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U. S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-Q
(MARK ONE)
|X| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1998
|_| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from __________ to __________
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Commission File Number 1-12804
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mobile mini, inc.
(Exact name of registrant as specific in its charter)
Delaware 86-0748362
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
1834 West 3rd Street
Tempe, Arizona 85281
(Address of principal executive offices)
(602) 894-6311
(Registrant's telephone number, including area code)
Indicate by check whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes [X] No [ ],
As of November 3, 1998, there were outstanding 7,902,083 shares of the
issuer's common stock, par value $.01.
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<PAGE>
MOBILE MINI, INC.
INDEX TO FORM 10-Q FILING
FOR THE QUARTER ENDED SEPTEMBER 30, 1998
TABLE OF CONTENTS PAGE
NUMBER
PART I.
FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets 3
September 30, 1998 (unaudited) and December 31, 1997
Consolidated Statements of Operations 4
Three Months and Nine Months ended September 30, 1998
and September 30, 1997 (unaudited)
Consolidated Statements of Cash Flows 6
Nine Months Ended September 30, 1998 and September 30,
1997
(unaudited)
Notes to Consolidated Financial Statements 7
Item 2. Management's Discussion and Analysis of Financial Condition 10
and Results of Operations
PART II.
OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders 16
Item 6. Exhibits and Reports on Form 8-K 16
SIGNATURES 17
2
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
MOBILE MINI, INC.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
ASSETS September 30, 1998 December 31, 1997
(Unaudited)
------------------ ------------------
<S> <C> <C>
CASH AND CASH EQUIVALENTS $ 736,937 $ 1,005,204
RECEIVABLES, net of allowance for doubtful accounts
of $1,045,000 and $893,000, respectively 6,917,888 6,259,476
INVENTORIES 7,285,441 4,748,316
CONTAINER LEASE FLEET, net 70,574,768 50,906,908
PROPERTY PLANT AND EQUIPMENT, net 19,010,116 18,011,916
DEPOSITS AND PREPAID EXPENSES 1,695,395 898,615
OTHER ASSETS 3,264,432 2,221,587
------------------ ------------------
Total assets $ 109,484,977 $ 84,052,022
================== ==================
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES:
ACCOUNTS PAYABLE $ 3,855,150 $ 2,676,634
ACCRUED LIABILITIES 4,314,699 3,104,747
LINE OF CREDIT 51,053,884 35,883,104
NOTES PAYABLE 5,244,686 6,123,049
OBLIGATIONS UNDER CAPITAL LEASES 3,405,631 5,371,603
SUBORDINATED NOTES, net 6,686,997 6,647,874
DEFERRED INCOME TAXES 7,143,155 5,217,619
------------------ ------------------
Total liabilities 81,704,202 65,024,630
------------------ ------------------
STOCKHOLDERS' EQUITY:
Common stock; $.01 par value, 17,000,000 shares
authorized, 7,878,583 and 6,799,524 issued and
outstanding at September 30, 1998 and December
31, 1997, respectively 78,786 67,995
Additional paid-in capital 21,560,227 16,206,166
Common stock to be issued, 85,468 shares 500,000 --
Retained earnings 5,641,762 2,753,231
------------------ ------------------
Total stockholders' equity 27,780,775 19,027,392
------------------ ------------------
Total liabilities and stockholders' equity $ 109,484,977 $ 84,052,022
================== ==================
</TABLE>
See the accompanying notes to these consolidated balance sheets.
3
<PAGE>
MOBILE MINI, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
Three Months Ended September 30,
--------------------------------
1998 1997
------------ ------------
REVENUES:
Leasing $ 9,698,292 $ 6,668,491
Container and other sales 3,472,281 4,701,743
Other 198,015 129,711
------------ ------------
13,368,588 11,499,945
COSTS AND EXPENSES:
Cost of container and other sales 2,167,114 3,108,623
Leasing, selling and general expenses 6,668,556 5,295,188
Depreciation and amortization 737,515 596,560
------------ ------------
INCOME FROM OPERATIONS 3,795,403 2,499,574
OTHER INCOME (EXPENSE):
Interest income 9,181 1,423
Interest expense (1,455,818) (1,317,114)
------------ ------------
INCOME BEFORE PROVISION FOR INCOME TAXES 2,348,766 1,183,883
PROVISION FOR INCOME TAXES 939,506 520,909
------------ ------------
NET INCOME $ 1,409,260 $ 662,974
============ ============
EARNINGS PER SHARE:
Basic $ 0.18 $ 0.10
============ ============
WEIGHTED AVERAGE NUMBER OF COMMON
SHARES OUTSTANDING
7,960,170 6,739,324
============ ============
Diluted $ 0.17 $ 0.10
============ ============
WEIGHTED AVERAGE NUMBER OF COMMON AND
COMMON SHARE EQUIVALENTS OUTSTANDING 8,411,797 6,832,160
============ ============
See the accompanying notes to these consolidated statements
4
<PAGE>
MOBILE MINI, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
Nine Months Ended September 30,
-------------------------------
1998 1997
------------ ------------
REVENUES:
Leasing $ 25,457,210 $ 17,323,195
Container and other sales 12,670,741 15,441,124
Other 387,342 578,877
------------ ------------
38,515,293 33,343,196
COSTS AND EXPENSES:
Cost of container and other sales 8,872,001 11,118,979
Leasing, selling and general expenses 18,452,010 14,587,373
Depreciation and amortization 2,107,987 1,598,436
------------ ------------
INCOME FROM OPERATIONS 9,083,295 6,038,408
OTHER INCOME (EXPENSE):
Interest income 25,866 1,423
Interest expense (4,294,943) (3,565,737)
------------ ------------
INCOME BEFORE PROVISION FOR INCOME TAXES 4,814,218 2,474,094
PROVISION FOR INCOME TAXES 1,925,687 1,088,601
------------ ------------
NET INCOME $ 2,888,531 $ 1,385,493
============ ============
EARNINGS PER SHARE:
Basic $ 0.37 $ 0.21
============ ============
WEIGHTED AVERAGE NUMBER OF COMMON
SHARES OUTSTANDING 7,784,968 6,739,324
============ ============
Diluted $ 0.35 $ 0.21
============ ============
WEIGHTED AVERAGE NUMBER OF COMMON AND
COMMON SHARE EQUIVALENTS OUTSTANDING 8,366,628 6,752,332
============ ============
See the accompanying notes to these consolidated statements
5
<PAGE>
MOBILE MINI, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
Nine Months Ended September 30,
-------------------------------
1998 1997
------------ ------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 2,888,531 $ 1,385,493
Adjustments to reconcile income to net cash provided by
operating activities:
Reserve for doubtful accounts receivable 684,011 478,131
Amortization of deferred loan costs 447,195 378,609
Amortization of warrants issuance discount 39,123 --
Depreciation and amortization 2,107,987 1,598,436
(Gain) loss on disposal of property, plant and equipment (3,949) 53,058
Deferred income taxes 1,925,536 1,059,463
Changes in certain assets and liabilities, net of effect of
businesses acquired
Increase in receivables (1,300,549) (2,619,863)
Increase in inventories (2,537,125) (622,604)
Increase in deposits and prepaid expenses (719,410) (634,385)
(Decrease) increase in other assets 182,965 (377,513)
Increase in accounts payable 1,178,516 913,086
Increase in accrued liabilities 1,209,952 1,077,952
------------ ------------
Net cash provided by operating activities 6,102,783 2,689,863
------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Cash paid for businesses acquired (3,944,446) --
Net purchases of container lease fleet (17,191,111) (12,100,138)
Net purchases of property, plant, and equipment (2,132,583) (1,707,509)
------------ ------------
Net cash used in investing activities (23,268,140) (13,807,647)
------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net borrowings under lines of credit 15,170,780 10,117,792
Proceeds from issuance of notes payable 376,670 3,754,955
Principal payments on notes payable (1,255,033) (1,153,933)
Principal payments on capital lease obligations (2,076,179) (1,001,298)
Exercise of warrants 4,679,877 --
Issuance of common stock 975 --
------------ ------------
Net cash provided by financing activities 16,897,090 11,717,516
------------ ------------
NET (DECREASE) INCREASE IN CASH (268,267) 599,732
CASH AND CASH EQUIVALENTS AT BEGINNING
OF PERIOD 1,005,204 736,543
------------ ------------
CASH AND CASH EQUIVALENTS AT END OF
PERIOD $ 736,937 $ 1,336,275
============ ============
</TABLE>
See the accompanying notes to these consolidated statements.
6
<PAGE>
MOBILE MINI, INC. AND SUBSIDIARIES - NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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 nine month period ended September 30, 1998 are not necessarily
indicative of the operating results that may be expected for the entire year
ending December 31, 1998. These financial statements should be read in
conjunction with the Company's December 31, 1997 financial statements and
accompanying notes thereto.
Certain amounts in the 1997 financial statements have been reclassified to
conform with the 1998 financial statement presentation.
NOTE B - The Company adopted SFAS No. 128, EARNINGS PER SHARE, in 1997. Pursuant
to SFAS No. 128, basic earnings per common share is computed by dividing net
income by the weighted average number of shares of common stock outstanding
during the period. Diluted earnings per common share are determined assuming
that options were exercised at the beginning of each period or at the time of
issuance. All prior period earnings per share data presented has been restated.
NOTE C - The Company's outstanding Common Stock Purchase Warrants, issued in
connection with the Company's initial public offering, expired on February 17,
1998. Prior to their expiration, 1,046,212 of the 1,067,500 warrants were
exercised, generating approximately $4.7 million in cash.
NOTE D - In January 1998, the Company acquired the assets of Nevada Storage
Containers, a Las Vegas, Nevada based container leasing and sales business, for
approximately $1.4 million in cash and approximately 85,000 shares of the
Company's common stock valued at $500,000. Under the purchase agreement, the
shares of common stock will not be issued until one year from the closing date.
In April 1998, the Company acquired the assets of Aspen Instant Storage, a
company engaged in container leasing and sales in Oklahoma City, Oklahoma. The
purchase price was approximately $540,000 in cash and approximately 18,000
shares of the Company's common stock valued at $184,000.
In April 1998, the Company also opened a new leasing and sales branch in
Albuquerque, New Mexico.
In August 1998 the Company acquired the Denver, Colorado based container leasing
business of Unitrans, Inc., dba Mobile Mini Warehousing, (not affiliated with
Mobile Mini, Inc.), for approximately $2.1 million in cash.
7
<PAGE>
With this location, the Company had added four new leasing and sales locations
in four separate states during 1998, bringing the total number of leasing and
sales facilities to 12 locations operating in 7 states, in addition to its
dealer and telecommunication divisions and its main manufacturing facility.
NOTE E - 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:
September 30, 1998 December 31, 1997
(Unaudited)
------------------ -----------------
Raw material and supplies $ 4,885,578 $ 3,241,962
Work-in-process 1,561,801 631,399
Finished containers 838,062 874,955
------------ ------------
$ 7,285,441 $ 4,748,316
============ ============
NOTE F - Property, plant and equipment consisted of the following at:
September 30, 1998 December 31, 1997
(Unaudited)
------------------ -----------------
Land $ 708,555 $ 708,555
Vehicles and equipment 14,616,751 12,721,917
Buildings and improvements 7,003,896 6,739,190
Office fixtures and equipment 3,300,653 3,109,904
------------ ------------
25,629,855 23,279,566
Less accumulated depreciation (6,619,739) (5,267,650)
------------ ------------
$ 19,010,116 $ 18,011,916
============ ============
NOTE G - The Company maintains a container lease fleet consisting of refurbished
or manufactured storage containers and office units that are leased to customers
with varying terms. Depreciation is provided using the straight-line method with
an estimated useful life of 20 years and a salvage value estimated at 70% of
cost. In management's opinion, estimated salvage values do not cause carrying
values to exceed net realizable value. Normal repairs and maintenance to the
lease fleet are expensed as incurred. As of September 30, 1998, the Company's
container lease fleet was $70.6 million as compared to $50.9 million at December
31, 1997, before depreciation. A portion of this increase reflects the container
lease fleet acquisitions of Nevada Storage Container, Aspen Instant Storage and
Mobile Mini Warehousing.
NOTE H - In June 1998, the Company sold the remaining portable modular buildings
that were under lease agreements and repaid the underlying capital lease
obligations related to these buildings. The revenues from these sales are
included in the accompanying statements of operations.
NOTE I - The Company has adopted FASB No. 130, REPORTING COMPREHENSIVE INCOME,
effective January 1, 1998. The Company, however, has not incurred transactions
that are within the definitions of "Comprehensive Income" and accordingly, is
not required to make additional disclosures in the accompanying consolidated
financial statements for the current year or for the same period represented in
the prior year.
8
<PAGE>
NOTE J - In June 1998, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 133, ACCOUNTING FOR DERIVATIVE INSTRUMENTS
AND HEDGING ACTIVITIES. Statement No. 133 provides a comprehensive and
consistent standard for the recognition and measurement of derivatives and
hedging activities. The new statement requires all derivatives to be recorded in
the balance sheet as either an asset or liability measured at its fair value.
Statement No. 133 is effective for fiscal years beginning after June 15, 1999.
The Company believes the adoption of Statement No. 133 will not have any
material impact in the Company's financial statements or its business
operations.
NOTE K - The Company entered into an Interest Rate Swap Agreement ("Agreement")
effective in September 1998, under which the Company is designated as the fixed
rate payer at an interest rate of 5.5% per annum. Under the Agreement, the
Company has effectively fixed, for a three year period, the interest rate
payable on $30 million of its revolving line of credit so that is based upon a
spread from 5.5%, rather than a spread from the Eurodollar rate, which was
5.625% at September 30, 1998. The Company's objective in entering into this
transaction was to reduce the risk of interest rate fluctuations in the future.
As the Company had debt of $66.4 million at September 30, 1998, and intends to
continue to operate with leverage, management believed it was prudent to lock in
a fixed interest rate at a time when fixed rates had significantly decreased.
9
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
THREE MONTHS ENDED SEPTEMBER 30, 1998 COMPARED TO
THREE MONTHS ENDED SEPTEMBER 30, 1997
Revenues for the quarter ended September 30, 1998 were $13,369,000,
which represents an 16.2% increase over revenues of $11,500,000 for the quarter
ended September 30, 1997. Revenues from leasing of portable storage containers
and office units increased 45.4% during the three months ended September 30,
1998 as compared to the same period in the prior year. Leasing revenues
represented 72.5% of total revenues for the third quarter ending September 30,
1998 as compared to 58.0% in the third quarter in 1997. The Company has
transitioned from primarily a seller of containers and other structures, to
primarily a lessor of containers and portable offices. A change in the
composition of the Company's revenues and expenses has occurred as the Company
has continued to expand and concentrate its efforts on its leasing operations,
which generate higher operating margins than do sales of containers. This change
has resulted in a deferral of the recognition of revenues and corresponding
container costs over the term of the leases. As such, income from operations
increased 51.8% over the same period of the prior year. Revenues from the
leasing of portable storage containers and office units increased 45.4%, while
revenues from the sales of the Company's products decreased 26.1%. The increase
in lease revenues resulted from a 44.2% increase in the average number of
containers on lease as compared to the same period in the prior year, as well as
an increase in the average rental rate per unit. The Company's new leasing
locations in Nevada, Oklahoma, New Mexico and Colorado contributed to a portion
of this growth. The decrease in container sales primarily reflects the Company's
continued emphasis on leasing rather than selling containers and lower sales
levels in the Company's dealer division.
Cost of container and other sales as a percentage of container and
other sales for the quarter ended September 30, 1998 was 62.4% compared to 66.1%
for the same quarter in 1997. This improvement is attributable to a decline in
the cost of both containers and steel as well as efficiencies achieved at the
Company's manufacturing plant associated with increased production of containers
at the plant.
Leasing, selling and general expenses increased by 25.9% for the
quarter ended September 30, 1998 as compared to the quarter ended September 30,
1997. As a percentage of revenues, leasing, selling and general expenses for the
quarter ended September 30, 1998 were 49.9% as compared to 46.0% for the same
quarter in 1997. This increase resulted from higher costs associated with the
45.4% increase in lease revenues and additional administrative costs to
accommodate the increased growth, offset in part by efficiencies of scale
resulting from the growth of the container leasing business at all locations.
Interest expense increased by 10.5% during the quarter ended September
30, 1998 compared to the prior year period. This resulted from the substantial
growth in the Company's lease fleet and the related borrowings to finance that
growth, and from interest costs related to the Company's subordinated debt which
was issued in October 1997. These increases were partially offset by reduced
interest rates under the Company's revolving line of credit, which was amended
in May, 1998.
10
<PAGE>
Depreciation and amortization increased by 23.6% for the three months
ended September 30, 1998 as compared to the prior year period. This resulted
from the substantial increase in the Company's lease fleet and from the addition
of equipment at the Company's various locations to support growth in the size of
the lease fleet.
The Company posted a 112.6% increase in net income to $1,409,000, or
$0.17 per share diluted for the quarter ended September 30, 1998, compared to
net income of $663,000 or $0.10 per share diluted during the same period in the
prior year. This increase is primarily a result of a 45.4% increase in container
leasing revenues, which produce higher net margins than container sales,
partially offset by the higher administrative expenses and increased interest
costs associated primarily with the increases in the lease fleet. The Company's
effective tax rate was reduced to 40.0% at September 30, 1998 from 44.0% at
September 30, 1997. Diluted earnings per share was based upon a 23.1% increase
in the weighted average number of common and common share equivalents
outstanding when compared to the same period in the prior year.
11
<PAGE>
NINE MONTHS ENDED SEPTEMBER 30, 1998 COMPARED TO
NINE MONTHS ENDED SEPTEMBER 30, 1997
Revenues for the nine months ended September 30, 1998 were $38,515,000,
which represents a 15.5% increase over revenues of $33,343,000 for the nine
months ended September 30, 1997. Revenues from the leasing of portable storage
containers and office units increased 47.0% during the first nine months of 1998
as compared to the same period in 1997, while revenues from the sales of the
Company's products decreased 17.9%. The increase in lease revenues resulted from
a 42.7% increase in the average number of containers on lease as compared to the
same period in the prior year, as well as an increase in the average rental rate
per unit. The Company's new leasing locations in Nevada, Oklahoma, New Mexico
and Colorado also contributed to a portion of this growth. The decrease of
container sales primarily reflects the emphasis on leasing rather than selling
containers and from lower sales levels in the Company's dealer division. The
Company's other revenues decreased $192,000 in the first nine months of 1998 as
compared to the same period in 1997.
Cost of container and other sales as a percentage of container and
other sales for the nine months ended September 30, 1998 was 70.0% compared to
72.0% for the same period in 1997. This improvement is attributable to a decline
in the cost of both containers and steel as well as efficiencies achieved at the
Company's manufacturing plant associated with increased production of containers
at the plant.
Leasing, selling and general expenses increased by 26.5% for the nine
months ended September 30, 1998 as compared to the nine months ended September
30, 1997. As a percentage of revenues, leasing, selling and general expenses for
the nine months ended September 30, 1998 was 47.9% as compared to 43.7% for the
nine months ended September 30, 1997. This increase resulted from increased
expenses associated with the 47.0% increase in lease revenues and from
additional administrative costs to handle this increased growth, offset in part
by efficiencies of scale resulting from the growth of the container leasing
business at all locations.
Interest expense increased by 20.5% during the nine months ended
September 30, 1998 compared to the prior year period. This resulted from the
substantial growth in the Company's lease fleet and the related borrowings to
finance that growth, and from interest costs related to the Company's
subordinated debt which was issued in October 1997. These increases were
partially offset by reduced interest rates under the Company's revolving line of
credit, which was amended in May, 1998.
Depreciation and amortization increased by 31.9% for the nine months
ended September 30, 1998 as compared to the prior year period. This results from
the increase in the Company's lease fleet and from the addition of equipment at
the Company's various locations to support this growth.
The Company posted a 108.5% increase in net income to $2,889,000, or
$0.35 per share diluted for the nine months ended September 30, 1998 compared to
net income of $1,385,000 or $0.21 per share diluted during the same period in
the prior year. This increase is primarily a result of an increase in container
leasing revenues, which produce higher net margins than container sales,
partially offset by the higher administrative expenses and increased interest
costs associated primarily with the increases in the lease fleet. Diluted
earnings per share was based upon a 23.9% increase in the weighted average
number of common and common share
12
<PAGE>
equivalents outstanding when compared to the same period in the prior year. The
Company's effective tax rate was reduced to 40.0% at September 30, 1998 from
44.0% at September 30, 1997.
LIQUIDITY AND CAPITAL RESOURCES
The Company plans to continue to increase the size of its container
lease fleet and related property, plant and equipment. The acquisitions
completed during 1998 and the growth in the container lease fleet and related
property, plant and equipment at pre-existing locations was funded in large part
through the Company's revolving line of credit under its Senior Credit Agreement
dated March 28, 1996, as amended, with BT Commercial Corp., as agent for a group
of lenders (the "Senior Credit Agreement"). The Senior Credit Agreement permits
borrowings based on the level of the Company's inventories, receivables and the
size of its container lease fleet. The $5.2 million of cash generated from the
exercise of the Company's Common Stock Purchase Warrants and $4.8 million of
cash provided by operating activities was also used to finance this growth.
In May 1998, the Company and its lenders amended the terms of the
Senior Credit Agreement. The revolving line of credit was increased from $40
million to $60 million, principal amortization on the $6 million term loan under
the Senior Credit Agreement was reduced, the term of the Senior Credit Agreement
was extended for an additional two years, and the interest rate was reduced. The
interest rate is now fixed quarterly based on the Company's ratio of funded debt
to earnings before interest, taxes, depreciation and amortization (EBITDA). The
interest rate was initially adjusted from 3% to 1.75% above the Eurodollar rate
based upon the Company's leverage ratio at the time the amendment to the Senior
Credit Agreement became effective. This rate remained unchanged through
September 30, 1998 and increased 0.25% effective on October 1, 1998.
As of September 30, 1998, the Company had borrowings outstanding under
the revolving line of credit of $51,054,000. These borrowings allowed the
Company to increase the container lease fleet by $21,921,000, acquire the assets
of three companies (Nevada Storage Containers, Aspen Instant Storage and Mobile
Mini Warehousing) and open a new leasing location in Albuquerque, New Mexico. A
portion of the lease fleet increase resulted from the acquisitions. At September
30, 1998, $8,486,000 of additional borrowings were available under the revolving
line of credit. As of November 3, 1998, the Company had borrowings outstanding
of $53,673,000 and $6,327,000 of additional borrowing availability under the
revolving line of credit.
During the nine months ended September 30, 1998, the Company's
operations provided cash of $6,103,000. This resulted from earnings before
deferred taxes, a continuing emphasis on increasing credit and extending payment
terms with major suppliers, increased collection efforts to reduce outstanding
receivables and the cash sale of the Company's modular buildings inventory. This
was partially offset by an increase in inventory and accounts receivables
related to the expansion of the Company's business and an increase in deposits
and prepaid expenses primarily related to container purchases.
The Company invested $23,268,000 in its container lease fleet and other
equipment during the nine months ended September 30, 1998. This amount is net of
$1,573,000 of sales from the container lease fleet.
Cash flow provided by financing activities totaled $16,897,000 for the
nine months ended September 30, 1998. The primary source of financing was
$15,171,000, of net borrowings on the
13
<PAGE>
Company's revolving line of credit and approximately $5,200,000 of gross
proceeds received upon the exercise of warrants to purchase 1,046,212 shares of
the Company's common stock prior to their expiration on February 17, 1998. The
warrants had been issued in connection with the Company's initial public
offering in 1994. The warrant proceeds were used to initially reduce the line of
credit and to fund the increase in the container lease fleet, related property,
plant and equipment, inventory levels, and the acquisition of the container
assets of Nevada Storage Containers and Aspen Instant Storage. Cash flow from
financing activities was partially offset by principal payments on notes payable
and capitalized leases and the payoff of capitalized leases related to the sale
of modular buildings previously held by the Company under lease agreements.
The Company anticipates that it will need additional capital to
continue its growth over the next 12 months. The Company is currently in
discussions with its lenders regarding increasing its revolving line of credit
under the Senior Credit Agreement. If the Company is successful in increasing
this line, it will provide the Company with sufficient capital to permit
controlled growth over the next 12 months. Although the Company believes it will
be successful in increasing the line of credit, if it were not successful, the
Company would be required to either obtain additional capital through other
means or discontinue its growth until such capital were obtained.
EFFECTS OF INFLATION
The results of operations of the Company for the periods discussed have
not been significantly affected by inflation.
YEAR 2000 COMPLIANCE
The Company recognizes the problems associated with the year 2000
transactions and established a plan to address and evaluate its programs for any
potential year 2000 compliance issues relating to: (i) internal operating
systems, (ii) suppliers and customers, and (iii) third party services that it
relies on in its daily operations.
INTERNAL OPERATING SYSTEMS. The Company completed its assessment of all
major internal operating systems. The Company installed a new software system
that was completed at the end of fiscal year 1997. This primary operating
software system has been certified by the vendor to be fully compliant with the
year 2000 transactions. The Company continues to test this software for such
compliance in addition to all of the other Company systems. The Company has
started a review of its other software packages and PC hardware. The Company's
major internal operating systems are year 2000 compliant and the Company will
test any new modular software packages added to enhance its primary operating
system. The Company expects this assessment to be fully complete and compliant
ready by the third quarter of fiscal 1999.
SUPPLIERS AND CUSTOMERS. The Company is currently evaluating the year
2000 readiness of its material vendors and suppliers. The Company has forwarded
questionnaires to all of its suppliers and will evaluate responses on a
case-by-case basis. The Company will place the emphasis of its review on its
primary vendors, such as steel, paint and other suppliers and the phone systems.
In the event that the Company's suppliers are not year 2000 compliant in a
timely manner, the Company could experience a shortage in its material supplies
and, as a result, results of operations and financial conditions could be
affected. The Company also sends questionnaires to its larger leasing customers
for the year 2000 issues. A majority of these customers are not large corporate
entities, and if the majority of the Company's customers are not year 2000
compliant in a timely manner, customer lease payments could be delayed and the
Company's cash flow would be materially and adversely affected.
14
<PAGE>
THIRD PARTY SERVICES. The Company has identified what it considers the
critical areas that require year 2000 compliance and continues to evaluate these
issues related to the business operations. The Company has been in contact with
their outside service providers and discussing their assessment of their year
2000 readiness. Where the Company is dependent on outside service providers, in
the event they are not year 2000 compliant in a timely manner the Company's
business operations could be disrupted and results of operations and financial
condition would be materially and adversely affected.
Contingency plans are being discussed for evaluation and resolution,
but to date the Company's contingency plan has not been completed. This will be
a major focus as the Company moves forward in addressing potential year 2000
consequences.
The majority of the year 2000 project is being handled by currently
employed personnel. The Company has established an estimate of $250,000 to
complete additional hardware and software upgrades to comply with the year 2000
issues. The cost of the Company's year 2000 compliance program has not had and
is not expected to have a material effect on the Company's results of operations
or liquidity.
The Company continues to monitor and assess the year 2000 issues.
However, because of the numerous variables and uncertainties associated with the
year 2000 compliance, including the effect on the Company of non-compliance by
third parties, availability of certain resources and assumptions of future
events, there can be no assurance that its operations will not be materially or
adversely affected by year 2000 compliance problems. While contingency plans are
intended to minimize any negative impacts on the Company, there can be no
assurance that the plans will be successful and that any such disruptions will
not have a material adverse effect on the Company's financial condition or
results of operations.
FACTORS THAT MAY AFFECT FUTURE OPERATING RESULTS, AND "SAFE HARBOR"
STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995
Statements in this Report which include such words as "believe",
"intends" or "anticipates", such as the statement regarding the Company's
ability to meet its obligations and capital needs during the next 12 months, are
forward-looking statements. The occurrence of one or more unanticipated events,
however, including a decrease in cash flow generated from operations, a material
increase in the borrowing rates under the Senior Credit Agreement (which rates
are based on the prime rate or the Eurodollar rates in effect from time to
time), a material increase or decrease in prevailing market prices for used
containers, or a change in general economic conditions resulting in decreased
demand for the Company's products, could cause actual results to differ
materially from anticipated results and have a material adverse effect on the
Company's ability to meet its obligations and capital needs, and cause future
operating results and other events not to occur as presently anticipated. The
Company issued $6.9 million of senior subordinated notes in October 1997, in a
public offering pursuant to a Registration Statement. That Registration
Statement and the Prospectus, dated October 8, 1997, which is a part of it (the
"Prospectus"), include a section entitled "Risk Factors", which describes
certain factors that may affect future operating results of the Company. That
section is hereby incorporated by reference in this Report. Those factors should
be considered carefully in evaluating an investment in the Company's Common
Stock. If you do not have a copy of the Prospectus, you may obtain one by
requesting it from the Company's Investor Relations Department at (602) 894-6311
or by mail at Mobile Mini, Inc., 1834 West Third Street, Tempe, Arizona 85281.
The Company's filings with the SEC may be accessed at the SEC's World Wide Web
site at http://www.sec.gov.
15
<PAGE>
PART II. OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
On October 2, 1998, the Company held its annual stockholders meeting.
At the annual meeting, the following nominees were elected to the Board of
Directors, each to serve a three-year term.
NOMINEE VOTES FOR VOTES WITHHELD ABSTENTIONS
------- --------- -------------- -----------
Ronald J. Marusiak 7,264,964 15,544 598,075
Lawrence Trachtenberg 7,264,964 15,544 598,075
The Company also has four continuing directors whose terms expire in
future years: Richard E. Bunger, Steven G. Bunger, George E. Berkner and Stephen
A McConnell.
In addition to the election of two directors, the shareholders also
approved an amendment to the Company's 1994 Stock Option Plan to increase from
750,000 to 1,200,000 the number of shares issuable under the Plan, and ratified
the appointment of Arthur Andersen LLP as the Company's independent auditors for
1998, by the following votes:
AMENDMENT OF 1994 STOCK OPTION PLAN:
Votes For: 4,425,885
Votes Against: 330,434
Votes Withheld: 23,981
RATIFICATION OF APPOINTMENT OF AUDITORS:
Votes For: 7,245,868
Votes Against: 16,600
Votes Withheld: 18,040
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) EXHIBITS
NUMBER DESCRIPTION
11 Computation of Earnings per Share for the
Three Month and Nine Month Period ended
September 30, 1998 and 1997
27 Selected Financial Data
(b) REPORTS ON FORM 8-K: none
The other items of Form 10-K are not applicable and have been omitted.
16
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
MOBILE MINI, INC.
(Registrant)
Dated: November 13, 1998 /s/ Larry Trachtenberg
---------------------------
Larry Trachtenberg
Chief Financial Officer &
Executive Vice President
17
EXHIBIT 11
MOBILE MINI, INC.
STATEMENT RE: COMPUTATION OF EARNING PER SHARE
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
1998 1997 1998 1997
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
BASIC:
Common shares outstanding, beginning of period 6,799,524 6,739,324 6,799,524 6,739,324
Effect of weighting shares:
Weighted common shares issued 1,075,178 -- 906,237 --
Common stock to be issued 85,468 -- 79,207 --
---------- ---------- ---------- ----------
Weighted average number of common shares
outstanding 7,960,170 6,739,324 7,784,968 6,739,324
========== ========== ========== ==========
Net income $1,409,260 $ 662,974 $2,888,531 $1,385,493
========== ========== ========== ==========
Earnings per share $ 0.18 $ 0.10 $ 0.37 $ 0.21
========== ========== ========== ==========
DILUTED:
Common shares outstanding, beginning of period 6,799,524 6,739,324 6,799,524 6,739,324
Effect of weighting shares:
Weighted common shares issued 1,075,178 -- 906,237 --
Employee stock options 296,676 92,836 295,599 13,008
Convertible warrants 82,163 -- 210,566 --
IPO stock purchase options 72,788 -- 75,495 --
Common stock to be issued 85,468 -- 79,207 --
---------- ---------- ---------- ----------
Weighted average number of common and common
equivalent shares outstanding 8,411,797 6,832,160 8,366,628 6,752,332
========== ========== ========== ==========
Net income $1,409,260 $ 662,974 $2,888,531 $1,385,493
========== ========== ========== ==========
Earnings per share $ 0.17 $ 0.10 $ 0.35 $ 0.21
========== ========== ========== ==========
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> SEP-30-1998
<EXCHANGE-RATE> 1
<CASH> 736,937
<SECURITIES> 0
<RECEIVABLES> 7,963,324
<ALLOWANCES> 1,045,436
<INVENTORY> 7,285,441
<CURRENT-ASSETS> 16,635,661
<PP&E> 25,629,855
<DEPRECIATION> 6,619,739
<TOTAL-ASSETS> 109,484,977
<CURRENT-LIABILITIES> 8,169,849
<BONDS> 0
0
0
<COMMON> 78,786
<OTHER-SE> 500,000
<TOTAL-LIABILITY-AND-EQUITY> 109,484,977
<SALES> 12,670,741
<TOTAL-REVENUES> 38,515,293
<CGS> 8,872,001
<TOTAL-COSTS> 29,431,998
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 4,269,077
<INCOME-PRETAX> 4,814,218
<INCOME-TAX> 1,925,687
<INCOME-CONTINUING> 2,888,531
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,888,531
<EPS-PRIMARY> 0.37
<EPS-DILUTED> 0.35
</TABLE>
