As filed with the Securities and Exchange Commission on July 2, 1997
Registration No. 333-_____
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM S-2
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
(POST EFFECTIVE AMENDMENT NO. 1 TO FORM SB-2 REGISTRATION STATEMENT)
MOBILE MINI, INC.
(Exact name of Registrant as specified in its charter)
Delaware 7519 86-0748362
- ------------------------ ---------------------------- ----------------
(State of Incorporation) (Primary Standard Industrial (I.R.S. Employer
Classification Code Number) Identification No.)
1834 West Third Street
Tempe, Arizona 85281
(602) 790-4214
(Address, including zip code, and telephone number, including
area code, of registrant's principal executive offices)
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Lawrence Trachtenberg
Executive Vice President
1834 West Third Street
Tempe, Arizona 85281
(602) 894-6311
(Name, address including zip code, and telephone number,
including area code, of agent for service)
---------------
with copies to
Joseph P. Richardson, Esq.
Bryan Cave LLP
2800 North Central Avenue, 21st Floor
Phoenix, Arizona 85004
Approximate date of commencement of proposed sale to the public: As
soon as practicable after this Registration Statement becomes effective.
If any of the securities being registered on this Form are to be
offered on a delayed or continuous basis pursuant to Rule 415 under the
Securities Act of 1933, check the following box. [ ]
If the registrant elects to deliver its latest annual report to
security holders, or a complete and legible facsimile thereof, pursuant to Item
11 (a)(1) of this form, check the following box. [ ]
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement of the same offering. [ ]______________________
If this form is a post-effective amendment filed pursuant to Rule
462(c) under the Securities Act, check the following box and list the Securities
Act registration statement number of the earlier effective registration
statement for the same offering. [ ]____________
If delivery of the prospectus is expected to be made pursuant to Rule
434, please check the following box. [ ]
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CALCULATION OF REGISTRATION FEE
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==========================================================================================================
Proposed Proposed
Maximum Maximum Amount of
Title of Each Class of Securities To Be Amount To Be Offering Price Aggregate Offering
Registered Registered Per Unit Price Registration Fee
==========================================================================================================
<S> <C> <C> <C> <C>
Common Stock, par value $.01 per 1,067,500(1) $5.00(2) $5,337,500 $1,841.00
share, issuable upon exercise of
Redeemable Common Stock Purchase
Warrants issued in connection with
the Company's 1994 initial public
offering (the "Public Warrants")
</TABLE>
This Registration Statement incorporates the Post-Effective Amendment No. 1 to
Mobile Mini, Inc., Registration Statement on Form SB-2, Registration No.
33-71528-LA, which Registration Statement was declared effective by the
Commission on February 17, 1994. The 1,067,500 shares of Common Stock issuable
upon exercise of Public Warrants were previously registered in connection with
the Company's 1994 initial public offering pursuant to Registration No.
33-71528-LA, and of the $1,841.00 filing fee identified above, $1,858.84 was
previously paid in connection with Registration No. 33-71528-LA. All shares of
Common Stock for which this Registration Statement is being filed, have been
previously registered and sufficient registration fees have been previously
paid, as identified above.
1. Pursuant to Rule 416, there are also being registered such
indeterminate number of additional shares of Common Stock as may be required for
issuance pursuant to the anti-dilution provisions of the Public Warrants.
2. Reflects the exercise price of a Public Warrant, payment of which
entitles the holder thereof to purchase one share of Common Stock.
---------------
The Registrant hereby amends this Registration Statement on such date
or dates as may be necessary to delay its effective date until the registrant
shall file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until this Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
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mobile mini, inc.
CROSS REFERENCE SHEET
Pursuant to Item 501(b) of Regulation S-K
<TABLE>
<CAPTION>
Form S-2 Item Number and Caption Location in Prospectus
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<S> <C> <C>
1. Forepart of the Registration Facing Page of Registration Statement; Outside Front
Statement and Outside Front Cover Page of Prospectus
Cover Page of Prospectus
2. Inside Front and Outside Back Inside Front Cover Page; Outside Back Cover Page
Cover Pages of Prospectus
3. Summary Information, Risk Prospectus Summary; Risk Factors
Factors and Ratio of Earnings to
Fixed Charges
4. Use of Proceeds Use of Proceeds
5. Determination of Offering Price Outside Front Cover Page of Prospectus; Risk Factors;
Plan of Distribution
6. Dilution *
7. Selling Security Holders Warrantholders
8. Plan of Distribution Outside Front Cover of Prospectus; Plan of Distribution
9. Description of Securities to be Description of Securities
Registered
10. Interests of Named Experts and *
Counsel
11. Information With Respect to the Risk Factors; Dividends; Selected Consolidated Financial
Registrant Information Data; Management's Discussion and Analysis
of Results of Operations and Financial Condition; The
Company Management; Description of Common Securities;
Index to Consolidated Financial Statements;
Consolidated Financial Statements
12. Incorporation of Certain Information Incorporation of Certain Documents by Reference
by Reference
13. Disclosure of Commission *
Position on Indemnification for
Securities Act Liabilities
</TABLE>
- ----------------------
* Not applicable.
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SUBJECT TO COMPLETION - DATED _____________, 1997
PROSPECTUS
1,067,500 SHARES
mobile mini, inc.
COMMON STOCK
--------------
This Prospectus relates to an offering (the "Offering") of 1,067,500
shares of common stock, par value $.01 per share (the "Common Stock"), of Mobile
Mini, Inc. (the "Company"), issuable upon exercise of redeemable Common Stock
Purchase Warrants (the "Public Warrants") issued in connection with the
Company's 1994 initial public offering (the "Initial Public Offering"). The
Public Warrants are sometimes collectively referred to herein as the "Warrants,"
and the shares of Common Stock issuable upon exercise of the Warrants are
sometimes collectively referred to herein as the "Warrant Shares." The Warrant
Shares issuable upon exercise of the Warrants may be offered for sale by certain
warrantholders of the Company (collectively, the "Warrantholders"), and are not
being offered for the account of the Company. The Company will not receive any
proceeds from the sale of the Warrant Shares by the Warrantholders, although it
will receive proceeds from the exercise of the Warrants, if and to the extent
exercised. The Company will pay all of the expenses, estimated to be
approximately $30,000, in connection with this offering, other than underwriting
and brokerage commissions, discounts, fees and counsel fees and expenses
incurred by the Warrantholders. See "USE OF PROCEEDS," "WARRANTHOLDERS" and
"PLAN OF DISTRIBUTION."
The Company's publicly traded Common Stock is currently quoted on the
Nasdaq National Market ("Nasdaq") under the symbol "MINI." On June 19, 1997, the
last sale price of the Common Stock as quoted on Nasdaq was $4.12 per share.
FOR A DISCUSSION OF CERTAIN MATERIAL FACTORS THAT SHOULD BE CONSIDERED IN
CONNECTION WITH AN INVESTMENT IN THE COMMON STOCK SEE "RISK FACTORS" (COMMENCING
ON PAGE 9 HEREOF).
Each Public Warrant entitles the holder thereof to purchase, at any
time through August 17, 1997, one share of Common Stock at a price of $5.00 per
share. The Company has the right to call the Public Warrants for redemption at
$.01 per Public Warrant on 30 days written notice if the average closing bid
price of the Common Stock, as reported on Nasdaq, equals or exceeds $7.00 per
share for 20 consecutive trading days ending within 20 days of the date of the
notice of redemption. In the event that the Company elects to exercise its right
to redeem the Public Warrants, such Public Warrants will be exercisable until
the close of business on the date for redemption fixed in such notice. If any
Public Warrant called for redemption is not exercised by such time, it will
cease to be exercisable and the holder will be entitled only to the redemption
price. The exercise price of the Warrants is subject to adjustment pursuant to
the anti-dilution provisions of the Warrants; however, as of the date hereof, no
such adjustment has been required to be made.
The Warrant Shares may be offered by the Warrantholders from time to
time in transactions on Nasdaq. The Warrant Shares may also be offered in
negotiated transactions, at fixed prices which may be changed, at market prices
prevailing at the time of sale, or at negotiated prices. The Warrantholders may
effect such transactions by selling the Warrant Shares in negotiated
transactions, on Nasdaq or through broker-dealers, and such broker-dealers may
receive compensation in the form of discounts, concessions or commissions from
the Warrantholders and/or the purchasers of the Warrant Shares for whom such
broker- dealers may act as agents or to whom they sell as principal, or both
(which compensation as to a particular broker-dealer might be in excess of
customary commissions). Alternatively, the Warrantholders may from time to time
offer the Warrant Shares through underwriters, dealers or agents, who may
receive compensation in the form of underwriting discounts, concessions
4
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or commissions from the Warrantholders and/or the purchasers of securities for
whom they act as agents. See "WARRANTHOLDERS" and "PLAN OF DISTRIBUTION."
NO PERSON IS AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATION NOT CONTAINED IN THIS PROSPECTUS IN CONNECTION WITH THE OFFERING
OF SECURITIES MADE HEREBY AND, IF GIVEN OR MADE, SUCH INFORMATION MUST NOT BE
RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY. THIS PROSPECTUS DOES NOT
CONSTITUTE AN OFFER TO EXCHANGE OR SELL, OR A SOLICITATION OF AN OFFER TO
EXCHANGE OR PURCHASE, ANY SECURITIES IN ANY JURISDICTION IN WHICH, OR TO ANY
PERSON TO WHOM, IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION. NEITHER THE
DELIVERY OF THIS PROSPECTUS NOR ANY DISTRIBUTION OF SECURITIES MADE HEREUNDER
SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS NOT BEEN
ANY CHANGE IN THE AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF OR THAT THE
INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO ITS DATE.
---------------
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in
accordance therewith files reports, proxy statements and other information with
the Securities and Exchange Commission (the "Commission"). Reports, proxy
statements and other information filed by the Company may be inspected and
copied at the public reference facilities maintained by the Commission at Room
1024, 450 Fifth Street, N.W., Washington, D.C. 20549, and at the Commission's
Regional Offices located at Citicorp Center, 500 West Madison Street, Suite
1400, Chicago, Illinois 60661 and 7 World Trade Center, 13th Floor, New York,
New York 10048. Copies of such materials can be obtained upon written request
from the Public Reference Section of the Commission at 450 Fifth Street, N.W.,
Washington, D.C. 20549, at prescribed rates.
The Company has filed with the Commission a registration statement on
Form S-2 (herein, together with all amendments and exhibits, referred to as the
"Registration Statement") under the Securities Act of 1933, as amended (the
"Securities Act"). This Prospectus does not contain all of the information set
forth in the Registration Statement, certain parts of which have been omitted in
accordance with the rules and regulations of the Commission. For further
information, reference is hereby made to the Registration Statement. Each
statement made in this Prospectus concerning a document filed as part of the
Registration Statement is qualified in its entirety by reference to such
document for a complete statement of its provisions. Copies of the Registration
Statement may be inspected, without charge, at the offices of the Commission, or
obtained at prescribed rates from the Public Reference Section of the
Commission, at the address set forth above, or on the World Wide Web through the
Commission's Internet address at "http://www.sec.gov."
---------------
This Prospectus contains certain forward-looking statements within the
meaning of the Private Securities Litigation Reform Act of 1995, with respect to
the financial condition, results of operations and business of the Company,
including statements under the caption "SUMMARY." Forward-looking statements
include, but are not limited to, statements regarding future events and the
Company's plans, beliefs and expectations. Forward-looking statements involve
certain risks and uncertainties. No assurance can be given that any such matters
will be realized. Factors that may cause actual results to differ materially
from those contemplated by such forward-looking statements include, among
others, the following possibilities: (i) competitive conditions in the
industries in which the Company operates; and (ii) general economic conditions
that are less favorable than expected. Further information on other factors
which could affect the financial results of the Company and such forward-looking
statements is included in the section herein entitled "Risk Factors."
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INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed with the Commission (File No. 1-12804)
pursuant to the Exchange Act are incorporated herein by reference:
1. The Company's Annual Report on Form 10-K for the fiscal year
ended December 31, 1996, and the Company's Amendment Numbers 1
and 2 thereto;
2. All other reports filed by the Company pursuant to Section
13(a) or 15(d) of the Exchange Act since December 31, 1996,
consisting of the Company's Quarterly Reports on Form 10-Q for
the fiscal quarter ended March 31, 1997; and
3. The description of the Common Stock contained in the Company's
Registration Statement on Form 8-A, dated February 9, 1994 as
amended by Amendment No. 1 dated February 16, 1994.
All other documents filed by the Company pursuant to Sections 13(a),
13(c), 14 or 15(d) of the Exchange Act subsequent to the date of this Prospectus
and prior to the termination of the Offering made hereby shall be deemed
incorporated by reference in this Prospectus and to be a part hereof from the
date of filing of such documents.
Any statement contained in a document incorporated or deemed to be
incorporated herein by reference, or contained in this Prospectus, shall be
deemed to be modified or superseded for purposes of this Prospectus to the
extent that a statement contained herein or in any other subsequently filed
document which also is or is deemed to be incorporated by reference herein
modifies or supersedes such statement. Any such statement so modified shall not
be deemed to constitute a part of this Prospectus except as so modified, and any
statement so superseded shall not be deemed to constitute a part of this
Prospectus.
The Company will provide, without charge, to each person, including any
beneficial owner of the Warrants or the Warrant Shares, to whom a copy of this
Prospectus is delivered, upon the written or oral request of any such person, a
copy of any or all of the documents which are incorporated herein by reference
(other than exhibits to the information that is incorporated by reference unless
such exhibits are specifically incorporated by reference into the information
that this Prospectus incorporates). Requests for such copies should be directed
to: Stockholder Relations Department, Mobile Mini, Inc., 1834 West Third Street,
Tempe, Arizona 85281, telephone: (602) 894-6311.
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SUMMARY
Unless otherwise indicated, all financial and share information set
forth in this Prospectus assumes no issuance of an aggregate of 770,750 shares
of Common Stock reserved for issuance pursuant to outstanding options and
warrants (other than the Warrants). All references to fiscal years refer to the
fiscal year of the Company ending December 31. Unless the context otherwise
requires, all references in this Prospectus to the "Company" refer to Mobile
Mini, Inc. and its subsidiaries.
The Company
Mobile Mini, Inc. (the "Company") designs and manufactures portable
steel storage containers, portable offices and telecommunication shelters and
acquires, refurbishes, and modifies ocean-going shipping containers for sales
and leasing as inland portable storage units. In addition, the Company designs
and manufactures a variety of delivery systems to complement the Company's
storage container sales and leasing activities.
The Company was incorporated in Delaware on December 31, 1993, with
substantially all of the assets and liabilities of Mobile Mini Storage Systems
("MMSS") and the stock of Delivery Design Systems, Inc. ("DDS"). The Company's
business had been conducted as a sole proprietorship from 1983 until the
Company's incorporation. Its principal executive office is located at 1834 West
Third Street, Tempe, Arizona 85281, and its telephone number is (602) 894-6311.
RISK FACTORS
For discussion of considerations relevant to an investment in the
Common Stock, see "RISK FACTORS."
The Offering
<TABLE>
<S> <C>
SECURITIES OFFERED 1,067,500 shares of Common Stock issuable upon exercise of
the Public Warrants. See "DESCRIPTION OF SECURITIES."
COMMON STOCK OUTSTANDING
PRIOR TO THE OFFERING 6,739,324 shares.
COMMON STOCK TO BE OUTSTANDING
AFTER THE OFFERING 7,806,824 shares (assuming exercise of all
outstanding Public Warrants and the issuance of all 1,067,500
shares issuable upon such exercise).
USE OF PROCEEDS In the event that all of the unexercised Warrants are
exercised, the maximum aggregate net proceeds which the
Company would receive from such exercise would be
approximately $5.3 million. To the extent received, such
proceeds will be utilized for working capital and general
corporate purposes, and for possible acquisitions (none of
which have been identified) at the discretion of the
Company's management, and initially would be used to reduce
borrowings outstanding under the Company's revolving credit
facility. If no Warrants are exercised, the Company will
not receive any additional proceeds in connection with this
Offering. In addition, the Company will not receive any
proceeds from the sale of the Warrant Shares. See "USE OF
PROCEEDS."
</TABLE>
7
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<TABLE>
<S> <C>
TRADING SYMBOL The Common Stock is traded on the Nasdaq National Market under
the symbol MINI.
</TABLE>
SUMMARY CONSOLIDATED FINANCIAL DATA
CONSOLIDATED STATEMENT OF INCOME DATA (in thousands, except per share amounts)
<TABLE>
<CAPTION>
Three Months Ended March 31, Year Ended December 31,
---------------------------- ---------------------------------------------------
(unaudited)
1997 1996 1996 1995 1994 1993(1) 1992(1)(2)
---- ---- ---- ---- ---- ------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Revenues $9,649 $8,909 $42,210 $39,905 $28,182 $17,122 $12,001
Income from operations 1,450 741 4,527 4,306 2,791 1,514 710
Income (loss) before
extraordinary item 202 (114) 481 777 956 276 116
Extraordinary item -- (410) (410) -- -- -- 185
Net income (loss) 202 (524) 70 777 956 276 301
Earnings per common and common equivalent share:
Income (loss) before
extraordinary item $0.03 $(0.02) $0.07 $0.16 $0.21 $0.10 $0.04
Extraordinary item -- (0.06) (0.06) -- -- -- 0.07
Net income (loss) 0.03 (0.08) 0.01 0.16 0.21 0.10 0.11
CONSOLIDATED BALANCE SHEET DATA (as of December 31 of each year)
Total assets $68,577 $55,414 $64,816 $54,342 $40,764 $20,082 $14,773
Long term lines of credit 30,073 16,612 26,406 4,009 -- -- --
Long term debt and
obligations under
capital leases,
including current 13,032 15,829 13,742 24,533 16,140 9,334 6,622
portion
</TABLE>
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(1) Prior to 1994, the Company's predecessor was operated as a sole
proprietorship. Per share information are therefore calculated on a pro
forma basis assuming that the only common stock outstanding was that
issued to Richard E. Bunger at the time the Company was capitalized and
all significant transactions for the transfer of assets to the Company
have been eliminated for the pro forma statements.
(2) Certain amounts have been restated to conform with subsequent years'
presentation.
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RISK FACTORS
Except for historical information contained herein, this Prospectus
contains forward-looking statements that involve risks and uncertainties. Such
forward-looking statements include, but are not limited to, statements regarding
future events and the Company's plans and expectations. The Company's actual
results may differ materially from such statements. Factors that cause or
contribute to such differences include, but are not limited to, those discussed
below as well as those discussed elsewhere in this Prospectus and in the
documents incorporated herein by reference.
In considering the matters set forth in this Prospectus, prospective
purchasers of the Common Stock should carefully consider the matters set forth
below as well as other information set forth in this Prospectus.
Uncertainty in Supply and Price of Used Containers
The Company purchases used ocean-going shipping containers which
comprise a majority of the storage containers which the Company leases. The
Company's ability to obtain used containers for its lease fleet is subject in
large part to the availability of these containers in the market. This is in
part subject to international trade issues and the demand for containers in the
ocean cargo shipping business. Should there be a shortage in supply of used
containers, the Company could supplement its lease fleet with new manufactured
containers. However, should there be an overabundance of these used containers
available, it is likely that prices would fall. This could result in a reduction
in the lease rates the Company could obtain from its container leasing
operations. It could also cause the appraised orderly liquidation value of the
containers in the lease fleet to decline. In such event, the Company's ability
to finance its business through the credit agreement with its lenders would be
severely limited, as the maximum borrowing limit under that facility is based
upon the appraised orderly liquidation value of the Company's container lease
fleet.
Uncertainty of Additional Financing to Sustain Growth
The Company believes that its current capitalization, together with
borrowings available under the credit agreement with its lenders, is sufficient
to maintain its current level of operations. However, the Company will not be
able to sustain recent-period growth trends without additional availability of
credit and equity to support continued increase in its container lease fleet. At
June 20, 1997, the Company had borrowings of approximately $32.8 million
outstanding under its $35 million credit facility. The Company has begun
discussions with its lenders about increasing borrowing availability under the
credit agreement, but presently has no commitment from the lenders regarding
such increase. While the Company believes that the net proceeds from the
exercise of the Warrants (assuming all the Warrants will be exercised) would
provide sufficient equity to permit continued growth at recent levels, there can
be no assurance that any Warrants will be exercised or that the lenders under
the Company's credit agreement will agree to provide additional borrowing
availability to the Company. The cost of used containers continue to increase,
the Company would be required to secure additional financing through debt or
equity offerings, additional borrowings or a combination of these sources (in
addition to any net proceeds received upon exercise of the Warrants). However,
there is no assurance that any such financings will be obtained or obtained on
terms acceptable to the Company.
Lease Utilization Levels
Historically, the Company has maintained lease fleet utilization levels
in the 85-to-92% range. During 1996, the Company's lease fleet utilization level
was 90%. Should the Company experience an unexpected decline in demand for its
lease units due to economic conditions, an increase in competition, an increase
in supply of used containers or any other reason, the Company would expect to
dispose of containers in order to maintain acceptable utilization levels. If
this were to occur at a time when the market price of used containers has
declined, it could result in losses on the sale of these containers. In
addition, the Company's operating results would be adversely affected because it
would continue to be subject to the high fixed costs of its branch operations
but it would have reduced lease revenues.
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Risk of Debt Covenant Defaults
The Company has a $35 million credit facility that expires in March
1999. The credit agreement is secured by substantially all of the assets of the
Company. The Company is required to comply with certain covenants and
restrictions, including covenants relating to the Company's financial condition
and results of operations. If the Company is unable or fails to comply with the
covenants and restrictions, the lender would have the right not to make loans
under the credit agreement and to require early payment of outstanding loans.
The lack of availability of loans or the requirement to make early repayment of
loans would have a material adverse effect on the Company's business, financial
condition, or results of operations. See "Management's Discussion and Analysis
Financial Condition and Results of Operations -- Liquidity and Capital
Resources."
Uncertainty of Future Financial Performance, Fluctuations in Operating Results
The Company's results of operations may vary from period to period due
to a variety of factors, including expenditures to acquire or start-up and
integrate into the Company's operations new businesses which the Company seeks
to acquire as part of its expansion strategy, the introduction of new products
by the Company or its competitors, availability of and cost increases of used
containers from which the Company builds its container fleet, changes in
marketing and sales expenditures, pricing pressures, market acceptance of the
Company's products, particularly in new market areas in which the Company may
expand, and general economic and industry conditions affect demand for the
Company's products and influence the Company's operating costs and margins.
Broad Discretion as to Use of Proceeds
The Company intends to use a portion of any net proceeds of this
Offering to expand the Company's business, either through development of new
facilities, the purchase or manufacture of additional containers, or by
acquisition of other mobile warehouse or container businesses. However, as of
the date of this Prospectus the Company does not have any binding commitments
relating to any acquisitions. As a result, a portion of the net proceeds of this
Offering will be available for acquisitions and projects that are not yet
identified, and the Board of Directors will have broad discretion with respect
to the application of such net proceeds. See "USE OF PROCEEDS."
Competition
The Company believes that its products, services, pricing and
manufacturing capabilities allow it to compete favorably in each of the on-site
leasing, off-site leasing and sales segments of the Company's markets in the
areas it currently operates. However, the Company's ability to continue to
compete favorably in each of its markets is dependent upon many factors,
including the market for used ocean-going shipping containers and the costs of
steel. During 1996, the price of used steel cargo containers increased by
approximately 20%, although prices have declined somewhat during the first half
of 1997.
The Company believes that competition in each of its markets may
increase significantly in the future. It is probable that such competitors will
have greater marketing and financial resources than the Company. As competition
increases, significant pricing pressure and reduced profit margins may result.
Prolonged price competition, along with outer forms of competition, could have a
material adverse affect on the Company's business and results of operations.
Reliance on Key Employees
The Company is substantially dependent on the personal efforts and
abilities of Richard E. Bunger, (the Company's founder and its Chairman), Steven
G. Bunger, the Company's President and Chief Executive Officer, and Lawrence
Trachtenberg, the Company's Executive Vice President and Chief Financial
Officer. The loss or unavailability of either of these officers or certain other
key employees for any significant period of time could have a material adverse
effect on the Company's business prospects or earning capacity. The Company
maintains $2 million of "key person" life insurance on Richard E. Bunger.
10
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Continued Control by Management.
The Company's executive officers and directors presently own an
aggregate of approximately 2,462,900 shares, or 36.5% of the outstanding Common
Stock. In the event that all of the Warrants are exercised and 1,067,500 Warrant
Shares are issued, the Company's executive officers and directors (who own an
aggregate of 25,000 Warrants) will own an aggregate of 2,487,900 shares, or
31.9%, of the Common Stock outstanding after such exercises. Richard E. Bunger,
the Company's Chairman, beneficially owns approximately 34.0% of the Common
Stock outstanding and, assuming that all the Warrants are exercised, will own
approximately 29.3% following such exercise. Consequently, the executive
officers and directors of the Company collectively, and Mr. Bunger individually,
will continue to have substantial influence in the election of all members of
the Board of Directors and therefor on the direction of the Company's business
and affairs.
Potential Volatility of Stock Price
The market price of the Common Stock has been and may continue to be
highly volatile, and could in the future be subject to wide fluctuations in
response to quarter to quarter variations in operating results, changes in
earnings estimates by analysts, market conditions in the industry and general
economic conditions. In addition, the stock market has from time to time
experienced significant price and volume fluctuations that have been unrelated
to the in the Common Stock must be willing to bear the risk of such fluctuations
in earnings and stock price.
Anti-Takeover Considerations
The Company's Board of Directors intend to propose that the Company's
shareholders adopt at the Company's 1997 annual meeting a group of proposals,
including amendments to the Company's Certificate of Incorporation which
amendments if adopted could, together or separately, discourage potential
acquisition proposals, delay or prevent a change in control of the Company, and
limit the price that certain investors might be willing to pay in the future for
the Company's Common Stock. These proposals will likely include: a classified
board of directors; and a provision barring shareholder action by written
consent. The Company is also subject to Section 203 of the Delaware General
Corporation Law, which may also inhibit a change in control of the Company. In
addition, the provisions of certain executive employment agreements and stock
option agreements may result in economic benefits to the holders thereof upon
the occurrence of a change in control.
No Payment of Dividends
The Company has not previously paid any dividends on its Common Stock
and for the foreseeable future intends to continue its policy of retaining any
earnings to finance the development and expansion of its business. In addition,
the credit agreement between the Company and its lenders prohibits the payment
of dividends.
USE OF PROCEEDS
In the event that all of the Warrants are exercised, the Company will
receive maximum gross proceeds of $5,337,500 from the exercise of the Public
Warrants. Accordingly, the maximum net proceeds which the Company would receive
from such exercise, after deduction of expenses of approximately $30,000
incurred in connection with this Offering, would be approximately $5,307,500.
Although the Company currently intends to utilize the net proceeds of the
Offering to repay a portion of the Company's revolving line of credit for
working capital and general corporate purposes, such net proceeds may be
expended for other corporate purposes, including additional acquisitions, at the
discretion of the Company's management. Borrowing under the Company's revolving
line of credit amounted to approximately $32.8 million at June 20, 1997 and
interest accrues on such borrowings at the Company's option at either prime plus
1.5% (10.0% per annum at June 20, 1997) or the Eurodollar rate (as defined) plus
3% per annum.
11
<PAGE>
On June 19, 1997, the last sale price quoted on Nasdaq for a share of
Common Stock was $4.12 per share. Although it is possible that the Warrants,
exercisable at $5.00 per share, may be exercised if the market price of the
Common Stock exceeds such exercise price prior to the August 17, 1997 expiration
date of the Warrants, it is impossible to predict how many of the Warrants will
be exercised and the amount of the proceeds, if any, realizable therefrom. If
the market price of the Common Stock remains below the exercise price of the
Warrants, the Company believes that few, if any, of the Warrants will be
exercised before the Warrant expiration date.
If none of the outstanding Warrants are exercised, the Company will not
receive any additional proceeds in connection with this Offering.
PRICE RANGE OF COMMON STOCK
The Common Stock trades on the National Market tier of the NASDAQ
Market under the symbol "MINI." Prior to December 26, 1995, the Common Stock was
traded on the SmallCap Market. The following table sets forth, for the indicated
periods, the high and low sale prices for the Common Stock as reported by the
NASDAQ Market. The quotations set forth below reflect inter-dealer prices,
without retail mark-up, mark-down or commission, and may not represent actual
transactions. The Company has approximately 79 holders of record of its Common
Stock. The Company believes it has in excess of 400 beneficial owners of its
Common Stock.
<TABLE>
<CAPTION>
1997 1996 1995
---- ---- ----
HIGH LOW HIGH LOW HIGH LOW
<S> <C> <C> <C> <C> <C> <C>
First Quarter $3 5/8 $3 $4 3/8 $2 7/8 $4 1/2 $3 1/2
Second Quarter $4 1/4(1) $3(1) $4 7/16 $3 3/8 $5 $3 5/8
Third Quarter -- -- $4 3/8 $2 13/16 $6 1/8 $4 3/4
Fourth Quarter ended -- -- $4 1/4 $3 $5 7/8 $3 5/8
</TABLE>
- ----------------------
(1) Through June 19, 1997.
Holders of the Common Stock are entitled to receive such dividends as
may be declared by the Board of Directors of the Company. To date, the Company
has neither declared nor paid any cash dividends on its Common Stock, nor does
the Company anticipate that cash dividends will be paid in the foreseeable
future. Additionally, the Company is subject to covenants pursuant to a credit
agreement with its lenders which prohibit the payment of dividends.
DIVIDEND POLICY
Cash dividends have not been paid on the Common Stock. The Company
presently intends to retain earnings to finance the development and growth of
its business. Accordingly, the Company does not anticipate that any dividends
will be declared on the Common Stock for the foreseeable future. Future payment
of cash dividends, if any, will depend upon the Company's financial condition,
results of operations, business conditions, capital requirements, future
prospects and other factors deemed relevant by the Company's Board of Directors.
The Company's credit agreement with its lenders prohibits the payment of
dividends on any class of the Company's capital stock.
12
<PAGE>
CAPITALIZATION
The following table sets forth the consolidated capitalization of the
Company at March 31, 1997, and as adjusted to give effect to the issuance of the
1,067,500 Warrant Shares subject to the Warrants (at the Warrant exercise price
of $5.00 per share and after deducting estimated offering expenses), and as
otherwise described under "Use of Proceeds."
<TABLE>
<CAPTION>
March 31,1997
--------------------------------
Actual As adjusted
------ -----------
<S> <C> <C>
Revolving credit agreements(1) $30,072,512 $24,765,012
Stockholders' equity:
Common Stock, $.01 par value:
17,000,000 shares authorized; 6,739,324 shares issued and
outstanding; 7,806,824 shares issued and outstanding, as adjusted 67,393 78,068
Additional paid-in capital 14,338,873 19,635,698
Retained earnings 2,004,597 2,004,597
----------- -----------
Total stockholders' equity 16,410,863 21,718,363
----------- -----------
Total capitalization $46,483,375 $46,483,375
=========== ===========
</TABLE>
- ----------------------
(1) See Note 3 of Notes to Consolidated Financial Statements.
Special Note On Forward-Looking Statements
Except for historical information contained herein, this Prospectus
contains forward-looking statements within the meaning of Section 27A of the
Securities Act and Section 21E of the Exchange Act and the Company intends that
such forward-looking statements be subject to the safe harbors created thereby.
Such forward-looking statements involve risks and uncertainties and include, but
are not limited to, statements regarding future events and the Company's plans
and expectations. The Company's actual results may differ materially from such
statements. Factors that cause or contribute to such differences include, but
are not limited to, those discussed above in "Risk Factors", as well as those
discussed elsewhere in this Prospectus and the documents incorporated herein by
reference. Although the Company believes that the assumptions underlying its
forward-looking statements are reasonable, any of the assumptions could prove
inaccurate and, therefore, there can be no assurance that the results
contemplated in such forward-looking statements will be realized. In addition,
as disclosed above under "Risk Factors", the business and operations of the
Company are subject to substantial risks which increase the uncertainties
inherent in the forward-looking statements included in this Prospectus. The
inclusion of such forward-looking information should not be regarded as a
representation by the Company or any other person that the future events, plans
or expectations contemplated by the Company will be achieved.
THE COMPANY
General
Mobile Mini, Inc. (the "Company") is a Delaware corporation capitalized
effective December 31, 1993. From 1983 through 1993, the business operations of
the Company were conducted as a sole proprietorship by Richard E. Bunger under
the trade name "mobile mini storage systems" ("MMSS"). The business operations
transferred to the Company were comprised of MMSS and a related corporation,
Delivery Design Systems, Inc. ("DDS"). The Company's subsidiaries include DDS
which formerly engaged in the business of designing, developing and
manufacturing truck trailers and other delivery systems for the Company's
portable storage
13
<PAGE>
containers and Mobile Mini I, Inc. which engages in the business of acquiring
and maintaining certain of the Company's facilities. The business and assets of
DDS were transferred to the Company in 1996.
The Company's operations commenced in Phoenix, Arizona, in 1983 when
Mr. Bunger, then a designer and builder of integrated animal production (feed
lot) and traditional mini-storage facilities, recognized the potential of using
ocean-going shipping containers for inland portable storage. Mr. Bunger's
experience in the mini-storage industry indicated that the containers could be
profitably leased as storage units to a wide range of business, individual and
governmental users. By 1986 the portable storage concept had been proven and the
business was expanded through an additional sales and leasing branch established
in Tucson, Arizona. In 1988, the Company commenced operations in Rialto,
California to service the greater Los Angeles area. In early 1990, the Company
relocated its manufacturing facility from its original site in Phoenix to a
heavy-industry zoned industrial park located near Maricopa, Arizona and
administrative offices were established in Tempe, Arizona. In 1994, the Company
opened a "satellite" branch in San Diego, California which is serviced from its
Rialto "hub." Also in 1994, the Company opened operations in Texas by the
establishment of hub locations in Houston and Dallas/Fort Worth. In early 1995,
the Company opened satellite locations in the San Antonio and Austin
metropolitan areas.
Products
The Company designs and manufactures portable steel storage containers,
portable offices and telecommunication shelters and acquires, refurbishes, and
modifies ocean-going shipping containers for sales and leasing as inland
portable storage units. In addition, the Company designs and manufactures a
variety of delivery systems to complement the Company's storage container sales
and leasing activities.
The principal products of the Company are portable steel storage
containers, portable offices, telecommunications shelters and certain other
products used in conjunction with the portable storage containers. The Company
also produces certain steel products built to special order specifications. The
Company has patented, proprietary or trade secret rights in all products it has
designed and manufactured. The locking system for the Company's containers is
patented and provides virtually impenetrable security to the storage container.
The Company's main product in its storage market segment is the
portable steel storage container. The Company acquires used ocean-going cargo
containers which it reconditions and retrofits with its patented locking system.
To compensate for supply and price fluctuations associated with acquiring used
ocean-going containers, the Company also manufactures various lines of new
containers, featuring the Company's proprietary "W" or "stud wall" panels.
Storage container units may be significantly modified and turned into portable
offices, portable storage facilities, open-sided storage and retail facilities,
as well as a large variety of other applications.
The Company sells and leases its storage containers to a wide variety
of individual, business and governmental users. The Company's lease activities
include both on-site and off-site leasing. "Off-site" leasing occurs when the
Company leases a portable storage container which is then located at the
customer's place of use. "On-site" leasing occurs when the Company stores the
portable container containing the customer's goods at one of the Company's
facilities, which are similar to a standard mini-storage facility, but with
increased security, ease of access and container delivery and pick-up service.
In mid-1995, Mobile Mini established a telecommunication shelter
division to complement its storage container business, diversify its product
line and target the domestic and international markets. The Company's modular
telecommunication shelters, marketed under the name "Mobile Telestructures", can
be built in a vast variety of designs, sizes, strengths, exterior appearances
and configurations. The Company has developed proprietary technology that makes
these units very portable, lightweight, highly secure and virtually weather
resistant. The Company intends to devote additional resources toward marketing
this product in 1997.
The Company has developed technology to add a stucco finish to the
exterior of its all steel buildings, making them more aesthetically appealing
while retaining the strength and durability afforded by steel. This attribute is
especially important to the Mobile Telestructures operations, where
telecommunication companies are under pressure to use shelters and towers that
blend in with the locale at which they are located. In addition, in
14
<PAGE>
1996, the Company introduced its ArmorKoat line of telecommunication shelters
which feature a specially formulated concrete exterior coat to its steel
shelters. This formulation increases the strength of the building and can meet
the needs of customers that require concrete buildings.
The Company also designs, develops and manufactures a complete
proprietary line of truck trailers and other delivery systems utilized in
connection with its storage container sales and leasing activities. The Company
provides delivery and pick-up services for customers at their places of
business, homes or other locations.
Business Restructuring
The Company previously was involved in the manufacture, sale and
leasing of modular steel buildings in the state of Arizona. These buildings were
used primarily as portable schools, but could be used for a variety of purposes.
Although the Company believes its modular buildings were superior to the
wood-framed buildings offered by its competitors, the Company was not able to
generate acceptable margins on this product line. During 1996, the Company
implemented a strategic restructuring program designed to concentrate management
effort and resources and better position itself to achieve its strategic growth
objectives. As a result of this program, the Company's 1996 results include
charges of $700,000 ($400,000 after tax, or $.06 per share) for costs associated
with restructuring the Company's manufacturing operations and for other related
charges. These charges were recorded in the fourth quarter of 1996, and were
comprised of the write-down of assets used in the Company's discontinued modular
building operations and related severance obligations ($300,000), and the
write-down of other fixed assets ($400,000). The Company has utilized the
management resources and production capacity previously utilized by its modular
building operations division to expand the Company's telecommunications shelter
business and its container leasing operations.
Marketing
The Company markets its storage containers both directly to the
consumer and through its national dealer network. The Company has sales and
leasing branches in Phoenix and Tucson, Arizona, San Diego and Rialto,
California and Houston, Dallas, San Antonio and Austin, Texas. The Company
services the greater Los Angeles, California area from its Rialto hub and its
Texas operations from its Houston and Dallas/Fort Worth hubs.
The Company sells and leases its storage containers directly to
consumers from each of its branches. With respect to leases, the Company engages
in both off-site and on-site leasing. Marketing for individual consumer sales
and rentals is primarily through Yellow Page ads, direct mailings and customer
referrals.
The Company markets its Mobile Telestructure products directly to
telecommunication companies as well as to companies providing turn-key
installations of shelters and towers.
Sales are also made through the Company's national dealer network which
currently provides the Company's manufactured containers to 54 dealers for
retail sale. Such dealers are in 78 separate locations in 30 states and 1
Canadian province. Marketing to dealers and potential dealers is primarily
through direct solicitation, trade shows, trade magazine advertising and
referrals. The dealers receive refabricated containers which they assemble and
paint. The Company provides training in assembly and marketing to its dealers.
None of the dealers are employed by the Company, nor does any dealer have a long
term requirements contract for the supply of refabricated containers or any
contract for training in assembly and marketing with the Company. The Company
does, however, benefit from the use of its name by several dealers on the
containers once they are constructed.
Leasing Operations
Since its founding, it has been the Company's primary goal to grow the
container leasing segment of its business. This business, which involves the
short-term leasing of a product with a long useful life and relatively low
depreciation, offers higher margins than the Company's other products and
services.
15
<PAGE>
The Company has sought to grow this business by opening branch
facilities in several cities in the Southwestern United States. When the Company
opens a facility, it devotes substantial resources, including a sizable
advertising budget, to the location. The new locations therefore generate losses
in early years, but once the Company has added sufficient containers to cover
the high fixed costs, its operations may become profitable at the new location.
Historically, profitability is not expected until approximately one to three
years after the new location is opened. The actual time to profitability depends
upon numerous factors, including differences in container costs compared to
historic cost levels, the level of competition in the new market, the
development of additional storage containers in the market by competitors and
other factors which are generally beyond the Company's control.
The Company plans to continue adding leased containers to existing
locations in order to increase its profitability. During 1996, the Company
obtained a credit line enabling it to substantially expand its container leasing
operations. See, "Management's Discussion and Analysis of Financial Condition
and Results of Operations - Liquidity and Capital Resources". The Company
increased containers on lease at same branch locations at March 31, 1997 by 19%
from March 31, 1996.
The Company's plan is to continue increasing its lease fleet at
existing locations in 1997, at a rate in line with historical increases.
Management believes that such an increase should substantially improve
profitability in 1997, particularly if the cost of used ocean-going containers
remains constant at year-end 1996 levels.
The Company also intends to expand its operations into additional
cities on a controlled basis. Such expansion could be through new start-up
operations by the Company or through acquisitions of existing operations.
Expansion through start-up operations would have the effect of reducing net
income during the early years of operations while the Company increased its
lease fleet at these locations. The Company has identified several potential new
markets, and is investigating start-up and acquisition possibilities in those
markets. As of the date of this Report, the Company is not a party to any
binding agreement respecting new sites or acquisition transactions.
Financing
The Company in recent periods has required increasing amounts of
financing to support the growth of its business. This financing was required
primarily to fund the acquisition of containers for the Company's lease fleet
and to fund the acquisition of property, plant and equipment to support both the
Company's container leasing and manufacturing operations.
The Company finances its operations and growth primarily through a
credit agreement (the "Credit Agreement") with BT Commercial Corporation, as
Agent for a group of lenders (the "Lenders"). The Company entered into the
Credit Agreement in March 1996, as amended in March 1997, in order to improve
its cash flow, increase its borrowing availability and fund its continued
growth. Under the terms of the Credit Agreement, the Lenders provide the Company
with a $35.0 million revolving line of credit and a $6.0 million term loan.
Borrowings under the Credit Agreement are secured by substantially all of the
Company's assets.
The term loan is to be repaid over a five-year period. Interest accrues
on the term loan at the Company's option at either prime plus 1.75% or the
Eurodollar rate plus 3.25%. Borrowings under the term loan are payable monthly
as follows (plus interest):
Months 1 through 12 $ 62,500
Months 13 through 24 $ 83,333
Months 25 through 60 $118,056
Additional principal payments equal to 75% of Excess Cash Flow, as
defined in the term loan documents which constitute part of the Credit
Agreement, are required annually. As of March 31, 1997, no additional payment
was required under this provision.
Available borrowings under the revolving line of credit are based upon
the level of the Company's inventories, receivables and container lease fleet.
The container lease fleet is appraised at least annually, and up to
16
<PAGE>
90% of the lesser of cost or appraised orderly liquidation value may be included
in the borrowing base. Interest accrues at the Company's option at either prime
plus 1.5% or the Eurodollar rate plus 3% and is payable monthly or at the end of
the term of any Eurodollar borrowing. The term of this line of credit is three
years, with a one-year extension option.
In connection with the closing of the Credit Agreement, the Company
terminated its line of credit with its previous lender, repaying all
indebtedness under that line. In addition, the Company repaid other long-term
debt and obligations under capital leases totaling $14.1 million. As a result,
costs previously deferred related to certain indebtedness and prepayment
penalties resulted in fiscal 1996 in an extraordinary charge to earnings of
approximately $410,000 after benefit for income taxes.
The Credit Agreement contains several financial covenants and minimum
required utilization rates in its lease fleet, limits on capital expenditures,
acquisitions, changes in control, the incurrence of additional debt and the
repurchase of common stock, and prohibits the payment of dividends.
The Company has also financed its operations through the issuance and
sale of its equity securities. In February 1994, the Company completed its
initial public offering. Net proceeds to the Company totaled approximately $7.0
million. In December 1995, the Company received net proceeds of $4.1 million,
through a private placement of 50,000 shares of Series A Convertible Preferred
Stock, $.01 par value, $100 stated value ("Series A"). Pursuant to the terms of
the Series A, all 50,000 shares of Series A were converted into 1,904,324 shares
of the Company's common stock at an average conversion rate of $2.63 per share
during the first quarter of 1996. These equity issuances provided the capital
necessary to obtain the financing available under the Credit Agreement.
Prior to 1996, the Company's growth was financed in part through
financing of containers pursuant to capital leases or secured borrowings. These
financings generally required repayment in full over a five year period and
provided for interest at a fixed rate. Since the Company's containers have a
useful life far in excess of five years, these financings required the Company
to pay in full the debt related to a capital expenditure well in advance of the
related asset's useful life. The repayment terms of these financings adversely
affected cash flow prior to the refinancing pursuant to the Credit Agreement.
The Company believes that its current capitalization, together with
borrowings available under the Credit Agreement, is sufficient to maintain its
current level of operations. However, should demand for the Company's products
exceed current expectation or should the cost of used containers continue to
increase, the Company would be required to secure additional financing through
debt or equity offerings, additional borrowings or a combination of these
sources. However, there is no assurance that any such financings can be obtained
or obtained on terms acceptable to the Company.
Patents, Trade Names and Trade Secrets
The Company has eight patents issued by and four patents pending with
the U.S. Patent and Trademark Office related to the design and application of
its products. The Company intends to process other patent applications for
additional products developed currently or in the future, to the extent the
Company deems such applications appropriate. "mobile mini" and "mobile mini
storage systems" are registered trade names and service marks in the United
States and Canada. The Company has applied to have "mobile telestructures"
registered as a trade name and service mark.
The patents as well as the various state trade secrets acts afford
proprietary protection to the Company's products, including the unique locking
system and design of its manufactured products. The Company has in place several
access control and proprietary procedure policies implemented to meet the
requirements of protecting its trade secrets under applicable law. The Company
follows a policy of aggressively pursuing claims of patent, trade name, service
mark and trade secret infringement. The Company does not believe that its
products and trademarks or other confidential and proprietary rights infringe
upon the proprietary rights of third parties. There can be no assurance,
however, that third parties will not assert infringement claims against the
Company in the future. The
17
<PAGE>
successful assertion of rights and the defense of infringement claims could have
a material adverse affect on the Company's business, results of operations and
financial condition. There can be no assurance that the Company will have
sufficient resources to sustain expensive or protracted legal actions to protect
its proprietary rights or, alternatively, to defend claims of infringement.
Customers
The market for the Company's products can generally be divided into
four distinct areas -- retail, residential, commercial and
institutional/governmental. Revenues are derived from either rentals or sales
directly to customers or through sales to the Company's dealers.
The Company's customer profile is diverse and does not rely on one
industry. Instead, the Company targets several different markets within various
geographic areas. As of December 31, 1996 the Company's customers fall into the
following categories and approximate percentages: (i) with respect to leasing:
retail and wholesale businesses, 52%; homeowners, 17%; construction, 22%;
institutions, 4%; government, industrial and other, 5%; (ii) with respect to
sales: retail and wholesale businesses, 54%; homeowners, 5%; construction, 12%;
institutions, 14%; government, industrial and other, 15%.
Customers utilize the Company's storage units in a variety of ways. For
example, retail companies use the Company's storage units for extra warehousing;
real estate development companies utilize the Company's products to securely
store equipment, tools and materials; and governmental agencies such as the U.S.
Armed Forces and the U.S. Drug Enforcement Agency lease and buy the Company's
high-security, portable storage units to store equipment and confiscated goods.
Competition
Because the Company competes in several market segments, no one entity
is known to be in direct competition with the Company in all its market
segments. With respect to its on-site leasing activities, the Company competes
directly with conventional mini-storage warehouse facilities in the localities
in which it operates. Some of the Company's on-site leasing competitors include
U-Haul, Public Storage and Shurgard Storage Centers. With respect to off-site
leasing and sales, the Company has several competitors, which include Haulaway,
Mobile Storage, National Security Containers, and a large number of smaller
competitors. The Company believes that its products, services, pricing and
manufacturing capabilities allow it to compete favorably in each of the on-site
leasing, off-site leasing and sales segments of the Company's markets in the
areas it currently operates.
The Company's Mobile Telestructures division competes against several
competitors that supply shelters, the largest of which the Company believes to
be Fibrebond Corporation, the Rohn division of UNR Industries and the Andrew
Corporation.
Management believes that the Company has a number of competitive
advantages both in terms of products and operations. Among its product's
patented features is the locking system which serves to meet the customer's
primary concern, security. Based on reports from customers who have suffered
burglary attempts, the Company's locking system is extremely difficult to
defeat. The Company's delivery trailers have largely been designed and built by
the Company and certain key features have patent potential which the Company may
pursue. These proprietary delivery systems, which are specifically designed to
transport, load and unload containers, allow the Company to deliver containers
economically in otherwise inaccessible locations.
Operationally, the Company manufactures containers from raw steel as an
alternative to using ocean-going containers. In the event ocean-going containers
are in short supply or become uneconomical to retrofit to the needs of the
Company, the Company can manufacture its own container product. The Company will
continue to manufacture new storage units for inclusion primarily in its sales
inventory and also in its lease fleet.
The Company's ability to continue to compete favorably in each of its
markets is dependent upon many factors, including the market for used
ocean-going containers and the costs of steel. During 1996, the price of used
18
<PAGE>
steel cargo containers increased by approximately 20%. Management believes that
the Company's container manufacturing capabilities makes the Company less
susceptible than its competitors to ocean-going container price fluctuations,
particularly since the cost of used containers is affected by many factors, only
one of which is the cost of steel from which the Company can manufacture new
containers.
The Company believes that competition in each of its markets may
increase significantly in the future. It is probable that such competitors will
have greater marketing and financial resources than the Company. As competition
increases, significant pricing pressure and reduced profit margins may result.
Prolonged price competition, along with other forms of competition, could have a
material adverse affect on the Company's business and results of operations.
Additionally, as the Company continues to expand its operations in different
regions, start-up costs incurred reduce the Company's overall profit margins.
Employees
As of June 1, 1997, the Company had approximately 800 full time
employees at all of its locations. The Company believes that its continued
success depends on its ability to attract and retain highly qualified personnel.
The Company's employees are not represented by a labor union and the Company has
no knowledge of any current organization activities. The Company has never
suffered a work stoppage and considers its relations with employees to be good.
Properties
The Company has four manufacturing centers located in Maricopa,
Arizona, Rialto, California, and Houston and Dallas/Fort Worth, Texas. Sales and
leasing are conducted from Phoenix, Rialto, Houston and Dallas/Fort Worth in
addition to four other locations. The Company's administrative and sales offices
are located in Tempe, Arizona.
The Company's primary manufacturing center is located in a
heavy-industry zoned industrial park near Maricopa, Arizona, approximately 30
miles south of Phoenix. The facility is seven years old and is located on an
approximate 45 acre industrial site. Twenty-three acres of this site were
purchased from Richard E. Bunger in 1996. See, "Certain Relationships and
Related Transactions." The facility includes nine manufacturing buildings,
totaling approximately 130,000 square feet, which house manufacturing, assembly,
construction, painting and vehicle maintenance operations.
The Phoenix, Arizona sales and leasing branch services the Phoenix
metropolitan area from its approximately 10.7 acre facility, of which
approximately 5 acres were leased in the first quarter of 1997. All Phoenix
marketing and any on-site storage is conducted from this site. Approximately 3.4
acres are owned by the Company, approximately 5.8 acres are leased from
non-affiliated parties and the remaining 1.5 acres are owned by members of the
Bunger family and are under lease at what management believes to be competitive
market rates. See, "Certain Relationships and Related Transactions."
The Rialto, California sales and leasing hub is approximately 10 acres
in size, with three industrial shops used for modification of ocean-going
containers, assembly of the Company's manufactured containers and on-site
leases. The Rialto facility serves as the Company's southern California hub and
supports the San Diego branch. The Rialto site is owned by Mobile Mini Systems,
Inc., a separate corporation owned by Richard E. Bunger, and is leased to the
Company at what management believes to be competitive market rates. See,
"Certain Relationships and Related Transactions."
The Texas operations are supported by hub facilities in Houston and
Dallas/Fort Worth. Both facilities contain manufacturing centers, sales and
leasing operations and on-site storage facilities. The Houston facility is
located on seven acres with six buildings totaling approximately 34,400 square
feet. The Dallas/Fort Worth facility, which is owned by the Company, is located
on 17 acres with six buildings totaling approximately 36,600 square feet.
19
<PAGE>
The Company's administrative and sales offices are located in Tempe,
Arizona. The facilities are leased by the Company from an unaffiliated third
party and have approximately 28,800 square feet of space which the Company
anticipates will meet its needs for the near-term. The Company's lease term is
through December 2000.
In addition to its administrative offices and manufacturing facilities,
the Company has facilities used for sales, leasing and onsite storage. The major
properties owned or leased by the Company are listed in the table below:
<TABLE>
<CAPTION>
Location Use Area Title
-------- --- ---- -----
<S> <C> <C> <C>
Tempe, Arizona Sales administration 20,100 sq. ft. Leased
Maricopa, Arizona Manufacturing 44.8 acres Owned(1)
Rialto, California Sales, leasing, manufacturing and 10 acres Leased(2)
on-site storage
Houston, Texas Sales, leasing, manufacturing and 7.0 acres Leased
on-site storage
Phoenix, Arizona Sales, leasing and on-site storage 10.7 acres Owned(1)/leased(3)
Tucson, Arizona Sales, leasing and on-site storage 2.7 acres Leased(4)
San Diego, California Sales, leasing and on-site storage 5.0 acres Leased
Dallas, Texas Sales, leasing, manufacturing and 17 acres Owned(1)
on-site storage
San Antonio, Texas Sales, leasing and on-site storage 3.0 acres Leased
Round Rock, Texas(5) Sales, leasing and on-site storage 5.0 acres Leased
</TABLE>
- ----------------------
(1) Pledged pursuant to the Credit Agreement. See, "The Company -
Financing."
(2) Leased by the Company from an affiliate of Richard E. Bunger. See
"Certain Relationships and Related Transactions."
(3) Of the 10.7 acres comprising these sites, 3.4 acres are owned by the
Company and 1.5 acres are subject to long-term leases from members of
the Bunger family. See, "Certain Relationships and Related
Transactions."
(4) This property is leased by the Company from members of the Bunger
family. See "Certain Relationships and Related Transactions."
(5) A community of the Austin, Texas metropolitan area.
20
<PAGE>
SELECTED CONSOLIDATED FINANCIAL INFORMATION
The following table summarizes certain selected financial data of the
Company and is qualified in its entirety by the more detailed consolidated
financial statements and notes thereto appearing elsewhere herein. The data has
been derived from the consolidated financial statements of the Company audited
by Arthur Andersen LLP, independent public accountants.
CONSOLIDATED STATEMENT OF INCOME DATA (in thousands, except per share amounts)
<TABLE>
<CAPTION>
Three Months Ended March 31, Year Ended December 31,
---------------------------- -------------------------------------------------------
(unaudited)
1997 1996 1996 1995 1994 1993(1) 1992(1)(2)
---- ---- ---- ---- ---- ------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Revenues $9,649 $8,909 $42,210 $39,905 $28,182 $17,122 $12,001
Income from operations 1,450 741 4,527 4,306 2,791 1,514 710
Income (loss) before
extraordinary item 202 (114) 481 777 956 276 116
Extraordinary item -- (410) (410) -- -- -- 185
Net income (loss) 202 (524) 70 777 956 276 301
Earnings per common and common equivalent share:
Income (loss) before
extraordinary item $0.03 $(0.02) $0.07 $0.16 $0.21 $0.10 $0.04
Extraordinary item -- (0.06) (0.06) -- -- -- 0.07
Net income (loss) 0.03 (0.08) 0.01 0.16 0.21 0.10 0.11
CONSOLIDATED BALANCE SHEET DATA (as of December 31 of each year)
Total assets $68,577 $55,414 $64,816 $54,342 $40,764 $20,082 $14,773
Long term lines of 30,073 16,612 26,406 4,009 -- -- --
credit
Long term debt and
obligations under
capital leases,
including current
portion 13,032 15,829 13,742 24,533 16,140 9,334 6,622
</TABLE>
- ----------------------
(1) Prior to 1994, the Company's predecessor was operated as a sole
proprietorship. Per share information are therefore calculated on a pro
forma basis assuming that the only common stock outstanding was that
issued to Richard E. Bunger at the time the Company was capitalized and
all significant transactions for the transfer of assets to the Company
have been eliminated for the pro forma statements.
(2) Certain amounts have been restated to conform with subsequent years'
presentation.
21
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
General
The Company was founded in 1983 and, from inception through 1988, the
Company exclusively engaged in the refabrication of ocean-going cargo
containers, which it leased to the public for storage containers and portable
offices. In 1989, the Company began to sell containers. Contributing to growth
of sales revenues was the development of a national distribution system
(referred to by the Company as the national dealer network), manufacture of new
Company designed containers from raw steel as an alternative and supplement to
the refabrication of ocean-going containers, the manufacture of modular steel
buildings (discontinued in 1996; see "Item 1. DESCRIPTION OF BUSINESS - BUSINESS
RESTRUCTURING") and special order products which the Company sells and leases to
schools, governmental entities and others, and the development of the
telecommunication shelter division which commenced operations in mid-year 1995.
The leasing of containers stored on-site at the Company's locations
(similar to traditional mini-storage warehouses) as well as the leasing of
containers stored off-site is becoming a more significant portion of the
Company's business and is contributing to the Company's growth. Since 1993, the
number of units at the Company's leasing locations has increased by the
following percentages as compared to the preceding year:
December 31 1993 38%
1994 62%
1995 32%
1996 18%
As the leasing operations are the most profitable of the Company's
operations, management plans to increase the level of these operations,
especially at existing locations. In addition, the Company expects to open
additional facilities on a controlled basis at locations which management
believes can become profitable over a relatively short period of time.
Results of Operations
The following table sets forth, for the periods indicated, the
percentage, as a percent of total revenue, of certain items in the Consolidated
Financial Statements of the Company, included elsewhere herein. The table and
the discussion below should be read in conjunction with the Consolidated
Financial Statements and Notes thereto.
<TABLE>
<CAPTION>
Three Months Ended March 31, Year Ended December 31,
---------------------------- -----------------------
1997 1996 1996 1995 1994
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Revenues:
Container And Modular Building Sales
47.1% 55.2% 56.0% 60.8% 65.6%
Leasing 40.4 35.6 32.3 30.6 25.5
Other 12.5 9.2 11.7 8.6 8.9
---- --- ---- --- ---
Subtotal 100.0 100.0 100.0 100.0 100.0
Costs and Expenses:
Cost Of Container And Modular
Building Sales 35.7 44.1 47.2 47.9 49.3
Leasing, Selling And General Expenses
44.4 43.5 36.3 38.0 38.5
Depreciation And Amortization 4.9 4.1 4.1 3.3 2.2
Restructuring Charge --.- --.- 1.7 --.- --.-
---- ---- --- ---- ----
</TABLE>
22
<PAGE>
<TABLE>
<CAPTION>
1997 1996 1996 1995 1994
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Income from Operations 15.0 8.3 10.7 10.8 10.0
Other Income (Expenses):
Interest Income and Other --.- --.- 0.5 0.7 0.6
Interest Expense (11.3) (10.6) (9.2) (8.0) (4.5)
----- ----- ---- ---- ----
Income (Loss) Before Provision For
Income (Benefit) Taxes And
Extraordinary Item 3.7 (2.3) 2.0 3.5 6.1
Provision (Benefit) For Income Taxes
1.6 (1.0) 0.9 1.5 2.7
Income (Loss) Before Extraordinary
Item 2.1 (1.3) 1.1 2.0 3.4
Extraordinary Item --.- (4.6) 1.0 --.- --.-
----- ----- ---- ---- ----
Net Income (Loss) 2.1% (5.9)% 0.1% 2.0% 3.4%
===== ===== ==== ==== ====
</TABLE>
Three Months Ended March 31, 1997 Compared to Three Months Ended March 31, 1996
Revenues for the quarter ended March 31, 1997 were $9,649,000, which
represents an 8.3% increase over revenues of $8,909,000 for the quarter ended
March 31, 1996. Revenues from the sales of the Company's products decreased 7.6%
due to a decrease in revenues from the Company's discontinued modular building
operations while revenues from the leasing of portable storage and office units
increased 22.9%. Revenues from the Company's trucking and other related leasing
activities increased 47.0%. The increase in lease revenue and lease related
revenue resulted from an increase in price, a substantial increase in the number
of containers on lease and an increase in ancillary income, including increased
late charge income and loss limitation waiver income.
Historically, the Company's business is partially seasonal with the
first quarter's revenues and earnings generally being the lowest.
Cost of container and other sales as a percentage of container and
other sales for the quarter ended March 31, 1997 was 75.9% compared to 79.9% for
the same quarter in 1996. This decrease primarily resulted from an increase in
margins on the sale of containers in addition to a decline in sales of the
Company's discontinued modular building line, which produced low margins during
fiscal 1996. It is uncertain whether the higher margins generated on container
sales during the first quarter will continue during the remainder of the year.
Leasing, selling and general expenses were 44.4% of total revenue in
the quarter ended March 31, 1997 compared to 43.5% in the quarter ended March
31, 1996.
Interest expense was 11.3% of revenues during the first quarter of 1997
compared to 10.6% of revenues during the quarter ended March 31, 1996. This
increase is primarily due to the costs related to financing the Company's growth
in its container lease fleet and equipment which permitted the Company to
substantially increase its leasing revenue. This increase is partially offset by
a 2.6% decrease in the Company's weighted average borrowing rate as a result of
lower interest rates under its credit facility (including the effect of
amortization of additional debt issuance costs in connection with that
facility).
23
<PAGE>
Depreciation and amortization increased from 4.1% of revenues for the
quarter ended March 31, 1996 to 4.9% for the quarter ended March 31, 1997. This
increase was related to the increase in he Company's lease fleet and the
acquisition of additional equipment at the Company's various locations.
The Company posted net income of $202,000, or $.03 per share, for the
quarter ended March 31, 1997 compared to the quarter ended March 31, 1996 during
which the Company posted a net loss before extraordinary item of $114,000 or
$.02 per share. During the quarter ended March 31, 1996, the Company prepaid
certain debt and capital leases in connection with entering into a new credit
agreement. The Company recognized an extraordinary charge to earnings of
$410,000, or $.06 per share, net of the benefit for income taxes, as a result of
this early extinguishment of debt.
Fiscal 1996 Compared to Fiscal 1995
Revenues for the year ended December 31, 1996 increased to $42,210,000
from $39,905,000 during 1995. Revenues during 1995 included $3,645,000 of
container sale revenue recorded under sale-leaseback transactions. The revenue
from sale-leaseback transactions was offset by an equal cost of container sales
and did not produce any gross margin. The Company did not enter into
sale-leaseback transactions during 1996. Excluding the effect of these
sale-leaseback transactions, revenues increased by 16.4% from 1995 to 1996,
primarily the result of increases in both sales and leasing revenues generated
from existing branch locations and the sale of certain used modular buildings
that had been previously leased. The Texas operations, which commenced in late
1994, sustained growth and contributed 8.5% and 15.8% to the Company's container
sales and leasing revenues, respectively, during 1996 as compared to 7.0% and
9.6%, respectively, in 1995. The dealer and telecommunication shelter division
contributed 25.5% and 4.1%, respectively, of the sales revenues in 1996 as
compared to 27.2% and 5.8%, respectively, in 1995. Revenues related to container
and modular building sales and leasing activities increased 14.5% and 11.7%,
respectively, from the prior year, exclusive of container sale revenue recorded
under sale-leaseback transactions.
Excluding the effect of sale-leaseback transactions, cost of container
and modular building sales as a percentage of container and modular building
sales increased to 84.4% compared to 74.8% for the prior year. This increase is
attributable to the mix of products sold, a shortage in supply of used
containers, which caused an increase in the acquisition cost of these
containers, in addition to an increase in sales of manufactured new containers
which typically result in lower margins to the Company, and a refinement in the
Company's allocation of certain indirect manufacturing costs.
Excluding the effect of sale-leaseback transactions, leasing, selling
and general expenses were 36.3% of total revenue in 1996, compared to 41.8% in
1995. The decrease primarily results from the continued efficiencies obtained by
the Company's Texas operations, which were in their start-up phase during 1995,
and to the Company passing certain property tax expenses on to customers.
The Company recorded a restructuring charge (See "The Company --
Business Restructuring") of $700,000 or 1.7% of total revenue in 1996. There was
no similar charge in 1995.
Income from operations was $4,527,000 in 1996 compared to $4,345,000 in
1995. Excluding the restructuring charge, income from operations would have been
12.4% of total revenue in 1996 as compared to 12.0% in 1995.
Interest expense increased to $3,894,000 in 1996 compared to $3,212,000
in 1995. This increase in interest expense was primarily the result of an
increase in the average balance of debt outstanding of 51.4% compared to 1995,
(incurred in order to finance the substantial increase in the Company's
equipment and container lease fleet), along with the related amortization of
debt issuance costs, partially offset by a decrease of 3.0% in the Company's
weighted average borrowing rate resulting from lower interest rates under the
Company's Credit Agreement.
24
<PAGE>
Depreciation and amortization increased to 4.1% of revenues in 1996,
from 3.3% in 1995, and is directly related to the expansion of the Company's
manufacturing facility along with the substantial growth in the Company's lease
fleet and additional support equipment at the Company's sales and leasing
locations.
The Company had income before extraordinary item of $481,000, or $.07
per share, in 1996, compared to net income of $777,000, or $.16 per share in
1995. This decrease primarily resulted from the $700,000 restructuring charge
recorded by the Company in the fourth quarter of 1996 discussed above. Excluding
this charge, 1996 earnings before extraordinary item were approximately
$873,000, or $.13 per share. The weighted average common shares outstanding at
the end of 1996 increased by 34% from the prior year due to the issuance of
additional common stock in 1996 pursuant to the conversion of the Series A
Convertible Preferred Stock, issued during the fourth quarter of 1995, which was
converted to common stock in 1996.
The Company prepaid approximately $14.1 million of debt and capital
leases in connection with entering into the Credit Agreement in March 1996. As a
result, the Company recognized an extraordinary charge to earnings of $410,000,
or $.06 per share, net of the benefit for income taxes, as a result of this
early extinguishment of debt. The Company also incurred financing costs of
$2,000,000 in connection with the Credit Agreement, which have been deferred and
are being amortized over the term of the Credit Agreement.
Fiscal 1995 Compared to Fiscal 1994
Revenues for the year ended December 31, 1995 increased to $39,905,000
from $28,182,000 in 1994. This 41.6% increase was primarily the result of
increases in both sales and leasing revenues generated from the new branch
locations in Texas, coupled with increased demand for the Company's product at
its existing locations. The Texas operation contributed 7.0% and 9.6% to the
Company's container sales and leasing revenues, respectively. Additionally, the
telecommunication shelter division comprised 5.8% of sales revenues. Revenues
related to container and modular building sales and leasing activities increased
31.3% and 70.2%, respectively, from the prior year. Additional revenues,
primarily related to delivery operations, increased 35.6% from 1994 levels.
Cost of sales increased to 78.7% of sales and leasing revenues from
75.2% of sales and leasing revenues in 1994. The increase was primarily
attributable to the modular division which contracted for the construction of
more sophisticated units requiring substantially more interior build-out than in
previous years and the start up of the new telecommunication shelter division,
which generated lower profit margins during the start-up phase.
Leasing, selling and general expenses were 38.0% of total revenues in
1995, which approximated their 1994 level of 38.5% of total revenues. The
Company's new branch locations incurred higher administrative and advertising
costs than in 1994, which were offset by the increased revenues from the
existing locations where a large portion of the leasing, selling and general
expenses are fixed or semi-variable. Depreciation and amortization expense
increased to $1,318,000 from $625,000 in 1994 as a result of the increase in the
container lease fleet and the increase in support equipment required for the
delivery operations and manufacturing facilities.
Interest expense increased to $3,212,000 in 1995 compared to $1,274,000
in 1994. The Company utilized its line of credit availability more extensively
in 1995, and also increased borrowings during the year to finance the
substantial growth in its container lease fleet. The average outstanding balance
on the line of credit was approximately $4.2 million and $1.1 million for 1995
and 1994, respectively.
Net income for fiscal 1995 was $777,000 compared to $956,000 for 1994.
The effective tax rate was 44% for both years. Earnings per share was $.16 per
share for 1995, and $.21 per share in 1994. The weighted average number of
common and common equivalent shares outstanding increased to 5,010,126 in 1995
compared to 4,496,904 in 1994. This increase was a result of the shares issued
in the initial public offering in 1994 being outstanding for the entire year in
1995 and a private placement of 50,000 shares of Series A Convertible Preferred
Stock in 1995.
25
<PAGE>
Quarterly Results of Operations
The following table reflects certain selected unaudited quarterly
operating results of the Company for each of the eight quarters through the
quarter ended December 31, 1996. The Company believes that all necessary
adjustments have been included to present fairly the quarterly information when
read in conjunction with the Consolidated Financial Statements included
elsewhere herein. The operating results for any quarter are not necessarily
indicative of the results for any future period.
26
<PAGE>
<TABLE>
<CAPTION>
1997 1996 1995
---- -------------------------------------------- -------------------------------------------
(in thousands, except per share amounts)
Mar 31 Mar 31 June 30 Sept 30 Dec 31 Mar 31 June 30 Sept 30 Dec 31
-------- -------- -------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Revenues:
Container and modular
building sales $ 4,543 $ 4,916 $ 5,746 $ 6,376 $ 6,581 $ 5,448 $ 6,313 $ 7,555 $ 4,948
Leasing 3,899 3,171 3,171 3,433 3,863 2,521 2,959 3,259 3,475
Other 1,207 770 1,344 1,348 1,491 706 1,118 702 901
-------- -------- -------- -------- -------- -------- -------- -------- --------
9,649 8,857 10,261 11,157 11,935 8,675 10,390 11,516 9,324
Costs and Expenses:
Cost of container and
modular building sales 3,446 3,926 5,120 5,380 5,500 4,347 4,887 5,949 3,924
Leasing, selling and
general expenses 4,281 3,874 3,215 3,680 4,575 3,466 4,141 3,942 3,625
Depreciation and
amortization 472 368 380 452 513 238 312 359 409
Restructuring charge -- -- -- -- 700 -- -- -- --
-------- -------- -------- -------- -------- -------- -------- -------- --------
Income from operations 1,450 689 1,546 1,645 647 624 1,050 1,266 1,366
Other Income (Expense):
Interest income and other -- 56 31 23 115 115 7 73 98
Interest Expense (1,090) (948) (1,001) (974) (971) (650) (723) (846) (993)
-------- -------- -------- -------- -------- -------- -------- -------- --------
Income (Loss)Before
Provision For Income
Tax (Benefit) and
Extraordinary Item 360 (203) 576 694 (209) 89 334 493 471
Provision For (Benefit of)
Income Taxes 158 (89) 253 305 (92) 39 147 217 207
Income (Loss) Before
Extraordinary Item 202 (114) 323 389 (117) 50 187 276 264
Extraordinary Item -- (410) -- -- -- -- -- -- --
-------- -------- -------- -------- -------- -------- -------- -------- --------
</TABLE>
27
<PAGE>
<TABLE>
<CAPTION>
1997 1996 1995
---- -------------------------------------------- -------------------------------------------
(in thousands, except per share amounts)
Mar 31 Mar 31 June 30 Sept 30 Dec 31 Mar 31 June 30 Sept 30 Dec 31
-------- -------- -------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net Income (Loss) $ 202 $ (524) $ 323 $ 389 $ (117) $ 50 $ 187 $ 276 $ 264
======== ======== ======== ======== ======== ======== ======== ======== ========
Earnings (Loss) Per
Common and Common
Equivalent Share:
Income (Loss)
Before
Extraordinary Item $ 0.03 $ (0.02) $ 0.05 $ 0.06 $ (0.02) $ 0.01 $ 0.04 $ 0.06 $ 0.05
Extraordinary Item -- (.06) -- -- -- -- -- -- --
-------- -------- -------- -------- -------- -------- -------- -------- --------
Net Income (Loss) $ 0.03 $ (0.08) $ 0.05 $ 0.06 $ (0.02) $ 0.01 $ 0.04 $ 0.06 $ 0.05
======== ======== ======== ======== ======== ======== ======== ======== ========
</TABLE>
28
<PAGE>
Quarterly results can be affected by a number of factors, including the
timing of orders, customer delivery requirements, production delays,
inefficiencies, the mix of product sales and leases, raw material availability
and general economic conditions.
Seasonality
There is little seasonality inherent in the Company's operations.
However, sales of custom built units can be dependent on the purchasers' timing
needs to place the units into service. In addition, demand for off-site
container leases is stronger from September through December due to increased
needs for storing inventory for the holiday season by the Company's retail
customers. Containers used by these customers are often returned early in the
following year, causing a lower than normal occupancy rate for the Company
during the first quarter. The occupancy levels have historically ranged from a
low of 82% to a high of 95%. These seasonable fluctuations created a marginal
decrease in cash flow for each of the first quarters during the past several
years. On-site storage is not as subject to seasonal fluctuation, and the
Company anticipates that as on-site storage becomes a larger percentage of its
storage operations, that the Company will experience less seasonality.
Liquidity and Capital Resources
Due to the nature of its business, the Company required increased
amounts of financing to support the growth of its business during the last
several years. This financing has been required primarily to fund the
acquisition and manufacture of containers for the Company's lease fleet and also
to fund the acquisition of property, plant and equipment and to support both the
Company's container leasing and manufacturing operations. The Company continues
to require increasing amounts of financing to sustain the continued growth of
its business. The financing primarily funds the acquisition of containers for
the Company's lease fleet in addition to property, plant and equipment to
support both the Company's leasing and manufacturing operations. Most of new
financing is funded through the Credit Agreement (defined below) where
borrowings under the revolving line of credit are based on the level of the
Company's inventories, receivables and the container lease fleet.
In order to improve its cash flow, increase its borrowing availability
and fund its continued growth, in March 1996 the Company entered into the Credit
Agreement with BT Commercial Corporation, as Agent for a group of lenders (the
"Lenders"). Under the terms of the Credit Agreement, the Lenders provided the
Company with a $35.0 million revolving line of credit and a $6.0 million term
loan. Borrowings under the Credit Agreement are secured by substantially all of
the Company's assets.
Borrowings under the term loan are to be repaid over a five-year
period. Interest accrues on the term loan at the Company's option at either
prime plus 1.75% or the Eurodollar rate plus 3.25%. Borrowings under the term
loan are payable monthly as follows (plus interest):
Months 1 through 12 $ 62,500
Months 13 through 24 83,333
Months 25 through 60 118,056
Additional principal payments equal to 75% of Excess Cash Flow, as defined in
the term loan documents, are required annually.
Available borrowings under the revolving line of credit are based upon
the level of the Company's inventories, receivables and container lease fleet.
The container lease fleet will be appraised at least annually, and up to 90% of
the lesser of cost or appraised orderly liquidation value may be included in the
borrowing base. Interest accrues at the Company's option at either prime plus
1.5% or the Eurodollar rate plus 3% and is payable monthly or at the end of the
term of any Eurodollar borrowing period. The term of this line of credit is
three years, with a one-year extension option. As of December 31, 1996 and March
31, 1997, $26.4 million and $30.1 million, respectively, of borrowings were
outstanding and approximately $0.9 million and $0.6 million respectively, of
additional borrowing was available under the revolving line of credit. At June
20, 1997, approximately $32.8 million of borrowings were outstanding and
approximately $2.1 million of additional borrowings were available.
29
<PAGE>
The Credit Agreement contains several financial covenants including a
minimum tangible net worth requirement, a minimum fixed charge coverage ratio, a
maximum ratio of debt-to-equity, minimum operating income levels and minimum
required utilization rates. In addition, the Credit Agreement contains limits on
capital expenditures, acquisitions, changes in control, the incurrence of
additional debt, and the repurchase of common stock, and prohibits the payment
of dividends.
In connection with the closing of the Credit Agreement in March 1996,
the Company terminated its line of credit with its previous lender, repaying all
indebtedness under that line. In addition, the Company repaid other long-term
debt and obligations under capital leases totaling $14.1 million.
During 1996, the Company's operations provided cash flow of $1,390,000
compared to utilizing $166,000 in 1995. The improvement in cash flow primarily
resulted from the improved financing terms under the Credit Agreement which
permitted a reduction of accounts payables, partially offset by an increase in
accrued liabilities and an increase in receivables. During the quarter ended
March 31, 1997 the Company utilized cash from operations of $224,000. Cash was
invested in higher inventory levels which were partially offset by a reduction
in prepaids and other assets and an increase in accounts payable.
During 1996, the Company invested $10,751,000 in equipment and the
container lease fleet. This amount is net of $2,707,000 in related sales and
financing. The Company invested $2,838,000 in its container lease fleet and
other equipment during the quarter ended March 31, 1997. This amount is net of
$413,000 in sales of containers from the lease fleet.
Cash flow from financing activities totaled $8,667,000 during 1996.
This was the result of increased borrowings to finance container lease fleet and
equipment acquisitions and the restructuring of the Company's debt under the
Credit Agreement, partially offset by the principal payments on indebtedness and
an increase in other assets associated with deferred financing costs incurred in
connection with the closing of the Credit Agreement. Cash flow from financing
activities provided $2,956,000 for the quarter ended March 31, 1997. This
financing was utilized to fund the increase in the lease fleet and related
equipment and was partially offset by principal payments on long-term debt and
capitalized leases.
The Company believes that its current capitalization, together with
borrowings available under the Credit Agreement, is sufficient to maintain its
current level of operations. However, the Company will not be able to sustain
recent growth trends without additional availability of credit and equity to
support continued increase in its container lease fleet. The Company has begun
discussions with its lenders about increasing borrowing availability under the
credit agreement, but presently has no commitment from the lenders regarding
such increase. While the Company believes that the net proceeds from the
exercise of the Warrants (assuming all the Warrants will be exercised) would
provide sufficient equity to permit continued growth at recent levels, there can
be no assurance that any Warrants will be exercised or that the lenders under
the Company's credit agreement will agree to provide additional borrowing
availability to the Company. The cost of used containers continue to increase,
the Company would be required to secure additional financing through debt or
equity offerings, additional borrowings or a combination of these sources (in
addition to any net proceeds received upon exercise of the Warrants). However,
there is no assurance that any such financings will be obtained or obtained on
terms acceptable to the Company.
MANAGEMENT
Directors and Executive Officers
The following table sets forth information concerning each of the
directors and executive officers of the Company:
<TABLE>
<CAPTION>
Name Age Positions
---- --- ---------
<S> <C> <C>
Richard E. Bunger 59 Chairman of the Board of Directors
</TABLE>
30
<PAGE>
<TABLE>
<CAPTION>
Name Age Positions
---- --- ---------
<S> <C> <C>
Steven G. Bunger 36 President, Chief Executive Officer and Director
Lawrence Trachtenberg 41 Executive Vice President, Chief Financial
Officer and Director
George E. Berkner 62 Director
Ronald J. Marusiak 49 Director
Burton K. Kennedy Jr. 49 Senior Vice President of Sales and Marketing
</TABLE>
Richard E. Bunger has served as the Chairman of the Board and Director,
founded the Company's operations in 1983 and also served as the Company's Chief
Executive Officer and President from inception through April 1997. Mr. Bunger
has been awarded approximately 70 patents, many related to portable storage
technology. For a period of approximately 25 years prior to founding the
Company, Mr. Bunger owned and operated Corral Industries Incorporated, a
worldwide designer/builder of integrated animal production facilities, and a
designer/builder of mini storage facilities.
Steven G. Bunger has served as Chief Executive Officer, President and
Director since April 1997. Prior to April 1997 Mr. Bunger served as the
Company's Chief Operating Officer and was responsible for overseeing all of the
Company's operations and sales activities with overall responsibility for
advertising, marketing and pricing. Mr. Bunger graduated from Arizona State
University in 1986 with a B.A.-Business Administration. He is the son of Richard
E. Bunger.
Lawrence Trachtenberg joined the Company in December 1995 as its
Executive Vice President and Chief Financial Officer, General Counsel,
Secretary, Treasurer and Director. Mr. Trachtenberg is primarily responsible for
all accounting, banking and related financial matters for the Company. Mr.
Trachtenberg is admitted to practice law in the States of Arizona and New York
and is a Certified Public Accountant in New York. Prior to joining the Company,
Mr. Trachtenberg served as Vice President and General Counsel at Express America
Mortgage Corporation, a mortgage banking company, from February 1994 through
September 1995 and as Vice President and Chief Financial Officer of Pacific
International Services Corporation, a corporation engaged in car rentals and
sales, from March 1990 through January 1994. Mr. Trachtenberg received his Juris
Doctorate from Harvard Law School in 1981 and his B.A. - Accounting/Economics
from Queens College - CUNY in 1977.
George E. Berkner has served as a Directors of the Company in December,
1993. From August, 1992 to present, Mr. Berkner has been the Vice President of
AdGraphics, Inc., a computer graphics company. From May, 1990 to August, 1992,
Mr. Berkner was a private investor. From February, 1972 until May, 1990, Mr.
Berkner was the President and Chief Executive Officer of Gila River Products, a
plastics manufacturer with 155 employees. Mr. Berkner is also a director of Auto
X-Ray, Inc. Mr. Berkner graduated from St. Johns University with a
B.A.-Economics/Business in 1956.
Ronald J. Marusiak has served as a Director of the Company since
February 1996. From January 1988 to present, Mr. Marusiak has been the Division
President of Micro-Tronics, Inc., a corporation engaged in precision machining
and tool and die building for companies throughout the U.S. Mr. Marusiak is the
co-owner of R2B2 Systems, Inc., a computer hardware and software company. Mr.
Marusiak is also a director of McKee Securities, Inc. Mr. Marusiak received a
Masters of Science in Management from LaVerne University in 1979 and graduated
from the United States Air Force Academy in 1971.
Burton K. Kennedy Jr. has served as the Company's Senior Vice President
of Sales and Marketing since July 1996, and served with the Company's
predecessor from March 1986 until September 1991. Mr. Kennedy has the overall
responsibility for all branch lease and sale operations and also directs the
acquisition of container inventory. From September 1993 through June 1996, Mr.
Kennedy served in various executive positions with
31
<PAGE>
National Security Containers, a division of Cavco, Inc. From April 1992 through
August 1993 he was a working partner in American Bonsai.
Executive Compensation
The following table sets forth certain compensation paid or accrued by
the Company during the fiscal year ended December 31, 1996 to the Chief
Executive Officer ("CEO") and executive officers of the Company whose salary and
bonus exceeded $100,000 (collectively with the CEO, the "Named Officers").
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Long-
Term
Compen-
Annual Compensation saton
------------------------------------------------------- -------------
Other All
Name and Fiscal Annual Stock Other
Principal Position Year Salary Bonus Compensation Options(#) Compensation
- -------------------------- -------- ------------ -------------- ------------------ ------------- ------------------
<S> <C> <C> <C> <C> <C> <C>
Richard E. Bunger, 1996 $100,000 $107,873 -- -- $4,100(2)
Chief Executive Officer 1995 $104,167 $77,808 -- -- $4,100(2)
1994 $125,000 -- -- 75,000 $4,100(2)
Lawrence Trachtenberg, 1996 $50,000 $95,887 -- 25,000 $5,000(3)
Chief Financial Officer, 1995 -- -- -- 50,000 --
Executive Vice President 1994 -- -- -- -- --
Steven G. Bunger, 1996 $50,000 $95,887 -- 25,000 $5,000(3)
Chief Operating Officer, 1995 $42,500 $94,128 -- 50,000 $4,375(3)
Executive Vice President 1994 $20,000 $103,988 -- -- --
</TABLE>
- ----------------------
(1) The named positions served in these capacities through Fiscal year end
1996. In April 1997, Steven G. Bunger succeeded Mr. Richard E. Bunger
as the Company's Chief Executive Officer and President.
(2) The Company provides Mr. Bunger with the use of a Company-owned
vehicle. The amount shown represents the Company's estimate of costs
borne by it in connection with the vehicle, including fuel,
maintenance, license fees and other operating costs.
(3) Mr. Trachtenberg and Mr. Steven Bunger are each paid $5,000 per year in
consideration of their respective non-compete agreements. Mr. Bunger
entered into such agreement after the commencement of the 1995 fiscal
year.
Option Grants
The following table sets forth certain information regarding the grant
and exercise of options to the Named Officers in 1996.
32
<PAGE>
OPTION GRANTS IN FISCAL YEAR 1996
<TABLE>
<CAPTION>
Potential Realizable
Value at Assumed
Annual Rate of
Percent of Total Stock Price
Options Granted Exercise or Appreciation for
Options to Employees in Base Price Expiration Option Term
Name Granted Fiscal Year ($/Sh)(1) Date 5%($) 10%($)
- ---------------------- --------------- --------------------- --------------- ---------------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C>
Richard E. Bunger -- -- -- -- -- --
Lawrence Trachtenberg 25,000 25% $3.50 April 2006 $55,028 $139,452
Steve G. Bunger 25,000 25% $3.85 April 2001 $26,592 $58,762
</TABLE>
- ----------------------
(1) This disclosure is provided pursuant to Item 402(c) of Regulation S-K
and assumes that the actual stock price appreciation over the maximum
remaining option terms (10 and 5 years for Mr. Trachtenberg's and Mr.
Bunger's options, respectively) will be at the assumed 5% and 10%
levels.
Option Exercises and Values
The following table sets forth certain information regarding the
exercise and values of options held by the Named Officers as of December 31,
1996.
<TABLE>
<CAPTION>
Number of Un- Value of Unexercised
exercised Options at In-the-Money Options at
Shares December 31, 1996 December 1996(1)
Acquired on Value Exercisable/ Exercisable/
Name Exercise (#) Realized Unexercisable Unexercisable
- ------------------------- ------------------ ------------------ -------------------------- --------------------------
<S> <C> <C>
Richard E. Bunger -- -- 45,000/30,000 $0/$0
Lawrence Trachtenberg -- -- 25,000/50,000 $0/$0
Steven G. Bunger -- -- 25,000/50,000 $0/$0
</TABLE>
- ----------------------
(1) All the exercisable options were exercisable at a price greater than
the last reported sale price of the Common Stock ($3.125) on the Nasdaq
Stock Market National Market System on December 31, 1996.
Employment Agreements
The Company provides Mr. Richard Bunger with life insurance (of which
the Company is the beneficiary) in the amount of $2,000,000, a Company vehicle,
and all the employee benefits provided to the Company's executive employees.
Although the Company has not entered into any long-term employment
contracts with any of its employees, the Company has entered into numerous
agreements with key employees which are terminable at will,
33
<PAGE>
with or without cause, including agreements with Lawrence Trachtenberg and
Steven G. Bunger. Each of these agreements contains a covenant not to compete
for a period of two years after termination of employment and a covenant not to
disclose confidential information of a proprietary nature to third parties.
The Company had numerous bonus and incentive arrangements with several
employees during 1996, including Mr. Richard Bunger, Mr. Trachtenberg and Mr.
Steven G. Bunger. These agreements included an incentive program to provide
financial awards for an increase in revenues or for the attainment of quotas.
Mr. Richard Bunger, Mr. Trachtenberg and Mr. Steven G. Bunger received a
percentage of gross profit as incentive compensation. These compensation
agreements were evaluated by an independent executive compensation consulting
organization and effective January 1, 1997, the employees, including Mr. Richard
Bunger, Mr. Trachtenberg and Mr. Steven Bunger are being compensated in 1997
based on commensurate fair market salaries.
Compensation of Directors
The Company's directors (other than officers of the Company) received
cash compensation for service on the Board of Directors and committees thereof
in the amount of $500 per quarterly meeting. Mr. Berkner, Mr. Marusiak and,
prior to his resignation in February 1996, Mr. Roy Snell, each had the right to
receive options to acquire 3,000 shares of Common Stock on each August 1 while
serving as members of the compensation committee but not to exceed 15,000
options per person. In lieu of options, Mr. Snell elected to receive the right
to cash payments of $250 per month. Mr. Snell provided certain consulting
services to the Company related to obtaining financing for the Company's
operating equipment and containers since 1991 for which he was being compensated
$1,200 per annum.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Effective December 31, 1993, Richard E. Bunger, an executive officer,
director and founder of the Company, contributed substantially all of the assets
and liabilities of MMSS and the stock of DDS to the Company in exchange for
2,700,000 shares of Common Stock and the assumption of certain liabilities by
the Company. Such liabilities include liabilities associated with the MMSS
assets and operations and certain income tax liabilities of Mr. Bunger and an
affiliate arising from the MMSS operations occurring prior to January 1, 1994.
Such income tax liabilities were estimated at $428,000. Deferred income tax
liabilities associated with the assets contributed, established at $2,393,000,
were also required to be recognized by the Company in connection with such
capitalization. The Company will indemnify and defend Mr. Bunger against loss or
expense related to all liabilities assumed by the Company and for any contingent
liabilities arising from past operations. Prior to the capitalization of the
Company, Mr. Bunger personally guaranteed the Company's lines of credit and
other material debts. These obligations have subsequently been extinguished by
payment of the debts by the Company.
The Company leases certain of its business locations from affiliates of
Mr. Bunger, including his children. The Company entered into an agreement,
effective January 1, 1994, to lease a portion of the property comprising its
Phoenix location and the property comprising its Tucson location from Richard E.
Bunger's five children. Total annual base lease payments under these leases
currently equal $66,000, with annual adjustment based on the consumer price
index. Lease payments in fiscal year 1996 equaled $69,702. The term of each of
these leases will expire on December 31, 2003. Prior to 1994, these properties
were leased by the Company's predecessor at annual rental payments equaling
$14,000. Additionally, the Company entered into an agreement effective January
1, 1994 to lease its Rialto facility from Mobile Mini Systems, Inc. for total
annual base lease payments of $204,000 with annual adjustments based on the
consumer price index. This lease agreement was extended for and additional five
years during 1996. Lease payments in fiscal year 1996 equaled $215,442. Prior to
1994, the Rialto site was leased to the Company's predecessor at an annual rate
of $132,000. Management believes the increase in rental rates reflect the fair
market rental value of these properties. Prior to the effectiveness of the
written leases, the terms were approved by the Company's independent and
disinterested directors.
In March 1994 the Company's manufacturing facility in Maricopa, Arizona
needed additional acreage to expand its manufacturing capabilities and began
using approximately 22 acres of property owned by Richard E. Bunger. The Company
leased this property from Mr. Bunger with annual payments of $40,000 with an
annual
34
<PAGE>
adjustment based on the Consumer Price Index. The Company purchased the property
from Mr. Bunger on March 29, 1996 for a purchase price of $335,000, which
management believes reflects the fair market value of the property.
WARRANTHOLDERS
The 1,067,500 Warrant Shares offered hereby are issuable upon exercise
of Public Warrants which were issued in the Company's Initial Public Offering in
1994 and are currently publicly traded on Nasdaq.
PLAN OF DISTRIBUTION
The Warrant Shares issuable upon exercise of the Warrants may be
distributed if, as and when such Warrants are exercised by the holders thereof.
The Company may solicit the exercise of the Warrants at any time by reducing the
exercise price of the Warrants. As of the date of this Prospectus, the Company
does not have the right to call the Public Warrants because the Common Stock has
not traded at or above $5.00 for at least 15 consecutive trading days.
The Company may engage one or more broker-dealers to solicit the
exercise of Public Warrants in compliance with the provisions of Regulation M
promulgated under the Exchange Act. The Company anticipates that it would pay
any such broker-dealer a fee of between 1% and 4% of the exercise price of
Warrants solicited for exercise which are exercised.
The Warrant Shares offered hereby may, upon compliance with applicable
"blue sky" laws, be sold from time to time to purchasers directly by the
Warrantholders or by pledgees, donees, transferees or other successors in
interest, or in negotiated transactions and on Nasdaq through brokers or
dealers, or otherwise. Such broker-dealers may receive compensation in the form
of discounts, concessions or commissions from the Warrantholders for whom such
broker-dealers may act as agents or to whom they sell as principal, or both
(which compensation as to a particular broker-dealer might be in excess of
customary commissions). In addition, any securities covered by this Prospectus
which qualify for sale pursuant to Rule 144 may be sold under Rule 144 rather
than pursuant to this Prospectus.
Alternatively, the Warrantholders may from time to time offer the
Warrant Shares offered hereby through underwriters, dealers or agents, who may
receive compensation in the form of underwriting discounts, concessions or
commissions from the Warrantholders and/or the purchasers of Warrant Shares for
whom they may act as agents.
The Warrantholders and any underwriters, dealers or agents that
participate in the distribution of Warrant Shares offered hereby may be deemed
to be underwriters, and any profit on the sale of such Warrant Shares by them
and any discounts, commissions or concessions received by any such underwriters,
dealers or agents might be deemed to be underwriting discounts and commissions
under the Securities Act. At the time a particular offer of Warrant Shares is
made, to the extent required, a post-effective amendment to this Registration
Statement will be filed with the Commission which will set forth the aggregate
amount of Warrant Shares being offered and the terms of the offering, including
the name or names of any underwriters, dealers or agents, and discounts,
commissions and other items constituting compensation from the Warrantholders
and any discounts, commissions or concessions allowed or reallowed or paid to
dealers.
The Warrant Shares offered hereby may be sold from time to time in one
or more transactions at market prices prevailing at the time of sale, at a fixed
offering price, which may be changed, at varying prices determined at the time
of sale or at negotiated prices. The Warrantholders will pay the commissions and
discounts of underwriters, dealers or agents, if any, incurred in connection
with the sale of the Warrant Shares.
The Company will not receive any proceeds from the sale of the Warrant
Shares issuable upon exercise of the Warrants. On the assumption that all of the
Warrants are exercised, the maximum net proceeds which the
35
<PAGE>
Company would receive from such exercise, after deduction of expenses of this
Offering, would be approximately $5.3 million. There can be no assurance that
any of such Warrants will be exercised.
DESCRIPTION OF SECURITIES
General
The Company's Certificate of Incorporation authorizes the issuance of
22,000,000, consisting of 17,000,000 shares of Common stock and 5,000,000 shares
of preferred stock, par value $.01 per share. As of June 20, 1997, 6,739,324
shares of Common Stock were outstanding and no shares of preferred stock were
outstanding.
Common Stock
The holders of Common Stock are entitled to one vote per share on all
matters submitted to a vote of stockholders of the Company. In addition, such
holders are entitled to receive ratably such dividends, if any, as may be
declared from time to time by the Board of Directors out of funds legally
available therefor. In the event of the dissolution, liquidation or winding up
of the Company, the holders of Common Stock are entitled to share ratably in all
assets remaining after payment of all liabilities of the Company. All
outstanding shares of Common Stock are fully paid and nonassessable.
The holders of Common Stock do not have any subscription, redemption or
conversion rights, nor do they have any preemptive or other rights to acquire or
subscribe for additional, unissued or treasury shares. Accordingly, if the
Company were to elect to sell additional shares of Common Stock following this
Offering, persons acquiring Common Stock in this Offering would have no right to
purchase additional shares, and as a result, their percentage equity interest in
the Company would be reduced.
Pursuant to the Company's Bylaws, except for any matters which,
pursuant to the Delaware General Corporation Law ("Delaware Law"), require a
greater percentage vote for approval, the holders of one-third of the
outstanding Common Stock, if present in person or by proxy, are sufficient to
constitute a quorum for the transaction of business at meetings of the Company's
stockholders. Holders of shares of Common Stock are entitled to one vote per
share on all matters submitted to the vote of Company stockholders. Except as to
any matters which, pursuant to Delaware Law, require a greater percentage vote
for approval, the affirmative vote of the holders of a majority of the Common
Stock present in person or by proxy at any meeting (provided a quorum as
aforesaid is present thereat) is sufficient to authorize, affirm or ratify any
act or action, including the election of directors.
The holders of Common Stock do not have cumulative voting rights.
Accordingly, the holders of more than half of the outstanding shares of Common
Stock can elect all of the Directors to be elected in any election, if they
choose to do so. In such event, the holders of the remaining shares of Common
Stock would not be able to elect any Directors. The Board is empowered to fill
any vacancies on the Board created by the resignation, death or removal of
Directors.
In addition to voting at duly called meetings at which a quorum is
present in person or by proxy, Delaware Law and the Company's Bylaws provide
that stockholders may take action without the holding of a meeting by written
consent or consents signed by the holders of a majority of the outstanding
shares of the capital stock of the Company entitled to vote thereon. Prompt
notice of the taking of any action without a meeting by less than unanimous
consent of the stockholders will be given to those stockholders who do not
consent in writing to the action. The purposes of this provision are to
facilitate action by stockholders and to reduce the corporate expense associated
with annual and special meetings of stockholders. Pursuant to the rules and
regulations of the Commission, if stockholder action is taken by written
consent, the Company will be required to send to each stockholder entitled to
vote on the matter acted on, but whose consent was not solicited, an information
statement containing information substantially similar to that which would have
been contained in a proxy statement. The Board of Directors intends to place
before the Company's stockholders at the Company's 1997 annual meeting a
36
<PAGE>
proposal that would amend the Company's Bylaws and Certificate of Incorporation
to prohibit shareholder action by written consent.
Preferred Stock
The Company is authorized to issued up to 5,000,000 shares of preferred
stock, .01 par value per share ("Preferred Stock"), 50,000 of which were
designated and issued as Series A Convertible Preferred Stock during December
1995 for consideration of $100 per share. All of the outstanding shares of the
Series A Convertible Preferred Stock were converted according to their terms
into an aggregate of 1,943,000 shares of Common Stock during the first quarter
of 1996, at which time all such shares of the Series A Convertible Preferred
Stock became authorized but unissued shares of Preferred Stock which may be
reissued.
Under the Company's certificate of incorporation, shares of Preferred
Stock may, without any action by the stockholders of the Company, be issued by
the Board of Directors of the Company form time to time in one or more series
for such consideration and with such relative rights, privileges and preferences
as the Board may determine. Accordingly, the Board has the power, without
stockholder approval, to fix the dividend rate and to establish the provisions,
if any, relating to voting rights, redemption rate, sinking fund, liquidation
preferences and conversion rights for any series of Preferred Stock issued in
the future, which could adversely affect the voting power or other rights of the
holders of the Common Stock.
It is not possible to state the actual effect of the authorization of
the Preferred Stock upon the rights of the holders of the Common Stock until the
Board determines the specific rights of the holders of any series of referred
Stock. The Board's authority to issue Preferred Stock provides a convenient
vehicle in connection with possible acquisitions and other corporate purposes,
but could have the effect of making it more difficult for a person or group to
gain control of the Company. The Company has no present plans to issue any
shares of Preferred Stock.
Classified Board Of Directors And Related Provisions
The Company's Board of Directors intends to propose that the Company's
stockholders adopt at the Company's 1997 annual meeting of stockholders an
amendment to the Company's Certificate of Incorporation to provide for a
classified board of directors. The amendment will provide that the Board of
Directors be divided into three classes, and that the directors serve staggered
terms of three years each. The purpose of the classified board is to promote
conditions of continuity and stability in the composition of the Board of
Directors and in the policies formulated by the Board of Directors, by insuring
that in the ordinary course, at least two-thirds of the directors will at all
times have at least one year's experience as directors. However, the classified
board structure may prevent stockholders who do not approve of the policies of
the Board of Directors from removing a majority of the Board of Directors at a
single annual meeting, because it will normally take two annual meetings of
stockholders to elect a majority of the Board.
Delaware Anti-Takeover Law
Section 203 of the Delaware Law prohibits a publicly held Delaware
corporation from engaging in a "business combination" with an "interested
stockholder" for a period of three years after the date of the transaction in
which the person became an interested stockholder, unless (i) prior to the date
of the business combination, the transaction is approved by the board of
directors of the corporation, (ii) upon consummation of the transaction which
resulted in the stockholder becoming an interested stockholder, the interested
stockholder owns at least 85% of the outstanding voting stock, or (iii) on or
after such date, the business combination is approved by the board of directors
and by the affirmative vote of at least 66 2/3% of the outstanding voting stock
that is not owned by the interested stockholder. A "business combination"
includes mergers, asset sales and other transactions resulting in a financial
benefit to the stockholder. An "interested stockholder" is a person, who,
together with affiliates and associates, owns (or within three years, did own)
15% or more of the corporation's voting stock.
37
<PAGE>
Transfer And Warrant Agent
The transfer agent for the Common Stock and the Warrant Agent for the
Warrants is Harris Trust and Savings Bank.
LEGAL MATTERS
The validity of the Common Stock offered hereby will be passed upon for
the Company by Bryan Cave LLP, Phoenix, Arizona.
EXPERTS
The consolidated financial statements and schedule of the Company and
its subsidiaries as of December 31, 1995 and 1996 and for each of the three
years in the period ended December 31, 1996 included or incorporated by
reference in this prospectus and elsewhere in the registration statement have
been audited by Arthur Andersen LLP, independent public accountants, as
indicated in their reports with respect thereto, and are included and
incorporated by reference herein in reliance upon the authority of said firm as
experts in accounting and auditing in giving said reports.
38
<PAGE>
INDEX
Report of Independent Public Accountants F-2
Financial Statements-
Consolidated Balance Sheets - December 31, 1996 and 1995 F-3
Consolidated Statements of Operations - For the Years Ended
December 31, 1996, 1995 and 1994 F-4
Consolidated Statements of Stockholders' Equity - For the Years
Ended December 31, 1996, 1995 and 1994 F-5
Consolidated Statements of Cash Flows - For the Years Ended
December 31, 1996, 1995 and 1994 F-5
Notes to Consolidated Financial Statements - December 31, 1996 and 1995 F-6
Financial Statements (Unaudited)-
Consolidated Balance Sheet - March 31, 1997 (unaudited) F-18
Consolidated Statements of Operations - Three Months ended
March 31, 1997 and March 31, 1996 (unaudited) F-19
Consolidated Statements of Cash Flows Three Months ended
March 31, 1997 and March 31, 1996 (unaudited) F-20
Notes to Consolidated Financial Statements - March 31, 1997
and March 31, 1996 (unaudited) F-21
F-1
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Mobile Mini, Inc.:
We have audited the accompanying consolidated balance sheets of MOBILE
MINI, INC. (a Delaware corporation) and subsidiaries as of December 31, 1996 and
1995, and the related consolidated statements of operations, stockholders'
equity and cash flows for each of the three years in the period ended December
31, 1996. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. 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 financial position of Mobile Mini, Inc.
and subsidiaries as of December 31, 1996 and 1995 and the results of their
operations and their cash flows for each of the three years in the period ended
December 31, 1996, in conformity with generally accepted accounting principles.
ARTHUR ANDERSEN LLP
Phoenix, Arizona
March 24, 1997.
<PAGE>
MOBILE MINI, INC.
CONSOLIDATED BALANCE SHEETS
December 31, 1996 and 1995
<TABLE>
<CAPTION>
ASSETS
December 31,
1996 1995
----------- -----------
<S> <C> <C>
CURRENT ASSETS:
Cash $ 736,543 $ 1,430,651
Receivables, net of allowance for doubtful accounts of $268,000 and 4,631,854 4,312,725
$158,000 at December 31, 1996 and 1995, respectively
Inventories 4,998,382 5,193,222
Prepaid and other 742,984 718,574
----------- -----------
Total current assets 11,109,763 11,655,172
CONTAINER LEASE FLEET, net of accumulated depreciation of $1,244,000 and 34,313,193 26,954,936
$911,000, respectfully
PROPERTY, PLANT AND EQUIPMENT, net (Note 5) 17,696,046 15,472,164
OTHER ASSETS 1,697,199 259,672
----------- -----------
$64,816,201 $54,341,944
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 2,557,329 $ 4,265,147
Accrued compensation 674,818 238,132
Other accrued liabilities 1,517,295 1,334,332
Current portion of long-term debt (Note 4) 1,378,829 737,181
Current portion of obligations under capital leases (Note 5) 1,352,279 2,488,205
----------- -----------
Total Current Liabilities 7,480,550 9,062,997
LINE OF CREDIT (Note 3) 26,406,035 4,099,034
LONG-TERM DEBT, less current portion (Note 4) 5,623,948 8,363,333
OBLIGATIONS UNDER CAPITAL LEASES, less current portion (Note 5) 5,387,067 12,944,653
DEFERRED INCOME TAXES 3,709,500 3,711,985
----------- -----------
Total liabilities 48,607,100 38,182,002
COMMITMENTS AND CONTINGENCIES (Notes 7 and 9)
STOCKHOLDERS' EQUITY (Note 10):
Series A Convertible Preferred Stock, $.01 par value, $100 stated value, -- 5,000,000
5,000,000 shares authorized, 0 and 50,000 shares issued and outstanding
at December 31, 1996 and 1995, respectively
Common stock, $.01 par value, 17,000,000 shares authorized, 6,739,324 and 67,393 48,350
4,835,000 shares issued and outstanding at December 31, 1996 and 1995,
respectively
Additional paid-in capital 14,338,873 9,378,979
Retained earnings 1,802,835 1,732,613
----------- -----------
Total stockholders' equity 16,209,101 16,159,942
----------- -----------
$64,816,201 $54,341,944
=========== ===========
</TABLE>
The accompanying notes are an integral part
of these consolidated balance sheets.
F-3
<PAGE>
MOBILE MINI, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
For the Years Ended December 31, 1996, 1995 and 1994
<TABLE>
<CAPTION>
1996 1995 1994
------------ ------------ ------------
<S> <C> <C> <C>
REVENUES:
Container and modular building sales $ 23,618,754 $ 24,264,547 $ 18,480,503
Leasing 13,638,635 12,213,888 7,174,585
Delivery, hauling and other 4,952,705 3,426,767 2,527,146
------------ ------------ ------------
42,210,094 39,905,202 28,182,234
COSTS AND EXPENSES:
Cost of container and modular building sales 19,926,191 19,106,960 13,903,299
Leasing, selling, and general expenses 15,343,210 15,174,159 10,863,068
Depreciation and amortization 1,713,419 1,317,974 624,754
Restructuring charge (Note 1) 700,000 -- --
------------ ------------ ------------
INCOME FROM OPERATIONS 4,527,274 4,306,109 2,791,113
OTHER INCOME (EXPENSE):
Interest income and other 225,053 292,686 204,007
Interest expense (3,894,155) (3,211,659) (1,274,204)
------------ ------------ ------------
Income Before Provision For Income Taxes And
Extraordinary Item 858,172 1,387,136 1,720,916
PROVISION FOR INCOME TAXES (377,596) (610,341) (765,098)
------------ ------------ ------------
INCOME BEFORE EXTRAORDINARY ITEM 480,576 776,795 955,818
EXTRAORDINARY ITEM, net of income tax benefit of
$322,421 (Note 3) (410,354) -- --
------------ ------------ ------------
NET INCOME $ 70,222 $ 776,795 $ 955,818
============ ============ ============
EARNINGS PER COMMON AND COMMON EQUIVALENT SHARE:
Income before extraordinary item $ 0.07 $ 0.16 $ 0.21
Extraordinary item (0.06) -- --
------------ ------------ ------------
Net income $ 0.01 $ 0.16 $ 0.21
============ ============ ============
WEIGHTED AVERAGE NUMBER OF COMMON AND COMMON
EQUIVALENT SHARES OUTSTANDING 6,737,592 5,010,126 4,496,904
============ ============ ============
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
F-4
<PAGE>
MOBILE MINI, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
For the years ended December 31, 1996, 1995, and 1994
<TABLE>
<CAPTION>
Additional Total
Preferred Common Paid-in Retained Stockholders
Stock Stock Capital Earnings Equity
----- ----- ------- -------- ------
<S> <C> <C> <C> <C> <C>
BALANCE, December 31, 1993 $ -- $ 27,000 $ 3,265,097 $ -- $ 3,292,097
Sale of common stock (Note 10) -- 21,350 7,005,768 -- 7,027,118
Net income -- -- -- 955,818 955,818
------------ ------------ ------------ ------------ ------------
BALANCE, December 31, 1994 -- 48,350 10,270,865 955,818 11,275,033
Sale of preferred stock
(Note 10) 5,000,000 -- (891,886) -- 4,108,114
Net income -- -- -- 776,795 776,795
------------ ------------ ------------ ------------ ------------
BALANCE, December 31, 1995 5,000,000 48,350 9,378,979 1,732,613 16,159,942
Conversion of preferred
stock (Note 10) (5,000,000) 19,043 4,959,894 -- (21,063)
Net income -- -- 70,222 70,222
------------ ------------ ------------ ------------ ------------
BALANCE, December 31, 1996 $ -- $ 67,393 $ 14,338,873 $ 1,802,835 $ 16,209,101
============ ============ ============ ============ ============
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
MOBILE MINI, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Years Ended December 31, 1996, 1995 and 1994
<TABLE>
<CAPTION>
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 70,222 $ 776,795 $ 955,818
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Extraordinary loss on early debt extinguishment 410,354 -- --
Amortization of deferred costs on credit agreement 385,473 -- --
Depreciation and amortization 1,713,419 1,317,974 624,754
Loss (gain) on disposal of property, plant and
equipment 3,938 1,763 (399)
Changes in assets and liabilities:
Increase in receivables, net (319,129) (292,339) (2,255,883)
Decrease (increase) in inventories 194,840 (1,085,216) (2,681,378)
Increase in prepaid and other (24,410) (219,109) (112,169)
Decrease (increase) in other assets 45,902 (87,617) (89,495)
(Decrease) increase in accounts payable (1,707,818) (825,657) 3,551,884
(Decrease) increase in accrued liabilities 619,649 (382,147) 618,970
(Decrease) increase in deferred income taxes (2,485) 629,987 688,998
------------ ------------ ------------
Net cash provided by (used in) operating activities 1,389,961 (165,566) 1,301,100
------------ ------------ ------------
</TABLE>
F-5
<PAGE>
<TABLE>
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
CASH FLOWS FROM INVESTING ACTIVITIES:
Net purchases of container lease fleet (7,737,552) (6,752,060) (6,512,209)
Net purchases of property, plant and equipment (3,013,247) (4,025,574) (7,918,913)
------------ ------------ ------------
Net cash used in investing activities (10,750,799) (10,777,634) (14,431,122)
------------ ------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net borrowings under lines of credit 22,307,001 876,804 1,427,208
Proceeds from issuance of long-term debt 7,127,997 5,855,982 3,290,005
Proceeds from sale-leaseback transactions -- 5,857,235 4,690,350
Payment for deferred financing costs (1,963,484) -- --
Principal payments and penalties on early debt
extinguishment (14,405,879) -- --
Principal payments on long-term debt (1,334,083) (2,081,883) (1,081,740)
Principal payments on capital lease obligations (3,043,759) (3,089,046) (1,505,677)
Additional paid in capital (21,063) 4,108,114 7,027,118
------------ ------------ ------------
Net cash provided by financing activities 8,666,730 11,527,206 13,847,264
------------ ------------ ------------
NET INCREASE (DECREASE) IN CASH (694,108) 584,006 717,242
CASH, beginning of year 1,430,651 846,645 129,403
------------ ------------ ------------
CASH, end of year $ 736,543 $ 1,430,651 $ 846,645
============ ============ ============
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the year for interest $ 3,186,774 $ 2,745,542 $ 1,320,084
============ ============ ============
Cash paid during the year for income taxes $ 59,958 $ 277,600 $ 300,692
============ ============ ============
</TABLE>
SUPPLEMENTAL DISCLOSURE OF NONCASH FINANCING ACTIVITIES: Capital lease
obligations of $548,697, $1,851,336 and $1,413,061 during 1996, 1995, and 1994,
respectively, were incurred in connection with lease agreements for containers
and equipment.
The accompanying notes are an integral part of these consolidated statements.
MOBILE MINI, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1996
(1) THE COMPANY, ITS OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES
Organization
Mobile Mini, Inc., a Delaware corporation, designs and manufactures
portable steel storage containers and telecommunications shelters and acquires
and refurbishes ocean-going shipping containers for sale and lease primarily in
Arizona, California and Texas. It also designs and manufactures a variety of
delivery systems to compliment its storage container sales and leasing
activities.
F-6
<PAGE>
Principles of Consolidation
The consolidated financial statements include the accounts of Mobile
Mini, Inc. and its wholly owned subsidiaries, Delivery Design Systems, Inc.
("DDS") and Mobile Mini I, Inc. (collectively the "Company"). All material
inter-company transactions have been eliminated.
Management's Plans
The Company has experienced rapid growth during the last several years
with revenues increasing at a 35.0% compounded rate during the last three years.
This growth related to both the opening of additional sales and leasing offices
in California and Texas and to an increase in leasing revenues due to the
expansion of the Company's container lease fleet. Much of this growth was
financed with short-term debt or capital leases, which was not adequate to meet
the Company's growth needs.
As discussed more fully in Note 3, in March 1996, the Company entered
into a $41.0 million credit agreement (the "Credit Agreement") with a group of
lenders. Initial borrowings under the Credit Agreement of $22,592,000 were used
to refinance a majority of the Company's outstanding indebtedness with more
favorable terms. The Company intends to use its remaining borrowing
availability, primarily to expand its container lease fleet and related
operations.
The Company believes that its current capitalization together with
borrowings available under the Credit Agreement, is sufficient to maintain the
Company's current level of operations and permit controlled growth. However,
should demand for the Company's products exceed current expectations, the
Company would be required to secure additional financing through debt or equity
offerings, additional borrowings or a combination of these sources. However,
there is no assurance that any such financings will be available or will be
available on terms acceptable to the Company.
The Company's ability to obtain used containers for its lease fleet is
subject in large part to the availability of these containers in the market.
This is in part subject to international trade issues and the demand for
containers in the ocean cargo shipping business. Should there be a shortage in
supply of used containers, the Company could supplement its lease fleet with new
manufactured containers. However, should there be an overabundance of these used
containers available, it is likely that prices would fall. This could result in
a reduction in the lease rates the Company could obtain from its container
leasing operations. It could also cause the appraised orderly liquidation value
of the containers in the lease fleet to decline. In such event, the Company's
ability to finance its business through the Credit Agreement would be severely
limited, as the maximum borrowing limit under that facility is based upon the
appraised orderly liquidation value of the Company's container lease fleet.
The Company previously was involved in the manufacture, sale and
leasing of modular steel buildings in the state of Arizona. These buildings were
used primarily as portable schools, but could be used for a variety of purposes.
Although the Company believes its modular buildings were superior to the
wood-framed buildings offered by its competitors, the Company was not able to
generate acceptable margins on this product line. During 1996, the Company
implemented a strategic restructuring program designed to concentrate management
effort and resources and better position itself to achieve its strategic growth
objectives. As a result of this program, the Company's 1996 results include
charges of $700,000 ($400,000 after tax, or $.06 per share) for costs associated
with restructuring the Company's manufacturing operations and for other related
charges. These charges were recorded in the fourth quarter of 1996, and were
comprised of the write-down of assets used in the Company's discontinued modular
building operations and related severance obligations ($300,000), and the
write-down of other fixed assets ($400,000). By discontinuing its modular
building operations, the Company will be able to utilize t he management
resources and production capacity previously utilized by this division to expand
the Company's telecommunications shelter business and its container leasing
operations.
Revenue Recognition
The Company recognizes revenue from sales of containers upon delivery.
Revenue generated under container leases is recognized on a straight-line basis
over the term of the related lease.
F-7
<PAGE>
Revenue under certain contracts for the manufacture of modular
buildings is recognized using the percentage-of-completion method primarily
based on contract costs incurred to date compared with total estimated contract
costs. Provision for estimated losses on uncompleted contracts is made in the
period in which such losses are determined. Costs and estimated earnings less
billings on uncompleted contracts of approximately $141,000 and $112,000 in 1996
and 1995, respectively, represent amounts received in excess of revenue
recognized and are included in accrued liabilities in the accompanying balance
sheet. In 1995, costs and estimated revenue recognized in excess of amounts
billed were included in receivables.
Revenue for container delivery, pick-up and hauling is recognized as
the related services are provided.
Concentrations of Credit Risk
Financial instruments which potentially expose the Company to
concentrations of credit risk, as defined by Statement of Financial Accounting
Standards ("SFAS") No. 105, consist primarily of trade accounts receivable. The
Company's trade accounts receivable are generally secured by the related
container or modular building sold or leased to the customer.
The Company does not rely on any one customer base. The Company's sales
and leasing customers by major category are presented below as a percentage of
units sold/leased:
<TABLE>
<CAPTION>
1996 1995
---- ----
Sales Leasing Sales Leasing
----- ------- ----- -------
<S> <C> <C> <C> <C>
Retail and wholesale businesses 54% 52% 50% 44%
Homeowners 5% 17% 6% 22%
Construction 12% 22% 10% 23%
Institutions 14% 4% 20% 5%
Government, industrial and other 15% 5% 14% 6%
</TABLE>
Inventories
Inventories are stated at the lower of cost or market, with cost being
determined under the specific identification method. Market is the lower of
replacement cost or net realizable value. Inventories at December 31 consisted
of the following:
1996 1995
---- ----
Raw materials and supplies $3,547,487 $2,858,181
Work-in-process 288,986 883,814
Finished containers 1,161,909 1,451,227
---------- ----------
$4,998,382 $5,193,222
========== ==========
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. Salvage 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 salvage values do not cause
carrying values to exceed net realizable value. Normal repairs and maintenance
to property, plant and equipment are expensed as incurred.
F-8
<PAGE>
Property, plant and equipment at December 31 consisted of the
following:
Estimated Useful Life in Years
------------------------------
1996 1995
---- ----
Land $ 708,555 $ 328,555
Vehicles and equipment 5 to 10 11,218,281 9,469,092
Buildings and improvements 30 6,958,247 6,363,154
Office fixtures and equipment 5 to 20 2,514,812 1,714,312
------------ ------------
21,399,895 17,875,113
Less-Accumulated depreciation (3,703,849) (2,402,949)
------------ ------------
$ 17,696,046 $ 15,472,164
============ ============
At December 31, 1996 and 1995, substantially all property, plant and
equipment has been pledged as collateral for long-term debt obligations and
obligations under capital lease (see Notes 3, 4 and 5).
Accrued Liabilities
Included in accrued liabilities in the accompanying consolidated
balance sheets are customer deposits and prepayments totaling approximately
$412,000 and $505,000 for the years ended December 31, 1996 and 1995,
respectively.
Earnings Per Common and Common Share Equivalent
Earnings per common and common share equivalent is computed by dividing
net income by the weighted average number of common and common equivalent shares
outstanding. Fully diluted and primary earnings per common and common share
equivalent are considered equal for all periods presented.
Fair Value of Financial Instruments
The estimated fair value of financial instruments has been determined
by the Company using available market information and valuation methodologies.
Considerable judgment is required in estimating fair values. Accordingly, the
estimates may not be indicative of the amounts the Company could realize in a
current market exchange.
The carrying amounts of cash, receivables and accounts payable
approximate fair values. The carrying amounts of the Company's borrowing under
the line of credit agreement and long-term debt instruments approximate their
fair value. The fair value of the Company's long-term debt and line of credit is
estimated using discounted cash flow analyses, based on the Company's current
incremental borrowing rates for similar types of borrowing arrangements.
Deferred Financing Costs
Included in other assets are deferred financing costs of $1,659,218 and
$172,715 at December 31, 1996 and 1995, respectively. These costs of obtaining
long-term financing are being amortized over the term of the related debt, using
the straight line method.
F-9
<PAGE>
Advertising Expense
The Company expenses the costs of advertising the first time the
advertising takes place, except for direct-response advertising, which is
capitalized and amortized over its expected period of future benefits.
Advertising expense totaled $2,341,000 and $2,258,000 in 1996 and 1995,
respectively.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenue and expenses during the reporting
period. Actual results could differ from those estimates.
Recently Issued Accounting Standard
Statement of Financial Accounting Standards No. 121 (SFAS No. 121),
Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to
be Disposed of, was adopted in 1996. The adoption of SFAS No. 121 did not have a
material effect on the Company's financial position or its results of
operations.
(2) CONTAINER LEASE FLEET
The Company has a container lease fleet consisting of refurbished or
constructed containers and modular buildings that are leased to customers under
operating lease agreements with varying terms. Depreciation is provided using
the straight-line method over the containers' and modular buildings' estimated
useful lives of 20 years with salvage values estimated at 70% of cost. In the
opinion of management, estimated salvage values do not cause carrying values to
exceed net realizable value. At December 31, 1996 and 1995, approximately $6.9
million and $24.9 million, respectively of containers and modular buildings
included in the container lease fleet have been pledged as collateral for
long-term debt and obligations under capital leases and, at December 31, 1996.
The balance of the containers are secured as collateral under the Credit
Agreement (see Notes 3, 4 and 5). Normal repairs and maintenance to the
containers and modular buildings are expensed as incurred.
(3) LINE OF CREDIT
In March 1996, the Company entered into the Credit Agreement with BT
Commercial Corporation, as Agent for a group of lenders (the "Lenders"). Under
the terms of the Credit Agreement, as amended, the Lenders have provided the
Company with a $35.0 million revolving line of credit and a $6.0 million term
loan. Borrowings under the Credit Agreement are secured by substantially all of
the Company's assets.
Available borrowings under the revolving line of credit are based upon
the level of the Company's inventories, receivables and container lease fleet.
The container lease fleet will be appraised at lease annually, and up to 90% of
the lesser of cost or appraised orderly liquidation value, as defined, may be
included in the borrowing base. Interest accrues at the Company's option at
either prime plus 1.5% or the Eurodollar rate plus 3% and is payable monthly.
The term of this line of credit is three years, with a one-year extension
option.
In connection with the closing of the Credit Agreement, the Company
terminated its line of credit with its previous lender, repaying all
indebtedness under that line. In addition, the Company repaid other long-term
debt and obligations under capital leases totaling $14.1 million. As a result,
the Company recognized costs previously deferred related to certain indebtedness
and prepayment penalties resulting in an extraordinary charge to earnings of
$410,000 ($732,000 net of a $322,000 benefit for income taxes).
The line of credit balance outstanding at December 31, 1996, was
approximately $26.4 million and is classified as a long-term obligation in the
accompanying 1996 balance sheet. The amount available for borrowing was
approximately $957,000 at December 31, 1996. Prior to the refinancing, the
Company had available short-term lines of credit which bore interest at 1.5%
over the prime rate. During 1996 and 1995, the weighted average interest
F-10
<PAGE>
rate under the lines of credit was 8.73% and 10.2%, respectively, and the
average balance outstanding during 1996 and 1995 was approximately $20.3 million
and $4.2 million, respectively.
The Credit Agreement contains several covenants including a minimum
tangible net worth requirement, a minimum fixed charge coverage ratio, a maximum
ratio of debt to equity, minimum operating income levels and minimum required
utilization rates. In addition, the Credit Agreement contains limits on capital
expenditures and the incurrence of additional debt, as well as prohibiting the
payment of dividends.
(4) LONG TERM DEBT
Long-term debt at December 31, consists of the following:
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Notes payable to BT Commercial Corporation, interest ranging from 3.25% $5,347,500 $ --
over Eurodollar rate (5.6% at December 31, 1996) to 1.75% over
prime (8.25% at December 31, 1996), fixed monthly installments of
principal plus interest, due March 2001, secured by various classes
of the Company's assets
Notes payable, interest ranging from 9% to 12.2%, monthly installments 743,867 3,122,665
of principal and interest, due March 1997 through September 2001,
secured by equipment and vehicles
Notes payable, interest ranging from 11.49% to 12.63%, monthly 706,796 4,324,043
installments of principal and interest, due July 2000 through
January 2001, secured by containers
Short term note payable to financial institution, interest at 6.89% 114,614 --
payable in fixed monthly installments due March 1997, unsecured
Notes payable to banks, interest ranging from 1.75% to 2.75% over prime, -- 1,635,806
monthly installments of principal and interest, paid off in March ----------- -----------
1996, secured by deeds of trust on real property
7,002,777 9,100,514
Less: Current portion (1,378,829) (737,181)
----------- -----------
$ 5,623,948 $ 8,363,333
=========== ===========
</TABLE>
Future maturities under long-term debt are as follows:
Years ending December 31, 1996
-----------
1997 $ 1,378,829
1998 1,673,650
1999 1,806,743
2000 1,707,031
2001 436,524
-----------
7,002,777
Less: current portion (1,378,829)
-----------
$ 5,623,948
===========
The Credit Agreement with BT Commercial Corporation contains
restrictive covenants. See Note 3.
F-11
<PAGE>
(5) OBLIGATIONS UNDER CAPITAL LEASES
The Company leases certain storage containers and equipment under
capital leases expiring through 2001. Certain storage container leases were
entered into under sale-leaseback arrangements with various leasing companies.
The lease agreements provide the Company with a purchase option at the end of
the lease term based on an agreed upon percentage of the original cost of the
containers. These leases have been capitalized using interest rates ranging from
approximately 8% to 14%. The leases are secured by storage containers and
equipment under lease.
During 1995 and 1994, the Company entered into multi-year agreements
(the "Leases") to lease a number of portable classrooms to school districts in
Arizona. Subsequent to entering the leases, the Company "sold" the portable
classrooms and assigned the Leases to an unrelated third party financial
institution (the "Assignee"). In addition, the Company entered into
Remarketing/Releasing Agreements (the "Agreements") with the Assignee. The
Agreements provide that the Company will be the exclusive selling/leasing agent
upon the termination of the aforementioned Leases for a period of 12 months. If
the Company is successful in releasing the buildings and the Assignee receives,
via lease payments, an amount equal to the Base Price, as defined, plus any
reimbursed remarketing costs of the Company, the Company has the option to
repurchase the buildings for $1 each. If the Company sells any of the buildings,
the Assignee shall receive from each sale that portion of the Base Price
allocated to the building sold plus costs the Assignee has reimbursed to the
Company plus interest on those combined amounts from the date of the Lease
termination at the Assignee's prime rate plus 4%. Any sales proceeds in excess
of this amount are to be remitted to the Company.
In the event the Company has not released or sold the buildings within
12 months of the termination of the Leases, the Assignee has the right to
require the Company to repurchase the buildings for the Base Price plus all
costs the Assignee has reimbursed to the Company plus interest thereon at the
Assignee's prime rate plus 4% since the termination of the Lease. For financial
reporting purposes these transactions were accounted for as capital leases in
accordance with SFAS No. 13, Accounting for Leases. For income tax purposes
these transactions were treated as sales.
During 1996, leases on 15 of the buildings matured and the Company sold
all 15 portable buildings in 1996 pursuant to the Agreements. The revenues from
these sales are included in the accompanying statements of operations and the
underlying capital lease obligations for these buildings were paid in full at
December 31, 1996.
Future payments of obligations under capital leases:
Years ending December 31, 1997 $2,091,580
1998 2,456,136
1999 2,405,222
2000 1,313,241
2001 54,418
----------
Total payments 8,320,598
Less: Amounts representing interest (1,581,251)
----------
6,739,347
Less: Current portion (1,352,279)
----------
$5,387,067
==========
Certain obligations under capital leases contain financial covenants
which include that the Company maintains a specified interest expense coverage
ratio and a required debt to equity ratio.
Gains from sale-leaseback transactions have been deferred and are being
amortized over the estimated useful lives of the related assets. Unamortized
gains at December 31, 1996 and 1995, approximated $288,000 and $305,000,
respectively, and are reflected as a reduction in the container lease fleet in
the accompanying financial statements.
F-12
<PAGE>
Included in the accompanying statements of operations are revenues of
approximately $3,645,000 in 1995 for container sales under sale-leaseback
transactions where no profit was recognized. The Company did not enter into any
significant sale-leaseback transactions during 1996.
(6) INCOME TAXES
The Company accounts for income taxes in accordance with SFAS No. 109,
Accounting for Income Taxes. SFAS No. 109 requires the use of an asset and
liability approach in accounting for income taxes. Deferred tax assets and
liabilities are recorded based on the differences between the financial
statement and tax bases of assets and liabilities at the tax rates in effect
when these differences are expected to reverse.
The provision for income taxes at December 31, 1996, 1995 and 1994
consisted of the following:
1996 1995 1994
---- ---- ----
Current $ -- $ -- $ --
Deferred 377,596 610,341 765,098
-------- -------- --------
Total $377,596 $610,341 $765,098
======== ======== ========
The components of the net deferred tax liability at December 31, 1996 and 1995
are as follows:
1996 1995
---- ----
Net long-term deferred tax liability:
Accelerated tax depreciation $(7,363,000) $(5,450,000)
Deferred gain on sale-leaseback transactions (429,000) 136,000
Deferred revenue (Note 5) -- (87,000)
Alternative minimum tax credit 211,000 211,000
Reserve and other 324,500 (68,000)
Net operating loss carry-forwards 3,369,000 1,412,000
Valuation allowance (13,000) (13,000)
----------- -----------
(3,900,500) (3,859,000)
----------- -----------
Net short-term deferred tax asset:
Valuation reserve for accounts receivable 113,000 66,000
Unicap adjustment 40,000 51,000
Vacation reserve 38,000 30,000
----------- -----------
191,000 147,000
----------- -----------
$(3,709,500) $(3,712,000)
=========== ===========
SFAS No. 109 requires the reduction of deferred tax assets by a
valuation allowance if, based on the weight of available evidence, it is more
likely than not that some or all of the deferred tax assets will not be
realized.
Stock issuance's by the Company may cause a change in ownership under
the provisions of the Internal Revenue Code Section 382; accordingly, the
utilization of the Company's net operating loss carry-forwards may be subject to
annual limitations. Due to a change in ownership during 1996, approximately
$1,300,000 of the Company's net operating losses are subject to limitation.
F-13
<PAGE>
A reconciliation of the federal statutory rate to the Company's
effective tax rate for the years ended December 31 are as follows:
1996 1995 1994
---- ---- ----
Statutory federal rate 34% 34% 34%
State taxes, net of federal benefit 6 6 8
Effect of permanent differences 4 4 2
-- -- --
44% 44% 44%
== == ==
Net operating loss carry-forwards for federal income tax purposes
totaled $8.0 million and $3.6 million at December 31, 1996 and 1995,
respectively, and expire from 2008 through 2011.
(7) TRANSACTIONS WITH RELATED PARTIES
Effective December 31, 1993, Richard E. Bunger contributed
substantially all of the assets and liabilities of Mobile Mini Storage Systems
("MMSS") and the stock of DDS to the Company in exchange for 2,700,000 shares of
common stock and the assumption of certain liabilities by the Company. Such
liabilities include liabilities associated with the MMSS operations and certain
income tax liabilities of Mr. Bunger and an affiliate arising from the MMSS
operations occurring prior to January 1, 1994. These income tax liabilities were
approximately $2,821,000. The Company will indemnify and defend Mr. Bunger
against loss or expense related to all liabilities assumed by the Company and
for any contingent liabilities arising from past operations.
The Company leases a portion of the property comprising its Phoenix
location and the property comprising its Tucson location from Mr. Bunger's five
children. Annual payments under these leases currently total approximately
$70,000 with an annual adjustment based on the Consumer Price Index. The term of
each of these leases will expire on December 31, 2003. Additionally, the Company
leases its Rialto, California facility from Mobile Mini Systems, Inc., an
affiliate, wholly owned by Mr. Bunger, for total annual lease payments of
$204,000, with annual adjustments based on the Consumer Price Index. The Rialto
lease is for a term of 15 years expiring on December 31, 2011. Management
believes the rental rates reflect the fair market value of these properties. The
Company purchased certain leased property at its Maricopa, Arizona facility from
Mr. Bunger on March 29, 1996, for a purchase price of $335,000, which management
believes reflects the fair market value of the property.
All ongoing and future transactions with affiliates will be on terms no
less favorable than could be obtained from unaffiliated parties and will be
approved by a majority of the independent and disinterested directors.
(8) BENEFIT PLANS
Stock Option Plan
In August 1994, the Company's board of directors adopted the Mobile
Mini, Inc. 1994 Stock Option Plan ("the Plan"). Under the terms of the Plan,
both incentive stock options ("ISOs"), which are intended to meet the
requirements of Section 422 of the Internal Revenue Code, and non-qualified
stock options may be granted. ISOs may be granted to the officers and key
personnel of the Company. Non-qualified stock options may be granted to the
Company's directors and key personnel, and to providers of various services to
the Company. The purpose of the Plan is to provide a means of performance-based
compensation in order to attract and retain qualified personnel and to provide
an incentive to others whose job performance or services affect the Company.
Under the Plan, as amended in 1996, options to purchase a maximum of
543,125 shares of the Company's common stock may be granted. The exercise price
for any option granted under the Plan may not be less than 100% (110% if the
option is granted to a stockholder who at the time the option is granted owns
stock comprising more than 10% of the total combined voting power of all classes
of stock of the Company) of the fair market value of the
F-14
<PAGE>
common stock at the time the option is granted. The option holder may pay the
exercise price in cash or by delivery of previously acquired shares of common
stock of the Company that have been held for at least six months.
The Plan is administered by the compensation committee of the board of
directors which will determine whether such options will be granted, whether
such options will be ISOs or non-qualified options, which directors, officers,
key personnel and service providers will be granted options, the restrictions
upon the forfeitablity of such options and the number of options to be granted,
subject to the aggregate maximum number set forth above. Each option granted
must terminate no more than 10 years from the date it is granted.
The board of directors may amend the Plan at any time, except that
approval by the Company's shareholders may be required for any amendment that
increases the aggregate number of shares which may be issued pursuant to the
Plan, changes the class of persons eligible to receive such options, modifies
the period within which the options may be granted, modifies the period within
which the options may be exercised or the terms upon which options may be
exercised, or increases the material benefits occurring to the participants
under the Plan. Unless previously terminated by the board of directors, the Plan
will terminate in November, 2003, but any option granted thereunder will
continue throughout the terms of such option.
The following summarizes the activity for the Plan for the years ended
December 31, 1996 and 1995:
<TABLE>
<CAPTION>
1996 1995
---- ----
Number Weighted Average Number Weighted Average
------ ---------------- ------ ----------------
of Shares Exercise Price of Shares Exercise Price
--------- -------------- --------- --------------
<S> <C> <C> <C> <C>
Options outstanding, beginning of 241,000 $4.04 128,000 $4.11
year
Granted 156,000 $3.43 143,000 $3.94
Canceled/Expired (50,000) $3.16 (30,000) $3.88
Exercised -- --
------- ----- ------- -----
Options outstanding, end of year 347,000 $3.89 241,000 $4.04
------- ----- ------- -----
Options exercisable, end of year 158,500 89,250
------- ------
Range of exercise prices $3.12-$3.85 $3.75-$5.38
=========== ===========
Weighted average fair value of $1.70 $ .97
options granted ===== =====
</TABLE>
At December 31, 1996, the weighted average remaining contractual life
of the options outstanding was 7.6 years.
Statement of Financial Accounting Standards No. 123
During 1995, the Financial Accounting Standards Board issued SFAS No.
123, Accounting for Stock-Based Compensation, which defines a fair value based
method of accounting for an employee stock option or similar equity instrument
and encourages all entities to adopt that method of accounting for all of their
employee stock compensation plans. However, it also allows an entity to continue
to measure compensation cost related to stock options issued to employees under
the Plan using the method of accounting prescribed by the Accounting Principles
Board Opinion No. 25 (APB No. 25), Accounting for Stock Issued to Employees.
Entities electing to remain under the accounting in APB No. 25 must make pro
forma disclosures of net income and earnings per share, as if the fair value
based method of accounting defined in SFAS No. 123 has been applied.
F-15
<PAGE>
The Company has computed for pro forma disclosure purposes the value of
all options and warrants granted during 1995 and 1996, using the following
weighted average assumptions used for grants:
Risk free interest rate 6.4%
Expected dividend yield None
Expected holding period 4 years
Expected volatility 48%
Options were assumed to be exercised at the end of the four year
expected life for the purpose of this valuation. Adjustments were not made for
options forfeited prior to vesting. The total value of options granted was
computed to be the following approximate amounts, which would be amortized on
the straight-line basis over the average holding period of options:
Year ended December 31, 1996 $99,418
Year ended December 31, 1995 $56,838
If the Company had accounted for stock options issued to employees
using a fair value based method of accounting, the Company's net income and net
income per share would have been reported as follows:
Year Ended December 31,
1996 1995
---- ----
Net Income:
As reported $ 70,222 $ 776,795
Pro forma 14,548 744,966
Net income per common share
and common share equivalent:
As reported $ 0.01 $ 0.16
Pro forma 0.00 0.15
The effects of applying SFAS No. 123 for providing pro forma
disclosures for 1996 and 1995 are not likely to be representative of the effects
on reported net income and net income per common share equivalent for future
years, because options vest over several years and additional awards generally
are made each year, and SFAS No. 123 has not been applied to options granted
prior to January 1, 1995.
401(k) Plan
In 1995, the Company established a contributory retirement plan (the
"401(k) Plan") covering eligible employees with at least one year of service.
The 401(k) Plan is designed to provide tax-deferred income to the Company's
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
2% to 15% of their respective salary, not to exceed the statutory limit. The
Company may elect to make a qualified non-elective contribution in an amount as
determined by the Company. Under the terms of the 401(k) Plan, the Company 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 his or
her funds among certain named plans. The Company did not elect to make any
qualified non-elective contributions or profit sharing contributions to the
401(k) Plan during 1996 or 1995.
(9) COMMITMENTS AND CONTINGENCIES
As discussed more fully in Note 7, the Company is obligated under
noncancelable operating leases with related parties. The Company also leases its
corporate offices and other properties, as well as operating equipment
F-16
<PAGE>
from third parties under noncancelable operating leases. Rent expense under
these agreements was approximately $649,000, $515,000 and $342,000 for the years
ended December 31, 1996, 1995, and 1994, respectively. Total future commitments
under all noncancelable agreements for the years ended December 31, are as
follows:
1997 $ 800,987
1998 821,825
1999 837,417
2000 770,668
2001 585,319
Thereafter 3,821,386
----------
$7,637,602
==========
The Company is involved in certain administrative proceedings arising
in the normal course of business. In the opinion of management, the Company's
potential exposure under the pending administrative proceedings is adequately
provided for in the accompanying financial statements and any adverse outcome
will not have a material impact on the Company's results of operations or its
financial condition.
(10) STOCKHOLDERS' EQUITY
Initial Public Offering
In February 1994, the Company successfully completed an initial public
offering of 937,500 Units, each Unit consisting of two shares of common stock
and one detachable common stock warrant for the purchase of one share of common
stock for $5.00 per share. An additional 130,000 Units were sold in March 1994
pursuant to the underwriters' over-allotment option. Net proceeds to the Company
totaled $7,027,118.
The Company also granted the underwriters a warrant ("Underwriters'
Warrant") for the purchase of an additional 93,750 Units. The Underwriters'
Warrant is exercisable for four years, commencing on February 17, 1995, at an
exercise price of $12.00 per unit. As of December 31, 1995, none of the
detachable common stock warrants or Underwriters' Warrants had been exercised.
Series A Convertible Preferred Stock
In December 1995, the Company completed the private placement of 50,000
shares of Series A Convertible Preferred Stock ("Series A"), $.01 par value,
$100 stated value, for aggregate net proceeds of $4.1 million. Pursuant to the
terms of the Series A, all 50,000 shares of Series A were converted into
1,904,324 shares of the Company's common stock at an average conversion rate of
$2.63 per share during the first quarter of 1996.
F-17
<PAGE>
MOBILE MINI, INC.
CONSOLIDATED BALANCE SHEET
(UNAUDITED)
ASSETS March 31, 1997
--------------
CURRENT ASSETS:
Cash and cash equivalents $ 630,858
Receivables, net 4,644,884
Inventories 6,724,769
Prepaid and other 554,725
-----------
Total current assets 12,555,236
CONTAINER LEASE FLEET, net 36,221,160
PROPERTY, PLANT AND EQUIPMENT, net 18,243,569
OTHER ASSETS, net 1,556,859
-----------
Total assets $68,576,824
===========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 3,163,111
Accrued interest 585,392
Accrued compensation 423,847
Accrued liabilities 1,021,039
Current portion of long-term debt 1,330,366
Current portion of obligations under capital leases 1,918,800
-----------
Total current liabilities 8,442,555
LINE OF CREDIT 30,072,512
LONG-TERM DEBT, less current portion 5,287,642
OBLIGATIONS UNDER CAPITAL LEASES, less current
portion 4,495,277
DEFERRED INCOME TAXES 3,867,975
-----------
Total liabilities 52,165,961
-----------
STOCKHOLDERS' EQUITY:
Common stock; $.01 par value, 17,000,000 shares authorized,
6,739,324 issued and outstanding 67,393
Additional paid-in capital 14,338,873
Retained earnings 2,004,597
-----------
Total stockholders' equity 16,410,863
-----------
Total liabilities and stockholders' equity $68,576,824
===========
F-18
<PAGE>
MOBILE MINI, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended March 31,
----------------------------
1997 1996
---- ----
<S> <C> <C>
REVENUES:
Container and other sales $ 4,542,631 $ 4,915,832
Leasing 3,898,948 3,171,300
Other 1,207,877 821,783
----------- -----------
9,649,456 8,908,915
COSTS AND EXPENSES:
Cost of container and other sales 3,445,770 3,925,438
Leasing, selling and general expenses 4,281,350 3,874,363
Depreciation and amortization 472,167 368,279
----------- -----------
Income from operations 1,450,169 740,835
OTHER INCOME (EXPENSE):
Interest income and other -- 4,000
Interest expense (1,089,879) (948,349)
----------- -----------
INCOME (LOSS) BEFORE PROVISION FOR INCOME
(BENEFIT) TAXES AND EXTRAORDINARY ITEM
360,290 (203,514)
PROVISION (BENEFIT) FOR INCOME TAXES 158,528 (89,546)
----------- -----------
INCOME (LOSS) BEFORE EXTRAORDINARY ITEM 201,762 (113,968)
EXTRAORDINARY ITEM (Note C) -- (410,354)
----------- -----------
NET INCOME (LOSS) $ 201,762 $ (524,322)
=========== ===========
EARNINGS (LOSS) PER SHARE OF COMMON STOCK AND
COMMON STOCK EQUIVALENT:
INCOME (LOSS) BEFORE EXTRAORDINARY ITEM
$ 0.03 $ (0.02)
EXTRAORDINARY ITEM -- (0.06)
----------- -----------
NET INCOME (LOSS) $ 0.03 $ (0.08)
=========== ===========
WEIGHTED AVERAGE NUMBER OF COMMON AND
COMMON EQUIVALENT SHARES OUTSTANDING
6,739,758 6,732,358
=========== ===========
</TABLE>
F-19
<PAGE>
MOBILE MINI, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended March 31,
----------------------------
1997 1996
---- ----
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ 201,762 $ (524,322)
Adjustments to reconcile income to net cash used in
operating activities:
Extraordinary loss on early debt retirement -- 410,354
Depreciation and amortization 472,167 368,279
Gain on disposal of property, plant and equipment -- (4,000)
Changes in assets and liabilities:
Decrease (increase) in receivables, net (13,030) 863,478
Increase in inventories (1,815,657) (581,675)
Decrease (increase) in prepaids and other 188,259 (84,859)
Decrease in other assets 140,340 195,693
(Decrease) increase in accounts payable 605,782 (1,828,140)
(Decrease) increase in accrued liabilities (161,835) 49,304
(Decrease) increase in deferred income taxes 158,475 (411,967)
------------ ------------
Net cash used in operating activities (223,737) (1,547,855)
------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Net purchases of container lease fleet (1,741,236) (78,861)
Net purchases of property, plant, and equipment (1,097,151) (425,433)
------------ ------------
Net cash used in investing activities (2,838,387) (504,294)
------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net borrowings under lines of credit 3,666,477 12,512,634
Proceeds from issuance of long-term debt -- 6,635,069
Deferred costs on credit agreement -- (1,897,573)
Principal payments and penalties on early debt extinguishment -- (14,405,879)
Principal payments on long-term debt (384,769) (549,747)
Principal payments on capital lease obligations (325,269) (931,839)
Additional paid in capital -- (21,063)
------------ ------------
Net cash provided by financing activities 2,956,439 1,341,602
------------ ------------
NET DECREASE IN CASH (105,685) (710,547)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 736,543 1,430,651
------------ ------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 630,858 $ 720,104
============ ============
</TABLE>
See the accompanying notes to these consolidated statements.
F-20
<PAGE>
MOBILE MINI, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE A - The accompanying unaudited consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for interim
financial information and the instructions to Form 10-Q. Accordingly, they do
not include all the information and footnotes required by generally accepted
accounting principles for complete financial statements. In the opinion of
management, all adjustments (which include only normal recurring adjustments)
necessary to present fairly the financial position, results of operations, and
cash flows for all periods presented have been made. The results of operations
for the three month period ended March 31, 1997 are not necessarily indicative
of the operating results that may be expected for the entire year ending
December 31, 1997. These financial statements should be read in conjunction with
the Company's December 31, 1996 financial statements and accompanying notes
thereto.
Certain amounts in the 1996 financial statements have been reclassified to
conform with the 1997 financial statement presentation.
NOTE B - Earnings (loss) per common share is computed by dividing net income
(loss) by the weighted average number of common share equivalents assumed
outstanding during the periods. Fully diluted earnings per common share is
considered equal to primary earnings per share in all periods presented.
In March 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 128, "Earnings per Share" (SFAS No. 128).
SFAS No. 128 is effective for fiscal years ending after December 15, 1997, and
when adopted, will require restatement of prior periods earnings per share. The
effect of this statement is not significant on any period presented.
NOTE C - The Company entered into a credit agreement (the "Credit Agreement") in
March, 1996 with BT Commercial Corporation, as Agent for a group of lenders (the
"Lenders"). Under the terms of the Credit Agreement, the Lenders have provided
the Company with a $35.0 million revolving line of credit and a $6.0 million
term loan. Borrowings under the Credit Agreement are secured by substantially
all of the Company's assets.
In connection with the closing of the Credit Agreement, the Company repaid
long-term debt and obligations under capital leases totaling $14.1 million. As a
result, costs previously deferred related to this indebtedness and prepayment
penalties resulted in an extraordinary charge to earnings in 1996, of
approximately $410,000 after the benefit of income taxes.
NOTE D - Inventories are stated at the lower of cost or market, with cost being
determined under the specific identification method. Market is the lower of
replacement cost or net realizable value. Inventories consisted of the following
at:
March 31, 1997 December 31, 1996
-------------- -----------------
Raw material and supplies $3,903,561 $3,547,487
Work-in-process 911,543 288,986
Finished containers 1,909,665 1,161,909
---------- ----------
$6,724,769 $4,998,382
========== ==========
F-21
<PAGE>
NOTE E - Property, plant and equipment consisted of the following at:
March 31, 1997 December 31, 1996
-------------- -----------------
Land $ 708,554 $ 708,555
Vehicles and equipment 11,581,984 11,218,281
Buildings and improvements 7,296,205 6,958,247
Office fixtures and equipment 2,620,597 2,514,812
------------ ------------
22,207,340 21,399,895
Less accumulated depreciation (3,963,771) (3,703,849)
------------ ------------
$ 18,243,569 $ 17,696,046
============ ============
F-22
<PAGE>
No dealer, salesperson or other person is authorized to give any
information or to make any representation not contained in this Prospectus in
connection with this offering, and any information or representation not
contained herein must not be relied upon as having been authorized by the
Company or any other person. This Prospectus does not constitute an offer to
sell or a solicitation of an offer to buy any securities other than the
registered securities to which it relates or an offer to or solicitation of any
person in any jurisdiction where such an offer or solicitation would be
unlawful. Neither the delivery of this Prospectus at any time nor any sale made
hereunder shall, under any circumstances, create any implication that the
information herein contained is correct as of any time subsequent to the date of
this Prospectus.
TABLE OF CONTENTS
<TABLE>
<S> <C>
Available Information----------------------------------------------------------------------------------------------5
Incorporation of Certain Documents by Reference--------------------------------------------------------------------6
Summary------------------------------------------------------------------------------------------------------------7
Risk Factors-------------------------------------------------------------------------------------------------------9
Use of Proceeds----------------------------------------------------------------------------------------------------11
Dividend Policy----------------------------------------------------------------------------------------------------12
Capitalization-----------------------------------------------------------------------------------------------------13
The Company--------------------------------------------------------------------------------------------------------13
Selected Consolidated Financial Information------------------------------------------------------------------------21
Management's Discussion and Analysis of Financial Condition and Results of Operations------------------------------22
Management---------------------------------------------------------------------------------------------------------30
Certain Relationships and Related Transactions---------------------------------------------------------------------34
Warrantholders-----------------------------------------------------------------------------------------------------35
Plan of Distribution-----------------------------------------------------------------------------------------------35
Description of Securities------------------------------------------------------------------------------------------36
Legal Matters------------------------------------------------------------------------------------------------------38
Experts------------------------------------------------------------------------------------------------------------38
Consolidated Financial Statements----------------------------------------------------------------------------------F-1
</TABLE>
<PAGE>
1,067,500 SHARES
mobile mini, inc.
COMMON STOCK
--------------------------
PROSPECTUS
--------------------------
_____________, 1997
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The Company estimates that expenses in connection with the offering
described in this registration statement (other than underwriting and brokerage
discounts, commissions and fees and legal fees incurred by the Warrantholders,
if any, payable by such Warrantholders) will be as follows:
Securities and Exchange Commission registration fee $ 0
Legal fees and expenses 15,000
Accounting fees and expenses 15,000
-------
Total $30,000
=======
All amounts except the Securities and Exchange Commission registration
fee (which was paid in connection with prior filings) are estimated.
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The Company's Certificate of Incorporation and Bylaws provide that the
Company will indemnify its directors and executive officers and may indemnify
its other officers, employees and other agents to the fullest extent permitted
by Delaware law. Pursuant to these provisions, the Company intends to enter into
indemnity agreements with each of its directors and executive officers.
In addition, the Company's Certificate of Incorporation provides that,
to the fullest extent permitted by Delaware law, the Company's directors will
not be liable for monetary damages for breach of the directors' fiduciary duty
of care to the Company and its stockholders. This provision in the Certificate
of Incorporation does not eliminate the duty of care, and in appropriate
circumstances equitable remedies such as an injunction or other forms of
non-monetary relief would remain available under Delaware law. Each director
will be subject to liability for breach of the director's duty of loyalty to the
Company, for acts or omissions not in good faith or involving intentional
misconduct or knowing violations of law, for acts or omissions that the director
believes to be contrary to the best interests of the Company or its
stockholders, for any transaction from which the director derived an improper
personal benefit, for acts or omissions involving a reckless disregard for the
director's duty to the Company or its stockholders when the director was aware
or should have been aware of a risk of serious injury to the Company or its
stockholders, for acts or omissions that constitute an unexcused pattern of
inattention that amounts to an abdication of the director's duty to the Company
or its stockholders, for improper transactions between the director and the
Company and for improper distributions to stockholders and loans to directors
and officers. This provision also does not affect a director's responsibilities
under any other laws, such as the federal securities laws or state or federal
environmental laws.
ITEM 16. EXHIBITS
EXHIBIT
NUMBER DESCRIPTION
- ------ -----------
4.1 Form of Warrant Agreement.(1)
4.2 Form of Underwriter Warrant.(1)
4.3 Specimen Form of Common Stock Certificate. (1)
II-1
<PAGE>
4.4 Specimen Form of Warrant Certificate. (1)
5.1 Opinion of Bryan Cave LLP.
23.1 Consent of Bryan Cave LLP (included in Exhibit 5.1).
23.2 Consent of Arthur Andersen LLP.
24.1 Power of Attorney(2)
- --------------------
(1) Incorporated by reference, filed as an exhibit to the Company's
Registration Statement on Form SB-2, SEC File No. 33-71528-LA.
(2) Included on the signature page of the Form S-2 Registration Statement.
ITEM 17. UNDERTAKINGS.
(a) The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are
being made, a post-effective amendment to this registration statement;
(2) That, for the purpose of determining any liability under
the Securities Act of 1933, each such post-effective amendment shall be deemed
to be a new registration statement relating to the securities offered therein,
and the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof; and
(3) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain unsold at the
termination of the offering.
(b) The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
Registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Securities Exchange Act of 1934 that is incorporated by reference in the
Registration Statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
(c) Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers, and controlling persons
of the Registrant pursuant to the foregoing provisions, or otherwise, the
Registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Registrant of expenses
incurred or paid by a director, officer, or controlling person of the Registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of counsel the matter has
been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question of whether such indemnification by it is against
public policy as expressed in the Securities Act and will be governed by the
final adjudication of such issue.
II-2
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act, the registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-2 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in Tempe, Arizona, on this 26th day of June, 1997.
MOBILE MINI, INC.
By:/s/Steven G. Bunger
-------------------------------------
Steven G. Bunger,
President and Chief Executive Officer
POWER OF ATTORNEY
Each of the undersigned hereby authorizes Lawrence Trachtenberg as his
attorney-in-fact to execute in the name of each such person and to file such
amendments (including post-effective amendments) to this registration statement
as the Registrant deems appropriate and appoints such person as attorney-in-fact
to sign on his behalf amendments, exhibits, supplements and post-effective
amendments to this registration statement.
Pursuant to the requirements of the Securities Act of 1933, as amended,
this to Registration Statement has been signed below by the following persons in
the capacities and on the dates indicated.
SIGNATURE TITLE DATE
- --------- ----- ----
/s/ Steven G. Bunger President, Chief Executive Officer June 26, 1997
- ------------------------- Executive Officer and Director
Steven G. Bunger (principal executive officer)
/s/ Lawrence Trachtenberg Executive Vice President, Chief June 26, 1997
- ------------------------- Financial Officer and Director
Lawrence Trachtenberg (principal financial and accounting officer)
/s/ Richard E. Bunger Chairman of the Board June 26, 1997
- -------------------------
Richard E. Bunger
/s/ George Berkner Director June 26, 1997
- -------------------------
George Berkner
/s/ Ronald J. Marusiak Director June 26, 1997
- -------------------------
Ronald J. Marusiak
II-3
<TABLE>
<S> <C> <C>
BRYAN CAVE LLP
LONDON, ENGLAND
ST. LOUIS, MISSOURI TWENTY-FIRST FLOOR RIYADH, SAUDI ARABIA
WASHINGTON, D.C. 2800 NORTH CENTRAL AVENUE KUWAIT CITY, KUWAIT
NEW YORK, NEW YORK PHOENIX, ARIZONA 85004-1098 ABU DHABI, UNITED ARAB EMIRATES
KANSAS CITY, MISSOURI (602) 230-7000 DUBAI, UNITED ARAB EMIRATES
OVERLAND PARK, KANSAS FACSIMILE: (602) 266-5938 HONG KONG
LOS ANGELES, CALIFORNIA ASSOCIATED OFFICE IN SHANGHAI
SANTA MONICA, CALIFORNIA
IRVINE, CALIFORNIA
</TABLE>
June 30, 1997
Mobile Mini, Inc.
1834 West Third Street
Tempe, Arizona 85281
Dear Sirs:
We are acting as counsel to Mobile Mini, Inc. (the "Company") in
connection with the Registration Statement on Form S-2 (the "Registration
Statement"), under the Securities Act of 1933, as amended (the "Act"), covering
1,067,500 shares of the Company's common stock, par value $.01 per share (the
"Common Stock"), issuable upon exercise of redeemable Common Stock Purchase
Warrants (the "Warrants") issued in connection with the Company's 1994 initial
public offering (the "Initial Public Offering").
We have examined the originals, or certified, conformed or reproduction
copies, of all such records, agreements, instruments and documents as we have
deemed relevant or necessary as the basis for the opinion hereinafter expressed.
In all such examinations, we have assumed the genuineness of all signatures on
original or certified copies and the conformity to original or certified copies
of all copies submitted to us as conformed or reproduction copies. As to various
questions of fact relevant to such opinion, we have relied upon, and assumed the
accuracy of, certificates and oral or written statements and other information
of or from public officials, officers or representatives of the Company, and
others.
Based upon the foregoing, we are of the opinion that the shares of
Common Stock reserved for issuance upon exercise of the Warrants, when so
issued, upon exercise in accordance with the terms and provisions of the
Warrants, will be validly issued, fully paid and non-assessable.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and to the reference to this firm under the caption
"Legal Matters" in the Prospectus forming a part of the Registration Statement.
In giving this consent, we do not hereby admit that we are in the category of
persons whose consent is required under Section 7 of the Act.
Very truly yours,
/s/ Bryan Cave LLP
BRYAN CAVE LLP
ARTHUR ANDERSEN LLP
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to (i) the use of our
report included in this registration statement and (ii) the incorporation by
reference in this registration statement of our report dated March 24, 1997,
included in Mobile Mini, Inc's Form 10-K for the year ended December 31, 1996,
and to all references to our firm included in this registration statement.
ARTHUR ANDERSEN LLP
Phoenix, Arizona,
June 27, 1997.
