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U. S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended September 30, 2000
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the transition period from __________ to __________
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Commission File Number 1-12804
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[MOBILE MINI, INC. LOGO]
(Exact name of registrant as specific in its charter)
Delaware 86-0748362
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
7420 S. Kyrene Road, Suite 101
Tempe, Arizona 85283
(Address of principal executive offices)
(480) 894-6311
(Registrant's telephone number, including area code)
(Registrant's former address: 1834 W. Third Street, Tempe, Arizona 85281)
Indicate by check whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
-------------- ---------------
As of November 3, 2000, there were outstanding 11,588,084 shares of the
issuer's common stock, par value $.01.
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MOBILE MINI, INC.
INDEX TO FORM 10-Q FILING
FOR THE QUARTER ENDED SEPTEMBER 30, 2000
PAGE
TABLE OF CONTENTS NUMBER
PART I.
FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets
December 31, 1999 and September 30, 2000 3
Consolidated Statements of Operations
Three Months and Nine Months ended September 30, 1999 and September
30, 2000 4
Consolidated Statements of Cash Flows
Nine Months Ended September 30, 1999 and September 30, 2000 6
Notes to Consolidated Financial Statements 7
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations 12
PART II.
OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 17
SIGNATURES 18
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PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
MOBILE MINI, INC.
CONSOLIDATED BALANCE SHEETS
ASSETS
DECEMBER 31, 1999 SEPTEMBER 30, 2000
(unaudited)
----------------- ------------------
CASH AND CASH EQUIVALENTS $ 547,124 $ 34,806
RECEIVABLES, net of allowance for doubtful accounts of $1,621,000
and $1,408,000, respectively 8,861,815 11,682,898
INVENTORIES 9,644,157 10,725,251
PORTABLE STORAGE UNIT LEASE FLEET, net 121,277,355 175,030,324
PROPERTY PLANT AND EQUIPMENT, net 23,245,287 26,955,664
DEPOSITS AND PREPAID EXPENSES 890,142 1,702,114
OTHER ASSETS, net 13,926,606 26,599,078
------------ ------------
TOTAL ASSETS $178,392,486 $252,730,135
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES:
ACCOUNTS PAYABLE $ 3,532,240 $ 7,205,161
ACCRUED LIABILITIES 5,169,364 5,535,719
LINE OF CREDIT 71,638,064 125,582,760
NOTES PAYABLE 6,284,810 5,569,729
OBLIGATIONS UNDER CAPITAL LEASES 347,850 234,928
DEFERRED INCOME TAXES 14,032,673 20,154,750
------------ ------------
TOTAL LIABILITIES 101,005,001 164,283,047
------------ ------------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Common stock; $.01 par value, 95,000,000 shares authorized, (increased from
17,000,000 shares on June 21, 2000); 11,438,356 and 11,585,739 issued and
outstanding at December 31, 1999 and September 30, 2000, respectively 114,383 115,857
Additional paid-in capital 61,032,336 62,823,768
Retained earnings 16,240,766 25,507,463
------------ ------------
TOTAL STOCKHOLDERS' EQUITY 77,387,485 88,447,088
------------ ------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $178,392,486 $252,730,135
============ ============
See the accompanying notes to these consolidated balance sheets.
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MOBILE MINI, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
THREE MONTHS ENDED SEPTEMBER 30,
--------------------------------
1999 2000
------------ ------------
REVENUES:
Leasing $ 14,876,911 $ 20,513,767
Sales 3,210,209 3,154,420
Other 100,071 185,696
------------ ------------
18,187,191 23,853,883
COSTS AND EXPENSES:
Cost of sales 2,173,017 2,038,833
Leasing, selling and general expenses 8,501,736 11,873,310
Depreciation and amortization 1,100,170 1,580,147
------------ ------------
INCOME FROM OPERATIONS 6,412,268 8,361,593
OTHER INCOME (EXPENSE):
Interest income 13,530 8,516
Interest expense (1,399,662) (2,650,737)
------------ ------------
INCOME BEFORE PROVISION FOR INCOME TAXES 5,026,136 5,719,372
PROVISION FOR INCOME TAXES 2,010,454 2,230,555
------------ ------------
NET INCOME $ 3,015,682 $ 3,488,817
============ ============
EARNINGS PER SHARE:
BASIC $ 0.27 $ 0.30
============ ============
DILUTED $ 0.25 $ 0.29
============ ============
WEIGHTED AVERAGE NUMBER OF COMMON AND COMMON
SHARE EQUIVALENTS OUTSTANDING:
BASIC 11,322,397 11,580,193
============ ============
DILUTED 11,853,952 11,968,013
============ ============
See the accompanying notes to these consolidated statements
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MOBILE MINI, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
NINE MONTHS ENDED SEPTEMBER 30,
-------------------------------
1999 2000
------------ ------------
REVENUES:
Leasing $ 37,467,088 $ 53,736,021
Sales 9,268,516 10,076,349
Other 310,347 475,418
------------ ------------
47,045,951 64,287,788
COSTS AND EXPENSES:
Cost of sales 6,192,066 6,517,379
Leasing, selling and general expenses 22,841,558 31,819,104
Depreciation and amortization 2,888,119 4,345,649
------------ ------------
INCOME FROM OPERATIONS 15,124,208 21,605,656
OTHER INCOME (EXPENSE):
Interest income 40,575 76,893
Interest expense (4,654,560) (6,491,242)
------------ ------------
INCOME BEFORE PROVISION FOR INCOME TAXES 10,510,223 15,191,307
PROVISION FOR INCOME TAXES 4,204,090 5,924,610
------------ ------------
NET INCOME 6,306,133 9,266,697
PREFERRED STOCK DIVIDEND 21,918 --
------------ ------------
NET INCOME AVAILABLE TO COMMON SHAREHOLDERS $ 6,284,215 $ 9,266,697
============ ============
EARNINGS PER SHARE:
BASIC $ 0.65 $ 0.80
============ ============
DILUTED $ 0.61 $ 0.78
============ ============
WEIGHTED AVERAGE NUMBER OF COMMON AND COMMON
SHARE EQUIVALENTS OUTSTANDING:
BASIC 9,732,241 11,526,538
============ ============
DILUTED 10,237,445 11,931,521
============ ============
See the accompanying notes to these consolidated statements.
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MOBILE MINI, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
NINE MONTHS ENDED SEPTEMBER 30,
-------------------------------
1999 2000
------------ ------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 6,306,133 $ 9,266,697
Adjustments to reconcile income to net cash provided by
operating activities:
Provision for doubtful accounts 728,597 1,027,805
Amortization of deferred loan costs 451,276 320,048
Amortization of warrants issuance discount 39,123 --
Depreciation and amortization 2,888,119 4,345,649
Loss on disposal of property, plant and equipment 35,050 81,861
Deferred income taxes 4,203,940 6,122,077
Changes in certain assets and liabilities, net of effect of
businesses acquired:
Increase in receivables (1,913,212) (3,621,430)
Increase in inventories (2,636,192) (1,072,095)
Decrease (increase) in deposits and prepaid expenses 125,369 (651,972)
Decrease (increase) in other assets 167,033 (1,033,976)
Increase in accounts payable 3,223,046 3,672,921
Increase (decrease) in accrued liabilities 777,320 (266,169)
------------ ------------
NET CASH PROVIDED BY OPERATING ACTIVITIES 14,395,602 18,191,416
------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Cash paid for businesses acquired (27,989,118) (25,889,448)
Net purchases of portable storage unit lease fleet (21,829,617) (40,997,381)
Net purchases of property, plant and equipment (3,114,212) (5,251,505)
------------ ------------
NET CASH USED IN INVESTING ACTIVITIES (52,932,947) (72,138,334)
------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net borrowings under lines of credit 881,609 53,944,696
Proceeds from issuance of notes payable 3,514,047 620,802
Principal payments on notes payable (1,343,739) (1,335,883)
Principal payments on capital lease obligations (2,501,476) (112,922)
Exercise of warrants 678,161 39,041
Issuance of common stock 37,465,646 278,866
Preferred stock dividend (21,918) --
------------ ------------
NET CASH PROVIDED BY FINANCING ACTIVITIES 38,672,330 53,434,600
------------ ------------
NET INCREASE (DECREASE) IN CASH 134,985 (512,318)
CASH AND CASH EQUIVALENTS AT BEGINNING OF
PERIOD 1,030,138 547,124
------------ ------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 1,165,123 $ 34,806
============ ============
See the accompanying notes to these consolidated statements.
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MOBILE MINI, INC. AND SUBSIDIARIES - NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE A - The accompanying unaudited consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for interim
financial information and the instructions to Form 10-Q. Accordingly, they do
not include all the information and footnotes required by accounting principles
generally accepted in the United States for complete financial statements. In
the opinion of management, all adjustments (which include only normal recurring
adjustments) necessary to present fairly the financial position, results of
operations, and cash flows for all periods presented have been made. The results
of operations for the nine month period ended September 30, 2000 are not
necessarily indicative of the operating results that may be expected for the
entire year ending December 31, 2000. These financial statements should be read
in conjunction with the Company's December 31, 1999 financial statements and
accompanying notes thereto.
NOTE B - The Company adopted SFAS No. 128, Earnings per Share, in 1997. Pursuant
to SFAS No. 128, basic earnings per common share are computed by dividing net
income by the weighted average number of shares of common stock outstanding
during the period. Diluted earnings per common share are determined assuming
that options were exercised at the beginning of each period or at the time of
issuance. The following table shows the computation of earnings per share for
the three month period and the nine month period ended September 30:
Three months Nine months
ended September 30, ended September 30,
1999 2000 1999 2000
----------- ----------- ----------- -----------
BASIC:
Common shares outstanding, beginning of period 11,144,666 11,567,089 7,966,863 11,438,356
Effect of weighting shares:
Weighted common shares issued 177,731 13,104 1,765,378 88,182
----------- ----------- ----------- -----------
Weighted average number of common shares
outstanding 11,322,397 11,580,193 9,732,241 11,526,538
=========== =========== =========== ===========
Net income available to common shareholders $ 3,015,682 $ 3,488,817 $ 6,284,215 $ 9,266,697
=========== =========== =========== ===========
Earnings per share $ 0.27 $ 0.30 $ 0.65 $ 0.80
=========== =========== =========== ===========
DILUTED:
Common shares outstanding, beginning of period 11,144,666 11,567,089 7,966,863 11,438,356
Effect of weighting shares:
Weighted common shares issued 177,731 13,104 1,765,378 88,182
Options and warrants assumed converted 404,038 302,032 382,706 316,810
Warrants 127,517 85,788 122,498 88,173
----------- ----------- ----------- -----------
Weighted average number of common and
common equivalent shares outstanding 11,853,952 11,968,013 10,237,445 11,931,521
=========== =========== =========== ===========
Net income available to common shareholders $ 3,015,682 $ 3,488,817 $ 6,284,215 $ 9,266,697
=========== =========== =========== ===========
Earnings per share $ 0.25 $ 0.29 $ 0.61 $ 0.78
=========== =========== =========== ===========
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NOTE C - Inventories are stated at the lower of cost or market, with cost being
determined under the specific identification method. Market is the lower of
replacement cost or net realizable value. Inventories consisted of the following
at:
December 31, 1999 September 30, 2000
----------------- ------------------
Raw material and supplies $ 7,453,662 $ 7,593,366
Work-in-process 880,885 805,931
Finished portable storage units 1,309,610 2,325,954
----------- -----------
$ 9,644,157 $10,725,251
=========== ===========
NOTE D - Property, plant and equipment consisted of the following at:
December 31, 1999 September 30, 2000
----------------- ------------------
Land $ 777,668 $ 777,668
Vehicles and equipment 19,397,810 23,981,432
Buildings and improvements 8,228,124 8,215,600
Office fixtures and equipment 3,964,242 4,705,840
------------ ------------
32,367,844 37,680,540
Less accumulated depreciation (9,122,557) (10,724,876)
------------ ------------
$ 23,245,287 $ 26,955,664
============ ============
NOTE E - The Company maintains a portable storage and portable office unit lease
fleet consisting primarily of refurbished or manufactured containers and
portable offices that are leased to customers under short-term operating lease
agreements with varying terms. Depreciation is provided using the straight-line
method with an estimated useful life of 20 years and a salvage value estimate at
approximately 50% to 70% of cost. In the opinion of management, estimated
salvage values do not cause carrying values to exceed net realizable value.
Normal repairs and maintenance to the lease fleet are expensed when incurred. As
of September 30, 2000, the lease fleet totaled $175.0 million as compared to
$121.3 million at December 31, 1999, net of accumulated depreciation of $5.9
million and $4.1 million, respectively.
NOTE F - The Company 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, its branch operations. The
branch operations segment includes the leasing and sales of portable storage
units to customers 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.
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.
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.
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For the Three Months Ended:
Branch
Operations Other Combined
----------- ----------- -----------
September 30, 1999
Revenues from external customers $18,411,887 $ (224,696) $18,187,191
Segment profit (loss) before allocated interest,
depreciation and amortization expense 10,176,960 (2,424,283) 7,752,677
Allocated interest expense 1,399,662 -- 1,399,662
Depreciation and amortization expense 996,881 103,289 1,100,170
Segment profit (loss) 3,020,976 (5,294) 3,015,682
September 30, 2000
Revenues from external customers $23,778,714 $ 75,169 $23,853,883
Segment profit (loss) before allocated interest,
depreciation and amortization expense 12,816,638 (2,624,190) 10,192,448
Allocated interest expense 2,650,737 -- 2,650,737
Depreciation and amortization expense 1,509,197 70,950 1,580,147
Segment profit (loss) 3,506,660 (17,843) 3,488,817
For the Nine Months Ended:
Branch
Operations Other Combined
----------- ----------- -----------
September 30, 1999
Revenues from external customers $46,304,456 $ 741,495 $47,045,951
Segment profit (loss) before allocated interest,
depreciation and amortization expense 23,552,074 (5,007,647) 18,544,427
Allocated interest expense 4,654,560 -- 4,654,560
Depreciation and amortization expense 2,585,301 302,818 2,888,119
Segment profit 6,239,211 45,004 6,284,215
September 30, 2000
Revenues from external customers $64,161,830 $ 125,958 $64,287,788
Segment profit (loss) before allocated interest,
depreciation and amortization expense 32,499,233 (5,814,402) 26,684,831
Allocated interest expense 6,491,242 -- 6,491,242
Depreciation and amortization expense 4,051,487 294,162 4,345,649
Segment profit (loss) 9,293,875 (27,178) 9,266,697
As of:
Branch
Operations Other Combined
----------- ----------- -----------
September 30, 1999
Segment assets - lease fleet $112,723,984 $ -- $112,723,984
Segment assets - property, plant and equipment 21,338,908 933,991 22,272,899
Expenditures for long-lived assets - lease fleet 21,829,617 -- 21,829,617
Expenditures for long-lived assets - PPE 2,856,221 257,991 3,114,212
September 30, 2000
Segment assets - lease fleet $175,030,324 $ -- $175,030,324
Segment assets - property, plant and equipment 25,955,821 999,843 26,955,664
Expenditures for long-lived assets - lease fleet 40,997,381 -- 40,997,381
Expenditures for long-lived assets - PPE 4,803,035 448,470 5,251,505
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NOTE G - New Accounting Pronouncements. In December 1999, the Securities and
Exchange Commission ("SEC") issued Staff Accounting Bulletin ("SAB") No. 101,
"Revenue Recognition in Financial Statements," which was subsequently updated by
SAB 101A. SAB 101 and SAB 101A summarize certain of the SEC's views in applying
accounting principles generally accepted in the United States to revenue
recognition in financial statements. The Company will adopt SAB 101 in the
quarter ending December 31, 2000. The Company has evaluated the impact of the
adoption of SAB 101 and determined it will not materially affect results of
operations or financial position.
In June 1998, the Financial Accounting Standards Board ("FASB") issued Statement
of Financial Standards ("SFAS") No. 133 (as amended by SFAS No. 138),
"Accounting for Derivative Instruments and Hedging Activities," which requires
that an entity recognize all derivatives as either assets or liabilities in the
statement of financial position and measure those instruments at fair value. In
June 1999, the FASB issued SFAS No. 137 which deferred the effective date of
SFAS No. 133. The Company will be required to adopt SFAS No. 133, as amended,
effective January 1, 2001 for the fiscal year ended December 31, 2001. The
Company does not anticipate any material impact resulting from the adoption of
SFAS No. 133, as amended.
NOTE H - In March 2000, the Company acquired the portable storage container
lease fleet of Texas Advanced Mobile Storage Corp. and an affiliated entity for
cash, common stock and assumption of debt. The sellers were based in Texas and
this acquisition gives the Company a presence in three new Texas locations, El
Paso, Pharr and Corpus Christi, in addition to adding rental fleet to three of
our existing Texas locations - Dallas/Ft. Worth, San Antonio and Austin.
In April 2000, the Company entered several Florida markets by way of two cash
acquisitions. On April 10, 2000, the Company acquired substantially all the
portable storage assets of Diversified Container Services, Inc., a
privately-owned portable storage leasing company operating in Jacksonville,
Florida. On April 13, 2000, the Company acquired the portable storage assets of
A-1 Trailer Rental Ltd., which had portable storage leasing operations in Tampa,
Orlando, Ft. Myers and Miami/Ft. Lauderdale, Florida.
In May 2000, the Company expanded its Tulsa, Oklahoma operations by acquiring,
for cash, substantially all the portable storage assets of Best Warehouse, a
privately-owned portable storage leasing company operating in Tulsa, Oklahoma.
Also in May, the Company entered the Atlanta, Georgia market through acquiring
substantially all of the portable storage assets of PM Inc., dba Trailers Etc.,
for cash and common stock.
In August 2000, the Company acquired substantially all the Salt Lake City based
portable storage assets of McKinney Vehicles Services, Inc., a privately-owned
company operating in several states. The assets added in this cash acquisition
are deployed in our existing Salt Lake City operations.
The acquisitions were accounted for as purchases in accordance with Accounting
Principles Board (APB) Opinion No. 16 and, accordingly, the purchased assets and
assumed liabilities were recorded at their estimated fair values at the
acquisition date.
The purchase price of the acquired operations was paid for as follows:
Cash paid for businesses acquired $12,369,000
Retirement of debt 13,520,000
-----------
25,889,000
Common stock 1,475,000
Other 450,000
-----------
Total $27,814,000
===========
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The fair value of assets purchased has been allocated as follows:
Receivables $ 265,000
Tangible assets 15,007,000
Deposits, prepaid expenses and other assets 160,000
Goodwill 13,172,000
Assumed liabilities (790,000)
------------
Total $ 27,814,000
============
Goodwill is amortized using the straight-line method over 25 years from the date
of the acquisition. The unamortized portion of goodwill is included in other
assets on the balance sheets.
The Company opened an operation in Seattle, Washington in January 2000.
At November 3, 2000, the Company operated 29 branches located in 14 states.
NOTE I - On July 25, 2000, the Company's senior lenders increased the credit
facilities under the Company's Credit Agreement. This increase is comprised of a
$40.0 million increase in the revolving line of credit available under the
Credit Agreement and approximately a $5.0 to $7.0 million increase to the
Company's term loan under the Credit Agreement. The increase to the term loan is
subject to certain conditions set forth within the agreement. The increase in
total available borrowings is being used to support the continued growth of the
Company. The Company's obligations to the lenders under the Credit Agreement are
secured by substantially all of the Company's assets.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
THREE MONTHS ENDED SEPTEMBER 30, 2000 COMPARED TO
THREE MONTHS ENDED SEPTEMBER 30, 1999
Our total revenues for the quarter ended September 30, 2000 increased
by 31.2% to $23.9 million from $18.2 million for the same period in 1999.
Leasing revenues for the quarter increased by 37.9% to $20.5 million from $14.9
million in the same period of 1999. The increase in our leasing revenues
resulted primarily from a 40.9% increase in the average number of portable
storage units on lease, partially offset by a 2.1% lower average rental rate per
unit. The slight decline in rental rate per unit is primarily due to lower rates
in certain new market locations. Leasing revenues in the current year quarter
include the operations of 13 new markets which we entered during the past year;
none of these operations were included in our results for the quarter ended
September 30, 1999. Our sales of portable storage units for the three months
ended September 30, 2000 remained nearly level with sales for the quarter ended
September 30, 1999 and approximated $3.2 million during each period.
Cost of sales for the quarter ended September 30, 2000 decreased to
64.6% of sales revenues from 67.7% of sales revenues in the same quarter in
1999. This increase in profit margin on sales resulted from improved
efficiencies in our manufacturing plant.
Our leasing, selling and general expenses for the quarter ended
September 30, 2000 increased to $11.9 million, or 49.8% of total revenues, from
$8.5 million, or 46.7% of total revenues, for the quarter ended September 30,
1999. This increase resulted mainly because leasing became a larger percentage
of our business, and the selling and general expense as a percentage of leasing
exceeds that of the sales side of our business. In addition, we had a
significant increase in the number of new branches in operation and the initial
margins at new branches are typically lower than margins at established branches
until the number of units on lease at new branches and the average rental rate
per unit at those branches increases as the new branches mature. We had 29
branch locations at September 30, 2000 compared to 16 branch locations one year
earlier. In addition, we grew the size of the lease fleet at many of our
existing branches, and that growth had associated with it increased sales,
general and operating expenses.
Depreciation and amortization expenses during the 2000 quarter
increased by approximately 43.6% to $1.6 million from $1.1 million during the
same period in 1999. This expense was 6.6% of total revenues during the 2000
quarter, compared to approximately 6.0%, during the same period in 1999. This
increase is due primarily to growth in the size of our lease fleet and support
equipment over the past twelve months as leasing activities continued to become
a larger part of our business than in prior years.
Our operating margin was 35.1% during the quarter ended September 30,
2000, compared to 35.3% for the same period in 1999. Our operating margin is
typically higher on leasing than it is on sales of portable storage units, and
our operating margin on our leasing activities has continued to increase as we
take advantage of the economies of scale being achieved in our core leasing
business as existing branches grow. These economies of scale are offset, to some
extent, by the lower operating margins at new branches during their early years
until the Company is able to increase average lease rates and the number of
containers on rent at these branches. Income from operations increased by 30.4%
to $8.4 million for the quarter ended September 30, 2000 from $6.4 million for
the same period in 1999.
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Interest expense increased by 89.4% to $2.7 million during the quarter
ended September 30, 2000 from $1.4 million for the same period in 1999. The
increase in interest expense is a result of higher average debt outstanding
during 2000 and an increase in interest rates on our debt resulting from higher
prevailing interest rates. The increase in outstanding debt was incurred
primarily to expand our lease fleet and our operations through acquisitions of
portable storage leasing assets, many of which were in new markets. The interest
rate on the debt outstanding under our Credit Agreement is based on a spread
over the Eurodollar rate. In 2000, the Eurodollar rate increased over 1999
levels. The net effect was that the interest rate under our Credit Agreement,
including the effect of our interest rate swap agreement, increased by 1.26% for
the three months ended September 30, 2000 as compared to the same period in
1999.
Our net income for the three months ended September 30, 2000 was $3.5
million, or $0.29 per diluted share of common stock, compared to $3.0 million,
or $0.25 per diluted share of common stock, for the same period in 1999. This
15.7% increase was primarily due to higher lease revenues and higher operating
income in 2000 offset by higher debt levels and interest rates. For the three
months ended September 30, 2000 our effective tax rate was 39.0% as compared to
40.0% for the same period in 1999.
NINE MONTHS ENDED SEPTEMBER 30, 2000 COMPARED TO
NINE MONTHS ENDED SEPTEMBER 30, 1999
Our total revenues for the nine months ended September 30, 2000
increased by 36.6% to $64.3 million from $47.0 million for the nine months ended
September 30, 1999. Leasing revenues for the nine months ended September 30,
2000 increased by 43.4% to $53.7 million from $37.5 million in the same period
of 1999. The increase in our leasing revenues resulted primarily from a 43.8%
increase in the average number of portable storage units on lease. Leasing
revenues in the first nine months of 2000 include the operations of 13 new
markets entered into after September 30, 1999; none of these operations were
included in our results for the nine months ended September 30, 1999. Our sales
of portable storage units for the nine months ended September 30, 2000 increased
by 8.7% to $10.1 million from $9.3 million in the same period in 1999. This
increase in sales primarily resulted from sales in the markets we entered after
September 30, 1999.
Cost of sales for the nine months ended September 30, 2000 decreased to
64.7% on sales revenues of $10.1 million from 66.8% on sales revenues of $9.3
million in the same period in 1999. This increase in our profit margin on sales
resulted from efficiencies in our manufacturing plant and increased production.
Our leasing, selling and general expenses for the nine months ended
September 30, 2000 increased to $31.9 million, or 49.5% of total revenues, from
$22.8 million, or 48.6% of total revenues, for the nine months ended September
30, 1999. This increase resulted mainly because leasing became a larger
percentage of our business, as the selling and general expense as a percentage
of leasing exceeds that as a percentage of sales. In addition, we had a
significant increase (16 to 29) in the number of branches in operation, and the
initial margins at new branches are typically lower than margins at established
branches until the number of units on lease at new branches and the average
rental rate per unit at those branches increases as the new branches mature. We
also grew the size of the lease fleet at many of our existing branches, and that
growth had associated with it increased sales, general and operating expenses.
Depreciation and amortization expenses during the first nine months of
2000 increased by approximately 50.5% to $4.3 million from $2.9 million during
the same period in 1999. This expense was 6.8% of total revenues during the
first nine months of 2000, compared to approximately 6.1%, during the same
period in 1999. This increase is due primarily to growth in the size of our
lease fleet and support equipment over the past twelve months and because
leasing activities are a larger part of our business than in prior years.
Our operating margin was 33.6% during the nine months ended September
30, 2000, compared to 32.1% for the same period in 1999. Our operating margin is
typically higher on leasing than it is on sales of portable storage units, and
our operating margin on our leasing activities has continued to increase as we
take advantage of the economies of scale being achieved in our core leasing
business as existing branches grow. These economies
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of scale are offset, to some extent, by the lower operating margins at new
branches during their early years until the Company is able to increase average
lease rates and the number of containers on rent at these branches. Income from
operations increased by 42.9% to $21.6 million for the nine months ended
September 30, 2000 from $15.1 million for the same period in 1999.
Interest expense increased by 39.5% to $6.5 million for the nine months
ended September 30, 2000 from $4.7 million for the same period in 1999. The
increase in interest expense was primarily a result of higher average debt
outstanding during 2000 and an increase in interest rates on our debt resulting
from higher prevailing interest rates. The increase in outstanding debt was
incurred primarily to expand our lease fleet and our operations through
acquisitions of portable storage leasing assets, many of which were in new
markets. The interest rate on the debt outstanding under our Credit Agreement is
based on a spread over the Eurodollar rate. In 2000, the Eurodollar rate
increased over 1999 levels. The net effect was that the interest rate under our
Credit Agreement, including the effect of our interest rate swap agreement,
increased by 0.67% for the nine months ended September 30, 2000 as compared to
the same period in 1999.
Our net income for the nine months ended September 30, 2000 was $9.3
million, or $0.78 per diluted share of common stock, compared to $6.3 million,
or $0.61 per diluted share of common stock, for the same period in 1999. This
47.5% increase was primarily due to higher lease revenues and higher operating
margins in 2000. We had a 16.5% increase in the number of common and common
share equivalents outstanding in 2000 due primarily to the sale of approximately
3.0 million shares of common stock in a public offering in May 1999. Our
effective tax rate was 39.0% for the nine months ended September 30, 2000 and
40.0% for the nine months ended September 30, 1999.
LIQUIDITY AND CAPITAL RESOURCES
Our leasing and manufacturing business is very capital intensive. The
principal means by which we finance our working capital requirements are cash
flows from operations, borrowings under our Credit Agreement and proceeds from
equity and debt financings.
Operating Activities. Our operations provided net cash flow of $18.2
million during the nine months ended September 30, 2000 versus $14.4 million
during the same period in 1999. This increased cash flow resulted primarily from
our higher net income and increases in deferred income taxes. Increases in
receivables, inventories, deposits and pre-paid expenses and other assets were
offset by increased accounts payable. The increase also is a function of the
growth of our portable storage leasing business.
Investing Activities. Net cash used in investing activities was $72.1
million for the nine months ended September 30, 2000 versus $52.9 million for
the same period in 1999. This use of cash was primarily for acquisitions of
businesses, increased purchases for our portable storage units and property,
plant and equipment.
Financing Activities. Net cash provided by financing activities was
$53.4 million for the nine months ended September 30, 2000 versus $38.7 million
for the same period in 1999. During the nine months ended September 30, 2000,
net cash provided by financing activities was primarily from $53.9 million of
net borrowings under our Credit Agreement, as compared to $882,000 for the same
period in 1999. The borrowings were used primarily to fund our acquisitions and
to grow our lease fleet. In the nine months ended September 30, 1999 we received
approximately $36.9 million in net proceeds from the public sale of
approximately 3.0 million shares of our common stock, and these proceeds were
initially used to pay down our line of credit under our Credit Agreement. Our
cash provided by financing activities in the nine months ended September 30,
2000 was partially offset by $1.4 million in principal payments on notes payable
and capitalized lease obligations.
Effective in September 1998, we entered into an Interest Rate Swap
Agreement (the Agreement), under which Mobile Mini is designated as the fixed
rate payer with a base rate of 5.5% per annum. Under the Agreement, we
effectively fixed, for a three year period, the interest rate payable on $30.0
million of our revolving line of credit so that the rate is based upon a spread
from a fixed 5.5% rate, rather than a spread from the floating Eurodollar rate.
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Since March 1996, our principal source of liquidity has been available
borrowings under our Credit Agreement. On July 25, 2000, we entered into an
agreement with our lenders to increase the available borrowings under our Credit
Agreement by approximately $47.0 million. The interest rate under our Credit
Agreement is determined quarterly, based on our ratio of funded debt to earnings
before interest, taxes, depreciation and amortization (EBITDA). As of September
30, 2000, we had $125.6 million of outstanding borrowings under our Credit
Agreement and $30.3 million of additional borrowings were available. Our
borrowing rate was 1.25% above the prevailing Eurodollar rate. As of October 31,
2000, we had $129.8 million of outstanding borrowings under the Credit Agreement
and $30.2 million of additional borrowings were available under our borrowing
base formula. Our borrowing rate for the quarter ending December 31, 2000 will
be 1.50% above the prevailing Eurodollar rate. We expect to obtain additional
term loan availability of approximately $5.0 to $7.0 million under the Credit
Agreement before the end of the fourth quarter, which we will use to reduce our
debt under the revolving line of credit under the Credit Agreement.
We believe that our working capital, together with our cash flow from
operations, borrowing availability under our Credit Agreement and other
available funding sources will be sufficient to fund our operations for the next
12 months. We believe that in order to maintain our growth rate we may be
required to obtain additional debt financing and to raise additional equity
capital in the future. However, there is no assurance that we will be able to
continue to obtain debt or equity financing on acceptable terms.
SEASONALITY
Although demand from some of our customers is somewhat seasonal, our
operations as a whole have not been seasonal. Demand for leases of our portable
storage units by large retailers is stronger from September through December
because these retailers need to store more inventory for the holiday season. Our
retail customers usually return these 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 quarter of the past several years.
EFFECTS OF INFLATION
Our results of operations for the periods discussed in this Report have
not been significantly affected by inflation.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
We seek to reduce earnings and cash flow volatility associated with
changes in interest rates by entering into financial arrangements 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 we use to manage
interest rate fluctuations affecting our variable rate debt. We currently have
one outstanding interest rate swap agreement under which we pay a fixed rate and
receive a variable interest rate on $30.0 million of debt. At September 30,
2000, there had been no material changes in the reported market risks since
December 31, 1999.
FACTORS THAT MAY AFFECT FUTURE OPERATING RESULTS, AND "SAFE HARBOR" STATEMENT
UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995
Statements in this Report which include such words as "believe",
"expect", "intends" or "anticipates", such as the statement regarding our
ability to meet our obligations and capital needs during the next 12 months, are
forward-looking statements. The occurrence of one or more unanticipated events,
however, including a decrease in cash flow generated from operations, a material
increase in the borrowing rates under our Credit Agreement (which rates are
based on the prime rate or the Eurodollar rates in effect from time to time), a
material increase or decrease in prevailing market prices for used containers,
or a change in general economic conditions resulting in decreased demand for our
products, could cause actual results to differ materially from anticipated
results and have a material adverse effect on our ability to meet our
obligations and capital needs, and cause future operating results and other
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events not to occur as presently anticipated. Our annual report, Form 10-K,
filed with the U.S. Securities and Exchange Commission, includes a section
entitled "Factors That May Affect Future Operating Results", which describes
certain factors that may affect our future operating results. That section is
hereby incorporated by reference in this Report. Those factors should be
considered carefully in evaluating an investment in our common stock. If you do
not have a copy of the Form 10-K, you may obtain one by requesting it from the
Company's Investor Relations Department at (480) 894-6311 or by mail to Mobile
Mini, Inc., 7420 S. Kyrene Rd., Suite 101, Tempe, Arizona 85283. Our filings
with the SEC, including the Form 10-K, may be accessed at the SEC's World Wide
Web site at http://www.sec.gov.
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PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) EXHIBITS
NUMBER DESCRIPTION
27 Financial Data Schedule
(b) REPORTS ON FORM 8-K: none
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
MOBILE MINI, INC.
(Registrant)
Dated: November 14, 2000 /s/ Larry Trachtenberg
-----------------------------------
Larry Trachtenberg
Chief Financial Officer &
Executive Vice President
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EXHIBIT INDEX
Exhibit 27 - Financial Data Schedule