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U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

Form 10-K

(Mark One)

Commission File Number 1-12804

(Exact Name of Registrant as Specified in its Charter)

7420 S. Kyrene Road, Suite 101
Tempe, Arizona 85283
(Address of Principal Executive Offices)

(480) 894-6311
(Registrant’s Telephone Number)

Securities Registered Under Section 12(g) of the Exchange Act:

Indicate by checkmark whether the Registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No __

Indicate by checkmark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.  

The aggregate market value on February 20, 2001 of the voting stock owned by non-affiliates of the registrant was approximately $213,483,675.00 (calculated by excluding all shares held by executive officers, directors and non-institutional holders of five percent or more of the voting power of the registrant, without conceding that such persons are “affiliates” of the registrant for purposes of the federal securities laws).

As of February 20, 2001, there were outstanding 11,602,584 shares of the issuer’s common stock, par value $.01.

Documents incorporated by reference: Portions of the Proxy Statement for the Registrant’s 2001 Annual Meeting of Stockholders are incorporated herein by reference in Part III of this Form 10-K to the extent stated herein. Certain Exhibits are incorporated in Item 14 of this Report by reference to other reports and registration statements of the Registrant which have been filed with the Securities and Exchange Commission. Exhibit Index is at page 49.

PART I

Except for historical information, the following description of Mobile Mini’s business contains forward-looking statements which involve risks and uncertainties. Our actual results could differ materially from those set forth in these forward-looking statements as a result of a number of factors, including those set forth below in Item 1 in this report under the heading “Factors That May Affect Future Operating Results.”

ITEM 1. DESCRIPTION OF BUSINESS.

      We are the nation’s largest provider of portable storage solutions through our lease fleet of over 55,000 portable storage units. We currently have 30 branches and operate in 16 states. Our products provide secure, accessible temporary storage for a diversified client base of over 43,000 customers, including Wal-Mart, Motorola, Frito Lay, Holiday Inns, Target, Home Depot, numerous municipalities and the U.S. military. Our customers use our products for a wide variety of storage applications, including retail and manufacturing inventory, construction materials and equipment, documents and records and household goods. We obtain our portable storage units by purchasing used ocean-going containers, which we refurbish and modify, and by manufacturing our own units. We offer a wide range of products in varying lengths and widths with an assortment of differentiated features such as our patented security systems, multiple doors, electrical wiring and shelving. In addition to our leasing operations, we sell new and used portable storage units and provide ancillary services.

      In 1996, we initiated a strategy of focusing on leasing instead of selling our portable storage units. We initiated this strategic shift because we believe leasing allows us to achieve strong growth, improved profitability and increased predictability of our business. Since 1996, we have increased our lease fleet by approximately 42,000 units, for a CAGR of approximately 42.1%. We believe our leasing model is highly attractive because portable storage units:

	•	provide predictable, recurring revenues from leases with an average duration of approximately 17 months;
	•	have average monthly rental rates which recoup our unit investment within an average of 28 months;
	•	have useful lives exceeding 20 years, low maintenance and high residual values; and
	•	produce incremental leasing operating margins above 60%.

      As a result of shifting our focus to leasing, we have achieved substantial increases in our revenues and profitability. Our annual leasing revenues have increased from $17.9 million in 1996 to $76.1 million in 2000, representing a CAGR of 43.6%. Over this same period, our operating income has increased from $4.7 million in 1996 to $31.1 million in 2000, representing a CAGR of 60.0% and our operating margin has grown from 11.2% to 34.5%.

Industry Overview

      The storage industry includes two principal segments, fixed self-storage and portable storage.

      The fixed self-storage segment consists of permanent structures located away from customer locations. Fixed self-storage is used primarily by consumers to temporarily store excess household goods. This segment is highly fragmented but includes several large national companies such as Public Storage and Shurgard Storage Centers.

      The portable storage segment differs from the fixed self-storage segment because it brings the storage solution to the customer’s location and addresses the need for secure, temporary storage with immediate access. The advantages of portable storage include convenience, immediate accessibility, better security and lower price. In contrast to fixed self-storage, the portable storage segment is primarily used by businesses. This segment is highly fragmented with no national participants. Although there are no published estimates of the size of the portable storage segment, we believe the size of the market is expanding due to increasing awareness of the advantages of portable storage.

      Our products also serve the mobile office industry. This industry provides temporary office space and is estimated to exceed $2.5 billion annually. We also offer portable record storage units.

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      Our goal is to be the leading national provider of portable storage solutions. We believe that our competitive strengths and growth strategy, as outlined below, enable us to achieve this goal.

Competitive Strengths

      Market Leadership. We have a lease fleet of over 55,000 portable storage units and are the largest provider of portable storage solutions in a majority of our markets. We believe we are creating brand awareness and that “Mobile Mini” is associated with high quality portable storage products and superior customer service. We have achieved significant growth in new and existing markets by capturing market share from competitors and by creating demand among businesses and consumers who were previously unaware of the availability of our products to meet their storage needs.

      Superior, Differentiated Products. We offer the industry’s broadest range of portable storage products in varying lengths and widths to better meet our customers’ temporary storage needs. Our manufacturing and refurbishing capabilities enable us to offer products that our competitors are unable to match. Most competitors offer only standard eight-foot-wide ocean-going containers in 20-, 40- or 45-foot lengths, while our portable storage units range in size from five to 48 feet in length and eight to 10.5 feet in width. Our manufactured 10.5-foot wide units, introduced in 1998, provide 50% more usable storage space than the standard eight-foot-wide ocean-going containers offered by our competitors. Our products also have patented locking systems, multiple door options, electrical wiring, shelving and other customized features.

      Customer Service Focus. We believe that the portable storage industry is very service intensive and essentially local. Our entire organization is focused on providing high levels of customer service. We have trained our sales force to focus on all aspects of customer service from the sales call onward. We differentiate ourselves by providing flexible lease terms and timely delivery of units. We conduct on-going training programs for our sales force to assure high levels of customer service and awareness of local market competitive conditions. Our salespeople work out of our local branch locations rather than from our headquarters. This allows them to interact directly with customers, better understand local market needs and develop each market in response to those needs. Our customized management information systems increase our responsiveness to customer inquiries and enable us to efficiently monitor our sales force’s performance. As a result of this customer service focus, we enjoy high levels of repeat business and word-of-mouth referrals.

      Sales and Marketing Emphasis. We target a diverse customer base and, unlike most of our competitors, we have developed sophisticated sales and marketing programs enabling us to expand market awareness of our products and generate strong internal growth. We assist our salespeople by providing them with our highly customized contact management system and intensive sales training programs. We monitor our salespersons’ effectiveness through our extensive sales monitoring programs. Yellow page and direct mail advertising is an integral part of our sales and marketing approach. In 2000, our total advertising costs were $4.1 million, and we mailed over seven million product brochures to existing and prospective customers.

      Diverse Customer Base. During 2000, we served more than 43,000 customers across a wide range of industries and believe this diversity reduces our susceptibility to economic downturns in our markets or in any of the industries in which our customers operate. Our diverse customer base also demonstrates the broad applications for our products and the opportunity to create future demand through targeted marketing. Our customers include large and small retailers, construction companies, medical centers, schools, utilities, distributors, the U.S. military, hotels, restaurants, entertainment complexes and households. In 2000, our largest customer accounted for 5.2% of

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      Customized Management Information Systems. We have made substantial investments in our management information systems to optimize fleet utilization, capture detailed customer data, improve financial performance and support our growth. Our management information systems enable us to carefully monitor the size, mix, utilization and rental rates of our lease fleet by branch on a daily basis. We have maintained an average annual utilization rate of our lease fleet above 85% while growing our lease fleet from 13,604 units in 1996 to 55,410 units in 2000, representing a CAGR of 42.1%. Our systems also capture relevant customer demographic and usage information, which we use to target new customers within our existing and new markets. Our headquarters and each branch are linked through a scaleable PC-based wide area network that provides real-time transaction processing and detailed reports on a branch by branch basis.

      Flexibility Afforded By Manufacturing Capability. We design and manufacture our own portable storage units in addition to refurbishing and modifying used ocean-going containers. This capability allows us to offer a wide range of products and proprietary features to better meet our customers’ needs, charge premium lease rates and gain market share from our competitors with more limited product offerings. Our manufacturing capability also provides us with an additional supply of units to support our growth.

Growth Strategy

Our growth strategy consists of the following:

      Focus on Core Portable Storage Leasing Business. We focus on growing our core leasing business because it provides predictable, recurring revenue and high margins. We believe there is substantial demand for our portable storage units throughout the United States. Our focus on leasing has allowed us to increase our leasing revenues from $17.9 million in 1996 to $76.1 million in 2000, representing a CAGR of 43.6%, and expand our operating margins from 11.2% to 34.5% over the same period.

      Generate High Levels of Internal Growth. We focus on increasing the number of portable storage units we lease from our existing branches to both new and repeat customers. We have historically been able to generate strong internal growth within our existing markets through aggressive marketing and lease fleet growth. In 2000, our internal lease revenues in markets opened for at least one year grew approximately 22.4%. We believe that by increasing awareness of the benefits of portable storage and through our targeted marketing and advertising programs, we can continue to increase our leasing revenues and generate strong internal growth. For example, in the Los Angeles area, our largest market and a market we have served for over 11 years, we have increased the number of portable storage units in our lease fleet from approximately 4,200 units at the end of 1996 to nearly 10,000 units at the end of 2000, demonstrating the high levels of internal growth we can realize from our existing branches.

      Continue Branch Expansion. We intend to use our branch model to expand to new markets throughout the United States. We have identified many markets in the United States where we believe demand for portable storage units is underdeveloped. These markets are currently being served by small, local competitors. In 1998, we began our expansion strategy by entering four new markets, three by acquisition and one by start-up. In 1999, we entered seven new markets, six by acquisition and one by start-up. In 2000, we entered 10 new markets, nine by acquisition and one by start-up, and in February 2001 we entered the Kansas City market through an acquisition. Whenever feasible, we enter a new market by acquiring the storage units and leases of a small, local portable storage business in order to generate immediate revenue to cover overhead and forego typical branch start-up expenses.

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      Introduce New Products. We attempt to introduce new products and new applications for our products through an active research and development effort. For example, in 1998 we introduced a 10.5-foot wide storage unit that has proven to be a popular product with our customers. In 1999, we completed the design of a records storage unit, which provides highly secure, on-site, easily accessible storage. We market this unit as a records storage solution for semi-active records. We have also added mobile offices as a complementary product to better serve our customers. We believe our design and manufacturing capabilities increase our ability to service our customers’ needs and demand for our portable storage solutions.

Products

      We provide a broad range of portable storage products to meet our customers’ varying needs. Our products and features are as follows:

  Portable Storage Products

	•	Refurbished and Modified Storage Units. We purchase used ocean-going containers from leasing companies or brokers. These containers are eight feet wide, 8’6” to 9’6” high and 20, 40 or 45 feet long. After acquisition, we refurbish and modify ocean-going containers. Refurbishment typically involves cleaning, removing rust and dents, repairing floors and sidewalls, painting, adding our signs and installing new doors and our patented locking system. Modification typically involves splitting containers into 5-, 10-, 15-, 20- or 25-foot lengths.
	•	Manufactured Storage Units. We manufacture portable storage units for our lease fleet and for sale. We do this at our manufacturing facility in Maricopa, Arizona. We can manufacture units up to 12 feet wide and 50 feet long and can add doors, windows, locks and other customized features. Typically, we manufacture “knock-down” units, which we ship to one of our five branches with assembly capabilities. This method of shipment is less expensive than shipping fully assembled storage units.
	•	Records Storage Units. We market proprietary portable records storage units that enable customers to store documents at their location for easy access, or at one of our facilities. Our units are 10.5 feet wide and are available in 12- and 23-foot lengths. The units feature high-security doors and locks, electrical wiring, shelving, folding work tables and air filtration systems. We believe our product is a cost-effective alternative to mass warehouse storage, with a high level of fire and water damage protection.

  Mobile Offices

	•	Steel Mobile Office Units. We manufacture steel mobile office units that range from 10 to 40 feet in length. We offer these units in various configurations, including office and storage combination units that provide a 10- or 15-foot office with the remaining area available for storage. We believe our office units provide the advantage of ground accessibility for ease of access and high security in an all-steel design. These units are equipped with electrical wiring, heating and air conditioning, phone jacks, carpet or tile, proprietary doors and windows with security bars.
	•	Wood Mobile Office Units. We also purchase wood office units that range from 8 to 24 feet in width and 20 to 60 feet in length. These units have a wide range of exterior and interior options, including exterior stairs or ramps, awnings and skirting. These units are equipped with electrical wiring, heating and air conditioning, phone jacks, carpet or tile and windows with security bars.

      We purchase used ocean-going containers and refurbish and modify them at our facilities in Arizona, California, Oklahoma, Colorado and Texas. We also manufacture new portable storage

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Branch Operations

      We locate our branches in markets with attractive demographics and strong growth prospects. Within each market, we have located our branches in areas that allow for easy delivery of portable storage units to our customers. We also seek locations that are visible from high traffic roads as an effective way to advertise our products and our name. Our branches maintain an inventory of portable storage units available for lease, and some of our branches also provide on-site storage of units under lease. The following table shows information about our branches:

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      Each branch has a branch manager who has overall supervisory responsibility for all activities of the branch. Branch managers report to one of our seven regional managers. Our regional managers, in turn, report to one of our two vice presidents. Incentive bonuses are a substantial portion of the compensation for these vice presidents, branch and regional managers.

      Each branch has its own sales force, a transportation department that delivers and picks up portable storage units from customers and an office manager. Each branch has delivery trucks and forklifts to load, transport and unload units and a storage yard staff responsible for unloading and stacking units. Units are stored by stacking them three high to maximize usable ground area. Each branch also has a fleet maintenance department to maintain the branch’s trucks, forklifts and other equipment.

Sales and Marketing

      We have approximately 165 people at our branches and 13 people in management at our headquarters that conduct sales and marketing on a full-time basis. We believe that by locating most of our sales and marketing staff in our branches, we can better understand the portable storage needs of our customers and provide high levels of customer service.

      Our sales and marketing force provides information about our products to prospective customers by handling inbound calls and by initiating cold calls. We have on-going sales and marketing training programs covering all aspects of leasing and customer service. Our branches communicate with one another and with headquarters through our management information system. This enables the sales and marketing team to share leads and other information and permits the headquarters staff to monitor and review sales and leasing productivity on a branch by branch basis. Our sales and marketing employees are compensated primarily on a commission basis.

      We advertise our products in the yellow pages and use a targeted direct mail program. In 2000, we mailed over seven million product brochures to existing and prospective customers. These brochures describe our products and features and highlight the advantages of portable storage. Our total advertising costs were approximately $3.1 million in 1999 and $4.1 million in 2000.

Customers

      During 2000, more than 43,000 customers leased our portable storage units, compared to about 36,000 in 1999. Our customer base is diverse and consists of businesses in a broad range of industries. During 2000, our largest single customer accounted for 5.2% of our leasing revenues, and our next largest customer accounted for less than 3.0% of our leasing revenues (excluding ancillary revenues).

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      We target customers who can benefit from our portable storage solutions either for seasonal, temporary or long-term storage needs. Customers use our portable storage units for a wide range of purposes. The following table provides an overview at December 31, 2000 of our customers and how they use our portable storage units:

Manufacturing

      We build new portable storage units, steel mobile offices and custom-designed structures at our Maricopa, Arizona manufacturing plant. We also refurbish used ocean-going containers at this plant and our branches in Los Angeles, Houston, Dallas, Denver and Oklahoma City. Our manufacturing process includes cutting, shaping and welding raw steel, installing customized features and painting the newly constructed units. We have about 270 manufacturing workers at our Maricopa facility, and about 290 manufacturing workers in our branch facilities. We manufactured and refurbished about 12,900 portable storage units in 2000. Many of our manufactured portable storage units are “knock-down” units, which we ship to one of our five branches with assembly capabilities. We can ship up to twelve, 20-foot containers on a single flat-bed trailer. By comparison, only two or three assembled 20-foot ocean-going containers can be shipped on a flat-bed trailer. This reduces our cost of transporting units to our branches. We believe we can expand the capacity of our Maricopa facility at a relatively low cost.

      We purchase raw materials such as steel, vinyl, wood, glass and paint, which we use in our manufacturing and refurbishing operations. We typically buy these raw materials on a purchase order basis. We do not have long-term contracts with vendors for the supply of any raw materials.

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      Our manufacturing capacity protects us to some extent from price increases for used ocean-going containers. Used ocean-going containers vary in price from time to time based on market conditions. Should the price of used ocean-going containers increase substantially, we can increase our manufacturing volume and reduce the number of used containers we buy and refurbish.

Management Information Systems

      We use a customized management information system in an effort to optimize lease fleet utilization and the effectiveness of our sales and marketing. This system consists of a wide-area network that connects our headquarters and all of our branches. Headquarters and each branch can enter data into the system and access data on a real-time basis. We generate weekly management reports by branch with leasing volume, fleet utilization, lease rates and fleet movement as well as monthly profit and loss statements on a consolidated and branch basis. These reports allow management to monitor each branch’s performance on a daily, weekly and monthly basis. We track each portable storage unit by its serial number. Lease fleet and sales information is entered in the system daily at the branch level and verified through periodic physical inventories by branch employees. Branch salespeople also use the system to track customer leads and other sales data, including information about current and prospective customers.

Lease Terms

      Our leases have an average initial term of over eight months and provide for the lease to continue at the same rental rate on a month-to-month basis until the customer cancels the lease. The average duration of our leases has been 17 months. Our average monthly rental rate was $118 in 2000. Most of our portable storage units rent for $50 to $200 per month, although large custom-designed units may rent for as much as $440 per month. Our mobile offices typically rent for $115 to $775 per month. Each lease provides that the customer is responsible for the cost of delivery at lease inception and pickup at lease termination. Our leases specify that the customer is liable for any damage done to the unit beyond ordinary wear and tear. However, our customers may purchase a damage waiver from us to avoid this liability. This provides us with an additional source of recurring revenue. The customer’s possessions stored within the portable storage unit are the responsibility of the customer.

Competition

      We face competition from several local companies and usually one or two regional companies in all of our current markets. Our competitors include lessors of storage units, mobile offices, used over-the-road trailers and other structures used for portable storage. We also compete with conventional fixed self-storage facilities to a lesser extent. We compete primarily in terms of product quality and availability, lease rates and customer service. Some of our competitors have less debt, greater market share and greater financial resources and pricing flexibility than we do. Sometimes, a competitor will lower its lease rates in one of our markets to try to gain market share. This may require us to reduce our lease rates as well, which could reduce our profitability in those markets.

      In addition to competition for customers, we face competition in purchasing used ocean-going containers. Several types of businesses purchase used ocean-going containers, including various freight transportation companies, freight forwarders and commercial and retail storage companies. Some of these companies have greater financial resources than we do. As a result, if the number of available containers for sale decreases, these competitors may be able to absorb an increase in the cost of containers, while we could not. If used ocean-going container prices increase substantially, we may not be able to manufacture enough new units to grow our fleet. These price increases also could increase our expenses and reduce our earnings.

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      Competition in our markets may increase significantly in the future. New competitors may enter our markets and may have greater marketing and financial resources than we do. This may allow them to gain market share at our expense. We may have to lower our lease rates because of greater competition. This would lower our profit margins. If our competitors have greater financial resources, they may be able to sustain these pricing pressures better than we can. Prolonged price competition is likely to have a material adverse effect on our business and results of operations.

Employees

      As of February 20, 2001, we had approximately 1,225 full-time employees. Our employees are represented by the following major categories:

      Our employees are not represented by a labor union. We consider our relations with our employees to be good.

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Factors That May Affect Future Operating Results

Our business involves a high degree of risk and there are numerous factors that may affect our future operating results including those factors discussed below. If any of the following risks and uncertainties actually occur, our business, results of operations and financial condition could be harmed.

We must successfully manage our planned growth, and our growth may strain our management, operating and other resources.

      Our future performance will depend in large part on our ability to manage our planned growth. Our recent growth has strained our management, human and other resources. To successfully manage this growth, we must continue to add managers and employees and improve our operating, financial and other internal procedures and controls. We also must effectively motivate, train and manage our employees. We cannot be sure that we can integrate our recent and future acquisitions and new branches into our operations. If we do not manage our growth effectively, some of our acquisitions and new branches may fail, and we may have to close unprofitable locations. Closing a branch would likely result in additional expenses that would cause our operating results to suffer.

Because we operate with a high amount of debt, fluctuations in interest rates could increase our operating costs, decrease profitability and limit our planned growth.

      Our operations are capital intensive, and we operate with a high amount of debt relative to our size. We have a credit facility with a group of banks, which allows us to borrow up to 80% to 90% of the cost of a finished portable storage unit. Under the credit facility, we can borrow up to $160 million on a revolving loan basis, which means that amounts repaid may be reborrowed. As of February 20, 2001, we had borrowed approximately $145.2 million under our credit facility, leaving approximately $14.8 million available for further borrowing under the credit facility. Our high amount of debt makes us more vulnerable to a downturn in the general economy or in the industries we serve. In addition, amounts we borrow under our credit facility bear interest at a variable rate. Because these rates change with prevailing interest rates, higher prevailing interest rates will increase the amount of interest we have to pay on our debt. This could harm our profitability and our ability to grow as quickly as we are planning.

      Under our credit facility, we must comply with a variety of covenants and restrictions. These include minimum tangible net worth, operating income and lease fleet utilization requirements. The terms of our credit facility also limit our capital expenditures, acquisitions, additional debt and repurchases of our common stock as well as prohibit us from paying cash dividends. These covenants and restrictions could limit our ability to respond to market conditions and restrict our planned growth. Also, if we fail to comply with these covenants and restrictions, the lenders have the right to refuse to lend us additional funds, and they may require early payment of amounts we owe them. If this happens, we may be unable to fund our operations and we would have to scale back our leasing activities. Furthermore, if we default, our lenders may foreclose on most of our assets.

We will need additional debt or equity to sustain our growth, and we may not be able to obtain this financing on acceptable terms.

      Our ability to grow will depend in part on our ability to obtain either additional debt or equity financing. We cannot be sure, however, that we will be able to obtain the necessary debt or equity

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A slowdown in the economy could reduce demand from some of our customers.

      In 2000, customers in the retail and construction industries accounted for a majority of our leasing and sales revenues. These industries tend to be cyclical and particularly susceptible to slowdowns in the overall economy. If an economic slowdown occurs, we are likely to experience less demand for leases and sales of our products. If we do, our results of operations may decline, and we may decide to slow the pace of our planned lease fleet growth and new branch expansion.

Our operating results and financial performance may fluctuate.

      Demand for leases of our portable storage units is stronger from September through December because large retailers need to store more inventory for the holiday season. Our retail customers usually return leased units to us early in the following year. As a result, we experience lower lease fleet utilization rates during the first quarter of each year.

      Our results of operations may fluctuate significantly from period to period due to a variety of additional factors that affect demand for our portable storage units. These factors include:

	•	general economic and industry conditions;
	•	availability and cost of used ocean-going containers;
	•	changes in our marketing and sales expenditures;
	•	pricing pressures from our competitors;
	•	market acceptance of our portable storage units, particularly in new markets we enter;
	•	timing and number of new branches we acquire or start-up; and
	•	introduction and timing of new products or features by ourselves or our competitors.

Our growth strategy may be limited by the risks relating to our acquiring existing businesses and our establishing additional branches in new markets.

      Our strategy is to grow in part through branch expansion, either by acquisitions or new branch openings. This strategy involves a number of risks, including the following:

	•	we may not find suitable acquisition targets or locations for new branches;
	•	competition for acquisition candidates could cause purchase prices to significantly increase;
	•	we may fail to adequately integrate the operations we acquire into our existing business structure;
	•	the costs of completing an acquisition and then integrating and operating it could be higher than we expect; and
	•	we may acquire or start a branch in a new market that turns out not to have enough demand for our portable storage units to make the branch profitable.

There is uncertainty and risk in the supply and price of used ocean-going containers which are a key component of our product line.

      We purchase, refurbish and modify used ocean-going containers in order to expand our lease fleet. The availability of these containers depends in part on the level of international trade and

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      Several types of businesses purchase used ocean-going containers. These include various freight transportation companies, freight forwarders and commercial and retail storage companies. Some of these companies have greater financial resources than we do. As a result, if the number of available containers for sale decreases, these competitors may be able to absorb an increase in the cost of containers, while we could not. If used ocean-going container prices increase substantially, we may not be able to manufacture enough new units to grow our fleet. These price increases also could increase our expenses and reduce our earnings.

      The amount we can borrow under our credit facility depends in part on the value of the portable storage units in our lease fleet. If the value of our lease fleet declines, we cannot borrow as much. Therefore, we may be unable to add as many units to our fleet as we would like. Also, we are required to satisfy several covenants with our lenders that are affected by changes in the value of our lease fleet. We would breach some of these covenants if the value of our lease fleet drops below specified levels. If this happened, we could not borrow the amounts we would need to expand our business, and we could be forced to liquidate a portion of our existing fleet.

Competition could reduce our market share and decrease our revenues.

      We face competition from several local companies and usually from one or two regional companies in each of our current markets. Our competitors include lessors of storage units, mobile offices, used over-the-road trailers and other structures used for portable storage. We also compete with conventional fixed self-storage facilities to a lesser extent. We compete primarily in terms of product quality and availability, lease rates and customer service. Some of our competitors have less debt, greater market share in some markets and greater financial resources and pricing flexibility than we do. Sometimes, a competitor will lower its lease rates in one of our markets to try to gain market share. This may require us to lower our lease rates as well, which would reduce our profitability in those markets.

      Competition in our markets may increase significantly in the future. New competitors may enter our markets and may have greater marketing and financial resources than we do. This may allow them to gain market share at our expense. We may have to lower our lease rates because of greater competition. This would lower our profit margins. If our competitors have greater financial resources, they may be able to sustain these pricing pressures better than we can. Prolonged price competition is likely to harm our business and results of operations.

The supply and cost of raw materials we use in manufacturing fluctuates and could increase our operating costs.

      We manufacture portable storage units to add to our lease fleet and for sale. In our manufacturing process, we purchase steel, vinyl, wood, glass and other raw materials from various suppliers. We cannot be sure that an adequate supply of these materials will continue to be available on terms acceptable to us. The raw materials we use are subject to price fluctuations that we cannot control. Changes in the cost of raw materials can have a significant effect on our operations and earnings. Rapid increases in raw material prices are difficult to pass through to customers. If we are unable to pass on these higher costs, our profitability will decline. If raw material prices decline significantly, we may have to write down our raw materials inventory values. If this happens, our results of operations and financial condition will decline.

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Some zoning laws restrict the use of our storage units and therefore limit our ability to offer our products in all markets.

      Most of our customers use our storage units to store their goods on their own properties. Local zoning laws in some of our markets do not allow some of our customers to keep portable storage units on their properties or do not permit portable storage units unless located out of sight from the street. If local zoning laws in one or more of our markets no longer allow our units to be stored on customers’ sites, our business would be adversely affected. Also, we probably would not enter a new market where zoning laws do not allow our units to be stored on customers’ sites.

We may not be able to retain our existing personnel or hire and retain the additional personnel that we need to sustain and grow our business.

      Our future success will depend on our ability to attract, retain and motivate employees with various skills, as well as semi-skilled and unskilled labor for our branches and manufacturing plants. Competition for all types of employees, including skilled and unskilled laborers, is intense. A shortage in available labor could require us to increase our wages and benefits to attract and retain enough employees. An increase in our labor costs, or our inability to attract, retain and motivate employees, would likely harm our growth plans and may adversely affect our business and results of operations.

Compliance with existing and future governmental regulation could increase our operating costs.

      We manufacture, refurbish or modify portable storage units at six locations. Our facilities are subject to regulation by several federal and state government agencies, including the Occupational Safety and Health Administration (OSHA) and the Environmental Protection Agency.

      Our facilities are subject to worker safety and health laws and regulations administered by OSHA. Our employees work with metal presses, heavy materials and welding equipment, and the possibility of injury is quite high. This means that OSHA is likely to inspect our facilities from time to time. If we were found to be out of compliance, we may have to pay fines or even reconfigure our operations at considerable cost. New OSHA regulations may be enacted in the future that could increase our cost of manufacturing and refurbishing portable storage units.

      Various environmental laws and regulations may expose us to liability for past or present spills, disposals or other releases of hazardous or toxic substances or waste products. This may be the case even if we did not know about or cause the problem. We generate waste and by-products from our painting operations, potentially exposing us to environmental liability or contamination. Federal or state agencies may impose more stringent disposal regulations for paint waste and by-products. This could increase our costs of manufacturing and refurbishing portable storage units.

We depend on a few key management persons.

      We are substantially dependent on the personal efforts and abilities of Steven G. Bunger, our Chairman, President and Chief Executive Officer, and Lawrence Trachtenberg, our Executive Vice President and Chief Financial Officer. The loss of either of these officers or our other key management persons could harm our business and prospects for growth.

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The market price of our common stock has been volatile and may continue to be volatile after this offering, and the value of your investment may decline.

      The market price of our common stock has been volatile and may continue to be volatile after this offering. This volatility may cause wide fluctuations in the price of our common stock on the Nasdaq National Market. The market price of our common stock is likely to be affected by:

	•	changes in general conditions in the economy or the financial markets;
	•	variations in our quarterly operating results;
	•	changes in financial estimates by securities analysts;
	•	other developments affecting us, our industry, customers or competitors;
	•	the operating and stock price performance of companies that investors deem comparable to us; and
	•	the number of shares available for resale in the public markets under applicable securities laws.

FORWARD-LOOKING STATEMENTS

This report contains statements about future events and expectations that constitute forward-looking statements. Forward-looking statements are based on management’s beliefs, assumptions and expectations of our future economic performance, taking into account the information currently available to management. These statements are not statements of historical fact. Forward-looking statements involve risks and uncertainties that may cause of actual results, performance or financial condition to differ materially from the expectations of future results, performance or financial condition we express or imply in any forward-looking statements. The words “believe,” “may,” “will,” “should,” “anticipate,” “estimate,” “expect,” “intend,” “objective,” “seek,” “strive” or similar words, or the negative of these words, identify forward-looking statements. We qualify any forward-looking statements entirely by these cautionary factors.

ITEM 2. DESCRIPTION OF PROPERTY.

We own our branch locations in Dallas, Texas, Oklahoma City, Oklahoma and a portion of our Phoenix, Arizona location. We lease all of our other branch locations. All of our major leased properties have remaining lease terms of at lease five years, and we believe that satisfactory alternative properties can be found in all of our markets if necessary.

We own our manufacturing facility in Maricopa, Arizona, approximately 30 miles south of Phoenix. This facility is ten years old and is on approximately 45 acres. The facility includes nine manufacturing buildings, totaling approximately 166,600 square feet. These buildings house our manufacturing, assembly, refurbishing, painting and vehicle maintenance operations.

We lease our corporate and administrative offices in Tempe, Arizona. These offices have 25,000 square feet of space. The lease term is through May 2005.

ITEM 3. LEGAL PROCEEDINGS.

We are a party to routine claims incidental to our business. Most of these claims involve alleged damage to customers’ property while stored in units they lease from us. We carry insurance to protect us against loss from these types of claims, subject to deductibles under the policy. We do not believe that any current litigation, individually or in the aggregate, is likely to have a material adverse effect on our business or results of operations.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.

No matters were submitted to a vote of our security holders during the quarter ended December 31, 2000.

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Executive Officers of Mobile Mini, Inc.

Set forth below is information respecting the name, age, position and offices with Mobile Mini of our executive officer who is not a continuing director or a director nominee. Information respecting our executive officers who are continuing directors and director nominees is set forth in Item 10 of this report.

      Deborah K. Keeley has served as our Vice President of Accounting since August 1996 and Corporate Controller since September 1995. Prior to joining us, she was Corporate Accounting Manager for Evans Withycombe Residential, an apartment developer, for six years.

PART II

ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.

Our Common Stock trades on the Nasdaq National Market under the symbol “MINI”. The following are the high and low sale prices for the common stock during the periods indicated as reported by the Nasdaq Stock Market.

We had approximately 117 holders of record of our common stock on February 2, 2001; and we believe we have more than 2,000 beneficial owners of our common stock.

We have never declared nor paid any cash dividends on our common stock. We do not currently expect to pay cash dividends on our common stock. Instead we will continue to use our cash resources to support the planned growth of our business. Our credit facility with our lenders does not allow us to pay cash dividends without the consent of our lenders.

ITEM 6. SELECTED FINANCIAL DATA.

The following table shows our selected consolidated historical financial data for the stated periods. You should read this material with “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and the financial statements included elsewhere in this report.

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ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

The following discussion of our financial condition and results of operations should be read together with the financial statements and the accompanying notes included elsewhere in this report. This discussion contains forward-looking statements that involve risks and uncertainties. Our actual results may differ materially from those anticipated in those forward-looking statements as a result of certain factors, including, but not limited to, those described under Item 1, “Description of Business — Factors That May Affect Future Operating Results” and included in other portions of this report.

Overview

      Since 1996, we have transitioned our business to focus on the leasing of portable storage units rather than their sale. This has caused the composition of our revenues and expenses to change. Leasing revenues as a percentage of our total revenues increased to 84.4% in 2000 from 80.0% in 1999, 69.2% in 1998, 54.0% in 1997 and 42.1% in 1996. The number of portable storage units in our lease fleet increased from 13,604 at the end of 1996 to 55,410 at the end of 2000, representing a CAGR of 42.1%.

      Our leasing revenues include all rent we receive for our portable storage units and other structures. Our sales revenues include sales of portable storage units and other structures to customers. Our other revenues consist principally of charges for the delivery of the portable storage units we sell. Our principal operating expenses are (1) cost of sales; (2) leasing, selling and general expenses; and (3) depreciation and amortization, primarily depreciation of the portable storage units in our lease fleet. Cost of sales includes both our cost to buy, transport, refurbish and modify used ocean-going containers and our cost to manufacture portable storage units and other structures. Leasing, selling and general expenses include advertising and other marketing expenses, commissions and corporate overhead for both our leasing and sales activities. Annual repair and maintenance expenses on our leased units have averaged approximately 2% of lease revenues and are included in leasing, selling and general expenses. We expense our repair and maintenance costs as incurred. Our lease fleet units are depreciated on the straight-line method over our units’ estimated useful life of 20 years after the date that we put the unit in service, with estimated residual values ranging from 50% to 70% of our unit investment.

Results of Operations

      The following table shows the percentage of total revenues represented by the key items that make up our statements of operations:

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2000 Compared to 1999

      Total revenues in 2000 increased by $23.5 million, or 35.3%, to $90.2 million from $66.7 million in 1999. Leasing revenues in 2000 increased by $22.8 million, or 42.7%, to $76.1 million from $53.3 million in 1999. This increase resulted from a 44.5% increase in the average number of portable storage units on lease, partially offset by a 1.2% decrease in the average rent per unit. In 2000, our internal lease revenues in markets opened for at least one year grew approximately 22.4%. Our revenues from the sale of units increased by $0.6 million, or 4.6%, to $13.4 million in 2000 from $12.8 million in 1999.

      Cost of sales from the sale of units increased by $0.2 million, or 2.1%, to $8.7 million in 2000 from $8.5 million in 1999. Cost of sales, as a percentage of sales revenues, decreased to 64.8% in 2000 from 66.3% in 1999. This reduction was primarily the result of lower per unit manufacturing and refurbishment costs of units sold.

      Leasing, selling and general expenses increased $12.2 million, or 37.7%, to $44.4 million in 2000 from $32.2 million in 1999. Leasing, selling and general expenses, as a percentage of total revenues, increased to 49.2% in 2000 from 48.3% in 1999. The increase in leasing-related expenses as a percentage of total revenues was primarily due to the $4.7 million of expenses associated with the ten branches we added in 2000 and higher commissions related to higher leasing volume. In general, new branches initially have lower profit margins until the branches’ fixed operating costs are covered by higher leasing volumes.

      Depreciation and amortization expenses increased by $1.9 million, or 48.2%, to $6.0 million in 2000 from $4.1 million in 1999. The increase was primarily due to our larger lease fleet, additional manufacturing equipment and amortization of goodwill associated with our acquisitions.

      Interest expense increased by $3.3 million, or 54.3%, to $9.5 million in 2000 from $6.2 million in 1999. The increase was primarily the result of higher average debt outstanding during 2000. Our average debt outstanding increased by 58.0%, due to an additional $73.3 million of borrowings under our credit facility. We used this debt financing primarily to expand our lease fleet and fund our branch expansion. The weighted average interest rate on our debt increased to 7.7% in 2000 from 7.6% in 1999, excluding amortization of debt issuance costs. Including amortization of debt issuance costs, the weighted average interest rate was 8.1% in 2000 and 8.3% in 1999.

      Provision for income taxes was based on an annual effective tax rate of 39.0% for 2000 and 40.0% for 1999, decreasing as a result of the generation of income from different states.

      Net income increased by $4.2 million, or 46.8%, to $13.2 million in 2000 from $9.0 million in 1999. Net income as a percentage of total revenues increased to 14.7% in 2000 from 13.5% in 1999. The increase in net income primarily resulted from our higher leasing revenues in 2000 and the decrease in leasing, selling and general expenses per unit on lease in 2000. During 1999, we recorded an extraordinary charge of $0.4 million (net of an income tax benefit), in connection with the early extinguishment of $6.9 million of our 12% Senior Subordinated Notes, which were originally scheduled to mature in November 2002.

1999 Compared to 1998

      Total revenues in 1999 increased by $14.0 million, or 26.5%, to $66.7 million from $52.7 million in 1998. Leasing revenues in 1999 increased by $16.8 million, or 46.2%, to $53.3 million from $36.5 million in 1998. This increase resulted from a 44.5% increase in the average number of portable storage units on lease, and a 1.2% increase in the average rent per unit. In 1999, our internal leasing revenue growth was 25.5%. Our revenues from the sale of units decreased by $2.8 million, or 17.9%, to $12.8 million in 1999 from $15.6 million in 1998. This decrease reflects our decision in 1998 to curtail the sale of telecommunication shelters and discontinue our dealer program.

      Cost of sales from the sale of units decreased by $2.2 million, or 20.7%, to $8.5 million in 1999 from $10.7 million in 1998. Cost of sales, as a percentage of sales revenues, decreased to 66.3% in 1999 from 68.7% in 1998. This reduction was primarily the result of lower prices for used ocean-going containers and the fact that we produced more portable storage units at our manufacturing facility in 1999 than in 1998.

      Leasing, selling and general expenses increased $6.5 million, or 25.2%, to $32.2 million in 1999 from $25.7 million in 1998. The increase in leasing-related expenses was primarily due to the $2.1 million of expenses associated with the seven branches we added in 1999 and higher commissions related to our higher leasing volume. Leasing, selling and general expenses, as a percentage of total revenues, decreased to 48.3% in 1999 from 48.8% in 1998 due to these expenses being spread over a larger revenue base in 1999.

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      Depreciation and amortization expenses increased by $1.2 million, or 40.9%, to $4.1 million in 1999 from $2.9 million in 1998. The increase was primarily due to our larger lease fleet, additional manufacturing equipment and amortization of goodwill associated with our acquisitions.

      Interest expense increased by $0.3 million, or 4.5%, to $6.2 million in 1999 from $5.9 million in 1998. The increase was primarily the result of higher average debt outstanding during 1999. Our average debt outstanding increased by 21.0%, due to an additional $14.5 million of borrowings under our credit facility. We used this debt financing primarily to expand our lease fleet and fund our branch expansion. The weighted average interest rate on our debt decreased to 7.6% in 1999 from 8.7% in 1998, excluding amortization of debt issuance costs. Including amortization of debt issuance costs, the weighted average interest rate was 8.3% in 1999 and 9.6% in 1998.

      Provision for income taxes was based on an annual effective tax rate of 40.0% for both 1999 and 1998.

      Net income increased by $4.5 million, or 100.8%, to $9.0 million in 1999 from $4.5 million in 1998. Net income as a percentage of total revenues increased to 13.5% in 1999 from 8.5% in 1998. The increase in net income primarily resulted from our higher leasing revenues and the decrease in leasing, selling and general expenses per unit on lease in 1999. During 1999, we recorded an extraordinary charge of $0.4 million (net of an income tax benefit), in connection with the early extinguishment of $6.9 million of our 12% Senior Subordinated Notes, which were originally scheduled to mature in November 2002.

Liquidity and Capital Resources

      Growing our lease fleet is capital intensive. We have financed the growth of our lease fleet and our higher working capital requirements through cash flows from operations, proceeds from equity financings and borrowings under our credit facility.

      Operating Activities. Our operations provided net cash flow of $24.6 million in 2000, $19.2 million in 1999 and $8.5 million in 1998. This increasing cash flow resulted primarily from our higher net income and the impact of depreciation expense and deferred income taxes. The growth of our business, however, has required us to use more cash to support higher levels of accounts receivable and inventory.

      Investing Activities. Net cash used in investing activities was $95.0 million in 2000, $55.7 million in 1999 and $31.2 million in 1998. This increasing use of cash resulted primarily from higher levels of capital expenditures for lease fleet and branch expansion. Capital expenditures for our lease fleet were $62.6 million in 2000, $30.4 million in 1999 and $23.5 million in 1998. Capital expenditures for property, plant and equipment were $6.1 million in 2000, $4.7 million in 1999 and $3.8 million in 1998. In addition, we spent $26.3 million in 2000, $28.6 million (including $8 million of mandatorily redeemable preferred stock) in 1999 and $3.9 million in 1998 for acquisitions.

      Financing Activities. Net cash provided by financing activities was $71.3 million in 2000, $36.0 million in 1999 and $22.8 million in 1998. During 2000, net cash provided by financing activities was provided by our credit facility, which we used to expand our lease fleet and finance our branch expansion. In 1999, net cash provided by financing activities was primarily from our public offering of 2,965,000 shares of common stock. We received gross proceeds of approximately $39.3 million from our 1999 common stock offering, and we received approximately $0.9 million from the exercise of warrants to purchase shares of our common stock. During 1998, net cash provided by financing activities was primarily from $21.3 million of net borrowings under our credit facility and $5.7 million of gross proceeds from the exercise of warrants to purchase shares of our common stock. The majority of warrants exercised were issued in connection with our initial public offering in 1994.

      Our principal source of liquidity has been our credit facility, which currently consists of a revolving line of credit and a term loan. The interest rate under our credit facility is determined quarterly, based on our ratio of funded debt to earnings before interest, taxes, depreciation and amortization (EBITDA). During 2000, the average interest rate under our credit facility was 7.7%, including the effect of the interest rate swap agreement. As of February 20, 2001 we had $145.2 million of outstanding borrowings under our $160 million revolving line of credit, and $14.8 million of additional borrowings were available under the credit facility. The amount we can borrow under the revolving line of credit portion of our credit facility is based upon the level of our inventories, accounts receivable and the value of our lease fleet. The lease fleet is appraised at least annually for purposes of the credit facility. Our obligations under the credit facility are secured by a lien on substantially all of our assets, including all of our portable storage units. The credit facility includes a term loan due in March 2003, with a one-year extension option. The term loan had an outstanding principal balance of $10.7 million at December 31, 2000. We must make principal and interest payments monthly on the term loan.

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      We have entered into Interest Rate Swap Agreements, under which we have effectively fixed, for a three year period, the interest rate payable on an aggregate of $85 million of borrowings under our revolving line of credit so that the rate is based upon a spread from fixed rates, rather than a spread from the Eurodollar rate. Under these agreements, we have effectively fixed, for a three-year period expiring in February 2004, the interest rate payable on $25 million, $30 million and $30 million of borrowings under our revolving line of credit so that the rate is based upon a spread from 5.33%, 5.35% and 5.46%, respectively, rather than a spread from the Eurodollar rate.

      In October 1997, we issued $6.9 million of 12% Senior Subordinated Notes with detachable redeemable warrants to purchase 172,500 shares of our common stock at $5.00 per share. These notes were due November 1, 2002 but could be prepaid beginning November 1, 1999 without a prepayment penalty. We redeemed the entire principal balance outstanding on November 1, 1999. Because the notes were sold with redeemable warrants, a portion of the sale price was allocated to the notes and a portion to the redeemable warrants, based on their respective fair market values. The resulting discount increased the effective interest rate on the notes and was amortized as interest expense over the life of the notes. In connection with the early redemption of these notes, we recorded an extraordinary charge of $0.4 million, net of a tax provision, in 1999.

      We believe that our working capital, together with our cash flow from operations, borrowings under our credit facility and other available funding sources will be sufficient to fund our operations and planned growth for at least the 12 months following this offering. Thereafter, we believe that we will need additional debt or equity financing to maintain historical growth rates.

Seasonality

      Demand from some of our customers is somewhat seasonal. Demand for leases of our portable storage units by large retailers is stronger from September through December because these retailers need to store more inventory for the holiday season. Our retail customers usually return these leased units to us early in the following year. This has caused lower utilization rates for our lease fleet and a marginal decrease in cash flow during the first quarter of the past several years.

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ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

We seek to reduce earnings and cash flow volatility associated with changes in interest rates through a financial arrangement intended to provide a hedge against a portion of the risks associated with such volatility. We continue to have exposure to such risks to the extent they are not hedged.

An interest rate swap agreement is the only instrument we used to manage interest rate fluctuations affecting our variable rate debt. At December 31, 2000, we had one outstanding interest rate swap agreement covering $30 million of our debt. Under that agreement, we paid a fixed rate and received a variable interest rate. The following table sets forth the scheduled maturities and the total fair value of our debt portfolio:

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We enter into derivative financial arrangements only to the extent that the arrangement meets the objectives described above, and we do not engage in such transactions for speculative purposes. As discussed in Item 7 "Management's Discussion and Analysis of Financial Condition and Results of Operations — Liquidity and Capital Resources," during February 2001 we entered into two new interest rate swap agreements and extended the swap agreement described above. Our credit facility matures in 2004, including a one-year extension option. These variable rate liabilities will continue to increase due to future growth until maturity.

See Note 3 – Line of Credit in the notes to financial statements incorporated herein by reference for further description of the variable rate liability.

Management intends to renew or replace the line of credit with similar arrangements or debt prior to maturity, on terms reasonably similar to their existing terms. We, however, cannot be certain that such financing will be available or on terms acceptable to us.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

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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 subsidiary as of December 31, 1999 and 2000, and the related consolidated statements of operations, stockholders’ equity and cash flows for each of the three years in the period ended December 31, 2000. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.

      We conducted our audits in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

      In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Mobile Mini, Inc. and subsidiary as of December 31, 1999 and 2000, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2000, in conformity with accounting principles generally accepted in the United States.

      Our audits were made for the purpose of forming an opinion on the basic financial statements taken as a whole. The schedule listed in the Index to Consolidated Financial Statements is presented for purposes of complying with the Securities and Exchange Commission's rules and is not a required part of the basic financial statements. This schedule has been subjected to the auditing procedures applied in the audits of the basic financial statements and, in our opinion, fairly states in all material respects the financial data required to be set forth therein in relation to the basic financial statements taken as a whole.

	ARTHUR ANDERSEN LLP

Phoenix, Arizona

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MOBILE MINI, INC.

CONSOLIDATED BALANCE SHEETS

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MOBILE MINI, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS