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EX-31.1 - EX-31.1 - MOBILE MINI INCmini-ex311_6.htm

 

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

FORM 10-Q

 

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

For the quarterly period ended September 30, 2016

or

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      No  

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      No  

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

Accelerated filer

 

 

 

 

Non-accelerated filer

  (Do not check if a smaller reporting company)

Smaller reporting company

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

At October 14, 2016, there were outstanding 44,461,900 shares of the registrant’s common stock, par value $.01.

 

 

 

 

 


 

MOBILE MINI, INC.

INDEX TO FORM 10-Q FILING

FOR THE QUARTER ENDED SEPTEMBER 30, 2016

 

 

 

 

 

PAGE

 

 

 

 

 

PART I. FINANCIAL INFORMATION

 

 

 

 

 

 

 

Item 1. Financial Statements

 

3

 

 

 

 

 

 

 

Condensed Consolidated Balance Sheets September 30, 2016 (unaudited) and December 31, 2015

 

3

 

 

 

 

 

 

 

Condensed Consolidated Statements of Operations (unaudited) for the Three Months and Nine Months Ended September 30, 2016 and September 30, 2015

 

4

 

 

 

 

 

 

 

Condensed Consolidated Statements of Comprehensive Income (Loss) (unaudited) for the Three Months and Nine Months Ended September 30, 2016 and September 30, 2015

 

5

 

 

 

 

 

 

 

Condensed Consolidated Statements of Cash Flows (unaudited)  for the Nine Months Ended September 30, 2016
and September 30, 2015

 

6

 

 

 

 

 

 

 

Notes to Condensed Consolidated Financial Statements (unaudited)

 

8

 

 

 

 

 

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

 

31

 

 

 

 

 

Item 3. Quantitative and Qualitative Disclosures About Market Risk

 

48

 

 

 

 

 

Item 4. Controls and Procedures

 

48

 

 

 

 

 

PART II. OTHER INFORMATION

 

 

 

 

 

 

 

Item 1A. Risk Factors

 

49

 

 

 

 

 

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

 

50

 

 

 

 

 

Item 6. Exhibits

 

51

 

2


 

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

MOBILE MINI, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except par value data)

 

 

 

September 30,

2016

 

 

December 31,

2015

 

 

 

(unaudited)

 

 

(audited)

 

ASSETS

 

Cash and cash equivalents

 

$

9,522

 

 

$

1,613

 

Receivables, net of allowance for doubtful accounts of $4,116 and $2,162

   at September 30, 2016 and December 31, 2015, respectively

 

 

93,129

 

 

 

80,191

 

Inventories

 

 

18,162

 

 

 

15,596

 

Rental fleet, net

 

 

951,646

 

 

 

951,323

 

Property, plant and equipment, net

 

 

152,647

 

 

 

131,687

 

Other assets

 

 

18,396

 

 

 

16,766

 

Intangibles, net

 

 

69,260

 

 

 

73,212

 

Goodwill

 

 

703,765

 

 

 

706,387

 

Total assets

 

$

2,016,527

 

 

$

1,976,775

 

 

 

 

 

 

 

 

 

 

LIABILITIES AND STOCKHOLDERS' EQUITY

 

Liabilities:

 

 

 

 

 

 

 

 

Accounts payable

 

$

32,143

 

 

$

29,086

 

Accrued liabilities

 

 

62,385

 

 

 

59,024

 

Lines of credit

 

 

651,537

 

 

 

667,708

 

Obligations under capital leases

 

 

52,531

 

 

 

38,274

 

Senior notes, net of deferred financing costs of $4,842 and $2,447

   at September 30, 2016 and December 31, 2015, respectively

 

 

245,158

 

 

 

197,553

 

Deferred income taxes

 

 

232,634

 

 

 

219,601

 

Total liabilities

 

 

1,276,388

 

 

 

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, 49,293 issued and 44,464

   outstanding at September 30, 2016 and 49,145 issued and 44,594 outstanding at

   December 31, 2015

 

 

493

 

 

 

491

 

Additional paid-in capital

 

 

591,323

 

 

 

584,447

 

Retained earnings

 

 

352,549

 

 

 

352,262

 

Accumulated other comprehensive loss

 

 

(69,582

)

 

 

(44,162

)

Treasury stock, at cost, 4,829 and 4,551 shares at September 30, 2016 and

   December 31, 2015, respectively

 

 

(134,644

)

 

 

(127,509

)

Total stockholders' equity

 

 

740,139

 

 

 

765,529

 

Total liabilities and stockholders' equity

 

$

2,016,527

 

 

$

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

September 30,

 

 

Nine Months Ended

September 30,

 

 

 

2016

 

 

2015

 

 

2016

 

 

2015

 

Revenues:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Rental

 

$

121,784

 

 

$

124,813

 

 

$

355,913

 

 

$

368,175

 

Sales

 

 

6,610

 

 

 

6,594

 

 

 

19,843

 

 

 

22,765

 

Other

 

 

459

 

 

 

1,936

 

 

 

2,479

 

 

 

5,320

 

Total revenues

 

 

128,853

 

 

 

133,343

 

 

 

378,235

 

 

 

396,260

 

Costs and expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Rental, selling and general expenses

 

 

80,457

 

 

 

81,659

 

 

 

234,796

 

 

 

247,809

 

Cost of sales

 

 

3,897

 

 

 

4,366

 

 

 

12,186

 

 

 

14,899

 

Restructuring expenses

 

 

1,648

 

 

 

1,846

 

 

 

5,220

 

 

 

4,773

 

Asset impairment charge and loss on divestiture, net

 

 

 

 

 

 

 

 

 

 

 

66,128

 

Depreciation and amortization

 

 

16,184

 

 

 

14,998

 

 

 

47,630

 

 

 

45,075

 

Total costs and expenses

 

 

102,186

 

 

 

102,869

 

 

 

299,832

 

 

 

378,684

 

Income from operations

 

 

26,667

 

 

 

30,474

 

 

 

78,403

 

 

 

17,576

 

Other expense:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest income

 

 

 

 

 

1

 

 

 

 

 

 

1

 

Interest expense

 

 

(8,047

)

 

 

(8,960

)

 

 

(24,533

)

 

 

(26,986

)

Debt extinguishment expense

 

 

 

 

 

 

 

 

(9,192

)

 

 

 

Deferred financing costs write-off

 

 

 

 

 

 

 

 

(2,271

)

 

 

 

Foreign currency exchange

 

 

(5

)

 

 

 

 

 

(9

)

 

 

(2

)

Income (loss) before income tax provision (benefit)

 

 

18,615

 

 

 

21,515

 

 

 

42,398

 

 

 

(9,411

)

Income tax provision (benefit)

 

 

5,906

 

 

 

7,536

 

 

 

14,619

 

 

 

(5,480

)

Net income (loss)

 

$

12,709

 

 

$

13,979

 

 

$

27,779

 

 

$

(3,931

)

Earnings (loss) per share:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

$

0.29

 

 

$

0.31

 

 

$

0.63

 

 

$

(0.09

)

Diluted

 

 

0.29

 

 

 

0.31

 

 

 

0.63

 

 

 

(0.09

)

Weighted average number of common and common share

   equivalents outstanding:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 

44,159

 

 

 

44,721

 

 

 

44,170

 

 

 

45,145

 

Diluted

 

 

44,453

 

 

 

45,147

 

 

 

44,431

 

 

 

45,145

 

Cash dividends declared per share

 

$

0.21

 

 

$

0.19

 

 

$

0.62

 

 

$

0.56

 

 

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

September 30,

 

 

Nine Months Ended

September 30,

 

 

 

2016

 

 

2015

 

 

2016

 

 

2015

 

Net income (loss)

 

$

12,709

 

 

$

13,979

 

 

$

27,779

 

 

$

(3,931

)

Foreign currency translation adjustment

 

 

(6,435

)

 

 

(9,171

)

 

 

(25,420

)

 

 

(8,432

)

Comprehensive income (loss)

 

$

6,274

 

 

$

4,808

 

 

$

2,359

 

 

$

(12,363

)

 

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

 

 

5


 

MOBILE MINI, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)

 

 

 

Nine Months Ended

September 30,

 

 

 

2016

 

 

2015

 

Cash flows from operating activities:

 

 

 

 

 

 

 

 

Net income (loss)

 

$

27,779

 

 

$

(3,931

)

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

   by operating activities:

 

 

 

 

 

 

 

 

Debt extinguishment expense

 

 

9,192

 

 

 

 

Deferred financing costs write-off

 

 

2,271

 

 

 

 

Asset impairment charge and loss on divestiture, net

 

 

 

 

 

66,128

 

Provision for doubtful accounts

 

 

4,290

 

 

 

2,826

 

Amortization of deferred financing costs

 

 

1,457

 

 

 

2,384

 

Amortization of long-term liabilities

 

 

87

 

 

 

76

 

Share-based compensation expense

 

 

6,521

 

 

 

10,833

 

Depreciation and amortization

 

 

47,630

 

 

 

45,075

 

Gain on sale of rental fleet

 

 

(4,228

)

 

 

(5,196

)

Loss on disposal of property, plant and equipment

 

 

1,089

 

 

 

2,035

 

Deferred income taxes

 

 

14,448

 

 

 

(6,086

)

Foreign currency transaction loss

 

 

9

 

 

 

2

 

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

 

 

 

 

 

 

 

 

Receivables

 

 

(19,099

)

 

 

(6,478

)

Inventories

 

 

(2,680

)

 

 

(875

)

Other assets

 

 

562

 

 

 

(5,415

)

Accounts payable

 

 

3,952

 

 

 

6,621

 

Accrued liabilities

 

 

2,741

 

 

 

5,722

 

Net cash provided by operating activities

 

 

96,021

 

 

 

113,721

 

Cash flows from investing activities:

 

 

 

 

 

 

 

 

Proceeds from wood mobile office divestiture, net

 

 

 

 

 

83,299

 

Cash paid for businesses acquired, net of cash acquired

 

 

(9,206

)

 

 

(18,622

)

Additions to rental fleet, excluding acquisitions

 

 

(46,480

)

 

 

(53,540

)

Proceeds from sale of rental fleet

 

 

10,770

 

 

 

13,300

 

Additions to property, plant and equipment, excluding acquisitions

 

 

(25,750

)

 

 

(17,918

)

Proceeds from sale of property, plant and equipment

 

 

2,369

 

 

 

2,447

 

Net cash (used in) provided by investing activities

 

 

(68,297

)

 

 

8,966

 

Cash flows from financing activities:

 

 

 

 

 

 

 

 

Net repayments under lines of credit

 

 

(16,171

)

 

 

(42,138

)

Proceeds from issuance of 5.875% senior notes due 2024

 

 

250,000

 

 

 

 

Redemption of 7.875% senior notes due 2020

 

 

(200,000

)

 

 

 

Debt extinguishment expense

 

 

(9,192

)

 

 

 

Deferred financing costs

 

 

(5,352

)

 

 

(113

)

Principal payments on capital lease obligations

 

 

(4,693

)

 

 

(2,883

)

Issuance of common stock

 

 

356

 

 

 

1,670

 

Dividend payments

 

 

(27,327

)

 

 

(25,308

)

Purchase of treasury stock

 

 

(7,135

)

 

 

(55,819

)

Net cash used in financing activities

 

 

(19,514

)

 

 

(124,591

)

Effect of exchange rate changes on cash

 

 

(301

)

 

 

(122

)

Net increase (decrease) in cash

 

 

7,909

 

 

 

(2,026

)

Cash and cash equivalents at beginning of period

 

 

1,613

 

 

 

3,739

 

Cash and cash equivalents at end of period

 

$

9,522

 

 

$

1,713

 

 

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

6


 

MOBILE MINI, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS - Continued

(In thousands)

(Unaudited)

 

 

 

Nine Months Ended

September 30,

 

 

 

2016

 

 

2015

 

Supplemental disclosure of cash flow information:

 

 

 

 

 

 

 

 

Cash paid for interest

 

$

17,880

 

 

$

20,422

 

Cash paid for income and franchise taxes

 

 

1,380

 

 

 

3,274

 

Equipment and other acquired through capital lease obligations

 

 

18,951

 

 

 

17,638

 

Capital expenditures accrued or payable

 

 

5,053

 

 

 

11,410

 

 

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

 

 

 

7


 

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 September 30, 2016, we had a fleet of portable storage and ground level office units operating throughout the United States (the “U.S.”), Canada and the United Kingdom (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 containment products are leased primarily to chemical, refinery, oil and natural gas drilling, mining and environmental service customers.

On May 15, 2015, we completed the divestiture of our wood mobile office fleet within our North American portable storage segment for a cash price of $92.0 million, less associated assumed liabilities of approximately $6.8 million.  Activity directly associated with this business is included in the nine months ended September 30, 2015, and is not included in the corresponding period of the current year. 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 and nine months ended September 30, 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 audited consolidated financial statements and accompanying notes thereto 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”) 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.

 

 

(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. Early adoption is permitted.  We expect to implement this standard in the first quarter of 2017 and 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.  Early adoption is permitted. We are currently evaluating the impact the standard will have on our consolidated financial statements.

8


MOBILE MINI, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited) - Continued

 

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-year period. As a result, unamortized debt issuance costs of $4.8 million and $2.4 million as of September 30, 2016 and December 31, 2015, respectively, have been deducted from the carrying amount of our Senior Notes (as defined below) 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 September 30, 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 September 30, 2016 and December 31, 2015 approximated their respective book values.

During the current-year period, we redeemed all $200.0 million aggregate principal amount of our outstanding 7.875% senior notes due December 1, 2020 (“2020 Notes”), and issued $250.0 million aggregate principal amount of 5.875% senior notes due July 1, 2024 (“2024 Notes”).  See more information in Note 11 “Senior Notes and Lines of Credit”. The fair value of our 2020 Notes and  2024 Notes (together, the “Senior Notes”) for the periods presented below 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 Senior Notes.

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:

 

 

 

September 30,

2016

 

 

December 31,

2015

 

 

 

(In thousands)

 

Carrying value

 

$

250,000

 

 

$

200,000

 

Fair value

 

 

261,250

 

 

 

207,000

 

 

 

9


MOBILE MINI, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited) - Continued

 

(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

September 30,

 

 

Nine Months Ended

September 30,

 

 

 

2016

 

 

2015

 

 

2016

 

 

2015

 

 

 

(In thousands, except per share data)

 

Numerator:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income (loss)

 

$

12,709

 

 

$

13,979

 

 

$

27,779

 

 

$

(3,931

)

Denominator:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average shares outstanding - basic

 

 

44,159

 

 

 

44,721

 

 

 

44,170

 

 

 

45,145

 

Dilutive effect of share-based awards

 

 

294

 

 

 

426

 

 

 

261

 

 

 

 

Weighted average shares outstanding - diluted

 

 

44,453

 

 

 

45,147

 

 

 

44,431

 

 

 

45,145

 

Earnings (loss) per share:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

$

0.29

 

 

$

0.31

 

 

$

0.63

 

 

$

(0.09

)

Diluted

 

 

0.29

 

 

 

0.31

 

 

 

0.63

 

 

 

(0.09

)

 

 

Basic weighted average number of common shares outstanding does not include restricted stock awards of 0.3 million shares as of September 30, 2016 and 2015.

There were approximately 0.6 million of common stock equivalents that would have been included in the diluted EPS denominator for the nine-month period ended September 30, 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

September 30,

 

 

Nine Months Ended

September 30,

 

 

 

2016

 

 

2015

 

 

2016

 

 

2015

 

 

 

(In thousands)

 

Stock options

 

 

1,569

 

 

 

1,146

 

 

 

2,088

 

 

 

1,143

 

Restricted share awards

 

 

5

 

 

 

4

 

 

 

4

 

 

 

1

 

Total

 

 

1,574

 

 

 

1,150

 

 

 

2,092

 

 

 

1,144

 

 

 

 

(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 office fleet 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 office fleet 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.

10


MOBILE MINI, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited) - Continued

 

On April 16, 2015, we entered into a definitive agreement to sell our wood mobile office fleet 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 on sale of $1.5 million on that date.

For the nine months ended September 30, 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

 

 

155,429

 

Ancillary items in property, plant and equipment

 

 

1,201

 

Impairment loss

 

$

(64,630

)

Sale price

 

$

92,000

 

Book value of divested assets after impairment

 

 

92,000

 

Selling expenses

 

 

1,498

 

Net loss on sale of wood mobile office fleet

 

$

(1,498

)

 

 

(6) Acquisitions

During the nine months ended September 30, 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 it was immaterial to our financial position or results of operations in the aggregate.

The components of the purchase price and net assets acquired during the nine months ended September 30, 2016 are as follows (in thousands):

 

Net Assets Acquired:

 

 

 

 

Rental fleet

 

$

4,233

 

Property, plant and equipment

 

 

190

 

Intangible assets:

 

 

 

 

Customer relationships

 

 

808

 

Non-compete agreements

 

 

50

 

Goodwill

 

 

3,682

 

Other assets

 

 

402

 

Liabilities

 

 

(159

)

Total purchase price

 

$

9,206

 

 

 

11


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, 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 September 30, 2016 and December 31, 2015 consisted of the following:

 

 

 

September 30,

2016

 

 

December 31,

2015

 

 

 

(In thousands)

 

Raw materials and supplies

 

$

15,112

 

 

$

13,436

 

Work-in-process

 

 

31

 

 

 

189

 

Finished portable storage units

 

 

3,019

 

 

 

1,971

 

Inventories

 

$

18,162

 

 

$

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 office fleet during 2015.

Third-party appraisals on our rental fleet are required by our lenders on a regular basis. The appraisals typically report no difference in the value of the unit due to the age or length of time it has been in our fleet.  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 “Senior Notes and Lines of Credit”. Based in part upon our lender’s third-party appraiser who evaluated our fleet as of September 30, 2015, management estimates that the net orderly liquidation appraisal value as of September 30, 2016 was approximately $1.1 billion.  

Depreciation expense related to our rental fleet for the nine months ended September 30, 2016 and 2015 was $24.3 million and $25.8 million, respectively. At September 30, 2016, all rental fleet units were pledged as collateral under the Credit Agreement.

12


MOBILE MINI, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited) - Continued

 

Rental fleet consisted of the following at September 30, 2016 and December 31, 2015:

 

 

 

Residual Value

as Percentage of

Original Cost (1)

 

 

Useful Life

in Years

 

September 30,

2016

 

 

December 31,

2015

 

 

 

 

 

 

 

 

 

(In thousands)

 

Portable Storage:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Steel storage containers

 

 

55%

 

 

30

 

$

619,155

 

 

$

612,782

 

Steel ground level offices

 

 

55%

 

 

30

 

 

347,794

 

 

 

346,233

 

Other

 

 

 

 

 

 

 

 

5,329

 

 

 

7,052

 

Total

 

 

 

 

 

 

 

 

972,278

 

 

 

966,067

 

Accumulated depreciation

 

 

 

 

 

 

 

 

(148,324

)

 

 

(142,338

)

Total portable storage fleet, net

 

 

 

 

 

 

 

$

823,954

 

 

$

823,729

 

Specialty Containment:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Steel tanks

 

 

 

 

 

25

 

$

61,971

 

 

$

55,467

 

Roll-off boxes

 

 

 

 

 

15 - 20

 

 

28,986

 

 

 

25,161

 

Stainless steel tank trailers

 

 

 

 

 

25

 

 

28,892

 

 

 

28,160

 

Vacuum boxes

 

 

 

 

 

20

 

 

11,519

 

 

 

9,852

 

De-watering boxes

 

 

 

 

 

20

 

 

5,436

 

 

 

5,383

 

Pumps and filtration equipment

 

 

 

 

 

7

 

 

13,072

 

 

 

13,964

 

Other

 

 

 

 

 

 

 

 

6,779

 

 

 

6,843

 

Total

 

 

 

 

 

 

 

 

156,655

 

 

 

144,830

 

Accumulated depreciation

 

 

 

 

 

 

 

 

(28,963

)

 

 

(17,236

)

Total specialty containment fleet, net

 

 

 

 

 

 

 

$

127,692

 

 

$

127,594

 

Total rental fleet, net

 

 

 

 

 

 

 

$

951,646

 

 

$

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 the nine months ended September 30, 2016 and 2015 was $18.6 million and $14.8 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 the divestiture of our wood mobile office fleet during 2015.

Property, plant and equipment at September 30, 2016 and December 31, 2015 consisted of the following:

 

 

 

Residual Value

as Percentage of

Original Cost

 

 

Useful Life

in Years

 

September 30,

2016

 

 

December 31,

2015

 

 

 

 

 

 

 

 

 

(In thousands)

 

Land

 

 

 

 

 

 

 

$

3,854

 

 

$

4,045

 

Vehicles and machinery

 

0 - 55%

 

 

5 - 30

 

 

134,322

 

 

 

118,185

 

Buildings and improvements (1)

 

     0 - 25

 

 

3 - 30

 

 

22,673

 

 

 

21,549

 

Office fixtures and equipment

 

 

 

 

3 - 10

 

 

61,001

 

 

 

47,063

 

Property, plant and equipment

 

 

 

 

 

 

 

 

221,850

 

 

 

190,842

 

Accumulated depreciation

 

 

 

 

 

 

 

 

(69,203

)

 

 

(59,155

)

Property, plant and equipment, net

 

 

 

 

 

 

 

$

152,647

 

 

$

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.

13


MOBILE MINI, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited) - Continued

 

As of September 30, 2016 and December 31, 2015, we had $32.6 million and $23.5 million, respectively, of capitalized software, net of accumulated depreciation, included in property, plant and equipment.  Of the $32.6 million of capitalized software at September 30, 2016, $30.6 million related to the development of our new enterprise resource planning (“ERP”) 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 $703.8 million total goodwill at September 30, 2016, $468.6 million related to the North America portable storage segment, $53.9 million related to the U.K. portable storage segment and $181.2 million related to the specialty containment segment.

The following table shows the activity and balances related to goodwill from January 1, 2016 to September 30, 2016 (in thousands): 

 

Balance at January 1, 2016

 

$

706,387

 

Acquisition

 

 

3,682

 

Foreign currency

 

 

(7,376

)

Adjustments

 

 

1,072

 

Balance at September 30, 2016

 

$

703,765

 

 

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:

 

 

 

 

 

September 30, 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)