e10vk
U.S. SECURITIES AND EXCHANGE
COMMISSION
Washington, D.C.
20549
Form 10-K
ANNUAL REPORT PURSUANT TO
SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT
OF 1934
For the fiscal year ended December 31, 2008
Commission File Number 1-12804
(Exact Name of Registrant as
Specified in its Charter)
|
|
|
Delaware
|
|
86-0748362
|
(State or other jurisdiction
of
incorporation or organization)
|
|
(IRS Employer
Identification No.)
|
7420 S. Kyrene
Road, Suite 101
Tempe, Arizona 85283
(Address
of Principal Executive Offices)
(480) 894-6311
(Registrants Telephone
Number)
Securities Registered pursuant to Section 12(b) of the
Act:
|
|
|
Title of Class
|
|
Name of Each Exchange on Which Registered
|
|
Common Stock, $.01 par value
Preferred Share Purchase Rights
|
|
Nasdaq Global Select Market
|
Securities registered pursuant to Section 12(g) of the
Act:
None.
Indicate by check mark if the registrant is a well-known
seasoned issuer, as defined in Rule 405 of the Securities
Act. Yes o No þ
Indicate by check mark if the registrant is not required to file
reports pursuant to Section 13 or Section 15(d) of the
Act. Yes o No þ
Indicate by check mark whether the Registrant: (1) has
filed all reports required to be filed by Section 13 or
15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has
been subject to such filing requirements for the past
90 days. Yes þ No o
Indicate by check mark if disclosure of delinquent filers
pursuant to Item 405 of
Regulation S-K
is not contained herein, and will not be contained, to the best
of registrants knowledge, in definitive proxy or
information statements incorporated by reference in
Part III of this
Form 10-K
or any amendment to this
Form 10-K. þ
Indicate by check mark whether the registrant is a large
accelerated filer, an accelerated filer, a non-accelerated
filer, or a smaller reporting company. See the definitions of
large accelerated filer, accelerated
filer and smaller reporting company in
Rule 12b-2
of the Exchange Act. (Check one):
|
|
|
|
|
|
|
Large accelerated
filer þ
|
|
Accelerated
filer o
|
|
Non-accelerated
filer o
|
|
Smaller reporting
company o
|
(Do not check if a smaller reporting company)
Indicate by check mark whether the registrant is a shell company
(as defined in
Rule 12b-2
of the
Act). Yes o No þ
The aggregate market value on June 30, 2008 of the voting
stock owned by non-affiliates of the registrant was
approximately $674 million.
As of February 20, 2009, there were outstanding
35,446,409 million shares of the issuers common
stock, par value $.01.
DOCUMENTS
INCORPORATED BY REFERENCE:
Portions of the Proxy Statement for the Registrants 2009
Annual Meeting of Stockholders are incorporated herein by
reference in Part III of this
Form 10-K
to the extent stated herein. Certain exhibits are incorporated
in Item 15 of this Report by reference to other reports and
registration statements of the Registrant which have been filed
with the Securities and Exchange Commission.
MOBILE
MINI, INC.
2008
FORM 10-K
ANNUAL REPORT
TABLE OF
CONTENTS
i
PART I
Mobile
Mini, Inc.
We are the largest provider of portable storage solutions in
North America and the United Kingdom, through our total lease
fleet of approximately 273,700 portable storage and mobile
office units at December 31, 2008. 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.
At December 31, 2008, we operated through a network of 94
branches in the United States, Canada, the United Kingdom and
The Netherlands. In addition, we have various operational yards
to support our branch operations in both North America and the
U.K. Our portable units provide secure, accessible temporary
storage for a diversified client base of approximately 118,000
customers, including large and small retailers, construction
companies, medical centers, schools, utilities, manufacturers
and distributors, the U.S. and U.K. military, hotels,
restaurants, entertainment complexes and households. Our
customers use our products for a wide variety of storage
applications, including retail and manufacturing supplies and
inventory, temporary offices, construction materials and
equipment, documents and records and household goods.
On June 27, 2008, we acquired Mobile Storage Group, Inc.
(MSG) in a transaction valued at $755.4 million (the
Merger). Mobile Mini assumed Mobile Storage Groups
outstanding indebtedness of $540.9 million and paid other
consideration and transaction costs of $214.5 million
consisting of $17.9 million cash (net of $5.5 million
cash acquired), and the issuance of approximately
8.6 million shares of convertible preferred stock with a
determined fair value at issuance of $196.6 million and a
liquidation preference value of $154.0 million. The
discussion in this Annual Report of our business, financial
condition and results of operations includes the results of our
combined operations with Mobile Storage Group since
June 27, 2008.
We were founded in 1983 and since 1996, have followed a strategy
of focusing on leasing rather than selling our portable storage
units. Leasing revenues represented approximately 90% of total
revenues for the year ending December 31, 2008. We believe
our leasing strategy is highly effective because the vast
majority of our fleet consists of steel portable storage units
which:
|
|
|
|
|
provide predictable, recurring revenues from leases with an
average duration of approximately 32 months;
|
|
|
|
have average monthly lease rates that recoup our current
investment on our remanufactured units within an average of
35 months;
|
|
|
|
have long useful lives exceeding 25 years, relatively low
maintenance and high residual values; and
|
|
|
|
produce incremental leasing operating margins of approximately
56.0%.
|
Since 1996, we have increased our total lease fleet from
13,600 units to approximately 273,700 units as of
December 31, 2008, for a compound annual growth rate, or
CAGR, of 28.4%. We experienced a significant increase in 2008
due to our acquisition of MSG. As a result of our focus on
leasing, we have achieved substantial increases in our revenues,
margins and profitability. Our annual leasing revenues have
increased from $17.9 million in 1996 to $371.6 million
in 2008, representing a CAGR of 28.8%. In addition to our
leasing operations, we sell new and used portable storage units
and provide delivery, installation and other ancillary products
and services.
Our fleet is primarily comprised of remanufactured and
differentiated steel portable storage containers which were
built according to standards developed by the International
Organization for Standardization (ISO), other steel containers
that we manufactured and mobile offices. We remanufacture and
customize our purchased ISO containers by adding our proprietary
locking and easy-opening door systems. These assets are
characterized by low risk of obsolescence, extreme durability,
relatively low maintenance, long useful lives and a history of
high-value retention. In 2000, we began adding wood mobile
office units to the lease fleet to complement our core steel
portable storage products. We maintain our steel containers and
mobile offices on a regular basis. Maintenance of our steel
products consists primarily of repainting units, essentially
keeping them in the same condition as when they entered our
fleet. Repair and maintenance of our wood mobile offices
primarily consists of replacing the interior flooring which
could be either tile or carpeting. Repair and maintenance
expense for our fleet has averaged
1
approximately 4.0% of lease revenues over the past three fiscal
years and is expensed as incurred. We believe our historical
experience with leasing rates and sales prices for these assets
demonstrates their high-value retention. We are able to lease
our portable storage containers at similar rates without regard
to the age of the container. In addition, we have sold
containers and steel security offices from our lease fleet at an
average of 148% of original cost from 1997 through 2008.
Industry
Overview
The storage industry includes two principal segments, fixed
self-storage and portable storage. The fixed self-storage
segment consists of permanent structures located away from
customer locations used primarily by consumers to temporarily
store excess household goods. We do not participate in the fixed
self-storage segment. We do offer non-fixed self storage in
secure containers from our fleet at some of our locations in the
U.S. and the U.K.
The portable storage segment in which our business operates
differs from the fixed self-storage segment in that it brings
the storage solution to the customers location and
addresses the need for secure, temporary storage with immediate
access to the storage unit. The advantages of portable storage
include convenience, immediate accessibility, better security
and lower price. In contrast to fixed self-storage, the portable
storage segment is primarily used by businesses. This segment of
the storage industry is highly fragmented and remains primarily
local in nature. We believe the portable storage market in the
U.S. exceeds $1.5 billion in revenue annually.
Portable storage solutions include containers, van trailers and
roll-off units. Although there are no published estimates of the
size of the portable storage segment, we believe portable
storage containers are achieving increased storage market share
compared to other storage options and that this segment is
expanding because of an increasing awareness that only
containers provide ground level access and better protect
against damage caused by wind or water than do other portable
storage alternatives. As a result, containers can meet the needs
of a diverse range of customers. Portable storage containers
such as ours provide ground level access, higher security and
improved aesthetics compared with certain other portable storage
alternatives such as van trailers.
Our products also serve the mobile office industry. This
industry provides mobile offices and other modular structures
and is estimated by the Modular Building Institute to be
approximately $5 billion in revenue annually in North
America. We offer combined storage/office units and mobile
offices in varying lengths and widths, with lease terms in North
America currently averaging approximately 14 months.
We also offer portable record storage units and many of our
regular storage units are used for document and record storage.
We believe the documents and records storage industry will
continue to grow as businesses continue to generate substantial
paper records that must be kept for extended periods.
Our goal is to continue to be the leading provider of portable
storage solutions in North America and the U.K. We believe our
competitive strengths and business strategy will enable us to
achieve this goal.
Competitive
Strengths
Our competitive strengths include the following:
Market Leadership. At December 31, 2008,
we maintained a total lease fleet of approximately
273,700 units and we are the largest provider of portable
storage solutions in North America and the U.K. We believe we
are creating brand awareness and the name Mobile
Mini is associated with high quality portable storage
products, superior customer service and value-added storage
solutions. We have achieved significant growth in new and
existing markets by capturing market share from competitors and
by creating demand among businesses and consumers who were
previously unaware of the availability of our products to meet
their storage needs.
Superior, Differentiated Products. We offer
the industrys broadest range of portable storage products,
with many features that differentiate our products from those of
our competition. We remanufacture used ocean-going containers
and have designed and manufactured our own portable storage
units. These capabilities allow us to offer a wide range of
products and proprietary features to better meet our
customers needs, charge premium lease rates and gain
market share from our competitors, who offer more limited
product selections. Our portable storage units vary in size from
5 to 48 feet in length and 8 to 10 feet in width. The
10-foot wide units we
2
manufacture provide 40% more usable storage space than the
standard eight-foot-wide ocean-going containers offered by our
competitors. The vast majority of our products have our patented
locking system and multiple door options In addition, we offer
portable storage units with electrical wiring, shelving and
other customized features. This differentiation allows us to
charge premium rental rates versus our competition.
Sales and Marketing Emphasis. We target a
diverse customer base and, unlike most of our competitors, have
developed sophisticated sales and marketing programs enabling us
to expand market awareness of our products and generate strong
internal growth. We have a dedicated commissioned sales team and
we assist them by providing them with our highly customized
contact management system and intensive sales training programs.
We monitor our salespersons effectiveness through our
extensive sales calls monitoring and sales mentoring and
training programs. On-line, yellow pages and direct-mail
advertising are integral parts of our sales and marketing
approach. Our website includes value added features such as
product video tours, online payment capabilities and online real
time sales inquiries, enabling customers to chat live with our
salespeople.
National Presence with Local Service. We have
the largest national network for portable storage solutions in
the U.S. and U.K. and believe it would be difficult to
replicate. We have invested significant capital developing a
national network of branches that serves most major metropolitan
areas in the U.S. and the U.K. We have differentiated
ourselves from our local competitors and made replication of our
presence difficult by developing our branch network through both
opening branches in multiple cities and purchasing competitors
in key markets. The difficulty and time required to obtain the
number of units necessary to support a national operation would
make establishing a large competitor difficult. In addition,
there are difficulties associated with recruiting and hiring an
experienced management team such as ours that has strong
industry knowledge and local relationships with customers Our
network of local branches allows us to develop and maintain
relationships with our local customers, while providing a level
of service to regional and national companies that is made
possible by our nationwide presence. Our local managers, sales
force and delivery drivers develop and maintain critical
personal relationships with the customers that benefit from
access to our wide selection of products that we are able to
offer.
Geographic and Customer Diversification. At
December 31, 2008, we operated from 94 branches of which 74
were located in the U.S., two in Canada, seventeen in the U.K.,
and one in The Netherlands. We served approximately 118,000
customers from a wide range of industries in 2008. Our customers
include large and small retailers, construction companies,
medical centers, schools, utilities, manufacturers and
distributors, the U.S. and U.K. militaries, government
agencies, hotels, restaurants, entertainment complexes and
households. Our diverse customer base demonstrates the broad
applications for our products and our opportunity to create
future demand through targeted marketing. In 2008, our largest
and our second-largest customers accounted for 1.8% and 0.7% of
our leasing revenues, respectively, and our twenty largest
customers accounted for approximately 5.2% of our leasing
revenues. During 2008, approximately 53.4% of our customers
rented a single unit. We believe this diversity also helps us to
better weather economic downturns in individual markets and the
industries in which our customers operate.
Customer Service Focus. We believe the
portable storage industry is particularly service intensive and
essentially local. Our entire organization is focused on
providing high levels of customer service, and our salespeople
work out of our branch locations to better understand local
market needs. We have trained our sales force to focus on all
aspects of customer service from the sales call onward. We
differentiate ourselves by providing security, convenience, high
product quality, differentiated and broad product selection and
availability, and competitive lease rates. We conduct on-going
training programs for our sales force to assure high levels of
customer service and awareness of local market competitive
conditions. Additionally, in 2008 we began to use a Net Promoter
Score (NPS) system to measure and enhance our customer service.
We use NPS to measure customer satisfaction each month,
rental-by-rental,
in real time through surveys conducted by a third party. We then
use customer feedback to drive service improvements across the
company, from our branches to our corporate headquarters. Our
customized Enterprise Resource Planning (ERP) system also
increases our responsiveness to customer inquiries and enables
us to efficiently monitor our sales forces performance.
Approximately 54.1% of our 2008 leasing revenues were derived
from repeat customers, which we believe is a result of our
superior customer service.
3
Customized Enterprise Resource Planning
System. We have made significant investments in
an ERP system for our U.S. and U.K. business. These
investments enable us to optimize fleet utilization, control
pricing, capture detailed customer data, easily control credit
approval while approving it quickly, audit company results
reports, gain efficiencies in internal control compliance and
support our growth by projecting near-term capital needs. In
addition, we believe this system gives us a competitive
advantage over smaller and less sophisticated local and regional
competitors. In addition, our ERP system allow us to carefully
monitor, on a real time basis, the size, mix, utilization and
lease rates of our lease fleet branch by branch. Our systems
also capture relevant customer demographic and usage
information, which we use to target new customers within our
existing and new markets.
Business
Strategy
Our business strategy consists of the following:
Focus on Core Portable Storage Leasing
Business. We focus on growing our core storage
leasing business, which accounted for 79.0% of our fleet at
December 31, 2008, because it provides recurring revenue
and high margins. We believe that we can continue to generate
substantial demand for our portable storage units throughout
North America and in the U.K. and The Netherlands. Our leasing
revenues have grown from $17.9 million in 1996 to
$371.6 million in 2008, reflecting a CAGR of 28.8%.
Generate Strong Internal Growth. We focus on
increasing the number of portable storage units we lease from
our existing branches to both new and repeat customers. We have
historically generated strong internal growth within our
existing markets through sophisticated sales and marketing
programs aimed to increase brand recognition, expand market
awareness of the uses of portable storage and differentiate our
superior products from our competitors. We define internal
growth as growth in lease revenues on a year-over-year basis at
our branch locations in operation for at least one year, without
inclusion of leasing revenue attributed to same-market
acquisitions. Our internal growth rate historically was positive
every quarter. Due to the acquisition of MSG, we were able to
close locations and combine branch management in each of the
cities with overlapping branches and reposition our lease fleet
at our resulting branch locations to align with customer demand.
As a result, comparing internal growth by branch for periods
after this acquisition to periods before this acquisition would
be difficult.
Opportunistic Branch Expansion. We believe we
have attractive geographic expansion opportunities, and we have
developed a new market entry strategy, which we replicate in
each new market in the U.S. and Europe. We typically enter
a new market by acquiring the lease fleet assets of a small
local portable storage business to minimize
start-up
costs and then overlay our business model onto the new branch.
Our business model consists of significantly expanding the fleet
inventory with our differentiated products, introducing our
sophisticated sales and marketing program supported by increased
advertising and direct marketing expenditures, adding
experienced Mobile Mini personnel and implementing our
customized ERP system. As a result of implementing our business
model, our new branches have typically achieved strong organic
growth, including during their first several years of operation.
In 2008, we dramatically expanded our geographic locations in
both the U.S. and U.K. and we expanded our presence in some
of our existing markets through the acquisition of MSG and four
other smaller acquisitions. Even with the acquisition of MSG, we
have identified other markets where we believe demand for
portable storage units is underdeveloped. Typically, these
markets are served by small, local competitors. Given the
current economic environment, however, we are currently focused
on optimizing our existing markets.
Continue to Enhance Product Offering. We
continue to enhance our existing products to meet our
customers needs and requirements. We have historically
been able to introduce new products and features that expand the
applications and overall market for our storage products. For
example, over the last ten years we introduced a number of
innovative products including a 10-foot-wide storage unit, a
record storage unit and a 10-by-30-foot steel combination
storage/office unit to our fleet. The record storage unit
provides highly secure,
on-site and
easy access to archived business records close at hand. In
addition to our steel container and steel security offices, we
have also added wood mobile offices as a complementary product
to better serve our
4
customers. We have also made continuous improvements (i.e.,
making it easier to use in colder climates) to our patented
locking system over the years. Currently, the 10-foot-wide unit,
the record storage unit and the 10-by-30-foot steel combination
storage/office unit are exclusively offered by Mobile Mini. We
believe our design and manufacturing capabilities increase our
ability to service our customers needs and expand demand
for our portable storage solutions.
Products
We provide a broad range of portable storage products to meet
our customers varying needs. Our products are managed and
our customers are serviced locally by our employee team at each
of our branches, including management, sales personnel and yard
facility employees. Some features of our different products are
listed below:
|
|
|
|
|
Remanufactured and Modified Steel Storage
Units. We purchase used ocean-going containers
from leasing companies, shipping lines and brokers. These
containers were originally built to ISO standards and are eight
feet wide, 86 to 96 high and 20, 40 or
45 feet long. After acquisition, we remanufacture and
modify these ocean-going containers. Remanufacturing typically
involves cleaning, removing rust and dents, repairing floors and
sidewalls, painting, adding our signs and installing new doors
and our proprietary locking system. Modification typically
involves splitting some containers into 5-, 10-, 15-, 20- or
25-foot lengths. We have also manufactured portable steel
storage units for our lease fleet and for sale including our ten
foot wide units.
|
We generally purchase used ISO containers when they are 10 to
12 years old, a time at which their useful life as
ocean-going shipping containers is over according to the
standards promulgated by the International Organization for
Standardization. Because we do not have the same stacking and
strength requirements that apply in the ocean-going shipping
industry, we have no need for these containers to meet ISO
standards. We purchase these containers, truck them to our
locations, remanufacture them by removing any rust, paint them
with a rust inhibiting paint, and further customize them,
typically by adding our proprietary easy-opening door system and
our patented locking system. We believe we are able to purchase
used ocean-going containers at competitive prices because of our
volume purchasing power.
|
|
|
|
|
Steel Security Office and Steel Security/Office/Storage
Units. We buy and historically have manufactured
steel combination office/security and security office units that
range from 10 to 40 feet in length. We offer these units in
various configurations, including office and storage combination
units that provide a 10- or 15-foot office with the remaining
area available for storage. We believe our office units provide
the advantage of ground accessibility for ease of access and
high security in an all-steel design. Our European products
include canteen units and drying rooms for the construction
industry. For customers with space limitations, the
office/canteen units can also be stacked two high with stairs
for access to the top unit. These office units are equipped with
electrical wiring, heating and air conditioning, phone jacks,
carpet or tile, high security doors and windows with security
bars or shutters. Some of these offices are also equipped with
sinks, hot water heaters, cabinets and restrooms.
|
|
|
|
Wood Mobile Office Units. We added mobile
office units to our product line in 2000. We purchase these
units, which range from eight to 24 feet in width and 20 to
60 feet in length, from manufacturers. These units have a
wide range of exterior and interior options, including exterior
stairs or ramps, awnings and skirting. These units are equipped
with electrical wiring, heating and air conditioning, phone
jacks, carpet or tile and windows with security bars. Many of
these units contain restrooms.
|
|
|
|
Steel Records Storage Units. We market
proprietary portable records storage units that enable customers
to store documents at their location for easy access, or at one
of our facilities. Our units are 10.5 feet wide and are
available in
12-and
23-foot lengths. The units feature high-security doors and
locks, electrical wiring, shelving, folding work tables and air
filtration systems. We believe our product is a cost-effective
alternative to mass warehouse storage, with a high level of fire
and water damage protection.
|
|
|
|
Van Trailers Non-Core Storage
Units. Our acquisitions typically entail the
purchase of small companies with lease fleets primarily
comprised of standard ISO containers. However, many of these
companies also have van trailers and other manufactured storage
products which we believe do not have the same advantages
|
5
|
|
|
|
|
as standard containers. It is our goal to dispose of these units
from our fleet either as their initial rental period ends or
within a few years. We do not remanufacture these products. See
Product Lives and Durability Van Trailers and
Other Non-Core Storage Products below. At
December 31, 2008, van trailers comprised less than 1.3% of
our fleet, based on a gross book value basis.
|
|
|
|
|
|
Timber Units Non-Core Units. In
connection with the MSG transaction, we acquired assets that
were not part of our principal lease fleet. These assets include
timber units in the U.K. which are older wood constructed mobile
offices. We plan to dispose of these non-core assets as
opportunities permit.
|
|
|
|
Portable Toilets Non-Core
Units. Other units acquired in the MSG
transaction include portable toilets which are typically leased
in conjunction with office unit leases in the U.K.
|
Product
Lives and Durability
We believe our steel portable storage units, steel security
offices, and wood mobile offices have estimated useful lives of
25 years, 25 years, and 20 years, respectively,
from the date we build or acquire and remanufacture them, with
residual values of our
per-unit
investment ranging from 50% for our mobile offices to 62.5% for
our core steel products. Van trailers, which comprised 1.3% of
the gross book value of our lease fleet at December 31,
2008, are depreciated over seven years to a 20% residual value.
For the past three fiscal years, our cost to repair and maintain
our lease fleet units averaged approximately 4.0% of our lease
revenues. Repainting the outside of storage units is the most
frequent maintenance item.
We maintain our steel containers on a regular basis by painting
them, removing rust, and occasionally replacing the wooden floor
or a rusted panel as they come off rent and are ready to be
leased again. This periodic maintenance keeps the container in
essentially the same condition as after we initially
remanufactured it and is designed to maintain the units
value and rental rates comparable to new units.
Approximately 9.9% of our 2008 revenue was derived from sales of
our units. Because the containers in our lease fleet do not
significantly depreciate in value, we have no systematic program
in place to sell lease fleet containers as they reach a certain
age. Instead, most of our U.S. container sales involve
either highly customized containers that would be difficult to
lease on a recurring basis, or containers that we have not
remanufactured. In addition, due primarily to availability of
inventory at various locations at certain times of the year, we
sell a certain portion of containers and offices from the lease
fleet. Our gross margins increase for containers in the lease
fleet for greater lengths of time prior to sale, because
although these units have been depreciated based upon a
25 year useful life and 62.5% residual value (1.5% per
year), in most cases fair value may not decline by nearly that
amount due to the nature of the assets and our stringent
maintenance policy.
The following table shows the gross margin on containers and
steel security offices sold from inventory (which we call our
sales fleet) and from our lease fleet from 1997 through 2008
based on the length of time in the lease fleet.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales
|
|
|
Sales
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue as a
|
|
|
Revenue as a
|
|
|
|
Number of
|
|
|
Sales
|
|
|
Original
|
|
|
Percentage of
|
|
|
Percentage of
|
|
|
|
Units Sold
|
|
|
Revenue
|
|
|
Cost(1)
|
|
|
Original Cost
|
|
|
Net Book Value
|
|
|
|
(Dollars in thousands)
|
|
|
Sales fleet(2)
|
|
|
37,170
|
|
|
$
|
118,216
|
|
|
$
|
77,815
|
|
|
|
152
|
%
|
|
|
152
|
%
|
Lease fleet, by period held before sale:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Less than 5 years
|
|
|
17,776
|
|
|
$
|
63,635
|
|
|
$
|
42,863
|
|
|
|
148
|
%
|
|
|
151
|
%
|
5 to 10 years
|
|
|
4,379
|
|
|
$
|
19,101
|
|
|
$
|
12,995
|
|
|
|
147
|
%
|
|
|
162
|
%
|
10 to 15 years
|
|
|
1,050
|
|
|
$
|
4,048
|
|
|
$
|
2,822
|
|
|
|
143
|
%
|
|
|
169
|
%
|
15 to 20 years
|
|
|
153
|
|
|
$
|
528
|
|
|
$
|
365
|
|
|
|
145
|
%
|
|
|
180
|
%
|
20+ years
|
|
|
6
|
|
|
$
|
20
|
|
|
$
|
17
|
|
|
|
119
|
%
|
|
|
172
|
%
|
|
|
|
(1) |
|
Original cost for purposes of this table includes
(i) the price we paid for the unit, plus (ii) the cost
of our manufacturing or remanufacturing, which includes both the
cost of customizing units incurred, plus (iii) the |
6
|
|
|
|
|
freight charges to our branch when the unit is first placed in
service. For manufactured units, cost includes our manufacturing
cost and the freight charges to the branch location where the
unit is first placed into service. |
|
(2) |
|
Includes sales of unremanufactured ISO containers. |
In addition, appraisals on our fleet are conducted on a regular
basis by an independent appraiser selected by our lenders, and
the appraiser does not differentiate in value based upon the age
of the container or the length of time it has been in our fleet.
As of December 31, 2008, based on this orderly liquidation
value appraisal, on which our borrowings under our revolving
credit facility are based, our lease fleet appraisal value is
approximately $919.3 million, which equates to 85.3% of our
lease fleet net book value of $1.1 billion at year end. At
December 31, 2007, our orderly liquidation value equated to
81.7% of the lease fleet net book value.
Because steel storage containers substantially keep their value
when properly maintained, we are able to lease containers that
have been in our lease fleet for various lengths of time at
similar rates, without regard to the age of the container. Our
lease rates vary by the size and type of unit leased, length of
contractual term, custom features and the geographic location of
our branch at which the lease is originated. While we focus on
service and security as a main differentiation of our products
from our competitors, pricing competition, market conditions and
other factors can influence our leasing rates.
The following chart shows the average monthly lease rate that we
currently receive for various types of containers that have been
in our lease fleet for various periods of time. We have added
our 10-foot-wide containers and security offices to the fleet
only in the last several years and those types of units are not
included in this chart. This chart includes the eight major
types of containers in the fleet, excluding units acquired in
the Merger, but specific details of such type of unit are not
provided due to competitive considerations.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Age of Containers
|
|
|
|
|
|
|
|
|
(By Number of Years in Our Lease Fleet)(1)
|
|
|
Total Number/
|
|
|
|
|
|
0 5
|
|
|
6 10
|
|
|
11 15
|
|
|
16 20
|
|
|
Over 21
|
|
|
Average Dollar
|
|
|
Type 1
|
|
Number of units
|
|
|
4,513
|
|
|
|
2,993
|
|
|
|
1,670
|
|
|
|
127
|
|
|
|
2
|
|
|
|
9,305
|
|
|
|
Average rent
|
|
$
|
70.51
|
|
|
$
|
83.14
|
|
|
$
|
84.01
|
|
|
$
|
77.90
|
|
|
$
|
70.42
|
|
|
$
|
77.10
|
|
Type 2
|
|
Number of units
|
|
|
1,098
|
|
|
|
956
|
|
|
|
511
|
|
|
|
83
|
|
|
|
1
|
|
|
|
2,649
|
|
|
|
Average rent
|
|
$
|
86.15
|
|
|
$
|
84.36
|
|
|
$
|
84.23
|
|
|
$
|
82.32
|
|
|
$
|
70.42
|
|
|
$
|
85.01
|
|
Type 3
|
|
Number of units
|
|
|
12,004
|
|
|
|
3,549
|
|
|
|
2,254
|
|
|
|
675
|
|
|
|
604
|
|
|
|
19,086
|
|
|
|
Average rent
|
|
$
|
59.73
|
|
|
$
|
82.59
|
|
|
$
|
84.45
|
|
|
$
|
82.98
|
|
|
$
|
78.92
|
|
|
$
|
68.33
|
|
Type 4
|
|
Number of units
|
|
|
262
|
|
|
|
451
|
|
|
|
347
|
|
|
|
49
|
|
|
|
1
|
|
|
|
1,110
|
|
|
|
Average rent
|
|
$
|
112.18
|
|
|
$
|
110.24
|
|
|
$
|
108.03
|
|
|
$
|
101.65
|
|
|
$
|
108.33
|
|
|
$
|
109.63
|
|
Type 5
|
|
Number of units
|
|
|
455
|
|
|
|
1,376
|
|
|
|
158
|
|
|
|
29
|
|
|
|
1
|
|
|
|
2,019
|
|
|
|
Average rent
|
|
$
|
97.73
|
|
|
$
|
120.63
|
|
|
$
|
126.71
|
|
|
$
|
121.22
|
|
|
$
|
124.58
|
|
|
$
|
115.96
|
|
Type 6
|
|
Number of units
|
|
|
3,545
|
|
|
|
4,673
|
|
|
|
1,166
|
|
|
|
145
|
|
|
|
14
|
|
|
|
9,543
|
|
|
|
Average rent
|
|
$
|
123.77
|
|
|
$
|
128.07
|
|
|
$
|
130.73
|
|
|
$
|
128.72
|
|
|
$
|
138.98
|
|
|
$
|
126.82
|
|
Type 7
|
|
Number of units
|
|
|
12,509
|
|
|
|
7,240
|
|
|
|
1,076
|
|
|
|
92
|
|
|
|
872
|
|
|
|
21,789
|
|
|
|
Average rent
|
|
$
|
110.96
|
|
|
$
|
112.79
|
|
|
$
|
122.11
|
|
|
$
|
127.41
|
|
|
$
|
107.27
|
|
|
$
|
112.04
|
|
Type 8
|
|
Number of units
|
|
|
338
|
|
|
|
404
|
|
|
|
252
|
|
|
|
27
|
|
|
|
5
|
|
|
|
1,026
|
|
|
|
Average rent
|
|
$
|
166.59
|
|
|
$
|
160.68
|
|
|
$
|
167.24
|
|
|
$
|
150.66
|
|
|
$
|
198.68
|
|
|
$
|
164.16
|
|
|
|
|
(1) |
|
We have excluded units acquired in the Merger from the table
above so as not to distort the data presented as these units
have all been in our lease fleet less than one year. |
We believe fluctuations in rental rates based on container age
are primarily a function of the location of the branch from
which the container was leased rather than age of the container.
Some of the units added to our lease fleet during recent years
through our acquisitions program have lower lease rates than the
rates we typically obtain because the units remain on lease
under terms (including lower rental rates) that were in place
when we obtained the units in acquisitions.
7
We periodically review our depreciation policy against various
factors, including the following:
|
|
|
|
|
results of our lenders independent appraisal of our lease
fleet;
|
|
|
|
practices of the major competitors in our industry;
|
|
|
|
our experience concerning useful life of the units;
|
|
|
|
profit margins we are achieving on sales of depreciated
units; and
|
|
|
|
lease rates we obtain on older units.
|
Our depreciation policy for our lease fleet uses the
straight-line method over the units estimated useful life,
after the date we put the unit in service, and the units are
depreciated down to their estimated residual values.
Steel Storage, Steel Office and Combination
Units. Our steel products are our core leasing
units and include portable storage units, whether manufactured
or remanufactured ISO containers, steel security office and
storage/office combination units. Our steel units are
depreciated over 25 years with an estimated residual value
of 62.5%.
Wood Mobile Office Units. Because of the wood
structure of these units, they are more susceptible to wear and
tear than steel units. We depreciate these units over
20 years down to a 50% residual value (2.5% per year) which
we believe to be consistent with most of our major competitors
in this industry. Wood mobile office units lose value over time
and we may sell older units from time to time. At the end of
2008, our wood mobile offices were all less than nine years old.
These units, excluding those units acquired in acquisitions, are
also more expensive than our storage units, causing an increase
in the average carrying value per unit in the lease fleet over
the last eight years.
Although the operating margins on mobile offices are high, they
are lower than the margins on steel containers. However, these
mobile offices are rented using our existing infrastructure and
therefore provide incremental returns far in excess of our fixed
expenses. This adds to our overall profitability and operating
margins.
Van Trailers Non-Core Storage
Units. At December 31, 2008, van trailers
made up less than 1.3% of the gross book value of our lease
fleet. When we acquire businesses in our industry, the acquired
businesses often have van trailers and other manufactured
storage products which we believe do not offer customers the
same advantages as our core steel container storage product. We
depreciate our van trailers over 7 years to a 20% residual
value. We often attempt to sell most of these units from our
fleet as they come off rent or within a few years after we
acquire them. We do not utilize our resources to remanufacture
these products and instead resell them.
Timber Units Non-Core Units. These
units are older wood constructed mobile offices in the U.K. and
are depreciated over 5 years to 10% of their assigned value.
Portable Toilets Non-Core
Units. Steel portable toilets are depreciated
over 25 years to 62.5% of their residual value, wood timber
portable toilets are depreciated over 5 years to 10% of
their residual value and fiberglass portable toilets are
depreciated over 3 years to 30% of their residual value.
Lease
Fleet Configuration
Our lease fleet is comprised of over 100 different
configurations of units. Throughout the year we add units to our
fleet through purchases of used ISO containers and containers
obtained through acquisitions, both of which we remanufacture
and customize. We also purchase new manufactured mobile offices
in various configurations and sizes, and manufacture our own
custom steel units. Due to the number of units acquired in the
MSG transaction and the current economic environment, we do not
anticipate needing to purchase or acquire containers or offices
to remanufacture or customize until the operating environment
significantly improves. Our initial cost basis of an ISO
container includes the purchase price from the seller, the cost
of remanufacturing, which can include removing rust and dents,
repairing floors, sidewalls and ceilings, painting, signage,
installing new doors, seals and a locking system. Additional
modifications may involve the splitting of a unit to create
several smaller units and adding customized features. The
restoring and modification processes do not necessarily occur in
the same year the units are purchased or acquired. We procure
larger containers, typically 40-foot units, and split them into
two 20-foot units or one 25-foot and one 15-foot unit, or other
configurations as needed, and then add new doors along with our
patented locking system and sometimes we add custom features. We
also will sell units from our lease fleet to our customers.
8
The table below outlines those transactions that effectively
increased the net asset value of our lease fleet from
$802.9 million at December 31, 2007 to
$1.1 billion at December 31, 2008:
|
|
|
|
|
|
|
|
|
|
|
Dollars
|
|
|
Units
|
|
|
|
(Dollars in thousands)
|
|
|
Lease fleet at December 31, 2007, net
|
|
$
|
802,923
|
|
|
|
160,116
|
|
Purchases:
|
|
|
|
|
|
|
|
|
Container purchases and containers obtained through
acquisitions, including freight
|
|
|
201,589
|
|
|
|
96,381
|
|
Non-core units obtained through acquisitions, primarily van
trailers
|
|
|
57,683
|
|
|
|
21,658
|
|
Manufactured units:
|
|
|
|
|
|
|
|
|
Steel containers, combination storage/office combo units and
steel security offices
|
|
|
29,376
|
|
|
|
1,844
|
|
New wood mobile offices
|
|
|
9,340
|
|
|
|
312
|
|
Remanufacturing and customization:(3)
|
|
|
|
|
|
|
|
|
Remanufacturing or customization of units purchased or acquired
in the current year
|
|
|
9,188
|
|
|
|
2,650
|
(1)
|
Remanufacturing or customization of 4,651 units purchased
in a prior year
|
|
|
16,693
|
|
|
|
1,184
|
(1)
|
Remanufacturing or customization of 985 units obtained
through acquisition in a prior year
|
|
|
409
|
|
|
|
141
|
(2)
|
Other(4)
|
|
|
(12,794
|
)
|
|
|
(1,734
|
)
|
Cost of sales from lease fleet
|
|
|
(18,464
|
)
|
|
|
(8,804
|
)
|
Depreciation
|
|
|
(17,787
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Lease fleet at December 31, 2008, net
|
|
$
|
1,078,156
|
|
|
|
273,748
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
These units include the net additional units that were the
result of splitting steel containers into one or more shorter
units, such as splitting a 40-foot container into two 20-foot
units, or one 25-foot unit and one 15-foot unit. |
|
(2) |
|
Includes units moved from finished goods to lease fleet. |
|
(3) |
|
Does not include any routine maintenance, which is expensed as
incurred. |
|
(4) |
|
Dollars primarily represent foreign currency translation
adjustments. |
The table below outlines the composition of our lease fleet at
December 31, 2008:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Percentage of
|
|
|
|
Lease Fleet
|
|
|
Number of Units
|
|
|
Units
|
|
|
|
(In thousands)
|
|
|
|
|
|
|
|
|
Steel storage containers
|
|
$
|
616,750
|
|
|
|
216,669
|
|
|
|
79
|
%
|
Offices
|
|
|
523,242
|
|
|
|
43,593
|
|
|
|
16
|
%
|
Van trailers
|
|
|
15,610
|
|
|
|
13,486
|
|
|
|
5
|
%
|
Other, primarily chassis
|
|
|
2,161
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,157,763
|
|
|
|
|
|
|
|
|
|
Accumulated depreciation
|
|
|
(79,607
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
1,078,156
|
|
|
|
273,748
|
|
|
|
100
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Branch
Operations
Our senior management analyzes and manages the business as one
business segment and our operations across all branches
concentrate on the same core business of leasing, using products
which are substantially the same in each market. In order to
effectively manage this business across different geographic
areas, we divide our one
9
business segment into smaller management areas we call
divisions, regions and branches. Each of our branches generally
has similar economic characteristics covering all products
leased or sold, including similar customer base, sales
personnel, advertising, yard facilities, general and
administrative costs and branch management.
In the U.S. particularly, we locate our branches in markets
with attractive demographics and strong growth prospects. Within
each market, we have located our branches in areas that allow
for easy delivery of portable storage units to our customers
over a wide geographic area. In addition, when cost effective,
we seek locations that are visible from high traffic roads in
order to advertise our products and our name. Our branches
maintain an inventory of portable storage units available for
lease, and some of our older branches also provide storage of
units under lease at the branch
(on-site
storage).
We currently have 74 branches in the U.S., 2 branches in Canada,
17 branches in the U.K. and one branch in The Netherlands.
Additionally, we have 24 properties we call operations yards
from which we can service a local market and store and maintain
our product and equipment. These operations yards do not have
branch managers or sales people but typically have a dispatcher
and drivers assigned to them.
Each branch has a branch manager who has overall supervisory
responsibility for all activities of the branch. Branch managers
report to regional managers who each generally oversee 5-6
branches. Our regional managers, in turn, report to one of our
operational senior vice presidents (called a managing director
in Europe). Performance based incentive bonuses are a
substantial portion of the compensation for these senior vice
presidents, regional and branch managers.
Each branch has its own sales force and a transportation
department that delivers and picks up portable storage units
from customers. Each branch has delivery trucks and forklifts to
load, transport and unload units and a storage yard staff
responsible for unloading and stacking units. Steel units can be
stored by stacking them three to four high to maximize usable
ground area. Our larger branches also have a fleet maintenance
department to maintain the branchs trucks, forklifts and
other equipment. Our smaller branches perform preventative
maintenance tasks but outsource major repairs.
Sales and
Marketing
We have dedicated local sales people at our branches and a sales
management team at our headquarters and other locations that
conduct sales and marketing on a full-time basis. We believe
that by locating most of our sales and marketing staff in our
branches, we can better understand the portable storage needs of
our customers and provide higher levels of customer service. Our
sales force handles all of our products and we do not maintain
separate sales forces for our various product lines. Our sales
and marketing force provides information about our products to
prospective customers by handling inbound calls and by
initiating cold calls. We have on-going sales and marketing
training programs covering all aspects of leasing and customer
service. Our branches communicate with one another and with
corporate headquarters through our ERP system. This enables the
sales and marketing team to share leads and other information
and permits management to monitor and review sales and leasing
productivity on a
branch-by-branch
basis. We constantly strive to improve our sales efforts by
recording and rating the sales calls made and received by our
trained sales force. Our sales and marketing employees are
compensated primarily on a commission basis.
Our nationwide presence in the U.S. and the U.K. allows us
to offer our products to larger customers who wish to centralize
the procurement of portable storage on a multi-regional or
national basis. We are well equipped to meet multi-regional
customers needs through our National Account Program,
which centralizes and simplifies the procurement, rental and
billing process for those customers. Approximately 1,100
U.S. customers and 60 European customers currently
participate in our National Account Program. We also provide our
national account customers with service guarantees which assure
them they will receive the same high level of customer service
from any of our branch locations. This program has helped us
succeed in leveraging customer relationships developed at one
branch throughout our branch system.
We focus an increasing portion of our marketing expenditures on
internet-based initiatives with web-based products and services
for both existing customers and potential customers. We also
advertise our products in the yellow pages and use a targeted
direct mail program. In 2008, we mailed approximately
8.2 million product
10
brochures to existing and prospective customers. These brochures
describe our products and features and highlight the advantages
of portable storage.
Customers
During 2008, approximately 118,000 customers leased our portable
storage, combination storage/office and mobile office units,
compared to approximately 93,000 in 2007. Our customer base is
diverse and consists of businesses in a broad range of
industries. Our largest single leasing customer accounted for
only 1.8% of our leasing revenues in both 2007 and 2008. Our
next largest customer accounted for approximately 0.9% and 0.7%
of our leasing revenues in 2007 and 2008, respectively. Our
twenty largest customers combined accounted for approximately
4.9% of our lease revenues in 2007 and approximately 5.2% of our
lease revenues in 2008. Approximately 53.4% of our customers
rented a single unit during 2008.
Based on an independent market study, we believe our customers
are engaged in a vast majority of the industries identified in
the four-digit SIC (Standard Industrial Classification) manual
published by the U.S. Bureau of the Census.
We target customers who can benefit from our portable storage
solutions either for seasonal, temporary or long-term storage
needs. Customers use our portable storage units for a wide range
of purposes. The following table provides an overview of our
customers and how they use our portable storage, combination
storage/office and mobile office units as of December 31,
2008:
|
|
|
|
|
|
|
|
|
|
|
Approximate
|
|
|
|
|
|
|
|
Percentage of
|
|
|
Representative
|
|
|
Business
|
|
Units on Lease
|
|
|
Customers
|
|
Typical Application
|
|
Consumer service and retail businesses
|
|
|
30
|
%
|
|
Department, drug, grocery and strip mall stores, hotels,
restaurants, dry cleaners and service stations
|
|
Inventory storage, record storage and seasonal needs
|
Construction
|
|
|
36
|
%
|
|
General, electrical, plumbing and mechanical contractors,
landscapers, residential homebuilders and equipment rental
companies
|
|
Equipment and materials storage and job offices
|
Consumers
|
|
|
4
|
%
|
|
Homeowners
|
|
Backyard storage and storage of household goods during
relocation or renovation; storage at our location
|
Government and Institutions
|
|
|
10
|
%
|
|
Schools, hospitals, medical centers, military, Native American
tribal governments and reservations and national, state, county
and local governmental agencies
|
|
Athletic equipment, military storage, disaster preparedness,
supplier, record storage, security office, supplies, equipment
storage, temporary office space and seasonal needs
|
Industrial and commercial
|
|
|
13
|
%
|
|
Distributors, trucking and utility companies, finance and
insurance companies and film production companies
|
|
Raw materials, equipment, record storage, in-plant office and
seasonal needs
|
Other
|
|
|
7
|
%
|
|
|
|
|
Remanufacturing
In December 2008, after integrating the assets and operations we
acquired in the MSG acquisition, we leveraged our combined fleet
and restructured our manufacturing operations, reducing overhead
and capital expenditures for our lease fleet. We accomplished
this primarily by reducing our work force at our Maricopa,
Arizona manufacturing facility by approximately 90%, in addition
to reducing manufacturing and remanufacturing
11
staff at other locations. Additionally, we essentially halted
new production activities other than completing existing work in
process assignments. Historically, we built new steel portable
storage units, steel security offices and other custom-designed
steel structures as well as remanufacture used ocean-going
containers at our Maricopa, Arizona facility. We continue to
remanufacture used ocean-going containers at our branch
locations. Our differentiated product offering allows us to
provide a broad selection of products to our customers and
distinguishes our products from our competitors. If needed in
the remanufacturing process we purchase raw materials such as
steel, vinyl, wood, glass and paint, which we use in our
remanufacturing and restoring operations. We typically buy these
raw materials on a purchase order basis. We do not have
long-term contracts with vendors for the supply of any raw
materials. For the near future, we expect our Maricopa, Arizona
facility, with a limited staff, will predominately be used for
remanufacturing and rebranding units acquired in acquisitions to
be compliant with our lease fleet standards and for repairs and
maintenance on our existing lease fleet.
Vehicles
At December 31, 2008, we had a fleet of 851 delivery
trucks, of which 705 were owned and 146 were leased. We use
these trucks to deliver and pick up containers at customer
locations. We supplement our delivery fleet by outsourcing
delivery services to independent haulers when appropriate.
Enterprise
Resource Planning System
In 2006, we implemented our new customized ERP system in North
America to improve and optimize lease fleet utilization, improve
the effectiveness of our sales and marketing programs and to
allow international growth using the same ERP system throughout
the company. In 2007, our European operations were converted
from their existing systems onto the same ERP customized
platform under which we operate in North America to gain further
efficiencies. This system consists of a wide-area network that
connects our headquarters and all of our branches. Our Tempe,
Arizona corporate headquarters and each branch can enter data
into the system and access data on a real-time basis. We
generate weekly management reports by branch with leasing
volume, fleet utilization, lease rates and fleet movement as
well as monthly profit and loss statements on a consolidated and
branch basis. These reports allow management to monitor each
branchs performance on a daily, weekly and monthly basis.
In 2008, we implemented a dashboard system in order to gain
further efficiencies by having branch managers, regional
managers and senior vice presidents electronically review
real-time data we feel is most relevant to the business. We
track each portable storage unit by its serial number. Lease
fleet and sales information are entered in the system daily at
the branch level and verified through monthly physical
inventories by branch or corporate employees. Branch salespeople
also use the system to track customer leads and other sales
data, including information about current and prospective
customers. We have made significant investments to our ERP
system during the past three years, and we intend to continue
that investment to further optimize the features of this new
system for both the North American and our European operations.
Subsequent to the closing of the Merger, MSGs business
data was successfully transferred to and incorporated into our
ERP system. All new U.S. locations acquired in the Merger were
operationally capable of using our systems shortly after we
closed the transaction. We converted MSGs U.K. branches
onto our systems in the third quarter 2008.
Lease
Terms
Under our lease agreements, each lease has an original intended
length of term at inception but if the customer keeps the leased
unit beyond the original intended term, the lease continues on a
month-to-month basis until cancelled by the customer. At the end
of 2008, our steel storage containers initially have an average
intended term of approximately 8 months at inception,
however their average duration for these leases that have
fulfilled their term agreement was 33 months to date. The
average monthly rental rate on these units was approximately
$100. Our security, security/storage and mobile offices
typically have an average intended lease term of approximately
11 months. The duration of all office leases that have
fulfilled their term agreement was 23 months in 2008. Our
leases provide that the customer is responsible for the cost of
delivery and pickup at lease inception. Our leases specify that
the customer is liable for any damage done to the unit beyond
ordinary wear and tear. However, our customers may purchase a
damage waiver from us to avoid this liability in certain
circumstances. This provides us
12
with an additional source of recurring revenue. The
customers possessions stored within the portable storage
unit are typically the responsibility of the customer.
Competition
We face competition from several local and regional companies,
as well as from national companies, in all of our current
markets. We compete with several large national and
international companies in our mobile office product line. Our
competitors include lessors of storage units, mobile offices,
used van trailers and other structures used for portable
storage. We also compete with conventional fixed self-storage
facilities. We compete primarily in terms of security,
convenience, product quality, broad product selection and
availability, lease rates and customer service. In our core
portable storage business, we typically compete with Williams
Scotsman, Elliot Hire, PODS, Pac-Van, 1-800-PAC-RAT, LLC,
Haulaway Storage Containers, Inc., Moveable Cubicle, Speedy
Hire, and a number of other national, regional and local
competitors. In the mobile office business, we typically compete
with ModSpace, Williams Scotsman, McGrath RentCorp and other
national, regional and local companies.
Employees
As of December 31, 2008, we employed approximately
2,155 full-time employees in the following major categories:
|
|
|
|
|
Management
|
|
|
165
|
|
Administrative
|
|
|
440
|
|
Sales and marketing
|
|
|
490
|
|
Manufacturing
|
|
|
255
|
|
Drivers and storage unit handling
|
|
|
805
|
|
Access to
Information
Our Internet address is www.mobilemini.com. We
make available at this address, free of charge, our annual
report on
Form 10-K,
quarterly reports on
Form 10-Q,
current reports on
Form 8-K
and amendments to those reports filed or furnished pursuant to
Section 13(a) or 15(d) of the Securities Exchange Act of
1934, as soon as reasonably practicable after we electronically
file such material with, or furnish it to, the Securities and
Exchange Commission. In addition to this
Form 10-K,
we incorporate by reference as identified herein, certain
information from parts of our proxy statement for the 2009
Annual Meeting of Stockholders, which we expect to file with the
SEC on or about April 29, 2009, which will also be
available free of charge on our website. Reports of our
executive officers, directors and any other persons required to
file securities ownership reports under Section 16(a) of
the Securities Exchange Act of 1934 are also available through
our web site. Information contained on our web site is not part
of this Annual Report.
Cautionary
Statement about Forward Looking Statements
Our discussion and analysis in this Annual Report, in other
reports that we file with the Securities and Exchange
Commission, in our press releases and in public statements of
our officers and corporate spokespersons contain forward-looking
statements. Forward-looking statements give our current
expectations or forecasts of future events. You can identify
these statements by the fact that they do not relate strictly to
historical or current events. They include words such as
anticipate, estimate,
expect, intend, plan,
believe and other words of similar meaning in
connection with discussion of future operating or financial
performance. These include statements relating to future
actions, acquisition and growth strategy, synergies and cost
savings anticipated from acquisitions and mergers, future
performance or results of current and anticipated products,
sales efforts, expenses, the outcome of contingencies such as
legal proceedings and financial results.
Forward-looking statements may turn out to be wrong. They can be
affected by inaccurate assumptions or by known or unknown risks
and uncertainties. We undertake no obligation to update or
revise any forward-looking statements whether as a result of new
information, future events or otherwise. We provide the
following discussion
13
of risks and uncertainties relevant to our business. These are
factors that we think could cause our actual results to differ
materially from expected and historical results. Mobile Mini
could also be adversely affected by other factors besides those
listed here.
A
continued economic slowdown, particularly in the non-residential
construction sector of the economy, could reduce demand from
some of our customers, which could negatively impact our
financial results.
The recent global financial events have resulted in the
consolidation, failure or near failure of a number of
institutions in the banking, insurance and investment banking
industries and have substantially reduced the ability of
companies to obtain financing. These events have also caused a
substantial reduction in the stock market and layoffs and other
restrictions on spending by companies in almost every business
sector. These events could have a number of different effects on
our business, including:
|
|
|
|
|
reduction in consumer and business spending, which would result
in a reduction in demand for our products;
|
|
|
|
a negative impact on the ability of our customers to timely pay
their obligations to us or our vendors to timely supply
services, thus reducing our cash flow; and
|
|
|
|
an increase in counterparty risk.
|
Additionally, at the end of 2007 and 2008, customers in the
construction industry, primarily in non-residential
construction, accounted for approximately 43% and 36%,
respectively, of our leased units. If the current economic
slowdown in the non-residential construction sector continues,
it is likely that we would experience less demand for leases and
sales of our products. Also, because most of the cost of our
leasing business is either fixed or semi variable, this would
cause our margins to contract and the adverse affect on
operating results would be more pronounced.
Global
capital and credit markets conditions could have an adverse
effect on our ability to access the capital and credit markets,
including our credit facility.
Due to the ongoing disruptions in the global credit markets,
liquidity in the debt markets has been materially impacted,
making financing terms for borrowers less attractive or, in some
cases, unavailable altogether. Prolonged disruptions in the
global credit markets or the failure of additional lending
institutions could result in the unavailability of certain types
of debt financing, including access to revolving lines of credit.
We monitor the financial strength of our larger customers,
derivative counterparties, lenders and insurance carriers on an
on-going basis using publicly available information in order to
evaluate our exposure to those who have or who we believe may
likely experience significant threats to their ability to
adequately service our needs. While we engage in borrowing and
repayment activities under our revolving credit facility on an
almost daily basis and have not had any disruption in our
ability to access our revolving credit facility as needed, the
current credit market conditions could eventually increase the
likelihood that one or more of our lenders may be unable to
honor its commitments under our revolving credit facility, which
could have an adverse effect on our business, financial
condition and results of operations.
Additionally, in the future we may need to raise additional
funds to, among other things, fund our existing operations,
improve or expand our operations, respond to competitive
pressures, or make acquisitions. If adequate funds are not
available on acceptable terms, we may be unable to meet our
business or strategic objectives or compete effectively. If we
raise additional funds by issuing equity securities,
stockholders may experience dilution of their ownership
interests, and the newly issued securities may have rights
superior to those of the common stock. If we raise additional
funds by issuing debt, we may be subject to further limitations
on our operations. If we fail to raise capital when needed, our
business will be negatively affected.
We may
fail to realize the anticipated benefits of the merger
transaction with Mobile Storage Group, and the continuing
integration process could adversely impact our ongoing
operations.
We acquired Mobile Storage Group with the expectation that the
merged operations would result in various benefits, including,
among other things, an expanded customer base and ongoing cost
savings and operating
14
efficiencies. The continued success of the merged operations
will depend, in part, on our ability to realize such anticipated
benefits from combining the businesses of our company and Mobile
Storage Group. The anticipated benefits and cost savings of the
merger may not be realized fully, or at all, or may take longer
to realize than expected. Failure to achieve anticipated
benefits could result in increased costs and decreases in the
amounts of expected revenues of the combined company.
Unionization
by some or all of our employees could cause increases in
operating costs.
None of our employees are presently covered by collective
bargaining agreements. However, from time to time various unions
have attempted to organize some of our employees. We cannot
predict the outcome of any continuing or future efforts to
organize our employees, the terms of any future labor
agreements, or the effect, if any, those agreements might have
on our operations or financial performance.
We believe that a unionized workforce would generally increase
our operating costs, divert the attention of management from
servicing customers and increase the risk of work stoppages, all
of which could have a material adverse effect on our business,
results of operations or financial condition.
We
operate with a high amount of debt and we may incur significant
additional indebtedness.
Our operations are capital intensive, and we operate with a high
amount of debt relative to our size. In May 2007, we issued
$150.0 million in aggregate principal amount of
6.875% Senior Notes. These notes were issued at 99.548% of
par value. In connection with our acquisition of Mobile Storage
Group, we assumed approximately $544.9 million of Mobile
Storage Groups indebtedness with an acquisition date fair
value of $540.9 million. On June 27, 2008, we entered
into an ABL Credit Agreement under which we may borrow up to
$900.0 million on a revolving loan basis which means that
amounts repaid may be reborrowed. Our substantial indebtedness
could have adverse consequences. For example, it could:
|
|
|
|
|
require us to dedicate a substantial portion of our cash flow
from operations to payments on our indebtedness, which could
reduce the availability of our cash flow to fund future working
capital, capital expenditures, acquisitions and other general
corporate purposes;
|
|
|
|
make it more difficult for us to satisfy our obligations with
respect to our Senior Notes;
|
|
|
|
expose us to the risk of increased interest rates, as certain of
our borrowings will be at variable rates of interest;
|
|
|
|
require us to sell assets to reduce indebtedness or influence
our decisions about whether to do so;
|
|
|
|
increase our vulnerability to general adverse economic and
industry conditions;
|
|
|
|
limit our flexibility in planning for, or reacting to, changes
in our business and our industry;
|
|
|
|
restrict us from making strategic acquisitions or pursuing
business opportunities; and
|
|
|
|
limit, along with the financial and other restrictive covenants
in our indebtedness, among other things, our ability to borrow
additional funds. Failing to comply with those covenants could
result in an event of default which, if not cured or waived,
could have a material adverse effect on our business, financial
condition and results of operations.
|
Covenants
in our debt instruments restrict or prohibit our ability to
engage in or enter into a variety of transactions.
The indentures governing our 6.875% Senior Notes and the
9.75% Senior Notes originally issued by MSG which we
assumed as part of the Merger and, to a lesser extent, our
revolving credit facility agreements contain various covenants
that may limit our discretion in operating our business. In
particular, we are limited in our ability to merge, consolidate
or transfer substantially all of our assets, issue preferred
stock of subsidiaries and create liens on our assets to secure
debt. In addition, if there is default, and we do not maintain
borrowing availability in excess of certain pre-determined
levels, we may be unable to incur additional indebtedness, make
restricted payments (including paying cash dividends on our
capital stock) and redeem or repurchase our capital stock. Our
Senior Notes
15
do not contain financial maintenance covenants and the financial
maintenance covenants under our revolving credit facility are
not applicable unless we fall below $100 million in
borrowing availability.
Our revolving credit facility requires us, under certain limited
circumstances, to maintain certain financial ratios and limits
our ability to make capital expenditures. These covenants and
ratios could have an adverse effect on our business by limiting
our ability to take advantage of financing, merger and
acquisition or other corporate opportunities and to fund our
operations. Breach of a covenant in our debt instruments could
cause acceleration of a significant portion of our outstanding
indebtedness. Any future debt could also contain financial and
other covenants more restrictive than those imposed under the
indentures governing the Senior Notes, and the revolving credit
facility.
A breach of a covenant or other provision in any debt instrument
governing our current or future indebtedness could result in a
default under that instrument and, due to cross-default and
cross-acceleration provisions, could result in a default under
our other debt instruments. Upon the occurrence of an event of
default under the revolving credit facility or any other debt
instrument, the lenders could elect to declare all amounts
outstanding to be immediately due and payable and terminate all
commitments to extend further credit. If we were unable to repay
those amounts, the lenders could proceed against the collateral
granted to them, if any, to secure the indebtedness. If the
lenders under our current or future indebtedness accelerate the
payment of the indebtedness, we cannot assure you that our
assets or cash flow would be sufficient to repay in full our
outstanding indebtedness, including the Senior Notes.
The amount we can borrow under our revolving credit facility
depends in part on the value of the portable storage units in
our lease fleet. If the value of our lease fleet declines under
appraisals our lenders receive, we cannot borrow as much. We are
required to satisfy several covenants with our lenders that are
affected by changes in the value of our lease fleet. We would
breach some of these covenants if the value of our lease fleet
drops below specified levels. If this happens, we may not be
able to borrow the amounts we need to expand our business, and
we may be forced to liquidate a portion of our existing fleet.
We may
not be able to successfully acquire new operations or integrate
future acquisitions, which could cause our business to
suffer.
We may not be able to successfully complete potential strategic
acquisitions if we cannot reach agreement on acceptable terms or
for other reasons. If we buy a company, we may experience
difficulty integrating that companys personnel and
operations, which could negatively affect our operating results.
In addition:
|
|
|
|
|
the key personnel of the acquired company may decide not to work
for us;
|
|
|
|
we may experience business disruptions as a result of
information technology systems conversions;
|
|
|
|
we may experience additional financial and accounting challenges
and complexities in areas such as tax planning, treasury
management, and financial reporting;
|
|
|
|
we may be held liable for environmental risks and liabilities as
a result of our acquisitions, some of which we may not have
discovered during our due diligence;
|
|
|
|
our ongoing business may be disrupted or receive insufficient
management attention; and
|
|
|
|
we may not be able to realize the cost savings or other
financial benefits we anticipated.
|
In connection with future acquisitions, we may assume the
liabilities of the companies we acquire. These liabilities,
including liabilities for environmental-related costs, could
materially and adversely affect our business. We may have to
incur debt or issue equity securities to pay for any future
acquisition, the issuance of which could involve the imposition
of restrictive covenants or be dilutive to our existing
stockholders.
If we do not manage our growth effectively, some of our new
branches and acquisitions may lose money or fail, and we may
have to close unprofitable locations. Closing a branch in such
circumstances would likely result in additional expenses that
would cause our operating results to suffer.
In connection with expansion outside of the U.S., we face
fluctuations in currency exchange rates, exposure to additional
regulatory requirements, including certain trade barriers,
changes in political and economic conditions,
16
and exposure to additional and potentially adverse tax regimes.
Our success in Europe will depend, in part, on our ability to
anticipate and effectively manage these and other risks. Our
failure to manage these risks may adversely affect our growth,
in Europe and elsewhere, and lead to increased administrative
costs.
Fluctuations
between the British pound and U.S. dollar could adversely affect
our results of operations.
We derived approximately 12.8% of our total revenues in 2008
from our operations in the U.K. The financial position and
results of operations of our U.K. subsidiaries are measured
using the British pound as the functional currency. As a result,
we are exposed to currency fluctuations both in receiving cash
from our U.K. operations and in translating our financial
results back into U.S. dollars. We believe the impact on us
of currency fluctuations from an operations perspective is
mitigated by the fact that the majority of our expenses, capital
expenditures and revenues in the U.K. are in British pounds. We
do, however, have significant currency exposure as a result of
translating our financial results from British pounds into
U.S. dollars for purposes of financial reporting. Assets
and liabilities of our U.K. subsidiary are translated at the
period end exchange rate in effect at each balance sheet date.
Our income statement accounts are translated at the average rate
of exchange prevailing during each month. Translation
adjustments arising from differences in exchange rates from
period to period are included in the accumulated other
comprehensive income (loss) in stockholders equity. A
strengthening of the U.S. dollar against the British pound
reduces the amount of income or loss we recognize from our U.K.
business. In 2007, the British pound was at or near a multi-year
high against the U.S. dollar, and we cannot predict the
effects of further exchange rate fluctuations on our future
operating results. We are also exposed to additional currency
transaction risk when our U.S. operations incur purchase
obligations in a currency other than in U.S. dollars and
our U.K. operations incur purchase obligations in a currency
other than in British pounds. As exchange rates vary, our
results of operations and profitability may be harmed. We do not
currently hedge our currency transaction or translation
exposure, nor do we have any current plans to do so. The risks
we face in foreign currency transactions and translation may
continue to increase as we further develop and expand our U.K.
operations. Furthermore, to the extent we expand our business
into other countries, we anticipate we will face similar market
risks related to foreign currency translation caused by exchange
rate fluctuations between the U.S. dollar and the
currencies of those countries.
If we
determine that our goodwill has become impaired, we may incur
significant charges to our pre-tax income.
At December 31, 2008, we had $492.7 million of
goodwill on our consolidated balance sheets after the impairment
charges discussed below. Goodwill represents the excess of cost
over the fair value of net assets acquired in business
combinations. In the future, goodwill and intangible assets may
increase as a result of future acquisitions. Goodwill and
intangible assets are reviewed at least annually for impairment.
Impairment may result from, among other things, deterioration in
the performance of acquired businesses, adverse market
conditions, stock price, and adverse changes in applicable laws
or regulations, including changes that restrict the activities
of the acquired business.
At December 31, 2008, we recognized an impairment of
approximately $13.7 million primarily relating to our
operations in the U.K. For more information, see the Notes to
Consolidated Financial Statements included in our financial
statements contained in this Annual Report.
We are
subject to environmental regulations and could incur costs
relating to environmental matters.
We are subject to various federal, state, and local
environmental protection and health and safety laws and
regulations governing, among other things:
|
|
|
|
|
the emission and discharge of hazardous materials into the
ground, air, or water;
|
|
|
|
the exposure to hazardous materials; and
|
|
|
|
the generation, handling, storage, use, treatment,
identification, transportation, and disposal of industrial
by-products, waste water, storm water, oil/fuel and other
hazardous materials.
|
We are also required to obtain environmental permits from
governmental authorities for certain of our operations. If we
violate or fail to obtain or comply with these laws,
regulations, or permits, we could be fined or
17
otherwise sanctioned by regulators. We could also become liable
if employees or other parties are improperly exposed to
hazardous materials.
Under certain environmental laws, we could be held responsible
for all of the costs relating to any contamination at, or
migration to or from, our or our predecessors past or
present facilities. These laws often impose liability even if
the owner, operator or lessor did not know of, or was not
responsible for, the release of such hazardous substances.
Environmental laws are complex, change frequently, and have
tended to become more stringent over time. The costs of
complying with current and future environmental and health and
safety laws, and our liabilities arising from past or future
releases of, or exposure to, hazardous substances, may adversely
affect our business, results of operations, or financial
condition.
The
supply and cost of used ocean-going containers fluctuates, and
this can affect our pricing and our ability to
grow.
As needed, we purchase, remanufacture and modify used
ocean-going containers in order to expand our lease fleet. If
used ocean-going container prices increase substantially, we may
not be able to manufacture enough new units to grow our fleet.
These price increases also could increase our expenses and
reduce our earnings, particularly if we are not able (due to
competitive reasons or otherwise) to raise our rental rates to
absorb this increased cost. Conversely, an oversupply of used
ocean-going containers may cause container prices to fall. Our
competitors may then lower the lease rates on their storage
units. As a result, we may need to lower our lease rates to
remain competitive. This would cause our revenues and our
earnings to decline.
The
supply and cost of raw materials we use in manufacturing
fluctuates and could increase our operating costs.
As needed, we manufacture portable storage units to add to our
lease fleet and for sale. In our manufacturing process, we
purchase steel, vinyl, wood, glass and other raw materials from
various suppliers. We cannot be sure that an adequate supply of
these materials will continue to be available on terms
acceptable to us. The raw materials we use are subject to price
fluctuations that we cannot control. Changes in the cost of raw
materials can have a significant effect on our operations and
earnings. Rapid increases in raw material prices are often
difficult to pass through to customers, particularly to leasing
customers. If we are unable to pass on these higher costs, our
profitability could decline. If raw material prices decline
significantly, we may have to write down our raw materials
inventory values. If this happens, our results of operations and
financial condition will decline.
Some
zoning laws in the U.S. and Canada and temporary planning
permission regulations in Europe restrict the use of our
portable storage and office units and therefore limit our
ability to offer our products in all markets.
Most of our customers use our storage units to store their goods
on their own properties. Local zoning laws and temporary
planning permission regulations in some of our markets do not
allow some of our customers to keep portable storage and office
units on their properties or do not permit portable storage
units unless located out of sight from the street. If local
zoning laws or planning permission regulations in one or more of
our markets no longer allow our units to be stored on
customers sites, our business in that market will suffer.
We
depend on a few key management persons.
We are substantially dependent on the personal efforts and
abilities of Steven G. Bunger, our Chairman, President and Chief
Executive Officer, Mark E. Funk, our Executive Vice President
and Chief Financial Officer, and Jody Miller, our Executive Vice
President and Chief Operating Officer. The loss of any of these
officers or our other key management persons could harm our
business and prospects for growth.
18
The
market price of our common stock has been volatile and may
continue to be volatile and the value of your investment may
decline.
The market price of our common stock has been volatile and may
continue to be volatile. This volatility may cause wide
fluctuations in the price of our common stock on the Nasdaq
Global Select Market. The market price of our common stock is
likely to be affected by:
|
|
|
|
|
changes in general conditions in the economy, geopolitical
events or the financial markets;
|
|
|
|
variations in our quarterly operating results;
|
|
|
|
changes in financial estimates by securities analysts;
|
|
|
|
other developments affecting us, our industry, customers or
competitors;
|
|
|
|
the operating and stock price performance of companies that
investors deem comparable to us; and
|
|
|
|
the number of shares available for resale in the public markets
under applicable securities laws.
|
|
|
ITEM 1B.
|
UNRESOLVED
STAFF COMMENTS
|
We have received no written comments regarding our periodic or
current reports from the staff of the SEC that were issued
180 days or more preceding the end of our 2008 fiscal year
and that remain unresolved.
We own several properties in the U.S., including our
manufacturing facility in Maricopa, Arizona, approximately
30 miles south of Phoenix. In the U.K., we own two
locations. We lease all of our other branch locations. All of
our major leased properties have remaining lease terms of
between 1 and 11 years and we believe that satisfactory
alternative properties can be found in all of our markets if we
do not renew these existing leased properties. The properties we
lease for our branch locations are generally located in
industrial areas so that we can stack containers, store large
amounts of containers and offices and operate our delivery
trucks. These properties tend to be 1 to 10 acre sites with
little development needed for us to use them, other than a paved
or hard-packed surface, utilities and proper zoning.
Four of our leased properties are with related persons. Three of
these leases expired December 31, 2008 but we anticipate
renewing these leases at market rates for terms of approximately
five years. The terms of these related persons lease agreements
have been reviewed and approved by the independent directors who
comprise a majority of the members of our Board of Directors.
Our Maricopa facility is 17 years old and is on
approximately 43 acres. The facility includes nine
manufacturing buildings, totaling approximately 171 thousand
square feet. These buildings housed our manufacturing, assembly,
restoring, painting and vehicle maintenance operations. At the
end of 2008, in connection with the MSG transaction, we
restructured our manufacturing operations, and as a result, this
facility for the near future will be primarily used to rebrand,
remanufacture and do repairs and maintenance on the our existing
lease fleet.
We lease our corporate and administrative offices in Tempe,
Arizona. These offices have approximately 35,000 square
feet of office space. The lease term is through December 2014.
Our European headquarters is located in
Stockton-on-Tees
where we lease approximately 10,000 square feet of office
space. The term on this lease is through July, 2017.
|
|
ITEM 3.
|
LEGAL
PROCEEDINGS.
|
We are party from time to time to various claims and lawsuits
which arise in the ordinary course of business. Although the
specific allegations in the lawsuits differ, most of them
involve claims pertaining to goods allegedly damaged while
stored in one of our containers. We do not believe that the
ultimate resolution of these claims or lawsuits will have a
material adverse effect on our business, financial condition,
results of operations or cash flows.
19
|
|
ITEM 4.
|
SUBMISSION
OF MATTERS TO A VOTE OF SECURITY HOLDERS.
|
No matters were submitted to a vote of our security holders
during the fourth quarter ended December 31, 2008.
PART II
|
|
ITEM 5.
|
MARKET
FOR COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER
PURCHASES OF EQUITY SECURITIES.
|
Common
Stock Prices
Our common stock trades on The Nasdaq Global Select Market under
the symbol MINI. The following are the high and low
sale prices for the common stock during the periods indicated as
reported by the Nasdaq Stock Market.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2007
|
|
|
2008
|
|
|
|
High
|
|
|
Low
|
|
|
High
|
|
|
Low
|
|
|
Quarter ended March 31,
|
|
$
|
29.40
|
|
|
$
|
25.12
|
|
|
$
|
20.13
|
|
|
$
|
14.07
|
|
Quarter ended June 30,
|
|
$
|
33.65
|
|
|
$
|
26.30
|
|
|
$
|
25.31
|
|
|
$
|
18.61
|
|
Quarter ended September 30,
|
|
$
|
32.01
|
|
|
$
|
21.56
|
|
|
$
|
26.14
|
|
|
$
|
15.00
|
|
Quarter ended December 31,
|
|
$
|
25.23
|
|
|
$
|
16.50
|
|
|
$
|
19.37
|
|
|
$
|
10.88
|
|
We had 88 holders of record of our common stock on
February 24, 2009, and we estimate that we have more than
5,400 beneficial owners of our common stock.
Mobile Mini has not paid cash dividends on its common stock and
does not expect to do so in the foreseeable future, as it
intends to retain all earnings to provide funds for the
operation and expansion of its business. Further, our revolving
credit agreement restricts our ability to pay dividends or other
distributions on our common stock.
Sales of
Unregistered Securities; Repurchases of Securities
On June 27, 2008, as part of the consideration for the
acquisition of Mobile Storage Group, we issued 8.6 million
shares of our Series A Convertible Redeemable Participating
Preferred Stock, to the former stockholders of Mobile Storage
Group. This issuance was made pursuant to an exemption from
registration under Regulation D of the Securities Act of
1933, as amended.
The preferred stock is convertible into 8.6 million shares
of our common stock at any time at the option of the holders,
representing an initial conversion price of $18.00 per common
share. The preferred stock will be mandatorily convertible into
our common stock if, after the first anniversary of the issuance
of the preferred stock, our common stock trades above $23.00 per
share for a period of 30 consecutive days.
For additional information, see Managements
Discussion and Analysis of Financial Conditions and Results of
Operations Liquidity and Capital
Resources Preferred Stock.
On August 8, 2007, our Board of Directors approved a common
stock repurchase program authorizing up to $50.0 million of
our outstanding shares to be repurchased over a six-month period
which expired in February 2008. We had repurchased
2.2 million shares for approximately $39.3 million
under this authorization prior to December 31, 2007.
20
Stock
Performance Graph
The following Performance Graph and related information shall
not be deemed soliciting material or
filed with the Securities and Exchange Commission,
nor should such information be incorporated by reference into
any future filings under the Securities Act of 1933 or the
Securities Exchange Act of 1934, each as amended, except to the
extent that Mobile Mini specifically incorporates it by
reference in such filing.
The following graph compares the cumulative total return on our
capital stock with the cumulative total returns (assuming
reinvestment of dividends) on the Standard and Poors
SmallCap 600 and the Nasdaq Composite Index if $100 were
invested in our common stock and each index on December 31,
2003.
STOCK
PERFORMANCE GRAPH
Mobile Mini, Inc.
At December 31, 2008
Total Return* Performance
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Period Ended December 31,
|
|
Index
|
|
2003
|
|
|
2004
|
|
|
2005
|
|
|
2006
|
|
|
2007
|
|
|
2008
|
|
Mobile Mini, Inc.
|
|
$
|
100.00
|
|
|
$
|
167.55
|
|
|
$
|
240.37
|
|
|
$
|
273.23
|
|
|
$
|
188.03
|
|
|
$
|
146.25
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Standard & Poors SmallCap 600
|
|
$
|
100.00
|
|
|
$
|
122.65
|
|
|
$
|
132.07
|
|
|
$
|
152.04
|
|
|
$
|
151.59
|
|
|
$
|
104.48
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nasdaq Stock Market Index (U.S.)
|
|
$
|
100.00
|
|
|
$
|
108.84
|
|
|
$
|
111.16
|
|
|
$
|
122.11
|
|
|
$
|
132.42
|
|
|
$
|
63.80
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
* |
|
Total Return based on $100 initial investment and reinvestment
of dividends. |
21
|
|
ITEM 6.
|
SELECTED
FINANCIAL DATA.
|
The following table shows our selected consolidated historical
financial data for the stated periods. Amounts include the
effect of rounding. You should read this material with
Managements Discussion and Analysis of Financial
Condition and Results of Operations and the financial
statements and related footnotes included elsewhere in this
Annual Report.
On February 22, 2006, our Board of Directors approved a
two-for-one stock split in the form of a 100 percent stock
dividend effected on March 10, 2006. Per share amounts,
share amounts and weighted numbers of shares outstanding give
effect for this two-for-one stock split in the below tables for
all periods presented.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
2004
|
|
|
2005
|
|
|
2006
|
|
|
2007
|
|
|
2008
|
|
|
|
(In thousands, except per share and operating data)
|
|
|
Consolidated Statements of Income Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Leasing
|
|
$
|
149,856
|
|
|
$
|
188,578
|
|
|
$
|
245,105
|
|
|
$
|
284,638
|
|
|
$
|
371,560
|
|
Sales
|
|
|
17,919
|
|
|
|
17,499
|
|
|
|
26,824
|
|
|
|
31,644
|
|
|
|
41,267
|
|
Other
|
|
|
566
|
|
|
|
1,093
|
|
|
|
1,434
|
|
|
|
2,020
|
|
|
|
2,577
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenues
|
|
|
168,341
|
|
|
|
207,170
|
|
|
|
273,363
|
|
|
|
318,302
|
|
|
|
415,404
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Costs and expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of sales
|
|
|
11,352
|
|
|
|
10,845
|
|
|
|
17,186
|
|
|
|
21,651
|
|
|
|
28,044
|
|
Leasing, selling and general expenses
|
|
|
90,696
|
|
|
|
109,257
|
|
|
|
139,906
|
|
|
|
166,994
|
|
|
|
212,335
|
|
Integration, merger and restructuring expense
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
24,427
|
|
Goodwill impairment
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
13,667
|
|
Depreciation and amortization
|
|
|
11,427
|
|
|
|
12,854
|
|
|
|
16,741
|
|
|
|
21,149
|
|
|
|
31,767
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total costs and expenses
|
|
|
113,475
|
|
|
|
132,956
|
|
|
|
173,833
|
|
|
|
209,794
|
|
|
|
310,240
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from operations
|
|
|
54,866
|
|
|
|
74,214
|
|
|
|
99,530
|
|
|
|
108,508
|
|
|
|
105,164
|
|
Other income (expense):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest income
|
|
|
|
|
|
|
11
|
|
|
|
437
|
|
|
|
101
|
|
|
|
135
|
|
Other income
|
|
|
|
|
|
|
3,160
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense
|
|
|
(20,434
|
)
|
|
|
(23,177
|
)
|
|
|
(23,681
|
)
|
|
|
(24,906
|
)
|
|
|
(48,146
|
)
|
Debt extinguishment expense
|
|
|
|
|
|
|
|
|
|
|
(6,425
|
)
|
|
|
(11,224
|
)
|
|
|
|
|
Foreign currency exchange gains (loss)
|
|
|
|
|
|
|
|
|
|
|
66
|
|
|
|
107
|
|
|
|
(112
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before provision for income taxes
|
|
|
34,432
|
|
|
|
54,208
|
|
|
|
69,927
|
|
|
|
72,586
|
|
|
|
57,041
|
|
Provision for income taxes
|
|
|
13,773
|
|
|
|
20,220
|
|
|
|
27,151
|
|
|
|
28,410
|
|
|
|
28,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
|
20,659
|
|
|
|
33,988
|
|
|
|
42,776
|
|
|
|
44,176
|
|
|
|
29,041
|
|
Earnings allocable to preferred stock
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(2,739
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income available to common stockholders
|
|
$
|
20,659
|
|
|
$
|
33,988
|
|
|
$
|
42,776
|
|
|
$
|
44,176
|
|
|
$
|
26,302
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
0.71
|
|
|
$
|
1.14
|
|
|
$
|
1.25
|
|
|
$
|
1.24
|
|
|
$
|
0.77
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted
|
|
$
|
0.70
|
|
|
$
|
1.10
|
|
|
$
|
1.21
|
|
|
$
|
1.22
|
|
|
$
|
0.75
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average number of common and common share equivalents
outstanding:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
28,974
|
|
|
|
29,867
|
|
|
|
34,243
|
|
|
|
35,489
|
|
|
|
34,155
|
|
Diluted
|
|
|
29,565
|
|
|
|
30,875
|
|
|
|
35,425
|
|
|
|
36,296
|
|
|
|
38,875
|
|
Other Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EBITDA(1)
|
|
$
|
66,293
|
|
|
$
|
90,239
|
|
|
$
|
116,774
|
|
|
$
|
129,865
|
|
|
$
|
136,954
|
|
Net cash provided by operating activities
|
|
|
40,322
|
|
|
|
69,249
|
|
|
|
76,884
|
|
|
|
91,299
|
|
|
|
98,518
|
|
Net cash used in investing activities
|
|
|
(80,508
|
)
|
|
|
(113,275
|
)
|
|
|
(192,763
|
)
|
|
|
(138,682
|
)
|
|
|
(97,913
|
)
|
Net cash provided by (used in) financing activities
|
|
|
40,555
|
|
|
|
43,282
|
|
|
|
116,966
|
|
|
|
48,427
|
|
|
|
(6,689
|
)
|
Operating Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of branches (at year end)
|
|
|
48
|
|
|
|
51
|
|
|
|
62
|
|
|
|
66
|
|
|
|
94
|
|
Lease fleet units (at year end)
|
|
|
100,727
|
|
|
|
116,317
|
|
|
|
149,615
|
|
|
|
160,116
|
|
|
|
273,748
|
|
Lease fleet covenant utilization (annual average)
|
|
|
80.7
|
%
|
|
|
82.9
|
%
|
|
|
82.7
|
%
|
|
|
79.6
|
%
|
|
|
75.0
|
%
|
Lease revenue growth from prior year
|
|
|
16.6
|
%
|
|
|
25.8
|
%
|
|
|
30.0
|
%
|
|
|
16.1
|
%
|
|
|
30.5
|
%
|
Operating margin
|
|
|
32.6
|
%
|
|
|
35.8
|
%
|
|
|
36.4
|
%
|
|
|
34.1
|
%
|
|
|
25.3
|
%
|
Net income margin
|
|
|
12.3
|
%
|
|
|
16.4
|
%
|
|
|
15.6
|
%
|
|
|
13.9
|
%
|
|
|
7.0
|
%
|
22
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At December 31,
|
|
|
|
2004
|
|
|
2005
|
|
|
2006
|
|
|
2007
|
|
|
2008
|
|
|
|
(In thousands)
|
|
|
Consolidated Balance Sheet Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Lease fleet, net
|
|
$
|
454,106
|
|
|
$
|
550,464
|
|
|
$
|
697,439
|
|
|
$
|
802,923
|
|
|
$
|
1,078,156
|
|
Total assets
|
|
|
592,146
|
|
|
|
704,957
|
|
|
|
900,030
|
|
|
|
1,028,851
|
|
|
|
1,798,857
|
|
Total debt
|
|
|
277,044
|
|
|
|
308,585
|
|
|
|
302,045
|
|
|
|
387,989
|
|
|
|
907,206
|
|
Stockholders equity
|
|
|
216,369
|
|
|
|
267,975
|
|
|
|
442,004
|
|
|
|
457,890
|
|
|
|
495,228
|
|
Reconciliation of EBITDA to net cash provided by operating
activities, the most directly comparable GAAP measure:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
2004
|
|
|
2005
|
|
|
2006
|
|
|
2007
|
|
|
2008
|
|
|
|
(In thousands)
|
|
|
EBITDA(1)
|
|
$
|
66,293
|
|
|
$
|
90,239
|
|
|
$
|
116,774
|
|
|
$
|
129,865
|
|
|
$
|
136,954
|
|
Senior Note redemption premiums
|
|
|
|
|
|
|
|
|
|
|
(4,987
|
)
|
|
|
(8,926
|
)
|
|
|
|
|
Interest paid
|
|
|
(19,254
|
)
|
|
|
(21,727
|
)
|
|
|
(24,770
|
)
|
|
|
(27,896
|
)
|
|
|
(33,032
|
)
|
Income and franchise taxes paid
|
|
|
(372
|
)
|
|
|
(495
|
)
|
|
|
(733
|
)
|
|
|
(797
|
)
|
|
|
(667
|
)
|
Provision for loss from natural disasters
|
|
|
|
|
|
|
1,710
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Provision for restructuring charge
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5,626
|
|
Goodwill impairment
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
13,667
|
|
Share-based compensation expense
|
|
|
|
|
|
|
19
|
|
|
|
3,066
|
|
|
|
4,028
|
|
|
|
5,656
|
|
Gain on sale of lease fleet units
|
|
|
(2,277
|
)
|
|
|
(3,529
|
)
|
|
|
(4,922
|
)
|
|
|
(5,560
|
)
|
|
|
(9,849
|
)
|
Loss on disposal of property, plant and equipment
|
|
|
604
|
|
|
|
704
|
|
|
|
454
|
|
|
|
203
|
|
|
|
567
|
|
Change in certain assets and liabilities, net of effect of
business acquired:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Receivables
|
|
|
(3,309
|
)
|
|
|
(5,371
|
)
|
|
|
(6,580
|
)
|
|
|
(2,119
|
)
|
|
|
2,201
|
|
Inventories
|
|
|
(2,178
|
)
|
|
|
(4,823
|
)
|
|
|
628
|
|
|
|
(610
|
)
|
|
|
7,655
|
|
Deposits and prepaid expenses
|
|
|
(669
|
)
|
|
|
(480
|
)
|
|
|
(1,446
|
)
|
|
|
(1,754
|
)
|
|
|
177
|
|
Other assets and intangibles
|
|
|
37
|
|
|
|
(19
|
)
|
|
|
(4
|
)
|
|
|
318
|
|
|
|
105
|
|
Accounts payable and accrued liabilities
|
|
|
1,447
|
|
|
|
13,021
|
|
|
|
(596
|
)
|
|
|
4,547
|
|
|
|
(30,542
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by operating activities
|
|
$
|
40,322
|
|
|
$
|
69,249
|
|
|
$
|
76,884
|
|
|
$
|
91,299
|
|
|
$
|
98,518
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reconciliation of net income to EBITDA:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
2004
|
|
|
2005
|
|
|
2006
|
|
|
2007
|
|
|
2008
|
|
|
|
(In thousands except percentages)
|
|
|
Net income
|
|
$
|
20,659
|
|
|
$
|
33,988
|
|
|
$
|
42,776
|
|
|
$
|
44,176
|
|
|
$
|
29,041
|
|
Interest expense
|
|
|
20,434
|
|
|
|
23,177
|
|
|
|
23,681
|
|
|
|
24,906
|
|
|
|
48,146
|
|
Income taxes
|
|
|
13,773
|
|
|
|
20,220
|
|
|
|
27,151
|
|
|
|
28,410
|
|
|
|
28,000
|
|
Depreciation and amortization
|
|
|
11,427
|
|
|
|
12,854
|
|
|
|
16,741
|
|
|
|
21,149
|
|
|
|
31,767
|
|
Debt restructuring/extinguishment expense
|
|
|
|
|
|
|
|
|
|
|
6,425
|
|
|
|
11,224
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EBITDA(1)
|
|
$
|
66,293
|
|
|
$
|
90,239
|
|
|
$
|
116,774
|
|
|
$
|
129,865
|
|
|
$
|
136,954
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EBITDA margin(2)
|
|
|
39.4
|
%
|
|
|
43.6
|
%
|
|
|
42.7
|
%
|
|
|
40.8
|
%
|
|
|
33.0
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
EBITDA, as further discussed below, is defined as net income
before interest expense, income taxes, depreciation and
amortization, and debt restructuring or extinguishment expense.
We present EBITDA because we believe it provides useful
information regarding our ability to meet our future debt
payment requirements, capital expenditures and working capital
requirements and that it provides an overall evaluation of our
financial |
23
|
|
|
|
|
condition. In addition, EBITDA is a component of certain
financial covenants under our $900.0 million revolving
credit facility and will be used to determine our available
borrowing ability and the interest rate in effect at any point
in time after June 30, 2009. |
EBITDA has certain limitations as an analytical tool and should
not be used as a substitute for net income, cash flows, or other
consolidated income or cash flow data prepared in accordance
with generally accepted accounting principles in the
U.S. or as a measure of our profitability or our liquidity.
In particular, EBITDA, as defined does not include:
|
|
|
|
|
Interest expense because we borrow money to
partially finance our capital expenditures, primarily related to
the expansion of our lease fleet, interest expense is a
necessary element of our cost to secure this financing to
continue generating additional revenues.
|
|
|
|
Income taxes because we operate in jurisdictions
subject to income taxation, income tax expense is a necessary
element of our costs to operate.
|
|
|
|
Depreciation and amortization because we are a
leasing company, our business is very capital intensive and we
hold acquired assets for a period of time before they generate
revenues, cash flow and earnings; therefore, depreciation and
amortization expense is a necessary element of our business.
|
|
|
|
Debt restructuring or extinguishment expense as
defined in our revolving credit facility, debt restructuring and
extinguishment expenses are not deducted in our various
calculations made under the credit agreement and are treated no
differently than interest expense. As discussed above, interest
expense is a necessary element of our cost to finance a portion
of the capital expenditures needed for the growth of our
business.
|
When evaluating EBITDA as a performance measure, and excluding
the above-noted charges, all of which have material limitations,
investors should consider, among other factors, the following:
|
|
|
|
|
increasing or decreasing trends in EBITDA;
|
|
|
|
how EBITDA compares to levels of debt and interest
expense; and
|
|
|
|
whether EBITDA historically has remained at positive levels .
|
Because EBITDA, as defined, excludes some but not all items that
affect our cash flow from operating activities, EBITDA may not
be comparable to a similarly titled performance measure
presented by other companies.
|
|
|
(2) |
|
EBITDA margin is calculated as EBITDA divided by total revenues
expressed as a percentage. The GAAP financial measure that is
most directly comparable to EBITDA Margin is operating margin,
which represents operating income divided by revenues. EBITDA
margin is presented along with the operating margin so as not to
imply that more emphasis be placed on it than the corresponding
GAAP measure. |
|
|
ITEM 7.
|
MANAGEMENTS
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS.
|
The following discussion of our financial condition and
results of operations should be read together with the
consolidated financial statements and the accompanying notes
included elsewhere in this Annual Report. This discussion
contains forward-looking statements that involve risks and
uncertainties. Our actual results may differ materially from
those anticipated in those forward-looking statements as a
result of certain factors, including, but not limited to, those
described under Item 1A, Risk Factors.
The following discussion takes into consideration our
acquisition of Mobile Storage Group on June 27, 2008. The
operations of Mobile Storage Group are included in our operating
results for only six months of the twelve months ended
December 31, 2008. Additionally, the results of operations
for 2007 also include four additional acquisitions and one start
up location that we completed in 2007; in 2008, the results of
operations include four acquisitions (beyond Mobile Storage
Group) we completed during 2008.
24
Executive
Summary
2008 was a transformational year for Mobile Mini as we
acquired our largest competitor, Mobile Storage Group, which
contributed to increasing total revenues 30.5% to
$415.4 million from $318.3 million. In addition, we
were cash flow positive (after capital expenditures but
excluding acquisitions) for the first time in our operating
history. Since closing the acquisition, we believe we have been
achieving the economic benefits of the MSG integration sooner
than anticipated, particularly through a reduction in overhead
and infrastructure costs as previously overlapping locations in
both the U.S. and the U.K. have been combined.
In addition, we enacted a selective price increase in the third
quarter of 2008, focusing on customers who have had units out on
rent for an extended period of time. To date, the attrition
rates for the affected customers have been the same or less than
other customers. In addition, although fuel costs came down in
the fourth quarter of 2008, they were at their highest levels
during much of the third quarter. Where possible, we recouped
some of those costs by imposing a fuel surcharge in the
U.S. in the second quarter of 2008 and in the U.K. in
September 2008.
The recession and credit crisis in the U.S. and U.K. have
curtailed non-residential construction activity and we expect
these factors to continue to negatively affect our revenues in
2009. As a result, in late 2008 and early 2009, we made
reductions in non-essential expenses, most notably by reducing
headcount. In the fourth quarter of 2008, we restructured our
manufacturing operations to reduce costs and implemented two
rounds of company-wide reductions, which together resulted in
reductions of approximately 430 employees. We continually
monitor activity levels through a variety of metrics we use to
find efficiencies in the number of drivers, dispatchers,
managers, salespeople and corporate staff needed in the evolving
business environment. As a result, we may continue to reduce
headcount in areas where we believe we can find efficiencies
without reducing customer service and sales activity levels.
We believe these efforts, coupled with only nominal fleet
purchases and maintenance expense, will allow us to continue to
generate free cash flow in 2009 and pay down debt, which remains
a top corporate priority. Since the Mobile Storage Group
transaction, we have reduced borrowings under our
$900.0 million asset based revolving credit facility from
$604.0 million at June 27, 2008 to $554.5 million
at December 31, 2008, leaving us with $332.8 million
of unused borrowing capacity under our facility. Our senior
notes do not contain financial maintenance covenants and the
financial maintenance covenants under our revolving credit
facility are not applicable unless we fall below
$100.0 million in borrowing availability.
At the same time we are reducing costs, we are increasing our
internal efforts on sales growth to our core customers and have
refocused our efforts to gain business through government
projects at the federal, state and local levels. We are doing
this in part through increasing salesperson accountability
through our disciplined sales processes which we believe has
traditionally given us a significant competitive advantage.
General
In addition to our leasing business, we also sell portable
storage containers and occasionally sell mobile office units.
Our sales revenues as a percentage of total revenues represented
9.9% of revenues in 2008.
On June 27, 2008, we acquired the outstanding shares of
Mobile Storage Group through a merger of a wholly-owned
subsidiary of Mobile Mini into Mobile Storage Groups
ultimate parent, MSG WC Holdings Corp. Immediately thereafter,
each of MSG WC Holdings Corp. and two of its direct subsidiaries
merged with and into Mobile Mini and Mobile Storage Group became
a wholly-owned subsidiary of Mobile Mini. We refer to this
transaction as the Merger throughout this document.
The Merger was the largest acquisition we have completed and it
increased the scope of our operations in both the U.S. and
the U.K. Our consolidated statements of income for the reporting
period ended December 31, 2008, include certain estimated
expenses expected to be incurred related to integration of the
business acquired in the Merger and a restructuring charge
related to restructuring of our manufacturing operations as a
result of the Merger. See the Notes to Consolidated Financial
Statements included herein for additional information regarding
the Merger.
25
Prior to acquiring MSG, Mobile Mini grew through both organic
growth and smaller acquisitions, which we use to gain a presence
in new markets. Typically, we enter a new market through the
acquisition of the business of a smaller local competitor and
then apply our business model, which is usually much more
customer service and marketing focused than the business we are
buying or its competitors in the market. If we cannot find a
desirable acquisition opportunity in a market we wish to enter,
we establish a new location from the ground up. As a result, a
new branch location will typically have fairly low operating
margins during its early years, but as our marketing efforts
help us penetrate the new market and we increase the number of
units on rent at the new branch, we take advantage of operating
efficiencies to improve operating margins at the branch and
typically reach company average levels after several years. When
we enter a new market, we incur certain costs in developing an
infrastructure. For example, advertising and marketing costs
will be incurred and certain minimum levels of staffing and
delivery equipment will be put in place regardless of the new
markets revenue base. Once we have achieved revenues
during any period that are sufficient to cover our fixed
expenses, we generate high margins on incremental lease
revenues. Therefore, each additional unit rented in excess of
the break-even level, contributes significantly to
profitability. Conversely, additional fixed expenses that we
incur require us to achieve additional revenue as compared to
the prior period to cover the additional expense.
As a result of the Merger, we have been implementing our
business model across the newly acquired MSG branches. While we
have been able to realize significant cost reductions as a
result of the combination of two companies, there may yet be
inefficiencies or additional fixed costs that put pressure on
operating margins as we fully integrate the two companies.
Among the external factors we examine to determine the direction
of our business is the level of non-residential construction
activity. Customers in the construction industry represented
approximately 36% and 43% of our units on rent at
December 31, 2008 and 2007, respectively, and because of
the degree of operating leverage we have, increases or decreases
in non-residential construction activity can have a significant
effect on our operating margins and net income. In 2007, after
three years of very strong growth in non-residential
construction activity in the U.S, the growth rate in this sector
began to moderate and the level of our construction related
business began to slow down and then decline. This decline
continues to adversely affect our results of operations into
2009.
In managing our business, we focus on growing leasing revenues,
particularly in existing markets where we can take advantage of
the operating leverage inherent in our business model. Mobile
Minis goal is to maintain a stable growth rate.
We are a capital-intensive business, so in addition to focusing
on earnings per share, we focus on adjusted EBITDA to measure
our results. We calculate this number by first calculating
EBITDA, which we define as net income before interest expense,
debt restructuring or extinguishment expense, provision for
income taxes, depreciation and amortization. This measure
eliminates the effect of financing transactions that we enter
into and this measure provides us with a means to track
internally generated cash from which we can fund our interest
expense and our lease fleet growth. In comparing EBITDA from
year to year, we typically further adjust EBITDA to ignore the
effect of what we consider non-recurring events not related to
our core business operations to arrive at what we define as
adjusted EBITDA. Although not presented in this Annual Report
for 2008, adjusted EBITDA does not include the integration,
merger and restructuring expenses related to the MSG acquisition
and a goodwill impairment charge related to the U.K. and The
Netherlands.
In managing our business, we routinely compare our EBITDA
margins from year to year and based upon age of branch. As
capital is invested in our established branch locations, we
achieve higher EBITDA margins on that capital than we achieve on
capital invested to establish a new branch, because our fixed
costs are already in place in connection with the established
branches. The fixed costs are those associated with yard and
delivery equipment, as well as advertising, sales, marketing and
office expenses. With a new market or branch, we must first fund
and absorb the startup costs for setting up the new branch
facility, hiring and developing the management and sales team
and developing our marketing and advertising programs. A new
branch will have low EBITDA margins in its early years until the
number of units on rent increases. Because of our high operating
margins on incremental lease revenue, which we realize on a
branch by branch basis when the branch achieves leasing revenues
sufficient to cover the branchs fixed costs, leasing
revenues in excess of the break-even amount produce large
increases in
26
profitability. Conversely, absent significant growth in leasing
revenues, the EBITDA margin at a branch will remain relatively
flat on a period by period comparative basis.
Because EBITDA and EBITDA margin are non-GAAP financial
measures, as defined by the SEC, we include in this Annual
Report reconciliations of EBITDA to the most directly comparable
financial measures calculated and presented in accordance with
accounting principles generally accepted in the U.S. These
reconciliations are included in Item 6, Selected
Financial Data.
Accounting
and Operating Overview
Our leasing revenues include all rent and ancillary revenues we
receive for our portable storage, combination storage/office and
mobile office units. Our sales revenues include sales of these
units to customers. Our other revenues consist principally of
charges for the delivery of the units we sell. Our principal
operating expenses are: (1) cost of sales;
(2) leasing, selling and general expenses; and
(3) depreciation and amortization, primarily depreciation
of the portable storage units and mobile offices in our lease
fleet. Cost of sales is the cost of the units that we sold
during the reported period and includes both our cost to buy,
transport, remanufacture and modify used ocean-going containers
and our cost to manufacture portable storage units and other
structures. Leasing, selling and general expenses include among
other expenses, advertising and other marketing expenses, real
property lease expenses, commissions, repair and maintenance
costs of our lease fleet and transportation equipment and
corporate expenses for both our leasing and sales activities.
Annual repair and maintenance expenses on our leased units over
the last three years have averaged approximately 4.0% of lease
revenues and are included in leasing, selling and general
expenses. We expense our normal repair and maintenance costs as
incurred (including the cost of periodically repainting units).
Our principal asset is our lease fleet, which has historically
maintained value close to its original cost. The steel units in
our lease fleet (other than van trailers) are depreciated on the
straight-line method using an estimated useful life of
25 years, after the date the unit is placed in service,
with an estimated residual value of 62.5%. The depreciation
policy is supported by our historical lease fleet data which
shows that we have been able to obtain comparable rental rates
and sales prices irrespective of the age of our container lease
fleet. Our wood mobile office units are depreciated over
20 years to 50% of original cost. Van trailers, which
constitute a small part of our fleet, are depreciated over
7 years to a 20% residual value. Van trailers, which are
only added to the fleet as a result of acquisitions of portable
storage businesses, are of much lower quality than storage
containers and consequently depreciate more rapidly. We also
have other non-core products that are added to our fleet as a
result of acquisitions that have various other measures of
useful lives and residual values. See Item 1.
Business Product Lives and Durability.
During the last five years, our annual utilization levels
averaged 80.2%, and ranged from a low of 75.0% in 2008 to a high
of 82.9% in 2005. Our utilization level averaged 75.0% during
2008. Since 1996, we have increased our total lease fleet from
13,600 units to approximately 273,700 units,
representing a CAGR of 28.4%.
27
Results
of Operations
The following table shows the percentage of total revenues
represented by the key items that make up our statements of
income; certain amounts may not add due to rounding:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
2004
|
|
|
2005
|
|
|
2006
|
|
|
2007
|
|
|
2008
|
|
|
Revenues:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Leasing
|
|
|
89.0
|
%
|
|
|
91.0
|
%
|
|
|
89.7
|
%
|
|
|
89.4
|
%
|
|
|
89.5
|
%
|
Sales
|
|
|
10.7
|
|
|
|
8.5
|
|
|
|
9.8
|
|
|
|
9.9
|
|
|
|
9.9
|
|
Other
|
|
|
0.3
|
|
|
|
0.5
|
|
|
|
0.5
|
|
|
|
0.7
|
|
|
|
0.6
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenues
|
|
|
100.0
|
|
|
|
100.0
|
|
|
|
100.0
|
|
|
|
100.0
|
|
|
|
100.0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Costs and expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of sales
|
|
|
6.7
|
|
|
|
5.2
|
|
|
|
6.3
|
|
|
|
6.8
|
|
|
|
6.8
|
|
Leasing, selling and general expenses
|
|
|
53.9
|
|
|
|
52.8
|
|
|
|
51.2
|
|
|
|
52.5
|
|
|
|
51.1
|
|
Integration, merger and restructuring expense
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5.9
|
|
Goodwill impairment
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3.3
|
|
Depreciation and amortization
|
|
|
6.8
|
|
|
|
6.2
|
|
|
|
6.1
|
|
|
|
6.6
|
|
|
|
7.6
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total costs and expenses
|
|
|
67.4
|
|
|
|
64.2
|
|
|
|
63.6
|
|
|
|
65.9
|
|
|
|
74.7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from operations
|
|
|
32.6
|
|
|
|
35.8
|
|
|
|
36.4
|
|
|
|
34.1
|
|
|
|
25.3
|
|
Other income (expense):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest income
|
|
|
|
|
|
|
|
|
|
|
0.2
|
|
|
|
|
|
|
|
|
|
Other income
|
|
|
|
|
|
|
1.6
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense
|
|
|
(12.1
|
)
|
|
|
(11.2
|
)
|
|
|
(8.7
|
)
|
|
|
(7.8
|
)
|
|
|
(11.6
|
)
|
Debt extinguishment expense
|
|
|
|
|
|
|
|
|
|
|
(2.4
|
)
|
|
|
(3.5
|
)
|
|
|
|
|
Foreign currency exchange gains (loss)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before provision for income taxes
|
|
|
20.5
|
|
|
|
26.2
|
|
|
|
25.5
|
|
|
|
22.8
|
|
|
|
13.7
|
|
Provision for income taxes
|
|
|
8.2
|
|
|
|
9.8
|
|
|
|
9.9
|
|
|
|
8.9
|
|
|
|
6.7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
|
12.3
|
%
|
|
|
16.4
|
%
|
|
|
15.6
|
%
|
|
|
13.9
|
%
|
|
|
7.0
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Twelve
Months Ended December 31, 2008 Compared to Twelve Months
Ended December 31, 2007
Total revenues in 2008 increased $97.1 million, or 30.5%,
to $415.4 million from $318.3 million in 2007.
Leasing, our primary revenue focus, accounted for approximately
89.5% of total revenues during 2008. Leasing revenues in 2008
increased $86.9 million, or 30.5%, to $371.5 million
from $284.6 million in 2007. This increase in revenues
resulted from a 32.0% increase in the average number of units on
lease, offset by a 1.5% decrease due to unfavorable foreign
currency exchange rates and virtually no change in average
rental yield per unit (price). In 2008, our leasing revenue
growth rate was 30.5% as compared to 16.1% in 2007. The
increased growth rate in 2008 is due to the Merger. This was
offset in part by a reduction in business activity in 2008 from
its 2007 level due to a decline in non-residential construction
activity and the economic recession. Our leasing revenue growth
rate in 2008 over the same period in the prior year was 6.0%,
3.5%, 61.3%, and 47.3% for the first, second, third and fourth
quarters, respectively. Our leasing revenues would have declined
in the third and fourth quarters of 2008 without the MSG Merger.
As a result of the Merger, we added 29 new branches in 2008 (18
branches in the U.S. and 11 in the U.K.). We also completed
four smaller acquisitions in 2008, three where we combined
acquired businesses in cities in which we already had existing
operations and one in Hartford, Connecticut. Our sales of units
accounted for 9.9% of total revenues in both 2008 and 2007. Our
revenues from the sale of units increased $9.7 million, or
30.4%, to $41.3 million in 2008 from $31.6 million in
2007. This increase is related to the higher level of sales
activity at our newer locations both in the U.S. and in the
U.K. attributable to locations added as a result of the MSG
Merger. Other revenues, primarily related to our sales business
and principally arising from transportation charges for the
delivery
28
of units sold and the sale of ancillary products, represented
approximately 0.6% of total revenues in 2008 and 0.7% in 2007.
Cost of sales are the costs related to our sales revenue only.
Cost of sales as a percentage of sales revenue decreased
slightly to 68.0% in 2008 from 68.4% in 2007.
Leasing, selling and general expenses increased
$45.3 million, or 27.2%, to $212.3 million in 2008
from $167.0 million in 2007. Leasing, selling and general
expenses, as a percentage of total revenues, were 51.1% and
52.5% in 2008 and 2007, respectively. This decrease as a
percentage of revenues is due to the operating leverage
associated with our leasing activities and in part, due to cost
saving synergies related to the Merger that we realized during
the last two quarters of 2008. The increase in 2008 of
$45.3 million is primarily the result of the Merger, as the
majority of our leasing, selling and general expenses increase
occurred during the third and fourth quarters. In 2007, our
expenses included the costs associated with developing
infrastructure to support our Europe operations as a result of
implementing our leasing business model for the operations we
acquired in 2006. These fixed costs, for the most part,
continued into 2008. Included in leasing, selling and general
expense is approximately $5.1 million and $4.0 million
in 2008 and 2007, respectively, of expenses related to
share-based compensation in accordance with
SFAS No. 123(R). The major increases in leasing,
selling and general expenses for 2008 were: (1) payroll and
related payroll costs, which increased by $22.0 million
primarily in connection with the additional locations such as
staffing for branch managers, sales and office personnel and
yard personnel, including drivers, fork lift operators and
dispatchers; (2) delivery and freight costs, including
fuel, which increased $10.0 million related to picking up
and delivery of containers, including the additional trucks we
added at the new locations; and (3) building and land lease
costs for our locations, which increased $2.5 million,
including the assumption of leases utilized by the locations
added in the Merger and contractual rate increases at existing
and new locations. The increased delivery and freight costs
includes the higher cost of fuel, primarily during the first
three quarters of 2008, and for more third-party vendors which
were used for the delivery of our units, mainly wood modular
offices. Part of the increased costs was passed to our customers
in the form of higher trucking rates.
Integration, merger and restructuring expenses in 2008 represent
estimated costs for exiting targeted Mobile Mini branch
operations that overlapped with Mobile Storage Groups
properties, repositioning and relocating assets to their
intended location, and other costs associated with personnel and
office expenses associated with the integration of the
companies. Also included in this expense is our estimated cost
for restructuring our manufacturing operations and includes
severance, related benefit costs and asset impairment charges
for the disposal of manufacturing equipment and inventories that
will not be used in the restructured environment.
Goodwill impairment in 2008 represents a non-cash charge for a
portion of our goodwill related to our U.K. and The Netherlands
operations as more fully described in the Notes to Consolidated
Financial Statements included in Item 8 in this report.
EBITDA increased $7.1 million, or 5.5%, to
$137.0 million in 2008 from $129.9 million in 2007.
EBITDA in 2008 includes integration, merger and restructuring
expenses of $24.4 million and a charge for goodwill
impairment of $13.7 million, both as described above.
Depreciation and amortization expenses increased
$10.6 million, or 50.2%, to $31.8 million in 2008 from
$21.1 million in 2007. The higher depreciation expense is
primarily due to the increase in our lease fleet over the prior
year including the depreciation of units acquired through
acquisitions. It also includes the lease fleet of additional
wood modular offices which have a higher depreciation rate than
our steel units. Also, in 2007 and 2008, depreciation expense
includes the related depreciation on the additions to property,
plant and equipment, primarily trucks, forklifts and trailers,
to support the lease fleet, and the customized ERP system to
enhance our reporting environment. In 2008, depreciation and
amortization expense includes the amortization of customer
relationships and trade name valuation that were associated with
the MSG Merger. Since December 31, 2007, our lease fleet
cost basis for depreciation increased by $292.2 million.
See Critical Accounting Policies, Estimates and
Judgments within this Item 7.
Interest expense increased $23.2 million, or 93.3%, to
$48.1 million in 2008 from $24.9 million in 2007. This
increase is primarily due to the $540.9 million of debt we
assumed in the Merger. Although we assumed Mobile Storages
$200.0 million of 9.75% senior notes and the interest
rate spread under our revolving credit facility
29
increased from LIBOR + 1.25% to LIBOR + 2.50%, our average
borrowing rate declined slightly in 2008, due to lower
prevailing LIBOR rates. The monthly weighted average interest
rate on our debt was 6.8% for 2008 compared to 7.0% for 2007,
excluding amortization of debt issuance costs. Taking into
account the amortization of debt issuance costs, the monthly
weighted average interest rate was 7.2% in 2008 and 7.3% in 2007.
Debt extinguishment expense for 2007 resulted from the write-off
of the remaining unamortized deferred loan costs and the
redemption premium on $97.5 million aggregate principal
amount of outstanding 9.5% Senior Notes redeemed in the
second quarter of 2007.
Provision for income taxes was based on an annual effective tax
rate of 49.1% for 2008 as compared to an annual effective tax
rate of 39.1% for 2007. Our 2008 consolidated tax provision
includes the expected tax rates for our operations in the U.S.,
Canada, U.K. and The Netherlands. At December 31, 2008, we
had a federal net operating loss carryforward of approximately
$206.1 million, which expires if unused from 2017 to 2028.
In addition, we had net operating loss carryforwards in the
various states in which we operate. We believe, based on
internal projections, that we will generate sufficient taxable
income needed to realize the corresponding federal and state
deferred tax assets to the extent they are recorded as deferred
tax assets in our balance sheet.
Net income in 2008 was $29.0 million, as compared to
$44.2 million in 2007. Our 2008 net income results
were primarily achieved by our 30.5% increase in revenues and
the operating leverage associated with this growth and synergies
achieved in the last six months of 2008 as a result of the
Merger. The 2008 year was negatively affected by the
$24.4 million ($15.3 million after tax), charge
related to the integration, merger and restructuring expense in
addition to $13.7 million after tax charge for goodwill
impairment. In 2007, net income was unfavorably affected by the
$11.2 million, ($6.9 million after tax) charge for
debt extinguishment expense related to the redemption of our
then outstanding 9.5% Senior Notes.
Twelve
Months Ended December 31, 2007 Compared to Twelve Months
Ended December 31, 2006
Total revenues in 2007 increased $44.9 million, or 16.4%,
to $318.3 million from $273.4 million in 2006.
Leasing, our primary focus, accounted for approximately 89.4% of
total revenues during 2007. Leasing revenues in 2007 increased
$39.5 million, or 16.1%, to $284.6 million from
$245.1 million in 2006. This increase resulted from a 5.2%
increase in the average rental yield per unit, a 10.4% increase
in the average number of units on lease and 0.5% increase due to
favorable exchange rates, in each case as compared to the same
period in 2006. The increase in revenues resulted from an
increase in average rental rates over the prior year, an
increase in revenue for ancillary rental services, such as
delivery charges and continued change in the mix of units being
added to our fleet. We have added more premium containers and
portable wood offices to the lease fleet in recent periods for
which we obtain higher rental rates than basic storage units.
The mobile offices we have added to our lease fleet in recent
quarters have on average been larger units that command higher
rents. These higher lease rates were partially offset by lower
rental rates on units added through acquisitions that continue
on lease, including Europe, which on the average are smaller,
were not remanufactured and were primarily storage containers
rather than mobile offices. In 2007, our leasing revenue growth
rate was 16.1% as compared to 30.0% in 2006. The leasing revenue
growth rate during the four quarters of 2007 was 28.2%, 18.6%,
12.8% and 8.2%, respectively. The fourth quarter growth rate was
negatively impacted by several factors, including the general
slowdown in non-residential construction during the second half
of 2007 and a planned significant reduction in our seasonal
storage business compared to 2006 levels. We opened four new
branches in 2007: two new locations in the U.S. and two in
Canada. We also completed another acquisition in 2007 in which
we consolidated the acquired business operations into our
existing Pensacola, Florida operations. Our sales of units
accounted for 9.9% in 2007 and 9.8% in 2006, of our total
revenues. Other revenues, primarily related to our sales
business and principally arising from transportation charges for
the delivery of units sold and the sale of ancillary products
represented 0.7% of total revenues in 2007 and 0.5% in 2006. Our
revenues from the sale of units increased $4.8 million, or
18.0%, to $31.6 million in 2007 from $26.8 million in
2006. This increase is primarily related to the higher level of
sales activity at our newer locations both in the U.S. and
especially in Europe which only had eight months reported in
2006.
Cost of sales are the costs related to our sales revenue only.
Cost of sales as a percentage of sales revenue increased to
68.4% in 2007 from 64.1% in 2006. The decrease in the
2007 gross margin results in large part from the
30
additional sales associated with our European operations where
many of our units are sold at wholesale and sales margins tend
to be lower than in the U.S.
Leasing, selling and general expenses increased
$27.1 million, or 19.4%, to $167.0 million in 2007
from $139.9 million in 2006. Leasing, selling and general
expenses, as a percentage of total revenues, were 52.5% and
51.2% in 2007 and 2006, respectively. In 2007, our margins were
affected by the costs associated with developing infrastructure
to support our U.K. operations, higher delivery and freight
costs, employee stock-based compensation expense, higher fleet
repair and maintenance expense, and expenses that vary in
relation to revenue growth. We generally anticipate that a new
branch will first achieve a positive operating margin after
approximately 12 months of operations. In the U.K., this
ramp up was more pronounced than our historical experience,
because the operating model of our predecessor featured
outsourced storage yards and third-party delivery equipment.
Consequently we needed to acquire properties from which to
operate our branches, delivery equipment with which to operate
our business, and sales employees to drive demand for our
products. During 2007, delivery and freight costs, including
fuel, increased by $4.4 million over 2006, as fuel prices
increased and we used more third-party vendors for the
transportation of our units, particularly our modular office
units (increased costs were passed on to customers in the form
of higher delivery and
pick-up
charges). Included in leasing, selling and general expense is
approximately $4.0 million and $3.1 million in 2007
and 2006, respectively, of expenses related to share-based
compensation in accordance with SFAS No. 123(R), which
became effective for us on January 1, 2006. In addition,
the other major increases in leasing, selling and general
expenses for 2007 were: (1) repairs on our lease fleet,
including costs related to our office units, increased by
$5.0 million due to costs associated with repairing
hurricane damaged units and a larger number of mobile offices
maintaining our higher overall utilization and repairs and
maintenance of delivery and other equipment increased by
$1.3 million principally as a result of our preventative
maintenance programs and general repairs associated with
servicing a larger lease fleet and (2) payroll and related
expenses increased by $10.0 million and included increased
commissions paid on increased revenues as well as general wage
increases.
EBITDA increased $13.1 million, or 11.2%, to
$129.9 million in 2007 from $116.8 million in 2006.
Depreciation and amortization expenses increased
$4.4 million, or 26.3%, to $21.1 million in 2007 from
$16.7 million in 2006. The higher depreciation expense is
primarily due to the growth in our lease fleet over the prior
year to meet increased demand of our products and included the
depreciation of units acquired through acquisitions in both 2006
and 2007. It also includes the depreciation expenses associated
with the portable storage units added to the lease fleet during
2007 and the inclusion in the lease fleet of additional wood
modular offices which have a higher depreciation rate than our
steel units. Also, in 2006 and 2007, depreciation expense
includes the related depreciation on the additions to property,
plant and equipment, primarily trucks, forklifts and trailers,
to support the lease fleet growth, and the customized Enterprise
Resource Planning system to enhance our reporting environment.
This increase in our lease fleet enabled us to achieve our
higher lease revenues. Since December 31, 2006, our lease
fleet cost basis for depreciation increased by
$118.5 million. See Critical Accounting Policies,
Estimates and Judgments within this Item 7.
Interest expense increased $1.2 million, or 5.2%, to
$24.9 million in 2007 from $23.7 million in 2006. Our
monthly weighted average debt outstanding during 2007, compared
to 2006, increased 14.2% while our average borrowing rate
declined slightly in 2007, compared to the prior year level. In
2007, we redeemed $97.5 million of our 9.5% Senior
Notes and issued $150.0 million of 6.875% Senior
Notes, that were issued at 99.548% of par. In 2006, we paid down
$52.5 million of our higher interest rate 9.5% Senior
Notes. During 2007, we invested $110.6 million in net
additions to our lease fleet and $9.7 million in
acquisitions. These additions were funded through cash flow from
operations and additional borrowings. The monthly weighted
average interest rate on our debt was 7.0% for 2007 compared to
7.6% for 2006, excluding amortization of debt issuance costs.
Taking into account the amortization of debt issuance costs, the
monthly weighted average interest rate was 7.3% in 2007 and 7.9%
in 2006. Our weighted average interest rate is lower, in part,
because we redeemed our higher interest rate 9.5% Senior
Notes in May 2007. See Liquidity and Capital
Resources within this Item 7.
Debt extinguishment expense for the 2007 period resulted from
the write-off of the remaining unamortized deferred loan costs
and the redemption premium on $97.5 million aggregate
principal amount of outstanding 9.5% Senior Notes redeemed
in the second quarter of 2007. For the 2006 period, this expense
represents the portion
31
of deferred loan costs and the redemption premium on
$52.5 million aggregate principal amount of the
9.5% Senior Notes redeemed in May 2006.
Provision for income taxes was based on an annual effective tax
rate of 39.1% for 2007 as compared to an annual effective tax
rate of 38.8% for 2006. Our 2007 consolidated tax provision
includes the expected tax rates for our operations in the U.S.,
Canada, U.K. and The Netherlands. The 2006 tax provision
includes a $0.3 million tax benefit due to the recognition
of certain state net operating loss carryforwards that were
previously scheduled to expire in 2006. At December 31,
2007, we had a federal net operating loss carryforward of
approximately $78.2 million, which expires if unused from
2018 to 2027. In addition, we had net operating loss
carryforwards in the various states in which we operate. We
believe, based on internal projections, that we will generate
sufficient taxable income needed to realize the corresponding
federal and state deferred tax assets to the extent they are
recorded as deferred tax assets in our balance sheet.
Net income in 2007 was $44.2 million, as compared to
$42.8 million in 2006. Our 2007 net income results
were primarily achieved by our 16.4% increase in revenues and
the operating leverage associated with this growth. These
increases were partially offset by the $11.2 million,
($6.9 million after tax), charge for debt extinguishment
expense related to the redemption of our outstanding
9.5% Senior Notes. Our 2006 net income was partially
offset by the $6.4 million ($3.9 million after tax);
tax debt extinguishment expenses related to the partial
redemption of our 9.5% Senor Notes and includes a
$0.3 million tax benefit due to the expected recognition of
certain state net operating loss carryforwards.
Liquidity
and Capital Resources
Liquidity
Summary
Leasing is a capital-intensive business that requires us to
acquire assets before they generate revenues, cash flow and
earnings. The assets which we lease have very long useful lives
and require relatively little recurrent maintenance
expenditures. Most of the capital we deploy into our leasing
business historically has been used to expand our operations
geographically, to increase the number of units available for
lease at our leasing locations, and to add to the mix of
products we offer. During recent years, our operations have
generated annual cash flow that exceeds our pre-tax earnings,
particularly due to the deferral of income taxes caused by
accelerated depreciation that is used for tax accounting. In
2008, we were cash flow positive (after capital expenditures but
excluding acquisitions) for the first time in our operating
history.
During the past three years, our capital expenditures and
acquisitions have been funded by our operating cash flow, our
offering of shares of our common stock in March 2006 which
provided us approximately $120.3 million of net proceeds,
our May 2007 offering of Senior Notes which provided us
approximately $146.3 million of net proceeds, and through
borrowings under our revolving credit facility. Our operating
cash flow is generally weakest during the first quarter of each
fiscal year, when customers who leased containers for holiday
storage return the units. During 2008, we cut back significantly
on our capital expenditures and were able to fund the growth of
our lease fleet and fixed assets required to support our
operations with cash provided by operating activities. We expect
this trend to continue in 2009. In addition to cash flow
generated by operations, our principal current source of
liquidity is our revolving credit facility described below.
Revolving Credit Facility. In connection with
the Merger, we expanded our revolving credit facility to
increase our borrowing limit and to include the combined assets
of both Mobile Mini and Mobile Storage Group as security for the
facility.
On June 27, 2008, we entered into an ABL Credit Agreement
(the Credit Agreement) with Deutsche Bank AG New York Branch and
the other lenders party thereto. The Credit Agreement provides
for a $900.0 million revolving credit facility. All amounts
outstanding under the Credit Agreement are due on June 27,
2013. Amounts borrowed under the Credit Agreement and repaid or
prepaid during the term may be reborrowed. 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. As of December 31, 2008, borrowings outstanding
under our credit facility were approximately $554.5 million
and we had $332.8 million of additional borrowing
availability under the Credit Agreement, based upon borrowing
base calculations as of such date. Under the terms of the Credit
Agreement, we were in compliance
32
with all the covenants as of December 31, 2008. See
Financing Activities below for
more information abut our revolving credit facility.
Operating Activities. Our operations provided
net cash flow of $98.5 million in 2008 as compared to
$91.3 million in 2007 and $76.9 million in 2006. The
$7.2 million increase in 2008 over 2007 in cash provided by
operating activities, included a increase of $10.6 million
related to depreciation and amortization, $13.7 million for
non-cash goodwill impairment charges, a $5.6 million
non-cash expense for the restructuring of our manufacturing
operations and an increase of $3.4 million for provisions
for doubtful accounts partially offset by pre-tax income
decrease of $15.5 million. Additionally, in 2008, there
were decreases in both inventories and deposits and prepaid
expenses providing positive cash flows which were offset by
decreases in accounts payable and accrued liabilities. These
were all primarily a result of the Merger and the decrease in
purchases of inventories due to the restructuring of our
manufacturing operations in late 2008. In 2007, cash provided by
operating activities was negatively affected by debt
restructuring expense which included a $8.9 million premium
paid in connection with redeeming $97.5 million of our
9.5% Senior Notes. In 2007, cash provided by operating
activities was negatively impacted by increases in accounts
receivable which was due to the general growth in our leasing
activities by an increase in our sales activity related to our
newly acquired European operations, and by an increase in
deposits and prepaid expenses. Cash provided by operating
activities is enhanced by the deferral of most income taxes due
to the rapid tax depreciation rate of our assets and our federal
and state net operating loss carryforwards. At December 31,
2008, we had a federal net operating loss carryforward of
approximately $206.1 million and a net deferred tax
liability of $134.8 million.
Investing Activities. Net cash used in
investing activities was $97.9 million in 2008,
$138.7 million in 2007 and $192.8 million in 2006. In
2008, $33.3 million of cash was paid for acquisition of
businesses, compared to $9.7 million in 2007 and
$59.5 million in 2006. Capital expenditures for our lease
fleet, net of proceeds from sale of lease fleet units, were
$48.3 million in 2008, $110.6 million in 2007 and
$122.6 million in 2006. Our net capital expenditures for
our lease fleet decreased almost 56% in 2008, as we were able to
obtain most of the units we needed to support our growth through
the transaction with MSG and we required fewer units due to
decreased demand as a result of the economic slow down.
Additions to the lease fleet included remanufacturing of prior
acquisition units and manufactured or purchased steel and wood
offices. During the past several years we have increased the
customization of our fleet, enabling us to differentiate our
product from our competitors product, and we have
complimented our lease fleet by adding wood mobile offices. At
the end of 2008, we restructured our manufacturing operations to
right-size our future manufacturing requirements considering the
large lease fleet we acquired in the MSG transaction. With the
current economic conditions, we anticipate our near term
investing activities will be primarily focused on
remanufacturing units acquired in acquisitions to meet our lease
fleet standards as these units are placed on-rent. Capital
expenditures for property, plant and equipment, net of proceeds
from any sale of property, plant and equipment, were
$16.4 million in 2008, $18.4 million in 2007 and
$10.7 million in 2006. Expenditures for property, plant and
equipment in 2008 were primarily for technology and
communication improvements for our telephone and computer
systems and for delivery equipment at new locations acquired
through the Merger. The amount of cash that we use during any
period in investing activities is almost entirely within
managements discretion. We have no contracts or other
arrangements pursuant to which we are required to purchase a
fixed or minimum amount of goods or services in connection with
any portion of our business. Maintenance capital expenditures is
the cost to replace old forklifts, trucks and trailers that we
use to move and deliver our products to our customers, and for
enhancements to our computer information and communication
systems. Our maintenance capital expenditures were approximately
$3.0 million in 2008, primarily upgrades and improvements
to our communication equipment, $0.8 million in both 2007
and 2006.
Financing Activities. Net cash used in
financing activities was $6.7 million in 2008 and net cash
provided by financing activities was $48.4 million in 2007
and $117.0 million in 2006. In 2008, we increased our
borrowings under our revolving credit facility by
$316.7 million which we used primarily to fund the Merger,
as well as other related expenses and costs associated with our
credit agreement. In connection with the Merger we also assumed
debt obligations, some requiring monthly installment payments.
In 2007, we redeemed $97.5 million principal amount of
outstanding 9.5% Senior Notes and completed an offering of
$150.0 million principal amount 6.875% Senior Notes.
Also in 2007, under a common stock repurchase program, we
redeemed $39.3 million of our outstanding shares.
Additionally, we received $1.1 million, $5.6 million
and $5.1 million from the exercises
33
of employee stock options and the related tax benefits in 2008,
2007 and 2006, respectively. As of December 31, 2008, we
had $554.5 million of borrowings outstanding under our
revolving credit facility, and approximately $332.8 million
of additional borrowings were available to us under the facility.
Outstanding amounts under our Credit Agreement bear interest at
our option at either (i) LIBOR plus a defined margin, or
(ii) the Agent lender banks prime rate plus a margin.
LIBOR loans will initially bear interest at LIBOR plus 2.5% and
prime rate loans will initially bear interest at the Agent
lender banks prime rate plus 1.0%. After the quarter ended
June 30, 2009, the applicable margins for each type of loan
will range from 2.25% to 2.75% for LIBOR loans and 0.75% to
1.25% for prime rate loans depending upon our debt ratio at the
measurement date.
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
(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. At
December 31, 2008, we had $332.8 million in additional
borrowing availability under the Credit Agreement.
The Credit Agreement provides for U.K. borrowings, denominated
in either Pounds Sterling or Euros, by our subsidiary Mobile
Mini U.K. Limited based upon a U.K. borrowing base, and our
U.S. borrowings, denominated in Dollars, are based upon a
U.S. and Canada borrowing base.
The Credit Agreement does contain certain financial maintenance
covenants, but these maintenance covenants are not applicable
unless we have less than $100.0 million in borrowing
availability under the facility. At December 31, 2008, we
had approximately $332.8 million of availability.
The Credit Agreement also contains customary negative covenants
applicable to us and our subsidiaries, including covenants that
restrict their ability to, among other things, (i) make
capital expenditures in excess of defined limits,
(ii) allow certain liens to attach to us or our subsidiary
assets, (iii) repurchase or pay dividends or make certain
other restricted payments on capital stock and certain other
securities, or prepay certain indebtedness, (iv) incur
additional indebtedness or engage in certain other types of
financing transactions, and (v) make acquisitions or other
investments. We were in compliance with these covenants as of
December 31, 2008.
In connection with the Merger, we paid down the outstanding
balances of our and Mobile Storage Groups then-existing
revolving credit facilities. We financed these pay-downs through
a borrowing at closing under the ABL Credit Agreement.
We evaluated the expansion of our own revolving credit facility
under the provisions of
EITF 98-14,
Debtors Accounting for Changes in Line-of-Credit or
Revolving-Debt Arrangements, and as the new borrowing
capacity under the Credit Agreement exceeds that under our
original revolving credit facility, unamortized deferred
financing costs have been added to the costs incurred as part of
the Credit Agreement.
We believe we have sufficient borrowings available under our
revolving credit facility to provide for our normal capital
needs for the next 12 months. We monitor the financial
strength of our lenders on an on-going basis using
publicly-available information. Based upon that information, we
do not presently think that there is a likelihood that any of
our lenders might not be able to honor its commitments under the
Credit Agreement.
Preferred Stock. On June 27, 2008, as
part of the consideration for the acquisition of Mobile Storage
Group, we issued 8.6 million shares of our Series A
Convertible Redeemable Participating Preferred Stock to the
former stockholders of Mobile Storage Group. The shares were
determined to have an initial fair value of $196.6 million
based upon a third party valuation. The shares have a
liquidation preference of $154.0 million.
The preferred stock is convertible into 8.6 million shares
of our common stock at any time at the option of the holders,
representing an initial conversion price of $18.00 per common
share. The preferred stock will be mandatorily convertible into
our common stock if, after the first anniversary of the issuance
of the preferred stock, our common stock trades above $23.00 per
share for a period of 30 consecutive days.
The preferred stock votes with Mobile Minis common stock
as a single class. It ranks senior to the common stock only with
respect to a distribution upon the occurrence of the bankruptcy,
liquidation, dissolution or winding up of Mobile Mini. Holders
of a majority of the shares of preferred stock, may require us
to redeem all of the
34
outstanding preferred stock (i) if we enter into a binding
agreement in respect of a sale of the company (as defined in the
Certificate of Designation for the preferred stock) at a sale
price of less than $23.00 per share or (ii) at any time
after the tenth anniversary of the preferred stock issuance
date. If such majority holders do not exercise their redemption
rights following either of these events, we may, at our option,
redeem the preferred stock.
The preferred stock will not have any cash or
payment-in-kind
dividends (unless and until a dividend is paid with respect to
the common stock, in which case dividends will be paid on an
equal basis with the common stock, on an as-converted basis) and
does not impose any financial covenants upon us.
Hedging Activities. At December 31, 2008,
we had eight interest rate swap agreements in place to fix
interest rates paid on a total of $200.0 million of our
outstanding debt. We entered into interest rate swap agreements
that effectively fixed the interest rate so that the rate is
payable based upon a spread from fixed rates, rather than a
spread from the LIBOR rate. At December 31, 2008,
$552.7 million of our outstanding indebtedness bears
interest at fixed rates (or the rate is effectively fixed due to
a swap agreement), and approximately $354.5 million of
borrowings under our credit facility are variable rate.
Accounting for these swap agreements is covered by Statement of
Financial Accounting Standard (SFAS) No. 133.
Contractual
Obligations and Commitments
Our contractual obligations primarily consist of our outstanding
balance under our revolving credit facility and
$350.0 million of Senior Notes, together with other,
primarily unsecured notes payable obligations, and obligations
under capital leases. We also have operating lease commitments
for: (1) real estate properties for the majority of our
branches with remaining lease terms typically ranging from 1 to
11 years; (2) delivery, transportation and yard
equipment, typically under a five-year lease with purchase
options at the end of the lease term at a stated or fair market
value price; and (3) forklifts and office related equipment.
At December 31, 2008, primarily in connection with the
issuance of our insurance policies, we provided certain
insurance carriers and others with approximately
$12.7 million in letters of credit.
We currently do not have any obligations under purchase
agreements or commitments. Historically, we enter into
capitalized lease obligations from time to time to purchase
delivery, transportation and yard equipment and currently, as a
result of the Merger, have commitments for $5.5 million in
capital lease obligations.
35
The table below provides a summary of our contractual
commitments as of December 31, 2008. The operating lease
amounts include certain real estate leases that expire in 2009,
but have lease renewal options that we currently anticipate to
exercise in 2009 at the end of the initial lease period.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Payments Due by Period
|
|
|
|
|
|
|
Less Than
|
|
|
|
|
|
|
|
|
More Than
|
|
|
|
Total
|
|
|
1 Year
|
|
|
1-3 Years
|
|
|
3-5 Years
|
|
|
5 Years
|
|
|
|
(In thousands)
|
|
|
Revolving credit facility
|
|
$
|
554,532
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
554,532
|
|
|
$
|
|
|
Scheduled interest payment obligations under our revolving
credit facility(1)
|
|
|
54,895
|
|
|
|
16,397
|
|
|
|
32,793
|
|
|
|
5,705
|
|
|
|
|
|
Senior Notes
|
|
|
350,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
350,000
|
|
Scheduled interest payment obligations under our Senior Notes(2)
|
|
|
194,346
|
|
|
|
29,813
|
|
|
|
59,626
|
|
|
|
59,626
|
|
|
|
45,281
|
|
Other long-term debt (insurance financing)
|
|
|
1,026
|
|
|
|
1,026
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Scheduled interest payment obligations under our long-term
debt(2)
|
|
|
21
|
|
|
|
21
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Notes payable
|
|
|
354
|
|
|
|
184
|
|
|
|
170
|
|
|
|
|
|
|
|
|
|
Scheduled interest payment obligations under our notes payable(2)
|
|
|
5
|
|
|
|
4
|
|
|
|
1
|
|
|
|
|
|
|
|
|
|
Obligations under capital leases
|
|
|
5,497
|
|
|
|
1,436
|
|
|
|
2,772
|
|
|
|
1,133
|
|
|
|
156
|
|
Scheduled interest payment obligations under our capital
leases(3)
|
|
|
857
|
|
|
|
365
|
|
|
|
398
|
|
|
|
90
|
|
|
|
4
|
|
Operating leases(4)
|
|
|
73,317
|
|
|
|
16,789
|
|
|
|
24,927
|
|
|
|
15,842
|
|
|
|
15,759
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total contractual obligations
|
|
$
|
1,234,850
|
|
|
$
|
66,035
|
|
|
$
|
120,687
|
|
|
$
|
636,928
|
|
|
$
|
411,200
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Scheduled interest rate obligations under our revolving credit
facility were calculated using our weighted average rate of 3.0%
at December 31, 2008. Our revolving credit facility is
subject to a variable rate of interest. The weighted average
interest rate is inclusive of our fixed rates swap agreements. |
|
(2) |
|
Scheduled interest rate obligations under our Senior Notes and
other long-term debt were calculated using stated rates. |
|
(3) |
|
Scheduled interest rate obligations under capital leases were
calculated using imputed rates ranging from 5.6% to 8.5%. |
|
(4) |
|
Operating lease obligations include operating commitments and
restructuring related commitments and are net of sub-lease
income. For further discussion see Note 12 to our Consolidated
Financial Statements. |
Off-Balance
Sheet Transactions
Mobile Mini does not maintain any off-balance sheet
transactions, arrangements, obligations or other relationships
with unconsolidated entities or others that are reasonably
likely to have a material current or future effect on Mobile
Minis financial condition, changes in financial condition,
revenues or expenses, results of operations, liquidity, capital
expenditures or capital resources.
Seasonality
Demand from some of our customers is somewhat seasonal. Demand
for leases of our portable storage units by large retailers is
stronger from September through December because these retailers
need to store more inventories
36
for the holiday season. Our retail customers usually return
these leased units to us early in the following year. This
causes lower utilization rates for our lease fleet and a
marginal decrease in cash flow during the first quarter of the
year. Over the last few years, we have tried to reduce the
percentage of our units we reserve for this seasonal business
from the levels we allocated in earlier years, decreasing our
seasonality.
Critical
Accounting Policies, Estimates and Judgments
Our significant accounting policies are disclosed in Note 1
to our consolidated financial statements. The following
discussion addresses our most critical accounting policies, some
of which require significant judgment.
Mobile Minis consolidated financial statements have been
prepared in accordance with accounting principles generally
accepted in the U.S. The preparation of these consolidated
financial statements requires us to make estimates and
assumptions that affect the reported amounts of assets,
liabilities, revenues and expenses during the reporting period.
These estimates and assumptions are based upon our evaluation of
historical results and anticipated future events, and these
estimates may change as additional information becomes
available. The Securities and Exchange Commission defines
critical accounting policies as those that are, in
managements view, most important to our financial
condition and results of operations and those that require
significant judgments and estimates. Management believes that
our most critical accounting policies relate to:
Revenue Recognition. Lease and leasing
ancillary revenues and related expenses generated under portable
storage units and office units are recognized on a straight-line
basis. Revenues and expenses from portable storage unit delivery
and hauling are recognized when these services are earned, in
accordance with SAB No. 104. We recognize revenues
from sales of containers and mobile office units upon delivery
when the risk of loss passes, the price is fixed and
determinable and collectability is reasonably assured. We sell
our products pursuant to sales contracts stating the fixed sales
price with our customers.
Share-Based Compensation. Prior to 2006, we
accounted for stock-based compensation plans under the
recognition and measurement provisions of Accounting Principles
Board (APB) Opinion No. 25. Effective January 1, 2006,
we adopted the provisions of SFAS 123(R) using the
modified-prospective-transition method. SFAS 123(R)
requires companies to recognize the fair-value of stock-based
compensation transactions in the statement of income. The fair
value of our stock-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 rate is based on the
U.S. Treasury yield curve in effect at the time of grant.
We have never paid cash dividends, and do not currently intend
to pay cash dividends, and thus have assumed a 0% dividend
yield. If our actual experience differs significantly from the
assumptions used to compute our stock-based compensation cost,
or if different assumptions had been used, we may have recorded
too much or too little stock-based compensation cost. For stock
options and nonvested share awards subject solely to service
conditions, we recognize expense using the straight-line
attribution method. For nonvested share awards subject to
service and performance conditions, we are required to assess
the probability that such performance conditions will be met. If
the likelihood of the performance condition being met is deemed
probable, we will recognize the expense using accelerated
attribution method. In addition, for both stock options and
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
stock-based compensation expense could be materially different.
We had approximately $2.5 million of total unrecognized
compensation costs related to stock options at December 31,
2008 that are expected to be recognized over a weighted-average
period of 1.3 years and $18.6 million of total
unrecognized compensation costs related to nonvested share
awards at December 31, 2008 that are expected to be
recognized over a weighted-average period of 3.7 years. See
Note 10 to the Consolidated Financial Statements for a
further discussion on share-based compensation.
Allowance for Doubtful Accounts. We maintain
allowances for doubtful accounts for estimated losses resulting
from the inability of our customers to make required payments.
We establish and maintain reserves against
37
estimated losses based upon historical loss experience and
evaluation of past due accounts agings. Management reviews the
level of the allowances for doubtful accounts on a regular basis
and adjusts the level of the allowances as needed. If we were to
increase the factors used for our reserve estimates by 25%, it
would have the following approximate effect on our net income
and diluted earnings per share at December 31, as follows:
|
|
|
|
|
|
|
|
|
|
|
Years Ended December 31,
|
|
|
|
2007
|
|
|
2008
|
|
|
|
(In thousands except per share data)
|
|
|
As reported:
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
44,176
|
|
|
$
|
29,041
|
|
Diluted earnings per share
|
|
$
|
1.22
|
|
|
$
|
0.75
|
|
As adjusted for hypothetical change in reserve estimates:
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
43,893
|
|
|
$
|
28,245
|
|
Diluted earnings per share
|
|
$
|
1.21
|
|
|
$
|
0.73
|
|
If the financial condition of our customers were to deteriorate,
resulting in an impairment of their ability to make payments,
additional allowances may be required.
Impairment of Goodwill. We assess the
impairment of goodwill and other identifiable intangibles on an
annual basis or whenever events or changes in circumstances
indicate that the carrying value may not be recoverable. Some
factors we consider important which could trigger an impairment
review include the following:
|
|
|
|
|
significant under-performance relative to historical, expected
or projected future operating results;
|
|
|
|
significant changes in the manner of our use of the acquired
assets or the strategy for our overall business;
|
|
|
|
our market capitalization relative to net book value; and
|
|
|
|
significant negative industry or general economic trends.
|
Pursuant to SFAS No. 142, Goodwill and Other
Intangible Assets, we operate on one reportable segment,
which is comprised of three reporting units (North America, U.K.
and The Netherlands). All of our goodwill was allocated between
these three reporting units. We perform an annual impairment
test on goodwill at December 31 using the two-step process
prescribed in SFAS No. 142. The first step is a screen
for potential impairment, while the second step measures the
amount of the impairment, if any. In addition, we will perform
impairment tests during any reporting period in which events or
changes in circumstances indicate that an impairment may have
incurred. At December 31, 2008, we performed the first step
of the two-step impairment test and compared the fair value of
each reporting unit to its carrying value. In assessing the fair
value of the reporting units, we considered both the market
approach and the income approach. Under the market approach, the
fair value of the reporting unit is based on quoted market
prices of companies comparable to the reporting unit being
valued. Under the income approach, the fair value of the
reporting unit is based on the present value of estimated cash
flows. The income approach is dependent on a number of
significant management assumptions, including estimated future
revenue growth rates, gross margins on sales, operating margins,
capital expenditures and discount rates. Each approach was given
equal weight in arriving at the fair value of the reporting
unit. We determined the fair values of the U.K. and The
Netherlands reporting units were less than the carrying values
of the net assets of these reporting units, thus we performed
step two of the impairment test for these two reporting units.
In step two of the impairment test, we are required to determine
the implied fair value of the goodwill and compare it to the
carrying value of the goodwill. We allocated the fair value of
the reporting units to the respective assets and liabilities of
each reporting unit as if the reporting units had been acquired
in separate and individual business combinations and the fair
value of the reporting units was the price paid to acquire the
reporting units. The excess of the fair value of the reporting
units over the amounts assigned to their respective assets and
liabilities is the implied fair value of goodwill. For both
reporting units in the step two testing, the implied value of
goodwill was less than the carrying value of goodwill, resulting
in an impairment charge of $13.7 million in the fourth
quarter of 2008. We reconciled the fair values of our three
reporting units in the aggregate to our market capitalization at
December 31, 2008.
38
Impairment of Long-Lived Assets. We review
property, plant and equipment and intangibles with finite lives
(those assets resulting from acquisitions) for impairment when
events or circumstances indicate these assets might be impaired.
We test impairment using historical cash flows and other
relevant facts and circumstances as the primary basis for its
estimates of future cash flows. This process requires the use of
estimates and assumptions, which are subject to a high degree of
judgment. If these assumptions change in the future, whether due
to new information or other factors, we may be required to
record impairment charges for these assets.
Depreciation Policy. Our depreciation policy
for our lease fleet uses the straight-line method over our
units estimated useful life, after the date that we put
the unit in service. Our steel units are depreciated over
25 years with an estimated residual value of 62.5%. 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 the larger
competitors in our industry, profit margins we are achieving on
sales of depreciated units and lease rates we obtain on older
units. If we were to change our depreciation policy on our steel
units from 62.5% residual value and a
25-year life
to a lower or higher residual and a shorter or longer useful
life, such change could have a positive, negative or neutral
effect on our earnings, with the actual effect being determined
by the change. For example, a change in our estimates used in
our residual values and useful life on our steel units would
have the following approximate effect on our net income and
diluted earnings per share as reflected in the table below.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Useful
|
|
|
|
|
|
|
|
|
|
Residual
|
|
|
Life in
|
|
|
|
|
|
|
|
|
|
Value
|
|
|
Years
|
|
|
2007
|
|
|
2008
|
|
|
|
(In thousands except per share data)
|
|
|
As Reported:
|
|
|
62.5
|
%
|
|
|
25
|
|
|
|
|
|
|
|
|
|
Net income
|
|
|
|
|
|
|
|
|
|
$
|
44,176
|
|
|
$
|
29,041
|
|
Diluted earnings per share
|
|
|
|
|
|
|
|
|
|
$
|
1.22
|
|
|
$
|
0.75
|
|
As adjusted for change in estimates:
|
|
|
70.0
|
%
|
|
|
20
|
|
|
|
|
|
|
|
|
|
Net income
|
|
|
|
|
|
|
|
|
|
$
|
44,176
|
|
|
$
|
29,041
|
|
Diluted earnings per share
|
|
|
|
|
|
|
|
|
|
$
|
1.22
|
|
|
$
|
0.75
|
|
As adjusted for change in estimates:
|
|
|
50.0
|
%
|
|
|
20
|
|
|
|
|
|
|
|
|
|
Net income
|
|
|
|
|
|
|
|
|
|
$
|
41,380
|
|
|
$
|
25,038
|
|
Diluted earnings per share
|
|
|
|
|
|
|
|
|
|
$
|
1.14
|
|
|
$
|
0.64
|
|
As adjusted for change in estimates:
|
|
|
40.0
|
%
|
|
|
40
|
|
|
|
|
|
|
|
|
|
Net income
|
|
|
|
|
|
|
|
|
|
$
|
44,176
|
|
|
$
|
29,041
|
|
Diluted earnings per share
|
|
|
|
|
|
|
|
|
|
$
|
1.22
|
|
|
$
|
0.75
|
|
As adjusted for change in estimates:
|
|
|
30.0
|
%
|
|
|
25
|
|
|
|
|
|
|
|
|
|
Net income
|
|
|
|
|
|
|
|
|
|
$
|
40,541
|
|
|
$
|
23,837
|
|
Diluted earnings per share
|
|
|
|
|
|
|
|
|
|
$
|
1.12
|
|
|
$
|
0.61
|
|
As adjusted for change in estimates:
|
|
|
25.0
|
%
|
|
|
25
|
|
|
|
|
|
|
|
|
|
Net income
|
|
|
|
|
|
|
|
|
|
$
|
39,982
|
|
|
$
|
23,037
|
|
Diluted earnings per share
|
|
|
|
|
|
|
|
|
|
$
|
1.10
|
|
|
$
|
0.59
|
|
Insurance Reserves. Our workers
compensation, auto and general liability insurance are purchased
under large deductible programs. Our current per incident
deductibles are: workers compensation $250,000, auto
$250,000 and general liability $100,000. We provide for the
estimated expense relating to the deductible portion of the
individual claims. However, we generally do not know the full
amount of our exposure to a deductible in connection with any
particular claim during the fiscal period in which the claim is
incurred and for which we must make an accrual for the
deductible expense. We make these accruals based on a
combination of the claims development experience of our staff
and our insurance companies, and, at year end, the accrual is
reviewed and
39
adjusted, in part, based on an independent actuarial review of
historical loss data and using certain actuarial assumptions
followed in the insurance industry. A high degree of judgment is
required in developing these estimates of amounts to be accrued,
as well as in connection with the underlying assumptions. In
addition, our assumptions will change as our loss experience is
developed. All of these factors have the potential for
significantly impacting the amounts we have previously reserved
in respect of anticipated deductible expenses, and we may be
required in the future to increase or decrease amounts
previously accrued.
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 (as that
term is defined in SFAS No. 5) that a liability
has been incurred and the amount of loss can be reasonably
estimated. Because of the uncertainties related to both the
probability of incurred and possible range of loss on pending
claims and litigation, management must use considerable judgment
in making reasonable determination of the liability that could
result from an unfavorable outcome. As additional information
becomes available, we will assess the potential liability
related to our pending litigation and revise our estimates. Such
revisions in our estimates of the potential liability could
materially impact our results of operation. We do not anticipate
the resolution of such matters known at this time will have a
material adverse effect on our business or consolidated
financial position.
Deferred Taxes. In preparing our consolidated
financial statements, we recognize income taxes in each of the
jurisdictions in which we operate. For each jurisdiction, we
estimate the actual amount of taxes currently payable or
receivable as well as deferred tax assets and liabilities
attributable to temporary differences between the financial
statement carrying amounts of existing assets and liabilities
and their respective tax bases. Deferred income tax assets and
liabilities are measured using enacted tax rates expected to
apply to taxable income in the years in which these temporary
differences are expected to be recovered or settled. The effect
on deferred tax assets and liabilities of a change in tax rates
is recognized in income in the period that includes the
enactment date.
A valuation allowance is provided for those deferred tax assets
for which it is more likely than not that the related benefits
will not be realized. In determining the amount of the valuation
allowance, we consider estimated future taxable income as well
as feasible tax planning strategies in each jurisdiction. If we
determine that we will not realize all or a portion of our
deferred tax assets, we will increase our valuation allowance
with a charge to income tax expense or offset goodwill if the
deferred tax asset was acquired in a business combination.
Conversely, if we determine that we will ultimately be able to
realize all or a portion of the related benefits for which a
valuation allowance has been provided, all or a portion of the
related valuation allowance will be reduced with a credit to
income tax expense except if the valuation allowance was created
in conjunction with a tax asset in a business combination.
At December 31, 2008, we have a $1.1 million valuation
allowance and have $107.3 million of deferred tax assets
included within the net deferred tax liability on our balance
sheet. The majority of the deferred tax asset relates to federal
net operating loss carryforwards that have future expiration
dates. Management currently believes that adequate future
taxable income will be generated through future operations and,
or through available tax planning strategies to recover these
assets. However, given that these federal net operating loss
carryforwards that give rise to the deferred tax asset expire
over 12 years beginning in 2017, there could be changes in
managements judgment in future periods with respect to the
recoverability of these assets. As of December 31, 2008,
management believes that it is more likely than not that the
unreserved portion of these deferred tax assets will be
recovered.
Recent
Accounting Pronouncements
In September 2006, the Financial Accounting Standards Board
(FASB) issued Statement of Financial Accounting Standards (SFAS)
No. 157, Fair Value Measurement
(SFAS No. 157). SFAS No. 157 defines
fair value, establishes a framework for measuring fair value in
generally accepted accounting principles, and expands
disclosures about fair value measurements.
SFAS No. 157 is effective for fiscal years beginning
after November 15, 2007 and interim periods within those
fiscal years. The Company adopted SFAS No. 157 on
January 1, 2008, with no material effect on the
Companys consolidated financial statements.
On February 15, 2007, the FASB issued
SFAS No. 159, The Fair Value Option for Financial
Assets and Financial Liabilities (SFAS No. 159).
Under SFAS No. 159, the Company may elect to report
financial instruments
40
and certain other items at fair value on a
contract-by-contract
basis with changes in value reported in earnings. This election
is irrevocable. SFAS No. 159 provides an opportunity
to mitigate volatility in reported earnings that is caused by
measuring hedged assets and liabilities that were previously
required to use a different accounting method than the related
hedging contracts when the complex provisions of
SFAS No. 133, Accounting for Derivative Instruments
and Hedging Activities, applicable to hedge accounting are
not met. The Company adopted SFAS No. 159 on
January 1, 2008. The Company chose not to elect the fair
value option for its financial assets and liabilities existing
at January 1, 2008 and has not elected the fair value
option on any financial assets or liabilities in the year ended
December 31, 2008. Therefore, the adoption of
SFAS No. 159 had no impact on the Companys
consolidated financial statements.
In December 2007, the FASB issued SFAS No. 141
(revised 2007), Business Combinations
(SFAS No. 141(R)) which establishes principles and
requirements for how an acquirer recognizes and measures in its
financial statements the identifiable assets acquired, the
liabilities assumed and any noncontrolling interest in an
acquiree, including the recognition and measurement of goodwill
acquired in a business combination. Certain forms of contingent
consideration and certain acquired contingencies will be
recorded at fair value at the acquisition date.
SFAS No. 141(R) also states acquisition costs will
generally be expensed as incurred and restructuring costs will
be expensed in periods after the acquisition date. The Company
will apply SFAS No. 141(R) prospectively to business
combinations with an acquisition date on or after
January 1, 2009.
In December 2007, the FASB issued SFAS No. 160,
Noncontrolling Interests in Consolidated Financial
Statements An Amendment of ARB No. 51
(SFAS No. 160). SFAS No. 160 amends
Accounting Research Bulletin ARB No. 51,
Consolidated Financial Statements, to establish
accounting and reporting standards for the noncontrolling
interest in a subsidiary and for the deconsolidation of a
subsidiary. SFAS No. 160 becomes effective beginning
January 1, 2009. Presently, there are no noncontrolling
interests in any of the Companys consolidated
subsidiaries; therefore, the Company does not expect the
adoption of SFAS No. 160 to have a significant impact
on the Companys results of operations or financial
condition.
In March 2008, the FASB issued SFAS No. 161,
Disclosures about Derivative Instruments and Hedging
Activities An Amendment of FASB Statement
No. 133 (SFAS No. 161).
SFAS No. 161 requires qualitative disclosures about
objectives and strategies for using derivatives, quantitative
data about the fair value of and gains and losses on derivative
contracts and details of credit-risk-related contingent features
in hedged positions. The statement also requires enhanced
disclosures regarding how and why entities use derivative
instruments, how derivative instruments and related hedged items
are accounted and how derivative instruments and related hedged
items affect entities financial position, financial
performance and cash flows. SFAS No. 161 is effective
for fiscal periods beginning after November 15, 2008. The
Company does not expect the adoption of SFAS No. 161
will have a material effect on the Companys results of
operations or financial position.
In April 2008, the FASB issued FSP
FAS 142-3,
Determining the Useful Life of Intangible Assets (FSP
FAS 142-3).
FSP
FAS 142-3
amends the factors to be considered in determining the useful
life of intangible assets. Its intent is to improve the
consistency between the useful life of an intangible asset and
the period of expected cash flows used to measure its fair
value. FSP
FAS 142-3
is effective for fiscal years beginning after December 15,
2008. The Company currently adheres to the principle set forth
in FSP
FAS 142-3
and does not expect its adoption to materially affect the
Companys results of operations or financial condition.
In November 2008, the FASB ratified EITF Issue
No. 08-7,
Accounting for Defensive Intangible Assets (EITF
No. 08-7).
EITF
No. 08-7
applies to defensive intangible assets, which are acquired
intangible assets that the acquirer does not intend to actively
use but intends to hold to prevent its competitors from
obtaining access to them. As these assets are separately
identifiable, EITF
No. 08-7
requires an acquiring entity to account for defensive intangible
assets as a separate unit of accounting. Defensive intangible
assets must be recognized at fair value in accordance with
SFAS No. 141(R) and SFAS No. 157. EITF
No. 08-7
is effective for defensive intangible assets acquired in fiscal
years beginning on or after December 15, 2008. We are
currently evaluating the potential impact, if any, that the
adoption of EITF
No. 08-7
will have on our results of operations for financial condition.
41
|
|
ITEM 7A.
|
QUANTITATIVE
AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
|
Interest Rate Swap Agreement. We seek to
reduce earnings and cash flow volatility associated with changes
in interest rates through a financial arrangement intended to
provide a hedge against a portion of the risks associated with
such volatility. We continue to have exposure to such risks to
the extent they are not hedged.
Interest rate swap agreements are the only instruments we use to
manage interest rate fluctuations affecting our variable rate
debt. At December 31, 2008, we had eight interest rate swap
agreements under which we pay a fixed rate and receive a
variable interest rate on $200.0 million of debt. In 2008,
in accordance with SFAS No. 133, comprehensive income
included a charge of $6.3 million, net of income tax
benefit of $4.0 million, related to the fair value of our
interest rate swap agreements. We enter into derivative
financial arrangements only to the extent that the arrangement
meets the objectives described, and we do not engage in such
transactions for speculative purposes.
The following table sets forth the scheduled maturities and the
total fair value of our debt portfolio:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total at
|
|
|
Total Fair Value
|
|
|
|
At December 31,
|
|
|
December 31,
|
|
|
at December 31,
|
|
|
|
2009
|
|
|
2010
|
|
|
2011
|
|
|
2012
|
|
|
2013
|
|
|
Thereafter
|
|
|
2008
|
|
|
2008
|
|
|
|
(In thousands, except percentages)
|
|
|
Debt:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fixed rate
|
|
$
|
2,695
|
|
|
$
|
1,669
|
|
|
$
|
1,298
|
|
|
$
|
847
|
|
|
$
|
286
|
|
|
$
|
350,156
|
|
|
$
|
356,951
|
|
|
$
|
250,795
|
|
Average interest rate
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
8.49
|
%
|
|
|
|
|
Floating rate(1)
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
554,532
|
|
|
$
|
|
|
|
$
|
554,532
|
|
|
$
|
554,532
|
|
Average interest rate
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2.96
|
%
|
|
|
|
|
Operating leases:
|
|
$
|
16,789
|
|
|
$
|
13,986
|
|
|
$
|
10,941
|
|
|
$
|
8,671
|
|
|
$
|
7,171
|
|
|
$
|
15,759
|
|
|
$
|
17,317
|
|
|
|
|
|
|
|
|
(1) |
|
Included in our floating rate line of credit facility are
$200.0 million of fixed-rate swap agreements with a
weighted average interest rate of 4.0275% that mature in 2010
and 2011. |
Impact of Foreign Currency Rate Changes. We
currently have branch operations outside the U.S. and we
bill those customers primarily in their local currency which is
subject to foreign currency rate changes. Our operations in
Canada are billed in the Canadian Dollar, operations in the U.K.
are billed in Pound Sterling and operations in The Netherlands
are billed in the Euro. We are exposed to foreign exchange rate
fluctuations as the financial results of our
non-U.S. operations
are translated into U.S. Dollars. The impact of foreign
currency rate changes has historically been insignificant with
our Canadian operations, but we have more exposure to volatility
with our European operations. In order to help minimize our
exchange rate gain and loss volatility, we finance our European
entities through our revolving line of credit which allows us to
also borrow those funds in Pound Sterling denominated debt.
42
|
|
ITEM 8.
|
FINANCIAL
STATEMENTS AND SUPPLEMENTARY DATA.
|
INDEX TO
CONSOLIDATED FINANCIAL STATEMENTS AND SCHEDULE
43
Report of
Independent Registered Public Accounting Firm
The Board of Directors and Stockholders of Mobile Mini, Inc.
We have audited the accompanying consolidated balance sheets of
Mobile Mini, Inc. as of December 31, 2008 and 2007, and the
related consolidated statements of income, preferred stock and
stockholders equity, and cash flows for each of the three
years in the period ended December 31, 2008. Our audits
also included the financial statement schedule listed in the
Index at Item 15(a). These financial statements and
schedule are the responsibility of the Companys
management. Our responsibility is to express an opinion on these
financial statements and schedule based on our audits.
We conducted our audits in accordance with the standards of the
Public Company Accounting Oversight Board (United States). Those
standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in
the financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by
management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above
present fairly, in all material respects, the consolidated
financial position of Mobile Mini, Inc. at December 31,
2008 and 2007, and the consolidated results of its operations
and its cash flows for each of the three years in the period
ended December 31, 2008, in conformity with
U.S. generally accepted accounting principles. Also, in our
opinion, the related financial statement schedule, when
considered in relation to the basic financial statements taken
as a whole, presents fairly in all material respects the
information set forth therein.
We also have audited, in accordance with the standards of the
Public Company Accounting Oversight Board (United States),
Mobile Mini, Inc.s internal control over financial
reporting as of December 31, 2008, based on criteria
established in Internal Control-Integrated Framework issued by
the Committee of Sponsoring Organizations of the Treadway
Commission and our report dated February 27, 2009 expressed
an unqualified opinion thereon.
Phoenix, Arizona
February 27, 2009
44
MOBILE
MINI, INC.
(In
thousands except per share data)
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
|
2007
|
|
|
2008
|
|
|
ASSETS
|
Cash
|
|
$
|
3,703
|
|
|
$
|
3,184
|
|
Receivables, net of allowance for doubtful accounts of $3,993
and $7,193, respectively
|
|
|
37,221
|
|
|
|
61,424
|
|
Inventories
|
|
|
29,431
|
|
|
|
26,577
|
|
Lease fleet, net
|
|
|
802,923
|
|
|
|
1,078,156
|
|
Property, plant and equipment, net
|
|
|
55,363
|
|
|
|
88,509
|
|
Deposits and prepaid expenses
|
|
|
11,334
|
|
|
|
13,287
|
|
Other assets and intangibles, net
|
|
|
9,086
|
|
|
|
35,063
|
|
Goodwill
|
|
|
79,790
|
|
|
|
492,657
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
1,028,851
|
|
|
$
|
1,798,857
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS EQUITY
|
Accounts payable
|
|
$
|
20,560
|
|
|
$
|
21,433
|
|
Accrued liabilities
|
|
|
38,941
|
|
|
|
86,214
|
|
Line of credit
|
|
|
237,857
|
|
|
|
554,532
|
|
Notes payable
|
|
|
743
|
|
|
|
1,380
|
|
Obligations under capital leases
|
|
|
10
|
|
|
|
5,497
|
|
Senior notes, net of discount of $621 and $4,203 at
December 31, 2007 and December 31, 2008, respectively
|
|
|
149,379
|
|
|
|
345,797
|
|
Deferred income taxes
|
|
|
123,471
|
|
|
|
134,786
|
|
|
|
|
|
|
|
|
|
|
Total liabilities
|
|
|
570,961
|
|
|
|
1,149,639
|
|
|
|
|
|
|
|
|
|
|
Commitments and contingencies
|
|
|
|
|
|
|
|
|
Convertible preferred stock: $.01 par value,
20,000 shares authorized, 0 and 8,556 issued and
outstanding at December 31, 2007 and December 31,
2008, respectively, stated at its liquidity preference values
|
|
|
|
|
|
|
153,990
|
|
Stockholders equity:
|
|
|
|
|
|
|
|
|
Common stock; $.01 par value, 95,000 shares
authorized, 36,748 issued and 34,573 outstanding at
December 31, 2007 and 37,489 issued and 35,314 outstanding
at December 31, 2008, respectively
|
|
|
367
|
|
|
|
375
|
|
Additional paid-in capital
|
|
|
278,593
|
|
|
|
328,696
|
|
Retained earnings
|
|
|
213,894
|
|
|
|
242,935
|
|
Accumulated other comprehensive income (loss)
|
|
|
4,336
|
|
|
|
(37,478
|
)
|
Treasury stock, at cost, 2,175 shares
|
|
|
(39,300
|
)
|
|
|
(39,300
|
)
|
|
|
|
|
|
|
|
|
|
Total stockholders equity
|
|
|
457,890
|
|
|
|
495,228
|
|
|
|
|
|
|
|
|
|
|
Total liabilities and stockholders equity
|
|
$
|
1,028,851
|
|
|
$
|
1,798,857
|
|
|
|
|
|
|
|
|
|
|
See accompanying notes.
45
MOBILE
MINI, INC.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Years Ended December 31,
|
|
|
|
2006
|
|
|
2007
|
|
|
2008
|
|
|
|
(In thousands except per share data)
|
|
|
Revenues:
|
|
|
|
|
|
|
|
|
|
|
|
|
Leasing
|
|
$
|
245,105
|
|
|
$
|
284,638
|
|
|
$
|
371,560
|
|
Sales
|
|
|
26,824
|
|
|
|
31,644
|
|
|
|
41,267
|
|
Other
|
|
|
1,434
|
|
|
|
2,020
|
|
|
|
2,577
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenues
|
|
|
273,363
|
|
|
|
318,302
|
|
|
|
415,404
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Costs and expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of sales
|
|
|
17,186
|
|
|
|
21,651
|
|
|
|
28,044
|
|
Leasing, selling and general expenses
|
|
|
139,906
|
|
|
|
166,994
|
|
|
|
212,335
|
|
Integration, merger and restructuring expense
|
|
|
|
|
|
|
|
|
|
|
24,427
|
|
Goodwill impairment
|
|
|
|
|
|
|
|
|
|
|
13,667
|
|
Depreciation and amortization
|
|
|
16,741
|
|
|
|
21,149
|
|
|
|
31,767
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total costs and expenses
|
|
|
173,833
|
|
|
|
209,794
|
|
|
|
310,240
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from operations
|
|
|
99,530
|
|
|
|
108,508
|
|
|
|
105,164
|
|
Other income (expense):
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest income
|
|
|
437
|
|
|
|
101
|
|
|
|
135
|
|
Interest expense
|
|
|
(23,681
|
)
|
|
|
(24,906
|
)
|
|
|
(48,146
|
)
|
Debt extinguishment expense
|
|
|
(6,425
|
)
|
|
|
(11,224
|
)
|
|
|
|
|
Foreign currency exchange gains (loss)
|
|
|
66
|
|
|
|
107
|
|
|
|
(112
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before provision for income taxes
|
|
|
69,927
|
|
|
|
72,586
|
|
|
|
57,041
|
|
Provision for income taxes
|
|
|
27,151
|
|
|
|
28,410
|
|
|
|
28,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
|
42,776
|
|
|
|
44,176
|
|
|
|
29,041
|
|
Earnings allocable to preferred stock
|
|
|
|
|
|
|
|
|
|
|
(2,739
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income available to common stockholders
|
|
$
|
42,776
|
|
|
$
|
44,176
|
|
|
$
|
26,302
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
1.25
|
|
|
$
|
1.24
|
|
|
$
|
0.77
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted
|
|
$
|
1.21
|
|
|
$
|
1.22
|
|
|
$
|
0.75
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average number of common and common share equivalents
outstanding:
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
34,243
|
|
|
|
35,489
|
|
|
|
34,155
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted
|
|
|
35,425
|
|
|
|
36,296
|
|
|
|
38,875
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See accompanying notes.
46
MOBILE
MINI, INC.
For the
years ended December 31, 2006, 2007 and 2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Preferred Stock
|
|
|
Stockholders Equity
|
|
|
|
Series A
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated
|
|
|
|
|
|
|
|
|
|
Convertible
|
|
|
Shares of
|
|
|
|
|
|
Additional
|
|
|
Deferred
|
|
|
|
|
|
Other
|
|
|
|
|
|
|
|
|
|
Preferred Stock
|
|
|
Common
|
|
|
Common
|
|
|
Paid-In
|
|
|
Stock-Based
|
|
|
Retained
|
|
|
Comprehensive
|
|
|
Treasury
|
|
|
Stockholders
|
|
|
|
Shares
|
|
|
Amount
|
|
|
Stock
|
|
|
Stock
|
|
|
Capital
|
|
|
Compensation
|
|
|
Earnings
|
|
|
Income (Loss)
|
|
|
Stock
|
|
|
Equity
|
|
|
|
(In thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, December 31, 2005
|
|
|
|
|
|
$
|
|
|
|
|
30,618
|
|
|
$
|
306
|
|
|
$
|
141,855
|
|
|
$
|
(2,258
|
)
|
|
$
|
126,942
|
|
|
$
|
1,130
|
|
|
$
|
|
|
|
$
|
267,975
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
42,776
|
|
|
|
|
|
|
|
|
|
|
|
42,776
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair value change in derivatives, (net of income tax benefit of
$86)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(123
|
)
|
|
|
|
|
|
|
(123
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign currency translation, (net of income tax expense of $6)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,464
|
|
|
|
|
|
|
|
2,464
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
45,117
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of common stock
|
|
|
|
|
|
|
|
|
|
|
4,600
|
|
|
|
46
|
|
|
|
120,322
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
120,368
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercise of stock options
|
|
|
|
|
|
|
|
|
|
|
499
|
|
|
|
5
|
|
|
|
5,113
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5,118
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Tax benefit shortfall on stock option exercises
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(5
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(5
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reclassification due to the adoption of SFAS No. 123(R)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(2,258
|
)
|
|
|
2,258
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Restricted stock grants
|
|
|
|
|
|
|
|
|
|
|
181
|
|
|
|
2
|
|
|
|
(2
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Share-based compensation
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,431
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,431
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, December 31, 2006
|
|
|
|
|
|
|
|
|
|
|
35,898
|
|
|
|
359
|
|
|
|
268,456
|
|
|
|
|
|
|
|
169,718
|
|
|
|
3,471
|
|
|
|
|
|
|
|
442,004
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
44,176
|
|
|
|
|
|
|
|
|
|
|
|
44,176
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair value change in derivatives, (net of income tax benefit of
$816)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1,293
|
)
|
|
|
|
|
|
|
(1,293
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign currency translation, (net of income tax expense of $724)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,158
|
|
|
|
|
|
|
|
2,158
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
45,041
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercise of stock options
|
|
|
|
|
|
|
|
|
|
|
519
|
|
|
|
5
|
|
|
|
5,602
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5,607
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Tax benefit shortfall on stock option exercises
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(46
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(46
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchase of treasury stock, at cost
|
|
|
|
|
|
|
|
|
|
|
(2,175
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(39,300
|
)
|
|
|
(39,300
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Restricted stock grants
|
|
|
|
|
|
|
|
|
|
|
331
|
|
|
|
3
|
|
|
|
(3
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Share-based compensation
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,584
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,584
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, December 31, 2007
|
|
|
|
|
|
|
|
|
|
|
34,573
|
|
|
|
367
|
|
|
|
278,593
|
|
|
|
|
|
|
|
213,894
|
|
|
|
4,336
|
|
|
|
(39,300
|
)
|
|
|
457,890
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
29,041
|
|
|
|
|
|
|
|
|
|
|
|
29,041
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair value change in derivatives, (net of income tax benefit of
$3,982)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(6,299
|
)
|
|
|
|
|
|
|
(6,299
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign currency translation, (net of income tax benefit of
$1,351)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(35,515
|
)
|
|
|
|
|
|
|
(35,515
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive loss
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(12,773
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercise of stock options
|
|
|
|
|
|
|
|
|
|
|
134
|
|
|
|
2
|
|
|
|
1,470
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,472
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Tax benefit shortfall on stock option exercises
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(407
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(407
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of Series A Convertible Preferred Stock related to MSG
Merger (net of registration and issuance costs of $85)
|
|
|
8,556
|
|
|
|
153,990
|
|
|
|
|
|
|
|
|
|
|
|
42,525
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
42,525
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Restricted stock grants
|
|
|
|
|
|
|
|
|
|
|
607
|
|
|
|
6
|
|
|
|
(6
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Share-based compensation
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6,521
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6,521
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, December 31, 2008
|
|
|
8,556
|
|
|
$
|
153,990
|
|
|
|
35,314
|
|
|
$
|
375
|
|
|
$
|
328,696
|
|
|
$
|
|
|
|
$
|
242,935
|
|
|
$
|
(37,478
|
)
|
|
$
|
(39,300
|
)
|
|
$
|
495,228
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See accompanying notes.
47
MOBILE
MINI, INC.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Years Ended December 31,
|
|
|
|
2006
|
|
|
2007
|
|
|
2008
|
|
|
|
(In thousands)
|
|
|
Cash Flows From Operating Activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
42,776
|
|
|
$
|
44,176
|
|
|
$
|
29,041
|
|
Adjustments to reconcile net income to net cash provided by
operating activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Debt extinguishment expense
|
|
|
1,438
|
|
|
|
2,298
|
|
|
|
|
|
Provision for doubtful accounts
|
|
|
4,538
|
|
|
|
1,869
|
|
|
|
5,261
|
|
Provision for restructuring charge
|
|
|
|
|
|
|
|
|
|
|
5,626
|
|
Goodwill impairment
|
|
|
|
|
|
|
|
|
|
|
13,667
|
|
Amortization of deferred financing costs
|
|
|
840
|
|
|
|
985
|
|
|
|
2,873
|
|
Share-based compensation expense
|
|
|
3,066
|
|
|
|
4,028
|
|
|
|
5,656
|
|
Depreciation and amortization
|
|
|
16,741
|
|
|
|
21,149
|
|
|
|
31,767
|
|
Gain on sale of lease fleet units
|
|
|
(4,922
|
)
|
|
|
(5,560
|
)
|
|
|
(9,849
|
)
|
Loss on disposal of property, plant and equipment
|
|
|
454
|
|
|
|
203
|
|
|
|
567
|
|
Deferred income taxes
|
|
|
26,407
|
|
|
|
27,356
|
|
|
|
27,923
|
|
Foreign currency (gain) loss
|
|
|
(66
|
)
|
|
|
(107
|
)
|
|
|
112
|
|
Changes in certain assets and liabilities, net of effect of
businesses acquired:
|
|
|
|
|
|
|
|
|
|
|
|
|
Receivables
|
|
|
(11,118
|
)
|
|
|
(3,988
|
)
|
|
|
(3,060
|
)
|
Inventories
|
|
|
628
|
|
|
|
(610
|
)
|
|
|
7,655
|
|
Deposits and prepaid expenses
|
|
|
(1,446
|
)
|
|
|
(1,754
|
)
|
|
|
177
|
|
Other assets and intangibles
|
|
|
(4
|
)
|
|
|
318
|
|
|
|
105
|
|
Accounts payable
|
|
|
(2,088
|
)
|
|
|
2,691
|
|
|
|
(15,731
|
)
|
Accrued liabilities
|
|
|
(360
|
)
|
|
|
(1,755
|
)
|
|
|
(3,272
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by operating activities
|
|
|
76,884
|
|
|
|
91,299
|
|
|
|
98,518
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash Flows From Investing Activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash paid for businesses acquired
|
|
|
(59,475
|
)
|
|
|
(9,734
|
)
|
|
|
(33,250
|
)
|
Additions to lease fleet, excluding acquisitions
|
|
|
(135,883
|
)
|
|
|
(126,733
|
)
|
|
|
(76,622
|
)
|
Proceeds from sale of lease fleet units
|
|
|
13,327
|
|
|
|
16,181
|
|
|
|
28,338
|
|
Additions to property, plant and equipment
|
|
|
(10,882
|
)
|
|
|
(18,522
|
)
|
|
|
(16,874
|
)
|
Proceeds from sale of property, plant and equipment
|
|
|
150
|
|
|
|
126
|
|
|
|
495
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash used in investing activities
|
|
|
(192,763
|
)
|
|
|
(138,682
|
)
|
|
|
(97,913
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash Flows From Financing Activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Net borrowings under lines of credit
|
|
|
45,539
|
|
|
|
34,128
|
|
|
|
120,341
|
|
Redemption of 9.5% Senior Notes
|
|
|
(52,500
|
)
|
|
|
(97,500
|
)
|
|
|
|
|
Proceeds from issuance of 6.875% Senior Notes
|
|
|
|
|
|
|
149,322
|
|
|
|
|
|
Deferred financing costs
|
|
|
(1,664
|
)
|
|
|
(3,768
|
)
|
|
|
(15,166
|
)
|
Proceeds from issuance of notes payable
|
|
|
1,230
|
|
|
|
1,216
|
|
|
|
1,249
|
|
Principal payments on notes payable
|
|
|
(1,108
|
)
|
|
|
(1,254
|
)
|
|
|
(113,881
|
)
|
Principal payments on capital lease obligations
|
|
|
(17
|
)
|
|
|
(24
|
)
|
|
|
(704
|
)
|
Issuance of common stock, net
|
|
|
125,486
|
|
|
|
5,607
|
|
|
|
1,472
|
|
Purchase of treasury stock, at cost
|
|
|
|
|
|
|
(39,300
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used in) financing activities
|
|
|
116,966
|
|
|
|
48,427
|
|
|
|
(6,689
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effect of exchange rate changes on cash
|
|
|
76
|
|
|
|
1,289
|
|
|
|
5,565
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net increase (decrease) in cash
|
|
|
1,163
|
|
|
|
2,333
|
|
|
|
(519
|
)
|
Cash at beginning of year
|
|
|
207
|
|
|
|
1,370
|
|
|
|
3,703
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash at end of year
|
|
$
|
1,370
|
|
|
$
|
3,703
|
|
|
$
|
3,184
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplemental Disclosure of Cash Flow Information:
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash paid during the year for interest
|
|
$
|
24,770
|
|
|
$
|
27,896
|
|
|
$
|
33,032
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash paid during the year for income and franchise taxes
|
|
$
|
733
|
|
|
$
|
797
|
|
|
$
|
667
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest rate swap changes in value charged to equity
|
|
$
|
123
|
|
|
$
|
1,293
|
|
|
$
|
6,299
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See accompanying notes.
48
MOBILE
MINI, INC.
|
|
(1)
|
Mobile
Mini, its Operations and Summary of Significant Accounting
Policies:
|
Organization
and Special Considerations
Mobile Mini, Inc., a Delaware corporation, is a leading provider
of portable storage solutions. In these notes, the terms
Mobile Mini and the Company, means
Mobile Mini, Inc. At December 31, 2008, Mobile Mini has a
fleet of portable storage and office units, and operates
throughout the U.S., in Canada, the U.K. and The Netherlands.
The Companys portable storage products offer secure,
temporary storage with immediate access. The Company has a
diversified customer base, including large and small retailers,
construction companies, medical centers, schools, utilities,
distributors, the military, hotels, restaurants, entertainment
complexes and households. The Companys customers use its
products for a wide variety of applications, including the
storage of retail and manufacturing inventory, construction
materials and equipment, documents and records and other goods.
On June 27, 2008, we acquired Mobile Storage Group, Inc.
(MSG) in a transaction valued at $755.4 million (the
Merger). Mobile Mini assumed Mobile Storage Groups
outstanding indebtedness of $540.9 million and paid other
consideration and transaction costs of $214.5 million
consisting of $17.9 million cash (net of $5.5 million
cash acquired), and the issuance of approximately
8.6 million shares of convertible preferred stock with a
determined fair value at issuance of $196.6 million and a
liquidation preference value of $154.0 million. The
discussion in this Annual Report of the Companys business
includes the results of its combined operations with Mobile
Storage Group since June 27, 2008.
Principles
of Consolidation
The consolidated financial statements include the accounts of
Mobile Mini, Inc. and its wholly owned subsidiaries. The Company
does not have any subsidiaries in which it does not own 100% of
the outstanding stock. All significant intercompany balances and
transactions have been eliminated.
Revenue
Recognition
Lease and leasing ancillary revenues and related expenses
generated under portable storage units and office units are
recognized on a straight-line basis. Revenues and expenses from
portable storage unit delivery and hauling are recognized when
these services are earned, in accordance with
SAB No. 104, Revenue Recognition. The Company
recognizes revenues from sales of containers and mobile office
units upon delivery when the risk of loss passes, the price is
fixed and determinable and collectability is reasonably assured.
The Company sells its products pursuant to sales contracts
stating the fixed sales price with its customers.
Cost
of Sales
Cost of sales in the Companys consolidated statements of
income includes only the costs for units it sells. Similar costs
associated with the portable storage units that it leases are
capitalized on its balance sheet under Lease fleet.
Advertising
Costs
All non direct-response advertising costs are expensed as
incurred. Direct-response advertising costs, principally yellow
page advertising, are capitalized when paid and amortized over
the period in which the benefit is derived. At December 31,
2007 and 2008, prepaid advertising costs were approximately
$3.8 million and $4.0 million, respectively. The
amortization period of the prepaid balance never exceeds
12 months. The Companys direct-response advertising
costs are monitored by each branch through call logs and
advertising source codes in a contact enterprise resource
planning system. Advertising expense was $8.6 million,
$10.1 million and $12.5 million in 2006, 2007 and
2008, respectively.
49
MOBILE
MINI, INC. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Receivables
and Allowance for Doubtful Accounts
Receivables primarily consist of amounts due from customers from
the lease or sale of containers throughout the U.S., Canada, the
U.K. and The Netherlands. Mobile Mini records an estimated
provision for bad debts through a charge to operations in
amounts of its estimated losses expected to be incurred in the
collection of these accounts. The Company reviews the provision
for adequacy monthly. The estimated losses are based on
historical collection experience, and evaluation of past-due
account agings. Specific accounts are written off against the
allowance when management determines the account is
uncollectible. The Company requires a security deposit on most
leased office units to cover the cost of damages or unpaid
balances, if any.
Concentration
of Credit Risk
Financial instruments which potentially expose the Company to
concentrations of credit risk, as defined by
SFAS No. 105, Disclosure of Information about
Financial Instruments with Off-Balance-Sheet Risk and Financial
Instruments with Concentrations of Credit Risk, consist
primarily of receivables. Concentration of credit risk with
respect to receivables is limited due to the large number of
customers spread over a large geographic area in many industry
segments. No single customer accounts for more than 10% of our
receivables at December 31, 2007 and December 31,
2008. Receivables related to its sales operations are generally
secured by the product sold to the customer. Receivables related
to its leasing operations are primarily small month-to-month
amounts. The Company has the right to repossess leased portable
storage units, including any customer goods contained in the
unit, following non-payment of rent.
Inventories
Inventories are valued at the lower of cost (principally on a
standard cost basis which approximates the
first-in,
first-out (FIFO) method) or market. Market is the lower of
replacement cost or net realizable value. Inventories primarily
consist of raw materials, supplies,
work-in-process
and finished goods, all related to the manufacturing,
remanufacturing and maintenance, primarily for the
Companys lease fleet and its units held for sale. Raw
materials principally consist of raw steel, wood, glass, paint,
vinyl and other assembly components used in manufacturing and
remanufacturing processes.
Work-in-process
primarily represents units being built that are either pre-sold
or being built to add to its lease fleet upon completion.
Finished portable storage units primarily represent ISO
(International Organization for Standardization) containers held
in inventory until the containers are either sold as is,
remanufactured and sold, or units in the process of being
remanufactured to be compliant with the Companys lease
fleet standards before transferring the units to its lease
fleet. There is no certainty when the Company purchases the
containers whether they will ultimately be sold, remanufactured
and sold, or remanufactured and moved into its lease fleet.
Units that are determined to go into the Companys lease
fleet undergo an extensive remanufacturing process that includes
installing its proprietary locking system, signage, painting and
sometimes its proprietary security doors.
In 2008, in connection with the Companys restructuring of
its manufacturing operations it wrote down raw materials and
supplies it no longer intended to use. This charge totaled
$4.5 million.
Inventories at December 31, consist of the following:
|
|
|
|
|
|
|
|
|
|
|
2007
|
|
|
2008
|
|
|
|
(In thousands)
|
|
|
Raw materials and supplies
|
|
$
|
21,801
|
|
|
$
|
16,991
|
|
Work-in-process
|
|
|
2,819
|
|
|
|
1,611
|
|
Finished portable storage units
|
|
|
4,811
|
|
|
|
7,975
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
29,431
|
|
|
$
|
26,577
|
|
|
|
|
|
|
|
|
|
|
50
MOBILE
MINI, INC. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Property,
Plant and Equipment
Property, plant and equipment are stated at cost, net of
accumulated depreciation. Depreciation is provided using the
straight-line method over the assets estimated useful
lives. Residual values are determined when the property is
constructed or acquired and range up to 25%, depending on the
nature of the asset. In the opinion of management, estimated
residual values do not cause carrying values to exceed net
realizable value. The Companys depreciation expense
related to property, plant and equipment for 2006, 2007 and 2008
was $4.2 million, $5.6 million and $9.4 million,
respectively. Normal repairs and maintenance to property, plant
and equipment are expensed as incurred. When property or
equipment is retired or sold, the net book value of the asset,
reduced by any proceeds, is charged to gain or loss on the
retirement of fixed assets.
In 2007, the Company wrote off certain assets, which for the
most part were fully depreciated, that were in the process of
being replaced or were no longer required or used in its leasing
operations. In 2008, in connection with the Companys
restructuring of its manufacturing operations it recorded an
impairment charge to write-down and was included in integration,
merger and restructuring expense for equipment it no longer
intended to use. This charge totaled $1.2 million.
Property, plant and equipment at December 31, consist of
the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Estimated
|
|
|
|
|
|
|
|
|
|
Useful Life in
|
|
|
|
|
|
|
|
|
|
Years
|
|
|
2007
|
|
|
2008
|
|
|
|
(In thousands)
|
|
|
Land
|
|
|
|
|
|
$
|
772
|
|
|
$
|
10,978
|
|
Vehicles and machinery(1)
|
|
|
5 to 20
|
|
|
|
60,490
|
|
|
|
78,592
|
|
Buildings and improvements(2)
|
|
|
30
|
|
|
|
11,514
|
|
|
|
13,868
|
|
Office fixtures and equipment
|
|
|
5
|
|
|
|
11,579
|
|
|
|
20,948
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
84,355
|
|
|
|
124,386
|
|
Less accumulated depreciation
|
|
|
|
|
|
|
(28,992
|
)
|
|
|
(35,877
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total property, plant and equipment
|
|
|
|
|
|
$
|
55,363
|
|
|
$
|
88,509
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Includes impaired assets of $1.2 million (net book value of
related assets at December 31, 2008) related to the
restructuring of the Companys manufacturing operations.
This impairment is included in integration, merger and
restructuring expense in the consolidated statements of income. |
|
(2) |
|
Improvements made to leased properties are depreciated over the
lesser of the estimated remaining life or the remaining term of
the respective lease. |
Other
Assets and Intangibles
Other assets and intangibles primarily represent deferred
financing costs and intangible assets from acquisitions of
$12.5 million at December 31, 2007 and
$43.3 million at December 31, 2008, excluding
accumulated amortization of $3.4 million at
December 31, 2007 and $8.2 million at
December 31, 2008. Deferred financing costs are amortized
over the term of the agreement, and intangible assets are
amortized either on a straight-line basis, typically over a
five-year period, or on an accelerated basis for intrinsic
values assigned to customer lists and trade names.
51
MOBILE
MINI, INC. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
The following table reflects balances related to intangible
assets for the years ended December 31, 2007 and 2008 (in
thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2007
|
|
|
December 31, 2008
|
|
|
|
Gross
|
|
|
|
|
|
Net
|
|
|
Gross
|
|
|
|
|
|
|
|
|
|
Carrying
|
|
|
Accumulated
|
|
|
Carrying
|
|
|
Carrying
|
|
|
Accumulated
|
|
|
Net Carrying
|
|
|
|
Amount
|
|
|
Amortization
|
|
|
Amount
|
|
|
Amount
|
|
|
Amortization
|
|
|
Amount
|
|
|
Deferred financing costs
|
|
$
|
6,590
|
|
|
$
|
(1,809
|
)
|
|
$
|
4,781
|
|
|
$
|
21,756
|
|
|
$
|
(4,263
|
)
|
|
$
|
17,493
|
|
Customer lists
|
|
|
5,102
|
|
|
|
(1,234
|
)
|
|
|
3,868
|
|
|
|
20,166
|
|
|
|
(3,454
|
)
|
|
|
16,712
|
|
Tradenames/trademarks
|
|
|
221
|
|
|
|
(178
|
)
|
|
|
43
|
|
|
|
864
|
|
|
|
(343
|
)
|
|
|
521
|
|
Non-compete agreements
|
|
|
255
|
|
|
|
(83
|
)
|
|
|
172
|
|
|
|
330
|
|
|
|
(120
|
)
|
|
|
210
|
|
Patents and other
|
|
|
313
|
|
|
|
(91
|
)
|
|
|
222
|
|
|
|
211
|
|
|
|
(84
|
)
|
|
|
127
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
12,481
|
|
|
$
|
(3,395
|
)
|
|
$
|
9,086
|
|
|
$
|
43,327
|
|
|
$
|
(8,264
|
)
|
|
$
|
35,063
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortization expense for intangibles was approximately
$0.5 million, $1.0 million and $3.6 million in
2006, 2007 and 2008, respectively. Based on the carrying value
at December 31, 2008, and assuming no subsequent impairment
of the underlying assets, the annual amortization expense is
expected to be $5.3 million in 2009, $3.8 million in
2010, $2.7 million in 2011, $2.0 million in 2012,
$1.4 million in 2013 and $2.2 million thereafter.
Income
Taxes
Mobile Mini utilizes the liability method of accounting for
income taxes as set forth in SFAS No. 109,
Accounting for Income Taxes. Under the liability method,
deferred taxes are determined based on the difference between
the financial statement and tax basis of assets and liabilities
using enacted tax rates in effect in the years in which the
differences are expected to reverse. Valuation allowances are
established, when necessary, to reduce deferred tax assets to
the amount expected to be realized. Income tax expense includes
both taxes payable for the period and the change during the
period in deferred tax assets and liabilities.
Earnings
per Share
As a result of issuing the Preferred Stock, which participates
in distributions of earnings on the same basis as shares of
common stock, the Company has applied the provisions of EITF
Issue
No. 03-6,
Participating Securities and the Two-Class Method under
FASB Statement 128 (EITF
No. 03-6).
This issue established standards regarding the computation of
earnings per share (EPS) by companies that have issued
securities other than common stock that contractually entitle
the holder to participate in dividends and earnings of the
company. EITF
No. 03-6
requires earnings for the period to be allocated between the
common and preferred shareholders based on their respective
rights to receive dividends. Basic net income per share is then
calculated by dividing income allocable to common stockholders
by the weighted-average number of common shares outstanding, net
of shares subject to repurchase by the Company, during the
period. EITF
No. 03-6
does not require the presentation of basic and diluted net
income (loss) per share for securities other than common stock;
therefore, the following net income per share amounts only
pertain to the Companys common stock. The Company
calculates diluted net income per share under the if-converted
method unless the conversion of the preferred stock is
anti-dilutive to basic net income per share. To the extent the
inclusion of preferred stock is anti-dilutive, the Company
calculates diluted net income per share under the two-class
method. Potential common shares include restricted common stock
and incremental shares of common stock issuable upon the
exercise of stock options and vesting of nonvested stock awards
and convertible preferred stock using the treasury stock method.
52
MOBILE
MINI, INC. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
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
years ended December 31:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2006
|
|
|
2007
|
|
|
2008
|
|
|
|
(In thousands except earnings per share)
|
|
|
Historical net income per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
Numerator:
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
42,776
|
|
|
$
|
44,176
|
|
|
$
|
29,041
|
|
Less: Earnings allocable to preferred stock
|
|
|
|
|
|
|
|
|
|
|
(2,739
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income available to common stockholders
|
|
$
|
42,776
|
|
|
$
|
44,176
|
|
|
$
|
26,302
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic EPS Denominator:
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock outstanding beginning of period
|
|
|
30,521
|
|
|
|
35,640
|
|
|
|
34,041
|
|
Effect of weighted shares:
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted shares issued during the period ended December 31
|
|
|
3,722
|
|
|
|
302
|
|
|
|
114
|
|
Weighted shared purchased during the period ended December 31
|
|
|
|
|
|
|
(453
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Denominator for basic net income per share
|
|
|
34,243
|
|
|
|
35,489
|
|
|
|
34,155
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted EPS Denominator:
|
|
|
|
|
|
|
|
|
|
|
|
|
Common shares outstanding, beginning of year
|
|
|
30,521
|
|
|
|
35,640
|
|
|
|
34,041
|
|
Effect of weighting shares:
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted common shares issued during the period ended December 31
|
|
|
3,722
|
|
|
|
302
|
|
|
|
114
|
|
Weighted common shares purchased during the period ended
December 31
|
|
|
|
|
|
|
(453
|
)
|
|
|
|
|
Dilutive effect of employee stock options on nonvested
share-awards assumed converted during the period ended December
31
|
|
|
1,182
|
|
|
|
807
|
|
|
|
372
|
|
Dilutive effect of convertible preferred stock assumed converted
during the period ended December 31
|
|
|
|
|
|
|
|
|
|
|
4,348
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Denominator for diluted net income per share
|
|
|
35,425
|
|
|
|
36,296
|
|
|
|
38,875
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic net income per share
|
|
$
|
1.25
|
|
|
$
|
1.24
|
|
|
$
|
0.77
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted net income per share
|
|
$
|
1.21
|
|
|
$
|
1.22
|
|
|
$
|
0.75
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Employee stock options to purchase 0.6 million,
0.6 million and 0.6 million shares were issued or
outstanding during 2006, 2007 and 2008, respectively, but were
not included in the computation of diluted earnings per share
because the effect would have been anti-dilutive. The
anti-dilutive options could potentially dilute future earnings
per share. Basic weighted average number of common shares
outstanding in 2007 and 2008 does not include 0.5 million
and 1.0 million nonvested share-awards, respectively, as
the stock is not vested. During 2007 and 2008, an immaterial
amount of nonvested share-awards were not included in the
computation of diluted earnings per share because the effect
would have been anti-dilutive. The nonvested stock could
potentially dilute future earnings per share.
53
MOBILE
MINI, INC. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Long-Lived
Assets
Mobile Mini reviews long-lived assets for impairment whenever
events or changes in circumstances indicate the carrying amount
of such assets may not be fully recoverable. If this review
indicates the carrying value of these assets will not be
recoverable, as measured based on estimated undiscounted cash
flows over their remaining life, the carrying amount would be
adjusted to fair value. The cash flow estimates contain
managements best estimates, using appropriate and
customary assumptions and projections at the time. The Company
did not recognize any impairment losses in the year ended
December 31, 2007. The Company recognized impairment losses
of $1.2 million the year ended December 31, 2008
related to the restructuring of the Companys manufacturing
operations for vehicles and equipment the Company does not
anticipate using in the future.
Goodwill
Purchase prices of acquired businesses have been allocated to
the assets and liabilities acquired based on the estimated fair
values on the respective acquisition dates. Based on these
values, the excess purchase prices over the fair value of the
net assets acquired were allocated to goodwill. In 2008, the
Company completed the Merger by which MSG became a wholly-owned
subsidiary of Mobile Mini, Inc. Three other acquisitions of
businesses were asset purchases which results in the goodwill
relating to business acquisitions executed under asset purchase
agreements being deductible for income tax purposes over
15 years even though goodwill is not amortized for
financial reporting purposes. Our other acquisition in 2008 was
a stock purchase.
The Company evaluates goodwill periodically to determine whether
events or circumstances have occurred that would indicate
goodwill might be impaired. Pursuant to SFAS No. 142,
Goodwill and Other Intangible Assets, the Company has
assigned its goodwill to each of its three reporting units
(North America, U.K. and The Neatherlands). The Company performs
an annual impairment test on goodwill at December 31 using
the two-step process prescribed in SFAS No. 142. The
first step is a screen for potential impairment, while the
second step measures the amount of the impairment, if any. In
addition, the Company will perform impairment tests during any
reporting period in which events or changes in circumstances
indicate that an impairment may have incurred. At
December 31, 2008, the Company performed the first step of
the two-step impairment test and compared the fair value of each
reporting unit to its carrying value. In assessing the fair
value of the reporting units, the Company considered both the
market and income approaches. Under the market approach, the
fair value of the reporting unit is based on quoted market
prices of companies comparable to the reporting unit being
valued. Under the income approach, the fair value of the
reporting unit is based on the present value of estimated cash
flows. The income approach is dependent on a number of
significant management assumptions, including estimated future
revenue growth rates, gross margins on sales, operating margins,
capital expenditures and discount rates. Each approach was given
equal weight in arriving at the fair value of the reporting
unit. The Company determined the fair values of the U.K. and The
Netherlands reporting units were less than the carrying values
of the net assets of these reporting units, thus the Company
performed step two of the impairment test for these two
reporting units.
In step two of the impairment test, the Company is required to
determine the implied fair value of the goodwill and compare it
to the carrying value of the goodwill. The Company allocated the
fair value of the reporting units to the respective assets and
liabilities of each reporting unit as if the reporting units had
been acquired in separate and individual business combinations
and the fair value of the reporting units was the price paid to
acquire the reporting units. The excess of the fair value of the
reporting units over the amounts assigned to their respective
assets and liabilities is the implied fair value of goodwill.
For both reporting units in the step two testing, the implied
value of goodwill was less than the carrying value of goodwill,
resulting in an impairment charge of $13.7 million in the
fourth quarter of 2008. The Company reconciled the fair values
of its three reporting units in the aggregate to its market
capitalization at December 31, 2008. At December 31,
2008, after the effect of the impairment charges,
$435.5 million of the goodwill relates to the North America
reporting unit, $57.2 million relates to the U.K. reporting
unit, and $70,000 relates to The Netherlands reporting unit.
54
MOBILE
MINI, INC. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
The following table shows the activity and balances related to
goodwill from January 1, 2007 to December 31, 2008 (in
thousands):
|
|
|
|
|
Goodwill at January 1, 2007
|
|
$
|
76,456
|
|
Acquisitions
|
|
|
4,946
|
|
Adjustments(1)
|
|
|
(1,612
|
)
|
|
|
|
|
|
Goodwill at December 31, 2007
|
|
|
79,790
|
|
Acquisitions
|
|
|
452,607
|
|
Impairment(2)
|
|
|
(13,667
|
)
|
Adjustments(3)
|
|
|
(26,073
|
)
|
|
|
|
|
|
Goodwill at December 31, 2008
|
|
$
|
492,657
|
|
|
|
|
|
|
|
|
|
(1) |
|
Includes $1.9 million tax related adjustments associated
with the acquisition of Royal Wolf in 2006, partially offset by
foreign currency translation adjustments. |
|
(2) |
|
Includes goodwill impairment of approximately $12.8 million
related to the U.K. reporting unit and $900 thousand related to
The Netherlands reporting unit. |
|
(3) |
|
Represents foreign currency translation adjustments related to
the U.K. and The Netherlands reporting units. |
Fair
Value of Financial Instruments
The Company determines the estimated fair value of financial
instruments using available market information and valuation
methodologies. Considerable judgment is required in estimating
fair values. Accordingly, the estimates may not be indicative of
the amounts it could realize in a current market exchange.
The carrying amounts of cash, receivables, accounts payable and
accrued liabilities approximate fair values based on the
liquidity of these financial instruments or based on their
short-term nature. The carrying amounts of the Companys
borrowings under its credit facility and notes payable
approximate fair value. The fair values of the Companys
notes payable and credit facility are estimated using discounted
cash flow analyses, based on its current incremental borrowing
rates for similar types of borrowing arrangements. Based on the
borrowing rates currently available to the Company for bank
loans with similar terms and average maturities, the fair value
of fixed rate notes payable at December 31, 2007 and 2008,
approximated the book values. The fair value of the
Companys Senior Notes at December 31, 2007
($149.4 million principal amount outstanding) and 2008
($345.8 million principal amount outstanding), was
approximately $136.5 million and $244.0 million,
respectively. The determination for fair value is based on the
latest sales price at the end of each fiscal year obtained from
a third-party institution.
Deferred
Financing Costs
Included in other assets and intangibles are deferred financing
costs of approximately $4.8 million and $17.5 million,
net of accumulated amortization of $1.8 million and
$4.3 million, at December 31, 2007 and 2008,
respectively. Costs to obtaining long-term financing, including
the Companys amended credit facility, are amortized over
the term of the related debt, using the straight-line method.
Amortizing the deferred financing costs using the straight-line
method approximates such costs using the effective interest
method.
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 risks 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.
55
MOBILE
MINI, INC. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
The Companys primary interest rate risk exposure results
from changes in short-term U.S. dollar interest rates. In
an effort to manage interest rate exposures, the Company may
enter into interest rate swaps, which convert its floating rate
debt to a fixed-rate and which it designates as cash flow
hedges. Interest expense on the borrowings under these
agreements is accrued using the fixed rates identified in the
swap agreements.
Mobile Mini had interest rate swap agreements totaling
$125.0 million at December 31, 2007 and
$200.0 million at December 31, 2008. The fixed
interest rate on the Companys five swap agreements at
December 31, 2008 range from 3.25% to 4.71%, averaging
4.03% plus the spread. Three swap agreements mature in 2010 and
five swap agreements mature in 2011.
Derivative transactions resulted in a charge to comprehensive
income at December 31, 2007, of $1.3 million, net of
income tax benefit of $0.8 million. At December 31,
2008, derivative transactions resulted in a charge to
comprehensive income of $6.3 million, net of income tax
benefit of $4.0 million. The Companys outstanding
interest rate swaps at December 31, 2007 had a fair-value
totaling approximately $1.3 million, and were included in
other assets in our consolidated balance sheet. The
Companys outstanding interest rate swaps at
December 31, 2007 and 2008 had a fair-value totaling
approximately $1.3 and $11.5 million, respectively, and are
included in accrued liabilities in the consolidated balance
sheet.
Share-Based
Compensation
At December 31, 2008, the Company had three active
share-based employee compensation plans. Stock option awards
under these plans are granted with an exercise price per share
equal to the fair market value of the Companys common
stock on the date of grant. Each option must expire no more than
10 years from the date it is granted and historically
options are granted with vesting over a 4.5 year period.
The Company adopted SFAS No. 123(R) effective
January 1, 2006, using the modified prospective method.
SFAS No. 123(R) prohibits the recognition of a
deferred tax asset for an excess tax benefit that has not been
realized related to stock-based compensation deductions. The
Company adopted the
with-and-without
approach with respect to the ordering of tax benefits realized.
In the
with-and-without
approach, the excess tax benefit related to stock-based
compensation deductions will be recognized in additional paid-in
capital only if an incremental tax benefit would be realized
after considering all other tax benefits presently available to
us. Therefore, the Companys net operating loss
carryforward will offset current taxable income prior to the
recognition of the tax benefit related to stock-based
compensation deductions. In 2006, 2007 and 2008, there were
$3.6 million, $3.4 million and $0.4 million,
respectively, of excess tax benefits related to stock-based
compensation, which were not realized under this approach. Once
the Companys net operating loss carryforward is utilized,
these excess tax benefits, totaling $7.4 million, may be
recognized in additional paid-in capital.
Foreign
Currency Translation and Transactions
For Mobile Minis
non-U.S. operations,
the local currency is the functional currency. All assets and
liabilities are translated into dollars at period-end exchange
rates and all income statement amounts are translated at the
average exchange rate for each month within the year.
Use of
Estimates
The preparation of financial statements in conformity with
accounting principles generally accepted in the
U.S. requires management to make estimates and assumptions
that affect the amounts reported in the accompanying
consolidated financial statements and the notes to those
statements. Actual results could differ from those estimates.
The most significant estimates included within the financial
statements are the allowance for doubtful accounts, the
estimated useful lives and residual values on the lease fleet
and property, plant and equipment and goodwill and other asset
impairments.
56
MOBILE
MINI, INC. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Impact
of Recently Issued Accounting Standards
In September 2006, the Financial Accounting Standards Board
(FASB) issued Statement of Financial Accounting Standards (SFAS)
No. 157, Fair Value Measurement
(SFAS No. 157). SFAS No. 157 defines
fair value, establishes a framework for measuring fair value in
generally accepted accounting principles, and expands
disclosures about fair value measurements.
SFAS No. 157 is effective for fiscal years beginning
after November 15, 2007 and interim periods within those
fiscal years. The Company adopted SFAS No. 157 on
January 1, 2008, with no material effect on the
Companys consolidated financial statements.
On February 15, 2007, the FASB issued
SFAS No. 159, The Fair Value Option for Financial
Assets and Financial Liabilities (SFAS No. 159).
Under SFAS No. 159, the Company may elect to report
financial instruments and certain other items at fair value on a
contract-by-contract
basis with changes in value reported in earnings. This election
is irrevocable. SFAS No. 159 provides an opportunity
to mitigate volatility in reported earnings that is caused by
measuring hedged assets and liabilities that were previously
required to use a different accounting method than the related
hedging contracts when the complex provisions of
SFAS No. 133, Accounting for Derivative Instruments
and Hedging Activities, applicable to hedge accounting are
not met. The Company adopted SFAS No. 159 on
January 1, 2008. The Company chose not to elect the fair
value option for its financial assets and liabilities existing
at January 1, 2008 and did not elect the fair value option
on any financial assets or liabilities transacted in the year
ended December 31, 2008. Therefore, the adoption of
SFAS No. 159 had no impact on the Companys
consolidated financial statements.
In December 2007, the FASB issued SFAS No. 141
(revised 2007), Business Combinations
(SFAS No. 141(R)) which establishes principles and
requirements for how an acquirer recognizes and measures in its
financial statements the identifiable assets acquired, the
liabilities assumed and any noncontrolling interest in an
acquiree, including the recognition and measurement of goodwill
acquired in a business combination. Certain forms of contingent
consideration and certain acquired contingencies will be
recorded at fair value at the acquisition date.
SFAS No. 141(R) also states acquisition costs will
generally be expensed as incurred and restructuring costs will
be expensed in periods after the acquisition date. The Company
will apply SFAS No. 141(R) prospectively to business
combinations with an acquisition date on or after
January 1, 2009.
In December 2007, the FASB issued SFAS No. 160,
Noncontrolling Interests in Consolidated Financial
Statements An Amendment of ARB No. 51
(SFAS No. 160). SFAS No. 160 amends
Accounting Research Bulletin ARB No. 51,
Consolidated Financial Statements, to establish
accounting and reporting standards for the noncontrolling
interest in a subsidiary and for the deconsolidation of a
subsidiary. SFAS No. 160 becomes effective beginning
January 1, 2009. Presently, there are no noncontrolling
interests in any of the Companys consolidated
subsidiaries; therefore, the Company does not expect the
adoption of SFAS No. 160 to have a significant impact
on the Companys results of operations or financial
condition.
In March 2008, the FASB issued SFAS No. 161,
Disclosures about Derivative Instruments and Hedging
Activities An Amendment of FASB Statement
No. 133 (SFAS No. 161).
SFAS No. 161 requires qualitative disclosures about
objectives and strategies for using derivatives, quantitative
data about the fair value of and gains and losses on derivative
contracts and details of credit-risk-related contingent features
in hedged positions. The statement also requires enhanced
disclosures regarding how and why entities use derivative
instruments, how derivative instruments and related hedged items
are accounted and how derivative instruments and related hedged
items affect entities financial position, financial
performance and cash flows. SFAS No. 161 is effective
for fiscal periods beginning after November 15, 2008. The
Company does not expect the adoption of SFAS No. 161
will have a material effect on the Companys results of
operations or financial position.
In April 2008, the FASB issued FSP
FAS 142-3,
Determining the Useful Life of Intangible Assets (FSP
FAS 142-3).
FSP
FAS 142-3
amends the factors to be considered in determining the useful
life of intangible assets. Its intent is to improve the
consistency between the useful life of an intangible asset and
the period of expected cash flows used to measure its fair
value. FSP
FAS 142-3
is effective for fiscal years beginning after December 15,
2008.
57
MOBILE
MINI, INC. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
The Company currently adheres to the principle set forth in FSP
FAS 142-3
and does not expect its adoption to materially affect the
Companys results of operations or financial condition.
In November 2008, the FASB ratified EITF Issue
No. 08-7,
Accounting for Defensive Intangible Assets (EITF
No. 08-7).
EITF
No. 08-7
applies to defensive intangible assets, which are acquired
intangible assets that the acquirer does not intend to actively
use but intends to hold to prevent its competitors from
obtaining access to them. As these assets are separately
identifiable, EITF
No. 08-7
requires an acquiring entity to account for defensive intangible
assets as a separate unit of accounting. Defensive intangible
asset must be recognized at fair value in accordance with
SFAS No. 141(R) and SFAS No. 157. EITF
No. 08-7
is effective for defensive intangible assets acquired in fiscal
years beginning on or after December 15, 2008. We are
currently evaluating the potential impact, if any, that the
adoption of EITF
No. 08-7
will have on our results of operations for financial condition.
|
|
(2)
|
Fair
Value Measurements:
|
The Company adopted SFAS No. 157 on January 1,
2008. SFAS No. 157 defines fair value, as the price
that would be received from selling an asset or paid to transfer
a liability in an orderly transaction between market
participants. As such, fair value is a market-based measurement
that should be determined based on assumptions that market
participants would use in pricing an asset or liability. As a
basis for considering such assumptions, SFAS No. 157
establishes a three-tier fair value hierarchy, which prioritizes
the inputs used in measuring fair value as follows:
Level 1 Observable inputs such as quoted prices in active
markets for identical assets or liabilities;
Level 2 Observable inputs, other than Level 1 inputs in
active markets, that are observable either directly or
indirectly; and
Level 3 Unobservable inputs for which there is little or no
market data, which require the reporting entity to develop its
own assumptions
Assets and liabilities measured at fair value on a recurring
basis are as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quoted
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Prices in
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Active Markets for
|
|
|
Significant
|
|
|
Significant
|
|
|
|
|
|
|
Fair Value
|
|
|
Identical
|
|
|
Other Observable
|
|
|
Unobservable
|
|
|
|
|
|
|
December 31,
|
|
|
Assets
|
|
|
Inputs
|
|
|
Inputs
|
|
|
Valuation
|
|
|
|
2008
|
|
|
(Level 1)
|
|
|
(Level 2)
|
|
|
(Level 3)
|
|
|
Technique
|
|
|
Interest rate swap agreements
|
|
$
|
(11,532
|
)
|
|
$
|
|
|
|
$
|
(11,532
|
)
|
|
$
|
|
|
|
|
(1
|
)
|
|
|
|
(1) |
|
The Companys interest rate swap agreements are not traded
on a market exchange; therefore, the fair values are determined
using valuation models which include assumptions about the LIBOR
yield curve at the reporting dates as well as counterparty
credit risk and the Companys own non-performance risk. The
Company has consistently applied these calculation techniques to
all periods presented. At December 31, 2008, the fair value
of interest rate swap agreements is recorded in accrued
liabilities in the Companys consolidated balance sheet. |
Mobile Minis lease fleet primarily consists of
remanufactured, modified and manufactured portable storage and
office units that are leased to customers under short-term
operating lease agreements with varying terms. Depreciation is
provided using the straight-line method over its units
estimated useful life, after the date the Company put the unit
in service, and are depreciated down to their estimated residual
values. The Companys depreciation policy on its steel
units uses an estimated useful life of 25 years with an
estimated residual value of 62.5%. Wood mobile office units are
depreciated over 20 years down to a 50% residual value. Van
trailers, which are a small part of the Companys fleet,
are depreciated over 7 years to a 20% residual value. Van
trailers are only added to the fleet in connection with
acquisitions of portable storage businesses. In the opinion of
management, estimated
58
MOBILE
MINI, INC. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
residual values do not cause carrying values to exceed net
realizable value. The Company continues to evaluate these
depreciation policies as more information becomes available from
other comparable sources and its own historical experience. The
Companys depreciation expense related to lease fleet for
2006, 2007 and 2008 was $12.0 million, $14.5 million
and $18.9 million, respectively. At December 31, 2007
and 2008, all of the Companys lease fleet units were
pledged as collateral under the credit facility (see
Note 4). Normal repairs and maintenance to the portable
storage and mobile office units are expensed as incurred.
Lease fleet at December 31, consists of the following:
|
|
|
|
|
|
|
|
|
|
|
2007
|
|
|
2008
|
|
|
|
(In thousands)
|
|
|
Steel storage containers
|
|
$
|
459,665
|
|
|
$
|
616,750
|
|
Offices
|
|
|
402,640
|
|
|
|
523,242
|
|
Van trailers
|
|
|
2,330
|
|
|
|
15,610
|
|
Other, primarily chassis
|
|
|
956
|
|
|
|
2,161
|
|
|
|
|
|
|
|
|
|
|
|
|
|
865,591
|
|
|
|
1,157,763
|
|
Accumulated depreciation
|
|
|
(62,668
|
)
|
|
|
(79,607
|
)
|
|
|
|
|
|
|
|
|
|
|
|
$
|
802,923
|
|
|
$
|
1,078,156
|
|
|
|
|
|
|
|
|
|
|
In connection with the Merger, Mobile Mini expanded its
revolving credit facility to increase its borrowing limit and to
include the combined assets of both Mobile Mini and Mobile
Storage Group as security for the facility.
On June 27, 2008, Mobile Mini and its subsidiaries,
(including Mobile Storage Group and its subsidiaries) entered
into an ABL Credit Agreement (the Credit Agreement) with
Deutsche Bank AG New York Branch and other lenders party
thereto. The Credit Agreement provides for a five-year,
$900.0 million revolving credit facility. Amounts borrowed
under the Credit Agreement and repaid or prepaid during the term
may be reborrowed. Outstanding amounts under the Credit
Agreement will bear interest at the Companys option at
either (i) LIBOR plus a defined margin, or (ii) the
Agent banks prime rate plus a margin. LIBOR loans will
initially bear interest at LIBOR plus 2.5% and base rate loans
will initially bear interest at the Agent banks prime rate
plus 1.0%. After the quarter ended June 30, 2009, the
applicable margins for each type of loan will range from 2.25%
to 2.75% for LIBOR loans and 0.75% to 1.25% for base rate loans
depending upon the Companys then-debt ratio at the
measurement date. All amounts outstanding under the Credit
Agreement are due on June 27, 2013.
Availability of borrowings under the Credit Agreement is subject
to a borrowing base calculation based upon a valuation of the
Companys eligible accounts receivable, eligible container
fleet (including containers held for sale,
work-in-process
and raw materials), machinery and equipment and real property,
each multiplied by an applicable advance rate or limit. The
lease fleet is appraised at least once annually by a third-party
appraisal firm and up to 90% of the lesser of cost or appraised
orderly liquidation value, as defined, may be included in the
borrowing base to determine how much the Company may borrow
under this facility.
The Credit Agreement provides for U.K. borrowings, denominated
in either Pounds Sterling or Euros, by the Companys
subsidiary Mobile Mini U.K. Limited based upon a U.K. borrowing
base and for U.S. borrowings which are denominated in
Dollars, by Mobile Mini based upon a U.S. and Canada
borrowing base.
The Companys obligations and those of its subsidiaries
under the Credit Agreement are secured by a blanket lien on
substantially all of the Companys assets.
The Credit Agreement also contains customary negative covenants
applicable to Mobile Mini and its subsidiaries, including
covenants that restrict their ability to, among other things,
(i) make capital expenditures in excess of defined limits,
(ii) allow certain liens to attach to the Company or its
subsidiary assets, (iii) repurchase
59
MOBILE
MINI, INC. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
or pay dividends or make certain other restricted payments on
capital stock and certain other securities, or prepay certain
indebtedness, (iv) incur additional indebtedness or engage
in certain other types of financing transactions, and
(v) make acquisitions or other investments.
Mobile Mini also must comply with specified financial covenants
and affirmative covenants. Only if the Company falls below
specified borrowing availability levels, are financial
maintenance covenants applicable with set maximum permitted
values for its leverage ratio (as defined), fixed charge
coverage ratios and its minimum required utilization rates. At
December 31, 2007 and December 31, 2008, the Company
was in compliance with its covenants.
The weighted average interest rate under the line of credit,
including the effect of applicable interest rate swap
agreements, was approximately 6.3% in 2007 and 5.8% in 2008. The
average balance outstanding during 2007 and 2008 was
approximately $210.9 million and $413.8 million,
respectively.
Mobile Mini has interest rate swap agreements under which it
effectively fixed the interest rate payable on
$200.0 million of borrowings under the Companys
credit facility so that the interest rate is based on a spread
from a fixed rate rather than a spread from the LIBOR rate. The
Company accounts for the swap agreements in accordance with
SFAS No. 133 and the aggregate change in the fair
value of the interest rate swap agreements resulted in a charge
to comprehensive income for the year ended December 31,
2008 of $6.3 million, net of applicable income tax benefit
of $4.0 million.
In connection with the Merger, Mobile Mini paid down the
outstanding balances of its and Mobile Storage Groups
then-existing revolving credit facilities. The Company financed
these pay-downs through a borrowing at closing under its Credit
Agreement.
The Company evaluated the expansion of its revolving credit
facility under the provisions of
EITF 98-14,
Debtors Accounting for Changes in Line-of-Credit or
Revolving-Debt Arrangements, and as the new borrowing
capacity under the Credit Agreement exceeds that under the
original revolving credit facility, unamortized deferred
financing costs have been added to the costs incurred as part of
the Credit Agreement.
Notes payable at December 31, consist of the following:
|
|
|
|
|
|
|
|
|
|
|
2007
|
|
|
2008
|
|
|
|
(In thousands)
|
|
|
Notes payable to financial institution, interest at 5.94%,
payable in fixed monthly installments, matured June and July
2008, unsecured
|
|
$
|
743
|
|
|
$
|
|
|
Notes payable to financial institution, interest at 4.81%
payable in fixed monthly installments, maturing August 2009,
unsecured
|
|
|
|
|
|
|
1,026
|
|
Other notes payable, maturing through 2011
|
|
|
|
|
|
|
354
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
743
|
|
|
$
|
1,380
|
|
|
|
|
|
|
|
|
|
|
|
|
(6)
|
Obligations
Under Capital Leases:
|
At December 31, 2007, obligations under capital leases of
$10,000 were for office-related equipment.
At December 2008, obligations under capital leases are for
certain forklifts, storage containers and office related
equipment with an outstanding balance of $5.5 million. The
lease agreements provide the Company with a purchase option at
the end of the lease term based on an
agreed-upon
percentage of the original cost of the equipment. The leases
have been capitalized using interest rates ranging from
approximately 5.6% to 8.5%. The leases are secured by the
equipment under lease. Assets recorded under capital lease
obligations totaled approximately $6.0 million as of
December 31, 2008. Related accumulated amortization totaled
approximately $300,000
60
MOBILE
MINI, INC. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
as of December 31, 2008. The assets acquired under capital
leases and related accumulated amortization is included in
property, plant and equipment, net, and lease fleet, net, in the
consolidated balance sheets. The related amortization is
included in depreciation and amortization expense in the
Consolidated Statements of Income.
Future minimum capital lease payments at December 31, 2008
are as follows (in thousands):
|
|
|
|
|
2009
|
|
$
|
1,801
|
|
2010
|
|
|
1,738
|
|
2011
|
|
|
1,432
|
|
2012
|
|
|
912
|
|
2013
|
|
|
311
|
|
Thereafter
|
|
|
160
|
|
|
|
|
|
|
Total
|
|
|
6,354
|
|
Amount representing interest
|
|
|
(857
|
)
|
|
|
|
|
|
Present value of minimum lease payments
|
|
$
|
5,497
|
|
|
|
|
|
|
|
|
(7)
|
Equity
and Debt Issuances:
|
Mobile
Mini Supplemental Indenture
In connection with the Merger, Mobile Mini entered into a
Supplemental Indenture, dated as of June 27, 2008 (the
Mobile Mini Supplemental Indenture), with Mobile Storage Group,
Inc., a Delaware corporation, A Better Mobile Storage Company, a
California corporation and Mobile Storage Group (Texas), LP, a
Texas limited partnership (the New Mobile Mini Guarantors), the
guarantors (the Existing Mobile Mini Guarantors) party to the
Mobile Mini Indenture and Law Debenture Trust Company of
New York, as trustee (LDTC), pursuant to which the New Mobile
Mini Guarantors became Guarantors for all purposes
under the Mobile Mini Indenture. Mobile Mini, the Existing
Mobile Mini guarantors and LDTC previously entered into an
Indenture (the Mobile Mini Indenture), dated as of May 7,
2007, pursuant to which Mobile Mini issued $150.0 million
in aggregate principal amount of its 6.875% Senior Notes
due 2015 (the Mobile Mini Notes).
MSG
Supplemental Indenture
In connection with the Merger, Mobile Mini entered into a
Supplemental Indenture, dated as of June 27, 2008 (the MSG
Supplemental Indenture), with Mobile Mini of Ohio LLC, a
Delaware limited liability company, Mobile Mini, LLC, a
California limited liability company, Mobile Mini, LLC, a
Delaware limited liability company, Mobile Mini I, Inc., an
Arizona corporation, A Royal Wolf Portable Storage, Inc., a
California corporation, Temporary Mobile Storage, Inc., a
California corporation, Delivery Design Systems, an Arizona
corporation, Mobile Mini Texas Limited Partnership, LLP, a Texas
limited liability partnership (collectively, the New MSG
Guarantors), A Better Mobile Storage Company, a California
corporation, and Mobile Storage Group (Texas), LP, a Texas
limited partnership (the Existing MSG Guarantors), Mobile
Storage Group, Inc., a Delaware corporation, and Wells Fargo
Bank, N.A., as trustee (Wells Fargo), pursuant to which Mobile
Mini became an Issuer for all purposes under the MSG
Indenture (as defined below) and the New MSG Guarantors became
Guarantors for all purposes under the MSG Indenture.
Mobile Storage Group, Inc. and Mobile Services Group, Inc., a
Delaware corporation (the Original Issuers), the Existing MSG
Guarantors and Wells Fargo previously entered into an Indenture
(the MSG Indenture), dated as of August 1, 2006, pursuant
to which the Original Issuers issued $200.0 million in
aggregate principal amount of 9.75% Senior Notes due 2014
(the MSG Notes). The MSG Indenture includes covenants,
indemnities and events of default that are customary for
indentures of this type, including restrictions on the
incurrence of additional debt, sales of assets and payment of
dividends.
61
MOBILE
MINI, INC. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Future
Debt Obligations
The scheduled maturity for debt obligations under Mobile
Minis revolving line of credit, notes payable, obligations
under capital leases and Senior Notes for balances outstanding
at December 31, 2008 are as follows (in thousands):
|
|
|
|
|
2009
|
|
$
|
2,646
|
|
2010
|
|
|
1,644
|
|
2011
|
|
|
1,298
|
|
2012
|
|
|
847
|
|
2013
|
|
|
554,818
|
|
Thereafter
|
|
|
350,156
|
|
|
|
|
|
|
|
|
$
|
911,409
|
|
|
|
|
|
|
Preferred
Stock
In connection with the Merger, Mobile Mini issued
8.6 million shares of its Series A Convertible
Redeemable Participating Preferred Stock, to MSGs
stockholders. The shares were determined to have an initial fair
value of $196.6 million based upon a third party valuation.
The shares have a liquidation preference of $154.0 million.
The preferred stock votes with Mobile Minis common stock
as a single class. It ranks senior to the common stock only with
respect to a distribution upon the occurrence of the bankruptcy,
liquidation, dissolution or winding up of Mobile Mini. Holders
of a majority of the shares of preferred stock, may require the
Company to redeem all of the outstanding preferred stock
(i) if the Company enters into a binding agreement in
respect of a sale of the Company (as defined in the Certificate
of Designation for the preferred stock) at a sale price of less
than $23.00 per share or (ii) at any time after the tenth
anniversary of the preferred stock issuance date. If such
majority holders do not exercise their redemption rights
following either of these events, the Company at its option may
redeem the preferred stock. The preferred stock is convertible
into 8.6 million shares of the Companys common stock
at any time at the option of the holders, representing an
initial conversion price of $18.00 per common share. The
preferred stock will be mandatorily convertible into the
Companys common stock if, after the first anniversary of
the issuance of the preferred stock, its common stock trades
above $23.00 per share for a period of 30 consecutive days. The
preferred stock will not have any cash or
payment-in-kind
dividends (unless and until a dividend is paid with respect to
the common stock, in which case dividends will be paid on an
equal basis with the common stock, on an as-converted basis) and
does not impose any financial covenants upon the Company.
Under a Stockholders Agreement entered into with the sellers of
MSG, Mobile Mini must use all commercially reasonable efforts to
file a shelf registration statement on
Form S-3
under the U.S. Securities Act of 1933, as amended, before
April 27, 2009 covering all of the shares of Mobile Mini
common stock issuable upon conversion of the preferred stock and
any shares of its common stock received in respect of the
preferred stock (called the registrable securities) then held by
any Mobile Storage Group stockholders party to the Stockholders
Agreement to enable the resale of such registrable securities
after June 27, 2009.
The registration rights granted in the Stockholders Agreement
are subject to customary restrictions such as blackout periods
and limitations on the number of shares to be included in any
underwritten offering imposed by the managing underwriter. In
addition, the Stockholders Agreement contains other limitations
on the timing and ability of the holders of registrable
securities to exercise demands.
62
MOBILE
MINI, INC. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Income (loss) before taxes for the years ended December 31,
consisted of the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2006
|
|
|
2007
|
|
|
2008
|
|
|
|
(In thousands)
|
|
|
U.S.
|
|
$
|
69,260
|
|
|
$
|
75,355
|
|
|
$
|
70,534
|
|
Other Nations
|
|
|
667
|
|
|
|
(2,769
|
)
|
|
|
(13,493
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
69,927
|
|
|
$
|
72,586
|
|
|
$
|
57,041
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The provision (benefit) for income taxes for the years ended
December 31, consisted of the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2006
|
|
|
2007
|
|
|
2008
|
|
|
|
(In thousands)
|
|
|
Current:
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Federal
|
|
$
|
250
|
|
|
$
|
|
|
|
$
|
|
|
State
|
|
|
238
|
|
|
|
413
|
|
|
|
210
|
|
Other Nations
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
488
|
|
|
|
413
|
|
|
|
210
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred:
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Federal
|
|
|
22,961
|
|
|
|
24,845
|
|
|
|
26,549
|
|
State
|
|
|
3,407
|
|
|
|
3,978
|
|
|
|
2,662
|
|
Other Nations
|
|
|
295
|
|
|
|
(826
|
)
|
|
|
(1,421
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
26,663
|
|
|
|
27,997
|
|
|
|
27,790
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
27,151
|
|
|
$
|
28,410
|
|
|
$
|
28,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The components of the net deferred tax liability at
December 31, are approximately as follows:
|
|
|
|
|
|
|
|
|
|
|
2007
|
|
|
2008
|
|
|
|
(In thousands)
|
|
|
Deferred tax assets:
|
|
|
|
|
|
|
|
|
Net operating loss carryforwards
|
|
$
|
24,761
|
|
|
$
|
88,178
|
|
Deferred revenue and expenses
|
|
|
5,845
|
|
|
|
7,950
|
|
Accrued compensation and other benefits
|
|
|
2,423
|
|
|
|
4,454
|
|
Allowance for doubtful accounts
|
|
|
1,392
|
|
|
|
2,185
|
|
Other
|
|
|
2,312
|
|
|
|
4,542
|
|
|
|
|
|
|
|
|
|
|
Total deferred tax assets
|
|
|
36,733
|
|
|
|
107,309
|
|
Valuation allowance
|
|
|
(1,126
|
)
|
|
|
(1,126
|
)
|
|
|
|
|
|
|
|
|
|
Net deferred tax assets
|
|
|
35,607
|
|
|
|
106,183
|
|
|
|
|
|
|
|
|
|
|
Deferred tax liabilities:
|
|
|
|
|
|
|
|
|
Accelerated tax depreciation
|
|
|
(147,042
|
)
|
|
|
(239,794
|
)
|
Accelerated tax amortization
|
|
|
(11,277
|
)
|
|
|
(1,067
|
)
|
Other
|
|
|
(759
|
)
|
|
|
(108
|
)
|
|
|
|
|
|
|
|
|
|
Total deferred tax liabilities
|
|
|
(159,078
|
)
|
|
|
(240,969
|
)
|
|
|
|
|
|
|
|
|
|
Net deferred tax liabilities
|
|
$
|
(123,471
|
)
|
|
$
|
(134,786
|
)
|
|
|
|
|
|
|
|
|
|
63
MOBILE
MINI, INC. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
A deferred U.S. tax liability has not been provided on the
undistributed earnings of certain foreign subsidiaries because
it is Mobile Minis intent to permanently reinvest such
earnings. Undistributed earnings of foreign subsidiaries, which
have been, or are intended to be, permanently invested in
accordance with APB No. 23, Accounting for Income
Taxes Special Areas, aggregated approximately
$0.1 million and $0.1 million as of December 31,
2007 and 2008, respectively. A net deferred tax liability of
approximately $9.9 million related to the Companys
U.K. and The Netherlands operations have been combined with the
net deferred tax liabilities of its U.S. operations in its
consolidated balance sheet at December 31, 2008.
A reconciliation of the U.S. federal statutory rate to
Mobile Minis effective tax rate for the years ended
December 31, is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2006
|
|
|
2007
|
|
|
2008
|
|
|
U.S. federal statutory rate
|
|
|
35.0
|
%
|
|
|
35.0
|
%
|
|
|
35.0
|
%
|
State taxes, net of federal benefit
|
|
|
3.5
|
|
|
|
3.5
|
|
|
|
3.5
|
|
Non deductible expenses-other
|
|
|
0.4
|
|
|
|
0.6
|
|
|
|
1.6
|
|
Goodwill impairments
|
|
|
|
|
|
|
|
|
|
|
6.7
|
|
Foreign loss rate differential
|
|
|
|
|
|
|
|
|
|
|
2.3
|
|
Change in valuation allowance
|
|
|
(0.1
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
38.8
|
%
|
|
|
39.1
|
%
|
|
|
49.1
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At December 31, 2008, Mobile Mini had a U.S. federal
net operating loss carryforward of approximately
$206.1 million, which expires if unused from 2017 to 2028.
At December 31, 2008, the Company had net operating loss
carryforwards in the various states in which it operates
totaling $145.7 million, which expire if unused from 2008
to 2028. At December 31, 2007 and 2008, the Companys
deferred tax assets do not include $7.0 million and
$7.4 million of excess tax benefits from employee stock
option exercises that are a component of its net operating loss
carryforward. Additional paid in capital will be increased by
$7.4 million if and when such excess tax benefits are
realized. Management evaluates the ability to realize its
deferred tax assets on a quarterly basis and adjusts the amount
of its valuation allowance if necessary. There has been no
change recorded in 2008 on the $1.1 million valuation
allowance relating to Royal Wolf tax attribute carryforwards.
Accelerated tax amortization primarily relates to amortization
of goodwill for income tax purposes.
On January 1, 2007, Mobile Mini adopted the provision of
FIN 48, Accounting for Uncertainty in Income Taxes-an
interpretation of FASB Statement No. 109. FIN 48
contains a two-step approach to recognizing and measuring
uncertain tax positions accounted for in accordance with
SFAS No. 109, Accounting for Income Taxes. The
first step is to evaluate the tax position for recognition by
determining if the weight of available evidence indicates that
it is more likely than not that the position will be sustained
on audit, including resolution of related appeals or litigation
process, if any. The second step is to measure the tax benefit
as the largest amount that is more than 50% likely of being
realized upon ultimate settlement.
The Company files U.S. federal tax returns, U.S. state
tax returns, and foreign tax returns. The Company has identified
its U.S. Federal tax return as its major tax
jurisdiction. For the U.S. Federal return, years 2005
through 2007 are subject to tax examination by the
U.S. Internal Revenue Service. The Company is currently
under audit for the years 2006 and 2007. The Company believes
that its income tax filing positions and deductions will be
sustained on audit and do not anticipate any adjustments that
will result in a material change to our financial position.
Therefore, no reserves for uncertain income tax positions have
been recorded pursuant to FIN 48. The Company does not
anticipate that the total amount of unrecognized tax related to
any particular tax benefit position will change significantly
within the next 12 months.
The Companys policy for recording interest and penalties
associated with audits is to record such items as a component of
income before taxes. Penalties and associated interest costs are
recorded in leasing, selling and general expenses in its
consolidated statements of income.
64
MOBILE
MINI, INC. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
As a result of stock ownership changes during the years
presented, it is possible that the Company has undergone a
change in ownership for federal income tax purposes, which can
limit the amount of net operating loss currently available as a
deduction. Management has determined that even if such an
ownership change has occurred, it would not impair the
realization of the deferred tax asset resulting from the federal
net operating loss carryover.
Mobile Mini paid income taxes of approximately
$0.7 million, $0.8 million and $0.7 million in
2006, 2007 and 2008, respectively. These amounts are lower than
the recorded expense in the years due to net operating loss
carryforwards and general business credit utilization.
|
|
(9)
|
Transactions
with Related Persons:
|
When Mobile Mini was a private company prior to 1994, it leased
some of its properties from entities originally controlled by
its founder, Richard E. Bunger, and his family members. These
related party leases remain in effect. The Company leases a
portion of the property comprising its Phoenix location and the
property comprising its Tucson location from entities owned by
Steven G. Bunger and his siblings. Steven G. Bunger is Mobile
Minis President and Chief Executive Officer and has served
as its Chairman of the Board since February 2001. Annual lease
payments under these leases totaled approximately $91,000,
$94,000 and $98,000 in 2006, 2007 and 2008, respectively. The
term of each of these leases expired on December 31, 2008,
and the Company expects to renew these leases through
December 31, 2013 on terms approved by the Companys
Board of Directors. Mobile Mini leases its Rialto, California
facility from Mobile Mini Systems, Inc., a corporation wholly
owned by Barbara M. Bunger, the mother of Steven G. Bunger.
Annual lease payments in 2006, 2007 and 2008 under this lease
were approximately $277,000, $282,000 and $295,000,
respectively. The Rialto lease expires on April 1, 2016.
Management believes that the rental rates reflect the fair
market rental value of these properties or were less than the
fair market rental value. The terms of these related persons
lease agreements have been reviewed and approved by the
independent directors who comprise a majority of the members of
the Companys Board of Directors.
It is Mobile Minis intention not to enter into any
additional related person transactions other than extensions of
these lease agreements.
|
|
(10)
|
Share-Based
Compensation:
|
Prior to January 1, 2006, the Company accounted for
share-based employee compensation, including stock options,
using the method prescribed in APB No. 25. Under APB
No. 25, the stock options granted at market price, no
compensation cost was recognized, and a disclosure was made
regarding the pro forma effect on net earnings assuming
compensation cost had been recognized in accordance with
SFAS No. 123. Effective January 1, 2006, the
Company adopted SFAS No. 123(R) using the modified
prospective method.
In 2005, the Company began awarding nonvested shares under the
existing share-based compensation plans. The majority of the
Companys nonvested share-awards vest in equal annual
installments over a five year period. The total value of these
awards is expensed on a straight-line basis over the service
period of the employees receiving the grants. The service
period is the time during which the employees receiving
grants must remain employees for the shares granted to fully
vest. In December 2007, the Company granted to certain of its
executive officers 71,899 nonvested share- awards with vesting
subject to a performance condition. Vesting for these
share-awards is dependent upon the officers fulfilling the
service period requirements, as well as the Company meeting
certain EBITDA targets in each of the next four years. At the
date of grant, the EBITDA targets were not known, and as such,
the measurement date for the nonvested share-awards had not yet
occurred. This target was established by Mobile Minis
Board of Directors on February 20, 2008, at which point,
the value of each nonvested share-award was $15.85. The Company
is required to assess the probability that such performance
conditions will be met. If the likelihood of the performance
condition being met is deemed probable, the Company will
recognize the expense using accelerated attribution method. The
accelerated attribution method could result in as much as 50% of
the total value of the shares being recognized in the first year
of the service period if each of the four future targets is
assessed
65
MOBILE
MINI, INC. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
as probable of being met. Share-based payment expense related to
the vesting of share-awards during the year ended
December 31, 2008, was approximately $3.5 million. As
of December 31, 2008, the unrecognized compensation cost
related to share-awards was approximately $18.6 million,
which is expected to be recognized over a weighted-average
period of approximately 3.7 years.
Aggregate share-based payment expense was $5.7 million and $4.0
million for the periods ended December 31, 2008 and 2007,
respectively.
The total value of the stock option awards is expensed on a
straight-line basis over the service period of the employees
receiving the awards. As of December 31, 2008, total
unrecognized compensation cost related to stock option awards
was approximately $2.5 million and the related
weighted-average period over which it is expected to be
recognized is approximately 1.3 years.
Prior to the adoption of SFAS No. 123(R), the Company
presented all tax benefits for deductions resulting from the
exercise of stock options as operating cash flows as a change in
deferred income tax in the consolidated statements of cash
flows. SFAS No. 123(R) requires the cash flows
resulting from the tax benefits arising from tax deductions in
excess of the compensation cost recognized for those options
(excess tax benefits) to be classified as financing cash flows.
As of December 31, 2008, the Company had no tax benefits
arising from tax deductions in excess of the compensation cost
recognized because the benefit has not been realized
given that the Company currently has net operating loss
carryforwards and follow the
with-and-without
approach with respect to the ordering of tax benefits realized.
The following table summarizes the share-based compensation
expense and capitalized amounts for the years ending December 31
(in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2006
|
|
|
2007
|
|
|
2008
|
|
|
Gross share-based compensation
|
|
$
|
3,431
|
|
|
$
|
4,584
|
|
|
$
|
6,521
|
|
Capitalized share-based compensation
|
|
|
(365
|
)
|
|
|
(556
|
)
|
|
|
(865
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Share-based compensation expense
|
|
$
|
3,066
|
|
|
$
|
4,028
|
|
|
$
|
5,656
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The following table summarizes the activities under the
Companys stock option plans for the years ended December
31 (number of shares in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2006
|
|
|
2007
|
|
|
2008
|
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
|
Average
|
|
|
|
|
|
Average
|
|
|
|
|
|
Average
|
|
|
|
Number of
|
|
|
Exercise
|
|
|
Number of
|
|
|
Exercise
|
|
|
Number of
|
|
|
Exercise
|
|
|
|
Shares
|
|
|
Price
|
|
|
Shares
|
|
|
Price
|
|
|
Shares
|
|
|
Price
|
|
|
Options outstanding, beginning of year
|
|
|
2,964
|
|
|
$
|
14.00
|
|
|
|
2,609
|
|
|
$
|
15.86
|
|
|
|
2,028
|
|
|
$
|
17.03
|
|
Granted
|
|
|
215
|
|
|
|
29.99
|
|
|
|
9
|
|
|
|
30.47
|
|
|
|
|
|
|
|
|
|
Canceled/Expired
|
|
|
(71
|
)
|
|
|
(20.02
|
)
|
|
|
(71
|
)
|
|
|
(21.67
|
)
|
|
|
(144
|
)
|
|
|
(17.46
|
)
|
Exercised
|
|
|
(499
|
)
|
|
|
(10.26
|
)
|
|
|
(519
|
)
|
|
|
(10.80
|
)
|
|
|
(134
|
)
|
|
|
(10.98
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options outstanding, end of year
|
|
|
2,609
|
|
|
$
|
15.87
|
|
|
|
2,028
|
|
|
$
|
17.02
|
|
|
|
1,750
|
|
|
$
|
17.45
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options exercisable, end of year
|
|
|
1,425
|
|
|
$
|
13.95
|
|
|
|
1,344
|
|
|
$
|
15.63
|
|
|
|
1,426
|
|
|
$
|
16.39
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options and awards available for grant, end of year
|
|
|
1,234
|
|
|
|
|
|
|
|
958
|
|
|
|
|
|
|
|
399
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
66
MOBILE
MINI, INC. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
A summary of nonvested share-awards activity within the
Companys share-based compensation plans and changes is as
follows (share amounts in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
|
Average
|
|
|
|
|
|
|
Grant Date
|
|
|
|
Shares
|
|
|
Fair Value
|
|
|
Nonvested at January 1, 2006
|
|
|
97
|
|
|
$
|
23.56
|
|
Awarded
|
|
|
182
|
|
|
|
29.59
|
|
Released
|
|
|
(19
|
)
|
|
|
23.56
|
|
Forfeited
|
|
|
(1
|
)
|
|
|
27.70
|
|
|
|
|
|
|
|
|
|
|
Nonvested at December 31, 2006
|
|
|
259
|
|
|
$
|
27.61
|
|
Awarded
|
|
|
339
|
|
|
|
19.47
|
|
Released
|
|
|
(58
|
)
|
|
|
27.26
|
|
Forfeited
|
|
|
(8
|
)
|
|
|
27.67
|
|
|
|
|
|
|
|
|
|
|
Nonvested at December 31, 2007
|
|
|
532
|
|
|
$
|
22.46
|
|
|
|
|
|
|
|
|
|
|
Awarded
|
|
|
673
|
|
|
|
15.78
|
|
Released
|
|
|
(149
|
)
|
|
|
22.16
|
|
Forfeited
|
|
|
(66
|
)
|
|
|
21.49
|
|
|
|
|
|
|
|
|
|
|
Nonvested at December 31, 2008
|
|
|
990
|
|
|
$
|
18.03
|
|
|
|
|
|
|
|
|
|
|
The total fair value of share-awards vested in 2008 was
$3.3 million. The total fair value of share-awards vested
in 2007 was $1.6 million.
Options outstanding and exercisable by price range as of
December 31, 2008 are as follows, (number of shares in
thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options Outstanding
|
|
|
Options Exercisable
|
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average
|
|
|
Weighted
|
|
|
|
|
|
Weighted
|
|
Range of
|
|
|
|
|
Remaining
|
|
|
Average
|
|
|
|
|
|
Average
|
|
Exercise
|
|
Options
|
|
|
Contractual
|
|
|
Exercise
|
|
|
Options
|
|
|
Exercise
|
|
Prices
|
|
Outstanding
|
|
|
Life
|
|
|
Price
|
|
|
Exercisable
|
|
|
Price
|
|
|
$ 7.33 - 9.40
|
|
|
76
|
|
|
|
3.54
|
|
|
$
|
7.43
|
|
|
|
76
|
|
|
$
|
7.43
|
|
9.93
|
|
|
215
|
|
|
|
4.73
|
|
|
|
9.93
|
|
|
|
215
|
|
|
|
9.93
|
|
10.44 - 10.51
|
|
|
34
|
|
|
|
1.68
|
|
|
|
10.49
|
|
|
|
34
|
|
|
|
10.49
|
|
14.11
|
|
|
387
|
|
|
|
5.66
|
|
|
|
14.11
|
|
|
|
275
|
|
|
|
14.11
|
|
16.46
|
|
|
533
|
|
|
|
2.95
|
|
|
|
16.46
|
|
|
|
533
|
|
|
|
16.46
|
|
16.82 - 20.55
|
|
|
35
|
|
|
|
6.54
|
|
|
|
20.18
|
|
|
|
33
|
|
|
|
20.29
|
|
24.65
|
|
|
286
|
|
|
|
6.43
|
|
|
|
24.65
|
|
|
|
156
|
|
|
|
24.65
|
|
27.56 - 30.44
|
|
|
139
|
|
|
|
7.49
|
|
|
|
28.79
|
|
|
|
75
|
|
|
|
29.00
|
|
31.10
|
|
|
5
|
|
|
|
3.14
|
|
|
|
31.10
|
|
|
|
2
|
|
|
|
31.10
|
|
33.98
|
|
|
40
|
|
|
|
4.66
|
|
|
|
33.98
|
|
|
|
27
|
|
|
|
33.98
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,750
|
|
|
|
|
|
|
|
|
|
|
|
1,426
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
67
MOBILE
MINI, INC. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
A summary of stock option activity, as of December 31,
2008, is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
|
|
|
|
|
|
|
Average
|
|
|
|
|
|
|
|
|
|
Weighted
|
|
|
Remaining
|
|
|
|
|
|
|
|
|
|
Average
|
|
|
Contractual
|
|
|
Aggregate
|
|
|
|
Number
|
|
|
Exercise
|
|
|
Term
|
|
|
Intrinsic
|
|
|
|
of Shares
|
|
|
Price
|
|
|
(In Years)
|
|
|
Value
|
|
|
|
(In thousands)
|
|
|
|
|
|
|
|
|
(In thousands)
|
|
|
Outstanding
|
|
|
1,750
|
|
|
$
|
17.45
|
|
|
|
4.81
|
|
|
$
|
1,754
|
|
Vested and expected to vest
|
|
|
1,590
|
|
|
$
|
16.87
|
|
|
|
4.64
|
|
|
$
|
1,742
|
|
Exercisable
|
|
|
1,426
|
|
|
$
|
16.39
|
|
|
|
4.44
|
|
|
$
|
1,719
|
|
The aggregate intrinsic value of options exercised during the
period ended December 31, 2006, 2007 and 2008 was
$9.7 million, $10.0 million and $1.3 million,
respectively.
The fair value of each stock option award is estimated on the
date of the grant using the Black-Scholes option pricing model.
The following are the weighted average assumptions used for the
periods noted:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
|
2006
|
|
|
2007
|
|
|
2008
|
|
|
Risk-free interest rate
|
|
|
4.79
|
%
|
|
|
4.59
|
%
|
|
|
n/a
|
|
Expected holding period (years)
|
|
|
3.2
|
|
|
|
3.0
|
|
|
|
n/a
|
|
Expected stock volatility
|
|
|
35.3
|
%
|
|
|
33.2
|
%
|
|
|
n/a
|
|
Expected dividend rate
|
|
|
0.0
|
%
|
|
|
0.0
|
%
|
|
|
n/a
|
|
The Black-Scholes option valuation model was developed for use
in estimating the fair value of short-traded options that have
no vesting restrictions and are fully transferable. In addition,
option valuation models require the input of assumptions
including expected stock price volatility. The risk-free
interest rate is based on the U.S. treasury security rate
in effect at the time of the grant. The expected holding period
of options and volatility rates are based on the Companys
historical data. The Company does not anticipate paying a
dividend, and therefore no expected dividend yield was used.
The weighted average fair value of stock options granted was
$9.15 and $8.56 for 2006 and 2007, respectively. There were no
stock options granted in 2008.
Stock
Option and Equity Incentive Plans
In August 1994, Mobile Minis Board of Directors adopted
the Mobile Mini, Inc. 1994 Stock Option Plan, which was amended
in 1998 and expired (with respect to granting additional
options) in 2003. At December 31, 2008, there were
outstanding options to acquire 12,000 shares under the 1994
Plan. In August 1999, the Companys Board of Directors
approved the Mobile Mini, Inc. 1999 Stock Option Plan. As of
December 31, 2008, there were outstanding options to
acquire 1.7 million shares under the 1999 Plan. Both plans
and amendments were approved by the stockholders at annual
meetings. Awards granted under the 1999 Plan may be incentive
stock options, which are intended to meet the requirements of
Section 422 of the Internal Revenue Code, nonstatutory
stock options or shares of restricted stock awards. Incentive
stock options may be granted to the Companys officers and
other employees. Nonstatutory stock options may be granted to
directors and employees, and to non-employee service providers
and share-awards may be made to officers and other employees.
In February 2006, Mobile Minis Board of Directors approved
the 2006 Equity Incentive Plan that was subsequently approved by
the stockholders at the Companys 2006 Annual Meeting. The
2006 Plan is an omnibus stock plan permitting a
variety of equity programs designed to provide flexibility in
implementing equity and cash awards, including incentive stock
options, nonqualified stock options, nonvested share-awards,
restricted stock
68
MOBILE
MINI, INC. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
units, stock appreciation rights, performance stock, performance
units and other stock-based awards. Participants in the 2006
Plan may be granted any one of the equity awards or any
combination of them, as determined by the Board of Directors or
the Compensation Committee. The 2006 Plan has reserved
1.2 million shares of common stock for issuance. As of
December 31, 2008, there were outstanding options to
acquire 29,000 shares under the 2006 Plan.
The purpose of these plans is to attract and retain the best
available personnel for positions of substantial responsibility
and to provide incentives to, and to encourage ownership of
stock by, Mobile Minis management and other employees. The
Board of Directors believes that stock options and other
share-based awards are important to attract and to encourage the
continued employment and service of officers and other employees
and encourage them to devote their best efforts to the
Companys business, thereby advancing the interest of its
stockholders.
The option exercise price for all options granted under these
plans may not be less than 100% of the fair market value of the
common stock on the date of grant of the option (or 110% in the
case of an incentive stock option granted to an optionee
beneficially owning more than 10% of the outstanding common
stock). The maximum option term is ten years (or five years in
the case of an incentive stock option granted to an optionee
beneficially owning more than 10% of the outstanding common
stock). Payment for shares purchased under these plans is made
in cash. Options may, if permitted by the particular option
agreement, be exercised by directing that certificates for the
shares purchased be delivered to a licensed broker as agent for
the optionee, provided that the broker tenders to Mobile Mini,
cash or cash equivalents equal to the option exercise price.
The plans are administered by the Compensation Committee of
Mobile Minis Board of Directors. The Compensation
Committee is comprised of independent directors. They determine
whether options will be granted, whether options will be
incentive stock options, nonstatutory option, restricted stock,
or performance stock which officers, employees and service
providers will be granted options, the vesting schedule for
options and the number of options to be granted. Each option
granted must expire no more than 10 years from the date it
is granted and historically they have vested over a
4.5 year period. Each non-employee director serving on the
Companys Board of Directors receives an automatic award of
shares of Mobile Minis common stock equivalent to $82,500
based on the closing price of the Companys common stock on
August 1 of that year, or the following trading day if August 1
is not a trading day. These awards vest 100% when granted.
The Board of Directors may amend the plans at any time, except
that approval by Mobile Minis stockholders may be required
for an amendment that increases the aggregate number of shares
which may be issued pursuant to each plan, changes the class of
persons eligible to receive incentive stock options, modifies
the period within which options may be granted, modifies the
period within which options may be exercised or the terms upon
which options may be exercised, or increases the material
benefits accruing to the participants under each plan. The Board
of Directors may terminate or suspend the plans at any time.
Unless previously terminated, the 1999 Plan will expire in
August 2009 and the 2006 Plan will expire in February 2016. Any
option granted under a plan will continue until the option
expiration date, notwithstanding earlier termination of the plan
under which the option was granted.
In 2005, the Company began awarding nonvested shares under the
existing share-based compensation plans. These nonvested shares
vest in equal annual installments on each of the first four or
five annual anniversaries of the award date, unless the person
to whom the award was made is not then employed by Mobile Mini
(or one of its subsidiaries). In 2006 and 2007, certain officers
of the Company received performance based nonvested shares. The
Company did not grant performance based shares in 2008. If
employment terminates, the nonvested shares are forfeited by the
former employee.
In June 2008, in conjunction with the Merger and the hiring of
Mobile Storage Groups employees, the Company awarded
nonvested share-awards for an aggregate of 157,535 shares
with an aggregate fair value of $3.2 million. These awards
vest over a period of between one and five years. The total
value of these awards is expensed on a straight-line basis over
the service period.
69
MOBILE
MINI, INC. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
401(k)
and Retirement Plans
In 1995, the Company established a contributory retirement plan
in the U.S., the 401(k) Plan, covering eligible employees with
at least one year of service. The 401(k) Plan is designed to
provide tax-deferred retirement benefits to employees in
accordance with the provisions of Section 401(k) of the
Internal Revenue Code.
The 401(k) Plan provides that each participant may annually
contribute a fixed amount or a percentage of his or her salary,
not to exceed the statutory limit. Mobile Mini may make a
qualified non-elective contribution in an amount it determines.
Under the terms of the 401(k) Plan, Mobile Mini may also make
discretionary profit sharing contributions. Profit sharing
contributions are allocated among participants based on their
annual compensation. Each participant has the right to direct
the investment of their funds among certain named plans. Mobile
Mini contributes 25% of employees first 4% of
contributions up to a maximum of $2 thousand per employee. The
Company has a similar plan as governed and regulated by Canadian
law, where the Company makes matching contributions with the
same limitations as our 401(k) plan, to its Canadian employees.
In the U.K., the Companys employees are covered by a
defined contribution program. The employees become eligible to
participate three months after they begin employment. The plan
is designed as a retirement benefit program into which the
Company pays a fixed 7% of the annual employees salary
into the plan. Each employee has the election to make further
contributions if they so elect. The participants have the right
to direct the investment of their funds among certain named
plans. A charge of 1% is deducted annually from each
employees fund to cover the administrative costs of this
program.
In The Netherlands, the Companys employees are covered by
a defined contribution program. All employees become eligible
after one month of employment. Contributions are based on a
pre-defined percentage of the employees earnings. The
percentage contribution is based on the employees age,
with two-thirds of the contribution made by the Company and
one-third made by the employee. The Company does not incur any
administrative costs for this plan in 2008.
Mobile Mini made contributions to these plans of approximately
$0.2 million, $0.4 million and $0.7 million in
2006, 2007 and 2008, respectively. Additionally, the Company
incurred approximately $6,000 in each of those three years for
administrative costs for these programs.
|
|
(12)
|
Commitments
and Contingencies:
|
Leases
As discussed more fully in Note 9, Mobile Mini is obligated
under four noncancelable operating leases with related parties.
The Company also leases its corporate offices and other
properties and operating equipment from third parties under
noncancelable operating leases. Rent expense under these
agreements was approximately $8.6 million,
$10.2 million and $12.3 million for the years ended
December 31, 2006, 2007 and 2008, respectively.
As of December 31, 2008, contractual commitments associated
with indebtedness, lease obligations and restructuring are as
follows (in thousands).
70
MOBILE
MINI, INC. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Restructuring
|
|
|
Restructuring
|
|
|
|
|
|
|
Lease
|
|
|
Related Lease
|
|
|
Sub-lease
|
|
|
|
|
|
|
Commitments
|
|
|
Commitments
|
|
|
Income
|
|
|
Total
|
|
|
|
(In thousands)
|
|
|
2009
|
|
$
|
14,072
|
|
|
$
|
3,441
|
|
|
$
|
(724
|
)
|
|
$
|
16,789
|
|
2010
|
|
|
11,680
|
|
|
|
2,945
|
|
|
|
(639
|
)
|
|
|
13,986
|
|
2011
|
|
|
9,194
|
|
|
|
2,254
|
|
|
|
(507
|
)
|
|
|
10,941
|
|
2012
|
|
|
7,299
|
|
|
|
1,897
|
|
|
|
(525
|
)
|
|
|
8,671
|
|
2013
|
|
|
6,316
|
|
|
|
1,397
|
|
|
|
(542
|
)
|
|
|
7,171
|
|
Thereafter
|
|
|
13,616
|
|
|
|
2,656
|
|
|
|
(513
|
)
|
|
|
15,759
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
62,177
|
|
|
$
|
14,590
|
|
|
$
|
(3,450
|
)
|
|
$
|
73,317
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The above table includes certain real estate leases that expire
in 2008, but have lease renewal options that the Company
currently anticipates to exercise in 2008 at the end of the
initial lease period.
Future minimum lease payments under restructured non-cancelable
operating leases as of December 31, 2008, are included in
accrued liabilities in the consolidated balance sheet. See
Note 14 for a further discussion on restructuring related
commitments.
Insurance
The Company maintains insurance coverage for its operations and
employees with appropriate aggregate, per occurrence and
deductible limits as the Company reasonably determines is
necessary or prudent with current operations and historical
experience. The majority of these coverages have large
deductible programs which allow for potential improved cash flow
benefits based on its loss control efforts.
The Companys employee group health insurance program is a
self-insured program with an aggregate stop loss limit. The
insurance provider is responsible for funding all claims in
excess of the calculated monthly maximum liability. This
calculation is based on a variety of factors including the
number of employees enrolled in the plan. This plan allows for
some cash flow benefits while guarantying a maximum premium
liability. Actual results may vary from estimates based on the
Companys actual experience at the end of the plan policy
periods based on the carriers loss predictions and its
historical claims data.
The Companys workers compensation, auto and general
liability insurance are purchased under large deductible
programs. The Companys current per incident deductibles
are: workers compensation $250,000, auto $250,000 and
general liability $100,000. The Company expenses the deductible
portion of the individual claims. However, the Company generally
does not know the full amount of its exposure to a deductible in
connection with any particular claim during the fiscal period in
which the claim is incurred and for which it must make an
accrual for the deductible expense. The Company makes these
accruals based on a combination of the claims development
experience of its staff and its insurance companies, and, at
year end, the accrual is reviewed and adjusted, in part, based
on an independent actuarial review of historical loss data and
using certain actuarial assumptions followed in the insurance
industry. A high degree of judgment is required in developing
these estimates of amounts to be accrued, as well as in
connection with the underlying assumptions. In addition, the
Companys assumptions will change as its loss experience is
developed. All of these factors have the potential for
significantly impacting the amounts the Company has previously
reserved in respect of anticipated deductible expenses and the
Company may be required in the future to increase or decrease
amounts previously accrued. Under the Companys various
insurance programs, it has collective reserves recorded in
accrued liabilities of $7.5 million and $11.8 million
at December 31, 2007 and 2008, respectively.
As of December 31, 2008, in connection with the issuance of
our insurance policies, Mobile Mini has provided its various
insurance carriers approximately $12.4 million in letters
of credit.
71
MOBILE
MINI, INC. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
General
Litigation
The Company is a party to routine claims incidental to its
business. Most of these routine claims involve alleged damage to
customers property while stored in units leased from
Mobile Mini and damage alleged to have occurred during delivery
and pick-up
of containers. The Company carries insurance to protect it
against loss from these types of claims, subject to deductibles
under the policy. The Company does not believe that any of these
incidental claims, individually or in the aggregate, is likely
to have a material adverse effect on its business or results of
operations.
|
|
(13)
|
Stockholders
Equity:
|
On August 8, 2007, Mobile Minis Board of Directors
approved a common stock repurchase program authorizing up to
$50.0 million of its outstanding shares to be repurchased
over a six-month period. As of December 31, 2007, the
Company had repurchased 2.2 million shares for
approximately $39.3 million under this authorization, and
it did not repurchase any additional shares prior to the
expiration of this authorization in February 2008.
On February 22, 2006, the Board of Directors approved a
two-for-one stock split in the form of a 100 percent stock
dividend payable on March 10, 2006, to shareholders of
record as of the close of business on March 6, 2006. Per
share amounts, share amounts and the weighted average numbers of
shares outstanding give effect for this two-for-one stock split
for all periods presented.
In March 2006, Mobile Mini issued 4.6 million shares of its
common stock at approximately $26.22 per share, net of
underwriting discounts and commissions, but before other
expenses. The Company received net offering proceeds of
approximately $120.3 million which it used to redeem 35% of
the $150.0 million aggregate principal amount outstanding
of the Companys 9.5% Senior Notes and to temporarily
pay down its revolving line of credit.
|
|
(14)
|
Mergers
and Acquisitions:
|
The Company enters new markets in one of two ways, either by a
new branch
start-up or
through acquiring a business consisting of the portable storage
assets and related leases of other companies. An acquisition
generally provides the Company with cash flow which enables the
Company to immediately cover the overhead cost at a new branch.
On occasion, the Company also purchases portable storage
businesses in areas where the Company has existing small
branches either as part of multi-market acquisitions or in order
to increase the Companys operating margins at those
branches.
In 2006, the Company entered into a share purchase agreement to
acquire three companies of Royal Wolf Group which, in addition
to increasing the Companys operations in the U.S., gave
it presence in the U.K. and The Netherlands. The acquisition of
their businesses collectively did not meet the materiality
threshold established by the Securities and Exchange Commission
that would otherwise require reporting separate financial
information for these companies or performance information for
periods prior to the acquisition. In addition, the Company also
acquired three other businesses in 2006, L&L Surplus of
Utica, Inc., HOC-Express, Inc. and Affordable LLC through asset
purchase agreements.
In 2007, Mobile Mini acquired the portable storage assets and
assumed certain liabilities of four businesses:
(1) Worcester Leasing Company, Inc., operating in
Worcester, Vermont, (2) Site Storage and Equipment, Inc.
and Ace Container & Equipment Sales, Inc., located in
Theodore, Alabama, (3) Guest Inc., operating in the
Pittsburgh, Pennsylvania metropolitan area which also serves
eastern Ohio and northern West Virginia and (4) Centreline
Equipment Rentals Ltd., of Windsor, Ontario, which became Mobile
Minis third branch in Canada. The Company also opened its
second Canadian branch by commencing operations in the Vancouver
metropolitan area by way of a new branch start up. All
acquisitions in 2007 were for cash.
72
MOBILE
MINI, INC. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
On June 27, 2008, the Company completed the Merger by which
MSG became a wholly-owned subsidiary of Mobile Mini, Inc.
The results of operations for MSG are included herein from the
effective date of the Merger, June 27, 2008. The
Companys consolidated statements of income were impacted
by the estimated expenses accrued related to integration, merger
and restructuring costs recorded for the period ended
December 31, 2008. This expense primarily relates to costs,
incurred or estimated to be incurred, for the closing of
overlapping Mobile Mini lease properties and the repositioning
of assets between the two entities locations and personnel
relocation costs. Also, as a result of the Merger, the Company
recorded a restructuring expense relating to its manufacturing
operations. Certain other continuing costs, primarily related to
Mobile Minis personnel closing bonuses and severance
agreements and certain corporate costs incurred during the
integration are expensed as integration, merger and
restructuring expense as incurred.
Also in 2008, the Company acquired four other portable storage
businesses, three through asset purchase agreements and one as a
stock purchase: (1) International Equipment Services, Inc.,
operating in Oakland and Los Angeles, California,
(2) Advantage Container Corporation, operating in Dallas,
Texas, (3) J. Staal Enterprises, LLC, operating in
Santa Barbara, California and (4) Kelly Containers,
Inc., operating in Hartford, Connecticut.
The Merger and other acquisitions were accounted for as the
purchase of a business in accordance with
SFAS No. 141, Business Combinations, with the
purchased assets and assumed liabilities recorded at their
estimated fair values at the date of each acquisition.
The aggregate purchase price of the assets and operations
acquired consists of the following for the years ended December
31:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2007
|
|
|
2008
|
|
|
|
|
|
|
|
|
|
Other
|
|
|
|
|
|
|
|
|
|
MSG
|
|
|
Acquisitions
|
|
|
Total
|
|
|
|
(In thousands)
|
|
|
Cash
|
|
$
|
9,687
|
|
|
$
|
17,927
|
|
|
$
|
15,323
|
|
|
$
|
33,250
|
|
Assumption of debt
|
|
|
47
|
|
|
|
540,887
|
|
|
|
|
|
|
|
540,887
|
|
Issuance of convertible preferred stock, as initially valued
|
|
|
|
|
|
|
196,600
|
|
|
|
|
|
|
|
196,600
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
9,734
|
|
|
$
|
755,414
|
|
|
$
|
15,323
|
|
|
$
|
770,737
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash of $33.3 million for 2008 represents cash paid of
$38.8 million, net of cash acquired of $5.5 million,
and includes $19.3 million of costs.
73
MOBILE
MINI, INC. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
The fair value of the assets acquired and liabilities assumed
has been allocated as follows for the years ended December 31:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2007
|
|
|
2008
|
|
|
|
|
|
|
|
|
|
Other
|
|
|
|
|
|
|
|
|
|
MSG
|
|
|
Acquisitions
|
|
|
Total
|
|
|
|
(In thousands)
|
|
|
Receivables
|
|
$
|
|
|
|
$
|
31,942
|
|
|
$
|
65
|
|
|
$
|
32,007
|
|
Inventories
|
|
|
804
|
|
|
|
9,164
|
|
|
|
886
|
|
|
|
10,050
|
|
Lease fleet, net
|
|
|
2,996
|
|
|
|
268,259
|
|
|
|
5,396
|
|
|
|
273,655
|
|
Property, plant and equipment, net
|
|
|
354
|
|
|
|
34,045
|
|
|
|
538
|
|
|
|
34,583
|
|
Deposits, prepaid expenses and other assets
|
|
|
|
|
|
|
2,581
|
|
|
|
|
|
|
|
2,581
|
|
Intangible assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Customer lists
|
|
|
820
|
|
|
|
17,587
|
|
|
|
1,094
|
|
|
|
18,681
|
|
Trade names
|
|
|
|
|
|
|
943
|
|
|
|
|
|
|
|
943
|
|
Non-compete agreements
|
|
|
125
|
|
|
|
|
|
|
|
100
|
|
|
|
100
|
|
Goodwill
|
|
|
4,946
|
|
|
|
445,150
|
|
|
|
7,457
|
|
|
|
452,607
|
|
Liabilities and other
|
|
|
(348
|
)
|
|
|
(62,145
|
)
|
|
|
(250
|
)
|
|
|
(62,395
|
)
|
Deferred taxes
|
|
|
37
|
|
|
|
7,888
|
|
|
|
37
|
|
|
|
7,925
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
9,734
|
|
|
$
|
755,414
|
|
|
$
|
15,323
|
|
|
$
|
770,737
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The applicable purchase price for the Merger and the
acquisitions has been allocated to the assets acquired and
liabilities assumed, based upon estimated fair values as of the
acquisition date. The allocation is not finalized and amounts
are subject to change with the final valuation. The Company does
not believe any adjustments to the allocation of the purchase
prices or the reserves will have a material effect on the
Companys results of operations or financial position.
In connection with the MSG Merger, the Company identified
additional remaining costs expected to be incurred to exit
overlapping Mobile Storage Groups lease properties,
property shut down costs, costs of Mobile Storage Groups
severance agreements, costs for asset verifications and for
damaged assets and initially recorded accrued liabilities and
reserves. These liabilities and reserves are preliminary and are
subject to adjustments, both positive and negative, as
additional information and data becomes available. The reserve
related to any leased property that is subsequently sub-leased
or negotiated to terminate will be adjusted as each such
agreement is consummated. See Note 15 for additional
information on restructuring accruals.
Substantially all of the operating activities of Mobile Storage
Group will continue as it is integrated into the operations of
Mobile Mini. All corporate functions in the U.S., such as
payroll, accounting, personnel and collections, were transferred
to Mobile Mini and discontinued at Mobile Storage Group. As part
of the Merger of the operations in the U.K., one corporate
office was closed and consolidated with the other. In all cities
with overlapping Mobile Storage Group and Mobile Mini branch
locations, one branch has been shut down and consolidated with
the other. In connection with this consolidation, certain
corporate office, regional management and branch employees not
hired by Mobile Mini were terminated in exchange for a severance
payment. The majority of this consolidation was completed
shortly after closing of the Merger and the remainder continued
through the end of 2008.
Included in other assets and intangibles are:
(1) non-compete agreements that are amortized over the life
of the agreement, typically over 5 years, using the
straight-line method with no residual value, (2) values
associated with trade names are amortized on a straight-line
basis over 2 years with no residual value and
(3) values associated with customer lists are amortized on
an accelerated basis over 14 to 15 years with no residual
value.
74
MOBILE
MINI, INC. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
|
|
(15)
|
Integration,
Merger and Restructuring Costs:
|
In connection with the Merger, the Company recorded accruals for
costs to be incurred to exit overlapping Mobile Storage Group
lease properties, property shut down costs, costs of Mobile
Storage Groups severance agreements, costs for asset
verification and for damaged assets.
In connection with the Merger, the Company leveraged the
combined fleet and restructured the manufacturing operations and
reduced overhead and capital expenditures for the lease fleet.
In connection with these activities, the Company recorded costs
for severance agreements and recorded impairment charges to
write down to certain assets previously used in conjunction with
the manufacturing operations and inventories.
The following table details accrued integration, merger and
restructuring obligations (included in accrued liabilities in
the Consolidated Balance Sheet) and related activity for the
year ended December 31, 2008:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Lease
|
|
|
|
|
|
|
|
|
|
Severance and
|
|
|
Abandonment
|
|
|
Acquisition
|
|
|
|
|
|
|
Benefits
|
|
|
Costs
|
|
|
Integration
|
|
|
Total
|
|
|
|
(In thousands)
|
|
|
Accrued obligations as of December 31, 2007
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
Restructuring costs accrued in purchase price allocation
|
|
|
1,811
|
|
|
|
5,328
|
|
|
|
|
|
|
|
7,139
|
|
Integration, merger and restructuring expense
|
|
|
7,705
|
|
|
|
5,788
|
|
|
|
5,307
|
|
|
|
18,800
|
|
Cash paid
|
|
|
(7,507
|
)
|
|
|
(2,705
|
)
|
|
|
(4,164
|
)
|
|
|
(14,376
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accrued obligations as of December 31, 2008
|
|
$
|
2,009
|
|
|
$
|
8,411
|
|
|
$
|
1,143
|
|
|
$
|
11,563
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The following amounts are included in integration, merger and
restructuring expense for the year ended December 31, 2008
(in thousands):
|
|
|
|
|
Severance and benefits
|
|
$
|
7,705
|
|
Lease abandonment costs
|
|
|
5,788
|
|
Acquisition integration
|
|
|
5,307
|
|
Long-lived asset and inventory impairment charges
|
|
|
5,627
|
|
|
|
|
|
|
Integration, merger and restructuring expense
|
|
$
|
24,427
|
|
|
|
|
|
|
|
|
(16)
|
Supplemental
Pro Forma Information (unaudited):
|
The following table summarizes Mobile Minis unaudited
condensed consolidated statements of income as if the Merger
with MSG WC Holdings Corp., the ultimate parent company of
Mobile Storage Group, occurred on January 1 of each period
presented:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ended
|
|
|
|
|
|
|
December 31
|
|
|
|
|
|
|
2007
|
|
|
2008
|
|
|
|
|
|
|
(In thousands)
|
|
|
Total revenue
|
|
$
|
551,429
|
|
|
$
|
535,282
|
|
|
|
|
|
Net income
|
|
$
|
35,353
|
|
|
$
|
31,776
|
|
|
|
|
|
Diluted earnings per share
|
|
$
|
0.80
|
|
|
$
|
0.74
|
|
|
|
|
|
The above table includes integration, merger and restructuring
expense of $24.4 million for the years ended
December 31, 2007 and 2008. The year ended
December 31, 2008 also includes $13.7 million goodwill
impairment charge. The year ended December 31, 2007 also
includes $11.2 million of debt extinguishment expense.
75
MOBILE
MINI, INC. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
The unaudited pro forma financial information is presented for
informational purposes only and is not indicative, and should
not be relied upon as being indicative of the results of
operations that would have been achieved if the Merger had
actually taken place at the beginning of each of the periods
presented.
|
|
(17)
|
Other
Comprehensive Income:
|
The components of accumulated other comprehensive income, net of
tax, were as follows at December 31:
|
|
|
|
|
|
|
|
|
|
|
2007
|
|
|
2008
|
|
|
|
(In thousands)
|
|
|
Accumulated net unrealized holding loss on derivatives
|
|
$
|
(769
|
)
|
|
$
|
(7,068
|
)
|
Foreign currency translation adjustment
|
|
|
5,105
|
|
|
|
(30,410
|
)
|
|
|
|
|
|
|
|
|
|
Accumulated other comprehensive income (loss)
|
|
$
|
4,336
|
|
|
$
|
(37,478
|
)
|
|
|
|
|
|
|
|
|
|
The Financial Accounting Standards Board (FASB) issued
SFAS No. 131, Disclosures about Segments of an
Enterprise and Related Information, which establishes the
standards for companies to report information about operating
segments. Mobile Mini has operations in the U.S., Canada, the
U.K. and The Netherlands. All of the Companys branches
operate in their local currency and although the Company is
exposed to foreign exchange rate fluctuation in other foreign
markets where it leases and sells its products, the Company does
not believe this will be a significant impact on its results of
operations. Currently, the Companys branch operations
comprise its only segment and these operations concentrate on
its core business of leasing. Mobile Minis branches have
similar economic characteristics covering all products leased or
sold, including similar customer base, sales personnel,
advertising, yard facilities, general and administrative costs
and branch management. 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, mobile offices and combination units configured
for both storage and office space. The Company leases to
businesses and consumers in the general geographic area around
each branch. The operation includes the Companys
manufacturing facilities, which is responsible for the purchase,
manufacturing and remanufacturing of products for leasing and
sale, as well as for manufacturing certain delivery equipment.
In managing the Companys business, it focuses on earnings
per share and on its internal growth rate in leasing revenue,
which the Company defines as growth in lease revenues on a
year-over-year basis at its branch locations in operation for at
least one year, without inclusion of same market acquisitions.
Discrete financial data on each of the Companys products
is not available and it would be impractical to collect and
maintain financial data in such a manner; therefore, based on
the provisions of SFAS No. 131, reportable segment
information is the same as contained in its consolidated
financial statements.
The tables below represent the Companys revenue and
long-lived assets as attributed to geographic locations, at
December 31:
Revenue from external customers (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2006
|
|
|
2007
|
|
|
2008
|
|
|
North America
|
|
$
|
259,548
|
|
|
$
|
292,964
|
|
|
$
|
356,303
|
|
U.K.
|
|
|
10,096
|
|
|
|
19,109
|
|
|
|
53,126
|
|
The Netherlands
|
|
|
3,719
|
|
|
|
6,229
|
|
|
|
5,975
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenues
|
|
$
|
273,363
|
|
|
$
|
318,302
|
|
|
$
|
415,404
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
76
MOBILE
MINI, INC. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Long-lived assets (in thousands):
|
|
|
|
|
|
|
|
|
|
|
2007
|
|
|
2008
|
|
|
North America
|
|
$
|
810,573
|
|
|
$
|
1,041,540
|
|
U.K
|
|
|
43,984
|
|
|
|
120,914
|
|
The Netherlands
|
|
|
3,729
|
|
|
|
4,211
|
|
|
|
|
|
|
|
|
|
|
Total long-lived assets
|
|
$
|
858,286
|
|
|
$
|
1,166,665
|
|
|
|
|
|
|
|
|
|
|
|
|
(19)
|
Selected
Consolidated Quarterly Financial Data (unaudited):
|
The following table sets forth certain unaudited selected
consolidated financial information for each of the four quarters
in the years ended December 31, 2007 and 2008. In
managements opinion, this unaudited consolidated quarterly
selected information has been prepared on the same basis as the
audited consolidated financial statements and includes all
necessary adjustments, consisting only of normal recurring
adjustments, which management considers necessary for a fair
presentation when read in conjunction with the Consolidated
Financial Statements and notes. The Company believes these
comparisons of consolidated quarterly selected financial data
are not necessarily indicative of future performance.
Quarterly earnings per share may not total to the fiscal year
earnings per share due to the weighted average number of shares
outstanding at the end of each period reported and rounding.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
First Quarter
|
|
|
Second Quarter
|
|
|
Third Quarter
|
|
|
Fourth Quarter
|
|
|
|
(In thousands except earnings per share)
|
|
|
2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Leasing revenues
|
|
$
|
66,053
|
|
|
$
|
70,362
|
|
|
$
|
73,982
|
|
|
$
|
74,241
|
|
Total revenues
|
|
|
73,020
|
|
|
|
78,250
|
|
|
|
83,482
|
|
|
|
83,550
|
|
Gross profit margin on sales
|
|
|
2,195
|
|
|
|
2,378
|
|
|
|
2,716
|
|
|
|
2,704
|
|
Income from operations
|
|
|
26,832
|
|
|
|
27,642
|
|
|
|
27,233
|
|
|
|
26,801
|
|
Net income
|
|
|
12,697
|
|
|
|
6,331
|
(1)
|
|
|
12,704
|
|
|
|
12,444
|
|
Earnings per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
0.36
|
|
|
$
|
0.18
|
|
|
$
|
0.35
|
|
|
$
|
0.36
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted
|
|
$
|
0.35
|
|
|
$
|
0.17
|
(1)
|
|
$
|
0.35
|
|
|
$
|
0.36
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Leasing revenues
|
|
$
|
70,036
|
|
|
$
|
72,849
|
|
|
$
|
119,323
|
|
|
$
|
109,352
|
|
Total revenues
|
|
|
78,541
|
|
|
|
81,085
|
|
|
|
132,752
|
|
|
|
123,026
|
|
Gross profit margin on sales
|
|
|
2,465
|
|
|
|
2,467
|
|
|
|
3,957
|
|
|
|
4,334
|
|
Income from operations(2)
|
|
|
23,769
|
|
|
|
14,575
|
|
|
|
39,951
|
|
|
|
26,869
|
|
Net income(2)
|
|
|
10,658
|
|
|
|
4,861
|
|
|
|
13,276
|
|
|
|
246
|
|
Earnings per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
0.31
|
|
|
$
|
0.14
|
|
|
$
|
0.31
|
|
|
$
|
0.01
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted(2)
|
|
$
|
0.31
|
|
|
$
|
0.14
|
|
|
$
|
0.31
|
|
|
$
|
0.01
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Includes debt extinguishment expense of $11.2 million
($6.9 million after tax), or $0.19 per diluted share. |
|
(2) |
|
Includes integration, merger and restructuring expense of
$24.4 million ($15.3 million after tax), or $0.39 per
diluted share during the fiscal year 2008 and a non-cash
goodwill impairment charge of $13.7 million, both pre-tax
and after tax, or $0.35 per diluted share for fiscal year 2008. |
77
MOBILE
MINI, INC. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
|
|
(20)
|
Condensed
Consolidating Financial Information
|
Mobile Mini Supplemental Indenture
In connection with the Merger, Mobile Mini entered into the
Mobile Mini Supplemental Indenture described in Note 7
pursuant to which the New Mobile Mini Guarantors became
Guarantors under the Mobile Mini Indenture relating
to the Senior Notes.
In connection with the Merger, Mobile Mini also entered into the
MSG Supplemental Indenture described in Note 7 pursuant to
which Mobile Mini became an Issuer under the MSG
Indenture and the New MSG Guarantors became
Guarantors under the MSG Indenture.
As a result of the Supplemental Indentures described above, the
same subsidiaries of the Company are guarantors under each of
the MSG Notes and the Senior Notes.
The following tables present the condensed consolidating
financial information of Mobile Mini, Inc., representing the
subsidiaries of the Guarantors of the Senior Notes and MSG Notes
and the Non-Guarantor Subsidiaries. Separate financial
statements of the subsidiary guarantors are not presented
because the guarantee by each 100% owned subsidiary guarantor is
full and unconditional, joint and several, and management has
determined that such information is not material to investors.
78
MOBILE
MINI, INC. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
MOBILE
MINI, INC.
CONDENSED
CONSOLIDATING BALANCE SHEETS
As of
December 31, 2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-
|
|
|
|
|
|
|
|
|
|
Guarantors
|
|
|
Guarantors
|
|
|
Eliminations
|
|
|
Consolidated
|
|
|
|
(In thousands)
|
|
|
ASSETS
|
Cash
|
|
$
|
2,208
|
|
|
$
|
976
|
|
|
$
|
|
|
|
$
|
3,184
|
|
Receivables
|
|
|
45,827
|
|
|
|
15,597
|
|
|
|
|
|
|
|
61,424
|
|
Inventories
|
|
|
23,644
|
|
|
|
2,982
|
|
|
|
(49
|
)
|
|
|
26,577
|
|
Lease fleet, net
|
|
|
969,432
|
|
|
|
108,724
|
|
|
|
|
|
|
|
1,078,156
|
|
Property, plant and equipment, net
|
|
|
72,108
|
|
|
|
16,401
|
|
|
|
|
|
|
|
88,509
|
|
Deposits and prepaid expenses
|
|
|
12,130
|
|
|
|
1,157
|
|
|
|
|
|
|
|
13,287
|
|
Other assets and intangibles, net
|
|
|
28,144
|
|
|
|
6,919
|
|
|
|
|
|
|
|
35,063
|
|
Goodwill
|
|
|
435,450
|
|
|
|
57,207
|
|
|
|
|
|
|
|
492,657
|
|
Intercompany
|
|
|
131,257
|
|
|
|
35,782
|
|
|
|
(167,039
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
1,720,200
|
|
|
$
|
245,745
|
|
|
$
|
(167,088
|
)
|
|
$
|
1,798,857
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS EQUITY
|
Liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts payable
|
|
$
|
12,361
|
|
|
$
|
9,072
|
|
|
$
|
|
|
|
$
|
21,433
|
|
Accrued liabilities
|
|
|
81,146
|
|
|
|
5,068
|
|
|
|
|
|
|
|
86,214
|
|
Lines of credit
|
|
|
450,053
|
|
|
|
104,479
|
|
|
|
|
|
|
|
554,532
|
|
Notes payable
|
|
|
1,306
|
|
|
|
74
|
|
|
|
|
|
|
|
1,380
|
|
Obligations under capital leases
|
|
|
5,495
|
|
|
|
2
|
|
|
|
|
|
|
|
5,497
|
|
Senior notes
|
|
|
345,797
|
|
|
|
|
|
|
|
|
|
|
|
345,797
|
|
Deferred income taxes
|
|
|
124,858
|
|
|
|
10,363
|
|
|
|
(435
|
)
|
|
|
134,786
|
|
Intercompany
|
|
|
23
|
|
|
|
29,626
|
|
|
|
(29,649
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities
|
|
|
1,021,039
|
|
|
|
158,684
|
|
|
|
(30,084
|
)
|
|
|
1,149,639
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commitments and contingencies
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Convertible preferred stock
|
|
|
153,990
|
|
|
|
|
|
|
|
|
|
|
|
153,990
|
|
Stockholders equity:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock
|
|
|
375
|
|
|
|
18,433
|
|
|
|
(18,433
|
)
|
|
|
375
|
|
Additional paid-in capital
|
|
|
328,696
|
|
|
|
119,165
|
|
|
|
(119,165
|
)
|
|
|
328,696
|
|
Retained earnings
|
|
|
263,498
|
|
|
|
(21,157
|
)
|
|
|
594
|
|
|
|
242,935
|
|
Accumulated other comprehensive income
|
|
|
(8,098
|
)
|
|
|
(29,380
|
)
|
|
|
|
|
|
|
(37,478
|
)
|
Treasury stock, at cost
|
|
|
(39,300
|
)
|
|
|
|
|
|
|
|
|
|
|
(39,300
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total stockholders equity
|
|
|
545,171
|
|
|
|
87,061
|
|
|
|
(137,004
|
)
|
|
|
495,228
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities and stockholders equity
|
|
$
|
1,720,200
|
|
|
$
|
245,745
|
|
|
$
|
(167,088
|
)
|
|
$
|
1,798,857
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
79
MOBILE
MINI, INC. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
MOBILE
MINI, INC.
CONDENSED
CONSOLIDATING BALANCE SHEETS
As of
December 31, 2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-
|
|
|
|
|
|
|
|
|
|
Guarantors
|
|
|
Guarantors
|
|
|
Eliminations
|
|
|
Consolidated
|
|
|
|
(In thousands)
|
|
|
ASSETS
|
Cash
|
|
$
|
2,033
|
|
|
$
|
1,670
|
|
|
$
|
|
|
|
$
|
3,703
|
|
Receivables
|
|
|
31,046
|
|
|
|
6,175
|
|
|
|
|
|
|
|
37,221
|
|
Inventories
|
|
|
26,708
|
|
|
|
2,769
|
|
|
|
(46
|
)
|
|
|
29,431
|
|
Lease fleet, net
|
|
|
764,134
|
|
|
|
38,789
|
|
|
|
|
|
|
|
802,923
|
|
Property, plant and equipment, net
|
|
|
46,439
|
|
|
|
8,924
|
|
|
|
|
|
|
|
55,363
|
|
Deposits and prepaid expenses
|
|
|
10,386
|
|
|
|
948
|
|
|
|
|
|
|
|
11,334
|
|
Other assets and intangibles, net
|
|
|
6,256
|
|
|
|
2,830
|
|
|
|
|
|
|
|
9,086
|
|
Goodwill
|
|
|
66,251
|
|
|
|
13,539
|
|
|
|
|
|
|
|
79,790
|
|
Intercompany
|
|
|
36,574
|
|
|
|
36,146
|
|
|
|
(72,720
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
989,827
|
|
|
$
|
111,790
|
|
|
$
|
(72,766
|
)
|
|
$
|
1,028,851
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS EQUITY
|
Liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts payable
|
|
$
|
14,049
|
|
|
$
|
6,511
|
|
|
$
|
|
|
|
$
|
20,560
|
|
Accrued liabilities
|
|
|
37,330
|
|
|
|
1,611
|
|
|
|
|
|
|
|
38,941
|
|
Lines of credit
|
|
|
205,100
|
|
|
|
32,757
|
|
|
|
|
|
|
|
237,857
|
|
Notes payable
|
|
|
743
|
|
|
|
|
|
|
|
|
|
|
|
743
|
|
Obligations under capital leases
|
|
|
6
|
|
|
|
4
|
|
|
|
|
|
|
|
10
|
|
Senior notes, net of discount
|
|
|
149,379
|
|
|
|
|
|
|
|
|
|
|
|
149,379
|
|
Deferred income taxes
|
|
|
125,439
|
|
|
|
(1,702
|
)
|
|
|
(266
|
)
|
|
|
123,471
|
|
Intercompany
|
|
|
25
|
|
|
|
22,725
|
|
|
|
(22,750
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities
|
|
|
532,071
|
|
|
|
61,906
|
|
|
|
(23,016
|
)
|
|
|
570,961
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commitments and contingencies
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Convertible preferred stock
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stockholders equity:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock
|
|
|
367
|
|
|
|
18,433
|
|
|
|
(18,433
|
)
|
|
|
367
|
|
Additional paid-in capital
|
|
|
278,591
|
|
|
|
31,538
|
|
|
|
(31,536
|
)
|
|
|
278,593
|
|
Retained earnings
|
|
|
217,404
|
|
|
|
(3,729
|
)
|
|
|
219
|
|
|
|
213,894
|
|
Accumulated other comprehensive income
|
|
|
694
|
|
|
|
3,642
|
|
|
|
|
|
|
|
4,336
|
|
Treasury stock, at cost
|
|
|
(39,300
|
)
|
|
|
|
|
|
|
|
|
|
|
(39,300
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total stockholders equity
|
|
|
457,756
|
|
|
|
49,884
|
|
|
|
(49,750
|
)
|
|
|
457,890
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities and stockholders equity
|
|
$
|
989,827
|
|
|
$
|
111,790
|
|
|
$
|
(72,766
|
)
|
|
$
|
1,028,851
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
80
MOBILE
MINI, INC. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
MOBILE
MINI, INC.
CONDENSED
CONSOLIDATED STATEMENTS OF INCOME
Twelve
Months Ended December 31, 2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-
|
|
|
|
|
|
|
|
|
|
Guarantors
|
|
|
Guarantors
|
|
|
Eliminations
|
|
|
Consolidated
|
|
|
|
(In thousands)
|
|
|
Revenues:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Leasing
|
|
$
|
322,473
|
|
|
$
|
49,087
|
|
|
$
|
|
|
|
$
|
371,560
|
|
Sales
|
|
|
32,159
|
|
|
|
9,128
|
|
|
|
(20
|
)
|
|
|
41,267
|
|
Other
|
|
|
1,671
|
|
|
|
906
|
|
|
|
|
|
|
|
2,577
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenues
|
|
|
356,303
|
|
|
|
59,121
|
|
|
|
(20
|
)
|
|
|
415,404
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Costs and expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of sales
|
|
|
20,765
|
|
|
|
7,295
|
|
|
|
(16
|
)
|
|
|
28,044
|
|
Leasing, selling and general expenses
|
|
|
171,712
|
|
|
|
40,623
|
|
|
|
|
|
|
|
212,335
|
|
Integration, merger and restructuring expenses
|
|
|
21,676
|
|
|
|
2,751
|
|
|
|
|
|
|
|
24,427
|
|
Goodwill impairment
|
|
|
|
|
|
|
13,667
|
|
|
|
|
|
|
|
13,667
|
|
Depreciation and amortization
|
|
|
26,402
|
|
|
|
5,365
|
|
|
|
|
|
|
|
31,767
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total costs and expenses
|
|
|
240,555
|
|
|
|
69,701
|
|
|
|
(16
|
)
|
|
|
310,240
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from operations
|
|
|
115,748
|
|
|
|
(10,580
|
)
|
|
|
(4
|
)
|
|
|
105,164
|
|
Other income (expense):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest income
|
|
|
1,743
|
|
|
|
62
|
|
|
|
(1,670
|
)
|
|
|
135
|
|
Interest expense
|
|
|
(41,977
|
)
|
|
|
(7,839
|
)
|
|
|
1,670
|
|
|
|
(48,146
|
)
|
Foreign currency exchange
|
|
|
|
|
|
|
(112
|
)
|
|
|
|
|
|
|
(112
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) before provision for (benefit from) income taxes
|
|
|
75,514
|
|
|
|
(18,469
|
)
|
|
|
(4
|
)
|
|
|
57,041
|
|
Provision for (benefit from) income taxes
|
|
|
29,421
|
|
|
|
(1,250
|
)
|
|
|
(171
|
)
|
|
|
28,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
$
|
46,093
|
|
|
$
|
(17,219
|
)
|
|
$
|
167
|
|
|
$
|
29,041
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
81
MOBILE
MINI, INC. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
MOBILE
MINI, INC.
CONDENSED
CONSOLIDATED STATEMENTS OF INCOME
Twelve
Months Ended December 31, 2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-
|
|
|
|
|
|
|
|
|
|
Guarantors
|
|
|
Guarantors
|
|
|
Eliminations
|
|
|
Consolidated
|
|
|
|
(In thousands)
|
|
|
Revenues:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Leasing
|
|
$
|
267,718
|
|
|
$
|
16,920
|
|
|
$
|
|
|
|
$
|
284,638
|
|
Sales
|
|
|
23,648
|
|
|
|
8,055
|
|
|
|
(59
|
)
|
|
|
31,644
|
|
Other
|
|
|
1,598
|
|
|
|
422
|
|
|
|
|
|
|
|
2,020
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenues
|
|
|
292,964
|
|
|
|
25,397
|
|
|
|
(59
|
)
|
|
|
318,302
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Costs and expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of sales
|
|
|
15,242
|
|
|
|
6,460
|
|
|
|
(51
|
)
|
|
|
21,651
|
|
Leasing, selling and general expenses
|
|
|
148,876
|
|
|
|
18,118
|
|
|
|
|
|
|
|
166,994
|
|
Integration, merger and restructuring expense
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization
|
|
|
19,034
|
|
|
|
2,115
|
|
|
|
|
|
|
|
21,149
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total costs and expenses
|
|
|
183,152
|
|
|
|
26,693
|
|
|
|
(51
|
)
|
|
|
209,794
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from operations
|
|
|
109,812
|
|
|
|
(1,296
|
)
|
|
|
(8
|
)
|
|
|
108,508
|
|
Other income (expense):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest income
|
|
|
2,391
|
|
|
|
64
|
|
|
|
(2,354
|
)
|
|
|
101
|
|
Interest expense
|
|
|
(23,066
|
)
|
|
|
(4,195
|
)
|
|
|
2,355
|
|
|
|
(24,906
|
)
|
Debt extinguishment expense
|
|
|
(11,224
|
)
|
|
|
|
|
|
|
|
|
|
|
(11,224
|
)
|
Foreign currency exchange
|
|
|
|
|
|
|
107
|
|
|
|
|
|
|
|
107
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) before provision for (benefit from) income taxes
|
|
|
77,913
|
|
|
|
(5,320
|
)
|
|
|
(7
|
)
|
|
|
72,586
|
|
Provision for (benefit from) income taxes
|
|
|
30,125
|
|
|
|
(1,463
|
)
|
|
|
(252
|
)
|
|
|
28,410
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
$
|
47,788
|
|
|
$
|
(3,857
|
)
|
|
$
|
245
|
|
|
$
|
44,176
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
82
MOBILE
MINI, INC. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
MOBILE
MINI, INC.
CONDENSED
CONSOLIDATED STATEMENTS OF INCOME
Twelve
Months Ended December 31, 2006
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-
|
|
|
|
|
|
|
|
|
|
Guarantors
|
|
|
Guarantors
|
|
|
Eliminations
|
|
|
Consolidated
|
|
|
|
(In thousands)
|
|
|
Revenues:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Leasing
|
|
$
|
237,018
|
|
|
$
|
8,087
|
|
|
$
|
|
|
|
$
|
245,105
|
|
Sales
|
|
|
21,368
|
|
|
|
5,671
|
|
|
|
(215
|
)
|
|
|
26,824
|
|
Other
|
|
|
1,162
|
|
|
|
272
|
|
|
|
|
|
|
|
1,434
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenues
|
|
|
259,548
|
|
|
|
14,030
|
|
|
|
(215
|
)
|
|
|
273,363
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Costs and expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of sales
|
|
|
12,846
|
|
|
|
4,517
|
|
|
|
(177
|
)
|
|
|
17,186
|
|
Leasing, selling and general expenses
|
|
|
131,776
|
|
|
|
8,130
|
|
|
|
|
|
|
|
139,906
|
|
Integration, merger and restructuring expense
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization
|
|
|
15,829
|
|
|
|
912
|
|
|
|
|
|
|
|
16,741
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total costs and expenses
|
|
|
160,451
|
|
|
|
13,559
|
|
|
|
(177
|
)
|
|
|
173,833
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from operations
|
|
|
99,097
|
|
|
|
471
|
|
|
|
(38
|
)
|
|
|
99,530
|
|
Other income (expense):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest income
|
|
|
460
|
|
|
|
|
|
|
|
(23
|
)
|
|
|
437
|
|
Interest expense
|
|
|
(23,464
|
)
|
|
|
(240
|
)
|
|
|
23
|
|
|
|
(23,681
|
)
|
Debt extinguishment expense
|
|
|
(6,425
|
)
|
|
|
|
|
|
|
|
|
|
|
(6,425
|
)
|
Foreign currency exchange
|
|
|
|
|
|
|
66
|
|
|
|
|
|
|
|
66
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) before provision for (benefit from) income taxes
|
|
|
69,668
|
|
|
|
297
|
|
|
|
(38
|
)
|
|
|
69,927
|
|
Provision for (benefit from) income taxes
|
|
|
26,993
|
|
|
|
172
|
|
|
|
(14
|
)
|
|
|
27,151
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
$
|
42,675
|
|
|
$
|
125
|
|
|
$
|
(24
|
)
|
|
$
|
42,776
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
83
MOBILE
MINI, INC. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
MOBILE
MINI, INC.
CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS
Twelve
Months Ended December 31, 2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-
|
|
|
|
|
|
|
|
|
|
Guarantors
|
|
|
Guarantors
|
|
|
Eliminations
|
|
|
Consolidated
|
|
|
|
(In thousands)
|
|
|
Cash Flows From Operating Activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
$
|
46,093
|
|
|
$
|
(17,219
|
)
|
|
$
|
167
|
|
|
$
|
29,041
|
|
Adjustments to reconcile income to net cash provided by (used
in) operating activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Provision for doubtful accounts
|
|
|
4,351
|
|
|
|
912
|
|
|
|
(2
|
)
|
|
|
5,261
|
|
Provision for restructuring charge
|
|
|
5,626
|
|
|
|
|
|
|
|
|
|
|
|
5,626
|
|
Goodwill impairment
|
|
|
|
|
|
|
13,667
|
|
|
|
|
|
|
|
13,667
|
|
Amortization of deferred financing costs
|
|
|
2,873
|
|
|
|
|
|
|
|
|
|
|
|
2,873
|
|
Share-based compensation expense
|
|
|
4,627
|
|
|
|
512
|
|
|
|
5
|
|
|
|
5,656
|
|
Depreciation and amortization
|
|
|
26,402
|
|
|
|
5,365
|
|
|
|
|
|
|
|
31,767
|
|
Gain on sale of lease fleet units
|
|
|
(8,977
|
)
|
|
|
(888
|
)
|
|
|
16
|
|
|
|
(9,849
|
)
|
Loss on disposal of property, plant and equipment
|
|
|
566
|
|
|
|
1
|
|
|
|
|
|
|
|
567
|
|
Deferred income taxes
|
|
|
29,273
|
|
|
|
(1,381
|
)
|
|
|
31
|
|
|
|
27,923
|
|
Foreign currency gain (loss)
|
|
|
|
|
|
|
112
|
|
|
|
|
|
|
|
112
|
|
Changes in certain assets and liabilities, net of effect of
businesses acquired:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Receivables
|
|
|
(2,031
|
)
|
|
|
(1,029
|
)
|
|
|
|
|
|
|
(3,060
|
)
|
Inventories
|
|
|
7,655
|
|
|
|
|
|
|
|
|
|
|
|
7,655
|
|
Deposits and prepaid expenses
|
|
|
(698
|
)
|
|
|
875
|
|
|
|
|
|
|
|
177
|
|
Other assets and intangibles
|
|
|
105
|
|
|
|
|
|
|
|
|
|
|
|
105
|
|
Accounts payable
|
|
|
(11,469
|
)
|
|
|
(4,262
|
)
|
|
|
|
|
|
|
(15,731
|
)
|
Accrued liabilities
|
|
|
(1,432
|
)
|
|
|
(1,840
|
)
|
|
|
|
|
|
|
(3,272
|
)
|
Intercompany
|
|
|
(2,502
|
)
|
|
|
4,013
|
|
|
|
(1,511
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used in) operating activities
|
|
|
100,974
|
|
|
|
(1,162
|
)
|
|
|
(1,294
|
)
|
|
|
98,518
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash Flows From Investing Activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash paid for businesses acquired
|
|
|
(36,448
|
)
|
|
|
3,198
|
|
|
|
|
|
|
|
(33,250
|
)
|
Additions to lease fleet units, excluding acquisitions
|
|
|
(58,016
|
)
|
|
|
(18,606
|
)
|
|
|
|
|
|
|
(76,622
|
)
|
Proceeds from sale of lease fleet units
|
|
|
24,652
|
|
|
|
3,758
|
|
|
|
(72
|
)
|
|
|
28,338
|
|
Additions to property, plant and equipment
|
|
|
(11,614
|
)
|
|
|
(5,260
|
)
|
|
|
|
|
|
|
(16,874
|
)
|
Proceeds from sale of property, plant and equipment
|
|
|
492
|
|
|
|
3
|
|
|
|
|
|
|
|
495
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash used in investing activities
|
|
|
(80,934
|
)
|
|
|
(16,907
|
)
|
|
|
(72
|
)
|
|
|
(97,913
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash Flows From Financing Activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net borrowings under lines of credit
|
|
|
109,975
|
|
|
|
19,376
|
|
|
|
(9,010
|
)
|
|
|
120,341
|
|
Deferred financing costs
|
|
|
(15,166
|
)
|
|
|
|
|
|
|
|
|
|
|
(15,166
|
)
|
Proceeds from notes payable
|
|
|
1,249
|
|
|
|
|
|
|
|
|
|
|
|
1,249
|
|
Principal payments on notes payable
|
|
|
(113,881
|
)
|
|
|
|
|
|
|
|
|
|
|
(113,881
|
)
|
Principal payments on capital lease obligations
|
|
|
(702
|
)
|
|
|
(2
|
)
|
|
|
|
|
|
|
(704
|
)
|
Issuance of common stock, net
|
|
|
1,472
|
|
|
|
|
|
|
|
|
|
|
|
1,472
|
|
Purchase of treasury stock, at cost
|
|
|
209
|
|
|
|
(253
|
)
|
|
|
44
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash (used in) provided by financing activities
|
|
|
(16,844
|
)
|
|
|
19,121
|
|
|
|
(8,966
|
)
|
|
|
(6,689
|
)
|
Effect of exchange rate changes on cash
|
|
|
(3,021
|
)
|
|
|
(1,746
|
)
|
|
|
1,032
|
|
|
|
5,565
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net increase (decrease) in cash
|
|
|
175
|
|
|
|
(694
|
)
|
|
|
|
|
|
|
(519
|
)
|
Cash at beginning of year
|
|
|
2,033
|
|
|
|
1,670
|
|
|
|
|
|
|
|
3,703
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash at end of year
|
|
$
|
2,208
|
|
|
$
|
976
|
|
|
$
|
|
|
|
$
|
3,184
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
84
MOBILE
MINI, INC. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
MOBILE
MINI, INC.
CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS
Twelve
Months Ended December 31, 2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-
|
|
|
|
|
|
|
|
|
|
Guarantors
|
|
|
Guarantors
|
|
|
Eliminations
|
|
|
Consolidated
|
|
|
|
(In thousands)
|
|
|
Cash Flows From Operating Activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
$
|
47,788
|
|
|
$
|
(3,857
|
)
|
|
$
|
245
|
|
|
$
|
44,176
|
|
Adjustments to reconcile income to net cash provided by
operating activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Debt extinguishment expense
|
|
|
2,298
|
|
|
|
|
|
|
|
|
|
|
|
2,298
|
|
Provision for doubtful accounts
|
|
|
1,478
|
|
|
|
391
|
|
|
|
|
|
|
|
1,869
|
|
Amortization of deferred financing costs
|
|
|
985
|
|
|
|
|
|
|
|
|
|
|
|
985
|
|
Share-based compensation expense
|
|
|
3,616
|
|
|
|
405
|
|
|
|
7
|
|
|
|
4,028
|
|
Depreciation and amortization
|
|
|
19,034
|
|
|
|
2,115
|
|
|
|
|
|
|
|
21,149
|
|
Gain on sale of lease fleet units
|
|
|
(4,929
|
)
|
|
|
(631
|
)
|
|
|
|
|
|
|
(5,560
|
)
|
Loss on disposal of property, plant and equipment
|
|
|
203
|
|
|
|
|
|
|
|
|
|
|
|
203
|
|
Deferred income taxes
|
|
|
28,885
|
|
|
|
(1,459
|
)
|
|
|
(70
|
)
|
|
|
27,356
|
|
Foreign currency gain
|
|
|
|
|
|
|
(107
|
)
|
|
|
|
|
|
|
(107
|
)
|
Changes in certain assets and liabilities, net of effect of
businesses acquired:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Receivables
|
|
|
(1,255
|
)
|
|
|
(2,733
|
)
|
|
|
|
|
|
|
(3,988
|
)
|
Inventories
|
|
|
(751
|
)
|
|
|
141
|
|
|
|
|
|
|
|
(610
|
)
|
Deposits and prepaid expenses
|
|
|
(1,618
|
)
|
|
|
(136
|
)
|
|
|
|
|
|
|
(1,754
|
)
|
Other assets and intangibles
|
|
|
318
|
|
|
|
|
|
|
|
|
|
|
|
318
|
|
Accounts payable
|
|
|
1,192
|
|
|
|
1,499
|
|
|
|
|
|
|
|
2,691
|
|
Accrued liabilities
|
|
|
(2,910
|
)
|
|
|
1,155
|
|
|
|
|
|
|
|
(1,755
|
)
|
Intercompany
|
|
|
(2,252
|
)
|
|
|
2,037
|
|
|
|
215
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used in) operating activities
|
|
|
92,082
|
|
|
|
(1,180
|
)
|
|
|
397
|
|
|
|
91,299
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash Flows From Investing Activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash paid for businesses acquired
|
|
|
(9,734
|
)
|
|
|
|
|
|
|
|
|
|
|
(9,734
|
)
|
Additions to lease fleet units, excluding acquisitions
|
|
|
(107,329
|
)
|
|
|
(19,404
|
)
|
|
|
|
|
|
|
(126,733
|
)
|
Proceeds from sale of lease fleet units
|
|
|
13,593
|
|
|
|
2,586
|
|
|
|
2
|
|
|
|
16,181
|
|
Additions to property, plant and equipment
|
|
|
(11,638
|
)
|
|
|
(6,884
|
)
|
|
|
|
|
|
|
(18,522
|
)
|
Proceeds from sale of property, plant and equipment
|
|
|
126
|
|
|
|
|
|
|
|
|
|
|
|
126
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash (used in) provided by investing activities
|
|
|
(114,982
|
)
|
|
|
(23,702
|
)
|
|
|
2
|
|
|
|
(138,682
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash Flows From Financing Activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net borrowings under lines of credit
|
|
|
8,429
|
|
|
|
25,619
|
|
|
|
80
|
|
|
|
34,128
|
|
Redemption of 9.5% Senior Notes
|
|
|
(97,500
|
)
|
|
|
|
|
|
|
|
|
|
|
(97,500
|
)
|
Proceeds from issuance of 6.875% Senior Notes
|
|
|
149,322
|
|
|
|
|
|
|
|
|
|
|
|
149,322
|
|
Deferred financing costs
|
|
|
(3,768
|
)
|
|
|
|
|
|
|
|
|
|
|
(3,768
|
)
|
Proceeds from issuance of notes payable
|
|
|
1,216
|
|
|
|
|
|
|
|
|
|
|
|
1,216
|
|
Principal payments of notes payable
|
|
|
(1,254
|
)
|
|
|
|
|
|
|
|
|
|
|
(1,254
|
)
|
Principal payments on capital lease obligations
|
|
|
(23
|
)
|
|
|
(1
|
)
|
|
|
|
|
|
|
(24
|
)
|
Issuance of common stock, net
|
|
|
5,607
|
|
|
|
|
|
|
|
|
|
|
|
5,607
|
|
Purchase of treasury stock, at cost
|
|
|
(39,300
|
)
|
|
|
|
|
|
|
|
|
|
|
(39,300
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by financing activities
|
|
|
22,729
|
|
|
|
25,618
|
|
|
|
80
|
|
|
|
48,427
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effect of exchange rate changes on cash
|
|
|
1,549
|
|
|
|
219
|
|
|
|
(479
|
)
|
|
|
1,289
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net increase in cash
|
|
|
1,378
|
|
|
|
955
|
|
|
|
|
|
|
|
2,333
|
|
Cash at beginning of year
|
|
|
655
|
|
|
|
715
|
|
|
|
|
|
|
|
1,370
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash at end of year
|
|
$
|
2,033
|
|
|
$
|
1,670
|
|
|
$
|
|
|
|
$
|
3,703
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
85
MOBILE
MINI, INC. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
MOBILE
MINI, INC.
CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS
Twelve
Months Ended December 31, 2006
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-
|
|
|
|
|
|
|
|
|
|
Guarantors
|
|
|
Guarantors
|
|
|
Eliminations
|
|
|
Consolidated
|
|
|
|
(In thousands)
|
|
|
Cash Flows From Operating Activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
$
|
42,675
|
|
|
$
|
125
|
|
|
$
|
(24
|
)
|
|
$
|
42,776
|
|
Adjustments to reconcile income to net cash provided by
operating activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Debt extinguishment expense
|
|
|
1,438
|
|
|
|
|
|
|
|
|
|
|
|
1,438
|
|
Provision for doubtful accounts
|
|
|
4,387
|
|
|
|
151
|
|
|
|
|
|
|
|
4,538
|
|
Amortization of deferred financing costs
|
|
|
840
|
|
|
|
|
|
|
|
|
|
|
|
840
|
|
Share-based compensation expense
|
|
|
2,858
|
|
|
|
215
|
|
|
|
(7
|
)
|
|
|
3,066
|
|
Depreciation and amortization
|
|
|
15,829
|
|
|
|
912
|
|
|
|
|
|
|
|
16,741
|
|
(Gain) loss on sale of lease fleet units
|
|
|
(4,552
|
)
|
|
|
(372
|
)
|
|
|
2
|
|
|
|
(4,922
|
)
|
Loss on disposal of property, plant and equipment
|
|
|
454
|
|
|
|
|
|
|
|
|
|
|
|
454
|
|
Deferred income taxes
|
|
|
26,252
|
|
|
|
376
|
|
|
|
(221
|
)
|
|
|
26,407
|
|
Foreign currency gain
|
|
|
|
|
|
|
(66
|
)
|
|
|
|
|
|
|
(66
|
)
|
Changes in certain assets and liabilities, net of effect of
businesses acquired:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Receivables
|
|
|
(10,047
|
)
|
|
|
(3,700
|
)
|
|
|
2,629
|
|
|
|
(11,118
|
)
|
Inventories
|
|
|
1,934
|
|
|
|
(2,652
|
)
|
|
|
1,346
|
|
|
|
628
|
|
Deposits and prepaid expenses
|
|
|
(948
|
)
|
|
|
(756
|
)
|
|
|
258
|
|
|
|
(1,446
|
)
|
Other assets and intangibles
|
|
|
(16
|
)
|
|
|
(50,049
|
)
|
|
|
50,061
|
|
|
|
(4
|
)
|
Accounts payable
|
|
|
(4,845
|
)
|
|
|
4,808
|
|
|
|
(2,051
|
)
|
|
|
(2,088
|
)
|
Accrued liabilities
|
|
|
143
|
|
|
|
421
|
|
|
|
(924
|
)
|
|
|
(360
|
)
|
Intercompany
|
|
|
(427
|
)
|
|
|
428
|
|
|
|
(1
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used in) operating activities
|
|
|
75,975
|
|
|
|
(50,159
|
)
|
|
|
51,068
|
|
|
|
76,884
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash Flows From Investing Activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash paid for businesses acquired
|
|
|
(59,475
|
)
|
|
|
|
|
|
|
|
|
|
|
(59,475
|
)
|
Additions to lease fleet, excluding acquisitions
|
|
|
(130,112
|
)
|
|
|
(21,486
|
)
|
|
|
15,715
|
|
|
|
(135,883
|
)
|
Proceeds from sale of lease fleet units
|
|
|
12,000
|
|
|
|
1,329
|
|
|
|
(2
|
)
|
|
|
13,327
|
|
Additions to property, plant and equipment
|
|
|
(8,280
|
)
|
|
|
(3,307
|
)
|
|
|
705
|
|
|
|
(10,882
|
)
|
Proceeds from sale of property, plant and equipment
|
|
|
150
|
|
|
|
|
|
|
|
|
|
|
|
150
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash (used in) provided by investing activities
|
|
|
(185,717
|
)
|
|
|
(23,464
|
)
|
|
|
16,418
|
|
|
|
(192,763
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash Flows From Financing Activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net borrowings (repayments) under lines of credit
|
|
|
38,745
|
|
|
|
23,943
|
|
|
|
(17,149
|
)
|
|
|
45,539
|
|
Redemption of 9.5% Senior Notes
|
|
|
(52,500
|
)
|
|
|
|
|
|
|
|
|
|
|
(52,500
|
)
|
Deferred financing costs
|
|
|
(1,664
|
)
|
|
|
|
|
|
|
|
|
|
|
(1,664
|
)
|
Proceeds from issuance of notes payable
|
|
|
1,230
|
|
|
|
|
|
|
|
|
|
|
|
1,230
|
|
Principal payments on notes payable
|
|
|
(1,108
|
)
|
|
|
|
|
|
|
|
|
|
|
(1,108
|
)
|
Principal payments on capital lease obligations
|
|
|
(17
|
)
|
|
|
5
|
|
|
|
(5
|
)
|
|
|
(17
|
)
|
Issuance of common stock, net
|
|
|
125,486
|
|
|
|
49,810
|
|
|
|
(49,810
|
)
|
|
|
125,486
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used in) financing activities
|
|
|
110,172
|
|
|
|
73,758
|
|
|
|
(66,964
|
)
|
|
|
116,966
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effect of exchange rate changes on cash
|
|
|
18
|
|
|
|
580
|
|
|
|
(522
|
)
|
|
|
76
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net increase in cash
|
|
|
448
|
|
|
|
715
|
|
|
|
|
|
|
|
1,163
|
|
Cash at beginning of year
|
|
|
207
|
|
|
|
|
|
|
|
|
|
|
|
207
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash at end of year
|
|
$
|
655
|
|
|
$
|
715
|
|
|
$
|
|
|
|
$
|
1,370
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
86
|
|
ITEM 9.
|
CHANGES
IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
|
There were no disagreements with accountants on accounting and
financial disclosure matters during the periods reported herein.
|
|
ITEM 9A.
|
CONTROLS
AND PROCEDURES.
|
Disclosure
Controls
Under the supervision and with the participation of our
management, including our Chief Executive Officer and Chief
Financial Officer, we conducted an evaluation of the
effectiveness of the design and operation of our disclosure
controls and procedures, as such term is defined under
Rule 13a-15(e)
and
15d-15(e)
promulgated under the Securities Exchange Act of 1934, as
amended (the Exchange Act). Based on this evaluation, our Chief
Executive Officer and our Chief Financial Officer concluded that
our disclosure controls and procedures, were effective to ensure
that information required to be disclosed in Exchange Act
reports filed is communicated to management (including the CEO
and CFO) in a timely manner.
Report of
Management on Internal Control Over Financial
Reporting
Our management is responsible for establishing and maintaining
adequate internal control over financial reporting for the
company. Internal control over financial reporting is a process
to provide reasonable assurance regarding the reliability of our
financial reporting for external purposes in accordance with
accounting principles generally accepted in the United States of
America. Internal control over financial reporting includes
maintaining records that in reasonable detail accurately and
fairly reflect our transactions; providing reasonable assurance
that transactions are recorded as necessary for preparation of
our financial statements; providing reasonable assurance that
receipts and expenditures of company assets are made in
accordance with management authorization; and providing
reasonable assurance that unauthorized acquisition, use, or
disposition of company assets that could have a material effect
on our financial statements would be prevented or detected on a
timely basis. Because of its inherent limitations, internal
control over financial reporting is not intended to provide
absolute assurance that a misstatement of our financial
statements would be prevented or detected.
Management conducted an evaluation of the effectiveness of our
internal control over financial reporting based on the framework
in Internal Control Integrated Framework
issued by the Committee of Sponsoring Organizations of the
Treadway Commission. Based on this evaluation, management
concluded that the companys internal control over
financial reporting was effective, subject to the limitation
below, as of December 31, 2008.
During 2008, we completed the acquisition of Mobile Storage
Group, Inc. Consistent with the published guidance of the
Securities and Exchange Commission, our management excluded
certain operations of Mobile Mini U.K. Limited, operating in the
U.K., that were acquired in June 2008 in the Mobile Storage
Group, Inc. acquisition, from the scope of its assessment of
internal control over financial reporting as of
December 31, 2008. Total assets and total revenues for this
U.K. operations from the acquisition represented approximately
3% and 5%, respectively, of the related consolidated financial
statement amounts of Mobile Mini, Inc. as of and for the year
ended December 31, 2008.
Our internal control over financial reporting as of
December 31, 2008 has been audited by Ernst &
Young, LLP, an independent registered public accounting firm, as
stated in their report which is included herein.
87
Report of
Independent Registered Public Accounting Firm
The Board of Directors and Stockholders of
Mobile Mini, Inc.
We have audited Mobile Mini, Inc.s internal control over
financial reporting as of December 31, 2008, based on
criteria established in Internal Control Integrated
Framework issued by the Committee of Sponsoring Organizations of
the Treadway Commission (the COSO criteria). Mobile Mini,
Inc.s management is responsible for maintaining effective
internal control over financial reporting, and for its
assessment of the effectiveness of internal control over
financial reporting included in the accompanying Report of
Management on Internal Control Over Financial Reporting. Our
responsibility is to express an opinion on the companys
internal control over financial reporting based on our audit.
We conducted our audit in accordance with the standards of the
Public Company Accounting Oversight Board (United States). Those
standards require that we plan and perform the audit to obtain
reasonable assurance about whether effective internal control
over financial reporting was maintained in all material
respects. Our audit included obtaining an understanding of
internal control over financial reporting, assessing the risk
that a material weakness exists, testing and evaluating the
design and operating effectiveness of internal control based on
the assessed risk, and performing such other procedures as we
considered necessary in the circumstances. We believe that our
audit provides a reasonable basis for our opinion.
A companys internal control over financial reporting is a
process designed to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of
financial statements for external purposes in accordance with
generally accepted accounting principles. A companys
internal control over financial reporting includes those
policies and procedures that (1) pertain to the maintenance
of records that, in reasonable detail, accurately and fairly
reflect the transactions and dispositions of the assets of the
company; (2) provide reasonable assurance that transactions
are recorded as necessary to permit preparation of financial
statements in accordance with generally accepted accounting
principles, and that receipts and expenditures of the company
are being made only in accordance with authorizations of
management and directors of the company; and (3) provide
reasonable assurance regarding prevention or timely detection of
unauthorized acquisition, use or disposition of the
companys assets that could have a material effect on the
financial statements.
Because of its inherent limitations, internal control over
financial reporting may not prevent or detect misstatements.
Also, projections of any evaluation of effectiveness to future
periods are subject to the risk that controls may become
inadequate because of changes in conditions, or that the degree
of compliance with the policies or procedures may deteriorate.
As indicated in the accompanying Report of Management on
Internal Control Over Financial Reporting, managements
assessment of and conclusion on the effectiveness of internal
control over financial reporting did not include the internal
controls of certain operations of Mobile Mini U.K. Limited, that
were acquired in June 2008 in the Mobile Storage Group, Inc.
acquisition, and which are included in the 2008 consolidated
financial statements of Mobile Mini, Inc. This portion of Mobile
Mini U.K. Limited, consisted 3% of Mobile Mini, Inc.s
consolidated total assets as of December 31, 2008, and 5%
of Mobile Mini, Inc.s consolidated total revenues for the
year then ended. Our audit of internal control over financial
reporting of Mobile Mini, Inc. also did not include an
evaluation of the internal control over financial reporting of
the portion of Mobile Mini U.K. Limited acquired in the Mobile
Storage Group, Inc. acquisition.
In our opinion, Mobile Mini, Inc. maintained, in all material
respects, effective internal control over financial reporting as
of December 31, 2008, based on the COSO criteria.
We also have audited, in accordance with the standards of the
Public Company Accounting Oversight Board (United States), the
consolidated balance sheets of Mobile Mini, Inc. (and
subsidiaries) as of December 31, 2008 and 2007, and the
related consolidated statements of income, preferred stock and
stockholders equity, and cash flows for each of the three
years in the period ended December 31, 2008 of Mobile Mini,
Inc. and our report dated February 27, 2009 expressed an
unqualified opinion thereon.
Phoenix, Arizona
February 27, 2009
88
Changes
in Internal Control Over Financial Reporting
There were no changes in our internal controls over financial
reporting that occurred during our last fiscal quarter that have
materially affected, or are reasonably likely to materially
affect, our internal control over financial reporting.
|
|
ITEM 9B.
|
OTHER
INFORMATION.
|
None
PART III
|
|
ITEM 10.
|
DIRECTORS,
EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE.
|
EXECUTIVE
OFFICERS OF MOBILE MINI, INC.
Set forth below is information respecting the name, age and
position with Mobile Mini of our executive officers. Information
with respect to our directors and the nomination process is
incorporated herein by reference to information included in the
Proxy Statement for our 2009 Annual Meeting of Stockholders, to
be filed with the Securities and Exchange Commission no later
than 120 days following our fiscal year end (the 2009 Proxy
Statement).
Steven G. Bunger has served as our Chief Executive Officer,
President and a director since April 1997, and as our Chairman
of the Board since February 2001. Mr. Bunger joined Mobile
Mini in 1983 and initially worked in our drafting and design
department. He served in a variety of positions including
dispatcher, salesperson and advertising coordinator before
joining management. He served as sales manager of our Phoenix
branch and our operations manager and Vice President of
Operations and Marketing before becoming our Executive Vice
President and Chief Operating Officer in November 1995. He is
also a director of Cavco Industries, Inc., one of the
nations largest producers of manufactured housing.
Mr. Bunger graduated from Arizona State University with a
B.A. in Business Administration. Age 47.
Mark E. Funk has served as our Executive Vice President and
Chief Financial Officer since November 2008. Prior to joining
us, he was with Deutsche Bank Securities Inc. from September
1988 to November 2008, most recently as Managing Director in its
Structured Debt Group, where he had worked on numerous high
profile transactions. During his tenure at Deutsche Bank,
Mr. Funk worked in their New York, London, Chicago and Los
Angeles offices. Prior to joining Deutsche Bank, Mr. Funk
passed the certified public accountant examination and was a
senior auditor with KPMG. Mr. Funk earned a Bachelor of
Science in Business Administration from California State
University Long Beach and an MBA from University of California,
Los Angeles. Age 46.
Jody E. Miller has served as our Executive Vice President and
Chief Operating Officer since January 2009. Mr. Miller
joined us in June 2008 as Senior Vice President, Southeastern
Division from Mobile Storage Group. He had been a Regional Vice
President-Southeast Region and North Region since March 2004
with Mobile Storage Group. Prior to that he had served as
Regional Vice President of Rental Storage Corporation, working
there from October 1988 to February 2004. Mr. Miller
graduated from Central Missouri State University with a degree
in construction engineering. He has worked in the equipment
leasing and portable storage industry for 21 years.
Age 41.
William E. Armstead serves as our Senior Vice President,
Southeastern Division. He joined Mobile Mini after the
combination with Mobile Storage Group in June 2008 from the
Mobile Storage Group where he was Regional Vice
President Pacific Northwest since February 2007,
Regional Vice President-Pacific Southwest since 2006 and
Regional Vice President-Southwest Region since 2004. Prior to
joining Mobile Storage Group, Mr. Armstead served as a
District Manager of Rental Service Corporation, working for them
from July 1987 to September 2004. Mr. Armstead attended
Colorado State University. He has worked in the equipment
leasing and portable storage industry for 30 years.
Age 45.
89
Kyle G. Blackwell joined Mobile Mini in 1988 and has served in
numerous capacities, currently as our Senior Vice President,
Eastern Division, since 2002 and as our Vice President,
Operations from 1999 to 2000. He also served as a Regional
Manager from 1995 to 1999 and was engaged with the start up of
our Texas locations. Age 45.
Ronald Halchishak joined Mobile Mini after the combination with
Mobile Storage Group in June 2008 as our Senior Vice President
and Managing Director-Europe. He had been a Managing Director of
Ravenstock MSG since July 2007. Prior to that, from June 2003 to
January 2007, he served as the Vice President of the
Mid-Atlantic for Nations Rent. From June 1991 to March 2001,
Mr. Halchishak was Division President at Rental
Service Corporation. He graduated from Humboldt State University
with a B.A. in political science and psychology. Age 61.
Jon D. Keating has served as our Senior Vice President,
Operations since January 2008. He joined Mobile Mini in 1996 and
also served as Vice President, Manufacturing from April 2005 to
December 2007, a Regional Manager from March of 2000 to April
2005 and from November of 1996 to March of 2000 as Branch
Manager at our Phoenix sales branch. Age 39.
Deborah K. Keeley has served as our Senior Vice President and
Chief Accounting Officer since November 2005. From September
2005 to November 2005, she served as Senior Vice President. From
June 2005 to September 2005, she served as Senior Vice President
and Controller. From August 1996 to June 2005 she served as Vice
President and Controller and from August 1995 as Controller.
Prior to joining us, she was Corporate Accounting Manager for
Evans Withycombe Residential, an apartment developer, for six
years. Ms. Keeley has an Associates degree in Computer
Science and received her Bachelors degree in Accounting from
Arizona State University. Age 44.
Russell C. Lemley has served as our Senior Vice President,
Western Division since 1999, except from December 2007 to
December 2008, when he served as our Executive Vice President
and Chief Operating Officer. Prior to 1999, he served as our
Vice President, Operations from June 1998 to November 1999. He
joined us in August 1988 as Construction Superintendent to build
our ten-acre
facility in Los Angeles, California and served as Plant Manager
of that facility from 1989 to 1994 and as General Manager from
1994 to 1998. Prior to joining us, Mr. Lemley was the
Project Manager from 1984 through 1987 for the largest automated
pallet rack high rise in the United Sates for Ralphs
Grocery in San Fernando, California and managed the
construction of the first automated parts pallet rack facility
for Suzuki in Brea, California. Age 51.
Ronald E. Marshall has served as our Senior Vice President,
Central Division since October of 2003. From June of 1999 to
September of 2003 he was a Regional Manager for three of our
regions beginning with the Colorado/Utah and ending with the
California/Arizona market. He was our Director-Acquisitions from
February of 1998 to May of 1999. He joined Mobile Mini, Inc. in
February of 1997 as Branch Manager of Tucson, Arizona. Prior to
joining us, he was the General Manager of Pearce Distributing, a
beverage distributorship in Phoenix, Arizona. Age 58.
Christopher J. Miner has served as Senior Vice President and
General Counsel since December 2008. He joined Mobile Mini in
June 2008 as Vice President and General Counsel. He was
previously a partner at DLA Piper from 2007 to 2008 and advised
numerous corporate and financial institution clients on merger,
acquisition and capital markets transactions. Prior to that, he
was a partner at Squire, Sanders & Dempsey, which he
joined in 2004. He was an attorney in New York and Europe with
Davis Polk & Wardwell from 1999 to 2004 where he
specialized in corporate and securities law. Mr. Miner
received a B.A. and a J.D from Brigham Young University.
Age 37.
Information regarding our audit committee and our audit
committee financial experts is incorporated herein by reference
to information included in the 2009 Proxy Statement.
Information required by Item 405 of
Regulation S-K
is incorporated herein by reference to information included in
the 2009 Proxy Statement.
We have adopted a Code of Business Conduct and Ethics that
applies to our employees generally, and a Supplemental Code of
Ethics for Chief Financial Officer and Senior Financial Officers
in compliance with applicable rules of the SEC that applies to
our principal executive officer, our principal financial
officer, and our principal accounting officer or controller, or
persons performing similar functions. A copy of these Codes is
90
available free of charge on the Investors section of
our web site at www.mobilemini.com. We intend to satisfy
any disclosure requirement under Item 5.05 of
Form 8-K
regarding an amendment to, or waiver from, a provision of the
Supplemental Code of Ethics by posting such information on our
web site at the address and location specified above.
|
|
ITEM 11.
|
EXECUTIVE
COMPENSATION.
|
Information with respect to executive compensation is
incorporated herein by reference to information included in the
2009 Proxy Statement.
|
|
ITEM 12.
|
SECURITY
OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
RELATED STOCKHOLDER MATTERS.
|
Equity
Compensation Plan Information
We maintain the 1994 Stock Option Plan (the 1994 Plan), the 1999
Stock Option Plan (the 1999 Plan) and the 2006 Equity Incentive
Plan (the 2006 Plan), pursuant to which we may grant equity
awards to eligible persons. The 1994 Plan expired in 2003 and no
additional options may be granted hereunder; outstanding options
continue to be subject to the terms of the 1994 Plan until their
exercise or termination. The following table summarizes our
equity compensation plan information as of December 31,
2008. Information is included for both equity compensation plans
approved by our stockholders and equity plans not approved by
our stockholders.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common Shares
|
|
|
|
|
|
Common Shares Remaining
|
|
|
|
to be Issued Upon
|
|
|
Weighted Average
|
|
|
Available for Future
|
|
|
|
Exercise of
|
|
|
Exercise Price of
|
|
|
Issuance Under Equity
|
|
|
|
Outstanding
|
|
|
Outstanding
|
|
|
Compensation Plans
|
|
|
|
Options, Warrants
|
|
|
Options, Warrants
|
|
|
(Excluding Shares
|
|
|
|
and Rights
|
|
|
and Rights
|
|
|
Reflected in Column (a)
|
|
Plan Category
|
|
(a)
|
|
|
(b)
|
|
|
(c)
|
|
|
|
(In thousands)
|
|
|
|
|
|
(In thousands)
|
|
|
Equity compensation plans approved by Mobile Mini stockholders(1)
|
|
|
1,750
|
|
|
$
|
17.45
|
|
|
|
399
|
|
Equity compensation plans not approved by Mobile Mini
stockholders
|
|
|
-0-
|
|
|
|
-0-
|
|
|
|
-0-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Totals
|
|
|
1,750
|
|
|
$
|
17.45
|
|
|
|
399
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Of these shares, options to purchase 12,000 shares were
outstanding under the 1994 Plan, options to purchase
1.7 million shares were outstanding under the 1999 Plan and
options to purchase 29,000 shares were outstanding under the
2006 Plan. |
On December 31, 2008, the closing price of Mobile
Minis common stock as reported by The Nasdaq Stock Market
was $14.42.
The information set forth in our 2009 Proxy Statement under the
headings Security Ownership of Certain Beneficial Owners
and Management is incorporated herein by reference.
|
|
ITEM 13.
|
CERTAIN
RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR
INDEPENDENCE.
|
The information set forth in our 2009 Proxy Statement under the
caption Related Person Transactions and information
relating to director independence is incorporated herein by
reference.
|
|
ITEM 14.
|
PRINCIPAL
ACCOUNTANT FEES AND SERVICES.
|
The information set forth in our 2009 Proxy Statement under the
caption Audit Committee Disclosure is incorporated
herein by reference.
91
PART IV
ITEM 15. EXHIBITS AND
FINANCIAL STATEMENT SCHEDULES.
(a) Financial Statements:
(1) The financial statements required to be included in
this Report are included in Item 8 of this Report.
(2) The following financial statement schedule for the
years ended December 31, 2006, 2007 and 2008 is filed with
our annual report on
Form 10-K
for fiscal year ended December 31, 2008:
Schedule II Valuation and Qualifying Accounts
All other schedules have been omitted because they are not
applicable or not required.
(b) Exhibits:
|
|
|
|
|
Exhibit
|
|
|
Number
|
|
Description
|
|
|
3
|
.1.1
|
|
Amended and Restated Certificate of Incorporation of Mobile
Mini, Inc. (Incorporated by reference to Exhibit 3.1 of the
Registrants Report on
Form 10-K
for the fiscal year ended December 31, 1997).
|
|
3
|
.1.2
|
|
Certificate of Amendment, dated July 20, 2000, to the
Amended and Restated Certificate of Incorporation of the
Registrant (Incorporated by reference to Exhibit 3.1a of
the Registrants Report on
Form 10-Q
for the quarter ended June 30, 2000).
|
|
3
|
.1.3
|
|
Certificate of Designation, Preferences and Rights of
Series C Junior Participating Preferred Stock of Mobile
Mini, Inc., dated December 17, 1999 (Incorporated by
reference to the Registrants Report on
Form 8-K
dated December 13, 1999).
|
|
3
|
.1.4
|
|
Certificate of Amendment of the Amended and Restated Certificate
of Incorporation of Mobile Mini, Inc., dated June 26, 2008
(Incorporated by reference to the Registrants Report on
Form 8-K
dated July 1, 2008).
|
|
3
|
.1.5
|
|
Certificate of Designation of Mobile Mini, Inc. Series A
Convertible Redeemable Participating Preferred Stock, dated
June 27, 2008 (Incorporated by reference to the
Registrants Report on
Form 8-K
dated July 1, 2008).
|
|
3
|
.2
|
|
Amended and Restated By-laws of Mobile Mini, Inc., as amended
and restated through May 2, 2007 (Incorporated by reference
to the Registrants Report on
Form 10-K
for the fiscal year ended December 31, 2007).
|
|
4
|
.1
|
|
Form of Common Stock Certificate. (Incorporated by reference to
Exhibit 4.1 of the Registrants Report on
Form 10-K
for the fiscal year ended December 31, 2003).
|
|
4
|
.2
|
|
Rights Agreement, dated as of December 9, 1999, between
Mobile Mini, Inc. and Norwest Bank Minnesota, NA, as Rights
Agent. (Incorporated by reference to the Registrants
Report on
Form 8-K
dated December 13, 1999).
|
|
4
|
.3.1
|
|
Indenture dated as of May 7, 2007 among the Registrant, Law
Debenture Trust Company of New York, as Trustee, and
Deutsche Bank Trust Company Americas, as Paying Agent and
Registrar (incorporated by reference to Exhibit 4.1 to the
Registrants Registration Statement on
Form S-4
filed with the Commission on June 26, 2007) (the
Mobile Mini Indenture).
|
|
4
|
.3.2
|
|
Supplemental Indenture, dated as of June 27, 2008, among
Mobile Mini, Inc., Mobile Storage Group, Inc., A Better Mobile
Storage Company, Mobile Storage Group (Texas), LP, the
guarantors party to the Mobile Mini Indenture and Law Debenture
Trust Company of New York, as trustee (Incorporated by
reference to the Registrants Report on
Form 8-K
dated July 1, 2008).
|
|
4
|
.4.1
|
|
Indenture, dated as of August 1, 2006, by and among Mobile
Services Group, Inc., Mobile Storage Group, Inc., the subsidiary
guarantors named therein and Wells Fargo Bank, N.A., as trustee
(Incorporated by reference to Exhibit 4.1 to the Mobile
Storage Group, Inc.s
Form S-4
filed on September 18, 2007) (the MSG
Indenture).
|
|
4
|
.4.2
|
|
Supplemental Indenture, dated as of June 27, 2008, among
Mobile Mini, Inc., Mobile Mini of Ohio, LLC, Mobile Mini, LLC,
Mobile, LLC, Mobile Mini I, Inc., A Royal Wolf Portable
Storage, Inc., Temporary Mobile Storage, Inc., Delivery Design
Systems, Inc., Mobile Mini Texas Limited Partnership, LLP,
Mobile Storage Group, Inc., the guarantors party to the MSG
Indenture and Wells Fargo Bank, N.A., as trustee (Incorporated
by reference to the Registrants Report on
Form 8-K
dated July 1, 2008).
|
92
|
|
|
|
|
Exhibit
|
|
|
Number
|
|
Description
|
|
|
10
|
.1
|
|
Mobile Mini, Inc. Amended and Restated 1994 Stock Option Plan.
(Incorporated by reference to Exhibit 10.3 of the
Registrants Report on
Form 10-K
for the fiscal year ended December 31, 1997).
|
|
10
|
.2
|
|
Mobile Mini, Inc. Amended and Restated 1999 Stock Option Plan
(as amended through March 25, 2003). (Incorporated by
reference to Appendix B of the Registrants Definitive
Proxy Statement for its 2003 annual meeting of shareholders,
filed with the Commission on April 11, 2003 under cover of
Schedule 14A).
|
|
10
|
.2.1
|
|
Form of Stock Option Grant Agreement (Incorporated by reference
to Exhibit 10.2.1 of the Registrants Report on
Form 10-K
for the fiscal year ended December 31, 2004).
|
|
10
|
.3
|
|
Mobile Mini, Inc. 2006 Equity Incentive Plan (Incorporated by
reference to Appendix A of the Registrants Definitive
Proxy Statement for its 2006 annual meeting of shareholders
filed with the Commission on May 9, 2006 under cover of
Schedule 14A).
|
|
10
|
.4.1
|
|
ABL Credit Agreement, dated June 27, 2008, between Mobile
Mini, Deutsche Bank AG New York Branch and other lenders party
thereto (Incorporated by reference to the Registrants
Report on
Form 8-K
dated July 1, 2008).
|
|
10
|
.4.2
|
|
First Amendment to ABL Credit Agreement, dated August 31,
2008, between Mobile Mini, certain of its subsidiaries, Deutsche
Bank AG New York Branch and the other lenders party thereto
(Incorporated by reference to the Registrants Report on
Form 8-K
dated September 4, 2008).
|
|
10
|
.15
|
|
Amended and Restated Employment Agreement dated as of
May 28, 2008 by and between Mobile Mini, Inc. and Steven G.
Bunger. (Incorporated by reference to the Registrants
Report on
Form 8-K
dated June 2, 2008).
|
|
10
|
.16
|
|
Amended and Restated Employment Agreement dated
September 30, 2008 between Mobile Mini, Inc. and Lawrence
Trachtenberg. (Incorporated by reference to the
Registrants Report on
Form 8-K
dated September 30, 2008).
|
|
10
|
.17
|
|
Employment Agreement dated October 15, 2008 between Mobile
Mini, Inc. and Mark Funk. (Incorporated by reference to the
Registrants Report on
Form 8-K
dated October 17, 2008).
|
|
10
|
.18
|
|
Employment Agreement dated as of December 18, 2008 by and
between Mobile Mini, Inc. and Jody Miller. (Incorporated by
reference to the Registrants Report on
Form 8-K
dated December 23, 2008).
|
|
10
|
.19
|
|
Amended and Restated Employment Agreement dated as of
December 18, 2008 by and between Mobile Mini, Inc. and
Russell Lemley (Incorporated by reference to the
Registrants Report on
Form 8-K
dated December 23, 2008
|
|
10
|
.20
|
|
Form of Indemnification Agreement between the Registrant and its
Directors and Executive Officers. (Incorporated by reference to
Exhibit 10.20 of the Registrants Report on
Form 10-Q
for the quarter ended June 30, 2004).
|
|
10
|
.21
|
|
Agreement and Plan of Merger, dated as of February 22,
2008, among Mobile Mini, Inc., Cactus Merger Sub, Inc., MSG WC
Holdings Corp., and Welsh, Carson, Anderson & Stowe X,
L.P. (Incorporated by reference to Exhibit 2.1 to the
Registrants Report on
Form 8-K
filed with the Commission on February 28, 2008).
|
|
10
|
.22
|
|
Escrow Agreement dated as of June 27, 2008, between Mobile
Mini, Welsh, Carson, Anderson & Stowe X, L.P. and
Wells Fargo Bank, N.A. (Incorporated by reference to the
Registrants Report on
Form 8-K
dated July 1, 2008).
|
|
10
|
.23
|
|
Stockholders Agreement dated as of June 27, 2008, between
Mobile Mini and the certain stockholders. (Incorporated by
reference to the Registrants Report on
Form 8-K
dated July 1, 2008).
|
|
21
|
|
|
Subsidiaries of Mobile Mini, Inc. (Filed herewith)
|
|
23
|
.1
|
|
Consent of Independent Registered Public Accounting Firm. (Filed
herewith).
|
|
31
|
.1
|
|
Certification of Chief Executive Officer pursuant to
Item 601(b)(31) of
Regulation S-K.
(Filed herewith).
|
|
31
|
.2
|
|
Certification of Chief Financial Officer pursuant to
Item 601(b)(31) of
Regulation S-K.
(Filed herewith).
|
|
32
|
.1
|
|
Certification of Chief Executive Officer and Chief Financial
Officer pursuant to Item 601(b)(32) of
Regulation S-K.
(Filed herewith).
|
93
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the registrant has duly caused
this Report to be signed on its behalf by the undersigned,
thereunto duly authorized.
|
|
|
|
|
|
|
|
|
MOBILE MINI, INC.
|
|
|
|
|
|
Date: February 27, 2009
|
|
By:
|
|
/s/ Steven G. Bunger
Steven G. Bunger, President
|
Pursuant to the requirements of the Securities Exchange Act of
1934, this Report has been signed by the following persons on
behalf of the registrant and in the capacities and on the dates
indicated.
|
|
|
|
|
Date: February 27, 2009
|
|
By:
|
|
/s/ Steven G. Bunger
Steven G. Bunger
President, Chief Executive Officer and Director (Principal
Executive Officer)
|
Date: February 27, 2009
|
|
By:
|
|
/s/ Mark E. Funk
Mark E. Funk
Executive Vice President, Chief Financial Officer and Director
(Principal Financial Officer)
|
Date: February 27, 2009
|
|
By:
|
|
/s/ Deborah K. Keeley
Deborah K. Keeley
Senior Vice President and Chief Accounting Officer (Principal
Accounting Officer)
|
Date: February 27, 2009
|
|
By:
|
|
/s/ Michael E. Donovan
Michael E. Donovan, Director
|
Date: February 27, 2009
|
|
By:
|
|
/s/ Jeffrey S. Goble
Jeffrey S. Goble, Director
|
Date: February 27, 2009
|
|
By:
|
|
/s/ Stephen A McConnell
Stephen A McConnell, Director
|
Date: February 27, 2009
|
|
By:
|
|
/s/ Frederick G. McNamee
Frederick G. McNamee, Director
|
Date: February 27, 2009
|
|
By:
|
|
/s/ Sanjay Swani
Sanjay Swani, Director
|
Date: February 27, 2009
|
|
By:
|
|
/s/ Lawrence Trachtenberg
Lawrence Trachtenberg, Director
|
Date: February 27, 2009
|
|
By:
|
|
/s/ Michael L. Watts
Michael L. Watts, Director
|
94
SCHEDULE II
MOBILE MINI, INC.
VALUATION AND QUALIFYING ACCOUNTS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Years Ended December 31,
|
|
|
|
2006
|
|
|
2007
|
|
|
2008
|
|
|
|
(In thousands)
|
|
|
Allowance for doubtful accounts:
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at beginning of year
|
|
$
|
3,234
|
|
|
$
|
5,008
|
|
|
$
|
3,993
|
|
Provision charged to expense
|
|
|
4,538
|
|
|
|
1,869
|
|
|
|
5,261
|
|
Acquired through business acquisitions
|
|
|
462
|
|
|
|
|
|
|
|
2,873
|
|
Write-offs
|
|
|
(3,226
|
)
|
|
|
(2,884
|
)
|
|
|
(4,934
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at end of year
|
|
$
|
5,008
|
|
|
$
|
3,993
|
|
|
$
|
7,193
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
95
INDEX TO
EXHIBITS FILED HEREWITH
|
|
|
|
|
Exhibit
|
|
|
Number
|
|
Description
|
|
|
21
|
|
|
Subsidiaries of Mobile Mini, Inc.
|
|
23
|
.1
|
|
Consent of Independent Registered Public Accounting Firm.
|
|
31
|
.1
|
|
Certification of Chief Executive Officer pursuant to
Item 601(b)(31) of
Regulation S-K.
|
|
31
|
.2
|
|
Certification of Chief Financial Officer pursuant to
Item 601(b)(31) of
Regulation S-K.
|
|
32
|
.1
|
|
Certification of Chief Executive Officer and Chief Financial
Officer pursuant to Item 601(b)(32) of
Regulation S-K.
|
96