MINI

Mobile Mini, Inc. (MINI)

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Mobile Mini Inc. (MINI)

Q1 2009 Earnings Call

May 6, 2009 12:00 pm ET

Executives

Steven G. Bunger – President and Chief Executive Officer

Mark E. Funk – Executive Vice President and Chief Financial Officer

Analysts

Adrienne Colby – Deutsche Bank Securities

David Manthey – Robert W. Baird & Co.

Theodor Kundtz – Needham & Company

Jamie Sullivan – RBC Capital Markets

Bob Franklin - Prudential Equity Group

Gregg Hillman – First Wilshire Securities

[Alan Weber – Frebodian Company]

Chris Doherty – Oppenheimer

[Chris Sipple] – Blue Line Capital

Phyllis Camara – Pax World Funds

Scott Schneeberger – Oppenheimer & Co.

David Gold – Sidoti & Company

Chris White with Greenstone

Presentation

Operator

Welcome to the Mobile Mini Incorporated first quarter 2009 conference call. (Operator Instructions) I will now turn the conference over to Steve Bunger, President and CEO.

Steven G. Bunger

I want to welcome everyone to Mobile Mini's 2009 first quarter results conference call. I am Steve Bunger and with me is Mark Funk our Executive Vice President and CFO. To start with, Mark is going to read the disclaimer, outline the press release and give you his comments. Following that, I will give you my comments and then we'll open up the call to Q&A.

So, with that said, I'm going to turn the call over to Mark.

Mark E. Funk

We issued a press release this morning detailing our first quarter operating results. This release is available on our website and can be accessed through various web-based news services. In addition, our Form 8-K containing the press release has been filed and is now also 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 merger last June 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 in this call will be our non-GAAP financial results. A discussion of integration, merger and restructuring expenses are included in our 2008 and 2009 non-GAAP operating results. These items are included in our press release issued this morning.

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

Now, for the revenues. Revenues during the fourth quarter increased 27% to $100.2 million from $78.5 million last year. Lease revenue increased 28% to $89.5 million from $70 million last year. EBITDA increased 41% to $41.6 million from last year's EBITDA of $29.5 million, and net income for the quarter on March 31, 2009 increased $10.7 million or 9% compared to a net income of $9.8 million for the same quarter last year.

In addition to EBITDA dollars, EBITDA margin increased 4.1 percentage points from 37.5% to 41.6%. This improvement in EBITDA margin is due to headcount reductions to right-size our business given the economy, as well as the 8.1 million of cost synergies we achieved in the first quarter from our merger with Mobile Storage last June.

This merger enabled us to combine overlapping branches across North America and the U.K., and also to take advantage of the operating leverage inherent in our business model. In addition, we eliminated duplicative corporate overhead in both the U.S. and U.K.

As far as leasing revenues, leasing revenues in the first quarter of 2009 declined approximately 18% from fourth quarter 2008 levels. A portion of this decline, approximately 5%, is due to our fourth quarter seasonal retail business, which traditionally contributes to our strongest quarter of the year, meaning the fourth quarter.

The balance of the decrease is a result of the downturn in non-residential construction and the overall recession. We are hopeful that the March 2009 increase in the ABI, which is the architectural building index level which hit its highest level since last August 2008, will translate to an improvement in current non-residential activity in the near future.

Given our utilization rates in this discretionary nature of our fleet CapEx, we continue to significantly cut back on our capital expenditures, and you can see this in our numbers. For the first quarter of 2009, we had $1.4 million of net capital proceeds, not net CapEx, but net capital proceeds in excess of our capital expenditures versus capital expenditures of $16.5 million for the first quarter of 2008.

The net proceeds amount of $1.4 million was driven by our ability to sell units in our fleet at attractive margins, which more than covered all our CapEx needs for the quarter, including PP&E CapEx. Please note that we often sell storage units in nice margins regardless of age as these units do not have a model year and require very little maintenance.

The company's ratio of funded debt to EBITDA stood at 4.1 to 1 at March 31, 2009, this is calculated in accordance with a credit agreement. In addition, we believe we have the strongest balance sheet in the industry. Cash flows from operations, as well as our net capital proceeds from the sell of lease fleet, allowed us to pay down our revolving line of credit by an additional $24.5 million for the quarter, which brings the total pay down on the revolver to $74.1 million since June 30, 2008, which is right at the time of our merger with MSG.

With the first quarter of 2009 complete, we now have five consecutive reporting quarters of free cash flow. The first quarter of this year was our best free cash flow quarter ever and the free cash flow had five consecutive excludes acquisitions.

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