- ------------------------------------------------------------------------------
U. S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
--------------------------------------
Form 10-Q
(Mark One)
|X| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1996
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from __________ to __________
-----------------------------------
Commission File Number 1-12804
-----------------------------------
MOBILE MINI, INC.
(Exact name of small business issuer as specific in its charter)
Delaware 860748362
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
1834 West 3rd Street
Tempe, Arizona 85281
(Address of principal executive offices)
(602) 894-6311
(Issuer's telephone number)
Indicate by check whether the issuer (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
---- ----
As of May 1, 1996, there were outstanding 6,739,324 shares of the
issuer's common stock, par value $.01.
- ------------------------------------------------------------------------------
MOBILE MINI, INC.
INDEX TO FORM 10-Q FILING
FOR THE QUARTER ENDED MARCH 31, 1996
TABLE OF CONTENTS PAGE
NUMBER
PART I.
FINANCIAL INFORMATION
Item 1. Financial Statements 3
Consolidated Balance Sheets 3
March 31, 1996 (unaudited) and December 31, 1995
Consolidated Statements of Operations 4
Three Months ended March 31, 1996 and
March 31, 1995 (unaudited)
Consolidated Statements of Cash Flows 5
Three Months Ended March 31, 1996 and
March 31, 1995 (unaudited)
Notes to Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 8
PART II.
OTHER INFORMATION
Item 6(a) Exhibits 10
Item 6(b) Reports on Form 8-K 10
SIGNATURES 11
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
MOBILE MINI, INC.
CONSOLIDATED BALANCE SHEETS
ASSETS March 31, 1996 December 31, 1995
(Unaudited)
----------------------------------------
CURRENT ASSETS
Cash $ 720,104 $ 1,430,651
Receivables, net 3,449,247 4,312,725
Inventories 5,774,897 5,193,222
Prepaid and other 803,433 718,574
----------- -----------
Total current assets 10,747,681 11,655,172
CONTAINER LEASE FLEET, net 26,967,078 26,954,936
PROPERTY, PLANT AND EQUIPMENT, net 15,832,690 15,472,164
OTHER ASSETS 1,866,976 259,672
----------- ----------
$55,414,425 $54,341,944
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 2,437,008 $ 4,265,147
Accrued liabilities 1,621,768 1,572,464
Current portion of
long-term debt 1,021,348 737,181
Current portion of obligations
under capital leases 2,420,914 2,488,205
----------- -----------
Total current liabilities 7,501,038 9,062,997
LINE OF CREDIT 16,611,668 4,099,034
DEFERRED INCOME TAXES 3,300,018 3,711,985
LONG-TERM DEBT, less current portion 6,272,837 8,363,333
OBLIGATIONS UNDER CAPITAL LEASES,
less current portion
6,114,308 12,944,653
---------- -----------
Total liabilities 39,799,869 38,182,002
---------- -----------
STOCKHOLDERS' EQUITY:
Series A Convertible
Preferred Stock, $.01 par
value, $100 stated value,
5,000,000 shares authorized,
0 and 50,000 issued and
outstanding - 5,000,000
Common Stock, $.01 par value,
17,000,000 shares authorized,
6,739,324 and 4,835,000 shares
issued and outstanding 67,393 48,350
Additional paid-in capital 14,338,872 9,378,979
Retained earnings 1,208,291 1,732,613
---------- ----------
Total stockholders' equity 15,614,556 16,159,942
---------- ----------
Total liabilities and
stockholders' equity $55,414,425 $54,341,944
========== ==========
See the accompanying notes to these consolidated balance sheets.
MOBILE MINI, INC.
CONSOLIDATED STATEMENT OF OPERATIONS
(UNAUDITED)
Three Months Ended March 31,
REVENUES: 1996 1995
---- ----
Container and modular building sales $4,915,832 $5,448,427
Leasing 3,171,300 2,521,324
Other 769,577 705,192
--------- ---------
8,856,709 8,674,943
COSTS AND EXPENSES:
Cost of container and modular building sales 3,925,438 4,346,985
Leasing, selling, general expenses 3,874,363 3,465,758
Depreciation and amortization 368,279 238,500
--------- ---------
Income from operations 688,629 623,700
OTHER INCOME (EXPENSE):
Interest income and other 56,206 115,141
Interest expense (948,349) (649,693)
---------- ---------
INCOME (LOSS) BEFORE PROVISION FOR (203,514) 89,448
INCOME (BENEFIT) TAXES AND
EXTRAORDINARY ITEM
PROVISION (BENEFIT) FOR INCOME TAXES (89,546) 39,357
--------- ---------
NET INCOME BEFORE EXTRAORDINARY ITEM (113,968) 50,091
EXTRAORDINARY ITEM (410,354) -
--------- ---------
NET INCOME (LOSS) $ (524,322) $ 50,091
========== =========
LOSS PER COMMON AND COMMON EQUIVALENT
SHARE BEFORE EXTRAORDINARY ITEM (NOTE D) $ (.02) N/A
========= =========
EARNINGS (LOSS) PER COMMON AND
COMMON EQUIVALENT SHARE $ (.08) $ .01
========= =========
WEIGHTED AVERAGE NUMBER OF COMMON
AND COMMON EQUIVALENT SHARES
OUTSTANDING 6,732,358 4,835,000
========= =========
See the accompanying notes to these consolidated statements.
MOBILE MINI, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
Three Months Ended March 31,
CASH FLOWS FROM OPERATING ACTIVITIES: 1996 1995
---- ----
Net income (loss) $ (524,322) $ 50,091
Adjustments to reconcile net income
(loss) to net cash used in operating activities-
Depreciation and amortization 368,279 238,500
Gain on disposal of property, plant
and equipment (4,000) -
Changes in assets and liabilities-
Decrease (increase) in receivables, net 863,478 (145,842)
Increase in inventories (581,675) (2,535,609)
Increase in prepaids and other (84,859) (151,922)
Increase in other assets (1,607,304) (7,533)
(Decrease) increase in accounts payable (1,828,139) 1,281,999
Increase in accrued liabilities 49,304 258,874
(Decrease) increase in deferred income taxes (411,967) 39,357
-------- ----------
Net cash used in operating activities (3,761,205) (972,085)
---------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Net purchases of container lease fleet (78,861) (491,825)
Net purchases of property, plant, and equipment (425,433) (1,563,374)
-------- -----------
Net cash used in investing activities (504,294) (2,055,199)
---------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net borrowings under lines of credit 12,512,634 911,384
Proceeds from issuance of long-term debt 6,635,069 3,563,051
Principal payments on long-term debt (8,441,398) (531,973)
Principal payments on capital lease obligations (7,130,289) (455,898)
Additional paid in capital (21,064) -
-------- ----------
Net cash provided by financing activities 3,554,952 3,486,564
--------- ----------
NET INCREASE (DECREASE) IN CASH (710,547) 459,280
CASH AT BEGINNING OF PERIOD 1,430,651 846,645
--------- ----------
CASH AT END OF PERIOD $ 720,104 $ 1,305,925
========== ===========
See the accompanying notes to these consolidated statements.
MOBILE MINI, INC. AND SUBSIDIARIES - NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE A - The accompanying unaudited consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for interim
financial information and the instructions to Form 10-Q. Accordingly, they do
not include all the information and footnotes required by generally accepted
accounting principles for complete financial statements. In the opinion of
management, all adjustments (which include only normal recurring adjustments)
necessary to present fairly the financial position, results of operations, and
cash flows for all periods presented have been made. The results of operations
for the three-month period ended March 31, 1996, are not necessarily indicative
of the operating results that may be expected for the entire year ending
December 31, 1996. These financial statements should be read in conjunction with
the Company's December 31, 1995 financial statements and accompanying notes
thereto.
NOTE B - Earnings (loss) per share is computed by dividing net income (loss) by
the weighted average number of common share equivalents assumed outstanding
during the periods. Fully diluted earnings per share is considered equal to
primary earnings per share in all periods presented.
NOTE C - In December 1995, the Company completed the private placement of 50,000
shares of Series A Convertible Preferred Stock ("Series A"), $.01 par value,
$100 stated value. Subject to the terms of the Series A, all 50,000 shares of
Series A were converted into 1,904,324 shares of the Company's common stock at
an average conversion rate of $2.63 per share during the first quarter of 1996.
NOTE D - On March 29, 1996, the Company entered into a credit agreement (the
"Credit Agreement") with BT Commercial Corporation, as Agent for a group of
lenders (the "Lenders"). Under the terms of the Credit Agreement, the Lenders
have provided the Company with a $35.0 million revolving line of credit and a
$6.0 million term loan. Borrowings under the Credit Agreement are secured by
substantially all of the Company's assets.
In connection with the closing of the Credit Agreement, the Company terminated
its line of credit with M&I Thunderbird Bank, repaying all indebtedness under
that line. In addition, the Company repaid other long-term debt totaling $8.4
million and obligations under capital leases totaling $6.7 million. As a result,
costs previously deferred related to certain indebtedness and prepayment
penalties resulted in an extraordinary charge to earnings of approximately
$410,000 after the benefit of income taxes.
NOTE E - Inventories are stated at the lower of cost or market, with cost being
determined under the specific identification method. Market is the lower of
replacement cost or net realizable value. Inventories consisted of the following
at:
March 31, 1996 December 31, 1995
-------------- -----------------
Raw material and supplies $3,112,174 $2,858,181
Work-in-process 1,260,526 883,814
Finished containers 1,402,197 1,451,227
---------- ----------
$5,774,897 $5,193,222
========== ==========
NOTE F - Property, plant and equipment consisted of the following at:
March 31, 1996 December 31, 1995
-------------- -----------------
Land $ 663,555 $ 328,555
Vehicles and equipment 9,702,576 9,469,092
Buildings and improvements 6,376,900 6,363,154
Office fixtures and equipment 1,792,778 1,714,312
--------- ----------
18,535,809 17,875,113
Less accumulated depreciation ( 2,703,119) ( 2,402,949)
--------- ----------
$15,832,690 $15,472,164
========== ==========
NOTE G - On March 29, 1996, the Company purchased property adjacent to its
Maricopa facility from Mr. Richard E. Bunger, the Company's President, for a
purchase price of $335,000, which management believes reflects the fair market
value of the property. Prior to the purchase date, this property was leased from
Mr. Bunger.
Transactions with affiliates are on terms no less favorable than could be
obtained from unaffiliated parties and are approved by a majority of the
independent and disinterested directors.
NOTE H - Revenues for the three months ended March 31, 1995 include the sale of
certain storage containers under sale/leaseback arrangements. Gains from these
transactions have been deferred and are being amortized over the life of the
related asset.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
Three Months Ended March 31, 1996 Compared to
Three Months Ended March 31, 1995
Revenues for the quarter ended March 31, 1996 were $8,857,000 which
represents a 2.1% increase over revenues of $8,675,000 for the quarter ended
March 31, 1995. Revenues from both the sales of the Company's products and
leasing of portable storage and office units were higher, posting increases of
21.5% and 25.8% respectively, exclusive of container sales revenues recorded
under sale/leaseback transactions. In 1995, the Company's sales revenues
included approximately $1,401,000 in revenues recorded under sale/leaseback
financing agreements related principally to storage containers and portable
office units added to the Company's lease fleet. These revenues were offset by
equivalent expenses and did not produce gross margin. During the current year,
the Company did not enter into sale/leaseback transactions.
The Company's business is seasonal, with revenues and earnings
generally lowest during its first quarter.
Excluding the effect of sale/leaseback financings, cost of container
and modular building sales as a percentage of container and modular building
sales for the quarter ended March 31, 1996 was 79.9% compared to 72.8% for the
same quarter in 1995. This increase is primarily attributed to the mix of
products sold and an increase in the costs of certain raw materials.
Excluding the effect of sale/leaseback financing, leasing, selling and
general expenses were 43.7% of total revenue in the quarter ended March 31, 1996
compared to 47.6% in the quarter ended March 31, 1995. The decrease primarily
results from the efficiencies obtained by the Company's Texas operation, which
was in its start-up phase during the 1995 quarter.
Interest expense was 10.7% of revenues during the first quarter of 1996
compared to 7.5% of revenues during the quarter ended March 31, 1995. This
increase was due largely to the costs related to financing the majority of the
increase in the Company's equipment and container lease fleet.
Depreciation and amortization increased from 2.7% of revenues for the
quarter ended March 31, 1995 to 4.2% for the quarter ended March 31, 1996. This
increase is related primarily to the increase in size of the Company's
manufacturing facility, the increase in the Company's lease fleet and additional
equipment at the Company's new and existing locations.
The Company posted a net loss before extraordinary item of $114,000, or
$.02 per share, for the quarter ended March 31, 1996, compared to net income of
$50,000, or $.01 per share, for the quarter ended March 31, 1995.
In the quarter ended March 31, 1996, the Company prepaid certain debt
and capital leases in connection with entering into a credit agreement (see
Liquidity and Capital Resources). The Company recognized an extraordinary charge
to earnings of $410,000, or $.06 per share, net of the benefit for income taxes,
as a result of this early extinguishment of debt. The Company also incurred
costs of $1,803,000 to complete the credit agreement, which have been deferred
and are amortized over the term of the Agreement.
LIQUIDITY AND CAPITAL RESOURCES
The Company has required increasing amounts of financing to support the
growth of its business during the last several years. This financing has been
required primarily to fund the acquisition of containers for the Company's lease
fleet and also to fund the acquisition of property, plant and equipment and to
support both the Company's container leasing and manufacturing operations. The
financing consisted primarily of capital leases or secured borrowings, through
equity offerings and through other borrowings.
In order to improve its cash flow, increase its borrowing availability
and fund its continued growth, on March 29, 1996, the Company entered into a
credit agreement (the "Credit Agreement") with BT Commercial Corporation, as
Agent for a group of lenders (the "Lenders"). Under the terms of the Credit
Agreement, the Lenders provided the Company with a $35.0 million revolving line
of credit and a $6.0 million term loan. Borrowings under the Credit Agreement
are secured by substantially all of the Company's assets.
Borrowings under the term loan are to be repaid over a five-year
period. Interest on the term loan is at either prime plus 1.75% or the
Eurodollar rate plus 3.25%. Borrowings under the term loan are payable monthly
as follows (plus interest):
Months 1 through 12 $62,500
Months 13 through 24 83,333
Months 25 through 60 118,056
Additional principal payments equal to 75% of Excess Cash Flow, as defined, are
required annually.
Available borrowings under the revolving line of credit are based upon
the level of the Company's inventories, receivables and container lease fleet.
The container lease fleet will be appraised at least annually, and up to 90% of
the lesser of cost or appraised orderly liquidation value may be included in the
borrowing base. Interest accrues at either prime plus 1.5% or the Eurodollar
rate plus 3% and is payable monthly or at the end of the term of any Eurodollar
borrowing. The term of this line of credit is three years, with a one-year
extension option.
The Credit Agreement contains several covenants including a minimum
tangible net worth requirement, a minimum fixed charge coverage ratio, a maximum
ratio of debt-to-equity, minimum operating income levels and minimum required
utilization rates. In addition, the Credit Agreement contains limits on capital
expenditures, acquisitions, changes in control, the incurrence of additional
debt and the payment of dividends.
As of March 31, 1996, $2.0 million of additional borrowing was
available under the revolving line of credit.
In connection with the closing of the Credit Agreement, the Company
terminated its line of credit with M&I Thunderbird Bank, repaying all
indebtedness under that line. In addition, the Company repaid other long-term
debt totaling $8.4 million and obligations under capital leases totaling $6.7
million.
During the quarter ended March 31, 1996 the Company utilized cash flow
from operations of $3,761,000. This net use of cash was attributable primarily
to a reduction in accounts payable and an increase in other assets associated
with deferred financing costs incurred in connection with the closing of the
Credit Agreement. This was partially offset by a reduction in receivables.
During the quarter ended March 31, 1996, the Company invested $504,000
in equipment and the container lease fleet. This amount is net of the $233,000
in related financing.
Cash flow from financing activities totaled $3,555,000 during the three
months ended March 31, 1996. This was the result of restructuring the Company's
long-term debt and obligations under capital leases under the Credit Agreement
described above, partially offset by the principal payments on indebtedness
during the quarter.
The Company believes that cash flow generated from operations along
with the borrowing capacity under the Credit Agreement will be sufficient to
meet its obligations and capital needs for the next twelve months. However,
there can be no assurance that additional financing will not be required, and,
if required, will be available on terms acceptable to the Company.
EFFECTS OF INFLATION
The results of operations of the Company for the periods discussed have
not been significantly affected by inflation.
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
Number Description
27 Selected Financial Data
(b) Reports on Form 8-K
March 18, 1996 Item 5 - Other Events; Item 7 - Exhibits
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
MOBILE MINI, INC.
(Registrant)
Dated: May 13, 1996 By: /s/ Larry Trachtenberg
------------------------
Larry Trachtenberg
Chief Financial Officer