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, 2007
Commission File Number 1-12804
(Exact Name of Registrant as
Specified in its Charter)
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Delaware
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86-0748362
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(IRS Employer
Identification No.)
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7420 S. Kyrene
Road, Suite 101
Tempe, Arizona 85283
(Address
of Principal Executive Offices)
(480) 894-6311
(Registrants Telephone
Number)
Securities Registered pursuant to Section 12(b) of the
Act:
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Title of Class
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Name of Each Exchange on Which Registered
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Common Stock, $.01 par value
Preferred Share Purchase Rights
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Nasdaq Global Select Market
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Securities registered pursuant to Section 12(g) of the
Act:
None.
Indicate by check mark if the registrant is a well-known
seasoned issuer, as defined in Rule 405 of the Securities
Act. Yes þ No o
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, or a non-accelerated
filer. See definition of accelerated filer and large
accelerated filer in
Rule 12b-2
of the Exchange Act. (Check one):
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Large accelerated filer
þ
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Accelerated filer
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Non-accelerated filer
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Smaller reporting company
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(Do not check if a smaller reporting company)
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Indicate by check mark whether the registrant is a shell company
(as defined in
Rule 12b-2
of the
Act). Yes o No þ
The aggregate market value on June 30, 2007 of the voting
stock owned by non-affiliates of the registrant was
approximately $1,029,240,000.
As of February 22, 2008, there were outstanding
34,621,181 shares of the issuers common stock, par
value $.01.
DOCUMENTS
INCORPORATED BY REFERENCE:
Portions of the Proxy Statement for the Registrants 2008
Annual Meeting of Stockholders are incorporated herein by
reference in Item 5 of Part II and 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. The
Exhibit Index is at page 82.
MOBILE
MINI, INC.
2007
FORM 10-K
ANNUAL REPORT
TABLE OF
CONTENTS
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PART I
Merger
with Mobile Storage Group
On February 22, 2008, we entered into a definitive merger
agreement with Mobile Storage Group, Inc. of Glendale,
California. Mobile Storage Group will merge into Mobile Mini in
a transaction valued at approximately $701.5 million.
Pursuant to the merger, we will assume approximately
$535.0 million of Mobile Storage Groups outstanding
indebtedness and will acquire all outstanding shares of Mobile
Storage Group for $12.5 million in cash and shares of newly
issued Mobile Mini convertible preferred stock with a
liquidation preference of $154.0 million, which will be
initially convertible into approximately 8.55 million
shares of our common stock, and is redeemable at the
holders option following the tenth year after the issue
date.
The merger is expected to generate cost synergies of at least
$25.0 million on an annualized basis, which we expect to be
fully realized by the end of fiscal 2009. The cost synergies are
a result of the significant overlap in corporate functions and
branch infrastructure. We believe that the combination with
Mobile Storage Group will add 21 new locations in the
U.S. and 14 locations in the U.K.
Closing of the transaction is subject to approval by our
stockholders, obtaining required governmental approvals, receipt
of a new $1.0 billion asset-based revolving credit facility
and customary closing conditions. No closing date has been set
at this time. Depending on the timing of various disclosure
requirements, the stockholder meeting and regulatory approvals,
the transaction is expected to close as early as June 2008. Our
discussion of our business, financial conditions and results of
operations in this Report does not include the anticipated
effects of the combination with Mobile Storage Group.
Mobile
Mini, Inc.
We were founded in 1983 and we believe we are one of the largest
providers of portable storage solutions in the
United States through our total lease fleet of 160,100
portable storage and portable office units at December 31,
2007. We offer a wide range of portable storage products in
varying lengths and widths with an assortment of differentiated
features such as our proprietary security systems, multiple
doors, electrical wiring and shelving. At December 31,
2007, we operated through a network of 56 branches located in
the United States, three in Canada, six in the United Kingdom,
and one in The Netherlands. Our portable units provide secure,
accessible temporary storage for a diversified client base of
approximately 93,000 customers, including large and small
retailers, construction companies, medical centers, schools,
utilities, 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 inventory,
construction materials and equipment, documents and records and
household goods. 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. During the twelve months ended December 31, 2007,
we generated revenues of approximately $318.3 million.
Since 1996, we have followed a strategy of focusing on leasing
rather than selling our portable storage units. We believe this
leasing model is highly attractive because the vast majority of
our fleet (determined by unit count) consists of steel portable
storage units which:
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provide predictable, recurring revenues from leases with an
average duration of approximately 27 months;
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have average monthly lease rates that recoup our current unit
investment within an average of 34 months;
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have long useful lives exceeding 25 years, low maintenance
and high residual values; and
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produce incremental leasing operating margins of approximately
54%.
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Since 1996, we have increased our total lease fleet from
13,600 units to 160,100 units as of December 31,
2007, for a compound annual growth rate, or CAGR, of 25.1%. 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
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$17.9 million in 1996 to $284.6 million in 2007,
representing a CAGR of 28.6%. 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 refurbished and customized
steel portable storage containers, which were built according to
the standards developed by the International Organization for
Standardization (ISO), other steel containers that
we manufacture and mobile offices. We refurbish 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, 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. This
maintenance of our steel products consists primarily of
repainting units every two to three years, 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 4.3% 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 offices from our lease fleet at an
average of 148% of original cost from 1997 through 2007.
Appraisals on our fleet are conducted on a regular basis by an
independent appraiser selected by our banks, 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. Our
most recent fair market value and orderly liquidation value
appraisals were conducted in December 2007. This fair market
value appraisal appraised our fleet at a value in excess of net
book value. At December 31, 2007, based on these
appraisals, the fair market value of our lease fleet was
approximately 114.0% of our lease fleet net book value; and the
orderly liquidation value appraisal, on which our borrowings
under our revolving credit facility are based, appraised our
lease fleet at approximately $656.3 million, which equates
to 81.7% of the lease fleet net book value.
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.
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 business in the
United States exceeds $1.5 billion in revenue annually.
Historically, portable storage solutions included containers,
van trailers and roll-off units. We believe portable storage
containers are achieving increased market share compared to the
other options because of an increasing awareness that only
containers provide ground level access and protect against
damage caused by wind or water. 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. Although
there are no published estimates of the size of the portable
storage segment, we believe the size of the segment is expanding
due to increasing awareness of the advantages of portable
storage.
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 averaging approximately 13 months.
We also offer portable record storage units and many of our
regular storage units are used for document and record storage.
The documents and records storage industry is experiencing
significant growth as businesses continue to generate
substantial paper records that must be kept for extended periods.
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Our goal is to continue to be the leading U.S. nationwide
provider of portable storage solutions and to successfully
continue our operating methods in the United Kingdom. We believe
our competitive strengths and business strategy will enable us
to achieve these goals.
Competitive
Strengths
Our competitive strengths include the following:
Market Leadership. At December 31, 2007,
we maintained a total fleet of approximately 162,800 units,
which are held for lease and for sale, and we are the largest
provider of portable storage solutions in a majority of our
United States markets. At December 31, 2007, our lease
fleet was comprised of approximately 160,100 units and our
sales fleet was comprised of approximately 2,700 units. 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 customized features that differentiate our products
from those of our competition. We design and manufacture our own
portable storage units in addition to restoring and modifying
used ocean-going containers. These capabilities allow us to
offer a wide range of products and proprietary features to
better meet our customers needs, charge premium lease
rates and gain market share from our competitors, who offer more
limited product selections. Our portable storage units vary in
size from 5 to 48 feet in length and 8 to 10 feet in
width. The 10-foot wide units we manufacture provide 40% more
usable storage space than the standard eight-foot-wide
ocean-going containers offered by our competitors. The vast
majority of our products have a proprietary locking system and
multiple door options. In addition, we offer portable storage
units with electrical wiring, shelving and other customized
features.
Geographic and Customer Diversification. From
our 66 branches of which 56 are located in 32 states in the
United States, three in Canada, six in the United Kingdom, and
one in The Netherlands, we served approximately 93,000 customers
from a wide range of industries in 2007. Our customers include
large and small retailers, construction companies, medical
centers, schools, utilities, 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 2007, our largest and our second-largest customers
accounted for 1.8% and 0.9% of our leasing revenues,
respectively, and our twenty largest customers accounted for
approximately 4.9% of our leasing revenues. During 2007,
approximately 65.3% of our customers rented a single unit. We
believe this diversity also reduces our susceptibility to
economic downturns in our markets or in any of the industries in
which our customers operate. The fact that our business
continued to grow during the economic downturn of 2002 and 2003,
although at a slower than historic pace, demonstrates a measure
of resistance to recession in our business model.
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 flexible lease terms,
security, convenience, product quality, 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. Our customized enterprise resource
planning system also increases our responsiveness to customer
inquiries and enables us to efficiently monitor our sales
forces performance. Due to our orientation towards
customer service, 47.8% of our 2007 leasing revenues was derived
from repeat customers.
Sales and Marketing Emphasis. We target a
diverse customer base and, unlike most of our competitors, we
have developed sophisticated sales and marketing programs
enabling us to expand market awareness of our products and
generate strong internal growth. We have over 400 dedicated
commissioned salespeople, and we
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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 monitoring programs. Yellow pages and
direct-mail advertising are integral parts of our sales and
marketing approach. In 2007, our total advertising costs were
$10.1 million, and we mailed approximately 7.4 million
product brochures to existing and prospective customers as well
as our website, which was enhanced in 2007 to include 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.
Customized Enterprise Resource Planning
System. We made significant investments in
improving and developing a new (ERP) Enterprise Resource
Planning system. In 2006, we underwent a conversion from our
then existing ERP system in North America to a more
sophisticated and robust technology that enhanced our reporting
processes obtained under our previous environment. These
investments and the subsequent conversion of our ERP system
enable us to further optimize fleet utilization, control
pricing, capture detailed customer data, easily control credit
approval while approving it quickly, audit by exception reports,
gain efficiencies in internal control compliance and support our
growth by projecting near-term capital needs. Our ERP system
allow us to carefully monitor, on a daily basis, the size, mix,
utilization and lease rates of our lease fleet by branch on a
real time basis. Our systems also capture relevant customer
demographic and usage information, which we use to target new
customers within our existing and new markets. Our Tempe,
Arizona corporate headquarters and each North America branch are
linked through a scaleable Windows-based wide area network that
provides real-time transaction processing and detailed reports
on a
branch-by-branch
basis. In 2007, we brought our European operations onto the same
ERP system making available to them all the enhancements and
reporting capabilities we have in the U.S. We intend to
continue this investment during 2008 to further optimize the
reporting features of this new system and to further develop our
European operations to take advantage of our sophisticated
reporting environment.
Business
Strategy
Our business strategy consists of the following:
Focus on Core Portable Storage Leasing
Business. We focus on growing our core leasing
business because it provides predictable, recurring revenue and
high margins. We believe that we can generate substantial demand
for our portable storage units throughout North America and in
Europe. Our leasing revenues have grown from $17.9 million
in 1996 to $284.6 million in 2007, reflecting a CAGR of
28.6%.
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. Our
growth rate is dependent in part upon general economic
conditions, and during periods of slow economic growth we are
more likely to focus on growth by acquisitions in order to
leverage our cost structure and to maintain our growth and
profitability. Historically, we have been able to generate
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. The internal growth rate has remained
positive every quarter, but in 2002 and 2003 had fallen to
single digits, from over 20% prior to 2002. In 2005, our
internal growth rate accelerated to an average of 25.3% for the
year, reflecting a continued improvement in both economic and
market conditions. During 2007, our internal growth rate
averaged 11.8% for the year. In our eight oldest markets, all of
which we have operated in for at least twelve years, we achieved
an internal growth rate of 4.1% in 2007, demonstrating the
growth we believe that we can continue to achieve in our most
mature markets.
Branch Expansion. We believe we have an
attractive geographic expansion opportunity, and we have
developed a new market entry strategy, which we replicate in
each new market in the United States. 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
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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
typically achieve very strong organic growth during their first
several years.
We have identified many markets where we believe demand for
portable storage units is underdeveloped. Typically, these
markets are being served by small, local competitors. We
established our eight original branches between our founding in
1983 and 1995. In 1998, we began entering new markets through
our expansion strategy as illustrated in the following table:
New
Market Expansion
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Year Established
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Acquisition
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Start Up
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Total
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1998
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3
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1
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4
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1999
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6
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1
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7
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2000
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9
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1
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10
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2001
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6
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0
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6
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2002
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10
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1
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11
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2003
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1
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0
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1
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2004
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1
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0
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1
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2005
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0
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3
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3
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2006
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11
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0
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11
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2007
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3
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1
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4
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Total
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50
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8
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58
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Our expansion program and other factors can affect our overall
lease fleet asset utilization rate. During the last five years,
our annual utilization levels averaged 80.8%, and ranged from a
low of 78.7% in 2003 to a high of 82.9% in 2005. Our utilization
rate averaged 79.6% during 2007.
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, in 1998 we introduced a 10-foot wide storage unit that
has proven to be a popular product with our customers. In 1999,
we completed the design of a records storage unit, which
provides highly secure,
on-site,
easily accessible storage. We market this unit as a records
storage solution for customers who require easy access to
archived business records close at hand. In 2000, we added wood
mobile offices as a complementary product to better serve our
customers. In 2001, we redesigned and improved our security
locking system, making it easier to use, especially in colder
climates. In 2003, we were issued patents in connection with the
new locking system design and other improvements made. One
patent application was extended and issued in 2006. In 2006, we
applied for several patents for improvements or modifications to
our locking systems. These applications, all of which are still
pending, were filed in the United States, Europe and China. In
2002, we added a 10-by-30-foot steel combination storage/office
unit to complement the various other sizes we have in our fleet.
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.
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Products
We provide a broad range of portable storage products to meet
our customers varying needs. Our products are managed and
our customers are serviced locally by our employee team at each
of our branches, including management, sales personnel and yard
facility employees. Some features of our different products are
listed below:
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Refurbished and Modified Storage Units. We
purchase used ocean-going containers from leasing companies,
shipping lines or brokers. These containers are eight feet wide,
86 to 96 high and 20, 40 or 45 feet
long. After acquisition, we refurbish and modify the ocean-going
containers. Refurbishment 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 those
containers into 5-, 10-, 15-, 20- or 25-foot lengths.
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Manufactured Storage Units. We manufacture
portable steel storage units for our lease fleet and for sale.
We do this at our manufacturing facility in Maricopa, Arizona.
We can manufacture units up to 12 feet wide and
50 feet long and can add doors, windows, locks and other
customized features. We also offer a 10-foot-wide unit, which
provides 40% more usable storage space than a standard
eight-foot-wide unit. Typically, we manufacture
knock-down units, which we ship to our branches.
These units are then assembled by our branches that have
assembly capabilities or by third-party assemblers. This method
of shipment is less expensive than shipping fully assembled
storage units.
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Steel Combination Mobile Office and Storage/Office
Units. We buy and manufacture steel combination
storage/office and mobile 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. Europe also offers canteen
units and drying rooms for the construction industry. In Europe,
where space is limited, 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. In Europe,
some of the offices are also equipped with sinks, hot water
heaters, cabinets and restrooms.
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Wood Mobile Office Units. We added wood 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.
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Records Storage Units. We market and
manufacture proprietary portable records storage units that
enable customers to store documents at their location for easy
access, or at one of our facilities. Our units are
10.5 feet wide and are available in
12-and
23-foot lengths. The units feature high-security doors and
locks, electrical wiring, shelving, folding work tables and air
filtration systems. We believe our product is a cost-effective
alternative to mass warehouse storage, with a high level of fire
and water damage protection.
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Van Trailers and Other 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 that are inferior to standard containers. It is our
goal to dispose of these
sub-standard
units from our fleet either as their initial rental period ends
or within a few years. We do not refurbish these products. See
Product Lives and Durability Van Trailers and
Other Non-Core Storage Products below. At
December 31, 2007, van trailers comprised less than 0.2% of
our fleet, measured by unit count and by book cost basis.
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We purchase used ocean-going containers and refurbish and modify
them at our manufacturing facility in Arizona and at our other
branch locations. At certain branches, we also contract with
third parties to refurbish and modify our units. We believe we
are able to purchase used ocean-going containers at competitive
prices because of our volume purchasing power. The used
ocean-going containers we purchase are typically about eight to
12 years old. We believe our steel portable storage units,
steel offices, and wood modular offices have estimated useful
lives
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of 25 years, 25 years, and 20 years,
respectively, from the date we build or acquire and refurbish
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 less than
0.2% of the gross book value of our lease fleet at
December 31, 2007, 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
4.3% of our lease revenues. Repainting the outside of storage
units is the most frequent maintenance item.
Product
Lives and Durability
Core Portable Storage Products. Most of our
fleet is comprised of refurbished and customized ISO containers,
manufactured steel containers and record storage units, along
with our combined storage/office and mobile office units. These
products are built to last a long period of time with proper
maintenance.
We generally purchase used ISO containers when they are eight 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 in large quantities,
truck them to our locations, refurbish 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 proprietary locking system.
We maintain our steel containers on a regular basis by painting
them on average once every two to three years, removing rust,
and occasionally replacing the wooden floor or a rusted panel.
This periodic maintenance keeps the container in essentially the
same condition as after we initially refurbished it and is
designed to maintain the units value and rental rates
comparable to new units.
Pursuant to our revolving credit agreement, we have our
containers appraised on a periodic basis. Because of the uniform
quality of our containers, the appraiser does not differentiate
value based upon the age of the container or the length of time
it has been in our fleet. Our manufactured containers and steel
offices are not built to ISO standards, but are built in a
similar manner so that, like the ISO containers, they will
maintain their utility and value as long as they are maintained
in accordance with our maintenance program. As with our
refurbished and customized ISO containers, our lenders
appraiser does not differentiate the value of manufactured units
based upon the age of the unit. Our most recent fair market
value appraisal appraised our fleet at a value in excess of net
book value. At December 31, 2007, the net book value of our
fleet was approximately $802.9 million.
Approximately 9.9% of our 2007 revenue was derived from sales of
portable storage and mobile office units. Because the containers
in our lease fleet do not significantly depreciate in value, we
have no 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 unrefurbished and
refurbished containers that we had recently acquired but not yet
leased. 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.
7
The following table shows the gross margin on containers and
steel offices sold from inventory (which we call our sales
fleet) and from our lease fleet from 1998 through 2007 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)
|
|
|
33,679
|
|
|
$
|
108,107
|
|
|
$
|
70,658
|
|
|
|
153
|
%
|
|
|
153
|
%
|
Lease fleet, by period held before sale:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Less than 5 years
|
|
|
11,537
|
|
|
$
|
44,875
|
|
|
$
|
30,248
|
|
|
|
148
|
%
|
|
|
152
|
%
|
5 to 10 years
|
|
|
3,622
|
|
|
$
|
15,146
|
|
|
$
|
10,278
|
|
|
|
147
|
%
|
|
|
162
|
%
|
10 to 15 years
|
|
|
738
|
|
|
$
|
2,438
|
|
|
$
|
1,716
|
|
|
|
142
|
%
|
|
|
168
|
%
|
15 to 20 years
|
|
|
109
|
|
|
$
|
374
|
|
|
$
|
264
|
|
|
|
142
|
%
|
|
|
174
|
%
|
20+ years
|
|
|
4
|
|
|
$
|
14
|
|
|
$
|
11
|
|
|
|
123
|
%
|
|
|
175
|
%
|
|
|
|
(1) |
|
Original cost for purposes of this table includes
(i) the price we paid for the unit, plus (ii) the cost
of our manufacturing, which includes both the cost of
customizing units and refurbishment costs incurred, plus
(iii) the freight charges to our branch where the unit is
first placed in service. For manufactured units, cost includes
our manufacturing cost and the freight charges to the branch
location. |
|
(2) |
|
Includes sales of unrefurbished ISO containers. |
Because steel storage containers 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. To a degree, competition, market
conditions and other factors can influence our leasing rates.
8
The following chart shows, for containers that have been in our
lease fleet for various periods of time, the average monthly
lease rate that we currently receive for various types of
containers. 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 for at
least 10 years (we have been in business for over
23 years), and specific details of such type of unit are
not provided due to competitive considerations.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Age of Containers
|
|
|
|
|
|
|
|
|
(By Number of Years in Our Lease Fleet)
|
|
|
Total Number/
|
|
|
|
|
|
0 5
|
|
|
6 10
|
|
|
11 15
|
|
|
16 20
|
|
|
Over 21
|
|
|
Average Dollar
|
|
|
Type 1
|
|
Number of units
|
|
|
3,843
|
|
|
|
3,793
|
|
|
|
1,142
|
|
|
|
42
|
|
|
|
3
|
|
|
|
8,823
|
|
|
|
Average rent
|
|
$
|
80.75
|
|
|
$
|
81.94
|
|
|
$
|
82.14
|
|
|
$
|
76.71
|
|
|
$
|
77.64
|
|
|
$
|
81.42
|
|
Type 2
|
|
Number of units
|
|
|
1,192
|
|
|
|
1,153
|
|
|
|
388
|
|
|
|
53
|
|
|
|
1
|
|
|
|
2,787
|
|
|
|
Average rent
|
|
$
|
87.63
|
|
|
$
|
82.68
|
|
|
$
|
83.12
|
|
|
$
|
81.55
|
|
|
$
|
70.41
|
|
|
$
|
84.83
|
|
Type 3
|
|
Number of units
|
|
|
13,051
|
|
|
|
4,113
|
|
|
|
2,253
|
|
|
|
296
|
|
|
|
3
|
|
|
|
19,716
|
|
|
|
Average rent
|
|
$
|
68.43
|
|
|
$
|
82.18
|
|
|
$
|
81.89
|
|
|
$
|
81.42
|
|
|
$
|
68.61
|
|
|
$
|
73.03
|
|
Type 4
|
|
Number of units
|
|
|
232
|
|
|
|
639
|
|
|
|
255
|
|
|
|
11
|
|
|
|
1
|
|
|
|
1,138
|
|
|
|
Average rent
|
|
$
|
119.02
|
|
|
$
|
112.95
|
|
|
$
|
103.41
|
|
|
$
|
94.69
|
|
|
$
|
108.33
|
|
|
$
|
111.87
|
|
Type 5
|
|
Number of units
|
|
|
425
|
|
|
|
1,394
|
|
|
|
150
|
|
|
|
16
|
|
|
|
|
|
|
|
1,985
|
|
|
|
Average rent
|
|
$
|
107.71
|
|
|
$
|
121.62
|
|
|
$
|
123.20
|
|
|
$
|
121.53
|
|
|
$
|
|
|
|
$
|
118.76
|
|
Type 6
|
|
Number of units
|
|
|
4,127
|
|
|
|
5,048
|
|
|
|
775
|
|
|
|
51
|
|
|
|
7
|
|
|
|
10,008
|
|
|
|
Average rent
|
|
$
|
122.21
|
|
|
$
|
128.22
|
|
|
$
|
129.62
|
|
|
$
|
125.90
|
|
|
$
|
127.67
|
|
|
$
|
125.84
|
|
Type 7
|
|
Number of units
|
|
|
15,195
|
|
|
|
7,397
|
|
|
|
623
|
|
|
|
69
|
|
|
|
8
|
|
|
|
23,292
|
|
|
|
Average rent
|
|
$
|
108.95
|
|
|
$
|
114.02
|
|
|
$
|
124.23
|
|
|
$
|
124.26
|
|
|
$
|
123.02
|
|
|
$
|
111.02
|
|
Type 8
|
|
Number of units
|
|
|
345
|
|
|
|
507
|
|
|
|
194
|
|
|
|
12
|
|
|
|
3
|
|
|
|
1,061
|
|
|
|
Average rent
|
|
$
|
162.46
|
|
|
$
|
158.56
|
|
|
$
|
158.48
|
|
|
$
|
137.85
|
|
|
$
|
216.66
|
|
|
$
|
159.74
|
|
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.
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.
Wood Mobile Office Units. We began adding wood
mobile office units to the lease fleet in 2000 as a complement
to our core portable storage products. These units are
manufactured by third parties and are very similar to the units
in the lease fleets of other mobile office rental companies.
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 2007, our wood mobile offices were all less
than eight years old. These units 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 seven years.
9
Although, the operating margins on mobile offices are high, they
are lower than the margins on portable storage. 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 and Other Non-Core Storage
Products. At December 31, 2007, van trailers
made up less than 0.2% 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 that are
sub-standard
compared to our core steel container storage product. We attempt
to purge most of these inferior 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 refurbish these products and
instead resell them.
Van trailers are initially manufactured to be attached to trucks
to move merchandise in interstate commerce. The initial cost of
these units can be $19,000 or more. They are leased to, or
purchased by, cross country truckers and other companies
involved in cross country transportation of merchandise. They
are made of light weight material in order to make them ideal
for transport and have wheels and brakes. They are typically
made of aluminum, but have steel base frames to maintain some
structural integrity. Because of their light weight, moving
parts, the heavy loads they carry and the wear and tear involved
in hundreds of thousands of miles of transport, these units
depreciate quite rapidly. This business and the cartage business
described below are also very economically cyclical.
Once van trailers become too old to use in interstate commerce
without frequent maintenance and downtime, they are sold to
companies that use them as cartage trailers. At this
point, they may have a depreciated cost of approximately $5,000.
As cartage trailers, they are used to move loads of merchandise
much shorter distances and may be used to store goods for some
period of time and then to move them from one part of a facility
or a city to another part. They continue to depreciate quite
rapidly until they reach the point where they are not considered
safe or cost effective to move loaded with merchandise.
At this point, near the end of the life cycle of a van trailer,
it may be used for storage. Unlike a storage container, however,
van trailers are much less secure, can fairly easily be stolen
(as they are on wheels) and many customers feel they are
unsightly. Most importantly, they are not ground level and,
under the Occupational Safety and Health Administration (OSHA)
regulations, must be attached to approved stairs or ramps to
prevent accidents when they are accessed.
A large part of our leasing effort involves demonstrating to our
customers the superiority of our containers to van trailers.
Mobile Mini has found that when it markets steel storage
containers against storage van trailers, customers recognize the
superiority of containers. As a result, we believe that
eventually the use of van trailers will primarily be limited to
dock height storage and to customers who must frequently move
storage units.
The average initial unit value given to the van trailers we have
purchased in acquisitions that are remaining in our fleet is
approximately $900 (excluding refrigerated units which are
valued higher), and we depreciate these units over seven years
down to a 20% residual value. As noted above, we sell these
units as soon as practicable. During 2006 and 2007, we disposed
of approximately 1,000 and 875 van trailers, respectively,
representing approximately 32% and 31% of our van trailer fleet,
respectively.
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 refurbish and
customize. We also purchase new manufactured mobile offices in
various configurations and sizes, and manufacture our own custom
steel units. Our initial cost basis of an ISO container includes
the purchase price from the seller, the cost of refurbishment,
which can include removing rust and dents, repairing floors,
sidewalls and ceilings, painting, signage, installing new doors,
seals and a locking system. Additional modification 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 proprietary
locking system and sometimes we add custom features. We also
will sell units from our lease fleet to our customers.
10
The table below outlines those transactions that effectively
increased the net asset value of our lease fleet from
$697.4 million at December 31, 2006 to
$802.9 million at December 31, 2007:
|
|
|
|
|
|
|
|
|
|
|
Dollars
|
|
|
Units
|
|
|
|
(In thousands)
|
|
|
Lease fleet at December 31, 2006, net
|
|
$
|
697,439
|
|
|
|
149,615
|
|
Purchases:
|
|
|
|
|
|
|
|
|
Container purchases and containers obtained through
acquisitions, including freight
|
|
|
15,853
|
|
|
|
5,295
|
|
Non-core units obtained through acquisitions, primarily van
trailers
|
|
|
218
|
|
|
|
540
|
|
Manufactured units:
|
|
|
|
|
|
|
|
|
Steel containers, combination storage/office combo units and
steel security offices
|
|
|
46,229
|
|
|
|
4,184
|
|
New wood mobile offices
|
|
|
38,832
|
|
|
|
1,409
|
|
Refurbishment and customization:(3)
|
|
|
|
|
|
|
|
|
Refurbishment or customization of units purchased or acquired in
the current year
|
|
|
9,471
|
|
|
|
2,452
|
(1)
|
Refurbishment or customization of 3,272 units purchased in
a prior year
|
|
|
16,834
|
|
|
|
1,136
|
(1)
|
Refurbishment or customization of 2,808 units obtained
through acquisition in a prior year
|
|
|
2,366
|
|
|
|
381
|
(2)
|
Other
|
|
|
(736
|
)
|
|
|
(811
|
)
|
Cost of sales from lease fleet
|
|
|
(10,621
|
)
|
|
|
(4,085
|
)
|
Depreciation
|
|
|
(12,962
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Lease fleet at December 31, 2007, net
|
|
$
|
802,923
|
|
|
|
160,116
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(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. |
The table below outlines the composition of our lease fleet at
December 31, 2007:
|
|
|
|
|
|
|
|
|
|
|
Lease Fleet
|
|
|
Number of Units
|
|
|
|
(In thousands)
|
|
|
|
|
|
Steel storage containers
|
|
$
|
459,665
|
|
|
|
131,172
|
|
Offices
|
|
|
402,640
|
|
|
|
27,018
|
|
Van trailers
|
|
|
2,330
|
|
|
|
1,926
|
|
Other
|
|
|
956
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
865,591
|
|
|
|
|
|
Accumulated depreciation
|
|
|
(62,668
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
802,923
|
|
|
|
160,116
|
|
|
|
|
|
|
|
|
|
|
Branch
Operations
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
11
storage). We own our branch locations in Dallas, Texas,
Oklahoma City, Oklahoma and a portion of our Phoenix, Arizona
location. The rest of
our branch locations are leased. The following table shows
information about our branches by geographic area (U.S., Canada,
U.K. and the Netherlands), sorted by date established.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year
|
|
Location
|
|
Functions/Uses
|
|
Approximate Size
|
|
|
Established
|
|
|
United States:
|
|
|
|
|
|
|
|
|
|
|
Phoenix, Arizona
|
|
Leasing, on-site storage and sales
|
|
|
14 acres
|
|
|
|
1983
|
|
Tucson, Arizona
|
|
Leasing, on-site storage and sales
|
|
|
5 acres
|
|
|
|
1986
|
|
Los Angeles, California
|
|
Leasing, on-site storage and sales
|
|
|
15 acres
|
|
|
|
1988
|
|
San Diego, California
|
|
Leasing, on-site storage and sales
|
|
|
6 acres
|
|
|
|
1994
|
|
Dallas, Texas
|
|
Leasing, on-site storage and sales
|
|
|
17 acres
|
|
|
|
1994
|
|
Houston, Texas
|
|
Leasing, on-site storage and sales
|
|
|
9 acres
|
|
|
|
1994
|
|
San Antonio, Texas
|
|
Leasing, on-site storage and sales
|
|
|
7 acres
|
|
|
|
1995
|
|
Austin, Texas
|
|
Leasing, on-site storage and sales
|
|
|
7 acres
|
|
|
|
1995
|
|
Las Vegas, Nevada
|
|
Leasing and sales
|
|
|
6 acres
|
|
|
|
1998
|
|
Oklahoma City, Oklahoma
|
|
Leasing and sales
|
|
|
6 acres
|
|
|
|
1998
|
|
Albuquerque, New Mexico
|
|
Leasing and sales
|
|
|
6 acres
|
|
|
|
1998
|
|
Denver, Colorado
|
|
Leasing and sales
|
|
|
6 acres
|
|
|
|
1998
|
|
Tulsa, Oklahoma
|
|
Leasing and sales
|
|
|
7 acres
|
|
|
|
1999
|
|
Colorado Springs, Colorado
|
|
Leasing and sales
|
|
|
5 acres
|
|
|
|
1999
|
|
New Orleans, Louisiana
|
|
Leasing and sales
|
|
|
5 acres
|
|
|
|
1999
|
|
Memphis, Tennessee
|
|
Leasing and sales
|
|
|
9 acres
|
|
|
|
1999
|
|
Salt Lake City, Utah
|
|
Leasing, on-site storage and sales
|
|
|
3 acres
|
|
|
|
1999
|
|
Chicago, Illinois
|
|
Leasing and sales
|
|
|
7 acres
|
|
|
|
1999
|
|
Knoxville, Tennessee
|
|
Leasing and sales
|
|
|
5 acres
|
|
|
|
1999
|
|
Seattle, Washington
|
|
Leasing and sales
|
|
|
5 acres
|
|
|
|
2000
|
|
El Paso, Texas
|
|
Leasing and sales
|
|
|
4 acres
|
|
|
|
2000
|
|
Harlingen, Texas
|
|
Leasing and sales
|
|
|
5 acres
|
|
|
|
2000
|
|
Corpus Christi, Texas
|
|
Leasing and sales
|
|
|
3 acres
|
|
|
|
2000
|
|
Jacksonville, Florida
|
|
Leasing and sales
|
|
|
4 acres
|
|
|
|
2000
|
|
Miami/Ft. Lauderdale, Florida
|
|
Leasing and sales
|
|
|
8 acres
|
|
|
|
2000
|
|
Ft. Myers, Florida
|
|
Leasing and sales
|
|
|
5 acres
|
|
|
|
2000
|
|
Tampa, Florida
|
|
Leasing and sales
|
|
|
8 acres
|
|
|
|
2000
|
|
Orlando, Florida
|
|
Leasing and sales
|
|
|
7 acres
|
|
|
|
2000
|
|
Atlanta, Georgia
|
|
Leasing and sales
|
|
|
15 acres
|
|
|
|
2000
|
|
Kansas City, Kansas/Missouri
|
|
Leasing and sales
|
|
|
5 acres
|
|
|
|
2001
|
|
Milwaukee, Wisconsin
|
|
Leasing and sales
|
|
|
5 acres
|
|
|
|
2001
|
|
Charlotte, North Carolina
|
|
Leasing and sales
|
|
|
8 acres
|
|
|
|
2001
|
|
Nashville, Tennessee
|
|
Leasing and sales
|
|
|
6 acres
|
|
|
|
2001
|
|
San Francisco, California
|
|
Leasing and sales
|
|
|
7 acres
|
|
|
|
2001
|
|
Raleigh, North Carolina
|
|
Leasing and sales
|
|
|
8 acres
|
|
|
|
2001
|
|
Columbus, Ohio
|
|
Leasing and sales
|
|
|
7 acres
|
|
|
|
2002
|
|
Little Rock, Arkansas
|
|
Leasing and sales
|
|
|
12 acres
|
|
|
|
2002
|
|
St. Louis, Missouri
|
|
Leasing and sales
|
|
|
7 acres
|
|
|
|
2002
|
|
Ft. Worth, Texas
|
|
Leasing and sales
|
|
|
5 acres
|
|
|
|
2002
|
|
12
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year
|
|
Location
|
|
Functions/Uses
|
|
Approximate Size
|
|
|
Established
|
|
|
Louisville, Kentucky
|
|
Leasing and sales
|
|
|
7 acres
|
|
|
|
2002
|
|
Columbia, South Carolina
|
|
Leasing and sales
|
|
|
5 acres
|
|
|
|
2002
|
|
Baltimore, Maryland
|
|
Leasing and sales
|
|
|
9 acres
|
|
|
|
2002
|
|
Philadelphia, Pennsylvania
|
|
Leasing and sales
|
|
|
4 acres
|
|
|
|
2002
|
|
Richmond, Virginia
|
|
Leasing and sales
|
|
|
4 acres
|
|
|
|
2002
|
|
Boston, Massachusetts
|
|
Leasing and sales
|
|
|
4 acres
|
|
|
|
2002
|
|
Portland, Oregon
|
|
Leasing and sales
|
|
|
6 acres
|
|
|
|
2003
|
|
Detroit, Michigan
|
|
Leasing and sales
|
|
|
6 acres
|
|
|
|
2004
|
|
Minneapolis, Minnesota
|
|
Leasing and sales
|
|
|
5 acres
|
|
|
|
2005
|
|
Indianapolis, Indiana
|
|
Leasing and sales
|
|
|
6 acres
|
|
|
|
2005
|
|
Pensacola, Florida
|
|
Leasing and sales
|
|
|
5 acres
|
|
|
|
2005
|
|
Oakland, California
|
|
Leasing and sales
|
|
|
4 acres
|
|
|
|
2006
|
|
Fresno, California
|
|
Leasing and sales
|
|
|
5 acres
|
|
|
|
2006
|
|
Utica, New York
|
|
Leasing and sales
|
|
|
5 acres
|
|
|
|
2006
|
|
Wichita, Kansas
|
|
Leasing and sales
|
|
|
5 acres
|
|
|
|
2006
|
|
Worcester, Vermont
|
|
Leasing and sales
|
|
|
12 acres
|
|
|
|
2007
|
|
Pittsburgh, Pennsylvania
|
|
Leasing and sales
|
|
|
6 acres
|
|
|
|
2007
|
|
Canada:
|
|
|
|
|
|
|
|
|
|
|
Toronto, Ontario
|
|
Leasing and sales
|
|
|
4 acres
|
|
|
|
2002
|
|
Vancouver, British Columbia
|
|
Leasing and sales
|
|
|
3 acres
|
|
|
|
2007
|
|
Windsor, Ontario
|
|
Leasing and sales
|
|
|
2 acres
|
|
|
|
2007
|
|
United Kingdom:
|
|
|
|
|
|
|
|
|
|
|
London
|
|
Leasing and sales
|
|
|
5 acres
|
|
|
|
2006
|
|
Bristol
|
|
Leasing and sales
|
|
|
2 acres
|
|
|
|
2006
|
|
Birmingham
|
|
Leasing and sales
|
|
|
2 acres
|
|
|
|
2006
|
|
Liverpool
|
|
Leasing and sales
|
|
|
5 acres
|
|
|
|
2006
|
|
Leeds
|
|
Leasing and sales
|
|
|
2 acres
|
|
|
|
2006
|
|
Edinburgh
|
|
Leasing and sales
|
|
|
3 acres
|
|
|
|
2006
|
|
The Netherlands:
|
|
|
|
|
|
|
|
|
|
|
Rotterdam
|
|
Leasing and sales
|
|
|
2 acres
|
|
|
|
2006
|
|
Each branch has a branch manager who has overall supervisory
responsibility for all activities of the branch. Branch managers
report to one of our fifteen regional managers. Our regional
managers, in turn, report to one of our senior or executive vice
presidents. Performance based incentive bonuses are a
substantial portion of the compensation for these senior vice
presidents, regional and branch managers.
In North America, 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 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 and outsource major repairs.
During 2007, we introduced this organizational structure in our
U.K. branches and acquired branch properties and transportation
equipment.
13
Sales and
Marketing
We have 434 dedicated sales people at our branches and
26 people in sales management 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 enterprise resource planning system. This enables
the sales and marketing team to share leads and other
information and permits the staff at headquarters to monitor and
review sales and leasing productivity on a
branch-by-branch
basis. Our sales and marketing employees are compensated
primarily on a commission basis.
Our nationwide presence in the United States 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 simplifies the procurement, rental and billing process for
those customers. Approximately 1,100 U.S. 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 advertise our products in the yellow pages and use a targeted
direct mail program. In 2007, we mailed approximately
7.4 million product brochures to existing and prospective
customers. These brochures describe our products and features
and highlight the advantages of portable storage. Our total
advertising costs were approximately $10.1 million in 2007,
$8.6 million in 2006, and $7.6 million in 2005. During
2007, we began to 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.
Customers
During 2007, approximately 93,000 customers leased our portable
storage, combination storage/office and mobile office units,
compared to approximately 91,000 in 2006. Our customer base is
diverse and consists of businesses in a broad range of
industries. Our largest single leasing customer accounted for
2.1% and 1.8% of our leasing revenues in 2006 and 2007,
respectively. Our next largest customer accounted for
approximately 0.5% and 0.9% of our leasing revenues in 2006 and
2007, respectively. Our twenty largest customers combined
accounted for approximately 5.3% of our lease revenues in 2006
and approximately 4.9% of our lease revenues in 2007.
Approximately 65.3% of our customers rented a single unit during
2007.
14
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,
2007:
|
|
|
|
|
|
|
|
|
|
|
Approximate
|
|
|
|
|
|
|
|
Percentage of
|
|
|
Representative
|
|
|
Business
|
|
Units on Lease
|
|
|
Customers
|
|
Typical Application
|
|
Consumer service and retail businesses
|
|
|
31
|
%
|
|
Department, drug, grocery and strip mall stores, hotels,
restaurants, dry cleaners and service stations
|
|
Inventory storage, record storage and seasonal needs
|
Construction
|
|
|
43
|
%
|
|
General, electrical, plumbing and mechanical contractors,
landscapers, residential homebuilders and equipment rental
companies
|
|
Equipment and materials storage and job offices
|
Consumers
|
|
|
7
|
%
|
|
Homeowners
|
|
Backyard storage and storage of household goods during
relocation or renovation; storage at our location
|
Industrial and commercial
|
|
|
7
|
%
|
|
Distributors, trucking and utility companies, finance and
insurance companies and film production companies
|
|
Raw materials, equipment, record storage, in-plant office and
seasonal needs
|
Institutions, government agencies and others
|
|
|
12
|
%
|
|
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
|
Manufacturing
We build new steel portable storage units, steel mobile offices
and other custom-designed steel structures as well as refurbish
used ocean-going containers at our Maricopa, Arizona
manufacturing plant. We also refurbish used ocean-going
containers at our branch locations. Our manufacturing
capabilities allow us to differentiate our products from our
competitors and enable us to provide a broader product selection
to our customers. Our manufacturing process includes cutting,
shaping and welding raw steel, installing customized features
and painting the newly constructed units. Typically, we
manufacture knock-down units, which we ship to our
branches. These units are then assembled at our branches that
have assembly capabilities or by third-party assemblers. We can
ship up to twelve knock-down 20-foot containers on a
single flat-bed trailer. By comparison, only two or three
assembled 20-foot ocean-going containers can be shipped on a
flat-bed trailer. This reduces our cost of transporting units to
our branches and permits us to economically ship our
manufactured units to any city in the continental United States
or Canada. At December 31, 2007, we had 144 manufacturing
workers at our Maricopa facility, and an additional 363 workers
who participate in manufacturing and repair activities in our
branch facilities. We believe we can expand the capacity of our
Maricopa facility at a relatively low cost, and that numerous
third parties have the facilities needed to perform
refurbishment and assembly services for us on a contract basis.
We purchase raw materials such as steel, vinyl, wood, glass and
paint, which we use in our manufacturing 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.
Our manufacturing capacity protects us to some extent from
shortages of and price increases for used ocean-going
containers. Used ocean-going containers vary in availability and
price from time to time based on market
15
conditions. Should the price of used ocean-going containers
increase substantially, or should they become temporarily
unavailable, we can increase our manufacturing volume and reduce
the number of used steel containers we buy and refurbish.
Vehicles
At December 31, 2007, we had a fleet of 521 delivery
trucks, of which 388 were owned and 133 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. This system consists of a wide-area network that
connects our headquarters and all of our North American
branches. Our Tempe, Arizona corporate headquarters and each
North American 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. 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. 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. We have made significant investments
to our ERP system during the past three years, and we intend to
continue that investment in 2008 to further optimize the
features of this new system for both the North American and our
European operations.
Lease
Terms
Based on the composition of our North America leases at the end
of 2007, our North America steel portable storage unit leases
initially have an average intended term of approximately
10 months but then provide for the leases to continue on a
month-to-month
basis until the customer cancels the term. In Europe, our
customers historically had leased on a
month-to-month
basis. Our Europe operations have been transitioning to our
business leasing model, and as a result, approximately 40% of
our European leases at December 31, 2007 have intended
lease terms at lease inception of approximately 7 months
for portable storage units. Under either agreement, the lease
continues
month-to-month
until cancelled by the customer. During 2007, the company-wide
average duration of all portable storage leases was
27 months and the average monthly rental rate was
approximately $100. Most of our steel portable storage units
rent for between approximately $50 and $300 per month. Our van
trailers normally lease for substantially lower amounts than our
portable storage units. Our North America combination
storage/office and mobile office units typically have an average
intended lease term of approximately 13 months. The initial
lease term in Europe has historically been on a
month-to-month
basis. The average company-wide duration of all mobile office
and combo unit leases has been 22 months. Our combination
storage/office and mobile office units typically rent for $100
to over $1,100 per month. 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 some of this liability. This provides us with an
additional source of recurring revenue. The customers
possessions stored within the portable storage unit are
typically the responsibility of the customer.
Competition
We face competition from several local and regional companies,
as well as from national companies, in all of our current
markets. We compete with several large national and
international companies in our mobile office product line. Our
competitors include lessors of storage units, mobile offices,
used van trailers and other structures used for portable
storage. We also compete with conventional fixed self-storage
facilities. We compete primarily in
16
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
Mobile Storage Group, Williams Scotsman, Elliot Hire,
Ravenstock, PODS, 1-800-PAC-RAT, LLC., Haulaway Storage
Containers, Inc., 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, 2007, we employed approximately
2,095 full-time employees in the following major categories:
|
|
|
|
|
Management
|
|
|
120
|
|
Administrative
|
|
|
364
|
|
Sales and marketing
|
|
|
434
|
|
Manufacturing
|
|
|
507
|
|
Drivers and storage unit handling
|
|
|
670
|
|
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 certain information from parts of
our proxy statement for the 2008 Annual Meeting of Stockholders,
which we expect to file with the SEC on or about April 29,
2008, 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 Report.
Cautionary
Statement about Forward Looking Statements
Our discussion and analysis in this 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 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
slowdown in the non-residential construction sector of the
economy could reduce demand from some of our customers, which
could result in lower demand for our products.
At the end of 2006 and 2007, customers in the construction
industry, primarily in non-residential construction, accounted
for approximately 40% and 43%, respectively, of our leased
units. This industry tends to be cyclical. In 2002 and 2003 this
industry sector suffered a sustained economic slowdown which
resulted in much slower growth
17
in demand for leases and sales of our products. If another
sustained economic slowdown in the non-residential construction
sector were to occur, it is likely that we would again
experience less demand for leases and sales of our products.
Also, because most of our cost of leasing is either fixed or
semi variable, this would cause our margins to contract and the
adverse affect on operating results would be more pronounced.
Our internal growth rate slowed to 7.5% in 2002 and 7.4% in 2003
due to a slowdown in the economy, particularly in this sector.
During these years, our profitability declined.
We may
fail to realize the anticipated benefits of the merger with
Mobile Storage Group, and the integration process could
adversely impact our ongoing operations.
The Company and the Mobile Storage Group entered into the merger
agreement with the expectation that the merger would result in
various benefits, including, among other things, an expanded
customer base and ongoing cost savings and operating
efficiencies. The success of the merger 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.
Mobile Mini and Mobile Storage Group have operated independently
and until the completion of the merger will continue to operate
independently. It is possible that the integration process could
result in the loss of key employees, the disruption of each
companys ongoing businesses or inconsistencies in
standards, controls, procedures or policies that adversely
affect our ability to maintain relationships with customers and
employees or to achieve the anticipated benefits of the merger.
Integration efforts between the two companies will also divert
management attention and resources. These integration matters
could have an adverse effect on each of the companies during the
transition period. The integration may take longer than
anticipated and may have unanticipated adverse results relating
to Mobile Minis or Mobile Storage Groups existing
business.
We
will take on substantial additional indebtedness to finance the
merger and this additional indebtedness could significantly
impact Mobile Minis ability to operate its
business.
In connection with the merger, Mobile Mini expects to enter into
a $1.0 billion asset asset-based revolving loan. The
security for the credit facility will include a lien on
substantially all of the combined companys present and
future assets. Mobile Mini plans to use a portion of the
proceeds from the credit facility to pay a portion of the
approximately $535.0 million indebtedness of Mobile Storage
Group, $12.5 million cash component of the merger
consideration and the $25.0 million estimated amount of
transaction costs related to the merger. The indebtedness that
we will assume includes $200 million of Mobile Storage
Group senior notes. Such increased indebtedness could limit the
Mobile Minis financial and operating flexibility,
including by requiring Mobile Mini to dedicate a substantial
portion of its cash flow from operations to the interest on its
debt, making it more difficult to obtain additional financing on
favorable terms, limiting its ability to capitalize on
significant business opportunities and making it more vulnerable
to economic downturns. In addition, the significant level of
indebtedness could limit Mobile Minis flexibility to react
to changes in the industry and economic conditions and divert
financial resources away from the expansion and improvement of
its business.
Our
planned growth could strain our management resources, which
could disrupt our development of our new branch
locations.
Our future performance will depend in large part on our ability
to manage our planned growth, which in 2006 included our
commencement of operations in the United Kingdom and The
Netherlands. On February 22, 2008, we entered into a
definitive merger agreement under which Mobile Storage Group
will merge into Mobile Mini in a transaction valued at
approximately $701.5 million. Our growth could strain our
management, human and other resources. To successfully manage
this growth, we must continue to add managers and employees and
improve our operating, financial and other internal procedures
and controls. We also must effectively motivate, train and
manage our employees. 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.
18
Our
expansion may divert our resources from other aspects of our
business and require that we incur additional debt, and may
subject us to additional and different regulations. Failure to
manage these economic, financial, business and regulatory risks
may adversely impact our growth and results of
operations.
We regularly review and evaluate expansion opportunities. Our
expansion into markets in the United Kingdom and The
Netherlands, which commenced in 2006, requires us to make
substantial investments, which could divert resources from other
aspects of our business. We may also be required to raise
additional debt or equity capital to fund our expansion. In
addition, we may incur difficulties in staffing and managing our
new operations. In connection with expansion outside of the
U.S., we face fluctuations in currency exchange rates, exposure
to additional regulatory requirements, including certain trade
barriers, changes in political and economic conditions, and
exposure to additional and potentially adverse tax regimes. Our
success in Europe will depend, in part, on our ability to
anticipate and effectively manage these and other risks. Our
failure to manage these risks may adversely affect our growth,
in Europe and elsewhere, and lead to increased administrative
costs.
Covenants
in our debt instruments restrict or prohibit our ability to
engage in or enter into a variety of transactions.
The indenture governing our 6.875% Senior Notes and, to a
lesser extent, our revolving credit facility agreement 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 certain financial covenants or 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 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
indenture 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, 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 anticipate that
our new revolving credit facility, which we will enter into in
connection with our merger with Mobile Storage Group, will
include covenants similar to those in our existing credit
agreement.
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 May 2007, we entered into the First Amendment of
the Second Amended and Restated Loan and Security Agreement,
under which we may borrow up to $425.0 million on a
revolving loan basis, which
19
means that amounts repaid may be reborrowed. As of
February 22, 2008, we had outstanding borrowings of
approximately $234.9 million and letters of credit of
approximately $3.3 million under the credit facility,
leaving approximately $186.8 million available for further
borrowing and immediately available. In connection with our
merger with Mobile Storage Group, we anticipate that we will
assume approximately $535.0 million of Mobile Storage
Groups indebtedness. Our substantial indebtedness could
have consequences. For example, it could:
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require us to dedicate a substantial portion of our cash flow
from operations to payments on our indebtedness, which could
reduce the availability of our cash flow to fund future working
capital, capital expenditures, acquisitions and other general
corporate purposes;
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make it more difficult for us to satisfy our obligations with
respect to our Senior Notes;
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expose us to the risk of increased interest rates, as certain of
our borrowings will be at variable rates of interest;
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require us to sell assets to reduce indebtedness or influence
our decisions about whether to do so;
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increase our vulnerability to general adverse economic and
industry conditions;
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limit our flexibility in planning for, or reacting to, changes
in our business and our industry;
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restrict us from making strategic acquisitions or pursuing
business opportunities; and
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limit, along with the financial and other restrictive covenants
in our indebtedness, among other things, our ability to borrow
additional funds. Failing to comply with those covenants could
result in an event of default which, if not cured or waived,
could have a material adverse effect on our business, financial
condition and results of operations.
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We may
need additional debt or equity to sustain our growth, but we do
not have commitments for such funds beyond financing commitments
related to our merger with Mobile Storage Group.
We finance our growth through a combination of borrowings, cash
flow from operations, and equity financing. Our ability to
continue growing at the pace we have historically grown will
depend in part on our ability to obtain either additional debt
or equity financing. The terms on which debt and equity
financing is available to us varies from time to time and is
influenced by our performance and by external factors, such as
the economy generally and developments in the market, that are
beyond our control. Also, additional debt financing or the sale
of additional equity securities may cause the market price of
our common stock to decline. If we are unable to obtain
additional debt or equity financing on acceptable terms, we may
have to curtail our growth by delaying new branch openings, or,
under certain circumstances, lease fleet expansion.
Fluctuations
between the British pound and U.S. dollar could adversely affect
our results of operations.
We derived approximately 8.0% of our total revenues in 2007 from
our operations in the U.K. We expect that percentage will
increase materially on an annualized basis following the closing
of our merger with Mobile Storage Group. 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 of
currency fluctuations on us 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 we recognize from our U.K.
business. The British pound is currently 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
20
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. F 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.
The
supply and cost of used ocean-going containers fluctuates, and
this can affect our pricing and our ability to
grow.
We purchase, refurbish 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 increase
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.
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 United States 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.
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
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, Lawrence Trachtenberg, our Executive Vice
President and Chief Financial Officer, and Russ Lemley, 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.
21
The
market price of our common stock has been volatile and may
continue to be volatile and the value of your investment may
decline.
The market price of our common stock has been volatile and may
continue to be volatile. This volatility may cause wide
fluctuations in the price of our common stock on the Nasdaq
Global Select Market. The market price of our common stock is
likely to be affected by:
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changes in general conditions in the economy, geopolitical
events or the financial markets;
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variations in our quarterly operating results;
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changes in financial estimates by securities analysts;
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other developments affecting us, our industry, customers or
competitors;
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the operating and stock price performance of companies that
investors deem comparable to us; and
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the number of shares available for resale in the public markets
under applicable securities laws.
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ITEM 1B.
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UNRESOLVED
STAFF COMMENTS.
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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 2007 fiscal year
and that remain unresolved.
We own our branch locations in Dallas, Texas, Oklahoma City,
Oklahoma and a portion of our Phoenix, Arizona location. 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.
Some of the lease properties with lease terms expiring in 2008
are with related persons and we anticipate renewing those leases
for terms of approximately five years.
We own our manufacturing facility in Maricopa, Arizona,
approximately 30 miles south of Phoenix. This facility is
16 years old and is on approximately 43 acres. The
facility includes nine manufacturing buildings, totaling
approximately 171,300 square feet. These buildings house
our manufacturing, assembly, restoring, painting and vehicle
maintenance operations.
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 Loudwater,
Buckinghamshire, where we lease approximately 4,000 square
feet of office space. The term on this lease is through December
2012.
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ITEM 3.
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LEGAL
PROCEEDINGS.
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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.
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ITEM 4.
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SUBMISSION
OF MATTERS TO A VOTE OF SECURITY HOLDERS.
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No matters were submitted to a vote of our security holders
during the fourth quarter ended December 31, 2007.
EXECUTIVE
OFFICERS OF MOBILE MINI, INC.
Set forth below is information respecting the name, age and
position with Mobile Mini of our executive officers who are not
a continuing director or a director nominee. Information
respecting our executive officers who
22
are continuing directors and director nominees is set forth in
Item 10 of this Report which incorporates by reference to
Mobile Minis definitive proxy statement to the 2008 annual
meeting of shareholders, to be filed with the Securities and
Exchange Commission pursuant to Regulation 14A.
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 44.
Martin T Crayden joined Mobile Mini in April 2006 as our Senior
Vice President responsible for our operations in Europe. He
previously served as Director/CEO responsible for Royal
Wolfs operations in the United Kingdom and The Netherlands
since September 2000. He has been engaged in the U.K. container
industry since 1984. Age 46.
Jon D. Keating has served as our Senior Vice President,
Operations since January 2008. He joined Mobile Mini in 1996,
and he 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 38.
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 in 1989. Age 43.
Russell C. Lemley was appointed Executive Vice President and
Chief Operating Officer in December 2007. He served as Senior
Vice President, Western Division, since 1999 and 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 50.
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 57.
PART II
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ITEM 5.
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MARKET
FOR COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER
PURCHASES OF EQUITY SECURITIES.
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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 after giving effect to a
two-to-one
stock split effected on March 10, 2006. See Note 11 to
our consolidated financial statements included elsewhere in this
Report.
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2006
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2007
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High
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Low
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High
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Low
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Quarter ended March 31,
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$
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31.32
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$
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25.70
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$
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29.40
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$
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25.12
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Quarter ended June 30,
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$
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37.12
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$
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26.64
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$
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33.65
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$
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26.30
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Quarter ended September 30,
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$
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31.98
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$
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25.95
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$
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32.01
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$
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21.56
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Quarter ended December 31,
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$
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33.35
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$
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26.85
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$
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25.23
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$
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16.50
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We had approximately 212 holders of record of our common stock
on February 13, 2008, and we estimate that we have more
than 5,000 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
We did not make any sales of unregistered securities during
2007. 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. As of December 31, 2007, we had
repurchased 2,174,828 shares for approximately
$39.3 million under this authorization, and we did not
repurchase any additional shares prior to the expiration of this
authorization in February 2008.
The following table summarizes the purchase of equity securities
for the three-months ended December 31, 2007.
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(d) Maximum Number
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(or Approximate
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Dollar Value) of
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Shares That May Yet
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(2) Total
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(c) Total Number of
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be Purchased Under
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Number of
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(b) Average
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Shares Purchased as
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the Plans or
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Shared
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Price Paid per
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Part of Publicly
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Programs (In
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Period
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Purchased
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Share(2)
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Announced Plans(1)
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Thousands)
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October 2007
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1,610,087
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$
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17.20
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1,610,087
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$
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15,605
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November 2007
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285,506
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$
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17.15
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285,506
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$
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10,698
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December 2007
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$
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10,698
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Fourth Quarter Total
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1,895,593
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1,895,593
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(1) |
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On August 9, 2007, we announced our intention to repurchase
up to $50.0 million of our common stock over a period of
six months in open-market purchases or in privately negotiated
transactions in compliance with applicable securities laws and
regulations. This program was announced in a press release filed
as an exhibit to our
Form 8-K
filed on August 10, 2007. |
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(2) |
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The weighted average price paid per shares of common stock does
not include the cost of commissions. |
Equity
Compensation Plan Information
Information regarding Mobile Minis equity compensation
plans, including both stockholder approved plans and
non-stockholder approved plans, is set forth in the section
entitled Equity Compensation Plan Information in
Mobile Minis Notice of Annual Meeting of Shareowners and
Proxy Statement, to be filed within 120 days after
December 31, 2007, which information is incorporated herein
by reference.
24
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,
2002.
STOCK
PERFORMANCE GRAPH
Mobile Mini, Inc.
At December 31, 2007
Total Return Performance
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Period Ended December 31,
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Index
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2002
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2003
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2004
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2005
|
|
2006
|
|
2007
|
Mobile Mini, Inc.
|
|
$
|
100.00
|
|
|
$
|
125.85
|
|
|
$
|
210.85
|
|
|
$
|
302.49
|
|
|
$
|
343.84
|
|
|
$
|
236.63
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Standard & Poors SmallCap 600
|
|
$
|
100.00
|
|
|
$
|
138.79
|
|
|
$
|
170.22
|
|
|
$
|
183.30
|
|
|
$
|
211.01
|
|
|
$
|
210.38
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nasdaq Stock Market Index (U.S.)
|
|
$
|
100.00
|
|
|
$
|
149.52
|
|
|
$
|
162.72
|
|
|
$
|
166.18
|
|
|
$
|
182.57
|
|
|
$
|
197.98
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
* |
|
Total Return Based on $100 Initial Investment &
Reinvestment of Dividends |
25
|
|
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
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 Selected Financial Data tables for all
periods presented.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
2003
|
|
|
2004
|
|
|
2005
|
|
|
2006
|
|
|
2007
|
|
|
|
(In thousands, except per share and operating data)
|
|
|
Consolidated Statements of Income Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Leasing
|
|
$
|
128,482
|
|
|
$
|
149,856
|
|
|
$
|
188,578
|
|
|
$
|
245,105
|
|
|
$
|
284,638
|
|
Sales
|
|
|
17,248
|
|
|
|
17,919
|
|
|
|
17,499
|
|
|
|
26,824
|
|
|
|
31,644
|
|
Other
|
|
|
838
|
|
|
|
566
|
|
|
|
1,093
|
|
|
|
1,434
|
|
|
|
2,020
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenues
|
|
|
146,568
|
|
|
|
168,341
|
|
|
|
207,170
|
|
|
|
273,363
|
|
|
|
318,302
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Costs and expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of sales
|
|
|
11,487
|
|
|
|
11,352
|
|
|
|
10,845
|
|
|
|
17,186
|
|
|
|
21,651
|
|
Leasing, selling and general expenses
|
|
|
80,124
|
|
|
|
90,696
|
|
|
|
109,257
|
|
|
|
139,906
|
|
|
|
166,994
|
|
Florida litigation expense
|
|
|
8,502
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization
|
|
|
10,026
|
|
|
|
11,427
|
|
|
|
12,854
|
|
|
|
16,741
|
|
|
|
21,149
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total costs and expenses
|
|
|
110,139
|
|
|
|
113,475
|
|
|
|
132,956
|
|
|
|
173,833
|
|
|
|
209,794
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from operations
|
|
|
36,429
|
|
|
|
54,866
|
|
|
|
74,214
|
|
|
|
99,530
|
|
|
|
108,508
|
|
Other income (expense):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest income
|
|
|
2
|
|
|
|
|
|
|
|
11
|
|
|
|
437
|
|
|
|
101
|
|
Other income
|
|
|
|
|
|
|
|
|
|
|
3,160
|
|
|
|
|
|
|
|
|
|
Interest expense
|
|
|
(16,299
|
)
|
|
|
(20,434
|
)
|
|
|
(23,177
|
)
|
|
|
(23,681
|
)
|
|
|
(24,906
|
)
|
Debt restructuring/extinguishment expense
|
|
|
(10,440
|
)
|
|
|
|
|
|
|
|
|
|
|
(6,425
|
)
|
|
|
(11,224
|
)
|
Foreign currency exchange gain
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
66
|
|
|
|
107
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before provision for income taxes
|
|
|
9,692
|
|
|
|
34,432
|
|
|
|
54,208
|
|
|
|
69,927
|
|
|
|
72,586
|
|
Provision for income taxes
|
|
|
3,780
|
|
|
|
13,773
|
|
|
|
20,220
|
|
|
|
27,151
|
|
|
|
28,410
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
5,912
|
|
|
$
|
20,659
|
|
|
$
|
33,988
|
|
|
$
|
42,776
|
|
|
$
|
44,176
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
0.21
|
|
|
$
|
0.71
|
|
|
$
|
1.14
|
|
|
$
|
1.25
|
|
|
$
|
1.24
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted
|
|
$
|
0.20
|
|
|
$
|
0.70
|
|
|
$
|
1.10
|
|
|
$
|
1.21
|
|
|
$
|
1.22
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average number of common and common share equivalents
outstanding:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
28,625
|
|
|
|
28,974
|
|
|
|
29,867
|
|
|
|
34,243
|
|
|
|
35,489
|
|
Diluted
|
|
|
28,925
|
|
|
|
29,565
|
|
|
|
30,875
|
|
|
|
35,425
|
|
|
|
36,296
|
|
Other Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EBITDA(1)
|
|
$
|
46,457
|
|
|
$
|
66,293
|
|
|
$
|
90,239
|
|
|
$
|
116,774
|
|
|
$
|
129,865
|
|
Net cash provided by operating activities
|
|
|
40,690
|
|
|
|
40,322
|
|
|
|
69,249
|
|
|
|
76,884
|
|
|
|
91,299
|
|
Net cash used in investing activities
|
|
|
(55,269
|
)
|
|
|
(80,508
|
)
|
|
|
(113,275
|
)
|
|
|
(192,763
|
)
|
|
|
(138,682
|
)
|
Net cash provided by financing activities
|
|
|
12,730
|
|
|
|
40,555
|
|
|
|
43,282
|
|
|
|
116,966
|
|
|
|
48,427
|
|
Operating Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of branches (at year end)
|
|
|
47
|
|
|
|
48
|
|
|
|
51
|
|
|
|
62
|
|
|
|
66
|
|
Lease fleet units (at year end)
|
|
|
89,542
|
|
|
|
100,727
|
|
|
|
116,317
|
|
|
|
149,615
|
|
|
|
160,116
|
|
Lease fleet covenant utilization (annual average)
|
|
|
78.7
|
%
|
|
|
80.7
|
%
|
|
|
82.9
|
%
|
|
|
82.7
|
%
|
|
|
79.6
|
%
|
Lease revenue growth from prior year
|
|
|
10.6
|
%
|
|
|
16.6
|
%
|
|
|
25.8
|
%
|
|
|
30.0
|
%
|
|
|
16.1
|
%
|
Operating margin
|
|
|
24.9
|
%
|
|
|
32.6
|
%
|
|
|
35.8
|
%
|
|
|
36.4
|
%
|
|
|
34.1
|
%
|
Net income margin
|
|
|
4.0
|
%
|
|
|
12.3
|
%
|
|
|
16.4
|
%
|
|
|
15.6
|
%
|
|
|
13.9
|
%
|
26
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At December 31,
|
|
|
|
2003
|
|
|
2004
|
|
|
2005
|
|
|
2006
|
|
|
2007
|
|
|
|
(In thousands)
|
|
|
Consolidated Balance Sheet Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Lease fleet, net
|
|
$
|
383,672
|
|
|
$
|
454,106
|
|
|
$
|
550,464
|
|
|
$
|
697,439
|
|
|
$
|
802,923
|
|
Total assets
|
|
|
515,080
|
|
|
|
592,146
|
|
|
|
704,957
|
|
|
|
900,030
|
|
|
|
1,028,851
|
|
Total debt
|
|
|
240,610
|
|
|
|
277,044
|
|
|
|
308,585
|
|
|
|
302,045
|
|
|
|
387,989
|
|
Stockholders equity
|
|
|
189,293
|
|
|
|
216,369
|
|
|
|
267,975
|
|
|
|
442,004
|
|
|
|
457,890
|
|
Reconciliation of EBITDA to net cash provided by operating
activities, the most directly comparable GAAP measure:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
2003
|
|
|
2004
|
|
|
2005
|
|
|
2006
|
|
|
2007
|
|
|
|
(In thousands)
|
|
|
EBITDA(1)
|
|
$
|
46,457
|
|
|
$
|
66,293
|
|
|
$
|
90,239
|
|
|
$
|
116,774
|
|
|
$
|
129,865
|
|
Senior Note redemption premiums
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(4,987
|
)
|
|
|
(8,926
|
)
|
Interest paid
|
|
|
(8,841
|
)
|
|
|
(19,254
|
)
|
|
|
(21,727
|
)
|
|
|
(24,770
|
)
|
|
|
(27,896
|
)
|
Income and franchise taxes paid
|
|
|
(298
|
)
|
|
|
(372
|
)
|
|
|
(495
|
)
|
|
|
(733
|
)
|
|
|
(797
|
)
|
Provision for loss from natural disasters
|
|
|
|
|
|
|
|
|
|
|
1,710
|
|
|
|
|
|
|
|
|
|
Share-based compensation expense
|
|
|
|
|
|
|
|
|
|
|
19
|
|
|
|
3,066
|
|
|
|
4,028
|
|
Gain on sale of lease fleet units
|
|
|
(1,601
|
)
|
|
|
(2,277
|
)
|
|
|
(3,529
|
)
|
|
|
(4,922
|
)
|
|
|
(5,560
|
)
|
Loss on disposal of property, plant and equipment
|
|
|
44
|
|
|
|
604
|
|
|
|
704
|
|
|
|
454
|
|
|
|
203
|
|
Gain on sale of short-term investments
|
|
|
(59
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change in certain assets and liabilities, net of effect of
business acquired:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Receivables
|
|
|
327
|
|
|
|
(3,309
|
)
|
|
|
(5,371
|
)
|
|
|
(6,580
|
)
|
|
|
(2,119
|
)
|
Inventories
|
|
|
(1,781
|
)
|
|
|
(2,178
|
)
|
|
|
(4,823
|
)
|
|
|
628
|
|
|
|
(610
|
)
|
Deposits and prepaid expenses
|
|
|
(3,132
|
)
|
|
|
(669
|
)
|
|
|
(480
|
)
|
|
|
(1,446
|
)
|
|
|
(1,754
|
)
|
Other assets and intangibles
|
|
|
(35
|
)
|
|
|
37
|
|
|
|
(19
|
)
|
|
|
(4
|
)
|
|
|
318
|
|
Accounts payable and accrued liabilities
|
|
|
9,609
|
|
|
|
1,447
|
|
|
|
13,021
|
|
|
|
(596
|
)
|
|
|
4,547
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by operating activities
|
|
$
|
40,690
|
|
|
$
|
40,322
|
|
|
$
|
69,249
|
|
|
$
|
76,884
|
|
|
$
|
91,299
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reconciliation of net income to EBITDA:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
2003
|
|
|
2004
|
|
|
2005
|
|
|
2006
|
|
|
2007
|
|
|
|
(In thousands except percentages)
|
|
|
Net income
|
|
$
|
5,912
|
|
|
$
|
20,659
|
|
|
$
|
33,988
|
|
|
$
|
42,776
|
|
|
$
|
44,176
|
|
Interest expense
|
|
|
16,299
|
|
|
|
20,434
|
|
|
|
23,177
|
|
|
|
23,681
|
|
|
|
24,906
|
|
Income taxes
|
|
|
3,780
|
|
|
|
13,773
|
|
|
|
20,220
|
|
|
|
27,151
|
|
|
|
28,410
|
|
Depreciation and amortization
|
|
|
10,026
|
|
|
|
11,427
|
|
|
|
12,854
|
|
|
|
16,741
|
|
|
|
21,149
|
|
Debt restructuring/extinguishment expense
|
|
|
10,440
|
|
|
|
|
|
|
|
|
|
|
|
6,425
|
|
|
|
11,224
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EBITDA(1)
|
|
$
|
46,457
|
|
|
$
|
66,293
|
|
|
$
|
90,239
|
|
|
$
|
116,774
|
|
|
$
|
129,865
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EBITDA margin(2)
|
|
|
31.7
|
%
|
|
|
39.4
|
%
|
|
|
43.6
|
%
|
|
|
42.7
|
%
|
|
|
40.8
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
EBITDA, as further discussed below, is defined as net income
before interest expense, income taxes, depreciation and
amortization, and debt restructuring or extinquishment expense.
We present EBITDA because we believe it provides useful
information regarding our ability to meet our future debt
payment requirements, |
27
|
|
|
|
|
capital expenditures and working capital requirements and that
it provides an overall evaluation of our financial condition. In
addition, EBITDA is a component of certain financial covenants
under our revolving credit facility and is used to determine our
available borrowing ability and the interest rate in effect at
any point in time. |
EBITDA has certain limitations as an analytical tool and should
not be used as a substitute for net income, cash flows, or other
consolidated income or cash flow data prepared in accordance
with generally accepted accounting principles in the United
States or as a measure of our profitability or our liquidity. In
particular, EBITDA, as defined does not include:
|
|
|
|
|
Interest expense because we borrow money to
partially finance our capital expenditures, primarily related to
the expansion of our lease fleet, interest expense is a
necessary element of our cost to secure this financing to
continue generating additional revenues.
|
|
|
|
Income taxes EBITDA, as defined, does not reflect
income taxes or the requirements for any tax payments.
|
|
|
|
Depreciation and amortization because we are a
leasing company, our business is very capital intensive and we
hold acquired assets for a period of time before they generate
revenues, cash flow and earnings; therefore, depreciation and
amortization expense is a necessary element of our business.
|
|
|
|
|
|
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. |
28
Selected
Consolidated Quarterly Financial Data (unaudited):
The following table sets forth certain unaudited selected
consolidated financial information for each of the four quarters
in fiscal 2006 and 2007. Certain amounts include the effects of
rounding. You should read this material with the financial
statements and related footnotes included elsewhere in this
Report. Mobile Mini believes these comparisons of consolidated
quarterly selected financial data are not necessarily indicative
of future performance.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2006
|
|
|
|
First Quarter
|
|
|
Second Quarter
|
|
|
Third Quarter
|
|
|
Fourth Quarter
|
|
|
|
(In thousands, except per share data)
|
|
|
Revenues:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Leasing
|
|
$
|
51,534
|
|
|
$
|
59,331
|
|
|
$
|
65,595
|
|
|
$
|
68,645
|
|
Sales
|
|
|
4,528
|
|
|
|
6,590
|
|
|
|
8,071
|
|
|
|
7,635
|
|
Other
|
|
|
358
|
|
|
|
377
|
|
|
|
323
|
|
|
|
376
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenues
|
|
|
56,420
|
|
|
|
66,298
|
|
|
|
73,989
|
|
|
|
76,656
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Costs and expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of sales
|
|
|
2,914
|
|
|
|
4,152
|
|
|
|
5,109
|
|
|
|
5,011
|
|
Leasing, selling and general expenses
|
|
|
29,996
|
|
|
|
33,849
|
|
|
|
37,310
|
|
|
|
38,751
|
|
Depreciation and amortization
|
|
|
3,588
|
|
|
|
4,004
|
|
|
|
4,380
|
|
|
|
4,769
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total costs and expenses
|
|
|
36,498
|
|
|
|
42,005
|
|
|
|
46,799
|
|
|
|
48,531
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from operations
|
|
|
19,922
|
|
|
|
24,293
|
|
|
|
27,190
|
|
|
|
28,125
|
|
Other income (expense):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest income
|
|
|
51
|
|
|
|
372
|
|
|
|
9
|
|
|
|
5
|
|
Interest expense
|
|
|
(6,446
|
)
|
|
|
(5,740
|
)
|
|
|
(5,693
|
)
|
|
|
(5,802
|
)
|
Debt extinguishment expense
|
|
|
|
|
|
|
(6,425
|
)
|
|
|
|
|
|
|
|
|
Foreign currency exchange
|
|
|
|
|
|
|
(51
|
)
|
|
|
(1
|
)
|
|
|
118
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before provision for income taxes
|
|
|
13,527
|
|
|
|
12,449
|
|
|
|
21,505
|
|
|
|
22,446
|
|
Provision for income tax
|
|
|
5,323
|
|
|
|
4,791
|
|
|
|
8,615
|
|
|
|
8,422
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
8,204
|
|
|
$
|
7,658
|
|
|
$
|
12,890
|
|
|
$
|
14,024
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
0.27
|
|
|
$
|
0.22
|
|
|
$
|
0.36
|
|
|
$
|
0.39
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted
|
|
$
|
0.26
|
|
|
$
|
0.21
|
|
|
$
|
0.35
|
|
|
$
|
0.38
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
29
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2007
|
|
|
|
First Quarter
|
|
|
Second Quarter
|
|
|
Third Quarter
|
|
|
Fourth Quarter
|
|
|
|
(In thousands, except per share data)
|
|
|
Revenues:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Leasing
|
|
$
|
66,053
|
|
|
$
|
70,362
|
|
|
$
|
73,982
|
|
|
$
|
74,241
|
|
Sales
|
|
|
6,654
|
|
|
|
7,538
|
|
|
|
8,691
|
|
|
|
8,761
|
|
Other
|
|
|
313
|
|
|
|
350
|
|
|
|
809
|
|
|
|
548
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenues
|
|
|
73,020
|
|
|
|
78,250
|
|
|
|
83,482
|
|
|
|
83,550
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Costs and expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of sales
|
|
|
4,459
|
|
|
|
5,160
|
|
|
|
5,975
|
|
|
|
6,057
|
|
Leasing, selling and general expenses
|
|
|
36,838
|
|
|
|
40,335
|
|
|
|
44,693
|
|
|
|
45,128
|
|
Depreciation and amortization
|
|
|
4,891
|
|
|
|
5,113
|
|
|
|
5,581
|
|
|
|
5,564
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total costs and expenses
|
|
|
46,188
|
|
|
|
50,608
|
|
|
|
56,249
|
|
|
|
56,749
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from operations
|
|
|
26,832
|
|
|
|
27,642
|
|
|
|
27,233
|
|
|
|
26,801
|
|
Other income (expense):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest income
|
|
|
8
|
|
|
|
29
|
|
|
|
34
|
|
|
|
30
|
|
Interest expense
|
|
|
(5,953
|
)
|
|
|
(6,100
|
)
|
|
|
(6,241
|
)
|
|
|
(6,612
|
)
|
Debt extinguishment expense
|
|
|
|
|
|
|
(11,224
|
)
|
|
|
|
|
|
|
|
|
Foreign currency exchange
|
|
|
|
|
|
|
(1
|
)
|
|
|
54
|
|
|
|
54
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before provision for income taxes
|
|
|
20,887
|
|
|
|
10,346
|
|
|
|
21,080
|
|
|
|
20,273
|
|
Provision for income taxes
|
|
|
8,190
|
|
|
|
4,015
|
|
|
|
8,376
|
|
|
|
7,829
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
12,697
|
|
|
$
|
6,331
|
|
|
$
|
12,704
|
|
|
$
|
12,444
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
0.36
|
|
|
$
|
0.18
|
|
|
$
|
0.35
|
|
|
$
|
0.36
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted
|
|
$
|
0.35
|
|
|
$
|
0.17
|
|
|
$
|
0.35
|
|
|
$
|
0.36
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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 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 account our acquisition on
April 28, 2006, of the Royal Wolf Companies. The operations
acquired are included in our operating results for the twelve
months ended December 31, 2007 and 2006. Only eight months
of results of these acquired operations are included in the
operating results for the twelve months ended December 31,
2006. As a result of this acquisition, we added two new
locations in California, six locations in the United Kingdom and
a branch in The Netherlands. We also consolidated operations at
10 locations in the United States where there was branch overlap
as a result of the acquisition. The results of operations for
2007 also include the four acquisitions and one start up
location that we completed in 2007.
Overview
General
We derive most of our revenues from the leasing of portable
storage containers and portable offices. The average North
America intended lease term at lease inception is approximately
10 months for portable storage units
30
and approximately 13 months for portable offices. In
Europe, our customers historically had been on a month to month
basis. Our European operations have been transitioning to our
business leasing model, and as a result, 40% of our European
leases at December 31, 2007 have intended lease terms at
lease inception of approximately 7 months for portable
storage units. In 2007, the company wide over-all lease term
averaged 27 months for portable storage units and
22 months for portable offices. As a result of these long
average lease terms, our leasing business tends to provide us
with a recurring revenue stream and minimizes fluctuations in
revenues. However, there is no assurance that we will maintain
such lengthy overall lease terms.
In addition to our leasing business, we also sell portable
storage containers and occasionally we sell portable office
units. Our sales revenues as a percentage of total revenues have
represented 9.9% of revenues in 2007. Our European subsidiaries,
which in 2007 derived approximately 31.6% of their revenues from
container sales, have been transitioned to our leasing business
model, but sales continue to be a large part of their revenues
for the time being.
Mobile Mini has grown through both internally generated growth
and 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 staffing levels and certain
minimum levels of 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.
From 2003 through 2005, we had not entered into as many new
markets as we had in the earlier years or as we did in 2006 and
2007, resulting in less downward pressure on our operating
margins. With the entry into eleven new markets in 2006,
particularly the seven branches that operate in Europe, we added
fixed costs to develop new branch infrastructure in 2006 and
2007. These additional costs include branch office and yard
locations, marketing and advertising programs, delivery
equipment, Enterprise Resource Planning system and staffing
requirements. These expenses put some pressure on our operating
margins in the fourth quarter of 2006, and more pressure in
2007. This infrastructure will enable the new branches to
complete the transition to our leasing business model, which
should lead to more revenue growth and then slowly start
increasing operating margins as we start realizing the benefits
from incremental lease revenues. We also have to staff our
European headquarters that processes and tracks all of their
leasing, sales and accounting transactions for consolidation
with our North America operations.
Among the external factors we examine to determine the direction
of our business is the level of non-residential construction
activity, especially in areas of the country where we have a
significant presence. Customers in the construction industry
represented approximately 43% and 40% of our units on rent at
December 31, 2007 and 2006, respectively, and because of
the degree of operating leverage we have, increases or declines
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 slowdown in certain geographic areas,
particularly in the southeast and southwest. We were able to
offset a portion of these economic effects by continuing to gain
market share for certain of our products, particularly our
manufactured containers and portable offices, and by rapidly
growing our base in Europe and certain geographic areas in the
U.S. We believe that the uncertainty and caution that is
apparent in the financial markets in the early part of 2008,
particularly as market conditions affect the availability of
credit to finance construction projects, could continue to exert
downward pressure on the levels of non-residential construction
activity. In late 2007 and early 2008, we notice a slowdown in
the southeast and southwest regions. This could have a material
effect upon our results of operations.
31
In managing our business, we focus on our growth in 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 high growth rate
so that revenue growth will exceed inflationary growth in
expenses.
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 on an irregular basis based on capital needs and market
opportunities, 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. The non-recurring events reflected in the
adjusted EBITDA are the effect in 2003 of our Florida litigation
expense, which was concluded in 2003, and, in 2005, for losses
incurred related to Hurricane Katrina and the proceeds received
from a third party related to a settlement agreement in
connection with the Florida litigation. In 2006, with the
adoption of SFAS No. 123(R), when we calculated
adjusted EBITDA, we also excluded share-based compensation
expense in comparing adjusted EBITDA to other periods. Under APB
Opinion No. 25, we did not recognize compensation expense
in connection with stock option awards in years prior to 2006.
Because EBITDA is a non- GAAP financial measure, as defined by
the SEC, we include in this Report reconciliations of EBITDA to
the most directly comparable financial measures calculated and
presented in accordance with accounting principles generally
accepted in the United States. These reconciliations are
included in Item 6, Selected Financial Data.
In managing our business, we routinely compare our adjusted
EBITDA margins from year to year and based upon age of branch.
We define this margin as adjusted EBITDA divided by our total
revenues, expressed as a percentage. We use this comparison, for
example, to study internally the effect that increased costs
have on our margins. As capital is invested in our established
branch locations, we achieve higher adjusted 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
adjusted EBITDA margins in its early years until the number of
units on rent increases. Because of our high operating margins
on incremental lease revenue, which we realize on a branch by
branch basis when the branch achieves leasing revenues
sufficient to cover the branchs fixed costs, leasing
revenues in excess of the break-even amount produce large
increases in profitability. Conversely, absent significant
growth in leasing revenues, the adjusted EBITDA margin at a
branch will remain relatively flat on a period by period
comparative basis.
Accounting
and Operating Overview
Our leasing revenues include all rent and ancillary revenues we
receive for our portable storage, combination storage/office and
mobile office units. Our sales revenues include sales of these
units to customers. Our other revenues consist principally of
charges for the delivery of the units we sell. Our principal
operating expenses are (1) cost of sales; (2) leasing,
selling and general expenses; and (3) depreciation and
amortization, primarily depreciation of the portable storage
units and portable offices in our lease fleet. Cost of sales is
the cost of the units that we sold during the reported period
and includes both our cost to buy, transport, refurbish 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 4.3% of lease revenues and are included
in leasing, selling and general expenses. We expense our normal
repair and maintenance costs as incurred (including the cost of
periodically repainting units).
Our principal asset is our lease fleet, which has historically
maintained value close to its original cost. The steel units in
our lease fleet (other than van trailers) are depreciated on the
straight-line method using an estimated useful
32
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. See Item 1. Business Product
Lives and Durability.
Our expansion program and other factors can affect our overall
utilization rate. During the last five years, our annual
utilization levels averaged 80.8%, and ranged from a low of
78.7% in 2003 to a high of 82.9% in 2005. Our utilization level
averaged 79.6% during 2007. Since 1996, we have increased our
total lease fleet from 13,600 units to 160,100 units,
representing a CAGR of 25.1%.
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:
|
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|
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Year Ended December 31,
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2003
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2004
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2005
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2006
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2007
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Revenues:
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|
|
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|
|
|
|
|
|
|
|
|
|
|
|
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Leasing
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|
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87.7
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%
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|
89.0
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%
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|
|
91.0
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%
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|
|
89.7
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%
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|
|
89.4
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%
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Sales
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|
|
11.8
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|
|
|
10.7
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|
|
|
8.5
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|
|
|
9.8
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|
|
|
9.9
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Other
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|
0.5
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0.3
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0.5
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0.5
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0.7
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|
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|
|
|
|
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Total revenues
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100.0
|
|
|
|
100.0
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|
|
100.0
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|
|
100.0
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|
|
100.0
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Costs and expenses:
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Cost of sales
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7.8
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|
6.7
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5.2
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6.3
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|
6.8
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|
Leasing, selling and general expenses
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54.7
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53.9
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52.8
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51.2
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52.5
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Florida litigation expense
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5.8
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Depreciation and amortization
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6.8
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|
|
6.8
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6.2
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|
|
6.1
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|
6.6
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|
|
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Total costs and expenses
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75.1
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67.4
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64.2
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63.6
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|
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65.9
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|
|
|
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Income from operations
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|
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24.9
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|
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32.6
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35.8
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|
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36.4
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|
|
|
34.1
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|
Other income (expense):
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|
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|
|
|
|
|
|
Interest income
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
0.2
|
|
|
|
|
|
Other income
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|
|
|
|
|
|
|
|
|
|
1.6
|
|
|
|
|
|
|
|
|
|
Interest expense
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|
|
(11.1
|
)
|
|
|
(12.1
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)
|
|
|
(11.2
|
)
|
|
|
(8.7
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)
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|
|
(7.8
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)
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Debt restructuring expense
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|
|
(7.2
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)
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|
|
|
|
|
|
|
|
|
(2.4
|
)
|
|
|
(3.5
|
)
|
Foreign currency exchange gain
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|
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|
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|
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Income before provision for income taxes
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|
|
6.6
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|
|
|
20.5
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|
|
|
26.2
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|
|
|
25.5
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|
|
|
22.8
|
|
Provision for income taxes
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|
|
2.6
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|
|
|
8.2
|
|
|
|
9.8
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|
|
|
9.9
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|
|
|
8.9
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|
|
|
|
|
|
|
|
|
|
|
|
|
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|
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|
|
|
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Net income
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|
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4.0
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%
|
|
|
12.3
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%
|
|
|
16.4
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%
|
|
|
15.6
|
%
|
|
|
13.9
|
|
|
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|
|
|
|
|
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|
|
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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
of portable storage units and portable offices 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 yield resulted from an increase in average rental rates over
the prior year, an increase
33
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
portable offices we have added to our lease fleet in recent
quarters have on average been larger units that command high
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 refurbished and were primarily storage containers
rather than portable 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 United
States 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 portable storage and office 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
portable storage 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 United States and
especially in Europe which only had eight months reported in
2006. Our leasing business continues to be our primary focus and
leasing revenues have become the predominant part of our revenue
mix over the past several years. We expect this trend to
continue as our European branches scale down their sales
activity and trend to our leasing business model.
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 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 United Kingdom 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 United
Kingdom, 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
34
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 and Estimates 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 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 United
States, Canada, United Kingdom 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 extinquishment 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.
Twelve
Months Ended December 31, 2006 Compared to Twelve Months
Ended December 31, 2005
Total revenues in 2006 increased $66.2 million, or 32.0%,
to $273.4 million from $207.2 million in 2005. Leasing
of portable storage units and portable offices accounted for
approximately 89.7% of total revenues during 2006. Leasing
revenues in 2006 increased $56.5 million, or 30.0%, to
$245.1 million from $188.6 million in 2005. This
increase resulted from a 3.2% increase in the average rental
yield per unit, a 26.7% increase in the average number of units
on lease and 0.1% increase due to favorable exchange rates, in
each case as compared to the same period in 2005. The increase
in yield resulted from an increase in average rental rates over
the prior year and an increase in revenue for ancillary rental
services, such as delivery charges. An increase in the mix of
premium units having higher rental rates which we added to our
fleet was offset by lower rental rates on units added through
35
acquisitions, especially in Europe, which on the average are
smaller, were not refurbished and were primarily storage
containers rather than portable offices. Excluding our European
operations, our average rental yield per unit increased 5.5% in
2006 compared to 2005. In 2006, our lease revenue growth rate
was 30.0% as compared to 25.8% in 2005. We opened eleven new
branches through acquisitions in 2006: four in the United
States, six in the United Kingdom and one in The
Netherlands. We also completed another acquisition in 2006 in
which we consolidated the acquired business operations into our
existing Pensacola, Florida operations. Our sales of portable
storage and office units accounted for 9.8% and 8.5% in 2006 and
2005, respectively, 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 0.5% of total
revenues in both 2006 and 2005. Our revenues from the sale of
portable storage units increased $9.3 million, or 53.3%, to
$26.8 million in 2006 from $17.5 million in 2005. This
increase is primarily related to the higher level of sales
activity at our newer locations both in the United States and
especially in Europe. Our leasing business continues to be our
primary focus and leasing revenues have become the predominant
part of our revenue mix over the past several years.
Cost of sales are the costs related to our sales revenue only.
Cost of sales as a percentage of sales revenue increased to
64.1% in 2006 from 62.0% in 2005. Our gross margin was at a
higher-than-typical
level during both periods. The slight decrease in the
2006 gross margin results from our European operations
where many of our units were sold at wholesale.
Leasing, selling and general expenses increased
$30.6 million, or 28.1%, to $139.9 million in 2006
from $109.3 million in 2005. Leasing, selling and general
expenses, as a percentage of total revenues, were 51.2% and
52.8% in 2006 and 2005, respectively. Included in this expense
for 2006, is approximately $3.1 million of expenses related
to share-based compensation in accordance with
SFAS No. 123(R), which became effective for us on
January 1, 2006. The 2005 expense amount includes
$1.7 million related to Hurricane Katrina. Excluding these
items, our leasing, selling and general expenses would have
increased by $29.3 million, or 27.2%, to
$136.8 million in 2006, as compared to $107.5 million
in 2005. As the markets we entered in the past few years have
continued to mature and as their revenues have increased to
cover our fixed expenses at those locations, those markets have
produced high margins on incremental lease revenues. Each
additional unit on lease in excess of the break-even level
contributes significantly to profitability. Over the next year,
we anticipate our leasing, selling and general expenses will
increase modestly as we add more infrastructure to the seven
European and four United States branches acquired in 2006, to
support their transformation to our business model. In addition
to the share-based compensation expense, the major increase in
leasing, selling and general expenses for 2006 were:
(1) payroll and related expenses increased by
$11.3 million and included the increase in commissions we
paid our sales personnel related to the $66.2 million
increase in revenues and general wage increases for over
1,900 employees who support the growth of our leasing
activities; (2) delivery and freight costs, including fuel,
increased by $8.6 million 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); (3) repairs on our lease fleet, including costs
related to our office units, increased by $2.6 million due
to our increased maintenance efforts associated with maintaining
our higher overall utilization rates and the higher cost
associated with maintaining mobile offices; and (4) repairs
and maintenance of delivery and other equipment increased by
$1.0 million principally as a result of our preventative
maintenance programs and general repairs associated with
servicing a larger lease fleet.
EBITDA increased $26.6 million, or 29.4%, to
$116.8 million in 2006 from $90.2 million in 2005.
EBITDA, adjusted to exclude $3.1 million of share-based
compensation expense in 2006 and Hurricane Katrina expenses of
$1.7 million and $3.2 million of other income in 2005,
increased $31.0 million, or 35.0%, to $119.8 million
in 2006 as compared to $88.8 million in 2005.
Depreciation and amortization expenses increased
$3.8 million, or 30.2%, to $16.7 million in 2006 from
$12.9 million in 2005. 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 or units acquired through acquisitions in 2006. It
also includes the depreciation expenses associated with the
refurbishment of portable storage units added to the lease fleet
during 2006 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, depreciation expense includes
the related depreciation on the additions to property, plant and
equipment, primarily trucks, forklifts and trailers, to
36
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, 2005, our lease
fleet cost basis for depreciation increased by
$157.8 million. See Critical Accounting Policies and
Estimates within this Item 7.
Other income in 2005, represents net proceeds of a settlement
agreement pursuant to which a third party reimbursed us for a
portion of losses sustained in two lawsuits that arose in
connection with the acquisition in April 2000 of a portable
storage business in Florida.
Interest expense increased $0.5 million, or 2.2%, to
$23.7 million in 2006 from $23.2 million in 2005. Our
monthly weighted average debt outstanding during 2006, compared
to 2005, was virtually unchanged due to our equity offering.
This slight increase in interest expense in 2006 resulted
primarily from higher interest rates on our variable rate line
of credit, which was offset by the interest savings resulting
from the redemption of $52.5 million of our
9.5% Senior Notes in May 2006. During 2006, we invested
$122.6 million in net additions to our lease fleet and
$59.5 million in acquisitions. These additions were funded
through cash flow from operations, use of a portion of the
proceeds of an equity offering, and additional borrowings. The
monthly weighted average interest rate on our debt was 7.6% for
both 2006 and 2005, excluding amortization of debt issuance
costs. Taking into account the amortization of debt issuance
costs, the monthly weighted average interest rate was 7.9% to
both 2006 and 2005. Our weighted average interest rate is
slightly higher in 2006 primarily due to higher LIBOR rates in
effect during 2006, partially offset by lower spreads from LIBOR
on our line of credit due to our improved leverage ratio. In
addition, our weighted average interest rate is reduced as a
larger percentage of our borrowing comes from our lower rate
revolving line of credit. Interest costs include interest
related to our Senior Notes that bear interest at 9.5% per
annum, which was higher than the average borrowing rate under
our revolving credit facility.
Debt extinguishment expense in the 2006 period represents the
portion of deferred loan costs and the redemption premium on 35%
of the $150.0 million aggregate principal amount of
outstanding Senior Notes that we redeemed in May 2006.
Provision for income taxes was based on an annual effective tax
rate of 38.8% for 2006 as compared to an annual effective tax
rate of 37.3% for 2005. Our 2006 consolidated tax provision
includes the expected tax rates for our operations in the United
States, Canada, United Kingdom and The Netherlands. The tax
provision rate for 2006 was slightly higher than in 2005, due to
permanent differences increasing for the expense relating to
incentive stock options as a result of the adoption of
SFAS No. 123(R). 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, that management expects to recover
with 2006 taxable income. The 2005 tax provision includes a
$0.7 million tax benefit due to the recognition of certain
state net operating loss carryforwards that were previously
scheduled to expire in 2005 and 2006. At December 31, 2006,
we had a federal net operating loss carryforward of
approximately $47.0 million, which expires if unused from
2021 to 2026. 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 2006 was $42.8 million, as compared to
$34.0 million in 2005. Our 2006 net income results
were primarily achieved by our 32.0% increase in revenues and
the operating leverage associated with this growth, and includes
a $0.3 million tax benefit discussed above. These increases
were partially offset by the $3.1 million,
($2.3 million after tax), charge for share-based
compensation and the $6.4 million ($3.9 million after
tax) for debt extinguishment expense related to the partial
redemption of our Senior Notes. Our 2005 net income
includes the proceeds from a settlement agreement of
$3.2 million ($1.9 million after tax),
$1.7 million ($1.0 million after tax) expenses related
to Hurricane Katrina, and a $0.7 million tax benefit due to
the expected recognition of certain state net operating loss
carryforwards.
37
Liquidity
and Capital Resources
Liquidity
Summary
Most of our capital needs are discretionary and are used
principally to acquire additional units for our lease fleet.
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 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.
During the second quarter of 2007, we redeemed
$97.5 million principal amount of our issued and
outstanding 9.5% Senior Notes due 2013. On May 7,
2007, we completed the offering of our $150.0 million
principal amount 6.875% Senior Notes due 2015, issued at
99.548% of par value, through a private placement to
institutional investors. Subsequently, the private placement
notes were exchanged for a like amount of Senior Notes with
identical terms pursuant to an exchange offer registered under
the Securities Act of 1933. We received net proceeds of
approximately $146.3 million, after underwriters
discounts and commissions, from our issuance of the
$150.0 million 6.875% Senior Notes. We used these
proceeds to redeem the $97.5 million principal balance of
our 9.5% Senior Notes, and paid accrued interest,
transaction costs and the redemption premium (approximately
$8.8 million) on the 9.5% Senior Notes. We used the
remaining net proceeds of approximately $33.2 million to
repay borrowings under our revolving line of credit.
On May 7, 2007, we amended our senior secured revolving
line of credit to provide a $425.0 million revolving credit
facility, which is scheduled to mature in May 2012. We may also,
at our option and without lenders consent, increase
available borrowings under the revolving credit facility by an
additional $75.0 million during the term of the agreement.
During the past two years, our capital expenditures and
acquisitions have been funded by our operating cash flow, an
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, and borrowings under our
revolving credit facility. Our operating cash flow is, in
general, weakest during the first quarter of each fiscal year,
when customers who leased containers for holiday storage return
the units. At December 31, 2007, we had unused borrowing
availability of approximately $183.7 million under our
revolving credit facility. Our net borrowings outstanding under
our revolving credit facility increased by $34.2 million,
from $203.7 million at December 31, 2006 to
$237.9 million at December 31, 2007. The net
additional borrowings, which were offset by the
$33.2 million paydown of our revolving credit agreement in
May 2007 utilizing a portion of the proceeds of the Senior Note
issuance, were used, in conjunction with cash provided by
operating activities, to fund the $126.7 million of
additions to our lease fleet, purchase property, plant and
equipment of $18.5 million, to fund the purchase price
related to acquisitions in 2007 totaling $9.7 million and
to repurchase $39.3 million of our common stock. As of
February 22, 2008, borrowings outstanding under our
revolving credit facility were approximately $234.9 million.
Operating Activities. Our operations provided
net cash flow of $91.3 million in 2007 as compared to
$76.9 million in 2006 and $69.2 million in 2005. The
$14.4 million increase in 2007 over 2006 in cash provided
by operating activities, in addition to increased pre-tax income
and the related deferral of the income taxes, included the
increase of a non-cash charge of $1.0 million related to
share-based compensation expense, and a $0.9 million
increase in non-cash debt extinguishment expense relating to the
redemption of our 9.5% Senior Notes. In 2007, cash provided
by operating activities was negatively affected by the
$8.9 million premium paid in connection with redeeming
$97.5 million of our 9.5% Senior Notes. In 2006, cash
provided by operating activities was negatively affected by the
$5.0 million premium paid in connection with redeeming 35%
of our 9.5% Senior Notes, while in 2005 cash provided by
operating activities was positively influenced by the receipt of
$3.2 million of other income. Additionally, 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. In 2005,
accounts payable increased by $8.6 million, while in 2006,
accounts payable decreased $2.1 million primarily due to
the
38
timing of vendor payment requirements. 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, 2007, we had a federal net operating loss
carryforward of approximately $78.2 million and a net
deferred tax liability of $123.5 million.
Investing Activities. Net cash used in
investing activities was $138.7 million in 2007,
$192.8 million in 2006 and $113.3 million in 2005. In
2007, $9.7 million of cash was paid for acquisition of
businesses, compared to $59.5 million in 2006 and
$7.0 million in 2005. Capital expenditures for our lease
fleet, net of proceeds from sale of lease fleet units, were
$110.6 million in 2007, $122.6 million in 2006 and
$100.0 million in 2005. Capital expenditures decreased
almost 10% in 2007, with the decrease occurring primarily in the
fourth quarter 2007 due to the economic slow down. Additions to
the lease fleet included refurbishment of prior acquisition
units and our 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. Capital expenditures for property, plant and
equipment, net of proceeds from any sale of property, plant and
equipment, were $18.4 million in 2007, $10.7 million
in 2006 and $6.4 million in 2005. The $12.3 million
net increase for property, plant and equipment, of which
$7.3 million was spent in Europe, was primarily for new
delivery equipment and forklifts at our newer branches and
additional hardware and software in conjunction with our
upgraded computer information systems. The amount of cash that
we use during any period in investing activities is almost
entirely within managements discretion. Mobile Mini has 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 systems. Our maintenance capital
expenditures were approximately $0.8 million in 2007,
$0.8 million in 2006 and $1.9 million in 2005.
Financing Activities. Net cash provided by
financing activities was $48.4 million in 2007,
$117.0 million in 2006 and $43.3 million in 2005. In
2006, we received approximately $120.3 million in net
proceeds from the Equity Offering and we redeemed
$52.5 million (or 35% of the aggregate outstanding
principal balance) of our 9.5% Senior Notes. During 2006,
in addition to our Equity Offering, we relied on cash provided
by operations as well as our revolving credit facility to
provide the additional capital needed to fund the growth of our
lease fleet and to complete certain acquisitions. Additionally,
we received $5.6 million, $5.2 million and
$11.7 million from the exercises of employee stock options
and the related tax benefits in 2007, 2006 and 2005,
respectively. As of December 31, 2007, we had
$237.9 million of borrowings outstanding under our
revolving credit facility, and approximately $183.7 million
of additional borrowings were available to us under the
facility. As of February 22, 2008, our borrowings
outstanding under our revolving credit facility were
approximately $234.9 million.
Loans under our revolving credit facility bear interest at a
rate based, at our option and subject to our leverage ratio, on
either (1) the prime rate plus a spread ranging from -0.25%
(negative) to 0.25%, or (2) LIBOR, plus a spread ranging
from 1.25% to 2.00%. The interest rate spread from the LIBOR
rate and prime rate is measured at the end of each quarter.
Interest on outstanding borrowings is payable monthly or, with
respect to LIBOR borrowings, either quarterly or on the last day
of the applicable interest period (whichever is more frequent).
In addition to paying interest on any outstanding principal
amount, we pay an unused revolving credit facility fee to the
senior lenders equal to a range of 0.25% to 0.375% per annum on
the unused daily balance of the revolving credit commitment,
payable monthly in arrears, based upon the actual number of days
elapsed in a 360 day year. For each letter of credit we
issue, we pay (i) a per annum fee equal to the margin over
the LIBOR rate from time to time in effect, (ii) a fronting
fee on the aggregate outstanding stated amounts of such letters
of credit, plus (iii) customary administrative charges.
All of our obligations under the revolving credit facility are
guaranteed jointly and severally by each of our subsidiaries.
The revolving credit facility and the related guarantees are
secured by substantially all of our assets and all assets of
each guarantor, including but not limited to (i) a
first-priority pledge of all of the outstanding capital stock or
other ownership interest owned by us and each guarantor and
(ii) first-priority security interests in all of our
tangible and intangible assets and the tangible and intangible
assets of each guarantor (in each case, other than certain
equipment assets subject to capitalized lease obligations). As
of December 31, 2007, we had minor capital lease
obligations relating to office equipment.
39
Our revolving credit agreement imposes some material covenants
that restrict us in the conduct of our business, although
certain covenants are inapplicable in whole or in part as long
as we are not in default under the agreement and we maintain
borrowing availability in excess of certain pre-determined
levels. If our borrowing availability is below a specified
level, the revolving credit facility triggers covenants
restricting (or in some cases, further restricting) our ability
to, among other things: (i) declare cash dividends, or
redeem or repurchase our capital stock in excess of
$10.0 million; (ii) prepay, redeem or purchase other
debt; (iii) incur liens; (iv) make loans and
investments; (v) incur additional indebtedness;
(vi) amend or otherwise alter debt and other material
agreements; (vii) make capital expenditures;
(viii) engage in mergers, acquisitions and asset sales;
(ix) transact with affiliates; and (x) alter the
business we conduct. We also must comply with specified
financial covenants and affirmative covenants. Should we fall
below specified borrowing availability levels, then these
financial covenants would set maximum permitted values for our
leverage ratio, fixed charge coverage ratio and our minimum
required utilization rates. Our compliance with financial
covenants is measured as of the last day of each fiscal quarter.
Under the terms of the revolving credit facility agreement, we
were in compliance with all the covenants at December 31,
2007.
Events of default under the revolving credit facility include,
but are not limited to, (i) our failure to timely pay
principal or interest under the facility when due, (ii) our
material breach of any representations or warranty,
(iii) covenant defaults, (iv) events of bankruptcy,
(v) cross default under certain other debt instruments,
(vi) certain unsatisfied final judgments over a stated
threshold amount, and (vii) a change of control.
At December 31, 2007, we had five interest rate swap
agreements for a total of $125.0 million of debt. Two of
these agreements (covering a total of $50 million of debt)
expire during February 2008. 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, 2007,
$275.1 million of our outstanding indebtedness bears
interest at fixed rates (or the rate is effectively fixed due to
a swap agreement), and approximately $112.9 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.
We believe we have sufficient borrowings available under the
$425.0 million revolving credit facility to provide for our
normal capital needs for the next 12 to 36 months, with the
duration dependent in large part upon the balance between the
internal growth rates achieved during 2007 and subsequent
periods and the expenses of entering into additional markets
during the period, which will be the main determinant of how
quickly we use our additional borrowing capacity under the
revolving credit facility.
With the closing of the definitive merger agreement announced in
February 2008, we will have secured a $1.0 billion
asset-based revolving credit facility to allow for increased
borrowing capability after paying merger costs and repayment of
indebtedness.
Contractual
Obligations and Commitments
Our contractual obligations primarily consist of our outstanding
balance under our secured revolving credit facility and
$97.5 million of Senior Notes, together with other
unsecured notes payable obligations and small 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 on our major leased properties
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) other equipment,
primarily office machines.
At December 31, 2007, in connection with the issuance of
our insurance policies, we provided certain insurance carriers
with approximately $3.4 million in letters of credit and an
agreement under which we are contingently responsible for
$2.9 million in order to provide credit support for our
payment of the deductibles
and/or loss
limitation reimbursements under the insurance policies.
We currently do not have any obligations under purchase
agreements or commitments. Historically, we enter into
capitalized lease obligations from time to time to purchase
delivery, transportation and yard equipment and currently have
small commitments recorded as capital leases relating to some
office equipment.
40
The table below provides a summary of our contractual
commitments as of December 31, 2007. The operating lease
amounts include certain real estate leases that expire in 2008,
but have lease renewal options that we currently anticipate to
exercise in 2008 at the end of the initial lease period.
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Payments Due by Period
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Less Than
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More Than
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Total
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1 Year
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1-3 Years
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3-5 Years
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5 Years
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(In thousands)
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Revolving credit facility
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$
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237,857
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$
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$
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$
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237,857
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$
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Scheduled interest payment obligations under our revolving
credit facility(1)
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64,299
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14,788
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29,577
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19,934
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Senior Notes
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150,000
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150,000
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Scheduled interest payment obligations under our Senior Notes(2)
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77,344
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10,313
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20,625
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20,625
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25,781
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Other long-term debt
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743
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743
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Scheduled interest payment obligations under our long-term
debt(2)
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14
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14
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Obligations under capital leases
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10
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8
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2
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Scheduled interest payment obligations under capital leases(3)
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1
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1
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Operating leases
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48,904
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10,325
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16,707
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9,442
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12,430
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Total contractual obligations
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$
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579,172
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$
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36,192
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$
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66,911
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$
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287,858
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$
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188,211
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(1) |
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Scheduled interest rate obligations under our revolving credit
facility were calculated using our weighted average rate of 6.2%
at December 31, 2007. 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. |
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(2) |
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Scheduled interest rate obligations under our Senior Notes and
other long-term debt were calculated using stated rates. |
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(3) |
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Scheduled interest rate obligations under two capital leases
were calculated using imputed rates of 6.5% and 13.6%. |
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 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
reduced the percentage of our units we reserve for this seasonal
business from the levels we allocated in earlier years,
decreasing our seasonality.
Critical
Accounting Policies, Estimates and Judgments
Our significant accounting policies are disclosed in Note 1
to our consolidated financial statements. The following
discussion addresses our most critical accounting policies, some
of which require significant judgment.
41
Mobile Minis consolidated financial statements have been
prepared in accordance with accounting principles generally
accepted in the United States. 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 collectibility is reasonably assured. We sell
our products pursuant to sales contracts stating the fixed sales
price with our customers.
Share-Based Compensation. Prior to fiscal
2007, 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 $4.7 million of total unrecognized
compensation costs related to stock options at December 31,
2007 that are expected to be recognized over a weighted-average
period of 1.9 years and $11.5 million of total unrecognized
compensation costs related to nonvested share awards at December
31, 2007 that are expected to be recognized over a
weighted-average period of 4.0 years. See Note 9 to the
Consolidated Financial Statement for a further discussion on
stock-based compensation.
42
Allowance for Doubtful Accounts. We maintain
allowances for doubtful accounts for estimated losses resulting
from the inability of our customers to make required payments.
We establish and maintain reserves against estimated losses
based upon historical loss experience and evaluation of past due
accounts agings. Management reviews the level of the allowances
for doubtful accounts on a regular basis and adjusts the level
of the allowances as needed. If we were to increase the factors
used for our reserve estimates by 25%, it would have the
following approximate effect on our net income and diluted
earnings per share at December 31, as follows:
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Years Ended December 31,
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2006
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2007
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(In thousands except per share data)
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As reported:
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Net income
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$
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42,776
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$
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44,176
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Diluted earnings per share
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$
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1.21
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$
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1.22
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As adjusted for hypothetical change in reserve estimates:
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Net income
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$
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42,083
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$
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43,893
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Diluted earnings per share
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$
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1.19
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$
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1.21
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If the financial condition of our customers were to deteriorate,
resulting in an impairment of their ability to make payments,
additional allowances 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:
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significant under-performance relative to historical, expected
or projected future operating results;
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significant changes in the manner of our use of the acquired
assets or the strategy for our overall business;
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our market capitalization relative to net book value; and
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|
significant negative industry or general economic trends.
|
Pursuant to SFAS No. 142, Goodwill and Other
Intangible Assets, we operate on one reportable segment,
which is comprised of three reporting units with the addition of
our European operations. We perform an annual impairment test on
goodwill 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. We
performed the required impairment tests for goodwill as of
December 31, 2007 and determined that goodwill is not
impaired and it is not necessary to record any impairment losses
related to goodwill. We will continue to perform this test in
the future as required by SFAS No. 142.
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. Van trailers are only added to the fleet as a
result of acquisitions of portable storage businesses.
In 2004, we modified our depreciation policy on our steel units
to increase the useful life to 25 years (from
20 years), and to decrease the residual value to 62.5%
(from 70%), which effectively resulted in continued depreciation
on steel units for five additional years at the same annual rate
(1.5%). This change was made to reflect
43
that some of our steel units have now been in our lease fleet
longer than 20 years and these units continue to be
effective income producing assets that do not show signs of
reaching the end of their useful life. The depreciation policy
is supported by our historical lease fleet data that shows we
have been able to retain comparable rental rates and sales
prices irrespective of the age of the unit in our container
lease fleet.
We periodically review our depreciation policy against various
factors, including the results of our lenders independent
appraisal of our lease fleet, practices of the larger
competitors in our industry, profit margins we are achieving on
sales of depreciated units and lease rates we obtain on older
units. If we were to change our depreciation policy on our steel
units from 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
|
|
|
2006
|
|
|
2007
|
|
|
|
(In thousands except per share data)
|
|
|
As Reported:
|
|
|
62.5
|
%
|
|
|
25
|
|
|
|
|
|
|
|
|
|
Net income
|
|
|
|
|
|
|
|
|
|
$
|
42,776
|
|
|
$
|
44,176
|
|
Diluted earnings per share
|
|
|
|
|
|
|
|
|
|
$
|
1.21
|
|
|
$
|
1.22
|
|
As adjusted for change in estimates:
|
|
|
70
|
%
|
|
|
20
|
|
|
|
|
|
|
|
|
|
Net income
|
|
|
|
|
|
|
|
|
|
$
|
42,776
|
|
|
$
|
44,176
|
|
Diluted earnings per share
|
|
|
|
|
|
|
|
|
|
$
|
1.21
|
|
|
$
|
1.22
|
|
As adjusted for change in estimates:
|
|
|
50
|
%
|
|
|
20
|
|
|
|
|
|
|
|
|
|
Net income
|
|
|
|
|
|
|
|
|
|
$
|
39,595
|
|
|
$
|
41,380
|
|
Diluted earnings per share
|
|
|
|
|
|
|
|
|
|
$
|
1.12
|
|
|
$
|
1.14
|
|
As adjusted for change in estimates:
|
|
|
40
|
%
|
|
|
40
|
|
|
|
|
|
|
|
|
|
Net income
|
|
|
|
|
|
|
|
|
|
$
|
42,776
|
|
|
$
|
44,176
|
|
Diluted earnings per share
|
|
|
|
|
|
|
|
|
|
$
|
1.21
|
|
|
$
|
1.22
|
|
As adjusted for change in estimates:
|
|
|
30
|
%
|
|
|
25
|
|
|
|
|
|
|
|
|
|
Net income
|
|
|
|
|
|
|
|
|
|
$
|
38,641
|
|
|
$
|
40,541
|
|
Diluted earnings per share
|
|
|
|
|
|
|
|
|
|
$
|
1.09
|
|
|
$
|
1.12
|
|
As adjusted for change in estimates:
|
|
|
25
|
%
|
|
|
25
|
|
|
|
|
|
|
|
|
|
Net income
|
|
|
|
|
|
|
|
|
|
$
|
38,004
|
|
|
$
|
39,982
|
|
Diluted earnings per share
|
|
|
|
|
|
|
|
|
|
$
|
1.07
|
|
|
$
|
1.10
|
|
Insurance Reserves. Our workers
compensation, auto and general liability insurance are purchased
under large deductible programs. Our current per incident
deductibles are: workers compensation $250,000, auto
$250,000 and general liability $100,000. We provide for the
estimated expense relating to the deductible portion of the
individual claims. However, we generally do not know the full
amount of our exposure to a deductible in connection with any
particular claim during the fiscal period in which the claim is
incurred and for which we must make an accrual for the
deductible expense. We make these accruals based on a
combination of the claims development experience of our staff
and our insurance companies, and, at year end, the accrual is
reviewed and adjusted, in part, based on an independent
actuarial review of historical loss data and using certain
actuarial assumptions followed in the insurance industry. A high
degree of judgment is required in developing these estimates of
amounts to be accrued, as well as in connection with the
underlying assumptions. In addition, our assumptions will change
as our loss experience is developed. All of these factors have
the potential for significantly impacting the amounts we have
previously reserved in respect of anticipated deductible
expenses, and we may be required in the future to increase or
decrease amounts previously accrued.
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
44
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, 2007, we have a $1.1 million valuation
allowance and have $36.7 million of deferred tax assets
included within the net deferred tax liability on our balance
sheet. The majority of 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 loss carryforwards that give
rise to the deferred tax asset expire over 10 years
beginning in 2018, there could be changes in managements
judgment in future periods with respect to the recoverability of
these assets. As of December 31, 2007, 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 June 2006, the Financial Accounting Standards Board (FASB)
issued Financial Interpretation No. (FIN) 48, Accounting for
Uncertainty in Income Taxes, which clarifies the accounting
for uncertainty in income taxes recognized in an
enterprises financial statements in accordance with FASB
Statement No. 109, Accounting for Income Taxes. The
interpretation prescribes a recognition threshold and
measurement attribute for the financial statement recognition
and measurement of a tax position taken or expected to be taken
in a tax return. FIN 48 is effective for fiscal years
beginning after December 15, 2006. We adopted this
interpretation as of January 1, 2007. Adoption of FIN 48
did not have a material effect on our results of operations or
financial condition.
In September 2006, the FASB issued 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. We are in the process of determining
the effect, if any, that the adoption of SFAS No. 157
will have on our 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 this Standard, we 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
45
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 hedge accounting are not met.
SFAS No. 159 is effective for years beginning after
November 15, 2007. We are currently evaluating the
potential impact of adopting this Standard.
In June 2007, the FASB ratified the Emerging Issues Task Force
(EITF) consensus on EITF Issue
No. 06-11,
Accounting for Income Tax Benefits on Dividends on
Share-based Payment Awards. This EITF indicates tax benefits
of dividends on unvested restricted stock are to be recognized
in equity as an increase in the pool of excess tax benefits. If
the related awards are forfeited or are no longer expected to
vest, then the benefits are to be reclassified from equity to
the income statement. The EITF is effective for fiscal years
beginning after December 15, 2007. We do not expect the
adoption of EITF Issue
No. 06-11
will have a material effect on our results of operations or
financial condition.
In December 2007, the FASB issued SFAS No. 141
(revised 2007), Business Combinations
(SFAS No. 141R). SFAS No. 141R
establishes principles and requirements for how an acquirer
recognizes and measures in its financial statements the
identifiable assets acquired, the liabilities assumed, any
non-controlling interest in the acquiree and the goodwill
acquired. Under SFAS No. 141R, an acquiring entity
will be required to recognize all the assets acquired and
liabilities assumed in a transaction at the acquisition-due fair
value with limited exceptions. SFAS No. 141R also
establishes disclosure requirements to enable the evaluation of
the nature and financial effects of the business combination.
This statement is effective for fiscal years beginning after
December 15, 2008. We are currently evaluating the
potential impact of the adoption of SFAS No. 141R on
our results of operations or financial condition.
In December 2007, the FASB issued Statement of Financial
Accounting Standards No. 160, Noncontrolling Interests
in Consolidated Financial Statements (an amendment of
Accounting Research Bulletin (ARB 51)) (SFAS No. 160).
SFAS No. 160 amends ARB 51 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 non-controlling
interests in any of the Companys consolidated
subsidiaries, therefore, we do not expect the adoption of
SFAS No. 160 to have a significant impact on our
results of operations or financial conditions.
|
|
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, 2007, we had five interest rate swap
agreements under which we pay a fixed rate and receive a
variable interest rate on $125.0 million of debt. In 2007,
in accordance with SFAS No. 133, comprehensive income
included a charge of $1.3 million, net of income tax
benefit of $0.8 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,
|
|
|
|
2008
|
|
|
2009
|
|
|
2010
|
|
|
2011
|
|
|
2012
|
|
|
Thereafter
|
|
|
2007
|
|
|
2007
|
|
|
|
(In thousands, except percentages)
|
|
|
Debt:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fixed rate
|
|
$
|
751
|
|
|
$
|
1
|
|
|
$
|
1
|
|
|
|
|
|
|
$
|
|
|
|
$
|
150,000
|
|
|
$
|
150,753
|
|
|
$
|
137,251
|
|
Average interest rate
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6.87
|
%
|
|
|
|
|
Floating rate(1)
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
237,857
|
|
|
$
|
|
|
|
$
|
237,857
|
|
|
$
|
237,857
|
|
Average interest rate
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6.22
|
%
|
|
|
|
|
Operating leases:
|
|
$
|
10,325
|
|
|
$
|
9,407
|
|
|
$
|
7,300
|
|
|
$
|
5,601
|
|
|
$
|
3,841
|
|
|
$
|
12,430
|
|
|
$
|
48,904
|
|
|
|
|
|
46
|
|
|
(1) |
|
Included in our floating rate line of credit facility are
$125.0 million of fixed-rate swap agreements with a
weighted average interest rate of 5.41% that mature between 2008
and 2010. |
Impact of Foreign Currency Rate Changes. We
currently have branch operations outside the United States and
we bill those customers primarily in their local currency which
is subject to foreign currency rate changes. Our operations in
Canada are billed in the Canadian Dollar, operations in the
United Kingdom are billed in Pound Sterling and operations in
The Netherlands are billed in the Eurodollar. We are exposed to
foreign exchange rate fluctuations as the financial results of
our
non-United
States operations are translated into U.S. Dollars. The
impact of foreign currency rate changes has historically been
insignificant with our Canadian operations, but we have more
exposure to volatility with our European operations. In order to
help minimize our exchange rate gain and loss volatility, we
finance our European entities through our revolving line of
credit which allows us to also borrow those funds in Pound
Sterling denominated debt.
47
|
|
ITEM 8.
|
FINANCIAL
STATEMENTS AND SUPPLEMENTARY DATA.
|
INDEX TO
CONSOLIDATED FINANCIAL STATEMENTS AND SCHEDULE
48
Managements
Report on Internal Control Over Financial Reporting
To the Shareholders of Mobile Mini, Inc.,
The management of Mobile Mini, Inc., is responsible for
establishing and maintaining adequate internal control over
financial reporting, as such term is defined in Exchange Act
Rules 13a-15(f)
and
15d-15(f).
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. 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 our assets; (2) provide reasonable assurance that
transactions are recorded as necessary to permit preparation of
financial statements in conformity with U.S. generally
accepted accounting principles, and that our receipts and
expenditures are being made only in accordance with
authorizations of our management and directors; and
(3) provide reasonable assurance regarding prevention or
timely detection of unauthorized acquisition, use, or
disposition of our assets that could have a material effect on
the financial statements.
Because of its inherent limitations, our controls and procedures
may not prevent or detect misstatements. A control system, no
matter how well conceived and operated, can provide only
reasonable, not absolute, assurance that the objectives of the
controls system are met. Because of the inherent limitations in
all controls systems, no evaluation of controls can provide
absolute assurance that all control issues and instances of
fraud, if any, have been detected.
Under the supervision and with the participation of management,
with the exception as noted above, we assessed the effectiveness
of our internal control over financial reporting based on the
criteria in Internal Control Integrated Framework
issued by the Committee of Sponsoring Organizations of the
Treadway Commission. Based on our evaluation under the criteria
in Internal Control Integrated Framework, we
concluded that our internal control over financial reporting was
effective as of December 31, 2007.
The effectiveness of our internal control over financial
reporting as of December 31, 2007 has been audited by Ernst
& Young LLP, an Independent Registered Public Accounting
Firm, as stated in their report which is included herein.
Steven G. Bunger
Chief Executive Officer
Mobile Mini, Inc.
/s/ Lawrence
Trachtenberg
Lawrence Trachtenberg
Executive Vice President and
Chief Financial Officer
Mobile Mini, Inc.
49
Report of
Independent Registered Public Accounting Firm
The Board of Directors and Stockholders
Mobile Mini, Inc.
We have audited Mobile Mini, Inc.s internal control over
financial reporting as of December 31, 2007, 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
Managements Report on Internal Control Over Financial
Reporting. Our responsibility is to express an opinion on the
companys internal control over financial reporting based
on our audit.
We conducted our audit in accordance with the standards of the
Public Company Accounting Oversight Board (United States). Those
standards require that we plan and perform the audit to obtain
reasonable assurance about whether effective internal control
over financial reporting was maintained in all material
respects. Our audit included obtaining an understanding of
internal control over financial reporting, assessing the risk
that a material weakness exists, testing and evaluating the
design and operating effectiveness of internal control based on
the assessed risk, and performing such other procedures as we
considered necessary in the circumstances. We believe that our
audit provides a reasonable basis for our opinion.
A companys internal control over financial reporting is a
process designed to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of
financial statements for external purposes in accordance with
generally accepted accounting principles. A companys
internal control over financial reporting includes those
policies and procedures that (1) pertain to the maintenance
of records that, in reasonable detail, accurately and fairly
reflect the transactions and dispositions of the assets of the
company; (2) provide reasonable assurance that transactions
are recorded as necessary to permit preparation of financial
statements in accordance with generally accepted accounting
principles, and that receipts and expenditures of the company
are being made only in accordance with authorizations of
management and directors of the company; and (3) provide
reasonable assurance regarding prevention or timely detection of
unauthorized acquisition, use, or disposition of the
companys assets that could have a material effect on the
financial statements.
Because of its inherent limitations, internal control over
financial reporting may not prevent or detect misstatements.
Also, projections of any evaluation of effectiveness to future
periods are subject to the risk that controls may become
inadequate because of changes in conditions, or that the degree
of compliance with the policies or procedures may deteriorate.
In our opinion, Mobile Mini, Inc. maintained, in all material
respects, effective internal control over financial reporting as
of December 31, 2007, 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. as of
December 31, 2007 and 2006, and the related consolidated
statements of income, stockholders equity, and cash flows
for each of the three years in the period ended
December 31, 2007 of Mobile Mini, Inc. and our report dated
February 28, 2008 expressed an unqualified opinion thereon.
Phoenix, Arizona
February 28, 2008
50
Report of
Independent Registered Public Accounting Firm
The Board of Directors and Stockholders
Mobile Mini, Inc.
We have audited the accompanying consolidated balance sheets of
Mobile Mini, Inc. as of December 31, 2007 and 2006, and the
related consolidated statements of income, stockholders
equity, and cash flows for each of the three years in the period
ended December 31, 2007. Our audit also included the
financial statement schedule listed in Item 15(a)(2). These
consolidated financial statements and schedule are the
responsibility of the Companys management. Our
responsibility is to express an opinion on these financial
statements 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,
2007 and 2006, and the consolidated results of its operations
and its cash flows for each of the three years in the period
ended December 31, 2007, in conformity with
U.S. generally accepted accounting principles.
As discussed in Note 1 to the consolidated financial
statements, Mobile Mini, Inc. changed its method of accounting
for share-based payments in accordance with Statement of
Financial Accounting Standards No. 123 (revised
2004) on January 1, 2006.
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, 2007, 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 28, 2008 expressed
an unqualified opinion thereon.
Phoenix, Arizona
February 28, 2008
51
MOBILE
MINI, INC.
(In
thousands except per share data)
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
|
2006
|
|
|
2007
|
|
|
ASSETS
|
Cash
|
|
$
|
1,370
|
|
|
$
|
3,703
|
|
Receivables, net of allowance for doubtful accounts of $5,008
and $3,933, respectively
|
|
|
34,953
|
|
|
|
37,221
|
|
Inventories
|
|
|
27,863
|
|
|
|
29,431
|
|
Lease fleet, net
|
|
|
697,439
|
|
|
|
802,923
|
|
Property, plant and equipment, net
|
|
|
43,072
|
|
|
|
55,363
|
|
Deposits and prepaid expenses
|
|
|
9,553
|
|
|
|
11,334
|
|
Other assets and intangibles, net
|
|
|
9,324
|
|
|
|
9,086
|
|
Goodwill
|
|
|
76,456
|
|
|
|
79,790
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
900,030
|
|
|
$
|
1,028,851
|
|
|
|
|
|
|
|
|
|
|
Liabilities:
|
|
|
|
|
|
|
|
|
Accounts payable
|
|
$
|
18,928
|
|
|
$
|
20,560
|
|
Accrued liabilities
|
|
|
39,546
|
|
|
|
38,941
|
|
Line of credit
|
|
|
203,729
|
|
|
|
237,857
|
|
Notes payable
|
|
|
781
|
|
|
|
743
|
|
Obligations under capital leases
|
|
|
35
|
|
|
|
10
|
|
Senior notes, net of discount of $0 and $621 at
December 31, 2006 and December 31, 2007, respectively
|
|
|
97,500
|
|
|
|
149,379
|
|
Deferred income taxes
|
|
|
97,507
|
|
|
|
123,471
|
|
|
|
|
|
|
|
|
|
|
Total liabilities
|
|
|
458,026
|
|
|
|
570,961
|
|
|
|
|
|
|
|
|
|
|
Commitments and contingencies
|
|
|
|
|
|
|
|
|
Stockholders equity:
|
|
|
|
|
|
|
|
|
Common stock; $0.01 par value, 95,000 shares
authorized, 35,898 and 34,573 issued and outstanding at
December 31, 2006 and December 31, 2007, respectively
|
|
|
359
|
|
|
|
367
|
|
Additional paid-in capital
|
|
|
268,456
|
|
|
|
278,593
|
|
Retained earnings
|
|
|
169,718
|
|
|
|
213,894
|
|
Accumulated other comprehensive income
|
|
|
3,471
|
|
|
|
4,336
|
|
Treasury stock, at cost, 2,175 shares
|
|
|
|
|
|
|
(39,300
|
)
|
|
|
|
|
|
|
|
|
|
Total stockholders equity
|
|
|
442,004
|
|
|
|
457,890
|
|
|
|
|
|
|
|
|
|
|
Total liabilities and stockholders equity
|
|
$
|
900,030
|
|
|
$
|
1,028,851
|
|
|
|
|
|
|
|
|
|
|
See accompanying notes.
52
MOBILE
MINI, INC.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Years Ended December 31,
|
|
|
|
2005
|
|
|
2006
|
|
|
2007
|
|
|
|
(In thousands except per share data)
|
|
|
Revenues:
|
|
|
|
|
|
|
|
|
|
|
|
|
Leasing
|
|
$
|
188,578
|
|
|
$
|
245,105
|
|
|
$
|
284,638
|
|
Sales
|
|
|
17,499
|
|
|
|
26,824
|
|
|
|
31,644
|
|
Other
|
|
|
1,093
|
|
|
|
1,434
|
|
|
|
2,020
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenues
|
|
|
207,170
|
|
|
|
273,363
|
|
|
|
318,302
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Costs and expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of sales
|
|
|
10,845
|
|
|
|
17,186
|
|
|
|
21,651
|
|
Leasing, selling and general expenses
|
|
|
109,257
|
|
|
|
139,906
|
|
|
|
166,994
|
|
Depreciation and amortization
|
|
|
12,854
|
|
|
|
16,741
|
|
|
|
21,149
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total costs and expenses
|
|
|
132,956
|
|
|
|
173,833
|
|
|
|
209,794
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from operations
|
|
|
74,214
|
|
|
|
99,530
|
|
|
|
108,508
|
|
Other income (expense):
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest income
|
|
|
11
|
|
|
|
437
|
|
|
|
101
|
|
Other income
|
|
|
3,160
|
|
|
|
|
|
|
|
|
|
Interest expense
|
|
|
(23,177
|
)
|
|
|
(23,681
|
)
|
|
|
(24,906
|
)
|
Debt extinguishment expense
|
|
|
|
|
|
|
(6,425
|
)
|
|
|
(11,224
|
)
|
Foreign currency exchange gains
|
|
|
|
|
|
|
66
|
|
|
|
107
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before provision for income taxes
|
|
|
54,208
|
|
|
|
69,927
|
|
|
|
72,586
|
|
Provision for income taxes
|
|
|
20,220
|
|
|
|
27,151
|
|
|
|
28,410
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
33,988
|
|
|
$
|
42,776
|
|
|
$
|
44,176
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
1.14
|
|
|
$
|
1.25
|
|
|
$
|
1.24
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted
|
|
$
|
1.10
|
|
|
$
|
1.21
|
|
|
$
|
1.22
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average number of common and common share equivalents
outstanding:
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
29,867
|
|
|
|
34,243
|
|
|
|
35,489
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted
|
|
|
30,875
|
|
|
|
35,425
|
|
|
|
36,296
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See accompanying notes.
53
MOBILE
MINI, INC.
For the
years ended December 31, 2005, 2006 and 2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated
|
|
|
|
|
|
|
|
|
|
Shares of
|
|
|
|
|
|
Additional
|
|
|
Deferred
|
|
|
|
|
|
Other
|
|
|
|
|
|
|
|
|
|
Common
|
|
|
Common
|
|
|
Paid-In
|
|
|
Stock-Based
|
|
|
Retained
|
|
|
Comprehensive
|
|
|
Treasury
|
|
|
Stockholders
|
|
|
|
Stock
|
|
|
Stock
|
|
|
Capital
|
|
|
Compensation
|
|
|
Earnings
|
|
|
Income (Loss)
|
|
|
Stock
|
|
|
Equity
|
|
|
|
(In thousands)
|
|
|
Balance, December 31, 2004
|
|
|
29,366
|
|
|
$
|
294
|
|
|
$
|
122,787
|
|
|
$
|
|
|
|
$
|
92,954
|
|
|
$
|
334
|
|
|
$
|
|
|
|
$
|
216,369
|
|
Net income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
33,988
|
|
|
|
|
|
|
|
|
|
|
|
33,988
|
|
Market value change in derivatives, (net of income tax expense
of $434)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
679
|
|
|
|
|
|
|
|
679
|
|
Foreign currency translation, (net of income tax expense of $75)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
117
|
|
|
|
|
|
|
|
117
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
34,784
|
|
Exercise of stock options, (including income tax benefit of
$5,061)
|
|
|
1,155
|
|
|
|
11
|
|
|
|
16,792
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
16,803
|
|
Restricted stock grants
|
|
|
97
|
|
|
|
1
|
|
|
|
2,276
|
|
|
|
(2,277
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortization of restricted stock
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
19
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
19
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, December 31, 2005
|
|
|
30,618
|
|
|
|
306
|
|
|
|
141,855
|
|
|
|
(2,258
|
)
|
|
|
126,942
|
|
|
|
1,130
|
|
|
|
|
|
|
|
267,975
|
|
Net income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
42,776
|
|
|
|
|
|
|
|
|
|
|
|
42,776
|
|
Market 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
|
|
Market 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
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See accompanying notes.
54
MOBILE
MINI, INC.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Years Ended December 31,
|
|
|
|
2005
|
|
|
2006
|
|
|
2007
|
|
|
|
(In thousands)
|
|
|
Cash Flows From Operating Activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
33,988
|
|
|
$
|
42,776
|
|
|
$
|
44,176
|
|
Adjustments to reconcile net income to net cash provided by
operating activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Debt extinguishment expense
|
|
|
|
|
|
|
1,438
|
|
|
|
2,298
|
|
Provision for doubtful accounts
|
|
|
3,036
|
|
|
|
4,538
|
|
|
|
1,869
|
|
Provision for loss from natural disasters
|
|
|
1,710
|
|
|
|
|
|
|
|
|
|
Amortization of deferred financing costs
|
|
|
829
|
|
|
|
840
|
|
|
|
985
|
|
Share-based compensation expense
|
|
|
19
|
|
|
|
3,066
|
|
|
|
4,028
|
|
Depreciation and amortization
|
|
|
12,854
|
|
|
|
16,741
|
|
|
|
21,149
|
|
Gain on sale of lease fleet units
|
|
|
(3,529
|
)
|
|
|
(4,922
|
)
|
|
|
(5,560
|
)
|
Loss on disposal of property, plant and equipment
|
|
|
704
|
|
|
|
454
|
|
|
|
203
|
|
Deferred income taxes
|
|
|
20,097
|
|
|
|
26,407
|
|
|
|
27,356
|
|
Foreign currency exchange gains
|
|
|
|
|
|
|
(66
|
)
|
|
|
(107
|
)
|
Changes in certain assets and liabilities, net of effect of
businesses acquired:
|
|
|
|
|
|
|
|
|
|
|
|
|
Receivables
|
|
|
(8,407
|
)
|
|
|
(11,118
|
)
|
|
|
(3,988
|
)
|
Inventories
|
|
|
(4,823
|
)
|
|
|
628
|
|
|
|
(610
|
)
|
Deposits and prepaid expenses
|
|
|
(480
|
)
|
|
|
(1,446
|
)
|
|
|
(1,754
|
)
|
Other assets and intangibles
|
|
|
(19
|
)
|
|
|
(4
|
)
|
|
|
318
|
|
Accounts payable
|
|
|
8,581
|
|
|
|
(2,088
|
)
|
|
|
2,691
|
|
Accrued liabilities
|
|
|
4,689
|
|
|
|
(360
|
)
|
|
|
(1,755
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by operating activities
|
|
|
69,249
|
|
|
|
76,884
|
|
|
|
91,299
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash Flows From Investing Activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash paid for businesses acquired
|
|
|
(7,021
|
)
|
|
|
(59,475
|
)
|
|
|
(9,734
|
)
|
Additions to lease fleet, excluding acquisitions
|
|
|
(109,540
|
)
|
|
|
(135,883
|
)
|
|
|
(126,733
|
)
|
Proceeds from sale of lease fleet units
|
|
|
9,505
|
|
|
|
13,327
|
|
|
|
16,181
|
|
Additions to property, plant and equipment
|
|
|
(6,433
|
)
|
|
|
(10,882
|
)
|
|
|
(18,522
|
)
|
Proceeds from sale of property, plant and equipment
|
|
|
57
|
|
|
|
150
|
|
|
|
126
|
|
Change in other assets
|
|
|
157
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash used in investing activities
|
|
|
(113,275
|
)
|
|
|
(192,763
|
)
|
|
|
(138,682
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash Flows From Financing Activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Net borrowings under lines of credit
|
|
|
32,026
|
|
|
|
45,539
|
|
|
|
34,128
|
|
Redemption of 9.5% Senior Notes
|
|
|
|
|
|
|
(52,500
|
)
|
|
|
(97,500
|
)
|
Proceeds from issuance of 6.785% Senior Notes
|
|
|
|
|
|
|
|
|
|
|
149,322
|
|
Deferred financing costs
|
|
|
|
|
|
|
(1,664
|
)
|
|
|
(3,768
|
)
|
Proceeds from issuance of notes payable
|
|
|
934
|
|
|
|
1,230
|
|
|
|
1,216
|
|
Principal payments on notes payable
|
|
|
(1,420
|
)
|
|
|
(1,108
|
)
|
|
|
(1,254
|
)
|
Principal payments on capital lease obligations
|
|
|
|
|
|
|
(17
|
)
|
|
|
(24
|
)
|
Issuance of common stock, net
|
|
|
11,742
|
|
|
|
125,486
|
|
|
|
5,607
|
|
Purchase of treasury stock, at cost
|
|
|
|
|
|
|
|
|
|
|
(39,300
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by financing activities
|
|
|
43,282
|
|
|
|
116,966
|
|
|
|
48,427
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effect of exchange rate changes on cash
|
|
|
192
|
|
|
|
76
|
|
|
|
1,289
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net increase (decrease) in cash
|
|
|
(552
|
)
|
|
|
1,163
|
|
|
|
2,333
|
|
Cash at beginning of year
|
|
|
759
|
|
|
|
207
|
|
|
|
1,370
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash at end of year
|
|
$
|
207
|
|
|
$
|
1,370
|
|
|
$
|
3,703
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplemental Disclosure of Cash Flow Information:
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash paid during the year for interest
|
|
$
|
21,727
|
|
|
$
|
24,770
|
|
|
$
|
27,896
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash paid during the year for income and franchise taxes
|
|
$
|
495
|
|
|
$
|
733
|
|
|
$
|
797
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest rate swap changes in value (credited) charged to equity
|
|
$
|
(679
|
)
|
|
$
|
123
|
|
|
$
|
1,293
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See accompanying notes.
55
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, Company, we,
us, or our, means Mobile Mini, Inc. At
December 31, 2007, we have a fleet of portable storage and
office units, and operate throughout the United States, in
Canada, the United Kingdom and The Netherlands. Our portable
storage products offer secure, temporary storage with immediate
access. We have a diversified customer base, including large and
small retailers, construction companies, medical centers,
schools, utilities, distributors, the military, hotels,
restaurants, entertainment complexes and households. Customers
use our 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.
Principles
of Consolidation
The consolidated financial statements include the accounts of
Mobile Mini, Inc. and its wholly owned subsidiaries, including
our European operations. We do not have any subsidiaries in
which we do 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. 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 collectibility is reasonably assured. We sell
our products pursuant to sales contracts stating the fixed sales
price with our customers.
Cost
of Sales
Cost of sales in our consolidated statements of income includes
only the costs for units we sell. Similar costs associated with
the portable storage units that we lease are capitalized on our
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,
2006 and 2007, prepaid advertising costs were approximately
$3.2 million and $3.8 million, respectively. The
amortization period of the prepaid balance never exceeds
12 months. Our 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 $7.6 million, $8.6 million and
$10.1 million in 2005, 2006 and 2007, respectively.
Cash
Our revolving credit agreement includes restrictions on excess
cash. There was no restricted cash at December 31, 2006 and
2007.
Receivables
and Allowance for Doubtful Accounts
Receivables primarily consist of amounts due from customers from
the lease or sale of containers throughout the United States,
Canada and Europe. Mobile Mini records an estimated provision
for bad debts through a charge to operations in amounts of our
estimated losses expected to be incurred in the collection of
these accounts. We review
56
MOBILE
MINI, INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
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. We require 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 us 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. Receivables related to our sales operations are
generally secured by the product sold to the customer.
Receivables related to our leasing operations are primarily
small month-to-month amounts. We have 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,
refurbishment and maintenance, primarily for our lease fleet and
our units held for sale. Raw materials principally consist of
raw steel, wood, glass, paint, vinyl and other assembly
components used in manufacturing and refurbishing processes.
Work-in-process
primarily represents units being built at our manufacturing
facility that are either pre-sold or being built to add to our
lease fleet upon completion. Finished portable storage units
primarily represents ISO (International Organization for
Standardization) containers held in inventory until the
containers are either sold as is, refurbished and sold, or units
in the process of being refurbished to be compliant with our
lease fleet standards before transferring the units to our lease
fleet. There is no certainty when we purchase the containers
whether they will ultimately be sold, refurbished and sold, or
refurbished and moved into our lease fleet. Units that are
determined to go into our lease fleet undergo an extensive
refurbishment process that includes installing our proprietary
locking system, signage, painting and sometimes our proprietary
security doors.
Inventories at December 31, consist of the following:
|
|
|
|
|
|
|
|
|
|
|
2006
|
|
|
2007
|
|
|
|
(In thousands)
|
|
|
Raw materials and supplies
|
|
$
|
18,420
|
|
|
$
|
21,801
|
|
Work-in-process
|
|
|
3,031
|
|
|
|
2,819
|
|
Finished portable storage units
|
|
|
6,412
|
|
|
|
4,811
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
27,863
|
|
|
$
|
29,431
|
|
|
|
|
|
|
|
|
|
|
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. Our depreciation expense related to property,
plant and equipment for 2005, 2006 and 2007 was
$3.2 million, $4.2 million and $5.6 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.
57
MOBILE
MINI, INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
In 2006 and 2007, we 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 our leasing
operations.
Property, plant and equipment at December 31, consist of
the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Estimated
|
|
|
|
|
|
|
|
|
|
Useful Life in
|
|
|
|
|
|
|
|
|
|
Years
|
|
|
2006
|
|
|
2007
|
|
|
|
(In thousands)
|
|
|
Land
|
|
|
|
|
|
$
|
772
|
|
|
$
|
772
|
|
Vehicles and machinery
|
|
|
5 to 20
|
|
|
|
45,734
|
|
|
|
60,490
|
|
Buildings and improvements(1)
|
|
|
30
|
|
|
|
10,645
|
|
|
|
11,514
|
|
Office fixtures and equipment
|
|
|
5
|
|
|
|
9,552
|
|
|
|
11,579
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
66,703
|
|
|
|
84,355
|
|
Less accumulated depreciation
|
|
|
|
|
|
|
(23,631
|
)
|
|
|
(28,992
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
43,072
|
|
|
$
|
55,363
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Improvements made to leased properties are depreciated over the
lesser of the estimated remaining life or the remaining term of
the respective lease. |
Other
Assets and Intangibles
Other assets and intangibles primarily represent deferred
financing costs and intangible assets from acquisitions of
$11.9 million at December 31, 2006 and
$12.5 million at December 31, 2007, excluding
accumulated amortization of $3.4 million at both
December 31, 2006 and 2007. 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. At
December 31, 2006, other assets and intangibles also
included $0.9 million for the fair value of our interest
rate swap agreements.
Income
Taxes
We utilize 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
Basic earnings per common share are computed by dividing net
income by the weighted average number of shares of common stock
outstanding during the year. Diluted earnings per common share
are determined assuming the potential dilution of the exercise
or conversion of options and nonvested share-awards into common
stock.
58
MOBILE
MINI, INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
The following table sets forth the computation of basic and
diluted earnings per share for the years ended December 31:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2005
|
|
|
2006
|
|
|
2007
|
|
|
|
(In thousands except earnings per share)
|
|
|
BASIC:
|
|
|
|
|
|
|
|
|
|
|
|
|
Common shares outstanding, beginning of year
|
|
|
29,366
|
|
|
|
30,521
|
|
|
|
35,640
|
|
Effect of weighting shares:
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted common shares issued
|
|
|
501
|
|
|
|
3,722
|
|
|
|
302
|
|
Weighted common shares purchased
|
|
|
|
|
|
|
|
|
|
|
(453
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average number of common shares outstanding
|
|
|
29,867
|
|
|
|
34,243
|
|
|
|
35,489
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
33,988
|
|
|
$
|
42,776
|
|
|
$
|
44,176
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings per share
|
|
$
|
1.14
|
|
|
$
|
1.25
|
|
|
$
|
1.24
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
DILUTED:
|
|
|
|
|
|
|
|
|
|
|
|
|
Common shares outstanding, beginning of year
|
|
|
29,366
|
|
|
|
30,521
|
|
|
|
35,640
|
|
Effect of weighting shares:
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted common shares issued
|
|
|
501
|
|
|
|
3,722
|
|
|
|
302
|
|
Weighted common shares purchased
|
|
|
|
|
|
|
|
|
|
|
(453
|
)
|
Employee stock options and nonvested share-awards assumed
converted
|
|
|
1,008
|
|
|
|
1,182
|
|
|
|
807
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average number of common and common share equivalents
outstanding
|
|
|
30,875
|
|
|
|
35,425
|
|
|
|
36,296
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
33,988
|
|
|
$
|
42,776
|
|
|
$
|
44,176
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings per share
|
|
$
|
1.10
|
|
|
$
|
1.21
|
|
|
$
|
1.22
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Employee stock options to purchase 0.5 million,
0.6 million and 0.6 million shares were issued or
outstanding during 2005, 2006 and 2007, 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 2006 and 2007 does not include 0.3 million
and 0.5 million nonvested share-awards, respectively, as
the stock is not vested. During 2006 and 2007, 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.
Long-Lived
Assets
We review 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. We have not recognized any impairment
losses during the three year period ended December 31, 2007.
59
MOBILE
MINI, INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
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 2006, we
entered into a share purchase agreement to acquire three
companies of the Royal Wolf Group. All other acquisitions of
businesses have been transacted as asset purchases which results
in our 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.
We evaluate 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, we operate in one reportable
segment, which is comprised of three reporting units with the
addition of our European operations. We perform an annual
impairment test on goodwill 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. We performed the first step of the required impairment
tests for goodwill as of December 31, 2007 and determined
that goodwill is not impaired. At December 31, 2007, $66.2
million of our goodwill relates to the United States reporting
unit, $12.6 million relates to the United Kingdom reporting
unit, and $1.0 million relates to The Netherlands reporting
unit. Fair value has been determined for each reporting unit in
order to determine the recoverability of the recorded goodwill.
At December 31, 2007, we used a discounted cash flows
approach to determine the fair value of our United Kingdom and
The Netherlands reporting units. In the United States, we used
an allocation of market capitalization to measure potential
impairment. The fair value determined for the United Kingdom and
The Netherlands as well as the allocated market capitalization
to the U.S. exceeded the net carrying value of the
reporting units, therefore, the second step for potential
impairment was unnecessary.
The following table shows the activity and balances related to
goodwill from January 1, 2006 to December 31, 2007 (in
thousands):
|
|
|
|
|
Goodwill at January 1, 2006
|
|
$
|
56,311
|
|
Acquisitions
|
|
|
19,231
|
|
Divestitures
|
|
|
|
|
Adjustments(1)
|
|
|
914
|
|
|
|
|
|
|
Goodwill at December 31, 2006
|
|
|
76,456
|
|
Acquisitions
|
|
|
4,946
|
|
Divestitures
|
|
|
|
|
Adjustments(2)
|
|
|
(1,612
|
)
|
|
|
|
|
|
Goodwill at December 31, 2007
|
|
$
|
79,790
|
|
|
|
|
|
|
|
|
|
(1) |
|
Primarily relates to foreign currency translation adjustments on
the Royal Wolf acquisition from the date of the acquisition to
the end of December 31, 2006. |
|
(2) |
|
Includes $1.9 million tax related adjustments associated
with the acquisition of Royal Wolf in 2006, partially offset by
foreign currency translation adjustments. |
60
MOBILE
MINI, INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Fair
Value of Financial Instruments
We determine 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
we 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 our borrowings under
our credit facility and notes payable approximate fair value.
The fair values of our notes payable and credit facility are
estimated using discounted cash flow analyses, based on our
current incremental borrowing rates for similar types of
borrowing arrangements. Based on the borrowing rates currently
available to us for bank loans with similar terms and average
maturities, the fair value of fixed rate notes payable at
December 31, 2006 and 2007, approximated the book values.
The fair value of our Senior Notes at December 31, 2006
($97.5 million) and 2007 ($149.4 million), was
approximately $104.1 million and $136.5 million,
respectively. The determination for fair value is based on the
latest sales price at the end of each fiscal year obtained from
a third-party institution.
Deferred
Financing Costs
Included in other assets and intangibles are deferred financing
costs of approximately $4.2 million and $4.8 million,
net of accumulated amortization of $2.3 million and
$1.8 million, at December 31, 2006 and 2007,
respectively. Costs to obtaining long-term financing, including
our 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, our operations are exposed to
fluctuations in interest rates. We address 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.
Our primary interest rate risk exposure results from changes in
short-term U.S. dollar interest rates. In an effort to
manage interest rate exposures, we may enter into interest rate
swaps, which convert our floating rate debt to a fixed-rate and
which we designate as cash flow hedges. Interest expense on the
borrowings under these agreements is accrued using the fixed
rates identified in the swap agreements.
We had interest rate swap agreements totaling $50.0 million
at December 31, 2006 and $125.0 million at
December 31, 2007. The fixed interest rate on our five swap
agreements at December 31, 2007 range from 3.66% to 4.63%,
averaging 4.16% plus the spread. Two swap agreements mature in
2008 and three swap agreements mature in 2010.
Derivative transactions resulted in a charge to comprehensive
income at December 31, 2006, of $0.1 million, net of
income tax benefit of $0.1 million. At December 31, 2007,
derivative transactions resulted in a charge to comprehensive
income of $1.3 million, net of income tax benefit of
$0.8 million. Our outstanding interest rate swaps at
December 31, 2006 had a fair-value totaling approximately
$0.9 million, and were included in other assets in our
consolidated balance sheet. Our outstanding interest rate swaps
at December 31, 2007 had a fair-value totaling
approximately $1.3 million and are included in other liabilities
in our consolidated balance sheet.
Share-Based
Compensation
At December 31, 2007, 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 our common
61
MOBILE
MINI, INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
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.
Prior to January 1, 2006, the Company accounted for
share-based employee compensation, including stock options,
using the method prescribed in Accounting Principles Board
Opinion No. 25, Accounting for Stock Issued to
Employees and related interpretations (APB Opinion
No. 25). Under APB Opinion No. 25, we did not
recognize compensation cost in connection with stock options
granted at market price, and we disclosed the pro forma effect
on net earnings assuming compensation cost had been recognized
in accordance with Statement of Financial Accounting Standards
No. 123, Accounting for Stock-Based Compensation. On
December 16, 2004, the Financial Accounting Standards Board
issued SFAS No. 123 (revised 2004), Share-Based
Payment (SFAS No. 123(R)), which requires
companies to measure and recognize compensation expense for all
share-based payments at fair value. SFAS No. 123(R)
eliminates the ability to account for share-based compensation
transactions using APB Opinion No. 25, and generally
requires that such transactions to be accounted for using
prescribed fair-value-based methods. SFAS No. 123(R)
permits public companies to adopt its requirements using one of
two methods: (a) a modified prospective method
in which compensation costs are recognized beginning with the
effective date based on the requirements of
SFAS No. 123(R) for all share-based payments granted
or modified after the effective date, and based on the
requirements of SFAS No. 123 for all awards granted to
employees prior to the effective date of
SFAS No. 123(R) that remain unvested on the effective
date, or (b) a modified retrospective method
which includes the requirements of the modified prospective
method described above, but also permits companies to restate
based on the amounts previously recognized under
SFAS No. 123 for purposes of pro forma disclosures
either for all periods presented, or prior interim periods of
the year of adoption. The Company adopted
SFAS No. 123(R) effective January 1, 2006, using
the modified prospective method. Other than nonvested
share-awards, no share-based employee compensation cost has been
reflected in net income prior to the adoption of
SFAS No. 123(R). Results for prior periods have not
been restated.
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. We
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, our 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
and 2007, there were $3.6 million and $3.4 million,
respectively, of excess tax benefits related to stock-based
compensation, which were not realized under this approach. Once
our net operating loss carryforward is utilized, these excess
tax benefits, totaling $7.0 million, may be recognized in
additional paid-in capital.
Foreign
Currency Translation and Transactions
For our
non-United
States operations, the local currency is the functional
currency. All assets and liabilities are translated into United
States 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 United States
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.
62
MOBILE
MINI, INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Impact
of Recently Issued Accounting Standards
In June 2006, the Financial Accounting Standards Board (FASB)
issued Financial Interpretation No. (FIN) 48, Accounting for
Uncertainty in Income Taxes, which clarifies the accounting
for uncertainty in income taxes recognized in an
enterprises financial statements in accordance with FASB
Statement No. 109, Accounting for Income Taxes. The
interpretation prescribes a recognition threshold and
measurement attribute for the financial statement recognition
and measurement of a tax position taken or expected to be taken
in a tax return. FIN 48 is effective for fiscal years
beginning after December 15, 2006. We adopted this
interpretation as of January 1, 2007. Adoption of
FIN 48 did not have a material effect in our results of
operation or financial condition.
In September 2006, the FASB issued 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. We are in the process of determining
the effect, if any, that the adoption of SFAS No. 157
will have on our 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 this Standard, we 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 hedge accounting are not met.
SFAS No. 159 is effective for years beginning after
November 15, 2007. We are currently evaluating the
potential impact of adopting this Standard.
In June 2007, the FASB ratified the Emerging Issues Task Force
(EITF) consensus on EITF Issue
No. 06-11,
Accounting for Income Tax Benefits on Dividends on
Share-based Payment Awards. This EITF indicates tax benefits
of dividends on unvested restricted stock are to be recognized
in equity as an increase in the pool of excess tax benefits. If
the related awards are forfeited or are no longer expected to
vest, then the benefits are to be reclassified from equity to
the income statement. The EITF is effective for fiscal years
beginning after December 15, 2007. We do not expect the
adoption of EITF Issue
No. 06-11
will have a material effect on our results of operations or
financial condition.
In December 2007, the FASB issued SFAS No. 141
(revised 2007), Business Combinations
(SFAS No. 141R). SFAS No. 141R
establishes principles and requirements for how an acquirer
recognizes and measures in its financial statements the
identifiable assets acquired, the liabilities assumed, any
non-controlling interest in the acquiree and the goodwill
acquired. Under SFAS No. 141R, an acquiring entity
will be required to recognize all the assets acquired and
liabilities assumed in a transaction at the acquisition-due fair
value with limited exceptions. SFAS No. 141R also
establishes disclosure requirements to enable the evaluation of
the nature and financial effects of the business combination.
This statement is effective for fiscal years beginning after
December 15, 2008. We are currently evaluating the
potential impact of the adoption of SFAS No. 141R on
our results of operations or financial condition.
In December 2007, the FASB issued Statement of Financial
Accounting Standards No. 160, Noncontrolling Interests
in Consolidated Financial Statements (an amendment of
Accounting Research Bulletin (ARB 51)) (SFAS No. 160).
SFAS No. 160 amends ARB 51 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 non-controlling
interests in any of the Companys consolidated
subsidiaries, therefore, we do not expect the adoption of
SFAS No. 160 to have a significant impact on our
results of operations or financial conditions.
63
MOBILE
MINI, INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Our lease fleet primarily consists of refurbished, 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 our units estimated useful life, after the
date we put the unit in service, and are depreciated down to
their estimated residual values. Our depreciation policy on our
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 our 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 residual values do not cause carrying
values to exceed net realizable value. We continue to evaluate
these depreciation policies as more information becomes
available from other comparable sources and our own historical
experience. Our depreciation expense related to lease fleet for
2005, 2006 and 2007 was $9.5 million, $12.0 million
and $14.5 million, respectively. At December 31, 2006
and 2007, all of our lease fleet units were pledged as
collateral under the credit facility (see Note 3). 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:
|
|
|
|
|
|
|
|
|
|
|
2006
|
|
|
2007
|
|
|
|
(In thousands)
|
|
|
Steel storage containers
|
|
$
|
423,766
|
|
|
$
|
459,665
|
|
Offices
|
|
|
320,160
|
|
|
|
402,640
|
|
Van trailers
|
|
|
2,702
|
|
|
|
2,330
|
|
Other, primarily chassis
|
|
|
479
|
|
|
|
956
|
|
|
|
|
|
|
|
|
|
|
|
|
|
747,107
|
|
|
|
865,591
|
|
Accumulated depreciation
|
|
|
(49,668
|
)
|
|
|
(62,668
|
)
|
|
|
|
|
|
|
|
|
|
|
|
$
|
697,439
|
|
|
$
|
802,923
|
|
|
|
|
|
|
|
|
|
|
On May 7, 2007, we amended our revolving credit facility by
increasing the facility by $75.0 million to
$425.0 million and executed a First Amendment to Second
Amended and Restated Loan and Security Agreement with our
lenders. Borrowings of up to $425.0 million are available
under this revolving facility, based on the value of our lease
fleet, property, plant, equipment, and levels of inventories and
receivables. Under the amended revolving credit facility we may
further increase the maximum borrowing limit to
$500.0 million without our lenders consent, as long
as we are in compliance with the terms of the agreement. The
Agreement provides up to $100.0 million may be borrowed in
Euros as well as Pounds Sterling. Borrowings under the facility
are, at our option, at either a spread from the prime rate or
LIBOR rates, as defined. The credit facility is scheduled to
expire in May 2012.
Our revolving credit facility has covenants that can restrict
the conduct of our business if we go into default under the
agreement or if we do not maintain borrowing availability in
excess of certain pre-determined levels (generally between
$42.0 million and $75.0 million). If our borrowing
availability is below a specified level, the revolving credit
facility triggers covenants restricting (or in some cases,
further restricting) our ability to, among other things:
(i) declare cash dividends, or redeem or repurchase our
capital stock in excess of $10.0 million; (ii) prepay,
redeem or purchase other debt; (iii) incur liens;
(iv) make loans and investments; (v) incur additional
indebtedness; (vi) amend or otherwise alter debt and other
material agreements; (vii) make capital expenditures;
(viii) engage in mergers, acquisitions and asset sales;
(ix) transact with affiliates; and (x) alter the
business we conduct. We also must comply with specified
financial covenants and affirmative covenants. Should we fall
below
64
MOBILE
MINI, INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
specified borrowing availability levels, then these financial
covenants would set maximum permitted values for our leverage
ratio (as defined), fixed charge coverage ratio and our minimum
required utilization rates. At December 31, 2006 and
December 31, 2007, we were in compliance with those
covenants.
Borrowings under this revolving credit facility are secured by a
lien on substantially all of our present and future assets. 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 we may borrow under this
facility. The interest rate spread from LIBOR and the prime rate
can change under the facility, based on a quarterly calculation
of our ratio of funded debt to earnings before interest expense,
taxes, depreciation and amortization and certain excluded
expenses during the prior 12 month. At December 31,
2007, the prime rate was 7.25% and our weighted average LIBOR
rate, including the effect of our interest rate swap agreements,
was 6.22% on our outstanding balance of $237.9 million. We
had approximately $183.7 million of availability at
December 31, 2007, under our funded debt to EBITDA covenant.
Our revolving credit facility had outstanding balances of
$203.7 million and $237.9 million at December 31,
2006 and 2007, respectively. In 2007, we used proceeds from the
issuance of our $150.0 million 6.875% Senior Notes to
redeem $97.5 million aggregate principal amount outstanding
to our 9.5% Senior Notes plus the redemption premium and
accrued and unpaid interest. During 2006, we used proceeds from
a common stock offering, in part to redeem 35%, or
$52.5 million, of the $150.0 million aggregate
principal amount outstanding of our 9.5% Senior Notes plus
the redemption premium and accrued and unpaid interest thereon.
The weighted average interest rate under the line of credit,
including the effect of applicable interest rate swap
agreements, was approximately 6.5% in 2006 and 6.3% in 2007. The
average balance outstanding during 2006 and 2007 was
approximately $184.2 million and $210.5 million,
respectively.
We have interest rate swap agreements under which we effectively
fixed the interest rate payable on $125.0 million of
borrowings under our credit facility so that the interest rate
is based on a spread from a fixed rate rather than a spread from
the LIBOR rate. We account for the swap agreements in accordance
with SFAS No. 133 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,
2007 of $1.3 million, net of applicable income tax benefit
of $0.8 million.
Notes payable at December 31, consist of the following:
|
|
|
|
|
|
|
|
|
|
|
2006
|
|
|
2007
|
|
|
|
(In thousands)
|
|
|
Notes payable to financial institution, interest at 5.94%,
payable in fixed monthly installments, maturing June and July
2008, unsecured
|
|
$
|
|
|
|
$
|
743
|
|
Notes payable to financial institution, interest at 8.25% and
6.3%, payable in fixed monthly installments, matured June and
July 2007, unsecured
|
|
|
781
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
781
|
|
|
$
|
743
|
|
|
|
|
|
|
|
|
|
|
All payments of notes payable are scheduled to mature in 2008.
|
|
(5)
|
Obligations
Under Capital Leases
|
We have two capital lease obligations for office related
equipment which had outstanding balances at December 31,
2007 of $10,000, which have terms ending in 2010.
65
MOBILE
MINI, INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
|
|
(6)
|
Equity
and Debt Issuances:
|
In May 2007, we received net proceeds of approximately
$146.3 million, after underwriters discounts and
commissions, from our issuance of $150.0 million of
6.875% Senior Notes. The Senior Notes were issued at a
discount of $0.7 million which is reflected as a reduction of
the balance of Senior Notes on our consolidated balance sheet at
December 31, 2007. We also incurred costs of approximately
$3.6 million which are included, net of amortization of
$0.4 million, in other assets on our consolidated balance
sheet at December 31, 2007. Included in the $3.6 million
figure is approximately $3.0 million relating to
underwriters discounts and commissions. We used these
proceeds to redeem the aggregate principal amount outstanding of
our 9.5% Senior Notes, ($97.5 million), plus we paid
accrued interest, transaction costs and the redemption premium
on the 9.5% Notes. The additional net proceeds to us of
approximately $33.2 million were used to repay borrowings
under our revolving line of credit.
In March 2006, pursuant to a public offering, we issued
4.6 million shares of our common stock at approximately
$26.22 per share, after underwriting discounts and commissions,
but before other expenses. We received net offering proceeds of
approximately $120.3 million which we used to redeem 35% of
the $150 million aggregate principle amount outstanding of
our 9.5% Senior Notes and to pay down our revolving line of
credit.
The scheduled maturity for debt obligations under our revolving
line of credit, notes payable, obligations under capital leases
and Senior Notes for balances outstanding at December 31,
2007 (in thousands) are as follows:
|
|
|
|
|
2008
|
|
$
|
751
|
|
2009
|
|
|
1
|
|
2010
|
|
|
1
|
|
2011
|
|
|
|
|
2012
|
|
|
237,857
|
|
Thereafter
|
|
|
150,000
|
|
|
|
|
|
|
|
|
$
|
388,610
|
|
|
|
|
|
|
Income (loss) before taxes for the years ended December 31,
consisted of the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2005
|
|
|
2006
|
|
|
2007
|
|
|
|
(In thousands)
|
|
|
U.S.
|
|
$
|
53,992
|
|
|
$
|
69,260
|
|
|
$
|
75,355
|
|
Other Nations
|
|
|
216
|
|
|
|
667
|
|
|
|
(2,769
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
54,208
|
|
|
$
|
69,927
|
|
|
$
|
72,586
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
66
MOBILE
MINI, INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
The provision (benefit) for income taxes for the years ended
December 31, consisted of the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2005
|
|
|
2006
|
|
|
2007
|
|
|
|
(In thousands)
|
|
|
Current:
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Federal
|
|
$
|
106
|
|
|
$
|
250
|
|
|
$
|
|
|
State
|
|
|
17
|
|
|
|
238
|
|
|
|
413
|
|
Other Nations
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
123
|
|
|
|
488
|
|
|
|
413
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred:
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Federal
|
|
|
17,834
|
|
|
|
22,961
|
|
|
|
24,845
|
|
State
|
|
|
2,179
|
|
|
|
3,407
|
|
|
|
3,978
|
|
Other Nations
|
|
|
84
|
|
|
|
295
|
|
|
|
(826
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
20,097
|
|
|
|
26,663
|
|
|
|
27,997
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
20,220
|
|
|
$
|
27,151
|
|
|
$
|
28,410
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The components of the net deferred tax liability at
December 31, are approximately as follows:
|
|
|
|
|
|
|
|
|
|
|
2006
|
|
|
2007
|
|
|
|
(In thousands)
|
|
|
Deferred tax assets:
|
|
|
|
|
|
|
|
|
Net operating loss carryforwards
|
|
$
|
17,399
|
|
|
$
|
24,761
|
|
Deferred revenue and expenses
|
|
|
5,155
|
|
|
|
5,845
|
|
Accrued compensation and other benefits
|
|
|
2,200
|
|
|
|
2,423
|
|
Allowance for doubtful accounts
|
|
|
1,856
|
|
|
|
1,392
|
|
Other
|
|
|
1,808
|
|
|
|
2,312
|
|
|
|
|
|
|
|
|
|
|
Total deferred tax assets
|
|
|
28,418
|
|
|
|
36,733
|
|
Valuation allowance
|
|
|
(2,326
|
)
|
|
|
(1,126
|
)
|
|
|
|
|
|
|
|
|
|
Net deferred tax assets
|
|
|
26,092
|
|
|
|
35,607
|
|
|
|
|
|
|
|
|
|
|
Deferred tax liabilities:
|
|
|
|
|
|
|
|
|
Accelerated tax depreciation
|
|
|
(113,929
|
)
|
|
|
(147,042
|
)
|
Accelerated tax amortization
|
|
|
(8,365
|
)
|
|
|
(11,277
|
)
|
Other
|
|
|
(1,305
|
)
|
|
|
(759
|
)
|
|
|
|
|
|
|
|
|
|
Total deferred tax liabilities
|
|
|
(123,599
|
)
|
|
|
(159,078
|
)
|
|
|
|
|
|
|
|
|
|
Net deferred tax liabilities
|
|
$
|
(97,507
|
)
|
|
$
|
(123,471
|
)
|
|
|
|
|
|
|
|
|
|
A deferred U.S. tax liability has not been provided on the
undistributed earnings of certain foreign subsidiaries because
it is our 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, 2006 and 2007,
respectively. A net deferred tax asset of $1.3 million and
a net deferred tax liability of approximately $0.2 million
related to our United Kingdom and The Netherlands operations,
respectively, have been combined with the net deferred tax
liabilities of our United States operations in our consolidated
balance sheet at December 31, 2007.
67
MOBILE
MINI, INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
A reconciliation of the U.S. federal statutory rate to
Mobile Minis effective tax rate for the years ended
December 31, is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2005
|
|
|
2006
|
|
|
2007
|
|
|
U.S. federal statutory rate
|
|
|
35.0
|
%
|
|
|
35.0
|
%
|
|
|
35.0
|
%
|
State taxes, net of federal benefit
|
|
|
3.5
|
|
|
|
3.5
|
|
|
|
3.5
|
|
Nondeductible expenses
|
|
|
|
|
|
|
0.4
|
|
|
|
0.6
|
|
Change in valuation allowance
|
|
|
(1.2
|
)
|
|
|
(0.1
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
37.3
|
%
|
|
|
38.8
|
%
|
|
|
39.1
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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. At December 31, 2007, we had
net operating loss carryforwards in the various states in which
we operate totaling $47.9 million. These state net
operating losses expire if unused from 2008 to 2027. At
December 31, 2006 and 2007, our deferred tax assets do not
include $3.6 million and $7.0 million of excess tax
benefits from employee stock option exercises that are a
component of our net operating loss carryforward. Additional
paid in capital will be increased by $7.0 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. As a result, in prior years we recorded a valuation
allowance relating to state loss carryforwards expected to
expire. We subsequently recorded a reduction in the valuation
allowance of $0.7 million in 2005 and $0.3 million in
2006 based upon changes in expected taxable income that caused
the assessment of recoverability to improve. Additionally, in
2006, management recorded a valuation allowance in the amount of
$2.3 million on some of the tax attribute carryforwards
acquired as a part of the Royal Wolf acquisition. This allowance
relates to a portion of the acquired loss carryforwards that may
not be eligible for use depending on certain historic and future
events. Should such allowance become recoverable, it would be
recorded as a reduction to goodwill relating to the acquisition.
In 2007, we determined that an additional $1.2 million of
the Royal Wolf loss carryforwards would be available to offset
future taxable income. Accordingly, the valuation allowance was
reduced from $2.3 million to $1.1 million as an offset
to previously recorded goodwill. Accelerated tax amortization
primarily relates to amortization of goodwill for income tax
purposes.
On January 1, 2007, we 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.
We file U.S. federal tax returns, U.S. state tax returns, and
foreign tax returns. We have identified our U.S. Federal tax
return as our major tax jurisdiction. For the U.S.
Federal return, years 2003 through 2006 are subject to tax
examination by the U.S. Internal Revenue Service. We do not
currently have any ongoing tax examinations with the IRS. We
believe that our 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. In addition, we do not
record a cumulative effect adjustment related to the adoption of
FIN 48. We did not anticipate that the total amount of
unrecognized tax related to any particular tax benefit position
will change significantly within the next 12 months.
Our 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 our consolidated
statements of income.
68
MOBILE
MINI, INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
As a result of stock ownership changes during the years
presented, it is possible that we have 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.
We paid income taxes of approximately $0.5 million,
$0.7 million and $0.8 million in 2005, 2006 and 2007,
respectively. These amounts are lower than the recorded expense
in the years due to net operating loss carryforwards and general
business credit utilization.
|
|
(8)
|
Transactions
with Related Persons:
|
When we were a private company prior to 1994, we leased some of
our properties from entities controlled by our founder, Richard
E. Bunger, and his family members. These related party leases
remain in effect. We lease a portion of the property comprising
our Phoenix location and the property comprising our Tucson
location from entities owned by Steven G. Bunger and his
siblings. Steven G. Bunger is our President and Chief Executive
Officer and has served as our Chairman of the Board since
February 2001. Annual lease payments under these leases totaled
approximately $91,000, $91,000 and $94,000 in 2005, 2006 and
2007, respectively. The term of each of these leases expires on
December 31, 2008. 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 2005, 2006 and 2007
under this lease were approximately $267,000, $277,000 and
$282,000 respectively. The Rialto lease expires on April 1,
2016. Management believes that the rental rates reflect the fair
market rental value of these properties. These related persons
lease agreements have been reviewed by the independent directors
who comprise a majority of the members of our Board of Directors.
It is Mobile Minis intention not to enter into any
additional related person transactions other than extensions of
lease agreements.
|
|
(9)
|
Share-Based
Compensation
|
Prior to January 1, 2006, we 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, we adopted SFAS No. 123(R) using
the modified prospective method.
The adoption of SFAS No. 123(R) and nonvested share
expense reduced income before income tax expense for the period
ended December 31, 2007, by approximately $4.0 million
and reduced net income by approximately $2.5 million. As a
result, basic and diluted earnings per share for
December 31, 2007 were reduced by approximately $0.08 and
$0.07, respectively. In 2006, we capitalized approximately
$0.4 million of compensation costs related to stock options
and nonvested share-awards to the lease fleet.
On November 10, 2005, the FASB issued FASB Staff Position
No. FAS 123(R)-3, Transition Election Related to
Accounting for Tax Effects of Share-Based Payment Awards. We
have elected to adopt the alternative transition method provided
in the FASB Staff Position for calculating the effects of
share-based compensation pursuant to FAS 123(R). The
alternative transition method includes a simplified method to
establish the beginning balance of the additional paid in
capital pool (APIC pool) related to the tax effects of employee
share-based compensation, which is available to absorb tax
deficiencies recognized subsequent to the adoption of
FAS 123(R).
In 2005, we began awarding nonvested shares under the existing
share-based compensation plans. The majority of our 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, we granted to certain of our executive officers 71,899
nonvested share-
69
MOBILE
MINI, INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
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 our 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 our Board of Directors
on February 20, 2008, at which point, the value of each
nonvested share-award was $15.85. 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. 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 are assessed as probable of being met.
Share-based compensation expense related to nonvested
share-awards outstanding during the period ended
December 31, 2007, was approximately $1.8 million. As
of December 31, 2007, the total amount of unrecognized
compensation cost related to nonvested share-awards was
approximately $11.5 million, which is expected to be
recognized over a weighted-average period of approximately
4.0 years.
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, 2007, total
unrecognized compensation cost related to stock option awards
was approximately $4.7 million and the related
weighted-average period over which it is expected to be
recognized is approximately 1.9 years.
Prior to the adoption of SFAS No. 123(R), we 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 condensed 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, 2007, we had no tax benefits arising
from tax deductions in excess of the compensation cost
recognized because the benefit has not been realized
given that we currently have 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 activities under our stock
option plans for the years ended December 31 (number of shares
in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2005
|
|
|
2006
|
|
|
2007
|
|
|
|
|
|
|
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
|
|
|
3,732
|
|
|
$
|
11.38
|
|
|
|
2,964
|
|
|
$
|
14.00
|
|
|
|
2,609
|
|
|
$
|
15.86
|
|
Granted
|
|
|
524
|
|
|
|
23.97
|
|
|
|
215
|
|
|
|
29.99
|
|
|
|
9
|
|
|
|
30.47
|
|
Canceled/Expired
|
|
|
(137
|
)
|
|
|
(13.01
|
)
|
|
|
(71
|
)
|
|
|
(20.02
|
)
|
|
|
(71
|
)
|
|
|
(21.67
|
)
|
Exercised
|
|
|
(1,155
|
)
|
|
|
(10.17
|
)
|
|
|
(499
|
)
|
|
|
(10.26
|
)
|
|
|
(519
|
)
|
|
|
(10.80
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options outstanding, end of year
|
|
|
2,964
|
|
|
$
|
14.00
|
|
|
|
2,609
|
|
|
$
|
15.87
|
|
|
|
2,028
|
|
|
$
|
17.02
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options exercisable, end of year
|
|
|
1,457
|
|
|
$
|
12.33
|
|
|
|
1,425
|
|
|
$
|
13.95
|
|
|
|
1,344
|
|
|
$
|
15.63
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options and awards available for grant, end of year
|
|
|
361
|
|
|
|
|
|
|
|
1,234
|
|
|
|
|
|
|
|
958
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
70
MOBILE
MINI, INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
A summary of nonvested share-awards activity within our
share-based compensation plans and changes is as follows (share
amounts in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
|
Average
|
|
|
|
|
|
|
Grant Date
|
|
|
|
Shares
|
|
|
Fair Value
|
|
|
Nonvested at January 1, 2005
|
|
|
|
|
|
$
|
|
|
Awarded
|
|
|
97
|
|
|
|
23.56
|
|
Released
|
|
|
|
|
|
|
|
|
Forfeited
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nonvested at December 31, 2005
|
|
|
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
|
|
|
|
|
|
|
|
|
|
|
The total fair value of share-awards vested in 2007 was
$1.6 million. The total fair value of share-awards vested
in 2006 was $0.5 million.
Options outstanding and exercisable by price range as of
December 31, 2007 are as follows, (number of shares in
thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options Outstanding
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
Options Exercisable
|
|
|
|
|
|
|
Average
|
|
|
Weighted
|
|
|
|
|
|
Weighted
|
|
Range of
|
|
|
|
|
Remaining
|
|
|
Average
|
|
|
|
|
|
Average
|
|
Exercise
|
|
Options
|
|
|
Contractual
|
|
|
Exercise
|
|
|
Options
|
|
|
Exercise
|
|
Prices
|
|
Outstanding
|
|
|
Life
|
|
|
Price
|
|
|
Exercisable
|
|
|
Price
|
|
|
$ 5.06 - $ 9.53
|
|
|
159
|
|
|
|
3.95
|
|
|
$
|
7.63
|
|
|
|
159
|
|
|
$
|
7.63
|
|
9.93 - 9.93
|
|
|
250
|
|
|
|
5.88
|
|
|
|
9.93
|
|
|
|
150
|
|
|
|
9.93
|
|
10.44 - 13.75
|
|
|
64
|
|
|
|
3.34
|
|
|
|
11.37
|
|
|
|
64
|
|
|
|
11.37
|
|
14.11
|
|
|
426
|
|
|
|
6.82
|
|
|
|
14.11
|
|
|
|
188
|
|
|
|
14.11
|
|
15.77
|
|
|
30
|
|
|
|
3.58
|
|
|
|
15.77
|
|
|
|
30
|
|
|
|
15.77
|
|
16.46
|
|
|
533
|
|
|
|
3.95
|
|
|
|
16.46
|
|
|
|
533
|
|
|
|
16.46
|
|
16.82 - 20.55
|
|
|
50
|
|
|
|
7.55
|
|
|
|
20.28
|
|
|
|
47
|
|
|
|
20.44
|
|
24.65
|
|
|
308
|
|
|
|
7.81
|
|
|
|
24.65
|
|
|
|
92
|
|
|
|
24.65
|
|
27.56 - 31.10
|
|
|
162
|
|
|
|
8.80
|
|
|
|
28.92
|
|
|
|
63
|
|
|
|
29.37
|
|
33.98
|
|
|
46
|
|
|
|
8.34
|
|
|
|
33.98
|
|
|
|
18
|
|
|
|
33.98
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,028
|
|
|
|
|
|
|
|
|
|
|
|
1,344
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
71
MOBILE
MINI, INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
A summary of stock option activity, as of December 31,
2007, 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
|
|
|
2,028
|
|
|
$
|
17.02
|
|
|
|
5.93
|
|
|
$
|
7.430
|
|
Vested and expected to vest
|
|
|
1,783
|
|
|
$
|
16.41
|
|
|
|
5.70
|
|
|
$
|
6.957
|
|
Exercisable
|
|
|
1,344
|
|
|
$
|
15.63
|
|
|
|
5.20
|
|
|
$
|
5.515
|
|
The aggregate intrinsic value of options exercised during the
period ended December 31, 2005, 2006 and 2007 was
$12.4 million, $9.7 million and $10.0 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,
|
|
|
|
2005
|
|
|
2006
|
|
|
2007
|
|
|
Risk-free interest rate
|
|
|
4.40
|
%
|
|
|
4.79
|
%
|
|
|
4.59
|
%
|
Expected holding period (years)
|
|
|
5.2
|
|
|
|
3.2
|
|
|
|
3.0
|
|
Expected stock volatility
|
|
|
34.5
|
%
|
|
|
35.3
|
%
|
|
|
33.2
|
%
|
Expected dividend rate
|
|
|
0.0
|
%
|
|
|
0.0
|
%
|
|
|
0.0
|
%
|
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 our historical
data. We do not anticipate paying a dividend, and therefore no
expected dividend yield was used.
The weighted average fair value of stock options granted was
$9.26, $9.15 and $8.56 for 2005, 2006 and 2007, respectively.
The following table illustrates the effect on net income and
earnings per share as if we had applied the fair value
recognition provisions of SFAS No. 123 to all
outstanding stock option awards prior to our adoption of
SFAS No. 123(R) for the year ended December 31:
|
|
|
|
|
|
|
2005
|
|
|
|
(In thousand except
|
|
|
|
per share data)
|
|
|
Net income, as reported
|
|
$
|
33,988
|
|
Deduct: Total stock-based employee compensation expense
determined under fair value based method for all awards, net of
related tax effects
|
|
|
2,798
|
|
|
|
|
|
|
Pro-forma net income
|
|
$
|
31,190
|
|
|
|
|
|
|
Earnings per share:
|
|
|
|
|
Basic, as reported
|
|
$
|
1.14
|
|
Basic, pro forma
|
|
$
|
1.04
|
|
Diluted, as reported
|
|
$
|
1.10
|
|
Diluted, pro forma
|
|
$
|
1.01
|
|
72
MOBILE
MINI, INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Stock
Option and Equity Incentive Plans
In August 1994, our 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, 2007, there were outstanding options to
acquire 89,000 shares under the 1994 Plan. In August 1999,
our Board of Directors approved the Mobile Mini, Inc. 1999 Stock
Option Plan. As of December 31, 2007, there were
outstanding options to acquire 1.9 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, nonstatuatory stock options or shares of restricted stock
awards. Incentive stock options may be granted to our 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, our Board of Directors approved the 2006
Equity Incentive Plan that was subsequently approved by the
stockholders at our 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 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, 2007, there were outstanding options to
acquire 36,250 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, our 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 our business,
thereby advancing the interest of our 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 us cash or
cash equivalents equal to the option exercise price.
The plans are administered by the Compensation Committee of our
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 our Board of Directors receives an automatic
award of 2,500 shares of common stock on August 1 of each
year as part of the compensation we provide to such directors.
The Board of Directors may amend the plans at any time, except
that approval by our 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
73
MOBILE
MINI, INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
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 February 2005, the Compensation Committee of our Board of
Directors approved the accelerated vesting of a portion of our
stock options granted on December 13, 2001, at an exercise
price of $16.46 per share. All of the stock options that were
scheduled to vest on June 13, 2006, which covered
approximately 166,200 shares, were accelerated and vested
as of February 23, 2005. At the time of the
Committees action, the exercise price under the options
was less than the market value of the common stock. The
acceleration of the vesting allowed awards to vest that would
otherwise have been forfeited or become unexercisable and
established a new measurement date. At the accelerated vesting
date, no compensation expense was recorded in accordance with
FIN 44, Accounting for Certain Transactions involving
Stock Compensation-an interpretation of APB Opinion No. 25,
as the difference in the intrinsic value on the date of the
original grant and the date of the modifications was minimal,
and the majority of the employees included in the accelerated
vesting are expected to continue employment through the original
vesting date.
In 2005, we 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 us (or one of
our subsidiaries). In 2006 and 2007, certain officers of the
Company received performance based nonvested shares. If
employment terminates, the nonvested shares are forfeited by the
former employee.
401(k)
and Retirement Plans
In 1995, we established a contributory retirement plan in the
United States, 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 10% of employees contributions up to a
maximum of $500 per employee. We have a similar plan as governed
and regulated by Canadian law, where we make matching
contributions with the same limitations as our 401(k) plan, to
our Canadian employees.
In the United Kingdom, 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 we
pay 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 us and one-third
made by the employee. We did not incur any administrative costs
for this plan in 2007.
We made contributions to these plans of approximately
$0.1 million, $0.2 million and $0.4 million in
2005, 2006 and 2007, respectively. Additionally, we incurred
approximately $6,000 in each of those three years for
administrative costs for these programs.
74
MOBILE
MINI, INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
|
|
(11)
|
Commitments
and Contingencies:
|
Leases
As discussed more fully in Note 8, we are obligated under
noncancellable operating leases with related parties. We also
lease our corporate offices and other properties and operating
equipment from third parties under noncancellable operating
leases. Rent expense under these agreements was approximately
$6.8 million, $8.6 million and $10.2 million for
the years ended December 31, 2005, 2006 and 2007,
respectively. Total future commitments under all noncancellable
agreements for the years ended December 31, are as follows
(in thousands):
|
|
|
|
|
2008
|
|
$
|
10,325
|
|
2009
|
|
|
9,407
|
|
2010
|
|
|
7,300
|
|
2011
|
|
|
5,601
|
|
2012
|
|
|
3,841
|
|
Thereafter
|
|
|
12,430
|
|
|
|
|
|
|
|
|
$
|
48,904
|
|
|
|
|
|
|
The above table includes certain real estate leases that expire
in 2008, but have lease renewal options that we currently
anticipate to exercise in 2008 at the end of the initial lease
period.
Insurance
We maintain insurance coverage for our operations and employees
with appropriate aggregate, per occurrence and deductible limits
as we reasonably determine 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 our loss control
efforts.
Our 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 our actual experience
at the end of the plan policy periods based on the
carriers loss predictions and our historical claims data.
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
expense the deductible portion of the individual claims.
However, we generally do not know the full amount of our
exposure to a deductible in connection with any particular claim
during the fiscal period in which the claim is incurred and for
which we must make an accrual for the deductible expense. We
make these accruals based on a combination of the claims
development experience of our staff and our insurance companies,
and, at year end, the accrual is reviewed and adjusted, in part,
based on an independent actuarial review of historical loss data
and using certain actuarial assumptions followed in the
insurance industry. A high degree of judgment is required in
developing these estimates of amounts to be accrued, as well as
in connection with the underlying assumptions. In addition, our
assumptions will change as our loss experience is developed. All
of these factors have the potential for significantly impacting
the amounts we have previously reserved in respect of
anticipated deductible expenses, and we may be required in the
future to increase or decrease amounts previously accrued. Under
our various insurance programs, we have collective reserves
recorded in accrued liabilities of $6.8 million and
$7.5 million at December 31, 2006 and 2007,
respectively.
As of December 31, 2007, in connection with the issuance of
our insurance policies, we have provided our various insurance
carriers approximately $3.4 million in letters of credit
and an agreement under which we are
75
MOBILE
MINI, INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
contingently responsible for $2.9 million to provide credit
support for our payment of the deductibles
and/or loss
limitation reimbursements under the insurance policies.
Florida
Litigation
In April 2000, we acquired the portable storage business that
was operated in Florida by
A-1 Trailer
Rental and several affiliated entities (collectively,
A-1
Trailer Rental). Two lawsuits were filed against us in the
State of Florida arising out of that acquisition.
In April 2005, we entered into a settlement agreement pursuant
to which a third party partially reimbursed us for losses we
sustained in connection with those lawsuits. The net proceeds
are included in our Consolidated Statements of Income as
Other income for the year ended December 31,
2005.
General
Litigation
We are a party to routine claims incidental to our business.
Most of these routine claims involve alleged damage to
customers property while stored in units leased from us
and damage alleged to have occurred during delivery and
pick-up of
containers. We carry insurance to protect us against loss from
these types of claims, subject to deductibles under the policy.
We do not believe that any of these incidental claims,
individually or in the aggregate, is likely to have a material
adverse effect on our business or results of operations.
|
|
(12)
|
Stockholders
Equity:
|
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. As of December 31, 2007, we had repurchased
2,174,828 shares for approximately $39.3 million under
this authorization, and we 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.
As discussed in Note 6, in March 2006, we issued
4.6 million shares of our common stock at approximately
$26.22 per share, net of underwriting discounts and commissions,
but before other expenses. We received net offering proceeds of
approximately $120.3 million which we used to redeem 35% of
the $150.0 million aggregate principal amount outstanding
of our
91/2% Senior
Notes and to temporarily pay down our revolving line of credit.
We enter 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 provides us with cash flow which enables us to
immediately cover the overhead cost at the new branch. On
occasion, we also purchase portable storage businesses in areas
where we have existing smaller branches either as part of
multi-market acquisitions or in order to increase our operating
margins at those branches.
In 2006, we entered into a share purchase agreement to acquire
three companies of Royal Wolf Group which, in addition to
increasing our operations in the U.S., gave us presence in the
United Kingdom 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, we also acquired three other
businesses in 2006, L&L Surplus of Utica, Inc.,
HOC-Express, Inc. and Affordable LLC through asset purchase
agreements.
76
MOBILE
MINI, INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
In 2007, we acquired the portable storage assets and assumed
certain liabilities of four businesses. In January we acquired
the portable storage assets of Worcester Leasing Company, Inc.,
operating in Worcester, Vermont. In May we acquired the portable
storage assets of Site Storage and Equipment, Inc. and Ace
Container & Equipment Sales, Inc., located in
Theodore, Alabama. The acquired assets from the Alabama
companies are serviced by our Pensacola branch which conducts
business in the Golf coast and surrounding regions. In October
we acquired the portable storage assets of Guest Inc., operating
in the Pittsburgh, Pennsylvania metropolitan area which also
serves eastern Ohio and northern West Virginia. In November we
acquired the portable storage and mobile office assets of
Centreline Equipment Rentals Ltd., of Windsor, Ontario, which
became our third branch in Canada. In May 2007, we also opened
our second Canadian branch by commencing operations in the
Vancouver metropolitan area by way of a new branch start up. All
acquisitions in 2006 and 2007 were for cash.
The accompanying consolidated financial statements include the
operations of the acquired businesses from the dates of
acquisition. The acquisitions were accounted for as a purchase
in accordance with SFAS No. 141, Business
Combinations, with the purchased assets and the assumed
liabilities recorded at their estimated fair values at the dates
of acquisition.
The aggregate purchase price of the assets and operations
acquired consists of the following for the years ended December
31:
|
|
|
|
|
|
|
|
|
|
|
2006
|
|
|
2007
|
|
|
|
(In thousands)
|
|
|
Cash
|
|
$
|
59,411
|
|
|
$
|
9,687
|
|
Other acquisition costs
|
|
|
64
|
|
|
|
47
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
59,475
|
|
|
$
|
9,734
|
|
|
|
|
|
|
|
|
|
|
The fair value of the assets purchased has been allocated as
follows for the years ended December 31:
|
|
|
|
|
|
|
|
|
|
|
2006
|
|
|
2007
|
|
|
|
(In thousands)
|
|
|
Tangible assets
|
|
$
|
34,169
|
|
|
$
|
4,154
|
|
Deferred tax asset
|
|
|
4,400
|
|
|
|
37
|
|
Receivables
|
|
|
3,474
|
|
|
|
|
|
Deposits and prepaid expenses
|
|
|
409
|
|
|
|
|
|
Intangible assets:
|
|
|
|
|
|
|
|
|
Customer lists
|
|
|
3,960
|
|
|
|
820
|
|
Trade names
|
|
|
180
|
|
|
|
|
|
Non-compete agreements
|
|
|
55
|
|
|
|
125
|
|
Goodwill
|
|
|
19,231
|
|
|
|
4,946
|
|
Liabilities and other
|
|
|
(6,403
|
)
|
|
|
(348
|
)
|
|
|
|
|
|
|
|
|
|
|
|
$
|
59,475
|
|
|
$
|
9,734
|
|
|
|
|
|
|
|
|
|
|
The purchase prices for acquisitions have been allocated to the
assets acquired and liabilities assumed based upon estimated
fair values as of the acquisition dates and are subject to
adjustment when additional information concerning asset and
liability valuations are finalized. We do not believe any
adjustments to the allocation will have any material effect on
our results of operations or financial position.
Included in other assets and intangibles
are: (1) non-compete agreements that are
amortized typically over 5 years using the straight-line
method with no residual value, (2) intrinsic values
associated with trade names that are amortized on a
straight-line basis from 2 to 15 years with no residual
value and (3) intrinsic values associated with customer
lists that are amortized on an accelerated basis over
11 years with no residual value. Amortization
77
MOBILE
MINI, INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
expense for intangibles related to acquisitions was
approximately $0.1 million, $0.5 million and
$1.0 million in 2005, 2006 and 2007, respectively. Based on
the carrying value at December 31, 2007, and assuming no
subsequent impairment of the underlying assets, the annual
amortization expense is expected to be $0.8 million in
2008, $0.7 million in 2009, $0.6 million in 2010,
$0.5 million in 2011, $0.5 million in 2012 and
$1.0 million thereafter.
In the third quarter of 2005, as a result of assessing our
damages resulting from Hurricane Katrina, we recorded an expense
of approximately $1.7 million. This charge is included in
Leasing, selling and general expenses in our
consolidated statements of income. In 2005, we received a
limited reimbursement from our insurance company for certain
trucks that were destroyed in the storm. Although we have filed
a claim with our insurance companies for other damage to our
former New Orleans facility and rental units and equipment
located there, the insurance companies have informed us that
they do not intend to cover damage caused by flooding rather
than by the hurricane. Although we are still pursuing our
insurance claims, the insurance companies have filed a
reservation of rights regarding flood damages and there is
uncertainty as to the timing and extent of any further insurance
recovery.
|
|
(15)
|
Other
Comprehensive Income:
|
The components of accumulated other comprehensive income, net of
tax, were as follows at December 31:
|
|
|
|
|
|
|
|
|
|
|
2006
|
|
|
2007
|
|
|
|
(In thousands)
|
|
|
Accumulated net unrealized holding gain (loss) on derivatives
|
|
$
|
523
|
|
|
$
|
(769
|
)
|
Foreign currency translation adjustment
|
|
|
2,948
|
|
|
|
5,105
|
|
|
|
|
|
|
|
|
|
|
Accumulated other comprehensive income
|
|
$
|
3,471
|
|
|
$
|
4,336
|
|
|
|
|
|
|
|
|
|
|
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. We have operations in the United States, Canada, the
United Kingdom and The Netherlands. All of our branches operate
in their local currency and although we are exposed to foreign
exchange rate fluctuation in other foreign markets where we
lease and sell our products, we do not believe this will be a
significant impact on our results of operations. Currently, our
branch operations comprise our only segment and these operations
concentrate on our core business of leasing. Our 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. We do not
attempt to allocate shared revenue nor general, selling and
leasing expenses to the different configurations of portable
storage and office products for lease and sale. The branch
operations include the leasing and sales of portable storage
units, portable offices and combination units configured for
both storage and office space. We lease to businesses and
consumers in the general geographic area around each branch. The
operation includes our manufacturing facilities, which is
responsible for the purchase, manufacturing and refurbishment of
products for leasing and sale, as well as for manufacturing
certain delivery equipment.
In managing our business, we focus on earnings per share and on
our internal growth rate in leasing revenue, which we define 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 same market acquisitions.
Discrete financial data on each of our 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 our consolidated financial statements.
78
MOBILE
MINI, INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
The tables below represent our revenue and long-lived assets as
attributed to geographic locations, at December 31:
Revenue from external customers (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2005
|
|
|
2006
|
|
|
2007
|
|
|
United States.
|
|
$
|
205,599
|
|
|
$
|
257,485
|
|
|
$
|
290,161
|
|
Other Nations.
|
|
|
1,571
|
|
|
|
15,878
|
|
|
|
28,141
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenues
|
|
$
|
207,170
|
|
|
$
|
273,363
|
|
|
$
|
318,302
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-lived assets (in thousands):
|
|
|
|
|
|
|
|
|
|
|
2006
|
|
|
2007
|
|
|
United States
|
|
$
|
710,155
|
|
|
$
|
810,573
|
|
Other Nations
|
|
|
30,356
|
|
|
|
47,713
|
|
|
|
|
|
|
|
|
|
|
Total long-lived assets
|
|
$
|
740,511
|
|
|
$
|
858,286
|
|
|
|
|
|
|
|
|
|
|
|
|
(17)
|
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, 2006 and 2007. 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. We believe 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.
79
MOBILE
MINI, INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
First Quarter
|
|
|
Second Quarter
|
|
|
Third Quarter
|
|
|
Fourth Quarter
|
|
|
|
(In thousands except earnings per share)
|
|
|
2006
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Leasing revenues
|
|
$
|
51,534
|
|
|
$
|
59,331
|
|
|
$
|
65,595
|
|
|
$
|
68,645
|
|
Total revenues
|
|
|
56,420
|
|
|
|
66,298
|
|
|
|
73,989
|
|
|
|
76,656
|
|
Gross profit margin on sales
|
|
|
1,614
|
|
|
|
2,438
|
|
|
|
2,962
|
|
|
|
2,624
|
|
Income from operations
|
|
|
19,922
|
|
|
|
24,293
|
|
|
|
27,190
|
|
|
|
28,125
|
|
Net income
|
|
|
8,204
|
|
|
|
7,658
|
(1)
|
|
|
12,890
|
|
|
|
14,024
|
(2)
|
Earnings per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
0.27
|
|
|
$
|
0.22
|
(1)
|
|
$
|
0.36
|
|
|
$
|
0.39
|
(2)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted
|
|
$
|
0.26
|
|
|
$
|
0.21
|
(1)
|
|
$
|
0.35
|
|
|
$
|
0.38
|
(2)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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
|
(3)
|
|
|
12,704
|
|
|
|
12,444
|
|
Earnings per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
0.36
|
|
|
$
|
0.18
|
(3)
|
|
$
|
0.35
|
|
|
$
|
0.36
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted
|
|
$
|
0.35
|
|
|
$
|
0.17
|
(3)
|
|
$
|
0.35
|
|
|
$
|
0.36
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Includes debt extinguishment expense of $6.4 million
($3.9 million after tax), or $0.11 per diluted share. |
|
(2) |
|
Includes a $0.3 million income tax benefit due to the
recognition of certain state net operating loss carryforwards,
or $0.01 per diluted share. |
|
(3) |
|
Includes debt extinguishment expense of $11.2 million
($6.9 million after tax), or $0.19 per diluted share. |
On February 22, 2008 we entered into a definitive merger
agreement with Mobile Storage Group, Inc. of Glendale,
California. Mobile Storage Group will merge into Mobile Mini in
a transaction valued at approximately $701.5 million.
Pursuant to the merger, we will assume approximately
$535.0 million of Mobile Storage Groups outstanding
indebtedness and will acquire all outstanding shares of Mobile
Storage Group for $12.5 million in cash and shares of newly
issued Mobile Mini convertible preferred stock with a
liquidation preference of $154.0 million, which following
the tenth year after the issue date will be initially
convertible into approximately 8.55 million shares of our
common stock, and is redeemable at the holders option, ten
years after the date of issuance.
Closing of the transaction is subject to approval by our
stockholders, obtaining required governmental approvals, receipt
of a new $1.0 billion asset-based revolving credit facility
and customary closing conditions. No closing date has been set
at this time, pending receipt of the necessary approvals.
Mobile Mini has received a fully underwritten commitment from
Deutsche Bank AG, Bank of America and JP Morgan for a
$1.0 billion asset-based revolving line of credit facility
to fund the transaction, subject to customary conditions
including the execution of definitive documentation.
80
|
|
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.
Conclusion
Regarding the Effectiveness of Disclosure Controls and
Procedures
Under the supervision and with the participation of our
management, including our Chief Executive Officer and Chief
Financial Officer, we conducted an evaluation of the
effectiveness of the design and operation of our disclosure
controls and procedures, as such term is defined under
Rule 13a-15(e)
and
15d-15(e)
promulgated under the Securities Exchange Act of 1934, as
amended (the Exchange Act). Based on this evaluation, our Chief
Executive Officer and our Chief Financial Officer concluded that
our disclosure controls and procedures, subject to the
limitations as noted below, were effective during the period and
as of the end of the period covered by this annual report. Our
evaluation and assessment of our controls and procedures
includes our operations in Europe.
Because of inherent limitations, our disclosure controls and
procedures may not prevent or detect misstatements. A control
system, no matter how well conceived and operated, can provide
only reasonable, not absolute, assurance that the objectives of
the controls system are met. Because of the inherent limitations
in all controls systems, no evaluation of controls can provide
absolute assurance that all control issues and instances of
fraud, if any, have been detected.
Changes
in Internal Control Over Financial Reporting
There were no changes in our internal controls over financial
reporting that occurred during the year ended December 31,
2007, that have materially affected, or are reasonably likely to
materially affect, our internal control over financial reporting.
The Sarbanes-Oxley Act of 2002 (the Act) imposed many
requirements regarding corporate governance and financial
reporting. One requirement under section 404 of the Act is
for management to report on our internal control over financial
reporting and for our independent registered public accountants
to attest to this Report. Managements Report on Internal
Control Over Financial Reporting and our Independent Registered
Public Accounting Firms report with respect to
managements assessment of the effectiveness of internal
control over financial reporting are included in Item 8,
Financial Statements and Supplementary Data.
ITEM 9B. OTHER
INFORMATION.
None
PART III
ITEM 10. DIRECTORS,
EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE.
Information concerning our executive officers is set forth in
Item 1 of this
Form 10-K
under the caption Executive Officers of Mobile Mini,
Inc.
Information with respect to our directors and the nomination
process is incorporated herein by reference to information
included in the Proxy Statement for our 2008 Annual Meeting of
Stockholders.
Information regarding our audit committee and our audit
committee financial experts is incorporated herein by reference
to information included in the Proxy Statement for our 2008
Annual Meeting of Stockholders.
Information required by Item 405 of
Regulation S-K
is incorporated herein by reference to information included in
the Proxy Statement for our 2008 Annual Meeting of Stockholders.
81
We have adopted a Code of Business Conduct and Ethics that
applies to our employees generally, and a Supplemental Code of
Ethics for Chief Financial Officer and Senior Financial Officers
in compliance with applicable rules of the SEC that applies to
our principal executive officer, our principal financial
officer, and our principal accounting officer or controller, or
persons performing similar functions. A copy of these Codes is
available free of charge on the Investors section of
our web site at www.mobilemini.com. We intend to satisfy
any disclosure requirement under Item 5.05 of
Form 8-K
regarding an amendment to, or waiver from, a provision of the
Supplemental Code of Ethics by posting such information on our
web site at the address and location specified above.
|
|
ITEM 11.
|
EXECUTIVE
COMPENSATION.
|
Information with respect to executive compensation is
incorporated herein by reference to information included in the
Proxy Statement for our 2008 Annual Meeting of Stockholders.
|
|
ITEM 12.
|
SECURITY
OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
RELATED STOCKHOLDER MATTERS.
|
The information set forth in our 2008 Proxy Statement under the
headings Security Ownership of Certain Beneficial Owners
and Management and Equity Compensation Plan
Information is incorporated herein by reference.
|
|
ITEM 13.
|
CERTAIN
RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR
INDEPENDENCE.
|
The information set forth in our 2008 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 2008 Proxy Statement under the
caption Audit Committee Disclosure is incorporated
herein by reference.
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, 2005, 2006 and 2007 is filed with
our annual report on
Form 10-K
for fiscal year ended December 31, 2007:
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
|
|
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
|
.1.1
|
|
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).
|
82
|
|
|
|
|
Exhibit
|
|
|
Number
|
|
Description
|
|
|
3
|
.1.2
|
|
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
|
.2
|
|
Amended and Restated By-laws of Mobile Mini, Inc., as amended
and restated through May 2, 2007 (Filed herewith).
|
|
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
|
|
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) [Indenture
under which the Registrants 6.875% Senior Notes due
2015 are issued].
|
|
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
|
|
Second Amended and Restated Loan and Security Agreement, dated
as of February 17, 2006, among Mobile Mini, Inc., each of
the financial institutions a signatory thereto, together with
assigns, as Lenders, and Deutsche Bank AG, New York Branch, as
Agent (Incorporated by reference to Exhibit 10.3.1 of the
Registrants Report on
Form 10-K
for the fiscal year ended December 31, 2005).
|
|
10
|
.4.2
|
|
Amended and Restated Guaranty, dated February 17, 2006, by
each subsidiary of Mobile Mini, Inc. to Deutsche Bank AG, New
York Branch, as Agent (Incorporated by reference to
Exhibit 10.3.2 of the Registrants Report on
Form 10-K
for the fiscal year ended December 31, 2005).
|
|
10
|
.4.3
|
|
Amended and Restated Subsidiary Security Agreement, dated
February 17, 2006, by each subsidiary of Mobile Mini, Inc.
and Deutsche Bank AG, New York Branch, as Agent (Incorporated by
reference to Exhibit 10.3.3 of the Registrants Report
on
Form 10-K
for the fiscal year ended December 31, 2005).
|
|
10
|
.4.4
|
|
Amended and Restated Pledge Agreement, dated February 17,
2006 by Mobile Mini, Inc., each of its subsidiaries and Deutsche
Bank AG, New York Branch, as Agent (Incorporated by reference to
Exhibit 10.3.4 of the Registrants Report on
Form 10-K
for the fiscal year ended December 31, 2005).
|
|
10
|
.4.5
|
|
First Amendment to Second Amended and Restated Loan and Security
Agreement, dated as of May 7, 2007 by and among Mobile
Mini, Inc., Mobile Mini UK Limited, each of the financial
institutions a signatory thereto, together with assigns, as
Lenders and Deutsche Bank AG, New York branch, as Agent
(Incorporated by reference to Exhibit 10.1 of the
Registrants Report on
Form 10-Q
for the quarter ended June 30, 2007).
|
|
10
|
.5
|
|
Lease Agreement by and between Steven G. Bunger, Michael J.
Bunger, Carolyn A. Clawson, Jennifer J. Blackwell, Susan E.
Bunger and Mobile Mini Storage Systems dated January 1,
1994. (Incorporated by reference to the Registrants
Registration Statement on
Form SB-2
(No. 33-71528-LA),
as amended).
|
|
10
|
.6
|
|
Lease Agreement by and between Steven G. Bunger, Michael J.
Bunger, Carolyn A. Clawson, Jennifer J. Blackwell, Susan E.
Bunger and Mobile Mini Storage Systems dated January 1,
1994. (Incorporated by reference to the Registrants
Registration Statement on
Form SB-2
(No. 33-71528-LA),
as amended).
|
83
|
|
|
|
|
Exhibit
|
|
|
Number
|
|
Description
|
|
|
10
|
.7
|
|
Lease Agreement by and between Steven G. Bunger, Michael J.
Bunger, Carolyn A. Clawson, Jennifer J. Blackwell, Susan E.
Bunger and Mobile Mini Storage Systems dated January 1,
1994. (Incorporated by reference to the Registrants
Registration Statement on
Form SB-2
(No. 33-71528-LA),
as amended).
|
|
10
|
.8
|
|
Lease Agreement by and between Mobile Mini Systems, Inc. and
Mobile Mini Storage Systems dated January 1, 1994.
(Incorporated by reference to the Registrants Registration
Statement on
Form SB-2
(No. 33-71528-LA),
as amended).
|
|
10
|
.9
|
|
Amendment to Lease Agreement by and between Steven G. Bunger,
Michael J. Bunger, Carolyn A. Clawson, Jennifer J. Blackwell,
Susan E. Bunger and Mobile Mini Storage Systems dated
August 15, 1994. (Incorporated by reference to the
Registrants Report on
Form 10-QSB
for the quarter ended September 30, 1994).
|
|
10
|
.10
|
|
Amendment to Lease Agreement by and between Steven G. Bunger,
Michael J. Bunger, Carolyn A. Clawson, Jennifer J. Blackwell,
Susan E. Bunger and Mobile Mini Storage Systems dated
August 15, 1994. (Incorporated by reference to the
Registrants Report on
Form 10-QSB
for the quarter ended September 30, 1994).
|
|
10
|
.11
|
|
Amendment to Lease Agreement by and between Steven G. Bunger,
Michael J. Bunger, Carolyn A. Clawson, Jennifer J. Blackwell,
Susan E. Bunger and Mobile Mini Storage Systems dated
August 15, 1994. (Incorporated by reference to the
Registrants Report on
Form 10-QSB
for the quarter ended September 30, 1994).
|
|
10
|
.12
|
|
Amendment to Lease Agreement by and between Mobile Mini Systems,
Inc., a California corporation, and the Registrant dated
December 30, 1994. (Incorporated by reference to the
Registrants Report on
Form 10-KSB
for the fiscal year ended December 31, 1994).
|
|
10
|
.13
|
|
Lease Agreement by and between Richard E. and Barbara M. Bunger
and the Registrant dated November 1, 1995. (Incorporated by
reference to the Registrants Report on
Form 10-KSB
for the fiscal year ended December 31, 1995).
|
|
10
|
.14
|
|
Amendment to Lease Agreement by and between Richard E. and
Barbara M. Bunger and the Registrant dated November 1,
1995. (Incorporated by reference to the Registrants Report
on
Form 10-KSB
for the fiscal year ended December 31, 1995).
|
|
10
|
.15
|
|
Amendment No. 2 to Lease Agreement between Mobile Mini
Systems, Inc. and the Registrant. (Incorporated by reference to
Exhibit 10.18 of the Registrants Report on
Form 10-K
for the fiscal year ended December 31, 1997).
|
|
10
|
.16
|
|
Employment Agreement dated September 22, 1999 between
Mobile Mini, Inc. and Steven G. Bunger. (Incorporated by
reference to Exhibit 10.15 of the Registrants Report
on
Form 10-K
for the fiscal year ended December 31, 2003).
|
|
10
|
.17
|
|
Employment Agreement dated September 22, 1999 between
Mobile Mini, Inc. and Lawrence Trachtenberg. (Incorporated by
reference to Exhibit 10.16 of the Registrants Report
on
Form 10-K
for the fiscal year ended December 31, 2003).
|
|
10
|
.18
|
|
Second Amendment to Lease, made and entered into effective as of
December 31, 2003, by and between CAZ Enterprises, L.L.C.
(successor in interest to Steven G. Bunger, Michael J. Bunger,
Carolyn A. Clawson, Jennifer J. Blackwell and Susan E. Bunger),
as Landlord, and Mobile Mini, Inc., as successor in interest to
Mobile Mini Storage Systems, as Tenant [relates to premises
identified as 3848 South 36th Street, Phoenix, Arizona].
(Incorporated by reference to Exhibit 10.17 of the
Registrants Report on
Form 10-K
for the fiscal year ended December 31, 2003).
|
|
10
|
.19
|
|
Second Amendment to Lease, made and entered into effective as of
December 31, 2003, by and between CAZ Enterprises, L.L.C.
(successor in interest to Steven G. Bunger, Michael J. Bunger,
Carolyn A. Clawson, Jennifer J. Blackwell and Susan E. Bunger),
as Landlord, and Mobile Mini, Inc., as successor in interest to
Mobile Mini Storage Systems, as Tenant [relates to premises
identified as 3434 East Wood Street, Phoenix, Arizona].
(Incorporated by reference to Exhibit 10.18 of the
Registrants Report on
Form 10-K
for the fiscal year ended December 31, 2003).
|
84
|
|
|
|
|
Exhibit
|
|
|
Number
|
|
Description
|
|
|
10
|
.20
|
|
Second Amendment to Lease, made and entered into effective as of
December 31, 2003, by and between Three and Two
Enterprises, L.L.C. (successor in interest to Steven G. Bunger,
Michael J. Bunger, Carolyn A. Clawson, Jennifer J. Blackwell and
Susan E. Bunger), as Landlord, and Mobile Mini, Inc., as
successor in interest to Mobile Mini Storage Systems, as Tenant
[relates to premises identified as 1485 West Glenn, Tucson,
Arizona]. (Incorporated by reference to Exhibit 10.19 of
the Registrants Report on
Form 10-K
for the fiscal year ended December 31, 2003).
|
|
10
|
.21
|
|
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
|
.22
|
|
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).
|
|
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).
|
85
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 29, 2008
|
|
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 29, 2008
|
|
By:
|
|
/s/ Steven G. Bunger
Steven G. Bunger
President, Chief Executive Officer and Director (Principal
Executive Officer)
|
Date: February 29, 2008
|
|
By:
|
|
/s/ Lawrence Trachtenberg
Lawrence Trachtenberg
Executive Vice President, Chief Financial Officer and Director
(Principal Financial Officer)
|
Date: February 29, 2008
|
|
By:
|
|
/s/ Deborah K. Keeley
Deborah K. Keeley
Senior Vice President and Chief Accounting Officer (Principal
Accounting Officer)
|
Date: February 29, 2008
|
|
By:
|
|
/s/ Jeffrey S. Goble
Jeffrey S. Goble, Director
|
Date: February 29, 2008
|
|
By:
|
|
/s/ Ronald J. Marusiak
Ronald J. Marusiak, Director
|
Date: February 29, 2008
|
|
By:
|
|
/s/ Stephen A McConnell
Stephen A McConnell, Director
|
Date: February 29, 2008
|
|
By:
|
|
/s/ Michael L. Watts
Michael L. Watts, Director
|
86
SCHEDULE II
MOBILE
MINI, INC.
VALUATION
AND QUALIFYING ACCOUNTS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Years Ended December 31,
|
|
|
|
2005
|
|
|
2006
|
|
|
2007
|
|
|
|
(In thousands)
|
|
|
Allowance for doubtful accounts:
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at beginning of year
|
|
$
|
2,701
|
|
|
$
|
3,234
|
|
|
$
|
5,008
|
|
Provision charged to expense
|
|
|
3,036
|
|
|
|
4,538
|
|
|
|
1,869
|
|
Provision for Hurricane Katrina
|
|
|
50
|
|
|
|
|
|
|
|
|
|
Acquired through business acquisitions
|
|
|
|
|
|
|
462
|
|
|
|
|
|
Write-offs
|
|
|
(2,553
|
)
|
|
|
(3,226
|
)
|
|
|
(2,884
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at end of year
|
|
$
|
3,234
|
|
|
$
|
5,008
|
|
|
$
|
3,933
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
87
INDEX TO
EXHIBITS
|
|
|
|
|
Exhibit
|
|
|
Number
|
|
Description
|
|
|
3
|
.2
|
|
Amended and Restated By-laws of Mobile Mini, Inc., as amended
and restated through May 2, 2007 (Filed herewith).
|
|
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).
|
88