e10vkza
U.S. SECURITIES AND EXCHANGE
COMMISSION
Washington, D.C.
20549
Form 10-K/A
Amendment
No. 1
ANNUAL REPORT PURSUANT TO
SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT
OF 1934
For the fiscal year ended December 31, 2007
Commission File Number 1-12804
(Exact Name of Registrant as
Specified in its Charter)
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Delaware
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86-0748362
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(IRS Employer
Identification No.)
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7420 S. Kyrene
Road, Suite 101
Tempe, Arizona 85283
(Address
of Principal Executive Offices)
(480) 894-6311
(Registrants Telephone
Number)
Securities Registered pursuant to Section 12(b) of the
Act:
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Title of Class
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Name of Each Exchange on Which Registered
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Common Stock, $.01 par value
Preferred Share Purchase Rights
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Nasdaq Global Select Market
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Securities registered pursuant to Section 12(g) of the
Act:
None.
Indicate by check mark if the registrant is a well-known
seasoned issuer, as defined in Rule 405 of the Securities
Act. Yes þ No o
Indicate by check mark if the registrant is not required to file
reports pursuant to Section 13 or Section 15(d) of the
Act. Yes o No þ
Indicate by check mark 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 þ No o
Indicate by check mark 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 registrants 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. þ
Indicate by check mark whether the registrant is a large
accelerated filer, an accelerated filer, or a non-accelerated
filer. See definition of accelerated filer and large
accelerated filer in
Rule 12b-2
of the Exchange Act. (Check one):
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Large accelerated filer
þ
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Accelerated filer
o
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Non-accelerated filer
o
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Smaller reporting company
o
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(Do not check if a smaller reporting company)
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Indicate by check mark whether the registrant is a shell company
(as defined in
Rule 12b-2
of the
Act). Yes o No þ
The aggregate market value on June 30, 2007 of the voting
stock owned by non-affiliates of the registrant was
approximately $1,029,240,000.
As of February 22, 2008, there were outstanding
34,621,181 shares of the issuers common stock, par
value $.01.
DOCUMENTS
INCORPORATED BY REFERENCE:
Portions of the Proxy Statement for the Registrants 2008
Annual Meeting of Stockholders are incorporated herein by
reference in Item 5 of Part II and in Part III of
this
Form 10-K
to the extent stated herein. Certain exhibits are incorporated
in Item 15 of this Report by reference to other reports and
registration statements of the Registrant which have been filed
with the Securities and Exchange Commission.
EXPLANATORY
NOTE
Mobile Mini, Inc. filed its Annual Report on
Form 10-K
for the fiscal year ended December 31, 2007 (the
Original Filing) on February 29, 2008.
The Original Filing includes a Report of Independent Registered
Public Accounting Firm from which certain language pertaining to
the financial statement schedule was inadvertently omitted. This
Amendment No. 1 on
Form 10-K/A
(this Amendment) adds the language inadvertently
omitted from the Report of Independent Registered Public
Accounting Firm in the Original Filing.
The Report of Independent Registered Public Accounting Firm is
set forth within Item 8 (Financial Statements and
Supplementary Data) of the Original Filing. The corrected Report
of Independent Registered Public Accounting Firm is included at
page F-4
within Item 8 which is part of this Amendment. As required
by SEC
Rule 12b-15,
this Amendment contains the entire text of Item 8 of
Form 10-K.
The Report of Independent Registered Public Accounting Firm
included in Item 8 attached hereto supersedes and replaces
the Report of Independent Registered Public Accounting Firm
included within the Original Filing.
As a result of this Amendment, the certifications pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002, filed as
exhibits to the Original Filing, have been re-executed and
re-filed as of the date of this Amendment.
There is no other change made to the Original Filing except the
replacement of the Report of Independent Registered Public
Accounting Firm and update of the Section 302
certifications. This Amendment makes no attempt to reflect
events occurring after the filing of the Original Filing and
does not change any previously reported financial results of
operations or any disclosures contained in that document.
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ITEM 8.
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FINANCIAL
STATEMENTS AND SUPPLEMENTARY DATA.
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INDEX TO
CONSOLIDATED FINANCIAL STATEMENTS AND SCHEDULE
F-1
Managements
Report on Internal Control Over Financial Reporting
To the Shareholders of Mobile Mini, Inc.,
The management of Mobile Mini, Inc., is responsible for
establishing and maintaining adequate internal control over
financial reporting, as such term is defined in Exchange Act
Rules 13a-15(f)
and
15d-15(f).
Internal control over financial reporting is a process designed
to provide reasonable assurance regarding the reliability of
financial reporting and the preparation of financial statements
for external purposes in accordance with generally accepted
accounting principles. Internal control over financial reporting
includes those policies and procedures that (1) pertain to
the maintenance of records that, in reasonable detail,
accurately and fairly reflect the transactions and dispositions
of our assets; (2) provide reasonable assurance that
transactions are recorded as necessary to permit preparation of
financial statements in conformity with U.S. generally
accepted accounting principles, and that our receipts and
expenditures are being made only in accordance with
authorizations of our management and directors; and
(3) provide reasonable assurance regarding prevention or
timely detection of unauthorized acquisition, use, or
disposition of our assets that could have a material effect on
the financial statements.
Because of its inherent limitations, our controls and procedures
may not prevent or detect misstatements. A control system, no
matter how well conceived and operated, can provide only
reasonable, not absolute, assurance that the objectives of the
controls system are met. Because of the inherent limitations in
all controls systems, no evaluation of controls can provide
absolute assurance that all control issues and instances of
fraud, if any, have been detected.
Under the supervision and with the participation of management,
with the exception as noted above, we assessed the effectiveness
of our internal control over financial reporting based on the
criteria in Internal Control Integrated Framework
issued by the Committee of Sponsoring Organizations of the
Treadway Commission. Based on our evaluation under the criteria
in Internal Control Integrated Framework, we
concluded that our internal control over financial reporting was
effective as of December 31, 2007.
The effectiveness of our internal control over financial
reporting as of December 31, 2007 has been audited by Ernst
& Young LLP, an Independent Registered Public Accounting
Firm, as stated in their report which is included herein.
Steven G. Bunger
Chief Executive Officer
Mobile Mini, Inc.
/s/ Lawrence
Trachtenberg
Lawrence Trachtenberg
Executive Vice President and
Chief Financial Officer
Mobile Mini, Inc.
F-2
Report of
Independent Registered Public Accounting Firm
The Board of Directors and Stockholders
Mobile Mini, Inc.
We have audited Mobile Mini, Inc.s internal control over
financial reporting as of December 31, 2007, based on
criteria established in Internal Control Integrated
Framework issued by the Committee of Sponsoring Organizations of
the Treadway Commission (the COSO criteria). Mobile Mini,
Inc.s management is responsible for maintaining effective
internal control over financial reporting, and for its
assessment of the effectiveness of internal control over
financial reporting included in the accompanying
Managements Report on Internal Control Over Financial
Reporting. Our responsibility is to express an opinion on the
companys internal control over financial reporting based
on our audit.
We conducted our audit in accordance with the standards of the
Public Company Accounting Oversight Board (United States). Those
standards require that we plan and perform the audit to obtain
reasonable assurance about whether effective internal control
over financial reporting was maintained in all material
respects. Our audit included obtaining an understanding of
internal control over financial reporting, assessing the risk
that a material weakness exists, testing and evaluating the
design and operating effectiveness of internal control based on
the assessed risk, and performing such other procedures as we
considered necessary in the circumstances. We believe that our
audit provides a reasonable basis for our opinion.
A companys internal control over financial reporting is a
process designed to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of
financial statements for external purposes in accordance with
generally accepted accounting principles. A companys
internal control over financial reporting includes those
policies and procedures that (1) pertain to the maintenance
of records that, in reasonable detail, accurately and fairly
reflect the transactions and dispositions of the assets of the
company; (2) provide reasonable assurance that transactions
are recorded as necessary to permit preparation of financial
statements in accordance with generally accepted accounting
principles, and that receipts and expenditures of the company
are being made only in accordance with authorizations of
management and directors of the company; and (3) provide
reasonable assurance regarding prevention or timely detection of
unauthorized acquisition, use, or disposition of the
companys assets that could have a material effect on the
financial statements.
Because of its inherent limitations, internal control over
financial reporting may not prevent or detect misstatements.
Also, projections of any evaluation of effectiveness to future
periods are subject to the risk that controls may become
inadequate because of changes in conditions, or that the degree
of compliance with the policies or procedures may deteriorate.
In our opinion, Mobile Mini, Inc. maintained, in all material
respects, effective internal control over financial reporting as
of December 31, 2007, based on the COSO criteria.
We also have audited, in accordance with the standards of the
Public Company Accounting Oversight Board (United States), the
consolidated balance sheets of Mobile Mini, Inc. as of
December 31, 2007 and 2006, and the related consolidated
statements of income, stockholders equity, and cash flows
for each of the three years in the period ended
December 31, 2007 of Mobile Mini, Inc. and our report dated
February 28, 2008 expressed an unqualified opinion thereon.
Phoenix, Arizona
February 28, 2008
F-3
Report of
Independent Registered Public Accounting Firm
The Board of Directors and Stockholders
Mobile Mini, Inc.
We have audited the accompanying consolidated balance sheets of
Mobile Mini, Inc. as of December 31, 2007 and 2006, and the
related consolidated statements of income, stockholders
equity, and cash flows for each of the three years in the period
ended December 31, 2007. Our audit also included the
financial statement schedule listed in Item 15(a)(2). These
consolidated financial statements and schedule are the
responsibility of the Companys management. Our
responsibility is to express an opinion on these financial
statements and schedule based on our audits.
We conducted our audits in accordance with the standards of the
Public Company Accounting Oversight Board (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 consolidated
financial position of Mobile Mini, Inc. at December 31,
2007 and 2006, and the consolidated results of its operations
and its cash flows for each of the three years in the period
ended December 31, 2007, in conformity with
U.S. generally accepted accounting principles. Also, in our
opinion, the related financial statement schedule, when
considered in relation to the basic financial statements taken
as a whole, presents fairly in all material respects the
information set forth therein.
As discussed in Note 1 to the consolidated financial
statements, Mobile Mini, Inc. changed its method of accounting
for share-based payments in accordance with Statement of
Financial Accounting Standards No. 123 (revised
2004) on January 1, 2006.
We also have audited, in accordance with the standards of the
Public Company Accounting Oversight Board (United States),
Mobile Mini, Inc.s internal control over financial
reporting as of December 31, 2007, based on criteria
established in Internal Control-Integrated Framework issued by
the Committee of Sponsoring Organizations of the Treadway
Commission and our report dated February 28, 2008 expressed
an unqualified opinion thereon.
Phoenix, Arizona
February 28, 2008
F-4
MOBILE
MINI, INC.
(In
thousands except per share data)
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December 31,
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2006
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2007
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ASSETS
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Cash
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$
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1,370
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$
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3,703
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Receivables, net of allowance for doubtful accounts of $5,008
and $3,933, respectively
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34,953
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37,221
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Inventories
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27,863
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29,431
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Lease fleet, net
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697,439
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802,923
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Property, plant and equipment, net
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43,072
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55,363
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Deposits and prepaid expenses
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9,553
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11,334
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Other assets and intangibles, net
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9,324
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9,086
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Goodwill
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76,456
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79,790
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Total assets
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$
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900,030
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$
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1,028,851
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Liabilities:
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Accounts payable
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$
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18,928
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$
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20,560
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Accrued liabilities
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39,546
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38,941
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Line of credit
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203,729
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237,857
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Notes payable
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781
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743
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Obligations under capital leases
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35
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10
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Senior notes, net of discount of $0 and $621 at
December 31, 2006 and December 31, 2007, respectively
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97,500
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149,379
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Deferred income taxes
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97,507
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123,471
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Total liabilities
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458,026
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570,961
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Commitments and contingencies
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Stockholders equity:
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Common stock; $0.01 par value, 95,000 shares
authorized, 35,898 and 34,573 issued and outstanding at
December 31, 2006 and December 31, 2007, respectively
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359
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367
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Additional paid-in capital
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268,456
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278,593
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Retained earnings
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169,718
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213,894
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Accumulated other comprehensive income
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3,471
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4,336
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Treasury stock, at cost, 2,175 shares
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(39,300
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)
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Total stockholders equity
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442,004
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457,890
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Total liabilities and stockholders equity
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$
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900,030
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$
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1,028,851
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See accompanying notes.
F-5
MOBILE
MINI, INC.
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For the Years Ended December 31,
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2005
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2006
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2007
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(In thousands except per share data)
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Revenues:
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Leasing
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$
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188,578
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$
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245,105
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$
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284,638
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Sales
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17,499
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26,824
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31,644
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Other
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1,093
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1,434
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2,020
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Total revenues
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207,170
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273,363
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318,302
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Costs and expenses:
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Cost of sales
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10,845
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17,186
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21,651
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Leasing, selling and general expenses
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109,257
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139,906
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166,994
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Depreciation and amortization
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12,854
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16,741
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21,149
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Total costs and expenses
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132,956
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173,833
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209,794
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Income from operations
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74,214
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99,530
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108,508
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Other income (expense):
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Interest income
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11
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437
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101
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Other income
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3,160
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Interest expense
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(23,177
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)
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(23,681
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)
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(24,906
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Debt extinguishment expense
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(6,425
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)
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(11,224
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Foreign currency exchange gains
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66
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107
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Income before provision for income taxes
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54,208
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69,927
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72,586
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Provision for income taxes
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20,220
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27,151
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28,410
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Net income
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$
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33,988
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$
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42,776
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$
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44,176
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Earnings per share:
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Basic
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$
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1.14
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$
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1.25
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$
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1.24
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Diluted
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$
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1.10
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$
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1.21
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$
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1.22
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Weighted average number of common and common share equivalents
outstanding:
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Basic
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29,867
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|
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34,243
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35,489
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Diluted
|
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30,875
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35,425
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36,296
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See accompanying notes.
F-6
MOBILE
MINI, INC.
For the
years ended December 31, 2005, 2006 and 2007
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Accumulated
|
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Shares of
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Additional
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Deferred
|
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Other
|
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Common
|
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Common
|
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Paid-In
|
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Stock-Based
|
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Retained
|
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Comprehensive
|
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Treasury
|
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Stockholders
|
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Stock
|
|
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Stock
|
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Capital
|
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Compensation
|
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Earnings
|
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Income (Loss)
|
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Stock
|
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Equity
|
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(In thousands)
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Balance, December 31, 2004
|
|
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29,366
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$
|
294
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$
|
122,787
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|
$
|
|
|
|
$
|
92,954
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$
|
334
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|
$
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|
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|
$
|
216,369
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Net income
|
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|
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33,988
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|
|
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33,988
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Market value change in derivatives, (net of income tax expense
of $434)
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|
|
|
|
|
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|
|
679
|
|
|
|
|
|
|
|
679
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Foreign currency translation, (net of income tax expense of $75)
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|
|
|
|
117
|
|
|
|
|
|
|
|
117
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
34,784
|
|
Exercise of stock options, (including income tax benefit of
$5,061)
|
|
|
1,155
|
|
|
|
11
|
|
|
|
16,792
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
16,803
|
|
Restricted stock grants
|
|
|
97
|
|
|
|
1
|
|
|
|
2,276
|
|
|
|
(2,277
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortization of restricted stock
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
19
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
19
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, December 31, 2005
|
|
|
30,618
|
|
|
|
306
|
|
|
|
141,855
|
|
|
|
(2,258
|
)
|
|
|
126,942
|
|
|
|
1,130
|
|
|
|
|
|
|
|
267,975
|
|
Net income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
42,776
|
|
|
|
|
|
|
|
|
|
|
|
42,776
|
|
Market value change in derivatives, (net of income tax benefit
of $86)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(123
|
)
|
|
|
|
|
|
|
(123
|
)
|
Foreign currency translation, (net of income tax expense of $6)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,464
|
|
|
|
|
|
|
|
2,464
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
45,117
|
|
Issuance of common stock
|
|
|
4,600
|
|
|
|
46
|
|
|
|
120,322
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
120,368
|
|
Exercise of stock options
|
|
|
499
|
|
|
|
5
|
|
|
|
5,113
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5,118
|
|
Tax benefit shortfall on stock option exercises
|
|
|
|
|
|
|
|
|
|
|
(5
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(5
|
)
|
Reclassification due to the adoption of SFAS No. 123(R)
|
|
|
|
|
|
|
|
|
|
|
(2,258
|
)
|
|
|
2,258
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Restricted stock grants
|
|
|
181
|
|
|
|
2
|
|
|
|
(2
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Share-based compensation
|
|
|
|
|
|
|
|
|
|
|
3,431
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,431
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, December 31, 2006
|
|
|
35,898
|
|
|
|
359
|
|
|
|
268,456
|
|
|
|
|
|
|
|
169,718
|
|
|
|
3,471
|
|
|
|
|
|
|
|
442,004
|
|
Net income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
44,176
|
|
|
|
|
|
|
|
|
|
|
|
44,176
|
|
Market value change in derivatives, (net of income tax benefit
of $816)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1,293
|
)
|
|
|
|
|
|
|
(1,293
|
)
|
Foreign currency translation, (net of income tax expense of $724)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,158
|
|
|
|
|
|
|
|
2,158
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
45,041
|
|
Exercise of stock options
|
|
|
519
|
|
|
|
5
|
|
|
|
5,602
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5,607
|
|
Tax benefit shortfall on stock option exercises
|
|
|
|
|
|
|
|
|
|
|
(46
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(46
|
)
|
Purchase of treasury stock, at cost
|
|
|
(2,175
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(39,300
|
)
|
|
|
(39,300
|
)
|
Restricted stock grants
|
|
|
331
|
|
|
|
3
|
|
|
|
(3
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Share-based compensation
|
|
|
|
|
|
|
|
|
|
|
4,584
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,584
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, December 31, 2007
|
|
|
34,573
|
|
|
$
|
367
|
|
|
$
|
278,593
|
|
|
$
|
|
|
|
$
|
213,894
|
|
|
$
|
4,336
|
|
|
$
|
(39,300
|
)
|
|
$
|
457,890
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See accompanying notes.
F-7
MOBILE
MINI, INC.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Years Ended December 31,
|
|
|
|
2005
|
|
|
2006
|
|
|
2007
|
|
|
|
(In thousands)
|
|
|
Cash Flows From Operating Activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
33,988
|
|
|
$
|
42,776
|
|
|
$
|
44,176
|
|
Adjustments to reconcile net income to net cash provided by
operating activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Debt extinguishment expense
|
|
|
|
|
|
|
1,438
|
|
|
|
2,298
|
|
Provision for doubtful accounts
|
|
|
3,036
|
|
|
|
4,538
|
|
|
|
1,869
|
|
Provision for loss from natural disasters
|
|
|
1,710
|
|
|
|
|
|
|
|
|
|
Amortization of deferred financing costs
|
|
|
829
|
|
|
|
840
|
|
|
|
985
|
|
Share-based compensation expense
|
|
|
19
|
|
|
|
3,066
|
|
|
|
4,028
|
|
Depreciation and amortization
|
|
|
12,854
|
|
|
|
16,741
|
|
|
|
21,149
|
|
Gain on sale of lease fleet units
|
|
|
(3,529
|
)
|
|
|
(4,922
|
)
|
|
|
(5,560
|
)
|
Loss on disposal of property, plant and equipment
|
|
|
704
|
|
|
|
454
|
|
|
|
203
|
|
Deferred income taxes
|
|
|
20,097
|
|
|
|
26,407
|
|
|
|
27,356
|
|
Foreign currency exchange gains
|
|
|
|
|
|
|
(66
|
)
|
|
|
(107
|
)
|
Changes in certain assets and liabilities, net of effect of
businesses acquired:
|
|
|
|
|
|
|
|
|
|
|
|
|
Receivables
|
|
|
(8,407
|
)
|
|
|
(11,118
|
)
|
|
|
(3,988
|
)
|
Inventories
|
|
|
(4,823
|
)
|
|
|
628
|
|
|
|
(610
|
)
|
Deposits and prepaid expenses
|
|
|
(480
|
)
|
|
|
(1,446
|
)
|
|
|
(1,754
|
)
|
Other assets and intangibles
|
|
|
(19
|
)
|
|
|
(4
|
)
|
|
|
318
|
|
Accounts payable
|
|
|
8,581
|
|
|
|
(2,088
|
)
|
|
|
2,691
|
|
Accrued liabilities
|
|
|
4,689
|
|
|
|
(360
|
)
|
|
|
(1,755
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by operating activities
|
|
|
69,249
|
|
|
|
76,884
|
|
|
|
91,299
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash Flows From Investing Activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash paid for businesses acquired
|
|
|
(7,021
|
)
|
|
|
(59,475
|
)
|
|
|
(9,734
|
)
|
Additions to lease fleet, excluding acquisitions
|
|
|
(109,540
|
)
|
|
|
(135,883
|
)
|
|
|
(126,733
|
)
|
Proceeds from sale of lease fleet units
|
|
|
9,505
|
|
|
|
13,327
|
|
|
|
16,181
|
|
Additions to property, plant and equipment
|
|
|
(6,433
|
)
|
|
|
(10,882
|
)
|
|
|
(18,522
|
)
|
Proceeds from sale of property, plant and equipment
|
|
|
57
|
|
|
|
150
|
|
|
|
126
|
|
Change in other assets
|
|
|
157
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash used in investing activities
|
|
|
(113,275
|
)
|
|
|
(192,763
|
)
|
|
|
(138,682
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash Flows From Financing Activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Net borrowings under lines of credit
|
|
|
32,026
|
|
|
|
45,539
|
|
|
|
34,128
|
|
Redemption of 9.5% Senior Notes
|
|
|
|
|
|
|
(52,500
|
)
|
|
|
(97,500
|
)
|
Proceeds from issuance of 6.875% Senior Notes
|
|
|
|
|
|
|
|
|
|
|
149,322
|
|
Deferred financing costs
|
|
|
|
|
|
|
(1,664
|
)
|
|
|
(3,768
|
)
|
Proceeds from issuance of notes payable
|
|
|
934
|
|
|
|
1,230
|
|
|
|
1,216
|
|
Principal payments on notes payable
|
|
|
(1,420
|
)
|
|
|
(1,108
|
)
|
|
|
(1,254
|
)
|
Principal payments on capital lease obligations
|
|
|
|
|
|
|
(17
|
)
|
|
|
(24
|
)
|
Issuance of common stock, net
|
|
|
11,742
|
|
|
|
125,486
|
|
|
|
5,607
|
|
Purchase of treasury stock, at cost
|
|
|
|
|
|
|
|
|
|
|
(39,300
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by financing activities
|
|
|
43,282
|
|
|
|
116,966
|
|
|
|
48,427
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effect of exchange rate changes on cash
|
|
|
192
|
|
|
|
76
|
|
|
|
1,289
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net increase (decrease) in cash
|
|
|
(552
|
)
|
|
|
1,163
|
|
|
|
2,333
|
|
Cash at beginning of year
|
|
|
759
|
|
|
|
207
|
|
|
|
1,370
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash at end of year
|
|
$
|
207
|
|
|
$
|
1,370
|
|
|
$
|
3,703
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplemental Disclosure of Cash Flow Information:
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash paid during the year for interest
|
|
$
|
21,727
|
|
|
$
|
24,770
|
|
|
$
|
27,896
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash paid during the year for income and franchise taxes
|
|
$
|
495
|
|
|
$
|
733
|
|
|
$
|
797
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest rate swap changes in value (credited) charged to equity
|
|
$
|
(679
|
)
|
|
$
|
123
|
|
|
$
|
1,293
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See accompanying notes.
F-8
MOBILE
MINI, INC.
|
|
(1)
|
Mobile
Mini, 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 solutions. In these notes, the terms
Mobile Mini, Company, we,
us, or our, means Mobile Mini, Inc. At
December 31, 2007, we have a fleet of portable storage and
office units, and operate throughout the United States, in
Canada, the United Kingdom and The Netherlands. Our portable
storage products offer secure, temporary storage with immediate
access. We have a diversified customer base, including large and
small retailers, construction companies, medical centers,
schools, utilities, distributors, the military, hotels,
restaurants, entertainment complexes and households. Customers
use our products for a wide variety of applications, including
the storage of retail and manufacturing inventory, construction
materials and equipment, documents and records and other goods.
Principles
of Consolidation
The consolidated financial statements include the accounts of
Mobile Mini, Inc. and its wholly owned subsidiaries, including
our European operations. We do not have any subsidiaries in
which we do not own 100% of the outstanding stock. All
significant intercompany balances and transactions have been
eliminated.
Revenue
Recognition
Lease and leasing ancillary revenues and related expenses
generated under portable storage units and office units are
recognized on a straight-line basis. Revenues and expenses from
portable storage unit delivery and hauling are recognized when
these services are earned, in accordance with
SAB No. 104, Revenue Recognition. We recognize
revenues from sales of containers and mobile office units upon
delivery when the risk of loss passes, the price is fixed and
determinable and collectibility is reasonably assured. We sell
our products pursuant to sales contracts stating the fixed sales
price with our customers.
Cost
of Sales
Cost of sales in our consolidated statements of income includes
only the costs for units we sell. Similar costs associated with
the portable storage units that we lease are capitalized on our
balance sheet under Lease fleet.
Advertising
Costs
All non direct-response advertising costs are expensed as
incurred. Direct-response advertising costs, principally yellow
page advertising, are capitalized when paid and amortized over
the period in which the benefit is derived. At December 31,
2006 and 2007, prepaid advertising costs were approximately
$3.2 million and $3.8 million, respectively. The
amortization period of the prepaid balance never exceeds
12 months. Our direct-response advertising costs are
monitored by each branch through call logs and advertising
source codes in a contact enterprise resource planning system.
Advertising expense was $7.6 million, $8.6 million and
$10.1 million in 2005, 2006 and 2007, respectively.
Cash
Our revolving credit agreement includes restrictions on excess
cash. There was no restricted cash at December 31, 2006 and
2007.
Receivables
and Allowance for Doubtful Accounts
Receivables primarily consist of amounts due from customers from
the lease or sale of containers throughout the United States,
Canada and Europe. Mobile Mini records an estimated provision
for bad debts through a charge to operations in amounts of our
estimated losses expected to be incurred in the collection of
these accounts. We review
F-9
MOBILE
MINI, INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
the provision for adequacy monthly. The estimated losses are
based on historical collection experience, and evaluation of
past-due account agings. Specific accounts are written off
against the allowance when management determines the account is
uncollectible. We require a security deposit on most leased
office units to cover the cost of damages or unpaid balances, if
any.
Concentration
of Credit Risk
Financial instruments which potentially expose us to
concentrations of credit risk, as defined by
SFAS No. 105, Disclosure of Information about
Financial Instruments with Off-Balance-Sheet Risk and Financial
Instruments with Concentrations of Credit Risk, consist
primarily of receivables. Concentration of credit risk with
respect to receivables is limited due to the large number of
customers spread over a large geographic area in many industry
segments. Receivables related to our sales operations are
generally secured by the product sold to the customer.
Receivables related to our leasing operations are primarily
small month-to-month amounts. We have the right to repossess
leased portable storage units, including any customer goods
contained in the unit, following non-payment of rent.
Inventories
Inventories are valued at the lower of cost (principally on a
standard cost basis which approximates the
first-in,
first-out (FIFO) method) or market. Market is the lower of
replacement cost or net realizable value. Inventories primarily
consist of raw materials, supplies,
work-in-process
and finished goods, all related to the manufacturing,
refurbishment and maintenance, primarily for our lease fleet and
our units held for sale. Raw materials principally consist of
raw steel, wood, glass, paint, vinyl and other assembly
components used in manufacturing and refurbishing processes.
Work-in-process
primarily represents units being built at our manufacturing
facility that are either pre-sold or being built to add to our
lease fleet upon completion. Finished portable storage units
primarily represents ISO (International Organization for
Standardization) containers held in inventory until the
containers are either sold as is, refurbished and sold, or units
in the process of being refurbished to be compliant with our
lease fleet standards before transferring the units to our lease
fleet. There is no certainty when we purchase the containers
whether they will ultimately be sold, refurbished and sold, or
refurbished and moved into our lease fleet. Units that are
determined to go into our lease fleet undergo an extensive
refurbishment process that includes installing our proprietary
locking system, signage, painting and sometimes our proprietary
security doors.
Inventories at December 31, consist of the following:
|
|
|
|
|
|
|
|
|
|
|
2006
|
|
|
2007
|
|
|
|
(In thousands)
|
|
|
Raw materials and supplies
|
|
$
|
18,420
|
|
|
$
|
21,801
|
|
Work-in-process
|
|
|
3,031
|
|
|
|
2,819
|
|
Finished portable storage units
|
|
|
6,412
|
|
|
|
4,811
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
27,863
|
|
|
$
|
29,431
|
|
|
|
|
|
|
|
|
|
|
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. Residual 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
residual values do not cause carrying values to exceed net
realizable value. Our depreciation expense related to property,
plant and equipment for 2005, 2006 and 2007 was
$3.2 million, $4.2 million and $5.6 million,
respectively. Normal repairs and maintenance to property, plant
and equipment are expensed as incurred. When property or
equipment is retired or sold, the net book value of the asset,
reduced by any proceeds, is charged to gain or loss on the
retirement of fixed assets.
F-10
MOBILE
MINI, INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
In 2006 and 2007, we wrote off certain assets, which for the
most part were fully depreciated, that were in the process of
being replaced or were no longer required or used in our leasing
operations.
Property, plant and equipment at December 31, consist of
the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Estimated
|
|
|
|
|
|
|
|
|
|
Useful Life in
|
|
|
|
|
|
|
|
|
|
Years
|
|
|
2006
|
|
|
2007
|
|
|
|
(In thousands)
|
|
|
Land
|
|
|
|
|
|
$
|
772
|
|
|
$
|
772
|
|
Vehicles and machinery
|
|
|
5 to 20
|
|
|
|
45,734
|
|
|
|
60,490
|
|
Buildings and improvements(1)
|
|
|
30
|
|
|
|
10,645
|
|
|
|
11,514
|
|
Office fixtures and equipment
|
|
|
5
|
|
|
|
9,552
|
|
|
|
11,579
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
66,703
|
|
|
|
84,355
|
|
Less accumulated depreciation
|
|
|
|
|
|
|
(23,631
|
)
|
|
|
(28,992
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
43,072
|
|
|
$
|
55,363
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Improvements made to leased properties are depreciated over the
lesser of the estimated remaining life or the remaining term of
the respective lease. |
Other
Assets and Intangibles
Other assets and intangibles primarily represent deferred
financing costs and intangible assets from acquisitions of
$11.9 million at December 31, 2006 and
$12.5 million at December 31, 2007, excluding
accumulated amortization of $3.4 million at both
December 31, 2006 and 2007. Deferred financing costs are
amortized over the term of the agreement, and intangible assets
are amortized either on a straight-line basis, typically over a
five-year period, or on an accelerated basis for intrinsic
values assigned to customer lists and trade names. At
December 31, 2006, other assets and intangibles also
included $0.9 million for the fair value of our interest
rate swap agreements.
Income
Taxes
We utilize the liability method of accounting for income taxes
as set forth in SFAS No. 109, Accounting for Income
Taxes. Under the liability method, deferred taxes are
determined based on the difference between the financial
statement and tax basis of assets and liabilities using enacted
tax rates in effect in the years in which the differences are
expected to reverse. Valuation allowances are established, when
necessary, to reduce deferred tax assets to the amount expected
to be realized. Income tax expense includes both taxes payable
for the period and the change during the period in deferred tax
assets and liabilities.
Earnings
per Share
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 the potential dilution of the exercise
or conversion of options and nonvested share-awards into common
stock.
F-11
MOBILE
MINI, INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
The following table sets forth the computation of basic and
diluted earnings per share for the years ended December 31:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2005
|
|
|
2006
|
|
|
2007
|
|
|
|
(In thousands except earnings per share)
|
|
|
BASIC:
|
|
|
|
|
|
|
|
|
|
|
|
|
Common shares outstanding, beginning of year
|
|
|
29,366
|
|
|
|
30,521
|
|
|
|
35,640
|
|
Effect of weighting shares:
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted common shares issued
|
|
|
501
|
|
|
|
3,722
|
|
|
|
302
|
|
Weighted common shares purchased
|
|
|
|
|
|
|
|
|
|
|
(453
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average number of common shares outstanding
|
|
|
29,867
|
|
|
|
34,243
|
|
|
|
35,489
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
33,988
|
|
|
$
|
42,776
|
|
|
$
|
44,176
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings per share
|
|
$
|
1.14
|
|
|
$
|
1.25
|
|
|
$
|
1.24
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
DILUTED:
|
|
|
|
|
|
|
|
|
|
|
|
|
Common shares outstanding, beginning of year
|
|
|
29,366
|
|
|
|
30,521
|
|
|
|
35,640
|
|
Effect of weighting shares:
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted common shares issued
|
|
|
501
|
|
|
|
3,722
|
|
|
|
302
|
|
Weighted common shares purchased
|
|
|
|
|
|
|
|
|
|
|
(453
|
)
|
Employee stock options and nonvested share-awards assumed
converted
|
|
|
1,008
|
|
|
|
1,182
|
|
|
|
807
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average number of common and common share equivalents
outstanding
|
|
|
30,875
|
|
|
|
35,425
|
|
|
|
36,296
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
33,988
|
|
|
$
|
42,776
|
|
|
$
|
44,176
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings per share
|
|
$
|
1.10
|
|
|
$
|
1.21
|
|
|
$
|
1.22
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Employee stock options to purchase 0.5 million,
0.6 million and 0.6 million shares were issued or
outstanding during 2005, 2006 and 2007, respectively, but were
not included in the computation of diluted earnings per share
because the effect would have been anti-dilutive. The
anti-dilutive options could potentially dilute future earnings
per share. Basic weighted average number of common shares
outstanding in 2006 and 2007 does not include 0.3 million
and 0.5 million nonvested share-awards, respectively, as
the stock is not vested. During 2006 and 2007, an immaterial
amount of nonvested share-awards were not included in the
computation of diluted earnings per share because the effect
would have been anti-dilutive. The nonvested stock could
potentially dilute future earnings per share.
Long-Lived
Assets
We review long-lived assets for impairment whenever events or
changes in circumstances indicate the carrying amount of such
assets may not be fully recoverable. If this review indicates
the carrying value of these assets will not be recoverable, as
measured based on estimated undiscounted cash flows over their
remaining life, the carrying amount would be adjusted to fair
value. The cash flow estimates contain managements best
estimates, using appropriate and customary assumptions and
projections at the time. We have not recognized any impairment
losses during the three year period ended December 31, 2007.
F-12
MOBILE
MINI, INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Goodwill
Purchase prices of acquired businesses have been allocated to
the assets and liabilities acquired based on the estimated fair
values on the respective acquisition dates. Based on these
values, the excess purchase prices over the fair value of the
net assets acquired were allocated to goodwill. In 2006, we
entered into a share purchase agreement to acquire three
companies of the Royal Wolf Group. All other acquisitions of
businesses have been transacted as asset purchases which results
in our goodwill relating to business acquisitions executed under
asset purchase agreements being deductible for income tax
purposes over 15 years even though goodwill is not
amortized for financial reporting purposes.
We evaluate goodwill periodically to determine whether events or
circumstances have occurred that would indicate goodwill might
be impaired. Pursuant to SFAS No. 142, Goodwill and
Other Intangible Assets, we operate in one reportable
segment, which is comprised of three reporting units with the
addition of our European operations. We perform an annual
impairment test on goodwill using the two-step process
prescribed in SFAS No. 142. The first step is a screen
for potential impairment, while the second step measures the
amount of the impairment, if any. In addition, we will perform
impairment tests during any reporting period in which events or
changes in circumstances indicate that an impairment may have
incurred. We performed the first step of the required impairment
tests for goodwill as of December 31, 2007 and determined
that goodwill is not impaired. At December 31, 2007, $66.2
million of our goodwill relates to the United States reporting
unit, $12.6 million relates to the United Kingdom reporting
unit, and $1.0 million relates to The Netherlands reporting
unit. Fair value has been determined for each reporting unit in
order to determine the recoverability of the recorded goodwill.
At December 31, 2007, we used a discounted cash flows
approach to determine the fair value of our United Kingdom and
The Netherlands reporting units. In the United States, we used
an allocation of market capitalization to measure potential
impairment. The fair value determined for the United Kingdom and
The Netherlands as well as the allocated market capitalization
to the U.S. exceeded the net carrying value of the
reporting units, therefore, the second step for potential
impairment was unnecessary.
The following table shows the activity and balances related to
goodwill from January 1, 2006 to December 31, 2007 (in
thousands):
|
|
|
|
|
Goodwill at January 1, 2006
|
|
$
|
56,311
|
|
Acquisitions
|
|
|
19,231
|
|
Divestitures
|
|
|
|
|
Adjustments(1)
|
|
|
914
|
|
|
|
|
|
|
Goodwill at December 31, 2006
|
|
|
76,456
|
|
Acquisitions
|
|
|
4,946
|
|
Divestitures
|
|
|
|
|
Adjustments(2)
|
|
|
(1,612
|
)
|
|
|
|
|
|
Goodwill at December 31, 2007
|
|
$
|
79,790
|
|
|
|
|
|
|
|
|
|
(1) |
|
Primarily relates to foreign currency translation adjustments on
the Royal Wolf acquisition from the date of the acquisition to
the end of December 31, 2006. |
|
(2) |
|
Includes $1.9 million tax related adjustments associated
with the acquisition of Royal Wolf in 2006, partially offset by
foreign currency translation adjustments. |
F-13
MOBILE
MINI, INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Fair
Value of Financial Instruments
We determine the estimated fair value of financial instruments
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
we could realize in a current market exchange.
The carrying amounts of cash, receivables, accounts payable and
accrued liabilities approximate fair values based on the
liquidity of these financial instruments or based on their
short-term nature. The carrying amounts of our borrowings under
our credit facility and notes payable approximate fair value.
The fair values of our notes payable and credit facility are
estimated using discounted cash flow analyses, based on our
current incremental borrowing rates for similar types of
borrowing arrangements. Based on the borrowing rates currently
available to us for bank loans with similar terms and average
maturities, the fair value of fixed rate notes payable at
December 31, 2006 and 2007, approximated the book values.
The fair value of our Senior Notes at December 31, 2006
($97.5 million) and 2007 ($149.4 million), was
approximately $104.1 million and $136.5 million,
respectively. The determination for fair value is based on the
latest sales price at the end of each fiscal year obtained from
a third-party institution.
Deferred
Financing Costs
Included in other assets and intangibles are deferred financing
costs of approximately $4.2 million and $4.8 million,
net of accumulated amortization of $2.3 million and
$1.8 million, at December 31, 2006 and 2007,
respectively. Costs to obtaining long-term financing, including
our amended credit facility, are amortized over the term of the
related debt, using the straight-line method. Amortizing the
deferred financing costs using the straight-line method
approximates such costs using the effective interest method.
Derivatives
In the normal course of business, our operations are exposed to
fluctuations in interest rates. We address a portion of these
risks through a controlled program of risks management that
includes the use of derivative financial instruments. The
objective of controlling these risks is to limit the impact of
fluctuations in interest rates on earnings.
Our primary interest rate risk exposure results from changes in
short-term U.S. dollar interest rates. In an effort to
manage interest rate exposures, we may enter into interest rate
swaps, which convert our floating rate debt to a fixed-rate and
which we designate as cash flow hedges. Interest expense on the
borrowings under these agreements is accrued using the fixed
rates identified in the swap agreements.
We had interest rate swap agreements totaling $50.0 million
at December 31, 2006 and $125.0 million at
December 31, 2007. The fixed interest rate on our five swap
agreements at December 31, 2007 range from 3.66% to 4.63%,
averaging 4.16% plus the spread. Two swap agreements mature in
2008 and three swap agreements mature in 2010.
Derivative transactions resulted in a charge to comprehensive
income at December 31, 2006, of $0.1 million, net of
income tax benefit of $0.1 million. At December 31, 2007,
derivative transactions resulted in a charge to comprehensive
income of $1.3 million, net of income tax benefit of
$0.8 million. Our outstanding interest rate swaps at
December 31, 2006 had a fair-value totaling approximately
$0.9 million, and were included in other assets in our
consolidated balance sheet. Our outstanding interest rate swaps
at December 31, 2007 had a fair-value totaling
approximately $1.3 million and are included in other liabilities
in our consolidated balance sheet.
Share-Based
Compensation
At December 31, 2007, the Company had three active
share-based employee compensation plans. Stock option awards
under these plans are granted with an exercise price per share
equal to the fair market value of our common
F-14
MOBILE
MINI, INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
stock on the date of grant. Each option must expire no more than
10 years from the date it is granted and historically
options are granted with vesting over a 4.5 year period.
Prior to January 1, 2006, the Company accounted for
share-based employee compensation, including stock options,
using the method prescribed in Accounting Principles Board
Opinion No. 25, Accounting for Stock Issued to
Employees and related interpretations (APB Opinion
No. 25). Under APB Opinion No. 25, we did not
recognize compensation cost in connection with stock options
granted at market price, and we disclosed the pro forma effect
on net earnings assuming compensation cost had been recognized
in accordance with Statement of Financial Accounting Standards
No. 123, Accounting for Stock-Based Compensation. On
December 16, 2004, the Financial Accounting Standards Board
issued SFAS No. 123 (revised 2004), Share-Based
Payment (SFAS No. 123(R)), which requires
companies to measure and recognize compensation expense for all
share-based payments at fair value. SFAS No. 123(R)
eliminates the ability to account for share-based compensation
transactions using APB Opinion No. 25, and generally
requires that such transactions to be accounted for using
prescribed fair-value-based methods. SFAS No. 123(R)
permits public companies to adopt its requirements using one of
two methods: (a) a modified prospective method
in which compensation costs are recognized beginning with the
effective date based on the requirements of
SFAS No. 123(R) for all share-based payments granted
or modified after the effective date, and based on the
requirements of SFAS No. 123 for all awards granted to
employees prior to the effective date of
SFAS No. 123(R) that remain unvested on the effective
date, or (b) a modified retrospective method
which includes the requirements of the modified prospective
method described above, but also permits companies to restate
based on the amounts previously recognized under
SFAS No. 123 for purposes of pro forma disclosures
either for all periods presented, or prior interim periods of
the year of adoption. The Company adopted
SFAS No. 123(R) effective January 1, 2006, using
the modified prospective method. Other than nonvested
share-awards, no share-based employee compensation cost has been
reflected in net income prior to the adoption of
SFAS No. 123(R). Results for prior periods have not
been restated.
SFAS No. 123(R) prohibits the recognition of a
deferred tax asset for an excess tax benefit that has not been
realized related to stock-based compensation deductions. We
adopted the
with-and-without
approach with respect to the ordering of tax benefits realized.
In the
with-and-without
approach, the excess tax benefit related to stock-based
compensation deductions will be recognized in additional paid-in
capital only if an incremental tax benefit would be realized
after considering all other tax benefits presently available to
us. Therefore, our net operating loss carryforward will offset
current taxable income prior to the recognition of the tax
benefit related to stock-based compensation deductions. In 2006
and 2007, there were $3.6 million and $3.4 million,
respectively, of excess tax benefits related to stock-based
compensation, which were not realized under this approach. Once
our net operating loss carryforward is utilized, these excess
tax benefits, totaling $7.0 million, may be recognized in
additional paid-in capital.
Foreign
Currency Translation and Transactions
For our
non-United
States operations, the local currency is the functional
currency. All assets and liabilities are translated into United
States dollars at period-end exchange rates and all income
statement amounts are translated at the average exchange rate
for each month within the year.
Use of
Estimates
The preparation of financial statements in conformity with
accounting principles generally accepted in the United States
requires management to make estimates and assumptions that
affect the amounts reported in the accompanying consolidated
financial statements and the notes to those statements. Actual
results could differ from those estimates. The most significant
estimates included within the financial statements are the
allowance for doubtful accounts, the estimated useful lives and
residual values on the lease fleet and property, plant and
equipment and goodwill and other asset impairments.
F-15
MOBILE
MINI, INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Impact
of Recently Issued Accounting Standards
In June 2006, the Financial Accounting Standards Board (FASB)
issued Financial Interpretation No. (FIN) 48, Accounting for
Uncertainty in Income Taxes, which clarifies the accounting
for uncertainty in income taxes recognized in an
enterprises financial statements in accordance with FASB
Statement No. 109, Accounting for Income Taxes. The
interpretation prescribes a recognition threshold and
measurement attribute for the financial statement recognition
and measurement of a tax position taken or expected to be taken
in a tax return. FIN 48 is effective for fiscal years
beginning after December 15, 2006. We adopted this
interpretation as of January 1, 2007. Adoption of
FIN 48 did not have a material effect in our results of
operation or financial condition.
In September 2006, the FASB issued SFAS No. 157,
Fair Value Measurement (SFAS No. 157).
SFAS No. 157 defines fair value, establishes a
framework for measuring fair value in generally accepted
accounting principles, and expands disclosures about fair value
measurements. SFAS No. 157 is effective for fiscal
years beginning after November 15, 2007 and interim periods
within those fiscal years. We are in the process of determining
the effect, if any, that the adoption of SFAS No. 157
will have on our consolidated financial statements.
On February 15, 2007, the FASB issued
SFAS No. 159, The Fair Value Option for Financial
Assets and Financial Liabilities (SFAS No. 159).
Under this Standard, we may elect to report financial
instruments and certain other items at fair value on a
contract-by-contract
basis with changes in value reported in earnings. This election
is irrevocable. SFAS No. 159 provides an opportunity
to mitigate volatility in reported earnings that is caused by
measuring hedged assets and liabilities that were previously
required to use a different accounting method than the related
hedging contracts when the complex provisions of
SFAS No. 133 hedge accounting are not met.
SFAS No. 159 is effective for years beginning after
November 15, 2007. We are currently evaluating the
potential impact of adopting this Standard.
In June 2007, the FASB ratified the Emerging Issues Task Force
(EITF) consensus on EITF Issue
No. 06-11,
Accounting for Income Tax Benefits on Dividends on
Share-based Payment Awards. This EITF indicates tax benefits
of dividends on unvested restricted stock are to be recognized
in equity as an increase in the pool of excess tax benefits. If
the related awards are forfeited or are no longer expected to
vest, then the benefits are to be reclassified from equity to
the income statement. The EITF is effective for fiscal years
beginning after December 15, 2007. We do not expect the
adoption of EITF Issue
No. 06-11
will have a material effect on our results of operations or
financial condition.
In December 2007, the FASB issued SFAS No. 141
(revised 2007), Business Combinations
(SFAS No. 141R). SFAS No. 141R
establishes principles and requirements for how an acquirer
recognizes and measures in its financial statements the
identifiable assets acquired, the liabilities assumed, any
non-controlling interest in the acquiree and the goodwill
acquired. Under SFAS No. 141R, an acquiring entity
will be required to recognize all the assets acquired and
liabilities assumed in a transaction at the acquisition-due fair
value with limited exceptions. SFAS No. 141R also
establishes disclosure requirements to enable the evaluation of
the nature and financial effects of the business combination.
This statement is effective for fiscal years beginning after
December 15, 2008. We are currently evaluating the
potential impact of the adoption of SFAS No. 141R on
our results of operations or financial condition.
In December 2007, the FASB issued Statement of Financial
Accounting Standards No. 160, Noncontrolling Interests
in Consolidated Financial Statements (an amendment of
Accounting Research Bulletin (ARB 51)) (SFAS No. 160).
SFAS No. 160 amends ARB 51 to establish accounting and
reporting standards for the noncontrolling interest in a
subsidiary and for the deconsolidation of a subsidiary.
SFAS No. 160 becomes effective beginning
January 1, 2009. Presently, there are no non-controlling
interests in any of the Companys consolidated
subsidiaries, therefore, we do not expect the adoption of
SFAS No. 160 to have a significant impact on our
results of operations or financial conditions.
F-16
MOBILE
MINI, INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Our lease fleet primarily consists of refurbished, modified and
manufactured portable storage and office units that are leased
to customers under short-term operating lease agreements with
varying terms. Depreciation is provided using the straight-line
method over our units estimated useful life, after the
date we put the unit in service, and are depreciated down to
their estimated residual values. Our depreciation policy on our
steel units uses an estimated useful life of 25 years with
an estimated residual value of 62.5%. Wood mobile office units
are depreciated over 20 years down to a 50% residual value.
Van trailers, which are a small part of our fleet, are
depreciated over 7 years to a 20% residual value. Van
trailers are only added to the fleet in connection with
acquisitions of portable storage businesses. In the opinion of
management, estimated residual values do not cause carrying
values to exceed net realizable value. We continue to evaluate
these depreciation policies as more information becomes
available from other comparable sources and our own historical
experience. Our depreciation expense related to lease fleet for
2005, 2006 and 2007 was $9.5 million, $12.0 million
and $14.5 million, respectively. At December 31, 2006
and 2007, all of our lease fleet units were pledged as
collateral under the credit facility (see Note 3). Normal
repairs and maintenance to the portable storage and mobile
office units are expensed as incurred.
Lease fleet at December 31, consists of the following:
|
|
|
|
|
|
|
|
|
|
|
2006
|
|
|
2007
|
|
|
|
(In thousands)
|
|
|
Steel storage containers
|
|
$
|
423,766
|
|
|
$
|
459,665
|
|
Offices
|
|
|
320,160
|
|
|
|
402,640
|
|
Van trailers
|
|
|
2,702
|
|
|
|
2,330
|
|
Other, primarily chassis
|
|
|
479
|
|
|
|
956
|
|
|
|
|
|
|
|
|
|
|
|
|
|
747,107
|
|
|
|
865,591
|
|
Accumulated depreciation
|
|
|
(49,668
|
)
|
|
|
(62,668
|
)
|
|
|
|
|
|
|
|
|
|
|
|
$
|
697,439
|
|
|
$
|
802,923
|
|
|
|
|
|
|
|
|
|
|
On May 7, 2007, we amended our revolving credit facility by
increasing the facility by $75.0 million to
$425.0 million and executed a First Amendment to Second
Amended and Restated Loan and Security Agreement with our
lenders. Borrowings of up to $425.0 million are available
under this revolving facility, based on the value of our lease
fleet, property, plant, equipment, and levels of inventories and
receivables. Under the amended revolving credit facility we may
further increase the maximum borrowing limit to
$500.0 million without our lenders consent, as long
as we are in compliance with the terms of the agreement. The
Agreement provides up to $100.0 million may be borrowed in
Euros as well as Pounds Sterling. Borrowings under the facility
are, at our option, at either a spread from the prime rate or
LIBOR rates, as defined. The credit facility is scheduled to
expire in May 2012.
Our revolving credit facility has covenants that can restrict
the conduct of our business if we go into default under the
agreement or if we do not maintain borrowing availability in
excess of certain pre-determined levels (generally between
$42.0 million and $75.0 million). If our borrowing
availability is below a specified level, the revolving credit
facility triggers covenants restricting (or in some cases,
further restricting) our ability to, among other things:
(i) declare cash dividends, or redeem or repurchase our
capital stock in excess of $10.0 million; (ii) prepay,
redeem or purchase other debt; (iii) incur liens;
(iv) make loans and investments; (v) incur additional
indebtedness; (vi) amend or otherwise alter debt and other
material agreements; (vii) make capital expenditures;
(viii) engage in mergers, acquisitions and asset sales;
(ix) transact with affiliates; and (x) alter the
business we conduct. We also must comply with specified
financial covenants and affirmative covenants. Should we fall
below
F-17
MOBILE
MINI, INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
specified borrowing availability levels, then these financial
covenants would set maximum permitted values for our leverage
ratio (as defined), fixed charge coverage ratio and our minimum
required utilization rates. At December 31, 2006 and
December 31, 2007, we were in compliance with those
covenants.
Borrowings under this revolving credit facility are secured by a
lien on substantially all of our present and future assets. The
lease fleet is appraised at least once annually by a third-party
appraisal firm and up to 90% of the lesser of cost or appraised
orderly liquidation value, as defined, may be included in the
borrowing base to determine how much we may borrow under this
facility. The interest rate spread from LIBOR and the prime rate
can change under the facility, based on a quarterly calculation
of our ratio of funded debt to earnings before interest expense,
taxes, depreciation and amortization and certain excluded
expenses during the prior 12 month. At December 31,
2007, the prime rate was 7.25% and our weighted average LIBOR
rate, including the effect of our interest rate swap agreements,
was 6.22% on our outstanding balance of $237.9 million. We
had approximately $183.7 million of availability at
December 31, 2007, under our funded debt to EBITDA covenant.
Our revolving credit facility had outstanding balances of
$203.7 million and $237.9 million at December 31,
2006 and 2007, respectively. In 2007, we used proceeds from the
issuance of our $150.0 million 6.875% Senior Notes to
redeem $97.5 million aggregate principal amount outstanding
to our 9.5% Senior Notes plus the redemption premium and
accrued and unpaid interest. During 2006, we used proceeds from
a common stock offering, in part to redeem 35%, or
$52.5 million, of the $150.0 million aggregate
principal amount outstanding of our 9.5% Senior Notes plus
the redemption premium and accrued and unpaid interest thereon.
The weighted average interest rate under the line of credit,
including the effect of applicable interest rate swap
agreements, was approximately 6.5% in 2006 and 6.3% in 2007. The
average balance outstanding during 2006 and 2007 was
approximately $184.2 million and $210.5 million,
respectively.
We have interest rate swap agreements under which we effectively
fixed the interest rate payable on $125.0 million of
borrowings under our credit facility so that the interest rate
is based on a spread from a fixed rate rather than a spread from
the LIBOR rate. We account for the swap agreements in accordance
with SFAS No. 133 and the aggregate change in the fair
value of the interest rate swap agreements resulted in a charge
to comprehensive income for the year ended December 31,
2007 of $1.3 million, net of applicable income tax benefit
of $0.8 million.
Notes payable at December 31, consist of the following:
|
|
|
|
|
|
|
|
|
|
|
2006
|
|
|
2007
|
|
|
|
(In thousands)
|
|
|
Notes payable to financial institution, interest at 5.94%,
payable in fixed monthly installments, maturing June and July
2008, unsecured
|
|
$
|
|
|
|
$
|
743
|
|
Notes payable to financial institution, interest at 8.25% and
6.3%, payable in fixed monthly installments, matured June and
July 2007, unsecured
|
|
|
781
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
781
|
|
|
$
|
743
|
|
|
|
|
|
|
|
|
|
|
All payments of notes payable are scheduled to mature in 2008.
|
|
(5)
|
Obligations
Under Capital Leases
|
We have two capital lease obligations for office related
equipment which had outstanding balances at December 31,
2007 of $10,000, which have terms ending in 2010.
F-18
MOBILE
MINI, INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
|
|
(6)
|
Equity
and Debt Issuances:
|
In May 2007, we received net proceeds of approximately
$146.3 million, after underwriters discounts and
commissions, from our issuance of $150.0 million of
6.875% Senior Notes. The Senior Notes were issued at a
discount of $0.7 million which is reflected as a reduction of
the balance of Senior Notes on our consolidated balance sheet at
December 31, 2007. We also incurred costs of approximately
$3.6 million which are included, net of amortization of
$0.4 million, in other assets on our consolidated balance
sheet at December 31, 2007. Included in the $3.6 million
figure is approximately $3.0 million relating to
underwriters discounts and commissions. We used these
proceeds to redeem the aggregate principal amount outstanding of
our 9.5% Senior Notes, ($97.5 million), plus we paid
accrued interest, transaction costs and the redemption premium
on the 9.5% Notes. The additional net proceeds to us of
approximately $33.2 million were used to repay borrowings
under our revolving line of credit.
In March 2006, pursuant to a public offering, we issued
4.6 million shares of our common stock at approximately
$26.22 per share, after underwriting discounts and commissions,
but before other expenses. We received net offering proceeds of
approximately $120.3 million which we used to redeem 35% of
the $150 million aggregate principle amount outstanding of
our 9.5% Senior Notes and to pay down our revolving line of
credit.
The scheduled maturity for debt obligations under our revolving
line of credit, notes payable, obligations under capital leases
and Senior Notes for balances outstanding at December 31,
2007 (in thousands) are as follows:
|
|
|
|
|
2008
|
|
$
|
751
|
|
2009
|
|
|
1
|
|
2010
|
|
|
1
|
|
2011
|
|
|
|
|
2012
|
|
|
237,857
|
|
Thereafter
|
|
|
150,000
|
|
|
|
|
|
|
|
|
$
|
388,610
|
|
|
|
|
|
|
Income (loss) before taxes for the years ended December 31,
consisted of the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2005
|
|
|
2006
|
|
|
2007
|
|
|
|
(In thousands)
|
|
|
U.S.
|
|
$
|
53,992
|
|
|
$
|
69,260
|
|
|
$
|
75,355
|
|
Other Nations
|
|
|
216
|
|
|
|
667
|
|
|
|
(2,769
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
54,208
|
|
|
$
|
69,927
|
|
|
$
|
72,586
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-19
MOBILE
MINI, INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
The provision (benefit) for income taxes for the years ended
December 31, consisted of the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2005
|
|
|
2006
|
|
|
2007
|
|
|
|
(In thousands)
|
|
|
Current:
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Federal
|
|
$
|
106
|
|
|
$
|
250
|
|
|
$
|
|
|
State
|
|
|
17
|
|
|
|
238
|
|
|
|
413
|
|
Other Nations
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
123
|
|
|
|
488
|
|
|
|
413
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred:
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Federal
|
|
|
17,834
|
|
|
|
22,961
|
|
|
|
24,845
|
|
State
|
|
|
2,179
|
|
|
|
3,407
|
|
|
|
3,978
|
|
Other Nations
|
|
|
84
|
|
|
|
295
|
|
|
|
(826
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
20,097
|
|
|
|
26,663
|
|
|
|
27,997
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
20,220
|
|
|
$
|
27,151
|
|
|
$
|
28,410
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The components of the net deferred tax liability at
December 31, are approximately as follows:
|
|
|
|
|
|
|
|
|
|
|
2006
|
|
|
2007
|
|
|
|
(In thousands)
|
|
|
Deferred tax assets:
|
|
|
|
|
|
|
|
|
Net operating loss carryforwards
|
|
$
|
17,399
|
|
|
$
|
24,761
|
|
Deferred revenue and expenses
|
|
|
5,155
|
|
|
|
5,845
|
|
Accrued compensation and other benefits
|
|
|
2,200
|
|
|
|
2,423
|
|
Allowance for doubtful accounts
|
|
|
1,856
|
|
|
|
1,392
|
|
Other
|
|
|
1,808
|
|
|
|
2,312
|
|
|
|
|
|
|
|
|
|
|
Total deferred tax assets
|
|
|
28,418
|
|
|
|
36,733
|
|
Valuation allowance
|
|
|
(2,326
|
)
|
|
|
(1,126
|
)
|
|
|
|
|
|
|
|
|
|
Net deferred tax assets
|
|
|
26,092
|
|
|
|
35,607
|
|
|
|
|
|
|
|
|
|
|
Deferred tax liabilities:
|
|
|
|
|
|
|
|
|
Accelerated tax depreciation
|
|
|
(113,929
|
)
|
|
|
(147,042
|
)
|
Accelerated tax amortization
|
|
|
(8,365
|
)
|
|
|
(11,277
|
)
|
Other
|
|
|
(1,305
|
)
|
|
|
(759
|
)
|
|
|
|
|
|
|
|
|
|
Total deferred tax liabilities
|
|
|
(123,599
|
)
|
|
|
(159,078
|
)
|
|
|
|
|
|
|
|
|
|
Net deferred tax liabilities
|
|
$
|
(97,507
|
)
|
|
$
|
(123,471
|
)
|
|
|
|
|
|
|
|
|
|
A deferred U.S. tax liability has not been provided on the
undistributed earnings of certain foreign subsidiaries because
it is our intent to permanently reinvest such earnings.
Undistributed earnings of foreign subsidiaries, which have been,
or are intended to be, permanently invested in accordance with
APB No. 23, Accounting for Income Taxes
Special Areas, aggregated approximately $0.1 million
and $0.1 million as of December 31, 2006 and 2007,
respectively. A net deferred tax asset of $1.3 million and
a net deferred tax liability of approximately $0.2 million
related to our United Kingdom and The Netherlands operations,
respectively, have been combined with the net deferred tax
liabilities of our United States operations in our consolidated
balance sheet at December 31, 2007.
F-20
MOBILE
MINI, INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
A reconciliation of the U.S. federal statutory rate to
Mobile Minis effective tax rate for the years ended
December 31, is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2005
|
|
|
2006
|
|
|
2007
|
|
|
U.S. federal statutory rate
|
|
|
35.0
|
%
|
|
|
35.0
|
%
|
|
|
35.0
|
%
|
State taxes, net of federal benefit
|
|
|
3.5
|
|
|
|
3.5
|
|
|
|
3.5
|
|
Nondeductible expenses
|
|
|
|
|
|
|
0.4
|
|
|
|
0.6
|
|
Change in valuation allowance
|
|
|
(1.2
|
)
|
|
|
(0.1
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
37.3
|
%
|
|
|
38.8
|
%
|
|
|
39.1
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At December 31, 2007, we had a federal net operating loss
carryforward of approximately $78.2 million which expires
if unused from 2018 to 2027. At December 31, 2007, we had
net operating loss carryforwards in the various states in which
we operate totaling $47.9 million. These state net
operating losses expire if unused from 2008 to 2027. At
December 31, 2006 and 2007, our deferred tax assets do not
include $3.6 million and $7.0 million of excess tax
benefits from employee stock option exercises that are a
component of our net operating loss carryforward. Additional
paid in capital will be increased by $7.0 million if and
when such excess tax benefits are realized. Management evaluates
the ability to realize its deferred tax assets on a quarterly
basis and adjusts the amount of its valuation allowance if
necessary. As a result, in prior years we recorded a valuation
allowance relating to state loss carryforwards expected to
expire. We subsequently recorded a reduction in the valuation
allowance of $0.7 million in 2005 and $0.3 million in
2006 based upon changes in expected taxable income that caused
the assessment of recoverability to improve. Additionally, in
2006, management recorded a valuation allowance in the amount of
$2.3 million on some of the tax attribute carryforwards
acquired as a part of the Royal Wolf acquisition. This allowance
relates to a portion of the acquired loss carryforwards that may
not be eligible for use depending on certain historic and future
events. Should such allowance become recoverable, it would be
recorded as a reduction to goodwill relating to the acquisition.
In 2007, we determined that an additional $1.2 million of
the Royal Wolf loss carryforwards would be available to offset
future taxable income. Accordingly, the valuation allowance was
reduced from $2.3 million to $1.1 million as an offset
to previously recorded goodwill. Accelerated tax amortization
primarily relates to amortization of goodwill for income tax
purposes.
On January 1, 2007, we adopted the provision of
FIN 48, Accounting for Uncertainty in Income Taxes-an
interpretation of FASB Statement No. 109. FIN 48
contains a two-step approach to recognizing and measuring
uncertain tax positions accounted for in accordance with SFAS
No. 109, Accounting for Income Taxes. The first step
is to evaluate the tax position for recognition by determining
if the weight of available evidence indicates that it is more
likely than not that the position will be sustained on audit,
including resolution of related appeals or litigation process,
if any. The second step is to measure the tax benefit as the
largest amount that is more than 50% likely of being realized
upon ultimate settlement.
We file U.S. federal tax returns, U.S. state tax returns, and
foreign tax returns. We have identified our U.S. Federal tax
return as our major tax jurisdiction. For the U.S.
Federal return, years 2003 through 2006 are subject to tax
examination by the U.S. Internal Revenue Service. We do not
currently have any ongoing tax examinations with the IRS. We
believe that our income tax filing positions and deductions will
be sustained on audit and do not anticipate any adjustments that
will result in a material change to our financial position.
Therefore, no reserves for uncertain income tax positions have
been recorded pursuant to FIN 48. In addition, we do not
record a cumulative effect adjustment related to the adoption of
FIN 48. We did not anticipate that the total amount of
unrecognized tax related to any particular tax benefit position
will change significantly within the next 12 months.
Our policy for recording interest and penalties associated with
audits is to record such items as a component of income before
taxes. Penalties and associated interest costs are recorded in
leasing, selling and general expenses in our consolidated
statements of income.
F-21
MOBILE
MINI, INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
As a result of stock ownership changes during the years
presented, it is possible that we have undergone a change in
ownership for federal income tax purposes, which can limit the
amount of net operating loss currently available as a deduction.
Management has determined that even if such an ownership change
has occurred, it would not impair the realization of the
deferred tax asset resulting from the federal net operating loss
carryover.
We paid income taxes of approximately $0.5 million,
$0.7 million and $0.8 million in 2005, 2006 and 2007,
respectively. These amounts are lower than the recorded expense
in the years due to net operating loss carryforwards and general
business credit utilization.
|
|
(8)
|
Transactions
with Related Persons:
|
When we were a private company prior to 1994, we leased some of
our properties from entities controlled by our founder, Richard
E. Bunger, and his family members. These related party leases
remain in effect. We lease a portion of the property comprising
our Phoenix location and the property comprising our Tucson
location from entities owned by Steven G. Bunger and his
siblings. Steven G. Bunger is our President and Chief Executive
Officer and has served as our Chairman of the Board since
February 2001. Annual lease payments under these leases totaled
approximately $91,000, $91,000 and $94,000 in 2005, 2006 and
2007, respectively. The term of each of these leases expires on
December 31, 2008. Mobile Mini leases its Rialto,
California facility from Mobile Mini Systems, Inc., a
corporation wholly owned by Barbara M. Bunger, the mother of
Steven G. Bunger. Annual lease payments in 2005, 2006 and 2007
under this lease were approximately $267,000, $277,000 and
$282,000 respectively. The Rialto lease expires on April 1,
2016. Management believes that the rental rates reflect the fair
market rental value of these properties. These related persons
lease agreements have been reviewed by the independent directors
who comprise a majority of the members of our Board of Directors.
It is Mobile Minis intention not to enter into any
additional related person transactions other than extensions of
lease agreements.
|
|
(9)
|
Share-Based
Compensation
|
Prior to January 1, 2006, we accounted for share-based
employee compensation, including stock options, using the method
prescribed in APB No. 25. Under APB No. 25, the stock
options granted at market price, no compensation cost was
recognized, and a disclosure was made regarding the pro forma
effect on net earnings assuming compensation cost had been
recognized in accordance with SFAS No. 123. Effective
January 1, 2006, we adopted SFAS No. 123(R) using
the modified prospective method.
The adoption of SFAS No. 123(R) and nonvested share
expense reduced income before income tax expense for the period
ended December 31, 2007, by approximately $4.0 million
and reduced net income by approximately $2.5 million. As a
result, basic and diluted earnings per share for
December 31, 2007 were reduced by approximately $0.08 and
$0.07, respectively. In 2006, we capitalized approximately
$0.4 million of compensation costs related to stock options
and nonvested share-awards to the lease fleet.
On November 10, 2005, the FASB issued FASB Staff Position
No. FAS 123(R)-3, Transition Election Related to
Accounting for Tax Effects of Share-Based Payment Awards. We
have elected to adopt the alternative transition method provided
in the FASB Staff Position for calculating the effects of
share-based compensation pursuant to FAS 123(R). The
alternative transition method includes a simplified method to
establish the beginning balance of the additional paid in
capital pool (APIC pool) related to the tax effects of employee
share-based compensation, which is available to absorb tax
deficiencies recognized subsequent to the adoption of
FAS 123(R).
In 2005, we began awarding nonvested shares under the existing
share-based compensation plans. The majority of our nonvested
share-awards vest in equal annual installments over a five year
period. The total value of these awards is expensed on a
straight-line basis over the service period of the employees
receiving the grants. The service period is the time
during which the employees receiving grants must remain
employees for the shares granted to fully vest. In December
2007, we granted to certain of our executive officers 71,899
nonvested share-
F-22
MOBILE
MINI, INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
awards with vesting subject to a performance condition. Vesting
for these share-awards is dependent upon the officers fulfilling
the service period requirements, as well as our meeting certain
EBITDA targets in each of the next four years. At the date of
grant, the EBITDA targets were not known, and as such, the
measurement date for the nonvested share-awards had not yet
occurred. This target was established by our Board of Directors
on February 20, 2008, at which point, the value of each
nonvested share-award was $15.85. We are required to assess the
probability that such performance conditions will be met. If the
likelihood of the performance condition being met is deemed
probable, we will recognize the expense using accelerated
attribution method. The accelerated attribution method could
result in as much as 50% of the total value of the shares being
recognized in the first year of the service period if each of
the four future targets are assessed as probable of being met.
Share-based compensation expense related to nonvested
share-awards outstanding during the period ended
December 31, 2007, was approximately $1.8 million. As
of December 31, 2007, the total amount of unrecognized
compensation cost related to nonvested share-awards was
approximately $11.5 million, which is expected to be
recognized over a weighted-average period of approximately
4.0 years.
The total value of the stock option awards is expensed on a
straight-line basis over the service period of the employees
receiving the awards. As of December 31, 2007, total
unrecognized compensation cost related to stock option awards
was approximately $4.7 million and the related
weighted-average period over which it is expected to be
recognized is approximately 1.9 years.
Prior to the adoption of SFAS No. 123(R), we presented
all tax benefits for deductions resulting from the exercise of
stock options as operating cash flows as a change in deferred
income tax in the condensed consolidated statements of cash
flows. SFAS No. 123(R) requires the cash flows
resulting from the tax benefits arising from tax deductions in
excess of the compensation cost recognized for those options
(excess tax benefits) to be classified as financing cash flows.
As of December 31, 2007, we had no tax benefits arising
from tax deductions in excess of the compensation cost
recognized because the benefit has not been realized
given that we currently have net operating loss carryforwards
and follow the
with-and-without
approach with respect to the ordering of tax benefits realized.
The following table summarizes the activities under our stock
option plans for the years ended December 31 (number of shares
in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2005
|
|
|
2006
|
|
|
2007
|
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
|
Average
|
|
|
|
|
|
Average
|
|
|
|
|
|
Average
|
|
|
|
Number of
|
|
|
Exercise
|
|
|
Number of
|
|
|
Exercise
|
|
|
Number of
|
|
|
Exercise
|
|
|
|
Shares
|
|
|
Price
|
|
|
Shares
|
|
|
Price
|
|
|
Shares
|
|
|
Price
|
|
|
Options outstanding, beginning of year
|
|
|
3,732
|
|
|
$
|
11.38
|
|
|
|
2,964
|
|
|
$
|
14.00
|
|
|
|
2,609
|
|
|
$
|
15.86
|
|
Granted
|
|
|
524
|
|
|
|
23.97
|
|
|
|
215
|
|
|
|
29.99
|
|
|
|
9
|
|
|
|
30.47
|
|
Canceled/Expired
|
|
|
(137
|
)
|
|
|
(13.01
|
)
|
|
|
(71
|
)
|
|
|
(20.02
|
)
|
|
|
(71
|
)
|
|
|
(21.67
|
)
|
Exercised
|
|
|
(1,155
|
)
|
|
|
(10.17
|
)
|
|
|
(499
|
)
|
|
|
(10.26
|
)
|
|
|
(519
|
)
|
|
|
(10.80
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options outstanding, end of year
|
|
|
2,964
|
|
|
$
|
14.00
|
|
|
|
2,609
|
|
|
$
|
15.87
|
|
|
|
2,028
|
|
|
$
|
17.02
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options exercisable, end of year
|
|
|
1,457
|
|
|
$
|
12.33
|
|
|
|
1,425
|
|
|
$
|
13.95
|
|
|
|
1,344
|
|
|
$
|
15.63
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options and awards available for grant, end of year
|
|
|
361
|
|
|
|
|
|
|
|
1,234
|
|
|
|
|
|
|
|
958
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-23
MOBILE
MINI, INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
A summary of nonvested share-awards activity within our
share-based compensation plans and changes is as follows (share
amounts in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
|
Average
|
|
|
|
|
|
|
Grant Date
|
|
|
|
Shares
|
|
|
Fair Value
|
|
|
Nonvested at January 1, 2005
|
|
|
|
|
|
$
|
|
|
Awarded
|
|
|
97
|
|
|
|
23.56
|
|
Released
|
|
|
|
|
|
|
|
|
Forfeited
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nonvested at December 31, 2005
|
|
|
97
|
|
|
$
|
23.56
|
|
Awarded
|
|
|
182
|
|
|
|
29.59
|
|
Released
|
|
|
(19
|
)
|
|
|
23.56
|
|
Forfeited
|
|
|
(1
|
)
|
|
|
27.70
|
|
|
|
|
|
|
|
|
|
|
Nonvested at December 31, 2006
|
|
|
259
|
|
|
$
|
27.61
|
|
Awarded
|
|
|
339
|
|
|
|
19.47
|
|
Released
|
|
|
(58
|
)
|
|
|
27.26
|
|
Forfeited
|
|
|
(8
|
)
|
|
|
27.67
|
|
|
|
|
|
|
|
|
|
|
Nonvested at December 31, 2007
|
|
|
532
|
|
|
$
|
22.46
|
|
|
|
|
|
|
|
|
|
|
The total fair value of share-awards vested in 2007 was
$1.6 million. The total fair value of share-awards vested
in 2006 was $0.5 million.
Options outstanding and exercisable by price range as of
December 31, 2007 are as follows, (number of shares in
thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options Outstanding
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
Options Exercisable
|
|
|
|
|
|
|
Average
|
|
|
Weighted
|
|
|
|
|
|
Weighted
|
|
Range of
|
|
|
|
|
Remaining
|
|
|
Average
|
|
|
|
|
|
Average
|
|
Exercise
|
|
Options
|
|
|
Contractual
|
|
|
Exercise
|
|
|
Options
|
|
|
Exercise
|
|
Prices
|
|
Outstanding
|
|
|
Life
|
|
|
Price
|
|
|
Exercisable
|
|
|
Price
|
|
|
$ 5.06 - $ 9.53
|
|
|
159
|
|
|
|
3.95
|
|
|
$
|
7.63
|
|
|
|
159
|
|
|
$
|
7.63
|
|
9.93 - 9.93
|
|
|
250
|
|
|
|
5.88
|
|
|
|
9.93
|
|
|
|
150
|
|
|
|
9.93
|
|
10.44 - 13.75
|
|
|
64
|
|
|
|
3.34
|
|
|
|
11.37
|
|
|
|
64
|
|
|
|
11.37
|
|
14.11
|
|
|
426
|
|
|
|
6.82
|
|
|
|
14.11
|
|
|
|
188
|
|
|
|
14.11
|
|
15.77
|
|
|
30
|
|
|
|
3.58
|
|
|
|
15.77
|
|
|
|
30
|
|
|
|
15.77
|
|
16.46
|
|
|
533
|
|
|
|
3.95
|
|
|
|
16.46
|
|
|
|
533
|
|
|
|
16.46
|
|
16.82 - 20.55
|
|
|
50
|
|
|
|
7.55
|
|
|
|
20.28
|
|
|
|
47
|
|
|
|
20.44
|
|
24.65
|
|
|
308
|
|
|
|
7.81
|
|
|
|
24.65
|
|
|
|
92
|
|
|
|
24.65
|
|
27.56 - 31.10
|
|
|
162
|
|
|
|
8.80
|
|
|
|
28.92
|
|
|
|
63
|
|
|
|
29.37
|
|
33.98
|
|
|
46
|
|
|
|
8.34
|
|
|
|
33.98
|
|
|
|
18
|
|
|
|
33.98
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,028
|
|
|
|
|
|
|
|
|
|
|
|
1,344
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-24
MOBILE
MINI, INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
A summary of stock option activity, as of December 31,
2007, is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
|
|
|
|
|
|
|
Average
|
|
|
|
|
|
|
|
|
|
Weighted
|
|
|
Remaining
|
|
|
|
|
|
|
|
|
|
Average
|
|
|
Contractual
|
|
|
Aggregate
|
|
|
|
Number
|
|
|
Exercise
|
|
|
Term
|
|
|
Intrinsic
|
|
|
|
of Shares
|
|
|
Price
|
|
|
(In Years)
|
|
|
Value
|
|
|
|
(In thousands)
|
|
|
|
|
|
|
|
|
(In thousands)
|
|
|
Outstanding
|
|
|
2,028
|
|
|
$
|
17.02
|
|
|
|
5.93
|
|
|
$
|
7,430
|
|
Vested and expected to vest
|
|
|
1,783
|
|
|
$
|
16.41
|
|
|
|
5.70
|
|
|
$
|
6,957
|
|
Exercisable
|
|
|
1,344
|
|
|
$
|
15.63
|
|
|
|
5.20
|
|
|
$
|
5,515
|
|
The aggregate intrinsic value of options exercised during the
period ended December 31, 2005, 2006 and 2007 was
$12.4 million, $9.7 million and $10.0 million,
respectively.
The fair value of each stock option award is estimated on the
date of the grant using the Black-Scholes option pricing model.
The following are the weighted average assumptions used for the
periods noted:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
|
2005
|
|
|
2006
|
|
|
2007
|
|
|
Risk-free interest rate
|
|
|
4.40
|
%
|
|
|
4.79
|
%
|
|
|
4.59
|
%
|
Expected holding period (years)
|
|
|
5.2
|
|
|
|
3.2
|
|
|
|
3.0
|
|
Expected stock volatility
|
|
|
34.5
|
%
|
|
|
35.3
|
%
|
|
|
33.2
|
%
|
Expected dividend rate
|
|
|
0.0
|
%
|
|
|
0.0
|
%
|
|
|
0.0
|
%
|
The Black-Scholes option valuation model was developed for use
in estimating the fair value of short-traded options that have
no vesting restrictions and are fully transferable. In addition,
option valuation models require the input of assumptions
including expected stock price volatility. The risk-free
interest rate is based on the U.S. treasury security rate
in effect at the time of the grant. The expected holding period
of options and volatility rates are based on our historical
data. We do not anticipate paying a dividend, and therefore no
expected dividend yield was used.
The weighted average fair value of stock options granted was
$9.26, $9.15 and $8.56 for 2005, 2006 and 2007, respectively.
The following table illustrates the effect on net income and
earnings per share as if we had applied the fair value
recognition provisions of SFAS No. 123 to all
outstanding stock option awards prior to our adoption of
SFAS No. 123(R) for the year ended December 31:
|
|
|
|
|
|
|
2005
|
|
|
|
(In thousand except
|
|
|
|
per share data)
|
|
|
Net income, as reported
|
|
$
|
33,988
|
|
Deduct: Total stock-based employee compensation expense
determined under fair value based method for all awards, net of
related tax effects
|
|
|
2,798
|
|
|
|
|
|
|
Pro-forma net income
|
|
$
|
31,190
|
|
|
|
|
|
|
Earnings per share:
|
|
|
|
|
Basic, as reported
|
|
$
|
1.14
|
|
Basic, pro forma
|
|
$
|
1.04
|
|
Diluted, as reported
|
|
$
|
1.10
|
|
Diluted, pro forma
|
|
$
|
1.01
|
|
F-25
MOBILE
MINI, INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Stock
Option and Equity Incentive Plans
In August 1994, our Board of Directors adopted the Mobile Mini,
Inc. 1994 Stock Option Plan, which was amended in 1998 and
expired (with respect to granting additional options) in 2003.
At December 31, 2007, there were outstanding options to
acquire 89,000 shares under the 1994 Plan. In August 1999,
our Board of Directors approved the Mobile Mini, Inc. 1999 Stock
Option Plan. As of December 31, 2007, there were
outstanding options to acquire 1.9 million shares under the
1999 Plan. Both plans and amendments were approved by the
stockholders at annual meetings. Awards granted under the 1999
Plan may be incentive stock options, which are intended to meet
the requirements of Section 422 of the Internal Revenue
Code, nonstatuatory stock options or shares of restricted stock
awards. Incentive stock options may be granted to our officers
and other employees. Nonstatutory stock options may be granted
to directors and employees, and to non-employee service
providers and share-awards may be made to officers and other
employees.
In February 2006, our Board of Directors approved the 2006
Equity Incentive Plan that was subsequently approved by the
stockholders at our 2006 Annual Meeting. The 2006 Plan is an
omnibus stock plan permitting a variety of equity
programs designed to provide flexibility in implementing equity
and cash awards, including incentive stock options, nonqualified
stock options, nonvested share-awards, restricted stock units,
stock appreciation rights, performance stock, performance units
and other stock-based awards. Participants in the 2006 Plan may
be granted any one of the equity awards or any combination of
them, as determined by the Board of Directors or the
Compensation Committee. The 2006 Plan has reserved
1.2 million shares of common stock for issuance. As of
December 31, 2007, there were outstanding options to
acquire 36,250 shares under the 2006 Plan.
The purpose of these plans is to attract and retain the best
available personnel for positions of substantial responsibility
and to provide incentives to, and to encourage ownership of
stock by, our management and other employees. The Board of
Directors believes that stock options and other share-based
awards are important to attract and to encourage the continued
employment and service of officers and other employees and
encourage them to devote their best efforts to our business,
thereby advancing the interest of our stockholders.
The option exercise price for all options granted under these
plans may not be less than 100% of the fair market value of the
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 these plans is made in
cash. 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 us cash or
cash equivalents equal to the option exercise price.
The plans are administered by the Compensation Committee of our
Board of Directors. The Compensation Committee is comprised of
independent directors. They determine whether options will be
granted, whether options will be incentive stock options,
nonstatutory option, restricted stock, or performance stock
which officers, employees 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 and historically
they have vested over a 4.5 year period. Each non-employee
director serving on our Board of Directors receives an automatic
award of 2,500 shares of common stock on August 1 of each
year as part of the compensation we provide to such directors.
The Board of Directors may amend the plans at any time, except
that approval by our stockholders may be required for an
amendment that increases the aggregate number of shares which
may be issued pursuant to each plan, changes the class of
persons eligible to receive incentive stock 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 each plan. The Board
of
F-26
MOBILE
MINI, INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Directors may terminate or suspend the plans at any time. Unless
previously terminated, the 1999 Plan will expire in August 2009
and the 2006 Plan will expire in February 2016. 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.
In February 2005, the Compensation Committee of our Board of
Directors approved the accelerated vesting of a portion of our
stock options granted on December 13, 2001, at an exercise
price of $16.46 per share. All of the stock options that were
scheduled to vest on June 13, 2006, which covered
approximately 166,200 shares, were accelerated and vested
as of February 23, 2005. At the time of the
Committees action, the exercise price under the options
was less than the market value of the common stock. The
acceleration of the vesting allowed awards to vest that would
otherwise have been forfeited or become unexercisable and
established a new measurement date. At the accelerated vesting
date, no compensation expense was recorded in accordance with
FIN 44, Accounting for Certain Transactions involving
Stock Compensation-an interpretation of APB Opinion No. 25,
as the difference in the intrinsic value on the date of the
original grant and the date of the modifications was minimal,
and the majority of the employees included in the accelerated
vesting are expected to continue employment through the original
vesting date.
In 2005, we began awarding nonvested shares under the existing
share-based compensation plans. These nonvested shares vest in
equal annual installments on each of the first four or five
annual anniversaries of the award date, unless the person to
whom the award was made is not then employed by us (or one of
our subsidiaries). In 2006 and 2007, certain officers of the
Company received performance based nonvested shares. If
employment terminates, the nonvested shares are forfeited by the
former employee.
401(k)
and Retirement Plans
In 1995, we established a contributory retirement plan in the
United States, 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 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 a fixed amount or a percentage of his or her salary,
not to exceed the statutory limit. Mobile Mini may make a
qualified non-elective contribution in an amount it determines.
Under the terms of the 401(k) Plan, Mobile Mini 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. Mobile
Mini contributes 10% of employees contributions up to a
maximum of $500 per employee. We have a similar plan as governed
and regulated by Canadian law, where we make matching
contributions with the same limitations as our 401(k) plan, to
our Canadian employees.
In the United Kingdom, the Companys employees are covered
by a defined contribution program. The employees become eligible
to participate three months after they begin employment. The
plan is designed as a retirement benefit program into which we
pay a fixed 7% of the annual employees salary into the
plan. Each employee has the election to make further
contributions if they so elect. The participants have the right
to direct the investment of their funds among certain named
plans. A charge of 1% is deducted annually from each
employees fund to cover the administrative costs of this
program.
In The Netherlands, the Companys employees are covered by
a defined contribution program. All employees become eligible
after one month of employment. Contributions are based on a
pre-defined percentage of the employees earnings. The
percentage contribution is based on the employees age,
with two-thirds of the contribution made by us and one-third
made by the employee. We did not incur any administrative costs
for this plan in 2007.
We made contributions to these plans of approximately
$0.1 million, $0.2 million and $0.4 million in
2005, 2006 and 2007, respectively. Additionally, we incurred
approximately $6,000 in each of those three years for
administrative costs for these programs.
F-27
MOBILE
MINI, INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
|
|
(11)
|
Commitments
and Contingencies:
|
Leases
As discussed more fully in Note 8, we are obligated under
noncancellable operating leases with related parties. We also
lease our corporate offices and other properties and operating
equipment from third parties under noncancellable operating
leases. Rent expense under these agreements was approximately
$6.8 million, $8.6 million and $10.2 million for
the years ended December 31, 2005, 2006 and 2007,
respectively. Total future commitments under all noncancellable
agreements for the years ended December 31, are as follows
(in thousands):
|
|
|
|
|
2008
|
|
$
|
10,325
|
|
2009
|
|
|
9,407
|
|
2010
|
|
|
7,300
|
|
2011
|
|
|
5,601
|
|
2012
|
|
|
3,841
|
|
Thereafter
|
|
|
12,430
|
|
|
|
|
|
|
|
|
$
|
48,904
|
|
|
|
|
|
|
The above table includes certain real estate leases that expire
in 2008, but have lease renewal options that we currently
anticipate to exercise in 2008 at the end of the initial lease
period.
Insurance
We maintain insurance coverage for our operations and employees
with appropriate aggregate, per occurrence and deductible limits
as we reasonably determine is necessary or prudent with current
operations and historical experience. The majority of these
coverages have large deductible programs which allow for
potential improved cash flow benefits based on our loss control
efforts.
Our employee group health insurance program is a self-insured
program with an aggregate stop loss limit. The insurance
provider is responsible for funding all claims in excess of the
calculated monthly maximum liability. This calculation is based
on a variety of factors including the number of employees
enrolled in the plan. This plan allows for some cash flow
benefits while guarantying a maximum premium liability. Actual
results may vary from estimates based on our actual experience
at the end of the plan policy periods based on the
carriers loss predictions and our historical claims data.
Our workers compensation, auto and general liability
insurance are purchased under large deductible programs. Our
current per incident deductibles are: workers compensation
$250,000, auto $250,000 and general liability $100,000. We
expense the deductible portion of the individual claims.
However, we generally do not know the full amount of our
exposure to a deductible in connection with any particular claim
during the fiscal period in which the claim is incurred and for
which we must make an accrual for the deductible expense. We
make these accruals based on a combination of the claims
development experience of our staff and our insurance companies,
and, at year end, the accrual is reviewed and adjusted, in part,
based on an independent actuarial review of historical loss data
and using certain actuarial assumptions followed in the
insurance industry. A high degree of judgment is required in
developing these estimates of amounts to be accrued, as well as
in connection with the underlying assumptions. In addition, our
assumptions will change as our loss experience is developed. All
of these factors have the potential for significantly impacting
the amounts we have previously reserved in respect of
anticipated deductible expenses, and we may be required in the
future to increase or decrease amounts previously accrued. Under
our various insurance programs, we have collective reserves
recorded in accrued liabilities of $6.8 million and
$7.5 million at December 31, 2006 and 2007,
respectively.
As of December 31, 2007, in connection with the issuance of
our insurance policies, we have provided our various insurance
carriers approximately $3.4 million in letters of credit
and an agreement under which we are
F-28
MOBILE
MINI, INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
contingently responsible for $2.9 million to provide credit
support for our payment of the deductibles
and/or loss
limitation reimbursements under the insurance policies.
Florida
Litigation
In April 2000, we acquired the portable storage business that
was operated in Florida by
A-1 Trailer
Rental and several affiliated entities (collectively,
A-1
Trailer Rental). Two lawsuits were filed against us in the
State of Florida arising out of that acquisition.
In April 2005, we entered into a settlement agreement pursuant
to which a third party partially reimbursed us for losses we
sustained in connection with those lawsuits. The net proceeds
are included in our Consolidated Statements of Income as
Other income for the year ended December 31,
2005.
General
Litigation
We are a party to routine claims incidental to our business.
Most of these routine claims involve alleged damage to
customers property while stored in units leased from us
and damage alleged to have occurred during delivery and
pick-up of
containers. 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 of these incidental claims,
individually or in the aggregate, is likely to have a material
adverse effect on our business or results of operations.
|
|
(12)
|
Stockholders
Equity:
|
On August 8, 2007, our Board of Directors approved a common
stock repurchase program authorizing up to $50.0 million of
our outstanding shares to be repurchased over a six-month
period. As of December 31, 2007, we had repurchased
2,174,828 shares for approximately $39.3 million under
this authorization, and we did not repurchase any additional
shares prior to the expiration of this authorization in February
2008.
On February 22, 2006, the Board of Directors approved a
two-for-one stock split in the form of a 100 percent stock
dividend payable on March 10, 2006, to shareholders of
record as of the close of business on March 6, 2006. Per
share amounts, share amounts and the weighted average numbers of
shares outstanding give effect for this two-for-one stock split
for all periods presented.
As discussed in Note 6, in March 2006, we issued
4.6 million shares of our common stock at approximately
$26.22 per share, net of underwriting discounts and commissions,
but before other expenses. We received net offering proceeds of
approximately $120.3 million which we used to redeem 35% of
the $150.0 million aggregate principal amount outstanding
of our 9.5% Senior Notes and to temporarily pay down our
revolving line of credit.
We enter new markets in one of two ways, either by a new branch
start up or through acquiring a business consisting of the
portable storage assets and related leases of other companies.
An acquisition provides us with cash flow which enables us to
immediately cover the overhead cost at the new branch. On
occasion, we also purchase portable storage businesses in areas
where we have existing smaller branches either as part of
multi-market acquisitions or in order to increase our operating
margins at those branches.
In 2006, we entered into a share purchase agreement to acquire
three companies of Royal Wolf Group which, in addition to
increasing our operations in the U.S., gave us presence in the
United Kingdom and The Netherlands. The acquisition of their
businesses collectively did not meet the materiality threshold
established by the Securities and Exchange Commission that would
otherwise require reporting separate financial information for
these companies or performance information for periods prior to
the acquisition. In addition, we also acquired three other
businesses in 2006, L&L Surplus of Utica, Inc.,
HOC-Express, Inc. and Affordable LLC through asset purchase
agreements.
F-29
MOBILE
MINI, INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
In 2007, we acquired the portable storage assets and assumed
certain liabilities of four businesses. In January we acquired
the portable storage assets of Worcester Leasing Company, Inc.,
operating in Worcester, Vermont. In May we acquired the portable
storage assets of Site Storage and Equipment, Inc. and Ace
Container & Equipment Sales, Inc., located in
Theodore, Alabama. The acquired assets from the Alabama
companies are serviced by our Pensacola branch which conducts
business in the Golf coast and surrounding regions. In October
we acquired the portable storage assets of Guest Inc., operating
in the Pittsburgh, Pennsylvania metropolitan area which also
serves eastern Ohio and northern West Virginia. In November we
acquired the portable storage and mobile office assets of
Centreline Equipment Rentals Ltd., of Windsor, Ontario, which
became our third branch in Canada. In May 2007, we also opened
our second Canadian branch by commencing operations in the
Vancouver metropolitan area by way of a new branch start up. All
acquisitions in 2006 and 2007 were for cash.
The accompanying consolidated financial statements include the
operations of the acquired businesses from the dates of
acquisition. The acquisitions were accounted for as a purchase
in accordance with SFAS No. 141, Business
Combinations, with the purchased assets and the assumed
liabilities recorded at their estimated fair values at the dates
of acquisition.
The aggregate purchase price of the assets and operations
acquired consists of the following for the years ended December
31:
|
|
|
|
|
|
|
|
|
|
|
2006
|
|
|
2007
|
|
|
|
(In thousands)
|
|
|
Cash
|
|
$
|
59,411
|
|
|
$
|
9,687
|
|
Other acquisition costs
|
|
|
64
|
|
|
|
47
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
59,475
|
|
|
$
|
9,734
|
|
|
|
|
|
|
|
|
|
|
The fair value of the assets purchased has been allocated as
follows for the years ended December 31:
|
|
|
|
|
|
|
|
|
|
|
2006
|
|
|
2007
|
|
|
|
(In thousands)
|
|
|
Tangible assets
|
|
$
|
34,169
|
|
|
$
|
4,154
|
|
Deferred tax asset
|
|
|
4,400
|
|
|
|
37
|
|
Receivables
|
|
|
3,474
|
|
|
|
|
|
Deposits and prepaid expenses
|
|
|
409
|
|
|
|
|
|
Intangible assets:
|
|
|
|
|
|
|
|
|
Customer lists
|
|
|
3,960
|
|
|
|
820
|
|
Trade names
|
|
|
180
|
|
|
|
|
|
Non-compete agreements
|
|
|
55
|
|
|
|
125
|
|
Goodwill
|
|
|
19,231
|
|
|
|
4,946
|
|
Liabilities and other
|
|
|
(6,403
|
)
|
|
|
(348
|
)
|
|
|
|
|
|
|
|
|
|
|
|
$
|
59,475
|
|
|
$
|
9,734
|
|
|
|
|
|
|
|
|
|
|
The purchase prices for acquisitions have been allocated to the
assets acquired and liabilities assumed based upon estimated
fair values as of the acquisition dates and are subject to
adjustment when additional information concerning asset and
liability valuations are finalized. We do not believe any
adjustments to the allocation will have any material effect on
our results of operations or financial position.
Included in other assets and intangibles
are: (1) non-compete agreements that are
amortized typically over 5 years using the straight-line
method with no residual value, (2) intrinsic values
associated with trade names that are amortized on a
straight-line basis from 2 to 15 years with no residual
value and (3) intrinsic values associated with customer
lists that are amortized on an accelerated basis over
11 years with no residual value. Amortization
F-30
MOBILE
MINI, INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
expense for intangibles related to acquisitions was
approximately $0.1 million, $0.5 million and
$1.0 million in 2005, 2006 and 2007, respectively. Based on
the carrying value at December 31, 2007, and assuming no
subsequent impairment of the underlying assets, the annual
amortization expense is expected to be $0.8 million in
2008, $0.7 million in 2009, $0.6 million in 2010,
$0.5 million in 2011, $0.5 million in 2012 and
$1.0 million thereafter.
In the third quarter of 2005, as a result of assessing our
damages resulting from Hurricane Katrina, we recorded an expense
of approximately $1.7 million. This charge is included in
Leasing, selling and general expenses in our
consolidated statements of income. In 2005, we received a
limited reimbursement from our insurance company for certain
trucks that were destroyed in the storm. Although we have filed
a claim with our insurance companies for other damage to our
former New Orleans facility and rental units and equipment
located there, the insurance companies have informed us that
they do not intend to cover damage caused by flooding rather
than by the hurricane. Although we are still pursuing our
insurance claims, the insurance companies have filed a
reservation of rights regarding flood damages and there is
uncertainty as to the timing and extent of any further insurance
recovery.
|
|
(15)
|
Other
Comprehensive Income:
|
The components of accumulated other comprehensive income, net of
tax, were as follows at December 31:
|
|
|
|
|
|
|
|
|
|
|
2006
|
|
|
2007
|
|
|
|
(In thousands)
|
|
|
Accumulated net unrealized holding gain (loss) on derivatives
|
|
$
|
523
|
|
|
$
|
(769
|
)
|
Foreign currency translation adjustment
|
|
|
2,948
|
|
|
|
5,105
|
|
|
|
|
|
|
|
|
|
|
Accumulated other comprehensive income
|
|
$
|
3,471
|
|
|
$
|
4,336
|
|
|
|
|
|
|
|
|
|
|
The Financial Accounting Standards Board (FASB) issued
SFAS No. 131, Disclosures about Segments of an
Enterprise and Related Information, which establishes the
standards for companies to report information about operating
segments. We have operations in the United States, Canada, the
United Kingdom and The Netherlands. All of our branches operate
in their local currency and although we are exposed to foreign
exchange rate fluctuation in other foreign markets where we
lease and sell our products, we do not believe this will be a
significant impact on our results of operations. Currently, our
branch operations comprise our only segment and these operations
concentrate on our core business of leasing. Our branches have
similar economic characteristics covering all products leased or
sold, including similar customer base, sales personnel,
advertising, yard facilities, general and administrative costs
and branch management. Managements allocation of
resources, performance evaluations and operating decisions are
not dependent on the mix of a branchs products. We do not
attempt to allocate shared revenue nor general, selling and
leasing expenses to the different configurations of portable
storage and office products for lease and sale. The branch
operations include the leasing and sales of portable storage
units, portable offices and combination units configured for
both storage and office space. We lease to businesses and
consumers in the general geographic area around each branch. The
operation includes our manufacturing facilities, which is
responsible for the purchase, manufacturing and refurbishment of
products for leasing and sale, as well as for manufacturing
certain delivery equipment.
In managing our business, we focus on earnings per share and on
our internal growth rate in leasing revenue, which we define as
growth in lease revenues on a year-over-year basis at our branch
locations in operation for at least one year, without inclusion
of same market acquisitions.
Discrete financial data on each of our products is not available
and it would be impractical to collect and maintain financial
data in such a manner; therefore, based on the provisions of
SFAS No. 131, reportable segment information is the
same as contained in our consolidated financial statements.
F-31
MOBILE
MINI, INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
The tables below represent our revenue and long-lived assets as
attributed to geographic locations, at December 31:
Revenue from external customers (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2005
|
|
|
2006
|
|
|
2007
|
|
|
United States
|
|
$
|
205,599
|
|
|
$
|
257,485
|
|
|
$
|
290,161
|
|
Other Nations
|
|
|
1,571
|
|
|
|
15,878
|
|
|
|
28,141
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenues
|
|
$
|
207,170
|
|
|
$
|
273,363
|
|
|
$
|
318,302
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-lived assets (in thousands):
|
|
|
|
|
|
|
|
|
|
|
2006
|
|
|
2007
|
|
|
United States
|
|
$
|
710,155
|
|
|
$
|
810,573
|
|
Other Nations
|
|
|
30,356
|
|
|
|
47,713
|
|
|
|
|
|
|
|
|
|
|
Total long-lived assets
|
|
$
|
740,511
|
|
|
$
|
858,286
|
|
|
|
|
|
|
|
|
|
|
|
|
(17)
|
Selected
Consolidated Quarterly Financial Data (unaudited):
|
The following table sets forth certain unaudited selected
consolidated financial information for each of the four quarters
in the years ended December 31, 2006 and 2007. In
managements opinion, this unaudited consolidated quarterly
selected information has been prepared on the same basis as the
audited consolidated financial statements and includes all
necessary adjustments, consisting only of normal recurring
adjustments, which management considers necessary for a fair
presentation when read in conjunction with the Consolidated
Financial Statements and notes. We believe these comparisons of
consolidated quarterly selected financial data are not
necessarily indicative of future performance.
Quarterly earnings per share may not total to the fiscal year
earnings per share due to the weighted average number of shares
outstanding at the end of each period reported and rounding.
F-32
MOBILE
MINI, INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
First Quarter
|
|
|
Second Quarter
|
|
|
Third Quarter
|
|
|
Fourth Quarter
|
|
|
|
(In thousands except earnings per share)
|
|
|
2006
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Leasing revenues
|
|
$
|
51,534
|
|
|
$
|
59,331
|
|
|
$
|
65,595
|
|
|
$
|
68,645
|
|
Total revenues
|
|
|
56,420
|
|
|
|
66,298
|
|
|
|
73,989
|
|
|
|
76,656
|
|
Gross profit margin on sales
|
|
|
1,614
|
|
|
|
2,438
|
|
|
|
2,962
|
|
|
|
2,624
|
|
Income from operations
|
|
|
19,922
|
|
|
|
24,293
|
|
|
|
27,190
|
|
|
|
28,125
|
|
Net income
|
|
|
8,204
|
|
|
|
7,658
|
(1)
|
|
|
12,890
|
|
|
|
14,024
|
(2)
|
Earnings per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
0.27
|
|
|
$
|
0.22
|
(1)
|
|
$
|
0.36
|
|
|
$
|
0.39
|
(2)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted
|
|
$
|
0.26
|
|
|
$
|
0.21
|
(1)
|
|
$
|
0.35
|
|
|
$
|
0.38
|
(2)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Leasing revenues
|
|
$
|
66,053
|
|
|
$
|
70,362
|
|
|
$
|
73,982
|
|
|
$
|
74,241
|
|
Total revenues
|
|
|
73,020
|
|
|
|
78,250
|
|
|
|
83,482
|
|
|
|
83,550
|
|
Gross profit margin on sales
|
|
|
2,195
|
|
|
|
2,378
|
|
|
|
2,716
|
|
|
|
2,704
|
|
Income from operations
|
|
|
26,832
|
|
|
|
27,642
|
|
|
|
27,233
|
|
|
|
26,801
|
|
Net income
|
|
|
12,697
|
|
|
|
6,331
|
(3)
|
|
|
12,704
|
|
|
|
12,444
|
|
Earnings per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
0.36
|
|
|
$
|
0.18
|
(3)
|
|
$
|
0.35
|
|
|
$
|
0.36
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted
|
|
$
|
0.35
|
|
|
$
|
0.17
|
(3)
|
|
$
|
0.35
|
|
|
$
|
0.36
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Includes debt extinguishment expense of $6.4 million
($3.9 million after tax), or $0.11 per diluted share. |
|
(2) |
|
Includes a $0.3 million income tax benefit due to the
recognition of certain state net operating loss carryforwards,
or $0.01 per diluted share. |
|
(3) |
|
Includes debt extinguishment expense of $11.2 million
($6.9 million after tax), or $0.19 per diluted share. |
On February 22, 2008 we entered into a definitive merger
agreement with Mobile Storage Group, Inc. of Glendale,
California. Mobile Storage Group will merge into Mobile Mini in
a transaction valued at approximately $701.5 million.
Pursuant to the merger, we will assume approximately
$535.0 million of Mobile Storage Groups outstanding
indebtedness and will acquire all outstanding shares of Mobile
Storage Group for $12.5 million in cash and shares of newly
issued Mobile Mini convertible preferred stock with a
liquidation preference of $154.0 million, which following
the tenth year after the issue date will be initially
convertible into approximately 8.55 million shares of our
common stock, and is redeemable at the holders option, ten
years after the date of issuance.
Closing of the transaction is subject to approval by our
stockholders, obtaining required governmental approvals, receipt
of a new $1.0 billion asset-based revolving credit facility
and customary closing conditions. No closing date has been set
at this time, pending receipt of the necessary approvals.
Mobile Mini has received a fully underwritten commitment from
Deutsche Bank AG, Bank of America and JP Morgan for a
$1.0 billion asset-based revolving line of credit facility
to fund the transaction, subject to customary conditions
including the execution of definitive documentation.
F-33
|
|
ITEM 15.
|
EXHIBITS AND
FINANCIAL STATEMENT SCHEDULES.
|
The following exhibits are filed with this Report.
|
|
|
|
|
Number
|
|
Description
|
|
|
31
|
.3
|
|
Updated Certification of the Companys Chief Executive
Officer pursuant to 18 U.S.C. Section 1350, as adopted
pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. (*)
|
|
31
|
.4
|
|
Updated Certification of the Companys Chief Financial
Officer pursuant to 18 U.S.C. Section 1350, as adopted
pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. (*)
|
56
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the registrant has duly caused
this Amendment No. 1 to Report on
Form 10-K/A
to be signed on its behalf by the undersigned, thereunto duly
authorized.
|
|
|
|
|
|
|
|
|
MOBILE MINI, INC.
|
|
|
|
|
|
Date: March 18, 2008
|
|
By:
|
|
/s/ Steven G. Bunger
Steven
G. Bunger, President
|
INDEX TO
EXHIBITS
The following exhibits are filed with this Report.
|
|
|
|
|
Number
|
|
Description
|
|
|
31
|
.3
|
|
Updated Certification of the Companys Chief Executive
Officer pursuant to 18 U.S.C. Section 1350, as adopted
pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. (*)
|
|
31
|
.4
|
|
Updated Certification of the Companys Chief Financial
Officer pursuant to 18 U.S.C. Section 1350, as adopted
pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. (*)
|