Q4 2006 Mobile Mini Earnings Conference Call - Final.

Original Source: FD (FAIR DISCLOSURE) WIRE

OPERATOR: Good day, everyone, and welcome to Mobile Mini Inc. fourth-quarter 2006 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, President and CEO. Please go ahead, sir.

STEVE BUNGER, PRESIDENT & CEO, MOBILE MINI: Thank you and good morning. I want to welcome everyone to Mobile Mini's 2006 fourth-quarter and year-end 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 our press release and give you his comments. Following that, I will give you my comments and then open the call up for questions and answers.

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

LARRY TRACHTENBERG, EVP & CFO, MOBILE MINI: Thanks, Steve. We issued a press release this morning detailing fourth-quarter and full-year 2006 pro forma and GAAP 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 also been filed and is also now available.

Before we get started, I would like to read you our legal disclaimer. This conference call may contain forward-looking statements, particularly regarding our ability to continue to grow our existing markets and to expand into new markets, our ability to finance our business, and operating results and prospects for 2007 and beyond, 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 at this time, and Mobile Mini disclaims any intent or obligation to update forward-looking statements.

In this conference call, we will discuss certain non-GAAP financial measures such as EBITDA and pro forma operating results. A reconciliation of how we define and arrive at EBITDA is included in our Form 8-K. A reconciliation of pro forma to GAAP financial results is included in our press release issued this morning.

With that said, Mobile Mini today reported its fourth-quarter and fiscal year 2006 GAAP and pro forma financial results. The pro forma results exclude the effects of stock-based compensation accounting, an income tax benefit related to the use of net operating loss carryforwards and a second-quarter charge related to the early extinguishment of debt. All results discussed today are pro forma results unless otherwise noted.

Revenues for the quarter increased by 32.4% to a record $76.7 million from $57.9 million. Lease revenues increased 29.1% to a record $68.6 million from $53.2 million. Of this growth, 15.6% was internal growth. EBITDA rose 34.8% to a record $33.8 million from last year's EBITDA of $25.1 million. Net income for the quarter ended December 31, 2006 was a record $14.3 million or $0.39 per diluted share as compared with net income of $9.8 million or $0.31 per diluted share for the same quarter last year. Our fourth-quarter operating results were the best results in our 23-year history.

The Company's operating margins increased from 37.4% to 37.7%. We entered 11 new branches in 2006, and we are very pleased that we have been able to increase margins during a year with such significant geographic expansion by increasing margins at our older branches. New branches tend to have lower operating margins during their early years, but as we grow the number of units on rent at existing branches, operating margins expand in subsequent years.

For the full year, revenues reached $273.4 million, pro forma EBITDA totaled $119.8 million and pro forma earnings per share were $1.38. During 2006 our lease fleet capital expenditures net of proceeds from sales of lease fleet units were $122.6 million. Our PP&E capital expenditures totaled $10.7 million, and we completed four acquisitions at total purchase price of $59.5 million. The Company continued to improve its already very strong ratio of funded debt to EBITDA in spite of its sizable CapEx spending. This ratio improved to approximately 2.5 to 1 at 12/31, which is down from 2.6 to 1 at September 30 and a 3.5 to 1 level at December 31, 2005. We believe we have the strongest balance sheet in the industry and are uniquely poised to take advantage of the growth opportunities available to us as we expand the portable storage industry.

Today we also issued first-quarter 2007 earnings guidance and have firmed the full-year 2007 earnings guidance we issued eight weeks ago. Based upon the actual growth in our business achieved during 2006 and the trends we're seeing in the first quarter of 2007 to date, we believe we can achieve earnings of $0.31 to $0.33 per share before an estimated $0.02 per share charge related to stock-based compensation during the first quarter, which equates to pro forma EBITDA of approximately $30 million. That is based on revenues for the first quarter -- the lease revenues for the first quarter of between $65 million and $66 million. For the year we continue to believe we can achieve pro forma diluted earnings per share of between $1.52 and $1.57, which equates to pro forma EBITDA of between $139 million and $142 million. This is based on lease revenues of between $285 million and $290 million. The pro forma 2007 guidance excludes approximately $0.07 per share of stock-based compensation.

I would now like to turn the call back over to Steve Bunger for his remarks.

STEVE BUNGER: Thank you, Larry. The fourth quarter was another very impressive quarter for Mobile Mini. We continue to be hitting on all cylinders. In the fourth quarter, we achieved strong internal growth of 15.6%, we had a strong increase in our rental yield of 5.8% excluding Europe and our operating margins and EBITDA margins were a strong 37.7 and 44.1% respectively. For the year we achieved strong internal growth of 19.9%, we saw a strong increase in our rental yield of 5.5% excluding Europe, and our operating margins and EBITDA margins were a strong 37.5% and 43.8% respectively.

From a sales revenue perspective, we increased our sales revenue by 69% in the fourth quarter of 2006 compared to the prior year quarter, while keeping our sales gross profit margins strong at 34.4%. The increased sales revenue and lower gross profit margins on sales are primarily a result of the sales we made in Europe as a result of the Royal Wolf acquisition. We do expect this trend to continue in the near future, but to gradually normalize as we transition the European branches to a rental model. The only matrix we did not hit was our utilization matrix, which was down slightly in the fourth quarter of 2006 compared to 2005, but it was still an impressive 83.9%. The lower utilization was primarily a result of timing. In a large part -- it related really in a large part to the run-up of the US -- it …