2002 ANNUAL REPORT
The Storage and Office Solution Specialists
Mobile Mini Branch Locations
Branch Location
Manufacturing Plant
• Corporate Headquarters
Mobile Mini, Inc. is North America’s leading provider of portable storage solutions through its fleet of
approximately 86,000 portable storage units and portable offices. Through a Company-owned network of 46
branches located in 26 states and one Canadian province, the Company implements a replicable operating
strategy of leasing secure, high quality portable storage containers and office units, to offer a diversified product
line and to deliver excellent customer service.
Mobile Mini’s ongoing success in deploying this strategy stems from the Company’s consistent attention to
a number of key operational drivers. These include expanding and strengthening its infrastructure; adding new or
adapting existing products that solve customers’ storage problems, sales initiatives, marketing, retaining dedicated
employees and promoting from within.
Since its founding in 1983, Mobile Mini’s diligent focus on these initiatives has driven the Company’s expansion
from one location to a network of 46 locations with nearly 300 commissioned sales people and more than 1,400
total employees. At the same time, this strategic focus has
enabled the Company to build a solid financial foundation
and positioned Mobile Mini, Inc. to continue its pattern of
profitable growth.
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Message to Our Fellow Shareholders:
In 1996, we decided to transform Mobile Mini’s business. We did so
by moving away from the Company’s historic reliance on sales of storage
containers through a network of branches in three states backed by a net-
work of independent dealers across the country, and we became an enter-
prise focused on leasing our varied suite of storage solutions through our
own branch network. Looking back over the past six years, we are proud
of the results this transformation has produced. During that period, annu-
al leasing revenues increased from $17.9 million to $116.2 million, repre-
senting a compound annual growth rate (CAGR) of 36.6%, and our pro
forma1 operating income rose from $4.7 million to $44.1 million, for a
CAGR of 45.0%. While our growth rate on a pro forma operating basis
slowed in 2002, we posted our sixth consecutive year of record results
during 2002.
2002 Business and Financial Overview
With the benefit of hindsight, we now know our business model works
irrespective of prevailing economic conditions. However, there is no
doubt our business model works far better during strong economic times.
Our cost of rentals is fixed or semi-variable, consequently, when con-
tainers on lease are at optimal levels, we achieve exceptional operating
leverage and improved margins. We did achieve growth during 2002 but
at a slower pace than prior years. Our ability to grow was negatively
impacted by overall slow down in the economy. Here are just some of
our fiscal year 2002 highlights:
■ Total revenues rose 16.0% to $133.1 million;
■ Lease revenues rose 16.5% to $116.2 million and comprised 87.3%
of annual revenues, up from 86.9% of annual revenues in 2001;
■ Pro forma operating income grew by 8.7% to $44.1 million;
■ Pro forma net income before extraordinary item was up 6.2% to
$19.8 million;
■ Pro forma earnings per diluted share before the extraordinary item
2002 saw other growth that we believe positions
us for the future:
■ The cumulative number of customers served by Mobile Mini rose
19.2% to approximately 62,000 in 2002 from approximately 52,000
in 2001;
■ Our fleet size at December 31, 2002 was approximately 86,000
units compared to approximately 71,000 units one year earlier;
■ Internal growth in leasing revenues, which we define as growth in
locations open one year or more, excluding acquisitions, was
7.5%; and
■ We added 11 branches in 2002, and, we operate from 46 locations
in 26 states and one Canadian province.
2002 was a challenging year, and I am proud to report Mobile Mini
was up to the challenge. Our marketing and product mix strategy con-
tinued to drive same store growth of 7.5%, albeit not at the same double-
digit levels as in past years. Slower percentage growth was most appar-
ent in some of our most mature markets, where our large business base
and market dominance create a higher internal growth rate hurdle at the
starting gate. Our average utilization rate was down for the year, to
77.9% from 82.5% in 2001, but considering the 19.6% increase in size
of our fleet, our aggressive new market expansion, and the general eco-
nomic slow down, our lower utilization rate was foreseeable and within
our business model for the year.
While we did experience a lower average rental rate in the fourth quar-
ter, on an annualized basis, our average rental rates in 2002 approximat-
ed those of 2001. The lower average rental rate we experienced in the
final quarter of the year reflected a number of factors, most notably the
impact of our purchase of storage container assets from Transport
International Pool (TIP), a unit of GE Capital. This acquisition was large
in size and the lease fleet which we acquired, while of high quality, was
concentrated in the eastern states where prevailing rental rates are lower
was $1.38 compared to $1.34 in 2001.
Storage
% of total
revenues
Margin Analysis
2002 (1)
2001
EBITDA
40.2
2000
% of total
revenues
% of total
revenues
where
41.3
34.5
42.6
35.3
16.3
14.7
Operating Income
Net Income
33.1
14.9(2)
EARNINGS PER SHARE
(diluted)
$1.38
(1) (2)
$1.34
$1.11
you need it.
OPERATING INCOME
($ in millions)
$44.1
(1)
REVENUES
($ in millions)
$133.1
$40.6
$31.1
$114.7
$90.2
00
01
02
00
01
02
00
01
02
1 Pro forma financial information for 2002 excludes Florida litigation expense of approximately $ 0.8 million, net of income tax benefit of $0.5 million.
2 Before extraordinary item.
1
than rates that we traditionally achieve. The drag on rental rates was
magnified by the exceptional growth at the new branches that we
acquired or opened in the eastern states in conjunction with the purchase
of TIP storage container assets. Exclusive of these factors, our average
rental rate was unchanged at branches that we have operated for more
than one year.
Strong Balance Sheet Yields Financial Flexibility
Mobile Mini is now in the strongest financial position in its history. In
early 2002, we secured a new line of credit, which increased our bor-
rowing availability by $80 million, to $250 million, and refinanced our
old credit line. In connection with this refinancing, we wrote-off debt
issuance costs associated with the former loan. The write-off was record-
ed as an after tax non-cash extraordinary charge of approximately $0.8
million, or $.06 per diluted share.
At December 31, 2002, our debt-to-book capitalization was approxi-
mately 54%, which is low for leasing companies. Shareholders’ equity at
year-end was $178.7 million, up 10.5% from $161.7 million at year-end
2001. We had cash flow from operations in 2002 of $45.4 million, which
permitted us to limit additional borrowings to $5 million during the sec-
ond half of 2002 as compared to $32 million during the same period in
2001. The capital structure we now have in place is sufficient to fund our
internal growth plans for 2003. Nonetheless, we will continue to explore
opportunities to access the capital markets, to ensure we have access to
funds at the best possible terms and before the funds are needed.
Mobile Mini, A Truly National Company
With the addition of 11 new branches comprising the Class of 2002,
Mobile Mini is now a national company. Our 46 branches are located
in 45 United States cities and in Toronto, Canada. I am extremely
pleased to report seven of the 11 new branches have already achieved
profitability, and the class is performing well ahead of plan.
Five of the new branches resulted from our June purchase of certain
North American portable storage container assets from TIP. This trans-
action formed the foundation on which we established Mobile Mini
branches in Baltimore, Richmond, Philadelphia, Boston and Toronto.
At that same time, we completed two smaller acquisitions, one in
Baltimore and one which became a new branch in Columbia, SC. The
other new locations we entered in 2002 are Columbus, OH; Little Rock,
AR; Fort Worth, TX; St. Louis, MO; and Louisville, KY. With our
national presence, and in particular our branches in the heavily populat-
ed East Coast, we have the critical mass and dispersion of branches to
build our national accounts program, which is a priority for 2003.
Our Branch Expansion Strategy
A discussion of our branch expansion program would not be complete
without mention of three critical points. First, new locations invariably
produce lower operating margins until they build their number of con-
tainers on lease. While the Class of 2002 is running ahead of schedule,
new branches are generally earnings neutral in the first year, but are a cat-
alyst for growth in lease revenue in succeeding years. As branches
mature, operating margins and return on invested capital improve, as
illustrated by the following chart.
Year Branch
Established
Operating Margin %
(after corporate allocation)
12 months ended Dec. 31,
2002
After Tax Return on
Invested Capital
(NOPLAT)
12 months ended Dec. 31,
2002
Pre-1998
1998
1999
2000
2001
2002
All branches
39.8%
38.0%
21.6%
21.3%
10.1%
14.7%
32.1%
15.9%
14.8%
6.9%
7.1%
3.9%
5.5%
12.1%
STOCKHOLDERS’ EQUITY
($ in millions)
$178.7
$161.7
$92.4
LEASE FLEET UNITS
(in thousands at year end)
LEASE REVENUE GROWTH
(from prior year)
83.6
42.7%
70.1
55.5
31.0%
16.5%
00
01
02
00
01
02
00
01
02
2
Our branch expansion strategy is not a rollup or consolidation story.
We do not seek to acquire current earnings when we enter a new mar-
ket; rather we generally purchase income-generating rental fleets large
enough to forgo the inherent startup costs which we would incur if we
started a branch without such a purchase of storage units on rent. That
means in any given year, our earnings generally come from our
branches that we have operated for at least one year, and are not
dependant on acquisitions.
Lastly, we do not purchase operations that resemble a Mobile Mini
branch. There is much to be done when we enter a new market. First,
we generally assign a Mobile Mini-trained branch manager to head the
new location and oversee a handful of commissioned salespeople
which we hire for the branch. We then activate a battery of initiatives
-- customer development and service programs, sales force training,
supervision and monitoring; compensation based upon the number of
containers on lease and profitability; and direct mail and yellow page
advertising to enlarge the market for Mobile Mini’s array of storage
solutions. While this is underway, we add a full complement of our
proprietary storage containers and mobile offices to the inventory at the
new branch. We sometimes buy substandard assets, such as van trail-
ers, when we acquire a storage business in a new market, and we begin
to sell those substandard assets as soon as they come off lease. We
install our customized management information systems so we have
access to detailed data on the branch performance, including its success
rate in turning inquiries into customers. While other companies may
grow their business through rollups or consolidation, we take a differ-
ent road and focus our efforts on long-term internal growth and we lay
the foundation for that growth promptly by making a considerable
investment in the new branch.
We have added 38 new branches since the beginning of 1998. We
have never closed a branch, which gives further credence to the viability
of our business model and confirms our belief that portable storage is a
feasible business in any United States city. The portable storage indus-
try is uniquely service intensive and, for the most part, locally focused.
We give our branch managers the responsibility and authority to make
the critical decisions that allow them to capitalize upon the business
opportunities specific to their locale. We furnish our branch managers
and their staffs with the tools and support they need to grow their branch-
es, including training, advertising programs, market intelligence and a
sophisticated, results-oriented MIS system.
Product Diversity & Differentiation
A visit to our website at www.mobilemini.com will give you a visual
understanding of the range of portable storage solutions, security offices
and mobile offices we make available to our customers, as well as how
customers deploy these. For example, customers use our storage and
office solutions to store excess inventory and seasonal items, to store
equipment and tools, as sales, first aid, and guard offices, for record stor-
age, and in countless other applications.
In many ways, ours is a story of mass customization made possible by
having our own manufacturing and refurbishment capabilities. While we
build 10-foot wide and other custom units, most of our units began their
lives as 40-foot long ocean-going containers. Once decommissioned, we
acquire and overhaul these containers. For starters, we cut the units into
5-, 10-, 15-, 20- or 25-foot lengths; remove rust or dents; and repair or
replace floors and sidewalls. More importantly, we install our patented
lock and door system, which makes the unit customer-friendly because
of easy-opening doors that are highly secure. Once painted with our sig-
nage added, the units are ready to be commissioned into our rental fleet.
But that is just for starters. Depending upon use, we add optional fea-
tures which may include: doors on both ends, doors on the sides, fully
adjustable shelving, ramps, ventilation systems, windows and partitions,
electrical outlets, lights and plumbing, carpet or tiled floors, phone jacks,
air conditioning and heating. Product differentiation is a critical com-
petitive advantage and allows us to let others do battle over the low mar-
gin, price sensitive, commodity storage business.
To be better equipped to offer customers a full complement of space
enhancing solutions, we decided several years ago to expand our lease
fleet by adding wood mobile offices, which are larger than the steel
offices we produce. Wood mobile offices, which are purchased from
third parties, are both attractive and functional. Offered with restrooms,
carpet and French doors, exterior stairs or ramps, awnings, skirting and
furniture, wood mobile offices have become an important component of
our product mix.
Since we are frequently asked about the composition and value of our
lease fleet, we offer an extensive disclosure in our annual report on Form
10-K. For the purpose of this letter, we reiterate several key characteris-
tics of our lease fleet. Our steel storage containers:
■ Are affordable, which is one reason that lease terms last on average
19 months;
■ Allow us to recoup our current unit investment in approximately 32
■ Generate predictable, recurring lease revenues, which adds visibility
to our budgeting and forecasting disciplines;
■ Have long useful lives and high residual values.
months;
Mobile Mini is the
nation’s leading provider
of portable
storage
solutions.
3
Our Goals for the 2003
Unlike 2002 and prior years when we aggressively expanded our
branch network through carefully targeted acquisitions, we expect to
complete a smaller number of opportunistic transactions in 2003. Cost
containment, capital preservation, optimizing operations in existing loca-
tions, building a national accounts program and maintaining our financial
strength are our top priorities in 2003. However, we will continue to dili-
gently investigate all possible transactions in an effort to facilitate our
continued growth in 2003 and beyond. In short, our business plan con-
tinues to perform and we continue to grow our business and generate
record earnings every year.
Finale
Just a few final points that don’t fit anywhere else. George E. Berkner,
who had served as a director since December 1993, stepped down in
September to devote more time to his philanthropic activities and per-
sonal interests. At that time, two other independent directors joined our
board, Thomas Graunke and Michael L. Watts. The Mobile Mini Board
of Directors now has seven members, the majority of whom are inde-
pendent directors. Tom and Mike are outstanding entrepreneurs with
excellent credentials and records of accomplishment building their busi-
nesses into leaders within their respective industries.
In 2002, Mobile Mini was again included among the premier small
companies named to Forbes Magazine’s list of the Best Small Companies
and was again cited in Fortune Magazine’s special issue, the 100 Fastest-
Growing Publicly Held Small Businesses in America. CIBC World
Markets began following Mobile Mini in research in 2002 with their
highest rating, and the two other investment firms, Deutsche Banc
Securities and Sidoti & Co. that write on Mobile Mini have similarly
given our Company their highest rating as well.
On behalf of the Board of Directors and all of our employees, we
thank our shareholders for their continued support and confidence in
Mobile Mini and its people. Our thanks go out to the more than 1400
Mobile Mini staff members. Each of you at our branches, in our plant
and at corporate headquarters, is to be commended.
Sincerely yours,
Steven G. Bunger
Chairman, President & Chief Executive Officer
Gaining Market Share At the Expense of the
Competition
By year-end 2002, Mobile Mini served over 62,000 customers, an
increase of approximately 10,000 in one year. Our twenty largest cus-
tomers accounted for less than 8.8% of our lease revenues in 2002.
Mobile Mini storage solutions are leased by many types of customers
including specialty and mass market retailers, hotels, entertainment com-
plexes, dry cleaners, service stations, contractors, industrial and distribu-
tion companies, universities, medical institutions and government agen-
cies. The basis for success in our business is renting one container to one
customer. We focus on developing and maintaining a broad customer
base to lessen our risk exposure to industry and seasonal fluctuations in
demand for our products. While the construction industry is a market we
continue to serve, it has become a smaller piece of our total lease rev-
enues over the past four years. That is why in 2002, when the commer-
cial construction industry began to decline, Mobile Mini’s exposure was
far less than our competitors who rely more heavily on the economic
health of the construction industry. In addition, we limit the amount of
holiday season volume to 11% to 13% of our rental fleet, preferring the
prospect of longer term lease commitments represented by our core busi-
ness to short term seasonal leases followed by large numbers of idle
assets being held. Although there is much demand for storage units in
the third and fourth quarters due to the holidays, we have elected not to
try and win all of the Christmas business at the risk of disrupting our core
business of focusing on longer term rentals which provide predictable
revenue streams.
Based on information obtained from SEC filings, public debt filings
and from the acquisitions we have completed, we are quite certain our
market share has been improving at the expense of national, regional and
local competitors. As referenced earlier in this letter, our financial, mar-
keting and operational strengths and our differentiated products are
among the reasons for these gains. Moreover, we are not seeing new
entrants in the portable storage industry. With the exception of regional
portable storage companies and the commodity storage companies, we
have not seen any unusual pricing practices from competitors in our
existing markets compared to prior years. But perhaps the most com-
pelling marketing case to be made for Mobile Mini is that the portable
storage market is still in its infancy throughout most of the United States
resulting in enormous opportunity for growth, both to new markets and
within existing markets.
The Lawsuit
In addition to actual Generally Accepted Accounting Practices
(GAAP) results, we are reporting “pro forma” financial results. Our
pro forma results are identical to our GAAP results except that we
exclude Florida litigation expenses which are the legal and other costs
related to our defense of the Florida litigation (Nuko Holdings I, LLC
v. Mobile Mini) and related litigation. We discuss the lawsuit, verdict,
appeal, and related litigation in our annual report on Form 10-K,
which follows this letter. When there is news to report on this front,
we will report it. We and our attorneys believe the judgment is not
supported in anyway by the facts and we are doing everything within
our power to overturn this decision.
4
CORPORATE INFORMATION
DIRECTORS AND OFFICERS
SHAREHOLDER INFORMATION
BOARD OF DIRECTORS
INVESTOR RELATIONS
Steven G. Bunger
Chairman, President and Chief Executive Officer
Lawrence Trachtenberg
Executive Vice President and Chief Financial Officer
The Equity Group
800 Third Avenue, 36th Floor
New York, New York 10022-7604
Telephone: 212-371-8660
Fax: 212-421-1278
Carolyn A. Clawson
President – SkilQuest, Inc.
A sales and management support company
Thomas Graunke
CEO and President – KnowledgeNet
A business e-learning company
Ronald J. Marusiak
Division President – Micro-Tronics, Inc.
A precision machining and tool & die company
Stephen A McConnell
President – Solano Ventures
A private capital investment company
Michael L. Watts
Chairman and CEO – Sunstate Equipment Company, LLC
A construction equipment rental company
CORPORATE OFFICERS
Kyle G. Blackwell
Senior Vice President
Burton K. Kennedy
Senior Vice President – Sales
Russell C. Lemley
Senior Vice President
Ronald E. Marshall
Senior Vice President
Michael J. Bunger
Vice President – Operations
Aric T. Clawson
Vice President – Manufacturing
Deborah K. Keeley
Vice President – Controller
TRANSFER AGENT AND REGISTRAR
Wells Fargo Bank Minnesota, N.A.
Shareowner Services
161 N. Concord Exchange Street
South St. Paul, Minnesota 55075-1139
INDEPENDENT PUBLIC AUDITORS
Ernst & Young LLP
Two North Central Avenue
Suite 2300
Phoenix, Arizona 85004-2347
INDEPENDENT COUNSEL
Bryan Cave LLP
Two North Central Avenue
22nd Floor
Phoenix, Arizona 85004-4406
CORPORATE OFFICE
7420 South Kyrene Road
Suite 101
Tempe, Arizona 85283-4578
Telephone: 480-894-6311
Fax: 480-894-6433
Recent press releases, quarterly reports and additional information
about Mobile Mini, Inc. can be obtained by visiting our World Wide
Web site at: www.mobilemini.com
7402 South Kyrene Road
Suite 101
Tempe, Arizona 85283
Phone: 480-894-6311
www.mobilemini.com