Mobile Mini, Inc.
Annual Report 2018

Plain-text annual report

UNITED STATES 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, 2018 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 (I.R.S. Employer Identification No.) 4646 E. Van Buren Street, Suite 400 Phoenix, Arizona 85008 (Address of principal executive offices) (Zip Code) (480) 894-6311 (Registrant’s telephone number, including area code) Securities registered pursuant to Section 12(b) of the Act: Title of each class Common Stock, $.01 par value Preferred Share Purchase Rights Name of each exchange on which registered 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 ⌧ No (cid:4) 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 (cid:4) 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 (cid:4) Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ⌧ No (cid:4) Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§ 229.405 of this chapter) 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. (cid:4) Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act. Large accelerated filer Non-accelerated filer ⌧ (cid:4) Emerging growth company (cid:4) Accelerated filer Smaller reporting company (cid:4) (cid:4) If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. (cid:4) Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes (cid:4) No ⌧ The aggregate market value on June 30, 2018 of the voting common stock held by non-affiliates of the registrant was approximately $2.0 billion. As of January 25, 2019, there were outstanding 44,683,551 shares of the registrant’s common stock, par value $.01. Portions of the Proxy Statement for the registrant’s 2019 Annual Meeting of Stockholders are incorporated herein by reference in Part III of this Annual Report on Form 10-K to the extent stated herein. DOCUMENTS INCORPORATED BY REFERENCE: MOBILE MINI, INC. 2018 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 MINE SAFETY DISCLOSURES .................................................................................................................... ITEM 4 ITEM 5 ITEM 6 ITEM 7 PART II MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES .................................................................................. SELECTED FINANCIAL DATA.................................................................................................................... MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS....................................................................................................................................... ITEM 7A QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK................................. ITEM 8 FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA ................................................................. ITEM 9 CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING 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.................................................................................................................... ITEM 12 SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS ................................................................................................. ITEM 13 CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE ....................................................................................................................................... ITEM 14 PRINCIPAL ACCOUNTING FEES AND SERVICES................................................................................... Page 4 15 24 25 25 25 26 28 33 51 52 96 96 96 97 97 97 97 97 ITEM 15 EXHIBITS, FINANCIAL STATEMENT SCHEDULES................................................................................ 98 PART IV 2 Cautionary Statement about Forward Looking Statements Unless otherwise indicated, the terms “Mobile Mini,” the “Company,” “we,” “us” and “our” refer to Mobile Mini, Inc. together with its consolidated subsidiaries. Our discussion and analysis in this Annual Report on Form 10-K, our 2018 Annual Report to Stockholders, our other reports that we file with the Securities and Exchange Commission (the “SEC”), our press releases and in public statements of our officers and corporate spokespersons contain “forward-looking” statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and the Private Securities Litigation Reform Act of 1995. 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. We have tried, wherever possible, to identify such statements by using words such as “may,” “plan,” “seek,” “will,” “expect,” “intend,” “estimate,” “anticipate,” “believe,” “continue,” “project,” “could,” “should,” “would,” “likely,” “future,” “target,” “forecast,” “goal,” “observe,” and “strategy” or the negative thereof or variations thereon or similar terminology. The forward-looking statements in this Annual Report on Form 10-K reflect management’s beliefs, plans, objectives, goals, expectations, anticipations and intentions with respect to our financial condition, results of operations, future performance and business, and include statements regarding, among other things, our future actions; financial position; management forecasts; efficiencies; cost savings, synergies and opportunities to increase productivity and profitability; our plans and expectations regarding acquisitions; income and margins; liquidity; anticipated growth; the economy; business strategy; budgets; projected costs and plans and objectives of management for future operations; sales efforts; taxes; refinancing of existing debt; and the outcome of contingencies such as legal proceedings and financial results. Forward-looking statements are neither historical facts nor assurances of future performance. Instead, they are based only on our current beliefs, expectations and assumptions regarding the future of our business, future plans and strategies, projections, anticipated events and trends, the economy and other future conditions. Because forward-looking statements relate to the future, they are subject to certain risks and uncertainties, including, without limitation, an economic slowdown in the United States (“U.S.”) and/or the United Kingdom (“U.K.”) that affects any significant portion of our customer base, or the geographic regions where we operate in those countries; our ability to manage growth at existing or new locations; our ability to obtain borrowings under our revolving credit facility or additional debt or equity financings on acceptable terms; changes in the supply and price of used containers; our ability to increase revenue and control operating costs; our ability to raise or maintain rental rates; our ability to leverage and protect our information technology systems; our ability to protect our patents and other intellectual property; currency exchange and interest rate fluctuations; oil and gas prices; governmental laws and regulations affecting domestic and foreign operations, including tax obligations and labor laws; changes in the supply and cost of the raw materials we use in refurbishing or remanufacturing storage units; competitive developments affecting our industry, including pricing pressures; the timing, effectiveness and number of new markets we enter; our ability to cross-sell our portable storage and specialty containment products; our ability to integrate recent acquisitions; changes in generally accepted accounting principles; changes in local zoning laws affecting either our ability to operate in certain areas or our customer’s ability to use our products; any changes in business, political and economic conditions due to the threat of future terrorist activity in the U.S. and other parts of the world and related U.S. military action overseas; our ability to utilize our deferred tax assets; and those other risks and uncertainties discussed herein, that could cause actual results to differ materially from historical results or those anticipated. In light of these risks and uncertainties, there can be no assurance that the forward-looking information contained in this Annual Report on Form 10-K will in fact transpire or prove to be accurate. Readers are cautioned to consider the specific risk factors described herein and in “Item 1A. Risk Factors” of this Annual Report on Form 10-K, and not to place undue reliance on the forward-looking statements contained herein, which speak only as of the date hereof. The Company undertakes no obligation to update or publicly revise any forward-looking statement whether as a result of new information, future developments or otherwise. All subsequent written or oral forward-looking statements attributable to the Company or persons acting on its behalf are expressly qualified in their entirety by this paragraph. You are advised, however, to consult any further disclosures we make on related subjects in our subsequently filed Form 10-Q and Form 8-K reports and our other filings with the SEC. Also note that we provide a cautionary discussion of risks, uncertainties and possibly inaccurate assumptions relevant to our business under “Item 1A. Risk Factors” of this Annual Report on Form 10-K. We note these factors for investors as permitted by the Private Securities Litigation Reform Act of 1995. You should understand it is not possible to predict or identify all such factors. 3 ITEM 1. BUSINESS. Mobile Mini, Inc. - General PART I We believe we are the world’s leading provider of portable storage solutions, and are committed to providing our customers with superior service and access to a high-quality and diverse fleet. We are also a leading provider of specialty containment solutions in the United States (“U.S.”). Our mission is to uphold our leadership positions in portable storage solutions to customers throughout North America and the United Kingdom (“U.K.”) and become the provider of choice for specialty containment products in the U.S. Business Model Mobile Mini, founded in 1983, focuses on renting rather than selling our units, with rental revenues representing approximately 94% of our total revenues for the year ended December 31, 2018. We believe this strategy provides us with predictable, recurring revenue. Additionally, our assets have long useful lives, low maintenance and generally maintain their value throughout their useful lives. We also sell new and used units and provide delivery, installation and other ancillary products and value-added services. Our business is comprised primarily of two product categories: − Storage Solutions This category consists of our container and ground level office product offerings. We offer a wide range of Storage Solutions products in varying lengths and widths with an assortment of differentiated features such as patented locking systems, premium doors, electrical wiring and shelving. Our Storage Solutions products provide secure, accessible storage for a diversified client base of approximately 72,000 customers across various industries, including construction, retail and consumer services, industrial, commercial and governmental. Our customers use these products for a wide variety of storage applications, including construction materials and equipment, retail and manufacturing inventory, maintenance supplies, documents and records, household goods, and as portable offices. − Tank & Pump Solutions Our Tank & Pump Solutions products consist primarily of liquid and solid containment units, pumps and filtration equipment. Additionally, we provide an offering to our customers of value-added services designed to enhance the efficiency of managing liquid and solid waste. The client base for our Tank & Pump Solutions products includes customers in specialty industries, such as chemical, refinery, oil and natural gas drilling, mining and environmental. As of December 31, 2018, our network includes 117 Storage Solutions locations, 20 Tank & Pump Solutions locations and 17 combined locations. Included in our Storage Solutions network are 15 locations in the U.K., where we are a leading provider, and two in Canada. Our Storage Solutions fleet consists of approximately 195,600 units, and our Tank & Pump business has a fleet of approximately 12,600 units. In the discussions below, we generally refer to our business and assets as either “Storage Solutions” or “Tank & Pump Solutions.” Recent Strategic Transactions Consistent with our strategy to focus on high returning assets, during the second quarter of 2018 we initiated an organization-wide project to assess the economic and operational status of our fleet and other assets as well as an in-depth analysis of our fleet management process to identify inefficiencies. The result of this review was the identification of specific assets over which a further determination as to the economics of continued retention and repair could be made. In July 2018, management presented a proposed plan of sale for certain identified assets to the Board of Directors, and on July 24, the Board of Directors made the strategic decision to approve the plan and authorized management to begin actively marketing the assets for sale. As a result, these assets, which were primarily rental fleet, were classified as held for sale and we recognized a loss in 2018. We also identified and placed as held for sale, property, plant and equipment and inventory that were not being used efficiently. The total loss recognized in 2018 as a result of this determination and the implementation of this plan of sale was $102.1 million. The assets represent a subset of larger asset groups held by the Company. As of December 31, 2018, the sale was completed. 4 Because the majority of these units were not producing revenue we do not anticipate the disposal of these assets to have any impact on our ability to generate revenue or to meet customer demand, nor do we expect a material impact on our liquidity or free cash flow, including planned capital expenditures. Overall, as a result of the disposal of fleet and our strengthened processes, we expect operating expense savings of approximately $5 million to $7 million annually. The savings include reductions in labor, repairs and maintenance and lease costs. In addition, as a result of the reduction to our fleet and property, plant and equipment we expect depreciation expense to decrease approximately $0.9 million per quarter. Industry Overview Storage Solutions The storage industry includes two principal sectors, fixed self-storage and portable storage. The fixed self-storage sector consists of permanent structures located away from customer locations to store excess household goods. We do not participate in the fixed self-storage sector. The portable storage sector, upon which our business focuses, differs from the fixed self-storage sector, as it brings the storage solution to the customer’s location and fulfills the need for secure storage with immediate access to the storage unit. The advantages of portable storage include convenience, immediate accessibility, and lower price. In contrast to the fixed self- storage sector, the portable storage sector is primarily used by businesses. This sector of the storage industry is highly fragmented and remains primarily local in nature. Although there are no published estimates of the size of the portable storage market, we believe the sector is expanding due to the increasing awareness of the advantages of portable storage and that portable storage units are achieving increased market share compared to other portable options because containers provide ground level access, better protection against wind or water damage, higher security and improved aesthetics when compared to certain other portable storage alternatives such as van trailers. Certain of our portable storage products serve the modular space industry, which includes mobile offices and other modular structures. We offer steel ground level offices either custom designed and manufactured or made from converted ISO (International Organization for Standardization) containers as well as combination steel ground level office/storage units in varying lengths and widths to serve the various requirements of our customers. Tank & Pump Solutions In the specialty containment sector services industry, we service different markets. We serve the industrial market, which is comprised mainly of chemical facilities and refineries (the “downstream” market), and, to a lesser extent, companies engaged in the exploration and production of oil and natural gas (the “upstream” market). Additionally, we serve a diversified group of customers engaged in projects in the construction, pipeline and mining markets. Downstream customers utilize our equipment and services to manage and remove liquid and solid waste generated by ongoing operating activities as well as turn-around projects and large-scale expansion projects, while upstream customers tend to rent steel tanks to store water used in well hydraulic fracturing (“fracking”). Other customers utilize a wide variety of our products differentiated by the type of project in which they are engaged. Business Environment and Outlook Approximately 66% of our rental revenue during the twelve-month period ended December 31, 2018 was derived from our North American Storage Solutions business, 20% was derived from our Tank & Pump Solutions business in North America and 14% was derived from our U.K. Storage Solutions business. Our business is subject to the general health of the economy and we utilize a variety of general economic indicators to assess market trends and determine the direction of our business. On June 23, 2016, the U.K. voted to leave the European Union (the “E.U.”) in a referendum vote, which may have currently unknown social, geopolitical and economic impacts. The withdrawal negotiations began in 2017, and are still continuing. The date of the U.K.’s departure from the E.U. is set for March 29, 2019. As developments and their impact become clearer, we may adjust our strategy and operations accordingly. 5 Based on our current forecasts and assessment, we expect that the majority of our end markets will continue to drive demand for our products. In particular, construction, which represents approximately 36% of our consolidated rental revenue, is forecasted for continued growth in absolute terms but the rate of growth is expected to slow as compared to 2018. Economic indicators related to our industrial and commercial end-segment are also favorable with positive trends in production and capacity utilization. Industrial and commercial customers, which comprise approximately 25% of our rental revenue, generally operate in industries such as: large processing plants for organic and inorganic chemicals, refineries, distributors and trucking and utility companies. Our national retail accounts typically involve seasonal demand in the third and fourth quarter during the holiday season. Retail and consumer service customers comprise approximately 25% of our revenue and include department, drug, grocery and strip mall stores as well as hotels, restaurants, service stations and dry cleaners. Competitive Strengths Our competitive strengths include the following: Market Leader. We believe we are the world’s largest provider of portable storage solutions, the largest portable storage provider in North America, a market leader in portable storage and accommodation solutions in the U.K., where we have nearly 100% geographic coverage, and the third largest provider of specialty containment solutions in the U.S. Our business units operate under one family of brands. The portable storage business is branded as “Mobile Mini Storage Solutions,” while our specialty containment business, which previously operated under the Evergreen Tank Solutions (“ETS”) and Water Movers brand names is known as “Mobile Mini Tank + Pump Solutions”. Together we are “Mobile Mini Solutions”. The Mobile Mini Solutions brand name is associated with high quality products, superior customer service and value-added solutions. Our branding reinforces this reputation and communicates to Mobile Mini’s customers that the Company offers a diversified portfolio of products, with consistent quality and world-class service. We believe we are one of a few competitors in the U.S. and the U.K. who possess the brand awareness, network of locations, customer relationships and infrastructure to compete on a national and regional basis while maintaining a strong local market presence. Superior, Differentiated Products and Service. Within Storage Solutions, we offer a wide breadth of products and proprietary security features, like our patented tri-cam locking system. This product differentiation within the Storage Solutions sector and our superior service allows us to gain market share and charge premium rental rates. We also offer a broad range of Tank & Pump Solutions equipment and value-added services, which enables us to meet customers’ ongoing needs throughout the various life cycles of projects unique to the petrochemical and industrial industries. Our comprehensive turnkey solutions to customers’ containment, storage, pumping and filtration needs drive the creation of strong long-term partnerships with our customers. 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 organic growth. We have a dedicated, commissioned sales team that works within our highly customized customer relationship management (“CRM”) system. We manage our salespersons’ effectiveness through extensive sales call monitoring, mentoring and intensive training programs. Our digital advertising includes paid and organic search, industry targeted content, social messaging and strategic partnerships. Additionally, our web site is designed to maximize organic and local search features, making use of location- specific content using the latest in technology to connect our customers with the nearest branch, as quickly as possible. Our web site features video case studies, product specifications, easy access to our new customer portal and supports real time sales inquiries that enable customers to chat live with salespeople. National Presence with Local Service. We have invested significant capital developing a national network of locations that serve most major metropolitan areas in the U.S. and the U.K. Our national presence in both markets allows us to offer our products to larger customers who wish to centralize the procurement of Storage Solutions and Tank & Pump Solutions products on a multi-regional or national basis. We have leveraged and will continue to leverage our national Storage Solutions presence and infrastructure across the U.S. to facilitate the geographic expansion of our Tank & Pump Solutions division. Locally, our branch managers, sales representatives and drivers develop and maintain critical long-lasting relationships with our customers who benefit from our reach and exceptional service, as well as our wide selection of products. 6 Customer Service. The portable storage industry is service intensive. To position ourselves to understand our customers’ needs, we have trained our sales force to focus on all aspects of customer service from the sales call onward. We use Salesforce.com® as our CRM platform to increase our responsiveness to customer inquiries and to efficiently monitor our sales force’s performance. We use a Net Promoter Score (“NPS”) system to measure customer loyalty through real time surveys conducted by a third party. We utilize customer feedback to drive service improvements across the Company, from our field locations to our corporate headquarters, resulting in proven success as evidenced by our best in class NPS score of 85% for 2018. We differentiate ourselves by coupling market-leading product quality, security, convenience, selection and availability, with exceptional customer service. We believe our superior customer service drives customer satisfaction and we survey our customers to ensure that we are easy to do business with. Within the tank and pump industry, we have leveraged our broad range of products and expertise to differentiate ourselves from competitors. Our Tank & Pump Solutions business offers a full suite of the liquid and solid containment equipment required to execute a comprehensive containment solution that often must meet stringent regulatory and technical requirements. In addition, we offer EnviroTrackTM, a proprietary, sophisticated technology platform that provides detailed real-time data capture, tracking and customized reporting capabilities. This technology, which may be integrated with customers’ enterprise systems, is a unique customer service tool that enables us to develop strong, long-term relationships with our larger customers. Many of our Tank & Pump Solutions customers are large, blue-chip companies. We are committed to being the supplier of choice for our customers and during 2018 introduced and expanded several proprietary digital business solutions. Our customer portal MM ConnectTM provides our customers real-time access to track their rented units, request services, review account history and make payments. We upgraded EnviroTrackTM as a GPS and smart-device enabled solution allowing our Tank & Pump Solutions customers to manage both their equipment on rent as well as their waste streams through the life cycle of the rental period. We also introduced a number of mobile applications to drive efficiencies when interacting with our customers including delivery notifications, real time contract activations and confirmation of delivery signatures. Our technology is a real market differentiator, enabling us to develop strong, long-term relationships with more customers. This alignment of technology and processes provides value for our customers, driving market share gains for Mobile Mini, especially with large customers that value deepened connectivity and ease of use. Customized Management Information Systems. We continue to make significant investments in the management information systems supporting our operations. Our systems enable us to optimize fleet utilization, control pricing, dispatch and track our trucks, capture detailed customer data, evaluate and approve credit applications, monitor company results, gain efficiencies in internal control compliance, and support our growth by projecting near-term capital needs. Our customized management information systems also provide insight into estimating our forward-looking market potential by territory. This enables us to be more proactive and responsive when driving specific revenue streams. Decision makers and field personnel at all levels have access to real-time business information. In addition, we consistently capture relevant customer demographic and usage information to target new customers within existing and new markets. These capabilities result in a competitive advantage over smaller, less sophisticated regional competitors. Safety. At Mobile Mini, we are committed to the safety of our employees and our business partners. We believe that our focus on safety is a competitive advantage, as customers are increasingly focused on safety records in their sourcing decisions, especially in the Tank & Pump Solutions segment. Business Strategy Our strategic goal is to accelerate rental revenue growth and expand our operating margins by leveraging our infrastructure, focusing on higher returning assets and driving continuous improvements in efficiency. To achieve this goal, we intend to continue execution of the following strategies: Focus on Core Rental Business with Higher Returning Assets. Our rental business provides predictable recurring revenue and high margins. We are constantly evaluating our portfolio of product offerings to ensure our capital is invested in products that provide optimal returns. For example, during 2018 we made a decision to divest specific assets following a review and determination regarding the economics of continued retention and repair of such assets. 7 Generate Strong Organic Growth. We focus on increasing market penetration and gaining additional revenues from existing customers as well as gaining new customers through sophisticated sales and marketing programs aimed at increasing brand recognition, expanding market awareness of the uses of portable storage and differentiating our superior products from those of our competitors. Opportunistic Geographic Expansion. We continue to evaluate potential acquisitions of varying sizes. Acquisitions are a method we may use to create value, gain market share and expand to new or underserved markets in North America where we believe demand for portable storage units is underdeveloped. We also have a proven strategy to enter markets by migrating available fleet to new markets that can be serviced by nearby full-service field locations. From these start-up operational yards, we are able to redeploy existing available fleet, allowing for cost effective new location openings with minimal capital expenditures. We also believe we have the opportunity to geographically expand the markets in which we offer Tank & Pump Solutions products. Innovative Product Offering. Our wide offering of products with varying features expands the applications and overall market for our Storage Solutions products. Within our Tank & Pump Solutions products, we offer one of the broadest ranges of services and containment equipment in the industry complemented by an assortment of pumps and filtration units designed to allow us to partner with customers through every project stage. In light of the foregoing, we believe that there will continue to be substantial demand for our rental products throughout North America and the U.K. In addition, for certain of our customers, we partner with other rental companies to provide supplementary product offerings. Arranging these comprehensive rental services for our customers increases customer loyalty while generating additional rental revenue without additional investment in fleet. Opportunities for Cross-selling and Expansion. By leveraging Mobile Mini’s national footprint we can expand the geographic reach of our Tank & Pump Solutions products. Additionally, our significant Tank & Pump Solutions presence in downstream markets, particularly in the Gulf Coast region of the U.S., has allowed us to leverage established, long-term Tank & Pump Solutions relationships for their Storage Solutions needs. Focus on Efficient Utilization of Fleet. We are focused on following disciplined pricing practices and maintaining the right mix of products within each geography to maximize the return on our assets and we continuously strive to enhance our fleet management processes to decrease unavailable fleet. Additionally, our salesforce proactively reaches out to the market to increase awareness of our products and has sophisticated tools to increase sales productivity. Increasing utilization results in higher rental margins and reduces capital expenditure requirements to meet growth. Drive Profitability of Existing Locations. We have established key performance indicators to optimize profitability at individual locations and incentivize local management teams based on the performance of their branch. We also compare results across locations and regions to identify areas of opportunity for growth or for increased efficiencies. Continuous Improvement in Our Systems. We have made significant investments in our management information systems supporting our operations and believe these systems give us a competitive advantage. In 2016, we executed our new SAP® Enterprise Resource Planning (“ERP”) system. This system is a scalable platform to support future growth. We are focused on continued enhancements that drive further process improvements and efficiencies. Products To achieve favorable pricing and optimize our capital expenditures we centrally manage the purchasing of our rental fleet. Within Storage Solutions, we believe we are able to procure ISO containers at competitive prices because of our volume purchasing power, and have multiple suppliers. Nearly all the Tank & Pump units we rent to customers are manufactured by a limited number of suppliers. We do not generally maintain long-term contracts with any of our suppliers. We protect our products and brands through the use of trademarks and patents. In particular, we have patented our proprietary tri-cam locking system, our Container Guard Lock and other continued improvements in our locking technology both in the markets in which we operate, as well as in Europe and China. 8 Storage Solutions We offer customers a wide range of portable storage and office products with an assortment of differentiated features such as patented locking systems, premium and multiple door options and numerous configuration options. Our portable storage units provide secure, accessible storage. Our principal products are listed below: (cid:129) (cid:129) Steel Storage Containers. Standard portable storage containers are available in lengths ranging from 5 to 48 feet, widths of either 8 feet or 10 feet and a variety of customization options. Doors can be placed at the front, front and back, or the sides of containers. Other options include partitions and shelving. We believe our steel storage containers are a cost-effective alternative to mass warehouse storage, with a high level of fire and water damage protection. Steel Ground Level Offices. We offer steel ground level offices from 10 to 40 feet in length and 8 or 10 feet in width. Our 8 foot wide offices are available in various configurations, including office and storage combination units that provide a 10- or 15-foot office with the remaining area available for storage. Our office units provide the advantage of ground accessibility for ease of access and high security in an all-steel design. Our U.K. products include canteen units and drying rooms for the construction industry. For customers with space limitations, the U.K. office/canteen units can also be stacked two or three-high with stairs for access to the upper units. 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. Tank & Pump Solutions We offer a broad range of specialty containment equipment and services complemented by an assortment of pumps, filtration units and waste hauling services. In addition, we offer ancillary products for rental and for sale to our customers, such as: hoses, pipes, filters and spill containment. Our principal products and services include those listed below: (cid:129) (cid:129) (cid:129) (cid:129) (cid:129) (cid:129) (cid:129) Steel Tanks. Our fleet of steel tanks offers flexible sizes and other options such as weir, gas buster and open top steel tanks. Applications include: temporary storage of chemicals, water and other liquids, thorough mixing, agitation and circulation of stored liquids with other products, removal of gas from fluids circulated in the wellbore - such as mud used during drilling operations, and settling of solids in liquids prior to filtration or discharge. Stainless Steel Tank Trailers. Our stainless steel tankers meet department of transportation specifications for use in the storage and transportation of chemical, caustics and other liquids. Stainless steel tanks are offered insulated or non-insulated with level indication and vapor recovery capability. Roll-Off Boxes. Utilized for a variety of containment applications where it is necessary to maintain the homogeneity of the contents, our roll-off boxes provide simple, leak-proof storage and transportation of solid industrial byproducts. Roll-tarps or rolling metal lids are available to protect the contents from the elements during transport or storage. Vacuum boxes. Vacuum roll-off boxes are also offered to pair with a vacuum truck for containment, storage or transportation of pressurized contents. Dewatering Boxes. Our dewatering boxes are configured to provide for the draining of excess liquid from slurry or sludge which reduces storage, transportation and disposal costs. Upon completion of dewatering, the container is generally picked up by a roll-off truck for content disposal. Vacuum dewatering boxes are also offered. Pumps and Filtration Equipment. We offer a variety of pumps and filtration equipment differentiated by size and power. This equipment is used primarily for liquid circulation and filtration in municipal and industrial applications. Services. Value-added services performed by our employees include: − − − − Transportation of containers for waste management between multiple locations or in-plant, Waste management oversight and service provision by an on-site dedicated team, System design including assessment of pumping, filtration and temporary storage needs, and Field services to correctly install and connect customer containment equipment. 9 Product Lives and Durability We rent containers and equipment that have been in our fleet for various lengths of time at similar rates, without regard to the age of the unit. Third-party appraisals on our rental fleet are required by our lenders on a regular basis. The appraisals typically report no difference in the value of the unit due to the age or length of time it has been in our fleet. These appraisals are used to calculate our available borrowings under our Amended and Restated ABL Credit Agreement, dated December 14, 2015, with Deutsche Bank AG New York Branch, as administrative agent, and the other lenders party thereto (the “Credit Agreement” or “revolving credit facility”). Based in part upon our lender’s third-party appraiser who evaluated our fleet as of September 30, 2018, management estimates that the net orderly liquidation appraisal value of our rental fleet at December 31, 2018 was approximately $1.1 billion. Our net book value for this fleet as of December 31, 2018 was $929.1 million. Storage Solutions Steel containers have a long useful life with no technical obsolescence. Our steel portable storage containers and steel ground level offices have estimated useful lives of 30 years from the date we build or acquire and remanufacture them, with residual values of 55%. We maintain our steel containers on a regular basis by removing rust, painting them with rust inhibiting paint, plug-welding holes, and occasionally replacing the wooden floor or a rusted steel panel. Repainting the outside of storage units is the most common maintenance item. A properly maintained container is essentially in the same condition as when initially remanufactured. Tank & Pump Solutions When purchased new, our steel tanks and stainless steel tank trailers have estimated useful lives of 25 years, dewatering and roll-off boxes have useful lives ranging from 15 to 20 years and our pumps and filtration equipment have estimated lives of 7 years. We do not assume any residual value at the end of the assets’ useful lives. There is a limited secondary market for Tank & Pump Solutions products. We have outlined a stringent quality control and maintenance program to ensure that only equipment of the highest quality is released to the field. Each container undergoes a thorough visual inspection, hydro-testing and ultrasonic thickness testing to identify maintenance requirements. Tank maintenance includes repainting with rust inhibiting paint, replacing interior liners, and repairing valves, gaskets and rails. This periodic maintenance keeps the Tank & Pump units in essentially the same condition as when initially purchased and is designed to maintain the units’ value. Depreciation We depreciate our rental fleet using the straight-line method over each unit’s estimated useful life after the date we place the unit in service, and the units are depreciated down to their estimated residual values, if any. Assets obtained through acquisitions are recorded at their then current fair market value and depreciated to their estimated residual value over each asset’s estimated remaining life. Remanufacturing and Manufacturing of Storage Solutions Containers We purchase used ISO containers from leasing companies, shipping lines and brokers. These containers were originally built to ISO standards and are 8 feet wide, up to 9.5 feet high and 20, 40 or 45 feet long. After acquisition, we remanufacture and modify these ISO containers. Remanufacturing typically involves cleaning, removing rust and dents, repairing floors and sidewalls, painting, adding our signs and further customizing units by adding our proprietary easy opening door system and our patented locking system. Modification typically involves splitting some containers into differing lengths. The capitalized cost for remanufactured units includes the price we paid for the unit, plus the cost of customizing units and freight charges to our location when the unit is first placed in service. For manufactured units, cost includes our manufacturing cost, customization costs and freight charges to our location when the unit is first placed in service. In addition, we also purchase containers that have been manufactured to our specifications and require no further customization. We typically purchase raw materials such as steel, vinyl, wood, glass and paint as needed for the manufacturing or remanufacturing of our Storage Solutions containers. We do not have long-term contracts with vendors for the supply of raw materials. 10 Rental Fleet Composition The table below outlines the composition of our Storage Solutions rental fleet at December 31, 2018: Steel storage containers Steel ground level offices Other Storage Solutions rental fleet Accumulated depreciation Storage Solutions rental fleet, net Rental Fleet Number of Units Percentage of Gross Fleet in Dollars Percentage of Units (In thousands) $ 601,127 166,946 27,854 341,385 809 7,249 949,761 195,609 (151,666) $ 798,095 63 % 36 1 100 % 85 % 14 1 100 % The table below outlines the composition of our Tank & Pump Solutions rental fleet at December 31, 2018: Steel tanks Roll-off boxes Stainless steel tank trailers Vacuum boxes Dewatering boxes Pumps and filtration equipment Other Tank & Pump Solutions rental fleet Accumulated depreciation Tank & Pump Solutions rental fleet, net Rental Fleet Number of Units Percentage of Gross Fleet in Dollars Percentage of Units (In thousands) 72,770 $ 34,205 28,764 17,005 8,429 13,984 8,475 183,632 (52,637) $ 130,995 3,109 5,707 639 1,561 817 740 n/a 12,573 40 % 19 16 9 4 8 4 100 % 25 % 45 5 12 6 7 n/a 100 % Operations Our senior management analyzes and manages our business as (i) two Storage Solutions business segments: North America and the U.K. and (ii) one Tank & Pump Solutions business segment. To effectively manage this business across different geographic areas, we divide these business segments into smaller management areas we call divisions, regions and locations. Each of our locations, in their respective segment, generally has similar characteristics covering products rented or sold, similar customer bases, sales personnel, advertising, yard facilities, general and administrative costs and field operations management. Further financial information by segment is provided in Note 15 “Segment Reporting” to the accompanying consolidated financial statements. We locate our field operations in markets with attractive demographics and strong growth prospects. Within each market, we are located in areas that allow for easy delivery of 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. A typical branch consists of outdoor storage space for units not currently on rent and a small office. Each branch has a manager who has overall supervisory responsibility for all operational activities. Branch managers report to regional managers who each generally oversee multiple locations. Our regional managers, in turn, report to one of our operational senior vice presidents (called a managing director in the U.K.). Performance-based incentive bonuses are a substantial portion of the compensation for these senior vice presidents, regional managers and branch managers. Locations have dedicated sales staff and transportation personnel that deliver and pick up units from customers. We also supplement our delivery fleet by outsourcing delivery services to independent haulers when appropriate. The locations have delivery trucks and forklifts to load, transport and unload units and a yard staff responsible for unloading and stacking units. Portable storage steel units can be stored by stacking them to maximize usable ground area. Our branch employees perform preventive maintenance tasks, but outsource major repairs and other maintenance requirements either externally or to a senior repair team. 11 Sales and Marketing Storage Solutions We approach the market through a hybrid sales model consisting of a dedicated sales staff at our field locations as well as at our National Sales Center (“NSC”). Our field sales representatives handle local inbound calls and work to develop their branch territory and deepen local relationships through effective networking and sales calls. The NSC handles overflow, answering inbound calls and working digital leads while initiating outbound sales campaigns across our footprint. Our one- team approach means that everyone works with our local branch managers and dispatchers to ensure customers receive integrated first-class service from inquiry to pickup. We believe that offering our customers local sales and service support in addition to the convenience of a centralized sales operation, allows us to serve all of our customers in a dedicated, efficient manner. Our sales and marketing personnel provide information about our products to prospective customers by handling inbound calls and initiating outbound marketing calls. We have ongoing sales and marketing training programs covering all aspects of sales process and customer service. Our field locations communicate with one another and with corporate headquarters through our ERP system and our CRM platform, Salesforce.com®. This centralization of information enables the sales team to share leads and other information and permits management to monitor and review sales and rental productivity on a location-by- location basis. We improve our sales efforts by recording and rating the sales calls made and received by our trained sales force. Our sales personnel are compensated largely on a commission basis. Our national footprint 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. Within our portable storage business, we are well equipped to meet these customers’ needs through our National Account Program, which centralizes and simplifies the procurement, rental and billing process for those customers. Our largest customers tend to participate in our National Account Program. We provide our National Account customers with service guarantees, which assure them they will receive the same superior customer service and access to high quality, diverse fleet from any of our field locations. This program has helped us succeed in leveraging customer relationships developed at one location across our entire network of locations. We focus a significant portion of our marketing expenditures on digital initiatives for both existing and potential customers. We also use targeted direct email and digital programs to build brand awareness by communicating market specific features and tying them to industry benefits of using portable storage solutions. We have implemented aspects of search engine marketing like remarketing, pay per click, content curation, and organic search best practices to drive our customers to on-line lead generation integrated into our CRM. Immediately after completion of the online form, our dedicated sales force contacts the customer and completes the request. External market research vendors are an integral part of our sales and marketing approach. Tank & Pump Solutions Each Tank & Pump Solutions branch is responsible for targeting potential new customers in the branch’s service area and to be available to respond to customers 24 hours a day, 365 days a year. The branches are supported by a corporate team, including a sales and marketing department, business development representatives and National Account management. Branch managers and business development representatives work with customers to design customized solutions and identify new service and product applications. National Account management maintains contractual relationships with numerous blue-chip customers and coordinates the provision of services to customers with locations across multiple areas. Our sales personnel are compensated largely on a commission basis. Within our Tank & Pump Solutions business we utilize an advanced prospect and customer management software package across our sales force and branch network, providing enhanced visibility and tracking on all prospective customer accounts. Personnel have access to real-time critical customer information regardless of location. This access facilitates targeted marketing and sharing of relevant customer information across branches. Customers Storage Solutions In 2018, we served approximately 72,000 customers. Within the Storage Solutions product lines, our first and second largest customers accounted for 9.1% and 1.7%, respectively, of Storage Solutions rental revenues and our 20 largest customers combined accounted for approximately 17.9% of Storage Solutions rental revenues. During 2018, approximately 56% of our customers rented a single unit. We target customers who we believe can benefit from our Storage Solutions, either for seasonal, temporary or long-term storage needs. Customers use our portable storage units for a wide range of purposes. 12 Tank & Pump Solutions Our Tank & Pump Solutions customers are concentrated in the Gulf Coast region of the U.S. and are generally large companies, including blue-chip companies, with whom we have long-term relationships. During the year ended December 31, 2018, our first and second largest customers accounted for approximately 12.3% and 6.5%, respectively, of Tank & Pump Solutions rental revenues and our 20 largest customers combined accounted for approximately 52.8% of Tank & Pump Solutions rental revenues. Generally, our Tank & Pump Solutions customers belong in one of the following three categories: (cid:129) (cid:129) (cid:129) Downstream customers that focus on refining petroleum crude oil as well as processing and purifying raw natural gas. These customers may also market and distribute products derived from crude oil and natural gas including such products as gasoline, kerosene, jet fuel, diesel oil, lubricants, asphalt, natural gas and hundreds of varieties of petrochemicals. Upstream customers focusing on exploration for underground crude oil and natural gas fields. Upstream companies perform such activities as well drilling, operation of producing wells and bringing crude oil and/or raw natural gas to the surface using alternative methods. This category includes companies that perform fracking and transmission services. Diversified customers consist of all other companies to whom we provide products or services. These customers primarily perform pump and filtration activities such as: municipal sewer and water infrastructure, mining pit pump work, pipeline construction and maintenance, non-residential construction and other major projects. We estimate that total 2018 Tank & Pump Solutions rental revenue was 69%, 13% and 18% from downstream, upstream and diversified customers, respectively. Combined Customer Base The following table provides an overview of our customers and the estimated portion of total rental revenue generated by each customer group during the year ended December 31, 2018: Construction Business Retail and consumer services Industrial and commercial Estimated Percentage 36% Representative Customers General, electrical, plumbing and mechanical contractors, landscapers, residential homebuilders, and equipment rental companies 25% Department, drug, grocery and strip mall stores, hotels, restaurants, dry cleaners and service stations 25% Major processing plants for organic and inorganic chemicals, refineries, distributors and trucking and utility companies Government and institutions 6% National, state and local agencies and municipalities, schools, hospitals, medical centers, military, Native American tribal governments and reservations Oil and gas 3% Companies performing such activities as exploratory well drilling, operation of producing wells and bringing crude oil and/or raw natural gas to the surface using alternative methods (including fracking) Other Total 5% 100% 13 Rental Terms Storage Solutions We enter into contracts with our Storage Solutions customers generally based on a 28-day rate and billing cycle. The rental continues until cancelled by the customer or the Company. On average, the steel storage containers on rent at December 31, 2018, have been in place for 28 months, and the steel ground level offices on rent at December 31, 2018 have been in place for 15 months. Our rental contracts provide that the customer is responsible for the cost of delivery and pickup and specify that the customer is liable for any damage done to the unit beyond ordinary wear and tear. Customers may purchase a damage waiver from us to avoid damage liability in certain circumstances, which provides us with an additional source of recurring revenue. Customer possessions stored within a portable storage unit are the responsibility of that customer. Tank & Pump Solutions Our Tank & Pump Solutions rental contracts typically offer daily, weekly or monthly rates. Certain of our larger customers have multi-year agreements that limit rate increases during the term of the contract. The rental duration varies widely by application, and the rental continues until the unit is returned in clean condition to us. Rental contracts specify that the customer is responsible for carrying commercial general liability insurance, is liable for any damage to the unit beyond ordinary wear and tear, and for all materials the customer contains in rented equipment. The customer is contractually responsible for the cost of delivery and pickup, as well as thoroughly emptying and cleaning the equipment before return. Competition In all segments, we face competition from local and regional companies, as well as national companies, in substantially all of our current markets. We compete with several large national and international companies in our ground level office product line. Our competitors include lessors of storage units, mobile offices, van trailers and other structures used for portable storage. We also compete with conventional fixed self-storage facilities. In our Storage Solutions segments, we compete primarily in terms of security, convenience, product quality, broad product selection and availability, rental rates and customer service. In our Storage Solutions business, our largest competitors are Algeco Scotsman, PODS, Pac-Van, 1-800-PACK-RAT, Haulaway Storage Containers, ModSpace, McGrath RentCorp, and Wernick Hire, along with other national, regional and local companies. The liquid and solid containment industry is highly fragmented, consisting principally of local providers, with a handful of regional and national providers. In our Tank & Pump Solutions business we compete based on factors including: quality and breadth of equipment, technical applications expertise, knowledgeable and experienced sales and service personnel, on- time delivery and proactive logistics management, geographic areas serviced, rental rates and customer service. Our competitors include United Rentals, Rain For Rent and Adler Tanks. Employees As of December 31, 2018, we employed 2,049 employees, the majority of which are full time. Of these employees, 1,629 are employed in North America and 420 are employed in the U.K. No employees are currently covered by a collective bargaining agreement, and we have never experienced a work stoppage. We believe that our relations with our employees are good. Seasonality Demand from our Storage Solutions customers is somewhat seasonal. Construction customers typically reflect higher demand during months with more temperate weather, while demand for our portable storage units by large retailers is stronger from September through December because these retailers need to store more inventories for the holiday season. Our retail customers usually return these rented units to us in December and early in the following year. In our Tank & Pump Solutions business, demand from customers is typically higher in the middle of the year from March to October, driven by the timing of customer maintenance projects. The demand for rental of our pumps may also be impacted by weather, specifically when temperatures drop below freezing. 14 Environmental and Safety Our operations, and the operations of certain of our customers, are subject to numerous federal and local laws and regulations governing environmental protection and transportation. These laws regulate such issues as wastewater, storm water and the management, storage and disposal of, or exposure to, hazardous substances. We are not aware of any pending environmental compliance or remediation matters that are reasonably likely to have a material adverse effect on our business, financial position or results of operations. However, failure by us to comply with applicable environmental and other requirements could result in fines, penalties, enforcement actions, third party claims, remediation actions, and could negatively impact our reputation with customers. We have a company-wide focus on safety and have implemented a number of measures to promote workplace safety. Customers are increasingly focused on safety records in their sourcing decisions due to increased regulations to report all incidents that occur at their sites and the costs associated with such incidents. Cybersecurity We believe that we have implemented appropriate preventative measures to avert and mitigate the effects of cyber attacks; however, like other companies, the measures that we employ to protect our systems may not detect or prevent cybersecurity breaches. We have, from time to time, experienced threats to our data and systems, including malware, computer virus attacks and phishing attempts. While we carry robust cybersecurity insurance, costs and consequences of a cybersecurity incident could include remediation expenses, lost revenues, litigation, increased insurance premiums, reputational damage and erosion of shareholder value. Our Board regularly reviews our cybersecurity risks and controls with senior management. Cyber security controls include disclosure controls over the sales of securities by executives. We have not experienced a material cybersecurity breach. Access to Information Our website is located at 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 amended (the “Exchange Act”), as soon as reasonably practicable after we electronically file such material with, or furnish it to, the SEC. Throughout this Form 10-K, we “incorporate by reference” as identified herein certain information from parts of our proxy statement for the 2019 Annual Meeting of Stockholders, which we will file with the SEC and which will 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 Exchange Act are also available through our website. Information contained on our website does not, and shall not be deemed to, constitute part of this Annual Report on Form 10-K. Mobile Mini’s reference to the URL for our website is intended to be an inactive textual reference only. ITEM 1A. RISK FACTORS. Our business, results of operations and financial condition are subject to numerous risks and uncertainties. Set forth below and elsewhere in this Annual Report on Form 10-K and in other documents we file with the SEC are descriptions of the risks and uncertainties that could cause our actual results to differ materially from the results contemplated by the forward- looking statements contained in this Annual Report on Form 10-K. Should any of these risks materialize, our business, results of operations, financial condition and future prospects could be negatively impacted, which in turn could affect the trading value of our securities. 15 RISKS RELATED TO OUR BUSINESS Our business is subject to the general health of the economy, including non-residential spending and energy prices, accordingly any slowdowns or decreases in the U.S. or international economy could materially affect our revenue and operating results. An economic slowdown in the U.S. or international economy, including non-residential construction spending and energy prices, may cause substantial volatility in the stock market and layoffs and other restrictions on spending by companies in almost every business sector which could impact our business in a variety of ways, including: (cid:129) (cid:129) (cid:129) a reduction in consumer and business spending, which would result in a reduction in demand for our products; a negative impact on rates we can charge or 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 an increase in payment risk with others we do business with, including financial institutions. Without similar changes in expenses, which may be difficult to achieve, our margins will contract if revenue falls, and ultimately may result in having a material adverse effect on our financial condition. Many of our larger National Account customers are retailers, which is a sector that has been undergoing pressure from changes in their competitive environment. We also service customers in a variety of other industries, some of which have also been under financial pressure. If changes in the businesses of our customers caused them to rent fewer units or to be unable to meet their obligations to us, our operating results could be materially adversely affected. National Accounts made up approximately 36% of our 2018 North American Storage Solutions rental revenues. Many of these accounts are large retailers who are under pressure from changes to their industry (including consolidation and lower sales revenue from physical locations). While none of these changes has yet had a material impact on our business, it could be that future changes to the retail industry would cause them to rent fewer units from us. Alternatively, consolidation or financial pressures could see some retail customers either be acquired or become bankrupt. We also service a variety of other industries, some of which have also been under financial pressure. Historically, accounts receivable write-offs have not been material. However, if we are unable to manage credit risk issues, or if a large number of customers have financial difficulties at the same time, our credit losses could increase above historical levels and our operating results would be adversely affected. Delinquencies and credit losses generally can be expected to increase during economic slowdowns or recessions. We face unique regulatory and political challenges presented by international markets, particularly with respect to the uncertainty around “Brexit”. In connection with our business outside the U.S., we face exposure to additional regulatory requirements, including certain trade barriers, unforeseen risks related to foreign trade, tariffs and embargos, changes in political and economic conditions, and exposure to additional and potentially adverse tax regimes. Our success in the U.K. depends, 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 the U.K. and elsewhere, and lead to increased administrative costs. In June 2016, the U.K. held a referendum in which British citizens approved an exit from the European Union (the “E.U.”), which is commonly referred to as “Brexit”. The withdrawal negotiations began in 2017, and remain ongoing. The date of the U.K.'s departure from the E.U. is set for March 29, 2019. The U.K.'s stated intention is to leave the E.U.'s Single Market and Customs Union. Leaving the Single Market means that free movement of goods, services, people and capital between the U.K. and the E.U. will come to an end. In its place will likely be a trade agreement between the U.K. and E.U., which will provide for more restricted reciprocal access. Leaving the Customs Union means that the U.K. will have its own independent trade policy, but a trade border between the U.K. and the E.U. may arise for the first time in forty or so years, and with that comes the possibility of tariffs and the certainty of customs clearance requirements. The U.K. is preparing for Brexit by passing a raft of new legislation to: replace and to an extent replicate all E.U. law; to install new customs rules and procedures; to establish an independent trade policy; and to establish a new immigration policy. Brexit continues to be a source of significant business uncertainty, particularly because the draft deal negotiated by the U.K. and E.U. was overwhelmingly rejected by the U.K. Parliament in a vote on January 15, 2019. The consequence of this is, shortly before the U.K, is due to leave the E.U., there is no agreement on what the terms of the new relationship will be, and businesses have no idea of the regulatory frameworks in which they will be operating. The options are a new deal being struck; 16 and/or the deadline of March 29, 2019 being extended; and/or the U.K. having a further referendum and voting to stay in the E.U.; or the U.K. leaving the E.U. without a deal. It is impossible at the moment to predict which option is most likely. Given the lack of agreement and scale of possible regulatory change, it remains uncertain how the U.K.'s withdrawal would affect us. U.K. legislation governing the mobile storage sector which is derived from E.U. law will be repealed and replaced. It is expected that the U.K. will not diverge from E.U. rules in the early years after Brexit, but this has still to be confirmed. E.U. law also governs health and safety, environment, employment, and immigration law, all of which are relevant to the operation of our business in the U.K. Any changes in these rules could affect us, as could changes in cross-border trade between the U.K. and E.U. In a broader context, Brexit has caused significant volatility in global stock markets and currency exchange rate fluctuations that resulted in the strengthening of the U.S. dollar against foreign currencies in which we conduct business. The strengthening of the U.S. dollar relative to other currencies may adversely affect our operating results. Brexit may also create global economic uncertainty, which may cause our customers to closely monitor their costs and reduce their spending budgets. Any of these effects of Brexit, among others, could adversely affect our business, financial condition, operating results and cash flows. Our operational measures designed to increase revenue while continuing to control operating costs may not generate the improvements and efficiencies we expect and may not drive growth or returns. We have employed a number of operational measures designed to increase revenue while continuing to pursue our strategy of reducing operating costs where available. Additionally, our hybrid sales strategy of using local sales people in addition to a centralized call center team is designed to meet customer needs and drive revenue growth but differs from our historic sales structure. No assurance can be given that these strategies will achieve the desired goals and efficiencies in the future. The success of these strategies are somewhat dependent on a number of factors that are beyond our control. Even if we carry out these measures in the manner we currently expect, we may not achieve the improvements or efficiencies we anticipate, or on the timetable we anticipate. There may be unforeseen productivity, revenue or other consequences resulting from our strategies that will adversely affect us or impact our strategies for asset management. Therefore, there can be no guarantee that our strategies will prove effective in achieving desired profitability, margins, or returns on capital employed. Additionally, these strategies may have adverse consequences if our cost cutting and operational changes are deemed by customers to adversely impact product quality or service levels. We face intense competition that may lead to our inability to increase or maintain our prices, which could have a material adverse impact on our results of operations. The Storage Solutions and Tank & Pump Solutions industries are highly competitive and highly fragmented. Many of the markets in which we operate are served by numerous competitors, ranging from national companies like ourselves, to smaller multi-regional companies and small, independent businesses with a limited number of locations. See “Business — Competition.” Some of our principal competitors are less leveraged than we are and may have lower fixed costs and may be better able to withstand adverse market conditions within the industry. Additionally, some of our competitors currently offer products outside of our offerings or may have better brand recognition in some end customer sectors. If these competitors use their brand awareness to compete with our product offerings, customers may choose these competitors’ products over ours and we could lose business. Our competitors typically compete aggressively on the basis of pricing and may continue to impact our ability to attract and retain customers or maintain the rental rates we charge. Additionally, general economic factors could negatively impact the rental rates we are able to charge. To the extent that we choose to match our competitors’ declining prices, it could harm our results of operations as we would have lower margins. To the extent that we choose not to match or remain within a reasonable competitive distance from our competitors’ pricing, it could also harm our results of operations, as we may lose rental volume. Any material failure, inadequacy, interruption or breach of security of our information technology could harm our ability to effectively operate our business. We rely heavily on information systems across our operations. We also utilize third-party cloud providers to host certain of our applications and to store data. Our ability to effectively manage our business depends significantly on the reliability and capacity of these systems. The failure of these systems to operate effectively, could result in substantial harm or inconvenience to us, our employees, or our customers and negatively impact our results. 17 We believe that we have implemented appropriate measures to mitigate potential risks; however, like other companies, our information technology systems may be vulnerable to a variety of interruptions due to our own error or events beyond our control. The measures that we employ to protect our systems may not detect or prevent cybersecurity breaches, natural disasters, terrorist attacks, telecommunications failures, computer viruses, hackers, phishing attacks, and other security issues. We have, from time to time, experienced threats to our data and systems, including malware, computer virus attacks and phishing attempts. Additionally, we may not anticipate or combat all types of future attacks until after they have been launched. Costs and consequences of each of these situations or data privacy breaches could include remediation expenses, lost revenues, litigation, increased insurance premiums, reputational damage and erosion of shareholder value. We intend to continue to launch operations into new geographic markets and/or add Tank & Pump Solutions operations in existing Storage Solutions markets, which may be costly and may not be successful. We have in the past, and intend in the future, to expand our Storage Solutions and Tank & Pump Solutions operations into new geographic markets, primarily in North America. This expansion could require financial resources that would not therefore be available for other aspects of our business. In addition, this expansion could require the time and attention of management, leaving less time to focus on existing business. If we fail to manage the risks inherent in our geographic expansion, we could incur capital and operating costs without any related increase in revenue, which would harm our operating results. We may not be able to successfully integrate past acquisitions, or complete and integrate future acquisitions, or greenfield expansions. Any acquisition or expansion may result in additional and unexpected expenses, and the anticipated benefits of the integration of an acquisition or expansion may not be realized. In addition, we may assume certain liabilities in connection with any acquisition. To the extent there are unrecorded liabilities, including current or future environmental-related costs, which we failed to discover during our due diligence investigations and that are not subject to indemnification or reimbursement, our future operations could be materially and adversely affected. We may not be able to successfully complete future strategic acquisitions if we cannot reach agreement on acceptable terms or for other reasons. 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. In connection with potential future acquisitions, we may experience difficulty integrating personnel and operations, which could negatively affect our operating results in the following manner: (cid:129) (cid:129) (cid:129) (cid:129) (cid:129) (cid:129) (cid:129) key personnel of the acquired company may decide not to work for us; we may experience business disruptions as a result of information technology systems conversions; we may experience additional financial and accounting challenges and complexities in areas such as tax planning, treasury management, and financial reporting; we may be held liable for environmental risks and liabilities as a result of our acquisitions or expansion, some of which we may not have discovered during our due diligence; we may assume the liabilities of companies we acquire or properties we expand to in the future which could materially and adversely affect our business; our ongoing core business may be disrupted or receive insufficient management attention; and we may not be able to realize anticipated cost savings, synergies or other financial benefits. We are exposed to various possible claims relating to our business and our insurance may not fully protect us. We are exposed to various possible claims relating to our business. These possible claims include those relating to: (i) personal injury or death caused by products rented or sold by us; (ii) motor vehicle accidents involving our vehicles and our employees; (iii) employment and labor law-related claims; (iv) property damage; (v) cybersecurity breaches or IT compliance issues; (vi) shareholder lawsuits; (vii) medical claims exceeding our insurance limits and (viii) commercial claims. Our insurance policies have deductibles or self-insured retentions which would require us to expend amounts prior to taking advantage of coverage limits. Currently, we believe that we have adequate insurance coverage for the protection of our assets and operations. However, our insurance may not fully protect us for certain types of claims, such as claims for punitive damages or for damages arising from intentional misconduct, which are often alleged in third party lawsuits. In addition, we may be 18 exposed to uninsured liability for claims falling outside the scope of our current coverage or at levels in excess of our policy limits. If we are found liable for any significant claims that are not covered by insurance, our liquidity and operating results could be materially adversely affected. It is possible that our insurance carrier may disclaim coverage for any class action and derivative lawsuits against us. It is also possible that some or all of the insurance that is currently available to us will not be available in the future on economically reasonable terms or not available at all. In addition, whether we are covered by insurance or not, certain claims may have the potential for negative publicity surrounding such claims, which may lead to lower revenues, as well as additional similar claims being filed. 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. From time to time various unions attempt to organize certain 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. The supply and cost of shipping containers fluctuates, which can affect our pricing and our ability to grow. As needed, we purchase, remanufacture and modify shipping containers in order to expand our rental fleet. If container prices increase substantially, these price increases 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 containers may cause container prices to fall. In such event, competitors may then lower the rental rates on their storage units. As a result, we may need to lower our rental rates to remain competitive. These events could cause our revenues and our earnings to decline. We depend on our suppliers for the Tank & Pump Solutions equipment we rent to customers. Nearly all the Tank & Pump Solutions equipment we rent to customers is manufactured by a limited number of suppliers. We do not maintain long-term contracts with any of these suppliers. If our suppliers were unable or unwilling to provide us with such equipment, our operations would be affected if we were unable to obtain the equipment necessary to operate and grow our business. Also, should our suppliers substantially increase their prices (due to increased demand in certain products, or otherwise), we may not be able to raise our rental rates to absorb such increased cost. These events could cause our revenues and earnings to decline. The supply and cost of raw materials we use in remanufacturing and repairing units fluctuates and could increase our operating costs. As needed, we remanufacture and repair units for our rental fleet and for sale. In these processes, we purchase steel, paint, 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 rental 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 could decline. Fluctuations in fuel costs or reduced supplies of fuel could harm our business. In connection with our business, to better serve our customers and limit our capital expenditures, we often move our fleet from branch to branch. In addition, the majority of our customers arrange for delivery and pickup of our units through us. Accordingly, we could be materially adversely affected by significant increases in fuel prices that result in higher costs to us for transporting equipment. It is unlikely that we would be able to promptly raise our prices to make up for increased fuel costs. A significant or prolonged price fluctuation or disruption of fuel supplies could have a material adverse effect on our financial condition and results of operations. 19 We may not be able to adequately protect our intellectual property and other proprietary rights that are material to our business. Our ability to compete effectively depends in part upon protection of our rights in trademarks, copyrights and other intellectual property rights we own or license, including patents to our locking system for our Storage Solutions. Our use of contractual provisions, confidentiality procedures and agreements, and trademark, copyright, unfair competition, trade secret and other laws to protect our intellectual property and other proprietary rights may not be adequate. Litigation may be necessary to enforce our intellectual property rights and protect our proprietary information and patents, or to defend against claims by third parties that our services or our use of intellectual property infringe their intellectual property rights. Any litigation or claims brought by or against us could result in substantial costs and diversion of our resources. A successful claim of trademark, copyright or other intellectual property infringement against us could prevent us from providing services, which could harm our business, financial condition or results of operations. In addition, a breakdown in our internal policies and procedures may lead to an unintentional disclosure of our proprietary, confidential or material non-public information, which could in turn harm our business, financial condition or results of operations. If we determine that our goodwill, intangible assets or other long-lived assets have become impaired, or if we determine that our fleet residual values are too high, we may incur significant charges to our pre-tax income. At December 31, 2018, we had $705.2 million of goodwill, $55.5 million of unamortized intangible assets and $929.1 million of undepreciated rental fleet on our Consolidated Balance Sheet. Goodwill is reviewed at least annually for impairment. All long-lived assets are reviewed for impairment when an impairment indicator is present. Impairment may result from, among other things, deterioration in the performance of the business, adverse market conditions, stock price, and adverse changes in applicable laws or regulations, including changes that restrict the activities of the Company. Additionally, our rental fleet is subject to residual value risk upon disposition. We include in income from operations the difference between the sales price and the depreciated value of a unit sold. Market value at the time of sale is subject to numerous factors including general economic conditions. Fleet may not sell at the prices or in the quantities we expect. Sales of our rental fleet at prices significantly below our projections will have a negative impact on our results of operations and cash flow. For more information, see the “Notes to Consolidated Financial Statements” included in our financial statements contained in this Annual Report on Form 10-K. If we fail to attract and retain key management and personnel, we may be unable to implement our business plan. One of the most important factors in our ability to profitably execute our business plan is our ability to attract, develop and retain qualified personnel, including our chief executive officer (“CEO”) and senior operational management. Our success in retaining a CEO and attracting and retaining qualified people, particularly experienced operational and sales management, is dependent on the resources available in individual geographic areas and the impact on the labor supply due to general economic conditions, as well as our ability to provide a competitive compensation package, including the implementation of adequate drivers of retention and rewards based on performance, and work environment. The departure of any key personnel and our inability to enforce non-competition agreements could have a negative impact on our business. RISKS RELATED TO OUR INDEBTEDNESS AND GLOBAL CAPITAL AND CREDIT MARKETS 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. At December 31, 2018, we had $250.0 million in aggregate principal amount of 5.875% senior notes due July 1, 2024 (the “2024 Notes”) and $593.5 million of indebtedness under the Credit Agreement. Our substantial indebtedness could have adverse consequences. For example, it could: (cid:129) (cid:129) require us to dedicate a substantial portion of our cash flow from operations to payments on our indebtedness, which could reduce the availability of our cash flow to fund future working capital, pay dividends, capital expenditures, acquisitions and other general corporate purposes; make it more difficult for us to satisfy our obligations with respect to the 2024 Notes; 20 (cid:129) (cid:129) (cid:129) (cid:129) (cid:129) (cid:129) expose us to the risk of increased interest rates, as approximately 66% of our borrowings are at variable rates of interest; require us to sell assets to reduce indebtedness or influence our decisions about whether to do so; increase our vulnerability to general adverse economic and industry conditions; limit our flexibility in planning for, or reacting to, changes in our business and our industry; restrict us from making strategic acquisitions or pursuing business opportunities; and 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. Our Credit Agreement 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 indenture governing the 2024 Notes, and the Credit Agreement. The indenture governing the 2024 Notes contains various covenants that 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 a 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. The 2024 Notes do not contain financial maintenance covenants and the financial maintenance covenant under the Credit Agreement is not applicable unless we fall below specific borrowing availability levels. 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 Credit Agreement 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 2024 Notes. The amount we can borrow under our Credit Agreement depends in part on the value of our rental fleet. If the value of our rental fleet declines under appraisals our lenders receive, the amount we can borrow will similarly decline. We are required to satisfy several covenants with our lenders that are affected by changes in the value of our rental fleet. We would be in breach of certain of these covenants if the value of our rental 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 generate sufficient cash to service all of our debt, and may be forced to take other actions to satisfy our obligations under such indebtedness, which may not be successful. Our ability to make scheduled payments on or to refinance our obligations under our debt will depend on our financial and operating performance and that of our subsidiaries, which, in turn, will be subject to prevailing economic and competitive conditions and to financial and business factors, many of which may be beyond our control. See the table under “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Liquidity and Capital Resources — Contractual Obligations and Commitments” for disclosure regarding the amount of cash required to service our debt. We may not maintain a level of cash flow from operating activities sufficient to permit us to pay the principal, premium, if any, and interest on our indebtedness. If our cash flow and capital resources are insufficient to fund our debt service obligations, we may be forced to reduce or delay capital expenditures, sell assets, seek to obtain additional equity capital or restructure our debt. Such alternative measures may not be successful and may not enable us to meet our scheduled debt service obligations. We may not be able to refinance any of our indebtedness or obtain additional financing, particularly because of 21 our anticipated high levels of debt and the debt incurrence restrictions imposed by the agreements governing our debt, as well as prevailing market conditions. In the absence of such operating results and resources, we could face substantial liquidity problems and might be required to dispose of material assets or operations to meet our debt service and other obligations. The instruments governing our indebtedness restrict our ability to dispose of assets and use the proceeds from any such dispositions. We may not be able to consummate those sales, or if we do, at an opportune time, or the proceeds that we realize may not be adequate to meet debt service obligations when due. Fluctuations between the British pound and U.S. dollar could adversely affect our results of operations. We derived approximately 14% of our consolidated rental revenues in 2018 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. subsidiaries 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 accumulated other comprehensive loss in stockholders’ equity. A strengthening of the U.S. dollar against the British pound reduces the amount of income or loss we recognize on a consolidated basis from our U.K. business. 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. Global capital and credit market conditions could have an adverse effect on our ability to access the capital and credit markets, including our revolving credit facility. Disruptions in the global credit markets that materially impact liquidity in the debt market, making financing terms for borrowers less attractive or, in some cases, unavailable altogether, have occurred in the past and may occur again in the future. Such a disruption could result in the unavailability of certain types of debt financing, including access to revolving lines of credit. 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. However, future credit market conditions could 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 arising out of the agreements governing such debt. If we fail to raise capital when needed, our business will be negatively affected. RISKS RELATED TO GOVERNMENT REGULATIONS As Department of Transportation regulations change, our operations could be negatively impacted and competition for qualified drivers could increase. We operate in the U.S. pursuant to operating authority granted by the U.S. Department of Transportation (“DOT”). Our Company drivers must comply with the safety and fitness regulations of the DOT, including those relating to drug and alcohol testing and hours-of-service. Such matters as equipment weight and dimensions are also subject to government regulations. Our safety record could be ranked poorly compared to our peer firms. A poor fleet ranking may result in the loss of customers 22 or difficulty attracting and retaining qualified drivers which could affect our results of operations. Should additional rules be enacted in the future, compliance with such rules could result in additional costs. We are subject to environmental regulations and could incur costs relating to environmental matters. Federal, state, local, foreign and provincial laws and regulations regulate such issues as wastewater, storm water, air quality and the management, storage and disposal of, or exposure to, hazardous substances and hazardous and solid wastes. Several aspects of our businesses may involve risks related to environmental and health and safety liability. For example, we own, transport and rent tanks and boxes in which waste materials are placed by our customers. While we have a policy which, with certain limited exceptions, requires customers to return tanks and containers clean of any substances, they may fail to comply with these obligations. Additionally, we provide waste hauling services, which involves environmental risks during transport. While we endeavor to comply with all regulatory requirements, failure to be in compliance with any environmental regulatory requirements may increase our compliance or remediation costs or cause restrictions on our business, either of which could have a material effect on our financial position or results of operations. 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 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 contamination 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. Ongoing governmental review of hydraulic fracturing (“fracking”) and its environmental impact could lead to changes to this activity or its substantial curtailment, which could adversely affect our revenue and results of operations. Approximately 3% of our consolidated rental revenue for the year ended December 31, 2018 is related to customers involved in the upstream exploration and production of oil and natural gas. A portion of this revenue involves rentals to customers that use the fracking method to extract natural gas. The Environmental Protection Agency is studying the potential adverse effects that fracking may have on the environment and public health, and has issued regulations or guidance regarding certain aspects of the process. Other federal, state and local governments and governmental agencies have also begun to investigate and/or regulate fracking. Additional governmental regulation could result in increased costs of compliance or the curtailment of fracking in the future, which would adversely affect our revenue and results of operations. We have operations throughout North America and the U.K. and are subject to multiple state and local regulations as well as federal, state and local taxing authorities. Changes in applicable law, regulations or our material failure to comply with any of them, can have negative impacts on our business. Additionally, our effective tax rates and cash payable for taxes could be adversely impacted by changes in tax laws within the jurisdictions in which profits are determined to be earned and taxed. Most of our customers use our storage units to store their goods on their own properties for various lengths of time. Local zoning laws and temporary planning permission regulations in certain 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 or may limit the type of product they may use or how long it can be at their locations. Local building codes may place restrictions on our office units. 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 are also subject to numerous and differing state and local laws governing labor. While we endeavor to comply with all requirements, failure to be in compliance with any labor requirements may result in increased costs, or affect our ability to maintain an effective workforce, either of which could have a material effect on our financial position or results of operations. Our financial results are significantly impacted by our effective tax rates which could be impacted by a number of factors, including changes in tax rules and regulations or their interpretation, including changes in the U.S. related to the treatment of accelerated depreciation expense, carry-forwards of net operating losses, and taxation of foreign income and expenses. The 23 enactment of future tax law changes by federal and state taxing authorities may impact the Company’s future period tax provision and its deferred tax liabilities. Any tariffs on steel imports could result in increased container prices and adversely affect our results of operations. On June 15, 2018, the U.S. government issued part 2 of the 25% ad valorem tariff that will be applied to Chinese exports to the U.S. The list of proposed commodities that would be subject to this 25% tariff included intermodal containers. While this was later reversed and containers were removed from the list of items subject to the tariffs, there cannot be any guarantee that they will not later be subject to future tariffs. Because most portable storage containers currently in the United States are originally manufactured in China to transport goods before eventually being sold for domestic use, any proposed future tariff would immediately increase the cost of new and used containers being sold into the U.S. If such a tariff were to be enacted, steel container prices would increase. We may not be able to pass such price increases on to our customers and may not be able to secure adequate alternative sources of containers on a timely or cost-effective basis. Either of these occurrences could adversely affect our results of operations and financial condition. RISKS RELATED TO OUR COMMON STOCK The market price of our common stock has been volatile and may continue to be volatile and the value of your investment may decline. 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) (cid:129) (cid:129) (cid:129) (cid:129) (cid:129) (cid:129) (cid:129) (cid:129) (cid:129) (cid:129) (cid:129) (cid:129) (cid:129) (cid:129) (cid:129) (cid:129) (cid:129) changes in general conditions in the economy, geopolitical events or the financial markets; variations in our quarterly operating results; changes in financial estimates by securities analysts; our ability to maintain our dividend; other developments affecting us, our industry, customers or competitors; changes in demand for our products or the prices we charge due to changes in economic conditions, competition or other factors; general economic conditions in the markets where we operate; the cyclical nature of our customers’ businesses, particularly those operating in the construction sectors; the market perception that we are exposed to oil and gas production more than we currently are, and the related stock market volatility around oil and gas production companies; rental rate changes in response to competitive factors; bankruptcy or insolvency of our customers, thereby reducing demand for our used units; seasonal rental patterns; acquisitions or divestitures and related costs; labor shortages, work stoppages or other labor difficulties; possible unrecorded liabilities of acquired companies; possible write-offs or exceptional charges due to changes in applicable accounting standards, goodwill impairment, or divestiture or impairment of assets; the operating and stock price performance of companies that investors deem comparable to us; and 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 2018 fiscal year and that remain unresolved. 24 ITEM 2. PROPERTIES. The location and general character of our principal properties are as follows: Corporate and administrative: (cid:129) (cid:129) Our corporate and administrative offices are located in Phoenix, Arizona. These leased offices occupy approximately 50,000 square feet of office space, including our NSC. The lease term expires in October 2025. Our U.K. headquarters are located in Stockton-on-Tees, United Kingdom, where we lease approximately 10,000 square feet of office space. The lease term expires in July 2027. Field Locations. We locate our field operations in markets with attractive demographics and strong growth prospects. Within each market, we are located in areas that allow for easy delivery of 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. A typical branch consists of outdoor storage space for units not currently on rent and a small office. These properties tend to be one to five acre sites with little development needed for us to use them, other than a paved or hard-packed surface, utilities and proper zoning. In North America we own two locations, and in the U.K., we own one location. We lease the remaining locations in which we operate. Other. We own a 43-acre facility in Maricopa, Arizona that is primarily used to rebrand, remanufacture and perform major repairs and maintenance on our existing rental fleet and build custom sale units. We believe that satisfactory alternative properties can be found in all of our markets if we do not renew existing leased properties. ITEM 3. LEGAL PROCEEDINGS. We are party from time to time to various claims and lawsuits that arise in the ordinary course of business, including claims related to employment matters, contractual disputes, personal injuries and property damage. In addition, various legal actions, claims and governmental inquiries and proceedings are pending or may be instituted or asserted in the future against us and our subsidiaries. Litigation is subject to many uncertainties, and the outcome of the individual litigated matters is not predictable with assurance. It is possible that certain of the actions, claims, inquiries or proceedings, including those discussed above, could be decided unfavorably to us or any of our subsidiaries involved. Although we cannot predict with certainty the ultimate resolution of lawsuits, investigations and claims asserted against us, 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. ITEM 4. MINE SAFETY DISCLOSURES. Not applicable. 25 PART II ITEM 5. MARKET FOR REGISTRANT’S 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”. We had 60 holders of record of our common stock on January 25, 2019. The number of beneficial owners is substantially greater than the number of record holders because a large portion of our common stock is held of record in broker “street names.” Dividend Policy In November 2013, our Board of Directors (the “Board”) authorized the initiation of a quarterly cash dividend program to all of our common stockholders with the first quarterly common stock cash dividend paid in the first quarter of 2014. Each dividend payment is subject to review and approval by the Board. We declared cash dividends of approximately $1.00 per share for a total of $44.6 million during fiscal 2018 and approximately $0.91 per share for a total of $40.2 million during fiscal 2017. Our Credit Agreement contains certain restrictions on the declaration and payment of dividends. Issuer Purchases of Equity Securities On November 6, 2013, the Board approved a share repurchase program authorizing up to $125.0 million of our outstanding shares of common stock to be repurchased. On April 17, 2015, the Board authorized up to an additional $50.0 million of our outstanding shares of common stock to be repurchased, for a total of $175.0 million under the share repurchase program. The shares may be repurchased from time to time in the open market or in privately negotiated transactions. The share repurchases are subject to prevailing market conditions and other considerations. The share repurchase program does not have an expiration date and may be suspended or terminated at any time by the Board. All shares repurchased are held in treasury. During the full year 2018, we purchased 400 shares of our common stock under the authorized share repurchase program and we withheld approximately 17,000 shares of vested stock awards from employees, for an approximate value of $0.7 million, to satisfy minimum tax withholding obligations. These shares were not acquired pursuant to the share repurchase program. The table below summarizes the information about purchases of our common stock during the quarterly period ended December 31, 2018: Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs Approximate Dollar Value of Shares That May Yet be Purchased Under the Plans or Programs Total Number of Shares Purchased (1) Average Price Paid per Share (2) 42 $ — 694 $ 736 41.77 — 34.41 (In thousands) 70,837 70,837 70,825 — $ — 400 400 Period October 2018 November 2018 December 2018 Total (1) (2) Shares not purchased as part of a publicly announced plan or program represent shares withheld from employees to satisfy minimum tax withholding obligations upon the vesting of restricted stock. The weighted average price paid per share of common stock does not include the cost of commissions. 26 Stock Performance Graph The following Performance Graph and related information shall not be deemed “soliciting material” or “filed” with the SEC, nor should such information be incorporated by reference into any future filings under the Securities Act or the Exchange Act, except to the extent that Mobile Mini specifically incorporates it by reference in such filing. The following graph compares the five-year cumulative total return on our common stock with the cumulative total returns (assuming reinvestment of dividends) on the Standard and Poor’s SmallCap 600 and the NASDAQ US Benchmark TR Index if $100 were invested in our common stock and each index on December 31, 2013. Among Mobile Mini, Inc., the Standard & Poor’s SmallCap 600 and the NASDAQ US Benchmark TR Index Comparison of Five Year Cumulative Total Return* $200 $150 $100 $50 $- 2013 2014 2015 2016 2017 2018 Mobile Mini, Inc. Standard & Poor’s SmallCap 600 NASDAQ US Benchmark TR Index 2013 2014 2015 2016 2017 2018 Mobile Mini, Inc. Standard & Poor's SmallCap 600 NASDAQ US Benchmark TR Index 99.98 $ $ 100.00 $ 86.50 100.00 105.76 103.67 131.20 148.56 135.96 100.00 112.46 113.00 127.70 155.01 146.57 91.85 $ 78.20 $ 78.38 $ * Total Return based on $100 initial investment and reinvestment of dividends. 27 ITEM 6. SELECTED FINANCIAL DATA. The following selected financial data reflect the results of operations, cash flow and balance sheet data as of and for the years ended December 31, 2014 through 2018. 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 Form 10-K. 2018 For the Years Ended December 31, 2015 2016 2017 (In thousands, except per share and operating data) 2014 Consolidated Statements of Operations Data: Revenues: Rental Sales Other Total revenues Costs and expenses: Rental, selling and general expenses Cost of sales Restructuring expenses Asset impairment charge and loss on divestiture, net Depreciation and amortization Total costs and expenses Income from operations Other income (expense): Interest income Interest expense Debt restructuring/extinguishment expense Deferred financing costs write-off Foreign currency exchange (Loss) income before income tax provision (benefit) Income tax provision (benefit) Net (loss) income (Loss) earnings per share: Basic Diluted Weighted average number of common and common: share equivalents outstanding Basic Diluted Other Data: Net cash from operating activities Net cash from investing activities Net cash from financing activities $ 558,197 $ 34,354 678 593,229 498,825 $ 32,440 2,284 533,549 480,083 $ 26,499 2,040 508,622 494,715 $ 29,953 6,109 530,777 364,123 22,437 2,006 102,140 67,000 557,706 35,523 6 (40,904) — — 64 (5,311) 2,751 (8,062) $ 336,438 21,001 2,886 — 63,372 423,697 109,852 25 (35,728) — — (25) 74,124 (48,104) 122,228 $ 309,294 16,471 6,020 — 63,734 395,519 113,103 2 (32,726) (9,192) (2,271) (18) 68,898 21,650 47,248 $ 326,252 19,671 20,798 66,128 60,344 493,193 37,584 1 (35,900) — (931) (2) 752 (4,822) 5,574 $ 410,362 31,585 3,527 445,474 280,948 21,944 3,542 557 39,334 346,325 99,149 — (28,729) — — (1) 70,419 26,033 44,386 (0.18) $ (0.18) $ 2.77 $ 2.76 $ 1.07 $ 1.06 $ 0.12 $ 0.12 $ 0.96 0.95 $ $ $ 44,295 44,295 44,055 44,254 44,145 44,390 44,953 45,460 46,026 46,725 $ 160,098 $ (77,063) (92,144) 135,646 $ (70,006) (57,043) 136,244 $ (88,153) (44,853) 152,814 $ (14,415) (140,576) 120,625 (446,752) 329,780 28 2018 2017 December 31, 2016 2015 2014 Operating Data (unaudited): Number of Storage Solutions stand-alone locations (at year end) Number of Tank & Pump Solutions stand-alone locations (at year end) Combined Storage Solutions and Tank & Pump Solutions locations (at year end) Storage Solutions rental fleet units (at year end) Tank & Pump Solutions rental fleet units (at year end) Storage Solutions rental fleet utilization based on number of units (annual average) (1) Tank & Pump Solutions rental fleet utilization based on number of units (annual average) (1)(2) Tank & Pump Solutions rental fleet utilization based on original equipment cost (annual average) (3) 117 20 121 17 125 19 133 136 19 $ 24 17 195,609 12,573 16 214,997 12,109 14 211,332 12,051 7 205,238 11,744 — 213,546 10,265 $ 75.9% 71.5% 70.6% 69.4% 68.6% — — 61.8% 68.0% 74.0% 66.5% — — — — (1) Utilization calculated as average units on rent divided by average rental fleet size in units, including re-rented equipment. Tank & Pump business was acquired in December 2014. The twelve months ended December 31, 2015 is the first (2) meaningful period for this statistic. Beginning in 2017, Mobile Mini transitioned to the utilization methodology described in footnote 3 below. (3) Utilization calculated as the average original cost of equipment on rent, excluding re-rented equipment, divided by the average original cost of equipment in the fleet. Statistic is not available prior to 2017. 2018 2017 December 31, 2016 (In thousands) 2015 2014 Consolidated Balance Sheet Data: Rental fleet, net Total assets Total debt, net Stockholders' equity Non-GAAP Data and Reconciliations $ 929,090 $ 989,154 $ 950,065 $ 951,323 $1,087,056 2,005,064 2,073,407 2,004,894 1,976,775 2,100,229 927,491 854,531 937,076 735,614 932,926 861,688 903,535 765,529 903,343 810,269 We are a capital-intensive business. Therefore, in addition to focusing on measurements calculated in accordance with generally accepted accounting principles in the U.S. (“GAAP”), we focus on EBITDA, adjusted EBITDA and free cash flow to measure our operating results. EBITDA, adjusted EBITDA and the resultant margins, and free cash flow are non-GAAP financial measures. As such, we include in this Annual Report on Form 10-K reconciliations to their most directly comparable GAAP financial measures. We also evaluate our operations on a constant currency basis. The non-GAAP data, reconciliations and a description of the limitations of these measures are included below. EBITDA and Adjusted EBITDA. EBITDA is defined as net income before discontinued operation, net of tax (if applicable), interest expense, income taxes, depreciation and amortization, and debt restructuring or extinguishment expense (if applicable), including any write-off of deferred financing costs. Adjusted EBITDA further excludes certain non-cash expenses, as well as transactions that management believes are not indicative of our ongoing business. Because EBITDA and adjusted EBITDA, as defined, exclude some but not all items that affect our cash flow from operating activities, they may not be comparable to similarly titled performance measures presented by other companies. We present EBITDA and adjusted EBITDA because we believe that they provide an overall evaluation of our financial condition and useful information regarding our ability to meet our future debt payment requirements, capital expenditures and working capital requirements. EBITDA and adjusted EBITDA have certain limitations as analytical tools and should not be used as substitutes for net income, cash flows, or other consolidated income or cash flow data prepared in accordance with GAAP. EBITDA and adjusted EBITDA margins are calculated as EBITDA and adjusted EBITDA divided by total revenues expressed as a percentage. 29 Reconciliation of net (loss) income, the most directly comparable GAAP measure, to EBITDA and adjusted EBITDA is as follows: 2018 For the Years Ended December 31, 2016 2015 2017 (In thousands) 2014 Net (loss) income Interest expense Income tax provision (benefit) Depreciation and amortization Debt restructuring/extinguishment expense Deferred financing costs write-off EBITDA Share-based compensation expense (1) Restructuring expenses (2) Acquisition-related expenses (3) Asset impairment charge and loss on divestiture, net (4) Sales tax refunds and remittance, net (5) Transition services revenue (6) Transition services expense (6) Other (7) Adjusted EBITDA EBITDA margin Adjusted EBITDA, margin (8) $ (8,062) $ 122,228 $ 47,248 $ 40,904 2,751 67,000 — — 102,593 10,504 2,006 — 35,728 (48,104) 63,372 — — 173,224 6,070 2,886 123 32,726 21,650 63,734 9,192 2,271 176,821 6,947 6,020 100 5,574 $ 35,900 (4,822) 60,344 — 931 97,927 12,277 20,798 2,650 44,386 28,729 26,033 39,334 — — 138,482 14,490 3,542 5,070 — — — — 2,500 102,140 — — — — 557 — — — — $ 217,243 $ 184,803 $ 190,376 $ 200,836 $ 162,141 31.1 % 36.4 66,128 (1,176) (2,997) 4,357 872 — (219) — — 707 17.3 % 36.6 32.5 % 34.6 34.8 % 37.4 18.4 % 38.1 Reconciliation of net cash provided by operating activities to EBITDA is as follows: For the Years Ended December 31, 2018 2017 2016 2015 2014 Net cash provided by operating activities Interest paid Income and franchise taxes paid Share-based compensation expense, including share-based restructuring expense (1)(2) Asset impairment charge and loss on divestiture, net (4) Non-cash restructuring expense, excluding share-based compensation (2) Gain on sale of rental fleet Loss on disposal of property, plant and equipment Change in certain assets and liabilities, net of effect of businesses acquired: Receivables Inventories Other assets Accounts payable and accrued liabilities EBITDA (In thousands) $ 160,098 $ 135,646 $ 136,244 $ 152,814 $ 120,625 24,559 1,103 21,546 1,772 32,372 4,935 35,029 2,607 37,979 4,012 (10,867) (7,373) (7,399) (13,827) (15,071) (102,140) — — (66,128) (557) — 6,055 (600) — 5,657 (517) — 5,472 (1,285) (12,411) 6,402 (2,188) — 5,732 (348) 19,599 406 (826) (11,123) 21,159 (598) (60) (30) $ 102,593 $ 173,224 $ 176,821 $ 10,640 90 635 (9,190) 479 4,419 (945) (2,680) 855 1,399 (699) (4,431) 97,927 $ 138,482 (1) (2) Share-based compensation represents non-cash compensation expense associated with the granting of equity instruments. The reconciliation of net cash provided by operating activities to EBITDA includes share-based compensation recognized within restructuring expense and share-based compensation that is included in the “other” line item. See footnotes 2 and 7 below. The Company has undergone restructuring actions to align its business operations. For more information related to the 2018, 2017 and 2016 restructuring costs, see Note 14 “Restructuring Costs” to the accompanying consolidated financial 30 statements. In 2015, we recognized $19.7 million of restructuring charges related to activities associated with the integration of ETS into the existing Mobile Mini infrastructure. The remaining 2015 restructuring charges primarily related to costs associated with our move away from the wood mobile office business. Restructuring charges in 2014 primarily relate to the transition of key leadership positions and changes in the structure of our U.K. business, including the closure of our Belfast, North Ireland location. Incremental costs associated with acquisitions. In 2018, Mobile Mini placed for sale and divested of certain underperforming assets. See additional information in Note 4 “Held for Sale Assets” to the accompanying consolidated financial statements. In 2015, these costs represent asset impairment charge and loss on divestiture of our wood mobile offices. (3) (4) (5) Revenue associated with sales tax refunds of $1.4 million in 2016 and $1.2 million in 2015, offset by a sales tax (6) remittance of $1.1 million in 2016. Transition services revenue and operating expenses associated with the provision of transition services related to the wood mobile offices divestiture, including expenses related to wood mobile offices on our leased properties. (7) Other expenses in 2017 and 2016 related to severance for senior executives, including the acceleration of stock-based compensation, as well as fees and penalties associated with the 2016 sales tax remittance discussed previously. Other expenses in 2015 are related to the settlement of an outstanding unclaimed property liability with the state of Delaware. (8) Revenue discussed above associated with the sales tax refunds as well as the transition services were excluded in the calculation of the adjusted EBITDA margin. Free Cash Flow. Free cash flow is defined as net cash provided by operating activities, minus or plus, net cash used in or provided by investing activities, excluding acquisitions and certain transactions. Free cash flow is a non-GAAP financial measure and is not intended to replace net cash provided by operating activities, the most directly comparable financial measure prepared in accordance with GAAP. We present free cash flow because we believe it provides useful information regarding our liquidity and ability to meet our short-term obligations. In particular, free cash flow indicates the amount of cash available after capital expenditures for, among other things, investments in our existing business, debt service obligations, payment of authorized quarterly dividends, repurchase of our common stock and strategic small acquisitions. Reconciliation of net cash provided by operating activities to free cash flow is as follows: Net cash provided by operating activities Additions to rental fleet, excluding acquisitions Proceeds from sale of rental fleet Additions to property, plant and equipment, excluding acquisitions Proceeds from sale of property, plant and equipment Net capital expenditures, excluding acquisitions 2018 For the Years Ended December 31, 2015 2016 2017 (In thousands) $ 160,098 $ 135,646 $ 136,244 $ 152,814 $ 120,625 2014 (85,961) 14,993 (63,688) 12,953 (57,372) 13,679 (74,732) 16,865 (27,279) 23,053 (16,931) 683 (87,216) (20,122) 851 (70,006) (30,659) 2,764 (71,588) (31,163) 9,860 (79,170) (15,779) 4,199 (15,806) Free cash flow $ 72,882 $ 65,640 $ 64,656 $ 73,644 $ 104,819 Constant Currency. We calculate the effect of currency fluctuations on current periods by translating the results for our business in the U.K. during the applicable period using the average exchange rates from the comparative prior-year period. We present constant currency information to provide useful information to assess our underlying business excluding the effect of material foreign currency rate fluctuations. 31 The table below shows certain financial information as calculated on a constant currency basis, whereby the indicated 2018 financial information has been translated utilizing the average exchange rate for the twelve months ended December 31, 2017: Rental revenues Rental, selling and general expenses Adjusted EBITDA Twelve Months Ended December 31, 2018 Calculated in Constant Currency As Reported Difference (In thousands) $ 555,425 $ 362,229 216,298 558,197 $ 364,123 217,243 (2,772) (1,894) (945) The table below shows certain financial information as calculated on a constant currency basis, whereby the indicated 2017 financial information has been translated utilizing the average exchange rate for the twelve months ended December 31, 2016: Rental revenues Rental, selling and general expenses Adjusted EBITDA Twelve Months Ended December 31, 2017 Calculated in Constant Currency As Reported Difference (In thousands) $ 502,747 $ 339,002 186,281 498,825 $ 336,438 184,803 3,922 2,564 1,478 The table below reflects a summary of certain of the non-GAAP financial data set forth above: 2018 2017 For the Years Ended December 31, 2015 2016 (In thousands, except percentages) 2014 Non-GAAP Data: EBITDA EBITDA margin Adjusted EBITDA Adjusted EBITDA margin Free cash flow $ 102,593 $ 173,224 $ 176,821 17.3% 32.5% $ 34.8% 97,927 $ 138,482 18.4% 31.1% $ 217,243 $ 184,803 $ 190,376 $ 200,836 $ 162,141 36.6% $ 72,882 34.6% $ 65,640 37.4% $ 64,656 $ 38.1% 36.4% 73,644 $ 104,819 32 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 tables and information in this “Management’s Discussion and Analysis of Financial Condition and Results of Operations” (“MD&A”) section were derived from exact numbers and may have immaterial rounding differences. Overview Executive Summary Throughout 2018, our continuing operational strategic goals included growing revenue and expanding our operating margins by leveraging our infrastructure, focusing on higher returning assets and driving continuous improvements in efficiency. To achieve these goals, we concentrated on generating growth in our core rental business through strong organic growth. We also leveraged our new ERP system functionality and other technology enhancements to drive additional efficiencies, including mobile applications for both our employees and our customers and processes around the management of fleet. As of December 31, 2018, our network includes 117 Storage Solutions locations, 20 Tank & Pump locations and 17 combined locations. Our Storage Solutions fleet consists of approximately 195,600 units and our Tank & Pump Solutions business has a fleet of approximately 12,600 units. For the year ended December 31, 2018, our achievements included: (cid:129) (cid:129) (cid:129) (cid:129) (cid:129) (cid:129) (cid:129) Grew total rental revenues 11.9% year-over-year Within our Storage Solutions business, which represented approximately 80% of rental revenue in 2018: − − − Grew total rental revenues 10.1% year-over-year, Increased year-over-year Storage Solutions rental rates by 2.4%, and Increased average units on rent by 3.5%, Successfully positioned our Tank & Pump Solutions business to take advantage of positive trends in our underlying markets, which resulted in: − − − Year-over-year rental revenue growth of 20.1%, Increased average equipment on rent (based on original equipment cost) by 20.8% year-over-year, with sequential increases in each quarter, and Year-over-year rate increases for new equipment placed on rent, Generated adjusted EBITDA of $217.2 million, with a 36.6% margin, Implemented digital and mobile solutions across our businesses to drive market share, especially with large customers that value this deepened technology, and Generated $72.9 million in free cash flow and returned $44.5 million to shareholders through dividends. Decreased leverage ratio to 4.2x as of December 31, 2018, from 5.0x as of December 31, 2017 (leverage ratio calculated by dividing debt, less cash, by adjusted EBITDA). 33 Asset Impairment Charge and Loss on Divestiture, Net of Proceeds Consistent with our strategy to focus on high returning assets, during the second quarter of 2018 we initiated an organization-wide project to assess the economic and operational status of our fleet and other assets as well as an in-depth analysis of our fleet management process to identify inefficiencies. The result of this review was the identification of specific assets over which a further determination as to the economics of continued retention and repair could be made. In July 2018, management presented a proposed plan of sale for certain identified assets to the Board of Directors, and on July 24, the Board of Directors made the strategic decision to approve the plan and authorized management to begin actively marketing the assets for sale. As a result, we classified these assets, which were primarily rental fleet, as held for sale and recognized a loss of $102.1 million in 2018. We also identified and placed as held for sale, property, plant and equipment and inventory that were not being used efficiently. The assets represent a subset of larger asset groups held by the Company. As of December 31, 2018, the sale was completed. Because the majority of these units were not producing revenue we do not anticipate the disposal of these assets to have any impact on our ability to generate revenue or to meet customer demand, nor do we expect a material impact on our liquidity or free cash flow, including planned capital expenditures. Overall, between the disposal of fleet and our strengthened processes, we expect operating expense savings of approximately $5 million to $7 million annually. The savings includes reductions in labor, repairs and maintenance and lease costs. In 2018 we realized savings of approximately $2 million related to the fleet divestiture and new strengthened processes around fleet management. We expect to implement all costs savings measures by the end of the first quarter of 2019. In addition, as a result of the reduction to our fleet and property, plant and equipment we expect depreciation expense to decrease approximately $0.9 million per quarter. Tax Cuts and Jobs Act On December 22, 2017, the U.S. government enacted the Tax Cuts and Jobs Act (the “Tax Act”), which, among other things, reduced the federal income tax rate from 35% to 21% effective January 1, 2018, and requires mandatory repatriation of foreign earnings. As a result of the Tax Act, we remeasured our net deferred tax liabilities and recognized a net tax benefit of $77.6 million during the fourth quarter of 2017. In addition, we recorded a provisional income tax expense of $3.1 million related to the repatriation of foreign earnings. The Company finalized its analysis of the impact of the Tax Act passed in December 2017 and in the current year recorded a reduction of $2.6 million to provisional amounts that were recorded in the prior year. Business Environment and Outlook Approximately 66% of our rental revenue during the twelve-month period ended December 31, 2018 was derived from our North American Storage Solutions business, 20% was derived from our Tank & Pump Solutions business in North America and 14% was derived from our U.K. Storage Solutions business. Our business is subject to the general health of the economy and we utilize a variety of general economic indicators to assess market trends and determine the direction of our business. On June 23, 2016, the U.K. voted to leave the European Union (the “E.U.”) in a referendum vote, which may have currently unknown social, geopolitical and economic impacts. The withdrawal negotiations began in 2017, and are still continuing. The date of the U.K.’s departure from the E.U. is set for March 29, 2019. As developments and their impact become clearer, we may adjust our strategy and operations accordingly. Based on our current forecasts and assessment, we expect that the majority of our end markets will continue to drive demand for our products. In particular, construction, which represents approximately 36% of our consolidated rental revenue, is forecasted for continued growth in absolute terms but the rate of growth is expected to slow as compared to 2018. Economic indicators related to our industrial and commercial end-segment are also favorable with positive trends in production and capacity utilization. Industrial and commercial customers, which comprise approximately 25% of our rental revenue, generally operate in industries such as: large processing plants for organic and inorganic chemicals, refineries, distributors and trucking and utility companies. Our national retail accounts typically involve seasonal demand in the third and fourth quarter during the holiday season. Retail and consumer service customers comprise approximately 25% of our revenue and include department, drug, grocery and strip mall stores as well as hotels, restaurants, service stations and dry cleaners. Accounting and Operating Overview Our principal operating revenues and expenses are: Revenues: (cid:129) (cid:129) Rental revenues include all rent and ancillary revenues we receive for our rental fleet. Sales revenues consist primarily of sales of new and used fleet and, to a lesser extent, parts and supplies sold to customers. 34 Costs and Expenses: (cid:129) Rental, selling and general expenses include, among other expenses, payroll and payroll-related costs (including share-based compensation and commissions for our sales team), fleet transportation and fuel costs, repair and maintenance costs for our rental fleet and transportation equipment, real estate lease expense, insurance costs, and general corporate expenses. (cid:129) (cid:129) Cost of sales in our consolidated statements of operations includes the net book value of the units that were sold during the reported period and includes both our cost to buy, transport, remanufacture and modify used containers and our cost to manufacture Storage Solutions units and other structures, and to a lesser extent the costs of parts and supplies sold to customers. Depreciation and amortization includes depreciation on our rental fleet, our property, plant and equipment, and amortization of definite-lived intangible assets. In addition to focusing on GAAP measurements, we focus on EBITDA, adjusted EBITDA, and free cash flow to measure our operating results. As such, we include in this Annual Report on Form 10-K reconciliations to their most directly comparable GAAP financial measures. We also evaluate our operations on a constant currency basis. These reconciliations and descriptions of why we believe these measures provide useful information to investors as well as a description of the limitations of these measures are included in “Item 6. Selected Financial Data.” Results of Operations Twelve Months Ended December 31, 2018, Compared to Twelve Months Ended December 31, 2017 The following table sets forth for each of the periods indicated our statements of operations data and expresses revenue and expense data as percentage of total revenues for the periods presented: Years Ended December 31, Percent of Revenue Years Ended December 31, Increase (Decrease) 2018 2017 2018 2017 2018 versus 2017 (In thousands, except percentages) $558,197 $498,825 34,354 32,440 2,284 593,229 533,549 678 94.1 % 5.8 0.1 100.0 93.5 % $ 59,372 1,914 6.1 (1,606) 0.4 59,680 100.0 11.9 % 5.9 (70.3) 11.2 Revenues: Rental Sales Other Total revenues Costs and expenses: Rental, selling and general expenses Cost of sales Restructuring expenses Asset impairment charge and loss on divestiture, net Depreciation and amortization Total costs and expenses Income from operations Other income (expense): Interest income Interest expense Foreign currency exchange 364,123 336,438 22,437 21,001 2,886 2,006 102,140 — 67,000 63,372 557,706 423,697 35,523 109,852 25 6 (40,904) (35,728) (25) 64 61.4 3.8 0.3 17.2 11.3 94.0 6.0 — (6.9) — 63.1 3.9 0.5 27,685 1,436 (880) — 11.9 79.4 20.6 102,140 3,628 134,009 (74,329) — (6.7) — (19) (5,176) 89 8.2 6.8 n/a n/a 5.7 31.6 (67.7) n/a 14.5 n/a (Loss) income before income tax provision (benefit) Income tax provision (benefit) Net (loss) income (5,311) 74,124 2,751 (48,104) $ (8,062) $122,228 (0.9) 0.5 (1.4)% (79,435) 13.9 (9.0) 50,855 22.9 % $(130,290) 35 EBITDA (1) Adjusted EBITDA (1) Free Cash Flow (1) Years Ended December 31, Percent of Revenue Years Ended December 31, 2018 2017 2018 2017 (In thousands, except percentages) Increase (Decrease) 2018 versus 2017 $102,593 $173,224 217,243 184,803 72,882 65,640 17.3 % 36.6 12.3 32.5 % $ (70,631) 32,440 34.6 7,242 12.3 (40.8) % 17.6 11.0 (1) See “Non-GAAP Data and Reconciliations” earlier in this Annual Report on Form 10-K. The following table sets forth certain financial information as calculated on a constant currency basis: Rental revenues Rental, selling and general expenses Adjusted EBITDA Twelve Months Ended December 31, 2018 Calculated in Constant Currency (1) As Reported Difference (In thousands) $ 555,425 $ 362,229 216,298 558,197 $ 364,123 217,243 (2,772) (1,894) (945) (1) See “Non-GAAP Data and Reconciliations” earlier in this Annual Report on Form 10-K. Total Revenues. The following tables depict revenue by type of business for the twelve-month periods ended December 31: Revenues: Rental Sales Other Total revenues Revenues: Rental Sales Other Total revenues Storage Solutions 2018 2017 Increase (Decrease) 2018 versus 2017 (In thousands, except percentages) $ 447,464 $ 406,590 $ 26,989 1,875 $ 477,024 $ 435,454 $ 29,032 528 40,874 2,043 (1,347) 41,570 10.1 % 7.6 (71.8) 9.5 Tank & Pump Solutions 2018 2017 Increase (Decrease) 2018 versus 2017 (In thousands, except percentages) $ 110,733 $ 5,322 150 $ 116,205 $ 92,235 $ 5,451 409 98,095 $ 18,498 (129) (259) 18,110 20.1 % (2.4) (63.3) 18.5 Of the $593.2 million of total revenues in 2018, $477.0 million, or 80.4%, related to the Storage Solutions business and $116.2 million, or 19.6%, related to the Tank & Pump Solutions business. In the prior year, $435.5 million, or 81.6%, related to the Storage Solutions business and $98.1 million, or 18.4%, related to the Tank & Pump Solutions business. Rental Revenues. Storage Solutions rental revenue for the twelve months ended December 31, 2018 increased $40.9 million, or 10.1%, as compared to the prior-year period. The increase was driven by a 2.4% increase in year-over-year rental rates and a 3.5% increase in units on rent as well as favorable mix and increases in delivery and pickup revenue. Yield (calculated as rental revenues divided by average units on rent) increased approximately 6.3% as compared to the prior-year period, driven by increased rates, favorable mix and increased delivery and pickup revenue. Beginning in the second half of 2017, we successfully leveraged our technology, footprint and fleet capacity to partner with our National Account customers, which continued to drive year-over-year growth in 2018, especially in the first half of 2018. During 2018 we began to pursue partnerships with other rental companies to provide supplementary product offerings for certain of our Storage Solutions 36 customers. Arranging these comprehensive rental services for our customers increases loyalty while generating additional rental revenue, without additional investment in fleet. While these revenues were not material for the fourth quarter or the full year of 2018, we do expect to continue to develop these revenues. Rental revenues within the Tank & Pump Solutions business increased $18.5 million, or 20.1%, for the twelve months ended December 31, 2018, as compared to the prior year period. The increase was driven by an approximately 20.8% increase in fleet on rent for the current year. Overall, rates were challenged in the first half of 2018, however, we had year-over-year rate increases for new equipment placed on rent throughout the last six months of the year. Demand from our downstream customers increased overall and maintenance projects that were postponed throughout much of 2017 returned to normalized levels. We believe we are performing better than the market by leveraging our superior service and national footprint with our larger customers. Additionally, we experienced a year-over-year increase in upstream business due to increased activity in the oil and gas segment. Our salesforce has also successfully pursued new diversified customers in local geographies and we gained traction throughout 2018 on several new or extended customer contracts signed late in 2017 and early 2018. Sales Revenues. We focus on rental revenues. In general, sales of units from our fleet occur due to a particular customer need, or due to having fleet in excess of demand at a particular location. Storage Solutions sales revenue for the twelve months ended December 31, 2018 increased $2.0 million, or 7.6%, to $29.0 million, compared to $27.0 million in the prior-year period. Tank & Pump Solutions sales revenue for the twelve months ended December 31, 2018 decreased $0.1 million to $5.3 million, compared to $5.4 million in the prior-year period. Costs and Expenses. The following tables depict costs and expenses by type of business for the twelve-month periods ended December 31: Costs and expenses: Storage Solutions 2018 2017 Increase (Decrease) 2018 versus 2017 (In thousands, except percentages) Rental, selling and general expenses Cost of sales Restructuring expenses Asset impairment charge and loss on divestiture, net Depreciation and amortization $ 287,648 $ 268,013 $ 17,930 2,674 — 38,792 19,635 1,509 (740) 99,882 2,690 $ 450,385 $ 327,409 $ 122,976 19,439 1,934 99,882 41,482 7.3 % 8.4 n/a n/a 6.9 37.6 Total costs and expenses Costs and expenses: Tank & Pump Solutions 2018 2017 Increase (Decrease) 2018 versus 2017 (In thousands, except percentages) Rental, selling and general expenses Cost of sales Restructuring expenses Asset impairment charge and loss on divestiture, net Depreciation and amortization $ 76,475 $ 2,998 72 2,258 25,518 $ 107,321 $ 68,425 $ 3,071 212 — 24,580 96,288 $ 8,050 (73) (140) 2,258 938 11,033 11.8 % (2.4) n/a n/a 3.8 11.5 Total costs and expenses Rental, Selling and General Expenses. Rental, selling and general expenses for the twelve months ended December 31, 2018 of $364.1 million increased $27.7 million, or 8.2%, as compared to 2017. Of this total increase, $19.6 million related to the Storage Solutions business and $8.1 million related to the Tank & Pump Solutions business. As a percentage of total revenues, rental, selling and general expenses were 61.4% for the twelve months ended December 31, 2018, which was down from 63.1% in 2017. Within the Storage Solutions business rental, selling and general expenses in the prior-year period was $2.6 million of expense related to the severance and transition of an executive. Excluding this expense, rental, selling and general expenses increased $22.3 million, an 8.4% increase from the prior-year period. The increase was primarily due to higher transportation, salary and re-rent costs required to support the additional rental activity as well as an increase in variable compensation in the 37 current year, as compared to the prior year. Also contributing to the year-over-year difference is increased stock-based compensation expense due to the anticipated achievement of certain goals related to our performance-based stock award plan. Rental, selling and general expenses for the Tank & Pump Solutions business increased $8.1 million, or 11.8%, in the twelve months ended December 31, 2018, as compared to the prior year. The increase was largely due to increased transportation costs to support the additional rental activity as well as an increase in variable compensation in the current year, as compared to the prior year. Cost of Sales. Cost of sales is the cost related to our sales revenue only. Within the Storage Solutions business, cost of sales was $19.4 million and $17.9 million for the twelve-month periods ended December 31, 2018 and 2017, respectively. Storage Solutions sales profit was $9.6 million and $9.1 million for the twelve-month periods ended December 31, 2018 and 2017, respectively. Sales profit expressed as a percentage of sales revenue (sales profit margin) was 33.0% in the twelve months ended December 31, 2018 and 33.6% in the prior-year period. Within the Tank & Pump Solutions business, cost of sales was $3.0 million and $3.1 million for the twelve months ended December 31, 2018 and 2017, respectively. Tank & Pump Solutions sales profit was $2.3 million and $2.4 million for the twelve-month periods ended December 31, 2018 and 2017, respectively. Restructuring expenses. The $2.0 million of restructuring expenses recognized in the twelve months ended December 31, 2018, consisted primarily of expense related to the restructuring of our corporate service center, including the severance of an executive, and expense incurred in conjunction with the divestiture of certain assets as discussed earlier in this MD&A. Additionally in 2018, we recognized expenses related to projects initiated in prior years that were not accruable during such periods. Of the $2.9 million of restructuring expense recognized in the twelve months ended December 31, 2017, approximately $1.3 million related to the integration of our wholly owned subsidiary ETS into the existing Mobile Mini infrastructure and $0.9 million consisted of costs related to the divestiture of our wood mobile office business, primarily related to the abandonment of yards, or portions of yards. The remaining restructuring expense related largely to division and corporate departmental restructurings. Asset impairment charge and loss on divestiture, net. As discussed in the overview section of this MD&A, during the current period we identified specific underperforming assets to classify as held for sale. As a result, we recognized a loss of $102.1 million in the year. Depreciation and Amortization Expense. Depreciation and amortization expense of $67.0 million increased 5.7% in the twelve-month period ended December 31, 2018, as compared to 2017. The majority of this increase relates to depreciation on property, plant and equipment. Interest Expense. Interest expense was $40.9 million for the twelve months ended December 31, 2018 compared to $35.7 million in the prior-year period. This 14.5% increase is due to a higher effective interest rate on our lines of credit, partially offset by an overall decrease in debt outstanding. Our average debt outstanding in the twelve months ended December 31, 2018 was $917.8 million, compared to $934.5 million in the prior year period. The weighted average interest rate on our debt was 4.2% and 3.6% for the twelve-month periods ended December 31, 2018 and 2017, respectively, excluding the amortization of deferred financing costs. Taking into account the amortization of deferred financing costs, the weighted average interest rate was 4.5% and 3.8% for the twelve-month periods ended December 31, 2018 and 2017, respectively. (Benefit) Provision for Income Taxes. The effective income tax (benefit) rate of (51.8%) for the year ended December 31, 2018 was impacted by the $102.1 million asset impairment charge and loss on divestiture which resulted in a $5.3 million loss before income taxes. As a result of the low pre-tax loss, the permanent differences between actual income and taxable income are having a meaningful effect on the tax rate. The nondeductible items include $5.8 million in tax expense related to prior- period share-based compensation, offset by a $2.6 million reduction in our provisional tax expense related to the repatriation of foreign earnings for the impact of the Tax Act enacted in December 2017. Excluding the asset impairment charge and loss on divestiture, the reversal of deferred tax assets related to nondeductible share-based compensation expense of $5.8 million, and the $2.6 million reduction to our provisional tax expense for U.S. Tax Reform, our income tax provision for the year ended December 31, 2018 was $24.7 million and the effective tax rate was 25.5%. The decrease in the effective tax rate as compared to the 2017 effective rate was primarily due to the reduction of the U.S. federal tax rate from 35% to 21%, partially offset by the increase in disallowed deductions for officers’ compensation, both of which are a result of the Tax Act enacted in 2017. Based on information currently available to us, we estimate that our 2019 effective tax rate will be between 25% and 27%. 38 The effective income tax (benefit) rate of (64.9%) for the year ended December 31, 2017 was primarily impacted by the accounting for the Tax Act enacted in December 2017, which reduced the federal income tax rate from 35% to 21%. Excluding the effects of tax reform, our effective tax rate for the year ended December 31, 2017 was 35.6%. At December 31, 2018, we had a federal net operating loss carryforward of approximately $150.5 million, which expires, if unused, from 2029 to 2034. In addition, we had net operating loss carryforwards in the various states in which we operate. Over the past three years, we have generated $113.5 million of federal taxable income. At December 31, 2018, we had $71.3 million of gross deferred tax assets included within the net deferred tax liability on our balance sheet, and a $1.0 million valuation allowance. We believe, based on internal projections, that we will generate sufficient taxable income needed to realize the corresponding unreserved federal and state deferred tax assets to the extent they are recorded as deferred tax assets in our balance sheet. However, given that the federal net operating loss carryforwards that give rise to the deferred tax asset expire over six years beginning in 2029, there could be changes in management’s judgment in future periods with respect to the recoverability of these assets. See Note 8 “Income Taxes” to the accompanying consolidated financial statements for further discussion on income taxes. Net (Loss) Income. For the twelve months ended December 31, 2018, we had a net loss of $8.1 million. The loss was driven by our impairment charge and loss on divestiture, which more than offset our increased revenues. This loss compares to net income of $122.2 million for the twelve months ended December 31, 2017. The net income for 2017 was affected by the recognition of an income tax benefit of $74.5 million related to income tax legislation enacted in December 2017. Adjusted EBITDA. For the twelve months ended December 31, 2018, we realized adjusted EBITDA of $217.2 million, an increase of $32.4 million, or 17.6%, as compared to adjusted EBITDA of $184.8 million in the prior year. The increase was generated by strong growth in both our Storage Solutions and Tank & Pump Solutions businesses, and was partially offset by overall increased rental, selling and general costs. Our adjusted EBITDA margins were 36.6% and 34.6% for the twelve-month periods ended December 31, 2018 and 2017, respectively. The increase in adjusted EBITDA margin is due to increased efficiencies and our ability to leverage our infrastructure to grow revenue at a higher rate than expense. During the twelve months ended December 31, 2018, adjusted EBITDA related to the Storage Solutions business increased $22.1 million, or 14.0%, to $180.1 million from $158.0 million in the prior year. Adjusted EBITDA related to the Tank & Pump Solutions business increased $10.3 million, or 38.4%, to $37.2 million during the twelve months ended December 31, 2018 from $26.8 million during the prior year. Adjusted EBITDA margins for the twelve months ended December 31, 2018 were 37.8% for the Storage Solutions business and 32.0% for the Tank & Pump Solutions business. 39 Twelve Months Ended December 31, 2017, Compared to Twelve Months Ended December 31, 2016 The following table sets forth for each of the periods indicated our statements of operations data and expresses revenue and expense data as percentage of total revenues for the periods presented: Revenues: Rental Sales Other Total revenues Costs and expenses: Rental, selling and general expenses Cost of sales Restructuring expenses Depreciation and amortization Total costs and expenses Income from operations Other income (expense): Years Ended December 31, Percent of Revenue Years Ended December 31, Increase (Decrease) 2017 2016 2017 2016 2017 versus 2016 (In thousands, except percentages) $498,825 $480,083 32,440 26,499 2,040 533,549 508,622 2,284 93.5 % 6.1 0.4 100.0 94.4 % $ 18,742 5,941 5.2 0.4 244 24,927 100.0 3.9 % 22.4 12.0 4.9 2,886 336,438 309,294 21,001 16,471 6,020 63,372 63,734 423,697 395,519 109,852 113,103 63.1 3.9 0.5 11.9 79.4 20.6 60.8 3.2 1.2 12.5 77.8 22.2 27,144 4,530 (3,134) (362) 28,178 (3,251) 8.8 27.5 n/a (0.6) 7.1 (2.9) n/a 9.2 n/a n/a n/a 25 Interest income Interest expense Debt extinguishment expense Deferred financing costs write-off Foreign currency exchange 2 (35,728) (32,726) (9,192) (2,271) (18) Income before income tax (benefit) provision 74,124 68,898 (48,104) 21,650 Income tax (benefit) provision $122,228 $ 47,248 Net income — — (25) — (6.7) — — — 13.9 (9.0) 22.9 % 23 — (3,002) (6.4) 9,192 (1.8) 2,271 (0.4) (7) — 5,226 13.5 4.3 (69,754) 9.3 % $ 74,980 EBITDA (1) Adjusted EBITDA (1) (2) Free Cash Flow (1) Years Ended December 31, Percent of Revenue Years Ended December 31, 2017 2016 2017 2016 (In thousands, except percentages) Increase (Decrease) 2017 versus 2016 $173,224 $176,821 184,803 190,376 65,640 64,656 32.5 % 34.6 12.3 34.8 % $ (3,597) (5,573) 37.4 984 12.7 (2.0) % (2.9) 1.5 (1) (2) See “Non-GAAP Data and Reconciliations” earlier in this Annual Report on Form 10-K. The calculation of adjusted EBITDA as a percentage of revenue includes a net reduction to revenues related to transactions not indicative of our business. See “Non-GAAP Data and Reconciliations” earlier in this Annual Report on Form 10-K. The following table sets forth certain financial information as calculated on a constant currency basis: Rental revenues Rental, selling and general expenses Adjusted EBITDA Twelve Months Ended December 31, 2017 Calculated in Constant Currency (1) As Reported Difference (In thousands) $ 502,747 $ 339,002 186,281 498,825 $ 336,438 184,803 3,922 2,564 1,478 (1) See “Non-GAAP Data and Reconciliations” earlier in this Annual Report on Form 10-K. 40 Total Revenues. The following tables depict revenue by type of business for the twelve-month periods ended December 31: Revenues: Rental Sales Other Total revenues Revenues: Rental Sales Other Total revenues Storage Solutions 2017 2016 Increase (Decrease) 2017 versus 2016 (In thousands, except percentages) 406,590 $ 26,989 1,875 435,454 $ 387,145 $ 21,576 1,840 410,561 $ 19,445 5,413 35 24,893 5.0 % 25.1 1.9 6.1 Tank & Pump Solutions 2017 2016 Increase (Decrease) 2017 versus 2016 (In thousands, except percentages) 92,235 $ 5,451 409 98,095 $ 92,938 $ 4,923 200 98,061 $ (703) 528 209 34 (0.8)% 10.7 104.5 0.0 $ $ $ $ Of the $533.5 million of total revenues in 2017, $435.5 million, or 81.6%, related to the Storage Solutions business and $98.1 million, or 18.4%, related to the Tank & Pump Solutions business. In 2016, $410.6 million, or 80.7%, related to the Storage Solutions business and $98.1 million, or 19.3%, related to the Tank & Pump Solutions business. Rental Revenues. Storage Solutions rental revenue for the twelve months ended December 31, 2017 increased $19.4 million, or 5.0%, as compared to 2016. Adjusting for an unfavorable change in currency translation rates rental revenue increased approximately 6.0%, as compared to 2016. The increase was driven by a 3.1% increase in year-over-year rental rates and a 4.6% increase in units on rent. Adjusting for the unfavorable currency effect, yield increased approximately 1.4% as compared to 2016, driven by the rate increase in 2017, offset by changes in mix and other rental items. The full year rental revenue increase was impacted by strong fourth quarter year-over-year increases in seasonal business. Storage Solutions rental revenues in the fourth quarter of 2017 increased 9.8%, as compared to the fourth quarter of 2016, when adjusted for the impact of currency fluctuations. Rental revenues within the Tank & Pump Solutions business decreased $0.7 million, or 0.8%, for the twelve-month period ended December 31, 2017, as compared to 2016. Decreased year-over-year rental revenue in the first nine months of 2017 was largely offset by increased year-over-year rental revenue in the fourth quarter of 2017. Rental revenues for the first nine months of 2017 decreased $3.9 million, or 5.5%, when compared to the same period in 2016, due primarily to decreased demand from our downstream customers as well as fewer infrastructure projects in our pump business. Fourth quarter 2017 rental revenue for our Tank & Pump Solutions business increased $3.2 million, or 14.2%, compared to the fourth quarter of 2016 due to the resumption of previously deferred maintenance in our downstream market, increased demand overall and new business. Sales Revenues. We focus on rental revenues. In general, sales of units from our fleet occur due to a particular customer need, or due to having fleet in excess of demand at a particular location. Storage Solutions sales revenue for the twelve months ended December 31, 2017 increased $5.4 million, or 25.1%, to $27.0 million, compared to $21.6 million in 2016. The growth was largely due to increased activity in the U.K. resulting from an acquisition in late 2016. Tank & Pump Solutions sales revenue for the twelve months ended December 31, 2017 increased $0.5 million to $5.4 million, compared to $4.9 million in 2016. 41 Costs and Expenses. The following tables depict costs and expenses by type of business for the twelve-month periods ended December 31: Costs and expenses: Rental, selling and general expenses Cost of sales Restructuring expenses Depreciation and amortization Total costs and expenses Costs and expenses: Rental, selling and general expenses Cost of sales Restructuring expenses Depreciation and amortization Total costs and expenses Storage Solutions 2017 2016 Increase (Decrease) 2017 versus 2016 (In thousands, except percentages) $ 268,013 $ 245,536 $ 13,319 5,419 35,509 $ 327,409 $ 299,783 $ 17,930 2,674 38,792 22,477 4,611 (2,745) 3,283 27,626 9.2 % 34.6 n/a 9.2 9.2 Tank & Pump Solutions 2017 2016 Increase (Decrease) 2017 versus 2016 (In thousands, except percentages) $ $ 68,425 $ 3,071 212 24,580 96,288 $ 63,758 $ 3,152 601 28,225 95,736 $ 4,667 (81) (389) (3,645) 552 7.3 % (2.6) n/a (12.9) 0.6 Rental, Selling and General Expenses. Rental, selling and general expenses for the twelve months ended December 31, 2017 of $336.4 million increased $27.1 million, or 8.8%, as compared to 2016. Of this total increase, $22.5 million related to the Storage Solutions business and $4.7 million related to the Tank & Pump Solutions business. As a percentage of total revenues, rental, selling and general expenses were 63.1% for the twelve months ended December 31, 2017, which was up from 60.8% in 2016. Within the Storage Solutions business, rental, selling and general expenses for the twelve months ended December 31, 2017 increased $22.5 million, or 9.2%, from 2016. Included in Storage Solutions rental, selling and general expenses for 2017 and 2016 were $2.6 million and $0.8 million, respectively, of expenses that were not indicative of our operations, primarily costs associated with the severance and transition of executive officers. Excluding the expenses discussed above, rental, selling and general expenses within the Storage Solutions business increased $20.7 million during the twelve months ended December 31, 2017, as compared to the 2016 period. When further adjusted for the effect of the change in currency translation rates, rental selling and general expenses for the Storage Solutions business increased $23.3 million. This increase was driven largely by higher variable compensation in 2017, as compared to 2016. In addition, transportation costs and payroll increased due to increased rental activity. Rental, selling and general expenses for the Tank & Pump Solutions business increased $4.7 million in 2017, as compared to 2016. The increase was largely due to increased payroll and variable compensation. Cost of Sales. Cost of sales is the cost related to our sales revenue only. Within the Storage Solutions business, cost of sales was $17.9 million and $13.3 million in the twelve-month periods ended December 31, 2017 and 2016, respectively. Storage Solutions sales profit was $9.1 million and $8.3 million for the twelve-month periods ended December 31, 2017 and 2016, respectively. Sales profit margin was 33.6% in the twelve months ended December 31, 2017 and 38.3% in 2016. The decrease in profit margin is due to sales activity related to a U.K. acquisition in late 2016. Within the Tank & Pump Solutions business, cost of sales was $3.1 million and $3.2 million in the twelve months ended December 31, 2017 and 2016, respectively. Tank & Pump Solutions sales profit was $2.4 million and $1.8 million for the twelve-month periods ended December 31, 2017 and 2016, respectively. 42 Restructuring expenses. The restructuring expenses in 2017 and 2016 resulted primarily from the continuation of projects initiated in prior years. Included in restructuring expenses for the twelve months ended December 31, 2017 and 2016 were approximately $1.3 million and $2.0 million, respectively, of expenses related to the integration of our wholly owned subsidiary, ETS into the existing Mobile Mini infrastructure. Also included in restructuring expenses for the twelve months ended December 31, 2017 and 2016 was $0.9 million and $3.3 million, respectively, of costs related to the divestiture of our wood mobile office business, primarily related to the abandonment of yards, or portions of yards. The remaining restructuring expenses in both years relate largely to divisional and corporate departmental restructurings. Depreciation and Amortization Expense. Depreciation and amortization expense of $63.4 million decreased slightly in the twelve-month period ended December 31, 2017, as compared to 2016. Interest Expense. Interest expense increased $3.0 million to $35.7 million in the twelve months ended December 31, 2017, compared to $32.7 million in 2016. The 9.2% increase is primarily due to higher interest rates on the line of credit, partially offset by a decrease in the effective interest rate on our bonds due to the issuance of the 2024 Notes and extinguishment of the $200.0 million aggregate principal amount of our outstanding 7.875% senior notes due December 1, 2020 (the “2020 Notes” and together with the 2024 Notes, the “Senior Notes”) in the second quarter of 2016. Our average debt outstanding in the twelve months ended December 31, 2017 was $934.5 million, as compared to $929.1 million in 2016. The weighted average interest rate on our debt was 3.6% and 3.3% for the twelve-month periods ended December 31, 2017 and 2016, respectively, excluding the amortization of deferred financing costs. Taking into account the amortization of deferred financing costs, the weighted average interest rate was 3.8% and 3.5% for the twelve-month periods ended December 31, 2017 and 2016, respectively. Debt Extinguishment Expense and Deferred Financing Costs Write-off. As a result of the redemption of the 2020 Notes in 2016, we recognized $9.2 million in debt extinguishment expense, consisting of $7.9 million in debt redemption premiums and $1.3 million in contractually required interest above the amount payable prior to the redemption. Additionally, we wrote off $2.3 million of previously deferred financing costs associated with the 2020 Notes that had not yet been amortized. (Benefit) Provision for Income Taxes. The effective income tax (benefit) rate of (64.9%) for the year ended December 31, 2017 was primarily impacted by the accounting for the Tax Act enacted in December 2017, which reduced the federal income tax rate from 35% to 21%. The Company recognized a net benefit of $77.6 million related to the remeasurement of its net deferred tax liabilities for this rate change, affecting the rate by (104.7%). Additionally, the Company recorded a provisional expense of $3.1 million for the mandatory repatriation of foreign earnings, affecting the rate by 4.2%. Excluding the effects of tax reform, our effective tax rate for the year ended December 31, 2017 was 35.6%. The increase to 35.6% from the effective tax rate of 31.4% for 2016 is due to an enacted U.K. rate change in 2016, reducing the rate applied to deferred tax balances from 18% to 17%, which resulted in a $0.9 million benefit for the year ended December 31, 2016. Additionally, changes in foreign rate differentials contributed to the overall effective tax rate increase. The change in foreign rate differentials was caused by the utilization of all remaining U.K. net operating losses during 2017, resulting in higher tax rates on our current year U.K. income. Net Income. As a result of the income statement activity discussed above, we had net income of $122.2 million for the twelve months ended December 31, 2017. Excluding the effect of the tax legislation, we estimate our net income would have been approximately $47.7 million, as compared to $47.2 million for the twelve months ended December 31, 2016. Adjusted EBITDA. For the twelve-month period ended December 31, 2017, we realized adjusted EBITDA of $184.8 million, a decrease of $5.6 million, or 2.9%, as compared to adjusted EBITDA of $190.4 million in 2016. Growth in our Storage Solutions business revenue was offset by a decrease in the Tank & Pump Solutions business, overall increased rental, selling and general costs primarily driven by increased variable compensation in the twelve-month period ended December 31, 2017 and an unfavorable currency exchange rate. Our adjusted EBITDA margins were 34.6% and 37.4% for the years ended December 31, 2017 and 2016, respectively. During the twelve months ended December 31, 2017, adjusted EBITDA related to the Storage Solutions business decreased $1.0 million, or 0.6%, to $158.0 million, from $159.0 million in the prior-year period. Adjusted EBITDA related to the Tank & Pump Solutions business decreased $4.5 million, or 14.5%, to $26.8 million during the twelve months ended December 31, 2017, from $31.4 million during 2016. Adjusted EBITDA margins for the twelve months ended December 31, 2017 were 36.3% for the Storage Solutions business and 27.4% for the Tank & Pump Solutions business. 43 The full-year adjusted EBITDA was favorably impacted by a strong fourth quarter in which we realized adjusted EBITDA of $55.6 million, an increase of $1.5 million, or 2.7%, compared to the fourth quarter of 2016. Revenue growth due to increased Tank & Pump Solutions business, and robust growth in our seasonal Storage Solutions revenues, while largely offset by increased variable compensation and other rental, selling and general expense increases, resulted in overall adjusted EBITDA growth in the fourth quarter. LIQUIDITY AND CAPITAL RESOURCES Renting is a capital-intensive business that requires us to acquire assets before they generate revenues, cash flow and earnings. The majority of the assets that we rent have very long useful lives and require relatively little maintenance expenditures. Most of the capital we have deployed in our rental business historically has been used to expand our operations geographically, to execute opportunistic acquisitions, to increase the number of units available for rent at our existing 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 cash flow from operations and the deferral of income taxes caused by accelerated depreciation of our fixed assets in our tax return filings. Our cash from operating activities for the years ended December 31, 2018, 2017 and 2016 of $160.1 million, $135.6 million and $136.2 million, respectively, resulted in free cash flow of $72.9 million, $65.6 million and $64.7 million, respectively. In addition to free cash flow, our principal current source of liquidity is the Credit Agreement described below. Revolving Credit Facility. On December 14, 2015, we entered into the Credit Agreement with Deutsche Bank AG New York Branch, as administrative agent, and other lenders party thereto. The Credit Agreement provides for a five-year, $1.0 billion first lien senior secured revolving credit facility maturing on or before the earlier of (i) December 14, 2020 and (ii) the date that is 90 days prior to the final maturity date of the Senior Notes if such Senior Notes remain outstanding on such date. The Credit Agreement also provides for the issuance of irrevocable standby letters of credit by U.S. lenders in amounts totaling up to $50.0 million, by U.K.-based lenders in amounts totaling up to $20.0 million, and by Canadian-based lenders in amounts totaling up to $20.0 million. The obligations of us and our subsidiary guarantors under the Credit Agreement are secured by a blanket lien on substantially all of our assets. At December 31, 2018, we had $593.5 million of borrowings outstanding and $403.4 million of additional borrowing availability under the Credit Agreement. We were in compliance with the terms of the Credit Agreement as of December 31, 2018 and were above the minimum borrowing availability threshold and therefore not subject to any financial maintenance covenants. Amounts borrowed under the Credit Agreement and repaid or prepaid during the term may be reborrowed. Outstanding amounts under the Credit Agreement bear interest at our option at either: (i) the London interbank offered rate (“LIBOR”) plus an applicable margin (“LIBOR Loans”), or (ii) the prime rate plus an applicable margin (“Base Rate Loans”). The applicable margin for each type of loan is based on an availability-based pricing grid and ranges from 1.25% to 1.75% for LIBOR Loans and 0.25% to 0.75% for Base Rate Loans at each measurement date. The margins in effect as of December 31, 2018 are 1.50% for LIBOR Loans and 0.50% for Base Rate Loans. Availability of borrowings under the Credit Agreement is subject to a borrowing base calculation based upon a valuation of our eligible accounts receivable, eligible rental fleet (including units held for sale, work-in-process and raw materials) and machinery and equipment, each multiplied by an applicable advance rate or limit. The rental fleet is appraised at least once annually by a third-party appraisal firm and up to 90% of the net orderly liquidation value, as defined in the Credit Agreement, is included in the borrowing base to determine how much we may borrow under the Credit Agreement. The Credit Agreement provides for U.K. borrowings, which are, at our option, denominated in either British pounds or Euros, by our U.K. subsidiary based upon a U.K. borrowing base; Canadian borrowings, which are denominated in Canadian dollars, by our Canadian subsidiary based upon a Canadian borrowing base; and U.S. borrowings, which are denominated in U.S. dollars, based upon a U.S. borrowing base along with any Canadian assets not included in the Canadian subsidiary. The Credit Agreement also contains customary negative covenants, including covenants that restrict our ability to, among other things: (i) allow certain liens to attach to Mobile Mini or subsidiary assets, (ii) repurchase or pay dividends or make certain other restricted payments on capital stock and certain other securities, or prepay certain indebtedness, (iii) incur additional indebtedness or engage in certain other types of financing transactions, and (iv) make acquisitions or other investments. In addition, we must comply with a minimum fixed charge coverage ratio of 1.00 to 1.00 as of the last day of each quarter, upon the minimum availability amount under the Credit Agreement falling below the greater of (y) $90 million and (z) 10% of the lesser of the then total revolving loan commitment and aggregate borrowing base. 44 We believe our cash provided by operating activities will provide for our normal capital needs for the next twelve months. If not, we have sufficient borrowings available under our Credit Agreement to meet any additional funding requirements. We monitor the financial strength of our lenders on an ongoing basis using publicly-available information. Based upon that information, we do not presently believe that there is a likelihood that any of our lenders will be unable to honor their respective commitments under the Credit Agreement. Senior Notes. On May 9, 2016, we issued $250.0 million aggregate principal amount of the 2024 Notes at an initial offering price of 100% of their face value. The net proceeds from the sale of the 2024 Notes were used to (i) redeem all $200.0 million aggregate principal amount of our outstanding 2020 Notes at a redemption price of 103.938% of the principal amount thereof plus accrued and unpaid interest to, but not including, the redemption date of June 8, 2016, (ii) repay a portion of the indebtedness outstanding under the Credit Agreement, and (iii) pay fees and expenses related to the offering of the 2024 Notes. The 2024 Notes bear interest at a rate of 5.875% per year, accruing from May 9, 2016, have an eight-year term and mature on July 1, 2024. Interest on the 2024 Notes is payable semiannually in arrears on January 1 and July 1, beginning on January 1, 2017. The 2024 Notes are senior unsecured obligations of the Company and are unconditionally guaranteed on a senior unsecured basis by certain of our existing and future domestic subsidiaries. Cash Flow Summary Net (loss) income Adjustments to reconcile net (loss) income to net cash provided by operating activities: Debt extinguishment expense and deferred financing costs write-off Asset impairment charge and loss on divestiture, net Deferred income taxes Other adjustments Total adjustments to reconcile net (loss) income to net cash provided by operating activities Changes in certain assets and liabilities, net of effect of businesses acquired Net cash provided by operating activities Net cash used in investing activities Net cash used in financing activities Effect of exchange rate changes on cash Net (decrease) increase in cash For the Years Ended December 31, 2017 2016 2018 (In thousands) $ (8,062) $ 122,228 $ 47,248 — 102,140 (2,523) 76,965 — — (49,980) 72,857 11,463 — 21,634 74,976 176,582 22,877 108,073 (8,422) 160,098 (77,063) (92,144) 1,263 (7,846) $ (9,459) 135,646 (70,006) (57,043) 717 9,314 $ (19,077) 136,244 (88,153) (44,853) (714) 2,524 $ Operating Activities. Net cash provided by operating activities was $160.1 million for the twelve months ended December 31, 2018, compared to $135.6 million in the prior year, an increase of $24.5 million. The twelve months ended December 31, 2018 reflects a net loss of $8.1 million compared to net income of $122.2 million in 2017; however, non-cash adjustments in 2018 total $176.6 million and include a $102.1 million non-cash expense resulting from an asset impairment charge and loss on divestiture. These non-cash adjustments in 2018 resulted in a net increase to cash provided by operating activities. Net non-cash adjustments in 2017 were $22.9 million. Within non-cash adjustments, deferred taxes was $2.5 million in 2018 and $50.0 million in 2017. For further discussion, see Note 8 “Income Taxes” to the accompanying consolidated financial statements. The change in working capital accounts resulted in cash outflows of $8.4 million in 2018 and $9.5 million in 2017 and was due to normal operating fluctuations. 45 Net cash provided by operating activities was $135.6 million for the twelve months ended December 31, 2017, compared to $136.2 million in the prior year, a slight decrease. The twelve months ended December 31, 2017 reflects an increase in net income of $75.0 million. Non-cash adjustments in 2017 total $22.9 million as compared to $108.1 million in 2016. This fluctuation is primarily a result of the Tax Act enacted in 2017 and debt extinguishment costs in 2016. The change in working capital accounts resulted in cash outflows of $9.5 million in 2017 and $19.1 million in 2016. The $8.9 million decrease in cash outflows is largely due to increases in accounts receivable during 2016 due to the implementation of our new ERP system, as well as changes in the invoicing process instituted by our largest Storage Solutions customer. 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, 2018, we had a federal net operating loss carryforward of approximately $150.5 million and a net deferred tax liability of $170.1 million. Investing Activities. Net cash used in investing activities was $77.1 million in 2018, compared to $70.0 million in 2017 and $88.2 million in 2016. In 2018, investing activities included $10.2 million of proceeds related to assets that were designated as held for sale and in 2016, we paid $16.6 million, for acquisitions. Otherwise, net cash used in investing activities consists of net expenditures for rental fleet and property, plant and equipment. Rental fleet expenditures were as follows for the periods indicated: Additions to Rental Fleet, Excluding Acquisitions For the Years Ended December 31, 2017 2018 2016 North America Storage Solutions United Kingdom Storage Solutions Tank & Pump Solutions Consolidated additions to rental fleet, excluding acquisitions Proceeds from sale of rental fleet Rental fleet net capital expenditures $ $ (In thousands) 52,654 $ 6,893 26,414 85,961 (14,993) 70,968 $ 45,043 $ 11,405 7,240 63,688 (12,953) 50,735 $ 32,270 10,851 14,251 57,372 (13,679) 43,693 Rental fleet expenditures were $86.0 million in 2018, an increase of $22.3 million compared to 2017. Rental fleet expenditures in 2018 were made to meet overall increases in Tank & Pump Solutions demand as well as for Storage Solutions demand in geographic areas of high utilization, as well as to meet customer demand for specific types of units. Compared to 2016, rental fleet expenditures increased 11.0% in 2017. Proceeds from sale of rental fleet units were consistent over the past three years. In general, sales of units from our fleet occur due to a particular customer need, or due to having fleet in excess of demand at a particular location; as such, the proceeds from sale of rental units will normally fluctuate from year to year. Property, plant and equipment net capital expenditures were $16.2 million in 2018, $19.3 million in 2017 and $27.9 million in 2016. These expenditures primarily related to internal software development, leasehold improvements and replacements for our transportation equipment. The amount of cash that we use during any period in investing activities is almost entirely within management’s discretion. In addition to our expenditures for our rental fleet, capital expenditures include items such as the cost to buy or replace forklifts, trucks and trailers that we use to move and deliver our products to our customers, and for our computer information and communication systems. In addition to the cash expenditures, we acquired property, plant and equipment through capital leases totaling $20.3 million, $9.5 million and $19.0 million in 2018, 2017 and 2016, respectively. These leases were primarily for transportation related equipment. We anticipate our near term investing activities in 2019 will be between $75 million and $80 million and will be primarily focused on obtaining fleet to support growth in our North America Storage Solutions and Tank & Pump Solutions businesses. In addition, we may invest in acquisitions. Financing Activities. Net cash used in financing activities was $92.1 million in 2018, $57.0 million in 2017 and $44.9 million in 2016. Activity in 2016 includes the issuance of $250.0 million aggregate principal amount of the 2024 Notes at an initial offering price of 100% of their face value. The net proceeds from the sale of the 2024 Notes were used to (i) redeem all $200.0 million aggregate principal amount of our outstanding 2020 Notes at a redemption price of 103.938% of the principal amount thereof plus accrued and unpaid interest to, but not including, the redemption date of June 8, 2016, (ii) repay a portion of the indebtedness outstanding under the Credit Agreement, and (iii) pay fees and expenses related to the offering of the 2024 Notes. 46 We have used free cash flow to purchase treasury stock, pay down borrowings and pay dividends. In 2018, 2017 and 2016, we paid cash dividends of $44.5 million, $40.2 million and $36.4 million, respectively, to our stockholders and purchased shares of our common stock of $0.7 million, $8.4 million and $11.3 million, respectively. As of December 31, 2018 we have $70.8 million remaining to repurchase treasury shares under the repurchase program. Borrowings outstanding under our Credit Agreement as of December 31, 2018, totaled $593.5 million and approximately $403.4 million of additional borrowings were available to us. Deferred financing cost expenditures in 2016 largely relate to the issuance of the 2024 Notes. Contractual Obligations and Commitments Our contractual obligations primarily consist of our outstanding balance under the Credit Agreement, $250.0 million aggregate principal amount of the 2024 Notes and obligations under capital leases. We also have operating lease commitments for: (i) real estate properties for the majority of our locations with remaining lease terms typically ranging from one to ten years, (ii) delivery, transportation and yard equipment, typically under a five-year lease with purchase options at the end of the lease term at a stated or fair market value price, and (iii) office related equipment. At December 31, 2018, primarily in connection with securing our insurance policies, we provided certain insurance carriers and others with approximately $3.1 million in letters of credit. The table below provides a summary of our contractual commitments as of December 31, 2018. Lease renewal options that we currently anticipate exercising at the end of the initial lease period have been included in the schedule below. Total Less Than 1 Year 3 - 5 Years More than 5 Years 1 - 3 Years (In thousands) — $ 593,495 $ — $ — $ 593,495 $ Revolving credit facility Interest payment obligations under our revolving credit facility (1) Senior Notes Interest payment obligations under our Senior Notes (2) Obligations under capital leases Interest payment obligations under our capital leases (3) Operating leases (4) Purchase obligations (5) Total contractual obligations 71,597 250,000 80,782 63,359 5,419 103,708 10,790 $1,179,150 $ 47,356 24,241 — — 29,375 14,688 23,007 10,472 2,296 1,583 28,834 18,827 — 10,790 80,601 $ 724,363 $ — — 29,375 19,242 1,149 22,607 — — 250,000 7,344 10,638 391 33,440 — 72,373 $ 301,813 (1) (2) (3) Scheduled interest rate obligations under our Credit Agreement, which is subject to a variable rate of interest, were calculated using our weighted average rate as of December 31, 2018 of 3.9%. Also included in this number are estimated fees to be paid related to unused portions of our lines of credit. Scheduled interest rate obligations under our Senior Notes were calculated using the stated rate of 5.875%. Scheduled interest rate obligations under capital leases were calculated using imputed rates primarily ranging from 1.7% to 4.1%. (4) Operating lease obligations include operating commitments and restructuring related commitments. For further discussion, see Note 12 “Commitments and Contingencies” to the accompanying consolidated financial statements. Purchase obligations consist of a noncancelable commitment to purchase containers for inclusion in our fleet. (5) Off-Balance Sheet Transactions We do not maintain any off-balance sheet transactions, arrangements, obligations or other relationships with unconsolidated entities or others that are reasonably likely to have a material current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources. Seasonality Demand from our Storage Solutions customers is somewhat seasonal. Construction customers typically reflect higher demand during months with more temperate weather, while demand for our portable storage units by large retailers is stronger from September through December because these retailers need to store more inventories for the holiday season. Our retail customers usually return these rented units to us in December and early in the following year. In the Tank & Pump Solutions business, demand from customers is typically higher in the middle of the year from March to October, driven by the timing of 47 customer maintenance projects. The demand for rental of our pumps may also be impacted by weather, specifically when temperatures drop below freezing. Critical Accounting Policies, Estimates and Judgments Our significant accounting policies are disclosed in Note 2 to the accompanying consolidated financial statements. The following discussion addresses our most critical accounting policies, some of which require significant judgment. Our consolidated financial statements have been prepared in accordance with GAAP. 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 expert information, our evaluation of historical results and anticipated future events, and these estimates may change as additional information becomes available. We have identified below our accounting policies that we believe could potentially produce materially different results if we were to change underlying estimates or assumptions. Revenue Recognition. A performance obligation is a promise in a contract to transfer a distinct good or service to the customer. A contract’s transaction price is allocated to each distinct performance obligation and recognized as revenue when, or as, the performance obligation is satisfied. Rental contracts with our customers may have multiple performance obligations including the direct rental of fleet to our customers, fleet delivery and pickup. Also included in rental revenues are ancillary fees, including late charges and charges for damages. For contracts with multiple performance obligations, we allocate the contract’s transaction price to each performance obligation using the contractually stated price as our best estimate of the standalone selling price of each distinct promise in the contract. Our prices are determined using methods and assumptions developed consistently across similar customers and markets. We enter into contracts with our customers to rent equipment generally based on a 28-day rate for our Storage Solutions fleet and a daily, weekly or monthly rate for our Tank & Pump Solutions fleet. Revenues from renting are recognized ratably over the rental period under lessor accounting. The rental continues until cancelled by the customer or the Company. If equipment is returned prior to the end of the contractually obligated period, the excess, if any, between the amount the customer is contractually required to pay, over the cumulative amount of revenue recognized to date, is recognized as incremental revenue upon return. Customers may utilize our equipment delivery and pick-up services in conjunction with the rental of equipment, but it is not required. Revenue pursuant to the delivery or pick up of a rented unit is recognized in rental revenue upon completion of the service. Sales revenue is primarily generated by the sale of new and used units, and to a lesser extent, parts and supplies sold to Tank & Pump Solutions customers. Sales contracts generally have a single performance obligation that is satisfied at the time of delivery. Sales revenue is measured based on the consideration specified in the contract and recognized when the customer takes possession of the unit or other sale items. Purchase Accounting. We account for acquisitions under the acquisition method. Under the acquisition method of accounting, we record assets acquired and liabilities assumed at their estimated fair market value on the date of acquisition. Goodwill is measured as the excess of the fair value of the consideration transferred over the fair value of the identifiable net assets. Estimated fair values of acquired assets and liabilities is provisional and could change as additional information is received. We finalize valuations as soon as practicable, but not later than one-year from the acquisition date. Any subsequent changes to purchase price allocations result in a corresponding adjustment to goodwill. The determination of the fair value of intangible assets requires the use of significant judgment with regard to (i) the fair value; and (ii) whether such intangibles are amortizable or non-amortizable and, if amortizable, the period and the method by which the intangible asset will be amortized. We estimate the fair value of acquisition-related intangible assets principally based on projections of cash flows that will arise from identifiable intangible assets of acquired businesses. The projected cash flows are discounted to determine the present value of the assets at the dates of acquisition. Goodwill. For acquired businesses, we record assets acquired and liabilities assumed at their estimated fair values on the respective acquisition dates. Based on these values, the excess purchase prices over the fair value of the net assets acquired is recorded as goodwill. Of the $705.2 million total goodwill at December 31, 2018, $468.4 million related to the North American Storage Solutions segment, $55.6 million related to the U.K. Storage Solutions segment and $181.2 million related to the Tank & Pump Solutions segment. 48 Goodwill impairment testing requires judgment, including: the identification of the reporting units; determination of the fair value of each reporting unit; the assignment of assets, liabilities and goodwill to each reporting unit; estimates and assumptions regarding future cash flows and discount rates; and an assumption regarding the form of the transaction in which the reporting unit would be acquired by a market participant. Management assesses potential impairment of goodwill on an annual basis at December 31, or whenever events or changes in circumstances indicate that the carrying value may not be recoverable. Some factors management considers important which could require an impairment review include the following: (cid:129) (cid:129) (cid:129) (cid:129) significant under-performance relative to historical, expected or projected future operating results; significant changes in the manner of our use of the acquired assets or the strategy for the overall business; market capitalization relative to net book value; and significant negative industry or general economic trends. Management may choose to assess qualitative factors to determine if it is more-likely-than-not that goodwill might be impaired and whether or not to perform the two-step goodwill impairment test. When the two-step impairment test is performed, the first step requires a comparison of the fair value of each of our reporting unit’s net assets to the respective carrying value of net assets. If the carrying value of a reporting unit’s net assets is less than its fair value, no indication of impairment exists and a second step is not performed. If the carrying amount of a reporting unit’s net assets is higher than its fair value, there is an indication that an impairment may exist and a second step must be performed. If the second step is necessary, management is required to determine the implied fair value of the goodwill and compare it to the carrying value of the goodwill. The fair value of the reporting units would be assigned 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. If the carrying amount of the reporting unit’s goodwill is greater than the implied fair value of its goodwill, an impairment loss must be recognized for the difference. When assessing the fair value of the reporting units under the two-step impairment test, management considers 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 and discount rates. Other estimates relate to tax payments, operating margins and capital expenditures. Each approach is given equal weight in arriving at the fair value of the reporting unit. As of December 31, 2018, 2017 and 2016, we assessed qualitative factors and determined it is more-likely-than-not each of the reporting unit’s assigned goodwill had estimated fair values greater than the respective reporting unit’s individual net asset carrying values; therefore, the two-step impairment test was not performed. Impairment of Long-Lived Assets (Other than Goodwill). Our rental fleet, property, plant and equipment, and finite-lived intangibles are reviewed for impairment whenever events or changes in circumstances indicate the carrying amount of such assets may be impaired. (See potential impairment indicators under “Goodwill” above.) 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 of evaluation. Rental Fleet. Rental fleet is capitalized at cost and depreciated over the estimated useful life of the unit using the straight- line method. Rental fleet is depreciated whether or not it is out on rent. Capitalized cost of our rental fleet includes the price paid to acquire the unit and freight charges to the location when the unit is first placed in service, and when applicable, the cost of our manufacturing or remanufacturing, which includes the cost of customizing units. Ordinary repair and maintenance costs are charged to operations as incurred. We periodically review depreciable lives and residual values against various factors, including the results of our lenders’ independent appraisal of our rental fleet, practices of our competitors in comparable industries and profit margins achieved on sales of depreciated units. 49 The table below depicts the estimated useful lives and residual values (presented as a percentage of capitalized cost) for our major categories of Storage Solutions rental fleet. Storage Solutions: Steel storage containers Steel ground level offices Residual Value as Percentage of Original Cost Useful Life in Years 55% 55 30 30 The table below depicts the estimated useful lives for our major categories of Tank & Pump Solutions rental fleet when purchased new. We estimate zero residual value for our Tank & Pump Solutions fleet as there is a limited secondary market for Tank & Pump Solutions products. Tank & Pump Solutions: Steel tanks Roll-off boxes Vacuum boxes Stainless steel tank trailers De-watering boxes Pumps and filtration equipment Useful Life in Years 25 15 - 20 20 25 20 7 The estimated useful lives and residual values of our rental fleet might change in the future based on changing circumstances. If these estimates change in the future, we may be required to recognize increased or decreased depreciation expense for these assets. For instance, if all our rental fleet units had been placed in service with useful lives 25% less or greater than our current estimated useful lives, we estimate that our annual depreciation expense for the year ended December 31, 2018 would have been $10.5 million higher or $6.3 million lower, respectively. Similarly, if our rental fleet units had been placed in service with estimated residual values decreased by 10% of the original cost, for example from 55% to 45% (with Tank & Pump Solutions residual values remaining at 0%), depreciation expense would have been approximately $3.3 million higher for the year ended December 31, 2018. If our rental fleet units had been placed in service with estimated residual values increased by 10% of the original cost, for example, from 55% to 65% for steel storage containers and from 0% to 10% for Tank & Pump Solutions, our depreciation expense would have been lower by approximately $5.0 million, for the year ended December 31, 2018. Income 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. 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. The majority of our deferred tax asset relates to federal net operating loss carryforwards that have future expiration dates. Management believes that adequate future taxable income will be generated through future operations, or through available tax planning strategies to recover the unreserved portion of these assets. However, given that the federal net operating loss carryforwards that give rise to the deferred tax asset expire over six years beginning in 2029, there could be changes in management’s judgment in future periods with respect to the recoverability of these assets. 50 Tax regulations within the various jurisdictions within which we operate are subject to interpretation of the related tax laws and regulations and require the application of significant judgment. Our income taxes are subject to examination by federal, state and foreign tax authorities. There may be differing interpretations of tax laws and regulations, and as a result, disputes may arise with these tax authorities involving the timing and amount of deductions and allocation of income. We have recorded certain income tax effects for the impact of the Tax Cuts and Jobs Act (the “Tax Act”) which was enacted on December 22, 2017. Previously issued guidance provided for a one year period from the enactment date to allow the Company to complete its analysis of the Tax Act. The Company has completed its analysis and recorded any final effects within this one year period. The Tax Act enacted a new a minimum tax on U.S. companies’ foreign operations called Global Intangible Low Tax Income (“GILTI”). The Company has made a policy election to account for any impacts of GILTI tax in the period in which it is incurred. See additional information regarding income taxes in Note 8 “Income Taxes” to the accompanying financial statements. Recent Accounting Pronouncements For discussions of the adoption and potential impacts of recently issued accounting standards, refer to Note 2 “Summary of Significant Accounting Policies” to the accompanying condensed consolidated financial statements. ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK. The following table sets forth the scheduled maturities and the total fair value of our debt portfolio as of December 31, 2018: Principal Maturing in the Twelve Months Ended December 31, 2019 2020 2021 2022 2023 Thereafter Total at December 31, 2018 Total Fair Value at December 31, 2018 Debt: Fixed rate Average interest rate $ 10,472 $ 11,567 $ 11,440 $ 10,356 $ 8,886 $260,638 $ 313,359 $ 310,387 4.99% Floating rate $ — $593,495 $ — $ — $ — $ — $ 593,495 $ 593,495 Average interest rate 3.93% Operating leases $ 18,827 $ 15,510 $ 13,324 $ 12,205 $ 10,402 $ 33,440 $ 103,708 (In thousands, except percentages) Impact of Foreign Currency Rate Changes. We currently have operations outside the U.S., and we bill those customers primarily in their local currency, which is subject to foreign currency rate changes. Our operations in Canada are billed in the Canadian dollar, and our operations in the U.K. are billed in British pounds. We are exposed to foreign exchange rate fluctuations as the financial results of our non-U.S. operations are translated into U.S. dollars. The impact of foreign currency rate changes has historically been insignificant with our Canadian operations, but we have more exposure to volatility with our U.K. operations. Based on the level of our U.K. operations during the twelve months ended December 31, 2018, a 10% change in the value of the British pound as compared to the U.S. dollar would have changed net income by approximately $0.9 million for the twelve months ended December 31, 2018. We do not currently hedge our currency transaction or translation exposure, nor do we have any current plans to do so. On June 23, 2016, the U.K. held a referendum in which British citizens approved an exit from the E.U., commonly referred to as “Brexit.” As a result of the referendum, the global markets and currencies have been adversely impacted, including volatility in the value of the British pound as compared to the U.S. dollar. Volatility in exchange rates is expected to continue in the short term as the U.K. negotiates its exit from the E.U. In order to help minimize our exchange rate gain and loss volatility, we finance our U.K. entities through our revolving credit facility, which allows us, at our option, to borrow funds locally in British pound denominated debt. In the longer term, any impact from Brexit on us will depend, in part, on the outcome of tariff, trade, regulatory and other negotiations. Although it is unknown what the result of those negotiations will be, it is possible that new terms may adversely affect our operations and financial results. 51 ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA. INDEX TO CONSOLIDATED FINANCIAL STATEMENTS Report of Independent Registered Public Accounting Firm ....................................................................................... Consolidated Balance Sheets — December 31, 2018 and 2017 ................................................................................. Consolidated Statements of Operations — For the Years Ended December 31, 2018, 2017 and 2016 ..................... Consolidated Statements of Comprehensive (Loss) Income — For the Years Ended December 31, 2018, 2017 and 2016.................................................................................................................................................................. Consolidated Statements of Stockholders’ Equity — For the Years Ended December 31, 2018, 2017 and 2016 ..... Consolidated Statements of Cash Flows — For the Years Ended December 31, 2018, 2017 and 2016 .................... Notes to Consolidated Financial Statements ............................................................................................................... 53 55 56 57 58 59 60 52 Report of Independent Registered Public Accounting Firm To the stockholders and board of directors Mobile Mini, Inc.: Opinions on the Consolidated Financial Statements and Internal Control Over Financial Reporting We have audited the accompanying consolidated balance sheets of Mobile Mini, Inc. and subsidiaries (the “Company”) as of December 31, 2018 and 2017, the related consolidated statements of operations, comprehensive (loss) income, stockholders’ equity, and cash flows for each of the years in the three-year period ended December 31, 2018, and the related notes (collectively, the “consolidated financial statements”). We also have audited the Company’s internal control over financial reporting as of December 31, 2018, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2018 and 2017, and the results of its operations and its cash flows for each of the years in the three-year period ended December 31, 2018, in conformity with U.S. generally accepted accounting principles. Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2018, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. Basis for Opinion The Company’s management is responsible for these consolidated financial statements, 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 consolidated financial statements and an opinion on the Company’s internal control over financial reporting based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud, and whether effective internal control over financial reporting was maintained in all material respects. Our audits of the consolidated financial statements included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions. 53 Definition and Limitations of Internal Control Over Financial Reporting 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. /s/ KPMG LLP We have served as the Company’s auditor since 2013. Phoenix, Arizona February 5, 2019 54 MOBILE MINI, INC. CONSOLIDATED BALANCE SHEETS (In thousands except par value data) December 31, 2018 2017 $ 5,605 $ 13,451 130,233 11,725 929,090 154,254 13,398 55,542 705,217 2,005,064 $ 33,177 $ 88,136 593,495 63,359 246,489 170,139 1,194,795 111,562 15,671 989,154 157,304 15,334 62,024 708,907 2,073,407 26,955 78,084 634,285 52,791 245,850 173,754 1,211,719 — — 500 619,850 410,641 (72,861) 497 605,369 463,322 (60,334) (147,861) 810,269 2,005,064 $ (147,166) 861,688 2,073,407 $ ASSETS Cash and cash equivalents Receivables, net of allowance for doubtful accounts of $4,599 and $6,250 at December 31, 2018 and December 31, 2017, respectively Inventories Rental fleet, net Property, plant and equipment, net Other assets Intangibles, net Goodwill Total assets $ LIABILITIES AND STOCKHOLDERS’ EQUITY $ Liabilities: Accounts payable Accrued liabilities Lines of credit Obligations under capital leases Senior notes, net of deferred financing costs of $3,511 and $4,150 at December 31, 2018 and December 31, 2017, respectively Deferred income taxes Total liabilities Commitments and contingencies Stockholders' equity: Preferred stock $.01 par value, 20,000 shares authorized, none issued Common stock $.01 par value, 95,000 shares authorized, 49,986 issued and 44,690 outstanding at December 31, 2018 and 49,658 issued and 44,380 outstanding at December 31, 2017 Additional paid-in capital Retained earnings Accumulated other comprehensive loss Treasury stock, at cost, 5,296 and 5,278 shares at December 31, 2018 and December 31, 2017, respectively Total stockholders' equity Total liabilities and stockholders' equity See accompanying notes. 55 MOBILE MINI, INC. CONSOLIDATED STATEMENTS OF OPERATIONS (In thousands except per share data) Revenues: Rental Sales Other Total revenues Costs and expenses: Rental, selling and general expenses Cost of sales Restructuring expenses Asset impairment charge and loss on divestiture, net Depreciation and amortization Total costs and expenses Income from operations Other income (expense): Interest income Interest expense Debt extinguishment expense Deferred financing costs write-off Foreign currency exchange (Loss) income from operations before income tax provision (benefit) Income tax provision (benefit) Net (loss) income (Loss) earnings per share: Basic Diluted Weighted average number of common and common share equivalents outstanding Basic Diluted Cash dividends declared per share For the Years Ended December 31, 2017 2016 2018 558,197 $ 34,354 678 593,229 364,123 22,437 2,006 102,140 67,000 557,706 35,523 6 (40,904) — — 64 (5,311) 2,751 (8,062) $ 498,825 $ 32,440 2,284 533,549 336,438 21,001 2,886 — 63,372 423,697 109,852 25 (35,728) — — (25) 74,124 (48,104) 122,228 $ 480,083 26,499 2,040 508,622 309,294 16,471 6,020 — 63,734 395,519 113,103 2 (32,726) (9,192) (2,271) (18) 68,898 21,650 47,248 (0.18) $ (0.18) 2.77 $ 2.76 1.07 1.06 44,295 44,295 1.00 $ 44,055 44,254 0.91 $ 44,145 44,390 0.82 $ $ $ $ See accompanying notes. 56 MOBILE MINI, INC. CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME (In thousands) Net (loss) income Other comprehensive (loss) income : Foreign currency translation adjustment, net of income tax provision of $88, $30 and $106 in 2018, 2017 and 2016, respectively Other comprehensive (loss) income Comprehensive (loss) income For the Years Ended December 31, 2017 2016 2018 $ (8,062) $ 122,228 $ 47,248 (12,527) (12,527) (20,589) $ 20,713 20,713 142,941 $ (36,885) (36,885) 10,363 $ See accompanying notes. 57 MOBILE MINI, INC. CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY For the years ended December 31, 2016, 2017 and 2018 (In thousands) Additional Accumulated Other Total Balance at January 1, 2016 Net income Common stock dividends declared Other comprehensive loss Exercise of stock options Tax shortfall on equity award transactions Purchase of treasury stock Restricted stock grants, net Share-based compensation Balance at December 31, 2016 Net income Common stock dividends declared Other comprehensive income Exercise of stock options Purchase of treasury stock Restricted stock grants, net Share-based compensation Cumulative effect of adoption of accounting pronouncement Balance at December 31, 2017 Net loss Common stock dividends declared Other comprehensive loss Exercise of stock options Purchase of treasury stock Restricted stock grants, net Share-based compensation Balance at December 31, 2018 Earnings Income (Loss) Shares Amount Common Stock Paid-In Retained Comprehensive Treasury Stock Stockholders' Shares Amount Capital 44,594 $ 491 $584,447 $352,262 $ — 47,248 — — — (36,614) — — — — — — — 467 1 (44,162) 4,551 $(127,509) $ 765,529 47,248 (36,614) (36,885) 468 — — — — (36,885) — — — — — — — Equity 17 (242) — — 7,399 — — (446) — 1 130 — — 44,295 — — — — — — 233 3 (281) — 1 133 — — — — — — 493 592,071 362,896 — 122,228 — (40,214) — — — 5,797 — — — (1) — 7,373 — — — 446 — — — — — (11,290) — — (81,047) 4,997 (138,799) — — — — (8,367) — — — — — — 20,713 — — — — 281 — — — — (242) (11,290) 1 7,399 735,614 122,228 (40,214) 20,713 5,800 (8,367) — 7,373 — — — (60,334) 5,278 (147,166) — — — — (695) — — 18,541 861,688 (8,062) (44,619) (12,527) 3,617 (695) — 10,867 (72,861) 5,296 $(147,861) $ 810,269 — — — — (12,527) — — — 18 — — — — — — — 44,380 — — — — — — 118 1 (18) — 2 210 129 18,412 497 605,369 463,322 (8,062) — — (44,619) — — — 3,616 — — — (2) — — 10,867 — 44,690 $ 500 $619,850 $410,641 $ See accompanying notes. 58 MOBILE MINI, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands) Cash Flows from Operating Activities: Net (loss) income Adjustments to reconcile net (loss) income to net cash provided by operating activities: For the Years Ended December 31, 2017 2016 2018 $ (8,062) $ 122,228 $ 47,248 Debt extinguishment expense Deferred financing costs write-off Asset impairment charge and loss on divestiture, net Provision for doubtful accounts Amortization of deferred financing costs Amortization of long-term liabilities Share-based compensation expense Depreciation and amortization Gain on sale of rental fleet Loss on disposal of property, plant and equipment Deferred income taxes Tax shortfall on equity award transactions Foreign currency transaction loss Changes in certain assets and liabilities, net of effect of businesses acquired: Receivables Inventories Other assets Accounts payable Accrued liabilities Net cash provided by operating activities Cash Flows from Investing Activities: Proceeds from sale of assets held for sale Cash paid for businesses acquired, net of cash acquired Additions to rental fleet, excluding acquisitions Proceeds from sale of rental fleet Additions to property, plant and equipment, excluding acquisitions Proceeds from sale of property, plant and equipment Net cash used in investing activities Cash Flows from Financing Activities: Net repayments under lines of credit Proceeds from issuance of 5.875% senior notes due 2024 Redemption of 7.875% senior notes due 2020 Debt extinguishment expense Deferred financing costs Principal payments on capital lease obligations Issuance of common stock Dividend payments Purchase of treasury stock Net cash used in financing activities Effect of exchange rate changes on cash Net (decrease) increase in cash Cash and cash equivalents at beginning of year Cash and cash equivalents at end of year Supplemental Disclosure of Cash Flow Information: Cash paid during the year for interest Cash paid during the year for income and franchise taxes Equipment and other acquired through capital lease obligations Capital expenditures accrued or payable $ $ — — 102,140 2,412 2,060 145 10,867 67,000 (6,055) 600 (2,523) — (64) (22,011) (406) 826 2,909 10,260 160,098 10,153 — (85,961) 14,993 (16,931) 683 (77,063) (40,790) — — — — (9,746) 3,617 (44,530) (695) (92,144) 1,263 (7,846) 13,451 5,605 $ 37,979 $ 4,012 20,314 10,752 — — — 5,037 2,060 130 7,373 63,372 (5,657) 517 (49,980) — 25 (15,677) (90) (635) (4,985) 11,928 135,646 — — (63,688) 12,953 (20,122) 851 (70,006) (6,875) — — — (12) (7,418) 5,800 (40,171) (8,367) (57,043) 717 9,314 4,137 13,451 $ 35,029 $ 2,607 9,501 7,270 9,192 2,271 — 6,162 1,976 116 7,399 63,734 (5,472) 1,285 21,634 (242) 18 (27,321) 598 60 239 7,347 136,244 — (16,565) (57,372) 13,679 (30,659) 2,764 (88,153) (26,548) 250,000 (200,000) (9,192) (5,369) (6,520) 468 (36,402) (11,290) (44,853) (714) 2,524 1,613 4,137 21,546 1,772 18,951 3,230 See accompanying notes. 59 MOBILE MINI, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (1) Mobile Mini, Organization and Description of Business Mobile Mini, Inc., a Delaware corporation, is a leading provider of portable storage and specialty containment solutions. In these notes, the terms “Mobile Mini,” the “Company,” “we,” “us,” and “our” refer to Mobile Mini, Inc. At December 31, 2018, we have a fleet of portable storage and office units operating throughout the U.S., Canada and the U.K. serving a diversified customer base, including construction companies, large and small retailers, medical centers, schools, utilities, distributors, the military, hotels, restaurants, entertainment complexes and households. These customers use our products for a wide variety of applications, including the storage of construction materials and equipment, retail and manufacturing inventory, documents and records and other goods. We also have a fleet of specialty containment products, concentrated in the Gulf Coast region of the U.S., including liquid and solid containment units, serving a specialty sector in the industry. Specialty products are leased primarily to chemical, refinery, oil and natural gas drilling, mining and environmental service customers. Basis of Presentation and Consolidation The consolidated financial statements include the accounts of Mobile Mini and our wholly owned subsidiaries. We do not have any subsidiaries in which we do not own 100% of the outstanding stock. All significant intercompany balances and transactions have been eliminated. Use of Estimates The preparation of financial statements in conformity with U.S. generally accepted accounting principles (“GAAP”) 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. Significant estimates affect the calculation of depreciation and amortization, the calculation of the allowance for doubtful accounts, the analysis of goodwill and long-lived assets for potential impairment and certain accrued liabilities. (2) Summary of Significant Accounting Policies Cash Equivalents We consider all highly liquid instruments with insignificant interest rate risk and with maturities of three months or less at purchase to be cash equivalents. Receivables and Allowance for Doubtful Accounts Receivables are stated net of an allowance for doubtful accounts. We estimate the amount of customer receivables that are uncollectible and record an estimated provision for bad debts through a charge to operations. The provision is based on historical collection experience and evaluation of past-due accounts. Specific accounts are written off against the allowance when management determines the account is uncollectible. We require a security deposit on most leased office units to cover the cost of damages or unpaid balances, if any. Our provision for doubtful accounts was less than 1.5% of total revenues in the years ended December 31, 2018, 2017 and 2016. The information presented in the table below reflects the activity in the allowance for doubtful accounts during the periods presented. 2018 For the Years Ended December 31, 2017 (In thousands) 2016 Balance at beginning of year Provision charged to expense Write-offs and other Balance at end of year $ $ 6,250 $ 2,412 (4,063) 4,599 $ 4,886 $ 5,037 (3,673) 6,250 $ 2,162 6,162 (3,438) 4,886 60 MOBILE MINI, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Concentration of Credit Risk Financial instruments which potentially expose us to concentrations of credit risk consist primarily of receivables. Concentration of credit risk with respect to receivables is limited due to our large number of customers spread over a broad geographic area in many industry sectors. We typically have the right to repossess rented portable storage units, including any customer goods contained in the unit, following non-payment of rent. Receivables related to sold units are generally secured by the product sold to the customer. Our largest customer accounted for approximately 6.0% of our consolidated rental revenue for the year ended December 31, 2018, and 17.6% of our total receivables at December 31, 2018. These receivables generally fluctuate throughout the year depending upon seasonal demand but are typically higher at year end following the seasonal holiday business. Inventories Inventories are valued at the lower of cost (principally on a standard cost basis which approximates the first-in, first-out method) or net realizable value. Raw materials and supplies principally consist of raw steel, glass, paint, vinyl and other assembly components used in manufacturing and remanufacturing processes and, to a lesser extent, parts used for internal maintenance and ancillary items held for sale in our Tank & Pump Solutions segment. Work-in-process primarily represents partially assembled units. Finished units primarily represent purchased or assembled containers held in inventory until the container is either sold as is, remanufactured and sold, or remanufactured and deployed as rental fleet. Inventories at December 31 consisted of the following: Raw materials and supplies Work-in-process Finished units Inventories Rental fleet 2018 2017 (In thousands) 8,078 $ — 3,647 11,725 $ 11,732 50 3,889 15,671 $ $ Rental fleet is capitalized at cost and depreciated over the estimated useful life of the unit using the straight-line method. Rental fleet is depreciated whether or not it is out on rent. Capitalized cost of rental fleet includes the price paid to acquire the unit and freight charges to the location when the unit is first placed in service, and when applicable, the cost of manufacturing or remanufacturing, which includes the cost of customizing units. Ordinary repair and maintenance costs are charged to operations as incurred. We periodically review depreciable lives and residual values against various factors, including the results of our lenders’ independent appraisal of our rental fleet, practices of our competitors in comparable industries and profit margins achieved on sales of depreciated units. Property, Plant and Equipment Property, plant and equipment are stated at cost, net of accumulated depreciation and amortization. Depreciation is recorded using the straight-line method over the assets’ estimated useful lives. Our depreciation expense related to property, plant and equipment for 2018, 2017 and 2016 was $28.8 million, $25.9 million and $25.1 million, respectively. Normal repairs and maintenance to property, plant and equipment are expensed as incurred. When property or equipment is retired or sold, the net book value of the asset, reduced by any proceeds, is charged to gain or loss on the disposal of property, plant and equipment and is included in rental, selling and general expenses in the consolidated statements of operations. 61 MOBILE MINI, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Property, plant and equipment at December 31 consisted of the following: Residual Value as Percentage of Original Cost Useful Life in Years 2018 2017 Land Vehicles and machinery Buildings and improvements (1) Computer equipment and software Furniture and office equipment Property, plant and equipment Accumulated depreciation and amortization Property, plant and equipment, net 0 - 55% 0 - 25 0 0 5 - 30 3 - 30 3 - 10 3 - 10 $ (In thousands) 1,638 $ 156,195 27,614 70,903 6,680 263,030 (108,776) 2,970 151,937 25,079 66,505 6,911 253,402 (96,098) $ 154,254 $ 157,304 (1) Improvements made to leased properties are depreciated over the lesser of the estimated useful life or the remaining term of the respective lease Capitalized Software Development Costs We capitalize qualifying computer software costs incurred during the application development stage for internally developed software. Additionally, we capitalize qualifying costs incurred for upgrades and enhancements that result in additional functionality to existing software. Costs related to preliminary project planning activities, post-implementation activities, maintenance and minor modifications are expensed as incurred. Internal-use software is amortized on a straight line basis over its estimated useful life. Deferred Financing Costs Deferred financing costs consist of the costs of obtaining long-term financing. Deferred financing costs related to our lines of credit are included in other assets in the consolidated balance sheets, while the Senior Notes are presented on the balance sheet net of deferred financing costs. These costs are amortized and included in interest expense over the term of the related debt, using the straight-line method, which approximates the effective interest method. Amortization expense for deferred financing costs was approximately $2.1 million, $2.1 million and $2.0 million in 2018, 2017 and 2016, respectively. As of December 31, 2018, $3.5 million and $2.8 million of the total $6.3 million unamortized deferred financing costs, related to the 2024 Notes and the Credit Agreement, respectively. The annual amortization of deferred financing costs is expected to be as follows (in thousands): 2019 2020 2021 2022 2023 Thereafter Total $ $ 2,060 2,000 638 638 638 319 6,293 Goodwill For acquired businesses, we record assets acquired and liabilities assumed at their estimated fair values on the respective acquisition dates. Based on these values, the excess purchase prices over the fair value of the net assets acquired is recorded as goodwill. Of the $705.2 million total goodwill at December 31, 2018, $468.4 million related to the North America Storage Solutions segment, $55.6 million related to the U.K. Storage Solutions segment and $181.2 million related to the Tank & Pump Solutions segment. 62 MOBILE MINI, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Goodwill impairment testing requires judgment, including: the identification of the reporting units; determination of the fair value of each reporting unit; the assignment of assets, liabilities and goodwill to each reporting unit; estimates and assumptions regarding future cash flows and discount rates; and an assumption regarding the form of the transaction in which the reporting unit would be acquired by a market participant. Management assesses potential impairment of goodwill on an annual basis at December 31, or whenever events or changes in circumstances indicate that the carrying value may not be recoverable. We have determined that the reporting units are consistent with our identified segments. Some factors management considers important which could indicate an impairment review include the following: (cid:129) (cid:129) (cid:129) (cid:129) significant under-performance relative to historical, expected or projected future operating results; significant changes in the manner of our use of the acquired assets or the strategy for the overall business; market capitalization relative to net book value; and significant negative industry or general economic trends. Management may choose to assess qualitative factors to determine if it is more-likely-than-not that goodwill might be impaired and whether or not to perform the two-step goodwill impairment test. When we review goodwill for impairment utilizing a two-step process, the first step of the impairment test requires a comparison of the fair value of each of our reporting unit’s net assets to the respective carrying value of net assets. If the carrying value of a reporting unit’s net assets is less than its fair value, no indication of impairment exists and a second step is not performed. If the carrying amount of a reporting unit’s net assets is higher than its fair value, there is an indication that an impairment may exist and a second step must be performed. If the second step is necessary, management is required to determine the implied fair value of the goodwill and compare it to the carrying value of the goodwill. The fair value of the reporting units would be assigned 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. If the carrying amount of the reporting unit’s goodwill is greater than the implied fair value of its goodwill, an impairment loss must be recognized for the difference. When assessing the fair value of the reporting units under the two-step impairment test, management considers 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 and discount rates. Other estimates relate to tax payments, operating margins and capital expenditures. Each approach is given equal weight in arriving at the fair value of the reporting unit. As of December 31, 2018, 2017 and 2016, management assessed qualitative factors and determined it is more-likely- than-not each of the reporting unit’s assigned goodwill had estimated fair values greater than the respective reporting unit’s individual net asset carrying values; therefore, the two step impairment test was not performed. The following table shows the activity and balances related to goodwill from January 1, 2017 to December 31, 2018: Balance at January 1, 2017 (1) Adjustments Foreign currency (2) Balance at December 31, 2017 (1) Foreign currency (2) Balance at December 31, 2018 (1) (In thousands) 703,558 $ 18 5,331 708,907 (3,690) 705,217 $ Includes accumulated amortization of $2.0 million and accumulated impairment of $12.5 million. (1) (2) Represents foreign currency translation adjustments primarily related to the U.K. storage solutions reporting unit. 63 MOBILE MINI, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Intangibles Intangible assets are amortized over the estimated useful life of the asset utilizing a method which reflects the estimated pattern in which the economic benefits will be consumed. Customer relationships are amortized based on the estimated attrition rates of the underlying customer base, other intangibles are amortized using the straight-line method. The following table reflects balances related to intangible assets for the years ended December 31: Estimated Useful Life Gross Carrying Amount 2018 Accumulated Amortization Net Carrying Amount Gross Carrying Amount (In thousands) 2017 Accumulated Amortization Net Carrying Amount 15 - 20 $ 92,751 $ 5,913 5 - 10 1,886 59 $ 100,609 $ 5 20 (39,472) $ 53,279 $ 93,235 $ 5,954 1,899 (4,014) 1,890 337 (1,549) 60 27 (32) (45,067) $ 55,542 $ 101,139 $ (34,660) $ 58,575 2,642 (3,312) 776 (1,114) 31 (29) (39,115) $ 62,024 Customer relationships Trade names/trademarks Non-compete agreements Other Total Amortization expense for amortizable intangibles was approximately $6.5 million, $6.5 million and $6.4 million in 2018, 2017 and 2016, respectively. See information regarding intangibles acquired in conjunction with company acquisitions in Note 3. Based on the carrying value at December 31, 2018, future amortization of intangible assets is expected to be as follows for the years ended December 31 (in thousands): 2019 2020 2021 2022 2023 Thereafter Total $ $ 6,291 5,141 4,905 4,605 4,324 30,276 55,542 Impairment of Long-Lived Assets (Other than Goodwill) Our rental fleet, property, plant and equipment, and finite-lived intangibles are reviewed for impairment whenever events or changes in circumstances indicate the carrying amount of such assets may be impaired. (See potential impairment indicators under “Goodwill” above). 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 of evaluation. See Note 4 for discussion of an impairment and divestiture loss during 2018 related primarily to long-lived assets. There were no indicators of impairment for long-lived assets held for use at December 31, 2018 or at December 31, 2017. Purchase Accounting We account for acquisitions under the acquisition method. Under the acquisition method of accounting, we record assets acquired and liabilities assumed at their estimated fair market value on the date of acquisition. Goodwill is measured as the excess of the fair value of the consideration transferred over the fair value of the identifiable net assets. Estimated fair values of acquired assets and liabilities is provisional and could change as additional information is received. We finalize valuations as soon as practicable, but not later than one-year from the acquisition date. Any subsequent changes to purchase price allocations results in a corresponding adjustment to goodwill. 64 MOBILE MINI, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS The determination of the fair value of intangible assets requires the use of significant judgment with regard to (i) the fair value; and (ii) whether such intangibles are amortizable or non-amortizable and, if amortizable, the period and the method by which the intangible asset will be amortized. We estimate the fair value of acquisition-related intangible assets principally based on projections of cash flows that will arise from identifiable intangible assets of acquired businesses. The projected cash flows are discounted to determine the present value of the assets at the dates of acquisition. Revenue Recognition A performance obligation is a promise in a contract to transfer a distinct good or service to the customer. A contract’s transaction price is allocated to each distinct performance obligation and recognized as revenue when, or as, the performance obligation is satisfied. Rental contracts with our customers may have multiple performance obligations including the direct rental of fleet to our customers, fleet delivery and pickup. Also included in rental revenues are ancillary fees including late charges and charges for damages. For contracts with multiple performance obligations, we allocate the contract’s transaction price to each performance obligation using the contractually stated price as our best estimate of the standalone selling price of each distinct promise in the contract. Our prices are determined using methods and assumptions developed consistently across similar customers and markets. We enter into contracts with our customers to rent equipment generally based on a 28-day rate for our Storage Solutions fleet and a daily, weekly or monthly rate for our Tank & Pump Solutions fleet. Revenues from renting are recognized ratably over the rental period under lessor accounting. The rental continues until cancelled by the customer or the Company. If equipment is returned prior to the end of the contractually obligated period, the excess, if any, between the amount the customer is contractually required to pay, over the cumulative amount of revenue recognized to date, is recognized as incremental revenue upon return. Customers may utilize our equipment delivery and pick-up services in conjunction with the rental of equipment, but it is not required. Revenue pursuant to the delivery or pick up of a rented unit is recognized in rental revenue upon completion of the service. Sales revenue is primarily generated by the sale of new and used units, and to a lesser extent, parts and supplies sold to Tank & Pump Solutions customers. Sales contracts generally have a single performance obligation that is satisfied at the time of delivery. Sales revenue is measured based on the consideration specified in the contract and recognized when the customer takes possession of the unit or other sale items. Our Storage Solutions rental customers are generally billed in advance. Additionally, we may bill our customers in advance for fleet pickup. Tank & Pump Solutions rental customers are typically billed in arrears, a minimum of once per month. Sales transactions are generally billed in advance or upon transfer of the sold items. Payments from customers are generally due upon receipt of the invoice. Certain customers have extended terms for payment, but no terms are greater than one year following the invoice date. Taxes assessed by a governmental authority that are both imposed and concurrent with a specific revenue-producing transaction, that are collected by the Company from a customer, are excluded from revenue. We adopted new guidance related to revenue from contracts with customers. The adoption did not have a significant impact on our revenue, nor did it result in a cumulative effect adjustment as of January 1, 2018. We have consistently applied our accounting policies to all periods presented in these consolidated financial statements. Contract Costs and Liabilities We incur commission costs to obtain rental contracts and for sales of fleet inventory. We expect the period benefitted by each commission to be less than one year. As a result, we have applied the practical expedient for incremental costs of obtaining a contract and expense commissions as incurred. 65 MOBILE MINI, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS When customers are billed in advance, we defer recognition of revenue and reflect unearned rental revenue at the end of the period. As of December 31, 2018 and 2017, we had approximately $41.0 million and $38.3 million, respectively, of unearned rental revenue included in accrued liabilities in the condensed consolidated balance sheets for December 31, 2018 and 2017. We expect to perform the remaining performance obligations and recognize the unearned rental revenue within the next twelve months. Accordingly, we have applied the practical expedient available, under which we do not disclose the amount of consideration allocable to different performance obligations. Cost of Sales Cost of sales in our consolidated statements of operations includes the net book value of the units that were sold during the reported period and includes both our cost to buy, transport, remanufacture and modify used containers and our cost to manufacture Storage Solutions units and other structures, and to a lesser extent the costs of parts and supplies sold to customers. Advertising Costs Advertising expense was $3.4 million, $4.0 million and $3.9 million in 2018, 2017 and 2016, respectively. The balance of prepaid advertising costs, which are never amortized more than twelve months, was less than $0.1 million at both December 31, 2018 and 2017. Income 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. 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. We record uncertain tax positions using a two-step process, whereby (1) we determine whether it is more-likely-than-not that the tax positions will be sustained on the basis of the technical merits of the position and (2) for those tax positions that meet the more-likely-than-not recognition threshold, we recognize the largest amount of tax benefit that is more than 50% likely to be realized upon ultimate settlement with the related tax authority. The Company recognizes interest and penalties related to unrecognized tax benefits within the interest expense line and other expense line, respectively, in the accompanying consolidated statements of operations. Accrued interest and penalties are included within the related liability lines in the consolidated balance sheets. The Tax Act enacted a new a minimum tax on U.S. companies’ foreign operations called Global Intangible Low Tax Income (“GILTI”). The Company has made a policy election to account for any impacts of GILTI tax in the period in which it is incurred. In the current year, the Company finalized its analysis of the impact of U.S. tax reform passed in December 2017 and has recorded a reduction to provisional amounts recorded in the fourth quarter of 2017. See additional information regarding income taxes in Note 8. (Loss) Earnings per Share Basic (loss) earnings per share (“EPS”) is calculated by dividing net loss or income by the weighted average number of common shares outstanding during the period. Restricted stock awards are subject to the risk of forfeiture and are not included 66 MOBILE MINI, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS in the calculation of basic weighted average number of common shares outstanding until vested. Diluted EPS is calculated under the treasury stock method. Potential common shares included restricted common stock and incremental shares of common stock issuable upon the exercise of stock options. The following table is a reconciliation of net (loss) income and weighted-average shares of common stock outstanding for purposes of calculating basic and diluted EPS for the years ended December 31: Numerator: Net (loss) income Denominator: For the Years Ended December 31, 2018 2016 2017 (In thousands, except per share data) $ (8,062) $ 122,228 $ 47,248 Weighted average shares outstanding - basic Dilutive effect of share-based awards Weighted average shares outstanding - diluted 44,295 — 44,295 44,055 199 44,254 44,145 245 44,390 Earnings per share: Basic Diluted $ (0.18) $ (0.18) 2.77 $ 2.76 1.07 1.06 There are approximately 0.7 million of common stock equivalents that would have been included in the diluted EPS denominator for the year ended December 31, 2018 had there not been a net loss. These common stock equivalents were excluded because their inclusion would reduce the net loss per share. In addition, the following table represents the number of stock options and restricted stock awards that were issued or outstanding but excluded in calculating diluted EPS because their effect would have been anti-dilutive, or the underlying performance criteria has not been met, for the years ended December 31: 2018 For the Years Ended December 31, 2017 (In thousands) 2016 Stock options Restricted stock awards Total Fair Value Measurements 915 33 948 2,078 2 2,080 2,076 5 2,081 Fair value is the price that would be received from selling an asset or paid to transfer a liability in an orderly transaction between market participants. Fair value is a market-based measurement determined by assumptions that market participants would use in pricing an asset or liability. We categorize each of our fair value measurements in one of the following three levels based on the lowest level of input that is significant to the fair value measurement: Level 1 — Observable inputs such as quoted prices in active markets for identical assets or liabilities; Level 2 — Observable inputs, other than Level 1 inputs in active markets, that are observable either directly or indirectly; and Level 3 — Unobservable inputs for which there is little or no market data, which require the reporting entity to develop its own assumptions. At December 31, 2018 and 2017, we did not have any financial instruments required to be recorded at fair value on a recurring basis. The carrying amounts of cash, cash equivalents, receivables, accounts payable and accrued liabilities approximate fair values based on their short-term nature. The fair values of our revolving credit facility and capital leases are estimated using discounted cash flow analyses, based on our current incremental borrowing rates for similar types of borrowing arrangements. Based on the borrowing rates currently available to us for bank loans with similar terms and average maturities, the fair value of our revolving credit facility debt and capital leases, which are measured using Level 2 inputs, at December 31, 2018 and 2017 approximated their respective book values. 67 MOBILE MINI, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS The fair value of our $250 million aggregate principal amount of 5.875% senior notes due July 1, 2024 (the “Senior Notes” or “2024 Notes”) is based on their latest sales price at the end of each period obtained from a third-party institution and is Level 2 in the fair value hierarchy as there is not an active market for these Senior Notes. The Senior Notes are presented on the balance sheet net of deferred financing costs. The gross carrying value and the fair value of the Senior Notes are as follows: Carrying value Fair value Derivatives 2018 2017 (In thousands) $ 250,000 $ 247,028 250,000 262,500 In the normal course of business, our operations are exposed to fluctuations in interest rates. We have in the past, and may again in the future, address a portion of these risks through a controlled program of risk 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. At December 31, 2018 and 2017, we did not have any derivative financial instruments. Share-Based Compensation We calculate the fair value of stock options using the Black-Scholes-Merton option pricing valuation model, which incorporates various assumptions including volatility, expected life and risk-free interest rates. The fair value of restricted stock awards is estimated as the closing price of our common stock on the date of grant. Compensation related to service-based awards are recognized on a straight-line basis over the vesting period, which is generally three to five years. Compensation expense related to performance-based awards is recognized over the implicit service period of the award based on management’s estimate of the probability of the performance criteria being satisfied, adjusted at each balance sheet date. Expense related to performance-based awards that have multiple vesting dates, is recognized using the accelerated attribution approach, whereby each vesting tranche is treated as a separate award for purposes of determining the implicit service period. Share-based compensation expense is reduced for forfeitures when they occur. Foreign Currency Translation and Transactions For our non-U.S. operations, the local currency is the functional currency. All assets and liabilities are translated into U.S. dollars at period-end exchange rates and all income statement amounts are translated at the average exchange rate for each month within the year. Impact of Recently Issued Accounting Standards Tax Reform. During December 2017, the Financial Accounting Standards Board (“FASB”) released Staff Accounting Bulletin No. 118 (“the Bulletin”) which provides accounting guidance regarding accounting for income taxes for the reporting period that includes the enactment of the Tax Cuts and Jobs Act (the “Tax Act”) enacted on December 22, 2017. The bulletin provides guidance in those situations where the accounting for certain income tax effects of the Tax Act will be incomplete by the time financial statements are issued for the reporting period that includes the enactment date. For those elements of the Tax Act that cannot be reasonable estimated, no effect will be recorded. The staff has provided in the Bulletin that in situations where the accounting is incomplete for certain effects of the Tax Act, a measurement period is provided in order to complete the accounting. The measurement period begins in the reporting period that includes the enactment of the Tax Act and ends when the entity has obtained, prepared and analyzed the information needed in order to complete the accounting requirements, but no later than one year from enactment. The measurement period therefore ended in December 2018. The Company finalized its analysis of the impact of the Tax Act in the current year. Please refer to the significant accounting policies for income taxes above in this footnote, as well as Note 8 for additional information. 68 MOBILE MINI, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Share-Based Compensation – Modifications. In May 2017, the FASB issued a standard which clarifies what constitutes a modification of a share-based payment award. This standard is effective for annual and interim periods beginning after December 15, 2017. We implemented this standard on January 1, 2018 and will apply the guidance prospectively to modifications, if any. Business Combinations. In January 2017, the FASB issued a standard which clarifies the definition of a business and provides a new framework for determining whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses. This standard is effective for annual and interim periods beginning after December 15, 2017. We implemented this standard on January 1, 2018 and will apply the guidance prospectively to future transactions. Intangibles – Goodwill and Other. In January 2017, the FASB issued a standard requiring an entity to no longer perform a hypothetical purchase price allocation to measure goodwill impairment. Instead, impairment will be measured using the difference between the carrying amount and the fair value of the reporting unit. This standard is effective for annual and interim periods beginning after December 15, 2019. Entities may early adopt the guidance for goodwill impairment tests with measurement dates after January 1, 2017. We have not determined an adoption date and do not expect the adoption of this standard to have a material effect on our consolidated financial statements. Share-Based Compensation. In March 2016, the FASB issued a standard intended to simplify several areas of accounting for share-based compensation arrangements, including the income tax impact, classification on the statement of cash flows and forfeitures. We implemented this standard on January 1, 2017. This standard eliminates the requirement that excess tax benefits be realized before companies can recognize them. As a result, utilizing the modified retrospective method, we recorded a cumulative-effect adjustment for previously unrecognized excess tax benefits of $18.5 million in the opening balance sheet for 2017, with an offsetting increase to retained earnings. In addition, the standard allows us to make a policy election to either continue to reduce share-based compensation expense for forfeitures in future periods, or to recognize forfeitures as they occur. We have chosen to record forfeitures as they occur and recorded an immaterial adjustment to reflect a cumulative-effect adjustment to the opening balance sheet for 2017 to reflect the difference between the fair value estimate of awards historically expected to be forfeited and the fair value estimate of awards actually forfeited. This standard also requires all excess tax benefits and tax deficiencies associated with the exercise of stock options and vesting of restricted stock to be recorded as income tax expense or benefit. Increases and decreases in the aggregate intrinsic value (or negative value) of such activity could introduce volatility in our effective tax rate. The remaining provisions of the new guidance did not have a material effect on our consolidated financial statements. Leases. In February 2016, the FASB issued a standard on lease accounting requiring a lessee to recognize assets and liabilities on the balance sheet for leases with lease terms greater than 12 months. This standard is effective for annual and interim periods beginning after December 15, 2018. We will adopt this standard effective January 1, 2019. A modified retrospective transition approach is required. Entities may choose between applying the new standard as of the date of initial application, or applying the standard to all leases existing as of the earliest comparative period and recasting its comparative period financial statements. We expect to use the effective date as our date of initial application. Consequently, financial information will not be updated and the disclosures required under the new standard will not be provided for dates and periods before January 1, 2019. The standard includes optional transition practical expedients intended to simplify its adoption. We intend to elect to use certain of these expedients including, among other things, the ability to retain lease classification determined under legacy GAAP as well as a relief from reviewing expired or existing contracts to determine if they contain leases. We anticipate the lessee accounting for operating leases under the standard will have a material effect on our statement of financial position. When we enter contractual arrangements as lessor, we expect the period of each rental to be less than one year. As such, we do not believe the accounting for our contractual rental revenue for contracts in which we are the lessor will be materially affected by the adoption of this standard. Upon adoption, we currently expect to recognize additional operating liabilities for contracts in which we are the lessee totaling between $90 million to $95 million, with corresponding right of use assets. The liabilities will be calculated as the present value of the remaining minimum rental payments for existing operating leases. 69 MOBILE MINI, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Revenue from Contracts with Customers. In May 2014, the FASB issued an accounting standard on revenue from contracts with customers. The standard provides a single model for revenue arising from contracts with customers and supersedes previous revenue recognition guidance. The standard requires an entity to recognize the amount of revenue to which it expects to be entitled for the transfer of goods or services and is effective for annual and interim periods beginning after December 15, 2017. We adopted this guidance with a date of initial application of January 1, 2018. The majority of our revenue, as it relates to contractual rental revenue, is excluded from the scope of this standard, and the accounting for the remaining revenue streams were not affected. We utilized the modified retrospective adoption and there was no impact on our consolidated financial statements, nor was there a cumulative effect of initially applying the standard. For more information regarding our revenue from contracts with customers, see the disclosure in Note 5. (3) Acquisitions During the year ended December 31, 2016, we completed three acquisitions of portable storage businesses. One acquisition expanded our business in Dallas, Texas. The other two were in the United Kingdom. The accompanying consolidated financial statements include the operations of the acquired businesses from the dates of acquisition. The aggregate purchase price for the assets acquired were recorded based on their estimated fair values at the date of the acquisitions. We have not disclosed the pro-forma impact of the acquisitions on operations as they were immaterial to our financial position or results of operations in the aggregate. The components of the purchase price and net assets acquired during the year ended December 31, 2016 (as adjusted in 2017) are as follows (in thousands): Net Assets Acquired: Cash Rental fleet Property, plant and equipment Intangible assets: Customer relationships Non-compete agreements Goodwill Other assets Other liabilities Total Total, less cash acquired $ $ $ 1,562 10,054 285 1,616 50 6,467 1,218 (3,125) 18,127 16,565 We did not make any acquisitions during the years ended December 31, 2018 and 2017. (4) Held for Sale Assets Consistent with our strategy to focus on high returning assets, during the second quarter of 2018 we initiated an organization-wide project to assess the economic and operational status of our fleet and other assets as well as an in-depth analysis of our fleet management process to identify inefficiencies. The task encompassed an intensive review of underperforming assets throughout North America and the United Kingdom using our recently implemented enterprise resource planning system and sophisticated work order system that allows specific identification of the status of each unit and facilitates deeper analysis of repair and maintenance costs. The result of this review was the identification of specific assets over which a further determination as to the economics of continued retention and repair could be made. In July 2018, management presented a proposed plan of sale for certain identified assets to the Board of Directors, and on July 24, 2018 the Board of Directors made the strategic decision to approve the plan and authorized management to begin actively marketing the assets for sale. As a result, we placed these assets as held for sale and recognized a $98.3 million loss on divestiture in the third quarter of 2018. In the fourth quarter of 2018, additional assets were identified and placed as held for sale, resulting in a full-year loss of $102.1 million, which consisted primarily of a non-cash loss of $111.4 million. The majority of the assets have been sold as scrap metal. In addition to rental fleet, we also identified and placed for sale, property, plant and equipment and inventory that were not being used efficiently. The assets represent a subset of larger asset groups held by the Company. As of December 31, 2018, the sale was completed. 70 MOBILE MINI, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS In conjunction with this project, we evaluated the assigned depreciable lives and salvage values of our fleet. We believe that the assigned lives and salvage values discussed in Note 6 continue to be appropriate for our fleet. Related to this activity, the Company has recognized exit costs as positions were eliminated and yards, or portions of yards were exited. The estimated loss as adjusted is set forth below: North America Storage Solutions Fleet: Steel storage containers Steel ground level offices Other United Kingdom Storage Solutions Fleet Tank & Pump Solutions Fleet Other Total Proceeds, net of disposal costs Net loss on impairment and divestiture Net Book Value (In thousands) Units $ $ 57,579 30,806 363 8,152 1,654 12,875 111,429 (9,289) 102,140 20,072 3,543 286 1,525 622 n/a 26,048 (5) Revenue from Contracts with Customers In the following table, rental revenue is disaggregated by the nature of the underlying service provided and for the periods indicated. The table also includes a reconciliation of the disaggregated rental revenue to our reportable segments. Direct rental revenue Delivery, pickup and similar revenue Ancillary rental revenue Total rental revenues Direct rental revenue Delivery, pickup and similar revenue Ancillary rental revenue Total rental revenues For the Twelve Months Ended December 31, 2018 Storage Solutions North America United Kingdom Total (In thousands) Tank & Pump Solutions Consolidated $ 273,232 $ 82,325 11,156 $ 366,713 $ 78,163 $ 407,911 56,516 $ 329,748 $ 132,111 30,330 19,456 101,781 18,175 2,240 15,935 4,779 80,751 $ 447,464 $ 110,733 $ 558,197 For the Twelve Months Ended December 31, 2017 Storage Solutions North America United Kingdom Total (In thousands) Tank & Pump Solutions Consolidated $ 247,014 $ 70,478 11,756 $ 329,248 $ 54,102 $ 301,116 $ 89,176 18,698 16,298 4,542 77,342 $ 406,590 $ 66,204 $ 367,320 113,065 23,889 2,142 18,440 92,235 $ 498,825 71 MOBILE MINI, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS For the Twelve Months Ended December 31, 2016 Storage Solutions North America United Kingdom Total (In thousands) Tank & Pump Solutions Consolidated $ 233,273 $ 65,216 10,732 $ 309,221 $ 54,068 $ 287,341 $ 84,491 19,275 15,313 4,581 77,924 $ 387,145 $ 65,874 $ 353,215 108,831 24,340 2,724 18,037 92,938 $ 480,083 Direct rental revenue Delivery, pickup and similar revenue Ancillary rental revenue Total rental revenues (6) Rental Fleet Depreciation expense related to our rental fleet for 2018, 2017 and 2016 was $31.7 million, $31.0 million and $32.3 million, respectively. At December 31, 2018 and 2017, all rental fleet units were pledged as collateral under the Credit Agreement. Appraisals on our rental fleet are required by our lenders on a regular basis. The appraisal typically reports no difference in the value of the unit due to the age or length of time it has been in our fleet. Based in part upon our lender’s third- party appraiser who evaluated our fleet as of September 30, 2018, management estimates that the net orderly liquidation appraisal value of our rental fleet as of December 31, 2018 was approximately $1.1 billion. Our net book value for this fleet as of December 31, 2018 was $929.1 million. Rental fleet at December 31 consisted of the following: Storage Solutions: Steel storage containers Steel ground level offices Other Total Accumulated depreciation Total Storage Solutions fleet, net Tank & Pump Solutions: Steel tanks Roll-off boxes Stainless steel tank trailers Vacuum boxes De-watering boxes Pumps and filtration equipment Other Total Accumulated depreciation Total Tank & Pump Solutions fleet, net Total rental fleet, net Residual Value as Percentage of Original Cost (1) Useful Life in Years 55% 55% 30 30 25 15 - 20 25 20 20 7 2018 2017 (In thousands) 601,127 $ 341,385 7,249 949,761 (151,666) 798,095 $ 655,553 374,836 8,290 1,038,679 (168,112) 870,567 72,770 $ 34,205 28,764 17,005 8,429 13,984 8,475 183,632 (52,637) 130,995 $ 929,090 $ 64,254 29,897 28,871 12,700 6,361 12,680 7,088 161,851 (43,264) 118,587 989,154 $ $ $ $ $ (1) Tank & Pump Solutions fleet has been assigned zero residual value. 72 MOBILE MINI, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (7) Debt Lines of Credit On December 14, 2015, we entered into the Credit Agreement with Deutsche Bank AG New York Branch, as administrative agent, and other lenders party thereto. The Credit Agreement provides for a five-year, $1.0 billion first lien senior secured revolving credit facility maturing on or before the earlier of (i) December 14, 2020 and (ii) the date that is 90 days prior to the final maturity date of the Senior Notes, if such Senior Notes remain outstanding on such date. The Credit Agreement also provides for the issuance of irrevocable standby letters of credit by U.S.-based lenders in amounts totaling up to $50.0 million, by U.K.-based lenders in amounts totaling up to $20.0 million, and by Canadian-based lenders in amounts totaling up to $20.0 million. The obligations of Mobile Mini and its subsidiary guarantors under the Credit Agreement are secured by a blanket lien on substantially all of our assets. Amounts borrowed under the Credit Agreement and repaid or prepaid during the term may be reborrowed. Outstanding amounts under the Credit Agreement bear interest at our option at either: (i) the London interbank offered rate (“LIBOR”) plus an applicable margin (“LIBOR Loans”), or (ii) the prime rate plus an applicable margin (“Base Rate Loans”). The applicable margin for each type of loan is based on an availability-based pricing grid and ranges from 1.25% to 1.75% for LIBOR Loans and 0.25% to 0.75% for Base Rate Loans at each measurement date. As of December 31, 2018, the applicable margins are 1.50% for LIBOR Loans and 0.50% for Base Rate Loans. Availability of borrowings under the Credit Agreement is subject to a borrowing base calculation based upon a valuation of the Company’s eligible accounts receivable, eligible container fleet (including containers held for sale, work-in-process and raw materials) and machinery and equipment, each multiplied by an applicable advance rate or limit. The rental fleet is appraised at least once annually by a third-party appraisal firm and up to 90% of the net orderly liquidation value, as defined in the Credit Agreement, is included in the borrowing base to determine how much the Company may borrow under the Credit Agreement. The Credit Agreement provides for U.K. borrowings, which are, at the Company’s option, denominated in either British pounds or Euros, by its U.K. subsidiary based upon a U.K. borrowing base; Canadian borrowings, which are denominated in Canadian dollars, by its Canadian subsidiary based upon a Canadian borrowing base; and U.S. borrowings, which are denominated in U.S. dollars, by the Company based upon a U.S. borrowing base along with any Canadian assets not included in the Canadian subsidiary. The Credit Agreement also contains customary negative covenants, including covenants that restrict the Company’s ability to, among other things: (i) allow certain liens to attach to the Company’s or its subsidiaries’ assets, (ii) repurchase or pay dividends or make certain other restricted payments on capital stock and certain other securities, or prepay certain indebtedness, (iii) incur additional indebtedness or engage in certain other types of financing transactions, and (iv) make acquisitions or other investments. In addition, we must comply with a minimum fixed charge coverage ratio of 1.00 to 1.00 as of the last day of each quarter, upon the minimum availability amount under the Credit Agreement falling below the greater of (y) $90 million and (z) 10% of the lesser of the then total revolving loan commitment and aggregate borrowing base. As of December 31, 2018, we were in compliance with the minimum borrowing availability threshold set forth in the Credit Agreement and, therefore, are not subject to any financial maintenance covenants. The weighted average interest rate under the lines of credit was approximately 3.5% in 2018 and 2.6% in 2017. The average outstanding balance was approximately $613.8 million and $637.9 million during 2018 and 2017, respectively. At December 31, 2018, the Company had approximately $593.5 million of borrowings outstanding and $403.4 million of additional borrowing availability under the Credit Agreement, based upon borrowing base calculations as of such date. Senior Notes On May 9, 2016, we issued $250.0 million aggregate principal amount of the 2024 Notes at an initial offering price of 100% of their face value. The net proceeds from the sale of the 2024 Notes were used to (i) redeem all $200.0 million aggregate principal amount of our outstanding 7.875% senior notes due December 1, 2020 (the “2020 Notes”) at a redemption price of 103.938% of the principal amount thereof plus accrued and unpaid interest to, but not including, the redemption date of June 8, 2016, (ii) repay a portion of the indebtedness outstanding under our asset-based revolving credit facility, and (iii) pay fees and expenses related to the offering of the 2024 Notes. 73 MOBILE MINI, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS As a result of the redemption of the 2020 Notes during 2016, we recognized $9.2 million in debt extinguishment expense, consisting of $7.9 million in debt redemption premiums and $1.3 million in contractually required interest above the amount payable prior to the redemption. Additionally, we wrote off $2.3 million of previously deferred financing costs associated with the 2020 Notes that had not yet been amortized. The 2024 Notes bear interest at a rate of 5.875% per year, accruing from May 9, 2016, have an eight-year term and mature on July 1, 2024. The 2024 Notes are senior unsecured obligations of the Company and are unconditionally guaranteed on a senior unsecured basis by certain of our existing and future domestic subsidiaries. Obligations Under Capital Leases At December 31, 2018 and 2017, obligations under capital leases for certain real property, transportation, technology and office related equipment were $63.4 million and $52.8 million, respectively. Certain of the lease agreements provide us with a purchase option at the end of the lease term. The leases have been capitalized using interest rates primarily ranging from approximately 1.7% to 4.1% and are secured by the property and equipment under lease. Assets recorded under capital lease obligations totaled approximately $90.3 million as of December 31, 2018 and $71.6 million as of December 31, 2017. Related accumulated amortization totaled approximately $35.7 million as of December 31, 2018 and $25.4 million as of December 31, 2017. The assets acquired under capital leases and related accumulated amortization are included in property, plant and equipment, net, in the consolidated balance sheets. The related amortization is included in depreciation and amortization expense in the consolidated statements of operations. Future minimum capital lease payments at December 31, 2018 are as follows (in thousands): 2019 2020 2021 2022 2023 Thereafter Total Amount representing interest Present value of minimum lease payments $ $ 12,055 12,869 12,434 11,060 9,331 11,029 68,778 (5,419) 63,359 Future Debt Obligations The scheduled maturity for debt obligations for balances outstanding at December 31, 2018 are as follows: 2019 2020 2021 2022 2023 Thereafter Total Lines of Credit Senior Notes Capital Lease Obligations Total (In thousands) — $ 10,472 $ 10,472 — $ $ 11,567 605,062 — 593,495 11,440 11,440 — — 10,356 10,356 — — 8,886 8,886 — — 10,638 260,638 — 250,000 $ 593,495 $ 250,000 $ 63,359 $ 906,854 74 MOBILE MINI, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (8) Income Taxes (Loss) income from operations before income tax for the years ended December 31 consisted of the following: 2018 For the Years Ended December 31, 2017 (In thousands) 2016 U.S. Foreign Total $ $ (16,784) $ 11,473 (5,311) $ 52,609 $ 21,515 74,124 $ 45,430 23,468 68,898 The provision for income taxes from continuing operations for the years ended December 31 consisted of the following: 2018 For the Years Ended December 31, 2017 (In thousands) 2016 Current: U.S. federal State Foreign Total current Deferred: U.S. federal State Foreign Total deferred $ — $ 2,340 2,934 5,274 — $ 990 886 1,876 158 (1,796) (885) (2,523) 2,751 $ (59,257) 7,000 2,277 (49,980) (48,104) $ (1,124) 1,093 — (31) 16,628 1,215 3,838 21,681 21,650 Total (benefit) provision for income taxes $ A reconciliation of the U.S. federal statutory rate to our effective tax rate for the years ended December 31 is as follows: U.S. federal statutory rate State taxes, net of federal benefit Nondeductible expenses and other U.S. mandatory repatriation Executive compensation Adjustment of deferred tax asset for nondeductible share-based compensation Global intangible low tax income Adjustment of net deferred tax liability for enacted tax rate change Foreign rate differential Effective tax rate For the Years Ended December 31, 2018 2017 21.0 % 6.3 (0.7) 47.5 (15.2) 35.0 % 4.5 0.1 4.2 — (109.5) (14.3) — — 2016 35.0 % 1.6 1.1 — — — — 7.7 5.4 (51.8)% (104.7) (4.0) (64.9)% 0.2 (6.5) 31.4 % The effective income tax (benefit) rate of (51.8%) for the year ended December 31, 2018 was impacted by the $102.1 million asset impairment charge and loss on divestiture which resulted in a $5.3 million loss before income taxes. As a result of the low pre-tax loss, the permanent differences between actual income and taxable income are having a meaningful effect on the tax rate. The nondeductible items include $5.8 million in tax expense related to share-based compensation, offset by a $2.6 million reduction in our provisional tax expense related to the repatriation of foreign earnings for the impact of the Tax Act enacted in December 2017. The $5.8 million tax expense from share-based compensation resulted from an out-of-period adjustment recorded in the fourth quarter of 2018 to correct deferred tax assets that had been established in error in previous years based on the expectation that the compensation would be deductible. In the fourth quarter of 2018 we determined the share-based compensation to be nondeductible and reversed the $5.8 million of deferred tax assets. We determined that the error is immaterial to all prior period 75 MOBILE MINI, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS financial statements. Further, the out-of-period correction is immaterial to the consolidated financial statements for the quarter and year ended December 31, 2018. The effective income tax (benefit) rate of (64.9%) for the year ended December 31, 2017 was primarily impacted by the accounting for the U.S. tax reform enacted in December 2017 which reduced the federal income tax rate from 35% to 21%. The Company recognized a net benefit of $77.6 million related to the remeasurement of its net deferred tax liabilities for this rate change, affecting the rate by (104.7%). Additionally, the Company recorded a provisional expense of $3.1 million for the mandatory repatriation of foreign earnings, affecting the rate by 4.2%.The effective income tax rate of 31.4% for the year ended December 31, 2016 was primarily impacted by enacted rate changes to the U.K. income tax rate from 18% to 17%, which resulted in a $0.9 million benefit. The components of the net deferred tax liability at December 31 are approximately as follows: Deferred tax assets: Net operating loss carryforwards Deferred revenue and expenses Accrued compensation and other benefits Allowance for doubtful accounts Equity compensation Capital leases Other Total deferred tax assets Valuation allowance Net deferred tax assets Deferred tax liabilities: Fixed assets Intangibles and goodwill Other Total deferred tax liabilities Net deferred tax liabilities $ 2018 2017 (In thousands) 38,693 $ 8,999 4,552 1,307 2,573 14,008 1,177 71,309 (1,037) 70,272 44,228 8,435 4,118 1,532 7,092 12,999 1,456 79,860 (1,126) 78,734 (204,394) (35,051) (966) (240,411) (218,605) (33,165) (718) (252,488) $ (170,139) $ (173,754) A net deferred tax liability of approximately $17.6 million and $19.3 million related to our U.K. operations has been combined with the net deferred tax liabilities of our U.S. operations in the consolidated balance sheets at December 31, 2018 and 2017, respectively. At December 31, 2018, we had U.S. federal net operating loss carryforwards on our federal tax return of approximately $150.5 million, which expire if unused from 2029 to 2034. At December 31, 2018, we had net operating loss carryforwards on the various states’ tax returns in which we operate totaling $100.6 million, which expire if unused from 2019 to 2038. Management evaluates the ability to realize our deferred tax assets on a quarterly basis and adjusts the amount of our valuation allowance if necessary. Over the past three years, we have generated $113.5 million of federal taxable income. Management currently believes that the ability to generate adequate future taxable income through operations and the reversal of taxable temporary differences are adequate to recover the unreserved portion of these deferred tax assets. For income tax purposes, deductible compensation related to share-based awards is based on the value of the award when realized, which may be different than the compensation expense recognized by us in our financial statements, which is based on the award value on the date of grant. The difference between the value of the award upon grant, and the value of the award when ultimately realized, creates either additional tax expense or benefit. As our stock is publicly traded, it is possible that we have undergone a change in ownership for federal income tax purposes, which can limit the amount of net operating loss currently available as a deduction. We have 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. 76 MOBILE MINI, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS We paid income and franchise taxes of approximately $4.0 million in 2018, $2.6 million in 2017 and $1.8 million in 2016. These amounts are lower than the recorded expense in some years due to net operating loss carryforwards and general business credit utilization. We are subject to taxation in the U.S. federal jurisdiction, as well as various U.S. state and foreign jurisdictions. We have identified our U.S. federal tax return as our “major” tax jurisdiction. As of December 31, 2018, we are no longer subject to examination by U.S. federal tax authorities for years prior to 2015, to examination for any U.S. state taxing authority prior to 2013, or to examination for any foreign jurisdictions prior to 2014. All subsequent periods remain open to examination. Uncertain tax positions are recognized and measured using a two-step approach. 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. As of December 31, 2018, we no longer have unrecognized tax benefits. The reduction to our unrecognized tax benefits had no effect on our effective tax rate. A reconciliation of the beginning and ending balance of unrecognized tax benefits is as follows: Balance December 31, 2017 Additions based on tax positions related to the current year Additions for tax positions in prior years Reductions for settlements Balance December 31, 2018 Gross Position Tax Effect (In thousands) $ 14,140 $ 3,521 — — (14,140) — $ — — (3,521) — $ Our policy for recording interest and penalties associated with uncertain tax positions is to record such items as a component of income before taxes. Penalties and associated interest costs, if any, are recorded in rental, selling and general expenses in our consolidated statements of operations. (9) Transactions with Related Persons With the acquisition of Evergreen Tank Solutions, Inc. (“ETS”) in December 2014 (the “ETS Acquisition”), we acquired its wholly owned subsidiary, Water Movers, Inc. which has two real property leases with an entity partly owned by Michael Watts, a member of our Board. These leases began in 2013, prior to the ETS Acquisition, and expire in 2023. Rental payments under these leases are currently approximately $19,000 per month. Any future renewals of these leases will be approved by the Board as related party transactions. Mr. Watts is also an investor in a digital marketing and strategy company with which Mobile Mini conducts business. During 2018 and 2017, Mobile Mini made approximately $0.4 million and $0.7 million, respectively, in payments to this company. There was no payable due at December 31, 2018. Prior to becoming Senior Vice President – Chief Human Resources Officer on November 30, 2017, Mark Krivoruchka was president and owner of a management consultant company that provided human resources consulting and staffing services to Mobile Mini. For the year ended December 31, 2017, Mobile Mini expensed approximately $1.0 million related to this agreement, including reimbursement for expenses incurred. No expenses were incurred under this agreement in 2018. (10) Share-Based Compensation We have historically awarded stock options and restricted stock awards for employees and non-employee directors as a means of attracting and retaining quality personnel and to align employee performance with stockholder value. Stock option plans are approved by our stockholders and administered by the compensation committee of the Board. The current plan allows for a variety of equity programs designed to provide flexibility in implementing equity and cash awards, including incentive stock options, nonqualified stock options, restricted stock awards, restricted stock units, stock appreciation rights, performance stock, performance units and other stock-based awards. Participants may be granted any one of the equity awards or any 77 MOBILE MINI, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS combination. We do not award stock options with an exercise price below the market price of the underlying securities on the date of award. As of December 31, 2018, 1.6 million shares are available for future grants assuming performance-based options vest at their target amounts. Generally stock options have contractual terms of ten years. Service-based awards. We grant share-based compensation awards that vest over time subject to the employee rendering service over the vesting period. The majority of the service–based awards vest in equal annual installments over a period of three to four years. The expense for service-based awards is expensed ratably over the full service period of the grant. Performance-based awards. All performance-based awards granted in 2018, 2017 and 2016 vest contingently over a three-year period assuming a target number of options or restricted share awards. However, the terms of these awards provide that the number of options or restricted share awards that ultimate vest may vary between 50% and 200% of the target amount, or may be zero. The targets were set at the time of grant. For 2018, 2017 and 2016, vesting conditions were related to the Company’s return on capital employed. Expense related to performance-based awards that have multiple vesting dates, is recognized using the accelerated attribution approach, whereby each vesting tranche is treated as a separate award for purposes of determining the implicit service period. The accelerated attribution approach results in a higher expense during the earlier years of vesting. Non-employee director awards. Each non-employee director serving on the Board receives an automatic award of shares of Mobile Mini’s common stock annually. These awards vest 100% when granted. For each of the years ended December 31, 2018, 2017 and 2016, $0.8 million of expense was recognized related to these grants. Share-based compensation expense. The following table summarizes our share-based compensation for the years ended December 31: 2018 For the Years Ended December 31, 2017 (In thousands) 2016 Share-based compensation expense included in: Rental, selling and general expenses Restructuring expenses Total share-based compensation $ $ 10,504 $ 363 10,867 $ 7,255 $ 118 7,373 $ 7,220 179 7,399 As of December 31, 2018, total unrecognized compensation cost related to stock option awards assuming achievement at target was approximately $0.5 million and the related weighted-average period over which it is expected to be recognized is approximately 0.5 years. As of December 31, 2018, the unrecognized compensation cost related to restricted stock awards assuming achievement at target was approximately $6.6 million, which is expected to be recognized over a weighted-average period of approximately 1.6 years. Stock options. The fair value of each stock option award is estimated on the date of the grant using the Black-Scholes- Merton option pricing model which requires the input of assumptions. We estimate the risk-free interest rate based on the U.S. Treasury security rate in effect at the time of the grant. The expected life of the options, volatility and dividend rates are estimated based on our historical data. No new stock options were issued in 2018. The following are the key assumptions used for the period noted: Risk-free interest rate Expected life of the options (years) Expected stock price volatility Expected dividend rate 2017 1.7% - 2.1% 5.0 32.9% - 35.4% 2.5% - 3.1% 2016 1.1% - 1.5% 5.0 35.3% - 36.9% 2.2% - 3.1% 78 MOBILE MINI, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS The following table summarizes stock option activity for the years ended December 31 (share amounts in thousands): Outstanding options at January 1, 2016 Granted Canceled/Expired Exercised Outstanding options at December 31, 2016 Granted Canceled/Expired Exercised Outstanding options at December 31, 2017 Additional options granted based upon achievement of specified performance criteria Canceled/Expired Exercised Outstanding options at December 31, 2018 Unvested target options that vest based upon 2018 performance conditions Unvested target options that vest based upon 2019 performance conditions Number of Options Performance- Based Options Service- Based Options Total Options Weighted Average Exercise Price 2,870 — (96) (10) 2,764 — (119) (137) 2,508 — (32) (55) 2,421 2,870 $ 594 (155) (17) 3,292 462 (352) (233) 3,169 81 (178) (118) 2,954 33.40 26.54 36.07 28.50 32.06 32.44 33.43 24.88 32.49 32.42 27.82 30.86 32.71 — 594 (59) (7) 528 462 (233) (96) 661 81 (146) (63) 533 232 116 Grants of performance-based stock options are shown in the table at the target award. Due to actual performance exceeding targets, the shares granted in 2017 that contingently vested based upon 2017 performance criteria vested above target resulting in additional grants. Shares granted in 2016 and contingently vesting based upon both 2016 and 2017 criteria did not achieve the minimum vesting target criteria, which resulted in the forfeiture of shares in 2018. The shares granted in both 2017 and 2016 that contingently vest based upon 2018 performance will vest above target. As a result, in the first quarter of 2019, in addition to the target options included in the table above, we expect approximately 0.2 million options will be granted and vest. A summary of stock options outstanding as of December 31, 2018, is as follows: Outstanding Exercisable Weighted Average Exercise Price Weighted Average Remaining Contractual Terms (In years) Aggregate Intrinsic Value (In thousands) 32.71 33.00 5.02 $ 4.64 4,919 4,249 Number of Shares (In thousands) 2,954 $ 2,606 The aggregate intrinsic value of options exercised during the period ended December 31, 2018, 2017 and 2016 was $1.4 million, $1.6 million and $0.1 million, respectively. The weighted average fair value of stock options granted was $8.23 and $6.64 for the years ended December 31, 2017 and 2016, respectively. 79 MOBILE MINI, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Restricted Stock Awards. The fair value of restricted stock awards is estimated as the closing price of our common stock on the date of grant. A summary of restricted stock activity is as follows (share amounts in thousands): Number of Shares Performance- Based Awards Service- Based Awards Total Awards Restricted stock awards at January 1, 2016 Awarded Released Forfeited Restricted stock awards at December 31, 2016 Awarded Released Forfeited Restricted stock awards at December 31, 2017 Awarded Released Forfeited Restricted stock awards at December 31, 2018 Restricted target stock awards that vest based upon 2018 performance conditions Restricted target stock awards that vest based upon 2019 performance conditions Restricted target stock awards that vest based upon 2020 performance conditions 242 172 (130) (41) 243 163 (142) (30) 234 123 (115) (9) 233 — — — — — — — — — 103 (2) (7) 94 32 31 31 Weighted Average Grant Date Fair Value 31.70 27.39 29.75 28.36 30.27 32.25 30.39 31.53 31.42 38.47 34.26 36.38 35.06 242 $ 172 (130) (41) 243 163 (142) (30) 234 226 (117) (16) 327 The table presents the granted awards at their targeted amount. Due to actual performance exceeding targets, the restricted stock awards granted in 2018 that contingently vest based upon 2018 will vest above target. As a result, in the first quarter of 2019, in addition to the target shares included in the table above, we expect approximately 32,000 shares will be granted and vest. The total fair value of restricted stock awards that vested in 2018, 2017 and 2016 were $4.0 million, $4.3 million and $3.8 million, respectively. (11) Benefit Plans In the U.S. we sponsor 401(k) retirement plans designed to provide tax-deferred retirement benefits to employees in accordance with the provisions of Section 401(k) of the Internal Revenue Code. We also sponsor defined contribution programs in the U.K., and have a Registered Retirement Savings Plan regulated by Canadian law. Under the U.S. and Canadian plans we match a percentage of the participants’ contributions up to a specified amount. Under the U.K. plan, we contribute a percentage of each participant’s annual salary to the plan and, depending on the plan, employees may also be required to contribute a percentage of their annual salary into the plan. For the U.S. plans Company matches vest over a period of five years, while Company matches for U.K. and Canadian employees are immediately vested. Company contributions to all these benefit plans totaled approximately $1.2 million, $0.9 million and $0.9 million in 2018, 2017 and 2016, respectively. In each of the three years ending December 31, 2018, 2017 and 2016, we incurred less than $0.1 million for administrative costs for these programs. 80 MOBILE MINI, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (12) Commitments and Contingencies Operating Leases We lease our corporate offices and other properties and operating equipment from third parties under noncancelable operating leases. Expense under these agreements was approximately $25.3 million, $23.9 million and $22.3 million for the years ended December 31, 2018, 2017 and 2016, respectively. As of December 31, 2018, contractual commitments associated with lease obligations are as follows: 2019 2020 2021 2022 2023 Thereafter Total Operating Lease Commitments Restructuring Related Lease Commitments Sub-Lease Income Total (In thousands) $ $ 18,852 $ 15,609 13,357 12,205 10,402 33,440 103,865 $ 74 $ — — — — — 74 $ (99) $ 18,827 15,510 (99) 13,324 (33) 12,205 — 10,402 — 33,440 — (231) $ 103,708 Future minimum lease payments under restructured non-cancelable operating leases as of December 31, 2018, are included in accrued liabilities in the consolidated balance sheet. See Note 14 for a further discussion on restructuring related commitments. Purchase Obligations As of December 31, 2018, we had commitments to purchase $10.8 million of rental fleet related to our North American Storage Solutions business for delivery in 2019. Insurance Reserves We maintain insurance coverage for our operations and employees with appropriate aggregate, per occurrence and deductible limits as we reasonably determine is necessary or prudent considering current operations and historical experience. The majority of these coverages have large deductible programs which allow for potential improved cash flow benefits based on our loss control efforts, while guaranteeing a maximum premium liability. Our employee group health insurance program is a self-insured program with individual and aggregate stop loss limits. 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. Actual results may vary from estimates based on our actual experience at the end of the plan policy periods based on the carrier’s loss predictions and our historical claims data. We expense 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 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 previously reserved in respect of anticipated deductible expenses and we may be required in the future to increase or decrease amounts previously accrued. Our worker’s compensation, auto and general liability insurance are purchased under large deductible programs. Our worker’s compensation insurance has a deductible of $500,000 on the first claim in a policy year and a deductible of $250,000 on any subsequent claims. Auto and general liability insurance per incident deductibles are $500,000 and $50,000, respectively. Under our various insurance programs, we have collective reserves recorded in accrued liabilities of $3.6 million and $3.9 million at December 31, 2018 and 2017, respectively. 81 MOBILE MINI, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS In connection with the issuance of our insurance policies, we have provided our various insurance carriers $3.1 million in letters of credit as of December 31, 2018. General Litigation We are a party to various claims and litigation in the normal course of business. Our current estimated range of liability related to various claims and pending litigation is based on claims for which our management can determine that it is probable that a liability has been incurred and the amount of loss can be reasonably estimated. Because of the uncertainties related to both the probability of incurred and possible range of loss on pending claims and litigation, management must use considerable judgment in making reasonable determination of the liability that could result from an unfavorable outcome. As additional information becomes available, we will assess the potential liability related to our pending litigation and revise our estimates. Such revisions in our estimates of the potential liability could materially impact our results of operation. We do not anticipate the resolution of such matters known at this time will have a material adverse effect on our business or consolidated financial position. (13) Stockholders’ Equity Dividends During the twelve months ended December 31, 2018 we declared cash dividends of $1.00 per share for a total of $44.6 million. Each future quarterly dividend payment is subject to review and approval by the Board. In addition, our Credit Agreement contains restrictions on the declaration and payment of dividends. Declaration Date January 31, 2018 April 19, 2018 July 18, 2018 October 17, 2018 Treasury stock Payment Date March 14, 2018 May 30, 2018 August 29, 2018 November 28, 2018 Record Date (close of business) February 28, 2018 May 16, 2018 August 15, 2018 November 14, 2018 $ Dividend Amount Per Share of Common Stock 0.250 0.250 0.250 0.250 On November 6, 2013, the Board approved a share repurchase program authorizing up to $125.0 million of our outstanding shares of common stock to be repurchased. On April 17, 2015, the Board authorized up to an additional $50.0 million of our outstanding shares of common stock to be repurchased, for a total of $175.0 million under the share repurchase program. The shares may be repurchased from time to time in the open market or in privately negotiated transactions. The share repurchases are subject to prevailing market conditions and other considerations. The share repurchase program does not have an expiration date and may be suspended or terminated at any time by the Board. All shares repurchased are held in treasury. The following table presents share repurchase activities during the years ended December 31, 2018, 2017 and 2016: For the Years Ended December 31, 2017 2016 2018 Shares repurchased under share repurchase program: Number of shares repurchased Average price per repurchased share (1) Aggregate purchase price, in thousands Other shares repurchased (2) Number of shares repurchased Average price per repurchased share (1) Aggregate purchase price, in thousands 400 29.99 $ 12 $ 248,072 29.58 $ 7,338 $ 429,205 25.20 10,815 17,217 39.65 $ 683 $ 34 30.40 $ 1,024 $ 16 29.41 467 $ $ $ $ (1) The weighted average price paid per share of common stock does not include the cost of commissions. 82 MOBILE MINI, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (2) Shares not purchased as part of a publicly announced plan or program represent shares withheld from employees to satisfy minimum tax withholding obligations upon the vesting of restricted stock. Approximately $70.8 million is available for repurchase under our authorized repurchase program as of December 31, 2018. (14) Restructuring Costs We have undergone restructuring actions to align our business operations, resulting in expense of $2.0 million, $2.9 million and $6.0 million for the years ended December 31, 2018, 2017 and 2016, respectively. The $2.0 million of restructuring expenses recognized in the twelve months ended December 31, 2018, consisted primarily of expense related to the restructuring of our corporate service center, including the severance of an executive, and expense incurred with the restructuring of our business in conjunction with the divestiture of certain assets as discussed in Note 4. Additionally in 2018, we recognized expenses related to projects initiated in prior years that were not accruable during such periods. For the twelve months ended December 31, 2017 and 2016, we recognized $1.3 million and $2.0 million, respectively, in expenses related to activities associated with the integration of ETS into the existing Mobile Mini infrastructure. In addition, we recognized $0.9 million and $3.3 million during the twelve months ended December 31, 2017 and 2016, respectively, related to the abandonment of yards, or portions of yards, as well as other costs due to our move away from the wood mobile office business. The remaining costs in 2017 and 2016 related largely to divisional and corporate departmental restructurings. The following table details accrued restructuring obligations (included in accrued liabilities in the consolidated balance sheets) and related activity for the years ended December 31, 2018, 2017 and 2016: Accrued obligations as of January 1, 2016 Restructuring expense Settlement of obligations Accrued obligations as of December 31, 2016 Restructuring expense Settlement of obligations Accrued obligations as of December 31, 2017 Restructuring expense Settlement of obligations Accrued obligations as of December 31, 2018 Severance and Benefits Lease Abandonment Costs Other Costs Total $ $ 1,245 $ 1,006 (1,856) 395 931 (787) 539 1,338 (1,473) 404 $ (In thousands) 495 $ 3,453 (3,580) 368 900 (1,086) 182 482 (578) 86 $ 2 $ 1,561 (1,563) — 1,055 (1,019) 36 186 (209) 13 $ 1,742 6,020 (6,999) 763 2,886 (2,892) 757 2,006 (2,260) 503 The following amounts are included in restructuring expense for the years ended December 31: Severance and benefits Lease abandonment costs Other costs Restructuring expenses 2018 2017 (In thousands) 2016 $ $ 1,338 $ 482 186 2,006 $ 931 $ 900 1,055 2,886 $ 1,006 3,453 1,561 6,020 83 MOBILE MINI, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (15) Segment Reporting Our operations are comprised of three reportable segments: Storage Solutions North America, Storage Solutions United Kingdom and Tank & Pump Solutions. Discrete financial data on each of our products is not available and it would be impractical to collect and maintain financial data in such a manner. The results for each segment are reviewed discretely by our chief operating decision maker. We operate in the U.S., U.K. and Canada. All of our locations operate in their local currency and, although we are exposed to foreign exchange rate fluctuation in foreign markets where we rent and sell our products, we do not believe such exposure will have a significant impact on our results of operations. Revenues recognized by our U.S. locations were $499.8 million, $444.7 million and $424.4 million for the twelve months ended December 31, 2018, 2017 and 2016, respectively. The following tables set forth certain information regarding each of our reportable segments for the years ended December 31, 2018, 2017 and 2016: For the Year Ended December 31, 2018 Storage Solutions North America United Kingdom Total (In thousands) Tank & Pump Solutions Consolidated Revenues: Rental Sales Other Total revenues Costs and expenses: $ 366,713 $ 20,008 304 387,025 Rental, selling and general expenses Cost of sales Restructuring expenses Asset impairment charge and loss on divestiture, net Depreciation and amortization Total costs and expenses Income from operations Interest expense, net of interest income Income tax provision Capital expenditures for additions to rental fleet, excluding acquisitions 233,764 12,263 1,934 91,230 33,591 372,782 14,243 $ $ 29,305 $ $ 258 80,751 $ 447,464 $ 110,733 $ 558,197 34,354 9,024 678 224 593,229 5,322 150 89,999 477,024 116,205 29,032 528 76,475 53,884 287,648 2,998 19,439 7,176 72 1,934 — 2,258 99,882 8,652 25,518 41,482 7,891 77,603 450,385 107,321 8,884 $ 26,639 $ 12,396 $ 10,792 $ 30,106 $ 801 $ 112 2,639 2,381 364,123 22,437 2,006 102,140 67,000 557,706 35,523 40,898 2,751 52,654 6,893 59,547 26,414 85,961 84 MOBILE MINI, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS For the Year Ended December 31, 2017 Storage Solutions North America United Kingdom Total (In thousands) Tank & Pump Solutions Consolidated $ 329,248 $ 19,016 1,430 349,694 77,342 $ 406,590 $ 26,989 7,973 1,875 445 85,760 435,454 92,235 $ 498,825 32,440 5,451 2,284 409 533,549 98,095 Revenues: Rental Sales Other Total revenues Costs and expenses: Rental, selling and general expenses Cost of sales Restructuring expenses Depreciation and amortization Total costs and expenses Income from operations Interest expense, net of interest income Income tax (benefit) provision Capital expenditures for additions to rental fleet, excluding acquisitions 217,718 11,534 2,674 31,735 263,661 86,033 $ $ 24,385 $ $ (52,886) 50,295 268,013 17,930 6,396 2,674 — 38,792 7,057 63,748 327,409 22,012 $ 108,045 $ 24,886 $ (50,841) 501 $ 2,045 68,425 336,438 3,071 21,001 212 2,886 24,580 63,372 423,697 96,288 1,807 $ 109,852 35,703 10,817 $ (48,104) 2,737 45,043 11,405 56,448 7,240 63,688 For the Year Ended December 31, 2016 Storage Solutions North America United Kingdom Total (In thousands) Tank & Pump Solutions Consolidated $ 309,221 $ 18,852 1,530 329,603 77,924 $ 387,145 $ 21,576 2,724 1,840 310 80,958 410,561 92,938 $ 480,083 26,499 4,923 2,040 200 508,622 98,061 Revenues: Rental Sales Other Total revenues Costs and expenses: Rental, selling and general expenses Cost of sales Restructuring expenses Depreciation and amortization Total costs and expenses Income from operations Interest expense, net of interest income Income tax provision (benefit) Capital expenditures for additions to rental fleet, excluding acquisitions 197,440 11,248 5,419 28,722 242,829 86,774 $ $ 20,920 $ $ 22,687 48,096 245,536 13,319 2,071 5,419 — 35,509 6,787 56,954 299,783 24,004 $ 110,778 $ 21,456 $ 25,608 536 $ 2,921 309,294 63,758 16,471 3,152 6,020 601 63,734 28,225 95,736 395,519 2,325 $ 113,103 32,724 11,268 $ 21,650 (3,958) 32,270 10,851 43,121 14,251 57,372 85 MOBILE MINI, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Assets related to our reportable segments include the following: Storage Solutions North America United Kingdom Tank & Pump Solutions Consolidated Total (In thousands) As of December 31, 2018: Goodwill Intangibles, net Rental fleet, net As of December 31, 2017: Goodwill Intangibles, net Rental fleet, net $ 468,400 $ 859 54,342 657,459 140,636 798,095 130,995 55,601 $ 524,001 $ 181,216 $ 705,217 55,542 929,090 1,200 341 $ 468,785 $ 1,314 60,068 714,154 156,413 870,567 118,587 58,906 $ 527,691 $ 181,216 $ 708,907 62,024 989,154 1,956 642 Included in the consolidated balance sheets are long-lived assets other than property, plant and equipment in the U.S. of $1.5 billion as of both December 31, 2018 and 2017. (16) 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, 2018 and 2017. 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. We believe these comparisons of consolidated quarterly selected financial data are not necessarily indicative of future performance. Quarterly EPS may not total to the fiscal year EPS 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 per share data) 2018 Rental revenue Total revenues Income (loss) from operations Net income (loss) Earnings (loss) per share: Basic Diluted 2017 Rental revenue Total revenues Income from operations Net income Earnings per share: Basic Diluted $ 132,338 $ 132,887 $ 140,924 $ 152,048 160,869 140,654 38,911 29,331 14,248 14,855 141,999 28,577 15,000 149,707 (61,296) (52,165) 0.34 0.33 0.34 0.33 (1.18) (1.18) 0.32 0.32 First Quarter Second Quarter Third Quarter Fourth Quarter (In thousands, except per share data) $ 114,742 $ 117,851 $ 127,695 $ 138,537 146,696 36,995 92,071 136,636 26,812 11,228 126,690 22,152 8,777 123,527 23,893 10,152 0.23 0.23 0.20 0.20 0.25 0.25 2.09 2.07 86 MOBILE MINI, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (17) Condensed Consolidating Financial Information for Guarantors The following tables reflect the condensed consolidating financial information of our subsidiary guarantors of the Senior Notes and our non-guarantor subsidiaries. Separate financial statements of the subsidiary guarantors are not presented because the guarantee by each 100% owned subsidiary guarantor is full and unconditional, joint and several, subject to customer exceptions, and management has determined that such information is not material to investors. CONDENSED CONSOLIDATING BALANCE SHEETS As of December 31, 2018 (In thousands) Guarantors Non- Guarantors Eliminations Consolidated ASSETS $ 1,483 $ 114,702 9,811 781,588 130,351 11,341 55,189 645,126 148,811 $ 1,898,402 $ 4,122 $ 15,531 1,914 147,502 23,903 2,057 353 60,091 34,449 289,922 $ 5,605 — $ 130,233 — 11,725 — 929,090 — 154,254 — 13,398 — 55,542 — 705,217 — (183,260) — (183,260) $ 2,005,064 LIABILITIES AND STOCKHOLDERS' EQUITY Cash and cash equivalents Receivables, net Inventories Rental fleet, net Property, plant and equipment, net Other assets Intangibles, net Goodwill Intercompany receivables Total assets Liabilities: Accounts payable Accrued liabilities Lines of credit Obligations under capital leases Senior Notes Deferred income taxes Intercompany payables Total liabilities Commitments and contingencies Stockholders' equity: Common stock Additional paid-in capital Retained earnings Accumulated other comprehensive loss Treasury stock, at cost Total stockholders' equity Total liabilities and stockholders' equity $ 27,271 $ 79,537 589,310 63,253 246,489 151,758 29,586 1,187,204 5,906 $ 8,599 4,185 106 — 18,381 5,675 42,852 — $ 33,177 — 88,136 — 593,495 — 63,359 — 246,489 — 170,139 — (35,261) (35,261) 1,194,795 500 619,850 238,709 — (147,861) 711,198 $ 1,898,402 $ — 147,999 171,932 (72,861) — 247,070 289,922 $ 500 — 619,850 (147,999) 410,641 — (72,861) — (147,861) — (147,999) 810,269 (183,260) $ 2,005,064 87 Cash and cash equivalents Receivables, net Inventories Rental fleet, net Property, plant and equipment, net Other assets Intangibles, net Goodwill Intercompany receivables Total assets Liabilities: Accounts payable Accrued liabilities Lines of credit Obligations under capital leases Senior Notes Deferred income taxes Intercompany payables Total liabilities Commitments and contingencies Stockholders' equity: Common stock Additional paid-in capital Retained earnings Accumulated other comprehensive loss Treasury stock, at cost Total stockholders' equity Total liabilities and stockholders' equity MOBILE MINI, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS CONDENSED CONSOLIDATING BALANCE SHEETS As of December 31, 2017 (In thousands) Guarantors Non- Guarantors Eliminations Consolidated ASSETS $ 803 $ 91,624 13,471 823,997 133,919 13,324 61,360 645,126 145,855 $ 1,929,479 $ 12,648 $ 19,938 2,200 165,157 23,385 2,010 664 63,781 4,806 294,589 $ 13,451 — $ 111,562 — 15,671 — 989,154 — 157,304 — 15,334 — 62,024 — 708,907 — (150,661) — (150,661) $ 2,073,407 LIABILITIES AND STOCKHOLDERS' EQUITY $ 21,004 $ 71,298 634,285 52,648 245,850 153,345 1,437 1,179,867 5,951 $ 6,786 — 143 — 20,409 1,225 34,514 26,955 — $ 78,084 — 634,285 — 52,791 — 245,850 — 173,754 — (2,662) — (2,662) 1,211,719 497 605,369 290,912 — (147,166) 749,612 $ 1,929,479 $ — 147,999 172,410 (60,334) — 260,075 294,589 $ 497 — 605,369 (147,999) 463,322 — (60,334) — (147,166) — (147,999) 861,688 (150,661) $ 2,073,407 88 MOBILE MINI, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS For the Year Ended December 31, 2018 (In thousands) Revenues: Rental Sales Other Total revenues Costs and expenses: Rental, selling and general expenses Cost of sales Restructuring expenses Asset impairment charge and loss on divestiture, net Depreciation and amortization Total costs and expenses Income from operations Other income (expense): Interest income Dividend income Interest expense Foreign currency exchange (Loss) income before income tax provision Income tax provision Net (loss) income Guarantors Non- Guarantors Eliminations Consolidated $ $ 474,347 $ 24,988 445 499,780 307,374 15,028 2,006 92,441 58,769 475,618 24,162 3 8,983 (40,101) 47 (6,906) 677 (7,583) $ 83,850 $ 9,366 233 93,449 56,749 7,409 — 9,699 8,231 82,088 11,361 3 — (803) 17 10,578 2,074 8,504 $ — $ — — — — — — — — — — — (8,983) — — (8,983) (8,983) $ 558,197 34,354 678 593,229 364,123 22,437 2,006 102,140 67,000 557,706 35,523 6 — (40,904) 64 (5,311) 2,751 (8,062) CONDENSED CONSOLIDATING STATEMENTS OF COMPREHENSIVE LOSS For the Year Ended December 31, 2018 (In thousands) Net (loss) income Other comprehensive loss: Foreign currency translation adjustment, net of income tax provision of $88 Other comprehensive loss Comprehensive loss Guarantors $ (7,583) $ Non- Guarantors Eliminations 8,504 $ (8,983) $ Consolidated (8,062) — — (7,583) $ (12,527) (12,527) (4,023) $ — — (8,983) $ (12,527) (12,527) (20,589) $ 89 MOBILE MINI, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS CONDENSED CONSOLIDATING STATEMENTS OF INCOME For the Year Ended December 31, 2017 (In thousands) Revenues: Rental Sales Other Total revenues Costs and expenses: Rental, selling and general expenses Cost of sales Restructuring expenses Depreciation and amortization Total costs and expenses Income from operations Other income (expense): Interest income Interest expense Foreign currency exchange Income before income tax (benefit) provision Income tax (benefit) provision Net income Guarantors Non- Guarantors Eliminations Consolidated $ $ 418,590 $ 24,265 1,829 444,684 283,490 14,464 2,886 55,976 356,816 87,868 10,616 (45,819) — 52,665 (51,256) 103,921 $ 80,235 $ 8,175 455 88,865 52,948 6,537 — 7,396 66,881 21,984 — $ — — — — — — — — — 9 (509) (25) 21,459 3,152 18,307 $ (10,600) 10,600 — — — $ 498,825 32,440 2,284 533,549 336,438 21,001 2,886 63,372 423,697 109,852 25 (35,728) (25) 74,124 (48,104) 122,228 CONDENSED CONSOLIDATING STATEMENTS OF COMPREHENSIVE INCOME For the Year Ended December 31, 2017 (In thousands) Net income Other comprehensive income: Foreign currency translation adjustment, net of income tax provision of $30 Other comprehensive income Comprehensive income Guarantors $ 103,921 $ Non- Guarantors Eliminations 18,307 $ Consolidated 122,228 — $ — — 103,921 $ 20,713 20,713 39,020 $ $ — — — $ 20,713 20,713 142,941 90 MOBILE MINI, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS CONDENSED CONSOLIDATING STATEMENTS OF INCOME For the Year Ended December 31, 2016 (In thousands) Guarantors Non- Guarantors Eliminations Consolidated Revenues: Rental Sales Other Total revenues Costs and expenses: Rental, selling and general expenses Cost of sales Restructuring expenses Depreciation and amortization Total costs and expenses Income from operations Other income (expense): Interest income Interest expense Debt extinguishment expense Deferred financing costs write-off Foreign currency exchange $ 399,200 $ 23,509 1,718 424,427 258,799 14,228 6,015 56,548 335,590 88,837 10,613 (42,662) (9,192) (2,271) — 80,883 $ 2,990 322 84,195 50,495 2,243 5 7,186 59,929 24,266 — $ — — — — — — — — — 2 (677) — — (18) (10,613) 10,613 — — — Income from continuing operations before income tax provision Income tax provision Net income 45,325 18,729 26,596 $ 23,573 2,921 20,652 $ $ — — — $ CONDENSED CONSOLIDATING STATEMENTS OF COMPREHENSIVE INCOME (LOSS) For the Year Ended December 31, 2016 (In thousands) 480,083 26,499 2,040 508,622 309,294 16,471 6,020 63,734 395,519 113,103 2 (32,726) (9,192) (2,271) (18) 68,898 21,650 47,248 Net income Other comprehensive loss: Foreign currency translation adjustment, net of income tax benefit of $106 Other comprehensive loss Comprehensive income (loss) Guarantors $ 26,596 $ Non- Guarantors Eliminations 20,652 $ Consolidated 47,248 — $ — — 26,596 $ (36,885) (36,885) (16,233) $ $ — — — $ (36,885) (36,885) 10,363 91 MOBILE MINI, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS For the Year Ended December 31, 2018 (In thousands) Cash Flows from Operating Activities: Net (loss) income Adjustments to reconcile net (loss) income to net cash provided by operating activities: Asset impairment charge and loss on divestiture, net Provision for doubtful accounts Amortization of deferred financing costs Amortization of long-term liabilities Share-based compensation expense Depreciation and amortization Gain on sale of rental fleet Loss on disposal of property, plant and equipment Deferred income taxes Foreign currency transaction loss Changes in certain assets and liabilities, net of effect of businesses acquired: Receivables Inventories Other assets Accounts payable Accrued liabilities Intercompany Net cash provided by operating activities Cash Flows from Investing Activities: Proceeds from sale of assets held for sale Additions to rental fleet, excluding acquisitions Proceeds from sale of rental fleet Additions to property, plant and equipment, excluding acquisitions Proceeds from sale of property, plant and equipment Net cash used in investing activities Cash Flows from Financing Activities: Net (repayments) borrowings under lines of credit Principal payments on capital lease obligations Issuance of common stock Dividend payments Purchase of treasury stock Intercompany Net cash used in financing activities Effect of exchange rate changes on cash Net increase (decrease) in cash Cash and cash equivalents at beginning of year Cash and cash equivalents at end of year Guarantors Non- Guarantors Eliminations Consolidated $ (7,583) $ 8,504 $ (8,983) $ (8,062) 92,441 2,193 2,060 145 10,642 58,769 (5,307) 569 (1,782) (47) (25,271) (128) 1,030 3,332 7,885 25,345 164,293 9,468 (78,694) 11,835 (10,541) 611 (67,321) (44,975) (9,709) 3,617 (44,530) (695) — (96,292) — 680 803 1,483 $ 9,699 219 — — 225 8,231 (748) 31 (741) (17) 3,260 (278) (204) (423) 2,375 (25,345) 4,788 685 (7,267) 3,158 (6,390) 72 (9,742) 4,185 (37) — — — (8,983) (4,835) 1,263 (8,526) 12,648 4,122 $ — — — — — — — — — — — — — — — (8,983) — — — — — — — — — — — 8,983 8,983 — — — — $ 102,140 2,412 2,060 145 10,867 67,000 (6,055) 600 (2,523) (64) (22,011) (406) 826 2,909 10,260 — 160,098 10,153 (85,961) 14,993 (16,931) 683 (77,063) (40,790) (9,746) 3,617 (44,530) (695) — (92,144) 1,263 (7,846) 13,451 5,605 $ 92 MOBILE MINI, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS For the Year Ended December 31, 2017 (In thousands) Cash Flows from Operating Activities: Net income Adjustments to reconcile net income to net cash provided by operating activities: Provision for doubtful accounts Amortization of deferred financing costs Amortization of long-term liabilities Share-based compensation expense Depreciation and amortization Gain on sale of rental fleet Loss on disposal of property, plant and equipment Deferred income taxes Foreign currency transaction loss Changes in certain assets and liabilities, net of effect of businesses acquired: Receivables Inventories Other assets Accounts payable Accrued liabilities Intercompany Net cash provided by operating activities Cash Flows from Investing Activities: Additions to rental fleet, excluding acquisitions Proceeds from sale of rental fleet Additions to property, plant and equipment, excluding acquisitions Proceeds from sale of property, plant and equipment Net cash used in investing activities Cash Flows from Financing Activities: Net repayments under lines of credit Deferred financing costs Principal payments on capital lease obligations Issuance of common stock Dividend payments Purchase of treasury stock Net cash used in financing activities Effect of exchange rate changes on cash Net (decrease) increase in cash Cash and cash equivalents at beginning of year Cash and cash equivalents at end of year Guarantors Non- Guarantors Eliminations Consolidated $ 103,921 $ 18,307 $ — $ 122,228 4,446 2,060 130 7,083 55,976 (5,319) 140 (52,248) — (15,595) 1,056 (578) (2,939) 12,917 503 111,553 591 — — 290 7,396 (338) 377 2,268 25 (82) (1,146) (57) (2,046) (989) (503) 24,093 (52,115) 11,432 (11,573) 1,521 (14,672) 149 (55,206) (5,450) 702 (14,800) (6,690) (12) (7,364) 5,800 (40,171) (8,367) (56,804) — (457) 1,260 803 $ (185) — (54) — — — (239) 717 9,771 2,877 12,648 $ — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — $ 5,037 2,060 130 7,373 63,372 (5,657) 517 (49,980) 25 (15,677) (90) (635) (4,985) 11,928 — 135,646 (63,688) 12,953 (20,122) 851 (70,006) (6,875) (12) (7,418) 5,800 (40,171) (8,367) (57,043) 717 9,314 4,137 13,451 $ 93 MOBILE MINI, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS For the Year Ended December 31, 2016 (In thousands) Cash Flows from Operating Activities: Net income Adjustments to reconcile net income to net cash provided by operating activities: Debt extinguishment expense Deferred financing costs write-off Provision for doubtful accounts Amortization of deferred financing costs Amortization of long-term liabilities Share-based compensation expense Depreciation and amortization Gain on sale of rental fleet Loss on disposal of property, plant and equipment Deferred income taxes Tax shortfall on equity award transactions Foreign currency transaction loss Changes in certain assets and liabilities, net of effect of businesses acquired: Receivables Inventories Other assets Accounts payable Accrued liabilities Intercompany Net cash provided by operating activities Cash Flows from Investing Activities: Cash paid for businesses acquired, net of cash acquired Additions to rental fleet, excluding acquisitions Proceeds from sale of rental fleet Additions to property, plant and equipment, excluding acquisitions Proceeds from sale of property, plant and equipment Net cash used in investing activities Cash Flows from Financing Activities: Net repayments under lines of credit Proceeds from issuance of 5.875% senior notes due 2024 Redemption of 7.875% senior notes due 2020 Debt extinguishment expense Deferred financing costs Principal payments on capital lease obligations Issuance of common stock Dividend payments Purchase of treasury stock Net cash used in financing activities Effect of exchange rate changes on cash Net increase in cash Cash and cash equivalents at beginning of year Cash and cash equivalents at end of year Guarantors Non- Guarantors Eliminations Consolidated 26,596 20,652 — $ 47,248 9,192 2,271 5,498 1,968 116 7,126 56,548 (5,014) 1,131 18,713 (242) — (23,543) (302) 105 (930) 7,227 776 107,236 (9,206) (46,471) 11,976 (22,402) 2,053 (64,050) (24,775) 250,000 (200,000) (9,192) (5,369) (6,399) 468 (36,402) (11,290) (42,959) — 227 1,033 1,260 $ — — 664 8 — 273 7,186 (458) 154 2,921 — 18 (3,778) 900 (45) 1,169 120 (776) 29,008 (7,359) (10,901) 1,703 (8,257) 711 (24,103) (1,773) — — — — (121) — — — (1,894) (714) 2,297 580 2,877 $ — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — $ 9,192 2,271 6,162 1,976 116 7,399 63,734 (5,472) 1,285 21,634 (242) 18 (27,321) 598 60 239 7,347 — 136,244 (16,565) (57,372) 13,679 (30,659) 2,764 (88,153) (26,548) 250,000 (200,000) (9,192) (5,369) (6,520) 468 (36,402) (11,290) (44,853) (714) 2,524 1,613 4,137 $ 94 MOBILE MINI, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (18) Subsequent Events On January 30, 2019, the Board authorized and declared a cash dividend to all our common stockholders of $0.275 per share of common stock, payable on March 13, 2019 to stockholders of record as of the close of business February 27, 2019. Each future quarterly dividend payment is subject to review and approval by the Board. 95 ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE. None. ITEM 9A. CONTROLS AND PROCEDURES. Controls and Procedures As of the end of the period covered by this Annual Report on Form 10-K, we carried out an evaluation, under the supervision and with the participation of our management, including our Chief Executive Officer and our Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act. Based on that evaluation, our Chief Executive Officer and our Chief Financial Officer concluded that, as of the end of the period covered by this Annual Report on Form 10-K, the Company’s disclosure controls and procedures, were effective such that the information relating to the Company required to be disclosed in our SEC reports (i) is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and (ii) is accumulated and communicated to the Company’s management, including our Chief Executive Officer and our Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. 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 the Company’s internal control over financial reporting based on the framework in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on this evaluation, management concluded that the Company’s internal control over financial reporting was effective as of December 31, 2018. Our internal control over financial reporting as of December 31, 2018 has been audited by KPMG LLP, an independent registered public accounting firm, as stated in their report which is included herein. Changes in Internal Control Over Financial Reporting Under the supervision and with the participation of our management, including our Principal Executive Officer and Principal Financial Officer, we conducted an evaluation of any changes in our internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) that occurred during our most recently completed fiscal quarter. Based on that evaluation, our Principal Executive Officer and Principal Financial Officer concluded that there has not been any change in our internal control over financial reporting during that quarter that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting. ITEM 9B. OTHER INFORMATION. None. 96 PART III ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE. The information required to be disclosed by this item is incorporated herein by reference to our definitive proxy statement for the 2019 Annual Meeting of Stockholders (the “2019 Proxy Statement”), which we expect to file with the SEC within 120 days after the end of our fiscal year ended December 31, 2018. ITEM 11. EXECUTIVE COMPENSATION. The information required to be disclosed by this item is incorporated herein by reference to the 2019 Proxy Statement, which we expect to file with the SEC within 120 days after the end of our fiscal year ended December 31, 2018. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS. Equity Compensation Plan Information A description of our equity compensation plans approved by our shareholders is included in Note 10 to the accompanying consolidated financial statements. 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) 954 $ 35.34 1,625 2,000 2,954 31.45 32.71 1,625 Plan Category Equity compensation plans approved by Mobile Mini Stockholders (1) Equity compensation plans not approved by Mobile Mini Stockholders (2) Totals (1) Options to purchase shares were outstanding under our Amended and Restated Equity Incentive Plan. (2) Reflects shares subject to an outstanding stock option agreement awarded as a non-plan based inducement grant in connection with the hiring of Mr. Olsson as the Company’s President and CEO. This grant was made pursuant to NASDAQ rule 5635(c)(4). On December 31, 2018, the closing price of Mobile Mini’s common stock as reported by The NASDAQ Stock Market was $31.75. All other information required to be disclosed by this item is incorporated herein by reference to the 2019 Proxy Statement, which we expect to file with the SEC within 120 days after the end of our fiscal year ended December 31, 2018. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE. The information required to be disclosed by this item is incorporated herein by reference to the 2019 Proxy Statement, which we expect to file with the SEC within 120 days after the end of our fiscal year ended December 31, 2018. ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES. The information required to be disclosed by this item is incorporated herein by reference to the 2019 Proxy Statement, which we expect to file with the SEC within 120 days after the end of our fiscal year ended December 31, 2018. 97 ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES. (a) Financial Statements: PART IV (1) The financial statements required to be included in this Annual Report on Form 10-K are included in Item 8 of Part II of this Annual Report on Form 10-K. (2) All schedules have been omitted because they are not applicable or because the information is included elsewhere in this Annual Report on Form 10-K. Description 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 Current Report on Form 8-K filed with the SEC on February 28, 2008). Stock Purchase Agreement dated as of November 13, 2014 by and among Mobile Mini, Inc., each Seller listed on Annex A thereto, Gulf Tanks Holdings, Inc. and Odyssey Investment Partners, LLC. (Incorporated by reference to Exhibit 2.1 to the Registrant’s Current Report on Form 8-K filed with the SEC on December 11, 2014). Amended and Restated Certificate of Incorporation of Mobile Mini, Inc. (Incorporated by reference to Exhibit 3.1 to the Registrant’s Annual Report on Form 10-K for the fiscal year ended December 31, 1997 filed with the SEC on March 27, 1998). Certificate of Amendment to the Amended and Restated Certificate of Incorporation of the Mobile Mini, Inc., dated July 20, 2000. (Incorporated by reference to Exhibit 3.1A to the Registrant’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2000 filed with the SEC on August 14, 2000). Form of Certificate of Designation, Preferences and Rights of Series C Junior Participating Preferred Stock of Mobile Mini, Inc. (Incorporated by reference to Exhibit A to Exhibit 1 to the Registrant’s Registration Statement on Form 8-A filed with the SEC on December 13, 1999). Certificate of Amendment of the Amended and Restated Certificate of Incorporation of Mobile Mini, Inc., dated June 26, 2008. (Incorporated by reference to Exhibit 3.2 to the Registrant’s Current Report on Form 8-K filed with the SEC on July 1, 2008). Certificate of Designation of Mobile Mini, Inc. Series A Convertible Redeemable Participating Preferred Stock, dated June 26, 2008. (Incorporated by reference to Exhibit 3.1 to the Registrant’s Current Report on Form 8-K filed with the SEC on July 1, 2008). Certificate of Amendment to the Amended and Restated Certificate of Incorporation of Mobile Mini, Inc., dated September 14, 2015 (Incorporated by reference to Exhibit 3.1 to the Registrant’s Current Report on Form 8-K filed with the SEC on September 15, 2015). Third Amended and Restated Bylaws of Mobile Mini, Inc., effective as of September 14, 2015. (Incorporated by reference to Exhibit 3.2 to the Registrant’s Current Report on Form 8-K filed with the SEC on September 15, 2015). Fourth Amended and Restated Bylaws of Mobile Mini, Inc., effective as of January 31, 2018. (Incorporated by reference to Exhibit 3.1 to the Registrant’s Current Report on Form 8-K filed with the SEC on February 6, 2018). Form of Common Stock Certificate. (Incorporated by reference to Exhibit 4.1 of the Registrant’s Annual Report to Form 10-K for the fiscal year ended December 31, 2003 filed with the SEC on March 15, 2004). Rights Agreement, dated as of December 9, 1999, between Mobile Mini, Inc. and Norwest Bank Minnesota, NA, as rights agent. (Incorporated by reference to Exhibit 1 to the Registrant’s Registration Statement on Form 8-A filed with the SEC on December 13, 1999). Indenture, dated as of November 23, 2010, among Mobile Mini, Inc., the Guarantor parties thereto, Law Debenture Trust Company of New York, as trustee, and Deutsche Bank Trust Company Americas, as paying agent, registrar and transfer agent. (Incorporated by reference to Exhibit 4.1 to the Registrant’s Current Report on Form 8-K filed with the SEC on November 29, 2010). Exhibit Number 2.1 2.2+ 3.1 3.2 3.3 3.4 3.5 3.6 3.7 3.8 4.1 4.2 4.3 98 Exhibit Number 4.4 4.5 10.1† 10.2† 10.3† 10.4† 10.5† 10.6† 10.7† 10.8† 10.9 10.10++ 10.11† Description Indenture, dated as of May 9, 2016, by and among the Company, the subsidiary guarantors identified therein, and Deutsche Bank Trust Company Americas, as trustee, paying agent, registrar and transfer agent (Incorporated by reference to Exhibit 4.1 to the Registrant’s Current Report on Form 8-K filed with the SEC on May 10, 2016). Registration Rights Agreement, dated as of May 9, 2016, by and among the Company, the subsidiary guarantors identified therein, Deutsche Bank Securities Inc., Merrill Lynch, Pierce, Fenner & Smith Incorporated, Barclays Capital Inc., BNP Paribas Securities Corp., J.P. Morgan Securities LLC, BBVA Securities Inc., and Mitsubishi UFJ Securities (USA) Inc., as initial purchasers (Incorporated by reference to Exhibit 4.2 to the Registrant’s Current Report on Form 8-K filed with the SEC on May 10, 2016). Mobile Mini, Inc. Amended and Restated 1999 Stock Option Plan, as amended through March 25, 2003. (Incorporated by reference to Appendix B to the Registrant’s Definitive Proxy Statement for its 2003 Annual Meeting of Stockholders, filed with the SEC on April 11, 2003). Form of Stock Option Grant Agreement. (Incorporated by reference to Exhibit 10.2.1 to the Registrant’s Annual Report on Form 10-K for the fiscal year ended December 31, 2004 filed with the SEC on March 16, 2005). Mobile Mini, Inc. Amended and Restated Equity Incentive Plan, effective March 20, 2015. (Incorporated by reference to Appendix B of the Registrant’s Definitive Proxy Statement for its 2015 Annual Meeting of Stockholders filed with the SEC on March 30, 2015). Amendment No. 1 to the Mobile Mini, Inc. Amended and Restated Equity Incentive Plan (effective as of March 11, 2016) (Incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed with the SEC on March 14, 2016). Employment Agreement dated as of December 22, 2009, by and between Mobile Mini, Inc. and Christopher J. Miner. (Incorporated by reference to Exhibit 99.1 to the Registrant’s Current Report on Form 8-K filed with the SEC on December 24, 2009). Amendment No. 1 to Employment Agreement, effective December 21, 2012, by and between Mobile Mini, Inc. and Christopher J. Miner (Incorporated by reference to Exhibit 10.14 to the Registrant’s Annual Report on Form 10-K for the fiscal year ended December 31, 2012 filed with the SEC on March 1, 2013). Amendment No. 2 to Employment Agreement, dated April 20, 2015 by and between Mobile Mini, Inc. and Christopher J. Miner. (Incorporated by reference to Exhibit 10.3 to the Registrant’s Current Report on Form 8-K filed with the SEC on April 21, 2015). Form of Indemnification Agreement between Mobile Mini, Inc. and its Directors and Executive Officers (Incorporated by reference to Exhibit 10.20 to the Registrant’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2004 filed with the SEC on August 9, 2004). ABL Credit Agreement, dated February 22, 2012, among Mobile Mini, Deutsche Bank AG New York Branch and other lenders party thereto. (Incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed with the SEC on February 28, 2012). Schedules to the ABL Credit Agreement, dated February 22, 2012, among Mobile Mini, Deutsche Bank AG New York Branch and other Lenders party thereto. (Incorporated by reference to Exhibit 10.2 to the Registrant’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2012 filed with the SEC on May 10, 2012). Amended and Restated Executive Employment Agreement, effective as of January 14, 2016, by and between Mobile Mini, Inc. and Erik Olsson. (Incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed with the SEC on January 14, 2016). 10.12† Form of Stock Option Agreement between Mobile Mini, Inc. and Erik Olsson. (Incorporated by reference to Exhibit 99.2 to the Registrant’s Registration Statement on Form S-8 filed with the SEC on May 10, 2013). 99 Exhibit Number 10.13† 10.14† 10.15† 10.16 10.17 Description Second Amended and Restated Employment Agreement between Mobile Mini, Inc. and Kelly Williams, dated June 4, 2014. (Incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed with the SEC on June 10, 2014). Amendment No. 1 to Second Amended and Restated Employment Agreement, dated April 20, 2015 by and between Mobile Mini, Inc. and Kelly Williams. (Incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed with the SEC on April 21, 2015) Third Amended and Restated Employment Agreement between Mobile Mini and Kelly Williams, dated January 15, 2019. (Incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed with the SEC on January 22, 2019) Incremental Credit Agreement dated as of December 10, 2014, to the ABL Credit Agreement, dated as of February 22, 2012, among Mobile Mini, Inc., the other borrowers and guarantors party thereto, the lenders from time to time party thereto and Deutsche Bank AG New York Branch, as administrative agent. (Incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed with the SEC on December 11, 2014). Amended and Restated ABL Credit Agreement, dated December 14, 2015, among Mobile Mini, Inc., Deutsche Bank AG New York Branch, and the other lenders party thereto. (Incorporated by reference to Exhibit 10.22 to the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2015, filed with the SEC on February 5, 2016). 10.18++ Schedules to the Amended and Restated ABL Credit Agreement, dated December 14, 2015, between Mobile Mini, Inc., Deutsche Bank AG New York Branch and the other lenders party thereto. (Incorporated by reference to Exhibit 10.23 to the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2015, filed with the SEC on February 5, 2016). 10.19 10.20 10.21† 10.22† 21* 23.1* 24* 31.1* 31.2* 32.1** Asset Purchase Agreement, dated as of April 16, 2015, between New Acton Mobile Industries LLC and Mobile Mini, Inc. (Incorporated by reference to Exhibit 10.1 to the Registrant’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2015 filed with the SEC on July 23, 2015). Purchase Agreement, dated May 4, 2016, by and between the Company, and Deutsche Bank Securities Inc., as the representative of the several parties listed on Schedule II thereto (Incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed with the SEC on May 10, 2016). Employment Agreement between Mobile Mini, Inc. and Van Welch, dated August 31, 2017 (Incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed with the SEC on August 7, 2017). Employment Agreement between Mobile Mini, Inc. and Mark Krivoruchka, dated November 30, 2017 (Incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed with the SEC on December 5, 2017). Subsidiaries of Mobile Mini, Inc. Consent of Independent Registered Public Accounting Firm. Power of Attorney (included on signature page). Certification of Chief Executive Officer pursuant to Item 601(b)(31) of Regulation S-K. Certification of Chief Financial Officer pursuant to Item 601(b)(31) of Regulation S-K. Certification of Chief Executive Officer and Chief Financial Officer pursuant to Item 601(b)(32) of Regulation S- K. 101.INS* XBRL Instance Document. 101.SCH* XBRL Taxonomy Extension Schema Document. 101.CAL* XBRL Taxonomy Extension Calculation Linkbase Document. 100 Exhibit Number Description 101.DEF* XBRL Taxonomy Extension Definition Linkbase Document. 101.LAB* XBRL Taxonomy Extension Labels Linkbase Document. 101.PRE* XBRL Taxonomy Extension Presentation Linkbase Document. * ** + Filed herewith. Furnished herewith. The schedules and exhibits in this exhibit have been omitted pursuant to Item 601(b)(2) of Regulation S-K. Mobile Mini agrees to furnish supplementally a copy of such schedules and exhibits, or any section thereof, to the SEC upon request. ++ Confidential treatment has been granted for certain portions of this exhibit pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended. The confidential information has been omitted and filed separately with the Securities and Exchange Commission. Management contract or compensatory arrangement. † 101 Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this Annual Report to be signed on its behalf by the undersigned, thereunto duly authorized. SIGNATURES Date: February 5, 2019 MOBILE MINI, INC. By: /s/ Erik Olsson Erik Olsson Chief Executive Officer KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Van Welch his true and lawful attorneys-in-fact and agent, with full power of substitution and resubstitution, for him and in his name, place and stead, in any and all capacities, to sign any and all amendments to this Annual Report, and to file the same, with all exhibits thereto, and other documents in connection therewith with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, and fully and to all intents and purposes as he might or could do in person hereby ratifying and confirming all that said attorney-in-fact and agents, or his substitute or substitutes, may lawfully do or cause to be done by virtue hereof. Pursuant to the requirements of the Securities Exchange Act of 1934, this Annual Report has been signed by the following persons on behalf of the registrant and in the capacities and on the dates indicated. Date: February 5, 2019 Date: February 5, 2019 Date: February 5, 2019 Date: February 5, 2019 Date: February 5, 2019 Date: February 5, 2019 Date: February 5, 2019 Date: February 5, 2019 Date: February 5, 2019 Date: February 5, 2019 Date: February 5, 2019 /s/ Erik Olsson Erik Olsson Chief Executive Officer and Director (Principal Executive Officer) /s/ Van Welch Van Welch Executive Vice President and Chief Financial Officer (Principal Financial Officer) /s/ Chad Ainsworth Chad Ainsworth Vice President and Chief Accounting Officer (Principal Accounting Officer) /s/ Michael L. Watts Michael L. Watts Chairman of the Board and Director /s/ Sara R. Dial Sara R. Dial, Director /s/ Jeffrey S. Goble Jeffrey S. Goble, Director /s/ James J. Martell James J. Martell, Director /s/ Stephen A McConnell Stephen A McConnell, Director /s/ Frederick G. McNamee, III Frederick G. McNamee, III, Director /s/ Kimberly J. McWaters Kimberly J. McWaters, Director /s/ Lawrence Trachtenberg Lawrence Trachtenberg, Director By: By: By: By: By: By: By: By: By: By: By: 102 

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