<PAGE> 1
U. S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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 June 30, 2000
|_| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the transition period from __________ to __________
Commission File Number 1-12804
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)
7420 S. Kyrene Road, Suite 101
Tempe, Arizona 85283
(Address of principal executive offices)
(480) 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 August 4, 2000, there were outstanding 11,582,614 shares of the
issuer's common stock, par value $.01.
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MOBILE MINI, INC.
INDEX TO FORM 10-Q FILING
FOR THE QUARTER ENDED JUNE 30, 2000
<TABLE>
<CAPTION>
TABLE OF CONTENTS PAGE
NUMBER
PART I.
FINANCIAL INFORMATION
<S> <C>
Item 1. Financial Statements
Consolidated Balance Sheets 3
December 31, 1999 and June 30, 2000
Consolidated Statements of Operations 4
Three Months and Six Months ended June 30, 1999 and June 30, 2000
Consolidated Statements of Cash Flows 6
Six Months Ended June 30, 1999 and June 30, 2000
Notes to Consolidated Financial Statements 7
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations 12
Item 3. Quantitative and Qualitative Disclosures About Market Risk 15
PART II
OTHER INFORMATION
Item 2. Changes in Securities and Use of Proceeds 17
Item 4. Submission to a Vote of Security Holder 18
Item 6. Exhibits and Reports on Form 8-K 19
SIGNATURES 20
</TABLE>
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PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
MOBILE MINI, INC.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
ASSETS
DECEMBER 31, 1999 JUNE 30, 2000
----------------- --------------
<S> <C> <C>
CASH AND CASH EQUIVALENTS $547,124 $ 562,359
RECEIVABLES, net of allowance for doubtful accounts of
$1,621,000 and $1,588,000, respectively 8,861,815 9,690,170
INVENTORIES 9,644,157 11,128,086
PORTABLE STORAGE UNIT LEASE FLEET, net 121,277,355 155,982,278
PROPERTY PLANT AND EQUIPMENT, net 23,245,287 26,082,470
DEPOSITS AND PREPAID EXPENSES 890,142 2,635,331
OTHER ASSETS, net 13,926,606 26,505,098
------------ ------------
TOTAL ASSETS $178,392,486 $232,585,792
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES:
ACCOUNTS PAYABLE $3,532,240 $7,871,886
ACCRUED LIABILITIES 5,169,364 5,141,093
LINE OF CREDIT 71,638,064 111,134,194
NOTES PAYABLE 6,284,810 5,369,063
OBLIGATIONS UNDER CAPITAL LEASES 347,850 273,736
DEFERRED INCOME TAXES 14,032,673 17,924,195
------------ ------------
TOTAL LIABILITIES 101,005,001 147,714,167
============ ============
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Common stock; $.01 par value, 95,000,000 shares authorized, (increased from
17,000,000 shares on June 21, 2000); 11,438,356 and 11,567,089 issued and
outstanding at December 31, 1999
and June 30, 2000, respectively 114,383 115,671
Additional paid-in capital 61,032,336 62,737,308
Retained earnings 16,240,766 22,018,646
------------ ------------
TOTAL STOCKHOLDERS' EQUITY 77,387,485 84,871,625
============ ============
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $178,392,486 $232,585,792
============ ============
</TABLE>
See the accompanying notes to these consolidated balance sheets.
3
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MOBILE MINI, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
THREE MONTHS ENDED JUNE 30,
-------------------------------
1999 2000
------------ ------------
<S> <C> <C>
REVENUES:
Leasing $12,581,818 $18,168,872
Sales 3,034,923 3,362,704
Other 74,871 135,946
------------ ------------
15,691,612 21,667,522
COSTS AND EXPENSES:
Cost of sales 2,038,843 2,183,970
Leasing, selling and general expenses 7,728,935 10,763,674
Depreciation and amortization 979,478 1,474,385
------------ ------------
INCOME FROM OPERATIONS 4,944,356 7,245,493
OTHER INCOME (EXPENSE):
Interest income 22,742 7,433
Interest expense (1,668,125) (2,235,436)
------------ ------------
INCOME BEFORE PROVISION FOR INCOME TAXES 3,298,973 5,017,490
PROVISION FOR INCOME TAXES 1,319,590 1,912,276
------------ ------------
NET INCOME 1,979,383 3,105,214
PREFERRED STOCK DIVIDEND 21,918 --
------------ ------------
NET INCOME AVAILABLE TO COMMON SHAREHOLDERS $1,957,465 $3,105,214
============ ============
EARNINGS PER SHARE:
BASIC $ 0.20 $ 0.27
============ ============
DILUTED $ 0.19 $ 0.26
============ ============
WEIGHTED AVERAGE NUMBER OF COMMON AND COMMON SHARE
EQUIVALENTS OUTSTANDING:
BASIC 9,823,258 11,537,167
============ ============
DILUTED 10,352,020 11,973,900
============ ============
</TABLE>
See the accompanying notes to these consolidated statements
4
<PAGE> 5
MOBILE MINI, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE 30,
-------------------------------
1999 2000
------------ ------------
<S> <C> <C>
REVENUES:
Leasing $22,590,177 $33,222,254
Sales 6,058,307 6,921,929
Other 210,276 289,722
------------ ------------
28,858,760 40,433,905
COSTS AND EXPENSES:
Cost of sales 4,019,049 4,478,546
Leasing, selling and general expenses 14,339,822 19,945,794
Depreciation and amortization 1,787,949 2,765,502
------------ ------------
INCOME FROM OPERATIONS 8,711,940 13,244,063
OTHER INCOME (EXPENSE):
Interest income 27,045 68,377
Interest expense (3,254,898) (3,840,505)
------------ ------------
INCOME BEFORE PROVISION FOR INCOME TAXES 5,484,087 9,471,935
PROVISION FOR INCOME TAXES 2,193,636 3,694,055
------------ ------------
NET INCOME 3,290,451 5,777,880
PREFERRED STOCK DIVIDEND 21,918 --
------------ ------------
NET INCOME AVAILABLE TO COMMON SHAREHOLDERS $3,268,533 $5,777,880
============ ============
EARNINGS PER SHARE:
BASIC $ 0.37 $ 0.50
============ ============
DILUTED $ 0.35 $ 0.48
============ ============
WEIGHTED AVERAGE NUMBER OF COMMON AND COMMON
SHARE EQUIVALENTS OUTSTANDING:
BASIC 8,932,915 11,499,420
============ ============
DILUTED 9,432,547 11,914,125
============ ============
</TABLE>
See the accompanying notes to these consolidated statements.
5
<PAGE> 6
MOBILE MINI, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE 30,
-----------------------------
1999 2000
------------ ------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $3,290,451 $5,777,880
Adjustments to reconcile income to net cash provided by
operating activities:
Provision for doubtful accounts 564,838 729,082
Amortization of deferred loan costs 302,344 189,464
Amortization of warrants issuance discount 26,082 --
Depreciation and amortization 1,787,949 2,765,502
Loss on disposal of property, plant and equipment 32,615 69,989
Deferred income taxes 2,193,586 3,891,522
Changes in certain assets and liabilities, net of effect of
businesses acquired:
Increase in receivables (702,946) (1,313,426)
Increase in inventories (2,513,310) (1,474,930)
Decrease (increase) in deposits and prepaid expenses 102,227 (1,595,189)
Decrease (increase) in other assets 260,977 (606,452)
Increase in accounts payable 1,506,781 4,339,646
Increase (decrease) in accrued liabilities 607,770 (660,795)
------------ ------------
NET CASH PROVIDED BY OPERATING ACTIVITIES 7,459,364 12,112,293
------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Cash paid for businesses acquired (17,500,000) (25,740,933)
Net purchases of portable storage unit lease fleet (10,213,200) (21,285,586)
Net purchases of property, plant and equipment (1,816,267) (3,808,069)
------------ ------------
NET CASH USED IN INVESTING ACTIVITIES (29,529,467) (50,834,588)
------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net (payments) borrowings under lines of credit (4,532,975) 39,496,130
Principal payments on notes payable (820,327) (915,747)
Principal payments on capital lease obligations (2,095,669) (74,114)
Redemption of manditorily redeemable preferred stock (8,000,000) --
Exercise of warrants 600,161 28,291
Issuance of common stock 36,635,566 202,970
Preferred stock dividend (21,918) --
------------ ------------
NET CASH PROVIDED BY FINANCING ACTIVITIES 21,764,838 38,737,530
------------ ------------
NET (DECREASE) INCREASE IN CASH (305,265) 15,235
CASH AND CASH EQUIVALENTS AT BEGINNING OF
PERIOD 1,030,138 547,124
------------ ------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 724,873 $ 562,359
============ ============
</TABLE>
See the accompanying notes to these consolidated statements.
6
<PAGE> 7
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 accounting principles
generally accepted in the United States 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 six month period ended June 30, 2000 are not necessarily
indicative of the operating results that may be expected for the entire year
ending December 31, 2000. These financial statements should be read in
conjunction with the Company's December 31, 1999 financial statements and
accompanying notes thereto.
NOTE B - The Company adopted SFAS No. 128, Earnings per Share, in 1997. Pursuant
to SFAS No. 128, basic earnings per common share are 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. The following table shows the computation of earnings per share for
the three month period and the six month period ended June 30:
<TABLE>
<CAPTION>
Three months ended June 30, Six months ended June 30,
1999 2000 1999 2000
---- ---- ---- ----
BASIC:
<S> <C> <C> <C> <C>
Common shares outstanding, beginning of period 7,966,863 11,508,751 7,966,863 11,438,356
Effect of weighting shares:
Weighted common shares issued 1,856,395 28,416 966,052 61,064
----------- ----------- ----------- -----------
Weighted average number of common shares outstanding 9,823,258 11,537,167 8,932,915 11,499,420
=========== =========== =========== ===========
Net income available to common shareholders $1,957,466 $3,105,214 $3,268,533 $5,777,881
=========== =========== =========== ===========
Earnings per share $ 0.20 $ 0.27 $ 0.37 $ 0.50
=========== =========== =========== ===========
DILUTED:
Common shares outstanding, beginning of period 7,966,863 11,508,751 7,966,863 11,438,356
Effect of weighting shares:
Weighted common shares issued 1,856,395 28,416 966,052 61,064
Options and warrants assumed converted 412,236 346,223 387,389 325,323
Warrants 116,526 90,510 112,243 89,382
----------- ----------- ----------- -----------
Weighted average number of common and common equivalent
shares outstanding 10,352,020 11,973,900 9,432,547 11,914,125
=========== =========== =========== ===========
Net income available to common shareholders $1,957,465 $3,105,214 $3,268,533 $5,777,881
=========== =========== =========== ===========
Earnings per share $ 0.19 $ 0.26 $ 0.35 $ 0.48
=========== =========== =========== ===========
</TABLE>
7
<PAGE> 8
NOTE C - 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:
<TABLE>
<CAPTION>
December 31, 1999 June 30, 2000
----------------- -------------
<S> <C> <C>
Raw material and supplies $7,453,662 $8,597,995
Work-in-process 880,885 565,859
Finished portable storage units 1,309,610 1,964,232
----------- -----------
$9,644,157 $11,128,086
=========== ===========
</TABLE>
NOTE D - Property, plant and equipment consisted
of the following at:
<TABLE>
<CAPTION>
December 31, 1999 June 30, 2000
----------------- -------------
<S> <C> <C>
Land $ 777,668 $ 777,668
Vehicles and equipment 19,397,810 22,761,535
Buildings and improvements 8,228,124 8,277,793
Office fixtures and equipment 3,964,242 4,524,682
------------ ------------
32,367,844 36,341,678
Less accumulated depreciation (9,122,557) (10,259,208)
------------ ------------
$23,245,287 $26,082,470
============ ============
</TABLE>
NOTE E - The Company maintains a portable storage and portable office unit lease
fleet consisting primarily of refurbished or manufactured containers and
portable offices that are leased to customers under short-term operating lease
agreements with varying terms. Depreciation is provided using the straight-line
method with an estimated useful life of 20 years and a salvage value estimate at
approximately 50% to 70% of cost. In the opinion of management, estimated
salvage values do not cause carrying values to exceed net realizable value.
Normal repairs and maintenance to the lease fleet are expensed when incurred. As
of June 30, 2000, the lease fleet was $156.0 million as compared to $121.3
million at December 31, 1999, net of accumulated depreciation of $5.1 million
and $4.1 million, respectively.
NOTE F - The Company adopted SFAS No. 131, Disclosures about Segments of an
Enterprise and Related Information, effective December 31, 1998. SFAS No. 131
superseded SFAS No. 14, Financial Reporting for Segments of a Business
Enterprise. The adoption of SFAS No. 131 did not affect results of operations or
financial position, but did affect the disclosure of segment information.
The Company's management approach includes evaluating each segment on which
operating decisions are made based on performance, results and profitability.
The Company currently has one reportable segment, its branch operations. The
branch operations segment includes the leasing and sales of portable storage
units to customers in the general geographic area of each branch. This segment
also includes the Company's manufacturing facilities which are responsible for
the purchase, manufacturing and refurbishment of the Company's products for
leasing, sales or equipment additions to the Company's delivery system, and its
discontinued dealer program.
The Company evaluates performance and profitability before interest costs,
depreciation, income taxes and major non-recurring transactions. The Company
does not account for intersegment revenues or expenses between its divisions.
The Company's reportable segment concentrates on the Company's core business of
leasing, manufacturing, and selling portable storage and office units. Included
in the branch operations segment are residual sales from the Company's dealer
division that was discontinued in 1998. The operating segment has managers who
meet
8
<PAGE> 9
regularly and are accountable to the chief executive officer for financial
results and ongoing plans including the influence of competition.
For the Three Months Ended:
<TABLE>
<CAPTION>
Branch
Operations Other Combined
---------- ----- --------
<S> <C> <C> <C>
June 30, 1999
Revenues from external customers $14,879,997 $811,615 $15,691,612
Segment profit (loss) before allocated interest,
depreciation and amortization expense 7,303,764 (1,209,836) 6,093,928
Allocated interest expense 1,668,125 -- 1,668,125
Depreciation and amortization expense 879,072 100,406 979,478
Segment profit 1,921,182 36,283 1,957,465
June 30, 2000
Revenues from external customers $21,651,126 $16,396 $21,667,522
Segment profit (loss) before allocated interest,
depreciation and amortization expense 10,500,014 (1,574,283) 8,925,731
Allocated interest expense 2,235,436 -- 2,235,436
Depreciation and amortization expense 1,379,416 94,969 1,474,385
Segment profit 3,099,806 5,408 3,105,214
</TABLE>
For the Six Months Ended:
<TABLE>
<CAPTION>
Branch
Operations Other Combined
---------- ----- --------
<S> <C> <C> <C>
June 30, 1999
Revenues from external customers $27,892,569 $966,191 $28,858,760
Segment profit (loss) before allocated interest,
depreciation and amortization expense 13,375,114 (2,583,364) 10,791,750
Allocated interest expense 3,254,898 -- 3,254,898
Depreciation and amortization expense 1,588,420 199,529 1,787,949
Segment profit 3,218,235 50,298 3,268,533
June 30, 2000
Revenues from external customers $40,383,116 $50,789 $40,433,905
Segment profit (loss) before allocated interest,
depreciation and amortization expense 19,682,595 (3,190,212) 16,492,383
Allocated interest expense 3,840,505 -- 3,840,505
Depreciation and amortization expense 2,542,290 223,212 2,765,502
Segment profit (loss) 5,787,215 (9,335) 5,777,880
</TABLE>
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As of:
<TABLE>
<CAPTION>
Branch
Operations Other Combined
---------- ----- --------
<S> <C> <C> <C>
June 30, 1999
Segment assets - lease fleet $100,547,901 $ -- $100,547,901
Segment assets - property, plant and equipment 21,137,201 988,529 22,125,730
Expenditures for long-lived assets - least fleet 10,315,121 -- 10,315,121
Expenditures for long-lived assets - PPE 1,626,016 190,251 1,816,267
June 30, 2000
Segment assets - lease fleet $155,982,278 $ -- $155,982,278
Segment assets - property, plant and equipment 25,106,893 975,577 26,082,470
Expenditures for long-lived assets - lease fleet 21,285,586 -- 21,285,586
Expenditures for long-lived assets - PPE 3,481,681 326,388 3,808,069
</TABLE>
NOTE G - New Accounting Pronouncements. In December 1999, the Securities and
Exchange Commission ("SEC") issued Staff Accounting Bulletin ("SAB") No. 101,
"Revenue Recognition in Financial Statements," which was subsequently updated by
SAB 101A. SAB 101 and SAB 101A summarize certain of the SEC's views in applying
accounting principles generally accepted in the United States to revenue
recognition in financial statements. The Company is required to adopt SAB 101 no
later than December 31, 2000. The Company is currently evaluating the impact of
the adoption of SAB 101 on its results of operations and financial position.
In June 1998, the Financial Accounting Standards Board ("FASB") issued Statement
of Financial Standards ("SFAS") No. 133 (as amended by SFAS No. 138),
"Accounting for Derivative Instruments and Hedging Activities," which requires
that an entity recognize all derivatives as either assets or liabilities in the
statement of financial position and measure those instruments at fair value. In
June 1999, the FASB issued SFAS No. 137 which deferred the effective date of
SFAS No. 133. The Company will be required to adopt SFAS No. 133, as amended,
effective January 1, 2001 for the fiscal year ended December 31, 2001. The
Company does not anticipate any material impact resulting from the adoption of
SFAS No. 133, as amended.
NOTE H - In March 2000, the Company acquired the portable storage container
lease fleet of Texas Advanced Mobile Storage Corp. and an affiliated entity for
cash, common stock and assumption of debt. The sellers were based in Texas and
this acquisition gives the Company a presence in three new Texas locations, El
Paso, Pharr and Corpus Christi, in addition to adding rental fleet to three of
our existing Texas locations - Dallas/Ft. Worth, San Antonio and Austin.
In April 2000, the Company entered several Florida markets by way of two cash
acquisitions. On April 10, 2000, the Company acquired substantially all the
portable storage assets of Diversified Container Services, Inc., a
privately-owned portable storage leasing company operating in Jacksonville,
Florida. On April 13, 2000, the Company acquired the portable storage assets of
A-1 Trailer Rental Ltd., which had portable storage leasing operations in Tampa,
Orlando, Ft. Myers and Miami/Ft. Lauderdale, Florida.
In May 2000, the Company expanded its Tulsa, Oklahoma operations by acquiring,
for cash, substantially all the portable storage assets of Best Warehouse, a
privately-owned portable storage leasing company operating in Tulsa, Oklahoma.
Also in May, the Company entered the Atlanta, Georgia market through acquiring
substantially all of the portable storage assets of PM Inc., dba Trailers Etc.,
for cash and common stock.
The acquisitions were accounted for as purchases in accordance with Accounting
Principles Board (APB) Opinion No. 16 and, accordingly, the purchased assets and
assumed liabilities were recorded at their estimated fair values at the
acquisition date.
10
<PAGE> 11
The purchase price of the acquired operations was paid for as follows:
<TABLE>
<CAPTION>
<S> <C>
Cash $ 12,756,000
Common Stock 1,475,000
Retirement of Debt 13,430,000
------------
Total $ 27,661,000
============
The fair value of assets purchased has been allocated as follows:
Receivables $ 265,000
Tangible assets 14,923,000
Deposits, prepaid expenses and other assets 150,000
Goodwill 13,112,000
Assumed liabilities (789,000)
------------
Total $ 27,661,000
============
</TABLE>
Goodwill is amortized using the straight-line method over 25 years from the date
of the acquisition.
The Company opened an operation in Seattle, Washington in January 2000.
At August 4, 2000, the Company operated 29 branches located in 14 states.
NOTE I - On July 25, 2000, the Company's senior lenders increased the credit
facilities under the Company's Credit Agreement by $50.0 million. This increase
is comprised of a $40.0 million increase in the revolving line of credit
available under the Credit Agreement and a $10.0 million increase to the
Company's term loan under the Credit Agreement. The increase to the term loan is
subject to certain conditions set forth within the agreement. The increase in
total available borrowings will be used to support the continued growth of the
Company. The Company's obligations to the lenders under the Credit Agreement are
secured by substantially all of the Company's assets.
11
<PAGE> 12
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
THREE MONTHS ENDED JUNE 30, 2000 COMPARED TO
THREE MONTHS ENDED JUNE 30, 1999
Our total revenues for the quarter ended June 30, 2000 increased by
38.1% to $21.7 million from $15.7 million for the same period in 1999. Leasing
revenues for the quarter increased by 44.4% to $18.2 million from $12.6 million
in the same period of 1999. The increase in our leasing revenues resulted
primarily from a 45.3% increase in the average number of portable storage units
on lease, partially offset by a 0.6% lower average rental rate per unit due to
lower rates in certain new market locations. Leasing revenues in the current
year quarter include the operations of 13 new markets entered into during the
past year; none of these operations were included in our results for the quarter
ended June 30, 1999. Our sales of portable storage units for the three months
ended June 30, 2000 increased by 10.8% to $3.4 million from $3.0 million in the
same period in 1999. This increase in sales primarily resulted from sales of
portable storage units made in the markets we entered during the past twelve
months.
Cost of sales for the quarter ended June 30, 2000 decreased to 64.9% on
sales revenues of $3.4 million from 67.2% on sales revenues of $3.0 million in
the same quarter in 1999. This increase in our profit margin on sales resulted
from continued efficiencies in our manufacturing plant and increased production.
Our leasing, selling and general expenses for the quarter ended June
30, 2000 increased to $10.8 million, or 49.7% of total revenues, from $7.7
million, or 49.3% of total revenues, for the quarter ended June 30, 1999. This
increase resulted mainly because leasing became a larger percentage of our
business, and the selling and general expense as a percentage of leasing exceeds
that of the sales side of our business. In addition, we had a significant
increase in the number of branches in operation and the initial margins at new
branches are typically lower than margins at established branches until the
number of units on lease at new branches increases. This increase negatively
impacted the selling and general expense percentage. We had 29 branch locations
at June 30, 2000 compared to 16 branch locations one year earlier. In addition,
we grew the size of the lease fleet at many of our existing branches, and that
growth had associated with it increased sales, general and operating expenses.
These expenses increased 0.4% as a percentage of revenues in the 2000 quarter as
compared to the 1999 quarter.
Depreciation and amortization expenses during the 2000 quarter
increased by approximately 50.5% to $1.5 million from $1.0 million during the
same period in 1999. This expense was 6.8% of total revenues during the 2000
quarter, compared to approximately 6.2%, during the same period in 1999. This
increase is due primarily to growth in the size of our lease fleet and support
equipment over the past twelve months because leasing activities are a larger
part of our business than in prior years.
Our operating margin was 33.4% during the quarter ended June 30, 2000,
compared to 31.5% for the same period in 1999. Our operating margin is typically
higher on our leasing than it is on our sales of portable storage units, and our
operating margin on our leasing activities has continued to increase as we take
advantage of the economies of scale that we are beginning to achieve in our core
leasing business. These increases are offset, to some extent, by the lower
operating margins of new branches during their early years. As a result, income
from operations increased by 46.5% to $7.2 million for the quarter ended June
30, 2000 from $4.9 million for the same period in 1999.
Interest expense increased by 34.0% to $2.2 million during the quarter
ended June 30, 2000 from $1.7 million for the same period in 1999. The increase
in interest expense was primarily a result of higher average debt outstanding
during 2000 and an increase in interest rates in the debt outstanding under our
Credit Agreement, partially offset by the redemption of our higher interest 12%
Senior Subordinated Notes. The interest rate on the
12
<PAGE> 13
debt outstanding under our Credit Agreement is based on a spread over the
Eurodollar rate. In 2000, the Eurodollar rate increased over 1999 levels and the
spread declined by 0.5% due to our lower ratio of funded debt to EBITDA. The net
effect was that the interest rate under our Credit Agreement, including the
effect of our interest rate swap agreement, increased by 0.75% for the three
months ended June 30, 2000 as compared to the same period in 1999. The increase
in outstanding debt was incurred primarily to expand our lease fleet and our
operations through acquisitions of portable storage leasing assets, many of
which were in new markets.
Our net income for the three months ended June 30, 2000 was $3.1
million, or $0.26 per diluted share of common stock, compared to $2.0 million,
or $0.19 per diluted share of common stock, for the same period in 1999. This
58.6% increase was primarily due to higher lease revenues and higher operating
margins in 2000. We had a 3.8% increase in the number of common and common share
equivalents outstanding in 2000 due primarily to the sale of approximately 3.0
million shares of common stock in a public offering in May 1999. For the three
months ended June 30, 2000 our effective tax rate was 39.0% as compared to 40.0%
for the same period in 1999.
SIX MONTHS ENDED JUNE 30, 2000 COMPARED TO
SIX MONTHS ENDED JUNE 30, 1999
Our total revenues for the six months ended June 30, 2000 increased by
40.1% to $40.4 million from $28.9 million for the six months ended June 30,
1999. Leasing revenues for the six months ended June 30, 2000 increased by 47.1%
to $33.2 million from $22.6 million in the same period of 1999. The increase in
our leasing revenues resulted primarily from a 45.7% increase in the average
number of portable storage units on lease and a 1.0% higher average rental rate
per unit. Leasing revenues in the first six months of 2000 include the
operations of 13 new markets entered into after June 30, 1999; none of these
operations were included in our results for the six months ended June 30, 1999.
Our sales of portable storage units for the six months ended June 30, 2000
increased by 14.3% to $6.9 million from $6.1 million in the same period in 1999.
This increase in sales primarily resulted from sales in the markets we entered
after June 30, 1999.
Cost of sales for the six months ended June 30, 2000 decreased to 64.7%
on sales revenues of $6.9 million from 66.3% on sales revenues of $6.1 million
in the same period in 1999. This increase in our profit margin on sales resulted
from efficiencies in our manufacturing plant and increased production.
Our leasing, selling and general expenses for the six months ended June
30, 2000 increased to $19.9 million, or 49.3% of total revenues, from $14.3
million, or 49.7% of total revenues, for the six months ended June 30, 1999.
This increase resulted mainly because leasing became a larger percentage of our
business, and the selling and general expense as a percentage of leasing exceeds
that of the sales. In addition, we had a significant increase in the number of
branches in operation and the initial margins at new branches are typically
lower than margins at established branches until the number of units on lease at
new branches increases. This increase negatively impacted the selling and
general expense percentage. We had 29 branch locations at June 30, 2000 compared
to 16 branch locations one year earlier. In addition, we grew the size of the
lease fleet at many of our existing branches, and that growth had associated
with it increased sales, general and operating expenses. These expenses in the
six months ended June 30, 2000 decreased as a percentage of revenues compared to
the same period in 1999 principally because of economies of scale achieved since
June 30, 1999.
Depreciation and amortization expenses during the first six months of
2000 increased by approximately 54.7% to $2.8 million from $1.8 million during
the same period in 1999. This expense was 6.8% of total revenues during the
first six months of 2000, compared to approximately 6.2%, during the same period
in 1999. This increase is due primarily to growth in the size of our lease fleet
and support equipment over the past twelve months and because leasing activities
are a larger part of our business than in prior years.
Our operating margin was 32.8% during the six months ended June 30,
2000, compared to 30.2% for the same period in 1999. Our operating margin is
typically higher on our leasing than it is on our sales of portable storage
units, and our operating margin on our leasing activities has continued to
increase as we take advantage of the economies of scale that we are achieving in
our core leasing business. These increases are offset, to some extent, by the
lower operating margins of new branches during their early years. As a result,
income from
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<PAGE> 14
operations increased by 52.0% to $13.2 million for the six months ended June 30,
2000 from $8.7 million for the same period in 1999.
Interest expense increased by 18.0% to $3.8 million for the six months
ended June 30, 2000 from $3.3 million for the same period in 1999. The increase
in interest expense was primarily a result of higher average debt outstanding
during 2000 and an increase in interest rates in the debt outstanding under our
Credit Agreement, partially offset by the redemption of our higher interest 12%
Senior Subordinated Notes. The interest rate on the debt outstanding under our
Credit Agreement is based on a spread over the Eurodollar rate. In 2000, the
Eurodollar rate increased over 1999 levels and the spread declined by 0.5% due
to our lower ratio of funded debt to EBITDA. The net effect was that the
interest rate under our Credit Agreement, including the effect of our interest
rate swap agreement, increased by 0.75% for the three months ended June 30, 2000
as compared to the same period in 1999. The increase in outstanding debt was
incurred primarily to expand our lease fleet and our operations through
acquisitions of portable storage leasing assets, many of which were in new
markets.
Our net income for the six months ended June 30, 2000 was $5.8 million,
or $0.48 per diluted share of common stock, compared to $3.3 million, or $0.35
per diluted share of common stock, for the same period in 1999. This 37.1%
increase was primarily due to higher lease revenues and higher operating margins
in 2000. We had a 3.8% increase in the number of common and common share
equivalents outstanding in 2000 due primarily to the sale of approximately 3.0
million shares of common stock in a public offering in May 1999. Our effective
tax rate was 39.0% for the six months ended June 30, 2000 and 40.0% for the six
months ended June 30, 1999.
LIQUIDITY AND CAPITAL RESOURCES
Our leasing and manufacturing business is very capital intensive. The
principal means by which we finance our working capital requirements are cash
flows from operations, proceeds from equity and debt financings and borrowings
under our Credit Agreement.
Operating Activities. Our operations provided net cash flow of $12.1
million during the six months ended June 30, 2000 versus $7.5 million during the
same period in 1999. This increased cash flow resulted primarily from our higher
net income and increases in deferred income taxes. Increases in receivables,
inventories, deposits and pre-paid expenses were offset by increased accounts
payable. The increase in deposits and pre-paid expenses primarily related to
committed purchases at June 30, 2000 for our portable lease fleet for our new
locations, which were generally delivered during July 2000. The increases also
resulted from the growth of our portable storage leasing business.
Investing Activities. Net cash used in investing activities was $50.8
million for the six months ended June 30, 2000 versus $29.5 million for the same
period in 1999. This use of cash was primarily for acquisitions of businesses,
increased purchases for our portable storage units and property, plant and
equipment.
Financing Activities. Net cash provided by financing activities was
$38.7 million for the six months ended June 30, 2000 versus $21.8 million for
the same period in 1999. During the six months ended June 30, 2000, net cash
provided by financing activities was primarily from $39.5 million of net
borrowings under our Credit Agreement, as compared to $4.5 million of net
repayments in the same period in 1999. The borrowings were used primarily to
fund our acquisitions and to grow our lease fleet. Our cash provided by
financing activities in the six months ended June 30, 2000 was partially offset
by $990,000 in principal payments on notes payable and capitalized lease
obligations.
Effective in September 1998, we entered into an Interest Rate Swap
Agreement (the Agreement), under which Mobile Mini is designated as the fixed
rate payer with a base rate of 5.5% per annum. Under the Agreement, we
effectively fixed, for a three year period, the interest rate payable on $30.0
million of our revolving line of credit so that the rate is based upon a spread
from a fixed 5.5% rate, rather than a spread from the floating Eurodollar rate.
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<PAGE> 15
Since March 1996, our principal source of liquidity has been available
borrowings under our Credit Agreement, which at June 30, 2000, consisted of a
$120.0 million revolving line of credit and a term loan with a principal balance
of $5.1 million. As of July 25, 2000, we entered into an agreement with our
lenders to increase the available borrowings under our Credit Agreement by $50.0
million. The interest rate under our Credit Agreement is determined quarterly,
based on our ratio of funded debt to earnings before interest, taxes,
depreciation and amortization (EBITDA). As of June 30, 2000, we had $111.1
million of outstanding borrowings under our Credit Agreement and $8.9 million of
additional borrowings were available. Our borrowing rate was 1.25% above the
prevailing Eurodollar rate. As of August 4, 2000, after a $40.0 million initial
increase in available borrowings under the revolving credit line portion of our
Credit Agreement, we had $117.9 million of outstanding borrowings under the
Credit Agreement and $20.1 million of additional borrowings were available under
our borrowing base formula. We expect to obtain additional term loan
availability of approximately $10.0 million under the Credit Agreement during
the third quarter. The proceeds will be used to reduce our debt under the
revolving line of credit under the Credit Agreement.
We believe that our working capital, together with our cash flow from
operations, borrowing availability under our Credit Agreement and other
available funding sources will be sufficient to fund our operations for the next
12 months. We believe that in order to maintain our growth rate we may be
required to obtain additional debt financing and to raise additional equity
capital in the future. However, there is no assurance that we will be able to
continue to obtain debt or equity financing on acceptable terms.
SEASONALITY
Although demand from some of our customers is somewhat seasonal, our
operations as a whole have not been seasonal. Demand for leases of our portable
storage units by large retailers is stronger from September through December
because these retailers need to store more inventory for the holiday season. Our
retail customers usually return these leased units to us early in the following
year. This has caused lower utilization rates for our lease fleet and a marginal
decrease in cash flow during the first quarter of the past several years.
EFFECTS OF INFLATION
Our results of operations for the periods discussed in this Report have
not been significantly affected by inflation.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
We seek to reduce earnings and cash flow volatility associated with
changes in interest rates by entering into financial arrangements intended to
provide a hedge against a portion of the risks associated with such volatility.
We continue to have exposure to such risks to the extent they are not hedged.
An interest rate swap agreement is the only instrument we use to manage
interest rate fluctuations affecting our variable rate debt. We currently have
one outstanding interest rate swap agreement under which we pay a fixed rate and
receive a variable interest rate on $30.0 million of debt. At June 30, 2000,
there had been no material changes in the reported market risks since December
31, 1999.
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 our ability to meet
our 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 our 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
15
<PAGE> 16
decreased demand for our products, could cause actual results to differ
materially from anticipated results and have a material adverse effect on our
ability to meet our obligations and capital needs, and cause future operating
results and other events not to occur as presently anticipated. Our annual
report, Form 10-K, filed with the U.S. Securities and Exchange Commission,
includes a section entitled "Factors That May Affect Future Operating Results",
which describes certain factors that may affect our future operating results.
That section is hereby incorporated by reference in this Report. Those factors
should be considered carefully in evaluating an investment in our common stock.
If you do not have a copy of the Form 10-K, you may obtain one by requesting it
from the Company's Investor Relations Department at (480) 894-6311 or by mail to
Mobile Mini, Inc., 7420 S. Kyrene Rd., Suite 101, Tempe, Arizona 85283. Our
filings with the SEC, including the Form 10-K, may be accessed at the SEC's
World Wide Web site at http://www.sec.gov.
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<PAGE> 17
PART II. OTHER INFORMATION
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
Recent Sales of Unregistered Securities
Since January 1, 2000, Mobile Mini has issued an aggregate of 81,575
shares of its common stock in transactions that were exempt from the
registration requirements of the Securities Act of 1933, as amended. The
issuances are described below:
1. On March 3, 2000, we issued 60,287 shares of common stock in partial
payment (valued at approximately $1.0 million) of the purchase price when we
acquired storage units and certain other assets from Texas Advanced Mobile
Storage Corp. and affiliates. In connection with the issuance of the shares to
Texas Advanced Mobile Storage and its affiliates, Mobile Mini relied upon the
exemptions from registration afforded by Section 4(2) of the Securities Act and
Rule 506 thereunder promulgated by the Securities and Exchange Commission.
2. On May 23, 2000, we issued 21,288 shares of common stock in partial
payment (valued at approximately $475,000) of the purchase price when we
acquired storage units and certain other assets from PM Inc. dba Trailers Etc.
In connection with the issuance of the shares to PM Inc., Mobile Mini relied
upon the exemptions from registration afforded by Section 4(2) of the Securities
Act and Rule 506 thereunder promulgated by the Securities and Exchange
Commission.
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<PAGE> 18
ITEM 4. SUBMISSION TO A VOTE OF SECURITY HOLDERS
Our annual meeting of stockholders was held on June 21, 2000 in
Phoenix, Arizona. On the record date for the annual meeting, 11,512,201 shares
of common stock, were outstanding and eligible to vote. A quorum was present at
the annual meeting. The table below briefly describes the proposals and results
from the annual meeting of stockholders.
<TABLE>
<CAPTION>
Number of Shares Voted:
-----------------------
For Withheld
--- --------
<S> <C> <C>
Election of Directors, each to serve
a three year term:
Richard E. Bunger 8,848,152 1,074,967
Stephen A McConnell 9,340,638 582,481
</TABLE>
<TABLE>
<CAPTION>
Broker
For Against Abstain Non-Vote
--- ------- ------- --------
<S> <C> <C> <C> <C>
Approve and amend the Company's Amended &
Restated Certificate of Incorporation to
increase the number of authorized shares of
common stock from 17 million to 95
million: 8,221,806 1,687,347 13,966 None
Approve an amendment to the Company's Amended
and Restated Certificate of Incorporation to
remove Article 15:
8,890,392 1,016,081 16,646 None
Ratification of appointment of Arthur Andersen
LLP as the Independent Auditors for 2000: 9,908,271 10,256 4,592 None
</TABLE>
In addition to the election of two directors at the annual meeting,
the terms of four directors continued after the meeting. The continuing
directors are Steven G. Bunger, George E. Berkner, Ronald J. Marusiak and
Lawrence Trachtenberg.
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<PAGE> 19
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) EXHIBITS
<TABLE>
<CAPTION>
NUMBER DESCRIPTION
------ -----------
<S> <C>
27 Financial Data Schedule
(B) REPORTS ON FORM 8-K: none
3.1a Certificate of Amendment of the Amended and Restated
Certificate of Incorporation of Mobile Mini, Inc.
10.5a First Amendment to Amended and Restated Credit Agreement dated
as of July 25, 2000 among Mobile Mini, Inc., each of the
financial institutions a signatory thereto, as Lenders, and BT
Commercial Corporation, as agent.
</TABLE>
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<PAGE> 20
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: August 14, 2000 /s/ Larry Trachtenberg
-----------------------------------
Larry Trachtenberg
Chief Financial Officer &
Executive Vice President
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<PAGE> 21
<TABLE>
<CAPTION>
NUMBER DESCRIPTION
------ -----------
<S> <C>
27 Financial Data Schedule
3.1a Certificate of Amendment of the Amended and Restated
Certificate of Incorporation of Mobile Mini, Inc.
10.5a First Amendment to Amended and Restated Credit Agreement dated
as of July 25, 2000 among Mobile Mini, Inc., each of the
financial institutions a signatory thereto, as Lenders, and BT
Commercial Corporation, as agent.
</TABLE>
