e10vq
U. S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
Form 10-Q
(Mark One)
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þ |
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended June 30, 2006
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o |
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from to
Commission File Number 1-12804
(Exact name of registrant as specific in its charter)
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Delaware
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86-0748362 |
(State or other jurisdiction of
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(IRS Employer Identification No.) |
incorporation or organization) |
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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)
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 is a large accelerated filer, an accelerated
filer or a non-accelerated filer. See definition of accelerated filer and large accelerated filer
in Rule 12b-2 of the Exchange Act.
Large accelerated filer o Accelerated filer þ Non-accelerated filer o
Indicate by check mark whether the registrant is a shell company (as defined by Rule
12b-2 of the Securities Exchange Act of 1934). Yes o No þ
At July 31, 2006, there were outstanding 35,414,264 shares of the issuers common stock.
MOBILE MINI, INC.
INDEX TO FORM 10-Q FILING
FOR THE QUARTER ENDED JUNE 30, 2006
TABLE OF CONTENTS
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PAGE |
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NUMBER |
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3 |
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3 |
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Three Months ended June 30, 2005 and June 30, 2006 |
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4 |
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Six months ended June 30, 2005 and June 30, 2006 |
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5 |
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6 |
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7 |
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17 |
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30 |
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31 |
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32 |
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32 |
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32 |
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EX-31.1 |
EX-31.2 |
EX-32.1 |
2
PART I. FINANCIAL INFORMATION
ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS
MOBILE MINI, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands except per share data)
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December 31, 2005 |
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June 30, 2006 |
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(Note A) |
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(unaudited) |
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ASSETS |
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Cash and cash equivalents |
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$ |
207 |
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$ |
2,698 |
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Receivables, net of allowance for doubtful accounts of
$3,234 and $4,396 at December 31, 2005 and June 30,
2006, respectively |
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24,538 |
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32,150 |
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Inventories |
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23,490 |
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30,857 |
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Lease fleet, net |
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550,464 |
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631,855 |
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Property, plant and equipment, net |
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36,048 |
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39,017 |
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Deposits and prepaid expenses |
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7,669 |
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7,774 |
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Other assets and intangibles, net |
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6,230 |
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11,072 |
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Goodwill |
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56,311 |
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79,655 |
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Total assets |
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$ |
704,957 |
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$ |
835,078 |
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LIABILITIES AND STOCKHOLDERS EQUITY |
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Liabilities: |
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Accounts payable |
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$ |
17,481 |
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$ |
23,014 |
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Accrued liabilities |
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35,576 |
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39,117 |
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Line of credit |
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157,926 |
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181,055 |
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Notes payable |
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659 |
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Obligations under capital leases |
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47 |
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Senior Notes |
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150,000 |
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97,500 |
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Deferred income taxes |
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75,340 |
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86,327 |
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Total liabilities |
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436,982 |
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427,060 |
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Commitments and contingencies |
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Stockholders equity: |
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Common stock; $.01 par value, 95,000 shares authorized,
30,618 and 35,408 issued and outstanding at December
31, 2005 and June 30, 2006, respectively |
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306 |
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354 |
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Additional paid-in capital |
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141,855 |
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263,383 |
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Deferred share-based compensation |
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(2,258 |
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Retained earnings |
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126,942 |
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142,804 |
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Accumulated other comprehensive income |
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1,130 |
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1,477 |
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Total stockholders equity |
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267,975 |
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408,018 |
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Total liabilities and stockholders equity |
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$ |
704,957 |
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$ |
835,078 |
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See accompanying notes to the condensed consolidated financial statements.
3
MOBILE MINI, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(In thousands except per share data)
(unaudited)
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Three Months Ended June 30, |
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2005 |
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2006 |
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Revenues: |
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Leasing |
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$ |
45,276 |
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$ |
59,331 |
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Sales |
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4,883 |
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6,590 |
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Other |
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242 |
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377 |
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Total revenues |
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50,401 |
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66,298 |
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Costs and expenses: |
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Cost of sales |
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3,032 |
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4,152 |
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Leasing, selling and general expenses |
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25,988 |
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33,849 |
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Depreciation and amortization |
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3,139 |
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4,004 |
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Total costs and expenses |
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32,159 |
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42,005 |
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Income from operations |
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18,242 |
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24,293 |
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Other income (expense): |
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Interest income |
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7 |
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372 |
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Other income |
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3,160 |
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Interest expense |
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(5,630 |
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(5,740 |
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Debt extinquishment expense |
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(6,425 |
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Foreign currency exchange |
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(51 |
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Income before provision for income taxes |
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15,779 |
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12,449 |
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Provision for income taxes |
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5,634 |
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4,791 |
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Net income |
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$ |
10,145 |
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$ |
7,658 |
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Earnings per share: |
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Basic |
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$ |
0.34 |
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$ |
0.22 |
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Diluted |
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$ |
0.33 |
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$ |
0.21 |
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Weighted average number of common and
common share equivalents outstanding: |
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Basic |
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29,611 |
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35,191 |
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Diluted |
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30,589 |
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36,297 |
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See accompanying notes to the condensed consolidated financial statements
4
MOBILE MINI, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(In thousands except per share data)
(unaudited)
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Six Months Ended June 30, |
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2005 |
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2006 |
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Revenues: |
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Leasing |
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$ |
86,668 |
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$ |
110,865 |
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Sales |
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8,865 |
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11,118 |
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Other |
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611 |
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735 |
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Total revenues |
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96,144 |
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122,718 |
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Costs and expenses: |
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Cost of sales |
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5,559 |
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7,066 |
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Leasing, selling and general expenses |
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50,170 |
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63,846 |
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Depreciation and amortization |
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6,187 |
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7,592 |
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Total costs and expenses |
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61,916 |
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78,504 |
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Income from operations |
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34,228 |
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44,214 |
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Other income (expense): |
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Interest income |
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8 |
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424 |
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Other income |
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3,160 |
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Interest expense |
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(11,150 |
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(12,186 |
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Debt extinquishment expense |
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(6,425 |
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Foreign currency exchange |
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(51 |
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Income before provision for income taxes |
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26,246 |
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25,976 |
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Provision for income taxes |
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9,716 |
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10,114 |
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Net income |
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$ |
16,530 |
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$ |
15,862 |
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Earnings per share: |
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Basic |
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$ |
0.56 |
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$ |
0.48 |
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Diluted |
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$ |
0.54 |
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$ |
0.47 |
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Weighted average number of common and
common share equivalents outstanding: |
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Basic |
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29,509 |
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32,951 |
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Diluted |
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30,479 |
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34,001 |
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See accompanying notes to the condensed consolidated financial statements.
5
MOBILE MINI, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(unaudited)
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Six Months Ended June 30, |
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2005 |
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2006 |
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Cash Flows From Operating Activities: |
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Net income |
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$ |
16,530 |
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$ |
15,862 |
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Adjustments to reconcile income to net cash provided by operating
activities: |
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Debt extinquishment expense |
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1,438 |
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Provision for doubtful accounts |
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1,341 |
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2,032 |
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Amortization of deferred financing costs |
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414 |
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436 |
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Amortization of share-based compensation |
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1,535 |
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Depreciation and amortization |
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6,187 |
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7,592 |
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Gain on sale of lease fleet units |
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(1,722 |
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(2,232 |
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Loss on disposal of property, plant and equipment |
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434 |
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40 |
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Deferred income taxes |
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9,697 |
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9,870 |
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Foreign currency exchange rate loss |
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51 |
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Changes in certain assets and liabilities: |
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Receivables |
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(3,429 |
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(5,924 |
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Inventories |
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(8,621 |
) |
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(2,373 |
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Deposits and prepaid expenses |
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1,253 |
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294 |
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Other assets and intangibles |
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21 |
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(3 |
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Accounts payable |
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5,113 |
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1,594 |
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Accrued liabilities |
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(268 |
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(923 |
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Net cash provided by operating activities |
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26,950 |
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29,289 |
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Cash Flows From Investing Activities: |
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Cash paid for businesses acquired |
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(59,496 |
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Additions to lease fleet, excluding acquisitions |
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(44,306 |
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(60,442 |
) |
Proceeds from sale of lease fleet units |
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4,705 |
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6,287 |
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Additions to property, plant and equipment, excluding acquisitions |
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(1,806 |
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(3,872 |
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Proceeds from sale of property, plant and equipment |
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23 |
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61 |
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Change in other assets |
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157 |
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Net cash used in investing activities |
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(41,227 |
) |
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(117,462 |
) |
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Cash Flows From Financing Activities: |
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Net borrowings under lines of credit |
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12,104 |
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23,159 |
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Redemption of Senior Notes |
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(52,500 |
) |
Deferred financing costs |
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(1,629 |
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Principal payments on notes payable |
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(783 |
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(608 |
) |
Principal payments on capital lease obligations |
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(4 |
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Net issuance of common stock |
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3,206 |
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122,100 |
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Net cash provided by financing activities |
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|
14,527 |
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|
90,518 |
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Effect of exchange rate changes on cash |
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(143 |
) |
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|
146 |
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Net increase in cash |
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|
107 |
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|
2,491 |
|
Cash at beginning of period |
|
|
759 |
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|
207 |
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Cash at end of period |
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$ |
866 |
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$ |
2,698 |
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Supplemental Disclosure of Cash Flow Information: |
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Interest rate swap changes in value credited to equity |
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$ |
207 |
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$ |
233 |
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|
See accompanying notes to the condensed consolidated financial statements.
6
MOBILE MINI, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
NOTE A
Basis of Presentation
The accompanying unaudited condensed consolidated financial statements have been prepared in
conformity with U.S. generally accepted accounting principles applicable to interim financial
information and the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they
do not include all the information and footnotes required by accounting principles generally
accepted in the United States for complete financial statements. In the opinion of management, all
adjustments (which include normal and recurring adjustments) necessary to present fairly the
financial position, results of operations, and cash flows for all periods presented have been made.
All significant inter-Company balances and transactions have been eliminated. Certain
prior-period amounts in the accompanying condensed consolidated financial statements have been
reclassified to conform to current financial presentation.
The consolidated balance sheet at December 31, 2005 has been derived from the audited consolidated
financial statements at that date but does not include all of the information and footnotes
required by accounting principles generally accepted in the United States for complete financial
statements.
The results of operations for the six-month period ended June 30, 2006 are not necessarily
indicative of the operating results that may be expected for the entire year ending December 31,
2006. Historically, Mobile Mini experiences some seasonality each year which has caused lower
utilization rates for our lease fleet and a marginal decrease in cash flow during the first half of
the year. These condensed consolidated financial statements should be read in conjunction with our
December 31, 2005 consolidated financial statements and accompanying notes thereto, which are
included in our Annual Report on Form 10-K filed with the Securities and Exchange Commission (SEC)
on March 16, 2006.
On February 22, 2006, our Board of Directors approved a two-for-one stock split in the form of a
100 percent stock dividend, which was effected on March 10, 2006. Per share amounts, share amounts
and weighted numbers of shares outstanding give effect for this two-for-one stock split for all
periods presented.
NOTE B
Recent Accounting Pronouncements
SFAS No. 154, Accounting Changes and Error Corrections, a replacement of APB Opinion No. 20,
Accounting Changes, and Statement No. 3, Reporting Accounting Changes in Interim Financial
Statements, was issued in May 2005. SFAS No. 154 changes the requirements for the accounting and
reporting of a change in accounting principle. Previously, most voluntary changes in accounting
principles were recognized by way of a cumulative effect adjustment within net income during the
period of the change. SFAS No. 154 requires retrospective application to prior periods financial
statements, unless it is impracticable to determine either the period-specific effects or the
cumulative effect of the change. SFAS No. 154 is effective for accounting changes made in fiscal
years beginning after December 15, 2005. However, SFAS No. 154 does not change the transition
provisions of any existing accounting pronouncements. We adopted SFAS No. 154 on January 1, 2006,
and do not expect it to have a material effect on our results of operations or financial condition.
In June 2006, the Financial Accounting Standards Board (FASB) issued Financial Interpretation No.
(FIN) 48, Accounting for Uncertainty in Income Taxes, which clarifies the accounting for
uncertainty in income taxes recognized in an enterprises financial statements in accordance with
FASB Statement No. 109, Accounting for Income Taxes. The interpretation prescribes a recognition
threshold and measurement attribute for the financial statement recognition and measurement of a
tax position taken or expected to be taken in a tax return. FIN 48 is effective for fiscal years
beginning after December 15, 2006. We are currently evaluating the requirements under FIN 48 and
the effect, if any, that the adoption of FIN 48 will have on our results of operations or financial
condition.
7
NOTE C Basic earnings per common share are computed by dividing net income by the weighted
average number of shares of common stock outstanding during the period. Diluted earnings per
common share are determined assuming the potential dilution of the exercise or conversion of
options into common stock. The following table shows the computation of earnings per share for the
three-month period and six-month period ended June 30.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
Six Months Ended |
|
|
|
June 30, |
|
|
June 30, |
|
|
|
2005 |
|
|
2006 |
|
|
2005 |
|
|
2006 |
|
|
|
(In thousands except earnings per share data) |
|
BASIC: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock outstanding,
beginning of period |
|
|
29,574 |
|
|
|
35,154 |
|
|
|
29,366 |
|
|
|
30,521 |
|
Effect of weighting shares: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted shares issued during
the period ended June 30, |
|
|
37 |
|
|
|
37 |
|
|
|
143 |
|
|
|
2,430 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average number of
shares outstanding |
|
|
29,611 |
|
|
|
35,191 |
|
|
|
29,509 |
|
|
|
32,951 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income available to
shareholders |
|
$ |
10,145 |
|
|
$ |
7,658 |
|
|
$ |
16,530 |
|
|
$ |
15,862 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings per share |
|
$ |
0.34 |
|
|
$ |
0.22 |
|
|
$ |
0.56 |
|
|
$ |
0.48 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
DILUTED: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock outstanding,
beginning of period |
|
|
29,574 |
|
|
|
35,154 |
|
|
|
29,366 |
|
|
|
30,521 |
|
Effect of weighting shares: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted shares issued during
the period ended June 30, |
|
|
37 |
|
|
|
37 |
|
|
|
143 |
|
|
|
2,430 |
|
Employee stock options
assumed converted during the
period ended June 30, |
|
|
978 |
|
|
|
1,106 |
|
|
|
970 |
|
|
|
1,050 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average number of
shares outstanding |
|
|
30,589 |
|
|
|
36,297 |
|
|
|
30,479 |
|
|
|
34,001 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income available to common
shareholders |
|
$ |
10,145 |
|
|
$ |
7,658 |
|
|
$ |
16,530 |
|
|
$ |
15,862 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings per share |
|
$ |
0.33 |
|
|
$ |
0.21 |
|
|
$ |
0.54 |
|
|
$ |
0.47 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the three months ended June 30, 2005 and 2006, options to purchase 1,000 and 466,900,
respectively, of the Companys stock were excluded from the calculation of diluted earnings per
share because they were anti-dilutive. For the six months ended June 30, 2005 and 2006, options to
purchase 7,000 and 466,400, respectively, of the Companys stock were excluded from the calculation
of diluted earnings per share because they were anti-dilutive. The table above excludes 124,018
nonvested share awards granted in 2005 and 2006.
8
NOTE D
Share-Based Compensation
At June 30, 2006, the Company had three active share-based employee compensation plans. Stock
option awards under these plans are granted at the fair market value on the date of grant. Each
option must expire no more than 10 years from the date it is granted and historically options are
granted with vesting over a 4.5 year period. Prior to January 1, 2006, the Company accounted for
share-based employee compensation, including stock options, using the method prescribed in
Accounting Principles Board Opinion No. 25, Accounting for Stock Issued to Employees and Related
Interpretations. Under APB Opinion No. 25, we did not recognize compensation cost in connection
with stock options granted at market price, and we disclosed the pro forma effect on net earnings
assuming compensation cost had been recognized in accordance with Statement of Financial Accounting
Standards No. 123, Accounting for Stock-Based Compensation. On December 16, 2004, the Financial
Accounting Standards Board issued SFAS No. 123(R), Share-Based Payment, which requires companies to
measure and recognize compensation expense for all share-based payments at fair value. SFAS No.
123(R) eliminates the ability to account for share-based compensation transactions using APB
Opinion No. 25, and generally requires that such transactions to be accounted for using prescribed
fair-value-based methods. SFAS No. 123(R) permits public companies to adopt its requirements using
one of two methods: (a) a modified prospective method in which compensation costs are recognized
beginning with the effective date based on the requirements of SFAS No. 123(R) for all share-based
payments granted or modified after the effective date, and based on the requirements of SFAS No.
123 for all awards granted to employees prior to the effective date of SFAS No. 123(R) that remain
unvested on the effective date, or (b) a modified retrospective method which includes the
requirements of the modified prospective method described above, but also permits companies to
restate based on the amounts previously recognized under SFAS No. 123 for purposes of pro forma
disclosures either for all periods presented, or prior interim periods of the year of adoption.
The Company adopted SFAS No. 123(R) effective January 1, 2006, using the modified prospective
method. Other than nonvested share awards, no share-based employee compensation cost has been
reflected in net income prior to the adoption of SFAS No. 123(R). Results for prior periods have
not been restated.
The adoption of SFAS No. 123(R) and nonvested share expense reduced income before income tax
expense for the three-month and six-month period ended June 30, 2006, by approximately $0.8
million, and $1.5 million, respectively. It reduced net income for the three-month and six-month
period ended June 30, 2006 by approximately $0.5 million and $1.0 million, respectively. As a
result, basic and diluted earnings per share for the three-month and six-month period ended June
30, 2006 were each reduced by approximately $0.01 and $0.03, respectively.
In December 2005, the Company awarded 96,668 nonvested shares of the Companys common stock with a
weighted average fair value of $23.56 per share based upon the trading price of our common stock on
the date of the award. In the second quarter of 2006, the Company awarded 27,350 nonvested shares
of the Companys common stock with a weighted average fair value of $33.75 per share based upon the
trading price of our common stock on the date of the award. The total value of the award 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 options granted to fully vest. Share-based compensation expense related to nonvested
share awards outstanding during the three month period and six month period ended June 30, 2006,
was approximately $0.1 million and $0.2 million, respectively. As of June 30, 2006, the total
amount of unrecognized compensation cost related to nonvested share awards was approximately $2.9
million, which is expected to be recognized over a weighted-average period of approximately five
years. There were no shares vested or shares forfeited in the six months ended June 30, 2006.
The total value of the stock option awards is expensed on a straight-line basis over the service
period of the employees receiving the awards. As of June 30, 2006, total unrecognized compensation
cost related to stock option awards was approximately $7.9 million and the related weighted-average
period over which it is expected to be recognized is approximately 1.9 years.
Prior to the adoption of SFAS No. 123(R), the Company presented all tax benefits of deductions
resulting from the exercise of stock options as operating cash flows in the change in deferred
income tax line in the condensed consolidated statements of cash flows. SFAS No. 123(R) requires
the cash flows resulting from the tax benefits arising from tax deductions in excess of the
compensation cost recognized for those options (excess tax benefits) to be classified as
9
financing
cash flows. As of June 30, 2006, 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.
10
A summary of stock option activity within the Companys stock-based compensation plans and changes
for the six months ended June 30, 2006 is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average |
|
|
|
|
|
|
|
|
|
|
Weighted |
|
|
Remaining |
|
|
Aggregate |
|
|
|
Number |
|
|
Average |
|
|
Contractual |
|
|
Intrinsic |
|
|
|
of Shares |
|
|
Exercise |
|
|
Term |
|
|
Value |
|
|
|
(In thousands) |
|
|
Price |
|
|
(In years) |
|
|
(In thousands) |
|
Balance at December 31, 2005 |
|
|
2,964 |
|
|
$ |
14.00 |
|
|
|
|
|
|
|
|
|
Granted |
|
|
63 |
|
|
|
32.58 |
|
|
|
|
|
|
|
|
|
Exercised |
|
|
(163 |
) |
|
|
11.34 |
|
|
|
|
|
|
|
|
|
Terminated/expired |
|
|
(45 |
) |
|
|
19.20 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at June 30, 2006 |
|
|
2,819 |
|
|
$ |
14.48 |
|
|
|
6.78 |
|
|
$ |
41,890 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The intrinsic value of options exercised during the six months ended June 30, 2006 was $2.9
million.
A summary of fully-vested stock options and stock options expected to vest, as of June 30, 2006, is
as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted |
|
|
|
|
|
|
|
|
|
|
|
|
Average |
|
|
|
|
|
|
|
|
Weighted |
|
Remaining |
|
Aggregate |
|
|
Number |
|
Average |
|
Contractual |
|
Intrinsic |
|
|
of Shares |
|
Exercise |
|
Term |
|
Value |
|
|
(In thousands) |
|
Price |
|
(In years) |
|
(In thousands) |
Outstanding |
|
|
2,558 |
|
|
$ |
13.95 |
|
|
|
6.6 |
|
|
$ |
39,335 |
|
Exercisable |
|
|
1,726 |
|
|
$ |
12.88 |
|
|
|
5.8 |
|
|
$ |
28,276 |
|
The fair value of each stock option award is estimated on the date of the grant using the
Black-Scholes option pricing model. The following are the weighted average assumptions used for the
periods noted:
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended |
|
|
June 30 |
|
|
2005 |
|
2006 |
Risk-free interest rate |
|
|
4.04 |
% |
|
|
5.05 |
% |
Expected holding period |
|
5.7 years |
|
|
3.6 years |
|
Expected stock volatility |
|
|
37.1 |
% |
|
|
36.9 |
% |
Expected dividend rate |
|
|
0.0 |
% |
|
|
0.0 |
% |
The risk-free interest rate is based on the U.S. treasury security rate in effect at the time of
the grant. The expected holding period of options and volatility rates are based on historical data
of the Company. The expected dividend yield is based on expected annual dividend to be paid by the
Company as a percentage of the market value of the Companys stock as of the date of grant.
The weighted average fair value of stock options granted during the six months ended June 30, 2005
and 2006 was $7.24 and $10.95, respectively.
11
The following table illustrates the effect on net income and net income per common share as if the
Company had applied the fair value recognition provisions of SFAS No. 123 to all outstanding stock
option awards for periods presented prior to the Companys adoption of SFAS No. 123(R):
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
Six Months Ended |
|
|
|
June 30, 2005 |
|
|
June 30, 2005 |
|
|
|
(In thousand except per share data) |
|
Net income, as reported |
|
$ |
10,145 |
|
|
$ |
16,530 |
|
Deduct: Total stock-based
employee compensation
expense determined under
fair value based method for
all awards, net of related
tax effects |
|
|
576 |
|
|
|
2,035 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pro-forma net income |
|
$ |
9,569 |
|
|
$ |
14,495 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income per common share |
|
|
|
|
|
|
|
|
Basic, as reported |
|
$ |
0.34 |
|
|
$ |
0.56 |
|
Basic, pro forma |
|
$ |
0.32 |
|
|
$ |
0.49 |
|
Diluted, as reported |
|
$ |
0.33 |
|
|
$ |
0.54 |
|
Diluted, pro forma |
|
$ |
0.31 |
|
|
$ |
0.48 |
|
NOTE E Inventories are valued at the lower of cost (principally on a standard cost basis which
approximates the first-in, first-out (FIFO) method) or market. Market is the lower of replacement
cost or net realizable value. Inventories primarily consist of raw materials, supplies,
work-in-process and finished goods, all related to the manufacturing, refurbishment and maintenance
of units, primarily for our lease fleet and our units held for sale. Raw materials principally
consist of raw steel, wood, glass, paint, vinyl and other assembly components used in manufacturing
and refurbishing processes. Work-in-process primarily represents units being built at our
manufacturing facility that are either pre-sold or being built to add to our lease fleet upon
completion. Finished portable storage units primarily represents ISO containers held in inventory
until the containers are either sold as is, refurbished and sold, or units in the process of being
refurbished to be compliant with our lease fleet standards before transferring the units to our
lease fleet. There is no certainty when we purchase the containers whether they will ultimately be
sold, refurbished and sold, or refurbished and moved into our lease fleet. Units that we add to
our lease fleet undergo an extensive refurbishment process that includes installing our proprietary
locking system, signage, painting and sometimes adding our proprietary security doors.
|
|
|
|
|
|
|
|
|
|
|
December 31, 2005 |
|
|
June 30, 2006 |
|
|
|
(In thousands) |
|
Raw material and supplies |
|
$ |
16,054 |
|
|
$ |
18,413 |
|
Work-in-process |
|
|
1,819 |
|
|
|
3,011 |
|
Finished portable storage units |
|
|
5,617 |
|
|
|
9,433 |
|
|
|
|
|
|
|
|
|
|
$ |
23,490 |
|
|
$ |
30,857 |
|
|
|
|
|
|
|
|
12
NOTE F 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. 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. Property, plant and equipment consist of the
following at:
|
|
|
|
|
|
|
|
|
|
|
December 31, 2005 |
|
|
June 30, 2006 |
|
|
|
(In thousands) |
|
Land |
|
$ |
772 |
|
|
$ |
772 |
|
Vehicles and equipment |
|
|
38,867 |
|
|
|
41,459 |
|
Buildings and improvements |
|
|
8,905 |
|
|
|
9,698 |
|
Office fixtures and equipment |
|
|
7,296 |
|
|
|
8,807 |
|
|
|
|
|
|
|
|
|
|
|
55,840 |
|
|
|
60,736 |
|
Less accumulated depreciation |
|
|
(19,792 |
) |
|
|
(21,719 |
) |
|
|
|
|
|
|
|
|
|
$ |
36,048 |
|
|
$ |
39,017 |
|
|
|
|
|
|
|
|
NOTE G Mobile Mini has a lease fleet primarily consisting of refurbished, modified and
manufactured portable storage and office units that are leased to customers under short-term
operating lease agreements with varying terms. Depreciation is provided using the straight-line
method over our units estimated useful life, after the date that we put the unit in service, and
are depreciated down to their estimated residual values. Our steel units are depreciated over 25
years with an estimated residual value of 62.5%. Wood office 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 seven years to a 20% residual value. Van trailers are only added to the fleet in
connection with acquisitions of portable storage businesses, and then only when van trailers are a
part of the business acquired.
In the opinion of management, estimated residual values do not cause carrying values to exceed net
realizable value. We continue to evaluate these depreciation policies as more information becomes
available from other comparable sources and our own historical experience.
Normal repairs and maintenance to the portable storage and mobile office units are expensed as
incurred. As of December 31, 2005, the lease fleet totaled $589.3 million as compared to $675.6
million at June 30, 2006, before accumulated depreciation of $38.8 million and $43.7 million,
respectively.
Lease fleet consists of the following at:
|
|
|
|
|
|
|
|
|
|
|
December 31, 2005 |
|
|
June 30, 2006 |
|
|
|
(In thousands) |
|
Steel storage containers |
|
$ |
347,494 |
|
|
$ |
392,557 |
|
Offices |
|
|
238,069 |
|
|
|
279,725 |
|
Van trailers |
|
|
3,252 |
|
|
|
2,952 |
|
Other |
|
|
494 |
|
|
|
377 |
|
|
|
|
|
|
|
|
|
|
|
589,309 |
|
|
|
675,611 |
|
Less accumulated depreciation |
|
|
(38,845 |
) |
|
|
(43,756 |
) |
|
|
|
|
|
|
|
|
|
$ |
550,464 |
|
|
$ |
631,855 |
|
|
|
|
|
|
|
|
13
NOTE H The Financial Accounting Standards Board (FASB) issued SFAS No. 131,
Disclosures about Segments of an Enterprise and Related Information, which establishes the
standards for companies to report information about operating segments. We have operations in the
United States, Canada, the United Kingdom and The Netherlands. All of our branches operate in
their local currency and although we are exposed to foreign exchange rate fluctuation in other
foreign markets where we lease and sell our products, we do not believe there will be a significant
impact on our results of operations. Currently, our branch operation is the only segment that
concentrates on our core business of leasing. Each branch has similar economic characteristics
covering all products leased or sold, including the same customer base, sales personnel,
advertising, yard facilities, general and administrative costs and the branch management.
Managements allocation of resources, performance evaluations and operating decisions are not
dependent on the mix of a branchs products. We do not attempt to allocate shared revenue nor
general, selling and leasing expenses to the different configurations of portable storage and
office products for lease and sale. The branch operations include the leasing and sales of
portable storage units, portable offices and combination units configured for both storage and
office space. We lease to businesses and consumers in the general geographic area relative to each
branch. The operation includes our manufacturing facilities, which is responsible for the
purchase, manufacturing and refurbishment of products for leasing and sale, as well as for
manufacturing certain delivery equipment.
In managing our business, we focus on earnings per share and on our internal growth rate in leasing
revenue, which we define as growth in lease revenues on a year-over-year basis at our branch
locations in operation for at least one year, without inclusion of same market acquisitions.
Discrete financial data on each of our products is not available and it would be impractical to
collect and maintain financial data in such a manner; therefore, based on the provisions of SFAS
No. 131, reportable segment information is the same as contained in our condensed consolidated
financial statements.
The tables below represent our revenue and long-lived assets as attributed to geographic locations
(in thousands):
Revenue from external customers:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
Six Months Ended |
|
|
|
June 30, |
|
|
June 30, |
|
|
|
2005 |
|
|
2006 |
|
|
2005 |
|
|
2006 |
|
United States |
|
$ |
50,019 |
|
|
$ |
62,480 |
|
|
$ |
95,416 |
|
|
$ |
118,466 |
|
Other Nations |
|
|
382 |
|
|
|
3,818 |
|
|
|
728 |
|
|
|
4,252 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenues |
|
$ |
50,401 |
|
|
$ |
66,298 |
|
|
$ |
96,144 |
|
|
$ |
122,718 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-lived assets:
|
|
|
|
|
|
|
|
|
|
|
December 31, 2005 |
|
|
June 30, 2006 |
|
United States |
|
$ |
580,595 |
|
|
$ |
648,009 |
|
Other Nations |
|
|
5,917 |
|
|
|
22,863 |
|
|
|
|
|
|
|
|
Total long-lived assets |
|
$ |
586,512 |
|
|
$ |
670,872 |
|
|
|
|
|
|
|
|
NOTE I Comprehensive income, net of tax, consisted of the following at:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
Six Months Ended |
|
|
|
June 30, |
|
|
June 30, |
|
|
|
2005 |
|
|
2006 |
|
|
2005 |
|
|
2006 |
|
|
|
(In thousands) |
|
Net income |
|
$ |
10,145 |
|
|
$ |
7,658 |
|
|
$ |
16,530 |
|
|
$ |
15,862 |
|
Net unrealized holding gain (loss) on derivatives |
|
|
(280 |
) |
|
|
69 |
|
|
|
207 |
|
|
|
233 |
|
Foreign currency translation adjustment |
|
|
(89 |
) |
|
|
109 |
|
|
|
(87 |
) |
|
|
114 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total comprehensive income |
|
$ |
9,776 |
|
|
$ |
7,836 |
|
|
$ |
16,650 |
|
|
$ |
16,209 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
14
The components of accumulated other comprehensive income, net of tax, were as follows:
|
|
|
|
|
|
|
|
|
|
|
December 31, 2005 |
|
|
June 30, 2006 |
|
|
|
(In thousands) |
|
Accumulated net unrealized holding gain on derivatives |
|
$ |
646 |
|
|
$ |
880 |
|
Foreign currency translation adjustment |
|
|
484 |
|
|
|
597 |
|
|
|
|
|
|
|
|
Total accumulated other comprehensive income |
|
$ |
1,130 |
|
|
$ |
1,477 |
|
|
|
|
|
|
|
|
NOTE J On February 17, 2006, we modified our revolving credit facility and entered into a
$350.0 million Second Amended and Restated Loan and Security Agreement with our lenders. The
Second Amended credit facility covered approximately $173.9 million of outstanding obligations
under the previous amendment. The modified credit facility is scheduled to expire in February
2011.
NOTE K In March 2006, pursuant to a public offering, we issued 4.6 million shares of our common
stock (which includes 600,000 shares pursuant to exercise by the underwriters of an over-allotment
option). We received net offering proceeds of approximately $120.3 million at the end of March
2006.
NOTE L On March 13, 2006, we entered into a Share Purchase Agreement with Triton CSA
International B.V., to acquire three companies of the Royal Wolf Group. The entities were: (i) A
Royal Wolf Portable Storage, Inc., operating in the United States; (ii) Royalwolf Trading (UK)
Limited, operating in the United Kingdom; and (iii) Royal Wolf Containers B.V., operating in The
Netherlands. The acquisition of these businesses collectively did not meet the materiality
threshold established by the Securities and Exchange Commission that would otherwise require
reporting separate financial information for these companies or pro forma information for periods
prior to the acquisition. The transaction closed on April 28, 2006.
In May 2006, we acquired the portable storage assets of L&L Surplus of Utica, Inc., a
privately-owned leasing company operating in the central portion of the State of New York, and the
portable storage assets of HOC-Express, Inc., a privately-owned company operating in the
metropolitan area of Wichita, Kansas. In June 2006, we acquired the portable storage assets of
Affordable LLC, operating primarily in the southwestern portion of Alabama. The acquired assets of
Affordable LLC, are serviced by our Pensacola branch that conducts business for the Gulf Coast and
surrounding regions.
We paid cash of approximately $59.5 million and assumed certain liabilities in connection with
these transactions. At June 30, 2006, the Company operates 54 branches in the United States, one
in Canada, six in the United Kingdom, and one in The Netherlands.
The acquisitions were accounted for as purchases in accordance with SFAS No. 141, Business
Combinations, and the purchased assets and the assumed liabilities were recorded at their estimated
fair values at the date of acquisition.
The aggregate purchase price of the assets and operations acquired consists of the following, in
thousands:
|
|
|
|
|
Cash |
|
$ |
59,411 |
|
Other acquisition costs |
|
|
85 |
|
|
|
|
|
Total |
|
$ |
59,496 |
|
|
|
|
|
15
The fair value of the assets purchased as been allocated as follows, in thousands:
|
|
|
|
|
Tangible assets |
|
$ |
39,475 |
|
Intangible assets: |
|
|
|
|
Customer-related |
|
|
3,906 |
|
Trade names |
|
|
180 |
|
Goodwill |
|
|
23,387 |
|
Assumed liabilities |
|
|
(7,452 |
) |
|
|
|
|
Total |
|
$ |
59,496 |
|
|
|
|
|
The purchase prices for acquisitions have been allocated to the assets acquired and liabilities
assumed based upon estimated fair values as of the acquisition dates and are subject to adjustment
when additional information concerning asset and liability valuations are finalized.
The intangible assets are amortized on an accelerated basis over 11 years.
NOTE M On May 4, 2006, we redeemed 35% of the $150.0 million aggregate principal amount
outstanding of our 91/2% Senior Notes. The redemption price was 109.5% of the principal balance
redeemed plus accrued and unpaid interest thereon. In conjunction with this redemption we recorded
debt extinguishment costs of approximately $6.4 million with respect to the premium paid and the
portion of debt issuance costs relating to the debt paid.
16
|
|
|
ITEM 2. |
|
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 our December 31, 2005 consolidated financial statements and the accompanying notes
thereto which are included in our Annual Report on Form 10-K filed with the Securities and Exchange
Commission on March 16, 2006. 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 Cautionary Factors That May Affect Future Operating Results.
The following discussion takes into account our acquisition on April 28, 2006, of the Royal Wolf
Companies. As a result of that acquisition, we added two new locations in California, six
locations in the United Kingdom and a branch in The Netherlands. We also consolidated operations
at the 10 locations in the United States where there was branch overlap as a result of the
acquisition. The acquisition included approximately 18,000 portable storage containers, offices
and related rental assets. The results of operations at these acquired locations, as well as the
other acquisitions we concluded in the second quarter of 2006, are included in our discussions
below.
Overview
General
In 1996, we initiated a strategy of focusing on leasing rather than selling our portable storage
units. As a result, we now derive most of our revenues from the leasing of portable storage
containers and portable offices. In 2005, the average contracted lease term at lease inception was
approximately 10 months for portable storage units and approximately 13 months for portable
offices. After the expiration of the contracted lease term, units continue on lease on a
month-to-month basis. In 2005, the over-all lease term averaged 23 months for portable storage
units and 20 months for portable offices. As a result of these relatively long average lease
terms, our leasing business tends to provide us with a recurring revenue stream and minimizes
fluctuations in revenues. However, there is no assurance that we will maintain such lengthy
overall lease terms.
In addition to our leasing business, we also sell portable storage containers and occasionally we
sell portable office units. Since 1996, when we changed our focus to leasing, our sales revenues,
as a percentage of total revenues, has decreased and is currently approximately 10% of revenues.
Over the last eight years, Mobile Mini has grown through internally generated growth and
acquisitions. We use acquisitions to gain presence in new markets. Typically, we enter a new
market through the acquisition of the business of a smaller local competitor and then apply our
business model, which is usually much more customer service and marketing focused than the business
we are buying or its competitors in the market. If we cannot find a desirable acquisition
opportunity in a market we wish to enter, we establish a new location from the ground up. As a
result, a new branch location will often have fairly low operating margins during its early years,
but as our marketing efforts help us penetrate the new market and we increase the number of units
on rent at the new branch, we take advantage of operating efficiencies to improve operating margins
at the branch and usually reach company average levels after several years. When we enter a new
market, we incur certain costs in developing an infrastructure. For example, advertising and
marketing costs will be incurred and certain minimum staffing levels and certain minimum levels of
delivery equipment will be put in place regardless of the new markets revenue base. Once we have
achieved revenues during any period that are sufficient to cover our fixed expenses, we generate
high margins on incremental lease revenues. Therefore, each additional unit rented in excess of
the break even level contributes significantly to profitability. Conversely, additional fixed
expenses that we incur require us to achieve additional revenue as compared to the prior period to
cover the additional expense. We incur lower start-up costs and a quicker growth rate using our
acquisition model than by establishing a new location from the ground up.
Among the external factors we examine to determine the direction of our business is the level of
non-residential construction activity, especially in areas of the country where we have a
significant presence. Customers in the construction industry represented approximately 35% of our
units on rent at December 31, 2005, and because of the degree of our operating leverage we have,
increases or declines in non-residential construction activity can have a
17
significant effect on our operating margins and net income. In 2002 and 2003, we saw weakness in
the level of revenues from the non-residential construction sector of our customer base. The
lower-than-historical growth rates in revenues combined with increases in fixed costs depressed our
growth in adjusted EBITDA (as defined below) in those years. Beginning in 2004, the level of
non-residential construction activity in the U.S. leveled off and rose after two years of steep
declines. As a result of the improvement in the non-residential construction sector and the
general improvements in the economy, our adjusted EBITDA increased in 2004, 2005 and during the
first two quarters of 2006.
In managing our business, we focus on our internal growth rate in leasing revenue, which we define
as growth in lease revenues on a year-over-year basis at our branch locations in operation for at
least one year, without inclusion of leasing revenue attributed to same-market acquisitions. This
internal growth rate has remained positive every quarter, but in 2002 and 2003 had fallen to single
digits, from over 20% prior to 2002. We achieved an internal growth rate in 2005 of 25.3% and
22.8% during the first six months of 2006. Mobile Minis goal is to maintain a high internal
growth rate so that revenue growth will exceed inflationary growth in expenses, and we can continue
to take advantage of the operating leverage inherent in our business model.
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 debt extinguishment
costs (if any during the relevant measurement period), provision for income taxes, and depreciation
and amortization. This measure eliminates the effect of financing transactions that we enter into
on an irregular basis based on capital needs and market opportunities, and this measure provides us
with a means to track internally generated cash from which we can fund our interest expense and our
lease fleet growth. In comparing EBITDA from year to year, we typically further adjust EBITDA to
ignore the effect of what we consider non-recurring events not related to our core business
operations to arrive at what we define as adjusted EBITDA. Because EBITDA is a non-GAAP financial
measure, as defined by the SEC, we include in the tables below reconciliations of EBITDA to the
most directly comparable financial measures calculated and presented in accordance with accounting
principles generally accepted in the United States.
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 interest rate in effect at any point in time.
EBITDA has certain limitations as an analytical tool and should not be used as a substitute for net
income, cash flows or other consolidated income or cash flow data prepared in accordance with
generally accepted accounting principles in the United States or as a measure of our profitability
or our liquidity. In particular, EBITDA, as defined does not include:
|
|
|
Interest expense because we borrow money to partially finance our capital
expenditures, primarily related to the expansion of our lease fleet, interest expense is a
necessary element of our cost to secure this financing to continue generating additional
revenues. |
|
|
|
|
Debt restructuring or extinquishment expense as defined in our revolving credit
facility, debt restructuring or debt extinguishment expenses are not deducted in our
various calculations made under the credit agreement and are treated no differently than
interest expense. As discussed above, interest expense is a necessary element of our cost
to finance a portion of the capital expenditures needed for the growth of our business. |
|
|
|
|
Income taxes EBITDA, as defined, does not reflect income taxes or the requirements
for any tax payments. |
|
|
|
|
Depreciation and amortization because we are a leasing company, our business is very
capital intensive and we hold acquired assets for a period of time before they generate
revenues, cash flow and earnings; therefore, depreciation and amortization expense is a
necessary element of our business. |
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. |
18
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.
The table below is a reconciliation of EBITDA to net cash provided by operating activities for the
periods ended June 30:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
Six Months Ended |
|
|
|
June 30, |
|
|
June 30, |
|
|
|
2005 |
|
|
2006 |
|
|
2005 |
|
|
2006 |
|
|
|
(In thousands) |
|
EBITDA |
|
$ |
24,548 |
|
|
$ |
28,618 |
|
|
$ |
43,583 |
|
|
$ |
52,179 |
|
Senior Note redemption premiums |
|
|
|
|
|
|
(4,987 |
) |
|
|
|
|
|
|
(4,987 |
) |
Interest paid |
|
|
(1,756 |
) |
|
|
(3,827 |
) |
|
|
(11,011 |
) |
|
|
(14,726 |
) |
Income and franchise taxes paid |
|
|
(129 |
) |
|
|
(46 |
) |
|
|
(216 |
) |
|
|
(111 |
) |
Amortization of share-based compensation |
|
|
|
|
|
|
781 |
|
|
|
|
|
|
|
1,535 |
|
Gain on sale of lease fleet units |
|
|
(932 |
) |
|
|
(1,301 |
) |
|
|
(1,722 |
) |
|
|
(2,232 |
) |
Loss on disposal of property, plant and equipment |
|
|
17 |
|
|
|
11 |
|
|
|
434 |
|
|
|
40 |
|
Deferred income taxes |
|
|
125 |
|
|
|
(131 |
) |
|
|
197 |
|
|
|
(133 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Changes in certain assets and liabilities, net of effect
of businesses acquired: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Receivables |
|
|
(1,283 |
) |
|
|
(5,369 |
) |
|
|
(2,088 |
) |
|
|
(3,892 |
) |
Inventories |
|
|
(6,039 |
) |
|
|
(1,370 |
) |
|
|
(8,621 |
) |
|
|
(2,373 |
) |
Deposits and prepaid expenses |
|
|
1,166 |
|
|
|
287 |
|
|
|
1,253 |
|
|
|
294 |
|
Other assets and intangibles |
|
|
(5 |
) |
|
|
207 |
|
|
|
21 |
|
|
|
(3 |
) |
Accounts payable and accrued liabilities |
|
|
4,419 |
|
|
|
6,403 |
|
|
|
5,120 |
|
|
|
3,698 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by operating activities |
|
$ |
20,131 |
|
|
$ |
19,276 |
|
|
$ |
26,950 |
|
|
$ |
29,289 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EBITDA is calculated as follows, without further adjustment, for the periods ended June 30:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
Six Months Ended |
|
|
|
June 30, |
|
|
June 30, |
|
|
|
2005 |
|
|
2006 |
|
|
2005 |
|
|
2006 |
|
|
|
(In thousands except percentages) |
|
Net income |
|
$ |
10,145 |
|
|
$ |
7,658 |
|
|
$ |
16,530 |
|
|
$ |
15,862 |
|
Interest expense |
|
|
5,630 |
|
|
|
5,740 |
|
|
|
11,150 |
|
|
|
12,186 |
|
Debt extinguishment expense |
|
|
|
|
|
|
6,425 |
|
|
|
|
|
|
|
6,425 |
|
Provision for income taxes |
|
|
5,634 |
|
|
|
4,791 |
|
|
|
9,716 |
|
|
|
10,114 |
|
Depreciation and amortization |
|
|
3,139 |
|
|
|
4,004 |
|
|
|
6,187 |
|
|
|
7,592 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EBITDA |
|
$ |
24,548 |
|
|
$ |
28,618 |
|
|
$ |
43,583 |
|
|
$ |
52,179 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EBITDA margin(1) |
|
|
48.7 |
% |
|
|
43.2 |
% |
|
|
45.3 |
% |
|
|
42.5 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
EBITDA margin is calculated as EBITDA divided by total revenues expressed as a
percentage. |
In managing our business, we routinely compare our adjusted EBITDA margins from year to year and
based upon age of branch. We define this margin as adjusted EBITDA divided by our total revenues,
expressed as a percentage. We use this comparison, for example, to study internally the effect
that increased costs have on our margins. As capital is invested in our established branch
locations, we achieve higher adjusted EBITDA margins on that capital than we achieve on capital
invested to establish a new branch, because our fixed costs are already in place in connection with
the established branches. The fixed costs are those associated with yard and delivery equipment,
as well as advertising, sales, marketing and office expenses. With a new market or branch, we must
first fund and absorb the startup costs for
19
setting up the new branch facility, hiring and
developing the management and sales team and developing our marketing and advertising
programs. A new branch will have low adjusted EBITDA margins in its early years until the number
of units on rent increases. Because of our high operating margins on incremental lease revenue,
which we realize on a branch-by-branch basis when the branch achieves leasing revenues sufficient
to cover the branchs fixed costs, leasing revenues in excess of the break-even amount produce
large increases in profitability. Conversely, absent significant growth in leasing revenues, the
adjusted EBITDA margin at a branch will remain relatively flat on a period-by-period comparative
basis.
Accounting and Operating Overview
Our leasing revenues include all rent and ancillary revenues we receive for our portable storage,
combination storage/office and mobile office units. Our sales revenues include sales of these units
to customers. Our other revenues consist principally of charges for the delivery of the units we
sell. Our principal operating expenses are (1) cost of sales; (2) leasing, selling and general
expenses; and (3) depreciation and amortization, primarily depreciation of the portable storage
units in our lease fleet. Cost of sales is the cost of the units that we sold during the reported
period and includes both our cost to buy, transport, refurbish and modify used ocean-going
containers and our cost to manufacture portable storage units and other structures. Leasing,
selling and general expenses include among other expenses, advertising and other marketing
expenses, commissions and corporate expenses for both our leasing and sales activities. Annual
repair and maintenance expenses on our leased units over the last three fiscal years have averaged
approximately 2.9% of lease revenues and are included in leasing, selling and general expenses. We
expense our normal repair and maintenance costs as incurred (including the cost of periodically
repainting units).
Our principal asset is our lease fleet, which has historically maintained value close to its
original cost. The steel units in our lease fleet (other than van trailers) are depreciated on the
straight-line method over our units estimated useful life of 25 years after the date the unit is
placed in service, with an estimated residual value of 62.5%. The depreciation policy is supported
by our historical lease fleet data which shows that we have been able to obtain comparable rental
rates and sales prices irrespective of the age of our container lease fleet. Our wood mobile
office units are depreciated over 20 years to 50% of original cost. Van trailers, which constitute
a small part of our fleet, are depreciated over seven 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.
The table below summarizes those transactions that increased the net value of our lease fleet from
$550.5 million at December 31, 2005, to $631.9 million at June 30, 2006:
|
|
|
|
|
|
|
|
|
|
|
Dollars |
|
|
Units |
|
|
|
(In thousands) |
|
|
|
|
Lease fleet at December 31, 2005, net |
|
$ |
550,464 |
|
|
|
116,317 |
|
|
|
|
|
|
|
|
|
|
Purchases: |
|
|
|
|
|
|
|
|
Container purchases and containers obtained through acquisitions, including freight |
|
|
30,274 |
|
|
|
20,081 |
|
|
|
|
|
|
|
|
|
|
Manufactured units: |
|
|
|
|
|
|
|
|
Steel storage containers, combination office units and steel security offices |
|
|
19,854 |
|
|
|
2,532 |
|
Wood mobile offices |
|
|
27,229 |
|
|
|
1,063 |
|
|
|
|
|
|
|
|
|
|
Refurbishment and customization(3): |
|
|
|
|
|
|
|
|
Refurbishment or customization of units purchased or acquired in the current year |
|
|
3,968 |
|
|
|
1,184 |
(1) |
Refurbishment or customization of 1,827 units purchased in a prior year |
|
|
5,644 |
|
|
|
1,026 |
(2) |
Refurbishment or customization of 275 units obtained through acquisition in a prior year |
|
|
2,847 |
|
|
|
154 |
(3) |
|
|
|
|
|
|
|
|
|
Other |
|
|
923 |
|
|
|
167 |
|
Cost of sales from lease fleet |
|
|
(4,055 |
) |
|
|
(1,714 |
) |
Depreciation |
|
|
(5,293 |
) |
|
|
|
|
|
|
|
|
|
|
|
Lease fleet at June 30, 2006, net |
|
$ |
631,855 |
|
|
|
140,810 |
|
|
|
|
|
|
|
|
20
|
|
|
(1) |
|
These units represent the net additional units that were the result of splitting steel containers into one or more shorter units, such as splitting a 40-foot container
into two 20-foot units, or one 25-foot unit and one 15-foot unit. |
|
(2) |
|
Includes units moved from finished goods to lease fleet. |
|
(3) |
|
Does not include any routine maintenance. |
The table below outlines the composition of our lease fleet at June 30, 2006:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of |
|
|
|
Lease Fleet |
|
|
Units |
|
|
|
(In thousands) |
|
|
|
|
|
Steel storage containers |
|
$ |
392,557 |
|
|
|
118,823 |
|
Offices |
|
|
279,725 |
|
|
|
19,886 |
|
Van trailers |
|
|
2,952 |
|
|
|
2,101 |
|
Other |
|
|
377 |
|
|
|
|
|
Accumulated depreciation |
|
|
(43,756 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
631,855 |
|
|
|
140,810 |
|
|
|
|
|
|
|
|
Our most recent fair market value and orderly liquidation value appraisals were conducted in
January 2006. In April 2006, we had appraisals completed for the United Kingdom assets acquired
from Royal Wolf. At June 30, 2006, based on these appraisal values, the fair market value of our
lease fleet was approximately 120.5% of our lease fleet net book value, and the orderly liquidation
value appraisal, on which our borrowings under our revolving credit facility are based, was
approximately $544.8 million, which equates to 86.2% of the lease fleet net book value. These are
an independent third-party appraisers estimation of value under two sets of assumptions, and there
is no certainty that such values could in fact be achieved if any assumption were to prove
incorrect at the time of an actual sale or liquidation.
Our expansion program and other factors can affect our overall utilization rate. During the last
five fiscal years, our annual utilization levels averaged 80.9%, and ranged from a low of 78.7% in
2003 to a high of 83.1% in 2001. During years in which we enter many additional markets or in
which certain geographic areas are affected by a slowdown in non-residential construction,
utilization rates will tend to be lower. With the addition of fewer markets in 2003 and 2004, and
the improvement in non-residential construction in 2004, we focused on increasing our utilization
rate by balancing inventory between markets and decreasing the number of out-of-service units. Our
average utilization rate increased from 78.7% in 2003 to 82.9% in 2005. Our utilization is
somewhat seasonal, with the low realized in the first quarter and the high realized in the fourth
quarter.
RESULTS OF OPERATIONS
Three Months Ended June 30, 2006, Compared to
Three Months Ended June 30, 2005
Total revenues for the quarter ended June 30, 2006, increased by $15.9 million, or 31.5%, to $66.3
million from $50.4 million for the same period in 2005. Leasing revenues for the quarter increased
by $14.1 million, or 31.0%, to $59.3 million from $45.3 million for the same period in 2005. This
increase resulted from a 2.2% increase in the average rental yield per unit and a 28.2% increase in
the average number of units on lease compared to the 2005 second quarter. The increase in yield
resulted from an increase in average rental rates over the last year and an increase in revenue for
ancillary rental services, such as delivery charges. An increase in the mix of premium units
having higher rental rates being added to our fleet was offset by lower rental rates on units
acquired in acquisitions, which were on average smaller and were not refurbished. Our internal
growth rate, which we define as the growth in lease revenues in markets opened for at least one
year, excluding growth arising as a result of additional acquisitions in those markets, was 22.4%
for the three months ended June 30, 2006, as compared to 26.1% for the comparable three-month
period of 2005. Our sales of portable storage and office units for the three months ended June 30,
2006, increased by 35.0% to $6.6 million from $4.9 million during the same period in 2005 and is
primarily attributed to sales at the European operations that we acquired through Royal Wolf. As a
percentage of total revenues, leasing revenues for the quarter ended June 30, 2006,
21
represented
89.5% as compared to 89.8% for the same period in 2005. The 0.3% decline is attributed to the
higher revenue ratio of sales to
total revenue in our European operations. Our leasing business continues to be our primary focus
and has become an increasing part of our revenue mix over the past several years. We expect this
trend to continue as we transform our newly-acquired branches to our business model.
Cost of sales are the costs related to the sales revenues only. Cost of sales for the quarter
ended June 30, 2006, increased to 63.0% of sales from 62.1% of sales in the same period in 2005.
Our gross margin was fairly steady and at a higher-than-typical level during both periods.
Leasing, selling and general expenses increased $7.9 million, or 30.2%, to $33.8 million for the
quarter ended June 30, 2006, from $26.0 million for the same period in 2005. Leasing, selling and
general expenses, as a percentage of total revenues, decreased to 51.1% for the quarter ended June
30, 2006, from 51.6% for the same period in 2005. Included in this expense during the 2006 quarter
is approximately $0.8 million of expenses related to share-based compensation in accordance with
SFAS No. 123(R), which became effective for Mobile Mini on January 1, 2006. Excluding the
share-based compensation expense, our leasing, selling and general expenses would have increased by
$7.1 million, or 27.2%, for the quarter ended June 30, 2006, as compared with the same period in
2005. As the markets we entered in the past few years continue to mature and as their revenues
increase to cover our fixed expenses at those locations, those markets will begin to contribute to
higher margins on incremental lease revenues. Each additional unit on lease in excess of the
break-even level contributes significantly to profitability. Over the next several months, we
anticipate our leasing, selling and general expenses will increase as we add more infrastructure to
the seven European and four United States branches acquired in 2006, to support their
transformation to our business model. As mentioned above, as these branches mature their
profitability will increase significantly. Leasing, selling and general expense for the quarter
ended June 30, 2006, also includes the costs of the 12 new branches we opened after June 30, 2005.
In addition to the share-based compensation expense, the major increases in leasing, selling and
general expenses for the quarter ended June 30, 2006, were payroll and related expenses to support
the growth of our leasing activities, repairs and maintenance expense, including costs related to
our office units, associated with maintaining the high level of utilization achieved in 2005, and
delivery and freight costs, including fuel, which we were able to pass onto our customers in the
form of higher delivery charges.
EBITDA increased by $4.1 million, or 16.6%, to $28.6 million for the quarter ended June 30, 2006,
compared to $24.5 million for the same period in 2005. EBITDA, excluding $0.8 million of
share-based compensation expense during the 2006 quarter and excluding the $3.2 million other
income in the 2005 quarter, increased $8.0 million or 37.5%, to $29.4 million.
Depreciation and amortization expenses increased $0.9 million, or 27.5%, to $4.0 million in the
quarter ended June 30, 2006, from $3.1 million during the same period in 2005. The increase is
primarily due to the growth in lease fleet over the last year in order to meet increased demand and
market expansion. Since June 30, 2005, our lease fleet cost basis for depreciation increased by
approximately $151.5 million.
Other income in the 2005 quarter, represents net proceeds of a settlement agreement pursuant to
which a third party reimbursed us for a portion of losses sustained in two lawsuits that arose in
connection with the acquisition in April 2000 of a portable storage business in Florida.
Interest expense was $5.7 million for the quarter ended June 30, 2006 compared to $5.6 million for
the same period in 2005. Although interest rates had been increasing since June 2005, during 2006
a portion of the net proceeds of an equity offering were used to redeem $52.5 million of our higher
interest-bearing 91/2% Senior Notes. The reduction in interest expense resulting from this
redemption was partially offset by a $43.1 million increase in net borrowings under our credit line
since June 30, 2005. Our average debt outstanding for the three months ended June 30, 2006,
compared to the same period in 2005, decreased by 0.6%, primarily due to the repayment of debt with
the proceeds of our equity offering in March 2006, which was offset by borrowings to fund
acquisitions and a portion of our lease fleet growth. The remainder of the growth of the lease
fleet was funded by operating cash flow. The weighted average interest rate on our debt for the
three months ended June 30, 2006, was 7.7% compared to 7.6% for the three months ended June 30,
2005, excluding amortization of debt issuance costs. Taking into account the amortization of debt
issuance costs, the weighted average interest rate was 8.0% in the 2006 quarter and 7.9% in the
2005 quarter.
22
Debt extinguishment expense in the 2006 quarter represents the portion of deferred loan costs and
the redemption premium on 35% of the $150.0 million aggregate principal amount of outstanding
Senior Notes that we redeemed in May 2006.
Provision for income taxes was based on a blended annual effective tax rate of 38.5% in the quarter
ended June 30, 2006, as compared to 39.0% during the same period in 2005. Our 2006 second quarter
consolidated tax provision includes the expected tax rates for our operations in the United States,
Canada, United Kingdom and The Netherlands. As our foreign operations grow in profitability, our
blended tax rate should be lower. Our 2005 second quarter tax provision includes a $0.5 million
tax benefit due to the expected recognition of certain state net operating loss carryforwards.
Net income for the three months ended June 30, 2006, was $7.7 million compared to net income of
$10.1 million for the same period in 2005. Our 2006 second quarter net income results were
primarily achieved by our 31.5% increase in revenues and the operating leverage associated with
this growth, partially offset by the $0.8 million, ($0.5 million after tax), charge for share-based
compensation and the $6.4 million ($4.0 million after tax) for debt extinguishment expense related
to the partial redemption of our Senior Notes. Our 2005 second quarter net income also includes
the proceeds from a settlement agreement of $3.2 million ($1.9 million after tax) and the effect of
the tax benefit discussed above.
Six Months Ended June 30, 2006 compared to
Six Months Ended June 30, 2005
Total revenues for the six months ended June 30, 2006, increased by $26.6 million, or 27.6%, to
$122.7 million from $96.1 million for the same period in 2005. Leasing revenues for the six months
increased by $24.2 million, or 27.9%, to $110.9 million from $86.7 million for the same period in
2005. This increase resulted from a 4.3% increase in the average rental yield per unit and a 22.6%
increase in the average number of units on lease compared to the same period in 2005. The increase
in yield resulted from an increase in average rental rates over the last year and an increase in
revenue for ancillary rental services, such as delivery charges. An increase in the mix of premium
units having higher rental rates being added to our fleet was offset by lower rental rates on units
acquired in acquisitions, which were on average smaller and were not refurbished. Our internal
growth rate, which we define as the growth in lease revenues in markets opened for at least one
year, excluding any growth arising as a result of additional acquisitions in those markets, was
22.8% for the six months ended June 30, 2006, as compared to 27.2% for the six-month period of
2005. Our sales of portable storage and office units for the six months ended June 30, 2006
increased by 25.4% to $11.1 million from $8.9 million during the same period in 2005. This
increase is primarily attributed to sales at the European operations that we acquired through Royal
Wolf. As a percentage of total revenues, leasing revenues for the six months ended June 30, 2006,
represented 90.3% as compared to 90.1% for the same period in 2005. The minor increase of 0.2% is
attributed to the higher revenue ratio of sales to total revenue in our European operations. Our
leasing business continues to be our major focus and has become an increasing part of our revenue
mix over the past several years. We expect this trend to continue as we transform our
newly-acquired branches to our business model.
Cost of sales are the costs related to the sales revenue only. Cost of sales for the six months
ended June 30, 2006, increased to 63.6% of sales from 62.7% of sales in the same period of 2005.
Our gross margin was fairly steady and at a higher-than-typical level during both periods.
Leasing, selling and general expenses increased $13.7 million, or 27.3%, to $63.8 million for the
six months ended June 30, 2006, from $50.2 million for the same period in 2005. Leasing, selling
and general expenses, as a percentage of total revenues, decreased to 52.0% for the six months
ended June 30, 2006, from 52.2% for the same period in 2005. Included in this expense for the
six-month period ended June 30, 2006, is approximately $1.5 million of expenses related to
share-based compensation in accordance with SFAS No. 123(R), which became effective for Mobile Mini
on January 1, 2006. Excluding the share-based compensation expense, our leasing, selling and
general expenses would have increased by $12.1 million, or 24.2%, for the period ended June 30,
2006, as compared with the same period in 2005. As the markets we entered in the past few years
continue to mature and as their revenues increase to cover our fixed expenses at those locations,
those markets will begin to contribute to our high margins on incremental lease revenues. Each
additional unit on lease in excess of the break-even level contributes significantly to
profitability. Over the next several months, we anticipate our leasing, selling and general
expenses will increase as we add more infrastructure to the seven European and four United States
branches acquired in 2006, to support their transformation to our business model.
23
As mentioned above, as these branches mature their profitability will increase significantly. Leasing, selling
and general expense for the period ended June 30, 2006, also includes the costs of the 12 new
branches we opened after June 30, 2005. In addition to the share-based compensation expense, the
major increases in leasing, selling and general expenses for the six months ended June 30, 2006
were payroll and related expenses to support the growth of our leasing activities, repairs and
maintenance expense, including costs related to our office units, associated with maintaining the
high level of utilization achieved in 2005, delivery and freight costs, including fuel, which we
were able to pass onto our customers in the form of higher delivery charges, and certain insurance
expenses.
EBITDA increased by $8.6 million, or 19.7%, to $52.2 million for the six months ended June 30,
2006, compared to $43.6 million for the same period in 2005. EBITDA, excluding $1.5 million of
share-based compensation expense during 2006 and excluding the $3.2 million other income in 2005,
increased $13.3 million or 32.9% to $53.7 million.
Depreciation and amortization expenses increased $1.4 million, or 22.7% to $7.6 million in the six
months ended June 30, 2006, from $6.2 million during the same period in 2005. The increase is
primarily due to the growth in our lease fleet over the last year in order to meet increased
demand. Since June 30, 2005, our lease fleet cost basis for depreciation increased by
approximately $151.5 million.
Other income in 2005, represents net proceeds of a settlement agreement pursuant to which a third
party reimbursed us for a portion of losses sustained in two lawsuits that arose in connection with
the acquisition in April 2000 of a portable storage business in Florida.
Interest expense increased $1.0 million, or 9.3%, to $12.2 million for the six months ended June
30, 2006, compared to $11.2 million for the same period in 2005. This increase resulted primarily
from higher debt levels during the six months ended June 30, 2006. During the eighteen months
ended June 30, 2006, the Company invested $154.2 million in net additions to its lease fleet and
$66.5 million in acquisitions. These additions were funded through cash flow from operations, the
equity offering, and additional borrowings. The weighted average interest rate on our debt for the
six months ended June 30, 2006 and 2005, was 7.8% and 7.6%, respectively, excluding amortization of
debt issuance costs. Taking into account the amortization of debt issuance costs, the weighted
average interest rate was 8.0% in the 2006 six months and 7.9% in the 2005 six-month period. This
slight reduction in interest rates resulted from the redemption of $52.5 million of our 91/2% Senior
Notes in May 2006, which was offset by higher interest rates on our variable rate line of credit.
Debt extinguishment expense in the 2006 period represents the portion of deferred loan costs and
the redemption premium on 35% of the $150.0 million aggregate principal amount of outstanding
Senior Notes that we redeemed in May 2006.
Provision for income taxes was based on a blended annual effective tax rate of 38.9% in the six
months ended June 30, 2006, as compared to an annual effective tax rate of 39.0% during the same
period in 2005. Our 2006 consolidated tax provision includes the expected tax rates for our
operations in the United States, Canada, United Kingdom and The Netherlands. As our foreign
operations grow in profitability, our blended tax rate should be lower. Our 2005 tax provision
includes a $0.5 million tax benefit due to the expected recognition of certain state net operating
loss carryforwards.
Net income for the six months ended June 30, 2005, was $15.9 million compared to net income of
$16.5 million for the same period in 2005. Our 2006 net income results were primarily achieved by
our 27.6% increase in revenues and the operating leverage associated with this growth, partially
offset by the $1.5 million, ($1.0 million after tax), charge for share-based compensation and the
$6.4 million ($4.0 million after tax) for debt extinguishment expense related to the partial
redemption of our Senior Notes. Our 2005 net income also includes the proceeds from a settlement
agreement of $3.2 million ($1.9 million after tax) and the effect of the tax benefit discussed
above.
LIQUIDITY AND CAPITAL RESOURCES
Over the past several years, we have financed an increasing portion of our capital needs, most of
which are discretionary and are used principally to acquire additional units for the lease fleet,
through working capital and funds generated from operations. Leasing is a capital-intensive
business that requires us to acquire assets before they generate revenues, cash flow and earnings.
The assets which we lease have very long useful lives and require relatively little recurrent
maintenance expenditures. Most of the capital we deploy into our leasing business has been used to
expand our
24
operations geographically, to increase the number of units available for lease at our
leasing locations, and to add to the mix of products we offer. During recent years, our operations
have generated annual cash flow that exceeds our pre-tax earnings, particularly due to the deferral
of income taxes caused by accelerated depreciation that is used for tax accounting.
In March 2006, we completed a public offering of 4.6 million shares of our common stock (the
Equity Offering), which provided net proceeds to us of approximately $120.3 million. We used
$57.5 million of the proceeds to redeem $52.5 million principal amount of our 91/2% Senior Notes and
the remainder to temporarily pay down our line of credit.
At December 31, 2005, we had a $250.0 million senior secured revolving line of credit with a group
of lenders that was scheduled to mature in February 2008. On February 17, 2006, we modified the
credit agreement by entering into a
Second Amended and Restated Loan and Security Agreement that provides a five-year $350.0 million
senior secured revolving credit facility, which is scheduled to mature in February 2011. We may
also, at our option and without lenders consent, increase available borrowings under the credit
facility by an additional $75.0 million during the term of the agreement.
During the past two years, our capital expenditures and acquisitions have been funded by our
operating cash flow, the Equity Offering and through borrowings under our revolving credit
facility. Our operating cash flow is, in general, weakest during the first quarter of each fiscal
year, when customers who leased containers for holiday storage return the units. In addition to
cash flow generated by operations, our principal current source of liquidity is our $350.0 million
revolving credit facility and our equity offering completed in March 2006. During the six months
ended June 30, 2006, we had net additional borrowings under our credit facility of approximately
$23.2 million, as compared to $12.1 million for the same period in 2005. This increase was used in
conjunction with cash provided by operating activities to fund the
$60.4 million additions in our
lease fleet during the six months ended June 30, 2006, to complete acquisitions in the second
quarter of 2006 totaling $59.5 million and to redeem 35% of our 91/2% Senior Notes at a redemption
price of $57.5 million in the aggregate. We financed the acquisitions and the Senior Notes
redemption with a portion of the approximately $120.3 million of net proceeds from our equity
offering and used the remainder of the net proceeds to reduce borrowings under our credit facility.
As of July 31, 2006, borrowings outstanding under our credit facility were approximately $191.3
million.
Operating
Activities. Our operations provided net cash flow of $29.3 million for the six months
ended June 30, 2006, compared to $27.0 million during the same period in 2005.
The $2.3 million
increase in cash generated by operations in 2006, in addition to pre-tax income, is primarily the
result of a non-cash charge of $1.5 million related to share-based compensation expense, and a $1.4
million non-cash debt extinguishment expense. In 2006, cash provided by operating activities was
negatively affected by the $5.0 million premium paid for redeeming 35% of our 91/2% Senior Notes,
while in 2005 cash provided by operating activities was positively influenced by a one-time event
of $3.2 million in other income. In both years, cash generated by operations was negatively
impacted by seasonal increases in inventory levels. In 2006, a $5.9 million increase in accounts
receivable, due to growth in our leasing activities, was partially
offset with a $1.6 million
increase in accounts payable.
Investing
Activities. Net cash used in investing activities was $117.5 million for the six months
ended June 30, 2006, compared to $41.2 million for the same period in 2005. Capital expenditures
for acquisition of businesses were $59.5 million for the six months ended June 30, 2006. We did not
complete any acquisitions for the same period in 2005. Capital expenditures for our lease fleet,
net of proceeds from sale of lease fleet units, were $54.2 million for the six months ended June
30, 2006, and $39.6 million for the same period in 2005. The capital expenditures increase for our
lease fleet is primarily due to an increase in demand for our products, requiring us to purchase
and refurbish more containers and offices. During the six months ended June 30, 2006, we were able
to meet a portion of the increased leasing demand by utilizing previously idle units. During the
past several years, we have increased the customization of our fleet, enabling us to differentiate
our product from our competitors product. Capital expenditures for property, plant and equipment,
net of proceeds from sales of property, plant and equipment, were $3.8 million for the six months
ended June 30, 2006 compared to the $1.8 million for the same period in 2005. 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.
Financing Activities. Net cash provided by financing activities was $90.5 million during the six
months ended June 30, 2006, compared to $14.5 million for the same period in 2005. In 2006, we
received approximately $120.3 million in net
25
proceeds from a public offering of 4.6 million shares
of our common stock and in 2006 and 2005 we received approximately $1.8 million and $3.2 million,
respectively, from exercises of employee stock options. In 2006, we spent $52.5 million to redeem
35% of the aggregate outstanding principal balance of our 91/2% Senior Notes. Also, during the six
months ended June 30, 2006 and 2005, net cash provided by financing activities was provided by our
revolving credit facility and was used together with cash flow generated from operations to fund
our expansion of the lease fleet.
On February 17, 2006, we amended our $250.0 million revolving credit facility through a
modification of the credit facility which, among other things, increased the amount of the facility
to $350.0 million. The interest rate under our revolving credit facility is based on our ratio of
funded debt to earnings before interest expenses, taxes, depreciation and amortization, debt
restructuring and extinquishment expenses, as defined, and any extraordinary gains or non-cash
extraordinary losses. The initial borrowing rate under the modified credit facility was LIBOR plus
1.50% per annum or the prime rate less 0.25% per annum, whichever we elect. The interest rate
spread from LIBOR and prime rate can change based on our debt ratio measured at the end of each
quarter, as defined in our credit agreement. The interest rate spread on our non-prime borrowings,
based on our June 30, 2006 quarterly results, will decrease by 0.25% effective August 1, 2006.
We have interest rate swap agreements under which we effectively fixed the interest rate payable on
$50.0 million of borrowings under our credit facility so that the rate is based upon a spread from
a fixed rate, rather than a spread from the LIBOR rate. We account for the swap agreements in
accordance with SFAS No. 133 which resulted in comprehensive income for the six months ended June
30, 2006, of $0.2 million, net of applicable income taxes of $0.1 million.
CONTRACTUAL OBLIGATIONS AND COMMITMENTS
Our contractual obligations primarily consist of our outstanding balance under our revolving credit
facility and our unsecured Senior Notes, together with other notes payable obligations both secured
and unsecured. We also have operating lease commitments for: 1) real estate properties for the
majority of our branches, 2) delivery, transportation and yard equipment, typically under a
five-year lease with purchase options at the end of the lease term at a stated or fair market value
price; and 3) other equipment, primarily office machines.
In connection with the issuance of our insurance policies, we have provided our various insurance
carriers approximately $3.6 million in letters of credit and an agreement under which we are
contingently responsible for $2.3 million to provide credit support for our payment of the
deductibles and/or loss limitation reimbursements under the insurance policies.
We currently do not have any obligations under purchase agreements or commitments. Historically,
we enter into capitalized lease obligations from time to time to purchase delivery, transportation
and yard equipment. Currently, we have two small capital lease commitments related to office
equipment.
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 inventory for the holiday season. Our retail customers usually return these leased
units to us early in the following year. This causes lower utilization rates for our lease fleet
and a marginal decrease in cash flow during the first quarter of the year.
EFFECTS OF INFLATION
Our results of operations for the periods discussed in this report have not been significantly
affected by inflation.
26
CRITICAL ACCOUNTING POLICIES, ESTIMATES AND JUDGMENTS
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. The preparation of these consolidated financial statements requires us to
make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues
and expenses during the reporting period. These estimates and assumptions are based upon our
evaluation of historical results and anticipated future events, and these estimates may change as
additional information becomes available. The Securities and Exchange Commission defines critical
accounting policies as those that are, in managements view, most important to our financial
condition and results of operations and those that require significant judgments and estimates.
Management believes that our most critical accounting policies relate to:
Revenue Recognition. Lease and leasing ancillary revenues and related expenses generated under
portable storage units and office units are recognized on a straight-line basis. Revenues and
expenses from portable storage unit delivery and hauling are recognized when these services are
billed, in accordance with SAB No. 104. We recognize revenues from sales of containers and mobile
offices upon delivery when the risk of loss passes and collectibility is reasonably assured. We
sell our products pursuant to sales contracts stating the fixed sales price with our customers.
Share-Based Compensation. As part of our adoption of SFAS No. 123(R) effective January 1, 2006, we
are required to recognize the fair value of share-based compensation awards as an expense. We
apply the Black-Scholes option pricing model in order to determine the fair value of stock options
on the date of grant, and we apply judgment in estimating key assumptions that are important
elements in the model, such as the expected stock-price volatility, expected holding period and
expected forfeiture rates. Our estimates of these important assumptions are based on historical
data and judgment regarding market trends and factors. If actual results are not consistent with
our assumptions and judgments used in estimating these factors, we may be required to record
additional share-based compensation expense or income tax expense, which could be material to our
results of operations.
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 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:
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Three Months Ended |
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Six Months Ended |
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June 30, |
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2005 |
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2006 |
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2005 |
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2006 |
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(In thousands) |
As Reported: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
|
$ |
10,145 |
|
|
$ |
7,658 |
|
|
$ |
16,530 |
|
|
$ |
15,862 |
|
Diluted earnings per share |
|
$ |
0.33 |
|
|
$ |
0.21 |
|
|
$ |
0.54 |
|
|
$ |
0.47 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As adjusted for change in
estimates: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
|
$ |
10,049 |
|
|
$ |
7,464 |
|
|
$ |
16,325 |
|
|
$ |
15,552 |
|
Diluted earnings per share |
|
$ |
0.33 |
|
|
$ |
0.21 |
|
|
$ |
0.54 |
|
|
$ |
0.46 |
|
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:
27
|
|
|
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. |
When we determine that the carrying value of goodwill and other identified intangibles may not be
recoverable, we measure impairment based on a projected discounted cash flow method using a
discount rate determined by our management to be commensurate with the risk inherent in our current
business model. We operate in one reportable segment, which is comprised of one reporting unit and
pursuant to SFAS No. 142, Goodwill and Other Intangible Assets, all of our goodwill has been
assigned to the enterprise as a whole. We test goodwill for impairment using the two-step process
prescribed in SFAS No. 142. The first step is a screen for potential impairment, while the second
step measures the amount of the impairment, if any. We performed the annual required impairment
tests for goodwill at December 31, 2005, and determined that the carrying amount of goodwill was
not impaired as of that date. We will perform this test in the future as required by SFAS No. 142.
Impairment Long-Lived Assets. We review property, plant and equipment and intangibles with finite
lives (those assets resulting from acquisitions) for impairment when events or circumstances
indicate these assets might be impaired. We test impairment using historical cash flows and other
relevant facts and circumstances as the primary basis for its estimates of future cash flows. This
process requires the use of estimates and assumptions, which are subject to a high degree of
judgment. If these assumptions change in the future, whether due to new information or other
factors, we may be required to record impairment charges for these assets.
Depreciation Policy. Our depreciation policy for our lease fleet uses the straight-line method
over our units estimated useful life, after the date that we put the unit in service. Our steel
units are depreciated over 25 years with an estimated residual value of 62.5%. Wood offices units
are depreciated over 20 years with an estimated residual value of 50%. Van trailers, which are a
small part of our fleet, are depreciated over seven years to a 20% residual value. Van trailers
are only added to the fleet as a result of acquisitions of portable storage businesses.
28
We periodically review our depreciation policy against various factors, including the results of
our lenders independent appraisal of our lease fleet, practices of the larger competitors in our
industry, profit margins we are achieving on sales of depreciated units and lease rates we obtain
on older units. If we were to change our depreciation policy on our steel units from 62.5%
residual value and a 25-year life to a lower or higher residual and a shorter or longer useful
life, such change could have a positive, negative or neutral effect on our earnings, with the
actual effect being determined by the change. For example, a change in our estimates used in our
residual values and useful life would have the following approximate effect on our net income and
diluted earnings per share as reflected in the table below.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Useful |
|
Three Months Ended |
|
Six Months Ended |
|
|
Salvage |
|
Life in |
|
June 30, |
|
June 30, |
|
|
Value |
|
Years |
|
2005 |
|
2006 |
|
2005 |
|
2006 |
|
|
|
|
|
|
|
|
|
|
(In thousands except per share data) |
As Reported: |
|
|
62.5 |
% |
|
|
25 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
|
|
|
|
|
|
|
|
|
$ |
10,145 |
|
|
$ |
7,658 |
|
|
$ |
16,530 |
|
|
$ |
15,862 |
|
Diluted earnings per share |
|
|
|
|
|
|
|
|
|
$ |
0.33 |
|
|
$ |
0.21 |
|
|
$ |
0.54 |
|
|
$ |
0.47 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As adjusted for change in estimates: |
|
|
70 |
% |
|
|
20 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
|
|
|
|
|
|
|
|
|
$ |
10,146 |
|
|
$ |
7,658 |
|
|
$ |
16,531 |
|
|
$ |
15,862 |
|
Diluted earnings per share |
|
|
|
|
|
|
|
|
|
$ |
0.33 |
|
|
$ |
0.21 |
|
|
$ |
0.54 |
|
|
$ |
0.47 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As adjusted for change in estimates: |
|
|
50 |
% |
|
|
20 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
|
|
|
|
|
|
|
|
|
$ |
9,512 |
|
|
$ |
6,883 |
|
|
$ |
15,291 |
|
|
$ |
14,344 |
|
Diluted earnings per share |
|
|
|
|
|
|
|
|
|
$ |
0.31 |
|
|
$ |
0.19 |
|
|
$ |
0.50 |
|
|
$ |
0.42 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As adjusted for change in estimates: |
|
|
40 |
% |
|
|
40 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
|
|
|
|
|
|
|
|
|
$ |
10,145 |
|
|
$ |
7,658 |
|
|
$ |
16,530 |
|
|
$ |
15,862 |
|
Diluted earnings per share |
|
|
|
|
|
|
|
|
|
$ |
0.33 |
|
|
$ |
0.21 |
|
|
$ |
0.54 |
|
|
$ |
0.47 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As adjusted for change in estimates: |
|
|
30 |
% |
|
|
25 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
|
|
|
|
|
|
|
|
|
$ |
9,322 |
|
|
$ |
6,650 |
|
|
$ |
14,917 |
|
|
$ |
13,888 |
|
Diluted earnings per share |
|
|
|
|
|
|
|
|
|
$ |
0.31 |
|
|
$ |
0.18 |
|
|
$ |
0.49 |
|
|
$ |
0.41 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As adjusted for change in estimates: |
|
|
25 |
% |
|
|
25 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
|
|
|
|
|
|
|
|
|
$ |
9,195 |
|
|
$ |
6,495 |
|
|
$ |
14,669 |
|
|
$ |
13,585 |
|
Diluted earnings per share |
|
|
|
|
|
|
|
|
|
$ |
0.30 |
|
|
$ |
0.18 |
|
|
$ |
0.43 |
|
|
$ |
0.40 |
|
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 $100,000 and general liability $100,000. We expense the deductible portion of the
individual claims. However, we generally do not know the full amount of our exposure to a
deductible in connection with any particular claim during the fiscal period in which the claim is
incurred and for which we must make an accrual for the deductible expense. We make these accruals
based on a combination of the claims development experience of our staff and our insurance
companies; and, at year end, the accrual is reviewed and adjusted, in part, based on an independent
actuarial review of historical loss data and using certain actuarial assumptions followed in the
insurance industry. A high degree of judgment is required in developing these estimates of amounts
to be accrued, as well as in connection with the underlying assumptions. In addition, our
assumptions will change as our loss experience is developed. All of these factors have the
potential for significantly impacting the amounts we have previously reserved in respect of
anticipated deductible expenses, and we
29
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.
We do not anticipate that the resolution of such matters, known at this time, will have a material
adverse effect on our business or consolidated financial position.
RECENT ACCOUNTING PRONOUNCEMENTS
SFAS No. 154, Accounting Changes and Error Corrections, a replacement of APB Opinion No. 20,
Accounting Changes, and Statement No. 3, Reporting Accounting Changes in Interim Financial
Statements, was issued in May 2005. SFAS No. 154 changes the requirements for the accounting and
reporting of a change in accounting principle. Previously, most voluntary changes in accounting
principles were recognized by way of a cumulative effect adjustment within net income during the
period of the change. SFAS No. 154 requires retrospective application to prior periods financial
statements, unless it is impracticable to determine either the period-specific effects or the
cumulative effect of the change. SFAS No. 154 is effective for accounting changes made in fiscal
years beginning after December 15, 2005. However, SFAS No. 154 does not change the transition
provisions of any existing accounting pronouncements. We adopted SFAS No. 154 on January 1, 2006,
and do not expect it to have a material effect on our results of operations or financial condition.
In June 2006, the Financial Accounting Standards Board (FASB) issued Financial Interpretation No.
(FIN) 48, Accounting for Uncertainty in Income Taxes, which clarifies the accounting for
uncertainty in income taxes recognized in an enterprises financial statements in accordance with
FASB Statement No. 109, Accounting for Income Taxes. The interpretation prescribes a recognition
threshold and measurement attribute for the financial statement recognition and measurement of a
tax position taken or expected to be taken in a tax return. FIN 48 is effective for fiscal years
beginning after December 15, 2006. We are currently evaluating the requirements under FIN 48 and
the effect, if any, that the adoption of FIN 48 will have on our results of operations or financial
condition.
ITEM 3. 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 June 30, 2006, we had interest rate swap agreements under
which we pay a fixed rate and receive a variable interest rate on $50.0 million of debt. For the
six months ended June 30, 2006, in accordance with SFAS No. 133, comprehensive income included $0.2
million, net of applicable income taxes of $0.1 million, related to the fair value of our interest
rate swap agreements.
Impact of Foreign Currency Rate Changes. At June 30, 2006, we have branch operations outside the
United States and we bill those customers primarily in their local currency which is subject to
foreign currency rate changes. Our operations in Canada are billed in the Canadian Dollar,
operations in the United Kingdom are billed in Pound Sterling and operations in The Netherlands are
billed in the Euro Dollar. We are exposed to foreign exchange rate fluctuations as the financial
results of our non-United States operations are translated into U.S. Dollars. The impact of
foreign currency rate changes has historically been insignificant with our Canadian operations, but
we would expect the foreign exchange impact may be more volatile with our European operations.
CAUTIONARY FACTORS THAT MAY AFFECT FUTURE RESULTS
Our disclosure and analysis in this report contains forward-looking information about our financial
results and estimates and our business prospects that involve substantial risks and uncertainties.
From time to time, we also may provide oral or written forward-looking statements in other
materials we release to the public. Forward-looking statements are expressions of our current
expectations or forecasts of future events. You can identify these statements by the fact that
they do not relate strictly to historic or current facts. They include words such as anticipate,
estimate, expect, project, intend, plan, believe, will, and other words and terms of similar meaning in
connection with any discussion
30
of future operating or financial performance. In particular, these
include statements relating to future actions, future performance or results, expenses, the outcome
of contingencies, such as legal proceedings, and financial results. Among the factors that could
cause actual results to differ materially are the following:
|
|
|
economic slowdown that affects any significant portion of our customer base, including
economic slowdown in areas of limited geographic scope if markets in which we have
significant operations are impacted by such slowdown |
|
|
|
|
our ability to manage our planned growth, both internally and at new branches |
|
|
|
|
our ability to obtain additional debt or equity financing on acceptable terms |
|
|
|
|
changes in the supply and price of used ocean-going containers |
|
|
|
|
changes in the supply and cost of the raw materials we use in manufacturing storage units, including steel |
|
|
|
|
competitive developments affecting our industry, including pricing pressures in newer markets |
|
|
|
|
the timing and number of new branches that we open or acquire |
|
|
|
|
our ability to protect our patents and other intellectual property |
|
|
|
|
interest rate fluctuations |
|
|
|
|
governmental laws and regulations affecting domestic and foreign operations, including tax obligations |
|
|
|
|
changes in generally accepted accounting principles |
|
|
|
|
any changes in business, political and economic conditions due to the threat of future
terrorist activity in the U.S. and other parts of the world, and related U.S. military
action overseas |
|
|
|
|
increases in costs and expenses, including cost of raw materials and employment costs |
We cannot guarantee that any forward-looking statement will be realized, although we believe we
have been prudent in our plans and assumptions. Achievement of future results is subject to risks,
uncertainties and inaccurate assumptions. Should known or unknown risks or uncertainties
materialize, or should underlying assumptions prove inaccurate, actual results could vary
materially from past results and those anticipated, estimated or projected. Investors should bear
this in mind as they consider forward-looking statements.
We undertake no obligation to publicly update forward-looking statements, whether as a result of
new information, future events or otherwise. You are advised, however, to consult any further
disclosures we make on related subjects in our Form 10-Q, 8-K and 10-K reports to the Securities
and Exchange Commission. Our Form 10-K filing for the fiscal year ended December 31, 2005, listed
various important factors that could cause actual results to differ materially from expected and
historic results. We note these factors for investors as permitted by the Private Securities
Litigation Reform Act of 1995. Readers can find them in Item 1A. of that filing under the heading
Risk Factors. You may obtain a copy of our Form 10-K by requesting it from the Companys
Investor Relations Department at (480) 894-6311 or by mail to Mobile Mini, Inc., 7420 S. Kyrene
Rd., Suite 101, Tempe, Arizona 85283. Our filings with the SEC, including the Form 10-K, may be
accessed through Mobile Minis website at www.mobilemini.com, and at the SECs website at
www.sec.gov. Material on our website is not incorporated in this report, except by express
incorporation by reference herein.
ITEM 4. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures.
Under the supervision and with the participation of our management, including our Chief Executive
Officer and Chief Financial Officer, we conducted an evaluation of the effectiveness of the design
and operation of our disclosure controls and procedures, as such term is defined under Rule
13a-15(e) and 15d-15(e) promulgated under the Securities Exchange Act of 1934, as amended (the
Exchange Act). Based on this evaluation, our Chief Executive Officer and our Chief Financial
Officer concluded that our disclosure controls and procedures were effective during the period and
as of the end of the period covered by this report.
31
Changes in Internal Controls.
There were no changes in the Companys internal controls over financial reporting that have
materially affected, or are reasonably likely to materially affect, the Companys internal control
over financial reporting.
PART II. OTHER INFORMATION
ITEM 1A. RISK FACTORS
In addition to the other information set forth in this report, you should carefully consider the
factors discussed in the Risk Factors section in our Annual Report on Form 10-K for the year
ended December 31, 2005, which could materially affect our financial condition and results of
operations. The risks described in our Annual Report on Form 10-K are not the only risks we face.
Additional risks and uncertainties not currently known to us or that we currently deem to be
immaterial also may materially adversely affect our financial condition and results of operations.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Our annual meeting of stockholders was held on June 28, 2006, in Phoenix, Arizona. On the record
date for the annual meeting, 35,250,490 shares of common stock were outstanding and eligible to
vote. A quorum was present at the annual meeting. The table below briefly describes the proposal
and the results from the annual meeting of stockholders.
|
|
|
|
|
|
|
|
|
|
|
Number of Shares Voted: |
|
|
(In thousands) |
|
|
For |
|
Withheld |
Election of Directors, each to serve a three-year term: |
|
|
|
|
|
|
|
|
Stephen A McConnell |
|
|
33,091 |
|
|
|
515 |
|
Jeffrey S. Goble |
|
|
33,109 |
|
|
|
497 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Broker |
|
|
For |
|
Against |
|
Withheld |
|
Non-Votes |
Approval of the 2006 Equity Incentive Plan: |
|
|
27,274 |
|
|
|
2,280 |
|
|
|
218 |
|
|
|
3,834 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ratification of appointment of Ernst & Young LLP as
the independent registered public accounting firm for
the fiscal year ending December 31, 2006: |
|
|
32,880 |
|
|
|
605 |
|
|
|
121 |
|
|
|
|
|
In addition to the election of two directors at the annual meeting, the terms of four directors
continued after the meeting. The continuing directors were Steven G. Bunger, Ronald J.
Marusiak, Lawrence Trachtenberg, and Michael L. Watts.
ITEM 6. EXHIBITS
(a) Exhibits (filed herewith):
|
|
|
Number |
|
Description |
31.1
|
|
Certification of Chief Executive Officer pursuant to Item 601(b)(31)
of Regulation S-K. (Filed herewith). |
31.2
|
|
Certification of Chief Financial Officer pursuant to Item 601(b)(31)
of Regulation S-K. (Filed herewith). |
32.1
|
|
Certification of Chief Executive Officer and Chief Financial Officer
pursuant to item 601(b)(32) of Regulation S-K. (Filed herewith). |
32
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused
this report to be signed on its behalf by the undersigned thereunto duly authorized.
|
|
|
|
|
|
|
MOBILE MINI, INC.
|
|
|
|
|
|
|
|
Date: August 9, 2006
|
|
/s/ Lawrence Trachtenberg |
|
|
|
|
|
|
|
|
|
Lawrence Trachtenberg |
|
|
|
|
Chief Financial Officer & |
|
|
|
|
Executive Vice President |
|
|
33
INDEX TO EXHIBITS
Exhibits (Filed herewith):
|
|
|
Number |
|
Description |
31.1
|
|
Certification of Chief Executive Officer pursuant to Item 601(b)(31)
of Regulation S-K. (Filed herewith). |
|
31.2
|
|
Certification of Chief Financial Officer pursuant to Item 601(b)(31)
of Regulation S-K. (Filed herewith). |
|
32.1
|
|
Certification of Chief Executive Officer and Chief Financial Officer
pursuant to item 601(b)(32) of Regulation S-K. (Filed herewith). |
34