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EX-32.1 - EX-32.1 - MOBILE MINI INCmini-ex321_7.htm
EX-31.2 - EX-31.2 - MOBILE MINI INCmini-ex312_6.htm
EX-31.1 - EX-31.1 - MOBILE MINI INCmini-ex311_8.htm
EX-10.2 - EX-10.2 - MOBILE MINI INCmini-ex102_176.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 June 30, 2017

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, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth 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

 

 

 

 

 

 

Emerging growth company

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.     

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

At July 14, 2017, there were outstanding 44,188,712 shares of the registrant’s common stock, par value $.01.

 

 

 


 

MOBILE MINI, INC.

INDEX TO FORM 10-Q FILING

FOR THE QUARTER ENDED JUNE 30, 2017

 

 

 

 

 

PAGE

 

 

 

 

 

PART I. FINANCIAL INFORMATION

 

 

 

 

 

 

 

Item 1. Financial Statements

 

3

 

 

 

 

 

 

 

Condensed Consolidated Balance Sheets June 30, 2017 (unaudited) and December 31, 2016

 

3

 

 

 

 

 

 

 

Condensed Consolidated Statements of Income (unaudited) for the Three Months and Six Months Ended June 30, 2017 and June 30, 2016

 

4

 

 

 

 

 

 

 

Condensed Consolidated Statements of Comprehensive Income (Loss) (unaudited) for the Three Months and Six Months Ended June 30, 2017 and June 30, 2016

 

5

 

 

 

 

 

 

 

Condensed Consolidated Statements of Cash Flows (unaudited) for the Six Months Ended June 30, 2017 and June 30, 2016

 

6

 

 

 

 

 

 

 

Notes to Condensed Consolidated Financial Statements (unaudited)

 

8

 

 

 

 

 

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

 

30

 

 

 

 

 

Item 3. Quantitative and Qualitative Disclosures About Market Risk

 

44

 

 

 

 

 

Item 4. Controls and Procedures

 

44

 

 

 

 

 

PART II. OTHER INFORMATION

 

 

 

 

 

 

 

Item 1A. Risk Factors

 

45

 

 

 

 

 

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

 

46

 

 

 

 

 

Item 6. Exhibits

 

47

 

 

 

 

2


 

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

MOBILE MINI, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except par value data)

 

 

 

June 30,

2017

 

 

December 31,

2016

 

 

 

(unaudited)

 

 

(audited)

 

ASSETS

 

Cash and cash equivalents

 

$

9,274

 

 

$

4,137

 

Receivables, net of allowance for doubtful accounts of $5,809 and $4,886

   at June 30, 2017 and December 31, 2016, respectively

 

 

92,390

 

 

 

99,175

 

Inventories

 

 

16,399

 

 

 

15,412

 

Rental fleet, net

 

 

964,141

 

 

 

950,065

 

Property, plant and equipment, net

 

 

150,636

 

 

 

149,197

 

Other assets

 

 

17,128

 

 

 

14,930

 

Intangibles, net

 

 

65,204

 

 

 

68,420

 

Goodwill

 

 

706,602

 

 

 

703,558

 

Total assets

 

$

2,021,774

 

 

$

2,004,894

 

 

 

 

 

 

 

 

 

 

LIABILITIES AND STOCKHOLDERS' EQUITY

 

Liabilities:

 

 

 

 

 

 

 

 

Accounts payable

 

$

30,708

 

 

$

27,388

 

Accrued liabilities

 

 

64,956

 

 

 

64,126

 

Lines of credit

 

 

637,651

 

 

 

641,160

 

Obligations under capital leases

 

 

49,302

 

 

 

50,704

 

Senior notes, net of deferred financing costs of $4,469 and $4,788

   at June 30, 2017 and December 31, 2016, respectively

 

 

245,531

 

 

 

245,212

 

Deferred income taxes

 

 

231,579

 

 

 

240,690

 

Total liabilities

 

 

1,259,727

 

 

 

1,269,280

 

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, 49,455 issued and 44,189

   outstanding at June 30, 2017 and 49,292 issued and 44,295 outstanding at

   December 31, 2016

 

 

495

 

 

 

493

 

Additional paid-in capital

 

 

597,658

 

 

 

592,071

 

Retained earnings

 

 

380,125

 

 

 

362,896

 

Accumulated other comprehensive loss

 

 

(69,448

)

 

 

(81,047

)

Treasury stock, at cost, 5,266 and 4,997 shares at June 30, 2017 and

   December 31, 2016, respectively

 

 

(146,783

)

 

 

(138,799

)

Total stockholders' equity

 

 

762,047

 

 

 

735,614

 

Total liabilities and stockholders' equity

 

$

2,021,774

 

 

$

2,004,894

 

 

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

 

 

3


 

MOBILE MINI, INC.

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(In thousands, except per share data)

(Unaudited)

 

 

 

Three Months Ended

June 30,

 

 

Six Months Ended

June 30,

 

 

 

2017

 

 

2016

 

 

2017

 

 

2016

 

Revenues:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Rental

 

$

117,851

 

 

$

116,773

 

 

$

232,593

 

 

$

234,129

 

Sales

 

 

8,401

 

 

 

6,342

 

 

 

16,379

 

 

 

13,233

 

Other

 

 

438

 

 

 

1,734

 

 

 

1,245

 

 

 

2,020

 

Total revenues

 

 

126,690

 

 

 

124,849

 

 

 

250,217

 

 

 

249,382

 

Costs and expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Rental, selling and general expenses

 

 

82,850

 

 

 

78,037

 

 

 

161,209

 

 

 

154,339

 

Cost of sales

 

 

5,408

 

 

 

3,678

 

 

 

10,520

 

 

 

8,289

 

Restructuring expenses

 

 

538

 

 

 

1,324

 

 

 

1,437

 

 

 

3,572

 

Depreciation and amortization

 

 

15,742

 

 

 

16,269

 

 

 

31,006

 

 

 

31,446

 

Total costs and expenses

 

 

104,538

 

 

 

99,308

 

 

 

204,172

 

 

 

197,646

 

Income from operations

 

 

22,152

 

 

 

25,541

 

 

 

46,045

 

 

 

51,736

 

Other income (expense):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest income

 

 

16

 

 

 

 

 

 

16

 

 

 

 

Interest expense

 

 

(8,807

)

 

 

(8,002

)

 

 

(17,209

)

 

 

(16,486

)

Debt extinguishment expense

 

 

 

 

 

(9,192

)

 

 

 

 

 

(9,192

)

Deferred financing costs write-off

 

 

 

 

 

(2,271

)

 

 

 

 

 

(2,271

)

Foreign currency exchange

 

 

(18

)

 

 

(4

)

 

 

(27

)

 

 

(4

)

Income before income tax provision

 

 

13,343

 

 

 

6,072

 

 

 

28,825

 

 

 

23,783

 

Income tax provision

 

 

4,566

 

 

 

2,000

 

 

 

9,896

 

 

 

8,713

 

Net income

 

$

8,777

 

 

$

4,072

 

 

$

18,929

 

 

$

15,070

 

Earnings per share:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

$

0.20

 

 

$

0.09

 

 

$

0.43

 

 

$

0.34

 

Diluted

 

 

0.20

 

 

 

0.09

 

 

 

0.43

 

 

 

0.34

 

Weighted average number of common and common share

   equivalents outstanding:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 

43,944

 

 

 

44,132

 

 

 

44,026

 

 

 

44,175

 

Diluted

 

 

44,025

 

 

 

44,505

 

 

 

44,183

 

 

 

44,420

 

Cash dividends declared per share

 

$

0.23

 

 

$

0.21

 

 

$

0.45

 

 

$

0.41

 

 

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

June 30,

 

 

Six Months Ended

June 30,

 

 

 

2017

 

 

2016

 

 

2017

 

 

2016

 

Net income

 

$

8,777

 

 

$

4,072

 

 

$

18,929

 

 

$

15,070

 

Foreign currency translation adjustment

 

 

9,096

 

 

 

(15,272

)

 

 

11,599

 

 

 

(18,985

)

Comprehensive income (loss)

 

$

17,873

 

 

$

(11,200

)

 

$

30,528

 

 

$

(3,915

)

 

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

 

 

5


 

MOBILE MINI, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)

 

 

 

Six Months Ended

June 30,

 

 

 

2017

 

 

2016

 

Cash flows from operating activities:

 

 

 

 

 

 

 

 

Net income

 

$

18,929

 

 

$

15,070

 

Adjustments to reconcile net income to net cash provided

   by operating activities:

 

 

 

 

 

 

 

 

Debt extinguishment expense

 

 

 

 

 

9,192

 

Deferred financing costs write-off

 

 

 

 

 

2,271

 

Provision for doubtful accounts

 

 

2,202

 

 

 

2,646

 

Amortization of deferred financing costs

 

 

1,030

 

 

 

948

 

Amortization of long-term liabilities

 

 

65

 

 

 

58

 

Share-based compensation expense

 

 

3,820

 

 

 

4,245

 

Depreciation and amortization

 

 

31,006

 

 

 

31,446

 

Gain on sale of rental fleet

 

 

(2,826

)

 

 

(2,782

)

Loss on disposal of property, plant and equipment

 

 

282

 

 

 

689

 

Deferred income taxes

 

 

9,151

 

 

 

8,542

 

Foreign currency exchange

 

 

27

 

 

 

4

 

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

 

 

 

 

 

 

 

 

Receivables

 

 

5,585

 

 

 

(12,296

)

Inventories

 

 

(904

)

 

 

(1,790

)

Other assets

 

 

(2,794

)

 

 

482

 

Accounts payable

 

 

(2,192

)

 

 

5,765

 

Accrued liabilities

 

 

(160

)

 

 

220

 

Net cash provided by operating activities

 

 

63,221

 

 

 

64,710

 

Cash flows from investing activities:

 

 

 

 

 

 

 

 

Cash paid for businesses acquired, net of cash acquired

 

 

 

 

 

(9,206

)

Additions to rental fleet, excluding acquisitions

 

 

(23,027

)

 

 

(28,158

)

Proceeds from sale of rental fleet

 

 

6,283

 

 

 

7,409

 

Additions to property, plant and equipment, excluding acquisitions

 

 

(8,707

)

 

 

(19,263

)

Proceeds from sale of property, plant and equipment

 

 

768

 

 

 

1,615

 

Net cash used in investing activities

 

 

(24,683

)

 

 

(47,603

)

Cash flows from financing activities:

 

 

 

 

 

 

 

 

Net repayments under lines of credit

 

 

(3,509

)

 

 

(20,961

)

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

 

 

(12

)

 

 

(4,916

)

Principal payments on capital lease obligations

 

 

(3,736

)

 

 

(2,920

)

Issuance of common stock

 

 

1,640

 

 

 

92

 

Dividend payments

 

 

(20,119

)

 

 

(18,236

)

Purchase of treasury stock

 

 

(7,984

)

 

 

(7,096

)

Net cash used in financing activities

 

 

(33,720

)

 

 

(13,229

)

Effect of exchange rate changes on cash

 

 

319

 

 

 

(152

)

Net increase in cash

 

 

5,137

 

 

 

3,726

 

Cash and cash equivalents at beginning of period

 

 

4,137

 

 

 

1,613

 

Cash and cash equivalents at end of period

 

$

9,274

 

 

$

5,339

 

 

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

6


 

MOBILE MINI, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS - Continued

(In thousands)

(Unaudited)

 

 

 

Six Months Ended

June 30,

 

 

 

2017

 

 

2016

 

Supplemental disclosure of cash flow information:

 

 

 

 

 

 

 

 

Cash paid for interest

 

$

18,187

 

 

$

13,991

 

Cash paid for income and franchise taxes

 

 

1,100

 

 

 

1,151

 

Equipment and other acquired through capital lease obligations

 

 

2,333

 

 

 

14,258

 

Capital expenditures accrued or payable

 

 

8,268

 

 

 

5,507

 

 

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 storage solutions and tank and pump solutions. In these notes, the terms “Mobile Mini” the “Company,” “we,” “us,” and “our” refer to Mobile Mini, Inc.

At June 30, 2017, we had a fleet of storage solutions 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 tank and pump solutions products, concentrated in the U.S. Gulf Coast, including liquid and solid containment units, serving a specialty sector in the industry.  Our tank and pump products are leased primarily to chemical, refinery, oil and natural gas drilling, mining and environmental service customers.

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 six months ended June 30, 2017 and 2016, respectively 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, 2016 filed with the Securities and Exchange Commission (“SEC”) on February 2, 2017.

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 – Modifications. In May 2017, the Financial Accounting Standards Board (“FASB”) issued a standard which clarifies what constitutes a modification of a share-based payment award.  This standard is effective for annual and interim periods beginning after December 15, 2017.  We will implement this standard on January 1, 2018 and apply the guidance prospectively to modifications after that date.

Business Combinations.  In January 2017, the FASB issued a standard which clarifies the definition of a business and provides a new framework for determining whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses.  This standard is effective for annual and interim periods beginning after December 15, 2017.  We anticipate implementing this standard on January 1, 2018 and applying the guidance prospectively to transactions after that date.

Intangibles – Goodwill and Other.  In January 2017, the FASB issued a standard requiring an entity to no longer perform a hypothetical purchase price allocation to measure goodwill impairment.  Instead, impairment will be measured using the difference between the carrying amount and the fair value of the reporting unit.  This standard is effective for annual and interim periods beginning after December 15, 2019.  Entities may early adopt the guidance for goodwill impairment tests with measurement dates after January 1, 2017.  We have not determined an adoption date and do not expect the adoption of this standard to have a material effect on our consolidated financial statements.

8


 MOBILE MINI, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited) - Continued

 

Share-Based Compensation. In March 2016, the 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. We implemented this standard on January 1, 2017.

This standard eliminates the requirement that excess tax benefits be realized before companies can recognize them. As a result, utilizing the modified retrospective method, we recorded a cumulative-effect adjustment for previously unrecognized excess tax benefits of $18.5 million in the opening balance sheet for 2017, with an offsetting increase to retained earnings. In addition, the standard allows us to make a policy election to either continue to reduce share-based compensation expense for forfeitures in future periods, or to recognize forfeitures as they occur. We have chosen to record forfeitures as they occur and recorded an immaterial cumulative-effect adjustment to the opening balance sheet to reflect the difference between the fair value estimate of awards historically expected to be forfeited and the fair value estimate of awards actually forfeited. This standard also requires all excess tax benefits and tax deficiencies associated with the exercise of stock options and vesting of restricted stock to be recorded as income tax expense or benefit. Increases and decreases in the aggregate intrinsic value (or negative value) of such activity could introduce volatility in our effective tax rate. The remaining provisions of the new guidance did not have a material effect on our consolidated financial statements.

Leases.  In February 2016, the 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 and the standard requires the use of a modified retrospective transition method. While we are continuing to evaluate all potential impacts of the standard, we do not believe the accounting for our contractual rental revenue will be materially affected by the adoption of this standard.  We anticipate the lessee accounting for operating leases under the standard will have a material effect on our statement of financial position.

Revenue from Contracts with Customers.  In May 2014, the 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 and 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.

While we are continuing to assess all potential impacts of the standard, we currently believe the majority of our revenue, as it relates to contractual rental revenue, is excluded from the scope of this standard, and the accounting for the remaining revenue streams will not be materially affected. Accordingly, we do not anticipate that the adoption of this standard will have a material impact on our consolidated financial statements. We expect to utilize the modified retrospective adoption and recognize the cumulative effect of initially applying the standard, if any, as an adjustment to the opening balance of retained earnings at the date of initial application.

 

 

(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 June 30, 2017 and December 31, 2016, 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 June 30, 2017 and December 31, 2016 approximated their respective book values.

9


 MOBILE MINI, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited) - Continued

 

The fair value of our $250.0 million aggregate principal amount of 5.875% senior notes due July 1, 2024 (the “Senior Notes” or “2024 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 Senior Notes.  The Senior Notes are presented on the balance sheet net of deferred financing costs. The gross carrying value and the fair value of our Senior Notes are as follows:

 

 

 

June 30,

2017

 

 

December 31,

2016

 

 

 

(In thousands)

 

Carrying value

 

$

250,000

 

 

$

250,000

 

Fair value

 

 

261,250

 

 

 

258,750

 

 

 

(4) Earnings Per Share

Basic earnings per share (“EPS”) is calculated by dividing net income by the weighted average number of common shares outstanding during the period.  Restricted stock awards are subject to the risk of forfeiture and are not included in the calculation of basic weighted average number of common shares outstanding until vested. Diluted EPS is calculated under the treasury stock method.  Potential common shares included restricted common stock and incremental shares of common stock issuable upon the exercise of stock options.

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

 

 

 

Three Months Ended

June 30,

 

 

Six Months Ended

June 30,

 

 

 

2017

 

 

2016

 

 

2017

 

 

2016

 

 

 

(In thousands, except per share data)

 

Numerator:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income

 

$

8,777

 

 

$

4,072

 

 

$

18,929

 

 

$

15,070

 

Denominator:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average shares outstanding - basic

 

 

43,944

 

 

 

44,132

 

 

 

44,026

 

 

 

44,175

 

Dilutive effect of share-based awards

 

 

81

 

 

 

373

 

 

 

157

 

 

 

245

 

Weighted average shares outstanding - diluted

 

 

44,025

 

 

 

44,505

 

 

 

44,183

 

 

 

44,420

 

Earnings per share:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

$

0.20

 

 

$

0.09

 

 

$

0.43

 

 

$

0.34

 

Diluted

 

 

0.20

 

 

 

0.09

 

 

 

0.43

 

 

 

0.34

 

 

 

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, or the underlying performance criteria had not yet been met:

 

 

 

Three Months Ended

June 30,

 

 

Six Months Ended

June 30,

 

 

 

2017

 

 

2016

 

 

2017

 

 

2016

 

 

 

(In thousands)

 

Stock options

 

 

2,302

 

 

 

1,083

 

 

 

2,227

 

 

 

2,094

 

Restricted share awards

 

 

143

 

 

 

24

 

 

 

89

 

 

 

10

 

Total

 

 

2,445

 

 

 

1,107

 

 

 

2,316

 

 

 

2,104

 

 

 

 

(5) 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 Tank & Pump Solutions segment. Work-in-process primarily represents partially assembled units. Finished units

10


 MOBILE MINI, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited) - Continued

 

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 June 30, 2017 and December 31, 2016 consisted of the following:

 

 

 

June 30,

2017

 

 

December 31,

2016

 

 

 

(In thousands)

 

Raw materials and supplies

 

$

12,900

 

 

$

12,908

 

Work-in-process

 

 

31

 

 

 

31

 

Finished units

 

 

3,468

 

 

 

2,473

 

Inventories

 

$

16,399

 

 

$

15,412

 

 

 

(6) 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.

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. Based in part upon our lender’s third-party appraiser who evaluated our fleet as of September 30, 2016, management estimates that the net orderly liquidation appraisal value as of June 30, 2017 was approximately $1.1 billion.  Our net book value for this fleet as of June 30, 2017 was $964.1 million.

Depreciation expense related to our rental fleet for the six months ended June 30, 2017 and 2016 was $15.3 million and $16.1 million, respectively. At June 30, 2017, all rental fleet units were pledged as collateral 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”).

11


 MOBILE MINI, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited) - Continued

 

Rental fleet consisted of the following at June 30, 2017 and December 31, 2016:

 

 

 

Residual Value

as Percentage of

Original Cost (1)

 

 

Estimated

Useful Life

in Years

 

June 30,

2017

 

 

December 31,

2016

 

 

 

 

 

 

 

 

 

(In thousands)

 

Storage Solutions:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Steel storage containers

 

 

55%

 

 

30

 

$

636,092

 

 

$

625,094

 

Steel ground level offices

 

55

 

 

30

 

 

358,806

 

 

 

347,574

 

Other

 

 

 

 

 

 

 

 

7,841

 

 

 

4,430

 

Total

 

 

 

 

 

 

 

 

1,002,739

 

 

 

977,098

 

Accumulated depreciation

 

 

 

 

 

 

 

 

(159,708

)

 

 

(151,238

)

Total Storage Solutions fleet, net

 

 

 

 

 

 

 

$

843,031

 

 

$

825,860

 

Tank & Pump Solutions:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Steel tanks

 

 

 

 

 

25

 

$

62,991

 

 

$

61,955

 

Roll-off boxes

 

 

 

 

 

15 - 20

 

 

28,817

 

 

 

28,743

 

Stainless steel tank trailers

 

 

 

 

 

25

 

 

29,093

 

 

 

29,150

 

Vacuum boxes

 

 

 

 

 

20

 

 

12,142

 

 

 

11,512

 

De-watering boxes

 

 

 

 

 

20

 

 

5,981

 

 

 

5,429

 

Pumps and filtration equipment

 

 

 

 

 

7

 

 

13,242

 

 

 

13,690

 

Other

 

 

 

 

 

 

 

 

6,946

 

 

 

6,150

 

Total

 

 

 

 

 

 

 

 

159,212

 

 

 

156,629

 

Accumulated depreciation

 

 

 

 

 

 

 

 

(38,102

)

 

 

(32,424

)

Total Tank & Pump Solutions fleet, net

 

 

 

 

 

 

 

$

121,110

 

 

$

124,205

 

Total rental fleet, net

 

 

 

 

 

 

 

$

964,141

 

 

$

950,065

 

 

(1)

Tank & Pump Solutions fleet has been assigned zero residual value.

 

 

(7) 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 six months ended June 30, 2017 and 2016 was $12.5 million and $12.1 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 Income.

Property, plant and equipment at June 30, 2017 and December 31, 2016 consisted of the following:

 

 

 

Residual Value

as Percentage of

Original Cost

 

 

Estimated

Useful Life

in Years

 

June 30,

2017

 

 

December 31,

2016

 

 

 

 

 

 

 

 

 

(In thousands)

 

Land

 

 

 

 

 

 

 

$

2,953

 

 

$

3,789

 

Vehicles and machinery

 

   0 - 55%

 

 

5 - 30

 

 

139,076

 

 

 

131,584

 

Buildings and improvements (1)

 

0 - 25

 

 

3 - 30

 

 

24,637

 

 

 

22,750

 

Furniture, office and computer equipment

 

 

 

 

3 - 10

 

 

68,881

 

 

 

63,969

 

Property, plant and equipment

 

 

 

 

 

 

 

 

235,547

 

 

 

222,092

 

Accumulated depreciation

 

 

 

 

 

 

 

 

(84,911

)

 

 

(72,895

)

Property, plant and equipment, net

 

 

 

 

 

 

 

$

150,636

 

 

$

149,197

 

 

(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 June 30, 2017 and December 31, 2016, we had $37.7 million and $35.0 million, respectively, of capitalized software, net of accumulated depreciation, included in property, plant and equipment.

 

 

(8) 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 $706.6 million total goodwill at June 30, 2017, $468.6 million related to the North America Storage Solutions segment, $56.8 million related to the U.K. Storage Solutions segment and $181.2 million related to the Tank & Pump Solutions segment.

The following table shows the activity and balances related to goodwill from January 1, 2017 to June 30, 2017 (in thousands): 

 

Balance at January 1, 2017

 

$

703,558

 

Foreign currency

 

 

3,026

 

Adjustments

 

 

18

 

Balance at June 30, 2017

 

$

706,602

 

 

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:

 

 

 

 

 

June 30, 2017

 

 

December 31, 2016

 

 

 

Estimated

Useful Life

in Years

 

Gross

Carrying

Amount

 

 

Accumulated

Amortization

 

 

Net

Carrying

Amount

 

 

Gross

Carrying

Amount

 

 

Accumulated

Amortization

 

 

Net

Carrying

Amount

 

 

 

 

 

(In thousands)

 

Customer relationships

 

15 - 20

 

$

92,805

 

 

$

(31,642

)

 

$

61,163

 

 

$

92,515

 

 

$

(28,729

)

 

$

63,786

 

Trade names/trademarks

 

  5 - 10

 

 

5,928

 

 

 

(2,843

)

 

 

3,085

 

 

 

5,892

 

 

 

(2,364

)

 

 

3,528

 

Non-compete agreements

 

5

 

 

1,888

 

 

 

(964

)

 

 

924

 

 

 

1,886

 

 

 

(813

)

 

 

1,073

 

Other

 

20

 

 

60

 

 

 

(28

)

 

 

32

 

 

 

59

 

 

 

(26

)

 

 

33

 

Total

 

 

 

$

100,681

 

 

$

(35,477

)

 

$

65,204

 

 

$

100,352

 

 

$

(31,932

)

 

$

68,420

 

 

Amortization expense for amortizable intangibles was approximately $3.3 million and $3.2 million for the six-month periods ended June 30, 2017 and 2016.  Based on the carrying value at June 30, 2017, future amortization of intangible assets is expected to be as follows for the years ended December 31 (in thousands): 

 

2017 (remaining)

 

$

3,274

 

2018

 

 

6,387

 

2019