MINI

Mobile Mini, Inc. (MINI)

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Mobile Mini, Inc. (MINI)

Q2 2008 Earnings Call Transcript

August 7, 2008 12:00 pm ET

Executives

Steve Bunger – Chairman, President, and CEO

Larry Trachtenberg EVP and CFO

Analysts

David Gold – Sidoti & Company

Scott Schneeberger – Oppenheimer & Co.

Ted Kundtz – Needham & Company

Jamie Sullivan – RBC Capital Markets

Brandt Sakakeeny – Deutsche Bank

Bob Franklin – Prudential Financial

Bardor John [ph] – Deutsche Bank

Christopher Hwerty [ph] – Oppenheimer & Co.

Philip Volpicelli – Goldman Sachs

David Manthey – Robert W. Baird & Co.

Jamie Sullivan – RBC Capital Markets

Presentation

Operator

Good day everyone, and welcome to the Mobile Mini Incorporated second quarter 2008 conference call. At this time I would like to inform you that this conference is being recorded and that all participants are currently in a listen-only mode. I will now turn the conference over to Mr. Steve Bunger. Please go ahead sir.

Steven Bunger

Thank you and good morning. I want to welcome everyone to Mobile Mini’s 2008 second quarter results conference call. I am Steve Bunger and with me is Larry Trachtenberg, our Executive Vice President and CFO. To start with Larry 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 will open the call up for questions and answers. With that said I am going to turn the call over to Larry.

Larry Trachtenberg

Thanks Steve. We issued a press release this morning detailing our second quarter and six month ended June 30, 2008, operating results. This release is available on our website and can also be accessed through various web-based news services. Our Form 8-K containing the press release has been filed and is also now available. Before we get started I would like to read our legal disclaimer. This call may contain forward-looking statements particularly regarding earnings estimates and Mobile Mini’s merger with Mobile Storage Group, and related estimates of merger related and brands consolidation expenses and cost savings, 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. Discussion of debt extinguishment expense which is excluded from our 2007 non-GAAP operating results and the merger related expenses that are excluded in calculating our 2008 non-GAAP operating results is included in our press release that we issued this morning.

In this conference call we will discuss certain non-GAAP financial measures such as EBITDA and free cash flow. Reconciliations of how we define and arrive at EBITDA and free cash flow are included in our Form 8-K. Mobile Mini today reported its second quarter financial results. Revenues for the second quarter increased by 3.6% to $81.1 million from $76.3 million last year. These revenues increased 3.5% to $72.8 million from $70.4 million last year.

EBITDA declined slightly to $32 million from last year’s EBITDA of $32.8 million. Net income for the quarter ended June 30, 2008, declined to $12.1 million or $0.35 per diluted share as compared with net income of $13.2 million or $0.36 per diluted share for the same quarter of last year. The company’s operating margin was 32.3% as compared with 35.3% during the same quarter of last year. Operating margins were impacted by continued weakness in our California, Arizona, and Florida branches related to the weakness in construction activity and the general economy in those states. That weakness was offset in part by continued strong growth in Europe.

As we pointed out in the past, this growth required considerable infrastructure build out. Our expense structure increased by over $500,000 per quarter between the second and third quarters of 2007 and the effects of those cost increases can be seen in our year-over-year comparisons. However, as we have stated in prior calls, margins in Europe hit their low point during the third quarter of 2007, and have been increasing since. Now that we have added the considerable operations of Mobile Storage in Europe, we would expect much stronger operating results in the U.K going forward. In addition our year-over-year comparisons were impacted by a 55% increase in the cost of fuel. These costs were offset in part by a fuel surcharge added in April.

For the six months ended June 30, 2008, revenues reached $159.6 million, EBITDA totalled $61.4 million and non-GAAP earnings per share were $0.65. During the six months ended June 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 $11.2 million of free cash flow versus a cash requirement of $33.3 million during the same period of last year. That really shows you just – you know, it just held much of our Capex as discretionary Capex and how when growth slows down we can really change our business from a user of cash to a generator of free cash flow.

Our leased fleet capital expenditures, net of proceeds from sales of lease fleet units were $25.6 million, and only $10.8 million in the second quarter. Our PP&E Capex totaled $4.8 million. We generated $41.5 million of cash flow from operations. The company’s ratio of funded debt to EBITDA stood at 3.95-to-1 at June 30, 2008, as calculated in accordance with our credit agreement.

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