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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, 2001
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
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Commission File Number 1-12804
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MOBILE MINI, INC.
(Exact name of registrant as specific in its charter)
Delaware 86-0748362
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
7420 S. Kyrene Road, Suite 101
Tempe, Arizona 85283
(Address of principal executive offices)
(480) 894-6311
(Registrant's telephone number, including area code)
Indicate by check whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
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As of November 2, 2001, there were outstanding 14,094,227 shares of the
issuer's common stock, par value $.01.
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1
MOBILE MINI, INC.
INDEX TO FORM 10-Q FILING
FOR THE QUARTER ENDED SEPTEMBER 30, 2001
TABLE OF CONTENTS
PAGE
NUMBER
PART I.
FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Consolidated Balance Sheets
December 31, 2000 and September 30, 2001 3
Condensed Consolidated Statements of Operations
Three Months and Nine Months ended September 30, 2000 and
September 30, 2001 4
Condensed Consolidated Statements of Cash Flows
Nine Months Ended September 30, 2000 and September 30, 2001 6
Notes to Condensed Consolidated Financial Statements 7
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations 12
Item 3. Quantitative and Qualitative Disclosures About Market Risk 15
PART II.
OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 16
SIGNATURES 17
2
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
MOBILE MINI, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
DECEMBER 31, SEPTEMBER 30,
2000 2001
------------- -------------
ASSETS
Cash $ 1,528,526 $ 1,379,035
Receivables, net of allowance for doubtful accounts of $1,618,000
and $2,147,000, respectively 12,016,024 15,050,925
Inventories 11,288,195 16,485,569
Portable storage unit lease fleet, net 195,864,789 256,528,928
Property plant and equipment, net 27,231,280 31,438,074
Deposits and prepaid expenses 5,291,275 8,642,557
Other assets, net 26,740,061 33,333,698
------------- -------------
TOTAL ASSETS $ 279,960,150 $ 362,858,786
============= =============
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES:
Accounts payable $ 7,358,748 $ 10,277,018
Accrued liabilities 7,398,069 12,463,079
Line of credit 138,700,000 148,600,000
Notes payable 11,190,721 9,371,136
Obligations under capital leases 199,035 136,991
Deferred income taxes 22,682,230 29,476,524
------------- -------------
TOTAL LIABILITIES 187,528,803 210,324,748
------------- -------------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Common stock; $.01 par value, 95,000,000 shares authorized,
11,594,584 and 14,081,202 issued and outstanding at
December 31, 2000 and September 30, 2001, respectively 115,917 140,812
Additional paid-in capital 62,854,726 112,304,210
Retained earnings 29,460,704 42,381,936
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92,431,347 154,826,958
Accumulated other comprehensive loss -- (2,292,920)
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TOTAL STOCKHOLDERS' EQUITY 92,431,347 152,534,038
------------- -------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 279,960,150 $ 362,858,786
============= =============
See the accompanying notes to these condensed consolidated balance sheets.
3
MOBILE MINI, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
THREE MONTHS ENDED SEPTEMBER 30,
--------------------------------
2000 2001
------------ ------------
REVENUES:
Leasing $ 20,513,767 $ 26,223,907
Sales 3,154,420 4,023,099
Other 185,696 65,883
------------ ------------
23,853,883 30,312,889
COSTS AND EXPENSES:
Cost of sales 2,038,833 2,596,366
Leasing, selling and general expenses 11,873,310 14,650,855
Depreciation and amortization 1,580,147 2,107,381
------------ ------------
INCOME FROM OPERATIONS 8,361,593 10,958,287
OTHER INCOME (EXPENSE):
Interest income 8,516 3,958
Interest expense (2,650,737) (2,392,407)
------------ ------------
INCOME BEFORE PROVISION FOR INCOME TAXES 5,719,372 8,569,838
PROVISION FOR INCOME TAXES 2,230,555 3,342,238
------------ ------------
NET INCOME $ 3,488,817 $ 5,227,600
============ ============
EARNINGS PER SHARE:
BASIC $ 0.30 $ 0.37
============ ============
DILUTED $ 0.29 $ 0.36
============ ============
WEIGHTED AVERAGE NUMBER OF COMMON AND COMMON
SHARE EQUIVALENTS OUTSTANDING:
BASIC 11,580,193 14,041,364
============ ============
DILUTED 11,968,013 14,481,315
============ ============
See the accompanying notes to these condensed consolidated statements.
4
MOBILE MINI, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
NINE MONTHS ENDED SEPTEMBER 30,
------------------------------
2000 2001
------------ ------------
REVENUES:
Leasing $ 53,736,021 $ 71,081,947
Sales 10,076,349 11,157,103
Other 475,418 333,230
------------ ------------
64,287,788 82,572,280
COSTS AND EXPENSES:
Cost of sales 6,517,379 7,332,120
Leasing, selling and general expenses 31,819,104 40,653,207
Depreciation and amortization 4,345,649 5,854,586
------------ ------------
INCOME FROM OPERATIONS 21,605,656 28,732,367
OTHER INCOME (EXPENSE):
Interest income 76,893 31,219
Interest expense (6,491,242) (7,581,239)
------------ ------------
INCOME BEFORE PROVISION FOR INCOME TAXES 15,191,307 21,182,347
PROVISION FOR INCOME TAXES 5,924,610 8,261,115
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NET INCOME $ 9,266,697 $ 12,921,232
============ ============
EARNINGS PER SHARE:
BASIC $ 0.80 $ 0.97
============ ============
DILUTED $ 0.78 $ 0.94
============ ============
WEIGHTED AVERAGE NUMBER OF COMMON AND COMMON
SHARE EQUIVALENTS OUTSTANDING:
BASIC 11,526,538 13,303,839
============ ============
DILUTED 11,931,521 13,757,536
============ ============
See the accompanying notes to these condensed consolidated statements.
5
MOBILE MINI, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
NINE MONTHS ENDED SEPTEMBER 30,
------------------------------
2000 2001
------------ ------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 9,266,697 $ 12,921,232
Adjustments to reconcile income to net cash provided
by operating activities:
Provision for doubtful accounts 1,027,805 1,369,089
Amortization of deferred loan costs 320,048 449,812
Amortization of accrued option compensation -- 57,192
Depreciation and amortization 4,345,649 5,854,586
Loss on disposal of property, plant and equipment 81,861 8,580
Deferred income taxes 6,122,077 8,260,260
Changes in certain assets and liabilities, net of effect
of businesses acquired:
Increase in receivables (3,621,430) (4,403,990)
Increase in inventories (1,072,095) (4,210,267)
Increase in deposits and prepaid expenses (651,972) (3,176,282)
Increase in other assets (1,033,976) (98,014)
Increase in accounts payable 3,672,921 2,918,270
(Decrease) increase in accrued liabilities (266,169) 889,785
------------ ------------
NET CASH PROVIDED BY OPERATING ACTIVITIES 18,191,416 20,840,253
------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Cash paid for businesses acquired (25,889,448) (13,669,150)
Net purchases of portable storage unit lease fleet (40,997,381) (58,924,249)
Net purchases of property, plant and equipment (5,251,505) (5,825,559)
------------ ------------
NET CASH USED IN INVESTING ACTIVITIES (72,138,334) (78,418,958)
------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net borrowings under line of credit 53,944,696 9,900,000
Proceeds from issuance of notes payable 620,802 400,822
Deferred financing costs -- (6,344)
Principal payments on notes payable (1,335,883) (2,220,407)
Principal payments on capital lease obligations (112,922) (62,044)
Exercise of warrants 39,041 251,525
Issuance of common stock 278,866 49,165,662
------------ ------------
NET CASH PROVIDED BY FINANCING ACTIVITIES 53,434,600 57,429,214
------------ ------------
NET DECREASE IN CASH (512,318) (149,491)
CASH AT BEGINNING OF PERIOD 547,124 1,528,526
------------ ------------
CASH AT END OF PERIOD $ 34,806 $ 1,379,035
============ ============
See the accompanying notes to these condensed consolidated statements.
6
MOBILE MINI, INC. AND SUBSIDIARIES - NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
NOTE A - The accompanying unaudited condensed consolidated financial statements
have been prepared in accordance with accounting principles generally accepted
in the United States 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, 2001, are not necessarily indicative of the operating
results that may be expected for the entire year ending December 31, 2001. These
condensed financial statements should be read in conjunction with the Company's
December 31, 2000 financial statements and accompanying notes thereto.
NOTE B - 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 ended Nine months ended
September 30, September 30,
---------------------------- ----------------------------
2000 2001 2000 2001
------------ ------------ ------------ ------------
BASIC:
Common shares outstanding, beginning of period 11,567,089 14,032,552 11,438,356 11,591,584
Effect of weighting shares:
Weighted common shares issued 13,104 8,812 88,182 1,712,255
------------ ------------ ------------ ------------
Weighted average number of common shares outstanding 11,580,193 14,041,364 11,526,538 13,303,839
============ ============ ============ ============
Net income available to common shareholders $ 3,488,817 $ 5,227,600 $ 9,266,697 $ 12,921,232
============ ============ ============ ============
Earnings per share $ 0.30 $ 0.37 $ 0.80 $ 0.97
============ ============ ============ ============
DILUTED:
Common shares outstanding, beginning of period 11,567,089 14,032,552 11,438,356 11,591,584
Effect of weighting shares:
Weighted common shares issued 13,104 8,812 88,182 1,712,255
Options assumed converted 302,032 388,783 316,810 387,214
Warrants 85,788 51,168 88,173 66,483
------------ ------------ ------------ ------------
Weighted average number of common and common
equivalent shares outstanding
11,968,013 14,481,315 11,931,521 13,757,536
============ ============ ============ ============
Net income available to common shareholders $ 3,488,817 $ 5,227,600 $ 9,266,697 $ 12,921,232
============ ============ ============ ============
Earnings per share $ 0.29 $ 0.36 $ 0.78 $ 0.94
============ ============ ============ ============
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:
7
December 31, 2000 September 30, 2001
----------------- ------------------
Raw material and supplies $ 8,756,336 $ 12,500,180
Work-in-process 722,313 1,057,591
Finished portable storage units 1,809,546 2,927,798
------------ ------------
$ 11,288,195 $ 16,485,569
============ ============
NOTE D - Property, plant and equipment consisted of the following at:
December 31, 2000 September 30, 2001
----------------- ------------------
Land $ 777,668 $ 777,668
Vehicles and equipment 24,121,739 29,469,507
Buildings and improvements 8,812,352 9,093,167
Office fixtures and equipment 4,840,134 5,411,233
------------ ------------
38,551,893 44,751,575
Less accumulated depreciation (11,320,613) (13,313,501)
------------ ------------
$ 27,231,280 $ 31,438,074
============ ============
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 approximate 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, 2001, the lease fleet totaled $266.1 million as
compared to $202.5 million at December 31, 2000, less accumulated depreciation
of $9.5 million and $6.6 million, respectively.
NOTE F - The Company's management approach to the disclosure of segment
information 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 record intercompany revenues or expenses on transactions between its
segments.
The Company's reportable segment concentrates on the Company's core business of
leasing, manufacturing, and selling portable storage and office units. 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.
8
For the Three Months Ended:
Branch
Operations Other Combined
------------------------------------------------
September 30, 2000
Revenues from external customers $ 23,778,714 $ 75,169 $ 23,858,883
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
September 30, 2001
Revenues from external customers $ 30,009,751 $ 303,138 $ 30,312,889
Segment profit (loss) before allocated interest,
depreciation and amortization expense
15,493,377 (2,204,717) 13,288,660
Allocated interest expense 2,392,407 -- 2,392,407
Depreciation and amortization expense 1,839,153 268,228 2,107,381
Segment profit (loss) 5,227,714 (114) 5,227,600
Other comprehensive loss, net of tax benefit (1,776,781) -- (1,776,781)
Reconciliation to Statement of Operations: For the Three Months Ended,
September 30, 2000 September 30, 2001
------------------ ------------------
Segment profit before allocated interest, depreciation
and amortization and income tax expense $ 10,192,448 $ 13,288,660
Depreciation and Amortization (1,580,147) (2,107,381)
Operating Leases (246,172) (230,048)
Interest Income (8,516) (3,958)
Allocated corporate items 3,980 11,014
------------ ------------
Income From Operations $ 8,361,593 $ 10,958,287
============ ============
For the Nine Months Ended:
Branch
Operations Other Combined
-----------------------------------------------
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
September 30, 2001
Revenues from external customers $ 82,269,142 $ 303,138 $ 82,572,280
Segment profit (loss) before allocated interest,
depreciation and amortization expense 41,725,619 (6,406,461) 35,319,158
Allocated interest expense 7,581,239 -- 7,581,239
Depreciation and amortization expense 5,428,689 425,897 5,854,586
Segment profit (loss) 12,931,842 (10,610) 12,921,232
Other comprehensive loss, net of tax benefit (2,292,920) -- (2,292,920)
9
Reconciliation to Statement of Operations: For the Nine Months Ended,
September 30, 2000 September 30, 2001
------------------ ------------------
Segment profit before allocated interest, depreciation
and amortization and income tax expense $ 26,684,831 $ 35,319,158
Depreciation and Amortization (4,345,649) (5,854,586)
Operating Leases (662,961) (706,299)
Interest Income (76,893) (31,219)
Allocated corporate items 6,328 5,313
------------ ------------
Income From Operations $ 21,605,656 $ 28,732,367
============ ============
As of:
Branch
Operations Other Combined
--------------------------------------------
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
September 30, 2001
Segment assets - lease fleet $256,528,928 $ -- $256,528,928
Segment assets - property, plant and equipment 30,374,955 1,063,119 31,438,074
Expenditures for long-lived assets - lease fleet 58,924,249 -- 58,924,249
Expenditures for long-lived assets - PPE 5,646,354 179,205 5,825,559
NOTE G - New Accounting Pronouncements. The Company adopted Staff Accounting
Bulletin (SAB) 101, Revenue Recognition in Financial Statements, effective
October 1, 2000. The adoption of SAB 101 did not materially affect results of
operations or financial position.
The Company recognizes revenues from sales of containers upon delivery. Lease
and leasing ancillary revenues and related expenses generated under portable
storage units are recognized monthly when the customer is invoiced, which is not
materially different than on a straight-line basis.
In June 1998, SFAS No. 133, Accounting for Derivative Instruments and Hedging
Activities, was issued and was subsequently amended by SFAS No. 137 and No. 138.
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. SFAS No. 133, as
amended, is effective January 1, 2001, for the fiscal year ended December 31,
2001. The Company has adopted SFAS No. 133 effective January 1, 2001. At
September 30, 2001, SFAS No. 133 resulted in a charge to comprehensive income of
$2.3 million, net of an applicable income tax benefit of $1.5 million.
In June 2001, the Financial Accounting Standards Board issued SFAS No. 142
Goodwill and Other Intangible Assets ("SFAS No. 142"). Upon initial adoption, it
eliminates the amortization of all existing and newly acquired goodwill on a
prospective basis and requires companies to assess goodwill impairment, at least
annually, based on the fair value of the reporting unit. The Company is required
to adopt SFAS No. 142 on January 1, 2002, and goodwill acquired in transactions
that close after June 30, 2001 will not be amortized, in accordance with the new
pronouncement. Management is assessing the impact of the adoption of SFAS No.
142 on the Company's financial statements. Amortization expense of goodwill was
$835,000 and $650,000 for the nine months ended September 30, 2001 and 2000,
respectively.
10
NOTE H - In February 2001, the Company acquired substantially all the assets of
KRJ Systems, Inc., a privately owned portable storage leasing company operating
in the states of Kansas and Missouri. In April 2001, the Company purchased the
portable storage assets of Giuffrey Bros./Cranes, Inc., which operated in the
greater Milwaukee, Wisconsin area and also acquired the portable storage assets
of Metrolina Truck and Trailer Service, Inc., which operated in the Charlotte,
North Carolina area. In July 2001, the Company entered the major metropolitan
areas of northern California including San Francisco, Oakland, Sacramento,
Stockton and Modesto, through the acquisition of certain portable storage assets
from A-Quik - Space Storage Container Company Incorporated. In July, the Company
also purchased the portable storage assets of Container Storage Rental, LLC, a
privately owned leasing company operating in Nashville, Tennessee. In August
2001, the Company acquired certain assets from A-1 Trailer Rentals, Inc. and an
affiliate located in Raleigh, North Carolina which services the Raleigh, Durham
and Chapel Hill markets, and also acquired certain assets from Rice Intermodal,
Inc. and Stow-It Storage Container which complimented our existing operations in
Chicago, Illinois and Salt Lake City, Utah, respectively.
The Company paid cash of approximately $13.7 million in connection with these
transactions. At November 2, 2001, the Company operated 35 branches located in
18 states.
The acquisitions were accounted for as purchases in accordance with Accounting
Principles Board Opinion No. 16, Business Combinations for all acquisitions
completed prior to July 1, 2001 and acquisitions completed subsequent to July 1,
2001 were accounted for under SFAS 141. 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 were paid for as follows:
Cash $ 13,564,000
Other Acquisition Costs 105,000
------------
Total $ 13,669,000
============
The fair value of assets purchased has been allocated as follows:
Tangible assets $ 6,134,000
Deposits, prepaid expenses and other assets 175,000
Goodwill 7,776,000
Assumed liabilities (416,000)
------------
Total $ 13,669,000
============
Goodwill for acquisitions completed through June 30, 2001, is amortized using
the straight-line method over 25 years from the date of the acquisition.
Goodwill for acquisitions after June 30, 2001 is not being amortized in
accordance with SFAS No. 142.
NOTE I - On March 20, 2001, the Company completed a public offering of 2,875,000
shares of its common stock. Of the shares sold, 2,239,713 shares were sold by
the Company and 635,287 shares were sold by selling shareholders. The Company
received gross proceeds of approximately $50.2 million. The Company is using the
net proceeds of $47.2 million to fund its lease fleet and branch expansion and
for working capital, having initially used these proceeds to reduce borrowings
under its line of credit.
11
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
THREE MONTHS ENDED SEPTEMBER 30, 2001 COMPARED TO
THREE MONTHS ENDED SEPTEMBER 30, 2000
Total revenues for the quarter ended September 30, 2001 increased by $6.5
million, or 27.1%, to $30.3 million from $23.9 million for the same period in
2000. Leasing revenues for the quarter increased by $5.7 million, or 27.8%, to
$26.2 million from $20.5 million in the same period of 2000. This increase
resulted from a 27.4% increase in the average number of portable storage units
on lease and a 0.3% increase in the average rent per unit. In the quarter ended
September 30, 2001, our internal lease revenues in markets opened for at least
one year (excluding acquisitions in those markets) grew at a rate of 22.8%. Our
sales of portable storage units for the three months ended September 30, 2001
increased by 27.5% to $4.0 million from $3.2 million in the same period in 2000.
Cost of sales is associated only with the cost of units that we have sold
during this comparative period. Cost of sales for the quarter ended September
30, 2001 remained about level at 64.5% on sales revenues of $4.0 million as
compared with 64.6% on sales revenues of $3.2 million in the same quarter in
2000.
Leasing, selling and general expenses increased $2.8 million, or 23.4%, to
$14.7 million for the quarter ended September 30, 2001, from $11.9 million for
the same period in 2000. Leasing, selling and general expenses, as a percentage
of total revenues, decreased to 48.3% in the quarter ended September 30, 2001,
from 49.8% for the same period in 2000. The increase in leasing-related expenses
was primarily related to the 27.8% increase in leasing revenues. The decline in
these expenses as a percentage of revenue resulted primarily from economies of
scale achieved at our more established branches as their lease fleets have grown
and they have taken advantage of high margins on incremental lease revenue. This
was partially offset by higher leasing related expenses (as a percentage of
revenues) at newer branches which had fewer containers on rent. In general, a
new branch initially has lower operating margins until the branch's fixed
operating costs are spread over a larger lease fleet which is developed as the
branch grows and matures.
Depreciation and amortization expenses increased $527,000, or 33.4%, to
$2.1 million in the quarter ended September 30, 2001, from $1.6 million during
the same period in 2000. The increase is due to our larger lease fleet and
amortization of goodwill associated with our acquisitions.
Interest expense decreased $258,000, or 9.7%, to $2.4 million for the
quarter ended September 30, 2001, compared to $2.7 million for the same period
in 2000. Our average debt outstanding for the three months ended September 30,
2001, compared to the same period in 2000, increased by 17.4%, primarily due to
increased borrowings under our credit facility to fund the growth of our
business. This increase in borrowings was more than offset by a decrease in the
weighted average interest rate on our debt from 8.4% for the three months ended
September 30, 2000 to 6.5% for the three months ended September 30, 2001,
excluding amortization of debt issuance costs. Including amortization of debt
issuance costs, the weighted average interest rate was 6.1% in 2001 and 8.0% in
2000.
Provision for income taxes was based on an annual effective tax rate of
39.0% for the three months ended September 30, 2001 and 2000.
Net income for the three months ended September 30, 2001, was $5.2
million, an increase of 49.8%, compared to $3.5 million for the same period in
2000. Net income as a percentage of total revenues increased 2.6% in the second
quarter of 2001 to 17.2%, compared to 14.6% in the same period in 2000.
12
NINE MONTHS ENDED SEPTEMBER 30, 2001 COMPARED TO
NINE MONTHS ENDED SEPTEMBER 30, 2000
Total revenues for the nine months ended September 30, 2001 increased by
$18.3 million, or 28.4%, to $82.6 million from $64.3 million for the same period
in 2000. Leasing revenues for the nine months ended September 30, 2001 increased
by $17.3 million, or 32.3%, to $71.1 million from $53.7 million in the same
period of 2000. This increase resulted from a 32.3% increase in the average
number of portable storage units on lease, while the average rent per unit
remained constant during both nine month periods. In the nine months ended
September 30, 2001, our internal lease revenues in markets opened for at least
one year (excluding acquisitions in those markets) grew at a rate of 23.6%. Our
sales of portable storage units for the nine months ended September 30, 2001
increased by 10.7% to $11.2 million from $10.1 million in the same period in
2000.
Cost of sales is associated only with the cost of units that we have sold
during this comparative period. Cost of sales for the nine months ended
September 30, 2001 increased to 65.7% on sales revenues of $11.2 million from
64.7% on sales revenues of $10.1 million in the same period in 2000.
Leasing, selling and general expenses increased $8.8 million, or 27.8%, to
$40.7 million for the nine months ended September 30, 2001, from $31.8 million
for the same period in 2000. Leasing, selling and general expenses, as a
percentage of total revenues, decreased to 49.2% in the nine months ended
September 30, 2001, from 49.5% for the same period in 2000. The increase in
leasing-related expenses was primarily related to the 32.3% increase in leasing
revenues. The decline in these expenses as a percentage of revenue resulted
primarily from economies of scale achieved at our more established branches as
their lease fleets have grown and they have taken advantage of high margins on
incremental lease revenue. This was partially offset by higher leasing related
expenses (as a percentage of revenues) at newer branches which had fewer
containers on rent. In general, a new branch initially has lower operating
margins until the branch's fixed operating costs are spread over a larger lease
fleet which is developed as the branch grows and matures.
Depreciation and amortization expenses increased by $1.5 million, or
34.7%, to $5.9 million in the nine months ended September 30, 2001, from $4.3
million during the same period in 2000. The increase is due to our larger lease
fleet and amortization of goodwill associated with our acquisitions prior to
June 30, 2001.
Interest expense increased by $1.1 million, or 16.8%, to $7.6 million for
the nine months ended September 30, 2001, compared to $6.5 million for the same
period in 2000. The increase is primarily the result of higher average debt
outstanding during 2001. Our average debt outstanding increased by 31.2%,
primarily due to additional borrowings under our credit facility to fund the
growth of our business. This was offset by a decrease in the weighted average
interest rate on our debt from 7.6% for the nine months ended September 30, 2000
to 6.7% for the nine months ended September 30, 2001, excluding amortization of
debt issuance costs. Including amortization of debt issuance costs, the weighted
average interest rate was 7.1% in 2001 and 8.0% in 2000.
Provision for income taxes was based on an annual effective tax rate of
39.0% for the nine months ended September 30, 2001 and 2000.
Net income for the nine months ended September 30, 2001, was $12.9
million, an increase of 39.4% compared to $9.3 million for the same period in
2000. Net income as a percentage of total revenues increased 1.2% in the nine
months ended September 30, 2001 to 15.6% as compared to 14.4% in the same period
in 2000. The diluted weighted number of common shares outstanding at September
30, 2001 increased 15.3% to 13.8 million from 11.9 million at September 30,
2000.
LIQUIDITY AND CAPITAL RESOURCES
Growing our lease fleet is very capital intensive, and the amount of
capital we need at any particular time is dependent principally upon the extent
of growth of our lease fleet that we have targeted. We have financed the growth
of our lease fleet and our higher working capital requirements through cash
flows from operations, proceeds from equity financings and borrowings under our
credit facility.
13
Operating Activities. Our operations provided net cash flow of $20.8
million during the nine months ended September 30, 2001, and $18.2 million
during the same period in 2000. In 2001, cash flow provided by income before
depreciation, amortization and deferred income taxes increased by $7.3 million.
However, this increase was partially offset by increases in accounts receivable,
inventories, deposits and pre-paid expenses, all of which have grown in
conjunction with the expansion of our operations at both our existing and our
new branch locations.
Investing Activities. Net cash used in investing activities was $78.4
million for the nine months ended September 30, 2001, and $72.1 million for the
same period in 2000. This increase was due to higher levels of lease fleet
expansion in the 2001 period, which was partially offset by a reduced level of
new branch acquisition activity in 2001 compared to 2000. Capital expenditures
for our lease fleet were $58.9 million for the nine months ended September 30,
2001, and $41.0 million for the same period in 2000. Capital expenditures for
property, plant and equipment were $5.8 million during the nine months ended
September 30, 2001, and $5.3 million for the same period in 2000. We spent $13.7
million during the nine months ended September 30, 2001, compared to $25.9
million during the same period in 2000 for acquisitions.
Financing Activities. Net cash provided by financing activities was $57.4
million for the nine months ended September 30, 2001, and $53.4 million for the
same period in 2000. During the nine months ended September 30, 2001, net cash
provided by financing activities was primarily provided by our sale of
approximately 2.2 million shares of common stock in March 2001, which resulted
in net proceeds to us of approximately $47.2 million. These proceeds were used
to temporarily pay down our borrowings outstanding under our line of credit. We
then use borrowings from the line of credit to continue to fund our lease fleet
and branch expansion and for working capital.
Our principal source of liquidity has been our credit facility, which
currently consists of a revolving line of credit and a 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). As of November 2, 2001, we had $153.2 million of outstanding
borrowings under our $160.0 million revolving line of credit, and $6.8 million
of additional borrowings were available under the credit facility.
We have entered into Interest Rate Swap Agreements under which we have
effectively fixed, for a three year period, the interest rate payable on an
aggregate of $85 million of borrowings under our revolving line of credit so
that the rate is based upon a spread from fixed rates, rather than a spread from
the Eurodollar rate. Under these agreements, we have effectively fixed, for a
three-year period expiring in February 2004, the interest rate payable on $25
million, $30 million and $30 million of borrowings under our revolving line of
credit so that the rate is based upon a spread from 5.33%, 5.35% and 5.46%,
respectively, rather than a spread from the Eurodollar rate. These swap
agreements are covered by SFAS No. 133 and accordingly resulted in a charge to
comprehensive income of $2.3 million, net of applicable income tax benefit of
$1.5 million. See Note G to the Notes to Condensed Consolidated Financial
Statements included at Part I, Item 1 of this Report.
We believe that our working capital, together with our cash flow from
operations and borrowings available under our credit facility, which we
currently expect to expand during the first quarter of 2002, will be sufficient
to fund our operations and planned growth for at least 12 months.
SEASONALITY
Demand from some of our customers is somewhat 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.
14
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.
Interest rate swap agreements are the only instruments we use to manage
interest rate fluctuations affecting our variable rate debt. At September 30,
2001, we had three outstanding interest rate swap agreements under which we pay
a fixed rate and receive a variable interest rate on $85.0 million of debt.
During the nine months ended September 30, 2001, in accordance with SFAS No. 133
we recorded a $2.3 million charge to comprehensive income, net of applicable
income tax benefit of $1.5 million, related to the fair value of our interest
rate swap agreements.
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
events not to occur as presently anticipated. Our annual report on Form 10-K,
filed with the U.S. Securities and Exchange Commission, includes a section
entitled "Factors That May Affect Future Operating Results", in which we discuss
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.
15
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) EXHIBITS:
NUMBER DESCRIPTION
10.3.1(12) Second Amendment to Amended and Restated Credit Agreement and
Consent of Guarantors
(b) REPORTS ON FORM 8-K: none
16
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, 2001 /s/ Larry Trachtenberg
---------------------------------
Larry Trachtenberg
Chief Financial Officer &
Executive Vice President
17
EXHIBIT INDEX
NUMBER DESCRIPTION
10.3.1(12) Second Amendment to Amended and Restated Credit Agreement and
Consent of Guarantors