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2008 Annual Report
Advertising • Agriculture • Airports/Air-lines • AnimAl shelters/clinics • ApArtments • Auto pArts stores • Automotive mAnufAc-turer • BAkeries • BAnks • Bedding stores • Bicycle shops • Body shops • Bookstores • cAr deAlers • cAr pArt stores • cArpet stores • churches • cleAning compAnies • colleg-es • concrete plAnts • construction sites • convenience mArkets • dAtA compAnies • delivery services • demolition compAnies • distriBution centers • distriButors • drug stores • eAting/restAurAnts • electricAl supply • elevAtor repAir • emergency stor-Age • energy compAnies • engineering firms • entertAinment • equipment rentAl • event plAnning • excAvAting compAnies • exporter • fActories • fAirs stAte grounds • fArms • feed stores • fence compAnies • fire depArt-ment • fire sprinkler compAnies • firewAter restorAtion • firewood • fireworks • fix-ture instAll mAteriAls • flooring compAnies • florist • footBAll teAm • freight forwArd-er • furniture stores • gArAges • gArden stores • gAs stAtions • generAl contrAc-tors • girls softBAll teAm • glAss instAllA-tion compAnies • golf course • government • grAding compAnies • grocery stores • gun cluBs • gymnAsiums • hArdwAre stores • heAt And cool • heAvy equipment compAny • horse trAcks • hospitAls • hotel • house wAre stores • housing Authority • hurricAne relief • hvAc • independent contrActor • indiAn reservAtions • industriAl • insulA-tion compAny • insurAnce compAny • interior design • intrAmurAl • JAils • JAnitoriAl • JAnitoriAl supply • JunkyArds • kindergAr-ten cAre school • lABorAtories • lAndfills • lAndscAping compAnies • lAundry mAts • leAsing compAnies • lighting stores • logis-tics • mAil order • mAnufActuring compAnies • mArkets • mAsonry • mechAnicAl supply • medicAl emergency equipment • militAry BAs-es • mining • motels • motorcycle shops • movie theAters • municipAlities • nAtionAl Ac-counts • nAvAl Air BAse • nurseries • office supplies • offices • onsite construction • owner operAtors • pAint stores • pAinters • pAper • pArents cluBs (ptA) • pArks And rec-reAtion • pArts store • pAstry shops • pet stores • plAnes (smAll Airport) • plumBing • pool supplies • port A potty • post office • power stAtions • produce stores • putt putt • rAce motorist • rAce trAcks • records • recycling • rentAls • repAir shops • resi-dentiAl construction • restAurAnts • resto-rAtion • roofing compAny • sAlvAge • sAnitA-tion (puBlic works) • schools • scrAp yArds • service stAtions • shipping stores • shop-ping centers • speciAl trAde contrActors • sports teAms • storAge fAcilities • supply stores • surf shop • swAp meets • tAxi ser-vices • television stAtions • tire stores • trAins • trAnsmission • trAnsportAtion ser-vices • trophy shops • truck repAir shops • trucking compAnies • umBrellA/pAtio ser-vices • underground cABle compAnies • uni-form compAnies • universities • used cAr sAles • utility compAnies • vAcuum compAnies • vAn conversion • vAult storAge • vegetABle fArms • vehicle detAil shop • vehicle repAir shop • vehiculAr impound yArd • villAs con-struction • vineyArds • wAr • wArehouses • wAshers/dryers compAnies • wAste fAcilities
● Branch Offices
n Operational Yards
n Corporate Headquarters
Corporate Profile
Mobile Mini, Inc. is the world’s leading provider of portable storage solutions through its lease fleet of approximately 270,000 portable
storage units and mobile offices. Through a network of branches in the United States, Canada, United Kingdom and The Netherlands,
the company implements a replicable operating strategy of leasing secure, high quality portable storage containers and mobile offices,
offering a diversified product line and to delivering excellent customer service.
Mobile Mini’s ongoing success in deploying this strategy stems from the company’s consistent attention to a number of key marketing
and operational drivers. These include maintaining an internal growth focus, increasing market awareness, offering superior,
differentiated products, emphasizing sales and marketing, maintaining a national presence coupled with local service, geographic and
customer diversification, employee retention and promotion, and providing superior customer service.
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 94 branches and 25 operational yards and has enabled the company to build a solid financial foundation and positioned
Mobile Mini to continue its pattern of market leadership and sustainable growth.
Margin Analysis
2006 (1)
% of total
revenues
2007 (3)
% of total
revenues
2008 (4)
% of total
revenues
EBITDA
Operating Income
Net Income
42.7
36.4
17.0(2)
40.8
34.1
16.0
42.1
34.5
14.0
(1) Non-GAAP financial information for 2006 excludes debt extinguishment expense of $3.9 million, net of income tax benefit of $2.5 million.
(2) Excludes tax benefit of $0.3 million due to recognition of certain state net operating loss carryforwards.
(3) Non-GAAP financial information for 2007 excludes debt extinguishment expense of $6.9 million, net of income tax benefit of $4.3 million.
(4) Non-GAAP financial information for 2008 excludes integration, merger and restructuring expenses of $24.4 million, net of income tax benefit of $9.1 million, and non-cash goodwill
impairment of $13.7 million.
Storage that spans a world of possibilities
Dear Fellow Shareholders:
2008 was a landmark year for Mobile Mini, highlighted by the
acquisition of our largest competitor, Mobile Storage Group, or
MSG, on June 27, 2008. As a result of this important event in the
company’s history, Mobile Mini is the leading global provider of
portable storage solutions, with an expanded geographic footprint
covering most major markets in both the U.S. and the U.K. Through
this transaction, we added top caliber management to our executive
team, adopted the best practices of the two companies, added
much needed critical mass to our U.K. operations and strengthened
our capabilities to service our national account customers. The
actions we undertook since closing the acquisition to eliminate
overlapping branches and duplicative overhead and other fixed costs
have produced, and we expect will continue to produce, superior
operating leverage and provide free cash flow to pay down our debt.
Before proceeding with a review of operations and giving our
perspective on 2009 and beyond, below is a summary of our record
non-GAAP financial performance and other financial highlights,
adjusted to back out integration and restructuring expenses related
to the MSG acquisition, a non-cash goodwill impairment charge
in 2008, debt extinguishment expense in 2007 and 2006, and an
income tax benefit in 2006.
Adjusted (non-GAAP) 2008 Performance and Financial
Highlights Compared to Adjusted (non-GAAP) 2007 (see end
of letter for GAAP reconciliation and adjustments)
■ Revenues were $415.4 million, up 30.5% from $318.3 million;
■ Lease revenues rose 30.5% to $371.6 million from $284.6 million;
■ EBITDA was $175.0 million, a 34.7% improvement from
$129.9 million;
■ Operating income increased 32.0% to $143.3 million from
$108.5 million;
■ Net income was $58.0 million, up 13.5% from $51.1 million;
■ Diluted earnings per share rose to $1.49, a 5.7% improvement
from $1.41;
■ Capital expenditures, net of proceeds from sales, were $64.6
million, down 49.9% from $128.9 million;
■ Funded debt to EBITDA, calculated in accordance with the terms
of our revolving credit facility, was 3.9-to-1 at December 31,
2008; and
■ Free cash flow, excluding opportunistic acquisitions, was $33.9
million, compared to a $37.7 million cash requirement in 2007.
REVENUES
($ in millions)
$415.4
EBITDA
($ in millions)
$175.0
$318.3
$273.4
$129.9
$116.8
EARNINGS PER SHARE
(diluted)
$1.41
$1.49
$1.31
06
07
08
06
07
08
06
07
08
1
Advertising • Agriculture • Airports/Airlines • AnimAl shelters/clinics • ApArtments • Auto pArts stores • Automotive mAnufActurer • BAkeries • BAnks • Bedding stores • Bicycle shops • Body shops • Bookstores • cAr deAlers • cAr pArt stores • cArpet stores • churches • cleAning compAnies • colleges • concrete plAnts • construction sites • convenience mArkets • dAtA compAnies • delivery services • demolition compAnies • distriBution centers • distriButors • drug stores • eAting/restAurAnts • electricAl supply • elevAtor repAir • emergency storAge • energy compAnies • engineering firms • entertAinment • equipment rentAl • event plAnning • excAvAting compAnies • exporter • fActories • fAirs stAte grounds • fArms • feed stores • fence compAnies • fire depArtment • fire sprinkler compAnies • firewAter restorAtion • firewood • fireworks • fixture instAll mAteriAls • flooring compAnies • florist • footBAll teAm • freight forwArder • furniture stores • gArAges • gArden stores • gAs stAtions • generAl contrActors • girls softBAll teAm • glAss instAllAtion compAnies • golf course • government • grAding compAnies • grocery stores • gun cluBs • gymnAsiums • hArdwAre stores • heAt And cool • heAvy equipment compAny • horse trAcks • hospitAls • hotel • house wAre stores • housing Authority • hurricAne relief • hvAc • independent contrActor • indiAn reservAtions • industriAl • insulAtion compAny • insurAnce compAny • interior design • intrAmurAl • JAils • JAnitoriAl • JAnitoriAl supply • JunkyArds • kindergArten cAre school • lABorAtories • lAndfills • lAndscAping compAnies • lAundry mAts • leAsing compAnies • lighting stores • logistics • mAil order • mAnufActuring compAnies • mArkets • mAsonry • mechAnicAl supply • medicAl emergency equipment • militAry BAses • mining • motels • motorcycle shops • movie theAters • municipAlities • nAtionAl Accounts • nAvAl Air BAse • nurseries • office supplies • offices • onsite construction • owner operAtors • pAint stores • pAinters • pAper • pArents cluBs (ptA) • pArks And recreAtion • pArts store • pAstry shops • pet stores • plAnes (smAll Airport) • plumBing • pool supplies • port A potty • post office • power stAtions • produce stores • putt putt • rAce motorist • rAce trAcks • records • recycling • rentAls • repAir shops • residentiAl construction • restAurAnts • restorAtion • roofing compAny • sAlvAge • sAnitAtion (puBlic works) • schools • scrAp yArds • service stAtions • shipping stores • shopping centers • speciAl trAde contrActors • sports teAms • storAge fAcilities • supply stores • surf shop • swAp meets • tAxi services • television stAtions • tire stores • trAins • trAnsmission • trAnsportAtion services • trophy shops • truck repAir shops • trucking compAnies • umBrellA/pAtio services • underground cABle compAnies • uniform compAnies • universities • used cAr sAles • utility compAnies • vAcuum compAnies • vAn conversion • vAult storAge • vegetABle fArms • vehicle detAil shop Wherever there is
a need for storage,
Mobile Mini storage
units are on the job.
a dispatcher and yard people, and the management and sales
functions are handled at the closest full service branch. In total,
including operational yard locations, Mobile Mini now locally
services 119 markets.
The merger was financially very powerful because of the $30
million of annual synergies we achieved by combining the
operations and personnel of the two companies and eliminating
duplicate costs. Most of these synergies were realized by
combining the corporate offices in the U.S. and in the U.K. and
combining the overlapping branch locations. We eliminated
duplicate management, administrative personnel, property, IT and
advertising costs at each closed branch location. All of the major
anticipated synergies have been successfully realized.
As a result of excess idle rental fleet following the MSG acquisition
and weak economic conditions in the U.S. and the U.K. in the
latter part of 2008, we made the strategic decision to substantially
reduce our manufacturing activities across North America. In
late 2008, we effectively closed down our primary manufacturing
facility located in Maricopa, Arizona and then in early 2009
eliminated manufacturing at most of our branch locations.
These moves should allow the company to produce significant
positive net cash flow as we no longer have these fixed
manufacturing costs at our branches. We will save in rental fleet
capital expenditures by continuing to sell excess units out of our
rental fleet as well as by relocating idle fleet assets to branch
locations with higher demand. With our much larger fleet size and
branch count, relocating units between branches is proving far
more efficient and far less capital intensive than purchasing
and/or manufacturing units. Our near-term capital expenditures
plan relates mainly to property plant and equipment, and
investments in IT. We foresee minimal rental fleet capital
expenditures over the near-term, and most of that expense will
be primarily associated with upgrading locking systems and
rebranding the acquired MSG lease fleet.
One of the unfortunate but important initiatives we accomplished
in late 2008 and early 2009 was reducing our overall staffing
levels and operating costs which was necessitated by the slowing
economy and deepening recession. To maintain our strong margins
and profitability, we have reduced the variable costs of our
operations, which are composed primarily of employees, including
drivers, yard people, administrative, accounting and salespeople.
We believe we are right-sizing the business not only for the current
economic conditions, but also for the long haul.
2008 Operating Highlights
■ We served 118,000 customers, up 27.0% from 93,000 customers
in 2007. Of note, in 2008 our largest customer accounted for
1.8% of our leasing revenues; the top 20 customers accounted
for 5.2% of leasing revenues and approximately 53.4% of our
customers rented a single unit;
■ Our lease fleet increased 71.0% to approximately 273,700 units
at December 31, 2008 as compared to 160,100 units at December
31, 2007, primarily due to the MSG acquisition;
■ The average number of units on lease increased 32.0% year-over-
year; and
■ Average utilization was 75.0% compared to 79.6% one year
earlier.
Acquisition, Integration Highlights and Staff Reductions
The MSG acquisition, which was valued at $755.4 million, was
transforming for us in terms of scale, financial impact and strategic
rationale. In connection with the acquisition, Mobile Mini secured a
new $900 million asset based revolving credit facility which partially
refinanced MSG’s outstanding debt and also funded the cash portion
of the acquisition. The balance of the purchase price involved
Mobile Mini’s assumption of MSG’s senior unsecured notes and the
issuance to MSG’s former shareholders of 8.6 million shares of Mobile
Mini convertible preferred stock valued at the time at $196.6 million
and with a liquidation preference value of $154 million.
After we signed the definitive agreement in February 2008 to
acquire MSG, our team put an integration and consolidation plan
in place so that by the closing on June 27th, we were off to a
running start to operate and integrate the acquired business.
After eliminating or converting overlapping branches into
operational yards, we ended the year with a total of 94 branches
- 74 in the U.S., 17 in the U.K., two in Canada and one in The
Netherlands. This branch count includes four small acquisitions
we also completed in 2008, three of which we combined with
our existing operations and one we used to enter a new market.
All told, that translates into 18 additional U.S. branches and 11
additional branches in the U.K. during 2008.
We now also have 25 operational yards, which are locations which
enable us to locally service customers for transportation yet reduce
our operating costs by leveraging the infrastructure costs of a
nearby branch. While a standard branch is fully staffed with a
branch manager, office personnel, salespeople, drivers and yard
personnel, an operational yard typically has drivers and perhaps
2
Tried and True - The Mobile Mini Business Model
We have been executing our business model, which with rare
notable exceptions such as the MSG transaction, is primarily focused
on internal growth. We’ve built an enviable record of enlarging the
market for portable storage solutions by aggressively marketing our
highly differentiated product line. The following are Mobile Mini’s
compound annual growth rates since 1996, when we started the
year with eight branches in three states:
■ 28.4% annual growth in total lease fleet;
■ 20.9% annual growth in total revenues; and
■ 28.8% annual growth in lease revenues.
Essential to our business strategy are the workhorses of our
fleet, steel portable storage units, which:
■ Comprise 77.0% of our rental fleet units;
■ Provide predictable, recurring revenues from leases with an
average duration of approximately 32 months;
■ Have average monthly lease rates that recoup our current unit
investment within an average of 35 months;
■ Possess long useful lives exceeding 25 years, have no model year,
require little maintenance, and have high residual values; and
■ Produce incremental leasing operating margins of approximately
56.0%.
To achieve these results, we have placed a high priority on product
diversification, superior customer service, targeted marketing
programs, relentless and trained sales personnel, results-oriented
information systems and customer and geographic diversity.
Our customers represent a broad cross-section of the economy and
society at large. Wherever there is a need for storage, Mobile Mini
storage units are on the job. Our customers include small, medium,
and large retailers, construction companies, utilities, manufacturers
and distributors, military and government installations, hotels,
schools, restaurants, entertainment complexes and households. Our
portable storage units are fixtures in the parking lots of industrial
and distribution companies and on the campuses of educational
and medical institutions. Our office units are frequently used as
temporary office space, golf course clubhouses, first aid sites,
guard/security units, sales offices and job site offices.
We recognize that layoffs can unfortunately, adversely, affect
employees and their families, but these actions were necessary
to realign our workforce to the current business environment,
to achieve long-term growth and to optimize and minimize our
capital expenditure requirements.
Since the MSG acquisition, we have reduced head count in the U.S.
and the U.K. by over 630 employees. Today, Mobile Mini has 1,890
employees, with 1,460 employees in North America and 430 in
Europe. Of those, 385 are dedicated salespeople that receive most
of their compensation from performance based commissions.
Except for the ongoing process of rebranding MSG storage
units that remain at customer sites under long-term leases,
the integration of the two companies is officially complete.
This transaction brought together the best in class of our two
organizations in terms of management, business processes and
historical corporate strengths and cultures, which are now shared
across our entire organization. Mobile Mini, for example, has been
second to none in local sales and marketing, while MSG carved
out a solid ‘national account’ business with large multi-location
organizations. We believe we have accomplished our initial goals
of integrating two large organizations, achieving the acquisition
synergies, combining the best of the best, significantly reducing
manufacturing and its related costs and, most importantly,
maintaining the sales and marketing culture which will drive future
growth.
LEASE FLEET UNITS
(in thousands at end of year)
273.7
LEASE REVENUE GROWTH
($ in millions from prior year)
$86.9
STOCKHOLDERS’ EQUITY
($ in millions)
$495.2
$442.0
$457.9
149.6
160.1
$56.5
$39.5
06
07
08
06
07
08
06
07
08
3
We differentiate ourselves by providing security, convenience,
high product quality, broad product selection, and exceptional
customer service. Our portable storage units range from 5 to 48
feet in length and 8 to 10 feet in width. Customers can select
from multiple door options, as well as a host of other customized
features options such as partitions, lighting and shelving. The
vast majority of our products are configured with our patented
high security vaulted locking systems and easy opening doors.
With our fleet of owned and leased trucks, delivery is generally
within 24 hours. While this is all part of good service, it is
also a revenue enhancer, since the sooner a unit is on rent, the
sooner we generate lease revenues.
To optimize the performance of our commissioned sales team, we
provide our sales people with intensive and on-going training and
coaching. We have always made customer service a high priority and
it has paid off. Approximately 54.1% of our 2008 leasing revenues
were derived from repeat customers. New in 2008, we began using
the Net Promoter Score system to measure customer satisfaction
each month, rental-by-rental, in real time through surveys conducted
by a third party. We then use customer feedback to drive service
improvements across our organization. Product superiority and
differentiation are supported by sophisticated sales and marketing
outreach programs which encompass print and internet advertising.
Add to that our significantly upgraded website which has product
video tours, online payment capabilities and online real time sales
inquiries, enabling customers to chat live with our salespeople.
To do the best possible job, we need timely information and that
entails an on-going investment in our Enterprise Resource Planning
(ERP) system, which enables us to optimize fleet utilization, control
pricing, capture detailed customer data, expedite the credit approval
process, gain efficiencies in internal control compliance and support
our growth by projecting near-term capital needs. Furthermore,
our ERP system allows us to carefully monitor, on a real time basis,
the size, mix, utilization and lease rates of our fleet branch by
branch. Our systems also capture relevant customer demographic
and usage information, which is used to target new customers
within our existing and new markets. This breadth of data gives us
an advantage over our competitors who tend to be smaller and less
sophisticated local and regional operators.
LOOKING FORWARD
For 2009, our financial goals place as much emphasis on our balance
sheet and cash flow statements as on our income statements.
Judging from what we accomplished in the second half of 2008
when we reduced outstanding debt under our revolving credit
facility by approximately $50 million, we are heading in the right
direction. As 2008 closed, our liquidity position was excellent.
We had in excess of $300 million of borrowing availability under
our revolving credit facility. There are no financial maintenance
covenants under our senior notes and the financial maintenance
covenants in our credit facility are not applicable unless we fall
below $100 million in borrowing availability. In addition, our $900
million credit facility will not come due until June 2013 and our two
senior note issues do not mature until August 2014 and May 2015.
from the pressures of excessive leverage, tight credit and a weak
economy, we recognize that we made some wise business decisions
last year by building a flexible capital structure and generating
cash flow by reducing capital expenditures and operating costs. We
continue to manage our business conservatively, anticipating that
things could get worse before they get better in the U.S. and in the
U.K. This is not the first time we have been faced with a difficult
economy, but today we are in a much stronger position than in prior
recessions because we now have greater geographic, customer and
product diversification, and are now a free cash flowing business,
which allows us to further deleverage our balance sheet.
Our 2009 business plan calls for continuing to take costs out of
our business to maintain our margins, preserving capital, reducing
net capital expenditures to between $15 million to $25 million,
and utilizing free cash flow to pay down debt. We also plan to
continue to monetize less productive non-core assets. In addition,
the $30 million of estimated annualized cost synergies from the MSG
acquisition will assist us in achieving these objectives.
While we are finding ways to operate more efficiently, we are
also doing everything possible to maintain our utilization rates
and correspondingly, our lease revenues, at productive levels.
For example, since billions of dollars have been allocated under
The American Recovery and Reinvestment Act for transportation
infrastructure programs and for the modernization of municipal,
state and federal buildings, we now have a dedicated team in place
to pursue opportunities presented by this large potential source of
business. We have extensive experience with this market segment,
and approximately 10% of our units on rent at December 31, 2008
were to government and institutional customers.
There is no doubt that 2009 will be a challenging year, with far
less visibility as to what the future might bring than in prior years.
While we don’t welcome a recession, if history repeats itself, there
should be a bright side for our stronger and leaner company in the
form of market share gains once the economy turns.
Before closing, I would like to officially welcome Mark Funk as our
new Chief Financial Officer and Sanjay Swani and Michael Donovan as
new members to our Board of Directors in 2008. Mark succeeded Larry
Trachtenberg who retired as an officer at year-end but who remains
on our Board of Directors and a very good friend to all of us at Mobile
Mini. We also welcome all of the new employees who joined us during
2008, especially in connection with the MSG acquisition.
Speaking on behalf of the Board of Directors, I want to thank the
entire Mobile Mini team for their contributions to the successes of
2008. We also appreciate the support of our shareholders, suppliers,
customers, noteholders and lenders as well as our new investors,
directors and employees who joined us from MSG.
Sincerely yours,
After seeing some of the large players in businesses similar to
ours, including the office and equipment rental businesses, suffer
Steven G. Bunger
Chairman, President & Chief Executive Officer
4
Non-GAAP Adjustments
We defi ne “Non-GAAP” measures as operating results excluding certain non-recurring charges, which are more fully discussed in the footnotes below.
Non-GAAP Reconciliation to Nearest Comparable GAAP Measure
Twelve Months Ended December 31, 2006
(in thousands except per share data and percentages)
(including effects of rounding)
Non-GAAP (1)
Debt extinguishment
expense (2)
Income tax
benefi t (3)
GAAP
Revenues
EBITDA
EBITDA margin
Operating income
Operating income margin
Pre tax income (loss)
Net income (loss)
Diluted earnings (loss) per share
$
$
$
$
$
$
273,363
116,774
42.7%
99,530
36.4%
76,352
46,386
1.31
$
$
$
$
$
$
-
-
-
-
-
(6,425)
(3,952)
(0.11)
$
$
$
$
$
$
$
$
$
$
$
$
-
-
-
-
-
-
342
0.01
$
$
$
$
$
$
273,363
116,774
42.7%
99,530
36.4%
69,927
42,776
1.21
GAAP
318,302
129,865
40.8%
108,508
34.1%
72,586
44,176
1.22
Twelve Months Ended December 31, 2007
(in thousands except per share data and percentages)
(including effects of rounding)
Non-GAAP (1)
Debt extinguishment
expense (2)
$
$
$
$
$
$
318,302
129,865
40.8%
108,508
34.1%
83,810
51,078
1.41
$
$
$
$
$
$
-
-
-
-
-
(11,224)
(6,902)
(0.19)
Twelve Months Ended December 31, 2008
(in thousands except per share data and percentages)
(including effects of rounding)
Non-GAAP (1)
Integration, merger and
restructuring expenses (4)
Goodwill
impairment (5)
GAAP
$
$
$
$
$
$
415,404
175,048
42.1%
143,258
34.5%
95,135
58,020
1.49
$
$
$
$
$
$
-
(24,427)
(5.9)%
(24,427)
(5.9)%
(24,427)
(15,312)
(0.39)
$
$
$
$
$
$
-
(13,667)
(3.3)%
(13,667)
(3.3)%
(13,667)
(13,667)
(0.35)
$
$
$
$
$
$
415,404
136,954
33.0%
105,164
25.3%
57,041
29,041
0.75
(1) This column represents a Non-GAAP presentation even though some individual line items presented, such as revenues, are identical under both
GAAP and Non-GAAP presentations.
(2) Debt extinguishment expense in 2007 represents deferred loan costs and the redemption premium on $97.5 million aggregate principal amount
outstanding of our 9.5% Senior Notes that we redeemed and is excluded in the Non-GAAP presentation. Debt extinguishment expense in 2006
represents the portion of deferred loan costs and the redemption premium on $57.5 million principal amount of our 9.5% Senior Notes that we
redeemed and is excluded in the Non-GAAP presentation.
(3) Income tax benefi t represents the recognition of certain state net operating loss carryforwards that were previously scheduled to expire in 2006 that
management believed were recoverable and is excluded in the Non-GAAP presentation.
(4) Integration, merger and restructuring expenses in 2008 represents those costs that we accrued in connection with the acquisition of MSG and those
costs in the connection with the restructuring of our operations as a result of the MSG acquisition and is excluded in the Non-GAAP presentation.
(5) Goodwill impairment in 2008 represents the estimated non-cash write-off of portions of goodwill relating to our U.K. and Netherlands
operations and is excluded in the Non-GAAP presentation.
5
Revenues
EBITDA
EBITDA margin
Operating income
Operating income margin
Pre tax income (loss)
Net income (loss)
Diluted earnings (loss) per share
Revenues
EBITDA
EBITDA margin
Operating income (loss)
Operating income margin
Pre tax income (loss)
Net income (loss)
Diluted earnings (loss) per share
Mobile Mini, Inc.’s 2008 Annual Report
on Form 10-K
is available without charge from:
The Equity Group
800 Third Avenue, 36th Floor
New York, New York 10022
Our Form 10-K is also available
on our website at www.mobilemini.com.
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2008
Commission File Number 1-12804
(Exact Name of Registrant as Specified in its Charter)
Delaware
(State or other jurisdiction of
incorporation or organization)
86-0748362
(IRS Employer
Identification No.)
7420 S. Kyrene Road, Suite 101
Tempe, Arizona 85283
(Address of Principal Executive Offices)
(480) 894-6311
(Registrant’s Telephone Number)
Securities Registered pursuant to Section 12(b) of the Act:
Title of Class
Name of Each Exchange on Which Registered
Common Stock, $.01 par value
Preferred Share Purchase Rights
Nasdaq Global Select Market
Securities registered pursuant to Section 12(g) of the Act:
None.
Indicate by check mark if the registrant
is a well-known seasoned issuer, as defined in Rule 405 of the Securities
Act. Yes n
No ¥
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the
Act. Yes n
No ¥
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 n
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not
be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of
this Form 10-K or any amendment to this Form 10-K. ¥
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. (Check one):
Large accelerated filer ¥
Accelerated filer n
Non-accelerated filer n
(Do not check if a smaller reporting company)
Smaller reporting company n
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes n
No ¥
The aggregate market value on June 30, 2008 of the voting stock owned by non-affiliates of the registrant was approximately
$674 million.
As of February 20, 2009, there were outstanding 35,446,409 million shares of the issuer’s common stock, par value $.01.
DOCUMENTS INCORPORATED BY REFERENCE:
Portions of the Proxy Statement for the Registrant’s 2009 Annual Meeting of Stockholders are incorporated herein by reference in
Part III of this Form 10-K to the extent stated herein. Certain exhibits are incorporated in Item 15 of this Report by reference to other
reports and registration statements of the Registrant which have been filed with the Securities and Exchange Commission.
MOBILE MINI, INC.
2008 FORM 10-K ANNUAL REPORT
TABLE OF CONTENTS
PART I
ITEM 1
BUSINESS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
ITEM 1A RISK FACTORS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
ITEM 1B UNRESOLVED STAFF COMMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
PROPERTIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
ITEM 2
LEGAL PROCEEDINGS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
ITEM 3
SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS . . . . . . . . . . . . . . .
ITEM 4
PART II
ITEM 5 MARKET FOR COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND
ISSUER PURCHASES OF EQUITY SECURITIES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SELECTED FINANCIAL DATA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
ITEM 6
ITEM 7 MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
ITEM 7A QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK . . . . . .
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA . . . . . . . . . . . . . . . . . . . . . .
ITEM 8
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
ITEM 9
AND FINANCIAL DISCLOSURE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
ITEM 9A CONTROLS AND PROCEDURES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
ITEM 9B OTHER INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
PART III
ITEM 10 DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE . . . . . . . . . .
ITEM 11 EXECUTIVE COMPENSATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
ITEM 12
AND RELATED STOCKHOLDER MATTERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
ITEM 13 CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR
ITEM 14
INDEPENDENCE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
PRINCIPAL ACCOUNTANT FEES AND SERVICES. . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Page
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ITEM 15 EXHIBITS AND FINANCIAL STATEMENT SCHEDULES . . . . . . . . . . . . . . . . . . . . . . . .
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PART IV
i
ITEM 1. BUSINESS.
Mobile Mini, Inc.
PART I
We are the largest provider of portable storage solutions in North America and the United Kingdom, through
our total lease fleet of approximately 273,700 portable storage and mobile office units at December 31, 2008. We
offer a wide range of portable storage products in varying lengths and widths with an assortment of differentiated
features such as our patented locking systems, multiple doors, electrical wiring and shelving. At December 31,
2008, we operated through a network of 94 branches in the United States, Canada, the United Kingdom and The
Netherlands. In addition, we have various operational yards to support our branch operations in both North America
and the U.K. Our portable units provide secure, accessible temporary storage for a diversified client base of
approximately 118,000 customers, including large and small retailers, construction companies, medical centers,
schools, utilities, manufacturers and distributors, the U.S. and U.K. military, hotels, restaurants, entertainment
complexes and households. Our customers use our products for a wide variety of storage applications, including
retail and manufacturing supplies and inventory, temporary offices, construction materials and equipment, doc-
uments and records and household goods.
On June 27, 2008, we acquired Mobile Storage Group, Inc. (MSG) in a transaction valued at $755.4 million
(the Merger). Mobile Mini assumed Mobile Storage Group’s outstanding indebtedness of $540.9 million and paid
other consideration and transaction costs of $214.5 million consisting of $17.9 million cash (net of $5.5 million cash
acquired), and the issuance of approximately 8.6 million shares of convertible preferred stock with a determined fair
value at issuance of $196.6 million and a liquidation preference value of $154.0 million. The discussion in this
Annual Report of our business, financial condition and results of operations includes the results of our combined
operations with Mobile Storage Group since June 27, 2008.
We were founded in 1983 and since 1996, have followed a strategy of focusing on leasing rather than selling
our portable storage units. Leasing revenues represented approximately 90% of total revenues for the year ending
December 31, 2008. We believe our leasing strategy is highly effective because the vast majority of our fleet
consists of steel portable storage units which:
(cid:129) provide predictable, recurring revenues from leases with an average duration of approximately 32 months;
(cid:129) have average monthly lease rates that recoup our current investment on our remanufactured units within an
average of 35 months;
(cid:129) have long useful lives exceeding 25 years, relatively low maintenance and high residual values; and
(cid:129) produce incremental leasing operating margins of approximately 56.0%.
Since 1996, we have increased our total lease fleet from 13,600 units to approximately 273,700 units as of
December 31, 2008, for a compound annual growth rate, or CAGR, of 28.4%. We experienced a significant increase
in 2008 due to our acquisition of MSG. As a result of our focus on leasing, we have achieved substantial increases in
our revenues, margins and profitability. Our annual leasing revenues have increased from $17.9 million in 1996 to
$371.6 million in 2008, representing a CAGR of 28.8%. In addition to our leasing operations, we sell new and used
portable storage units and provide delivery, installation and other ancillary products and services.
Our fleet is primarily comprised of remanufactured and differentiated steel portable storage containers which
were built according to standards developed by the International Organization for Standardization (ISO), other steel
containers that we manufactured and mobile offices. We remanufacture and customize our purchased ISO
containers by adding our proprietary locking and easy-opening door systems. These assets are characterized by
low risk of obsolescence, extreme durability, relatively low maintenance, long useful lives and a history of high-
value retention. In 2000, we began adding wood mobile office units to the lease fleet to complement our core steel
portable storage products. We maintain our steel containers and mobile offices on a regular basis. Maintenance of
our steel products consists primarily of repainting units, essentially keeping them in the same condition as when
they entered our fleet. Repair and maintenance of our wood mobile offices primarily consists of replacing the
interior flooring which could be either tile or carpeting. Repair and maintenance expense for our fleet has averaged
1
approximately 4.0% of lease revenues over the past three fiscal years and is expensed as incurred. We believe our
historical experience with leasing rates and sales prices for these assets demonstrates their high-value retention. We
are able to lease our portable storage containers at similar rates without regard to the age of the container. In
addition, we have sold containers and steel security offices from our lease fleet at an average of 148% of original
cost from 1997 through 2008.
Industry Overview
The storage industry includes two principal segments, fixed self-storage and portable storage. The fixed self-
storage segment consists of permanent structures located away from customer locations used primarily by consumers
to temporarily store excess household goods. We do not participate in the fixed self-storage segment. We do offer non-
fixed self storage in secure containers from our fleet at some of our locations in the U.S. and the U.K.
The portable storage segment in which our business operates differs from the fixed self-storage segment in that
it brings the storage solution to the customer’s location and addresses the need for secure, temporary storage with
immediate access to the storage unit. The advantages of portable storage include convenience, immediate
accessibility, better security and lower price. In contrast to fixed self-storage, the portable storage segment is
primarily used by businesses. This segment of the storage industry is highly fragmented and remains primarily local
in nature. We believe the portable storage market in the U.S. exceeds $1.5 billion in revenue annually. Portable
storage solutions include containers, van trailers and roll-off units. Although there are no published estimates of the
size of the portable storage segment, we believe portable storage containers are achieving increased storage market
share compared to other storage options and that this segment is expanding because of an increasing awareness that
only containers provide ground level access and better protect against damage caused by wind or water than do other
portable storage alternatives. As a result, containers can meet the needs of a diverse range of customers. Portable
storage containers such as ours provide ground level access, higher security and improved aesthetics compared with
certain other portable storage alternatives such as van trailers.
Our products also serve the mobile office industry. This industry provides mobile offices and other modular
structures and is estimated by the Modular Building Institute to be approximately $5 billion in revenue annually in
North America. We offer combined storage/office units and mobile offices in varying lengths and widths, with lease
terms in North America currently averaging approximately 14 months.
We also offer portable record storage units and many of our regular storage units are used for document and
record storage. We believe the documents and records storage industry will continue to grow as businesses continue
to generate substantial paper records that must be kept for extended periods.
Our goal is to continue to be the leading provider of portable storage solutions in North America and the U.K.
We believe our competitive strengths and business strategy will enable us to achieve this goal.
Competitive Strengths
Our competitive strengths include the following:
Market Leadership. At December 31, 2008, we maintained a total lease fleet of approximately
273,700 units and we are the largest provider of portable storage solutions in North America and the U.K.
We believe we are creating brand awareness and the name “Mobile Mini” is associated with high quality
portable storage products, superior customer service and value-added storage solutions. We have achieved
significant growth in new and existing markets by capturing market share from competitors and by creating
demand among businesses and consumers who were previously unaware of the availability of our products to
meet their storage needs.
Superior, Differentiated Products. We offer the industry’s broadest range of portable storage products,
with many features that differentiate our products from those of our competition. We remanufacture used ocean-
going containers and have designed and manufactured our own portable storage units. These capabilities allow us
to offer a wide range of products and proprietary features to better meet our customers’ needs, charge premium
lease rates and gain market share from our competitors, who offer more limited product selections. Our portable
storage units vary in size from 5 to 48 feet in length and 8 to 10 feet in width. The 10-foot wide units we
2
manufacture provide 40% more usable storage space than the standard eight-foot-wide ocean-going containers
offered by our competitors. The vast majority of our products have our patented locking system and multiple door
options In addition, we offer portable storage units with electrical wiring, shelving and other customized features.
This differentiation allows us to charge premium rental rates versus our competition.
Sales and Marketing Emphasis. We target a diverse customer base and, unlike most of our competitors,
have developed sophisticated sales and marketing programs enabling us to expand market awareness of our
products and generate strong internal growth. We have a dedicated commissioned sales team and we assist
them by providing them with our highly customized contact management system and intensive sales training
programs. We monitor our salespersons’ effectiveness through our extensive sales calls monitoring and sales
mentoring and training programs. On-line, yellow pages and direct-mail advertising are integral parts of our
sales and marketing approach. Our website includes value added features such as product video tours, online
payment capabilities and online real time sales inquiries, enabling customers to chat live with our salespeople.
National Presence with Local Service. We have the largest national network for portable storage
solutions in the U.S. and U.K. and believe it would be difficult to replicate. We have invested significant capital
developing a national network of branches that serves most major metropolitan areas in the U.S. and the U.K.
We have differentiated ourselves from our local competitors and made replication of our presence difficult by
developing our branch network through both opening branches in multiple cities and purchasing competitors
in key markets. The difficulty and time required to obtain the number of units necessary to support a national
operation would make establishing a large competitor difficult. In addition, there are difficulties associated
with recruiting and hiring an experienced management team such as ours that has strong industry knowledge
and local relationships with customers Our network of local branches allows us to develop and maintain
relationships with our local customers, while providing a level of service to regional and national companies
that is made possible by our nationwide presence. Our local managers, sales force and delivery drivers develop
and maintain critical personal relationships with the customers that benefit from access to our wide selection of
products that we are able to offer.
Geographic and Customer Diversification. At December 31, 2008, we operated from 94 branches of
which 74 were located in the U.S., two in Canada, seventeen in the U.K., and one in The Netherlands. We
served approximately 118,000 customers from a wide range of industries in 2008. Our customers include large
and small retailers, construction companies, medical centers, schools, utilities, manufacturers and distributors,
the U.S. and U.K. militaries, government agencies, hotels, restaurants, entertainment complexes and house-
holds. Our diverse customer base demonstrates the broad applications for our products and our opportunity to
create future demand through targeted marketing. In 2008, our largest and our second-largest customers
accounted for 1.8% and 0.7% of our leasing revenues, respectively, and our twenty largest customers
accounted for approximately 5.2% of our leasing revenues. During 2008, approximately 53.4% of our
customers rented a single unit. We believe this diversity also helps us to better weather economic downturns in
individual markets and the industries in which our customers operate.
Customer Service Focus. We believe the portable storage industry is particularly service intensive and
essentially local. Our entire organization is focused on providing high levels of customer service, and our
salespeople work out of our branch locations to better understand local market needs. We have trained our sales
force to focus on all aspects of customer service from the sales call onward. We differentiate ourselves by
providing security, convenience, high product quality, differentiated and broad product selection and avail-
ability, and competitive lease rates. We conduct on-going training programs for our sales force to assure high
levels of customer service and awareness of local market competitive conditions. Additionally, in 2008 we
began to use a Net Promoter Score (NPS) system to measure and enhance our customer service. We use NPS to
measure customer satisfaction each month, rental-by-rental, in real time through surveys conducted by a third
party. We then use customer feedback to drive service improvements across the company, from our branches to
our corporate headquarters. Our customized Enterprise Resource Planning (ERP) system also increases our
responsiveness to customer inquiries and enables us to efficiently monitor our sales force’s performance.
Approximately 54.1% of our 2008 leasing revenues were derived from repeat customers, which we believe is a
result of our superior customer service.
3
Customized Enterprise Resource Planning System. We have made significant investments in an ERP
system for our U.S. and U.K. business. These investments enable us to optimize fleet utilization, control
pricing, capture detailed customer data, easily control credit approval while approving it quickly, audit
company results reports, gain efficiencies in internal control compliance and support our growth by projecting
near-term capital needs. In addition, we believe this system gives us a competitive advantage over smaller and
less sophisticated local and regional competitors. In addition, our ERP system allow us to carefully monitor, on
a real time basis, the size, mix, utilization and lease rates of our lease fleet branch by branch. Our systems also
capture relevant customer demographic and usage information, which we use to target new customers within
our existing and new markets.
Business Strategy
Our business strategy consists of the following:
Focus on Core Portable Storage Leasing Business. We focus on growing our core storage leasing
business, which accounted for 79.0% of our fleet at December 31, 2008, because it provides recurring revenue
and high margins. We believe that we can continue to generate substantial demand for our portable storage
units throughout North America and in the U.K. and The Netherlands. Our leasing revenues have grown from
$17.9 million in 1996 to $371.6 million in 2008, reflecting a CAGR of 28.8%.
Generate Strong Internal Growth. We focus on increasing the number of portable storage units we lease
from our existing branches to both new and repeat customers. We have historically generated strong internal
growth within our existing markets through sophisticated sales and marketing programs aimed to increase
brand recognition, expand market awareness of the uses of portable storage and differentiate our superior
products from our competitors. We define internal growth as growth in lease revenues on a year-over-year basis
at our branch locations in operation for at least one year, without inclusion of leasing revenue attributed to
same-market acquisitions. Our internal growth rate historically was positive every quarter. Due to the
acquisition of MSG, we were able to close locations and combine branch management in each of the cities
with overlapping branches and reposition our lease fleet at our resulting branch locations to align with
customer demand. As a result, comparing internal growth by branch for periods after this acquisition to periods
before this acquisition would be difficult.
Opportunistic Branch Expansion. We believe we have attractive geographic expansion opportunities,
and we have developed a new market entry strategy, which we replicate in each new market in the U.S. and
Europe. We typically enter a new market by acquiring the lease fleet assets of a small local portable storage
business to minimize start-up costs and then overlay our business model onto the new branch. Our business
model consists of significantly expanding the fleet inventory with our differentiated products, introducing our
sophisticated sales and marketing program supported by increased advertising and direct marketing expen-
ditures, adding experienced Mobile Mini personnel and implementing our customized ERP system. As a result
of implementing our business model, our new branches have typically achieved strong organic growth,
including during their first several years of operation.
In 2008, we dramatically expanded our geographic locations in both the U.S. and U.K. and we expanded
our presence in some of our existing markets through the acquisition of MSG and four other smaller
acquisitions. Even with the acquisition of MSG, we have identified other markets where we believe demand for
portable storage units is underdeveloped. Typically, these markets are served by small, local competitors.
Given the current economic environment, however, we are currently focused on optimizing our existing
markets.
Continue to Enhance Product Offering. We continue to enhance our existing products to meet our
customers’ needs and requirements. We have historically been able to introduce new products and features that
expand the applications and overall market for our storage products. For example, over the last ten years we
introduced a number of innovative products including a 10-foot-wide storage unit, a record storage unit and a
10-by-30-foot steel combination storage/office unit to our fleet. The record storage unit provides highly
secure, on-site and easy access to archived business records close at hand. In addition to our steel container and
steel security offices, we have also added wood mobile offices as a complementary product to better serve our
4
customers. We have also made continuous improvements (i.e., making it easier to use in colder climates) to our
patented locking system over the years. Currently, the 10-foot-wide unit, the record storage unit and the 10-by-
30-foot steel combination storage/office unit are exclusively offered by Mobile Mini. We believe our design
and manufacturing capabilities increase our ability to service our customers’ needs and expand demand for our
portable storage solutions.
Products
We provide a broad range of portable storage products to meet our customers’ varying needs. Our products are
managed and our customers are serviced locally by our employee team at each of our branches, including
management, sales personnel and yard facility employees. Some features of our different products are listed below:
(cid:129) Remanufactured and Modified Steel Storage Units. We purchase used ocean-going containers from
leasing companies, shipping lines and brokers. These containers were originally built to ISO standards
and are eight feet wide, 8’6” to 9’6” high and 20, 40 or 45 feet long. After acquisition, we remanufacture and
modify these ocean-going containers. Remanufacturing typically involves cleaning, removing rust and
dents, repairing floors and sidewalls, painting, adding our signs and installing new doors and our proprietary
locking system. Modification typically involves splitting some containers into 5-, 10-, 15-, 20- or 25-foot
lengths. We have also manufactured portable steel storage units for our lease fleet and for sale including our
ten foot wide units.
We generally purchase used ISO containers when they are 10 to 12 years old, a time at which their useful life
as ocean-going shipping containers is over according to the standards promulgated by the International
Organization for Standardization. Because we do not have the same stacking and strength requirements that
apply in the ocean-going shipping industry, we have no need for these containers to meet ISO standards. We
purchase these containers, truck them to our locations, remanufacture them by removing any rust, paint
them with a rust inhibiting paint, and further customize them, typically by adding our proprietary easy-
opening door system and our patented locking system. We believe we are able to purchase used ocean-going
containers at competitive prices because of our volume purchasing power.
(cid:129) Steel Security Office and Steel Security/Office/Storage Units. We buy and historically have manufactured
steel combination office/security and security office units that range from 10 to 40 feet in length. We offer
these units in various configurations, including office and storage combination units that provide a 10- or 15-
foot office with the remaining area available for storage. We believe our office units provide the advantage of
ground accessibility for ease of access and high security in an all-steel design. Our European products
include canteen units and drying rooms for the construction industry. For customers with space limitations,
the office/canteen units can also be stacked two high with stairs for access to the top unit. These office units
are equipped with electrical wiring, heating and air conditioning, phone jacks, carpet or tile, high security
doors and windows with security bars or shutters. Some of these offices are also equipped with sinks, hot
water heaters, cabinets and restrooms.
(cid:129) Wood Mobile Office Units. We added mobile office units to our product line in 2000. We purchase these
units, which range from eight to 24 feet in width and 20 to 60 feet in length, from manufacturers. These units
have a wide range of exterior and interior options, including exterior stairs or ramps, awnings and skirting.
These units are equipped with electrical wiring, heating and air conditioning, phone jacks, carpet or tile and
windows with security bars. Many of these units contain restrooms.
(cid:129) Steel Records Storage Units. We market proprietary portable records storage units that enable customers to
store documents at their location for easy access, or at one of our facilities. Our units are 10.5 feet wide and
are available in 12-and 23-foot lengths. The units feature high-security doors and locks, electrical wiring,
shelving, folding work tables and air filtration systems. We believe our product is a cost-effective alternative
to mass warehouse storage, with a high level of fire and water damage protection.
(cid:129) Van Trailers — Non-Core Storage Units. Our acquisitions typically entail the purchase of small companies
with lease fleets primarily comprised of standard ISO containers. However, many of these companies also
have van trailers and other manufactured storage products which we believe do not have the same advantages
5
as standard containers. It is our goal to dispose of these units from our fleet either as their initial rental period
ends or within a few years. We do not remanufacture these products. See “Product Lives and Durability —
Van Trailers and Other Non-Core Storage Products” below. At December 31, 2008, van trailers comprised
less than 1.3% of our fleet, based on a gross book value basis.
(cid:129) Timber Units — Non-Core Units.
In connection with the MSG transaction, we acquired assets that were
not part of our principal lease fleet. These assets include timber units in the U.K. which are older wood
constructed mobile offices. We plan to dispose of these non-core assets as opportunities permit.
(cid:129) Portable Toilets — Non-Core Units. Other units acquired in the MSG transaction include portable toilets
which are typically leased in conjunction with office unit leases in the U.K.
Product Lives and Durability
We believe our steel portable storage units, steel security offices, and wood mobile offices have estimated
useful lives of 25 years, 25 years, and 20 years, respectively, from the date we build or acquire and remanufacture
them, with residual values of our per-unit investment ranging from 50% for our mobile offices to 62.5% for our core
steel products. Van trailers, which comprised 1.3% of the gross book value of our lease fleet at December 31, 2008,
are depreciated over seven years to a 20% residual value. For the past three fiscal years, our cost to repair and
maintain our lease fleet units averaged approximately 4.0% of our lease revenues. Repainting the outside of storage
units is the most frequent maintenance item.
We maintain our steel containers on a regular basis by painting them, removing rust, and occasionally
replacing the wooden floor or a rusted panel as they come off rent and are ready to be leased again. This periodic
maintenance keeps the container in essentially the same condition as after we initially remanufactured it and is
designed to maintain the unit’s value and rental rates comparable to new units.
Approximately 9.9% of our 2008 revenue was derived from sales of our units. Because the containers in our
lease fleet do not significantly depreciate in value, we have no systematic program in place to sell lease fleet
containers as they reach a certain age. Instead, most of our U.S. container sales involve either highly customized
containers that would be difficult to lease on a recurring basis, or containers that we have not remanufactured. In
addition, due primarily to availability of inventory at various locations at certain times of the year, we sell a certain
portion of containers and offices from the lease fleet. Our gross margins increase for containers in the lease fleet for
greater lengths of time prior to sale, because although these units have been depreciated based upon a 25 year useful
life and 62.5% residual value (1.5% per year), in most cases fair value may not decline by nearly that amount due to
the nature of the assets and our stringent maintenance policy.
The following table shows the gross margin on containers and steel security offices sold from inventory (which
we call our sales fleet) and from our lease fleet from 1997 through 2008 based on the length of time in the lease fleet.
Sales fleet(2) . . . . . . . . . . . . . . .
Lease fleet, by period held
before sale:
Less than 5 years . . . . . . . . . .
5 to 10 years . . . . . . . . . . . . .
10 to 15 years . . . . . . . . . . . .
15 to 20 years . . . . . . . . . . . .
20+ years . . . . . . . . . . . . . . . .
Number of
Units Sold
Sales
Revenue
Original
Cost(1)
Sales
Revenue as a
Percentage of
Original Cost
Sales
Revenue as a
Percentage of
Net Book Value
37,170
$118,216
$77,815
152%
152%
(Dollars in thousands)
17,776
4,379
1,050
153
6
$ 63,635
$ 19,101
4,048
$
528
$
20
$
$42,863
$12,995
$ 2,822
365
$
17
$
148%
147%
143%
145%
119%
151%
162%
169%
180%
172%
(1) “Original cost” for purposes of this table includes (i) the price we paid for the unit, plus (ii) the cost of our
manufacturing or remanufacturing, which includes both the cost of customizing units incurred, plus (iii) the
6
freight charges to our branch when the unit is first placed in service. For manufactured units, cost includes our
manufacturing cost and the freight charges to the branch location where the unit is first placed into service.
(2) Includes sales of unremanufactured ISO containers.
In addition, appraisals on our fleet are conducted on a regular basis by an independent appraiser selected by our
lenders, and the appraiser does not differentiate in value based upon the age of the container or the length of time it
has been in our fleet. As of December 31, 2008, based on this orderly liquidation value appraisal, on which our
borrowings under our revolving credit facility are based, our lease fleet appraisal value is approximately
$919.3 million, which equates to 85.3% of our lease fleet net book value of $1.1 billion at year end. At
December 31, 2007, our orderly liquidation value equated to 81.7% of the lease fleet net book value.
Because steel storage containers substantially keep their value when properly maintained, we are able to lease
containers that have been in our lease fleet for various lengths of time at similar rates, without regard to the age of
the container. Our lease rates vary by the size and type of unit leased, length of contractual term, custom features and
the geographic location of our branch at which the lease is originated. While we focus on service and security as a
main differentiation of our products from our competitors, pricing competition, market conditions and other factors
can influence our leasing rates.
The following chart shows the average monthly lease rate that we currently receive for various types of
containers that have been in our lease fleet for various periods of time. We have added our 10-foot-wide containers
and security offices to the fleet only in the last several years and those types of units are not included in this chart.
This chart includes the eight major types of containers in the fleet, excluding units acquired in the Merger, but
specific details of such type of unit are not provided due to competitive considerations.
Type 1 . . . . . . . . Number of units
Average rent
Type 2 . . . . . . . . Number of units
Average rent
Type 3 . . . . . . . . Number of units
Average rent
Type 4 . . . . . . . . Number of units
Average rent
Type 5 . . . . . . . . Number of units
Type 6 . . . . . . . . Number of units
Average rent
Average rent
Type 7 . . . . . . . . Number of units
Type 8 . . . . . . . . Number of units
Average rent
Average rent
0 — 5
4,513
$ 70.51
1,098
$ 86.15
12,004
$ 59.73
262
$112.18
455
$ 97.73
3,545
$123.77
12,509
$110.96
338
$166.59
Age of Containers
(By Number of Years in Our Lease Fleet)(1)
11 — 15
16 — 20
6 — 10
2,993
$ 83.14
956
$ 84.36
3,549
$ 82.59
451
$110.24
1,376
$120.63
4,673
$128.07
7,240
$112.79
404
$160.68
1,670
$ 84.01
511
$ 84.23
2,254
$ 84.45
347
$108.03
158
$126.71
1,166
$130.73
1,076
$122.11
252
$167.24
127
$ 77.90
83
$ 82.32
675
$ 82.98
49
$101.65
29
$121.22
145
$128.72
92
$127.41
27
$150.66
Over 21
2
$ 70.42
1
$ 70.42
604
$ 78.92
1
$108.33
1
$124.58
14
$138.98
872
$107.27
5
$198.68
Total Number/
Average Dollar
9,305
$ 77.10
2,649
$ 85.01
19,086
$ 68.33
1,110
$109.63
2,019
$115.96
9,543
$126.82
21,789
$112.04
1,026
$164.16
(1) We have excluded units acquired in the Merger from the table above so as not to distort the data presented as
these units have all been in our lease fleet less than one year.
We believe fluctuations in rental rates based on container age are primarily a function of the location of the
branch from which the container was leased rather than age of the container. Some of the units added to our lease
fleet during recent years through our acquisitions program have lower lease rates than the rates we typically obtain
because the units remain on lease under terms (including lower rental rates) that were in place when we obtained the
units in acquisitions.
7
We periodically review our depreciation policy against various factors, including the following:
(cid:129) results of our lenders’ independent appraisal of our lease fleet;
(cid:129) practices of the major competitors in our industry;
(cid:129) our experience concerning useful life of the units;
(cid:129) profit margins we are achieving on sales of depreciated units; and
(cid:129) lease rates we obtain on older units.
Our depreciation policy for our lease fleet uses the straight-line method over the units’ estimated useful life,
after the date we put the unit in service, and the units are depreciated down to their estimated residual values.
Steel Storage, Steel Office and Combination Units. Our steel products are our core leasing units and include
portable storage units, whether manufactured or remanufactured ISO containers, steel security office and storage/
office combination units. Our steel units are depreciated over 25 years with an estimated residual value of 62.5%.
Wood Mobile Office Units. Because of the wood structure of these units, they are more susceptible to wear
and tear than steel units. We depreciate these units over 20 years down to a 50% residual value (2.5% per year)
which we believe to be consistent with most of our major competitors in this industry. Wood mobile office units lose
value over time and we may sell older units from time to time. At the end of 2008, our wood mobile offices were all
less than nine years old. These units, excluding those units acquired in acquisitions, are also more expensive than
our storage units, causing an increase in the average carrying value per unit in the lease fleet over the last eight years.
Although the operating margins on mobile offices are high, they are lower than the margins on steel containers.
However, these mobile offices are rented using our existing infrastructure and therefore provide incremental returns
far in excess of our fixed expenses. This adds to our overall profitability and operating margins.
Van Trailers — Non-Core Storage Units. At December 31, 2008, van trailers made up less than 1.3% of the
gross book value of our lease fleet. When we acquire businesses in our industry, the acquired businesses often have
van trailers and other manufactured storage products which we believe do not offer customers the same advantages
as our core steel container storage product. We depreciate our van trailers over 7 years to a 20% residual value. We
often attempt to sell most of these units from our fleet as they come off rent or within a few years after we acquire
them. We do not utilize our resources to remanufacture these products and instead resell them.
Timber Units — Non-Core Units. These units are older wood constructed mobile offices in the U.K. and are
depreciated over 5 years to 10% of their assigned value.
Portable Toilets — Non-Core Units. Steel portable toilets are depreciated over 25 years to 62.5% of their
residual value, wood timber portable toilets are depreciated over 5 years to 10% of their residual value and
fiberglass portable toilets are depreciated over 3 years to 30% of their residual value.
Lease Fleet Configuration
Our lease fleet is comprised of over 100 different configurations of units. Throughout the year we add units to our
fleet through purchases of used ISO containers and containers obtained through acquisitions, both of which we
remanufacture and customize. We also purchase new manufactured mobile offices in various configurations and sizes,
and manufacture our own custom steel units. Due to the number of units acquired in the MSG transaction and the
current economic environment, we do not anticipate needing to purchase or acquire containers or offices to
remanufacture or customize until the operating environment significantly improves. Our initial cost basis of an
ISO container includes the purchase price from the seller, the cost of remanufacturing, which can include removing
rust and dents, repairing floors, sidewalls and ceilings, painting, signage, installing new doors, seals and a locking
system. Additional modifications may involve the splitting of a unit to create several smaller units and adding
customized features. The restoring and modification processes do not necessarily occur in the same year the units are
purchased or acquired. We procure larger containers, typically 40-foot units, and split them into two 20-foot units or
one 25-foot and one 15-foot unit, or other configurations as needed, and then add new doors along with our patented
locking system and sometimes we add custom features. We also will sell units from our lease fleet to our customers.
8
The table below outlines those transactions that effectively increased the net asset value of our lease fleet from
$802.9 million at December 31, 2007 to $1.1 billion at December 31, 2008:
Dollars
Units
(Dollars in thousands)
Lease fleet at December 31, 2007, net. . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 802,923
Purchases:
160,116
Container purchases and containers obtained through acquisitions,
including freight . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Non-core units obtained through acquisitions, primarily van trailers . . . . .
201,589
57,683
96,381
21,658
Manufactured units:
Steel containers, combination storage/office combo units and steel
security offices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
New wood mobile offices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
29,376
9,340
1,844
312
Remanufacturing and customization:(3)
Remanufacturing or customization of units purchased or acquired in the
current year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
9,188
2,650(1)
Remanufacturing or customization of 4,651 units purchased in a prior
year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
16,693
1,184(1)
Remanufacturing or customization of 985 units obtained through
acquisition in a prior year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other(4) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cost of sales from lease fleet . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Depreciation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
409
(12,794)
(18,464)
(17,787)
141(2)
(1,734)
(8,804)
Lease fleet at December 31, 2008, net. . . . . . . . . . . . . . . . . . . . . . . . . . . . . $1,078,156
273,748
(1) These units include the net additional units that were the result of splitting steel containers into one or more
shorter units, such as splitting a 40-foot container into two 20-foot units, or one 25-foot unit and one 15-foot
unit.
(2) Includes units moved from finished goods to lease fleet.
(3) Does not include any routine maintenance, which is expensed as incurred.
(4) Dollars primarily represent foreign currency translation adjustments.
The table below outlines the composition of our lease fleet at December 31, 2008:
Steel storage containers. . . . . . . . . . . . . . . . . . . . . . .
Offices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Van trailers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other, primarily chassis . . . . . . . . . . . . . . . . . . . . . .
Accumulated depreciation . . . . . . . . . . . . . . . . . . . . .
Lease Fleet
(In thousands)
$ 616,750
523,242
15,610
2,161
1,157,763
(79,607)
Number of Units
Percentage of
Units
216,669
43,593
13,486
79%
16%
5%
$1,078,156
273,748
100%
Branch Operations
Our senior management analyzes and manages the business as one business segment and our operations across
all branches concentrate on the same core business of leasing, using products which are substantially the same in
each market. In order to effectively manage this business across different geographic areas, we divide our one
9
business segment into smaller management areas we call divisions, regions and branches. Each of our branches
generally has similar economic characteristics covering all products leased or sold, including similar customer base,
sales personnel, advertising, yard facilities, general and administrative costs and branch management.
In the U.S. particularly, we locate our branches in markets with attractive demographics and strong growth
prospects. Within each market, we have located our branches in areas that allow for easy delivery of portable storage
units to our customers over a wide geographic area. In addition, when cost effective, we seek locations that are
visible from high traffic roads in order to advertise our products and our name. Our branches maintain an inventory
of portable storage units available for lease, and some of our older branches also provide storage of units under lease
at the branch (on-site storage).
We currently have 74 branches in the U.S., 2 branches in Canada, 17 branches in the U.K. and one branch in
The Netherlands. Additionally, we have 24 properties we call operations yards from which we can service a local
market and store and maintain our product and equipment. These operations yards do not have branch managers or
sales people but typically have a dispatcher and drivers assigned to them.
Each branch has a branch manager who has overall supervisory responsibility for all activities of the branch.
Branch managers report to regional managers who each generally oversee 5-6 branches. Our regional managers, in
turn, report to one of our operational senior vice presidents (called a managing director in Europe). Performance
based incentive bonuses are a substantial portion of the compensation for these senior vice presidents, regional and
branch managers.
Each branch has its own sales force and a transportation department that delivers and picks up portable storage
units from customers. Each branch has delivery trucks and forklifts to load, transport and unload units and a storage
yard staff responsible for unloading and stacking units. Steel units can be stored by stacking them three to four high
to maximize usable ground area. Our larger branches also have a fleet maintenance department to maintain the
branch’s trucks, forklifts and other equipment. Our smaller branches perform preventative maintenance tasks but
outsource major repairs.
Sales and Marketing
We have dedicated local sales people at our branches and a sales management team at our headquarters and
other locations that conduct sales and marketing on a full-time basis. We believe that by locating most of our sales
and marketing staff in our branches, we can better understand the portable storage needs of our customers and
provide higher levels of customer service. Our sales force handles all of our products and we do not maintain
separate sales forces for our various product lines. Our sales and marketing force provides information about our
products to prospective customers by handling inbound calls and by initiating cold calls. We have on-going sales
and marketing training programs covering all aspects of leasing and customer service. Our branches communicate
with one another and with corporate headquarters through our ERP system. This enables the sales and marketing
team to share leads and other information and permits management to monitor and review sales and leasing
productivity on a branch-by-branch basis. We constantly strive to improve our sales efforts by recording and rating
the sales calls made and received by our trained sales force. Our sales and marketing employees are compensated
primarily on a commission basis.
Our nationwide presence in the U.S. and the U.K. allows us to offer our products to larger customers who wish
to centralize the procurement of portable storage on a multi-regional or national basis. We are well equipped to meet
multi-regional customers’ needs through our National Account Program, which centralizes and simplifies the
procurement, rental and billing process for those customers. Approximately 1,100 U.S. customers and 60 European
customers currently participate in our National Account Program. We also provide our national account customers
with service guarantees which assure them they will receive the same high level of customer service from any of our
branch locations. This program has helped us succeed in leveraging customer relationships developed at one branch
throughout our branch system.
We focus an increasing portion of our marketing expenditures on internet-based initiatives with web-based
products and services for both existing customers and potential customers. We also advertise our products in the
yellow pages and use a targeted direct mail program. In 2008, we mailed approximately 8.2 million product
10
brochures to existing and prospective customers. These brochures describe our products and features and highlight
the advantages of portable storage.
Customers
During 2008, approximately 118,000 customers leased our portable storage, combination storage/office and
mobile office units, compared to approximately 93,000 in 2007. Our customer base is diverse and consists of
businesses in a broad range of industries. Our largest single leasing customer accounted for only 1.8% of our leasing
revenues in both 2007 and 2008. Our next largest customer accounted for approximately 0.9% and 0.7% of our
leasing revenues in 2007 and 2008, respectively. Our twenty largest customers combined accounted for approx-
imately 4.9% of our lease revenues in 2007 and approximately 5.2% of our lease revenues in 2008. Approximately
53.4% of our customers rented a single unit during 2008.
Based on an independent market study, we believe our customers are engaged in a vast majority of the
industries identified in the four-digit SIC (Standard Industrial Classification) manual published by the U.S. Bureau
of the Census.
We target customers who can benefit from our portable storage solutions either for seasonal, temporary or
long-term storage needs. Customers use our portable storage units for a wide range of purposes. The following table
provides an overview of our customers and how they use our portable storage, combination storage/office and
mobile office units as of December 31, 2008:
Business
Approximate
Percentage of
Units on Lease
Representative
Customers
Consumer service and retail
businesses. . . . . . . . . . . . .
30%
Construction . . . . . . . . . . . . .
36%
Consumers . . . . . . . . . . . . . .
4%
Government and
Institutions . . . . . . . . . . . .
10%
Industrial and commercial . . .
13%
Other . . . . . . . . . . . . . . . . . .
7%
Remanufacturing
Department, drug, grocery
and strip mall stores, hotels,
restaurants, dry cleaners and
service stations
General, electrical, plumbing
and mechanical contractors,
landscapers, residential
homebuilders and equipment
rental companies
Homeowners
Schools, hospitals, medical
centers, military, Native
American tribal governments
and reservations and
national, state, county and
local governmental agencies
Distributors, trucking and
utility companies, finance
and insurance companies and
film production companies
Typical Application
Inventory storage, record
storage and seasonal needs
Equipment and materials
storage and job offices
Backyard storage and storage
of household goods during
relocation or renovation;
storage at our location
Athletic equipment, military
storage, disaster
preparedness, supplier, record
storage, security office,
supplies, equipment storage,
temporary office space and
seasonal needs
Raw materials, equipment,
record storage, in-plant office
and seasonal needs
In December 2008, after integrating the assets and operations we acquired in the MSG acquisition, we
leveraged our combined fleet and restructured our manufacturing operations, reducing overhead and capital
expenditures for our lease fleet. We accomplished this primarily by reducing our work force at our Maricopa,
Arizona manufacturing facility by approximately 90%, in addition to reducing manufacturing and remanufacturing
11
staff at other locations. Additionally, we essentially halted new production activities other than completing existing
work in process assignments. Historically, we built new steel portable storage units, steel security offices and other
custom-designed steel structures as well as remanufacture used ocean-going containers at our Maricopa, Arizona
facility. We continue to remanufacture used ocean-going containers at our branch locations. Our differentiated
product offering allows us to provide a broad selection of products to our customers and distinguishes our products
from our competitors. If needed in the remanufacturing process we purchase raw materials such as steel, vinyl,
wood, glass and paint, which we use in our remanufacturing and restoring operations. We typically buy these raw
materials on a purchase order basis. We do not have long-term contracts with vendors for the supply of any raw
materials. For the near future, we expect our Maricopa, Arizona facility, with a limited staff, will predominately be
used for remanufacturing and rebranding units acquired in acquisitions to be compliant with our lease fleet
standards and for repairs and maintenance on our existing lease fleet.
Vehicles
At December 31, 2008, we had a fleet of 851 delivery trucks, of which 705 were owned and 146 were leased.
We use these trucks to deliver and pick up containers at customer locations. We supplement our delivery fleet by
outsourcing delivery services to independent haulers when appropriate.
Enterprise Resource Planning System
In 2006, we implemented our new customized ERP system in North America to improve and optimize lease
fleet utilization, improve the effectiveness of our sales and marketing programs and to allow international growth
using the same ERP system throughout the company. In 2007, our European operations were converted from their
existing systems onto the same ERP customized platform under which we operate in North America to gain further
efficiencies. This system consists of a wide-area network that connects our headquarters and all of our branches.
Our Tempe, Arizona corporate headquarters and each branch can enter data into the system and access data on a
real-time basis. We generate weekly management reports by branch with leasing volume, fleet utilization, lease
rates and fleet movement as well as monthly profit and loss statements on a consolidated and branch basis. These
reports allow management to monitor each branch’s performance on a daily, weekly and monthly basis. In 2008, we
implemented a dashboard system in order to gain further efficiencies by having branch managers, regional
managers and senior vice presidents electronically review real-time data we feel is most relevant to the business. We
track each portable storage unit by its serial number. Lease fleet and sales information are entered in the system
daily at the branch level and verified through monthly physical inventories by branch or corporate employees.
Branch salespeople also use the system to track customer leads and other sales data, including information about
current and prospective customers. We have made significant investments to our ERP system during the past three
years, and we intend to continue that investment to further optimize the features of this new system for both the
North American and our European operations. Subsequent to the closing of the Merger, MSG’s business data was
successfully transferred to and incorporated into our ERP system. All new U.S. locations acquired in the Merger
were operationally capable of using our systems shortly after we closed the transaction. We converted MSG’s U.K.
branches onto our systems in the third quarter 2008.
Lease Terms
Under our lease agreements, each lease has an original intended length of term at inception but if the customer
keeps the leased unit beyond the original intended term, the lease continues on a month-to-month basis until
cancelled by the customer. At the end of 2008, our steel storage containers initially have an average intended term of
approximately 8 months at inception, however their average duration for these leases that have fulfilled their term
agreement was 33 months to date. The average monthly rental rate on these units was approximately $100. Our
security, security/storage and mobile offices typically have an average intended lease term of approximately
11 months. The duration of all office leases that have fulfilled their term agreement was 23 months in 2008. Our
leases provide that the customer is responsible for the cost of delivery and pickup at lease inception. Our leases
specify that the customer is liable for any damage done to the unit beyond ordinary wear and tear. However, our
customers may purchase a damage waiver from us to avoid this liability in certain circumstances. This provides us
12
with an additional source of recurring revenue. The customer’s possessions stored within the portable storage unit
are typically the responsibility of the customer.
Competition
We face competition from several local and regional companies, as well as from national companies, in all of
our current markets. We compete with several large national and international companies in our mobile office
product line. Our competitors include lessors of storage units, mobile offices, used van trailers and other structures
used for portable storage. We also compete with conventional fixed self-storage facilities. We compete primarily in
terms of security, convenience, product quality, broad product selection and availability, lease rates and customer
service. In our core portable storage business, we typically compete with Williams Scotsman, Elliot Hire, PODS,
Pac-Van, 1-800-PAC-RAT, LLC, Haulaway Storage Containers, Inc., Moveable Cubicle, Speedy Hire, and a
number of other national, regional and local competitors. In the mobile office business, we typically compete with
ModSpace, Williams Scotsman, McGrath RentCorp and other national, regional and local companies.
Employees
As of December 31, 2008, we employed approximately 2,155 full-time employees in the following major
categories:
Management. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 165
Administrative . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 440
Sales and marketing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 490
Manufacturing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 255
Drivers and storage unit handling . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 805
Access to Information
Our Internet address is www.mobilemini.com. We make available at this address, free of charge, our annual
report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to those reports
filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as soon as reasonably
practicable after we electronically file such material with, or furnish it to, the Securities and Exchange Commission.
In addition to this Form 10-K, we incorporate by reference as identified herein, certain information from parts of our
proxy statement for the 2009 Annual Meeting of Stockholders, which we expect to file with the SEC on or about
April 29, 2009, which will also be available free of charge on our website. Reports of our executive officers,
directors and any other persons required to file securities ownership reports under Section 16(a) of the Securities
Exchange Act of 1934 are also available through our web site. Information contained on our web site is not part of
this Annual Report.
ITEM 1A. RISK FACTORS
Cautionary Statement about Forward Looking Statements
Our discussion and analysis in this Annual Report, in other reports that we file with the Securities and
Exchange Commission, in our press releases and in public statements of our officers and corporate spokespersons
contain forward-looking statements. Forward-looking statements give our current expectations or forecasts of
future events. You can identify these statements by the fact that they do not relate strictly to historical or current
events. They include words such as “anticipate,” “estimate,” “expect,” “intend,” “plan,” “believe” and other words
of similar meaning in connection with discussion of future operating or financial performance. These include
statements relating to future actions, acquisition and growth strategy, synergies and cost savings anticipated from
acquisitions and mergers, future performance or results of current and anticipated products, sales efforts, expenses,
the outcome of contingencies such as legal proceedings and financial results.
Forward-looking statements may turn out to be wrong. They can be affected by inaccurate assumptions or by
known or unknown risks and uncertainties. We undertake no obligation to update or revise any forward-looking
statements whether as a result of new information, future events or otherwise. We provide the following discussion
13
of risks and uncertainties relevant to our business. These are factors that we think could cause our actual results to
differ materially from expected and historical results. Mobile Mini could also be adversely affected by other factors
besides those listed here.
A continued economic slowdown, particularly in the non-residential construction sector of the economy,
could reduce demand from some of our customers, which could negatively impact our financial results.
The recent global financial events have resulted in the consolidation, failure or near failure of a number of
institutions in the banking, insurance and investment banking industries and have substantially reduced the ability
of companies to obtain financing. These events have also caused a substantial reduction in the stock market and
layoffs and other restrictions on spending by companies in almost every business sector. These events could have a
number of different effects on our business, including:
(cid:129) reduction in consumer and business spending, which would result in a reduction in demand for our products;
(cid:129) a negative impact on the ability of our customers to timely pay their obligations to us or our vendors to timely
supply services, thus reducing our cash flow; and
(cid:129) an increase in counterparty risk.
Additionally, at the end of 2007 and 2008, customers in the construction industry, primarily in non-residential
construction, accounted for approximately 43% and 36%, respectively, of our leased units. If the current economic
slowdown in the non-residential construction sector continues, it is likely that we would experience less demand for
leases and sales of our products. Also, because most of the cost of our leasing business is either fixed or semi
variable, this would cause our margins to contract and the adverse affect on operating results would be more
pronounced.
Global capital and credit markets conditions could have an adverse effect on our ability to access the
capital and credit markets, including our credit facility.
Due to the ongoing disruptions in the global credit markets, liquidity in the debt markets has been materially
impacted, making financing terms for borrowers less attractive or, in some cases, unavailable altogether. Prolonged
disruptions in the global credit markets or the failure of additional lending institutions could result in the
unavailability of certain types of debt financing, including access to revolving lines of credit.
We monitor the financial strength of our larger customers, derivative counterparties, lenders and insurance
carriers on an on-going basis using publicly available information in order to evaluate our exposure to those who
have or who we believe may likely experience significant threats to their ability to adequately service our needs.
While we engage in borrowing and repayment activities under our revolving credit facility on an almost daily basis
and have not had any disruption in our ability to access our revolving credit facility as needed, the current credit
market conditions could eventually increase the likelihood that one or more of our lenders may be unable to honor
its commitments under our revolving credit facility, which could have an adverse effect on our business, financial
condition and results of operations.
Additionally, in the future we may need to raise additional funds to, among other things, fund our existing
operations, improve or expand our operations, respond to competitive pressures, or make acquisitions. If adequate
funds are not available on acceptable terms, we may be unable to meet our business or strategic objectives or
compete effectively. If we raise additional funds by issuing equity securities, stockholders may experience dilution
of their ownership interests, and the newly issued securities may have rights superior to those of the common stock.
If we raise additional funds by issuing debt, we may be subject to further limitations on our operations. If we fail to
raise capital when needed, our business will be negatively affected.
We may fail to realize the anticipated benefits of the merger transaction with Mobile Storage Group, and
the continuing integration process could adversely impact our ongoing operations.
We acquired Mobile Storage Group with the expectation that the merged operations would result in various
benefits, including, among other things, an expanded customer base and ongoing cost savings and operating
14
efficiencies. The continued success of the merged operations will depend, in part, on our ability to realize such
anticipated benefits from combining the businesses of our company and Mobile Storage Group. The anticipated
benefits and cost savings of the merger may not be realized fully, or at all, or may take longer to realize than
expected. Failure to achieve anticipated benefits could result in increased costs and decreases in the amounts of
expected revenues of the combined company.
Unionization by some or all of our employees could cause increases in operating costs.
None of our employees are presently covered by collective bargaining agreements. However, from time to time
various unions have attempted to organize some of our employees. We cannot predict the outcome of any continuing
or future efforts to organize our employees, the terms of any future labor agreements, or the effect, if any, those
agreements might have on our operations or financial performance.
We believe that a unionized workforce would generally increase our operating costs, divert the attention of
management from servicing customers and increase the risk of work stoppages, all of which could have a material
adverse effect on our business, results of operations or financial condition.
We operate with a high amount of debt and we may incur significant additional indebtedness.
Our operations are capital intensive, and we operate with a high amount of debt relative to our size. In May
2007, we issued $150.0 million in aggregate principal amount of 6.875% Senior Notes. These notes were issued at
99.548% of par value. In connection with our acquisition of Mobile Storage Group, we assumed approximately
$544.9 million of Mobile Storage Group’s indebtedness with an acquisition date fair value of $540.9 million. On
June 27, 2008, we entered into an ABL Credit Agreement under which we may borrow up to $900.0 million on a
revolving loan basis which means that amounts repaid may be reborrowed. Our substantial indebtedness could have
adverse consequences. For example, it could:
(cid:129) require us to dedicate a substantial portion of our cash flow from operations to payments on our indebt-
edness, which could reduce the availability of our cash flow to fund future working capital, capital
expenditures, acquisitions and other general corporate purposes;
(cid:129) make it more difficult for us to satisfy our obligations with respect to our Senior Notes;
(cid:129) expose us to the risk of increased interest rates, as certain of our borrowings will be at variable rates of
interest;
(cid:129) require us to sell assets to reduce indebtedness or influence our decisions about whether to do so;
(cid:129) increase our vulnerability to general adverse economic and industry conditions;
(cid:129) limit our flexibility in planning for, or reacting to, changes in our business and our industry;
(cid:129) restrict us from making strategic acquisitions or pursuing business opportunities; and
(cid:129) limit, along with the financial and other restrictive covenants in our indebtedness, among other things, our
ability to borrow additional funds. Failing to comply with those covenants could result in an event of default
which, if not cured or waived, could have a material adverse effect on our business, financial condition and
results of operations.
Covenants in our debt instruments restrict or prohibit our ability to engage in or enter into a variety of
transactions.
The indentures governing our 6.875% Senior Notes and the 9.75% Senior Notes originally issued by MSG
which we assumed as part of the Merger and, to a lesser extent, our revolving credit facility agreements contain
various covenants that may limit our discretion in operating our business. In particular, we are limited in our ability
to merge, consolidate or transfer substantially all of our assets, issue preferred stock of subsidiaries and create liens
on our assets to secure debt. In addition, if there is default, and we do not maintain borrowing availability in excess
of certain pre-determined levels, we may be unable to incur additional indebtedness, make restricted payments
(including paying cash dividends on our capital stock) and redeem or repurchase our capital stock. Our Senior Notes
15
do not contain financial maintenance covenants and the financial maintenance covenants under our revolving credit
facility are not applicable unless we fall below $100 million in borrowing availability.
Our revolving credit facility requires us, under certain limited circumstances, to maintain certain financial
ratios and limits our ability to make capital expenditures. These covenants and ratios could have an adverse effect on
our business by limiting our ability to take advantage of financing, merger and acquisition or other corporate
opportunities and to fund our operations. Breach of a covenant in our debt instruments could cause acceleration of a
significant portion of our outstanding indebtedness. Any future debt could also contain financial and other
covenants more restrictive than those imposed under the indentures governing the Senior Notes, and the revolving
credit facility.
A breach of a covenant or other provision in any debt instrument governing our current or future indebtedness
could result in a default under that instrument and, due to cross-default and cross-acceleration provisions, could result
in a default under our other debt instruments. Upon the occurrence of an event of default under the revolving credit
facility or any other debt instrument, the lenders could elect to declare all amounts outstanding to be immediately due
and payable and terminate all commitments to extend further credit. If we were unable to repay those amounts, the
lenders could proceed against the collateral granted to them, if any, to secure the indebtedness. If the lenders under our
current or future indebtedness accelerate the payment of the indebtedness, we cannot assure you that our assets or cash
flow would be sufficient to repay in full our outstanding indebtedness, including the Senior Notes.
The amount we can borrow under our revolving credit facility depends in part on the value of the portable
storage units in our lease fleet. If the value of our lease fleet declines under appraisals our lenders receive, we cannot
borrow as much. We are required to satisfy several covenants with our lenders that are affected by changes in the
value of our lease fleet. We would breach some of these covenants if the value of our lease fleet drops below
specified levels. If this happens, we may not be able to borrow the amounts we need to expand our business, and we
may be forced to liquidate a portion of our existing fleet.
We may not be able to successfully acquire new operations or integrate future acquisitions, which could
cause our business to suffer.
We may not be able to successfully complete potential strategic acquisitions if we cannot reach agreement on
acceptable terms or for other reasons. If we buy a company, we may experience difficulty integrating that
company’s personnel and operations, which could negatively affect our operating results. In addition:
(cid:129) the key personnel of the acquired company may decide not to work for us;
(cid:129) we may experience business disruptions as a result of information technology systems conversions;
(cid:129) we may experience additional financial and accounting challenges and complexities in areas such as tax
planning, treasury management, and financial reporting;
(cid:129) we may be held liable for environmental risks and liabilities as a result of our acquisitions, some of which we
may not have discovered during our due diligence;
(cid:129) our ongoing business may be disrupted or receive insufficient management attention; and
(cid:129) we may not be able to realize the cost savings or other financial benefits we anticipated.
In connection with future acquisitions, we may assume the liabilities of the companies we acquire. These
liabilities, including liabilities for environmental-related costs, could materially and adversely affect our business.
We may have to incur debt or issue equity securities to pay for any future acquisition, the issuance of which could
involve the imposition of restrictive covenants or be dilutive to our existing stockholders.
If we do not manage our growth effectively, some of our new branches and acquisitions may lose money or fail,
and we may have to close unprofitable locations. Closing a branch in such circumstances would likely result in
additional expenses that would cause our operating results to suffer.
In connection with expansion outside of the U.S., we face fluctuations in currency exchange rates, exposure to
additional regulatory requirements, including certain trade barriers, changes in political and economic conditions,
16
and exposure to additional and potentially adverse tax regimes. Our success in Europe will depend, in part, on our
ability to anticipate and effectively manage these and other risks. Our failure to manage these risks may adversely
affect our growth, in Europe and elsewhere, and lead to increased administrative costs.
Fluctuations between the British pound and U.S. dollar could adversely affect our results of operations.
We derived approximately 12.8% of our total revenues in 2008 from our operations in the U.K. The financial
position and results of operations of our U.K. subsidiaries are measured using the British pound as the functional
currency. As a result, we are exposed to currency fluctuations both in receiving cash from our U.K. operations and in
translating our financial results back into U.S. dollars. We believe the impact on us of currency fluctuations from an
operations perspective is mitigated by the fact that the majority of our expenses, capital expenditures and revenues
in the U.K. are in British pounds. We do, however, have significant currency exposure as a result of translating our
financial results from British pounds into U.S. dollars for purposes of financial reporting. Assets and liabilities of
our U.K. subsidiary are translated at the period end exchange rate in effect at each balance sheet date. Our income
statement accounts are translated at the average rate of exchange prevailing during each month. Translation
adjustments arising from differences in exchange rates from period to period are included in the accumulated other
comprehensive income (loss) in stockholders’ equity. A strengthening of the U.S. dollar against the British pound
reduces the amount of income or loss we recognize from our U.K. business. In 2007, the British pound was at or near
a multi-year high against the U.S. dollar, and we cannot predict the effects of further exchange rate fluctuations on
our future operating results. We are also exposed to additional currency transaction risk when our U.S. operations
incur purchase obligations in a currency other than in U.S. dollars and our U.K. operations incur purchase
obligations in a currency other than in British pounds. As exchange rates vary, our results of operations and
profitability may be harmed. We do not currently hedge our currency transaction or translation exposure, nor do we
have any current plans to do so. The risks we face in foreign currency transactions and translation may continue to
increase as we further develop and expand our U.K. operations. Furthermore, to the extent we expand our business
into other countries, we anticipate we will face similar market risks related to foreign currency translation caused by
exchange rate fluctuations between the U.S. dollar and the currencies of those countries.
If we determine that our goodwill has become impaired, we may incur significant charges to our pre-tax
income.
At December 31, 2008, we had $492.7 million of goodwill on our consolidated balance sheets after the
impairment charges discussed below. Goodwill represents the excess of cost over the fair value of net assets
acquired in business combinations. In the future, goodwill and intangible assets may increase as a result of future
acquisitions. Goodwill and intangible assets are reviewed at least annually for impairment. Impairment may result
from, among other things, deterioration in the performance of acquired businesses, adverse market conditions, stock
price, and adverse changes in applicable laws or regulations, including changes that restrict the activities of the
acquired business.
At December 31, 2008, we recognized an impairment of approximately $13.7 million primarily relating to our
operations in the U.K. For more information, see the Notes to Consolidated Financial Statements included in our
financial statements contained in this Annual Report.
We are subject to environmental regulations and could incur costs relating to environmental matters.
We are subject to various federal, state, and local environmental protection and health and safety laws and
regulations governing, among other things:
(cid:129) the emission and discharge of hazardous materials into the ground, air, or water;
(cid:129) the exposure to hazardous materials; and
(cid:129) the generation, handling, storage, use, treatment, identification, transportation, and disposal of industrial by-
products, waste water, storm water, oil/fuel and other hazardous materials.
We are also required to obtain environmental permits from governmental authorities for certain of our
operations. If we violate or fail to obtain or comply with these laws, regulations, or permits, we could be fined or
17
otherwise sanctioned by regulators. We could also become liable if employees or other parties are improperly
exposed to hazardous materials.
Under certain environmental laws, we could be held responsible for all of the costs relating to any contam-
ination at, or migration to or from, our or our predecessors’ past or present facilities. These laws often impose
liability even if the owner, operator or lessor did not know of, or was not responsible for, the release of such
hazardous substances.
Environmental laws are complex, change frequently, and have tended to become more stringent over time. The
costs of complying with current and future environmental and health and safety laws, and our liabilities arising from
past or future releases of, or exposure to, hazardous substances, may adversely affect our business, results of
operations, or financial condition.
The supply and cost of used ocean-going containers fluctuates, and this can affect our pricing and our
ability to grow.
As needed, we purchase, remanufacture and modify used ocean-going containers in order to expand our lease
fleet. If used ocean-going container prices increase substantially, we may not be able to manufacture enough new
units to grow our fleet. These price increases also could increase our expenses and reduce our earnings, particularly
if we are not able (due to competitive reasons or otherwise) to raise our rental rates to absorb this increased cost.
Conversely, an oversupply of used ocean-going containers may cause container prices to fall. Our competitors may
then lower the lease rates on their storage units. As a result, we may need to lower our lease rates to remain
competitive. This would cause our revenues and our earnings to decline.
The supply and cost of raw materials we use in manufacturing fluctuates and could increase our operating
costs.
As needed, we manufacture portable storage units to add to our lease fleet and for sale. In our manufacturing
process, we purchase steel, vinyl, wood, glass and other raw materials from various suppliers. We cannot be sure
that an adequate supply of these materials will continue to be available on terms acceptable to us. The raw materials
we use are subject to price fluctuations that we cannot control. Changes in the cost of raw materials can have a
significant effect on our operations and earnings. Rapid increases in raw material prices are often difficult to pass
through to customers, particularly to leasing customers. If we are unable to pass on these higher costs, our
profitability could decline. If raw material prices decline significantly, we may have to write down our raw materials
inventory values. If this happens, our results of operations and financial condition will decline.
Some zoning laws in the U.S. and Canada and temporary planning permission regulations in Europe
restrict the use of our portable storage and office units and therefore limit our ability to offer our products
in all markets.
Most of our customers use our storage units to store their goods on their own properties. Local zoning laws and
temporary planning permission regulations in some of our markets do not allow some of our customers to keep
portable storage and office units on their properties or do not permit portable storage units unless located out of sight
from the street. If local zoning laws or planning permission regulations in one or more of our markets no longer
allow our units to be stored on customers’ sites, our business in that market will suffer.
We depend on a few key management persons.
We are substantially dependent on the personal efforts and abilities of Steven G. Bunger, our Chairman,
President and Chief Executive Officer, Mark E. Funk, our Executive Vice President and Chief Financial Officer, and
Jody Miller, our Executive Vice President and Chief Operating Officer. The loss of any of these officers or our other
key management persons could harm our business and prospects for growth.
18
The market price of our common stock has been volatile and may continue to be volatile and the value of
your investment may decline.
The market price of our common stock has been volatile and may continue to be volatile. This volatility may
cause wide fluctuations in the price of our common stock on the Nasdaq Global Select Market. The market price of
our common stock is likely to be affected by:
(cid:129) changes in general conditions in the economy, geopolitical events or the financial markets;
(cid:129) variations in our quarterly operating results;
(cid:129) changes in financial estimates by securities analysts;
(cid:129) other developments affecting us, our industry, customers or competitors;
(cid:129) the operating and stock price performance of companies that investors deem comparable to us; and
(cid:129) the number of shares available for resale in the public markets under applicable securities laws.
ITEM 1B. UNRESOLVED STAFF COMMENTS
We have received no written comments regarding our periodic or current reports from the staff of the SEC that
were issued 180 days or more preceding the end of our 2008 fiscal year and that remain unresolved.
ITEM 2. PROPERTIES.
We own several properties in the U.S., including our manufacturing facility in Maricopa, Arizona, approx-
imately 30 miles south of Phoenix. In the U.K., we own two locations. We lease all of our other branch locations. All
of our major leased properties have remaining lease terms of between 1 and 11 years and we believe that satisfactory
alternative properties can be found in all of our markets if we do not renew these existing leased properties. The
properties we lease for our branch locations are generally located in industrial areas so that we can stack containers,
store large amounts of containers and offices and operate our delivery trucks. These properties tend to be 1 to 10 acre
sites with little development needed for us to use them, other than a paved or hard-packed surface, utilities and
proper zoning.
Four of our leased properties are with related persons. Three of these leases expired December 31, 2008 but we
anticipate renewing these leases at market rates for terms of approximately five years. The terms of these related
persons lease agreements have been reviewed and approved by the independent directors who comprise a majority
of the members of our Board of Directors.
Our Maricopa facility is 17 years old and is on approximately 43 acres. The facility includes nine manu-
facturing buildings, totaling approximately 171 thousand square feet. These buildings housed our manufacturing,
assembly, restoring, painting and vehicle maintenance operations. At the end of 2008, in connection with the MSG
transaction, we restructured our manufacturing operations, and as a result, this facility for the near future will be
primarily used to rebrand, remanufacture and do repairs and maintenance on the our existing lease fleet.
We lease our corporate and administrative offices in Tempe, Arizona. These offices have approximately
35,000 square feet of office space. The lease term is through December 2014. Our European headquarters is located
in Stockton-on-Tees where we lease approximately 10,000 square feet of office space. The term on this lease is
through July, 2017.
ITEM 3. LEGAL PROCEEDINGS.
We are party from time to time to various claims and lawsuits which arise in the ordinary course of business.
Although the specific allegations in the lawsuits differ, most of them involve claims pertaining to goods allegedly
damaged while stored in one of our containers. We do not believe that the ultimate resolution of these claims or
lawsuits will have a material adverse effect on our business, financial condition, results of operations or cash flows.
19
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
No matters were submitted to a vote of our security holders during the fourth quarter ended December 31,
2008.
PART II
ITEM 5. MARKET FOR COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER
PURCHASES OF EQUITY SECURITIES.
Common Stock Prices
Our common stock trades on The Nasdaq Global Select Market under the symbol “MINI”. The following are
the high and low sale prices for the common stock during the periods indicated as reported by the Nasdaq Stock
Market.
2007
2008
High
Low
High
Low
Quarter ended March 31, . . . . . . . . . . . . . . . . . . . . . . . . . . .
Quarter ended June 30, . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Quarter ended September 30, . . . . . . . . . . . . . . . . . . . . . . . .
Quarter ended December 31, . . . . . . . . . . . . . . . . . . . . . . . .
$29.40
$33.65
$32.01
$25.23
$25.12
$26.30
$21.56
$16.50
$20.13
$25.31
$26.14
$19.37
$14.07
$18.61
$15.00
$10.88
We had 88 holders of record of our common stock on February 24, 2009, and we estimate that we have more
than 5,400 beneficial owners of our common stock.
Mobile Mini has not paid cash dividends on its common stock and does not expect to do so in the foreseeable
future, as it intends to retain all earnings to provide funds for the operation and expansion of its business. Further,
our revolving credit agreement restricts our ability to pay dividends or other distributions on our common stock.
Sales of Unregistered Securities; Repurchases of Securities
On June 27, 2008, as part of the consideration for the acquisition of Mobile Storage Group, we issued
8.6 million shares of our Series A Convertible Redeemable Participating Preferred Stock, to the former stockholders
of Mobile Storage Group. This issuance was made pursuant to an exemption from registration under Regulation D
of the Securities Act of 1933, as amended.
The preferred stock is convertible into 8.6 million shares of our common stock at any time at the option of the
holders, representing an initial conversion price of $18.00 per common share. The preferred stock will be
mandatorily convertible into our common stock if, after the first anniversary of the issuance of the preferred
stock, our common stock trades above $23.00 per share for a period of 30 consecutive days.
For additional information, see “Management’s Discussion and Analysis of Financial Conditions and Results
of Operations — Liquidity and Capital Resources — Preferred Stock”.
On August 8, 2007, our Board of Directors approved a common stock repurchase program authorizing up to
$50.0 million of our outstanding shares to be repurchased over a six-month period which expired in February 2008.
We had repurchased 2.2 million shares for approximately $39.3 million under this authorization prior to Decem-
ber 31, 2007.
20
Stock Performance Graph
The following Performance Graph and related information shall not be deemed “soliciting material” or
“filed” with the Securities and Exchange Commission, nor should such information be incorporated by reference
into any future filings under the Securities Act of 1933 or the Securities Exchange Act of 1934, each as amended,
except to the extent that Mobile Mini specifically incorporates it by reference in such filing.
The following graph compares the cumulative total return on our capital stock with the cumulative total returns
(assuming reinvestment of dividends) on the Standard and Poor’s SmallCap 600 and the Nasdaq Composite Index if
$100 were invested in our common stock and each index on December 31, 2003.
STOCK PERFORMANCE GRAPH
Mobile Mini, Inc.
At December 31, 2008
Total Return* Performance
Mobile Mini, Inc.
Standard & Poor’s SmallCap 600
Nasdaq Stock Market Index (U.S.)
S
R
A
L
L
O
D
450
400
350
300
250
200
150
100
50
0
2003
2004
2005
2006
2007
2008
Index
Mobile Mini, Inc.
Standard & Poor’s SmallCap 600
Nasdaq Stock Market Index (U.S.)
Period Ended December 31,
2003
2004
2005
2006
2007
2008
$100.00 $167.55 $240.37 $273.23 $188.03 $146.25
$100.00 $122.65 $132.07 $152.04 $151.59 $104.48
$100.00 $108.84 $111.16 $122.11 $132.42 $ 63.80
* Total Return based on $100 initial investment and reinvestment of dividends.
21
ITEM 6. SELECTED FINANCIAL DATA.
The following table shows our selected consolidated historical financial data for the stated periods. Amounts
include the effect of rounding. You should read this material with “Management’s Discussion and Analysis of
Financial Condition and Results of Operations” and the financial statements and related footnotes included
elsewhere in this Annual Report.
On February 22, 2006, our Board of Directors approved a two-for-one stock split in the form of a 100 percent
stock dividend effected on March 10, 2006. Per share amounts, share amounts and weighted numbers of shares
outstanding give effect for this two-for-one stock split in the below tables for all periods presented.
2004
Year Ended December 31,
2006
(In thousands, except per share and operating data)
2005
2007
2008
Consolidated Statements of Income Data:
Revenues:
Leasing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $149,856
17,919
Sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
566
168,341
Total revenues . . . . . . . . . . . . . . . . . . . . . . . . . . .
Costs and expenses:
Cost of sales . . . . . . . . . . . . . . . . . . . . . . . . . .
Leasing, selling and general expenses. . . . . . . . .
Integration, merger and restructuring expense . . .
Goodwill impairment . . . . . . . . . . . . . . . . . . . .
Depreciation and amortization . . . . . . . . . . . . . .
Total costs and expenses . . . . . . . . . . . . . . . . . . . .
Income from operations . . . . . . . . . . . . . . . . . . . .
Other income (expense):
11,352
90,696
—
—
11,427
113,475
54,866
$ 188,578
17,499
1,093
207,170
$ 245,105
26,824
1,434
273,363
$ 284,638
31,644
2,020
318,302
$371,560
41,267
2,577
415,404
10,845
109,257
—
—
12,854
132,956
74,214
17,186
139,906
—
—
16,741
173,833
99,530
21,651
166,994
—
—
21,149
209,794
108,508
—
Interest income . . . . . . . . . . . . . . . . . . . . . . . . .
—
Other income . . . . . . . . . . . . . . . . . . . . . . . . . .
(20,434)
Interest expense . . . . . . . . . . . . . . . . . . . . . . . .
—
Debt extinguishment expense. . . . . . . . . . . . . . .
—
Foreign currency exchange gains (loss) . . . . . . .
34,432
Income before provision for income taxes . . . . . . .
13,773
Provision for income taxes . . . . . . . . . . . . . . . . . .
20,659
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
—
Earnings allocable to preferred stock . . . . . . . . . . .
Net income available to common stockholders . . . . $ 20,659
11
3,160
(23,177)
—
—
54,208
20,220
33,988
—
$ 33,988
437
—
(23,681)
(6,425)
66
69,927
27,151
42,776
—
$ 42,776
101
—
(24,906)
(11,224)
107
72,586
28,410
44,176
—
$ 44,176
28,044
212,335
24,427
13,667
31,767
310,240
105,164
135
—
(48,146)
—
(112)
57,041
28,000
29,041
(2,739)
$ 26,302
Earnings per share:
Basic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Diluted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
0.71
0.70
$
$
1.14
1.10
$
$
1.25
1.21
$
$
1.24
1.22
$
$
0.77
0.75
Weighted average number of common and common
share equivalents outstanding:
Basic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Diluted . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
28,974
29,565
Other Data:
EBITDA(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 66,293
40,322
Net cash provided by operating activities . . . . . . . .
Net cash used in investing activities. . . . . . . . . . . .
(80,508)
Net cash provided by (used in) financing
29,867
30,875
34,243
35,425
35,489
36,296
34,155
38,875
$ 90,239
69,249
(113,275)
$ 116,774
76,884
(192,763)
$ 129,865
91,299
(138,682)
$136,954
98,518
(97,913)
activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Operating Data:
Number of branches (at year end) . . . . . . . . . . . . .
Lease fleet units (at year end) . . . . . . . . . . . . . . . .
Lease fleet covenant utilization (annual average) . .
Lease revenue growth from prior year . . . . . . . . . .
Operating margin . . . . . . . . . . . . . . . . . . . . . . . . .
Net income margin . . . . . . . . . . . . . . . . . . . . . . . .
40,555
43,282
116,966
48,427
(6,689)
48
100,727
51
116,317
62
149,615
66
160,116
94
273,748
82.9%
25.8%
35.8%
16.4%
82.7%
30.0%
36.4%
15.6%
79.6%
16.1%
34.1%
13.9%
75.0%
30.5%
25.3%
7.0%
80.7%
16.6%
32.6%
12.3%
22
2004
2005
2006
2007
2008
At December 31,
(In thousands)
Consolidated Balance Sheet Data:
Lease fleet, net . . . . . . . . . . . . . . . . . . . . . . $454,106
592,146
Total assets . . . . . . . . . . . . . . . . . . . . . . . . .
277,044
Total debt . . . . . . . . . . . . . . . . . . . . . . . . . .
216,369
Stockholders’ equity . . . . . . . . . . . . . . . . . .
$550,464
704,957
308,585
267,975
$697,439
900,030
302,045
442,004
$ 802,923
1,028,851
387,989
457,890
$1,078,156
1,798,857
907,206
495,228
Reconciliation of EBITDA to net cash provided by operating activities, the most directly comparable GAAP
measure:
EBITDA(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Senior Note redemption premiums . . . . . . . . . . .
Interest paid . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income and franchise taxes paid . . . . . . . . . . . . .
Provision for loss from natural disasters . . . . . . .
Provision for restructuring charge . . . . . . . . . . . .
Goodwill impairment . . . . . . . . . . . . . . . . . . . . .
Share-based compensation expense . . . . . . . . . . .
Gain on sale of lease fleet units . . . . . . . . . . . . .
Loss on disposal of property, plant and
equipment . . . . . . . . . . . . . . . . . . . . . . . . . . .
Change in certain assets and liabilities, net of
effect of business acquired:
2004
$ 66,293
—
(19,254)
(372)
—
—
—
—
(2,277)
2005
2007
Year Ended December 31,
2006
(In thousands)
$116,774
(4,987)
(24,770)
(733)
—
—
—
3,066
(4,922)
$ 90,239
—
(21,727)
(495)
1,710
—
—
19
(3,529)
$129,865
(8,926)
(27,896)
(797)
—
—
—
4,028
(5,560)
2008
$136,954
—
(33,032)
(667)
—
5,626
13,667
5,656
(9,849)
604
704
454
203
567
Receivables . . . . . . . . . . . . . . . . . . . . . . . .
Inventories . . . . . . . . . . . . . . . . . . . . . . . . .
Deposits and prepaid expenses . . . . . . . . . .
Other assets and intangibles . . . . . . . . . . . .
Accounts payable and accrued liabilities . . .
(3,309)
(2,178)
(669)
37
1,447
(5,371)
(4,823)
(480)
(19)
13,021
(6,580)
628
(1,446)
(4)
(596)
(2,119)
(610)
(1,754)
318
4,547
2,201
7,655
177
105
(30,542)
Net cash provided by operating activities . . . . . .
$ 40,322
$ 69,249
$ 76,884
$ 91,299
$ 98,518
Reconciliation of net income to EBITDA:
2004
Year Ended December 31,
2005
2007
(In thousands except percentages)
2006
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $20,659
20,434
Interest expense . . . . . . . . . . . . . . . . . . . . . . . . . .
13,773
Income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . .
11,427
Depreciation and amortization . . . . . . . . . . . . . . .
—
Debt restructuring/extinguishment expense . . . . . .
$33,988
23,177
20,220
12,854
—
$ 42,776
23,681
27,151
16,741
6,425
$ 44,176
24,906
28,410
21,149
11,224
2008
$ 29,041
48,146
28,000
31,767
—
EBITDA(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $66,293
$90,239
$116,774
$129,865
$136,954
EBITDA margin(2) . . . . . . . . . . . . . . . . . . . . . . .
39.4%
43.6%
42.7%
40.8%
33.0%
(1) EBITDA, as further discussed below, is defined as net income before interest expense, income taxes,
depreciation and amortization, and debt restructuring or extinguishment expense. We present EBITDA because
we believe it provides useful information regarding our ability to meet our future debt payment requirements,
capital expenditures and working capital requirements and that it provides an overall evaluation of our financial
23
condition. In addition, EBITDA is a component of certain financial covenants under our $900.0 million
revolving credit facility and will be used to determine our available borrowing ability and the interest rate in
effect at any point in time after June 30, 2009.
EBITDA has certain limitations as an analytical tool and should not be used as a substitute for net income, cash
flows, or other consolidated income or cash flow data prepared in accordance with generally accepted
accounting principles in the U.S. or as a measure of our profitability or our liquidity. In particular, EBITDA, as
defined does not include:
(cid:129) Interest expense — because we borrow money to partially finance our capital expenditures, primarily related
to the expansion of our lease fleet, interest expense is a necessary element of our cost to secure this financing
to continue generating additional revenues.
(cid:129) Income taxes — because we operate in jurisdictions subject to income taxation, income tax expense is a
necessary element of our costs to operate.
(cid:129) Depreciation and amortization — because we are a leasing company, our business is very capital intensive
and we hold acquired assets for a period of time before they generate revenues, cash flow and earnings;
therefore, depreciation and amortization expense is a necessary element of our business.
(cid:129) Debt restructuring or extinguishment expense — as defined in our revolving credit facility, debt restructuring
and extinguishment expenses are not deducted in our various calculations made under the credit agreement
and are treated no differently than interest expense. As discussed above, interest expense is a necessary
element of our cost to finance a portion of the capital expenditures needed for the growth of our business.
When evaluating EBITDA as a performance measure, and excluding the above-noted charges, all of which
have material limitations, investors should consider, among other factors, the following:
(cid:129) increasing or decreasing trends in EBITDA;
(cid:129) how EBITDA compares to levels of debt and interest expense; and
(cid:129) whether EBITDA historically has remained at positive levels .
Because EBITDA, as defined, excludes some but not all items that affect our cash flow from operating
activities, EBITDA may not be comparable to a similarly titled performance measure presented by other
companies.
(2) EBITDA margin is calculated as EBITDA divided by total revenues expressed as a percentage. The GAAP
financial measure that is most directly comparable to EBITDA Margin is operating margin, which represents
operating income divided by revenues. EBITDA margin is presented along with the operating margin so as not
to imply that more emphasis be placed on it than the corresponding GAAP measure.
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
The following discussion of our financial condition and results of operations should be read together with the
consolidated financial statements and the accompanying notes included elsewhere in this Annual Report. This
discussion contains forward-looking statements that involve risks and uncertainties. Our actual results may differ
materially from those anticipated in those forward-looking statements as a result of certain factors, including, but
not limited to, those described under Item 1A, “Risk Factors”.
The following discussion takes into consideration our acquisition of Mobile Storage Group on June 27, 2008.
The operations of Mobile Storage Group are included in our operating results for only six months of the twelve
months ended December 31, 2008. Additionally, the results of operations for 2007 also include four additional
acquisitions and one start up location that we completed in 2007; in 2008, the results of operations include four
acquisitions (beyond Mobile Storage Group) we completed during 2008.
24
Executive Summary
2008 was a transformational year for Mobile Mini as we acquired our largest competitor, Mobile Storage
Group, which contributed to increasing total revenues 30.5% to $415.4 million from $318.3 million. In addition, we
were cash flow positive (after capital expenditures but excluding acquisitions) for the first time in our operating
history. Since closing the acquisition, we believe we have been achieving the economic benefits of the MSG
integration sooner than anticipated, particularly through a reduction in overhead and infrastructure costs as
previously overlapping locations in both the U.S. and the U.K. have been combined.
In addition, we enacted a selective price increase in the third quarter of 2008, focusing on customers who have
had units out on rent for an extended period of time. To date, the attrition rates for the affected customers have been
the same or less than other customers. In addition, although fuel costs came down in the fourth quarter of 2008, they
were at their highest levels during much of the third quarter. Where possible, we recouped some of those costs by
imposing a fuel surcharge in the U.S. in the second quarter of 2008 and in the U.K. in September 2008.
The recession and credit crisis in the U.S. and U.K. have curtailed non-residential construction activity and we
expect these factors to continue to negatively affect our revenues in 2009. As a result, in late 2008 and early 2009,
we made reductions in non-essential expenses, most notably by reducing headcount. In the fourth quarter of 2008,
we restructured our manufacturing operations to reduce costs and implemented two rounds of company-wide
reductions, which together resulted in reductions of approximately 430 employees. We continually monitor activity
levels through a variety of metrics we use to find efficiencies in the number of drivers, dispatchers, managers,
salespeople and corporate staff needed in the evolving business environment. As a result, we may continue to reduce
headcount in areas where we believe we can find efficiencies without reducing customer service and sales activity
levels.
We believe these efforts, coupled with only nominal fleet purchases and maintenance expense, will allow us to
continue to generate free cash flow in 2009 and pay down debt, which remains a top corporate priority. Since the
Mobile Storage Group transaction, we have reduced borrowings under our $900.0 million asset based revolving
credit facility from $604.0 million at June 27, 2008 to $554.5 million at December 31, 2008, leaving us with
$332.8 million of unused borrowing capacity under our facility. Our senior notes do not contain financial
maintenance covenants and the financial maintenance covenants under our revolving credit facility are not
applicable unless we fall below $100.0 million in borrowing availability.
At the same time we are reducing costs, we are increasing our internal efforts on sales growth to our core
customers and have refocused our efforts to gain business through government projects at the federal, state and local
levels. We are doing this in part through increasing salesperson accountability through our disciplined sales
processes which we believe has traditionally given us a significant competitive advantage.
General
In addition to our leasing business, we also sell portable storage containers and occasionally sell mobile office
units. Our sales revenues as a percentage of total revenues represented 9.9% of revenues in 2008.
On June 27, 2008, we acquired the outstanding shares of Mobile Storage Group through a merger of a wholly-
owned subsidiary of Mobile Mini into Mobile Storage Group’s ultimate parent, MSG WC Holdings Corp.
Immediately thereafter, each of MSG WC Holdings Corp. and two of its direct subsidiaries merged with and
into Mobile Mini and Mobile Storage Group became a wholly-owned subsidiary of Mobile Mini. We refer to this
transaction as “the Merger” throughout this document.
The Merger was the largest acquisition we have completed and it increased the scope of our operations in both
the U.S. and the U.K. Our consolidated statements of income for the reporting period ended December 31, 2008,
include certain estimated expenses expected to be incurred related to integration of the business acquired in the
Merger and a restructuring charge related to restructuring of our manufacturing operations as a result of the Merger.
See the Notes to Consolidated Financial Statements included herein for additional information regarding the
Merger.
25
Prior to acquiring MSG, Mobile Mini grew through both organic growth and smaller acquisitions, which we
use to gain a presence in new markets. Typically, we enter a new market through the acquisition of the business of a
smaller local competitor and then apply our business model, which is usually much more customer service and
marketing focused than the business we are buying or its competitors in the market. If we cannot find a desirable
acquisition opportunity in a market we wish to enter, we establish a new location from the ground up. As a result, a
new branch location will typically have fairly low operating margins during its early years, but as our marketing
efforts help us penetrate the new market and we increase the number of units on rent at the new branch, we take
advantage of operating efficiencies to improve operating margins at the branch and typically reach company
average levels after several years. When we enter a new market, we incur certain costs in developing an
infrastructure. For example, advertising and marketing costs will be incurred and certain minimum levels of
staffing and delivery equipment will be put in place regardless of the new market’s revenue base. Once we have
achieved revenues during any period that are sufficient to cover our fixed expenses, we generate high margins on
incremental lease revenues. Therefore, each additional unit rented in excess of the break-even level, contributes
significantly to profitability. Conversely, additional fixed expenses that we incur require us to achieve additional
revenue as compared to the prior period to cover the additional expense.
As a result of the Merger, we have been implementing our business model across the newly acquired MSG
branches. While we have been able to realize significant cost reductions as a result of the combination of two
companies, there may yet be inefficiencies or additional fixed costs that put pressure on operating margins as we
fully integrate the two companies.
Among the external factors we examine to determine the direction of our business is the level of non-
residential construction activity. Customers in the construction industry represented approximately 36% and 43% of
our units on rent at December 31, 2008 and 2007, respectively, and because of the degree of operating leverage we
have, increases or decreases in non-residential construction activity can have a significant effect on our operating
margins and net income. In 2007, after three years of very strong growth in non-residential construction activity in
the U.S, the growth rate in this sector began to moderate and the level of our construction related business began to
slow down and then decline. This decline continues to adversely affect our results of operations into 2009.
In managing our business, we focus on growing leasing revenues, particularly in existing markets where we
can take advantage of the operating leverage inherent in our business model. Mobile Mini’s goal is to maintain a
stable growth rate.
We are a capital-intensive business, so in addition to focusing on earnings per share, we focus on adjusted
EBITDA to measure our results. We calculate this number by first calculating EBITDA, which we define as net
income before interest expense, debt restructuring or extinguishment expense, provision for income taxes,
depreciation and amortization. This measure eliminates the effect of financing transactions that we enter into
and this measure provides us with a means to track internally generated cash from which we can fund our interest
expense and our lease fleet growth. In comparing EBITDA from year to year, we typically further adjust EBITDA to
ignore the effect of what we consider non-recurring events not related to our core business operations to arrive at
what we define as adjusted EBITDA. Although not presented in this Annual Report for 2008, adjusted EBITDA
does not include the integration, merger and restructuring expenses related to the MSG acquisition and a goodwill
impairment charge related to the U.K. and The Netherlands.
In managing our business, we routinely compare our EBITDA margins from year to year and based upon age of
branch. As capital is invested in our established branch locations, we achieve higher EBITDA margins on that
capital than we achieve on capital invested to establish a new branch, because our fixed costs are already in place in
connection with the established branches. The fixed costs are those associated with yard and delivery equipment, as
well as advertising, sales, marketing and office expenses. With a new market or branch, we must first fund and
absorb the startup costs for setting up the new branch facility, hiring and developing the management and sales team
and developing our marketing and advertising programs. A new branch will have low EBITDA margins in its early
years until the number of units on rent increases. Because of our high operating margins on incremental lease
revenue, which we realize on a branch by branch basis when the branch achieves leasing revenues sufficient to cover
the branch’s fixed costs, leasing revenues in excess of the break-even amount produce large increases in
26
profitability. Conversely, absent significant growth in leasing revenues, the EBITDA margin at a branch will remain
relatively flat on a period by period comparative basis.
Because EBITDA and EBITDA margin are non-GAAP financial measures, as defined by the SEC, we include
in this Annual Report reconciliations of EBITDA to the most directly comparable financial measures calculated and
presented in accordance with accounting principles generally accepted in the U.S. These reconciliations are
included in Item 6, “Selected Financial Data”.
Accounting and Operating Overview
Our leasing revenues include all rent and ancillary revenues we receive for our portable storage, combination
storage/office and mobile office units. Our sales revenues include sales of these units to customers. Our other
revenues consist principally of charges for the delivery of the units we sell. Our principal operating expenses are:
(1) cost of sales; (2) leasing, selling and general expenses; and (3) depreciation and amortization, primarily
depreciation of the portable storage units and mobile offices in our lease fleet. Cost of sales is the cost of the units
that we sold during the reported period and includes both our cost to buy, transport, remanufacture and modify used
ocean-going containers and our cost to manufacture portable storage units and other structures. Leasing, selling and
general expenses include among other expenses, advertising and other marketing expenses, real property lease
expenses, commissions, repair and maintenance costs of our lease fleet and transportation equipment and corporate
expenses for both our leasing and sales activities. Annual repair and maintenance expenses on our leased units over
the last three years have averaged approximately 4.0% of lease revenues and are included in leasing, selling and
general expenses. We expense our normal repair and maintenance costs as incurred (including the cost of
periodically repainting units).
Our principal asset is our lease fleet, which has historically maintained value close to its original cost. The steel
units in our lease fleet (other than van trailers) are depreciated on the straight-line method using an estimated useful
life of 25 years, after the date the unit is placed in service, with an estimated residual value of 62.5%. The
depreciation policy is supported by our historical lease fleet data which shows that we have been able to obtain
comparable rental rates and sales prices irrespective of the age of our container lease fleet. Our wood mobile office
units are depreciated over 20 years to 50% of original cost. Van trailers, which constitute a small part of our fleet, are
depreciated over 7 years to a 20% residual value. Van trailers, which are only added to the fleet as a result of
acquisitions of portable storage businesses, are of much lower quality than storage containers and consequently
depreciate more rapidly. We also have other non-core products that are added to our fleet as a result of acquisitions
that have various other measures of useful lives and residual values. See “Item 1. Business — Product Lives and
Durability”.
During the last five years, our annual utilization levels averaged 80.2%, and ranged from a low of 75.0% in
2008 to a high of 82.9% in 2005. Our utilization level averaged 75.0% during 2008. Since 1996, we have increased
our total lease fleet from 13,600 units to approximately 273,700 units, representing a CAGR of 28.4%.
27
Results of Operations
The following table shows the percentage of total revenues represented by the key items that make up our
statements of income; certain amounts may not add due to rounding:
2004
Year Ended December 31,
2005
2007
2006
2008
Revenues:
Leasing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
89.0% 91.0% 89.7% 89.4% 89.5%
9.8
10.7
0.5
0.3
8.5
0.5
9.9
0.7
9.9
0.6
Total revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
100.0
100.0
100.0
100.0
100.0
Costs and expenses:
Cost of sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Leasing, selling and general expenses. . . . . . . . . . . . .
Integration, merger and restructuring expense . . . . . . .
Goodwill impairment . . . . . . . . . . . . . . . . . . . . . . . . .
Depreciation and amortization . . . . . . . . . . . . . . . . . .
Total costs and expenses . . . . . . . . . . . . . . . . . . . . . . . .
Income from operations . . . . . . . . . . . . . . . . . . . . . . . . .
Other income (expense):
Interest income . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Debt extinguishment expense . . . . . . . . . . . . . . . . . . .
Foreign currency exchange gains (loss). . . . . . . . . . . .
Income before provision for income taxes . . . . . . . . . . .
Provision for income taxes . . . . . . . . . . . . . . . . . . . . . .
6.7
53.9
—
—
6.8
67.4
32.6
—
—
(12.1)
—
—
20.5
8.2
5.2
52.8
—
—
6.2
64.2
35.8
—
1.6
(11.2)
—
—
26.2
9.8
6.3
51.2
—
—
6.1
63.6
36.4
0.2
—
(8.7)
(2.4)
—
25.5
9.9
6.8
52.5
—
—
6.6
65.9
34.1
—
—
(7.8)
(3.5)
—
22.8
8.9
6.8
51.1
5.9
3.3
7.6
74.7
25.3
—
—
(11.6)
—
—
13.7
6.7
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
12.3% 16.4% 15.6% 13.9% 7.0%
Twelve Months Ended December 31, 2008 Compared to Twelve Months Ended December 31, 2007
Total revenues in 2008 increased $97.1 million, or 30.5%, to $415.4 million from $318.3 million in 2007.
Leasing, our primary revenue focus, accounted for approximately 89.5% of total revenues during 2008. Leasing
revenues in 2008 increased $86.9 million, or 30.5%, to $371.5 million from $284.6 million in 2007. This increase in
revenues resulted from a 32.0% increase in the average number of units on lease, offset by a 1.5% decrease due to
unfavorable foreign currency exchange rates and virtually no change in average rental yield per unit (price). In
2008, our leasing revenue growth rate was 30.5% as compared to 16.1% in 2007. The increased growth rate in 2008
is due to the Merger. This was offset in part by a reduction in business activity in 2008 from its 2007 level due to a
decline in non-residential construction activity and the economic recession. Our leasing revenue growth rate in 2008
over the same period in the prior year was 6.0%, 3.5%, 61.3%, and 47.3% for the first, second, third and fourth
quarters, respectively. Our leasing revenues would have declined in the third and fourth quarters of 2008 without the
MSG Merger. As a result of the Merger, we added 29 new branches in 2008 (18 branches in the U.S. and 11 in the
U.K.). We also completed four smaller acquisitions in 2008, three where we combined acquired businesses in cities
in which we already had existing operations and one in Hartford, Connecticut. Our sales of units accounted for 9.9%
of total revenues in both 2008 and 2007. Our revenues from the sale of units increased $9.7 million, or 30.4%, to
$41.3 million in 2008 from $31.6 million in 2007. This increase is related to the higher level of sales activity at our
newer locations both in the U.S. and in the U.K. attributable to locations added as a result of the MSG Merger. Other
revenues, primarily related to our sales business and principally arising from transportation charges for the delivery
28
of units sold and the sale of ancillary products, represented approximately 0.6% of total revenues in 2008 and 0.7%
in 2007.
Cost of sales are the costs related to our sales revenue only. Cost of sales as a percentage of sales revenue
decreased slightly to 68.0% in 2008 from 68.4% in 2007.
Leasing, selling and general expenses increased $45.3 million, or 27.2%, to $212.3 million in 2008 from
$167.0 million in 2007. Leasing, selling and general expenses, as a percentage of total revenues, were 51.1% and
52.5% in 2008 and 2007, respectively. This decrease as a percentage of revenues is due to the operating leverage
associated with our leasing activities and in part, due to cost saving synergies related to the Merger that we realized
during the last two quarters of 2008. The increase in 2008 of $45.3 million is primarily the result of the Merger, as
the majority of our leasing, selling and general expenses increase occurred during the third and fourth quarters. In
2007, our expenses included the costs associated with developing infrastructure to support our Europe operations as
a result of implementing our leasing business model for the operations we acquired in 2006. These fixed costs, for
the most part, continued into 2008. Included in leasing, selling and general expense is approximately $5.1 million
and $4.0 million in 2008 and 2007, respectively, of expenses related to share-based compensation in accordance
with SFAS No. 123(R). The major increases in leasing, selling and general expenses for 2008 were: (1) payroll and
related payroll costs, which increased by $22.0 million primarily in connection with the additional locations such as
staffing for branch managers, sales and office personnel and yard personnel, including drivers, fork lift operators
and dispatchers; (2) delivery and freight costs, including fuel, which increased $10.0 million related to picking up
and delivery of containers, including the additional trucks we added at the new locations; and (3) building and land
lease costs for our locations, which increased $2.5 million, including the assumption of leases utilized by the
locations added in the Merger and contractual rate increases at existing and new locations. The increased delivery
and freight costs includes the higher cost of fuel, primarily during the first three quarters of 2008, and for more third-
party vendors which were used for the delivery of our units, mainly wood modular offices. Part of the increased
costs was passed to our customers in the form of higher trucking rates.
Integration, merger and restructuring expenses in 2008 represent estimated costs for exiting targeted Mobile
Mini branch operations that overlapped with Mobile Storage Group’s properties, repositioning and relocating assets
to their intended location, and other costs associated with personnel and office expenses associated with the
integration of the companies. Also included in this expense is our estimated cost for restructuring our manufacturing
operations and includes severance, related benefit costs and asset impairment charges for the disposal of man-
ufacturing equipment and inventories that will not be used in the restructured environment.
Goodwill impairment in 2008 represents a non-cash charge for a portion of our goodwill related to our U.K.
and The Netherlands operations as more fully described in the Notes to Consolidated Financial Statements included
in Item 8 in this report.
EBITDA increased $7.1 million, or 5.5%, to $137.0 million in 2008 from $129.9 million in 2007. EBITDA in
2008 includes integration, merger and restructuring expenses of $24.4 million and a charge for goodwill impairment
of $13.7 million, both as described above.
Depreciation and amortization expenses increased $10.6 million, or 50.2%, to $31.8 million in 2008 from
$21.1 million in 2007. The higher depreciation expense is primarily due to the increase in our lease fleet over the
prior year including the depreciation of units acquired through acquisitions. It also includes the lease fleet of
additional wood modular offices which have a higher depreciation rate than our steel units. Also, in 2007 and 2008,
depreciation expense includes the related depreciation on the additions to property, plant and equipment, primarily
trucks, forklifts and trailers, to support the lease fleet, and the customized ERP system to enhance our reporting
environment. In 2008, depreciation and amortization expense includes the amortization of customer relationships
and trade name valuation that were associated with the MSG Merger. Since December 31, 2007, our lease fleet cost
basis for depreciation increased by $292.2 million. See “Critical Accounting Policies, Estimates and Judgments”
within this Item 7.
Interest expense increased $23.2 million, or 93.3%, to $48.1 million in 2008 from $24.9 million in 2007. This
increase is primarily due to the $540.9 million of debt we assumed in the Merger. Although we assumed Mobile
Storage’s $200.0 million of 9.75% senior notes and the interest rate spread under our revolving credit facility
29
increased from LIBOR + 1.25% to LIBOR + 2.50%, our average borrowing rate declined slightly in 2008, due to
lower prevailing LIBOR rates. The monthly weighted average interest rate on our debt was 6.8% for 2008 compared
to 7.0% for 2007, excluding amortization of debt issuance costs. Taking into account the amortization of debt
issuance costs, the monthly weighted average interest rate was 7.2% in 2008 and 7.3% in 2007.
Debt extinguishment expense for 2007 resulted from the write-off of the remaining unamortized deferred loan
costs and the redemption premium on $97.5 million aggregate principal amount of outstanding 9.5% Senior Notes
redeemed in the second quarter of 2007.
Provision for income taxes was based on an annual effective tax rate of 49.1% for 2008 as compared to an
annual effective tax rate of 39.1% for 2007. Our 2008 consolidated tax provision includes the expected tax rates for
our operations in the U.S., Canada, U.K. and The Netherlands. At December 31, 2008, we had a federal net
operating loss carryforward of approximately $206.1 million, which expires if unused from 2017 to 2028. In
addition, we had net operating loss carryforwards in the various states in which we operate. We believe, based on
internal projections, that we will generate sufficient taxable income needed to realize the corresponding federal and
state deferred tax assets to the extent they are recorded as deferred tax assets in our balance sheet.
Net income in 2008 was $29.0 million, as compared to $44.2 million in 2007. Our 2008 net income results
were primarily achieved by our 30.5% increase in revenues and the operating leverage associated with this growth
and synergies achieved in the last six months of 2008 as a result of the Merger. The 2008 year was negatively
affected by the $24.4 million ($15.3 million after tax), charge related to the integration, merger and restructuring
expense in addition to $13.7 million after tax charge for goodwill impairment. In 2007, net income was unfavorably
affected by the $11.2 million, ($6.9 million after tax) charge for debt extinguishment expense related to the
redemption of our then outstanding 9.5% Senior Notes.
Twelve Months Ended December 31, 2007 Compared to Twelve Months Ended December 31, 2006
Total revenues in 2007 increased $44.9 million, or 16.4%, to $318.3 million from $273.4 million in 2006.
Leasing, our primary focus, accounted for approximately 89.4% of total revenues during 2007. Leasing revenues in
2007 increased $39.5 million, or 16.1%, to $284.6 million from $245.1 million in 2006. This increase resulted from
a 5.2% increase in the average rental yield per unit, a 10.4% increase in the average number of units on lease and
0.5% increase due to favorable exchange rates, in each case as compared to the same period in 2006. The increase in
revenues resulted from an increase in average rental rates over the prior year, an increase in revenue for ancillary
rental services, such as delivery charges and continued change in the mix of units being added to our fleet. We have
added more premium containers and portable wood offices to the lease fleet in recent periods for which we obtain
higher rental rates than basic storage units. The mobile offices we have added to our lease fleet in recent quarters
have on average been larger units that command higher rents. These higher lease rates were partially offset by lower
rental rates on units added through acquisitions that continue on lease, including Europe, which on the average are
smaller, were not remanufactured and were primarily storage containers rather than mobile offices. In 2007, our
leasing revenue growth rate was 16.1% as compared to 30.0% in 2006. The leasing revenue growth rate during the
four quarters of 2007 was 28.2%, 18.6%, 12.8% and 8.2%, respectively. The fourth quarter growth rate was
negatively impacted by several factors, including the general slowdown in non-residential construction during the
second half of 2007 and a planned significant reduction in our seasonal storage business compared to 2006 levels.
We opened four new branches in 2007: two new locations in the U.S. and two in Canada. We also completed another
acquisition in 2007 in which we consolidated the acquired business operations into our existing Pensacola, Florida
operations. Our sales of units accounted for 9.9% in 2007 and 9.8% in 2006, of our total revenues. Other revenues,
primarily related to our sales business and principally arising from transportation charges for the delivery of units
sold and the sale of ancillary products represented 0.7% of total revenues in 2007 and 0.5% in 2006. Our revenues
from the sale of units increased $4.8 million, or 18.0%, to $31.6 million in 2007 from $26.8 million in 2006. This
increase is primarily related to the higher level of sales activity at our newer locations both in the U.S. and especially
in Europe which only had eight months reported in 2006.
Cost of sales are the costs related to our sales revenue only. Cost of sales as a percentage of sales revenue
increased to 68.4% in 2007 from 64.1% in 2006. The decrease in the 2007 gross margin results in large part from the
30
additional sales associated with our European operations where many of our units are sold at wholesale and sales
margins tend to be lower than in the U.S.
Leasing, selling and general expenses increased $27.1 million, or 19.4%, to $167.0 million in 2007 from
$139.9 million in 2006. Leasing, selling and general expenses, as a percentage of total revenues, were 52.5% and
51.2% in 2007 and 2006, respectively. In 2007, our margins were affected by the costs associated with developing
infrastructure to support our U.K. operations, higher delivery and freight costs, employee stock-based compen-
sation expense, higher fleet repair and maintenance expense, and expenses that vary in relation to revenue growth.
We generally anticipate that a new branch will first achieve a positive operating margin after approximately
12 months of operations. In the U.K., this ramp up was more pronounced than our historical experience, because the
operating model of our predecessor featured outsourced storage yards and third-party delivery equipment.
Consequently we needed to acquire properties from which to operate our branches, delivery equipment with
which to operate our business, and sales employees to drive demand for our products. During 2007, delivery and
freight costs, including fuel, increased by $4.4 million over 2006, as fuel prices increased and we used more third-
party vendors for the transportation of our units, particularly our modular office units (increased costs were passed
on to customers in the form of higher delivery and pick-up charges). Included in leasing, selling and general expense
is approximately $4.0 million and $3.1 million in 2007 and 2006, respectively, of expenses related to share-based
compensation in accordance with SFAS No. 123(R), which became effective for us on January 1, 2006. In addition,
the other major increases in leasing, selling and general expenses for 2007 were: (1) repairs on our lease fleet,
including costs related to our office units, increased by $5.0 million due to costs associated with repairing hurricane
damaged units and a larger number of mobile offices maintaining our higher overall utilization and repairs and
maintenance of delivery and other equipment increased by $1.3 million principally as a result of our preventative
maintenance programs and general repairs associated with servicing a larger lease fleet and (2) payroll and related
expenses increased by $10.0 million and included increased commissions paid on increased revenues as well as
general wage increases.
EBITDA increased $13.1 million, or 11.2%, to $129.9 million in 2007 from $116.8 million in 2006.
Depreciation and amortization expenses increased $4.4 million, or 26.3%, to $21.1 million in 2007 from
$16.7 million in 2006. The higher depreciation expense is primarily due to the growth in our lease fleet over the
prior year to meet increased demand of our products and included the depreciation of units acquired through
acquisitions in both 2006 and 2007. It also includes the depreciation expenses associated with the portable storage
units added to the lease fleet during 2007 and the inclusion in the lease fleet of additional wood modular offices
which have a higher depreciation rate than our steel units. Also, in 2006 and 2007, depreciation expense includes the
related depreciation on the additions to property, plant and equipment, primarily trucks, forklifts and trailers, to
support the lease fleet growth, and the customized Enterprise Resource Planning system to enhance our reporting
environment. This increase in our lease fleet enabled us to achieve our higher lease revenues. Since December 31,
2006, our lease fleet cost basis for depreciation increased by $118.5 million. See “Critical Accounting Policies,
Estimates and Judgments” within this Item 7.
Interest expense increased $1.2 million, or 5.2%, to $24.9 million in 2007 from $23.7 million in 2006. Our
monthly weighted average debt outstanding during 2007, compared to 2006, increased 14.2% while our average
borrowing rate declined slightly in 2007, compared to the prior year level. In 2007, we redeemed $97.5 million of
our 9.5% Senior Notes and issued $150.0 million of 6.875% Senior Notes, that were issued at 99.548% of par. In
2006, we paid down $52.5 million of our higher interest rate 9.5% Senior Notes. During 2007, we invested
$110.6 million in net additions to our lease fleet and $9.7 million in acquisitions. These additions were funded
through cash flow from operations and additional borrowings. The monthly weighted average interest rate on our
debt was 7.0% for 2007 compared to 7.6% for 2006, excluding amortization of debt issuance costs. Taking into
account the amortization of debt issuance costs, the monthly weighted average interest rate was 7.3% in 2007 and
7.9% in 2006. Our weighted average interest rate is lower, in part, because we redeemed our higher interest rate
9.5% Senior Notes in May 2007. See “Liquidity and Capital Resources” within this Item 7.
Debt extinguishment expense for the 2007 period resulted from the write-off of the remaining unamortized
deferred loan costs and the redemption premium on $97.5 million aggregate principal amount of outstanding
9.5% Senior Notes redeemed in the second quarter of 2007. For the 2006 period, this expense represents the portion
31
of deferred loan costs and the redemption premium on $52.5 million aggregate principal amount of the 9.5% Senior
Notes redeemed in May 2006.
Provision for income taxes was based on an annual effective tax rate of 39.1% for 2007 as compared to an
annual effective tax rate of 38.8% for 2006. Our 2007 consolidated tax provision includes the expected tax rates for
our operations in the U.S., Canada, U.K. and The Netherlands. The 2006 tax provision includes a $0.3 million tax
benefit due to the recognition of certain state net operating loss carryforwards that were previously scheduled to
expire in 2006. At December 31, 2007, we had a federal net operating loss carryforward of approximately
$78.2 million, which expires if unused from 2018 to 2027. In addition, we had net operating loss carryforwards in
the various states in which we operate. We believe, based on internal projections, that we will generate sufficient
taxable income needed to realize the corresponding federal and state deferred tax assets to the extent they are
recorded as deferred tax assets in our balance sheet.
Net income in 2007 was $44.2 million, as compared to $42.8 million in 2006. Our 2007 net income results
were primarily achieved by our 16.4% increase in revenues and the operating leverage associated with this growth.
These increases were partially offset by the $11.2 million, ($6.9 million after tax), charge for debt extinguishment
expense related to the redemption of our outstanding 9.5% Senior Notes. Our 2006 net income was partially offset
by the $6.4 million ($3.9 million after tax); tax debt extinguishment expenses related to the partial redemption of
our 9.5% Senor Notes and includes a $0.3 million tax benefit due to the expected recognition of certain state net
operating loss carryforwards.
Liquidity and Capital Resources
Liquidity Summary
Leasing is a capital-intensive business that requires us to acquire assets before they generate revenues, cash
flow and earnings. The assets which we lease have very long useful lives and require relatively little recurrent
maintenance expenditures. Most of the capital we deploy into our leasing business historically has been used to
expand our operations geographically, to increase the number of units available for lease at our leasing locations,
and to add to the mix of products we offer. During recent years, our operations have generated annual cash flow that
exceeds our pre-tax earnings, particularly due to the deferral of income taxes caused by accelerated depreciation
that is used for tax accounting. In 2008, we were cash flow positive (after capital expenditures but excluding
acquisitions) for the first time in our operating history.
During the past three years, our capital expenditures and acquisitions have been funded by our operating cash
flow, our offering of shares of our common stock in March 2006 which provided us approximately $120.3 million of
net proceeds, our May 2007 offering of Senior Notes which provided us approximately $146.3 million of net
proceeds, and through borrowings under our revolving credit facility. Our operating cash flow is generally weakest
during the first quarter of each fiscal year, when customers who leased containers for holiday storage return the
units. During 2008, we cut back significantly on our capital expenditures and were able to fund the growth of our
lease fleet and fixed assets required to support our operations with cash provided by operating activities. We expect
this trend to continue in 2009. In addition to cash flow generated by operations, our principal current source of
liquidity is our revolving credit facility described below.
Revolving Credit Facility.
In connection with the Merger, we expanded our revolving credit facility to
increase our borrowing limit and to include the combined assets of both Mobile Mini and Mobile Storage Group as
security for the facility.
On June 27, 2008, we entered into an ABL Credit Agreement (the Credit Agreement) with Deutsche Bank AG
New York Branch and the other lenders party thereto. The Credit Agreement provides for a $900.0 million revolving
credit facility. All amounts outstanding under the Credit Agreement are due on June 27, 2013. Amounts borrowed
under the Credit Agreement and repaid or prepaid during the term may be reborrowed. The obligations of Mobile
Mini and our subsidiary guarantors under the Credit Agreement are secured by a blanket lien on substantially all of
our assets. As of December 31, 2008, borrowings outstanding under our credit facility were approximately
$554.5 million and we had $332.8 million of additional borrowing availability under the Credit Agreement, based
upon borrowing base calculations as of such date. Under the terms of the Credit Agreement, we were in compliance
32
with all the covenants as of December 31, 2008. See “— Financing Activities” below for more information abut our
revolving credit facility.
Operating Activities. Our operations provided net cash flow of $98.5 million in 2008 as compared to
$91.3 million in 2007 and $76.9 million in 2006. The $7.2 million increase in 2008 over 2007 in cash provided by
operating activities, included a increase of $10.6 million related to depreciation and amortization, $13.7 million for
non-cash goodwill impairment charges, a $5.6 million non-cash expense for the restructuring of our manufacturing
operations and an increase of $3.4 million for provisions for doubtful accounts partially offset by pre-tax income
decrease of $15.5 million. Additionally, in 2008, there were decreases in both inventories and deposits and prepaid
expenses providing positive cash flows which were offset by decreases in accounts payable and accrued liabilities.
These were all primarily a result of the Merger and the decrease in purchases of inventories due to the restructuring
of our manufacturing operations in late 2008. In 2007, cash provided by operating activities was negatively affected
by debt restructuring expense which included a $8.9 million premium paid in connection with redeeming
$97.5 million of our 9.5% Senior Notes. In 2007, cash provided by operating activities was negatively impacted
by increases in accounts receivable which was due to the general growth in our leasing activities by an increase in
our sales activity related to our newly acquired European operations, and by an increase in deposits and prepaid
expenses. Cash provided by operating activities is enhanced by the deferral of most income taxes due to the rapid tax
depreciation rate of our assets and our federal and state net operating loss carryforwards. At December 31, 2008, we
had a federal net operating loss carryforward of approximately $206.1 million and a net deferred tax liability of
$134.8 million.
Investing Activities. Net cash used in investing activities was $97.9 million in 2008, $138.7 million in 2007
and $192.8 million in 2006. In 2008, $33.3 million of cash was paid for acquisition of businesses, compared to
$9.7 million in 2007 and $59.5 million in 2006. Capital expenditures for our lease fleet, net of proceeds from sale of
lease fleet units, were $48.3 million in 2008, $110.6 million in 2007 and $122.6 million in 2006. Our net capital
expenditures for our lease fleet decreased almost 56% in 2008, as we were able to obtain most of the units we needed
to support our growth through the transaction with MSG and we required fewer units due to decreased demand as a
result of the economic slow down. Additions to the lease fleet included remanufacturing of prior acquisition units
and manufactured or purchased steel and wood offices. During the past several years we have increased the
customization of our fleet, enabling us to differentiate our product from our competitors’ product, and we have
complimented our lease fleet by adding wood mobile offices. At the end of 2008, we restructured our manufacturing
operations to right-size our future manufacturing requirements considering the large lease fleet we acquired in the
MSG transaction. With the current economic conditions, we anticipate our near term investing activities will be
primarily focused on remanufacturing units acquired in acquisitions to meet our lease fleet standards as these units
are placed on-rent. Capital expenditures for property, plant and equipment, net of proceeds from any sale of
property, plant and equipment, were $16.4 million in 2008, $18.4 million in 2007 and $10.7 million in 2006.
Expenditures for property, plant and equipment in 2008 were primarily for technology and communication
improvements for our telephone and computer systems and for delivery equipment at new locations acquired
through the Merger. The amount of cash that we use during any period in investing activities is almost entirely
within management’s discretion. We have no contracts or other arrangements pursuant to which we are required to
purchase a fixed or minimum amount of goods or services in connection with any portion of our business.
Maintenance capital expenditures is the cost to replace old forklifts, trucks and trailers that we use to move and
deliver our products to our customers, and for enhancements to our computer information and communication
systems. Our maintenance capital expenditures were approximately $3.0 million in 2008, primarily upgrades and
improvements to our communication equipment, $0.8 million in both 2007 and 2006.
Financing Activities. Net cash used in financing activities was $6.7 million in 2008 and net cash provided by
financing activities was $48.4 million in 2007 and $117.0 million in 2006. In 2008, we increased our borrowings
under our revolving credit facility by $316.7 million which we used primarily to fund the Merger, as well as other
related expenses and costs associated with our credit agreement. In connection with the Merger we also assumed
debt obligations, some requiring monthly installment payments. In 2007, we redeemed $97.5 million principal
amount of outstanding 9.5% Senior Notes and completed an offering of $150.0 million principal amount
6.875% Senior Notes. Also in 2007, under a common stock repurchase program, we redeemed $39.3 million
of our outstanding shares. Additionally, we received $1.1 million, $5.6 million and $5.1 million from the exercises
33
of employee stock options and the related tax benefits in 2008, 2007 and 2006, respectively. As of December 31,
2008, we had $554.5 million of borrowings outstanding under our revolving credit facility, and approximately
$332.8 million of additional borrowings were available to us under the facility.
Outstanding amounts under our Credit Agreement bear interest at our option at either (i) LIBOR plus a defined
margin, or (ii) the Agent lender bank’s prime rate plus a margin. LIBOR loans will initially bear interest at LIBOR
plus 2.5% and prime rate loans will initially bear interest at the Agent lender bank’s prime rate plus 1.0%. After the
quarter ended June 30, 2009, the applicable margins for each type of loan will range from 2.25% to 2.75% for
LIBOR loans and 0.75% to 1.25% for prime rate loans depending upon our debt ratio at the measurement date.
Availability of borrowings under the Credit Agreement is subject to a borrowing base calculation based upon a
valuation of our eligible accounts receivable, eligible container fleet (including containers held for sale,
work-in-process and raw materials), machinery and equipment and real property, each multiplied by an applicable
advance rate or limit. At December 31, 2008, we had $332.8 million in additional borrowing availability under the
Credit Agreement.
The Credit Agreement provides for U.K. borrowings, denominated in either Pounds Sterling or Euros, by our
subsidiary Mobile Mini U.K. Limited based upon a U.K. borrowing base, and our U.S. borrowings, denominated in
Dollars, are based upon a U.S. and Canada borrowing base.
The Credit Agreement does contain certain financial maintenance covenants, but these maintenance covenants
are not applicable unless we have less than $100.0 million in borrowing availability under the facility. At
December 31, 2008, we had approximately $332.8 million of availability.
The Credit Agreement also contains customary negative covenants applicable to us and our subsidiaries,
including covenants that restrict their ability to, among other things, (i) make capital expenditures in excess of
defined limits, (ii) allow certain liens to attach to us or our subsidiary assets, (iii) repurchase or pay dividends or
make certain other restricted payments on capital stock and certain other securities, or prepay certain indebtedness,
(iv) incur additional indebtedness or engage in certain other types of financing transactions, and (v) make
acquisitions or other investments. We were in compliance with these covenants as of December 31, 2008.
In connection with the Merger, we paid down the outstanding balances of our and Mobile Storage Group’s
then-existing revolving credit facilities. We financed these pay-downs through a borrowing at closing under the
ABL Credit Agreement.
We evaluated the expansion of our own revolving credit facility under the provisions of EITF 98-14, Debtor’s
Accounting for Changes in Line-of-Credit or Revolving-Debt Arrangements, and as the new borrowing capacity
under the Credit Agreement exceeds that under our original revolving credit facility, unamortized deferred
financing costs have been added to the costs incurred as part of the Credit Agreement.
We believe we have sufficient borrowings available under our revolving credit facility to provide for our
normal capital needs for the next 12 months. We monitor the financial strength of our lenders on an on-going basis
using publicly-available information. Based upon that information, we do not presently think that there is a
likelihood that any of our lenders might not be able to honor its commitments under the Credit Agreement.
Preferred Stock. On June 27, 2008, as part of the consideration for the acquisition of Mobile Storage Group,
we issued 8.6 million shares of our Series A Convertible Redeemable Participating Preferred Stock to the former
stockholders of Mobile Storage Group. The shares were determined to have an initial fair value of $196.6 million
based upon a third party valuation. The shares have a liquidation preference of $154.0 million.
The preferred stock is convertible into 8.6 million shares of our common stock at any time at the option of the
holders, representing an initial conversion price of $18.00 per common share. The preferred stock will be
mandatorily convertible into our common stock if, after the first anniversary of the issuance of the preferred
stock, our common stock trades above $23.00 per share for a period of 30 consecutive days.
The preferred stock votes with Mobile Mini’s common stock as a single class. It ranks senior to the common
stock only with respect to a distribution upon the occurrence of the bankruptcy, liquidation, dissolution or winding
up of Mobile Mini. Holders of a majority of the shares of preferred stock, may require us to redeem all of the
34
outstanding preferred stock (i) if we enter into a binding agreement in respect of a sale of the company (as defined in
the Certificate of Designation for the preferred stock) at a sale price of less than $23.00 per share or (ii) at any time
after the tenth anniversary of the preferred stock issuance date. If such majority holders do not exercise their
redemption rights following either of these events, we may, at our option, redeem the preferred stock.
The preferred stock will not have any cash or payment-in-kind dividends (unless and until a dividend is paid
with respect to the common stock, in which case dividends will be paid on an equal basis with the common stock, on
an as-converted basis) and does not impose any financial covenants upon us.
Hedging Activities. At December 31, 2008, we had eight interest rate swap agreements in place to fix interest
rates paid on a total of $200.0 million of our outstanding debt. We entered into interest rate swap agreements that
effectively fixed the interest rate so that the rate is payable based upon a spread from fixed rates, rather than a spread
from the LIBOR rate. At December 31, 2008, $552.7 million of our outstanding indebtedness bears interest at fixed
rates (or the rate is effectively fixed due to a swap agreement), and approximately $354.5 million of borrowings
under our credit facility are variable rate. Accounting for these swap agreements is covered by Statement of
Financial Accounting Standard (SFAS) No. 133.
Contractual Obligations and Commitments
Our contractual obligations primarily consist of our outstanding balance under our revolving credit facility and
$350.0 million of Senior Notes, together with other, primarily unsecured notes payable obligations, and obligations
under capital leases. We also have operating lease commitments for: (1) real estate properties for the majority of our
branches with remaining lease terms typically ranging from 1 to 11 years; (2) delivery, transportation and yard
equipment, typically under a five-year lease with purchase options at the end of the lease term at a stated or fair
market value price; and (3) forklifts and office related equipment.
At December 31, 2008, primarily in connection with the issuance of our insurance policies, we provided
certain insurance carriers and others with approximately $12.7 million in letters of credit.
We currently do not have any obligations under purchase agreements or commitments. Historically, we enter
into capitalized lease obligations from time to time to purchase delivery, transportation and yard equipment and
currently, as a result of the Merger, have commitments for $5.5 million in capital lease obligations.
35
The table below provides a summary of our contractual commitments as of December 31, 2008. The operating
lease amounts include certain real estate leases that expire in 2009, but have lease renewal options that we currently
anticipate to exercise in 2009 at the end of the initial lease period.
Payments Due by Period
Total
Less Than
1 Year
1-3 Years
(In thousands)
3-5 Years
More Than
5 Years
Revolving credit facility . . . . . . . . . $ 554,532
Scheduled interest payment
$ — $
— $554,532
$
—
obligations under our revolving
credit facility(1) . . . . . . . . . . . . .
Senior Notes . . . . . . . . . . . . . . . . . .
Scheduled interest payment
obligations under our Senior
Notes(2) . . . . . . . . . . . . . . . . . . .
Other long-term debt (insurance
54,895
350,000
16,397
—
32,793
—
5,705
—
—
350,000
194,346
29,813
59,626
59,626
45,281
financing) . . . . . . . . . . . . . . . . . .
1,026
1,026
Scheduled interest payment
obligations under our long-term
debt(2) . . . . . . . . . . . . . . . . . . . .
Notes payable . . . . . . . . . . . . . . . . .
Scheduled interest payment
obligations under our notes
payable(2) . . . . . . . . . . . . . . . . . .
Obligations under capital leases . . . .
Scheduled interest payment
obligations under our capital
leases(3) . . . . . . . . . . . . . . . . . . .
Operating leases(4) . . . . . . . . . . . . .
—
—
170
—
—
—
21
354
21
184
5
5,497
4
1,436
1
2,772
—
1,133
—
—
—
—
156
857
73,317
365
16,789
398
24,927
90
15,842
4
15,759
Total contractual obligations . . . . . . $1,234,850
$66,035
$120,687
$636,928
$411,200
(1) Scheduled interest rate obligations under our revolving credit facility were calculated using our weighted
average rate of 3.0% at December 31, 2008. Our revolving credit facility is subject to a variable rate of interest.
The weighted average interest rate is inclusive of our fixed rates swap agreements.
(2) Scheduled interest rate obligations under our Senior Notes and other long-term debt were calculated using
stated rates.
(3) Scheduled interest rate obligations under capital leases were calculated using imputed rates ranging from 5.6%
to 8.5%.
(4) Operating lease obligations include operating commitments and restructuring related commitments and are net
of sub-lease income. For further discussion see Note 12 to our Consolidated Financial Statements.
Off-Balance Sheet Transactions
Mobile Mini does not maintain any off-balance sheet transactions, arrangements, obligations or other
relationships with unconsolidated entities or others that are reasonably likely to have a material current or future
effect on Mobile Mini’s financial condition, changes in financial condition, revenues or expenses, results of
operations, liquidity, capital expenditures or capital resources.
Seasonality
Demand from some of our customers is somewhat seasonal. Demand for leases of our portable storage units by
large retailers is stronger from September through December because these retailers need to store more inventories
36
for the holiday season. Our retail customers usually return these leased units to us early in the following year. This
causes lower utilization rates for our lease fleet and a marginal decrease in cash flow during the first quarter of the
year. Over the last few years, we have tried to reduce the percentage of our units we reserve for this seasonal
business from the levels we allocated in earlier years, decreasing our seasonality.
Critical Accounting Policies, Estimates and Judgments
Our significant accounting policies are disclosed in Note 1 to our consolidated financial statements. The
following discussion addresses our most critical accounting policies, some of which require significant judgment.
Mobile Mini’s consolidated financial statements have been prepared in accordance with accounting principles
generally accepted in the U.S. The preparation of these consolidated financial statements requires us to make
estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses during the
reporting period. These estimates and assumptions are based upon our evaluation of historical results and
anticipated future events, and these estimates may change as additional information becomes available. The
Securities and Exchange Commission defines critical accounting policies as those that are, in management’s view,
most important to our financial condition and results of operations and those that require significant judgments and
estimates. Management believes that our most critical accounting policies relate to:
Revenue Recognition. Lease and leasing ancillary revenues and related expenses generated under portable
storage units and office units are recognized on a straight-line basis. Revenues and expenses from portable storage
unit delivery and hauling are recognized when these services are earned, in accordance with SAB No. 104. We
recognize revenues from sales of containers and mobile office units upon delivery when the risk of loss passes, the
price is fixed and determinable and collectability is reasonably assured. We sell our products pursuant to sales
contracts stating the fixed sales price with our customers.
Share-Based Compensation. Prior to 2006, we accounted for stock-based compensation plans under the
recognition and measurement provisions of Accounting Principles Board (APB) Opinion No. 25. Effective
January 1, 2006, we adopted the provisions of SFAS 123(R) using the modified-prospective-transition method.
SFAS 123(R) requires companies to recognize the fair-value of stock-based compensation transactions in the
statement of income. The fair value of our stock-based awards is estimated at the date of grant using the Black-
Scholes option pricing model. The Black-Scholes valuation calculation requires us to estimate key assumptions
such as future stock price volatility, expected terms, risk-free rates and dividend yield. Expected stock price
volatility is based on the historical volatility of our stock. We use historical data to estimate option exercises and
employee terminations within the valuation model. The expected term of options granted is derived from an analysis
of historical exercises and remaining contractual life of stock options, and represents the period of time that options
granted are expected to be outstanding. The risk-free rate is based on the U.S. Treasury yield curve in effect at the
time of grant. We have never paid cash dividends, and do not currently intend to pay cash dividends, and thus have
assumed a 0% dividend yield. If our actual experience differs significantly from the assumptions used to compute
our stock-based compensation cost, or if different assumptions had been used, we may have recorded too much or
too little stock-based compensation cost. For stock options and nonvested share awards subject solely to service
conditions, we recognize expense using the straight-line attribution method. For nonvested share awards subject to
service and performance conditions, we are required to assess the probability that such performance conditions will
be met. If the likelihood of the performance condition being met is deemed probable, we will recognize the expense
using accelerated attribution method. In addition, for both stock options and nonvested share awards, we are
required to estimate the expected forfeiture rate of our stock grants and only recognize the expense for those shares
expected to vest. If the actual forfeiture rate is materially different from our estimate, our stock-based compensation
expense could be materially different. We had approximately $2.5 million of total unrecognized compensation costs
related to stock options at December 31, 2008 that are expected to be recognized over a weighted-average period of
1.3 years and $18.6 million of total unrecognized compensation costs related to nonvested share awards at
December 31, 2008 that are expected to be recognized over a weighted-average period of 3.7 years. See Note 10 to
the Consolidated Financial Statements for a further discussion on share-based compensation.
Allowance for Doubtful Accounts. We maintain allowances for doubtful accounts for estimated losses
resulting from the inability of our customers to make required payments. We establish and maintain reserves against
37
estimated losses based upon historical loss experience and evaluation of past due accounts agings. Management
reviews the level of the allowances for doubtful accounts on a regular basis and adjusts the level of the allowances as
needed. If we were to increase the factors used for our reserve estimates by 25%, it would have the following
approximate effect on our net income and diluted earnings per share at December 31, as follows:
As reported:
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Diluted earnings per share . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
As adjusted for hypothetical change in reserve estimates:
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Diluted earnings per share . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Years Ended
December 31,
2007
2008
(In thousands except
per share data)
$44,176
$ 1.22
$29,041
$ 0.75
$43,893
$ 1.21
$28,245
$ 0.73
If the financial condition of our customers were to deteriorate, resulting in an impairment of their ability to
make payments, additional allowances may be required.
Impairment of Goodwill. We assess the impairment of goodwill and other identifiable intangibles on an
annual basis or whenever events or changes in circumstances indicate that the carrying value may not be
recoverable. Some factors we consider important which could trigger an impairment review include the following:
(cid:129) significant under-performance relative to historical, expected or projected future operating results;
(cid:129) significant changes in the manner of our use of the acquired assets or the strategy for our overall business;
(cid:129) our market capitalization relative to net book value; and
(cid:129) significant negative industry or general economic trends.
Pursuant to SFAS No. 142, Goodwill and Other Intangible Assets, we operate on one reportable segment,
which is comprised of three reporting units (North America, U.K. and The Netherlands). All of our goodwill was
allocated between these three reporting units. We perform an annual impairment test on goodwill at December 31
using the two-step process prescribed in SFAS No. 142. The first step is a screen for potential impairment, while the
second step measures the amount of the impairment, if any. In addition, we will perform impairment tests during any
reporting period in which events or changes in circumstances indicate that an impairment may have incurred. At
December 31, 2008, we performed the first step of the two-step impairment test and compared the fair value of each
reporting unit to its carrying value. In assessing the fair value of the reporting units, we considered both the market
approach and the income approach. Under the market approach, the fair value of the reporting unit is based on
quoted market prices of companies comparable to the reporting unit being valued. Under the income approach, the
fair value of the reporting unit is based on the present value of estimated cash flows. The income approach is
dependent on a number of significant management assumptions, including estimated future revenue growth rates,
gross margins on sales, operating margins, capital expenditures and discount rates. Each approach was given equal
weight in arriving at the fair value of the reporting unit. We determined the fair values of the U.K. and The
Netherlands reporting units were less than the carrying values of the net assets of these reporting units, thus we
performed step two of the impairment test for these two reporting units.
In step two of the impairment test, we are required to determine the implied fair value of the goodwill and
compare it to the carrying value of the goodwill. We allocated the fair value of the reporting units to the respective
assets and liabilities of each reporting unit as if the reporting units had been acquired in separate and individual
business combinations and the fair value of the reporting units was the price paid to acquire the reporting units. The
excess of the fair value of the reporting units over the amounts assigned to their respective assets and liabilities is the
implied fair value of goodwill. For both reporting units in the step two testing, the implied value of goodwill was
less than the carrying value of goodwill, resulting in an impairment charge of $13.7 million in the fourth quarter of
2008. We reconciled the fair values of our three reporting units in the aggregate to our market capitalization at
December 31, 2008.
38
Impairment of Long-Lived Assets. We review property, plant and equipment and intangibles with finite lives
(those assets resulting from acquisitions) for impairment when events or circumstances indicate these assets might
be impaired. We test impairment using historical cash flows and other relevant facts and circumstances as the
primary basis for its estimates of future cash flows. This process requires the use of estimates and assumptions,
which are subject to a high degree of judgment. If these assumptions change in the future, whether due to new
information or other factors, we may be required to record impairment charges for these assets.
Depreciation Policy. Our depreciation policy for our lease fleet uses the straight-line method over our units’
estimated useful life, after the date that we put the unit in service. Our steel units are depreciated over 25 years with
an estimated residual value of 62.5%. Wood offices units are depreciated over 20 years with an estimated residual
value of 50%. Van trailers, which are a small part of our fleet, are depreciated over 7 years to a 20% residual value.
We have other non-core products that have various other measures of useful lives and residual values. Van trailers
and other non-core products are only added to the fleet as a result of acquisitions of portable storage businesses.
We periodically review our depreciation policy against various factors, including the results of our lenders’
independent appraisal of our lease fleet, practices of the larger competitors in our industry, profit margins we are
achieving on sales of depreciated units and lease rates we obtain on older units. If we were to change our
depreciation policy on our steel units from 62.5% residual value and a 25-year life to a lower or higher residual and a
shorter or longer useful life, such change could have a positive, negative or neutral effect on our earnings, with the
actual effect being determined by the change. For example, a change in our estimates used in our residual values and
useful life on our steel units would have the following approximate effect on our net income and diluted earnings per
share as reflected in the table below.
As Reported: . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Diluted earnings per share . . . . . . . . . . . . . . . . . . . . . . . . .
As adjusted for change in estimates: . . . . . . . . . . . . . . . . .
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Diluted earnings per share . . . . . . . . . . . . . . . . . . . . . . . . .
As adjusted for change in estimates: . . . . . . . . . . . . . . . . .
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Diluted earnings per share . . . . . . . . . . . . . . . . . . . . . . . . .
As adjusted for change in estimates: . . . . . . . . . . . . . . . . .
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Diluted earnings per share . . . . . . . . . . . . . . . . . . . . . . . . .
As adjusted for change in estimates: . . . . . . . . . . . . . . . . .
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Diluted earnings per share . . . . . . . . . . . . . . . . . . . . . . . . .
As adjusted for change in estimates: . . . . . . . . . . . . . . . . .
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Diluted earnings per share . . . . . . . . . . . . . . . . . . . . . . . . .
Residual
Value
Useful
Life in
Years
2007
2008
(In thousands except per share data)
62.5%
25
70.0%
20
50.0%
20
40.0%
40
30.0%
25
25.0%
25
$44,176
$ 1.22
$29,041
$ 0.75
$44,176
$ 1.22
$29,041
$ 0.75
$41,380
$ 1.14
$25,038
$ 0.64
$44,176
$ 1.22
$29,041
$ 0.75
$40,541
$ 1.12
$23,837
$ 0.61
$39,982
$ 1.10
$23,037
$ 0.59
Insurance Reserves. Our worker’s compensation, auto and general liability insurance are purchased under
large deductible programs. Our current per incident deductibles are: worker’s compensation $250,000, auto
$250,000 and general liability $100,000. We provide for the estimated expense relating to the deductible portion of
the individual claims. However, we generally do not know the full amount of our exposure to a deductible in
connection with any particular claim during the fiscal period in which the claim is incurred and for which we must
make an accrual for the deductible expense. We make these accruals based on a combination of the claims
development experience of our staff and our insurance companies, and, at year end, the accrual is reviewed and
39
adjusted, in part, based on an independent actuarial review of historical loss data and using certain actuarial
assumptions followed in the insurance industry. A high degree of judgment is required in developing these estimates
of amounts to be accrued, as well as in connection with the underlying assumptions. In addition, our assumptions
will change as our loss experience is developed. All of these factors have the potential for significantly impacting
the amounts we have previously reserved in respect of anticipated deductible expenses, and we may be required in
the future to increase or decrease amounts previously accrued.
Contingencies. We are a party to various claims and litigation in the normal course of business. Manage-
ment’s current estimated range of liability related to various claims and pending litigation is based on claims for
which our management can determine that it is probable (as that term is defined in SFAS No. 5) that a liability has
been incurred and the amount of loss can be reasonably estimated. Because of the uncertainties related to both the
probability of incurred and possible range of loss on pending claims and litigation, management must use
considerable judgment in making reasonable determination of the liability that could result from an unfavorable
outcome. As additional information becomes available, we will assess the potential liability related to our pending
litigation and revise our estimates. Such revisions in our estimates of the potential liability could materially impact
our results of operation. We do not anticipate the resolution of such matters known at this time will have a material
adverse effect on our business or consolidated financial position.
Deferred Taxes.
In preparing our consolidated financial statements, we recognize income taxes in each of the
jurisdictions in which we operate. For each jurisdiction, we estimate the actual amount of taxes currently payable or
receivable as well as deferred tax assets and liabilities attributable to temporary differences between the financial
statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred income tax
assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which
these temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities
of a change in tax rates is recognized in income in the period that includes the enactment date.
A valuation allowance is provided for those deferred tax assets for which it is more likely than not that the
related benefits will not be realized. In determining the amount of the valuation allowance, we consider estimated
future taxable income as well as feasible tax planning strategies in each jurisdiction. If we determine that we will not
realize all or a portion of our deferred tax assets, we will increase our valuation allowance with a charge to income
tax expense or offset goodwill if the deferred tax asset was acquired in a business combination. Conversely, if we
determine that we will ultimately be able to realize all or a portion of the related benefits for which a valuation
allowance has been provided, all or a portion of the related valuation allowance will be reduced with a credit to
income tax expense except if the valuation allowance was created in conjunction with a tax asset in a business
combination.
At December 31, 2008, we have a $1.1 million valuation allowance and have $107.3 million of deferred tax
assets included within the net deferred tax liability on our balance sheet. The majority of the deferred tax asset
relates to federal net operating loss carryforwards that have future expiration dates. Management currently believes
that adequate future taxable income will be generated through future operations and, or through available tax
planning strategies to recover these assets. However, given that these federal net operating loss carryforwards that
give rise to the deferred tax asset expire over 12 years beginning in 2017, there could be changes in management’s
judgment in future periods with respect to the recoverability of these assets. As of December 31, 2008, management
believes that it is more likely than not that the unreserved portion of these deferred tax assets will be recovered.
Recent Accounting Pronouncements
In September 2006, the Financial Accounting Standards Board (FASB) issued Statement of Financial
Accounting Standards (SFAS) No. 157, Fair Value Measurement (SFAS No. 157). SFAS No. 157 defines fair
value, establishes a framework for measuring fair value in generally accepted accounting principles, and expands
disclosures about fair value measurements. SFAS No. 157 is effective for fiscal years beginning after November 15,
2007 and interim periods within those fiscal years. The Company adopted SFAS No. 157 on January 1, 2008, with
no material effect on the Company’s consolidated financial statements.
On February 15, 2007, the FASB issued SFAS No. 159, The Fair Value Option for Financial Assets and
Financial Liabilities (SFAS No. 159). Under SFAS No. 159, the Company may elect to report financial instruments
40
and certain other items at fair value on a contract-by-contract basis with changes in value reported in earnings. This
election is irrevocable. SFAS No. 159 provides an opportunity to mitigate volatility in reported earnings that is
caused by measuring hedged assets and liabilities that were previously required to use a different accounting
method than the related hedging contracts when the complex provisions of SFAS No. 133, Accounting for
Derivative Instruments and Hedging Activities, applicable to hedge accounting are not met. The Company adopted
SFAS No. 159 on January 1, 2008. The Company chose not to elect the fair value option for its financial assets and
liabilities existing at January 1, 2008 and has not elected the fair value option on any financial assets or liabilities in
the year ended December 31, 2008. Therefore, the adoption of SFAS No. 159 had no impact on the Company’s
consolidated financial statements.
In December 2007, the FASB issued SFAS No. 141 (revised 2007), Business Combinations (SFAS No. 141(R))
which establishes principles and requirements for how an acquirer recognizes and measures in its financial
statements the identifiable assets acquired, the liabilities assumed and any noncontrolling interest in an acquiree,
including the recognition and measurement of goodwill acquired in a business combination. Certain forms of
contingent consideration and certain acquired contingencies will be recorded at fair value at the acquisition date.
SFAS No. 141(R) also states acquisition costs will generally be expensed as incurred and restructuring costs will be
expensed in periods after the acquisition date. The Company will apply SFAS No. 141(R) prospectively to business
combinations with an acquisition date on or after January 1, 2009.
In December 2007, the FASB issued SFAS No. 160, Noncontrolling Interests in Consolidated Financial
Statements — An Amendment of ARB No. 51 (SFAS No. 160). SFAS No. 160 amends Accounting Research
Bulletin ARB No. 51, Consolidated Financial Statements, to establish accounting and reporting standards for the
noncontrolling interest in a subsidiary and for the deconsolidation of a subsidiary. SFAS No. 160 becomes effective
beginning January 1, 2009. Presently, there are no noncontrolling interests in any of the Company’s consolidated
subsidiaries; therefore, the Company does not expect the adoption of SFAS No. 160 to have a significant impact on
the Company’s results of operations or financial condition.
In March 2008, the FASB issued SFAS No. 161, Disclosures about Derivative Instruments and Hedging
Activities — An Amendment of FASB Statement No. 133 (SFAS No. 161). SFAS No. 161 requires qualitative
disclosures about objectives and strategies for using derivatives, quantitative data about the fair value of and gains
and losses on derivative contracts and details of credit-risk-related contingent features in hedged positions. The
statement also requires enhanced disclosures regarding how and why entities use derivative instruments, how
derivative instruments and related hedged items are accounted and how derivative instruments and related hedged
items affect entities’ financial position, financial performance and cash flows. SFAS No. 161 is effective for fiscal
periods beginning after November 15, 2008. The Company does not expect the adoption of SFAS No. 161 will have
a material effect on the Company’s results of operations or financial position.
In April 2008, the FASB issued FSP FAS 142-3, Determining the Useful Life of Intangible Assets (FSP
FAS 142-3). FSP FAS 142-3 amends the factors to be considered in determining the useful life of intangible assets.
Its intent is to improve the consistency between the useful life of an intangible asset and the period of expected cash
flows used to measure its fair value. FSP FAS 142-3 is effective for fiscal years beginning after December 15, 2008.
The Company currently adheres to the principle set forth in FSP FAS 142-3 and does not expect its adoption to
materially affect the Company’s results of operations or financial condition.
In November 2008, the FASB ratified EITF Issue No. 08-7, Accounting for Defensive Intangible Assets (EITF
No. 08-7). EITF No. 08-7 applies to defensive intangible assets, which are acquired intangible assets that the
acquirer does not intend to actively use but intends to hold to prevent its competitors from obtaining access to them.
As these assets are separately identifiable, EITF No. 08-7 requires an acquiring entity to account for defensive
intangible assets as a separate unit of accounting. Defensive intangible assets must be recognized at fair value in
accordance with SFAS No. 141(R) and SFAS No. 157. EITF No. 08-7 is effective for defensive intangible assets
acquired in fiscal years beginning on or after December 15, 2008. We are currently evaluating the potential impact,
if any, that the adoption of EITF No. 08-7 will have on our results of operations for financial condition.
41
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
Interest Rate Swap Agreement. We seek to reduce earnings and cash flow volatility associated with changes
in interest rates through a financial arrangement intended to provide a hedge against a portion of the risks associated
with such volatility. We continue to have exposure to such risks to the extent they are not hedged.
Interest rate swap agreements are the only instruments we use to manage interest rate fluctuations affecting our
variable rate debt. At December 31, 2008, we had eight interest rate swap agreements under which we pay a fixed
rate and receive a variable interest rate on $200.0 million of debt. In 2008, in accordance with SFAS No. 133,
comprehensive income included a charge of $6.3 million, net of income tax benefit of $4.0 million, related to the
fair value of our interest rate swap agreements. We enter into derivative financial arrangements only to the extent
that the arrangement meets the objectives described, and we do not engage in such transactions for speculative
purposes.
The following table sets forth the scheduled maturities and the total fair value of our debt portfolio:
2009
2010
At December 31,
2011
2012
Thereafter
(In thousands, except percentages)
2013
Debt:
Fixed rate . . . . . . . . . . $ 2,695 $ 1,669 $ 1,298 $ 847 $
Average interest rate . .
Floating rate(1) . . . . . . $ — $ — $ — $ — $554,532 $
Average interest rate . .
Operating leases: . . . . . $16,789 $13,986 $10,941 $8,671 $ 7,171 $ 15,759
286 $350,156
Total at
December 31,
2008
Total Fair Value
at December 31,
2008
$356,951
$250,795
8.49%
— $554,532
$554,532
2.96%
$ 17,317
(1) Included in our floating rate line of credit facility are $200.0 million of fixed-rate swap agreements with a
weighted average interest rate of 4.0275% that mature in 2010 and 2011.
Impact of Foreign Currency Rate Changes. We currently have branch operations outside the U.S. and we bill
those customers primarily in their local currency which is subject to foreign currency rate changes. Our operations
in Canada are billed in the Canadian Dollar, operations in the U.K. are billed in Pound Sterling and operations in
The Netherlands are billed in the Euro. We are exposed to foreign exchange rate fluctuations as the financial results
of our non-U.S. operations are translated into U.S. Dollars. The impact of foreign currency rate changes has
historically been insignificant with our Canadian operations, but we have more exposure to volatility with our
European operations. In order to help minimize our exchange rate gain and loss volatility, we finance our European
entities through our revolving line of credit which allows us to also borrow those funds in Pound Sterling
denominated debt.
42
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND SCHEDULE
Reports of Independent Registered Public Accounting Firm . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
Consolidated Balance Sheets — December 31, 2007 and 2008 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
Consolidated Statements of Income — For the Years Ended December 31, 2006, 2007 and 2008 . . . . . . . . 46
Consolidated Statements of Preferred Stock and Stockholders’ Equity — For the Years Ended
December 31, 2006, 2007 and 2008 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
Consolidated Statements of Cash Flows — For the Years Ended December 31, 2006, 2007 and 2008. . . . . 48
Notes to Consolidated Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
43
Report of Independent Registered Public Accounting Firm
The Board of Directors and Stockholders of Mobile Mini, Inc.
We have audited the accompanying consolidated balance sheets of Mobile Mini, Inc. as of December 31, 2008
and 2007, and the related consolidated statements of income, preferred stock and stockholders’ equity, and cash
flows for each of the three years in the period ended December 31, 2008. Our audits also included the financial
statement schedule listed in the Index at Item 15(a). These financial statements and schedule are the responsibility
of the Company’s management. Our responsibility is to express an opinion on these financial statements and
schedule based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board
(United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the
consolidated financial position of Mobile Mini, Inc. at December 31, 2008 and 2007, and the consolidated results
of its operations and its cash flows for each of the three years in the period ended December 31, 2008, in conformity
with U.S. generally accepted accounting principles. Also, in our opinion, the related financial statement schedule,
when considered in relation to the basic financial statements taken as a whole, presents fairly in all material respects
the information set forth therein.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board
(United States), Mobile Mini, Inc.’s internal control over financial reporting as of December 31, 2008, based on
criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organiza-
tions of the Treadway Commission and our report dated February 27, 2009 expressed an unqualified opinion
thereon.
Phoenix, Arizona
February 27, 2009
/s/ Ernst & Young LLP
44
MOBILE MINI, INC.
CONSOLIDATED BALANCE SHEETS
(In thousands except per share data)
December 31,
2007
2008
ASSETS
Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Receivables, net of allowance for doubtful accounts of $3,993 and $7,193,
3,703
$
3,184
respectively . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Lease fleet, net. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Property, plant and equipment, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deposits and prepaid expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other assets and intangibles, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Goodwill . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
37,221
29,431
802,923
55,363
11,334
9,086
79,790
61,424
26,577
1,078,156
88,509
13,287
35,063
492,657
Total assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $1,028,851
$1,798,857
LIABILITIES AND STOCKHOLDERS’ EQUITY
Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Accrued liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Line of credit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Notes payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Obligations under capital leases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Senior notes, net of discount of $621 and $4,203 at December 31, 2007 and
December 31, 2008, respectively . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
20,560
38,941
237,857
743
10
149,379
123,471
$
21,433
86,214
554,532
1,380
5,497
345,797
134,786
Total liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
570,961
1,149,639
Commitments and contingencies
Convertible preferred stock: $.01 par value, 20,000 shares authorized, 0 and 8,556
issued and outstanding at December 31, 2007 and December 31, 2008,
respectively, stated at its liquidity preference values . . . . . . . . . . . . . . . . . . . . . .
Stockholders’ equity:
Common stock; $.01 par value, 95,000 shares authorized, 36,748 issued and
34,573 outstanding at December 31, 2007 and 37,489 issued and 35,314
outstanding at December 31, 2008, respectively . . . . . . . . . . . . . . . . . . . . . . . . .
Additional paid-in capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Retained earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accumulated other comprehensive income (loss) . . . . . . . . . . . . . . . . . . . . . . . . . .
Treasury stock, at cost, 2,175 shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
—
153,990
367
278,593
213,894
4,336
(39,300)
375
328,696
242,935
(37,478)
(39,300)
Total stockholders’ equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
457,890
495,228
Total liabilities and stockholders’ equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $1,028,851
$1,798,857
See accompanying notes.
45
MOBILE MINI, INC.
CONSOLIDATED STATEMENTS OF INCOME
For the Years Ended December 31,
2006
2008
2007
(In thousands except per share data)
Revenues:
Leasing. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$245,105
26,824
1,434
$284,638
31,644
2,020
$371,560
41,267
2,577
Total revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
273,363
318,302
415,404
Costs and expenses:
Cost of sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Leasing, selling and general expenses . . . . . . . . . . . . . . . . . . . . . . . . .
Integration, merger and restructuring expense. . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Goodwill impairment
Depreciation and amortization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
17,186
139,906
—
—
16,741
21,651
166,994
—
—
21,149
28,044
212,335
24,427
13,667
31,767
Total costs and expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
173,833
209,794
310,240
Income from operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other income (expense):
Interest income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Debt extinguishment expense. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Foreign currency exchange gains (loss) . . . . . . . . . . . . . . . . . . . . . . . .
Income before provision for income taxes . . . . . . . . . . . . . . . . . . . . . . . .
Provision for income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Earnings allocable to preferred stock . . . . . . . . . . . . . . . . . . . . . . . . . . . .
99,530
108,508
105,164
437
(23,681)
(6,425)
66
69,927
27,151
42,776
—
101
(24,906)
(11,224)
107
72,586
28,410
44,176
—
135
(48,146)
—
(112)
57,041
28,000
29,041
(2,739)
Net income available to common stockholders . . . . . . . . . . . . . . . . . . .
$ 42,776
$ 44,176
$ 26,302
Earnings per share:
Basic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Diluted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
$
1.25
1.21
$
$
1.24
1.22
$
$
0.77
0.75
Weighted average number of common and common share equivalents
outstanding:
Basic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
34,243
Diluted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
35,425
35,489
36,296
34,155
38,875
See accompanying notes.
46
CONSOLIDATED STATEMENTS OF PREFERRED STOCK AND STOCKHOLDERS’ EQUITY
For the years ended December 31, 2006, 2007 and 2008
MOBILE MINI, INC.
Preferred Stock
Series A
Convertible
Preferred Stock
Shares Amount
Stockholders’ Equity
Shares of
Common
Stock
Common
Stock
Additional
Paid-In
Capital
Deferred
Stock-Based
Compensation
Retained
Earnings
Accumulated
Other
Comprehensive
Income (Loss)
Treasury
Stock
Stockholders’
Equity
Balance, December 31, 2005 . .
. . .
— $
— 30,618
Net income . .
. . .
. . .
. .
. . .
—
Fair value change in derivatives,
(net of income tax benefit of
. .
$86) . . .
. . .
. . .
. .
. . .
Foreign currency translation, (net
of income tax expense of $6) . .
Comprehensive income . .
. .
. . .
Issuance of common stock . .
. . .
Exercise of stock options .
. .
. . .
Tax benefit shortfall on stock
. .
option exercises
. . .
.
. . .
Reclassification due to the
adoption of SFAS No. 123(R) . .
Restricted stock grants . .
. .
. . .
Share-based compensation . .
. . .
Balance, December 31, 2006 . .
. . .
Net income . .
. . .
. . .
. .
. . .
Fair value change in derivatives,
(net of income tax benefit of
. .
$816) . .
. . .
. . .
. .
. . .
—
—
—
—
—
—
—
—
—
—
—
Foreign currency translation, (net
of income tax expense of
. . .
. .
$724) . .
. . .
. .
. . .
—
Comprehensive income . .
. .
. . .
Exercise of stock options .
. .
. . .
Tax benefit shortfall on stock
. .
option exercises
. . .
.
Purchase of treasury stock, at
. .
. .
cost . . .
. . .
. . .
. . .
. . .
Restricted stock grants . .
. .
. . .
Share-based compensation . .
. . .
Balance, December 31, 2007 . .
. . .
Net income . .
. . .
. . .
. .
. . .
Fair value change in derivatives,
(net of income tax benefit of
. .
$3,982) .
. . .
. . .
. .
. . .
Foreign currency translation, (net
of income tax benefit of
. . .
. .
$1,351) .
. . .
. .
. . .
Comprehensive loss
Exercise of stock options .
. .
. . .
Tax benefit shortfall on stock
. .
option exercises
. . .
.
. . .
Issuance of Series A Convertible
Preferred Stock related to MSG
Merger (net of registration and
issuance costs of $85) .
. .
. . .
—
—
—
—
—
—
—
—
—
—
—
(In thousands)
$141,855
$(2,258)
$126,942
$ 1,130
$
—
—
—
120,322
5,113
(5)
(2,258)
(2)
3,431
268,456
—
—
—
5,602
(46)
—
(3)
4,584
278,593
—
—
—
1,470
(407)
42,525
(6)
6,521
—
—
—
—
—
—
2,258
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
42,776
—
—
—
—
—
—
—
—
—
169,718
44,176
—
—
—
—
—
—
—
213,894
29,041
—
—
—
—
—
—
—
(123)
2,464
—
—
—
—
—
—
3,471
—
(1,293)
2,158
—
—
—
—
—
4,336
—
(6,299)
(35,515)
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
$267,975
42,776
(123)
2,464
45,117
120,368
5,118
(5)
—
—
3,431
442,004
44,176
(1,293)
2,158
45,041
5,607
(46)
(39,300)
(39,300)
—
—
(39,300)
—
—
—
—
—
—
—
—
—
4,584
457,890
29,041
(6,299)
(35,515)
(12,773)
1,472
(407)
42,525
—
6,521
$306
—
—
—
46
5
—
—
2
—
359
—
—
—
5
—
—
3
—
367
—
—
—
2
—
—
6
—
—
—
—
—
—
—
—
—
—
—
—
—
4,600
499
—
—
181
—
— 35,898
—
—
—
—
—
—
—
—
—
—
—
519
—
(2,175)
331
—
— 34,573
—
—
—
—
—
—
—
—
134
—
—
607
—
Restricted stock grants . .
. .
. . .
Share-based compensation . .
. . .
—
—
—
—
8,556
153,990
Balance, December 31, 2008 . .
. . .
8,556
$153,990
35,314
$375
$328,696
$ —
$242,935
$(37,478)
$(39,300)
$495,228
See accompanying notes.
47
MOBILE MINI, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
Cash Flows From Operating Activities:
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 42,776 $ 44,176 $ 29,041
Adjustments to reconcile net income to net cash provided by operating
activities:
For the Years Ended December 31,
2007
(In thousands)
2008
2006
Debt extinguishment expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Provision for doubtful accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Provision for restructuring charge . . . . . . . . . . . . . . . . . . . . . . . . . .
Goodwill impairment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Amortization of deferred financing costs . . . . . . . . . . . . . . . . . . . . .
Share-based compensation expense . . . . . . . . . . . . . . . . . . . . . . . . .
Depreciation and amortization . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Gain on sale of lease fleet units . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Loss on disposal of property, plant and equipment . . . . . . . . . . . . . .
Deferred income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Foreign currency (gain) loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Changes in certain assets and liabilities, net of effect of businesses
acquired:
Receivables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deposits and prepaid expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other assets and intangibles . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accrued liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net cash provided by operating activities . . . . . . . . . . . . . . . . . . . . .
1,438
4,538
—
—
840
3,066
16,741
(4,922)
454
26,407
(66)
(11,118)
628
(1,446)
(4)
(2,088)
(360)
76,884
2,298
1,869
—
—
985
4,028
21,149
(5,560)
203
27,356
(107)
(3,988)
(610)
(1,754)
318
2,691
(1,755)
91,299
Cash Flows From Investing Activities:
Cash paid for businesses acquired . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Additions to lease fleet, excluding acquisitions . . . . . . . . . . . . . . . . . . . .
Proceeds from sale of lease fleet units . . . . . . . . . . . . . . . . . . . . . . . . . .
Additions to property, plant and equipment . . . . . . . . . . . . . . . . . . . . . . .
Proceeds from sale of property, plant and equipment . . . . . . . . . . . . . . . .
Net cash used in investing activities . . . . . . . . . . . . . . . . . . . . . . . . .
(59,475)
(135,883)
13,327
(10,882)
150
(192,763)
(9,734)
(126,733)
16,181
(18,522)
126
(138,682)
Cash Flows From Financing Activities:
Net borrowings under lines of credit . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Redemption of 9.5% Senior Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Proceeds from issuance of 6.875% Senior Notes . . . . . . . . . . . . . . . . . . .
Deferred financing costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Proceeds from issuance of notes payable . . . . . . . . . . . . . . . . . . . . . . . . .
Principal payments on notes payable . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Principal payments on capital lease obligations . . . . . . . . . . . . . . . . . . . .
Issuance of common stock, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Purchase of treasury stock, at cost
Net cash provided by (used in) financing activities . . . . . . . . . . . . . .
Effect of exchange rate changes on cash . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net increase (decrease) in cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cash at beginning of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cash at end of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Supplemental Disclosure of Cash Flow Information:
45,539
(52,500)
(1,664)
1,230
(1,108)
(17)
125,486
34,128
(97,500)
— 149,322
(3,768)
1,216
(1,254)
(24)
5,607
— (39,300)
48,427
1,289
2,333
1,370
3,703 $
116,966
76
1,163
207
1,370 $
—
5,261
5,626
13,667
2,873
5,656
31,767
(9,849)
567
27,923
112
(3,060)
7,655
177
105
(15,731)
(3,272)
98,518
(33,250)
(76,622)
28,338
(16,874)
495
(97,913)
120,341
—
—
(15,166)
1,249
(113,881)
(704)
1,472
—
(6,689)
5,565
(519)
3,703
3,184
Cash paid during the year for interest . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 24,770 $ 27,896 $ 33,032
Cash paid during the year for income and franchise taxes . . . . . . . . . . . . $
733 $
797 $
667
Interest rate swap changes in value charged to equity . . . . . . . . . . . . . . . $
123 $
1,293 $
6,299
See accompanying notes.
48
MOBILE MINI, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(1) Mobile Mini, its Operations and Summary of Significant Accounting Policies:
Organization and Special Considerations
Mobile Mini, Inc., a Delaware corporation, is a leading provider of portable storage solutions. In these notes,
the terms “Mobile Mini” and the “Company”, means Mobile Mini, Inc. At December 31, 2008, Mobile Mini has a
fleet of portable storage and office units, and operates throughout the U.S., in Canada, the U.K. and The
Netherlands. The Company’s portable storage products offer secure, temporary storage with immediate access.
The Company has a diversified customer base, including large and small retailers, construction companies, medical
centers, schools, utilities, distributors, the military, hotels, restaurants, entertainment complexes and households.
The Company’s customers use its 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.
On June 27, 2008, we acquired Mobile Storage Group, Inc. (MSG) in a transaction valued at $755.4 million
(the Merger). Mobile Mini assumed Mobile Storage Group’s outstanding indebtedness of $540.9 million and paid
other consideration and transaction costs of $214.5 million consisting of $17.9 million cash (net of $5.5 million cash
acquired), and the issuance of approximately 8.6 million shares of convertible preferred stock with a determined fair
value at issuance of $196.6 million and a liquidation preference value of $154.0 million. The discussion in this
Annual Report of the Company’s business includes the results of its combined operations with Mobile Storage
Group since June 27, 2008.
Principles of Consolidation
The consolidated financial statements include the accounts of Mobile Mini, Inc. and its wholly owned
subsidiaries. The Company does not have any subsidiaries in which it does not own 100% of the outstanding stock.
All significant intercompany balances and transactions have been eliminated.
Revenue Recognition
Lease and leasing ancillary revenues and related expenses generated under portable storage units and office
units are recognized on a straight-line basis. Revenues and expenses from portable storage unit delivery and hauling
are recognized when these services are earned, in accordance with SAB No. 104, Revenue Recognition. The
Company recognizes revenues from sales of containers and mobile office units upon delivery when the risk of loss
passes, the price is fixed and determinable and collectability is reasonably assured. The Company sells its products
pursuant to sales contracts stating the fixed sales price with its customers.
Cost of Sales
Cost of sales in the Company’s consolidated statements of income includes only the costs for units it sells.
Similar costs associated with the portable storage units that it leases are capitalized on its balance sheet under
“Lease fleet”.
Advertising Costs
All non direct-response advertising costs are expensed as incurred. Direct-response advertising costs, prin-
cipally yellow page advertising, are capitalized when paid and amortized over the period in which the benefit is
derived. At December 31, 2007 and 2008, prepaid advertising costs were approximately $3.8 million and
$4.0 million, respectively. The amortization period of the prepaid balance never exceeds 12 months. The
Company’s direct-response advertising costs are monitored by each branch through call logs and advertising
source codes in a contact enterprise resource planning system. Advertising expense was $8.6 million, $10.1 million
and $12.5 million in 2006, 2007 and 2008, respectively.
49
MOBILE MINI, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Receivables and Allowance for Doubtful Accounts
Receivables primarily consist of amounts due from customers from the lease or sale of containers throughout
the U.S., Canada, the U.K. and The Netherlands. Mobile Mini records an estimated provision for bad debts through
a charge to operations in amounts of its estimated losses expected to be incurred in the collection of these accounts.
The Company reviews the provision for adequacy monthly. The estimated losses are based on historical collection
experience, and evaluation of past-due account agings. Specific accounts are written off against the allowance when
management determines the account is uncollectible. The Company requires a security deposit on most leased
office units to cover the cost of damages or unpaid balances, if any.
Concentration of Credit Risk
Financial instruments which potentially expose the Company to concentrations of credit risk, as defined by
SFAS No. 105, Disclosure of Information about Financial Instruments with Off-Balance-Sheet Risk and Financial
Instruments with Concentrations of Credit Risk, consist primarily of receivables. Concentration of credit risk with
respect to receivables is limited due to the large number of customers spread over a large geographic area in many
industry segments. No single customer accounts for more than 10% of our receivables at December 31, 2007 and
December 31, 2008. Receivables related to its sales operations are generally secured by the product sold to the
customer. Receivables related to its leasing operations are primarily small month-to-month amounts. The Company
has the right to repossess leased portable storage units, including any customer goods contained in the unit,
following non-payment of rent.
Inventories
Inventories are valued at the lower of cost (principally on a standard cost basis which approximates the first-in,
first-out (FIFO) method) or market. Market is the lower of replacement cost or net realizable value. Inventories
primarily consist of raw materials, supplies, work-in-process and finished goods, all related to the manufacturing,
remanufacturing and maintenance, primarily for the Company’s lease fleet and its units held for sale. Raw materials
principally consist of raw steel, wood, glass, paint, vinyl and other assembly components used in manufacturing and
remanufacturing processes. Work-in-process primarily represents units being built that are either pre-sold or being
built to add to its lease fleet upon completion. Finished portable storage units primarily represent ISO (International
Organization for Standardization) containers held in inventory until the containers are either sold as is, reman-
ufactured and sold, or units in the process of being remanufactured to be compliant with the Company’s lease fleet
standards before transferring the units to its lease fleet. There is no certainty when the Company purchases the
containers whether they will ultimately be sold, remanufactured and sold, or remanufactured and moved into its
lease fleet. Units that are determined to go into the Company’s lease fleet undergo an extensive remanufacturing
process that includes installing its proprietary locking system, signage, painting and sometimes its proprietary
security doors.
In 2008, in connection with the Company’s restructuring of its manufacturing operations it wrote down raw
materials and supplies it no longer intended to use. This charge totaled $4.5 million.
Inventories at December 31, consist of the following:
Raw materials and supplies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Work-in-process . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Finished portable storage units . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$21,801
2,819
4,811
$16,991
1,611
7,975
$29,431
$26,577
2007
2008
(In thousands)
50
MOBILE MINI, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Property, Plant and Equipment
Property, plant and equipment are stated at cost, net of accumulated depreciation. Depreciation is provided
using the straight-line method over the assets’ estimated useful lives. Residual values are determined when the
property is constructed or acquired and range up to 25%, depending on the nature of the asset. In the opinion of
management, estimated residual values do not cause carrying values to exceed net realizable value. The Company’s
depreciation expense related to property, plant and equipment for 2006, 2007 and 2008 was $4.2 million,
$5.6 million and $9.4 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 retirement of fixed assets.
In 2007, the Company wrote off certain assets, which for the most part were fully depreciated, that were in the
process of being replaced or were no longer required or used in its leasing operations. In 2008, in connection with
the Company’s restructuring of its manufacturing operations it recorded an impairment charge to write-down and
was included in integration, merger and restructuring expense for equipment it no longer intended to use. This
charge totaled $1.2 million.
Property, plant and equipment at December 31, consist of the following:
Estimated
Useful Life in
Years
Land . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Vehicles and machinery(1). . . . . . . . . . . . . . . . . . . . . . . . . . .
Buildings and improvements(2) . . . . . . . . . . . . . . . . . . . . . . .
Office fixtures and equipment . . . . . . . . . . . . . . . . . . . . . . . .
5 to 20
30
5
Less accumulated depreciation . . . . . . . . . . . . . . . . . . . . . . . .
2007
2008
$
(In thousands)
772
60,490
11,514
11,579
$ 10,978
78,592
13,868
20,948
84,355
(28,992)
124,386
(35,877)
Total property, plant and equipment . . . . . . . . . . . . . . . . . . . .
$ 55,363
$ 88,509
(1) Includes impaired assets of $1.2 million (net book value of related assets at December 31, 2008) related to the
restructuring of the Company’s manufacturing operations. This impairment is included in integration, merger
and restructuring expense in the consolidated statements of income.
(2) Improvements made to leased properties are depreciated over the lesser of the estimated remaining life or the
remaining term of the respective lease.
Other Assets and Intangibles
Other assets and intangibles primarily represent deferred financing costs and intangible assets from acqui-
sitions of $12.5 million at December 31, 2007 and $43.3 million at December 31, 2008, excluding accumulated
amortization of $3.4 million at December 31, 2007 and $8.2 million at December 31, 2008. Deferred financing costs
are amortized over the term of the agreement, and intangible assets are amortized either on a straight-line basis,
typically over a five-year period, or on an accelerated basis for intrinsic values assigned to customer lists and trade
names.
51
MOBILE MINI, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
The following table reflects balances related to intangible assets for the years ended December 31, 2007 and
2008 (in thousands):
Deferred financing costs . . . . . . .
Customer lists . . . . . . . . . . . . . .
Tradenames/trademarks . . . . . . .
Non-compete agreements . . . . . .
Patents and other . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . .
December 31, 2007
December 31, 2008
Gross
Carrying
Amount
$ 6,590
5,102
221
255
313
$12,481
Accumulated
Amortization
$(1,809)
(1,234)
(178)
(83)
(91)
$(3,395)
Net
Carrying
Amount
$4,781
3,868
43
172
222
$9,086
Gross
Carrying
Amount
$21,756
20,166
864
330
211
$43,327
Accumulated
Amortization
Net Carrying
Amount
$(4,263)
(3,454)
(343)
(120)
(84)
$(8,264)
$17,493
16,712
521
210
127
$35,063
Amortization expense for intangibles was approximately $0.5 million, $1.0 million and $3.6 million in 2006,
2007 and 2008, respectively. Based on the carrying value at December 31, 2008, and assuming no subsequent
impairment of the underlying assets, the annual amortization expense is expected to be $5.3 million in 2009,
$3.8 million in 2010, $2.7 million in 2011, $2.0 million in 2012, $1.4 million in 2013 and $2.2 million thereafter.
Income Taxes
Mobile Mini utilizes the liability method of accounting for income taxes as set forth in SFAS No. 109,
Accounting for Income Taxes. Under the liability method, deferred taxes are determined based on the difference
between the financial statement and tax basis of assets and liabilities using enacted tax rates in effect in the years in
which the differences are expected to reverse. Valuation allowances are established, when necessary, to reduce
deferred tax assets to the amount expected to be realized. Income tax expense includes both taxes payable for the
period and the change during the period in deferred tax assets and liabilities.
Earnings per Share
As a result of issuing the Preferred Stock, which participates in distributions of earnings on the same basis as
shares of common stock, the Company has applied the provisions of EITF Issue No. 03-6, Participating Securities
and the Two-Class Method under FASB Statement 128 (EITF No. 03-6). This issue established standards regarding
the computation of earnings per share (EPS) by companies that have issued securities other than common stock that
contractually entitle the holder to participate in dividends and earnings of the company. EITF No. 03-6 requires
earnings for the period to be allocated between the common and preferred shareholders based on their respective
rights to receive dividends. Basic net income per share is then calculated by dividing income allocable to common
stockholders by the weighted-average number of common shares outstanding, net of shares subject to repurchase by
the Company, during the period. EITF No. 03-6 does not require the presentation of basic and diluted net income
(loss) per share for securities other than common stock; therefore, the following net income per share amounts only
pertain to the Company’s common stock. The Company calculates diluted net income per share under the if-
converted method unless the conversion of the preferred stock is anti-dilutive to basic net income per share. To the
extent the inclusion of preferred stock is anti-dilutive, the Company calculates diluted net income per share under
the two-class method. Potential common shares include restricted common stock and incremental shares of
common stock issuable upon the exercise of stock options and vesting of nonvested stock awards and convertible
preferred stock using the treasury stock method.
52
MOBILE MINI, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
The following is a reconciliation of net income and weighted-average shares of common stock outstanding for
purposes of calculating basic and diluted earnings per share for the years ended December 31:
2006
2008
2007
(In thousands except earnings per
share)
Historical net income per share:
Numerator:
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Less: Earnings allocable to preferred stock . . . . . . . . . . . . . . . . .
$42,776
—
$44,176
—
$29,041
(2,739)
Net income available to common stockholders . . . . . . . . . . . .
$42,776
$44,176
$26,302
Basic EPS Denominator:
Common stock outstanding beginning of period . . . . . . . . . . . . . . .
Effect of weighted shares:
Weighted shares issued during the period ended
30,521
35,640
34,041
December 31 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
3,722
302
Weighted shared purchased during the period ended
December 31 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
—
(453)
114
—
Denominator for basic net income per share . . . . . . . . . . . . . . . . . .
34,243
35,489
34,155
Diluted EPS Denominator:
Common shares outstanding, beginning of year . . . . . . . . . . . . . . .
Effect of weighting shares:
30,521
35,640
34,041
Weighted common shares issued during the period ended
December 31 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
3,722
302
Weighted common shares purchased during the period
ended December 31 . . . . . . . . . . . . . . . . . . . . . . . . . . . .
—
(453)
114
—
Dilutive effect of employee stock options on nonvested
share-awards assumed converted during the period ended
December 31 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Dilutive effect of convertible preferred stock assumed
1,182
807
372
converted during the period ended December 31 . . . . . . .
—
—
4,348
Denominator for diluted net income per share . . . . . . . . . . . . . . . .
35,425
36,296
38,875
Basic net income per share . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 1.25
$ 1.24
$ 0.77
Diluted net income per share . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 1.21
$ 1.22
$ 0.75
Employee stock options to purchase 0.6 million, 0.6 million and 0.6 million shares were issued or outstanding
during 2006, 2007 and 2008, respectively, but were not included in the computation of diluted earnings per share
because the effect would have been anti-dilutive. The anti-dilutive options could potentially dilute future earnings
per share. Basic weighted average number of common shares outstanding in 2007 and 2008 does not include
0.5 million and 1.0 million nonvested share-awards, respectively, as the stock is not vested. During 2007 and 2008,
an immaterial amount of nonvested share-awards were not included in the computation of diluted earnings per share
because the effect would have been anti-dilutive. The nonvested stock could potentially dilute future earnings per
share.
53
MOBILE MINI, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Long-Lived Assets
Mobile Mini reviews long-lived assets for impairment whenever events or changes in circumstances indicate
the carrying amount of such assets may not be fully recoverable. If this review indicates the carrying value of these
assets will not be recoverable, as measured based on estimated undiscounted cash flows over their remaining life,
the carrying amount would be adjusted to fair value. The cash flow estimates contain management’s best estimates,
using appropriate and customary assumptions and projections at the time. The Company did not recognize any
impairment losses in the year ended December 31, 2007. The Company recognized impairment losses of
$1.2 million the year ended December 31, 2008 related to the restructuring of the Company’s manufacturing
operations for vehicles and equipment the Company does not anticipate using in the future.
Goodwill
Purchase prices of acquired businesses have been allocated to the assets and liabilities acquired based on the
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 were allocated to goodwill. In 2008, the Company completed the Merger by
which MSG became a wholly-owned subsidiary of Mobile Mini, Inc. Three other acquisitions of businesses were
asset purchases which results in the goodwill relating to business acquisitions executed under asset purchase
agreements being deductible for income tax purposes over 15 years even though goodwill is not amortized for
financial reporting purposes. Our other acquisition in 2008 was a stock purchase.
The Company evaluates goodwill periodically to determine whether events or circumstances have occurred
that would indicate goodwill might be impaired. Pursuant to SFAS No. 142, Goodwill and Other Intangible Assets,
the Company has assigned its goodwill to each of its three reporting units (North America, U.K. and The
Neatherlands). The Company performs an annual impairment test on goodwill at December 31 using the two-step
process prescribed in SFAS No. 142. The first step is a screen for potential impairment, while the second step
measures the amount of the impairment, if any. In addition, the Company will perform impairment tests during any
reporting period in which events or changes in circumstances indicate that an impairment may have incurred. At
December 31, 2008, the Company performed the first step of the two-step impairment test and compared the fair
value of each reporting unit to its carrying value. In assessing the fair value of the reporting units, the Company
considered both the market and income approaches. Under the market approach, the fair value of the reporting unit
is based on quoted market prices of companies comparable to the reporting unit being valued. Under the income
approach, the fair value of the reporting unit is based on the present value of estimated cash flows. The income
approach is dependent on a number of significant management assumptions, including estimated future revenue
growth rates, gross margins on sales, operating margins, capital expenditures and discount rates. Each approach was
given equal weight in arriving at the fair value of the reporting unit. The Company determined the fair values of the
U.K. and The Netherlands reporting units were less than the carrying values of the net assets of these reporting units,
thus the Company performed step two of the impairment test for these two reporting units.
In step two of the impairment test, the Company is required to determine the implied fair value of the goodwill
and compare it to the carrying value of the goodwill. The Company allocated the fair value of the reporting units to
the respective assets and liabilities of each reporting unit as if the reporting units had been acquired in separate and
individual business combinations and the fair value of the reporting units was the price paid to acquire the reporting
units. The excess of the fair value of the reporting units over the amounts assigned to their respective assets and
liabilities is the implied fair value of goodwill. For both reporting units in the step two testing, the implied value of
goodwill was less than the carrying value of goodwill, resulting in an impairment charge of $13.7 million in the
fourth quarter of 2008. The Company reconciled the fair values of its three reporting units in the aggregate to its
market capitalization at December 31, 2008. At December 31, 2008, after the effect of the impairment charges,
$435.5 million of the goodwill relates to the North America reporting unit, $57.2 million relates to the U.K.
reporting unit, and $70,000 relates to The Netherlands reporting unit.
54
MOBILE MINI, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
The following table shows the activity and balances related to goodwill from January 1, 2007 to December 31,
2008 (in thousands):
Goodwill at January 1, 2007 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 76,456
Acquisitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
4,946
(1,612)
Adjustments(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Goodwill at December 31, 2007 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Acquisitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Impairment(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Adjustments(3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
79,790
452,607
(13,667)
(26,073)
Goodwill at December 31, 2008 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $492,657
(1) Includes $1.9 million tax related adjustments associated with the acquisition of Royal Wolf in 2006, partially
offset by foreign currency translation adjustments.
(2) Includes goodwill impairment of approximately $12.8 million related to the U.K. reporting unit and $900
thousand related to The Netherlands reporting unit.
(3) Represents foreign currency translation adjustments related to the U.K. and The Netherlands reporting units.
Fair Value of Financial Instruments
The Company determines the estimated fair value of financial instruments using available market information
and valuation methodologies. Considerable judgment is required in estimating fair values. Accordingly, the
estimates may not be indicative of the amounts it could realize in a current market exchange.
The carrying amounts of cash, receivables, accounts payable and accrued liabilities approximate fair values
based on the liquidity of these financial instruments or based on their short-term nature. The carrying amounts of the
Company’s borrowings under its credit facility and notes payable approximate fair value. The fair values of the
Company’s notes payable and credit facility are estimated using discounted cash flow analyses, based on its current
incremental borrowing rates for similar types of borrowing arrangements. Based on the borrowing rates currently
available to the Company for bank loans with similar terms and average maturities, the fair value of fixed rate notes
payable at December 31, 2007 and 2008, approximated the book values. The fair value of the Company’s Senior
Notes at December 31, 2007 ($149.4 million principal amount outstanding) and 2008 ($345.8 million principal
amount outstanding), was approximately $136.5 million and $244.0 million, respectively. The determination for
fair value is based on the latest sales price at the end of each fiscal year obtained from a third-party institution.
Deferred Financing Costs
Included in other assets and intangibles are deferred financing costs of approximately $4.8 million and
$17.5 million, net of accumulated amortization of $1.8 million and $4.3 million, at December 31, 2007 and 2008,
respectively. Costs to obtaining long-term financing, including the Company’s amended credit facility, are
amortized over the term of the related debt, using the straight-line method. Amortizing the deferred financing
costs using the straight-line method approximates such costs using the effective interest method.
Derivatives
In the normal course of business, the Company’s operations are exposed to fluctuations in interest rates. The
Company addresses a portion of these risks through a controlled program of risks management that includes the use
of derivative financial instruments. The objective of controlling these risks is to limit the impact of fluctuations in
interest rates on earnings.
55
MOBILE MINI, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
The Company’s primary interest rate risk exposure results from changes in short-term U.S. dollar interest rates.
In an effort to manage interest rate exposures, the Company may enter into interest rate swaps, which convert its
floating rate debt to a fixed-rate and which it designates as cash flow hedges. Interest expense on the borrowings
under these agreements is accrued using the fixed rates identified in the swap agreements.
Mobile Mini had interest rate swap agreements totaling $125.0 million at December 31, 2007 and $200.0 mil-
lion at December 31, 2008. The fixed interest rate on the Company’s five swap agreements at December 31, 2008
range from 3.25% to 4.71%, averaging 4.03% plus the spread. Three swap agreements mature in 2010 and five swap
agreements mature in 2011.
Derivative transactions resulted in a charge to comprehensive income at December 31, 2007, of $1.3 million,
net of income tax benefit of $0.8 million. At December 31, 2008, derivative transactions resulted in a charge to
comprehensive income of $6.3 million, net of income tax benefit of $4.0 million. The Company’s outstanding
interest rate swaps at December 31, 2007 had a fair-value totaling approximately $1.3 million, and were included in
other assets in our consolidated balance sheet. The Company’s outstanding interest rate swaps at December 31,
2007 and 2008 had a fair-value totaling approximately $1.3 and $11.5 million, respectively, and are included in
accrued liabilities in the consolidated balance sheet.
Share-Based Compensation
At December 31, 2008, the Company had three active share-based employee compensation plans. Stock option
awards under these plans are granted with an exercise price per share equal to the fair market value of the
Company’s common stock on the date of grant. Each option must expire no more than 10 years from the date it is
granted and historically options are granted with vesting over a 4.5 year period.
The Company adopted SFAS No. 123(R) effective January 1, 2006, using the modified prospective method.
SFAS No. 123(R) prohibits the recognition of a deferred tax asset for an excess tax benefit that has not been realized
related to stock-based compensation deductions. The Company adopted the with-and-without approach with
respect to the ordering of tax benefits realized. In the with-and-without approach, the excess tax benefit related to
stock-based compensation deductions will be recognized in additional paid-in capital only if an incremental tax
benefit would be realized after considering all other tax benefits presently available to us. Therefore, the Company’s
net operating loss carryforward will offset current taxable income prior to the recognition of the tax benefit related
to stock-based compensation deductions. In 2006, 2007 and 2008, there were $3.6 million, $3.4 million and
$0.4 million, respectively, of excess tax benefits related to stock-based compensation, which were not realized
under this approach. Once the Company’s net operating loss carryforward is utilized, these excess tax benefits,
totaling $7.4 million, may be recognized in additional paid-in capital.
Foreign Currency Translation and Transactions
For Mobile Mini’s non-U.S. operations, the local currency is the functional currency. All assets and liabilities
are translated into dollars at period-end exchange rates and all income statement amounts are translated at the
average exchange rate for each month within the year.
Use of Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the
U.S. requires management to make estimates and assumptions that affect the amounts reported in the accompanying
consolidated financial statements and the notes to those statements. Actual results could differ from those estimates.
The most significant estimates included within the financial statements are the allowance for doubtful accounts, the
estimated useful lives and residual values on the lease fleet and property, plant and equipment and goodwill and
other asset impairments.
56
MOBILE MINI, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Impact of Recently Issued Accounting Standards
In September 2006, the Financial Accounting Standards Board (FASB) issued Statement of Financial
Accounting Standards (SFAS) No. 157, Fair Value Measurement (SFAS No. 157). SFAS No. 157 defines fair
value, establishes a framework for measuring fair value in generally accepted accounting principles, and expands
disclosures about fair value measurements. SFAS No. 157 is effective for fiscal years beginning after November 15,
2007 and interim periods within those fiscal years. The Company adopted SFAS No. 157 on January 1, 2008, with
no material effect on the Company’s consolidated financial statements.
On February 15, 2007, the FASB issued SFAS No. 159, The Fair Value Option for Financial Assets and
Financial Liabilities (SFAS No. 159). Under SFAS No. 159, the Company may elect to report financial instruments
and certain other items at fair value on a contract-by-contract basis with changes in value reported in earnings. This
election is irrevocable. SFAS No. 159 provides an opportunity to mitigate volatility in reported earnings that is
caused by measuring hedged assets and liabilities that were previously required to use a different accounting
method than the related hedging contracts when the complex provisions of SFAS No. 133, Accounting for
Derivative Instruments and Hedging Activities, applicable to hedge accounting are not met. The Company adopted
SFAS No. 159 on January 1, 2008. The Company chose not to elect the fair value option for its financial assets and
liabilities existing at January 1, 2008 and did not elect the fair value option on any financial assets or liabilities
transacted in the year ended December 31, 2008. Therefore, the adoption of SFAS No. 159 had no impact on the
Company’s consolidated financial statements.
In December 2007, the FASB issued SFAS No. 141 (revised 2007), Business Combinations (SFAS No. 141(R))
which establishes principles and requirements for how an acquirer recognizes and measures in its financial
statements the identifiable assets acquired, the liabilities assumed and any noncontrolling interest in an acquiree,
including the recognition and measurement of goodwill acquired in a business combination. Certain forms of
contingent consideration and certain acquired contingencies will be recorded at fair value at the acquisition date.
SFAS No. 141(R) also states acquisition costs will generally be expensed as incurred and restructuring costs will be
expensed in periods after the acquisition date. The Company will apply SFAS No. 141(R) prospectively to business
combinations with an acquisition date on or after January 1, 2009.
In December 2007, the FASB issued SFAS No. 160, Noncontrolling Interests in Consolidated Financial
Statements — An Amendment of ARB No. 51 (SFAS No. 160). SFAS No. 160 amends Accounting Research
Bulletin ARB No. 51, Consolidated Financial Statements, to establish accounting and reporting standards for the
noncontrolling interest in a subsidiary and for the deconsolidation of a subsidiary. SFAS No. 160 becomes effective
beginning January 1, 2009. Presently, there are no noncontrolling interests in any of the Company’s consolidated
subsidiaries; therefore, the Company does not expect the adoption of SFAS No. 160 to have a significant impact on
the Company’s results of operations or financial condition.
In March 2008, the FASB issued SFAS No. 161, Disclosures about Derivative Instruments and Hedging
Activities — An Amendment of FASB Statement No. 133 (SFAS No. 161). SFAS No. 161 requires qualitative
disclosures about objectives and strategies for using derivatives, quantitative data about the fair value of and gains
and losses on derivative contracts and details of credit-risk-related contingent features in hedged positions. The
statement also requires enhanced disclosures regarding how and why entities use derivative instruments, how
derivative instruments and related hedged items are accounted and how derivative instruments and related hedged
items affect entities’ financial position, financial performance and cash flows. SFAS No. 161 is effective for fiscal
periods beginning after November 15, 2008. The Company does not expect the adoption of SFAS No. 161 will have
a material effect on the Company’s results of operations or financial position.
In April 2008, the FASB issued FSP FAS 142-3, Determining the Useful Life of Intangible Assets (FSP
FAS 142-3). FSP FAS 142-3 amends the factors to be considered in determining the useful life of intangible assets.
Its intent is to improve the consistency between the useful life of an intangible asset and the period of expected cash
flows used to measure its fair value. FSP FAS 142-3 is effective for fiscal years beginning after December 15, 2008.
57
MOBILE MINI, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
The Company currently adheres to the principle set forth in FSP FAS 142-3 and does not expect its adoption to
materially affect the Company’s results of operations or financial condition.
In November 2008, the FASB ratified EITF Issue No. 08-7, Accounting for Defensive Intangible Assets (EITF
No. 08-7). EITF No. 08-7 applies to defensive intangible assets, which are acquired intangible assets that the
acquirer does not intend to actively use but intends to hold to prevent its competitors from obtaining access to them.
As these assets are separately identifiable, EITF No. 08-7 requires an acquiring entity to account for defensive
intangible assets as a separate unit of accounting. Defensive intangible asset must be recognized at fair value in
accordance with SFAS No. 141(R) and SFAS No. 157. EITF No. 08-7 is effective for defensive intangible assets
acquired in fiscal years beginning on or after December 15, 2008. We are currently evaluating the potential impact,
if any, that the adoption of EITF No. 08-7 will have on our results of operations for financial condition.
(2) Fair Value Measurements:
The Company adopted SFAS No. 157 on January 1, 2008. SFAS No. 157 defines fair value, as the price that
would be received from selling an asset or paid to transfer a liability in an orderly transaction between market
participants. As such, fair value is a market-based measurement that should be determined based on assumptions
that market participants would use in pricing an asset or liability. As a basis for considering such assumptions,
SFAS No. 157 establishes a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value
as follows:
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
Assets and liabilities measured at fair value on a recurring basis are as follows (in thousands):
Quoted
Prices in
Active Markets for
Identical
Assets
(Level 1)
Fair Value
December 31,
2008
Significant
Other Observable
Inputs
(Level 2)
Significant
Unobservable
Inputs
(Level 3)
Valuation
Technique
Interest rate swap agreements . . . .
$(11,532)
$—
$(11,532)
$—
(1)
(1) The Company’s interest rate swap agreements are not traded on a market exchange; therefore, the fair values are
determined using valuation models which include assumptions about the LIBOR yield curve at the reporting
dates as well as counterparty credit risk and the Company’s own non-performance risk. The Company has
consistently applied these calculation techniques to all periods presented. At December 31, 2008, the fair value
of interest rate swap agreements is recorded in accrued liabilities in the Company’s consolidated balance sheet.
(3) Lease Fleet:
Mobile Mini’s lease fleet primarily consists of remanufactured, modified and manufactured portable storage
and office units that are leased to customers under short-term operating lease agreements with varying terms.
Depreciation is provided using the straight-line method over its units’ estimated useful life, after the date the
Company put the unit in service, and are depreciated down to their estimated residual values. The Company’s
depreciation policy on its steel units uses an estimated useful life of 25 years with an estimated residual value of
62.5%. Wood mobile office units are depreciated over 20 years down to a 50% residual value. Van trailers, which are
a small part of the Company’s fleet, are depreciated over 7 years to a 20% residual value. Van trailers are only added
to the fleet in connection with acquisitions of portable storage businesses. In the opinion of management, estimated
58
MOBILE MINI, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
residual values do not cause carrying values to exceed net realizable value. The Company continues to evaluate
these depreciation policies as more information becomes available from other comparable sources and its own
historical experience. The Company’s depreciation expense related to lease fleet for 2006, 2007 and 2008 was
$12.0 million, $14.5 million and $18.9 million, respectively. At December 31, 2007 and 2008, all of the Company’s
lease fleet units were pledged as collateral under the credit facility (see Note 4). Normal repairs and maintenance to
the portable storage and mobile office units are expensed as incurred.
Lease fleet at December 31, consists of the following:
Steel storage containers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Offices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Van trailers. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other, primarily chassis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$459,665
402,640
2,330
956
$ 616,750
523,242
15,610
2,161
2007
2008
(In thousands)
Accumulated depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
865,591
(62,668)
1,157,763
(79,607)
$802,923
$1,078,156
(4) Line of Credit:
In connection with the Merger, Mobile Mini expanded its revolving credit facility to increase its borrowing
limit and to include the combined assets of both Mobile Mini and Mobile Storage Group as security for the facility.
On June 27, 2008, Mobile Mini and its subsidiaries, (including Mobile Storage Group and its subsidiaries)
entered into an ABL Credit Agreement (the Credit Agreement) with Deutsche Bank AG New York Branch and
other lenders party thereto. The Credit Agreement provides for a five-year, $900.0 million revolving credit facility.
Amounts borrowed under the Credit Agreement and repaid or prepaid during the term may be reborrowed.
Outstanding amounts under the Credit Agreement will bear interest at the Company’s option at either (i) LIBOR
plus a defined margin, or (ii) the Agent bank’s prime rate plus a margin. LIBOR loans will initially bear interest at
LIBOR plus 2.5% and base rate loans will initially bear interest at the Agent bank’s prime rate plus 1.0%. After the
quarter ended June 30, 2009, the applicable margins for each type of loan will range from 2.25% to 2.75% for
LIBOR loans and 0.75% to 1.25% for base rate loans depending upon the Company’s then-debt ratio at the
measurement date. All amounts outstanding under the Credit Agreement are due on June 27, 2013.
Availability of borrowings under the Credit Agreement is subject to a borrowing base calculation based upon a
valuation of the Company’s eligible accounts receivable, eligible container fleet (including containers held for sale,
work-in-process and raw materials), machinery and equipment and real property, each multiplied by an applicable
advance rate or limit. The lease fleet is appraised at least once annually by a third-party appraisal firm and up to 90%
of the lesser of cost or appraised orderly liquidation value, as defined, may be included in the borrowing base to
determine how much the Company may borrow under this facility.
The Credit Agreement provides for U.K. borrowings, denominated in either Pounds Sterling or Euros, by the
Company’s subsidiary Mobile Mini U.K. Limited based upon a U.K. borrowing base and for U.S. borrowings which
are denominated in Dollars, by Mobile Mini based upon a U.S. and Canada borrowing base.
The Company’s obligations and those of its subsidiaries under the Credit Agreement are secured by a blanket
lien on substantially all of the Company’s assets.
The Credit Agreement also contains customary negative covenants applicable to Mobile Mini and its
subsidiaries, including covenants that restrict their ability to, among other things, (i) make capital expenditures
in excess of defined limits, (ii) allow certain liens to attach to the Company or its subsidiary assets, (iii) repurchase
59
MOBILE MINI, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
or pay dividends or make certain other restricted payments on capital stock and certain other securities, or prepay
certain indebtedness, (iv) incur additional indebtedness or engage in certain other types of financing transactions,
and (v) make acquisitions or other investments.
Mobile Mini also must comply with specified financial covenants and affirmative covenants. Only if the
Company falls below specified borrowing availability levels, are financial maintenance covenants applicable with
set maximum permitted values for its leverage ratio (as defined), fixed charge coverage ratios and its minimum
required utilization rates. At December 31, 2007 and December 31, 2008, the Company was in compliance with its
covenants.
The weighted average interest rate under the line of credit, including the effect of applicable interest rate swap
agreements, was approximately 6.3% in 2007 and 5.8% in 2008. The average balance outstanding during 2007 and
2008 was approximately $210.9 million and $413.8 million, respectively.
Mobile Mini has interest rate swap agreements under which it effectively fixed the interest rate payable on
$200.0 million of borrowings under the Company’s credit facility so that the interest rate is based on a spread from a
fixed rate rather than a spread from the LIBOR rate. The Company accounts for the swap agreements in accordance
with SFAS No. 133 and the aggregate change in the fair value of the interest rate swap agreements resulted in a
charge to comprehensive income for the year ended December 31, 2008 of $6.3 million, net of applicable income
tax benefit of $4.0 million.
In connection with the Merger, Mobile Mini paid down the outstanding balances of its and Mobile Storage
Group’s then-existing revolving credit facilities. The Company financed these pay-downs through a borrowing at
closing under its Credit Agreement.
The Company evaluated the expansion of its revolving credit facility under the provisions of EITF 98-14,
Debtor’s Accounting for Changes in Line-of-Credit or Revolving-Debt Arrangements, and as the new borrowing
capacity under the Credit Agreement exceeds that under the original revolving credit facility, unamortized deferred
financing costs have been added to the costs incurred as part of the Credit Agreement.
(5) Notes Payable:
Notes payable at December 31, consist of the following:
Notes payable to financial institution, interest at 5.94%, payable in fixed monthly
installments, matured June and July 2008, unsecured . . . . . . . . . . . . . . . . . . . . . $743
$ —
Notes payable to financial institution, interest at 4.81% payable in fixed monthly
installments, maturing August 2009, unsecured . . . . . . . . . . . . . . . . . . . . . . . . . .
Other notes payable, maturing through 2011 . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
— 1,026
354
—
$743
$1,380
2007
2008
(In thousands)
(6) Obligations Under Capital Leases:
At December 31, 2007, obligations under capital leases of $10,000 were for office-related equipment.
At December 2008, obligations under capital leases are for certain forklifts, storage containers and office
related equipment with an outstanding balance of $5.5 million. The lease agreements provide the Company with a
purchase option at the end of the lease term based on an agreed-upon percentage of the original cost of the
equipment. The leases have been capitalized using interest rates ranging from approximately 5.6% to 8.5%. The
leases are secured by the equipment under lease. Assets recorded under capital lease obligations totaled approx-
imately $6.0 million as of December 31, 2008. Related accumulated amortization totaled approximately $300,000
60
MOBILE MINI, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
as of December 31, 2008. The assets acquired under capital leases and related accumulated amortization is included
in property, plant and equipment, net, and lease fleet, net, in the consolidated balance sheets. The related
amortization is included in depreciation and amortization expense in the Consolidated Statements of Income.
Future minimum capital lease payments at December 31, 2008 are as follows (in thousands):
2009 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2010 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2011 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2012 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2013 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Thereafter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$1,801
1,738
1,432
912
311
160
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Amount representing interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
6,354
(857)
Present value of minimum lease payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$5,497
(7) Equity and Debt Issuances:
Mobile Mini Supplemental Indenture
In connection with the Merger, Mobile Mini entered into a Supplemental Indenture, dated as of June 27, 2008
(the Mobile Mini Supplemental Indenture), with Mobile Storage Group, Inc., a Delaware corporation, A Better
Mobile Storage Company, a California corporation and Mobile Storage Group (Texas), LP, a Texas limited
partnership (the New Mobile Mini Guarantors), the guarantors (the Existing Mobile Mini Guarantors) party to the
Mobile Mini Indenture and Law Debenture Trust Company of New York, as trustee (LDTC), pursuant to which the
New Mobile Mini Guarantors became “Guarantors” for all purposes under the Mobile Mini Indenture. Mobile Mini,
the Existing Mobile Mini guarantors and LDTC previously entered into an Indenture (the Mobile Mini Indenture),
dated as of May 7, 2007, pursuant to which Mobile Mini issued $150.0 million in aggregate principal amount of its
6.875% Senior Notes due 2015 (the Mobile Mini Notes).
MSG Supplemental Indenture
In connection with the Merger, Mobile Mini entered into a Supplemental Indenture, dated as of June 27, 2008
(the MSG Supplemental Indenture), with Mobile Mini of Ohio LLC, a Delaware limited liability company, Mobile
Mini, LLC, a California limited liability company, Mobile Mini, LLC, a Delaware limited liability company,
Mobile Mini I, Inc., an Arizona corporation, A Royal Wolf Portable Storage, Inc., a California corporation,
Temporary Mobile Storage, Inc., a California corporation, Delivery Design Systems, an Arizona corporation,
Mobile Mini Texas Limited Partnership, LLP, a Texas limited liability partnership (collectively, the New MSG
Guarantors), A Better Mobile Storage Company, a California corporation, and Mobile Storage Group (Texas), LP, a
Texas limited partnership (the Existing MSG Guarantors), Mobile Storage Group, Inc., a Delaware corporation, and
Wells Fargo Bank, N.A., as trustee (Wells Fargo), pursuant to which Mobile Mini became an “Issuer” for all
purposes under the MSG Indenture (as defined below) and the New MSG Guarantors became “Guarantors” for all
purposes under the MSG Indenture.
Mobile Storage Group, Inc. and Mobile Services Group, Inc., a Delaware corporation (the Original Issuers),
the Existing MSG Guarantors and Wells Fargo previously entered into an Indenture (the MSG Indenture), dated as
of August 1, 2006, pursuant to which the Original Issuers issued $200.0 million in aggregate principal amount of
9.75% Senior Notes due 2014 (the MSG Notes). The MSG Indenture includes covenants, indemnities and events of
default that are customary for indentures of this type, including restrictions on the incurrence of additional debt,
sales of assets and payment of dividends.
61
MOBILE MINI, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Future Debt Obligations
The scheduled maturity for debt obligations under Mobile Mini’s revolving line of credit, notes payable,
obligations under capital leases and Senior Notes for balances outstanding at December 31, 2008 are as follows (in
thousands):
2009 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
2010 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2011 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2012 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2013 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Thereafter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2,646
1,644
1,298
847
554,818
350,156
$911,409
Preferred Stock
In connection with the Merger, Mobile Mini issued 8.6 million shares of its Series A Convertible Redeemable
Participating Preferred Stock, to MSG’s stockholders. The shares were determined to have an initial fair value of
$196.6 million based upon a third party valuation. The shares have a liquidation preference of $154.0 million.
The preferred stock votes with Mobile Mini’s common stock as a single class. It ranks senior to the common
stock only with respect to a distribution upon the occurrence of the bankruptcy, liquidation, dissolution or winding
up of Mobile Mini. Holders of a majority of the shares of preferred stock, may require the Company to redeem all of
the outstanding preferred stock (i) if the Company enters into a binding agreement in respect of a sale of the
Company (as defined in the Certificate of Designation for the preferred stock) at a sale price of less than $23.00 per
share or (ii) at any time after the tenth anniversary of the preferred stock issuance date. If such majority holders do
not exercise their redemption rights following either of these events, the Company at its option may redeem the
preferred stock. The preferred stock is convertible into 8.6 million shares of the Company’s common stock at any
time at the option of the holders, representing an initial conversion price of $18.00 per common share. The preferred
stock will be mandatorily convertible into the Company’s common stock if, after the first anniversary of the
issuance of the preferred stock, its common stock trades above $23.00 per share for a period of 30 consecutive days.
The preferred stock will not have any cash or payment-in-kind dividends (unless and until a dividend is paid with
respect to the common stock, in which case dividends will be paid on an equal basis with the common stock, on an
as-converted basis) and does not impose any financial covenants upon the Company.
Under a Stockholders Agreement entered into with the sellers of MSG, Mobile Mini must use all commercially
reasonable efforts to file a shelf registration statement on Form S-3 under the U.S. Securities Act of 1933, as
amended, before April 27, 2009 covering all of the shares of Mobile Mini common stock issuable upon conversion
of the preferred stock and any shares of its common stock received in respect of the preferred stock (called the
registrable securities) then held by any Mobile Storage Group stockholders party to the Stockholders Agreement to
enable the resale of such registrable securities after June 27, 2009.
The registration rights granted in the Stockholders Agreement are subject to customary restrictions such as
blackout periods and limitations on the number of shares to be included in any underwritten offering imposed by the
managing underwriter. In addition, the Stockholders Agreement contains other limitations on the timing and ability
of the holders of registrable securities to exercise demands.
62
MOBILE MINI, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(8)
Income Taxes:
Income (loss) before taxes for the years ended December 31, consisted of the following:
U.S. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other Nations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$69,260
667
2006
2007
(In thousands)
$75,355
(2,769)
2008
$ 70,534
(13,493)
$69,927
$72,586
$ 57,041
The provision (benefit) for income taxes for the years ended December 31, consisted of the following:
Current:
U.S. Federal
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
State . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other Nations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
2006
2007
(In thousands)
2008
250
238
—
488
$ — $ —
210
—
413
—
413
210
Deferred:
U.S. Federal
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
State . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other Nations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
22,961
3,407
295
26,663
24,845
3,978
(826)
26,549
2,662
(1,421)
27,997
27,790
$27,151
$28,410
$28,000
The components of the net deferred tax liability at December 31, are approximately as follows:
2007
2008
(In thousands)
Deferred tax assets:
Net operating loss carryforwards . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred revenue and expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accrued compensation and other benefits . . . . . . . . . . . . . . . . . . . . . . . .
Allowance for doubtful accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 24,761
5,845
2,423
1,392
2,312
$ 88,178
7,950
4,454
2,185
4,542
Total deferred tax assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Valuation allowance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
36,733
(1,126)
107,309
(1,126)
Net deferred tax assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
35,607
106,183
Deferred tax liabilities:
Accelerated tax depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accelerated tax amortization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(147,042)
(11,277)
(759)
(239,794)
(1,067)
(108)
Total deferred tax liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(159,078)
(240,969)
Net deferred tax liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$(123,471)
$(134,786)
63
MOBILE MINI, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
A deferred U.S. tax liability has not been provided on the undistributed earnings of certain foreign subsidiaries
because it is Mobile Mini’s intent to permanently reinvest such earnings. Undistributed earnings of foreign
subsidiaries, which have been, or are intended to be, permanently invested in accordance with APB No. 23,
Accounting for Income Taxes — Special Areas, aggregated approximately $0.1 million and $0.1 million as of
December 31, 2007 and 2008, respectively. A net deferred tax liability of approximately $9.9 million related to the
Company’s U.K. and The Netherlands operations have been combined with the net deferred tax liabilities of its
U.S. operations in its consolidated balance sheet at December 31, 2008.
A reconciliation of the U.S. federal statutory rate to Mobile Mini’s effective tax rate for the years ended
December 31, is as follows:
2006
2007
2008
U.S. federal statutory rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
State taxes, net of federal benefit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
3.5
0.4
Non deductible expenses-other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Goodwill impairments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . —
Foreign loss rate differential . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . —
Change in valuation allowance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
35.0% 35.0% 35.0%
3.5
3.5
1.6
0.6
— 6.7
— 2.3
—
(0.1) —
38.8% 39.1% 49.1%
At December 31, 2008, Mobile Mini had a U.S. federal net operating loss carryforward of approximately
$206.1 million, which expires if unused from 2017 to 2028. At December 31, 2008, the Company had net operating
loss carryforwards in the various states in which it operates totaling $145.7 million, which expire if unused from
2008 to 2028. At December 31, 2007 and 2008, the Company’s deferred tax assets do not include $7.0 million and
$7.4 million of excess tax benefits from employee stock option exercises that are a component of its net operating
loss carryforward. Additional paid in capital will be increased by $7.4 million if and when such excess tax benefits
are realized. Management evaluates the ability to realize its deferred tax assets on a quarterly basis and adjusts the
amount of its valuation allowance if necessary. There has been no change recorded in 2008 on the $1.1 million
valuation allowance relating to Royal Wolf tax attribute carryforwards. Accelerated tax amortization primarily
relates to amortization of goodwill for income tax purposes.
On January 1, 2007, Mobile Mini adopted the provision of FIN 48, Accounting for Uncertainty in Income
Taxes-an interpretation of FASB Statement No. 109. FIN 48 contains a two-step approach to recognizing and
measuring uncertain tax positions accounted for in accordance with SFAS No. 109, Accounting for Income Taxes.
The first step is to evaluate the tax position for recognition by determining if the weight of available evidence
indicates that it is more likely than not that the position will be sustained on audit, including resolution of related
appeals or litigation process, if any. The second step is to measure the tax benefit as the largest amount that is more
than 50% likely of being realized upon ultimate settlement.
The Company files U.S. federal tax returns, U.S. state tax returns, and foreign tax returns. The Company has
identified its U.S. Federal tax return as its “major” tax jurisdiction. For the U.S. Federal return, years 2005 through
2007 are subject to tax examination by the U.S. Internal Revenue Service. The Company is currently under audit for
the years 2006 and 2007. The Company believes that its income tax filing positions and deductions will be sustained
on audit and do not anticipate any adjustments that will result in a material change to our financial position.
Therefore, no reserves for uncertain income tax positions have been recorded pursuant to FIN 48. The Company
does not anticipate that the total amount of unrecognized tax related to any particular tax benefit position will
change significantly within the next 12 months.
The Company’s policy for recording interest and penalties associated with audits is to record such items as a
component of income before taxes. Penalties and associated interest costs are recorded in leasing, selling and
general expenses in its consolidated statements of income.
64
MOBILE MINI, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
As a result of stock ownership changes during the years presented, it is possible that the Company has
undergone a change in ownership for federal income tax purposes, which can limit the amount of net operating loss
currently available as a deduction. Management has determined that even if such an ownership change has occurred,
it would not impair the realization of the deferred tax asset resulting from the federal net operating loss carryover.
Mobile Mini paid income taxes of approximately $0.7 million, $0.8 million and $0.7 million in 2006, 2007 and
2008, respectively. These amounts are lower than the recorded expense in the years due to net operating loss
carryforwards and general business credit utilization.
(9) Transactions with Related Persons:
When Mobile Mini was a private company prior to 1994, it leased some of its properties from entities
originally controlled by its founder, Richard E. Bunger, and his family members. These related party leases remain
in effect. The Company leases a portion of the property comprising its Phoenix location and the property comprising
its Tucson location from entities owned by Steven G. Bunger and his siblings. Steven G. Bunger is Mobile Mini’s
President and Chief Executive Officer and has served as its Chairman of the Board since February 2001. Annual
lease payments under these leases totaled approximately $91,000, $94,000 and $98,000 in 2006, 2007 and 2008,
respectively. The term of each of these leases expired on December 31, 2008, and the Company expects to renew
these leases through December 31, 2013 on terms approved by the Company’s Board of Directors. Mobile Mini
leases its Rialto, California facility from Mobile Mini Systems, Inc., a corporation wholly owned by Barbara M.
Bunger, the mother of Steven G. Bunger. Annual lease payments in 2006, 2007 and 2008 under this lease were
approximately $277,000, $282,000 and $295,000, respectively. The Rialto lease expires on April 1, 2016.
Management believes that the rental rates reflect the fair market rental value of these properties or were less
than the fair market rental value. The terms of these related persons lease agreements have been reviewed and
approved by the independent directors who comprise a majority of the members of the Company’s Board of
Directors.
It is Mobile Mini’s intention not to enter into any additional related person transactions other than extensions of
these lease agreements.
(10) Share-Based Compensation:
Prior to January 1, 2006, the Company accounted for share-based employee compensation, including stock
options, using the method prescribed in APB No. 25. Under APB No. 25, the stock options granted at market price,
no compensation cost was recognized, and a disclosure was made regarding the pro forma effect on net earnings
assuming compensation cost had been recognized in accordance with SFAS No. 123. Effective January 1, 2006, the
Company adopted SFAS No. 123(R) using the modified prospective method.
In 2005, the Company began awarding nonvested shares under the existing share-based compensation plans.
The majority of the Company’s nonvested share-awards vest in equal annual installments over a five year period.
The total value of these awards is expensed on a straight-line basis over the service period of the employees
receiving the grants. The “service period” is the time during which the employees receiving grants must remain
employees for the shares granted to fully vest. In December 2007, the Company granted to certain of its executive
officers 71,899 nonvested share- awards with vesting subject to a performance condition. Vesting for these share-
awards is dependent upon the officers fulfilling the service period requirements, as well as the Company meeting
certain EBITDA targets in each of the next four years. At the date of grant, the EBITDA targets were not known, and
as such, the measurement date for the nonvested share-awards had not yet occurred. This target was established by
Mobile Mini’s Board of Directors on February 20, 2008, at which point, the value of each nonvested share-award
was $15.85. The Company is required to assess the probability that such performance conditions will be met. If the
likelihood of the performance condition being met is deemed probable, the Company will recognize the expense
using accelerated attribution method. The accelerated attribution method could result in as much as 50% of the total
value of the shares being recognized in the first year of the service period if each of the four future targets is assessed
65
MOBILE MINI, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
as probable of being met. Share-based payment expense related to the vesting of share-awards during the year ended
December 31, 2008, was approximately $3.5 million. As of December 31, 2008, the unrecognized compensation
cost related to share-awards was approximately $18.6 million, which is expected to be recognized over a weighted-
average period of approximately 3.7 years.
Aggregate share-based payment expense was $5.7 million and $4.0 million for the periods ended December 31,
2008 and 2007, respectively.
The total value of the stock option awards is expensed on a straight-line basis over the service period of the
employees receiving the awards. As of December 31, 2008, total unrecognized compensation cost related to stock
option awards was approximately $2.5 million and the related weighted-average period over which it is expected to
be recognized is approximately 1.3 years.
Prior to the adoption of SFAS No. 123(R), the Company presented all tax benefits for deductions resulting
from the exercise of stock options as operating cash flows as a change in deferred income tax in the consolidated
statements of cash flows. SFAS No. 123(R) requires the cash flows resulting from the tax benefits arising from tax
deductions in excess of the compensation cost recognized for those options (excess tax benefits) to be classified as
financing cash flows. As of December 31, 2008, the Company had no tax benefits arising from tax deductions in
excess of the compensation cost recognized because the benefit has not been “realized” given that the Company
currently has net operating loss carryforwards and follow the with-and-without approach with respect to the
ordering of tax benefits realized.
The following table summarizes the share-based compensation expense and capitalized amounts for the years
ending December 31 (in thousands):
Gross share-based compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $3,431
(365)
Capitalized share-based compensation . . . . . . . . . . . . . . . . . . . . . . . . .
$4,584
(556)
$6,521
(865)
Share-based compensation expense . . . . . . . . . . . . . . . . . . . . . . . . . . . $3,066
$4,028
$5,656
2006
2007
2008
The following table summarizes the activities under the Company’s stock option plans for the years ended
December 31 (number of shares in thousands):
2006
2007
2008
Number of
Shares
Options outstanding, beginning of
year . . . . . . . . . . . . . . . . . . . . . . . .
Granted . . . . . . . . . . . . . . . . . . . . . . .
Canceled/Expired . . . . . . . . . . . . . . . .
Exercised . . . . . . . . . . . . . . . . . . . . . .
2,964
215
(71)
(499)
Weighted
Average
Exercise
Price
$ 14.00
29.99
(20.02)
(10.26)
Options outstanding, end of year . . . . .
2,609
$ 15.87
Options exercisable, end of year . . . . .
1,425
$ 13.95
Options and awards available for
grant, end of year . . . . . . . . . . . . . .
1,234
Number of
Shares
2,609
9
(71)
(519)
2,028
1,344
958
Weighted
Average
Exercise
Price
$ 15.86
30.47
(21.67)
(10.80)
$ 17.02
$ 15.63
Number of
Shares
2,028
—
(144)
(134)
1,750
1,426
399
Weighted
Average
Exercise
Price
$ 17.03
—
(17.46)
(10.98)
$ 17.45
$ 16.39
66
MOBILE MINI, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
A summary of nonvested share-awards activity within the Company’s share-based compensation plans and
changes is as follows (share amounts in thousands):
Nonvested at January 1, 2006 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Awarded . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Released . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Forfeited . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Nonvested at December 31, 2006 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Awarded . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Released . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Forfeited . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Shares
97
182
(19)
(1)
259
339
(58)
(8)
Nonvested at December 31, 2007 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
532
Awarded . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Released . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Forfeited . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
673
(149)
(66)
Weighted
Average
Grant Date
Fair Value
$23.56
29.59
23.56
27.70
$27.61
19.47
27.26
27.67
$22.46
15.78
22.16
21.49
Nonvested at December 31, 2008 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
990
$18.03
The total fair value of share-awards vested in 2008 was $3.3 million. The total fair value of share-awards
vested in 2007 was $1.6 million.
Options outstanding and exercisable by price range as of December 31, 2008 are as follows, (number of shares
in thousands):
Range of
Exercise
Prices
$ 7.33 - 9.40 . . . . . . . . . . . . . . . . . . . . . . . . .
9.93 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
10.44 - 10.51 . . . . . . . . . . . . . . . . . . . . . . . . .
14.11 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
16.46 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
16.82 - 20.55 . . . . . . . . . . . . . . . . . . . . . . . . .
24.65 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
27.56 - 30.44 . . . . . . . . . . . . . . . . . . . . . . . . .
31.10 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
33.98 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Options Outstanding
Options Exercisable
Weighted
Average
Exercise
Price
$ 7.43
9.93
10.49
14.11
16.46
20.29
24.65
29.00
31.10
33.98
Weighted
Average
Remaining
Contractual
Life
Weighted
Average
Exercise
Price
Options
Exercisable
Options
Outstanding
3.54
4.73
1.68
5.66
2.95
6.54
6.43
7.49
3.14
4.66
$ 7.43
9.93
10.49
14.11
16.46
20.18
24.65
28.79
31.10
33.98
76
215
34
275
533
33
156
75
2
27
1,426
76
215
34
387
533
35
286
139
5
40
1,750
67
MOBILE MINI, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
A summary of stock option activity, as of December 31, 2008, is as follows:
Outstanding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Vested and expected to vest . . . . . . . . . . . . . . . . . . . . .
Exercisable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Weighted
Average
Remaining
Contractual
Term
(In Years)
4.81
4.64
4.44
Weighted
Average
Exercise
Price
$17.45
$16.87
$16.39
Aggregate
Intrinsic
Value
(In thousands)
$1,754
$1,742
$1,719
Number
of Shares
(In thousands)
1,750
1,590
1,426
The aggregate intrinsic value of options exercised during the period ended December 31, 2006, 2007 and 2008
was $9.7 million, $10.0 million and $1.3 million, respectively.
The fair value of each stock option award is estimated on the date of the grant using the Black-Scholes option
pricing model. The following are the weighted average assumptions used for the periods noted:
December 31,
2007
2006
2008
Risk-free interest rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.79% 4.59% n/a
Expected holding period (years) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
n/a
Expected stock volatility . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35.3% 33.2% n/a
0.0% 0.0% n/a
Expected dividend rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
3.0
3.2
The Black-Scholes option valuation model was developed for use in estimating the fair value of short-traded
options that have no vesting restrictions and are fully transferable. In addition, option valuation models require the
input of assumptions including expected stock price volatility. The risk-free interest rate is based on the
U.S. treasury security rate in effect at the time of the grant. The expected holding period of options and volatility
rates are based on the Company’s historical data. The Company does not anticipate paying a dividend, and therefore
no expected dividend yield was used.
The weighted average fair value of stock options granted was $9.15 and $8.56 for 2006 and 2007, respectively.
There were no stock options granted in 2008.
(11) Benefit Plans:
Stock Option and Equity Incentive Plans
In August 1994, Mobile Mini’s Board of Directors adopted the Mobile Mini, Inc. 1994 Stock Option Plan,
which was amended in 1998 and expired (with respect to granting additional options) in 2003. At December 31,
2008, there were outstanding options to acquire 12,000 shares under the 1994 Plan. In August 1999, the Company’s
Board of Directors approved the Mobile Mini, Inc. 1999 Stock Option Plan. As of December 31, 2008, there were
outstanding options to acquire 1.7 million shares under the 1999 Plan. Both plans and amendments were approved
by the stockholders at annual meetings. Awards granted under the 1999 Plan may be incentive stock options, which
are intended to meet the requirements of Section 422 of the Internal Revenue Code, nonstatutory stock options or
shares of restricted stock awards. Incentive stock options may be granted to the Company’s officers and other
employees. Nonstatutory stock options may be granted to directors and employees, and to non-employee service
providers and share-awards may be made to officers and other employees.
In February 2006, Mobile Mini’s Board of Directors approved the 2006 Equity Incentive Plan that was
subsequently approved by the stockholders at the Company’s 2006 Annual Meeting. The 2006 Plan is an “omnibus”
stock plan permitting a variety of equity programs designed to provide flexibility in implementing equity and cash
awards, including incentive stock options, nonqualified stock options, nonvested share-awards, restricted stock
68
MOBILE MINI, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
units, stock appreciation rights, performance stock, performance units and other stock-based awards. Participants in
the 2006 Plan may be granted any one of the equity awards or any combination of them, as determined by the Board
of Directors or the Compensation Committee. The 2006 Plan has reserved 1.2 million shares of common stock for
issuance. As of December 31, 2008, there were outstanding options to acquire 29,000 shares under the 2006 Plan.
The purpose of these plans is to attract and retain the best available personnel for positions of substantial
responsibility and to provide incentives to, and to encourage ownership of stock by, Mobile Mini’s management and
other employees. The Board of Directors believes that stock options and other share-based awards are important to
attract and to encourage the continued employment and service of officers and other employees and encourage them
to devote their best efforts to the Company’s business, thereby advancing the interest of its stockholders.
The option exercise price for all options granted under these plans may not be less than 100% of the fair market
value of the common stock on the date of grant of the option (or 110% in the case of an incentive stock option
granted to an optionee beneficially owning more than 10% of the outstanding common stock). The maximum option
term is ten years (or five years in the case of an incentive stock option granted to an optionee beneficially owning
more than 10% of the outstanding common stock). Payment for shares purchased under these plans is made in cash.
Options may, if permitted by the particular option agreement, be exercised by directing that certificates for the
shares purchased be delivered to a licensed broker as agent for the optionee, provided that the broker tenders to
Mobile Mini, cash or cash equivalents equal to the option exercise price.
The plans are administered by the Compensation Committee of Mobile Mini’s Board of Directors. The
Compensation Committee is comprised of independent directors. They determine whether options will be granted,
whether options will be incentive stock options, nonstatutory option, restricted stock, or performance stock which
officers, employees and service providers will be granted options, the vesting schedule for options and the number
of options to be granted. Each option granted must expire no more than 10 years from the date it is granted and
historically they have vested over a 4.5 year period. Each non-employee director serving on the Company’s Board of
Directors receives an automatic award of shares of Mobile Mini’s common stock equivalent to $82,500 based on the
closing price of the Company’s common stock on August 1 of that year, or the following trading day if August 1 is
not a trading day. These awards vest 100% when granted.
The Board of Directors may amend the plans at any time, except that approval by Mobile Mini’s stockholders
may be required for an amendment that increases the aggregate number of shares which may be issued pursuant to
each plan, changes the class of persons eligible to receive incentive stock options, modifies the period within which
options may be granted, modifies the period within which options may be exercised or the terms upon which options
may be exercised, or increases the material benefits accruing to the participants under each plan. The Board of
Directors may terminate or suspend the plans at any time. Unless previously terminated, the 1999 Plan will expire in
August 2009 and the 2006 Plan will expire in February 2016. Any option granted under a plan will continue until the
option expiration date, notwithstanding earlier termination of the plan under which the option was granted.
In 2005, the Company began awarding nonvested shares under the existing share-based compensation plans.
These nonvested shares vest in equal annual installments on each of the first four or five annual anniversaries of the
award date, unless the person to whom the award was made is not then employed by Mobile Mini (or one of its
subsidiaries). In 2006 and 2007, certain officers of the Company received performance based nonvested shares. The
Company did not grant performance based shares in 2008. If employment terminates, the nonvested shares are
forfeited by the former employee.
In June 2008, in conjunction with the Merger and the hiring of Mobile Storage Group’s employees, the
Company awarded nonvested share-awards for an aggregate of 157,535 shares with an aggregate fair value of
$3.2 million. These awards vest over a period of between one and five years. The total value of these awards is
expensed on a straight-line basis over the service period.
69
MOBILE MINI, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
401(k) and Retirement Plans
In 1995, the Company established a contributory retirement plan in the U.S., the 401(k) Plan, covering eligible
employees with at least one year of service. The 401(k) Plan is designed to provide tax-deferred retirement benefits
to employees in accordance with the provisions of Section 401(k) of the Internal Revenue Code.
The 401(k) Plan provides that each participant may annually contribute a fixed amount or a percentage of his or
her salary, not to exceed the statutory limit. Mobile Mini may make a qualified non-elective contribution in an
amount it determines. Under the terms of the 401(k) Plan, Mobile Mini may also make discretionary profit sharing
contributions. Profit sharing contributions are allocated among participants based on their annual compensation.
Each participant has the right to direct the investment of their funds among certain named plans. Mobile Mini
contributes 25% of employees’ first 4% of contributions up to a maximum of $2 thousand per employee. The
Company has a similar plan as governed and regulated by Canadian law, where the Company makes matching
contributions with the same limitations as our 401(k) plan, to its Canadian employees.
In the U.K., the Company’s employees are covered by a defined contribution program. The employees become
eligible to participate three months after they begin employment. The plan is designed as a retirement benefit
program into which the Company pays a fixed 7% of the annual employees’ salary into the plan. Each employee has
the election to make further contributions if they so elect. The participants have the right to direct the investment of
their funds among certain named plans. A charge of 1% is deducted annually from each employee’s fund to cover
the administrative costs of this program.
In The Netherlands, the Company’s employees are covered by a defined contribution program. All employees
become eligible after one month of employment. Contributions are based on a pre-defined percentage of the
employee’s earnings. The percentage contribution is based on the employee’s age, with two-thirds of the
contribution made by the Company and one-third made by the employee. The Company does not incur any
administrative costs for this plan in 2008.
Mobile Mini made contributions to these plans of approximately $0.2 million, $0.4 million and $0.7 million in
2006, 2007 and 2008, respectively. Additionally, the Company incurred approximately $6,000 in each of those three
years for administrative costs for these programs.
(12) Commitments and Contingencies:
Leases
As discussed more fully in Note 9, Mobile Mini is obligated under four noncancelable operating leases with
related parties. The Company also leases its corporate offices and other properties and operating equipment from
third parties under noncancelable operating leases. Rent expense under these agreements was approximately
$8.6 million, $10.2 million and $12.3 million for the years ended December 31, 2006, 2007 and 2008, respectively.
As of December 31, 2008, contractual commitments associated with indebtedness, lease obligations and
restructuring are as follows (in thousands).
70
MOBILE MINI, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Lease
Commitments
Restructuring
Related Lease
Commitments
Restructuring
Sub-lease
Income
(In thousands)
2009 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2010 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2011 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2012 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2013 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Thereafter . . . . . . . . . . . . . . . . . . . . . . . . . .
$14,072
11,680
9,194
7,299
6,316
13,616
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$62,177
$ 3,441
2,945
2,254
1,897
1,397
2,656
$14,590
Total
$16,789
13,986
10,941
8,671
7,171
15,759
$ (724)
(639)
(507)
(525)
(542)
(513)
$(3,450)
$73,317
The above table includes certain real estate leases that expire in 2008, but have lease renewal options that the
Company currently anticipates to exercise in 2008 at the end of the initial lease period.
Future minimum lease payments under restructured non-cancelable operating leases as of December 31, 2008,
are included in accrued liabilities in the consolidated balance sheet. See Note 14 for a further discussion on
restructuring related commitments.
Insurance
The Company maintains insurance coverage for its operations and employees with appropriate aggregate, per
occurrence and deductible limits as the Company reasonably determines is necessary or prudent with current
operations and historical experience. The majority of these coverages have large deductible programs which allow
for potential improved cash flow benefits based on its loss control efforts.
The Company’s employee group health insurance program is a self-insured program with an aggregate stop
loss limit. The insurance provider is responsible for funding all claims in excess of the calculated monthly
maximum liability. This calculation is based on a variety of factors including the number of employees enrolled in
the plan. This plan allows for some cash flow benefits while guarantying a maximum premium liability. Actual
results may vary from estimates based on the Company’s actual experience at the end of the plan policy periods
based on the carrier’s loss predictions and its historical claims data.
The Company’s worker’s compensation, auto and general liability insurance are purchased under large
deductible programs. The Company’s current per incident deductibles are: worker’s compensation $250,000, auto
$250,000 and general liability $100,000. The Company expenses the deductible portion of the individual claims.
However, the Company generally does not know the full amount of its exposure to a deductible in connection with any
particular claim during the fiscal period in which the claim is incurred and for which it must make an accrual for the
deductible expense. The Company makes these accruals based on a combination of the claims development
experience of its staff and its insurance companies, and, at year end, the accrual is reviewed and adjusted, in part,
based on an independent actuarial review of historical loss data and using certain actuarial assumptions followed in the
insurance industry. A high degree of judgment is required in developing these estimates of amounts to be accrued, as
well as in connection with the underlying assumptions. In addition, the Company’s assumptions will change as its loss
experience is developed. All of these factors have the potential for significantly impacting the amounts the Company
has previously reserved in respect of anticipated deductible expenses and the Company may be required in the future
to increase or decrease amounts previously accrued. Under the Company’s various insurance programs, it has
collective reserves recorded in accrued liabilities of $7.5 million and $11.8 million at December 31, 2007 and 2008,
respectively.
As of December 31, 2008, in connection with the issuance of our insurance policies, Mobile Mini has provided
its various insurance carriers approximately $12.4 million in letters of credit.
71
MOBILE MINI, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
General Litigation
The Company is a party to routine claims incidental to its business. Most of these routine claims involve
alleged damage to customers’ property while stored in units leased from Mobile Mini and damage alleged to have
occurred during delivery and pick-up of containers. The Company carries insurance to protect it against loss from
these types of claims, subject to deductibles under the policy. The Company does not believe that any of these
incidental claims, individually or in the aggregate, is likely to have a material adverse effect on its business or results
of operations.
(13) Stockholders’ Equity:
On August 8, 2007, Mobile Mini’s Board of Directors approved a common stock repurchase program
authorizing up to $50.0 million of its outstanding shares to be repurchased over a six-month period. As of
December 31, 2007, the Company had repurchased 2.2 million shares for approximately $39.3 million under this
authorization, and it did not repurchase any additional shares prior to the expiration of this authorization in February
2008.
On February 22, 2006, the Board of Directors approved a two-for-one stock split in the form of a 100 percent
stock dividend payable on March 10, 2006, to shareholders of record as of the close of business on March 6, 2006.
Per share amounts, share amounts and the weighted average numbers of shares outstanding give effect for this two-
for-one stock split for all periods presented.
In March 2006, Mobile Mini issued 4.6 million shares of its common stock at approximately $26.22 per share,
net of underwriting discounts and commissions, but before other expenses. The Company received net offering
proceeds of approximately $120.3 million which it used to redeem 35% of the $150.0 million aggregate principal
amount outstanding of the Company’s 9.5% Senior Notes and to temporarily pay down its revolving line of credit.
(14) Mergers and Acquisitions:
The Company enters new markets in one of two ways, either by a new branch start-up or through acquiring a
business consisting of the portable storage assets and related leases of other companies. An acquisition generally
provides the Company with cash flow which enables the Company to immediately cover the overhead cost at a new
branch. On occasion, the Company also purchases portable storage businesses in areas where the Company has
existing small branches either as part of multi-market acquisitions or in order to increase the Company’s operating
margins at those branches.
In 2006, the Company entered into a share purchase agreement to acquire three companies of Royal Wolf
Group which, in addition to increasing the Company’s operations in the U.S., gave it presence in the U.K. and The
Netherlands. The acquisition of their businesses collectively did not meet the materiality threshold established by
the Securities and Exchange Commission that would otherwise require reporting separate financial information for
these companies or performance information for periods prior to the acquisition. In addition, the Company also
acquired three other businesses in 2006, L&L Surplus of Utica, Inc., HOC-Express, Inc. and Affordable LLC
through asset purchase agreements.
In 2007, Mobile Mini acquired the portable storage assets and assumed certain liabilities of four businesses:
(1) Worcester Leasing Company, Inc., operating in Worcester, Vermont, (2) Site Storage and Equipment, Inc. and
Ace Container & Equipment Sales, Inc., located in Theodore, Alabama, (3) Guest Inc., operating in the Pittsburgh,
Pennsylvania metropolitan area which also serves eastern Ohio and northern West Virginia and (4) Centreline
Equipment Rentals Ltd., of Windsor, Ontario, which became Mobile Mini’s third branch in Canada. The Company
also opened its second Canadian branch by commencing operations in the Vancouver metropolitan area by way of a
new branch start up. All acquisitions in 2007 were for cash.
72
MOBILE MINI, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
On June 27, 2008, the Company completed the Merger by which MSG became a wholly-owned subsidiary of
Mobile Mini, Inc.
The results of operations for MSG are included herein from the effective date of the Merger, June 27, 2008. The
Company’s consolidated statements of income were impacted by the estimated expenses accrued related to
integration, merger and restructuring costs recorded for the period ended December 31, 2008. This expense
primarily relates to costs, incurred or estimated to be incurred, for the closing of overlapping Mobile Mini lease
properties and the repositioning of assets between the two entities’ locations and personnel relocation costs. Also, as
a result of the Merger, the Company recorded a restructuring expense relating to its manufacturing operations.
Certain other continuing costs, primarily related to Mobile Mini’s personnel closing bonuses and severance
agreements and certain corporate costs incurred during the integration are expensed as integration, merger and
restructuring expense as incurred.
Also in 2008, the Company acquired four other portable storage businesses, three through asset purchase
agreements and one as a stock purchase: (1) International Equipment Services, Inc., operating in Oakland and Los
Angeles, California, (2) Advantage Container Corporation, operating in Dallas, Texas, (3) J. Staal Enterprises, LLC,
operating in Santa Barbara, California and (4) Kelly Containers, Inc., operating in Hartford, Connecticut.
The Merger and other acquisitions were accounted for as the purchase of a business in accordance with
SFAS No. 141, Business Combinations, with the purchased assets and assumed liabilities recorded at their estimated
fair values at the date of each acquisition.
The aggregate purchase price of the assets and operations acquired consists of the following for the years ended
December 31:
2007
Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $9,687
Assumption of debt . . . . . . . . . . . . . . . . . . . . . . . . .
47
Issuance of convertible preferred stock, as initially
2008
Other
Acquisitions
Total
MSG
(In thousands)
$ 17,927
540,887
$15,323
—
$ 33,250
540,887
valued . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
— 196,600
—
196,600
$9,734
$755,414
$15,323
$770,737
Cash of $33.3 million for 2008 represents cash paid of $38.8 million, net of cash acquired of $5.5 million, and
includes $19.3 million of costs.
73
MOBILE MINI, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
The fair value of the assets acquired and liabilities assumed has been allocated as follows for the years ended
December 31:
2007
2008
Other
Acquisitions
MSG
(In thousands)
Receivables. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ — $ 31,942
9,164
Inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
268,259
Lease fleet, net . . . . . . . . . . . . . . . . . . . . . . . . . . . .
34,045
Property, plant and equipment, net . . . . . . . . . . . . . .
Deposits, prepaid expenses and other assets . . . . . . .
2,581
Intangible assets:
804
2,996
354
—
Customer lists . . . . . . . . . . . . . . . . . . . . . . . . . . .
Trade names . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Non-compete agreements . . . . . . . . . . . . . . . . . . .
Goodwill . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Liabilities and other . . . . . . . . . . . . . . . . . . . . . . . .
Deferred taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . .
820
—
125
4,946
(348)
37
17,587
943
—
445,150
(62,145)
7,888
$
65
886
5,396
538
—
1,094
—
100
7,457
(250)
37
Total
$ 32,007
10,050
273,655
34,583
2,581
18,681
943
100
452,607
(62,395)
7,925
$9,734
$755,414
$15,323
$770,737
The applicable purchase price for the Merger and the acquisitions has been allocated to the assets acquired and
liabilities assumed, based upon estimated fair values as of the acquisition date. The allocation is not finalized and
amounts are subject to change with the final valuation. The Company does not believe any adjustments to the
allocation of the purchase prices or the reserves will have a material effect on the Company’s results of operations or
financial position.
In connection with the MSG Merger, the Company identified additional remaining costs expected to be
incurred to exit overlapping Mobile Storage Group’s lease properties, property shut down costs, costs of Mobile
Storage Group’s severance agreements, costs for asset verifications and for damaged assets and initially recorded
accrued liabilities and reserves. These liabilities and reserves are preliminary and are subject to adjustments, both
positive and negative, as additional information and data becomes available. The reserve related to any leased
property that is subsequently sub-leased or negotiated to terminate will be adjusted as each such agreement is
consummated. See Note 15 for additional information on restructuring accruals.
Substantially all of the operating activities of Mobile Storage Group will continue as it is integrated into the
operations of Mobile Mini. All corporate functions in the U.S., such as payroll, accounting, personnel and
collections, were transferred to Mobile Mini and discontinued at Mobile Storage Group. As part of the Merger of the
operations in the U.K., one corporate office was closed and consolidated with the other. In all cities with overlapping
Mobile Storage Group and Mobile Mini branch locations, one branch has been shut down and consolidated with the
other. In connection with this consolidation, certain corporate office, regional management and branch employees
not hired by Mobile Mini were terminated in exchange for a severance payment. The majority of this consolidation
was completed shortly after closing of the Merger and the remainder continued through the end of 2008.
Included in other assets and intangibles are: (1) non-compete agreements that are amortized over the life of the
agreement, typically over 5 years, using the straight-line method with no residual value, (2) values associated with
trade names are amortized on a straight-line basis over 2 years with no residual value and (3) values associated with
customer lists are amortized on an accelerated basis over 14 to 15 years with no residual value.
74
MOBILE MINI, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(15)
Integration, Merger and Restructuring Costs:
In connection with the Merger, the Company recorded accruals for costs to be incurred to exit overlapping
Mobile Storage Group lease properties, property shut down costs, costs of Mobile Storage Group’s severance
agreements, costs for asset verification and for damaged assets.
In connection with the Merger, the Company leveraged the combined fleet and restructured the manufacturing
operations and reduced overhead and capital expenditures for the lease fleet. In connection with these activities, the
Company recorded costs for severance agreements and recorded impairment charges to write down to certain assets
previously used in conjunction with the manufacturing operations and inventories.
The following table details accrued integration, merger and restructuring obligations (included in accrued
liabilities in the Consolidated Balance Sheet) and related activity for the year ended December 31, 2008:
Accrued obligations as of December 31, 2007 . . . . . . .
Restructuring costs accrued in purchase price
allocation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Integration, merger and restructuring expense. . . . . . . .
Cash paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Severance and
Benefits
Lease
Abandonment
Costs
Acquisition
Integration
Total
(In thousands)
$ —
$ —
$ — $
—
1,811
7,705
(7,507)
5,328
5,788
(2,705)
—
5,307
(4,164)
7,139
18,800
(14,376)
Accrued obligations as of December 31, 2008 . . . . . . .
$ 2,009
$ 8,411
$ 1,143
$ 11,563
The following amounts are included in integration, merger and restructuring expense for the year ended
December 31, 2008 (in thousands):
Severance and benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Lease abandonment costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Acquisition integration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Long-lived asset and inventory impairment charges . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 7,705
5,788
5,307
5,627
Integration, merger and restructuring expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$24,427
(16) Supplemental Pro Forma Information (unaudited):
The following table summarizes Mobile Mini’s unaudited condensed consolidated statements of income as if
the Merger with MSG WC Holdings Corp., the ultimate parent company of Mobile Storage Group, occurred on
January 1 of each period presented:
Years Ended
December 31
2007
2008
(In thousands)
Total revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $551,429
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 35,353
0.80
Diluted earnings per share . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
$535,282
$ 31,776
0.74
$
The above table includes integration, merger and restructuring expense of $24.4 million for the years ended
December 31, 2007 and 2008. The year ended December 31, 2008 also includes $13.7 million goodwill impairment
charge. The year ended December 31, 2007 also includes $11.2 million of debt extinguishment expense.
75
MOBILE MINI, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
The unaudited pro forma financial information is presented for informational purposes only and is not
indicative, and should not be relied upon as being indicative of the results of operations that would have been
achieved if the Merger had actually taken place at the beginning of each of the periods presented.
(17) Other Comprehensive Income:
The components of accumulated other comprehensive income, net of tax, were as follows at December 31:
Accumulated net unrealized holding loss on derivatives . . . . . . . . . . . . . . . . . . $ (769)
5,105
Foreign currency translation adjustment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ (7,068)
(30,410)
Accumulated other comprehensive income (loss) . . . . . . . . . . . . . . . . . . . . . . . $4,336
$(37,478)
2007
2008
(In thousands)
(18) Segment Reporting:
The Financial Accounting Standards Board (FASB) issued SFAS No. 131, Disclosures about Segments of an
Enterprise and Related Information, which establishes the standards for companies to report information about
operating segments. Mobile Mini has operations in the U.S., Canada, the U.K. and The Netherlands. All of the
Company’s branches operate in their local currency and although the Company is exposed to foreign exchange rate
fluctuation in other foreign markets where it leases and sells its products, the Company does not believe this will be
a significant impact on its results of operations. Currently, the Company’s branch operations comprise its only
segment and these operations concentrate on its core business of leasing. Mobile Mini’s branches have similar
economic characteristics covering all products leased or sold, including similar customer base, sales personnel,
advertising, yard facilities, general and administrative costs and branch management. Management’s allocation of
resources, performance evaluations and operating decisions are not dependent on the mix of a branch’s products.
The Company does not attempt to allocate shared revenue nor general, selling and leasing expenses to the different
configurations of portable storage and office products for lease and sale. The branch operations include the leasing
and sales of portable storage units, mobile offices and combination units configured for both storage and office
space. The Company leases to businesses and consumers in the general geographic area around each branch. The
operation includes the Company’s manufacturing facilities, which is responsible for the purchase, manufacturing
and remanufacturing of products for leasing and sale, as well as for manufacturing certain delivery equipment.
In managing the Company’s business, it focuses on earnings per share and on its internal growth rate in leasing
revenue, which the Company defines as growth in lease revenues on a year-over-year basis at its branch locations in
operation for at least one year, without inclusion of same market acquisitions.
Discrete financial data on each of the Company’s products is not available and it would be impractical to
collect and maintain financial data in such a manner; therefore, based on the provisions of SFAS No. 131, reportable
segment information is the same as contained in its consolidated financial statements.
The tables below represent the Company’s revenue and long-lived assets as attributed to geographic locations,
at December 31:
Revenue from external customers (in thousands):
North America . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $259,548
10,096
U.K.
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
3,719
The Netherlands . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$292,964
19,109
6,229
$356,303
53,126
5,975
Total revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $273,363
$318,302
$415,404
2006
2007
2008
76
MOBILE MINI, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Long-lived assets (in thousands):
North America . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
U.K . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
The Netherlands . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$810,573
43,984
3,729
$1,041,540
120,914
4,211
Total long-lived assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$858,286
$1,166,665
2007
2008
(19) Selected Consolidated Quarterly Financial Data (unaudited):
The following table sets forth certain unaudited selected consolidated financial information for each of the four
quarters in the years ended December 31, 2007 and 2008. In management’s opinion, this unaudited consolidated
quarterly selected information has been prepared on the same basis as the audited consolidated financial statements
and includes all necessary adjustments, consisting only of normal recurring adjustments, which management
considers necessary for a fair presentation when read in conjunction with the Consolidated Financial Statements
and notes. The Company believes these comparisons of consolidated quarterly selected financial data are not
necessarily indicative of future performance.
Quarterly earnings per share may not total to the fiscal year earnings per share due to the weighted average
number of shares outstanding at the end of each period reported and rounding.
First Quarter
Second Quarter
Third Quarter
Fourth Quarter
(In thousands except earnings per share)
2007
Leasing revenues . . . . . . . . . . . . . . . . . . . . . .
Total revenues . . . . . . . . . . . . . . . . . . . . . . . .
Gross profit margin on sales . . . . . . . . . . . . . .
Income from operations . . . . . . . . . . . . . . . . .
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . .
Earnings per share:
Basic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$66,053
73,020
2,195
26,832
12,697
$ 0.36
Diluted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 0.35
2008
Leasing revenues . . . . . . . . . . . . . . . . . . . . . .
Total revenues . . . . . . . . . . . . . . . . . . . . . . . .
Gross profit margin on sales . . . . . . . . . . . . . .
Income from operations(2) . . . . . . . . . . . . . . .
Net income(2) . . . . . . . . . . . . . . . . . . . . . . . .
Earnings per share:
Basic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$70,036
78,541
2,465
23,769
10,658
$ 0.31
Diluted(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 0.31
$70,362
78,250
2,378
27,642
6,331(1)
$ 73,982
83,482
2,716
27,233
12,704
$
$
0.18
0.17(1)
$
$
0.35
0.35
$72,849
81,085
2,467
14,575
4,861
$
$
0.14
0.14
$119,323
132,752
3,957
39,951
13,276
$
$
0.31
0.31
$ 74,241
83,550
2,704
26,801
12,444
$
$
0.36
0.36
$109,352
123,026
4,334
26,869
246
$
$
0.01
0.01
(1) Includes debt extinguishment expense of $11.2 million ($6.9 million after tax), or $0.19 per diluted share.
(2) Includes integration, merger and restructuring expense of $24.4 million ($15.3 million after tax), or $0.39 per
diluted share during the fiscal year 2008 and a non-cash goodwill impairment charge of $13.7 million, both pre-
tax and after tax, or $0.35 per diluted share for fiscal year 2008.
77
MOBILE MINI, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(20) Condensed Consolidating Financial Information
Mobile Mini Supplemental Indenture
In connection with the Merger, Mobile Mini entered into the Mobile Mini Supplemental Indenture described in
Note 7 pursuant to which the New Mobile Mini Guarantors became “Guarantors” under the Mobile Mini Indenture
relating to the Senior Notes.
In connection with the Merger, Mobile Mini also entered into the MSG Supplemental Indenture described in
Note 7 pursuant to which Mobile Mini became an “Issuer” under the MSG Indenture and the New MSG Guarantors
became “Guarantors” under the MSG Indenture.
As a result of the Supplemental Indentures described above, the same subsidiaries of the Company are
guarantors under each of the MSG Notes and the Senior Notes.
The following tables present the condensed consolidating financial information of Mobile Mini, Inc.,
representing the subsidiaries of the Guarantors of the Senior Notes and MSG Notes and the Non-Guarantor
Subsidiaries. Separate financial statements of the subsidiary guarantors are not presented because the guarantee by
each 100% owned subsidiary guarantor is full and unconditional, joint and several, and management has determined
that such information is not material to investors.
78
MOBILE MINI, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
MOBILE MINI, INC.
CONDENSED CONSOLIDATING BALANCE SHEETS
As of December 31, 2008
Guarantors
Non-
Guarantors
Eliminations
Consolidated
(In thousands)
ASSETS
$
Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Receivables. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Lease fleet, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Property, plant and equipment, net . . . . . . . . . . . . . . . .
Deposits and prepaid expenses. . . . . . . . . . . . . . . . . . .
Other assets and intangibles, net . . . . . . . . . . . . . . . . .
Goodwill
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Intercompany . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2,208
45,827
23,644
969,432
72,108
12,130
28,144
435,450
131,257
$
976
15,597
2,982
108,724
16,401
1,157
6,919
57,207
35,782
$
— $
—
(49)
—
—
—
—
—
(167,039)
3,184
61,424
26,577
1,078,156
88,509
13,287
35,063
492,657
—
Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$1,720,200
$245,745
$(167,088)
$1,798,857
LIABILITIES AND STOCKHOLDERS’ EQUITY
Liabilities:
Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accrued liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Lines of credit
Notes payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Obligations under capital leases . . . . . . . . . . . . . . . . . .
Senior notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred income taxes. . . . . . . . . . . . . . . . . . . . . . . . .
Intercompany . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
12,361
81,146
450,053
1,306
5,495
345,797
124,858
23
$
9,072
5,068
104,479
74
2
—
10,363
29,626
$
— $
—
—
—
—
—
(435)
(29,649)
21,433
86,214
554,532
1,380
5,497
345,797
134,786
—
Total liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1,021,039
158,684
(30,084)
1,149,639
Commitments and contingencies
Convertible preferred stock . . . . . . . . . . . . . . . . . . . . .
Stockholders’ equity:
Common stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Additional paid-in capital . . . . . . . . . . . . . . . . . . . . . .
Retained earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accumulated other comprehensive income . . . . . . . . . .
Treasury stock, at cost. . . . . . . . . . . . . . . . . . . . . . . . .
153,990
375
328,696
263,498
(8,098)
(39,300)
18,433
119,165
(21,157)
(29,380)
—
(18,433)
(119,165)
594
—
—
153,990
375
328,696
242,935
(37,478)
(39,300)
Total stockholders’ equity . . . . . . . . . . . . . . . . . . . .
545,171
87,061
(137,004)
495,228
Total liabilities and stockholders’ equity . . . . . . . . . .
$1,720,200
$245,745
$(167,088)
$1,798,857
79
MOBILE MINI, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
MOBILE MINI, INC.
CONDENSED CONSOLIDATING BALANCE SHEETS
As of December 31, 2007
Guarantors
Non-
Guarantors
Eliminations
Consolidated
(In thousands)
ASSETS
$
Cash. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Receivables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Lease fleet, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Property, plant and equipment, net. . . . . . . . . . . . . . . . .
Deposits and prepaid expenses . . . . . . . . . . . . . . . . . . .
Other assets and intangibles, net . . . . . . . . . . . . . . . . . .
Goodwill . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Intercompany . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2,033
31,046
26,708
764,134
46,439
10,386
6,256
66,251
36,574
$
1,670
6,175
2,769
38,789
8,924
948
2,830
13,539
36,146
$
— $
—
(46)
—
—
—
—
—
(72,720)
3,703
37,221
29,431
802,923
55,363
11,334
9,086
79,790
—
Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$989,827
$111,790
$(72,766)
$1,028,851
LIABILITIES AND STOCKHOLDERS’ EQUITY
Liabilities:
Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accrued liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Lines of credit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Notes payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Obligations under capital leases. . . . . . . . . . . . . . . . . . .
Senior notes, net of discount . . . . . . . . . . . . . . . . . . . . .
Deferred income taxes . . . . . . . . . . . . . . . . . . . . . . . . .
Intercompany . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 14,049
37,330
205,100
743
6
149,379
125,439
25
Total liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
532,071
Commitments and contingencies
Convertible preferred stock . . . . . . . . . . . . . . . . . . . . . .
Stockholders’ equity:
Common stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Additional paid-in capital . . . . . . . . . . . . . . . . . . . . . . .
Retained earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accumulated other comprehensive income . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . .
Treasury stock, at cost
367
278,591
217,404
694
(39,300)
Total stockholders’ equity . . . . . . . . . . . . . . . . . . . . .
457,756
$
6,511
1,611
32,757
—
4
—
(1,702)
22,725
61,906
$
— $
—
—
—
—
—
(266)
(22,750)
(23,016)
20,560
38,941
237,857
743
10
149,379
123,471
—
570,961
18,433
31,538
(3,729)
3,642
—
49,884
(18,433)
(31,536)
219
—
—
(49,750)
367
278,593
213,894
4,336
(39,300)
457,890
Total liabilities and stockholders’ equity. . . . . . . . . . .
$989,827
$111,790
$(72,766)
$1,028,851
80
MOBILE MINI, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
MOBILE MINI, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
Twelve Months Ended December 31, 2008
Guarantors
Non-
Guarantors
Eliminations
Consolidated
(In thousands)
Revenues:
Leasing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Sales. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$322,473
32,159
1,671
$ 49,087
9,128
906
$ —
(20)
—
$371,560
41,267
2,577
Total revenues. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
356,303
59,121
(20)
415,404
Costs and expenses:
Cost of sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Leasing, selling and general expenses . . . . . . . . . . . .
Integration, merger and restructuring expenses . . . . . .
Goodwill impairment. . . . . . . . . . . . . . . . . . . . . . . . .
Depreciation and amortization . . . . . . . . . . . . . . . . . .
20,765
171,712
21,676
—
26,402
Total costs and expenses . . . . . . . . . . . . . . . . . . . . . . . .
240,555
7,295
40,623
2,751
13,667
5,365
69,701
Income (loss) from operations . . . . . . . . . . . . . . . . . . . .
Other income (expense):
115,748
(10,580)
Interest income . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest expense. . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Foreign currency exchange . . . . . . . . . . . . . . . . . . . .
1,743
(41,977)
—
62
(7,839)
(112)
Income (loss) before provision for (benefit from)
income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Provision for (benefit from) income taxes . . . . . . . . . . .
75,514
29,421
(18,469)
(1,250)
(16)
—
—
—
—
(16)
(4)
(1,670)
1,670
—
(4)
(171)
28,044
212,335
24,427
13,667
31,767
310,240
105,164
135
(48,146)
(112)
57,041
28,000
Net income (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 46,093
$(17,219)
$
167
$ 29,041
81
MOBILE MINI, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
MOBILE MINI, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
Twelve Months Ended December 31, 2007
Guarantors
Non-
Guarantors
Eliminations
Consolidated
(In thousands)
Revenues:
Leasing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Sales. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$267,718
23,648
1,598
$16,920
8,055
422
$ —
(59)
—
$284,638
31,644
2,020
Total revenues. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
292,964
25,397
(59)
318,302
Costs and expenses:
Cost of sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Leasing, selling and general expenses . . . . . . . . . . . .
Integration, merger and restructuring expense . . . . . . .
Depreciation and amortization . . . . . . . . . . . . . . . . . .
15,242
148,876
—
19,034
Total costs and expenses . . . . . . . . . . . . . . . . . . . . . . . .
183,152
6,460
18,118
—
2,115
26,693
Income (loss) from operations . . . . . . . . . . . . . . . . . . . .
Other income (expense):
109,812
(1,296)
Interest income . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest expense. . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Debt extinguishment expense . . . . . . . . . . . . . . . . . . .
Foreign currency exchange . . . . . . . . . . . . . . . . . . . .
2,391
(23,066)
(11,224)
—
Income (loss) before provision for (benefit from)
income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Provision for (benefit from) income taxes . . . . . . . . . . .
77,913
30,125
64
(4,195)
—
107
(5,320)
(1,463)
(51)
—
—
—
(51)
(8)
(2,354)
2,355
—
—
(7)
(252)
21,651
166,994
—
21,149
209,794
108,508
101
(24,906)
(11,224)
107
72,586
28,410
Net income (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 47,788
$ (3,857)
$
245
$ 44,176
82
MOBILE MINI, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
MOBILE MINI, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
Twelve Months Ended December 31, 2006
Guarantors
Non-
Guarantors
Eliminations
Consolidated
(In thousands)
Revenues:
Leasing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Sales. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$237,018
21,368
1,162
$ 8,087
5,671
272
Total revenues. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
259,548
14,030
$ —
(215)
—
(215)
$245,105
26,824
1,434
273,363
Costs and expenses:
Cost of sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Leasing, selling and general expenses . . . . . . . . . . . .
Integration, merger and restructuring expense . . . . . . .
Depreciation and amortization . . . . . . . . . . . . . . . . . .
12,846
131,776
—
15,829
4,517
8,130
—
912
Total costs and expenses . . . . . . . . . . . . . . . . . . . . . . . .
160,451
13,559
Income (loss) from operations . . . . . . . . . . . . . . . . . . . .
Other income (expense):
99,097
471
Interest income . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest expense. . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Debt extinguishment expense . . . . . . . . . . . . . . . . . . .
Foreign currency exchange . . . . . . . . . . . . . . . . . . . .
460
(23,464)
(6,425)
—
Income (loss) before provision for (benefit from)
income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Provision for (benefit from) income taxes . . . . . . . . . . .
69,668
26,993
Net income (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 42,675
$
—
(240)
—
66
297
172
125
(177)
—
—
—
(177)
(38)
(23)
23
—
—
(38)
(14)
17,186
139,906
—
16,741
173,833
99,530
437
(23,681)
(6,425)
66
69,927
27,151
$ (24)
$ 42,776
83
MOBILE MINI, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
MOBILE MINI, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
Twelve Months Ended December 31, 2008
Cash Flows From Operating Activities:
Net income (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Adjustments to reconcile income to net cash provided by
(used in) operating activities:
Provision for doubtful accounts . . . . . . . . . . . . . . . .
Provision for restructuring charge . . . . . . . . . . . . . .
Goodwill impairment . . . . . . . . . . . . . . . . . . . . . . .
Amortization of deferred financing costs . . . . . . . . .
Share-based compensation expense . . . . . . . . . . . . .
Depreciation and amortization . . . . . . . . . . . . . . . . .
Gain on sale of lease fleet units . . . . . . . . . . . . . . .
Loss on disposal of property, plant and equipment . .
Deferred income taxes . . . . . . . . . . . . . . . . . . . . . .
Foreign currency gain (loss) . . . . . . . . . . . . . . . . . .
Changes in certain assets and liabilities, net of effect of
businesses acquired:
Receivables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Inventories. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deposits and prepaid expenses . . . . . . . . . . . . . . . .
Other assets and intangibles . . . . . . . . . . . . . . . . . .
Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . .
Accrued liabilities . . . . . . . . . . . . . . . . . . . . . . . . .
Intercompany . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net cash provided by (used in) operating activities . .
Cash Flows From Investing Activities:
Cash paid for businesses acquired. . . . . . . . . . . . . . . . . .
Additions to lease fleet units, excluding acquisitions . . . .
Proceeds from sale of lease fleet units . . . . . . . . . . . . . .
Additions to property, plant and equipment . . . . . . . . . . .
Proceeds from sale of property, plant and equipment . . . .
Net cash used in investing activities . . . . . . . . . . . .
Cash Flows From Financing Activities:
Net borrowings under lines of credit . . . . . . . . . . . . . . . .
Deferred financing costs . . . . . . . . . . . . . . . . . . . . . . . .
Proceeds from notes payable . . . . . . . . . . . . . . . . . . . . .
Principal payments on notes payable . . . . . . . . . . . . . . .
Principal payments on capital lease obligations . . . . . . . .
Issuance of common stock, net . . . . . . . . . . . . . . . . . . . .
Purchase of treasury stock, at cost . . . . . . . . . . . . . . . . .
Net cash (used in) provided by financing activities . .
Effect of exchange rate changes on cash . . . . . . . . . . . . . . .
Net increase (decrease) in cash . . . . . . . . . . . . . . . . . . . . .
Cash at beginning of year . . . . . . . . . . . . . . . . . . . . . . . . .
Cash at end of year. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Guarantors
Non-
Guarantors
Eliminations
Consolidated
(In thousands)
$ 46,093
$(17,219)
$
167
$ 29,041
4,351
5,626
—
2,873
4,627
26,402
(8,977)
566
29,273
—
(2,031)
7,655
(698)
105
(11,469)
(1,432)
(2,502)
100,974
(36,448)
(58,016)
24,652
(11,614)
492
(80,934)
109,975
(15,166)
1,249
(113,881)
(702)
1,472
209
(16,844)
(3,021)
175
2,033
2,208
$
912
—
13,667
—
512
5,365
(888)
1
(1,381)
112
(1,029)
—
875
—
(4,262)
(1,840)
4,013
(1,162)
3,198
(18,606)
3,758
(5,260)
3
(16,907)
19,376
—
—
—
(2)
—
(253)
19,121
(1,746)
(694)
1,670
976
$
(2)
—
—
—
5
—
16
—
31
—
—
—
—
—
—
—
(1,511)
(1,294)
—
—
(72)
—
—
(72)
(9,010)
—
—
—
—
—
44
(8,966)
1,032
—
—
$ —
5,261
5,626
13,667
2,873
5,656
31,767
(9,849)
567
27,923
112
(3,060)
7,655
177
105
(15,731)
(3,272)
—
98,518
(33,250)
(76,622)
28,338
(16,874)
495
(97,913)
120,341
(15,166)
1,249
(113,881)
(704)
1,472
—
(6,689)
5,565
(519)
3,703
3,184
$
84
MOBILE MINI, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
MOBILE MINI, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
Twelve Months Ended December 31, 2007
Guarantors
Non-
Guarantors
Eliminations
Consolidated
(In thousands)
$ 47,788
$ (3,857)
$ 245
$ 44,176
Cash Flows From Operating Activities:
Net income (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Adjustments to reconcile income to net cash provided by
operating activities:
Debt extinguishment expense . . . . . . . . . . . . . . . . .
Provision for doubtful accounts . . . . . . . . . . . . . . . .
Amortization of deferred financing costs . . . . . . . . .
Share-based compensation expense . . . . . . . . . . . . .
Depreciation and amortization . . . . . . . . . . . . . . . . .
Gain on sale of lease fleet units . . . . . . . . . . . . . . .
Loss on disposal of property, plant and equipment . .
Deferred income taxes . . . . . . . . . . . . . . . . . . . . . .
Foreign currency gain . . . . . . . . . . . . . . . . . . . . . . .
Changes in certain assets and liabilities, net of effect of
businesses acquired:
Receivables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Inventories. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deposits and prepaid expenses . . . . . . . . . . . . . . . .
Other assets and intangibles . . . . . . . . . . . . . . . . . .
Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . .
Accrued liabilities . . . . . . . . . . . . . . . . . . . . . . . . .
Intercompany . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net cash provided by (used in) operating activities . .
Cash Flows From Investing Activities:
2,298
1,478
985
3,616
19,034
(4,929)
203
28,885
—
(1,255)
(751)
(1,618)
318
1,192
(2,910)
(2,252)
92,082
Cash paid for businesses acquired. . . . . . . . . . . . . . . . . .
Additions to lease fleet units, excluding acquisitions . . . .
Proceeds from sale of lease fleet units . . . . . . . . . . . . . .
Additions to property, plant and equipment . . . . . . . . . . .
Proceeds from sale of property, plant and equipment . . . .
Net cash (used in) provided by investing activities . .
(9,734)
(107,329)
13,593
(11,638)
126
(114,982)
Cash Flows From Financing Activities:
Net borrowings under lines of credit . . . . . . . . . . . . . . . .
Redemption of 9.5% Senior Notes . . . . . . . . . . . . . . . . .
Proceeds from issuance of 6.875% Senior Notes . . . . . . .
Deferred financing costs. . . . . . . . . . . . . . . . . . . . . . .
Proceeds from issuance of notes payable . . . . . . . . . . . . .
Principal payments of notes payable . . . . . . . . . . . . . . . .
Principal payments on capital lease obligations . . . . . . . .
Issuance of common stock, net . . . . . . . . . . . . . . . . . . . .
Purchase of treasury stock, at cost . . . . . . . . . . . . . . . . .
Net cash provided by financing activities . . . . . . . . .
Effect of exchange rate changes on cash . . . . . . . . . . . . . . .
Net increase in cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cash at beginning of year . . . . . . . . . . . . . . . . . . . . . . . . .
Cash at end of year. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
8,429
(97,500)
149,322
(3,768)
1,216
(1,254)
(23)
5,607
(39,300)
22,729
1,549
1,378
655
2,033
$
85
—
391
—
405
2,115
(631)
—
(1,459)
(107)
(2,733)
141
(136)
—
1,499
1,155
2,037
(1,180)
—
(19,404)
2,586
(6,884)
—
(23,702)
25,619
—
—
—
—
—
(1)
—
—
25,618
219
955
715
$ 1,670
—
—
—
7
—
—
—
(70)
—
—
—
—
—
—
—
215
397
—
—
2
—
—
2
80
—
—
—
—
—
—
—
—
80
(479)
—
—
$ —
2,298
1,869
985
4,028
21,149
(5,560)
203
27,356
(107)
(3,988)
(610)
(1,754)
318
2,691
(1,755)
—
91,299
(9,734)
(126,733)
16,181
(18,522)
126
(138,682)
34,128
(97,500)
149,322
(3,768)
1,216
(1,254)
(24)
5,607
(39,300)
48,427
1,289
2,333
1,370
3,703
$
MOBILE MINI, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
MOBILE MINI, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
Twelve Months Ended December 31, 2006
Cash Flows From Operating Activities:
Net income (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Adjustments to reconcile income to net cash provided by
operating activities:
Debt extinguishment expense . . . . . . . . . . . . . . . . .
Provision for doubtful accounts . . . . . . . . . . . . . . . .
Amortization of deferred financing costs . . . . . . . . .
Share-based compensation expense . . . . . . . . . . . . .
Depreciation and amortization . . . . . . . . . . . . . . . . .
(Gain) loss on sale of lease fleet units . . . . . . . . . . .
Loss on disposal of property, plant and equipment . .
Deferred income taxes . . . . . . . . . . . . . . . . . . . . . .
Foreign currency gain . . . . . . . . . . . . . . . . . . . . . . .
Changes in certain assets and liabilities, net of effect of
businesses acquired:
Receivables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Inventories. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deposits and prepaid expenses . . . . . . . . . . . . . . . .
Other assets and intangibles . . . . . . . . . . . . . . . . . .
Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . .
Accrued liabilities . . . . . . . . . . . . . . . . . . . . . . . . .
Intercompany . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net cash provided by (used in) operating activities . .
Cash Flows From Investing Activities:
Cash paid for businesses acquired. . . . . . . . . . . . . . . . . .
Additions to lease fleet, excluding acquisitions . . . . . . . .
Proceeds from sale of lease fleet units . . . . . . . . . . . . . .
Additions to property, plant and equipment . . . . . . . . . . .
Proceeds from sale of property, plant and equipment . . . .
Net cash (used in) provided by investing activities . .
Cash Flows From Financing Activities:
Net borrowings (repayments) under lines of credit . . . . . .
Redemption of 9.5% Senior Notes . . . . . . . . . . . . . . . . .
Deferred financing costs . . . . . . . . . . . . . . . . . . . . . . . .
Proceeds from issuance of notes payable . . . . . . . . . . . . .
Principal payments on notes payable . . . . . . . . . . . . . . .
Principal payments on capital lease obligations . . . . . . . .
Issuance of common stock, net . . . . . . . . . . . . . . . . . . . .
Net cash provided by (used in) financing activities . .
Effect of exchange rate changes on cash . . . . . . . . . . . . . . .
Net increase in cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cash at beginning of year . . . . . . . . . . . . . . . . . . . . . . . . .
Cash at end of year. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Guarantors
Non-
Guarantors
Eliminations
Consolidated
(In thousands)
$ 42,675
$
125
$
(24)
$ 42,776
1,438
4,387
840
2,858
15,829
(4,552)
454
26,252
—
(10,047)
1,934
(948)
(16)
(4,845)
143
(427)
75,975
(59,475)
(130,112)
12,000
(8,280)
150
(185,717)
38,745
(52,500)
(1,664)
1,230
(1,108)
(17)
125,486
110,172
18
448
207
655
$
—
151
—
215
912
(372)
—
376
(66)
(3,700)
(2,652)
(756)
(50,049)
4,808
421
428
(50,159)
—
(21,486)
1,329
(3,307)
—
(23,464)
23,943
—
—
—
—
5
49,810
73,758
580
715
—
715
$
—
—
—
(7)
—
2
—
(221)
—
2,629
1,346
258
50,061
(2,051)
(924)
(1)
51,068
—
15,715
(2)
705
—
16,418
(17,149)
—
—
—
—
(5)
(49,810)
(66,964)
(522)
—
—
—
$
1,438
4,538
840
3,066
16,741
(4,922)
454
26,407
(66)
(11,118)
628
(1,446)
(4)
(2,088)
(360)
—
76,884
(59,475)
(135,883)
13,327
(10,882)
150
(192,763)
45,539
(52,500)
(1,664)
1,230
(1,108)
(17)
125,486
116,966
76
1,163
207
1,370
$
86
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
There were no disagreements with accountants on accounting and financial disclosure matters during the
periods reported herein.
ITEM 9A. CONTROLS AND PROCEDURES.
Disclosure Controls
Under the supervision and with the participation of our management, including our Chief Executive Officer
and Chief Financial Officer, we conducted an evaluation of the effectiveness of the design and operation of our
disclosure controls and procedures, as such term is defined under Rule 13a-15(e) and 15d-15(e) promulgated under
the Securities Exchange Act of 1934, as amended (the Exchange Act). Based on this evaluation, our Chief Executive
Officer and our Chief Financial Officer concluded that our disclosure controls and procedures, were effective to
ensure that information required to be disclosed in Exchange Act reports filed is communicated to management
(including the CEO and CFO) in a timely manner.
Report of Management on Internal Control Over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial
reporting for the company. Internal control over financial reporting is a process to provide reasonable assurance
regarding the reliability of our financial reporting for external purposes in accordance with accounting principles
generally accepted in the United States of America. Internal control over financial reporting includes maintaining
records that in reasonable detail accurately and fairly reflect our transactions; providing reasonable assurance that
transactions are recorded as necessary for preparation of our financial statements; providing reasonable assurance
that receipts and expenditures of company assets are made in accordance with management authorization; and
providing reasonable assurance that unauthorized acquisition, use, or disposition of company assets that could have
a material effect on our financial statements would be prevented or detected on a timely basis. Because of its
inherent limitations, internal control over financial reporting is not intended to provide absolute assurance that a
misstatement of our financial statements would be prevented or detected.
Management conducted an evaluation of the effectiveness of our internal control over financial reporting based
on the framework in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organi-
zations of the Treadway Commission. Based on this evaluation, management concluded that the company’s internal
control over financial reporting was effective, subject to the limitation below, as of December 31, 2008.
During 2008, we completed the acquisition of Mobile Storage Group, Inc. Consistent with the published
guidance of the Securities and Exchange Commission, our management excluded certain operations of Mobile Mini
U.K. Limited, operating in the U.K., that were acquired in June 2008 in the Mobile Storage Group, Inc. acquisition,
from the scope of its assessment of internal control over financial reporting as of December 31, 2008. Total assets
and total revenues for this U.K. operations from the acquisition represented approximately 3% and 5%, respectively,
of the related consolidated financial statement amounts of Mobile Mini, Inc. as of and for the year ended
December 31, 2008.
Our internal control over financial reporting as of December 31, 2008 has been audited by Ernst & Young, LLP,
an independent registered public accounting firm, as stated in their report which is included herein.
87
Report of Independent Registered Public Accounting Firm
The Board of Directors and Stockholders of
Mobile Mini, Inc.
We have audited Mobile Mini, Inc.’s internal control over financial reporting as of December 31, 2008, based
on criteria established in Internal Control — Integrated Framework issued by the Committee of Sponsoring
Organizations of the Treadway Commission (the COSO criteria). Mobile Mini, Inc.’s management is responsible
for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of
internal control over financial reporting included in the accompanying Report of Management on Internal Control
Over Financial Reporting. Our responsibility is to express an opinion on the company’s internal control over
financial reporting based on our audit.
We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board
(United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about
whether effective internal control over financial reporting was maintained in all material respects. Our audit
included obtaining an understanding of internal control over financial reporting, assessing the risk that a material
weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the
assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe
that our audit provides a reasonable basis for our opinion.
A company’s internal control over financial reporting is a process designed to provide reasonable assurance
regarding the reliability of financial reporting and the preparation of financial statements for external purposes in
accordance with generally accepted accounting principles. A company’s internal control over financial reporting
includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail,
accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable
assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance
with generally accepted accounting principles, and that receipts and expenditures of the company are being made
only in accordance with authorizations of management and directors of the company; and (3) provide reasonable
assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the company’s
assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect
misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that
controls may become inadequate because of changes in conditions, or that the degree of compliance with the
policies or procedures may deteriorate.
As indicated in the accompanying Report of Management on Internal Control Over Financial Reporting,
management’s assessment of and conclusion on the effectiveness of internal control over financial reporting did not
include the internal controls of certain operations of Mobile Mini U.K. Limited, that were acquired in June 2008 in
the Mobile Storage Group, Inc. acquisition, and which are included in the 2008 consolidated financial statements of
Mobile Mini, Inc. This portion of Mobile Mini U.K. Limited, consisted 3% of Mobile Mini, Inc.’s consolidated total
assets as of December 31, 2008, and 5% of Mobile Mini, Inc.’s consolidated total revenues for the year then ended.
Our audit of internal control over financial reporting of Mobile Mini, Inc. also did not include an evaluation of the
internal control over financial reporting of the portion of Mobile Mini U.K. Limited acquired in the Mobile Storage
Group, Inc. acquisition.
In our opinion, Mobile Mini, Inc. maintained, in all material respects, effective internal control over financial
reporting as of December 31, 2008, based on the COSO criteria.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board
(United States), the consolidated balance sheets of Mobile Mini, Inc. (and subsidiaries) as of December 31, 2008
and 2007, and the related consolidated statements of income, preferred stock and stockholders’ equity, and cash
flows for each of the three years in the period ended December 31, 2008 of Mobile Mini, Inc. and our report dated
February 27, 2009 expressed an unqualified opinion thereon.
Ernst & Young LLP
Phoenix, Arizona
February 27, 2009
88
Changes in Internal Control Over Financial Reporting
There were no changes in our internal controls over financial reporting that occurred during our last fiscal
quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial
reporting.
ITEM 9B. OTHER INFORMATION.
None
PART III
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE.
EXECUTIVE OFFICERS OF MOBILE MINI, INC.
Set forth below is information respecting the name, age and position with Mobile Mini of our executive
officers. Information with respect to our directors and the nomination process is incorporated herein by reference to
information included in the Proxy Statement for our 2009 Annual Meeting of Stockholders, to be filed with the
Securities and Exchange Commission no later than 120 days following our fiscal year end (the 2009 Proxy
Statement).
Steven G. Bunger has served as our Chief Executive Officer, President and a director since April 1997, and as
our Chairman of the Board since February 2001. Mr. Bunger joined Mobile Mini in 1983 and initially worked in our
drafting and design department. He served in a variety of positions including dispatcher, salesperson and advertising
coordinator before joining management. He served as sales manager of our Phoenix branch and our operations
manager and Vice President of Operations and Marketing before becoming our Executive Vice President and Chief
Operating Officer in November 1995. He is also a director of Cavco Industries, Inc., one of the nation’s largest
producers of manufactured housing. Mr. Bunger graduated from Arizona State University with a B.A. in Business
Administration. Age 47.
Mark E. Funk has served as our Executive Vice President and Chief Financial Officer since November 2008.
Prior to joining us, he was with Deutsche Bank Securities Inc. from September 1988 to November 2008, most
recently as Managing Director in its Structured Debt Group, where he had worked on numerous high profile
transactions. During his tenure at Deutsche Bank, Mr. Funk worked in their New York, London, Chicago and Los
Angeles offices. Prior to joining Deutsche Bank, Mr. Funk passed the certified public accountant examination and
was a senior auditor with KPMG. Mr. Funk earned a Bachelor of Science in Business Administration from
California State University Long Beach and an MBA from University of California, Los Angeles. Age 46.
Jody E. Miller has served as our Executive Vice President and Chief Operating Officer since January 2009.
Mr. Miller joined us in June 2008 as Senior Vice President, Southeastern Division from Mobile Storage Group. He
had been a Regional Vice President-Southeast Region and North Region since March 2004 with Mobile Storage
Group. Prior to that he had served as Regional Vice President of Rental Storage Corporation, working there from
October 1988 to February 2004. Mr. Miller graduated from Central Missouri State University with a degree in
construction engineering. He has worked in the equipment leasing and portable storage industry for 21 years.
Age 41.
William E. Armstead serves as our Senior Vice President, Southeastern Division. He joined Mobile Mini after
the combination with Mobile Storage Group in June 2008 from the Mobile Storage Group where he was Regional
Vice President — Pacific Northwest since February 2007, Regional Vice President-Pacific Southwest since 2006
and Regional Vice President-Southwest Region since 2004. Prior to joining Mobile Storage Group, Mr. Armstead
served as a District Manager of Rental Service Corporation, working for them from July 1987 to September 2004.
Mr. Armstead attended Colorado State University. He has worked in the equipment leasing and portable storage
industry for 30 years. Age 45.
89
Kyle G. Blackwell joined Mobile Mini in 1988 and has served in numerous capacities, currently as our Senior
Vice President, Eastern Division, since 2002 and as our Vice President, Operations from 1999 to 2000. He also
served as a Regional Manager from 1995 to 1999 and was engaged with the start up of our Texas locations. Age 45.
Ronald Halchishak joined Mobile Mini after the combination with Mobile Storage Group in June 2008 as our
Senior Vice President and Managing Director-Europe. He had been a Managing Director of Ravenstock MSG since
July 2007. Prior to that, from June 2003 to January 2007, he served as the Vice President of the Mid-Atlantic for
Nations Rent. From June 1991 to March 2001, Mr. Halchishak was Division President at Rental Service
Corporation. He graduated from Humboldt State University with a B.A. in political science and psychology.
Age 61.
Jon D. Keating has served as our Senior Vice President, Operations since January 2008. He joined Mobile Mini
in 1996 and also served as Vice President, Manufacturing from April 2005 to December 2007, a Regional Manager
from March of 2000 to April 2005 and from November of 1996 to March of 2000 as Branch Manager at our Phoenix
sales branch. Age 39.
Deborah K. Keeley has served as our Senior Vice President and Chief Accounting Officer since November
2005. From September 2005 to November 2005, she served as Senior Vice President. From June 2005 to September
2005, she served as Senior Vice President and Controller. From August 1996 to June 2005 she served as Vice
President and Controller and from August 1995 as Controller. Prior to joining us, she was Corporate Accounting
Manager for Evans Withycombe Residential, an apartment developer, for six years. Ms. Keeley has an Associates
degree in Computer Science and received her Bachelors degree in Accounting from Arizona State University.
Age 44.
Russell C. Lemley has served as our Senior Vice President, Western Division since 1999, except from
December 2007 to December 2008, when he served as our Executive Vice President and Chief Operating Officer.
Prior to 1999, he served as our Vice President, Operations from June 1998 to November 1999. He joined us in
August 1988 as Construction Superintendent to build our ten-acre facility in Los Angeles, California and served as
Plant Manager of that facility from 1989 to 1994 and as General Manager from 1994 to 1998. Prior to joining us,
Mr. Lemley was the Project Manager from 1984 through 1987 for the largest automated pallet rack high rise in the
United Sates for Ralph’s Grocery in San Fernando, California and managed the construction of the first automated
parts pallet rack facility for Suzuki in Brea, California. Age 51.
Ronald E. Marshall has served as our Senior Vice President, Central Division since October of 2003. From
June of 1999 to September of 2003 he was a Regional Manager for three of our regions beginning with the Colorado/
Utah and ending with the California/Arizona market. He was our Director-Acquisitions from February of 1998 to
May of 1999. He joined Mobile Mini, Inc. in February of 1997 as Branch Manager of Tucson, Arizona. Prior to
joining us, he was the General Manager of Pearce Distributing, a beverage distributorship in Phoenix, Arizona.
Age 58.
Christopher J. Miner has served as Senior Vice President and General Counsel since December 2008. He
joined Mobile Mini in June 2008 as Vice President and General Counsel. He was previously a partner at DLA Piper
from 2007 to 2008 and advised numerous corporate and financial institution clients on merger, acquisition and
capital markets transactions. Prior to that, he was a partner at Squire, Sanders & Dempsey, which he joined in 2004.
He was an attorney in New York and Europe with Davis Polk & Wardwell from 1999 to 2004 where he specialized
in corporate and securities law. Mr. Miner received a B.A. and a J.D from Brigham Young University. Age 37.
Information regarding our audit committee and our audit committee financial experts is incorporated herein by
reference to information included in the 2009 Proxy Statement.
Information required by Item 405 of Regulation S-K is incorporated herein by reference to information
included in the 2009 Proxy Statement.
We have adopted a Code of Business Conduct and Ethics that applies to our employees generally, and a
Supplemental Code of Ethics for Chief Financial Officer and Senior Financial Officers in compliance with
applicable rules of the SEC that applies to our principal executive officer, our principal financial officer, and our
principal accounting officer or controller, or persons performing similar functions. A copy of these Codes is
90
available free of charge on the “Investors” section of our web site at www.mobilemini.com. We intend to satisfy any
disclosure requirement under Item 5.05 of Form 8-K regarding an amendment to, or waiver from, a provision of the
Supplemental Code of Ethics by posting such information on our web site at the address and location specified
above.
ITEM 11. EXECUTIVE COMPENSATION.
Information with respect to executive compensation is incorporated herein by reference to information
included in the 2009 Proxy Statement.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
AND RELATED STOCKHOLDER MATTERS.
Equity Compensation Plan Information
We maintain the 1994 Stock Option Plan (the 1994 Plan), the 1999 Stock Option Plan (the 1999 Plan) and the
2006 Equity Incentive Plan (the 2006 Plan), pursuant to which we may grant equity awards to eligible persons. The
1994 Plan expired in 2003 and no additional options may be granted hereunder; outstanding options continue to be
subject to the terms of the 1994 Plan until their exercise or termination. The following table summarizes our equity
compensation plan information as of December 31, 2008. Information is included for both equity compensation
plans approved by our stockholders and equity plans not approved by our stockholders.
Plan Category
Common Shares
to be Issued Upon
Exercise of
Outstanding
Options, Warrants
and Rights
(a)
(In thousands)
Weighted Average
Exercise Price of
Outstanding
Options, Warrants
and Rights
(b)
Common Shares Remaining
Available for Future
Issuance Under Equity
Compensation Plans
(Excluding Shares
Reflected in Column (a)
(c)
(In thousands)
Equity compensation plans approved by
Mobile Mini stockholders(1) . . . . . . .
Equity compensation plans not approved
by Mobile Mini stockholders . . . . . . .
Totals . . . . . . . . . . . . . . . . . . . . . . . . . .
1,750
-0-
1,750
$17.45
-0-
$17.45
399
-0-
399
(1) Of these shares, options to purchase 12,000 shares were outstanding under the 1994 Plan, options to purchase
1.7 million shares were outstanding under the 1999 Plan and options to purchase 29,000 shares were
outstanding under the 2006 Plan.
On December 31, 2008, the closing price of Mobile Mini’s common stock as reported by The Nasdaq Stock
Market was $14.42.
The information set forth in our 2009 Proxy Statement under the headings “Security Ownership of Certain
Beneficial Owners and Management” is incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR
INDEPENDENCE.
The information set forth in our 2009 Proxy Statement under the caption “Related Person Transactions” and
information relating to director independence is incorporated herein by reference.
ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
The information set forth in our 2009 Proxy Statement under the caption “Audit Committee Disclosure” is
incorporated herein by reference.
91
ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) Financial Statements:
PART IV
(1) The financial statements required to be included in this Report are included in Item 8 of this Report.
(2) The following financial statement schedule for the years ended December 31, 2006, 2007 and 2008 is
filed with our annual report on Form 10-K for fiscal year ended December 31, 2008:
Schedule II — Valuation and Qualifying Accounts
All other schedules have been omitted because they are not applicable or not required.
(b) Exhibits:
Exhibit
Number
Description
3.1.1 Amended and Restated Certificate of Incorporation of Mobile Mini, Inc. (Incorporated by reference to
Exhibit 3.1 of the Registrant’s Report on Form 10-K for the fiscal year ended December 31, 1997).
3.1.2 Certificate of Amendment, dated July 20, 2000, to the Amended and Restated Certificate of Incorporation
of the Registrant (Incorporated by reference to Exhibit 3.1a of the Registrant’s Report on Form 10-Q for
the quarter ended June 30, 2000).
3.1.3 Certificate of Designation, Preferences and Rights of Series C Junior Participating Preferred Stock of
Mobile Mini, Inc., dated December 17, 1999 (Incorporated by reference to the Registrant’s Report on
Form 8-K dated December 13, 1999).
4.2
4.1
3.2
4.3.1
3.1.4 Certificate of Amendment of the Amended and Restated Certificate of Incorporation of Mobile Mini, Inc.,
dated June 26, 2008 (Incorporated by reference to the Registrant’s Report on Form 8-K dated July 1, 2008).
3.1.5 Certificate of Designation of Mobile Mini, Inc. Series A Convertible Redeemable Participating Preferred
Stock, dated June 27, 2008 (Incorporated by reference to the Registrant’s Report on Form 8-K dated
July 1, 2008).
Amended and Restated By-laws of Mobile Mini, Inc., as amended and restated through May 2, 2007
(Incorporated by reference to the Registrant’s Report on Form 10-K for the fiscal year ended
December 31, 2007).
Form of Common Stock Certificate. (Incorporated by reference to Exhibit 4.1 of the Registrant’s Report
on Form 10-K for the fiscal year ended December 31, 2003).
Rights Agreement, dated as of December 9, 1999, between Mobile Mini, Inc. and Norwest Bank
Minnesota, NA, as Rights Agent. (Incorporated by reference to the Registrant’s Report on Form 8-K dated
December 13, 1999).
Indenture dated as of May 7, 2007 among the Registrant, Law Debenture Trust Company of New York, as
Trustee, and Deutsche Bank Trust Company Americas, as Paying Agent and Registrar (incorporated by
reference to Exhibit 4.1 to the Registrant’s Registration Statement on Form S-4 filed with the Commission
on June 26, 2007) (the “Mobile Mini Indenture”).
Supplemental Indenture, dated as of June 27, 2008, among Mobile Mini, Inc., Mobile Storage Group, Inc.,
A Better Mobile Storage Company, Mobile Storage Group (Texas), LP, the guarantors party to the Mobile
Mini Indenture and Law Debenture Trust Company of New York, as trustee (Incorporated by reference to
the Registrant’s Report on Form 8-K dated July 1, 2008).
Indenture, dated as of August 1, 2006, by and among Mobile Services Group, Inc., Mobile Storage Group,
Inc., the subsidiary guarantors named therein and Wells Fargo Bank, N.A., as trustee (Incorporated by
reference to Exhibit 4.1 to the Mobile Storage Group, Inc.’s Form S-4 filed on September 18, 2007) (the
“MSG Indenture”).
Supplemental Indenture, dated as of June 27, 2008, among Mobile Mini, Inc., Mobile Mini of Ohio, LLC,
Mobile Mini, LLC, Mobile, LLC, Mobile Mini I, Inc., A Royal Wolf Portable Storage, Inc., Temporary
Mobile Storage, Inc., Delivery Design Systems, Inc., Mobile Mini Texas Limited Partnership, LLP,
Mobile Storage Group, Inc., the guarantors party to the MSG Indenture and Wells Fargo Bank, N.A., as
trustee (Incorporated by reference to the Registrant’s Report on Form 8-K dated July 1, 2008).
4.4.2
4.4.1
4.3.2
92
Exhibit
Number
10.1
10.2
10.2.1
10.3
Description
Mobile Mini, Inc. Amended and Restated 1994 Stock Option Plan. (Incorporated by reference to
Exhibit 10.3 of the Registrant’s Report on Form 10-K for the fiscal year ended December 31, 1997).
Mobile Mini, Inc. Amended and Restated 1999 Stock Option Plan (as amended through March 25, 2003).
(Incorporated by reference to Appendix B of the Registrant’s Definitive Proxy Statement for its 2003
annual meeting of shareholders, filed with the Commission on April 11, 2003 under cover of
Schedule 14A).
Form of Stock Option Grant Agreement (Incorporated by reference to Exhibit 10.2.1 of the Registrant’s
Report on Form 10-K for the fiscal year ended December 31, 2004).
Mobile Mini, Inc. 2006 Equity Incentive Plan (Incorporated by reference to Appendix A of the
Registrant’s Definitive Proxy Statement for its 2006 annual meeting of shareholders filed with the
Commission on May 9, 2006 under cover of Schedule 14A).
10.4.1 ABL Credit Agreement, dated June 27, 2008, between Mobile Mini, Deutsche Bank AG New York
Branch and other lenders party thereto (Incorporated by reference to the Registrant’s Report on Form 8-K
dated July 1, 2008).
First Amendment to ABL Credit Agreement, dated August 31, 2008, between Mobile Mini, certain of its
subsidiaries, Deutsche Bank AG New York Branch and the other lenders party thereto (Incorporated by
reference to the Registrant’s Report on Form 8-K dated September 4, 2008).
10.4.2
10.15 Amended and Restated Employment Agreement dated as of May 28, 2008 by and between Mobile Mini,
Inc. and Steven G. Bunger. (Incorporated by reference to the Registrant’s Report on Form 8-K dated
June 2, 2008).
10.17
10.18
10.16 Amended and Restated Employment Agreement dated September 30, 2008 between Mobile Mini, Inc.
and Lawrence Trachtenberg. (Incorporated by reference to the Registrant’s Report on Form 8-K dated
September 30, 2008).
Employment Agreement dated October 15, 2008 between Mobile Mini, Inc. and Mark Funk.
(Incorporated by reference to the Registrant’s Report on Form 8-K dated October 17, 2008).
Employment Agreement dated as of December 18, 2008 by and between Mobile Mini, Inc. and Jody
Miller. (Incorporated by reference to the Registrant’s Report on Form 8-K dated December 23, 2008).
10.19 Amended and Restated Employment Agreement dated as of December 18, 2008 by and between Mobile
Mini, Inc. and Russell Lemley (Incorporated by reference to the Registrant’s Report on Form 8-K dated
December 23, 2008
Form of Indemnification Agreement between the Registrant and its Directors and Executive Officers.
(Incorporated by reference to Exhibit 10.20 of the Registrant’s Report on Form 10-Q for the quarter ended
June 30, 2004).
10.20
10.22
10.23
10.21 Agreement and Plan of Merger, dated as of February 22, 2008, among Mobile Mini, Inc., Cactus Merger
Sub, Inc., MSG WC Holdings Corp., and Welsh, Carson, Anderson & Stowe X, L.P. (Incorporated by
reference to Exhibit 2.1 to the Registrant’s Report on Form 8-K filed with the Commission on
February 28, 2008).
Escrow Agreement dated as of June 27, 2008, between Mobile Mini, Welsh, Carson, Anderson & Stowe
X, L.P. and Wells Fargo Bank, N.A. (Incorporated by reference to the Registrant’s Report on Form 8-K
dated July 1, 2008).
Stockholders Agreement dated as of June 27, 2008, between Mobile Mini and the certain stockholders.
(Incorporated by reference to the Registrant’s Report on Form 8-K dated July 1, 2008).
Subsidiaries of Mobile Mini, Inc. (Filed herewith)
Consent of Independent Registered Public Accounting Firm. (Filed herewith).
Certification of Chief Executive Officer pursuant to Item 601(b)(31) of Regulation S-K. (Filed herewith).
Certification of Chief Financial Officer pursuant to Item 601(b)(31) of Regulation S-K. (Filed herewith).
Certification of Chief Executive Officer and Chief Financial Officer pursuant to Item 601(b)(32) of
Regulation S-K. (Filed herewith).
21
23.1
31.1
31.2
32.1
93
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has
duly caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized.
MOBILE MINI, INC.
SIGNATURES
Date: February 27, 2009
By:
/s/ Steven G. Bunger
Steven G. Bunger, President
Pursuant to the requirements of the Securities Exchange Act of 1934, this Report has been signed by the
following persons on behalf of the registrant and in the capacities and on the dates indicated.
Date: February 27, 2009
Date: February 27, 2009
Date: February 27, 2009
Date: February 27, 2009
Date: February 27, 2009
Date: February 27, 2009
Date: February 27, 2009
Date: February 27, 2009
Date: February 27, 2009
Date: February 27, 2009
By:
By:
By:
By:
By:
By:
By:
By:
By:
By:
/s/ Steven G. Bunger
Steven G. Bunger
President, Chief Executive Officer and Director
(Principal Executive Officer)
/s/ Mark E. Funk
Mark E. Funk
Executive Vice President and Chief Financial Officer
(Principal Financial Officer)
/s/ Deborah K. Keeley
Deborah K. Keeley
Senior Vice President and Chief Accounting Officer
(Principal Accounting Officer)
/s/ Michael E. Donovan
Michael E. Donovan, Director
/s/ Jeffrey S. Goble
Jeffrey S. Goble, Director
/s/ Stephen A McConnell
Stephen A McConnell, Director
/s/ Frederick G. McNamee
Frederick G. McNamee, Director
/s/ Sanjay Swani
Sanjay Swani, Director
/s/ Lawrence Trachtenberg
Lawrence Trachtenberg, Director
/s/ Michael L. Watts
Michael L. Watts, Director
94
SCHEDULE II
MOBILE MINI, INC.
VALUATION AND QUALIFYING ACCOUNTS
For the Years Ended December 31,
2007
(In thousands)
2008
2006
Allowance for doubtful accounts:
Balance at beginning of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Provision charged to expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Acquired through business acquisitions . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Write-offs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 3,234
4,538
462
(3,226)
$ 5,008
1,869
—
(2,884)
$ 3,993
5,261
2,873
(4,934)
Balance at end of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 5,008
$ 3,993
$ 7,193
95
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Corporate Information
Directors and Officers
Board of Directors
Steven G. Bunger
Corporate Officers
Mark E. Funk
Chairman, President and Chief Executive Officer
Executive Vice President and Chief Financial Officer
Jody E. Miller
Executive Vice President and Chief Operating Officer
William E. Armstead
Senior Vice President
Kyle G. Blackwell
Senior Vice President
Ron Halchishak
Senior Vice President & Managing Director – European Division
Jon D. Keating
Senior Vice President – Operations
Deborah K. Keeley
Senior Vice President – Chief Accounting Officer
Russell C. Lemley
Senior Vice President
Ronald E. Marshall
Senior Vice President
Christopher J. Miner
Senior Vice President & General Counsel
Scott V. Buller
Vice President – National Accounts
Michael J. Bunger
Vice President – Mobile Offices
Katherine H. Callaway
Vice President – Risk Management and Human Resources
Gilbert P. Gomez
Vice President – Strategic Planning
Mark A. Graham
Vice President – Business Development
Paul D. Widner
Vice President – Sales Development
Larry Trachtenberg
Private Investor
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
Jeffrey S. Goble
President – Medegen, Inc.
A developer and manufacturer of specialty infusion
therapy medical devices
Sanjay Swani
General Partner – Welsh, Carson, Andersen & Stowe
A private equity firm
Michael E. Donovan
Principal – Welsh, Carson, Andersen & Stowe
A private equity firm
Fredrick G. (Rick) McNamee
Principal – Quadrus Consulting
A strategy and technology operations consulting company
Shareholder Information
Investor Relations
The Equity Group
800 Third Avenue, 36th Floor
NY, NY 10022-7604
Telephone: 212-371-8660
Fax: 212-421-1278
Independent Counsel
Squire, Sanders & Dempsey LLP
40 North Central Avenue
Suite 2700
Phoenix, AZ 85004-4498
Transfer Agent and Registrar
Wells Fargo Bank Minnesota, N.A.
Shareowner Services
161 N. Concord Exchange St.
South St. Paul, MN 55075-1139
Corporate Office
7420 South Kyrene Road
Suite 101
Tempe, AZ 85283-4578
Telephone: 480-894-6311
Fax: 480-894-6433
Independent Registered
Public Accounting Firm
Ernst & Young LLP
Two North Central Avenue
Suite 2300
Phoenix, AZ 85004-2347
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
Meeting customer demand
with product diversity
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7420 South Kyrene Road
Suite 101
Tempe, Arizona 85283
Phone: 480-894-6311
www.mobilemini.com
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