Use these links to rapidly review the document
Table of Contents
PART III

Table of Contents

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C.DC 20549



FORM 10-K



(Mark One)  

ý

 

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

For the Fiscal Year Ended December 31, 20092012

or

o

 

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

For the transition period from                                to                               

Commission File Number 1-13045



IRON MOUNTAIN INCORPORATED
(Exact name of registrantRegistrant as specifiedSpecified in its charter)Its Charter)

Delaware
(State or other jurisdiction of incorporation)
745 Atlantic Avenue, Boston, Massachusetts
(Address of principal executive offices)
 23-2588479
(I.R.S. Employer Identification No.)
02111
(Zip Code)
617-535-4766
(Registrant's telephone number, including area code)



         Securities registered pursuant to Section 12(b) of the Act:

Title of Each Class Name of Exchange on Which Registered
Common Stock, $.01 par value per share New York Stock Exchange

         Securities registered pursuant to Section 12(g) of the Act:None

         Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ý    No o

         Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes o    No ý

         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 ý    No o

         Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes oý    No o

         Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K ýo

         Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a small 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 ý 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 in Rule 12b-2 of the Exchange Act). Yes o    No ý

         As of June 30, 2009,29, 2012, the aggregate market value of the Common Stock of the registrant held by non-affiliates of the registrant was $5,202,229,298approximately $4.8 billion based on the closing price on the New York Stock Exchange on such date.

         Number of shares of the registrant's Common Stock at February 11, 2010: 203,611,9898, 2013: 190,140,008


Table of Contents


IRON MOUNTAIN INCORPORATED
20092012 FORM 10-K ANNUAL REPORT

Table of Contents

 
  
 Page

PART I


Item 1.


 


Business


 


1


Item 1A.


 


Risk Factors


 

14
16


Item 1B.


 


Unresolved Staff Comments


 

20
25


Item 2.


 


Properties


 

20
25


Item 3.


 


Legal Proceedings


 

21
25


Item 4.


 

Submission of Matters to a Vote of Security Holders
Mine Safety Disclosures


 

21
26


PART II


Item 5.


 


Market forFor Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities


 

22
27


Item 6.


 


Selected Financial Data


 

23
29


Item 7.


 


Management's Discussion and Analysis of Financial Condition and Results of Operations


 

26
32


Item 7A.


 


Quantitative and Qualitative Disclosures About Market Risk


 

55
68


Item 8.


 


Financial Statements and Supplementary Data


 

57
70


Item 9.


 


Changes in and Disagreements withWith Accountants on Accounting and Financial Disclosure


 

57
70


Item 9A.


 


Controls and Procedures


 

57
70


Item 9B.


 


Other Information


 

59
73


PART III


Item 10.


 


Directors, Executive Officers and Corporate Governance


 

60
74


Item 11.


 


Executive Compensation


 

60
74


Item 12.


 


Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters


 

60
74


Item 13.


 


Certain Relationships and Related Transactions, and Director Independence


 

60
74


Item 14.


 


Principal Accountant Fees and Services


 

60
74


PART IV


Item 15.


 


Exhibits and Financial Statement Schedules


 

60
74

i


Table of Contents

        References in this Annual Report on Form 10-K to "the Company," "Iron Mountain," "IMI," "we," "us" or "our" include Iron Mountain Incorporated and its consolidated subsidiaries, unless the context indicates otherwise.


DOCUMENTS INCORPORATED BY REFERENCE

        Certain information required in Items 10, 11, 12, 13 and 14 of Part III of this Annual Report on Form 10-K (the "Annual Report") is incorporated by reference from our definitive Proxy Statement for theour 2013 Annual Meeting of Stockholders (our "Proxy Statement") to be held onfiled with the Securities and Exchange Commission (the "SEC" or about June 3, 2010."Commission") within 120 days after the close of the fiscal year ended December 31, 2012.


CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

        We have made statements in this Annual Report on Form 10-K that constitute "forward-looking statements" as that term is defined in the Private Securities Litigation Reform Act of 1995 and other federal securities laws. These forward-looking statements concern our operations, economic performance, financial condition, goals, beliefs, future growth strategies, investments,investment objectives, plans and current expectations, includingsuch as our intent(1) commitment to repurchase sharesfuture dividend payments, (2) expected target leverage ratio, (3) expected internal revenue growth rate and capital expenditures for 2013, (4) expected increase in our Adjusted OIBDA margins in our International Business segment, (5) expected growth in cartons stored on behalf of existing customers, and (6) estimated range of tax payments and other costs expected to pay dividends,be incurred in connection with our financial ability and sourcesproposed conversion to fund the repurchase program and dividend policy, and the amounts of such repurchases and dividends. Thea real estate investment trust ("REIT"). These forward-looking statements are subject to various known and unknown risks, uncertainties and other factors. When we use words such as "believes," "expects," "anticipates," "estimates" or similar expressions, we are making forward-looking statements.

        Although we believe that our forward-looking statements are based on reasonable assumptions, our expected results may not be achieved, and actual results may differ materially from our expectations. Important factors that could cause actual results to differ from expectations include, among others:

ii


Table of Contents

ii


Table of Contents

        Other risks may adversely impact us, as described more fully under "Item 1A. Risk Factors."Factors" of this Annual Report.

        You should not rely upon forward-looking statements except as statements of our present intentions and of our present expectations, which may or may not occur. You should read these cautionary statements as being applicable to all forward-looking statements wherever they appear. Except as required by law, we undertake no obligation to release publicly the result of any revision to these forward-looking statements that may be made to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events. Readers are also urged to carefully review and consider the various disclosures we have made in this document, as well as our other periodic reports filed with the Securities and Exchange Commission (the "Commission" or "SEC").SEC.

iii


Table of Contents


PART I

Item 1. Business.

A.    Development of Business.

        We are a leadingstore records, primarily paper documents and data backup media, and provide information management services company. Wethat help organizations around the world reduce the risks,protect their information, lower storage rental costs, comply with regulations, enable corporate disaster recovery, and inefficiencies associated with storing and usingbetter use their physical and digital data.information for business advantages, regardless of its format, location or lifecycle stage. We offer comprehensive records management services, data protection & recovery services and information destruction services, along with the expertise and experience to address complex storage and information management challenges such as rising storage rental costs, and increased litigation, regulatory compliance and disaster recovery.recovery requirements. Founded in an underground facility near Hudson, New York in 1951, Iron Mountain Incorporated, a Delaware corporation, is a trusted partner to more than 140,000 corporate155,000 clients throughout North America, Europe, Latin America and Asia Pacific. We have a diversified customer base comprisedconsisting of commercial, legal, banking, healthcare, accounting, insurance, entertainment and government organizations, including more than 97%94% of the Fortune 1000 and more than 93% of the FTSE 100.1000. As of December 31, 2009,2012, we provided servicesoperated over 1,000 facilities, comprising 64.5 million square feet, in 3835 countries on five continents and employed over 20,000 people and operated more than 1,000 facilities.17,500 people.

        Now in our 59th62nd year, we have experienced tremendous growth, particularly since successfully completing the initial public offering of our common stock in February 1996. We have grown from a U.S. business operating fewer than 85 facilities (6 million square feet) with limited productstorage and information management service offerings and annual revenues of $104$104.0 million in 1995 into a global enterprise providing storage and a broad range of related information management services to customers in markets around the world with over 1,000 facilities (64.5 million square feet) and total revenues of $3more than $3.0 billion for the year ended December 31, 2009.2012. On January 5, 2009, we were added to the S&P 500 Index, and as of December 31, 2012 we are currentlywere number 681644 on the Fortune 1000.

        Our success since becoming a public company in 1996 has been driven in large part by our execution of a consistent long-term growth plan to build marketindustry leadership by extending our strategic positionpresence through service line and global expansion. This growth plan has been sequenced into three phases. The first phase involved establishing leadership and broad market access in our core businesses:storage solutions and related records management services and data protection & recovery services, primarily through acquisitions. In the second phase, we invested in building a successful selling organization to access new customers, converting previously unvended demand. While different parts of our business are in different stages of evolution along our three-phase strategy, as an enterprise,in North America and our more developed international markets, we have transitioned to the third phase of our growth plan, which we call the capitalization phase. In this phase, which we expect will runto continue for a long time to come,many years, we seek to expand our relationships with our customers to continue solving their increasingly complex storage and information management problems. Doing this wellGrowing our customer relationships means expanding our global storage and service offerings on a global basis while maximizing our solid core businesses. In doing this, we continue to build what we believe to be a very durable business through disciplined execution.

        Consistent with this strategy,model, we have transitioned from a growth strategy driven primarily by acquisitions of storage and information management services companies to expansion driven primarily by internala growth strategy that includes multiple sources of revenue growth. In 2001, internalThese sources of revenue growth exceededinclude: (i) organic growth throughcomprised of growth from existing customers, sales to new customers and acquiring customer relationships from third-parties; (ii) acquisitions forof storage and information management services businesses; and (iii) the first time since we began our acquisition program in 1996. This has continued to be the case in each year since 2001 with the exceptionintroduction of 2004. In the absence of unusual acquisition activity, wenew rental streams and ancillary services.

        We expect to achieve more of our revenuelong-term growth internally in 2010goals by focusing on expanding our global core storage rental business through increased incoming volumes and beyond.

        In February, 2010, we acquired Mimosa Systems, Inc. ("Mimosa"), a leader in enterprise-class digital content archiving solutions, for approximately $112 million in cash. Mimosa, based in Santa Clara, California, provides an on-premisesby offering our customers integrated archive for email, SharePoint data and files, and complements our existing enterprise-class, cloud-based digital archive services. NearPoint®, Mimosa's enterprise archiving platform, has applications for retention and disposition, electronic discovery ("eDiscovery"), compliance supervision, classification, recovery, and end-user search, enabling customers to reduce risk, and lower their eDiscovery and storage costs.services


Table of Contents

that address their increasingly complex storage and information management needs regardless of the format, location or lifecycle stage of their information. Storage rental is the key driver of our economics and allows us to expand our relationships with our customers through value-added services that flow from storage rental. Consistent with our overall strategy, we are focused on increasing incoming volumes on a global basis. There are multiple sources of new volumes available to us, and these sources inform our growth investment strategy. Our investments in sales and marketing support sales to new customers that do not currently outsource some or all of their storage and information management needs, as well as increased volumes from existing customers. We also expect to invest in the acquisitions of customer relationships and acquisitions of storage and information management services businesses. In North America and our more developed international markets, we expect that these acquisitions will primarily be fold-in acquisitions designed to optimize the utilization of existing assets, expand our presence and better serve customers. We also expect to use acquisitions to expand our presence in attractive, higher growth emerging markets. Finally, we are continuing to add new rental streams and ancillary services to our portfolio to support our long-term growth objectives and drive solid returns on invested capital.

        At this stage in our evolution we also are focused on driving increased profitability and cash flow through a disciplined management approach and a focus on optimizing our business operations. Consisting of productivity initiatives, pricing program improvements and cost controls, our optimization strategy has produced significant and visible results. Between 2006 and 2010, we had compounded annual growth rates of 11% for Adjusted OIBDA, defined as operating income before (1) depreciation and amortization, (2) intangible impairments, (3) (gain) loss on disposal/write-down of property, plant and equipment, net and (4) costs associated with our 2011 proxy contest, the work of the Strategic Review Special Committee of our board of directors (the "Special Committee") and the proposed REIT conversion, discussed below (collectively "REIT Costs"), 17% for Adjusted Earnings per Share from Continuing Operations and 3% for Earnings per Share from Continuing Operations. During that same period, we reduced our capital expenditures (excluding real estate) as a percent of revenues from 13.4% in 2006 to 7.9% in 2010. These gains were driven primarily by cost reductions and the optimization of our North American Business segment as we increased Adjusted OIBDA margins in that segment by nearly 800 basis points between 2006 and 2010. Our current focus is on sustaining the high margin, high profitability levels of the North American Business segment while optimizing our International Business segment using the same strategies. We expect to achieve 25% Adjusted OIBDA margins in the International Business segment by the end of 2013, a 700 basis points improvement over 2010 levels. Beyond 2013, we expect to grow consolidated Adjusted OIBDA margins at a much slower rate because we will have already completed the major profit improvement initiatives in both the North American and International Business segments. In our internal revenuemore developed markets, continuous improvement initiatives will generate modest margin improvement, a portion of which we expect to reinvest in our business. In our emerging markets, margins should expand as the local businesses mature, and we will look to reinvest a portion of that improvement to support the growth objectives primarily throughof these businesses. For more detailed definitions and reconciliations of Adjusted OIBDA and Adjusted Earnings per Share from Continuing Operations and a sophisticated salesdiscussion of why we believe these measures provide relevant and account management coverage model. This model is designeduseful information to drive incremental revenues by acquiring new customer relationshipsour current and increasing business with newpotential investors, see "Item 7. Management's Discussion and existing customers by selling them our productsAnalysis of Financial Condition and services in new geographies and selling additional products and services such as information destruction, digital data protection, document management services and eDiscovery services.Results of Operations—Non-GAAP Measures" of this Annual Report.

        We intend our selling effortsare committed to be augmenteddelivering stockholder value. To that end, and supported by expanded marketing programs,our increased profitability and strong cash flows, we initiated a stockholder payout program in February 2010 consisting of a share repurchase authorization of up to $150.0 million and a dividend policy under which include product managementwe have paid, and in the future intend to pay, cash dividends on our common stock. Our first ever quarterly cash dividend, declared in March 2010, was $0.0625 per share. Subsequently, our board of directors approved an increase in the amount authorized under our share repurchase program of up to an additional $1.05 billion, bringing the total authorization to $1.2 billion. As of December 31, 2012,


Table of Contents

we have purchased 37.7 million shares of our common stock for approximately $1.1 billion under this program. We have also increased our quarterly dividend on three occasions, including most recently in June 2012, when we announced an 8% increase to our regular quarterly dividend payments through 2013. The June 2012 increase to our quarterly dividend, to $0.27 per share, represented a 332% increase over the quarterly dividend amount declared in March 2010.

        In April 2011, we announced a three-year strategic plan to increase stockholder value. The key components of our plan are: (i) sustaining a leadership position in our North American Business segment; (ii) driving substantial improvements in our International Business segment; and (iii) committing to significant stockholder payouts of $2.2 billion through 2013, with $1.2 billion being paid out by May 2012. We fulfilled the commitment to return $1.2 billion of capital to stockholders by May 2012. The remaining $1.0 billion of the stockholder payout plan has been replaced by our regular quarterly dividends and the stockholder distributions and expenditures associated with our plan to convert to a REIT (the "Conversion Plan"). As part of our strategic plan, in June 2011, we completed the sale of our online backup and recovery, digital archiving and eDiscovery solutions businesses (the "Digital Business") for approximately $395.4 million in cash. Additionally, in connection with our strategic portfolio review of certain international operations, we sold our New Zealand operations in October 2011, and we sold our Italian operations in April 2012.

Potential REIT Conversion

        In June 2012, we announced our intention to pursue conversion to a REIT. The plan to convert to a REIT was unanimously approved by our board of directors following a thorough analysis and careful consideration of ways to maximize value through alternative financing, capital and tax strategies. Assuming we are successful in converting, we would plan to elect REIT status no sooner than our taxable year beginning January 1, 2014. Any REIT election made by us must be effective as of the beginning of a taxable year; therefore, if, as a core discipline.calendar year taxpayer, we are unable to convert to a REIT by January 1, 2014, the next possible conversion date would be January 1, 2015.

        Our Conversion Plan currently includes submitting requests for private letter rulings ("PLR") to the U.S. Internal Revenue Service (the "IRS"). Our PLR requests have multiple components, and the conversion to a REIT will require favorable rulings from the IRS on numerous technical tax issues, including the characterization of our racking assets as real estate. We submitted our PLR requests to the IRS during the third quarter of 2012, but the IRS may not provide a favorable response to our PLR requests until the second half of 2013 or at all.

        Our ability to qualify as a REIT will depend upon our continuing compliance following our conversion to a REIT with various requirements, including requirements related to the nature of our assets, the sources of our income and the distributions to our stockholders. If we fail to qualify as a REIT, we will be subject to U.S. federal income tax at regular corporate rates. Even if we qualify for taxation as a REIT, we may be subject to some federal, state, local and foreign taxes on our income and property. In particular, while state income tax regimes often parallel the U.S. federal income tax regime for REITs described above, many states do not completely follow U.S. federal rules and some may not follow them at all.

        We believe that electing REIT status will maximize our enterprise value as we advance our strategy and provide significant benefits to our stockholders. A key component of our overall strategic plan is our capital allocation strategy to return excess cash to our stockholders, and we believe operating as a REIT aligns well with this strategy. In November 2012, we paid a $700.0 million special dividend (the "Special Dividend") representing the initial distribution to satisfy the requirement that we pay to stockholders our accumulated earnings and profits which is estimated to be approximately $1.0 billion to $1.5 billion (the "E&P Distribution") in connection with our potential conversion to a REIT. The Special Dividend consisted of $140.0 million paid in cash and $560.0 million in common stock value.


Table of Contents

We issued 17.0 million new shares in connection with the Special Dividend. We also planbelieve that through conversion to continue developing an extensive worldwide networka REIT we may be able to expand our shareholder base and lower our cost of channel partnersfinancing through which we are sellingincreased ownership of currently leased real estate. We expect our long-term capital allocation strategy as a wide arrayREIT will naturally shift toward increased use of technology solutions. Our salesequity to support lower leverage, though our leverage may increase in the short-term to fund the costs to support the Conversion Plan.

        See Item 7. "Management's Discussion and account coverage modelAnalysis of Financial Condition and Results of Operations—Overview" and "—Liquidity and Capital Resources" of this Annual Report for more information regarding our go-to-market strategy will continuepossible conversion to evolvea REIT, including anticipated costs associated with the Conversion Plan, and Item 1A. "Risk Factors—Risks Related to meet the needsProposed REIT Conversion" of this Annual Report for a discussion of risks associated with our customers.conversion to a REIT, including impediments to a conversion.

B.    Description of Business.

Overview

        We provide cost-effective secure storage for all major media, including paper (which is the primary form of records storage we provide), as well as secure off-site storage of data backup media. Our related information management services can be broadly divided into three major service categories: records management services, data protection & recovery services, and information destruction services. We offer both physical services and technology solutions in each of these categories. Media formats can be broadly divided into physical and electronic records. We define physical records to include paper documents, as well as all other non-electronic media such as microfilm and microfiche, master audio and videotapes, film, X-rays and blueprints. Electronic records include emaile-mail and various forms of magnetic media such as computer tapes, and hard drives and optical disks.

        Our physical records management services include: flexible retrieval access, retention management and records management program development and implementation based on best-practicesbest practices to help customers comply with specific regulatory requirements implementation ofand policy-based programs that feature secure, cost-effective storage for all major media, including paper (which is the dominant form of records storage), flexible retrieval access and retention management. Includedprograms. Also included within physical records management services isare our Document Management Solutions ("DMS"). This suite of servicesDMS helps organizations to gain better access to, and ultimately control over, their paper records by digitizing, indexing and hosting them in online archives to provide complete information life-cyclelifecycle solutions. Our technology-based records management services are comprised primarily of digital archiving and related services for secure, legally compliant and cost-effective long-term archiving of electronic records and eDiscovery services. Within the records management services category, we have developed specialized services for vital records and regulated industries such as healthcare, energy, government and financial services.

        Our physical data protection & recovery services include disaster preparedness, planning, supportthe secure handling and secure, off-site vaultingtransportation of data backup media for fast and efficient data recovery in the event of a disaster, human error or virus.virus as well as disaster preparedness, planning and support. Our technology-based data protection & recovery services include online backup and recovery solutions for desktop and laptop computers and remote servers. Since our sale of the Digital Business, we offer these technology-based services primarily through partnerships. Additionally, we serve as a trusted, neutral third party and offer intellectual propertytechnology escrow services to protect and manage source code and other proprietary information.

        Our information destruction services are comprised almost exclusively consist of secure shredding services. Secure shredding services complete the life cyclelifecycle of a record and involve the shredding of sensitive documents in a way that ensures privacy and a secure chain of custody for the records. These services typically include either the scheduled pick-up of loose office records, which customers accumulate in specially designed secure containers that we provide, or the shredding of documents stored in our records facilities upon the expiration of their scheduled retention periods.


Table of Contents

Physical Records

        Physical records may be broadly divided into two categories: active and inactive. Active records relate to ongoing and recently completed activities or contain information that is frequently referenced. Active records are usually stored and managed on-site by the organization that originated themtheir owners to


Table of Contents


ensure ready availability. Inactive physical records are the principal focus of the storage and information management services industry. Inactive recordsindustry and consist of those records that are not needed for immediate access but which must be retained for legal, regulatory and compliance reasons or for occasional reference in support of ongoing business operations. A large and growing specialty subset of the physical records market is medical records. These are active and semi-active records that are often stored off-site with, and serviced by, ana storage and information management services vendor. Special regulatory requirements often apply to medical records. In addition to our core records management services, we provide consulting, facilities management, fulfillment and other outsourcing services.services relating to storage and information management.

Electronic Records

        Electronic records management focuses on the storage of, and related services for, computer media that is either a backup copy of recently processed data or archival in nature. We believe the issues encountered by customers trying to manage their electronic records are similar to the ones they face in their physical records management programs and consist primarily of: (1) storage capacity and the preservation of data; (2) access to and control over the data in a secure environment; and (3) the need to retain electronic records due to regulatory requirements or for litigation support. Customer needs for data backup and recovery and archiving are distinctively different. Backup data exists because of the need of many businesses to maintain backup copies of their data in order to be able to recover the data in the event of a system failure, casualty loss or other disaster. It is customary (and a best practice) for data processing groups to rotate backup tapes to off-site locations on a regular basis and to require multiple copies of such information at multiple sites.

In addition to the physical rotationstorage and storagerotation of backup data that our physical business segmentswe provide, our Worldwide Digital Business segment offerswe offer online backup services through partnerships as an alternative way for businesses to transfer data to us,store and to access the data they have stored with us.data. Online backup is a Web-based service that automatically backs up computer data from servers or directly from desktop and laptop computers over the Internet and stores it in one of our secure data centers. In early 2003, we announced an expansion of the online backup service to include backup and recovery for personal computer data, answering customers' needs to protect critical business data, which is often unprotected on employee laptop and desktop personal computers. In November 2004, we acquired Connected Corporation ("Connected"), a market leader in the backup and recovery of this distributed data, and in December 2005, we acquired LiveVault Corporation ("LiveVault"), a market leader in the backup and recovery of server data.

        There is a growing need for better ways of archiving electronic records for legal, regulatory and compliance reasons and for occasional reference in support of ongoing business operations. Historically, businesses have relied on backup tapes for storing archived data in electronic format, but this process can be costly and ineffective when attempting to search and retrieve the data for litigation or other needs. In addition, many industries, such as healthcare and financial services, are facing increased governmental regulation mandating the way in which electronic records are stored and managed. To help customers meet these growing storage challenges, we introduced digital archiving services in 2003. We have experienced increasing market adoption of these services, especially for e-mail archiving, which enables businesses to identify and retrieve electronic records quickly and cost-effectively, while maintaining regulatory compliance.

        On December 1, 2006, changes to the Federal Rules of Civil Procedure ("FRCP") were implemented; as a result, electronically stored information was explicitly defined as a separate class of discoverable information in litigation. There is no longer any ambiguity about whether digital data constitutes a "document" and businesses now have the clear responsibility to produce electronic records. In December 2007, we acquired Stratify Inc. ("Stratify"), a leading provider of eDiscovery services to assist customers with managing discovery of electronic records.

        We believe the issues encountered by customers trying to manage their electronic records are similar to the ones they face in their physical records management programs and consist primarily of: (1) storage capacity and the preservation of data; (2) access to and control over the data in a secure environment; and (3) the need to retain electronic records due to regulatory requirements or for


Table of Contents


litigation support. Our digital services offerings are representative of our commitment to address evolving records management needs and expand the array of services we offer.

Growth of Market

        We believe that the volume of stored physical and electronic records will continue to increase on a global basis for a number of reasons, including: (1) regulatory requirements; (2) concerns over possible future litigation and the resulting increases in volume and holding periods of records; (3) the continued proliferation of data processing technologies such as personal computers and networks; (4) inexpensive document producing technologies such as facsimile, desktop publishing software and desktop printing; (5) the high cost of reviewing records and deciding whether to retain or destroy them; (6) the failure of many entities to adopt or follow policies on records destruction; and (7) the need to keep backup copies of certain records in off-site locations for business continuity purposes in the event of disaster.

        We believe that the creation of paper-based information will continue to grow,be sustained, not in spite of, but because of, "paperless" technologies such as e-mail and the Internet. These technologies have prompted the creation of hard copies of such electronic information and have also led to increased demand for electronic records services, such as the storage and off-site rotation of backup copies of magnetic media. In addition, we believe that the proliferation of digital information technologies and distributed data networks has created a growing need for efficient, cost-effective, high quality technology solutions for electronic data protection digital archiving and the management of electronic documents.


Table of Contents

Consolidation ofAcquisitions in a Highly Fragmented Industry

        There was significant consolidation within the highly fragmented physicalThe storage and information management services industry in North America from 1995 to 2000has long been and atremains a slower but continuing pace in recent years. Most physical information management services companies serve a single local market, and are often either owner-operated or ancillary to another business, such as a moving and storage company. We believe that the consolidation trend in the physical information managementhighly fragmented industry bothwith thousands of competitors in North America and other international geographies, will continue because ofaround the industry's capital requirements for growth,world. Between 1995 and 2004 there was significant acquisition activity in the industry. Acquisitions were a fast and efficient way to achieve scale, expand geographically and broaden service offerings. We believe this acquisition activity, which is ongoing, is due to the opportunities for large information management services providers to achieve economies of scale and meet customer demands for more sophisticated, technology-based solutions.

        We believe that the consolidation trend Attractive acquisition opportunities, many of which are small, in this industry is also due to,North America and will continue as a result of, the preference of certain large organizations to contract with one vendor in multiple cities and countries for multiple services. In particular, larger customers increasingly demand a single, sophisticated company to handle all of their important physical records needs. Large national and multinational companies are better able to satisfy these demands than smaller competitors. We have made, and mayinternationally continue to make from timeexist, and we may pursue acquisition of these businesses where we believe they present a good opportunity to time, acquisitions ofcreate value for our competitors, many of whom are small, single-city operators.stockholders.

DescriptionCharacteristics of Our Business

        We generate our revenues by renting storage space to a large and diverse customer base in 64.5 million square feet of real estate around the globe and providing storage (both physical and electronic records in a variety of information media formats),to our customers core records management, data protection & recovery, information destruction, DMS services and an expanding menu of complementary products and services to a large and diverse customer base.services. Providing outsourced information management servicesstorage is the mainstay of our customer relationships and providesserves as the foundation for all our revenue growth. Core services, which are a vital part of a comprehensive records management program, consist primarily of the handling and transportation of stored records and information. In our secure shredding operations, core services consist primarily of the scheduled collection and shredding of records and documents generated by business operations. Additionally, core services include certain DMS services and recurring project revenues. As is the case with storage revenues,rental revenue, core service revenues are highly recurring in nature. In 2009,2012, our storage rental and core service revenues represented approximately 88%89% of our total consolidated revenues. In addition to our core services, we offer a wide array of complementary


Table of Contents


products and services, including special project work, data restoration projects, fulfillment services, consulting services, technology services and product sales (including software licenses, specially designed storage containers and related supplies). In addition, included inFurthermore, complementary services revenue isincludes recycled paper revenues. Theserevenue. Complementary services address more specific needs of our customers and are designed to enhance our customers' overall records management programs. These services complement our core services; however, they are more episodic and discretionary in nature. Revenue generated by all of our operating segments includes both core and complementary components.

        Our various operating segments offer the products and services discussed below. In general, our North American Physical Business and our International Physical Business segments offer physical recordsstorage and the information management services data protection & recovery services and information destruction services,discussed below, in their respective geographies. Our Worldwide Digital Business segment includes our online backup and recovery solutions for server data and personal computers, digital archiving services, eDiscovery services and intellectual property management services and is not limited to any particular geography. Some of our complementary services and products are offered within all of our segments. The amount of revenues derived from our North American Physical Business, International Physical Business and Worldwide DigitalInternational Business operating segments and other relevant data, including financial information about geographic areas and product and service lines, for fiscal years 2007, 20082010, 2011 and 20092012 are set forth in Note 9 to Notes to Consolidated Financial Statements.

Secure Storage

        We provide cost-effective secure storage for all major media, including paper (which is the primary form of records storage we provide) as well as secure off-site vaulting of data backup media. Renting secure space to customers for the purpose of storing paper records and data backup media is by far our largest source of revenue. Records storage consists primarily of the archival storage of records for long periods of time according to applicable laws, regulations and industry best practices. The secure off-site storage of data backup media is a key component of a company's disaster recovery and business continuity programs and storage rental charges are generally billed monthly on a per storage unit basis.

        Hard copy business records are typically stored for long periods of time with limited activity in cartons packed by the customer. For some customers we store individual files on an open shelf basis, and these files are typically more active. Storage rental charges are generally billed monthly on a per


Table of Contents

storage unit basis, usually per cubic foot of records, and include the provision of space, racking systems, computerized inventory and activity tracking and physical security.

        Vital records contain critical or irreplaceable data such as master audio and video recordings, film and other highly proprietary information, such as energy data. Vital records may require special facilities, either because of the data they contain or the media on which they are recorded. Accordingly, our charges for providing enhanced security and special climate-controlled environments for vital records are higher than for typical storage rental.

Service Offerings

        Our information management services can be broadly divided into three major categories: records management services, data protection & recovery services and information destruction services. We offer both physical services and technology solutions in the records management and data protection & recovery categories. Currently, we offer only offer physical services in the information destruction services category.

Records Management Services

        By far our largest category of services, records management services are comprised primarily of the archival storage of records, both physical and digital, for long periods of time according to applicable laws, regulations and industry best practice. CoreCentral to any records management program is the handling and transportation of thosestored records being stored and the eventual destruction of documents stored inthose records facilities upon the expiration of their scheduled retention periods. For physical records, thisThis is accomplished through our extensive service and courier operations. Other records management services include:include our DMS services as well as Compliant Records Management and Consulting Services, DMS, Health Information Storage and Management Solutions, Film & Sound Archives,Entertainment Services, Energy Data Services, Discovery Services and other ancillary services.

        Hard copy business records are typically stored for long periods of time in cartons packed by the customer with limited activity. For some customers we store individual files on an open shelf basis and these files are typically more active. Storage charges are generally billed monthly on a per storage unit basis, usually either per carton or per cubic foot of records, and include the provision of space, racking, computerized inventory and activity tracking and physical security.

        Service and courier operations are an integral part of our comprehensive records management program for all physical media. Theymedia and include adding records to storage, temporary removal oftemporarily removing records from storage, refiling of removed records, permanent withdrawalspermanently withdrawing records from storage and the destruction ofdestroying records. Service charges are generally assessed for each procedureactivity on a per unit basis. Courier operations consist primarily of the pick-up and delivery of records upon customer request. Charges for courier services are based on urgency of delivery, volume and location and are billed monthly. As of December 31, 2009, we were utilizing a2012, our fleet consisted of approximately 3,700 owned or leased vehicles.


Table of Contents

        Our digital archiving services focus on archiving digital information with long-term preservation requirements. These services represent the digital analogy to our physical records management services. Because of increased litigation risks and regulatory mandates, such as the changes to the FRCP that explicitly define electronically stored information as a separate class of discoverable information, companies are increasingly aware of the need to apply the same records management policies and retention schedules to electronic data as they do physical records. Typical digital records include e-mail, e-statements, images, electronic documents retained for legal or compliance purposes and other data documenting business transactions.

        The growth rate of mission-critical digital information is accelerating, driven in part by the use of the Internet as a distribution and transaction medium. The rising cost and increasing importance of storing and managing digital information, management, coupled with the increasing availability of telecommunications bandwidth at lower costs, may create meaningful opportunities for us to provide solutions to our customers with respect to their digital records storage and management challenges. We continue to cultivate marketing and technology partnerships to support this anticipated growth.

        The focus of our DMS business is to develop, implement and support comprehensive documentstorage and information management solutions for the complete lifecycle of our customers' information. We seek to develop solutions that solve our customers' document management challenges by integrating the management of physical records, document conversion and digital storage. Our DMS complementsservices complement our core physical and digital service offerings leveraging our global footprint and enhance our existing customer relationships. We differentiate our offerings from our competitors by providing solutions that integrate and extendexpand our existing portfolio of products and services.

The trend towards increased usage of Electronic Document Management ("EDM") systems represents another opportunity for us. In addition to our existing archival storage services, there is increased opportunityus to manage active records. Our DMS services provide the bridge between customers' physical documents and their new EDM solutions.

        We offer records management services that have been tailored for specific industries, such as health care, or to address the needs of customers with more specific needsrequirements based on the critical nature of their records. HealthcareFor example, medical records tend to be more active in nature and are typically


Table of Contents

stored on specialized open shelving systems that provide easier access to individual files. In addition to storing medical records, we provide health care information services, principallywhich include the handling, storage, filing, processing and retrieval of medical records used by hospitals, private practitioners and other medical institutions. Medical records tend to be more active in nature and are typically stored on specialized open shelving systems that provide easier access to individual files. Healthcare information services also includeinstitutions, as well as recurring project work and ancillary services. Recurring project work involves the on-site removal of aged patient files and related computerized file indexing. Ancillary healthcare information services include release of information (medical record copying and delivery), temporary staffing, contract coding, facilities management and imaging.

        Vital records contain critical or irreplaceable data such as master audio and video recordings, film and other highly proprietary information, such as energy data. Vital records may require special facilities or services, either because of the data they contain or the media on which they are recorded. Our charges for providing enhanced security and special climate-controlled environments for vital records are higher than for typical storage services. We provide the same ancillary services for vital records as we provide for our other storage operations.

        Our Discovery Services comprise solutions designed to address the legal discovery and corporate governance needs of our customers. Those services and solutions allow our customers to collect, prepare, process, review, and produce data that may exist in either paper or digital form in response to internal investigations, litigation or regulatory requests.

        Electronic discovery is the component of legal discovery involving information that is converted into digital data or collected and processed in that form. Our eDiscovery services, principally embodied by the Stratify® Legal Discovery application, help our customers identify, organize, analyze, and review


Table of Contents


particularly relevant or responsive information from within the universe of electronic data generated during the normal course of their business. The ability of current content management technologies to capture and maintain several copies of documents—including different versions of working drafts—underscores the challenges companies face in managing information for eDiscovery.

        Our consolidated suite of physical and digital discovery services has been designed to deliver a secure, end-to-end chain-of-custody, while also reducing both risks and costs for our customers.

        We offer a variety of additional services which customers may request or contract for on an individual basis. These services include conducting records inventories, packing records into cartons or other containers, and creating computerized indices of files and individual documents. We also provide services for the management of active records programs. We can provide these services, which generally include document and file processing and storage, both off-site at our own facilities and by supplying our own personnel to perform management functions on-site at the customer's premises. We also sell a full line of specially designed corrugated cardboard storage cartons.

        Other complementary lines of business that we operate include fulfillment services and professional consulting services. Fulfillment services are performed by our wholly-ownedwholly owned subsidiary, Iron Mountain Fulfillment Services, Inc. ("IMFS"). IMFS stores customer marketing literature and other materials for its customers and delivers this material to sales offices, trade shows and prospective customers' locations based on current and prospective customer orders.needs. In addition, IMFS assembles custom marketing packages and orders and manages and provides detailed reporting on customer marketing literature inventories. A growing element of the content we manage and fulfill is stored digitally and printed on demand by IMFS. Digital print allows marketing materials such as brochures, direct mail, flyers, pamphlets and newsletters to be personalized to the recipient with the variable messages, graphics and content.

        We provide professional consulting services to customers, enabling them to develop and implement comprehensive recordsstorage and information management programs. Our consulting business draws on our experience in storage solutions and information management services to analyze the practices of companies and assist them in creating more effective programs ofto store records and information management.manage information. Our consultants work with these customers to develop policies and schedules for document retention and destruction.

        We also sell a fullsold our domain name management product line of specially designed corrugated cardboard storage cartons. In 2008in 2010 and the Digital Business, including our former wholly owned subsidiaries, Mimosa Systems, Inc. and Stratify, Inc., and our New Zealand operations in 2011. Also, we divested ourselves ofsold our commodity data products sales business.Italian operations in April 2012. Consistent with our treatment of acquisitions, we eliminated all revenues associated with our data products businessthese businesses, which have all been reflected as discontinued operations for financial reporting purposes, from the calculation of our internal growth in 2008rates for 2010, 2011 and 2009.2012.

Data Protection & Recovery Services

        Our data protection & recovery services are designed to comply with applicable laws and regulations and to satisfy industry best practices with regard to the off-site vaulting of data for disaster recovery and business continuity purposes. As is the case with our records management services, weWe provide data protection & recovery services for both physical and electronic records. We also offer intellectual property managementtechnology escrow services in this category.

        Physical data protection & recovery services consist of the storage and rotation of backup computer media as part of corporate disaster recovery and business continuity plans. Computer tapes, cartridges and disk packs are transported off-site by our courier operations on a scheduled basis to secure, climate-controlled facilities, where they are available to customers 24 hours a day, 365 days a year, to facilitate data recovery in the event of a disaster. Frequently, back-upbackup tapes are then rotated from our facilities back to


Table of Contents

our customers' data centers. We also manage tape library relocations and support disaster recovery testing and execution.

        Online backup is oura Web-based service that automatically backs up computer data from servers or directly from desktop or laptop computers over the Internet and stores it in one of our secure data centers. Customers use our Connected® backup for PC software product for online backupAfter the sale of desktop or laptop computer datathe Digital Business, we continue to offer this service pursuant to a reseller agreement with Autonomy Corporation plc, a corporation formed under the laws of England and our LiveVault® server data backup and recovery product for online


Table of Contents


backup of server data. Customers can choose our off-site hosted Software as a Service solution or they can license the software from us as part of a customer on-site solution.Wales ("Autonomy").

        Through our intellectual property managementtechnology escrow services business, we act as a trusted, neutral, third party, safeguarding valuable technology assets—such as software source code, object code and data—in secure, access-protected escrow accounts. Acting in this intermediary role, we help document and maintain intellectual property integrity. The result is increased control and leverage for all parties, enabling them to protect themselves, while maintaining competitive advantage.

Information Destruction Services

        Our information destruction services consist primarily of our physical secure shredding operations. Secure shredding is a natural extension of our hardcopyhard copy records management services, completing the life cyclelifecycle of a record, and involves the shredding of sensitive documents for corporate customers that, in many cases, also use our services for management of less sensitive archival records. These services typically include the scheduled pick-up of loose office records whichthat customers accumulate in specially designed secure containers we provide. Complementary to our shredding operations is the sale of the resultant waste paper to third-party recyclers. Through a combination of plant-based shredding operations and mobile shredding units comprisedconsisting of custom built trucks, we are able to offer secure shredding services to our customers throughout the U.S., Canada, the U.K.United Kingdom, Ireland, Australia and Australia/New Zealand.Latin America.

Financial Characteristics of Our Business

        Our financial model is based on the recurring nature of our various revenue streams. The historical predictability of our revenues and the resulting adjusted operating income before depreciation and amortization ("Adjusted OIBDA")OIBDA allow us to operate with a high degree of financial leverage. For a more detailed definition and reconciliation of Adjusted OIBDA and a discussion of why we believe this measure provides relevant and useful information to our current and potential investors, see Item 7. "Management's Discussion and Analysis of Financial Condition and Results of Operations—Non-GAAP Measures." Our business has the following financial characteristics:


Table of Contents


Table of Contents

        Following is a table presenting our capital expenditures for 2010, 2011 and 2012 organized by the nature of the spending as described above:

 
 Year Ended December 31, 
Nature of Capital Spend (dollars in millions)
 2010(1)(2) 2011(1)(2) 2012(1)(2) 

Business Line Growth

 $116 $81 $61 

Real Estate

  14  20  54 

Business Operations(3)

  65  84  75 

Product Development

  10  2  4 

Product Improvement

  31  14  12 

Operational Efficiencies

  8  18  42 
        

Total Capital

 $244 $218 $248 

Less: Real Estate and REIT Capital Expenditures

  (14) (20) (66)
        

Total Capital, Net of Real Estate and REIT Capital Expenditures

 $230 $198 $182 
        

        We believe that capital expenditures, net of real estate and capital expenditures that are part of our REIT Costs, incurred as a percent of revenues is a meaningful metric for investors asbecause it indicates the efficiency with which we are investing in the internal growth and operational efficiency of our business. For the years 20072010 through 2009,2012, our total capital expenditures, net of real estate and capital expenditures that are part of our REIT Costs, incurred as a percent of revenues were approximately 8%, 7% and 6%, respectively. This decrease since 2010 is due primarily to our disciplined approach to capital management, a shift toward less capital intensive service revenues and moderating growth rates in our physical storage rental business.

        Following is a table presenting our capital expenditures as a percent of total revenues were 14%, 13%for 2010, 2011 and 10%, respectively. Included2012 organized by the nature of the spending as described above:

 
 Year Ended December 31, 
Nature of Capital Spend
 2010(1)(2) 2011(1)(2) 2012(1)(2) 

Business Line Growth

  4.0% 2.7% 2.0%

Real Estate

  0.5% 0.7% 1.8%

Business Operations(3)

  2.2% 2.8% 2.5%

Product Development

  0.3% 0.1% 0.1%

Product Improvement

  1.1% 0.5% 0.4%

Operational Efficiencies

  0.3% 0.6% 1.4%
        

Total Capital

  8.4% 7.2% 8.3%

Less: Real Estate and REIT Capital Expenditures

  (0.5)% (0.7)% (2.2)%
        

Total Capital, Net of Real Estate and REIT Capital Expenditures

  7.9% 6.6% 6.1%
        

(1)
Represents capital expenditures on an accrual basis and may differ from amounts presented on the cash basis in the total are limited annual capital expenditures madeConsolidated Statement of Cash Flows.

(2)
Columns may not foot due to rounding.

(3)
Capital expended in ordersupport of ongoing business operations includes amounts previously referred to maintain our current revenue stream. We define theseas maintenance capital expenditures to include itemsexpenditures. This category includes capital expended on operational support initiatives such as major facility repairs including life, healthsales and safety improvements, replacement of warehouse equipment, shredding bins,marketing and certain computer equipment (including personal computers for employees and equipment for our operations), and system conversions. For each of the years 2007 through 2009, these maintenance capital expenditures represented approximately 2% of our annual revenues. The balance of our aggregate capital expenditures were growth-related investments, primarily in storage systems, which include racking, building and leasehold improvements, computer systems hardware and software, and buildings. These growth-related capital expenditures are primarily discretionary and create additional capacity for increases in revenues and Adjusted OIBDA. Since shifting our focus from growth through acquisitions to internal revenue growth, our capital expenditures in most years, made primarilyinformation technology projects to support our internal revenue growth, have generally exceeded the aggregate acquisition consideration we paid in the same year. This was not the case in 2007 due to the acquisitionsinfrastructure requirements.

Table of ArchivesOne, Inc. ("ArchivesOne") and Stratify. We expect this trend to continue in the future absent unusual acquisition activity.Contents

Growth Strategy

        Our objective isWe offer our customers an integrated value proposition by providing them with secure storage and comprehensive information management services, including records management services, data protection & recovery services and information destruction services. We have the expertise and experience to address complex storage and information management challenges such as rising storage rental costs and increased litigation, regulatory compliance and disaster recovery requirements. We expect to maintain a leadership position in the storage and information management services industry around the world protectingby enabling customers to store, protect and storing our customers' information and enabling them to better use it without regard to mediatheir information—regardless of its format, location or geographic location. In the U.S.lifecycle stage—so they can optimize their business and Canada, we seek to be one of the largest information management services providers in each of our markets. Internationally, ourensure proper recovery, compliance and discovery.

        Our objectives are to continue to capitalize on our expertise in the storage and information management services industry and to make additional fold-in acquisitions in more developed markets and acquisitions and investments to establish an industry-leading presence in selected internationalemerging markets. We intend thatOur near-term growth objectives include a set of specific initiatives: (1) increasing our primary avenues of growth will continueincoming storage volumes with a targeted, low risk approach to be: (1) the introduction of new productsimproving our sales effectiveness, thereby increasing revenues from our existing customers and services such as secure shredding, online backup, eDiscovery and DMS; (2) increased business with existing customers; (3) the addition ofgaining new customers; (2) driving higher volume growth in our international businesses as we expand our platform for selling storage, core services and (4) selectivenew services in higher growth markets; and (3) continuing to add new rental streams and ancillary services to our portfolio to support our long-term growth objectives and drive solid returns on invested capital. Our overall growth strategy will focus on growing our business organically, making strategic customer acquisitions in new and existing markets.


Tablepursuing acquisitions of Contentsstorage and information management businesses.

Introduction of New Products and Services

        We continue to expand our portfolio of products and services. Adding new products and services allows us to further penetratestrengthen our existing customer accountsrelationships and attract new customers in previously untapped markets.

        In 2009, we introduced two new technology solutions: Virtual File Store™ ("VFS"), an enterprise-class, cloud-based digital storage archiving service and eVantage™, an on-premises eDiscovery early case assessment solution. VFS is an on-demand, long-term storage service that reduces total cost of ownership for storing and managing static data files. As companies search for cost-effective solutions to manage large amounts of digital information, our VFS solution offers secure, long-term storage of inactive data at off-site data centers, greatly reducing the investment in an expensive on-site storage infrastructure and supporting regulatory and compliance initiatives. Stratify's eVantage solution safeguards corporate proprietary information and allows general counsel to reduce the cost and risk of eDiscovery by going beyond statistical data culling with advanced technologies that drive more intelligent qualitative analysis on all matters and internal investigations in their eDiscovery portfolio.

Growth from Existing Customers

        Our existing customers storingcustomers' storage of physical records contributecontributes to the growth of storage rental and storage-related servicecertain records management services revenues growth because, on average, theyour existing customers generate additional cartons at a faster rate than old cartons are destroyed or permanently removed. However, during the recent economic downturn, the combination of lower incoming volumes from existing customers, due in large part, we believe, to high unemployment rates and generally lower business activity, and increased destruction rates, resulted in lower consolidated net volume growth in recent quarters, including negative net volume growth from existing customers at times in certain markets. Since reaching unusually high levels in 2009, our destruction rates have stabilized at rates closer to historical norms. After the economy has improved, we expect our growth from existing customers should improve although we cannot give any assurance as to how much, if any, improvement we will realize. In order to maximize growth opportunities from existing customers, we seek to maintain high levels of customer retention by providing premium customer service through our local account management staff.

        Our sales coverage model is designed to identify and capitalize on incremental revenue opportunities by strategically allocating our sales resources based on a sophisticated segmentation ofto our customer base and selling additional recordsstorage, information management data protection & recoveryservices and information destruction services,products in new and existing markets within our existing customer relationships. We also seek to leverage existing business relationships with our customers by selling complementaryThese services and products. Servicesproducts include special project work, data restoration projects, fulfillment services, consulting services, technology services and product sales (including software licenses, specially designed storage containers and related supplies). In addition, included in complementary services revenue is recycled paper revenues.


Table of Contents

Addition ofExpanding New Customersand Existing Customer Relationships

        Our sales forces are dedicated to three primary objectives: (1) establishing new customer account relationships; (2) generating additional revenue fromby expanding existing customers in new and existing markets;customer relationships globally; and (3) expanding new and existing customer relationships by effectively selling a wide array of complementary services and products. In order to accomplish these objectives, our sales forces draw on our U.S. and international marketing organizations and senior management.

Growth through Acquisitions

        The goalsgoal of our current acquisition program are (1)is to supplement internal growth in our physical businesses by expanding our new service capabilities and industry-specific services and continuing to expand our presence in targeted emerging markets, continuing to make fold-in acquisitions in North America and more developed international markets;markets and (2) to accelerateexpanding our leadershiprental streams, new service capabilities and time to market in our digital businesses.industry-specific services. We have a successful record of acquiring and integrating storage and information management services companies. We substantially completed our geographic expansion in North America, Europe and Latin America by 2003 and began our expansion into Asia Pacific in 2005.


Table of Contents

Acquisitions in the North American PhysicalBusiness Segment

        We have acquired, and we continue to seek to acquire, storage and information management services businesses in the U.S. and Canada. Given the relatively small numbersize of attractivemost acquisition targets in our core physical businesses in North America, andwhere we believe they present a good opportunity to create value for our increased revenue base,stockholders, future acquisitions are expected to be less significant to our overall North American Business segment revenue growth than in the past. Acquisitions in the North American Physical segment will likely focus primarily on expanding our DMS capabilities and enhancing industry-specific services such as health information management solutions.

Acquisitions in the International PhysicalBusiness Segment

        We expect to continue to make acquisitions and investments in storage and information management services businesses in targeted markets outside North America.America, particularly emerging markets. We have acquired and invested in, and seek to acquire and invest in, storage and information management services companies in certain countries, and, more specifically, certain markets within such countries, where we believe there is potential for significant growth. Future acquisitions and investments will focus primarily on developingexpanding priority expansion markets in Continental Europe, Latin America and Asia Pacific, with continued leverage of our successful joint venture model. Similar to our strategy in North America, we will also explore international acquisitions that strengthen our capabilities in areas such as DMS and industry-specific services.

        The experience, depth and strength of local management are particularly important in our international expansion and acquisition strategy. Since beginning our international expansion program in January 1999, we have, directly and through joint ventures, expanded our operations into 36more than 30 countries in Europe, Latin America and Asia Pacific. These transactions have taken, and may continue to take, the form of acquisitions of an entire business or controlling or minority investments with a long-term goal of full ownership. We believe oura joint venture strategy, rather than an outright acquisition, may, in certain markets, better position us to expand the existing business. The local partner benefitspartners benefit from our expertise in the storage and information management services industry, our multinational customer relationships, our access to capital and our technology, andwhile we benefit from our local partners' knowledge of the market, relationships with local customers and their presence in the community. In addition to the criteria we use to evaluate North American acquisition candidates, when looking at an international investment or acquisition, we also evaluate the presence in the potential market of our existing customers as well as the risks uniquely associated with an international investment, including those risks described below.

        Our long-term goal is to acquire full ownership of each business in which we mademake a joint venture investment. InSince 2008, we have acquired the remaining minority equity ownership in our BrazilianGreece (2010), China (2010), Hong Kong (2010) and Singapore (2010) operations and increased our equity ownership interest in our Switzerland (2012) and Turkey (2012) operations. In 2010, to better align our operations with our long-term international growth objectives, we sold our equity ownership interest in Indonesia and Sri Lanka. We now own more than 98%97% of our international operations, measured as a percentage of consolidated revenues. In connection with the strategic review of certain of our


Table of Contents

international businesses, we sold our New Zealand operations in October 2011 and our Italian operations in April 2012.

        Our international investments are subject to risks and uncertainties relating to the indigenous political, social, regulatory, tax and economic structures of other countries, as well as fluctuations in currency valuation, exchange controls, expropriation and governmental policies limiting returns to foreign investors.

        The amount of our revenues derived from international operations and other relevant financial data for fiscal years 2007, 20082010, 2011 and 20092012 are set forth in Note 9 to Notes to Consolidated Financial Statements. For the years ended December 31, 2007, 20082010, 2011 and 2009,2012, we derived approximately 32%, 32%34% and 30%35%, respectively, of our total revenues from outside of the U.S. As of December 31, 2007, 20082010, 2011 and 2009,2012, we havehad long-lived assets of approximately 34%36%, 31%36% and 34%37%, respectively, outside of the U.S.

AcquisitionsCompetition

        We are a global leader in the Worldwide Digital Segment

        Our focus on technology innovation allows us to bring leading productsphysical storage and information management services to market designed to solve customer problemsindustry with operations in the areas of data protection, archiving and discovery. Our


Table of Contents


approach to innovation includes our internal development efforts, partnering with other technology companies and acquisition of new and existing technologies. We intend to build or develop our own technology in areas core to our strategy in order to protect and extend our position in the market. Examples include, back up and archiving Software as a Service and data reduction technologies. We are developing global technology partnerships that complement our product and service offerings, allow us to offer a complete solution to the marketplace and keep us in contact with emerging technology companies. Our technology acquisition strategy is designed to accelerate our product strategy, leadership and time to market and past examples include the Connected (2004), LiveVault (2005), Stratify (2007) and Mimosa (2010) acquisitions. We expect our future technology acquisitions will be of two primary types, those that bring us new or improved technologies to enhance our existing technology portfolio and those that increase our market position through technology and established revenue streams.

Competition

35 countries. We compete with our current and potential customers' internal storage and information management services capabilities. We can provide no assurance that these organizations will begin or continue to use an outside company such as Iron Mountain for their future storage and information management services.

        We also compete with multiplenumerous storage and information management serviceservices providers in allevery geographic areasarea where we operate. The physical storage and information management services industry is highly competitive and includes thousands of competitors in North America and around the world. We believe that competition for customers is based on price, reputation for reliability, quality and security of storage, quality of service and scope and scale of technology and that we generally compete effectively in each of these areas.

Alternative Technologies

        We derive most of our revenues from rental fees for the storage of paper documents and storage-relatedrecords management services. This storage requires significant physical space. Alternative storage technologies exist, many of which require significantly less space than paper documents. These technologies include computer media, microform, CD-ROM and optical disk. To date, none of these technologies has replaced paper documents as the principalprimary means for storing information. However, we can provide no assurance that our customers will continue to store most of their records inas paper documents format.documents. We continue to invest inprovide additional services such as online backup, and digital records management,primarily through partnerships, designed to address our customers' need for efficient, cost-effective, high quality solutions for electronic records and storage and information management.

Employees

        As of December 31, 2009,2012, we employed over 10,5008,500 employees in the U.S. and over 9,6009,000 employees outside of the U.S. At December 31, 2009,2012, an aggregate of 518445 employees were represented by unions in California, Georgia and five citiesthree provinces in Canada.

        All non-union employees are generally eligible to participate in our benefit programs, which include medical, dental, life, short and long-term disability, retirement/401(k) and accidental death and dismemberment plans. Unionized employees receive these types of benefits through their unions. In addition to base compensation and other usual benefits, all full-time employees participate in some form of incentive-based compensation program that provides payments based on revenues, profits, collections or attainment of specified objectives for the unit in which they work. Management believes


Table of Contents

that we have good relationships with our employees and unions. All union employees are currently under renewed labor agreements or operating under an extension agreement.


Table of Contents

Insurance

        For strategic risk transfer purposes, we maintain a comprehensive insurance program with insurers that we believe to be reputable and that have adequate capitalization in amounts that we believe to be appropriate. Property insurance is purchased on a comprehensive basis, including flood and earthquake (including excess coverage), subject to certain policy conditions, sublimits and deductibles. Property is insured based upon the replacement cost of real and personal property, including leasehold improvements, business income loss and extra expense. Among otherOther types of insurance that we carry, which are also subject to certain policy conditions, sublimits and deductibles, are:include: medical, workersworkers' compensation, general liability, umbrella, automobile, professional, warehouse legal liability and directorsdirectors' and officersofficers' liability policies. In 2002, we established a wholly-owned Vermont domiciled captive insurance company as a subsidiary through which we retain and reinsure a portion of our property loss exposure.

        Our customer contracts usually contain provisions limiting our liability with respect to loss or destruction of, or damage to, records or information stored with us. Our liability under thesephysical storage contracts is often limited to a nominal fixed amount per item or unit of storage, such as per cubic foot. Our liability under our DMS services and other service contracts is often limited to a percentage of annual revenue under the contract. We cannot assure youprovide assurance that where we have limitation of liability provisions that they will be enforceable in all instances or would otherwise protect us from liability. Also, some of our contracts with large volume accounts and some of the contracts assumed in our acquisitions contain no such limits or contain higher limits. In addition to provisions limiting our liability, our standard storage rental and service contracts include a schedule setting forth the majority of the customer-specific terms, including storage rental and service pricing and service delivery terms. Our customers may dispute the interpretation of various provisions in their contracts. While we have had relatively few disputes with our customers with regard to the terms of their customer contracts, and anymost disputes to date have not been material, we can give you no assurance that we will not have material disputes in the future.

Environmental Matters

        Some of our current and formerly owned or leased properties were previously used by entities other than us for industrial or other purposes that involved the use, storage, generation and/or disposal of hazardous substances and wastes, including petroleum products. In some instances these properties includedthis prior use involved the operation of underground storage tanks or the presence of asbestos-containing materials. Although we have from time to time conducted limited environmental investigations and remedial activities at some of our former and current facilities, we have not undertaken an in-depth environmental review of all of our properties. We therefore may be potentially liable for environmental costs and may be unable to sell, rent, mortgage or use contaminated real estate owned or leased by us. Under various federal, state and local environmental laws, we may be potentially liable for environmental compliance and remediation costs to address contamination, if any, located at owned and leased properties as well as damages arising from such contamination, whether or not we know of, or were responsible for, the contamination, or the contamination occurred while we owned or leased the property. Environmental conditions for which we might be liable may also exist at properties that we may acquire in the future. In addition, future regulatory action and environmental laws may impose costs for environmental compliance that do not exist today.

      �� We transfer a portion of our risk of financial loss due to currently undetected environmental matters by purchasing an environmental impairment liability insurance policy, which covers all owned and leased locations. Coverage is provided for both liability and remediation costs.

Reincorporation

        On May 27, 2005, Iron Mountain Incorporated, a Pennsylvania corporation ("Iron Mountain PA"), reincorporated as a Delaware corporation. The reincorporation was effected by means of a statutory merger (the "Merger") of Iron Mountain PA with and into Iron Mountain Incorporated, a Delaware


Table of Contents


corporation ("Iron Mountain DE"), a wholly owned subsidiary of Iron Mountain PA. In connection with the Merger, Iron Mountain DE succeeded to and assumed all of the assets and liabilities of Iron Mountain PA. Apart from the change in its state of incorporation, the Merger had no effect on Iron Mountain PA's business, board composition, management, employees, fiscal year, assets or liabilities, or location of its facilities, and did not result in any relocation of management or other employees. The Merger was approved at the Annual Meeting of Stockholders held on May 26, 2005. Upon consummation of the Merger, Iron Mountain DE succeeded to Iron Mountain PA's reporting obligations and continued to be listed on the New York Stock Exchange under the symbol "IRM."

Internet Website

        Our Internet address iswww.ironmountain.com. Under the "Investors""For Investors" section on our Internet website, we make available through a hyperlink to a third party website, free of charge, our Annual ReportReports on Form 10-K, our Quarterly Reports on Form 10-Q, our Current Reports on Form 8-K and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (the "Exchange Act") as soon as reasonably practicable after such forms are filed with or furnished to the SEC. We are not including the information contained on or available through our website as a part of, or incorporating such information by reference into, this Annual Report on Form 10-K. Copies of our corporate governance guidelines, code of ethics and the charters of our audit, compensation, and nominating and governance committees are available on the Investors"For Investors" section of our website,www.ironmountain.com, under the heading "Corporate Governance."


Item 1A. Risk Factors.

        Our businesses face many risks. If any of the events or circumstances described in the following risks actually occur, our businesses, financial condition or results of operations could suffer, and the trading price of our debt or equity securities could decline. Our investorscurrent and prospectivepotential investors should consider the following risks and the information contained under the heading "Cautionary Note Regarding Forward-Looking Statements" before deciding to invest in our securities.

Risks Related to the Proposed REIT Conversion

Although following our strategic review process we have chosen to pursue conversion to a REIT, we may not be successful in converting to a REIT effective January 1, 2014, or at all.

        As previously announced, in June 2011 we formed the Special Committee to evaluate, among other things, ways to maximize stockholder value through alternative financing, capital, and tax strategies, including evaluating a potential conversion to a REIT (the "Conversion Plan"). In June 2012, our board of directors unanimously approved the Conversion Plan. There are significant implementation and operational complexities to address in connection with converting to a REIT, including obtaining a favorable PLR from the IRS, completing internal reorganizations, modifying accounting, information technology and real estate systems, receiving stockholder approvals, refinancing our revolving credit and term loan facilities and making required stockholder payouts. Further, changes in legislation or the federal tax rules could adversely impact our ability to convert to a REIT and/or the attractiveness of converting to a REIT. Similarly, even if we are able to satisfy the existing REIT requirements, the tax laws, regulations and interpretations governing REITs may change at any time in ways that could be disadvantageous to us.

        Additionally, several conditions must be met in order to complete the conversion to a REIT, and the timing and outcome of many of these conditions are beyond our control. For example, we cannot provide assurance that the IRS will ultimately provide us with a favorable PLR or that any favorable PLR will be received in a timely manner for us to convert successfully to a REIT as of January 1, 2014. Even if the transactions necessary to implement REIT conversion are effected, our board of directors may decide not to elect REIT status, or to delay such election, if it determines in its sole discretion that it is not in the best interests of our stockholders. We can provide no assurance if or when conversion to a REIT will be successful. Furthermore, if we do convert, the effective date of the REIT conversion could be delayed beyond January 1, 2014, in which event we could not elect REIT status until the taxable year beginning January 1, 2015, at the earliest.


Table of Contents

We may not qualify or remain qualified as a REIT, and/or may not realize the anticipated benefits to stockholders, including the achievement of tax savings for us, increases in income distributable to stockholders, the potential to lower our cost of financing through increased ownership of currently leased real estate and the expansion of our stockholder base.

        If we convert to a REIT, we plan to operate in a manner consistent with REIT qualification rules; however, we cannot provide assurance that we will, in fact, qualify as a REIT or remain so qualified. REIT qualification involves the application of highly technical and complex provisions of the U.S. Internal Revenue Code of 1986, as amended (the "Code"), to our operations as well as various factual determinations concerning matters and circumstances not entirely within our control. There are limited judicial or administrative interpretations of these provisions.

        Even if we are successful converting to a REIT and electing REIT status, we cannot provide assurance that our stockholders will experience benefits attributable to our qualification and taxation as a REIT, including our ability to (1) reduce our corporate level federal tax through distributions to stockholders, (2) lower our cost of financing or (3) expand our stockholder base. The realization of the anticipated benefits to stockholders will depend on numerous factors, many of which are outside our control, including interest rates. In addition, future distributions to stockholders will depend on our cash flows, as well as the impact of alternative, more attractive investments as compared to dividends. Further, changes in legislation or the federal tax rules could adversely impact the benefits of being a REIT.

Complying with REIT qualification requirements may limit our flexibility or cause us to forego otherwise attractive opportunities.

        To qualify as a REIT for federal income tax purposes, and to remain so qualified, we must continually satisfy tests concerning, among other things, the sources of our income, the nature and diversification of our assets, the amounts we distribute to our stockholders and the ownership of our common stock. For example, under the Code, no more than 25% of the value of the assets of a REIT may be represented by securities of one or more U.S. taxable REIT subsidiaries ("TRS") and other nonqualifying assets. This limitation may affect our ability to make large investments in other non-REIT qualifying operations or assets. As such, compliance with REIT tests may hinder our ability to make certain attractive investments, including the purchase of significant nonqualifying assets and the material expansion of non-real estate activities.

There are uncertainties relating to our estimate of our E&P Distribution, as well as the timing of such E&P Distribution and the percentage of common stock and cash we may distribute.

        We have provided an estimated range of the E&P Distribution. We are in the process of conducting a study of our pre-REIT accumulated earnings and profits as of the close of our 2011 taxable year using our historic tax returns and other available information. This is a very involved and complex study that is not yet complete, and the actual result of the study relating to our pre-REIT accumulated earnings and profits as of the close of our 2011 taxable year may be materially different from our current estimates. In addition, the estimated range of our E&P Distribution is based on our projected taxable income for our 2012 and 2013 taxable years and our current business plans and performance, but our actual earnings and profits (and the actual amount of the E&P Distribution) will vary depending on, among other items, the timing of certain transactions, our actual taxable income and performance for 2012 and 2013 and possible changes in legislation or tax rules and IRS revenue procedures relating to distributions of earnings and profits. For these reasons and others, our actual E&P Distribution may be materially different from our estimated range.

        In the fourth quarter of 2012, we paid to our stockholders a Special Dividend of $700 million, which represented the initial portion of the expected E&P Distribution. We expect the balance of the


Table of Contents

E&P Distribution will be paid in 2014, but the timing of the planned payment of the remaining E&P Distribution, which may or may not occur, may be affected by potential tax law changes, the completion of various phases of the REIT Conversion Plan and other factors beyond our control. The Special Dividend was paid in the aggregate of 20% in cash and 80% in shares of our common stock. We may decide, based on our cash flows and strategic plans, IRS revenue procedures relating to distributions of earnings and profits, leverage and other factors, to pay the remaining portion of the E&P Distribution entirely in cash or a different mix of cash and common stock.

We may be required to borrow funds and/or raise equity to satisfy our E&P Distribution and other conversion costs.

        Depending on the ultimate size and timing of the stockholder distributions and the cash outlays associated with our conversion to a REIT, we may raise debt and/or issue equity in the near-term to fund these disbursements, even if the then-prevailing market conditions are not favorable for these borrowings or offerings. Whether we issue equity, at what price and the amount and other terms of any such issuances will depend on many factors, including alternative sources of capital, our then-existing leverage, our need for additional capital, market conditions and other factors beyond our control. If we raise additional funds through the issuance of equity securities or debt convertible into equity securities, the percentage of stock ownership by our existing stockholders may be reduced. In addition, new equity securities or convertible debt securities could have rights, preferences, and privileges senior to those of our current stockholders, which could substantially decrease the value of our securities owned by them. Depending on the share price we are able to obtain, we may have to sell a significant number of shares in order to raise the capital we deem necessary to execute our long-term strategy, and our stockholders may experience dilution in the value of their shares as a result. Furthermore, satisfying our E&P Distribution and other conversion costs may increase the financing we need to fund capital expenditures, future growth and expansion initiatives. As a result, our indebtedness could increase. See "Risks Relating to Our Indebtedness" for further information regarding our substantial indebtedness.

There are uncertainties relating to the costs associated with implementing the Conversion Plan.

        We have provided an estimated range of our tax and other costs to convert to a REIT, including estimated tax liabilities associated with a change in our method of depreciating and amortizing various assets and annual compliance costs. Our estimate of these taxes and other costs, however, may not be accurate, and such costs may in actuality be materially different from our estimates due to unanticipated outcomes in the PLR, changes in our business support functions and support costs, the unsuccessful execution of internal planning, including restructurings and cost reduction initiatives, or other factors.

We have no experience operating as a REIT, which may adversely affect our business, financial condition and results of operations if we successfully convert to a REIT.

        We have no experience operating as a REIT and our senior management has no experience operating a REIT. Our pre-REIT operating experience may not be sufficient to prepare us to operate successfully as a REIT. Our inability to operate successfully as a REIT, including the failure to maintain REIT status, could adversely affect our business, financial condition and results of operations.

Operational Risks

Our customers may shift from paper storage to alternative technologies that require less physical space.

        We derive most of our revenues from the storage of paper documents and storage related services. This storage requires significant physical space, which we provide through our owned and leased facilities. Alternative storage technologies exist, many of which require significantly less space than


Table of Contents

paper documents. These technologies include computer media, microform, CD-ROM and optical disk. U.S. federal government initiatives have resulted in many health care providers adopting programs to evolve to greater use of electronic medical records. In addition, as alternative technologies are adopted, storage related services may decline as the physical records we store become less active and more archived. We can provide no assurance that our customers will continue to store most of their records in paper documents format. The adoption of alternative technologies may also result in decreased demand for services related to the paper documents we store. A significant shift by our customers to storage of data through non-paper based technologies, whether now existing or developed in the future, could adversely affect our businesses.

Governmental and customer focus on data security could increase our costs of operations. We may not be able to fully offset these costs through increases in our rates. In addition, incidents in which we fail to protect our customers' information against security breaches could result in monetary damages against us and could otherwise damage our reputation, harm our businesses and adversely impact our results of operations.

        In reaction to publicized incidents in which electronically stored information has been lost, illegally accessed or stolen, almost all U.S. states have adopted breach of data security statutes or regulations that require notification to consumers if the security of their personal information, such as social security numbers, is breached. In addition, in 2009certain federal laws and regulations affecting financial institutions, health care providers and plans and others impose requirements regarding the United States Departmentprivacy and security of Health and Human Services adopted regulations requiringinformation maintained by those institutions as well as notification to persons whose personal health information is accessed by an unauthorized third partyparty. Some of these laws and providesregulations provide for civil fines in some circumstances.certain circumstances and require the adoption and maintenance of privacy and information security programs; our failure to be in compliance with any such programs may adversely affect our business. One U.S. state has adopted regulations requiring every company that maintains or stores personal information to adopt a comprehensive written information security program. In some instances European data protection authorities have issued large fines as a result of data security breaches. Our information security practices have been the subject of review or inquiry by governmental agencies, and we may be subject to additional reviews or inquiries of governmental agencies in the future.

        Continued governmental focus on data security may lead to additional legislative action. For example, in the United Statespast the U.S. Congress is consideringhas considered legislation intended to addressthat would expand the federal data security through various methods that include requiringbreach notification to affected persons of data security breaches.requirement beyond the financial and medical fields. In


Table of Contents


addition, the increasedEuropean Commission has proposed a new regulation and directive that will, if adopted, supersede Directive 95/46/EC, which has governed the processing of personal data since 1995. It is anticipated that the new proposal will significantly alter the security and privacy obligations of entities, such as Iron Mountain, that process data of citizens of members of the European Union. The continued emphasis on information security may lead customers to request that we take additional measures to enhance security and assume higher liability under our contracts. We have experienced incidents in which customers' backup tapes or other records have been lost, and we have been informed by customers that some of the incidents involved the loss of personal information, resulting in some incidents that the lost media or records contained personal information.monetary costs to those customers for which we have provided reimbursement. As a result of legislative initiatives and client demands, we may have to modify our operations with the goal of further improving data security. Any such modifications may result in increased expenses and operating complexity, and we may be unable to increase the rates we charge for our services sufficiently to offset any increased expenses.

        In addition to increases in the costs of operations or potential liability that may result from a heightened focus on data security, our reputation may be damaged by any compromise of security, accidental loss or theft of customer data in our possession. We believe that establishing and maintaining a good reputation is critical to attracting and retaining customers. If our reputation is damaged, we may become less competitive, which could negatively impact our businesses, financial condition or results of operations.


Table of Contents

Our customer contracts may not always limit our liability and may sometimes contain terms that could lead to disputes in contract interpretation.

        Our customer contracts usually contain provisions limiting our liability with respect to loss or destruction of, or damage to, records or information stored with us. Our liability under physical storage contracts is often limited to a nominal fixed amount per item or unit of storage, such as per cubic foot. Ourfoot and our liability under our digital, DMS services and other service contracts is often limited to a percentage of annual revenue under the contract.contract; however, some of our contracts with large volume accounts and some of the contracts assumed in our acquisitions contain no such limits or contain higher limits. We cannot assure youprovide assurance that where we have limitation of liability provisions they will be enforceable in all instances or, if enforceable, that they would otherwise protect us from liability. In addition to provisions limiting our liability, our standard storage rental and service contracts include a schedule setting forth the majority of the customer-specific terms, including storage rental and service pricing and service delivery terms. Our customers may dispute the interpretation of various provisions in their contracts. While we have had relatively few disputes with our customers with regard to the terms of their customer contracts, and anymost disputes to date have not been material, we can give you no assurance that we will not have material disputes in the future.

As stored records become less active our core service revenue growth may decline.

        Our core service revenue growth is being negatively impacted by declining activity rates as stored records are becoming less active. The amount of information available to customers through the internet or their own information systems has been steadily increasing in recent years. As a result, while customers continue to store their records with us, they are less likely than they have been in the past to retrieve records for research purposes thereby reducing their core service activity levels.

We face competition for customers.

        We compete in some of our business lines, with our current and potential customers' internal information management services capabilities. These organizations may not begin or continue to use a third party, such as our company, for their future information management services needs. We also compete, in both our physical and digital businesses, with multiple storage and information management services providers in all geographic areas where we operate; our current or potential customers may choose to use those competitors instead of us. We also compete, in some of our business lines, with our current and potential customers' internal storage and information management services capabilities. These organizations may not begin or continue to use a third party, such as Iron Mountain, for their future storage and information management services needs.

We may not be ableFailure to effectively operatecomply with certain regulatory and expandcontractual requirements under our digital businesses.

        We operate certain digital information management businesses and are implementing a planned expansion into other digital businesses. Our participation in these markets poses certain unique risks. For example, we may be unable to:


Table of Contents

        In addition, the digital solutions we offer may not gain or retain market acceptance, or business partners upon whom we depend for technical and management expertise, and the hardware and software products we need to complement our services may not perform as expected.

Our customers may shift from paper storage to alternative technologies that require less physical space.

        We derive most of our revenues from the storage of paper documents and storage related services. This storage requires significant physical space, which we provide through our owned and leased facilities. Alternative storage technologies exist, many of which require significantly less space than paper documents. These technologies include computer media, microform, CD-ROM and optical disk. We can provide no assurance that our customers will continue to store most of their records in paper documents format. A significant shift by our customers to storage of data through non-paper based technologies, whether now existing or developed in the future,U.S. Government contracts could adversely affect our businesses.

Our customers may be constrained in their ability to pay for services or require fewer services.revenues, operating results and financial position.

        A continued recession may cause some customers to postpone projects for which they would otherwise retainSelling our services to the U.S. Government subjects us to certain regulatory and maycontractual requirements. Failure to comply with these requirements could subject us to investigations, price reductions, up to treble damages, and civil penalties. Noncompliance with certain regulatory and contractual requirements could also result in some instances cause customers to forgous being suspended or barred from future U.S. Government contracting. Any of these outcomes could have a material adverse effect on our services. Many of our largest customers arerevenues, operating results and financial institutions, which have been particularly affected by the economic downturn; their condition may lead them to reduce their use of our services. In addition, a higher percentage of our customers may seek protection under bankruptcy laws, potentially affecting not only future business but also our ability to collect accounts receivable.position.

We may be subject to certain costs and potential liabilities associated with the real estate required for our businesses.business.

        Because our physical businesses arebusiness is heavily dependent on real estate, we face special risks attributable to the real estate we own or lease. Such risks include:


Table of Contents

        Some of our current and formerly owned or leased properties were previously used by entities other than us for industrial or other purposes that involved the use, storage, generation and/or disposal of hazardous substances and wastes, including petroleum products. In some instances these properties includedthis prior use involved the operation of underground storage tanks or the presence of asbestos-containing materials. Although we have from time to time conducted limited environmental investigations and remedial


Table of Contents


activities at some of our former and current facilities, we have not undertaken an in-depth environmental review of all of our properties. We therefore may be potentially liable for environmental costs like those discussed above and may be unable to sell, rent, mortgage or use contaminated real estate owned or leased by us. Environmental conditions for which we might be liable may also exist at properties that we may acquire in the future. In addition, future regulatory action and environmental laws may impose costs for environmental compliance that do not exist today.

International operations may pose unique risks.

        As of December 31, 2009,2012, we provided services in 37more than 30 countries outside the U.S. As part of our growth strategy, we expect to continue to acquire or invest in storage and information management services businesses in select foreign markets. International operations are subject to numerous risks, including:

        In particular, our net income can be significantly affected by fluctuations in currencies associated with certain intercompany balances of our foreign subsidiaries owed to us and between our foreign subsidiaries.

Changing fire and safety standards may result in significant expense in certain jurisdictions.

        As of December 31, 2012, we operated 938 records management and off-site data protection facilities worldwide, including 569 in the United States alone. Many of these facilities were built and outfitted by third parties and added to Iron Mountain's real estate portfolio as part of acquisitions. Some of these facilities contain fire suppression and safety features that are different from our current


Table of Contents

specifications and current standards for new facilities, although we believe all of our facilities were constructed in compliance with laws and regulations in effect at the time of their construction or outfitting. Where we believe the fire suppression and safety features of a facility require improvement, we will develop and implement a plan to remediate the issue. In some instances local authorities having jurisdiction may take the position that our fire suppression and safety features in a particular facility are insufficient and require additional measures which may involve considerable expense to Iron Mountain. If additional fire safety and suppression measures beyond our current operating plan were required at a large number of our facilities, the expense required for compliance could negatively impact our business, financial condition or results of operations.

Unexpected events could disrupt our operations and adversely affect our results of operations.

        Unexpected events, including fires or explosions at our facilities, natural disasters such as hurricanes and earthquakes, war or terrorist activities, unplanned power outages, supply disruptions and failure of equipment or systems, could adversely affect our results of operations. These events could result in customer service disruption, physical damage to one or more key operating facilities, the temporary closure of one or more key operating facilities or the temporary disruption of information systems, each of which could negatively impact our results of operations.

Fluctuations in commodity prices may affect our operating revenues and results of operations.

        Our operating revenues and results of operations are impacted by significant changes in commodity prices. In particular, our secure shredding operations generate revenue from the sale of shredded paper to recyclers. We generate additional revenue through a customer surcharge when the price of diesel fuel rises above certain predetermined rates. As a result, significant declines in paper and diesel fuel prices may negatively impact our revenues and results of operations, and increases in other commodity prices, including steel, may negatively impact our results of operations.

Attacks on our internal information technology systems could damage our reputation, harm our businesses and adversely impact our results of operations.

        Our reputation for providing secure information storage to customers is critical to the success of our business. We have previously faced attempts by unauthorized users to gain access to our information technology systems and expect to continue to face such attempts. Although we seek to prevent, detect and investigate these security incidents and have taken steps to prevent such security breaches, there can be no assurance that attacks by unauthorized users will not be attempted in the future or that our security measures will be effective. A successful breach of the security of our information technology systems could lead to theft or misuse of our customers' proprietary or confidential information and result in third party claims against us and reputational harm. If our reputation is damaged, we may become less competitive, which could negatively impact our businesses, financial condition or results of operations.

We may be subject to claims that our technology particularly with respect to digital services, violates the intellectual property rights of a third party.

        Third parties may have legal rights (including ownership of patents, trade secrets, trademarks and copyrights) to ideas, materials, processes, names or original works that are the same or similar to those we use, especially in our digital business.use. Third parties may bring claims, or threaten to bring claims, against us that allege that their intellectual property rights are being infringed or violated by our use of intellectual property. Litigation or threatened litigation could be costly and distract our senior management from operating our business. Further, if we cannot establish our right or obtain the right to use the intellectual property on reasonable terms, we may be required to develop alternative intellectual property at our expense to mitigate potential harm.

Fluctuations in commodity prices may affect our operating revenues and results of operations.

        Our operating revenues and results of operations are impacted by significant changes in commodity prices. Our secure shredding operations generate revenue from the sale of shredded paper to recyclers. We generate additional revenue when the price of diesel fuel rises above certain predetermined rates through a customer surcharge. As a result, significant declines in paper and diesel fuel prices may negatively impact our revenues and results of operations while increases in other commodity prices, including steel, may negatively impact our results of operations.

Unexpected events could disrupt our operations and adversely affect our results of operations.

        Unexpected events, including fires or explosions at our facilities, natural disasters such as hurricanes and tornados, war or terrorist activities, unplanned power outages, supply disruptions and failure of equipment or systems, could adversely affect our results of operations. These events could


Table of Contents


result in customer disruption, physical damages to one or more key operating facilities, the temporary closure of one or more key operating facilities or the temporary disruption of information systems.

Risks RelatingRelated to Our Common Stock

No Guaranty of Dividend Payments or Stock RepurchasesThere is no assurance that we will continue to pay dividends.

        Although ourOur board of directors recently approved a share repurchase program and adopted a dividend policy under which we intend to pay quarterly cash dividends on our common stock,stock. However, our ability to pay dividends will be adversely affected if any determinationsof the risks described herein occur. In addition, any determination by us to repurchase our common stock or pay cash dividends on our common stock in the future will be based primarily upon our financial condition, results of operations, business requirements the price of our common stock in the case of the repurchase programand strategy and our board of director'sdirectors' continuing determination that the repurchase program and the declaration of dividends under the dividend policy areis in the best interests of our shareholders and are in compliance with all laws and agreements applicable to the repurchase and dividend programs.stockholders. The terms of our revolving credit agreementfacility and term loan facility and our indentures contain provisions permitting the payment of cash dividends and stock repurchases subject to certain limitations. For these reasons, among others, our cash dividend rate may decline or we may cease paying dividends.

Risks RelatingRelated to Our Indebtedness

Our substantial indebtedness could adversely affect our financial health and prevent us from fulfilling our obligations under our various debt instruments.

        We have a significant amount of indebtedness. The following table shows important credit statistics as of December 31, 20092012 (dollars in millions):


  
 

Total long-term debt

 $3,251.8  $3,825.0 

Total equity

 $2,145.2  $1,162.4 

Debt to equity ratio

 1.52x 3.29 X

        Our substantial indebtedness could have important consequences to you.our current and potential investors. Our indebtedness may increase as we continue to borrow under existing and future credit arrangements in order to finance future acquisitions, to fund the Conversion Plan and for general corporate purposes, which would increase the associated risks. These risks include:


Table of Contents

Restrictive loan covenants may limit our ability to pursue our growth strategy.

        Our credit facility and our indentures contain covenants restricting or limiting our ability to, among other things:


Table of Contents

        These restrictions may adversely affect our ability to pursue our acquisition and other growth strategies.

We may not have the ability to raise the funds necessary to finance the repurchase of outstanding senior subordinated indebtedness upon a change of control event as required by our indentures.

        Upon the occurrence of a change"change of control,control", we will be required to offer to repurchase all outstanding senior subordinated indebtedness. However, it is possible that we will not have sufficient funds at the time of the change of control to make the required repurchase of the notes or that restrictions in our revolving credit facility will not allow such repurchases. In addition, certainCertain important corporate events, however, such as leveraged recapitalizations that would increase the level of our indebtedness, would not constitute a "change of control" under our indentures.

Since Iron Mountain is a holding company, and, therefore, our ability to make payments on our various debt obligations depends in part on the operations of our subsidiaries.

        Iron Mountain is a holding company, andcompany; substantially all of our assets consist of the stock of our subsidiaries, and substantially all of our operations are conducted by our direct and indirect wholly owned subsidiaries. As a result, our ability to make payments on our various debt obligations will be dependent upon the receipt of sufficient funds from our subsidiaries. However, our various debt obligations are guaranteed, on a joint and several and full and unconditional basis, by most, but not all, of our direct and indirect wholly owned U.S. subsidiaries.

Acquisition and Expansion Risks

Failure to manage our growth may impact operating results.

        If we succeed in expanding our existing businesses, or in moving into new areas of business, that expansion may place increased demands on our management, operating systems, internal controls and financial and physical resources. If not managed effectively, these increased demands may adversely affect the services we provide to existing customers. In addition, our personnel, systems, procedures and controls may be inadequate to support future operations. Consequently, in order to manage growth effectively, we may be required to increase expenditures to increase our physical resources, expand, train and manage our employee base, improve management, financial and information systems and controls, or make other capital expenditures. Our results of operations and financial condition could be harmed if we encounter difficulties in effectively managing the budgeting, forecasting and other process control issues presented by future growth.

Failure to successfully integrate acquired operations could negatively impact our futurebalance sheet and results of operations.

        The success of any acquisition we make depends in part on our ability to integrate the acquired company. The process of integrating acquired businesses may involve unforeseen difficulties and may require a


Table of Contents


disproportionate amount of our management's attention and our financial and other resources. We can give no assurance that we will ultimately be able to effectively integrate and manage the operations of any acquired business. Nor can we assure you that we will be able to maintain or improve the historical financial performance of Iron Mountain or our acquisitions. The failure to successfully integrate thesethe cultures, operating systems, procedures and information technologies of an acquired business could have a material adverse effect on our balance sheet and results of operations.


Table of Contents

We may be unable to continue our international expansion.

        OurPart of our growth strategy involves expanding operations in international markets, and we expect to continue this expansion. Europe, and Latin America and Australia have been our primary areas of focus for international expansion, and we have begun our expansionexpanded into the Asia Pacific region.region to a lesser extent. We have entered into joint ventures and have acquired all or a majority of the equity in storage and information management services businesses operating in these areas and may acquire other storage and information management services businesses in the future.

        This growth strategy involves risks. We may be unable to pursue this strategy in the future.future at the desired pace or at all. For example, we may be unable to:

        We also compete with other storage and information management services providers for companies to acquire. Some of our competitors may possess substantial financial and other resources. If any such competitor were to devote additional resources to pursue such acquisition candidates or focus its strategy on our international markets, the purchase price for potential acquisitions or investments could rise, competition in international markets could increase and our results of operations could be adversely affected.


Item 1B. Unresolved Staff Comments.

        None.


Item 2. Properties.

        As of December 31, 2009,2012, we conducted operations through 801760 leased facilities and 239266 facilities that we own. Our facilities are divided among our reportable segments as follows: North American Physical Business (677)(656), International Physical Business (345)(369), Worldwide Digital Business (17) and Corporate (1). These facilities contain a total of 65.664.5 million square feet of space. Facility rent expense was $230.1$216.1 million, $219.4 million and $224.7 million for the years ended December 31, 20082010, 2011 and 2009,2012, respectively. The leased facilities typically have initial lease terms of tenfive to fifteenten years with one or more five yearfive-year options to extend. In addition, some of the leases contain either a purchase option or a right of first refusal upon the sale of the property. Our facilities are located throughout North America, Europe, Latin America and Asia Pacific, with the largest number of facilities in California, Florida, New York, New Jersey, Texas, Canada and the U.K.United Kingdom. We believe that the space available in our facilities is adequate to meet our current needs, although future growth may require that we acquire additional real property either by leasing or purchasing. See Note 10 to Notes to Consolidated Financial Statements for information regarding our minimum annual rentallease commitments.


Table of Contents


Item 3. Legal Proceedings.

        In August 2010, we were named as a defendant in a patent infringement suit filed in the U.S. District Court for the Eastern District of Texas by Oasis Research, LLC. The plaintiff alleged that the technology found in our Connected and LiveVault products infringed certain U.S. patents owned by the


London FireTable of Contents

plaintiff. As part of the sale of our Digital Business, discussed in Note 14 to Notes to Consolidated Financial Statements, our Connected and LiveVault products were sold to Autonomy, and Autonomy assumed this obligation and the defense of this litigation and agreed to indemnify us against any losses. In July 2006,November 2012, the claim was settled and Autonomy paid the entire settlement amount.

        On November 4, 2011, we experienced a significant fire at a facility we leased in a leasedAprilia, Italy. The facility primarily stored archival and inactive business records for local area businesses. Despite quick response by local fire authorities, damage to the building was extensive, and information management facility in London, England, that resulted in the complete destruction of the facilitybuilding and its contents. The London Fire Brigade ("LFB") issuedcontents were a report in which it was concluded thattotal loss. We continue to assess the fire resulted either from human agency, i.e., arson, or an unidentified ignition device or source, and its report to the Home Office concluded that the fire resulted from a deliberate act. The LFB also concluded that the installed sprinkler system failed to control the fire due to the primary electric fire pump being disabled prior toimpact of the fire, and, the standby diesel fire pump being disabled in the early stagesalthough our warehouse legal liability insurer has reserved its rights to contest coverage related to certain types of the fire by third-party contractors.potential claims, we believe we carry adequate insurance. We have been sued by two customers, and have received notices of claimscorrespondence from other customers, or their subrogated insurance carriers under various theories of liabilities arising out of lost data and/or records as a result of the fire. Certain of those claims have resulted in litigation in courts in the United Kingdom.liabilities. We deny any liability inwith respect ofto the London fire and we have referred these claims to our primary warehouse legal liability insurer which has been defending them to date under a reservation of rights. Certain of the claims have been settled for nominal amounts, typically one to two British pounds sterling per carton, as specified in the contracts, which amounts have been or will be reimbursed to us from our primary property insurer. Many claims, including substantial claims, remain outstanding; others have been resolved pursuant to consent orders. We believe we carry adequate property and liability insurance.an appropriate response. We do not expect that legal proceedings related to this event will have a material impact toon our consolidated financial condition, results of operations or financial condition.

Pittsburgh Litigation

        In May, 2006and cash flows. As discussed in Note 14 to Notes to Consolidated Financial Statements, we filed an eviction lawsuit against a tenant, Digital Encoding Factory, LLC ("DEF"), leasing space insold our Boyers, Pennsylvania records storage facility for its failureItalian operations on April 27, 2012, and we indemnified the buyers related to make required rent payments. In October, 2006, DEFcertain obligations and two related companies, EDA Acquisition, LLC, and Media Holdings, LLC, filed a lawsuit against us incontingencies associated with the U.S. Federal District Court for Western Pennsylvania alleging that they started a digital scanning business in our Boyers, Pennsylvania, records storage facility because we orally agreed to refer customer digital scanning business in the facility to them (the "Pittsburgh Lawsuit") and promised substantial business. The plaintiffs contend that we breached this alleged oral agreement and seek to recover damages in the range of $6.5 million to $53.5 million. The Pittsburgh Lawsuit is scheduled for trial in March, 2010. We dispute the plaintiffs' claims and contend that there was no such oral agreement. We have not recorded any loss reserve for this matter. We plan to defend against the alleged claims at trial. We are unable to estimate the final outcome of this matter.fire.

General

        In addition to the matters discussed above, we are involved in litigation from time to time in the ordinary course of business with abusiness. A portion of the defense and/or settlement costs beingassociated with such litigation is covered by various commercial liability insurance policies purchased by us.us and, in limited cases, indemnification from third parties. In the opinion of management, other than discussed above, no material legal proceedings are pending to which we, or any of our properties, are subject.


Item 4. Submission of Matters to a Vote of Security Holders.Mine Safety Disclosures.

        There were no matters submitted to a vote of security holders of Iron Mountain during the fourth quarter of the fiscal year ended December 31, 2009.None.


Table of Contents


PART II

Item 5. Market forFor Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.

        Our common stock is traded on the New York Stock Exchange or NYSE,(the "NYSE") under the symbol "IRM." The following table sets forth the high and low sale prices on the NYSE, for the years 20082011 and 2009:2012:

 
 Sale Prices 
 
 High Low 

2008

       
 

First Quarter

 $37.13 $24.20 
 

Second Quarter

  31.28  25.51 
 

Third Quarter

  30.08  23.50 
 

Fourth Quarter

  27.79  16.71 

2009

       
 

First Quarter

 $25.66 $16.91 
 

Second Quarter

  31.27  21.52 
 

Third Quarter

  32.04  26.29 
 

Fourth Quarter

  27.57  22.74 
 
 Sale Prices 
 
 High Low 

2011

       

First Quarter

 $31.53 $24.28 

Second Quarter

  35.50  31.18 

Third Quarter

  35.79  27.68 

Fourth Quarter

  33.70  28.34 

2012

       

First Quarter

 $32.24 $28.35 

Second Quarter

  33.50  27.10 

Third Quarter

  34.18  30.91 

Fourth Quarter

  37.70  30.50 

        The closing price of our common stock on the NYSE on February 11, 20108, 2013 was $21.73.$34.25. As of February 11, 2010,8, 2013, there were 628490 holders of record of our common stock. We believe that there are more than 48,50062,500 beneficial owners of our common stock.

        We have not paid dividends on our common stock during the last two years, however, inIn February 2010, our board of directors adopted a dividend policy under which we have paid, and in the future intend to pay, quarterly cash dividends on our common stock beginning instock. Declaration and payment of future quarterly dividends is at the second quarterdiscretion of 2010. The first dividendour board of $0.0625 per share will be payable on April 15, 2010 to shareholders of record on March 25, 2010.directors. In February 20102011 and 2012, our board of directors also approveddeclared the following dividends:

Declaration Date
 Dividend
Per Share
 Record Date Total
Amount
(in thousands)
 Payment Date 

March 11, 2011

 $0.1875  March 25, 2011 $37,601  April 15, 2011 

June 10, 2011

  0.2500  June 24, 2011  50,694  July 15, 2011 

September 8, 2011

  0.2500  September 23, 2011  46,877  October 14, 2011 

December 1, 2011

  0.2500  December 23, 2011  43,180  January 13, 2012 

March 8, 2012

  0.2500  March 23, 2012  42,791  April 13, 2012 

June 5, 2012

  0.2700  June 22, 2012  46,336  July 13, 2012 

September 6, 2012

  0.2700  September 25, 2012  46,473  October 15, 2012 

October 11, 2012

  4.0600  October 22, 2012  700,000  November 21, 2012 

December 14, 2012

  0.2700  December 26, 2012  51,296  January 17, 2013 

        On October 11, 2012, we announced the declaration by our board of directors of a special dividend of $700 million (the "Special Dividend") on our shares of common stock, payable, at the election of the stockholders, in either common stock or cash to stockholders of record as of October 22, 2012 (the "Record Date"). The Special Dividend, which is a distribution to stockholders of a portion of our accumulated earnings and profits, was paid in a combination of common stock and cash on November 21, 2012 (the "Distribution Date") to stockholders of record as of the Record Date. The total amount of cash paid to all stockholders associated with the Special Dividend was approximately $140.0 million (including cash paid in lieu of fractional shares). Our shares of common stock were valued for purposes of the Special Dividend based upon the average closing price on the three trading days following November 14, 2012, or $32.87 per share, repurchase program authorizingand we issued approximately 17 million shares


Table of Contents

of our common stock in connection with the Special Dividend. These shares impact weighted average shares outstanding from the date of issuance, thus impacting our earnings per share data prospectively from the Distribution Date.

        Our board of directors has authorized up to $150 million$1.2 billion in repurchases of our common stock. As of February 8, 2013, we have repurchased approximately $1.1 billion of our common stock under such authorization. Any determinations by us to repurchase our common stock or pay cash dividends on our common stock in the future will be based primarily upon our financial condition, results of operations, business requirements, the price of our common stock in(in the case of the repurchase programprogram) and our board of director'sdirectors' continuing determination that the repurchase program and the declaration of dividends under the dividend policy are in the best interests of our shareholdersstockholders and are in compliance with all laws and agreements applicable to the repurchase and dividend programs. The terms of our credit agreement and our indentures contain provisions permitting the payment of cash dividends and stock repurchases subject to certain limitations.

        There was no common stock repurchased or salesUnregistered Sales of Equity Securities and Use of Proceeds

        We did not sell any unregistered securities forduring the fourth quarterthree months ended December 31, 2009.2012, nor did we repurchase any shares of our common stock during the three months ended December 31, 2012. As of December 31, 2012, we had approximately $66.0 million available for future repurchases under our authorized stock repurchase program.


Table of Contents


Item 6. Selected Financial Data.

        The following selected consolidated statements of operations, balance sheet and other data have been derived from our audited consolidated financial statements. The selected consolidated financial and operating information set forth below giving effect to stock splits, should be read in conjunction with Item"Item 7. "Management'sManagement's Discussion and Analysis of Financial Condition and Results of Operations" and our Consolidated Financial Statements and the Notes thereto included elsewhere in this filing.Annual Report.



 Year Ended December 31, 


 2005 2006 2007 2008 2009  Year Ended December 31, 


 (In thousands, except per share data)
  2008 2009 2010(1) 2011 2012 

Consolidated Statements of Operations Data:

Consolidated Statements of Operations Data:

  

Revenues:

Revenues:

  

Storage rental

 $1,496,194 $1,533,792 $1,598,718 $1,682,990 $1,733,138 

Service

 1,329,240 1,240,592 1,293,631 1,331,713 1,272,117 

Storage

 $1,181,551 $1,327,169 $1,499,074 $1,657,909 $1,696,395            

Total Revenues

 2,825,434 2,774,384 2,892,349 3,014,703 3,005,255 

Operating Expenses:

 

Cost of sales (excluding depreciation and amortization)

 1,311,891 1,201,871 1,192,862 1,245,200 1,277,113 

Selling, general and administrative

 759,264 749,934 772,811 834,591 850,371 

Depreciation and amortization

 254,497 277,186 304,205 319,499 316,344 

Intangible Impairments(2)

   85,909 46,500  

Loss (Gain) on disposal/write-down of property, plant and equipment, net

 7,522 168 (10,987) (2,286) 4,400 

Service

 896,604 1,023,173 1,230,961 1,397,225 1,317,200            
           
 

Total Revenues

 2,078,155 2,350,342 2,730,035 3,055,134 3,013,595 

Operating Expenses:

 

Cost of sales (excluding depreciation and amortization)

 938,239 1,074,268 1,260,120 1,382,019 1,271,214 

Selling, general and administrative

 569,695 670,074 771,375 882,364 874,359 

Depreciation and amortization

 186,922 208,373 249,294 290,738 319,072 

(Gain) Loss on disposal/writedown of property, plant and equipment, net

 (3,485) (9,560) (5,472) 7,483 406 
           
 

Total Operating Expenses

 1,691,371 1,943,155 2,275,317 2,562,604 2,465,051 

Total Operating Expenses

 2,333,174 2,229,159 2,344,800 2,443,504 2,448,228 

Operating Income

Operating Income

 386,784 407,187 454,718 492,530 548,544  492,260 545,225 547,549 571,199 557,027 

Interest Expense, Net

Interest Expense, Net

 183,584 194,958 228,593 236,635 227,790  219,989 212,545 204,559 205,256 242,599 

Other Expense (Income), Net

Other Expense (Income), Net

 6,182 (11,989) 3,101 31,028 (12,079) 31,505 (12,599) 8,768 13,043 16,062 
                      
 

Income Before Provision for Income Taxes

 197,018 224,218 223,024 224,867 332,833 

Income from Continuing Operations Before Provision for Income Taxes

 240,766 345,279 334,222 352,900 298,366 

Provision for Income Taxes

Provision for Income Taxes

 81,484 93,795 69,010 142,924 110,527  146,122 113,762 167,483 106,488 114,873 
                      

Income Before Cumulative Effect of Change in Accounting Principle

 115,534 130,423 154,014 81,943 222,306 

Cumulative Effect of Change in Accounting Principle (net of tax benefit)

 (2,751)(1)     

Income from Continuing Operations

 94,644 231,517 166,739 246,412 183,493 

Loss from Discontinued Operations, Net of Tax

 (14,889) (12,138) (219,417) (47,439) (6,774)

Gain (Loss) on Sale of Discontinued Operations, Net of Tax

    200,619 (1,885)
                      

Net Income

 112,783 130,423 154,014 81,943 222,306 

Net Income (Loss)

 79,755 219,379 (52,678) 399,592 174,834 

Less: Net (Loss) Income Attributable to Noncontrolling Interests

 (94) 1,429 4,908 4,054 3,126 
 

Less: Net Income (Loss) Attributable to Noncontrolling Interests

 1,684 1,560 920 (94) 1,429            

Net Income (Loss) Attributable to Iron Mountain Incorporated

 $79,849 $217,950 $(57,586)$395,538 $171,708 
                      

Net Income Attributable to Iron Mountain Incorporated

 $111,099 $128,863 $153,094 $82,037 $220,877 
           

(footnotes follow)


Table of Contents

 
 Year Ended December 31, 
 
 2008 2009 2010(1) 2011 2012 
 
 (In thousands, except per share data)
 

Earnings (Losses) per Share—Basic:

                

Income from Continuing Operations

 $0.47 $1.14 $0.83 $1.27 $1.06 
            

Total (Loss) Income from Discontinued Operations

 $(0.07)$(0.06)$(1.09)$0.79 $(0.05)
            

Net Income (Loss) Attributable to Iron Mountain Incorporated

 $0.40 $1.07 $(0.29)$2.03 $0.99 
            

Earnings (Losses) per Share—Diluted:

                

Income from Continuing Operations

 $0.47 $1.13 $0.83 $1.26 $1.05 
            

Total (Loss) Income from Discontinued Operations

 $(0.07)$(0.06)$(1.09)$0.78 $(0.05)
            

Net Income (Loss) Attributable to Iron Mountain Incorporated

 $0.39 $1.07 $(0.29)$2.02 $0.98 
            

Weighted Average Common Shares Outstanding—Basic

  201,279  202,812  201,991  194,777  173,604 
            

Weighted Average Common Shares Outstanding—Diluted

  203,290  204,271  201,991  195,938  174,867 
            

Dividends Declared per Common Share(3)

 $ $ $0.3750 $0.9375 $5.1200 
            

(footnotes follow)

                

 
 Year Ended December 31, 
 
 2008 2009 2010(1) 2011 2012 
 
 (In thousands)
 

Other Data:

                

Adjusted OIBDA(4)

 $754,279 $822,579 $926,676 $950,439 $912,217 

Adjusted OIBDA Margin(4)

  26.7% 29.6% 32.0% 31.5% 30.4%

Ratio of Earnings to Fixed Charges

  1.8x  2.2x  2.2x  2.2x  1.9x 


 
 As of December 31, 
 
 2008 2009 2010(1) 2011 2012 
 
 (In thousands)
 

Consolidated Balance Sheet Data:

                

Cash and Cash Equivalents

 $278,370 $446,656 $258,693 $179,845 $243,415 

Total Assets

  6,359,291  6,851,157  6,416,393  6,041,258  6,358,339 

Total Long-Term Debt (including Current Portion of Long-Term Debt)

  3,240,450  3,248,649  3,008,207  3,353,588  3,825,003 

Total Equity

  1,814,769  2,150,760  1,952,865  1,254,256  1,162,448 

(footnotes follow)

                

(1)
Prior to January 1, 2010, the financial position and results of operations of the operating subsidiaries of Iron Mountain Europe (Group) Limited (collectively referred to as "IME"), our European business, were consolidated based on IME's fiscal year ended October 31. Effective January 1, 2010, we changed the fiscal year-end (and the reporting period for consolidation purposes) of IME to coincide with Iron Mountain Incorporated's fiscal year-end of December 31.

Table of Contents


     
     Year Ended December 31, 
     
     2005 2006 2007 2008 2009 
     
     (In thousands, except per share data)
     

    Earnings per Share—Basic:

                    

    Income Before Cumulative Effect of Change in Accounting Principle

                    
     

    Attributable to Iron Mountain Incorporated

     $0.58 $0.65 $0.77 $0.41 $1.09 

    Cumulative Effect of Change in Accounting Principle (net of tax benefit)

                    
     

    Attributable to Iron Mountain Incorporated

      (0.01)        
                

    Net Income Attributable to Iron Mountain Incorporated per Share—Basic

     $0.57 $0.65 $0.77 $0.41 $1.09 
                

    Earnings per Share—Diluted:

                    

    Income Before Cumulative Effect of Change in Accounting Principle

                    
     

    Attributable to Iron Mountain Incorporated

     $0.57 $0.64 $0.76 $0.40 $1.08 

    Cumulative Effect of Change in Accounting Principle (net of tax benefit)

                    
     

    Attributable to Iron Mountain Incorporated

      (0.01)        
                

    Net Income Attributable to Iron Mountain Incorporated per Share—Diluted

     $0.56 $0.64 $0.76 $0.40 $1.08 
                

    Weighted Average Common Shares Outstanding—Basic

      195,988  198,116  199,938  201,279  202,812 
                

    Weighted Average Common Shares Outstanding—Diluted

      198,104  200,463  202,062  203,290  204,271 
                

    (footnotes follow)

     
     Year Ended December 31, 
     
     2005 2006 2007 2008 2009 
     
     (In thousands)
     

    Other Data:

                    

    Adjusted OIBDA(2)

     $570,221 $606,000 $698,540 $790,751 $868,022 

    Adjusted OIBDA Margin(2)

      27.4% 25.8% 25.6% 25.9% 28.8%

    Ratio of Earnings to Fixed Charges

      1.8 x  1.8 x  1.7 x  1.7 x  2.1x 


     
     As of December 31, 
     
     2005 2006 2007 2008 2009 
     
     (In thousands)
     

    Consolidated Balance Sheet Data:

                    

    Cash and Cash Equivalents

     $53,413 $45,369 $125,607 $278,370 $446,656 

    Total Assets

      4,766,140  5,209,521  6,307,921  6,356,854  6,846,834 

    Total Long-Term Debt (including Current Portion of Long-Term Debt)

      2,529,431  2,668,816  3,266,288  3,243,215  3,251,784 

    Total Equity

      1,375,996  1,558,563  1,804,544  1,806,328  2,145,246 

    Table of Contents

    Reconciliation of Adjusted OIBDA to Operating Income and Net Income:

     
     Year Ended December 31, 
     
     2005 2006 2007 2008 2009 
     
     (In thousands)
     

    Adjusted OIBDA(2)

     $570,221 $606,000 $698,540 $790,751 $868,022 

    Depreciation and Amortization

      186,922  208,373  249,294  290,738  319,072 

    (Gain) Loss on Disposal/Writedown of Property, Plant and Equipment, Net

      (3,485) (9,560) (5,472) 7,483  406 
                

    Operating Income

      386,784  407,187  454,718  492,530  548,544 

    Less: Interest Expense, Net

      183,584  194,958  228,593  236,635  227,790 
     

    Other Expense (Income), Net

      6,182  (11,989) 3,101  31,028  (12,079)
     

    Provision for Income Taxes

      81,484  93,795  69,010  142,924  110,527 
     

    Cumulative Effect of Change in Accounting

                    
      

    Principle (net of tax benefit)

      2,751(1)        
     

    Net Income (Loss) Attributable to Noncontrolling interests

      1,684  1,560  920  (94) 1,429 
                

    Net Income Attributable to Iron Mountain Incorporated

     $111,099 $128,863 $153,094 $82,037 $220,877 
                

    (footnotes follow)


    (1)
    A non-cash charge of $2,751 net of tax benefit was recorded inWe believe that the fourth quarter of 2005 as a cumulative effect of change in accounting principle related to the elimination of the two-month reporting lag for IME is preferable because it will result in more contemporaneous reporting of events and results related to IME. In accordance with applicable accounting literature, a change in subsidiary year-end is treated as a change in accounting principle and requires retrospective application. The impact of the change was not material to the results of operations for the previously reported annual and interim periods after January 1, 2008, and, thus, those results have not been revised. There is, however, a charge of $4.7 million recorded to other (income) expense, net in the accompanying consolidated statementsyear ended December 31, 2010 to recognize the immaterial difference arising from the change. There were no significant, infrequent or unusual items in the IME two-month period ended December 31, 2008 and 2009.

(2)
For the year ended December 31, 2010, we recorded a non-cash goodwill impairment charge of operations$85,909 related to conditional asset retirement obligations.our technology escrow services business, which we continue to own and operate and which was previously reflected in the former worldwide digital business segment and is now reflected as a component of the North American Business segment. For the year ended December 31, 2010, we recorded a $197,876 non-cash goodwill impairment charge related to our former worldwide digital business that is included in loss from discontinued operations, net of tax. For the year ended December 31, 2011, we recorded a non-cash goodwill impairment charge of $46,500 in our Continental Western Europe reporting unit, which is a component of the International Business segment. See Note 2.g. to Notes to Consolidated Financial Statements.

(2)(3)
In February 2010, our board of directors adopted a dividend policy under which we began paying quarterly dividends on our common stock. See "Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities" of this Annual Report.

(4)
Adjusted OIBDA and Adjusted OIBDA Margin are non-GAAP measures. Adjusted OIBDA is defined as operating income before depreciation, and amortization, expenses, excludingintangible impairments, (gain) loss on disposal/writedownwrite-down of property, plant and equipment, net.net and REIT Costs (as defined below). Adjusted OIBDA Margin is calculated by dividing Adjusted OIBDA by total revenues. For a more detailed definition and reconciliation of Adjusted OIBDA and a discussion of why we believe these non-GAAP measures provide relevant and useful information to our current and potential investors, see Item"Item 7. "Management'sManagement's Discussion and Analysis of Financial Condition and Results of Operations—Non-GAAP Measures."Measures" of this Annual Report.

Table of Contents


Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations.

        The following discussion should be read in conjunction with "Item 6. Selected Financial Data" and the Consolidated Financial Statements and Notes thereto and the other financial and operating information included elsewhere in this filing.Annual Report.

        This discussion contains "forward-looking statements,"statements" as that term is defined in the Private Securities Litigation Reform Act of 1995 and in other federal securities laws. See "Cautionary Note Regarding Forward-Looking Statements" on page ii of this filingAnnual Report and "Item 1A. Risk Factors" beginning on page 1416 of this filing.Annual Report.

Overview

Potential REIT Conversion

        On June 5, 2012, we announced that our board of directors, following a thorough analysis of alternatives and careful consideration of the topic, and after the unanimous recommendation of the Special Committee, unanimously approved a plan for IMI to pursue the Conversion Plan. If we are able to convert to, and qualify as, a REIT, we will generally be permitted to deduct from U.S. federal income taxes dividends paid to our stockholders. The income represented by such dividends would not be subject to U.S. federal taxation at the entity level but would be taxed, if at all, only at the stockholder level. Nevertheless, the income of our U.S. taxable REIT subsidiaries ("TRS"), which will hold our U.S. operations that may not be REIT-compliant, will be subject, as applicable, to U.S. federal and state corporate income tax, and we will continue to be subject to foreign income taxes in non-U.S. jurisdictions in which we hold assets or conduct operations, regardless of whether held or conducted through qualified REIT subsidiaries ("QRS") or TRS. We will also be subject to a separate corporate income tax on any gains recognized during a specified period (generally, 10 years) following the REIT conversion that are attributable to "built-in" gains with respect to the assets that we own on the date we convert to a REIT. Our ability to qualify as a REIT will depend upon our continuing compliance with various requirements following our conversion to a REIT, including requirements related to the nature of our assets, the sources of our income and the distributions to our stockholders. If we fail to qualify as a REIT, we will be subject to U.S. federal income tax at regular corporate rates. Even if we qualify for taxation as a REIT, we may be subject to some federal, state, local and foreign taxes on our income and property. In particular, while state income tax regimes often parallel the U.S. federal income tax regime for REITs described above, many states do not completely follow U.S. federal rules and some may not follow them at all.

        We currently estimate the incremental operating and capital expenditures associated with the Conversion Plan through 2014 to be approximately $150.0 million to $200.0 million. Of these amounts, approximately $47.0 million was incurred in 2012, including approximately $12.5 million of capital expenditures. If the Conversion Plan is successful, we also expect to incur an additional $10.0 million to $15.0 million in annual REIT compliance costs in future years.

Discontinued Operations

        In August 2010, we divested the domain name management product line of our digital business (the "Domain Name Product Line"). On June 2, 2011, we completed the sale (the "Digital Sale") of our online backup and recovery, digital archiving and eDiscovery solutions businesses of our digital business (the "Digital Business") to Autonomy Corporation plc, a corporation formed under the laws of England and Wales ("Autonomy"), pursuant to a purchase and sale agreement dated as of May 15, 2011 among IMI, certain subsidiaries of IMI and Autonomy (the "Digital Sale Agreement"). Additionally, on October 3, 2011, we sold our records management operations in New Zealand. Also, on April 27, 2012, we sold our records management operations in Italy. The financial position, operating results and cash flows of the Domain Name Product Line, the Digital Business, our New


Table of Contents

Zealand operations and our Italian operations, including the gain on the sale of the Domain Name Product Line, the Digital Business and our New Zealand operations and the loss on the sale of the Italian operations, for all periods presented, have been reported as discontinued operations for financial reporting purposes. See Note 14 to Notes to Consolidated Financial Statements.

General

        Our revenues consist of storage rental revenues as well as service revenues. Storage rental revenues, both physical and digital, which are considered a key driver of financial performance indicator for the storage and information management services industry, consist primarily of largely recurring periodic rental charges related to the storage of materials or data (generally on a per unit basis), which that are typically retained by customers for many years, and have accounted for over 54% of total consolidated revenues in each of the last five years. Our annual revenues from these fixed periodic storage fees have grown for 21 consecutive years. Service revenues are comprised ofinclude charges for related core service activities and a wide array of complementary products and services. Included in core service revenues are: (1) the handling of records, including the addition of new records, temporary removal of records from storage, refiling of removed records and the destruction of records, and permanent withdrawals from storage;records; (2) courier operations, consisting primarily of the pickup and delivery of records upon customer request; (3) secure shredding of sensitive documents; and (4) other recurring services, including maintenanceDocument Management Solutions ("DMS"), which relate to physical and support contracts.digital records, and recurring project revenues. Our core service revenue growth has been negatively impacted by declining activity rates as stored records are becoming less active. The amount of information available to customers through the internet or their own information systems has been steadily increasing in recent years. As a result, while customers continue to store their records with us, they are less likely than they have been in the past to retrieve records for research purposes thereby reducing their core service activity levels. We expect this trend to continue in 2013. Our complementary services revenues include special project work, customer termination and permanent withdrawal fees, data restoration projects, fulfillment services, consulting services, technology services and product sales (including software licenses, specially designed storage containers and related supplies). Our secure shredding business generatesrevenues include the sale of recycled paper (included in complementary services revenues), the price of which can fluctuate from period to period, adding to the volatility and reducing the predictability of that revenue stream. Over time our service revenues have grown at a faster pace than our storage revenues, as a result, storage revenues as a percent of consolidated revenues has declined. Our consolidated revenues are also subject to variations caused by the net effect of foreign currency translation on revenue derived from outside the U.S. For the years ended December 31, 2007, 2008 and 2009, we derived approximately 32%, 32% and 30%, respectively, of our total revenues from outside the U.S.

        We recognize revenue when the following criteria are met: persuasive evidence of an arrangement exists, services have been rendered, the sales price is fixed or determinable and collectability of the resulting receivable is reasonably assured. Storage rental and service revenues are recognized in the month the respective storage rental or service is provided, and customers are generally billed on a monthly basis on contractually agreed-upon terms. Amounts related to future storage rental or prepaid service contracts, including maintenance and support contracts for customers where storage rental fees or services are billed in advance are accounted for as deferred revenue and recognized ratably over the applicable storage rental or service period or when the service is performed. Revenue from the sales of products, which is included as a component of service revenues, is recognized when products are shipped to the customer and title has passed to the customer. Revenues from the sales of products have historically not been significant.

        Cost of sales (excluding depreciation and amortization) consists primarily of wages and benefits for field personnel, facility occupancy costs (including rent and utilities), transportation expenses (including vehicle leases and fuel), other product cost of sales and other equipment costs and supplies. Of these, wages and benefits and facility occupancy costs are the most significant. Trends in total wages and benefits in dollars and as a percentage of total consolidated revenue are influenced by changes in headcount and compensation levels, achievement of incentive compensation targets, workforce productivity and variability in costs associated with medical insurance and workers compensation.


Table of Contents


Trends in facility occupancy costs are impacted by the total number of facilities we occupy, the mix of properties we own versus properties we occupy under operating leases, fluctuations in per square foot occupancy costs, and the levels of utilization of these properties. Due to the declining economic environment in 2008, the current fair market values


Table of vans, trucks and mobile shredding units within our vehicle fleet portfolio, which we lease, declined. As a result, certain vehicle leases that previously met the requirements to be considered operating leases are now classified as capital leases upon renewal, or at lease inception, for new leases. The impact of this change with respect to these leases has been to lower vehicle rent expense (a component of transportation costs within cost of sales) by approximately $22.4 million, offset by an increased amount of combined depreciation (by approximately $20.2 million) and interest expense (by approximately $3.3 million) for the year ended December 31, 2009 as compared to the year ended December 31, 2008.Contents

        The expansion of our European,international and secure shredding and digital services businesses has impacted the major cost of sales components. Our European and secure shreddinginternational operations are more labor intensive than our core U.S. physical businessesoperations in North America and, therefore, increase our labor costs asare a higher percentage of consolidated revenues. This trend is partially offset bysegment revenue than in our digital services businesses, which require significantly less direct labor.North American operations. Our secure shredding operations incur lesslower facility costs and higher transportation costs as a percentage of revenues compared to our core physical businesses.

        Selling, general and administrative expenses consist primarily of wages and benefits for management, administrative, information technology, sales, account management and marketing personnel, as well as expenses related to communications and data processing, travel, professional fees, bad debts, training, office equipment and supplies. Trends in total wageswage and benefitsbenefit dollars and as a percentage of total consolidated revenue are influenced by changes in headcount and compensation levels, achievement of incentive compensation targets, workforce productivity and variability in costs associated with medical insurance. The overhead structure of our expanding European and Asianinternational operations, as compared to our North American operations, is more labor intensive and has not achieved the same level of overhead leverage, which may result in an increase in selling, general and administrative expenses, as a percentage of consolidated revenue, as our European and Asianinternational operations become a more meaningful percentage of our consolidated results. Similarly, our digital services businesses require a higher level of overhead, particularly in the area of information technology, than our core physical businesses.

        Our depreciation and amortization charges result primarily from the capital-intensive nature of our business. The principal components of depreciation relate to storage systems, which include racking, building and leasehold improvements, computer systems hardware and software, and buildings. Amortization relates primarily to customer relationships andrelationship acquisition costs and core technology and is impacted by the nature and timing of acquisitions.

        Our consolidated revenues and expenses are subject to variations caused by the net effect of foreign currency translation on revenues and expenses incurred by our entities outside the U.S. In 2007, we saw increases in both revenues and expenses as a result of the strengthening of the Canadian dollar, Euro and British pound sterling against the U.S. dollar. During 2008, we saw net increases in both revenues and expenses as a result of the strengthening of the Euro, the Brazilian real and the Canadian dollar against the U.S. dollar, offset by the weakening of the British pound sterling against the U.S. dollar, based on an analysis of weighted average rates for the comparable periods. In the third quarter of 2008, we saw a dramatic strengthening of the U.S. dollar in comparison to all the major foreign currencies of our most significant international markets, which lead to a decrease in reported revenue and expenses in the fourth quarter of 2008. In 2009, we saw decreases in both revenues and expenses as a result of the weakening of the British pound sterling, Canadian dollar and Euro against the U.S. dollar, based on an analysis of weighted average rates for the comparable periods. It is difficult to predict how muchthe future fluctuations of foreign currency exchange rates will fluctuate in the future and how those fluctuations will impact our consolidated statement of operations. Due to the expansion of our


Table of Contents


international operations, some of these fluctuations have become material on individual balances. However, because both the revenues and expenses are denominated in the local currency of the country in which they are derived or incurred, the impact of currency fluctuations on our operating income and operating margin is partially mitigated. In order to provide a framework for assessing how our underlying businesses performed excluding the effect of foreign currency fluctuations, we compare the percentage change in the results from one period to another period in this report using constant currency disclosure.presentation. The constant currency growth rates are calculated by translating the 20072010 results at the 20082011 average exchange rates and the 20082011 results at the 20092012 average exchange rates.


Table of Contents

        The following table is a comparison of underlying average exchange rates of the foreign currencies that had the most significant impact on our U.S. dollar-reported revenues and expenses:

 
 Average Exchange
Rates for the
Year Ended
December 31,
  
 
 
 Percentage
(Strengthening)/
Weakening of
the U.S. dollar
 
 
 2008 2009 

British pound sterling*

 $1.944 $1.544  (20.6)%

Canadian dollar

 $0.944 $0.880  (6.8)%

Euro*

 $1.497 $1.366  (8.8)%
 
 Average Exchange
Rates for the
Year Ended
December 31,
  
 
 
 Percentage
Strengthening/
(Weakening) of
Foreign Currency
 
 
 2011 2012 

British pound sterling

 $1.604 $1.585  (1.2)%

Canadian dollar

 $1.012 $1.000  (1.2)%

Euro

 $1.392 $1.286  (7.6)%


 
 Average Exchange
Rates for the
Year Ended
December 31,
  
 
 
 Percentage
(Strengthening)/
Weakening of
the U.S. dollar
 
 
 2007 2008 

British pound sterling*

 $1.983 $1.944  (2.0)%

Canadian dollar

 $0.935 $0.944  1.0%

Euro*

 $1.344 $1.497  11.4%

*
Corresponding to the appropriate periods based on Iron Mountain Europe Limited's fiscal year ended October 31.
 
 Average Exchange
Rates for the
Year Ended
December 31,
  
 
 
 Percentage
Strengthening/
(Weakening) of
Foreign Currency
 
 
 2010 2011 

British pound sterling

 $1.546 $1.604  3.8%

Canadian dollar

 $0.971 $1.012  4.2%

Euro

 $1.328 $1.392  4.8%

Non-GAAP Measures

Adjusted Operating Income Before Depreciation, Amortization, Intangible Impairments, and Amortization, or REIT Costs ("Adjusted OIBDAOIBDA")

        Adjusted OIBDA is defined as operating income before depreciation, and amortization, expenses, excludingintangible impairments, (gain) loss on disposal/writedownwrite-down of property, plant and equipment, net.net, and REIT Costs (as defined below). Adjusted OIBDA Margin is calculated by dividing Adjusted OIBDA by total revenues. We use multiples of current or projected Adjusted OIBDA in conjunction with our discounted cash flow models to determine our overall enterprise valuation and to evaluate acquisition targets. We believe Adjusted OIBDA and Adjusted OIBDA Margin provide our current and potential investors with relevant and useful information regarding our ability to generate cash flow to support business investment. These measures are an integral part of the internal reporting system we use to assess and evaluate the operating performance of our business. Adjusted OIBDA does not include certain items that we believe are not indicative of our core operating results, specifically: (1) gains and losses(gain) loss on disposal/writedownwrite-down of property, plant and equipment, net; (2) intangible impairments; (3) REIT Costs; (4) other expense (income), net; (5) income (loss) from discontinued operations, net (2) other (income) expense,of tax; (6) gain (loss) on sale of discontinued operations, net (3) cumulative effect of change in accounting principletax and (4)(7) net income (loss) attributable to noncontrolling interests.

Adjusted OIBDA also does not include interest expense, net and the provision (benefit) for income taxes. These expenses are associated with our capitalization and tax structures, which we do not consider when evaluating the operating profitability of our core operations. Finally, Adjusted OIBDA does not include depreciation and amortization expenses, in order to eliminate the impact of capital investments, which we evaluate by comparing capital expenditures to incremental revenue generated and as a


Table of Contents


percentage of total revenues. Adjusted OIBDA and Adjusted OIBDA Margin should be considered in addition to, but not as a substitute for, other measures of financial performance reported in accordance with accounting principles generally accepted in the UnitedUnites States of America ("GAAP"), such as operating or net income (loss) or cash flows from operating activities from continuing operations (as determined in accordance with GAAP).


Table of Contents

Reconciliation of Adjusted OIBDA to Operating Income, Income from Continuing Operations and Net Income (Loss) (in thousands):

 
 Year Ended December 31, 
 
 2008 2009 2010 2011 2012 

Adjusted OIBDA

 $754,279 $822,579 $926,676 $950,439 $912,217 

Less: Depreciation and Amortization

  254,497  277,186  304,205  319,499  316,344 

Intangible Impairments

      85,909  46,500   

Loss (Gain) on Disposal/Write-down of Property, Plant and Equipment, Net

  7,522  168  (10,987) (2,286) 4,400 

REIT Costs(1)

        15,527  34,446 
            

Operating Income

  492,260  545,225  547,549  571,199  557,027 

Less: Interest Expense, Net

  219,989  212,545  204,559  205,256  242,599 

Other Expense (Income), Net

  31,505  (12,599) 8,768  13,043  16,062 

Provision for Income Taxes

  146,122  113,762  167,483  106,488  114,873 
            

Income from Continuing Operations

  94,644  231,517  166,739  246,412  183,493 

Total (Loss) Income from Discontinued Operations, Net of Tax

  (14,889) (12,138) (219,417) 153,180  (8,659)

Net (Loss) Income Attributable to Noncontrolling Interests

  (94) 1,429  4,908  4,054  3,126 
            

Net Income (Loss) Attributable to Iron Mountain Incorporated

 $79,849 $217,950 $(57,586)$395,538 $171,708 
            

(1)
Includes costs associated with our 2011 proxy contest, the work of the Special Committee and the proposed REIT conversion ("REIT Costs").

Adjusted Earnings per Share from Continuing Operations ("Adjusted EPS")

        Adjusted EPS is defined as reported earnings per share from continuing operations excluding: (1) (gain) loss on disposal/write-down of property, plant and equipment, net; (2) intangible impairments; (3) REIT Costs; (4) other expense (income), net; and (5) the tax impact of reconciling items and discrete tax items. We do not believe these excluded items to be indicative of our ongoing operating results, and they are not considered when we are forecasting our future results. We believe Adjusted EPS is of value to our current and potential investors when comparing our results from past, present and future periods.


Table of Contents

Reconciliation of Adjusted EPS—Fully Diluted from Continuing Operations to Reported EPS—Fully Diluted from Continuing Operations:

 
 Year Ended December 31, 
 
 2007 2008 2009 

Adjusted OIBDA

 $698,540 $790,751 $868,022 
 

Less: Depreciation and Amortization

  249,294  290,738  319,072 
  

(Gain) Loss on disposal/writedown of

          
  

property, plant and equipment, net

  (5,472) 7,483  406 
        
 

Operating Income

  454,718  492,530  548,544 
 

Less: Interest Expense, Net

  228,593  236,635  227,790 
  

Other Expense (Income), Net

  3,101  31,028  (12,079)
  

Provision for Income Taxes

  69,010  142,924  110,527 
  

Net Income (Loss) Attributable to

          
   

Noncontrolling interests

  920  (94) 1,429 
        

Net Income Attributable to Iron Mountain Incorporated

 $153,094 $82,037 $220,877 
        
 
 Year Ended December 31, 
 
 2008 2009 2010 2011 2012 

Adjusted EPS—Fully Diluted from Continuing Operations

 $0.86 $1.01 $1.28 $1.36 $1.21 

Less: Loss (Gain) on disposal/write-down of property, plant and equipment, net

  0.04    (0.05) (0.01) 0.03 

Intangible Impairments

      0.43  0.24   

Other Expense (Income), net

  0.15  (0.06) 0.04  0.07  0.09 

REIT Costs

        0.08  0.20 

Tax impact of reconciling items and discrete tax items

  0.20  (0.06) 0.03  (0.28) (0.16)
            

Reported EPS—Fully Diluted from Continuing Operations

 $0.47 $1.13 $0.83 $1.26 $1.05 
            

Critical Accounting Policies

        Our discussion and analysis of our financial condition and results of operations are based upon our consolidated financial statements, which have been prepared in accordance with GAAP. The preparation of these financial statements requires us to make estimates, judgments and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities at the date of the financial statements and for the period then ended. On an on-goingongoing basis, we evaluate the estimates used. We base our estimates on historical experience, actuarial estimates, current conditions and various other assumptions that we believe to be reasonable under the circumstances. These estimates form the basis for making judgments about the carrying values of assets and liabilities and are not readily apparent from other sources. Actual results may differ from these estimates. Our critical accounting policies include the following, which are listed in no particular order:

Revenue Recognition

        Our revenues consist of storage rental revenues as well as service revenues and are reflected net of sales and value added taxes. Storage rental revenues, both physical and digital, which are considered a key driver of financial performance indicator for the storage and information management services industry, consist primarily of largely recurring periodic rental charges related to the storage of materials or data (generally on a per unit basis). Service revenues are comprised ofinclude charges for related core service activities and a wide array of complementary products and services. Included in core service revenues are: (1) the handling of records, including the addition of new records, temporary removal of records from storage, refillingrefiling of removed records and the destruction of records, and permanent withdrawals from storage;records; (2) courier operations, consisting primarily of the pickup and delivery of records upon customer request; (3) secure shredding of sensitive documents; and (4) other recurring services, including maintenanceDMS, which relate to physical and support contracts.digital records, and recurring project revenues. Our complementary services revenues include special project work, customer termination and permanent withdrawal fees, data restoration projects, fulfillment services, consulting services, technology services and product sales (including software licenses, specially designed storage


Table of Contents


containers and related supplies). Our secure shredding revenues include the sale of recycled paper (included in complementary services)services revenues), the price of which can fluctuate from period to period, adding to the volatility and reducing the predictability of that revenue stream.

        We recognize revenue when the following criteria are met: persuasive evidence of an arrangement exists, services have been rendered, the sales price is fixed or determinable and collectability of the resulting receivable is reasonably assured. Storage rental and service revenues are recognized in the month the respective storage rental or service is provided, and customers are generally billed on a


Table of Contents

monthly basis on contractually agreed-upon terms. Amounts related to future storage rental or prepaid service contracts, including maintenance and support contracts for customers where storage rental fees or services are billed in advance are accounted for as deferred revenue and recognized ratably over the applicable storage rental or service period or when the service is performed. Revenue from the sales of products, which is included as a component of service revenues, is recognized when products are shipped to the customer and title has passed to the customer. SalesRevenues from the sales of software licenses are recognized at the time of product delivery to our customer or reseller and maintenance and support agreements are recognized ratably over the term of the agreement. Software license sales and maintenance and support accounted for less than 1% of our 2009 consolidated revenues. Within our Worldwide Digital Business segment, in certain instances, we process and host data for customers. In these instances, the processing fees are deferred and recognized over the estimated service period.products have historically not been significant.

Accounting for Acquisitions

        Part of our growth strategy has included the acquisition by us of numerous businesses. The purchase price of these acquisitionseach acquisition has been determined after due diligence of the acquiredtarget business, market research, strategic planning and the forecasting of expected future results and synergies. Estimated future results and expected synergies are subject to revisions as we integrate each acquisition and attempt to leverage resources.

        Each acquisition has been accounted for using the purchaseacquisition method of accounting as defined under the applicable accounting standards at the date of each acquisition. Accounting for these acquisitions has resulted in the capitalization of the cost in excess of fair value of the net assets acquired in each of these acquisitions as goodwill. We estimated the fair values of the assets acquired in each acquisition as of the date of acquisition and these estimates are subject to adjustment. These estimates are subject toadjustment based on the final assessments of the fair value of property, plant and equipment, intangible assets, operating leases and deferred income taxes. We complete these assessments within one year of the date of acquisition. See Note 6 to Notes to Consolidated Financial Statements.

        In connection with each of our acquisitions, we have undertaken certain restructurings of the acquired businesses to realize efficiencies and potential cost savings. Our restructuring activities include the elimination of duplicate facilities, reductions in staffing levels, and other costs associated with exiting certain activities of the businesses we acquire. Our acquisitions after January 1, 2009 will be accounted for under newly promulgated accounting guidance. While many of the fundamentals described above have not changed, several have. In particular, all acquisition costs and restructuring activity will be charged to operations rather than being capitalized as part of the purchase price. In addition, while in the past we only recorded contingent consideration when paid, we now must estimate it at the time of acquisition and account for that as part of the initial purchase price allocation. Any subsequent changes in this estimate will directly impact the consolidated statement of operations. While we finalize our plans to restructure the businesses we acquire within one year of the date of acquisition, it may take more than one year to complete all activities related to the restructuring of an acquired business.


Table of Contents

Allowance for Doubtful Accounts and Credit MemosMemo Reserves

        We maintain an allowance for doubtful accounts and credit memos for estimated losses resulting from the potential inability of our customers to make required payments and potential disputes regarding billing and service issues. When calculating the allowance, we consider our past loss experience, current and prior trends in our aged receivables and credit memo activity, current economic conditions and specific circumstances of individual receivable balances. If the financial condition of our customers were to significantly change, resulting in a significant improvement or impairment of their ability to make payments, an adjustment of the allowance may be required. We consider accounts receivable to be delinquent after such time as reasonable means of collection have been exhausted. We charge-off uncollectible balances as circumstances warrant, generally, no later than one year past due. As of December 31, 20082011 and 2009,2012, our allowance for doubtful accounts and credit memos balance totaled $19.6$23.3 million and $25.5$25.2 million, respectively.

Impairment of Tangible and Intangible Assets

        Assets subject to depreciation or amortization: We review long-lived assets and all amortizable intangible assets for impairment whenever events or changes in circumstances indicate the carrying amount of such assets may not be recoverable. Recoverability of these assets is determined by comparing the forecasted undiscounted net cash flows of the operation to which the assets relate to their carrying amount. The operations are generally distinguished by the business segment and geographic region in which they operate. If the operation is determined to be unable to recover the carrying amount of its assets, then intangible assets are written down first, followed by the other long-lived assets of the operation, to fair value. Fair value is determined based on discounted cash flows or appraised values, depending upon the nature of the assets.

        Goodwill—Assets not subject to amortization: Goodwill and intangible assets with indefinite lives are not amortized but are reviewed annually for impairment or more frequently if impairment indicators arise. We have selected October 1 as our annual goodwill impairment review date. We


Table of Contents

performed our annual goodwill impairment review as of October 1, 2007, 20082010, 2011 and 20092012 and noted no impairment of goodwill.goodwill at these dates. However, as a result of interim triggering events as discussed below, we recorded provisional goodwill impairment charges in each of the third quarters of 2010 and 2011 in conjunction with the Digital Sale and associated with our European operations, respectively. These provisional goodwill impairment charges were finalized in the fourth quarters of the 2010 and 2011 fiscal years, respectively. As of December 31, 2012, no factors were identified that would alter our October 1, 2012 goodwill assessment. In making this assessment, we relyrelied on a number of factors including operating results, business plans, anticipated future cash flows, transactions and market placemarketplace data. There are inherent uncertainties related to these factors and our judgment in applying them to the analysis of goodwill impairment. As of December 31, 2009, no factors were identified that would alter this assessment. When changes occur in the composition of one or more reporting units, the goodwill is reassigned to the reporting units affected based on their relative fair values.

        During the quarter ended September 30, 2010, prior to our annual goodwill impairment review, we concluded that events occurred and circumstances changed in our former worldwide digital business reporting unit that required us to conduct an impairment review. The primary factors contributing to our conclusion that we had a triggering event and a requirement to reassess our former worldwide digital business reporting unit goodwill for impairment included: (1) a reduction in forecasted revenue and operating results due to continued pressure on key parts of the business as a result of the weak economy; (2) reduced revenue and profit outlook for our eDiscovery service due to smaller average matter size and lower pricing; (3) a decision to discontinue certain software development projects; and (4) the sale of the Domain Name Product Line. As a result of the review, we recorded a provisional goodwill impairment charge associated with our former worldwide digital business reporting unit in the amount of $255.0 million during the quarter ended September 30, 2010. We finalized the estimate in the fourth quarter of 2010, and we recorded an additional impairment of $28.8 million, for a total goodwill impairment charge of $283.8 million. For the year ended December 31, 2010, based on a relative fair value basis, we allocated $85.9 million of this charge to the retained technology escrow services business, which continues to be included in our continuing results of operations. We retained our technology escrow services business, which had previously been reported in the former worldwide digital business segment along with the Digital Business and the Domain Name Product Line and is now reported in the North American Business segment.

        In September 2011, as a result of certain changes we made in the manner in which our European operations are managed, we reorganized our reporting structure and reassigned goodwill among the revised reporting units. As a result of the management and reporting changes, we concluded at that time that we had three reporting units within our European operations: (1) United Kingdom, Ireland and Norway ("UKI"); (2) Belgium, France, Germany, Luxembourg, Netherlands and Spain ("Continental Western Europe"); and (3) the remaining countries in Europe ("Central Europe"). As a result of the restructuring of our reporting units, we concluded that we had an interim triggering event, and, therefore, we performed an interim goodwill impairment test for UKI, Continental Western Europe and Central Europe in the third quarter of 2011, as of August 31, 2011. As required by GAAP, prior to our goodwill impairment analysis, we performed an impairment assessment on the long-lived assets within our UKI, Continental Western Europe and Central Europe reporting units and noted no impairment, except for our Italian operations, which was included in our Continental Western Europe reporting unit, and which is now included in discontinued operations. Based on our analysis, we concluded that the goodwill of our UKI and Central Europe reporting units was not impaired. Our Continental Western Europe reporting unit's fair value was less than its carrying value, and, as a result, we recorded a goodwill impairment charge of $46.5 million included as a component of intangible impairments from continuing operations in our consolidated statements of operations for the year ended December 31, 2011.

        Our reporting units at which level we performed our goodwill impairment analysis as of October 1, 2011 were as follows: (1) North America; (2) UKI; (3) Continental Western Europe; (4) Central


Table of Contents

Europe; (5) Latin America; (6) Australia; and (7) our China, Hong Kong, India, Russia, Singapore and Ukraine joint ventures (collectively, "Worldwide Joint Ventures"). As of December 31, 2011, the carrying value of goodwill, net amounted to $1,748.9 million, $306.2 million, $46.4 million, $63.8 million, $27.3 million and $61.7 million for North America, UKI, Continental Western Europe, Central Europe, Latin America and Australia, respectively. Our Worldwide Joint Ventures reporting unit had no goodwill as of December 31, 2011.

        In 2012, we reorganized the management and reporting structure of our international operations. As a result of the management and reporting changes, we concluded that we have the following six reporting units: (1) North America; (2) United Kingdom, Ireland, Norway, Belgium, France, Germany, Luxembourg, Netherlands and Spain ("Western Europe"); (3) the remaining countries in Europe ("Emerging Markets"); (4) Latin America; (5) Australia, China, Hong Kong and Singapore ("Asia Pacific"); and (6) India, Russia and Ukraine ("Emerging Market Joint Ventures"). As of December 31, 2012, the carrying value of goodwill, net amounted to $1,762.3 million, $365.3 million, $87.5 million, $56.9 million and $62.8 million for North America, Western Europe, Emerging Markets, Latin America and Asia Pacific, respectively. Our Emerging Market Joint Ventures reporting unit had no goodwill as of December 31, 2012. Based on our goodwill impairment assessment, all of our reporting units with goodwill had estimated fair values as of October 1, 2012 that exceeded their carrying values by greater than 30%.

        Reporting unit valuations have been calculated using an income approach based on the present value of future cash flows of each reporting unit or a combined approach based on the present value of future cash flows and market and transaction multiples of revenues and earnings. The income approach incorporates many assumptions including future growth rates, discount factors, expected capital expenditures and income tax cash flows. Changes in economic and operating conditions impacting these assumptions could result in a goodwill impairmentimpairments in future periods. In conjunction with our annual goodwill impairment reviews, we reconcile the sum of the valuations of all of our reporting units to our market capitalization as of such dates. Our reporting units at which level we performed our goodwill impairment analysis as of October 1, 2009 were as follows: North America (excluding Fulfillment); Fulfillment; Europe; Worldwide Digital Business (excluding Stratify); Stratify; Latin America; and Asia Pacific. As of December 31, 2009, the carrying value of goodwill, net amounted to $1.7 billion, $1.3 million, $470.9 million, $124.0 million, $130.0 million, $28.4 million and $60.9 million for North America (excluding Fulfillment), Fulfillment, Europe, Worldwide Digital Business (excluding Stratify), Stratify, Latin America and Asia Pacific, respectively.

        Our North America (excluding Fulfillment); Fulfillment; Europe; Worldwide Digital Business (excluding Stratify); Stratify and Latin America reporting units have fair values as of October 1, 2009


Table of Contents


that significantly exceed their carrying values. Our Asia Pacific reporting unit has a fair value that exceeds its carrying value by 9% as of October 1, 2009. Asia Pacific is still in the investment stage and accordingly its fair value does not exceed its carrying value by a significant margin at this point in time. A deterioration of the Asia Pacific business or the business not achieving the forecasted results could lead to an impairment in future periods.

Accounting for Internal Use Software

        We develop various software applications for internal use. Computer software costs associated with internal use software are expensed as incurred until certain capitalization criteria are met. Payroll and related costs for employees who are directly associated with, and who devote time to, the development of internal use computer software projects (to the extent time is spent directly on the project) are capitalized and depreciated over the estimated useful life of the software. Capitalization begins when the design stage of the project has been completed and it is probable that the application will be completed and used to perform the function intended. Depreciation begins when the software is placed in service. Computer software costs that are capitalized are periodically evaluated for impairment.

        It may be necessary for us to write-off amounts associated with the development of internal use software if the project cannot be completed as intended. Our expansion into new technology-based service offerings requires the development of internal use software that will be susceptible to rapid and significant changes in technology. We may be required to write-off unamortized costs or shorten the estimated useful life if an internal use software program is replaced with an alternative tool prior to the end of the software's estimated useful life. General uncertainties related to expansion into digital businesses, including the timing of introduction and market acceptance of our services, may adversely impact the recoverability of these assets. As of December 31, 2008 and 2009, capitalized labor net of accumulated depreciation was $45.6 million and $41.4 million, respectively. See Note 2(f) to Notes to Consolidated Financial Statements.

        During the years ended December 31, 2007, 2008 and 2009, we wrote-off $1.3 million, $0.6 million and $0.6 million, respectively, of previously deferred software costs in Corporate, primarily internal labor costs, associated with internal use software development projects that were discontinued after implementation, which resulted in a loss on disposal/writedown of property, plant and equipment, net.

Income Taxes

        We have recorded a valuation allowance, amounting to $42.1$76.1 million as of December 31, 2009, to reduce2012, reducing our deferred tax assets, primarily associated with certain state and foreign net operating loss carryforwards and foreign tax credit carryforwards, to the amount that is more likely than not to be realized. We have federal net operating loss carryforwards, which begin to expire in 20192020 through 2025, of $38.6$25.9 million ($13.59.1 million, tax effected) at December 31, 20092012 to reduce future federal taxable income. We have an assetassets for state net operating losses of $16.1$9.4 million (net of federal tax benefit), which begins to expire in 20102013 through 2025, subject to a valuation allowance of approximately 99%83%. We have assets for foreign net operating losses of $29.7$46.3 million, with various expiration dates (and in some cases no expiration date), subject to a valuation allowance of approximately 81%82%. Additionally, weWe also have federal research credits of $0.9 million which begin to expire in 2010, and foreign tax credits of $59.3$44.3 million, which begin to expire in 20142017 through 2019. Based on current expectations and plans, we expect2020, subject to fully utilize our foreign tax credit carryforwards prior to their expiration.a valuation allowance of approximately 68%. If actual results differ unfavorably from certain of our estimates used, we may not be able to realize all or part of our net deferred income tax assets and foreign tax credit carryforwards, and additional valuation allowances may be required. Although we believe our estimates are reasonable, no assurance can be given that our estimates reflected in the tax provisions and accruals will equal our actual results. These differences could have a material impact on our income tax provision and operating results in the period in which such determination is made.


Table of Contents

        The evaluation of an uncertain tax position is a two-step process. The first step is a recognition process whereby the company determineswe determine whether it is more likely than not that a tax position will be sustained upon examination, including resolution of any related appeals or litigation processes, based on the technical merits of the position. The second step is a measurement process whereby a tax position that meets the more likely than not recognition threshold is calculated to determine the amount of benefit


Table of Contents

to recognize in the financial statements. The tax position is measured at the largest amount of benefit that is greater than 50% likely of being realized upon ultimate settlement. We recognized a $16.6 million increase in the reserve related to uncertain tax positions, which was accounted for as a reduction to the January 1, 2007 balance of retained earnings in conjunction with the adoption of a new accounting standard related to uncertain tax positions.

        We are subject to examination by various tax authorities in jurisdictions in which we have significant business operations.operations or a taxable presence. We regularly assess the likelihood of additional assessments by tax authorities and provide for these matters as appropriate. As of December 31, 20082011 and 2009,2012, we had approximately $84.6$31.4 million and $88.2$37.6 million, respectively, of reserves related to uncertain tax positions. The reversal of these reserves will be recorded as a reduction of our income tax provision if sustained. Although we believe our tax estimates are appropriate, the final determination of tax audits and any related litigation could result in favorable or unfavorable changes in our estimates.

        We have elected to recognize interest and penalties associated with uncertain tax positions as a component of the provision (benefit) for income taxes in the accompanying consolidated statements of operations.taxes. We recorded $1.2$(1.6) million, $4.5$(8.5) million and $4.7$1.3 million for gross interest and penalties for the years ended December 31, 2007, 20082010, 2011 and 2009,2012, respectively.

        We had $8.1$2.8 million and $12.9$3.6 million accrued for the payment of interest and penalties as of December 31, 20082011 and 2009,2012, respectively.

        WeExcept for certain Canadian subsidiaries for which we recorded a deferred tax liability of $0.6 million, we have not providedrecorded deferred taxes on book over tax outside basis differences related to certainour other foreign subsidiaries because such basis differences are not expected to reverse in the foreseeable future and we intend to reinvest the undistributed earnings of such foreign subsidiaries indefinitely outside the U.S. These basis differences arose primarily through the undistributed book earnings of our foreign subsidiaries. The basis differences could be reversed through a sale of the subsidiaries, the receipt of dividends from subsidiaries as well asand certain other events or actions on our part, each of which would result in an increase in our provision for income taxes. It is not practicable to calculate the amount of suchunrecognized deferred tax liability on the book over tax outside basis differences.difference because of the complexities of the hypothetical calculation. As of December 31, 2012, we had approximately $71.5 million of undistributed earnings within our foreign subsidiaries which approximates the book over tax outside basis difference. We may record deferred taxes on book over tax outside basis differences related to certain foreign subsidiaries in the future depending upon a number of factors, decisions and events in connection with our potential conversion to a REIT, including favorable indications from the IRS with regard to our PLR requests, finalization of countries to be included in the reorganization pursuant to the Conversion Plan, refinancing our revolving credit and term loan facilities, shareholder approval of certain modifications to our corporate charter and final board of directors approval of our conversion to a REIT.

Stock-Based Compensation

        We record stock-based compensation expense, utilizing the straight-line method, for the cost of stock options, restricted stock, restricted stock units, performance units and shares of stock issued under the employee stock purchase plan. Stock-based compensation expense included in the accompanying consolidated statements of operations, for the years ended December 31, 2007, 20082010, 2011 and 20092012 was $13.9$20.4 million, ($10.2including $3.1 million after tax or $0.05 per basic and diluted share), $19.0 millionin discontinued operations, ($15.7 million after tax or $0.08 per basic and diluted share) and $18.7, $17.5 million, including $0.3 million in discontinued operations, ($14.78.8 million after tax or $0.07$0.05 per basic and diluted shares)share), and $30.4 million ($23.4 million after tax or $0.14 per basic and $0.13 per diluted share), respectively.

        The fair values of option grants are estimated on the date of grant using the Black-Scholes option pricing model. Expected volatility and the expected term are the input factors to that model which require the most significant management judgment. Expected volatility is calculated utilizing daily historical volatility over a period that equates to the expected life of the option. The expected life (estimated period of time outstanding) of the stock options granted is estimated using the historical exercise behavior of employees.

Self-Insured Liabilities

        We are self-insured up to certain limits for costs associated with workers' compensation claims, vehicle accidents, property and general business liabilities, and benefits paid under employee healthcare


Table of Contents


and short-term disability programs. At December 31, 2008 and 2009 there were approximately $39.6 million and $41.1 million, respectively, of self-insurance accruals reflected in our consolidated balance sheets. The measurement of these costs requires the consideration of historical cost experience and judgments about the present and expected levels of cost per claim. We account for these costs primarily through actuarial methods, which develop estimates of the undiscounted liability for claims incurred, including those claims incurred but not reported. These methods provide estimates of future ultimate claim costs based on claims incurred as of the balance sheet date.

        We believe the use of actuarial methods to account for these liabilities provides a consistent and effective way to measure these highly judgmental accruals. However, the use of any estimation technique in this area is inherently sensitive given the magnitude of claims involved and the length of time until the ultimate cost is known. We believe our recorded obligations for these expenses are appropriate. Nevertheless, changes in healthcare costs, severity, and other factors can materially affect the estimates for these liabilities.

Recent Accounting Pronouncements

        Effective January 1, 2009, GAAP for noncontrolling interests changed. The presentation and disclosure requirements of noncontrolling interests have been applied to all of our financial statements, notes and other financial data retrospectively for all periods presented.

        In June 2009,September 2011, the Financial Accounting Standards Board ("FASB") established the FASBissued Accounting Standards Codification (the "Codification"Update ("ASU") No. 2011-08,Intangibles—Goodwill and Other (Topic 350): Testing Goodwill for Impairment. ASU No. 2011-08 allows, but does not require, entities to becomefirst assess qualitatively whether it is necessary to perform the sourcetwo-step goodwill impairment test. If an entity believes, as a result of authoritative U.S. GAAP recognized byits qualitative assessment, that it is more likely than not that the FASB to be applied by nongovernmental entities. Rules and interpretive releasesfair value of a reporting unit is less than its carrying amount, the SEC under authorityquantitative two-step impairment test is required; otherwise, no further testing is required. We adopted ASU No. 2011-08 as of federal securities laws are also sources of authoritative U.S. GAAP for SEC registrants. The Codification was effective for financial statements issued for interim and annual periods ending after September 15, 2009. The Codification superseded all then-existing non-SEC accounting and reporting standards on JulyJanuary 1, 2009, and all other non-grandfathered non-SEC accounting literature not included in the Codification became nonauthoritative.2012. The adoption of the CodificationASU No. 2011-08 did not have a materialan impact on our consolidated financial statements andposition, results of operations.

        Effective at the start of a reporting entity's first fiscal year beginning after November 15, 2009,operations or January 1, 2010, for a calendar year-end entity, the Codification will require more information about transfers of financial assets, including securitization transactions, and transactions where entities have continuing exposure to the risks related to transferred financial assets. The Codification eliminates the concept of a "qualifying special-purpose entity," changes the requirements for derecognizing financial assets, and requires additional disclosures about an entity's involvement with variable interest entities and any significant changes in risk exposure due to that involvement. A reporting entity will be required to disclose how its involvement with a variable interest entity affects the reporting entity's financial statements. We do not expect the adoption of these Codification updates to have a material impact on our consolidated financial statements and results of operations.

        In October 2009, the FASB issued amended guidance on multiple-deliverable revenue arrangements and software revenue recognition. The multiple-deliverable revenue arrangements updates to the Codification applies to all deliverables in contractual arrangements in all industries in which a vendor will perform multiple revenue-generating activities. The change to the Codification creates a selling price hierarchy that an entity must use as evidence of fair value in separately accounting for all deliverables on a relative selling price basis which qualify for separation. The selling price hierarchy includes: (1) vendor-specific objective evidence; (2) third-party evidence and (3) estimated selling price. Broadly speaking, this update to the Codification will result in the possibility for some entities to recognize revenue earlier and more closely align with the economics of certain revenue arrangements if the other criteria for separation (e.g. standalone value to the customer) arecash flows.


Table of Contents


met. The software revenue recognition guidance was issued to address factors that entities should consider when determining whether the software and non-software components function together to deliver the product's essential functionality. The software revenue recognition updates to the Codification will allow revenue arrangements in which the software and non-software components deliver together the product's essential functionality to follow the multiple-deliverable revenue recognition criteria as opposed to the criteria applicable to software revenue recognition. Both updates are effective for fiscal years beginning on or after June 15, 2010 and apply prospectively to new or materially modified revenue arrangements after its effective date. Early adoption is permitted; however, we do not anticipate early adopting. We are currently evaluating the impact of these Codification updates to our consolidated financial statements and results of operations.

        In January 2010, the FASB issued amended guidance improving disclosures about fair value measurements to add new requirements for disclosures about transfers into and out of Levels 1 and 2 and separate disclosures about purchases, sales, issuances, and settlements relating to Level 3 measurements. The new guidance also clarifies existing fair value disclosures about the level of disaggregation and about inputs and valuation techniques used to measure fair value. The Codification requires an entity, in determining the appropriate classes of assets and liabilities, to consider the nature and risks of the assets and liabilities as well as their placement in the fair value hierarchy (Level 1, 2 or 3). The Codification is effective for the first reporting period, including interim periods, beginning after December 15, 2009, except for the requirement to provide the Level 3 activity of purchases, sales, issuances, and settlements on a gross basis, which will be effective for fiscal years beginning after December 15, 2010. In the period of initial adoption, entities will not be required to provide the amended disclosures for any previous periods presented for comparative purposes. However, those disclosures are required for periods ending after initial adoption. Early adoption is permitted; however, we do not anticipate early adopting. We do not expect adoption to have a material impact on our consolidated financial statements and results of operations.


Table of Contents

Results of Operations

Comparison of Year Ended December 31, 20092012 to Year Ended December 31, 20082011 and Comparison of Year Ended December 31, 20082011 to Year Ended December 31, 20072010 (in thousands):



 Year Ended December 31,  
  
  Year Ended December 31,  
  
 


 Dollar
Change
 Percentage
Change
  Dollar
Change
 Percentage
Change
 


 2008 2009  2011 2012 

Revenues

Revenues

 $3,055,134 $3,013,595 $(41,539) (1.4)% $3,014,703 $3,005,255 $(9,448) (0.3)%

Operating Expenses(1)

Operating Expenses(1)

 2,562,604 2,465,051 (97,553) (3.8)%

Operating Expenses(1)

 2,443,504 2,448,228 4,724 0.2%
                  

Operating Income

 492,530 548,544 56,014 11.4%

Operating Income

 571,199 557,027 (14,172) (2.5)%

Other Expenses, Net

Other Expenses, Net

 410,587 326,238 (84,349) (20.5)% 324,787 373,534 48,747 15.0%
                  

Income from Continuing Operations(1)

 246,412 183,493 (62,919) (25.5)%

Loss from Discontinued Operations(1)

 (47,439) (6,774) 40,665 85.7%

Gain (Loss) on Sale of Discontinued Operations

 200,619 (1,885) (202,504) (100.9)%

Net Income

 81,943 222,306 140,363 171.3%         

Net (Loss) Income Attributable to the Noncontrolling Interests

 (94) 1,429 1,523 1620.2%

Net Income

 399,592 174,834 (224,758) (56.2)%

Net Income Attributable to Noncontrolling Interests

 4,054 3,126 (928) 22.9%
                  

Net Income Attributable to Iron Mountain Incorporated

 $395,538 $171,708 $(223,830) (56.6)%

Net Income Attributable to Iron Mountain Incorporated

 $82,037 $220,877 $138,840 169.2%         

Adjusted OIBDA(2)

 $950,439 $912,217 $(38,222) (4.0)%
                  

Adjusted OIBDA(1)

 $790,751 $868,022 $77,271 9.8%
         

Adjusted OIBDA Margin(1)

 25.9% 28.8%     

Adjusted OIBDA Margin(2)

 31.5% 30.4%     

 

 
 Year Ended December 31,  
  
 
 
 Dollar
Change
 Percentage
Change
 
 
 2010 2011 

Revenues

 $2,892,349 $3,014,703 $122,354  4.2%

Operating Expenses(1)(3)

  2,344,800  2,443,504  98,704  4.2%
           

Operating Income

  547,549  571,199  23,650  4.3%

Other Expenses, Net

  380,810  324,787  (56,023) (14.7)%
           

Income from Continuing Operations(1)(3)

  166,739  246,412  79,673  47.8%

Loss from Discontinued Operations(1)(3)

  (219,417) (47,439) 171,978  78.4%

Gain on Sale of Discontinued Operations

    200,619  200,619  100.0%
           

Net (Loss) Income

  (52,678) 399,592  452,270  858.6%

Net Income Attributable to Noncontrolling Interests

  4,908  4,054  (854) 17.4%
           

Net (Loss) Income Attributable to Iron Mountain Incorporated

 $(57,586)$395,538 $453,124  786.9%
           

Adjusted OIBDA(2)

 $926,676 $950,439 $23,763  2.6%
           

Adjusted OIBDA Margin(2)

  32.0% 31.5%      

 
 Year Ended December 31,  
  
 
 
 Dollar
Change
 Percentage
Change
 
 
 2007 2008 

Revenues

 $2,730,035 $3,055,134 $325,099  11.9%

Operating Expenses

  2,275,317  2,562,604  287,287  12.6%
           
 

Operating Income

  454,718  492,530  37,812  8.3%

Other Expenses, Net

  300,704  410,587  109,883  36.5%
           
 

Net Income

  154,014  81,943  (72,071) (46.8)%

Net Income (Loss) Attributable to the Noncontrolling Interests

  920  (94) (1,014) (110.2)%
           
 

Net Income Attributable to Iron Mountain Incorporated

 $153,094 $82,037 $(71,057) (46.4)%
           

Adjusted OIBDA(1)

 $698,540 $790,751 $92,211  13.2%
           

Adjusted OIBDA Margin(1)

  25.6% 25.9%      

(1)
A $49.0 million non-cash goodwill impairment charge related to our Continental Western Europe reporting unit in the year ended December 31, 2011 was recorded. $46.5 million of the charge is included in our continuing results of operations (included in operating expenses in 2011). $2.5 million of the charge was allocated to our Italian operations and is included in loss from discontinued operations in 2011. See Notes 2.g. and 14 to Notes to Consolidated Financial Statements.

(2)
See "Non-GAAP Measures—Adjusted Operating Income Before Depreciation, Amortization, Intangible Impairments and Amortization, or Adjusted OIBDA"REIT Costs ('Adjusted OIBDA')" in this Annual Report for the

Table of Contents

    definition, reconciliation and a discussion of why we believe these measures provide relevant and useful information to our current and potential investors.

(3)
A $283.8 million non-cash goodwill impairment charge related to our former worldwide digital business reporting unit in the year ended December 31, 2010 was recorded. We allocated $85.9 million of the charge to our retained technology escrow services business, included in our continuing results of operations (included in operating expenses in 2010). We allocated the remaining $197.9 million of the charge to the Digital Business (included in loss from discontinued operations in 2010). See Notes 2.g. and 14 to Notes to Consolidated Financial Statements.

Table of Contents

REVENUE



 Year Ended
December 31,
  
 Percentage Change  
   
  
  
 Percentage Change  
 


 Dollar
Change
  
 Constant
Currency(1)
 Internal
Growth(2)
  Year Ended December 31,  
  
 


 2008 2009 Actual  Dollar
Change
  
 Constant
Currency(1)
 Internal
Growth(2)
 

Storage

 $1,657,909 $1,696,395 $38,486 2.3% 6.2% 6%

 2011 2012 Dollar
Change
 Actual Constant
Currency(1)
 Internal
Growth(2)
 

Storage Rental

 $1,682,990 $1,733,138 3.0%

Core Service

Core Service

 961,303 947,754 (13,549) (1.4)% 3.7% 4% 968,424 942,826 (25,598) (2.6)% (1.0)% (2.5)%
                  

Total Core Revenue

 2,619,212 2,644,149 24,937 1.0% 5.3% 5%

Total Core Revenue

 2,651,414 2,675,964 24,550 0.9% 2.4% 1.0%

Complementary Services

Complementary Services

 435,922 369,446 (66,476) (15.2)% (11.4)% (9)% 363,289 329,291 (33,998) (9.4)% (8.5)% (9.6)%
                  

Total Revenue

 $3,014,703 $3,005,255 $(9,448) (0.3)% 1.1% (0.3)%

Total Revenue

 $3,055,134 $3,013,595 $(41,539) (1.4)% 3.0% 3%         

Total Service Revenue

 $1,331,713 $1,272,117 $(59,596) (4.5)% (3.1)% (4.4)%
                  

 

 
  
  
  
 Percentage Change  
 
 
 Year Ended December 31,  
  
 
 
 Dollar
Change
  
 Constant
Currency(1)
 Internal
Growth(2)
 
 
 2010 2011 Actual 

Storage Rental

 $1,598,718 $1,682,990 $84,272  5.3% 3.9% 3.1%

Core Service

  947,737  968,424  20,687  2.2% 0.3% (0.8)%
                 

Total Core Revenue

  2,546,455  2,651,414  104,959  4.1% 2.6% 1.6%

Complementary Services

  345,894  363,289  17,395  5.0% 3.5% 3.7%
                 

Total Revenue

 $2,892,349 $3,014,703 $122,354  4.2% 2.7% 1.9%
                 

Total Service Revenue

 $1,293,631 $1,331,713 $38,082  2.9% 1.2% 0.4%
                 

 
 Year Ended
December 31,
  
 Percentage Change  
 
 
 Dollar
Change
  
 Constant
Currency(1)
 Internal
Growth(2)
 
 
 2007 2008 Actual 

Storage

 $1,499,074 $1,657,909 $158,835  10.6% 10.0% 8%

Core Service

  833,419  961,303  127,884  15.3% 14.5% 10%
                 
 

Total Core Revenue

  2,332,493  2,619,212  286,719  12.3% 11.6% 9%

Complementary Services

  397,542  435,922  38,380  9.7% 9.3% 4%
                 
 

Total Revenue

 $2,730,035 $3,055,134 $325,099  11.9% 11.3% 8%
                 

(1)
Constant currency growth rates are calculated by translating the 20072011 results at the 20082012 average exchange rates and the 20082010 results at the 20092011 average exchange rates.

(2)
Our internal revenue growth rate represents the weighted average year-over-year growth rate of our revenues after removing the effects of acquisitions, divestitures and foreign currency exchange rate fluctuations. We calculate internal revenue growth in local currency for our international operations.

        Our consolidated storage rental revenues increased $38.5$50.1 million, or 2.3%3.0%, to $1,696.4$1,733.1 million for the year ended December 31, 20092012 and $158.8$84.3 million, or 10.6%5.3%, to $1,657.9$1,683.0 million for the year ended December 31, 2008,2011, in comparison to the years ended December 31, 20082011 and 2007,2010, respectively. The increase in 2009 is attributable togrowth rate for the year ended December 31, 2012 consists of internal revenue growth of 6% resulting from strength3.0%. Net acquisitions/divestitures contributed 1.3% of the increase in reported storage rental revenues in 2012 over 2011. Foreign currency exchange rate fluctuations decreased our storage rental revenue growth rate for the year ended December 31, 2012 by approximately 1.4%. Our consolidated storage rental revenue growth in 2012 was driven by sustained storage rental internal growth of 2.1% and 6.1% in our North American PhysicalBusiness and International Physical operatingBusiness segments, offsetrespectively. Global records management net volumes in 2012 increased by foreign1.8% over the ending volume at December 31, 2011.


Table of Contents

The growth rate for the year ended December 31, 2011 consists of internal revenue growth of 3.1%. Net acquisitions/divestitures contributed 0.8% of the increase in reported storage rental revenues in 2011 over 2010. Foreign currency exchange rate fluctuations of (4)%. Current economic factors have ledadded approximately 1.4% to a moderationour storage rental revenue growth rate for the year ended December 31, 2011. Our consolidated storage rental revenue growth in 2011 was driven by continued solid storage rental growth in the International Business segment and consistent volume and price increases in our storage growth rate, as a result of longer new sales cycles in our digital business and lower new sales and higher destruction rates in our physical business. The increase in 2008 is attributable to internal revenue growth of 8% resulting from strength across all of our segments, as well as acquisitions and foreign currency exchange rate fluctuations, which had positive impacts of 2% and 1%, respectively.North American Business segment.

        Consolidated service revenues, consisting of core and complementary services, decreased $80.0$59.6 million, or (5.7)%4.5%, to $1,317.2$1,272.1 million for the year ended December 31, 20092012 from $1,397.2$1,331.7 million for the year ended December 31, 2008.2011. Service revenue internal growth was negative 1% as a result of4.4% for the year ended December 31, 2012. The negative service revenue internal growth for 2012 was driven by negative complementary service revenue internal growth of negative 9%9.6% due primarily to the significant decrease in 2009,recycled paper prices in 2012 compared to the same period last year, which resulted in $30.0 million less of recycled paper revenue. This decline was partially offset by strong DMS revenue growth and increased project revenues in 2012. Core service internal growth in 2012 was negative 2.5% due to expected declines in activity-based core services, particularly in the North American Business segment. Foreign currency exchange rate fluctuations decreased reported service revenues by 1.4% in 2012 over 2011. Offsetting the decrease in reported service revenues were net acquisitions/divestures, which contributed 1.4% to our service revenues in 2012. Consolidated service revenues, consisting of core and complementary services, increased $38.1 million, or 2.9%, to $1,331.7 million for the year ended December 31, 2011 from $1,293.6 million for the year ended December 31, 2010. Service revenue internal growth was 0.4% driven by complementary service revenue internal growth of 4% over 2008. As expected, complementary3.7% in 2011, partially offset by negative core service revenue internal growth of 0.8% in 2011. Complementary service revenues decreased on a year-over-year basisincreased in 2011 compared to 2010 primarily due to the completion$25.8 million of a large special project in Europe in the third quarter of 2008 and $34.4 million lessadditional revenue generated from the sale of recycled paper revenues resulting from a steep declinedue, in part, to increases in paper prices. The price of recycled paper pricing. We also experienced softness in 2009 inincreased through the more discretionary revenues such as project revenuesthird quarter of 2011 before beginning a sharp decline into the first quarter of 2012 and fulfillment services.settling into a level approximately 30% below the 2011 average price for most of 2012. Core service revenue internal growth in the year ended December 31, 2011 was also constrained by current economic trends and pressurespressure on activity-based service revenues related to the handling and transportation of items in storagestorage. These decreases were partially offset by strong DMS revenue growth and secure shredding. Unfavorable foreignhigher fuel surcharges in 2011. Foreign currency exchange rate fluctuations reducedincreased reported service revenues by 5% for 20091.7% in 2011 over the same period in 2010. Net acquisitions/divestitures contributed 0.8% of the increase in reported service revenues in 2011 compared to 2008. Consolidated service revenues increased $166.3 million, or 13.5%, to $1,397.2 million for the year ended December 31, 2008


Table of Contents


from $1,231.0 million for the year ended December 31, 2007. The increase is attributable to internal growth of 8% (comprised of core services revenue internal growth of 10% and complementary service revenue internal growth of 4%), supported by strong growthsame period in data protection and secure shredding revenues, increased recycled paper revenues driven by higher volumes and a year-over-year increase in the average prices for recycled paper, and fuel surcharges. Acquisitions and foreign currency exchange rate fluctuations also added 5% and 1%, respectively, to total growth in 2008 over 2007.2010.

        For the reasons stated above, our consolidated revenues decreased $41.5$9.4 million, or (1.4)%0.3%, to $3,013.6$3,005.3 million for the year ended December 31, 20092012 from $3,055.1$3,014.7 million for the year ended December 31, 2008. Internal revenue growth was 3% for 2009.2011. We calculate internal revenue growth in local currency for our international operations. Internal revenue growth was negative 0.3% for 2012. For the year ended December 31, 2009,2012, foreign currency exchange rate fluctuations negatively impacteddecreased our reportedconsolidated revenues by 4%1.4% primarily due to the weakening of the British pound sterling, Canadian dollar and Euro against the U.S. dollar, based on an analysis of weighted average rates for the comparable periods. Offsetting the decrease in reported consolidated revenues were net acquisitions/divestitures which contributed an increase of 1.3% of total reported revenues in 2012 over the same period in 2011. Our consolidated revenues increased $325.1$122.4 million, or 11.9%4.2%, to $3,055.1$3,014.7 million for the year ended December 31, 20082011 from $2,730.0$2,892.3 million for the year ended December 31, 2007.2010. Internal revenue growth was 8% and 10% in 2008 and 2007, respectively, and acquisitions contributed 3% in both 2008 and 2007.1.9% for 2011. For the year ended December 31, 2008, net favorable2011, foreign currency exchange rate fluctuations that impactedincreased our consolidated revenues were 1% and were primarily due to the strengthening of the Euro, the Brazilian real and the Canadian dollar against the U.S. dollar, offset by the weakening of the British pound sterling against the U.S. dollar, based on an analysis of weighted average rates for the comparable periods. For the year ended December 31, 2007, net favorable foreign currency exchange rate fluctuations that impacted our revenues were 3% and were1.5% primarily due to the strengthening of the British pound sterling, Canadian dollar and Euro against the U.S. dollar, based on an analysis of weighted average rates for the comparable periods. Net acquisitions/divestitures contributed 0.8% of the increase in total reported revenues in 2011 over the same period in 2010.


 2008 2009  2011 2012 

 First
Quarter
 Second
Quarter
 Third
Quarter
 Fourth
Quarter
 First
Quarter
 Second
Quarter
 Third
Quarter
 Fourth
Quarter
  First
Quarter
 Second
Quarter
 Third
Quarter
 Fourth
Quarter
 First
Quarter
 Second
Quarter
 Third
Quarter
 Fourth
Quarter
 

Storage Revenue

 8% 8% 8% 8% 7% 6% 7% 5%

Storage Rental Revenue

 3.0% 2.8% 3.3% 3.3% 2.9% 3.5% 2.4% 3.2%

Service Revenue

 10% 9% 9% 5% 0% 1% (4)% 0% (0.1)% 1.2% 1.8% (1.4)% (2.2)% (5.2)% (7.8)% (2.4)%

Total Revenue

 9% 9% 8% 7% 4% 4% 2% 3% 1.6% 2.1% 2.6% 1.2% 0.6% (0.3)% (2.1)% 0.8%

        We expect our consolidated internal revenue growth rate for 2013 to be approximately (1)% to 2%. During the past eight quarters our storage rental revenue internal growth rate has ranged between 5%2.4% and 8%3.5%. Storage rental revenue internal growth rates have stabilized over the past eight quarters following a decline that was driven primarily by the most recent financial crisis. Volume growth in the North American Business segment has been relatively flat over this period and as a result, storage rental growth has been driven primarily by net price increases. Within our International Business segment, the more developed markets are generating consistent low-to-mid single-digit storage rental growth while the emerging markets are producing strong double-digit storage rental growth by taking advantage of the first-time outsourcing trends for physical records storage and management in those markets. The internal revenue growth rate for service revenue is inherently more volatile than the storage rental revenue internal growth rate due to the more discretionary nature of certain complementary services we offer, such as large special projects, software licenses, and the volatility of pricespricing for recycled paper. These revenues, which are often event drivenevent-driven and impacted to a greater extent by economic downturns as customers defer or cancel the purchase of certain services as a way to reduce their short-term costs, and may be difficult to replicate in future periods. As a commodity, recycled paper prices are subject to the volatility of that market. We expect our consolidated internal revenue growth for 2010 to be between 4% and 6%. The internal growth rate for total service revenues reflects the following: (1) growth in North American storage-related service revenues, increased special project revenues and higher recycled paper revenues through the third quarter of 2008; (2) a large public sector contract in Europe that was completed in the third quarter of 2008; (3) declines in commodity prices for recycled paper and fuel, beginning in the fourth quarter of 2008; (4) the expected softness in our complementary service revenues, such as project revenues and fulfillment services, beginning in the fourth quarter of 2008; and (5)consistent pressures on activity-based service revenues related to the handling and transportation of items in storage and secure shredding.shredding, particularly in the North American Business segment; (2) fluctuations in the price of recycled paper, which increased through the third quarter of 2011 before beginning a sharp decline into the first quarter of 2012 and settling into a level approximately 30% below the 2011 average price for most of 2012; (3) softness in some of our other complementary service lines, such as fulfillment services; and (4) higher fuel surcharges.


Table of Contents

OPERATING EXPENSES

        Consolidated cost of sales (excluding depreciation and amortization) is comprisedconsists of the following expenses (in thousands):

  
  
  
 Percentage
Change
  
  
  
 

  
  
  
 Percentage Change % of
Consolidated
Revenues
  
   
  
  
 % of
Consolidated
Revenues
  
 

 Year Ended December 31,  
 Percentage
Change
(Favorable)/
Unfavorable
  Year Ended December 31,  
 Percentage
Change
(Favorable)/
Unfavorable
 

 Dollar
Change
  
 Constant
Currency
% of
Consolidated
Revenues
 Dollar
Change
  
 Constant
Currency
% of
Consolidated
Revenues

 2008 2009 Actual 2008 2009 2011 2012 Actual 2011 2012

Labor

 $674,466 $626,751 $(47,715) (7.1)% (2.5)% 22.1% 20.8% (1.3 $595,207 $625,922 $30,715 5.2% 6.8% 19.7% 20.8% 1.1

Facilities

 413,968 408,836 (5,132) (1.2)% 3.6% 13.5% 13.6% 0.1% 422,020 421,098 (922) (0.2)% 1.2% 14.0% 14.0% 0.0%

Transportation

 151,891 110,220 (41,671) (27.4)% (23.8)% 5.0% 3.7% (1.3)% 125,005 126,023 1,018 0.8% 2.4% 4.1% 4.2% 0.1%

Product Cost of Sales and Other

 141,694 125,407 (16,287) (11.5)% (7.5)% 4.6% 4.2% (0.4)% 102,968 104,070 1,102 1.1% 3.0% 3.4% 3.5% 0.1%
                  

 $1,382,019 $1,271,214 $(110,805) (8.0)% (3.5)% 45.2% 42.2% (3.0)% $1,245,200 $1,277,113 $31,913 2.6% 4.1% 41.3% 42.5% 1.2%
                  

 

  
  
  
 Percentage
Change
  
  
  
 

  
  
  
 Percentage Change % of
Consolidated
Revenues
  
   
  
  
 % of
Consolidated
Revenues
  
 

 Year Ended December 31,  
 Percentage
Change
(Favorable)/
Unfavorable
  Year Ended December 31,  
 Percentage
Change
(Favorable)/
Unfavorable
 

 Dollar
Change
  
 Constant
Currency
% of
Consolidated
Revenues
 Dollar
Change
  
 Constant
Currency
% of
Consolidated
Revenues

 2007 2008 Actual 2007 2008 2010 2011 Actual 2010 2011

Labor

 $615,059 $674,466 $59,407 9.7% 8.8% 22.5% 22.1% (0.4 $580,920 $595,207 $14,287 2.5% 0.7% 20.1% 19.7% (0.4

Facilities

 374,529 413,968 39,439 10.5% 9.7% 13.7% 13.5% (0.2)% 405,341 422,020 16,679 4.1% 2.4% 14.0% 14.0% 0.0%

Transportation

 134,882 151,891 17,009 12.6% 12.3% 4.9% 5.0% 0.1% 107,406 125,005 17,599 16.4% 14.4% 3.7% 4.1% 0.4%

Product Cost of Sales and Other

 135,650 141,694 6,044 4.5% 4.1% 5.0% 4.6% (0.4)% 99,195 102,968 3,773 3.8% 1.7% 3.4% 3.4% 0.0%
                  

 $1,260,120 $1,382,019 $121,899 9.7% 8.9% 46.2% 45.2% (1.0)% $1,192,862 $1,245,200 $52,338 4.4% 2.6% 41.2% 41.3% 0.1%
                  

Labor

        ForLabor expense increased to 20.8% of consolidated revenues for the year ended December 31, 2009 as2012 compared to 19.7% for the year ended December 31, 2011. Labor expense for the year ended December 31, 2012 increased by 6.8% on a constant currency basis compared to the year ended December 31, 2008,2011 primarily due to merit increases, the reclassification of certain overhead expenses to cost of sales, and $12.9 million in labor costs associated with our recent acquisitions. Labor costs were favorably impacted by 1.6 percentage points due to currency rate changes during the year ended December 31, 2012.

        Labor expense decreased to 19.7% of consolidated revenues for the year ended December 31, 2011 compared to 20.1% for the year ended December 31, 2010. For the year ended December 31, 2011, labor expense was favorablyunfavorably impacted by 51.8 percentage points ofdue to currency variations.rate changes. Excluding (1) the effect of currency rate fluctuations and (2) the impact associated with labor expense decreased by 2.5% in 2009 due primarily to productivity gains in our North American Physical Business, which is reflected in the approximate year-over-year decline of 8% in employee headcount, offset by merit increases.

        For the year ended December 31, 2008 as comparedcost accruals related to the year ended December 31, 2007, labor expenseBrazilian litigation (in which a charge of $7.4 million was unfavorably impacted by 1 percentage pointrecorded in 2010 and a benefit of currency variations. Excluding the effect of currency rate fluctuations,$3.5 million was recorded in 2011) labor expense increased by 8.8%, but decreased2.6% in 2011 over 2010 primarily due to increased incentive compensation of $8.0 million as a percentagewell as increased health insurance expenses of consolidated revenue, mainly as a result of higher recycled paper revenue and strong growth in our digital services revenues, which have lower labor costs, and labor efficiencies in our North American business. These benefits were partially offset by the impact of revenue mix, as labor-intensive services such as secure shredding and DMS continue to grow at a faster rate than our storage revenues, and the dilutive impact of more labor intensive acquisitions.$5.0 million.

Facilities

        Facilities costs as a percentage of consolidated revenues were favorably impacted by 5 percentage points of currency variations duringflat at 14.0% for the yearyears ended December 31, 2009.2012 and December 31, 2011. The largest component of our facilities cost is rent expense, which, in constant currency terms, increased by $2.9$6.5 million to $213.8 million for 2009 over 2008, but decreased from 13.2% of consolidated storage revenues for 2008 to 12.5% of consolidated storage revenues for 2009, mainly as a result of the impact of revenue mix and due to incremental rent charges incurred in the latter half ofyear


Table of Contents


2008 relatedended December 31, 2012 compared to the same period in 2011, primarily due to $3.4 million of rent expense associated with our U.K. operations.recent acquisitions, as well as certain facility consolidations within both our North American Business and International Business segments during the fourth quarter of fiscal year 2012. Other facilities costs for 2009 increaseddecreased by approximately $2.2 million, in constant currency terms, for the year ended December 31, 2012 compared to the year ended December 31, 2011, primarily due to increased common area chargesreductions in insurance costs and personal property taxes. Facilities costs were favorably impacted by 1.4 percentage points due to currency rate changes during the year ended December 31, 2012.

        Facilities costs were flat at 14.0% of $8.5 million, property taxesconsolidated revenues for the years ended December 31, 2011 and insurance of $2.4 million, and utilities of $0.3 million related to rising costs.

December 31, 2010. Facilities costs were unfavorably impacted by 11.7 percentage point ofpoints due to currency variations, and as a percentage of consolidated revenues decreased slightly to 13.5% forrate changes during the year ended December 31, 2008 from 13.7% for the year ended December 31, 2007.2011. The largest component of our facilities cost is rent expense, which, on a reported dollar basis, decreased to 12.5% of consolidated storage rental revenues for the year ended December 31, 2011 compared to 13.0% in the same period in 2010. Other facilities costs increased by approximately $10.1 million, in constant currency terms, increased by $27.0 million over 2007 and increased as a percentage of consolidated storage revenues from 12.6% for 2007the year ended December 31, 2011 compared to 13.2% for 2008. The increase in rent is mainly driven by the timing of new real estate as we continue to expand our storage business, as well as an incremental rental charge in 2008 of $3.3 million related to our decision to exit a leased facility in the U.K., partially offset by the expansion of our secure shredding and other service businesses, which incur lower rent and facilities costs than our core physical business, coupled with increased utilization levels. Other facilities costs increased in constant currency terms in 2008 from 2007year ended December 31, 2010, primarily due to increased building maintenance costs of utilities of $7.7$6.9 million and common area chargesincreased insurance costs of $1.3 million related to rising costs and an increased number of facilities.$5.4 million.

Transportation

        Transportation expenses were favorably impactedincreased by 4 percentage points of$2.9 million in constant currency variationsterms during the year ended December 31, 2009. Certain vehicle leases related2012 compared to vans, trucks and mobile shredding unitsthe same period in our vehicle lease portfolio previously classified2011 as operating leases are now classified as capital leases upon renewal or at inception for new leases. As a result for 2009 we had lowerof a $3.5 million increase in various vehicle rent expensecosts (including fuel, insurance, repair and lease costs), partially offset by a reduction in our North American Physical segmentthird-party transportation costs of approximately $22.4 million (offset$0.4 million. Transportation expenses were favorably impacted by an increased amount of combined depreciation of approximately $20.2 million and interest expense of approximately $3.3 million). In addition, fuel costs have decreased by $14.1 million during 2009 as compared to 2008. The lower fuel costs are primarily1.6 percentage points due to lower commodity prices and to a lesser extent, the benefit of productivity gains from ongoing transportation improvement initiatives, as well as, $1.8 million related to foreign currency variations.

        Our transportation expenses (which are influenced by several variables including total number of vehicles, owned versus leased vehicles, use of subcontracted couriers, fuel expenses, maintenance and insurance) were not materially impacted by currency variations, but increased slightly as a percentage of consolidated revenues forrate changes during the year ended December 31, 2008 compared2012.

        Transportation expenses were unfavorably impacted by 2.0 percentage points due to currency rate changes during the year ended December 31, 2007. The expansion of our secure shredding operations, which incurs higher transportation costs than our core physical business, contributed to the increase in dollar terms, as well as rising fuel costs, which contributed $10.5 million of the increase in constant currency terms, and the2011. Transportation expenses increased use of leased vehicles which contributed $5.6by $15.7 million in constant currency terms someduring the year ended December 31, 2011 compared to the same period in 2010. The increase in transportation costs was primarily a result of which were offset, as a percentageincreased third party transportation costs of revenue, by incremental$7.1 million, increased fuel surcharges.costs of $6.3 million and increased vehicle repair, rental and insurance costs of $2.0 million.

Product Cost of Sales and Other

        Product cost of sales and other, which includes cartons, media and other service, storage and supply costs, is highly correlated to complementary revenue streams. For the year ended December 31, 2012, product cost of sales and other, which is correlated to higher project revenues, increased by $1.1 million as compared to the prior year period on an actual basis. These costs were favorably impacted by 41.9 percentage points ofdue to currency variationsrate changes during the year ended December 31, 2009.2012.

        Product cost of sales and other was unfavorably impacted by 2.1 percentage points of currency rate changes during the year ended December 31, 2011. For 2009,2011, product cost of sales and other decreased in constant currency termsincreased by $10.1$3.8 million as compared to the prior year. Approximately $9.5 million of the decrease is due to the sale of our North American data product sales line in the second quarter of 2008. The remainder of the decrease was a result of a decrease in other complementary revenue streams.

        Product and other cost of sales were not materially impacted by currency variations, but increased $6.0 million in the year ended December 31, 2008 compared to the year ended December 31, 2007. The decrease as a percentage of revenue primarily reflects the impact of the sale of our North2010 on an actual basis.


Table of Contents


American commodity product sales line, which consisted of the sale of data storage media, imaging products and data center furniture to our physical data protection and recovery services customers.

Selling, General and Administrative Expenses

        Selling, general and administrative expenses are comprisedconsists of the following expenses (in thousands):

  
  
  
 Percentage
Change
  
  
  
 

  
  
  
 Percentage Change % of
Consolidated
Revenues
  
   
  
  
 % of
Consolidated
Revenues
  
 

 Year Ended December 31,  
 Percentage
Change
(Favorable)/
Unfavorable
  Year Ended December 31,  
 Percentage
Change
(Favorable)/
Unfavorable
 

 Dollar
Change
  
 Constant
Currency
% of
Consolidated
Revenues
 Dollar
Change
  
 Constant
Currency
% of
Consolidated
Revenues

 2008 2009 Actual 2008 2009 2011 2012 Actual 2011 2012

General and Administrative

 $442,852 $455,326 $12,474 2.8% 8.0% 14.5% 15.1% 0.6 $470,430 $508,365 $37,935 8.1% 9.5% 15.6% 16.9% 1.3

Sales, Marketing & Account Management

 276,697 261,955 (14,742) (5.3)% (1.4)% 9.1% 8.7% (0.4)% 244,645 235,449 (9,196) (3.8)% (2.6)% 8.1% 7.8% (0.3)%

Information Technology

 152,113 145,247 (6,866) (4.5)% (1.9)% 5.0% 4.8% (0.2)% 110,010 98,234 (11,776) (10.7)% (9.3)% 3.6% 3.3% (0.3)%

Bad Debt Expense

 10,702 11,831 1,129 10.5% 11.7% 0.4% 0.4% 0.0% 9,506 8,323 (1,183) (12.4)% (12.5)% 0.3% 0.3% 0.0%
                  

 $882,364 $874,359 $(8,005) (0.9)% 3.4% 28.9% 29.0% 0.1% $834,591 $850,371 $15,780 1.9% 3.2% 27.7% 28.3% 0.6%
                  

 

  
  
  
 Percentage
Change
  
  
  
 

  
  
  
 Percentage Change % of
Consolidated
Revenues
  
   
  
  
 % of
Consolidated
Revenues
  
 

 Year Ended December 31,  
 Percentage
Change
(Favorable)/
Unfavorable
  Year Ended December 31,  
 Percentage
Change
(Favorable)/
Unfavorable
 

 Dollar
Change
  
 Constant
Currency
% of
Consolidated
Revenues
 Dollar
Change
  
 Constant
Currency
% of
Consolidated
Revenues

 2007 2008 Actual 2007 2008 2010 2011 Actual 2010 2011

General and Administrative

 $382,727 $442,852 $60,125 15.7% 15.2% 14.0% 14.5% 0.5 $446,175 $470,430 $24,255 5.4% 3.9% 15.4% 15.6% 0.2

Sales, Marketing & Account Management

 249,966 276,697 26,731 10.7% 10.0% 9.2% 9.1% (0.1)% 214,977 244,645 29,668 13.8% 12.0% 7.4% 8.1% 0.7%

Information Technology

 135,788 152,113 16,325 12.0% 11.8% 5.0% 5.0% 0.0% 99,858 110,010 10,152 10.2% 8.7% 3.5% 3.6% 0.1%

Bad Debt Expense

 2,894 10,702 7,808 269.8% 257.6% 0.1% 0.4% 0.3% 11,801 9,506 (2,295) (19.4)% (20.8)% 0.4% 0.3% (0.1)%
                  

 $771,375 $882,364 $110,989 14.4% 13.9% 28.3% 28.9% 0.6% $772,811 $834,591 $61,780 8.0% 6.4% 26.7% 27.7% 1.0%
                  

General and Administrative

        General and administrative expenses were favorably impactedincreased to 16.9% of consolidated revenues in the year ended December 31, 2012 compared to 15.6% in the year ended December 31, 2011. In constant currency terms, general and administrative expenses increased by 5 percentage points of currency variations9.5% during the year ended December 31, 2009. In constant currency terms,2012 compared to the same period in 2011. Included in general and administrative expenses for the year ended December 31, 2012 were $34.4 million of REIT Costs compared to $15.5 million in the comparable prior year period. Further contributing to the increase in 2012 was increased stock-based compensation expense including medicalof $10.6 million and other benefits, increased by $17.8a $7.4 million increase within our Latin American operations primarily associated with our recent acquisition in 2009 as a result of merit increases and increased headcount. In addition, legal costs and professional fees (related to project and cost saving initiatives) increased $24.7 million in 2009.Brazil. These increases arewere partially offset by lower discretionary spendingthe reclassification of $8.8 million for items including recruitingcertain overhead expenses to cost of sales. General and relocations, telephone, training, postageadministrative expenses were favorably impacted by 1.4 percentage points due to currency rate changes during the year ended December 31, 2012.

        General and supplies, and certain enterprise-wide meetings which were heldadministrative expenses increased to 15.6% of consolidated revenues in 2008 but notthe year ended December 31, 2011 compared to 15.4% in 2009.

the year ended December 31, 2010. General and administrative expenses were unfavorably impacted by 11.5 percentage point ofpoints due to currency variationsrate changes during the year ended December 31, 2008 compared to2011. In constant currency terms, general and administrative expenses increased by $17.8 million in the year ended December 31, 2007. In constant currency terms,2011 compared to the same period in 2010. The increase is mainlywas primarily attributable to increased$15.5 million of advisory fees and other costs associated with our 2011 proxy contest and a $16.1 million increase in incentive compensation, expensepartially offset by a reduction of $33.2$16.2 million reflecting increased headcount due to acquisitions and general business expansion, as well as increases in related office occupancy costs of $6.4 million,other professional fees of $8.2 million (relatedwithin North America related to projectproductivity investments incurred in 2010 and cost saving initiatives) and other overhead of $10.6 million, including such items as insurance, postage and supplies and telephone costs. Includedwhich did not repeat in compensation expense is stock option expense, which increased by $3.1 million in 2008 compared to 2007 due to an increase in the number of stock option grants and the fair value of such grants in 2007.2011.


Table of Contents

Sales, Marketing & Account Management

        Sales, marketing and account management expenses were favorably impacted by 4 percentage pointsdecreased to 7.8% of currency variationsconsolidated revenues during the year ended December 31, 2009.2012 compared to 8.1% in the same prior year period. In constant currency terms, the decrease of 1.4%$6.3 million during the year ended December 31, 2012 compared to the same period in 20092011 is primarily relateddue to lower discretionary spending of $4.1a $3.0 million on items suchreduction in compensation expenses, primarily associated with a decrease in commissions expense within our North American Business segment, as travelwell as a corresponding decrease in the associated payroll taxes. Sales, marketing and entertainment and our enterprise-wide sales meeting which was held in 2008 but not in 2009. Commissions expense also declinedaccount management expenses were favorably impacted by $10.2 million in constant1.2 percentage points due to currency termsrate changes during 2009.the year ended December 31, 2012. These decreases arewere partially offset by increased investment in personnel in sales and account management and merit increases inrestructuring costs of $3.6 million incurred within our International Physical segment of $4.8 million and increased compensation (other than commissions) of $4.4 million primarily as a result of merit increases in the North American Physical segment.Business segment during the fourth quarter of 2012.

        Sales, marketing and account management expenses were unfavorably impacted by 11.8 percentage point ofpoints due to currency variationsrate changes during the year ended December 31, 2008. Mostly labor-related and comprised of compensation and commissions, these costs are primarily driven by the headcount in each of these departments, which, on average, was higher throughout 2008 compared to 2007.2011. In constant currency terms, the increase of $26.3 million in the year ended December 31, 2011 is primarily related to increased sales and marketing expenses, primarily related to a planned incremental investment of $20.0 million within North America to sustain the revenue annuity, primarily resulting in increased compensation expenseof $23.9 million, due to increased sales commissions, payroll tax expenses and commissions increased $18.9 million and $6.5 million, respectively, in 2008 compared to 2007.incentive compensation.

Information Technology

        In constant currency terms, information technology expenses decreased $10.1 million during the year ended December 31, 2012 compared to the same period in 2011 primarily due to decreased compensation expenses of $8.2 million, as well as decreased professional fees of $2.6 million. Information technology expenses were favorably impacted by 31.4 percentage points ofdue to currency variationsrate changes during the year ended December 31, 2009.2012.

        In constant currency terms, the decrease of 1.9% in information technology expenses for 2009 was due to reduced overhead and discretionary spending, such as recruiting, travel and entertainment, professional fees, and equipment rental costs of $2.3increased $8.8 million and disciplined cost management.

        Information technology expenses were not materially impacted by currency variations and remained flat as a percentage of consolidated revenues forduring the year ended December 31, 20082011 compared to the same period in 2010 primarily due to an increase in incentive compensation and related payroll taxes of $6.1 million and health insurance and other benefit costs of $2.9 million. Information technology expenses were unfavorably impacted by 1.5 percentage points due to currency rate changes during the year ended December 31, 2007. The increase in constant currency terms in 2008 in information technology expenses is primarily related to a $13.9 million increase in compensation expense, and represents an investment in infrastructure and product development.2011.

Bad Debt Expense

        Consolidated bad debt expense increased $1.1for the year ended December 31, 2012 decreased $1.2 million, or 12.4%, to $11.8$8.3 million (0.4%(0.3% of consolidated revenues) from $9.5 million (0.3% of consolidated revenues) for the year ended December 31, 2009 from $10.7 million (0.4% of consolidated revenues) for the year ended December 31, 2008.2011. We maintain an allowance for doubtful accounts that is calculated based on our past loss experience, current and prior trends in our aged receivables, current economic conditions, and specific circumstances of individual receivable balances. The increase in bad debt expense in 2009 from 2008 is attributable to the worsening economic climate. We continue to monitor our customers' payment activity and make adjustments based on their financial condition and in light of historical and expected trends.

        Consolidated bad debt expense increased $7.8for the year ended December 31, 2011 decreased $2.3 million to $10.7$9.5 million (0.3% of consolidated revenues) from $11.8 million (0.4% of consolidated revenues) for the year ended December 31, 2008 from $2.9 million (0.1% of consolidated revenues) for the year ended December 31, 2007. The increase in bad debt expense in 2008 from 2007 is attributable to the worsening economic climate and the resultant deterioration in the aging of our accounts receivable.


Table of Contents2010.

Depreciation, Amortization, and (Gain) Loss on Disposal/WritedownWrite-down of Property, Plant and Equipment, Net

        Depreciation expense increased $29.0decreased $10.0 million for the year ended December 31, 2009,2012 compared to the year ended December 31, 2008,2011, consisting of $2.1 million within our North American Business and


Table of Contents

Corporate segments associated with information technology assets reaching the end of their useful life and $7.9 million in our International Business segment primarily related to accelerated depreciation taken in previous years due to additional depreciation expense of approximately $20.2 million resulting fromthe decision to exit certain vehicle leases which had previously been classified as operating leases, being classified as capital leases upon renewal or at inception for new leases, as well as additional depreciation associated with technology investmentsfacilities in our Worldwide Digital Business segment of $4.1 million.the United Kingdom. Depreciation expense increased $32.0$11.9 million for the year ended December 31, 20082011 compared to the year ended December 31, 2007,2010, primarily due to the $7.9 million increase in our International Business segment noted above, as well as additional depreciation expense related to capital expenditures and acquisitions, including storage systems, which include racking, building and leasehold improvements, computer systems, hardware and software, and buildings.buildings primarily in our International Business segment.

        Amortization expense decreased $0.6increased $6.9 million for the year ended December 31, 2009,2012 compared to the year ended December 31, 2008,2011, primarily due to decreases resulting from currency variations which were offset by the increased amortization of intangible assets, such as customer relationship intangible assets and intellectual property acquired through business combinations. Amortization expense increased $9.5$3.4 million for the year ended December 31, 20082011 compared to the year ended December 31, 2007,2010, primarily due to amortizationan increase of intangible assets, such as customer relationship intangible assets and intellectual property acquired through business combinations.related to the Poland acquisition described in Note 6 to Notes to Consolidated Financial Statements.

        Consolidated loss on disposal/writedownwrite-down of property, plant and equipment, net was $4.4 million for the year ended December 31, 2012 and consisted primarily of $5.5 million, $1.9 million and $0.5 million of losses associated with asset write-downs in our European operations, North American operations and Latin American operations, respectively, offset by $3.5 million of gains associated with the sale of leased vehicles in North America. Consolidated gain on disposal/write-down of property, plant and equipment, net of $0.4$2.3 million for the year ended December 31, 2009,2011 consisted primarily of (1) a gain of approximately $3.2 million related to the disposition of a facility in Canada and (2) a gain of approximately $3.0 million on the retirement of leased vehicles accounted for as capital lease assets in North America, offset by (3) a loss associated with discontinued use of certain third-party software licenses of approximately $3.5 million (approximately $3.1 million associated with our International Business segment and approximately $0.4 million associated with our North American Business segment). Consolidated gain on disposal/write-down of property, plant and equipment, net of $11.0 million for the year ended December 31, 2010 consisted primarily of a gain of approximately $10.2 million as a result of the settlement with our insurers in connection with a portion of the property component of our claim related to the Chilean earthquake in the third and fourth quarter of 2010, gains of approximately $3.2 million in North America primarily related to the disposition of certain owned equipment and a gain on disposal of a building in our International PhysicalBusiness segment of approximately $1.9$1.3 million in France,the United Kingdom, offset by losses on the writedown of certain facilities of approximately $1.0 million of asset write-downs associated with our Latin American operations and approximately $2.6 million of impairment losses primarily related to certain owned facilities in North America.

Intangible Impairments

        During the quarter ended September 30, 2010, prior to our annual goodwill impairment review, we concluded that events occurred and circumstances changed in our former worldwide digital business reporting unit that required us to conduct an impairment review. The primary factors contributing to our conclusion that we had a triggering event and a requirement to reassess our former worldwide digital business reporting unit goodwill for impairment included: (1) a reduction in forecasted revenue and operating results due to continued pressure on key parts of the business as a result of the weak economy; (2) reduced revenue and profit outlook for our eDiscovery service due to smaller average matter size and lower pricing; (3) a decision to discontinue certain software development projects; and (4) the sale of the Domain Name Product Line. As a result of the review, we recorded a provisional goodwill impairment charge associated with our former worldwide digital business reporting unit in the amount of $255.0 million during the quarter ended September 30, 2010. We finalized the estimate in the fourth quarter of 2010, and we recorded an additional impairment of $28.8 million, for a total


Table of Contents

goodwill impairment charge of $283.8 million. In the year ended December 31, 2010, based on a relative fair value basis, we allocated $85.9 million of this charge to the retained technology escrow services business, which continues to be included in our continuing results of operations. We retained our technology escrow services business, which had previously been reported in the former worldwide digital business segment along with the Digital Business and the Domain Name Product Line and is now reported in the North American Physical segment, $0.7 millionBusiness segment.

        In September 2011, as a result of certain changes we made in the manner in which our European operations are managed, we reorganized our reporting structure and reassigned goodwill among the revised reporting units. As a result of the management and reporting changes, we concluded at that time that we had three reporting units within our European operations: (1) UKI; (2) Continental Western Europe; and (3) Central Europe. As a result of the restructuring of our reporting units, we concluded that we had an interim triggering event, and, therefore, we performed an interim goodwill impairment test for UKI, Continental Western Europe and Central Europe in the third quarter of 2011, as of August 31, 2011. As required by GAAP, prior to our goodwill impairment analysis, we performed an impairment assessment on the long-lived assets within our UKI, Continental Western Europe and Central Europe reporting units and noted no impairment, except for our Italian operations, which was included in our International Physical segment, $0.3Continental Western Europe reporting unit, and which is now included in discontinued operations. Based on our analyses, we concluded that the goodwill of our UKI and Central Europe reporting units was not impaired. Our Continental Western Europe reporting unit's fair value was less than its carrying value, and, as a result, we recorded a goodwill impairment charge of $46.5 million included as a component of intangible impairments from continuing operations in our Worldwide Digital segment and $0.3 million in Corporate (associated with discontinued products after implementation). Consolidated loss on disposal/writedownconsolidated statements of property, plant and equipment, net of $7.5 millionoperations for the year ended December 31, 2008, consisted primarily of a $2.3 million impairment of an owned storage facility in North America which we decided to exit in the first quarter of 2008, a $1.3 million impairment of an owned storage facility which we decided to exit in the third quarter of 2008, a $0.5 million write-down for an owned storage facility that we had vacated and had classified as available for sale in the third quarter of 2008, a $1.9 million write-down of two owned storage facilities in North America and related assets which we decided to exit in the fourth quarter of 2008, as well as a $0.6 million write-off of previously deferred software costs in Corporate associated with discontinued products after implementation and other disposal and asset write-downs. Consolidated gain on disposal/writedown of property, plant and equipment, net of $5.5 million for the year ended December 31, 2007, consisted primarily of a gain related to insurance proceeds from our property claim of $7.7 million associated with the July 2006 fire in one of our London, England facilities, net of a $1.3 million write-off of previously deferred software costs in Corporate associated with a discontinued product after implantation.2011.

OPERATING INCOME and ADJUSTED OIBDA

        As a result of all the foregoing factors, consolidated operating income increased $56.0decreased $14.2 million, or 11.4%2.5%, to $548.5$557.0 million (18.2%(18.5% of consolidated revenues) for the year ended December 31, 20092012 from $492.5$571.2 million (16.1%(18.9% of consolidated revenues) for the year ended December 31, 2008.2011. As a result of all the foregoing factors, consolidated Adjusted OIBDA increased $77.3decreased $38.2 million, or 9.8%4.0%, to $868.0$912.2 million (28.8%(30.4% of consolidated revenues) for the year ended December 31, 20092012 from $790.8$950.4 million (25.9%(31.5% of consolidated revenues) for the year ended December 31, 2008.2011.

        As a result of all the foregoing factors, consolidated operating income increased $37.8$23.7 million, or 8.3%4.3%, to $492.5$571.2 million (16.1%(18.9% of consolidated revenues) for the year ended December 31, 20082011 from


Table of Contents


$454.7 $547.5 million (16.7%(18.9% of consolidated revenues) for the year ended December 31, 2007.2010. As a result of all the foregoing factors, consolidated Adjusted OIBDA increased $92.2$23.8 million, or 13.2%2.6%, to $790.8$950.4 million (25.9%(31.5% of consolidated revenues) for the year ended December 31, 20082011 from $698.5$926.7 million (25.6%(32.0% of consolidated revenues) for the year ended December 31, 2007.2010.


Table of Contents

OTHER EXPENSES, NET

Interest Expense, Net

        Consolidated interest expense, net decreased $8.8increased $37.3 million to $227.8$242.6 million (7.6%(8.1% of consolidated revenues) for the year ended December 31, 20092012 from $236.6$205.3 million (7.7%(6.8% of consolidated revenues) for the year ended December 31, 20082011 primarily due to a reductionthe issuance of $1.0 billion in year-over-yearaggregate principal of the 53/4% Senior Subordinated Notes due 2024 (the "53/4% Notes") in August 2012 and the issuance of $400.0 million in aggregate principal amount of the 73/4% Senior Subordinated Notes due 2019 (the "73/4% Notes") in September 2011, as well as an increase in the average outstanding borrowings under our revolving credit facility whilefacilities during the year ended December 31, 2012 compared to the same period in 2011. This increase was partially offset by the early retirement of $231.3 million of the 73/4% Senior Subordinated Notes due 2015 (the "73/4% Notes due 2015") during early 2011, as well as the early retirement of $320.0 million of our 65/8% Senior Subordinated Notes due 2016 (the "65/8% Notes") and $200.0 million of our 83/4% Senior Subordinated Notes due 2018 (the "83/4% Notes") in August 2012. Our weighted average interest rate remained flatwas 6.5% at 7.0% as of December 31, 20092012 and 2008. We incurred approximately $3.3 million of additional interest expense on capital leases on certain vehicle leases previously classified as operating leases prior to renewal or upon lease inception.6.9% at December 31, 2011.

        Consolidated interest expense, net increased $8.0$0.7 million to $236.6$205.3 million (7.7%(6.8% of consolidated revenues) for the year ended December 31, 20082011 from $228.6$204.6 million (8.4%(7.1% of consolidated revenues) for the year ended December 31, 2007,2010 primarily due to the full year impactissuance of borrowings to fund acquisitions completed$400.0 million in 2007,aggregate principal of our 73/4% Notes due 2019 in September 2011, which was partially offset by a decrease inthe early retirement of $431.3 million of our weighted average interest rate to 7.0% as of December 31, 2008 from 7.4% as of December 31, 2007. In addition, as a result of the repayment of IME's revolving credit facility73/4% Notes due 2015 during late 2010 and term loans with borrowings in the U.S., we had higher than normal interest expense of approximately $4.1 million in the second quarter of 2007. This was a result of the difference in our calendar reporting period and that of IME which is two months in arrears, and had no impact on cash flows.early 2011.

Other (Income) Expense, Net (in thousands)


 Year Ended December 31,  
  Year Ended December 31,  
 

 Dollar
Change
  Dollar
Change
 

 2008 2009  2011 2012 

Foreign currency transaction losses (gains), net

 $28,882 $(12,477)$(41,359) $17,352 $10,223 $(7,129)

Debt extinguishment expense

 418 3,031 2,613 

Debt extinguishment expense, net

 993 10,628 9,635 

Other, net

 1,728 (2,633) (4,361) (5,302) (4,789) 513 
              

 $31,028 $(12,079)$(43,107) $13,043 $16,062 $3,019 
              

 


 Year Ended December 31,  
  Year Ended December 31,  
 

 Dollar
Change
  Dollar
Change
 

 2007 2008  2010 2011 

Foreign currency transaction losses, net

 $11,311 $28,882 $17,571  $5,664 $17,352 $11,688 

Debt extinguishment expense

 5,703 418 (5,285)

Debt extinguishment expense, net

 1,792 993 (799)

Other, net

 (13,913) 1,728 15,641  1,312 (5,302) (6,614)
              

 $3,101 $31,028 $27,927  $8,768 $13,043 $4,275 
              

        Net foreign currency transaction gainslosses of $12.5$10.2 million, based on period-end exchange rates, were recorded in the year ended December 31, 2009. Gains2012. Losses were primarily a result of changes in the exchange rate of the Brazilian real, as this currency relates to our intercompany balances with and between our Brazilian subsidiaries, as well as additional losses associated with our British pound sterling and Euro denominated debt and forward foreign currency swap contracts denominated in British pounds sterling and Australian dollars. These losses were partially offset by gains resulting primarily from the change in the exchange rate of the British pound sterling, Euro and Australian dollar against the U.S. dollar compared to December 31, 2011, as it relates to our intercompany balances with and between our European and Australian subsidiaries.


Table of Contents

        Net foreign currency transaction losses of $17.4 million, based on period-end exchange rates, were recorded in the year ended December 31, 2011. Losses were primarily a result of British pound sterling denominated debt and forward foreign currency swap contracts and changes in the exchange rate of the Euro, Russian Ruble and certain Latin American currencies against the U.S. dollar compared to December 31, 2010, as these currencies relate to our intercompany balances with and between our European and Latin American subsidiaries. Partially offsetting these losses were gains which resulted primarily from our Euro denominated bonds issued by IMI as well as changes in the exchange rate of the British pound sterling against the U.S. dollar compared to December 31, 2010, as these currencies relate to our intercompany balances with and between our United Kingdom subsidiaries.

        Net foreign currency transaction losses of $5.7 million, based on period-end exchange rates, were recorded in the year ended December 31, 2010. Losses resulted primarily from changes in the exchange rate of the British poundpounds sterling, the Euro and the Russian Ruble, offset by the Brazilian Real, and Chilean Peso against the U.S. dollar compared to December 31, 2008,2009, as these currencies relate to our intercompany balances with and between our European and Latin American subsidiaries, offset by losses as a result ofand gains associated with our British poundspound sterling forward contracts, British pound sterling denominated debt and Euro denominated debt and forward foreign currency swap contracts heldissued by our U.S. parent company.


Table of Contents

        Net foreign currency transaction losses of $28.9 million, based on period-end exchange rates, were recorded in the year ended December 31, 2008. Losses resulted primarily as a result of the British pound sterling against the U.S. dollar compared to December 31, 2007, as this currency relates to our intercompany balances with and between our U.K. subsidiaries, offset by gains on the marking-to-market of British pound sterling and Euro denominated debt and forward foreign currency swap contracts held by our U.S. parent company.

        Net foreign currency transaction losses of $11.3 million based on period-end exchange rates were recorded in the year ended December 31, 2007, primarily due to losses as a result of the Euro and Canadian dollar, offset by gains as a result of the British pound sterling against the U.S. dollar compared to December 31, 2006, as these currencies relate to our intercompany balances with and between our Canadian and European subsidiaries. Additionally, the U.S. parent company incurred losses as a result of primarily marking to market British pounds sterling and Euro denominated debt, offset by gains on Euro for U.S. dollar foreign currency swaps.IMI.

        During the year ended December 31, 2009,2012 we redeemed our 8recorded a charge of approximately $10.6 million in the third quarter of 2012 related to the early extinguishment of $320.0 million of the 65/8% Senior Subordinated Notes due 2013 (the "8and $200.0 million of the 83/4% Notes. This charge consists of the call premium associated with the 83/4% Notes and original issue discounts and deferred financing costs related to the 65/8% notes")Notes and wrote-off $3.0 million in associated deferred financing costs. During 2008, we redeemed the remaining outstanding portion of our 813/4% Senior SubordinatedNotes. During the year ended December 31, 2011 we recorded a gain of approximately $0.9 million in the first quarter of 2011 related to the early extinguishment of $231.3 million of the 73/4% Notes due 2011 and in connection with the reduction in our revolving credit facility availability due to a bankruptcy2015. This gain consists of one of our lenders, we wrote-off $0.4 million in deferred financing costs. During 2007, we wrote-off $5.7 millionoriginal issue premiums, net of deferred financing costs related to the 73/4% Notes due 2015. Additionally, we recorded a charge of $1.8 million in the second quarter of 2011 related to the early retirement of our previous revolving credit and term loan facilities, representing a write-off of deferred financing costs. During the year ended December 31, 2010, we redeemed $200.0 million of the $431.3 million aggregate principal amount outstanding of the 73/4% Notes due 2015 at a redemption price of $1,012.92 for each one thousand dollars of principal amount of the notes redeemed, plus accrued and unpaid interest. We recorded a charge to other expense (income), net of $1.8 million in the third quarter of 2010 related to the early extinguishment of U.S.the 73/4% Notes due 2015 that were redeemed. This charge consists of the call premium and U.K. term loans and revolving credit facilities.deferred financing costs, net of original issue premiums related to the 73/4% Notes due 2015 that were redeemed.

        Other, net in the year ended December 31, 20092012 consisted primarily of $2.7 million of royalty income associated with the Digital Business, $1.5 million of gains associated with our acquisition of equity interests that we previously held associated with our Turkish and Swiss joint ventures and $1.3 million of gains related to certain marketable securities held in a trust for the benefit of employees included in a deferred compensation plan we sponsor. Other, net for the year ended December 31, 2011 was a gain of $5.3 million, which primarily consists of $1.7a $5.9 million gain associated with the fair valuing of the 20% equity interest that we previously held in our Polish joint venture in connection with our acquisition of the remaining 80% interest in January 2011. Other, net in the year ended December 31, 2010 was a $1.3 million loss. Included in the loss for the year ended December 31, 2010 was $4.7 million of losses related to the impact of the change in IME's fiscal year-end. Since its inception, IME had operated with an October 31 fiscal year-end. IME's financial results had historically been consolidated with IMI's results with a two-month lag. In order to better align our European processes with the enterprise, effective January 1, 2010, the IME fiscal year-end was changed to December 31 to match the Company's fiscal year-end. The $4.7 million charge represents the net impact of this change for the two years ended December 31, 2009. Partially offsetting this loss was $1.2 million of gains related to certain trading marketable securities held in a trust for the benefit of employees included in a deferred compensation plan we sponsor, in addition to $0.6 millionsponsor.


Table of business interruption proceeds for an owned storage facility in France, which was taken by eminent domain in the first quarter of 2009. Other, net in the year ended December 31, 2008 primarily consists of $1.8 million of write-downs related to certain trading marketable securities held in a trust for the benefit of employees included in a deferred compensation plan we sponsor. Other, net in the year ended December 31, 2007 consisted of $12.9 million of business interruption insurance proceeds pertaining to the July 2006 fire in one of our London, England facilities.Contents

Provision for Income Taxes

        Our effective tax rates for the years ended December 31, 2007, 20082010, 2011 and 20092012 were 30.9%50.1%, 63.6%30.2% and 33.2%38.5%, respectively. The primary reconciling items between the federal statutory rate of 35% and our overall effective tax rate for the year ended December 31, 2012 were differences in the rates of tax at which our foreign earnings are subject, including foreign exchange gains and losses in different jurisdictions with different tax rates and state income taxes (net of federal tax benefit). During the year ended December 31, 2012, foreign currency gains were recorded in lower tax jurisdictions associated with our marking-to-market of intercompany loan positions while foreign currency losses were recorded in higher tax jurisdictions associated with our marking-to-market of debt and derivative instruments, which lowered our 2012 effective tax rate by 2.2%. The primary reconciling items between the federal statutory rate of 35% and our overall effective tax rate for the year ended December 31, 2011 was a positive impact provided by the recognition of certain previously unrecognized tax benefits due to expirations of statute of limitation periods and settlements with tax authorities in various jurisdictions and differences in the rates of tax at which our foreign earnings are subject, including foreign exchange gains and losses in different jurisdictions with different tax rates. This benefit was partially offset by state income taxes (net of federal benefit). Additionally, to a lesser extent, a goodwill impairment charge included in income from continuing operations as a component of intangible impairments in our consolidated statements of operations, of which a majority was non-deductible for tax purposes, is a reconciling item that impacts our effective tax rate. The primary reconciling item between the federal statutory rate of 35% and our overall effective tax rate for the year ended December 31, 2010 was a goodwill impairment charge included in income from continuing operations as a component of intangible impairments in our consolidated statements of operations, of which a majority was non-deductible for tax purposes. The negative impact of U.S. legislative changes reducing the expected utilization of foreign tax credits was offset by the recognition of certain previously unrecognized tax benefits due to expirations of statute of limitation periods and settlements with tax authorities in various jurisdictions. Additionally, to a lesser extent, state income taxes (net of federal benefit) and differences in the rates of tax at which our foreign earnings are subject. The decrease in the effective tax rate in 2009 is primarily due to significantsubject, including foreign exchange gains and losses in different jurisdictions with different tax rates. For 2009, foreign currency gains were recorded in lower tax jurisdictions associated with the marking-to-market of intercompany loan positions while foreign currency losses were recorded in higher tax jurisdictions associated with the marking-to-market of debtrates, are also reconciling items and derivative instruments, which reduced the effective tax rate by 4.9% for the year ended December 31, 2009. Discrete items are recorded in the period they occur. The increase inimpact our effective tax rate in 2008 is primarily due to significant foreign exchange gains and losses in different jurisdictions with different tax rates. For 2008, foreign currency gains were recorded in higher tax jurisdictions, associated with our marking-to-market of debt and derivative instruments, while foreign currency losses were recorded in lower tax jurisdiction, associated with the marking-to-market of intercompany loan positions, which together increased the 2008 tax rate by 22.5% for the year ended December 31, 2008. Meanwhile, for 2007 the opposite occurred, foreign currency losses were recorded in higher tax jurisdictions associated with our marking to market of debt and derivative instruments while foreign currency gains were recorded in lower tax jurisdictions associated with marking to market intercompany loan positions.


Table of Contentsrate.

        Our effective tax rate is subject to variability in the future variability due to, among other items: (a)(1) changes in the mix of income from foreign jurisdictions; (b)(2) tax law changes; (c)(3) volatility in foreign exchange gains and (losses); and (d)(4) the timing of the establishment and reversal of tax reserves.reserves; (5) our ability to utilize foreign tax credits and net operating losses that we generate; and (6) our proposed REIT conversion. We are subject to income taxes in both the U.S. and numerous foreign jurisdictions. We are subject to examination by various tax authorities in jurisdictions in which we have significant business operations.operations or a taxable presence. We regularly assess the likelihood of additional assessments by tax authorities and provide for these matters as appropriate. Although we believe our tax estimates are appropriate, the final determination of tax audits and any related litigation could result in changes in our estimates.

NET INCOME FROM CONTINUING OPERATIONS

        As a result of all the foregoing factors, consolidated net income from continuing operations for the year ended December 31, 2009 increased $140.42012 decreased $62.9 million, or 171.3%25.5%, to $222.3$183.5 million (7.4%(6.1% of consolidated revenues) from net income from continuing operations of $81.9$246.4 million (2.7%(8.2% of consolidated revenues) for the year ended December 31, 2008.2011. The decrease in income from continuing operations is primarily due to the $37.3 million increase in interest expense, an $18.9 million increase in REIT Costs year over year, and a higher income tax provision in 2012 compared to 2011.

        As a result of the foregoing factors, consolidated income from continuing operations for the year ended December 31, 2011 increased $79.7 million, or 47.8%, to $246.4 million (8.2% of consolidated revenues) from income from continuing operations of $166.7 million (5.8% of consolidated revenues)


Table of Contents

for the year ended December 31, 2010. The increase in operating income notedfrom continuing operations is primarily due to the year-over-year decrease of our provision for income taxes as described above and the goodwill impairment charge recorded in fiscal year 2010 associated with our technology escrow services business, which was previously a component of our former worldwide digital business segment, partially offset by the goodwill impairment charge recorded in fiscal year 2011 associated with our Continental Western Europe reporting unit, as well as, the impact of foreign currency exchange rate impactsfluctuations and the year-over-year change in the (gain) loss on disposal/write-down of property, plant and equipment, net.

INCOME (LOSS) FROM DISCONTINUED OPERATIONS AND GAIN (LOSS) ON SALE OF DISCONTINUED OPERATIONS, NET OF TAX

        Loss from discontinued operations was $(219.4) million, $(47.4) million and $(6.8) million for the years ended December 31, 2010, 2011 and 2012, respectively. We recorded a goodwill impairment charge associated with our former worldwide digital business reporting unit in the amount of $197.9 million, net of the amount allocated to the retained technology escrow services business during the year ended December 31, 2010, based on a relative fair value basis, which continues to be included in other income (expense), net andour continuing results of operations as previously discussed above. During 2011, we recorded an impairment charge of $4.9 million to write-down the impactlong-lived assets of our New Zealand operations to its estimated net realizable value, which is included in loss from discontinued operations. Additionally, we recorded a tax ratebenefit of $7.9 million during 2011 associated with the outside tax basis of our New Zealand operations, which is also reflected in income (loss) from discontinued operations. Additionally, in conjunction with the goodwill impairment analysis performed associated with our Continental Western Europe reporting unit, we performed an impairment test on the long-lived assets of our Italian operations in the third quarter of 2011. The undiscounted cash flows from our Italian operations were lower than the carrying value of the long-lived assets of such operations and resulted in the requirement to fair value the long-lived assets of this lower level component. As a result, we recorded write-offs of other intangible assets, primarily customer relationship values of $8.0 million, and certain write-downs to property, plant and equipment (primarily racking) long-lived assets in Italy of $6.6 million in the third quarter of 2011, which are included in loss from discontinued operations. We allocated $2.5 million of the Continental Western Europe goodwill impairment charge to our Italian operations which is included in loss from discontinued operations for 2009, contributedthe year ended December 31, 2011.

        Pursuant to the increaseDigital Sale Agreement, we received approximately $395.4 million in cash, consisting of the initial purchase price and a preliminary working capital adjustment, which was subject to a customary post-closing adjustment based on the amount of working capital at closing. Autonomy disputed our calculation of the working capital adjustment in the Digital Sale Agreement and, as contemplated by the Digital Sale Agreement, the matter was referred to an independent third party accounting firm for determination of the appropriate adjustment amount. On February 22, 2013, the independent third party accounting firm issued its determination of the appropriate working capital adjustment, which was consistent with the amount we had accrued. As a result, no adjustment to the previously recorded gain on sale of discontinued operations, net income.of tax was required. Transaction costs relating to the Digital Sale amounted to approximately $7.4 million. Additionally, $11.1 million of inducements payable to Autonomy have been netted against the proceeds in calculating the gain on the Digital Sale. Also, a tax provision of $45.1 million associated with the gain recorded on the Digital Sale was recorded for the year ended December 31, 2011. A gain on sale of discontinued operations in the amount of $243.9 million ($198.7 million, net of tax) was recorded during the year ended December 31, 2011, as a result of the Digital Sale. We sold our New Zealand operations on October 3, 2011 and recorded a gain on the sale of discontinued operations of approximately $1.9 million during the fourth quarter of 2011. A loss on sale of discontinued operations in the amount of $1.9 million ($1.9 million,


Table of Contents

net of tax) was recorded during the year ended December 31, 2012 as a result of the sale of our Italian operations.

NONCONTROLLING INTERESTS

        For the year ended December 31, 2009,2012, net income attributable to noncontrolling interests resulted in a reduction todecrease in net income attributable to Iron Mountain Incorporated of $1.4$3.1 million. For the year ended December 31, 2011, net income attributable to noncontrolling interests resulted in a decrease in net income attributable to Iron Mountain Incorporated of $4.1 million. For the year ended December 31, 2010, net income attributable to noncontrolling interests resulted in a decrease in net income attributable to Iron Mountain Incorporated of $4.9 million. These amounts represent our noncontrolling partners' share of earnings/losses in our majority-owned international subsidiaries that are consolidated in our operating results.

        As a result of all the foregoing factors, consolidated net income for the year ended December 31, 2008 decreased $72.1 million, or 46.8%, to $81.9 million (2.7% of consolidated revenues) from net income of $154.0 million (5.6% of consolidated revenues) for the year ended December 31, 2007.

Segment Analysis (in thousands)

        Beginning January 1, 2009, we changed the composition of our segments to not allocate certain corporate and centrally controlled costs, which primarily relate to executive and staff functions, including finance, human resources, and information technology, as well as all stock-based compensation, which benefit the enterprise as a whole. These are now reflected as Corporate costs and are not allocated to our operating segments. Therefore, the presentation of all historical segment reporting has been changed to conform to our new management reporting. Corporate and our operating segments are discussed below.        Our reportable operating segments are North American Physical Business, International Physical Business and Worldwide Digital Business.Corporate. See Note 9 to Notes to Consolidated Financial Statements. Our North American Physical Business which consists ofsegment offers storage and information management services throughout the United States and Canada, offersincluding the storage of paper documents, as well as all other non-electronic media such as microfilm and microfiche, master audio and videotapes, film, X-rays and blueprints, including healthcare information services, vital records services, service and courier operations, and the collection, handling and disposal of sensitive documents for corporate customers ("Hard Copy"); the storage and rotation of backup computer media as part of corporate disaster recovery plans, including service and courier operations ("Data Protection"); information destruction services ("Destruction"); the scanning, imaging and document conversion services of active and inactive records, or DMS; the storage, assembly, and detailed reporting of customer marketing literature and delivery to sales offices, trade shows and prospective customers' sites based on current and prospective customer orders ("Fulfillment").; and technology escrow services that protect and manage source code. Our International Physical Business segment offers storage and information management services throughout Europe, Latin America and Asia Pacific, including Hard Copy, Data Protection, Destruction and Destruction (in the U.K.). Our Worldwide Digital Business offers information management services for electronic records conveyed via telecommunication lines and the Internet, including online backup and recovery solutions for server data and personal computers, as well as email archiving, third party intellectual property escrow services that protect intellectual property assets such as software source code, and electronic discovery services for the legal market that offers in-depth discovery and data investigation solutions.DMS. Corporate consists of costs related to executive and staff functions, including


Table of Contents


finance, human resources and information technology, which benefit the enterprise as a whole. These costs are primarily related to the general management of these functions on a corporate level and the design and development of programs, policies and procedures that are then implemented in the individual segments, with each segment bearing its own cost of implementation. Corporate also includes stock-based employee compensation expense associated with all employee stock-based awards.

North American Physical Business


  
  
  
 Percentage Change  
   
  
  
 Percentage
Change
  
 

 Year Ended December 31,  
  
  Year Ended December 31,  
  
 

 Dollar
Change
  
 Constant
Currency
 Internal
Growth
  Dollar Change  
 Constant
Currency
 Internal
Growth
 

 2008 2009 Actual  2011 2012 Actual 

Segment Revenue

 $2,067,316 $2,101,526 $34,210 1.7% 2.3% 3% $2,229,143 $2,198,563 $(30,580) (1.4)% (1.3)% (1.3)%
              

Segment Adjusted OIBDA(1)

 $768,523 $856,761 $88,238 11.5% 12.2%    $961,973 $916,196 $(45,777) (4.8)% (4.6)%   
              

Segment Adjusted OIBDA(1) as a Percentage of Segment Revenue

 37.2% 40.8%          43.2% 41.7%         

Table of Contents


 
  
  
  
 Percentage
Change
  
 
 
 Year Ended December 31,  
  
 
 
 Dollar
Change
  
 Constant
Currency
 Internal
Growth
 
 
 2010 2011 Actual 

Segment Revenue

 $2,193,464 $2,229,143 $35,679  1.6% 1.2% 1.1%
                  

Segment Adjusted OIBDA(1)

 $969,505 $961,973 $(7,532) (0.8)% (1.2)%   
                  

Segment Adjusted OIBDA(1) as a Percentage of Segment Revenue

  44.2% 43.2%            

 
  
  
  
 Percentage Change  
 
 
 Year Ended December 31,  
  
 
 
 Dollar
Change
  
 Constant
Currency
 Internal
Growth
 
 
 2007 2008 Actual 

Segment Revenue

 $1,890,068 $2,067,316 $177,248  9.4% 9.3% 8%
                  

Segment Adjusted OIBDA(1)

 $681,232 $768,523 $87,291  12.8% 12.8%   
                  

Segment Adjusted OIBDA(1) as a Percentage of Segment Revenue

  36.0% 37.2%            

(1)
See Note 9 to Notes to the Consolidated Financial Statements for definition of Adjusted OIBDA and for the basis on which allocations are made and a reconciliation of Adjusted OIBDA to income (loss) from continuing operations before provision (benefit) for income taxes.

        During the year ended December 31, 2009,2012, revenue in our North American Physical Business segment increased 1.7% overdecreased 1.4% compared to the year ended December 31, 2008,2011, primarily due to negative internal growth of 3%1.3%. InternalThe negative internal growth was due to solid storagedriven by negative complementary service revenue internal growth of 6% related12.0% in the year ended December 31, 2012 due primarily to increased Hard Copy and Data Protection revenues anda decrease in the price of recycled paper. The negative internal growth was negatively impactedalso driven by depressednegative core service internal growth of 3.1% in the year ended December 31, 2012, which was primarily a result of lower revenues from activity-based services. Partially offsetting the negative 2%. Continued organicservice growth was storage rental revenue internal growth of 2.1% in our core services businessthe year ended December 31, 2012, as a result of 3% was more than offset by decreased complementary services revenues primarily due to steep declines in recycled paper prices and softness in discretionary special projects and fulfillment services.net price increases. Additionally, unfavorable foreign currency fluctuationsrate changes related to Canadathe Canadian dollar resulted in decreased 2009 revenue,reported revenues, as measured in U.S. dollars, of 1 percentage point.0.1% for the year ended December 31, 2012. Adjusted OIBDA, as a percentage of segment revenue, increaseddecreased by 1.3% on a constant currency basis in 2009 due mainly to productivity gains, pricing actions, disciplined cost management, lower vehicle rent expense duethe year ended December 31, 2012 compared to the recharacterizationsame period in 2011 primarily as a result of the decrease in recycled paper revenue as well as $6.3 million of certain vehicle leases, and increased margin due tocosts that were reclassified into the sale of our low-margin data products divisionNorth American Business segment from the Corporate segment in 2008, partially offset by a $17.7 million increase in professional fees (related to project and cost savings initiatives).fiscal year 2012.

        During the year ended December 31, 2008,2011, revenue in our North American Physical Business segment increased 9.4%1.6% over 2007,the year ended December 31, 2010, primarily due to solid internal growth supportedof 1.1%. Internal growth was due to storage rental internal growth of 2.2% related to flat volume growth and net price increases, partially offset by increased destructiontotal service internal growth of negative 0.3%. Our core service revenues were constrained by lower service and data protection revenues,activity levels partially offset by higher fuel surcharges, yielding negative internal growth of 1.4% for the year ended December 31, 2011, while our complementary service revenue yielded 2.5% internal growth as a result of higher pricing of recycled paper, revenues,as well as improved special project and product sales. Additionally, favorable foreign currency rate changes related to the growing impactCanadian dollar resulted in increased 2011 revenue, as measured in U.S. dollars, of our 2007 acquisitions, primarily ArchivesOne, which contributed $15.3 million, or approximately 0.8%.0.4% for the year ended December 31, 2011. Adjusted OIBDA as a percentpercentage of segment revenue increaseddecreased for the year ended December 31, 2011 compared to the same period in 20082010 due mainly to increases in sales and marketing expenses of $27.5 million, inclusive of a planned incremental investment of $20.0 million to sustain the revenue annuity, and higher recycled paper revenues, fuel surcharges, as well as labor efficiencies, expense management, and facility utilization,incentive compensation accruals of $20.6 million, partially offset by increased transportation expenses, such as rising fuel costs.a constant currency increase in revenue of $26.0 million and a reduction of $16.2 million in professional fees related to productivity investments incurred in 2010 and which did not repeat in 2011.


Table of Contents

International Physical Business


  
  
  
 Percentage Change  
   
  
  
 Percentage
Change
  
 

 Year Ended December 31,  
  
  Year Ended December 31,  
  
 

 Dollar
Change
  
 Constant
Currency
 Internal
Growth
  Dollar
Change
  
 Constant
Currency
 Internal
Growth
 

 2008 2009 Actual  2011 2012 Actual 

Segment Revenue

 $764,812 $682,684 $(82,128) (10.7)% 4.8% 5% $785,560 $806,692 $21,132 2.7% 7.9% 2.8%
              

Segment Adjusted OIBDA(1)

 $138,432 $125,364 $(13,068) (9.4)% 8.3%    $164,212 $173,620 $9,408 5.7% 9.5%   
              

Segment Adjusted OIBDA(1) as a Percentage of Segment Revenue

 18.1% 18.4%         

Segment Adjusted OIBDA(1) as a

 

Percentage of Segment Revenue

 20.9% 21.5%         

 

 
  
  
  
 Percentage
Change
  
 
 
 Year Ended December 31,  
  
 
 
 Dollar
Change
  
 Constant
Currency
 Internal
Growth
 
 
 2010 2011 Actual 

Segment Revenue

 $698,885 $785,560 $86,675  12.4% 7.2% 4.3%
                  

Segment Adjusted OIBDA(1)

 $130,969 $164,212 $33,243  25.4% 19.0%   
                  

Segment Adjusted OIBDA(1) as a Percentage of Segment Revenue

  18.7% 20.9%            

 
  
  
  
 Percentage Change  
 
 
 Year Ended December 31,  
  
 
 
 Dollar
Change
  
 Constant
Currency
 Internal
Growth
 
 
 2007 2008 Actual 

Segment Revenue

 $676,749 $764,812 $88,063  13.0% 10.7% 7%
                  

Segment Adjusted OIBDA(1)

 $135,714 $138,432 $2,718  2.0% (0.4)%   
                  

Segment Adjusted OIBDA(1) as a Percentage of Segment Revenue

  20.1% 18.1%            

(1)
See Note 9 to Notes to the Consolidated Financial Statements for definition of Adjusted OIBDA and for the basis on which allocations are made and a reconciliation of Adjusted OIBDA to income (loss) from continuing operations before provision (benefit) for income taxes.

        RevenueReported revenues in our International Physical Business segment decreased 10.7%increased 2.7% during the year ended December 31, 20092012 over 2008the same period last year. Internal growth was 2.8% supported by solid 6.1% storage rental internal growth. Acquisitions contributed 5.1% to total reported revenue growth in the year ended December 31, 2012 primarily due to our acquisitions in Brazil and Switzerland in the second quarter of 2012. These gains were partially offset by foreign currency fluctuations in 2009,2012, primarily in the United Kingdom, which resulted inEurope, that decreased 2009 revenue, as measured in U.S. dollars, by approximately 5.2% in the year ended December 31, 2012 as compared to 20082011. Adjusted OIBDA as a percentage of segment revenue increased by 60 basis points in the year ended December 31, 2012 compared to the prior year period. Increased operating income from productivity gains and disciplined cost management contributed 150 basis points of improvement in 2012 over 2011. These gains were partially offset by the costs associated with closing a facility in the United Kingdom and the impact of integration costs associated with acquisitions completed in 2012.

        Revenue in our International Business segment increased 12.4% during the year ended December 31, 2011 over 2010 due to internal growth of 4.3% and foreign currency fluctuations in 2011, primarily in Europe, which resulted in increased 2011 revenue, as measured in U.S. dollars, of approximately 16 percentage points. This decline was offset by total5.1% as compared to 2010. Total internal revenue growth for the segment of 5%,for the year ended December 31, 2011 was supported by solid 8%6.2% storage rental internal growth and total service revenue internal growth of 1%2.3%. Service revenue internal growth includes an unfavorable year-over-year comparisonAcquisitions contributed 3.0% of the increase in total reported international revenues in the year ended December 31, 2011, primarily due to a large European special project that was completedour acquisitions in Poland in the thirdfirst quarter of 2008 which contributed to complementary revenue internal growth2011 and Greece in the second quarter of negative 10%.2010. Adjusted OIBDA as a percentage of segment revenue increased in 2009 primarily due to disciplined cost management and productivity gains, partially offset by the completion of a large, high-margin European special project in the third quarter of 2008, increased rent and facility costs and increased compensation expense related to investments in sales and business support during 2008 and 2009.

        Revenue in our International Physical Business segment increased 13.0% during the year ended December 31, 2008 over 2007,2011 compared to the same period in 2010 primarily due to internal growthincreased operating income from productivity gains, pricing actions and disciplined cost management, offset by $5.9 million of 7% and the growing impact of our acquisitions in Europe and Asia Pacific, which combined contributed 4% to revenue growth year over year. Further, favorable currency fluctuations during 2008, primarily in Europe, resulted in increased revenue, as measured in U.S. dollars, of approximately 2 percentage points compared to 2007. Adjusted OIBDA was favorably impacted by 2 percentage points of currency variations, but decreased in constant currency terms and as a percent of segment revenue in 2008 primarily due to special project revenue in Europe in 2007 that did not repeat in 2008, increased compensation expense due to incentives associated with certain acquisitions, and incremental rental charges related to our decision to exit a leased facility in the U.K.additional productivity investments.


Table of Contents

Worldwide Digital BusinessCorporate

 
  
  
  
 Dollar Change Percentage Change 
 
 Year Ended December 31, 
 
 from 2010
to 2011
 from 2011
to 2012
 from 2010
to 2011
 from 2011
to 2012
 
 
 2010 2011 2012 

Segment Adjusted OIBDA(1)

 $(173,798)$(175,746)$(177,599)$(1,948)$(1,853) (1.1)% (1.1)%

Segment Adjusted OIBDA(1) as a Percentage of Consolidated Revenue

  (6.0)% (5.8)% (5.9)%            

 
  
  
  
 Percentage Change  
 
 
 Year Ended December 31,  
  
 
 
 Dollar
Change
  
 Constant
Currency
 Internal
Growth
 
 
 2008 2009 Actual 

Segment Revenue

 $223,006 $229,385 $6,379  2.9% 3.6% 4%
                  

Segment Adjusted OIBDA(1)

 $41,782 $50,303 $8,521  20.4% 19.8%   
                  

Segment Adjusted OIBDA(1) as a Percentage of Segment Revenue

  18.7% 21.9%            


 
  
  
  
 Percentage Change  
 
 
 Year Ended December 31,  
  
 
 
 Dollar
Change
  
 Constant
Currency
 Internal
Growth
 
 
 2007 2008 Actual 

Segment Revenue

 $163,218 $223,006 $59,788  36.6% 36.4% 12%
                  

Segment Adjusted OIBDA(1)

 $25,662 $41,782 $16,120  62.8% 60.7%   
                  

Segment Adjusted OIBDA(1) as a Percentage of Segment Revenue

  15.7% 18.7%            

(1)
See Note 9 to Notes to the Consolidated Financial Statements for definition of Adjusted OIBDA and for the basis on which allocations are made and a reconciliation of Adjusted OIBDA to income (loss) from continuing operations before provision (benefit) for income taxes.

        During the year ended December 31, 2009,2012, expenses in the Corporate segment as a percentage of consolidated revenue in our Worldwide Digital Business segment increased 2.9% over 2008, due10 basis points compared to strong performance in our eDiscovery business offset by a decrease in data restoration and license sales in 2009 over 2008. In the year ended December 31, 2009, Adjusted OIBDA2011, primarily due to a $13.1 million increase in stock-based compensation expense and increased professional fees associated with strategic and corporate initiatives, which was partially offset by reduced information technology expenses of $9.7 million and a $6.3 million reclassification of certain costs out of the Worldwide DigitalCorporate segment and into the North American Business segment increased compared to 2008 due to the impact of revenue mix and decreases in commissions and discretionary spending, including recruiting, travel and entertainment.fiscal year 2012.

        During the year ended December 31, 2008, revenue in our Worldwide Digital Business segment increased 36.6% over 2007, due to the acquisition of Stratify in December 2007 and strong internal growth of 12%. The increase in internal growth is primarily attributable to growth in digital storage revenue from our online backup service offerings, offset by a large license sale that occurred in 2007 and did not repeat in 2008. Adjusted OIBDA2011, expenses in the Worldwide Digital BusinessCorporate segment increased dueas a percentage of consolidated revenues decreased 1.1% compared to our significant year over year revenue gains, and was impacted favorably by 2 percentage points of currency variations.


Table of Contents

Corporate

 
  
  
  
 Dollar Change Percentage Change 
 
 Year Ended December 31, 
 
 from 2007
to 2008
 from 2008
to 2009
 from 2007
to 2008
 from 2008
to 2009
 
 
 2007 2008 2009 

Segment Adjusted OIBDA(1)

 $(144,068)$(157,986)$(164,406)$(13,918)$(6,420) 9.7% 4.1%

Segment Adjusted OIBDA(1) as a Percentage of Consolidated Revenue

  (5.3)% (5.2)% (5.5)%            

(1)
See Note 9 to Notes to the Consolidated Financial Statements for definition of Adjusted OIBDA and for the basis on which allocations are made and a reconciliation of Adjusted OIBDA to income before provision for income taxes.

        During the year ended December 31, 2009, expenses in the Corporate segment increased 4.1% over the year ended December 31, 2008, driven primarily by increases in professional fees of $3.7 million related to project and consulting costs, compensation of $2.5 million due primarily to merit increases and charitable contributions of $2.0 million, offset by decreases in other expenses of $1.5 million, which includes much of our discretionary spending, such as travel and entertainment and supplies, and a decrease in stock-based compensation expense of $0.3 million.2010.

        During the year ended December 31, 2008, expenses in Corporate increased 9.7% over 2007 driven mainly by salaries and benefits, which increased $9.6 million, primarily as a result of increased headcount plus our continued investment in information technology, infrastructure and product development, as well as, legal and safety and security. In addition, stock-based compensation expense increased $5.1 million as a result of headcount and an increase in the number of stock option grants and the fair value of such grants in 2007, while incentive compensation decreased by $2.1 million. Further, we saw increases in professional fees of $4.2 million, primarily for services in the areas of information technology, infrastructure and product development. Facility costs increased $1.0 million in 2008 compared to 2007, while other expenses, which includes much of our discretionary spending, including supplies and telephone, decreased $3.9 million.

Liquidity and Capital Resources

        The following is a summary of our cash balances and cash flows (in thousands) as of and for the years ended December 31,

 
 2007 2008 2009 

Cash flows from operating activities

 $484,644 $537,029 $616,911 

Cash flows from investing activities

  (866,635) (459,594) (324,066)

Cash flows from financing activities

  457,005  87,368  (129,692)

Cash and cash equivalents at the end of year

  125,607  278,370  446,656 
 
 2010 2011 2012 

Cash flows from operating activities—continuing operations

 $603,229 $663,514 $443,652 

Cash flows from investing activities—continuing operations

  (298,458) (302,213) (394,064)

Cash flows from financing activities—continuing operations

  (379,711) (762,670) 28,269 

Cash and cash equivalents at the end of year

  258,693  179,845  243,415 

        Net cash provided by operating activities from continuing operations was $616.9$443.7 million for the year ended December 31, 20092012 compared to $537.0$663.5 million for the year ended December 31, 2008.2011. The 14.9% increase33.1% decrease resulted primarily from an increase in netlower operating income excluding non-cash chargescombined with higher cash payments for interest (primarily related to funding our stockholder payout plan and funding of $47.9 millionREIT Costs), incentive compensation and a decreaseincome taxes in the useyear ended December 31, 2012 compared to the same period in 2011.

        Our business requires capital expenditures to support our expected revenue growth and ongoing operations as well as new products and services and increased profitability. These expenditures are included in the cash flows from investing activities from continuing operations. The nature of workingour capital of $58.2 millionexpenditures has evolved over 2008, offset by an increase in realized foreign exchange losses of $26.2 million over 2008.

        Due totime along with the nature of our businesses, webusiness. We make significant capital expenditures to support a number of different objectives. The majority of our capital goes to support business-line growth and additionsour ongoing operations, but we also expend capital to customer acquisition costs. Our capitalsupport the development and improvement of products and services and projects designed to increase our profitability. These expenditures are primarily related to growth and include


Table of Contents


investments in storage systems, information systemsgenerally small and discretionary investments in real estate.nature. Cash paid for our capital expenditures, cash paid for acquisitions (net of cash acquired) and additions to customer acquisition costs during the year ended December 31, 20092012 amounted to $312.8$240.7 million, $125.1 million and $10.8$28.9 million, respectively. For the year ended December 31, 2009, capital2012, these expenditures net and additions to customer acquisition costs were funded


Table of Contents

with cash flows provided by operating activities and cash equivalents on hand.from continuing operations. Excluding potential future acquisitions, we expect our capital expenditures to be approximately $320$325.0 million in the year ending December 31, 2010.2013. Included in our estimated capital expenditures for 20102013 is approximately $30$75.0 million of opportunity-driven real estate purchases.and approximately $35.0 million associated with the Conversion Plan.

        Net cash used inprovided by financing activities from continuing operations was $129.7$28.3 million for the year ended December 31, 2009.2012. During the year ended December 31, 2009,2012, we had $539.7received $985.0 million ofin net proceeds from the saleissuance of senior subordinated notes, gross borrowings under our revolving creditthe 53/4% Notes due 2024 and term loan facilities and other debt of $36.9 million, $24.2$40.2 million of proceeds from the exercise of stock options and purchases under the employee stock purchase plan, $5.5 million of excess tax benefits from stock-based compensation and $1.1 million in contributions from noncontrolling partners.plan. We used the proceeds from these financing transactions (1) for the early retirement of $447.9$320.0 million and $200.0 million of our 8the 65/8% notes,Notes and 83/4% Notes, respectively; (2) to repay $287.7borrowings under our term loan and revolving credit facilities and other debt of $113.5 million; (3) to repurchase $38.1 million of our common stock; and (4) to pay dividends in the amount of $318.8 million on our common stock (including the cash portion of the Special Dividend).

Share Repurchases and Dividends

        Our board of directors has authorized up to $1.2 billion in repurchases of our common stock. All repurchases are subject to stock price, market conditions, corporate and legal requirements and other factors. As of December 31, 2012, we had a remaining amount available for repurchase under our share repurchase program of $66.0 million, which represents approximately 1% in the aggregate of our outstanding common stock based on the closing price on such date.

        The following table is a summary of our repurchase activity under all of our share repurchase programs during 2012:

 
 2012 
 
 Shares Amount(1) 
 
  
 (In thousands)
 

Authorizations remaining as of January 1,

    $100,701 

Additional Authorizations

      

Repurchases paid

  1,103,149  (34,666)

Repurchases unsettled

      
       

Authorization remaining as of December 31,

    $66,035 
       

(1)
Amount excludes commissions paid associated with share repurchases.

        In February 2010, our board of directors adopted a dividend policy under which we have paid, and in the future intend to pay, quarterly cash dividends on our common stock. Declaration and payment of future quarterly dividends is at the discretion of our board of directors. We may pay certain


Table of Contents

distributions after becoming a REIT in the form of cash and common stock. In fiscal years 2011 and 2012, our board of directors declared the following dividends:

Declaration Date
 Dividend
Per Share
 Record Date Total
Amount
 Payment Date 

March 11, 2011

 $0.1875  March 25, 2011 $37,601  April 15, 2011 

June 10, 2011

  0.2500  June 24, 2011  50,694  July 15, 2011 

September 8, 2011

  0.2500  September 23, 2011  46,877  October 14, 2011 

December 1, 2011

  0.2500  December 23, 2011  43,180  January 13, 2012 

March 8, 2012

  0.2500  March 23, 2012  42,791  April 13, 2012 

June 5, 2012

  0.2700  June 22, 2012  46,336  July 13, 2012 

September 6, 2012

  0.2700  September 25, 2012  46,473  October 15, 2012 

October 11, 2012

  4.0600  October 22, 2012  700,000  November 21, 2012 

December 14, 2012

  0.2700  December 26, 2012  51,296  January 17, 2013 

Potential REIT Conversion

        In April 2011, we announced a three-year strategic plan that included stockholder payouts through a combination of share buybacks, ongoing quarterly dividends and potential one-time dividends of approximately $2.2 billion through 2013, with approximately $1.2 billion to be paid out by May 2012. We fulfilled the commitment to return $1.2 billion of capital to stockholders by May 2012. The REIT Conversion Plan, however, includes several modifications to the previously announced stockholder payout plan. In accordance with tax rules applicable to REIT conversions, we anticipate making distributions to stockholders of our accumulated earnings and profits which is estimated to be approximately $1.0 billion to $1.5 billion (collectively, the "E&P Distribution"). We expect to pay the E&P Distribution in a combination of common stock and cash dividends, with at least 80% of the E&P Distribution in the form of common stock and up to 20% in cash. On October 11, 2012, we announced the declaration by our board of directors of a special dividend of $700 million (the "Special Dividend") payable, at the election of the stockholders, in either common stock or cash to stockholders of record as of October 22, 2012 (the "Record Date"). The Special Dividend, which is a portion of the E&P Distribution, was paid in a combination of common stock and cash on November 21, 2012 (the "Distribution Date") to stockholders of record as of the Record Date. The balance of any additional E&P Distribution will be paid out over several years beginning in 2014 based, in part, on IRS rules and the timing of the conversions of additional international operations into the REIT structure. Stockholders elected to be paid their pro rata portion of the Special Dividend in all common stock or cash. The total amount of cash paid to all stockholders associated with the Special Dividend was approximately $140.0 million (including cash paid in lieu of fractional shares). Our shares of common stock were valued for purposes of the Special Dividend based upon the average closing price on the three trading days following November 14, 2012, or $32.87 per share, and as such, the number of shares of common stock we issued in the Special Dividend was approximately 17.0 million and the total value of common stock paid to all stockholders associated with the Special Dividend was approximately $560.0 million. These shares will impact weighted average shares outstanding from the date of issuance, thus impacting our earnings per share data prospectively from the Distribution Date. With regard to our levels of indebtedness, we plan to operate within our target leverage ratio range of 3x—4x EBITDA (as defined in our revolving credit and term loansfacilities). We may, however, temporarily operate above the high end of this range due to the timing of cash outlays related to the Conversion Plan.

        There are significant tax payments and other debtcosts associated with implementing the Conversion Plan, and $1.6certain tax liabilities may be incurred regardless of whether we ultimately succeed in converting to a REIT. In addition, we must undertake major modifications to our internal systems, including accounting, information technology and real estate, in order to convert to a REIT. We currently estimate that we will incur approximately $375.0 million to $475.0 million in costs to support


Table of Contents

the Conversion Plan, including approximately $225.0 million to $275.0 million of financing costs.

        Duerelated tax payments associated with a change in our method of depreciating and amortizing various assets, including certain of our racking, from our current method to methods that are consistent with the declining economic environment in 2008, the current fair market valuescharacterization of vans, truckssuch assets as real property. The total tax on recapture of depreciation and mobile shredding units within our vehicle fleet portfolio, which we lease, have declined. As a result, certain vehicle leases that previously met the requirementsamortization expenses across all relevant assets is expected to be considered operating leases have been classifiedpaid out over up to five years beginning in 2012, with approximately $80.0 million paid in 2012. These tax liabilities were already reflected as capital leases, and certain others will be, upon renewal. The impact of these changeslong-term deferred income taxes on our consolidated cash flowbalance sheet. As such, there will be no income statement inimpact associated with the year endedpayment of these tax liabilities. However, we have reclassified approximately $123.9 million of long-term deferred income tax liabilities to current deferred income taxes (included within accrued expenses within current liabilities) and prepaid and other assets (included within current assets) within our consolidated balance sheet as of December 31, 2009 is that payments related2012. In 2013, we expect to reclassify another $41.3 million of long-term deferred income tax liabilities to current deferred income taxes. Additionally, we currently estimate the incremental operating and capital expenditures associated with the Conversion Plan through 2014 to be approximately $150.0 million to $200.0 million. Of these leases previously reflected as a useamounts, approximately $47.0 million was incurred in 2012, including approximately $12.5 million of cash within the operating activities section of our consolidated statement of cash flows are now,capital expenditures.

Financial Instruments and will be, reflected as a use of cash within the financing activities section of our consolidated statement of cash flows. For 2009, the amount of this impact was $19.1 million.Debt

        Financial instruments that potentially subject us to market risk consist principally of cash and cash equivalents (including money market funds and time deposits. As of December 31, 2009, we haddeposits), restricted cash (primarily U.S. Treasuries) and accounts receivable. The only significant concentrations of liquid investments as of December 31, 2012 relate to cash and cash equivalents and restricted cash held on deposit with five global banks and tentwo "Triple A" rated money market funds which we consider to be large, highly ratedhighly-rated investment-grade institutions. As per our risk management investment grade institutions.policy, we limit exposure to concentration of credit risk by limiting the amount invested in any one mutual fund to a maximum of $50.0 million or in any one financial institution to a maximum of $75.0 million. As of December 31, 2009,2012, our cash and cash equivalentequivalents and restricted cash balance was $446.7$277.0 million, including money market funds and time deposits amounting to $381.6$218.6 million. A substantial portion of thesethe money market funds areis invested in U.S. treasuries.Treasuries. As of December 31, 2012, we had approximately $122.8 million of our cash and cash equivalents in foreign entities (excluding foreign branches of U.S. entities). We do not intend to repatriate this cash and cash equivalents in the foreseeable future, and we intend to reinvest these funds indefinitely outside the U.S. (see Note 7 to Notes to Consolidated Financial Statements).


Table of Contents

        We are highly leveraged and expect to continue to be highly leveraged for the foreseeable future. Our consolidated debt as of December 31, 2009 was2012 comprised of the following (in thousands):

Revolving Credit Facility(1)

 $55,500 

Term Loan Facility(1)

  462,500 

71/4% GBP Senior Subordinated Notes due 2014 (the "71/4% Notes")(2)

  242,813 

71/2% CAD Senior Subordinated Notes due 2017 (the "Subsidiary Notes") (3)

  175,875 

8% Senior Subordinated Notes due 2018 (the "8% Notes")(2)

  49,834 

63/4% Euro Senior Subordinated Notes due 2018 (the "63/4% Notes")(2)

  335,152 

73/4% Senior Subordinated Notes due 2019 (the "73/4% Notes due 2019")(2)

  400,000 

8% Senior Subordinated Notes due 2020 (the "8% Notes due 2020")(2)

  300,000 

83/8% Senior Subordinated Notes due 2021 (the "83/8% Notes")(2)

  548,518 

53/4% Senior Subordinated Notes due 2024 (the "53/4% Notes")(2)

  1,000,000 

Real Estate Mortgages, Capital Leases and Other(4)

  254,811 
    

Total Long-term Debt

  3,825,003 

Less Current Portion

  (92,887)
    

Long-term Debt, Net of Current Portion

 $3,732,116 
    

Revolving Credit Facility(1)

 $21,799 

Term Loan Facility(1)

  400,300 

71/4% GBP Senior Subordinated Notes due 2014(2)

  238,920 

73/4% Senior Subordinated Notes due 2015(2)

  435,856 

65/8% Senior Subordinated Notes due 2016(2)

  317,035 

71/2% CAD Senior Subordinated Notes due 2017(the "Subsidiary Notes")(3)

  166,810 

83/4% Senior Subordinated Notes due 2018(2)

  200,000 

8% Senior Subordinated Notes due 2018(2)

  49,749 

63/4% Euro Senior Subordinated Notes due 2018(2)

  363,166 

8% Senior Subordinated Notes due 2020(2)

  300,000 

83/8% Senior Subordinated Notes due 2021(2)

  548,002 

Real Estate Mortgages, Capital Leases and Other(4)

  210,147 
    
 

Total Long-term Debt

  3,251,784 

Less Current Portion

  (40,561)
    
  

Long-term Debt, Net of Current Portion

 $3,211,223 
    

(1)
The capital stock or other equity interests of most of our U.S. subsidiaries, and up to 66% of the capital stock or other equity interests of our first tierfirst-tier foreign subsidiaries, are pledged to secure these debt instruments, together with all intercompany obligations of foreign subsidiaries owed to us or to one of our U.S. subsidiary guarantors.guarantors or Iron Mountain Canada Corporation ("Canada Company") and all promissory notes held by us or one of our U.S. subsidiary guarantors or Canada Company.

(2)
Collectively, referred to as the Parent"Parent Notes. Iron Mountain Incorporated ("IMI")" IMI is the direct obligor on the Parent Notes, which are fully and unconditionally guaranteed, on a senior subordinated basis, by substantially all of its direct and indirect wholly100% owned U.S. subsidiaries (the "Guarantors"). These guarantees are joint and several obligations of the Guarantors. Iron Mountain Canada Corporation ("Canada Company")Company and the remainder of our subsidiaries do not guarantee the Parent Notes.

(3)
Canada Company is the direct obligor on the Subsidiary Notes, which are fully and unconditionally guaranteed, on a senior subordinated basis, by IMI and the Guarantors. These guarantees are joint and several obligations of IMI and the Guarantors.

(4)
Includes (a) real estate mortgages of $6.6$4.3 million, (b) capital lease obligations of $193.7$235.8 million, and (c) other various notes and other obligations, which were assumed by us as a result of certain acquisitions, of $9.8$14.7 million.

Table of Contents

        OurOn June 27, 2011, we entered into a credit agreement that consists of (1) revolving credit facilities under which we can borrow, subject to certain limitations as defined in the credit agreement, up to an aggregate amount of $725.0 million (including Canadian dollars, British pounds sterling and Euros, among other currencies) (the "Revolving Credit Facility") and (2) a $500.0 million term loan facilities,facility (the "Term Loan Facility," and collectively with the Revolving Credit Facility, the "Credit Agreement"). We have the right to request an increase in the aggregate amount available to be borrowed under the Credit Agreement up to a maximum of $1.8 billion. The Revolving Credit Facility is supported by a group of 19 banks. IMI, Iron Mountain Information Management, Inc. ("IMIM"), Canada Company, IME, Iron Mountain Australia Pty Ltd., Iron Mountain Switzerland Gmbh and any other subsidiary of IMIM designated by IMIM (the "Other Subsidiaries") may, with the consent of the administrative agent, as well asdefined in the Credit Agreement, borrow under certain of the following tranches of the Revolving Credit Facility: (1) tranche one in the amount of $400.0 million is available to IMI and IMIM in U.S. dollars, British pounds sterling and Euros, (2) tranche two in the amount of $150.0 million is available to IMI or IMIM in either U.S. dollars or Canadian dollars and available to Canada Company in Canadian dollars and (3) tranche three in the amount of $175.0 million is available to IMI or IMIM and the Other Subsidiaries in U.S. dollars, Canadian dollars, British pounds sterling, Euros and Australian dollars, among others. The Revolving Credit Facility terminates on June 27, 2016, at which point all revolving credit loans under such facility become due. With respect to the Term Loan Facility, loan payments are required through maturity on June 27, 2016 in equal quarterly installments of the aggregate annual amounts based upon the following percentage of the original principal amount in the table below (except that each of the first three quarterly installments in the fifth year shall be 10% of the original principal amount and the final quarterly installment in the fifth year shall be 35% of the original principal):

Year Ending
Percentage

June 30, 2012

5%

June 30, 2013

5%

June 30, 2014

10%

June 30, 2015

15%

June 27, 2016

65%

        The Term Loan Facility may be prepaid without penalty or premium, in whole or in part, at any time. IMI and IMIM guarantee the obligations of each of the subsidiary borrowers. The capital stock or other equity interests of most of our indentures, useU.S. subsidiaries, and up to 66% of the capital stock or other equity interests of our first-tier foreign subsidiaries, are pledged to secure the Credit Agreement, together with all intercompany obligations of subsidiaries owed to us or to one of our U.S. subsidiary guarantors or Canada Company and all promissory notes held by us or one of our U.S. subsidiary guarantors or Canada Company. The interest rate on borrowings under the Credit Agreement varies depending on our choice of interest rate and currency options, plus an applicable margin, which varies based on certain financial ratios. Additionally, the Credit Agreement requires the payment of a commitment fee on the unused portion of the Revolving Credit Facility, which fee ranges from between 0.3% to 0.5% based on certain financial ratios. There are also fees associated with any outstanding letters of credit. As of December 31, 2012, we had $55.5 million of outstanding borrowings under the Revolving Credit Facility, all of which was denominated in U.S. dollars; we also had various outstanding letters of credit totaling $2.3 million. The remaining availability under the Revolving Credit Facility on December 31, 2012, based on IMI's leverage ratio, which is calculated based on the last 12 months' earnings before interest, taxes, depreciation and amortization ("EBITDA") based calculationsand other adjustments as primary measuresdefined in the Credit Agreement and current external debt, was $667.2 million. The interest rate in effect under the Revolving Credit Facility and Term Loan Facility was 4.0% and 2.0%, respectively, as of financial performance, including leverage ratiosDecember 31, 2012.


Table of Contents

        The Credit Agreement, our indentures and other agreements governing our indebtedness contain certain restrictive financial and operating covenants, including covenants that restrict our ability to complete acquisitions, pay cash dividends, incur indebtedness, make investments, sell assets and take certain other corporate actions. The covenants do not contain a rating trigger. Therefore, a change in our debt rating would not trigger a default under the Credit Agreement, and our indentures andor other agreements governing our indebtedness. The Credit Agreement, as well as our indentures, uses EBITDA-based calculations as primary measures of financial performance, including leverage and fixed charge coverage ratios. IMI's revolving credit and term leverage ratio was 3.83.4 and 3.33.9 as of December 31, 20082011 and 2009,2012, respectively, compared to a maximum allowable ratio of 5.5.5.5 under the Credit Agreement. Similarly, our bond leverage ratio, per the indentures, was 4.53.9 and 4.15.3 as of December 31, 20082011 and 2009,2012, respectively, compared to a maximum allowable ratio of 6.5. IMI's revolving credit and term loan fixed charge coverage ratio was 1.5 and 1.3 as of December 31, 2011 and 2012, respectively, compared to a minimum allowable ratio of 1.2 under the Credit Agreement. Noncompliance with these leverage and fixed charge coverage ratios would have a material adverse effect on our financial condition and liquidity. We were in compliance with all debt covenants in material agreements as of December 31, 2009 and we do not expect the debt covenants and


Table of Contents


restrictions to limit our recently approved share repurchase program or dividends under our dividend policy as more fully discussed below. In the fourth quarter of 2007, we designated as Excluded Restricted Subsidiaries (as defined in the indentures), certain of our subsidiaries that own our assets and conduct operations in the United Kingdom. As a result of such designation, these subsidiaries are now subject to substantially all of the covenants for the indentures, except that they are not required to provide a guarantee, and the EBITDA and debt of these subsidiaries is included for purposes of calculation of the leverage ratio.

        Our ability to pay interest on or to refinance our indebtedness depends on our future performance, working capital levels and capital structure, which are subject to general economic, financial, competitive, legislative, regulatory and other factors which may be beyond our control. There can be no assurance that we will generate sufficient cash flow from our operations or that future financings will be available on acceptable terms or in amounts sufficient to enable us to service or refinance our indebtedness or to make necessary capital expenditures.

        On April 16, 2007, we entered into a new credit agreement (the "Credit Agreement") to replace the existing IMI revolving credit and term loan facilities and the existing IME revolving credit and term loan facilities. The Credit Agreement consists of revolving credit facilities where we can borrow, subject to certain limitations as defined in the Credit Agreement, up to an aggregate amount of $765 million (including Canadian dollar and multi-currency revolving credit facilities), and a $410 million term loan facility. Our revolving credit facility is supported by a group of 24 banks. Our subsidiaries, Canada Company and Iron Mountain Switzerland GmbH, may borrow directly under the Canadian revolving credit and multi-currency revolving credit facilities, respectively. Additional subsidiary borrowers may be added under the multi-currency revolving credit facility. The revolving credit facility terminates on April 16, 2012. With respect to the term loan facility, quarterly loan payments of approximately $1.0 million are required through maturity on April 16, 2014, at which time the remaining outstanding principal balance of the term loan facility is due. The interest rate on borrowings under the Credit Agreement varies depending on our choice of interest rate and currency options, plus an applicable margin. IMI guarantees the obligations of each of the subsidiary borrowers under the Credit Agreement, and substantially all of our U.S. subsidiaries guarantee the obligations of IMI and the subsidiary borrowers. The capital stock or other equity interests of most of our U.S. subsidiaries, and up to 66% of the capital stock or other equity interests of our first tier foreign subsidiaries, are pledged to secure the Credit Agreement, together with all intercompany obligations of foreign subsidiaries owed to us or to one of our U.S. subsidiary guarantors.

        As of December 31, 2009, we had $21.8 million of outstanding borrowings under the revolving credit facility, which were denominated in Euro (EUR 1.8 million), Australian dollars (AUD 9.0 million) and in British pound sterling (GBP 7.0 million); we also had various outstanding letters of credit totaling $43.4 million. The remaining availability, based on IMI's leverage ratio, which is calculated based on the last 12 months' EBITDA and other adjustments as defined in the Credit Agreement and current external debt, under the revolving credit facility on December 31, 2009, was $699.8 million. The interest rate in effect under the revolving credit facility and term loan facility was 3.0% and 1.8%, respectively, as of December 31, 2009.

        In August 2009,2012, we completed an underwritten public offering of $550.0 million$1.0 billion in aggregate principal amount of our 8the 53/84% Senior Subordinated Notes, due 2021, which were issued at 99.625%100% of par. Our net proceeds of $539.7$985.0 million, after paying the underwriters' discounts and commissions, waswere used to (a) redeem of all of the remaining $447.9 million of aggregate principal amount of our outstanding 865/8% notes,Notes and 83/4% Notes and to repay existing indebtedness under our Revolving Credit Facility, and the balance will be used for general corporate purposes, including funding a portion of the costs we expect to incur in connection with the Conversion Plan.

        In August 2012, we redeemed (1) the $320.0 million aggregate principal amount outstanding of the 65/8% Notes at 100% of par, plus accrued and unpaid interest, alland (2) the $200.0 million aggregate principal amount outstanding of which were called for redemption in August 2009,the 83/4% Notes at 102.9% of par, plus accrued and redeemed in September 2009, (b) repay borrowings under our revolving credit facility, and (c) for general corporate purposes.unpaid interest. We recorded a charge to other expense (income), net of $3.0$10.6 million in the third quarter of 20092012 related to the early extinguishment of the 865/8% notes, whichNotes and 83/4% Notes. This charge consists of the call premium, original issue discounts and deferred financing costs and original issue premiums and discounts related to the 865/8% notes.Notes and 83/4% Notes.

Acquisitions

        In April 2012, in order to enhance our existing operations in Brazil, we acquired the stock of Grupo Store, a storage rental and records management and data protection business in Brazil with locations in Sao Paulo, Rio de Janeiro, Porto Alegre and Recife, for a purchase price of approximately $79.0 million ($75.0 million, net of cash acquired). Included in the purchase price is approximately $8.0 million being held in escrow to secure a working capital adjustment and the indemnification obligations of the former owners of the business ("Sellers") to IMI. The amounts held in escrow for purposes of the working capital adjustment will be distributed either to IMI or the Sellers based on the final agreed upon working capital amount. Unless paid to us in accordance with the terms of the agreement, all amounts remaining in escrow after the final working capital adjustment and any indemnification payments are paid out will be released to the Sellers in four annual installments, commencing in April 2014.


Table of Contents

        In February, 2010,May 2012, we acquired Mimosa, a leader in enterprise-class digital content archiving solutions, for approximately $112 million in cash. Mimosa, based in Santa Clara, California, provides an on-premises integrated archive for email, SharePoint data and files, and complements our existing enterprise-class, cloud-based digital archive services. NearPoint, Mimosa's enterprise archiving platform, has applications for retention and disposition, eDiscovery, compliance supervision, classification, recovery, and end-user search, enabling customers to reduce risk, and lower their eDiscovery and storage costs.

        In February, 2010, our board of directors approved a new share repurchase program authorizing up to $150 million in repurchasescontrolling interest of our common stock. This representsjoint venture in Switzerland (Sispace AG), which provides storage rental and records management services, in a stock transaction for a cash purchase price of approximately 3% of our outstanding common stock based on the closing price on February 19, 2010. All purchases are subject to stock price, market conditions, corporate and legal requirements and other factors. In addition, in February, 2010, our board of directors adopted a dividend policy under which we intend to pay quarterly cash dividends on our common stock. The first quarterly dividend of $0.0625 per share will be payable on April 15, 2010 to shareholders of record on March 25, 2010. Declaration and payment of future quarterly dividends is at the discretion of our board of directors. If we continue the $.0625 per share quarterly dividend we anticipate that the 2010 annual dividend payout will be approximately $50 million based on our total outstanding shares as of February 19, 2010 (of which the fourth quarter 2010 payment would not be paid until January, 2011, if declared).$21.6 million.

Contractual Obligations

        The following table summarizes our contractual obligations as of December 31, 20092012 and the anticipated effect of these obligations on our liquidity in future years (in thousands):

 
 Payments Due by Period 
 
 Total Less than
1 Year
 1-3 Years 3-5 Years More than
5 Years
 

Capital Lease Obligations

 $235,826 $47,312 $72,219 $34,906 $81,389 

Long-Term Debt Obligations (excluding Capital Lease Obligations)

  3,592,375  45,575  447,662  461,054  2,638,084 

Interest Payments(1)

  1,833,567  241,076  443,955  404,182  744,354 

Operating Lease Obligations(2)

  2,632,496  223,138  416,931  383,619  1,608,808 

Purchase and Asset Retirement Obligations

  44,821  22,683  10,094  1,043  11,001 
            

Total(3)

 $8,339,085 $579,784 $1,390,861 $1,284,804 $5,083,636 
            

 
 Payments Due by Period 
 
 Total Less than 1 Year 1-3 Years 3-5 Years More than 5 Years 

Capital Lease Obligations

 $193,738 $31,982 $68,000 $31,313 $62,443 

Long-Term Debt Obligations (excluding Capital Lease Obligations)

  3,060,985  8,579  35,906  629,196  2,387,304 

Interest Payments(1)

  1,812,826  222,311  439,073  415,401  736,041 

Operating Lease Obligations(2)

  3,012,838  228,950  421,982  383,208  1,978,698 

Purchase and Asset Retirement Obligations(3)

  66,101  28,487  25,421  978  11,215 
            

Total(4)

 $8,146,488 $520,309 $990,382 $1,460,096 $5,175,701 
            

(1)
Amounts include variable rate interest payments, which are calculated utilizing the applicable interest rates as of December 31, 2009;2012; see Note 4 to Notes to Consolidated Financial Statements. Amounts also include interest on capital leases.

(2)
Amounts are offset by sublease income of $8.9$13.8 million in total (including $2.3$4.1 million, $2.7$5.9 million, $1.8$3.1 million and $2.1$0.7 million, in less than 1 year, 1-3 years, 3-5 years and more than 5 years, respectively).

(3)
In connection with some of our acquisitions, we have potential earn-out obligations that may be payable in the event businesses we acquired meet certain financial objectives. These payments are based on the future results of these operations, and our estimate of the maximum contingent earn-out payments we may be required to make under all such agreements as of December 31, 2009 is approximately $9.6 million.

Table of Contents

(4)
The table above excludes $88.2$37.6 million in uncertain tax positions as we are unable to make reasonably reliable estimates of the period of cash settlement, if any, with the respective taxing authorities.

        We expect to meet our cash flow requirements for the next twelve months from cash generated from operations, existing cash, cash equivalents, borrowings under the Credit Agreement and other financings, which may include senior subordinated notes, secured credit facilities, securitizations and mortgage or capital lease financings.financings, and the issuance of equity. We expect to meet our long-term cash flow requirements using the same means described above, as well asabove. If we convert to a REIT, we expect our long-term capital allocation strategy will naturally shift toward increased use of equity to support lower leverage, though our leverage may increase in the potential issuanceshort-term to fund the costs of debt or equity securities as we deem appropriate. See Notes 4, 7, and 10 to Notes to Consolidated Financial Statements.the Conversion Plan.

Off-Balance Sheet Arrangements

        We have no off-balance sheet arrangements as defined in Regulation S-K Item 303(a)(4)(ii).

Net Operating LossLosses and Foreign Tax Credit Carryforwards

        We have federal net operating loss carryforwards, which begin to expire in 20192020 through 2025, of $38.6$25.9 million ($13.59.1 million, tax effected) at December 31, 20092012 to reduce future federal taxable income. We have an assetassets for state net operating losses of $16.1$9.4 million (net of federal tax benefit), which begins to expire in 20102013 through 2025, subject to a valuation allowance of approximately 99%83%. We have assets for foreign net operating losses of $29.7$46.3 million, with various expiration dates (and in some cases no expiration date), subject to a valuation allowance of approximately 81%82%. Additionally, weWe also have federal research credits of $0.9 million which begin to expire in 2010, and foreign tax credits of $59.3


Table of Contents

$44.3 million, which begin to expire in 20142017 through 2019. Based on current expectations and plans, we expect2020, subject to fully utilize our foreign tax credit carryforwards prior to their expiration.a valuation allowance of approximately 68%.

Inflation

        Certain of our expenses, such as wages and benefits, insurance, occupancy costs and equipment repair and replacement, are subject to normal inflationary pressures. Although to date we have been able to offset inflationary cost increases through increased operating efficiencies and the negotiation of favorable long-term real estate leases, we can give no assurance that we will be able to offset any future inflationary cost increases through similar efficiencies, leases or increased storage rental or service charges.


Item 7A. Quantitative and Qualitative Disclosures About Market Risk.

Market Risk

        Financial instruments that potentially subject us to market risk consist principally of cash and cash equivalents (including money market funds and time deposits. As of December 31, 2009, we haddeposits), restricted cash (primarily U.S. Treasuries) and accounts receivable. The only significant concentrations of liquid investments as of December 31, 2012 relate to cash and cash equivalents and restricted cash held on deposit with five global banks and tentwo "Triple A" rated money market funds which we consider to be large, highly ratedhighly-rated investment-grade institutions. As per our risk management investment grade institutions.policy, we limit exposure to concentration of credit risk by limiting the amount invested in any one mutual fund to a maximum of $50.0 million or in any one financial institution to a maximum of $75.0 million. As of December 31, 2009,2012, our cash and cash equivalents and restricted cash balance was $446.7$277.0 million, including money market funds and time deposits amounting to $381.6$218.6 million. A substantial portion of thesethe money market funds areis invested in U.S. treasuries.Treasuries.

Interest Rate Risk

        Given the recurring nature of our revenues and the long-term nature of our asset base, we have the ability and the preference to use long-term, fixed interest rate debt to finance our business at attractive rates, thereby helping to preserve our long-term returns on invested capital. We target approximately 75% of our debt portfolio to be fixed with respect to interest rates. Occasionally, we will use interest rate swaps as a tool to maintain our targeted level of fixed rate debt. See Notes 3 and 4 to Notes to Consolidated Financial Statements.


Table of Contents

        As of December 31, 2009,2012, we had $430.3$519.3 million of variable rate debt outstanding with a weighted average variable interest rate of 2.0%approximately 2.2%, and $2,821.5$3,305.7 million of fixed rate debt outstanding. As of December 31, 2009, 86.8%2012, approximately 86.4% of our total debt outstanding was fixed. If the weighted average variable interest rate on our variable rate debt had increased by 1%, our net income for the year ended December 31, 20092012 would have been reduced by $2.7approximately $4.5 million. See Note 4 to Notes to Consolidated Financial Statements included in this Form 10-K for a discussion of our long-term indebtedness, including the fair values of such indebtedness as of December 31, 2009.2012.

Currency Risk

        Our investments in IME, Canada Company, Iron Mountain Mexico, SA de RL de CV, Iron Mountain South America, Ltd., Iron Mountain Australia Pty Ltd., Iron Mountain New Zealand Ltd. and our other international investments may be subject to risks and uncertainties related to fluctuations in currency valuation. Our reporting currency is the U.S. dollar. However, our international revenues and expenses are generated in the currencies of the countries in which we operate, primarily the Euro, Canadian dollar and British pound sterling. Declines in the value of the local currencies in which we are paid relative to the U.S.


Table of Contents

dollar will cause revenues in U.S. dollar terms to decrease and dollar-denominated liabilities to increase in local currency.

        The impact of currency fluctuations on our earnings is mitigated significantly by the fact that most operating and other expenses are also incurred and paid in the local currency. We also have several intercompany obligations between our foreign subsidiaries and IMI and our U.S.-based subsidiaries. In addition, Iron Mountain Switzerland GmbH, and our foreign subsidiaries and IME also have intercompany obligations between them. These intercompany obligations are primarily denominated in the local currency of the foreign subsidiary.

        We have adopted and implemented a number of strategies to mitigate the risks associated with fluctuations in currency valuations. One strategy is to finance certain of our international subsidiaries with debt that is denominated in local currencies, thereby providing a natural hedge. In determining the amount of any such financing, we take into account local tax strategiesconsiderations, among other factors. Another strategy we utilize is for IMI or IMIM to borrow in foreign currencies to hedge our intercompany financing activities. Finally,In addition, on occasion, we enter into currency swaps to temporarily or permanently hedge an overseas investment, such as a major acquisition, to lock in certain transaction economics. We have implemented these strategies for our foreign investments in the U.K.,United Kingdom, Continental Europe and Canada. Specifically, through our 150150.0 million British pounds sterling denominated 71/4% Senior Subordinated Notes due 2014 and our 255255.0 million 63/4% Euro Senior Subordinated Notes due 2018, we effectively hedge most of our outstanding intercompany loans denominated in British pounds sterling and Euros. Canada Company has financed its capital needs through direct borrowings in Canadian dollars under the Credit Agreement and its 175175.0 million CAD denominated 71/2% Senior Subordinated Notes due 2017. This creates a tax efficient natural currency hedge. In the third quarter of 2007, weWe designated a portion of our 63/4% Euro Senior Subordinated Notes due 2018 issued by IMI as a hedge of net investment of certain of our Euro denominated subsidiaries. As a result, we recorded $1.9$4.4 million ($1.02.7 million, net of tax) of foreign exchange gainslosses related to the "marking-to-market" of such debt to currency translation adjustments which is a component of accumulated other comprehensive items, net included in stockholders' equity for the year ended December 31, 2009.2012. As of December 31, 2009,2012, cumulative net gains of $3.4$10.7 million, net of tax are recorded in accumulated other comprehensive items, net associated with this net investment hedge.

        We have also entered into a number of separate forward contracts to hedge our exposures to British pounds sterling.sterling and Australian dollars. As of December 31, 2009,2012, we had an outstanding forward contract to purchase $121.3$201.2 million U.S. dollars and sell 73.6125.0 million in British pounds sterling to hedge our intercompany exposures with IME.our European operations. As of December 31, 2012, we had an outstanding forward contract to purchase $77.3 million U.S. dollars and sell 75.0 million Australian dollars to hedge our intercompany exposures with our Australian subsidiary. At the maturity of the forward contracts, we may enter into new forward contracts to hedge movements in the underlying currencies. At the time of settlement, we either pay or receive the net settlement amount from the forward contract and recognize this amount in other expense (income), net in the accompanying statement of


Table of Contents


operations as a realized foreign exchange gain or loss. We have not designated these forward contracts as hedges. At the end of each month, we mark the outstanding forward contracts to market and record an unrealized foreign exchange gain or loss for the mark-to-market valuation.valuation through other expense (income), net. During the year ended December 31, 2009,2012, there was $2.4$9.1 million in net cash disbursements included in cash from operating activities from continuing operations related to settlements associated with these foreign currency forward contracts. We recorded net losses in connection with these forward contracts of $12.0$13.0 million including(including an unrealized foreign exchange gainloss of $4.1$1.1 million related to certain British pound sterling forward contracts and an unrealized foreign exchange loss of $0.4 million related to the Australian dollar forward contract in other expense (income), net in the accompanying statement of operations as of December 31, 2009.2012, respectively. As


Table of Contents

of December 31, 2009,2012, except as noted above, our currency exposures to intercompany balances are unhedged.not hedged.

        The impact of devaluation or depreciating currency on an entity depends on the residual effect on the local economy and the ability of an entity to raise prices and/or reduce expenses. Due to our constantly changing currency exposure and the potential substantial volatility of currency exchange rates, we cannot predict the effect of exchange fluctuations on our business. The effect of a change in foreign exchange rates on our net investment in foreign subsidiaries is reflected in the "Accumulated Other Comprehensive Items, net" component of equity. A 10% depreciation in year-end 20092012 functional currencies, relative to the U.S. dollar, would result in a reduction in our equity of approximately $77.1$88.8 million.


Item 8. Financial Statements and Supplementary Data.

        The information required by this item is included in Item 15(a) of this Annual Report on Form 10-K.Report.


Item 9. Changes in and Disagreements withWith Accountants on Accounting and Financial Disclosure.

        None.


Item 9A. Controls and Procedures.

Disclosure Controls and Procedures

        The term "disclosure controls and procedures" is defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934, as amended (the "Exchange Act").Act. These rules refer to the controls and other procedures of a company that are designed to ensure that information is recorded, processed, summarized and communicated to management, including its principal executive and principal financial officers, as appropriate to allow timely decisions regarding what is required to be disclosed by a company in the reports that it files under the Exchange Act. As of December 31, 20092012 (the "Evaluation Date"), we carried out an evaluation, under the supervision and with the participation of our management, including our chief executive officer and chief financial officer, of the effectiveness of our disclosure controls and procedures. Based upon that evaluation, our chief executive officer and chief financial officer have concluded that, as of the Evaluation Date, our disclosure controls and procedures are effective.

Management's Report on Internal Control over Financial Reporting

        Our management, with the participation of our principal executive officer and principal financial officer, is responsible for establishing and maintaining adequate internal control over financial reporting as such term is defined in RuleRules 13a-15(f) and 15d-15(f) of the Exchange Act. Our internal control system is designed to provide reasonable assurance to our management and board of directors regarding the preparation and fair presentation of published financial statements. Due to their inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Projections of any evaluation of effectiveness to future periods are subject to the risks that controls may become inadequate because of changes in conditions or that the degree of compliance with policies or procedures may deteriorate. Under the supervision and with the participation of our management, including our chief executive officer and chief financial officer, we conducted an evaluation of the effectiveness of our internal control over financial reporting based on the framework inInternal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on ourthis evaluation, under the framework inInternal Control—Integrated Framework , our management concluded that our internal control over financial reporting was effective as of December 31, 2009.2012.


Table of Contents

        The effectiveness of our internal control over financial reporting has been audited by Deloitte & Touche LLP, an independent registered public accounting firm, as stated in their report which is included herein.in this Annual Report.

Remediation of Prior Material Weakness in Internal Control over Financial Reporting

        As previously disclosed in our Annual Report on Form 10-K for the year ended December 31, 2011, we determined that we did not maintain adequate and effective internal control in the area of identifying and monitoring price reduction clauses in certain U.S. government customer contracts.

        During the year ended December 31, 2012, we implemented the following changes in our internal control over financial reporting that remediated the material weakness described above:

        We have evaluated and tested the effectiveness of these controls as of December 31, 2012 and have determined that our previously reported material weakness has been remediated.


Table of Contents


REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Stockholders of
Iron Mountain Incorporated

        We have audited the internal control over financial reporting of Iron Mountain Incorporated and subsidiaries (the "Company") as of December 31, 2009,2012, based on criteria established inInternal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. The Company's management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management's Report on Internal Control Over Financial Reporting. Our responsibility is to express an opinion on the Company's internal control over financial reporting based on our audit.

        We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

        A company's internal control over financial reporting is a process designed by, or under the supervision of, the company's principal executive and principal financial officers, or persons performing similar functions, and effected by the company's board of directors, management, and other personnel to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company's internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2)��provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company's assets that could have a material effect on the financial statements.

        Because of the inherent limitations of internal control over financial reporting, including the possibility of collusion or improper management override of controls, material misstatements due to error or fraud may not be prevented or detected on a timely basis. Also, projections of any evaluation of the effectiveness of the internal control over financial reporting to future periods are subject to the risk that the controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

        In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2009,2012, based on the criteria established inInternal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission.

        We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated financial statements as of and for the year ended December 31, 20092012 of the Company and our report dated February 26, 2010March 1, 2013 expressed an unqualified opinion on those financial statements.

/s/ DELOITTE & TOUCHE LLP


Boston, Massachusetts
February 26, 2010March 1, 2013


Table of Contents

Changes in Internal Control over Financial Reporting

        There have been no changes in our internal control over financial reporting (as defined in Rule 13a-15(f) under the Securities Act of 1934) during the quarter ended December 31, 20092012 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.


Item 9B. Other Information.

        None.


Table of Contents


PART III

Item 10. Directors, Executive Officers and Corporate Governance.

        The information required by Item 10 is incorporated by reference to our definitive Proxy Statement for theour 2013 Annual Meeting of Stockholders to be held on or about June 3, 2010.(our "Proxy Statement").


Item 11. Executive Compensation.

        The information required by Item 11 is incorporated by reference to our definitive Proxy Statement for the Annual Meeting of Stockholders to be held on or about June 3, 2010.Statement.


Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.

        The information required by Item 12 is incorporated by reference to our definitive Proxy Statement for the Annual Meeting of Stockholders to be held on or about June 3, 2010.Statement.


Item 13. Certain Relationships and Related Transactions, and Director Independence.

        The information required by Item 13 is incorporated by reference to our definitive Proxy Statement for the Annual Meeting of Stockholders to be held on or about June 3, 2010.Statement.


Item 14. Principal Accountant Fees and Services.

        The information required by Item 14 is incorporated by reference to our definitive Proxy Statement for the Annual Meeting of Stockholders to be held on or about June 3, 2010.Statement.


PART IV

Item 15. Exhibits and Financial Statement Schedules.

(a)
Financial Statements and Financial Statement Schedules filed as part of this report:

 
 Page

A. Iron Mountain Incorporated

  

Report of Independent Registered Public Accounting Firm

 
6175

Consolidated Balance Sheets, December 31, 20082011 and 20092012

 
6276

Consolidated Statements of Operations, Years Ended December 31, 2007, 20082010, 2011 and 20092012

 
63

Consolidated Statements of Equity, Years Ended December 31, 2007, 2008 and 2009


6477

Consolidated Statements of Comprehensive Income (Loss), Years Ended December 31, 2007, 20082010, 2011 and 20092012

 
6578

Consolidated Statements of Equity, Years Ended December 31, 2010, 2011 and 2012


79

Consolidated Statements of Cash Flows, Years Ended December 31, 2007, 20082010, 2011 and 20092012

 
6680

Notes to Consolidated Financial Statements

 
6781
(b)
Exhibits filed as part of this report: As listed in the Exhibit Index following the signature page hereof.

Table of Contents


REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Stockholders of
Iron Mountain Incorporated

        We have audited the accompanying consolidated balance sheets of Iron Mountain Incorporated and subsidiaries (the "Company") as of December 31, 20092012 and 2008,2011, and the related consolidated statements of operations, equity, comprehensive income (loss), equity, and cash flows for each of the three years in the period ended December 31, 2009.2012. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on thesethe financial statements based on our audits.

        We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

        In our opinion, such consolidated financial statements present fairly, in all material respects, the financial position of Iron Mountain Incorporated and subsidiaries as of December 31, 20092012 and 2008,2011, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2009,2012, in conformity with accounting principles generally accepted in the United States of America.

        We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the Company's internal control over financial reporting as of December 31, 2009,2012, based on the criteria established inInternal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated February 26, 2010March 1, 2013 expressed an unqualified opinion on the Company's internal control over financial reporting.

/s/ DELOITTE & TOUCHE LLP

Boston, Massachusetts
February 26, 2010March 1, 2013


Table of Contents


IRON MOUNTAIN INCORPORATED

CONSOLIDATED BALANCE SHEETS

(In thousands, except share and per share data)



 December 31,  December 31, 


 2008 2009  2011 2012 

ASSETS

ASSETS

  

Current Assets:

Current Assets:

  

Cash and cash equivalents

 $179,845 $243,415 

Restricted cash

 35,110 33,612 

Accounts receivable (less allowances of $23,277 and $25,209 as of December 31, 2011 and 2012, respectively)

 543,467 572,200 

Deferred income taxes

 43,235 10,152 

Prepaid expenses and other

 105,537 164,713 

Assets of discontinued operations

 7,256  

Cash and cash equivalents

 $278,370 $446,656      

Total Current Assets

 914,450 1,024,092 

Property, Plant and Equipment:

 

Property, plant and equipment

 4,232,594 4,443,323 

Less—Accumulated depreciation

 (1,825,511) (1,965,596)

Accounts receivable (less allowances of $19,562 and $25,529, respectively)

 552,830 585,376      

Property, Plant and Equipment, net

 2,407,083 2,477,727 

Other Assets, net:

 

Goodwill

 2,254,268 2,334,759 

Customer relationships and acquisition costs

 410,149 456,120 

Deferred financing costs

 35,798 43,850 

Other

 19,510 21,791 

Deferred income taxes

 41,305 37,924      

Total Other Assets, net

 2,719,725 2,856,520 

Prepaid expenses and other

 103,887 141,469      
     
 

Total Current Assets

 976,392 1,211,425 

Property, Plant and Equipment:

 

Property, plant and equipment

 3,750,515 4,184,631 

Less—Accumulated depreciation

 (1,363,761) (1,616,431)
     
 

Net Property, Plant and Equipment

 2,386,754 2,568,200 

Other Assets, net:

 

Goodwill

 2,452,304 2,534,713 

Customer relationships and acquisition costs

 443,729 438,812 

Deferred financing costs

 33,186 35,206 

Other

 64,489 58,478 
     
 

Total Other Assets, net

 2,993,708 3,067,209 
     
 

Total Assets

 $6,356,854 $6,846,834 

Total Assets

 $6,041,258 $6,358,339 
          

LIABILITIES AND EQUITY

LIABILITIES AND EQUITY

  

Current Liabilities:

Current Liabilities:

  

Current portion of long-term debt

 $73,320 $92,887 

Accounts payable

 156,381 168,120 

Accrued expenses

 418,831 426,813 

Deferred revenue

 197,181 217,133 

Liabilities of discontinued operations

 3,317  

Current portion of long-term debt

 $35,751 $40,561      

Accounts payable

 154,614 175,231 

Accrued expenses

 356,473 390,860 

Deferred revenue

 182,759 208,062 
     
 

Total Current Liabilities

 729,597 814,714 

Total Current Liabilities

 849,030 904,953 

Long-term Debt, net of current portion

Long-term Debt, net of current portion

 3,207,464 3,211,223  3,280,268 3,732,116 

Other Long-term Liabilities

Other Long-term Liabilities

 113,136 118,081  53,169 62,917 

Deferred Rent

Deferred Rent

 73,005 90,503  97,177 97,356 

Deferred Income Taxes

Deferred Income Taxes

 427,324 467,067  507,358 398,549 

Commitments and Contingencies (see Note 10)

Commitments and Contingencies (see Note 10)

  

Equity:

Equity:

  

Iron Mountain Incorporated Stockholders' Equity:

 

Preferred stock (par value $0.01; authorized 10,000,000 shares; none issued and outstanding)

   

Common stock (par value $0.01; authorized 400,000,000 shares; issued and outstanding 172,140,966 shares and 190,005,788 shares as of December 31, 2011 and 2012, respectively)

 1,721 1,900 

Additional paid-in capital

 343,603 942,199 

Retained earnings

 902,567 185,558 

Accumulated other comprehensive items, net

 (2,203) 20,314 

Iron Mountain Incorporated Stockholders' Equity:

      

Total Iron Mountain Incorporated Stockholders' Equity

 1,245,688 1,149,971 
 

Preferred stock (par value $0.01; authorized 10,000,000 shares; none issued and outstanding)

        

Noncontrolling Interests

 8,568 12,477 
 

Common stock (par value $0.01; authorized 400,000,000 shares; issued and outstanding 201,931,332 shares and 203,546,757 shares, respectively)

 2,019 2,035      

Total Equity

 1,254,256 1,162,448 
 

Additional paid-in capital

 1,250,064 1,298,657      

Total Liabilities and Equity

 $6,041,258 $6,358,339 
 

Retained earnings

 591,912 812,789      
 

Accumulated other comprehensive items, net

 (41,215) 27,661 
     
 

Total Iron Mountain Incorporated Stockholders' Equity

 1,802,780 2,141,142 
     

Noncontrolling Interests

 3,548 4,104 
     
 

Total Equity

 1,806,328 2,145,246 
     
 

Total Liabilities and Equity

 $6,356,854 $6,846,834 
     

The accompanying notes are an integral part of these consolidated financial statements.


Table of Contents


IRON MOUNTAIN INCORPORATED

CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share data)

 
 Year Ended December 31, 
 
 2007 2008 2009 

Revenues:

          
 

Storage

 $1,499,074 $1,657,909 $1,696,395 
 

Service

  1,230,961  1,397,225  1,317,200 
        
  

Total Revenues

  2,730,035  3,055,134  3,013,595 

Operating Expenses:

          
 

Cost of sales (excluding depreciation and amortization)

  1,260,120  1,382,019  1,271,214 
 

Selling, general and administrative

  771,375  882,364  874,359 
 

Depreciation and amortization

  249,294  290,738  319,072 
 

(Gain) Loss on disposal/writedown of property, plant and equipment, net

  (5,472) 7,483  406 
        
  

Total Operating Expenses

  2,275,317  2,562,604  2,465,051 

Operating Income

  454,718  492,530  548,544 

Interest Expense, Net (includes Interest Income of $4,694, $5,485 and $2,566 in 2007, 2008 and 2009, respectively)

  228,593  236,635  227,790 

Other Expense (Income), Net

  3,101  31,028  (12,079)
        
  

Income Before Provision for Income Taxes

  223,024  224,867  332,833 

Provision for Income Taxes

  69,010  142,924  110,527 
        

Net Income

  154,014  81,943  222,306 
  

Less: Net Income (Loss) Attributable to Noncontrolling Interests

  920  (94) 1,429 
        

Net Income Attributable to Iron Mountain Incorporated

 $153,094 $82,037 $220,877 
        

Earnings per Share—Basic and Diluted:

          

Net Income Attributable to Iron Mountain Incorporated per Share—Basic

 $0.77 $0.41 $1.09 
        

Net Income Attributable to Iron Mountain Incorporated per Share—Diluted

 $0.76 $0.40 $1.08 
        

Weighted Average Common Shares Outstanding—Basic

  199,938  201,279  202,812 
        

Weighted Average Common Shares Outstanding—Diluted

  202,062  203,290  204,271 
        
 
 Year Ended December 31, 
 
 2010 2011 2012 

Revenues:

          

Storage rental

 $1,598,718 $1,682,990 $1,733,138 

Service

  1,293,631  1,331,713  1,272,117 
        

Total Revenues

  2,892,349  3,014,703  3,005,255 

Operating Expenses:

          

Cost of sales (excluding depreciation and amortization)

  1,192,862  1,245,200  1,277,113 

Selling, general and administrative

  772,811  834,591  850,371 

Depreciation and amortization

  304,205  319,499  316,344 

Intangible impairments

  85,909  46,500   

(Gain) Loss on disposal/write-down of property, plant and equipment, net

  (10,987) (2,286) 4,400 
        

Total Operating Expenses

  2,344,800  2,443,504  2,448,228 

Operating Income (Loss)

  547,549  571,199  557,027 

Interest Expense, Net (includes Interest Income of $1,785, $2,313 and $2,418 in 2010, 2011 and 2012, respectively)

  204,559  205,256  242,599 

Other Expense (Income), Net

  8,768  13,043  16,062 
        

Income (Loss) from Continuing Operations Before Provision (Benefit) for Income Taxes

  334,222  352,900  298,366 

Provision (Benefit) for Income Taxes

  167,483  106,488  114,873 
        

Income (Loss) from Continuing Operations

  166,739  246,412  183,493 

(Loss) Income from Discontinued Operations, Net of Tax

  (219,417) (47,439) (6,774)

Gain (Loss) on Sale of Discontinued Operations, Net of Tax

    200,619  (1,885)
        

Net (Loss) Income

  (52,678) 399,592  174,834 

Less: Net Income (Loss) Attributable to Noncontrolling Interests

  4,908  4,054  3,126 
        

Net (Loss) Income Attributable to Iron Mountain Incorporated

 $(57,586)$395,538 $171,708 
        

Earnings (Losses) per Share—Basic:

          

Income (Loss) from Continuing Operations

 $0.83 $1.27 $1.06 
        

Total (Loss) Income from Discontinued Operations

 $(1.09)$0.79 $(0.05)
        

Net (Loss) Income Attributable to Iron Mountain Incorporated

 $(0.29)$2.03 $0.99 
        

Earnings (Losses) per Share—Diluted:

          

Income (Loss) from Continuing Operations

 $0.83 $1.26 $1.05 
        

Total (Loss) Income from Discontinued Operations

 $(1.09)$0.78 $(0.05)
        

Net (Loss) Income Attributable to Iron Mountain Incorporated

 $(0.29)$2.02 $0.98 
        

Weighted Average Common Shares Outstanding—Basic

  201,991  194,777  173,604 
        

Weighted Average Common Shares Outstanding—Diluted

  201,991  195,938  174,867 
        

Dividends Declared per Common Share

 $0.3750 $0.9375 $5.1200 
        

The accompanying notes are an integral part of these consolidated financial statements.


Table of Contents


IRON MOUNTAIN INCORPORATED

CONSOLIDATED STATEMENTS OF EQUITY

(In thousands, except share data)

 
  
  
 Iron Mountain Incorporated Stockholders' Equity  
 
 
  
  
 Common Stock  
  
 Accumulated
Other
Comprehensive
Items, Net
  
 
 
  
 Comprehensive
Income (Loss)
 Additional
Paid-in Capital
 Retained
Earnings
 Noncontrolling
Interests
 
 
 Total Shares Amounts 

Balance, December 31, 2006

 $1,558,563 $  199,109,581 $1,991 $1,144,101 $373,387 $33,794 $5,290 

Issuance of shares under employee stock purchase plan and option plans and stock-based compensation, including tax benefit of $6,765

  42,599    1,583,636  16  42,583       

Stock options issued in connection with acquisition

  22,828        22,828       

Reserve related to uncertain tax positions (Note 7)

  (16,606)         (16,606)    

Comprehensive Income (Loss):

                         
 

Currency translation adjustment

  41,941  41,941          40,480  1,461 
 

Market value adjustments for hedging contracts, net of tax

  170  170          170   
 

Market value adjustments for securities, net of tax

  (383) (383)         (383)  
 

Net income

  154,014  154,014        153,094    920 
                         

Comprehensive Income

    $195,742             
                         

Noncontrolling interests equity contributions

  2,606               2,606 

Dividend payments to noncontrolling interests

  (1,188)              (1,188)
                   

Balance, December 31, 2007

  1,804,544 $  200,693,217  2,007  1,209,512  509,875  74,061  9,089 

Issuance of shares under employee stock purchase plan and option plans and stock-based compensation, including tax benefit of $5,112

  40,564    1,238,115  12  40,552       

Comprehensive Income (Loss):

                         
 

Currency translation adjustment

  (115,619) (115,619)         (114,613) (1,006)
 

Market value adjustments for securities, net of tax

  (663) (663)         (663)  
 

Net income (loss)

  81,943  81,943        82,037    (94)
                        ��

Comprehensive Loss

    $(34,339)            
                         

Noncontrolling interests equity contributions

  1,370               1,370 

Dividend payments to noncontrolling interests

  (1,321)              (1,321)

Parent purchase of noncontrolling interests

  (4,490)              (4,490)
                   

Balance, December 31, 2008

  1,806,328 $  201,931,332  2,019  1,250,064  591,912  (41,215) 3,548 

Issuance of shares under employee stock purchase plan and option plans and stock-based compensation, including tax benefit of $5,532

  48,609    1,615,425  16  48,593       

Comprehensive Income:

                         
 

Currency translation adjustment

  69,455  69,455          68,876  579 
 

Net income

  222,306  222,306        220,877    1,429 
                         

Comprehensive Income

    $291,761             
                         

Noncontrolling interests equity contributions

  578               578 

Dividend payments to noncontrolling interests

  (2,030)              (2,030)
                   

Balance, December 31, 2009

 $2,145,246     203,546,757 $2,035 $1,298,657 $812,789 $27,661 $4,104 
                   

The accompanying notes are an integral part of these consolidated financial statements.


Table of Contents


IRON MOUNTAIN INCORPORATED

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(In thousands)

 
 Years Ended December 31, 
 
 2007 2008 2009 

CONSOLIDATED COMPREHENSIVE INCOME (LOSS):

          

Net Income

 $154,014 $81,943 $222,306 

Other Comprehensive Income (Loss) :

          
 

Foreign Currency Translation Adjustments

  41,941  (115,619) 69,455 
 

Market Value Adjustments for Hedging Contracts, Net of Tax

  170     
 

Market Value Adjustments for Securities, Net of Tax

  (383) (663)  
        

Total Other Comprehensive Income (Loss)

  41,728  (116,282) 69,455 
        

Comprehensive Income (Loss)

  195,742  (34,339) 291,761 
 

Comprehensive Income (Loss) Attributable to Noncontrolling Interests

  2,381  (1,100) 2,008 
        

Comprehensive Income (Loss) Attributable to Iron Mountain Incorporated

 $193,361 $(33,239)$289,753 
        
 
 Year Ended December 31, 
 
 2010 2011 2012 

Net (Loss) Income

 $(52,678)$399,592 $174,834 

Other Comprehensive Income (Loss):

          

Foreign Currency Translation Adjustments

  2,288  (32,616) 23,186 
        

Total Other Comprehensive Income (Loss)

  2,288  (32,616) 23,186 
        

Comprehensive (Loss) Income

  (50,390) 366,976  198,020 

Comprehensive Income (Loss) Attributable to Noncontrolling Interests

  5,375  3,123  3,795 
        

Comprehensive (Loss) Income Attributable to Iron Mountain Incorporated

 $(55,765)$363,853 $194,225 
        

The accompanying notes are an integral part of these consolidated financial statements.


Table of Contents


IRON MOUNTAIN INCORPORATED

CONSOLIDATED STATEMENTS OF EQUITY

(In thousands, except share data)

 
  
 Iron Mountain Incorporated Stockholders' Equity  
 
 
  
 Common Stock  
  
  
  
 
 
  
 Additional
Paid-in
Capital
 Retained
Earnings
 Accumulated Other Comprehensive Items, Net Noncontrolling Interests 
 
 Total Shares Amounts 

Balance, December 31, 2009

 $2,150,760  203,546,757 $2,035 $1,298,657 $818,303 $27,661 $4,104 

Issuance of shares under employee stock purchase plan and option plans and stock-based compensation, including tax benefit of $2,252

  39,530  1,281,332  13  39,517       

Stock options issued in connection with acquisition

  1,997      1,997       

Stock repurchases

  (111,563) (4,764,023) (47) (111,516)      

Parent cash dividends declared

  (75,407)       (75,407)    

Currency translation adjustment

  2,288          1,821  467 

Net (loss) income

  (52,678)       (57,586)   4,908 

Noncontrolling interests dividends

  (2,062)           (2,062)
                

Balance, December 31, 2010

  1,952,865  200,064,066  2,001  1,228,655  685,310  29,482  7,417 

Issuance of shares under employee stock purchase plan and option plans and stock-based compensation, including tax benefit of $919

  102,986  3,930,318  39  102,947       

Stock repurchases

  (988,318) (31,853,418) (319) (987,999)      

Parent cash dividends declared

  (178,281)       (178,281)    

Currency translation adjustment

  (32,616)         (31,685) (931)

Net income (loss)

  399,592        395,538    4,054 

Noncontrolling interests equity contributions

  215            215 

Noncontrolling interests dividends

  (2,187)           (2,187)
                

Balance, December 31, 2011

  1,254,256  172,140,966  1,721  343,603  902,567  (2,203) 8,568 

Issuance of shares under employee stock purchase plan and option plans and stock-based compensation, including tax benefit of $1,045

  73,453  1,958,690  20  73,433       

Shares issued in connection with special dividend (see Note 13)

    17,009,281  170  559,840  (560,010)    

Stock repurchases

  (34,688) (1,103,149) (11) (34,677)      

Parent cash dividends declared

  (328,707)       (328,707)    

Currency translation adjustment

  23,186          22,517  669 

Net income (loss)

  174,834        171,708    3,126 

Noncontrolling interests equity contributions

  836            836 

Noncontrolling interests dividends

  (1,722)           (1,722)

Purchase of noncontrolling interests

  1,000            1,000 
                

Balance, December 31, 2012

 $1,162,448  190,005,788 $1,900 $942,199 $185,558 $20,314 $12,477 
                

The accompanying notes are an integral part of these consolidated financial statements.


Table of Contents


IRON MOUNTAIN INCORPORATED

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)



 Year Ended December 31,  Year Ended December 31, 


 2007 2008 2009  2010 2011 2012 

Cash Flows from Operating Activities:

Cash Flows from Operating Activities:

  

Net (loss) income

 $(52,678)$399,592 $174,834 

Loss (Income) from discontinued operations

 219,417 47,439 6,774 

(Gain) Loss on sale of discontinued operations

  (200,619) 1,885 

Adjustments to reconcile net income (loss) to cash flows from operating activities:

 

Depreciation

 278,760 290,638 280,598 

Amortization (includes deferred financing costs and bond discount of $5,357, $6,318 and $6,948 in 2010, 2011 and 2012, respectively)

 30,802 35,179 42,694 

Intangible impairments

 85,909 46,500  

Stock-based compensation expense

 17,274 17,250 30,360 

Provision (Benefit) for deferred income taxes

 37,666 3,389 (77,201)

Loss on early extinguishment of debt, net

 1,792 993 10,628 

(Gain) Loss on disposal/write-down of property, plant and equipment, net

 (10,987) (2,286) 4,400 

Foreign currency transactions and other, net

 18,043 24,298 11,764 

Changes in Assets and Liabilities (exclusive of acquisitions):

 

Accounts receivable

 11,793 (20,799) (17,964)

Prepaid expenses and other

 (8,811) 5,299 (58,400)

Accounts payable

 (547) 7,069 (706)

Accrued expenses and deferred revenue

 (38,072) 15,629 34,995 

Other assets and long-term liabilities

 12,868 (6,057) (1,009)

Net income

 $154,014 $81,943 $222,306        

Adjustments to reconcile net income to cash flows from operating activities:

 

Cash Flows from Operating Activities-Continuing Operations

 603,229 663,514 443,652 

Cash Flows from Operating Activities-Discontinued Operations

 21,911 (48,076) (10,916)

Depreciation

 222,655 254,619 283,571        

Cash Flows from Operating Activities

 625,140 615,438 432,736 

Cash Flows from Investing Activities:

 

Capital expenditures

 (258,849) (209,155) (240,683)

Cash paid for acquisitions, net of cash acquired

 (13,841) (75,246) (125,134)

Investment in restricted cash

 (35,102) (5) 1,498 

Additions to customer relationship and acquisition costs

 (13,202) (21,703) (28,872)

Investment in joint ventures

  (335) (2,330)

Proceeds from sales of property and equipment and other, net

 22,536 4,231 1,457 

Amortization (includes deferred financing costs and bond discount of $5,361, $4,982 and $5,117, respectively)

 32,000 41,101 40,618        

Cash Flows from Investing Activities-Continuing Operations

 (298,458) (302,213) (394,064)

Cash Flows from Investing Activities-Discontinued Operations

 (134,212) 380,721 (6,136)

Stock-based compensation expense

 13,861 18,988 18,703        

Cash Flows from Investing Activities

 (432,670) 78,508 (400,200)

Cash Flows from Financing Activities:

 

Repayment of revolving credit and term loan facilities and other debt

 (101,884) (2,017,174) (2,844,693)

Proceeds from revolving credit and term loan facilities and other debt

 53,567 2,170,979 2,731,185 

Early retirement of senior subordinated notes

 (202,584) (231,255) (525,834)

Net proceeds from sales of senior subordinated notes

  394,000 985,000 

Debt financing (repayment to) and equity contribution from (distribution to) noncontrolling interests, net

 169 698 480 

Stock repurchases

 (111,563) (984,953) (38,052)

Parent cash dividends

 (37,893) (172,616) (318,845)

Proceeds from exercise of stock options and employee stock purchase plan

 18,225 85,742 40,244 

Excess tax benefits from stock-based compensation

 2,252 919 1,045 

Payment of debt financing costs

  (9,010) (2,261)

Provision for deferred income taxes

 43,813 109,109 29,723        

Cash Flows from Financing Activities-Continuing Operations

 (379,711) (762,670) 28,269 

Cash Flows from Financing Activities-Discontinued Operations

 (1,523) (1,138) (39)

Loss on early extinguishment of debt

 5,703 418 3,031        

(Gain) Loss on disposal/writedown of property, plant and equipment, net

 (5,472) 7,483 406 

Foreign currency transactions and other, net

 17,110 50,312 (12,686)

Changes in Assets and Liabilities (exclusive of acquisitions):

 

Accounts receivable

 (33,650) (25,934) (21,421)

Prepaid expenses and other current assets

 (11,973) (5,923) (21,644)

Accounts payable

 14,213 (21,666) 8,311 

Accrued expenses, deferred revenue and other current liabilities

 25,932 12,836 48,814 

Other assets and long-term liabilities

 6,438 13,743 17,179 
       

Cash Flows from Operating Activities

 484,644 537,029 616,911 

Cash Flows from Investing Activities:

 

Capital expenditures

 (386,442) (386,721) (312,761)

Cash paid for acquisitions, net of cash acquired

 (481,526) (56,632) (2,033)

Additions to customer relationship and acquisition costs

 (16,403) (14,182) (10,759)

Investment in joint ventures

  (1,709) (3,114)

Proceeds from sales of property and equipment and other, net

 17,736 (350) 4,601 
       

Cash Flows from Investing Activities

 (866,635) (459,594) (324,066)

Cash Flows from Financing Activities:

 

Repayment of revolving credit and term loan facilities and other debt

 (2,311,331) (957,507) (287,712)

Proceeds from revolving credit and term loan facilities and other debt

 2,310,044 800,024 36,932 

Early retirement of senior subordinated notes

  (71,881) (447,874)

Net proceeds from sales of senior subordinated notes

 435,818 295,500 539,688 

Debt financing (repayment to) and equity contribution from (distribution to) noncontrolling interests, net

 1,950 960 1,064 

Proceeds from exercise of stock options and employee stock purchase plan

 21,843 16,145 24,233 

Excess tax benefits from stock-based compensation

 6,765 5,112 5,532 

Payment of debt financing costs

 (8,084) (985) (1,555)
       

Cash Flows from Financing Activities

 457,005 87,368 (129,692)

Cash Flows from Financing Activities

 (381,234) (763,808) 28,230 

Effect of Exchange Rates on Cash and Cash Equivalents

Effect of Exchange Rates on Cash and Cash Equivalents

 5,224 (12,040) 5,133  801 (8,986) 2,804 
              

Increase in Cash and Cash Equivalents

 80,238 152,763 168,286 

(Decrease) Increase in Cash and Cash Equivalents

 (187,963) (78,848) 63,570 

Cash and Cash Equivalents, Beginning of Period

Cash and Cash Equivalents, Beginning of Period

 45,369 125,607 $278,370  446,656 258,693 179,845 
              

Cash and Cash Equivalents, End of Period

Cash and Cash Equivalents, End of Period

 $125,607 $278,370 $446,656  $258,693 $179,845 $243,415 
              

Supplemental Information:

Supplemental Information:

  

Cash Paid for Interest

 $226,463 $203,035 $231,936 

Cash Paid for Interest

 $215,451 $242,145 $216,673        

Cash Paid for Income Taxes

 $139,072 $147,998 $228,607 
              

Non-Cash Investing and Financing Activities:

 

Capital Leases

 $30,367 $30,090 $54,518 

Cash Paid for Income Taxes

 $33,994 $44,109 $87,062        

Accrued Capital Expenditures

 $41,222 $43,696 $51,114 
              

Non-Cash Investing Activities:

 

Dividends Payable

 $37,514 $43,180 $53,042 

Capital Leases

 $17,207 $93,147 $72,120        

Unsettled Purchases of Parent Common Stock

 $ $3,364 $ 
              

Accrued Capital Expenditures

 $59,979 $46,009 $53,701 
       

The accompanying notes are an integral part of these consolidated financial statements.


Table of Contents


IRON MOUNTAIN INCORPORATED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 20092012

(In thousands, except share and per share data)

1. Nature of Business

        The accompanying financial statements represent the consolidated accounts of Iron Mountain Incorporated, a Delaware corporation ("IMI"), and its subsidiaries. We are a global full-service provider ofstore records and provide information management and related services for all media in various locations throughout North America, Europe, Latin America and Asia Pacific. We have a diversified customer base comprisedconsisting of commercial, legal, banking, health care, accounting, insurance, entertainment and government organizations.

        In August 2010, we sold the domain name management product line of our digital business (the "Domain Name Product Line"). On June 2, 2011, we sold (the "Digital Sale") our online backup and recovery, digital archiving and eDiscovery solutions businesses of our digital business (the "Digital Business") to Autonomy Corporation plc, a corporation formed under the laws of England and Wales ("Autonomy"), pursuant to a purchase and sale agreement dated as of May 15, 2011 among IMI, certain subsidiaries of IMI and Autonomy (the "Digital Sale Agreement"). Additionally, on October 3, 2011, we sold our records management operations in New Zealand and on April 27, 2012, we sold our records management operations in Italy. The financial position, operating results and cash flows of the Domain Name Product Line, the Digital Business, our New Zealand operations and our Italian operations, including the gain on the sale of the Domain Name Product Line, the Digital Business and our New Zealand operations and the loss on the sale of our Italian operations, for all periods presented, have been reported as discontinued operations for financial reporting purposes. See Note 14 for a further discussion of these events.

2. Summary of Significant Accounting Policies

        The accompanying financial statements reflect our financial position, and results of operations, comprehensive income (loss), equity and cash flows on a consolidated basis. Financial position and results of operations of Iron Mountain Europe Limited ("IME"), our European subsidiary, are consolidated for the appropriate periods based on its fiscal year ended October 31. All intercompany account balances have been eliminated.

        The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America ("GAAP") requires us to make estimates, judgments and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities at the date of the financial statements and for the period then ended. On an on-goingongoing basis, we evaluate the estimates used. We base our estimates on historical experience, actuarial estimates, current conditions and various other assumptions that we believe to be reasonable under the circumstances. These estimates form the basis for making judgments about the carrying values of assets and liabilities and are not readily apparent from other sources. Actual results may differ from these estimates.

        Cash and cash equivalents include cash on hand and cash invested in short-term securities, which have remaining maturities at the date of purchase of less than 90 days. Cash and cash equivalents are carried at cost, which approximates fair value.


Table of Contents


IRON MOUNTAIN INCORPORATED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

DECEMBER 31, 2012

(In thousands, except share and per share data)

2. Summary of Significant Accounting Policies (Continued)

        We have restricted cash associated with a collateral trust agreement with our insurance carrier related to our worker's compensation self-insurance program. The restricted cash subject to this agreement was $35,110 and $33,612 as of December 31, 2011 and 2012, respectively, and is included in current assets on our consolidated balance sheets. Restricted cash consists primarily of U.S. Treasuries.

        Local currencies are considered the functional currencies for our operations outside the United States,U.S., with the exception of certain foreign holding companies and our financing center in Switzerland, whose functional currencies are the U.S. dollar. AllIn those instances where the local currency is the functional currency, assets and liabilities are translated at period-end exchange rates, and revenues and expenses are translated at average exchange rates for the applicable period. Resulting translation adjustments are reflected in the accumulated other comprehensive items, net component of Iron Mountain Incorporated Stockholders' Equity and Noncontrolling Interests. The gain or loss on foreign currency transactions, calculated as the difference between the historical exchange rate and the exchange rate at the applicable measurement date, including those related to (a)(1) our 71/4% GBP Senior Subordinated Notes due 2014, (b)(2) our 63/4% Euro Senior Subordinated Notes due 2018, (c)(3) the borrowings in certain foreign currencies under our revolving credit agreements,agreement and (d)(4) certain foreign currency denominated intercompany obligations of our foreign subsidiaries to us and between our foreign subsidiaries, which are not considered permanently invested, are included in other expense (income), net, on our consolidated


Table of Contents


IRON MOUNTAIN INCORPORATED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

DECEMBER 31, 2009
(In thousands, except share and per share data)

2. Summary of Significant Accounting Policies (Continued)


statements of operations. The total of such netgain or loss on foreign currency transactions amounted to $11,311, a net loss of $28,882,$5,664, $17,352 and a net gain of $12,477$10,223 for the years ended December 31, 2007, 20082010, 2011 and 2009,2012, respectively.

        Every derivative instrument is required to be recorded in the balance sheet as either an asset or a liability measured at its fair value. Periodically, we acquire derivative instruments that are intended to hedge either cash flows or values whichthat are subject to foreign exchange or other market price risk and not for trading purposes. We have formally documented our hedging relationships, including identification of the hedging instruments and the hedged items, as well as our risk management objectives and strategies for undertaking each hedge transaction. Given the recurring nature of our revenues and the long termlong-term nature of our asset base, we have the ability and the preference to use long-term, fixed interest rate debt to finance our business, thereby preserving our long termlong-term returns on invested capital. We target approximately 75% of our debt portfolio to be fixed with respect to interest rates. Occasionally, we willmay use interest rate swaps as a tool to maintain our targeted level of fixed rate debt. In addition, we willmay use borrowings in foreign currencies, either obtained in the U.S. or by our foreign subsidiaries, to naturally hedge foreign currency risk associated with our international investments. Sometimes we enter into currency swaps to temporarily hedge an overseas investment, such as a major acquisition, while we arrange permanent financing or to hedge our exposuresexposure due to foreign currency exchange movements related to our intercompany accounts with and between our foreign subsidiaries. As of December 31, 20082011 and 2009,2012, none of our derivative instruments contained credit-risk related contingent features.


Table of Contents


IRON MOUNTAIN INCORPORATED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

DECEMBER 31, 2012

(In thousands, except share and per share data)

2. Summary of Significant Accounting Policies (Continued)

        Property, plant and equipment are stated at cost and depreciated using the straight-line method with the following useful lives:

Building and building improvements

 5 to 5040 years

Leasehold improvements

 8 to 10 years or the life of the lease, whichever is shorter

Racking

 31 to 20 years

Warehouse equipment

3 to 10 years

Vehicles and vehicles

 2 to 10 years

Furniture and fixtures

 2 to 10 years

Computer hardware and software

 3 to 5 years

Table of Contents


IRON MOUNTAIN INCORPORATED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

DECEMBER 31, 2009
(In thousands, except share and per share data)

2. Summary of Significant Accounting Policies (Continued)

        Property, plant and equipment (including capital leases in the respective category), at cost, consist of the following:


 December 31,  December 31, 

 2008 2009  2011 2012 

Land, buildings and building improvements

 $1,091,340 $1,202,406 

Land

 $172,454 $199,354 

Buildings and building improvements

 1,109,176 1,217,107 

Leasehold improvements

 346,837 429,331  474,965 461,927 

Racking

 1,198,015 1,318,501  1,420,180 1,481,377 

Warehouse equipment/vehicles

 275,866 343,591  355,951 366,754 

Furniture and fixtures

 72,678 78,265  79,193 81,093 

Computer hardware and software

 620,922 663,739  527,585 526,973 

Construction in progress

 144,857 148,798  93,090 108,738 
          

 $3,750,515 $4,184,631  $4,232,594 $4,443,323 
          

        Minor maintenance costs are expensed as incurred. Major improvements which extend the life, increase the capacity or improve the safety or the efficiency of property owned are capitalized. Major improvements to leased buildings are capitalized as leasehold improvements and depreciated.

        We develop various software applications for internal use. Computer software costs associated with internal use software are expensed as incurred until certain capitalization criteria are met. Payroll and related costs for employees who are directly associated with, and who devotedevoting time to, the development of internal use computer software projects (to the extent of the time is spent directly on the project) are capitalized. Capitalization begins when the design stage of the application has been completed and it is probable that the project will be completed and used to perform the function intended. Capitalized software costs are depreciated over the estimated useful life of the software beginningDepreciation begins when the software is placed in service. Computer software costs that are capitalized are periodically evaluated for impairment. During the years ended December 31, 2007, 20082010, 2011 and 2009,2012, we wrote-off $1,263, $610$0, $3,500 (approximately $3,050 associated with our International Business segment and $600,approximately $450 associated with our North American Business segment) and $1,110 associated with our North American Business segment, respectively, of previously deferred software costs (primarily in Corporate), primarily internal labor costs, associated with internal


Table of Contents


IRON MOUNTAIN INCORPORATED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

DECEMBER 31, 2012

(In thousands, except share and per share data)

2. Summary of Significant Accounting Policies (Continued)

use software development projects that were discontinued after implementation, which resulted in a loss on disposal/writedownwrite-down of property, plant and equipment, net in the accompanying consolidated statement of operations.

        Entities are required to record the fair value of a liability for an asset retirement obligation in the period in which it is incurred. Asset retirement obligations represent the costs to repair, replace or remove tangible long-lived assets required by law, regulatory rule or contractual agreement. When the liability is initially recorded, the entity capitalizes the cost by increasing the carrying amount of the related long-lived asset, which is then depreciated over the useful life of the related asset. The liability is increased over time through incomedepreciation expense such that the liability will equate to the future cost to retire the long-lived asset at the expected retirement date. Upon settlement of the liability, an entity either settles the obligation for its recorded amount or realizes a gain or loss upon settlement. Our obligations are primarily the result of requirements under our facility lease agreements which generally have "return to original condition" clauses which would require us to remove or restore items such as shred pits, vaults, demising walls and office build-outs, among others. The significant assumptions used in estimating our aggregate asset retirement obligation are the timing of removals, the probability of a requirement to perform, estimated cost and associated


Table of Contents


IRON MOUNTAIN INCORPORATED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

DECEMBER 31, 2009
(In thousands, except share and per share data)

2. Summary of Significant Accounting Policies (Continued)


expected inflation rates that are consistent with historical rates and credit-adjusted risk-free rates that approximate our incremental borrowing rate.

        A reconciliation of liabilities for asset retirement obligations (included in other long-term liabilities) is as follows:


 December 31,  December 31, 

 2008 2009  2011 2012 

Asset Retirement Obligations, beginning of the year

 $7,775 $9,096  $9,465 $10,116 

Liabilities Incurred

 797 882  300 389 

Liabilities Settled

 (486) (312) (774) (785)

Accretion Expense

 1,010 1,233  1,327 1,056 

Change in Probability Adjustment

 (176)  

Foreign Currency Exchange Movement

 (26) 206 
          

Asset Retirement Obligations, end of the year

 $9,096 $10,899  $10,116 $10,982 
          

        Goodwill and intangible assets with indefinite lives are not amortized but are reviewed annually for impairment or more frequently if impairment indicators arise. WeOther than goodwill, we currently have no intangible assets that have indefinite lives and which are not amortized, other than goodwill.amortized. Separable intangible assets that are not deemed to have indefinite lives are amortized over their useful lives. We periodicallyannually assess whether events or circumstances warrant a change in the life over which our intangible assets are amortized.amortized is necessary or more frequently if events or circumstances warrant.

        We have selected October 1 as our annual goodwill impairment review date. We performed our annual goodwill impairment review as of October 1, 2007, 20082010, 2011 and 2009,2012 and noted no impairment of goodwill.


Table of Contents


IRON MOUNTAIN INCORPORATED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

DECEMBER 31, 2012

(In thousands, except share and per share data)

2. Summary of Significant Accounting Policies (Continued)

goodwill at those dates. However, as a result of interim triggering events as discussed below, we recorded provisional goodwill impairment charges in each of the third quarters of 2010 and 2011 in conjunction with the Digital Sale and associated with our Continental Western Europe (as defined below) operations, respectively. These provisional goodwill impairment charges were finalized in the fourth quarters of the 2010 and 2011 fiscal years, respectively. As of December 31, 2012, no factors were identified that would alter our October 1, 2012 goodwill assessment. In making this assessment, we relyrelied on a number of factors including operating results, business plans, anticipated future cash flows, transactions and market placemarketplace data. There are inherent uncertainties related to these factors and our judgment in applying them to the analysis of goodwill impairment. As of December 31, 2009, no factors were identified that would alter this assessment. When changes occur in the composition of one or more reporting units, the goodwill is reassigned to the reporting units affected based on their relative fair values.

        As discussed in Note 14, we recorded a goodwill impairment charge in 2010 associated with our former worldwide digital business reporting unit. For the year ended December 31, 2010, we allocated $85,909 of this charge to the technology escrow services business based on a relative fair value basis. This charge continues to be included in our continuing results of operations as a component of intangible impairments in our consolidated statements of operations as we retained this business following the Digital Sale. Our technology escrow services business had previously been reported in the former worldwide digital business segment and is now reported in the North American Business segment.

        In September 2011, as a result of certain changes we made in the manner in which our European operations are managed, we reorganized our reporting structure and reassigned goodwill among the revised reporting units. Previously, we tested goodwill impairment at the European level on a combined basis. As a result of the management and reporting changes, we concluded at that time that we had three reporting units at which levelwithin our European operations: (1) United Kingdom, Ireland and Norway ("UKI"); (2) Belgium, France, Germany, Luxembourg, Netherlands and Spain ("Continental Western Europe"); and (3) the remaining countries in Europe ("Central Europe"). As a result of the restructuring of our reporting units, we concluded that we had an interim triggering event, and, therefore, we performed an interim goodwill impairment test for UKI, Continental Western Europe and Central Europe in the third quarter of 2011, as of August 31, 2011. As required by GAAP, prior to our goodwill impairment analysis, as of October 1, 2009 were as follows: North America (excluding Fulfillment), Fulfillment,we performed an impairment assessment on the long-lived assets within our UKI, Continental Western Europe Worldwide Digital Business (excluding Stratify, Inc. ("Stratify")), Stratify, Latin America and Asia Pacific. As of December 31, 2009, the carrying value of goodwill, net amounted to $1,719,124, $1,322, $470,921, $124,035, $130,014, $28,385 and $60,912 for North America (excluding Fulfillment), Fulfillment,Central Europe Worldwide Digital Business (excluding Stratify), Stratify, Latin America and Asia Pacific, respectively.

        Our North America (excluding Fulfillment); Fulfillment; Europe; Worldwide Digital Business (excluding Stratify); Stratify and Latin America reporting units have fair values as of October 1, 2009 that significantly exceed their carrying values. Our Asia Pacificand noted no impairment, except for our Italian operations, which was included in our Continental Western Europe reporting unit, has aand which is now included in discontinued operations as discussed in Note 14. Based on our analysis, we concluded that the goodwill of our UKI and Central Europe reporting units was not impaired. Our Continental Western Europe reporting unit's fair value that exceedswas less than its carrying value, by 9%and, as a result, we recorded a goodwill impairment charge of October 1, 2009. Asia Pacific$46,500 included as a component of intangible impairments from continuing operations in our consolidated statements of operations for the year ended December 31, 2011. A tax benefit of approximately $5,449 was recorded associated with the Continental Western Europe goodwill impairment charge for the year ended December 31, 2011 and is stillincluded in the investment stage and accordingly its fair value does not exceed its carrying value by a significant margin at this pointprovision (benefit) for income taxes from continuing operations in time.the accompanying


Table of Contents


IRON MOUNTAIN INCORPORATED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

DECEMBER 31, 2009
2012

(In thousands, except share and per share data)

2. Summary of Significant Accounting Policies (Continued)


A deteriorationconsolidated statement of operations. See Note 14 for the portion of the charge allocated to our Italian operations based on a relative fair value basis.

        Our reporting units at which level we performed our goodwill impairment analysis as of October 1, 2011 were as follows: (1) North America; (2) UKI; (3) Continental Western Europe; (4) Central Europe; (5) Latin America; (6) Australia; and (7) our China, Hong Kong, India, Russia, Singapore and Ukraine joint ventures (collectively, "Worldwide Joint Ventures"). As of December 31, 2011, the carrying value of goodwill, net amounted to $1,748,879, $306,150, $46,439, $63,781, $27,322 and $61,697 for North America, UKI, Continental Western Europe, Central Europe, Latin America and Australia, respectively. Our Worldwide Joint Ventures reporting unit had no goodwill as of December 31, 2011.

        In 2012, we reorganized the management and reporting structure of our international operations. As a result of the management and reporting changes, we concluded that we have the following six reporting units: (1) North America; (2) United Kingdom, Ireland, Norway, Belgium, France, Germany, Luxembourg, Netherlands and Spain ("Western Europe"); (3) the remaining countries in Europe ("Emerging Markets"); (4) Latin America; (5) Australia, China, Hong Kong and Singapore ("Asia Pacific"); (6) India, Russia and Ukraine ("Emerging Market Joint Ventures"). As of December 31, 2012, the carrying value of goodwill, net amounted to $1,762,307, $365,303, $87,492, $56,893 and $62,764 for North America, Western Europe, Emerging Markets, Latin America and Asia Pacific, business or the business not achieving the forecasted results could lead to anrespectively. Our Emerging Market Joint Ventures reporting unit had no goodwill as of December 31, 2012. Based on our goodwill impairment in future periods.assessment, all of our reporting units with goodwill had estimated fair values as of October 1, 2012 that exceeded their carrying values by greater than 30%.

        Reporting unit valuations have been calculated using an income approach based on the present value of future cash flows of each reporting unit or a combined approach based on the present value of future cash flows and market and transaction multiples of revenues and earnings. The income approach incorporates many assumptions including future growth rates, discount factors, expected capital expenditures and income tax cash flows. Changes in economic and operating conditions impacting these assumptions could result in goodwill impairments in future periods. In conjunction with our annual goodwill impairment reviews, we reconcile the sum of the valuations of all of our reporting units to our market capitalization as of such dates.


Table of Contents


IRON MOUNTAIN INCORPORATED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

DECEMBER 31, 2012

(In thousands, except share and per share data)

2. Summary of Significant Accounting Policies (Continued)

        The changes in the carrying value of goodwill attributable to each reportable operating segment for the years ended December 31, 20082011 and 20092012 is as follows:

 
 North
American
Business
 International
Business
 Total
Consolidated
 

Gross Balance as of December 31, 2010

 $2,012,049 $542,379 $2,554,428 

Deductible goodwill acquired during the year

  1,398    1,398 

Non-deductible goodwill acquired during the year

    35,207  35,207 

Fair value and other adjustments(1)

  2,161  (865) 1,296 

Currency effects

  (5,367) (12,677) (18,044)
        

Gross Balance as of December 31, 2011

  2,010,241  564,044  2,574,285 

Deductible goodwill acquired during the year

  7,605  32,609  40,214 

Non-deductible goodwill acquired during the year

    18,079  18,079 

Currency effects

  6,125  16,796  22,921 
        

Gross Balance as of December 31, 2012

 $2,023,971 $631,528 $2,655,499 
        

Accumulated Amortization Balance as of December 31, 2010

 $261,629 $13,238 $274,867 

Goodwill impairment

    46,500  46,500 

Currency effects

  (267) (1,083) (1,350)
        

Accumulated Amortization Balance as of December 31, 2011

  261,362  58,655  320,017 

Currency effects

  302  421  723 
        

Accumulated Amortization Balance as of December 31, 2012

 $261,664 $59,076 $320,740 
        

Net Balance as of December 31, 2010

 $1,750,420 $529,141 $2,279,561 
        

Net Balance as of December 31, 2011

 $1,748,879 $505,389 $2,254,268 
        

Net Balance as of December 31, 2012

 $1,762,307 $572,452 $2,334,759 
        

Accumulated Goodwill Impairment Balance as of December 31, 2011

 $85,909 $46,500 $132,409 
        

Accumulated Goodwill Impairment Balance as of December 31, 2012

 $85,909 $46,500 $132,409 
        

 
 North
American
Physical
Business
 International
Physical
Business
 Worldwide
Digital
Business
 Total
Consolidated
 

Balance as of December 31, 2007

 $1,717,700 $597,195 $259,397 $2,574,292 

Deductible goodwill acquired during the year

  12,281      12,281 

Non-deductible goodwill acquired during the year

    5,999    5,999 

Adjustments to purchase reserves

  6,927  218    7,145 

Fair value and other adjustments(1)

  (3,302) 4,395  (5,348) (4,255)

Currency effects

  (44,146) (99,012)   (143,158)
          

Balance as of December 31, 2008

  1,689,460  508,795  254,049  2,452,304 

Adjustments to purchase reserves

  (1,094) (24)   (1,118)

Fair value and other adjustments(2)

  2,467  6,959    9,426 

Currency effects

  29,613  44,488    74,101 
          

Balance as of December 31, 2009

 $1,720,446 $560,218 $254,049 $2,534,713 
          

(1)
Fair value and other adjustments primarily includes $2,319include $(835) of adjustments to property, plant and equipment, net, customer relationships and deferred income taxes, as well as $131 of cash paid related to prior year's acquisitions adjustments to deferred taxes of approximately $(3,213), and finalization of deferred revenue, customer relationship and property, plant and equipment (primarily racking) allocations from preliminary estimates previously recorded of approximately $(3,361).

(2)
Fair value and other adjustments primarily includes $2,033 of cash paid related to prior year's acquisitions, $6,963$2,000 of contingent earn-out obligations accrued and unpaid as of December 31, 20092011 related to a 2007 acquisition.

Table of Contents


IRON MOUNTAIN INCORPORATED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

DECEMBER 31, 2012
(In thousands, except share and $430per share data)

2. Summary of adjustments to deferred income taxes.

Significant Accounting Policies (Continued)

        We review long-lived assets and all amortizable intangible assets for impairment whenever events or changes in circumstances indicate the carrying amount of such assets may not be recoverable. Recoverability of these assets is determined by comparing the forecasted undiscounted net cash flows of


Table of Contents


IRON MOUNTAIN INCORPORATED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

DECEMBER 31, 2009
(In thousands, except share and per share data)

2. Summary of Significant Accounting Policies (Continued)


the operation to which the assets relate to their carrying amount. The operations are generally distinguished by the business segment and geographic region in which they operate. If the operation is determined to be unable to recover the carrying amount of its assets, then intangible assets are written down first, followed by the other long-lived assets of the operation, to fair value. Fair value is determined based on discounted cash flows or appraised values, depending upon the nature of the assets.

        Consolidated gainsgain on disposal/writedownwrite-down of property, plant and equipment, net of $5,472$10,987 in the year ended December 31, 20072010 consisted primarily of a gain of approximately $10,200 as a result of the settlement with our insurers in connection with a portion of the property component of our claim related to insurance proceeds from our property claim of $7,745 associated with the July 2006 fire in one of our London, England facilities, net of a $1,263 write-off of previously deferred software costs in Corporate associated with a discontinued product after implementation. Consolidated loss on disposal/writedown of property, plant and equipment, net of $7,483Chilean earthquake in the year ended December 31, 2008 consistedthird and fourth quarter of 2010, gains of approximately $3,200 in North America primarily of losses onrelated to the writedowndisposition of certain facilities of approximately $6,019 in our North American Physical Business, $610 write-off of previously deferred software costs in Corporate associated with discontinued products after implementationowned equipment and other disposals and asset writedowns. Consolidated loss on disposal/writedown of property, plant and equipment, net of $406 in the year ended December 31, 2009 consisted primarily of a gain on disposal of a building in our International PhysicalBusiness segment of approximately $1,900$1,300 in France,the United Kingdom, offset by approximately $1,000 of asset write-downs associated with our Latin American operations and approximately $2,600 of impairment losses primarily related to certain owned facilities in North America. Consolidated gain on disposal/write-down of property, plant and equipment, net of $2,286 in the year ended December 31, 2011 consisted primarily of a gain of approximately $3,200 related to the disposition of a facility in Canada and a gain of approximately $3,000 on the writedownretirement of certain facilities of approximately $1,000 inleased vehicles accounted for as capital lease assets associated with our North American PhysicalBusiness segment, $700 inoffset by a loss associated with discontinued use of certain third-party software licenses of approximately $3,500 (approximately $3,050 associated with our International Physical segment, $300 in our Worldwide DigitalBusiness segment and $300approximately $450 associated with our North American Business segment). Consolidated loss on disposal/write-down of property, plant and equipment, net was $4,400 in Corporate (associatedthe year ended December 31, 2012 and consisted primarily of approximately $5,500, $1,900 and $500 of asset write-offs in Europe, North America and Latin America, respectively, partially offset by approximately $3,500 of gains associated with discontinued products after implementation).the sale of leased vehicles in North America.

        Costs related to the acquisition of large volume accounts net of revenues received for the initial transfer of the records, are capitalized. Initial costs incurred to transport the boxes to one of our facilities, which includes labor and transportation charges, are amortized over periods ranging from one to 30 years (weighted average of 25 years at December 31, 2009)2012), and are included in depreciation and amortization in the accompanying consolidated statements of operations. Payments to a customer's current records management vendor or direct payments to a customer are amortized over periods ranging from one to 10 years (weighted average of 4five years at December 31, 2009)2012) to the storage and service revenue line items in the accompanying consolidated statements of operations. If the customer terminates its relationship with us, the unamortized cost is charged to expense or revenue. However, in the event of such termination, we generally collect, and record as income, permanent removal fees that generally equal or exceed the amount of the unamortized costs. Customer relationship intangible assets acquired through business combinations, which represents the majority of the balance, are amortized over periods ranging from six to 30 years (weighted average of 22 years at December 31, 2009). Amounts allocated in purchase accounting to customer relationship intangible assets are calculated based upon estimates of their fair value. Other intangible assets, including noncompetition agreements, acquired core technology and trademarks, are capitalized and amortized over periods ranging from two to 25 years (weighted average of 9 years at December 31, 2009).


Table of Contents


IRON MOUNTAIN INCORPORATED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

DECEMBER 31, 20092012
(In thousands, except share and per share data)

2. Summary of Significant Accounting Policies (Continued)

which represents the majority of the balance, are amortized over periods ranging from eight to 30 years (weighted average of 19 years at December 31, 2012). Amounts allocated in purchase accounting to customer relationship intangible assets are calculated based upon estimates of their fair value utilizing an income approach based on the present value of expected future cash flows. Other intangible assets, including noncompetition agreements, acquired core technology and trademarks, are capitalized and amortized over periods ranging from one to 10 years (weighted average of seven years at December 31, 2012).

        The gross carrying amount and accumulated amortization are as follows:

 
 December 31, 
Gross Caryying Amount
 2008 2009 

Customer relationship and acquisition costs

  541,300  574,223 

Other intangible assets (included in other assets, net)

  
55,682
  
56,738
 


 December 31, 
Gross Carrying Amount
 2011 2012 

Customer relationship and acquisition costs

 $593,901 $685,898 

Other intangible assets (included in other assets, net)

 6,761 9,778 
Accumulated Amortization
  
  
    

Customer relationship and acquisition costs

 97,571 135,411  
$

183,752
 
$

229,778
 

Other intangible assets (included in other assets, net)

 20,815 29,208  4,899 5,875 

        The amortization expense for the years ended December 31, 2007, 20082010, 2011 and 20092012 are as follows:



 Year Ended December 31,  Year Ended December 31, 


 2007 2008 2009  2010 2011 2012 

Customer relationship and acquisition costs:

Customer relationship and acquisition costs:

  

Amortization expense included in depreciation and amortization

 22,110 28,366 27,202 

Amortization expense charged to revenues

 4,864 6,528 8,096 

Amortization expense included in depreciation and amortization

 $24,435 $27,900 $34,806 

Amortization expense offsetting revenues

 9,710 10,100 10,784 

Other intangible assets:

Other intangible assets:

  

Amortization expense included in depreciation and amortization

 4,526 7,753 8,299 

Amortization expense included in depreciation and amortization

 1,010 961 940 

        Estimated amortization expense for existing intangible assets (excluding deferred financing costs, which are amortized through interest expense, of $5,156, $5,156, $4,596, $4,409$6,823, $6,366, $6,211, $5,146 and $3,577$4,077 for 2010, 2011, 2012, 2013, 2014, 2015, 2016 and 2014,2017, respectively) for the next five succeeding fiscal years is as follows:

 
 Estimated Amortization 
 
 Included in Depreciation
and Amortization
 Charged to Revenues 

2010

  29,915  4,317 

2011

  27,976  3,274 

2012

  26,894  1,852 

2013

  26,009  951 

2014

  25,102  458 
 
 Estimated Amortization 
 
 Included in Depreciation
and Amortization
 Charged to Revenues 

2013

 $37,582 $6,194 

2014

  36,861  4,556 

2015

  36,304  3,651 

2016

  35,187  2,662 

2017

  32,092  2,169 

Table of Contents


IRON MOUNTAIN INCORPORATED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

DECEMBER 31, 2012
(In thousands, except share and per share data)

2. Summary of Significant Accounting Policies (Continued)

        Deferred financing costs are amortized over the life of the related debt using the effective interest rate method. If debt is retired early, the related unamortized deferred financing costs are written off in the period the debt is retired to other expense (income), net. As of December 31, 20082011 and 2009,2012, gross carrying amount of deferred financing costs was $52,778$54,826 and $52,952,$63,649, respectively, and accumulated amortization of those costs was $19,592$19,028 and $17,746,$19,799, respectively, and was recorded in other assets, net in the accompanying consolidated balance sheet.


Table of Contents


IRON MOUNTAIN INCORPORATED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

DECEMBER 31, 2009
(In thousands, except share and per share data)

2. Summary of Significant Accounting Policies (Continued)

        AccruedPrepaid expenses and accrued expenses with items greater than 5% of total current assets and liabilities shown separately, respectively, consist of the following:

 
 December 31, 
 
 2008 2009 

Interest

 $60,305 $67,924 

Payroll and vacation

  72,094  77,475 

Restructuring costs (see Note 6)

  2,278  1,052 

Incentive compensation

  45,134  55,416 

Income taxes

    21,764 

Other

  176,662  167,229 
      

 $356,473 $390,860 
      
 
 December 31, 
 
 2011 2012 

Income tax receivable

 $17,174 $68,312 

Other

  88,363  96,401 
      

Prepaid expenses

 $105,537 $164,713 
      


 
 December 31, 
 
 2011 2012 

Interest

 $59,268 $64,227 

Payroll and vacation

  75,384  80,931 

Incentive compensation

  62,550  63,828 

Dividend

  43,180  53,042 

Self-insured liabilities (Note 10.b.)

  39,358  34,806 

Other

  139,091  129,979 
      

Accrued expenses

 $418,831 $426,813 
      

        Our revenues consist of storage rental revenues as well as service revenues and are reflected net of sales and value added taxes. Storage rental revenues, both physical and digital, which are considered a key driver of financial performance indicator for the storage and information management services industry, consist primarily of largely recurring periodic rental charges related to the storage of materials or data (generally on a per unit basis). Service revenues are comprised ofinclude charges for related core service activities and a wide array of complementary products and services. Included in core service revenues are: (1) the handling of records, including the addition of new records, temporary removal of records from storage, refiling of removed records and the destruction of records, and permanent withdrawals from storage;records; (2) courier operations, consisting primarily of the pickup and delivery of records upon customer request; (3) secure shredding of sensitive documents; and (4) other recurring services, including maintenanceDocument Management Solutions ("DMS"), which relate to physical and support contracts.digital records, and recurring project revenues. Our complementary services revenues


Table of Contents


IRON MOUNTAIN INCORPORATED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

DECEMBER 31, 2012
(In thousands, except share and per share data)

2. Summary of Significant Accounting Policies (Continued)

include special project work, customer termination and permanent withdrawal fees, data restoration projects, fulfillment services, consulting services, technology services and product sales (including software licenses, specially designed storage containers and related supplies). Our secure shredding revenues include the sale of recycled paper (included in complementary services)services revenues), the price of which can fluctuate from period to period, adding to the volatility and reducing the predictability of that revenue stream.

        We recognize revenue when the following criteria are met: persuasive evidence of an arrangement exists, services have been rendered, the sales price is fixed or determinable and collectability of the resulting receivable is reasonably assured. Storage rental and service revenues are recognized in the month the respective storage rental or service is provided, and customers are generally billed on a monthly basis on contractually agreed-upon terms. Amounts related to future storage rental or prepaid service contracts, including maintenance and support contracts for customers where storage rental fees or services are billed in advance are accounted for as deferred revenue and recognized ratably over the applicable storage rental or service period or when the service is performed. Revenue from the sales of products, which is included as a component of service revenues, is recognized when products are shipped to the customer and title has passed to the customer. SalesRevenues from the sales of software licenses are recognized at the time of product delivery to our customer or reseller and maintenance and support agreements are recognized ratably over the term of the agreement. Software license sales and maintenance and support accounted for less than 1% of our 2009 consolidated revenues. Within our


Table of Contents


IRON MOUNTAIN INCORPORATED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

DECEMBER 31, 2009
(In thousands, except share and per share data)

2. Summary of Significant Accounting Policies (Continued)


Worldwide Digital Business segment, in certain instances, we process and host data for customers. In these instances, the processing fees are deferred and recognized over the estimated service period.products have historically not been significant.

        We have entered into various leases for buildings that expire over various terms. Certain leases have fixed escalation clauses (excluding those tied to CPIthe consumer price index or other inflation-based indices) or other features (including return to original condition, primarily in the United Kingdom) which require normalization of the rental expense over the life of the lease resulting in deferred rent being reflected as a liability in the accompanying consolidated balance sheets. In addition, we have assumed various above and below market leases in connection with certain of our acquisitions. The difference between the present value of these lease obligations and the market rate at the date of the acquisition was recorded as a deferred rent liability or other long-term asset and is being amortized over the remaining lives of the respective leases.

        We record stock-based compensation expense, utilizing the straight-line method, for the cost of stock options, restricted stock, restricted stock units, performance units and shares of stock issued under the employee stock purchase plan (together, "Employee Stock-Based Awards").

        Stock-based compensation expense for Employee Stock-Based Awards included in the accompanying consolidated statements of operations for the years ended December 31, 2007, 20082010, 2011 and 20092012 was $13,861$20,378, including $3,104 in discontinued operations, ($10,16415,672 after tax or $0.08 per basic and diluted share), $17,510, including $260 in discontinued operations, ($8,834 after tax or $0.05 per basic and diluted share), $18,988 and $30,360 ($15,68223,437 after tax or $0.08$0.14 per basic and diluted share) and $18,703 ($14,716 after tax or $0.07$0.13 per basic and diluted share), respectively,respectively.


Table of Contents


IRON MOUNTAIN INCORPORATED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

DECEMBER 31, 2012
(In thousands, except share and per share data)

2. Summary of Significant Accounting Policies (Continued)

        Stock-based compensation expense for Employee Stock-Based Awards.Awards included in the accompanying consolidated statements of operations related to continuing operations is as follows:

 
 Year Ended December 31, 
 
 2010 2011 2012 

Cost of sales (excluding depreciation and amortization)

 $730 $914 $1,392 

Selling, general and administrative expenses

  16,544  16,336  28,968 
        

Total stock-based compensation

 $17,274 $17,250 $30,360 
        

        The benefits associated with the tax deductions in excess of recognized compensation cost are required to be reported as a financing activities in the consolidated statements of cash flow. This requirement reduces reported operating cash flows and increases reported financing cash flows. As a result, net financing cash flows from continuing operations included $6,765, $5,112$2,252, $919 and $5,532$1,045 for the years ended December 31, 2007, 20082010, 2011 and 2009,2012, respectively, from the benefits of tax deductions in excess of recognized compensation cost. We used the short form method to calculate the Additional Paid-in Capital ("APIC") pool. The tax benefit of any resulting excess tax deduction increases the APICAdditional Paid-in Capital ("APIC") pool. Any resulting tax deficiency is deducted from the APIC pool.

Stock Options

        Under our various stock option plans, options were granted with exercise prices equal to the market price of the stock on the date of grant. The majority of our options become exercisable ratably over a period of five years and generally have a contractual life of 10ten years, unless the holder's employment is terminated. Beginning in 2007, certainterminated sooner. Certain of the options we issue become exercisable ratably over a period of ten years and have a contractual life of 12 years, unless the holder's employment is terminated.terminated sooner. As of December 31, 2009, 10-year2012, ten-year vesting options represent 8.5%9.3% of total outstanding options. Beginning in 2011, certain of the options we issue become exercisable ratably over a period of three years and have a contractual life of ten years, unless the holder's employment is terminated sooner. As of December 31, 2012, three-year vesting options represent 14.4% of total outstanding options. Our non-employee directors are considered employees for purposes of our stock option plans and stock option reporting.


Table of Contents


IRON MOUNTAIN INCORPORATED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

DECEMBER 31, 2009
(In thousands, except share and per share data)

2. Summary of Significant Accounting Policies (Continued) Options granted to our non-employee directors generally become exercisable after one year.

        In December 2008, we amended each of the Iron Mountain Incorporated 2002 Stock Incentive Plan, the Iron Mountain Incorporated 1997 Stock Option Plan and the LiveVault Corporation 2001 Stock Incentive Plan and the Stratify, Inc. 1999 Stock Plan (each a "Plan" and, collectively, the "Plans") to provide that any unvested options and other awards granted under theeach respective Plan shall vest immediately should an employee be terminated by the Company, or terminate his or her own employment for good reason (as defined in each Plan), in connection with a vesting change in control (as defined in each Plan). The Mimosa Systems, Inc. 2009 Equity Incentive Plan and the Mimosa Systems, Inc. 2003 Stock Plan were similarly amended in June 2010.


Table of Contents


IRON MOUNTAIN INCORPORATED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

DECEMBER 31, 2012
(In thousands, except share and per share data)

2. Summary of Significant Accounting Policies (Continued)

        A total of 37,536,44238,917,411 shares of common stock have been reserved for grants of options and other rights under our various stock incentive plans. The number of shares available for grant at December 31, 20092012 was 7,609,807.6,801,350.

        The weighted average fair value of options granted in 2007, 20082010, 2011 and 20092012 was $11.72, $9.49$7.71, $7.42 and $9.72$7.00 per share, respectively. TheThese values were estimated on the date of grant using the Black-Scholes option pricing model. The following table summarizes the weighted average assumptions used for grants in the year ended December 31:

Weighted Average Assumption
 2007 2008 2009 
Weighted Average Assumptions
 2010 2011 2012 

Expected volatility

 27.7% 26.7% 32.1%  32.8% 33.4% 33.8%

Risk-free interest rate

 4.42% 2.98% 2.64%  2.48% 2.40% 1.24%

Expected dividend yield

 None None None  1.2% 3% 3%

Expected life of the option

 7.5 Years 6.6 Years 6.4 Years 

Expected life

 6.4 Years 6.3 Years 6.3 Years 

        Expected volatility wasis calculated utilizing daily historical volatility over a period that equates to the expected life of the option. The risk-free interest rate was based on the U.S. Treasury interest rates whose term is consistent with the expected life of the stock options. Expected dividend yield was notis considered in the option pricing model since we historically have not paid dividends.and represents our current annualized expected per share dividends over the current trade price of our common stock. The expected life (estimated period of time outstanding) of the stock options granted wasis estimated using the historical exercise behavior of employees.

        A summary of option activity for the year ended December 31, 20092012 is as follows:


 Options Weighted
Average
Exercise
Price
 Weighted
Average
Remaining
Contractual
Term
 Aggregate
Intrinsic
Value
  Options Weighted
Average
Exercise
Price
 Weighted
Average
Remaining
Contractual
Term
 Aggregate
Intrinsic
Value
 

Outstanding at December 31, 2008

 12,210,175 $22.70     

Outstanding at December 31, 2011

 7,118,458 $25.73     

Granted

 1,985,725 25.90      21,472 25.76     

Issued in connection with special dividend

 856,019 N/A     

Exercised

 (1,356,386) 13.36      (1,772,947) 21.53     

Forfeited

 (607,822) 26.51      (271,462) 22.74     

Expired

 (132,331) 24.84      (43,438) 28.49     
          

Outstanding at December 31, 2009

 12,099,361 $24.06 6.44 $28,676 

Outstanding at December 31, 2012

 5,908,102 $23.39 5.88 $45,908 
                  

Options exercisable at December 31, 2009

 5,494,992 $20.73 5.71 $24,813 

Options exercisable at December 31, 2012

 3,748,668 $23.42 5.11 $29,251 
                  

Options expected to vest

 2,021,352 $23.35 7.26 $15,572 
         

Table of Contents


IRON MOUNTAIN INCORPORATED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

DECEMBER 31, 20092012
(In thousands, except share and per share data)

2. Summary of Significant Accounting Policies (Continued)

        The following table provides the aggregate intrinsic value of stock options exercised and the aggregate fair value of stock options vested for the years ended December 31, 2007, 20082010, 2011 and 2009:2012:

 
 Years Ended December 31, 
 
 2007 2008 2009 

Aggregate intrinsic value of stock options exercised

 $24,113 $17,307 $18,929 
        

Aggregate fair value of stock options vested

 $29,361 $17,825 $18,686 
        
 
 Year Ended December 31, 
 
 2010 2011 2012 

Aggregate intrinsic value of stock options exercised

 $12,063 $37,901 $15,859 

Restricted Stock and Restricted Stock Units

        Under our various stock option plans, we may also issue grants of restricted stock. We issuedstock or restricted stock in July 2005, which hadunits ("RSUs"). Our restricted stock and RSUs generally have a 3-year vesting period, and in December 2006, December 2007 and June 2009, which had a 5-yearthree to five year vesting period. As a result of an amendment to our RSUs approved by our Compensation Committee of our board of directors in October 2012, all RSUs now accrue dividend equivalents associated with the underlying stock as we declare dividends. Dividends will generally be paid to holders of RSUs in cash upon the vesting date of the associated RSU and will be forfeited if the RSU does not vest. We accrued approximately $1,378 of cash dividends on RSUs for the year ended December 31, 2012. The fair value of restricted stock and RSUs is the excess of the market price of our common stock at the date of grant over the exercisepurchase price which(which is zero. Included in our stock-based compensation expense for the years ended December 31, 2007, 2008 and 2009 is a portion of the cost related to restricted stock granted in July 2005, December 2006, December 2007 and June 2009.typically zero).

        A summary of restricted stock and RSUs activity for the year ended December 31, 20092012 is as follows:


 Restricted
Stock
 Weighted-
Average
Grant-Date
Fair Value
  Restricted
Stock and
RSUs
 Weighted-
Average
Grant-Date
Fair Value
 

Non-vested at December 31, 2008

 810 $37.53 

Non-vested at December 31, 2011

 610,951 $28.85 

Granted

 2,474 28.36  898,093 30.08 

Issued in connection with special dividend

 122,589 N/A 

Vested

    (286,931) 28.91 

Forfeited

 (1,008) 35.73  (41,038) 27.51 
          

Non-vested at December 31, 2009

 2,276 28.36 

Non-vested at December 31, 2012

 1,303,664 $29.89 
          

        The total fair value of sharesrestricted stock vested for the years ended December 31, 2007, 20082010, 2011 and 20092012 was $863, $823$13, $13 and $0,$1, respectively. No RSUs vested during 2010. The total fair value of RSUs vested for the years ended December 31, 2011 and 2012 was $931 and $8,296, respectively.

Performance Units

        Under our various stock option plans, we may also issue grants of performance units ("PUs"). The number of PUs earned is determined based on our performance against predefined targets, which for grants of PUs made in 2011 and 2012 were calendar year revenue growth and return on invested capital ("ROIC"). The range of payout is zero to 150% of the number of granted PUs. The number of PUs earned is determined based on actual performance at the end of the one-year performance period, and the award will be settled in shares of our common stock, subject to cliff vesting, three years from


Table of Contents


IRON MOUNTAIN INCORPORATED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

DECEMBER 31, 2012
(In thousands, except share and per share data)

2. Summary of Significant Accounting Policies (Continued)

the date of the original PU grant. Additionally, employees who subsequently terminate their employment after the end of the one-year performance period and on or after attaining age 55 and completing 10 years of qualifying service (the "retirement criteria") shall immediately and completely vest in any PUs earned based on the actual achievement against the predefined targets as discussed above. As a result, PUs will be expensed over the shorter of (1) the vesting period, (2) achievement of the retirement criteria, which such achievement may occur as early as one year after the date of grant, or (3) a maximum of three years. As a result of an amendment to our PUs approved by our Compensation Committee of our board of directors in October 2012, all PUs now accrue dividend equivalents associated with the underlying stock as we declare dividends. Dividends will generally be paid to holders of PUs in cash upon the vesting date of the associated PU and will be forfeited if the PU does not vest. We accrued approximately $369 of cash dividends on PUs for the year ended December 31, 2012.

        In 2011 and 2012, we issued 154,239 and 221,781 PUs, respectively. During the one-year performance period, we will forecast the likelihood of achieving the predefined annual revenue growth and ROIC targets in order to calculate the expected PUs to be earned. We will record a compensation charge based on either the forecasted PUs to be earned (during the one-year performance period) or the actual PUs earned (at the one-year anniversary date) over the vesting period for each individual grant as described above. No PUs vested during 2011. The total fair value of earned PUs that vested during the year ended December 31, 2012 was $4,285. As of December 31, 2012, we expected 98.2% achievement of the predefined revenue and ROIC targets associated with the grants made in 2012.

        A summary of PU activity for the year ended December 31, 2012 is as follows:

 
 PUs Original
Awards
 PUs
Adjustment(1)
 Total
PUs Awards
 Weighted-
Average
Grant-Date
Fair Value
 

Non-vested at December 31, 2011

  112,749    112,749 $29.37 

Granted

  221,781  12,012  233,793  29.48 

Issued in connection with special dividend

  32,495  1,392  33,887  N/A 

Vested

  (124,914) (17,851) (142,765) 30.01 

Forfeited

  (6,018)   (6,018) 28.63 
           

Non-vested at December 31, 2012

  236,093  (4,447) 231,646 $29.12 
          

(1)
Represents the additional number of PUs based on either (a) the final performance criteria achievement at the end of the one-year performance period or (b) a change in estimated awards based on the forecasted performance against the predefined targets.

Employee Stock Purchase Plan

        We offer an employee stock purchase plan (the "ESPP") in which participation is available to substantially all U.S. and Canadian employees who meet certain service eligibility requirements (the "ESPP").requirements. The ESPP provides a way for our eligible employees to become stockholders on favorable terms. The ESPP


Table of Contents


IRON MOUNTAIN INCORPORATED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

DECEMBER 31, 2012
(In thousands, except share and per share data)

2. Summary of Significant Accounting Policies (Continued)

provides for the purchase of our common stock by eligible employees through successive offering periods. We generally have two 6-monthsix-month offering periods per year, the first of which begins June 1 and ends November 30 and the second of which begins December 1 and ends May 31. During each offering period, participating employees accumulate after-tax payroll contributions, up to a maximum of 15% of their compensation, to pay the exercise price of their options. Participating employees may withdraw from an


Table of Contents


IRON MOUNTAIN INCORPORATED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

DECEMBER 31, 2009
(In thousands, except share and per share data)

2. Summary of Significant Accounting Policies (Continued)


offering period before the purchase date and obtain a refund of the amounts withheld as payroll deductions. At the end of the offering period, outstanding options are exercised, and each employee's accumulated contributions are used to purchase our common stock. The price for shares purchased under the ESPP is 95% of the fair market price at the end of the offering period, without a look backlook-back feature. As a result, we do not recognize compensation cost for ourthe ESPP shares purchased. The ESPP was amended and approved by our stockholders on May 26, 2005 to increaseand the number of shares from 1,687,500available for purchase under the ESPP was increased to 3,487,500. For the years ended December 31, 2007, 20082010, 2011 and 2009,2012, there were 274,881257,381 shares, 305,151154,559 shares and 258,680151,285 shares, respectively, purchased under the ESPP. The number of shares available for purchase under the ESPP at December 31, 20092012 was 811,701.279,226.



        As of December 31, 2009,2012, unrecognized compensation cost related to the unvested portion of our Employee Stock-Based Awards was $59,506$44,255 and is expected to be recognized over a weighted-average period of 4.02.2 years.

        We generally issue shares for the exercises of stock options, issuance of restricted stock, RSUs, PUs and issuance of shares under our ESPP from unissued reserved shares.

        Accounting for income taxes requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of temporary differences between the tax and financial reporting basis of assets and liabilities and for loss and credit carryforwards. Valuation allowances are provided when recovery of deferred tax assets is not considered more likely than not. We have elected to recognize interest and penalties associated with uncertain tax positions as a component of the provision (benefit) for income taxes in the accompanying consolidated statements of operations.

        Basic net income (loss) per common share is calculated by dividing net income attributable to Iron Mountain Incorporated(loss) by the weighted average number of common shares outstanding. The calculation of diluted net income (loss) per share is consistent with that of basic net income (loss) per share but gives effect to all potential common shares (that is, securities such as options, warrants or convertible securities) that were outstanding during the period, unless the effect is antidilutive.


Table of Contents


IRON MOUNTAIN INCORPORATED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

DECEMBER 31, 20092012
(In thousands, except share and per share data)

2. Summary of Significant Accounting Policies (Continued)

        The following table presents the calculation of basic and diluted net income (loss) per share attributable to Iron Mountain Incorporated:share:

 
 Year Ended December 31, 
 
 2007 2008 2009 

Net income attributable to Iron Mountain Incorporated

 $153,094 $82,037 $220,877 
        

Weighted-average shares—basic

  199,938,000  201,279,000  202,812,000 

Effect of dilutive potential stock options

  2,108,554  2,004,974  1,458,777 

Effect of dilutive potential restricted stock

  15,764  6,189  41 
        

Weighted-average shares—diluted

  202,062,318  203,290,163  204,270,818 
        

Net income per share attributable to Iron Mountain Incorporated—basic

 $0.77 $0.41 $1.09 
        

Net income per share attributable to Iron Mountain Incorporated—diluted

 $0.76 $0.40 $1.08 
        

Antidilutive stock options, excluded from the calculation

  2,039,601  4,065,455  8,085,784 
        
 
 Year Ended December 31, 
 
 2010 2011 2012 

Income (Loss) from continuing operations

 $166,739 $246,412 $183,493 
        

Total (loss) income from discontinued operations (see Note 14)

 $(219,417)$153,180 $(8,659)
        

Net (loss) income attributable to Iron Mountain Incorporated

 $(57,586)$395,538 $171,708 
        

Weighted-average shares—basic

  201,991,000  194,777,000  173,604,000 

Effect of dilutive potential stock options

    1,060,477  914,308 

Effect of dilutive potential restricted stock, RSUs and PUs

    100,136  349,128 
        

Weighted-average shares—diluted

  201,991,000  195,937,613  174,867,436 
        

Earnings (Losses) per share—basic:

          

Income (Loss) from continuing operations

 $0.83 $1.27 $1.06 
        

Total (loss) income from discontinued operations (see Note 14)

 $(1.09)$0.79 $(0.05)
        

Net (loss) income attributable to Iron Mountain Incorporated—basic

 $(0.29)$2.03 $0.99 
        

Earnings (Losses) per share—diluted:

          

Income (Loss) from continuing operations

 $0.83 $1.26 $1.05 
        

Total (loss) income from discontinued operations (see Note 14)

 $(1.09)$0.78 $(0.05)
        

Net (loss) income attributable to Iron Mountain Incorporated—diluted

 $(0.29)$2.02 $0.98 
        

Antidilutive stock options, RSUs and PUs, excluded from the calculation

  9,305,328  3,973,760  1,286,150 
        

        Effective January 1, 2009, GAAP for noncontrolling interests changed. The presentation and disclosure requirements of noncontrolling interests have been applied to all of our financial statements, notes and other financial data retrospectively for all periods presented.

        In June 2009,September 2011, the Financial Accounting Standards Board ("FASB") established the FASBissued Accounting Standards Codification (the "Codification"Update ("ASU") No. 2011-08,Intangibles—Goodwill and Other (Topic 350): Testing Goodwill for Impairment. ASU No. 2011-08 allows, but does not require, entities to becomefirst assess qualitatively whether it is necessary to perform the sourcetwo-step goodwill impairment test. If an entity believes, as a result of authoritative U.S. GAAP recognized byits qualitative assessment, that it is more likely than not that the FASB to be applied by nongovernmental entities. Rules and interpretive releases of the SEC under authority of federal securities laws are also sources of authoritative U.S. GAAP for SEC registrants. The Codification was effective for financial statements issued for interim and annual periods ending after September 15, 2009. The Codification superseded all then-existing non-SEC accounting and reporting standards on July 1, 2009, and all other non-grandfathered non-SEC accounting literature not included in the Codification became nonauthoritative. The adoption of the Codification did not have a material impact on our consolidated financial statements and results of operations.

        Effective at the startfair value of a reporting entity's first fiscal year beginning after November 15, 2009, or January 1, 2010, for a calendar year-end entity,unit is less than its carrying amount, the Codification will require more information about transfers of financial assets, including securitization transactions, and transactions where entities have continuing exposure to the risks related to transferred financial assets. The Codification eliminates the concept of a "qualifying special-purpose entity," changes the requirements for derecognizing financial assets, and requires additional disclosures about an entity's involvement with variable interest entities and any significant changes in risk exposure due to that involvement. A reporting entity will be required to disclose how its involvement with a variable interest entity affects the reporting entity'squantitative two-step impairment test is required; otherwise, no further testing


Table of Contents


IRON MOUNTAIN INCORPORATED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

DECEMBER 31, 20092012
(In thousands, except share and per share data)

2. Summary of Significant Accounting Policies (Continued)


financial statements.is required. We do not expect theadopted ASU No. 2011-08 as of January 1, 2012. The adoption of these Codification updates toASU No. 2011-08 did not have a materialan impact on our consolidated financial statements andposition, results of operations.

        In October 2009, the FASB issued amended guidance on multiple-deliverable revenue arrangements and software revenue recognition. The multiple-deliverable revenue arrangements updates to the Codification applies to all deliverables in contractual arrangements in all industries in which a vendor will perform multiple revenue-generating activities. The change to the Codification creates a selling price hierarchy that an entity must use as evidence of fair value in separately accounting for all deliverables on a relative-selling-price basis which qualify for separation. The selling price hierarchy includes: (1) vendor-specific objective evidence; (2) third-party evidence and (3) estimated selling price. Broadly speaking, this update to the Codification will result in the possibility for some entities to recognize revenue earlier and more closely align with the economics of certain revenue arrangements if the other criteria for separation (e.g. standalone value to the customer) are met. The software revenue recognition guidance was issued to address factors that entities should consider when determining whether the software and non-software components function together to deliver the product's essential functionality. The software revenue recognition updates to the Codification will allow revenue arrangements in which the software and non-software components deliver together the product's essential functionality to follow the multiple-deliverable revenue recognition criteria as opposed to the criteria applicable to software revenue recognition. Both updates are effective for fiscal years beginning onoperations or after June 15, 2010 and apply prospectively to new or materially modified revenue arrangements after its effective date. Early adoption is permitted; however, we do not anticipate early adopting. We are currently evaluating the impact of these Codification updates to our consolidated financial statements and results of operations.

        In January 2010, the FASB issued amended guidance improving disclosures about fair value measurements to add new requirements for disclosures about transfers into and out of Levels 1 and 2 and separate disclosures about purchases, sales, issuances, and settlements relating to Level 3 measurements. The new guidance also clarifies existing fair value disclosures about the level of disaggregation and about inputs and valuation techniques used to measure fair value. The Codification requires an entity, in determining the appropriate classes of assets and liabilities, to consider the nature and risks of the assets and liabilities as well as their placement in the fair value hierarchy (Level 1, 2 or 3). The Codification is effective for the first reporting period, including interim periods, beginning after December 15, 2009, except for the requirement to provide the Level 3 activity of purchases, sales, issuances, and settlements on a gross basis, which will be effective for fiscal years beginning after December 15, 2010. In the period of initial adoption, entities will not be required to provide the amended disclosures for any previous periods presented for comparative purposes. However, those disclosures are required for periods ending after initial adoption. Early adoption is permitted; however, we do not anticipate early adopting. We do not expect adoption to have a material impact on our consolidated financial statements and results of operations.cash flows.

        We maintain an allowance for doubtful accounts and credit memos for estimated losses resulting from the potential inability of our customers to make required payments and potential disputes regarding billing and service issues. When calculating the allowance, we consider our past loss experience, current and


Table of Contents


IRON MOUNTAIN INCORPORATED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

DECEMBER 31, 2009
(In thousands, except share and per share data)

2. Summary of Significant Accounting Policies (Continued)


prior trends in our aged receivables and credit memo activity, current economic conditions and specific circumstances of individual receivable balances. If the financial condition of our customers were to significantly change, resulting in a significant improvement or impairment of their ability to make payments, an adjustment of the allowance may be required. We consider accounts receivable to be delinquent after such time as reasonable means of collection have been exhausted. We charge-off uncollectible balances as circumstances warrant, generally, no later than one year past due.

        Rollforward of allowance for doubtful accounts and credit memo reserves is as follows:

Year Ended December 31,
 Balance at
Beginning of
the Year
 Credit Memos
Charged to
Revenue
 Allowance for
Bad Debts
Charged to
Expense
 Other(1) Deductions(2) Balance at
End of
the Year
 

2010

 $19,595 $42,204 $11,801 $(481)$(52,372)$20,747 

2011

  20,747  39,343  9,506  (205) (46,114) 23,277 

2012

  23,277  39,723  8,323  977  (47,091) 25,209 

Year Ended December 31,
 Balance at
Beginning of
the Year
 Credit Memos
Charged to
Revenue
 Allowance for
Bad Debts
Charged to
Expense
 Other
Additions(1)
 Deductions(2) Balance at
End of
the Year
 

2007

 $15,157 $21,075 $2,894 $1,189 $(21,069)$19,246 

2008

  19,246  31,885  10,702  (1,819) (40,452) 19,562 

2009

  19,562  43,529  11,832  764  (50,158) 25,529 

(1)
Primarily consists of recoveries of previously written-off accounts receivable, allowances of businesses acquired and the impact associated with currency translation adjustments.

(2)
Primarily consists of the issuance of credit memos and the write-off of accounts receivable.

        Financial instruments that potentially subject us to concentrations of creditmarket risk consist principally of cash and cash equivalents (including money market funds and time deposits), restricted cash (primarily U.S. Treasuries) and accounts receivable. The only significant concentrations of liquid investments as of both December 31, 2009 relates2011 and 2012 relate to cash and cash equivalents and restricted cash held on deposit with five global banks and tenone "Triple A" rated money market fund and five global banks and two "Triple A" rated money market funds, respectively, which we consider to be large, highly ratedhighly-rated investment-grade institutions. As per our risk management investment grade institutions.policy, we limit exposure to concentration of credit risk by limiting the amount invested in any one mutual fund to a maximum of $50,000 or in any one financial institution to a maximum of $75,000. As of December 31, 2009,2011 and 2012, our cash and cash equivalentequivalents and restricted cash balance was $446,656,$214,955 and $277,027, respectively, including money market funds and time deposits amounting to $381,599.$181,823 and $218,629, respectively. A substantial portion of thesethe money market funds areis invested in U.S. treasuries.Treasuries.


Table of Contents


IRON MOUNTAIN INCORPORATED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

DECEMBER 31, 2012
(In thousands, except share and per share data)

2. Summary of Significant Accounting Policies (Continued)

        Entities are permitted under GAAP to elect to measure many financial instruments and certain other items at either fair value or cost. We did not elect the fair value measurement option for any of our financial assets or liabilities.

        Our financial assets or liabilities are measured using inputs from the three levels of the fair value hierarchy. A financial asset or liability's classification within the hierarchy is determined based on the lowest level input that is significant to the fair value measurement.

        The three levels of the fair value hierarchy are as follows:

        Level 1—Inputs are unadjusted quoted prices in active markets for identical assets or liabilities that we have the ability to access at the measurement date.

        Level 2—Inputs include quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active, inputs other than quoted prices that are observable for the asset or liability (i.e., interest rates, yield curves, etc.), and


Table of Contents


IRON MOUNTAIN INCORPORATED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

DECEMBER 31, 2009
(In thousands, except share and per share data)

2. Summary of Significant Accounting Policies (Continued)


inputs that are derived principally from or corroborated by observable market data by correlation or other means (market corroborated inputs).

        Level 3—Unobservable inputs that reflect our assumptions about the assumptions that market participants would use in pricing the asset or liability.

        The following tables provide the assets and liabilities carried at fair value measured on a recurring basis as of December 31, 20082011 and 2009,2012, respectively:


  
 Fair Value Measurements at
December 31, 2008 Using
   
 Fair Value Measurements at
December 31, 2011 Using
 
Description
 Total Carrying
Value at
December 31,
2008
 Quoted prices
in active
markets
(Level 1)
 Significant other
observable
inputs
(Level 2)
 Significant
unobservable
inputs
(Level 3)
  Total Carrying
Value at
December 31,
2011
 Quoted prices
in active
markets
(Level 1)
 Significant other
observable
inputs
(Level 2)
 Significant
unobservable
inputs
(Level 3)
 

Money Market Funds(1)

 $163,251 $ $163,251 $  $35,110 $ $35,110 $ 

Time Deposits(1)

 40,098  40,098   146,713  146,713  

Available-for-Sale and Trading Securities

 5,612 4,691(2) 921(1)  

Trading Securities

 9,124 8,497(2) 627(1)  

Derivative Assets(3)

 13,675  13,675   2,803  2,803  

Derivative Liabilities(3)

 435  435  

Table of Contents


IRON MOUNTAIN INCORPORATED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

DECEMBER 31, 2012
(In thousands, except share and per share data)

2. Summary of Significant Accounting Policies (Continued)


 
  
 Fair Value Measurements at
December 31, 2012 Using
 
Description
 Total Carrying
Value at
December 31,
2012
 Quoted prices
in active
markets
(Level 1)
 Significant other
observable
inputs
(Level 2)
 Significant
unobservable
inputs
(Level 3)
 

Money Market Funds(1)

 $68,800 $ $68,800 $ 

Time Deposits(1)

  149,829    149,829   

Trading Securities

  11,071  10,525(2) 546(1)  

Derivative Liabilities(3)

  1,522    1,522   

 
  
 Fair Value Measurements at
December 31, 2009 Using
 
Description
 Total Carrying
Value at
December 31,
2009
 Quoted prices
in active
markets
(Level 1)
 Significant other
observable
inputs
(Level 2)
 Significant
unobservable
inputs
(Level 3)
 

Money Market Funds(1)

 $265,904 $ $265,904 $ 

Time Deposits(1)

  115,695    115,695   

Trading Securities

  10,168  8,061(2) 2,107(1)  

Derivative Assets(3)

  4,115    4,115   

(1)
Money market funds and time deposits (including those in certain available-for-sale and trading securities) are measured based on quoted prices for similar assets and/or subsequent transactions.

(2)
Securities are measured at fair value using quoted market prices.

(3)
Our derivative assets and liabilities primarily relate to short-term (three(six months or less) foreign currency contracts that we have entered into to hedge our intercompany exposures denominated in British pounds sterling.sterling and Australian dollars. We calculate the fair value of such forward contracts by adjusting the spot rate utilized at the balance sheet date for translation purposes by an estimate of the forward points observed in active markets.

        Disclosures are required in the financial statements for items measured at fair value on a non-recurring basis. We did not have any material items that are measured at fair value on a non-recurring basis for the yearyears ended December 31, 2009.


Table of Contents


IRON MOUNTAIN INCORPORATED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

DECEMBER 31, 2009
(In thousands,2010, 2011 and 2012, except share and per share data)

2. Summary of Significant Accounting Policies (Continued)goodwill calculated based on Level 3 inputs, as more fully disclosed in Note 2.g.

        We have one trust that holds marketable securities. Marketable securities are classified as available-for-sale or trading. As of December 31, 20082011 and 2009,2012, the fair value of the money market and mutual funds included in this trust amounted to $5,612$9,124 and $10,168,$11,071, respectively, and were included in prepaid expenses and other in the accompanying consolidated balance sheets. For the year ended December 31, 2007, the marketable securities included in the trust were classified as available-for-sale and net realized gains of $961 were included in other expense (income), net in the accompanying consolidated statements of operations. Cumulative unrealized gains, net of tax of $663 are included in other comprehensive items, net included in Iron Mountain Incorporated stockholders' equity as of December 31, 2007. During 2008, weWe classified these marketable securities included in the trust as trading, and included in other expense (income), net in the accompanying consolidated statement of operations realized and unrealized net gains of $1,221, net losses of $2,563$321 and net gains of $1,745$1,292 for the years ended December 31, 20082010, 2011 and 2009,2012, respectively.

        As of December 31, 2009,2012, we have investments in joint ventures, including noncontrolling interests, in Archive Management Solutions of 20% (Poland), in Team Delta HoldingIron Mountain A/S of 20%32% (Denmark), in Iron Mountain Arsivleme Hizmetleri A.S. of 40% (Turkey), in Safe doc S.A. of 13% (Greece), and in Sispace AGKelman Technologies Inc. of 15% (Switzerland)25% (U.S. and Canada). These investments are accounted for using the equity method because we exercise significant influence over these entities and their operations. As of December 31, 20082011 and 2009,2012, the carrying value related to theseour equity investments was $6,767$3,499 and $9,148,$398, respectively, included in other assets in the accompanying consolidated balance sheets. Additionally, we have ana 4% investment in Image Tag comprised of equityCrossroads Systems, Inc. (U.S.) and debt holdings of $829 and $753its carrying value as of December 31, 20082012 was $1,672.


Table of Contents


IRON MOUNTAIN INCORPORATED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

DECEMBER 31, 2012
(In thousands, except share and 2009, respectively, which is accounted for using the cost method, included in other long-term assets in the accompanying consolidated balance sheets. We recorded a loss on our Image Tag investment in 2008 in the amountper share data)

2. Summary of $579 which is included in other (income) expense, net in the accompanying consolidated statement of operations. Additionally, we record interest payments received on outstanding borrowings with Image Tag as a reduction of our investment when received.Significant Accounting Policies (Continued)

        Accumulated other comprehensive items, net consists of foreign currency translation adjustments as of December 31, 20082011 and 2009, respectively.2012.

        Other expense (income), net consists of the following:


 Year Ended December 31,  Year Ended December 31, 

 2007 2008 2009  2010 2011 2012 

Foreign currency transaction losses (gains), net

 $11,311 $28,882 $(12,477) $5,664 $17,352 $10,223 

Debt extinguishment expense

 5,703 418 3,031 

Debt extinguishment expense, net

 1,792 993 10,628 

Other, net

 (13,913) 1,728 (2,633) 1,312 (5,302) (4,789)
              

 $3,101 $31,028 $(12,079) $8,768 $13,043 $16,062 
              

Table of Contents


IRON MOUNTAIN INCORPORATED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

DECEMBER 31, 2009
(In thousands, except share and per share data)

3. Derivative Instruments and Hedging Activities

        In connection with certain real estate loans, we swapped $97,000 of floating rate debt to fixed rate debt. This swap agreement was terminated in the second quarter of 2007. The total impact of marking to market the fair market value of the derivative liability and cash payments associated with the interest rate swap agreement resulted in our recording interest income of $34 for the year ended December 31, 2007.

        In June 2006, IME entered into a floating for fixed interest rate swap contract with a notional value of 75,000 British pounds sterling and was designated as a cash flow hedge. This swap agreement hedged interest rate risk on IME's British pounds multi-currency term loan facility. The notional value of the swap declined to 60,000 British pounds sterling in March 2007 to match the remaining term loan amount outstanding as of that date and was terminated in the second quarter of 2007. For the year ended December 31, 2007, we recorded additional interest income of $799, resulting from interest rate swap cash settlements and changes in fair value.

        In September 2006, we entered into a forward contract program to exchange U.S. dollars for 55,000 in Australian dollars ("AUD") and 20,200 in New Zealand dollars ("NZD") to hedge our intercompany exposure in these countries. These forward contracts typically settle on no more than a quarterly basis, at which time we enter into new forward contracts for the same underlying AUD and NZD amounts, to continue to hedge movements in AUD and NZD against the U.S. dollar. At the time of settlement, we either pay or receive the net settlement amount from the forward contract and recognize this amount in other expense (income), net in the accompanying statement of operations as a realized foreign exchange gain or loss. We have not designated these forward contracts as hedges. These forward contracts were not renewed in the third quarter of 2007. We recorded a realized loss of $5,906 for the year ended December 31, 2007.

We have entered into a number of separate forward contracts to hedge our exposures in British pounds sterling.sterling and Australian dollars. As of December 31, 2009,2012, we had (1) an outstanding forward contract to purchase 121,322$201,159 U.S. dollars and sell 73,600125,000 British pounds sterling to hedge our intercompany exposures with IME.our European operations and (2) an outstanding forward contract to purchase $77,250 U.S. dollars and sell 75,000 Australian dollars to hedge our intercompany exposures with our Australian subsidiary. At the maturity of the forward contracts, we may enter into new forward contracts to hedge movements in the underlying currencies. At the time of settlement, we either pay or receive the net settlement amount from the forward contract and recognize this amount in other (income) expense, net in the accompanying statement of operations as a realized foreign exchange gain or loss. At the end of each month, we mark the outstanding forward contracts to market and record an unrealized foreign exchange gain or loss for the mark-to-market valuation. We have not designated these forward contracts as hedges. During the years ended December 31, 2007, 20082010, 2011 and 2009,2012, there was $2,139 and $24,145$2,030 in net cash receipts, $1,092 in net cash disbursements and $2,392$9,116 in net cash disbursements, respectively, included in cash from operating activities from continuing operations related to settlements associated with these foreign currency forward contracts. The following table provides the fair value of our derivative instruments as of December 31, 2011 and 2012 and their gains and losses for the years ended December 31, 2010, 2011 and 2012:

 
 Asset Derivatives 
 
 December 31, 
 
 2011 2012 
Derivatives Not Designated as
Hedging Instruments
 Balance Sheet
Location
 Fair
Value
 Balance
Sheet Location
 Fair
Value
 

Foreign exchange contracts

 Prepaid expenses and other $2,803 Prepaid expenses and other $ 
          

Total

   $2,803   $ 
          

Table of Contents


IRON MOUNTAIN INCORPORATED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

DECEMBER 31, 20092012
(In thousands, except share and per share data)

3. Derivative Instruments and Hedging Activities (Continued)


instruments as of December 31, 2008 and 2009 and their gains and losses for the years ended December 31, 2007, 2008 and 2009:


 Asset Derivatives  Liability Derivatives 

 December 31,  December 31, 

 2008 2009  2011 2012 
Derivatives Not Designated as Hedging Instruments
 Balance Sheet
Location
 Fair
Value
 Balance Sheet Location Fair
Value
  Balance Sheet
Location
 Fair
Value
 Balance Sheet
Location
 Fair
Value
 

Foreign exchange contracts

 Current assets $13,675 Current assets $4,115  Accrued expenses $435 Accrued expenses $1,522 
          

Total

  $435 $1,522 

 $13,675 $4,115      
     

 


  
 Amount of (Gain) Loss
Recognized in Income
on Derivatives
   
 Amount of (Gain) Loss
Recognized in Income
on Derivatives
 

  
 December 31,   
 December 31, 

 Location of (Gain) Loss
Recognized in Income
on Derivative
  Location of (Gain) Loss
Recognized in Income on
Derivative
 
Derivatives Not Designated as Hedging Instruments
 2007 2008 2009  2010 2011 2012 

Foreign exchange contracts

 Other (income) expense, net $(3,369)$(36,886)$11,952  Other expense (income), net $2,025 $(1,209)$13,007 
              

Total

 $(3,369)$(36,886)$11,952  $2,025 $(1,209)$13,007 
              

        In the third quarter of 2007, weWe have designated a portion of our 63/4% Euro Senior Subordinated Notes due 2018 issued by Iron Mountain Incorporated ("IMI"IMI (the "63/4% Notes") as a hedge of net investment of certain of our Euro denominated subsidiaries. For the years ended December 31, 2007, 20082010, 2011 and 2009,2012, we designated on average 51,127, 167,57874,750, 86,750 and 95,500101,167 Euros, respectively, of ourthe 63/4% Euro Senior Subordinated Notes due 2018 issued by IMI as a hedge of net investment of certain of our Euro denominated subsidiaries. As a result, we recorded $6,136foreign exchange gains of $7,392 ($3,926,4,620, net of tax) of foreign exchange losses related to the mark to markingchange in fair value of such debt due to currency translation adjustments, which is a component of accumulated other comprehensive items, net included in stockholders' equity for the year ended December 31, 2007.2010. We recorded foreign exchange gains of $10,471$8,634 ($6,296,5,411, net of tax) related to the marking to marketchange in fair value of such debt due to currency translation adjustments, which is a component of accumulated other comprehensive items, net included in stockholders' equity for the year ended December 31, 2008.2011. We recorded foreign exchange gainslosses of $1,863$4,408 ($989,2,668, net of tax) related to the marking to marketchange in fair value of such debt due to currency translation adjustments, which is a component of accumulated other comprehensive items, net included in stockholders' equity for the year ended December 31, 2009.2012. As of December 31, 2009,2012, cumulative net gains of $3,359$10,722, net of tax are recorded in accumulated other comprehensive items, net associated with this net investment hedge.


Table of Contents


IRON MOUNTAIN INCORPORATED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

DECEMBER 31, 20092012
(In thousands, except share and per share data)

4. Debt

        Long-term debt consists ofcomprised the following:

 
 December 31, 2011 December 31, 2012 
 
 Carrying
Amount
 Fair
Value
 Carrying
Amount
 Fair
Value
 

Revolving Credit Facility(1)

 $96,000 $96,000 $55,500 $55,500 

Term Loan Facility(1)

  487,500  487,500  462,500  462,500 

71/4% GBP Senior Subordinated Notes due 2014 (the "71/4% Notes")(2)(3)

  233,115  233,115  242,813  242,813 

65/8% Senior Subordinated Notes due 2016 (the "65/8% Notes")(2)(3)

  318,025  320,400     

71/2% CAD Senior Subordinated Notes due 2017 (the "Subsidiary Notes")(2)(4)

  171,273  174,698  175,875  181,591 

83/4% Senior Subordinated Notes due 2018 (the "83/4% Notes")(2)(3)

  200,000  209,000     

8% Senior Subordinated Notes due 2018 (the "8% Notes")(2)(3)

  49,806  47,607  49,834  56,052 

63/4% Euro Senior Subordinated Notes due 2018 (the "63/4% Notes")(2)(3)

  328,750  312,352  335,152  341,753 

73/4% Senior Subordinated Notes due 2019 (the "73/4% Notes")(2)(3)

  400,000  422,750  400,000  451,000 

8% Senior Subordinated Notes due 2020 (the "8% Notes due 2020")(2)(3)

  300,000  313,313  300,000  317,250 

83/8% Senior Subordinated Notes due 2021 (the "83/8% Notes")(2)(3)

  548,346  586,438  548,518  610,500 

53/4% Senior Subordinated Notes due 2024 (the "53/4% Notes")(2)(3)

      1,000,000  1,012,500 

Real Estate Mortgages, Capital Leases and Other(5)

  220,773  220,773  254,811  254,811 
            

Total Long-term Debt

  3,353,588     3,825,003    

Less Current Portion

  (73,320)    (92,887)   
            

Long-term Debt, Net of Current Portion

 $3,280,268    $3,732,116    
            

 
 December 31, 2008 December 31, 2009 
 
 Carrying
Amount
 Fair
Value
 Carrying
Amount
 Fair
Value
 

Revolving Credit Facility(1)

 $219,388 $219,388 $21,799 $21,799 

Term Loan Facility(1)

  404,400  404,400  400,300  400,300 

85/8% Senior Subordinated Notes due 2013
(the "85/8% notes")(2)(3)

  447,961  423,241     

71/4% GBP Senior Subordinated Notes due 2014
(the "71/4% notes")(2)(3)

  217,185  157,459  238,920  236,531 

73/4% Senior Subordinated Notes due 2015
(the "73/4% notes")(2)(3)

  436,768  398,911  435,856  433,411 

65/8% Senior Subordinated Notes due 2016
(the "65/8% notes")(2)(3)

  316,541  272,800  317,035  313,200 

71/2% CAD Senior Subordinated Notes due 2017
(the "Subsidiary Notes")(2)(4)

  143,203  126,018  166,810  165,142 

83/4% Senior Subordinated Notes due 2018
(the "83/4% notes")(2)(3)

  200,000  177,250  200,000  207,750 

8% Senior Subordinated Notes due 2018
(the "8% notes")(2)(3)

  49,720  42,813  49,749  48,464 

63/4% Euro Senior Subordinated Notes due 2018
(the "63/4% notes")(2)(3)

  356,875  249,834  363,166  343,562 

8% Senior Subordinated Notes due 2020
(the "8% notes due 2020")(2)(3)

  300,000  246,750  300,000  305,250 

83/8% Senior Subordinated Notes due 2021
(the "83/8% notes")(2)(3)

      548,002  567,188 

Real Estate Mortgages, Capital Leases, Seller Notes and Other(5)

  151,174  151,174  210,147  210,147 
            

Total Long-term Debt

  3,243,215     3,251,784    

Less Current Portion

  (35,751)    (40,561)   
            

Long-term Debt, Net of Current Portion

 $3,207,464    $3,211,223    
            

(1)
The capital stock or other equity interests of most of our U.S. subsidiaries, and up to 66% of the capital stock or other equity interests of our first tierfirst-tier foreign subsidiaries, are pledged to secure these debt instruments, together with all intercompany obligations of foreign subsidiaries owed to us or to one of our U.S. subsidiary guarantors.guarantors or Iron Mountain Canada Corporation ("Canada Company") and all promissory notes held by us or one of our U.S. subsidiary guarantors or Canada Company. The fair value of this long-term debt approximates the carrying value (as borrowings under these debt instruments are based on current variable market interest rates, which are subject to change based on our consolidated leverage ratio, as of December 31, 20082011 and 2009,2012, respectively).

Table of Contents


IRON MOUNTAIN INCORPORATED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

DECEMBER 31, 2012
(In thousands, except share and per share data)

4. Debt (Continued)

(2)
The fair values of these debt instruments isare based on quoted market prices for these notes on December 31, 20082011 and 2009,2012, respectively.

(3)
Collectively, referred to as the Parent"Parent Notes." IMI is the direct obligor on the Parent Notes, which are fully and unconditionally guaranteed, on a senior subordinated basis, by substantially all of its direct and indirect 100% owned U.S. subsidiaries (the "Guarantors"). These guarantees are joint and several obligations of the Guarantors. Iron Mountain Canada Corporation ("Canada Company")Company and the remainder of our subsidiaries do not guarantee the Parent Notes.


Table of Contents


IRON MOUNTAIN INCORPORATED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

DECEMBER 31, 2009
(In thousands, except share and per share data)

4. Debt (Continued)

(4)
Canada Company is the direct obligor on the Subsidiary Notes, which are fully and unconditionally guaranteed, on a senior subordinated basis, by IMI and the Guarantors. These guarantees are joint and several obligations of IMI and the Guarantors.

(5)
Includes (a) real estate mortgages of $5,868$5,232 and $6,564$4,305 as of December 31, 20082011 and 2009,2012, respectively, which bear interest at rates ranging from 3.7%4.6% to 7.3%5.5% and are payable in various installments through 2023,2021, (b) seller notescapital lease obligations of $2,758$207,300 and $235,826 as of December 31, 2008, which bear interest at a rate of 4.75% per year2011 and were fully paid off in 2009, (c) capital lease obligations of $131,687 and $193,738 as of December 31, 2008 and 2009,2012, respectively, which bear a weighted average interest rate of 6.0%5.2% as of December 31, 20092012 and (d)(c) other various notes and other obligations, which were assumed by us as a result of certain acquisitions, of $10,861$8,241 and $9,845$14,680 as of December 31, 20082011 and 2009,2012, respectively, and bear a weighted average interest rate of 9.9%16.2% as of December 31, 2009.2012. We believe theThe fair value of this debt approximates its carrying value.

        On April 16, 2007,June 27, 2011, we entered into a new credit agreement (the "Credit Agreement") to replace the existing IMI revolving credit and term loan facilities and the existing IME revolving credit and term loan facilities. The Credit Agreementthat consists of (1) revolving credit facilities whereunder which we can borrow, subject to certain limitations as defined in the Credit Agreement,credit agreement, up to an aggregate amount of $765,000$725,000 (including Canadian dollardollars, British pounds sterling and multi-currency revolving credit facilities),Euros, among other currencies) (the "Revolving Credit Facility") and (2) a $410,000$500,000 term loan facility. Our revolving credit facility (the "Term Loan Facility," and collectively with the Revolving Credit Facility, the "Credit Agreement"). We have the right to request an increase in the aggregate amount available to be borrowed under the Credit Agreement up to a maximum of $1,800,000. The Revolving Credit Facility is supported by a group of 2419 banks. Our subsidiaries,IMI, Iron Mountain Information Management, Inc. ("IMIM"), Canada Company, andIron Mountain Europe (Group) Limited ("IME"), Iron Mountain Australia Pty Ltd., Iron Mountain Switzerland GmbH,Gmbh and any other subsidiary of IMIM designated by IMIM (the "Other Subsidiaries") may, with the consent of the administrative agent, as defined in the Credit Agreement, borrow directly under certain of the following tranches of the Revolving Credit Facility: (1) tranche one in the amount of $400,000 is available to IMI and IMIM in U.S. dollars, British pounds sterling and Euros; (2) tranche two in the amount of $150,000 is available to IMI or IMIM in either U.S. dollars or Canadian dollars and available to Canada Company in Canadian dollars; and (3) tranche three in the amount of $175,000 is available to IMI or IMIM and the Other Subsidiaries in U.S. dollars, Canadian dollars, British pounds sterling, Euros and Australian dollars, among others. The Revolving Credit Facility terminates on June 27, 2016, at which point all revolving credit and multi-currency revolving credit facilities, respectively. Additional subsidiary borrowers may be addedloans under the multi-currency revolving credit facility. The revolving creditsuch facility terminates on April 16, 2012.become due. With respect to the termTerm Loan Facility, loan facility, quarterly loan payments of approximately $1,000 are required through maturity on April 16, 2014, at which time the remaining outstanding principal balanceJune 27, 2016 in equal quarterly installments of the term loan facility is due.aggregate annual amounts based upon the following percentage of the original principal amount in the table below (except that each of the first three quarterly


Table of Contents


IRON MOUNTAIN INCORPORATED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

DECEMBER 31, 2012
(In thousands, except share and per share data)

4. Debt (Continued)

installments in the fifth year shall be 10% of the original principal amount and the final quarterly installment in the fifth year shall be 35% of the original principal):

Year Ending
Percentage

June 30, 2012

5%

June 30, 2013

5%

June 30, 2014

10%

June 30, 2015

15%

June 27, 2016

65%

        The interest rate on borrowings under the Credit Agreement varies depending on our choice of interest rateTerm Loan Facility may be prepaid without penalty or premium, in whole or in part, at any time. IMI and currency options, plus an applicable margin. IMI guaranteesIMIM guarantee the obligations of each of the subsidiary borrowers under the Credit Agreement, and substantially all of our U.S. subsidiaries guarantee the obligations of IMI and the subsidiary borrowers. The capital stock or other equity interests of most of our U.S. subsidiaries, and up to 66% of the capital stock or other equity interests of our first tierfirst-tier foreign subsidiaries, are pledged to secure the Credit Agreement, together with all intercompany obligations of foreign subsidiaries owed to us or to one of our U.S. subsidiary guarantors. We recordedguarantors or Canada Company and all promissory notes held by us or one of our U.S. subsidiary guarantors or Canada Company. The interest rate on borrowings under the Credit Agreement varies depending on our choice of interest rate and currency options, plus an applicable margin, which varies based on certain financial ratios. Additionally, the Credit Agreement requires the payment of a charge to other expense (income), net of approximately $5,703 in 2007 related tocommitment fee on the early retirementunused portion of the IMI and IME revolving credit facilities and term loans, representing the write-offRevolving Credit Facility, which fee ranges from between 0.3% to 0.5% based on certain financial ratios. There are also fees associated with any outstanding letters of deferred financing costs.credit. As of December 31, 2009,2012, we had $21,799$55,500 of outstanding borrowings under the revolving credit facility,Revolving Credit Facility, all of which werewas denominated in Euro (EUR 1,800), Australian dollars (AUD 9,000) and in British pounds sterling (GBP 7,020);U.S. dollars; we also had various outstanding letters of credit totaling $43,386.$2,321. The remaining availability under the Revolving Credit Facility on December 31, 2012, based on IMI's leverage ratio, which is calculated based on the last 12 months' earnings before interest, taxes, depreciation and amortization ("EBITDA"), and other adjustments as defined in the Credit Agreement and current external debt, under the revolving credit facility on December 31, 2009, was $699,815.$667,179. The interest rate in effect under the revolving credit facilityRevolving Credit Facility and term loan facilityTerm Loan Facility was 3.0%4.0% and 1.8%2.0%, respectively, as of December 31, 2009.2012. For the years ended December 31, 2007, 20082010, 2011 and 2009,2012, we recorded commitment fees and letters of $1,307, $1,561credit fees of $2,399, $2,123 and $1,953,$2,306, respectively, based on the unused balances under our revolving credit facilities.


Tablefacilities and outstanding letters of Contents


IRON MOUNTAIN INCORPORATED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

DECEMBER 31, 2009
(In thousands, except share and per share data)

4. Debt (Continued)credit.

        The Credit Agreement, our indentures and other agreements governing our indebtedness contain certain restrictive financial and operating covenants, including covenants that restrict our ability to complete acquisitions, pay cash dividends, incur indebtedness, make investments, sell assets and take certain other corporate actions. The covenants do not contain a rating trigger. Therefore, a change in our debt rating would not trigger a default under the Credit Agreement, and our indentures andor other agreements governing our indebtedness. Our revolving credit and term loan facilities,The Credit Agreement, as well as our indentures, use EBITDA basedEBITDA-based calculations as primary measures of financial performance, including leverage and fixed charge coverage ratios. IMI's revolving credit and term leverage ratio was 3.83.4 and 3.33.9 as of December 31, 20082011 and 2009,2012, respectively, compared to a maximum allowable ratio of 5.5.5.5 under the Credit Agreement. Similarly, our bond leverage ratio, per the indentures, was 4.53.9 and 4.15.3 as of December 31, 20082011 and 2009,2012, respectively, compared to a maximum allowable ratio of 6.5. IMI's revolving credit and term loan fixed charge coverage ratio was 1.5 and 1.3 as of December 31, 2011 and


Table of Contents


IRON MOUNTAIN INCORPORATED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

DECEMBER 31, 2012
(In thousands, except share and per share data)

4. Debt (Continued)

2012, respectively, compared to a minimum allowable ratio of 1.2 under the Credit Agreement. Noncompliance with these leverage and fixed charge coverage ratios would have a material adverse effect on our financial condition and liquidity. In the fourth quarter of 2007, we designated as Excluded Restricted Subsidiaries (as defined in the indentures), certain of our subsidiaries that own our assets and conduct our operations in the United Kingdom. As a result of such designation, these subsidiaries are now subject to substantially all of the covenants of the indentures, except that they are not required to provide a guarantee, and the EBITDA and debt of these subsidiaries is included for purposes of calculating the leverage ratio.

        As of December 31, 2009,2012, we have ninehad eight series of senior subordinated notes issued under various indentures, eightseven of which are direct obligations of the parent company, IMI; one (the Subsidiary Notes) is a direct obligation of Canada Company; and all are subordinated to debt outstanding under the Credit Agreement:


Table of Contents


IRON MOUNTAIN INCORPORATED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

DECEMBER 31, 2009
(In thousands, except share and per share data)

4. Debt (Continued)

        The Parent Notes and the Subsidiary Notes are fully and unconditionally guaranteed, on a senior subordinated basis, by substantially all of our direct and indirect 100% owned U.S. subsidiaries (the "Guarantors").the Guarantors. These guarantees are joint and several obligations of the Guarantors. The remainder of our subsidiaries do not guarantee the senior subordinated notes. Additionally, IMI guarantees the Subsidiary Notes. Canada Company does not guarantee the Parent Notes.

        In August 2009,2012, we completed an underwritten public offering of $550,000$1,000,000 in aggregate principal amount of our 8the 53/84% Senior Subordinated Notes, due 2021, which were issued at 99.625%100% of par. Our net proceeds of $539,688,$985,000, after paying the underwriters' discounts and commissions, waswere used to (a) redeem all of the remaining $447,874 of aggregate principal amount of our outstanding 865/8% notes,Notes and 83/4% Notes and to repay existing indebtedness under our Revolving Credit Facility, and the balance will be used for general corporate purposes, including funding a portion of the costs we expect to incur in connection with our proposed conversion to a real estate investment trust ("REIT").


Table of Contents


IRON MOUNTAIN INCORPORATED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

DECEMBER 31, 2012
(In thousands, except share and per share data)

4. Debt (Continued)

        In August 2012, we redeemed (1) the $320,000 aggregate principal amount outstanding of the 65/8% Notes at 100% of par, plus accrued and unpaid interest, alland (2) the $200,000 aggregate principal amount outstanding of which were called for redemption in August 2009,the 83/4% Notes at 102.9% of par, plus accrued and redeemed in September 2009, (b) repay borrowings under our revolving credit facility, and (c) for general corporate purposes.unpaid interest. We recorded a charge to other expense (income), net of $3,031$10,628 in the third quarter of 20092012 related to the early extinguishment of the 865/8% notes, whichNotes and 83/4% Notes. This charge consists of the call premium, original issue discounts and deferred financing costs and original issue premiums and discounts related to the 865/8% notes.Notes and 83/4% Notes.

        We recorded a charge of $1,843 to other expense (income), net in the second quarter of 2011 related to the early retirement of the previous revolving credit and term loan facilities, representing a write-off of deferred financings costs. In September 2010, we redeemed $200,000 of the $431,255 aggregate principal amount outstanding of our 73/4% Senior Subordinated Notes due 2015 (the "73/4% Notes due 2015") at a redemption price of $1,012.92 for each one thousand dollars of principal amount of notes redeemed, plus accrued and unpaid interest. We recorded a charge to other expense (income), net of $345$1,792 in the secondthird quarter of 20082010 related to the early extinguishment of the 8our 713/4% Senior Subordinated Notes due 2011 (the "82015 that were redeemed. This charge consists of the call premium and deferred financing costs, net of original issue premiums related to our 713/4% notes")Notes due 2015 that were redeemed. In January 2011, we redeemed the remaining $231,255 aggregate principal amount outstanding of our 73/4% Notes due 2015 at a redemption price of one thousand dollars for each one thousand dollars of principal amount of notes redeemed, plus accrued and unpaid interest. We recorded a gain to other expense (income), whichnet of $850 in the first quarter of 2011 related to the early extinguishment of our 73/4% Notes due 2015 that were redeemed. This gain consists of original issue premiums, net of deferred financing costs and original issue discounts related to the 8our 713/4% notes.Notes due 2015 that were redeemed.

        Each of the indentures for the notes provides that we may redeem the outstanding notes, in whole or in part, upon satisfaction of certain terms and conditions. In any redemption, we are also required to pay all accrued but unpaid interest on the outstanding notes.

        The following table presents the various redemption dates and prices of the senior subordinated notes. The redemption dates reflect the date at or after which the notes may be redeemed at our option at a premium redemption price. After these dates, the notes may be redeemed at 100% of face value:

Redemption Date
 71/4% notes
April 15,
 73/4% notes
January 15,
 65/8% notes
July 1,
 71/2% notes
March 15,
 83/4% notes
July 15,
 8% notes
October 15,
 63/4% notes
October 15,
 8% notes
July 15,
 83/8% notes
August 15,
  71/4% Notes
April 15,
 71/2% Notes
March 15,
 8% Notes
October 15,
 63/4% Notes
October 15,
 73/4% Notes
October 1,
 8% Notes
June 15,
 83/8% Notes
August 15,
 53/4% Notes
August 15,
 

2009

 103.625% 102.583% 102.208%       

2010

 102.417% 101.292% 101.104%       

2011

 101.208% 100.000% 100.000%  104.375% 104.000% 103.375%   

2012

 100.000% 100.000% 100.000% 103.750% 102.917% 102.667% 102.250%    100.000% 103.750% 102.667% 102.250%     

2013

 100.000% 100.000% 100.000% 102.500% 101.458% 101.333% 101.125% 104.000%   100.000% 102.500% 101.333% 101.125%  104.000%   

2014

 100.000% 100.000% 100.000% 101.250% 100.000% 100.000% 100.000% 102.667% 104.188%  100.000% 101.250% 100.000% 100.000%  102.667% 104.188%  

2015

  100.000% 100.000% 100.000% 100.000% 100.000% 100.000% 101.333% 102.792%   100.000% 100.000% 100.000% 103.875% 101.333% 102.792%  

2016

   100.000% 100.000% 100.000% 100.000% 100.000% 100.000% 101.396%   100.000% 100.000% 100.000% 101.938% 100.000% 101.396%  

2017

    100.000% 100.000% 100.000% 100.000% 100.000% 100.000%   100.000% 100.000% 100.000% 100.000% 100.000% 100.000% 102.875%

2018

   100.000% 100.000% 100.000% 100.000% 100.000% 101.917%

2019

     100.000% 100.000% 100.000% 100.958%

2020

      100.000% 100.000% 100.000%

        Prior to March 15, 2010, we may under certain conditions redeem a portion of the 71/2% notes with the net proceeds of one or more public equity offerings, at a redemption price of 107.50% of the principal amount.


Table of Contents


IRON MOUNTAIN INCORPORATED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

DECEMBER 31, 20092012
(In thousands, except share and per share data)

4. Debt (Continued)

        Prior to July 15, 2011, the 83/4% notes are redeemable at our option, in whole or in part, at a specified make-whole price.

        Prior to October 15, 2011, the 8% notes and 63/4% notes are redeemable at our option, in whole or in part, at a specified make-whole price.

        Prior to June 15, 2013, the 8% notesNotes due 2020 are redeemable at our option, in whole or in part, at a specified make-whole price.

        Prior to August 15, 2014, the 83/8% Notes are redeemable at our option, in whole or in part, at a specified make-whole price.

        Prior to October 1, 2015, the 73/4% notesNotes are redeemable at our option, in whole or in part, at a specified make-whole price.

        Prior to August 15, 2017, the 53/4% Notes are redeemable at our option, in whole or in part, at a specified make-whole price.

        Each of the indentures for the notes provides that we must repurchase, at the option of the holders, the notes at 101% of their principal amount, plus accrued and unpaid interest, upon the occurrence of a "Change of Control," which is defined in each respective indenture. Except for required repurchases upon the occurrence of a Change of Control or in the event of certain asset sales, each as described in the respective indenture, we are not required to make sinking fund or redemption payments with respect to any of the notes.

        Our indentures and other agreements governing our indebtedness contain certain restrictive financial and operating covenants including covenants that restrict our ability to complete acquisitions, pay cash dividends, incur indebtedness, make investments, sell assets and take certain other corporate actions. The covenants do not contain a rating trigger. Therefore, a change in our debt rating would not trigger a default under our indentures and other agreements governing our indebtedness.

Maturities of long-term debt excluding (premiums) discounts, net, are as follows:

Year
 Amount  Amount 

2010

 $40,561 

2011

 41,915 

2012

 61,991 

2013

 24,557  $92,887 

2014

 635,952  357,370 

2015

 162,511 

2016

 302,014 

2017

 193,946 

Thereafter

 2,449,747  2,719,473 
      

 $3,254,723  3,828,201 

Net Premiums (Discounts)

 (3,198)
      

Total Long-term Debt (including current portion)

 $3,825,003 
   

5. Selected Consolidated Financial Statements of Parent, Guarantors, Canada Company and Non-Guarantors

        The following data summarizes the consolidating Companyresults of IMI on the equity method of accounting as of December 31, 20082011 and 20092012 and for the years ended December 31, 2007, 20082010, 2011 and 2009.2012.

        The Parent Notes and the Subsidiary Notes are guaranteed by the subsidiaries referred to below as the "Guarantors." These subsidiaries are 100% owned by the Parent. The guarantees are full and unconditional, as well as joint and several.


Table of Contents


IRON MOUNTAIN INCORPORATED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

DECEMBER 31, 2009
(In thousands, except share and per share data)

5. Selected Consolidated Financial Statements of Parent, Guarantors, Canada Company and Non-Guarantors (Continued)

        Additionally, the ParentIMI guarantees the Subsidiary Notes, which were issued by Canada Company. Canada Company does not guarantee the Parent Notes. The other subsidiaries that do not guarantee the Parent Notes or the Subsidiary Notes are referred to below as the "Non-Guarantors."

 
 December 31, 2008 
 
 Parent Guarantors Canada
Company
 Non-
Guarantors
 Eliminations Consolidated 

Assets

                   

Current Assets:

                   
 

Cash and Cash Equivalents

 $ $210,636 $17,069 $50,665 $ $278,370 
 

Accounts Receivable

    373,902  30,451  148,477    552,830 
 

Intercompany Receivable

  1,021,450    12,927    (1,034,377)  
 

Other Current Assets

  13,776  81,755  8,793  40,868    145,192 
              
  

Total Current Assets

  1,035,226  666,293  69,240  240,010  (1,034,377) 976,392 

Property, Plant and Equipment, Net

    1,589,731  158,775  638,248    2,386,754 

Other Assets, Net:

                   
 

Long-term Notes Receivable from Affiliates and Intercompany Receivable

  2,120,482  1,000      (2,121,482)  
 

Investment in Subsidiaries

  1,457,677  1,181,642      (2,639,319)  
 

Goodwill

    1,761,036  164,704  526,564    2,452,304 
 

Other

  30,731  324,346  11,543  175,192  (408) 541,404 
              
  

Total Other Assets, Net

  3,608,890  3,268,024  176,247  701,756  (4,761,209) 2,993,708 
              
  

Total Assets

 $4,644,116 $5,524,048 $404,262 $1,580,014 $(5,795,586)$6,356,854 
              

Liabilities and Equity

                   

Intercompany Payable

 $ $976,173 $ $58,204 $(1,034,377)$ 

Current Portion of Long-term Debt

  4,687  18,482    12,582    35,751 

Total Other Current Liabilities

  56,445  427,570  22,062  187,769    693,846 

Long-term Debt, Net of Current Portion

  2,775,351  48,452  324,123  59,538    3,207,464 

Long-term Notes Payable to Affiliates and Intercompany Payable

  1,000  2,120,482      (2,121,482)  

Other Long-term Liabilities

  3,853  502,433  19,810  87,777  (408) 613,465 

Commitments and Contingencies (See Note 10)

                   
 

Total Iron Mountain Incorporated Stockholders' Equity

  1,802,780  1,430,456  38,267  1,170,596  (2,639,319) 1,802,780 
 

Noncontrolling Interests

        3,548    3,548 
              
  

Total Equity

  1,802,780  1,430,456  38,267  1,174,144  (2,639,319) 1,806,328 
              
  

Total Liabilities and Equity

 $4,644,116 $5,524,048 $404,262 $1,580,014 $(5,795,586)$6,356,854 
              

Table of Contents


IRON MOUNTAIN INCORPORATED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

DECEMBER 31, 20092012
(In thousands, except share and per share data)

5. Selected Consolidated Financial Statements of Parent, Guarantors, Canada Company and Non-Guarantors (Continued)



 December 31, 2009  December 31, 2011 


 Parent Guarantors Canada
Company
 Non-
Guarantors
 Eliminations Consolidated  Parent Guarantors Canada Company Non-
Guarantors
 Eliminations Consolidated 

Assets

Assets

  

Current Assets:

Current Assets:

  

Cash and Cash Equivalents

 $3,428 $10,750 $68,907 $96,760 $ $179,845 

Restricted Cash

 35,110     35,110 

Accounts Receivable

  334,658 40,115 168,694  543,467 

Intercompany Receivable

 905,451  4,639  (910,090)  

Assets of Discontinued Operations

    7,256  7,256 

Other Current Assets

 2,016 103,899 3,323 40,538 (1,004) 148,772 

Cash and Cash Equivalents

 $ $382,588 $3,906 $60,162 $ $446,656              

Accounts Receivable

  387,670 36,776 160,930  585,376 

Intercompany Receivable

 1,047,805  8,886  (1,056,691)  

Other Current Assets

 4,216 118,780 10,367 46,030  179,393 
             
 

Total Current Assets

 1,052,021 889,038 59,935 267,122 (1,056,691) 1,211,425 

Total Current Assets

 946,005 449,307 116,984 313,248 (911,094) 914,450 

Property, Plant and Equipment, Net

Property, Plant and Equipment, Net

  1,613,985 197,272 756,943  2,568,200  1,490 1,480,785 200,755 724,053  2,407,083 

Other Assets, Net:

Other Assets, Net:

  

Long-term Notes Receivable from Affiliates and Intercompany Receivable

 928,182 1,000 2,961 15,010 (947,153)  

Investment in Subsidiaries

 1,828,712 1,579,399 17,397  (3,425,508)  

Goodwill

  1,529,359 196,989 527,920  2,254,268 

Other

 27,226 240,557 9,804 187,870  465,457 

Long-term Notes Receivable from Affiliates and Intercompany Receivable

 2,192,476 1,000   (2,193,476)               

Total Other Assets, Net

 2,784,120 3,350,315 227,151 730,800 (4,372,661) 2,719,725 

Investment in Subsidiaries

 1,785,214 1,522,352   (3,307,566)               

Goodwill

  1,762,409 191,856 580,448  2,534,713 

Other

 32,837 300,582 12,210 187,324 (457) 532,496 
             
 

Total Other Assets, Net

 4,010,527 3,586,343 204,066 767,772 (5,501,499) 3,067,209 
             
 

Total Assets

 $5,062,548 $6,089,366 $461,273 $1,791,837 $(6,558,190)$6,846,834 

Total Assets

 $3,731,615 $5,280,407 $544,890 $1,768,101 $(5,283,755)$6,041,258 
                          

Liabilities and Equity

Liabilities and Equity

  

Intercompany Payable

Intercompany Payable

 $ $999,182 $ $57,509 $(1,056,691)$  $ $856,808 $ $53,282 $(910,090)$ 

Current Portion of Long-term Debt

Current Portion of Long-term Debt

 4,639 25,024 2,170 8,728  40,561  658 46,967 2,658 23,037  73,320 

Total Other Current Liabilities

Total Other Current Liabilities

 62,987 480,557 31,664 198,945  774,153  100,921 453,648 31,407 187,421 (1,004) 772,393 

Liabilities of Discontinued Operations

    3,317  3,317 

Long-term Debt, Net of Current Portion

Long-term Debt, Net of Current Portion

 2,848,927 76,728 181,318 104,250  3,211,223  2,378,040 630,118 185,953 86,157  3,280,268 

Long-term Notes Payable to Affiliates and Intercompany Payable

Long-term Notes Payable to Affiliates and Intercompany Payable

 1,000 2,192,476   (2,193,476)   1,000 946,153   (947,153)  

Other Long-term Liabilities

Other Long-term Liabilities

 3,853 544,233 24,025 103,997 (457) 675,651  5,308 528,897 31,418 92,081  657,704 

Commitments and Contingencies (See Note 10)

Commitments and Contingencies (See Note 10)

  

Total Iron Mountain Incorporated Stockholders' Equity

 1,245,688 1,817,816 293,454 1,314,238 (3,425,508) 1,245,688 

Noncontrolling Interests

    8,568  8,568 

Total Iron Mountain Incorporated Stockholders' Equity

 2,141,142 1,771,166 222,096 1,314,304 (3,307,566) 2,141,142              

Total Equity

 1,245,688 1,817,816 293,454 1,322,806 (3,425,508) 1,254,256 

Noncontrolling Interests

    4,104  4,104              

Total Liabilities and Equity

 $3,731,615 $5,280,407 $544,890 $1,768,101 $(5,283,755)$6,041,258 
                          
 

Total Equity

 2,141,142 1,771,166 222,096 1,318,408 (3,307,566) 2,145,246 
             
 

Total Liabilities and Equity

 $5,062,548 $6,089,366 $461,273 $1,791,837 $(6,558,190)$6,846,834 
             

Table of Contents


IRON MOUNTAIN INCORPORATED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

DECEMBER 31, 20092012
(In thousands, except share and per share data)

5. Selected Consolidated Financial Statements of Parent, Guarantors, Canada Company and Non-Guarantors (Continued)


 
 December 31, 2012 
 
 Parent Guarantors Canada
Company
 Non-
Guarantors
 Eliminations Consolidated 

Assets

                   

Current Assets:

                   

Cash and Cash Equivalents

 $ $13,472 $103,500 $126,443 $ $243,415 

Restricted Cash

  33,612          33,612 

Accounts Receivable

    338,455  44,363  189,382    572,200 

Intercompany Receivable

  1,055,593    5,781    (1,061,374)  

Other Current Assets

  48  121,933  5,720  47,164    174,865 
              

Total Current Assets

  1,089,253  473,860  159,364  362,989  (1,061,374) 1,024,092 

Property, Plant and Equipment, Net

  1,305  1,500,309  203,909  772,204    2,477,727 

Other Assets, Net:

                   

Long-term Notes Receivable from Affiliates and Intercompany Receivable

  1,070,930  1,000  4,136    (1,076,066)  

Investment in Subsidiaries

  1,941,540  1,688,000  18,422    (3,647,962)  

Goodwill

    1,536,964  202,282  595,513    2,334,759 

Other

  37,909  261,950  10,622  211,394  (114) 521,761 
              

Total Other Assets, Net

  3,050,379  3,487,914  235,462  806,907  (4,724,142) 2,856,520 
              

Total Assets

 $4,140,937 $5,462,083 $598,735 $1,942,100 $(5,785,516)$6,358,339 
              

Liabilities and Equity

                   

Intercompany Payable

 $ $942,547 $ $118,827 $(1,061,374)$ 

Current Portion of Long-term Debt

    70,870  2,799  19,218    92,887 

Total Other Current Liabilities

  111,536  469,249  31,015  200,266    812,066 

Long-term Debt, Net of Current Portion

  2,876,317  568,205  193,181  94,413    3,732,116 

Long-term Notes Payable to Affiliates and Intercompany Payable

  1,000  1,066,823    8,243  (1,076,066)  

Other Long-term Liabilities

  2,113  417,972  38,745  100,106  (114) 558,822 

Commitments and Contingencies (See Note 10)

                   

Total Iron Mountain Incorporated Stockholders' Equity

  1,149,971  1,926,417  332,995  1,388,550  (3,647,962) 1,149,971 

Noncontrolling Interests

        12,477    12,477 
              

Total Equity

  1,149,971  1,926,417  332,995  1,401,027  (3,647,962) 1,162,448 
              

Total Liabilities and Equity

 $4,140,937 $5,462,083 $598,735 $1,942,100 $(5,785,516)$6,358,339 
              

Table of Contents


IRON MOUNTAIN INCORPORATED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

DECEMBER 31, 2012
(In thousands, except share and per share data)

5. Selected Consolidated Financial Statements of Parent, Guarantors, Canada Company and Non-Guarantors (Continued)

 
 Year Ended December 31, 2007 
 
 Parent Guarantors Canada
Company
 Non-
Guarantors
 Eliminations Consolidated 

Revenues:

                   
 

Storage

 $ $1,074,743 $84,075 $340,256 $ $1,499,074 
 

Service

    790,997  89,350  350,614    1,230,961 
              
  

Total Revenues

    1,865,740  173,425  690,870    2,730,035 

Operating Expenses:

                   
 

Cost of Sales (Excluding Depreciation and Amortization)

    827,135  79,926  353,059    1,260,120 
 

Selling, General and Administrative

  (129) 548,918  30,146  192,440    771,375 
 

Depreciation and Amortization

  153  168,910  11,942  68,289    249,294 
 

Loss (Gain) on Disposal/Writedown of Property, Plant and Equipment, Net

    1,162  284  (6,918)   (5,472)
              
  

Total Operating Expenses

  24  1,546,125  122,298  606,870    2,275,317 
              

Operating (Loss) Income

  (24) 319,615  51,127  84,000    454,718 

Interest Expense (Income), Net

  195,785  (9,411) 25,025  17,194    228,593 

Other Expense (Income), Net

  46,132  (2,301) (5,087) (35,643)   3,101 
              

(Loss) Income Before Provision for Income Taxes

  (241,941) 331,327  31,189  102,449    223,024 

Provision for Income Taxes

    47,063  13,077  8,870    69,010 

Equity in the Earnings of Subsidiaries, Net of Tax

  (395,035) (99,045)     494,080   
              

Net Income

  153,094  383,309  18,112  93,579  (494,080) 154,014 
  

Less: Net (Loss) Income Attributable to Noncontrolling Interests

      (348) 1,268    920 
              

Net Income Attributable to Iron Mountain Incorporated

 $153,094 $383,309 $18,460 $92,311 $(494,080)$153,094 
              
 
 Year Ended December 31, 2010 
 
 Parent Guarantors Canada
Company
 Non-
Guarantors
 Eliminations Consolidated 

Revenues:

                   

Storage Rental

 $ $1,113,674 $110,768 $374,276 $ $1,598,718 

Service

    836,443  113,498  343,690    1,293,631 
              

Total Revenues

    1,950,117  224,266  717,966    2,892,349 

Operating Expenses:

                   

Cost of Sales (Excluding Depreciation and Amortization)

    746,479  86,352  360,031    1,192,862 

Selling, General and Administrative

  68  516,664  36,587  219,492    772,811 

Depreciation and Amortization

  223  201,534  18,818  83,630    304,205 

Intangible Impairments

    84,611    1,298    85,909 

(Gain) Loss on Disposal/Write-down of Property, Plant and Equipment, Net

    (1,039) 196  (10,144)   (10,987)
              

Total Operating Expenses

  291  1,548,249  141,953  654,307    2,344,800 
              

Operating (Loss) Income

  (291) 401,868  82,313  63,659    547,549 

Interest Expense (Income), Net

  194,689  (41,770) 44,898  6,742    204,559 

Other (Income) Expense, Net

  (22,662) (1,882) 18  33,294    8,768 
              

(Loss) Income from Continuing Operations Before Provision (Benefit) for Income Taxes

  (172,318) 445,520  37,397  23,623    334,222 

Provision (Benefit) for Income Taxes

    151,329  11,142  5,012    167,483 

Equity in the (Earnings) Losses of Subsidiaries, Net of Tax

  (114,732) (35,947) (1,508)   152,187   
              

(Loss) Income from Continuing Operations

  (57,586) 330,138  27,763  18,611  (152,187) 166,739 

(Loss) Income from Discontinued Operations, Net of Tax

    (215,479)   (3,938)   (219,417)
              

Net (Loss) Income

  (57,586) 114,659  27,763  14,673  (152,187) (52,678)

Less: Net Income (Loss) Attributable to Noncontrolling Interests

        4,908    4,908 
              

Net (Loss) Income Attributable to Iron Mountain Incorporated

 $(57,586)$114,659 $27,763 $9,765 $(152,187)$(57,586)
              

Net (Loss) Income

 $(57,586)$114,659 $27,763 $14,673 $(152,187)$(52,678)

Other Comprehensive Income (Loss):

                   

Foreign Currency Translation Adjustments

  4,620  (6,177) 12,174  (8,329)   2,288 

Equity in Other Comprehensive (Loss) Income of Subsidiaries

  (2,799) 3,224  621    (1,046)  
              

Total Other Comprehensive Income (Loss)

  1,821  (2,953) 12,795  (8,329) (1,046) 2,288 
              

Comprehensive (Loss) Income

  (55,765) 111,706  40,558  6,344  (153,233) (50,390)

Comprehensive Income (Loss) Attributable to Noncontrolling Interests

        5,375    5,375 
              

Comprehensive (Loss) Income Attributable to Iron Mountain Incorporated

 $(55,765)$111,706 $40,558 $969 $(153,233)$(55,765)
              

Table of Contents


IRON MOUNTAIN INCORPORATED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

DECEMBER 31, 20092012
(In thousands, except share and per share data)

5. Selected Consolidated Financial Statements of Parent, Guarantors, Canada Company and Non-Guarantors (Continued)


 
 Year Ended December 31, 2011 
 
 Parent Guarantors Canada
Company
 Non-
Guarantors
 Eliminations Consolidated 

Revenues:

                   

Storage Rental

 $ $1,132,743 $120,476 $429,771 $ $1,682,990 

Service

    833,652  115,973  382,088    1,331,713 
              

Total Revenues

    1,966,395  236,449  811,859    3,014,703 

Operating Expenses:

                   

Cost of Sales (Excluding Depreciation and Amortization)

  2,000  760,300  91,249  391,651    1,245,200 

Selling, General and Administrative

  (1,885) 548,848  38,965  248,663    834,591 

Depreciation and Amortization

  457  192,551  18,685  107,806    319,499 

Intangible Impairments

        46,500    46,500 

(Gain) Loss on Disposal/Write-down of Property, Plant and Equipment, Net

    (1,120) (420) (746)   (2,286)
              

Total Operating Expenses

  572  1,500,579  148,479  793,874    2,443,504 
              

Operating (Loss) Income

  (572) 465,816  87,970  17,985    571,199 

Interest Expense (Income), Net

  173,738  (24,055) 44,559  11,014    205,256 

Other (Income) Expense, Net

  (3,944) 7,561  315  9,111    13,043 
              

(Loss) Income from Continuing Operations Before Provision (Benefit) for Income Taxes

  (170,366) 482,310  43,096  (2,140)   352,900 

Provision (Benefit) for Income Taxes

    86,139  20,681  (332)   106,488 

Equity in the (Earnings) Losses of Subsidiaries, Net of Tax

  (565,904) 18,569  (4,545)   551,880   
              

Income (Loss) from Continuing Operations

  395,538  377,602  26,960  (1,808) (551,880) 246,412 

(Loss) Income from Discontinued Operations, Net of Tax

    (17,350)   (30,089)   (47,439)

Gain (Loss) on Sale of Discontinued Operations, Net of Tax

    198,735    1,884    200,619 
              

Net Income (Loss)

  395,538  558,987  26,960  (30,013) (551,880) 399,592 

Less: Net Income (Loss) Attributable to Noncontrolling Interests

        4,054    4,054 
              

Net Income (Loss) Attributable to Iron Mountain Incorporated

 $395,538 $558,987 $26,960 $(34,067)$(551,880)$395,538 
              

Net Income (Loss)

 $395,538 $558,987 $26,960 $(30,013)$(551,880)$399,592 

Other Comprehensive Income (Loss):

                   

Foreign Currency Translation Adjustments

  5,412  (97) (6,831) (31,100)   (32,616)

Equity in Other Comprehensive (Loss) Income of Subsidiaries

  (37,097) (36,443) 979    72,561   
              

Total Other Comprehensive (Loss) Income

  (31,685) (36,540) (5,852) (31,100) 72,561  (32,616)
              

Comprehensive Income (Loss)

  363,853  522,447  21,108  (61,113) (479,319) 366,976 

Comprehensive Income (Loss) Attributable to Noncontrolling Interests

        3,123    3,123 
              

Comprehensive Income (Loss) Attributable to Iron Mountain Incorporated

 $363,853 $522,447 $21,108 $(64,236)$(479,319)$363,853 
              

Table of Contents


IRON MOUNTAIN INCORPORATED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

DECEMBER 31, 2012
(In thousands, except share and per share data)

5. Selected Consolidated Financial Statements of Parent, Guarantors, Canada Company and Non-Guarantors (Continued)


 
 Year Ended December 31, 2012 
 
 Parent Guarantors Canada
Company
 Non-
Guarantors
 Eliminations Consolidated 

Revenues:

                   

Storage Rental

 $ $1,156,681 $124,370 $452,087 $ $1,733,138 

Service

    784,068  115,746  372,303    1,272,117 
              

Total Revenues

    1,940,749  240,116  824,390    3,005,255 

Operating Expenses:

                   

Cost of Sales (Excluding Depreciation and Amortization)

    761,092  97,436  418,585    1,277,113 

Selling, General and Administrative

  220  591,092  35,554  223,505    850,371 

Depreciation and Amortization

  320  192,304  18,601  105,119    316,344 

(Gain) Loss on Disposal/Write-down of Property, Plant and Equipment, Net

    (966) (122) 5,488    4,400 
              

Total Operating Expenses

  540  1,543,522  151,469  752,697    2,448,228 
              

Operating (Loss) Income

  (540) 397,227  88,647  71,693    557,027 

Interest Expense (Income), Net

  196,423  (17,117) 45,826  17,467    242,599 

Other Expense (Income), Net

  32,161  (3,842) (53) (12,204)   16,062 
              

(Loss) Income from Continuing Operations Before Provision (Benefit) for Income Taxes

  (229,124) 418,186  42,874  66,430    298,366 

Provision (Benefit) for Income Taxes

    86,549  14,715  13,609    114,873 

Equity in the (Earnings) Losses of Subsidiaries, Net of Tax

  (400,832) (73,625) (591)   475,048   
              

Income (Loss) from Continuing Operations

  171,708  405,262  28,750  52,821  (475,048) 183,493 

Income (Loss) from Discontinued Operations, Net of Tax

    430    (7,204)   (6,774)

Gain (Loss) on Sale of Discontinued Operations, Net of Tax

        (1,885)   (1,885)
              

Net Income (Loss)

  171,708  405,692  28,750  43,732  (475,048) 174,834 

Less: Net Income (Loss) Attributable to Noncontrolling Interests

        3,126    3,126 
              

Net Income (Loss) Attributable to Iron Mountain Incorporated

 $171,708 $405,692 $28,750 $40,606 $(475,048)$171,708 
              

Net Income (Loss)

 $171,708 $405,692 $28,750 $43,732 $(475,048)$174,834 

Other Comprehensive Income (Loss):

                   

Foreign Currency Translation Adjustments

  (2,668) (212) 7,578  18,488    23,186 

Equity in Other Comprehensive Income (Loss) of Subsidiaries

  25,185  25,421  434    (51,040)  
              

Total Other Comprehensive Income (Loss)

  22,517  25,209  8,012  18,488  (51,040) 23,186 
              

Comprehensive Income (Loss)

  194,225  430,901  36,762  62,220  (526,088) 198,020 

Comprehensive Income (Loss) Attributable to Noncontrolling Interests

        3,795    3,795 
              

Comprehensive Income (Loss) Attributable to Iron Mountain Incorporated

 $194,225 $430,901 $36,762 $58,425 $(526,088)$194,225 
              

Table of Contents


IRON MOUNTAIN INCORPORATED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

DECEMBER 31, 2012
(In thousands, except share and per share data)

5. Selected Consolidated Financial Statements of Parent, Guarantors, Canada Company and Non-Guarantors (Continued)

 
 Year Ended December 31, 2008 
 
 Parent Guarantors Canada
Company
 Non-
Guarantors
 Eliminations Consolidated 

Revenues:

                   
 

Storage

 $ $1,181,424 $92,532 $383,953 $ $1,657,909 
 

Service

    900,437  98,355  398,433    1,397,225 
              
  

Total Revenues

    2,081,861  190,887  782,386    3,055,134 

Operating Expenses:

                   
 

Cost of Sales (Excluding Depreciation and Amortization)

    884,212  84,216  413,591    1,382,019 
 

Selling, General and Administrative

  109  626,983  33,175  222,097    882,364 
 

Depreciation and Amortization

  182  196,783  13,755  80,018    290,738 
 

Loss (Gain) on Disposal/Writedown of Property, Plant and Equipment, Net

    7,568  21  (106)   7,483 
              
  

Total Operating Expenses

  291  1,715,546  131,167  715,600    2,562,604 
              

Operating (Loss) Income

  (291) 366,315  59,720  66,786    492,530 

Interest Expense (Income), Net

  209,712  (28,760) 46,849  8,834    236,635 

Other (Income) Expense, Net

  (125,361) (2,248) (351) 158,988    31,028 
              

(Loss) Income Before Provision for Income Taxes

  (84,642) 397,323  13,222  (101,036)   224,867 

Provision for Income Taxes

    138,454  (3,682) 8,152    142,924 

Equity in the (Earnings) Losses of Subsidiaries, Net of Tax

  (166,679) 95,532      71,147   
              

Net Income (Loss)

  82,037  163,337  16,904  (109,188) (71,147) 81,943 
  

Less: Net Loss Attributable to Noncontrolling Interests

        (94)   (94)
              

Net Income (Loss) Attributable to Iron Mountain Incorporated

 $82,037 $163,337 $16,904 $(109,094)$(71,147)$82,037 
              
 
 Year Ended December 31, 2010 
 
 Parent Guarantors Canada
Company
 Non-
Guarantors
 Eliminations Consolidated 

Cash Flows from Operating Activities:

                   

Cash Flows from Operating Activities-Continuing Operations

 $(180,588)$578,159 $56,113 $149,545 $ $603,229 

Cash Flows from Operating Activities-Discontinued Operations

    19,347    2,564    21,911 
              

Cash Flows from Operating Activities

  (180,588) 597,506  56,113  152,109    625,140 

Cash Flows from Investing Activities:

                   

Capital expenditures

    (137,937) (16,593) (104,319)   (258,849)

Cash paid for acquisitions, net of cash acquired

    (1,970) (3,705) (8,166)   (13,841)

Intercompany loans to subsidiaries

  577,316  34,465      (611,781)  

Investment in subsidiaries

  (10,258) (35,124)     45,382   

Investment in restricted cash

  (35,102)         (35,102)

Additions to customer relationship and acquisition costs

    (9,332) (594) (3,276)   (13,202)

Proceeds from sales of property and equipment and other, net

    5,867  93  16,576    22,536 
              

Cash Flows from Investing Activities-Continuing Operations

  531,956  (144,031) (20,799) (99,185) (566,399) (298,458)

Cash Flows from Investing Activities-Discontinued Operations

  (1,796) (129,972)   (6,036) 3,592  (134,212)
              

Cash Flows from Investing Activities

  530,160  (274,003) (20,799) (105,221) (562,807) (432,670)

Cash Flows from Financing Activities:

                   

Repayment of revolving credit and term loan facilities and other debt

  (4,100) (24,226) (2,504) (71,054)   (101,884)

Proceeds from revolving credit and term loan facilities and other debt

        53,567    53,567 

Early retirement of senior subordinated notes

  (202,584)         (202,584)

Debt financing (repayment to) and equity contribution from (distribution to) noncontrolling interests, net

        169    169 

Intercompany loans from parent

    (572,335) 122  (39,568) 611,781   

Equity contribution from parent

    10,258    35,124  (45,382)  

Stock repurchases

  (111,563)         (111,563)

Parent cash dividends

  (37,893)         (37,893)

Proceeds from exercise of stock options and employee stock purchase plan

  18,225          18,225 

Excess tax benefits from stock-based compensation

  2,252          2,252 
              

Cash Flows from Financing Activities-Continuing Operations

  (335,663) (586,303) (2,382) (21,762) 566,399  (379,711)

Cash Flows from Financing Activities-Discontinued Operations

    1,796    273  (3,592) (1,523)
              

Cash Flows from Financing Activities

  (335,663) (584,507) (2,382) (21,489) 562,807  (381,234)

Effect of exchange rates on cash and cash equivalents

      814  (13)   801 
              

Increase (Decrease) in cash and cash equivalents

  13,909  (261,004) 33,746  25,386    (187,963)

Cash and cash equivalents, beginning of period

    382,588  3,906  60,162    446,656 
              

Cash and cash equivalents, end of period

 $13,909 $121,584 $37,652 $85,548 $ $258,693 
              

Table of Contents


IRON MOUNTAIN INCORPORATED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

DECEMBER 31, 20092012
(In thousands, except share and per share data)

5. Selected Consolidated Financial Statements of Parent, Guarantors, Canada Company and Non-Guarantors (Continued)

 
 Year Ended December 31, 2009 
 
 Parent Guarantors Canada
Company
 Non-
Guarantors
 Eliminations Consolidated 

Revenues:

                   
 

Storage

 $ $1,247,778 $93,244 $355,373 $ $1,696,395 
 

Service

    875,814  96,764  344,622    1,317,200 
              
  

Total Revenues

    2,123,592  190,008  699,995    3,013,595 

Operating Expenses:

                   
 

Cost of Sales (Excluding Depreciation and Amortization)

    829,539  80,205  361,470    1,271,214 
 

Selling, General and Administrative

  92  638,770  32,127  203,370    874,359 
 

Depreciation and Amortization

  231  226,559  15,717  76,565    319,072 
 

Loss (Gain) on Disposal/Writedown of Property, Plant and Equipment, Net

    1,435  123  (1,152)   406 
              
  

Total Operating Expenses

  323  1,696,303  128,172  640,253    2,465,051 
              

Operating (Loss) Income

  (323) 427,289  61,836  59,742    548,544 

Interest Expense (Income), Net

  202,947  (28,189) 42,066  10,966    227,790 

Other Expense (Income) , Net

  44,642  (4,766) (2) (51,953)   (12,079)
              

(Loss) Income Before Provision for Income Taxes

  (247,912) 460,244  19,772  100,729    332,833 

Provision for Income Taxes

    97,504  3,624  9,399    110,527 

Equity in the Earnings of Subsidiaries, Net of Tax

  (468,789) (102,601)     571,390   
              

Net Income

  220,877  465,341  16,148  91,330  (571,390) 222,306 
  

Less: Net Income Attributable to Noncontrolling Interests

        1,429    1,429 
              

Net Income Attributable to Iron Mountain Incorporated

 $220,877 $465,341 $16,148 $89,901 $(571,390)$220,877 
              
 
 Year Ended December 31, 2011 
 
 Parent Guarantors Canada
Company
 Non-
Guarantors
 Eliminations Consolidated 

Cash Flows from Operating Activities:

                   

Cash Flows from Operating Activities-Continuing Operations

 $(162,478)$698,033 $45,232 $82,727 $ $663,514 

Cash Flows from Operating Activities-Discontinued Operations

    (47,166)   (910)   (48,076)
              

Cash Flows from Operating Activities

  (162,478) 650,867  45,232  81,817    615,438 

Cash Flows from Investing Activities:

                   

Capital expenditures

    (114,768) (14,155) (80,232)   (209,155)

Cash paid for acquisitions, net of cash acquired

    (5,378) (58) (69,810)   (75,246)

Intercompany loans to subsidiaries

  1,469,788  (83,385)     (1,386,403)  

Investment in subsidiaries

  (12,595) (12,595)     25,190   

Investment in restricted cash

  (5)         (5)

Additions to customer relationship and acquisition costs

    (15,700) (462) (5,541)   (21,703)

Investment in joint ventures

        (335)   (335)

Proceeds from sales of property and equipment and other, net

    363  66  3,802    4,231 
              

Cash Flows from Investing Activities-Continuing Operations

  1,457,188  (231,463) (14,609) (152,116) (1,361,213) (302,213)

Cash Flows from Investing Activities-Discontinued Operations

    371,365    9,356    380,721 
              

Cash Flows from Investing Activities

  1,457,188  139,902  (14,609) (142,760) (1,361,213) 78,508 

Cash Flows from Financing Activities:

                   

Repayment of revolving credit and term loan facilities and other debt

  (396,200) (1,458,628) (90,752) (71,594)   (2,017,174)

Proceeds from revolving credit and term loan facilities and other debt

    2,014,500  89,838  66,641    2,170,979 

Early retirement of senior subordinated notes

  (231,255)         (231,255)

Net proceeds from sale of senior subordinated notes

  394,000          394,000 

Debt financing (repayment to) and equity contribution from (distribution to) noncontrolling interests, net

        698    698 

Intercompany loans from parent

    (1,461,888) 5,429  70,056  1,386,403   

Equity contribution from parent

    12,595    12,595  (25,190)  

Stock repurchases

  (984,953)         (984,953)

Parent cash dividends

  (172,616)         (172,616)

Proceeds from exercise of stock options and employee stock purchase plan

  85,742          85,742 

Excess tax benefits from stock-based compensation

  919          919 

Payment of debt financing costs

  (828) (8,182)       (9,010)
              

Cash Flows from Financing Activities-Continuing Operations

  (1,305,191) (901,603) 4,515  78,396  1,361,213  (762,670)

Cash Flows from Financing Activities-Discontinued Operations

        (1,138)   (1,138)
              

Cash Flows from Financing Activities

  (1,305,191) (901,603) 4,515  77,258  1,361,213  (763,808)

Effect of exchange rates on cash and cash equivalents

      (3,883) (5,103)   (8,986)
              

(Decrease) Increase in cash and cash equivalents

  (10,481) (110,834) 31,255  11,212    (78,848)

Cash and cash equivalents, beginning of period

  13,909  121,584  37,652  85,548    258,693 
              

Cash and cash equivalents, end of period

 $3,428 $10,750 $68,907 $96,760 $ $179,845 
              

Table of Contents


IRON MOUNTAIN INCORPORATED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

DECEMBER 31, 20092012
(In thousands, except share and per share data)

5. Selected Consolidated Financial Statements of Parent, Guarantors, Canada Company and Non-Guarantors (Continued)

 
 Year Ended December 31, 2007 
 
 Parent Guarantors Canada
Company
 Non-
Guarantors
 Eliminations Consolidated 

Cash Flows from Operating Activities

 $(177,057)$474,366 $39,928 $147,407 $ $484,644 

Cash Flows from Investing Activities:

                   
 

Capital expenditures

    (248,102) (16,360) (121,980)   (386,442)
 

Cash paid for acquisitions, net of cash acquired

    (415,611) (2,303) (63,612)   (481,526)
 

Intercompany loans to subsidiaries

  (356,735) (157,492)     514,227   
 

Investment in subsidiaries

  (20,298) (20,298)     40,596   
 

Additions to customer relationship and acquisition costs

    (7,124) (960) (8,319)   (16,403)
 

Proceeds from sales of property and equipment and other, net

    7,340  391  10,005    17,736 
              
  

Cash Flows from Investing Activities

  (377,033) (841,287) (19,232) (183,906) 554,823  (866,635)

Cash Flows from Financing Activities:

                   
 

Repayment of revolving credit and term loan facilities and other debt

  (1,239,836) (10,894) (723,277) (337,324)   (2,311,331)
 

Proceeds from revolving credit and term loan facilities and other debt

  1,481,750  9,056  762,498  56,740    2,310,044 
 

Net proceeds from sale of senior subordinated notes

  289,058    146,760      435,818 
 

Debt financing (repayment to) and equity contribution from (distribution to) noncontrolling interests, net

        1,950    1,950 
 

Intercompany loans from parent

    360,062  (190,165) 344,330  (514,227)  
 

Equity contribution from parent

    20,298    20,298  (40,596)  
 

Proceeds from exercise of stock options and employee stock purchase plan

  21,843          21,843 
 

Excess tax benefits from stock-based compensation

  6,765          6,765 
 

Payment of debt financing costs

  (5,490)   (2,687) 93    (8,084)
              
  

Cash Flows from Financing Activities

  554,090  378,522  (6,871) 86,087  (554,823) 457,005 

Effect of exchange rates on cash and cash equivalents

      942  4,282    5,224 
              

Increase in cash and cash equivalents

    11,601  14,767  53,870    80,238 

Cash and cash equivalents, beginning of period

    16,354  762  28,253    45,369 
              

Cash and cash equivalents, end of period

 $ $27,955 $15,529 $82,123 $ $125,607 
              

Table of Contents


IRON MOUNTAIN INCORPORATED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

DECEMBER 31, 2009
(In thousands, except share and per share data)

5. Selected Consolidated Financial Statements of Parent, Guarantors, Canada Company and Non-Guarantors (Continued)

 
 Year Ended December 31, 2008 
 
 Parent Guarantors Canada
Company
 Non-
Guarantors
 Eliminations Consolidated 

Cash Flows from Operating Activities

 $(175,781)$570,427 $14,041 $128,342 $ $537,029 

Cash Flows from Investing Activities:

                   
 

Capital expenditures

    (222,161) (12,493) (152,067)   (386,721)
 

Cash paid for acquisitions, net of cash acquired

    (35,424)   (21,208)   (56,632)
 

Intercompany loans to subsidiaries

  50,007  (57,558)     7,551   
 

Investment in subsidiaries

  (14,344) (14,344)     28,688   
 

Additions to customer relationship and acquisition costs

    (8,795) (416) (4,971)   (14,182)
 

Investments in joint ventures

        (1,709)   (1,709)
 

Proceeds from sales of property and equipment and other, net

    927  33  (1,310)   (350)
              
  

Cash Flows from Investing Activities

  35,663  (337,355) (12,876) (181,265) 36,239  (459,594)

Cash Flows from Financing Activities:

                   
 

Repayment of revolving credit and term loan facilities and other debt

  (880,451) (14,993) (44,729) (17,334)   (957,507)
 

Proceeds from revolving credit and term loan facilities and other debt

  776,650  114  11,212  12,048    800,024 
 

Early retirement of senior subordinated notes

  (71,881)         (71,881)
 

Net proceeds from sale of senior subordinated notes

  295,500          295,500 
 

Debt financing (repayment to) and equity contribution from (distribution to) noncontrolling interests, net

        960    960 
 

Intercompany loans from parent

    (49,856) 35,856  21,551  (7,551)  
 

Equity contribution from parent

    14,344    14,344  (28,688)  
 

Proceeds from exercise of stock options and employee stock purchase plan

  16,145          16,145 
 

Excess tax benefits from stock-based compensation

  5,112          5,112 
 

Payment of debt financing costs

  (957)   (28)     (985)
              
  

Cash Flows from Financing Activities

  140,118  (50,391) 2,311  31,569  (36,239) 87,368 

Effect of exchange rates on cash and cash equivalents

      (1,936) (10,104)   (12,040)
              

Increase (Decrease) in cash and cash equivalents

    182,681  1,540  (31,458)   152,763 

Cash and cash equivalents, beginning of period

    27,955  15,529  82,123    125,607 
              

Cash and cash equivalents, end of period

 $ $210,636 $17,069 $50,665 $ $278,370 
              

Table of Contents


IRON MOUNTAIN INCORPORATED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

DECEMBER 31, 2009
(In thousands, except share and per share data)

5. Selected Consolidated Financial Statements of Parent, Guarantors, Canada Company and Non-Guarantors (Continued)



 Year Ended December 31, 2009  Year Ended December 31, 2012 


 Parent Guarantors Canada
Company
 Non-
Guarantors
 Eliminations Consolidated  Parent Guarantors Canada
Company
 Non-
Guarantors
 Eliminations Consolidated 

Cash Flows from Operating Activities:

 

Cash Flows from Operating Activities-Continuing Operations

 $(195,478)$496,542 $48,037 $94,551 $ $443,652 

Cash Flows from Operating Activities-Discontinued Operations

  (8,814)  (2,102)  (10,916)
             

Cash Flows from Operating Activities

Cash Flows from Operating Activities

 $(186,314)$634,063 $38,154 $131,008 $ $616,911  (195,478) 487,728 48,037 92,449  432,736 

Cash Flows from Investing Activities:

Cash Flows from Investing Activities:

  

Capital expenditures

  (134,852) (10,829) (95,002)  (240,683)

Cash paid for acquisitions, net of cash acquired

  (28,126)  (97,008)  (125,134)

Intercompany loans to subsidiaries

 88,376 (110,142)   21,766  

Investment in subsidiaries

 (37,572) (37,572)   75,144  

Investment in restricted cash

 1,498     1,498 

Additions to customer relationship and acquisition costs

  (23,543) (2,132) (3,197)  (28,872)

Investment in joint ventures

 (2,330)     (2,330)

Proceeds from sales of property and equipment and other, net

  (1,739) 5 3,191  1,457 

Capital expenditures

  (174,256) (22,042) (116,463)  (312,761)             

Cash Flows from Investing Activities-Continuing Operations

 49,972 (335,974) (12,956) (192,016) 96,910 (394,064)

Cash Flows from Investing Activities-Discontinued Operations

  (1,982)  (4,154)  (6,136)

Cash paid for acquisitions, net of cash acquired

  (256)  (1,777)  (2,033)             

Cash Flows from Investing Activities

 49,972 (337,956) (12,956) (196,170) 96,910 (400,200)

Cash Flows from Financing Activities:

 

Repayment of revolving credit and term loan facilities and other debt

  (2,774,070) (3,069) (67,554)  (2,844,693)

Proceeds from revolving credit and term loan facilities and other debt

  2,680,107  51,078  2,731,185 

Early retirement of senior subordinated notes

 (525,834)     (525,834)

Net proceeds from sales of senior subordinated notes

 985,000     985,000 

Debt financing (repayment to) and equity contribution from (distribution to) noncontrolling interests, net

    480  480 

Intercompany loans from parent

  (89,878) 714 110,930 (21,766)  

Equity contribution from parent

  37,572  37,572 (75,144)  

Stock repurchases

 (38,052)     (38,052)

Parent cash dividends

 (318,845)     (318,845)

Proceeds from exercise of stock options and employee stock purchase plan

 40,244     40,244 

Excess tax benefits from stock-based compensation

 1,045     1,045 

Payment of debt finacing costs

 (1,480) (781)    (2,261)

Intercompany loans to subsidiaries

 284,604 17,807   (302,411)               

Cash Flows from Financing Activities-Continuing Operations

 142,078 (147,050) (2,355) 132,506 (96,910) 28,269 

Cash Flows from Financing Activities-Discontinued Operations

    (39)  (39)

Investment in subsidiaries

 (164,256) (164,256)   328,512               

Additions to customer relationship and acquisition costs

  (6,711) (520) (3,528)  (10,759)

Investments in joint ventures

    (3,114)  (3,114)

Proceeds from sales of property and equipment and other, net

  3,717 45 839  4,601 
             
 

Cash Flows from Investing Activities

 120,348 (323,955) (22,517) (124,043) 26,101 (324,066)

Cash Flows from Financing Activities:

 

Repayment of revolving credit and term loan facilities and other debt

 (54,150) (18,438) (192,097) (23,027)  (287,712)

Proceeds from revolving credit and term loan facilities and other debt

    36,932  36,932 

Early retirement of senior subordinated notes

 (447,874)     (447,874)

Net proceeds from sale of senior subordinated notes

 539,688     539,688 

Debt financing (repayment to) and equity contribution from (distribution to) noncontrolling interests, net

    1,064  1,064 

Intercompany loans from parent

  (283,974) 5,751 (24,188) 302,411  

Equity contribution from parent

  164,256 156,655 7,601 (328,512)  

Proceeds from exercise of stock options and employee stock purchase plan

 24,233     24,233 

Excess tax benefits from stock-based compensation

 5,532     5,532 

Payment of debt financing costs

 (1,463)  (37) (55)  (1,555)
             
 

Cash Flows from Financing Activities

 65,966 (138,156) (29,728) (1,673) (26,101) (129,692)

Cash Flows from Financing Activities

 142,078 (147,050) (2,355) 132,467 (96,910) 28,230 

Effect of exchange rates on cash and cash equivalents

Effect of exchange rates on cash and cash equivalents

   928 4,205  5,133    1,867 937  2,804 
                          

Increase (Decrease) in cash and cash equivalents

  171,952 (13,163) 9,497  168,286 

(Decrease) Increase in cash and cash equivalents

 (3,428) 2,722 34,593 29,683  63,570 

Cash and cash equivalents, beginning of period

Cash and cash equivalents, beginning of period

  210,636 17,069 50,665  278,370  3,428 10,750 68,907 96,760  179,845 
                          

Cash and cash equivalents, end of period

Cash and cash equivalents, end of period

 $ $382,588 $3,906 $60,162 $ $446,656  $ $13,472 $103,500 $126,443 $ $243,415 
                          

Table of Contents


IRON MOUNTAIN INCORPORATED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

DECEMBER 31, 20092012
(In thousands, except share and per share data)

6. Acquisitions

        We account for acquisitions using the purchaseacquisition method of accounting, and, accordingly, the results of operations for each acquisition have been included in our consolidated results from their respective acquisition dates. Cash consideration for theour various acquisitions was primarily provided through borrowings under our credit facilities proceeds from the sale of senior subordinated notes and cash equivalents on-hand. We completed no acquisitions during 2009. Included in cash paid for acquisitions in the consolidated statement of cash flows for the year ended December 31, 2009 is contingent and other payments of $2,033 related to acquisitions made in prior years. The unaudited pro forma results of operations for the period ended December 31, 2007current and 2008prior periods are not presented due to the insignificant impact of the 20072010, 2011 and 20082012 acquisitions on our consolidated results of operations, respectively.operations. Noteworthy acquisitions are as follows:

        To extend our leadership role in the information management services industry, inIn May 2007,2010, we acquired ArchivesOne, Inc. ("ArchivesOne"the remaining 87% interest of our joint venture in Greece (Safe doc S.A.), in a leading provider of records and information management services in the United States. ArchivesOne had 31 facilities located in 17 major metropolitan markets in 10 states and the District of Columbia. Thestock transaction for a cash purchase price was $200,295 (net of cash acquired)approximately $4,700, and we now control 100% of our Greek operations, which provide storage and records management services. The carrying value of the 13% interest that we had previously acquired and accounted for ArchivesOne.

        To complement our current health information solutions, in September 2007, we acquired RMS Services—USA, Inc. ("RMS") for $45,400 in cash. RMS, a leading providerunder the equity method of outsourced file-room services, offers hospitals comprehensive, next generation file-roomaccounting amounted to approximately $416 and film-library management solutions.

        In December 2007, we acquired Stratify, Inc. ("Stratify") for $130,051 in cash (net of cash acquired) and $22,828 inthe fair value of options issued (basedsuch interest on the Black-Scholes option pricing model)date of acquisition was approximately $473 and resulted in a gain being recorded on the date of the transaction to augmentother (income) expense, net of approximately $57 during the second quarter of 2010.

        In January 2011, we acquired the remaining 80% interest of our suitejoint venture in Poland (Iron Mountain Poland Holdings Limited) in a stock transaction for an estimated purchase price of eDiscovery services, providing businesses withapproximately $80,000, including an initial cash purchase price of $35,000. As a complete, end-to-end Discovery Services solution. Stratify,result, we now own 100% of our Polish operations, which provide storage and records management services. The terms of the purchase and sale agreement also required a leadersecond payment based upon the audited financial results of the joint venture. This payment of $42,259 was based upon a formula defined in advanced electronic discovery servicesthe purchase and sale agreement and was paid in the second quarter of 2011. Additionally, in July 2012, we paid $2,500 of contingent consideration based upon the satisfaction of certain performance criteria. The carrying value of the 20% interest that we previously held and accounted for under the equity method of accounting amounted to approximately $5,774, and the fair value on the date of the acquisition of such interest of the additional 80% interest was approximately $11,694 and resulted in a gain being recorded to other (income) expense, net of approximately $5,920 in the year ended December 31, 2011. The fair value of our previously held equity interest was derived by reducing the total estimated consideration for the legal80% equity interest purchased by 40%, which represents management's estimate of the control premium paid, in order to derive the fair value of $11,694 for the 20% noncontrolling equity interest which we previously held. We determined that a 40% control premium was appropriate after considering the size and location of the business acquired, the potential future profits expected to be generated by the Polish entity and publicly available market offers in-depth discoverydata. One of the members of our board of directors and data investigation solutions for AmLaw 200 law firms and leading Fortune 500 corporations. Stratify is basedseveral of his family members hold an indirect equity interest in Mountain View, California.one of the stockholders that received proceeds in connection with this transaction. As a result of this equity interest, such board member, together with several of his family members, received approximately 24% of the purchase price that we paid (including the contingent consideration discussed above).

        ToIn April 2012, in order to enhance our existing operations in recordBrazil, we acquired the stock of Grupo Store, a storage rental and records management and information destructiondata protection business in Brazil with locations in Sao Paulo, Rio de Janeiro, Porto Alegre and expand our geographical footprintRecife, for a purchase price of approximately $79,000 ($75,000, net of cash acquired). Included in North America,the purchase price is approximately $8,000 being held in May 2008, we acquired DocuVault for $31,378. DocuVault isescrow to secure a leading providerworking capital adjustment and the indemnification obligations of records storage, secure shredding and data backup services in Denver and Colorado Springs.the former


Table of Contents


IRON MOUNTAIN INCORPORATED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

DECEMBER 31, 20092012
(In thousands, except share and per share data)

6. Acquisitions (Continued)

owners of the business ("Sellers") to IMI. The amounts held in escrow for purposes of the working capital adjustment will be distributed either to IMI or the Sellers based on the final agreed upon working capital amount. Unless paid to us in accordance with the terms of the agreement, all amounts remaining in escrow after the final working capital adjustment and any indemnification payments are paid out will be released to the Sellers in four annual installments, commencing in April 2014.

        In May 2012, we acquired a controlling interest of our joint venture in Switzerland (Sispace AG), which provides storage rental and records management services, in a stock transaction for a cash purchase price of approximately $21,600. The carrying value of the 15% interest that we previously held and accounted for under the equity method of accounting amounted to approximately $1,700 as of the date of acquisition, and the fair value on the date of the acquisition of such interest was approximately $2,700. This resulted in a gain being recorded to other income (expense), net of approximately $1,000 in the second quarter of 2012. The fair value of our previously held equity interest was derived by reducing the total estimated consideration for the controlling interest purchased by 30%, which represents management's estimate of the control premium paid, in order to derive the fair value of $2,700 for the 15% noncontrolling equity interest which we previously held. We determined the 30% control premium was appropriate after considering the size and location of the business acquired, the potential future profits expected to be generated by the Swiss entity and other publicly available market data.

        A summary of the cumulative consideration paid and the allocation of the purchase price of all of the acquisitions in each respective year is as follows:

 
 2010 2011 2012 

Cash Paid (gross of cash acquired)

 $10,542(1)$80,439(1)$131,972 

Contingent Consideration

    2,900   

Fair Value of Previously Held Equity Interest

  473  11,694  4,265 

Fair Value of Noncontrolling Interest

      1,000 
        

Total Consideration

  11,015  95,033  137,237 

Fair Value of Identifiable Assets Acquired:

          

Cash, Accounts Receivable, Prepaid Expenses, Deferred Income Taxes and Other

  1,615  7,918  18,998 

Property, Plant and Equipment(2)

  2,711  6,002  11,794 

Customer Relationship Assets(3)

  5,189  59,100  59,479 

Other Assets

    653  4,620 

Liabilities Assumed and Deferred Income Taxes(4)

  (3,840) (15,245) (15,947)

Noncontrolling Interests

  (390)    
        

Total Fair Value of Identifiable Net Assets Acquired

  5,285  58,428  78,944 
        

Goodwill Initially Recorded

 $5,730 $36,605 $58,293 
        

 
 2007 2008 

Cash Paid (gross of cash acquired)

 $490,966(1)$54,541(1)

Fair Value of Options Issued

  22,828   
      
 

Total Consideration

  513,794  54,541 

Fair Value of Identifiable Assets Acquired:

       
 

Cash, Accounts Receivable, Prepaid Expenses and Other

  45,819  3,172 
 

Property, Plant and Equipment(2)

  41,644  4,026 
 

Customer Relationship Assets(3)

  195,725  24,989 
 

Core Technology

  15,025  2,511 
 

Other Assets

  11,548  996 
 

Liabilities Assumed(4)

  (113,075) (3,922)
 

Noncontrolling Interests

    4,489(5)
      
 

Total Fair Value of Identifiable Net Assets Acquired

  196,686  36,261 
      

Recorded Goodwill

 $317,108 $18,280 
      

(1)
Included in cash paid for acquisitions in the consolidated statements of cash flows for the years ended December 31, 20072010 and 20082011 are contingent and other payments of $1,800$3,428 and $2,319,$132, respectively, related to acquisitions made in previous years.

Table of Contents


IRON MOUNTAIN INCORPORATED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

DECEMBER 31, 2012
(In thousands, except share and per share data)

6. Acquisitions (Continued)

(2)
ConsistedConsists primarily of land, buildings, racking, leasehold improvements and leasehold improvements.computer hardware and software.

(3)
The weighted average lives of customer relationship assets associated with acquisitions in 20072010, 2011 and 2008 were 242012 was 10 years, 20 years and 2817 years, respectively.

(4)
ConsistedConsists primarily of accounts payable, accrued expenses, notes payable, deferred revenue and notes payable.

deferred income taxes.
(5)
Consisted primarily

        Allocations of the carryingpurchase price for acquisitions completed in 2012 were based on estimates of the fair value of noncontrolling interests in Brazil atnet assets acquired and are subject to adjustment. We are not aware of any information that would indicate that the datefinal purchase price allocations will differ meaningfully from preliminary estimates. The purchase price allocations of acquisition in 2008.the 2012 acquisitions are subject to finalization of the assessment of the fair value of intangible assets (primarily customer relationship assets) and income taxes (primarily deferred income taxes).

        In connection with acquisitions priorour acquisition in India in May 2006, we entered into a stockholder agreement. The agreement contains a put provision that would allow the noncontrolling interest holder to sell the remaining 49.9% equity interest to us at any time after May 2009, for the greater of fair market value or approximately 84,835 Rupees (approximately $1,547 at December 31, 2008,2012 spot rate).

7. Income Taxes

        The significant components of the deferred tax assets and deferred tax liabilities are presented below:

 
 December 31, 
 
 2011 2012 

Deferred Tax Assets:

       

Accrued liabilities

 $53,983 $87,109 

Deferred rent

  21,889  19,772 

Net operating loss carryforwards

  58,113  64,796 

Foreign tax credits

  56,599  44,315 

Other

  44,168  44,673 

Valuation allowance

  (72,239) (76,050)
      

  162,513  184,615 

Deferred Tax Liabilities:

       

Other assets, principally due to differences in amortization

  (281,060) (254,156)

Plant and equipment, principally due to differences in depreciation

  (345,576) (318,856)
      

  (626,636) (573,012)
      

Net deferred tax liability

 $(464,123)$(388,397)
      

Table of Contents


IRON MOUNTAIN INCORPORATED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

DECEMBER 31, 2012
(In thousands, except share and per share data)

7. Income Taxes (Continued)

        The current and noncurrent deferred tax assets (liabilities) are presented below:

 
 December 31, 
 
 2011 2012 

Deferred tax assets

 $54,383 $54,409 

Deferred tax liabilities

  (11,148) (44,257)
      

Current deferred tax assets, net

 $43,235 $10,152 
      

Deferred tax assets

 $108,130 $130,206 

Deferred tax liabilities

  (615,488) (528,755)
      

Noncurrent deferred tax liabilities, net

 $(507,358)$(398,549)
      

        As of December 31, 2012, we have undertakenreclassified $123,946 of long-term deferred income tax liabilities to current deferred income taxes (included within accrued expenses within current liabilities) and prepaid and other assets (included within current assets) within our consolidated balance sheet related to the depreciation recapture associated with our recharacterization of certain restructuringsracking as real estate rather than personal property and amortization associated with other intangible assets in conjunction with our potential conversion to a REIT. In 2013, we expect to reclassify another $41,315 of long-term deferred income tax liabilities to current deferred income taxes.

        We have federal net operating loss carryforwards, which expire in 2020 through 2025, of $25,864 ($9,052, tax effected) at December 31, 2012 to reduce future federal taxable income. We have assets for state net operating losses of $9,420 (net of federal tax benefit), which expire in 2013 through 2025, subject to a valuation allowance of approximately 83%. We have assets for foreign net operating losses of $46,324, with various expiration dates (and in some cases no expiration date), subject to a valuation allowance of approximately 82%. We also have foreign tax credits of $44,315, which expire in 2017 through 2020, subject to a valuation allowance of approximately 68%.

        Rollforward of valuation allowance is as follows:

Year Ended December 31,
 Balance at
Beginning of
the Year
 Charged
(Credited) to
Expense
 Other
Additions
 Other
Deductions
 Balance at
End of
the Year
 

2010

 $33,926 $39,545 $ $(1,242)$72,229 

2011

  72,229  9,844    (9,834) 72,239 

2012

  72,239  2,274  1,537    76,050 

        We receive a tax deduction upon the exercise of non-qualified stock options or upon the disqualifying disposition by employees of incentive stock options and certain shares acquired under our employee stock purchase plan for the difference between the exercise price and the market price of the acquired businesses to realize efficiencies and potential cost savings. The restructuring activities include certain reductions in staffing levels, elimination of duplicate facilities and other costs associated with exiting certain activities of the acquired businesses. The estimated cost of these restructuring activities were recorded as costs of the acquisitions. Our acquisitions after January 1, 2009 will be accounted for under newly promulgated accounting guidance. All acquisition costs and restructuring activity will be charged to operations rather than being capitalized as part of the purchase price. We finalize restructuring plans for each business no later than one year fromunderlying common stock on the date of acquisition.exercise or disqualifying disposition. The tax benefit for non-qualified stock options is included in the consolidated financial statements in the period in which compensation expense is recorded. The tax benefit associated with compensation expense recorded in the consolidated financial statements related to incentive stock options is recorded in the period the disqualifying disposition occurs. All tax benefits for awards issued prior to January 1, 2003 and


Table of Contents


IRON MOUNTAIN INCORPORATED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

DECEMBER 31, 20092012
(In thousands, except share and per share data)

6. Acquisitions7. Income Taxes (Continued)

        The following is a summaryincremental tax benefits in excess of reserves related to such restructuring activities:

 
 2008 2009 

Reserves, Beginning Balance

 $3,602 $8,555 

Reserves Established

  8,694   

Expenditures

  (2,698) (6,356)

Adjustments to Goodwill, including Currency Effect(1)

  (1,043) (1,119)
      

Reserves, Ending Balance

 $8,555 $1,080 
      

(1)
Includes adjustments to goodwill as a result of management finalizing its restructuring plans.

        At December 31, 2008, the restructuring reserves related to acquisitions consisted of lease losses on abandoned facilities ($7,315), severance costs ($94) and other exit costs ($1,146). At December 31, 2009, the restructuring reserves related to acquisitions consisted of lease losses on abandoned facilities ($866), severance costs ($61) and other exit costs ($153). These accruals are expected to be substantially used prior to December 31, 2010.

        In connection with our acquisition in India, we entered into a shareholder agreement in May 2006. The agreement contains a put provision that would allow the noncontrolling interest holder to sell the remaining 49.9% equity interest to us beginning on the third anniversary of this agreement for the greater of fair market value or approximately 84,835 Rupees (approximately $1,800). Wecompensation expense recorded a liability representing our estimate of the fair value of the guarantee in the amount of $342consolidated financial statements are credited directly to equity and $360 as of December 31, 2008amounted to $2,252, $919 and 2009, respectively.

        In connection with some of our acquisitions, we have contingent earn-out obligations that become payable in the event the businesses we acquired achieve specified revenue targets and/or multiples of earnings before interest, taxes, depreciation and amortization (as defined in the purchase agreements). These payments are based on the future results of these operations and our estimate of the maximum contingent earn-out payments we may be required to make under all such agreements as of December 31, 2009 is approximately $9,610. These amounts are generally payable over periods ranging from 2010 through 2012 and all of these payments, if made, will be treated as additional consideration as part of the acquisition and will increase goodwill. We have recorded $535, $1,447 and $549 of compensation expense$1,045 for the years ended December 31, 2007, 20082010, 2011 and 2009, respectively,2012, respectively.

        Except for certain Canadian subsidiaries for which we recorded a deferred tax liability of $577, we have not recorded deferred taxes on book over tax outside basis differences related to our other foreign subsidiaries because such basis differences are not expected to reverse in the accompanyingforeseeable future and we intend to reinvest the undistributed earnings of such foreign subsidiaries indefinitely outside the U.S. These basis differences arose primarily through the undistributed book earnings of our foreign subsidiaries. The basis differences could be reversed through a sale of the subsidiaries, the receipt of dividends from subsidiaries and certain other events or actions on our part, each of which would result in an increase in our provision for income taxes. It is not practicable to calculate the amount of unrecognized deferred tax liability on the book over tax outside basis difference because of the complexities of the hypothetical calculation. As of December 31, 2012, we had $71,466 of undistributed earnings within our foreign subsidiaries which approximates the book over tax outside basis difference. We may record deferred taxes on book over tax outside basis differences related to certain foreign subsidiaries in the future depending upon a number of factors, decisions and events in connection with our potential conversion to a REIT, including favorable indications from the U.S. Internal Revenue Service with regard to our private letter ruling requests, finalization of countries to be included in the conversion plan, refinancing our revolving credit and term loan facilities, shareholder approval of certain modifications to our corporate charter and final board of directors approval of our conversion to a REIT.

        The components of income (loss) from continuing operations before provision (benefit) for income taxes are:

 
 Year Ended December 31, 
 
 2010 2011 2012 

U.S. 

 $272,806 $313,530 $191,175 

Canada

  41,474  48,327  44,358 

Other Foreign

  19,942  (8,957) 62,833 
        

 $334,222 $352,900 $298,366 
        

        The provision (benefit) for income taxes consists of the following components:

 
 Year Ended December 31, 
 
 2010 2011 2012 

Federal—current

 $76,992 $47,523 $134,231 

Federal—deferred

  41,825  25,708  (57,166)

State—current

  32,475  23,828  25,466 

State—deferred

  (851) (1,093) (15,134)

Foreign—current

  20,350  31,748  32,377 

Foreign—deferred

  (3,308) (21,226) (4,901)
        

 $167,483 $106,488 $114,873 
        

Table of Contents


IRON MOUNTAIN INCORPORATED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

DECEMBER 31, 2012
(In thousands, except share and per share data)

7. Income Taxes (Continued)

        A reconciliation of total income tax expense and the amount computed by applying the federal income tax rate of 35% to income from continuing operations before provision (benefit) for income taxes for the years ended December 31, 2010, 2011 and 2012, respectively, is as follows:

 
 Year Ended December 31, 
 
 2010 2011 2012 

Computed "expected" tax provision

 $116,978 $123,515 $104,428 

Changes in income taxes resulting from:

          

State taxes (net of federal tax benefit)

  17,163  16,301  6,946 

Increase in valuation allowance (net operating losses)

  (2) 12,601  9,045 

Increase (Decrease) in valuation allowance (foreign tax credits)

  39,547  (2,757) (6,771)

Impairment of goodwill and other transaction costs

  29,772  10,254  3,045 

Reserve accrual (reversal) and audit settlements (net of federal tax benefit)

  (41,753) (32,989) 8,266 

Foreign tax rate differential

  (7,828) (34,867) (30,798)

Disallowed foreign interest and Subpart F income

  8,247  5,663  15,242 

Other, net

  5,359  8,767  5,470 
        

 $167,483 $106,488 $114,873 
        

        Our effective tax rates for the years ended December 31, 2010, 2011 and 2012 were 50.1%, 30.2% and 38.5%, respectively. Our effective tax rate is subject to variability in the future due to, among other items: (1) changes in the mix of income from foreign jurisdictions; (2) tax law changes; (3) volatility in foreign exchange gains (losses); (4) the timing of the establishment and reversal of tax reserves; (5) our ability to utilize foreign tax credits and net operating losses that we generate; and (6) our proposed REIT conversion. The primary reconciling items between the federal statutory rate of 35% and our overall effective tax rate for the year ended December 31, 2012 were differences in the rates of tax at which our foreign earnings are subject, including foreign exchange gains and losses in different jurisdictions with different tax rates and state income taxes (net of federal tax benefit). During the year ended December 31, 2012, foreign currency gains were recorded in lower tax jurisdictions associated with our marking-to-market of intercompany loan positions while foreign currency losses were recorded in higher tax jurisdictions associated with our marking-to-market of debt and derivative instruments, which lowered our 2012 effective tax rate by 2.2%. The primary reconciling items between the federal statutory rate of 35% and our overall effective tax rate for the year ended December 31, 2011 was a positive impact provided by the recognition of certain previously unrecognized tax benefits due to expirations of statute of limitation periods and settlements with tax authorities in various jurisdictions and differences in the rates of tax at which our foreign earnings are subject, including foreign exchange gains and losses in different jurisdictions with different tax rates. This benefit was partially offset by state income taxes (net of federal tax benefit). Additionally, to a lesser extent, a goodwill impairment charge included in income from continuing operations as a component of intangible impairments in our consolidated statements of operations, related to contingent consideration arrangements. New accounting standards require that we must,of which a majority was non-deductible for any acquisitions that we make on or any time after January 1, 2009, (i) estimate our contingent consideration payments at the time of the acquisition and include such amount as part of the initial purchase price allocation, and (ii) any subsequent changes in this estimate will directly impact the consolidated statement of operations.

7. Income Taxes

        The evaluation of an uncertain tax positionpurposes, is a two-step process.reconciling item that impacts our effective tax rate. The first step isprimary reconciling item between the federal statutory rate of 35% and our overall effective tax rate for the year ended December 31, 2010 was a recognition process whereby the company determines whether it is more likely than not that a tax position will be


Table of Contents


IRON MOUNTAIN INCORPORATED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

DECEMBER 31, 20092012
(In thousands, except share and per share data)

7. Income Taxes (Continued)


goodwill impairment charge included in income from continuing operations as a component of intangible impairments in our consolidated statements of operations, of which a majority was non-deductible for tax purposes. The negative impact of U.S. legislative changes reducing the expected utilization of foreign tax credits was offset by the recognition of certain previously unrecognized tax benefits due to expirations of statute of limitation periods and settlements with tax authorities in various jurisdictions. Additionally, to a lesser extent, state income taxes (net of federal tax benefit) and differences in the rates of tax at which our foreign earnings are subject, including foreign exchange gains and losses in different jurisdictions with different tax rates, are also reconciling items and impact our effective tax rate.

        On January 2, 2013, the American Taxpayer Relief Act of 2012 (the "ATRA") was signed into law. In part, the ATRA retroactively reinstated and extended the controlled foreign corporation look-through rule, which provides for the exception from January 1, 2012 to December 31, 2013 of certain foreign earnings from U.S. federal taxation as Subpart F income. As a result, we expect our income tax provision for the first quarter of 2013 will include a discrete tax benefit of $4,025 relating to the previously expired period from January 1, 2012 to December 31, 2012.

        The evaluation of an uncertain tax position is a two-step process. The first step is a recognition process whereby we determine whether it is more likely than not that a tax position will be sustained upon examination, including resolution of any related appeals or litigation processes, based on the technical merits of the position. The second step is a measurement process whereby a tax position that meets the more likely than not recognition threshold is calculated to determine the amount of benefit to recognize in the financial statements. The tax position is measured at the largest amount of benefit that is greater than 50% likely of being realized upon ultimate settlement. We recognized a $16,606 increase in the reserve related to uncertain tax positions, which was accounted for as a reduction to the January 1, 2007 balance of retained earnings in conjunction with the adoption of a new accounting standard related to uncertain tax positions.

        We have elected to recognize interest and penalties associated with uncertain tax positions as a component of the provision (benefit) for income taxes in the accompanying consolidated statements of operations. We recorded $1,170, $4,495$(1,607), $(8,477) and $4,749$1,257 for gross interest and penalties for the years ended December 31, 2007, 20082010, 2011 and 2009,2012, respectively.

        We had $8,1252,819 and $12,874$3,554 accrued for the payment of interest and penalties as of December 31, 20082011 and 2009,2012, respectively.

        A summary of tax years that remain subject to examination by major tax jurisdictions is as follows:

Tax YearYears
 Tax Jurisdiction
See Below United StatesStates—Federal and State
19992006 to present Canada
20042010 to present United Kingdom

        The normal statute of limitations for U.S. federal tax purposes is three years from the date the tax return is filed. However, dueThe 2009, 2010 and 2011 tax years remain subject to ourexamination for U.S. federal tax purposes as well as net operating loss position, the U.S. government has the right to audit the amount of thecarryforwards utilized in these years. We utilized net operating loss up to three years after we utilize the loss on our federal income tax return. We utilized losses from years beginning in 1991, 19931998, 1999, and 19972000 in our federal income tax returns for our 2006, 2007, and 2008these tax years, respectively.years. The normal statute of limitations for state purposes is between three to five years. However, certain of our state statute of limitations remain open for periods longer than this when audits are in progress.


Table of Contents


IRON MOUNTAIN INCORPORATED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

DECEMBER 31, 2012
(In thousands, except share and per share data)

7. Income Taxes (Continued)

        We are subject to examination by various tax authorities in jurisdictions in which we have significant business operations.operations or a taxable presence. We regularly assess the likelihood of additional assessments by tax authorities and provide for these matters as appropriate. As of December 31, 20082011 and 2009,2012, we had approximately $84,566$31,408 and $88,155,$37,563, respectively, of reserves related to uncertain tax positions included in other long-term liabilities in the accompanying consolidated balance sheets. Although we believe our tax estimates are appropriate, the final determination of tax audits and any related litigation could result in favorable or unfavorable changes in our estimates.


Table of Contents


IRON MOUNTAIN INCORPORATED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

DECEMBER 31, 2009
(In thousands, except share and per share data)

7. Income Taxes (Continued)

        A reconciliation of unrecognized tax benefits is as follows:

Gross tax contingencies—January 1, 2007

 $83,958 

Gross tax contingencies—December 31, 2009

 $88,155 

Gross additions based on tax positions related to the current year

 8,885  6,575 

Gross additions for tax positions of prior years

 1,076  9,759 

Gross reductions for tax positions of prior years

 (5,872) (3,349)

Lapses of statutes

 (14,947) (33,001)

Settlements

 (192) (8,248)
      

Gross tax contingencies—December 31, 2007

 $72,908 

Gross additions based on tax positions related to the current year

 7,735 

Gross additions for tax positions of prior years

 11,862 

Gross reductions for tax positions of prior years

 (4,504)

Lapses of statutes

 (3,435)
   

Gross tax contingencies—December 31, 2008

 $84,566 

Gross tax contingencies—December 31, 2010

 $59,891 

Gross additions based on tax positions related to the current year

 3,166  6,593 

Gross additions for tax positions of prior years

 5,693  6,437 

Gross reductions for tax positions of prior years

 (720) (30,316)

Lapses of statutes

 (4,460) (6,268)

Settlements

 (90) (4,929)
      

Gross tax contingencies—December 31, 2009

 $88,155 

Gross tax contingencies—December 31, 2011

 $31,408 

Gross additions based on tax positions related to the current year

 6,598 

Gross additions for tax positions of prior years

 3,912 

Gross reductions for tax positions of prior years

 (427)

Lapses of statutes

 (2,829)

Settlements

 (1,099)
      

Gross tax contingencies—December 31, 2012

 $37,563 
   

        The reversal of all of these reserves of $88,155$37,563 ($82,27330,504 net of federal tax benefit) as of December 31, 20092012 will be recorded as a reduction of our income tax provision if sustained. We believe that it is reasonably possible that an amount up to approximately $30,208$5,230 of our unrecognized tax positions may be recognized by the end of 20102013 as a result of a lapse of statute of limitations and would affect the effective tax rate.


Table of Contents


IRON MOUNTAIN INCORPORATED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

DECEMBER 31, 2009
(In thousands, except share and per share data)

7. Income Taxes (Continued)

        The significant components of the deferred tax assets and deferred tax liabilities are presented below:

 
 December 31, 
 
 2008 2009 

Deferred Tax Assets:

       
 

Accrued liabilities

 $34,702 $38,919 
 

Deferred rent

  18,471  20,484 
 

Net operating loss carryforwards

  63,152  59,330 
 

AMT, research and foreign tax credits

  57,948  60,182 
 

Valuation Allowance

  (44,843) (42,128)
 

Other

  40,065  36,770 
      

  169,495  173,557 

Deferred Tax Liabilities:

       
 

Other assets, principally due to differences in amortization

  (256,690) (269,452)
 

Plant and equipment, principally due to differences in depreciation

  (298,824) (333,248)
      

  (555,514) (602,700)
      
 

Net deferred tax liability

 $(386,019)$(429,143)
      

        We have federal net operating loss carryforwards which begin to expire in 2019 through 2025 of $38,617 ($13,516, tax effected) at December 31, 2009 to reduce future federal taxable income. We have an asset for state net operating losses of $16,104 (net of federal tax benefit), which begins to expire in 2010 through 2025, subject to a valuation allowance of approximately 99%. We have assets for foreign net operating losses of $29,710, with various expiration dates, subject to a valuation allowance of approximately 81%. Additionally, we have federal research credits of $867 which begin to expire in 2010, and foreign tax credits of $59,315, which begin to expire in 2014 through 2019. Based on current expectations and plans, we expect to fully utilize our foreign tax credit carryforwards prior to their expiration.

        Rollforward of valuation allowance is as follows:

Year Ended December 31,
 Balance at
Beginning of
the Year
 Charged to
Expense
 Other
Additions
 Deductions Balance at
End of
the Year
 

2007

 $27,274 $23,962 $ $(7,832)$43,404 

2008

  43,404  1,439      44,843 

2009

  44,843  808  3,517  (7,040) 42,128 

        We receive a tax deduction upon the exercise of non-qualified stock options or upon the disqualifying disposition by employees of incentive stock optionsclosing and certain shares acquired under our employee stock purchase plan for the difference between the exercise price and the market price of the underlying common stock on the date of exercise or disqualifying disposition. The tax benefit for


Table of Contents


IRON MOUNTAIN INCORPORATED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

DECEMBER 31, 2009
(In thousands, except share and per share data)

7. Income Taxes (Continued)


non-qualified stock options is includedsettling significant audits in the consolidated financial statements in the period in which compensation expense is recorded. The tax benefit associated with compensation expense recorded in the consolidated financial statements related to incentive stock options is recorded in the period the disqualifying disposition occurs. All tax benefits for awards issued prior to January 1, 2003 and incremental tax benefits in excess of compensation expense recorded in the consolidated financial statements are credited directly to equity and amounted to $6,765, $5,112 and $5,532 for the years ended December 31, 2007, 2008 and 2009, respectively.

        We have not provided deferred taxes on book basis differences related to certain foreign subsidiaries because such basis differences are not expected to reverse in the foreseeable future and we intend to reinvest indefinitely outside the U.S. These basis differences arose primarily through the undistributed book earnings of our foreign subsidiaries. The basis differences could be reversed through a sale of the subsidiaries, the receipt of dividends from subsidiaries as well as certain other events or actions on our part, which would result in an increase in our provision for income taxes. It is not practicable to calculate the amount of such basis differences.

        The components of income (loss) before provision for income taxes are:

 
 2007 2008 2009 

U.S. 

 $103,043 $315,122 $215,594 

Canada

  22,100  16,128  22,162 

Foreign

  97,881  (106,383) 95,077 
        

 $223,024 $224,867 $332,833 
        

        The provision (benefit) for income taxes consists of the following components:

 
 Year Ended December 31, 
 
 2007 2008 2009 

Federal—current

 $11,429 $19,266 $51,227 

Federal—deferred

  37,301  101,837  22,439 

State—current

  10,443  10,192  17,239 

State—deferred

  1,683  7,777  6,531 

Foreign—current

  3,325  4,357  12,338 

Foreign—deferred

  4,829  (505) 753 
        

 $69,010 $142,924 $110,527 
        

Table of Contents


IRON MOUNTAIN INCORPORATED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

DECEMBER 31, 2009
(In thousands, except share and per share data)

7. Income Taxes (Continued)

        A reconciliation of total income tax expense and the amount computed by applying the federal income tax rate of 35% to income before provision for income taxes for the years ended December 31, 2007, 2008 and 2009, respectively, is as follows:

 
 Year Ended December��31, 
 
 2007 2008 2009 

Computed "expected" tax provision

 $78,058 $78,703 $116,492 

Changes in income taxes resulting from:

          
 

State taxes (net of federal tax benefit)

  1,844  14,520  15,451 
 

Increase in valuation allowance

  23,962  1,439  808 
 

Foreign tax rate differential and tax law change

  (38,917) 31,443  (22,232)
 

Subpart F Income

    5,368  984 
 

Other, net

  4,063  11,451  (976)
        

 $69,010 $142,924 $110,527 
        

        Our effective tax rates for the years ended December 31, 2007, 2008 and 2009 were 30.9%, 63.6% and 33.2%, respectively. The primary reconciling items between the statutory rate of 35% and our overall effective tax rate are state income taxes (net of federal benefit) and differences in the rates of tax at which our foreign earnings are subject including foreign exchange gains and losses in different jurisdictions with different tax rates.various worldwide jurisdictions.


Table of Contents


IRON MOUNTAIN INCORPORATED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

DECEMBER 31, 20092012
(In thousands, except share and per share data)

8. Quarterly Results of Operations (Unaudited)

Quarter Ended
 March 31 June 30 Sept. 30 Dec. 31 

2011

             

Total revenues

 $746,009 $758,551 $768,306 $741,837 

Operating income (loss)

  137,600  148,937  135,199  149,463 

Income (Loss) from continuing operations

  81,176  67,460  50,394  47,382 

Total (loss) income from discontinued operations

  (6,557) 185,587  (12,469) (13,381)

Net income (loss)

  74,619  253,047  37,925  34,001 

Net income (loss) attributable to Iron Mountain Incorporated

  73,460  252,684  37,338  32,056 

Earnings (Losses) per Share-Basic

             

Income (Loss) per share from continuing operations

  0.41  0.33  0.26  0.26 

Total (loss) income per share from discontinued operations

  (0.03) 0.92  (0.06) (0.07)

Net income (loss) per share attributable to Iron Mountain Incorporated

  0.37  1.25  0.19  0.18 

Earnings (Losses) per Share-Diluted

             

Income (Loss) per share from continuing operations

  0.40  0.33  0.26  0.26 

Total (loss) income per share from discontinued operations

  (0.03) 0.91  (0.06) (0.07)

Net income (loss) per share attributable to Iron Mountain Incorporated

  0.37  1.24  0.19  0.18 

2012

             

Total revenues

 $746,498 $752,165 $748,125 $758,467 

Operating income (loss)

  141,813  158,687  153,966  102,561 

Income (Loss) from continuing operations

  61,073  41,441  53,719  27,260 

Total (loss) income from discontinued operations

  (5,093) (2,524) 32  (1,074)

Net income (loss)

  55,980  38,917  53,751  26,186 

Net income (loss) attributable to Iron Mountain Incorporated

  55,350  38,055  52,809  25,494(1)

Earnings (Losses) per Share-Basic

             

Income (Loss) per share from continuing operations

  0.36  0.24  0.31  0.15 

Total (loss) income per share from discontinued operations

  (0.03) (0.01)   (0.01)

Net income (loss) per share attributable to Iron Mountain Incorporated

  0.32  0.22  0.31  0.14 

Earnings (Losses) per Share-Diluted

             

Income (Loss) per share from continuing operations

  0.35  0.24  0.31  0.15 

Total (loss) income per share from discontinued operations

  (0.03) (0.01)   (0.01)

Net income (loss) per share attributable to Iron Mountain Incorporated

  0.32  0.22  0.31  0.14 

Quarter Ended
 March 31 June 30 Sept. 30 Dec. 31 

2008

             

Total revenues

 $749,384 $768,857 $784,338 $752,555 

Operating income

  106,330  123,886  136,345  125,969 

Net income

  34,074  35,738  11,252  879 

Net income attributable to Iron Mountain Incorporated

  33,482  35,886  11,314  1,355(1)

Net income per share attributable to Iron Mountain Incorporated—basic

  0.17  0.18  0.06  0.01 

Net income per share attributable to Iron Mountain Incorporated—diluted

  0.16  0.18  0.06  0.01 

2009

             

Total revenues

 $723,346 $746,028 $764,885 $779,336 

Operating income

  121,197  138,054  142,649  146,644 

Net income

  26,944  87,512  43,177  64,673 

Net income attributable to Iron Mountain Incorporated

  28,799  87,638  43,186  61,254(2)

Net income per share attributable to Iron Mountain Incorporated—basic

  0.14  0.43  0.21  0.30 

Net income per share attributable to Iron Mountain Incorporated—diluted

  0.14  0.43  0.21  0.30 

(1)
The change in net income (loss) attributable to Iron Mountain Incorporated in the fourth quarter of 20082012 compared to the third quarter of 20082012 is primarily attributable to a decrease in operating income of approximately $51,400. The decrease in operating income is primarily related to a reductionincreases in operating income period-over-period.

(2)
The changeexpenses attributable to: (1) $16,700 in net income attributablecosts and certain asset write-downs associated with facility consolidations and other asset impairments, (2) $6,400 in legal fees and reserves and $4,000 in professional fees associated with certain strategic and corporate initiatives, (3) $7,400 in costs associated with the REIT conversion, (4) $6,100 in sales, marketing and account management costs within our North American Business segment (primarily associated with certain restructuring activities), (5) $4,300 in worker's compensation and personal property taxes related to Iron Mountain Incorporatedcertain benefits recorded in the third quarter of 2012 that did not repeat in the fourth quarter of 2009 compared to2012 and (6) $2,800 in stock-based compensation. Additionally, interest expense, net increased approximately $2,800 associated with the issuance of the 53/4% Notes offset by the redemption of the 65/8% Notes and the 83/4% Notes. Offsetting the decrease in operating income and the increase in interest expense, net were a reduction in the provision for income taxes of approximately $21,600 and a reduction in other expenses, net of approximately $6,200 primarily as a result of debt extinguishment charges recorded in the third quarter of 2009 is primarily2012 related to discrete tax benefits recordedthe redemption of the 65/8% Notes and the 83/4% Notes that did not repeat in the fourth quarter compared to the third quarter of 2009 related to unrealized foreign exchange gains and losses in different jurisdictions at different tax rates.2012.

9. Segment Information

        Beginning January 1, 2009, we changed the composition of our segments to not allocate certain corporate and centrally controlled costs, which primarily relate to executive and staff functions, including finance, human resources and information technology, as well as all stock-based compensation, which benefit the enterprise as a whole. These are now reflected as Corporate costs and are not allocated to our operating segments. Therefore, the presentation of all historical segment reporting has been changed to conform to our new management reporting.

        Corporate and our five operating segments are as follows:


Table of Contents


IRON MOUNTAIN INCORPORATED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

DECEMBER 31, 20092012
(In thousands, except share and per share data)

9. Segment Information (Continued)

        Our reportable operating segments and Corporate are described as follows:

        The Latin America, Asia Pacific and Europe operating segments have been aggregated given their similar economic characteristics, products, customers and processes and reported as one reportable segment, "International Physical Business." The Worldwide Digital Business does not meet the quantitative criteria for a reportable segment; however, management determined that it would disclose such information on a voluntary basis.


Table of Contents


IRON MOUNTAIN INCORPORATED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

DECEMBER 31, 20092012
(In thousands, except share and per share data)

9. Segment Information (Continued)

        An analysis of our business segment information and reconciliation to the consolidated financial statements is as follows:

 
 North
American
Business
 International
Business
 Corporate Total
Consolidated
 

2010

             

Total Revenues

 $2,193,464 $698,885 $ $2,892,349 

Depreciation and Amortization

  185,483  81,932  36,790  304,205 

Depreciation

  172,713  69,480  36,567  278,760 

Amortization

  12,770  12,452  223  25,445 

Adjusted OIBDA

  969,505  130,969  (173,798) 926,676 

Total Assets(1)

  4,370,465  1,641,251  404,677  6,416,393 

Expenditures for Segment Assets

  135,825  115,496  34,571  285,892 

Capital Expenditures

  120,162  104,116  34,571  258,849 

Cash Paid for Acquisitions, Net of Cash Acquired

  5,675  8,166    13,841 

Additions to Customer Relationship and Acquisition Costs

  9,988  3,214    13,202 

2011

             

Total Revenues

  2,229,143  785,560    3,014,703 

Depreciation and Amortization

  180,763  104,815  33,921  319,499 

Depreciation

  168,549  88,432  33,657  290,638 

Amortization

  12,214  16,383  264  28,861 

Adjusted OIBDA

  961,973  164,212  (175,746) 950,439 

Total Assets(1)

  4,194,850  1,646,701  199,707  6,041,258 

Expenditures for Segment Assets

  139,079  152,064  14,961  306,104 

Capital Expenditures

  117,338  76,856  14,961  209,155 

Cash Paid for Acquisitions, Net of Cash Acquired

  5,436  69,810    75,246 

Additions to Customer Relationship and Acquisition Costs

  16,305  5,398    21,703 

2012

             

Total Revenues

  2,198,563  806,692    3,005,255 

Depreciation and Amortization

  181,607  103,393  31,344  316,344 

Depreciation

  168,896  80,493  31,209  280,598 

Amortization

  12,711  22,900  135  35,746 

Adjusted OIBDA

  916,196  173,620  (177,599) 912,217 

Total Assets(1)

  4,304,340  1,854,050  199,949  6,358,339 

Expenditures for Segment Assets

  177,687  191,360  25,642  394,689 

Capital Expenditures

  123,882  91,159  25,642  240,683 

Cash Paid for Acquisitions, Net of Cash Acquired

  28,126  97,008    125,134 

Additions to Customer Relationship and Acquisition Costs

  25,679  3,193    28,872 

 
 North
American
Physical
Business
 International
Physical
Business
 Worldwide
Digital
Business
 Corporate Total
Consolidated
 

2007

                

Total Revenues

 $1,890,068 $676,749 $163,218 $ $2,730,035 

Depreciation and Amortization

  127,204  67,135  27,277  27,678  249,294 
 

Depreciation

  118,608  54,805  21,717  27,525  222,655 
 

Amortization

  8,596  12,330  5,560  153  26,639 

Adjusted OIBDA

  681,232  135,714  25,662  (144,068) 698,540 

Total Assets(1)

  4,056,801  1,691,856  435,117  124,147  6,307,921 

Expenditures for Segment Assets

  515,799  184,821  150,423  33,328  884,371 
 

Capital Expenditures

  219,794  112,948  20,372  33,328  386,442 
 

Cash Paid for Acquisitions, Net of Cash acquired

  287,863  63,612  130,051    481,526 
 

Additions to Customer Relationship and Acquisition Costs

  8,142  8,261      16,403 

2008

                

Total Revenues

  2,067,316  764,812  223,006    3,055,134 

Depreciation and Amortization

  145,260  78,800  32,511  34,167  290,738 
 

Depreciation

  134,320  64,220  22,094  33,985  254,619 
 

Amortization

  10,940  14,580  10,417  182  36,119 

Adjusted OIBDA

  768,523  138,432  41,782  (157,986) 790,751 

Total Assets(1)

  4,283,291  1,516,521  429,409  127,633  6,356,854 

Expenditures for Segment Assets

  225,361  172,321  32,069  27,784  457,535 
 

Capital Expenditures

  180,682  146,142  32,113  27,784  386,721 
 

Cash Paid for Acquisitions, Net of Cash acquired

  35,468  21,208  (44)   56,632 
 

Additions to Customer Relationship and Acquisition Costs

  9,211  4,971      14,182 

2009

                

Total Revenues

  2,101,526  682,684  229,385    3,013,595 

Depreciation and Amortization

  173,798  75,236  36,856  33,182  319,072 
 

Depreciation

  162,110  62,331  26,179  32,951  283,571 
 

Amortization

  11,688  12,905  10,677  231  35,501 

Adjusted OIBDA

  856,761  125,364  50,303  (164,406) 868,022 

Total Assets(1)

  4,576,155  1,723,659  413,974  133,046  6,846,834 

Expenditures for Segment Assets

  160,758  115,740  20,287  28,768  325,553 
 

Capital Expenditures

  153,247  110,459  20,287  28,768  312,761 
 

Cash Paid for Acquisitions, Net of Cash acquired

  256  1,777      2,033 
 

Additions to Customer Relationship and Acquisition Costs

  7,255  3,504      10,759 

(1)
Excludes all intercompany receivables or payables and investment in subsidiary balances.

Table of Contents


IRON MOUNTAIN INCORPORATED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

DECEMBER 31, 2012
(In thousands, except share and per share data)

9. Segment Information (Continued)

        The accounting policies of the reportable segments are the same as those described in Note 2. Adjusted OIBDA for each segment is defined as operating income before depreciation, and


Table of Contents


IRON MOUNTAIN INCORPORATED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

DECEMBER 31, 2009
(In thousands, except share and per share data)

9. Segment Information (Continued)


amortization, expenses, excludingintangible impairments, (gain) loss on disposal/writedownwrite-down of property, plant and equipment, net which areand REIT Costs (defined below) directly attributable to the segment (the same as and previously referred to as Contribution).segment. Internally, we use Adjusted OIBDA as the basis for evaluating the performance of, and allocating resources to, our operating segments.

        A reconciliation of Adjusted OIBDA to income from continuing operations before provision (benefit) for income taxes on a consolidated basis is as follows:

 
 Year Ended December 31, 
 
 2010 2011 2012 

Adjusted OIBDA

 $926,676 $950,439 $912,217 

Less: Depreciation and Amortization

  304,205  319,499  316,344 

Intangible Impairments (See Note 2.g. and Note 14)

  85,909  46,500   

(Gain) Loss on Disposal/Write-down of Property, Plant and Equipment, Net

  (10,987) (2,286) 4,400 

REIT Costs(1)

    15,527  34,446 

Interest Expense, Net

  204,559  205,256  242,599 

Other Expense (Income), Net

  8,768  13,043  16,062 
        

Income from Continuing Operations before Provision (Benefit) for Income Taxes

 $334,222 $352,900 $298,366 
        

 
 Years Ended December 31, 
 
 2007 2008 2009 

Adjusted OIBDA

  698,540 $790,751 $868,022 
 

Less: Depreciation and Amortization

  249,294  290,738  319,072 
  

(Gain) Loss on Disposal/Writedown of Property, Plant and Equipment, Net

  (5,472) 7,483  406 
  

Interest Expense, net

  228,593  236,635  227,790 
  

Other Expense (Income), net

  3,101  31,028  (12,079)
        

Income before Provision for Income Taxes

 $223,024 $224,867 $332,833 
        
(1)
Includes costs associated with our 2011 proxy contest, the work of the Strategic Review Special Committee of the board of directors and the proposed REIT conversion ("REIT Costs").

        Information as to our operations in different geographical areas is as follows:



 Years Ended December 31,  Year Ended December 31, 


 2007 2008 2009  2010 2011 2012 

Revenues:

Revenues:

  

United States

United States

 $1,862,809 $2,074,881 $2,116,528  $1,958,820 $1,984,805 $1,949,979 

United Kingdom(1)

 368,008 382,971 292,685 

United Kingdom

 295,462 307,905 290,044 

Canada

Canada

 179,636 197,031 196,246  231,477 244,337 248,583 

Other International

Other International

 319,582 400,251 408,136  406,590 477,656 516,649 
              

Total Revenues

 $2,730,035 $3,055,134 $3,013,595 

Total Revenues

 $2,892,349 $3,014,703 $3,005,255 
              

Long-lived Assets:

Long-lived Assets:

  

United States

United States

 $3,633,588 $3,728,501 $3,736,626  $3,341,241 $3,306,574 $3,359,560 

United Kingdom

United Kingdom

 723,128 596,631 617,141  552,309 529,239 529,336 

Canada

Canada

 432,789 355,878 425,838  448,485 434,517 445,699 

Other International

Other International

 696,020 699,452 855,804  861,896 856,478 999,652 
              

Total Long-lived Assets

 $5,203,931 $5,126,808 $5,334,247 

Total Long-lived Assets

 $5,485,525 $5,380,462 $5,635,409        
       

(1)
Change from 2008 to 2009 is primarily due to a weakening of the British pound sterling against the U.S. dollar year-over-year.

Table of Contents


IRON MOUNTAIN INCORPORATED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

DECEMBER 31, 20092012
(In thousands, except share and per share data)

9. Segment Information (Continued)

        Information as to our revenues by product and service lines is as follows:

 
 Year Ended December 31, 
 
 2010 2011 2012 

Revenues:

          

Records Management(1)(2)

 $2,081,492 $2,183,154 $2,193,602 

Data Protection & Recovery(1)(3)

  531,580  522,632  543,426 

Information Destruction(1)(4)

  279,277  308,917  268,227 
        

Total Revenues

 $2,892,349 $3,014,703 $3,005,255 
        

 
 Years Ended December 31, 
 
 2007 2008 2009 

Revenues:

          

Records Management(1)(2)

 $1,954,233 $2,146,293 $2,155,684 

Data Protection & Recovery(1)(3)

  536,217  612,158  606,608 

Information Destruction(1)(4)

  239,585  296,683  251,303 
        
 

Total Revenues

 $2,730,035 $3,055,134 $3,013,595 
        

(1)
Each of the service offerings within our product and service lines has a component of revenue that is storage rental related and a component that is service revenues, except the Information Destruction service offering, which does not have a storage component.

(2)
Includes Business Records Management, Archiving and Discovery Services, Compliant Records Management and Consulting Services, Document Management Solutions,DMS, Fulfillment Services, Domain Name Management, Health Information Management Solutions, Film and Sound Archives and Energy Data Services.Services and Dedicated Facilities Management.

(3)
Includes Physical Data Protection & Recovery Services Online Computer and Server Backup and Intellectual Property Management.Technology Escrow Services.

(4)
Includes Physical Secure Shredding and Compliant Information Destruction.

10. Commitments and Contingencies

        Most of our leased facilities are leased under various operating leases that typically have initial lease terms of tenfive to fifteenten years. A majority of these leases have renewal options with one or more five year options to extend and may have fixed or Consumer Price Index escalation clauses. We also lease equipment under operating leases primarily computers(primarily computers) which have an average lease life of three years. Vehicles and office equipment are also leased and have remaining lease lives ranging from one to seven years. Due to the declining economic environment in 2008, the current fair market values of vans, trucks and mobile shredding units within our vehicle fleet portfolio, which we lease, declined. As a result, certain vehicle leases that previously met the requirements to be considered operating leases were classified as capital leases upon renewal. The 2008 impact of this change on our consolidated balance sheet as of December 31, 2008 was an increase in property, plant and equipment and debt of $58,517 and had no impact on 2008 operating results. Operating results for 2009 accordingly have lower vehicle rent expense (a component of transportation costs within cost of sales), offset by an increased amount of combined depreciation and interest expense. Total rent expense (including common area maintenance charges) under all of our operating leases was $240,833, $280,360 (including $20,828 associated with vehicle leases which became capital leases in 2008)$238,480, $242,954 and $251,053$250,986 for the years ended


Table of Contents


IRON MOUNTAIN INCORPORATED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

DECEMBER 31, 2009
(In thousands, except share and per share data)

10. Commitments and Contingencies (Continued)


December 31, 2007, 20082010, 2011 and 2009,2012, respectively. Included in total rent expense was sublease income of $4,973, $5,341$2,721, $2,974 and $4,324$3,407 for the years ended December 31, 2007, 20082010, 2011 and 2009,2012, respectively.

        Estimated minimum future lease payments (excluding common area maintenance charges) include payments for certain renewal periods at our option because failure to renew results in an economic


Table of Contents


IRON MOUNTAIN INCORPORATED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

DECEMBER 31, 2012
(In thousands, except share and per share data)

10. Commitments and Contingencies (Continued)

disincentive due to significant capital expenditure costs (e.g., racking), thereby making it reasonably assured that we will renew the lease. Such payments in effect at December 31, are as follows:

Year
 Operating
Lease
Payment
 Sublease
Income
 Capital
Leases
 

2010

 $231,210 $2,260 $44,500 

2011

 217,742 1,440 45,787 

2012

 206,972 1,292 42,385 

 Operating
Lease
Payment
 Sublease
Income
 Capital
Leases
 

2013

2013

 198,117 1,031 26,755  $227,231 $4,093 $58,454 

2014

2014

 186,887 765 19,314  215,659 3,120 58,691 

2015

 207,176 2,784 31,131 

2016

 197,390 2,008 26,450 

2017

 189,391 1,154 22,474 

Thereafter

Thereafter

 1,980,796 2,098 132,197  1,609,500 692 142,598 
              

Total minimum lease payments

Total minimum lease payments

 $3,021,724 $8,886 $310,938  $2,646,347 $13,851 339,798 
              

Less amounts representing interest

     (103,972)

Less amounts representing interest

     (117,200)   

Present value of capital lease obligations

     $235,826 
      

Present value of capital lease obligations

     $193,738 
   

In addition, we have certain contractual obligations related to purchase commitments which require minimum payments of $24,487, $10,045, $9,766, $514, $464$22,683, $8,873, $1,221, $595, $448 and $316$19 in 2010, 2011, 2012, 2013, 2014, 2015, 2016, 2017 and thereafter, respectively.

        We are self-insured up to certain limits for costs associated with workers' compensation claims, vehicle accidents, property and general business liabilities, and benefits paid under employee healthcare and short-term disability programs. At December 31, 2011 and 2012 there were $39,358 and $34,806, respectively, of self-insurance accruals reflected in accrued expenses of our consolidated balance sheets. The measurement of these costs requires the consideration of historical cost experience and judgments about the present and expected levels of cost per claim. We account for these costs primarily through actuarial methods, which develop estimates of the undiscounted liability for claims incurred, including those claims incurred but not reported. These methods provide estimates of future ultimate claim costs based on claims incurred as of the balance sheet date.

        We are involved in litigation from time to time in the ordinary course of business with abusiness. A portion of the defense and/or settlement costs beingassociated with such litigation is covered by various commercial liability insurance policies purchased by us. Inus and, in limited cases, indemnification from third parties. Our policy is to establish reserves for loss contingencies when the opinion of management, no material legal proceedingslosses are pending to which we, or any of our properties, are subject, except as discussed below.both probable and reasonably estimable. We record legal costs associated with loss contingencies as expenses in the period in which they are incurred.

        In July 2006, we experienced a The matters described below represent our significant fire in a leased records and information management facility in London, England, that resulted in the complete destruction of the facility and its contents. The London Fire Brigade ("LFB") issued a report in which it was concluded that the fire resulted either from human agency, i.e., arson, or an unidentified ignition device or source, and its report to the Home Office concluded that the fire resulted from a deliberate act. The LFB also concluded that the installed sprinkler system failed to control the fire due to the primary electric fire pump being disabled prior to the fire and the standby diesel fire pump being disabled in the early stages of the fire by third-party contractors.loss contingencies. We have received noticesevaluated each matter and, if both probable and estimable, accrued an amount that represents our estimate of claims from customers or their subrogated insurance carriers under various theories of liabilities arising out of lost data and/or records asany probable loss associated with such matter. In addition, we have estimated a result of the fire. Certain ofreasonably possible range for all loss contingencies including those claims have resulted in litigation in courts in the United Kingdom.described below. We deny anybelieve it is reasonably


Table of Contents


IRON MOUNTAIN INCORPORATED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

DECEMBER 31, 20092012
(In thousands, except share and per share data)

10. Commitments and Contingencies (Continued)

possible that we could incur aggregate losses in addition to amounts currently accrued for all matters up to an additional $37,000 over the next several years.

        In August 2010, we were named as a defendant in a patent infringement suit filed in the U.S. District Court for the Eastern District of Texas by Oasis Research, LLC. The plaintiff alleged that the technology found in our Connected and LiveVault products infringed certain U.S. patents owned by the plaintiff. As part of the sale of our Digital Business, discussed in Note 14, our Connected and LiveVault products were sold to Autonomy, and Autonomy assumed this obligation and the defense of this litigation and agreed to indemnify us against any losses. In November 2012, the claim was settled and Autonomy paid the entire settlement amount.

        Since October 2001, we have provided services to the U.S. Government under several General Services Administration ("GSA") multiple award schedule contracts (the "Schedules"). The earliest of the Schedules was renewed in October 2006 with certain modifications to its terms. The Schedules contain a price reductions clause ("Price Reductions Clause") that requires us to offer to reduce the prices billed to the Government under the Schedules to correspond to the prices billed to certain benchmark commercial customers. Through December 31, 2012, we billed approximately $54,000 under the Schedules. In 2011, we initiated an internal review covering the contract period commencing in October 2006, and we discovered potential non-compliance with the Price Reductions Clause. We voluntarily disclosed the potential non-compliance to the GSA and its Office of Inspector General ("OIG") in June 2011.

        We continue to review this matter and provide the GSA and OIG with information regarding our pricing practices and the proposed pricing adjustment amount to be refunded. The GSA and OIG, however, may not agree with our determination of the refund amount and may request additional pricing adjustments, refunds, civil penalties, up to treble damages and/or interest related to our Schedules.

        In April 2012, the U.S. Government sent us a subpoena seeking information that substantially overlaps with the subjects that are covered by the voluntary disclosure process that we initiated with the GSA and OIG in June 2011, except that the subpoena seeks information dating back to 2000 and seeks information about non-GSA federal and state and local customers. Despite the substantial overlap, we understand that the subpoena relates to a separate inquiry, under the civil False Claims Act, that has been initiated independent of the GSA and OIG voluntary disclosure matter. We cannot determine at this time whether this separate inquiry will result in liability in respectaddition to the amount that may be paid in connection with the voluntary disclosure to the OIG and GSA described above.

        Given the above, it is reasonably possible that an adjustment to our estimates may be required in the future as a result of updated facts and circumstances. To the extent that an adjustment to our estimates is necessary in a future period, we will assess, at that time, whether the adjustment is a result of a change in estimate or the correction of an error. A change in estimate would be reflected as an adjustment through the then-current period statement of operations. A correction of an error would


Table of Contents


IRON MOUNTAIN INCORPORATED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

DECEMBER 31, 2012
(In thousands, except share and per share data)

10. Commitments and Contingencies (Continued)

require a quantitative and qualitative analysis to determine the approach to correcting the error. A correction of an error could be reflected in the then-current period statement of operations or as a restatement of prior period financial information, depending upon the underlying facts and circumstances and our quantitative and qualitative analysis.

        During the third quarter of 2012, we applied for abatement of assessments from the state of Massachusetts. The assessments related to a corporate excise audit of the London2004 through 2006 tax years in the aggregate amount of $8,191, including tax, interest and penalties through the assessment date. The applications for abatement were denied during the third quarter of 2012. On October 19, 2012 we filed petitions with the Massachusetts Appellate Tax Board challenging the assessments. The final outcome of this matter may require payment of additional corporate excise tax, which consists of two measures, an income tax, which is a component of the provision for income taxes, and a net worth tax, which is an operating charge. We intend to defend this matter vigorously at the Massachusetts Appellate Tax Board. In addition, we are currently under a corporate excise audit by the state of Massachusetts for the 2007 and 2008 tax years. The adjustments being proposed are for issues consistent with those assessed in the earlier years. The state has also informed us that an audit of the 2009-2011 years will begin shortly.

        On November 4, 2011, we experienced a fire at a facility we leased in Aprilia, Italy. The facility primarily stored archival and inactive business records for local area businesses. Despite quick response by local fire authorities, damage to the building was extensive, and the building and its contents were a total loss. We continue to assess the impact of the fire, and, although our warehouse legal liability insurer has reserved its rights to contest coverage related to certain types of potential claims, we believe we carry adequate insurance. We have been sued by two customers, and have received correspondence from other customers, under various theories of liabilities. We deny any liability with respect to the fire and we have referred these claims to our primary warehouse legal liability insurer which has been defending them to date under a reservation of rights. Certain of the claims have been settled for nominal amounts, typically one to two British pounds sterling per carton, as specified in the contracts, which amounts have been or will be reimbursed to us from our primary property insurer. Many claims, including substantial claims, remain outstanding; others have been resolved pursuant to consent orders.

        We believe we carry adequate property and liability insurance.an appropriate response. We do not expect that legal proceedings related to this event will have a material impact toon our consolidated financial condition, results of operations or financial condition. We recorded approximately $12,927and cash flows. As discussed in Note 14, we sold our Italian operations on April 27, 2012, and we indemnified the buyers related to certain obligations and contingencies associated with the fire.

        Our policy related to business interruption insurance recoveries is to record gains within other (income) expense, net for the year ended December 31, 2007 related to recoveries associated with settlementin our consolidated statement of the business interruption portion ofoperations and proceeds received within cash flows from operating activities in our insurance claim. Recoveries from the insurance carriers related to business personal property claims are reflected in ourconsolidated statement of cash flows under proceeds from sales of property and equipment and other, net includedflows. Such amounts are recorded in investing activities section when received and amountedthe period the cash is received. Our policy with respect to $17,755 for the year ended December 31, 2007. We have received recoveries related to our property claim with our insurance carriers that exceed the carrying value of such assets. We have recorded a gain on the disposalinvoluntary conversion of property, plant and equipment is to record any gain or loss within (gain) loss on disposal/write-down of $7,745 for the year ended December 31, 2007. Recoveries from the insurance carriers related to business interruption claims are reflectedproperty, plant and equipment, net within operating income in our consolidated statement of operations and proceeds received within cash flows from investing activities within our consolidated statement of cash flows as a component of net income includedflows. Losses are recorded when incurred and gains are recorded in the operating activities sectionperiod when received.the cash received exceeds the carrying value of the related property, plant and equipment. As a result of the sale of the


Table of Contents


IRON MOUNTAIN INCORPORATED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

DECEMBER 31, 2012
(In May, 2006 we filed an eviction lawsuit against a tenant, Digital Encoding Factory, LLC ("DEF"), leasing space in our Boyers, Pennsylvania records storage facility for its failurethousands, except share and per share data)

10. Commitments and Contingencies (Continued)

Italian operations, statements of operation and cash flow impacts related to make required rent payments. In October, 2006, DEF and two related companies, EDA Acquisition, LLC, and Media Holdings, LLC, filed a lawsuit against us in the U.S. Federal District Court for Western Pennsylvania alleging that they started a digital scanning business in our Boyers, Pennsylvania, records storage facility because we orally agreed to refer customer digital scanning business in the facility to them (the "Pittsburgh Lawsuit") and promised substantial business. The plaintiffs contend that we breached this alleged oral agreement and seek to recover damages in the range of $6,500 to $53,500. The Pittsburgh Lawsuit is scheduled for trial in March, 2010. We dispute the plaintiffs' claims and contend that there was no such oral agreement. We have not recorded any loss reserve for this matter. We plan to defend against the alleged claims at trial. We are unable to estimate the final outcome of this matter.fire will be reflected as discontinued operations.

11. Related Party Transactions

        We lease space to an affiliated company, Schooner Capital LLC ("Schooner"), for its corporate headquarters located in Boston, Massachusetts. For the years ended December 31, 2007, 20082010, 2011 and 2009,2012, Schooner paid rent to us totaling $168, $152$198, $188 and $177,$196, respectively. We lease facilities from a trustOne of whichthe members of our board of directors and several of his family members hold an indirect equity interest in one of the stockholders that received proceeds in connection with the acquisition of our officers isjoint venture in Poland. As a result of this equity interest, such board member, together with several of his family members, received approximately 24% of the beneficiary. Our aggregate rental payment for such facilities during 2007, 2008 and 2009 was $1,048, $1,078 and $1,105, respectively.


Table of Contents


IRON MOUNTAIN INCORPORATED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

DECEMBER 31, 2009
(In thousands, except share and per share data)
purchase price that we paid in connection with this transaction. See Note 6.

12. 401(k) Plans

        We have a defined contribution plan, which generally covers all non-union U.S. employees meeting certain service requirements. Eligible employees may elect to defer from 1% to 25% of compensation per pay period up to the amount allowed by the U.S. Internal Revenue Code.Code of 1986, as amended. In addition, IME operates a defined contribution plan, which is similar to the U.S.'s 401(k) Plan. We make matching contributions based on the amount of an employee's contribution in accordance with the plan documents. We have expensed $11,619, $14,883$14,282, $18,133 and $15,277$18,026 for the years ended December 31, 2007, 20082010, 2011 and 2009,2012, respectively.

13. Subsequent EventsStockholders' Equity Matters

        In February, 2010, we acquired Mimosa Systems, Inc. ("Mimosa"), a leader in enterprise-class digital content archiving solutions, for approximately $112,000 in cash. Mimosa, based in Santa Clara, California, provides an on-premises integrated archive for email, SharePoint data and files, and complements IMI's existing enterprise-class, cloud-based digital archive services. NearPoint, Mimosa's enterprise archiving platform, has applications for retention and disposition, eDiscovery, compliance supervision, classification, recovery, and end-user search, enabling customers to reduce risk, and lower their eDiscovery and storage costs.

        In February, 2010, IMI'sOur board of directors approved a new share repurchase program authorizinghas authorized up to $150,000$1,200,000 in repurchases of our common stock. This represents approximately 3% of IMI's outstanding common stock based on the closing price on February 19, 2010. All purchasesrepurchases are subject to stock price, market conditions, corporate and legal requirements and other factors. As of December 31, 2012, we had a remaining amount available for repurchase under our share repurchase program of $66,035, which represents approximately 1% in the aggregate of our outstanding common stock based on the closing stock price on such date.

In addition, in February 2010, IMI'sour board of directors adopted a dividend policy under which IMI intendswe have paid, and in the future intend to pay, quarterly cash dividends on itsour common stock. The first quarterly dividend of $0.0625 per share will be payable on April 15, 2010 to shareholders of record on March 25, 2010. Declaration and payment of


Table of Contents


IRON MOUNTAIN INCORPORATED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

DECEMBER 31, 2012
(In thousands, except share and per share data)

13. Stockholders' Equity Matters (Continued)

future quarterly dividends is at the discretion of IMI'sour board of directors. In 2011 and 2012, our board of directors declared the following dividends:

Declaration Date
 Dividend
Per Share
 Record Date Total
Amount
 Payment
Date

March 11, 2011

 $0.1875 March 25, 2011 $37,601 April 15, 2011

June 10, 2011

  0.2500 June 24, 2011  50,694 July 15, 2011

September 8, 2011

  0.2500 September 23, 2011  46,877 October 14, 2011

December 1, 2011

  0.2500 December 23, 2011  43,180 January 13, 2012

March 8, 2012

  0.2500 March 23, 2012  42,791 April 13, 2012

June 5, 2012

  0.2700 June 22, 2012  46,336 July 13, 2012

September 6, 2012

  0.2700 September 25, 2012  46,473 October 15, 2012

October 11, 2012

  4.0600 October 22, 2012  700,000 November 21, 2012

December 14, 2012

  0.2700 December 26, 2012  51,296 January 17, 2013

        On October 11, 2012, we announced the declaration by our board of directors of a special dividend of $700,000 (the "Special Dividend"), payable, at the election of the stockholders, in either common stock or cash to stockholders of record as of October 22, 2012 (the "Record Date"). The Special Dividend, which is a distribution to stockholders of a portion of our accumulated earnings and profits, was paid in a combination of common stock and cash. The Special Dividend was paid on November 21, 2012 (the "Distribution Date") to stockholders as of the Record Date. Stockholders elected to be paid their pro rata portion of the Special Dividend in all common stock or cash. The total amount of cash paid to all stockholders associated with the Special Dividend was approximately $140,000 (including cash paid in lieu of fractional shares). Our shares of common stock were valued for purposes of the Special Dividend based upon the average closing price on the three trading days following November 14, 2012, or $32.87 per share, and as such, the number of shares of common stock we issued in the Special Dividend was approximately 17,000 and the total amount of common stock paid to all stockholders associated with the Special Dividend was approximately $560,000. These shares impact weighted average shares outstanding from the date of issuance, thus impacting our earnings per share data prospectively from the Distribution Date.

14. Discontinued Operations

Digital Operations

        In August 2010, we sold the Domain Name Product Line for approximately $11,400 in cash at closing which is included in cash flows from operating activities—discontinued operations. This represented the sale of assets (primarily customer contracts) of a product line. Total revenues of this product line for the seven months ended July 31, 2010 were approximately $3,500. A gain in the amount of approximately $6,900 ($2,834, net of tax) was recorded during the quarter ended September 30, 2010 and is included in loss from discontinued operations, net of tax.

        During the quarter ended September 30, 2010, we concluded that events occurred and circumstances changed in our former worldwide digital business reporting unit that required us to conduct an impairment review. The primary factors contributing to our conclusion that we had a


Table of Contents


IRON MOUNTAIN INCORPORATED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

DECEMBER 31, 2012
(In thousands, except share and per share data)

14. Discontinued Operations (Continued)

triggering event and a requirement to reassess our former worldwide digital business reporting unit goodwill for impairment included: (1) a reduction in forecasted revenue and operating results due to continued pressure on key parts of the business as a result of the weak economy; (2) reduced revenue and profit outlook for our eDiscovery service due to smaller average matter size and lower pricing; (3) a decision to discontinue certain software development projects; and (4) the sale of the Domain Name Product Line. As a result of the review, we recorded a provisional goodwill impairment charge associated with our former worldwide digital business reporting unit in the amount of $255,000 during the quarter ended September 30, 2010. We finalized the estimate in the fourth quarter of 2010, and we recorded an additional impairment of $28,785, for a total goodwill impairment charge of $283,785. For the year ended December 31, 2010, we allocated $85,909 of this charge to the retained technology escrow services business, based on a relative fair value basis, which charge continues to be included in our continuing results of operations as a component of intangible impairments in our consolidated statements of operations.

        On June 2, 2011, we sold the Digital Business to Autonomy pursuant to the Digital Sale Agreement. In the Digital Sale, Autonomy purchased (1) the shares of certain of IMI's subsidiaries through which we conducted the Digital Business and (2) certain assets of IMI and its subsidiaries relating to the Digital Business. The Digital Sale qualified as discontinued operations and, as a result, the financial position, operating results and cash flows of the Digital Business and the Domain Name Product Line, for all periods presented, including the gains on the sales, have been reported as discontinued operations for financial reporting purposes.

        Pursuant to the Digital Sale Agreement, IMI received approximately $395,400 in cash, consisting of the initial purchase price and a preliminary working capital adjustment, which was subject to a customary post-closing adjustment based on the amount of working capital at closing. Autonomy disputed our calculation of the working capital adjustment in the Digital Sale Agreement and, as contemplated by the Digital Sale Agreement, the matter was referred to an independent third party accounting firm for determination of the appropriate adjustment amount. On February 22, 2013, the independent third party accounting firm issued its determination of the appropriate working capital adjustment, which was consistent with the amount we had accrued. As a result, no adjustment to the previously recorded gain on sale of discontinued operations, net of tax was required. Transaction costs relating to the Digital Sale amounted to $7,387. Additionally, $11,075 of inducements payable to Autonomy have been netted against the proceeds in calculating the gain on the Digital Sale. Also, a tax provision of $45,126 associated with the gain recorded on the Digital Sale was recorded for the year ended December 31, 2011. A gain on sale of discontinued operations in the amount of $243,861 ($198,735, net of tax) was recorded during the year ended December 31, 2011, as a result of the Digital Sale. Approximately $3,828 of cumulative translation adjustment associated with our Digital Business was reclassified from accumulated other comprehensive items, net and reduced the gain on the Digital Sale by the same amount.


Table of Contents


IRON MOUNTAIN INCORPORATED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

DECEMBER 31, 2012
(In thousands, except share and per share data)

14. Discontinued Operations (Continued)

        The table below summarizes certain results of operations of the Digital Business and the Domain Name Product Line:

 
 Year Ended December 31, 
 
 2010 2011(1) 2012 

Total Revenues

 $203,479 $79,199 $ 
        

Loss Before Benefit for Income Taxes of Discontinued Operations

 $(235,161)$(31,094)$(75)

Benefit for Income Taxes

  (19,682) (13,744) (505)
        

(Loss) Income from Discontinued Operations, Net of Tax

 $(215,479)$(17,350)$430 
        

Gain on Sale of Discontinued Operations

 $ $243,861 $ 

Provision for Income Taxes

    45,126   
        

Gain on Sale of Discontinued Operations, Net of Tax

 $ $198,735 $ 
        

Total (Loss) Income from Discontinued Operations and Sale, Net of Tax

 $(215,479)$181,385 $430 
        

(1)
Includes the results of operations of our Digital Business through June 2, 2011, the date the Digital Sale was consummated.

        There have been no allocations of corporate general and administrative expenses to discontinued operations. In accordance with our policy, we have allocated corporate interest associated with all debt that is not specifically allocated to a particular component based on the proportion of the assets of the Digital Business and the Domain Name Product Line to our total consolidated assets at the applicable weighted average interest rate associated with such debt for such reporting period. Interest allocated to the Digital Business and the Domain Name Product Line and included in loss from discontinued operations amounted to $14,336 and $2,396 for the years ended December 31, 2010 and 2011, respectively.

New Zealand Operations

        We completed the sale of our New Zealand operations on October 3, 2011 for a purchase price of approximately $10,000. During the second quarter of 2011, we recorded an impairment charge of $4,900 to write-down the long-lived assets of our New Zealand operations to its estimated net realizable value, which is included in income (loss) from discontinued operations. In the calculation of the carrying value of our New Zealand operations, we allocated the goodwill of our Australia/New Zealand reporting unit between Australia and New Zealand on a relative fair value basis. Additionally, we recorded a tax benefit of $7,883 during the year ended December 31, 2011 associated with the outside tax basis of our New Zealand operations, which is also reflected in income (loss) from discontinued operations. No valuation allowance was provided against this benefit as such amount is recoverable against the capital gain associated with the Digital Sale. We recorded a gain on the sale of discontinued operations associated with our New Zealand operations of $1,884 during the fourth quarter of 2011 which primarily represents cumulative translation adjustment associated with our New


Table of Contents


IRON MOUNTAIN INCORPORATED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

DECEMBER 31, 2012
(In thousands, except share and per share data)

14. Discontinued Operations (Continued)

Zealand operations which was reclassified from accumulated other comprehensive items, net and increased the gain on the sale of New Zealand by that same amount. The New Zealand operations were previously included within the International Business segment. For all periods presented, the financial position, operating results and cash flows of our New Zealand operations, including the gain on the sale, have evaluated subsequent eventsbeen reported as discontinued operations for financial reporting purposes.

        The table below summarizes certain results of our New Zealand operations:

 
 Year Ended December 31, 
 
 2010 2011(1) 2012 

Total Revenues

 $7,414 $6,489 $ 
        

Loss Before Benefit for Income Taxes of Discontinued Operations

 $(533)$(4,726)$(88)

Benefit for Income Taxes

    (7,883) (34)
        

(Loss) Income from Discontinued Operations, Net of Tax

 $(533)$3,157 $(54)
        

Gain on Sale of Discontinued Operations

 $ $1,884 $ 

Provision for Income Taxes

       
        

Gain on Sale of Discontinued Operations, Net of Tax

 $ $1,884 $ 
        

Total (Loss) Income from Discontinued Operations and Sale, Net of Tax

 $(533)$5,041 $(54)
        

(1)
Includes the results of operations of New Zealand through October 3, 2011, the date the sale of our New Zealand operations was consummated.

Italian Operations

        We sold our Italian operations on April 27, 2012, and we agreed to indemnify the buyers of our Italian operations for certain possible costs associated with the fire in Italy discussed more fully in Note 10.g. A loss on sale of discontinued operations in the amount of $1,885 was recorded during the year ended December 31, 2012 as a result of the sale of our Italian operations. Approximately $383 of cumulative translation adjustment associated with our Italian operations was reclassified from accumulated other comprehensive items, net and reduced the loss on the sale by the same amount. We allocated the goodwill of our Continental Western European reporting unit between our Italian operations and the remainder of this reporting unit on a relative fair value basis. During the third quarter of 2011, we recorded an impairment charge of $17,100 to write down the long-lived assets of our Italian operations to its estimated net realizable value, which is included in loss from discontinued operations. Our Italian operations were previously included within the International Business segment. For all periods presented, the financial statementsposition, operating results and cash flows of our Italian operations, including the loss on the sale, have been reported as discontinued operations for financial reporting purposes.


Table of Contents


IRON MOUNTAIN INCORPORATED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

DECEMBER 31, 2012
(In thousands, except share and per share data)

14. Discontinued Operations (Continued)

        The table below summarizes certain results of our Italian operations:

 
 Year Ended December 31, 
 
 2010 2011 2012(1) 

Total Revenues

 $18,284 $15,353 $2,138 
        

Loss Before Benefit for Income Taxes of Discontinued Operations

 $(3,756)$(35,350)$(8,692)

Benefit for Income Taxes

  (351) (2,104) (1,542)
        

Loss from Discontinued Operations, Net of Tax

 $(3,405)$(33,246)$(7,150)
        

Loss on Sale of Discontinued Operations

 $ $ $(1,885)

Provision for Income Taxes

       
        

Loss on Sale of Discontinued Operations, Net of Tax

 $ $ $(1,885)
        

Total Loss from Discontinued Operations and Sale, Net of Tax

 $(3,405)$(33,246)$(9,035)
        

(1)
Includes the results of operations of Italy through April 27, 2012, the date the sale of our Italian operations was consummated.

        The carrying amounts of the major classes of assets and liabilities of our Italian operations were issued.as follows:

 
 December 31, 2011 

Accounts receivable, net

 $4,676 

Prepaid expenses and other

  602 
    

Current assets of discontinued operations

  5,278 

Other assets, net

  1,978 
    

Non-current assets of discontinued operations

  1,978 
    

Assets of discontinued operations

 $7,256 
    

Current portion of long-term debt

 $118 

Accounts payable

  563 

Accrued expenses

  2,552 

Deferred revenue

  41 
    

Current liabilities of discontinued operations

  3,274 

Other long-term liabilities

  43 
    

Non-current liabilities of discontinued operations

  43 
    

Liabilities of discontinued operations

 $3,317 
    

Table of Contents


SIGNATURES

        Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

  IRON MOUNTAIN INCORPORATED

 

 

By:

 

/s/ BRIAN P. MCKEON

Brian P. McKeon
Executive Vice President and
Chief Financial Officer
(Principal Financial and Accounting Officer)

Dated: February 26, 2010March 1, 2013

        Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

Name
 
Title
 
Date

 

 

 

 

 
/s/ C. RICHARD REESEWILLIAM L. MEANEY

C. Richard Reese
Chairman of the Board of Directors and Executive ChairmanFebruary 26, 2010
/s/ ROBERT T. BRENNAN

Robert T. BrennanWilliam L. Meaney
 President and Chief Executive Officer and Director (Principal Executive Officer) February 26, 2010March 1, 2013

/s/ BRIAN P. MCKEON

Brian P. McKeon

 

Executive Vice President and Chief Financial Officer (Principal Financial and Accounting Officer)

 
February 26, 2010
March 1, 2013

/s/ C. RICHARD REESE

C. Richard Reese

 

Executive Chairman of the Board of Directors

 

March 1, 2013

/s/ TED R. ANTENUCCI

Ted R. Antenucci


Director


March 1, 2013

/s/ CLARKE H. BAILEY

Clarke H. Bailey

 

Director

 
February 26, 2010
March 1, 2013
/s/ CONSTANTIN R. BODEN

Constantin R. Boden
DirectorFebruary 26, 2010
/s/ KENT P. DAUTEN

Kent P. Dauten

 

Director

 
February 26, 2010
March 1, 2013

/s/ PAUL F. DENINGER

Paul F. Deninger

 

Director

 

March 1, 2013

/s/ PER-KRISTIAN HALVORSEN

Per-Kristian Halvorsen

 

Director

 
February 26, 2010
March 1, 2013

Table of Contents

Name
Title
Date

 

 

 

 
/s/ ARTHUR D. LITTLE

Arthur D. Little
DirectorFebruary 26, 2010
 
/s/ MICHAEL LAMACH

Michael Lamach
 Director February 26, 2010March 1, 2013

/s/ ARTHUR D. LITTLE

Arthur D. Little

 

Director

 

March 1, 2013

/s/ ALLAN Z. LOREN

Allan Z. Loren


Director


March 1, 2013

/s/ VINCENT J. RYAN

Vincent J. Ryan

 

Director

 
February 26, 2010
March 1, 2013

/s/ LAURIE A. TUCKER

Laurie A. Tucker

 

Director

 
February 26, 2010
March 1, 2013

/s/ ALFRED J. VERRECCHIA

Alfred J. Verrecchia


Director


March 1, 2013

Table of Contents


INDEX TO EXHIBITS

        Certain exhibits indicated below are incorporated by reference to documents we have filed with the Commission. Each exhibit marked by a pound sign (#) is a management contract or compensatory plan.

Exhibit Item
2.1 Purchase and Sale Agreement, dated July 12, 2003, between Haysamong Autonomy Corporation plc, and Iron Mountain Europe Limited (portions of which have been omitted pursuant to a request for confidential treatment).(Incorporated by reference to the Company's Quarterly Report on Form 10-Q for the quarter ended September 30, 2003).

2.2


Agreement and Plan of Merger by and between Iron Mountain Incorporated, a Pennsylvania corporation, and the Company and certain of its subsidiaries, dated as of May 27, 2005.15, 2011.(Incorporated by reference to the Company's Current Report on Form 8-K dated May 27, 2005).June 8, 2011.)


3.1

 

Amended and Restated Certificate of Incorporation of the Company, as amended.(Incorporated by reference to the Company's Annual Report on Form 10-K for the year ended December 31, 2006).2006.)


3.2

 

Amended and Restated Bylaws of the Company (as adopted on March 5, 2009)2010).(Incorporated by reference to the Company's Current Report on Form 8-K dated March 9, 2009).5, 2010.)

3.3


Declaration of Trust of IM Capital Trust I, dated as of December 10, 2001 among the Company, The Bank of New York, The Bank of New York (Delaware) and John P. Lawrence, as trustees. (Incorporated by reference to the Company's Registration Statement No. 333-75068, filed with the Commission on December 13, 2001).

3.4


Certificate of Trust of IM Capital Trust I.(Incorporated by reference to the Company's Registration Statement No. 333-75068, filed with the Commission on December 13, 2001).

4.1

 

Indenture for 71/4% GBP Senior Subordinated Notes due 2014, dated as of January 22, 2004, by and among the Company, the Guarantors named therein and The Bank of New York, as trustee.(Incorporated by reference to the Company's Current Report on Form 8-K dated July 11, 2006).2006.)


4.2

 

Senior Subordinated Indenture, dated as of December 30, 2002, among the Company, the Guarantors named therein and The Bank of New York, as trustee.(Incorporated by reference to the Company's Annual Report on Form 10-K for the year ended December 31, 2002).2002.)


4.3

 

First Supplemental Indenture, dated as of December 30, 2002, among the Company, the Guarantors named therein and The Bank of New York, as trustee relating to the 73/4% Senior Subordinated Notes due 2015.(Incorporated by reference to the Company's Annual Report on Form 10-K for the year ended December 31, 2002).

4.4


Second Supplemental Indenture, dated as of June 20, 2003, among the Company, the Guarantors named therein and The Bank of New York, as trustee relating to the 65/8% Senior Subordinated Notes due 2016.(Incorporated by reference to the Company's Annual Report on Form 10-K for the year ended December 31, 2003).

4.5


Third Supplemental Indenture, dated as of July 17, 2006, by and among the Company, the Guarantors named therein and The Bank of New York Trust Company, N.A., as trustee relating to the 83/4% Senior Subordinated Notes due 2018.(Incorporated by reference to the Company's Current Report on Form 8-K dated July 20, 2006).

Table of Contents

ExhibitItem
4.6Fourth Supplemental Indenture, dated as of October 16, 2006, by and among the Company, the Guarantors named therein and The Bank of New York Trust Company, N.A., as trustee, relating to the 8% Senior Subordinated Notes due 2018 and the 63/4% Euro Senior Subordinated Notes due 2018.(Incorporated by reference to the Company's Current Report on Form 8-K dated October 17, 2006).2006.)


4.74.4

 

Fifth Supplemental Indenture, dated as of January 19, 2007, by and among the Company, the Guarantors named therein and The Bank of New York Trust Company, N.A., as trustee, relating to the 63/4% Euro Senior Subordinated Notes due 2018.(Incorporated by reference to the Company's Current Report on Form 8-K dated January 24, 2007).2007.)


4.84.5

 

Amendment No. 1 to Fifth Supplemental Indenture, dated as of February 23, 2007, by and among the Company, the Guarantors named therein and The Bank of New York Trust Company, N.A., as trustee.(Incorporated by reference to the Company's Annual Report on Form 10-K for the year ended December 31, 2006).2006.)


4.94.6

 

Sixth Supplemental Indenture, dated as of March 15, 2007, by and among Iron Mountain Nova Scotia Funding Company, the Company and the other guarantorsGuarantors named therein and The Bank of New York Trust Company, N.A., as trustee, relating to the 71/2% CAD Senior Subordinated Notes due 2017.(Incorporated by reference to the Company's Current Report on Form 8-K dated March 23, 2007).2007.)

4.10

 

Registration Rights Agreement, dated as of March 15, 2007, between Iron Mountain Nova Scotia Funding Company, the Company and the other guarantors named therein and the Initial Purchasers named therein.(Incorporated by reference to the Company's Current Report on Form 8-K dated March 23, 2007).

4.114.7

 

Seventh Supplemental Indenture, dated as of June 5, 2008, by and among the Company, the Guarantors named therein and The Bank of New York Trust Company, N.A., as trustee, relating to the 8% Senior Subordinated Notes due 2020.(Incorporated by reference to the Company's Current Report on Form 8-K dated June 11, 2008).2008.)


4.124.8

 

Eighth Supplemental Indenture, dated as of August 10, 2009, by and among the Company, the Guarantors named therein and The Bank of New York Mellon Trust Company, N.A., as trustee, relating to the 83/8% Senior Subordinated Notes due 2021.(Incorporated by reference to the Company's Current Report on Form 8-K dated August 11, 2009).2009.)

Table of Contents


4.13


FormExhibitItem
4.9Senior Subordinated Indenture, dated as of stock certificate representing sharesSeptember 23, 2011, among the Company, the Guarantors named therein and The Bank of Common Stock, $.01 par value per share, of the Company. (#)New York Mellon Trust Company, N.A., as trustee.(Incorporated by reference to the Company's Current Report on Form 8-K dated February 1, 2000).September 29, 2011.)


10.14.10

 

First Supplemental Indenture, dated as of September 23, 2011, among Iron Mountain Incorporated, Executive Deferred Compensation Plan. (#)the Guarantors named therein and The Bank of New York Mellon Trust Company, N.A., as trustee, relating to the 73/4% Senior Subordinated Notes due 2019.(Incorporated by reference to the Company's AnnualCurrent Report on Form 10-K for the year ended December 31, 2007).8-K dated September 29, 2011.)


10.24.11

 

First AmendmentSecond Supplemental Indenture, dated as of August 10, 2012, among the Company, the Guarantors named therein and The Bank of New York Mellon Trust Company, N.A., as trustee, relating to the 53/4% Senior Subordinated Notes due 2024.(Incorporated by reference to the Company's Current Report on Form 8-K dated August 10, 2012.)


4.12


Form of Stock Certificate representing shares of Common Stock, $0.01 par value per share, of the Company.(Incorporated by reference to the Company's Quarterly Report on Form 10-Q for the quarter ended September 30, 2011.)


10.1


2008 Restatement of the Iron Mountain Incorporated Executive Deferred Compensation Plan. (#)(Incorporated by reference to the Company's Annual Report on Form 10-K for the year ended December 31, 2008).2007.)


10.2


First Amendment to 2008 Restatement of the Iron Mountain Incorporated Executive Deferred Compensation Plan. (#)(Incorporated by reference to the Company's Annual Report on Form 10-K for the year ended December 31, 2008.)


10.3


Third Amendment to 2008 Restatement of the Iron Mountain Incorporated Executive Deferred Compensation Plan. (#)(Incorporated by reference to the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 2012.)


10.4


Fourth Amendment to 2008 Restatement of the Iron Mountain Incorporated Executive Deferred Compensation Plan. (#)(Filed herewith.)


10.5

 

Iron Mountain Incorporated 1997 Stock Option Plan, as amended. (#)(Incorporated by reference to the Company's Annual Report on Form 10-K for the year ended December 31, 2000).2000.)


10.410.6

 

Amendment to Iron Mountain Incorporated 1997 Stock Option Plan, as amended. (#)(Incorporated by reference to the Company's Current Report on Form 8-K dated December 10, 2008).2008.)

Table of Contents



10.7
ExhibitItem
10.5

Iron Mountain Incorporated 1995 Stock Incentive Plan, as amended. (#)(Incorporated by reference to Iron Mountain/DE'sMountain /DE's Current Report on Form 8-K dated April 16, 1999).1999.)


10.610.8

 

Iron Mountain Incorporated 2002 Stock Incentive Plan. (#)(Incorporated by reference to the Company's Annual Report on Form 10-K for the year ended December 31, 2002).2002.)


10.710.9

 

Third Amendment to the Iron Mountain Incorporated 2002 Stock Incentive Plan. (#)(Incorporated by reference to Appendix A of the Company's Proxy Statement for the 2008 Annual Meeting of Stockholders, filed with the Commission on April 21, 2008).2008.)


10.810.10

 

Fourth Amendment to the Iron Mountain Incorporated 2002 Stock Incentive Plan. (#)(Incorporated by reference to the Company's Current Report on Form 8-K dated December 10, 2008).2008.)


10.910.11

 

Stratify, Inc. 1999 Stock Plan. (#)(Incorporated by referenceFifth Amendment to the Company's Annual Report on Form 10-K for the year ended December 31, 2007).

10.10


Amendment to Stratify, Inc. 1999Iron Mountain Incorporated 2002 Stock Incentive Plan. (#)(Incorporated by reference to the Company's Current Report on Form 8-K dated December 10, 2008).June 4, 2010.)

Table of Contents

ExhibitItem
10.12Sixth Amendment to the Iron Mountain Incorporated 2002 Stock Incentive Plan. (#)(Incorporated by reference to the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 2011.)


10.1110.13


Omnibus Performance Unit Amendment to the Iron Mountain Incorporated 2002 Stock Incentive Plan.(Incorporated by reference to the Company's Quarterly Report on Form 10-Q for the quarter ended September 30, 2012.)


10.14

 

Form of Iron Mountain Incorporated 1995 Stock Incentive Plan Amended and Restated Non-Qualified Stock Option Agreement. (#)(Incorporated by reference to the Company's Annual Report on Form 10-K for the year ended December 31, 2004).2004.)


10.1210.15

 

Form of Iron Mountain Incorporated 1995 Stock Incentive Plan Incentive Stock Option Agreement. (#)(Incorporated by reference to the Company's Annual Report on Form 10-K for the year ended December 31, 2004).2004.)


10.1310.16

 

Form of Iron Mountain Incorporated 1995 Stock Incentive Plan Non-Qualified Stock Option Agreement. (#)(Incorporated by reference to the Company's Annual Report on Form 10-K for the year ended December 31, 2004).2004.)


10.1410.17

 

Form of Iron Mountain Incorporated 1995 Stock Incentive Plan Amended and Restated Iron Mountain Non-Qualified Stock Option Agreement. (#)(Incorporated by reference to the Company's Annual Report on Form 10-K for the year ended December 31, 2004).2004.)


10.1510.18

 

Form of Iron Mountain Incorporated 1995 Stock Incentive Plan Incentive Stock Option Agreement. (#)(Incorporated by reference to the Company's Annual Report on Form 10-K for the year ended December 31, 2004).2004.)


10.1610.19

 

Form of Iron Mountain Incorporated 1995 Stock Incentive Plan Non-Qualified Stock Option Agreement. (#)(Incorporated by reference to the Company's Annual Report on Form 10-K for the year ended December 31, 2004).2004.)


10.1710.20

 

Form of Iron Mountain Incorporated 1997 Stock Option Plan Stock Option Agreement (version 1). (#)(Incorporated by reference to the Company's Annual Report on Form 10-K for the year ended December 31, 2004).2004.)


10.1810.21

 

Form of Iron Mountain Incorporated 1997 Stock Option Plan Stock Option Agreement (version 2). (#)(Incorporated by reference to the Company's Annual Report on Form 10-K for the year ended December 31, 2004).2004.)


10.1910.22

 

Form of Iron Mountain Incorporated 2002 Stock Incentive Plan Stock Option Agreement (version 1). (#)(Incorporated by reference to the Company's Annual Report on Form 10-K for the year ended December 31, 2004).2004.)

Table of Contents



10.23
ExhibitItem
10.20

Form of Iron Mountain Incorporated 2002 Stock Incentive Plan Stock Option Agreement (version 2). (#)(Incorporated by reference to the Company's Annual Report on Form 10-K for the year ended December 31, 2004).2004.)


10.2110.24

 

Iron Mountain Incorporated 2002 Stock Incentive Plan Stock Option Agreement, dated May 24, 2007, by and between Iron Mountain Incorporatedthe Company and Brian P. McKeon. (#)(Incorporated by reference to the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 2007).2007.)


10.2210.25

 

Form of Performance Unit Agreement pursuant to the Iron Mountain Incorporated 2002 Stock Incentive Plan. (#)(Incorporated by reference to the Company's Quarterly Report on Form 10-Q for the quarter ended March 31, 2011.)


10.26


Form of Restricted Stock Unit Agreement pursuant to the Iron Mountain Incorporated 2002 Stock Incentive Plan (version 3). (#)(Incorporated by reference to the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 2012.)

Table of Contents

ExhibitItem
10.27Change in Control Agreement, dated December 10, 2008, by and between the Company and Brian P. McKeon.(Incorporated by reference to the Company's Current Report on Form 8-K dated December 10, 2008).2008.)

10.23

 

Change in Control Agreement, dated December 10, 2008, by and between the Company and Robert Brennan.(Incorporated by reference to the Company's Current Report on Form 8-K dated December 10, 2008).

10.24


Summary Description of Compensation Plan for Executive Officers. (#)(Incorporated by reference to the Company's Annual Report on Form 10-K for the year ended December 31, 2006).

10.2510.28

 

Iron Mountain Incorporated 2003 Senior Executive Incentive Program. (#)(Incorporated by reference to the Company's Current Report on Form 8-K dated April 5, 2005).2005.)


10.2610.29

 

Amendment to the Iron Mountain Incorporated 2003 Senior Executive Incentive Program. (#)(Incorporated by reference to the Company's Current Report on Form 8-K dated June 1, 2006).4, 2010.)

10.27

 

Amendment to Iron Mountain Incorporated 2003 Senior Executive Incentive Program. (#)(Incorporated by reference to Appendix D of the Company's Proxy Statement for the 2008 Annual Meeting of Stockholders filed April 21, 2008).

10.28


2008 Categories of Criteria under the 2003 Senior Executive Incentive Plan, as amended.(Incorporated by reference to the Company's Current Report on Form 8-K dated March 12, 2008).

10.2910.30

 

Iron Mountain Incorporated 2006 Senior Executive Incentive Program. (#)(Incorporated by reference to the Company's Current Report on Form 8-K dated June 1, 2006).2006.)


10.3010.31

 

Amendment to the Iron Mountain Incorporated 2006 Senior Executive Incentive Program. (#)(Incorporated by reference to Appendix B of the Company's Proxy Statement for the 2008 Annual Meeting of Stockholders filed April 21, 2008).

10.31


2008 Categories of Criteria under the 2006 Senior Executive Incentive Plan.(Incorporated by reference to the Company's Current Report on Form 8-K dated March 12, 2008).June 4, 2010.)

10.32

 

Employment Agreement, dated as of August 11, 2008, by and between the Company and Robert Brennan.(Incorporated by reference to the Company's Current Report on Form 8-K dated August 11, 2008).

10.3310.32

 

Contract of Employment with Iron Mountain, between Iron Mountain Belgium NV and Marc Duale. (#)(Incorporated by reference to the Company's Current Report on Form 8-K dated December 30, 2009).2009.)


10.33


Addendum, dated March 19, 2012, to the Contract of Employment between Iron Mountain BPM International Sarl and Marc Duale, dated September 29, 2011, together with the Contract of Employment between Iron Mountain BPM International Sarl and Marc Duale, dated September 29, 2011, the Agreement Regarding the Suspension of the Employment Contract, effective September 30, 2011, and the Terms and Conditions for the Office of Director (Gerant) between Iron Mountain BPM SPRL and Marc Duale, dated October 1, 2011. (#)(Incorporated by reference to the Company's Quarterly Report on Form 10-Q for the quarter ended March 31, 2012.)


10.34


Employment Offer Letter, dated November 30, 2012, from the Company to William L. Meaney. (#)(Incorporated by reference to the Company's Current Report on Form 8-K dated December 3, 2012.)


10.35

 

Restated Compensation Plan for Non-Employee Directors. (#)(Filed herewith).herewith.)


10.3510.36

 

Iron Mountain Incorporated Director Deferred Compensation Plan. (#)(Incorporated by reference to the Company's Annual Report on Form 10-K for the year ended December 31, 2007).2007.)

Table of Contents



10.37


The Iron Mountain Companies Severance Plan. (#)(Incorporated by reference to the Company's Current Report on Form 8-K, dated March 13, 2012.)


Exhibit10.38


ItemAmended and Restated Severance Plan Severance Program No. 1. (#)(Incorporated by reference to the Company's Quarterly Report on Form 10-Q for the quarter ended March 31, 2012.)
10.36

10.39


First Amendment to Amended and Restated Severance Plan Severance Program No. 1. (#)(Filed herewith.)


10.40


Severance Program No. 2. (#)(Incorporated by reference to the Company's Current Report on Form 8-K dated December 3, 2012.)


10.41


Amended and Restated Registration Rights Agreement, dated as of June 12, 1997, by and among the Company and certain stockholders of the Company. (#)(Incorporated by reference to Iron Mountain/DE's Quarterly Report on Form 10-Q for the quarter ended June 30, 1997).1997.)

Table of Contents


10.37


Master Lease and SecurityExhibitItem
10.42Credit Agreement, dated as of May 22, 2001, between Iron Mountain Statutory Trust—2001, as Lessor, and Iron Mountain Records Management, Inc., as Lessee. (Incorporated by reference toJune 27, 2011, among the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 2001).

10.38


Amendment No. 1 to Master Lease and Security Agreement, dated as of November 1, 2001 between Iron Mountain Statutory Trust—2001, as Lessor, and Iron Mountain Records Management, Inc., as Lessee.(Incorporated by reference to the Company's Annual Report on Form 10-K for the year ended December 31, 2001).

10.39


Amendment to Master Lease and Security Agreement and Unconditional Guaranty, dated March 15, 2002, between Iron Mountain Statutory Trust—2001,Company, Iron Mountain Information Management, Inc. and the Company.(Incorporated by reference to the Company's Quarterly Report on Form 10-Q for the quarter ended March 31, 2002).

10.40


Unconditional Guaranty, dated as of May 22, 2001, from the Company, as Guarantor, to, Iron Mountain Statutory Trust—2001, as Lessor.(Incorporated by reference to the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 2001).

10.41


Subsidiary Guaranty, dated as of May 22, 2001, from certain subsidiaries of the Company as guarantors, for the benefit ofCanada Corporation, Iron Mountain Statutory Trust—2001 and consented to by Bank of Nova Scotia.(Incorporated by reference to the Company's Annual Report on Form 10-K for the year ended December 31, 2002).

10.42


Guaranty Letter, dated December 31, 2002, to Scotiabanc, Inc. fromSwitzerland GmbH, Iron Mountain Europe Limited, Iron Mountain Australia Pty Ltd., Iron Mountain Information Services, Inc.Management (Luxembourg) S.C.S., Iron Mountain Luxembourg S.a r.l., the lenders and other financial institutions party thereto, JPMorgan Chase Bank, Toronto Branch, as Canadian Administrative Agent, and JPMorgan Chase Bank, N.A., as Lessee and the Company as Guarantor.(Incorporated by reference to the Company's Annual Report on Form 10-K for the year ended December 31, 2002).

10.43


Master Construction Agency Agreement, dated as of May 22, 2001, between Iron Mountain Statutory Trust—2001, as Lessor, and Iron Mountain Records Management, Inc., as ConstructionAdministrative Agent.(Incorporated by reference to the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 2001).2011.)


10.43


Amendment to Credit Agreement, dated as of August 15, 2012, among the Company, Iron Mountain Information Management, Inc., Iron Mountain Canada Corporation, Iron Mountain Switzerland GmbH, Iron Mountain Europe Limited, Iron Mountain Australia Pty Ltd., Iron Mountain Information Management (Luxembourg) S.C.S., Iron Mountain Luxembourg S.a r.l., the lenders and other financial institutions party thereto, JPMorgan Chase Bank, Toronto Branch, as Canadian Administrative Agent, and JPMorgan Chase Bank, N.A., as Administrative Agent.(Incorporated by reference to the Company's Quarterly Report on Form 10-Q for the quarter ended September 30, 2012.)


10.44

 

Second Amendment to Credit Agreement, dated as of April 16, 2007,January 31, 2013, among the Company, Iron Mountain Information Management, Inc., Iron Mountain Canada Corporation, Iron Mountain Nova Scotia Funding Company,Switzerland GmbH, Iron Mountain Switzerland GmbH,Europe Limited, Iron Mountain Australia Pty Ltd., Iron Mountain Luxembourg S.a r.l., the lenders and other financial institutions party thereto, J.P. Morgan Securities Inc. and Barclays Capital, as Co-Lead Arrangers and Joint Bookrunners, Barclays Bank PLC and Bank of America, N.A., as Co-Syndication Agents, Citizens Bank of Massachusetts, The Royal Bank of Scotland PLC, The Bank of Nova Scotia and HSBC Bank USA, National Association, as Co-Documentation Agents, JPMorgan Chase Bank, N.A., Toronto Branch, as Canadian Administrative Agent, and JPMorgan Chase Bank, N.A., as Administrative Agent.(Incorporated by reference to the Company's Current Report on Form 8-K dated April 20, 2007).February 4, 2013.)


10.45

 

Acknowledgment, Confirmation and Amendment of Guarantee or Security Document, dated as of April 16 2007, among Iron Mountain Incorporated, certain of its subsidiaries as guarantors and/or pledgors, JPMorgan Chase Bank, N.A., Toronto Branch, as Canadian Administrative Agent, and JPMorgan Chase Bank, N.A., as Administrative Agent.(Incorporated by reference to the Company's Current Report on Form 8-K dated April 20, 2007).

Table of Contents

ExhibitItem
10.46Agreement of Resignation, Appointment and Acceptance, dated as of January 28, 2005, by and among the Company, The Bank of New York, as prior trustee, and The Bank of New York Trust Company, N.A., as successor trustee, relating to the Senior Subordinated Indenture for 73/4% Senior Subordinated Notes due 2015 and 65/8% Senior Subordinated Notes due 2016, dated as of December 30, 2002.(Incorporated by reference to the Company's Current Report on Form 8-K dated July 11, 2006).2006.)


10.46


Agreement, by and among Iron Mountain Incorporated, Elliot Associates, L.P. and Elliot International, L.P., dated April 18, 2011.(Incorporated by reference to the Company's Current Report on Form 8-K dated April 19, 2011.)


12

 

Statement re: Computation of Ratios.(Filed herewith).herewith.)


2121.1

 

Subsidiaries of the Company.(Filed herewith).herewith.)


23.1

 

Consent of Deloitte & Touche LLP (Iron Mountain Incorporated, Delaware).(Filed herewith).herewith.)


31.1

 

Rule 13a-14(a) Certification of Chief Executive Officer.(Filed herewith).herewith.)


31.2

 

Rule 13a-14(a) Certification of Chief Financial Officer.(Filed herewith).herewith.)


32.1

 

Section 1350 Certification of Chief Executive Officer.(Filed herewith).Furnished herewith.)


32.2

 

Section 1350 Certification of Chief Financial Officer.(Furnished herewith.)


101.1


The following materials from Iron Mountain Incorporated's Annual Report on Form 10-K for the year ended December 31, 2012 formatted in XBRL (eXtensible Business Reporting Language): (i) the Consolidated Balance Sheets, (ii) Consolidated Statements of Operations, (iii) Consolidated Statements of Equity, (iv) Consolidated Statements of Comprehensive Income (Loss), (v) Consolidated Statements of Cash Flows and (vi) Notes to Consolidated Financial Statements, tagged as blocks of text and in detail.(Filed herewith).herewith.)