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U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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Form 10-K
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OR THE SECURITIES
EXCHANGE ACT OF 1934 [Fee Required] For the fiscal year ended December
31, 1996
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [No Fee Required] For the transition period from
___________ to ________________
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Commission File Number 1-12804
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mobile mini, inc.
(Exact Name of Registrant as Specified in its Charter)
Delaware 86-0748362
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
1834 West 3rd Street
Tempe, Arizona 85281
(Address of Principal Executive
Offices)
(602) 894-6311
(Registrant's Telephone Number)
Securities Registered Under Section 12(g) of the Exchange Act:
Title of Class Name of Each Exchange on Which Registered
Common Stock, $.01 par value NASDAQ Stock Market National Market
Warrant to Purchase Common Stock NASDAQ Stock Market Small Cap Market
at $5.00 per share
Indicate by checkmark whether the Registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
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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 registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K.
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The aggregate market value on March 25, 1997 of the voting stock owned
by non-affiliates of the registrant was $11,872,272 (calculated by excluding all
shares held by executive officers, directors and holders of five percent of more
of the voting power of the registrant, without conceding that such persons are
"affiliates" of the registrant for purposes of the federal securities law).
As of March 25, 1997, there were outstanding 6,739,324 shares of the
issuer's common stock, par value $.01.
Documents incorporated by reference: Portions of the Proxy Statement
for the Registrant's 1997 Annual Meeting of Stockholders are incorporated herein
by reference in Part III of this Form 10-K to the extent stated herein.
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PART I
This Report contains forward-looking statements which involve risks and
uncertainties. The actual results of Mobile Mini, Inc. (together with its
wholly-owned subsidiaries, the "Company" or "Mobile Mini") could differ
materially from those anticipated in these forward-looking statements as a
result of certain factors, including those set forth in this Form 10-K and the
Company's other Securities and Exchange Commission filings. See particularly
Item 7, "Management's Discussion and Analysis of Financial Condition and Results
of Operations".
ITEM 1. DESCRIPTION OF BUSINESS.
General
Mobile Mini, Inc. (the "Company") is a Delaware corporation capitalized
effective December 31, 1993. From 1983 through 1993, the business operations of
the Company were conducted as a sole proprietorship by Richard E. Bunger under
the tradename "mobile mini storage systems" ("MMSS"). The business operations
transferred to the Company were comprised of MMSS and a related corporation,
Delivery Design Systems, Inc. ("DDS"). The Company's subsidiaries include DDS
which formerly engaged in the business of designing, developing and
manufacturing truck trailers and other delivery systems for the Company's
portable storage containers and Mobile Mini I, Inc. which engages in the
business of acquiring and maintaining certain of the Company's facilities. The
business and assets of DDS were transferred to the Company in 1996.
The Company's operations commenced in Phoenix, Arizona, in 1983 when
Mr. Bunger, then a designer and builder of integrated animal production (feed
lot) and traditional mini-storage facilities, recognized the potential of using
ocean-going shipping containers for inland portable storage. Mr. Bunger's
experience in the mini-storage industry indicated that the containers could be
profitably leased as storage units to a wide range of business, individual and
governmental users. By 1986 the portable storage concept had been proven and the
business was expanded through an additional sales and leasing branch established
in Tucson, Arizona. In 1988, the Company commenced operations in Rialto,
California to service the greater Los Angeles area. In early 1990, the Company
relocated its manufacturing facility from its original site in Phoenix to a
heavy-industry zoned industrial park located near Maricopa, Arizona and
administrative offices were established in Tempe, Arizona. In 1994, the Company
opened a "satellite" branch in San Diego, California which is serviced from its
Rialto "hub." Also in 1994, the Company opened operations in Texas by the
establishment of hub locations in Houston and Dallas/Fort Worth. In early 1995,
the Company opened satellite locations in the San Antonio and Austin
metropolitan areas.
Products
The Company designs and manufactures portable steel storage containers,
portable offices and telecommunication shelters and acquires, refurbishes, and
modifies ocean-going shipping containers for sales and leasing as inland
portable storage units. In addition, the Company designs and manufactures a
variety of delivery systems to complement the Company's storage container sales
and leasing activities.
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The principal products of the Company are portable steel storage
containers, portable offices, telecommunications shelters and certain other
products used in conjunction with the portable storage containers. The Company
also produces certain steel products built to special order specifications. The
Company has patented, proprietary or trade secret rights in all products it has
designed and manufactured. The locking system for the Company's containers is
patented and provides virtually impenetrable security to the storage container.
The Company's main product in its storage market segment is the
portable steel storage container. The Company acquires used ocean-going cargo
containers which it reconditions and retrofits with its patented locking system.
To compensate for supply and price fluctuations associated with acquiring used
ocean-going containers, the Company also manufactures various lines of new
containers, featuring the Company's proprietary "W" or "stud wall" panels.
Storage container units may be significantly modified and turned into portable
offices, portable storage facilities, open-sided storage and retail facilities,
as well as a large variety of other applications.
The Company sells and leases its storage containers to a wide variety
of individual, business and governmental users. The Company's lease activities
include both on-site and off-site leasing. "Off-site" leasing occurs when the
Company leases a portable storage container which is then located at the
customer's place of use. "On-site" leasing occurs when the Company stores the
portable container containing the customer's goods at one of the Company's
facilities, which are similar to a standard mini-storage facility, but with
increased security, ease of access and container delivery and pick-up service.
In mid-1995, Mobile Mini established a telecommunication shelter
division to complement its storage container business, diversify its product
line and target the domestic and international markets. The Company's modular
telecommunication shelters, marketed under the name "Mobile Telestructures", can
be built in a vast variety of designs, sizes, strengths, exterior appearances
and configurations. The Company has developed proprietary technology that makes
these units very portable, lightweight, highly secure and virtually weather
resistant. The Company intends to devote additional resources toward marketing
this product in 1997.
The Company has developed technology to add a stucco finish to the
exterior of its all steel buildings, making them more aesthetically appealing
while retaining the strength and durability afforded by steel. This attribute is
especially important to the Mobile Telestructures operations, where
telecommunication companies are under pressure to use shelters and towers that
blend in with the locale at which they are located. In addition, in 1996, the
Company introduced its ArmorKoat line of telecommunication shelters which
feature a specially formulated concrete exterior coat to its steel shelters.
This formulation increases the strength of the building and can meet the needs
of customers that require concrete buildings.
The Company also designs, develops and manufactures a complete
proprietary line of truck trailers and other delivery systems utilized in
connection with its storage container sales and leasing activities. The Company
provides delivery and pick-up services for customers at their places of
business, homes or other locations.
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Business Restructuring
The Company previously was involved in the manufacture, sale and
leasing of modular steel buildings in the state of Arizona. These buildings were
used primarily as portable schools, but could be used for a variety of purposes.
Although the Company believes its modular buildings were superior to the
wood-framed buildings offered by its competitors, the Company was not able to
generate acceptable margins on this product line. During 1996, the Company
implemented a strategic restructuring program designed to concentrate management
effort and resources and better position itself to achieve its strategic growth
objectives. As a result of this program, the Company's 1996 results include
charges of $700,000 ($400,000 after tax, or $.06 per share) for costs associated
with restructuring the Company's manufacturing operations and for other related
charges. These charges were recorded in the fourth quarter of 1996, and were
comprised of the write-down of assets used in the Company's discontinued modular
building operations and related severance obligations ($300,000), and the
write-down of other fixed assets ($400,000). By discontinuing its modular
building operations, the Company will be able to utilize the management
resources and production capacity previously utilized by this division to expand
the Company's telecommunications shelter business and its container leasing
operations.
Marketing
The Company markets its storage containers both directly to the
consumer and through its national dealer network. The Company has sales and
leasing branches in Phoenix and Tucson, Arizona, San Diego and Rialto,
California and Houston, Dallas, San Antonio and Austin, Texas. The Company
services the greater Los Angeles, California area from its Rialto hub and its
Texas operations from its Houston and Dallas/Ft. Worth hubs.
The Company sells and leases its storage containers directly to
consumers from each of its branches. With respect to leases, the Company engages
in both off-site and on-site leasing. Marketing for individual consumer sales
and rentals is primarily through Yellow Page ads, direct mailings and customer
referrals.
The Company markets its Mobile Telestructure products directly to
telecommunication companies as well as to companies providing turn-key
installations of shelters and towers.
Sales are also made through the Company's national dealer network which
currently provides the Company's manufactured containers to 53 dealers for
retail sale. Such dealers are in 75 separate locations in 28 states and one
Canadian province. Marketing to dealers and potential dealers is primarily
through direct solicitation, trade shows, trade magazine advertising and
referrals. The dealers receive pre-fabricated containers which they assemble and
paint. The Company provides training in assembly and marketing to its dealers.
None of the dealers are employed by the Company, nor does any dealer have a long
term requirements contract for the supply of pre-fabricated containers or any
contract for training in assembly and marketing with the Company. The Company
does, however, benefit from the use of its name by several dealers on the
containers once they are constructed.
Leasing Operations
Since its founding, it has been the Company's primary goal to grow the
container leasing segment of its business. This business, which involves the
short-term leasing of a product with a long useful life and relatively low
depreciation, offers higher margins than the Company's other products and
services.
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The Company has sought to grow this business by opening branch
facilities in several cities in the Southwestern United States. When the Company
opens a facility, it devotes substantial resources, including a sizable
advertising budget, to the location. The new locations therefore generate losses
in early years, but once the Company has added sufficient containers to cover
the high fixed costs, its operations may become profitable at the new location.
Historically, profitability is not expected until approximately one to three
years after the new location is opened. The actual time to profitability depends
upon numerous factors, including differences in container costs compared to
historic cost levels, the level of competition in the new market, the
development of additional storage containers in the market by competitors and
other factors which are generally beyond the Company's control.
The Company plans to continue adding additional leased containers to
existing locations in order to increase its profitability. During 1996, the
Company obtained a credit line enabling it to substantially expand its container
leasing operations. See, "Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS - LIQUIDITY AND CAPITAL
RESOURCES". The Company increased containers on lease at December 31, 1996 by
18% from December 31, 1995. This increase was achieved at branch locations that
had been in operation during 1995.
The Company's plan is to continue increasing its lease fleet at
existing locations in 1997, at a rate in line with historical increases.
Management believes that such an increase should substantially improve
profitability in 1997, particularly if the cost of used ocean-going containers
remains constant at year-end 1996 levels.
The Company also intends to expand its operations into additional
cities on a controlled basis. Such expansion could be through new start-up
operations by the Company or through acquisitions of existing operations.
Expansion through start-up operations would have the effect of reducing net
income during the early years of operations while the Company increased its
lease fleet at these locations. The Company has identified several potential new
markets, and is investigating start-up and acquisition possibilities in those
markets. As of the date of this Report, the Company is not a party to any
binding agreement respecting new sites or acquisition transactions.
Financing
The Company has required increasing amounts of financing to support the
growth of its business. This financing was required primarily to fund the
acquisition of containers for the Company's lease fleet and to fund the
acquisition of property, plant and equipment to support both the Company's
container leasing and manufacturing operations.
The Company finances its operations and growth primarily through a
credit agreement (the "Credit Agreement") with BT Commercial Corporation, as
Agent for a group of lenders (the "Lenders"). The Company entered into the
Credit Agreement in March 1996, as amended in March 1997, in order to improve
its cash flow, increase its borrowing availability and fund its continued
growth. Under the terms of the Credit Agreement, the Lenders provide the Company
with a $35.0 million revolving line of credit and a $6.0 million term loan.
Borrowings under the Credit Agreement are secured by substantially all of the
Company's assets.
The term loan is to be repaid over a five-year period. Interest accrues
on the term loan at the Company's option at either prime plus 1.75% or the
Eurodollar rate plus 3.25%. Borrowings under the term loan are payable monthly
as follows (plus interest):
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Months 1 through 12 $ 62,500
Months 13 through 24 83,333
Months 25 through 60 118,056
Additional principal payments equal to 75% of Excess Cash Flow, as
defined in the term loan documents which constitute part of the Credit
Agreement, are required annually. As of December 31, 1996, no additional payment
was required under this provision.
Available borrowings under the revolving line of credit are based upon
the level of the Company's inventories, receivables and container lease fleet.
The container lease fleet is appraised at least annually, and up to 90% of the
lesser of cost or appraised orderly liquidation value may be included in the
borrowing base. Interest accrues at the Company's option at either prime plus
1.5% or the Eurodollar rate plus 3% and is payable monthly or at the end of the
term of any Eurodollar borrowing. The term of this line of credit is three
years, with a one-year extension option.
In connection with the closing of the Credit Agreement, the Company
terminated its line of credit with its previous lender, repaying all
indebtedness under that line. In addition, the Company repaid other long-term
debt and obligations under capital leases totaling $14.1 million. As a result,
costs previously deferred related to certain indebtedness and prepayment
penalties resulted in an extraordinary charge to earnings of approximately
$410,000 after benefit for income taxes.
The Credit Agreement contains several financial covenants and minimum
required utilization rates in its lease fleet, limits on capital expenditures,
acquisitions, changes in control, the incurrence of additional debt and the
repurchase of common stock, and prohibits the payment of dividends.
The Company has also financed its operations through the issuance and
sale of its equity securities. In February 1994, the Company completed its
initial public offering. Net proceeds to the Company totaled approximately $7
million. In December 1995, the Company received net proceeds of $4.1 million,
through a private placement of 50,000 shares of Series A Convertible Preferred
Stock, $.01 par value, $100 stated value ("Series A"). Pursuant to the terms of
the Series A, all 50,000 shares of Series A were converted into 1,904,324 shares
of the Company's common stock at an average conversion rate of $2.63 per share
during the first quarter of 1996. These equity issuances provided the capital
necessary to obtain the financing available under the Credit Agreement.
Prior to 1996, the Company's growth was financed in part through
financing of containers pursuant to capital leases or secured borrowings. These
financings generally required repayment in full over a five year period and
provided for interest at a fixed rate. Since the Company's containers have a
useful life far in excess of five years, these financings required the Company
to pay in full the debt related to a capital expenditure well in advance of the
related asset's useful life. The repayment terms of these financings adversely
affected cash flow prior to the refinancing pursuant to the Credit Agreement.
The Company believes that its current capitalization, together with
borrowings available under the Credit Agreement, is sufficient to maintain its
current level of operations and permit controlled growth and increased
profitability. However, should demand for the Company's products exceed current
expectation or should the cost of used containers continue to increase, the
Company would be required to secure additional financing through debt or equity
offerings, additional borrowings or a combination of these sources. However,
there is no assurance that any such financings will be obtained or obtained on
terms acceptable to the Company.
-7-
Patents, Tradenames and Trade Secrets
The Company has eight patents issued by and four patents pending with
the U.S. Patent and Trademark Office related to the design and application of
its products. The Company intends to process other patent applications for
additional products developed currently or in the future, to the extent the
Company deems such applications appropriate. "mobile mini" and "mobile mini
storage systems" are registered trade names and service marks in the United
States and Canada. The Company has applied to have "mobile telestructures"
registered as a trade name and service mark.
The patents as well as the various state trade secrets acts afford
proprietary protection to the Company's products, including the unique locking
system and design of its manufactured products. The Company has in place several
access control and proprietary procedure policies implemented to meet the
requirements of protecting its trade secrets under applicable law. The Company
follows a policy of aggressively pursuing claims of patent, tradename, service
mark and trade secret infringement. The Company does not believe that its
products and trademarks or other confidential and proprietary rights infringe
upon the proprietary rights of third parties. There can be no assurance,
however, that third parties will not assert infringement claims against the
Company in the future. The successful assertion of rights and the defense of
infringement claims could have a material adverse affect on the Company's
business, results of operations and financial condition. There can be no
assurance that the Company will have sufficient resources to sustain expensive
or protracted legal actions to protect its proprietary rights or, alternatively,
to defend claims of infringement.
Customers
The market for the Company's products can generally be divided into
four distinct areas -- retail, residential, commercial and
institutional/governmental. Revenues are derived from either rentals or sales
directly to customers or through sales to the Company's dealers.
The Company's customer profile is diverse and does not rely on one
industry. Instead, the Company targets several different markets within various
geographic areas. As of December 31, 1996 the Company's leasing and sales
clients fall into the following categories and approximate percentages: (i) with
respect to leasing: retail and wholesale businesses, 52%; homeowners, 17%;
construction, 22%; institutions, 4%; government, industrial and other, 5%; (ii)
with respect to sales: retail and wholesale businesses, 54%; homeowners, 5%;
construction, 12%; institutions, 14%; government, industrial and other, 15%.
Customers utilize the Company's storage units in a variety of ways. For
example, retail companies use the Company's storage units for extra warehousing;
real estate development companies utilize the Company's products to securely
store equipment, tools and materials; and governmental agencies such as the U.S.
Armed Forces and the U.S. Drug Enforcement Agency lease and buy the Company's
high-security, portable storage units to store equipment and confiscated goods.
Competition
Because the Company competes with its products and services in several
market segments, no one entity is known to be in direct competition with the
Company in all its market segments. With respect to its on-site leasing
activities, the Company competes directly with conventional mini-storage
warehouse facilities in the localities in which it operates. Some of the
Company's on-site leasing competitors include Space Shuttle, a franchiser with a
limited number of franchises
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throughout the United States, Door to Door Storage, Public Storage and Shurgard
Storage Centers. With respect to off-site leasing and sales, the Company has
several competitors, which include Haulaway, Mobile Storage, National Security
Containers, and a large number of smaller competitors. The Company believes that
its products, services, pricing and manufacturing capabilities allow it to
compete favorably in each of the on-site leasing, off-site leasing and sales
segments of the Company's markets in the areas it currently operates.
The Company's Mobile Telestructures division competes against several
competitors that supply shelters, the largest of which the Company believes to
be Fibrebond Corporation, the Rohn division of UNR Industries and Andrew
Corporation.
Management believes that the Company has a number of competitive
advantages both in terms of products and operations. Among its product's
patented features is the locking system which serves to meet the customer's
primary concern, security. Based on reports from customers who have suffered
burglary attempts, the Company's locking system is extremely difficult to
defeat. The Company's delivery trailers have largely been designed and built by
the Company and certain key features have patent potential which the Company may
pursue. These proprietary delivery systems, which are specifically designed to
transport, load and unload containers, allow the Company to deliver containers
economically in otherwise inaccessible locations.
Operationally, the Company manufactures containers from raw steel as an
alternative to using ocean-going containers. In the event ocean-going containers
are in short supply or become uneconomical to retrofit to the needs of the
Company, the Company can manufacture its own container product. The Company will
continue to manufacture new storage units for inclusion primarily in its sales
inventory and also in its lease fleet.
The Company's ability to continue to compete favorably in each of its
markets is dependent upon many factors, including the market for used
ocean-going containers and the costs of steel. During 1996, the price of used
steel cargo containers increased by approximately 20%. Management believes that
the Company's container manufacturing capabilities makes the Company less
susceptible than its competitors to ocean-going container price fluctuations,
particularly since the cost of used containers is affected by many factors, only
one of which is the cost of steel from which the Company can manufacture new
containers.
The Company believes that competition in each of its markets may
increase significantly in the future. It is probable that such competitors will
have greater marketing and financial resources than the Company. As competition
increases, significant pricing pressure and reduced profit margins may result.
Prolonged price competition, along with other forms of competition, could have a
material adverse affect on the Company's business and results of operations.
Additionally, as the Company continues to expand its operations in different
regions, start-up costs incurred reduce the Company's overall profit margins.
Employees
As of March 1, 1997, the Company had approximately 800 full time
employees at all of its locations. The Company believes that its continued
success depends on its ability to attract and retain highly qualified personnel.
The Company's employees are not represented by a labor union and the Company has
no knowledge of any current organization activities. The Company has never
suffered a work stoppage and considers its relations with employees to be good.
ITEM 2. DESCRIPTION OF PROPERTY.
The Company has four manufacturing centers located in Maricopa,
Arizona, Rialto, California, and Houston and Dallas/Fort Worth, Texas. Sales and
leasing are conducted from
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Phoenix, Rialto, Houston and Dallas/Fort Worth in addition to four other
locations. The Company's administrative and sales offices are located in Tempe,
Arizona.
The Company's primary manufacturing center is located in a
heavy-industry zoned industrial park near Maricopa, Arizona, approximately 30
miles south of Phoenix. The facility is seven years old and is located on an
approximate 45 acre industrial site. Twenty-three acres of this site were
purchased from Richard E. Bunger in 1996. See, "ITEM 13. CERTAIN RELATIONSHIPS
AND RELATED TRANSACTIONS." The facility includes nine manufacturing buildings,
totaling approximately 130,000 square feet, which house manufacturing, assembly,
construction, painting and vehicle maintenance operations.
The Phoenix, Arizona sales and leasing branch services the Phoenix
metropolitan area from its approximately 10.7 acre facility, of which
approximately 5 acres were leased in the first quarter of 1997. All Phoenix
marketing and any on-site storage is conducted from this site. Approximately 3.4
acres are owned by the Company, approximately 5.8 acres are leased from
non-affiliated parties and the remaining 1.5 acres are owned by members of the
Bunger family and are under lease at what management believes to be competitive
market rates. See, "ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS."
The Rialto, California sales and leasing hub is approximately 10 acres
in size, with three industrial shops used for modification of ocean-going
containers, assembly of the Company's manufactured containers and on-site
leases. The Rialto facility serves as the Company's southern California hub and
supports the San Diego branch. The Rialto site is owned by Mobile Mini Systems,
Inc., a separate corporation owned by Richard E. Bunger, and is leased to the
Company at what management believes to be competitive market rates. See, "ITEM
13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS."
The Texas operations are supported by hub facilities in Houston and
Dallas/Fort Worth. Both facilities contain manufacturing centers, sales and
leasing operations and on-site storage facilities. The Houston facility is
located on seven acres with six buildings totaling approximately 34,400 square
feet. The Dallas/Fort Worth facility, which is owned by the Company, is located
on 17 acres with six buildings totaling approximately 36,600 square feet.
The Company's administrative and sales offices are located in Tempe,
Arizona. The facilities are leased by the Company from an unaffiliated third
party and have approximately 28,800 square feet of space which the Company
anticipates will meet its needs for the near-term. The Company's lease term is
through December 2000.
In addition to its administrative offices and manufacturing facilities,
the Company has facilities used for sales, leasing and onsite storage. The major
properties owned or leased by the Company are listed in the table below:
Location Use Area Title
-------- --------- ------ -------
Tempe, Arizona Corporate offices 8,700 sq. ft. Leased
Tempe, Arizona Sales administration 20,100 sq. ft. Leased
Maricopa, Arizona Manufacturing 44.8 acres Owned(1)
Rialto, California Sales, leasing, manufacturing and 10 acres Leased(2)
on-site storage
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Houston, Texas Sales, leasing, manufacturing and 7.0 acres Leased
on-site storage
Phoenix, Arizona Sales, leasing and on-site storage 10.7 acres Owned(1)/leased(3)
Tucson, Arizona Sales, leasing and on-site storage 2.7 acres Leased(4)
San Diego, California Sales, leasing and on-site storage 5.0 acres Leased
Dallas, Texas Sales, leasing, manufacturing and 17 acres Owned(1)
on-site storage
San Antonio, Texas Sales, leasing and on-site storage 3.0 acres Leased
Round Rock, Texas(5) Sales, leasing and on-site storage 5.0 acres Leased
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(1) Pledged pursuant to the Credit Agreement. See, "ITEM 1. DESCRIPTION OF
BUSINESS - Financing."
(2) Leased by the Company from an affiliate of Richard E. Bunger. See,
"ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS."
(3) Of the 10.7 acres comprising these sites, 3.4 acres are owned by the
Company and 1.5 acres are subject to long-term leases from members of
the Bunger family. See, "ITEM 13. CERTAIN RELATIONSHIPS AND RELATED
TRANSACTIONS."
(4) This property is leased by the Company from members of the Bunger
family. See "ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS."
(5) A community of the Austin, Texas metropolitan area.
ITEM 3. LEGAL PROCEEDINGS.
The Company is not a party to any legal proceeding other than various
claims and lawsuits arising in the normal course of its business which, in the
opinion of the Company's management, are not individually or collectively
material to its business.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY-HOLDERS
There were no matters submitted to a vote of security holders during
the fourth quarter of 1996.
EXECUTIVE OFFICERS
Set forth below are the names and ages of and other relevant
information about the directors, executive officers, and significant employees
of the Company.
Richard E. Bunger, age 59, Chairman of the Board, Chief Executive
Officer, President and Director, founded the Company's operations in
1983 and has managed the Company's operations since its commencement.
Mr. Bunger has been awarded approximately 70 patents, many related to
portable storage technology. For a period of approximately 25 years
prior to founding the Company, Mr. Bunger owned and operated Corral
Industries Incorporated, a worldwide designer/builder of integrated
animal production facilities, and a designer/builder of mini storage
facilities.
Lawrence Trachtenberg, age 40, Executive Vice President and Chief
Financial Officer, General Counsel, Secretary, Treasurer and Director,
joined the Company in December 1995.
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Mr. Trachtenberg is primarily responsible for all accounting, banking
and related financial matters for the Company. Mr. Trachtenberg is
admitted to practice law in the States of Arizona and New York and is a
Certified Public Accountant in New York. Prior to joining the Company,
Mr. Trachtenberg served as Vice President and General Counsel at
Express America Mortgage Corporation, a mortgage banking company, from
February 1994 through September 1995 and as Vice President and Chief
Financial Officer of Pacific International Services Corporation, a
corporation engaged in car rentals and sales, from March 1990 through
January 1994. Mr. Trachtenberg received his Juris Doctorate from
Harvard Law School in 1981 and his B.A. - Accounting/Economics from
Queens College - CUNY in 1977.
Steven G. Bunger, age 35, Executive Vice President and Chief Operating
Officer, was with the Company's predecessor since inception and was a
founding director of the Company. Mr. Bunger oversees all of the
Company's operations and sales activities with overall responsibility
for advertising, marketing and pricing. From December 31, 1993 to
January 1, 1995, Mr. Bunger served as Vice President of Operations. On
January 1, 1995, Mr. Bunger became Vice President of Operations and
Marketing and in November 1995 became the Company's Chief Operating
Officer. Mr. Bunger graduated from Arizona State University in 1986
with a B.A.-Business Administration. He is the son of Richard E.
Bunger.
Burton K. Kennedy Jr., age 49, Senior Vice President of Sales and
Marketing, was originally with the Company's predecessor from March
1986 when the Company had only a few hundred units to September 1991
when the Company had grown to several thousand units and rejoined the
Company July of 1996. Mr. Kennedy has the overall responsibility for
all branch lease and sale operations and also directs the acquisition
of container inventory. From September 1993 through June 1996, Mr.
Kennedy served in various executive positions with National Security
Containers, a division of Cavco, Inc. From April 1992 through August
1993 he was a working partner in American Bonsai.
PART II
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
The Common Stock trades on the National Market tier of the NASDAQ
Market under the symbol "MINI." Prior to December 26, 1995, the Common Stock was
traded on the SmallCap Marketsm. The following table sets forth, for the
indicated periods, the high and low sale prices for the Common Stock as reported
by the NASDAQ Market. The quotations set forth below reflect inter-dealer
prices, without retail mark-up, mark-down or commission, and may not represent
actual transactions. The Company has approximately 79 holders of record of its
Common Stock. The Company believes it has in excess of 400 beneficial owners of
its Common Stock.
FISCAL YEARS 1996 AND 1995:
1996 1995
---------------------- ----------------------
HIGH LOW HIGH LOW
---- --- ---- ---
Quarter ended March 31, $4 3/8 $2 7/8 $4 1/2 $3 1/2
Quarter ended June 30, 4 7/16 3 3/8 5 3 5/8
Quarter ended September 30, 4 3/8 2 13/16 6 1/8 4 3/4
Quarter ended December 31, 4 1/4 3 5 7/8 3 5/8
-12-
Holders of the Common Stock are entitled to receive such dividends as
may be declared by the Board of Directors of the Company. To date, the Company
has neither declared nor paid any cash dividends on its Common Stock, nor does
the Company anticipate that cash dividends will be paid in the foreseeable
future. Additionally, the Company is subject to covenants pursuant to the Credit
Agreement which prohibit the payment of dividends. The Company intends to apply
any earnings to the expansion and development of its business.
ITEM 6. SELECTED FINANCIAL DATA.
The following table summarizes certain selected financial data of the
Company and is qualified in its entirety by the more detailed consolidated
financial statements and notes thereto appearing elsewhere herein. The data has
been derived from the consolidated financial statements of the Company audited
by Arthur Andersen LLP, independent public accountants.
YEAR ENDED DECEMBER 31,
----------------------------------------------------------------
1996 1995 1994 1993(1) 1992(1)
------------ ------------ ------------ ------------- -----------
CONSOLIDATED STATEMENT OF INCOME (in thousands, except per share amounts)
Revenues $ 42,210 $ 39,905 $ 28,182 $ 17,122 $ 12,001
Income from operations 4,527 4,306 2,791 1,514 710
Income before extraordinary item 481 777 956 276 200
Extraordinary item (410) 0 0 0 185
Net income 70 777 956 276 301
Earnings per common and common equivalent share:
Income before extraordinary item 0.07 0.16 0.21 0.10 0.04
Extraordinary item (0.06) 0.00 0.00 0.00 0.07
Net income 0.01 0.16 0.21 0.10 0.11
CONSOLIDATED BALANCE SHEET DATA (as of December
31 of each year)
Total assets 64,816 54,342 40,764 20,082 14,773
Long term lines of credit 26,406 4,099 -- -- --
Long term debt and obligations under capital leases,
including current portion 13,742 24,533 16,140 9,334 6,622
(1) Prior to 1994, the Company's predecessor was operated as a sole
proprietorship. Per share information are therefore calculated on a
proforma basis assuming that the only common stock outstanding was that
issued to Richard E. Bunger at the time the Company was capitalized and all
significant transactions for the transfer of assets to the Company have
been eliminated for the proforma statements.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS.
-13-
General
The Company was founded in 1983 and operated only in the Phoenix,
Arizona area until 1986. In 1986 it expanded to Tucson, Arizona, in 1988 to
southern California and in 1994 to Texas. From inception through 1988, the
Company exclusively engaged in the refabrication of ocean-going cargo
containers, which it leased to the public for storage containers and portable
offices. In 1989, the Company began to sell containers. Contributing to growth
of sales revenues was the development of a national distribution system
(referred to by the Company as the national dealer network), manufacture of new
Company designed containers from raw steel as an alternative and supplement to
the refabrication of ocean-going containers, the manufacture of modular steel
buildings (discontinued in 1996; see "Item 1. DESCRIPTION OF BUSINESS - BUSINESS
RESTRUCTURING") and special order products which the Company sells and leases to
schools, governmental entities and others, and the development of the
telecommunication shelter division which commenced operations in mid-year 1995.
The leasing of containers stored on-site at the Company's locations
(similar to traditional mini-storage warehouses) as well as the leasing of
containers stored off-site is becoming a more significant portion of the
Company's business and is contributing to the Company's growth. Since 1993, the
number of units at the Company's leasing locations has increased by the
following percentages as compared to the preceding year:
December 31,
-------------------
1993 38%
1994 62%
1995 32%
1996 18%
As the leasing operations are the most profitable of the Company's
operations, management plans to increase the level of these operations,
especially at existing locations. In addition, the Company expects to open
additional facilities on a controlled basis at locations which management
believes can become profitable over a relatively short period of time.
Uncertainties faced by the Company include variances in start-up costs
for new storage locations, competition in new markets, and the opportunity cost
of deploying sufficient containers in a new market to reach economic viability.
While the Company has experience in entering new market areas and conducts
preliminary market research to assure itself that viable markets exist, there
can be no assurance of success when expanding into new markets. However, unlike
fixed mini-storage facilities, the Company does have the ability to relocate its
portable storage containers to other markets to adjust for market demand.
Results of Operations
The following table sets forth, for the periods indicated, the
percentage, as a percent of total revenue, of certain items in the Consolidated
Financial Statements of the Company, included elsewhere herein. The table and
the discussion below should be read in conjunction with the Consolidated
Financial Statements and Notes thereto.
-14-
Year Ended December 31,
---------------------------------------------
1996 1995 1994
---- ---- ----
REVENUES:
Container and modular building sales 56.0% 60.8% 65.6%
Leasing 32.3 30.6 25.5
Other 11.7 8.6 8.9
-------- -------- ------
100.0 100.0 100.0
COSTS AND EXPENSES:
Cost of container and modular building sales 47.2 47.9 49.3
Leasing, selling and general expenses 36.3 38.0 38.5
Depreciation and amortization 4.1 3.3 2.2
Restructuring charge 1.7 0.0 0.0
------- -------- ------
Income from Operations 10.7 10.8 10.0
OTHER INCOME (EXPENSE):
Interest income and other 0.5 0.7 0.6
Interest expense (9.2) (8.0) (4.5)
-------- -------- -------
INCOME BEFORE PROVISION FOR INCOME TAXES
AND EXTRAORDINARY ITEM: 2.0 3.5 6.1
PROVISION FOR INCOME TAXES 0.9 1.5 2.7
-------- -------- ------
INCOME BEFORE EXTRAORDINARY ITEM 1.1 2.0 3.4
EXTRAORDINARY ITEM 1.0 0.0 0.0
------ -------- -----
NET INCOME 0.1% 2.0% 3.4%
======= ======= =======
Fiscal 1996 Compared to Fiscal 1995
Revenues for the year ended December 31, 1996 increased to $42,210,000
from $39,905,000 during 1995. Revenues during 1995 included $3,645,000 of
container sale revenue recorded under sale-leaseback transactions. The revenue
from sale-leaseback transactions was offset by an equal cost of container sales
and did not produce any gross margin. The Company did not enter into
sale-leaseback transactions during 1996. Excluding the effect of these
sale-leaseback transactions, revenues increased by 16.4% from 1995 to 1996,
primarily the result of increases in both sales and leasing revenues generated
from existing branch locations and the sale of certain used modular buildings
that had been previously leased. The Texas operations, which commenced in late
1994, sustained growth and contributed 8.5% and 15.8% to the Company's container
sales and leasing revenues, respectively, during 1996 as compared to 7.0% and
9.6%, respectively, in 1995. The dealer and telecommunication shelter division
contributed 25.5% and 4.1%, respectively, of the sales revenues in 1996 as
compared to 27.2% and 5.8%, respectively, in 1995. Revenues related to container
and modular building sales and leasing activities increased 14.5% and 11.7%,
respectively, from the prior year, exclusive of container sale revenue recorded
under sale-leaseback transactions.
Excluding the effect of sale-leaseback transactions, cost of container
and modular building sales as a percentage of container and modular building
sales increased to 84.4% compared to 74.8% for the prior year. This increase is
attributable to the mix of products sold, a shortage in supply of used
containers, which caused an increase in the acquisition cost of these
containers, in addition to an increase in sales of manufactured new containers
which typically result in lower
-15-
margins to the Company, and a refinement in the Company's allocation of certain
indirect manufacturing costs.
Excluding the effect of sale-leaseback transactions, leasing, selling
and general expenses were 36.3% of total revenue in 1996, compared to 41.8% in
1995. The decrease primarily results from the continued efficiencies obtained by
the Company's Texas operations, which were in their start-up phase during 1995,
and to the Company passing certain property tax expenses on to customers.
The Company recorded a restructuring charge (See "ITEM 1. DESCRIPTION
OF BUSINESS.- BUSINESS RESTRUCTURING") of $700,000 or 1.7% of total revenue in
1996. There was no similar charge in 1995.
Income from operations was $4,527,000 in 1996 compared to $4,345,000 in
1995. Excluding the restructuring charge, income from operations would have been
12.4% of total revenue in 1996 as compared to 12.0% in 1995.
Interest expense increased to $3,894,000 in 1996 compared to $3,212,000
in 1995. This increase in interest expense was primarily the result of an
increase in the average balance of debt outstanding of 51.4% compared to 1995,
(incurred in order to finance the substantial increase in the Company's
equipment and container lease fleet), along with the related amortization of
debt issuance costs, partially offset by a decrease of 3.0% in the Company's
weighted average borrowing rate resulting from lower interest rates under the
Company's Credit Agreement.
Depreciation and amortization increased to 4.1% of revenues in 1996,
from 3.3% in 1995, and is directly related to the expansion of the Company's
manufacturing facility along with the substantial growth in the Company's lease
fleet and additional support equipment at the Company's sales and leasing
locations.
The Company had income before extraordinary item of $481,000, or $.07
per share, in 1996, compared to net income of $777,000, or $.16 per share in
1995. This decrease primarily resulted from the $700,000 restructuring charge
recorded by the Company in the fourth quarter of 1996 discussed above. See "Item
1. DESCRIPTION OF BUSINESS - BUSINESS RESTRUCTURING". Excluding this charge,
1996 earnings before extraordinary item were approximately $873,000, or $.13 per
share. The weighted average common shares outstanding at the end of 1996
increased by 34% from the prior year due to the issuance of additional common
stock in 1996 pursuant to the conversion of the Series A Convertible Preferred
Stock, issued during the fourth quarter of 1995, which was converted to common
stock in 1996.
The Company prepaid approximately $14.1 million of debt and capital
leases in connection with entering into the Credit Agreement in March 1996. As a
result, the Company recognized an extraordinary charge to earnings of $410,000,
or $.06 per share, net of the benefit for income taxes, as a result of this
early extinguishment of debt. The Company also incurred financing costs of
$2,000,000 in connection with the Credit Agreement, which have been deferred and
are being amortized over the term of the Credit Agreement.
Fiscal 1995 Compared to Fiscal 1994
Revenues for the year ended December 31, 1995 increased to $39,905,000
from $28,182,000 in 1994. This 41.6% increase was primarily the result of
increases in both sales and leasing revenues generated from the new branch
locations in Texas, coupled with increased demand for the
-16-
Company's product at its existing locations. The Texas operation contributed
7.0% and 9.6% to the Company's container sales and leasing revenues,
respectively. Additionally, the telecommunication shelter division comprised
5.8% of sales revenues. Revenues related to container and modular building sales
and leasing activities increased 31.3% and 70.2%, respectively, from the prior
year. Additional revenues, primarily related to delivery operations, increased
35.6% from 1994 levels.
Cost of sales increased to 78.7% of sales and leasing revenues from
75.2% of sales and leasing revenues in 1994. The increase was primarily
attributable to the modular division which contracted for the construction of
more sophisticated units requiring substantially more interior build-out than in
previous years and the start up of the new telecommunication shelter division,
which generated lower profit margins during the start-up phase.
Leasing, selling and general expenses were 38.0% of total revenues in
1995, which approximated their 1994 level of 38.5% of total revenues. The
Company's new branch locations incurred higher administrative and advertising
costs than in 1994, which were offset by the increased revenues from the
existing locations where a large portion of the leasing, selling and general
expenses are fixed or semi-variable. Depreciation and amortization expense
increased to $1,318,000 from $625,000 in 1994 as a result of the increase in the
container lease fleet and the increase in support equipment required for the
delivery operations and manufacturing facilities.
Interest expense increased to $3,212,000 in 1995 compared to $1,274,000
in 1994. The Company utilized its line of credit availability more extensively
in 1995, and also increased borrowings during the year to finance the
substantial growth in its container lease fleet. The average outstanding balance
on the line of credit was approximately $4.2 million and $1.1 million for 1995
and 1994, respectively.
Net income for fiscal 1995 was $777,000 compared to $956,000 for 1994.
The effective tax rate was 44% for both years. Earnings per share was $.16 per
share for 1995, and $.21 per share in 1994. The weighted average number of
common and common equivalent shares outstanding increased to 5,010,126 in 1995
compared to 4,496,904 in 1994. This increase was a result of the shares issued
in the initial public offering in 1994 being outstanding for the entire year in
1995 and a private placement of 50,000 shares of Series A Convertible Preferred
Stock in 1995.
Quarterly Results of Operations
The following table reflects certain selected unaudited quarterly
operating results of the Company for each of the eight quarters through the
quarter ended December 31, 1996. The Company believes that all necessary
adjustments have been included to present fairly the quarterly information when
read in conjunction with the Consolidated Financial Statements included
elsewhere herein. The operating results for any quarter are not necessarily
indicative of the results for any future period.
-17-
QUARTERLY RESULTS OF OPERATIONS
-------------------------------------------------------------------------------------------
1996 1995
-------------------------------------------------------------------------------------------
(in thousands, except per share amounts)
Mar 31 June 30 Sept 30 Dec 31 Mar 31 June 30 Sept 30 Dec 31
REVENUES:
Container and modular building sales $ 4,916 $ 5,746 $ 6,376 $ 6,581 $ 5,448 $ 6,313 $ 7,555 $ 4,948
Leasing 3,171 3,171 3,433 3,863 2,521 2,959 3,259 3,475
Other 770 1,344 1,348 1,491 706 1,118 702 901
-------------------------------------------------------------------------------------------
8,857 10,261 11,157 11,935 8,675 10,390 11,516 9,324
COSTS AND EXPENSES:
Cost of container and modular building sales
3,926 5,120 5,380 5,500 4,347 4,887 5,949 3,924
Leasing, selling and general expenses
3,874 3,215 3,680 4,575 3,466 4,141 3,942 3,625
Depreciation and amortization 368 380 452 513 238 312 359 409
Restructuring charge -- -- -- 700 -- -- -- --
-------------------------------------------------------------------------------------------
Income from operations 689 1,546 1,645 647 624 1,050 1,266 1,366
OTHER INCOME (EXPENSE):
Interest income and other 56 31 23 115 115 7 73 98
Interest Expense (948) (1,001) (974) (971) (650) (723) (846) (993)
-------------------------------------------------------------------------------------------
INCOME (LOSS)BEFORE PROVISION
FOR INCOME TAX (BENEFIT) AND
EXTRAORDINARY ITEM (203) 576 694 (209) 89 334 493 471
PROVISION FOR (BENEFIT OF) INCOME
TAXES (89) 253 305 (92) 39 147 217 207
-------------------------------------------------------------------------------------------
INCOME (LOSS) BEFORE EXTRAORDINARY ITEM
(114) 323 389 (117) 50 187 276 264
EXTRAORDINARY ITEM (410) -- -- -- -- -- -- --
-------------------------------------------------------------------------------------------
NET INCOME (LOSS) $ (524) $ 323 $ 389 $ (117) $ 50 $ 187 $ 276 $ 264
===========================================================================================
EARNINGS (LOSS)PER COMMON
AND COMMON EQUIVALENT SHARE:
INCOME (LOSS) BEFORE
EXTRAORDINARY ITEM $ (0.02) $ 0.05 $ 0.06 $ (0.02) $ 0.01 $ 0.04 $ 0.06 $ 0.05
EXTRAORDINARY ITEM (.06) -- -- -- -- -- -- --
-------------------------------------------------------------------------------------------
NET INCOME (LOSS) $ (0.08) $ 0.05 $ 0.06 $ (0.02) $ 0.01 $ 0.04 $ 0.06 $ 0.05
===========================================================================================
-18-
Quarterly results can be affected by a number of factors, including the
timing of orders, customer delivery requirements, production delays,
inefficiencies, the mix of product sales and leases, raw material availability
and general economic conditions.
Seasonality
There is little seasonality inherent in the Company's operations.
However, sales of custom built units can be dependent on the purchasers' timing
needs to place the units into service. In addition, demand for off-site
container leases is stronger from September through December due to increased
needs for storing inventory for the holiday season by the Company's retail
customers. Containers used by these customers are often returned early in the
following year, causing a lower than normal occupancy rate for the Company
during the first quarter. The occupancy levels have historically ranged from a
low of 82% to a high of 95%. These seasonable fluctuations created a marginal
decrease in cash flow for each of the first quarters during the past several
years. On-site storage is not as subject to seasonal fluctuation, and the
Company anticipates that as on-site storage becomes a larger percentage of its
storage operations, that the Company will experience less seasonability.
Liquidity and Capital Resources
Due to the nature of its business, the Company required increased
amounts of financing to support the growth of its business during the last
several years. This financing has been required primarily to fund the
acquisition and manufacture of containers for the Company's lease fleet and also
to fund the acquisition of property, plant and equipment and to support both the
Company's container leasing and manufacturing operations.
In order to improve its cash flow, increase its borrowing availability
and fund its continued growth, in March 1996 the Company entered into the Credit
Agreement with BT Commercial Corporation, as Agent for a group of lenders (the
"Lenders"). Under the terms of the Credit Agreement, the Lenders provided the
Company with a $35.0 million revolving line of credit and a $6.0 million term
loan. Borrowings under the Credit Agreement are secured by substantially all of
the Company's assets.
Borrowings under the term loan are to be repaid over a five-year
period. Interest accrues on the term loan at the Company's option at either
prime plus 1.75% or the Eurodollar rate plus 3.25%. Borrowings under the term
loan are payable monthly as follows (plus interest):
Months 1 through 12 $ 62,500
Months 13 through 24 83,333
Months 25 through 60 118,056
Additional principal payments equal to 75% of Excess Cash Flow, as defined in
the term loan documents, are required annually.
Available borrowings under the revolving line of credit are based upon
the level of the Company's inventories, receivables and container lease fleet.
The container lease fleet will be appraised at least annually, and up to 90% of
the lesser of cost or appraised orderly liquidation value may be included in the
borrowing base. Interest accrues at the Company's option at either prime plus
1.5% or the
-19-
Eurodollar rate plus 3% and is payable monthly or at the end of the term of any
Eurodollar borrowing period. The term of this line of credit is three years,
with a one-year extension option. As of December 31, 1996, $26.4 million of
borrowings were outstanding and approximately $0.9 million of additional
borrowing was available under the revolving line of credit.
The Credit Agreement contains several financial covenants including a
minimum tangible net worth requirement, a minimum fixed charge coverage ratio, a
maximum ratio of debt-to-equity, minimum operating income levels and minimum
required utilization rates. In addition, the Credit Agreement contains limits on
capital expenditures, acquisitions, changes in control, the incurrence of
additional debt, and the repurchase of common stock, and prohibits the payment
of dividends.
In connection with the closing of the Credit Agreement in March 1996,
the Company terminated its line of credit with its previous lender, repaying all
indebtedness under that line. In addition, the Company repaid other long-term
debt and obligations under capital leases totaling $14.1 million.
During 1996, the Company's operations provided cash flow of $1,390,000
compared to utilizing $166,000 in 1995. The improvement in cash flow primarily
resulted from the improved financing terms under the Credit Agreement which
permitted a reduction of accounts payables, partially offset by an increase in
accrued liabilities and an increase in receivables.
During 1996, the Company invested $10,751,000 in equipment and the
container lease fleet. This amount is net of $2,707,000 in related sales and
financing.
Cash flow from financing activities totaled $8,667,000 during 1996.
This was the result of increased borrowings to finance container lease fleet and
equipment acquisitions and the restructuring of the Company's debt under the
Credit Agreement, partially offset by the principal payments on indebtedness and
an increase in other assets associated with deferred financing costs incurred in
connection with the closing of the Credit Agreement.
The Company believes that its current capitalization, together with
borrowings available under the Credit Agreement, is sufficient to maintain its
current level of operations and permit controlled growth and increased
profitability for the next 12 months. However, should demand for the Company's
products exceed current expectation or should the cost of used containers
continue to increase, the Company would be required to secure additional
financing through debt or equity offerings, additional borrowings or a
combination of these sources. However, there is no assurance that any such
financings will be obtained or obtained on terms acceptable to the Company.
CERTAIN FACTORS AFFECTING FORWARD-LOOKING STATEMENTS - SAFE HARBOR STATEMENT
This Report on Form 10-K contains forward looking statements that
involve risks and uncertainties; the actual results of the Company could differ
materially from those anticipated in these forward-looking statements as a
result of certain factors discussed elsewhere in this Report, as well as the
following:
Uncertainty in Supply and Price of Used Containers
The Company's ability to obtain used containers for its lease fleet is
subject in large part to the availability of these containers in the market.
This is in part subject to international trade issues and the
-20-
demand for containers in the ocean cargo shipping business. Should there be a
shortage in supply of used containers, the Company could supplement its lease
fleet with new manufactured containers. However, should there be an
overabundance of these used containers available, it is likely that prices would
fall. This could result in a reduction in the lease rates the Company could
obtain from its container leasing operations. It could also cause the appraised
orderly liquidation value of the containers in the lease fleet to decline. In
such event, the Company's ability to finance its business through the Credit
Agreement would be severely limited, as the maximum borrowing limit under that
facility is based upon the appraised orderly liquidation value of the Company's
container lease fleet.
Uncertainty of Additional Financing
The Company believes that its current capitalization, together with
borrowings available under the Credit Agreement, is sufficient to maintain its
current level of operations and permit controlled growth and increased
profitability. However, should demand for the Company's products exceed current
expectation, or should the cost of used containers continue to increase, the
Company would be required to secure additional financing through debt or equity
offerings, additional borrowings or a combination of these sources. However,
there is no assurance that any such financings will be obtained or obtained on
terms acceptable to the Company.
Lease Utilization Levels
Historically, the Company has maintained lease fleet utilization levels
in the 85-to-92% range. During 1996, the Company's lease fleet utilization level
was 90%. Should the Company experience an unexpected decline in demand for its
lease units due to economic conditions, an increase in competition, an increase
in supply of used containers or any other reason, the Company would expect to
dispose of containers in order to maintain acceptable utilization levels. If
this were to occur at a time when the market price of used containers has
declined, it could result in losses on the sale of these containers. In
addition, the Company's operating results would be adversely affected because it
would continue to be subject to the high fixed costs of its branch operations
but it would have reduced lease revenues.
Uncertainty of Future Financial Performance; Fluctuations in Operating Results
The Company's results of operations may vary from period to period due
to a variety of factors, including expenditures to acquire or start-up and
integrate into the Company's operations new businesses which the Company seeks
to acquire as part of its expansion strategy, the introduction of new products
by the Company or its competitors, availability of and cost increases of used
containers from which the Company builds its container fleet, changes in
marketing and sales expenditures, pricing pressures, market acceptance of the
Company's products, particularly in new market areas in which the Company may
expand, and general economic and industry conditions affect demand for the
Company's products and influence the Company's operating costs and margins.
Risk of Debt Covenant Default
The Company has a $35 million credit facility that expires in March
1999. The Credit Agreement is secured by substantially all of the assets of the
Company. The Company is required to comply with certain covenants and
restrictions, including covenants relating to the Company's financial condition
and results of operations. If the Company is unable or fails to comply with the
covenants and restrictions, the lender would have the right not to make loans
under the Credit Agreement and to require early payment of outstanding loans.
The lack of availability of loans or the requirement to make early repayment of
-21-
loans would have a material adverse effect on the Company's business, financial
condition, or results of operations. See "LIQUIDITY AND CAPITAL
RESOURCES."
Competition
The Company believes that its products, services, pricing and
manufacturing capabilities allow it to compete favorably in each of the on-site
leasing, off-site leasing and sales segments of the Company's markets in the
areas it currently operates. However, the Company's ability to continue to
compete favorably in each of its markets is dependent upon many factors,
including the market for used ocean-going shipping containers and the costs of
steel. During 1996, the price of used steel cargo containers increased by
approximately 20%.
The Company believes that competition in each of its markets may
increase significantly in the future. It is probable that such competitors will
have greater marketing and financial resources than the Company. As competition
increases, significant pricing pressure and reduced profit margins may result.
Prolonged price competition, along with outer forms of competition, could have a
material adverse affect on the Company's business and results of operations.
-22-
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
INDEX
Report of Independent Public Accountants 23
Financial Statements-
Consolidated Balance Sheets - December 31, 1996 and 1995 24
Consolidated Statements of Operations - For the Years Ended
December 31, 1996, 1995 and 1994 25
Consolidated Statements of Stockholders' Equity - For the Years
Ended December 31, 1996, 1995 and 1994 26
Consolidated Statements of Cash Flows - For the Years Ended
December 31, 1996, 1995 and 1994 27
Notes to Consolidated Financial Statements - December 31, 1996 and 1995 28
Schedule II - Valuation and Qualifying Accounts
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Mobile Mini, Inc.:
We have audited the accompanying consolidated balance sheets of MOBILE MINI,
INC. (a Delaware corporation) and subsidiaries as of December 31, 1996 and 1995,
and the related consolidated statements of operations, stockholders' equity and
cash flows for each of the three years in the period ended December 31, 1996.
These financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements based
on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Mobile Mini, Inc. and
subsidiaries as of December 31, 1996 and 1995 and the results of their
operations and their cash flows for each of the three years in the period ended
December 31, 1996, in conformity with generally accepted accounting principles.
Our audits were made for the purpose of forming an opinion on the basic
financial statements taken as a whole. The schedule listed in the index of the
financial statements is presented for the purpose of complying with the
Securities and Exchange Commission's rules and is not a required part of the
basic financial statements. This schedule has been subjected to the auditing
procedures applied in our audits of the basic financial statements and, in our
opinion, fairly states in all material respects the financial data required to
be set forth therein in relation to the basic financial statements taken as a
whole.
ARTHUR ANDERSEN LLP
Phoenix, Arizona
March 24, 1997.
-23-
MOBILE MINI, INC.
CONSOLIDATED BALANCE SHEETS
December 31, 1996 and 1995
ASSETS
December 31,
CURRENT ASSETS: 1996 1995
----------- -------------
Cash $ 736,543 $ 1,430,651
Receivables, net of allowance for doubtful accounts of $268,000 and $158,000 at December 31,
1996 and 1995, respectively 4,631,854 4,312,725
Inventories 4,998,382 5,193,222
Prepaid and other 742,984 718,574
----------- -------------
Total current assets 11,109,763 11,655,172
CONTAINER LEASE FLEET, net of accumulated
depreciation of $1,244,000 and $911,000, respectfully 34,313,193 26,954,936
PROPERTY, PLANT AND EQUIPMENT, net (Note 5) 17,696,046 15,472,164
OTHER ASSETS 1,697,199 259,672
----------- -----------
$64,816,201 $ 54, 341,944
=========== =============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 2,557,329 $ 4,265,147
Accrued compensation 674,818 238,132
Other accrued liabilities 1,517,295 1,334,332
Current portion of long-term debt (Note 4) 1,378,829 737,181
Current portion of obligations under capital leases (Note 5) 1,352,279 2,488,205
----------- -------------
Total current liabilities 7,480,550 9,062,997
LINE OF CREDIT (Note 3) 26,406,035 4,099,034
LONG-TERM DEBT, less current portion (Note 4) 5,623,948 8,363,333
OBLIGATIONS UNDER CAPITAL LEASES, less current portion (Note 5) 5,387,067 12,944,653
DEFERRED INCOME TAXES 3,709,500 3,711,985
----------- -------------
Total liabilities 48,607,100 38,182,002
----------- -------------
COMMITMENTS AND CONTINGENCIES (Notes 7 and 9)
STOCKHOLDERS' EQUITY (Note 10):
Series A Convertible Preferred Stock, $.01 par value, $100 stated value,
5,000,000 shares authorized, 0 and 50,000 shares issued and outstanding at December 31,
1996 and 1995, respectively -- 5,000,000
Common stock, $.01 par value, 17,000,000 shares authorized, 6,739,324 and 4,835,000 shares
issued and outstanding at December 31, 1996 and 1995, respectively 67,393 48,350
Additional paid-in capital 14,338,873 9,378,979
Retained earnings 1,802,835 1,732,613
----------- -------------
Total stockholders' equity 16,209,101 16,159,942
----------- -------------
$64,816,201 $ 54,341,944
=========== =============
The accompanying notes are an integral part of these
consolidated balance sheets.
-24-
MOBILE MINI, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
For the Years Ended December 31, 1996, 1995 and 1994
1996 1995 1994
------------ ------------ ------------
REVENUES:
Container and modular building sales $ 23,618,754 $ 24,264,547 $ 18,480,503
Leasing 13,638,635 12,213,888 7,174,585
Delivery, hauling and other 4,952,705 3,426,767 2,527,146
------------ ------------ ------------
42,210,094 39,905,202 28,182,234
COSTS AND EXPENSES:
Cost of container and modular building sales 19,926,191 19,106,960 13,903,299
Leasing, selling, and general expenses 15,343,210 15,174,159 10,863,068
Depreciation and amortization 1,713,419 1,317,974 624,754
Restructuring charge (Note 1) 700,000 -- --
------------ ------------ ------------
INCOME FROM OPERATIONS 4,527,274 4,306,109 2,791,113
OTHER INCOME (EXPENSE):
Interest income and other 225,053 292,686 204,007
Interest expense (3,894,155) (3,211,659) (1,274,204)
------------ ------------ ------------
INCOME BEFORE PROVISION FOR INCOME TAXES AND EXTRAORDINARY ITEM 858,172 1,387,136 1,720,916
PROVISION FOR INCOME TAXES (377,596) (610,341) (765,098)
------------ ------------ ------------
INCOME BEFORE EXTRAORDINARY ITEM 480,576 776,795 955,818
EXTRAORDINARY ITEM, net of income tax benefit of $322,421 (Note 3) (410,354) -- --
------------ ------------ ------------
NET INCOME $ 70,222 $ 776,795 $ 955,818
============ ============ ============
EARNINGS PER COMMON AND COMMON EQUIVALENT SHARE:
Income before extraordinary item $ 0.07 $ 0.16 $ 0.21
Extraordinary item (0.06) -- --
------------ ------------ ------------
Net income $ 0.01 $ 0.16 $ 0.21
============ ============ ============
WEIGHTED AVERAGE NUMBER OF COMMON AND COMMON EQUIVALENT SHARES
OUTSTANDING 6,737,592 5,010,126 4,496,904
============ ============ ============
The accompanying notes are an integral part of these condolidated statements.
-25-
MOBILE MINI, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
For the years ended December 31, 1996, 1995, and 1994
Additional Total
Preferred Common Paid-in Retained Stockholders'
Stock Stock Capital Earnings Equity
------------ ------------ ------------ ------------ ------------
BALANCE, December 31, 1993 $ -- $ 27,000 $ 3,265,097 $ -- $ 3,292,097
Sale of common stock (Note 10) -- 21,350 7,005,768 -- 7,027,118
Net income -- -- -- 955,818 955,818
------------ ------------ ------------ ------------ ------------
BALANCE, December 31, 1994 -- 48,350 10,270,865 955,818 11,275,033
Sale of preferred stock (Note 5,000,000 -- (891,886) -- 4,108,114
10)
Net income -- -- -- 776,795 776,795
------------ ------------ ------------ ------------ ------------
BALANCE, December 31, 1995 5,000,000 48,350 9,378,979 1,732,613 16,159,942
Conversion of preferred stock
(Note 10) (5,000,000) 19,043 4,959,894 -- (21,063)
Net income -- -- -- 70,222 70,222
------------ ------------ ------------ ------------ ------------
BALANCE, December 31, 1996 $ -- $ 67,393 $ 14,338,873 $ 1,802,835 $ 16,209,101
============ ============ ============ ============ ============
The accompanying notes are an integral part of these consolidated statements.
-26-
MOBILE MINI, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Years Ended December 31, 1996, 1995 and 1994
1996 1995 1994
------------ ------------ ------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 70,222 $ 776,795 $ 955,818
Adjustments to reconcile net income to net cash provided by
(used in) operating activities:
Extroardinary loss on early debt extinguishment 410,354 -- --
Amortization of deferred costs on credit agreement 385,473 -- --
Depreciation and amortization 1,713,419 1,317,974 624,754
Loss (gain) on disposal of property, plant and equipment 3,938 1,763 (399)
Changes in assets and liabilities:
Increase in receivables, net (319,129) (292,339) (2,255,883)
Decrease (increase) in inventories 194,840 (1,085,216) (2,681,378)
Increase in prepaid and other (24,410) (219,109) (112,169)
Decrease (increase) in other assets 45,902 (87,617) (89,495)
(Decrease) increase in accounts payable (1,707,818) (825,657) 3,551,884
(Decrease) increase in accrued liabilities 619,649 (382,147) 618,970
(Decrease) increase in deferred income taxes (2,485) 629,987 688,998
------------ ------------ ------------
Net cash provided by (used in) operating 1,389,961 (165,566) 1,301,100
activities
------------ ------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Net purchases of container lease fleet (7,737,552) (6,752,060) (6,512,209)
Net purchases of property, plant and equipment (3,013,247) (4,025,574) (7,918,913)
------------ ------------ ------------
Net cash used in investing activities (10,750,799) (10,777,634) (14,431,122)
------------ ------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net borrowings under lines of credit 22,307,001 876,804 1,427,208
Proceeds from issuance of long-term debt 7,127,997 5,855,982 3,290,005
Proceeds from sale-leaseback transactions -- 5,857,235 4,690,350
Payment for deferred financing costs (1,963,484) -- --
Principal payments and penalties on early debt extinguishment (14,405,879) -- --
Principal payments on long-term debt (1,334,083) (2,081,883) (1,081,740)
Principal payments on capital lease obligations (3,043,759) (3,089,046) (1,505,677)
Additional paid in capital (21,063) 4,108,114 7,027,118
------------ ------------ ------------
Net cash provided by financing activities 8,666,730 11,527,206 13,847,264
------------ ------------ ------------
NET INCREASE (DECREASE) IN CASH (694,108) 584,006 717,242
CASH, beginning of year 1,430,651 846,645 129,403
------------ ------------ ------------
CASH, end of year $ 736,543 $ 1,430,651 $ 846,645
============ ============ ============
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the year for interest $ 3,186,774 $ 2,745,542 $ 1,320,084
============ ============ ============
Cash paid during the year for income taxes $ 59,958 $ 277,600 $ 300,692
============ ============ ============
SUPPLEMENTAL DISCLOSURE OF NONCASH FINANCING ACTIVITIES:
Capital lease obligations of $548,697, $1,851,336 and $1,413,061 during 1996,
1995, and 1994, respectively, were incurred in connection with lease
agreements for containers and equipment.
The accompanying notes are an integral part of these consolidated statements.
-27-
MOBILE MINI, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996
(1) THE COMPANY, ITS OPERATIONS AND SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES:
Organization
Mobile Mini, Inc., a Delaware corporation, designs and manufactures
portable steel storage containers and telecommunications shelters and acquires
and refurbishes ocean-going shipping containers for sale and lease primarily in
Arizona, California and Texas. It also designs and manufactures a variety of
delivery systems to compliment its storage container sales and leasing
activities.
Principles of Consolidation
The consolidated financial statements include the accounts of Mobile
Mini, Inc. and its wholly owned subsidiaries, Delivery Design Systems, Inc.
("DDS") and Mobile Mini I, Inc. (collectively the "Company"). All material
intercompany transactions have been eliminated.
Management's Plans
The Company has experienced rapid growth during the last several years
with revenues increasing at a 35.0% compounded rate during the last three years.
This growth related to both the opening of additional sales and leasing offices
in California and Texas and to an increase in leasing revenues due to the
expansion of the Company's container lease fleet. Much of this growth was
financed with short-term debt or capital leases, which was not adequate to meet
the Company's growth needs.
As discussed more fully in Note 3, in March 1996, the Company entered
into a $41.0 million credit agreement (the "Credit Agreement") with a group of
lenders. Initial borrowings under the Credit Agreement of $22,592,000 were used
to refinance a majority of the Company's outstanding indebtedness with more
favorable terms. The Company intends to use its remaining borrowing
availability, primarily to expand its container lease fleet and related
operations.
The Company believes that its current capitalization together with
borrowings available under the Credit Agreement, is sufficient to maintain the
Company's current level of operations and permit controlled growth. However,
should demand for the Company's products exceed current expectations, the
Company would be required to secure additional financing through debt or equity
offerings, additional borrowings or a combination of these sources. However,
there is no assurance that any such financings will be available or will be
available on terms acceptable to the Company.
The Company's ability to obtain used containers for its lease fleet is
subject in large part to the availability of these containers in the market.
This is in part subject to international trade issues and the demand for
containers in the ocean cargo shipping business. Should there be a shortage in
supply of used containers, the Company could supplement its lease fleet with new
manufactured containers. However, should there be an overabundance of these used
containers available, it is likely that prices would fall. This could result in
a reduction in the lease rates the Company could obtain from its container
leasing operations. It could also cause the appraised orderly liquidation value
of the containers in the lease fleet to decline. In such event, the Company's
ability to finance its business through the Credit Agreement would be severly
limited, as the maximum borrowing limit under that facility is based upon the
appraised orderly liquidation value of the Company's container lease fleet.
The Company previously was involved in the manufacture, sale and
leasing of modular steel buildings in the state of Arizona. These buildings were
used primarily as portable schools, but could be used for a variety of purposes.
Although the Company believes its modular buildings were superior to the
wood-framed buildings offered by its competitors, the Company was not able to
generate acceptable margins on this product line. During 1996, the Company
implemented a strategic restructuring program designed to concentrate management
effort and resources and better position itself to achieve its strategic growth
objectives. As a result of this program, the Company's 1996 results include
charges of $700,000 ($400,000 after tax, or $.06 per share) for costs associated
with restructuring the Company's manufacturing operations and for other related
charges. These charges were recorded in the fourth quarter of 1996, and were
comprised of the write-down of assets used in the Company's discontinued modular
building operations and related severance obligations ($300,000), and the
write-down of other fixed assets ($400,000). By discontinuing its modular
building operations, the Company will be able to utilize the management
resources and production capacity previously utilized by this division to expand
the Company's telecommunications shelter business and its container leasing
operations.
-28-
Revenue Recognition
The Company recognizes revenue from sales of containers upon delivery.
Revenue generated under container leases is recognized on a straight-line basis
over the term of the related lease.
Revenue under certain contracts for the manufacture of modular
buildings is recognized using the percentage-of-completion method primarily
based on contract costs incurred to date compared with total estimated contract
costs. Provision for estimated losses on uncompleted contracts is made in the
period in which such losses are determined. Costs and estimated earnings less
billings on uncompleted contracts of approximately $141,000 and $112,000 in 1996
and 1995, respectively, represent amounts received in excess of revenue
recognized and are included in accrued liabilities in the accompanying balance
sheet. In 1995, costs and estimated revenue recognized in excess of amounts
billed were included in receivables.
Revenue for container delivery, pick-up and hauling is recognized as
the related services are provided.
Concentrations of Credit Risk
Financial instruments which potentially expose the Company to
concentrations of credit risk, as defined by Statement of Financial Accounting
Standards ("SFAS") No. 105, consist primarily of trade accounts receivable. The
Company's trade accounts receivable are generally secured by the related
container or modular building sold or leased to the customer.
The Company does not rely on any one customer base. The Company's sales
and leasing customers by major category are presented below as a percentage of
units sold/leased:
1996 1995
--------------------------- ----------------------------
Sales Leasing Sales Leasing
Retail and wholesale businesses 54% 52% 50% 44%
Homeowners 5% 17% 6% 22%
Construction 12% 22% 10% 23%
Institutions 14% 4% 20% 5%
Government, industrial and other 15% 5% 14% 6%
Inventories
Inventories are stated at the lower of cost or market, with cost being
determined under the specific identification method. Market is the lower of
replacement cost or net realizable value. Inventories at December 31 consisted
of the following:
1996 1995
---------- ----------
Raw materials and supplies $3,547,487 $2,858,181
Work-in-process 288,986 883,814
Finished containers 1,161,909 1,451,227
========== ==========
$4,998,382 $5,193,222
========== ==========
-29-
Property, Plant and Equipment
Property, plant and equipment are stated at cost, net of accumulated
depreciation. Depreciation is provided using the straight-line method over the
assets' estimated useful lives. Salvage values are determined when the property
is constructed or acquired and range up to 25%, depending on the nature of the
asset. In the opinion of management, estimated salvage values do not cause
carrying values to exceed net realizable value. Normal repairs and maintenance
to property, plant and equipment are expensed as incurred.
Property, plant and equipment at December 31 consisted of the
following:
Estimated Useful Life
in Years
1996 1995
---------------- ----------
Land - $ 708,555 $ 328,555
Vehicles and equipment 5 to 10 11,218,281 9,469,092
Buildings and improvements 30 6,958,247 6,363,154
Office fixtures and equipment 5 to 20 2,514,812 1,714,312
------------ -------------
21,399,895 17,875,113
Less-Accumulated depreciation (3,703,849) (2,402,949)
------------ -------------
$ 17,696,046 $ 15,472,164
============== =============
At December 31, 1996 and 1995, substantially all property, plant and
equipment has been pledged as collateral for long-term debt obligations and
obligations under capital lease (see Notes 3, 4 and 5).
Accrued Liabilities
Included in accrued liabilities in the accompanying consolidated
balance sheets are customer deposits and prepayments totaling approximately
$412,000 and $505,000 for the years ended December 31, 1996 and 1995,
respectively.
Earnings Per Common and Common Share Equivalent
Earnings per common and common share equivalent is computed by dividing
net income by the weighted average number of common and common equivalent shares
outstanding. Fully diluted and primary earnings per common and common share
equivalent are considered equal for all periods presented.
Fair Value of Financial Instruments
The estimated fair value of financial instruments has been determined
by the Company using available market information and valuation methodologies.
Considerable judgment is required in estimating fair values. Accordingly, the
estimates may not be indicative of the amounts the Company could realize in a
current market exchange.
The carrying amounts of cash, receivables and accounts payable
approximate fair values. The carrying amounts of the Company's borrowing under
the line of credit agreement and long-term debt instruments approximate their
fair value. The fair value of the Company's long-term debt and line of credit is
estimated using discounted cash flow analyses, based on the Company's current
incremental borrowing rates for similar types of borrowing arrangements.
Deferred Financing Costs
Included in other assets are deferred financing costs of $1,659,218 and
$172,715 at December 31, 1996 and 1995, respectively. These costs of obtaining
long-term financing are being amortized over the term of the related debt, using
the straignt line method.
-30-
Advertising Expense
The Company expenses the costs of advertising the first time the advertising
takes place, except for direct-response advertising, which is capitalized and
amortized over its expected period of future benefits. Advertising expense
totaled $2,341,000 and $2,258,000 in 1996 and 1995, respectively.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenue and expenses during the reporting
period. Actual results could differ from those estimates.
Recently Issued Accounting Standard
Statement of Financial Accounting Standards No. 121 (SFAS No. 121),
Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to
be Disposed of, was adopted in 1996. The adoption of SFAS No. 121 did not have a
material effect on the Company's financial position or its results of
operations.
(2) CONTAINER LEASE FLEET:
The Company has a container lease fleet consisting of refurbished or
constructed containers and modular buildings that are leased to customers under
operating lease agreements with varying terms. Depreciation is provided using
the straight-line method over the containers' and modular buildings' estimated
useful lives of 20 years with salvage values estimated at 70% of cost. In the
opinion of management, estimated salvage values do not cause carrying values to
exceed net realizable value. At December 31, 1996 and 1995, approximately $6.9
million and $24.9 million, respectively of containers and modular buildings
included in the container lease fleet have been pledged as collateral for
long-term debt and obligations under capital leases and, at December 31, 1996.
The balance of the containers are secured as collateral under the Credit
Agreement (see Notes 3, 4 and 5). Normal repairs and maintenance to the
containers and modular buildings are expensed as incurred.
(3) LINE OF CREDIT:
In March 1996, the Company entered into the Credit Agreement with BT
Commercial Corporation, as Agent for a group of lenders (the "Lenders"). Under
the terms of the Credit Agreement, as amended, the Lenders have provided the
Company with a $35.0 million revolving line of credit and a $6.0 million term
loan. Borrowings under the Credit Agreement are secured by substantially all of
the Company's assets.
Available borrowings under the revolving line of credit are based upon
the level of the Company's inventories, receivables and container lease fleet.
The container lease fleet will be appraised at lease annually, and up to 90% of
the lesser of cost or appraised orderly liquidation value, as defined, may be
included in the borrowing base. Interest accrues at the Company's option at
either prime plus 1.5% or the Eurodollar rate plus 3% and is payable monthly.
The term of this line of credit is three years, with a one-year extension
option.
In connection with the closing of the Credit Agreement, the Company
terminated its line of credit with its previous lender, repaying all
indebtedness under that line. In addition, the Company repaid other long-term
debt and obligations under capital leases totaling $14.1 million. As a result,
the Company recognized costs previously deferred related to certain indebtedness
and prepayment penalties resulting in an extraordinary charge to earnings of
$410,000 ($732,000 net of a $322,000 benefit for income taxes).
The line of credit balance outstanding at December 31, 1996, was
approximately $26.4 million and is classified as a long-term obligation in the
accompanying 1996 balance sheet. The amount available for borrowing was
approximately $957,000 at December 31, 1996. Prior to the refinancing, the
Company had available short-term lines of credit which bore interest at 1.5%
over the prime rate. During 1996 and 1995, the weighted average interest
-31-
rate under the lines of credit was 8.73% and 10.2%, respectively, and the
average balance outstanding during 1996 and 1995 was approximately $20.3 million
and $4.2 million, respectively.
The Credit Agreement contains several covenants including a minimum
tangible net worth requirement, a minimum fixed charge coverage ratio, a maximum
ratio of debt to equity, minimum operating income levels and minimum required
utilization rates. In addition, the Credit Agreement contains limits on capital
expenditures and the incurrence of additional debt, as well as prohibiting the
payment of dividends.
(4) LONG TERM DEBT:
Long-term debt at December 31, consists of the following:
1996 1995
-------------- ---------
Notes payable to BT Commercial Corporation, interest ranging from 3.25%
over Eurodollar rate (5.6% at December 31, 1996) to 1.75% over prime
(8.25% at December 31, 1996), fixed monthly installments of principal
plus interest, due March 2001, secured by various classes of the
Company's assets $ 5,437,500 $ -
Notes payable, interest ranging from 9% to 12.2%, monthly installments
of principal and interest, due March 1997 through September 2001,
secured by equipment and vehicles 743,867 3,122,665
Notes payable, interest ranging from 11.49 % to 12.63%, monthly
installments of principal and interest, due July 2000 through January
2001, secured by containers 706,796 4,342,043
Short term note payable to financial institution, interest at 6.89%
payable in fixed monthly installments due March 1997, unsecured 114,614 -
Notes payable to banks, interest ranging from 1.75% to 2.75% over prime,
monthly installments of principal and interest, paid off in March
1996, secured by deeds of trust on real property. - 1,635,806
----------- -----------
7,002,777 9,100,514
Less: Current portion (1,378,829) (737,181)
----------- -----------
$ 5,623,948 $ 8,363,333
============ ===========
Future maturities under long-term debt are as follows:
Years ending December 31, 1996
-----------
1997 $ 1,378,829
1998 1,673,650
1999 1,806,743
2000 1,707,031
2001 436,524
-----------
$ 7,002,777
Less: current portion (1,378,829)
-----------
$ 5,623,948
===========
-32-
The Credit Agreement with BT Commercial Corporation contains
restrictive covenants. See Note 3
(5) OBLIGATIONS UNDER CAPITAL LEASES:
The Company leases certain storage containers and equipment under
capital leases expiring through 2001. Certain storage container leases were
entered into under sale-leaseback arrangements with various leasing companies.
The lease agreements provide the Company with a purchase option at the end of
the lease term based on an agreed upon percentage of the original cost of the
containers. These leases have been capitalized using interest rates ranging from
approximately 8% to 14%. The leases are secured by storage containers and
equipment under lease.
During 1995 and 1994, the Company entered into multi-year agreements
(the "Leases") to lease a number of portable classrooms to school districts in
Arizona. Subsequent to entering the leases, the Company "sold" the portable
classrooms and assigned the Leases to an unrelated third party financial
institution (the "Assignee"). In addition, the Company entered into
Remarketing/Releasing Agreements (the "Agreements") with the Assignee. The
Agreements provide that the Company will be the exclusive selling/leasing agent
upon the termination of the aforementioned Leases for a period of 12 months. If
the Company is successful in releasing the buildings and the Assignee receives,
via lease payments, an amount equal to the Base Price, as defined, plus any
reimbursed remarketing costs of the Company, the Company has the option to
repurchase the buildings for $1 each. If the Company sells any of the buildings,
the Assignee shall receive from each sale that portion of the Base Price
allocated to the building sold plus costs the Assignee has reimbursed to the
Company plus interest on those combined amounts from the date of the Lease
termination at the Assignee's prime rate plus 4%. Any sales proceeds in excess
of this amount are to be remitted to the Company.
In the event the Company has not released or sold the buildings within
12 months of the termination of the Leases, the Assignee has the right to
require the Company to repurchase the buildings for the Base Price plus all
costs the Assignee has reimbursed to the Company plus interest thereon at the
Assignee's prime rate plus 4% since the termination of the Lease. For financial
reporting purposes these transactions were accounted for as capital leases in
accordance with SFAS No. 13, Accounting for Leases. For income tax purposes
these transactions were treated as sales.
During 1996, leases on 15 of the buildings matured and the Company sold
all 15 portable buildings in 1996 pursuant to the Agreements. The revenues from
these sales are included in the accompanying statements of operations and the
underlying capital lease obligations for these buildings were paid in full at
December 31, 1996.
Future payments of obligations under capital leases:
Years ending December 31,
1997 $ 2,091,580
-33-
1998 2,456,136
1999 2,405,222
2000 1,313,241
2001 54,418
-----------
Total payments 8,320,598
Less: Amounts representing interest
(1,581,251)
-----------
6,739,347
Less: Current portion
(1,352,279)
-----------
$ 5,387,067
===========
Certain obligations under capital leases contain financial covenants
which include that the Company maintains a specified interest expense coverage
ratio and a required debt to equity ratio.
Gains from sale-leaseback transactions have been deferred and are being
amortized over the estimated useful lives of the related assets. Unamortized
gains at December 31, 1996 and 1995, approximated $288,000 and $305,000,
respectively, and are reflected as a reduction in the container lease fleet in
the accompanying financial statements.
Included in the accompanying statements of operations are revenues of
approximately $3,645,000 in 1995 for container sales under sale-leaseback
transactions where no profit was recognized. The Company did not enter into any
significant sale-leaseback transactions during 1996.
(6) INCOME TAXES:
The Company accounts for income taxes in accordance with SFAS No. 109,
Accounting for Income Taxes. SFAS No. 109 requires the use of an asset and
liability approach in accounting for income taxes. Deferred tax assets and
liabilities are recorded based on the differences between the financial
statement and tax bases of assets and liabilities at the tax rates in effect
when these differences are expected to reverse.
The provision for income taxes at December 31, 1996, 1995 and 1994
consisted of the following:
1996 1995 1994
-------- ---------- --------
Current $ - $ - $ -
Deferred 377,596 610,341 765,098
-------- ---------- --------
Total $377,596 $ 610,341 $765,098
======== ========== ========
-34-
The components of the net deferred tax liability at December 31, 1996
and 1995 are as follows:
1996 1995
---------------- ------------------
Net long-term deferred tax liability:
Accelerated tax depreciation $ (7,363,000) $ (5,450,000)
Deferred gain on sale-leaseback transactions (429,000) 136,000
Deferred revenue (Note 5) - (87,000)
Alternative minimum tax credit 211,000 211,000
Reserve and other 324,500 (68,000)
Net operating loss carryforwards 3,369,000 1,412,000
Valuation allowance (13,000) (13,000)
---------------- ------------------
(3,900,500) (3,859,000)
---------------- ------------------
Net short-term deferred tax asset:
Valuation reserve for accounts receivable 113,000 66,000
Unicap adjustment 40,000 51,000
Vacation reserve 38,000 30,000
---------------- ------------------
191,000 147,000
---------------- ------------------
$ (3,709,500) $ (3,712,000)
================ ==================
SFAS No. 109 requires the reduction of deferred tax assets by a
valuation allowance if, based on the weight of available evidence, it is more
likely than not that some or all of the deferred tax assets will not be
realized.
Stock issuances by the Company may cause a change in ownership under
the provisions of the Internal Revenue Code Section 382; accordingly, the
utilization of the Company's net operating loss carryforwards may be subject to
annual limitations. Due to a change in ownership during 1996, approximately
$1,300,000 of the Company's net operating losses are subject to limitation.
A reconciliation of the federal statutory rate to the Company's
effective tax rate for the years ended December 31 are as follows:
1996 1995 1994
--------------- ------------- -------------
Statutory federal rate 34% 34% 34%
State taxes, net of federal benefit 6 6 8
Effect of permanent differences 4 4 2
=============== ============= =============
44% 44% 44%
=============== ============= =============
Net operating loss carryforwards for federal income tax purposes
totalled $8.0 million and $3.6 million at December 31, 1996 and 1995,
respectively, and expire from 2008 through 2011.
(7) TRANSACTIONS WITH RELATED PARTIES:
Effective December 31, 1993, Richard E. Bunger contributed
substantially all of the assets and liabilities of Mobile Mini Storage Systems
("MMSS") and the stock of DDS to the Company in exchange for 2,700,000 shares of
common stock and the assumption of certain liabilities by the Company. Such
liabilities include liabilities associated with the MMSS operations and certain
income tax liabilities of Mr. Bunger and an affiliate arising from the MMSS
operations occurring prior to January 1, 1994. These income tax liabilities were
approximately $2,821,000. The Company will indemnify and defend Mr. Bunger
against loss or expense related to all liabilities assumed by the Company and
for any contingent liabilities arising from past operations.
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The Company leases a portion of the property comprising its Phoenix
location and the property comprising its Tucson location from Mr. Bunger's five
children. Annual payments under these leases currently total approximately
$70,000 with an annual adjustment based on the Consumer Price Index. The term of
each of these leases will expire on December 31, 2003. Additionally, the Company
leases its Rialto, California facility from Mobile Mini Systems, Inc., an
affiliate, wholly owned by Mr. Bunger, for total annual lease payments of
$204,000, with annual adjustments based on the Consumer Price Index. The Rialto
lease is for a term of 15 years expiring on December 31, 2011. Management
believes the rental rates reflect the fair market value of these properties. The
Company purchased certain leased property at its Maricopa, Arizona facility from
Mr. Bunger on March 29, 1996, for a purchase price of $335,000, which management
believes reflects the fair market value of the property.
All ongoing and future transactions with affiliates will be on terms no
less favorable than could be obtained from unaffiliated parties and will be
approved by a majority of the independent and disinterested directors.
(8) BENEFIT PLANS:
Stock Option Plan
In August 1994, the Company`s board of directors adopted the Mobile
Mini, Inc. 1994 Stock Option Plan ("the Plan"). Under the terms of the Plan,
both incentive stock options ("ISOs"), which are intended to meet the
requirements of Section 422 of the Internal Revenue Code, and non-qualified
stock options may be granted. ISOs may be granted to the officers and key
personnel of the Company. Non-qualified stock options may be granted to the
Company's directors and key personnel, and to providers of various services to
the Company. The purpose of the Plan is to provide a means of performance-based
compensation in order to attract and retain qualified personnel and to provide
an incentive to others whose job performance or services affect the Company.
Under the Plan, as amended in 1996, options to purchase a maximum of
543,125 shares of the Company's common stock may be granted. The exercise price
for any option granted under the Plan may not be less than 100% (110% if the
option is granted to a stockholder who at the time the option is granted owns
stock comprising more than 10% of the total combined voting power of all classes
of stock of the Company) of the fair market value of the common stock at the
time the option is granted. The option holder may pay the exercise price in cash
or by delivery of previously acquired shares of common stock of the Company that
have been held for at least six months.
The Plan is administered by the compensation committee of the board of
directors which will determine whether such options will be granted, whether
such options will be ISOs or non-qualified options, which directors, officers,
key personnel and service providers will be granted options, the restrictions
upon the forfeitablity of such options and the number of options to be granted,
subject to the aggregate maximum number set forth above. Each option granted
must terminate no more than 10 years from the date it is granted.
The board of directors may amend the Plan at any time, except that
approval by the Company's shareholders may be required for any amendment that
increases the aggregate number of shares which may be issued pursuant to the
Plan, changes the class of persons eligible to receive such options, modifies
the period within which the options may
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be granted, modifies the period within which the options may be exercised or the
terms upon which options may be exercised, or increases the material benefits
accruing to the participants under the Plan. Unless previously terminated by the
board of directors, the Plan will terminate in November, 2003, but any option
granted thereunder will continue throughout the terms of such option.
The following summarizes the activity for the Plan for the years ended
December 31, 1996 and 1995:
1996 1995
------------------------------ ----------------------------------
Number Weighted Average Number Weighted Average
of Shares Exercise Price of Shares Exercise Price
-------------------------------------------------------------------
Options outstanding,
beginning of year 241,000 $4.04 128,000 $4.11
Granted 156,000 $3.43 143,000 $3.94
Canceled/Expired (50,000) $3.16 (30,000) $3.88
Exercised - - - -
--------------- ---- ---------------- ------------
Options outstanding, end of year 347,000 $3.89 241,000 $4.04
--------------- ---- ---------------- ------------
Options exercisable, end of year 158,500 89,250
--------------- ----------------
Range of exercise prices $3.12-$3.85 $3.75-$5.38
=============== ================
Weighted average fair value of $1.70 $ .97
options granted
=============== ================
At December 31, 1996, the weighted average remaining contractual life of
the options outstanding was 7.6 years.
Statement of Financial Accounting Standards No. 123
During 1995, the Financial Accounting Standards Board issued SFAS No.
123, Accounting for Stock-Based Compensation, which defines a fair value based
method of accounting for an employee stock option or similar equity instrument
and encourages all entities to adopt that method of accounting for all of their
employee stock compensation plans. However, it also allows an entity to continue
to measure compensation cost related to stock options issued to employees under
the Plan using the method of accounting prescribed by the Accounting Principles
Board Opinion No. 25 (APB No. 25), Accounting for Stock Issued to Employees.
Entities electing to remain under the accounting in APB No. 25 must make pro
forma disclosures of net income and earnings per share, as if the fair value
based method of accounting defined in SFAS No. 123 has been applied.
The Company has computed for pro forma disclosure purposes the value of
all options and warrants granted during 1995 and 1996, using the following
weighted average assumptions used for grants:
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Risk free interest rate 6.4%
Expected dividend yield None
Expected holding period 4 years
Expected volatility 48%
Options were assumed to be exercised at the end of the four year
expected life for the purpose of this valuation. Adjustments were not made for
options forfeited prior to vesting. The total value of options granted was
computed to be the following approximate amounts, which would be amortized on
the straight-line basis over the average holding period of options:
Year ended December 31, 1996 $99,418
Year ended December 31, 1995 $56,838
If the Company had accounted for stock options issued to employees
using a fair value based method of accounting, the Company's net income and net
income per share would have been reported as follows:
Year Ended December 31,
1996 1995
------------ ------------
Net Income:
As reported $ 70,222 $ 776,795
Pro forma 14,548 744,966
Net income per common share
and common share equivalent:
As reported $ 0.01 $ 0.16
Pro forma 0.00 0.15
The effects of applying SFAS No. 123 for providing pro forma
disclosures for 1996 and 1995 are not likely to be representative of the effects
on reported net income and net income per common share equivalent for future
years, because options vest over several years and additional awards generally
are made each year, and SFAS No. 123 has not been applied to options granted
prior to January 1, 1995.
401(k) Plan
In 1995, the Company established a contributory retirement plan (the
"401(k) Plan") covering eligible employees with at least one year of service.
The 401(k) Plan is designed to provide tax-deferred income to the Company's
employees in accordance with the provisions of Section 401(k) of the Internal
Revenue Code.
The 401(k) Plan provides that each participant may annually contribute
2% to 15% of their respective salary, not to exceed the statutory limit. The
Company may elect to make a qualified non-elective contribution in an amount as
determined by the Company. Under the terms of the 401(k) Plan, the Company may
also make discretionary profit sharing contributions. Profit sharing
contributions are allocated among participants based on their annual
compensation. Each participant has the right to direct the investment of his or
her funds among certain named plans. The Company did not elect to make any
qualified non-elective contributions or profit sharing contributions to the
401(k) Plan during 1996 or 1995.
-38-
(9) COMMITMENTS AND CONTINGENCIES:
As discussed more fully in Note 7, the Company is obligated under
noncancelable operating leases with related parties. The Company also leases its
corporate offices and other properties, as well as operating equipment from
third parties under noncancelable operating leases. Rent expense under these
agreements was approximately $649,000, $515,000 and $342,000 for the years ended
December 31, 1996, 1995, and 1994, respectively. Total future commitments under
all noncancelable agreements for the years ended December 31, are as follows:
1997 $800,987
1998 821,825
1999 837,417
2000 770,668
2001 585,319
Thereafter 3,821,386
---------
$7,637,602
==========
The Company is involved in certain administrative proceedings arising
in the normal course of business. In the opinion of management, the Company's
potential exposure under the pending administrative proceedings is adequately
provided for in the accompanying financial statements and any adverse outcome
will not have a material impact on the Company's results of operations or its
financial condition.
(10) STOCKHOLDERS' EQUITY:
Initial Public Offering
In February 1994, the Company successfully completed an initial public
offering of 937,500 Units, each Unit consisting of two shares of common stock
and one detachable common stock warrant for the purchase of one share of common
stock for $5.00 per share. An additional 130,000 Units were sold in March 1994
pursuant to the underwriters' over-allotment option. Net proceeds to the Company
totaled $7,027,118.
The Company also granted the underwriters a warrant ("Underwriters'
Warrant") for the purchase of an additional 93,750 Units. The Underwriters'
Warrant is exercisable for four years, commencing on February 17, 1995, at an
exercise price of $12.00 per unit. As of December 31, 1995, none of the
detachable common stock warrants or Underwriters' Warrants had been exercised.
Series A Convertible Preferred Stock
In December 1995, the Company completed the private placement of 50,000
shares of Series A Convertible Preferred Stock ("Series A"), $.01 par value,
$100 stated value, for aggregate net proceeds of $4.1 million. Pursuant to the
terms of the Series A, all 50,000 shares of Series A were converted into
1,904,324 shares of the Company's common stock at an average conversion rate of
$2.63 per share during the first quarter of 1996.
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ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
Not applicable.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
ITEM 11. EXECUTIVE COMPENSATION.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
Information required to be disclosed in Items 10, 11, and 12 of this
Report are incorporated by reference to the Company's Proxy Statement relating
to its 1997 Annual Meeting of Stockholders, which will be filed with the
Securities and Exchange Commission pursuant to Regulation 14A.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
Effective December 31, 1993, Richard E. Bunger, an executive officer,
director and founder of the Company, contributed substantially all of the assets
and liabilities of MMSS and the stock of DDS to the Company in exchange for
2,700,000 shares of Common Stock and the assumption of certain liabilities by
the Company. Such liabilities include liabilities associated with the MMSS
assets and operations and certain income tax liabilities of Mr. Bunger and an
affiliate arising from the MMSS operations occurring prior to January 1, 1994.
Such income tax liabilities were estimated at $428,000. Deferred income tax
liabilities associated with the assets contributed, established at $2,393,000,
were also required to be recognized by the Company in connection with such
capitalization. The Company will indemnify and defend Mr. Bunger against loss or
expense related to all liabilities assumed by the Company and for any contingent
liabilities arising from past operations. Prior to the capitalization of the
Company, Mr. Bunger personally guaranteed the Company's lines of credit and
other material debts. These obligations have subsequently been extinguished by
payment of the debts by the Company.
The Company leases certain of its business locations from affiliates of
Mr. Bunger, including his children. The Company entered into an agreement,
effective January 1, 1994, to lease a portion of the property comprising its
Phoenix location and the property comprising its Tucson location from Richard E.
Bunger's five children. Total annual base lease payments under these leases
currently equal $66,000, with annual adjustment based on the consumer price
index. Lease payments in fiscal year 1996 equaled $69,702. The term of each of
these leases will expire on December 31, 2003. Prior to 1994, these properties
were leased by the Company's predecessor at annual rental payments equaling
$14,000. Additionally, the Company entered into an agreement effective January
1, 1994 to lease its Rialto facility from Mobile Mini Systems, Inc. for total
annual base lease payments of $204,000 with annual adjustments based on the
consumer price index. This lease agreement was extended for and additional five
years during 1996. Lease payments in fiscal year 1996 equaled $215,442. Prior to
1994, the Rialto site was leased to the Company's predecessor at an annual rate
of $132,000. Management believes the increase in rental rates reflect the fair
market rental value of these properties. Prior to the effectiveness of the
written leases, the terms were approved by the Company's independent and
disinterested directors.
-40-
In March 1994 the Company's manufacturing facility in Maricopa, Arizona
needed additional acreage to expand its manufacturing capabilities and began
using approximately 22 acres of property owned by Richard E. Bunger. The Company
leased this property from Mr. Bunger with annual payments of $40,000 with an
annual adjustment based on the Consumer Price Index. The Company purchased the
property from Mr. Bunger on March 29, 1996 for a purchase price of $335,000,
which management believes reflects the fair market value of the property.
-41-
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K.
(a) Documents filed as part of this Report:
(1) The financial statements required to be included in this
Report are included in ITEM 8 of this Report.
(2) The following financial statement schedule for the years ended
December 31, 1996, 1995 and 1994 is submitted herewith:
Schedule II - Valuation and Qualifying Accounts
All other schedules have been omitted because they are not
applicable or not required.
(3) Exhibits
Number Description Page
3.1(1) Certificate of Incorporation of Mobile Mini, Inc.; Amendment to
Certificate of Incorporation of Mobile Mini, Inc.; Second Amendment to
Certificate of Incorporation of Mobile Mini, Inc.; Third Amendment to
Certificate of Incorporation of Mobile Mini, Inc.; Fourth Amendment to
Certificate of Incorporation of Mobile Mini, Inc.; By-Laws of Mobile
Mini, Inc.
3.2(4) Fifth Certificate of Amendment to Certificate to Certificate of
Incorporation of Mobile Mini, Inc.
3.3(4) Certificate of Designations of Series A Convertible Preferred Stock of
Mobile Mini, Inc.
4.1(1) Form of Underwriters' Warrant
4.2(1) Form of Warrant Agreement by and between Mobile Mini, Inc. and Bank
One, Arizona, NA dated January 31, 1994
4.3(1) Form of Common Stock Certificate
4.4(1) Form of Warrant Certificate
10.2(1) Form of Employment Agreement
10.3(2) Mobile Mini, Inc. 1994 Stock Option Plan dated August 1, 1994
10.4 Statement regarding amendment to 1994 Stock Option Plan
10.5(5) Credit Agreement dated as of March 28, 1996 among Mobile Mini, Inc.,
each of the financial institutions initially a signatory thereto,
together with assignees, as Lenders, and BT Commercial Corporation, as
Agent.
10.6 Amendment No. 1 to Credit Agreement
10.7 Amendment No. 2 to Credit Agreement
10.8(1) Lease Agreement by and between Steven G. Bunger, Michael J. Bunger,
Carolyn A. Clawson, Jennifer J. Blackwell, Susan E. Bunger
(collectively "Landlord") and Mobile Mini Storage Systems ("Tenant")
dated January 1, 1994
10.9(1) Lease Agreement by and between Steven G. Bunger, Michael J. Bunger,
Carolyn A. Clawson, Jennifer J. Blackwell, Susan E. Bunger
(collectively "Landlord") and Mobile Mini Storage Systems ("Tenant")
dated January 1, 1994
10.10(1) Lease Agreement by and between Steven G. Bunger, Michael J. Bunger,
Carolyn A. Clawson, Jennifer J. Blackwell, Susan E. Bunger
(collectively "Landlord") and Mobile Mini Storage Systems ("Tenant")
dated January 1, 1994
10.11(1) Lease Agreement by and between Mobile Mini Systems, Inc. ("Landlord")
and Mobile Mini Storage Systems ("Tenant") dated January 1, 1994
10.12(2) Amendment to Lease Agreement by and between Steven G. Bunger, Michael
J. Bunger, Carolyn A. Clawson,
-42-
Jennifer J. Blackwell, Susan E. Bunger (collectively "Landlord") and
Mobile Mini Storage Systems ("Tenant") dated August 15, 1994
10.13(2) Amendment to Lease Agreement by and between Steven G. Bunger, Michael
J. Bunger, Carolyn A. Clawson, Jennifer J. Blackwell, Susan E. Bunger
(collectively "Landlord") and Mobile Mini Storage Systems ("Tenant")
dated August 15, 1994
10.14(2) Amendment to Lease Agreement by and between Steven G. Bunger, Michael
J. Bunger, Carolyn A. Clawson, Jennifer J. Blackwell, Susan E. Bunger
(collectively "Landlord") and Mobile Mini Storage Systems ("Tenant")
dated August 15, 1994
10.15(3) Amendment to Lease Agreement by and between Mobile Mini Storage
Systems, Inc., a California corporation, ("Landlord"), and the Company
dated December 30, 1994.
10.16(5) Lease Agreement by and between Richard E. and Barbara M. Bunger
("Landlord") and the Company ("Tenant'") dated November 1, 1995.
10.17(5) Amendment to Lease Agreement by and between Richard E. and Barbara M.
Bunger ("Landlord") and the Company ("Tenant'") dated November 1, 1995.
10.18 Amendment No. 2 to Lease Agreement between Mobile Mini Storage Systems,
Inc. and the Company
10.19(1) Patents and Patents Pending
10.20(1) U.S. and Canadian Tradename and Service Mark Registration
11 Statement Re: Computation of Per Share Earnings
21 Subsidiaries of Mobile Mini, Inc.
23 Consent of Arthur Andersen LLP
99 Selected Financial Data
All other exhibits are omitted as the information required is inapplicable
(1) Incorporated by reference from the Registrant's Registration Statement on
Form SB-2 (No. 33-71528-LA), as amended
(2) Incorporated by reference from the Registrant's Form 10-QSB for the quarter
ended September 30, 1994
(3) Incorporated by reference from the Registrant's Form 10-KSB for the fiscal
year ended December 31, 1994
(4) Incorporated by reference from the Registrant's Form 8-A filed January 29,
1996
(5) Incorporated by reference from the Registrant's Form 10-KSB for the fiscal
year ended December 31, 1995
(b) Reports on Form 8-K
None
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SCHEDULE II
MOBILE MINI, INC.
VALUATION AND QUALIFYING ACCOUNTS
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
December 31,
-----------------------------------------
1996 1995 1994
---- ---- ----
Allowance for doubtful accounts:
Balance at beginning of period $157,659 $256,022 $105,694
Provision charged to expense 502,065 382,653 339,642
Write-offs (391,543) (481,016) (189,314)
------- ------- -------
Balance at end of period $268,181 $157,659 $256,022
======= ======= =======
In accordance with Section 13 or 15(d) of the Exchange Act, the
registrant caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
MOBILE MINI, INC.
(Registrant)
Date: March 28, 1997 By: /s/ Richard E. Bunger
-----------------------------
Richard E. Bunger, Chief Executive Officer and Director
In accordance with the Exchange Act, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated.
Date: March 28, 1997 By: /s/ Richard E. Bunger
-----------------------------
Richard E. Bunger, Chief Executive Officer and Director
Date: March 28, 1997 By: /s/ Lawrence Trachtenberg
---------------------------------
Lawrence Trachtenberg, Chief Financial Officer and Director
Date: March 28, 1997 By: /s/ Steven G. Bunger
----------------------------
Steven G. Bunger, Chief Operating Officer and Director
Date: March 28, 1997 By: /s/ Ronald J. Marusiak
------------------------------
Ronald J. Marusiak, Director
Date: March 28, 1997 By: /s/ George Berkner
--------------------------
George Berkner, Director
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