Exhibit 99.1
FOR IMMEDIATE RELEASE
| Contact: | Stephen P. Golden Director of Investor Relations (617) 535-4799 |
Iron Mountain Incorporated Reports Second Quarter 2003 Financial Results
Boston, MA—July 31, 2003—Iron Mountain Incorporated (NYSE: IRM), the leader in records and information management services, today reported higher revenues, operating income, EBITDA and net income for the quarter ended June 30, 2003. The Company also reported that, as previously announced, it completed the acquisition of the information management services business of Hays plc ("Hays IMS") in Europe and Texas on July 16, 2003.
Iron Mountain's total consolidated revenues for the quarter ended June 30, 2003 grew to $359 million, an increase of 10% compared with the quarter ended June 30, 2002. For the quarter, storage revenues grew 12% and service revenues grew 7% compared to the prior year. Storage revenues, which are considered a key performance indicator for the records and information management services industry, are largely recurring since customers typically retain their records for many years. This marks the 58th consecutive quarter for which Iron Mountain has reported increased storage revenues.
For the second quarter of 2003, the storage and service revenue internal growth rates were 8.4% and 2.9%, respectively, yielding a total internal revenue growth rate of 6.1%. The storage internal growth rate continued its upward trend. Service revenue growth rates in the Company's North American business units were impacted in several ways. The North American paper business experienced lower levels of customer termination activity, archived records destructions and large special projects compared to prior periods. In addition, the Company's Off-Site Data Protection business continued to feel the pressure of tight information technology spending particularly with respect to its complementary services, most notably, data product sales. The Company believes that service revenues will likely grow at a slower rate than storage revenues for the balance of the year.
Richard Reese, the Company's Chairman and CEO, stated, "The Company reported solid results for the second quarter despite slower growth rates in certain service revenue lines. Storage internal growth rates continued to increase, margins were as expected and we generated free cash flow before acquisitions and investments on a year-to-date basis. We experienced slower growth rates in certain complementary service lines. Our international businesses are performing very well across the board and two weeks ago, we completed a very important acquisition in Europe, Hays IMS. This strategic acquisition doubles the size of our business in Europe and our initial observations reaffirm our enthusiasm for this transaction."
Operating income for the second quarter of 2003 was $69 million, or 19% of revenues, compared to $62 million, or 19% of revenues, for the same period in 2002. Net Income for the quarter was $20 million, or $0.23 per diluted share, compared to $20 million, or $0.23 per diluted share, for the same period in 2002. Included in net income for 2003 is $5 million of other income, net comprised of a $19 million foreign currency gain, due primarily to the strengthening of the Canadian dollar and the pound Sterling against the U.S. dollar, partially offset by a $14 million charge for the early extinguishment of debt related to the redemption of the Company's 83/4% notes. The Company will record a pre-tax charge of $6 million in the third quarter ending September 30, 2003, for the early extinguishment of debt related to the redemption of $50 million aggregate principal amount of the
81/8% notes of its subsidiary Iron Mountain Canada Corporation. Included in net income for 2002 is $6 million of other income, net comprised almost entirely of a foreign currency gain.
EBITDA (earnings from continuing operations before interest, taxes, depreciation and amortization) was $103 million, or 28.6% of revenues, for the quarter ended June 30, 2003 compared to $94 million, or 28.6% of revenues, for the quarter ended June 30, 2002.
Iron Mountain believes that EBITDA is useful to investors because it is an important financial measure used in evaluating the Company's performance, as EBITDA is an internally generated source of funds for investment in continued growth and for servicing indebtedness. Holders of the Company's publicly issued debt use EBITDA and EBITDA-based calculations as important criteria for evaluating the Company and, as a result, all of its bond indentures and covenants include EBITDA and EBITDA-based calculations as primary measures of financial performance. However, EBITDA is subject to foreign currency fluctuations and, under new accounting rules, debt extinguishment charges. As a result, operating income, which is less affected by these items, is emerging as an important measure of the Company's financial performance. EBITDA is not a measurement of financial performance under accounting principles generally accepted in the United States, or GAAP, and should not be considered as a substitute for operating or net income (as determined in accordance with GAAP).
Below is a reconciliation of Operating Income to EBITDA Before Extraordinary Item to Net Income:
| | Quarter Ended June 30, | Six Months Ended June 30, | ||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| | 2002 | 2003 | 2002 | 2003 | ||||||||||
| Operating Income | $ | 62,346 | $ | 68,651 | $ | 119,530 | $ | 140,878 | ||||||
| Add: Depreciation and Amortization | 26,353 | 30,765 | 51,509 | 60,714 | ||||||||||
| 88,699 | 99,416 | 171,039 | 201,592 | |||||||||||
| Less: Other Income, net | (6,268 | ) | (4,722 | ) | (4,956 | ) | (7,982 | ) | ||||||
| Minority Interests in Earnings of Subsidiaries | 1,098 | 1,558 | 2,055 | 2,858 | ||||||||||
| EBITDA Before Extraordinary Item | $ | 93,869 | $ | 102,580 | $ | 173,940 | $ | 206,716 | ||||||
| Less: Depreciation and Amortization | 26,353 | 30,765 | 51,509 | 60,714 | ||||||||||
| Interest Expense, net | 32,788 | 36,397 | 65,668 | 71,962 | ||||||||||
| Provision for Income Taxes | 14,739 | 15,285 | 24,256 | 32,623 | ||||||||||
| Cumulative Effect of Change in Accounting Principle | — | — | 6,396 | — | ||||||||||
| Net Income | $ | 19,989 | $ | 20,133 | $ | 26,111 | $ | 41,417 | ||||||
| Major Components of Other (Income) Expense, net: | ||||||||||||||
| Foreign Exchange Effects | $ | (6,315 | ) | $ | (18,551 | ) | $ | (6,274 | ) | $ | (23,634 | ) | ||
| Debt Extinguishment Charges | $ | — | $ | 13,841 | $ | 1,222 | $ | 15,665 | ||||||
For the six months ended June 30, 2003 Iron Mountain reported total consolidated revenues of $711 million, an increase of 10% with storage revenues growing at 11% and service revenues growing at 9% compared to the prior year. For the period, storage and service revenue internal growth rates were 8.3% and 5.1%, respectively, yielding a total internal revenue growth rate of 7.0%. Operating income for the first half of 2003 was $141 million, or 20% of revenues, compared to $120 million, or 19% of revenues, for the same period in 2002. Income from continuing operations before extraordinary items was $41 million, or $0.48 per diluted share, for the first six months of 2003, compared to $33 million, or $0.38 per diluted share, for the same period in 2002. Included in income from continuing operations before extraordinary items for the first half of 2003 is $8 million of other income, net comprised of a $24 million foreign currency gain, due primarily to the strengthening of the Canadian dollar and the pound Sterling against the U.S. dollar, partially offset by $16 million of
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charges for the early extinguishment of debt related to the Company's 2003 refinancing activities. Included in income from continuing operations before extraordinary items for the first half of 2002 is $5 million of other income, net for the first half of 2002 is comprised primarily of a $6 million foreign currency gain offset by $1 million of charges for the early extinguishment of debt related to the Company's 2002 refinancing activities.
Net Income for the first six months of 2003 was $41 million, or $0.48 per diluted share, compared to $26 million, or $0.30 per diluted share, for the same period in 2002. Included in net income for 2002 is a $6 million after tax charge representing the cumulative effect of a change in accounting principle recorded in the first quarter of 2002.
EBITDA before extraordinary item was $207 million, or 29.1% of revenues, for the six months ended June 30, 2003 compared to $174 million, or 27.0% of revenues, for the six months ended June 30, 2002.
Company Completes Successful Refinancings; Closes Hays IMS Acquisition
During the second quarter of 2003, the Company completed the redemption of its 83/4% notes by retiring the $220 million of aggregate principal amount outstanding at March 31, 2003. In June 2003, the Company sold $150 million of 65/8% notes at par. The net proceeds to the Company of $148 million were used to redeem $50 million in aggregate principal amount of the 81/8% notes, to fund a portion of the Hays IMS purchase price and for general corporate purposes.
In July 2003, Iron Mountain and its European joint venture, Iron Mountain Europe Ltd., completed the acquisition of Hays IMS. Total consideration for the transaction was 200 million pounds Sterling, including 14.5 million pounds Sterling for the US piece of the business. The Hays IMS acquisition adds 7 new markets in the UK, Germany, Norway and Belgium.
"This is a great transaction for Iron Mountain." said Richard Reese, "We have solidified our position as the leader in records and information management on three continents allowing us to better serve our new and existing customers. This transaction will create opportunities for our employees and continue to add value for our shareholders."
The following statements are based on current expectations and do not include the potential impact of any future acquisitions. These statements are forward-looking, and actual results may differ materially. Please refer to the cautionary language included in this press release when considering this information. The Company undertakes no obligation to update this information. The Company is providing the following financial guidance for the quarter ending September 30, 2003 and the full year ending December 31, 2003, which includes the estimated impact of the Hays IMS acquisition (dollars in millions):
| | | | Full Year Ending December 31, 2003 | ||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| | Quarter Ending September 30, 2003 | ||||||||||||||||||
| | Previous | Current | |||||||||||||||||
| | Low | High | Low | High | Low | High | |||||||||||||
| Revenues | $ | 375 | $ | 385 | $ | 1,440 | $ | 1,480 | $ | 1,480 | $ | 1,510 | |||||||
| Operating Income | 69 | 74 | 270 | 290 | 273 | 293 | |||||||||||||
| Depreciation & Amortization | ~33 | 127 | 123 | 133 | 127 | ||||||||||||||
Capital Expenditures | 190 | 215 | 190 | 215 | |||||||||||||||
| Internal Growth | 9 | % | 11 | % | 6 | % | 8 | % | |||||||||||
Iron Mountain's conference call to discuss the second quarter 2003 financial results will be held today at 11:00 am eastern time. In order to further enhance the overall quality of its investor
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communications, the Company will simulcast the conference call on its website atwww.ironmountain.com. A slide presentation providing summary financial and statistical information that will be discussed on the conference call will also be posted to the website and available for real-time viewing. The slide presentation and replays of the conference call will be available on the website for future reference.
About Iron Mountain
Iron Mountain Incorporated is the world's trusted partner for outsourced records and information management services. Founded in 1951, the Company has grown to service more than 150,000 customer accounts throughout the United States, Canada, Europe and Latin America. Iron Mountain offers records management services for both physical and digital media, disaster recovery support services, and consulting—services that help businesses save money and manage risks associated with legal and regulatory compliance, protection of vital information, and business continuity challenges. For more information, visit www.ironmountain.com.
This press release contains certain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, and is subject to the safe-harbor created by such Act. Forward-looking statements include our third quarter and full year 2003 financial performance outlook and statements regarding our goals, beliefs, strategies, objectives, plans or current expectations. These statements involve known and unknown risks, uncertainties and other factors that may cause the actual results to be materially different from those contemplated in the forward-looking statements. Such factors include, but are not limited to: (i) changes in customer preferences and demand for the Company's services; (ii) changes in the price for the Company's services relative to the cost of providing such services; (iii) the cost and availability of financing for contemplated growth; (iv) the Company's ability or inability to complete acquisitions on satisfactory terms and to integrate acquired companies efficiently; (v) in the various digital businesses on which the Company is embarking, capital and technical requirements will be beyond the Company's means, markets for the Company's services will be less robust than anticipated, or competition will be more intense than anticipated; (vi) the possibility that business partners upon which the Company depends for technical assistance or management and acquisition expertise outside the United States will not perform as anticipated; (vii) changes in the political and economic environments in the countries in which the Company's international subsidiaries operate; and (viii) other trends in competitive or economic conditions affecting Iron Mountain's financial condition or results of operations not presently contemplated. Iron Mountain undertakes 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.
NOTE: Condensed Consolidated Financial Statements of Iron Mountain Incorporated follow.
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Iron Mountain Incorporated
Condensed Consolidated Statements of Operations
(Amounts in Thousands except Per Share Data)
(Unaudited)
| | Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| | 2002 | 2003 | 2002 | 2003 | ||||||||||||
| Revenues: | ||||||||||||||||
| Storage | $ | 186,984 | $ | 208,969 | $ | 370,420 | $ | 411,800 | ||||||||
| Service and Storage Material Sales | 140,736 | 150,301 | 274,498 | 299,281 | ||||||||||||
| Total Revenues | 327,720 | 359,270 | 644,918 | 711,081 | ||||||||||||
| Operating Expenses: | ||||||||||||||||
| Cost of Sales (Excluding Depreciation) | 155,407 | 162,032 | 307,853 | 322,183 | ||||||||||||
| Selling, General and Administrative | 85,312 | 96,134 | 167,506 | 187,290 | ||||||||||||
| Depreciation and Amortization | 26,353 | 30,765 | 51,509 | 60,714 | ||||||||||||
| Merger-Related Expenses | 280 | — | 580 | — | ||||||||||||
| (Gain) Loss on Disposal / Writedown of Property, Plant and Equipment, Net | (1,978 | ) | 1,688 | (2,060 | ) | 16 | ||||||||||
| Total Operating Expenses | 265,374 | 290,619 | 525,388 | 570,203 | ||||||||||||
| Operating Income | 62,346 | 68,651 | 119,530 | 140,878 | ||||||||||||
Interest Expense, Net | 32,788 | 36,397 | 65,668 | 71,962 | ||||||||||||
| Other income, Net | (6,268 | ) | (4,722 | ) | (4,956 | ) | (7,982 | ) | ||||||||
| Income from Continuing Operations Before Provision for Income Taxes and Minority Interest | 35,826 | 36,976 | 58,818 | 76,898 | ||||||||||||
Provision for Income Taxes | 14,739 | 15,285 | 24,256 | 32,623 | ||||||||||||
| Minority Interest in Earnings of Subsidiaries | 1,098 | 1,558 | 2,055 | 2,858 | ||||||||||||
| Income from Continuing Operations Before Cumulative Effect of Change in Accounting Principle | 19,989 | 20,133 | 32,507 | 41,417 | ||||||||||||
| Cumulative Effect of Change in Accounting Principle (Net of Minority Interest) (1) | — | — | (6,396 | ) | — | |||||||||||
| Net Income | $ | 19,989 | $ | 20,133 | $ | 26,111 | $ | 41,417 | ||||||||
| Income From Continuing Operations Before Cumulative Effect of Change in Accounting Principle Per Share — Basic | $ | 0.24 | $ | 0.24 | $ | 0.38 | $ | 0.49 | ||||||||
| Income From Continuing Operations Before Cumulative Effect of Change in Accounting Principle Per Share — Diluted | $ | 0.23 | $ | 0.23 | $ | 0.38 | $ | 0.48 | ||||||||
| Net Income Per Share—Basic | $ | 0.24 | $ | 0.24 | $ | 0.31 | $ | 0.49 | ||||||||
| Net Income Per Share—Diluted | $ | 0.23 | $ | 0.23 | $ | 0.30 | $ | 0.48 | ||||||||
| Weighted Average Common Shares Outstanding—Basic | 84,534 | 85,234 | 84,454 | 85,166 | ||||||||||||
| Weighted Average Common Shares Outstanding—Diluted | 86,078 | 86,793 | 86,024 | 86,672 | ||||||||||||
| EBITDA Before Extraordinary Item | $ | 93,869 | $ | 102,580 | $ | 173,940 | $ | 206,716 | ||||||||
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Iron Mountain Incorporated
Condensed Consolidated Balance Sheets
(Amounts in Thousands)
(Unaudited)
| | December 31, 2002 | June 30, 2003 | ||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| ASSETS | ||||||||||
| Current Assets: | ||||||||||
| Cash and Cash Equivalents | $ | 56,292 | $ | 177,863 | ||||||
| Accounts Receivable (less allowances of $20,274 and $20,353, respectively) | 225,416 | 239,987 | ||||||||
| Other Current Assets | 85,332 | 68,879 | ||||||||
| Total Current Assets | 367,040 | 486,729 | ||||||||
| Property, Plant and Equipment: | ||||||||||
| Property, Plant and Equipment at Cost | 1,577,588 | 1,701,035 | ||||||||
| Less: Accumulated Depreciation | (338,400 | ) | (394,041 | ) | ||||||
| Property, Plant and Equipment, net | 1,239,188 | 1,306,994 | ||||||||
| Other Assets: | ||||||||||
| Goodwill, net | 1,544,974 | 1,587,402 | ||||||||
| Other Non-current Assets, net | 79,453 | 95,090 | ||||||||
| Total Other Assets | 1,624,427 | 1,682,492 | ||||||||
| Total Assets | $ | 3,230,655 | $ | 3,476,215 | ||||||
| LIABILITIES AND SHAREHOLDERS' EQUITY | ||||||||||
| Current Liabilities: | ||||||||||
| Current Portion of Long-term Debt | $ | 69,732 | $ | 52,895 | ||||||
| Other Current Liabilities | 358,230 | 370,131 | ||||||||
| Total Current Liabilities | 427,962 | 423,026 | ||||||||
| Long-term Debt, Net of Current Portion | 1,662,365 | 1,822,375 | ||||||||
| Other Long-term Liabilities | 133,335 | 160,798 | ||||||||
| Minority Interests | 62,132 | 68,460 | ||||||||
| Shareholders' Equity | 944,861 | 1,001,556 | ||||||||
| Total Liabilities and Shareholders' Equity | $ | 3,230,655 | $ | 3,476,215 | ||||||
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