U. S. SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

Form 10-Q

þ		QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2008

o		TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from                      to                     

(Exact name of registrant as specific in its charter)

Delaware		86-0748362
(State or other jurisdiction of		(IRS Employer
incorporation or organization)		Identification No.)

7420 S. Kyrene Road, Suite 101
Tempe, Arizona 85283
(Address of principal executive offices)

(480) 894-6311
(Registrant’s telephone number, including area code)

     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 þ No o

      Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer þ		Accelerated filer o		Non-accelerated filer   o (Do not check if a smaller reporting company)		Smaller reporting company o

Indicate by check mark whether the registrant is a shell company (as defined by Rule 12b-2 of the Securities Exchange Act of 1934)
Yes o No þ

At November 3, 2008, there were outstanding 34,867,324 shares of the issuer’s common stock.

 

 

MOBILE MINI, INC.
INDEX TO FORM 10-Q FILING
FOR THE QUARTER ENDED SEPTEMBER 30, 2008

TABLE OF CONTENTS

		PAGE
		NUMBER
PART I. FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements			3
Condensed Consolidated Balance Sheets December 31, 2007 and September 30, 2008 (unaudited)			3
Condensed Consolidated Statements of Income (unaudited):
Three Months Ended September 30, 2007 and September 30, 2008			4
Nine Months Ended September, 2007 and September 30, 2008			5
Condensed Consolidated Statements of Cash Flows (unaudited)
Nine Months Ended September 30, 2007 and September 30, 2008			6
Notes to Condensed Consolidated Financial Statements (unaudited)			7
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations			30
Item 3. Quantitative and Qualitative Disclosures About Market Risk			45
Item 4. Controls and Procedures			45
PART II. OTHER INFORMATION
Item 1A. Risk Factors			46
Item 6. Exhibits			47
SIGNATURES
EX-31.1
EX-31.2
EX-32.1

PART I. FINANCIAL INFORMATION

ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS

MOBILE MINI, INC.

		December 31, 2007				September 30, 2008
		(See Note A)				(unaudited)
ASSETS
Cash and cash equivalents		$	3,703			$	4,852
Receivables, net of allowance for doubtful accounts of $3,993 and $7,560 at December 31, 2007 and September 30, 2008, respectively			37,221				68,809
Inventories			29,431				38,650
Lease fleet, net			802,923				1,096,126
Property, plant and equipment, net			55,363				91,008
Deposits and prepaid expenses			11,334				12,978
Other assets and intangibles, net			9,086				82,909
Goodwill			79,790				544,403
Total assets		$	1,028,851			$	1,939,735
LIABILITIES AND STOCKHOLDERS’ EQUITY
Liabilities:
Accounts payable		$	20,560			$	26,694
Accrued liabilities			38,941				97,835
Lines of credit			237,857				589,086
Notes payable			743				438
Obligations under capital leases			10				5,906
Senior notes, net			149,379				345,609
Deferred income taxes			123,471				195,084
Total liabilities			570,961				1,260,652
Commitments and contingencies
Redeemable convertible preferred stock; $.01 par value, 20,000 shares authorized, 0 and 8,556 issued and outstanding with liquidation preference of $0 and $153,990 at December 31, 2007 and September 30, 2008, respectively			—				153,990
Stockholders’ equity:
Common stock; $.01 par value, 95,000 shares authorized, 34,573 and 34,869 issued and outstanding at December 31, 2007 and September 30, 2008, respectively			367				370
Additional paid-in capital			278,593				327,368
Retained earnings			213,894				242,691
Accumulated other comprehensive income			4,336				(6,036	)
Treasury stock, at cost, 2,175 shares			(39,300	)			(39,300	)
Total stockholders’ equity			457,890				525,093
Total liabilities and stockholders’ equity		$	1,028,851			$	1,939,735

See accompanying notes to the condensed consolidated financial statements.

MOBILE MINI, INC.

		Three Months Ended September 30,
		2007				2008
Revenues:
Leasing		$	73,982			$	119,323
Sales			8,691				12,528
Other			809				901
Total revenues			83,482				132,752
Costs and expenses:
Cost of sales			5,975				8,571
Leasing, selling and general expenses			44,693				68,466
Integration and merger expenses			—				6,059
Depreciation and amortization			5,581				9,705
Total costs and expenses			56,249				92,801
Income from operations			27,233				39,951
Other income (expense):
Interest income			34				7
Interest expense			(6,241	)			(18,022	)
Foreign currency exchange			54				(45	)
Income before provision for income taxes			21,080				21,891
Provision for income taxes			8,376				8,615
Net income			12,704				13,276
Undistributed earnings allocable to preferred stock			—				(2,650	)
Net income available to common stockholders		$	12,704			$	10,626
Earnings per share:
Basic		$	0.35			$	0.31
Diluted		$	0.35			$	0.31
Weighted average number of common and common share equivalents outstanding:
Basic			35,996				34,174
Diluted			36,717				43,257

See accompanying notes to the condensed consolidated financial statements.

MOBILE MINI, INC.

		Nine Months Ended September 30,
		2007				2008
Revenues:
Leasing		$	210,397			$	262,208
Sales			22,883				28,451
Other			1,472				1,719
Total revenues			234,752				292,378
Costs and expenses:
Cost of sales			15,594				19,562
Leasing, selling and general expenses			121,866				155,732
Integration and merger expenses			—				17,668
Depreciation and amortization			15,585				21,121
Total costs and expenses			153,045				214,083
Income from operations			81,707				78,295
Other income (expense):
Interest income			70				69
Interest expense			(18,294	)			(30,586	)
Debt extinguishment expense			(11,224	)			—
Foreign currency exchange			54				(53	)
Income before provision for income taxes			52,313				47,725
Provision for income taxes			20,581				18,930
Net income			31,732				28,795
Undistributed earnings allocable to preferred stock			—				(2,690	)
Net income available to common stockholders		$	31,732			$	26,105
Earnings per share:
Basic		$	0.89			$	0.77
Diluted		$	0.86			$	0.77
Weighted average number of common and common share equivalents outstanding:
Basic			35,818				34,124
Diluted			36,736				37,512

See accompanying notes to the condensed consolidated financial statements.

MOBILE MINI, INC.

		Nine Months Ended September 30,
		2007				2008
Cash Flows From Operating Activities:
Net income		$	31,732			$	28,795
Adjustments to reconcile income to net cash provided by operating activities:
Debt extinguishment expense			2,298				—
Provision for doubtful accounts			1,822				3,484
Amortization of deferred financing costs			644				1,762
Share-based compensation expense			3,272				3,905
Depreciation and amortization			15,585				21,121
Gain on sale of lease fleet units			(4,176	)			(6,095	)
Loss on disposal of property, plant and equipment			37				466
Deferred income taxes			19,529				18,854
Foreign currency exchange			(54	)			53
Changes in certain assets and liabilities, net of effect of businesses acquired:
Receivables			(5,537	)			(5,831	)
Inventories			(2,478	)			(485	)
Deposits and prepaid expenses			(1,190	)			1,237
Other assets and intangibles			(146	)			(136	)
Accounts payable			3,526				(11,978	)
Accrued liabilities			2,221				9,434
Net cash provided by operating activities			67,085				64,586
Cash Flows From Investing Activities:
Cash paid for businesses acquired			(6,066	)			(24,209	)
Additions to lease fleet, excluding acquisitions			(97,424	)			(56,693	)
Proceeds from sale of lease fleet units			11,940				17,667
Additions to property, plant and equipment			(15,647	)			(11,042	)
Proceeds from sale of property, plant and equipment			68				322
Net cash used in investing activities			(107,129	)			(73,955	)
Cash Flows From Financing Activities:
Net (repayments) borrowings under lines of credit			(5,971	)			135,040
Proceeds from issuance of notes payable			1,216				—
Proceeds from issuance of 6.875% Senior Notes			149,322				—
Redemption of 9.5% Senior Notes			(97,500	)			—
Deferred financing costs			(3,682	)			(14,833	)
Principal payments on notes payable			(864	)			(113,188	)
Principal payments on capital lease obligations			(16	)			(350	)
Issuance of common stock, net			5,337				1,446
Purchase of treasury stock			(7,737	)			—
Net cash provided by financing activities			40,105				8,115
Effect of exchange rate changes on cash			505				2,403
Net increase in cash			566				1,149
Cash at beginning of period			1,370				3,703
Cash at end of period		$	1,936			$	4,852
Supplemental Disclosure of Cash Flow Information:
Interest rate swap changes in value charged to equity		$	327			$	850
Preferred shares issued in business combination		$	—			$	197

See accompanying notes to the condensed consolidated financial statements.

MOBILE MINI, INC. AND SUBSIDIARIES — NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

NOTE A — Basis of Presentation

The accompanying unaudited condensed consolidated financial statements have been prepared in conformity with U.S. generally accepted accounting principles applicable to interim financial information and the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all the information and footnotes required by accounting principles generally accepted in the United States for complete financial statements. In the opinion of management of Mobile Mini, Inc. (Mobile Mini or the Company), all adjustments (which include normal recurring adjustments) necessary to present fairly the financial position, results of operations, and cash flows for all periods presented have been made. All significant inter-company balances and transactions have been eliminated.

The local currency of the Company’s foreign operations are converted to U.S. currency for the Company’s condensed consolidated financial statements for each period being presented and the Company is subject to foreign exchange rate fluctuations in connection with the Company’s European and Canadian operations.

The condensed consolidated balance sheet at December 31, 2007, has been derived from the audited consolidated financial statements at that date but does not include all of the information and footnotes required by accounting principles generally accepted in the United States for complete financial statements.

The results of operations for the nine-month period ended September 30, 2008, are not necessarily indicative of the operating results that may be expected for the entire year ending December 31, 2008. Historically, Mobile Mini experiences some seasonality each year which has caused lower utilization rates for the Company’s lease fleet and a marginal decrease in cash flow during the first half of the year. Additionally, on June 27, 2008, the Company consummated the transactions described below in Note B and such transactions will have a material effect on the Company’s results of operations in the future. These condensed consolidated financial statements should be read in conjunction with the Company’s December 31, 2007, consolidated financial statements and accompanying notes thereto, which are included in the Company’s Annual Report on Form 10-K and on Form 10-K/A filed with the Securities and Exchange Commission (SEC) on February 29, 2008 and March 18, 2008, respectively.

NOTE B — Acquisition of Mobile Storage Group

Merger

On June 27, 2008, a wholly-owned subsidiary of Mobile Mini merged with and into the ultimate parent company of Mobile Storage Group, Inc., MSG WC Holdings Corp., and immediately thereafter, MSG WC Holdings Corp. and two of its subsidiaries merged with and into Mobile Mini (the Merger). As a result of the Merger, Mobile Storage Group, Inc. (MSG) became a wholly-owned subsidiary of Mobile Mini. Upon the closing, Mobile Mini assumed Mobile Storage Group’s outstanding indebtedness of $540.5 million and paid aggregate consideration of $217.7 million representing cash totaling approximately $21.1 million and the issuance of approximately 8.6 million shares of convertible Preferred Stock with a determined fair value at issuance of $196.6 million and a liquidation preference value of $154.0 million. The Merger was effected pursuant to a merger agreement entered into on February 22, 2008. The Merger was approved by Mobile Mini stockholders at a special meeting of stockholders on June 26, 2008. See Note M for additional details on the Company’s acquisitions and merger transactions. The results of operations for MSG have been included in the Company’s results of operations beginning on June 27, 2008.

Credit Agreement

In connection with the Merger, Mobile Mini expanded its revolving credit facility to increase its borrowing limit and to include the combined assets of both Mobile Mini and Mobile Storage Group as security for the facility.

On June 27, 2008, Mobile Mini and its subsidiaries, (including Mobile Storage Group and its subsidiaries) entered into an ABL Credit Agreement (the Credit Agreement) with Deutsche Bank AG New York Branch and other lenders party thereto. The Credit Agreement provides for a five-year, $900.0 million revolving credit facility. Amounts borrowed under the Credit Agreement and repaid or prepaid

MOBILE MINI, INC. AND SUBSIDIARIES — NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

during the term may be reborrowed. Outstanding amounts under the Credit Agreement will bear interest at the Company’s option at either (i) LIBOR plus a defined margin, or (ii) the Agent bank’s prime rate plus a margin. LIBOR loans will initially bear interest at LIBOR plus 2.5% and base rate loans will initially bear interest at the Agent bank’s prime rate plus 1.0%. After the quarter ended June 30, 2009, the applicable margins for each type of loan will range from 2.25% to 2.75% for LIBOR loans and 0.75% to 1.25% for base rate loans depending upon Mobile Mini’s then-debt ratio. At September 30, 2008, the Company had $589.1 million outstanding under the Credit Agreement. All amounts outstanding under the Credit Agreement are due on June 27, 2013.

Availability of borrowings under the Credit Agreement is subject to a borrowing base calculation based upon a valuation of the Company’s eligible accounts receivable, eligible container fleet (including containers held for sale, work-in-process and raw materials), machinery and equipment and real property, each multiplied by an applicable advance rate or limit. At September 30, 2008, the Company had $302.1 million in additional borrowing availability under the credit facility.

The Credit Agreement provides for UK borrowings, denominated in either Pounds Sterling or Euros, by the Company’s subsidiary Mobile Mini UK Limited based upon a UK borrowing base and for U.S. borrowings, denominated in Dollars, by Mobile Mini, Inc. based upon a U.S. and Canada borrowing base.

The obligations of the Mobile Mini and its subsidiaries under the Credit Agreement are secured by a blanket lien on substantially all of their assets.

The Credit Agreement also contains customary negative covenants applicable to Mobile Mini and its subsidiaries, including covenants that restrict their ability to, among other things, (i) make capital expenditures in excess of defined limits, (ii) allow certain liens to attach to Mobile Mini or subsidiary assets, (iii) repurchase or pay dividends or make certain other restricted payments on capital stock and certain other securities, or prepay certain indebtedness, (iv) incur additional indebtedness or engage in certain other types of financing transactions, and (v) make acquisitions or other investments. Under the terms of the Credit Agreement, the Company was in compliance with all the covenants as of September 30, 2008.

In connection with the Merger, Mobile Mini paid down the outstanding balances of its and Mobile Storage Group’s then-existing revolving credit facilities. The Company financed these pay-downs through a borrowing at closing under its Credit Agreement. The Company evaluated the expansion of the revolving credit facility under the provisions of EITF 98-14, Debtor’s Accounting for Changes in Line-of-Credit or Revolving-Debt Arrangements, and as the borrowing capacity under the Credit Agreement exceeds that under the original revolving credit facility, unamortized deferred financing costs have been added to the costs incurred as part of the Credit Agreement.

Mobile Mini Supplemental Indenture

In connection with the Merger, Mobile Mini entered into a Supplemental Indenture, dated as of June 27, 2008 (the Mobile Mini Supplemental Indenture), with Mobile Storage Group, Inc., a Delaware corporation, A Better Mobile Storage Company, a California corporation and Mobile Storage Group (Texas), LP, a Texas limited partnership (the New Mobile Mini Guarantors), the guarantors (the Existing Mobile Mini Guarantors) party to the Mobile Mini Indenture and Law Debenture Trust Company of New York, as trustee (LDTC), pursuant to which the New Mobile Mini Guarantors became “Guarantors” for all purposes under the Mobile Mini Indenture. Mobile Mini, the Existing Mobile Mini guarantors and LDTC previously entered into an Indenture (the Mobile Mini Indenture), dated as of May 7, 2007, pursuant to which Mobile Mini issued $150.0 million in aggregate principal amount of its 6.875% Senior Notes due 2015 (the Mobile Mini Notes). See Note O.

MSG Supplemental Indenture

In connection with the Merger, Mobile Mini entered into a Supplemental Indenture, dated as of June 27, 2008 (the MSG Supplemental Indenture), with Mobile Mini of Ohio LLC, a Delaware limited liability company, Mobile Mini, LLC, a California limited liability company, Mobile Mini, LLC, a Delaware limited liability company, Mobile Mini I, Inc., an Arizona corporation, A Royal Wolf Portable Storage, Inc., a California corporation, Temporary Mobile Storage, Inc., a California corporation, Delivery Design Systems,

MOBILE MINI, INC. AND SUBSIDIARIES — NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited) — Continued

Inc., an Arizona corporation, Mobile Mini Texas Limited Partnership, LLP, a Texas limited liability partnership (collectively, the New MSG Guarantors), A Better Mobile Storage Company, a California corporation, and Mobile Storage Group (Texas), LP, a Texas limited partnership (the Existing MSG Guarantors), Mobile Storage Group, Inc., a Delaware corporation, and Wells Fargo Bank, N.A., as trustee (Wells Fargo), pursuant to which Mobile Mini became an “Issuer” for all purposes under the MSG Indenture (as defined below) and the New MSG Guarantors became “Guarantors” for all purposes under the MSG Indenture.

Mobile Storage Group, Inc. and Mobile Services Group, Inc., a Delaware corporation (the Original Issuers), the Existing MSG Guarantors and Wells Fargo previously entered into an Indenture (the MSG Indenture), dated as of August 1, 2006, pursuant to which the Original Issuers issued $200.0 million in aggregate principal amount of 9.75% Senior Notes due 2014 (the MSG Notes). The MSG Indenture includes covenants, indemnities and events of default that are customary for indentures of this type, including restrictions on the incurrence of additional debt, sales of assets and payment of dividends. See Note O.

Preferred Stock

In connection with the Merger, the Company issued 8.6 million shares of the Company’s Series A Convertible Redeemable Participating Preferred Stock, to MSG’s stockholders. The shares were determined to have an initial fair value of $196.6 million based upon a third party valuation. The shares have a liquidation preference of $154.0 million.

The preferred stock votes with the Company’s common stock as a single class. It ranks senior to the common stock only with respect to a distribution upon the occurrence of the bankruptcy, liquidation, dissolution or winding up of Mobile Mini. Holders of a majority of the shares of preferred stock, may require Mobile Mini to redeem all of the outstanding preferred stock (i) if Mobile Mini enters into a binding agreement in respect of a sale of the Company (as defined in the Certificate of Designation for the preferred stock) at a sale price of less than $23.00 per share or (ii) at any time after the tenth anniversary of the preferred stock issuance date. If such majority holders do not exercise their redemption rights following either of these events, Mobile Mini at its option may redeem the preferred stock. The preferred stock is convertible into 8.6 million shares of Mobile Mini’s common stock at any time at the option of the holders, representing an initial conversion price of $18.00 per common share. The preferred stock will be mandatorily convertible into Mobile Mini common stock if, after the first anniversary of the issuance of the preferred stock, Mobile Mini’s common stock trades above $23.00 per share for a period of 30 consecutive days. The preferred stock will not have any cash or payment-in-kind dividends (unless and until a dividend is paid with respect to the common stock, in which case dividends will be paid on an equal basis with the common stock, on an as-converted basis) and does not impose any financial covenants upon Mobile Mini.

Under a Stockholders Agreement entered into with the sellers of MSG, Mobile Mini must use all commercially reasonable efforts to file a shelf registration statement on Form S-3 under the U.S. Securities Act of 1933, as amended, before April 27, 2009 covering all of the shares of Mobile Mini common stock issuable upon conversion of the preferred stock and any shares of Mobile Mini common stock received in respect of the preferred stock (called the registrable securities) then held by any Mobile Storage Group stockholders party to the Stockholders Agreement to enable the resale of such registrable securities after June 27, 2009.

The registration rights granted in the Stockholders Agreement are subject to customary restrictions such as blackout periods and limitations on the number of shares to be included in any underwritten offering imposed by the managing underwriter. In addition, the Stockholders Agreement contains other limitations on the timing and ability of the holders of registrable securities to exercise demands.

NOTE C — Recent Accounting Pronouncements

In September 2006, the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standards (SFAS) No. 157, Fair Value Measurement (SFAS No. 157). SFAS No. 157 defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles, and expands disclosures about fair value measurements. SFAS No. 157 is effective for fiscal years beginning after November 15, 2007 and interim periods within those fiscal years. The Company adopted SFAS No. 157 on January 1, 2008, with no effect on the Company’s consolidated financial statements.

MOBILE MINI, INC. AND SUBSIDIARIES — NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited) – Continued

On February 15, 2007, the FASB issued SFAS No. 159, The Fair Value Option for Financial Assets and Financial Liabilities (SFAS No. 159). Under SFAS No. 159, the Company may elect to report financial instruments and certain other items at fair value on a contract-by-contract basis with changes in value reported in earnings. This election is irrevocable. SFAS No. 159 provides an opportunity to mitigate volatility in reported earnings that is caused by measuring hedged assets and liabilities that were previously required to use a different accounting method than the related hedging contracts when the complex provisions of SFAS No. 133, Accounting for Derivative Instruments and Hedging Activities, applicable to hedge accounting are not met. The Company adopted SFAS No. 159 on January 1, 2008. The Company chose not to elect the fair value option for its financial assets and liabilities existing at January 1, 2008 and did not elect the fair value option on financial assets and liabilities transacted in the nine months ended September 30, 2008. Therefore, the adoption of SFAS No. 159 had no impact on the Company’s consolidated financial statements.

In December 2007, the FASB issued SFAS No. 141 (revised 2007), Business Combinations (SFAS No. 141(R)) which establishes principles and requirements for how an acquirer recognizes and measures in its financial statements the identifiable assets acquired, the liabilities assumed and any noncontrolling interest in an acquiree, including the recognition and measurement of goodwill acquired in a business combination. Certain forms of contingent consideration and certain acquired contingencies will be recorded at fair value at the acquisition date. SFAS No. 141(R) also states acquisition costs will generally be expensed as incurred and restructuring costs will be expensed in periods after the acquisition date. The Company will apply SFAS No. 141(R) prospectively to business combinations with an acquisition date on or after January 1, 2009.

In December 2007, the FASB issued SFAS No. 160, Noncontrolling Interests in Consolidated Financial Statements — An Amendment of ARB No. 51 (SFAS No. 160). SFAS No. 160 amends Accounting Research Bulletin ARB No. 51, Consolidated Financial Statements, to establish accounting and reporting standards for the noncontrolling interest in a subsidiary and for the deconsolidation of a subsidiary. SFAS No. 160 becomes effective beginning January 1, 2009. Presently, there are no noncontrolling interests in any of the Company’s consolidated subsidiaries; therefore, the Company does not expect the adoption of SFAS No. 160 to have a significant impact on the Company’s results of operations or financial condition.

In March 2008, the FASB issued SFAS No. 161, Disclosures about Derivative Instruments and Hedging Activities — An Amendment of FASB Statement No. 133 (SFAS No. 161). SFAS No. 161 requires qualitative disclosures about objectives and strategies for using derivatives, quantitative data about the fair value of and gains and losses on derivative contracts and details of credit-risk-related contingent features in hedged positions. The statement also requires enhanced disclosures regarding how and why entities use derivative instruments, how derivative instruments and related hedged items are accounted and how derivative instruments and related hedged items affect entities’ financial position, financial performance and cash flows. SFAS No. 161 is effective for fiscal periods beginning after November 15, 2008. The Company does not expect the adoption of SFAS No. 161 will have a material effect on the Company’s results of operations or financial position.

In April 2008, the FASB issued FSP FAS 142-3, Determining the Useful Life of Intangible Assets (FSP FAS 142-3). FSP FAS 142-3 amends the factors to be considered in determining the useful life of intangible assets. Its intent is to improve the consistency between the useful life of an intangible asset and the period of expected cash flows used to measure its fair value. FSP FAS 142-3 is effective for fiscal years beginning after December 15, 2008. The Company currently adheres to the principle set forth in FSP FAS 142-3 and does not expect its adoption to materially affect the Company’s results of operations or financial condition.

NOTE D — Fair Value Measurements

The Company adopted SFAS No. 157 on January 1, 2008. SFAS No. 157 defines fair value, as the price that would be received from selling an asset or paid to transfer a liability in an orderly transaction between market participants. As such, fair value is a market-based measurement that should be determined based on assumptions that market participants would use in pricing an asset or liability. As a basis for considering such assumptions, SFAS No. 157 establishes a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value as follows:

MOBILE MINI, INC. AND SUBSIDIARIES — NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited) — Continued

Level 1		Observable inputs such as quoted prices in active markets for identical assets or liabilities;
Level 2		Observable inputs, other than Level 1 inputs in active markets, that are observable either directly or indirectly; and
Level 3		Unobservable inputs for which there is little or no market data, which require the reporting entity to develop its own assumptions

Assets and liabilities measured at fair value on a recurring basis are as follows (in thousands):

Quoted Prices in

Active Markets

Significant

Fair Value

for

Other

Significant

September

Identical

Observable

Unobservable

30,

Assets

Inputs

Inputs

Valuation

2008

(Level 1)

(Level 2)

(Level 3)

Technique

Interest rate swap agreements

$(2,635)

$—

$(2,635)

$—

(1)

NOTE E — Earnings Per Share

As a result of issuing the Preferred Stock, which participates in distributions of earnings on the same basis as shares of common stock, the Company has applied the provisions of EITF Issue No. 03-6, Participating Securities and the Two-Class Method under FASB Statement 128 (EITF No. 03-6). This issue established standards regarding the computation of earnings per share (EPS) by companies that have issued securities other than common stock that contractually entitle the holder to participate in dividends and earnings of the company. EITF No. 03-6 requires earnings for the period to be allocated between the common and preferred shareholders based on their respective rights to receive dividends. Basic net income per share is then calculated by dividing income allocable to common stockholders by the weighted-average number of common shares outstanding, net of shares subject to repurchase by the Company, during the period. EITF No. 03-6 does not require the presentation of basic and diluted net income (loss) per share for securities other than common stock; therefore, the following net income per share amounts only pertain to the Company’s common stock. The Company calculates diluted net income per share under the if-converted method unless the conversion of the preferred stock is anti-dilutive to basic net income per share. To the extent the inclusion of preferred stock is anti-dilutive, the Company calculates diluted net income per share under the two-class method. Potential common shares include restricted common stock and incremental shares of common stock issuable upon the exercise of stock options and vesting of nonvested stock awards and convertible preferred stock using the treasury stock method.

MOBILE MINI, INC. AND SUBSIDIARIES — NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited) — Continued

The following is a reconciliation of net income and weighted-average shares of common stock outstanding for purposes of calculating basic and diluted earnings per share for the three-month and nine-month period ended September 30:

		Three Months Ended September 30,								Nine Months Ended September 30,
		2007				2008				2007				2008
		(In thousands except earnings per share data)
Historical net income per share:
Numerator:
Net income		$	12,704			$	13,276			$	31,732			$	28,795
Less: Earnings allocable to preferred stock			—				(2,650	)			—				(2,690	)
Net income available to common stockholders		$	12,704			$	10,626			$	31,732			$	26,105
Basic EPS Denominator:
Common stock outstanding beginning of period			36,125				34,146				35,640				34,041
Effect of weighting shares:
Weighted shares issued during the period ended September 30,			10				28				225				83
Weighted shares purchased during the period ended September 30,			(139	)			—				(47	)			—
Denominator for basic net income per share			35,996				34,174				35,818				34,124
Diluted EPS Denominator:
Common stock outstanding beginning of period			36,125				34,146				35,640				34,041
Effect of weighting shares:
Weighted shares issued during the period ended September 30,			10				28				225				83
Weighted shares purchased during the period ended September 30,			(139	)			—				(47	)			—
Dilutive effect of employee stock options on nonvested share-swards assumed converted during the period ended September 30,			721				527				918				442
Dilutive effect of convertible preferred stock assumed converted during the period ended September 30			—				8,556				—				2,946
Denominator for diluted net income per share			36,717				43,257				36,736				37,512
Basic net income per share		$	0.35			$	0.31			$	0.89			$	0.77
Diluted net income per share		$	0.35			$	0.31			$	0.86			$	0.77

For the three months ended September 30, 2007 and 2008, options to purchase 528,900 and 502,275 shares of stock, respectively, were excluded from the calculation of diluted earnings per share because they were anti-dilutive. For the nine months ended September 30, 2007 and 2008, options to purchase 591,250 and 564,400 shares of stock, respectively, were excluded from the calculation of diluted earnings per share because they were anti-dilutive. Basic weighted average number of common shares outstanding as of September 30, 2007 and 2008 does not include 251,076 and 653,838, respectively, of nonvested share-awards because the awards had not then vested. For the three months ended September 30, 2007 and 2008, 24,987 and 23,104, respectively, of nonvested share awards were not included in the computation of diluted earnings per share because the effect would have been anti-dilutive. For the nine months ended September 30, 2007 and 2008, 3,907 and 84,786, respectively, of nonvested share-awards were not included in the computation of diluted earnings per share because the effect would have been anti-dilutive. For the three and nine months ended September 30, 2008, the if-converted method was used to calculate diluted earnings per share as it was not anti-dilutive in either period.

MOBILE MINI, INC. AND SUBSIDIARIES — NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited) — Continued

NOTE F — Share-Based Compensation

At September 30, 2008, the Company had three active share-based employee compensation plans. Stock option awards under these plans are granted with an exercise price per share equal to the fair market value of the Company’s common stock on the date of grant. Each option must expire no more than 10 years from the date it is granted and, historically, options are granted with vesting over a 4.5 year period.

In 2005, the Company began awarding nonvested shares under the existing share-based compensation plans. These share awards vest over a four or five year period. The total value of these awards is expensed on a straight-line basis over the service period of the employees receiving the awards. The “service period” is the time during which the employees receiving awards must remain employees for the shares granted to fully vest.

Starting in December 2006, the Company awarded nonvested share-awards to certain executive officers with vesting subject to a performance condition. Vesting of these share-awards is dependent upon the officers fulfilling the service period requirements as well as the Company achieving certain EBITDA targets in each of the next four years. At the date of the 2007 awards, the EBITDA targets were not known, and as such, the measurement date for the nonvested share-awards had not yet occurred. This target was established by the Company’s Board of Directors on February 20, 2008, at which point, the value of each nonvested share-award was $15.85. The Company is required to assess the probability that the performance conditions will be met. If the likelihood of the performance conditions being met is deemed probable the Company will recognize the expense using the accelerated attribution method. The accelerated attribution method could result in as much as 50% of the total value of the shares being recognized in the first year of the service period if each of the four future targets is assessed as probable of being met. For performance based awards granted in 2006 and 2007, the accelerated attribution method has been used to recognize the expense.

In June 2008, in conjunction with the Merger and the hiring of Mobile Storage Group’s employees, the Company awarded nonvested share-awards for an aggregate of 157,535 shares. These awards vest over a period of between one and five years. The total value of these awards is expensed on a straight-line basis over the service period.

As of September 30, 2008, the total amount of unrecognized compensation cost related to nonvested share awards was approximately $13.5 million, which is expected to be recognized over a weighted-average period of approximately 3.2 years.

The total value of the stock option grants is expensed over the related employee’s service period on a straight-line basis. As of September 30, 2008, total unrecognized compensation cost related to stock option grants was approximately $3.0 million, which is expected to be recognized over a weighted-average period of approximately 1.6 years.

A summary of stock option activity within the Company’s stock-based compensation plans and changes for the nine months ended September 30, 2008 is as follows:

		Number of				Weighted
		Shares				Average
		(In thousands)				Exercise Price
Balance at December 31, 2007			2,028			$	17.02
Granted			—				—
Exercised			(131	)			11.04
Terminated/expired			(126	)			16.03
Balance at September 30, 2008			1,771			$	17.54

The intrinsic value of options exercised during the nine months ended September 30, 2008 was $1.3 million.

MOBILE MINI, INC. AND SUBSIDIARIES — NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited) — Continued

A summary of nonvested share-awards activity within the Company’s share-based compensation plans and changes for the nine months ended September 30, 2008 is as follows:

		Number of				Weighted Average
		Shares				Grant Date Fair
		(In thousands)				Value
Nonvested at December 31, 2007			532			$	22.46
Awarded			190				20.44
Released			(44	)			22.31
Forfeited			(24	)			20.65
Nonvested at September 30, 2008			654			$	21.95

A summary of fully-vested stock options and stock options expected to vest, as of September 30, 2008, is as follows:

										Weighted
		Number of				Weighted				Average				Aggregate
		Shares				Average				Remaining				Intrinsic
		(In				Exercise				Contractual				Value (In
		thousands)				Price				Term				thousands)
Outstanding			1,771			$	17.54				5.3			$	6,836
Vested and expected to vest			1,619			$	16.98				5.1			$	6,658
Exercisable			1,418			$	16.25				4.9			$	6,232

The fair value of each stock option award is estimated on the date of the grant using the Black-Scholes option pricing model. The following are the weighted average assumptions used for the periods noted:

		Nine Months Ended
		September 30, 2007
Risk-free interest rate			4.59%
Expected holding period (years)			3.00%
Expected stock volatility			33.24%
Expected dividend rate			0.00%

There were no stock options granted during the nine months ended September 30, 2008.

NOTE G — Inventories

Inventories are valued at the lower of cost (principally on a standard cost basis which approximates the first-in, first-out (FIFO) method) or market. Market is the lower of replacement cost or net realizable value. Inventories primarily consist of raw materials, supplies, work-in-process and finished goods, all related to the manufacturing, refurbishment and maintenance of portable storage units and office units, primarily for the Company’s lease fleet and the Company’s units held for sale. Raw materials principally consist of raw steel, wood, glass, paint, vinyl and other assembly components used in manufacturing and refurbishing processes. Work-in-process primarily represents units being built at the Company’s manufacturing facility that are either pre-sold or being built to add to the Company’s lease fleet upon completion. Finished portable storage units primarily represents ISO (the International Organization for Standardization) containers held in inventory until the containers are either sold as is, refurbished and sold, or units in the process of being refurbished to be compliant with the Company’s lease fleet standards before transferring the units into the Company’s lease fleet. There is no certainty when the Company purchases the containers whether they will ultimately be sold, refurbished and sold, or refurbished and moved into the Company’s lease fleet. Units that the Company adds to the Company’s lease fleet undergo an extensive refurbishment process that includes installing the Company’s proprietary locking system, signage, painting and sometimes adding the Company’s proprietary security doors. The increases in inventories include $8.7 million from the Merger.

MOBILE MINI, INC. AND SUBSIDIARIES — NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited) — Continued

		December 31, 2007				September 30, 2008
		(In thousands)
Raw material and supplies		$	21,801			$	26,766
Work-in-process			2,819				2,279
Finished portable storage units			4,811				9,605
		$	29,431			$	38,650

NOTE H — Income Taxes

The Company adopted the provision of FIN 48, Accounting for Uncertainty in Income Taxes-an interpretation of FASB Statement No. 109 on January 1, 2007. FIN 48 contains a two-step approach to recognizing and measuring uncertain tax positions accounted for in accordance with SFAS No. 109, Accounting for Income Taxes. The first step is to evaluate the tax position for recognition by determining if the weight of available evidence indicates that it is more likely than not that the position will be sustained on audit, including resolution of related appeals or litigation processes, if any. The second step is to measure the tax benefit as the largest amount that is more than 50% likely of being realized upon ultimate settlement.

The Company filed U.S. federal tax returns, U.S. State tax returns, and foreign tax returns. The Company has identified the Company’s U.S. Federal tax return as the Company’s “major” tax jurisdiction. For the U.S. Federal return, years 2005 through 2007 are subject to tax examination by the U.S. Internal Revenue Service. The IRS has commenced an audit of our consolidated U.S. Federal return for 2006. The audit is in the initial stage and no adjustments have been determined at this time. The Company believes that the Company’s income tax filing positions and deductions will be sustained upon audit and do not anticipate any adjustments that will result in a material change to the Company’s financial position. Therefore, no reserves for uncertain income tax positions have been recorded pursuant to FIN 48. In addition, the Company did not record a cumulative effect adjustment related to the adoption of FIN 48. The Company does not anticipate that the total amount of unrecognized tax benefit related to any particular tax position will change significantly within the next 12 months.

The Company’s policy for recording interest and penalties associated with audits is to record such items as a component of income before taxes. Penalties and associated interest costs are recorded in leasing, selling and general expenses in the Condensed Consolidated Statements of Income.

NOTE I — Property, Plant and Equipment

Property, plant and equipment are stated at cost, net of accumulated depreciation. Depreciation is calculated using the straight-line method over the assets’ estimated useful lives. Residual values are determined when the property is constructed or acquired and range up to 25%, depending on the nature of the asset. In the opinion of management, estimated residual values do not cause carrying values to exceed net realizable value. Normal repairs and maintenance to property, plant and equipment are expensed as incurred. When property or equipment is retired or sold, the net book value of the asset, reduced by any proceeds, is charged to gain or loss on the retirement of fixed assets. Property, plant and equipment consist of the following at:

		December 31, 2007				September 30, 2008
		(In thousands)
Land		$	772			$	10,577
Vehicles and equipment			60,490				80,132
Buildings and improvements			11,514				15,666
Office fixtures and equipment			11,579				18,487
			84,355				124,862
Less accumulated depreciation			(28,992	)			(33,854	)
		$	55,363			$	91,008

The increase in property, plant and equipment includes $34.1 million that is due to the Merger.

MOBILE MINI, INC. AND SUBSIDIARIES — NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited) — Continued

NOTE J — Lease Fleet

Mobile Mini has a lease fleet primarily consisting of refurbished, modified and manufactured portable storage and office units that are leased to customers under short-term operating lease agreements with varying terms. Depreciation is calculated using the straight-line method over the Company’s units’ estimated useful life, after the date that the Company put the unit in service, and are depreciated down to their estimated residual values. The Company’s steel units are depreciated over 25 years with an estimated residual value of 62.5%. Wood office units are depreciated over 20 years with an estimated residual value of 50%. Van trailers, which are a small part of the Company’s fleet, are depreciated over seven years to a 20% residual value. Van trailers are only added to the fleet in connection with acquisitions of portable storage businesses, and then only when van trailers are a part of the business acquired.

In the opinion of management, estimated residual values do not cause carrying values to exceed net realizable value. The Company continues to evaluate these depreciation policies as more information becomes available from other comparable sources and the Company’s own historical experience.

Normal repairs and maintenance to the portable storage and mobile office units are expensed as incurred. As of December 31, 2007, the lease fleet totaled $865.6 million as compared to $1,171.0 million at September 30, 2008, before accumulated depreciation of
$62.7 million and $74.9 million, respectively. The increase in the value of the lease fleet before accumulated depreciation includes $272.3 million in units acquired at closing in connection with the Merger with MSG.

Lease fleet consists of the following at:

		December 31, 2007				September 30, 2008
		(In thousands)
Steel storage containers		$	459,665			$	620,087
Offices			402,640				531,940
Van trailers			2,330				16,363
Other			956				2,663
			865,591				1,171,053
Accumulated depreciation			(62,668	)			(74,927	)
		$	802,923			$	1,096,126

NOTE K— Segment Reporting

The Financial Accounting Standards Board (FASB) issued SFAS No. 131, Disclosures about Segments of an Enterprise and Related Information, which establishes the standards for companies to report information about operating segments. The Company has operations in the United States, Canada, the United Kingdom and The Netherlands. All of the Company’s branches operate in their local currency and although the Company is exposed to foreign exchange rate fluctuation in other foreign markets where the Company leases and sells the Company’s products, the Company does not believe this will have a significant impact on the Company’s results of operations. Currently, the Company’s branch operation is the only segment that concentrates on the Company’s core business of leasing. Each branch has similar economic characteristics covering all products leased or sold, including the same customer base, sales personnel, advertising, yard facilities, general and administrative costs and the branch management. Management’s allocation of resources, performance evaluations and operating decisions are not dependent on the mix of a branch’s products. The Company does not attempt to allocate shared revenue nor general, selling and leasing expenses to the different configurations of portable storage and office products for lease and sale. The branch operations include the leasing and sales of portable storage units, portable offices and combination units configured for both storage and office space. The Company leases to businesses and consumers in the general geographic area surrounding each branch. The operation includes the Company’s manufacturing facilities, which is responsible for the purchase, manufacturing and refurbishment of products for leasing and sale, as well as for manufacturing certain delivery equipment.

In managing the Company’s business, the Company focuses on growing the Company’s leasing revenues, particularly in existing markets where the Company can take advantage of the operating leverage inherent in the Company’s business model, adjusted EBITDA and earnings per share. The Company calculates adjusted EBITDA by first calculating EBITDA, which the Company

MOBILE MINI, INC. AND SUBSIDIARIES — NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited) — Continued

defines as net income before interest expense, debt restructuring or extinguishment expense, provision for income taxes, depreciation and amortization. This measure eliminates the effect on financing transactions that the Company enters into on an irregular basis based on capital needs and market opportunities. This measure also provides the Company with a means to track internally generated cash from which the Company can fund the Company’s interest expense and the Company’s lease fleet growth. In comparing EBITDA from year-to-year, the Company typically further adjusts EBITDA to eliminate the effect of what the Company considers to be non-recurring events not related to the Company’s core business operations to arrive at what the Company defines as adjusted EBITDA.

Discrete financial data on each of the Company’s products is not available and it would be impractical to collect and maintain financial data in such a manner; therefore, based on the provisions of SFAS No. 131, reportable segment information is the same as contained in the Company’s Condensed Consolidated Financial Statements.

The tables below represent the Company’s revenue and long-lived assets, consisting of lease fleet and property, plant and equipment, as attributed to geographic locations (in thousands):

Revenue from external customers:

		Three Months Ended								Nine Months Ended
		September 30,								September 30,
		2007				2008				2007				2008
		(In thousands)
North America		$	76,483			$	106,750			$	216,453			$	252,179
United Kingdom			5,329				24,520				13,639				35,355
The Netherlands			1,670				1,482				4,660				4,844
Total revenues		$	83,482			$	132,752			$	234,752			$	292,378

Long-lived assets:

		December 31, 2007				September 30, 2008
		(In thousands)
North America		$	810,573			$	1,032,276
United Kingdom			43,984				150,914
The Netherlands			3,729				3,944
Total long-lived assets		$	858,286			$	1,187,134

NOTE L — Comprehensive Reporting

Comprehensive income, net of tax, consisted of the following at:

		Three Months Ended								Nine Months Ended
		September 30,								September 30,
		2007				2008				2007				2008
		(In thousands)
Net income		$	12,704			$	13,276			$	31,732			$	28,795
Net unrealized holding loss on derivatives			(125	)			(642	)			(327	)			(850	)
Foreign currency translation adjustment			1,417				(10,305	)			2,646				(9,522	)
Total comprehensive income		$	13,996			$	2,329			$	34,051			$	18,423

MOBILE MINI, INC. AND SUBSIDIARIES — NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited) — Continued

The components of accumulated other comprehensive income, net of tax, were as follows:

		December 31, 2007				September 30, 2008
		(In thousands)
Accumulated net unrealized holding gain on derivatives		$	(769	)		$	(1,619	)
Foreign currency translation adjustment			5,105				(4,417	)
Total accumulated other comprehensive income		$	4,336			$	(6,036	)

NOTE M — Mergers and Acquisitions

The Company enters new markets in one of two ways, either by a new branch start-up or through acquiring a business consisting of the portable storage assets and related leases of other companies. An acquisition generally provides the Company with cash flow which enables the Company to immediately cover the overhead cost at the new branch. On occasion, the Company also purchases portable storage businesses in areas where the Company has existing small branches either as part of multi-market acquisitions or in order to increase the Company’s operating margins at those branches.

On June 27, 2008, the Company completed the Merger, described in Note B, by which MSG became a wholly-owned subsidiary of Mobile Mini, Inc.

The results of operations for MSG are included herein from the effective date of the Merger, June 27, 2008. The Company’s consolidated statements of income were impacted by the estimated expenses accrued related to integration and merger costs recorded for the three and nine month periods ended September 30, 2008. This expense primarily relates to costs, incurred or estimated to be incurred, for the closing of overlapping Mobile Mini lease properties and the repositioning of assets between the two entities’ locations and personnel relocation costs. Certain other continuing costs, primarily related to Mobile Mini’s personnel closing bonuses and severance agreements and certain corporate costs incurred during the integration are expensed as integration and merger expenses as incurred.

In September 2008, the Company acquired the portable storage assets of International Equipment Services, Inc., operating in Oakland and Los Angeles, California. The acquired assets are serviced by the Company’s California branches.

In September 2008, the Company also acquired Advantage Container Corporation, operating in Dallas, Texas. The acquired assets are serviced by the Company’s Dallas and Ft. Worth, Texas branches.

The Merger and other acquisitions were accounted for as the purchase of a business in accordance with SFAS No. 141, Business Combinations, with the purchased assets and the assumed liabilities recorded at their estimated fair values at the date of each acquisition.

The aggregate purchase price of the assets and operations acquired consists of the following for the nine-month period ended September 30, 2008:

		MSG				Other Acquisitions				Total
						2008
						(In thousands)
Cash		$	21,088			$	3,121			$	24,209
Assumption of debt			540,552				—				540,552
Issuance of convertible preferred stock, as initially valued			196,600				—				196,600
		$	758,240			$	3,121			$	761,361

Cash paid of $30.1 million is net of cash acquired of $5.9 million.

MOBILE MINI, INC. AND SUBSIDIARIES — NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited) — Continued

The fair value of the assets acquired and liabilities assumed have been initially allocated as follows:

		MSG				Other Acquisitions				Total
						2008
						(In thousands)
Receivables		$	30,937			$	65			$	31,002
Inventories			8,694				296				8,990
Lease fleet, net			272,277				995				273,272
Property, plant and equipment, net			34,062				40				34,102
Deposits, prepaid expenses and other assets			3,098				—				3,098
Intangible assets:
Customer lists			13,737				159				13,896
Trade names			46,473				—				46,473
Non-compete agreements			955				50				1,005
Goodwill			471,947				1,628				473,575
Liabilities and other			(68,654	)			(49	)			(68,703	)
Deferred taxes			(55,285	)			(64	)			(55,349	)
		$	758,241			$	3,120			$	761,361

The reserve related to any leased property that is subsequently sub-leased or negotiated to terminate will be adjusted as each such agreement is consummated.

The applicable purchase price for the Merger and the acquisitions has been initially allocated to the assets acquired and liabilities assumed, based upon estimated fair values as of the acquisition date. The allocation is not finalized and amounts are subject to change with the final valuation. The Company does not believe any adjustments to the allocation of the purchase prices or the reserves will have a material effect on the Company’s results of operations or financial position.

Included in other assets and intangibles are: (1) non-compete agreements that are amortized over the life of the agreement, typically 5 years, using the straight-line method with no residual value, (2) values associated with trade names which are not currently amortized as their useful life is currently being evaluated and (3) values associated with customer lists that are amortized on an accelerated basis over 10 years with no residual value.

In connection with the MSG Merger, the Company identified additional remaining costs expected to be incurred to exit overlapping Mobile Storage Group’s lease properties, property shut down costs, costs of Mobile Storage Group’s severance agreements, costs for asset verifications and for damaged assets and initially recorded accrued liabilities and reserves of approximately $21.2 million. These liabilities and reserves are preliminary and are subject to adjustments, both positive and negative, as additional information and data becomes available.

Substantially all of the operating activities of Mobile Storage Group will continue as it is integrated into the operations of Mobile Mini. All corporate functions in the United States, such as payroll, accounting, personnel and collections, were transferred to Mobile Mini and discontinued at Mobile Storage Group. As part of the Merger of the operations in the United Kingdom, one corporate office is being closed and consolidated with the other. In all cities with overlapping Mobile Storage Group and Mobile Mini branch locations, one branch will be shut down and consolidated with the other. In connection with this consolidation, certain corporate office, regional management and branch employees not hired by Mobile Mini were terminated in exchange for a severance payment. The majority of this consolidation was completed shortly after closing of the Merger and the remainder will continue through the end of this year.

MOBILE MINI, INC. AND SUBSIDIARIES — NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited) — Continued

NOTE N — Supplemental Pro Forma Information

The following table summarizes Mobile Mini’s unaudited condensed consolidated statements of income as if the Merger with MSG WC Holdings Corp., the ultimate parent company of Mobile Storage Group, occurred on January 1 of each period presented:

		Three Months Ended				Nine Months Ended
		September 30,				September 30,
		2007				2007				2008
		(In thousands)
Total revenue		$	143,493			$	403,616			$	412,256
Net income		$	11,515			$	23,601			$	31,875
Diluted earnings per share		$	0.25			$	0.52			$	0.74

The above table includes integration and merger expenses of $6.1 million and $17.7 million for three month and nine month periods presented, respectively, and $11.2 million of debt extinguishment expense in the nine month period ended 2007.

The unaudited pro forma financial information is presented for informational purposes only and is not indicative, and should not be relied upon as being indicative of the results of operations that would have been achieved if the Merger had actually taken place at the beginning of each of the periods presented.

NOTE O — Condensed Consolidating Financial Information

Mobile Mini Supplemental Indenture

In connection with the Merger, Mobile Mini entered into Mobile Mini Supplemental Indenture described in Note B pursuant to which the New Mobile Mini Guarantors became “Guarantors” under the Mobile Mini Indenture relating to the Senior Notes.

In connection with the Merger, Mobile Mini also entered into the MSG Supplemental Indenture described in Note B pursuant to which Mobile Mini became an “Issuer” under the MSG Indenture and the New MSG Guarantors became “Guarantors” under the MSG Indenture.

As a result of the Supplemental Indentures described above, the same subsidiaries of the Company are guarantors under each of the MSG Notes and the Senior Notes.

The following tables present the condensed consolidating financial information of Mobile Mini, Inc., representing the subsidiaries of the Guarantors of the Senior Notes and MSG Notes and the Non-Guarantor Subsidiaries. Separate financial statements of the subsidiary guarantors are not presented because the guarantee by each 100% owned subsidiary guarantor is full and unconditional, joint and several, and management has determined that such information is not material to investors.

MOBILE MINI, INC. AND SUBSIDIARIES — NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited) — Continued

MOBILE MINI, INC.
CONDENSED CONSOLIDATING BALANCE SHEETS
As of September 30, 2008
(In thousands)
(unaudited)

						Non-
		Guarantors				Guarantors				Eliminations				Consolidated
ASSETS
Cash and cash equivalents		$	1,778			$	3,074			$	—			$	4,852
Receivables, net			50,765				18,044				—				68,809
Inventories			35,242				3,457				(49	)			38,650
Lease fleet, net			960,679				135,447				—				1,096,126
Property, plant and equipment, net			71,597				19,411				—				91,008
Deposits and prepaid expenses			10,651				2,327				—				12,978
Other assets and intangibles, net			60,453				22,456				—				82,909
Goodwill			480,106				64,297				—				544,403
Intercompany			114,179				36,322				(150,501	)			—
Total assets		$	1,785,450			$	304,835			$	(150,550	)		$	1,939,735
LIABILITIES AND STOCKHOLDERS’ EQUITY
Liabilities:
Accounts payable		$	15,605			$	11,089			$	—			$	26,694
Accrued liabilities			88,856				8,979				—				97,835
Lines of credit			461,060				128,026				—				589,086
Notes payable			330				108				—				438
Obligations under capital leases			5,904				2				—				5,906
Senior notes, net			345,609				—				—				345,609
Deferred income taxes			177,836				17,637				(389	)			195,084
Intercompany			23				29,321				(29,344	)			—
Total liabilities			1,095,223				195,162				(29,733	)			1,260,652
Commitments and contingencies
Redeemable convertible preferred stock			153,990				—				—				153,990
Stockholders’ equity:
Common stock			370				31,385				(31,385	)			370
Additional paid-in capital			327,369				89,772				(89,773	)			327,368
Retained earnings			248,562				(6,212	)			341				242,691
Accumulated other comprehensive income			(764	)			(5,272	)			—				(6,036	)
Treasury stock, at cost			(39,300	)			—				—				(39,300	)
Total stockholders’ equity			536,237				109,673				(120,817	)			525,093
Total liabilities and stockholders’ equity		$	1,785,450			$	304,835			$	(150,550	)		$	1,939,735

MOBILE MINI, INC. AND SUBSIDIARIES — NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited) — Continued

MOBILE MINI, INC.
CONDENSED CONSOLIDATING BALANCE SHEETS
As of December 31, 2007
(In thousands)
(unaudited)

						Non-
		Guarantors				Guarantors				Eliminations				Consolidated
ASSETS
Cash		$	2,033			$	1,670			$	—			$	3,703
Receivables, net			31,046				6,175				—				37,221
Inventories			26,708				2,769				(46	)			29,431
Lease fleet, net			764,134				38,789				—				802,923
Property, plant and equipment, net			46,439				8,924				—				55,363
Deposits and prepaid expenses			10,386				948				—				11,334
Other assets and intangibles, net			6,256				2,830				—				9,086
Goodwill			66,251				13,539				—				79,790
Intercompany			36,574				36,146				(72,720	)			—
Total assets		$	989,827			$	111,790			$	(72,766	)		$	1,028,851
LIABILITIES AND STOCKHOLDERS’ EQUITY
Liabilities:
Accounts payable		$	14,049			$	6,511			$	—			$	20,560
Accrued liabilities			37,330				1,611				—				38,941
Lines of credit			205,100				32,757				—				237,857
Notes payable			743				16,596				(16,596	)			743
Obligations under capital leases			6				4				—				10
Senior notes, net			149,379				—				—				149,379
Deferred income taxes			125,439				(1,702	)			(266	)			123,471
Intercompany			25				6,129				(6,154	)			—
Total liabilities			532,071				61,906				(23,016	)			570,961
Commitments and contingencies
Stockholders’ equity:
Common stock			367				18,433				(18,433	)			367
Additional paid-in capital			278,591				31,538				(31,536	)			278,593
Retained earnings			217,404				(3,729	)			219				213,894
Accumulated other comprehensive income			694				3,642				—				4,336
Treasury stock, at cost			(39,300	)			—				—				(39,300	)
Total stockholders’ equity			457,756				49,884				(49,750	)			457,890
Total liabilities and stockholders’ equity		$	989,827			$	111,790			$	(72,766	)		$	1,028,851

MOBILE MINI, INC. AND SUBSIDIARIES — NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited) — Continued

MOBILE MINI, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
Three Months Ended September 30, 2008
(In thousands)
(unaudited)

						Non-
		Guarantors				Guarantors				Eliminations				Consolidated
Revenues:
Leasing		$	96,629			$	22,694			$	—			$	119,323
Sales			9,589				2,939				—				12,528
Other			532				369				—				901
Total revenues			106,750				26,002				—				132,752
Costs and expenses:
Cost of sales			6,288				2,283				—				8,571
Leasing, selling and general expenses			50,875				17,591				—				68,466
Integration and merger expenses			4,982				1,077				—				6,059
Depreciation and amortization			7,742				1,963				—				9,705
Total costs and expenses			69,887				22,914				—				92,801
Income from operations			36,863				3,088				—				39,951
Other income (expense):
Interest income			541				7				(541	)			7
Interest expense			(15,477	)			(3,086	)			541				(18,022	)
Foreign currency exchange			—				(45	)			—				(45	)
Income (loss) before provision for (benefit from) income taxes			21,927				(36	)			—				21,891
Provision for (benefit from) income taxes			8,493				180				(58	)			8,615
Net income (loss)		$	13,434			$	(216	)		$	58			$	13,276

MOBILE MINI, INC. AND SUBSIDIARIES — NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited) — Continued

MOBILE MINI, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
Three Months Ended September 30, 2007
(In thousands)
(unaudited)

						Non-
		Guarantors				Guarantors				Eliminations				Consolidated
Revenues:
Leasing		$	69,056			$	4,926			$	—			$	73,982
Sales			6,772				1,959				(40	)			8,691
Other			655				154				—				809
Total revenues			76,483				7,039				(40	)			83,482
Costs and expenses:
Cost of sales			4,459				1,555				(39	)			5,975
Leasing, selling and general expenses			39,623				5,070				—				44,693
Depreciation and amortization			5,047				534				—				5,581
Total costs and expenses			49,129				7,159				(39	)			56,249
Income (loss) from operations			27,354				(120	)			(1	)			27,233
Other income (expense):
Interest income			376				19				(361	)			34
Interest expense			(5,679	)			(922	)			360				(6,241	)
Foreign currency exchange			—				54				—				54
Income (loss) before provision for (benefit from) income taxes			22,051				(969	)			(2	)			21,080
Provision for (benefit from) income taxes			8,575				(165	)			(34	)			8,376
Net income (loss)		$	13,476			$	(804	)		$	32			$	12,704