
|
|
|
|
Guarantors
|
|
|
Guarantors
|
|
|
Eliminations
|
|
|
Consolidated
|
|
|
|
(In thousands)
|
|
|
Cash Flows From Operating Activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
$
|
28,912
|
|
|
$
|
(27
|
)
|
|
$
|
(1,087
|
)
|
|
$
|
27,798
|
|
Adjustments to reconcile income to net cash provided by
operating activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Provision for doubtful accounts
|
|
|
2,189
|
|
|
|
497
|
|
|
|
15
|
|
|
|
2,701
|
|
Provision for restructuring charge
|
|
|
(19
|
)
|
|
|
|
|
|
|
|
|
|
|
(19
|
)
|
Amortization of deferred financing costs
|
|
|
4,456
|
|
|
|
|
|
|
|
|
|
|
|
4,456
|
|
Amortization of long-term liabilities
|
|
|
906
|
|
|
|
|
|
|
|
|
|
|
|
906
|
|
Share-based compensation expense
|
|
|
5,263
|
|
|
|
526
|
|
|
|
(7
|
)
|
|
|
5,782
|
|
Depreciation and amortization
|
|
|
31,562
|
|
|
|
7,520
|
|
|
|
|
|
|
|
39,082
|
|
Gain on sale of lease fleet units
|
|
|
(10,586
|
)
|
|
|
(1,065
|
)
|
|
|
(10
|
)
|
|
|
(11,661
|
)
|
Loss on disposal of property, plant and equipment
|
|
|
66
|
|
|
|
5
|
|
|
|
|
|
|
|
71
|
|
Deferred income taxes
|
|
|
17,460
|
|
|
|
(247
|
)
|
|
|
(12
|
)
|
|
|
17,201
|
|
Foreign currency loss
|
|
|
|
|
|
|
88
|
|
|
|
|
|
|
|
88
|
|
Changes in certain assets and liabilities, net of effect of
businesses acquired:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Receivables
|
|
|
13,503
|
|
|
|
5,123
|
|
|
|
|
|
|
|
18,626
|
|
Inventories
|
|
|
2,545
|
|
|
|
1,146
|
|
|
|
|
|
|
|
3,691
|
|
Deposits and prepaid expenses
|
|
|
3,528
|
|
|
|
(116
|
)
|
|
|
|
|
|
|
3,412
|
|
Other assets and intangibles
|
|
|
(845
|
)
|
|
|
|
|
|
|
|
|
|
|
(845
|
)
|
Accounts payable
|
|
|
(1,850
|
)
|
|
|
(4,443
|
)
|
|
|
|
|
|
|
(6,293
|
)
|
Accrued liabilities
|
|
|
(16,127
|
)
|
|
|
(2,099
|
)
|
|
|
|
|
|
|
(18,226
|
)
|
Intercompany
|
|
|
(8,652
|
)
|
|
|
8,310
|
|
|
|
342
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used in) operating activities
|
|
|
72,311
|
|
|
|
15,218
|
|
|
|
(759
|
)
|
|
|
86,770
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash Flows From Investing Activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Additions to lease fleet, excluding acquisitions
|
|
|
(13,140
|
)
|
|
|
(8,377
|
)
|
|
|
|
|
|
|
(21,517
|
)
|
Proceeds from sale of lease fleet units
|
|
|
29,135
|
|
|
|
4,353
|
|
|
|
7
|
|
|
|
33,495
|
|
Additions to property, plant and equipment
|
|
|
(7,059
|
)
|
|
|
(3,235
|
)
|
|
|
|
|
|
|
(10,294
|
)
|
Proceeds from sale of property, plant and equipment
|
|
|
941
|
|
|
|
311
|
|
|
|
|
|
|
|
1,252
|
|
Other
|
|
|
112
|
|
|
|
|
|
|
|
|
|
|
|
112
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used in) investing activities
|
|
|
9,989
|
|
|
|
(6,948
|
)
|
|
|
7
|
|
|
|
3,048
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash Flows From Financing Activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net repayments under lines of credit
|
|
|
(83,903
|
)
|
|
|
(7,305
|
)
|
|
|
10,331
|
|
|
|
(80,877
|
)
|
Redemption of 9.75% Senior Notes
|
|
|
(1,150
|
)
|
|
|
|
|
|
|
|
|
|
|
(1,150
|
)
|
Deferred financing costs
|
|
|
(75
|
)
|
|
|
|
|
|
|
|
|
|
|
(75
|
)
|
Proceeds from issuance of notes payable
|
|
|
1,272
|
|
|
|
|
|
|
|
|
|
|
|
1,272
|
|
Principal payments on notes payable
|
|
|
(1,478
|
)
|
|
|
(55
|
)
|
|
|
|
|
|
|
(1,533
|
)
|
Principal payments on capital lease obligations
|
|
|
(1,435
|
)
|
|
|
1
|
|
|
|
(2
|
)
|
|
|
(1,436
|
)
|
Issuance of common stock, net
|
|
|
800
|
|
|
|
|
|
|
|
|
|
|
|
800
|
|
Intercompany
|
|
|
(209
|
)
|
|
|
(1,076
|
)
|
|
|
1,285
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash (used in) provided by financing activities
|
|
|
(86,178
|
)
|
|
|
(8,435
|
)
|
|
|
11,614
|
|
|
|
(82,999
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effect of exchange rate changes on cash
|
|
|
2,252
|
|
|
|
347
|
|
|
|
(10,862
|
)
|
|
|
(8,263
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (decrease) increase in cash
|
|
|
(1,626
|
)
|
|
|
182
|
|
|
|
|
|
|
|
(1,444
|
)
|
Cash at beginning of year
|
|
|
2,208
|
|
|
|
976
|
|
|
|
|
|
|
|
3,184
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash at end of year
|
|
$
|
582
|
|
|
$
|
1,158
|
|
|
$
|
|
|
|
$
|
1,740
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
89
|
|
ITEM 9.
|
CHANGES
IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
|
There were no disagreements with accountants on accounting and
financial disclosure matters during the periods reported herein.
|
|
ITEM 9A.
|
CONTROLS
AND PROCEDURES.
|
Disclosure
Controls
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 were effective to ensure
that information required to be disclosed in Exchange Act
reports filed is communicated to management (including the CEO
and CFO) in a timely manner.
Report of
Management on Internal Control Over Financial
Reporting
Our management is responsible for establishing and maintaining
adequate internal control over financial reporting for the
company. Internal control over financial reporting is a process
to provide reasonable assurance regarding the reliability of our
financial reporting for external purposes in accordance with
accounting principles generally accepted in the United States of
America. Internal control over financial reporting includes
maintaining records that in reasonable detail accurately and
fairly reflect our transactions; providing reasonable assurance
that transactions are recorded as necessary for preparation of
our financial statements; providing reasonable assurance that
receipts and expenditures of company assets are made in
accordance with management authorization; and providing
reasonable assurance that unauthorized acquisition, use, or
disposition of company assets that could have a material effect
on our financial statements would be prevented or detected on a
timely basis. Because of its inherent limitations, internal
control over financial reporting is not intended to provide
absolute assurance that a misstatement of our financial
statements would be prevented or detected.
Management conducted an evaluation of the effectiveness of the
Companys internal control over financial reporting based
on the framework in Internal Control Integrated
Framework issued by the Committee of Sponsoring
Organizations of the Treadway Commission. Based on this
evaluation, management concluded that the Companys
internal control over financial reporting was effective as of
December 31, 2009.
Our internal control over financial reporting as of
December 31, 2009 has been audited by Ernst &
Young, LLP, an independent registered public accounting firm, as
stated in their report which is included herein.
90
Report of
Independent Registered Public Accounting Firm
The Board of Directors and Stockholders of
Mobile Mini, Inc.
We have audited Mobile Mini, Inc.s internal control over
financial reporting as of December 31, 2009, based on
criteria established in Internal Control Integrated
Framework issued by the Committee of Sponsoring Organizations of
the Treadway Commission (the COSO criteria). Mobile Mini,
Inc.s management is responsible for maintaining effective
internal control over financial reporting, and for its
assessment of the effectiveness of internal control over
financial reporting included in the accompanying Report of
Management on Internal Control Over Financial Reporting. Our
responsibility is to express an opinion on the companys
internal control over financial reporting based on our audit.
We conducted our audit in accordance with the standards of the
Public Company Accounting Oversight Board (United States). Those
standards require that we plan and perform the audit to obtain
reasonable assurance about whether effective internal control
over financial reporting was maintained in all material
respects. Our audit included obtaining an understanding of
internal control over financial reporting, assessing the risk
that a material weakness exists, testing and evaluating the
design and operating effectiveness of internal control based on
the assessed risk, and performing such other procedures as we
considered necessary in the circumstances. We believe that our
audit provides a reasonable basis for our opinion.
A companys internal control over financial reporting is a
process designed to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of
financial statements for external purposes in accordance with
generally accepted accounting principles. A companys
internal control over financial reporting includes those
policies and procedures that (1) pertain to the maintenance
of records that, in reasonable detail, accurately and fairly
reflect the transactions and dispositions of the assets of the
company; (2) provide reasonable assurance that transactions
are recorded as necessary to permit preparation of financial
statements in accordance with generally accepted accounting
principles, and that receipts and expenditures of the company
are being made only in accordance with authorizations of
management and directors of the company; and (3) provide
reasonable assurance regarding prevention or timely detection of
unauthorized acquisition, use or disposition of the
companys assets that could have a material effect on the
financial statements.
Because of its inherent limitations, internal control over
financial reporting may not prevent or detect misstatements.
Also, projections of any evaluation of effectiveness to future
periods are subject to the risk that controls may become
inadequate because of changes in conditions, or that the degree
of compliance with the policies or procedures may deteriorate.
In our opinion, Mobile Mini, Inc. maintained, in all material
respects, effective internal control over financial reporting as
of December 31, 2009, based on the COSO criteria.
We also have audited, in accordance with the standards of the
Public Company Accounting Oversight Board (United States), the
consolidated balance sheets of Mobile Mini, Inc. (and
subsidiaries) as of December 31, 2009 and 2008, and the
related consolidated statements of income, preferred stock and
stockholders equity, and cash flows for each of the three
years in the period ended December 31, 2009 of Mobile Mini,
Inc. and our report dated March 1, 2010 expressed an
unqualified opinion thereon.
Phoenix, Arizona
March 1, 2010
91
Changes
in Internal Control Over Financial Reporting
There were no changes in our internal controls over financial
reporting that occurred during our last fiscal quarter that have
materially affected, or are reasonably likely to materially
affect, our internal control over financial reporting.
|
|
ITEM 9B.
|
OTHER
INFORMATION.
|
None
PART III
|
|
ITEM 10.
|
DIRECTORS,
EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE.
|
EXECUTIVE
OFFICERS OF MOBILE MINI, INC.
Set forth below is information respecting the name, age and
position with Mobile Mini of our executive officers. Information
with respect to our directors and the nomination process is
incorporated herein by reference to information included in the
Proxy Statement for our 2010 Annual Meeting of Stockholders, to
be filed with the Securities and Exchange Commission no later
than 120 days following our fiscal year end (the 2010 Proxy
Statement).
Steven G. Bunger has served as our Chief Executive Officer,
President and a director since April 1997, and as our Chairman
of the Board since February 2001. Mr. Bunger joined Mobile
Mini in 1983 and initially worked in our drafting and design
department. He served in a variety of positions including
dispatcher, salesperson and advertising coordinator before
joining management. He served as sales manager of our Phoenix
branch and our operations manager and Vice President of
Operations and Marketing before becoming our Executive Vice
President and Chief Operating Officer in November 1995. He is
also a director of Cavco Industries, Inc., one of the
nations largest producers of manufactured housing.
Mr. Bunger graduated from Arizona State University with a
B.A. in Business Administration. Age 48.
Mark E. Funk has served as our Executive Vice President and
Chief Financial Officer since November 2008. Prior to joining
us, he was with Deutsche Bank Securities Inc. from September
1988 to November 2008, most recently as Managing Director in its
Structured Debt Group, where he had worked on numerous high
profile transactions. During his tenure at Deutsche Bank,
Mr. Funk worked in their New York, London, Chicago and Los
Angeles offices. Prior to joining Deutsche Bank, Mr. Funk
passed the certified public accountant examination and was a
senior auditor with KPMG. Mr. Funk earned a Bachelor of
Science in Business Administration from California State
University Long Beach and an MBA from University of California,
Los Angeles. Age 47.
Jody E. Miller has served as our Executive Vice President and
Chief Operating Officer since January 2009. Mr. Miller
joined us in June 2008 as Senior Vice President, Southeastern
Division from Mobile Storage Group. He had been a Regional Vice
President-Southeast Region and North Region since March 2004
with Mobile Storage Group. Prior to that he had served as
Regional Vice President of Rental Service Corporation, working
there from October 1988 to February 2004. Mr. Miller
graduated from Central Missouri State University with a degree
in construction engineering. He has worked in the equipment
leasing and portable storage industry for 21 years.
Age 42.
Kyle G. Blackwell joined Mobile Mini in 1988 and has served in
numerous capacities, currently as our Senior Vice President,
Eastern Division, since 2002 and as our Vice President,
Operations from 1999 to 2000. He also served as a Regional
Manager from 1995 to 1999 and was engaged with the start up of
our Texas locations. Age 46.
Ronald Halchishak joined Mobile Mini after the combination with
Mobile Storage Group in June 2008 as our Senior Vice President
and Managing Director-Europe. He had been a Managing Director of
Ravenstock MSG since July 2007. Prior to that, from June 2003 to
January 2007, he served as the Vice President of the
Mid-Atlantic for Nations Rent. From June 1991 to March 2001,
Mr. Halchishak was Division President at Rental
Service Corporation. He graduated from Humboldt State University
with a B.A. in political science and psychology. Age 62.
92
Jon D. Keating has served as our Senior Vice President,
Operations since January 2008. He joined Mobile Mini in 1996 and
also served as Vice President, Manufacturing from April 2005 to
December 2007, a Regional Manager from March of 2000 to April
2005 and from November of 1996 to March of 2000 as Branch
Manager at our Phoenix sales branch. Age 40.
Deborah K. Keeley has served as our Senior Vice President and
Chief Accounting Officer since November 2005. From September
2005 to November 2005, she served as Senior Vice President. From
June 2005 to September 2005, she served as Senior Vice President
and Controller. From August 1996 to June 2005 she served as Vice
President and Controller and from August 1995 as Controller.
Prior to joining us, she was Corporate Accounting Manager for
Evans Withycombe Residential, an apartment developer, for six
years. Ms. Keeley has an Associates degree in Computer
Science and received her Bachelors degree in Accounting from
Arizona State University. Age 45.
Russell C. Lemley served as our Senior Vice President, Western
Division from 1999 to February 2010, except from December 2007
to December 2008, when he served as our Executive Vice President
and Chief Operating Officer. Prior to 1999, he served as our
Vice President, Operations from June 1998 to November 1999. He
joined us in August 1988 as Construction Superintendent to build
our ten-acre
facility in Los Angeles, California and served as Plant Manager
of that facility from 1989 to 1994 and as General Manager from
1994 to 1998. Prior to joining us, Mr. Lemley was the
Project Manager from 1984 through 1987 for the largest automated
pallet rack high rise in the United Sates for Ralphs
Grocery in San Fernando, California and managed the
construction of the first automated parts pallet rack facility
for Suzuki in Brea, California. Age 52.
Ronald E. Marshall has served as our Senior Vice President,
Central Division since October of 2003. From June of 1999 to
September of 2003 he was a Regional Manager for three of our
regions beginning with the Colorado/Utah and ending with the
California/Arizona market. He was our Director-Acquisitions from
February of 1998 to May of 1999. He joined Mobile Mini, Inc. in
February of 1997 as Branch Manager of Tucson, Arizona. Prior to
joining us, he was the General Manager of Pearce Distributing, a
beverage distributorship in Phoenix, Arizona. Age 59.
Christopher J. Miner has served as Senior Vice President and
General Counsel since December 2008. He joined Mobile Mini in
June 2008 as Vice President and General Counsel. He was
previously a partner at DLA Piper from 2007 to 2008 and advised
numerous corporate and financial institution clients on merger,
acquisition and capital markets transactions. Prior to that, he
was a partner at Squire, Sanders & Dempsey, which he
joined in 2004. He was an attorney in New York and Europe with
Davis Polk & Wardwell from 1999 to 2004 where he
specialized in corporate and securities law. Mr. Miner
received a B.A. and a J.D. from Brigham Young University.
Age 38.
Information regarding our audit committee and our audit
committee financial experts is incorporated herein by reference
to information included in the 2010 Proxy Statement.
Information required by Item 405 of
Regulation S-K
is incorporated herein by reference to information included in
the 2010 Proxy Statement.
We have adopted a Code of Business Conduct and Ethics that
applies to our employees generally, and a Supplemental Code of
Ethics for Chief Financial Officer and Senior Financial Officers
in compliance with applicable rules of the SEC that applies to
our principal executive officer, our principal financial
officer, and our principal accounting officer or controller, or
persons performing similar functions. A copy of these Codes is
available free of charge on the Investors section of
our web site at www.mobilemini.com. We intend to satisfy
any disclosure requirement under Item 5.05 of
Form 8-K
regarding an amendment to, or waiver from, a provision of the
Supplemental Code of Ethics by posting such information on our
web site at the address and location specified above.
|
|
ITEM 11.
|
EXECUTIVE
COMPENSATION.
|
Information with respect to executive compensation is
incorporated herein by reference to information included in the
2010 Proxy Statement.
93
|
|
ITEM 12.
|
SECURITY
OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
RELATED STOCKHOLDER MATTERS.
|
Equity
Compensation Plan Information
We maintain the 1994 Stock Option Plan (the 1994 Plan), the 1999
Stock Option Plan (the 1999 Plan) and the 2006 Equity Incentive
Plan (the 2006 Plan), pursuant to which we may grant equity
awards to eligible persons. The 1994 Plan expired in 2003 and no
additional options may be granted hereunder and there are no
outstanding options subject to exercise at the end of 2009. The
1999 Plan expired in 2009 and no additional options maybe
granted hereunder, outstanding options continue to be subject to
the terms of the 1999 Plan until their exercise or termination.
The following table summarizes our equity compensation plan
information as of December 31, 2009. Information is
included for both equity compensation plans approved by our
stockholders and equity plans not approved by our stockholders.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common Shares
|
|
|
|
|
|
Common Shares Remaining
|
|
|
|
to be Issued Upon
|
|
|
Weighted Average
|
|
|
Available for Future
|
|
|
|
Exercise of
|
|
|
Exercise Price of
|
|
|
Issuance Under Equity
|
|
|
|
Outstanding
|
|
|
Outstanding
|
|
|
Compensation Plans
|
|
|
|
Options, Warrants
|
|
|
Options, Warrants
|
|
|
(Excluding Shares
|
|
|
|
and Rights
|
|
|
and Rights
|
|
|
Reflected in Column (a)
|
|
Plan Category
|
|
(a)
|
|
|
(b)
|
|
|
(c)
|
|
|
|
(In thousands)
|
|
|
|
|
|
(In thousands)
|
|
|
Equity compensation plans approved by Mobile Mini stockholders(1)
|
|
|
1,559
|
|
|
$
|
17.20
|
|
|
|
2,788
|
|
Equity compensation plans not approved by Mobile Mini
stockholders
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Totals
|
|
|
1,559
|
|
|
$
|
17.20
|
|
|
|
2,788
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Of these shares, options to purchase 1.53 million shares
were outstanding under the 1999 Plan and options to purchase
29,000 shares were outstanding under the 2006 Plan. |
On December 31, 2009, the closing price of Mobile
Minis common stock as reported by The Nasdaq Stock Market
was $14.09.
The information set forth in our 2010 Proxy Statement under the
headings Security Ownership of Certain Beneficial Owners
and Management is incorporated herein by reference.
|
|
ITEM 13.
|
CERTAIN
RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR
INDEPENDENCE.
|
The information set forth in our 2010 Proxy Statement under the
caption Related Person Transactions and information
relating to director independence is incorporated herein by
reference.
|
|
ITEM 14.
|
PRINCIPAL
ACCOUNTING FEES AND SERVICES.
|
The information set forth in our 2010 Proxy Statement under the
caption Audit Committee Disclosure is incorporated
herein by reference.
94
PART IV
|
|
ITEM 15.
|
EXHIBITS AND
FINANCIAL STATEMENT SCHEDULES.
|
(a) Financial Statements:
(1) The financial statements required to be included in
this Report are included in Item 8 of this Report.
(2) The following financial statement schedule for the
years ended December 31, 2007, 2008 and 2009 is filed with
our annual report on
Form 10-K
for fiscal year ended December 31, 2009:
Schedule II Valuation and Qualifying Accounts
All other schedules have been omitted because they are not
applicable or not required.
|
|
|
|
|
Exhibit
|
|
|
Number
|
|
Description
|
|
|
2
|
.1
|
|
Agreement and Plan of Merger, dated as of February 22,
2008, among Mobile Mini, Inc., Cactus Merger Sub, Inc., MSG WC
Holdings Corp., and Welsh, Carson, Anderson & Stowe X,
L.P. (Incorporated by reference to Exhibit 2.1 to the
Registrants Report on
Form 8-K
filed on February 28, 2008).
|
|
3
|
.1
|
|
Amended and Restated Certificate of Incorporation of Mobile
Mini, Inc. (Incorporated by reference to Exhibit 3.1 to the
Registrants Report on
Form 10-K
for the fiscal year ended December 31, 1997).
|
|
3
|
.2
|
|
Certificate of Amendment, dated July 20, 2000, to the
Amended and Restated Certificate of Incorporation of the
Registrant (Incorporated by reference to Exhibit 3.1A to
the Registrants Report on
Form 10-Q
for the quarter ended June 30, 2000).
|
|
3
|
.3
|
|
Certificate of Designation, Preferences and Rights of
Series C Junior Participating Preferred Stock of Mobile
Mini, Inc., dated December 17, 1999 (Incorporated by
reference to Exhibit A to Exhibit 1 to the
Registrants Registration Statement on
Form 8-A
filed on December 13, 1999).
|
|
3
|
.4
|
|
Certificate of Amendment of the Amended and Restated Certificate
of Incorporation of Mobile Mini, Inc., dated June 26, 2008
(Incorporated by reference to Exhibit 3.2 to the
Registrants Report on
Form 8-K
filed on July 1, 2008).
|
|
3
|
.5
|
|
Certificate of Designation of Mobile Mini, Inc. Series A
Convertible Redeemable Participating Preferred Stock, dated
June 27, 2008 (Incorporated by reference to
Exhibit 3.1 to the Registrants Report on
Form 8-K
filed on July 1, 2008).
|
|
3
|
.6
|
|
Amended and Restated By-laws of Mobile Mini, Inc., as amended
and restated through May 2, 2007 (Incorporated by reference
to Exhibit 3.2 to the Registrants Report on
Form 10-K
for the fiscal year ended December 31, 2007).
|
|
4
|
.1
|
|
Form of Common Stock Certificate. (Incorporated by reference to
Exhibit 4.1 of the Registrants Report on
Form 10-K
for the fiscal year ended December 31, 2003).
|
|
4
|
.2
|
|
Rights Agreement, dated as of December 9, 1999, between
Mobile Mini, Inc. and Norwest Bank Minnesota, NA, as Rights
Agent. (Incorporated by reference to the Registrants
Registration Statement on
Form 8-A
filed on December 13, 1999).
|
|
4
|
.3
|
|
Indenture dated as of May 7, 2007 among the Registrant, Law
Debenture Trust Company of New York, as Trustee, and
Deutsche Bank Trust Company Americas, as Paying Agent and
Registrar (incorporated by reference to Exhibit 4.1 to the
Registrants Registration Statement on
Form S-4
filed on June 26, 2007) (the Mobile Mini
Indenture).
|
|
4
|
.4
|
|
Supplemental Indenture, dated as of June 27, 2008, among
Mobile Mini, Inc., Mobile Storage Group, Inc., A Better Mobile
Storage Company, Mobile Storage Group (Texas), LP, the
guarantors party to the Mobile Mini Indenture and Law Debenture
Trust Company of New York, as trustee (Incorporated by
reference to Exhibit 4.3 to the Registrants Report on
Form 8-K
filed on July 1, 2008).
|
|
4
|
.5
|
|
Indenture, dated as of August 1, 2006, by and among Mobile
Services Group, Inc., Mobile Storage Group, Inc., the subsidiary
guarantors named therein and Wells Fargo Bank, N.A., as trustee
(Incorporated by reference to Exhibit 4.1 to Mobile Storage
Group, Inc.s
Form S-4
filed on September 18, 2007) (the MSG
Indenture).
|
|
4
|
.6
|
|
Supplemental Indenture, dated as of June 27, 2008, among
Mobile Mini, Inc., Mobile Mini of Ohio, LLC, Mobile Mini, LLC,
Mobile, LLC, Mobile Mini I, Inc., A Royal Wolf Portable
Storage, Inc., Temporary Mobile Storage, Inc., Delivery Design
Systems, Inc., Mobile Mini Texas Limited Partnership, LLP,
Mobile Storage Group, Inc., the guarantors party to the MSG
Indenture and Wells Fargo Bank, N.A., as trustee (Incorporated
by reference to Exhibit 4.1 to the Registrants Report
on
Form 8-K
filed on July 1, 2008).
|
95
|
|
|
|
|
Exhibit
|
|
|
Number
|
|
Description
|
|
|
10
|
.1
|
|
Mobile Mini, Inc. Amended and Restated 1994 Stock Option Plan.
(Incorporated by reference to Exhibit 10.3 of the
Registrants Report on
Form 10-K
for the fiscal year ended December 31, 1997).
|
|
10
|
.2
|
|
Mobile Mini, Inc. Amended and Restated 1999 Stock Option Plan
(as amended through March 25, 2003). (Incorporated by
reference to Appendix B of the Registrants Definitive
Proxy Statement for its 2003 annual meeting of shareholders,
filed on April 11, 2003 under cover of Schedule 14A).
|
|
10
|
.3
|
|
Form of Stock Option Grant Agreement (Incorporated by reference
to Exhibit 10.2.1 of the Registrants Report on
Form 10-K
for the fiscal year ended December 31, 2004).
|
|
10
|
.4
|
|
Mobile Mini, Inc. 2006 Equity Incentive Plan (Incorporated by
reference to Exhibit A of the Registrants Definitive
Proxy Statement for its 2009 annual meeting of shareholders
filed on April 30, 2009 under cover of Schedule 14A).
|
|
10
|
.5
|
|
ABL Credit Agreement, dated June 27, 2008, between Mobile
Mini, Deutsche Bank AG New York Branch and other lenders party
thereto (Incorporated by reference to Exhibit 10.3 to the
Registrants Report on
Form 8-K
filed on July 1, 2008).
|
|
10
|
.6
|
|
First Amendment to ABL Credit Agreement, dated August 31,
2008, between Mobile Mini, certain of its subsidiaries, Deutsche
Bank AG New York Branch and the other lenders party thereto
(Incorporated by reference to Exhibit 10.1 to the
Registrants Report on
Form 8-K
filed on September 4, 2008).
|
|
10
|
.7
|
|
Amended and Restated Employment Agreement dated as of
May 28, 2008 by and between Mobile Mini, Inc. and Steven G.
Bunger. (Incorporated by reference to Exhibit 99.1 to the
Registrants Report on
Form 8-K
dated June 2, 2008).
|
|
10
|
.8
|
|
2009 Amendment to Amended and Restated Employment Agreement
effective as of January 1, 2009 by and between Mobile Mini,
Inc. and Steven G. Bunger. (Filed herewith).
|
|
10
|
.9
|
|
Employment Agreement dated September 30, 2008 between
Mobile Mini, Inc. and Lawrence Trachtenberg. (Incorporated by
reference to Exhibit 10.1 to the Registrants Report
on
Form 8-K
filed on September 30, 2008).
|
|
10
|
.10
|
|
Employment Agreement dated October 15, 2008 between Mobile
Mini, Inc. and Mark E. Funk. (Incorporated by reference to
Exhibit 10.1 to the Registrants Report on
Form 8-K
filed on October 17, 2008).
|
|
10
|
.11
|
|
2009 Amendment to Amended and Restated Employment Agreement
effective as of January 1, 2009 by and between Mobile Mini,
Inc. and Mark E. Funk. (Filed herewith).
|
|
10
|
.12
|
|
Employment Agreement dated as of December 18, 2008 by and
between Mobile Mini, Inc. and Jody Miller. (Incorporated by
reference to Exhibit 99.1 to the Registrants Report
on
Form 8-K
filed on December 23, 2008).
|
|
10
|
.13
|
|
2009 Amendment to Amended and Restated Employment Agreement
effective as of January 1, 2009 by and between Mobile Mini,
Inc. and Jody Miller. (Filed herewith).
|
|
10
|
.14
|
|
Employment Agreement dated as of December 22, 2009 by and
between Mobile Mini, Inc. and Christopher J. Miner.
(Incorporated by reference to Exhibit 99.1 to the
Registrants Report on
Form 8-K
filed on December 24, 2009).
|
|
10
|
.15
|
|
Form of Indemnification Agreement between the Registrant and its
Directors and Executive Officers. (Incorporated by reference to
Exhibit 10.20 to the Registrants Report on
Form 10-Q
for the quarter ended June 30, 2004).
|
|
10
|
.16
|
|
Escrow Agreement dated as of June 27, 2008, between Mobile
Mini, Welsh, Carson, Anderson & Stowe X, L.P. and
Wells Fargo Bank, N.A. (Incorporated by reference to
Exhibit 10.1 to the Registrants Report on
Form 8-K
filed on July 1, 2008).
|
|
10
|
.17
|
|
Stockholders Agreement dated as of June 27, 2008, between
Mobile Mini and the certain stockholders. (Incorporated by
reference to Exhibit 10.2 to the Registrants Report
on
Form 8-K
filed on July 1, 2008).
|
|
21
|
|
|
Subsidiaries of Mobile Mini, Inc. (Filed herewith)
|
|
23
|
.1
|
|
Consent of Independent Registered Public Accounting Firm. (Filed
herewith).
|
|
31
|
.1
|
|
Certification of Chief Executive Officer pursuant to
Item 601(b)(31) of
Regulation S-K.
(Filed herewith).
|
|
31
|
.2
|
|
Certification of Chief Financial Officer pursuant to
Item 601(b)(31) of
Regulation S-K.
(Filed herewith).
|
|
32
|
.1
|
|
Certification of Chief Executive Officer and Chief Financial
Officer pursuant to Item 601(b)(32) of
Regulation S-K.
(Filed herewith).
|
96
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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: March 1, 2010
|
|
By:
|
|
/s/ Steven G. Bunger
Steven G. Bunger, President
|
Pursuant to the requirements of the Securities Exchange Act of
1934, this Report has been signed by the following persons on
behalf of the registrant and in the capacities and on the dates
indicated.
|
|
|
|
|
Date: March 1, 2010
|
|
By:
|
|
/s/ Steven G. Bunger
Steven G. Bunger President, Chief Executive Officer and
Director (Principal Executive Officer)
|
Date: March 1, 2010
|
|
By:
|
|
/s/ Mark E. Funk
Mark E. Funk Executive Vice President and Chief Financial
Officer (Principal Financial Officer)
|
Date: March 1, 2010
|
|
By:
|
|
/s/ Deborah K. Keeley
Deborah K. Keeley Senior Vice President and Chief Accounting
Officer (Principal Accounting Officer)
|
Date: March 1, 2010
|
|
By:
|
|
/s/ James J. Martell
James J. Martell, Director
|
Date: March 1, 2010
|
|
By:
|
|
/s/ Jeffrey S. Goble
Jeffrey S. Goble, Director
|
Date: March 1, 2010
|
|
By:
|
|
/s/ Stephen A McConnell
Stephen A McConnell, Director
|
Date: March 1, 2010
|
|
By:
|
|
/s/ Frederick G. McNamee
Frederick G. McNamee, Director
|
Date: March 1, 2010
|
|
By:
|
|
/s/ Sanjay Swani
Sanjay Swani, Director
|
Date: March 1, 2010
|
|
By:
|
|
/s/ Lawrence Trachtenberg
Lawrence Trachtenberg, Director
|
Date: March 1, 2010
|
|
By:
|
|
/s/ Michael L. Watts
Michael L. Watts, Director
|
97
SCHEDULE II
MOBILE
MINI, INC.
VALUATION
AND QUALIFYING ACCOUNTS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Years Ended December 31,
|
|
|
|
2007
|
|
|
2008
|
|
|
2009
|
|
|
|
(In thousands)
|
|
|
Allowance for doubtful accounts:
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at beginning of year
|
|
$
|
5,008
|
|
|
$
|
3,993
|
|
|
$
|
7,193
|
|
Provision charged to expense
|
|
|
1,869
|
|
|
|
5,261
|
|
|
|
2,701
|
|
Acquired through business acquisitions
|
|
|
|
|
|
|
2,873
|
|
|
|
623
|
|
Write-offs
|
|
|
(2,884
|
)
|
|
|
(4,934
|
)
|
|
|
(6,802
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at end of year
|
|
$
|
3,993
|
|
|
$
|
7,193
|
|
|
$
|
3,715
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
98
INDEX TO
EXHIBITS FILED HEREWITH
|
|
|
|
|
Exhibit
|
|
|
Number
|
|
Description
|
|
|
10
|
.8
|
|
2009 Amendment to Amended and Restated Employment Agreement
effective as of January 1, 2009 by and between Mobile Mini,
Inc. and Steven G. Bunger.
|
|
10
|
.11
|
|
2009 Amendment to Amended and Restated Employment Agreement
effective as of January 1, 2009 by and between Mobile Mini,
Inc. and Mark E. Funk.
|
|
10
|
.13
|
|
2009 Amendment to Amended and Restated Employment Agreement
effective as of January 1, 2009 by and between Mobile Mini,
Inc. and Jody Miller.
|
|
21
|
|
|
Subsidiaries of Mobile Mini, Inc.
|
|
23
|
.1
|
|
Consent of Independent Registered Public Accounting Firm.
|
|
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.
|
99