e10vk
U.S. SECURITIES AND EXCHANGE
COMMISSION
Washington, D.C.
20549
Form 10-K
ANNUAL REPORT PURSUANT TO
SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT
OF 1934
For the
fiscal year ended December 31, 2010
Commission File Number 1-12804
(Exact Name of Registrant as
Specified in its Charter)
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Delaware
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86-0748362
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(State or other jurisdiction
of
incorporation or organization)
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(I.R.S. Employer
Identification No.)
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7420 S. Kyrene
Road, Suite 101
Tempe, Arizona 85283
(Address
of Principal Executive Offices)
(480) 894-6311
(Registrants Telephone
Number, Including Area Code)
Securities Registered pursuant to Section 12(b) of the
Act:
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Title of Each Class
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Name of Each Exchange on Which Registered
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Common Stock, $.01 par value
Preferred Share Purchase Rights
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Nasdaq Global Select Market
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Securities registered pursuant to Section 12(g) of the
Act:
None
Indicate by check mark if the registrant is a well-known
seasoned issuer, as defined in Rule 405 of the Securities
Act. Yes o No þ
Indicate by check mark if the registrant is not required to file
reports pursuant to Section 13 or Section 15(d) of the
Act. Yes o No þ
Indicate by check mark whether the registrant (1) has filed
all reports required to be filed by Section 13 or 15(d) of
the Securities Exchange Act of 1934 during the preceding
12 months (or for such shorter period that the registrant
was required to file such reports), and (2) has been
subject to such filing requirements for the past
90 days. Yes þ No o
Indicate by check mark whether the registrant has submitted
electronically and posted on its corporate Website, if any,
every Interactive Data File required to be submitted and posted
pursuant to Rule 405 of
Regulation S-T
(§ 232.405 of this chapter) during the preceding
12 months (or for such shorter period that the registrant
was required to submit and post such
files). Yes þ No o
Indicate by check mark if disclosure of delinquent filers
pursuant to Item 405 of
Regulation S-K
(§ 229.405 of this chapter) is not contained herein,
and will not be contained, to the best of registrants
knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this
Form 10-K
or any amendment to this
Form 10-K. o
Indicate by check mark whether the registrant is a large
accelerated filer, an accelerated filer, a non-accelerated
filer, or a smaller reporting company. See the definitions of
large accelerated filer, accelerated
filer and smaller reporting company in
Rule 12b-2
of the Exchange Act. (Check one):
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Large accelerated
filer þ
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Accelerated
filer o
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Non-accelerated
filer o
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Smaller reporting
company o
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(Do not check if a smaller reporting company)
Indicate by check mark whether the registrant is a shell company
(as defined in
Rule 12b-2
of the
Act). Yes o No þ
The aggregate market value on June 30, 2010 of the voting
stock owned by non-affiliates of the registrant was
approximately $578 million.
As of February 18, 2011, there were outstanding
36,787,432 shares of the registrants common stock,
par value $.01.
DOCUMENTS
INCORPORATED BY REFERENCE:
Portions of the Proxy Statement for the registrants 2011
Annual Meeting of Stockholders are incorporated herein by
reference in Part III of this
Form 10-K
to the extent stated herein. Certain exhibits are incorporated
in Item 15 of this Report by reference to other reports and
registration statements of the registrant which have been filed
with the Securities and Exchange Commission.
MOBILE
MINI, INC.
2010
FORM 10-K
ANNUAL REPORT
TABLE OF
CONTENTS
i
Cautionary
Statement about Forward Looking Statements
Our discussion and analysis in this Annual Report, in other
reports that we file with the Securities and Exchange
Commission, in our press releases and in public statements of
our officers and corporate spokespersons contain forward-looking
statements. Forward-looking statements give our current
expectations or forecasts of future events. You can identify
these statements by the fact that they do not relate strictly to
historical or current events. They include words such as
may, plan, seek,
will, expect, intend,
estimate, anticipate,
believe or continue or the negative
thereof or variations thereon or similar terminology. These
forward-looking statements include statements regarding, among
other things, our future actions; financial position; management
forecasts; efficiencies; cost savings, synergies and
opportunities to increase productivity and profitability; income
and margins; liquidity; anticipated growth; the economy;
business strategy; budgets; projected costs and plans and
objectives of management for future operations; sales efforts;
taxes; refinancing of existing debt; and the outcome of
contingencies such as legal proceedings and financial results.
Forward-looking statements may turn out to be wrong. They can be
affected by inaccurate assumptions or by known or unknown risks
and uncertainties. We undertake no obligation to update or
revise any forward-looking statements, whether as a result of
new information, future events or otherwise. Important factors
that could cause actual results to differ materially from our
expectations are disclosed under Risk Factors and
elsewhere in this Annual Report, including, without limitation,
in conjunction with the forward-looking statements included in
this Annual Report. These are factors that we think could cause
our actual results to differ materially from expected and
historical results. Mobile Mini could also be adversely affected
by other factors besides those listed. All subsequent written
and oral forward-looking statements attributable to us, or
persons acting on our behalf, are expressly qualified in their
entirety by the cautionary statements, factors and risks
identified herein.
ii
PART I
Mobile
Mini, Inc.
We are the worlds leading provider of portable storage
solutions. We offer a wide range of portable storage products in
varying lengths and widths with an assortment of differentiated
features such as our patented locking systems, premium doors,
electrical wiring and shelving. At December 31, 2010, we
operated a network of 121 locations in the United States,
Canada, the United Kingdom and The Netherlands. Our portable
units provide secure, accessible temporary storage for a
diversified customer base, including large and small retailers,
construction companies, medical centers, schools, utilities,
manufacturers and distributors, the U.S. and U.K. military,
hotels, restaurants, entertainment complexes and households. Our
customers use our products for a wide variety of storage
applications, including retail and manufacturing supplies and
inventory, temporary offices, construction materials and
equipment, documents and records and household goods.
We were founded in 1983 and follow a strategy of focusing on
leasing rather than selling our portable storage units. We
derive most of our revenues from the leasing of portable storage
containers, security offices and mobile offices. Leasing
revenues represented approximately 89.2% of total revenues for
the year ended December 31, 2010. We believe our leasing
strategy is highly attractive because the vast majority of our
fleet consists of steel portable storage units which:
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provide predictable, recurring revenues from leases with an
average duration of approximately 35 months;
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have average monthly lease rates that recoup our current
investment on our remanufactured units within an average of
35 months; and
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have long useful lives exceeding 30 years, relatively low
maintenance and high residual values.
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Our total lease fleet has grown significantly over the years to
approximately 245,500 units at December 31, 2010. We
experienced a significant increase in these units in 2008 when
we acquired Mobile Storage Group (MSG). In addition to our
leasing business, we also sell new and used portable storage
containers and security and mobile offices and provide delivery,
installation and other ancillary products and services. Our
sales represented 10.3% and 10.0% of total revenues for the
twelve months ended December 31, 2009 and 2010,
respectively.
Our fleet is primarily comprised of remanufactured and
differentiated steel portable storage containers that were built
according to standards developed by the International
Organization for Standardization (ISO), other steel containers,
steel offices that we manufacture, and mobile offices. We
remanufacture and customize our products by adding our
proprietary locking and easy-opening premium door system to our
purchased ISO containers and steel security offices. Because
they are composed primarily of steel, these assets are
characterized by low risk of obsolescence, extreme durability,
relatively low maintenance, long useful lives and a history of
high-value retention. We also have wood mobile office units in
our lease fleet to complement our core steel portable storage
containers and steel security offices. We perform maintenance on
our steel containers and offices on a regular basis. Repair and
maintenance expense for our fleet has averaged 2.7% of lease
revenues over the past three fiscal years and is expensed as
incurred. We believe our historical experience with leasing
rates and sales prices for these assets demonstrates their
high-value retention. We are able to lease our portable storage
containers at similar rates without regard to the age of the
container. In addition, we have sold containers and steel
security offices from our lease fleet at an average of 145% of
original cost from 1997 through 2010.
Industry
Overview
The storage industry includes two principal segments, fixed
self-storage and portable storage. The fixed self-storage
segment consists of permanent structures located away from
customer locations used primarily by consumers to temporarily
store excess household goods. We do not participate in the fixed
self-storage segment. We do offer some non-fixed self-storage in
secure containers from our fleet at some of our locations in the
U.S. and the U.K.
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The portable storage segment in which our business operates
differs from the fixed self-storage segment in that it brings
the storage solution to the customers location and
addresses the need for secure, temporary storage with immediate
access to the storage unit. The advantages of portable storage
include convenience, immediate accessibility, better security
and lower price. In contrast to fixed self-storage, the portable
storage segment is primarily used by businesses. This segment of
the storage industry is highly fragmented and remains primarily
local in nature. We believe the portable storage rental market
in the U.S. exceeds $1.5 billion in revenue annually.
Portable storage solutions include containers, record vaults and
van trailer units. Although there are no published estimates of
the size of the portable storage segment, we believe portable
storage containers are achieving increased storage market share
compared to other storage options and that this segment is
expanding because of an increasing awareness that only
containers provide both ground level access and better protect
against damage caused by wind or water than do other portable
storage alternatives. As a result, containers can meet the needs
of a diverse range of customers. Portable storage units such as
ours provide ground level access, higher security and improved
aesthetics compared with certain other portable storage
alternatives such as van trailers.
Our products also serve the mobile office industry. This
industry provides mobile offices and other modular structures
and we believe this industry generates approximately
$3.0 billion in revenue annually in North America. We offer
steel security offices, combination steel office/storage units
and mobile offices in varying lengths and widths to serve the
various requirements of our customers.
We also offer portable record storage units and many of our
regular storage units are used for document and record storage.
We believe the documents and records storage industry will
continue to grow as businesses continue to generate substantial
paper records that must be kept for extended periods.
Our goal is to continue to be the leading provider of portable
storage solutions in North America and the U.K. We believe our
competitive strengths and business strategy will enable us to
achieve this goal.
Competitive
Strengths
Our competitive strengths include the following:
Market Leadership. At December 31, 2010,
we maintained a total lease fleet of approximately
245,500 units and are the largest provider of portable
storage solutions in North America and the U.K. We are creating
brand awareness and believe the name Mobile Mini is
associated with high quality portable storage products, superior
customer service and value-added storage solutions. We have
historically achieved significant growth in new and existing
markets by capturing market share from competitors and by
creating demand among businesses and consumers who were
previously unaware of the availability of our products to meet
their storage requirements.
Superior, Differentiated Products. We offer
the industrys broadest range of portable storage products,
with many features that differentiate our products from those of
our competition. We remanufacture used ISO containers and have
designed and manufactured our own portable storage units. These
capabilities allow us to offer a wide range of products and
proprietary features to better meet our customers needs,
charge premium lease rates and gain market share from our
competitors, who offer more limited product selections. Our
portable storage units vary in size from 5 to 48 feet in
length and 8 to 10 feet in width. The 10-foot wide units we
manufactured provide 40% more usable storage space than the
standard eight-foot-wide ISO containers offered by our
competitors. The vast majority of our products have our patented
locking system and multiple door options, including easy-open
door systems. In addition, we offer portable storage units with
electrical wiring, shelving and other customized features. This
differentiation allows us to charge premium rental rates
compared to the rates charged by our competition.
Sales and Marketing Emphasis. We target a
diverse customer base and, unlike most of our competitors, have
developed sophisticated sales and marketing programs enabling us
to expand market awareness of our products and generate strong
internal growth. We have a dedicated commissioned sales team and
we assist them by providing them with our highly customized
contact management system and intensive sales training programs.
We monitor our salespersons effectiveness through our
extensive sales call monitoring and sales mentoring and training
programs. Our website is an integral part of our sales and
marketing approach as well as
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our advertising online, and in yellow pages and direct-mail
media. Our website includes customer focused features such as
product video tours, online payment capabilities and online real
time sales inquiries, enabling customers to chat live with our
salespeople.
National Presence with Local Service. We have
the largest national network of locations for portable storage
solutions in the U.S. and the U.K. and believe it would be
difficult for our competitors to replicate this network. We have
invested significant capital developing a national network of
locations that serves most major metropolitan areas in the
U.S. and the U.K. We have differentiated ourselves from our
local competitors and made replication of our presence difficult
by developing our branch network both through opening branches
in multiple cities and purchasing competitors in key markets.
The difficulty and time required to obtain the number of units
and locations necessary to support a national operation would
make establishing a large competitor difficult. In addition,
there are difficulties associated with recruiting and hiring an
experienced management team such as ours that has strong
industry knowledge and local relationships with customers. Our
network of local branches and operational yards allows us to
develop and maintain relationships with our local customers,
while providing a level of service to regional and national
companies that is made possible by our nationwide presence. Our
local managers, sales force and delivery drivers develop and
maintain critical personal relationships with customers that
benefit from access to our wide selection of products that we
have available. Additionally, our National Sales Center (NSC)
coordinates inbound calls from non-construction customers and
oversees outbound marketing campaigns.
Geographic and Customer Diversification. At
December 31, 2010, we operated from 121 locations of which
98 were located in the U.S., three in Canada, 19 in the U.K.,
and one in The Netherlands. We served approximately 84,500
customers from a wide range of industries in 2010. Our customers
include large and small retailers, construction companies,
medical centers, schools, utilities, manufacturers and
distributors, the U.S. and U.K. militaries, government
agencies, hotels, restaurants, entertainment complexes and
households. Our diverse customer base demonstrates the broad
applications for our products and our opportunity to create
future demand through targeted marketing. In 2010, our largest
and our second-largest customers accounted for 2.1% and 1.2% of
our leasing revenues, respectively, and our twenty largest
customers accounted for approximately 7.5% of our leasing
revenues. During 2010, approximately 61.4% of our customers
rented a single unit. We believe this diversity also helps us to
better weather economic downturns in individual markets and the
industries in which our customers operate.
Customer Service Focus. We believe the
portable storage industry is particularly service intensive. Our
entire organization is focused on providing high levels of
customer service, and we have salespeople both at the national
level and at our branch locations to better understand our
customers needs. We have trained our sales force to focus
on all aspects of customer service from the sales call onward.
We differentiate ourselves by providing security, convenience,
high product quality, differentiated and broad product selection
and availability, and competitive lease rates. We conduct
training programs for our sales force to assure high levels of
customer service and awareness of local market competitive
conditions. Additionally, we use a Net Promoter Score (NPS)
system to measure and enhance our customer service. We use NPS
to measure customer satisfaction each month,
rental-by-rental,
in real time through surveys conducted by a third party. We then
use customer feedback to drive service improvements across the
company, from our branches to our corporate headquarters. Our
Customer Relationship Management (CRM) system also increases our
responsiveness to customer inquiries and enables us to
efficiently monitor our sales forces performance.
Approximately 59.4% of our 2010 leasing revenues were derived
from repeat customers, which we believe is a result of our
superior customer service.
Customized Enterprise Resource Planning (ERP)
System. We have made significant investments in
an ERP system supporting our U.S. and U.K. operations.
These investments enable us to optimize fleet utilization,
control pricing, capture detailed customer data, easily evaluate
credit approval while approving it quickly, audit company
results reports, gain efficiencies in internal control
compliance and support our growth by projecting near-term
capital needs. In addition, we believe this system gives us a
competitive advantage over smaller and less sophisticated local
and regional competitors. Our ERP system allows us to carefully
monitor, on a real time basis, the size, mix, utilization and
lease rates of our lease fleet branch by branch. Our systems
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also capture relevant customer demographic and usage
information, which we use to target new customers within our
existing and new markets.
Business
Strategy
Our business strategy consists of the following:
Focus on Core Portable Storage Leasing
Business. We focus on growing our core storage
leasing business, which accounted for 81% of our fleet at
December 31, 2010, because it provides recurring revenue
and high margins. We believe that we can continue to generate
substantial demand for our portable storage units throughout
North America, the U.K. and The Netherlands.
Maintain Strong EBITDA Margins. One of the
tools we use internally to measure our financial performance is
EBITDA margins. We calculate this number by first calculating
EBITDA, which we define as net income before interest expense,
debt restructuring or extinguishment expense, provision for
income taxes, depreciation and amortization. In comparing EBITDA
from year to year, we may further adjust EBITDA to exclude the
effect of what we consider transactions or events not related to
our core business operations to arrive at adjusted EBITDA. We
define our EBITDA margins as EBITDA or adjusted EBITDA, divided
by our total revenues, expressed as a percentage. We continued
to aggressively manage this margin even during the recent
downturn in the economic environment. Our objective is to
maintain a relatively stable EBITDA margin through adjustments
to our cost structure as revenues change.
Generate Strong Internal Growth. We focus on
increasing the number of portable storage units we lease at our
existing branches to both new and repeat customers. We have
historically generated strong internal growth within our
existing markets by implementing our sophisticated sales and
marketing programs aimed to increase brand recognition, expand
market awareness of the uses of portable storage and
differentiate our superior products from our competitors.
Through our NSC, we are able to deploy sophisticated marketing
campaigns and customer tracking strategies to generate new sales
and support local branch operations. Our technology coupled with
a hybrid sales strategy allows us to bifurcate our customer base
into customers that need a local sales presence and those that
can be supported and grown by our centralized NSC sales force.
Through the NSC and our hybrid sales strategy we are able to
target sales campaigns by specific markets, customer type and
seasonal needs as well as adjust pricing simultaneously on a
national basis.
Opportunistic Geographic Expansion. We believe
we have attractive geographic expansion opportunities and have
identified over 50 additional markets in North America where we
believe demand for portable storage containers is
underdeveloped. We have developed a proven market strategy that
allows us to enter markets by either redeploying existing
containers to new markets that can be serviced by nearby
full-service branches or by acquiring the lease fleet assets of
a small local portable storage business and overlaying our
business model onto the new branch. Although we may make
opportunistic acquisitions in various markets from time to time,
we are currently focused on optimizing our existing markets and
entering new markets through greenfield operational yards. From
these
start-up
operational yards we are able to redeploy existing units and
deliver product into new markets without the overhead and
staffing of a full-service branch. We opened three greenfield
locations in 2010.
Continue to Enhance Product Offering. We
continue to enhance our existing products to meet our
customers needs and requirements. We have historically
been able to introduce new products and features that expand the
applications and overall market for our storage products. For
example, over the years we have introduced a number of
innovative products including a 10-foot-wide storage unit, a
record storage unit and a 10-by-30-foot steel combination
storage/office unit to our fleet. The record storage unit
provides highly secure,
on-site and
easy access to archived business records close at hand. In
addition to our steel container and steel security offices, we
have also added wood mobile offices as a complementary product
to better serve our customers. We have also made continuous
improvements (for example, making it easier to use in colder
climates) to our patented locking system over the years.
Currently, the 10-foot-wide unit, the record storage unit and
the 10-by-30-foot steel combination storage/office unit are
exclusively offered by Mobile Mini. We believe our proprietary
designed and manufactured units increase our ability to service
our customers needs and expand demand for our portable
storage solutions.
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Products
We provide a broad range of portable storage products to meet
our customers varying needs. Our products are managed and
our customers are serviced by our team at each of our locations,
including management, sales personnel and yard facility
employees. Some features of our different products are listed
below:
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Remanufactured and Modified Steel Storage
Containers. We purchase used ISO containers from
leasing companies, shipping lines and brokers. These containers
were originally built to ISO standards and are eight feet wide,
86 to 96 high and 20, 40 or 45 feet
long. After acquisition, we remanufacture and modify these ISO
containers at our locations. Remanufacturing typically involves
cleaning, removing rust and dents, repairing floors and
sidewalls, painting, adding our signs and further customizing
them by adding our proprietary easy opening door system and our
patented locking system. Modification typically involves
splitting some containers into 5-, 10-, 15-, 20- or 25-foot
lengths. We have also manufactured portable steel storage
containers for our lease fleet and for sale, including our
10-foot-wide containers.
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We generally purchase used ISO containers when they are 10 to
12 years old, a time at which their useful life as an ISO
shipping container has normally expired according to the
standards promulgated by the International Organization for
Standardization. Because we do not have the same stacking and
strength requirements that apply in the ISO shipping industry,
we have no need for these containers to meet ISO standards. If
we need to purchase ISO containers, as we have in the past, we
believe we would be able to procure them at competitive prices
because of our volume purchasing power.
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Steel Security Office and Steel Combination
Offices. We buy and historically have
manufactured steel security office/storage combination and
security office units that range from 10 to 40 feet in
length. We offer these units in various configurations,
including office and storage combination units that provide a
10- or
15-foot
office with the remaining area available for storage. Our office
units provide the advantage of ground accessibility for ease of
access and high security in an all-steel design. Our European
products include canteen units and drying rooms for the
construction industry. For customers with space limitations, the
office/canteen units can also be stacked two high with stairs
for access to the top unit. These office units are equipped with
electrical wiring, heating and air conditioning, phone jacks,
carpet or tile, high security doors and windows with security
bars or shutters. Some of these offices are also equipped with
sinks, hot water heaters, cabinets and restrooms.
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Wood Mobile Offices. We offer wood mobile
office units, which range from 8 to 24 feet in width and 20
to 60 feet in length, and which we purchase from
manufacturers. These units have a wide range of exterior and
interior options, including exterior stairs or ramps, awnings
and skirting. These units are equipped with electrical wiring,
heating and air conditioning, phone jacks, carpet or tile and
windows with security bars. Many of these units contain
restrooms.
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Steel Records Storage Containers. We market
proprietary portable records storage units that enable customers
to store documents at their location for easy access, or at one
of our facilities. Our units are 10.5 feet wide and are
available in 12 and 23-foot lengths. The units feature
high-security doors and locks, electrical wiring, shelving,
folding work tables and air filtration systems. We believe our
products are a cost-effective alternative to mass warehouse
storage, with a high level of fire and water damage protection.
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Van Trailers & Other Non-Core Storage
Units. Our acquisitions typically entail the
purchase of small companies with lease fleets primarily
comprised of standard ISO containers. However, many of these
companies also have van trailers and other storage products,
which we believe do not have the same advantages as standard
containers. It is our goal to dispose of these units from our
fleet either as their initial rental period ends or within a few
years. We do not remanufacture these products. See Product
Lives and Durability Van Trailers
Non-Core Storage Units below. At December 31, 2010,
van trailers comprised less than 0.2% of our lease fleet net
book value.
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We protect our products and brands through the use of trademarks
and patents. In particular, we have patented our proprietary
door locking system. In 2003 and 2006, we were issued United
States patents in connection with our Container Guard Lock and
our tri-cam locking system design. In 2006, we applied in
several countries for patents
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for improvements or modifications to our tri-cam locking
systems. These applications have been approved in Europe and
China and are under review in the United States and other
countries.
Product
Lives and Durability
Our steel portable storage containers, steel security offices,
and wood mobile offices have estimated useful lives of
30 years, 30 years, and 20 years, respectively,
from the date we build or acquire and remanufacture them, with
residual values of our
per-unit
investment ranging from 50% for our mobile offices to 55% for
our core steel products. Van trailers, which comprised 0.2% of
the net book value of our lease fleet at December 31, 2010,
are depreciated over seven years to a 20% residual value. For
the past three fiscal years, our cost to repair and maintain our
lease fleet units averaged approximately 2.7% of our lease
revenues. Repainting the outside of storage units is the most
common maintenance item.
We maintain our steel containers on a regular basis by painting
them with rust inhibiting paint, removing rust, and occasionally
replacing the wooden floor or a rusted panel as they come off
rent and are ready to be leased again. This periodic maintenance
keeps the container in essentially the same condition as after
we initially remanufactured it and is designed to maintain the
units value and rental rates comparable to new units.
Approximately 10.0% of our 2010 revenue was derived from sales
of our units. Because the containers in our lease fleet do not
significantly depreciate in value, we have no systematic program
in place to sell lease fleet containers as they reach a certain
age. Instead, most of our container sales involve either highly
customized containers that would be difficult to lease on a
recurring basis, or containers that we have not remanufactured.
In addition, due primarily to availability of inventory at
various locations at certain times of the year, we sell a
certain portion of containers and offices from the lease fleet.
Our gross margins typically increase for containers that have
been in our lease fleet for greater lengths of time prior to
sale, because although these units have been depreciated based
upon a 30 year useful life and 55% residual value (1.5% per
year), in most cases a units fair market value may not
decline by nearly that amount due to the nature of the assets
and our maintenance policy.
The following table shows the gross margin on containers and
steel security offices sold from inventory (which we call our
sales fleet) and from our lease fleet from 1997 through 2010
based on the length of time in the lease fleet.
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Sales
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Sales
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Revenue as a
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Revenue as a
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Number of
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Sales
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Original
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Percentage of
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Percentage of
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Units Sold
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Revenue
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Cost(1)
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Original Cost
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Net Book Value
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(Dollars in thousands)
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Sales fleet(2)
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39,597
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$
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127,012
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$
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84,166
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151
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%
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151
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%
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Lease fleet, by period held before sale:
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
Less than 5 years
|
|
|
35,908
|
|
|
$
|
108,284
|
|
|
$
|
74,736
|
|
|
|
145
|
%
|
|
|
151
|
%
|
5 to 10 years
|
|
|
5,344
|
|
|
$
|
24,090
|
|
|
$
|
16,585
|
|
|
|
145
|
%
|
|
|
161
|
%
|
10 to 15 years
|
|
|
1,455
|
|
|
$
|
6,009
|
|
|
$
|
4,282
|
|
|
|
140
|
%
|
|
|
166
|
%
|
15 to 20 years
|
|
|
279
|
|
|
$
|
884
|
|
|
$
|
654
|
|
|
|
135
|
%
|
|
|
171
|
%
|
20+ years
|
|
|
35
|
|
|
$
|
111
|
|
|
$
|
90
|
|
|
|
124
|
%
|
|
|
162
|
%
|
|
|
|
(1) |
|
Original cost for purposes of this table includes
(i) the price we paid for the unit, plus (ii) the cost
of our manufacturing or remanufacturing, which includes both the
cost of customizing units incurred, plus (iii) the freight
charges to our branch when the unit is first placed in service.
For manufactured units, cost includes our manufacturing cost and
the freight charges to the branch location where the unit is
first placed into service. |
|
(2) |
|
Includes sales of raw ISO containers. |
Appraisals on our fleet are conducted on a regular basis by an
independent appraiser selected by our lenders. The appraiser
does not differentiate in value based upon the age of the
container or the length of time it has been in our fleet. The
latest orderly liquidation value appraisal was conducted in
April 2010 by AccuVal Associates, Incorporated. Based on this
appraisal, on which our borrowings under our revolving credit
facility are based, our lease fleet liquidation appraisal value
as of December 31, 2010, is approximately
$818.5 million.
6
Because steel storage containers substantially keep their value
when properly maintained, we are able to lease containers that
have been in our lease fleet for various lengths of time at
similar rates, without regard to the age of the container. Our
lease rates vary by the size and type of unit leased, length of
contractual term, custom features and the geographic location of
our branch at which the lease is originated. While we focus on
service and security as a main differentiation of our products
from our competitors, pricing competition, market conditions and
other factors can influence our leasing rates.
The following chart shows the average monthly lease rate that we
currently receive for various types of containers that have been
in our lease fleet for various periods of time. We have added
our 10-foot-wide containers and security offices to the fleet
and those types of units are not included in this chart. This
chart includes the eight major types of containers in the fleet,
but specific details of such type of unit are not provided due
to competitive considerations.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Age of Containers
|
|
|
|
|
|
|
|
|
(By Number of Years in Our Lease Fleet)
|
|
|
Total Number/
|
|
|
|
|
|
0 5
|
|
|
6 10
|
|
|
11 15
|
|
|
16 20
|
|
|
Over 21
|
|
|
Average Dollar
|
|
|
Type 1
|
|
Number of units
|
|
|
7,959
|
|
|
|
1,724
|
|
|
|
1,890
|
|
|
|
204
|
|
|
|
5
|
|
|
|
11,782
|
|
|
|
Average monthly rent
|
|
$
|
63.08
|
|
|
$
|
84.01
|
|
|
$
|
85.48
|
|
|
$
|
83.13
|
|
|
$
|
79.08
|
|
|
$
|
70.09
|
|
Type 2
|
|
Number of units
|
|
|
940
|
|
|
|
818
|
|
|
|
438
|
|
|
|
113
|
|
|
|
5
|
|
|
|
2,314
|
|
|
|
Average monthly rent
|
|
$
|
83.47
|
|
|
$
|
85.75
|
|
|
$
|
86.76
|
|
|
$
|
84.45
|
|
|
$
|
83.63
|
|
|
$
|
84.95
|
|
Type 3
|
|
Number of units
|
|
|
16,176
|
|
|
|
2,493
|
|
|
|
1,512
|
|
|
|
587
|
|
|
|
60
|
|
|
|
20,828
|
|
|
|
Average monthly rent
|
|
$
|
67.25
|
|
|
$
|
82.51
|
|
|
$
|
84.59
|
|
|
$
|
86.07
|
|
|
$
|
87.82
|
|
|
$
|
70.92
|
|
Type 4
|
|
Number of units
|
|
|
207
|
|
|
|
240
|
|
|
|
391
|
|
|
|
94
|
|
|
|
6
|
|
|
|
938
|
|
|
|
Average monthly rent
|
|
$
|
97.18
|
|
|
$
|
106.75
|
|
|
$
|
109.10
|
|
|
$
|
103.70
|
|
|
$
|
95.29
|
|
|
$
|
105.24
|
|
Type 5
|
|
Number of units
|
|
|
550
|
|
|
|
290
|
|
|
|
688
|
|
|
|
27
|
|
|
|
|
|
|
|
1,555
|
|
|
|
Average monthly rent
|
|
$
|
105.01
|
|
|
$
|
115.83
|
|
|
$
|
124.18
|
|
|
$
|
118.04
|
|
|
$
|
|
|
|
$
|
115.74
|
|
Type 6
|
|
Number of units
|
|
|
3,268
|
|
|
|
2,971
|
|
|
|
1,550
|
|
|
|
216
|
|
|
|
12
|
|
|
|
8,017
|
|
|
|
Average monthly rent
|
|
$
|
123.67
|
|
|
$
|
123.61
|
|
|
$
|
131.22
|
|
|
$
|
127.11
|
|
|
$
|
136.41
|
|
|
$
|
125.22
|
|
Type 7
|
|
Number of units
|
|
|
11,583
|
|
|
|
5,918
|
|
|
|
1,436
|
|
|
|
93
|
|
|
|
12
|
|
|
|
19,042
|
|
|
|
Average monthly rent
|
|
$
|
110.21
|
|
|
$
|
111.69
|
|
|
$
|
122.04
|
|
|
$
|
127.83
|
|
|
$
|
128.56
|
|
|
$
|
111.66
|
|
Type 8
|
|
Number of units
|
|
|
269
|
|
|
|
270
|
|
|
|
302
|
|
|
|
41
|
|
|
|
5
|
|
|
|
887
|
|
|
|
Average monthly rent
|
|
$
|
165.76
|
|
|
$
|
162.48
|
|
|
$
|
166.60
|
|
|
$
|
158.62
|
|
|
$
|
185.03
|
|
|
$
|
164.83
|
|
We believe fluctuations in rental rates based on container age
are primarily a function of the location of the branch from
which the container was leased rather than age of the container.
Some of the units added to our lease fleet during recent years
through our acquisitions program have lower lease rates than the
rates we typically obtain because the units remain on lease
under terms (including lower rental rates) that were in place
when we obtained the units in acquisitions.
We periodically review our depreciation policy against various
factors, including the following:
|
|
|
|
|
results of our lenders independent appraisal of our lease
fleet;
|
|
|
|
practices of the major competitors in our industry;
|
|
|
|
our experience concerning useful life of the units;
|
|
|
|
profit margins we are achieving on sales of depreciated
units; and
|
|
|
|
lease rates we obtain on older units.
|
In 2009, some of the steel containers in our lease fleet were
older than the 25 year originally assigned useful life. In
April 2009, we evaluated our depreciation policy on steel units
and changed their estimated useful life to 30 years with an
estimated residual value of 55%, which effectively results in
continual depreciation on these units at the same annual rate of
book value as our previous depreciation policy of 25 year
life and 62.5% residual value. This change had an immaterial
impact on our consolidated financial statements at the date of
the change in estimate.
7
Our depreciation policy for our lease fleet uses the
straight-line method over the units estimated useful life,
after the date we put the unit in service, and the units are
depreciated down to their estimated residual values.
Steel Storage, Steel Security Office and Steel Combination
Offices. Our steel products are our core leasing
units and include portable storage units, whether manufactured
or remanufactured ISO containers, steel security office and
office/storage combination units. Our steel units are
depreciated over 30 years with an estimated residual value
of 55%.
Wood Mobile Offices. Because of the wood
structure of these units, they are more susceptible to wear and
tear than steel units. We depreciate these units over
20 years down to a 50% residual value (2.5% per year),
which we believe to be consistent with most of our major
competitors in this industry. Wood mobile office units lose
value over time and we may sell older units from time to time.
At the end of 2010, all of our wood mobile offices were less
than eleven years old. These units, excluding those units
acquired in acquisitions, are also more expensive than our
storage units, causing an increase in the average carrying value
per unit in the lease fleet over the last ten years.
The operating margins on mobile offices are lower than the
margins on steel containers. However, mobile offices are rented
using our existing infrastructure and therefore provide
incremental returns far in excess of our fixed expenses. These
returns add to our overall profitability and operating margins.
Van Trailers and Other Non-Core Storage
Units. At December 31, 2010, van trailers
made up less than 0.2% of the net book value of our lease fleet.
When we acquire businesses in our industry, the acquired
businesses often have van trailers and other manufactured
storage products that we believe do not offer customers the same
advantages as our core steel container storage product. We
depreciate our van trailers over 7 years to a 20% residual
value. We often attempt to sell most of these units from our
fleet as they come off rent or within a few years after we
acquire them. We do not utilize our resources to remanufacture
these products and instead resell them.
Lease
Fleet Configuration
Our lease fleet is comprised of over 100 different
configurations of units. Depending on fleet utilization, we add
units to our fleet through purchases of used ISO containers and
containers obtained through acquisitions, both of which we
remanufacture and customize. We also purchase new manufactured
mobile offices in various configurations and sizes, and
manufacture our own custom steel units. Due to the number of
units acquired in the MSG transaction and the current economic
environment, we do not anticipate needing to purchase or acquire
containers or offices to remanufacture or customize until our
fleet utilization returns to historic levels. Our initial cost
basis of an ISO container includes the purchase price from the
seller, the cost of remanufacturing, which can include removing
rust and dents, repairing floors, sidewalls and ceilings,
painting, signage and installing new doors, seals and a locking
system. Additional modifications may involve the splitting of a
unit to create several smaller units and adding customized
features. The restoration and modification processes do not
necessarily occur in the same year the units are purchased or
acquired. We procure larger containers, typically 40-foot units,
and split them into two 20-foot units or one 25-foot and one
15-foot unit, or other configurations as needed, and then add
new doors along with our patented locking system and sometimes
add custom features. In addition, we also sell units from our
lease fleet to our customers.
8
The table below outlines those transactions that effectively
maintained the net book value of our lease fleet at
$1.1 billion at December 31, 2009, and
$1.0 billion at December 31, 2010:
|
|
|
|
|
|
|
|
|
|
|
Dollars
|
|
|
Units
|
|
|
|
(In thousands)
|
|
|
Lease fleet at December 31, 2009, net
|
|
$
|
1,055,328
|
|
|
|
257,208
|
|
Purchases:
|
|
|
|
|
|
|
|
|
Container purchases including freight
|
|
|
263
|
|
|
|
93
|
|
Manufactured units:
|
|
|
|
|
|
|
|
|
Steel security offices
|
|
|
1,465
|
|
|
|
63
|
|
Wood mobile offices
|
|
|
20
|
|
|
|
1
|
|
Remanufacturing and customization of units purchased or obtained
in prior years
|
|
|
12,969
|
(1)
|
|
|
612
|
(2)
|
Other(3)
|
|
|
824
|
|
|
|
(29
|
)
|
Cost of sales from lease fleet
|
|
|
(18,881
|
)
|
|
|
(12,449
|
)
|
Effect of exchange rate changes
|
|
|
(2,945
|
)
|
|
|
|
|
Change in accumulated depreciation, excluding sales
|
|
|
(20,640
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Lease fleet at December 31, 2010, net
|
|
$
|
1,028,403
|
|
|
|
245,499
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Does not include any routine maintenance, which is expensed as
incurred. |
|
(2) |
|
These units include the net additional units that were the
result of splitting steel containers into two or more shorter
units, such as splitting a 40-foot container into two 20-foot
units, or one 25-foot unit and one 15-foot unit and include
units moved from finished goods to lease fleet. |
|
(3) |
|
Includes net transfers to and from property, plant and equipment
and net non-sale disposals and recoveries of the lease fleet. |
The table below outlines the composition of our lease fleet at
December 31, 2010:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Percentage of
|
|
|
|
Lease Fleet
|
|
|
Number of Units
|
|
|
Units
|
|
|
|
(In thousands)
|
|
|
|
|
|
|
|
|
Steel storage containers
|
|
$
|
612,214
|
|
|
|
198,584
|
|
|
|
81
|
%
|
Offices
|
|
|
529,892
|
|
|
|
41,553
|
|
|
|
17
|
%
|
Van trailers
|
|
|
3,762
|
|
|
|
5,362
|
|
|
|
2
|
%
|
Other (chassis and ancillary products)
|
|
|
2,491
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,148,359
|
|
|
|
|
|
|
|
|
|
Accumulated depreciation
|
|
|
(119,956
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
1,028,403
|
|
|
|
245,499
|
|
|
|
100
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Branch
Operations
Our senior management analyzes and manages the business as one
business segment and our operations across all branches
concentrate on the same core business of leasing and selling
products that are substantially the same in each market. In
order to effectively manage this business across different
geographic areas, we divide our one business segment into
smaller management areas we call divisions, regions and
branches. Each of our branches generally has similar economic
characteristics covering all products leased or sold, including
similar customer base, sales personnel, advertising, yard
facilities, general and administrative costs and branch
management. Further financial information by geography is
provided in Note 16 to the Consolidated Financial
Statements appearing in Item 8 of this report.
In the U.S. particularly, we locate our branches in markets
with attractive demographics and strong growth prospects. Within
each market, we have located our branches in areas that allow
for easy delivery of portable storage
9
units to our customers over a wide geographic area. In addition,
when cost effective, we seek locations that are visible from
high traffic roads in order to advertise our products and our
name. Our branches maintain an inventory of portable storage
units available for lease, and some of our older branches also
provide
on-site
storage of units under lease at the branch.
At December 31, 2010, we operated 121 locations of which 98
were located in the U.S., three in Canada, 19 in the U.K., and
one in The Netherlands. We currently have 67 branches in the
U.S., one branch in Canada, 17 branches in the U.K. and one
branch in The Netherlands. Additionally, we have properties we
call operational yards from which we can service a local market
and store and maintain our products and equipment. We continue
to evaluate our branch operations and where it becomes
operationally feasible, we convert some of our branches to
operational yards to further reduce expenses. These operational
yards do not have branch managers or sales people, but typically
have a dispatcher and drivers assigned to them. Likewise, in
order to enter new markets we will open new operational yards
that can be serviced by nearby full-service branches.
Each branch has a branch manager who has overall supervisory
responsibility for all activities of the branch. Many branch
managers also oversee operational yards that reside within their
geographic area. Branch managers report to regional managers who
each generally oversee multiple branches. Our regional managers,
in turn, report to one of our operational senior vice presidents
(called a managing director in Europe). Performance based
incentive bonuses are a substantial portion of the compensation
for these senior vice presidents, regional managers and branch
managers.
Each branch has its own dedicated sales staff and a
transportation department that delivers and picks up portable
storage units from customers. Each branch has delivery trucks
and forklifts to load, transport and unload units and a storage
yard staff responsible for unloading and stacking units. Steel
units can be stored by stacking them to maximize usable ground
area. Some of our larger branches also have a fleet maintenance
department to maintain the branchs trucks, forklifts and
other equipment. Our other branches perform preventive
maintenance tasks, but outsource major repairs and other
maintenance requirements.
Sales and
Marketing
We implemented a hybrid sales model consisting of a dedicated
sales staff at all of our branch locations as well as at our
NSC. Our local sales staff builds and strengthens relationships
with local customers in each market with particular emphasis on
contractors and construction-related customers, who tend to
demand local salesperson presence. Our NSC handles inbound calls
from new customers and leads sales campaigns to existing
customers not serviced by branch sales personnel. In addition,
the NSC initiates outbound marketing calls to solicit new
customers. Our sales staff at the NSC work with our local branch
managers, dispatchers and sales personnel to ensure customers
receive integrated first class service from initial call to
delivery. Our branch sales staff, national sales center and
sales management team at our headquarters and other locations
conduct sales and marketing on a full-time basis. We believe
that offering local salesperson presence for customers along
with the efficiencies of a centralized sales operation for
customers not needing a local sales contact will continue to
allow us to provide high levels of customer service and serve
all of our customers in a dedicated, efficient manner.
Our sales people handle all of our products and we do not
maintain separate sales forces for our various product lines.
Our sales and marketing force provides information about our
products to prospective customers by handling inbound calls and
by initiating outbound marketing calls. We have ongoing sales
and marketing training programs covering all aspects of leasing
and customer service. Our branches communicate with one another
and with corporate headquarters through our ERP system and our
customer relationship management software and tools. This
enables the sales team to share leads and other information and
permits management to monitor and review sales and leasing
productivity on a
branch-by-branch
basis. We improve our sales efforts by recording and rating the
sales calls made and received by our trained sales force. Our
sales employees are compensated largely on a commission basis.
Our nationwide presence in the U.S. and the U.K. allows us
to offer our products to larger customers who wish to centralize
the procurement of portable storage on a multi-regional or
national basis. We are well equipped to meet these
customers needs through our National Account Program,
which centralizes and simplifies the procurement, rental and
billing process for those customers. Approximately 1,100
U.S. customers and 60 European customers
10
currently participate in our National Account Program. We also
provide our national account customers with service guarantees,
which assure them they will receive the same high level of
customer service from any of our branch locations. This program
has helped us succeed in leveraging customer relationships
developed at one branch throughout our branch system.
We focus an increasing portion of our marketing expenditures on
internet-based initiatives with web-based products and services
for both existing customers and potential customers. We also
advertise our products in the yellow pages and have historically
used a targeted direct mail program which described our products
and features and highlighted the advantages of portable storage.
Customers
During 2010, approximately 84,500 customers leased our portable
storage products. Our customer base is diverse and consists of
businesses in a broad range of industries. In 2010, our largest
and second largest customers accounted for 2.1% and 1.2% of our
leasing revenues, respectively, and our 20 largest customers
accounted for approximately 7.5% of our leasing revenues. During
2010, approximately 61.4% of our customers rented a single unit.
Based on an independent market study, we believe our customers
are engaged in a vast majority of the industries identified in
the four-digit Standard Industrial Classification (SIC) manual
published by the U.S. Bureau of the Census.
We target customers who can benefit from our portable storage
solutions either for seasonal, temporary or long-term storage
needs. Customers use our portable storage units for a wide range
of purposes. The following table provides an overview of our
customers and how they use our portable storage, combination
storage/office and mobile office units as of December 31,
2010:
|
|
|
|
|
|
|
|
|
|
|
Approximate
|
|
|
|
|
|
|
|
Percentage of
|
|
|
Representative
|
|
|
Business
|
|
Units on Lease
|
|
|
Customers
|
|
Typical Application
|
|
Consumer service
|
|
|
|
|
|
|
|
|
and retail businesses
|
|
|
34.2
|
%
|
|
Department, drug, grocery and strip mall stores, hotels,
restaurants, dry cleaners and service stations
|
|
Inventory storage, supplies, record storage and seasonal needs
|
Construction
|
|
|
30.5
|
%
|
|
General, electrical, plumbing and mechanical contractors,
landscapers, residential homebuilders and equipment rental
companies
|
|
Equipment and materials storage and job offices
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Industrial and commercial
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19.4
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%
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Distributors, trucking and utility companies, finance and
insurance companies, real estate brokers and film production
companies
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Raw materials, equipment, record storage, in-plant office and
seasonal needs
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Government and institutions
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10.9
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%
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Schools, hospitals, medical centers, military, Native American
tribal governments and reservations and national, state, county
and local governmental agencies
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Athletic equipment, military storage, disaster preparedness,
supplier, record storage, security office, supplies, equipment
storage, temporary office space and seasonal needs
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Consumers
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5.0
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%
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Homeowners
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Backyard storage and storage of household goods during
relocation or renovation; storage at our location
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Remanufacturing
We continue to remanufacture used ISO containers by adding our
proprietary locking and easy-opening door systems at some of our
branch locations. Our differentiated product offering allows us
to provide a broad selection of products to our customers and
distinguishes our products from our competitors. If needed in
the remanufacturing process, we purchase raw materials such as
steel, vinyl, wood, glass and paint, which we use in our
remanufacturing and restoration operations. We typically buy
these raw materials on a purchase order basis as we do not have
long-term contracts with vendors for the supply of any raw
materials. Historically, we built new steel portable storage
units, steel security offices and other custom-designed steel
structures as well as remanufactured used ISO containers at our
Maricopa, Arizona facility. After integrating the assets and
operations we acquired in the MSG acquisition, we leveraged our
combined fleet and restructured our manufacturing operations,
reducing overhead and capital expenditures for our lease fleet.
We accomplished this primarily by reducing our work force at our
Maricopa, Arizona manufacturing facility in December 2008 by
approximately 90%, in addition to reducing manufacturing and
remanufacturing staff at other locations. Additionally, we
essentially halted new production activities other than
completing existing work in process assignments. For the near
future, we expect our Maricopa, Arizona facility, with a limited
staff, will predominately be used for building custom units,
maintenance on our existing fleet and storage for excess lease
fleet units.
Vehicles
At December 31, 2010, we had a fleet of 728 delivery
trucks, of which 608 were owned and 120 were leased. We use
these trucks to deliver and pick up containers at customer
locations. We supplement our delivery fleet by outsourcing
delivery services to independent haulers when appropriate.
Enterprise
Resource Planning and Customer Relationship Management
Systems
We operate a highly customized ERP and CRM system through which
key operational and financial information is made available on a
daily basis. Our management team uses this information to
monitor closely current business activities. We also use the
customized ERP system to improve and optimize lease fleet
utilization, improve the effectiveness of our sales and
marketing programs and to allow international growth by using
the same ERP system throughout the company. The ERP, CRM and all
our other systems are available throughout our branch network
through a high performance global network. Our Tempe, Arizona
corporate headquarters and each branch can enter data into the
system and access data on a real-time basis. We generate weekly
management reports by branch with leasing volume, fleet
utilization, lease rates and fleet movement. These reports allow
management to monitor each branchs performance on a daily,
weekly and monthly basis. We track each portable storage unit by
its serial number. Lease fleet and sales information are entered
in the ERP system daily at the branch level and verified through
physical inventories by branch or corporate employees.
Salespeople also use the CRM system to track customer leads and
other sales data, including information about current and
prospective customers. Members of our management team can access
all of these systems and databases throughout each day at all of
our locations or remotely. Our ERP system is comprised of
third-party licensed software and a number of proprietary custom
enhancements. We have made significant investments in our ERP
and CRM systems over the years, and we intend to continue such
investments to further optimize the features of these systems
for both our North American and European operations.
Lease
Terms
Under our lease agreements, each lease has an original intended
length of term at inception. However, if the customer keeps the
leased unit beyond the original intended term, the lease
continues on a
month-to-month
basis until cancelled by the customer. At the end of 2010, our
steel storage containers initially have an average intended term
of approximately 7 months at inception, however the average
duration for these leases that have fulfilled their term
agreement was 35 months to date. Our security,
security/storage and mobile offices typically have an average
intended lease term of approximately nine months. The average
duration of all office leases that have fulfilled their term
agreement was 24 months in 2010. Our leases provide that
the customer is responsible for the cost of delivery and pickup
at lease inception. Our leases specify that the customer is
liable for any damage done to the unit beyond ordinary wear and
tear. However, our customers may purchase a damage waiver from
us to avoid this liability in
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certain circumstances. This provides us with an additional
source of recurring revenue. Any customers possessions
stored within a portable storage unit are typically the
responsibility of that customer.
Competition
We face competition from several local and regional companies,
as well as from national companies, in all of our current
markets. We compete with several large national and
international companies in our mobile office product line. Our
competitors include lessors of storage units, mobile offices,
used van trailers and other structures used for portable
storage. We also compete with conventional fixed self-storage
facilities. We compete primarily in terms of security,
convenience, product quality, broad product selection and
availability, lease rates and customer service. In our core
portable storage business, we typically compete with Williams
Scotsman, Elliot Hire, PODS, Pac-Van, 1-800-PACK-RAT, LLC,
Haulaway Storage Containers, Inc., Moveable Cubicle, Speedy
Hire, and a number of other national, regional and local
competitors. In the mobile office business, we typically compete
with ModSpace, Williams Scotsman, McGrath RentCorp and other
national, regional and local companies.
Employees
As of December 31, 2010, we employed approximately
1,458 full-time employees in the following major categories:
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Management
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153
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Administrative
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308
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Sales and marketing
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278
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Manufacturing and mechanics
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82
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Drivers, dispatch and yard
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637
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Seasonality
Demand from some of our customers is somewhat seasonal. Demand
for leases of our portable storage units by large retailers is
stronger from September through December because these retailers
need to store more inventories for the holiday season. Our
retail customers usually return these leased units to us in
December and early in the following year. This seasonality has
historically caused lower utilization rates for our lease fleet
and a marginal decrease in cash flow during the first quarter of
each year.
Access to
Information
Our internet address is www.mobilemini.com. We make
available at this address, free of charge, our Annual Report on
Form 10-K,
quarterly reports on
Form 10-Q,
current reports on
Form 8-K
and amendments to those reports filed or furnished pursuant to
Section 13(a) or 15(d) of the Securities Exchange Act of
1934, as amended, (Exchange Act), as soon as reasonably
practicable after we electronically file such material with, or
furnish it to, the Securities and Exchange Commission (SEC). In
this
Form 10-K,
we incorporate by reference as identified herein certain
information from parts of our proxy statement for the 2011
Annual Meeting of Stockholders, which we will file with the SEC
and will be available free of charge on our website. Reports of
our executive officers, directors and any other persons required
to file securities ownership reports under Section 16(a) of
the Exchange Act are also available through our web site.
Information contained on our web site is not part of this Annual
Report.
A
continued economic slowdown, particularly in the non-residential
construction sector of the economy, could reduce demand from
some of our customers, which could negatively impact our
financial results.
The recent recession has caused disruptions and extreme
volatility in global financial markets and increased rates of
default and bankruptcy, and has reduced demand for portable
storage and mobile offices. These events have
13
also caused substantial volatility in the stock market and
layoffs and other restrictions on spending by companies in
almost every business sector. These events could continue to
impact our business in a variety of ways, including:
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reduction in consumer and business spending, which would result
in a reduction in demand for our products;
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a negative impact on the ability of our customers to timely pay
their obligations to us or our vendors to timely supply
services, thus reducing our cash flow; and
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an increase in counterparty risk.
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Additionally, at the end of 2009 and 2010, customers in the
construction industry, primarily in non-residential
construction, accounted for approximately 28% and 31%,
respectively, of our leased units. If the current economic
slowdown in the non-residential construction sector continues,
we may continue to experience less demand for leases and sales
of our products. Because most of the cost of our leasing
business is either fixed or semi- variable, our margins will
contract if revenue continues to fall without similar changes in
expenses, which may be difficult to achieve, and which
ultimately may result in having a material adverse effect on our
financial condition.
Our
operational measures designed to increase revenue while
continuing to control operating costs may not generate the
improvements and efficiencies we expect and may impact
customers.
We have responded to the economic slowdown by employing a number
of operational measures designed to increase revenue while
continuing to pursue our strategy of reducing operating costs
where available. Additionally, our hybrid sales strategy is
designed to meet customer needs and drive revenue growth but
differs from our historic sales structure. The extent to which
these strategies will achieve the desired goals and efficiencies
in 2011 and beyond is uncertain, as their success depends on a
number of factors, some of which are beyond our control.
Even if we carry out these measures in the manner we currently
expect, we may not achieve the improvements or efficiencies we
anticipate, or on the timetable we anticipate. There may be
unforeseen productivity, revenue or other consequences resulting
from our strategies that will adversely affect us. Therefore,
there can be no guarantee that our strategies will prove
effective in achieving desired profitability or margins.
Additionally, these strategies may have adverse consequences if
our cost cutting and operational changes are deemed by customers
to adversely impact product quality or service levels.
Global
capital and credit markets conditions could have an adverse
effect on our ability to access the capital and credit markets,
including via our credit facility.
In 2009, due to the disruptions in the global credit markets,
liquidity in the debt markets was materially impacted, making
financing terms for borrowers less attractive or, in some cases,
unavailable altogether. Renewed disruptions in the global credit
markets or the failure of additional lending institutions could
result in the unavailability of certain types of debt financing,
including access to revolving lines of credit.
We monitor the financial strength of our larger customers,
derivative counterparties, lenders and insurance carriers on a
periodic basis using publicly available information in order to
evaluate our exposure to those who have or who we believe may
likely experience significant threats to their ability to
adequately service our needs. While we engage in borrowing and
repayment activities under our revolving credit facility on an
almost daily basis and have not had any disruption in our
ability to access our revolving credit facility as needed, the
current credit market conditions could eventually increase the
likelihood that one or more of our lenders may be unable to
honor its commitments under our revolving credit facility, which
could have an adverse effect on our business, financial
condition and results of operations.
Additionally, in the future we may need to raise additional
funds to, among other things, fund our existing operations,
improve or expand our operations, respond to competitive
pressures, or make acquisitions. If adequate funds are not
available on acceptable terms, we may be unable to meet our
business or strategic objectives or compete effectively. If we
raise additional funds by issuing equity securities,
stockholders may experience dilution of their ownership
interests, and the newly issued securities may have rights
superior to those of the common stock. If we raise additional
funds by issuing debt, we may be subject to further limitations
on our operations arising out of the agreements governing such
debt. If we fail to raise capital when needed, our business will
be negatively affected.
14
We
face intense competition that may lead to our inability to
increase or maintain our prices, which could have a material
adverse impact on our results of operations.
The portable storage and mobile office industries are highly
competitive and highly fragmented. Many of the markets in which
we operate are served by numerous competitors, ranging from
national companies like ourselves, to smaller multi-regional
companies and small, independent businesses with a limited
number of locations. See Business
Competition. Some of our principal competitors are less
leveraged than we are and have lower fixed costs and may be
better able to withstand adverse market conditions within the
industry. Additionally, some of our competitors currently offer
products outside of our core container offerings but may have
better brand recognition in their current end customer segments.
If these competitors use their brand awareness to enter our
product offerings, customers may choose these competitors
products over ours and we could lose business. We generally
compete on the basis of, among other things, quality and breadth
of service, expertise, reliability, and the price, size, and
attractiveness of our rental units. Our competitors are
competing aggressively on the basis of pricing and may continue
to drive prices further down. To the extent that we choose to
match our competitors declining prices, it could harm our
results of operations. To the extent that we choose not to match
or remain within a reasonable competitive distance from our
competitors pricing, it could also harm our results of
operations, as we may lose rental volume.
We
operate with a high amount of debt and we may incur significant
additional indebtedness.
Our operations are capital intensive, and we operate with a high
amount of debt relative to our size. At December 31, 2010,
we had the following outstanding issuances of senior notes
(i) $150.0 million in aggregate principal amount of
6.875% senior notes due 2015; (ii) $200.0 million
in aggregate principal amount of 7.785% senior notes due
2020; and (iii) $22.3 million of outstanding notes
under a previous issuance of $200.0 million in aggregate
principal amount of 9.75% senior notes due 2014, which were
originally issued by MSG and assumed by us in connection with
our acquisition of MSG in June 2008. In January 2011, the
remaining outstanding amount of the 9.75% senior notes due
2014 was redeemed and ceased to be outstanding. Additionally, we
have entered into an ABL Credit Agreement under which we may
borrow up to $850.0 million on a revolving loan basis,
which means that amounts repaid may be reborrowed. All amounts
outstanding under the ABL Credit Agreement are due on
June 27, 2013. At December 31, 2010, we had
approximately $771.4 million of indebtedness. Our
substantial indebtedness could have adverse consequences. For
example, it could:
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require us to dedicate a substantial portion of our cash flow
from operations to payments on our indebtedness, which could
reduce the availability of our cash flow to fund future working
capital, capital expenditures, acquisitions and other general
corporate purposes;
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make it more difficult for us to satisfy our obligations with
respect to our senior notes;
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expose us to the risk of increased interest rates, as certain of
our borrowings will be at variable rates of interest;
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require us to sell assets to reduce indebtedness or influence
our decisions about whether to do so;
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increase our vulnerability to general adverse economic and
industry conditions;
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limit our flexibility in planning for, or reacting to, changes
in our business and our industry;
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restrict us from making strategic acquisitions or pursuing
business opportunities; and
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limit, along with the financial and other restrictive covenants
in our indebtedness, among other things, our ability to borrow
additional funds. Failing to comply with those covenants could
result in an event of default which, if not cured or waived,
could have a material adverse effect on our business, financial
condition and results of operations.
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15
Covenants
in our debt instruments restrict or prohibit our ability to
engage in or enter into a variety of transactions.
The indentures governing our 6.875% senior notes and
7.785% senior notes, contain various covenants that limit
our discretion in operating our business. In particular, we are
limited in our ability to merge, consolidate or transfer
substantially all of our assets, issue preferred stock of
subsidiaries and create liens on our assets to secure debt. In
addition, if there is default, and we do not maintain borrowing
availability in excess of certain pre-determined levels, we may
be unable to incur additional indebtedness, make restricted
payments (including paying cash dividends on our capital stock)
and redeem or repurchase our capital stock. Our senior notes do
not contain financial maintenance covenants and the financial
maintenance covenants under our revolving credit facility are
not applicable unless we fall below $100 million in
borrowing availability.
Our revolving credit facility requires us, under certain limited
circumstances, to maintain certain financial ratios and limits
our ability to make capital expenditures. These covenants and
ratios could have an adverse effect on our business by limiting
our ability to take advantage of financing, merger and
acquisition or other corporate opportunities and to fund our
operations. Breach of a covenant in our debt instruments could
cause acceleration of a significant portion of our outstanding
indebtedness. Any future debt could also contain financial and
other covenants more restrictive than those imposed under the
indentures governing the senior notes, and the revolving credit
facility.
A breach of a covenant or other provision in any debt instrument
governing our current or future indebtedness could result in a
default under that instrument and, due to cross-default and
cross-acceleration provisions, could result in a default under
our other debt instruments. Upon the occurrence of an event of
default under the revolving credit facility or any other debt
instrument, the lenders could elect to declare all amounts
outstanding to be immediately due and payable and terminate all
commitments to extend further credit. If we were unable to repay
those amounts, the lenders could proceed against the collateral
granted to them, if any, to secure the indebtedness. If the
lenders under our current or future indebtedness accelerate the
payment of the indebtedness, we cannot assure you that our
assets or cash flow would be sufficient to repay in full our
outstanding indebtedness, including the senior notes.
The amount we can borrow under our revolving credit facility
depends in part on the value of the portable storage units in
our lease fleet. If the value of our lease fleet declines under
appraisals our lenders receive, the amount we can borrow will
similarly decline. We are required to satisfy several covenants
with our lenders that are affected by changes in the value of
our lease fleet. We would be in breach of certain of these
covenants if the value of our lease fleet drops below specified
levels. If this happens, we may not be able to borrow the
amounts we need to expand our business, and we may be forced to
liquidate a portion of our existing fleet.
Disruptions in our information technology systems
(including our phone system) could limit our ability to
effectively operate, monitor and control our operations and
adversely affect our operating results.
Our information technology systems facilitate our ability to
monitor and control our operations and adjust to changing market
conditions. We rely on a sophisticated phone and data network to
communicate with customers and within our branch system. Any
disruptions in these systems or the failure of these systems to
operate as expected could, depending on the magnitude of the
problem, materially adversely affect our financial condition or
operating results by limiting our capacity to effectively
monitor and control our operations and adjust to changing market
conditions in a timely manner. Like other companies, our
information technology systems may be vulnerable to a variety of
interruptions due to events beyond our control, including, but
not limited to, natural disasters, terrorist attacks,
telecommunications failures, computer viruses, hackers, and
other security issues. In addition, because our systems contain
information about individuals and businesses, our failure to
maintain the security of the data we hold, whether the result of
our own error or the malfeasance or errors of others, could harm
our reputation or give rise to legal liabilities leading to
lower revenues, increased costs and other potential material
adverse effects on our results of operations.
16
As Department of Transportation regulations increase, our
operations could be negatively impacted and competition for
qualified drivers could increase and result in increased labor
costs.
We operate in the United States pursuant to operating authority
granted by the U.S. Department of Transportation, or DOT.
Our company drivers also must comply with the safety and fitness
regulations of the DOT, including those relating to drug and
alcohol testing and
hours-of-service.
Such matters as weight and equipment dimensions also are subject
to government regulations. We also may become subject to new or
more restrictive regulations relating to fuel emissions,
drivers
hours-of-service,
ergonomics, on-board reporting of operations, collective
bargaining, security at ports, and other matters affecting
safety or operating methods. The DOT is currently engaged in a
rulemaking proceeding regarding drivers
hours-of-service,
and the result could negatively impact utilization of our
equipment.
For example, in December 2010, CSA 2010, a new enforcement and
compliance model implementing driver standards in addition to
our current standards, was launched. CSA 2010 may reduce
the number of eligible drivers
and/or
negatively impact our fleet ranking.
Under CSA 2010, drivers and fleets will be evaluated and ranked
based on certain safety-related standards. The methodology for
determining a carriers DOT safety rating will be expanded
to include the on-road safety performance of the carriers
drivers. As a result, certain current and potential drivers may
no longer be eligible to drive for us, our fleet could be ranked
poorly as compared to our peer firms, and our safety rating
could be adversely impacted. A reduction in eligible drivers or
a poor fleet ranking may result in difficulty attracting and
retaining qualified drivers, which could result in increased
compensation costs.
We may
not be able to generate sufficient cash to service all of our
debt, and may be forced to take other actions to satisfy our
obligations under such indebtedness, which may not be
successful.
Our ability to make scheduled payments on or to refinance our
obligations under, our debt will depend on our financial and
operating performance and that of our subsidiaries, which, in
turn, will be subject to prevailing economic and competitive
conditions and to the financial and business factors, many of
which may be beyond our control. See the table under
Managements Discussion and Analysis of Financial
Condition and Results of Operations Liquidity and
Capital Resources Contractual Obligations for
disclosure regarding the amount of cash required to service our
debt.
We may not maintain a level of cash flow from operating
activities sufficient to permit us to pay the principal,
premium, if any, and interest on our indebtedness. If our cash
flow and capital resources are insufficient to fund our debt
service obligations, we may be forced to reduce or delay capital
expenditures, sell assets, seek to obtain additional equity
capital or restructure our debt. In the future, our cash flow
and capital resources may not be sufficient for payments of
interest on and principal of our debt, and such alternative
measures may not be successful and may not enable us to meet our
scheduled debt service obligations. We may not be able to
refinance any of our indebtedness or obtain additional
financing, particularly because of our anticipated high levels
of debt and the debt incurrence restrictions imposed by the
agreements governing our debt, as well as prevailing market
conditions. In the absence of such operating results and
resources, we could face substantial liquidity problems and
might be required to dispose of material assets or operations to
meet our debt service and other obligations. The instruments
governing our indebtedness restrict our ability to dispose of
assets and use the proceeds from any such dispositions. We may
not be able to consummate those sales, or if we do, at an
opportune time, or the proceeds that we realize may not be
adequate to meet debt service obligations when due.
The
market price of our common stock has been volatile and may
continue to be volatile and the value of your investment may
decline.
The market price of our common stock has been volatile and may
continue to be volatile. This volatility may cause wide
fluctuations in the price of our common stock on The NASDAQ
Global Select Market. The market price of our common stock is
likely to be affected by:
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changes in general conditions in the economy, geopolitical
events or the financial markets;
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variations in our quarterly operating results;
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changes in financial estimates by securities analysts;
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other developments affecting us, our industry, customers or
competitors;
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changes in demand for our products or the prices we charge due
to changes in economic conditions, competition or other factors;
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general economic conditions in the markets where we operate;
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the cyclical nature of our customers businesses,
particularly those operating in the construction sectors;
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rental rate changes in response to competitive factors;
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bankruptcy or insolvency of our customers, thereby reducing
demand for our used units;
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seasonal rental patterns, with rental activity tending to be
lowest in the first quarter of the year;
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timing of acquisitions of companies and new location openings
and related costs;
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labor shortages, work stoppages or other labor difficulties;
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possible unrecorded liabilities of acquired companies;
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possible write-offs or exceptional charges due to changes in
applicable accounting standards, goodwill impairment, or
impairment of assets;
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the operating and stock price performance of companies that
investors deem comparable to us; and
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the number of shares available for resale in the public markets
under applicable securities laws.
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Unionization
by some or all of our employees could cause increases in
operating costs.
None of our employees are presently covered by collective
bargaining agreements. However, from time to time various unions
have attempted to organize some of our employees. We cannot
predict the outcome of any continuing or future efforts to
organize our employees, the terms of any future labor
agreements, or the effect, if any, those agreements might have
on our operations or financial performance.
We believe that a unionized workforce would generally increase
our operating costs, divert the attention of management from
servicing customers and increase the risk of work stoppages, all
of which could have a material adverse effect on our business,
results of operations or financial condition.
Fluctuations
between the British pound and U.S. dollar could adversely affect
our results of operations.
We derived approximately 15.6% of our total revenues in 2010
from our operations in the U.K. The financial position and
results of operations of our U.K. subsidiaries are measured
using the British pound as the functional currency. As a result,
we are exposed to currency fluctuations both in receiving cash
from our U.K. operations and in translating our financial
results back into U.S. dollars. We believe the impact on us
of currency fluctuations from an operations perspective is
mitigated by the fact that the majority of our expenses, capital
expenditures and revenues in the U.K. are in British pounds. We
do, however, have significant currency exposure as a result of
translating our financial results from British pounds into
U.S. dollars for purposes of financial reporting. Assets
and liabilities of our U.K. subsidiary are translated at the
period end exchange rate in effect at each balance sheet date.
Our income statement accounts are translated at the average rate
of exchange prevailing during each month. Translation
adjustments arising from differences in exchange rates from
period to period are included in the accumulated other
comprehensive income (loss) in stockholders equity. A
strengthening of the U.S. dollar against the British pound
reduces the amount of income or loss we recognize on a
consolidated basis from our U.K. business. We cannot predict the
effects of further exchange rate fluctuations on our future
operating results. We are also exposed to additional currency
transaction risk when our U.S. operations incur purchase
obligations in a currency other than in U.S. dollars and
our U.K. operations incur purchase obligations in a currency
other than in British pounds. As exchange rates vary, our
results of operations and profitability may be harmed. We do not
currently hedge our currency transaction or translation
exposure, nor do we have any current plans to do so. The risks
we face in foreign currency transactions and translation may
continue to increase as we further develop and expand our U.K.
18
operations. Furthermore, to the extent we expand our business
into other countries, we anticipate we will face similar market
risks related to foreign currency translation caused by exchange
rate fluctuations between the U.S. dollar and the
currencies of those countries.
If we
determine that our goodwill has become impaired, we may incur
significant charges to our pre-tax income.
At December 31, 2010, we had $511.4 million of
goodwill on our Consolidated Balance Sheet. Goodwill represents
the excess of cost over the fair value of net assets acquired in
business combinations. In the future, goodwill and intangible
assets may increase as a result of future acquisitions. Goodwill
and intangible assets are reviewed at least annually for
impairment. Impairment may result from, among other things,
deterioration in the performance of acquired businesses, adverse
market conditions, stock price, and adverse changes in
applicable laws or regulations, including changes that restrict
the activities of the acquired business.
For more information, see the Notes to Consolidated Financial
Statements included in our financial statements contained in
this Annual Report.
We are
subject to environmental regulations and could incur costs
relating to environmental matters.
We are subject to various federal, state, and local
environmental protection and health and safety laws and
regulations governing, among other things:
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the emission and discharge of hazardous materials into the
ground, air, or water;
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the exposure to hazardous materials; and
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the generation, handling, storage, use, treatment,
identification, transportation, and disposal of industrial
by-products, waste water, storm water, oil/fuel and other
hazardous materials.
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We are also required to obtain environmental permits from
governmental authorities for certain of our operations. If we
violate or fail to obtain or comply with these laws,
regulations, or permits, we could be fined or otherwise
sanctioned by regulators. We could also become liable if
employees or other parties are improperly exposed to hazardous
materials.
Under certain environmental laws, we could be held responsible
for all of the costs relating to any contamination at, or
migration to or from, our or our predecessors past or
present facilities. These laws often impose liability even if
the owner, operator or lessor did not know of, or was not
responsible for, the release of such hazardous substances.
Environmental laws are complex, change frequently, and have
tended to become more stringent over time. The costs of
complying with current and future environmental and health and
safety laws, and our liabilities arising from past or future
releases of, or exposure to, hazardous substances, may adversely
affect our business, results of operations, or financial
condition.
The
supply and cost of used ISO containers fluctuates, which can
affect our pricing and our ability to grow.
As needed, we purchase, remanufacture and modify used ISO
containers in order to expand our lease fleet. If used ISO
container prices increase substantially, we may not be able to
manufacture enough new units to grow our fleet. These price
increases also could increase our expenses and reduce our
earnings, particularly if we are not able (due to competitive
reasons or otherwise) to raise our rental rates to absorb this
increased cost. Conversely, an oversupply of used ISO containers
may cause container prices to fall. In such event, competitors
may then lower the lease rates on their storage units. As a
result, we may need to lower our lease rates to remain
competitive. These events would cause our revenues and our
earnings to decline.
19
The
supply and cost of raw materials we use in manufacturing
fluctuates and could increase our operating costs.
As needed, we manufacture portable storage units to add to our
lease fleet and for sale. In our manufacturing process, we
purchase steel, vinyl, wood, glass and other raw materials from
various suppliers. We cannot be sure that an adequate supply of
these materials will continue to be available on terms
acceptable to us. The raw materials we use are subject to price
fluctuations that we cannot control. Changes in the cost of raw
materials can have a significant effect on our operations and
earnings. Rapid increases in raw material prices are often
difficult to pass through to customers, particularly to leasing
customers. If we are unable to pass on these higher costs, our
profitability could decline. If raw material prices decline
significantly, we may have to write down our raw materials
inventory values. If this happens, our results of operations and
financial condition will decline.
Some
zoning laws in the U.S. and Canada and temporary planning
permission regulations in Europe restrict the use of our
portable storage and office units and therefore limit our
ability to offer our products in all markets.
Most of our customers use our storage units to store their goods
on their own properties. Local zoning laws and temporary
planning permission regulations in some of our markets do not
allow some of our customers to keep portable storage and office
units on their properties or do not permit portable storage
units unless located out of sight from the street. If local
zoning laws or planning permission regulations in one or more of
our markets no longer allow our units to be stored on
customers sites, our business in that market will suffer.
If we
fail to retain key management and personnel, we may be unable to
implement our business plan.
One of the most important factors in our ability to profitably
execute our business plan is our ability to attract, develop and
retain qualified personnel, including our CEO and operational
management. Our success in attracting and retaining qualified
people is dependent on the resources available in individual
geographic areas and the impact on the labor supply due to
general economic conditions, as well as our ability to provide a
competitive compensation package, including the implementation
of adequate drivers of retention and rewards based on
performance, and work environment. The departure of any key
personnel and our inability to enforce non-competition
agreements could have a negative impact on our business.
We may
not be able to successfully acquire new operations or integrate
future acquisitions, which could cause our business to
suffer.
We may not be able to successfully complete potential strategic
acquisitions if we cannot reach agreement on acceptable terms or
for other reasons. If we buy a company, we may experience
difficulty integrating that Companys personnel and
operations, which could negatively affect our operating results.
In addition:
|
|
|
|
|
the key personnel of the acquired company may decide not to work
for us;
|
|
|
|
we may experience business disruptions as a result of
information technology systems conversions;
|
|
|
|
we may experience additional financial and accounting challenges
and complexities in areas such as tax planning, treasury
management, and financial reporting;
|
|
|
|
we may be held liable for environmental risks and liabilities as
a result of our acquisitions, some of which we may not have
discovered during our due diligence;
|
|
|
|
our ongoing business may be disrupted or receive insufficient
management attention; and
|
|
|
|
we may not be able to realize the cost savings or other
financial benefits we anticipated.
|
In connection with future acquisitions, we may assume the
liabilities of the companies we acquire. These liabilities,
including liabilities for environmental-related costs, could
materially and adversely affect our business. We may have to
incur debt or issue equity securities to pay for any future
acquisition, the issuance of which could involve the imposition
of restrictive covenants or be dilutive to our existing
stockholders.
20
If we do not manage new markets effectively, some of our new
branches and acquisitions may lose money or fail, and we may
have to close unprofitable locations. Closing a branch in such
circumstances would likely result in additional expenses that
would cause our operating results to suffer.
In connection with expansion outside of the U.S., we face
fluctuations in currency exchange rates, exposure to additional
regulatory requirements, including certain trade barriers,
changes in political and economic conditions, and exposure to
additional and potentially adverse tax regimes. Our success in
Europe depends, in part, on our ability to anticipate and
effectively manage these and other risks. Our failure to manage
these risks may adversely affect our growth, in Europe and
elsewhere, and lead to increased administrative costs.
We are
exposed to various possible claims relating to our business and
our insurance may not fully protect us.
We are exposed to various possible claims relating to our
business. These possible claims include those relating to
(1) personal injury or death caused by containers, offices
or trailers rented or sold by us, (2) motor vehicle
accidents involving our vehicles and our employees,
(3) employment-related claims, (4) property damage,
and (5) commercial claims. Our insurance policies have
deductibles or self-insured retentions which would require us to
expend amounts prior to taking advantage of coverage limits.
Currently, we believe that we have adequate insurance coverage
for the protection of our assets and operations. However, our
insurance may not fully protect us for certain types of claims,
such as claims for punitive damages or for damages arising from
intentional misconduct, which are often alleged in third party
lawsuits. In addition, we may be exposed to uninsured liability
at levels in excess of our policy limits.
If we are found liable for any significant claims that are not
covered by insurance, our liquidity and operating results could
be materially adversely affected. It is possible that our
insurance carrier may disclaim coverage for any class action and
derivative lawsuits against us. It is also possible that some or
all of the insurance that is currently available to us will not
be available in the future on economically reasonable terms or
not available at all. In addition, whether we are covered by
insurance or not, certain claims may have the potential for
negative publicity surrounding such claims, which may lead to
lower revenues, as well as additional similar claims being filed.
We may
not be able to adequately protect our intellectual property and
other proprietary rights that are material to our
business.
Our ability to compete effectively depends in part upon
protection of our rights in trademarks, copyrights and other
intellectual property rights we own or license, including
patents to our locking system. Our use of contractual
provisions, confidentiality procedures and agreements, and
trademark, copyright, unfair competition, trade secret and other
laws to protect our intellectual property and other proprietary
rights may not be adequate. Litigation may be necessary to
enforce our intellectual property rights and protect our
proprietary information and patents, or to defend against claims
by third parties that our services or our use of intellectual
property infringe their intellectual property rights. Any
litigation or claims brought by or against us could result in
substantial costs and diversion of our resources. A successful
claim of trademark, copyright or other intellectual property
infringement against us could prevent us from providing
services, which could harm our business, financial condition or
results of operations. In addition, a breakdown in our internal
policies and procedures may lead to an unintentional disclosure
of our proprietary, confidential or material non-public
information, which could in turn harm our business, financial
condition or results of operations.
|
|
ITEM 1B.
|
UNRESOLVED
STAFF COMMENTS.
|
We have received no written comments regarding our periodic or
current reports from the staff of the SEC that were issued
180 days or more preceding the end of our 2010 fiscal year
and that remain unresolved.
21
We own several properties in the U.S., including our facility in
Maricopa, Arizona, approximately 30 miles south of Phoenix.
In the U.K., we own two locations. We lease all of our other
locations. All of our major leased properties have remaining
lease terms of between 1 and 15 years and we believe that
satisfactory alternative properties can be found in all of our
markets if we do not renew these existing leased properties. The
properties we lease for our branch locations are generally
located in industrial areas so that we can stack containers,
store large amounts of containers and offices and operate our
delivery trucks. These properties tend to be 1 to 16 acre
sites with little development needed for us to use them, other
than a paved or hard-packed surface, utilities and proper zoning.
Four of our leased properties are with related persons and the
terms of these related persons lease agreements have been
reviewed and approved by the independent directors who comprise
a majority of the members of our Board of Directors.
Our Maricopa facility is on approximately 43 acres. The
facility housed our manufacturing, assembly, restoring, painting
and vehicle maintenance operations. At the end of 2008, we
restructured our manufacturing operations, and as a result, this
facility for the near future will be primarily used to rebrand,
remanufacture and do repairs and maintenance on our existing
lease fleet and to store any excess units in our fleet.
We lease our corporate and administrative offices in Tempe,
Arizona. These offices occupy approximately 55,000 square
feet of office space, including our NSC. The lease term expires
in December 2014. Our European headquarters is located in
Stockton-on-Tees,
United Kingdom where we lease approximately 10,000 square
feet of office space. The term of this lease expires in July
2017.
|
|
ITEM 3.
|
LEGAL
PROCEEDINGS.
|
We are party from time to time to various claims and lawsuits
that arise in the ordinary course of business, including claims
related to employment matters, contractual disputes, personal
injuries and property damage. In addition, various legal
actions, claims and governmental inquiries and proceedings are
pending or may be instituted or asserted in the future against
us and our subsidiaries.
Litigation is subject to many uncertainties, and the outcome of
the individual litigated matters is not predictable with
assurance. It is possible that certain of the actions, claims,
inquiries or proceedings, including those discussed above, could
be decided unfavorably to us or any of our subsidiaries
involved. Although we cannot predict with certainty the ultimate
resolution of lawsuits, investigations and claims asserted
against us, we do not believe that the ultimate resolution of
these claims or lawsuits will have a material adverse effect on
our business, financial condition, results of operations or cash
flows.
22
PART II
|
|
ITEM 5.
|
MARKET
FOR COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER
PURCHASES OF EQUITY SECURITIES.
|
Common
Stock Prices
Our common stock trades on The NASDAQ Global Select Market under
the symbol MINI. The following are the high and low
sale prices for the common stock during the periods indicated as
reported by the NASDAQ Stock Market.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2009
|
|
|
2010
|
|
|
|
High
|
|
|
Low
|
|
|
High
|
|
|
Low
|
|
|
Quarter ended March 31,
|
|
$
|
15.79
|
|
|
$
|
8.26
|
|
|
$
|
15.92
|
|
|
$
|
12.95
|
|
Quarter ended June 30,
|
|
$
|
15.18
|
|
|
$
|
11.02
|
|
|
$
|
18.21
|
|
|
$
|
14.69
|
|
Quarter ended September 30,
|
|
$
|
18.25
|
|
|
$
|
13.85
|
|
|
$
|
17.69
|
|
|
$
|
14.14
|
|
Quarter ended December 31,
|
|
$
|
17.96
|
|
|
$
|
13.77
|
|
|
$
|
20.35
|
|
|
$
|
14.83
|
|
We had 80 holders of record of our common stock on
February 17, 2011, and we estimate that we have more than
3,700 beneficial holders of our common stock.
We have not paid cash dividends on our common stock and do not
expect to do so in the foreseeable future, as we intend to
retain all earnings to provide funds for the operation and
expansion of our business. Further, our revolving credit
agreement restricts our ability to pay dividends or other
distributions on our common stock.
Sales of
Unregistered Securities; Repurchases of Securities
On June 27, 2008, as part of the consideration for the
acquisition of Mobile Storage Group, we issued 8.6 million
shares of our Series A Convertible Redeemable Participating
Preferred Stock to the former stockholders of Mobile Storage
Group. This issuance was made pursuant to an exemption from
registration under Regulation D of the Securities Act of
1933, as amended.
These outstanding shares of preferred stock are convertible into
an aggregate of 8.2 million shares of our common stock at
any time at the option of the holders, representing an initial
conversion price of $18.00 per common share. The preferred stock
will be mandatorily convertible into our common stock if, after
the first anniversary of the issuance thereof, our common stock
trades above $23.00 per share for a period of 30 consecutive
days. For additional information, see Notes to
Consolidated Financial Statements Equity and Debt
Issuances.
23
Stock
Performance Graph
The following Performance Graph and related information shall
not be deemed soliciting material or
filed with the SEC, nor should such information be
incorporated by reference into any future filings under the
Securities Act of 1933(the Securities Act), as amended, or the
Exchange Act, except to the extent that Mobile Mini specifically
incorporates it by reference in such filing.
The following graph compares the five-year cumulative total
return on our common stock with the cumulative total returns
(assuming reinvestment of dividends) on the Standard and
Poors SmallCap 600 and the NASDAQ Composite Index if $100
were invested in our common stock and each index on
December 31, 2005.
STOCK
PERFORMANCE GRAPH
Mobile Mini, Inc.
At December 31, 2010
Total Return* Performance
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Period Ended December 31,
|
|
Index
|
|
2005
|
|
|
2006
|
|
|
2007
|
|
|
2008
|
|
|
2009
|
|
|
2010
|
|
Mobile Mini, Inc.
|
|
$
|
100.00
|
|
|
$
|
113.67
|
|
|
$
|
78.23
|
|
|
$
|
60.84
|
|
|
$
|
59.45
|
|
|
$
|
83.08
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Standard & Poors SmallCap 600
|
|
$
|
100.00
|
|
|
$
|
115.12
|
|
|
$
|
114.78
|
|
|
$
|
79.11
|
|
|
$
|
99.34
|
|
|
$
|
125.48
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NASDAQ Stock Market Index (U.S.)
|
|
$
|
100.00
|
|
|
$
|
109.84
|
|
|
$
|
119.14
|
|
|
$
|
57.41
|
|
|
$
|
82.53
|
|
|
$
|
97.95
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
* |
|
Total Return based on $100 initial investment and reinvestment
of dividends. |
24
|
|
ITEM 6.
|
SELECTED
FINANCIAL DATA.
|
The following table shows our selected consolidated historical
financial data for the stated periods. Amounts include the
effect of rounding. Certain prior-period amounts in the selected
financial data tables have been reclassified to conform to the
current financial presentation. You should read this material
with Managements Discussion and Analysis of
Financial Condition and Results of Operations and the
financial statements and related footnotes included elsewhere in
this Annual Report.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
2006
|
|
|
2007
|
|
|
2008
|
|
|
2009
|
|
|
2010
|
|
|
|
(In thousands, except per share and operating data)
|
|
|
Consolidated Statements of Income Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Leasing
|
|
$
|
245,105
|
|
|
$
|
284,638
|
|
|
$
|
371,560
|
|
|
$
|
333,521
|
|
|
$
|
295,034
|
|
Sales
|
|
|
26,824
|
|
|
|
31,644
|
|
|
|
41,267
|
|
|
|
38,605
|
|
|
|
33,156
|
|
Other
|
|
|
1,434
|
|
|
|
2,020
|
|
|
|
2,577
|
|
|
|
2,335
|
|
|
|
2,567
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenues
|
|
|
273,363
|
|
|
|
318,302
|
|
|
|
415,404
|
|
|
|
374,461
|
|
|
|
330,757
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Costs and expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of sales
|
|
|
17,186
|
|
|
|
21,651
|
|
|
|
28,044
|
|
|
|
25,795
|
|
|
|
21,997
|
|
Leasing, selling and general expenses
|
|
|
139,906
|
|
|
|
166,994
|
|
|
|
212,335
|
|
|
|
192,861
|
|
|
|
179,121
|
|
Integration, merger and restructuring expenses
|
|
|
|
|
|
|
|
|
|
|
24,427
|
|
|
|
11,305
|
|
|
|
4,014
|
|
Goodwill impairment
|
|
|
|
|
|
|
|
|
|
|
13,667
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization
|
|
|
16,741
|
|
|
|
21,149
|
|
|
|
31,767
|
|
|
|
39,082
|
|
|
|
35,686
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total costs and expenses
|
|
|
173,833
|
|
|
|
209,794
|
|
|
|
310,240
|
|
|
|
269,043
|
|
|
|
240,818
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from operations
|
|
|
99,530
|
|
|
|
108,508
|
|
|
|
105,164
|
|
|
|
105,418
|
|
|
|
89,939
|
|
Other income (expense):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest income
|
|
|
437
|
|
|
|
101
|
|
|
|
135
|
|
|
|
29
|
|
|
|
1
|
|
Interest expense
|
|
|
(23,681
|
)
|
|
|
(24,906
|
)
|
|
|
(48,146
|
)
|
|
|
(59,504
|
)
|
|
|
(56,430
|
)
|
Debt restructuring/extinguishment expense
|
|
|
(6,425
|
)
|
|
|
(11,224
|
)
|
|
|
|
|
|
|
|
|
|
|
(11,024
|
)
|
Deferred financing costs write-off
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(525
|
)
|
Foreign currency exchange gains (loss)
|
|
|
66
|
|
|
|
107
|
|
|
|
(112
|
)
|
|
|
(88
|
)
|
|
|
(9
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before provision for income taxes
|
|
|
69,927
|
|
|
|
72,586
|
|
|
|
57,041
|
|
|
|
45,855
|
|
|
|
21,952
|
|
Provision for income taxes
|
|
|
27,151
|
|
|
|
28,410
|
|
|
|
28,000
|
|
|
|
18,057
|
|
|
|
8,443
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
|
42,776
|
|
|
|
44,176
|
|
|
|
29,041
|
|
|
|
27,798
|
|
|
|
13,509
|
|
Earnings allocable to preferred stockholders
|
|
|
|
|
|
|
|
|
|
|
(2,739
|
)
|
|
|
(5,431
|
)
|
|
|
(2,550
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income available to common stockholders
|
|
$
|
42,776
|
|
|
$
|
44,176
|
|
|
$
|
26,302
|
|
|
$
|
22,367
|
|
|
$
|
10,959
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
1.25
|
|
|
$
|
1.24
|
|
|
$
|
0.77
|
|
|
$
|
0.65
|
|
|
$
|
0.31
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted
|
|
$
|
1.21
|
|
|
$
|
1.22
|
|
|
$
|
0.75
|
|
|
$
|
0.64
|
|
|
$
|
0.31
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average number of common and common share equivalents
outstanding:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
34,243
|
|
|
|
35,489
|
|
|
|
34,155
|
|
|
|
34,597
|
|
|
|
35,196
|
|
Diluted
|
|
|
35,425
|
|
|
|
36,296
|
|
|
|
38,875
|
|
|
|
43,252
|
|
|
|
43,829
|
|
Other Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EBITDA(1)
|
|
$
|
116,774
|
|
|
$
|
129,865
|
|
|
$
|
136,954
|
|
|
$
|
144,441
|
|
|
$
|
125,617
|
|
Net cash provided by operating activities
|
|
|
81,871
|
|
|
|
100,225
|
|
|
|
98,518
|
|
|
|
86,770
|
|
|
|
60,805
|
|
Net cash (used in) provided by investing activities
|
|
|
(192,763
|
)
|
|
|
(138,682
|
)
|
|
|
(97,913
|
)
|
|
|
3,048
|
|
|
|
5,351
|
|
Net cash provided by (used in) financing
activities
|
|
|
111,979
|
|
|
|
39,501
|
|
|
|
(6,689
|
)
|
|
|
(82,999
|
)
|
|
|
(67,731
|
)
|
Operating Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of branches (at year end)
|
|
|
62
|
|
|
|
66
|
|
|
|
94
|
|
|
|
91
|
|
|
|
86
|
|
Lease fleet units (at year end)
|
|
|
149,615
|
|
|
|
160,116
|
|
|
|
273,748
|
|
|
|
257,208
|
|
|
|
245,499
|
|
Lease fleet covenant utilization (annual average)
|
|
|
82.7
|
%
|
|
|
79.6
|
%
|
|
|
75.0
|
%
|
|
|
59.2
|
%
|
|
|
53.4
|
%
|
Lease revenue growth (reduction) from prior year
|
|
|
30.0
|
%
|
|
|
16.1
|
%
|
|
|
30.5
|
%
|
|
|
(10.2
|
)%
|
|
|
(11.5
|
)%
|
Operating margin
|
|
|
36.4
|
%
|
|
|
34.1
|
%
|
|
|
25.3
|
%
|
|
|
28.1
|
%
|
|
|
27.2
|
%
|
Net income margin
|
|
|
15.6
|
%
|
|
|
13.9
|
%
|
|
|
7.0
|
%
|
|
|
7.4
|
%
|
|
|
4.1
|
%
|
EBITDA margin(3)
|
|
|
42.7
|
%
|
|
|
40.8
|
%
|
|
|
33.0
|
%
|
|
|
38.6
|
%
|
|
|
38.0
|
%
|
25
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At December 31,
|
|
|
|
2006
|
|
|
2007
|
|
|
2008
|
|
|
2009
|
|
|
2010
|
|
|
|
(In thousands)
|
|
|
Consolidated Balance Sheet Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Lease fleet, net
|
|
$
|
697,439
|
|
|
$
|
802,923
|
|
|
$
|
1,078,156
|
|
|
$
|
1,055,328
|
|
|
$
|
1,028,403
|
|
Total assets
|
|
|
900,030
|
|
|
|
1,028,851
|
|
|
|
1,798,857
|
|
|
|
1,754,039
|
|
|
|
1,716,317
|
|
Total debt
|
|
|
302,045
|
|
|
|
387,989
|
|
|
|
907,206
|
|
|
|
824,246
|
|
|
|
771,402
|
|
Convertible preferred stock, at liquidation preference values
|
|
|
|
|
|
|
|
|
|
|
153,990
|
|
|
|
147,427
|
|
|
|
147,427
|
|
Stockholders equity
|
|
|
442,004
|
|
|
|
457,890
|
|
|
|
495,228
|
|
|
|
547,624
|
|
|
|
569,038
|
|
Reconciliations of EBITDA to net cash provided by operating
activities, the most directly comparable GAAP measure:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
2006
|
|
|
2007
|
|
|
2008
|
|
|
2009
|
|
|
2010
|
|
|
|
(In thousands)
|
|
|
EBITDA(1)
|
|
$
|
116,774
|
|
|
$
|
129,865
|
|
|
$
|
136,954
|
|
|
$
|
144,441
|
|
|
$
|
125,617
|
|
Interest paid
|
|
|
(24,770
|
)
|
|
|
(27,896
|
)
|
|
|
(33,032
|
)
|
|
|
(54,817
|
)
|
|
|
(56,582
|
)
|
Income and franchise taxes paid
|
|
|
(733
|
)
|
|
|
(797
|
)
|
|
|
(667
|
)
|
|
|
(1,055
|
)
|
|
|
(823
|
)
|
Provision for restructuring charge
|
|
|
|
|
|
|
|
|
|
|
5,626
|
|
|
|
|
|
|
|
|
|
Goodwill impairment
|
|
|
|
|
|
|
|
|
|
|
13,667
|
|
|
|
|
|
|
|
|
|
Share-based compensation expense
|
|
|
3,066
|
|
|
|
4,028
|
|
|
|
5,656
|
|
|
|
5,782
|
|
|
|
6,292
|
|
Gain on sale of lease fleet units
|
|
|
(4,922
|
)
|
|
|
(5,560
|
)
|
|
|
(9,849
|
)
|
|
|
(11,661
|
)
|
|
|
(10,045
|
)
|
Loss on disposal of property, plant and equipment
|
|
|
454
|
|
|
|
203
|
|
|
|
567
|
|
|
|
52
|
|
|
|
34
|
|
Change in certain assets and liabilities, net of effect of
business acquired:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Receivables
|
|
|
(6,580
|
)
|
|
|
(2,119
|
)
|
|
|
2,201
|
|
|
|
21,327
|
|
|
|
(2,077
|
)
|
Inventories
|
|
|
628
|
|
|
|
(610
|
)
|
|
|
7,655
|
|
|
|
3,691
|
|
|
|
2,506
|
|
Deposits and prepaid expenses
|
|
|
(1,446
|
)
|
|
|
(1,754
|
)
|
|
|
177
|
|
|
|
3,412
|
|
|
|
1,486
|
|
Other assets and intangibles
|
|
|
(4
|
)
|
|
|
318
|
|
|
|
105
|
|
|
|
(845
|
)
|
|
|
(873
|
)
|
Accounts payable and accrued liabilities
|
|
|
(596
|
)
|
|
|
4,547
|
|
|
|
(30,542
|
)
|
|
|
(23,557
|
)
|
|
|
(4,730
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by operating activities
|
|
$
|
81,871
|
|
|
$
|
100,225
|
|
|
$
|
98,518
|
|
|
$
|
86,770
|
|
|
$
|
60,805
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reconciliation of net income to EBITDA and adjusted EBITDA:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
2006
|
|
|
2007
|
|
|
2008
|
|
|
2009
|
|
|
2010
|
|
|
|
(In thousands except percentages)
|
|
|
Net income
|
|
$
|
42,776
|
|
|
$
|
44,176
|
|
|
$
|
29,041
|
|
|
$
|
27,798
|
|
|
$
|
13,509
|
|
Interest expense
|
|
|
23,681
|
|
|
|
24,906
|
|
|
|
48,146
|
|
|
|
59,504
|
|
|
|
56,430
|
|
Income taxes
|
|
|
27,151
|
|
|
|
28,410
|
|
|
|
28,000
|
|
|
|
18,057
|
|
|
|
8,443
|
|
Depreciation and amortization
|
|
|
16,741
|
|
|
|
21,149
|
|
|
|
31,767
|
|
|
|
39,082
|
|
|
|
35,686
|
|
Debt restructuring/extinguishment expense
|
|
|
6,425
|
|
|
|
11,224
|
|
|
|
|
|
|
|
|
|
|
|
11,024
|
|
Deferred financing costs write-off
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
525
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EBITDA(1)
|
|
|
116,774
|
|
|
|
129,865
|
|
|
|
136,954
|
|
|
|
144,441
|
|
|
|
125,617
|
|
Integration, merger and restructuring expenses(4)
|
|
|
|
|
|
|
|
|
|
|
24,427
|
|
|
|
11,305
|
|
|
|
4,014
|
|
Goodwill impairment(5)
|
|
|
|
|
|
|
|
|
|
|
13,667
|
|
|
|
|
|
|
|
|
|
Class action settlement, other(6)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
835
|
|
|
|
275
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted EBITDA(2)
|
|
$
|
116,774
|
|
|
$
|
129,865
|
|
|
$
|
175,048
|
|
|
$
|
156,581
|
|
|
$
|
129,906
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EBITDA margin(3)
|
|
|
42.7
|
%
|
|
|
40.8
|
%
|
|
|
33.0
|
%
|
|
|
38.6
|
%
|
|
|
38.0
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted EBITDA margin(3)
|
|
|
42.7
|
%
|
|
|
40.8
|
%
|
|
|
42.1
|
%
|
|
|
41.8
|
%
|
|
|
39.3
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
26
|
|
|
(1) |
|
EBITDA, as further discussed below, is defined as net income
before interest expense, income taxes, depreciation and
amortization, and debt restructuring or extinguishment expense.
We present EBITDA because we believe it provides useful
information regarding our ability to meet our future debt
payment requirements, capital expenditures and working capital
requirements and that it provides an overall evaluation of our
financial condition. In addition, EBITDA is a component of
certain financial covenants under our revolving credit facility
and is used to determine our available borrowing capacity and
the facilitys applicable interest rate in effect at the
end of each measurement period. |
EBITDA has certain limitations as an analytical tool and should
not be used as a substitute for net income, cash flows, or other
consolidated income or cash flow data prepared in accordance
with generally accepted accounting principles in the U.S. or as
a measure of our profitability or our liquidity. In particular,
EBITDA, as defined does not include:
|
|
|
|
|
Interest expense because we borrow money to
partially finance our capital expenditures, primarily related to
the expansion of our lease fleet, interest expense is a
necessary element of our cost to secure this financing to
continue generating additional revenues.
|
|
|
|
Income taxes because we operate in jurisdictions
subject to income taxation, income tax expense is a necessary
element of our costs to operate.
|
|
|
|
Depreciation and amortization because we are a
leasing company, our business is very capital intensive and we
hold acquired assets for a period of time before they generate
revenues, cash flow and earnings; therefore, depreciation and
amortization expense is a necessary element of our business.
|
|
|
|
Debt restructuring or extinguishment expense debt
restructuring and extinguishment expenses are not deducted in
our various calculations made under our credit agreements and
are treated no differently than interest expense. As discussed
above, interest expense is a necessary element of our cost to
finance a portion of the capital expenditures needed for the
growth of our business.
|
When evaluating EBITDA as a performance measure, and excluding
the above-noted charges, all of which have material limitations,
investors should consider, among other factors, the following:
|
|
|
|
|
increasing or decreasing trends in EBITDA;
|
|
|
|
how EBITDA compares to levels of debt and interest
expense; and
|
|
|
|
whether EBITDA historically has remained at positive levels.
|
Because EBITDA, as defined, excludes some but not all items that
affect our cash flow from operating activities, EBITDA may not
be comparable to a similarly titled performance measure
presented by other companies.
|
|
|
(2) |
|
Adjusted EBITDA represents EBITDA plus the sum of certain
transactions that are excluded when internally evaluating our
operating performance. Management believes adjusted EBITDA is a
more meaningful evaluation and comparison of our core business
when comparing period over period results without regard to
transactions that potentially distort the performance of our
core business operating results. |
|
(3) |
|
EBITDA and adjusted EBITDA margins are calculated as EBITDA and
adjusted EBITDA divided by total revenues expressed as a
percentage. The GAAP financial measure that is most directly
comparable to EBITDA margin is operating margin, which
represents operating income divided by revenues. EBITDA margin
is presented along with the operating margin in the selected
financial data under Operating Data so as not to
imply that more emphasis be placed on this measure than the
corresponding GAAP measure. |
|
(4) |
|
Integration, merger and restructuring expenses represent costs
we incurred in connection with the MSG acquisition and the
expenses in connection with the continued restructuring of our
manufacturing operations as a result of the MSG acquisition. |
|
(5) |
|
Goodwill impairment represents a non-cash charge for a portion
of our goodwill relating to our United Kingdom and The
Netherlands operations. |
|
(6) |
|
Class action settlement expense represents costs incurred and
the estimated settlement cost of a purported class action
lawsuit that was settled in order to avoid the uncertainties and
cost of continued litigation representing $0.7 million and
$0.1 million in 2009 and 2010, respectively and other
represents one-time expenses. |
27
|
|
ITEM 7.
|
MANAGEMENTS
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS.
|
The following discussion of our financial condition and
results of operations should be read together with the
consolidated financial statements and the accompanying notes
included elsewhere in this Annual Report. This discussion
contains forward-looking statements that involve risks and
uncertainties. Our actual results may differ materially from
those anticipated in those forward-looking statements as a
result of certain factors, including, but not limited to, those
described under Item 1A, Risk Factors.
The following discussion takes into consideration our
acquisition of Mobile Storage Group, Inc. (MSG) on June 27,
2008. The operations of MSG are included in our operating
results for only six months of the twelve months ended
December 31, 2008. Additionally, in 2008, the results of
operations include four other acquisitions (beyond MSG) we
completed during 2008. There were no acquisitions consummated in
either 2009 or 2010.
Executive
Summary
Although fiscal 2010 was a challenging year for us globally with
the prolonged weakened economy still impacting businesses and
consumers, we were proactive on the cost side of our business
and saw signs of positive growth in the last half of 2010.
Despite our total revenue declining approximately 11.7% from the
2009 level, we continued to take essential actions to keep our
business right-sized, primarily by further reducing payroll
costs where possible and by other effective cost management
measures allowing us to maintain a strong adjusted EBITDA margin
of 39.3%. We were cash flow positive (excluding the MSG Merger)
for the third consecutive year as we have continued to manage
our operations and capital expenditures and have used this
positive cash flow to pay down debt of approximately
$160.0 million since June 30, 2008.
We began to see signs of recovery beginning in the second
quarter and we also continued to enact selective price increases
focusing on customers that had units out on rent for an extended
period of time and to date, have observed no measurable
difference in the attrition rates for these customers. By the
fourth quarter of 2010, our level of business had finally ceased
to decline on a year over year basis.
We continue to invest in our business with the adoption of a
hybrid sales model incorporating a local as well as centralized
component, with both groups incentivized on the basis of
performance. The salespeople at the branches primarily focus on
construction customers who tend to be large
multi-unit
customers that benefit from local service, while those in our
NSC in Tempe, Arizona are targeting the balance of our customers
who are generally single unit customers. We also implemented a
similar program in Europe in 2010.
In late 2008, we restructured our manufacturing operations to
reduce costs and implemented two rounds of company-wide
reductions in addition to other headcount reductions, which
together resulted in cost savings that continued throughout
2010. We continue to monitor activity levels through a variety
of metrics we use to determine the optimal efficiencies for our
drivers, dispatchers, managers, salespeople and corporate staff
needed in the changing business environment without negatively
impacting customer service and sales activity levels.
In 2009, we identified certain branch operations that we
converted to operational yards, which operate at a significantly
lower cost structure than traditional branches, and in 2010, we
opened three new greenfield locations as operational yards to
redeploy fleet and increase revenue while maintaining that same
level of efficiency. We monitor the effectiveness of our
branches and where possible, we will continue to migrate some of
our branches to these lower cost operational yards in the future.
In August 2010, we amended our revolving credit facility to
reduce the line by $50.0 million to $850.0 million,
which reduces our ongoing unused line fees. This amendment also
allows a permitted refinancing of our senior notes as well as
restricted payments and acquisitions to occur without financial
covenant restrictions provided we have $250.0 million in
pro forma excess borrowing availability. Following this
amendment, in November 2010 we completed an offering of
$200.0 million principal amount of 7.875% senior notes
due 2020 and redeemed $170.6 million principal amount of
9.75% senior notes due 2014. We redeemed the balance of the
9.75% senior notes due 2014 ($22.3 million) in January
2011. Our senior notes do not contain financial maintenance
covenants and the financial maintenance covenants under our
revolving credit facility are not applicable unless we fall
below $100.0 million in borrowing availability.
28
We believe these continued efforts, coupled with managing
working capital and controls over capital expenditures will
allow us to generate free cash flow in 2011 and to continue
paying down debt, which remains a top management priority. We
have reduced borrowings under our asset based revolving credit
facility from $473.7 million at December 31, 2009 to
$396.9 million at December 31, 2010, leaving us with
$385.9 million of unused borrowing capacity under our
facility.
As we continue to seek alternative methods to reduce expenses we
are at the same time focusing on sales growth to our core
customers and continue our sophisticated sales campaign
strategies at our NSC and branches. We accomplish this in part
through increasing salesperson accountability through our
disciplined sales processes which we believe has traditionally
given us a significant competitive advantage.
General
We are the worlds leading provider of portable storage
solutions, through a total lease fleet of approximately 245,500
units at December 31, 2010. We offer a wide range of
portable storage products in varying lengths and widths with an
assortment of differentiated features such as our patented
locking systems, multiple doors, electrical wiring and shelving.
We derive most of our revenues from leasing of portable storage
containers, security offices and mobile offices. In addition to
our leasing business, we also sell portable storage containers
and occasionally sell security and mobile office units. We also
sell non-core assets, in particular van trailers and timber
units, when the opportunity arises. Our sales revenues
represented 10.0% of total revenues in 2010.
On June 27, 2008, we acquired the outstanding shares of MSG
and MSG became a wholly-owned subsidiary of Mobile Mini. We
refer to this transaction as the Merger or the
MSG acquisition throughout this Annual Report. The MSG
acquisition was the largest acquisition we have completed and it
increased the scope of our operations in both the U.S. and
the U.K. Our consolidated statements of income for the periods
reported include certain estimated expenses expected or incurred
related to integration of the business acquired in the MSG
acquisition and restructuring charges related to restructuring
of our manufacturing operations as a result of the MSG
acquisition.
Prior to acquiring MSG, we grew both organically and through
smaller acquisitions, which we used to gain a presence in new
markets. Traditionally, we enter new markets through the
acquisition of the business of a smaller local competitor and
then implement our business model, which is usually more focused
on customer service and marketing than the acquired business or
other market competitors. Given our current utilization levels,
we are currently entering new markets through greenfield
locations by migrating idle fleet to new low-cost operational
yards. These greenfield operational yards do not have all the
overhead associated with a fully staffed branch as they
typically only have drivers and yard personnel to handle
deliveries and
pick-ups of
our fleet. A new location will generally have fairly low
operating margins during its early years, but as our marketing
efforts help us penetrate the new market and we increase the
number of units on rent at the new location, we are typically
able to reach company average levels of profitability after
several years. The costs associated with opening a greenfield
operational yard are lower than a fully staffed branch which
should have a comparatively positive effect on margins.
When we enter a new market, we incur certain costs in developing
new infrastructure. For example, advertising and marketing costs
will be incurred and certain minimum levels of staffing and
delivery equipment will be put in place regardless of the new
markets revenue base. Once we have achieved revenues
during any period that are sufficient to cover our fixed
expenses, we are able to generate relatively high margins on
incremental lease revenues. Therefore, each additional unit
rented in excess of the break-even level contributes
significantly to profitability. Conversely, any additional fixed
expenses require us to achieve additional revenue in order to
maintain our margins. When we refer to our operating leverage in
this discussion, we are describing the impact on margins once we
either cover our fixed costs or if we incur additional fixed
costs.
The level of non-residential construction activity is an
important external factor that we examine to determine the
direction of our business. Customers in the construction
industry represented approximately 31% and 28% of our leased
units at December 31, 2010 and December 31, 2009,
respectively, and because of the degree of operating leverage we
have, increases or decreases in non-residential construction
activity can have a significant effect on our operating margins
and net income. Beginning in the second quarter of 2008, the
level of our construction related
29
business slowed down and then declined. The decline continued
and adversely affected our results of operations. Although the
construction business has not returned to pre-2009 levels, the
level of our construction related business began to stabilize
and then increase in 2010.
In managing our business, we focus on growing leasing revenues,
particularly in existing markets where we can take advantage of
the operating leverage inherent in our business model. Our goals
are to maintain a stable operating margin and, after the economy
returns to normalized conditions, a steady growth rate in
leasing revenues.
We are a capital-intensive business, so in addition to focusing
on earnings per share, we focus on adjusted EBITDA to measure
our results. We calculate this number by first calculating
EBITDA, which we define as net income before interest expense,
debt restructuring or extinguishment expense, provision for
income taxes, depreciation and amortization. This measure
eliminates the effect of financing transactions that we enter
into and it provides us with a means to track internally
generated cash from which we can fund our interest expense and
our lease fleet growth. In comparing EBITDA from year to year,
we typically further adjust EBITDA to exclude the effect of what
we consider transactions or events not related to our core
business operations to arrive at what we define as adjusted
EBITDA. For 2008, 2009 and 2010, adjusted EBITDA excludes the
integration, merger and restructuring expenses related to the
MSG acquisition, the reduction and restructuring of our
manufacturing operations and other one-time expenses. In
addition, 2008 excludes the impairment charge to goodwill.
In managing our business, we measure our EBITDA margins from
year to year based on the size of the branch. We define this
margin as EBITDA divided by our total revenues, expressed as a
percentage. We use this comparison, for example, to study
internally the effect that increased costs have on our margins.
As capital is invested in our established branch locations, we
achieve higher EBITDA margins on that capital than we achieve on
capital invested to establish a new branch, because our fixed
costs are already in place in connection with the established
branches. The fixed costs are those associated with yard and
delivery equipment, as well as advertising, sales, marketing and
office expenses. With a new branch or operational yard, we must
first fund and absorb the
start-up
costs for setting up the new location, hiring and developing the
management and sales team and developing our marketing and
advertising programs. A new location will have lower EBITDA
margins in its early years until the branch increases the number
of units it has on rent. Because this operating leverage creates
higher operating margins on incremental lease revenue, which we
realize on a
branch-by-branch
basis when the branch achieves leasing revenues sufficient to
cover the branchs fixed costs, leasing revenues in excess
of the break-even amount produce large increases in
profitability. Conversely, absent growth in leasing revenues,
the EBITDA margin at a branch will be expected to remain
relatively flat on a
period-by-period
comparative basis if expenses remained the same or would
decrease if fixed costs increased.
Because EBITDA, adjusted EBITDA, EBITDA margin and adjusted
EBITDA margin are non-GAAP financial measures, as defined by the
SEC, we include in this Annual Report reconciliations of EBITDA
to the most directly comparable financial measures calculated
and presented in accordance with accounting principles generally
accepted in the U.S. These reconciliations are included in
Item 6, Selected Financial Data.
Accounting
and Operating Overview
Our leasing revenues include all rent and ancillary revenues we
receive for our portable storage, combination storage/office and
mobile office units. Our sales revenues include sales of these
units to customers. Our other revenues consist principally of
charges for the delivery of the units we sell. Our principal
operating expenses are: (1) cost of sales;
(2) leasing, selling and general expenses; and
(3) depreciation and amortization, primarily depreciation
of the portable storage units and mobile offices in our lease
fleet. Cost of sales is the cost of the units that we sold
during the reported period and includes both our cost to buy,
transport, remanufacture and modify used ISO containers and our
cost to manufacture portable storage units and other structures.
Leasing, selling and general expenses include among other
expenses, advertising and other marketing expenses, real
property lease expenses, commissions, repair and maintenance
costs of our lease fleet and transportation equipment,
stock-based compensation expense and corporate expenses for both
our leasing and sales activities. Annual repair and maintenance
expenses on our leased units over the last three years have
averaged approximately 2.7% of lease revenues and are included
in leasing, selling and general expenses. We expense our normal
repair and maintenance costs as incurred (including the cost of
periodically repainting units).
30
Our principal asset is our lease fleet, which has historically
maintained value close to its original cost. The steel units in
our lease fleet (other than van trailers) are depreciated on the
straight-line method using an estimated useful life of
30 years, after the date the unit is placed in service,
with an estimated residual value of 55%. The depreciation policy
is supported by our historical lease fleet data, which shows
that we have been able to obtain comparable rental rates and
sales prices irrespective of the age of our container lease
fleet. Our wood mobile office units are depreciated over
20 years to 50% of original cost. Van trailers, which
constitute a small part of our fleet, are depreciated over
7 years to a 20% residual value. Van trailers, which are
only added to the fleet as a result of acquisitions of portable
storage businesses, are of much lower quality than storage
containers and consequently depreciate more rapidly. We also
have other non-core products that are added to our fleet as a
result of acquisitions that have various other measures of
useful lives and residual values. See Item 1.
Business Product Lives and Durability.
During the last five fiscal years, our annual utilization levels
averaged 67.3% and ranged from a low of 53.4% in 2010 to a high
of 82.7% in 2006. The average lease fleet utilization was 53.4%
and 59.2% for 2010 and 2009, respectively. Historically, our
average utilization has been somewhat seasonal with the low
normally being realized in the first quarter and the high
realized in the fourth quarter of each year.
Results
of Operations
The following table shows the percentage of total revenues
represented by the key items that make up our statements of
income; certain amounts may not add due to rounding:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
2006
|
|
|
2007
|
|
|
2008
|
|
|
2009
|
|
|
2010
|
|
|
Revenues:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Leasing
|
|
|
89.7
|
%
|
|
|
89.4
|
%
|
|
|
89.5
|
%
|
|
|
89.1
|
%
|
|
|
89.2
|
%
|
Sales
|
|
|
9.8
|
|
|
|
9.9
|
|
|
|
9.9
|
|
|
|
10.3
|
|
|
|
10.0
|
|
Other
|
|
|
0.5
|
|
|
|
0.7
|
|
|
|
0.6
|
|
|
|
0.6
|
|
|
|
0.8
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenues
|
|
|
100.0
|
|
|
|
100.0
|
|
|
|
100.0
|
|
|
|
100.0
|
|
|
|
100.0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Costs and expenses:
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of sales
|
|
|
6.3
|
|
|
|
6.8
|
|
|
|
6.8
|
|
|
|
6.9
|
|
|
|
6.6
|
|
Leasing, selling and general expenses
|
|
|
51.2
|
|
|
|
52.5
|
|
|
|
51.1
|
|
|
|
51.5
|
|
|
|
54.2
|
|
Integration, merger and restructuring expenses
|
|
|
|
|
|
|
|
|
|
|
5.9
|
|
|
|
3.0
|
|
|
|
1.2
|
|
Goodwill impairment
|
|
|
|
|
|
|
|
|
|
|
3.3
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization
|
|
|
6.1
|
|
|
|
6.6
|
|
|
|
7.6
|
|
|
|
10.5
|
|
|
|
10.8
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total costs and expenses
|
|
|
63.6
|
|
|
|
65.9
|
|
|
|
74.7
|
|
|
|
71.9
|
|
|
|
72.8
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from operations
|
|
|
36.4
|
|
|
|
34.1
|
|
|
|
25.3
|
|
|
|
28.1
|
|
|
|
27.2
|
|
Other income (expense):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest income
|
|
|
0.2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense
|
|
|
(8.7
|
)
|
|
|
(7.8
|
)
|
|
|
(11.6
|
)
|
|
|
(15.9
|
)
|
|
|
(17.1
|
)
|
Debt extinguishment/restructuring expense
|
|
|
(2.4
|
)
|
|
|
(3.5
|
)
|
|
|
|
|
|
|
|
|
|
|
(3.3
|
)
|
Deferred financing costs write-off
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(0.2
|
)
|
Foreign currency exchange
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before provision for income taxes
|
|
|
25.5
|
|
|
|
22.8
|
|
|
|
13.7
|
|
|
|
12.2
|
|
|
|
6.6
|
|
Provision for income taxes
|
|
|
9.9
|
|
|
|
8.9
|
|
|
|
6.7
|
|
|
|
4.8
|
|
|
|
2.5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
|
15.6
|
%
|
|
|
13.9
|
%
|
|
|
7.0
|
%
|
|
|
7.4
|
%
|
|
|
4.1
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
31
Twelve
Months Ended December 31, 2010 Compared to Twelve Months
Ended December 31, 2009
Total revenues in 2010 decreased $43.7 million, or 11.7%,
to $330.8 million from $374.5 million in 2009.
Leasing, our primary revenue focus, accounted for approximately
89.2% of total revenues during 2010. Leasing revenues in 2010
decreased $38.5 million, or 11.5%, to $295.0 million
from $333.5 million in 2009. This decrease in leasing
revenues resulted from a 14.4% decrease in the average number of
units on lease, partially offset by a 3.4% increase in yield.
Yield was primarily driven by higher trucking and ancillary
revenues, while the average rental rate per unit remained
virtually unchanged. In 2010, decline in both leasing and sales
revenues was primarily the result of a reduction in business
activity including non-residential construction activity and the
weakness in the global economy. Our leasing revenue decline in
2010 over the same period in the prior year was 21.6%, 13.6%,
7.9% and 1.5% for the first, second, third and fourth quarters,
respectively, as the year over year decline in our business
leveled off by the time the year ended. Our revenues from the
sale of units decreased $5.4 million, or 14.1%, to
$33.2 million in 2010 from $38.6 million in 2009.
Other revenues are primarily related to transportation charges
for the delivery of units sold and the sale of ancillary
products and represented 0.8% and 0.6% of total revenues in 2010
and 2009, respectively.
Cost of sales relate to our sales revenue and as a percentage of
sales revenue decreased slightly to 66.3% in 2010 from 66.8% in
2009. The gross profit margin on sales improved 0.5% in 2010
over 2009 levels.
Leasing, selling and general expenses decreased
$13.8 million, or 7.1%, to $179.1 million in 2010 from
$192.9 million in 2009. Leasing, selling and general
expenses, as a percentage of total revenues, were 54.2% and
51.5% in 2010 and 2009, respectively. This slight increase as a
percentage of revenues is due to our fixed costs in a declining
revenue environment and was partially offset by variable cost
saving reductions achieved by the cost cutting measures we
implemented in response to the reduced revenue levels, primarily
payroll related reductions and migrating a number of our
branches to operational yards. These operational yards do not
have all the personnel and overhead expenses associated with a
fully staffed branch. The major decreases in leasing, selling
and general expenses for 2010 were (1) payroll and related
payroll costs, which decreased by $9.2 million primarily
due to reductions in our workforce and the decrease in
commission expense resulting from the lower revenues levels;
(2) insurance expense, which decreased $3.6 million
due to improved safety programs and general reductions in
premiums; and (3) advertising costs, which decreased
$2.0 million as we moved further away from printed
advertising campaigns. Delivery and freight costs, including
fuel, increased $4.1 million, and were related to an
increase in pick up and delivery activity of units by our
drivers or third-party vendors, many which were wood modular
offices that command higher delivery rates than regular
containers. Repairs and maintenance expenses, increased
$2.2 million, and includes the costs of repairing and
maintaining our lease fleet as well as our delivery equipment,
primarily our trucks, trailers and forklifts. Fixed costs for
building and land leases for our locations, including real
property taxes, increased $1.1 million, primarily due to
contractual rate increases, lease renewals, additional acreage,
new greenfield locations, and property tax increases.
Integration, merger and restructuring expenses for 2010 were
$4.0 million as compared to $11.3 million in 2009.
These costs primarily represent costs related to reductions in
our workforce.
Adjusted EBITDA decreased $26.7 million, or 17.0%, to
$129.9 million, as compared to $156.6 million for the
same period in 2009 and adjusted EBITDA margins were 39.3% and
41.8% of total revenues for 2010 and 2009, respectively. The
decrease is due to a decline in revenues, which were partially
offset by our cost cutting measures.
Depreciation and amortization expenses decreased
$3.4 million, or 8.7%, to $35.7 million in 2010 from
$39.1 million in 2009. The lower depreciation and
amortization expense is primarily due to reduced amortization
expense of intangible assets, primarily due to customer
relationships that are amortized on an accelerated basis, and
reduced depreciation expense related to property plant and
equipment, primarily due to lower levels of that equipment.
Depreciation expense includes the related depreciation on the
additions to property, plant and equipment, primarily trucks,
forklifts and trailers, to support the lease fleet, and the
customized ERP, CRM and other software systems to enhance our
reporting environment. It also includes wood modular offices
which have a higher depreciation rate than our steel units.
Depreciation and amortization expense also includes the
amortization of customer relationships and trade name valuation
that were associated with the Merger. Since December 31,
2009,
32
our lease fleet cost basis for depreciation decreased
$8.3 million. See Critical Accounting Policies,
Estimates and Judgments within this Item 7.
Interest expense decreased $3.1 million, or 5.2%, to
$56.4 million in 2010 from $59.5 million in 2009. The
decrease in interest expense is attributable to a decrease in
our lower average debt outstanding in 2010 compared to 2009,
principally due to the use of operating cash flow to reduce our
debt over the past year. Our average annual debt outstanding
decreased $85.7 million, or 9.7%, compared to the same
period last year. Additionally, we redeemed $6.0 million of
our MSG Notes in the first quarter of 2010 and replaced
$171.6 million of the 9.75% Notes with 7.875% Notes in
the fourth quarter of 2010. Although we continue to reduce
outstanding debt, the shift between our floating rate debt and
our higher fixed interest rate debt has caused a slight increase
in our weighted average interest rates as compared to the same
period for 2009. The monthly weighted average interest rate on
our debt was 6.5% for 2010 compared to 6.2% for 2009, excluding
the amortizations of debt issuance and other costs. Taking into
account the amortizations of debt issuance and other costs, the
monthly weighted average interest rate was 7.1% in 2010 and 6.8%
in 2009.
Debt restructuring expense in 2010 of $11.0 million relates
to the redemption of $170.6 million of our MSG Notes and
represents the early tender offer and related consent premiums
and the write-off of remaining unamortized acquisition date
discount related to the notes redeemed. See Liquidity and
Capital Resources Senior Notes.
Deferred financing costs write-off in 2010 of $0.5 million
represents that portion of deferred financing costs associated
with the $50.0 million Company elected reduction in the ABL
Agreement. See Liquidity and Capital Resources
Revolving Credit Facility.
Provision for income taxes was based on an annual effective tax
rate of 38.5% for 2010 as compared to an annual effective tax
rate of 39.4% for 2009. The 0.9% decrease is primarily due to a
reduction in the U.K. corporate tax rate as well as the
continued strengthening of our U.K. operations and their
corresponding increased contribution to the consolidated net
income. Our 2010 consolidated tax provision is based upon the
expected tax rates for our operations in the U.S., Canada, U.K.
and The Netherlands. At December 31, 2010, we had a federal
net operating loss carryforward of approximately
$301.6 million, which expires if unused from 2012 to 2030.
In addition, we had net operating loss carryforwards in the
various states in which we operate. We believe, based on
internal projections, that we will generate sufficient taxable
income needed to realize the corresponding federal and state
deferred tax assets to the extent they are recorded as deferred
tax assets in our balance sheet.
Net income in 2010 was $13.5 million, as compared to
$27.8 million in 2009. The 2010 year was negatively
affected by expenses of $11.5 million ($7.1 million
after tax), related to the redemption of the MSG Notes and the
reduction in the ABL Agreement, both discussed above. In
addition, the 2010 year was negatively affected by expenses
of $4.0 million ($2.5 million after tax), related to
integration, merger and restructuring. The 2009 year was
negatively affected by expenses of $11.3 million
($7.0 million after tax), related to integration, merger
and restructuring.
Twelve
Months Ended December 31, 2009 Compared to Twelve Months
Ended December 31, 2008
Total revenues in 2009 decreased $40.9 million, or 9.9%, to
$374.5 million from $415.4 million in 2008. Leasing,
our primary revenue focus, accounted for approximately 89.1% of
total revenues during 2009. Leasing revenues in 2009 decreased
$38.0 million, or 10.2%, to $333.5 million from
$371.5 million in 2008. This decrease in leasing revenues
resulted from a 3.5% decrease in the average number of units on
lease, and a 7.0% decrease in yield. Yield was primarily driven
by lower ancillary revenues and the mix of the type of units on
lease, while the average rental rate per unit remained virtually
unchanged. In 2009, the decline in both leasing and sales
revenues was primarily the result of a reduction in business
activity level due to a continued decline in non-residential
construction activity and the economic recession. Our leasing
revenues declined in the last two quarters of 2009 from the 2008
levels. Leasing revenues increased in the first two quarters of
2009 because the comparable quarters in 2008 excluded the MSG
merger. Our leasing revenue growth, or decline, rate in 2009
over the same period in the prior year was 27.8%, 15.9%, (31.2)%
and (29.1)% for the first, second, third and fourth quarters,
respectively. Our revenues from the sale of units decreased
$2.7 million, or 6.5%, to $38.6 million in 2009 from
$41.3 million in 2008.
33
Other revenues are primarily related to transportation charges
for the delivery of units sold and the sale of ancillary
products and represented 0.6% of total revenues in both 2009 and
2008.
Cost of sales relate to our sales revenue and as a percentage of
sales revenue decreased slightly to 66.8% in 2009 from 68.0% in
2008, thus the gross profit margin on sales improved 1.2% in
2009 over 2008 levels.
Leasing, selling and general expenses decreased
$19.4 million, or 9.2%, to $192.9 million in 2009 from
$212.3 million in 2008. Leasing, selling and general
expenses, as a percentage of total revenues, were 51.5% and
51.1% in 2009 and 2008, respectively. This slight increase as a
percentage of revenues is due to a decline in leasing revenues,
which were partially offset by the cost savings achieved in
2009. The $19.4 million decrease in 2009 is the result of
cost synergies achieved in the MSG acquisition in addition to
cost cutting measures on the reduced revenue levels. These cost
cutting measures primarily involved reductions in our workforce
and migrating a number of our branches to operational yards.
These operational yards do not have all the personnel and
overhead expenses associated with a fully staffed branch. The
major decreases in leasing, selling and general expenses for
2009 were: (1) delivery and freight costs, including fuel,
which decreased $9.5 million, and were related to the pick
up and delivery of containers by our drivers or third-party
vendors; (2) payroll and related payroll costs, which
decreased by $8.6 million primarily in connection with
reductions in our workforce; and (3) repairs and
maintenance expenses, which decreased $7.2 million, and
which includes the costs of repairing and maintaining our lease
fleet as well as our trucks, trailers and forklifts. Fixed costs
for building and land leases for our locations, including real
property taxes, increased $4.2 million due to the
assumption of leases utilized by the locations added in the
Merger and contractual rate increases at many of these locations.
Integration, merger and restructuring expenses for 2009 were
$11.3 million as compared to $24.4 million in 2008. In
2009, these costs primarily represent costs related to
reductions to our work force and the repositioning of fleet to
their intended location. In 2008, these costs primarily
represented estimated costs for exiting targeted Mobile Mini
branch operations that overlapped with MSGs properties,
repositioning and relocating assets to their intended location
and other costs associated with personnel and office expenses
associated with the integration of the companies. Also included
in the 2008 expense was our estimated cost for restructuring our
manufacturing operations including severance, related benefit
costs and asset impairment charges for the disposal of
manufacturing equipment and inventories that were not used in
the restructured environment.
Goodwill impairment in 2008 represented a non-cash charge for a
portion of our goodwill related to our U.K. and The Netherlands
operations. There was no goodwill impairment charges recorded in
2009. See Notes to Consolidated Financial Statements included in
Item 8 in this report for a more detailed discussion.
EBITDA increased $7.4 million, or 5.5%, to
$144.4 million, as compared to $137.0 million for the
same period in 2008 and EBITDA margins were 38.6% and 33.0% of
total revenues for 2009 and 2008, respectively. Adjusted EBITDA
was $156.6 million in 2009 as compared to
$175.0 million in 2008 and adjusted EBITDA margins were
41.8% and 42.1% of total revenues for 2009 and 2008,
respectively.
Depreciation and amortization expenses increased
$7.3 million, or 23.0%, to $39.1 million in 2009 from
$31.8 million in 2008. The higher depreciation expense is
primarily due to the depreciation of units acquired through
prior years acquisitions. It also includes wood modular
offices which have a higher depreciation rate than our steel
units. Depreciation expense also includes the related
depreciation on the additions to property, plant and equipment,
primarily trucks, forklifts and trailers, to support the lease
fleet, and the customized ERP, CRM and other software systems to
enhance our reporting environment. Depreciation and amortization
expense also includes the amortization of customer relationships
and trade name valuation that were associated with the MSG
Merger. Since December 31, 2008, our lease fleet cost basis
for depreciation increased only by $1.1 million. See
Critical Accounting Policies, Estimates and
Judgments within this Item 7.
Interest expense increased $11.4 million, or 23.6%, to
$59.5 million in 2009 from $48.1 million in 2008. This
increase is primarily due to the $540.9 million of debt we
assumed in the Merger. Although at the time of the Merger, we
assumed the MSG Notes and our interest rate spread under our
revolving credit facility increased from LIBOR + 1.25% to LIBOR
+ 2.50%, our average borrowing rate declined slightly in 2009,
due to lower prevailing LIBOR rates. The monthly weighted
average interest rate on our debt was 6.2% for 2009 compared to
6.8% for
34
2008, excluding the amortizations of debt issuance and other
costs. Taking into account the amortizations of debt issuance
and other costs, the monthly weighted average interest rate was
6.8% in 2009 and 7.2% in 2008.
Provision for income taxes was based on an annual effective tax
rate of 39.4% for 2009 as compared to an annual effective tax
rate of 49.1% for 2008. Our 2008 effective tax rate was
negatively affected by the goodwill impairment charge of
$13.7 million related to our European operations, which was
not tax deductible. Our 2009 consolidated tax provision includes
the expected tax rates for our operations in the U.S., Canada,
U.K. and The Netherlands. At December 31, 2009, we had a
federal net operating loss carryforward of approximately
$216.8 million, which expires if unused from 2017 to 2029.
In addition, we had net operating loss carryforwards in the
various states in which we operate. We believe, based on
internal projections, that we will generate sufficient taxable
income needed to realize the corresponding federal and state
deferred tax assets to the extent they are recorded as deferred
tax assets in our balance sheet.
Net income in 2009 was $27.8 million, as compared to
$29.0 million in 2008. Our 2009 net income results
were primarily achieved by maintaining our operating margins.
The 2009 year was negatively affected by expenses of
$11.3 million ($7.0 million after tax), related to
integration, merger and restructuring. The 2008 year was
negatively affected by expenses of $24.4 million
($15.3 million after tax), related to integration, merger
and restructuring in addition to a $13.7 million after tax
charge for goodwill impairment.
Liquidity
and Capital Resources
Liquidity
Summary
Leasing is a capital-intensive business that requires us to
acquire assets before they generate revenues, cash flow and
earnings. The assets which we lease have very long useful lives
and require relatively little recurrent maintenance
expenditures. Most of the capital we deploy into our leasing
business historically has been used to expand our operations
geographically, to increase the number of units available for
lease at our leasing locations, and to add to the mix of
products we offer. During recent years, our operations have
generated annual cash flow that exceeds our pre-tax earnings,
particularly due to our cash flow from operations and the
deferral of income taxes caused by accelerated depreciation of
our fixed assets in our tax return filings. For the past three
years, we were cash flow positive (after capital expenditures
but excluding the Merger).
During the past three years, our capital expenditures and
acquisitions have been funded from our operating cash flow, and
from borrowings under our revolving credit facility. Our
operating cash flow is generally weakest during the first
quarter of each fiscal year, when customers who leased
containers for holiday storage return the units and as a result
of seasonal weather in some of our markets. During 2008, 2009
and 2010, we significantly reduced our capital expenditures and
were able to fund capital expenditures with cash flow from
operations. We expect this trend to continue in 2011. In
addition to cash flow generated by operations, our principal
current source of liquidity is our revolving credit facility
described below.
Senior Notes. At December 31, 2010, we
had three series of outstanding senior notes
(i) $150.0 million aggregate principal amount of
6.875% senior notes due 2015 (the 2015 Notes),
(ii) $200.0 million aggregate principal amount of
7.875% senior notes due 2020 (the 2020 Notes, and together
with the 2015 Notes, the Mobile Mini Notes) and
(iii) $22.3 million aggregate principal amount of
9.750% senior notes originally issued in the amount of
$200.0 million by MSG due 2014 (the MSG Notes and together
with the Mobile Mini Notes, the Senior Notes). In January 2011,
all of the remaining MSG Notes were redeemed and ceased to be
outstanding.
We issued the 2020 Notes on November 23, 2010 at an initial
offering price of 100% of their face value. The net proceeds
from the sale of the 2020 Notes were used to redeem
approximately $170.6 million of the outstanding MSG Notes,
to pay the redemption and tender offer premium (approximately
$8.9 million) and accrued interest (approximately
$5.2 million) on the MSG Notes, and to pay fees and
expenses related to the offering. We used the remaining net
proceeds of approximately $10.4 million to repay borrowings
under our revolving credit facility.
The Senior Notes include covenants, indemnities and events of
default that are customary for indentures of this type,
including restrictions on the incurrence of additional debt,
sales of assets and payment of dividends. Management does not
believe that the covenants in the Senior Notes limit our ability
to pursue its intended
35
business strategy or its future financing needs. We were in
compliance with the covenants of the Senior Notes as of
December 31, 2010.
Revolving Credit Facility. On June 27,
2008, we entered into a $900.0 million ABL Credit Agreement
(the Credit Agreement) with Deutsche Bank AG New York Branch and
the other lenders party thereto. In August 2010, we entered into
a Second Amendment to the Credit Agreement that, among other
things, allows a permitted refinancing of our senior notes and
for restricted payments and acquisitions to occur without
financial covenant restrictions, provided we have
$250.0 million in pro forma excess borrowing availability
as defined in the Credit Agreement. We also elected to reduce
the Credit Agreement by $50.0 million to
$850.0 million, which reduces our ongoing unused line fees.
All amounts outstanding under the Credit Agreement are due on
June 27, 2013. The obligations of Mobile Mini and our
subsidiary guarantors under the Credit Agreement are secured by
a blanket lien on substantially all of our assets. At
December 31, 2010, we had approximately $396.9 million
of borrowings outstanding and $385.9 million of additional
borrowing availability under the Credit Agreement, based upon
borrowing base calculations as of such date. We were in
compliance with the terms of the Credit Agreement as of
December 31, 2010.
Amounts borrowed under the Credit Agreement and repaid during
the term may be reborrowed. Outstanding amounts under the Credit
Agreement will bear interest, at our option, at either
(i) LIBOR plus a defined margin, or (ii) the Agent
banks prime rate plus a margin. The applicable margins for
each type of loan will range from 2.25% to 2.75% for LIBOR loans
and 0.75% to 1.25% for base rate loans depending upon our debt
ratio, as defined in the Agreement, at the measurement date.
Based on our debt ratio at December 31, 2010, our
applicable interest rate margins for LIBOR loans will be LIBOR
plus 2.75% and prime plus 1.25% for base rate loans until the
next measurement date which is the end of each fiscal quarter
and becomes effective the month following managements
communication to their lenders.
The Credit Agreement provides for U.K. borrowings, denominated
in either Pounds Sterling or Euros, by the Companys
subsidiary Mobile Mini U.K. Limited, based upon a U.K. borrowing
base and additionally supported by the U.S. and Canada
borrowing base, if necessary. For U.S. borrowings, which
are denominated in U.S. Dollars, the borrowing base is
based upon a U.S. and Canada borrowing base.
Availability of borrowings under the Credit Agreement is subject
to a borrowing base calculation based upon a valuation of our
eligible accounts receivable, eligible container fleet, eligible
inventory (including containers held for sale,
work-in-process
and raw materials), machinery and equipment and real property,
each multiplied by an applicable advance rate or limit.
The Credit Agreement does contain certain financial maintenance
covenants, but these maintenance covenants are not applicable
unless we have less than $100.0 million in borrowing
availability under the facility. The Credit Agreement also
contains customary negative covenants applicable to us and our
subsidiaries, including covenants that restrict their ability
to, among other things, (i) make capital expenditures in
excess of defined limits, (ii) allow certain liens to
attach to us or our subsidiary assets, (iii) repurchase or
pay dividends or make certain other restricted payments on
capital stock and certain other securities, or prepay certain
indebtedness, (iv) incur additional indebtedness or engage
in certain other types of financing transactions, and
(v) make acquisitions or other investments.
We believe our cash provided by operating activities will
provide for our normal capital needs for the next
12 months. If not, we have sufficient borrowings available
under our revolving credit facility to meet any additional
funding requirements. We monitor the financial strength of our
lenders on an ongoing basis using publicly-available
information. Based upon that information, we do not presently
think that there is a likelihood that any of our lenders might
not be able to honor its commitments under the Credit Agreement.
Operating Activities. Our operations provided
net cash flow of $60.8 million in 2010 as compared to
$86.8 million in 2009 and $98.5 million in 2008. The
$26.0 million decrease in 2010 over 2009 in cash provided
by operating activities was primarily attributable to a decrease
in net income, after giving effect to non-cash items and a
decrease in working capital. In 2010, working capital was
primarily affected by a decrease in accrued liabilities. This
decrease reflects the continued reduction in certain liabilities
associated with the Merger and the interest payment in
connection with the $170.6 million redemption of the MSG
Notes. In 2009, there were decreases in
36
receivables, inventories and deposits and prepaid expenses which
were partially offset by decreases in accounts payable and
accrued liabilities. These decreases were primarily due to the
weakened economy, our restructured manufacturing operations and
reduction of certain liabilities associated with the Merger. In
2008, there were decreases in both inventories and deposits and
prepaid expenses providing positive cash flows, which were
offset by decreases in accounts payable and accrued liabilities.
These decreases were primarily a result of the Merger and the
decrease in purchases of inventories due to the restructuring of
our manufacturing operations in late 2008. Cash provided by
operating activities is enhanced by the deferral of most income
taxes due to the rapid tax depreciation rate of our assets and
our federal and state net operating loss carryforwards. At
December 31, 2010, we had a federal net operating loss
carryforward of approximately $301.6 million and a net
deferred tax liability of $165.6 million.
Investing Activities. Net cash provided by
investing activities was $5.4 million in 2010, compared to
$3.0 million in 2009 and to net cash used of
$97.9 million in 2008. In 2010 and 2009, we did not acquire
any businesses, compared to cash payments for acquisitions of
$33.3 million in 2008. Capital expenditures for our lease
fleet, net of proceeds from sale of lease fleet units, provided
net cash proceeds of $13.8 million in 2010 compared to net
cash proceeds of $12.0 million in 2009 and net cash
expenditures of $48.3 million in 2008. Our capital
expenditures for our lease fleet decreased 29.8% in 2010
compared to 2009 as we required fewer units to be manufactured
or remanufactured from prior acquisitions due to the continued
economic slowdown. Proceeds from sale of lease fleet units
decreased 13.8% as compared to 2009. Additions to the lease
fleet primarily included remanufacturing of prior acquisition
units and manufactured steel offices. During the past several
years we have increased the customization of our fleet, enabling
us to differentiate our product from our competitors
product, and we have complimented our lease fleet by adding wood
mobile offices. At the end of 2008, we restructured our
manufacturing operations to right-size our manufacturing
requirements considering the large lease fleet we acquired in
the MSG transaction. As a result of the acquisition and the
current economic conditions, we anticipate our near term
investing activities will be primarily focused on
remanufacturing units acquired in prior acquisitions to meet our
lease fleet standards as these units are placed on-rent. Capital
expenditures for property, plant and equipment, net of proceeds
from any sale of property, plant and equipment, were
$8.4 million in 2010, $9.0 million in 2009 and
$16.4 million in 2008. Expenditures for property, plant and
equipment in 2010 were primarily for technology and
communication improvements, delivery equipment and improvements
to our branch locations. The amount of cash that we use during
any period in investing activities is almost entirely within
managements discretion. We have no contracts or other
arrangements pursuant to which we are required to purchase a
fixed or minimum amount of goods or services in connection with
any portion of our business. Maintenance capital expenditures is
the cost to replace old forklifts, trucks and trailers that we
use to move and deliver our products to our customers, and for
enhancements to our computer information and communication
systems. Our maintenance capital expenditures were approximately
$2.2 million in 2010, $0.1 million in 2009 and
$3.0 million in 2008.
Financing Activities. Net cash used in
financing activities was $67.7 million in 2010 as compared
to $83.0 million in 2009 and $6.7 million in 2008. In
November 2010, we received approximately $195.1 million in
net proceeds from the issuance of the 2020 Notes, which we used
to redeem $170.6 million in principal amount of MSG Notes.
In conjunction with the redemption of the MSG Notes, we incurred
approximately $8.9 million in tender and consent premiums.
Earlier in the year we also redeemed $6.0 million of the
MSG Notes. In 2010, we reduced our net borrowings under our
revolving credit facility by $76.8 million in addition to
reducing other net debt obligations by $2.3 million. In
2009, we reduced our net borrowings under our revolving credit
facility by $80.9 million and other net debt obligations of
$1.7 million in addition to redeeming $1.1 million
principal amount of MSG Notes. In 2008, our borrowings under our
revolving credit facility were used primarily to fund the
Merger, as well as other related expenses and costs associated
with the credit facility. In connection with the Merger we also
assumed certain debt obligations, some requiring monthly
installment payments. We received $1.1 million,
$0.3 million and $1.7 million from the exercises of
employee stock options and the related tax benefits in 2008,
2009 and 2010, respectively. As of December 31, 2010, we
had $396.9 million of borrowings outstanding under our
revolving credit facility, and approximately $385.9 million
of additional borrowings were available to us under the facility.
37
Hedging Activities. At December 31, 2010,
we had five interest rate swap agreements in place to fix
interest rates paid on a total of $125.0 million of our
outstanding debt. We entered into interest rate swap agreements
that effectively fixed the interest rate so that the rate is
payable based upon a spread from fixed rates, rather than a
spread from the LIBOR rate. At December 31, 2010,
$449.5 million of our outstanding indebtedness bears
interest at fixed rates (or the rate is effectively fixed due to
a swap agreement), and approximately $271.9 million of
borrowings under our credit facility are at a variable rate.
Contractual
Obligations and Commitments
Our contractual obligations primarily consist of our outstanding
balance under our revolving credit facility and
$372.3 million of Senior Notes, together with other,
primarily unsecured notes payable obligations, and obligations
under capital leases. We also have operating lease commitments
for: (1) real estate properties for the majority of our
branches with remaining lease terms typically ranging from 1 to
15 years; (2) delivery, transportation and yard
equipment, typically under a five-year lease with purchase
options at the end of the lease term at a stated or fair market
value price; and (3) office related equipment.
At December 31, 2010, primarily in connection with the
issuance of our insurance policies, we provided certain
insurance carriers and others with approximately
$8.8 million in letters of credit.
We currently do not have any obligations under purchase
agreements or commitments. We enter into operating and capital
lease obligations from time to time. At December 31, 2010,
we had $2.6 million in capital lease obligations.
The table below provides a summary of our contractual
commitments as of December 31, 2010. The operating lease
amounts include certain real estate leases that expire in 2011,
but have lease renewal options that we currently anticipate to
exercise in 2011 at the end of the initial lease period.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Payments Due by Period
|
|
|
|
|
|
|
Less Than
|
|
|
|
|
|
|
|
|
More Than
|
|
|
|
Total
|
|
|
1 Year
|
|
|
1-3 Years
|
|
|
3-5 Years
|
|
|
5 Years
|
|
|
|
(In thousands)
|
|
|
Revolving credit facility
|
|
$
|
396,882
|
|
|
$
|
|
|
|
$
|
396,882
|
|
|
$
|
|
|
|
$
|
|
|
Scheduled interest payment obligations under our revolving
credit facility(1)
|
|
|
11,640
|
|
|
|
8,635
|
|
|
|
3,005
|
|
|
|
|
|
|
|
|
|
Senior Notes
|
|
|
372,272
|
|
|
|
|
|
|
|
|
|
|
|
172,272
|
|
|
|
200,000
|
|
Scheduled interest payment obligations under our Senior
Notes(2)(5)
|
|
|
212,592
|
|
|
|
28,234
|
|
|
|
56,468
|
|
|
|
49,140
|
|
|
|
78,750
|
|
Notes Payable
|
|
|
289
|
|
|
|
289
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Scheduled interest payment obligations under our Notes Payable(2)
|
|
|
3
|
|
|
|
3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Obligations under capital leases
|
|
|
2,576
|
|
|
|
1,288
|
|
|
|
1,135
|
|
|
|
153
|
|
|
|
|
|
Scheduled interest payment obligations under our capital
leases(3)
|
|
|
238
|
|
|
|
144
|
|
|
|
90
|
|
|
|
4
|
|
|
|
|
|
Operating leases(4)
|
|
|
67,432
|
|
|
|
17,432
|
|
|
|
26,747
|
|
|
|
14,997
|
|
|
|
8,256
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total contractual obligations
|
|
$
|
1,063,924
|
|
|
$
|
56,025
|
|
|
$
|
484,327
|
|
|
$
|
236,566
|
|
|
$
|
287,006
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Scheduled interest rate obligations under our revolving credit
facility were calculated using our weighted average rate of 2.2%
at December 31, 2010. Our revolving credit facility is
subject to a variable rate of interest. The weighted average
interest rate is inclusive of our fixed rate swap agreements
through mid 2011. |
38
|
|
|
(2) |
|
Scheduled interest rate obligations under our Senior Notes and
other long-term debt were calculated using stated rates. |
|
(3) |
|
Scheduled interest rate obligations under capital leases were
calculated using imputed rates ranging from 5.7% to 8.5%. |
|
(4) |
|
Operating lease obligations include operating commitments and
restructuring related commitments and are net of
sub-lease
income. For further discussion see Note 12 to our
Consolidated Financial Statements. |
|
(5) |
|
The aggregate principal amount outstanding on the MSG Notes
($22.3 million) at December 31, 2010, was redeemed in
January 2011. |
Off-Balance
Sheet Transactions
We do not maintain any off-balance sheet transactions,
arrangements, obligations or other relationships with
unconsolidated entities or others that are reasonably likely to
have a material current or future effect on our financial
condition, changes in financial condition, revenues or expenses,
results of operations, liquidity, capital expenditures or
capital resources.
Seasonality
Demand from some of our customers is somewhat seasonal. Demand
for leases of our portable storage units by large retailers is
stronger from September through December because these retailers
need to store more inventories for the holiday season. These
retailers usually return these leased units to us in December
and early in the following year. This seasonality has
historically caused lower utilization rates for our lease fleet
and a marginal decrease in cash flow during the first quarter of
each year.
Critical
Accounting Policies, Estimates and Judgments
Our significant accounting policies are disclosed in Note 1
to our Consolidated Financial Statements. The following
discussion addresses our most critical accounting policies, some
of which require significant judgment.
Our consolidated financial statements have been prepared in
accordance with U.S. generally accepted accounting
principles, or GAAP. The preparation of these consolidated
financial statements requires us to make estimates and
assumptions that affect the reported amounts of assets,
liabilities, revenues and expenses during the reporting period.
These estimates and assumptions are based upon our evaluation of
historical results and anticipated future events, and these
estimates may change as additional information becomes
available. The SEC defines critical accounting policies as those
that are, in managements view, most important to our
financial condition and results of operations and those that
require significant judgments and estimates. Management believes
that our most critical accounting policies relate to:
Revenue Recognition. Lease and leasing
ancillary revenues and related expenses generated under portable
storage and mobile office units are recognized on a
straight-line basis. Delivery and hauling revenues and expenses
from our portable storage and mobile office units are recognized
when these services are earned. We recognize revenues from sales
of containers and mobile office units upon delivery when the
risk of loss passes, the price is fixed and determinable and
collectability is reasonably assured. We sell our products
pursuant to sales contracts stating the fixed sales price with
our customers.
Share-Based Compensation. We recognize the
fair-value of share-based compensation transactions in the
consolidated statements of income. The fair value of our
share-based awards is estimated at the date of grant using the
Black-Scholes option pricing model. The Black-Scholes valuation
calculation requires us to estimate key assumptions such as
future stock price volatility, expected terms, risk-free rates
and dividend yield. Expected stock price volatility is based on
the historical volatility of our stock. We use historical data
to estimate option exercises and employee terminations within
the valuation model. The expected term of options granted is
derived from an analysis of historical exercises and remaining
contractual life of stock options, and represents the period of
time that options granted are expected to be outstanding. The
risk-free interest rate is based on the U.S. Treasury yield
in effect at the time of grant. We historically have not paid
cash dividends, and do not currently intend to pay cash
dividends, and thus have assumed a 0% dividend rate. If our
actual experience differs significantly from the
39
assumptions used to compute our share-based compensation cost,
or if different assumptions had been used, we may have recorded
too much or too little share-based compensation cost. In the
past we have issued stock options and restricted stock, which we
also refer to as nonvested shares. For stock options and
nonvested share-awards subject solely to service conditions, we
recognize expense using the straight-line method. For nonvested
share-awards subject to service and performance conditions, we
are required to assess the probability that such performance
conditions will be met. In 2010 the share-based compensation
expense was reduced by $0.4 million to reflect anticipated
shortfalls related to share-awards with vesting subject to a
performance conditions. If the likelihood of the performance
condition being met is deemed probable, we will recognize the
expense using the accelerated attribution method. In addition,
for both stock options and nonvested share-awards, we are
required to estimate the expected forfeiture rate of our stock
grants and only recognize the expense for those shares expected
to vest. If the actual forfeiture rate is materially different
from our estimate, our share-based compensation expense could be
materially different. We had approximately $2.3 million of
total unrecognized compensation costs related to stock options
at December 31, 2010 that are expected to be recognized
over a weighted-average period of 3.8 years and
$20.6 million of total unrecognized compensation costs
related to nonvested share-awards at December 31, 2010 that
are expected to be recognized over a weighted-average period of
3.2 years. See Note 10 to the Consolidated Financial
Statements for a further discussion on share-based compensation.
Allowance for Doubtful Accounts. We maintain
allowances for doubtful accounts for estimated losses resulting
from the inability of our customers to make required payments.
We establish and maintain reserves against estimated losses
based upon historical loss experience and evaluation of past due
accounts agings. Management reviews the level of the allowances
for doubtful accounts on a regular basis and adjusts the level
of the allowances as needed. If we were to increase the factors
used for our reserve estimates by 25%, it would have the
following approximate effect on our net income and diluted
earnings per share as follows:
|
|
|
|
|
|
|
|
|
|
|
Years Ended
|
|
|
December 31,
|
|
|
2009
|
|
2010
|
|
|
(In thousands except per share data)
|
|
As reported:
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
27,798
|
|
|
$
|
13,509
|
|
Diluted earnings per share
|
|
$
|
0.64
|
|
|
$
|
0.31
|
|
As adjusted for hypothetical change in reserve estimates:
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
27,390
|
|
|
$
|
13,219
|
|
Diluted earnings per share
|
|
$
|
0.63
|
|
|
$
|
0.30
|
|
If the financial condition of our customers were to deteriorate,
resulting in an impairment of their ability to make payments,
additional allowances may be required.
Impairment of Goodwill. We assess the
impairment of goodwill and other identifiable intangibles on an
annual basis or whenever events or changes in circumstances
indicate that the carrying value may not be recoverable. Some
factors we consider important which could trigger an impairment
review include the following:
|
|
|
|
|
significant under-performance relative to historical, expected
or projected future operating results;
|
|
|
|
significant changes in the manner of our use of the acquired
assets or the strategy for our overall business;
|
|
|
|
our market capitalization relative to net book value; and
|
|
|
|
significant negative industry or general economic trends.
|
We operate in one reportable segment, which is comprised of
three operating segments that also represent our reporting units
(North America, the U.K. and The Netherlands). All of our
goodwill was allocated between these three reporting units. At
December 31, 2010, only North America and the U.K. have
goodwill subject to impairment testing. We perform an annual
impairment test on goodwill at December 31 using a two-step
process. The first step is a screen for potential impairment,
while the second step measures the amount of the impairment, if
any. In addition, we will perform impairment tests during any
reporting period in which events or changes in circumstances
indicate that an impairment may have incurred.
40
At December 31, 2010, we performed the first step of the
two-step impairment test and compared the fair value of each
reporting unit to its carrying value. In assessing the fair
value of the reporting units, we considered both the market
approach and the income approach. Under the market approach, the
fair value of the reporting unit is based on quoted market
prices of companies comparable to the reporting unit being
valued. Under the income approach, the fair value of the
reporting unit is based on the present value of estimated cash
flows. The income approach is dependent on a number of
significant management assumptions, including estimated future
revenue growth rates, gross margins on sales, operating margins,
capital expenditures, tax payments and discount rate. Each
approach was given equal weight in arriving at the fair value of
the reporting unit. As of December 31, 2010, neither of the
reporting units with goodwill had estimated fair values less
than their individual net asset carrying values, therefore step
two was not required at December 31, 2010.
In step two of the impairment test, we are required to determine
the implied fair value of the goodwill and compare it to the
carrying value of the goodwill. We allocated the fair value of
the reporting units to the respective assets and liabilities of
each reporting unit as if the reporting units had been acquired
in separate and individual business combinations and the fair
value of the reporting units was the price paid to acquire the
reporting units. The excess of the fair value of the reporting
units over the amounts assigned to their respective assets and
liabilities is the implied fair value of goodwill. We reconciled
the fair values of our three reporting units in the aggregate to
our market capitalization at December 31, 2010.
The performance of our 2009 and 2010 annual impairment analyses
resulted in no impairment charges to the North America or U.K.
reporting units, where all of our goodwill is recorded. A
goodwill impairment charge of $13.7 million was recognized
in 2008, primarily related to the U.K. reporting unit. The fair
value of the North America and U.K. reporting units
exceeded the carrying value at December 31, 2010 by 41% and
18%, respectively. At December 31, 2010,
$447.3 million of our goodwill relates to the North America
reporting unit and $64.1 million relates to the U.K.
reporting unit.
The discount rates utilized in the 2010 analyses ranged from 11%
to 12% while the terminal growth rates used in the discounted
cash flow analysis were approximately 2%.
Impairment of Long-Lived Assets. We review
property, plant and equipment and intangibles with finite lives
(those assets resulting from acquisitions) for impairment when
events or circumstances indicate these assets might be impaired.
We test impairment using historical cash flows and other
relevant facts and circumstances as the primary basis for its
estimates of future cash flows. This process requires the use of
estimates and assumptions, which are subject to a high degree of
judgment. If these assumptions change in the future, whether due
to new information or other factors, we may be required to
record impairment charges for these assets. There were no
indicators of impairment at December 31, 2009 and 2010.
Depreciation Policy. Our depreciation policy
for our lease fleet uses the straight-line method over our
units estimated useful life, after the date that we put
the unit in service. Our steel units are depreciated over
30 years with an estimated residual value of 55%. Wood
offices units are depreciated over 20 years with an
estimated residual value of 50%. Van trailers, which are a small
part of our fleet, are depreciated over 7 years to a 20%
residual value. We have other non-core products that have
various other measures of useful lives and residual values. Van
trailers and other non-core products are only added to the fleet
as a result of acquisitions of portable storage businesses.
In April 2009, we evaluated our depreciation policy on our steel
units and changed the estimated useful life to 30 years
(from 25 years) and decreased the residual value to 55%
from 62.5%. This results in continual depreciation on steel
units for five additional years at the same annual rate of 1.5%
of book value. This change had an immaterial impact on the
consolidated financial statements at the date of the change in
estimate. We made this change because some of our steel units
have been in our lease fleet longer than 25 years and these
units continue to be effective income producing assets that do
not show signs of realizing the end of their useful life. Our
historical lease fleet data on our steel units shows we have
retained comparable rental rates and sales prices irrespective
of the age of the steel units in our lease fleet. We
periodically review our depreciation policy against various
factors, including the results of our lenders independent
appraisal of our lease fleet, practices of the larger
competitors in our industry, profit margins we are achieving on
sales of depreciated units and lease rates we obtain on older
units. If we were to change our depreciation policy on our steel
units from 55% residual value and a
30-year life
to a lower or higher residual and a shorter or longer useful
life, such change could have a positive, negative or neutral
effect on our earnings, with
41
the actual effect being determined by the change. For example, a
change in our estimates used in our residual values and useful
life on our steel units would have the following approximate
effect on our net income and diluted earnings per share as
reflected in the table below.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Useful
|
|
|
|
|
|
|
|
|
|
Residual
|
|
|
Life in
|
|
|
|
|
|
|
|
|
|
Value
|
|
|
Years
|
|
|
2009
|
|
|
2010
|
|
|
|
(In thousands except per share data)
|
|
|
As Reported(1):
|
|
|
55
|
%
|
|
|
30
|
|
|
|
|
|
|
|
|
|
Net income
|
|
|
|
|
|
|
|
|
|
$
|
27,798
|
|
|
$
|
13,509
|
|
Diluted earnings per share
|
|
|
|
|
|
|
|
|
|
$
|
0.64
|
|
|
$
|
0.31
|
|
As adjusted for change in estimates:
|
|
|
70
|
%
|
|
|
20
|
|
|
|
|
|
|
|
|
|
Net income
|
|
|
|
|
|
|
|
|
|
$
|
27,798
|
|
|
$
|
13,509
|
|
Diluted earnings per share
|
|
|
|
|
|
|
|
|
|
$
|
0.64
|
|
|
$
|
0.31
|
|
As adjusted for change in estimates(2):
|
|
|
62.5
|
%
|
|
|
25
|
|
|
|
|
|
|
|
|
|
Net income
|
|
|
|
|
|
|
|
|
|
$
|
27,798
|
|
|
$
|
13,509
|
|
Diluted earnings per share
|
|
|
|
|
|
|
|
|
|
$
|
0.64
|
|
|
$
|
0.31
|
|
As adjusted for change in estimates:
|
|
|
50
|
%
|
|
|
20
|
|
|
|
|
|
|
|
|
|
Net income
|
|
|
|
|
|
|
|
|
|
$
|
22,190
|
|
|
$
|
7,803
|
|
Diluted earnings per share
|
|
|
|
|
|
|
|
|
|
$
|
0.51
|
|
|
$
|
0.18
|
|
As adjusted for change in estimates:
|
|
|
40
|
%
|
|
|
40
|
|
|
|
|
|
|
|
|
|
Net income
|
|
|
|
|
|
|
|
|
|
$
|
27,798
|
|
|
$
|
13,509
|
|
Diluted earnings per share
|
|
|
|
|
|
|
|
|
|
$
|
0.64
|
|
|
$
|
0.31
|
|
As adjusted for change in estimates:
|
|
|
30
|
%
|
|
|
25
|
|
|
|
|
|
|
|
|
|
Net income
|
|
|
|
|
|
|
|
|
|
$
|
20,508
|
|
|
$
|
6,091
|
|
Diluted earnings per share
|
|
|
|
|
|
|
|
|
|
$
|
0.47
|
|
|
$
|
0.14
|
|
As adjusted for change in estimates:
|
|
|
25
|
%
|
|
|
25
|
|
|
|
|
|
|
|
|
|
Net income
|
|
|
|
|
|
|
|
|
|
$
|
19,386
|
|
|
$
|
4,949
|
|
Diluted earnings per share
|
|
|
|
|
|
|
|
|
|
$
|
0.45
|
|
|
$
|
0.11
|
|
|
|
|
(1) |
|
Effective April 2009 |
|
(2) |
|
Prior to April 2009 |
Insurance Reserves. Our workers
compensation, auto and general liability insurance are purchased
under large deductible programs. Our current per incident
deductibles are: workers compensation $250,000, auto
$500,000 and general liability $100,000. We provide for the
estimated expense relating to the deductible portion of the
individual claims. However, we generally do not know the full
amount of our exposure to a deductible in connection with any
particular claim during the fiscal period in which the claim is
incurred and for which we must make an accrual for the
deductible expense. We make these accruals based on a
combination of the claims development experience of our staff
and our insurance companies, and, at year end, the accrual is
reviewed and adjusted, in part, based on an independent
actuarial review of historical loss data and using certain
actuarial assumptions followed in the insurance industry. A high
degree of judgment is required in developing these estimates of
amounts to be accrued, as well as in connection with the
underlying assumptions. In addition, our assumptions will change
as our loss experience is developed. All of these factors have
the potential for significantly impacting the amounts we have
previously reserved in respect of anticipated deductible
expenses, and we may be required in the future to increase or
decrease amounts previously accrued.
Contingencies. We are a party to various
claims and litigation in the normal course of business.
Managements current estimated range of liability related
to various claims and pending litigation is based on claims for
which our management can determine that it is probable that a
liability has been incurred and the amount of loss can be
reasonably estimated. Because of the uncertainties related to
both the probability of incurred and possible range of loss on
pending claims and litigation, management must use considerable
judgment in making reasonable
42
determination of the liability that could result from an
unfavorable outcome. As additional information becomes
available, we will assess the potential liability related to our
pending litigation and revise our estimates. Such revisions in
our estimates of the potential liability could materially impact
our results of operation. We do not anticipate the resolution of
such matters known at this time will have a material adverse
effect on our business or consolidated financial position.
Deferred Taxes. In preparing our consolidated
financial statements, we recognize income taxes in each of the
jurisdictions in which we operate. For each jurisdiction, we
estimate the actual amount of taxes currently payable or
receivable as well as deferred tax assets and liabilities
attributable to temporary differences between the financial
statement carrying amounts of existing assets and liabilities
and their respective tax bases. Deferred income tax assets and
liabilities are measured using enacted tax rates expected to
apply to taxable income in the years in which these temporary
differences are expected to be recovered or settled. The effect
on deferred tax assets and liabilities of a change in tax rates
is recognized in income in the period that includes the
enactment date.
A valuation allowance is provided for those deferred tax assets
for which it is more likely than not that the related benefits
will not be realized. In determining the amount of the valuation
allowance, we consider estimated future taxable income as well
as feasible tax planning strategies in each jurisdiction. If we
determine that we will not realize all or a portion of our
deferred tax assets, we will increase our valuation allowance
with a charge to income tax expense or offset goodwill if the
deferred tax asset was acquired in a business combination.
Conversely, if we determine that we will ultimately be able to
realize all or a portion of the related benefits for which a
valuation allowance has been provided, all or a portion of the
related valuation allowance will be reduced with a credit to
income tax expense except if the valuation allowance was created
in conjunction with a tax asset in a business combination.
At December 31, 2010, we have a $1.4 million valuation
allowance and $135.6 million of deferred tax assets
included within the net deferred tax liability on our balance
sheet. The majority of the deferred tax asset relates to federal
net operating loss carryforwards that have future expiration
dates. Management believes that certain state net operating loss
carryforwards will expire unused and, as a result, has created a
valuation allowance of $0.2 million. Management currently
believes that adequate future taxable income will be generated
through future operations and, or through available tax planning
strategies to recover these assets. However, given that these
federal net operating loss carryforwards that give rise to the
deferred tax asset expire over 18 years beginning in 2012,
there could be changes in managements judgment in future
periods with respect to the recoverability of these assets. As
of December 31, 2010, management believes that it is more
likely than not that the unreserved portion of these deferred
tax assets will be recovered.
Purchase Accounting. We account for
acquisitions under the purchase method. Under the purchase
method of accounting, the price paid by us, including the value
of the redeemable convertible preferred stock, if any, is
allocated to the assets acquired and liabilities assumed based
upon the estimated fair values of the assets and liabilities
acquired and the fair value of the convertible redeemable
participating preferred stock issued at the date of acquisition.
The excess of the purchase price over the fair value of the net
assets and liabilities acquired represents goodwill that is
subject to annual impairment testing.
Earnings Per Share. Basic net income per share
is calculated by dividing income allocable to common
stockholders by the weighted-average number of common shares
outstanding, net of shares subject to repurchase by us during
the period. Income allocable to common stockholders is net
income less the earnings allocable to preferred stockholders.
Diluted net income per share is calculated under the
if-converted method unless the conversion of the preferred stock
is anti-dilutive to basic net income per share. To the extent
the inclusion of preferred stock is anti-dilutive, we calculate
diluted net income per share under the two-class method.
Potential common shares include restricted common stock and
incremental shares of common stock issuable upon the exercise of
stock options and vesting of nonvested stock awards and upon
conversion of convertible preferred stock using the treasury
stock method.
43
Recent
Accounting Pronouncements
Transfers of Financial Assets. In June 2009,
the Financial Accounting Standards Board (FASB) issued guidance
that changes the information a reporting entity provides in its
financial statements about the transfer of financial assets and
continuing interests held in transferred financial assets. The
standard amends previous accounting guidance by removing the
concept of qualified special purpose entities. This accounting
standard became effective for the Company for transfers
occurring on or after January 1, 2010. We adopted this
accounting standard and it did not have a material effect on our
consolidated financial statements and related disclosures.
Multiple Element Arrangements. In September
2009, the FASB issued new accounting guidance related to the
revenue recognition of multiple element arrangements. The new
guidance states that if vendor specific objective evidence or
third party evidence for deliverables in an arrangement cannot
be determined, companies will be required to develop a best
estimate of the selling price to separate deliverables and
allocate arrangement consideration using the relative selling
price method. This guidance is effective for arrangements
entered into after January 1, 2011. We currently do not
expect this guidance to have a material impact on our financial
statements and disclosures.
Fair Value Measurements. In January 2010, the
FASB issued guidance which requires new disclosures of
significant transfers in and out of Level 1 and
Level 2 fair value measurements. The guidance also requires
disclosure about the valuation techniques and inputs used to
measure fair value for both recurring and nonrecurring fair
value measurements for Level 2 and Level 3. We adopted
the provisions of this guidance on January 1, 2010. The
adoption of these provisions did not have a material effect on
our consolidated financial statements.
Business Combinations. In December 2010, the
FASB issued clarification on the accounting guidance for
business combinations. The new accounting guidance clarifies the
requirement that public entities that have entered into a new
business combination during the year, present comparative
financial statements disclosing revenue and earnings of the
combined entity as though the business combination that occurred
during the current year had occurred as of the beginning of the
comparable prior annual reporting period
only. This guidance is effective for business combinations
entered into after January 1, 2011. We currently do not
expect this guidance to have a material impact on our financial
statements and disclosures.
Goodwill. In December 2010, the FASB issued
new accounting guidance for goodwill impairment testing. The new
accounting guidance states that for reporting units with zero or
negative carrying amounts the reporting unit should perform Step
2 of a goodwill impairment after considering the evidence of
adverse qualitative factors that an impairment may exist. This
guidance is effective for business combinations entered into
after January 1, 2011. We currently do not expect this
guidance to have a material impact on our financial statements
and disclosures.
|
|
ITEM 7A.
|
QUANTITATIVE
AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
|
Interest Rate Swap Agreement. We seek to
reduce earnings and cash flow volatility associated with changes
in interest rates through a financial arrangement intended to
provide a hedge against a portion of the risks associated with
such volatility. We continue to have exposure to such risks to
the extent they are not hedged.
Interest rate swap agreements are the only instruments we use to
manage interest rate fluctuations affecting our variable rate
debt. At December 31, 2010, we had five interest rate swap
agreements under which we pay a fixed rate and receive a
variable interest rate on a notional amount of
$125.0 million of debt. In 2010, comprehensive income
included $3.4 million, net of income tax expense of
$2.2 million, related to the fair value of our interest
rate swap agreements. We enter into derivative financial
arrangements only to the extent that the arrangement meets the
objectives described, and we do not engage in such transactions
for speculative purposes.
44
The following table sets forth the scheduled maturities and the
total fair value of our debt portfolio:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total at
|
|
|
Total Fair Value
|
|
|
|
At December 31,
|
|
|
December 31,
|
|
|
at December 31,
|
|
|
|
2011
|
|
|
2012
|
|
|
2013
|
|
|
2014
|
|
|
2015
|
|
|
Thereafter
|
|
|
2010
|
|
|
2010
|
|
|
|
(In thousands, except percentages)
|
|
|
Debt:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fixed rate
|
|
$
|
1,577
|
|
|
$
|
846
|
|
|
$
|
289
|
|
|
$
|
22,425
|
(2)
|
|
$
|
150,000
|
|
|
$
|
200,000
|
|
|
$
|
375,137
|
|
|
$
|
378,473
|
|
Average interest rate
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5.43
|
%
|
|
|
|
|
Floating rate(1)
|
|
$
|
|
|
|
$
|
|
|
|
$
|
396,882
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
396,882
|
|
|
$
|
396,882
|
|
Average interest rate
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2.18
|
%
|
|
|
|
|
Operating leases:
|
|
$
|
17,432
|
|
|
$
|
14,554
|
|
|
$
|
12,192
|
|
|
$
|
9,199
|
|
|
$
|
5,797
|
|
|
$
|
8,254
|
|
|
$
|
67,428
|
|
|
|
|
|
|
|
|
(1) |
|
Included in our floating rate line of credit facility are
$125.0 million of fixed-rate swap agreements with a
weighted average interest rate of 3.74% that matures in 2011. |
|
(2) |
|
The aggregate principal amount outstanding of the MSG Notes,
$22.3 million, was redeemed in January 2011. |
Impact of Foreign Currency Rate Changes. We
currently have branch operations outside the U.S. and we
bill those customers primarily in their local currency which is
subject to foreign currency rate changes. Our operations in
Canada are billed in the Canadian Dollar, operations in the U.K.
are billed in Pound Sterling and operations in The Netherlands
are billed in the Euro. We are exposed to foreign exchange rate
fluctuations as the financial results of our
non-U.S. operations
are translated into U.S. Dollars. The impact of foreign
currency rate changes has historically been insignificant with
our Canadian operations, but we have more exposure to volatility
with our European operations. In order to help minimize our
exchange rate gain and loss volatility, we finance our European
entities through our revolving line of credit which allows us,
at our option, to borrow funds locally in Pound Sterling
denominated debt.
45
|
|
ITEM 8.
|
FINANCIAL
STATEMENTS AND SUPPLEMENTARY DATA.
|
INDEX TO
CONSOLIDATED FINANCIAL STATEMENTS AND SCHEDULE
46
Report of
Independent Registered Public Accounting Firm
The Board of Directors and Stockholders of Mobile Mini, Inc.
We have audited the accompanying consolidated balance sheets of
Mobile Mini, Inc. as of December 31, 2010 and 2009, and the
related consolidated statements of income, preferred stock and
stockholders equity, and cash flows for each of the three
years in the period ended December 31, 2010. Our audits
also included the financial statement schedule listed in the
Index at Item 15(a). These financial statements and
schedule are the responsibility of the Companys
management. Our responsibility is to express an opinion on these
financial statements and schedule based on our audits.
We conducted our audits in accordance with the standards of the
Public Company Accounting Oversight Board (United States). Those
standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in
the financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by
management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above
present fairly, in all material respects, the consolidated
financial position of Mobile Mini, Inc. at December 31,
2010 and 2009, and the consolidated results of its operations
and its cash flows for each of the three years in the period
ended December 31, 2010, in conformity with
U.S. generally accepted accounting principles. Also, in our
opinion, the related financial statement schedule, when
considered in relation to the basic financial statements taken
as a whole, presents fairly in all material respects the
information set forth therein.
We also have audited, in accordance with the standards of the
Public Company Accounting Oversight Board (United States),
Mobile Mini, Inc.s internal control over financial
reporting as of December 31, 2010, based on criteria
established in Internal Control-Integrated Framework issued by
the Committee of Sponsoring Organizations of the Treadway
Commission and our report dated March 1, 2011 expressed an
unqualified opinion thereon.
Phoenix, Arizona
March 1, 2011
47
MOBILE
MINI, INC.
(In
thousands except par value data)
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
|
2009
|
|
|
2010
|
|
|
ASSETS
|
Cash
|
|
$
|
1,740
|
|
|
$
|
1,634
|
|
Receivables, net of allowance for doubtful accounts of $3,715
and $2,424 at December 31, 2009 and December 31, 2010,
respectively
|
|
|
40,867
|
|
|
|
42,678
|
|
Inventories
|
|
|
22,147
|
|
|
|
19,569
|
|
Lease fleet, net
|
|
|
1,055,328
|
|
|
|
1,028,403
|
|
Property, plant and equipment, net
|
|
|
84,160
|
|
|
|
80,731
|
|
Deposits and prepaid expenses
|
|
|
9,916
|
|
|
|
8,405
|
|
Other assets and intangibles, net
|
|
|
26,643
|
|
|
|
23,478
|
|
Goodwill
|
|
|
513,238
|
|
|
|
511,419
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
1,754,039
|
|
|
$
|
1,716,317
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS EQUITY
|
Liabilities:
|
|
|
|
|
|
|
|
|
Accounts payable
|
|
$
|
14,130
|
|
|
$
|
13,607
|
|
Accrued liabilities
|
|
|
64,915
|
|
|
|
49,276
|
|
Line of credit
|
|
|
473,655
|
|
|
|
396,882
|
|
Notes payable
|
|
|
1,128
|
|
|
|
289
|
|
Obligations under capital leases
|
|
|
4,061
|
|
|
|
2,576
|
|
Senior Notes, net of discount of $3,448 and $617 at
December 31, 2009 and December 31, 2010, respectively
|
|
|
345,402
|
|
|
|
371,655
|
|
Deferred income taxes
|
|
|
155,697
|
|
|
|
165,567
|
|
|
|
|
|
|
|
|
|
|
Total liabilities
|
|
|
1,058,988
|
|
|
|
999,852
|
|
|
|
|
|
|
|
|
|
|
Commitments and contingencies
|
|
|
|
|
|
|
|
|
Convertible preferred stock: $.01 par value,
20,000 shares authorized, 8,556 issued and 8,191
outstanding at December 31, 2009 and December 31,
2010, stated at liquidation preference values
|
|
|
147,427
|
|
|
|
147,427
|
|
Stockholders equity:
|
|
|
|
|
|
|
|
|
Common stock: $.01 par value, 95,000 shares authorized
38,451 issued and
36,276 outstanding at December 31, 2009 and 38,962 issued
and 36,787 outstanding at December 31, 2010
|
|
|
385
|
|
|
|
390
|
|
Additional paid-in capital
|
|
|
341,597
|
|
|
|
349,693
|
|
Retained earnings
|
|
|
270,733
|
|
|
|
284,242
|
|
Accumulated other comprehensive loss
|
|
|
(25,791
|
)
|
|
|
(25,987
|
)
|
Treasury stock, at cost, 2,175 shares
|
|
|
(39,300
|
)
|
|
|
(39,300
|
)
|
|
|
|
|
|
|
|
|
|
Total stockholders equity
|
|
|
547,624
|
|
|
|
569,038
|
|
|
|
|
|
|
|
|
|
|
Total liabilities and stockholders equity
|
|
$
|
1,754,039
|
|
|
$
|
1,716,317
|
|
|
|
|
|
|
|
|
|
|
See accompanying notes.
48
MOBILE
MINI, INC.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Years Ended December 31,
|
|
|
|
2008
|
|
|
2009
|
|
|
2010
|
|
|
|
(In thousands except per share data)
|
|
|
Revenues:
|
|
|
|
|
|
|
|
|
|
|
|
|
Leasing
|
|
$
|
371,560
|
|
|
$
|
333,521
|
|
|
$
|
295,034
|
|
Sales
|
|
|
41,267
|
|
|
|
38,605
|
|
|
|
33,156
|
|
Other
|
|
|
2,577
|
|
|
|
2,335
|
|
|
|
2,567
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenues
|
|
|
415,404
|
|
|
|
374,461
|
|
|
|
330,757
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Costs and expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of sales
|
|
|
28,044
|
|
|
|
25,795
|
|
|
|
21,997
|
|
Leasing, selling and general expenses
|
|
|
212,335
|
|
|
|
192,861
|
|
|
|
179,121
|
|
Integration, merger and restructuring expenses
|
|
|
24,427
|
|
|
|
11,305
|
|
|
|
4,014
|
|
Goodwill impairment
|
|
|
13,667
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization
|
|
|
31,767
|
|
|
|
39,082
|
|
|
|
35,686
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total costs and expenses
|
|
|
310,240
|
|
|
|
269,043
|
|
|
|
240,818
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from operations
|
|
|
105,164
|
|
|
|
105,418
|
|
|
|
89,939
|
|
Other income (expense):
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest income
|
|
|
135
|
|
|
|
29
|
|
|
|
1
|
|
Interest expense
|
|
|
(48,146
|
)
|
|
|
(59,504
|
)
|
|
|
(56,430
|
)
|
Debt restructuring expense
|
|
|
|
|
|
|
|
|
|
|
(11,024
|
)
|
Deferred financing costs write-off
|
|
|
|
|
|
|
|
|
|
|
(525
|
)
|
Foreign currency exchange loss
|
|
|
(112
|
)
|
|
|
(88
|
)
|
|
|
(9
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before provision for income taxes
|
|
|
57,041
|
|
|
|
45,855
|
|
|
|
21,952
|
|
Provision for income taxes
|
|
|
28,000
|
|
|
|
18,057
|
|
|
|
8,443
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
|
29,041
|
|
|
|
27,798
|
|
|
|
13,509
|
|
Earnings allocable to preferred stockholders
|
|
|
(2,739
|
)
|
|
|
(5,431
|
)
|
|
|
(2,550
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income available to common stockholders
|
|
$
|
26,302
|
|
|
$
|
22,367
|
|
|
$
|
10,959
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
0.77
|
|
|
$
|
0.65
|
|
|
$
|
0.31
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted
|
|
$
|
0.75
|
|
|
$
|
0.64
|
|
|
$
|
0.31
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average number of common and common share equivalents
outstanding:
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
34,155
|
|
|
|
34,597
|
|
|
|
35,196
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted
|
|
|
38,875
|
|
|
|
43,252
|
|
|
|
43,829
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See accompanying notes.
49
MOBILE
MINI, INC.
For
the years ended December 31, 2008, 2009 and
2010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Preferred Stock
|
|
|
Stockholders Equity
|
|
|
|
|
|
|
Series A
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated
|
|
|
|
|
|
|
|
|
|
|
|
|
Convertible
|
|
|
Shares of
|
|
|
|
|
|
Additional
|
|
|
|
|
|
Other
|
|
|
|
|
|
|
|
|
|
|
|
|
Preferred Stock
|
|
|
Common
|
|
|
Common
|
|
|
Paid-In
|
|
|
Retained
|
|
|
Comprehensive
|
|
|
Treasury
|
|
|
Stockholders
|
|
|
|
|
|
|
Shares
|
|
|
Amount
|
|
|
Stock
|
|
|
Stock
|
|
|
Capital
|
|
|
Earnings
|
|
|
Income (Loss)
|
|
|
Stock
|
|
|
Equity
|
|
|
|
|
|
|
(In thousands)
|
|
|
Balance, December 31, 2007
|
|
|
|
|
|
$
|
|
|
|
|
34,573
|
|
|
$
|
367
|
|
|
$
|
278,593
|
|
|
$
|
213,894
|
|
|
$
|
4,336
|
|
|
$
|
(39,300
|
)
|
|
$
|
457,890
|
|
|
|
|
|
Net income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
29,041
|
|
|
|
|
|
|
|
|
|
|
|
29,041
|
|
|
|
|
|
Fair value change in derivatives, (net of income tax benefit of
$3,982)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(6,299
|
)
|
|
|
|
|
|
|
(6,299
|
)
|
|
|
|
|
Foreign currency translation, (net of income tax benefit of
$1,351)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(35,515
|
)
|
|
|
|
|
|
|
(35,515
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive loss
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(12,773
|
)
|
|
|
|
|
Exercise of stock options
|
|
|
|
|
|
|
|
|
|
|
134
|
|
|
|
2
|
|
|
|
1,470
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,472
|
|
|
|
|
|
Tax benefit shortfall on stock option exercises
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(407
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(407
|
)
|
|
|
|
|
Issuance of Series A Convertible Preferred Stock related to
MSG Merger (net of registration and issuance costs of $85)
|
|
|
8,556
|
|
|
|
153,990
|
|
|
|
|
|
|
|
|
|
|
|
42,525
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
42,525
|
|
|
|
|
|
Restricted stock grants
|
|
|
|
|
|
|
|
|
|
|
607
|
|
|
|
6
|
|
|
|
(6
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Share-based compensation
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6,521
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6,521
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, December 31, 2008
|
|
|
8,556
|
|
|
|
153,990
|
|
|
|
35,314
|
|
|
|
375
|
|
|
|
328,696
|
|
|
|
242,935
|
|
|
|
(37,478
|
)
|
|
|
(39,300
|
)
|
|
|
495,228
|
|
|
|
|
|
Net income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
27,798
|
|
|
|
|
|
|
|
|
|
|
|
27,798
|
|
|
|
|
|
Fair value change in derivatives, (net of income tax expense
of ($1,493))
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,335
|
|
|
|
|
|
|
|
2,335
|
|
|
|
|
|
Foreign currency translation, (net of income tax expense
of ($926))
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
9,352
|
|
|
|
|
|
|
|
9,352
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
39,485
|
|
|
|
|
|
Exercise of stock options
|
|
|
|
|
|
|
|
|
|
|
77
|
|
|
|
1
|
|
|
|
799
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
800
|
|
|
|
|
|
Tax benefit shortfall on stock option exercises
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(542
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(542
|
)
|
|
|
|
|
Preferred stock converted to common stock
|
|
|
(365
|
)
|
|
|
(6,563
|
)
|
|
|
365
|
|
|
|
4
|
|
|
|
6,559
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6,563
|
|
|
|
|
|
Restricted stock grants
|
|
|
|
|
|
|
|
|
|
|
520
|
|
|
|
5
|
|
|
|
(5
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Share-based compensation
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6,090
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6,090
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, December 31, 2009
|
|
|
8,191
|
|
|
|
147,427
|
|
|
|
36,276
|
|
|
|
385
|
|
|
|
341,597
|
|
|
|
270,733
|
|
|
|
(25,791
|
)
|
|
|
(39,300
|
)
|
|
|
547,624
|
|
|
|
|
|
Net income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
13,509
|
|
|
|
|
|
|
|
|
|
|
|
13,509
|
|
|
|
|
|
Fair value change in derivatives, (net of income tax expense
of ($2,162))
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,417
|
|
|
|
|
|
|
|
3,417
|
|
|
|
|
|
Foreign currency translation, (net of income tax expense of
($126))
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(3,613
|
)
|
|
|
|
|
|
|
(3,613
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
13,313
|
|
|
|
|
|
Exercise of stock options
|
|
|
|
|
|
|
|
|
|
|
160
|
|
|
|
1
|
|
|
|
1,860
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,861
|
|
|
|
|
|
Tax benefit shortfall on stock option exercises
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(201
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(201
|
)
|
|
|
|
|
Restricted stock grants
|
|
|
|
|
|
|
|
|
|
|
351
|
|
|
|
4
|
|
|
|
(4
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Share-based compensation
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6,441
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6,441
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, December 31, 2010
|
|
|
8,191
|
|
|
$
|
147,427
|
|
|
|
36,787
|
|
|
$
|
390
|
|
|
$
|
349,693
|
|
|
$
|
284,242
|
|
|
$
|
(25,987
|
)
|
|
$
|
(39,300
|
)
|
|
$
|
569,038
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See accompanying notes.
50
MOBILE
MINI, INC.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Years Ended December 31,
|
|
|
|
2008
|
|
|
2009
|
|
|
2010
|
|
|
|
(In thousands)
|
|
|
Cash Flows From Operating Activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
29,041
|
|
|
$
|
27,798
|
|
|
$
|
13,509
|
|
Adjustments to reconcile net income to net cash provided by
operating activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Debt restructuring expense
|
|
|
|
|
|
|
|
|
|
|
11,024
|
|
Deferred financing costs write-off
|
|
|
|
|
|
|
|
|
|
|
525
|
|
Provision for doubtful accounts
|
|
|
5,261
|
|
|
|
2,701
|
|
|
|
1,892
|
|
Provision for restructuring charge
|
|
|
5,626
|
|
|
|
|
|
|
|
|
|
Goodwill impairment
|
|
|
13,667
|
|
|
|
|
|
|
|
|
|
Amortization of deferred financing costs
|
|
|
2,455
|
|
|
|
4,456
|
|
|
|
4,366
|
|
Amortization of long-term liabilities
|
|
|
418
|
|
|
|
906
|
|
|
|
1,034
|
|
Share-based compensation expense
|
|
|
5,656
|
|
|
|
5,782
|
|
|
|
6,292
|
|
Depreciation and amortization
|
|
|
31,767
|
|
|
|
39,082
|
|
|
|
35,686
|
|
Gain on sale of lease fleet units
|
|
|
(9,849
|
)
|
|
|
(11,661
|
)
|
|
|
(10,045
|
)
|
Loss on disposal of property, plant and equipment
|
|
|
567
|
|
|
|
52
|
|
|
|
34
|
|
Deferred income taxes
|
|
|
27,923
|
|
|
|
17,201
|
|
|
|
7,736
|
|
Foreign currency loss
|
|
|
112
|
|
|
|
88
|
|
|
|
9
|
|
Changes in certain assets and liabilities, net of effect of
businesses
acquired:
|
|
|
|
|
|
|
|
|
|
|
|
|
Receivables
|
|
|
(3,060
|
)
|
|
|
18,626
|
|
|
|
(3,969
|
)
|
Inventories
|
|
|
7,655
|
|
|
|
3,691
|
|
|
|
2,506
|
|
Deposits and prepaid expenses
|
|
|
177
|
|
|
|
3,412
|
|
|
|
1,486
|
|
Other assets and intangibles
|
|
|
105
|
|
|
|
(845
|
)
|
|
|
(873
|
)
|
Accounts payable
|
|
|
(15,731
|
)
|
|
|
(6,293
|
)
|
|
|
(435
|
)
|
Accrued liabilities
|
|
|
(3,272
|
)
|
|
|
(18,226
|
)
|
|
|
(9,972
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by operating activities
|
|
|
98,518
|
|
|
|
86,770
|
|
|
|
60,805
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash Flows From Investing Activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash paid for businesses acquired
|
|
|
(33,250
|
)
|
|
|
|
|
|
|
|
|
Additions to lease fleet, excluding acquisitions
|
|
|
(76,622
|
)
|
|
|
(21,517
|
)
|
|
|
(15,103
|
)
|
Proceeds from sale of lease fleet units
|
|
|
28,338
|
|
|
|
33,495
|
|
|
|
28,860
|
|
Additions to property, plant and equipment
|
|
|
(16,874
|
)
|
|
|
(10,294
|
)
|
|
|
(8,555
|
)
|
Proceeds from sale of property, plant and equipment
|
|
|
495
|
|
|
|
1,252
|
|
|
|
149
|
|
Other
|
|
|
|
|
|
|
112
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash (used in) provided by investing activities
|
|
|
(97,913
|
)
|
|
|
3,048
|
|
|
|
5,351
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash Flows From Financing Activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Net borrowings (repayments) under lines of credit
|
|
|
120,341
|
|
|
|
(80,877
|
)
|
|
|
(76,773
|
)
|
Proceeds from issuance of 7.875% Senior Notes
|
|
|
|
|
|
|
|
|
|
|
200,000
|
|
Redemption of 9.75% Senior Notes
|
|
|
|
|
|
|
(1,150
|
)
|
|
|
(176,578
|
)
|
Senior Note redemption premiums
|
|
|
|
|
|
|
|
|
|
|
(8,955
|
)
|
Deferred financing costs
|
|
|
(15,166
|
)
|
|
|
(75
|
)
|
|
|
(4,964
|
)
|
Proceeds from issuance of notes payable
|
|
|
1,249
|
|
|
|
1,272
|
|
|
|
466
|
|
Principal payments on notes payable
|
|
|
(113,881
|
)
|
|
|
(1,533
|
)
|
|
|
(1,303
|
)
|
Principal payments on capital lease obligations
|
|
|
(704
|
)
|
|
|
(1,436
|
)
|
|
|
(1,485
|
)
|
Issuance of common stock, net
|
|
|
1,472
|
|
|
|
800
|
|
|
|
1,861
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash used in financing activities
|
|
|
(6,689
|
)
|
|
|
(82,999
|
)
|
|
|
(67,731
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effect of exchange rate changes on cash
|
|
|
5,565
|
|
|
|
(8,263
|
)
|
|
|
1,469
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net decrease in cash
|
|
|
(519
|
)
|
|
|
(1,444
|
)
|
|
|
(106
|
)
|
Cash at beginning of year
|
|
|
3,703
|
|
|
|
3,184
|
|
|
|
1,740
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash at end of year
|
|
$
|
3,184
|
|
|
$
|
1,740
|
|
|
$
|
1,634
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplemental Disclosure of Cash Flow Information:
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash paid during the year for interest
|
|
$
|
33,032
|
|
|
$
|
54,817
|
|
|
$
|
56,582
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash paid during the year for income and franchise taxes
|
|
$
|
667
|
|
|
$
|
1,055
|
|
|
$
|
823
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest rate swap changes in value charged (credited) to equity
|
|
$
|
6,299
|
|
|
$
|
(2,335
|
)
|
|
$
|
(3,417
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See accompanying notes.
51
MOBILE
MINI, INC.
|
|
(1)
|
Mobile
Mini, its Operations and Summary of Significant Accounting
Policies:
|
Organization
and Special Considerations
Mobile Mini, Inc., a Delaware corporation, is a leading provider
of portable storage solutions. In these notes, the terms
Mobile Mini and the Company, refers to
Mobile Mini, Inc. At December 31, 2010, Mobile Mini has a
fleet of portable storage and office units, and operates
throughout the U.S., in Canada, the U.K. and The Netherlands.
The Companys portable storage products offer secure,
temporary storage with immediate access. The Company has a
diversified customer base, including large and small retailers,
construction companies, medical centers, schools, utilities,
distributors, the military, hotels, restaurants, entertainment
complexes and households. The Companys customers use its
products for a wide variety of applications, including the
storage of retail and manufacturing inventory, construction
materials and equipment, documents and records and other goods.
On June 27, 2008, we acquired Mobile Storage Group, Inc.
(MSG) and the discussion in this Annual Report of the
Companys business includes the results of its combined
operations with MSG since June 27, 2008.
Principles
of Consolidation
The consolidated financial statements include the accounts of
Mobile Mini, Inc. and its wholly owned subsidiaries. The Company
does not have any subsidiaries in which it does not own 100% of
the outstanding stock. All significant intercompany balances and
transactions have been eliminated.
Revenue
Recognition
Lease and leasing ancillary revenues and related expenses
generated under portable storage and mobile office units are
recognized on a straight-line basis. Delivery and hauling
revenues and expenses from portable storage and mobile office
units are recognized when these services are earned. The Company
recognizes revenues from sales of containers and mobile office
units upon delivery when the risk of loss passes, the price is
fixed and determinable and collectability is reasonably assured.
The Company sells its products pursuant to sales contracts
stating the fixed sales price with its customers.
Cost
of Sales
Cost of sales in the Companys consolidated statements of
income includes only the costs for units it sells. Similar costs
associated with the portable storage units that it leases are
capitalized on its balance sheet under Lease fleet.
Advertising
Costs
All non direct-response advertising costs are expensed as
incurred. Direct-response advertising costs, principally yellow
page advertising, are capitalized when paid and amortized over
the period in which the benefit is derived. At December 31,
2009 and 2010, prepaid advertising costs were approximately
$2.3 million and $1.3 million, respectively. The
amortization period of the prepaid balance never exceeds
12 months. The direct-response advertising costs are
monitored through the Companys CRM system and the
marketing department. Advertising expense was $12.5 million
and $11.4 million and $9.3 million in 2008, 2009 and
2010, respectively.
Receivables
and Allowance for Doubtful Accounts
Receivables primarily consist of amounts due from customers from
the lease or sale of containers throughout the U.S., Canada, the
U.K. and The Netherlands. Mobile Mini records an estimated
provision for bad debts through a charge to operations in
amounts of its estimated losses expected to be incurred in the
collection of these accounts. The Company reviews the provision
for adequacy monthly. The estimated losses are based on
historical collection experience and evaluation of past-due
account agings. Specific accounts are written off against the
allowance when
52
MOBILE
MINI, INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
management determines the account is uncollectible. The Company
requires a security deposit on most leased office units to cover
the cost of damages or unpaid balances, if any.
Concentration
of Credit Risk
Financial instruments which potentially expose the Company to
concentrations of credit risk consist primarily of receivables.
Concentration of credit risk with respect to receivables is
limited due to the Companys large number of customers
spread over a broad geographic area in many industry segments.
No single customer accounts for more than 10.0% of our
receivables at December 31, 2009 and December 31,
20010. Receivables related to its sales operations are generally
secured by the product sold to the customer. Receivables related
to its leasing operations are primarily small
month-to-month
amounts. The Company has the right to repossess leased portable
storage units, including any customer goods contained in the
unit, following non-payment of rent.
Inventories
Inventories are valued at the lower of cost (principally on a
standard cost basis which approximates the
first-in,
first-out (FIFO) method) or market. Market is the lower of
replacement cost or net realizable value. Inventories primarily
consist of raw materials, supplies,
work-in-process
and finished goods, all related to the manufacturing,
remanufacturing and maintenance, primarily for the
Companys lease fleet and its units held for sale. Raw
materials principally consist of raw steel, wood, glass, paint,
vinyl and other assembly components used in manufacturing and
remanufacturing processes.
Work-in-process
primarily represents units being built that are either pre-sold
or being built to add to its lease fleet upon completion.
Finished portable storage units primarily represent ISO
(International Organization for Standardization) containers held
in inventory until the containers are either sold as is,
remanufactured and sold, or units in the process of being
remanufactured to be compliant with the Companys lease
fleet standards before transferring the units to its lease
fleet. There is no certainty when the Company purchases the
containers whether they will ultimately be sold, remanufactured
and sold, or remanufactured and moved into its lease fleet.
Units that are determined to go into the Companys lease
fleet undergo an extensive remanufacturing process that includes
installing its proprietary locking system, signage, painting and
sometimes its proprietary security doors.
Inventories at December 31, consist of the following:
|
|
|
|
|
|
|
|
|
|
|
2009
|
|
|
2010
|
|
|
|
(In thousands)
|
|
|
Raw materials and supplies
|
|
$
|
15,750
|
|
|
$
|
14,934
|
|
Work-in-process
|
|
|
589
|
|
|
|
197
|
|
Finished portable storage units
|
|
|
5,808
|
|
|
|
4,438
|
|
|
|
|
|
|
|
|
|
|
Inventories
|
|
$
|
22,147
|
|
|
$
|
19,569
|
|
|
|
|
|
|
|
|
|
|
Property,
Plant and Equipment
Property, plant and equipment are stated at cost, net of
accumulated depreciation. Depreciation is provided using the
straight-line method over the assets estimated useful
lives. Residual values are determined when the property is
constructed or acquired and range up to 25%, depending on the
nature of the asset. In the opinion of management, estimated
residual values do not cause carrying values to exceed net
realizable value. The Companys depreciation expense
related to property, plant and equipment for 2008, 2009 and 2010
was $9.4 million, $12.1 million and
$11.3 million, respectively. Normal repairs and maintenance
to property, plant and equipment are expensed as incurred. When
property or equipment is retired or sold, the net book value of
the asset, reduced by any proceeds, is charged to gain or loss
on the retirement of fixed assets and is included in leasing,
selling and general expenses in the Consolidated Statements of
Income.
53
MOBILE
MINI, INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Property, plant and equipment at December 31, consist of
the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Estimated
|
|
|
|
|
|
|
|
|
|
Useful Life in
|
|
|
|
|
|
|
|
|
|
Years
|
|
|
2009
|
|
|
2010
|
|
|
|
(In thousands)
|
|
|
Land
|
|
|
|
|
|
$
|
11,129
|
|
|
$
|
11,081
|
|
Vehicles and machinery
|
|
|
5 to 20
|
|
|
|
76,037
|
|
|
|
80,594
|
|
Buildings and improvements(1)
|
|
|
30
|
|
|
|
15,012
|
|
|
|
15,832
|
|
Office fixtures and equipment
|
|
|
5
|
|
|
|
26,404
|
|
|
|
27,368
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
128,582
|
|
|
|
134,875
|
|
Less accumulated depreciation
|
|
|
|
|
|
|
(44,422
|
)
|
|
|
(54,144
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Property, plant and equipment, net
|
|
|
|
|
|
$
|
84,160
|
|
|
$
|
80,731
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Improvements made to leased properties are depreciated over the
lesser of the estimated remaining life or the remaining term of
the respective lease. |
Other
Assets and Intangibles
Other assets and intangibles primarily represent deferred
financing costs and intangible assets from acquisitions of
$44.8 million at December 31, 2009 and
$49.2 million at December 31, 2010, excluding
accumulated amortization of $18.2 million at
December 31, 2009 and $25.7 million at
December 31, 2010. Deferred financing costs are amortized
over the term of the agreement, and intangible assets are
amortized on a straight-line basis, typically from five to
20 years, depending on its useful life. Intrinsic values
assigned to customer relationships and trade names are amortized
on an accelerated basis, typically over 15 years.
The following table reflects balances related to other assets
and intangible assets for the years ended December 31:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2009
|
|
|
2010
|
|
|
|
Gross
|
|
|
|
|
|
Net
|
|
|
Gross
|
|
|
|
|
|
|
|
|
|
Carrying
|
|
|
Accumulated
|
|
|
Carrying
|
|
|
Carrying
|
|
|
Accumulated
|
|
|
Net Carrying
|
|
|
|
Amount
|
|
|
Amortization
|
|
|
Amount
|
|
|
Amount
|
|
|
Amortization
|
|
|
Amount
|
|
|
|
(In thousands)
|
|
|
Deferred financing costs
|
|
$
|
21,831
|
|
|
$
|
(7,977
|
)
|
|
$
|
13,854
|
|
|
$
|
26,269
|
|
|
$
|
(11,670
|
)
|
|
$
|
14,599
|
|
Customer relationships
|
|
|
21,572
|
|
|
|
(9,266
|
)
|
|
|
12,306
|
|
|
|
21,313
|
|
|
|
(12,848
|
)
|
|
|
8,465
|
|
Trade names/trademarks
|
|
|
943
|
|
|
|
(750
|
)
|
|
|
193
|
|
|
|
926
|
|
|
|
(914
|
)
|
|
|
12
|
|
Non-compete agreements
|
|
|
273
|
|
|
|
(123
|
)
|
|
|
150
|
|
|
|
250
|
|
|
|
(153
|
)
|
|
|
97
|
|
Patents and other
|
|
|
218
|
|
|
|
(78
|
)
|
|
|
140
|
|
|
|
414
|
|
|
|
(109
|
)
|
|
|
305
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
44,837
|
|
|
$
|
(18,194
|
)
|
|
$
|
26,643
|
|
|
$
|
49,172
|
|
|
$
|
(25,694
|
)
|
|
$
|
23,478
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortization expense for deferred financing costs was
approximately $2.5 million, $3.7 million and
$3.7 million in 2008, 2009 and 2010, respectively. The
annual amortization of deferred financing costs is expected to
be $4.1 million in 2011, $4.1 million in 2012,
$2.5 million in 2013, $0.9 million in 2014 and
$3.0 million thereafter.
Amortization expense for all other intangibles was approximately
$3.7 million, $5.6 million and $4.0 million in
2008, 2009 and 2010, respectively. Based on the carrying value
at December 31, 2010, and assuming no
54
MOBILE
MINI, INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
subsequent impairment of the underlying assets, the annual
amortization expense is expected to be $2.9 million in
2011, $2.1 million in 2012, $1.5 million in 2013,
$1.0 million in 2014 and $1.4 million thereafter.
Income
Taxes
Mobile Mini utilizes the liability method of accounting for
income taxes where deferred taxes are determined based on the
difference between the financial statement and tax basis of
assets and liabilities using enacted tax rates in effect in the
years in which the differences are expected to reverse.
Valuation allowances are established, when necessary, to reduce
deferred tax assets to the amount expected to be realized.
Income tax expense includes both taxes payable for the period
and the change during the period in deferred tax assets and
liabilities.
Earnings
per Share
The Companys preferred stock participates in distributions
of earnings on the same basis as shares of common stock.
Earnings for the period are allocated between the common and
preferred shareholders based on their respective rights to
receive dividends. Basic net income per share is then calculated
by dividing income allocable to common stockholders by the
weighted-average number of common shares outstanding, net of
shares subject to repurchase by the Company, during the period.
The Company is not required to present basic and diluted net
income (loss) per share for securities other than common stock;
therefore, the following net income per share amounts only
pertain to the Companys common stock. The Company
calculates diluted net income per share under the if-converted
method unless the conversion of the preferred stock is
anti-dilutive to basic net income per share. To the extent the
inclusion of preferred stock is anti-dilutive, the Company
calculates diluted net income per share under the two-class
method. Potential common shares include restricted common stock
and incremental shares of common stock issuable upon the
exercise of stock options and vesting of nonvested stock awards
and convertible preferred stock using the treasury stock method.
55
MOBILE
MINI, INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
The following table is a reconciliation of net income and
weighted-average shares of common stock outstanding for purposes
of calculating basic and diluted earnings per share for the
years ended December 31:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2008
|
|
|
2009
|
|
|
2010
|
|
|
|
(In thousands except earnings per share)
|
|
|
Historical net income per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
Numerator:
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
29,041
|
|
|
$
|
27,798
|
|
|
$
|
13,509
|
|
Less: Earnings allocable to preferred stock
|
|
|
(2,739
|
)
|
|
|
(5,431
|
)
|
|
|
(2,550
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income available to common stockholders
|
|
$
|
26,302
|
|
|
$
|
22,367
|
|
|
$
|
10,959
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic EPS Denominator:
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock outstanding beginning of period
|
|
|
34,041
|
|
|
|
34,324
|
|
|
|
35,063
|
|
Effect of weighted shares:
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted shared issued during the period ended December 31,
|
|
|
114
|
|
|
|
273
|
|
|
|
133
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Denominator for basic net income per share
|
|
|
34,155
|
|
|
|
34,597
|
|
|
|
35,196
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted EPS Denominator:
|
|
|
|
|
|
|
|
|
|
|
|
|
Common shares outstanding, beginning of year
|
|
|
34,041
|
|
|
|
34,324
|
|
|
|
35,063
|
|
Effect of weighting shares:
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted common shares issued during the period ended
December 31,
|
|
|
114
|
|
|
|
273
|
|
|
|
133
|
|
Dilutive effect of stock options and nonvested share-awards
during the period ended December 31,
|
|
|
372
|
|
|
|
257
|
|
|
|
442
|
|
Dilutive effect of convertible preferred stock assumed converted
during the period ended December 31,
|
|
|
4,348
|
|
|
|
8,398
|
|
|
|
8,191
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Denominator for diluted net income per share
|
|
|
38,875
|
|
|
|
43,252
|
|
|
|
43,829
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic net income per share
|
|
$
|
0.77
|
|
|
$
|
0.65
|
|
|
$
|
0.31
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted net income per share
|
|
$
|
0.75
|
|
|
$
|
0.64
|
|
|
$
|
0.31
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic weighted average number of common shares outstanding in
2008, 2009 and 2010 does not include 1.0 million,
1.2 million and 1.6 million, respectively, of
share-awards, because the stock had not yet vested.
The following table represents the number of stock options and
nonvested share-awards that were issued or outstanding but
excluded in calculating diluted earnings per share because their
effect would have been anti-dilutive for the years ended
December 31:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2008
|
|
|
2009
|
|
|
2010
|
|
|
|
(In thousands)
|
|
|
Share options
|
|
|
565
|
|
|
|
1,407
|
|
|
|
1,227
|
|
Nonvested share-awards
|
|
|
275
|
|
|
|
794
|
|
|
|
306
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
840
|
|
|
|
2,201
|
|
|
|
1,533
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
56
MOBILE
MINI, INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Long
Lived Assets
Mobile Mini reviews long-lived assets for impairment whenever
events or changes in circumstances indicate the carrying amount
of such assets may not be fully recoverable. If this review
indicates the carrying value of these assets will not be
recoverable, as measured based on estimated undiscounted cash
flows over their remaining life, the carrying amount would be
adjusted to fair value. The cash flow estimates contain
managements best estimates, using appropriate and
customary assumptions and projections at the time. The Company
did not recognize any impairment losses in the years ended
December 31, 2009 and 2010.
Goodwill
Purchase prices of acquired businesses have been allocated to
the assets and liabilities acquired based on the estimated fair
values on the respective acquisition dates. Based on these
values, the excess purchase prices over the fair value of the
net assets acquired were allocated to goodwill. Acquisitions of
businesses under asset purchase agreements results in the
goodwill relating to business acquisition being deductible for
income tax purposes over 15 years even though goodwill is
not amortized for financial reporting purposes. The Company did
not have any acquisitions through mergers, asset purchase or
stock purchase agreements either in 2009 or 2010.
The Company evaluates goodwill periodically to determine whether
events or circumstances have occurred that would indicate
goodwill might be impaired. The Company originally had assigned
its goodwill to each of its three reporting units (North
America, the U.K. and The Netherlands). At December 31,
2010, only North America and the U.K. have goodwill subject to
impairment testing. The Company performs an annual impairment
test on goodwill at December 31 using the two-step process. The
first step is a screen for potential impairment, while the
second step measures the amount of the impairment, if any. In
addition, the Company will perform impairment tests during any
reporting period in which events or changes in circumstances
indicate that an impairment may have incurred. At
December 31, 2010, the Company performed the first step of
the two-step impairment test and compared the fair value of each
reporting unit to its carrying value. In assessing the fair
value of the reporting units, the Company considered both the
market and income approaches. Under the market approach, the
fair value of the reporting unit is based on quoted market
prices of companies comparable to the reporting unit being
valued. Under the income approach, the fair value of the
reporting unit is based on the present value of estimated cash
flows. The income approach is dependent on a number of
significant management assumptions, including estimated future
revenue growth rates, gross margins on sales, operating margins,
capital expenditure, tax payments and discount rates. Each
approach was given equal weight in arriving at the fair value of
the reporting unit. As of December 31, 2010, neither of the
Companys two remaining reporting units with goodwill had
estimated fair values less than the reporting units
individual net asset carrying values, therefore, step two of the
impairment test was not required at December 31, 2010.
If step two of the impairment test is necessary, the Company is
required to determine the implied fair value of the goodwill and
compare it to the carrying value of the goodwill. The Company
would allocate the fair value of the reporting units to the
respective assets and liabilities of each reporting unit as if
the reporting units had been acquired in separate and individual
business combinations and the fair value of the reporting units
was the price paid to acquire the reporting units. The excess of
the fair value of the reporting units over the amounts assigned
to their respective assets and liabilities is the implied fair
value of goodwill. The Company reconciled the fair values of its
two reporting units in the aggregate to its market
capitalization at December 31, 2010. At December 31,
2010, $447.3 million of the goodwill relates to the North
America reporting unit, and $64.1 million relates to the
U.K. reporting unit. The fair value of the North America and
U.K. reporting units exceeded the carrying value at
December 31, 2010 by 41% and 18%, respectively.
57
MOBILE
MINI, INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
The following table shows the activity and balances related to
goodwill from January 1, 2009 to December 31, 2010:
|
|
|
|
|
|
|
Goodwill
|
|
|
|
(In thousands)
|
|
|
Balance at January 1, 2009(1)
|
|
$
|
492,657
|
|
Adjustments(2)
|
|
|
14,735
|
|
Foreign currency(3)
|
|
|
5,846
|
|
|
|
|
|
|
Balance at December 31, 2009(1)
|
|
|
513,238
|
|
Foreign currency(3)
|
|
|
(1,819
|
)
|
|
|
|
|
|
Balance at December 31, 2010(1)
|
|
$
|
511,419
|
|
|
|
|
|
|
|
|
|
(1) |
|
Includes accumulated amortization of $2.0 million and
accumulated impairment of $13.7 million. |
|
(2) |
|
Represents purchase price allocation adjustments related to the
North America and U.K. reporting units. |
|
(3) |
|
Represents foreign currency translation adjustments related to
the U.K. reporting unit. |
Fair
Value of Financial Instruments
The Company determines the estimated fair value of financial
instruments using available market information and valuation
methodologies. Considerable judgment is required in estimating
fair values. Accordingly, the estimates may not be indicative of
the amounts it could realize in a current market exchange.
The carrying amounts of cash, receivables, accounts payable and
accrued liabilities approximate fair values based on the
liquidity of these financial instruments or based on their
short-term nature. The carrying amounts of the Companys
borrowings under its credit facility and notes payable
approximate fair value. The fair values of the Companys
notes payable and credit facility are estimated using discounted
cash flow analyses, based on its current incremental borrowing
rates for similar types of borrowing arrangements. Based on the
borrowing rates currently available to the Company for bank
loans with similar terms and average maturities, the fair value
of fixed rate notes payable at December 31, 2009 and 2010,
approximated their respective book values. The fair value of the
Companys $150.0 million aggregate principal amount of
6.875% senior notes due 2015 (the 2015 Notes), its
$200.0 million aggregate principal amount of
7.875% senior notes due 2020 (the 2020 Notes, and together
with the 2015 Notes, the Mobile Mini Notes) and its
$200.0 million aggregate principal amount of
9.750% senior notes originally issued by MSG due 2014 (the
MSG Notes and together with the Mobile Mini Notes, the Senior
Notes), is based on the latest sales price of the notes at the
end of each period obtained from a third-party institution.
The carrying value and the fair value of the Companys
Senior Notes are as follows:
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
December 31,
|
|
|
|
2009
|
|
|
2010
|
|
|
|
(In thousands)
|
|
|
Carrying value
|
|
$
|
345,402
|
|
|
$
|
371,655
|
|
|
|
|
|
|
|
|
|
|
Fair value
|
|
$
|
348,500
|
|
|
$
|
375,608
|
|
|
|
|
|
|
|
|
|
|
Deferred
Financing Costs
Included in other assets and intangibles are deferred financing
costs of approximately $13.9 million and
$14.6 million, net of accumulated amortization of
$8.0 million and $11.7 million, at December 31,
2009 and 2010, respectively. Costs of obtaining long-term
financing, including the Companys amended credit facility,
are amortized over the term of the related debt, using the
straight-line method. Amortizing the deferred financing costs
using the straight-line method approximates the effective
interest method.
58
MOBILE
MINI, INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Derivatives
In the normal course of business, the Companys operations
are exposed to fluctuations in interest rates. The Company
addresses a portion of these risks through a controlled program
of risk management that includes the use of derivative financial
instruments. The objective of controlling these risks is to
limit the impact of fluctuations in interest rates on earnings.
The Companys primary interest rate risk exposure results
from changes in short-term U.S. dollar interest rates. In
an effort to manage interest rate exposures, the Company may
enter into interest rate swap agreements, which convert its
floating rate debt to a fixed-rate and which it designates as
cash flow hedges. Interest expense on the notional amounts under
these agreements is accrued using the fixed rates identified in
the swap agreements.
Mobile Mini had interest rate swap agreements totaling with an
aggregate notional amount of $200 million and
$125 million at December 31, 2009 and
December 31, 2010, respectively. The fixed interest rate on
the Companys five swap agreements at December 31,
2010 range from 3.25% to 3.87% plus the spread. The swap
agreements mature in 2011.
The following tables summarize information related to the
Companys derivatives. All of the Companys
derivatives are designated as effective hedging instruments in
cash flow hedging relationships.
|
|
|
|
|
|
|
|
|
Interest Rate Swap Agreements
|
|
|
Balance Sheet Location
|
|
Fair Value
|
|
|
|
|
(In thousands)
|
|
December 31, 2009
|
|
|
Accrued liabilities
|
|
|
$
|
(7,703
|
)
|
December 31, 2010
|
|
|
Accrued liabilities
|
|
|
$
|
(2,124
|
)
|
|
|
|
|
|
Interest Rate Swap Agreements
|
|
|
Amount of Gain
|
|
|
Recognized in
|
|
|
Other
|
|
|
Comprehensive
|
|
|
Income on
|
|
|
Derivatives
|
|
|
(In thousands)
|
|
December 31, 2009 (net of income tax expense of $1,493)
|
|
$
|
2,335
|
|
December 31, 2010 (net of income tax expense of $2,162)
|
|
$
|
3,417
|
|
Share-Based
Compensation
At December 31, 2010, the Company had one active
share-based employee compensation plan. There are two expired
compensation plans, one of which still has outstanding options
subject to exercise or termination. No additional options can be
granted under the expired plans. Stock option awards under these
plans are granted with an exercise price per share equal to the
fair market value of the Companys common stock on the date
of grant. Each outstanding option must expire no more than
10 years from the date it was granted, unless exercised or
forfeited before the expiration date, and historically options
are granted with vesting over a 4.5 year period. The total
value of the Companys stock option awards is expensed over
the related employees service period on a straight-line
basis.
The Company uses the modified prospective method and does not
recognize a deferred tax asset for any excess tax benefit that
has not been realized related to stock-based compensation
deductions. The Company adopted the
with-and-without
approach with respect to the ordering of tax benefits realized.
In the
with-and-without
approach, the excess tax benefit related to stock-based
compensation deductions will be recognized in additional paid-in
capital only if an incremental tax benefit would be realized
after considering all other tax benefits presently available to
us. Therefore, the Companys net operating loss
carryforward will offset current taxable income prior to the
recognition of the tax benefit related to stock-based
compensation deductions. In 2008 and 2010 there were
$0.4 million and $2.4 million, respectively, of excess
tax benefits related to stock-based compensation, which were
59
MOBILE
MINI, INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
not realized under this approach. In 2009, no excess tax benefit
was generated, as instead a $1.3 million tax deduct
shortfall occurred, which was applied against previously
recognized benefits. Once the Companys net operating loss
carryforward is utilized, these excess tax benefits, totaling
$8.5 million, may be recognized in additional paid-in
capital.
Foreign
Currency Translation and Transactions
For Mobile Minis
non-U.S. operations,
the local currency is the functional currency. All assets and
liabilities are translated into U.S. dollars at period-end
exchange rates and all income statement amounts are translated
at the average exchange rate for each month within the year.
Use of
Estimates
The preparation of financial statements in conformity with
accounting principles generally accepted in the
U.S. requires management to make estimates and assumptions
that affect the amounts reported in the accompanying
consolidated financial statements and the notes to those
statements. Actual results could differ from those estimates.
The most significant estimates included within the financial
statements are the allowance for doubtful accounts, the
estimated useful lives and residual values on the lease fleet
and property, plant and equipment and goodwill and other asset
impairments.
Impact
of Recently Issued Accounting Standards
Transfers of Financial Assets. In June 2009,
the Financial Accounting Standards Board (FASB) issued guidance
that changes the information a reporting entity provides in its
financial statements about the transfer of financial assets and
continuing interests held in transferred financial assets. The
standard amends previous accounting guidance by removing the
concept of qualified special purpose entities. This accounting
standard is effective for the Company for transfers occurring on
or after January 1, 2010. The Company adopted this
accounting standard and it did not have a material effect on its
consolidated financial statements and related disclosures.
Fair Value Measurements. In January 2010, the
FASB issued guidance which requires new disclosures of
significant transfers in and out of Level 1 and
Level 2 fair value measurements. The guidance also requires
disclosure about the valuation techniques and inputs used to
measure fair value for both recurring and nonrecurring fair
value measurements for Level 2 and Level 3. The
Company adopted the provisions of this guidance on
January 1, 2010. The adoption of these provisions did not
have a material effect on the Companys consolidated
financial statements.
Business Combinations. In December 2010, the
FASB issued clarification on the accounting guidance for
business combinations. The new accounting guidance clarifies the
requirement that public entities that have entered into a new
business combination during the year, present comparative
financial statements disclosing revenue and earnings of the
combined entity as though the business combination that occurred
during the current year had occurred as of the beginning of the
comparable prior annual reporting period only. This guidance is
effective for business combinations entered into after
January 1, 2011. The Company currently does not expect this
guidance to have a material impact on its financial statements
and disclosures.
Goodwill. In December 2010, the FASB issued
new accounting guidance for goodwill impairment testing. The new
accounting guidance states that for reporting units with zero or
negative carrying amounts the reporting unit should perform Step
2 of a goodwill impairment after considering the evidence of
adverse qualitative factors that an impairment may exist. This
guidance is effective for business combinations entered into
after January 1, 2011. The Company currently does not
expect this guidance to have a material impact its financial
statements and disclosures.
60
MOBILE
MINI, INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
|
|
(2)
|
Fair
Value Measurements
|
The Company defines fair value as the price that would be
received from selling an asset or paid to transfer a liability
in an orderly transaction between market participants. Fair
value is a market-based measurement that should be determined
based on assumptions that market participants would use in
pricing an asset liability. As a basis for considering such
assumptions, the Company adopted the suggested accounting
guidance for the three levels of inputs that may be used to
measure fair value:
Level 1 Observable input such as quoted prices in active
markets for identical assets or liabilities;
Level 2 Observable inputs, other than Level 1 inputs
in active markets, that are observable either directly or
indirectly; and
Level 3 Unobservable inputs for which there is little or no
market data, which require the reporting entity to develop its
own assumptions.
Assets and liabilities measured at fair value on a recurring
basis are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quoted
|
|
|
|
|
|
|
|
|
|
|
Prices in
|
|
|
|
|
|
|
|
|
|
|
Active Markets for
|
|
Significant
|
|
Significant
|
|
|
|
|
|
|
Identical
|
|
Other Observable
|
|
Unobservable
|
|
|
|
|
|
|
Assets
|
|
Inputs
|
|
Inputs
|
|
Valuation
|
Interest Swap Agreements
|
|
Fair Value
|
|
(Level 1)
|
|
(Level 2)
|
|
(Level 3)
|
|
Technique
|
|
|
(In thousands)
|
|
December 31, 2009
|
|
$
|
(7,703
|
)
|
|
$
|
|
|
|
$
|
(7,703
|
)
|
|
$
|
|
|
|
|
(1
|
)
|
December 31, 2010
|
|
$
|
(2,124
|
)
|
|
$
|
|
|
|
$
|
(2,124
|
)
|
|
$
|
|
|
|
|
(1
|
)
|
|
|
|
(1) |
|
The Companys interest rate swap agreements are not traded
on a market exchange; therefore, the fair values are determined
using valuation models which include assumptions about the LIBOR
yield curve at the reporting dates as well as counterparty
credit risk and the Companys own non-performance risk. The
Company has consistently applied these calculation techniques to
all periods presented. At December 31, 2009 and 2010, the
fair value of interest rate swap agreements is recorded in
accrued liabilities in the Companys Consolidated Balance
Sheets. |
Mobile Minis lease fleet primarily consists of
remanufactured, modified and manufactured portable storage and
office units that are leased to customers under short-term
operating lease agreements with varying terms. Depreciation is
provided using the straight-line method over the units
estimated useful life, after the date the Company put the unit
in service, and are depreciated down to their estimated residual
values. The Companys depreciation policy on its steel
units uses an estimated useful life of 30 years with an
estimated residual value of 55%. Wood mobile office units are
depreciated over 20 years down to a 50% residual value. Van
trailers, which are a small part of the Companys fleet,
are depreciated over 7 years to a 20% residual value. Van
trailers and other non-core assets are only added to the fleet
in connection with acquisitions of portable storage businesses.
In the opinion of management, estimated residual values do not
cause carrying values to exceed net realizable value. The
Company continues to evaluate these depreciation policies as
more information becomes available from other comparable sources
and its own historical experience. The Companys
depreciation expense related to lease fleet for 2008, 2009 and
2010 was $18.9 million, $21.4 million and
$20.8 million, respectively. At December 31, 2009
61
MOBILE
MINI, INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
and 2010, all of the Companys lease fleet units were
pledged as collateral under the credit facility (see
Note 4). Normal repairs and maintenance to the portable
storage and mobile office units are expensed as incurred.
Lease fleet at December 31, consists of the following:
|
|
|
|
|
|
|
|
|
|
|
2009
|
|
|
2010
|
|
|
|
(In thousands)
|
|
|
Steel storage containers
|
|
$
|
621,466
|
|
|
$
|
612,214
|
|
Offices
|
|
|
526,951
|
|
|
|
529,892
|
|
Van trailers
|
|
|
5,557
|
|
|
|
3,762
|
|
Other (chassis and ancillary products)
|
|
|
2,651
|
|
|
|
2,491
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,156,625
|
|
|
|
1,148,359
|
|
Accumulated depreciation
|
|
|
(101,297
|
)
|
|
|
(119,956
|
)
|
|
|
|
|
|
|
|
|
|
Lease fleet, net
|
|
$
|
1,055,328
|
|
|
$
|
1,028,403
|
|
|
|
|
|
|
|
|
|
|
In connection with the Merger in 2008, Mobile Mini expanded its
revolving credit facility to increase its borrowing limit and to
include the combined assets of both Mobile Mini and Mobile
Storage Group as security for the facility.
On June 27, 2008, Mobile Mini and its subsidiaries,
(including Mobile Storage Group and its subsidiaries) entered
into an ABL Credit Agreement (the Credit Agreement) with
Deutsche Bank AG New York Branch and other lenders party
thereto. The Credit Agreement provided for a five-year,
$900.0 million revolving credit facility. In August 2010,
Mobile Mini entered into a Second Amendment to the Credit
Agreement which allowed the Company to reduce the Credit
Agreement by $50.0 million to $850.0 million. In
addition, the amendment provides for (1) new defined terms
in the Credit Agreement relating to a permitted refinancing of
the Companys senior notes and (ii) revisions to the
Payment Conditions (as defined in the Credit
Agreement) allowing restricted payments and acquisitions to
occur without financial covenants so long as the Company has
$250.0 million of pro forma excess borrowing availability
under the facility.
Amounts borrowed under the Credit Agreement and repaid or
prepaid during the term may be reborrowed. Outstanding amounts
under the Credit Agreement bear interest at the Companys
option at either (i) LIBOR plus a defined margin, or
(ii) the Agent banks prime rate plus a margin. The
applicable margins for each type of loan will range from 2.25%
to 2.75% for LIBOR loans and 0.75% to 1.25% for base rate loans
depending upon the Companys debt ratio at each measurement
date. All amounts outstanding under the Credit Agreement are due
on June 27, 2013.
Availability of borrowings under the Credit Agreement is subject
to a borrowing base calculation based upon a valuation of the
Companys eligible accounts receivable, eligible container
fleet (including containers held for sale,
work-in-process
and raw materials), machinery and equipment and real property,
each multiplied by an applicable advance rate or limit. The
lease fleet is appraised at least once annually by a third-party
appraisal firm and up to 90% of the lesser of cost or appraised
orderly liquidation value, as defined, may be included in the
borrowing base to determine how much the Company may borrow
under this facility.
The Credit Agreement provides for U.K. borrowings, denominated
in either Pounds Sterling or Euros, by the Companys
subsidiary Mobile Mini U.K. Limited based upon a U.K. borrowing
base and for U.S. borrowings, which are denominated in
U.S. Dollars, by Mobile Mini based upon a U.S. and
Canada borrowing base.
The Companys obligations and those of its subsidiaries
under the Credit Agreement are secured by a blanket lien on
substantially all of the Companys assets.
62
MOBILE
MINI, INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
The Credit Agreement also contains customary negative covenants
applicable to Mobile Mini and its subsidiaries, including
covenants that restrict their ability to, among other things,
(i) make capital expenditures in excess of defined limits,
(ii) allow certain liens to attach to the Company or its
subsidiary assets, (iii) repurchase or pay dividends or
make certain other restricted payments on capital stock and
certain other securities, or prepay certain indebtedness,
(iv) incur additional indebtedness or engage in certain
other types of financing transactions, and (v) make
acquisitions or other investments.
Mobile Mini also must comply with specified financial covenants
and affirmative covenants. Only if the Company falls below
specified borrowing availability levels are financial
maintenance covenants applicable, with set maximum permitted
values for its leverage ratio (as defined), fixed charge
coverage ratios and its minimum required utilization rates. At
December 31, 2009 and December 31, 2010, the Company
was above the minimum borrowing availability threshold and
therefore not subject to these financial maintenance covenants.
The weighted average interest rate under the line of credit,
including the effect of applicable interest rate swap
agreements, was approximately 4.4% in 2009 and 4.7% in 2010. The
average balance outstanding was approximately
$531.9 million and $448.4 million during 2009 and
2010, respectively.
Mobile Mini has interest rate swap agreements under which it
effectively fixed the interest rate payable on
$125.0 million of borrowings under the Companys
credit facility so that the interest rate is based on a spread
from a fixed rate rather than a spread from the LIBOR rate. The
aggregate change in the fair value of the interest rate swap
agreements resulted in comprehensive income of $2.3 million
and $3.4 million, net of applicable income taxes of
$1.5 million and $2.2 million for the years ended
December 31, 2009 and 2010, respectively.
Notes payable at December 31, consist of the following:
|
|
|
|
|
|
|
|
|
|
|
2009
|
|
|
2010
|
|
|
|
(In thousands)
|
|
|
Notes payable to financial institution, interest at 2.98%
payable in fixed monthly installments, matured September 2010,
unsecured
|
|
$
|
955
|
|
|
$
|
|
|
Notes payable to financial institution, interest at 2.56%
payable in fixed monthly installments, maturing through
September 2011, unsecured
|
|
|
|
|
|
|
279
|
|
Other notes payable, maturing through 2011
|
|
|
173
|
|
|
|
10
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
1,128
|
|
|
$
|
289
|
|
|
|
|
|
|
|
|
|
|
|
|
(6)
|
Obligations
Under Capital Leases:
|
At December 31, 2009 and 2010, obligations under capital
leases for certain forklifts, storage containers and office
related equipment were $4.1 million and $2.6 million,
respectively. The lease agreements provide the Company with a
purchase option at the end of the lease term. The leases have
been capitalized using interest rates ranging from approximately
5.7% to 8.5%. The leases are secured by the equipment under
lease. Assets recorded under capital lease obligations totaled
approximately $6.9 million as of December 31, 2009 and
$6.8 million as of December 31, 2010. Related
accumulated amortization totaled approximately $700,000 as of
December 31, 2009 and $1.2 million as of
December 31, 2010. The assets acquired under capital leases
and related accumulated amortization is included in property,
plant and equipment, net, and lease fleet, net, in the
Consolidated Balance Sheets. The related amortization is
included in depreciation and amortization expense in the
Consolidated Statements of Income.
63
MOBILE
MINI, INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Future minimum capital lease payments at December 31, 2010
are as follows (in thousands):
|
|
|
|
|
2011
|
|
$
|
1,432
|
|
2012
|
|
|
912
|
|
2013
|
|
|
314
|
|
2014
|
|
|
157
|
|
|
|
|
|
|
Total
|
|
|
2,815
|
|
Amount representing interest
|
|
|
(239
|
)
|
|
|
|
|
|
Present value of minimum lease payments
|
|
$
|
2,576
|
|
|
|
|
|
|
|
|
(7)
|
Equity
and Debt Issuances:
|
On November 23, 2010, the Company issued $200 million
aggregate principal amount of the 2020 Notes. The 2020 Notes
were issued by the Company at an initial offering price of 100%
of their face value. The net proceeds from the sale of the 2020
Notes were used to redeem approximately $170.6 million of
the outstanding MSG Notes due 2014, which were originally issued
by MSG and assumed by the Company in connection with the
acquisition of MSG in June 2008, to pay the redemption and
tender offer premium (approximately $8.9 million) and
accrued interest (approximately $5.2 million) on the MSG
Notes, and to pay fees and expenses related to the offering. We
used the remaining net proceeds of approximately
$10.4 million to repay borrowings under our revolving
credit facility. In January 2011, the remaining principal amount
outstanding on the MSG Notes, $22.3 million, was redeemed
pursuant to the terms of the Indenture.
The 2020 Notes have a ten-year term and mature on
December 1, 2020. The 2020 Notes bear interest at a rate of
7.875% per year, accruing from November 23, 2010. Interest
on the 2020 Notes is payable semiannually in arrears on June 1
and December 1 of each year, beginning on June 1, 2011. The
2020 Notes are senior unsecured obligations of the Company and
are unconditionally guaranteed on a senior unsecured basis by
all of our domestic subsidiaries.
On November 22, 2010, Mobile Mini entered into a Second
Supplemental Indenture with Wells Fargo Bank, N.A., as trustee
(the Second Supplemental Indenture), in connection with the
Companys cash tender offer and consent solicitation for
the MSG Notes. Pursuant to the Second Supplemental Indenture,
substantially all of the restrictive covenants and certain
events of default found in the indenture governing the MSG Notes
were removed. The Indenture was terminated in January 2011 with
the redemption of the remaining outstanding MSG Notes.
Senior Notes at December 31, consist of the following:
|
|
|
|
|
|
|
|
|
|
|
2009
|
|
|
2010
|
|
|
|
(In thousands)
|
|
|
Senior Notes, interest at 9.750%, maturing 2014
|
|
$
|
150,000
|
|
|
$
|
22,272
|
(1)
|
Senior Notes, interest at 6.875%, maturing 2015
|
|
|
198,850
|
|
|
|
150,000
|
|
Senior Notes, interest at 7.875%, maturing 2020
|
|
|
|
|
|
|
200,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
348,850
|
|
|
|
372,272
|
|
Less unamortized discount
|
|
|
(3,448
|
)
|
|
|
(617
|
)
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
345,402
|
|
|
$
|
371,655
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
The aggregate principal amount outstanding of the
9.750% Senior Notes at December 31, 2010 were redeemed
in January 2011. |
64
MOBILE
MINI, INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Future
Debt Obligations
The scheduled maturity for debt obligations under Mobile
Minis revolving line of credit, notes payable, obligations
under capital leases and Senior Notes for balances outstanding
at December 31, 2010 are as follows (in thousands):
|
|
|
|
|
2011
|
|
$
|
1,577
|
|
2012
|
|
|
846
|
|
2013
|
|
|
397,171
|
|
2014
|
|
|
22,425
|
|
2015
|
|
|
150,000
|
|
Thereafter
|
|
|
200,000
|
|
|
|
|
|
|
|
|
$
|
772,019
|
|
|
|
|
|
|
Preferred
Stock
As part of the consideration for the Merger, Mobile Mini issued
8.6 million shares of its Series A Convertible
Redeemable Participating Preferred Stock, to the former
MSGs stockholders. The shares were determined to have an
initial fair value of $196.6 million based upon a third
party valuation. The outstanding shares had a liquidation
preference of $147.4 million at December 31, 2009 and
at December 31, 2010.
The preferred stock votes with Mobile Minis common stock
as a single class. It ranks senior to the common stock only with
respect to distributions upon the occurrence of the bankruptcy,
liquidation, dissolution or winding up of Mobile Mini. Holders
of a majority of the shares of preferred stock, may require the
Company to redeem all of the outstanding preferred stock
(i) if the Company enters into a binding agreement in
respect of a sale of the Company (as defined in the Certificate
of Designation for the preferred stock) at a sale price of less
than $23.00 per share or (ii) at any time after the tenth
anniversary of the preferred stock issuance date. If such
majority holders do not exercise their redemption rights
following either of these events, the Company at its option may
redeem the preferred stock. These outstanding shares of
preferred stock are convertible into an aggregate of
8.2 million shares of the Companys common stock at
any time at the option of the holders, representing an initial
conversion price of $18.00 per common share. The preferred stock
will be mandatorily convertible into the Companys common
stock if, after the first anniversary of the issuance thereof,
its common stock trades above $23.00 per share for a period of
30 consecutive days. In 2009, 364,587 shares of preferred
stock were converted to an equal number of shares of common
stock. The preferred stock will not have any cash or
payment-in-kind
dividends (unless and until a dividend is paid with respect to
the common stock, in which case dividends will be paid on an
equal basis with the common stock, on an as-converted basis) and
does not impose any financial covenants upon the Company.
Under a Stockholders Agreement entered into with the sellers of
MSG, Mobile Mini filed a registration statement on
Form S-3
under the Securities Act of 1933, as amended, on April 28,
2009, as amended on June 19, 2009, covering all of the
shares of Mobile Mini common stock issuable upon conversion of
the preferred stock and any shares of its common stock received
in respect of the preferred stock (called the registrable
securities) then held by any Mobile Storage Group stockholders
party to the Stockholders Agreement to enable the resale of such
registrable securities after June 27, 2009.
The registration rights granted in the Stockholders Agreement
are subject to customary restrictions such as blackout periods
and limitations on the number of shares to be included in any
underwritten offering imposed by the managing underwriter. In
addition, the Stockholders Agreement contains other limitations
on the timing and ability of the holders of registrable
securities to exercise demands.
65
MOBILE
MINI, INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Income (loss) before taxes for the years ended December 31
consisted of the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2008
|
|
|
2009
|
|
|
2010
|
|
|
|
(In thousands)
|
|
|
U.S.
|
|
$
|
70,534
|
|
|
$
|
44,362
|
|
|
$
|
18,593
|
|
Foreign
|
|
|
(13,493
|
)
|
|
|
1,493
|
|
|
|
3,359
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
57,041
|
|
|
$
|
45,855
|
|
|
$
|
21,952
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The provision (benefit) for income taxes for the years ended
December 31, consisted of the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2008
|
|
|
2009
|
|
|
2010
|
|
|
|
(In thousands)
|
|
|
Current:
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Federal
|
|
$
|
|
|
|
$
|
(262
|
)
|
|
$
|
|
|
State
|
|
|
210
|
|
|
|
333
|
|
|
|
741
|
|
Foreign
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
210
|
|
|
|
71
|
|
|
|
741
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred:
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Federal
|
|
|
26,549
|
|
|
|
16,574
|
|
|
|
5,963
|
|
State
|
|
|
2,662
|
|
|
|
1,661
|
|
|
|
638
|
|
Foreign
|
|
|
(1,421
|
)
|
|
|
(249
|
)
|
|
|
1,101
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
27,790
|
|
|
|
17,986
|
|
|
|
7,702
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
28,000
|
|
|
$
|
18,057
|
|
|
$
|
8,443
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The components of the net deferred tax liability at
December 31, are approximately as follows:
|
|
|
|
|
|
|
|
|
|
|
2009
|
|
|
2010
|
|
|
|
(In thousands)
|
|
|
Deferred tax assets:
|
|
|
|
|
|
|
|
|
Net operating loss carryforwards
|
|
$
|
92,588
|
|
|
$
|
124,862
|
|
Deferred revenue and expenses
|
|
|
5,941
|
|
|
|
5,564
|
|
Accrued compensation and other benefits
|
|
|
2,861
|
|
|
|
1,755
|
|
Allowance for doubtful accounts
|
|
|
1,116
|
|
|
|
696
|
|
Other
|
|
|
6,545
|
|
|
|
5,442
|
|
|
|
|
|
|
|
|
|
|
Total deferred tax assets
|
|
|
109,051
|
|
|
|
138,319
|
|
Valuation allowance
|
|
|
(1,126
|
)
|
|
|
(1,358
|
)
|
|
|
|
|
|
|
|
|
|
Net deferred tax assets
|
|
|
107,925
|
|
|
|
136,961
|
|
|
|
|
|
|
|
|
|
|
Deferred tax liabilities:
|
|
|
|
|
|
|
|
|
Accelerated tax depreciation
|
|
|
(254,977
|
)
|
|
|
(286,980
|
)
|
Accelerated tax amortization
|
|
|
(3,253
|
)
|
|
|
(4,772
|
)
|
Other
|
|
|
(5,392
|
)
|
|
|
(10,776
|
)
|
|
|
|
|
|
|
|
|
|
Total deferred tax liabilities
|
|
|
(263,622
|
)
|
|
|
(302,528
|
)
|
|
|
|
|
|
|
|
|
|
Net deferred tax liabilities
|
|
$
|
(155,697
|
)
|
|
$
|
(165,567
|
)
|
|
|
|
|
|
|
|
|
|
66
MOBILE
MINI, INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
A deferred U.S. tax liability has not been provided on the
undistributed earnings of certain foreign subsidiaries because
it is Mobile Minis intent to permanently reinvest such
earnings. Undistributed earnings of foreign subsidiaries, which
have been, or are intended to be, permanently invested,
aggregated approximately $0.1 million and $3.2 million
as of December 31, 2009 and 2010, respectively. A net
deferred tax liability of approximately $11.9 million
related to the Companys U.K. and The Netherlands
operations have been combined with the net deferred tax
liabilities of its U.S. operations in the Consolidated
Balance Sheets at December 31, 2010.
A reconciliation of the U.S. federal statutory rate to
Mobile Minis effective tax rate for the years ended
December 31, is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2008
|
|
|
2009
|
|
|
2010
|
|
|
U.S. federal statutory rate
|
|
|
35.0
|
%
|
|
|
35.0
|
%
|
|
|
35.0
|
%
|
State taxes, net of federal benefit
|
|
|
3.5
|
|
|
|
3.5
|
|
|
|
3.5
|
|
Non deductible expenses-other
|
|
|
1.6
|
|
|
|
0.5
|
|
|
|
0.7
|
|
Change in valuation allowance
|
|
|
|
|
|
|
|
|
|
|
1.1
|
|
Goodwill impairments
|
|
|
6.7
|
|
|
|
|
|
|
|
|
|
Foreign rate differential
|
|
|
2.3
|
|
|
|
0.4
|
|
|
|
(1.8
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
49.1
|
%
|
|
|
39.4
|
%
|
|
|
38.5
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At December 31, 2010, Mobile Mini had a U.S. federal
net operating loss carryforward of approximately
$301.6 million, which expires if unused from 2012 to 2030.
At December 31, 2010, the Company had net operating loss
carryforwards in the various states in which it operates
totaling $208.3 million, which expire if unused from 2011
to 2030. At December 31, 2009 and 2010, the Companys
deferred tax assets do not include $5.5 million and
$8.5 million of excess tax benefits from employee stock
option exercises that are a component of its net operating loss
carryforward. Additional paid in capital will be increased by
$8.5 million if and when such excess tax benefits are
realized. Management evaluates the ability to realize its
deferred tax assets on a quarterly basis and adjusts the amount
of its valuation allowance if necessary. In 2010, the Company
recorded a valuation allowance of $0.2 million related to
various state net operating losses that expired in 2010 or will
expire in 2011. Accelerated tax amortization primarily relates
to amortization of goodwill for income tax purposes.
Mobile Mini adopted a two-step approach to recognizing and
measuring uncertain tax positions. The first step is to evaluate
the tax position for recognition by determining if the weight of
available evidence indicates that it is more likely than not
that the position will be sustained on audit, including
resolution of related appeals or litigation process, if any. The
second step is to measure the tax benefit as the largest amount
that is more than 50% likely of being realized upon ultimate
settlement.
The Company files U.S. federal tax returns, U.S. state
tax returns, and foreign tax returns. The Company has identified
its U.S. Federal tax return as its major tax
jurisdiction. For the U.S. Federal return, the
Companys tax years for 2008 and 2009 are subject to tax
examination by the U.S. Internal Revenue Service through
September 15, 2012 and 2013, respectively. No reserves for
uncertain income tax positions have been recorded. The Company
does not anticipate that the total amount of unrecognized tax
benefit related to any particular tax position will change
significantly within the next 12 months.
The Companys policy for recording interest and penalties
associated with audits is to record such items as a component of
income before taxes. Penalties and associated interest costs are
recorded in leasing, selling and general expenses in its
Consolidated Statements of Income.
As a result of stock ownership changes during the years
presented, it is possible that the Company has undergone a
change in ownership for federal income tax purposes, which can
limit the amount of net operating loss currently available as a
deduction. Management has determined that even if such an
ownership change has occurred, it would not impair the
realization of the deferred tax asset resulting from the federal
net operating loss carryover.
67
MOBILE
MINI, INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Mobile Mini paid income taxes of approximately
$0.7 million, $0.9 million and $0.8 million in
2008, 2009 and 2010, respectively. These amounts are lower than
the recorded expense in the years due to net operating loss
carryforwards and general business credit utilization.
|
|
(9)
|
Transactions
with Related Persons:
|
When Mobile Mini was a private company prior to 1994, it leased
some of its properties from entities originally controlled by
its founder, Richard E. Bunger, and his family members. These
related party leases remain in effect. The Company leases a
portion of the property comprising its Phoenix location and the
property comprising its Tucson location from entities owned by
Steven G. Bunger and his siblings. Steven G. Bunger is Mobile
Minis President and Chief Executive Officer and has served
as its Chairman of the Board since February 2001. Annual lease
payments under these leases totaled approximately $98,000,
$178,000 and $202,000 in 2008, 2009 and 2010, respectively. The
term of each of these leases expire on December 31, 2013.
Mobile Mini leases its Rialto, California facility from Mobile
Mini Systems, Inc., a corporation wholly owned by Barbara M.
Bunger, the mother of Steven G. Bunger. Annual lease payments in
2008, 2009 and 2010 under this lease were approximately
$295,000, $307,000 and $317,000, respectively. The Rialto lease
expires on April 1, 2016. Management believes that the
rental rates reflect the fair market rental value of these
properties or were less than the fair market rental value. The
terms of these related persons lease agreements have been
reviewed and approved by the independent directors who comprise
a majority of the members of the Companys Board of
Directors.
It is Mobile Minis intention not to enter into any
additional related person transactions other than extensions of
these lease agreements.
|
|
(10)
|
Share-Based
Compensation:
|
The Company awarded stock options and nonvested shares under the
existing share-based compensation plans. The majority of these
options and nonvested share-awards vest in equal annual
installments over a four to five year period. The total value of
these options and awards is expensed on a straight-line basis
over the service period of the employees receiving the grants.
The service period is the time during which the
employees receiving grants must remain employees for the shares
granted to fully vest.
The Company also grants its executive officers nonvested
share-awards with vesting subject to a performance conditions.
Vesting for these share-awards is dependent upon the officers
fulfilling the service period requirements, as well as the
Company meeting certain EBITDA targets in each of the next four
years after the grant is awarded. The Company is required to
assess the probability that such performance conditions will be
met. If the likelihood of the performance condition being met is
deemed probable, the Company will recognize the expense using
accelerated attribution method. The accelerated attribution
method could result in as much as 50% of the total value of the
shares being recognized in the first year of the service period
if each of the four future targets is assessed as probable of
being met. In 2009 and 2010, the share-based compensation
expense was reduced by $1.4 million, and $0.4 million,
respectively, to reflect anticipated shortfalls related to
share-awards with vesting subject to a performance conditions.
Share-based payment expense related to the vesting of options
and share-awards was approximately $3.5 million,
$4.3 million and $5.8 million for 2008, 2009 and 2010,
respectively. As of December 31, 2010, the unrecognized
compensation cost related to share-awards was approximately
$20.6 million, which is expected to be recognized over a
weighted-average period of approximately 3.2 years. As of
December 31, 2010, total unrecognized compensation cost
related to stock option awards was approximately
$2.3 million and the related weighted-average period over
which it is expected to be recognized is approximately
3.8 years.
The cash flows resulting from the tax benefits arising from tax
deductions in excess of the compensation cost recognized from
the exercise of stock options (excess tax benefits) are
classified as financing cash flows. As of December 31,
2010, the Company had no tax benefits arising from tax
deductions in excess of the compensation cost recognized because
the benefit has not been realized given that the
Company currently has net operating loss carryforwards and
follow the
with-and-without
approach with respect to the ordering of tax benefits realized.
68
MOBILE
MINI, INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
The following table summarizes the share-based compensation
expense and capitalized amounts for the years ending December 31:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2008
|
|
|
2009
|
|
|
2010
|
|
|
|
(In thousands)
|
|
|
Gross share-based compensation
|
|
$
|
6,521
|
|
|
$
|
6,090
|
|
|
$
|
6,441
|
|
Capitalized share-based compensation
|
|
|
(865
|
)
|
|
|
(308
|
)
|
|
|
(149
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Share-based compensation expense
|
|
$
|
5,656
|
|
|
$
|
5,782
|
|
|
$
|
6,292
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The following table summarizes the activities under the
Companys stock option plans for the years ended December
31 (number of shares in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2008
|
|
|
2009
|
|
|
2010
|
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
|
Average
|
|
|
|
|
|
Average
|
|
|
|
|
|
Average
|
|
|
|
Number of
|
|
|
Exercise
|
|
|
Number of
|
|
|
Exercise
|
|
|
Number of
|
|
|
Exercise
|
|
|
|
Shares
|
|
|
Price
|
|
|
Shares
|
|
|
Price
|
|
|
Shares
|
|
|
Price
|
|
|
Options outstanding, beginning of year
|
|
|
2,028
|
|
|
$
|
17.02
|
|
|
|
1,853
|
|
|
$
|
17.32
|
|
|
|
1,656
|
|
|
$
|
17.01
|
|
Granted
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
262
|
|
|
|
19.76
|
|
Canceled/Expired
|
|
|
(41
|
)
|
|
|
(23.35
|
)
|
|
|
(120
|
)
|
|
|
(25.73
|
)
|
|
|
(140
|
)
|
|
|
(19.17
|
)
|
Exercised
|
|
|
(134
|
)
|
|
|
(10.98
|
)
|
|
|
(77
|
)
|
|
|
(10.98
|
)
|
|
|
(160
|
)
|
|
|
(11.33
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options outstanding, end of year
|
|
|
1,853
|
|
|
$
|
17.32
|
|
|
|
1,656
|
|
|
$
|
17.01
|
|
|
|
1,618
|
|
|
$
|
17.84
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options exercisable, end of year
|
|
|
1,529
|
|
|
$
|
17.56
|
|
|
|
1,461
|
|
|
$
|
20.81
|
|
|
|
1,342
|
|
|
$
|
17.34
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options and awards available for grant, end of year
|
|
|
296
|
|
|
|
|
|
|
|
2,794
|
|
|
|
|
|
|
|
2,233
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
A summary of nonvested share-awards activity within the
Companys share-based compensation plans and changes is as
follows (share amounts in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
|
Average
|
|
|
|
|
|
|
Grant Date
|
|
|
|
Shares
|
|
|
Fair Value
|
|
|
Nonvested at January 1, 2008
|
|
|
532
|
|
|
$
|
22.46
|
|
|
|
|
|
|
|
|
|
|
Awarded
|
|
|
673
|
|
|
|
15.78
|
|
Released
|
|
|
(149
|
)
|
|
|
22.16
|
|
Forfeited
|
|
|
(66
|
)
|
|
|
21.49
|
|
|
|
|
|
|
|
|
|
|
Nonvested at December 31, 2008
|
|
|
990
|
|
|
$
|
18.03
|
|
|
|
|
|
|
|
|
|
|
Awarded
|
|
|
607
|
|
|
|
14.21
|
|
Released
|
|
|
(297
|
)
|
|
|
18.76
|
|
Forfeited
|
|
|
(87
|
)
|
|
|
18.29
|
|
|
|
|
|
|
|
|
|
|
Nonvested at December 31, 2009
|
|
|
1,213
|
|
|
$
|
16.05
|
|
|
|
|
|
|
|
|
|
|
Awarded
|
|
|
451
|
|
|
|
18.19
|
|
Released
|
|
|
(341
|
)
|
|
|
17.34
|
|
Forfeited
|
|
|
(100
|
)
|
|
|
15.72
|
|
|
|
|
|
|
|
|
|
|
Nonvested at December 31, 2010
|
|
|
1,223
|
|
|
$
|
16.51
|
|
|
|
|
|
|
|
|
|
|
The total fair value of share-awards vested in 2009 and 2010
were $5.6 million and $5.9 million, respectively.
69
MOBILE
MINI, INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
A summary of stock option activity, as of December 31,
2010, is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
|
|
|
Average
|
|
|
|
|
|
|
Weighted
|
|
Remaining
|
|
|
|
|
|
|
Average
|
|
Contractual
|
|
Aggregate
|
|
|
Number of
|
|
Exercise
|
|
Term
|
|
Intrinsic
|
|
|
Shares
|
|
Price
|
|
(In Years)
|
|
Value
|
|
|
(In thousands)
|
|
|
|
|
|
(In thousands)
|
|
Outstanding
|
|
|
1,618
|
|
|
$
|
17.84
|
|
|
|
4.02
|
|
|
$
|
5,254
|
|
Vested and expected to vest
|
|
|
1,570
|
|
|
$
|
17.70
|
|
|
|
3.89
|
|
|
$
|
5,247
|
|
Exercisable
|
|
|
1,342
|
|
|
$
|
17.34
|
|
|
|
2.84
|
|
|
$
|
5,254
|
|
The aggregate intrinsic value of options exercised during the
period ended December 31, 2008, 2009 and 2010 was
$1.3 million, $0.4 million and $1.0 million,
respectively.
The fair value of each stock option award is estimated on the
date of the grant using the Black-Scholes option pricing model.
The following are the key assumptions used for the period noted:
|
|
|
|
|
|
|
2010
|
|
Risk-free interest rate
|
|
|
2.1
|
%
|
Expected life of the options (years)
|
|
|
5.0
|
|
Expected stock price volatility
|
|
|
45.0
|
%
|
Expected dividend rate
|
|
|
|
|
The Black-Scholes option valuation model was developed for use
in estimating the fair value of short-traded options that have
no vesting restrictions and are fully transferable. In addition,
option valuation models require the input of assumptions
including expected stock price volatility. The risk-free
interest rate is based on the U.S. Treasury security rate
in effect at the time of the grant. The expected life of the
options and volatility rates are based on our historical data.
We do not anticipate paying a dividend, and therefore no
expected dividend yield was used.
The weighted average fair value of stock options granted was
$8.23 for 2010. Mobile Mini did not grant stock options under
the share-based compensation plan during 2008 or 2009.
Stock
Option and Equity Incentive Plans
In August 1994, Mobile Minis Board of Directors adopted
the Mobile Mini, Inc. 1994 Stock Option Plan, which was amended
in 1998 and expired (with respect to granting additional
options) in 2003. At December 31, 2010, there were no
outstanding options to acquire shares under the 1994 Plan. In
August 1999, the Companys Board of Directors approved the
Mobile Mini, Inc. 1999 Stock Option Plan, which expired (with
respect to granting additional options) in August 2009. As of
December 31, 2010, there were outstanding options to
acquire 1.33 million shares under the 1999 Plan. Both plans
and amendments were approved by the stockholders at annual
meetings. Awards granted under the 1999 Plan may be incentive
stock options, which are intended to meet the requirements of
Section 422 of the Internal Revenue Code, nonstatutory
stock options or shares of restricted stock awards. Incentive
stock options may be granted to the Companys officers and
other employees. Nonstatutory stock options may be granted to
directors and employees, and to non-employee service providers
and share-awards may be made to officers and other employees.
In February 2006, Mobile Minis Board of Directors approved
the 2006 Equity Incentive Plan that was subsequently approved by
the stockholders at the Companys 2006 Annual Meeting. At
the Annual Stockholders Meeting in June 2009, the
stockholders approved an amendment to the 2006 Equity Incentive
Plan to increase the maximum number of shares that could be
issued by an additional 3.0 million shares. The 2006 Plan
is an omnibus
70
MOBILE
MINI, INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
stock plan permitting a variety of equity programs designed to
provide flexibility in implementing equity and cash awards,
including incentive stock options, nonqualified stock options,
nonvested share-awards, restricted stock units, stock
appreciation rights, performance stock, performance units and
other stock-based awards. Participants in the 2006 Plan may be
granted any one of the equity awards or any combination of them,
as determined by the Board of Directors or the Compensation
Committee. The 2006 Plan, as amended, has reserved
4.2 million shares of common stock for issuance. As of
December 31, 2010, there were outstanding options to
acquire 291,000 shares under the 2006 Plan.
The purpose of these plans is to attract and retain the best
available personnel for positions of substantial responsibility
and to provide incentives to, and to encourage ownership of
stock by, Mobile Minis management and other employees. The
Board of Directors believes that stock options and other
share-based awards are important to attract and to encourage the
continued employment and service of officers and other employees
and encourage them to devote their best efforts to the
Companys business, thereby advancing the interest of its
stockholders.
The option exercise price for all options granted under these
plans may not be less than 100% of the fair market value of the
common stock on the date of grant of the option (or 110% in the
case of an incentive stock option granted to an optionee
beneficially owning more than 10% of the outstanding common
stock). The maximum option term is ten years (or five years in
the case of an incentive stock option granted to an optionee
beneficially owning more than 10% of the outstanding common
stock). Payment for shares purchased under these plans is made
in cash. Options may, if permitted by the particular option
agreement, be exercised by directing that certificates for the
shares purchased be delivered to a licensed broker as agent for
the optionee, provided that the broker tenders to Mobile Mini,
cash or cash equivalents equal to the option exercise price.
The plans are administered by the Compensation Committee of
Mobile Minis Board of Directors. The Compensation
Committee is comprised of independent directors. They determine
whether options will be granted, whether options will be
incentive stock options, nonstatutory option, restricted stock,
or performance stock, which officers, employees and service
providers will be granted options, the vesting schedule for
options and the number of options to be granted. Each
outstanding option must expire no more than 10 years from
the date it was granted, unless exercised or forfeited before
the expiration date, and historically options are granted with
vesting over a 4.5 year period. Each non-employee director
serving on the Companys Board of Directors receives an
automatic award of shares of Mobile Minis common stock
equivalent to $82,500 based on the closing price of the
Companys common stock on August 1 of that year, or the
following trading day if August 1 is not a trading day. These
awards vest 100% when granted.
The Board of Directors may amend the plans at any time, except
that approval by Mobile Minis stockholders may be required
for an amendment that increases the aggregate number of shares
which may be issued pursuant to each plan, changes the class of
persons eligible to receive incentive stock options, modifies
the period within which options may be granted, modifies the
period within which options may be exercised or the terms upon
which options may be exercised, or increases the material
benefits accruing to the participants under each plan. The Board
of Directors may terminate or suspend the plans at any time.
Unless previously terminated, the 2006 Plan will expire in
February 2016. Any option granted under a plan will continue
until the option expiration date, notwithstanding earlier
termination of the plan under which the option was granted.
In 2005, the Company began awarding nonvested shares under the
existing share-based compensation plans. These nonvested shares
vest in equal annual installments on each of the first four or
five annual anniversaries of the award date, unless the person
to whom the award was made is not then employed by Mobile Mini
(or one of its subsidiaries). In 2009 and 2010 certain officers
of the Company received performance based nonvested shares. The
Company did not grant performance based shares in 2008. If
employment terminates, the nonvested shares are forfeited by the
former employee.
In June 2008, in conjunction with the Merger and the hiring of
Mobile Storage Groups employees, the Company awarded
nonvested share-awards for an aggregate of 157,535 shares
with an aggregate fair value of
71
MOBILE
MINI, INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
$3.2 million. These awards vest over a period of between
one and five years. The total value of these awards is expensed
on a straight-line basis over the service period.
401(k)
and Retirement Plans
In 1995, the Company established a contributory retirement plan
in the U.S., the 401(k) Plan, covering eligible employees with
at least one year of service. The 401(k) Plan is designed to
provide tax-deferred retirement benefits to employees in
accordance with the provisions of Section 401(k) of the
Internal Revenue Code.
The 401(k) Plan provides that each participant may annually
contribute a fixed amount or a percentage of his or her salary,
not to exceed the statutory limit. Mobile Mini may make a
qualified non-elective contribution in an amount it determines.
Under the terms of the 401(k) Plan, Mobile Mini may also make
discretionary profit sharing contributions. Profit sharing
contributions are allocated among participants based on their
annual compensation. Each participant has the right to direct
the investment of their funds among certain named plans. Mobile
Mini can contribute 25% of its employees first 4% of
contributions up to a maximum of $2 thousand per employee. The
Company has a similar plan as governed and regulated by Canadian
law, where the Company makes matching contributions with the
same limitations as its 401(k) plan, to its Canadian employees.
In the U.K., the Companys employees are covered by a
defined contribution program. The employees become eligible to
participate three months after they begin employment. The plan
is designed as a retirement benefit program into which the
Company pays a fixed 7% of the annual employees salary
into the plan. Each employee has the election to make further
contributions if they so elect. The participants have the right
to direct the investment of their funds among certain named
plans. A charge of 1% is deducted annually from each
employees fund to cover the administrative costs of this
program.
In The Netherlands, the Companys employees are covered by
a defined contribution program. All employees become eligible
after one month of employment. Contributions are based on a
pre-defined percentage of the employees earnings. The
percentage contribution is based on the employees age,
with two-thirds of the contribution made by the Company and
one-third made by the employee. The administrative costs for
this plan are deducted by the administrative agent from the
contributions and the investment earnings.
In 2010, Mobile Mini did not make any contributions to the
retirement plan in the U.S.
Mobile Mini made contributions to these plans of approximately
$0.7 million, $0.5 million and $0.3 million in
2008, 2009 and 2010, respectively. The Company incurred
approximately $11,700, $26,100 and $26,500 in 2008, 2009 and
2010, respectively, for administrative costs for these programs.
|
|
(12)
|
Commitments
and Contingencies:
|
Leases
As discussed more fully in Note 9, Mobile Mini is obligated
under four noncancelable operating leases with related parties.
The Company also leases its corporate offices and other
properties and operating equipment from third parties under
noncancelable operating leases. Rent expense under these
agreements was approximately $12.3 million,
$16.4 million and $18.0 million for the years ended
December 31, 2008, 2009 and 2010, respectively.
72
MOBILE
MINI, INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
As of December 31, 2010, contractual commitments associated
with lease obligations are as follows (in thousands).
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating
|
|
|
Restructuring
|
|
|
Restructuring
|
|
|
|
|
|
|
Lease
|
|
|
Related Lease
|
|
|
Sub-lease
|
|
|
|
|
|
|
Commitments
|
|
|
Commitments
|
|
|
Income
|
|
|
Total
|
|
|
|
(In thousands)
|
|
|
2011
|
|
$
|
15,816
|
|
|
$
|
2,272
|
|
|
$
|
(656
|
)
|
|
$
|
17,432
|
|
2012
|
|
|
13,359
|
|
|
|
1,775
|
|
|
|
(580
|
)
|
|
|
14,554
|
|
2013
|
|
|
11,376
|
|
|
|
1,359
|
|
|
|
(543
|
)
|
|
|
12,192
|
|
2014
|
|
|
8,636
|
|
|
|
1,075
|
|
|
|
(512
|
)
|
|
|
9,199
|
|
2015
|
|
|
5,517
|
|
|
|
280
|
|
|
|
|
|
|
|
5,797
|
|
Thereafter
|
|
|
7,336
|
|
|
|
918
|
|
|
|
|
|
|
|
8,254
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
62,040
|
|
|
$
|
7,679
|
|
|
$
|
(2,291
|
)
|
|
$
|
67,428
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Future minimum lease payments under restructured non-cancelable
operating leases as of December 31, 2010, are included in
accrued liabilities in the Consolidated Balance Sheet. See
Note 14 for a further discussion on restructuring related
commitments.
Insurance
The Company maintains insurance coverage for its operations and
employees with appropriate aggregate, per occurrence and
deductible limits as the Company reasonably determines is
necessary or prudent with current operations and historical
experience. The majority of these coverages have large
deductible programs which allow for potential improved cash flow
benefits based on its loss control efforts.
The Companys employee group health insurance program is a
self-insured program with an aggregate stop loss limit. The
insurance provider is responsible for funding all claims in
excess of the calculated monthly maximum liability. This
calculation is based on a variety of factors including the
number of employees enrolled in the plan. This plan allows for
some cash flow benefits while guarantying a maximum premium
liability. Actual results may vary from estimates based on the
Companys actual experience at the end of the plan policy
periods based on the carriers loss predictions and its
historical claims data.
The Companys workers compensation, auto and general
liability insurance are purchased under large deductible
programs. The Companys current per incident deductibles
are: workers compensation $250,000, auto $500,000 and
general liability $100,000. The Company expenses the deductible
portion of the individual claims. However, the Company generally
does not know the full amount of its exposure to a deductible in
connection with any particular claim during the fiscal period in
which the claim is incurred and for which it must make an
accrual for the deductible expense. The Company makes these
accruals based on a combination of the claims development
experience of its staff and its insurance companies, and, at
year end, the accrual is reviewed and adjusted, in part, based
on an independent actuarial review of historical loss data and
using certain actuarial assumptions followed in the insurance
industry. A high degree of judgment is required in developing
these estimates of amounts to be accrued, as well as in
connection with the underlying assumptions. In addition, the
Companys assumptions will change as its loss experience is
developed. All of these factors have the potential for
significantly impacting the amounts the Company has previously
reserved in respect of anticipated deductible expenses and the
Company may be required in the future to increase or decrease
amounts previously accrued. Under the Companys various
insurance programs, it has collective reserves recorded in
accrued liabilities of $10.7 million and $7.8 million
at December 31, 2009 and 2010, respectively.
As of December 31, 2010, in connection with the issuance of
our insurance policies, Mobile Mini has provided its various
insurance carriers approximately $8.7 million in letters of
credit.
73
MOBILE
MINI, INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
General
Litigation
The Company is a party to routine claims incidental to its
business. Most of these routine claims involve alleged damage to
customers property while stored in units leased from
Mobile Mini and damage alleged to have occurred during delivery
and pick-up
of containers. The Company carries insurance to protect it
against loss from these types of claims, subject to deductibles
under the policy. The Company does not believe that any of these
incidental claims, individually or in the aggregate, is likely
to have a material adverse effect on its business or results of
operations.
|
|
(13)
|
Mergers
and Acquisitions:
|
The Company enters new markets in one of three ways i) a
new branch
start-up,
ii) or through acquiring a business consisting of the
portable storage assets and related leases of other companies,
or iii) by establishing greenfield operational yards which
are new
start-up
locations that do not have all the overhead associated with a
fully-staffed new branch
start-up. An
acquisition generally provides the Company with cash flow which
enables the Company to immediately cover the overhead cost at a
new branch. On occasion, the Company also purchases portable
storage businesses in areas where the Company has existing small
branches either as part of multi-market acquisitions or in order
to increase the Companys operating margins at those
branches.
In 2008, the Company completed the Merger by which MSG became a
wholly-owned subsidiary of Mobile Mini, Inc., and also acquired
four other portable storage businesses, three through asset
purchase agreements and one as a stock purchase. The Merger and
other acquisitions were accounted for as the purchase of a
business with the purchased assets and assumed liabilities
recorded at their estimated fair values of the date of each
acquisition. The Company did not enter into any mergers or
acquisitions in either 2009 or 2010.
|
|
(14)
|
Integration,
Merger and Restructuring Costs:
|
In connection with the Merger, the Company recorded accruals for
costs to be incurred to exit overlapping Mobile Storage Group
lease properties, property shut down costs, costs of Mobile
Storage Groups severance agreements, costs for asset
verification and for damaged assets.
In connection with the Merger, the Company leveraged the
combined fleet and restructured the manufacturing operations and
reduced overhead and capital expenditures for the lease fleet.
In connection with these activities, the Company recorded costs
for severance agreements and recorded impairment charges to
write down to certain assets previously used in conjunction with
the manufacturing operations and inventories.
74
MOBILE
MINI, INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
The following table details accrued integration, merger and
restructuring obligations (included in accrued liabilities in
the Consolidated Balance Sheets) and related activity for the
years ended December 31, 2008, 2009 and 2010:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Lease
|
|
|
|
|
|
|
|
|
|
Severance and
|
|
|
Abandonment
|
|
|
Acquisition
|
|
|
|
|
|
|
Benefits
|
|
|
Costs
|
|
|
Integration
|
|
|
Total
|
|
|
|
(In thousands)
|
|
|
Accrued obligations as of December 31, 2007
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
Restructuring costs accrued in purchase price allocation
|
|
|
1,811
|
|
|
|
5,328
|
|
|
|
|
|
|
|
7,139
|
|
Integration, merger and restructuring expense
|
|
|
7,705
|
|
|
|
5,788
|
|
|
|
5,307
|
|
|
|
18,800
|
|
Cash paid
|
|
|
(7,507
|
)
|
|
|
(2,705
|
)
|
|
|
(4,164
|
)
|
|
|
(14,376
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accrued obligations as of December 31, 2008
|
|
|
2,009
|
|
|
|
8,411
|
|
|
|
1,143
|
|
|
|
11,563
|
|
Integration, merger and restructuring expense
|
|
|
4,612
|
|
|
|
33
|
|
|
|
6,781
|
|
|
|
11,426
|
|
Cash paid
|
|
|
(6,156
|
)
|
|
|
(2,702
|
)
|
|
|
(7,921
|
)
|
|
|
(16,779
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accrued obligations as of December 31, 2009
|
|
|
465
|
|
|
|
5,742
|
|
|
|
3
|
|
|
|
6,210
|
|
Integration, merger and restructuring expense
|
|
|
2,214
|
|
|
|
|
|
|
|
1,800
|
|
|
|
4,014
|
|
Cash paid
|
|
|
(2,679
|
)
|
|
|
(1,935
|
)
|
|
|
(1,803
|
)
|
|
|
(6,417
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accrued obligations as of December 31, 2010
|
|
$
|
|
|
|
$
|
3,807
|
|
|
$
|
|
|
|
$
|
3,807
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The following amounts are included in integration, merger and
restructuring expense for the year ended December 31:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2008
|
|
|
2009
|
|
|
2010
|
|
|
|
(In thousands)
|
|
|
Severance and benefits
|
|
$
|
7,705
|
|
|
$
|
4,612
|
|
|
$
|
2,214
|
|
Lease abandonment costs
|
|
|
5,788
|
|
|
|
33
|
|
|
|
|
|
Acquisition integration
|
|
|
5,307
|
|
|
|
6,781
|
|
|
|
1,800
|
|
Long-lived asset and inventory impairment charges
|
|
|
5,627
|
|
|
|
(121
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Integration, merger and restructuring expenses
|
|
$
|
24,427
|
|
|
$
|
11,305
|
|
|
$
|
4,014
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(15)
|
Other
Comprehensive Loss:
|
The components of accumulated other comprehensive loss, net of
tax, were as follows at December 31:
|
|
|
|
|
|
|
|
|
|
|
2009
|
|
|
2010
|
|
|
|
(In thousands)
|
|
|
Accumulated net unrealized loss on derivatives
|
|
$
|
(4,733
|
)
|
|
$
|
(1,316
|
)
|
Foreign currency translation adjustment
|
|
|
(21,058
|
)
|
|
|
(24,671
|
)
|
|
|
|
|
|
|
|
|
|
Accumulated other comprehensive loss
|
|
$
|
(25,791
|
)
|
|
$
|
(25,987
|
)
|
|
|
|
|
|
|
|
|
|
The Company has operations in the United States, Canada, the
United Kingdom and The Netherlands. All of the Companys
branches operate in their local currency and although the
Company is exposed to foreign exchange rate fluctuation in other
foreign markets where the Company leases and sells the
Companys products, the Company does not believe this will
have a significant impact on the Companys results of
operations. Financial results of geographic regions are
aggregated into one reportable segment since their operations
have similar characteristics.
75
MOBILE
MINI, INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Each branch has similar characteristics covering all products
leased or sold, including similar products and services,
processes for delivering these services, customer base, sales
personnel, advertising, yard facilities, general and
administrative costs and the method of branch management.
Managements allocation of resources, performance
evaluations and operating decisions are not dependent on the mix
of a branchs products. The Company does not attempt to
allocate shared revenue nor general, selling and leasing
expenses to the different configurations of portable storage and
office products for lease and sale. The branch operations
include the leasing and sales of portable storage units,
portable offices and combination units configured for both
storage and office space. The Company leases to businesses and
consumers in the general geographic area surrounding each branch.
In managing the Companys business, management focuses on
growing leasing revenues, particularly in existing markets where
it can take advantage of the operating leverage inherent in its
business model, EBITDA and earnings per share.
Discrete financial data on each of the Companys products
is not available and it would be impractical to collect and
maintain financial data in such a manner; therefore, reportable
segment information is the same as contained in the
Companys Condensed Consolidated Financial Statements.
The tables below represent the Companys revenues from
customers and long-lived assets, consisting of lease fleet and
property, plant and equipment.
Revenue from external customers:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2008
|
|
|
2009
|
|
|
2010
|
|
|
|
(In thousands)
|
|
|
North America(1)
|
|
$
|
356,303
|
|
|
$
|
316,177
|
|
|
$
|
277,068
|
|
United Kingdom
|
|
|
53,126
|
|
|
|
55,024
|
|
|
|
51,511
|
|
The Netherlands
|
|
|
5,975
|
|
|
|
3,260
|
|
|
|
2,178
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenues
|
|
$
|
415,404
|
|
|
$
|
374,461
|
|
|
$
|
330,757
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Includes revenues in the United States of $352.2 million,
$313.0 million and $273.9 million for the fiscal years
2008, 2009 and 2010, respectively. |
Long-lived assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2008
|
|
|
2009
|
|
|
2010
|
|
|
|
(In thousands)
|
|
|
North America(1)
|
|
$
|
1,041,540
|
|
|
$
|
1,002,675
|
|
|
$
|
973,953
|
|
United Kingdom
|
|
|
120,914
|
|
|
|
132,356
|
|
|
|
131,203
|
|
The Netherlands
|
|
|
4,211
|
|
|
|
4,457
|
|
|
|
3,978
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total long-lived assets
|
|
$
|
1,166,665
|
|
|
$
|
1,139,488
|
|
|
$
|
1,109,134
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Includes long-lived assets of $1,028.2 million,
$988.9 million and $959.9 million in the United States
for the fiscal years 2008, 2009 and 2010, respectively. |
|
|
(17)
|
Selected
Consolidated Quarterly Financial Data
(unaudited):
|
The following table sets forth certain unaudited selected
consolidated financial information for each of the four quarters
in the years ended December 31, 2009 and 2010. In
managements opinion, this unaudited consolidated quarterly
selected information has been prepared on the same basis as the
audited consolidated financial statements and includes all
necessary adjustments, consisting only of normal recurring
adjustments, which management considers necessary for a fair
presentation when read in conjunction with the Consolidated
Financial Statements
76
MOBILE
MINI, INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
and notes. The Company believes these comparisons of
consolidated quarterly selected financial data are not
necessarily indicative of future performance.
Quarterly earnings per share may not total to the fiscal year
earnings per share due to the weighted average number of shares
outstanding at the end of each period reported and rounding.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
First Quarter
|
|
|
Second Quarter
|
|
|
Third Quarter
|
|
|
Fourth Quarter
|
|
|
|
(In thousands except earnings per share)
|
|
|
2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Leasing revenues
|
|
$
|
89,516
|
|
|
$
|
84,397
|
|
|
$
|
82,098
|
|
|
$
|
77,510
|
|
Total revenues
|
|
|
100,164
|
|
|
|
94,924
|
|
|
|
92,086
|
|
|
|
87,287
|
|
Gross profit margin on sales
|
|
|
3,191
|
|
|
|
3,238
|
|
|
|
3,273
|
|
|
|
3,108
|
|
Income from operations(1)
|
|
|
29,256
|
|
|
|
23,166
|
|
|
|
27,752
|
|
|
|
25,244
|
|
Net income(1)
|
|
|
8,466
|
|
|
|
5,227
|
|
|
|
8,120
|
|
|
|
5,985
|
|
Earnings per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
0.20
|
|
|
$
|
0.12
|
|
|
$
|
0.19
|
|
|
$
|
0.14
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted(1)
|
|
$
|
0.20
|
|
|
$
|
0.12
|
|
|
$
|
0.19
|
|
|
$
|
0.14
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Leasing revenues
|
|
$
|
70,179
|
|
|
$
|
72,911
|
|
|
$
|
75,599
|
|
|
$
|
76,345
|
|
Total revenues
|
|
|
76,878
|
|
|
|
81,843
|
|
|
|
84,617
|
|
|
|
87,419
|
|
Gross profit margin on sales
|
|
|
2,224
|
|
|
|
2,717
|
|
|
|
2,919
|
|
|
|
3,299
|
|
Income from operations(2)
|
|
|
18,560
|
|
|
|
21,827
|
|
|
|
23,725
|
|
|
|
25,827
|
|
Net income(2)(3)
|
|
|
2,410
|
|
|
|
4,779
|
|
|
|
5,469
|
|
|
|
851
|
|
Earnings per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
0.06
|
|
|
$
|
0.11
|
|
|
$
|
0.13
|
|
|
$
|
0.02
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted(2)(3)
|
|
$
|
0.06
|
|
|
$
|
0.11
|
|
|
$
|
0.12
|
|
|
$
|
0.02
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Includes integration, merger and restructuring expense of
$11.3 million ($7.0 after tax), or $0.17 per diluted share
during the fiscal year 2009 and one-time expenses of
$0.8 million ($0.5 million after tax), or $0.01 per
diluted share during the fiscal year 2009. |
|
(2) |
|
Includes integration, merger and restructuring expense of
$4.0 million ($2.5 million after tax), or $0.06 per
diluted share during the fiscal year 2010 and, one-time expenses
of $0.3 million ($0.2 million after tax), with no
effect to earnings per diluted share for fiscal year 2010. |
|
(3) |
|
Includes debt restructuring expense and deferred financing costs
write-off of $11.5 million ($7.1 million after tax),
or $0.16 per diluted share for fiscal year 2010. |
|
|
(18)
|
Condensed
Consolidating Financial Information
|
Mobile Mini Supplemental Indenture
The following tables present the condensed consolidating
financial information of Mobile Mini, Inc., representing the
subsidiaries of the Guarantors of the Senior Notes and the
Non-Guarantor Subsidiaries. Separate financial statements of the
subsidiary guarantors are not presented because the guarantee by
each 100% owned subsidiary guarantor is full and unconditional,
joint and several, and management has determined that such
information is not material to investors.
77
MOBILE
MINI, INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
MOBILE
MINI, INC.
CONDENSED
CONSOLIDATING BALANCE SHEETS
As of
December 31, 2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-
|
|
|
|
|
|
|
|
|
|
Guarantors
|
|
|
Guarantors
|
|
|
Eliminations
|
|
|
Consolidated
|
|
|
|
(In thousands)
|
|
|
ASSETS
|
Cash
|
|
$
|
582
|
|
|
$
|
1,158
|
|
|
$
|
|
|
|
$
|
1,740
|
|
Receivables, net
|
|
|
29,152
|
|
|
|
11,715
|
|
|
|
|
|
|
|
40,867
|
|
Inventories
|
|
|
20,169
|
|
|
|
2,027
|
|
|
|
(49
|
)
|
|
|
22,147
|
|
Lease fleet, net
|
|
|
936,366
|
|
|
|
118,962
|
|
|
|
|
|
|
|
1,055,328
|
|
Property, plant and equipment, net
|
|
|
66,309
|
|
|
|
17,851
|
|
|
|
|
|
|
|
84,160
|
|
Deposits and prepaid expenses
|
|
|
8,593
|
|
|
|
1,323
|
|
|
|
|
|
|
|
9,916
|
|
Other assets and intangibles, net
|
|
|
21,288
|
|
|
|
5,355
|
|
|
|
|
|
|
|
26,643
|
|
Goodwill
|
|
|
447,196
|
|
|
|
66,042
|
|
|
|
|
|
|
|
513,238
|
|
Intercompany
|
|
|
140,692
|
|
|
|
36,365
|
|
|
|
(177,057
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
1,670,347
|
|
|
$
|
260,798
|
|
|
$
|
(177,106
|
)
|
|
$
|
1,754,039
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS EQUITY
|
Liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts payable
|
|
$
|
8,605
|
|
|
$
|
5,525
|
|
|
$
|
|
|
|
$
|
14,130
|
|
Accrued liabilities
|
|
|
61,410
|
|
|
|
3,505
|
|
|
|
|
|
|
|
64,915
|
|
Lines of credit
|
|
|
366,150
|
|
|
|
107,505
|
|
|
|
|
|
|
|
473,655
|
|
Notes payable
|
|
|
1,100
|
|
|
|
28
|
|
|
|
|
|
|
|
1,128
|
|
Obligations under capital leases
|
|
|
4,060
|
|
|
|
1
|
|
|
|
|
|
|
|
4,061
|
|
Senior Notes, net of discount
|
|
|
345,402
|
|
|
|
|
|
|
|
|
|
|
|
345,402
|
|
Deferred income taxes
|
|
|
145,157
|
|
|
|
11,144
|
|
|
|
(604
|
)
|
|
|
155,697
|
|
Intercompany
|
|
|
23
|
|
|
|
39,425
|
|
|
|
(39,448
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities
|
|
|
931,907
|
|
|
|
167,133
|
|
|
|
(40,052
|
)
|
|
|
1,058,988
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commitments and contingencies
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Convertible preferred stock
|
|
|
147,427
|
|
|
|
|
|
|
|
|
|
|
|
147,427
|
|
Stockholders equity:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock
|
|
|
385
|
|
|
|
18,434
|
|
|
|
(18,434
|
)
|
|
|
385
|
|
Additional paid-in capital
|
|
|
341,597
|
|
|
|
119,175
|
|
|
|
(119,175
|
)
|
|
|
341,597
|
|
Retained earnings
|
|
|
292,408
|
|
|
|
(22,230
|
)
|
|
|
555
|
|
|
|
270,733
|
|
Accumulated other comprehensive loss
|
|
|
(4,077
|
)
|
|
|
(21,714
|
)
|
|
|
|
|
|
|
(25,791
|
)
|
Treasury stock, at cost
|
|
|
(39,300
|
)
|
|
|
|
|
|
|
|
|
|
|
(39,300
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total stockholders equity
|
|
|
591,013
|
|
|
|
93,665
|
|
|
|
(137,054
|
)
|
|
|
547,624
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities and stockholders equity
|
|
$
|
1,670,347
|
|
|
$
|
260,798
|
|
|
$
|
(177,106
|
)
|
|
$
|
1,754,039
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
78
MOBILE
MINI, INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
MOBILE
MINI, INC.
CONDENSED
CONSOLIDATING BALANCE SHEETS
As of
December 31, 2010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-
|
|
|
|
|
|
|
|
|
|
Guarantors
|
|
|
Guarantors
|
|
|
Eliminations
|
|
|
Consolidated
|
|
|
|
(In thousands)
|
|
|
ASSETS
|
Cash
|
|
$
|
1,065
|
|
|
$
|
569
|
|
|
$
|
|
|
|
$
|
1,634
|
|
Receivables, net
|
|
|
31,496
|
|
|
|
11,182
|
|
|
|
|
|
|
|
42,678
|
|
Inventories
|
|
|
17,812
|
|
|
|
1,806
|
|
|
|
(49
|
)
|
|
|
19,569
|
|
Lease fleet, net
|
|
|
909,715
|
|
|
|
118,688
|
|
|
|
|
|
|
|
1,028,403
|
|
Property, plant and equipment, net
|
|
|
64,238
|
|
|
|
16,493
|
|
|
|
|
|
|
|
80,731
|
|
Deposits and prepaid expenses
|
|
|
7,334
|
|
|
|
1,071
|
|
|
|
|
|
|
|
8,405
|
|
Other assets and intangibles, net
|
|
|
19,856
|
|
|
|
3,622
|
|
|
|
|
|
|
|
23,478
|
|
Goodwill
|
|
|
447,278
|
|
|
|
64,141
|
|
|
|
|
|
|
|
511,419
|
|
Intercompany
|
|
|
106,502
|
|
|
|
35,788
|
|
|
|
(142,290
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
1,605,296
|
|
|
$
|
253,360
|
|
|
$
|
(143,339
|
)
|
|
$
|
1,716,317
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS EQUITY
|
Liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts payable
|
|
$
|
8,604
|
|
|
$
|
5,003
|
|
|
$
|
|
|
|
$
|
13,607
|
|
Accrued liabilities
|
|
|
46,215
|
|
|
|
3,061
|
|
|
|
|
|
|
|
49,276
|
|
Lines of credit
|
|
|
358,232
|
|
|
|
38,650
|
|
|
|
|
|
|
|
396,882
|
|
Notes payable
|
|
|
289
|
|
|
|
|
|
|
|
|
|
|
|
289
|
|
Obligations under capital leases
|
|
|
2,576
|
|
|
|
|
|
|
|
|
|
|
|
2,576
|
|
Senior Notes, net of discount
|
|
|
371,655
|
|
|
|
|
|
|
|
|
|
|
|
371,655
|
|
Deferred income taxes
|
|
|
154,335
|
|
|
|
11,926
|
|
|
|
(694
|
)
|
|
|
165,567
|
|
Intercompany
|
|
|
23
|
|
|
|
4,658
|
|
|
|
(4,681
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities
|
|
|
941,929
|
|
|
|
63,298
|
|
|
|
(5,375
|
)
|
|
|
999,852
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commitments and contingencies
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Convertible preferred stock
|
|
|
147,427
|
|
|
|
|
|
|
|
|
|
|
|
147,427
|
|
Stockholders equity:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock
|
|
|
390
|
|
|
|
18,434
|
|
|
|
(18,434
|
)
|
|
|
390
|
|
Additional paid-in capital
|
|
|
349,695
|
|
|
|
119,173
|
|
|
|
(119,175
|
)
|
|
|
349,693
|
|
Retained earnings
|
|
|
205,131
|
|
|
|
78,466
|
|
|
|
645
|
|
|
|
284,242
|
|
Accumulated other comprehensive loss
|
|
|
24
|
|
|
|
(26,011
|
)
|
|
|
|
|
|
|
(25,987
|
)
|
Treasury stock, at cost
|
|
|
(39,300
|
)
|
|
|
|
|
|
|
|
|
|
|
(39,300
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total stockholders equity
|
|
|
515,940
|
|
|
|
190,062
|
|
|
|
(136,964
|
)
|
|
|
569,038
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities and stockholders equity
|
|
$
|
1,605,296
|
|
|
$
|
253,360
|
|
|
$
|
(142,339
|
)
|
|
$
|
1,716,317
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
79
MOBILE
MINI, INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
MOBILE
MINI, INC.
CONDENSED
CONSOLIDATING STATEMENTS OF INCOME
For the
Year Ended December 31, 2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-
|
|
|
|
|
|
|
|
|
|
Guarantors
|
|
|
Guarantors
|
|
|
Eliminations
|
|
|
Consolidated
|
|
|
|
(In thousands)
|
|
|
Revenues:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Leasing
|
|
$
|
322,473
|
|
|
$
|
49,087
|
|
|
$
|
|
|
|
$
|
371,560
|
|
Sales
|
|
|
32,159
|
|
|
|
9,128
|
|
|
|
(20
|
)
|
|
|
41,267
|
|
Other
|
|
|
1,671
|
|
|
|
906
|
|
|
|
|
|
|
|
2,577
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenues
|
|
|
356,303
|
|
|
|
59,121
|
|
|
|
(20
|
)
|
|
|
415,404
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Costs and expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of sales
|
|
|
20,765
|
|
|
|
7,295
|
|
|
|
(16
|
)
|
|
|
28,044
|
|
Leasing, selling and general expenses
|
|
|
171,712
|
|
|
|
40,623
|
|
|
|
|
|
|
|
212,335
|
|
Integration, merger and restructuring expenses
|
|
|
21,676
|
|
|
|
2,751
|
|
|
|
|
|
|
|
24,427
|
|
Goodwill impairment
|
|
|
|
|
|
|
13,667
|
|
|
|
|
|
|
|
13,667
|
|
Depreciation and amortization
|
|
|
26,402
|
|
|
|
5,365
|
|
|
|
|
|
|
|
31,767
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total costs and expenses
|
|
|
240,555
|
|
|
|
69,701
|
|
|
|
(16
|
)
|
|
|
310,240
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from operations
|
|
|
115,748
|
|
|
|
(10,580
|
)
|
|
|
(4
|
)
|
|
|
105,164
|
|
Other income (expense):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest income
|
|
|
1,743
|
|
|
|
62
|
|
|
|
(1,670
|
)
|
|
|
135
|
|
Interest expense
|
|
|
(41,977
|
)
|
|
|
(7,839
|
)
|
|
|
1,670
|
|
|
|
(48,146
|
)
|
Foreign currency exchange
|
|
|
|
|
|
|
(112
|
)
|
|
|
|
|
|
|
(112
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) before provision for (benefit from) income taxes
|
|
|
75,514
|
|
|
|
(18,469
|
)
|
|
|
(4
|
)
|
|
|
57,041
|
|
Provision for (benefit from) income taxes
|
|
|
29,421
|
|
|
|
(1,250
|
)
|
|
|
(171
|
)
|
|
|
28,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
$
|
46,093
|
|
|
$
|
(17,219
|
)
|
|
$
|
167
|
|
|
$
|
29,041
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
80
MOBILE
MINI, INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
MOBILE
MINI, INC.
CONDENSED
CONSOLIDATING STATEMENTS OF INCOME
For the
Year Ended December 31, 2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-
|
|
|
|
|
|
|
|
|
|
Guarantors
|
|
|
Guarantors
|
|
|
Eliminations
|
|
|
Consolidated
|
|
|
|
(In thousands)
|
|
|
Revenues:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Leasing
|
|
$
|
283,106
|
|
|
$
|
50,415
|
|
|
$
|
|
|
|
$
|
333,521
|
|
Sales
|
|
|
31,329
|
|
|
|
7,297
|
|
|
|
(21
|
)
|
|
|
38,605
|
|
Other
|
|
|
1,742
|
|
|
|
593
|
|
|
|
|
|
|
|
2,335
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenues
|
|
|
316,177
|
|
|
|
58,305
|
|
|
|
(21
|
)
|
|
|
374,461
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Costs and expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of sales
|
|
|
20,163
|
|
|
|
5,653
|
|
|
|
(21
|
)
|
|
|
25,795
|
|
Leasing, selling and general expenses
|
|
|
154,261
|
|
|
|
38,600
|
|
|
|
|
|
|
|
192,861
|
|
Integration, merger and restructuring expenses
|
|
|
10,457
|
|
|
|
848
|
|
|
|
|
|
|
|
11,305
|
|
Depreciation and amortization
|
|
|
31,562
|
|
|
|
7,520
|
|
|
|
|
|
|
|
39,082
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total costs and expenses
|
|
|
216,443
|
|
|
|
52,621
|
|
|
|
(21
|
)
|
|
|
269,043
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from operations
|
|
|
99,734
|
|
|
|
5,684
|
|
|
|
|
|
|
|
105,418
|
|
Other income (expense):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest income
|
|
|
1,808
|
|
|
|
7
|
|
|
|
(1,786
|
)
|
|
|
29
|
|
Interest expense
|
|
|
(55,394
|
)
|
|
|
(5,896
|
)
|
|
|
1,786
|
|
|
|
(59,504
|
)
|
Dividend income
|
|
|
1,255
|
|
|
|
|
|
|
|
(1,255
|
)
|
|
|
|
|
Foreign currency exchange
|
|
|
|
|
|
|
(88
|
)
|
|
|
|
|
|
|
(88
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) before provision for (benefit from) income taxes
|
|
|
47,403
|
|
|
|
(293
|
)
|
|
|
(1,255
|
)
|
|
|
45,855
|
|
Provision for (benefit from) income taxes
|
|
|
18,491
|
|
|
|
(266
|
)
|
|
|
(168
|
)
|
|
|
18,057
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
$
|
28,912
|
|
|
$
|
(27
|
)
|
|
$
|
(1,087
|
)
|
|
$
|
27,798
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
81
MOBILE
MINI, INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
MOBILE
MINI, INC.
CONDENSED
CONSOLIDATING STATEMENTS OF INCOME
For the
Year Ended December 31, 2010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-
|
|
|
|
|
|
|
|
|
|
Guarantors
|
|
|
Guarantors
|
|
|
Eliminations
|
|
|
Consolidated
|
|
|
|
(In thousands)
|
|
|
Revenues:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Leasing
|
|
$
|
246,846
|
|
|
$
|
48,188
|
|
|
$
|
|
|
|
$
|
295,034
|
|
Sales
|
|
|
28,005
|
|
|
|
5,151
|
|
|
|
|
|
|
|
33,156
|
|
Other
|
|
|
2,217
|
|
|
|
350
|
|
|
|
|
|
|
|
2,567
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenues
|
|
|
277,068
|
|
|
|
53,689
|
|
|
|
|
|
|
|
330,757
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Costs and expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of sales
|
|
|
18,305
|
|
|
|
3,692
|
|
|
|
|
|
|
|
21,997
|
|
Leasing, selling and general expenses
|
|
|
142,861
|
|
|
|
36,260
|
|
|
|
|
|
|
|
179,121
|
|
Integration, merger and restructuring expenses
|
|
|
3,998
|
|
|
|
16
|
|
|
|
|
|
|
|
4,014
|
|
Depreciation and amortization
|
|
|
29,075
|
|
|
|
6,611
|
|
|
|
|
|
|
|
35,686
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total costs and expenses
|
|
|
194,239
|
|
|
|
46,579
|
|
|
|
|
|
|
|
240,818
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from operations
|
|
|
82,829
|
|
|
|
7,110
|
|
|
|
|
|
|
|
89,939
|
|
Other income (expense):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest income
|
|
|
811
|
|
|
|
1
|
|
|
|
(811
|
)
|
|
|
1
|
|
Interest expense
|
|
|
(54,345
|
)
|
|
|
(2,896
|
)
|
|
|
811
|
|
|
|
(56,430
|
)
|
Dividend income
|
|
|
847
|
|
|
|
|
|
|
|
(847
|
)
|
|
|
|
|
Intercompany debt waiver
|
|
|
(98,442
|
)
|
|
|
98,442
|
|
|
|
|
|
|
|
|
|
Debt restructuring expense
|
|
|
(11,024
|
)
|
|
|
|
|
|
|
|
|
|
|
(11,024
|
)
|
Deferred financing costs write-off
|
|
|
(525
|
)
|
|
|
|
|
|
|
|
|
|
|
(525
|
)
|
Foreign currency exchange
|
|
|
|
|
|
|
(9
|
)
|
|
|
|
|
|
|
(9
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) before provision for (benefit from) income taxes
|
|
|
(79,849
|
)
|
|
|
102,648
|
|
|
|
(847
|
)
|
|
|
21,952
|
|
Provision for (benefit from) income taxes
|
|
|
7,429
|
|
|
|
1,104
|
|
|
|
(90
|
)
|
|
|
8,443
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
$
|
(87,278
|
)
|
|
$
|
101,544
|
|
|
$
|
(757
|
)
|
|
$
|
13,509
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
82
MOBILE
MINI, INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
MOBILE
MINI, INC.
CONDENSED
CONSOLIDATING STATEMENTS OF CASH FLOWS
For the
Year Ended December 31, 2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-
|
|
|
|
|
|
|
|
|
|
Guarantors
|
|
|
Guarantors
|
|
|
Eliminations
|
|
|
Consolidated
|
|
|
|
(In thousands)
|
|
|
Cash Flows From Operating Activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
$
|
46,093
|
|
|
$
|
(17,219
|
)
|
|
$
|
167
|
|
|
$
|
29,041
|
|
Adjustments to reconcile net income (loss) to net cash provided
by (used in) operating activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Provision for doubtful accounts
|
|
|
4,351
|
|
|
|
912
|
|
|
|
(2
|
)
|
|
|
5,261
|
|
Provision for restructuring charge
|
|
|
5,626
|
|
|
|
|
|
|
|
|
|
|
|
5,626
|
|
Goodwill impairment
|
|
|
|
|
|
|
13,667
|
|
|
|
|
|
|
|
13,667
|
|
Amortization of deferred financing costs
|
|
|
2,455
|
|
|
|
|
|
|
|
|
|
|
|
2,455
|
|
Amortization of long-term liabilities
|
|
|
418
|
|
|
|
|
|
|
|
|
|
|
|
418
|
|
Share-based compensation expense
|
|
|
5,139
|
|
|
|
512
|
|
|
|
5
|
|
|
|
5,656
|
|
Depreciation and amortization
|
|
|
26,402
|
|
|
|
5,365
|
|
|
|
|
|
|
|
31,767
|
|
Gain on sale of lease fleet units
|
|
|
(8,977
|
)
|
|
|
(888
|
)
|
|
|
16
|
|
|
|
(9,849
|
)
|
Loss on disposal of property, plant and equipment
|
|
|
566
|
|
|
|
1
|
|
|
|
|
|
|
|
567
|
|
Deferred income taxes
|
|
|
29,273
|
|
|
|
(1,381
|
)
|
|
|
31
|
|
|
|
27,923
|
|
Foreign currency loss
|
|
|
|
|
|
|
112
|
|
|
|
|
|
|
|
112
|
|
Changes in certain assets and liabilities, net of effect of
businesses acquired:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Receivables
|
|
|
(2,031
|
)
|
|
|
(1,029
|
)
|
|
|
|
|
|
|
(3,060
|
)
|
Inventories
|
|
|
7,655
|
|
|
|
|
|
|
|
|
|
|
|
7,655
|
|
Deposits and prepaid expenses
|
|
|
(698
|
)
|
|
|
875
|
|
|
|
|
|
|
|
177
|
|
Other assets and intangibles
|
|
|
105
|
|
|
|
|
|
|
|
|
|
|
|
105
|
|
Accounts payable
|
|
|
(11,469
|
)
|
|
|
(4,262
|
)
|
|
|
|
|
|
|
(15,731
|
)
|
Accrued liabilities
|
|
|
(1,432
|
)
|
|
|
(1,840
|
)
|
|
|
|
|
|
|
(3,272
|
)
|
Intercompany
|
|
|
(2,502
|
)
|
|
|
4,025
|
|
|
|
(1,523
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used in) operating activities
|
|
|
100,974
|
|
|
|
(1,150
|
)
|
|
|
(1,306
|
)
|
|
|
98,518
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash Flows From Investing Activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash paid for businesses acquired
|
|
|
(36,448
|
)
|
|
|
3,198
|
|
|
|
|
|
|
|
(33,250
|
)
|
Additions to lease fleet, excluding acquisitions
|
|
|
(58,016
|
)
|
|
|
(18,606
|
)
|
|
|
|
|
|
|
(76,622
|
)
|
Proceeds from sale of lease fleet units
|
|
|
24,652
|
|
|
|
3,758
|
|
|
|
(72
|
)
|
|
|
28,338
|
|
Additions to property, plant and equipment
|
|
|
(11,614
|
)
|
|
|
(5,260
|
)
|
|
|
|
|
|
|
(16,874
|
)
|
Proceeds from sale of property, plant and equipment
|
|
|
492
|
|
|
|
3
|
|
|
|
|
|
|
|
495
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash used in investing activities
|
|
|
(80,934
|
)
|
|
|
(16,907
|
)
|
|
|
(72
|
)
|
|
|
(97,913
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash Flows From Financing Activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net borrowings under lines of credit
|
|
|
109,975
|
|
|
|
19,376
|
|
|
|
(9,010
|
)
|
|
|
120,341
|
|
Deferred financing costs
|
|
|
(15,166
|
)
|
|
|
|
|
|
|
|
|
|
|
(15,166
|
)
|
Proceeds from issuance of notes payable
|
|
|
1,249
|
|
|
|
|
|
|
|
|
|
|
|
1,249
|
|
Principal payments on notes payable
|
|
|
(113,851
|
)
|
|
|
(30
|
)
|
|
|
|
|
|
|
(113,881
|
)
|
Principal payments on capital lease obligations
|
|
|
(702
|
)
|
|
|
(2
|
)
|
|
|
|
|
|
|
(704
|
)
|
Issuance of common stock, net
|
|
|
1,472
|
|
|
|
|
|
|
|
|
|
|
|
1,472
|
|
Intercompany
|
|
|
209
|
|
|
|
(253
|
)
|
|
|
44
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash (used in) provided by financing activities
|
|
|
(16,814
|
)
|
|
|
19,091
|
|
|
|
(8,966
|
)
|
|
|
(6,689
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effect of exchange rate changes on cash
|
|
|
(3,051
|
)
|
|
|
(1,728
|
)
|
|
|
10,344
|
|
|
|
5,565
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net increase (decrease) in cash
|
|
|
175
|
|
|
|
(694
|
)
|
|
|
|
|
|
|
(519
|
)
|
Cash at beginning of year
|
|
|
2,033
|
|
|
|
1,670
|
|
|
|
|
|
|
|
3,703
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash at end of year
|
|
$
|
2,208
|
|
|
$
|
976
|
|
|
$
|
|
|
|
$
|
3,184
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
83
MOBILE
MINI, INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
MOBILE
MINI, INC.
CONDENSED
CONSOLIDATING STATEMENTS OF CASH FLOWS
For the
Year Ended December 31, 2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-
|
|
|
|
|
|
|
|
|
|
Guarantors
|
|
|
Guarantors
|
|
|
Eliminations
|
|
|
Consolidated
|
|
|
|
(In thousands)
|
|
|
Cash Flows From Operating Activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
$
|
28,912
|
|
|
$
|
(27
|
)
|
|
$
|
(1,087
|
)
|
|
$
|
27,798
|
|
Adjustments to reconcile net income (loss) to net cash provided
by (used in) operating activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Provision for doubtful accounts
|
|
|
2,189
|
|
|
|
497
|
|
|
|
15
|
|
|
|
2,701
|
|
Amortization of deferred financing costs
|
|
|
4,456
|
|
|
|
|
|
|
|
|
|
|
|
4,456
|
|
Amortization of long-term liabilities
|
|
|
906
|
|
|
|
|
|
|
|
|
|
|
|
906
|
|
Share-based compensation expense
|
|
|
5,263
|
|
|
|
526
|
|
|
|
(7
|
)
|
|
|
5,782
|
|
Depreciation and amortization
|
|
|
31,562
|
|
|
|
7,520
|
|
|
|
|
|
|
|
39,082
|
|
Gain on sale of lease fleet units
|
|
|
(10,586
|
)
|
|
|
(1,065
|
)
|
|
|
(10
|
)
|
|
|
(11,661
|
)
|
Loss on disposal of property, plant and equipment
|
|
|
47
|
|
|
|
5
|
|
|
|
|
|
|
|
52
|
|
Deferred income taxes
|
|
|
17,460
|
|
|
|
(247
|
)
|
|
|
(12
|
)
|
|
|
17,201
|
|
Foreign currency loss
|
|
|
|
|
|
|
88
|
|
|
|
|
|
|
|
88
|
|
Changes in certain assets and liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Receivables
|
|
|
13,503
|
|
|
|
5,123
|
|
|
|
|
|
|
|
18,626
|
|
Inventories
|
|
|
2,545
|
|
|
|
1,146
|
|
|
|
|
|
|
|
3,691
|
|
Deposits and prepaid expenses
|
|
|
3,528
|
|
|
|
(116
|
)
|
|
|
|
|
|
|
3,412
|
|
Other assets and intangibles
|
|
|
(845
|
)
|
|
|
|
|
|
|
|
|
|
|
(845
|
)
|
Accounts payable
|
|
|
(1,850
|
)
|
|
|
(4,443
|
)
|
|
|
|
|
|
|
(6,293
|
)
|
Accrued liabilities
|
|
|
(16,127
|
)
|
|
|
(2,099
|
)
|
|
|
|
|
|
|
(18,226
|
)
|
Intercompany
|
|
|
(8,652
|
)
|
|
|
8,310
|
|
|
|
342
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used in) operating activities
|
|
|
72,311
|
|
|
|
15,218
|
|
|
|
(759
|
)
|
|
|
86,770
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash Flows From Investing Activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Additions to lease fleet
|
|
|
(13,140
|
)
|
|
|
(8,377
|
)
|
|
|
|
|
|
|
(21,517
|
)
|
Proceeds from sale of lease fleet units
|
|
|
29,135
|
|
|
|
4,353
|
|
|
|
7
|
|
|
|
33,495
|
|
Additions to property, plant and equipment
|
|
|
(7,059
|
)
|
|
|
(3,235
|
)
|
|
|
|
|
|
|
(10,294
|
)
|
Proceeds from sale of property, plant and equipment
|
|
|
941
|
|
|
|
311
|
|
|
|
|
|
|
|
1,252
|
|
Other
|
|
|
112
|
|
|
|
|
|
|
|
|
|
|
|
112
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used in) investing activities
|
|
|
9,989
|
|
|
|
(6,948
|
)
|
|
|
7
|
|
|
|
3,048
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash Flows From Financing Activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net repayments borrowings under lines of credit
|
|
|
(83,903
|
)
|
|
|
(7,305
|
)
|
|
|
10,331
|
|
|
|
(80,877
|
)
|
Redemption of 9.75% Senior Notes
|
|
|
(1,150
|
)
|
|
|
|
|
|
|
|
|
|
|
(1,150
|
)
|
Deferred financing costs
|
|
|
(75
|
)
|
|
|
|
|
|
|
|
|
|
|
(75
|
)
|
Proceeds from issuance of notes payable
|
|
|
1,272
|
|
|
|
|
|
|
|
|
|
|
|
1,272
|
|
Principal payments on notes payable
|
|
|
(1,478
|
)
|
|
|
(55
|
)
|
|
|
|
|
|
|
(1,533
|
)
|
Principal payments on capital lease obligations
|
|
|
(1,435
|
)
|
|
|
1
|
|
|
|
(2
|
)
|
|
|
(1,436
|
)
|
Issuance of common stock, net
|
|
|
800
|
|
|
|
|
|
|
|
|
|
|
|
800
|
|
Intercompany
|
|
|
(209
|
)
|
|
|
(1,076
|
)
|
|
|
1,285
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash (used in) provided by financing activities
|
|
|
(86,178
|
)
|
|
|
(8,435
|
)
|
|
|
11,614
|
|
|
|
(82,999
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effect of exchange rate changes on cash
|
|
|
2,252
|
|
|
|
347
|
|
|
|
(10,862
|
)
|
|
|
(8,263
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (decrease) increase in cash
|
|
|
(1,626
|
)
|
|
|
182
|
|
|
|
|
|
|
|
(1,444
|
)
|
Cash at beginning of year
|
|
|
2,208
|
|
|
|
976
|
|
|
|
|
|
|
|
3,184
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash at end of year
|
|
$
|
582
|
|
|
$
|
1,158
|
|
|
$
|
|
|
|
$
|
1,740
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
84
MOBILE
MINI, INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
MOBILE
MINI, INC.
CONDENSED
CONSOLIDATING STATEMENTS OF CASH FLOWS
For the
Year Ended December 31, 2010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-
|
|
|
|
|
|
|
|
|
|
Guarantors
|
|
|
Guarantors
|
|
|
Eliminations
|
|
|
Consolidated
|
|
|
|
(In thousands)
|
|
|
Cash Flows From Operating Activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (loss) income
|
|
$
|
(87,278
|
)
|
|
$
|
101,544
|
|
|
$
|
(757
|
)
|
|
$
|
13,509
|
|
Adjustments to reconcile net income (loss) to net cash (used in)
provided by operating activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Debt restructuring expense
|
|
|
11,024
|
|
|
|
|
|
|
|
|
|
|
|
11,024
|
|
Deferred financing costs write-off
|
|
|
525
|
|
|
|
|
|
|
|
|
|
|
|
525
|
|
Provision for doubtful accounts
|
|
|
1,368
|
|
|
|
524
|
|
|
|
|
|
|
|
1,892
|
|
Amortization of deferred financing costs
|
|
|
4,366
|
|
|
|
|
|
|
|
|
|
|
|
4,366
|
|
Amortization of long-term liabilities
|
|
|
981
|
|
|
|
53
|
|
|
|
|
|
|
|
1,034
|
|
Share-based compensation expense
|
|
|
5,723
|
|
|
|
569
|
|
|
|
|
|
|
|
6,292
|
|
Depreciation and amortization
|
|
|
29,075
|
|
|
|
6,611
|
|
|
|
|
|
|
|
35,686
|
|
Gain on sale of lease fleet units
|
|
|
(9,050
|
)
|
|
|
(995
|
)
|
|
|
|
|
|
|
(10,045
|
)
|
Loss on disposal of property, plant and equipment
|
|
|
25
|
|
|
|
9
|
|
|
|
|
|
|
|
34
|
|
Deferred income taxes
|
|
|
6,625
|
|
|
|
1,102
|
|
|
|
9
|
|
|
|
7,736
|
|
Foreign currency loss
|
|
|
|
|
|
|
9
|
|
|
|
|
|
|
|
9
|
|
Changes in certain assets and liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Receivables
|
|
|
(3,689
|
)
|
|
|
(280
|
)
|
|
|
|
|
|
|
(3,969
|
)
|
Inventories
|
|
|
2,366
|
|
|
|
140
|
|
|
|
|
|
|
|
2,506
|
|
Deposits and prepaid expenses
|
|
|
1,263
|
|
|
|
223
|
|
|
|
|
|
|
|
1,486
|
|
Other assets and intangibles
|
|
|
(873
|
)
|
|
|
|
|
|
|
|
|
|
|
(873
|
)
|
Accounts payable
|
|
|
(5
|
)
|
|
|
(430
|
)
|
|
|
|
|
|
|
(435
|
)
|
Accrued liabilities
|
|
|
(9,623
|
)
|
|
|
(349
|
)
|
|
|
|
|
|
|
(9,972
|
)
|
Intercompany
|
|
|
34,809
|
|
|
|
(14,009
|
)
|
|
|
(20,800
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash (used in) provided by operating activities
|
|
|
(12,368
|
)
|
|
|
94,721
|
|
|
|
(21,548
|
)
|
|
|
60,805
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash Flows From Investing Activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Additions to lease fleet
|
|
|
(7,239
|
)
|
|
|
(7,864
|
)
|
|
|
|
|
|
|
(15,103
|
)
|
Proceeds from sale of lease fleet units
|
|
|
25,675
|
|
|
|
3,185
|
|
|
|
|
|
|
|
28,860
|
|
Additions to property, plant and equipment
|
|
|
(6,693
|
)
|
|
|
(1,862
|
)
|
|
|
|
|
|
|
(8,555
|
)
|
Proceeds from sale of property, plant and equipment
|
|
|
68
|
|
|
|
81
|
|
|
|
|
|
|
|
149
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used in) investing activities
|
|
|
11,811
|
|
|
|
(6,460
|
)
|
|
|
|
|
|
|
5,351
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash Flows From Financing Activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net repayments under lines of credit
|
|
|
(7,917
|
)
|
|
|
(66,423
|
)
|
|
|
(2,433
|
)
|
|
|
(76,773
|
)
|
Proceeds from issuance of 7.875% Senior Notes
|
|
|
200,000
|
|
|
|
|
|
|
|
|
|
|
|
200,000
|
|
Redemption of 9.75% Senior Notes
|
|
|
(176,578
|
)
|
|
|
|
|
|
|
|
|
|
|
(176,578
|
)
|
Senior Note redemption premiums
|
|
|
(8,955
|
)
|
|
|
|
|
|
|
|
|
|
|
(8,955
|
)
|
Deferred financing costs
|
|
|
(4,964
|
)
|
|
|
|
|
|
|
|
|
|
|
(4,964
|
)
|
Proceeds from issuance of notes payable
|
|
|
466
|
|
|
|
|
|
|
|
|
|
|
|
466
|
|
Principal payments on notes payable
|
|
|
(1,276
|
)
|
|
|
(27
|
)
|
|
|
|
|
|
|
(1,303
|
)
|
Principal payments on capital lease obligations
|
|
|
(1,484
|
)
|
|
|
(1
|
)
|
|
|
|
|
|
|
(1,485
|
)
|
Issuance of common stock, net
|
|
|
1,861
|
|
|
|
|
|
|
|
|
|
|
|
1,861
|
|
Intercompany
|
|
|
|
|
|
|
(860
|
)
|
|
|
860
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used in) financing activities
|
|
|
1,153
|
|
|
|
(67,311
|
)
|
|
|
(1,573
|
)
|
|
|
(67,731
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effect of exchange rate changes on cash
|
|
|
(113
|
)
|
|
|
(21,539
|
)
|
|
|
23,121
|
|
|
|
1,469
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net increase (decrease) in cash
|
|
|
483
|
|
|
|
(589
|
)
|
|
|
|
|
|
|
(106
|
)
|
Cash at beginning of year
|
|
|
582
|
|
|
|
1,158
|
|
|
|
|
|
|
|
1,740
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash at end of year
|
|
$
|
1,065
|
|
|
$
|
569
|
|
|
$
|
|
|
|
$
|
1,634
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
85
|
|
ITEM 9.
|
CHANGES
IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
|
There were no disagreements with accountants on accounting and
financial disclosure matters during the periods reported herein.
|
|
ITEM 9A.
|
CONTROLS
AND PROCEDURES.
|
Controls
and Procedures
As of the end of the period covered by this report, we carried
out an evaluation, under the supervision and with the
participation of our management, including our Chief Executive
Officer and our Chief Financial Officer, of the effectiveness of
the design and operation of our disclosure controls and
procedures (as such term is defined in
Rules 13a-15(e)
and
15d-15(e)
under the Securities Exchange Act of 1934, as amended). Based on
that evaluation, our Chief Executive Officer and our Chief
Financial Officer concluded that, as of the end of the period
covered by this Annual Report on
Form 10-K,
the Companys disclosure controls and procedures, were
effective such that the information relating to the Company
required to be disclosed in our SEC reports (i) is
recorded, processed, summarized and reported within the time
periods specified in the SECs rules and forms, and
(ii) is accumulated and communicated to the Companys
management, including our Chief Executive Officer and our Chief
Financial Officer, as appropriate, to allow timely decisions
regarding required disclosure.
Report of
Management on Internal Control Over Financial
Reporting
Our management is responsible for establishing and maintaining
adequate internal control over financial reporting for the
company. Internal control over financial reporting is a process
to provide reasonable assurance regarding the reliability of our
financial reporting for external purposes in accordance with
accounting principles generally accepted in the United States of
America. Internal control over financial reporting includes
maintaining records that in reasonable detail accurately and
fairly reflect our transactions; providing reasonable assurance
that transactions are recorded as necessary for preparation of
our financial statements; providing reasonable assurance that
receipts and expenditures of company assets are made in
accordance with management authorization; and providing
reasonable assurance that unauthorized acquisition, use, or
disposition of company assets that could have a material effect
on our financial statements would be prevented or detected on a
timely basis. Because of its inherent limitations, internal
control over financial reporting is not intended to provide
absolute assurance that a misstatement of our financial
statements would be prevented or detected.
Management conducted an evaluation of the effectiveness of the
Companys internal control over financial reporting based
on the framework in Internal Control Integrated
Framework issued by the Committee of Sponsoring
Organizations of the Treadway Commission. Based on this
evaluation, management concluded that the Companys
internal control over financial reporting was effective as of
December 31, 2010.
Our internal control over financial reporting as of
December 31, 2010 has been audited by Ernst &
Young, LLP, an independent registered public accounting firm, as
stated in their report which is included herein.
86
Report of
Independent Registered Public Accounting Firm
The Board of Directors and Stockholders of
Mobile Mini, Inc.
We have audited Mobile Mini, Inc.s internal control over
financial reporting as of December 31, 2010, based on
criteria established in Internal Control Integrated
Framework issued by the Committee of Sponsoring Organizations of
the Treadway Commission (the COSO criteria). Mobile Mini,
Inc.s management is responsible for maintaining effective
internal control over financial reporting, and for its
assessment of the effectiveness of internal control over
financial reporting included in the accompanying Report of
Management on Internal Control Over Financial Reporting. Our
responsibility is to express an opinion on the companys
internal control over financial reporting based on our audit.
We conducted our audit in accordance with the standards of the
Public Company Accounting Oversight Board (United States). Those
standards require that we plan and perform the audit to obtain
reasonable assurance about whether effective internal control
over financial reporting was maintained in all material
respects. Our audit included obtaining an understanding of
internal control over financial reporting, assessing the risk
that a material weakness exists, testing and evaluating the
design and operating effectiveness of internal control based on
the assessed risk, and performing such other procedures as we
considered necessary in the circumstances. We believe that our
audit provides a reasonable basis for our opinion.
A companys internal control over financial reporting is a
process designed to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of
financial statements for external purposes in accordance with
generally accepted accounting principles. A companys
internal control over financial reporting includes those
policies and procedures that (1) pertain to the maintenance
of records that, in reasonable detail, accurately and fairly
reflect the transactions and dispositions of the assets of the
company; (2) provide reasonable assurance that transactions
are recorded as necessary to permit preparation of financial
statements in accordance with generally accepted accounting
principles, and that receipts and expenditures of the company
are being made only in accordance with authorizations of
management and directors of the company; and (3) provide
reasonable assurance regarding prevention or timely detection of
unauthorized acquisition, use or disposition of the
companys assets that could have a material effect on the
financial statements.
Because of its inherent limitations, internal control over
financial reporting may not prevent or detect misstatements.
Also, projections of any evaluation of effectiveness to future
periods are subject to the risk that controls may become
inadequate because of changes in conditions, or that the degree
of compliance with the policies or procedures may deteriorate.
In our opinion, Mobile Mini, Inc. maintained, in all material
respects, effective internal control over financial reporting as
of December 31, 2010, based on the COSO criteria.
We also have audited, in accordance with the standards of the
Public Company Accounting Oversight Board (United States), the
consolidated balance sheets of Mobile Mini, Inc. (and
subsidiaries) as of December 31, 2010 and 2009, and the
related consolidated statements of income, preferred stock and
stockholders equity, and cash flows for each of the three
years in the period ended December 31, 2010 of Mobile Mini,
Inc. and our report dated March 1, 2011 expressed an
unqualified opinion thereon.
Phoenix, Arizona
March 1, 2011
87
Changes
in Internal Control Over Financial Reporting
Under the supervision and with the participation of our
management, including our Principal Executive Officer and
Principal Financial Officer, we conducted an evaluation of any
changes in our internal control over financial reporting (as
such term is defined in
Rules 13a-15(f)
and
15d-15(f)
under the Exchange Act) that occurred during our most recently
completed fiscal quarter. Based on that evaluation, our
Principal Executive Officer and Principal Financial Officer
concluded that there has not been any change in our internal
control over financial reporting during that quarter that has
materially affected, or is reasonably likely to materially
affect, our internal control over financial reporting.
|
|
ITEM 9B.
|
OTHER
INFORMATION.
|
None
PART III
|
|
ITEM 10.
|
DIRECTORS,
EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE.
|
EXECUTIVE
OFFICERS OF MOBILE MINI, INC.
Set forth below is information respecting the name, age and
position with Mobile Mini of our 2010 executive officers.
Information with respect to our directors and the nomination
process is incorporated herein by reference to information
included in the Proxy Statement for our 2011 Annual Meeting of
Stockholders, to be filed with the SEC no later than
120 days following our fiscal year end (the 2011 Proxy
Statement).
Steven G. Bunger has served as our Chief Executive Officer,
President and a director since April 1997, and as our Chairman
of the Board since February 2001. Mr. Bunger joined Mobile
Mini in 1983 and initially worked in our drafting and design
department. He served in a variety of positions including
dispatcher, salesperson and advertising coordinator before
joining management. He served as sales manager of our Phoenix
branch and our operations manager and Vice President of
Operations and Marketing before becoming our Executive Vice
President and Chief Operating Officer in November 1995. He is
also a director of Cavco Industries, Inc., one of the
nations largest producers of manufactured housing.
Mr. Bunger graduated from Arizona State University with a
B.A. in Business Administration. Age 49.
Mark E. Funk has served as our Executive Vice President and
Chief Financial Officer since November 2008. Prior to joining
us, he was with Deutsche Bank Securities Inc. from September
1988 to November 2008, most recently as Managing Director in its
Structured Debt Group, where he had worked on numerous high
profile transactions. During his tenure at Deutsche Bank,
Mr. Funk worked in their New York, London, Chicago and Los
Angeles offices. Prior to joining Deutsche Bank, Mr. Funk
passed the certified public accountant examination and was a
senior auditor with KPMG. Mr. Funk earned a Bachelor of
Science in Business Administration from California State
University Long Beach and an MBA from University of California,
Los Angeles. Age 48.
Jody E. Miller has served as our Executive Vice President and
Chief Operating Officer since January 2009. Mr. Miller
joined us in June 2008 as Senior Vice President, Southeastern
Division from Mobile Storage Group. He had been a Regional Vice
President-Southeast Region and North Region since March 2004
with Mobile Storage Group. Prior to that he had served as
Regional Vice President of Rental Service Corporation, working
there from October 1988 to February 2004. Mr. Miller
graduated from Central Missouri State University with a degree
in construction engineering. He has worked in the equipment
leasing and portable storage industry for 21 years.
Age 43.
Kyle G. Blackwell joined Mobile Mini in 1988 and has served in
numerous capacities, currently as our Senior Vice President,
Eastern Division, since 2002 and as our Vice President,
Operations from 1999 to 2000. He also served as a Regional
Manager from 1995 to 1999 and was engaged with the start up of
our Texas locations. Age 47.
Ronald Halchishak joined Mobile Mini after the combination with
Mobile Storage Group in June 2008 as our Senior Vice President
and Managing Director-Europe. He had been a Managing Director of
Ravenstock MSG since July 2007. Prior to that, from June 2003 to
January 2007, he served as the Vice President of the
Mid-Atlantic for
88
Nations Rent. From June 1991 to March 2001, Mr. Halchishak
was Division President at Rental Service Corporation. He
graduated from Humboldt State University with a B.A. in
political science and psychology. Age 63.
Jon D. Keating has served as our Senior Vice President,
Operations since January 2008. He joined Mobile Mini in 1996 and
also served as Vice President, Manufacturing from April 2005 to
December 2007, a Regional Manager from March of 2000 to April
2005 and from November of 1996 to March of 2000 as Branch
Manager at our Phoenix sales branch. Age 41.
Deborah K. Keeley has served as our Senior Vice President and
Chief Accounting Officer since November 2005. From September
2005 to November 2005, she served as Senior Vice President. From
June 2005 to September 2005, she served as Senior Vice President
and Controller. From August 1996 to June 2005 she served as Vice
President and Controller and from August 1995 as Controller.
Prior to joining us, she was Corporate Accounting Manager for
Evans Withycombe Residential, an apartment developer, for six
years. Ms. Keeley has an Associates degree in Computer
Science and received her Bachelors degree in Accounting from
Arizona State University. Age 46.
Ronald E. Marshall has served as our Senior Vice President,
Central Division since October of 2003. From June of 1999 to
September of 2003 he was a Regional Manager for three of our
regions beginning with the Colorado/Utah and ending with the
California/Arizona market. He was our Director-Acquisitions from
February of 1998 to May of 1999. He joined Mobile Mini, Inc. in
February of 1997 as Branch Manager of Tucson, Arizona. Prior to
joining us, he was the General Manager of Pearce Distributing, a
beverage distributorship in Phoenix, Arizona. Age 60.
Christopher J. Miner has served as Senior Vice President and
General Counsel since December 2008. He joined Mobile Mini in
June 2008 as Vice President and General Counsel. He was
previously a partner at DLA Piper from 2007 to 2008 and advised
numerous corporate and financial institution clients on merger,
acquisition and capital markets transactions. Prior to that, he
was a partner at Squire, Sanders & Dempsey, which he
joined in 2004. He was an attorney in New York and Europe with
Davis Polk & Wardwell from 1999 to 2004 where he
specialized in corporate and securities law. Mr. Miner
received a B.A. and a J.D. from Brigham Young University.
Age 39.
Information regarding our audit committee and our audit
committee financial experts is incorporated herein by reference
to information included in the 2011 Proxy Statement.
Information required by Item 405 of
Regulation S-K
is incorporated herein by reference to information included in
the 2011 Proxy Statement.
We have adopted a Code of Business Conduct and Ethics that
applies to our employees generally, and a Supplemental Code of
Ethics applicable to our Chief Financial Officer and Senior
Financial Officers in compliance with applicable rules of the
SEC that applies to our principal executive officer, our
principal financial officer, and our principal accounting
officer or controller, or persons performing similar functions.
A copy of these Codes is available free of charge on the
Investors section of our web site at
www.mobilemini.com. We intend to satisfy any disclosure
requirement under Item 5.05 of
Form 8-K
regarding an amendment to, or waiver from, a provision of the
Supplemental Code of Ethics by posting such information on our
web site at the address and location specified above.
|
|
ITEM 11.
|
EXECUTIVE
COMPENSATION.
|
Information with respect to executive compensation is
incorporated herein by reference to information included in the
2011 Proxy Statement.
|
|
ITEM 12.
|
SECURITY
OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
RELATED STOCKHOLDER MATTERS.
|
Equity
Compensation Plan Information
We maintain the 1994 Stock Option Plan (the 1994 Plan), the 1999
Stock Option Plan (the 1999 Plan) and the 2006 Equity Incentive
Plan (the 2006 Plan), pursuant to which we may grant equity
awards to eligible persons. The
89
1994 Plan expired in 2003 and no additional options may be
granted thereunder and there are no outstanding options subject
to exercise at the end of 2010 pursuant thereto. The 1999 Plan
expired in 2009 and no additional options maybe granted
thereunder and outstanding options continue to be subject to the
terms of the 1999 Plan until their exercise or termination. The
following table summarizes our equity compensation plan
information as of December 31, 2010. Information is
included for both equity compensation plans approved by our
stockholders and equity plans not approved by our stockholders.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common Shares
|
|
|
|
|
|
Common Shares Remaining
|
|
|
|
to be Issued Upon
|
|
|
Weighted Average
|
|
|
Available for Future
|
|
|
|
Exercise of
|
|
|
Exercise Price of
|
|
|
Issuance Under Equity
|
|
|
|
Outstanding
|
|
|
Outstanding
|
|
|
Compensation Plans
|
|
|
|
Options, Warrants
|
|
|
Options, Warrants
|
|
|
(Excluding Shares
|
|
|
|
and Rights
|
|
|
and Rights
|
|
|
Reflected in Column (a)
|
|
Plan Category
|
|
(a)
|
|
|
(b)
|
|
|
(c)
|
|
|
|
(In thousands)
|
|
|
|
|
|
(In thousands)
|
|
|
Equity compensation plans approved by Mobile Mini stockholders(1)
|
|
|
1,618
|
|
|
$
|
17.83
|
|
|
|
2,233
|
|
Equity compensation plans not approved by Mobile Mini
stockholders
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Totals
|
|
|
1,618
|
|
|
$
|
17.83
|
|
|
|
2,233
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Of these shares, options to purchase 1.32 million shares
were outstanding under the 1999 Plan and options to purchase
0.3 million shares were outstanding under the 2006 Plan. |
On December 31, 2010, the closing price of Mobile
Minis common stock as reported by The NASDAQ Stock Market
was $19.69.
The information set forth in our 2011 Proxy Statement under the
headings Security Ownership of Certain Beneficial Owners
and Management is incorporated herein by reference.
|
|
ITEM 13.
|
CERTAIN
RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR
INDEPENDENCE.
|
The information set forth in our 2011 Proxy Statement under the
caption Related Person Transactions and information
relating to director independence is incorporated herein by
reference.
|
|
ITEM 14.
|
PRINCIPAL
ACCOUNTING FEES AND SERVICES.
|
The information set forth in our 2011 Proxy Statement under the
caption Audit Committee Disclosure is incorporated
herein by reference.
90
PART IV
|
|
ITEM 15.
|
EXHIBITS AND
FINANCIAL STATEMENT SCHEDULES.
|
(a) Financial Statements:
(1) The financial statements required to be included in
this Report are included in Item 8 of this Report.
(2) The following financial statement schedule for the
years ended December 31, 2008, 2009 and 2010 is filed with
our Annual Report on
Form 10-K
for fiscal year ended December 31, 2010:
Schedule II Valuation and Qualifying Accounts
All other schedules have been omitted because they are not
applicable or not required.
|
|
|
|
|
Exhibit
|
|
|
Number
|
|
Description
|
|
|
2
|
.1
|
|
Agreement and Plan of Merger, dated as of February 22,
2008, among Mobile Mini, Inc., Cactus Merger Sub, Inc., MSG WC
Holdings Corp., and Welsh, Carson, Anderson & Stowe X,
L.P. (Incorporated by reference to Exhibit 2.1 to the
Registrants Report on
Form 8-K
filed on February 28, 2008).
|
|
3
|
.1
|
|
Amended and Restated Certificate of Incorporation of Mobile
Mini, Inc. (Incorporated by reference to Exhibit 3.1 to the
Registrants Report on
Form 10-K
for the fiscal year ended December 31, 1997).
|
|
3
|
.2
|
|
Certificate of Amendment, dated July 20, 2000, to the
Amended and Restated Certificate of Incorporation of the
Registrant. (Incorporated by reference to Exhibit 3.1A to
the Registrants Report on
Form 10-Q
for the quarter ended June 30, 2000).
|
|
3
|
.3
|
|
Certificate of Designation, Preferences and Rights of
Series C Junior Participating Preferred Stock of Mobile
Mini, Inc., dated December 17, 1999. (Incorporated by
reference to Exhibit A to Exhibit 1 to the
Registrants Registration Statement on
Form 8-A
filed on December 13, 1999).
|
|
3
|
.4
|
|
Certificate of Amendment of the Amended and Restated Certificate
of Incorporation of Mobile Mini, Inc., dated June 26, 2008.
(Incorporated by reference to Exhibit 3.2 to the
Registrants Report on
Form 8-K
filed on July 1, 2008).
|
|
3
|
.5
|
|
Certificate of Designation of Mobile Mini, Inc. Series A
Convertible Redeemable Participating Preferred Stock, dated
June 27, 2008. (Incorporated by reference to
Exhibit 3.1 to the Registrants Report on
Form 8-K
filed on July 1, 2008).
|
|
3
|
.6
|
|
Amended and Restated By-laws of Mobile Mini, Inc., as amended
and restated through May 2, 2007. (Incorporated by
reference to Exhibit 3.2 to the Registrants Report on
Form 10-K
for the fiscal year ended December 31, 2007).
|
|
4
|
.1
|
|
Form of Common Stock Certificate. (Incorporated by reference to
Exhibit 4.1 of the Registrants Report on
Form 10-K
for the fiscal year ended December 31, 2003).
|
|
4
|
.2
|
|
Rights Agreement, dated as of December 9, 1999, between
Mobile Mini, Inc. and Norwest Bank Minnesota, NA, as Rights
Agent. (Incorporated by reference to the Registrants
Registration Statement on
Form 8-A
filed on December 13, 1999).
|
|
4
|
.3
|
|
Indenture dated as of May 7, 2007 among the Registrant, Law
Debenture Trust Company of New York, as Trustee, and
Deutsche Bank Trust Company Americas, as Paying Agent and
Registrar. ((Incorporated by reference to Exhibit 4.1 to
the Registrants Registration Statement on
Form S-4
filed on June 26, 2007) (the Mobile Mini Indenture)).
|
|
4
|
.4
|
|
Supplemental Indenture, dated as of June 27, 2008, among
Mobile Mini, Inc., Mobile Storage Group, Inc., A Better Mobile
Storage Company, Mobile Storage Group (Texas), LP, the
guarantors party to the Mobile Mini Indenture and Law Debenture
Trust Company of New York, as trustee. (Incorporated by
reference to Exhibit 4.3 to the Registrants Report on
Form 8-K
filed on July 1, 2008).
|
|
4
|
.5
|
|
Indenture, dated as of August 1, 2006, by and among Mobile
Services Group, Inc., Mobile Storage Group, Inc., the subsidiary
guarantors named therein and Wells Fargo Bank, N.A., as trustee.
((Incorporated by reference to Exhibit 4.1 to Mobile
Storage Group, Inc.s
Form S-4
filed on September 18, 2007) (the MSG Indenture)).
|
91
|
|
|
|
|
Exhibit
|
|
|
Number
|
|
Description
|
|
|
4
|
.6
|
|
Supplemental Indenture, dated as of June 27, 2008, among
Mobile Mini, Inc., Mobile Mini of Ohio, LLC, Mobile Mini, LLC,
Mobile, LLC, Mobile Mini I, Inc., A Royal Wolf Portable
Storage, Inc., Temporary Mobile Storage, Inc., Delivery Design
Systems, Inc., Mobile Mini Texas Limited Partnership, LLP,
Mobile Storage Group, Inc., the guarantors party to the MSG
Indenture and Wells Fargo Bank, N.A., as trustee. (Incorporated
by reference to Exhibit 4.1 to the Registrants Report
on
Form 8-K
filed on July 1, 2008).
|
|
4
|
.7
|
|
Indenture, dated as of November 23, 2010, among the
Registrant, the Guarantor parties thereto, Law Debenture
Trust Company of New York, as trustee, and Deutsche Bank
Trust Company Americas, as paying agent, registrar and
transfer agent. (Incorporated by reference to Exhibit 4.1
to the Registrants Report on
Form 8-K
filed on November 29, 2010).
|
|
4
|
.8
|
|
Second Supplemental Indenture, dated as of November 22,
2010, among the Registrant, the Guarantor parties thereto and
Wells Fargo Bank, N.A., as trustee. (Incorporated by reference
to Exhibit 4.2 to the Registrants Report on
Form 8-K
filed on November 29, 2010).
|
|
10
|
.1
|
|
Mobile Mini, Inc. Amended and Restated 1994 Stock Option Plan.
(Incorporated by reference to Exhibit 10.3 of the
Registrants Report on
Form 10-K
for the fiscal year ended December 31, 1997).
|
|
10
|
.2
|
|
Mobile Mini, Inc. Amended and Restated 1999 Stock Option Plan
(as amended through March 25, 2003). (Incorporated by
reference to Appendix B of the Registrants Definitive
Proxy Statement for its 2003 annual meeting of shareholders,
filed on April 11, 2003 under cover of Schedule 14A).
|
|
10
|
.3
|
|
Form of Stock Option Grant Agreement. (Incorporated by reference
to Exhibit 10.2.1 of the Registrants Report on
Form 10-K
for the fiscal year ended December 31, 2004).
|
|
10
|
.4
|
|
Mobile Mini, Inc. 2006 Equity Incentive Plan. (Incorporated by
reference to Exhibit A of the Registrants Definitive
Proxy Statement for its 2009 annual meeting of shareholders
filed on April 30, 2009 under cover of Schedule 14A).
|
|
10
|
.5
|
|
ABL Credit Agreement, dated June 27, 2008, between Mobile
Mini, Deutsche Bank AG New York Branch and other lenders party
thereto. (Incorporated by reference to Exhibit 10.3 to the
Registrants Report on
Form 8-K
filed on July 1, 2008).
|
|
10
|
.6+
|
|
Schedules to the ABL Credit Agreement, dated June 27, 2008,
between Mobile Mini, Deutsch Bank AG New York Branch and other
lenders party thereto. (Incorporated by reference to
Exhibit 10.1 of the Registrants Report on
Form 10-Q
for the quarter ended September 30, 2010).
|
|
10
|
.7
|
|
First Amendment to ABL Credit Agreement, dated August 31,
2008, between Mobile Mini, certain of its subsidiaries, Deutsche
Bank AG New York Branch and the other lenders party thereto.
(Incorporated by reference to Exhibit 10.1 to the
Registrants Report on
Form 8-K
filed on September 4, 2008).
|
|
10
|
.8
|
|
Schedules to the First Amendment to ABL Credit Agreement dated
August 31, 2008, between Mobile Mini, certain of its
subsidiaries, Deutsche Bank AG New York Branch and the other
lenders party thereto. (Incorporated by reference to
Exhibit 10.2 of the Registrants Report on
Form 10-Q
for the quarter ended September 30, 2010).
|
|
10
|
.9
|
|
Second Amendment to ABL Credit Agreement, dated August 18,
2010, between Mobile Mini, certain of its subsidiaries, Deutsche
Bank AG New York Branch and the other lenders party thereto.
(Incorporated by reference to Exhibit 10.1 of the
Registrants Report on
Form 8-K
filed on August 20, 2010).
|
|
10
|
.10
|
|
Amended and Restated Employment Agreement dated as of
May 28, 2008 by and between Mobile Mini, Inc. and Steven G.
Bunger. (Incorporated by reference to Exhibit 99.1 to the
Registrants Report on
Form 8-K
dated June 2, 2008).
|
|
10
|
.11
|
|
2009 Amendment to Amended and Restated Employment Agreement
effective as of January 1, 2009 by and between Mobile Mini,
Inc. and Steven G. Bunger. (Incorporated by reference to
Exhibit 10.8 of the Registrants Report on
Form 10-K
for the fiscal year ended December 31, 2009).
|
|
10
|
.12
|
|
Employment Agreement dated September 30, 2008 between
Mobile Mini, Inc. and Lawrence Trachtenberg. (Incorporated by
reference to Exhibit 10.1 to the Registrants Report
on
Form 8-K
filed on September 30, 2008).
|
|
10
|
.13
|
|
Employment Agreement dated October 15, 2008 between Mobile
Mini, Inc. and Mark E. Funk. (Incorporated by reference to
Exhibit 10.1 to the Registrants Report on
Form 8-K
filed on October 17, 2008).
|
92
|
|
|
|
|
Exhibit
|
|
|
Number
|
|
Description
|
|
|
10
|
.14
|
|
2009 Amendment to Amended and Restated Employment Agreement
effective as of January 1, 2009 by and between Mobile Mini,
Inc. and Mark E. Funk. (Incorporated by reference to
Exhibit 10.11 of the Registrants Report on
Form 10-K
for the fiscal year ended December 31, 2009).
|
|
10
|
.15
|
|
Employment Agreement dated as of December 18, 2008 by and
between Mobile Mini, Inc. and Jody Miller. (Incorporated by
reference to Exhibit 99.1 to the Registrants Report
on
Form 8-K
filed on December 23, 2008).
|
|
10
|
.16
|
|
2009 Amendment to Amended and Restated Employment Agreement
effective as of January 1, 2009 by and between Mobile Mini,
Inc. and Jody Miller. (Incorporated by reference to
Exhibit 10.13 of the Registrants Report on
Form 10-K
for the fiscal year ended December 31, 2009).
|
|
10
|
.17
|
|
Employment Agreement dated as of December 22, 2009 by and
between Mobile Mini, Inc. and Christopher J. Miner.
(Incorporated by reference to Exhibit 99.1 to the
Registrants Report on
Form 8-K
filed on December 24, 2009).
|
|
10
|
.18
|
|
Form of Indemnification Agreement between the Registrant and its
Directors and Executive Officers. (Incorporated by reference to
Exhibit 10.20 to the Registrants Report on
Form 10-Q
for the quarter ended June 30, 2004).
|
|
10
|
.19
|
|
Escrow Agreement dated as of June 27, 2008, between Mobile
Mini, Welsh, Carson, Anderson & Stowe X, L.P. and
Wells Fargo Bank, N.A. (Incorporated by reference to
Exhibit 10.1 to the Registrants Report on
Form 8-K
filed on July 1, 2008).
|
|
10
|
.20
|
|
Stockholders Agreement dated as of June 27, 2008, between
Mobile Mini and the certain stockholders. (Incorporated by
reference to Exhibit 10.2 to the Registrants Report
on
Form 8-K
filed on July 1, 2008).
|
|
10
|
.21
|
|
Registration Rights Agreement, dated as of November 23,
2010, among the Registrant, the Guarantor parties thereto, and
the Initial Purchasers. (Incorporated by reference to
Exhibit 4.2 to the Registrants Report on
Form 8-K
filed on November 29, 2010).
|
|
21*
|
|
|
Subsidiaries of Mobile Mini, Inc.
|
|
23
|
.1*
|
|
Consent of Independent Registered Public Accounting Firm.
|
|
23
|
.2*
|
|
Consent of Independent Valuation Firm.
|
|
31
|
.1*
|
|
Certification of Chief Executive Officer pursuant to
Item 601(b)(31) of
Regulation S-K.
|
|
31
|
.2*
|
|
Certification of Chief Financial Officer pursuant to
Item 601(b)(31) of
Regulation S-K.
|
|
32
|
.1**
|
|
Certification of Chief Executive Officer and Chief Financial
Officer pursuant to Item 601(b)(32) of
Regulation S-K.
|
|
101
|
.INS***
|
|
XBRL Instance Document.
|
|
101
|
.SCH***
|
|
XBRL Taxonomy Extension Schema Document.
|
|
101
|
.CAL***
|
|
XBRL Taxonomy Extension Calculation Linkbase Document.
|
|
101
|
.LAB***
|
|
XBRL Taxonomy Extension Labels Linkbase Document.
|
|
101
|
.PRE***
|
|
XBRL Taxonomy Extension Presentation Linkbase Document.
|
|
|
|
* |
|
Filed herewith. |
|
** |
|
Furnished herewith. |
|
*** |
|
Furnished herewith. In accordance with Rule 406T of
Regulation S-T,
the information in these exhibits shall not be deemed to be
filed for purposes of Section 18 of the
Exchange Act, or otherwise subject to liability under that
section, and shall not be incorporated by reference into any
registration statement, prospectus or other document filed under
the Securities Act of 1933, as amended, except as expressly set
forth by specific reference in such filing. |
|
+ |
|
Certain confidential information contained in this exhibit was
omitted by means of redacting a portion of the text and
replacing it with an asterisk. This exhibit has been filed
separately with the Secretary of the SEC without the redaction
pursuant to Confidential Treatment Request under Rule 406
of the Securities Act. |
93
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the registrant has duly caused
this Report to be signed on its behalf by the undersigned,
thereunto duly authorized.
|
|
|
|
|
|
|
|
|
MOBILE MINI, INC.
|
|
|
|
|
|
Date: March 1, 2011
|
|
By:
|
|
/s/ Steven G. Bunger
Steven G. Bunger, President
|
Pursuant to the requirements of the Securities Exchange Act of
1934, this Report has been signed by the following persons on
behalf of the registrant and in the capacities and on the dates
indicated.
|
|
|
|
|
Date: March 1, 2011
|
|
By:
|
|
/s/ Steven G. Bunger
Steven G. Bunger
President, Chief Executive Officer and Director (Principal
Executive Officer)
|
Date: March 1, 2011
|
|
By:
|
|
/s/ Mark E. Funk
Mark E. Funk
Executive Vice President and Chief Financial Officer (Principal
Financial Officer)
|
Date: March 1, 2011
|
|
By:
|
|
/s/ Deborah K. Keeley
Deborah K. Keeley
Senior Vice President and Chief Accounting Officer (Principal
Accounting Officer)
|
Date: March 1, 2011
|
|
By:
|
|
/s/ James J. Martell
James J. Martell, Director
|
Date: March 1, 2011
|
|
By:
|
|
/s/ Jeffrey S. Goble
Jeffrey S. Goble, Director
|
Date: March 1, 2011
|
|
By:
|
|
/s/ Stephen A McConnell
Stephen A McConnell, Director
|
Date: March 1, 2011
|
|
By:
|
|
/s/ Frederick G. McNamee
Frederick G. McNamee, Director
|
Date: March 1, 2011
|
|
By:
|
|
/s/ Sanjay Swani
Sanjay Swani, Director
|
Date: March 1, 2011
|
|
By:
|
|
/s/ Lawrence Trachtenberg
Lawrence Trachtenberg, Director
|
Date: March 1, 2011
|
|
By:
|
|
/s/ Michael L. Watts
Michael L. Watts, Director
|
94
Schedule
SCHEDULE II
MOBILE
MINI, INC.
VALUATION
AND QUALIFYING ACCOUNTS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Years Ended December 31,
|
|
|
|
2008
|
|
|
2009
|
|
|
2010
|
|
|
|
(In thousands)
|
|
|
Allowance for doubtful accounts:
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at beginning of year
|
|
$
|
3,993
|
|
|
$
|
7,193
|
|
|
$
|
3,715
|
|
Provision charged to expense
|
|
|
5,261
|
|
|
|
2,701
|
|
|
|
1,892
|
|
Acquired through business acquisitions
|
|
|
2,873
|
|
|
|
623
|
|
|
|
|
|
Write-offs
|
|
|
(4,934
|
)
|
|
|
(6,802
|
)
|
|
|
(3,183
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at end of year
|
|
$
|
7,193
|
|
|
$
|
3,715
|
|
|
$
|
2,424
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
95
INDEX TO
EXHIBITS FILED HEREWITH
|
|
|
|
|
Exhibit
|
|
|
Number
|
|
Description
|
|
|
21
|
|
|
Subsidiaries of Mobile Mini, Inc.
|
|
23
|
.1
|
|
Consent of Independent Registered Public Accounting Firm.
|
|
23
|
.2
|
|
Consent of Independent Valuation Firm.
|
|
31
|
.1
|
|
Certification of Chief Executive Officer pursuant to
Item 601(b)(31) of
Regulation S-K.
|
|
31
|
.2
|
|
Certification of Chief Financial Officer pursuant to
Item 601(b)(31) of
Regulation S-K.
|
|
32
|
.1
|
|
Certification of Chief Executive Officer and Chief Financial
Officer pursuant to Item 601(b)(32) of
Regulation S-K.
|