Form 10-Q
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
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þ |
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended September 30, 2010
or
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o |
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from to
Commission File Number: 1-12804
(Exact name of registrant as specified in its charter)
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Delaware
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86-0748362 |
(State or other jurisdiction of
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(I.R.S. Employer |
incorporation or organization)
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Identification No.) |
7420 S. Kyrene Road, Suite 101
Tempe, Arizona 85283
(Address of principal executive offices)
(480) 894-6311
(Registrants telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed
by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or
for such shorter period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. Yes þ No o
Indicate by check mark whether the registrant has submitted electronically and posted on its
corporate Web site, if any, every Interactive Data File required to be submitted and posted
pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months
(or for such shorter period that the registrant was required to submit and post such files). Yes
þ No o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated
filer, a non-accelerated filer, or a smaller reporting company. See the definitions of large
accelerated filer, accelerated filer and smaller reporting company in Rule 12b-2 of the
Exchange Act.
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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 Exchange Act) Yes o No þ
At October 29, 2010, there were outstanding 36,435,444 shares of the issuers common stock.
MOBILE MINI, INC.
INDEX TO FORM 10-Q FILING
FOR THE QUARTER ENDED SEPTEMBER 30, 2010
TABLE OF CONTENTS
2
PART I. FINANCIAL INFORMATION
ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS
MOBILE MINI, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands except per share data)
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December 31, 2009 |
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September 30, 2010 |
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(See Note A) |
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(unaudited) |
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ASSETS |
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Cash and cash equivalents |
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$ |
1,740 |
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$ |
2,099 |
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Receivables, net of allowance for doubtful accounts of $3,715 and $2,984 at
December 31, 2009 and September 30, 2010, respectively |
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40,867 |
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43,808 |
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Inventories |
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22,147 |
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20,517 |
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Lease fleet, net |
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1,055,328 |
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1,037,569 |
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Property, plant and equipment, net |
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84,160 |
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79,227 |
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Deposits and prepaid expenses |
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9,916 |
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7,088 |
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Other assets and intangibles, net |
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26,643 |
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20,617 |
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Goodwill |
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513,238 |
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512,777 |
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Total assets |
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$ |
1,754,039 |
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$ |
1,723,702 |
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LIABILITIES AND STOCKHOLDERS EQUITY |
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Liabilities: |
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Accounts payable |
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$ |
14,130 |
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$ |
13,309 |
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Accrued liabilities |
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64,915 |
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53,400 |
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Lines of credit |
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473,655 |
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433,111 |
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Notes payable |
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1,128 |
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14 |
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Obligations under capital leases |
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4,061 |
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2,958 |
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Senior Notes, net |
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345,402 |
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340,031 |
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Deferred income taxes |
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155,697 |
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165,094 |
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Total liabilities |
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1,058,988 |
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1,007,917 |
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Commitments and contingencies |
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Convertible preferred stock; $.01 par value, 20,000 shares authorized,
8,556 issued and 8,191 outstanding at December 31, 2009 and September 30,
2010, stated at liquidation preference values |
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147,427 |
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147,427 |
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Stockholders equity: |
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Common stock; $.01 par value: 95,000 shares authorized, 38,451 issued and
36,276 outstanding at December 31, 2009 and 38,614 issued and 36,439
outstanding at
September 30, 2010 |
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385 |
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386 |
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Additional paid-in capital |
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341,597 |
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347,540 |
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Retained earnings |
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270,733 |
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283,391 |
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Accumulated other comprehensive loss |
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(25,791 |
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(23,659 |
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Treasury stock, at cost, 2,175 shares |
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(39,300 |
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(39,300 |
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Total stockholders equity |
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547,624 |
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568,358 |
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Total liabilities and stockholders equity |
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$ |
1,754,039 |
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$ |
1,723,702 |
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See accompanying notes to the condensed consolidated financial statements.
3
MOBILE MINI, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(In thousands except per share data)
(unaudited)
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Three Months Ended September 30, |
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2009 |
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2010 |
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Revenues: |
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Leasing |
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$ |
82,098 |
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$ |
75,599 |
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Sales |
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9,493 |
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8,307 |
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Other |
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495 |
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711 |
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Total revenues |
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92,086 |
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84,617 |
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Costs and expenses: |
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Cost of sales |
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6,220 |
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5,388 |
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Leasing, selling and general expenses |
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47,355 |
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46,238 |
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Integration, merger and restructuring expenses |
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1,532 |
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518 |
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Depreciation and amortization |
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9,227 |
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8,748 |
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Total costs and expenses |
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64,334 |
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60,892 |
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Income from operations |
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27,752 |
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23,725 |
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Other income (expense): |
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Interest income |
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23 |
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Interest expense |
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(14,595 |
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(14,161 |
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Deferred financing costs write-off |
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(525 |
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Foreign currency exchange (loss) gain |
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(13 |
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5 |
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Income before provision for income taxes |
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13,167 |
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9,044 |
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Provision for income taxes |
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5,047 |
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3,575 |
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Net income |
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8,120 |
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5,469 |
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Earnings allocable to preferred stockholders |
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(1,615 |
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(1,032 |
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Net income available to common stockholders |
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$ |
6,505 |
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$ |
4,437 |
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Earnings per share: |
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Basic |
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$ |
0.19 |
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$ |
0.13 |
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Diluted |
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$ |
0.19 |
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$ |
0.12 |
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Weighted average number of common and common share equivalents outstanding: |
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Basic |
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34,464 |
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35,219 |
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Diluted |
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43,416 |
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43,877 |
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See accompanying notes to the condensed consolidated financial statements.
4
MOBILE MINI, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(In thousands except per share data)
(unaudited)
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Nine Months Ended September 30, |
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2009 |
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2010 |
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Revenues: |
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Leasing |
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$ |
256,011 |
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$ |
218,689 |
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Sales |
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29,411 |
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23,126 |
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Other |
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1,752 |
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1,523 |
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Total revenues |
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287,174 |
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243,338 |
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Costs and expenses: |
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Cost of sales |
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19,709 |
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15,266 |
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Leasing, selling and general expenses |
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148,002 |
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133,360 |
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Integration, merger and restructuring expenses |
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9,375 |
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3,672 |
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Depreciation and amortization |
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29,914 |
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26,928 |
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Total costs and expenses |
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207,000 |
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179,226 |
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Income from operations |
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80,174 |
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64,112 |
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Other income (expense): |
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Interest income |
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29 |
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1 |
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Interest expense |
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(44,802 |
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(43,135 |
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Deferred financing costs write-off |
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(525 |
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Foreign currency exchange loss |
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(88 |
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(9 |
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Income before provision for income taxes |
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35,313 |
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20,444 |
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Provision for income taxes |
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13,500 |
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7,786 |
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Net income |
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21,813 |
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12,658 |
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Earnings allocable to preferred stockholders |
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(4,344 |
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(2,391 |
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Net income available to common stockholders |
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$ |
17,469 |
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$ |
10,267 |
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Earnings per share: |
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Basic |
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$ |
0.51 |
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$ |
0.29 |
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Diluted |
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$ |
0.51 |
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$ |
0.29 |
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Weighted average number of common and common share equivalents outstanding: |
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Basic |
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34,400 |
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35,150 |
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Diluted |
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43,171 |
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43,728 |
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See accompanying notes to the condensed consolidated financial statements.
5
MOBILE MINI, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(unaudited)
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Nine Months Ended September 30, |
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2009 |
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2010 |
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Cash Flows From Operating Activities: |
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Net income |
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$ |
21,813 |
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$ |
12,658 |
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Adjustments to reconcile net income to net cash provided
by operating activities: |
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Deferred financing costs write-off |
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525 |
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Provision for doubtful accounts |
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1,840 |
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1,679 |
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Amortization of deferred financing costs |
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3,340 |
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3,298 |
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Amortization of long-term liabilities |
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552 |
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833 |
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Share-based compensation expense |
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5,106 |
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4,905 |
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Depreciation and amortization |
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29,914 |
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26,928 |
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Gain on sale of lease fleet units |
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(8,805 |
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(7,161 |
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Gain on disposal of property, plant and equipment |
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(102 |
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(79 |
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Deferred income taxes |
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12,872 |
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7,777 |
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Foreign currency transaction loss |
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88 |
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9 |
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Changes in certain assets and liabilities: |
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Receivables |
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18,053 |
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(4,650 |
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Inventories |
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2,788 |
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1,593 |
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Deposits and prepaid expenses |
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3,123 |
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2,822 |
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Other assets and intangibles |
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(669 |
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(913 |
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Accounts payable |
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(6,438 |
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(857 |
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Accrued liabilities |
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(14,850 |
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(7,194 |
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Net cash provided by operating activities |
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68,625 |
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42,173 |
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Cash Flows From Investing Activities: |
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Additions to lease fleet |
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(16,522 |
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(11,232 |
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Proceeds from sale of lease fleet units |
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25,431 |
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20,266 |
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Additions to property, plant and equipment |
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(8,135 |
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(3,771 |
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Proceeds from sale of property, plant and equipment |
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821 |
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120 |
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Other |
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112 |
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Net cash provided by investing activities |
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1,707 |
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5,383 |
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Cash Flows From Financing Activities: |
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Net repayments under lines of credit |
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(61,226 |
) |
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(40,544 |
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Deferred financing costs |
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(74 |
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Proceeds from issuance of notes payable |
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94 |
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Redemption of Senior Notes |
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(6,000 |
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Principal payments on notes payable |
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(1,202 |
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(1,207 |
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Principal payments on capital lease obligations |
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(1,082 |
) |
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(1,103 |
) |
Issuance of common stock, net |
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603 |
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922 |
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Net cash used in financing activities |
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(62,907 |
) |
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(47,912 |
) |
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Effect of exchange rate changes on cash |
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(8,868 |
) |
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715 |
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Net (decrease) increase in cash |
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(1,443 |
) |
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359 |
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Cash at beginning of period |
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3,184 |
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1,740 |
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Cash at end of period |
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$ |
1,741 |
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$ |
2,099 |
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Supplemental Disclosure of Cash Flow Information: |
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Interest rate swap changes in value credited to equity |
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$ |
(1,509 |
) |
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$ |
(2,629 |
) |
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|
See accompanying notes to the condensed consolidated financial statements.
6
MOBILE MINI, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
NOTE A Basis of Presentation
The accompanying unaudited condensed consolidated financial statements have been prepared in
conformity with U.S. generally accepted accounting principles applicable to interim financial
information and the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they
do not include all the information and footnotes required by U.S. generally accepted accounting
principles for complete financial statements. In the opinion of management of Mobile Mini, Inc.
(Mobile Mini or the Company), all adjustments (which include normal recurring adjustments)
necessary to present fairly the financial position, results of operations, and cash flows for all
periods presented have been made. All significant inter-company balances and transactions have been
eliminated.
The local currency of the Companys foreign operations is translated to U.S. currency for the
Companys condensed consolidated financial statements for each period being presented and the
Company is subject to foreign exchange rate fluctuations in connection with the Companys European
and Canadian operations.
The condensed consolidated balance sheet at December 31, 2009, has been derived from the audited
consolidated financial statements at that date but does not include all of the information and
footnotes required by U.S. generally accepted accounting principles for complete financial
statements.
The results of operations for the nine month period ended September 30, 2010, are not necessarily
indicative of the operating results that may be expected for the entire year ending December 31,
2010. Demand from some of the Companys customers is somewhat seasonal. Demand for leases of the
Companys portable storage units by large retailers is stronger from September through December
because these retailers need to store additional inventory for the holiday season. Many of these
retailers usually return these leased units to the Company early in the following year. This
seasonality has generally caused lower utilization rates for the Companys lease fleet and a
marginal decrease in cash flow during the first quarter of the year. Over the last few years, the
Company reduced the percentage of units it reserves for this seasonal business in comparison to the
levels it allocated in earlier years, decreasing the impact of this seasonality on the Companys
operations.
These condensed consolidated financial statements should be read in conjunction with the Companys
December 31, 2009 consolidated financial statements and accompanying notes thereto, which are
included in the Companys Annual Report on Form 10-K filed with the Securities and Exchange
Commission (SEC) on March 1, 2010.
NOTE B Recent Accounting Pronouncements
Transfers of Financial Assets. In June 2009, the Financial Accounting Standards Board (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 became effective for the Company for transfers
occurring on or after January 1, 2010. The Company adopted this accounting standard and it did not
have a material effect on its consolidated financial statements and related disclosures.
NOTE C 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 or liability. As a basis for considering such assumptions, the
Company adopted the suggested accounting guidance for the three levels of inputs that may be used
to measure fair value:
|
|
|
Level 1 |
|
Observable inputs such as quoted prices in active markets for identical assets or liabilities; |
|
|
|
Level 2 |
|
Observable inputs, other than Level 1 inputs in active markets, that are observable either directly or indirectly; and |
|
|
|
Level 3 |
|
Unobservable inputs for which there is little or no market data, which require the reporting entity to develop its own assumptions. |
7
MOBILE MINI, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited) Continued
Assets and liabilities measured at fair value on a recurring basis are as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quoted |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Prices in |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Active |
|
|
Significant |
|
|
|
|
|
|
|
|
|
|
|
|
|
Markets for |
|
|
Other |
|
|
Significant |
|
|
|
|
|
|
|
|
|
|
Identical |
|
|
Observable |
|
|
Unobservable |
|
|
|
|
|
|
|
|
|
|
Assets |
|
|
Inputs |
|
|
Inputs |
|
|
Valuation |
|
Interest Rate Swap Agreements |
|
Fair Value |
|
|
(Level 1) |
|
|
(Level 2) |
|
|
(Level 3) |
|
|
Technique |
|
December 31, 2009 |
|
$ |
(7,703 |
) |
|
$ |
|
|
|
$ |
(7,703 |
) |
|
$ |
|
|
|
|
|
(1) |
September 30, 2010 |
|
$ |
(3,407 |
) |
|
$ |
|
|
|
$ |
(3,407 |
) |
|
$ |
|
|
|
|
|
(1) |
|
|
|
(1) |
|
The Companys interest rate swap agreements are not traded on a market exchange. As a
result, the fair values are determined using valuation models that 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, 2009 and September 30, 2010, the fair
value of interest rate swap agreements is recorded in accrued liabilities in the Companys
condensed consolidated balance sheets. |
NOTE D 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 the Company could realize
in current market exchanges.
The carrying amounts of cash, receivables, accounts payable and accrued liabilities approximate
fair values based on the liquidity of these financial instruments or based on their short-term
nature. The carrying amounts of the Companys borrowings under its credit facility and notes
payable approximate fair value. The fair values of the Companys notes payable and credit facility
are estimated using discounted cash flow analyses, based on the Companys current incremental
borrowing rates for similar types of borrowing arrangements. Based on the borrowing rates
currently available to the Company for bank loans with similar terms and average maturities, the
fair value of the Companys notes payable and credit facility debt at December 31, 2009 and
September 30, 2010, approximated their respective book values. The fair value of the Companys
$150.0 million aggregate principal amount of 6.875% senior notes due 2015 (the Mobile Mini Notes)
and its $200.0 million aggregate principal amount of 9.750% senior notes originally issued by
Mobile Storage Group, Inc. due 2014 (the MSG Notes and together with the Mobile Mini Notes, the
Senior Notes), is based on the latest sales price of the notes at the end of each period obtained
from a third-party institution.
The carrying value and the fair value of the Companys Senior Notes are as follows:
|
|
|
|
|
|
|
|
|
|
|
December 31, 2009 |
|
|
September 30, 2010 |
|
|
|
(In thousands) |
|
Carrying value |
|
$ |
345,402 |
|
|
$ |
340,031 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair value |
|
$ |
348,500 |
|
|
$ |
348,528 |
|
|
|
|
|
|
|
|
8
MOBILE MINI, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited) Continued
NOTE E Earnings Per Share
The Company issued preferred stock that participates in distributions of earnings on the same basis
as shares of common stock. As such, the Company adopted the accounting guidance for the standards
regarding the computation of earnings per share (EPS) for
securities other than common stock that contractually entitle the holder to participate in
dividends and earnings of the Company. Earnings for the period are required to be allocated
between the common and preferred shareholders based on their respective rights to receive
dividends. Basic net income per share is then calculated by dividing income allocable to common
stockholders by the weighted-average number of common shares outstanding, net of shares subject to
repurchase by the Company, during the period. The Company is not required to present basic and
diluted net income per share for securities other than common stock. Accordingly, the following
net income per share amounts only pertain to the Companys common stock. The Company calculates
diluted net income per share under the if-converted method unless the conversion of the preferred
stock is anti-dilutive to basic net income per share. To the extent the inclusion of preferred
stock is anti-dilutive, the Company calculates diluted net income per share under the two-class
method. Potential common shares include restricted common stock, which is subject to risk of
forfeiture and incremental shares of common stock issuable upon the exercise of stock options and
upon the conversion of convertible preferred stock using the treasury stock method.
The following is a reconciliation of net income and weighted-average shares of common stock
outstanding for purposes of calculating basic and diluted earnings per share for the three month
and nine month periods ended September 30:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
Nine Months Ended |
|
|
|
September 30, |
|
|
September 30, |
|
|
|
2009 |
|
|
2010 |
|
|
2009 |
|
|
2010 |
|
|
|
(In thousands except earnings per share data) |
|
Historical net income per share: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Numerator: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
|
$ |
8,120 |
|
|
$ |
5,469 |
|
|
$ |
21,813 |
|
|
$ |
12,658 |
|
Less: Earnings allocable to preferred stockholders |
|
|
(1,615 |
) |
|
|
(1,032 |
) |
|
|
(4,344 |
) |
|
|
(2,391 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income available to common stockholders |
|
$ |
6,505 |
|
|
$ |
4,437 |
|
|
$ |
17,469 |
|
|
$ |
10,267 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic EPS Denominator: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock outstanding beginning of period |
|
|
34,435 |
|
|
|
35,193 |
|
|
|
34,324 |
|
|
|
35,063 |
|
Effect of weighting shares: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted shares issued during the period ended September 30, |
|
|
29 |
|
|
|
26 |
|
|
|
76 |
|
|
|
87 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Denominator for basic net income per share |
|
|
34,464 |
|
|
|
35,219 |
|
|
|
34,400 |
|
|
|
35,150 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted EPS Denominator: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock outstanding beginning of period |
|
|
34,435 |
|
|
|
35,193 |
|
|
|
34,324 |
|
|
|
35,063 |
|
Effect of weighting shares: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted shares issued during the period ended September 30, |
|
|
29 |
|
|
|
26 |
|
|
|
76 |
|
|
|
87 |
|
Dilutive effect of employee stock options on nonvested
share-awards assumed converted during the period ended
September 30, |
|
|
396 |
|
|
|
467 |
|
|
|
215 |
|
|
|
387 |
|
Dilutive effect of convertible preferred stock assumed
converted during the period ended September 30, |
|
|
8,556 |
|
|
|
8,191 |
|
|
|
8,556 |
|
|
|
8,191 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Denominator for diluted net income per share |
|
|
43,416 |
|
|
|
43,877 |
|
|
|
43,171 |
|
|
|
43,728 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic net income per share |
|
$ |
0.19 |
|
|
$ |
0.13 |
|
|
$ |
0.51 |
|
|
$ |
0.29 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted net income per share |
|
$ |
0.19 |
|
|
$ |
0.12 |
|
|
$ |
0.51 |
|
|
$ |
0.29 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic weighted average number of common shares outstanding as of September 30, 2009 and 2010 does
not include 1.0 million and 1.2 million, respectively, of share-awards because the awards had not
yet vested.
9
MOBILE MINI, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited) Continued
The following stock options and nonvested share-awards were excluded in calculating diluted
earnings per share because their effect would have been anti-dilutive:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
Nine Months Ended |
|
|
|
September 30, |
|
|
September 30, |
|
|
|
2009 |
|
|
2010 |
|
|
2009 |
|
|
2010 |
|
|
|
(In thousands) |
|
|
(In thousands) |
|
Stock options |
|
|
438 |
|
|
|
935 |
|
|
|
508 |
|
|
|
980 |
|
Nonvested share-awards |
|
|
103 |
|
|
|
56 |
|
|
|
313 |
|
|
|
35 |
|
NOTE F Share-Based Compensation
At September 30, 2010, 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 were granted with an exercise price per share equal to the fair market value of
the Companys common stock on the date of grant. Each outstanding option must expire no later than
10 years from the date it was granted, unless exercised or forfeited before the expiration date,
and historically options are granted with vesting over a 4.5 year period. The Company has not
granted any stock option awards in 2010. The total value of the Companys stock option awards is
expensed over the related employees service period on a straight-line basis.
The Company also awards restricted stock, also called nonvested share-awards in this discussion,
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
awards. The service period is the time during which the employees receiving awards must remain
employees for the shares granted to fully vest.
In addition, the Company awards nonvested share-awards to certain executive officers with vesting
subject to performance conditions. Vesting of these nonvested share-awards is dependent upon the
respective officers fulfilling the service period requirements as well as the Company achieving
certain EBITDA targets in each of the next four years. The 2010 target was established by the
Companys Board of Directors on February 22, 2010, at which point the value of each nonvested
share-award was $15.21. The Company is required to assess the probability that such performance
conditions will be met. If the likelihood of the performance conditions being met is deemed
probable, the Company will recognize the expense using the accelerated attribution method. The
accelerated attribution method could result in as much as 50% of the total value of the shares
being recognized in the first year of the service period if the likelihood of attaining each of the
four future targets is assessed as probable. For these performance based awards, the accelerated
attribution method has been used to recognize the expense.
In June 2008, in connection with the Companys acquisition of Mobile Storage Group (MSG), the
Company awarded nonvested share-awards that vested or will 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.
10
MOBILE MINI, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited) Continued
The following table sets forth unrecognized compensation costs related to the Companys share-based
compensation plan as of September 30, 2010:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted-Average |
|
|
|
September 30, 2010 |
|
|
Recognition Period |
|
|
|
(In thousands) |
|
|
(Years) |
|
Share-awards |
|
$ |
17,505 |
|
|
|
2.9 |
|
Stock option awards |
|
$ |
188 |
|
|
|
0.6 |
|
The following table summarizes the share-based compensation expense and capitalized amounts for the
three months and nine months ended September 30:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
Nine Months Ended |
|
|
|
September 30, |
|
|
September 30, |
|
|
|
2009 |
|
|
2010 |
|
|
2009 |
|
|
2010 |
|
|
|
(In thousands) |
|
Gross share-based compensation |
|
$ |
1,883 |
|
|
$ |
1,923 |
|
|
$ |
5,359 |
|
|
$ |
5,023 |
|
Capitalized share-based compensation |
|
|
(58 |
) |
|
|
(41 |
) |
|
|
(253 |
) |
|
|
(118 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Share-based compensation expense |
|
$ |
1,825 |
|
|
$ |
1,882 |
|
|
$ |
5,106 |
|
|
$ |
4,905 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
A summary of stock option activity within the Companys share-based compensation plans and changes
for the nine months ended September 30, 2010 is as follows:
|
|
|
|
|
|
|
|
|
|
|
Number of |
|
|
Weighted |
|
|
|
Shares |
|
|
Average |
|
|
|
(In thousands) |
|
|
Exercise Price |
|
Balance at December 31, 2009 |
|
|
1,656 |
|
|
$ |
17.01 |
|
Exercised |
|
|
(77 |
) |
|
$ |
11.38 |
|
Canceled/expired |
|
|
(130 |
) |
|
$ |
18.72 |
|
|
|
|
|
|
|
|
|
Balance at September 30, 2010 |
|
|
1,449 |
|
|
$ |
17.16 |
|
|
|
|
|
|
|
|
|
The intrinsic value of options exercised during the nine months ended September 30, 2010 was
approximately $367,000.
A summary of nonvested share-awards activity within the Companys share-based compensation plans
and changes for the nine months ended September 30, 2010 is as follows:
|
|
|
|
|
|
|
|
|
|
|
Number of |
|
|
Weighted Average |
|
|
|
Shares |
|
|
Grant Date Fair |
|
|
|
(In thousands) |
|
|
Value |
|
Nonvested at December 31, 2009 |
|
|
1,213 |
|
|
$ |
16.05 |
|
Awarded |
|
|
176 |
|
|
$ |
15.74 |
|
Released |
|
|
(105 |
) |
|
$ |
18.26 |
|
Forfeited |
|
|
(90 |
) |
|
$ |
15.74 |
|
|
|
|
|
|
|
|
|
Nonvested at September 30, 2010 |
|
|
1,194 |
|
|
$ |
15.83 |
|
|
|
|
|
|
|
|
|
11
MOBILE MINI, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited) Continued
A summary of fully-vested stock options and stock options expected to vest, as of September 30,
2010, is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted |
|
|
|
|
|
|
|
|
|
|
Weighted |
|
|
Average |
|
|
Aggregate |
|
|
|
Number of |
|
|
Average |
|
|
Remaining |
|
|
Intrinsic |
|
|
|
Shares |
|
|
Exercise |
|
|
Contractual |
|
|
Value |
|
|
|
(In thousands) |
|
|
Price |
|
|
Term |
|
|
(In thousands) |
|
Outstanding |
|
|
1,449 |
|
|
$ |
17.16 |
|
|
|
3.11 |
|
|
$ |
1,821 |
|
Vested and expected to vest |
|
|
1,430 |
|
|
$ |
17.03 |
|
|
|
3.08 |
|
|
$ |
1,821 |
|
Exercisable |
|
|
1,430 |
|
|
$ |
16.99 |
|
|
|
3.07 |
|
|
$ |
1,821 |
|
The fair value of each stock option award is estimated on the date of the grant using the
Black-Scholes option pricing model. No stock options were granted during the nine month period
ended September 30, 2010.
NOTE G Inventories
Inventories are valued at the lower of cost (principally on a standard cost basis that 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 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 the Companys 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 consist of the
following at the dates indicated:
|
|
|
|
|
|
|
|
|
|
|
December 31, 2009 |
|
|
September 30, 2010 |
|
|
|
(In thousands) |
|
Raw material and supplies |
|
$ |
15,750 |
|
|
$ |
15,456 |
|
Work-in-process |
|
|
589 |
|
|
|
216 |
|
Finished portable storage units |
|
|
5,808 |
|
|
|
4,845 |
|
|
|
|
|
|
|
|
|
|
$ |
22,147 |
|
|
$ |
20,517 |
|
|
|
|
|
|
|
|
NOTE H Income Taxes
The Company files U.S. Federal tax returns, U.S. State tax returns, and foreign tax returns. The
Company has identified the Companys U.S. Federal tax return as the Companys major tax
jurisdiction. The Companys tax years for 2008 and 2009 are subject to tax examination by the U.S.
Internal Revenue Service (IRS) through September 15, 2012 and 2013, respectively. 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 Company uses 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 processes, if any. The second step is
to measure the tax benefit as the largest amount that is more than 50% likely of being realized
upon ultimate settlement.
12
MOBILE MINI, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited) Continued
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, if any, are
recorded in leasing, selling and general expenses in the Condensed Consolidated Statements of
Income.
NOTE I Property, Plant and Equipment
Property, plant and equipment are stated at cost, net of accumulated depreciation. Depreciation is
calculated using the straight-line method over the assets estimated useful lives. Residual values
are determined when the property is constructed or acquired and range up to 25%, depending on the
nature of the asset. In the opinion of management, estimated residual values do not cause carrying
values to exceed net realizable value. Normal repairs and maintenance to property, plant and
equipment are expensed as incurred. When property or equipment is retired or sold, the net book
value of the asset, reduced by any proceeds, is charged to gain or loss on the retirement of fixed
assets and is included in leasing, selling and general expenses in the Condensed Consolidated
Statements of Income. Property, plant and equipment consist of the following at the dates
indicated:
|
|
|
|
|
|
|
|
|
|
|
December 31, 2009 |
|
|
September 30, 2010 |
|
|
|
(In thousands) |
|
Land |
|
$ |
11,129 |
|
|
$ |
11,116 |
|
Vehicles and equipment |
|
|
76,037 |
|
|
|
78,769 |
|
Buildings and improvements |
|
|
15,012 |
|
|
|
14,744 |
|
Office fixtures and equipment |
|
|
26,404 |
|
|
|
26,923 |
|
|
|
|
|
|
|
|
|
|
|
128,582 |
|
|
|
131,552 |
|
Less accumulated depreciation |
|
|
(44,422 |
) |
|
|
(52,325 |
) |
|
|
|
|
|
|
|
Total property, plant and equipment |
|
$ |
84,160 |
|
|
$ |
79,227 |
|
|
|
|
|
|
|
|
NOTE J Lease Fleet
Mobile Mini has a lease fleet primarily consisting of remanufactured and differentiated steel
portable storage containers, manufactured steel offices, and wood office units that are leased to
customers under short-term operating lease agreements with varying terms. Depreciation is
calculated using the straight-line method over the estimated useful life of the Companys units,
after the date that the Company put the unit in service, and are depreciated down to their
estimated residual values. The Companys steel units are depreciated over 30 years with an
estimated residual value of 55%. Wood office units are depreciated over 20 years with an estimated
residual value of 50%. Van trailers, which are a small part of the Companys fleet, are
depreciated over seven years to a 20% residual value. The Company has 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 the opinion of management, estimated residual values do not cause carrying values to exceed net
realizable value. The Company continues to evaluate these depreciation policies as more
information becomes available from other comparable sources and the Companys own historical
experience. Normal repairs and maintenance to the portable storage and mobile office units are
expensed as incurred.
13
MOBILE MINI, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited) Continued
Lease fleet consists of the following at the dates indicated:
|
|
|
|
|
|
|
|
|
|
|
December 31, 2009 |
|
|
September 30, 2010 |
|
|
|
(In thousands) |
|
Steel storage containers |
|
$ |
618,265 |
|
|
$ |
615,551 |
|
Steel and wood offices |
|
|
530,152 |
|
|
|
530,738 |
|
Van trailers |
|
|
5,557 |
|
|
|
4,174 |
|
Other (chassis and ancillary products) |
|
|
2,651 |
|
|
|
2,705 |
|
|
|
|
|
|
|
|
|
|
|
1,156,625 |
|
|
|
1,153,168 |
|
Accumulated depreciation |
|
|
(101,297 |
) |
|
|
(115,599 |
) |
|
|
|
|
|
|
|
|
|
$ |
1,055,328 |
|
|
$ |
1,037,569 |
|
|
|
|
|
|
|
|
NOTE K 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 variable interest rate exposures, the Company may enter
into interest rate swap agreements, which convert its floating rate debt to a fixed-rate and which
it designates as cash flow hedges. Interest expense on the notional amounts under these agreements
is accrued using the fixed rates identified in the swap agreements.
The Company had interest rate swap agreements with an aggregate notional amount of $200 million at
September 30, 2010. The fixed interest rates on the Companys eight swap agreements range from
3.25% to 4.71%, averaging 4.03%. Three swap agreements mature in the fourth quarter of 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 in cash flow hedging
relationships.
Interest Rate Swap Agreements
|
|
|
|
|
|
|
|
|
|
|
Fair Value |
|
|
|
Balance Sheet Location |
|
(In thousands) |
|
December 31, 2009 |
|
Accrued liabilities |
|
$ |
(7,703 |
) |
|
|
|
|
|
|
|
September 30, 2010 |
|
Accrued liabilities |
|
$ |
(3,407 |
) |
14
MOBILE MINI, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited) Continued
Interest Rate Swap Agreements
|
|
|
|
|
|
|
Amount of Gain |
|
|
|
Recognized in Other |
|
|
|
Comprehensive Income on |
|
|
|
Derivatives |
|
|
|
(In thousands) |
|
|
|
|
|
|
Three months ended September 30, 2009 (net of applicable income taxes of $167) |
|
$ |
263 |
|
|
|
|
|
|
Three months ended September 30, 2010 (net of applicable income taxes of $600) |
|
$ |
957 |
|
|
|
|
|
|
Nine months ended September 30, 2009 (net of applicable income taxes of $957) |
|
$ |
1,509 |
|
|
|
|
|
|
Nine months ended September 30, 2010 (net of applicable income taxes of $1,667) |
|
$ |
2,629 |
|
NOTE L Segment Reporting
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 fluctuations 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. Accordingly, reportable
segment information is the same as contained in the Companys Condensed Consolidated Financial
Statements.
15
MOBILE MINI, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited) Continued
The tables below represent the Companys revenue from customers and long-lived assets, consisting
of lease fleet and property, plant and equipment.
Revenues from customers:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
Nine Months Ended |
|
|
|
September 30, |
|
|
September 30, |
|
|
|
2009 |
|
|
2010 |
|
|
2009 |
|
|
2010 |
|
|
|
(In thousands) |
|
North America (1) |
|
$ |
77,874 |
|
|
$ |
70,126 |
|
|
$ |
243,530 |
|
|
$ |
203,393 |
|
United Kingdom |
|
|
13,454 |
|
|
|
13,927 |
|
|
|
41,144 |
|
|
|
38,288 |
|
The Netherlands |
|
|
758 |
|
|
|
564 |
|
|
|
2,500 |
|
|
|
1,657 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenues |
|
$ |
92,086 |
|
|
$ |
84,617 |
|
|
$ |
287,174 |
|
|
$ |
243,338 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Includes revenues in the United States of $77.0 million and $69.3 million for the three month
period and $241.2 million and $201.0 million for the nine month period ended September 30,
2009 and 2010, respectively. |
Long-lived assets:
|
|
|
|
|
|
|
|
|
|
|
December 31, |
|
|
September 30, |
|
|
|
2009 |
|
|
2010 |
|
|
|
(In thousands) |
|
North America (1) |
|
$ |
1,002,675 |
|
|
$ |
979,095 |
|
United Kingdom |
|
|
132,356 |
|
|
|
133,572 |
|
The Netherlands |
|
|
4,457 |
|
|
|
4,129 |
|
|
|
|
|
|
|
|
Total long-lived assets |
|
$ |
1,139,488 |
|
|
$ |
1,116,796 |
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Includes long lived assets of $988.9 million and $965.3 million in the United States at
December 31, 2009 and September 30, 2010, respectively. |
NOTE M Comprehensive Income
Comprehensive income, net of tax, consisted of the following at the dates indicated:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
Nine Months Ended |
|
|
|
September 30, |
|
|
September 30, |
|
|
|
2009 |
|
|
2010 |
|
|
2009 |
|
|
2010 |
|
|
|
(In thousands) |
|
Net income |
|
$ |
8,120 |
|
|
$ |
5,469 |
|
|
$ |
21,813 |
|
|
$ |
12,658 |
|
Net unrealized gain on derivatives |
|
|
263 |
|
|
|
957 |
|
|
|
1,509 |
|
|
|
2,629 |
|
Foreign currency translation adjustment |
|
|
(2,298 |
) |
|
|
8,051 |
|
|
|
8,931 |
|
|
|
(497 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Total comprehensive income |
|
$ |
6,085 |
|
|
$ |
14,477 |
|
|
$ |
32,253 |
|
|
$ |
14,790 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The components of accumulated other comprehensive loss, net of tax, were as follows:
|
|
|
|
|
|
|
|
|
|
|
December 31, 2009 |
|
|
September 30, 2010 |
|
|
|
(In thousands) |
|
Accumulated net unrealized loss on derivatives |
|
$ |
(4,733 |
) |
|
$ |
(2,104 |
) |
Foreign currency translation adjustment |
|
|
(21,058 |
) |
|
|
(21,555 |
) |
|
|
|
|
|
|
|
Total accumulated other comprehensive loss |
|
$ |
(25,791 |
) |
|
$ |
(23,659 |
) |
|
|
|
|
|
|
|
16
MOBILE MINI, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited) Continued
NOTE N Integration, Merger and Restructuring Expenses
In connection with the acquisition of MSG, the Company recorded accruals for costs to be incurred
to exit overlapping MSG lease properties, property shut down costs, costs of MSGs severance
agreements, costs for asset verification and for damaged assets. The Company was able to combine
the lease fleets of Mobile Mini and MSG and reduce the Companys capital expenditures for the lease
fleet going forward. In addition, following the acquisition, the Company restructured its
manufacturing operations and reduced overhead. In connection with these activities, the Company
recorded costs for severance agreements and recorded impairment charges to write down certain
assets previously used in conjunction with the manufacturing operations and inventories.
The following table details accrued integration, merger and restructuring obligations (included in
accrued liabilities in the Condensed Consolidated Balance Sheets) and related activity for the
period ended September 30, 2010:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Lease |
|
|
|
|
|
|
|
|
|
Severance and |
|
|
Abandonment |
|
|
Acquisition |
|
|
|
|
|
|
Benefits |
|
|
Costs |
|
|
Integration |
|
|
Total |
|
|
|
(In thousands) |
|
Accrued obligations as of December 31, 2009 |
|
$ |
465 |
|
|
$ |
5,742 |
|
|
$ |
3 |
|
|
$ |
6,210 |
|
Integration, merger and restructuring expenses |
|
|
2,057 |
|
|
|
|
|
|
|
1,615 |
|
|
|
3,672 |
|
Cash paid |
|
|
(2,412 |
) |
|
|
(1,451 |
) |
|
|
(1,618 |
) |
|
|
(5,481 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Accrued obligations as of September 30, 2010 |
|
$ |
110 |
|
|
$ |
4,291 |
|
|
$ |
|
|
|
$ |
4,401 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
These accrued obligations are expected to be paid out through the year 2014.
The following amounts are included in integration, merger and restructuring expenses for the
periods indicated:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
Nine Months Ended |
|
|
|
September 30, |
|
|
September 30, |
|
|
|
2009 |
|
|
2010 |
|
|
2009 |
|
|
2010 |
|
Severance and benefits |
|
$ |
630 |
|
|
$ |
96 |
|
|
$ |
3,859 |
|
|
$ |
2,057 |
|
Lease abandonment costs |
|
|
|
|
|
|
|
|
|
|
26 |
|
|
|
|
|
Acquisition integration |
|
|
902 |
|
|
|
422 |
|
|
|
5,490 |
|
|
|
1,615 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Integration, merger and restructuring expenses |
|
$ |
1,532 |
|
|
$ |
518 |
|
|
$ |
9,375 |
|
|
$ |
3,672 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NOTE O Condensed Consolidating Financial Information
Supplemental Indentures
In connection with the acquisition of MSG, Mobile Mini entered into a Supplemental Indenture
pursuant to which the New Mobile Mini Guarantors became Guarantors under Mobile Minis Indenture
relating to the Senior Notes. Mobile Mini also entered into the MSG Supplemental Indenture (the MSG
Notes) pursuant to which Mobile Mini became an Issuer for all purposes under the MSG Indenture
and the New MSG Guarantors became Guarantors for all purposes 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.
17
MOBILE MINI, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited) Continued
MOBILE MINI, INC.
CONDENSED CONSOLIDATING BALANCE SHEETS
As of December 31, 2009
(In thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non- |
|
|
|
|
|
|
|
|
|
Guarantors |
|
|
Guarantors |
|
|
Eliminations |
|
|
Consolidated |
|
ASSETS |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents |
|
$ |
582 |
|
|
$ |
1,158 |
|
|
$ |
|
|
|
$ |
1,740 |
|
Receivables, net |
|
|
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 |
|
|
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 stock |
|
|
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 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
18
MOBILE MINI, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited) Continued
MOBILE MINI, INC.
CONDENSED CONSOLIDATING BALANCE SHEETS
As of September 30, 2010
(In thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non- |
|
|
|
|
|
|
|
|
|
Guarantors |
|
|
Guarantors |
|
|
Eliminations |
|
|
Consolidated |
|
ASSETS |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents |
|
$ |
1,676 |
|
|
$ |
423 |
|
|
$ |
|
|
|
$ |
2,099 |
|
Receivables, net |
|
|
30,990 |
|
|
|
12,818 |
|
|
|
|
|
|
|
43,808 |
|
Inventories |
|
|
18,521 |
|
|
|
2,045 |
|
|
|
(49 |
) |
|
|
20,517 |
|
Lease fleet, net |
|
|
917,110 |
|
|
|
120,459 |
|
|
|
|
|
|
|
1,037,569 |
|
Property, plant and equipment, net |
|
|
61,985 |
|
|
|
17,242 |
|
|
|
|
|
|
|
79,227 |
|
Deposits and prepaid expenses |
|
|
5,907 |
|
|
|
1,181 |
|
|
|
|
|
|
|
7,088 |
|
Other assets and intangibles, net |
|
|
16,600 |
|
|
|
4,017 |
|
|
|
|
|
|
|
20,617 |
|
Goodwill |
|
|
447,228 |
|
|
|
65,549 |
|
|
|
|
|
|
|
512,777 |
|
Intercompany |
|
|
106,451 |
|
|
|
36,067 |
|
|
|
(142,518 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets |
|
$ |
1,606,468 |
|
|
$ |
259,801 |
|
|
$ |
(142,567 |
) |
|
$ |
1,723,702 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS EQUITY |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts payable |
|
$ |
7,153 |
|
|
$ |
6,156 |
|
|
$ |
|
|
|
$ |
13,309 |
|
Accrued liabilities |
|
|
50,039 |
|
|
|
3,361 |
|
|
|
|
|
|
|
53,400 |
|
Lines of credit |
|
|
391,887 |
|
|
|
41,224 |
|
|
|
|
|
|
|
433,111 |
|
Notes payable |
|
|
10 |
|
|
|
4 |
|
|
|
|
|
|
|
14 |
|
Obligations under capital leases |
|
|
2,958 |
|
|
|
|
|
|
|
|
|
|
|
2,958 |
|
Senior Notes, net |
|
|
340,031 |
|
|
|
|
|
|
|
|
|
|
|
340,031 |
|
Deferred income taxes |
|
|
154,022 |
|
|
|
11,751 |
|
|
|
(679 |
) |
|
|
165,094 |
|
Intercompany |
|
|
22 |
|
|
|
4,887 |
|
|
|
(4,909 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities |
|
|
946,122 |
|
|
|
67,383 |
|
|
|
(5,588 |
) |
|
|
1,007,917 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commitments and contingencies |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Convertible preferred stock |
|
|
147,427 |
|
|
|
|
|
|
|
|
|
|
|
147,427 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stockholders equity: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock |
|
|
386 |
|
|
|
18,434 |
|
|
|
(18,434 |
) |
|
|
386 |
|
Additional paid-in capital |
|
|
347,540 |
|
|
|
119,175 |
|
|
|
(119,175 |
) |
|
|
347,540 |
|
Retained earnings |
|
|
205,443 |
|
|
|
77,318 |
|
|
|
630 |
|
|
|
283,391 |
|
Accumulated other comprehensive loss |
|
|
(1,150 |
) |
|
|
(22,509 |
) |
|
|
|
|
|
|
(23,659 |
) |
Treasury stock, at cost |
|
|
(39,300 |
) |
|
|
|
|
|
|
|
|
|
|
(39,300 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Total stockholders equity |
|
|
512,919 |
|
|
|
192,418 |
|
|
|
(136,979 |
) |
|
|
568,358 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities and stockholders equity |
|
$ |
1,606,468 |
|
|
$ |
259,801 |
|
|
$ |
(142,567 |
) |
|
$ |
1,723,702 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
19
MOBILE MINI, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited) Continued
MOBILE MINI, INC.
CONDENSED CONSOLIDATING STATEMENTS OF INCOME
Three Months Ended September 30, 2009
(In thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non- |
|
|
|
|
|
|
|
|
|
Guarantors |
|
|
Guarantors |
|
|
Eliminations |
|
|
Consolidated |
|
Revenues: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Leasing |
|
$ |
69,163 |
|
|
$ |
12,935 |
|
|
$ |
|
|
|
$ |
82,098 |
|
Sales |
|
|
8,304 |
|
|
|
1,210 |
|
|
|
(21 |
) |
|
|
9,493 |
|
Other |
|
|
407 |
|
|
|
88 |
|
|
|
|
|
|
|
495 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenues |
|
|
77,874 |
|
|
|
14,233 |
|
|
|
(21 |
) |
|
|
92,086 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Costs and expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of sales |
|
|
5,329 |
|
|
|
912 |
|
|
|
(21 |
) |
|
|
6,220 |
|
Leasing, selling and general expenses |
|
|
37,658 |
|
|
|
9,697 |
|
|
|
|
|
|
|
47,355 |
|
Integration, merger and restructuring expenses |
|
|
1,257 |
|
|
|
275 |
|
|
|
|
|
|
|
1,532 |
|
Depreciation and amortization |
|
|
7,309 |
|
|
|
1,918 |
|
|
|
|
|
|
|
9,227 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total costs and expenses |
|
|
51,553 |
|
|
|
12,802 |
|
|
|
(21 |
) |
|
|
64,334 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from operations |
|
|
26,321 |
|
|
|
1,431 |
|
|
|
|
|
|
|
27,752 |
|
Other income (expense): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest income |
|
|
495 |
|
|
|
2 |
|
|
|
(474 |
) |
|
|
23 |
|
Interest expense |
|
|
(13,609 |
) |
|
|
(1,461 |
) |
|
|
475 |
|
|
|
(14,595 |
) |
Foreign currency exchange |
|
|
|
|
|
|
(13 |
) |
|
|
|
|
|
|
(13 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) before provision for (benefit of) income taxes |
|
|
13,207 |
|
|
|
(41 |
) |
|
|
1 |
|
|
|
13,167 |
|
Provision for (benefit of) income taxes |
|
|
5,118 |
|
|
|
(26 |
) |
|
|
(45 |
) |
|
|
5,047 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) |
|
$ |
8,089 |
|
|
$ |
(15 |
) |
|
$ |
46 |
|
|
$ |
8,120 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
20
MOBILE MINI, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited) Continued
MOBILE MINI, INC.
CONDENSED CONSOLIDATING STATEMENTS OF INCOME
Three Months Ended September 30, 2010
(In thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non- |
|
|
|
|
|
|
|
|
|
Guarantors |
|
|
Guarantors |
|
|
Eliminations |
|
|
Consolidated |
|
Revenues: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Leasing |
|
$ |
62,667 |
|
|
$ |
12,932 |
|
|
$ |
|
|
|
$ |
75,599 |
|
Sales |
|
|
6,831 |
|
|
|
1,476 |
|
|
|
|
|
|
|
8,307 |
|
Other |
|
|
628 |
|
|
|
83 |
|
|
|
|
|
|
|
711 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenues |
|
|
70,126 |
|
|
|
14,491 |
|
|
|
|
|
|
|
84,617 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Costs and expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of sales |
|
|
4,358 |
|
|
|
1,030 |
|
|
|
|
|
|
|
5,388 |
|
Leasing, selling and general expenses |
|
|
36,435 |
|
|
|
9,803 |
|
|
|
|
|
|
|
46,238 |
|
Integration, merger and restructuring expenses |
|
|
518 |
|
|
|
|
|
|
|
|
|
|
|
518 |
|
Depreciation and amortization |
|
|
7,183 |
|
|
|
1,565 |
|
|
|
|
|
|
|
8,748 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total costs and expenses |
|
|
48,494 |
|
|
|
12,398 |
|
|
|
|
|
|
|
60,892 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from operations |
|
|
21,632 |
|
|
|
2,093 |
|
|
|
|
|
|
|
23,725 |
|
Other income (expense): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest income |
|
|
136 |
|
|
|
|
|
|
|
(136 |
) |
|
|
|
|
Interest expense |
|
|
(13,700 |
) |
|
|
(597 |
) |
|
|
136 |
|
|
|
(14,161 |
) |
Deferred financing costs write-off |
|
|
(525 |
) |
|
|
|
|
|
|
|
|
|
|
(525 |
) |
Dividend income |
|
|
215 |
|
|
|
|
|
|
|
(215 |
) |
|
|
|
|
Foreign currency exchange |
|
|
|
|
|
|
5 |
|
|
|
|
|
|
|
5 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) before provision for (benefit from)
income taxes |
|
|
7,758 |
|
|
|
1,501 |
|
|
|
(215 |
) |
|
|
9,044 |
|
Provision for (benefit from) income taxes |
|
|
2,989 |
|
|
|
602 |
|
|
|
(16 |
) |
|
|
3,575 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) |
|
$ |
4,769 |
|
|
$ |
899 |
|
|
$ |
(199 |
) |
|
$ |
5,469 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
21
MOBILE MINI, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited) Continued
MOBILE MINI, INC.
CONDENSED CONSOLIDATING STATEMENTS OF INCOME
Nine Months Ended September 30, 2009
(In thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non- |
|
|
|
|
|
|
|
|
|
Guarantors |
|
|
Guarantors |
|
|
Eliminations |
|
|
Consolidated |
|
Revenues: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Leasing |
|
$ |
217,800 |
|
|
$ |
38,211 |
|
|
$ |
|
|
|
$ |
256,011 |
|
Sales |
|
|
24,426 |
|
|
|
5,006 |
|
|
|
(21 |
) |
|
|
29,411 |
|
Other |
|
|
1,304 |
|
|
|
448 |
|
|
|
|
|
|
|
1,752 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenues |
|
|
243,530 |
|
|
|
43,665 |
|
|
|
(21 |
) |
|
|
287,174 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Costs and expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of sales |
|
|
15,728 |
|
|
|
4,002 |
|
|
|
(21 |
) |
|
|
19,709 |
|
Leasing, selling and general expenses |
|
|
118,567 |
|
|
|
29,435 |
|
|
|
|
|
|
|
148,002 |
|
Integration, merger and restructuring expenses |
|
|
8,752 |
|
|
|
623 |
|
|
|
|
|
|
|
9,375 |
|
Depreciation and amortization |
|
|
24,189 |
|
|
|
5,725 |
|
|
|
|
|
|
|
29,914 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total costs and expenses |
|
|
167,236 |
|
|
|
39,785 |
|
|
|
(21 |
) |
|
|
207,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from operations |
|
|
76,294 |
|
|
|
3,880 |
|
|
|
|
|
|
|
80,174 |
|
Other income (expense): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest income |
|
|
1,357 |
|
|
|
7 |
|
|
|
(1,335 |
) |
|
|
29 |
|
Interest expense |
|
|
(41,626 |
) |
|
|
(4,511 |
) |
|
|
1,335 |
|
|
|
(44,802 |
) |
Foreign currency exchange |
|
|
|
|
|
|
(88 |
) |
|
|
|
|
|
|
(88 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) before provision for (benefit of) income taxes |
|
|
36,025 |
|
|
|
(712 |
) |
|
|
|
|
|
|
35,313 |
|
Provision for (benefit of) income taxes |
|
|
13,948 |
|
|
|
(322 |
) |
|
|
(126 |
) |
|
|
13,500 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) |
|
$ |
22,077 |
|
|
$ |
(390 |
) |
|
$ |
126 |
|
|
$ |
21,813 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
22
MOBILE MINI, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited) Continued
MOBILE MINI, INC.
CONDENSED CONSOLIDATING STATEMENTS OF INCOME
Nine Months Ended September 30, 2010
(In thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non- |
|
|
|
|
|
|
|
|
|
Guarantors |
|
|
Guarantors |
|
|
Eliminations |
|
|
Consolidated |
|
Revenues: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Leasing |
|
$ |
182,975 |
|
|
$ |
35,714 |
|
|
$ |
|
|
|
$ |
218,689 |
|
Sales |
|
|
19,166 |
|
|
|
3,960 |
|
|
|
|
|
|
|
23,126 |
|
Other |
|
|
1,251 |
|
|
|
272 |
|
|
|
|
|
|
|
1,523 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenues |
|
|
203,392 |
|
|
|
39,946 |
|
|
|
|
|
|
|
243,338 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Costs and expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of sales |
|
|
12,372 |
|
|
|
2,894 |
|
|
|
|
|
|
|
15,266 |
|
Leasing, selling and general expenses |
|
|
106,005 |
|
|
|
27,355 |
|
|
|
|
|
|
|
133,360 |
|
Integration, merger and restructuring expenses |
|
|
3,664 |
|
|
|
8 |
|
|
|
|
|
|
|
3,672 |
|
Depreciation and amortization |
|
|
21,939 |
|
|
|
4,989 |
|
|
|
|
|
|
|
26,928 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total costs and expenses |
|
|
143,980 |
|
|
|
35,246 |
|
|
|
|
|
|
|
179,226 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from operations |
|
|
59,412 |
|
|
|
4,700 |
|
|
|
|
|
|
|
64,112 |
|
Other income (expense): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest income |
|
|
678 |
|
|
|
1 |
|
|
|
(678 |
) |
|
|
1 |
|
Interest expense |
|
|
(41,522 |
) |
|
|
(2,291 |
) |
|
|
678 |
|
|
|
(43,135 |
) |
Deferred financing costs write-off |
|
|
(525 |
) |
|
|
|
|
|
|
|
|
|
|
(525 |
) |
Dividend income |
|
|
629 |
|
|
|
|
|
|
|
(629 |
) |
|
|
|
|
Intercompany debt waiver |
|
|
(98,442 |
) |
|
|
98,442 |
|
|
|
|
|
|
|
|
|
Foreign currency exchange |
|
|
|
|
|
|
(9 |
) |
|
|
|
|
|
|
(9 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) before provision for (benefit from) income taxes |
|
|
(79,770 |
) |
|
|
100,843 |
|
|
|
(629 |
) |
|
|
20,444 |
|
Provision for (benefit from) income taxes |
|
|
7,195 |
|
|
|
666 |
|
|
|
(75 |
) |
|
|
7,786 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) |
|
$ |
(86,965 |
) |
|
$ |
100,177 |
|
|
$ |
(554 |
) |
|
$ |
12,658 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
23
MOBILE MINI, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited) Continued
MOBILE MINI, INC.
CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS
Nine Months Ended September 30, 2009
(In thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non- |
|
|
|
|
|
|
|
|
|
Guarantors |
|
|
Guarantors |
|
|
Eliminations |
|
|
Consolidated |
|
Cash Flows From Operating Activities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) |
|
$ |
22,077 |
|
|
$ |
(390 |
) |
|
$ |
126 |
|
|
$ |
21,813 |
|
Adjustments to reconcile net income to net cash provided
by operating activities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Provision for doubtful accounts |
|
|
1,615 |
|
|
|
219 |
|
|
|
6 |
|
|
|
1,840 |
|
Amortization of deferred financing costs |
|
|
3,340 |
|
|
|
|
|
|
|
|
|
|
|
3,340 |
|
Amortization of long-term liabilities |
|
|
552 |
|
|
|
|
|
|
|
|
|
|
|
552 |
|
Share-based compensation expense |
|
|
4,616 |
|
|
|
492 |
|
|
|
(2 |
) |
|
|
5,106 |
|
Depreciation and amortization |
|
|
24,189 |
|
|
|
5,725 |
|
|
|
|
|
|
|
29,914 |
|
Gain on sale of lease fleet units |
|
|
(8,252 |
) |
|
|
(555 |
) |
|
|
2 |
|
|
|
(8,805 |
) |
(Gain) loss on disposal of property, plant and equipment |
|
|
(121 |
) |
|
|
19 |
|
|
|
|
|
|
|
(102 |
) |
Deferred income taxes |
|
|
13,315 |
|
|
|
(297 |
) |
|
|
(146 |
) |
|
|
12,872 |
|
Foreign currency exchange loss |
|
|
|
|
|
|
88 |
|
|
|
|
|
|
|
88 |
|
Changes in certain assets and liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Receivables |
|
|
12,686 |
|
|
|
5,367 |
|
|
|
|
|
|
|
18,053 |
|
Inventories |
|
|
1,989 |
|
|
|
799 |
|
|
|
|
|
|
|
2,788 |
|
Deposits and prepaid expenses |
|
|
3,272 |
|
|
|
(149 |
) |
|
|
|
|
|
|
3,123 |
|
Other assets and intangibles |
|
|
(669 |
) |
|
|
|
|
|
|
|
|
|
|
(669 |
) |
Accounts payable |
|
|
(3,814 |
) |
|
|
(2,624 |
) |
|
|
|
|
|
|
(6,438 |
) |
Accrued liabilities |
|
|
(12,803 |
) |
|
|
(2,047 |
) |
|
|
|
|
|
|
(14,850 |
) |
Intercompany |
|
|
(8,194 |
) |
|
|
7,241 |
|
|
|
953 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by operating activities |
|
|
53,798 |
|
|
|
13,888 |
|
|
|
939 |
|
|
|
68,625 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash Flows From Investing Activities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Additions to lease fleet units |
|
|
(10,161 |
) |
|
|
(6,361 |
) |
|
|
|
|
|
|
(16,522 |
) |
Proceeds from sale of lease fleet units |
|
|
22,756 |
|
|
|
2,692 |
|
|
|
(17 |
) |
|
|
25,431 |
|
Additions to property, plant and equipment |
|
|
(5,248 |
) |
|
|
(2,887 |
) |
|
|
|
|
|
|
(8,135 |
) |
Proceeds from sale of property, plant and equipment |
|
|
552 |
|
|
|
269 |
|
|
|
|
|
|
|
821 |
|
Other |
|
|
112 |
|
|
|
|
|
|
|
|
|
|
|
112 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used in) investing activities |
|
|
8,011 |
|
|
|
(6,287 |
) |
|
|
(17 |
) |
|
|
1,707 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash Flows From Financing Activities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (repayments) borrowings under lines of credit |
|
|
(64,409 |
) |
|
|
(7,008 |
) |
|
|
10,191 |
|
|
|
(61,226 |
) |
Principal payments on notes payable |
|
|
(1,161 |
) |
|
|
(41 |
) |
|
|
|
|
|
|
(1,202 |
) |
Principal payments on capital lease obligations |
|
|
(1,081 |
) |
|
|
|
|
|
|
(1 |
) |
|
|
(1,082 |
) |
Issuance of common stock, net |
|
|
603 |
|
|
|
|
|
|
|
|
|
|
|
603 |
|
Intercompany |
|
|
818 |
|
|
|
(847 |
) |
|
|
29 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash (used in) provided by financing activities |
|
|
(65,230 |
) |
|
|
(7,896 |
) |
|
|
10,219 |
|
|
|
(62,907 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Effect of exchange rate changes on cash |
|
|
1,658 |
|
|
|
615 |
|
|
|
(11,141 |
) |
|
|
(8,868 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (decrease) increase in cash |
|
|
(1,763 |
) |
|
|
320 |
|
|
|
|
|
|
|
(1,443 |
) |
Cash at beginning of period |
|
|
2,208 |
|
|
|
976 |
|
|
|
|
|
|
|
3,184 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash at end of period |
|
$ |
445 |
|
|
$ |
1,296 |
|
|
$ |
|
|
|
$ |
1,741 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
24
MOBILE MINI, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited) Continued
MOBILE MINI, INC.
CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS
Nine Months Ended September 30, 2010
(In thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non- |
|
|
|
|
|
|
|
|
|
Guarantors |
|
|
Guarantors |
|
|
Eliminations |
|
|
Consolidated |
|
Cash Flows From Operating Activities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (loss) income |
|
$ |
(86,965 |
) |
|
$ |
100,177 |
|
|
$ |
(554 |
) |
|
$ |
12,658 |
|
Adjustments to reconcile net income to net cash (used in)
provided by operating activities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred financing costs write-off |
|
|
525 |
|
|
|
|
|
|
|
|
|
|
|
525 |
|
Provision for doubtful accounts |
|
|
1,350 |
|
|
|
329 |
|
|
|
|
|
|
|
1,679 |
|
Amortization of deferred financing costs |
|
|
3,298 |
|
|
|
|
|
|
|
|
|
|
|
3,298 |
|
Amortization of long-term liabilities |
|
|
794 |
|
|
|
39 |
|
|
|
|
|
|
|
833 |
|
Share-based compensation expense |
|
|
4,383 |
|
|
|
522 |
|
|
|
|
|
|
|
4,905 |
|
Depreciation and amortization |
|
|
21,939 |
|
|
|
4,989 |
|
|
|
|
|
|
|
26,928 |
|
Gain on sale of lease fleet units |
|
|
(6,481 |
) |
|
|
(680 |
) |
|
|
|
|
|
|
(7,161 |
) |
(Gain) loss on disposal of property, plant and equipment |
|
|
(85 |
) |
|
|
6 |
|
|
|
|
|
|
|
(79 |
) |
Deferred income taxes |
|
|
7,092 |
|
|
|
665 |
|
|
|
20 |
|
|
|
7,777 |
|
Foreign currency exchange loss |
|
|
|
|
|
|
9 |
|
|
|
|
|
|
|
9 |
|
Changes in certain assets and liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Receivable |
|
|
(3,180 |
) |
|
|
(1,470 |
) |
|
|
|
|
|
|
(4,650 |
) |
Inventories |
|
|
1,653 |
|
|
|
(60 |
) |
|
|
|
|
|
|
1,593 |
|
Deposits and prepaid expenses |
|
|
2,687 |
|
|
|
135 |
|
|
|
|
|
|
|
2,822 |
|
Other assets and intangibles |
|
|
(913 |
) |
|
|
|
|
|
|
|
|
|
|
(913 |
) |
Accounts payable |
|
|
(1,455 |
) |
|
|
598 |
|
|
|
|
|
|
|
(857 |
) |
Accrued liabilities |
|
|
(7,078 |
) |
|
|
(116 |
) |
|
|
|
|
|
|
(7,194 |
) |
Intercompany |
|
|
34,809 |
|
|
|
(13,715 |
) |
|
|
(21,094 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash (used in) provided by operating activities |
|
|
(27,627 |
) |
|
|
91,428 |
|
|
|
(21,628 |
) |
|
|
42,173 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash Flows From Investing Activities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Additions to lease fleet units |
|
|
(5,377 |
) |
|
|
(5,855 |
) |
|
|
|
|
|
|
(11,232 |
) |
Proceeds from sale of lease fleet units |
|
|
17,933 |
|
|
|
2,333 |
|
|
|
|
|
|
|
20,266 |
|
Additions to property, plant and equipment |
|
|
(2,196 |
) |
|
|
(1,575 |
) |
|
|
|
|
|
|
(3,771 |
) |
Proceeds from sale of property, plant and equipment |
|
|
39 |
|
|
|
81 |
|
|
|
|
|
|
|
120 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used in) investing activities |
|
|
10,399 |
|
|
|
(5,016 |
) |
|
|
|
|
|
|
5,383 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash Flows From Financing Activities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (repayments) borrowings under lines of credit |
|
|
25,736 |
|
|
|
(64,691 |
) |
|
|
(1,589 |
) |
|
|
(40,544 |
) |
Deferred financing costs |
|
|
(74 |
) |
|
|
|
|
|
|
|
|
|
|
(74 |
) |
Proceeds from issuance of notes payable |
|
|
94 |
|
|
|
|
|
|
|
|
|
|
|
94 |
|
Redemption of Senior Notes |
|
|
(6,000 |
) |
|
|
|
|
|
|
|
|
|
|
(6,000 |
) |
Principal payments on notes payable |
|
|
(1,184 |
) |
|
|
(23 |
) |
|
|
|
|
|
|
(1,207 |
) |
Principal payments on capital lease obligations |
|
|
(1,102 |
) |
|
|
(1 |
) |
|
|
|
|
|
|
(1,103 |
) |
Issuance of common stock, net |
|
|
922 |
|
|
|
|
|
|
|
|
|
|
|
922 |
|
Intercompany |
|
|
|
|
|
|
(628 |
) |
|
|
628 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used in) financing activities |
|
|
18,392 |
|
|
|
(65,343 |
) |
|
|
(961 |
) |
|
|
(47,912 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Effect of exchange rate changes on cash |
|
|
(70 |
) |
|
|
(21,804 |
) |
|
|
22,589 |
|
|
|
715 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net increase (decrease) in cash |
|
|
1,094 |
|
|
|
(735 |
) |
|
|
|
|
|
|
359 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash at beginning of period |
|
|
582 |
|
|
|
1,158 |
|
|
|
|
|
|
|
1,740 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash at end of period |
|
$ |
1,676 |
|
|
$ |
423 |
|
|
$ |
|
|
|
$ |
2,099 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
25
ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion of our financial condition and results of operations should be read
together with our December 31, 2009 consolidated financial statements and the accompanying notes
thereto which are included in our Annual Report on Form 10-K filed with the Securities and Exchange
Commission on March 1, 2010, and amended on September 27, 2010. This discussion contains
forward-looking statements. Forward-looking statements are based on current expectations and
assumptions that involve risks and uncertainties. Our actual results may differ materially from
those anticipated in our forward-looking statements.
Overview
General
We are the worlds leading provider of portable storage solutions, with a total lease fleet of
approximately 248,900 portable storage and office units at September 30, 2010. We offer a wide
range of portable storage products in varying lengths and widths with an assortment of
differentiated features such as our patented locking systems, multiple doors, electrical wiring and
shelving.
We derive most of our revenues from the leasing of portable storage containers and offices. In
addition to our leasing business, we also sell portable storage containers and occasionally sell
office units. Our sales revenues represented 10.2% and 9.5% of total revenues for the nine months
ended September 30, 2009 and 2010, respectively.
Prior to acquiring Mobile Storage Group (MSG) in 2008, we grew both organically and through
smaller acquisitions, which we used to gain a presence in new markets. Traditionally, we enter new
markets through the acquisition of the business of a smaller local competitor and then implement
our business model, which is usually more focused on customer service and marketing than the
acquired business or other market competitors. Given our current utilization levels, we are
currently entering new markets through greenfield locations by migrating idle fleet to low-cost
operational yards. These greenfield operational yards do not have all the overhead associated with
a fully staffed branch as they typically only have drivers and yard personnel to handle deliveries
and pick-ups of our fleet. A new location will generally 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 location, we are typically able to reach company average levels
of profitability after several years. The costs associated with opening a greenfield operational
yard are lower than a fully staffed branch which should have a comparatively positive effect on
margins.
When we enter a new market, we incur certain costs in developing new 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 are able to
generate relatively high margins on incremental lease revenues. Therefore, each additional unit
rented in excess of the break-even level contributes significantly to profitability. Conversely,
any 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.
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 31% of our leased units at September 30, 2010 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. Beginning in the second quarter of
2008, the level of our construction related business slowed down and then declined. The decline
continued and adversely affected our results of operations in 2009. Although it has not returned
to pre-2009 levels, the level of our construction related business began to stabilize in 2010.
In managing our business, we focus on growing leasing revenues, particularly in existing markets
where we can take advantage of the high 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.
26
We are a capital-intensive business, so in addition to focusing on earnings per share, we focus on
adjusted EBITDA to measure our operating 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. The GAAP financial
measure that is most directly comparable to EBITDA is net cash provided by operating activities.
Because EBITDA, EBITDA margin, adjusted EBITDA and adjusted EBITDA margin are non-GAAP financial
measures as defined by the SEC, we include below in this report reconciliations of EBITDA to the
most directly comparable financial measures calculated and presented in accordance with U.S.
generally accepted accounting principles.
We present EBITDA and EBITDA margin 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. EBITDA margin
is calculated by dividing consolidated EBITDA by total revenues. The GAAP financial measure that
is most directly comparable to EBITDA margin is operating margin, which represents operating income
divided by revenues. More emphasis should not be placed on EBITDA margin than the corresponding
GAAP measure. 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 credit
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 U.S.
generally accepted accounting principles or as a measure of our profitability or our liquidity. In
particular, EBITDA, as defined, does not include:
|
|
|
Interest expense because we borrow money to partially finance our capital expenditures,
primarily related to the expansion of our lease fleet, interest expense is a necessary
element of our cost to secure this financing to continue generating additional revenues. |
|
|
|
|
Debt restructuring or extinguishment expense as historically defined in our revolving
credit facility, debt restructuring or debt extinguishment expenses are not deducted in our
various calculations made under our facility and are treated no differently than interest
expense. As discussed above, interest expense is a necessary element of our cost to finance
a portion of the capital expenditures needed for the growth of our business. |
|
|
|
|
Income taxes EBITDA, as defined, does not reflect income taxes or the requirements for
any tax payments. |
|
|
|
|
Depreciation and amortization because we are a leasing company, our business is very
capital intensive and we hold acquired assets for a period of time before they generate
revenues, cash flow and earnings; therefore, depreciation and amortization expense is a
necessary element of our business. |
When evaluating EBITDA as a performance measure, and excluding the above-noted charges, all of
which have material limitations, investors should consider, among other factors, the following:
|
|
|
increasing or decreasing trends in EBITDA; |
|
|
|
|
how EBITDA compares to levels of debt and interest expense; and |
|
|
|
|
whether EBITDA historically has remained at positive levels. |
Because EBITDA, as defined, excludes some but not all items that affect our cash flow from
operating activities, EBITDA may not be comparable to similarly titled performance measures
presented by other companies.
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.
27
The table below is a reconciliation of EBITDA to net cash provided by operating activities for the
periods indicated:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
Nine Months Ended |
|
|
|
September 30, |
|
|
September 30, |
|
|
|
2009 |
|
|
2010 |
|
|
2009 |
|
|
2010 |
|
|
|
(In thousands) |
|
EBITDA |
|
$ |
36,989 |
|
|
$ |
32,478 |
|
|
$ |
110,029 |
|
|
$ |
91,032 |
|
Interest paid |
|
|
(15,889 |
) |
|
|
(15,098 |
) |
|
|
(43,971 |
) |
|
|
(41,000 |
) |
Income and franchise taxes paid |
|
|
(92 |
) |
|
|
(87 |
) |
|
|
(964 |
) |
|
|
(736 |
) |
Share-based compensation expense |
|
|
1,825 |
|
|
|
1,882 |
|
|
|
5,106 |
|
|
|
4,905 |
|
Gain on sale of lease fleet units |
|
|
(3,026 |
) |
|
|
(2,684 |
) |
|
|
(8,805 |
) |
|
|
(7,161 |
) |
Loss (gain) on disposal of property, plant and equipment |
|
|
(138 |
) |
|
|
3 |
|
|
|
(102 |
) |
|
|
(79 |
) |
Changes in certain assets and liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Receivables |
|
|
2,330 |
|
|
|
(2,973 |
) |
|
|
19,893 |
|
|
|
(2,971 |
) |
Inventories |
|
|
1,149 |
|
|
|
687 |
|
|
|
2,788 |
|
|
|
1,593 |
|
Deposits and prepaid expenses |
|
|
688 |
|
|
|
598 |
|
|
|
3,123 |
|
|
|
2,822 |
|
Other assets and intangibles |
|
|
(228 |
) |
|
|
(390 |
) |
|
|
(669 |
) |
|
|
(913 |
) |
Accounts payable and accrued liabilities |
|
|
(1,819 |
) |
|
|
(378 |
) |
|
|
(17,803 |
) |
|
|
(5,319 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by operating activities |
|
$ |
21,789 |
|
|
$ |
14,038 |
|
|
$ |
68,625 |
|
|
$ |
42,173 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The table below is a reconciliation of net income to EBITDA and adjusted EBITDA, for the periods
indicated:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
Nine Months Ended |
|
|
|
September 30, |
|
|
September 30, |
|
|
|
2009 |
|
|
2010 |
|
|
2009 |
|
|
2010 |
|
|
|
(In thousands except percentages) |
|
Net income |
|
$ |
8,120 |
|
|
$ |
5,469 |
|
|
$ |
21,813 |
|
|
$ |
12,658 |
|
Interest expense |
|
|
14,595 |
|
|
|
14,161 |
|
|
|
44,802 |
|
|
|
43,135 |
|
Deferred financing costs write-off |
|
|
|
|
|
|
525 |
|
|
|
|
|
|
|
525 |
|
Provision for income taxes |
|
|
5,047 |
|
|
|
3,575 |
|
|
|
13,500 |
|
|
|
7,786 |
|
Depreciation and amortization |
|
|
9,227 |
|
|
|
8,748 |
|
|
|
29,914 |
|
|
|
26,928 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EBITDA |
|
|
36,989 |
|
|
|
32,478 |
|
|
|
110,029 |
|
|
|
91,032 |
|
Integration, merger and
restructuring expenses, other (1) |
|
|
1,532 |
|
|
|
518 |
|
|
|
9,375 |
|
|
|
3,942 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted EBITDA |
|
$ |
38,521 |
|
|
$ |
32,996 |
|
|
$ |
119,404 |
|
|
$ |
94,974 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EBITDA margin(2) |
|
|
40.2 |
% |
|
|
38.4 |
% |
|
|
38.3 |
% |
|
|
37.4 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted EBITDA margin(2) |
|
|
41.8 |
% |
|
|
39.0 |
% |
|
|
41.6 |
% |
|
|
39.0 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Integration, merger and restructuring expenses represent costs that we incurred in connection
with the MSG acquisition and the expenses in conjunction with the continued restructuring of
our operations and other excludes one-time expenses incurred in the
applicable period. Included in these costs are
integration, merger and non-cash restructuring expenses of
$.9 million and $.4 million for the three months
ended September 30, 2009 and 2010, respectively and
$6.7 million and $1.9 million for the nine months
ended September 30, 2009 and 2010, respectively. Additionally, we
incurred $1.2 million of integration, merger and non-cash restructuring
expenses in the three months ended December 31, 2009. |
|
(2) |
|
EBITDA margin and adjusted EBITDA margin are calculated as EBITDA and adjusted EBITDA,
divided by our total revenues expressed as a percentage. |
In managing our business, we measure our EBITDA margins from year to year and based upon the size
of our branches. 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 start-up 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 lower EBITDA margins in its early years until the branch increases the number of units they
have on rent. 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 would 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.
28
Accounting and Operating Overview
Our leasing revenues include all rent and ancillary revenues we receive for our portable storage,
combination storage/office and mobile office units. Our sales revenues include sales of these
units to customers. Our other revenues consist principally of charges for the delivery of the
units we sell. Our principal operating expenses are (1) cost of sales; (2) leasing, selling and
general expenses; and (3) depreciation and amortization, primarily depreciation of the portable
storage units and portable offices in our lease fleet. Cost of sales is the cost of the units that
we sold during the reported period and includes both our cost to buy, transport, remanufacture and
modify used ocean-going containers and our cost to manufacture portable storage units and other
structures. Leasing, selling and general expenses include, among other expenses, payroll and
related payroll costs, advertising and other marketing expenses, real property lease expenses,
commissions, repair and maintenance costs of our lease fleet and transportation equipment and
corporate expenses for both our leasing and sales activities. Our repairs on wood office units
require more maintenance cost than our portable storage units and have become a larger part of our
lease fleet repair and maintenance expense over the past several years. Annual repair and
maintenance expenses on our leased units have averaged approximately 3.4% of lease revenues over
the last three fiscal years and are included in leasing, selling and general expenses. We expense
our normal repair and maintenance costs as incurred (including the cost of periodically repainting
units).
Our principal asset is our lease fleet, which has historically maintained value close to its
original cost. The steel units in our lease fleet (other than van trailers) are depreciated on the
straight-line method over our units estimated useful life of 30 years after the date the unit is
placed in service, with an estimated residual value of 55%. The depreciation policy is supported
by our historical lease fleet data which shows that we have been able to obtain comparable rental
rates and sales prices irrespective of the age of our container lease fleet. Our wood mobile
office units are depreciated over 20 years to 50% of original cost. Van trailers, which constitute
a small part of our fleet, are depreciated over seven years to a 20% residual value. 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.
The table below summarizes those transactions that effectively maintained the net book value of our
lease fleet at $1.1 billion at December 31, 2009, and $1.0 billion at September 30, 2010:
|
|
|
|
|
|
|
|
|
|
|
Dollars |
|
|
Units |
|
|
|
(In thousands) |
|
|
|
|
Lease fleet at December 31, 2009, net |
|
$ |
1,055,328 |
|
|
|
257,208 |
|
Purchases: |
|
|
|
|
|
|
|
|
Container purchases, including freight |
|
|
120 |
|
|
|
24 |
|
Manufactured units: |
|
|
|
|
|
|
|
|
Steel security offices |
|
|
1,395 |
|
|
|
59 |
|
Remanufacturing and customization of units purchased or obtained in prior years |
|
|
8,780 |
(1) |
|
|
849 |
(2) |
Other (3) |
|
|
402 |
|
|
|
(259 |
) |
Cost of sales from lease fleet |
|
|
(13,154 |
) |
|
|
(9,024 |
) |
Effect of exchange rate changes |
|
|
(847 |
) |
|
|
|
|
Depreciation |
|
|
(14,455 |
) |
|
|
|
|
|
|
|
|
|
|
|
Lease fleet at September 30, 2010, net |
|
$ |
1,037,569 |
|
|
|
248,857 |
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Does not include any routine maintenance, which is expensed as incurred. |
|
(2) |
|
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 include units moved from finished
goods to the lease fleet. |
|
(3) |
|
Includes net transfers to and from property, plant and equipment and net non-sale disposals
and recoveries of the lease fleet. |
29
The table below outlines the composition of our lease fleet (by book value and unit count) at
September 30, 2010:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of |
|
|
Percentage |
|
|
|
Book Value |
|
|
Units |
|
|
of Units |
|
|
|
(In thousands) |
|
|
|
|
|
|
|
|
|
Steel storage containers |
|
$ |
615,551 |
|
|
|
201,173 |
|
|
|
81 |
% |
Steel and wood offices |
|
|
530,738 |
|
|
|
41,702 |
|
|
|
17 |
% |
Van trailers |
|
|
4,174 |
|
|
|
5,982 |
|
|
|
2 |
% |
Other (chassis and ancillary products) |
|
|
2,705 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,153,168 |
|
|
|
|
|
|
|
|
|
Accumulated depreciation |
|
|
(115,599 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
1,037,569 |
|
|
|
248,857 |
|
|
|
100 |
% |
|
|
|
|
|
|
|
|
|
|
Appraisals on our fleet are conducted on a regular basis by an independent appraiser selected by
our lenders. 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. The latest orderly liquidation value appraisal was
conducted in April 2010 by AccuVal Associates, Incorporated. Based on this appraisal, on which our
borrowings under our revolving credit facility are based, our lease fleet liquidation appraisal
value as of September 30, 2010, is approximately $821.5 million.
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. Historically our utilization is somewhat
seasonal, with the low normally being realized in the first quarter and the high realized in the
fourth quarter of each year. However, with the challenging economic business environment we have
seen a decline in our utilization rates compared to the same period in the prior year.
Our average utilization rate for the third quarter of 2010 was 53.3%, compared to 56.9% in the
third quarter of 2009. Our third quarter utilization rate progressed during the quarter and
increased to 54.1% at September 30, 2010.
RESULTS OF OPERATIONS
Three Months Ended September 30, 2010, Compared to
Three Months Ended September 30, 2009
Total revenues for the quarter ended September 30, 2010 decreased by $7.5 million, or 8.1%, to
$84.6 million from $92.1 million for the same period in 2009. Leasing revenues for the quarter
decreased by $6.5 million, or 7.9%, to $75.6 million from $82.1 million for the same period in
2009. This decrease in leasing revenues resulted from a 10.3% reduction in the average number of
units on lease, driven by the weak economy and the general decline in the level of non-residential
construction activity. This decrease was partially offset by a 2.7% increase in our yield that was
primarily driven by increases in ancillary income and product mix. Our sales of portable storage
and office units for the quarter ended September 30, 2010 decreased by 12.5%, to $8.3 million from
$9.5 million during the same period in 2009. The decrease in sales revenues primarily reflects the
general reduction in business activity relating to weak economic conditions. Leasing revenues, as
a percentage of total revenues for the quarters ended September 30, 2010 and 2009, were 89.3% and
89.2%, respectively. Our leasing business continues to be our primary focus and leasing revenues
have and continue to be the predominant part of our revenue mix.
Cost of sales is the cost related to our sales revenues only. Cost of sales was 64.9% and 65.5% of
sales revenue for the quarters ended September 30, 2010 and 2009, respectively. Our gross margins
increased to 35.1% for the quarter ended September 30, 2010, compared to 34.5% for the same period
in 2009.
Leasing, selling and general expenses decreased $1.1 million, or 2.4%, to $46.2 million for the
quarter ended September 30, 2010, from $47.3 million for the same period in 2009. This decrease is
primarily due to large reductions in our workforce and migrating a number of our branches to lower
cost operational yards. In addition to a reduction in payroll costs, we benefited from lower
insurance and advertising costs as compared to the prior period.
Integration, merger and restructuring expenses decreased $1.0 million to $0.5 million for the
quarter ended September 30, 2010 from $1.5 million for the quarter ended September 30, 2009. These
expenses primarily represent costs associated with reductions to our
workforce, costs for repositioning our assets and a reduction in our manufacturing operations.
Other continuing costs related to integration, merger and restructuring will be expensed as
incurred.
30
Adjusted EBITDA, decreased $5.5 million, or 14.3%, to $33.0 million, compared to $38.5 million for
the same period in 2009. Adjusted EBITDA margins were 39.0% and 41.8% of total revenues for the
three months ended September 30, 2010 and 2009, respectively. The decrease is due to a decline in
revenues, which were partially offset by our cost cutting efforts.
Depreciation and amortization expenses decreased $0.5 million, or 5.2%, to $8.7 million in the
quarter ended September 30, 2010, compared to $9.2 million during the same period in 2009. The
decrease is attributable to the reduced scope of our manufacturing operations and reductions in our
lease fleet, and is partially offset by investment in additional technology and communication
equipment and delivery equipment.
Interest expense decreased $0.4 million to $14.2 million for the quarter ended September 30, 2010,
compared to $14.6 million for the same period in 2009. This decrease is primarily attributable to
lower average debt outstanding during the quarter, principally due to the use of operating cash
flow to reduce our debt over the last 12 months. The weighted average interest rate on our debt
for the three months ended September 30, 2010 was 6.7% compared to 6.2% for the three months ended
September 30, 2009, excluding amortizations of debt issuance and other costs. Taking into account
the amortizations of debt issuance and other costs, the weighted average interest rate was 7.2% in
the 2010 quarter compared to 6.8% in the 2009 quarter.
Deferred financing costs write-off in 2010 represents that portion of deferred financing costs
associated with the $50.0 million Company elected reduction in the ABL Credit Agreement. See
Liquidity and Capital Resources Revolving Credit Facility.
Provision for income taxes was based on our annual estimated effective tax rate. The tax rate for
the quarter ended September 30, 2010 was 39.5%, compared to 38.3% during the same period in 2009.
Our consolidated tax provision includes the expected tax rates for our operations in the United
States, Canada, United Kingdom and The Netherlands.
Net income for the three months ended September 30, 2010 was $5.5 million compared to net income of
$8.1 million for the same period in 2009. Our third quarter net income results include
integration, merger and restructuring expenses of $0.5 million and $1.5 million (approximately $0.3
million and $1.0 million after tax), for the three months ended September 30, 2010 and 2009,
respectively.
Nine Months Ended September 30, 2010, Compared to
Nine Months Ended September 30, 2009
Total revenues for the nine months ended September 30, 2010 decreased by $43.9 million, or 15.3%,
to $243.3 million from $287.2 million for the same period in 2009. Leasing revenues for the nine
months decreased by $37.3 million, or 14.6%, to $218.7 million from $256.0 million for the same
period in 2009. This decrease in leasing revenues resulted from a 17.3% reduction in the average
number of units on lease, driven by the weak economy and the general decline in the level of
non-residential construction activity. This decrease was partially offset by a 3.3% increase in
our yield that was primarily driven by increases in ancillary income and product mix. Our sales of
portable storage and office units for the nine months ended September 30, 2010 decreased by 21.4%,
to $23.1 million from $29.4 million during the same period in 2009. The decrease in sales revenues
primarily reflects the general reduction in business activity relating to weak economic conditions.
Leasing revenues, as a percentage of total revenues for the nine months ended September 30, 2010
and 2009, were 89.9% and 89.1%, respectively. Our leasing business continues to be our primary
focus and leasing revenues have and continue to be the predominant part of our revenue mix.
Cost of sales is the cost related to our sales revenues only. Cost of sales was 66.0% and 67.0% of
sales revenue for the nine months ended September 30, 2010 and 2009, respectively. Our gross
margins increased 1.0 percentage point to 34.0% for the nine months ended September 30, 2010,
compared to 33.0% for the same period in 2009.
Leasing, selling and general expenses decreased $14.6 million, or 9.9%, to $133.4 million for the
nine months ended September 30, 2010, from $148.0 million for the same period in 2009. This
decrease is primarily due to large reductions in our workforce and migrating a number of our
branches to lower cost operational yards. In addition to a reduction in payroll costs, we
benefited from lower insurance and advertising costs as compared to the prior period.
31
Integration, merger and restructuring expenses for the nine months ended September 30, 2010 were
$3.7 million compared to $9.4 million for the same period in 2009. These expenses primarily
represent costs associated with reductions to our workforce, costs for repositioning our assets and
a reduction in our manufacturing operations. Other continuing costs related to integration, merger
and restructuring will be expensed as incurred.
Adjusted EBITDA, decreased $24.4 million, or 20.5%, to $95.0 million, compared to $119.4 million
for the same period in 2009. Adjusted EBITDA margins were 39.0% and 41.6% of total revenues for
the nine months ended September 30, 2010 and 2009, respectively. The decrease is due to a decline
in revenues, which were partially offset by our cost cutting efforts.
Depreciation and amortization expenses decreased $3.0 million, or 10.0%, to $26.9 million in the
nine months ended September 30, 2010, compared to $29.9 million during the same period in 2009.
The decrease is attributable to the reduced scope of our manufacturing operations and reductions in
our lease fleet, and is partially offset by investment in additional technology and communication
equipment and delivery equipment.
Interest expense decreased $1.7 million to $43.1 million for the nine months ended September 30,
2010, compared to $44.8 million for the same period in 2009. This decrease is primarily
attributable to lower average debt outstanding during the quarter, principally due to the use of
operating cash flow to reduce our debt over the last 12 months. The weighted average interest rate
on our debt for the nine months ended September 30, 2010 was 6.6% compared to 6.2% for the nine
months ended September 30, 2009, excluding amortizations of debt issuance and other costs. Taking
into account the amortizations of debt issuance and other costs, the weighted average interest rate
was 7.2% in 2010 and was 6.7% in 2009.
Deferred financing costs write-off in 2010 represents that portion of deferred financing costs
associated with the $50.0 million Company elected reduction in the ABL Credit Agreement. See
Liquidity and Capital Resources Revolving Credit Facility.
Provision for income taxes was based on our annual estimated effective tax rate. The tax rate for
the nine months ended September 30, 2010 was 38.1%, compared to 38.2% during the same period in
2009. Our consolidated tax provision includes the expected tax rates for our operations in the
United States, Canada, United Kingdom and The Netherlands.
Net income for the nine months ended September 30, 2010 was $12.7 million compared to net income of
$21.8 million for the same period in 2009. Net income results include integration, merger and
restructuring expenses of $3.7 million and $9.4 million, (approximately $2.3 million and $5.8
million after tax) for the nine months ended September 30, 2010 and 2009, respectively.
LIQUIDITY AND CAPITAL RESOURCES
Leasing is a capital-intensive business that requires us to acquire assets before they generate
revenues, cash flow and earnings. The assets that we lease have very long useful lives and require
relatively little recurrent maintenance expenditures. Most of the capital we have historically
deployed in our leasing business 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 cash flow from operations and the deferral of income taxes
caused by accelerated depreciation that is used for tax accounting. In 2008 and 2009, we were cash
flow positive (after capital expenditures but excluding acquisitions). This positive cash flow
trend has continued for the nine month period ended September 30, 2010.
During the past three years, our capital expenditures and acquisitions have been funded by our
operating cash flow and from 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 as a result of seasonal weather in some of our
markets. During 2009 and the nine months ended September 30, 2010, we cut back significantly on
our capital expenditures and were able to fund these expenditures with cash flow from operations.
We currently expect this trend to continue throughout 2010. In addition to cash flow generated by
operations, our principal current source of liquidity is our revolving credit facility described
below.
32
Revolving Credit Facility. On June 27, 2008, we entered into a $900.0 million ABL Credit Agreement
(the Credit Agreement) with Deutsche Bank AG New York Branch and the other lenders party thereto.
In August 2010, we entered into a Second Amendment to the Credit Agreement that, among other
things, allows a permitted refinancing of our senior notes as well as restricted payments and
acquisitions to occur without financial covenant restrictions provided we have $250 million in pro
forma excess borrowing availability
(as defined in the Credit Agreement). We also elected to reduce the Credit Agreement by $50.0
million to $850.0 million, which reduces our ongoing unused line fees. 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 September 30, 2010, we had approximately $433.1 million of borrowings
outstanding and $352.0 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 September 30, 2010.
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 Credit Agreement, at the
measurement date. Based on our debt ratio at September 30, 2010, 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 the 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 U.S. 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.
Senior Notes. The Company and its subsidiary, Mobile Storage Group, Inc. (MSG) has two series of
outstanding senior notes: the Companys $150 million aggregate principal amount of 6.875% senior
notes due 2015 (the Mobile Mini Notes) and its $200 million aggregate principal amount of 9.750%
senior notes originally issued by Mobile Storage Group, Inc. due 2014 (the MSG Notes and together
with the Mobile Mini Notes, the Senior Notes). As of the date hereof, $150.0 million of the
Mobile Mini Notes and $192.9 million of the MSG Notes remain outstanding.
In connection with the acquisition of MSG, Mobile Mini entered into a supplemental indenture
pursuant to which MSGs guarantor subsidiaries under the MSG Notes became Guarantors under the
Mobile Mini Notes. Similarly, Mobile Mini entered into a supplemental Indenture pursuant to which
Mobile Mini became an Issuer under the MSG Notes and Mobile Minis guarantor subsidiaries under
the Mobile Mini Notes became Guarantors for all purposes under the MSG Notes.
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 Mobile Mini Notes.
The Senior Notes include 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. Management does not believe that the covenants in the Senior
Notes limit the Companys ability to pursue its intended business strategy or its future financing
needs. We were in compliance with the covenants of the Senior Notes as of September 30, 2010.
As discussed above, the August 2010 Second Amendment to the Credit Agreement provides, among other
things, for a permitted refinancing of our Senior Notes under certain conditions.
Operating Activities. Our operations provided net cash flow of $42.2 million for the nine months
ended September 30, 2010, compared to $68.6 million during the same period in 2009. The $26.4
million decrease in cash provided by operations primarily resulted from changes in working capital
and a decrease in net income from fewer units on rent, after giving effect to non-cash items. We
used this net cash flow to fund operations and repay debt.
33
Investing Activities. Net cash provided by investing activities was $5.4 million for the nine
months ended September 30, 2010, compared to $1.7 million for the same period in 2009. Capital
expenditures for our lease fleet were $11.2 million and proceeds from sale of lease fleet units
were $20.3 million for the nine months ended September 30, 2010, compared to capital expenditures
of $16.5
million and proceeds of $25.4 million for the same period in 2009. Our capital expenditures for
our lease fleet decreased 32.0% in the first nine months of 2010, compared to the same period in
2009 as we remanufactured fewer units due to our utilization rate. As a result of the current
economic conditions, we anticipate our near-term investing activities will be primarily focused on
remanufacturing units acquired in acquisitions to meet our lease fleet standards as these units are
placed on lease. Capital expenditures for property, plant and equipment, net of proceeds from
sales of property, plant and equipment, were $3.7 million for the nine months ended September 30,
2010, compared to $7.3 million for the same period in 2009. The amount of cash that we use during
any period in investing activities is almost entirely within managements discretion. We have no
contracts or other arrangements pursuant to which we are required to purchase a fixed or minimum
amount of capital goods in connection with any portion of our business.
Financing Activities. Net cash used in financing activities was $47.9 million during the nine
months ended September 30, 2010 compared to $62.9 million for the same period in 2009. During the
nine months ended September 30, 2010, we made net repayments of $48.8 million of debt.
At September 30, 2010, we have interest rate swap agreements under which we effectively fixed the
interest rate payable on $200.0 million of borrowings under our Credit Agreement so that the rate
is based upon a spread from a fixed rate, rather than a spread from the LIBOR rate. The fair value
of our interest rate swap agreements resulted in amounts being recognized in other comprehensive
income for the nine months ended September 30, 2010, of $2.6 million net of applicable income taxes
of $1.7 million.
CONTRACTUAL OBLIGATIONS AND COMMITMENTS
Our contractual obligations primarily consist of our outstanding balance under our revolving credit
facility and $340.0 million of Senior Notes, (net of unamortized discounts of $2.8 million)
together with other 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
locations 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 September 30, 2010, primarily in connection with the issuance of our insurance policies, we
provided certain insurance carriers and others with approximately $12.0 million in letters of
credit.
We currently do not have any obligations under purchase agreements or commitments. Historically,
we have entered into capitalized lease obligations from time to time and as a result of the
acquisition of MSG, have commitments for $3.0 million in remaining capital lease obligations at
September 30, 2010.
OFF-BALANCE SHEET TRANSACTIONS
We do not maintain any off-balance sheet transactions, arrangements, obligations or other
relationships with unconsolidated entities or others that are reasonably likely to have a material
current or future effect on our financial condition, changes in financial condition, revenues or
expenses, results of operations, liquidity, capital expenditures or capital resources.
SEASONALITY
Demand from some of our customers is somewhat seasonal. Demand for leases of our portable storage
units by large retailers is stronger from September through December because these retailers need
to store more inventory for the holiday season. These retailers usually return these leased units
to us early in the following year. This seasonality has historically caused lower utilization
rates for our lease fleet and a marginal decrease in cash flow during the first quarter of each
year. Over the last few years, we reduced the percentage of our units we reserve for this seasonal
business in comparison with the levels we allocated in earlier years, decreasing the impact of this
seasonality on our operations.
EFFECTS OF INFLATION
Our results of operations for the periods discussed in this report have not been significantly
affected by inflation.
34
CRITICAL ACCOUNTING POLICIES, ESTIMATES AND JUDGMENTS
Our significant accounting policies are disclosed in Note 1 to our consolidated financial
statements included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2009.
The following discussion addresses our most critical accounting policies, some of which require
significant judgment.
Our consolidated financial statements have been prepared in accordance with U.S. generally accepted
accounting principles, or GAAP. 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 consolidated statements 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 share-awards.
For stock options and nonvested share-awards subject solely to service conditions, we recognize
expense using the straight-line method. For nonvested share-awards subject to service and
performance conditions, we are required to assess the probability that such performance conditions
will be met. If the likelihood of the performance condition being met is deemed probable, we will
recognize the expense using the 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 $0.2 million of total unrecognized
compensation costs related to stock options at September 30, 2010 that are expected to be
recognized over a weighted-average period of 0.6 years and $17.5 million of total unrecognized
compensation costs related to nonvested share-awards at September 30, 2010 that are expected to be
recognized over a weighted-average period 2.9 years. See Note F to the Condensed Consolidated
Financial Statements for a further discussion on share-based compensation.
35
Allowance for Doubtful Accounts. We maintain allowances for doubtful accounts for estimated losses
resulting from the inability of our customers to make required payments. We establish and maintain
reserves against estimated losses based upon historical loss experience and evaluation of past due
accounts receivable. Management reviews the level of the allowances for doubtful accounts on a
regular basis and adjusts the level of the allowances as needed. If we were to increase the
factors used for our reserve estimates by 25%, it would have the following approximate effect on
our net income and diluted earnings per share:
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Three Months Ended |
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Nine Months Ended |
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September 30, |
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September 30, |
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2009 |
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2010 |
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2009 |
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2010 |
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(In thousands except per share data) |
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As Reported: |
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Net income |
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$ |
8,120 |
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$ |
5,469 |
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$ |
21,813 |
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$ |
12,658 |
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Diluted earnings per share |
|
$ |
0.19 |
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$ |
0.12 |
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$ |
0.51 |
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$ |
0.29 |
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As adjusted for change in estimates: |
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Net income |
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$ |
8,063 |
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$ |
5,417 |
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$ |
21,530 |
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$ |
12,398 |
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Diluted earnings per share |
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$ |
0.19 |
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$ |
0.12 |
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$ |
0.50 |
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$ |
0.28 |
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If the financial condition of our customers were to deteriorate, resulting in an impairment of
their ability to make payments, additional allowances could 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 that could trigger an impairment review
include the following:
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significant under-performance relative to historical, expected or projected future
operating results; |
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significant changes in the manner of our use of the acquired assets or the strategy for
our overall business; |
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our market capitalization relative to net book value; and |
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significant negative industry or general economic trends. |
We operate 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 among these three reporting units. We perform an annual impairment test on goodwill
at December 31 using the two-step process required under GAAP. 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 September 30, 2010, there were
no significant negative changes to the future projected cash flows or to the general or specific
economic trends since the last annual test indicating the need for testing goodwill recoverability.
At December 31, 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, 2009, none of the reporting units with goodwill had estimated fair values
less than their individual net asset carrying values, therefore step two was not required.
In step two of the impairment test, we are required to determine the implied fair value of the
goodwill and compare it to the carrying value of the goodwill. We allocated the fair value of the
reporting units to the respective assets and liabilities of each reporting unit as if the reporting
units had been acquired in separate and individual business combinations and the fair value of the
reporting units was the price paid to acquire the reporting units. The excess of the fair value of
the reporting units over the amounts assigned to their respective assets and liabilities is the
implied fair value of goodwill. We reconciled the fair values of our three reporting units in the
aggregate to our market capitalization at December 31, 2009.
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 our 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.
36
Depreciation Policy. Our depreciation policy for our lease fleet uses the straight-line method over
the estimated useful life of our units, 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.
We periodically review our depreciation policy against various factors, including the results of
our lenders independent appraisal of our lease fleet, practices of other 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 a 55%
residual value and a 30-year life to a lower or higher residual value and a shorter or longer
useful life, such change could have a positive, negative or neutral effect on our earnings, with
the actual effect being determined by the change. For example, a change in our estimates used in
our residual values and useful life would have the following approximate effect on our net income
and diluted earnings per share as reflected in the table below.
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Useful |
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Three Months Ended |
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Nine Months Ended |
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Salvage |
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Life in |
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September 30, |
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September 30, |
|
|
|
Value |
|
|
Years |
|
|
2009 |
|
|
2010 |
|
|
2009 |
|
|
2010 |
|
|
|
(In thousands except per share data) |
|
As Reported (1): |
|
|
55 |
% |
|
|
30 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
|
|
|
|
|
|
|
|
|
$ |
8,120 |
|
|
$ |
5,469 |
|
|
$ |
21,813 |
|
|
$ |
12,658 |
|
Diluted earnings per share |
|
|
|
|
|
|
|
|
|
$ |
0.19 |
|
|
$ |
0.12 |
|
|
$ |
0.51 |
|
|
$ |
0.29 |
|
As adjusted for change in estimates: |
|
|
70 |
% |
|
|
20 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
|
|
|
|
|
|
|
|
|
$ |
8,120 |
|
|
$ |
5,469 |
|
|
$ |
21,813 |
|
|
$ |
12,658 |
|
Diluted earnings per share |
|
|
|
|
|
|
|
|
|
$ |
0.19 |
|
|
$ |
0.12 |
|
|
$ |
0.51 |
|
|
$ |
0.29 |
|
As adjusted for change in estimates(2): |
|
|
62.5 |
% |
|
|
25 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
|
|
|
|
|
|
|
|
|
$ |
8,120 |
|
|
$ |
5,469 |
|
|
$ |
21,813 |
|
|
$ |
12,658 |
|
Diluted earnings per share |
|
|
|
|
|
|
|
|
|
$ |
0.19 |
|
|
$ |
0.12 |
|
|
$ |
0.51 |
|
|
$ |
0.29 |
|
As adjusted for change in estimates: |
|
|
50 |
% |
|
|
20 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
|
|
|
|
|
|
|
|
|
$ |
6,684 |
|
|
$ |
4,069 |
|
|
$ |
17,526 |
|
|
$ |
8,342 |
|
Diluted earnings per share |
|
|
|
|
|
|
|
|
|
$ |
0.15 |
|
|
$ |
0.09 |
|
|
$ |
0.41 |
|
|
$ |
0.19 |
|
As adjusted for change in estimates: |
|
|
40 |
% |
|
|
40 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
|
|
|
|
|
|
|
|
|
$ |
8,120 |
|
|
$ |
5,469 |
|
|
$ |
21,813 |
|
|
$ |
12,658 |
|
Diluted earnings per share |
|
|
|
|
|
|
|
|
|
$ |
0.19 |
|
|
$ |
0.12 |
|
|
$ |
0.51 |
|
|
$ |
0.29 |
|
As adjusted for change in estimates: |
|
|
30 |
% |
|
|
25 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
|
|
|
|
|
|
|
|
|
$ |
6,253 |
|
|
$ |
3,649 |
|
|
$ |
16,239 |
|
|
$ |
7,047 |
|
Diluted earnings per share |
|
|
|
|
|
|
|
|
|
$ |
0.14 |
|
|
$ |
0.08 |
|
|
$ |
0.38 |
|
|
$ |
0.16 |
|
As adjusted for change in estimates: |
|
|
25 |
% |
|
|
25 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
|
|
|
|
|
|
|
|
|
$ |
5,965 |
|
|
$ |
3,369 |
|
|
$ |
15,382 |
|
|
$ |
6,183 |
|
Diluted earnings per share |
|
|
|
|
|
|
|
|
|
$ |
0.14 |
|
|
$ |
0.08 |
|
|
$ |
0.36 |
|
|
$ |
0.14 |
|
|
|
|
(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.
37
A high degree of judgment is required in developing these estimates of amounts to be accrued, as
well as in connection with the underlying assumptions. In addition, our assumptions will change as
our loss experience is developed. All of these factors have the potential for significantly
impacting the amounts we have previously reserved in respect of anticipated deductible expenses,
and we may be required in the future to increase or decrease amounts previously accrued.
Our health benefit programs are considered to be self insured products; however, we buy excess
insurance coverage that limits our medical liability exposure. Additionally, our medical program
includes a total aggregate claim exposure and we are currently accruing and reserving to the total
projected losses.
Contingencies. We are a party to various claims and 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.
Purchase Accounting. We account for acquisitions under the purchase method. Under the purchase
method of accounting, the price paid by us, including the value of the redeemable convertible
preferred stock, if any, is allocated to the assets acquired and liabilities assumed based upon the
estimated fair values of the assets and liabilities acquired and the fair value of the convertible
redeemable participating preferred stock issued at the date of acquisition. The excess of the
purchase price over the fair value of the net assets and liabilities acquired represents goodwill
that is subject to annual impairment testing.
Earnings Per Share. Basic net income per share is calculated by dividing income allocable to common
stockholders by the weighted-average number of common shares outstanding, net of shares subject to
repurchase by us during the period. Income allocable to common stockholders is net income less the
earnings allocable to preferred stockholders. Diluted net income per share is calculated under the
if-converted method unless the conversion of the preferred stock is anti-dilutive to basic net
income per share. To the extent the inclusion of preferred stock is anti-dilutive, we calculate
diluted net income per share under the two-class method. Potential common shares include
restricted common stock and incremental shares of common stock issuable upon the exercise of stock
options and vesting of nonvested stock awards and upon conversion of convertible preferred stock
using the treasury stock method.
There have been no changes in our critical accounting policies, estimates and judgments during the
nine month period ended September 30, 2010.
38
RECENT ACCOUNTING PRONOUNCEMENTS
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 became effective for the Company for transfers occurring on or after
January 1, 2010. The Company adopted this accounting standard and it did not have a material
effect on our consolidated financial statements and related 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,
2011. The Company currently does not expect this to have a material impact on its financial
statements and disclosures.
39
CAUTIONARY STATEMENTS REGARDING FORWARD-LOOKING STATEMENTS
This section and other sections of this report contain forward-looking information about our
financial results and estimates and our business prospects that involve substantial risks and
uncertainties. From time to time, we also may provide oral or written forward-looking statements
in other materials we release to the public. Forward-looking statements are expressions of our
current expectations or forecasts of future events. You can identify these statements by the fact
that they do not relate strictly to historic or current facts. They include words such as
anticipate, estimate, expect, project, intend, plan, believe, will, and other words
and terms of similar meaning in connection with any discussion of future operating or financial
performance. In particular these include statements relating to future actions, future performance
or results, expenses, the outcome of contingencies, such as legal proceedings and financial
results. Factors that could cause actual results to differ materially from projected results
include, without limitation:
|
|
|
a continued economic slowdown in the U.S. and/or the U.K. that affects any significant
portion of our customer base, or the geographic regions where we operate in those countries; |
|
|
|
|
our ability to manage growth at existing or new locations; |
|
|
|
|
our European operations may divert our resources from other aspects of our business; |
|
|
|
|
our ability to obtain borrowings under our credit facility or additional debt or equity
financing on acceptable terms; |
|
|
|
|
changes in the supply and price of used containers; |
|
|
|
|
changes in the supply and cost of the raw materials we use in refurbishing or
remanufacturing storage units; |
|
|
|
|
competitive developments affecting our industry, including pricing pressures in newer
markets; |
|
|
|
|
the timing and number of new branches that we open or acquire; |
|
|
|
|
our ability to protect our patents and other intellectual property; |
|
|
|
|
currency exchange and interest rate fluctuations; |
|
|
|
|
governmental laws and regulations affecting domestic and foreign operations, including
tax obligations, union formation and zoning laws; |
|
|
|
|
changes in generally accepted accounting principles; |
|
|
|
|
changes in local zoning laws affecting either our ability to operate in certain areas or
our customers ability to use our products; |
|
|
|
|
any changes in business, political and economic conditions due to the threat of future
terrorist activity in the U.S. and other parts of the world and related U.S. military action
overseas; and |
|
|
|
|
increases in costs and expenses, including the cost of raw materials, real estate and
employment costs. |
We cannot guarantee that any forward-looking statement will be realized, although we believe we
have been prudent in our plans and assumptions. Achievement of future results is subject to risks,
uncertainties and inaccurate assumptions. Should known or unknown risks or uncertainties
materialize, or should underlying assumptions prove inaccurate, actual results could vary
materially from past results and those anticipated, estimated or projected. Investors should bear
this in mind as they consider forward-looking statements. We undertake no obligation to publicly
update forward-looking statements, whether as a result of new information, future events or
otherwise. You are advised, however, to consult any further disclosures we make on related
subjects in our Form 10-Q, 8-K and 10-K reports filed with the SEC. Our Form 10-K filing for the
fiscal year ended December 31, 2009, listed various important factors that could cause actual
results to differ materially from expected and historic results. We note these factors for
investors as permitted by the Private Securities Litigation Reform Act of 1995. Readers can find
them in Item 1A of that filing and this filing under the heading
40
Risk Factors. You may obtain a copy of our Form 10-K by requesting it from the Companys
Investor Relations Department at (480) 894-6311 or by mail to Mobile Mini, Inc., 7420 S. Kyrene
Road, Suite 101, Tempe, Arizona 85283. Our filings with the SEC, including the Form 10-K, may be
accessed through Mobile Minis website at www.mobilemini.com, and at the SECs website at
http:/www.sec.gov. Material on our website is not incorporated in this report, except by express
incorporation by reference herein.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Interest Rate Swap Agreement. We seek to reduce earnings and cash flow volatility associated with
changes in interest rates through a financial arrangement intended to provide a hedge against a
portion of the risks associated with such volatility. We continue to have exposure to such risks
to the extent they are not hedged.
Interest rate swap agreements are the only instruments we use to manage interest rate fluctuations
affecting our variable rate debt. At September 30, 2010, we had interest rate swap agreements
under which we pay a fixed rate and receive a variable interest rate on a notional amount of $200
million. For the nine months ended September 30, 2010, comprehensive income included $2.6 million,
net of applicable income taxes of $1.7 million, related to the fair value of our interest rate swap
agreements.
Impact of Foreign Currency Rate Changes. We currently have branch operations outside the United
States and we bill those customers primarily in their local currency which is subject to foreign
currency rate changes. Our operations in Canada are billed in the Canadian Dollar, operations in
the United Kingdom are billed in Pound Sterling and operations in The Netherlands are billed in the
Euro. We are exposed to foreign exchange rate fluctuations as the financial results of our
non-United States operations are translated into U.S. Dollars. The impact of foreign currency rate
changes has historically been insignificant with our Canadian operations, but we have more exposure
to volatility with our European operations. In order to help minimize our exchange rate gain and
loss volatility, we finance our European entities through our revolving credit facility which
allows us, at our option, to borrow funds locally in Pound Sterling denominated debt.
ITEM 4. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures.
As of the end of the period covered by this report, we carried out an evaluation, under the
supervision and with the participation of our management, including our Chief Executive Officer and
our Chief Financial Officer, of the effectiveness of the design and operation of our disclosure
controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the
Securities Exchange Act of 1934, as amended). Based on that evaluation, our Chief Executive Officer
and our Chief Financial Officer concluded that, as of the end of the period covered by this
quarterly report on Form 10-Q, the Companys disclosure controls and procedures, subject to the
limitations as noted below, were effective such that the information relating to the Company
required to be disclosed in our SEC reports (i) is recorded, processed, summarized and reported
within the time periods specified in the SECs rules and forms, and (ii) is accumulated and
communicated to the Companys management, including our Chief Executive Officer and our Chief
Financial Officer, as appropriate to allow timely decisions regarding required disclosure.
Changes in Internal Controls.
There were no changes in our internal controls over financial reporting that have occurred during
our most recent fiscal quarter that have materially affected, or are reasonably likely to
materially affect, our internal control over financial reporting.
41
PART II. OTHER INFORMATION
ITEM 1A. RISK FACTORS
We refer you to documents filed by us with the SEC, specifically Item 1A. Risk Factors in our
Annual Report on Form 10-K for the fiscal year ended December 31, 2009, which identify important
risk factors that could materially affect our business, financial condition and future results. We
also refer you to the factors and cautionary language set forth in the section entitled Cautionary
Statements Regarding Forward-looking Statements in Managements Discussion and Analysis of this
quarterly report on Form 10-Q. This quarterly report on Form 10-Q, including the condensed
consolidated financial statements and related notes should be read in conjunction with such risks
and other factors for a full understanding our operations and financial condition. The risks
described in our Form 10-K and herein are not the only risks facing Mobile Mini. Additional risks
and uncertainties not currently known to us or that we currently deem to be immaterial also may
materially adversely affect our business, financial condition or operating results. The risk
factors included in our Annual Report on Form 10-K, as amended, for the fiscal year ended December
31, 2009 have not materially changed.
ITEM 6. EXHIBITS
|
|
|
Number |
|
Description |
|
|
|
10.1*
|
|
Schedules to the ABL Credit Agreement, dated June 27, 2008, between Mobile Mini, Deutsche Bank AG
New York Branch and other lenders party thereto. |
|
|
|
10.2*
|
|
Schedules to the 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. |
|
|
|
23.2*
|
|
Consent of Independent Valuation 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. |
|
|
|
101.INS***
|
|
XBRL Instance Document |
|
|
|
101.SCH***
|
|
XBRL Taxonomy Extension Schema Document |
|
|
|
101.CAL***
|
|
XBRL Taxonomy Extension Calculation Linkbase Document |
|
|
|
101.LAB***
|
|
XBRL Taxonomy Extension Labels Linkbase Document |
|
|
|
101.PRE***
|
|
XBRL Taxonomy Extension Presentation Linkbase Document |
|
|
|
|
|
Certain confidential information contained in this exhibit was omitted
by means of redacting a portion of the text and replacing it with an
asterisk. This exhibit has been filed separately with the Secretary
of the SEC without the redaction pursuant to a Confidential Treatment
Request under Rule 406 of the Securities Act.
|
|
* |
|
Filed herewith. |
|
** |
|
Furnished herewith. |
|
*** |
|
Furnished herewith. In accordance with Rule 406T of Regulation S-T,
the information in these exhibits shall not be deemed to be filed
for purposes of Section 18 of the Exchange Act, or otherwise subject
to liability under that section, and shall not be incorporated by
reference into any registration statement or other document filed
under the Securities Act of 1933, as amended, except as expressly set
forth by specific reference in such filing. |
42
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused
this report to be signed on its behalf by the undersigned thereunto duly authorized.
|
|
|
|
|
|
MOBILE MINI, INC.
|
|
Date: November 5, 2010 |
/s/ Mark E. Funk
|
|
|
Mark E. Funk |
|
|
Chief Financial Officer |
|
43