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U. S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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Form 10-Q
(Mark One)
|X| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1996
| | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from __________ to __________
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Commission File Number 1-12804
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MOBILE MINI, INC.
(Exact name of registrant as specific in its charter)
Delaware 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
(Registrant's telephone number)
Indicate by check whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
------- -------
As of November 12, 1996, there were outstanding 6,739,324 shares of the
issuer's common stock, par value $.01.
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MOBILE MINI, INC.
INDEX TO FORM 10-Q FILING
FOR THE QUARTER ENDED SEPTEMBER 30, 1996
TABLE OF CONTENTS PAGE
NUMBER
PART I.
FINANCIAL INFORMATION
Item 1. Financial Statements 3
Consolidated Balance Sheets 3
September 30, 1996 (unaudited) and December 31, 1995
Consolidated Statements of Operations 4
Three Months and Nine Months ended September 30, 1996 and
September 30, 1995 (unaudited)
Consolidated Statements of Cash Flows 5
Nine Months Ended September 30, 1996 and September 30, 1995
(unaudited)
Notes to Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of Financial Condition and 8
Results of Operations
PART II.
OTHER INFORMATION
Item 4 Submission of Matters to a Vote of Security Holders 12
Item 6(a) Exhibits 12
Item 6(b) Reports on Form 8-K 12
SIGNATURES 13
2
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
MOBILE MINI, INC.
CONSOLIDATED BALANCE SHEETS
ASSETS September 30, 1996 December 31, 1995
(Unaudited)
-------------------------------------
CURRENT ASSETS:
Cash and cash equivalents $ 947,022 $ 1,430,651
Receivables, net 4,044,061 4,312,725
Inventories 6,193,173 5,193,222
Prepaid and other 1,031,068 718,574
----------- -----------
Total current assets 12,215,324 11,655,172
CONTAINER LEASE FLEET, net 29,422,367 26,954,936
PROPERTY, PLANT AND EQUIPMENT, net 17,081,456 15,472,164
OTHER ASSETS, net 1,737,990 259,672
----------- -----------
Total assets $60,457,137 $54,341,944
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 2,496,994 $ 4,265,147
Accrued liabilities 1,592,569 1,572,464
Current portion of long-term debt 1,139,881 737,181
Current portion of obligations under capital leases 2,103,511 2,488,205
----------- -----------
Total current liabilities 7,332,955 9,062,997
LINE OF CREDIT 21,849,450 4,099,034
LONG-TERM DEBT, less current portion 5,647,835 8,363,333
OBLIGATIONS UNDER CAPITAL LEASES, less current portion 5,477,226 12,944,653
DEFERRED INCOME TAXES 3,823,303 3,711,985
----------- -----------
Total liabilities 44,130,769 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 at
September 30, 1996 and December 31, 1995, respectively -- 5,000,000
Common Stock, $.01 par value, 17,000,000 shares authorized, 6,739,324 and
4,835,000 shares issued and outstanding at September 30, 1996 and December
31, 1995, respectively 67,393 48,350
Additional paid-in capital 14,338,873 9,378,979
Retained earnings 1,920,102 1,732,613
----------- -----------
Total stockholders' equity 16,326,368 16,159,942
----------- -----------
Total liabilities and stockholders' equity $60,457,137 $54,341,944
=========== ===========
See the accompanying notes to these consolidated balance sheets.
3
MOBILE MINI, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
Nine Months Ended September 30, Three Months Ended September 30,
--------------------------------- ---------------------------------
1996 1995 1996 1995
------------ ------------ ------------ ------------
REVENUES:
Container and modular building sales $ 17,037,687 $ 19,316,103 $ 6,376,244 $ 7,554,755
Leasing 9,775,390 8,739,036 3,432,714 3,259,189
Other 3,461,849 2,526,076 1,348,199 702,526
------------ ------------ ------------ ------------
30,274,926 30,581,215 11,157,157 11,516,470
COSTS AND EXPENSES:
Cost of container and modular building sales 14,425,775 15,183,891 5,380,427 5,949,573
Leasing, selling and general expenses 10,768,774 11,548,852 3,679,876 3,941,953
Depreciation and amortization 1,200,063 909,006 451,648 358,730
------------ ------------ ------------ ------------
Income from operations 3,880,314 2,939,466 1,645,206 1,266,214
OTHER INCOME (EXPENSE):
Interest income and other 110,438 195,884 23,377 73,480
Interest expense (2,923,176) (2,218,626) (973,768) (846,188)
------------ ------------ ------------ ------------
INCOME BEFORE PROVISION FOR
INCOME TAXES AND
EXTRAORDINARY ITEM 1,067,576 916,724 694,815 493,506
PROVISION FOR INCOME TAXES 469,733 403,359 305,719 217,144
------------ ------------ ------------ ------------
INCOME BEFORE EXTRAORDINARY ITEM 597,843 513,365 389,096 276,362
EXTRAORDINARY ITEM (410,354) -- -- --
------------ ------------ ------------ ------------
NET INCOME $ 187,489 $ 513,365 $ 389,096 $ 276,362
============ ============ ============ ============
EARNINGS PER SHARE OF COMMON STOCK AND COMMON
STOCK EQUIVALENT:
INCOME BEFORE EXTRAORDINARY ITEM
$ 0.09 $ 0.11 $ 0.06 $ 0.06
EXTRAORDINARY ITEM (0.06) -- -- --
------------ ------------ ------------ ------------
NET INCOME $ 0.03 $ 0.11 $ 0.06 $ 0.06
============ ============ ============ ============
WEIGHTED AVERAGE NUMBER OF COMMON AND COMMON
EQUIVALENT SHARES OUTSTANDING 6,737,010 4,835,000 6,739,324 4,835,000
============ ============ ============ ============
See the accompanying notes to these consolidated statements.
4
MOBILE MINI, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
Nine Months Ended September 30,
---------------------------------
CASH FLOWS FROM OPERATING ACTIVITIES: 1996 1995
------------ ------------
Income before extraordinary item $ 597,843 $ 513,365
Adjustments to reconcile income to net cash provided by
(used in) operating activities:
Extraordinary loss on early debt extinguishment (410,354) --
Amortization of deferred costs on credit agreement 304,585 --
Depreciation and amortization 1,200,063 909,006
Gain on disposal of property, plant and equipment (7,762) --
Changes in assets and liabilities:
Decrease (increase) in receivables, net 268,664 (307,566)
Increase in inventories (999,951) (2,851,141)
Increase in prepaids and other (312,494) (89,131)
(Decrease) increase in other assets 204,564 (44,122)
(Decrease) increase in accounts payable (1,768,146) 2,133,908
(Decrease) increase in accrued liabilities 20,105 (238,386)
(Decrease) increase in deferred income taxes 111,318 403,359
------------ ------------
Net cash (used in) provided by operating activities (791,565) 429,292
------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Net sales (purchases) of container lease fleet (2,716,086) (2,343,212)
Net purchases of property, plant, and equipment (2,311,848) (3,386,021)
------------ ------------
Net cash used in investing activities (5,027,934) (5,729,233)
------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net borrowings under lines of credit 17,750,416 1,273,774
Proceeds from issuance of long-term debt 6,635,069 6,945,006
Deferred costs on credit agreement (1,987,467) --
Principal payments on early debt extinguishment
related to refinancing under the credit agreement (14,090,101) --
Principal payments on long-term debt (1,056,216) (2,003,013)
Principal payments on capital lease obligations (1,894,761) (1,600,990)
Preferred stock offering costs (21,070) --
------------ ------------
Net cash provided by financing activities 5,335,870 4,614,777
------------ ------------
NET DECREASE IN CASH (483,629) (685,164)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD
1,430,651 846,645
------------ ------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD
$ 947,022 $ 161,481
============ ============
See the accompanying notes to these consolidated statements.
5
MOBILE MINI, INC. AND SUBSIDIARIES - NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE A - The accompanying unaudited consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for interim
financial information and the instructions to Form 10-Q. Accordingly, they do
not include all the information and footnotes required by generally accepted
accounting principles for complete financial statements. In the opinion of
management, all adjustments (which include only normal recurring adjustments)
necessary to present fairly the financial position, results of operations, and
cash flows for all periods presented have been made. The results of operations
for the nine month period ended September 30, 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 per share is computed by dividing net income 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 its former lender, repaying all indebtedness under that
line. In addition, the Company repaid other long-term debt and obligations under
capital leases totaling $14.1 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:
September 30, 1996 December 31, 1995
------------------ -----------------
Raw material and supplies $2,371,846 $2,858,181
Work-in-process 1,881,647 883,814
Finished containers 1,939,680 1,451,227
---------- ----------
$6,193,173 $5,193,222
========== ==========
NOTE F - Property, plant and equipment consisted of the following at:
September 30, 1996 December 31, 1995
------------------ -----------------
Land $ 663,555 $ 328,555
Vehicles and equipment 11,109,020 9,469,092
Buildings and improvements 6,559,375 6,363,154
Office fixtures and equipment 2,080,044 1,714,312
----------- -----------
20,411,994 17,875,113
Less accumulated depreciation (3,330,538) (2,402,949)
----------- -----------
$17,081,456 $15,472,164
=========== ===========
6
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 reflected 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 nine months and the three months ended September 30,
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.
7
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
RESULTS OF OPERATIONS
Three Months Ended September 30, 1996 Compared to
Three Months Ended September 30, 1995
Revenues for the quarter ended September 30, 1996 were $11,157,000,
which represents a 3.1% decrease from revenues of $11,516,000 for the quarter
ended September 30, 1995. The Company believes longer term growth will be
achieved through its leasing operations and more emphasis was focused on
expanding this area in the third quarter. Revenues from sales of the Company's
products decreased by 1.2%, exclusive of container sales revenues recorded under
sale/leaseback transactions, while revenues from leasing of portable storage and
office units increased by 5.3%. In 1995, revenues included approximately
$1,099,000 recorded under sale/leaseback transactions related principally to
storage containers and portable office units. These revenues were offset by
equivalent cost of container sales and did not produce gross margin. During the
current year, the Company did not enter into any sale/leaseback transactions.
Excluding the effect of sale/leaseback transactions, cost of container
and modular building sales as a percentage of container and modular building
sales for the quarter ended September 30, 1996 was 84.4% compared to 78.8% for
the same quarter in 1995. This increase is attributable to the mix of products
sold and a continuing shortage in supply of used ISO containers which has
resulted in higher acquisition costs to the Company, in addition to increasing
its sales of manufactured new containers which typically result in lower margins
to the Company.
Excluding the effect of sale/leaseback transactions, leasing, selling
and general expenses were 33.0% of revenues in the quarter ended September
30,1996 compared to 37.8% in the quarter ended September 30, 1995. The decrease
results primarily from continued efficiencies obtained by the Company's Texas
operations, in addition to the Company beginning to pass certain expenses on to
customers.
Interest expense totaled 8.7% of revenues during the third quarter of
1996 compared to 7.3% of revenues during the quarter ended September 30, 1995.
This increase was due largely to the costs related to financing the substantial
increase in the Company's equipment and container lease fleet which increased
the Company's average debt outstanding during the period by 38%, in addition to
the amortization of debt issuance costs in connection with the Credit Agreement.
This increase was partially offset by a decrease of over 2% in the Company's
weighted average borrowing rate resulting from lower interest rates under the
Company's new credit facility.
Depreciation and amortization increased from 3.1% of revenues for the
quarter ended September 30, 1995 to 4.0% for the quarter ended September 30,
1996. This increase is related primarily to the increase in the Company's lease
fleet, the acquisition of additional equipment at the Company's locations and
the previous expansion of the Company's manufacturing facility.
The Company posted a 40.9% increase in net income to $389,000, or $.06
per share, for the quarter ended September 30, 1996, compared to net income of
$276,000, or $.06 per share, for the quarter ended September 30, 1995. The
weighted average common shares outstanding increased by 39% during the quarter
ended September 30, 1996, as compared to the prior year due to the issuance of
additional common stock.
8
Nine Months Ended September 30, 1996 Compared to
Nine Months Ended September 30, 1995
Revenues for the nine months ended September 30, 1996 were $30,275,000,
which represents a 1.0% decrease from revenues of $30,581,000 for the nine
months ended September 30, 1995, including container sale revenue recorded under
sale/leaseback transactions. Revenues from both the sales of the Company's
products and leasing of portable storage and office units were higher, posting
increases of 8.7% and 11.9% respectively, exclusive of container sale revenue
recorded under sale/leaseback transactions. This increase is primarily due to
the demand for the Company's products both for purchase and for lease. In 1995,
the Company's revenues included approximately $3,645,000 in revenue recorded
under sale/leaseback transactions related principally to storage containers and
portable office units. These revenues were offset by equivalent cost of
container sales and did not produce gross margin. During the current year, the
Company did not enter into any sale/leaseback transactions.
Excluding the effect of sale/leaseback transactions, cost of container
and modular building sales as a percentage of container and modular building
sales for the nine months ended September 30, 1996 was 84.7% compared to 78.6%
for the same period in 1995. This increase is attributable to the mix in sales
within the product line, a shortage in supply of used ISO containers, which had
caused an increase in the acquisition cost of these containers, in addition to
an increase in sales of manufactured new containers which typically result in
lower margins to the Company.
Excluding the effect of sale/leaseback transactions, leasing, selling
and general expenses were 35.6% of total revenue for the nine months ended
September 30, 1996 compared to 42.9% for the nine months ended September 30,
1995. The decrease primarily results from the continued efficiencies obtained by
the Company's Texas operations, which were in their start-up phase during 1995,
in addition to the Company beginning to pass certain expenses on to customers.
Interest expense totaled 9.7% of revenues during the nine months ended
September 30, 1996 compared to 7.3% of revenues during the same period ended
September 30, 1995. This increase was due largely to the costs related to
financing the substantial increase in the Company's equipment and container
lease fleet which increased the Company's average outstanding debt level by 50%
in addition to the amortization of debt issuance costs in connection with the
Credit Agreement. This increase was partially offset by a decrease of nearly 2%
in the Company's weighted average borrowing rate resulting from lower interest
rates under the Company's new credit facility.
Depreciation and amortization increased to 4.0% of revenues for the
nine months ended September 30, 1996 from 3.0% for the nine months ended
September 30, 1995. 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 locations.
The Company posted income before extraordinary item of $598,000, or
$.09 per share, for the nine months ended September 30, 1996, compared to net
income of $513,000, or $.11 per share, for the nine months ended September 30,
1995. The weighted average common shares outstanding increased by 39% during the
nine months ended September 30, 1996 as compared to the prior year due to the
issuance of additional common stock.
In the first quarter of 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 $1,960,000 in connection with the credit agreement, which have been
deferred and are amortized over the term of the credit agreement.
9
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, equity
offerings and 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 accrues on the term loan is at the Company's option 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 in
the term loan documents, 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 the Company's option 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. As of September 30, 1996, $1.1 million
of additional borrowing was available under the revolving line of credit, in
addition to the $21.9 million outstanding as of September 30, 1996.
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.
In connection with the closing of the Credit Agreement in March 1996,
the Company terminated its line of credit with its previous lender, repaying all
indebtedness under that line. In addition, the Company repaid other long-term
debt and obligations under capital leases totaling $14.1 million.
During the nine months ended September 30, 1996, the Company utilized
cash flow from operations of $792,000. This net use of cash was attributable
primarily to a reduction in accounts payable and increases in inventories and
prepaids. This was partially offset by operating income and a decrease in
receivables and other assets.
During the nine months ended September 30, 1996, the Company invested
$5,028,000 in equipment and the container lease fleet. This amount is net of the
$1,325,000 in related sales and financing.
Cash flow from financing activities totaled $5,336,000 during the nine
months ended September 30, 1996. This was the result of increased borrowings to
finance container lease fleet and equipment acquisitions and the restructuring
of the Company's debt under the Credit Agreement described above, partially
offset by the principal payments on indebtedness and an increase in other assets
associated with deferred financing costs incurred in connection with the closing
of the Credit Agreement.
10
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 12 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.
The statement regarding the Company's ability to meet its obligations and
capital needs for the next 12 months is a forward looking statement.
Unanticipated events, however, including a decrease in cash flow generated from
operations or a material increase in the borrowing rates under the Credit
Agreement, could cause actual results to differ materially from anticipated
results.
EFFECTS OF INFLATION
The results of operations of the Company for the periods discussed have
not been significantly affected by inflation.
11
PART II. OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
(a) The annual meeting of the stockholders of the Company was held on
August 27, 1996, in Phoenix, Arizona. The table below briefly describes
the proposals and results from the annual meeting of stockholders.
Number of Shares Voted:
-----------------------
1. Election of Directors: For Withheld
----------------------
Richard E. Bunger 6,282,132 64,833
Lawrence Trachtenberg 6,282,132 64.833
Steven G. Bunger 6,282,132 64,833
George E. Berkner 6,282,132 64,833
Ronald J. Marusiak 6,282,132 64,833
2. Amendment to For Against Abstain
Corporation's 1994 Stock
Option Plan. 5,879,667 212,022 255,276
3. Ratification of
appointment of Arthur
Andersen LLP as the
Independent Auditors. 6,282,251 39,289 25,425
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
Number Description
11 Computation of Earnings per Share for the Three and
Nine Month Periods ended September 30, 1996 and 1995
27 Selected Financial Data
(b) Reports on Form 8-K
none
12
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
MOBILE MINI, INC.
(Registrant)
Dated: November 12, 1996 By: /s/ Larry Trachtenberg
------------------------
Larry Trachtenberg
Chief Financial Officer
13