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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 March 31, 1998
|_| 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 ,
----------- -----------
As of May 12, 1998, there were outstanding 7,863,858 shares of the
issuer's common stock, par value $.01.
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1
MOBILE MINI, INC.
INDEX TO FORM 10-Q FILING
FOR THE QUARTER ENDED MARCH 31, 1998
TABLE OF CONTENTS PAGE
NUMBER
PART I.
FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets 3
March 31, 1998 (unaudited) and December 31, 1997
Consolidated Statements of Operations 4
Three Months ended March 31, 1998 and March 31, 1997
(unaudited)
Consolidated Statements of Cash Flows 5
Three Months Ended March 31, 1998 and March 31, 1997
(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 Exhibits and Reports on Form 8-K 11
SIGNATURES 12
2
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
MOBILE MINI, INC.
CONSOLIDATED BALANCE SHEETS
ASSETS March 31, 1998 December 31,
(Unaudited) 1997
-------------- ------------
CASH AND CASH EQUIVALENTS $ 452,459 $ 1,005,204
RECEIVABLES, net of allowance for doubtful accounts
of $987,000 and $893,000, respectively 6,519,962 6,259,476
INVENTORIES 7,023,716 4,748,316
CONTAINER LEASE FLEET, net 55,179,126 50,906,908
PROPERTY PLANT AND EQUIPMENT, net 18,041,479 18,011,916
DEPOSITS AND PREPAID EXPENSES 831,491 898,615
OTHER ASSETS 2,748,296 2,221,587
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Total assets $90,796,529 $84,052,022
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES:
ACCOUNTS PAYABLE $ 3,015,151 $ 2,676,634
ACCRUED LIABILITIES 3,551,508 3,104,747
LINE OF CREDIT 36,114,170 35,883,104
NOTES PAYABLE 5,647,035 6,123,049
OBLIGATIONS UNDER CAPITAL LEASES 5,031,561 5,371,603
SUBORDINATED NOTES, net 6,660,915 6,647,874
DEFERRED INCOME TAXES 5,552,667 5,217,619
----------- -----------
Total liabilities 65,573,007 65,024,630
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STOCKHOLDERS' EQUITY:
Common stock; $.01 par value, 17,000,000 shares
authorized, 7,845,736 and 6,799,524 issued and
outstanding at March 31, 1998 and December 31,
1997, respectively 78,457 67,995
Additional paid-in capital 21,358,657 16,206,166
Common stock to be issued, 85,468 shares 500,000 --
Retained earnings 3,286,408 2,753,231
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Total stockholders' equity 25,223,522 19,027,392
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Total liabilities and stockholders' equity $90,796,529 $84,052,022
=========== ===========
See the accompanying notes to these consolidated balance sheets.
3
MOBILE MINI, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
Three Months Ended March 31,
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1998 1997
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REVENUES:
Leasing $ 7,512,912 $ 4,995,110
Container and other sales 3,128,400 4,542,631
Other 104,911 111,715
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10,746,223 9,649,456
COSTS AND EXPENSES:
Cost of container and other sales 2,147,577 3,445,770
Leasing, selling and general expenses 5,564,381 4,281,350
Depreciation and amortization 666,771 472,167
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INCOME FROM OPERATIONS 2,367,494 1,450,169
OTHER INCOME (EXPENSE):
Interest income 11,287 --
Interest expense (1,490,152) (1,089,879)
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INCOME BEFORE PROVISION FOR INCOME TAXES 888,629 360,290
PROVISION FOR INCOME TAXES 355,452 158,528
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NET INCOME AVAILABLE FOR COMMON STOCK $ 533,177 $ 201,762
============ ============
EARNINGS PER SHARE:
BASIC:
Net income $ 0.07 $ 0.03
============ ============
WEIGHTED AVERAGE NUMBER OF COMMON
SHARES OUTSTANDING 7,440,628 6,739,324
============ ============
DILUTED:
Net income $ 0.07 $ 0.03
============ ============
WEIGHTED AVERAGE NUMBER OF COMMON AND
COMMON SHARE EQUIVALENTS OUTSTANDING 7,971,804 6,739,403
============ ============
See the accompanying notes to these consolidated statements
4
MOBILE MINI, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
Three Months Ended March 31,
----------------------------
1998 1997
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CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 533,177 $ 201,762
Adjustments to reconcile income to net cash used in
operating activities:
Reserve for doubtful accounts receivable 257,430 205,066
Amortization of deferred loan costs 178,343 122,941
Amortization of warrants issuance discount 13,041 --
Depreciation and amortization 666,771 472,167
Gain on disposal of property, plant and equipment (3,541) --
Deferred income taxes 335,048 158,475
Changes in certain assets and liabilities:
Increase in receivables (517,916) (218,096)
Increase in inventories (2,275,400) (1,815,657)
Decrease in deposits and prepaids 67,124 188,259
(Increase) decrease in other assets (205,052) 17,399
Increase in accounts payable 338,517 605,782
Increase (decrease) in accrued liabilities 446,761 (161,835)
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Net cash used in operating activities (165,697) (223,737)
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CASH FLOWS FROM INVESTING ACTIVITIES:
Net purchases of container lease fleet (4,476,082) (1,741,236)
Net purchases of property, plant, and equipment (488,929) (1,097,151)
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Net cash used in investing activities (4,965,011) (2,838,387)
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CASH FLOWS FROM FINANCING ACTIVITIES:
Net borrowings under lines of credit 231,066 3,666,477
Principal payments on notes payable (476,014) (384,769)
Principal payments on capital lease obligations (340,042) (325,269)
Exercise of warrants 5,162,953 --
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Net cash provided by financing activities 4,577,963 2,956,439
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NET DECREASE IN CASH (552,745) (105,685)
CASH AND CASH EQUIVALENTS AT BEGINNING
OF PERIOD 1,005,204 736,543
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CASH AND CASH EQUIVALENTS AT END OF
PERIOD $ 452,459 $ 630,858
=========== ===========
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 three month period ended March 31, 1998 are not necessarily indicative
of the operating results that may be expected for the entire year ending
December 31, 1998. These financial statements should be read in conjunction with
the Company's December 31, 1997 financial statements and accompanying notes
thereto.
Certain amounts in the 1997 financial statements have been reclassified to
conform with the 1998 financial statement presentation.
NOTE B - The Company adopted SFAS No. 128, Earnings per Share in 1997. Pursuant
to SFAS No. 128, basic earnings per common share are computed by dividing net
income by the weighted average number of shares of common stock outstanding
during the year. Diluted earnings per common share are determined assuming that
options were exercised at the beginning of each year or at the time of issuance.
SFAS No. 128 is effective for financial statements for both interim periods
presented and as a result, all prior period earnings per share data presented
has been restated.
NOTE C - The Company's outstanding Common Stock Purchase Warrants, issued in
connection with the Company's initial public offering, expired on February 17,
1998. Prior to their expiration, 1,046,212 of the 1,067,500 warrants were
exercised, generating approximately $5.2 million in cash.
NOTE D - In January 1998, the Company acquired the assets of Nevada Storage
Containers, a Las Vegas, Nevada based container leasing and sales business, for
approximately $1.4 million in cash and approximately 85,000 shares of the
Company's common stock valued at $500,000. Under the purchase agreement, the
shares of common stock will not be issued until one year from the closing date.
NOTE E - In April 1998, the Company acquired the assets of Aspen Instant
Storage, a company engaged in container leasing and sales in Oklahoma City,
Oklahoma. The purchase price was approximately $540,000 in cash and
approximately 18,000 shares of the Company's common stock valued at $184,000.
In April 1998, the Company also opened a new leasing and sales branch in
Albuquerque, New Mexico. With this new location, the Company now operates 11
leasing and sales offices in 6 states, in addition to its dealer and
telecommunication divisions and its manufacturing facility.
6
NOTE F - 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, 1998 December 31, 1997
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Raw material and supplies $5,449,314 $3,241,962
Work-in-process 832,283 631,399
Finished containers 742,118 874,955
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$7,023,716 $4,748,316
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NOTE G - Property, plant and equipment consisted of the following at:
March 31, 1998 December 31, 1997
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Land $ 708,555 $ 708,555
Vehicles and equipment 13,040,084 12,721,917
Buildings and improvements 6,835,678 6,739,190
Office fixtures and equipment 3,182,789 3,109,904
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23,767,106 23,279,566
Less accumulated depreciation (5,725,627) (5,267,650)
------------ ------------
$ 18,041,480 $ 18,011,916
============ ============
NOTE H - The Company maintains a container lease fleet consisting of refurbished
or manufactured storage containers and office units that are leased to customers
with varying terms. Depreciation is provided using the straight-line method with
an estimated useful life of 20 years and a salvage value estimated at 70% of
cost. In management's opinion, estimated salvage values do not cause carrying
values to exceed net realizable value. Normal repairs and maintenance to the
lease fleet are expensed as incurred. As of March 31, 1998, the Company's lease
fleet, net of depreciation, was $55.2 million as compared to $50.9 million at
December 31, 1997. A portion of this increase reflects the acquisition of Nevada
Storage Container's container lease fleet.
NOTE I - The Company has adapted FASB No. 130 Reporting Comprehensive Income
effective January 1, 1998. The Company, however, has not incurred transactions
that are within the definitions of "Comprehensive Income" and accordingly, is
not required to make additional disclosures on the accompanying consolidated
financial statements for the current year or for the same period represented in
the prior year.
7
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
RESULTS OF OPERATIONS
Three Months Ended March 31, 1998 Compared to
Three Months Ended March 31, 1997
Revenues for the quarter ended March 31, 1998 were $10,746,000, which
represents an 11.4% increase over revenues of $9,649,000 for the quarter ended
March 31, 1997. The Company has transitioned from primarily a seller of
containers and other structures, to primarily a lessor of containers and
portable offices. A change in the composition of the Company's revenues and
expense have occurred as the Company has continued to expand and concentrate its
efforts on leasing operations generating higher operating margins. This change
has resulted in a deferral of the recognition of revenues and corresponding
container costs. As such, income from operations as a percentage of revenues has
increased 7.0% over the same period of the prior year. Revenues from the leasing
of portable storage containers and office units increased 50.4%, while revenues
from the sales of the Company's products decreased 31.1%. The increase in lease
revenues resulted from an 8.4% increase in the average per unit container
revenue and a 38.7% increase in the average number of containers on lease. The
decrease of container sales primarily reflects the emphasis on leasing rather
than selling containers, the Company's discontinuance of its modular building
operations, which provided revenues of $491,000 during the first quarter of
1997, and lower sales levels in the Company's dealer division. The Company's
other revenues, primarily related to trucking services associated with sales
operations, remained relatively constant, decreasing by $7,000 as compared to
the quarter ended March 31, 1997.
Cost of container and other sales as a percentage of container and
other sales for the quarter ended March 31, 1998 was 68.6% compared to 75.9% for
the same quarter in 1997. This decrease resulted from the discontinuation of the
low-margin modular building business and from an increase in container sales
prices.
Leasing, selling and general expenses increased by 30.0% for the
quarter ended March 31, 1998 as compared to the quarter ended March 31, 1997.
This increase resulted from increased expenses associated with the 50.4%
increase in lease revenues and from additional administrative costs and staffing
needs to sustain growth levels.
Interest expense increased by 36.7% during the first quarter of 1998
compared to the prior year. This resulted from the growth in the Company's lease
fleet and the related borrowings to finance that growth, and interest costs
related to the Company's subordinated debt which was issued during the latter
part of 1997.
Depreciation and amortization increased by 41.2% for the three months
ended March 31, 1998 as compared to the prior year period. This resulted from
the increase in the Company's lease fleet and the acquisition of additional
equipment at the Company's various locations to support growth in the size of
the lease fleet.
The Company posted a 164.3% increase in net income to $533,000, or
$0.07 per share diluted for the quarter ended March 31, 1998 compared to net
income of $202,000 or $0.03 per share diluted during the same period in the
prior year. This increase is primarily a result of a 50.4% increase in container
leasing revenues, which produce higher net margins than container sales,
partially offset by higher administrative expenses and increased interest costs.
The Company's effective tax rate was reduced to 40% at March 31, 1998 from 44%
at March 31, 1997.
8
LIQUIDITY AND CAPITAL RESOURCES
The Company plans to continue to increase the size of its container
lease fleet and related property, plant and equipment. The recent acquisitions
of Nevada Storage Containers and Aspen Instant Storage and the growth in the
container lease fleet and related property, plant and equipment was primarily
funded through the Company's revolving line of credit, under its Credit
Agreement dated March 28, 1996 with BT Commercial Corp., as agent for a group of
lenders (the "Senior Credit Agreement") which permitted borrowings based on the
level of the Company's inventories, receivables and the size of its container
lease fleet. The $5.2 million of cash generated from the exercise of the
Company's Common Stock Purchase Warrants was used to reduce the line of credit
thereby making these funds available to finance this growth.
On May 12, 1998, the Company and its lenders amended the terms of the
Senior Credit Agreement. The revolving line of credit was increased from $40
million to $60 million, principal amortization on the $6 million term loan under
the Senior Credit Agreement was reduced, the term of the Senior Credit Agreement
was extended for an additional two years, and the interest rate was reduced. The
interest rate is now determined quarterly based on the Company's ratio of funded
debt to earnings before interest, taxes, depreciation and amortization (EBITDA).
The interest rate was initially adjusted from 3% to 1.75% above the Eurodollar
rate based upon the Company's leverage ratio at the time the amendment to the
Senior Credit Agreement became effective.
As of March 31, 1998, the Company had borrowings outstanding of
$36,114,000 under the revolving line of credit and $3,886,000 of additional
borrowing was available under that line. As of May 12, 1998, the Company had
borrowings outstanding of $38,335,000 and $9,476,000 of additional borrowing
availability under the Senior Credit Agreement, as amended.
During the three months ended March 31, 1998, the Company's operations
used cash of $166,000. This reflects an increase in inventories and receivables
relating to the growth of the Company's container leasing business, partially
offset by an increase in accounts payables and accrued liabilities.
The Company invested $4,965,000 in its container lease fleet and other
equipment during the three months ended March 31, 1998. This amount primarily
reflects $519,000 of sales from the container lease fleet.
Cash flow provided by financing activities totaled $4,578,000 for the
three months ended March 31, 1998. The primary source of financing was
approximately $5,200,000 received upon the exercise of warrants to purchase
1,046,212 shares of the Company's common stock prior to their expiration on
February 17, 1998. The warrant proceeds were used to reduce the line of credit
and to fund the increase in the container lease fleet, related property, plant
and equipment, inventory levels, and the acquisition of Nevada Storage
Containers. Cash flow from financing activities was partially offset by
principal payments on notes payable and capitalized leases.
The Company believes that its available resource will be sufficient to
maintain its current level of operations and permit continued growth over the
next 12 months. The Company expects to use a wide variety of financing sources
to fund its future growth, including public and private debt and equity, and
secured or unsecured bank financing, among other sources. There can be no
assurances that financing from such sources will be available in the future, or
if available that such financing will be available on terms acceptable to the
Company.
9
EFFECTS OF INFLATION
The results of operations of the Company for the periods discussed have
not been significantly affected by inflation.
FACTORS THAT MAY AFFECT FUTURE OPERATING RESULTS, AND "SAFE HARBOR" STATEMENT
UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995
Statements in this Report which include such words as "believe",
"intends" or "anticipates", such as the statement regarding the Company's
ability to meet its obligations and capital needs during the next 12 months, are
forward-looking statements. 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 Senior 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, and cause future
operating results and other events not to occur as presently anticipated. The
Company issued $6.9 million of senior subordinated notes in October 1997, in a
public offering pursuant to a Registration Statement. That Registration
Statement and the Prospectus, dated October 8, 1997, which is a part of it (the
"Prospectus"), include a section entitled "Risk Factors", which describes
certain factors that may affect future operating results of the Company. That
section is hereby incorporated by reference in this Report. Those factors should
be considered carefully in evaluating an investment in the Company's Common
Stock. If you do not have a copy of the Prospectus, you may obtain one by
requesting it from the Company's Investor Relations Department at (602) 894-6311
or by mail at Mobile Mini, Inc., 1834 West Third Street, Tempe, Arizona 85281.
The Company's filings with the SEC may be accessed at the SEC's World Wide Web
site at http://www.sec.gov.
10
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
Number Description
10.5.5 Amendment No. 5 to Senior Credit Agreement
dated as of March 31, 1998,
by and among the Registrant,
each financial institution a party thereto,
and BT Commercial Corporation, as Agent
11 Computation of Earnings per Share for the
Three Month Period ended
March 31, 1998 and 1997
27 Selected Financial Data
(b) Reports on Form 8-K: none
11
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 15, 1998 /s/ Larry Trachtenberg
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Larry Trachtenberg
Chief Financial Officer &
Executive Vice President
12