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U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
Form 10-K
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 FOR THE FISCAL YEAR ENDED
DECEMBER 31, 1999
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED] FOR THE
TRANSITION PERIOD FROM _____________ TO _____________
Commission File Number 1-12804
MOBILE MINI, INC.
(Exact Name of Registrant as Specified 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)
(480) 894-6311
(Registrant's Telephone Number)
Securities Registered Under Section 12(g) of the Exchange Act:
Title of Class Name of Each Exchange on Which Registered
Common Stock, $.01 par value Nasdaq Stock Market
Preferred Share Purchase Rights
Indicate by checkmark 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[ ]
Indicate by checkmark if disclosure of delinquent filers pursuant to Item 405 of
Regulation S-K is not contained herein, and will not be contained, to the best
of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K.[ ]
The aggregate market value on February 18, 2000 of the voting stock owned by
non-affiliates of the registrant was approximately $162,875,000 (calculated by
excluding all shares held by executive officers, directors and non-institutional
holders of five percent or more of the voting power of the registrant, without
conceding that such persons are "affiliates" of the registrant for purposes of
the federal securities laws).
As of February 18, 2000, there were outstanding 11,440,856 shares of the
issuer's common stock, par value $.01.
Documents incorporated by reference: Portions of the Proxy Statement for the
Registrant's 2000 Annual Meeting of Stockholders are incorporated herein by
reference in Part III of this Form 10-K to the extent stated herein. Certain
Exhibits are incorporated in Item 14 of this Report by reference to other
reports and registration statements of the Registrant which have been filed with
the Securities and Exchange Commission. Exhibit Index is at page 44.
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PART I
Except for historical information, the following description of Mobile Mini's
business contains forward-looking statements which involve risks and
uncertainties. Our actual results could differ materially from those set forth
in these forward-looking statements as a result of a number of factors,
including those set forth below in Item 1 in this report under the heading
"Factors That May Affect Future Operating Results."
ITEM 1. DESCRIPTION OF BUSINESS.
GENERAL
We are the nation's largest provider of portable storage solutions through a
lease fleet of over 37,000 storage units. We have 19 branch offices in 11
states. Our products provide attractive, accessible temporary storage for a
diversified customer base of over 36,000 customers, including Wal-Mart,
Motorola, Frito Lay, Holiday Inns, Target, numerous municipalities and the
Department of Defense. These customers use our products for excess inventory,
construction site storage, records and document storage and a host of other
applications. We obtain our portable storage units by purchasing used
ocean-going containers (ISOs), which we refurbish and modify, by manufacturing
our own units and by acquiring lease fleets from others. We offer a wide range
of products in varying lengths and widths with an assortment of differentiated
features such as our patented security systems, multiple doors, electrical
wiring and shelving. In addition to our leasing operations, we sell new and used
portable storage units and provide other ancillary services.
In 1996, we initiated a strategy of focusing on leasing rather than selling
portable storage units. We have been expanding our lease fleet since that time.
We believe that leasing our units is a more attractive business opportunity for
the following reasons:
- Our leases have an average life exceeding 19 months and produce
predictable, recurring revenues.
- Our average rental rates recover the cost of our investment within an
average of 26 months.
- Our portable storage units have useful lives exceeding 20 years with
residual values estimated at 70%.
- Leasing provides us incremental operating margins of approximately 60%
once the fixed costs of the branch have been covered.
As a result of our shift to a leasing focus, we have successfully increased our
size, recurring revenue stream and profitability. Since 1996, our lease fleet
has increased 228.3%, our annual leasing revenue has increased 244.7% to $53.3
million and our operating income has increased 376.8% to $21.9 million.
Additionally, we have increased our operating margin from 11.4% in 1995 to 32.8%
in 1999. We plan to continue to focus on the leasing of our portable storage
units to an increasing customer base through an expanding branch network.
INDUSTRY OVERVIEW
The storage industry consists of two principal segments, fixed self-storage and
portable storage.
The fixed self-storage segment consists of permanent structures away from
customers' locations. Fixed self-storage is used primarily by consumers to
temporarily store excess household goods. According to the Self Storage Almanac,
the fixed self-storage market exceeds $10 billion per year. This segment is
highly fragmented but includes several large national companies such as Public
Storage and Shurgard Storage Centers.
The portable storage segment is different from the fixed self-storage segment
because it brings the storage solution to the customer's own location and
addresses the need for temporary secure storage with immediate access. The
advantages of portable storage include convenience, immediate accessibility,
price and higher security. In contrast to fixed self-storage, the portable
storage segment is primarily used by businesses. This segment is highly
fragmented with no national participants. Although there are no published
estimates of the size of the portable storage segment, we believe there is
increasing market awareness of the advantages of
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portable storage. We believe, therefore, that there is substantial potential to
increase the size of the portable storage segment. Refurbished ISO shipping
containers and over-the-road trailers are the primary products used to provide
portable storage.
In 1999, approximately 81% of our leasing customers were businesses,
approximately 12% were consumers and approximately 7% were government,
institutional and other.
We also service the mobile office industry with a proprietary line of steel
structures with ground accessibility. This industry provides temporary office
space and is estimated to exceed $2 billion. We also recently introduced records
storage units which are specifically designed for efficient storage of business
records, are insulated and are equipped with fans and lighting. These units
provide portable, secure records storage. This industry is experiencing
significant growth as businesses continue to generate substantial paper records
that must be kept for extended periods.
COMPETITIVE STRENGTHS
We attribute our success in the portable storage business to the following
competitive strengths:
Market Leadership. We are the nation's largest lessor of portable storage units.
We have a lease fleet of over 37,000 portable storage units and are the largest
provider of portable storage solutions in a majority of our markets. We believe
we have created name recognition and brand awareness, and that "Mobile Mini" is
associated with high quality portable storage products and superior service. We
have achieved significant growth in new markets by capturing market share from
competitors and by creating demand among businesses and consumers who were
previously unaware of the availability of our products to meet their storage
needs.
Superior, Differentiated Products. We offer a broad range of portable storage
products in varying lengths and widths to better meet our customers' temporary
storage needs. Our manufacturing and refurbishing capabilities enable us to
offer products that our competitors are unable to match. Most competitors offer
only standard eight foot wide ISO shipping containers in 20, 40, or 45 foot
lengths. Our portable storage units range in size from five to 48 feet in length
and eight to 10.5 feet in width. Our manufactured 10-foot wide units, introduced
in 1998, provide 40% more useable storage space than the standard eight-foot
wide ISO shipping containers offered by our competitors. Our products also have
patented locking systems, multiple door options, and electrical wiring, shelving
and other customized features.
Customer Service Focus. We believe that the portable storage business is highly
service intensive and essentially local. We have trained our sales force to
focus on all aspects of customer service from the sales call onward. We
differentiate ourselves by providing flexible lease terms and timely delivery of
units. Our sales people work out of our branch locations rather than from our
headquarters. This allows them to interact directly with customers, better
understand local market needs and develop each market in response to those
needs. We conduct on-going training programs for our sales force to assure high
levels of customer service and awareness of local market competitive conditions.
Our customized software system increases our responsiveness to customer
inquiries and enables us to efficiently monitor our sales force's performance.
As a result of this customer service focus, we enjoy high levels of repeat
business and word-of-mouth referrals.
Diverse Customer Base. During 1999, we served more than 36,000 customers across
a wide range of industries including retailers, wholesales, commercial
businesses, contractors, consumers, governmental agencies and hospitals and
schools. No customer accounted for more than 5% of our 1999 lease revenues. The
top ten customers accounted for only 10% of our lease revenues. We believe that
our diverse customer base reduces our susceptibility to economic downturns in
our markets or in any of the industries in which our customers operate. Customer
diversity also demonstrates the broad application of our products and the
opportunity for us to create future demand.
Customized Management Information Systems. We have made substantial investments
in our management information system as part of our effort to optimize fleet
utilization, improve financial performance and provide customer data used to
target markets for additional revenue opportunities. Our MIS systems enable us
to carefully monitor the size, mix, utilization and rental rates of our lease
fleet by branch on a daily basis. We have maintained the average annual
utilization rate of our lease fleet above 86% over the last three years while
growing the size of the lease fleet by 172.5% to over 37,000 units. Our systems
also capture relevant customer
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demographic and usage information which we use to target new customers within
our existing and new markets. Our headquarters and each branch are linked
through a PC-based wide area network that provides real-time transaction
processing and detailed reports on a branch by branch basis.
Flexibility Afforded By Manufacturing Capability. We design and manufacture our
own portable storage units and also refurbish and modify used ISO shipping
containers. This capability allows us to offer a wide range of products to meet
our customers' needs, charge premium lease rates and gain market share from our
competitors that have more limited product offerings. Our manufacturing
capability also provides us with an alternative source of supply to support our
growth and to utilize whenever prices increase for used ISO shipping containers.
GROWTH STRATEGY
We intend to pursue the following growth strategy:
Focus on Core Portable Storage Leasing Business. We intend to continue to focus
on growing our core leasing business because it provides predictable, recurring
revenue and high margins. We believe there is substantial demand for our
portable storage units throughout the United States. For example, in the Los
Angeles area, our largest market and a market we entered in 1989, we have
increased the number of portable storage units in our lease fleet from
approximately 4,200 units at the end of 1996 to nearly 8,000 units at the end of
1999. Our focus on leasing has allowed us to achieve annual growth rates of
43.9% in leasing revenues and 66.4% in operating income over the past three
years.
Increase Penetration in Existing Markets. We intend to continue to focus on
increasing the number of portable storage units leased from our existing
branches to both new and repeat customers. We will attempt to create new demand
for leased units in all of our markets. We have historically been able to
generate strong internal growth within our existing markets. From 1996 through
1999, excluding the effect of acquisitions, we generated compounded annual
leasing revenue increases of 31.5% in the markets where we operated for more
than one year. We achieved high levels of internal growth by increasing
awareness of our products through our targeted marketing programs and
advertising while rapidly expanding our lease fleet.
Accelerate Branch Expansion. We believe our branch model can be introduced to
multiple markets throughout the United States and intend to pursue this
opportunity. We have identified many markets in the United States where we
believe demand for portable storage units is underdeveloped. These markets are
currently being served by small, fragmented industry competitors. In 1998, we
began our expansion strategy by entering four new markets, three by acquisition
and one by start-up. In 1999, we entered seven new markets, six by acquisition
and one by start-up. Whenever feasible, we enter a new market by acquiring the
storage units and leases of an operating business in order to generate immediate
revenue to cover overhead. Where there are not quality acquisitions available to
us, we plan to enter targeted markets through start-up branches.
Develop New Products. We attempt to develop new products and new applications
for our products through an active research and development effort. For example,
in 1998 we introduced a 10-foot wide storage unit that has proven to be a
popular product with our customers. In 1999 we completed the design of a records
storage unit which provides highly secure, on-site easily accessible storage. We
market this unit as a records storage solution for semi-active records. We
believe our design and manufacturing capabilities increase our ability to
service our customers' needs and the demand for our portable storage solutions.
PRODUCTS
We provide a broad range of portable storage products to our customers to meet
their varying needs. Our product types and their features are as follows:
Portable Storage Products
- Refurbished and Modified Storage Units. We purchase used ISO shipping
containers from leasing companies or brokers. These containers are
eight feet wide, 8'6" to 9'6" high and 20, 40 or 45 feet long. After
acquiring an ISO container, we
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refurbish and modify it. Refurbishment typically involves cleaning,
removing rust and dents, repairing floors and sidewalls, painting,
adding our signs and installing new doors and our patented locking
system. Modification typically involves splitting containers into 5,
10, 15, 20 or 25 foot lengths.
- Manufactured Storage Units. We manufacture portable storage units for
our lease fleet and for sale. We do this at our manufacturing facility
in Maricopa, Arizona. We can manufacture units up to 12 feet wide and
50 feet long and can add doors, windows, locks and other customized
features. Typically, we manufacture "knock-down" units which we ship to
our branches and assemble there. This method of shipment is less
expensive than shipping fully assembled storage units.
- Records Storage Units. In 1999 we completed the design of a proprietary
portable records storage unit that we are now marketing. Our units
enable customers to store their records at their location for easy
access or at one of our facilities. Our units are 10.5 feet wide and
are available in 12, 23 and 34 foot lengths. They feature high security
doors and locks, electrical wiring, shelving, folding work tables and
air filtration systems. We believe our product is a cost-effective
alternative to mass warehouse storage and provides fire and water
damage protection.
- Mobile Offices. We manufacture mobile office units that range from 10
to 40 feet in length. We offer mobile office units in various
configurations, including office and storage combination units that
provide a 10 or 15-foot office with the remaining area available for
storage. Office units are equipped with electrical wiring, heating and
air conditioning units, phone jacks, carpet and/or tile, proprietary
doors and windows with security bars. We believe the advantages of our
manufactured office units include ground accessibility and their high
security, all-steel design.
We purchase used ISO shipping containers and refurbish and modify them at our
facilities in Arizona, California and Texas. We also manufacture new portable
storage units at our Arizona facility. We believe we are able to purchase used
ISO shipping containers at competitive prices because of our volume purchases.
In 1999, excluding our acquisitions, we purchased and refurbished about 4,200
used ISO shipping containers and manufactured approximately 4,100 portable
storage units and mobile offices. The used ISO shipping containers we purchase
are typically about 10 to 12 years old. We believe our portable storage units
and mobile offices have useful lives of at least 20 years if properly
maintained, with residual values of over 70% of their original cost.
LEASE TERMS
Our leases have an average initial term of 8.1 months and provide for the term
to continue at the same rental rate on a month-to-month basis until the customer
cancels the lease. The average duration of our leases has been 19 months. Our
average monthly rental rate was $119 in 1999. Most of our portable storage units
rent for $60 to $165 per billing cycle, although large custom-designed units may
rent for as much as $300 per billing cycle. Our mobile offices typically rent
for $110 to $235 per billing cycle. The average utilization of our lease fleet
was 85.6% in 1999 and 87.0% in 1998. Each lease provides that the customer is
responsible for the cost of delivery at lease inception and pickup at lease
termination. The leases also specify that the customer is responsible for any
damage done to the unit beyond ordinary wear and tear. Our customers may
purchase a damage waiver from us. This provides us with an additional source of
revenue. For the past 3 years, our cost to repair and maintain our portable
storage units has averaged 1.9% of our lease revenues. Repainting the outside of
storage units is the most frequent maintenance item.
BRANCH OPERATIONS
We locate our branches primarily in larger cities in regions with attractive
demographics and strong growth prospects. Within each market, we have located
our branches in areas that allow for easy delivery of portable storage units to
our customers. We also seek locations that are very visible from high traffic
roads as an effective way to advertise our products and our name.
Each branch has a Branch Manager who has overall supervisory responsibility for
all activities of the branch. Branch Managers report to one of our six Regional
Managers. Incentive bonuses based upon branch performance are a substantial
portion of the compensation for both Branch and Regional Managers.
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Each branch has its own sales force, a transportation department that delivers
and picks up portable storage units from customers, and an office manager. Each
branch has delivery trucks and forklifts to load, transport and unload units and
a storage yard staff responsible for unloading and stacking units. Units are
stored by stacking them three high to maximize usable ground area. Each branch
also has a fleet maintenance department to maintain the branch's trucks,
forklifts and other equipment. Our larger branches provide on-site storage of
portable storage units leased to customers.
The following table shows information about our branches:
LOCATION FUNCTIONS SIZE YEAR ESTABLISHED
- -------- --------- ---- ----------------
Phoenix, Arizona Leasing, on-site storage, sales 10 acres 1983
Tucson, Arizona Leasing, on-site storage, sales 5 acres 1986
Los Angeles, California Leasing, on-site storage, 15 acres 1988
sales, refurbishment and
assembly
San Diego, California Leasing, on-site storage, sales 5 acres 1994
Dallas, Texas Leasing, on-site storage, 17 acres 1994
sales, refurbishment and
assembly
Houston, Texas Leasing, on-site storage, 7 acres 1994
sales, refurbishment and
assembly
San Antonio, Texas Leasing, on-site storage, sales 3 acres 1995
Austin, Texas Leasing, on-site storage, sales 5 acres 1995
Las Vegas, Nevada Leasing and sales 1 acre 1998
Oklahoma City, Oklahoma Leasing and sales 6 acres 1998
Albuquerque, New Mexico Leasing and sales 2 acres 1998
Denver, Colorado Leasing and sales 4 acres 1998
Tulsa, Oklahoma Leasing and sales 1 acre 1999
Colorado Springs, Colorado Leasing and sales 1 acre 1999
New Orleans, Louisiana Leasing and sales 3 acres 1999
Memphis, Tennessee Leasing and sales 3 acres 1999
Salt Lake City, Utah Leasing, on-site storage, sales 2 acres 1999
Chicago, Illinois Leasing and sales 2 acres 1999
Knoxville, Tennessee Leasing and sales 3 acres 1999
SALES AND MARKETING
We have approximately 100 people at our branches and 8 management people at our
headquarters involved in sales and marketing on a full-time basis. We believe
that by locating our sales and marketing staff in our branches, they are better
able to understand the portable storage needs of our customers and provide the
high levels of customer service.
Our sales and marketing force provides information about our products to
prospective customers by handling inbound calls and by initiating cold calls. We
have on-going training programs for our sales and marketing force covering all
aspects of leasing and customer service. Our branches are connected to one
another and to headquarters through our network processing system. This enables
the sales and marketing staff to share leads and other information and permits
the headquarters staff to monitor and review sales and leasing productivity on a
branch by branch basis. Our sales and marketing force is compensated primarily
on a
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commission basis. We restructured our commission program in 1996 when we changed
our focus to leasing rather than selling portable storage units.
We advertise our products in the yellow pages and use a targeted direct mail
program. In 1999, we mailed over 6 million product brochures to customers and
prospective customers. These brochures describe our products and the advantages
of our portable storage solutions.
CUSTOMERS
During 1999, more than 36,000 customers leased our portable storage units,
compared to about 28,000 in 1998. Our customer base is diverse and consists of
businesses in a broad range of industries. During 1999, our largest customer
accounted for only 4.4% of our leasing revenues.
We target customers who have long-term or seasonal storage needs. Customers use
our portable storage units for a wide range of purposes. The following provides
an overview of our customers and how they use our portable storage units:
Retail, including drug, grocery, shopping and strip mall stores, hotels,
restaurants, dry cleaners and service stations, 34%; Construction, including
general, electrical, plumbing and mechanical contractors, landscapers and
companies who build residential homes, 33%; Consumers, including homeowners for
home storage or moving related storage, 12%; Commercial, including companies
that do not sell to the general public, distributors, trucking and utility
companies, 14%; Government and Institutions, including federal, state, county
and local agencies, military, reservations, hospitals and educational
facilities, 6%; and Other, including farming, agriculture, finance and
insurance, real estate brokers and film production, 1%. Our retail and wholesale
customers in 1999 included Walmart(R), Kmart(R), Target(R) and Frito Lay(R). We
believe our construction customer base is characterized by a wide variety of
contractors who are associated with original construction and capital
improvements in the commercial, institutional, residential and industrial
sectors.
MANUFACTURING
We build new portable storage units, mobile offices and custom-designed
structures at our Maricopa, Arizona manufacturing plant. We also refurbish and
modify used ISO shipping containers at this plant. Our workers cut and shape
steel for new units and then weld and paint them. These workers also install
custom features. We have about 300 manufacturing workers in this plant. Company
wide, we manufactured and refurbished about 8,300 portable storage units in
1999. Many of our manufactured portable storage units are "knock down" units
which we ship to our branches for final assembly. We can ship up to twelve,
20-foot containers on a single flat-bed trailer. In comparison, only two to
three assembled 20-foot ISO shipping containers can be shipped on a flat-bed
trailer. Shipping units to our branches prior to final assembly reduces our cost
of transporting units to our branches. We believe we can expand the capacity of
our Maricopa plant at a relatively low capital cost.
We purchase raw materials such as steel, vinyl, wood, glass and paint, which we
use in our manufacturing and refurbishing operations. We have multiple sources
of supply. We typically buy these raw materials on an as needed basis; we do not
currently have long-term contracts with vendors for the supply of these raw
materials.
Our manufacturing capacity serves to protect us to some extent from price
increases for used ISO shipping containers. Used ISO shipping containers vary in
price from time to time based on market demand, which is related to the volume
of shipping of containerized freight. Should the price of used ISO shipping
containers increases substantially, we are able to increase our manufacturing
volume and reduce the number of used containers we buy and refurbish.
MANAGEMENT INFORMATION SYSTEMS; FLEET MANAGEMENT
We use a customized management information system for lease fleet management and
our targeted sales and marketing efforts. This system consists of a wide-area
network that connects our headquarters and all of our branches. Headquarters and
each branch can enter data into the system and access data on a real-time basis.
Our system generates weekly management reports by branch of leasing volume,
fleet utilization, lease rates and fleet movement as well as monthly profit and
loss statements by branch and company wide. These reports allow management to
monitor each branch's performance on a daily, weekly and monthly basis. We track
each portable storage unit by its serial number. Lease fleet and sales
information is entered in the system daily at the branch
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level and verified through periodic physical inventories by branch employees.
Branch salespeople use the system to track customer leads and other sales data
and to obtain information about current and prospective customers.
COMPETITION
In all of the markets where we operate, we face competition from several local
companies and usually one or two regional competitors. Our competitors include
lessors of portable storage units, used over-the-road trailers and other
structures used for temporary storage. To a lesser degree, we also compete with
fixed self-storage facilities, such as U-Haul, Public Storage, Shurgard Storage
Centers, and various smaller competitors. We compete primarily in terms of
security, convenience, product quality, availability, customer service and
price. Some of our competitors have less debt, greater market share and greater
financial resources and pricing flexibility than we do. Sometimes, a competitor
will lower its lease rates in one of our markets to try to gain market share.
This may require us to reduce our lease rates as well, which could reduce our
profitability in those markets.
In addition to competition for customers, we face competition in purchasing used
ISO shipping containers. Several types of businesses purchase used ISO shipping
containers, including various freight transportation companies, freight
forwarders and commercial and retail storage companies. If the number of
available containers for sale decreases, container prices could increase
substantially. This could increase our expenses and reduce our earnings.
Competition in our markets could increase in the future. New competitors may
enter our markets and may have greater marketing and financial resources than we
do. This may allow them to gain market share at our expense. Increased
competition may cause us to lower lease rates and reduce profit margins.
EMPLOYEES
As of February 18, 2000, we had about 1,000 full-time employees. Our employees
are represented by the following major categories:
Management 49
Administrative 175
Sales 98
Manufacturing 460
Drivers and Storage Unit Handling 218
Our employees are not represented by a labor union and we consider our relations
with our employees to be good.
FACTORS THAT MAY AFFECT FUTURE OPERATING RESULTS
Our business involves a high degree of risk and there are numerous factors that
may affect our future operating results including those factors discussed below.
If any of the following risks and uncertainties actually occur, our business,
results of operations and financial condition could be materially adversely
affected.
This report also contains forward-looking statements that involve risks and
uncertainties. Discussions in this report concerning forward-looking statements
are under the headings "Factors That May Affect Future Operating Results,"
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and "Business." Our actual results could differ materially from
those anticipated in the forward-looking statements as a result of certain
factors, including the factors described below.
Risks of Managing Our Growth
Our future performance will depend in large part on our ability to manage our
planned growth. Our anticipated future growth could strain our managerial, human
and other resources while we try to integrate the operations of our acquisitions
and new branches and adjust to operating in new markets. To successfully manage
this growth, we must continue to improve our operating, financial and
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other internal procedures and controls and add employees. We also must
effectively motivate, train and manage our employees. We cannot be sure that we
can assimilate future acquisitions and new branches into our operations. If we
do not manage our growth effectively, some of our acquisitions and new branches
may fail and we may decide to close unprofitable locations. Closures would
likely result in additional expenses which would cause our operating results to
suffer.
Our Company Operates With a High Amount of Debt
Our operations are very capital intensive and we operate with a high amount of
debt relative to our size. Typically, we borrow 80% to 90% of the cost of a
finished portable storage product. We have a credit facility with a group of
banks. Under the credit facility, we can borrow up to $120 million on a
revolving loan basis, which means that amounts repaid may be reborrowed. As of
February 18, 2000, we had borrowed approximately $74.4 million under our credit
facility, and had $33.5 million available for further borrowing based upon the
agreement's borrowing base formula. Our amount of debt makes us more vulnerable
in the event of a downturn in the general economy or in the industries we serve.
In addition, amounts we borrow under our credit facility bear interest at a
variable rate. Because these rates change with prevailing interest rates, higher
prevailing interest rates would increase the amount of interest we have to pay
on our debt. This could have a material adverse effect on profitability and our
ability to grow as quickly as we are planning.
Under our credit facility, maximum permissible borrowings are limited by the
appraised value of our lease fleet. In the event our lease fleet were to be
appraised at a lower value, this would adversely affect our borrowing ability
and therefore our liquidity.
Under our credit facility, we must comply with a variety of covenants and
restrictions. These include minimum tangible net worth, operating income, and
storage unit utilization rate requirements. The terms of our credit facility
also limit our capital expenditures, acquisitions, additional debt and
repurchases of our common stock, and prohibit us from paying cash dividends.
These covenants and restrictions could limit our ability to respond to market
conditions and restrict our planned growth. In addition, if we fail to comply
with these covenants and restrictions, the lenders have the right to refuse to
lend us additional funds, and they may require early payment of amounts we owe
them. In addition, upon default, our lenders may foreclose on most of our
assets, including our portable storage unit fleet. If this happens, we may be
unable to fund our operations and could not expand our leasing activities.
Additional Debt or Equity Financing Will Be Necessary to Sustain Our Growth
Our ability to grow at the rate we have grown at in the past will depend in part
on our ability to obtain additional debt financing and to raise additional
equity capital by issuing additional shares of our stock. We cannot be sure,
however, that we will be able to obtain the necessary debt or equity financing
on economically advantageous terms. Also, additional debt financing or the sale
of additional equity securities may cause the market price of our common stock
to decline. If we are unable to raise additional debt or equity financing on
acceptable terms, we may have to curtail our growth by delaying lease fleet
expansion or new branch openings.
Our Operating Results and Financial Performance May Fluctuate
Although demand from some of our customers is somewhat seasonal, our operations
as a whole have not been very seasonal. Demand for leases of our portable
storage units is stronger from September through December due to retailers
needing to store more inventory for the holiday season. Our retail customers
usually return leased units to us early in the following year. This has caused a
lower utilization rate for our lease fleet during the first quarter of each
year.
Our results of operations may vary significantly from period to period due to a
variety of factors which affect demand for our units.
These factors include:
- general economic and industry conditions;
- availability and cost of used ISO shipping containers;
- changes in our marketing and sales expenditures;
- pricing pressures from our competitors;
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- market acceptance of our portable storage units, particularly in new
markets we enter;
- the number of new branches we acquire and start-up and when do so; and
- when we introduce new products or when our competitors do so.
There Are Risks to Our Strategy
Our strategy is to grow in part through branch expansion, either by acquisitions
or new branch openings. This strategy involves a number of risks, including the
following:
- we may not find suitable acquisition targets or locations for new
branches;
- competition for acquisition candidates could cause purchase prices to
significantly increase;
- we may fail to adequately integrate the businesses we acquire into our
existing business structure;
- the costs of completing an acquisition and then integrating and
operating the business could be higher than we expect; and
- we may acquire a branch or start one in a new market that turns out not
to have enough demand for our portable storage units to make the branch
profitable.
A Slowdown in the Economy Could Reduce Leasing Demand by Some of Our Customers
In 1999, customers in the construction and retail industries accounted for a
majority of our leasing and sales revenues. These industries tend to be cyclical
and particularly susceptible to slowdowns in the overall economy. If an economic
slowdown occurs, we are likely to experience less demand for leases and sales of
our products from customers in the construction and retail sales industries.
This could have a material adverse effect on our business and results of
operations.
There is Uncertainty and Risk in the Supply and Price of Used ISO Containers
We purchase, refurbish and modify used ISO shipping containers as we add units
to our fleet. The availability of these containers depends in part on the state
of international trade and overall demand for containers in the ocean cargo
shipping business. When international shipping increases, the availability of
used ISO shipping containers for sale decreases, and the price of the containers
that are available typically increases. Conversely, an oversupply of used ISO
shipping containers may cause container prices to fall. Our competitors may then
lower the lease rates on their storage units. As a result, we may need to lower
our lease rates to remain competitive. This would decrease our revenues and our
earnings.
Several types of businesses purchase used ISO shipping containers. These include
various freight transportation companies, freight forwarders and commercial and
retail storage companies. As a result, if the number of available containers for
sale decreases, used ISO shipping container prices may increase substantially
and we may not be able to manufacture enough new units to grow our fleet. These
price increases also could increase our expenses and reduce our earnings.
The amount we can borrow under our credit facility depends in part on the value
of the portable storage units in our lease fleet. If the value of our lease
fleet declines, we cannot borrow as much. Therefore, we may be unable to add as
many units to our fleet as we would like. Also, we are required to satisfy
several covenants with our lenders that are affected by fluctuations in the
value of our lease fleet. We would breach some of these covenants if the value
of our lease fleet drops below specified levels.
We Face Significant Competition From a Variety of Businesses
In all of the markets where we operate, we face competition from several local
companies and usually from one or two regional companies. Our competitors
include lessors of storage units, used over-the-road trailers and other
structures used for portable storage. To a lesser degree we also compete with
conventional fixed self-storage facilities. We compete primarily in terms of
security, convenience, product quality and availability, lease rates and
customer service. Some of our competitors have larger lease fleets, less debt,
greater market share, and greater financial resources and pricing flexibility
than we do. Sometimes, a competitor
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will lower its lease rates in one of our markets to try to gain market share.
This may require us to lower our lease rates as well, which could reduce our
profitability in those markets.
Competition in our markets may increase in the future. New competitors may enter
our markets and may have greater marketing and financial resources that we do.
This may allow then to gain market share at our expense. Increased competition
may cause us to lower lease rates and reduce profit margins. Prolonged price
competition is likely to have a material adverse affect on our business and
results of operation.
There Are Risks From Fluctuations in the Supply and Costs of Raw Materials We
Use in Manufacturing
We also manufacture portable storage units. In our manufacturing process, we
purchase steel, vinyl, wood, glass and other raw materials from various
suppliers. We cannot be sure, however, that an adequate supply of these
materials will continue to be available on terms reasonably acceptable to us.
The raw materials we use are subject to price fluctuations that we cannot
control. The cost of raw materials will have a significant effect on our
operations and earnings. Rapid increases in material prices are difficult to
pass through to customers. If we are unable to pass on these higher costs, our
results of operations could decline significantly. If raw material prices
decline significantly, we may have to write down our raw materials inventory
values. If this happens, our results of operations and financial condition would
decline.
Zoning Laws Could Restrict the Use of Our Storage Units
Most of our customers use our storage units to store their goods on their
property. Officials in certain cities and towns have informed some of our
customers that local zoning laws do not permit them to keep our portable storage
units on their property or do not permit portable storage units unless located
out of sight behind their business. If our units cannot be located in a
significant number of cities and towns in our markets due to zoning laws or
other regulations, our business could be adversely affected.
We Must Attract and Retain Personnel in a Highly Competitive Labor Market
Our future success will depend on our ability to attract, retain and motivate
employees with various skills, as well as semi-skilled and unskilled labor for
our branches and manufacturing plants. Competition for all types of employees,
including skilled and unskilled laborers, is intense. A shortage in the pool of
employees could require us to increase our wage and benefits to attract and
retain enough employees. An increase in our labor costs, or our inability to
attract, retain and motivate employees, would likely have a material adverse
effect on our business and results of operations.
We Are Subject to Governmental Regulation
We manufacture, refurbish or modify portable storage units at four locations.
Our facilities are subject to regulation by several federal and state government
agencies, including the Occupational Safety and Health Administration (OSHA) and
the Environmental Protection Agency.
Our facilities are subject to worker safety and health laws and regulations
administered by OSHA. Our employees work with metal presses, heavy materials and
welding equipment, and the possibility of injury is quite high. This means that
OSHA is likely to inspect our facilities from time to time. We have on-going
training and safety programs designed to minimize injuries. If we were found to
be out of compliance, we may have to pay fines or even reconfigure our
operations at considerable cost. New OSHA regulations may be enacted in the
future and could increase our cost of manufacturing and refurbishing portable
storage units.
Various environmental laws and regulations may expose us to liability for past
or present spills, disposals or other releases of hazardous or toxic substances
or waste products. This may be the case even if we did not know about or cause
the spill or contamination. We generate waste and by-products from our painting
operations, potentially exposing us to liability for spills or contamination.
Federal or state agencies may impose more stringent disposal regulations for
paint waste and by-products. This also could increase the costs of manufacturing
and refurbishing portable storage units.
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The Market Price of Our Stock Is Volatile
The market price of our common stock has fluctuated for a number of reasons,
including quarterly variations in our operating results and changes in earnings
estimates by analysts. The stock market in general also has experienced extreme
price and volume fluctuations which have affected the stock price of many
companies including ours. These fluctuations may adversely affect the market
price of our common stock.
We Rely Heavily on a Few Key Employees
We are substantially dependent on the personal efforts and abilities of Richard
E. Bunger, our Founder and Chairman, Steven G. Bunger, our President and Chief
Executive Officer, and Lawrence Trachtenberg, our Executive Vice President and
Chief Financial Officer. The loss of any of these officer or our other key
employees could have a material adverse effect on our business and results of
operations. We have employment agreements with Steven G. Bunger and Lawrence
Trachtenberg.
"Safe Harbor' Statement under the Private Securities Litigation Reform Act of
1995
This report contains certain statements that may be deemed to be
"forward-looking statements." All statements, other than statements of
historical facts, included in this report that address activities, events or
developments that we expect, believe or anticipate will or may occur in the
future, including, without limitation, with respect to demand for our products,
competition in our industry, the continued availability of adequate financing to
support our anticipated activities including our continued expansion of existing
branches and expansion into new markets, the risks and uncertainties associated
with our growth and acquisition strategy, and our ability to manage our growth
and integrate new acquisitions, are forward-looking statements. These statements
are based on certain assumptions and, in certain cases, analyses that we have
made in light of our experience and perception of historical trends, current
conditions, expected future developments and other factors that we believe are
appropriate in the circumstances. Such statements are subject to a number of
risks or uncertainties, including the risk factors described above under
"Factors That May Affect Future Operating Results," general economic and
business conditions, the business opportunities that may be presented to us and
pursued by us, changes in laws or regulations and other factors, many of which
are beyond our control. Prospective investors and existing shareholders are
cautioned that any such statements are not guarantees of future performance and
that actual results or developments may differ materially from those projected
in forward-looking statements.
ITEM 2. DESCRIPTION OF PROPERTY.
We own our branch locations in Dallas, Texas, Oklahoma City, Oklahoma and a
portion of our Phoenix, Arizona location. We lease all of our other branch
locations. All of our major leased properties have remaining lease terms of at
lease five years, and we believe that satisfactory alternative properties can be
found in all of our markets if necessary.
We own our manufacturing facility in Maricopa, Arizona, approximately 30 miles
south of Phoenix. This facility is nine years old and is on approximately 45
acres. The facility includes nine manufacturing buildings, totaling
approximately 163,400 square feet. These buildings house our manufacturing,
assembly, refurbishing, painting and vehicle maintenance operations.
We lease our corporate and administrative offices in Tempe, Arizona. These
offices have 28,800 square feet of space. The lease term is through December
2000. We currently are negotiating a lease at a new location which will
accommodate our recent growth and foreseeable future needs.
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ITEM 3. LEGAL PROCEEDINGS.
We are a party to routine claims incidental to our business. Most of these
claims involve alleged damage to customers' property while stored in units they
lease from us. We carry insurance to protect us against loss from these types of
claims, subject to deductibles under the policy. We do not believe that any
current litigation, individually or in the aggregate, is likely to have a
material adverse effect on our business or results of operations.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
Our annual meeting of stockholders was held on November 10, 1999, in Phoenix,
Arizona. On the record date for the annual meeting, 11,370,841 shares of common
stock were outstanding and eligible to be voted. A quorum was present at the
annual meeting. The table below briefly describes the proposals and results from
the annual meeting of stockholders.
NUMBER OF SHARES VOTED:
-----------------------
Election of Directors, each to serve a three-year term: For Withheld
--- --------
Steven G. Bunger 10,060,011 4,898
George E. Berkner 10,060,611 4,298
For Against Abstain
--- ------- -------
Approve and adopt the Company's 1999 Stock Option Plan:
9,591,708 449,182 24,019
Ratification of appointment of Arthur Andersen LLP as
the Independent Auditors for 1999: 10,055,330 5,669 3,910
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PART II
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
Our Common Stock trades on the Nasdaq National Market under the symbol "MINI".
The following are the high and low sale prices for the common stock as reported
by the Nasdaq Stock Market.
FISCAL YEARS 1998 AND 1999
1998 1999
---- ----
HIGH LOW HIGH LOW
Quarter ended March 31, $10.500 $5.625 $13.563 $11.000
Quarter ended June 30, 12.438 8.625 19.563 11.125
Quarter ended September 30, 11.125 7.250 23.375 17.750
Quarter ended December 31, 11.125 6.625 22.438 16.688
We had approximately 95 holders of record of our common stock on February 18,
2000, however, we believe we have more than 2,000 beneficial owners of our
common stock.
We have never declared nor paid any cash dividends on our common stock. We do
not currently expect to pay cash dividends on our common stock. Instead we will
continue to use our cash resources to support the planned growth of our
business. Our credit facility with our lenders does not allow us to pay cash
dividends without the consent of our lenders.
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ITEM 6. SELECTED FINANCIAL DATA.
The following table shows our selected consolidated historical financial data
for the stated periods. You should read this material with "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
the financial statements included elsewhere in this report.
YEAR ENDED DECEMBER 31,
-----------------------
1995 1996 1997 1998 1999
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
CONSOLIDATED STATEMENTS OF OPERATIONS DATA:
Revenues:
Leasing......................................... $ 15,461 $ 17,876 $ 24,870 $ 36,461 $ 53,302
Sales........................................... 24,265 23,619 20,528 15,623 12,820
Other........................................... 458 931 685 593 531
------------ ------------ ------------ ------------ -----------
Total revenues.............................. 40,184 42,426 46,083 52,677 66,653
Costs and expenses:
Cost of sales................................... 19,107 19,926 14,546 10,730 8,506
Leasing, selling and general expenses........... 15,174 15,343 20,586 25,724 32,218
Depreciation and amortization................... 1,318 1,714 2,253 2,885 4,065
Restructuring charge............................ -- 700 -- -- --
------------ ------------ ------------ ------------ -----------
Income from operations............................. 4,585 4,743 8,698 13,338 21,864
Other income (expense):
Interest income................................. 14 9 4 31 48
Interest expense................................ (3,212) (3,894) (5,035) (5,896) (6,162)
------------ ------------ ------------ ------------ ------------
Income before provision for income taxes and
extraordinary item................................. 1,387 858 3,667 7,473 15,750
Provision for income taxes......................... 610 378 1,467 2,989 6,300
------------ ------------ ------------ ------------ -----------
Income before extraordinary item................... 777 480 2,200 4,484 9,450
Extraordinary item, net of income tax benefit of
$322 (1996) and $283 (1999)........................ -- (410) -- -- (424)
Preferred stock dividends.......................... (1,250) -- -- -- (22)
------------ ------------ ------------ ------------ ------------
Net income (loss) available to common shareholders $ (473) $ 70 $ 2,200 $ 4,484 $ 9,004
============ ============ ============ ============ ===========
Net income (loss) per share:
Basic:
Income before extraordinary item.............. $ (0.10) $ 0.07 $ 0.33 $ 0.57 $ 0.93
Extraordinary item............................ -- (0.06) -- -- (0.04)
------------ ------------ ------------ ------------ ------------
Net Income.................................... $ (0.10) $ 0.01 $ 0.33 $ 0.57 $ 0.89
============ ============ ============ ============ ===========
Diluted:
Income before extraordinary item.............. $ (0.10) $ 0.07 $ 0.32 $ 0.53 $ 0.89
Extraordinary item............................ -- (0.06) -- -- (0.04)
------------ ------------ ------------ ------------ ------------
Net Income.................................... $ (0.10) $ 0.01 $ 0.32 $ 0.53 $ 0.85
============ ============ ============ ============ ===========
Weighted average number of common and
common share equivalents outstanding:
Basic........................................... 4,835 6,738 6,752 7,840 10,153
Diluted......................................... 4,835 6,744 6,800 8,417 10,640
OTHER DATA:
Lease fleet units (at year end)................. 11,295 13,600 18,051 25,768 37,077
Lease fleet utilization (1)..................... 91.4% 89.7% 85.7% 87.0% 85.6%
Leasing revenue growth from prior year.......... 61.0% 15.6% 39.1% 46.6% 46.2%
Number of branches (at year end)................ 8 8 8 12 19
Operating margin................................ 11.4% 11.2%(2) 18.9% 25.3% 32.8%
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CONSOLIDATED BALANCE SHEET DATA:
YEAR ENDED DECEMBER 31,
-----------------------
1995 1996 1997 1998 1999
---- ---- ---- ---- ----
Lease fleet, net(3)................................ $ 23,862 $ 32,541 $ 49,151 $ 76,590 $ 121,277
Total assets....................................... 54,342 64,816 84,052 116,790 178,392
Total funded debt.................................. 28,632 40,148 54,026 71,900 78,271
Stockholders' equity............................... 16,160 16,209 19,027 29,872 77,387
(1) We calculated utilization by dividing the number of containers on lease
at the end of each week during the period by the total number of
portable storage units in the lease fleet at that time.
(2) Includes $700,000 (pre-tax) restructuring charge; 12.8% excluding the
restructuring charge.
(3) Excludes modular buildings held under capital leases which were
included in this balance sheet item prior to our sale of all our
modular buildings.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS.
OVERVIEW
Since 1996, we have transitioned to primarily leasing portable storage units
from primarily selling them. This has caused the composition of our revenues and
expenses to change. Leasing revenues as a percentage of our total revenues
increased to 80.0% in 1999 from 69.2% in 1998, 54.0% in 1997 and 42.1% in 1996.
From the end of 1996 to the end of 1999, we increased the number of portable
storage units in our lease fleet from 13,600 to 37,100. This is an average
annual growth rate in units of approximately 39.7%.
Our leasing revenues include all rent we receive for our portable storage units.
Our sales revenues include sales of portable storage units and other structures
to customers. Our other revenues consist principally of charges for the delivery
of the portable storage units we sell. Our principal operating expenses are (1)
cost of sales; (2) leasing, selling and general expenses; and (3) depreciation
and amortization, primarily depreciation of the portable storage units in our
lease fleet. Cost of sales includes both our cost to buy, refurbish and modify
used ISO shipping containers and our cost to manufacture portable storage units
and other structures. Leasing, selling and general expenses include advertising
and other marketing expenses, commissions and corporate overhead for both our
leasing and sales activities. Annual repair and maintenance expenses on our
leased units have averaged approximately 1.9% of lease revenues. We expense our
repair and maintenance costs as incurred. Our portable storage units are
depreciated on the straight-line method over our units' estimated useful life of
20 years, with salvage values estimated at 70% of our unit investment.
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RESULTS OF OPERATIONS
The following table shows the percentage of total revenues represented by the
key items that make up our statements of operations. You should read this table
and the discussion below with our financial statements.
YEAR ENDED DECEMBER 31,
1997 1998 1999
---- ---- ----
Revenues:
Leasing 54.0% 69.2% 80.0%
Sales 44.5 29.7 19.2
Other 1.5 1.1 0.8
----- ----- -----
Total revenues 100.0 100.0 100.0
Costs and expenses:
Cost of sales 31.5 20.4 12.8
Leasing, selling and general expenses 44.7 48.8 48.3
Depreciation and amortization 4.9 5.5 6.1
----- ----- -----
Income from operations 18.9 25.3 32.8
Other income (expense):
Interest income -- 0.1 --
Interest expense (10.9) (11.2) (9.2)
----- ----- -----
Income before provision for income taxes and
extraordinary item 8.0 14.2 23.6
Provision for income taxes 3.2 5.7 9.5
----- ----- -----
CIncome before extraordinary item 4.8 8.5 14.1
Extraordinary item -- -- (0.6)
----- ----- -----
Net income 4.8% 8.5% 13.5%
===== ===== =====
1999 COMPARED TO 1998
Total revenues in 1999 increased by 26.5% to $66.7 million from $52.7 million in
1998. Leasing revenues in 1999 increased by 46.2% to $53.3 million from $36.5
million in 1998. These increases resulted from a 44.5% increase in the average
number of portable storage units on lease and a 1.2% increase in the average
rent per unit. In 1999, we opened seven new branches, six of which were through
acquisitions. The new branches were in Salt Lake City, Colorado Springs, New
Orleans, Memphis, Chicago, Knoxville and Tulsa. We also acquired operations in
seven markets we already operated in. The branches in new markets generated an
increase in units leased of 18.4% in 1999 and accounted for 11.2% of our
increase in leasing revenues. Leasing revenues at branches open more than one
year (excluding operations acquired from others) increased by 28.2%. Our
revenues from the sale of units decreased by 17.9% to $12.8 million in 1999 from
$15.6 million in 1998. This decrease reflects our decision in 1998 to curtail
the sale of telecommunication shelters and discontinue our dealer program.
Cost of sales decreased to 66.3% of sales revenues in 1999 from 68.7% of sales
revenues in 1998. During 1999, we paid less for used ISO shipping containers and
also produced more portable storage units at our manufacturing plant than in
1998. These factors resulted in the higher gross margin on portable storage unit
sales in 1999.
Leasing, selling and general expenses increased 25.2% to $32.2 million in 1999
from $25.7 million in 1998. We had higher leasing-related expenses because of
the 44.5% increase in the average number of units on lease, higher commissions
because of our higher leasing volume and $2.1 million of expenses associated
with the six branches in new markets we acquired and the one branch we started
in 1999. Both acquired and start up branches initially have lower profit margins
until the branches' fixed operating costs are covered by higher leasing volumes.
Depreciation and amortization expenses increased by $1.2 million to 6.1% of
total revenue in 1999 from 5.5% in 1998. This increase resulted from our larger
lease fleet, additional equipment needed for manufacturing and maintaining the
lease fleet and other equipment added at our branches.
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Our operating margin increased to 32.8% in 1999 from 25.3% in 1998 principally
because we focused on leasing rather than selling our portable storage units and
because leasing, selling and general expenses decreased as a percent of leasing
revenues. As a result, income from operations increased by 63.9% to $21.9
million in 1999 from $13.3 million in 1998.
Interest expense increased by 4.5% to $6.2 million in 1999 from $5.9 million in
1998 as a result of higher average debt outstanding during 1999. Interest
expense as a percentage of revenues decreased to 9.2% in 1999 from 11.2% in
1998. Our average debt outstanding increased by 21.0%, due to an additional
$14.5 million of borrowings under our credit facility. We used this debt
financing primarily to expand our lease fleet. The weighted average interest
rate declined to 7.6% in 1999 from 8.7% in 1998, excluding amortization of debt
issuance costs. Including amortization of debt issuance costs, the weighted
average interest rate was 8.3% in 1999 and 9.6% in 1998.
Net income before extraordinary charges in 1999 was $9.4 million, or $0.89 per
diluted share of common stock, compared to net income in 1998 of $4.5 million,
or $0.53 per diluted share of common stock. During 1999 the Company recorded a
$0.04 per share extraordinary charge in connection with the early extinguishment
of our $6.9 million of Senior Subordinated Notes which were originally scheduled
to mature in November 2002. Our increase in net income primarily resulted from
our higher leasing revenues in 1999 and a decrease in leasing, selling and
general expenses per unit on lease in 1999. Our effective tax rate was 40.0% for
both 1999 and 1998. We had a 26.4% increase in the weighted average number of
common and common share equivalents outstanding in 1999 primarily because of a
public offering of 2.965 million shares of our common stock in May and June
1999.
1998 COMPARED TO 1997
Total revenues in 1998 increased by 14.3% to $52.7 million from $46.1 million in
1997. Leasing revenues in 1998 increased by 46.6% to $36.5 million from $24.9
million in 1997. These increases resulted from a 42.9% increase in the average
number of portable storage units on lease and a 2.6% increase in the average
rent per unit. In 1998, we opened four new branches, three of which were through
acquisitions. The new branches were in Las Vegas, Oklahoma City, Denver and
Albuquerque. These new branches accounted for 15.8% of our increase in 1998
leasing revenues. Our eight branches which operated in 1998 and 1997 accounted
for 84.2% of the increase in our 1998 leasing revenues. Our revenues from the
sale of portable storage units and other structures decreased by 23.9% to $15.6
million in 1998 from $20.5 million in 1997. This reflects our focus on leasing
rather than selling portable storage units. This decrease was also caused by our
decision in 1998 to curtail the sale of telecommunication shelters and
discontinue our dealer program.
Cost of sales decreased to 68.7% of sales revenues in 1998 from 70.9% in 1997.
During 1998, we paid less for both used ISO shipping containers and the steel we
use to manufacture portable storage units. We also produced more portable
storage units at our manufacturing plant in 1998 than in 1997. As a result, our
fixed manufacturing expenses were allocated over more units and resulted in a
higher gross margin on portable storage unit sales in 1998.
Leasing, selling and general expenses increased by $5.1 million to 48.8% of
total revenues in 1998 from 44.7% in 1997. We had higher leasing-related
expenses because of the 42.9% increase in the number of units on lease, higher
commissions because of our higher leasing volume and $1.4 million of expenses
associated with the three branches we acquired and the one branch we started in
1998. Both acquired and start-up branches initially have lower profit margins
until the branches' fixed operating costs are covered by higher leasing volumes.
However, these expenses decreased to 70.6% of our leasing revenues in 1998 from
82.8% in 1997.
Depreciation and amortization expenses increased by $631,000 to 5.5% of total
revenues in 1998 from 4.9% in 1997. This increase resulted from our larger lease
fleet, additional equipment needed for manufacturing and other equipment added
at our branches.
Our operating margin increased to 25.3% of total revenues in 1998 from 18.9% in
1997 principally because we focused on leasing rather than selling portable
storage units and because leasing, selling and general expenses decreased as a
percentage of leasing revenues. As a result, income from operations increased by
53.4% to $13.3 million in 1998 from $8.7 million in 1997.
Interest expense increased by 17.1% to $5.9 million in 1998 from $5.0 million in
1997 because we had higher average debt outstanding during 1998. Our average
debt outstanding increased by 29.0%, consisting of $6.9 million of 12% Senior
Subordinated Notes issued in October 1997 and an additional $21.3 million of
borrowings under our credit facility. We used this debt financing
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primarily to expand our lease fleet. The weighted average interest rate declined
to 8.7% in 1998 from 9.5% in 1997, excluding amortization of debt issuance
costs. Including amortization of debt issuance costs, the weighted average
interest rate was 9.6% in 1998 and 10.6% in 1997.
We reported net income in 1998 of $4.5 million, or $0.53 per diluted share of
common stock, compared to net income in 1997 of $2.2 million, or $0.32 per
diluted share of common stock. These increases were primarily because of our
higher leasing revenues in 1998 and the decrease in leasing, selling and general
expenses as a percentage of leasing revenues in 1998. Our effective tax rate was
40.0% for both 1998 and 1997. We had a 23.8% increase in the weighted average
number of common and common share equivalents outstanding in 1998 because of the
exercise of warrants we had issued in 1994 and common stock issued in connection
with the acquisitions completed during 1998.
LIQUIDITY AND CAPITAL RESOURCES
Our leasing and manufacturing businesses are very capital intensive. We have
financed our working capital requirements through cash flows from operations,
proceeds from equity and debt financings and borrowings under our credit
facility.
Operating Activities. Our operations provided net cash flow of $19.2 million in
1999, $8.5 million in 1998 and $6.1 million in 1997. This increasing cash flow
resulted primarily from our higher net income and the impact of depreciation
expense and deferred income taxes. The growth of our business, however, has
required us to use more cash to support higher levels of accounts receivable and
inventory.
Investing Activities. Net cash used in investing activities was $55.7 million in
1999, $31.2 million in 1998 and $19.2 million in 1997. This increasing use of
cash resulted primarily from higher levels of capital expenditures for lease
fleet expansion and acquisitions. Capital expenditures for our lease fleet were
$30.4 million in 1999, $23.5 million in 1998 and $17.1 million in 1997. Capital
expenditures for property, plant and equipment were $4.7 million in 1999, $3.8
million in 1998 and $2.1 million in 1997. In addition, we spent $28.6 million
(including $8 million of mandatorily redeemable preferred stock) in 1999 and
$3.9 million in 1998 for acquisitions. No acquisitions were completed in 1997.
Financing Activities. Net cash provided by financing activities was $36.0
million in 1999, $22.8 million in 1998 and $13.4 million in 1997. During 1999,
net cash provided by financing activities was primarily from a public offering
of 2,965,000 shares of common stock. We received gross proceeds of approximately
$39.3 million from this offering. We also received approximately $878,000 from
the exercise of warrants to purchase shares of our common stock. We also
borrowed an additional $14.5 million under our credit facility. The net cash
provided by financing activities was used to expand our lease fleet, finance
acquisitions, and prepay our Senior Subordinated Notes. During 1998, net cash
provided by financing activities was primarily from $21.3 million of net
borrowings under our credit facility and $5.7 million of gross proceeds from the
exercise of warrants to purchase shares of our common stock. The majority of
warrants exercised were issued in connection with our initial public offering in
1994.
We entered into an Interest Rate Swap Agreement effective in September 1998,
under which Mobile Mini is designated as the fixed rate payer at an interest
rate of 5.5% per annum. Under the Swap Agreement, the Company has effectively
fixed, for a three year period, the interest rate payable on $30 million of our
revolving line of credit so that the rate is based upon a spread from 5.5%,
rather than a spread from the Eurodollar rate.
Since March 1996, our principal source of liquidity has been our credit
facility, which currently consists of a $120 million revolving line of credit
and a $6.0 million term loan. The interest rate under our credit facility is
determined quarterly, based on our ratio of funded debt to earnings before
interest, taxes, depreciation and amortization (EBITDA). During 1999, the
average interest rate under our credit facility was 6.9%. As of February 18,
2000 we had $74.4 million of outstanding borrowings under our credit facility,
and $33.5 million of additional borrowings were available.
The amount we can borrow under the revolving line of credit portion of our
credit facility is based upon the level of our inventories, accounts receivable
and the value of our lease fleet. The lease fleet is appraised at least annually
for purposes of the credit facility. Our obligations under the credit facility
are secured by a lien on substantially all of our assets, including all of our
portable storage units.
18
20
The credit facility includes a term loan due in March 2004. The term loan had an
outstanding principal balance of $5.8 million at December 31, 1999. We must make
principal and interest payments monthly on the term loan.
In October 1997, we issued $6.9 million of 12% Senior Subordinated Notes with
detachable redeemable warrants to purchase 172,500 shares of our common stock at
$5.00 per share. These notes were due November 1, 2002 but could be prepaid
beginning November 1, 1999 without a prepayment penalty. We redeemed the entire
principal balance outstanding on November 1, 1999. Because the notes were sold
with redeemable warrants, a portion of the sale price was allocated to the notes
and a portion to the redeemable warrants, based on their respective fair market
values. The resulting discount increased the effective interest rate on the
notes, and was amortized as interest expense over the life of the notes. In
connection with the early redemption of these notes, we recorded an
extraordinary charge of $424,000, net of our tax provision, in 1999.
We believe that our working capital, together with our cash flow from
operations, borrowing under our credit facility and other available funding
sources will be sufficient to fund our operations and controlled growth for the
next 12 months. We believe that in order to maintain historical growth rates we
will be required to obtain additional debt financing or raise additional equity
capital by issuing additional shares of our stock. However, we cannot be sure
that we can obtain the necessary debt or equity capital on acceptable terms.
SEASONALITY
During the past three years, our operation as a whole has not been very
seasonal. Demand for leases of our portable storage units is stronger from
September through December because retailers need to store more inventory for
the holiday season. Our retail customers usually return leased units to us early
in the following year. This has caused lower utilization rates for our lease
fleet and a marginal decrease in cash flow during the first quarters of the past
several years.
YEAR 2000 COMPLIANCE AND EXPENDITURES
Our program to address the Year 2000 issue consisted of the following phases:
inventory, assessment, correction, testing and implementation. As of December
31, 1999, all phases were completed. We did not experience any significant
disruption as a result of the Year 2000 issue. Our total costs to remedy the
Year 2000 issue were approximately $26,000.
We can provide no assurance that all supplier and customer Year 2000 compliance
plans were successfully completed. We are not aware of any problems with any of
our suppliers, customers or third party providers that would negatively impact
our operations or adversely affect our business.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
We seek to reduce earnings and cash flow volatility associated with changes in
interest rates through a financial arrangement intended to provide a hedge
against a portion of the risks associated with such volatility. We continue to
have exposure to such risks to the extent they are not hedged.
An interest rate swap agreement is the only instrument used by the Company to
manage interest rate fluctuations affecting the Company's variable rate debt.
The Company currently has one outstanding interest rate swap agreement covering
$30 million of our debt, under which the Company pays a fixed rate and receives
a variable interest rate. The following table sets forth the scheduled
maturities and the total fair value of the Company's debt portfolio:
19
21
Total Fair
At December 31, Total at Value at
----------------------------------------------------------------- December 31, December 31,
2000 2001 2002 2003 2004 Thereafter 1999 1999
---------------------------------------------------------------------------------------------
Liabilities
Fixed Rate (in 000's) $ 509 $ 225 $ 67 $ 91 $ -- -- $ 882 $ 857
Average interest rate 8.7%
Floating rate (in 000's) $ 1,217 $ 1,200 $ 1,200 $ 1,200 $ 72,571 -- $ 77,388 $ 77,388
Average interest rate 7.5%
Interest Rate Swaps
Variable to fixed (in 000's) $ 30,000 $ 30,000 $ 30,000
Average pay rate 5.5%
Average receive rate 1 mo LIBOR-BBA
The Company enters into derivative financial arrangements only to the extent
that it meets the objectives described above, and the Company does not engage in
such transactions for speculative purposes. The Company's credit facility
matures in 2004, including a one-year extension option. These variable rate
liabilities will continue to increase due to future growth until maturity.
See Note 3 - Line of Credit in the notes to financial statements incorporated
herein by reference for further description of the variable rate liability.
Management intends to renew or replace the line of credit with similar
arrangements or debt prior to maturity, on terms reasonably similar to their
existing terms. We, however, cannot be certain that such financing will be
available or on terms acceptable to us.
20
22
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
INDEX
Report of Independent Public Accountants F-2
Consolidated Balance Sheets - December 31, 1998 and 1999 F-3
Consolidated Statements of Operations - For the Years Ended
December 31, 1997, 1998 and 1999 F-4
Consolidated Statements of Stockholders' Equity - For the Years
Ended December 31, 1997, 1998 and 1999 F-5
Consolidated Statements of Cash Flows - For the Years Ended
December 31, 1997, 1998 and 1999 F-6
Notes to Consolidated Financial Statements - December 31, 1998 and 1999 F-7
Financial Statement Schedule
Valuation and Qualifying Accounts - For the Years Ended
December 31, 1997, 1998 and 1999 46
F-1
23
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Mobile Mini, Inc.:
We have audited the accompanying consolidated balance sheets of MOBILE MINI,
INC. (a Delaware corporation) and subsidiaries as of December 31, 1998 and 1999,
and the related consolidated statements of operations, stockholders' equity and
cash flows for each of the three years in the period ended December 31, 1999.
These financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements based
on our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Mobile Mini, Inc. and
subsidiaries as of December 31, 1998 and 1999, and the results of their
operations and their cash flows for each of the three years in the period ended
December 31, 1999, in conformity with accounting principles generally accepted
in the United States.
Our audits were made for the purpose of forming an opinion on the basic
financial statements taken as a whole. The schedule listed in the index of the
financial statements is presented for purposes of complying with the Securities
and Exchange Commission's rules and is not a required part of the basic
financial statements. This schedule has been subjected to the auditing
procedures applied in the audits of the basic financial statements and, in our
opinion, fairly states in all material respects the financial data required to
be set forth therein in relation to the basic financial statements taken as a
whole.
ARTHUR ANDERSEN LLP
Phoenix, Arizona,
January 31, 2000.
F-2
24
MOBILE MINI, INC.
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1998 AND 1999
ASSETS 1998 1999
----------------- -----------------
CASH AND CASH EQUIVALENTS $ 1,030,138 $ 547,124
RECEIVABLES, net of allowance for doubtful accounts of $1,085,000 and $1,621,000,
respectively 6,254,938 8,861,815
INVENTORIES 8,550,778 9,644,157
PORTABLE STORAGE UNIT LEASE FLEET, net of accumulated depreciation of
$2,584,000 and $4,054,000, respectively 76,589,831 121,277,355
PROPERTY, PLANT AND EQUIPMENT, net 20,262,738 23,245,287
DEPOSITS AND PREPAID EXPENSES 787,426 890,142
OTHER ASSETS, net 3,314,384 13,926,606
--------------- ---------------
TOTAL ASSETS $ 116,790,233 $ 178,392,486
=============== ===============
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES:
ACCOUNTS PAYABLE $ 2,953,833 $ 3,532,240
ACCRUED LIABILITIES 3,858,165 5,169,364
LINE OF CREDIT 57,183,576 71,638,064
NOTES PAYABLE 4,819,976 6,284,810
OBLIGATIONS UNDER CAPITAL LEASES 3,196,021 347,850
SUBORDINATED NOTES, net 6,700,038 --
DEFERRED INCOME TAXES 8,206,830 14,032,673
--------------- ---------------
TOTAL LIABILITIES 86,918,439 101,005,001
--------------- ---------------
COMMITMENTS AND CONTINGENCIES (NOTE 10)
STOCKHOLDERS' EQUITY:
Common stock; $0.01 par value, 17,000,000 shares authorized, 7,966,863 and
11,438,356 issued and outstanding at December 31, 1998 and 1999, respectively 79,669 114,383
Additional paid-in capital 22,054,927 61,032,336
Common stock to be issued, 85,468 shares 500,000 --
Retained earnings 7,237,198 16,240,766
--------------- ---------------
TOTAL STOCKHOLDERS' EQUITY 29,871,794 77,387,485
--------------- ---------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 116,790,233 $ 178,392,486
=============== ===============
The accompanying notes are an integral part of these
consolidated balance sheets.
F-3
25
MOBILE MINI, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1997, 1998 AND 1999
1997 1998 1999
---- ---- ----
REVENUES:
Leasing $ 24,870,141 $ 36,461,050 $ 53,302,300
Sales 20,527,477 15,623,088 12,820,357
Other 685,005 592,393 530,842
-------------- -------------- -------------
46,082,623 52,676,531 66,653,499
COSTS AND EXPENSES:
Cost of sales 14,546,347 10,729,988 8,505,609
Leasing, selling and general expenses 20,585,458 25,724,193 32,218,343
Depreciation and amortization 2,253,264 2,884,007 4,065,573
-------------- -------------- -------------
INCOME FROM OPERATIONS 8,697,554 13,338,343 21,863,974
OTHER INCOME (EXPENSE):
Interest income 4,628 31,274 47,135
Interest expense (5,034,856) (5,896,339) (6,161,876)
-------------- -------------- --------------
INCOME BEFORE PROVISION FOR INCOME TAXES AND EXTRAORDINARY ITEM 3,667,326 7,473,278 15,749,233
PROVISION FOR INCOME TAXES 1,466,930 2,989,311 6,299,694
-------------- -------------- -------------
INCOME BEFORE EXTRAORDINARY ITEM 2,200,396 4,483,967 9,449,539
EXTRAORDINARY ITEM, net of income tax benefit of $282,702 -- -- (424,053)
-------------- -------------- --------------
NET INCOME 2,200,396 4,483,967 9,025,486
PREFERRED STOCK DIVIDEND -- -- 21,918
-------------- -------------- -------------
NET INCOME AVAILABLE TO COMMON SHAREHOLDERS $ 2,200,396 $ 4,483,967 $ 9,003,568
============== ============== =============
EARNINGS PER SHARE:
BASIC:
Income before extraordinary item $ 0.33 $ 0.57 $ 0.93
Extraordinary item -- -- (0.04)
-------------- -------------- --------------
Net income $ 0.33 $ 0.57 $ 0.89
============== ============== =============
DILUTED:
Income before extraordinary item $ 0.32 $ 0.53 $ 0.89
Extraordinary item -- -- (0.04)
-------------- -------------- --------------
Net income $ 0.32 $ 0.53 $ 0.85
============== ============== =============
WEIGHTED AVERAGE NUMBER OF COMMON AND COMMON SHARE EQUIVALENTS OUTSTANDING:
BASIC 6,752,147 7,839,623 10,153,086
============== ============== =============
DILUTED 6,800,303 8,417,168 10,640,438
============== ============== =============
The accompanying notes are an integral
part of these consolidated statements.
F-4
26
MOBILE MINI, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1997, 1998 AND 1999
Common
Additional Stock
Preferred Common Paid-in To be Retained Stockholders'
Stock Stock Capital Issued Earnings Equity
------------ -------- ----------- --------- ----------- -------------
BALANCE, December 31, 1996 $ -- $ 67,393 $15,588,873 $ -- $ 552,835 $16,209,101
Issuance of common stock (Notes 6 and 11) -- 600 333,175 -- -- 333,775
Exercise of stock options -- 2 648 -- -- 650
Warrants issued (Note 11) -- -- 283,470 -- -- 283,470
Net income -- -- -- -- 2,200,396 2,200,396
---------- -------- ----------- --------- ----------- -----------
BALANCE, December 31, 1997 -- 67,995 16,206,166 -- 2,753,231 19,027,392
Issuance of common stock (Notes 6 and 11) -- 180 183,820 -- -- 184,000
Exercise of stock options -- 9 3,779 -- -- 3,788
Exercise of warrants -- 11,485 5,661,162 -- -- 5,672,647
Common stock to be issued, 85,468 shares -- -- -- 500,000 -- 500,000
Net income -- -- -- -- 4,483,967 4,483,967
---------- -------- ----------- --------- ----------- -----------
BALANCE, December 31, 1998 -- 79,669 22,054,927 500,000 7,237,198 29,871,794
Issuance of common stock (Notes 6 and 11) -- 29,650 36,513,398 -- -- 36,543,048
Exercise of stock options -- 2,583 1,088,757 -- -- 1,091,340
Exercise of warrants -- 1,626 876,109 -- -- 877,735
Issuance of 85,468 shares of common stock -- 855 499,145 (500,000) -- --
Preferred stock dividend (Preferred
stock issued and redeemed in 1999) -- -- -- -- (21,918) (21,918)
Net income -- -- -- -- 9,025,486 9,025,486
---------- -------- ----------- --------- ----------- -----------
BALANCE, December 31, 1999 $ -- $114,383 $61,032,336 $ -- $16,240,766 $77,387,485
========== ======== =========== ========= =========== ===========
The accompanying notes are an integral part of these consolidated statements.
F-5
27
MOBILE MINI, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1997, 1998 AND 1999
1997 1998 1999
------------- -------------- --------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $2,200,396 $4,483,967 $9,025,486
Adjustments to reconcile income to net cash provided by operating activities:
Extraordinary loss on early debt extinguishment, net -- -- 424,053
Provision for doubtful accounts receivable 1,104,863 983,526 1,346,054
Amortization of deferred loan costs 548,725 587,096 570,687
Amortization of warrant issuance discount 8,694 52,164 43,470
Depreciation and amortization 2,253,264 2,884,007 4,065,573
Loss (gain) on disposal of property, plant and equipment 56,247 (2,901) 68,744
Deferred income taxes 1,508,119 2,989,211 6,299,545
Changes in certain assets and liabilities, net of effect of businesses
acquired:
Increase in receivables (2,732,485) (937,114) (3,065,586)
Decrease (increase) in inventories 250,066 (3,802,462) (1,032,895)
(Increase) decrease in deposits and prepaid expenses (155,631) 188,559 312,100
(Decrease) increase in other assets 10,746 (1,826) 212,463
Increase in accounts payable 119,305 277,199 504,846
Increase in accrued liabilities 912,634 753,416 455,128
------------ ------------ ------------
NET CASH PROVIDED BY OPERATING ACTIVITIES 6,084,943 8,454,842 19,229,668
------------ ------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Cash paid for businesses acquired (Note 12) -- (3,944,446) (20,615,486)
Net purchases of portable storage unit lease fleet (17,078,799) (23,492,555) (30,407,183)
Net purchases of property, plant and equipment (2,140,205) (3,775,359) (4,682,561)
------------ ------------ ------------
NET CASH USED IN INVESTING ACTIVITIES (19,219,004) (31,212,360) (55,705,230)
------------ ------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net borrowings under lines of credit 9,477,069 21,300,472 14,454,488
Proceeds from issuance of notes payable 10,391,748 376,670 3,514,047
Deferred financing costs (727,434) (505,061) (660,214)
Principal payments on subordinated notes -- -- (6,900,000)
Principal payments on notes payable (4,632,298) (1,679,743) (2,049,213)
Principal payments on capital lease obligations (1,367,833) (2,386,321) (2,856,765)
Redemption of mandatorily redeemable preferred stock -- -- (8,000,000)
Exercise of warrants 260,820 5,672,647 877,735
Issuance of common stock 650 3,788 37,634,388
Preferred stock dividend -- -- (21,918)
------------ ------------ ------------
NET CASH PROVIDED BY FINANCING ACTIVITIES 13,402,722 22,782,452 35,992,548
------------ ------------ ------------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 268,661 24,934 (483,014)
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 736,543 1,005,204 1,030,138
------------ ------------ ------------
CASH AND CASH EQUIVALENTS AT END OF YEAR $1,005,204 $1,030,138 $547,124
============ ============ ============
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the year for interest $4,347,025 $5,479,214 $5,453,406
============ ============ ============
Cash paid during the year for income taxes $66,162 $75,045 $93,294
============ ============ ============
SUPPLEMENTAL DISCLOSURE OF NONCASH FINANCING ACTIVITIES:
In 1999, the Company issued $8 million of Mandatorily Redeemable Preferred
Stock as partial payment of the purchase price of the assets of National
Security Containers, LLC. The Company subsequently redeemed the entire $8
million of preferred stock in 1999. In 1998, the Company issued 85,468 shares
of the Company's common stock valued at $500,000 as partial payment of the
purchase price for Nevada Storage Containers (Las Vegas, Nevada) and issued
18,022 shares of the Company's common stock valued at $184,000 as partial
payment of the purchase price of Aspen Instant Storage (Oklahoma City,
Oklahoma). In 1997, the Company issued 60,000 shares of the Company's common
stock and 15,000 warrants to purchase the Company's common stock with an
aggregate value of $357,675 as payment to the underwriter for services
performed in connection with the $6.9 million subordinated debt offering and
related bridge financing (Note 6). Capital lease obligations of $210,740
during 1998, were incurred in connection with lease agreements for equipment.
The Company did not enter into any capital lease obligations during 1997 or
1999.
The accompanying notes are an integral part of these consolidated statements.
F-6
28
MOBILE MINI, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1998 AND 1999
(1) THE COMPANY, ITS OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES:
Organization and Special Considerations
Mobile Mini, Inc., a Delaware corporation, is a leading provider of portable
storage leasing solutions. The Company designs and manufactures portable steel
storage units and acquires and refurbishes used ocean-going shipping containers
for lease primarily in Arizona, California, Texas, Nevada, Oklahoma, New Mexico
and Colorado. In addition to its leasing operations, the Company sells new and
used portable storage units and provides other ancillary services.
The Company has experienced rapid growth during the last several years with
lease revenues increasing at a 43.9% compounded rate during the last three
years. This growth is related to internal growth of the Company's portable
storage unit lease fleet at existing locations, as well as acquisitions.
The Company believes that its current capitalization, together with borrowings
available under the Credit Facility, is sufficient to permit continued growth.
However, should the Company expand the rate of geographic expansion, the Company
will be required to secure additional financing through additional borrowings,
debt or equity offerings, or a combination of these sources. The Company
believes that such financing will be available; however, there is no assurance
that any such financings will be available or on terms acceptable to the
Company.
The Company's ability to obtain used containers for its lease fleet is subject
in large part to the availability of these containers in the market. This is in
part subject to international trade issues and the demand for containers in the
ocean cargo shipping business. Should there be a shortage in supply of used
containers, the Company could supplement its lease fleet with new portable
storage units manufactured by the Company. However, should there be an
overabundance of these used containers available, it is likely that prices would
fall. This could result in a reduction in the lease rates the Company could
obtain from its portable storage unit leasing operations. It could also cause
the appraised orderly liquidation value of the portable storage units in the
lease fleet to decline. In such event, the Company's ability to finance its
business through the Credit Facility would be affected as the maximum borrowing
limit under that facility is based upon the appraised orderly liquidation value
of the Company's portable storage unit lease fleet. In addition, under the
Credit Facility, the Company is required to comply with certain covenants and
restrictions as more fully discussed in Note 3. If the Company fails to comply
with these covenants and restrictions, the lender has the right to refuse to
lend the Company additional funds and may require early payment of amounts owed
to the lender. If this happens, it would materially impact the Company's growth
and ability to fund ongoing operations. Furthermore, because a substantial
portion of the amount borrowed under the Credit Facility bears interest at a
variable rate, a significant increase in interest rates could have a materially
adverse affect on the results of operations and financial condition of the
Company.
Principles of Consolidation
The consolidated financial statements include the accounts of Mobile Mini, Inc.
and its wholly owned subsidiary, Mobile Mini I, Inc. (collectively the
"Company"). All material intercompany transactions have been eliminated.
Revenue Recognition
The Company recognizes revenues from sales of containers upon delivery. Revenue
generated under portable storage unit leases is recognized monthly when the
customer is invoiced.
F-7
29
Revenue under certain contracts for the manufacture of telecommunication
shelters is recognized using the percentage-of-completion method primarily based
on contract costs incurred to date compared with total estimated contract costs.
Provision for estimated losses on uncompleted contracts are made in the period
in which such losses are determined. Costs and estimated earnings in excess of
billings on uncompleted contracts is approximately $73,000 and $12,000 at
December 31, 1998 and 1999 respectively, and are included in receivables in the
accompanying consolidated balance sheets.
Revenue from portable storage unit delivery and hauling is recognized as these
services are provided.
Concentration of Credit Risk
Financial instruments which potentially expose the Company to concentrations of
credit risk, as defined by Statement of Financial Accounting Standards (SFAS)
No. 105, consist primarily of receivables. Concentration of credit risk with
respect to receivables are limited due to the large number of customers spread
over a large geographic area in many industry segments. The Company's
receivables related to its sales operations are generally secured by the product
sold to the customer. The Company's receivables related to its leasing
operations are primarily small month-to-month amounts. The Company has the right
to repossess the portable storage unit, including any customer goods, for
non-payment.
The Company's leasing customers by major category are presented below:
1998 1999
----------- -----------
Retail 40% 34%
Construction 31% 33%
Consumers 15% 12%
Commercial 7% 14%
Government and Institutions 6% 6%
Other 1% 1%
Cash and Cash Equivalents
Cash and cash equivalents at December 31, 1998 includes $415,800 (including
earned interest) in an interest reserve account as required under the Indenture
(see Note 6) in connection with the Company's 12% Senior Subordinated Notes.
Those Notes were prepaid in November 1999, and consequently there was no
corresponding amount at December 31, 1999.
Inventories
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 at December 31 consist of
the following:
1998 1999
---------------- ---------------
Raw materials and supplies $6,480,553 $7,453,662
Work-in-process 801,338 880,885
Finished portable storage units 1,268,887 1,309,610
---------- ----------
$8,550,778 $9,644,157
========== ==========
Property, Plant and Equipment
Property, plant and equipment are stated at cost, net of accumulated
depreciation. Depreciation is provided using the straight-line method over the
assets' estimated useful lives. Salvage values are determined when the property
is constructed or acquired and range up to 25%, depending on the nature of the
asset. In the opinion of management, estimated salvage values do not cause
F-8
30
carrying values to exceed net realizable value. Normal repairs and maintenance
to property, plant and equipment are expensed as incurred.
Property, plant and equipment at December 31 consist of the following:
Estimated Useful Life 1998 1999
In Years ---------------- ---------------
Land $777,668 $777,668
Vehicles and equipment 5 to 20 15,963,099 19,397,810
Buildings and improvements 30 7,211,833 8,228,124
Office fixtures and equipment 5 to 20 3,404,320 3,964,242
----------- -----------
27,356,920 32,367,844
Less-Accumulated depreciation (7,094,182) (9,122,557)
----------- -----------
$20,262,738 $23,245,287
=========== ===========
Property, plant and equipment includes assets acquired under capital leases of
approximately $818,000 and $767,000, and accumulated amortization of
approximately $165,000 and $190,000, at December 31, 1998 and 1999,
respectively.
At December 31, 1998 and 1999, a portion of property, plant and equipment was
pledged as collateral for notes payable obligations and obligations under
capital leases (see Notes 3, 4 and 5).
Accrued Liabilities
Included in accrued liabilities in the accompanying consolidated balance sheets
are customer deposits and prepayments totaling approximately $645,000 and
$880,000 for the years ended December 31, 1998 and 1999, respectively.
Earnings Per Share
The Company has adopted SFAS No. 128, Earnings per Share. 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.
F-9
31
Below are the required disclosures pursuant to SFAS No. 128 for the years ended
December 31, 1997, 1998 and 1999:
1997 1998 1999
--------------- ------------------ ------------------
Basic earnings per share:
Net income $2,200,396 $4,483,967 $ 9,003,568
========== ========== ===========
Weighted average common shares 6,752,147 7,839,623 10,153,086
---------- ---------- -----------
Basic earnings per share $0.33 $0.57 $0.89
========== ========== ===========
Diluted earnings per share:
Net income $2,200,396 $4,483,967 $ 9,003,568
========== ========== ===========
Weighted average common shares 6,752,147 7,839,623 10,153,086
Options and warrants assumed converted 48,156 577,545 487,352
---------- ---------- -----------
Weighted average common shares plus
assumed conversion 6,800,303 8,417,168 10,640,438
---------- ---------- -----------
Diluted earnings per share $0.32 $0.53 $0.85
========== ========== ===========
Long-Lived Assets
The Company periodically evaluated the carrying value of long-lived assets in
accordance with SFAS No. 121 Accounting for the Impairment of Long-Lived Assets
and for Long-Lived Assets to be Disposed of. Under SFAS No. 121, long-lived
assets and certain identifiable intangible assets to be held and used in
operations are reviewed for impairment whenever events or circumstances indicate
that the carrying amount of an asset may not be fully recoverable. An impairment
loss is recognized if the sum of the expected long-term undiscounted cash flows
is less than the carrying amount of the long-lived assets being evaluated.
Fair Value of Financial Instruments
The estimated fair value of financial instruments has been determined by the
Company using available market information and valuation methodologies.
Considerable judgment is required in estimating fair values. Accordingly, the
estimates may not be indicative of the amounts the Company could realize in a
current market exchange.
The carrying amounts of cash and cash equivalents, receivables and accounts
payable approximate fair values. The carrying amounts of the Company's
borrowings under the revolving line of credit and certain variable rate notes
payable instruments approximate fair value. The fair value of the Company's
variable rate notes payable and revolving line of credit is estimated using
discounted cash flow analyses, based on the Company's current incremental
borrowing rates for similar types of borrowing arrangements. Based on the
borrowing rates currently available to the Company for bank loans with similar
terms and average maturities, the fair value of fixed rate notes payable at
December 31, 1999 is approximately $857,000.
Deferred Financing Costs
Included in other assets are deferred financing costs of approximately
$2,032,000 and $1,590,000 at December 31, 1998 and 1999, respectively. These
costs of obtaining long-term financing are being amortized over the term of the
related debt, using the straight-line method. The difference between amortizing
the deferred financing costs using the straight-line method and amortizing such
costs using the effective interest method is not material.
Use of Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities
F-10
32
at the date of the financial statements and the reported amounts of revenue and
expenses during the reporting period. Actual results could differ from those
estimates.
Impact of Recently Issued Accounting Standards
In June 1998, SFAS No. 133, Accounting for Derivative Instruments and Hedging
Activities, was issued. This statement establishes accounting and reporting
standards requiring that every derivative instrument (including certain
derivative instruments embedded in other contracts) be recorded in the balance
sheet as either an asset or liability measured at its fair value. The statement
requires that changes in the fair value of the derivative be recognized
currently in earnings unless specific hedge accounting criteria are met. If
specific hedge accounting criteria are met, changes in the fair value of
derivatives will either be offset against the change in the fair value of the
hedged assets, liabilities, or firm commitments through earnings, or recognized
in other comprehensive income until the hedged item is recognized in earnings.
The ineffective portion of a derivative's change in fair value will be
immediately recognized in earnings. SAFS No. 133, as amended by SFAS No. 137, is
effective for fiscal years beginning after June 15, 2000. The Company expects to
adopt SFAS No. 133 effective January 1, 2001. Management believes the impact of
adopting SFAS No. 133 will not have any material impact on the Company's
financial statements.
(2) PORTABLE STORAGE UNIT LEASE FLEET:
The Company has a portable storage unit lease fleet consisting of refurbished or
manufactured containers that are leased to customers under short-term operating
lease agreements with varying terms. Depreciation is provided using the
straight-line method over the portable storage units estimated useful lives of
20 years with salvage values estimated at 70% of cost. In the opinion of
management, estimated salvage values do not cause carrying values to exceed net
realizable value. Portable storage units included in the lease fleet with an
original loan value of approximately $7.0 million at December 31, 1998 and
$101,000 at December 31, 1999, have been pledged as collateral for notes payable
and obligations under capital leases. The balance of the portable storage units
are pledged as collateral under the Credit Facility (see Notes 3, 4 and 5).
Normal repairs and maintenance to the portable storage units are expensed as
incurred.
Portable storage unit lease fleet includes assets acquired under capital leases
of approximately $6,435,000 and $110,000, and accumulated depreciation of
approximately $361,000 and $7,000 at December 31, 1998 and 1999, respectively.
(3) LINE OF CREDIT:
In March 1996, the Company entered into a Credit Facility. In December 1999, the
Company entered into an Amended and Restated Credit Facility. Under the terms of
the current Credit Facility, the Lenders have provided the Company with a $120
million revolving line of credit and a $6 million term loan. Borrowings under
the Credit Facility are secured by substantially all of the Company's assets.
Available borrowings under the revolving line of credit are based upon the level
of the Company's inventories, receivables and portable storage unit lease fleet.
The portable storage unit lease fleet is appraised at least annually, and up to
90% of the lesser of cost or appraised orderly liquidation value, as defined,
may be included in the borrowing base. The interest rate spread on the revolving
line of credit is fixed quarterly based on the Company's ratio of funded debt to
earnings before interest, taxes, depreciation and amortization. Borrowings are,
at the Company's option, at either a spread from the prime or the Eurodollar
rate. At December 31, 1999, the prime rate was 8.5% and the Eurodollar rate
ranged from 6.1% to 6.5%. The interest rate charged under the revolving line of
credit at December 31, 1999 was 8.5% for prime rate borrowings and ranged from
7.4% to 7.8% for Eurodollar borrowings. The revolving line of credit expires in
March 2004, including a one-year extension option.
The revolving line of credit balance outstanding was approximately $57.2 million
and $71.6 million at December 31, 1998 and 1999, respectively. The amount
available for borrowing was approximately $35.8 million at December 31, 1999.
During 1998 and 1999, the weighted average interest rate under the line of
credit was 7.67% and 6.9%, respectively, and the average balance outstanding
during 1998 and 1999 was approximately $45.1 million and $61.7 million,
respectively.
F-11
33
The Company entered into an Interest Rate Swap Agreement, (the Swap Agreement)
effective in September 1998, under which the Company is designated as the fixed
rate payer at an interest rate of 5.5% per annum. Under the Swap Agreement, the
Company has effectively fixed, for a three year period, the interest rate
payable on $30 million of its revolving line of credit so that it is based upon
a spread from 5.5%, rather than a spread from the Eurodollar rate. The Company
accounts for this agreement as a hedge of an existing liability in conformance
with SFAS No. 80, Accounting for Futures Contracts. Interest expense is accrued
using the fixed rate identified in the Agreement. The Company's objective in
entering into this transaction was to reduce the risk of interest rate
fluctuations in the future. As the Company intends to continue to operate with
leverage, management believed it was prudent to lock in a fixed interest rate at
a time when fixed rates had significantly decreased.
The Credit Facility contains several covenants including a minimum consolidated
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 Facility contains limits on capital
expenditures and the incurrence of additional debt, as well as prohibiting the
payment of cash dividends.
(4) NOTES PAYABLE:
Notes payable at December 31 consist of the following:
1998 1999
--------------- -----------------
Notes payable to BT Commercial Corporation, interest ranging from $3,687,500 $5,750,000
1.50% over Eurodollar rate (6.125% to 6.1875% at December 31, 1999)
to 0.25% over prime (8.5% at December 31, 1999), fixed monthly
installments of principal plus interest, due March 2004, secured by
various classes of the Company's assets
Notes payable, interest ranging from 10.5% to 11.49%, monthly 591,186 329,501
installments of principal and interest, due April 2000 through May
2002, secured by equipment and vehicles
Notes payable, interest ranged from 11.49% to 12.63%, monthly 385,418 --
installments of principal and interest, were due July 2000 through
January 2001, secured by portable storage units and paid in full
during 2000.
Notes payable to financial institution, interest rate of 6.33%, 155,872 205,309
payable in fixed monthly installments due April 2000, unsecured
---------- ----------
$4,819,976 $6,284,810
========== ==========
F-12
34
Future maturities under notes payable are as follows:
Years ending December 31,
2000 $ 1,577,132
2001 1,341,719
2002 1,232,624
2003 1,200,000
2004 933,335
---------------
$ 6,284,810
===============
(5) OBLIGATIONS UNDER CAPITAL LEASES:
The Company has leased certain portable storage units and equipment under
capital leases expiring through 2003 with various leasing companies. The lease
agreements provide the Company with a purchase option at the end of the lease
term based on an agreed upon percentage of the original cost of the portable
storage units. These leases have been capitalized using interest rates ranging
from approximately 6% to 14%. The leases are secured by the portable storage
units and equipment under lease.
Future payments of obligations under capital leases:
Years ending December 31,
2000 $ 170,905
2001 95,254
2002 40,836
2003 84,920
-----------
Total payments 391,915
Less: Amounts representing interest (44,065)
-----------
$ 347,850
===========
Gains from sale-leaseback transactions have been deferred and are being
amortized over the estimated useful lives of the related assets. Unamortized
gains at December 31, 1998 and 1999, approximated $254,000 and $237,000,
respectively, and are reflected as a reduction in the portable storage unit
lease fleet in the accompanying consolidated financial statements.
(6) EQUITY AND DEBT ISSUANCES:
In October 1997, the Company issued $6.9 million of 12% Senior Subordinated
Notes (the Notes) with a scheduled maturity date of November 1, 2002 and could
be redeemed by the Company at par on or after November 1, 1999. These Notes were
unsecured obligations of the Company. The Company redeemed the entire $6.9
million principal amount outstanding plus accrued interest on November 1, 1999.
The Notes were issued as part of a unit with Redeemable Warrants to purchase
172,500 shares of the Company's common stock at $5.00 per share. Additionally,
the Company issued warrants to purchase 15,000 shares of common stock to the
underwriters. The Company was required to maintain an interest reserve account
and to maintain in the reserve account, while any of the Notes were outstanding,
an amount equal to six months interest on the Notes based on the principal
amount outstanding. At December 31, 1998, the outstanding balance of the Notes
was $6.7 million, net of the remaining unamortized discount of approximately
$200,000. Because the Notes were offered as part of a unit with Redeemable
Warrants, a portion of the original offering price for a unit was allocated to
the Notes and a portion to the Redeemable Warrants based on their respective
fair market values. The resulting discount increased the effective interest rate
of the Notes and was being amortized to interest expense over the life of the
Notes. In conjunction with the redemption of the Notes, the Company recorded an
extraordinary charge for the remainder of the discount and certain unamortized
deferred loan charges.
F-13
35
In May, 1999, the Company completed a public offering of 3.1 million shares of
its common stock at $13.25 per share. Of the shares sold, 2.5 million shares
were sold by the Company and 600,000 shares were sold by selling shareholders.
The Company received gross proceeds of $33.1 million. Additionally, the
underwriters exercised their overallotment option to purchase an additional
465,000 shares of common stock at the public offering price, resulting in
additional gross proceeds to the Company of approximately $6.2 million.
(7) INCOME TAXES:
The Company accounts for income taxes in accordance with SFAS No. 109,
Accounting for Income Taxes. SFAS No. 109 requires the use of an asset and
liability approach in accounting for income taxes. Deferred tax assets and
liabilities are recorded based on the differences between the financial
statement and tax bases of assets and liabilities at the tax rates in effect
when these differences are expected to reverse.
The provision for income taxes at December 31, 1997, 1998 and 1999 consisted of
the following:
1997 1998 1999
-------------- -------------- ---------------
Current $ -- $ -- $ --
Deferred 1,467,000 2,989,000 6,300,000
--------- --------- ---------
Total $1,467,000 $2,989,000 $6,300,000
========== ========== ==========
The components of the net deferred tax liability at December 31, are as follows:
1998 1999
------------------ ------------------
Deferred Tax Assets (Liabilities):
Net operating loss carryforward $ 8,303,000 $ 9,728,000
Allowance for doubtful accounts 434,000 648,000
Alternative minimum tax credit 211,000 211,000
Other 307,000 715,000
Accelerated tax depreciation (17,496,000) (25,432,000)
Deferred (gain) expense on sale-leaseback transactions 34,000 97,000
------------ ------------
Net deferred tax liability $ (8,207,000) $(14,033,000)
============ ============
A reconciliation of the federal statutory rate to the Company's effective tax
rate for the years ended December 31 are as follows:
1997 1998 1999
---- ---- ----
Statutory federal rate 34% 34% 34%
State taxes, net of federal benefit 6 6 6
Other 0 0 0
------ ------ ------
40% 40% 40%
====== ====== ======
At December 31, 1999, the Company had a federal net operating loss carryover of
approximately $24,320,000 which expires if unused in years 2008 to 2019. At
December 31, 1999, the Company had an Arizona net operating loss carryover of
approximately $11,702,000 which expires if unused in years 2000 to 2004. At
December 31, 1999, the Company has other insignificant net operating loss
carryovers in the various states in which it operates.
As a result of stock ownership changes during the years presented, it is
possible that the Company has undergone one or more changes in ownership which
can limit the amount of net operating loss currently available as a deduction.
Such limitation could
F-14
36
result in the Company being required to pay tax currently because only a portion
of the net operating loss is available. Management believes that it will fully
realize its net operating loss carryforward and that a valuation reserve was not
necessary at December 31, 1999.
(8) TRANSACTIONS WITH RELATED PARTIES:
The Company leases a portion of the property comprising its Phoenix location and
the property comprising its Tucson location from Richard E. Bunger's five
children. Mr. Bunger is an executive officer, director and founder of the
Company. Annual base payments under these leases total approximately $66,000
with an annual adjustment based on the Consumer Price Index. The term of each of
these leases will expire on December 31, 2003. Additionally, the Company leases
its Rialto, California facility from Mobile Mini Systems, Inc., a corporation,
wholly owned by Mr. Bunger, for total annual base payments of $204,000, with
annual adjustments based on the Consumer Price Index. The Rialto lease is for a
term of 15 years, expiring on December 31, 2011. Management believes the rental
rates reflect the fair market value of these properties.
The Company obtains services throughout the year from Skilquest, Inc., a company
engaged in sales and management support programs. Skilquest, Inc. is owned by
Carolyn Clawson, the daughter of Mr. Richard E. Bunger and sister of Steven G.
Bunger. The Company made aggregate payments of approximately $69,000 and $85,000
to Skilquest, Inc. in 1998 and 1999, respectively, which the Company believes
represented the fair market value for the services performed.
The Company acquired 20 trucks from Richard E. Bunger in October 1998. The
purchase price was $256,000, which the Company believes represented the fair
market value for these assets.
During 1999, Mr. Bunger refurbished certain personally owned equipment at the
Company's facility and reimbursed the Company approximately $31,000 for labor
and material used. He had an additional $32,000 of work in process that the
Company will be reimbursed upon completion. The Company believes this amount
represented the fair market value for the services performed.
Mr. Bunger and the Company have entered into an agreement, dated December 30,
1999, whereby certain personally owned equipment of Mr. Bunger's, valued at
approximately $36,000, would be exchanged for certain other equipment the
Company owns which is valued at the same approximate market value. Part of this
exchange includes the Company owned vehicle which had been provided to Mr.
Bunger.
All ongoing and future transactions with affiliates will be on terms no less
favorable than could be obtained from unaffiliated parties and will be approved
by a majority of the independent and disinterested directors.
(9) BENEFIT PLANS:
STOCK OPTION PLANS
In August 1994, the Company's board of directors adopted the Mobile Mini, Inc.
1994 Stock Option Plan ("the Plan"). Under the Plan, as amended in 1998, options
to purchase a maximum of 1,200,000 shares of the Company's common stock may be
granted. In August 1999, the Board of Directors approved the adoption and
implementation of the Mobile Mini, Inc. 1999 Stock Option Plan, under which
500,000 shares of Mobile Mini's common stock are reserved for issuance upon the
exercise of options which may be granted under this plan. The 1999 Plan was
approved by the stockholders at the Company's annual meeting in November 1999.
Under the terms of the plans, both incentive stock options ("ISOs"), which are
intended to meet the requirements of Section 422 of the Internal Revenue Code,
and non-qualified stock options may be granted. ISOs may be granted to the
officers and key personnel of the Company. Non-qualified stock options may be
granted to the Company's directors and key personnel, and to providers of
various services to the Company. The purposes of the plans are to attract and
retain the best available personnel for positions of substantial responsibility
and to provide incentives to, and to encourage ownership of our stock by, key
management and other employees. The board of directors believes that stock
options are important to attract and to encourage the continued employment and
service of officers and other employees by facilitating their purchase of a
stock interest in Mobile Mini.
F-15
37
The option exercise price for all options granted under the plans may not be
less than 100% of the fair market value of our common stock on the date of grant
of the option (or 110% in the case of an incentive stock option granted to an
optionee beneficially owning more than 10% of the outstanding common stock). The
maximum option term is ten years (or five years in the case of an incentive
stock option granted to an optionee beneficially owning more than 10% of the
outstanding common stock).
Payment for shares purchased under the plans may be made either in cash or, if
permitted by the particular option agreement, by exchanging shares of common
stock with a fair market value equal to the total option exercise price plus
cash for any difference. Options may, if permitted by the particular option
agreement, be exercised by directing that certificates for the shares purchased
be delivered to a licensed broker as agent for the optionee, provided that the
broker tenders to Mobile Mini cash or cash equivalents equal to the option
exercise price.
The plans are administered by the compensation committee, which is comprised of
our outside directors. They determine whether options will be granted, whether
options will be ISOs or non-qualified options, which officers, key personnel and
service providers will be granted options, the vesting schedule for options and
the number of options to be granted. Each option granted must expire no more
than 10 years from the date it is granted.
The board of directors may amend the plans (or either plan) at any time, except
that approval of the Company's shareholders is required for any amendment that
increases the aggregate number of shares which may be issued pursuant to a plan,
changes the class of persons eligible to receive options, modifies the period
within which options may be granted, modifies the period within which options
may be exercised or the terms upon which options may be exercised, or increases
the material benefits accruing to the participants under the plan. The board of
directors may terminate or suspend the plans at any time. Unless previously
terminated, the 1994 Plan will terminate in November 2003 and the 1999 Plan will
terminate in August, 2009. Any option granted under a plan will continue until
the option expiration date, notwithstanding earlier termination of the plan
under which the option was granted.
The Company accounts for its stock-based compensation plans under APB No. 25,
under which no compensation expense has been recognized in the accompanying
financial statements for stock-based employee awards. All stock options have
been granted with an exercise price equal to or greater than the fair value of
the Company's common stock on the date of grant. The Company adopted SFAS No.
123 for disclosure purposes in 1996. For purposes of SFAS No. 123, the fair
value of each option granted has been estimated at the date of the grant using
the Black-Scholes option pricing model using the following assumptions:
1997 1998 1999
------------------- ------------------- ------------------
Risk free interest rates range 6.0 to 6.6% 5.27 to 5.49% 5.14 to 6.19%
Expected holding period 4.0 years 4.0 years 4.0 years
Dividend rate 0.0% 0.0% 0.0%
Expected volatility 55.4% 53.5% 50.7%
Under these assumptions, the fair value of the stock options granted was
$190,570, $329,774 and $667,586 for 1997, 1998 and 1999, respectively. These
amounts would be amortized on the straight-line basis as compensation expense,
over the average holding period of the options. If the Company had accounted for
stock options consistent with SFAS No. 123, utilizing the assumptions detailed
above, the Company's net income and earnings per share would have been reported
as follows at December 31:
F-16
38
1997 1998 1999
------------------- ------------------- ------------------
Net income
As reported $2,200,396 $4,483,967 $9,003,568
Pro forma 2,086,054 4,286,102 8,603,016
Basic EPS:
As reported $0.33 $0.57 $0.89
Pro forma 0.31 0.55 0.85
Diluted EPS:
As reported $0.32 $0.53 $0.85
Pro forma 0.31 0.51 0.81
The effect of applying SFAS No. 123 for providing pro forma disclosures is not
likely to be representative of the effect on reported net income or earnings per
share for future years, because options vest over several years, additional
stock options are generally awarded in each year, and SFAS No. 123 has not been
applied to options granted prior to January 1, 1995.
The following summarizes the activities under the Company's stock option plans
for the years ended December 31, 1997, 1998 and 1999:
1997 1998 1999
--------------------------- --------------------------- ----------------------------
Weighted Weighted Weighted
Number of Average Number of Average Number of Average
Shares Exercise Price Shares Exercise Price Shares Exercise Price
-------- -------------- --------- -------------- --------- --------------
Options outstanding, beginning of
year 347,000 $3.89 552,000 $3.80 756,150 $ 4.66
Granted 206,500 3.64 212,750 6.87 622,250 16.53
Canceled/Expired (1,300) 3.25 (7,700) 4.56 (14,100) 7.39
Exercised (200) 3.25 (900) 4.21 (258,250) 4.25
------- ------- ---------
Options outstanding, end of year 552,000 $3.80 756,150 $4.66 1,106,050 $11.39
------- ------- ---------
Options exercisable, end of year 247,050 $3.91 393,525 $4.22 309,425 $ 5.97
------- ------- -------
Options available for grant, end of
year 197,800 442,750 334,600
======= ======= =======
Weighted average fair value of
options granted $1.75 $3.23 $ 8.07
===== ===== ======
F-17
39
Options outstanding and exercisable by price range as of December 31, 1999 are
as follows:
Options Outstanding Options Exercisable
---------------------------------------------- --------------------------
Weighted
Average Weighted Weighted
Remaining Average Average
Range of Options Contractual Exercise Options Exercise
Exercise Prices Outstanding Life Price Exercisable Price
--------------- ----------- ---- ----- ----------- -----
$3.120 - $4.810 299,900 6.22 $3.662 188,700 $3.673
$6.125 - $10.125 189,700 8.19 $6.804 77,750 $7.074
$11.875 - $17.656 524,950 9.69 $15.771 33,600 $11.875
20.875 - $22.000 91,500 9.79 $21.152 9,375 $22.000
401(k) PLAN
In 1995, the Company established a contributory retirement plan (the 401(k)
Plan) covering eligible employees with at least one year of service. The 401(k)
Plan is designed to provide tax-deferred retirement benefits to the Company's
employees in accordance with the provisions of Section 401(k) of the Internal
Revenue Code.
The 401(k) Plan provides that each participant may annually contribute 2% to 15%
of his or her salary, not to exceed the statutory limit. The Company may make a
qualified non-elective contribution in an amount as determined by the Company.
Under the terms of the 401(k) Plan, the Company may also make discretionary
profit sharing contributions. Profit sharing contributions are allocated among
participants based on their annual compensation. Each participant has the right
to direct the investment of their funds among certain named plans. In 1998 and
1999, the Company contributed 10% of the employee contributions up to a maximum
of $500 per employee.
(10) COMMITMENTS AND CONTINGENCIES:
As discussed more fully in Note 8, the Company is obligated under noncancellable
operating leases with related parties. The Company also leases its corporate
offices and other properties, as well as operating equipment from third parties
under noncancellable operating leases. Rent expense under these agreements was
approximately $932,000, $1,413,000 and $1,827,000 for the years ended December
31, 1997, 1998 and 1999, respectively. Total future commitments under all
noncancellable agreements for the years ended December 31, are approximately as
follows:
2000 $ 2,350,000
2001 2,453,000
2002 2,007,000
2003 1,847,000
2004 1,392,000
Thereafter 4,286,000
-------------
$ 14,335,000
=============
The Company is involved in certain legal proceedings arising in the normal
course of business. In the opinion of management, the Company's potential
exposure under the pending proceedings is adequately provided for in the
accompanying financial statements and any adverse outcome will not have a
material impact on the Company's results of operations or its financial
condition.
F-18
40
(11) STOCKHOLDERS' EQUITY:
REDEEMABLE WARRANTS
Redeemable Warrants to purchase 187,500 shares of the Company's common stock at
$5.00 per share (subject to adjustment as described below) were issued in
connection with the issuance in November 1997 of the Senior Subordinated Notes
(Note 6). A portion of the original offering price was allocated to the Notes
and the Redeemable Warrants based on their relative fair values. The Redeemable
Warrants first became exercisable on March 1, 1998. The expiration date of the
Redeemable Warrants is November 1, 2002. After October 13, 1999, the Company has
the right to redeem the Redeemable Warrants at any time after the date that the
closing price of the common stock has equaled or exceeded $8.75 per share of a
period of 20 consecutive trading days. The redemption price is $0.05 per
Redeemable Warrant.
The number of shares of common stock for which a Redeemable Warrant is
exercisable and the purchase price thereof are subject to adjustment from time
to time upon the occurrence of certain events, including certain dividends and
distributions and issuances of shares of common stock at a price below the
market price. A Redeemable Warrant does not entitle the holder thereof to
receive any dividends paid on common stock nor does a holder of Redeemable
Warrants, as such, have any rights of a stockholder of the Company. As of
December 31, 1999, 66,230 of the Redeemable Warrants had been exercised for an
equal number of shares of the Company's common stock, with proceeds to the
Company of approximately $331,000.
(12) ACQUISITIONS
The Company acquired the assets of five companies during the year ended December
31, 1999. The acquisitions were accounted for as purchases in accordance with
Accounting Principals Boards (APB) Opinion No. 16, and accordingly, the
purchased assets were recorded at their estimated fair values at the date of
acquisition. The accompanying consolidated financial statements include the
operations of the acquired companies from their respective dates of acquisition.
The aggregate purchase price of the operations acquired consist of:
Cash $ 20,615,000
Mandatorily Redeemable Preferred Stock 8,000,000
Other acquisition costs 750,000
---------------
Total $ 29,365,000
===============
The fair value of the assets purchased has been allocated as follows:
Receivables $ 887,000
Tangible assets 18,320,000
Deposits, prepaid expenses and other assets 397,000
Goodwill 11,355,000
Assumed liabilities (1,594,000)
---------------
Total $ 29,365,000
===============
Goodwill is amortized using the straight-line method over 25 years from the date
of the acquisition. The Company did not make any acquisitions in 1997. Included
in other assets is $1,210,000 and $12,227,000 of goodwill, net of accumulated
amortization of $36,000 and $374,000 at December 31, 1998 and 1999 respectively.
In accordance with Rule 10-01 of Regulation S-X, summary pro forma data is
required to be presented for material business combinations, accounted for as a
purchase according to APB 16, that have occurred in the current year. The
following unaudited pro forma combined financial information for the years ended
December 31, 1998 and 1999 gives effect to the NSC acquisition as if it
F-19
41
had been consummated January 1 of each respective year. This unaudited pro forma
combined financial information does not purport to project what the Company's
actual results of operations would have been for the current period or for any
future period.
Year Ended Year Ended
December 31, 1998 December 31, 1999
Pro Forma Pro Forma
Historical Combined Historical Combined
-------------- -------------- -------------- --------------
Revenue $ 52,676,531 $ 59,872,992 $ 66,653,499 $ 69,628,636
Net income available to common
shareholders $ 4,483,967 $ 4,271,647 $ 9,003,568 $ 8,799,368
Earnings per share - basic $ 0.57 $ 0.54 $ 0.89 $ 0.87
Earnings per share - diluted $ 0.53 $ 0.51 $ 0.85 $ 0.83
Pro Forma adjustments include adjustments to:
- Amortize the non-competition agreement on a straight line basis
over 5 years.
- Increase depreciation for the increase in the containers and
decrease in the vehicles and equipment carrying value to fair
value.
- Reflect the amortization of goodwill recorded in connection with
the acquisition, calculated based on a 25 year life.
- Eliminate the predecessor's interest expense related to debt not
assumed, and record interest expense on debt issued or assume in
connection with the acquisition.
- Record the estimate tax provision associated with the pro forma
adjustments for the acquisition and to record the tax provision
for the acquired company which was a limited liability company for
income tax purposes for all periods prior to its acquisition by
the Company. The effective income tax rate used was 40%.
- Record dividends on the Series B Mandatorily Redeemable Preferred
Stock
(13) SEGMENT REPORTING:
The Company has adopted SFAS No. 131, Disclosures about Segments of an
Enterprise and Related Information, effective December 31, 1998. SFAS No. 131
superseded SFAS No. 14, Financial Reporting for Segments of a Business
Enterprise. The adoption of SFAS No. 131 did not affect results of operations or
financial position, but did affect the disclosure of segment information.
The Company's management approach includes evaluating each segment on which
operating decisions are made based on performance, results and profitability.
The Company currently has one reportable segment, branch operations. The branch
operations segment includes the leasing and sales of portable storage units to
businesses and consumers in the general geographic area of each branch. This
segment also includes the Company's manufacturing facilities which are
responsible for the purchase, manufacturing and refurbishment of the Company's
products for leasing, sales or equipment additions to the Company's delivery
system, and its discontinued dealer program. Previously, the Company had a
corporate sales segment, which related to specialty type product sales and
included the telecommunications and modular division of the Company. This
segment is now included in "other" as the modular program was discontinued and
the Company has scaled back the sales of telecommunication units.
The accounting policies of the segments are the same as those described in Note
1. The Company evaluates performance and profitability before interest costs,
depreciation, income taxes and major non-recurring transactions. The Company
does not account for intersegment revenues or expenses between its divisions.
F-20
42
The Company's reportable segment concentrates on the Company's core business of
leasing, manufacturing, and selling portable storage and office units. Included
in the branch operations segment are residual sales from the Company's dealer
division that was discontinued in 1998. The operating segment has managers who
meet regularly and are accountable to the chief executive officer for financial
results and ongoing plans including the influence of competition.
For the Fiscal Year ended:
Branch
Operations Other Combined
------------ ------------ ------------
December 31, 1997
- -----------------
Revenues from external customers $ 40,555,576 $ 5,527,047 $ 46,082,623
Segment profit (loss) before allocated interest,
depreciation and amortization and income tax expense 15,131,643 (3,959,201) 11,172,442
Allocated interest expense 4,980,955 53,901 5,034,856
Depreciation and amortization expense 2,002,123 251,141 2,253,264
Segment profit 2,109,282 91,114 2,200,396
Segment assets - lease fleet 49,150,986 -- 49,150,986
Segment assets - property, plant and equipment 16,677,428 1,334,488 18,011,916
Expenditures for long-lived assets - lease fleet 17,078,799 -- 17,078,799
Expenditures for long-lived assets - PPE 2,489,201 (348,996) 2,140,205
December 31, 1998
- -----------------
Revenues from external customers $ 48,677,951 $ 3,998,580 $ 52,676,531
Segment profit (loss) before allocated interest,
depreciation and amortization and income tax expense 22,569,007 (5,890,184) 16,678,823
Allocated interest expense 5,890,730 5,609 5,896,339
Depreciation and amortization expense 2,493,289 390,718 2,884,007
Segment profit (loss) 4,723,752 (239,785) 4,483,967
Segment assets - lease fleet 76,589,831 -- 76,589,831
Segment assets - property, plant and equipment 19,211,170 1,051,567 20,262,737
Expenditures for long-lived assets - lease fleet 23,492,555 -- 23,492,555
Expenditures for long-lived assets - PPE 5,122,157 (1,346,798) 3,775,359
December 31, 1999
- -----------------
Revenues from external customers $ 65,543,455 $ 1,110,044 $ 66,653,499
Segment profit (loss) before allocated interest,
depreciation and amortization and income tax expense 33,730,339 (7,021,208) 26,709,131
Allocated interest expense 6,161,876 -- 6,161,876
Depreciation and amortization expense 3,657,155 408,418 4,065,573
Segment profit (loss) 9,149,019 (145,451) 9,003,568
Segment assets - lease fleet 121,277,355 -- 121,277,355
Segment assets - property, plant and equipment 22,363,357 881,930 23,245,287
Expenditures for long-lived assets - lease fleet 30,407,183 -- 30,407,183
Expenditures for long-lived assets - PPE 4,368,687 313,874 4,682,561
F-21
43
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
Not applicable.
42
44
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
ITEM 11. EXECUTIVE COMPENSATION.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
The information called for by Items 10, 11, 12 and 13 is incorporated by
reference to the Company's definitive Proxy Statement for the 2000 Annual
Meeting of Shareholders to be filed with the Securities and Exchange Commission
pursuant to Regulation 14A.
43
45
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) Documents filed as part of this Report:
(1) The financial statements required to be included in this
Report are included in ITEM 8 of this Report.
(2) The following financial statement schedule for the years
ended December 31, 1997, 1998, and 1999 is submitted
herewith (at page F-4):
Schedule II - Valuation and Qualifying Accounts
All other schedules have been omitted because they are not
applicable or not required.
(3) Exhibits
Number Description Page
3.1(5) Amended and Restated Certificate of Incorporation of Mobile Mini, Inc.
3.1.1(6) Certificate of Designation, Preferences and Rights of Series C Junior
Participating Preferred Stock of Mobile Mini, Inc., dated December 17, 1999.
3.2 Amended and Restated By-laws of Mobile Mini, Inc., adopted February 14, 2000
4.1(1) Form of Common Stock Certificate
4.2(2) Agreement and Form of Warrant for Warrants issued in connection with 12%
Notes.
4.3(6) Rights Agreement, dated as of December 9, 1999, between Mobile Mini, Inc.
and Norwest Bank Minnesota, NA, as Rights Agent.
10.3(5) Mobile Mini, Inc. Amended and Restated 1994 Stock Option Plan
10.4 Mobile Mini, Inc. 1999 Stock Option Plan
10.5 Amended and Restated Credit Agreement dated as of December 27, 1999 among
Mobile Mini, Inc., each of the financial institutions initially
a signatory thereto, together with assignees, as Lenders, and
BT Commercial Corporation, as Agent.
10.6(1) Lease Agreement by and between Steven G. Bunger, Michael J. Bunger, Carolyn
A. Clawson, Jennifer J. Blackwell, Susan E. Bunger (collectively
"Landlord") and Mobile Mini Storage Systems ("Tenant") dated January 1, 1994
10.7(1) Lease Agreement by and between Steven G. Bunger, Michael J. Bunger, Carolyn
A. Clawson, Jennifer J. Blackwell, Susan E. Bunger (collectively
"Landlord") and Mobile Mini Storage Systems ("Tenant") dated January 1, 1994
10.8(1) Lease Agreement by and between Steven G. Bunger, Michael J. Bunger, Carolyn
A. Clawson, Jennifer J. Blackwell, Susan E. Bunger (collectively
"Landlord") and Mobile Mini Storage Systems ("Tenant") dated January 1, 1994
10.9(1) Lease Agreement by and between Mobile Mini Systems, Inc. ("Landlord") and
Mobile Mini Storage Systems ("Tenant") dated January 1, 1994
44
46
10.10(3) Amendment to Lease Agreement by and between Steven G. Bunger, Michael J.
Bunger, Carolyn A. Clawson, Jennifer J. Blackwell, Susan E. Bunger
(collectively "Landlord") and Mobile Mini Storage Systems ("Tenant") dated
August 15, 1994
10.11(2) Amendment to Lease Agreement by and between Steven G. Bunger, Michael J.
Bunger, Carolyn A. Clawson, Jennifer J. Blackwell, Susan E. Bunger
(collectively "Landlord") and Mobile Mini Storage Systems ("Tenant") dated
August 15, 1994
10.12(3) Amendment to Lease Agreement by and between Steven G. Bunger, Michael J.
Bunger, Carolyn A. Clawson, Jennifer J. Blackwell, Susan E. Bunger
(collectively "Landlord") and Mobile Mini Storage Systems ("Tenant") dated
August 15, 1994
10.13(4) Amendment to Lease Agreement by and between Mobile Mini
Systems, Inc., a California corporation, ("Landlord"), and the
Company dated December 30, 1994
10.14(5) Amendment No. 2 to Lease Agreement between Mobile Mini Systems, Inc. and
the Company
10.15(1) Patents and Patents Pending
10.16(1) U.S. and Canadian Trade Name and Service Mark Registration
11 Statement Re: Computation of Per Share Earnings
21(5) Subsidiaries of Mobile Mini, Inc.
23 Consent of Arthur Andersen LLP
27 Financial Data Schedule
All other exhibits are omitted as the information required is inapplicable
(1) Incorporated by reference to the Registrant's Registration Statement on
Form SB-2 (No. 33-71528-LA), as amended
(2) Incorporated by reference to the Registrant's Registration Statement on
Form S-2 (No. 333-34413)
(3) Incorporated by reference from the Registrant's Form 10-QSB for the
quarter ended September 30, 1994
(4) Incorporated by reference from the Registrant's Form 10-KSB for the
fiscal year ended December 31, 1994
(5) Incorporated by reference to the Registrant's Report on Form 10-K for
the fiscal year ended December 31, 1997
(6) Incorporated by reference to the Registrant's Report on Form 8-K dated
December 13, 1999
(b) Reports on Form 8-K
On December 13, 1999, Registrant filed a Report 8-K related to the adoption of a
Shareholder Rights Plan
45
47
SCHEDULE II
MOBILE MINI, INC.
VALUATION AND QUALIFYING ACCOUNTS
FOR THE YEARS ENDED DECEMBER 31, 1997, 1998 AND 1999
December 31,
------------
1997 1998 1999
----------- ----------- ------------
Allowance for doubtful accounts:
Balance at beginning of year $ 268,181 $ 892,992 $ 1,085,250
Provision charged to expense 1,104,863 983,526 1,346,054
Provision acquired -- -- 313,203
Write-offs (480,052) (791,268) (1,123,020)
----------- ----------- -----------
Balance at end of year $ 892,992 $ 1,085,250 $ 1,621,487
=========== =========== ===========
46
48
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
MOBILE MINI INC.
Date: February 29, 2000 By: /s/Steven G. Bunger
-------------------------------------------
Steven G. Bunger, President
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed by the following persons on behalf of the registrant and in the
capacities and on the dates indicated.
Date: February 29, 2000 By: /s/Steven G. Bunger
-------------------------------------------
Steven G. Bunger, President, Chief
Executive Officer and Director
(Principal Executive Officer)
Date: February 29, 2000 By: /s/Lawrence Trachtenberg
-------------------------------------------
Lawrence Trachtenberg, Executive Vice
President, Chief Financial Officer
and Director (Principal Financial
Officer and Principal Accounting
Officer)
Date: February 29, 2000 By: /s/Deborah K. Keeley
-------------------------------------------
Deborah K. Keeley, Vice President and
Controller (Chief Accounting
Officer)
Date: February 29, 2000 By: /s/Richard E. Bunger
-------------------------------------------
Richard E. Bunger, Chairman and Director
Date: February 29, 2000 By: /s/Ronald J. Marusiak
-------------------------------------------
Ronald J. Marusiak, Director
Date: February 29, 2000 By: /s/George Berkner
-------------------------------------------
George Berkner, Director
Date: February 29, 2000 By: /s/Stephen A McConnell
-------------------------------------------
Stephen A McConnell, Director
S-1
49
EXHIBIT INDEX
3.1(5) Amended and Restated Certificate of Incorporation of Mobile Mini, Inc.
3.1.1(6) Certificate of Designation, Preferences and Rights of Series C Junior
Participating Preferred Stock of Mobile Mini, Inc., dated December 17, 1999.
3.2 Amended and Restated By-laws of Mobile Mini, Inc., adopted February 14, 2000
4.1(1) Form of Common Stock Certificate
4.2(2) Agreement and Form of Warrant for Warrants issued in connection with 12%
Notes.
4.3(6) Rights Agreement, dated as of December 9, 1999, between Mobile Mini, Inc.
and Norwest Bank Minnesota, NA, as Rights Agent.
10.3(5) Mobile Mini, Inc. Amended and Restated 1994 Stock Option Plan
10.4 Mobile Mini, Inc. 1999 Stock Option Plan
10.5 Amended and Restated Credit Agreement dated as of December 27, 1999 among
Mobile Mini, Inc., each of the financial institutions initially
a signatory thereto, together with assignees, as Lenders, and
BT Commercial Corporation, as Agent.
10.6(1) Lease Agreement by and between Steven G. Bunger, Michael J. Bunger, Carolyn
A. Clawson, Jennifer J. Blackwell, Susan E. Bunger (collectively
"Landlord") and Mobile Mini Storage Systems ("Tenant") dated January 1, 1994
10.7(1) Lease Agreement by and between Steven G. Bunger, Michael J. Bunger, Carolyn
A. Clawson, Jennifer J. Blackwell, Susan E. Bunger (collectively
"Landlord") and Mobile Mini Storage Systems ("Tenant") dated January 1, 1994
10.8(1) Lease Agreement by and between Steven G. Bunger, Michael J. Bunger, Carolyn
A. Clawson, Jennifer J. Blackwell, Susan E. Bunger (collectively
"Landlord") and Mobile Mini Storage Systems ("Tenant") dated January 1, 1994
10.9(1) Lease Agreement by and between Mobile Mini Systems, Inc. ("Landlord") and
Mobile Mini Storage Systems ("Tenant") dated January 1, 1994
50
10.10(3) Amendment to Lease Agreement by and between Steven G. Bunger, Michael J.
Bunger, Carolyn A. Clawson, Jennifer J. Blackwell, Susan E. Bunger
(collectively "Landlord") and Mobile Mini Storage Systems ("Tenant") dated
August 15, 1994
10.11(2) Amendment to Lease Agreement by and between Steven G. Bunger, Michael J.
Bunger, Carolyn A. Clawson, Jennifer J. Blackwell, Susan E. Bunger
(collectively "Landlord") and Mobile Mini Storage Systems ("Tenant") dated
August 15, 1994
10.12(3) Amendment to Lease Agreement by and between Steven G. Bunger, Michael J.
Bunger, Carolyn A. Clawson, Jennifer J. Blackwell, Susan E. Bunger
(collectively "Landlord") and Mobile Mini Storage Systems ("Tenant") dated
August 15, 1994
10.13(4) Amendment to Lease Agreement by and between Mobile Mini
Systems, Inc., a California corporation, ("Landlord"), and the
Company dated December 30, 1994
10.14(5) Amendment No. 2 to Lease Agreement between Mobile Mini Systems, Inc. and
the Company
10.15(1) Patents and Patents Pending
10.16(1) U.S. and Canadian Trade Name and Service Mark Registration
11 Statement Re: Computation of Per Share Earnings
21(5) Subsidiaries of Mobile Mini, Inc.
23 Consent of Arthur Andersen LLP
27 Financial Data Schedule
All other exhibits are omitted as the information required is inapplicable
(1) Incorporated by reference to the Registrant's Registration Statement on
Form SB-2 (No. 33-71528-LA), as amended
(2) Incorporated by reference to the Registrant's Registration Statement on
Form S-2 (No. 333-34413)
(3) Incorporated by reference from the Registrant's Form 10-QSB for the
quarter ended September 30, 1994
(4) Incorporated by reference from the Registrant's Form 10-KSB for the
fiscal year ended December 31, 1994
(5) Incorporated by reference to the Registrant's Report on Form 10-K for
the fiscal year ended December 31, 1997
(6) Incorporated by reference to the Registrant's Report on Form 8-K dated
December 13, 1999