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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 June 30, 1997
|_| 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 86-0748362
(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, including area code)
Indicate by check whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
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As of August 11, 1997, 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 JUNE 30, 1997
TABLE OF CONTENTS PAGE
NUMBER
PART I.
FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets 3
June 30, 1997 (unaudited) and December 31, 1996
Consolidated Statements of Operations 4
Three Months and Six Months ended June 30, 1997 and
June 30, 1996 (unaudited)
Consolidated Statements of Cash Flows 5
Six Months Ended June 30, 1997 and June 30, 1996
(unaudited)
Notes to Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations 7
PART II.
OTHER INFORMATION
Item 6 Exhibits and Reports on Form 8-K 10
SIGNATURES 11
2
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
MOBILE MINI, INC.
CONSOLIDATED BALANCE SHEETS
ASSETS June 30, 1997 December 31, 1996
(Unaudited)
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CURRENT ASSETS:
Cash and cash equivalents $ 486,443 $ 736,543
Receivables, net 6,317,555 4,631,854
Inventories 7,411,453 4,998,382
Prepaid and other 571,754 742,984
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Total current assets 14,787,205 11,109,763
CONTAINER LEASE FLEET, net 39,144,436 34,313,193
PROPERTY, PLANT AND EQUIPMENT, net 17,827,040 17,696,046
OTHER ASSETS, net 1,458,650 1,697,199
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Total assets $73,217,331 $64,816,201
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LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 3,180,063 $ 2,557,329
Accrued compensation 445,265 674,818
Other accrued liabilities 1,929,720 1,517,295
Current portion of long-term debt 1,494,925 1,378,829
Current portion of obligations under capital leases 1,993,239 1,352,279
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Total current liabilities 9,043,212 7,480,550
LINE OF CREDIT 33,776,461 26,406,035
LONG-TERM DEBT, less current portion 5,101,700 5,623,948
OBLIGATIONS UNDER CAPITAL LEASES, less current portion 4,086,298 5,387,067
DEFERRED INCOME TAXES 4,278,040 3,709,500
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Total liabilities 56,285,711 48,607,100
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STOCKHOLDERS' EQUITY:
Common stock; $.01 par value, 17,000,000 shares authorized,
6,739,324 issued and outstanding at June 30, 1997 and
December 31, 1996 67,393 67,393
Additional paid-in capital 14,338,873 14,338,873
Retained earnings 2,525,354 1,802,835
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Total stockholders' equity 16,931,620 16,209,101
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Total liabilities and stockholders' equity $73,217,331 $64,816,201
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See the accompanying notes to these consolidated balance sheets.
3
MOBILE MINI, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
Three Months Ended June 30, Six Months Ended June 30,
------------------------------ ------------------------------
1997 1996 1997 1996
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REVENUES:
Container and other sales $ 6,196,750 $ 5,745,611 $ 10,739,381 $ 10,661,443
Leasing 4,106,333 3,171,376 8,005,281 6,342,676
Other 1,890,712 1,374,928 3,098,589 2,196,711
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12,193,795 10,291,915 21,843,251 19,200,830
COSTS AND EXPENSES:
Cost of container and other sales 4,564,586 5,119,910 8,010,356 9,045,348
Leasing, selling and general expenses 5,010,835 3,214,535 9,292,185 7,088,898
Depreciation and amortization 529,709 380,136 1,001,876 748,415
------------ ------------ ------------ ------------
Income from operations 2,088,665 1,577,334 3,538,834 2,318,169
OTHER INCOME (EXPENSE):
Interest income and other -- -- -- 4,000
Interest expense (1,158,744) (1,001,059) (2,248,623) (1,949,408)
------------ ------------ ------------ ------------
INCOME BEFORE PROVISION FOR INCOME
TAXES AND EXTRAORDINARY ITEM 929,921 576,275 1,290,211 372,761
PROVISION FOR INCOME TAXES 409,164 253,561 567,692 164,015
------------ ------------ ------------ ------------
INCOME BEFORE EXTRAORDINARY ITEM 520,757 322,714 722,519 208,746
EXTRAORDINARY ITEM (Note C) -- -- -- (410,354)
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NET INCOME (LOSS) $ 520,757 $ 322,714 $ 722,519 $ (201,608)
============ ============ ============ ============
EARNINGS (LOSS) PER SHARE OF COMMON
STOCK AND COMMON STOCK EQUIVALENT:
INCOME BEFORE EXTRAORDINARY ITEM $ 0.08 $ 0.05 $ 0.11 $ 0.03
EXTRAORDINARY ITEM -- -- -- (0.06)
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NET INCOME (LOSS) $ 0.08 $ 0.05 $ 0.11 $ (0.03)
============ ============ ============ ============
WEIGHTED AVERAGE NUMBER OF COMMON
AND COMMON EQUIVALENT SHARES
OUTSTANDING 6,755,517 6,739,324 6,743,391 6,735,841
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See the accompanying notes to these consolidated statements
4
MOBILE MINI, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
Six Months Ended June 30,
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CASH FLOWS FROM OPERATING ACTIVITIES: 1997 1996
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Net income (loss) $ 722,519 $ (201,608)
Adjustments to reconcile income to net cash used in operating
activities:
Extraordinary loss on early debt retirement -- 410,354
Amortization of deferred costs on credit agreement 245,921 151,407
Depreciation and amortization 1,001,876 748,415
Loss (gain) on disposal of property, plant and equipment 54,118 (2,164)
Changes in assets and liabilities:
Decrease (increase) in receivables, net (1,685,701) 334,376
Increase in inventories (2,367,519) (1,322,909)
Decrease (increase) in prepaids and other 171,230 (95,126)
Decrease (increase) in other assets (7,372) 255,720
(Decrease) increase in accounts payable 622,734 (2,126,774)
Increase in accrued liabilities 182,872 243,145
(Decrease) increase in deferred income taxes 568,540 (190,186)
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Net cash used in operating activities (490,782) (1,795,350)
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CASH FLOWS FROM INVESTING ACTIVITIES:
Net sales (purchases) of container lease fleet (5,147,114) 73,900
Net purchases of property, plant, and equipment (916,669) (1,288,384)
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Net cash used in investing activities (6,063,783) (1,214,484)
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CASH FLOWS FROM FINANCING ACTIVITIES:
Net borrowings under lines of credit 7,370,426 14,280,279
Proceeds from issuance of long-term debt 314,265 6,635,069
Deferred financing costs -- (2,114,411)
Principal payments and penalties on early debt
extinguishment -- (14,405,879)
Principal payments on long-term debt (720,417) (799,446)
Principal payments on capital lease obligations (659,809) (1,311,457)
Additional paid in capital -- (21,069)
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Net cash provided by financing activities 6,304,465 2,263,086
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NET DECREASE IN CASH (250,100) (746,748)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 736,543 1,430,651
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CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 486,443 $ 683,903
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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 six month period ended June 30, 1997 are not necessarily indicative of
the operating results that may be expected for the entire year ending December
31, 1997. These financial statements should be read in conjunction with the
Company's December 31, 1996 financial statements and accompanying notes thereto.
Certain amounts in the 1996 financial statements have been reclassified to
conform with the 1997 financial statement presentation.
NOTE B - Earnings (loss) per common 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 common share is
considered equal to primary earnings per share in all periods presented.
In March 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 128, "Earnings per Share" (SFAS No. 128).
SFAS No. 128 is effective for fiscal years ending after December 15, 1997, and
when adopted, will require restatement of prior periods earnings per share. The
effect of this statement is not significant on any period presented.
NOTE C - The Company entered into a credit agreement (the "Credit Agreement") in
March, 1996 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. In July, 1997, the revolving line of credit was increased to $40.0
million. 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 repaid
long-term debt and obligations under capital leases totaling $14.1 million. As a
result, costs previously deferred related to this indebtedness and prepayment
penalties resulted in an extraordinary charge to earnings in 1996, of
approximately $410,000 after the benefit of income taxes.
NOTE D - 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:
June 30, 1997 December 31, 1996
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Raw material and supplies $3,707,719 $3,547,487
Work-in-process 1,335,426 288,986
Finished containers 2,368,308 1,161,909
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$7,411,453 $4,998,382
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NOTE E - In July 1997, the Company completed a private placement of $3 million
of 12% senior subordinated notes (the "Bridge Notes") and warrants to purchase
50,000 shares of Mobile Mini, Inc. common stock at $5.00 per share. The Bridge
Notes are due the earlier of July 2002, or on the refinancing of the Bridge
Notes on substantially similar terms. The proceeds received by the Company will
be allocated between the Bridge Notes and the warrants based on the respective
fair values of each instrument. The resulting discount increases the effective
interest rate of the Bridge Notes and will be amortized to interest expense over
the life of the debt.
NOTE F - The Company's publicly traded warrants issued in connection with the
Company's initial public offering have been extended six months to expire on
February 17, 1998.
6
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
RESULTS OF OPERATIONS
Three Months Ended June 30, 1997 Compared to
Three Months Ended June 30, 1996
Revenues for the quarter ended June 30, 1997 were $12,194,000 which
represents an 18.5% increase over revenues of $10,292,000 for the quarter ended
June 30, 1996. Revenues from the sales of the Company's products increased 7.9%
while the revenues from the leasing of portable storage containers and office
units increased 29.5%. Revenues from the Company's trucking and other related
leasing activities increased 37.5%. The increase in lease and lease related
revenues resulted from an increase in the average container rental rate yielding
3.0%, and a 22.3% increase in the average number of containers on lease and an
increase in other income, including trucking service income and loss limitation
waiver income.
Cost of container and other sales as a percentage of container and
other sales for the quarter ended June 30, 1997 was 73.7% compared to 89.1% for
the same quarter in 1996. This decrease primarily resulted from an increase in
sales of the Company's higher margin telecommunication shelters and the
discontinuation of the modular building line, which produced lower margins
during fiscal 1996.
Leasing, selling and general expenses were 41.1% of total revenue in
the quarter ended June 30, 1997 compared to 31.2% in the quarter ended June 30,
1996. The increase is primarily related to additional operating costs to support
the increased leasing operations. These additional costs included higher
maintenance costs associated with a larger trucking fleet, additional equipment
to maintain, service and transport a larger container lease fleet, in addition
to increased personnel costs and related benefits to support the growth of the
leasing operations.
Interest expense was 9.5% of revenues during the second quarter of 1997
compared to 9.7% of revenues during the quarter ended June 30, 1996. Interest
expense increased $150,000 primarily due to the growth in the Company's leasing
operations and the related borrowings to finance that growth.
Depreciation and amortization increased from 3.7% of revenues for the
three months ended June 30, 1996 to 4.3% for the three months ended June 30,
1997. This is related to the increase in the Company's lease fleet and the
acquisition of additional equipment at the Company's various locations.
The Company posted a 61.4% increase in net income to $521,000, or $0.08
per share for the quarter ended June 30, 1997 compared to net income of $323,000
or $0.05 per share during the same period in the prior year. This increase is
primarily a result of increased revenues and the higher profit margins on sales
partially offset by higher administrative costs. The Company's effective tax
rate remained unchanged at 44%.
7
Six Months Ended June 30, 1997 Compared to
Six Months Ended June 30, 1996
Revenues for the six months ended June 30, 1997 were $21,843,000 which
represents a 13.8% increase over revenues of $19,201,000 for the six months
ended June 30, 1996. Revenues from the sales of the Company's products increased
0.7%, while the revenues from the leasing of portable storage and from the
Company's trucking and other related leasing activities increased 30% and
represented 50.8% of total revenue compared to 44.5% for the same period in
1996. This increase in lease and lease related revenues primarily is a result of
a 20% increase in the average number of containers on lease, an increase in the
average container rental rate, yielding 3.1%, and an increase in other income,
including trucking services income and loss limitation waiver income.
Cost of container and other sales as a percentage of container and
other sales for the six months ended June 30, 1997 was 74.6% compared to 84.8%
for the same period in 1996. This decrease primarily resulted from an increase
in sales of the Company's higher margin telecommunication shelters, and the
discontinuation of the Company's modular building line, which produced lower
margins during fiscal 1996.
Leasing, selling and general expenses were 42.5% of total revenue for
the six months ended June 30, 1997 compared to 36.9% in the six months ended
June 30, 1996. The increase is primarily related to additional operating costs
to support the increased leasing operations. These additional costs included
higher maintenance costs associated with a larger trucking fleet, additional
equipment to maintain, service and transport a larger container lease fleet, and
increased personnel costs and related benefits to support the growth of the
leasing operations.
Interest expense was 10.3% of revenues during the six months ended June
30, 1997 compared to 10.2% of revenues during the six months ended June 30,
1996. This increase is related to financing the Company's growth in its
container lease fleet and equipment which permitted the Company to substantially
increase its leasing revenue. This increase is partially offset by a 1.9%
decrease in the Company's weighted average borrowing rate as a result of lower
interest rates under the Credit Agreement (including the effect of amortization
of additional debt issuance costs in connection with the Company's Credit
Agreement).
Depreciation and amortization increased from 3.9% of revenues for the
six month period ended June 30, 1996 to 4.6% for the six month period ended June
30, 1997. This increase is related to the increase in the Company's lease fleet
and the acquisition of additional equipment at the Company's various locations.
The Company posted a net income of $723,000, or $0.11 per share for the
six months ended June 30, 1997 compared to net income before extraordinary item
of $209,000 or $0.03 per share during the prior year. This increase is primarily
a result of increased revenues and the higher profit margins on sales partially
offset by higher administrative costs. The Company's effective tax rate remained
unchanged at 44%. During the quarter ended March 31, 1996, the Company prepaid
certain debt and capital leases in connection with entering into a new credit
agreement. 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.
8
LIQUIDITY AND CAPITAL RESOURCES
The Company's business plan is to continue to increase the size of its
container lease fleet and related property, plant and equipment. The Company
will require additional financings to sustain such growth. New financing over
the past year was primarily funded through the Company's Credit Agreement, which
includes a revolving line of credit (the "Revolving Line") with permitted
borrowings based on the level of the Company's inventories, receivables and the
container lease fleet.
In July 1997, the Company issued $3 million of 12% senior subordinated
notes (the "Bridge Notes") with warrants to purchase 50,000 shares of the
Company's common stock at $5.00 per share. The Bridge Notes are due the earlier
of July 2002, or on the refinancing of the Bridge Notes through a private
placement or public offering on substantially similar terms. Proceeds of the
Bridge Notes were initially used to reduce the Revolving Line.
Simultaneously with the issuance of the Bridge Notes, the Company's
lenders increased the Revolving Line by an additional $5 million to $40 million.
As of June 30, 1997, the Company had borrowings outstanding of
$33,776,000 under the Revolving Line and $1,217,000 of additional borrowing was
available under that line. As a result of the increase in the Revolving Line and
the issuance of the Bridge Notes, additional borrowing availability had
increased to $3,722,000 on August 8, 1997.
During the six months ended June 30, 1997 the Company utilized cash
from operations of $491,000. Cash was invested in higher inventory levels and
higher outstanding receivables which were partially offset by an increase in
accounts payable, accrued liabilities and deferred taxes.
The Company invested $6,064,000 in its container lease fleet and other
equipment during the six months ended June 30, 1997. This amount is net of
$1,034,000 in sales of containers from the lease fleet.
Cash flow from financing activities provided $6,304,000 for the six
months ended June 30, 1997. This financing was utilized to fund the increase in
the lease fleet, related equipment, and inventory levels, which was partially
offset by principal payments on long-term debt and capitalized leases.
The Company believes that its current capitalization, together with the
increased borrowings available under the Credit Agreement, will be sufficient to
maintain its current level of operations and permit controlled growth. However,
should demand for the Company's products exceed current expectation, the Company
would be required to secure additional financing through debt or equity
offerings, additional borrowings or a combination of these sources. However,
there is no assurance that any such financing will be obtained or obtained on
terms acceptable to the Company.
The Statement regarding the Company's ability to meet its obligations
and capital needs during the next 12 months is a forward-looking statement. The
occurrence of one or more unanticipated events, however, including a decrease in
cash flow generated from operations, a material increase in the borrowing rates
under the Credit Agreement (which rates are based on the prime rate or the
Eurodollar rates in effect from time to time), a material increase or decrease
in prevailing market prices for used containers, or a change in general economic
conditions resulting in decreased demand for the Company's products, could cause
actual results to differ materially from anticipated results and have a material
adverse effect on the Company's ability to meet its obligations and capital
needs. More detailed discussion of factors which may affect the Company's
financial performance and results of operations are set forth in the Company's
annual report on Form 10-K for the fiscal year ended December 31, 1996 and its
other filings with the Securities and Exchange Commission ("SEC"), and such
discussions are incorporated herein by reference. The Company's filing with the
SEC may be accessed at the SEC's World Wide Web site at http://www.sec.gov.
EFFECTS OF INFLATION
The results of operations of the Company for the periods discussed have
not been significantly affected by inflation.
9
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
Number Description
10.1 Amendment No. 3 to Credit Agreement dated as of March 31,
1997, by and among the Registrant, each financial institution
a party thereto, and BT Commercial Corporation, as Agent.
10.2 Amendment No. 4 to Credit Agreement dated as of July 31, 1997,
by and among the Registrant, each financial institution a
party thereto, and BT Commercial Corporation, as Agent
10.3 Senior Subordinated Promissory Note dated July 31, 1997, by
the Registrant to Arizona Land Income Corporation
10.4 Pledge Agreement dated as of July 31, 1997, by and between the
Registrant and Arizona Land Income Corporation
10.5 Stock Purchase Warrant dated July 31, 1997
11 Computation of Earning per Share for the Three Month and Six
Month Period Ended June 30, 1997 and 1996
27 Selected Financial Data
(b) Reports on Form 8-K: none
10
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: 8/13/97 /s/ Larry Trachtenberg
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Larry Trachtenberg
Chief Financial Officer &
Executive Vice President
11