MINI

Mobile Mini, Inc. (MINI)

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Mobile Mini, Inc. (MINI)

Q3 2008 Earnings Call

November 3, 2008 5:30 pm ET

Executives

Steve Bunger – Chairman, President, and Chief Executive Officer

Larry Trachtenberg – Executive Vice President and Chief Financial Officer

Analysts

Adrienne Colby - Deutsche Bank

Philip Volpicelli - Goldman Sachs

Scott Schneeberger - CIBC World Markets

Theodor Kundtz - Needham & Company

David Gold - Sidoti

Chris Dougherty - Oppenheimer & Co.

Jamie Sullivan - RBC Capital Markets

Sundar Varadarajan - Deutsche Bank

Jim Harris - Bislett Partners

Presentation

Operator

Good day, everyone, and welcome to Mobile Mini, Inc. third quarter 2008 conference call. (Operator Instructions)

I would now turn the conference over to Steve Bunger, President and CEO. Please go ahead, sir.

Steve Bunger

Thank you and good afternoon. I also want to welcome everyone to Mobile Mini's 2008 third quarter results conference call. I'm Steve Bunger and with me is Larry Trachtenberg, our Executive Vice President and CFO, and also for a short comment later in the conversation, Mark Funk, our current Executive Vice President and soon-to-be CFO.

To start with, Larry's going to read the disclaimer, outline the press release and give you his comments. Following that I will give you my comments. Mark will give a few comments, and then we'll open the call up for questions and answers.

So with that said, I'll turn it over to Larry.

Larry Trachtenberg

Thanks, Steve. We issued a press release this afternoon detailing our third quarter and nine months ended September 30, 2008 operating results. This release is available on our website and can also be accessed through various web-based news services. A Form 8-K containing the press release has been filed and is also now available.

Before we get started, I'd like to read you our legal disclaimer. This call may include forward-looking statements, particularly regarding earnings estimates and anticipated cost savings resulting from our recent merger with Mobile Storage Group, which involve risks and uncertainties that could cause actual results to differ materially from those currently anticipated. Risks and uncertainties that may affect future results include those that are described from time to time in the company's SEC filings. These forward-looking statements represent the judgment of the company as of this date and Mobile Mini disclaims any intent or obligation to update forward-looking statements.

Unless otherwise noted, all results discussed on this call will be our non-GAAP financial results. A discussion of debt extinguishment expense included in our 2007 non-GAAP operating results and merger-related expenses included in our 2008 non-GAAP operating results is included in our press release issued this morning.

In this conference call we will discuss certain non-GAAP financial measures such as EBITDA and free cash flow. Reconciliation of how we define and arrive at EBITDA and free cash flow are included in our Form 8-K.

Mobile Mini today reported its third quarter financial results. Revenues during the third quarter increased by 59% to $132.8 million from $83.5 million last year. [Revenues] increased 61.3% to $119.3 million from $88.6 million last year.

EBITDA increased 69.2% to $55.7 million from last year's EBITDA of $32.9 million.

Net income for the quarter ended September 30, 2008 increased to $17.1 million or $0.40 per diluted share as compared to net income of $12.6 million or $0.35 per diluted share for the same quarter last year.

The company's operating margin increased to 34.7% from 32.6% during the third quarter of fiscal 2007.

Our improved results this year result primarily from the $6.4 million of cost saving synergies achieved in connection with our merger with Mobile Storage Group in June 2008. This merger enabled us to combine branch operations across the country and to take advantage of the operating leverage inherent in our business model. In addition we were able to eliminate duplicate corporate overhead. '

These cost reductions were offset in part by continued weakness in our rentals to the nonresidential construction segment. We are clearly in the midst of a downturn in nonresidential construction activity which continues to be most severe in California, Arizona and Florida.

In addition, our year-over-year comparison was impacted by a 92% increase in the cost of fuel. Although fuel costs have declined in recent weeks, most of the decline occurred after the end of the quarter.

For the nine months ended September 30, 2008, revenues reached $292.4 million, EBITDA totaled $117.1 million, and pro forma earnings per share were $1.06.

During the nine months ended September 30, 2008, we significantly cut back on our capital expenditures and generated free cash flow for the first time since we adopted our leasing model. We generated $14.8 million of free cash flow versus a cash requirement of $34 million during the same period last year.

Our lease fleet capital expenditures net of proceeds from sale of lease fleet units were $39 million, and our PP&E CapEx totaled $10.7 million.

We generated $64.6 million of cash flow from operations.

The company's ratio of funded debt to EBITDA stood at 3.98 to 1 at September 30, 2008, as calculated in accordance with our credit agreement.

We have consistently maintained the strongest balance sheet in the industry, which has enabled us to take advantage of the Mobile Storage Group merger opportunity.

Now in light of the state of the credit markets, we have received a number of questions in recent weeks regarding our debt maturities and the covenants in our various debt agreements.

We thought it would be useful to go over some of these items on this call. We have two issues of publicly held notes outstanding as well as a $900 million line of credit. The earliest of these issues to mature is our line of credit, which matures in June 2013. There is no need to refinance any of our debt before then.

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