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EX-31.1 - EX-31.1 - MOBILE MINI INCmini-ex311_9.htm
EX-32.1 - EX-32.1 - MOBILE MINI INCmini-ex321_7.htm
EX-23.2 - EX-23.2 - MOBILE MINI INCmini-ex232_8.htm
EX-31.2 - EX-31.2 - MOBILE MINI INCmini-ex312_6.htm

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

FORM 10-Q

 

x

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2016

or

o

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from                      to                     

Commission File Number: 1-12804

 

(Exact name of registrant as specified in its charter)

 

 

Delaware

 

86-0748362

(State or other jurisdiction of

incorporation or organization)

 

(I.R.S. Employer

Identification No.)

 

 

 

4646 E. Van Buren Street, Suite 400

Phoenix, Arizona

 

85008

(Address of principal executive offices)

 

(zip code)

(480) 894-6311

(Registrant’s telephone number, including area code)

 

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

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes  x    No  o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer

x

Accelerated filer

o

 

 

 

 

Non-accelerated filer

o  (Do not check if a smaller reporting company)

Smaller reporting company

o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act)    Yes  o    No  x

At April 15, 2016, there were outstanding 44,451,682 shares of the registrant’s common stock, par value $.01.

 

 

 

 

 


 

MOBILE MINI, INC.

INDEX TO FORM 10-Q FILING

FOR THE QUARTER ENDED MARCH 31, 2016

 

 

 

 

 

PAGE

 

 

 

 

 

PART I. FINANCIAL INFORMATION

 

 

 

 

 

 

 

Item 1. Financial Statements

 

3

 

 

 

 

 

 

 

Condensed Consolidated Balance Sheets March 31, 2016 (unaudited) and December 31, 2015

 

3

 

 

 

 

 

 

 

Condensed Consolidated Statements of Operations (unaudited) for the Three Months Ended March 31, 2016 and March 31, 2015

 

4

 

 

 

 

 

 

 

Condensed Consolidated Statements of Comprehensive Income (Loss) (unaudited) for the Three Months Ended March 31, 2016 and March 31, 2015

 

5

 

 

 

 

 

 

 

Condensed Consolidated Statements of Cash Flows (unaudited)  for the Three Months Ended March 31, 2016 and March 31, 2015

 

6

 

 

 

 

 

 

 

Notes to Condensed Consolidated Financial Statements (unaudited)

 

7

 

 

 

 

 

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

26

 

 

 

 

 

Item 3. Quantitative and Qualitative Disclosures About Market Risk

 

37

 

 

 

 

 

Item 4. Controls and Procedures

 

37

 

 

 

 

 

PART II. OTHER INFORMATION

 

 

 

 

 

 

 

Item 1a. Risk Factors

 

38

 

 

 

 

 

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

 

38

 

 

 

 

 

Item 6. Exhibits

 

39

 

2


 

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

MOBILE MINI, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except par value data)

 

 

 

March 31,

2016

 

 

December 31,

2015

 

 

 

(unaudited)

 

 

(audited)

 

ASSETS

 

Cash and cash equivalents

 

$

634

 

 

$

1,613

 

Receivables, net of allowance for doubtful accounts of $2,486 and $2,162

   at March 31, 2016 and December 31, 2015, respectively

 

 

77,278

 

 

 

80,191

 

Inventories

 

 

15,426

 

 

 

15,596

 

Rental fleet, net

 

 

957,527

 

 

 

951,323

 

Property, plant and equipment, net

 

 

138,028

 

 

 

131,687

 

Other assets

 

 

19,362

 

 

 

16,766

 

Intangibles, net

 

 

72,490

 

 

 

73,212

 

Goodwill

 

 

708,563

 

 

 

706,387

 

Total assets

 

$

1,989,308

 

 

$

1,976,775

 

 

 

 

 

 

 

 

 

 

LIABILITIES AND STOCKHOLDERS' EQUITY

 

Liabilities:

 

 

 

 

 

 

 

 

Accounts payable

 

$

31,209

 

 

$

29,086

 

Accrued liabilities

 

 

60,080

 

 

 

59,024

 

Lines of credit

 

 

672,861

 

 

 

667,708

 

Obligations under capital leases

 

 

42,301

 

 

 

38,274

 

Senior Notes, net of deferred financing costs of $2,323 and $2,447

   at March 31, 2016 and December 31, 2015, respectively

 

 

197,677

 

 

 

197,553

 

Deferred income taxes

 

 

226,081

 

 

 

219,601

 

Total liabilities

 

 

1,230,209

 

 

 

1,211,246

 

Commitments and contingencies

 

 

 

 

 

 

 

 

Stockholders' equity:

 

 

 

 

 

 

 

 

Preferred stock $.01 par value, 20,000 shares authorized, none issued

 

 

 

 

 

 

Common stock $.01 par value, 95,000 shares authorized, 49,280 issued and 44,452

   outstanding at March 31, 2016 and 49,145 issued and 44,594 outstanding at

   December 31, 2015

 

493

 

 

 

491

 

Additional paid-in capital

 

 

587,009

 

 

 

584,447

 

Retained earnings

 

 

354,066

 

 

 

352,262

 

Accumulated other comprehensive loss

 

 

(47,875

)

 

 

(44,162

)

Treasury stock, at cost, 4,828 and 4,551 shares at March 31, 2016 and

   December 31, 2015, respectively

 

 

(134,594

)

 

 

(127,509

)

Total stockholders' equity

 

 

759,099

 

 

 

765,529

 

Total liabilities and stockholders' equity

 

$

1,989,308

 

 

$

1,976,775

 

 

See accompanying notes to condensed consolidated financial statements (unaudited).

 

 

3


 

MOBILE MINI, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands except per share data)

(Unaudited)

 

 

 

Three Months Ended

March 31,

 

 

 

2016

 

 

2015

 

Revenues:

 

 

 

 

 

 

 

 

Rental

 

$

117,356

 

 

$

123,117

 

Sales

 

 

6,891

 

 

 

7,972

 

Other

 

 

286

 

 

 

1,540

 

Total revenues

 

 

124,533

 

 

 

132,629

 

Costs and expenses:

 

 

 

 

 

 

 

 

Rental, selling and general expenses

 

 

76,302

 

 

 

83,046

 

Cost of sales

 

 

4,611

 

 

 

5,133

 

Restructuring expenses

 

 

2,248

 

 

 

483

 

Asset impairment charge, net

 

 

 

 

 

64,726

 

Depreciation and amortization

 

 

15,177

 

 

 

15,539

 

Total costs and expenses

 

 

98,338

 

 

 

168,927

 

Income (loss) from operations

 

 

26,195

 

 

 

(36,298

)

Other expense:

 

 

 

 

 

 

 

 

Interest expense

 

 

(8,484

)

 

 

(9,059

)

Income (loss) before income tax provision (benefit)

 

 

17,711

 

 

 

(45,357

)

Income tax provision (benefit)

 

 

6,713

 

 

 

(18,031

)

Net income (loss)

 

$

10,998

 

 

$

(27,326

)

Earnings (loss) per share:

 

 

 

 

 

 

 

 

Basic

 

$

0.25

 

 

$

(0.60

)

Diluted

 

 

0.25

 

 

 

(0.60

)

Weighted average number of common and common share equivalents outstanding:

 

 

 

 

 

 

 

 

Basic

 

 

44,219

 

 

 

45,484

 

Diluted

 

 

44,335

 

 

 

45,484

 

Cash dividends declared per share

 

$

0.21

 

 

$

0.19

 

 

See accompanying notes to condensed consolidated financial statements (unaudited).

4


 

MOBILE MINI, INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(In thousands)

(Unaudited)

 

 

 

Three Months Ended

March 31,

 

 

 

2016

 

 

2015

 

Net income (loss)

 

$

10,998

 

 

$

(27,326

)

Foreign currency translation adjustment

 

 

(3,713

)

 

 

(11,777

)

Comprehensive income (loss)

 

$

7,285

 

 

$

(39,103

)

 

See accompanying notes to condensed consolidated financial statements (unaudited).

 

 

5


 

MOBILE MINI, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)

 

 

 

Three Months Ended

March 31,

 

 

 

2016

 

 

2015

 

Cash Flows from Operating Activities:

 

 

 

 

 

 

 

 

Net income (loss)

 

$

10,998

 

 

$

(27,326

)

Adjustments to reconcile net income (loss) to net cash provided by

   operating activities:

 

 

 

 

 

 

 

 

Asset impairment, net

 

 

 

 

 

64,726

 

Provision for doubtful accounts

 

 

1,203

 

 

 

1,169

 

Amortization of deferred financing costs

 

 

468

 

 

 

789

 

Amortization of long-term liabilities

 

 

29

 

 

 

25

 

Share-based compensation expense

 

 

2,564

 

 

 

3,250

 

Depreciation and amortization

 

 

15,177

 

 

 

15,539

 

Gain on sale of rental fleet

 

 

(1,378

)

 

 

(1,972

)

Loss on disposal of property, plant and equipment

 

 

338

 

 

 

335

 

Deferred income taxes

 

 

6,560

 

 

 

(18,233

)

Changes in certain assets and liabilities, net of effect of businesses acquired:

 

 

 

 

 

 

 

 

Receivables

 

 

1,628

 

 

 

(636

)

Inventories

 

 

143

 

 

 

157

 

Other assets

 

 

(849

)

 

 

455

 

Accounts payable

 

 

(2,506

)

 

 

1,033

 

Accrued liabilities

 

 

906

 

 

 

(839

)

Net cash provided by operating activities

 

 

35,281

 

 

 

38,472

 

Cash Flows from Investing Activities:

 

 

 

 

 

 

 

 

Cash paid for businesses acquired, net of cash acquired

 

 

(9,206

)

 

 

(1,200

)

Additions to rental fleet, excluding acquisitions

 

 

(10,884

)

 

 

(10,480

)

Proceeds from sale of rental fleet

 

 

3,970

 

 

 

4,842

 

Additions to property, plant and equipment, excluding acquisitions

 

 

(8,310

)

 

 

(4,241

)

Proceeds from sale of property, plant and equipment

 

 

840

 

 

 

607

 

Net cash used in investing activities

 

 

(23,590

)

 

 

(10,472

)

Cash Flows from Financing Activities:

 

 

 

 

 

 

 

 

Net borrowings (repayments) under lines of credit

 

 

5,152

 

 

 

(4,137

)

Deferred financing costs

 

 

(193

)

 

 

(100

)

Principal payments on capital lease obligations

 

 

(1,433

)

 

 

(849

)

Issuance of common stock

 

 

 

 

 

32

 

Dividend payments

 

 

(9,152

)

 

 

(8,509

)

Purchase of treasury stock

 

 

(7,084

)

 

 

(15,284

)

Net cash used in financing activities

 

 

(12,710

)

 

 

(28,847

)

Effect of exchange rate changes on cash

 

 

40

 

 

 

156

 

Net decrease in cash

 

 

(979

)

 

 

(691

)

Cash and cash equivalents at beginning of period

 

 

1,613

 

 

 

3,739

 

Cash and cash equivalents at end of period

 

$

634

 

 

$

3,048

 

Supplemental Disclosure of Cash Flow Information:

 

 

 

 

 

 

 

 

Cash paid for interest

 

$

3,878

 

 

$

4,190

 

Cash paid for income and franchise taxes

 

 

68

 

 

 

273

 

Equipment and other acquired through capital lease obligations

 

 

5,461

 

 

 

2,201

 

Capital expenditures accrued or payable

 

 

9,112

 

 

 

9,624

 

 

See accompanying notes to condensed consolidated financial statements (unaudited).

 

 

 

6


 

MOBILE MINI, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

 

 

(1) Mobile Mini, Inc. - Organization and Description of Business

Mobile Mini, Inc., a Delaware corporation, is a leading provider of portable storage and specialty containment solutions. In these notes, the terms “Mobile Mini” the “Company,” “we,” “us,” and “our” refer to Mobile Mini, Inc.

At March 31, 2016, we had a fleet of portable storage and office units operating throughout the U.S., Canada and the U.K. serving a diversified customer base, including large and small retailers, construction companies, medical centers, schools, utilities, distributors, the military, hotels, restaurants, entertainment complexes and households. These customers use our products for a wide variety of applications, including the storage of retail and manufacturing inventory, construction materials and equipment, documents and records and other goods. We also have a fleet of specialty containment products, concentrated in the U.S. Gulf Coast, including liquid and solid containment units, serving a specialty sector in the industry.  Our specialty products are leased primarily to chemical, refinery, oil and natural gas drilling, mining and environmental service customers.

On May 15, 2015, we closed a transaction to sell our wood mobile offices within our North American portable storage segment for a cash price of $92.0 million, less associated assumed liabilities.  Activity directly associated with this business is included in the three months ended March 31, 2015, and is not included in the three months ended March 31, 2016. See additional information regarding the divestiture in Note 5 “Impairment and Divestiture of North American Wood Mobile Offices”.

Basis of Presentation and Consolidation

The consolidated financial statements include the accounts of Mobile Mini and our wholly owned subsidiaries. We do not have any subsidiaries in which we do not own 100% of the outstanding stock. All significant intercompany balances and transactions have been eliminated.  The accompanying unaudited condensed consolidated financial statements have been prepared in conformity with U.S. generally accepted accounting principles (“GAAP”) applicable to interim financial information and the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all the information and footnotes required by GAAP for complete financial statements. In the opinion of management of Mobile Mini, all adjustments (which include normal recurring adjustments) necessary to present fairly the financial position, results of operations, and cash flows for all periods presented have been made. The results of operations for the three months ended March 31, 2016 and 2015 are not necessarily indicative of the results to be expected for the full year.

These condensed consolidated financial statements should be read in conjunction with our December 31, 2015 audited consolidated financial statements and accompanying notes thereto, which are included in our Annual Report on Form 10-K filed with the Securities and Exchange Commission (“SEC”) on February 5, 2016.

Use of Estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the accompanying condensed consolidated financial statements and the notes to those statements. Actual results could differ from those estimates. Significant estimates affect the calculation of depreciation and amortization, the calculation of the allowance for doubtful accounts, the analysis of goodwill and long-lived assets for potential impairment and certain accrued liabilities.

Reclassifications

Certain amounts in the Condensed Consolidated Statements of Operations for the three months ended March 31, 2015 have been reclassified to conform to the current period presentation. The reclassifications have no effect on total revenues, loss from operations, net loss or net loss per common share. For the previously reported three-month period ended March 31, 2015, the reclassifications resulted in $2.1 million and $1.2 million increases to rental revenues and sales revenues, respectively, with an offsetting decrease to other revenue.  For the same period, cost of sales increased $0.9 million, and rental, selling and general expenses decreased by the same amount.

The revenues reclassified to rental revenues from other revenues consist of ancillary services such as equipment cleaning fees and equipment installation. The items reclassified from other revenues to sales include sales of certain ancillary products.  Costs associated with these sales have also been reclassified to cost of sales from rental, selling and general expenses.  We believe the current presentation better reflects the nature of the underlying financial statement items.

 

7


MOBILE MINI, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited) - Continued

 

 

(2) Impact of Recently Issued Accounting Standards

Share-Based Compensation. In March 2016, the Financial Accounting Standards Board (“FASB”) issued a standard intended to simplify several areas of accounting for share-based compensation arrangements, including the income tax impact, classification on the statement of cash flows and forfeitures. This standard is effective for annual and interim periods beginning after December 15, 2016, and early adoption is permitted.  We are currently evaluating the impact that the standard will have on our consolidated financial statements.

Leases.  In February 2016, FASB issued a standard on lease accounting requiring a lessee to recognize assets and liabilities on the balance sheet for leases with lease terms greater than 12 months. This standard is effective for annual and interim periods beginning after December 15, 2018, and early adoption is permitted. We are currently evaluating the impact the standard will have on our consolidated financial statements.

Simplifying the Presentation of Debt Issuance Costs.  In April 2015, FASB issued accounting guidance on the presentation of debt issuance costs in the balance sheet.  This standard requires that certain debt issuance costs related to a recognized debt liability be presented in the balance sheet as a direct deduction from the carrying amount of that debt liability, consistent with debt discounts. The recognition and measurement guidance for debt issuance costs are not affected by this guidance.  We adopted this guidance during the current period. As a result, unamortized debt issuance costs of $2.3 million and $2.4 million as of March 31, 2016 and December 31, 2015, respectively, have been deducted from the carrying amount of our 7.875% senior notes due 2020 (the “Senior Notes”) in our balance sheet. Unamortized debt issuance costs related to our revolving lines of credit are included in other assets.

Revenue from Contracts with Customers.  In May 2014, FASB issued an accounting standard on revenue from contracts with customers.  The standard provides a single model for revenue arising from contracts with customers and supersedes current revenue recognition guidance.  The standard requires an entity to recognize the amount of revenue to which it expects to be entitled for the transfer of goods or services.  The standard is effective for annual and interim periods beginning after December 15, 2017.  Early adoption is permitted for the annual and interim periods beginning after December 15, 2016, but not prior to that time.  The revenue recognition standard permits the use of either the retrospective or cumulative effect transition method.  We expect to adopt this guidance when effective and are evaluating the impact, if any, of the adoption of the standard to our financial statements and related disclosures.  We have not yet selected a transition method nor determined the effect of the standard on our ongoing financial reporting.

 

 

(3) Fair Value Measurements

Fair value is the price that would be received from selling an asset or paid to transfer a liability in an orderly transaction between market participants. Fair value is a market-based measurement determined by assumptions that market participants would use in pricing an asset or liability. We categorize each of our fair value measurements in one of the following three levels based on the lowest level of input that is significant to the fair value measurement: 

Level 1 — Observable inputs such as quoted prices in active markets for identical assets or liabilities;

Level 2 — Observable inputs, other than Level 1 inputs in active markets, that are observable either directly or indirectly; and

Level 3 — Unobservable inputs for which there is little or no market data, which require the reporting entity to develop its own assumptions.

At March 31, 2016 and December 31, 2015, we did not have any financial instruments required to be recorded at fair value on a recurring basis.

The carrying amounts of cash, cash equivalents, receivables, accounts payable and accrued liabilities approximate fair values based on their short-term nature. The fair values of our revolving credit facility and capital leases are estimated using discounted cash flow analyses, based on our current incremental borrowing rates for similar types of borrowing arrangements. Based on the borrowing rates currently available to us for bank loans with similar terms and average maturities, the fair value of our revolving credit facility debt and capital leases, which are measured using Level 2 inputs, at March 31, 2016 and December 31, 2015 approximated their respective book values.

The fair value of our $200.0 million aggregate principal amount of Senior Notes is based on their latest sales price at the end of each period obtained from a third-party institution and is Level 2 in the fair value hierarchy as there is not an active market for these notes.

8


MOBILE MINI, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited) - Continued

 

The Senior Notes are presented on the balance sheet net of debt issuance costs. The gross carrying value and the fair value of our Senior Notes are as follows:

 

 

 

March 31,

2016

 

 

December 31,

2015

 

 

 

(In thousands)

 

Carrying value

 

$

200,000

 

 

$

200,000

 

Fair value

 

 

206,500

 

 

 

207,000

 

 

 

(4) Earnings (Loss) Per Share

Basic earnings (loss) per share (“EPS”) is calculated by dividing net income by the weighted average number of common shares outstanding during the period.  Diluted EPS is calculated under the treasury stock method.  Potential common shares included restricted common stock, which is subject to risk of forfeiture, incremental shares of common stock issuable upon the exercise of stock options and vesting of restricted stock awards.

The following table is a reconciliation of net income (loss) and weighted-average shares of common stock outstanding for purposes of calculating basic and diluted EPS:

 

 

 

Three Months Ended

March 31,

 

 

 

2016

 

 

2015

 

 

 

(In thousands, except

per share data)

 

Numerator:

 

 

 

 

 

 

 

 

Net income (loss)

 

$

10,998

 

 

$

(27,326

)

Denominator:

 

 

 

 

 

 

 

 

Weighted average shares outstanding - basic

 

 

44,219

 

 

 

45,484

 

Dilutive effect of share-based awards

 

 

116

 

 

 

 

Weighted average shares outstanding - diluted

 

 

44,335

 

 

 

45,484

 

Earnings (loss) per share:

 

 

 

 

 

 

 

 

Basic

 

$

0.25

 

 

$

(0.60

)

Diluted

 

 

0.25

 

 

 

(0.60

)

 

Basic weighted average number of common shares outstanding does not include restricted stock awards of 0.3 million and 0.4 million shares as of March 31, 2016 and 2015, respectively.

There were approximately 0.6 million of common stock equivalents that would have been included in the diluted EPS denominator for the three-month period ended March 31, 2015 had there not been a net loss. These common stock equivalents were excluded because their inclusion would reduce the net loss per share. In addition, the following table represents the number of stock options and restricted share awards that were issued or outstanding but excluded in calculating diluted EPS because their effect would have been anti-dilutive for the periods indicated:

 

 

 

Three Months Ended

March 31,

 

 

 

2016

 

 

2015

 

 

 

(In thousands)

 

Stock options

 

 

3,153

 

 

 

1,108

 

Restricted share awards

 

 

19

 

 

 

 

Total

 

 

3,172

 

 

 

1,108

 

 

 

9


MOBILE MINI, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited) - Continued

 

(5) Impairment and Divestiture of North American Wood Mobile Offices

Our business strategy is to invest in high return, low maintenance, long-lived assets. Wood mobile offices require more maintenance and upkeep than Mobile Mini’s steel containers and steel ground level offices, resulting in lower margins as compared to our other portable storage products and our specialty containment products. During March 2015, we entered into discussions regarding the possible sale of our wood mobile offices within our North American portable storage segment.  The discussions indicated that the fleet might be sold at an amount below carrying value.

Based upon the events described above, we conducted a review for impairment for these particular long-lived assets as of March 31, 2015.  The review included assumptions of cash flows considering the likelihood of possible outcomes that existed as of the date of the review, including assigning probabilities to these outcomes.  Management estimated the fair market value for the wood mobile offices based upon purchase price discussions. Based on this review, management determined that the assets were impaired as of March 31, 2015 and an impairment loss was recognized.

On April 16, 2015, we entered into a definitive agreement to sell our wood mobile offices within the North American portable storage segment for a cash price of $92.0 million, less associated deferred revenue and customer deposits of $6.8 million.  The net assets were reclassified to held for sale as of that date.  The transaction closed on May 15, 2015 and we recorded a net loss of $1.5 million on that date.

For the three months ended March 31, 2015, the following amounts were recorded for the impairment of the wood mobile office fleet (in thousands): 

 

 

 

 

 

Estimated fair market value

 

$

92,000

 

Net book value:

 

 

 

 

Wood mobile offices in rental fleet

 

 

155,558

 

Ancillary items in property, plant and equipment

 

 

1,168

 

Impairment loss

 

$

(64,726

)

 

 

(6) Acquisitions

During the three months ended March 31, 2016, we completed one acquisition of a portable storage business in Dallas, Texas. The accompanying condensed consolidated financial statements include the operations of the acquired business from the date of acquisition. The aggregate purchase price for the assets acquired were recorded based on their estimated fair values at the date of the acquisition.  We have not disclosed the pro-forma impact of the acquisition on operations as they were immaterial to our financial position or results of operations in the aggregate.

The components of the purchase price and net assets acquired during the three months ended March 31, 2016 are as follows (in thousands):

 

Net Assets Acquired:

 

 

 

 

Rental fleet

 

$

4,239

 

Property, plant and equipment

 

 

190

 

Intangible assets:

 

 

 

 

Customer relationships

 

 

808

 

Non-compete agreements

 

 

50

 

Goodwill

 

 

3,676

 

Other assets

 

 

402

 

Liabilities

 

 

(159

)

Total purchase price

 

$

9,206

 

 

 

10


MOBILE MINI, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited) - Continued

 

(7) Inventories

Inventories are valued at the lower of cost (principally on a standard cost basis which approximates the first-in, first-out method) or net realizable value. Raw materials and supplies principally consist of raw steel, wood, glass, paint, vinyl and other assembly components used in manufacturing and remanufacturing processes and to a lesser extent, parts used for internal maintenance and ancillary items held for sale in our specialty containment segment. Work-in-process primarily represents partially assembled units pre-sold or for use as fleet. Finished portable storage units primarily represent purchased or assembled containers held in inventory until the container is either sold as is, remanufactured and sold, or remanufactured and deployed as rental fleet. Inventories at March 31, 2016 and December 31, 2015 consisted of the following:

 

 

 

March 31,

2016

 

 

December 31,

2015

 

 

 

(In thousands)

 

Raw materials and supplies

 

$

13,690

 

 

$

13,436

 

Work-in-process

 

 

65

 

 

 

189

 

Finished portable storage units

 

 

1,671

 

 

 

1,971

 

Inventories

 

$

15,426

 

 

$

15,596

 

 

 

(8) Rental Fleet

Rental fleet is capitalized at cost and depreciated over the estimated useful life of the unit using the straight-line method. Rental fleet is depreciated whether or not it is out on rent. Capitalized cost of rental fleet includes the price paid to acquire the unit and freight charges to the location when the unit is first placed in service, and when applicable, the cost of manufacturing or remanufacturing, which includes the cost of customizing units. Ordinary repair and maintenance costs are charged to operations as incurred.

We periodically review depreciable lives and residual values against various factors, including the results of our lenders’ independent appraisal of our rental fleet, practices of our competitors in comparable industries and profit margins achieved on sales of depreciated units.  See Note 5 “Impairment and Divestiture of North American Wood Mobile Offices” for information regarding the impairment and divestiture of our wood mobile offices during 2015.

Appraisals on our rental fleet are required by our lenders on a regular basis. The appraisal typically reports no difference in the value of the unit due to the age or length of time it has been in our fleet. The latest orderly liquidation value appraisal in September 2015 was conducted by Gordon Brothers-AccuVal. Based on the values assigned in this appraisal our rental fleet net orderly liquidation appraisal value as of March 31, 2016 was approximately $1.1 billion.  These appraisals are used to calculate our available borrowings under our Amended and Restated ABL Credit Agreement, dated December 14, 2015, with Deutsche Bank AG New York Branch, as administrative agent, and the other lenders party thereto (the “Credit Agreement”), as described in Note 11 “Lines of Credit”.

Depreciation expense related to our rental fleet for the three months ended March 31, 2016 and 2015 was $8.1 million and $9.2 million, respectively. At March 31, 2016, all rental fleet units were pledged as collateral under the Credit Agreement.

11


MOBILE MINI, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited) - Continued

 

Rental fleet consisted of the following at March 31, 2016 and December 31, 2015:

 

 

 

Residual Value

as Percentage of

Original Cost (1)

 

 

Useful Life

in Years

 

 

March 31,

2016

 

 

December 31,

2015

 

 

 

 

 

 

 

 

 

 

 

(In thousands)

 

Portable Storage:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Steel storage containers

 

 

55%

 

 

 

30

 

 

$

614,056

 

 

$

612,782

 

Steel ground level offices

 

 

55%

 

 

 

30

 

 

 

349,196

 

 

 

346,233

 

Other

 

 

 

 

 

 

 

 

 

 

6,823

 

 

 

7,052

 

Total

 

 

 

 

 

 

 

 

 

 

970,075

 

 

 

966,067

 

Accumulated depreciation

 

 

 

 

 

 

 

 

 

 

(142,785

)

 

 

(142,338

)

Total portable storage fleet, net

 

 

 

 

 

 

 

 

 

$

827,290

 

 

$

823,729

 

Specialty Containment:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Steel tanks

 

 

 

 

 

25

 

 

$

56,761

 

 

$

55,467

 

Roll-off boxes

 

 

 

 

 

15 - 20

 

 

 

28,226

 

 

 

25,161

 

Stainless steel tank trailers

 

 

 

 

 

25

 

 

 

29,188

 

 

 

28,160

 

Vacuum boxes

 

 

 

 

 

20

 

 

 

10,207

 

 

 

9,852

 

De-watering boxes

 

 

 

 

 

20

 

 

 

5,375

 

 

 

5,383

 

Pumps and filtration equipment

 

 

 

 

 

7

 

 

 

14,005

 

 

 

13,964

 

Other

 

 

 

 

 

 

 

 

 

 

7,507

 

 

 

6,843

 

Total

 

 

 

 

 

 

 

 

 

 

151,269

 

 

 

144,830

 

Accumulated depreciation

 

 

 

 

 

 

 

 

 

 

(21,032

)

 

 

(17,236

)

Total specialty containment fleet, net

 

 

 

 

 

 

 

 

 

$

130,237

 

 

$

127,594

 

Total rental fleet, net

 

 

 

 

 

 

 

 

 

$

957,527

 

 

$

951,323

 

 

(1)

Specialty containment fleet has been assigned zero residual value.

 

 

(9) Property, Plant and Equipment

Property, plant and equipment are stated at cost, net of accumulated depreciation and amortization. Depreciation is recorded using the straight-line method over the assets’ estimated useful lives. Our depreciation expense related to property, plant and equipment for March 31, 2016 and 2015 was $5.5 million and $4.9 million, respectively. Normal repairs and maintenance to property, plant and equipment are expensed as incurred. When property or equipment is retired or sold, the net book value of the asset, reduced by any proceeds, is charged to gain or loss on the disposal of property, plant and equipment and is included in rental, selling and general expenses in the Condensed Consolidated Statements of Operations.  See Note 5 “Impairment and Divestiture of North American Wood Mobile Offices” for information regarding the impairment and divestiture of ancillary equipment related to our wood mobile offices during 2015.

Property, plant and equipment at March 31, 2016 and December 31, 2015 consisted of the following:

 

 

 

Residual Value

as Percentage of

Original Cost

 

 

Useful Life

in Years

 

March 31,

2016

 

 

December 31,

2015

 

 

 

 

 

 

 

 

 

(In thousands)

 

Land

 

 

 

 

 

 

 

$

3,999

 

 

$

4,045

 

Vehicles and machinery

 

0 - 55%

 

 

5 - 30

 

 

122,289

 

 

 

118,185

 

Buildings and improvements (1)

 

0 - 25

 

 

3 - 30

 

 

21,814

 

 

 

21,549

 

Office fixtures and equipment

 

 

 

 

3 - 10

 

 

51,641

 

 

 

47,063

 

Property, plant and equipment

 

 

 

 

 

 

 

 

199,743

 

 

 

190,842

 

Accumulated depreciation

 

 

 

 

 

 

 

 

(61,715

)

 

 

(59,155

)

Property, plant and equipment, net

 

 

 

 

 

 

 

$

138,028

 

 

$

131,687

 

 

(1)

Improvements made to leased properties are depreciated over the lesser of the estimated remaining life or the remaining term of the respective lease.

12


MOBILE MINI, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited) - Continued

 

As of March 31, 2016 and December 31, 2015, we had $27.2 million and $23.5 million, respectively, of capitalized software, net of accumulated depreciation, included in property, plant and equipment.  Of the $27.2 million of capitalized software at March 31, 2016, $23.3 million relates to the development of our new enterprise resource planning system.

 

 

(10) Goodwill and Intangibles

For acquired businesses, we record assets acquired and liabilities assumed at their estimated fair values on the respective acquisition dates. Based on these values, the excess purchase prices over the fair value of the net assets acquired is recorded as goodwill. Of the $708.6 million total goodwill at March 31, 2016, $467.6 million relates to the North America portable storage segment, $59.7 million relates to the U.K. portable storage segment and $181.2 million relates to the specialty containment segment.

The following table shows the activity and balances related to goodwill from January 1, 2016 to March 31, 2016 (in thousands): 

 

Balance at January 1, 2016

 

$

706,387

 

Acquisition

 

 

3,676

 

Foreign currency

 

 

(1,500

)

Balance at March 31, 2016

 

$

708,563

 

 

Intangible assets are amortized over the estimated useful life of the asset utilizing a method which reflects the estimated pattern in which the economic benefits will be consumed.  Customer relationships are amortized based on the estimated attrition rates of the underlying customer base, other intangibles are amortized using the straight-line method.

The following table reflects balances related to intangible assets for the periods presented:

 

 

 

 

 

March 31, 2016

 

 

December 31, 2015

 

 

 

Estimated

Useful

Life

 

Gross

Carrying

Amount

 

 

Accumulated

Amortization

 

 

Net

Carrying

Amount

 

 

Gross

Carrying

Amount

 

 

Accumulated

Amortization

 

 

Net

Carrying

Amount

 

 

 

 

 

(In thousands)

 

Customer relationships

 

11 - 20

 

$

92,889

 

 

$

(25,936

)

 

$

66,953

 

 

$

92,304

 

 

$

(24,875

)

 

$

67,429

 

Trade names/trademarks

 

5 - 10

 

 

6,002

 

 

 

(1,863

)

 

 

4,139

 

 

 

6,025

 

 

 

(1,684

)

 

 

4,341

 

Non-compete agreements

 

5

 

 

1,888

 

 

 

(526

)

 

 

1,362

 

 

 

1,839

 

 

 

(433

)

 

 

1,406

 

Other

 

20

 

 

60

 

 

 

(24

)

 

 

36

 

 

 

60

 

 

 

(24

)

 

 

36

 

Total

 

 

 

$

100,839

 

 

$

(28,349

)

 

$

72,490

 

 

$

100,228

 

 

$

(27,016

)

 

$

73,212

 

 

Amortization expense for amortizable intangibles was approximately $1.6 million and $1.5 million for the three-month periods ended March 31, 2016 and 2015, respectively.  Based on the carrying value at March 31, 2016, future amortization of intangible assets is expected to be as follows for the years ended December 31 (in thousands): 

 

2016 (remaining)

 

 

 

$

4,770

 

2017

 

 

 

 

6,245

 

2018

 

 

 

 

6,224

 

2019

 

 

 

 

6,196

 

2020

 

 

 

 

5,062

 

Thereafter

 

 

 

 

43,993

 

Total

 

 

 

$

72,490

 

 

 

13


MOBILE MINI, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited) - Continued

 

(11) Lines of Credit

On December 14, 2015, we entered into the Credit Agreement. The Credit Agreement provides for a five-year, $1.0 billion first lien senior secured revolving credit facility maturing on or before the earlier of (i) December 14, 2020 and (ii) the date that is 90 days prior to the final maturity date of the Senior Notes if such Senior Notes remain outstanding on such date.  The Credit Agreement also provides for the issuance of irrevocable standby letters of credit by U.S. lenders in amounts totaling up to $50.0 million, by U.K.-based lenders in amounts totaling up to $20.0 million, and by Canadian-based lenders in amounts totaling up to $20.0 million.  The obligations of Mobile Mini and its subsidiary guarantors under the Credit Agreement are secured by a blanket lien on substantially all of our assets.

Amounts borrowed under the Credit Agreement and repaid or prepaid during the term may be reborrowed. Outstanding amounts under the Credit Agreement bear interest at our option at either: (i) the London interbank offered rate (“LIBOR”) plus an applicable margin (“LIBOR Loans”), or (ii) the prime rate plus an applicable margin (“Base Rate Loans”). The applicable margin for each type of loan is based on an availability-based pricing grid and ranges from 1.25% to 1.75% for LIBOR Loans and 0.25% to 0.75% for Base Rate Loans at each measurement date. Pursuant to the terms of the Credit Agreement, outstanding amounts will bear interest at the highest level in the pricing grid until the first measurement date subsequent to March 31, 2016.  The margins in effect as of April 2016 are 1.50% for LIBOR Loans and 0.50% for Base Rate Loans.

Availability of borrowings under the Credit Agreement is subject to a borrowing base calculation based upon a valuation of the Company’s eligible accounts receivable, eligible container fleet (including containers held for sale, work-in-process and raw materials) and machinery and equipment, each multiplied by an applicable advance rate or limit. The rental fleet is appraised at least once annually by a third-party appraisal firm and up to 90% of the Net Orderly Liquidation Value, as defined in the Credit Agreement, is included in the borrowing base to determine how much the Company may borrow under the Credit Agreement.

The Credit Agreement provides for U.K. borrowings, which are, at the Company’s option, denominated in either Pounds Sterling or Euros, by its U.K. subsidiary based upon a U.K. borrowing base; Canadian borrowings, which are denominated in Canadian dollars, by its Canadian subsidiary based upon a Canadian borrowing base; and U.S. borrowings, which are denominated in U.S. dollars, by the Company based upon a U.S. borrowing base along with any Canadian assets not included in the Canadian subsidiary.

The Credit Agreement also contains customary negative covenants, including covenants that restrict our ability to, among other things: (i) allow certain liens to attach to Mobile Mini or subsidiary assets, (ii) repurchase or pay dividends or make certain other restricted payments on capital stock and certain other securities, or prepay certain indebtedness, (iii) incur additional indebtedness or engage in certain other types of financing transactions, and (iv) make acquisitions or other investments.  In addition, we must comply with a minimum fixed charge coverage ratio of 1.00 to 1.00 as of the last day of each quarter, upon the minimum availability amount under the Credit Agreement falling below the greater of (y) $90.0 million and (z) 10% of the lesser of the then total revolving loan commitment and aggregate borrowing base. As of March 31, 2016, we were in compliance with the minimum borrowing availability threshold as set forth in the Credit Agreement and therefore not subject to any financial maintenance covenants.

 

 

(12) Income Taxes

We file U.S. federal tax returns, U.S. state tax returns and foreign tax returns and have identified our U.S. federal tax return as our “major” tax jurisdiction. For the U.S. federal return, our tax years for 2012, 2013 and 2014 are subject to tax examination by the U.S. Internal Revenue Service through September 15, 2016, 2017 and 2018, respectively. We do not anticipate that the total amount of unrecognized tax benefit related to any particular tax position will change significantly within the next 12 months.

We use a two-step approach to recognizing and measuring uncertain tax positions. The first step is to evaluate the tax position for recognition by determining if the weight of available evidence indicates that it is more likely than not that the position will be sustained on audit, including resolution of related appeals or litigation processes, if any. The second step is to measure the tax benefit as the largest amount that is more than 50% likely of being realized upon ultimate settlement.

Our policy for recording interest and penalties associated with audits is to record such items as a component of income before taxes. Penalties and associated interest costs, if any, are recorded in rental, selling and general expenses in our Condensed Consolidated Statements of Operations.

 

 

14


MOBILE MINI, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited) - Continued

 

(13) Share-Based Compensation

We have historically awarded stock options and restricted stock awards for employees and non-employee directors as a means of attracting and retaining quality personnel and to align employee performance with stockholder value.  Stock option plans are approved by our stockholders and administered by the stock compensation committee of the Company’s Board of Directors (the “Board”). The current plan allows for a variety of equity programs designed to provide flexibility in implementing equity and cash awards, including incentive stock options, nonqualified stock options, restricted stock awards, restricted stock units, stock appreciation rights, performance stock, performance units and other stock-based awards. Participants may be granted any one of the equity awards or any combination. We do not award stock options with an exercise price below the market price of the underlying securities on the date of award.  As of March 31, 2016, 1.9 million shares are available for future grants.  Generally stock options have contractual terms of ten years.  

For the quarters ended March 31, 2016 and 2015, expense related to share-based compensation was $2.6 million and $3.3 million, respectively.  This expense was included in rental, selling and general expenses for these quarters. As of March 31, 2016, total unrecognized compensation cost related to stock option awards was approximately $5.9 million and the related weighted-average period over which it is expected to be recognized is approximately 1.8 years. As of March 31, 2016, the unrecognized compensation cost related to restricted stock awards was approximately $8.2 million, which is expected to be recognized over a weighted-average period of approximately 2.8 years.

Stock Options. The fair value of each stock option award is estimated on the date of the grant using the Black-Scholes-Merton option pricing model which requires the input of assumptions. We estimate the risk-free interest rate based on the U.S. Treasury security rate in effect at the time of the grant. The expected life of the options, volatility and dividend rates are estimated based on our historical data. The following are the key assumptions used for the period noted:

 

 

 

2016

 

 

2015

Risk-free interest rate

 

 

1.5%

 

 

1.3% - 1.5%

Expected life of the options (years)

 

5

 

 

5

Expected stock price volatility

 

 

36.7%

 

 

35.6% - 35.7%

Expected dividend rate

 

 

3.1%

 

 

1.8% - 2.0%

 

The following table summarizes stock option activity for the three months ended March 31, 2016 (share amounts in thousands):

 

 

 

Number of

Shares

 

 

Weighted

Average

Exercise

Price

 

Options outstanding, beginning of period

 

 

2,870

 

 

$

33.40

 

Granted

 

 

574

 

 

 

26.20

 

Canceled/Expired

 

 

(26

)

 

 

34.75

 

Exercised

 

 

 

 

 

 

 

Options outstanding, end of period

 

 

3,418

 

 

 

32.18

 

 

A summary of stock options outstanding as of March 31, 2016, is as follows:

 

 

 

Number of

Shares

 

 

Weighted

Average

Exercise

Price

 

 

Weighted

Average

Remaining

Contractual

Terms

 

 

Aggregate

Intrinsic

Value

 

 

 

(In thousands)

 

 

 

 

 

 

(In years)

 

 

(In thousands)

 

Outstanding

 

 

3,418

 

 

$

32.18

 

 

 

7.60

 

 

$

11,546

 

Vested and expected to vest

 

 

3,295

 

 

 

32.27

 

 

 

7.53

 

 

 

10,881

 

Exercisable

 

 

2,512

 

 

 

32.01

 

 

 

6.97

 

 

 

7,614

 

 

15


MOBILE MINI, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited) - Continued

 

The weighted average fair value of stock options granted was $6.54. Included in the tables above are option awards granted in 2016 which will vest based upon the achievement of specified performance criteria related to 2016 and future years. Such awards have been granted assuming a target number of options; however, the terms of these awards provide that the number of options that ultimately vest may vary between 50% and 200% of the target award, or may be zero. The tables present the options at their target amount, and the 1.9 million shares available for grant as noted previously, has also been calculated utilizing the target award amounts.  Included in the cancellations shown in the table above is the cancellation of approximately 13,000 options granted in previous years subject to performance criteria.  These awards were canceled during the current period due to vesting at less than 100% of the target award.

Restricted Stock Awards. The fair value of restricted stock awards is estimated as the closing price of our common stock on the date of grant. A summary of restricted stock award activity is as follows (share amounts in thousands):

 

 

 

Shares

 

 

Weighted

Average

Grant Date

Fair Value

 

Restricted stock awards at beginning of period

 

 

242

 

 

$

31.70

 

Awarded

 

 

143

 

 

 

26.23

 

Released

 

 

(54

)

 

 

33.25

 

Forfeited

 

 

(9

)

 

 

25.97

 

Restricted stock awards at end of period

 

 

322

 

 

 

29.16

 

 

The restricted stock awards that vested during the three months ended March 31, 2016 had an aggregate grant date fair value of $1.8 million and an aggregate vesting date fair value of $1.6 million.      

 

 

(14) Restructuring

We have undergone restructuring actions to align our business operations.  The restructuring expense during the three-month period ended March 31, 2016 resulted from the continuation of restructuring projects initiated in prior years.  These costs include additional restructuring items that were included in the prior year plan but were not accruable at the time of the previous charges. Of the $2.2 million of restructuring expense recognized in the three months ended March 31, 2016 approximately $1.3 million related to the integration of Evergreen Tank Solutions (“ETS”) into the existing Mobile Mini infrastructure, including our shift from managing operations on a product-oriented basis to a geographic, customer-focused organization; and, to support this shift, the re-alignment of sales leadership with operational leadership.  The remaining costs largely relate to the abandonment of yards related to our move away from the wood mobile office business. The restructuring expense recognized in the three months ended March 31, 2015 related primarily to the ETS integration.

The following table details accrued restructuring obligations (included in accrued liabilities in the Condensed Consolidated Balance Sheets) and related activity for the year ended December 31, 2015 and the three-month period ended March 31, 2016:

 

 

 

Fleet and Property,

Plant and

Equipment

Abandonment Costs

 

 

Severance and

Benefits

 

 

Lease

Abandonment

Costs

 

 

Other

Costs

 

 

Total

 

 

 

(In thousands)

 

Accrued obligations as of January 1, 2015

 

$

 

 

$

441

 

 

$

676

 

 

$

 

 

$

1,117

 

Restructuring expense

 

 

15,274

 

 

 

4,846

 

 

 

600

 

 

 

78

 

 

 

20,798

 

Settlement of obligations

 

 

(15,274

)

 

 

(4,042

)

 

 

(781

)

 

 

(76

)

 

 

(20,173

)

Accrued obligations as of December 31, 2015

 

 

 

 

 

1,245

 

 

 

495

 

 

 

2

 

 

 

1,742

 

Restructuring expense

 

 

106

 

 

 

72

 

 

 

736

 

 

 

1,334

 

 

 

2,248

 

Settlement of obligations

 

 

(106

)

 

 

(364

)

 

 

(780

)

 

 

(288

)

 

 

(1,538

)

Accrued obligations as of March 31, 2016

 

$

 

 

$

953

 

 

$

451

 

 

$

1,048

 

 

$

2,452

 

 

The majority of accrued obligations are expected to be paid out through the year 2016, with the exception of a lease that will continue into the first quarter of 2019.

16


MOBILE MINI, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited) - Continued

 

The following amounts are included in restructuring expense for the periods indicated:

 

 

 

Three Months Ended

March 31,

 

 

 

2016

 

 

2015

 

 

 

(In thousands)

 

Fleet and property, plant and equipment abandonment costs

 

$

106

 

 

$

 

Severance and benefits

 

 

72

 

 

 

464

 

Lease abandonment costs

 

 

736

 

 

 

19

 

Other costs

 

 

1,334

 

 

 

 

Restructuring expense

 

$

2,248

 

 

$

483

 

 

 

(15) Commitments and Contingencies

We are a party to various claims and litigation in the normal course of business. Our current estimated range of liability related to various claims and pending litigation is based on claims for which our management can determine that it is probable that a liability has been incurred and the amount of loss can be reasonably estimated. Because of the uncertainties related to both the probability of incurred and possible range of loss on pending claims and litigation, management must use considerable judgment in making reasonable determination of the liability that could result from an unfavorable outcome. As additional information becomes available, we will assess the potential liability related to our pending litigation and revise our estimates. Such revisions in our estimates of the potential liability could materially impact our results of operation. We do not anticipate the resolution of such matters known at this time will have a material adverse effect on our business or consolidated financial position.

 

 

(16) Stockholders’ Equity

Dividends

On January 21, 2016, the Board authorized and declared a cash dividend to all our common stockholders of $0.206 per share of common stock.  These dividends were payable on March 23, 2016 to all stockholders of record as of the close of business on March 9, 2016. Each future quarterly dividend payment is subject to review and approval by the Board. The Company’s Credit Agreement contains restrictions on the declaration and payment of dividends.

Treasury Stock

On November 6, 2013, the Board approved a share repurchase program authorizing up to $125.0 million of our outstanding shares of common stock to be repurchased. On April 17, 2015, the Board authorized up to an additional $50.0 million of our outstanding shares of common stock to be repurchased, for a total of $175.0 million under the share repurchase program. The shares may be repurchased from time to time in the open market or in privately negotiated transactions. The share repurchases are subject to prevailing market conditions and other considerations. The share repurchase program does not have an expiration date and may be suspended or terminated at any time by the Board. All shares repurchased are held in treasury.

During the three months ended March 31, 2016, we purchased approximately 0.3 million shares of our common stock at a cost of $6.8 million under the authorized share repurchase program, and approximately $82.2 million is available for repurchase as of March 31, 2016.  In addition, we withheld approximately 11,000 shares of stock from employees, for an approximate value of $0.3 million, upon vesting of share awards to satisfy minimum tax withholding obligations. These shares were not acquired pursuant to the share repurchase program.

During the three months ended March 31, 2015, we purchased approximately 0.4 million shares of our common stock at a cost of $15.0 million under the authorized share repurchase program and withheld approximately 7,000 shares of stock from employees, for an approximate value of $0.3 million, upon vesting of share awards to satisfy minimum tax withholding obligations. These shares were not acquired pursuant to the share repurchase program.

 

 

17


MOBILE MINI, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited) - Continued

 

(17) Segment Reporting

Our operations are comprised of three reportable segments: North American portable storage, U.K. portable storage and specialty containment.  Discrete financial data on each of our products is not available and it would be impractical to collect and maintain financial data in such a manner. The results for each segment are reviewed discretely by our chief operating decision maker.

We operate in the U.S., U.K. and Canada.  All of our locations operate in their local currency and, although we are exposed to foreign exchange rate fluctuation in foreign markets where we rent and sell our products, we do not believe such exposure will have a significant impact on our results of operations. Revenues recognized by our U.S. locations were $103.1 million and $110.5 million for the three months ended March 31, 2016 and 2015, respectively.

The following tables set forth certain information regarding each of our segments for the periods indicated.

 

 

 

For the Three Months Ended March 31, 2016

 

 

 

Portable Storage

 

 

 

 

 

 

 

 

 

 

 

North

America

 

 

United

Kingdom

 

 

Total

 

 

Specialty

Containment

 

 

Consolidated

 

 

 

(In thousands)

 

Revenues:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Rental

 

$

74,013

 

 

$

19,715

 

 

$

93,728

 

 

$

23,628

 

 

$

117,356

 

Sales

 

 

4,448

 

 

 

844

 

 

 

5,292

 

 

 

1,599

 

 

 

6,891

 

Other

 

 

213

 

 

 

54

 

 

 

267

 

 

 

19

 

 

 

286

 

Total revenues

 

 

78,674

 

 

 

20,613

 

 

 

99,287

 

 

 

25,246

 

 

 

124,533

 

Costs and expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Rental, selling and general expenses

 

 

48,388

 

 

 

12,466

 

 

 

60,854

 

 

 

15,448

 

 

 

76,302

 

Cost of sales

 

 

2,758

 

 

 

641

 

 

 

3,399

 

 

 

1,212

 

 

 

4,611

 

Restructuring expenses

 

 

2,182

 

 

 

 

 

 

2,182

 

 

 

66

 

 

 

2,248

 

Depreciation and amortization

 

 

6,427

 

 

 

1,711

 

 

 

8,138

 

 

 

7,039

 

 

 

15,177

 

Total costs and expenses

 

 

59,755

 

 

 

14,818

 

 

 

74,573

 

 

 

23,765

 

 

 

98,338

 

Income from operations

 

$

18,919

 

 

$

5,795

 

 

$

24,714

 

 

$

1,481

 

 

$

26,195

 

Interest expense, net of interest income

 

$

5,648

 

 

$

131

 

 

$

5,779

 

 

$

2,705

 

 

$

8,484

 

Income tax provision

 

 

5,406

 

 

 

1,068

 

 

 

6,474

 

 

 

239

 

 

 

6,713

 

Capital expenditures for additions to rental fleet,

   excluding acquisitions

 

 

4,580

 

 

 

4,170

 

 

 

8,750

 

 

 

2,134

 

 

 

10,884

 

 

18


MOBILE MINI, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited) - Continued

 

 

 

 

For the Three Months Ended March 31, 2015

 

 

 

Portable Storage

 

 

 

 

 

 

 

 

 

 

 

North

America

 

 

United

Kingdom

 

 

Total

 

 

Specialty

Containment

 

 

Consolidated

 

 

 

(In thousands)

 

Revenues:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Rental

 

$

78,984

 

 

$

20,020

 

 

$

99,004

 

 

$

24,113

 

 

$

123,117

 

Sales

 

 

4,983

 

 

 

979

 

 

 

5,962

 

 

 

2,010

 

 

 

7,972

 

Other

 

 

1,439

 

 

 

90

 

 

 

1,529

 

 

 

11

 

 

 

1,540

 

Total revenues

 

 

85,406

 

 

 

21,089

 

 

 

106,495

 

 

 

26,134

 

 

 

132,629

 

Costs and expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Rental, selling and general expenses

 

 

53,580

 

 

 

13,652

 

 

 

67,232

 

 

 

15,814

 

 

 

83,046

 

Cost of sales

 

 

3,122

 

 

 

742

 

 

 

3,864

 

 

 

1,269

 

 

 

5,133

 

Restructuring expenses

 

 

217

 

 

 

 

 

 

217

 

 

 

266

 

 

 

483

 

Asset impairment charge, net

 

 

64,726

 

 

 

 

 

 

64,726

 

 

 

 

 

 

64,726

 

Depreciation and amortization

 

 

7,890

 

 

 

1,576

 

 

 

9,466

 

 

 

6,073

 

 

 

15,539

 

Total costs and expenses

 

 

129,535

 

 

 

15,970

 

 

 

145,505

 

 

 

23,422

 

 

 

168,927

 

(Loss) income from operations

 

$

(44,129

)

 

$

5,119

 

 

$

(39,010

)

 

$

2,712

 

 

$

(36,298

)

Interest expense, net of interest income

 

$

6,149

 

 

$

218

 

 

$

6,367

 

 

$

2,692

 

 

$

9,059

 

Income tax (benefit) provision

 

 

(18,998

)

 

 

959

 

 

 

(18,039

)

 

 

8

 

 

 

(18,031

)

Capital expenditures for additions to rental fleet,

   excluding acquisitions

 

 

2,673

 

 

 

4,721

 

 

 

7,394

 

 

 

3,086

 

 

 

10,480

 

 

Assets related to the Company’s reportable segments include the following: 

 

 

 

Portable Storage

 

 

 

 

 

 

 

 

 

 

 

North

America

 

 

United

Kingdom

 

 

Total

 

 

Specialty

Containment

 

 

Consolidated

 

 

 

(In thousands)

 

As of March 31, 2016

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Goodwill

 

$

467,623

 

 

$

59,724

 

 

$

527,347

 

 

$

181,216

 

 

$

708,563

 

Intangibles

 

 

2,677

 

 

 

330

 

 

 

3,007

 

 

 

69,483

 

 

 

72,490

 

Rental Fleet

 

 

676,956

 

 

 

150,334

 

 

 

827,290

 

 

 

130,237

 

 

 

957,527

 

Property Plant and Equipment

 

 

102,297

 

 

 

18,984

 

 

 

121,281

 

 

 

16,747

 

 

 

138,028

 

Total assets, excluding intercompany assets

 

 

1,312,367

 

 

 

251,077

 

 

 

1,563,444

 

 

 

425,864

 

 

 

1,989,308

 

As of December 31, 2015:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Goodwill

 

$

463,616

 

 

$

61,532

 

 

$

525,148

 

 

$

181,239

 

 

$

706,387

 

Intangibles

 

 

2,021

 

 

 

403

 

 

 

2,424

 

 

 

70,788

 

 

 

73,212

 

Rental Fleet

 

 

672,080

 

 

 

151,649

 

 

 

823,729

 

 

 

127,594

 

 

 

951,323

 

Property Plant and Equipment

 

 

96,940

 

 

 

17,835

 

 

 

114,775

 

 

 

16,912

 

 

 

131,687

 

Total assets, excluding intercompany assets

 

 

1,299,723

 

 

 

252,462

 

 

 

1,552,185

 

 

 

424,590

 

 

 

1,976,775

 

 

The above schedule includes total assets in the U.S. of $1.7 billion as of both March 31, 2016 and December 31, 2015.

 

 

(18) Subsequent Events

Declaration of Quarterly Dividend

On April 27, 2016, the Company’s Board authorized and declared a quarterly dividend to all our common stockholders of $0.206 per share of common stock, payable on June 1, 2016 to all stockholders of record as of the close of business on May 18, 2016.

 

 

19


MOBILE MINI, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited) - Continued

 

(19) Condensed Consolidating Financial Information

The following tables reflect the condensed consolidating financial information of the Company’s subsidiary guarantors of the Senior Notes and its non-guarantor subsidiaries. Separate financial statements of the subsidiary guarantors are not presented because the guarantee by each 100% owned subsidiary guarantor is full and unconditional, joint and several, subject to customary exceptions, and management has determined that such information is not material to investors.

 

MOBILE MINI, INC.

CONDENSED CONSOLIDATING BALANCE SHEETS

As of March 31, 2016

(In thousands)

 

 

 

Guarantors

 

 

Non-

Guarantors

 

 

Eliminations

 

 

Consolidated

 

ASSETS

 

Cash and cash equivalents

 

$

569

 

 

$

65

 

 

$

 

 

$

634

 

Receivables, net

 

 

57,767

 

 

 

19,511

 

 

 

 

 

 

77,278

 

Inventories

 

 

14,515

 

 

 

911

 

 

 

 

 

 

15,426

 

Rental fleet, net

 

 

797,102

 

 

 

160,425

 

 

 

 

 

 

957,527

 

Property, plant and equipment, net

 

 

118,043

 

 

 

19,985

 

 

 

 

 

 

138,028

 

Other assets

 

 

17,357

 

 

 

2,005

 

 

 

 

 

 

19,362

 

Intangibles, net

 

 

72,105

 

 

 

385

 

 

 

 

 

 

72,490

 

Goodwill

 

 

644,120

 

 

 

64,443

 

 

 

 

 

 

708,563

 

Intercompany receivables

 

 

145,500

 

 

 

4,634

 

 

 

(150,134

)

 

 

 

Total assets

 

$

1,867,078

 

 

$

272,364

 

 

$

(150,134

)

 

$

1,989,308

 

LIABILITIES AND STOCKHOLDERS' EQUITY

 

Liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accounts payable

 

$

23,132

 

 

$

8,077

 

 

$

 

 

$

31,209

 

Accrued liabilities

 

 

53,356

 

 

 

6,724

 

 

 

 

 

 

60,080

 

Lines of credit

 

 

672,242

 

 

 

619

 

 

 

 

 

 

672,861

 

Obligations under capital leases

 

 

42,016

 

 

 

285

 

 

 

 

 

 

42,301

 

Senior Notes, net

 

 

197,677

 

 

 

 

 

 

 

 

 

197,677

 

Deferred income taxes

 

 

209,685

 

 

 

16,396

 

 

 

 

 

 

226,081

 

Intercompany payables

 

 

 

 

 

2,135

 

 

 

(2,135

)

 

 

 

Total liabilities

 

 

1,198,108

 

 

 

34,236

 

 

 

(2,135

)

 

 

1,230,209

 

Commitments and contingencies

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Stockholders' equity:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Common stock

 

 

493

 

 

 

 

 

 

 

 

 

493

 

Additional paid-in capital

 

 

587,009

 

 

 

147,999

 

 

 

(147,999

)

 

 

587,009

 

Retained earnings

 

 

216,062

 

 

 

138,004

 

 

 

 

 

 

354,066

 

Accumulated other comprehensive loss

 

 

 

 

 

(47,875

)

 

 

 

 

 

(47,875

)

Treasury stock, at cost

 

 

(134,594

)

 

 

 

 

 

 

 

 

(134,594

)

Total stockholders' equity

 

 

668,970

 

 

 

238,128

 

 

 

(147,999

)

 

 

759,099

 

Total liabilities and stockholders' equity

 

$

1,867,078

 

 

$

272,364

 

 

$

(150,134

)

 

$

1,989,308

 

 

20


MOBILE MINI, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited) - Continued

 

MOBILE MINI, INC.

CONDENSED CONSOLIDATING BALANCE SHEETS

As of December 31, 2015

(In thousands)

 

 

 

Guarantors

 

 

Non-

Guarantors

 

 

Eliminations

 

 

Consolidated

 

ASSETS

 

Cash and cash equivalents

 

$

1,033

 

 

$

580

 

 

$

 

 

$

1,613

 

Receivables, net

 

 

62,043

 

 

 

18,148

 

 

 

 

 

 

80,191

 

Inventories

 

 

14,224

 

 

 

1,372

 

 

 

 

 

 

15,596

 

Rental fleet, net

 

 

790,172

 

 

 

161,151

 

 

 

 

 

 

951,323

 

Property, plant and equipment, net

 

 

112,877

 

 

 

18,810

 

 

 

 

 

 

131,687

 

Other assets

 

 

14,854

 

 

 

1,912

 

 

 

 

 

 

16,766

 

Intangibles, net

 

 

72,751

 

 

 

461

 

 

 

 

 

 

73,212

 

Goodwill

 

 

640,444

 

 

 

65,943

 

 

 

 

 

 

706,387

 

Intercompany receivables

 

 

143,592

 

 

 

4,415

 

 

 

(148,007

)

 

 

 

Total assets

 

$

1,851,990

 

 

$

272,792

 

 

$

(148,007

)

 

$

1,976,775

 

LIABILITIES AND STOCKHOLDERS' EQUITY

 

Liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accounts payable

 

$

22,849

 

 

$

6,237

 

 

$

 

 

$

29,086

 

Accrued liabilities

 

 

51,815

 

 

 

7,209

 

 

 

 

 

 

59,024

 

Lines of credit

 

 

665,750

 

 

 

1,958

 

 

 

 

 

 

667,708

 

Obligations under capital leases

 

 

37,957

 

 

 

317

 

 

 

 

 

 

38,274

 

Senior Notes, net

 

 

197,553

 

 

 

 

 

 

 

 

 

197,553

 

Deferred income taxes

 

 

199,826

 

 

 

19,775

 

 

 

 

 

 

219,601

 

Intercompany payables

 

 

 

 

 

8

 

 

 

(8

)

 

 

 

Total liabilities

 

 

1,175,750

 

 

 

35,504

 

 

 

(8

)

 

 

1,211,246

 

Commitments and contingencies

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Stockholders' equity:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Common stock

 

 

491

 

 

 

 

 

 

 

 

 

491

 

Additional paid-in capital

 

 

584,447

 

 

 

147,999

 

 

 

(147,999

)

 

 

584,447

 

Retained earnings

 

 

218,811

 

 

 

133,451

 

 

 

 

 

 

352,262

 

Accumulated other comprehensive loss

 

 

 

 

 

(44,162

)

 

 

 

 

 

(44,162

)

Treasury stock, at cost

 

 

(127,509

)

 

 

 

 

 

 

 

 

(127,509

)

Total stockholders' equity

 

 

676,240

 

 

 

237,288

 

 

 

(147,999

)

 

 

765,529

 

Total liabilities and stockholders' equity

 

$

1,851,990

 

 

$

272,792

 

 

$

(148,007

)

 

$

1,976,775

 

 

21


MOBILE MINI, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited) - Continued

 

MOBILE MINI, INC.

CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS

Three Months Ended March 31, 2016

(In thousands)

 

 

 

Guarantors

 

 

Non-

Guarantors

 

 

Eliminations

 

 

Consolidated

 

Revenues:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Rental

 

$

96,890

 

 

$

20,466

 

 

$

 

 

$

117,356

 

Sales

 

 

5,961

 

 

 

930

 

 

 

 

 

 

6,891

 

Other

 

 

228

 

 

 

58

 

 

 

 

 

 

286

 

Total revenues

 

 

103,079

 

 

 

21,454

 

 

 

 

 

 

124,533

 

Costs and expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Rental, selling and general expenses

 

 

63,239

 

 

 

13,063

 

 

 

 

 

 

76,302

 

Cost of sales

 

 

3,910

 

 

 

701

 

 

 

 

 

 

4,611

 

Restructuring expenses

 

 

2,248

 

 

 

 

 

 

 

 

 

2,248

 

Depreciation and amortization

 

 

13,377

 

 

 

1,800

 

 

 

 

 

 

15,177

 

Total costs and expenses

 

 

82,774

 

 

 

15,564

 

 

 

 

 

 

98,338

 

Income from operations

 

 

20,305

 

 

 

5,890

 

 

 

 

 

 

26,195

 

Other income (expense):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest income

 

 

2,654

 

 

 

 

 

 

(2,654

)

 

 

 

Interest expense

 

 

(10,869

)

 

 

(269

)

 

 

2,654

 

 

 

(8,484

)

Income before income tax provision

 

 

12,090

 

 

 

5,621

 

 

 

 

 

 

17,711

 

Income tax provision

 

 

5,645

 

 

 

1,068

 

 

 

 

 

 

6,713

 

Net income

 

$

6,445

 

 

$

4,553

 

 

$

 

 

$

10,998

 

 

 

MOBILE MINI, INC.

CONDENSED CONSOLIDATING STATEMENTS OF COMPREHENSIVE INCOME

Three Months Ended March 31, 2016

(In thousands)

 

 

 

Guarantors

 

 

Non-

Guarantors

 

 

Eliminations

 

 

Consolidated

 

Net income

 

$

6,445

 

 

$

4,553

 

 

$

 

 

$

10,998

 

Foreign currency translation adjustment

 

 

 

 

 

(3,713

)

 

 

 

 

 

(3,713

)

Comprehensive income

 

$

6,445

 

 

$

840

 

 

$

 

 

$

7,285

 

 

22


MOBILE MINI, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited) - Continued

 

CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS

Three Months Ended March 31, 2015

(In thousands)

 

 

 

Guarantors

 

 

Non-

Guarantors

 

 

Eliminations

 

 

Consolidated

 

Revenues:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Rental

 

$

102,107

 

 

$

21,010

 

 

$

 

 

$

123,117

 

Sales

 

 

6,917

 

 

 

1,055

 

 

 

 

 

 

7,972

 

Other

 

 

1,450

 

 

 

90

 

 

 

 

 

 

1,540

 

Total revenues

 

 

110,474

 

 

 

22,155

 

 

 

 

 

 

132,629

 

Costs and expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Rental, selling and general expenses

 

 

68,674

 

 

 

14,372

 

 

 

 

 

 

83,046

 

Cost of sales

 

 

4,337

 

 

 

796

 

 

 

 

 

 

5,133

 

Restructuring expenses

 

 

483

 

 

 

 

 

 

 

 

 

483

 

Asset impairment charge, net

 

 

64,726

 

 

 

 

 

 

 

 

 

64,726

 

Depreciation and amortization

 

 

13,848

 

 

 

1,691

 

 

 

 

 

 

15,539

 

Total costs and expenses

 

 

152,068

 

 

 

16,859

 

 

 

 

 

 

168,927

 

(Loss) income from operations

 

 

(41,594

)

 

 

5,296

 

 

 

 

 

 

(36,298

)

Other income (expense):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest income

 

 

2,662

 

 

 

 

 

 

(2,662

)

 

 

 

Interest expense

 

 

(11,343

)

 

 

(378

)

 

 

2,662

 

 

 

(9,059

)

(Loss) income before income tax (benefit) provision

 

 

(50,275

)

 

 

4,918

 

 

 

 

 

 

(45,357

)

Income tax (benefit) provision

 

 

(18,991

)

 

 

960

 

 

 

 

 

 

(18,031

)

Net (loss) income

 

$

(31,284

)

 

$

3,958

 

 

$

 

 

$

(27,326

)

 

 

MOBILE MINI, INC.

CONDENSED CONSOLIDATING STATEMENTS OF COMPREHENSIVE LOSS

Three Months Ended March 31, 2015

(In thousands)

 

 

 

Guarantors

 

 

Non-

Guarantors

 

 

Eliminations

 

 

Consolidated

 

Net (loss) income

 

$

(31,284

)

 

$

3,958

 

 

$

 

 

$

(27,326

)

Foreign currency translation adjustment

 

 

 

 

 

(11,777

)

 

 

 

 

 

(11,777

)

Comprehensive loss

 

$

(31,284

)

 

$

(7,819

)

 

$

 

 

$

(39,103

)

 

23


MOBILE MINI, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited) - Continued

 

MOBILE MINI, INC.

CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS

Three Months Ended March 31, 2016

(In thousands)

 

 

 

Guarantors

 

 

Non-

Guarantors

 

 

Eliminations

 

 

Consolidated

 

Cash Flows from Operating Activities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income

 

$

6,445

 

 

$

4,553

 

 

$

 

 

$

10,998

 

Adjustments to reconcile net income to net cash

   provided by operating activities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Provision for doubtful accounts

 

 

1,155

 

 

 

48

 

 

 

 

 

 

1,203

 

Amortization of deferred financing costs

 

 

460

 

 

 

8

 

 

 

 

 

 

468

 

Amortization of long-term liabilities

 

 

29

 

 

 

 

 

 

 

 

 

29

 

Share-based compensation expense

 

 

2,473

 

 

 

91

 

 

 

 

 

 

2,564

 

Depreciation and amortization

 

 

13,377

 

 

 

1,800

 

 

 

 

 

 

15,177

 

Gain on sale of rental fleet units

 

 

(1,227

)

 

 

(151

)

 

 

 

 

 

(1,378

)

Loss on disposal of property, plant and equipment

 

 

287

 

 

 

51

 

 

 

 

 

 

338

 

Deferred income taxes

 

 

5,493

 

 

 

1,067

 

 

 

 

 

 

6,560

 

Changes in certain assets and liabilities, net of effect of

   businesses acquired:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Receivables

 

 

3,509

 

 

 

(1,881

)

 

 

 

 

 

1,628

 

Inventories

 

 

(291

)

 

 

434

 

 

 

 

 

 

143

 

Other assets

 

 

(721

)

 

 

(128

)

 

 

 

 

 

(849

)

Accounts payable

 

 

(4,191

)

 

 

1,685

 

 

 

 

 

 

(2,506

)

Accrued liabilities

 

 

1,219

 

 

 

(313

)

 

 

 

 

 

906

 

Intercompany

 

 

450

 

 

 

(450

)

 

 

 

 

 

 

Net cash provided by operating activities

 

 

28,467

 

 

 

6,814

 

 

 

 

 

 

35,281

 

Cash Flows from Investing Activities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash paid for businesses, net of cash acquired

 

 

(9,206

)

 

 

 

 

 

 

 

 

(9,206

)

Additions to rental fleet

 

 

(6,686

)

 

 

(4,198

)

 

 

 

 

 

(10,884

)

Proceeds from sale of rental fleet units

 

 

3,278

 

 

 

692

 

 

 

 

 

 

3,970

 

Additions to property, plant and equipment

 

 

(5,619

)

 

 

(2,691

)

 

 

 

 

 

(8,310

)

Proceeds from sale of property, plant and equipment

 

 

640

 

 

 

200

 

 

 

 

 

 

840

 

Net cash used in investing activities

 

 

(17,593

)

 

 

(5,997

)

 

 

 

 

 

(23,590

)

Cash Flows from Financing Activities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net borrowings (repayments) under lines of credit

 

 

6,492

 

 

 

(1,340

)

 

 

 

 

 

5,152

 

Deferred financing costs

 

 

(193

)

 

 

 

 

 

 

 

 

(193

)

Principal payments on capital lease obligations

 

 

(1,401

)

 

 

(32

)

 

 

 

 

 

(1,433

)

Dividend payments

 

 

(9,152

)

 

 

 

 

 

 

 

 

(9,152

)

Purchase of treasury stock

 

 

(7,084

)

 

 

 

 

 

 

 

 

(7,084

)

Net cash used in financing activities

 

 

(11,338

)

 

 

(1,372

)

 

 

 

 

 

(12,710

)

Effect of exchange rate changes on cash

 

 

 

 

 

40

 

 

 

 

 

 

40

 

Net decrease in cash

 

 

(464

)

 

 

(515

)

 

 

 

 

 

(979

)

Cash and cash equivalents at beginning of period

 

 

1,033

 

 

 

580

 

 

 

 

 

 

1,613

 

Cash and cash equivalents at end of period

 

$

569

 

 

$

65

 

 

$

 

 

$

634

 

 

24


MOBILE MINI, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited) - Continued

 

MOBILE MINI, INC.

CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS

Three Months Ended March 31, 2015

(In thousands)

 

 

 

Guarantors

 

 

Non-

Guarantors

 

 

Eliminations

 

 

Consolidated

 

Cash Flows from Operating Activities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net (loss) income

 

$

(31,284

)

 

$

3,958

 

 

$

 

 

$

(27,326

)

Adjustments to reconcile net (loss) income to net cash provided

   by operating activities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Asset impairment charge, net

 

 

64,726

 

 

 

 

 

 

 

 

 

64,726

 

Provision for doubtful accounts

 

 

947

 

 

 

222

 

 

 

 

 

 

1,169

 

Amortization of deferred financing costs

 

 

775

 

 

 

14

 

 

 

 

 

 

789

 

Amortization of long-term liabilities

 

 

25

 

 

 

 

 

 

 

 

 

25

 

Share-based compensation expense

 

 

3,160

 

 

 

90

 

 

 

 

 

 

3,250

 

Depreciation and amortization

 

 

13,848

 

 

 

1,691

 

 

 

 

 

 

15,539

 

Gain on sale of rental fleet units

 

 

(1,826

)

 

 

(146

)

 

 

 

 

 

(1,972

)

Loss on disposal of property, plant and equipment

 

 

219

 

 

 

116

 

 

 

 

 

 

335

 

Deferred income taxes

 

 

(19,192

)

 

 

959

 

 

 

 

 

 

(18,233

)

Foreign currency loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Changes in certain assets and liabilities, net of effect of

   businesses acquired:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Receivables

 

 

188

 

 

 

(824

)

 

 

 

 

 

(636

)

Inventories

 

 

(75

)

 

 

232

 

 

 

 

 

 

157

 

Other assets

 

 

357

 

 

 

98

 

 

 

 

 

 

455

 

Accounts payable

 

 

751

 

 

 

282

 

 

 

 

 

 

1,033

 

Accrued liabilities

 

 

(467

)

 

 

(372

)

 

 

 

 

 

(839

)

Intercompany

 

 

683

 

 

 

(844

)

 

 

161

 

 

 

 

Net cash provided by operating activities

 

 

32,835

 

 

 

5,476

 

 

 

161

 

 

 

38,472

 

Cash Flows from Investing Activities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash paid for businesses acquired, net of cash acquired

 

 

 

 

 

(1,200

)

 

 

 

 

 

(1,200

)

Additions to rental fleet

 

 

(5,745

)

 

 

(4,735

)

 

 

 

 

 

(10,480

)

Proceeds from sale of rental fleet units

 

 

4,268

 

 

 

574

 

 

 

 

 

 

4,842

 

Additions to property, plant and equipment

 

 

(3,307

)

 

 

(934

)

 

 

 

 

 

(4,241

)

Proceeds from sale of property, plant and equipment

 

 

243

 

 

 

364

 

 

 

 

 

 

607

 

Net cash used in investing activities

 

 

(4,541

)

 

 

(5,931

)

 

 

 

 

 

(10,472

)

Cash Flows from Financing Activities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net repayments under lines of credit

 

 

(4,602

)

 

 

619

 

 

 

(154

)

 

 

(4,137

)

Deferred financing costs

 

 

(100

)

 

 

 

 

 

 

 

 

(100

)

Principal payments on capital lease obligations

 

 

(828

)

 

 

(14

)

 

 

(7

)

 

 

(849

)

Issuance of common stock

 

 

32

 

 

 

 

 

 

 

 

 

32

 

Dividend payments

 

 

(8,509

)

 

 

 

 

 

 

 

 

(8,509

)

Purchase of treasury stock

 

 

(15,284

)

 

 

 

 

 

 

 

 

(15,284

)

Net cash (used in) provided by financing activities

 

 

(29,291

)

 

 

605

 

 

 

(161

)

 

 

(28,847

)

Effect of exchange rate changes on cash

 

 

 

 

 

156

 

 

 

 

 

 

156

 

Net increase (decrease) in cash

 

 

(997

)

 

 

306

 

 

 

 

 

 

(691

)

Cash and cash equivalents at beginning of period

 

 

2,977

 

 

 

762

 

 

 

 

 

 

3,739

 

Cash and cash equivalents at end of period

 

$

1,980

 

 

$

1,068

 

 

$

 

 

$

3,048

 

 

 

 

25


 

ITEM 2. 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 our December 31, 2015 consolidated financial statements and the accompanying notes thereto which are included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2015 filed with the Securities and Exchange Commission (“SEC”). This discussion contains forward-looking statements. Forward-looking statements are based on current expectations and assumptions that involve risks and uncertainties. Our actual results may differ materially from those anticipated in our forward-looking statements. The tables and information in this “Management’s Discussion and Analysis of Financial Conditions and Results of Operations” section were derived from exact numbers and may have immaterial rounding differences.

Overview

Executive Summary

We believe we are the world’s leading provider of portable storage solutions, maintaining a strong leadership position in virtually all markets served. Our mission is to be the leader in portable storage solutions to customers throughout North America and the U.K. and specialty containment solutions in the U.S.  We are committed to providing our customers with superior service and access to a high-quality and diverse fleet.  In managing our business, we focus on renting rather than selling our units, with rental revenues representing approximately 94.2% of our total revenues for the three months ended March 31, 2016.  We believe this strategy is highly attractive and provides predictable, recurring revenue. Additionally, our assets have long useful lives and low maintenance costs. We also sell new and used units, and provide delivery, installation and other ancillary products and value-added services.

During March 2015, we entered into discussions regarding the possible sale of our wood mobile offices within our North American portable storage segment.  The discussions indicated that the fleet might be sold at an amount below carrying value and we conducted a review for impairment for these long-lived assets as of March 31, 2015. Based on this review, an impairment loss was recorded in the quarter ended March 31, 2015. See additional discussion regarding the impairment and the divestiture of the wood mobile offices in Note 5 “Impairment and Divestiture of North American Wood Mobile Offices” to the accompanying condensed consolidated financial statements.  The wood mobile office business was ultimately divested as of May 15, 2015.  As such, activity associated with the wood mobile office business is included in the three months ended March 31, 2015, and no wood mobile office business is included for the corresponding period in the current year.

As of March 31, 2016, our network includes 130 portable storage locations, 18 specialty containment locations and 11 combined locations.  Our portable storage fleet consists of approximately 206,100 units and our specialty containment business has a fleet of approximately 11,900 units.

Business Environment and Outlook.  Excluding the divested wood mobile business, approximately 62% of our estimated combined rental revenue during the twelve-month period ended March 31, 2016 was derived from our North American portable storage business, 17% was derived from our U.K. portable storage business and 21% was derived from our specialty containment business.  Our business is subject to the general health of the economy and we utilize a variety of general economic indicators to assess market trends and determine the direction of our business.

Based on our assessment, we expect that the majority of our end markets will continue to drive demand for our products.  In particular, construction, which represents approximately 42% of our consolidated rental revenue, is forecasted for continued growth for the next several years.  While only 3% of our consolidated rental revenue is generated by oil and gas customers, the oil and gas industry is forecasted to continue to remain challenged in the near term.

Accounting and Operating Overview

Our principal operating revenues and expenses are:

Revenues:

 

·

Rental revenues include all rent and ancillary revenues we receive for our rental fleet.

 

·

Sales revenues consist primarily of sales of new and used portable storage products, used specialty containment fleet, and to a lesser extent, parts and supplies sold to specialty containment customers.

26


 

Costs and expenses:

 

·

Rental, selling and general expenses include, among other expenses, payroll and payroll-related costs including share-based compensation and commissions for our sales team, fleet transportation and fuel costs, repair and maintenance costs for our rental fleet and transportation equipment, real estate lease expense, insurance costs, and general corporate expenses.

 

·

Cost of sales is the net book value of the units that were sold during the reported period and includes both our cost to buy, transport, remanufacture and modify used containers and our cost to manufacture portable storage units and other structures.  To a lesser extent, cost of sales includes parts and supplies sold to specialty containment customers.

 

·

Depreciation and amortization includes depreciation on our rental fleet, our property, plant and equipment, and amortization of definite-lived intangible assets.

Our principal asset is our rental fleet, which is capitalized at cost and depreciated over the estimated useful life of the unit using the straight-line method. Rental fleet is depreciated whether or not it is out on rent. Capitalized cost of rental fleet includes the price paid to acquire the unit and freight charges to the location when the unit is first placed in service and, when applicable, the cost of manufacturing or remanufacturing, which includes the cost of customizing units. Ordinary repair and maintenance costs are charged to operations as incurred.

The table below outlines the composition of our portable storage rental fleet at March 31, 2016:

 

 

 

Rental Fleet

 

 

Number of

Units

 

 

Percentage of

Units

 

 

 

 

(In thousands)

 

 

 

 

 

 

 

 

 

 

Steel storage containers

 

$

614,056

 

 

 

174,311

 

 

 

85

 

%

Steel ground level offices

 

 

349,196

 

 

 

29,673

 

 

 

14

 

 

Other

 

 

6,823

 

 

 

2,074

 

 

 

1

 

 

Portable storage rental fleet

 

 

970,075

 

 

 

206,058

 

 

 

100

 

%

Accumulated depreciation

 

 

(142,785

)

 

 

 

 

 

 

 

 

 

Portable storage rental fleet, net

 

$

827,290

 

 

 

 

 

 

 

 

 

 

 

The tables below outline the composition of our specialty containment rental fleet at March 31, 2016:

 

 

 

Rental Fleet

 

 

Number of

Units

 

 

Percentage of

Units

 

 

 

 

(In thousands)

 

 

 

 

 

 

 

 

 

 

Steel tanks

 

$

56,761

 

 

 

2,906

 

 

 

24

 

%

Roll-off boxes

 

 

28,226

 

 

 

5,426

 

 

 

46

 

 

Stainless steel tank trailers

 

 

29,188

 

 

 

660

 

 

 

6

 

 

Vacuum boxes

 

 

10,207

 

 

 

1,148

 

 

 

10

 

 

Dewatering boxes

 

 

5,375

 

 

 

643

 

 

 

5

 

 

Pumps and filtration equipment

 

 

14,005

 

 

 

1,115

 

 

 

9

 

 

Other

 

 

7,507

 

 

n/a

 

 

 

 

 

 

Specialty containment rental fleet

 

 

151,269

 

 

 

11,898

 

 

 

100

 

%

Accumulated depreciation

 

 

(21,032

)

 

 

 

 

 

 

 

 

 

Specialty containment rental fleet, net

 

$

130,237

 

 

 

 

 

 

 

 

 

 

 

We are a capital-intensive business.  Therefore, in addition to focusing on measurements calculated in accordance with generally accepted accounting principles in the U.S. (“GAAP”), we focus on EBITDA, adjusted EBITDA, and free cash flow to measure our operating results.  EBITDA, adjusted EBITDA and the resultant margins, as well as free cash flow are non-GAAP financial measures.  As such, we include in this Quarterly Report on Form 10-Q reconciliations to their most directly comparable GAAP financial measures.  These reconciliations and a description of the limitations of these measures are included below in this report.

27


 

Non-GAAP Data and Reconciliations

EBITDA and Adjusted EBITDA. EBITDA is defined as net income before discontinued operation, net of tax (if applicable), interest expense, income taxes, depreciation and amortization, and debt restructuring or extinguishment expense (if applicable), including any write-off of deferred financing costs. Adjusted EBITDA further excludes certain non-cash expenses, as well as transactions that management believes are not indicative of our ongoing business.  Because EBITDA and adjusted EBITDA, as defined, exclude some but not all items that affect our cash flow from operating activities, they may not be comparable to similarly titled performance measures presented by other companies.

We present EBITDA and adjusted EBITDA because we believe that they provide an overall evaluation of our financial condition and useful information regarding our ability to meet our future debt payment requirements, capital expenditures and working capital requirements. EBITDA and adjusted EBITDA have certain limitations as analytical tools and should not be used as substitutes for net income, cash flows, or other consolidated income or cash flow data prepared in accordance with GAAP. EBITDA and adjusted EBITDA margins are calculated as EBITDA and adjusted EBITDA divided by total revenues expressed as a percentage.

Reconciliation of net income (loss) to EBITDA and adjusted EBITDA is as follows:

 

 

 

Three Months Ended

March 31,

 

 

 

 

2016

 

 

 

2015

 

 

 

 

(In thousands)

 

 

Net income (loss)

 

$

10,998

 

 

 

$

(27,326

)

 

Interest expense

 

 

8,484

 

 

 

 

9,059

 

 

Income tax provision (benefit)

 

 

6,713

 

 

 

 

(18,031

)

 

Depreciation and amortization

 

 

15,177

 

 

 

 

15,539

 

 

EBITDA

 

 

41,372

 

 

 

 

(20,759

)

 

Share-based compensation expense (1)

 

 

2,564

 

 

 

 

3,250

 

 

Restructuring expenses (2)

 

 

2,248

 

 

 

 

483

 

 

Acquisition-related expenses (3)

 

 

 

 

 

 

1,002

 

 

Asset impairment charge, net (4)

 

 

 

 

 

 

64,726

 

 

Sales tax refund (5)

 

 

 

 

 

 

(1,176

)

 

Adjusted EBITDA

 

$

46,184

 

 

 

$

47,526

 

 

EBITDA margin

 

 

33.2

 

%

 

 

(15.7

)

%

Adjusted EBITDA margin (6)

 

 

37.1

 

 

 

 

36.2

 

 

 

28


 

Reconciliation of net cash provided by operating activities to EBITDA, the most directly comparable GAAP measure, is as follows:

 

 

 

Three Months Ended

March 31,

 

 

 

2016

 

 

2015

 

 

 

(In thousands)

 

Net cash provided by operating activities

 

$

35,281

 

 

$

38,472

 

Interest paid

 

 

3,878

 

 

 

4,190

 

Income and franchise taxes paid

 

 

68

 

 

 

273

 

Share-based compensation expense (1)

 

 

(2,564

)

 

 

(3,250

)

Asset impairment charge, net (4)

 

 

 

 

 

(64,726

)

Gain on sale of rental fleet

 

 

1,378

 

 

 

1,972

 

Loss on disposal of property, plant and equipment

 

 

(338

)

 

 

(335

)

Change in certain assets and liabilities, net of effect of

   businesses acquired:

 

 

 

 

 

 

 

 

Receivables

 

 

(2,831

)

 

 

(533

)

Inventories

 

 

(143

)

 

 

(157

)

Other assets

 

 

849

 

 

 

(455

)

Accounts payable and accrued liabilities

 

 

5,794

 

 

 

3,790

 

EBITDA

 

$

41,372

 

 

$

(20,759

)

 

(1)

Share-based compensation represents non-cash compensation expense associated with the granting of equity instruments. For more information, see Note 13 “Share-Based Compensation” to the accompanying condensed consolidated financial statements.

(2)

The Company has undergone restructuring actions to align its business operations.  These activities materially change the scope of the business or the manner in which the business is conducted.  For more information, see Note 14 “Restructuring” to the accompanying condensed consolidated financial statements.

(3)

Incremental costs associated with acquisitions.

(4)

These costs represent asset impairment charge on the wood mobile office divestiture, net.  For more information about the wood mobile office divestiture, see Note 5 “Impairment and Divestiture of North American Wood Mobile Offices” to the accompanying condensed consolidated financial statements

(5)

Revenue associated with a sales tax refund.

(6)

Revenue discussed above associated with the sales tax refund was excluded in the calculation of the adjusted EBITDA margin for the 2015 period.

Free Cash Flow. Free cash flow is defined as net cash provided by operating activities, minus or plus, net cash used in or provided by investing activities, excluding acquisitions and certain transactions. Free cash flow is a non-GAAP financial measure and is not intended to replace net cash provided by operating activities, the most directly comparable financial measure prepared in accordance with GAAP. We present free cash flow because we believe it provides useful information regarding our liquidity and ability to meet our short-term obligations. In particular, free cash flow indicates the amount of cash available after capital expenditures for, among other things, investments in our existing business, debt service obligations, payment of authorized quarterly dividends, repurchase of our common stock and strategic small acquisitions.

Reconciliation of net cash provided by operating activities to free cash flow is as follows:

 

 

 

Three Months Ended

March 31,

 

 

 

2016

 

 

2015

 

 

 

(In thousands)

 

Net cash provided by operating activities

 

$

35,281

 

 

$

38,472

 

Additions to rental fleet, excluding acquisitions

 

 

(10,884

)

 

 

(10,480

)

Proceeds from sale of rental fleet

 

 

3,970

 

 

 

4,842

 

Additions to property, plant and equipment, excluding

   acquisitions

 

 

(8,310

)

 

 

(4,241

)

Proceeds from sale of property, plant and equipment

 

 

840

 

 

 

607

 

Net capital expenditures, excluding acquisitions

 

 

(14,384

)

 

 

(9,272

)

Free cash flow

 

$

20,897

 

 

$

29,200

 

 

29


 

RESULTS OF OPERATIONS

Three Months Ended March 31, 2016, Compared to Three Months Ended March 31, 2015

 

 

 

Three Months Ended

March 31,

 

 

Percent of Revenue

Three Months Ended

March 31,

 

 

 

Increase (Decrease)

 

 

 

 

2016

 

 

2015

 

 

2016

 

 

 

2015

 

 

 

2016 versus 2015

 

 

 

 

(In thousands, except percentages)

 

 

Revenues:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Rental

 

$

117,356

 

 

$

123,117

 

 

 

94.2

 

%

 

 

92.8

 

%

 

$

(5,761

)

 

 

(4.7

)

%

Sales

 

 

6,891

 

 

 

7,972

 

 

 

5.5

 

 

 

 

6.0

 

 

 

 

(1,081

)

 

 

(13.6

)

 

Other

 

 

286

 

 

 

1,540

 

 

 

0.2

 

 

 

 

1.2

 

 

 

 

(1,254

)

 

 

(81.4

)

 

Total revenues

 

 

124,533

 

 

 

132,629

 

 

 

100.0

 

 

 

 

100.0

 

 

 

 

(8,096

)

 

 

(6.1

)

 

Costs and expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Rental, selling and general expenses

 

 

76,302

 

 

 

83,046

 

 

 

61.3

 

 

 

 

62.6

 

 

 

 

(6,744

)

 

 

(8.1

)

 

Cost of sales

 

 

4,611

 

 

 

5,133

 

 

 

3.7

 

 

 

 

3.9

 

 

 

 

(522

)

 

 

(10.2

)

 

Restructuring expenses

 

 

2,248

 

 

 

483

 

 

 

1.8

 

 

 

 

0.4

 

 

 

 

1,765

 

 

 

365.4

 

 

Asset impairment charge, net

 

 

 

 

 

64,726

 

 

 

 

 

 

 

48.8

 

 

 

 

(64,726

)

 

n/a

 

 

Depreciation and amortization

 

 

15,177

 

 

 

15,539

 

 

 

12.2

 

 

 

 

11.7

 

 

 

 

(362

)

 

 

(2.3

)

 

Total costs and expenses

 

 

98,338

 

 

 

168,927

 

 

 

79.0

 

 

 

 

127.4

 

 

 

 

(70,589

)

 

 

(41.8

)

 

Income (loss) from operations

 

 

26,195

 

 

 

(36,298

)

 

 

21.0

 

 

 

 

(27.4

)

 

 

 

62,493

 

 

 

(172.2

)

 

Other income (expense):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest expense

 

 

(8,484

)

 

 

(9,059

)

 

 

(6.8

)

 

 

 

(6.8

)

 

 

 

575

 

 

 

(6.3

)

 

Income (loss) before income tax

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

provision (benefit)

 

 

17,711

 

 

 

(45,357

)

 

 

14.2

 

 

 

 

(34.1

)

 

 

 

63,068

 

 

 

 

 

 

Income tax provision (benefit)

 

 

6,713

 

 

 

(18,031

)

 

 

5.4

 

 

 

 

(13.6

)

 

 

 

24,744

 

 

 

 

 

 

Net income (loss)

 

$

10,998

 

 

$

(27,326

)

 

 

8.8

 

%

 

 

(20.5

)

%

 

$

38,324

 

 

 

 

 

 

 

 

 

Three Months Ended

March 31,

 

 

Percent of Revenue

Three Months Ended

March 31,

 

 

 

Increase (Decrease)

 

 

 

 

2016

 

 

2015

 

 

2016

 

 

 

2015

 

 

 

2016 versus 2015

 

 

 

 

(In thousands, except percentages)

 

 

EBITDA

 

$

41,372

 

 

$

(20,759

)

 

 

33.2

 

%

 

 

(15.7

)

%

 

$

62,131

 

 

 

(299.3

)

%

Adjusted EBITDA (1)

 

 

46,184

 

 

 

47,526

 

 

 

37.1

 

 

 

 

36.2

 

 

 

 

(1,342

)

 

 

(2.8

)

 

Free Cash Flow

 

 

20,897

 

 

 

29,200

 

 

 

16.8

 

 

 

 

22.0

 

 

 

 

(8,303

)

 

 

(28.4

)

 

 

(1)

The calculation of adjusted EBITDA as a percentage of revenue for the 2015 period includes a reduction to revenues related to transactions not indicative of our business.  See “Non-GAAP Data and Reconciliations” earlier in this report.

Total Revenues.  The following table depicts revenues by type of business for the three-month periods ended March 31:

 

 

 

Portable Storage

 

 

 

 

2016

 

 

2015

 

 

Increase (Decrease)

2016 versus 2015

 

 

 

 

(In thousands, except percentages)

Revenues:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Rental

 

$

93,728

 

 

$

99,004

 

 

$

(5,276

)

 

 

(5.3

)

%

Sales

 

 

5,292

 

 

 

5,962

 

 

 

(670

)

 

 

(11.2

)

 

Other

 

 

267

 

 

 

1,529

 

 

 

(1,262

)

 

 

(82.5

)

 

Total revenues

 

$

99,287

 

 

$

106,495

 

 

$

(7,208

)

 

 

(6.8

)

 

30


 

 

 

 

Specialty Containment

 

 

 

 

2016

 

 

2015

 

 

Increase (Decrease)

2016 versus 2015

 

 

 

 

(In thousands, except percentages)

Revenues:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Rental

 

$

23,628

 

 

$

24,113

 

 

$

(485

)

 

 

(2.0

)

%

Sales

 

 

1,599

 

 

 

2,010

 

 

 

(411

)

 

 

(20.4

)

 

Other

 

 

19

 

 

 

11

 

 

 

8

 

 

 

72.7

 

 

Total revenues

 

$

25,246

 

 

$

26,134

 

 

$

(888

)

 

 

(3.4

)

 

 

Of the $124.5 million of total revenues for the three months ended March 31, 2016, $99.3 million, or 79.7% related to portable storage business and $25.2 million, or 20.3% related to specialty containment business.  In the three-month period ended March 31, 2015, $106.5 million, or 80.3% related to portable storage business and $26.1 million, or 19.7% related to specialty containment business.  The wood mobile office business divested in May 2015 contributed approximately $11.3 million of total revenue and $10.6 million of rental revenue during the three months ended March 31, 2015.

Rental Revenues.  Excluding the effect of the wood mobile office divestiture discussed previously, portable storage rental revenue increased $5.3 million, or 6.0%, as compared to the prior-year quarter.  The increase was driven by a 2.3% increase in year-over-year rental rates and a 2.8% increase in units on rent. In addition, there was one more day in the current quarter as compared to the corresponding quarter in the prior year. These increases in revenue were partially offset by unfavorable currency translation rates in the current year, as compared to the prior year. Adjusted for the change in currency translation rates and excluding the divested assets, rental revenue increased approximately 7.3%, as compared to the prior-year quarter.  Excluding the divested wood mobile offices and adjusted for the unfavorable currency effect, yield (calculated as rental revenues divided by average units on rent) increased approximately 4.4% as compared to the prior-year quarter, largely driven by the rate increase and additional day in the current-year quarter.

Rental revenues within the specialty containment business decreased $0.5 million, or 2.0%, for the three-month period ended March 31, 2016, as compared to the same period in the prior year.  Revenue increases in both our downstream and diversified revenue sectors were more than offset by decreased activity in the upstream oil and gas sector.  Rates in the current-year quarter were up slightly as compared with the same period in the prior year.

Sales Revenues. We focus on rental revenues. As such and in general, sales of units from our fleet occur due to a particular customer need, or due to having fleet in excess of demand at a particular location.  Portable storage sales revenue for the quarter ended March 31, 2016 decreased $0.7 million, or 11.2%, to $5.3 million, compared to $6.0 million in the same period in 2015. Specialty containment sales revenue for the quarter ended March 31, 2016 decreased $0.4 million, or 20.4%, to $1.6 million, compared to $2.0 million in the same period in 2015.

Costs and expenses. The following table depicts costs and expenses by type of business for the three-month periods ended March 31:

 

 

 

Three Months Ended March 31,

 

 

 

 

Portable Storage

 

 

 

 

2016

 

 

2015

 

 

Increase (Decrease)

2016 versus 2015

 

 

 

 

(In thousands, except percentages)

 

 

Costs and expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Rental, selling and general expenses

 

$

60,854

 

 

$

67,232

 

 

$

(6,378

)

 

 

(9.5

)

%

Cost of sales

 

 

3,399

 

 

 

3,864

 

 

 

(465

)

 

 

(12.0

)

 

Restructuring expenses

 

 

2,182

 

 

 

217

 

 

 

1,965

 

 

n/a

 

 

Asset impairment charge, net

 

 

 

 

 

64,726

 

 

 

(64,726

)

 

n/a

 

 

Depreciation and amortization

 

 

8,138

 

 

 

9,466

 

 

 

(1,328

)

 

 

(14.0

)

 

Total costs and expenses

 

$

74,573

 

 

$

145,505

 

 

$

(70,932

)

 

 

(48.7

)

 

31


 

 

 

 

Three Months Ended March 31,

 

 

 

 

Specialty Containment

 

 

 

 

2016

 

 

2015

 

 

Increase (Decrease)

2016 versus 2015

 

 

 

 

(In thousands, except percentages)

 

 

Costs and expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Rental, selling and general expenses

 

$

15,448

 

 

$

15,814

 

 

$

(366

)

 

 

(2.3

)

%

Cost of sales

 

 

1,212

 

 

 

1,269

 

 

 

(57

)

 

 

(4.5

)

 

Restructuring expenses

 

 

66

 

 

 

266

 

 

 

(200

)

 

n/a

 

 

Depreciation and amortization

 

 

7,039

 

 

 

6,073

 

 

 

966

 

 

 

15.9

 

 

Total costs and expenses

 

$

23,765

 

 

$

23,422

 

 

$

343

 

 

 

1.5

 

 

 

Rental, Selling and General Expenses.  Rental, selling and general expenses in total decreased $6.7 million primarily due to the divestiture of our wood mobile office business. As a percentage of total revenues, rental, selling and general expenses were 61.3% for the three months ended March 31, 2016, which is down from 62.6% in the prior year (62.4% when excluding $1.0 million of acquisition-related costs in the prior-year quarter, as well as $1.2 million of other revenue related to a sales tax refund in the prior-year quarter).

Within portable storage, after excluding the $1.0 million of acquisition-related expenses in the prior-year quarter, the remaining decrease of $5.4 million for the three months ended March 31, 2016, as compared to the same period in the prior year, was driven largely by lower fleet freight and fuel resulting from decreased activity related to the wood mobile office business and decreasing fuel prices. Additionally, less yard space needs subsequent to the divestiture of our wood mobile office business contributed to lower rent expense. Payroll expense for portable storage in the current quarter was consistent with the prior-year quarter, as increases in salaries and wages were offset by a decrease in incentive compensation.

Rental, selling and general expenses for specialty containment business decreased $0.4 million, or 2.3%, in the current-year quarter, as compared to the prior-year quarter.  The decrease was primarily due to lower fleet freight and fuel resulting from decreased upstream activity, as well as a decrease in incentive compensation.

Cost of Sales. Cost of sales is the cost related to our sales revenue only. Within the portable storage business, cost of sales was $3.4 million and $3.9 million in the quarters ended March 31, 2016 and 2015, respectively.  Portable storage sales revenue, less cost of sales (sales profit), was $1.9 million and $2.1 million for the three-month periods ended March 31, 2016 and 2015, respectively.  Sales profit expressed as a percentage of sales revenue (sales profit margin) was 35.8% in the quarter ended March 31, 2016 and 35.2% in the prior-year quarter.

Within the specialty containment business, cost of sales was $1.2 million and $1.3 million in the quarters ended March 31, 2016 and 2015, respectively.  Specialty containment sales profit was $0.4 million and $0.7 million for the three-month periods ended March 31, 2016 and 2015, respectively.

Asset Impairment Charge, net.  The $64.7 million net asset impairment charge for the three months ended March 31, 2015 is due to the impairment of our wood mobile offices in our North American portable storage segment.  See additional discussion regarding the impairment of the wood mobile office assets in Note 5 “Impairment and Divestiture of North American Wood Mobile Offices” to the accompanying condensed consolidated financial statements.

Restructuring. Restructuring expenses in 2016 and 2015 primarily relate to the integration of our wholly-owned subsidiary, ETS, which was acquired on December 10, 2014, into the existing Mobile Mini infrastructure, including our shift from managing operations on a product-oriented basis to a geographic, customer-focused organization; and, to support this shift, the re-alignment of sales leadership with operational leadership.  In addition, included in restructuring expenses for the three months ended March 31, 2016 are costs related to our shift away from the wood mobile office business, primarily related to the abandonment of yards.

Depreciation and Amortization Expense. Depreciation and amortization expense decreased due to the divestiture of the wood mobile office units.  In the first quarter of 2015, we recognized $1.3 million of depreciation related to these units.  Excluding the divested business, depreciation and amortization of $8.1 million was consistent with the prior year.

Adjusted EBITDA. Short-term pressure resulting from the divestiture of our wood mobile office business and the year-over-year decline in upstream specialty containment rental revenue, partially offset by a decrease in incentive compensation, resulted in a $1.3 million, or 2.8%, decrease in adjusted EBITDA to $46.2 million, compared to $47.5 million in the prior-year quarter. Adjusted EBITDA related to the portable storage business decreased $0.7 million, or 1.7%. Specialty containment adjusted EBITDA decreased

32


 

$0.7 million. Adjusted EBITDA margins for the Company were 37.1% and 36.2% for the quarters ended March 31, 2016 and 2015, respectively. Adjusted EBITDA margins for the quarter ended March 31, 2016 were 37.8% for our portable storage business and 34.3% for our specialty containment business.

Interest Expense. Interest expense decreased $0.6 million, or 6.3%, to $8.5 million in the first quarter of 2016, compared to the same quarter in the prior year. Our average debt outstanding in the quarter ended March 31, 2016 was $909.9 million, as compared to $930.6 million in the prior-year quarter. The weighted average interest rate on our debt was 3.5% for both three-month periods ended March 31, 2016 and 2015, excluding the amortization of debt issuance costs. Taking into account the amortization of debt issuance costs, the weighted average interest rate was 3.7% and 3.9% for the three-month periods ended March 31, 2016 and 2015, respectively.

Provision for Income Taxes. During the quarter ended March 31, 2016, we had a $6.7 million provision for income taxes, compared to a net benefit of $18.0 million in the prior-year quarter. Our effective income tax rate decreased to 37.9% for the three months ended March 31, 2016, compared to 39.8% for the prior-year quarter.  The decrease in the tax rate is primarily due to the magnitude of the 2015 impairment loss in North America, which has a higher income tax rate.

Net Income. As a result of the income statement activity discussed above, we had net income of $11.0 million for the three months ended March 31, 2016.  Primarily due to the $64.7 million impairment loss, we had a net loss of $27.3 million in the prior-year quarter.

LIQUIDITY AND CAPITAL RESOURCES

Renting is a capital-intensive business that requires us to acquire assets before they generate revenues, cash flow and earnings. The majority of the assets that we rent have very long useful lives and require relatively little maintenance expenditures. Most of the capital we have deployed in our rental business historically has been used to expand our operations geographically, to execute opportunistic acquisitions, increase the number of units available for rent at our existing locations, and add to the mix of products we offer. During recent years, our operations have generated annual cash flow that exceeds our pre-tax earnings, particularly due to cash flow from operations and the deferral of income taxes caused by accelerated depreciation of our fixed assets in our tax return filings. Our strong cash from operating activities for the three-month periods ended March 31, 2016 and 2015 of $35.3 million and $38.5 million, respectively, resulted in free cash flow of $20.9 million and $29.2 million, respectively.  In addition to free cash flow, the Company’s principal current source of liquidity is our Amended and Restated ABL Credit Agreement, dated December 14, 2015, with Deutsche Bank AG New York Branch, as administrative agent, and the other lenders party thereto (the “Credit Agreement”) as described below.

Revolving Credit Facility. On December 14, 2015, we entered into the Credit Agreement.  The Credit Agreement replaces our prior ABL Credit Agreement, dated February 22, 2012, with Deutsche Bank AG New York Branch, as administrative agent, and the other lenders party thereto, that had a February 2017 maturity date.  The Credit Agreement provides for a five-year, $1.0 billion first lien senior secured revolving credit facility maturing on or before the earlier of (i) December 14, 2020 and (ii) the date that is 90 days prior to the final maturity date of our 7.875% senior notes due 2020 (“Senior Notes”) if such Senior Notes remain outstanding on such date.  The Credit Agreement also provides for the issuance of irrevocable standby letters of credit by U.S. lenders in amounts totaling up to $50.0 million, by U.K.-based lenders in amounts totaling up to $20 million, and by Canadian-based lenders in amounts totaling up to $20.0 million.

The obligations of us and our subsidiary guarantors under the Credit Agreement are secured by a blanket lien on substantially all of our assets. At March 31, 2016, we had $672.9 million of borrowings outstanding and $322.9 million of additional borrowing availability under the Credit Agreement. We were in compliance with the terms of the Credit Agreement as of March 31, 2016 and were above the minimum borrowing availability threshold and therefore not subject to any financial maintenance covenants.

Amounts borrowed under the Credit Agreement and repaid or prepaid during the term may be reborrowed. Outstanding amounts under the Credit Agreement bear interest at our option at either: (i) the London interbank offered rate (“LIBOR”) plus an applicable margin (“LIBOR Loans”), or (ii) the prime rate plus an applicable margin (“Base Rate Loans”). The applicable margin for each type of loan is based on an availability-based pricing grid and ranges from 1.25% to 1.75% for LIBOR Loans and 0.25% to 0.75% for Base Rate Loans at each measurement date.  Pursuant to the terms of the Credit Agreement, outstanding amounts will bear interest at the highest level in the pricing grid until the first measurement date subsequent to March 31, 2016.  The margins in effect as of April 2016 are 1.50% for LIBOR Loans and 0.50% for Base Rate Loans.

33


 

Availability of borrowings under the Credit Agreement is subject to a borrowing base calculation based upon a valuation of our eligible accounts receivable, eligible rental fleet (including units held for sale, work-in-process and raw materials) and machinery and equipment, each multiplied by an applicable advance rate or limit. The rental fleet is appraised at least once annually by a third-party appraisal firm and up to 90% of the Net Orderly Liquidation Value, as defined in the Credit Agreement, is included in the borrowing base to determine how much we may borrow under the Credit Agreement.

The Credit Agreement provides for U.K. borrowings, which are, at our option, denominated in either Pounds Sterling or Euros, by our U.K. subsidiary based upon a U.K. borrowing base; Canadian borrowings, which are denominated in Canadian dollars, by our Canadian subsidiary based upon a Canadian borrowing base; and U.S. borrowings, which are denominated in U.S. dollars, based upon a U.S. borrowing base along with any Canadian assets not included in the Canadian subsidiary.

The Credit Agreement also contains customary negative covenants, including covenants that restrict our ability to, among other things: (i) allow certain liens to attach to Mobile Mini or subsidiary assets, (ii) repurchase or pay dividends or make certain other restricted payments on capital stock and certain other securities, or prepay certain indebtedness, (iii) incur additional indebtedness or engage in certain other types of financing transactions, and (iv) make acquisitions or other investments.  In addition, we must comply with a minimum fixed charge coverage ratio of 1.00 to 1.00 as of the last day of each quarter, upon the minimum availability amount under the Credit Agreement falling below the greater of (y) $90.0 million and (z) 10% of the lesser of the then total revolving loan commitment and aggregate borrowing base. As of March 31, 2016, we were in compliance with the minimum borrowing availability threshold as set forth in the Credit Agreement and therefore not subject to any financial maintenance covenants.

We believe our cash provided by operating activities will provide for our normal capital needs for the next twelve months. If not, we have sufficient borrowings available under our Credit Agreement to meet any additional funding requirements. We monitor the financial strength of our lenders on an ongoing basis using publicly-available information. Based upon that information, we do not presently believe that there is a likelihood that any of our lenders will be unable to honor their respective commitments under the Credit Agreement.

Senior Notes. At March 31, 2016, we had outstanding $200.0 million aggregate principal amount of Senior Notes.  Interest on the Senior Notes is payable semiannually in arrears on June 1 and December 1 of each year.

Operating Activities. Net cash provided by operating activities was $35.3 million for the three months ended March 31, 2016, compared to $38.5 million in the same period in the prior year, a decrease of $3.2 million. Although the three-month period ended March 31, 2016 reflects net income of $11.0 million, compared to a net loss of $27.3 million in the comparable period in the prior year, the difference is due primarily to non-cash items.  Non-cash items in the current year include, $15.2 million in depreciation and amortization, $2.6 million of share-based compensation expense and $6.6 million change in deferred taxes.  Non-cash items in the prior year include a $64.7 million net asset impairment, $15.5 million of depreciation and amortization and $3.3 million of share-based compensation expense, offset by a non-cash reduction to net cash provided by operating activities of $18.2 million related to deferred income tax.

Excluding the net non-cash income statement items of $25.0 million in the current-year period and $65.6 million in the prior-year quarter, cash generated by net income decreased slightly to $36.0 million, from $38.3 million in the prior-year quarter.  The decrease is due primarily to the effects of the wood mobile divestiture. In addition, the change in working capital accounts resulted in cash outflow of $0.7 million in the current-year quarter, compared to an inflow of $0.2 million in the prior-year quarter, due to normal operating fluctuations.

Investing Activities. Net cash used in investing activities increased $13.1 million to $23.6 million for the three months ended March 31, 2016, compared to $10.5 million for the same period in 2015.  The increase in cash used is due to $9.2 million of cash paid in the current quarter for a business acquisition, compared to cash paid of $1.2 million for an acquisition in the first quarter of 2015. Additionally, we had increased net expenditures for long-lived assets during the three months ended March 31, 2016, as compared to the three months ended March 31, 2015.

Rental fleet capital expenditures and proceeds from sales of $10.9 million and $4.0 million, respectively, during the three months ended March 31, 2016 were consistent with capital expenditures and proceeds in the corresponding prior-year quarter. Of the $10.9 million in capital expenditures for rental fleet during the current period, $4.6 million related to our North America business, $4.2 million related to our U.K. business and $2.1 million to our specialty containment business.  Our expenditures are primarily to meet demand in geographic areas of high utilization for which it does not make economic sense to reposition our fleet and to meet customer demand for specific types of units.

34


 

Gross and net capital expenditures for property, plant and equipment were $8.3 million and $7.5 million, respectively, for the three-month period ended March 31, 2016 compared to gross and net capital expenditures for property, plant and equipment of $4.2 million and $3.6 million, respectively, for the three-month period ended March 31, 2015.  Expenditures during the three months ended March 31, 2016 and 2015 include hardware and software-related costs of approximately $4.5 million and $1.6 million, respectively.  These expenditures were primarily related to the implementation of our new enterprise resource planning platform and for general technology upgrades. The prior-year quarter includes costs related to our new corporate headquarters.

Financing Activities. Net cash used in financing activities during the three months ended March 31, 2016 was $12.7 million, compared to $28.8 million for the same period in 2015.  In the current-year quarter we borrowed $5.2 million on our lines of credit, purchased treasury stock totaling $7.1 million and paid dividends of $9.2 million.  In the prior-year quarter, free cash flow was used to pay down $4.1 million on our lines of credit, pay $8.5 million in dividends and purchase $15.3 million of treasury shares.

CONTRACTUAL OBLIGATIONS AND COMMITMENTS

Our contractual obligations primarily consist of our outstanding balance under the Credit Agreement, $200.0 million aggregate principal amount of the Senior Notes and obligations under capital leases. We also have operating lease commitments for: (i) real estate properties for the majority of our locations with remaining lease terms typically ranging from one to five years, (ii) delivery, transportation and yard equipment, typically under a five-year lease with purchase options at the end of the lease term at a stated or fair market value price, and (iii) office related equipment.

At March 31, 2016, primarily in connection with securing our insurance policies, we have provided certain insurance carriers and others with approximately $4.2 million in letters of credit. We currently do not have any obligations under purchase agreements or commitments.

OFF-BALANCE SHEET TRANSACTIONS

We do not maintain any off-balance sheet transactions, arrangements, obligations or other relationships with unconsolidated entities or others that are reasonably likely to have a material current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources.

SEASONALITY

Demand from our portable storage customers is somewhat seasonal. Construction customers typically reflect higher demand during months with more temperate weather, while demand for our portable storage units by large retailers is stronger from September through December because these retailers need to store more inventories for the holiday season. Our retail customers usually return these rented units to us in December and early in the following year. In the specialty containment business, demand from customers is typically higher in the middle of the year from March to October, driven by the timing of customer maintenance projects. The demand for rental of our pumps may also be impacted by weather, specifically when temperatures drop below freezing.

CRITICAL ACCOUNTING POLICIES, ESTIMATES AND JUDGMENTS

A comprehensive discussion of our critical accounting policies and management estimates and significant accounting policies are included in the “Management’s Discussion and Analysis of Financial Conditions and Results of Operations’ section and in Note 2 “Summary of Significant Accounting Policies” to the consolidated financial statements in our Annual Report on Form 10-K for the fiscal year ended December 31, 2015.

There have been no significant changes in our critical accounting policies, estimates and judgments during the three-month period ended March 31, 2016.

RECENT ACCOUNTING PRONOUNCEMENTS

For discussions of the adoption and potential impacts of recently issued accounting standards, refer to Note 2 “Impact of Recently Issued Accounting Standards” to the accompanying condensed consolidated financial statements.

35


 

CAUTIONARY STATEMENTS REGARDING FORWARD-LOOKING STATEMENTS

This section and other sections of this Quarterly Report on Form 10-Q contain forward-looking information about our financial results and estimates and our business prospects that involve substantial risks and uncertainties. From time to time, we also may provide oral or written forward-looking statements in other materials we release to the public. Forward-looking statements are expressions of our current expectations or forecasts of future events. You can identify these statements by the fact that they do not relate strictly to historic or current facts. They include words such as “may,” “plan,” “seek,” “will,” “expect,” “intend,” “estimate,” “anticipate,” “believe,” “continue,” “project,” “should,” “likely,” “future,” “target,” “forecast,” “goal,” “observe,” and “strategy” or the negative thereof or variations thereon or similar terminology in connection with any discussion of future operating or financial performance. The forward-looking statements in this Quarterly Report on Form 10-Q  reflect management’s beliefs, plans, objectives, goals, expectations, anticipations and intentions with respect to our financial condition, results of operations, future performance and business, and include statements regarding, among other things, our future actions; financial position; management forecasts; efficiencies; cost savings, synergies and opportunities to increase productivity and profitability; our plans and expectations regarding acquisitions; income and margins; liquidity; anticipated growth; the economy; business strategy; budgets; projected costs and plans and objectives of management for future operations; sales efforts; taxes; refinancing of existing debt; and the outcome of contingencies such as legal proceedings and financial results.  Factors that could cause actual results to differ materially from projected results include, without limitation:

 

·

an economic slowdown in the U.S. and/or the U.K. that affects any significant portion of our customer base, or the geographic regions where we operate in those countries;

 

·

our ability to manage growth at existing or new locations;

 

·

our ability to obtain borrowings under our revolving credit facility or additional debt or equity financings on acceptable terms;

 

·

changes in the supply and price of new and used products we lease;

 

·

our ability to increase revenue and control operating costs;

 

·

our ability to raise or maintain rental rates;

 

·

our ability to leverage and protect our information technology systems;

 

·

our ability to protect our patents and other intellectual property;

 

·

currency exchange and interest rate fluctuations;

 

·

governmental laws and regulations affecting domestic and foreign operations, including tax obligations, and labor laws;

 

·

changes in the supply and cost of the raw materials we use in refurbishing or remanufacturing storage units;

 

·

competitive developments affecting our industry, including pricing pressures;

 

·

the timing, effectiveness and number of new markets we enter;

 

·

our ability to cross-sell our portable storage and specialty containment products;

 

·

our ability to integrate recent acquisitions;

 

·

our ability to achieve the expected benefits of the divestiture of the wood mobile offices;

 

·

our ability to implement our new scalable enterprise resource platform;

 

·

changes in generally accepted accounting principles;

 

·

changes in local zoning laws affecting either our ability to operate in certain areas or our customer’s ability to use our products;

 

·

any changes in business, political and economic conditions due to the threat of future terrorist activity in the U.S. and other parts of the world and related U.S. military action overseas; and

 

·

our ability to utilize our deferred tax assets.

36


 

We cannot guarantee that any forward-looking statement will be realized, although we believe we have been prudent in our plans and assumptions. Achievement of future results is subject to risks, uncertainties and inaccurate assumptions. Should known or unknown risks or uncertainties materialize, or should underlying assumptions prove inaccurate, actual results could vary materially from past results and those anticipated, estimated or projected. We undertake no obligation to publicly update forward-looking statements, whether as a result of new information, future events or otherwise.

In addition to the information set forth in this report, you should carefully consider the factors discussed in our Annual Report on Form 10-K for the year ended December 31, 2015 under the heading “Risk Factors”.

 

 

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Interest Rate Risk.  As of March 31, 2016, we had $672.9 million of indebtedness under our Credit Agreement, which bears interest at variable rates.  The average interest rate applicable to our Credit Agreement was 2.2% for the three months ended March 31, 2016.  Based upon the average amount of our variable rate debt outstanding during the three months ended March 31, 2016, our annual interest expense would increase by approximately $6.6 million for each one percentage point increase in the interest rate of our lines of credit.

Impact of Foreign Currency Rate Changes. We currently have operations outside the U.S., and we bill those customers primarily in their local currency, which is subject to foreign currency rate changes. Our operations in Canada are billed in the Canadian Dollar, and our operations in the U.K. are billed in Pound Sterling. We are exposed to foreign exchange rate fluctuations as the financial results of our non-U.S. operations are translated into U.S. dollars. The impact of foreign currency rate changes has historically been insignificant with our Canadian operations, but we have more exposure to volatility with our U.K. operations. In order to help minimize our exchange rate gain and loss volatility, we finance our European entities through our Credit Agreement, which allows us, at our option, to borrow funds locally in Pound Sterling or Euros denominated debt.

 

 

ITEM 4. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

As of the end of the period covered by this Quarterly Report on Form 10-Q, we carried out an evaluation, under the supervision and with the participation of our management, including our Chief Executive Officer and our Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended). Based on that evaluation, our Chief Executive Officer and our Chief Financial Officer concluded that, as of the end of the period covered by this Quarterly Report on Form 10-Q, the Company’s disclosure controls and procedures were effective such that the information relating to the Company required to be disclosed in our SEC reports (i) is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and (ii) is accumulated and communicated to the Company’s management, including our Chief Executive Officer and our Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.

Changes in Internal Controls

There were no changes in our internal control over financial reporting that have occurred during the fiscal quarter covered by this report that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

 

 

37


 

PART II. OTHER INFORMATION

ITEM 1A. RISK FACTORS

We refer you to documents filed by us with the SEC, specifically “Item 1A. Risk Factors” in our Annual Report on Form 10-K for the fiscal year ended December 31, 2015, which identify important risk factors that could materially affect our business, financial condition and future results. We also refer you to the factors and cautionary language set forth in the section entitled “Cautionary Statements Regarding Forward-looking Statements” in “Item 2. Management’s Discussion and Analysis of Financial Conditions and Results of Operations” of this Quarterly Report on Form 10-Q. This Quarterly Report on Form 10-Q, including the accompanying condensed consolidated financial statements and related notes, should be read in conjunction with such risks and other factors for a full understanding of our operations and financial condition. The risks described in our Form 10-K for the fiscal year ended December 31, 2015 and herein are not the only risks facing us. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition or operating results. The risk factors included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2015 have not materially changed.

 

 

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

The table below summarizes the information about purchases of our common stock during the quarterly period ended March 31, 2016:

 

Period

 

Total Number

of Shares

Purchased (1)

 

 

Average

Price Paid

per Share (2)

 

 

Total Number

of Shares

Purchased as

Part of

Publicly

Announced

Plans or

Programs (3)

 

 

Approximate

Dollar

Value of Shares

That May

Yet be

Purchased

Under the

Plans or

Programs (3)

 

January 2016

 

 

24,076

 

 

$

25.47

 

 

 

19,873

 

 

$

88,494

 

February 2016

 

 

248,646

 

 

 

25.52

 

 

 

245,607

 

 

 

82,229

 

March 2016

 

 

3,808

 

 

 

31.71

 

 

 

 

 

 

82,229

 

Total

 

 

276,530

 

 

 

 

 

 

 

265,480

 

 

 

 

 

 

(1)

There were 11,050 shares not purchased as part of a publicly announced plan or program. These shares were withheld from employees to satisfy minimum tax withholding obligations upon the vesting of restricted stock.

(2)

The weighted average price paid per share of common stock does not include the cost of commissions.

(3)

In November 2013, the Company’s Board of Directors (the “Board”) approved a share repurchase program authorizing up to $125.0 million of the Company’s outstanding shares of common stock to be repurchased.  In April 2015, the Board approved an increase of $50.0 million to the share repurchase program. The shares may be repurchased from time to time in the open market or in privately negotiated transactions.  The share repurchase program does not have an expiration date and may be suspended or terminated at any time by the Board.

 

 

38


 

ITEM 6. EXHIBITS

 

Number

 

Description

 

 

 

  10.1

 

Amended and Restated Executive Employment Agreement, effective as of January 14, 2016, between Mobile Mini, Inc. and Erik Olsson (Incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed with the SEC on January 14, 2016)

 

 

 

  10.2

 

Amendment No. 1 to the Mobile Mini, Inc. Amended and Restated Equity Incentive Plan (effective as of March 11, 2016) (Incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed with the SEC on March 14, 2016)

 

 

 

  23.2*

 

Consent of Independent Valuation Firm

 

 

 

  31.1*

 

Certification of Chief Executive Officer pursuant to Item 601(b)(31) of Regulation S-K

 

 

 

  31.2*

 

Certification of Chief Financial Officer pursuant to Item 601(b)(31) of Regulation S-K

 

 

 

  32.1**

 

Certification of Chief Executive Officer and Chief Financial Officer pursuant to item 601(b)(32) of Regulation S-K

 

 

 

101.INS*

 

XBRL Instance Document

 

 

 

101.SCH*

 

XBRL Taxonomy Extension Schema Document

 

 

 

101.CAL*

 

XBRL Taxonomy Extension Calculation Linkbase Document

 

 

 

101.DEF*

 

XBRL Taxonomy Extension Definition Linkbase Document

 

 

 

101.LAB*

 

XBRL Taxonomy Extension Label Linkbase Document

 

 

 

101.PRE*

 

XBRL Taxonomy Extension Presentation Linkbase Document

 

*

Filed herewith.

**

Furnished herewith.

 

 

39


 

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

 

 

 

MOBILE MINI, INC.

 

 

 

Date: April 28, 2016

 

/s/ Mark E. Funk

 

 

Mark E. Funk

 

 

Chief Financial Officer

 

 

40