SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): AUGUST 15, 2000
IRON MOUNTAIN INCORPORATED
(Exact Name of Registrant as Specified in its Charter)
PENNSYLVANIA
(State or Other Jurisdiction of Incorporation or Organization)
1-13045 23-2588479
(Commission file number) (I.R.S. Employer Identification No.)
745 ATLANTIC AVENUE, BOSTON, MASSACHUSETTS 02111
(Address of Principal Executive Offices, Including Zip Code)
(617) 535-4766
(Registrant's Telephone Number, Including Area Code)
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits
(b) Pro forma Financial Information
During 1999 and 2000, the Company acquired several businesses. The following
represents the unaudited pro forma condensed consolidated financial
statements for certain businesses acquired by the Company in 1999 and 2000,
and certain other transactions. Pursuant to Article 11 of Regulation S-X, pro
forma effect has only been given to acquired businesses for which the Company
has previously filed audited financial statements in accordance with Rule
3-05 of Regulation S-X.
PAGE
Unaudited Pro Forma Condensed Consolidated Statement of
Operations for the six months ended June 30, 2000 2
Unaudited Pro Forma Condensed Consolidated Statement of
Operations for the year ended December 31, 1999 3
Schedule A- Schedule of 1999 Pro Forma Acquisitions for
the year ended December 31, 1999 4
Notes to Unaudited Pro Forma Condensed Consolidated
Financial Statements 5-13
IRON MOUNTAIN INCORPORATED
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL INFORMATION
The term pro forma transactions, as used in the accompanying pro forma
condensed consolidated financial statements and notes thereto, is defined as
certain of our 1999 and 2000 acquisitions and certain financing transactions
and includes the following: (a) the acquisitions of Iron Mountain Europe
Limited ("Iron Mountain Europe") (50.1% interest), First American Records
Management Inc. ("FARM"), Data Base, Inc. ("Data Base"), MAP, S.A.
(Memogarde) ("Memogarde") by Iron Mountain Europe, Central File, Inc.
("Central File"), Sistemas de Archivo Corporativo, S. de R.L. de C.V. (50.1%
interest) ("Sistemas de Archivo Corporativo"), Stortext (Holdings) Ltd.
("Stortext") by Iron Mountain Europe, Midtown Professional Records Center,
Inc. ("Midtown"), Pierce Leahy Corp. ("Pierce Leahy"), and Data Storage
Center, Inc. ("DSC"); (b) the issuance of $150 million 8 1/4% senior
subordinated notes in April 1999; (c) the sale of 5.8 million shares of
common stock in May 1999; (d) Iron Mountain's repurchase of shares issued in
connection with the Data Base acquisition for $39.5 million on May 18, 1999
and (e) the Company's amendment to its revolving credit facility effective
February 1, 2000, as if each had occurred as of January 1, 1999. The pro
forma condensed consolidated financial statements separately present the pro
forma effects of the DSC acquisition and the Pierce Leahy merger. You should
read the pro forma financial statements in conjunction with our Current
Reports on Form 8-K filed with the Securities and Exchange Commission ("SEC")
on February 1, 2000, May 4, 2000, and May 15, 2000; our 1999 Annual Report on
Form 10-K filed with the SEC on March 30, 2000; and our Quarterly Reports on
Form 10-Q filed with the SEC on May 15, 2000 and August 14, 2000.
The following Unaudited Pro Forma Condensed Consolidated Statements of
Operations (the "Pro Forma Statements of Operations") for the year ended
December 31, 1999 and the six months ended June 30, 2000 give effect to the
pro forma transactions described above, as if each had occurred as of January
1, 1999. Pursuant to certain SEC Rules and Regulations, the Pro Forma
Financial Statements do not include results of operations, or pro forma
adjustments, for nine acquisitions completed in 1999 and three acquisitions
completed in 2000 that are not defined herein as the 1999 Pro Forma
Acquisitions or shown as a 2000 acquisition. The aggregate pro forma revenues
of those 1999 and 2000 acquisitions not included in the pro forma condensed
consolidated financial statements were $8.0 million and $1.3 million for the
year ended December 31, 1999 and the six months ended June 30, 2000,
respectively. In addition, the Pro Forma Statements of Operations do not
include the results of operations for acquisitions completed by Pierce Leahy
in 1999. Pro forma adjustments are described in the accompanying notes.
The Pro Forma Financial Statements do not give effect to estimated
annual net cost savings of $15.0 million associated with the Pierce Leahy
acquisition. Management expects to achieve this annual level of savings
within three years after the merger. Further, the Pro Forma Financial
Statements do not reflect any further costs associated with integrating the
two companies as it is not practicable to quantify these costs at this time.
These costs may be material to Iron Mountain's results of operations.
Depending upon management's plans and the nature and timing of the costs, the
costs may be accounted for as part of the acquisition accounting, as a
post-combination restructuring charge, as operating expenses in the period
incurred or as capital expenditures. Furthermore, the Pro Forma Statements of
Operations do not give effect to all cost savings or incremental costs that
may occur as a result of the integration and consolidation of the 1999 Pro
Forma Acquisitions and DSC included in these pro forma financial statements.
In June 1999, Iron Mountain decided to sell its information technology
staffing business, Arcus Staffing Resources, Inc. ("Arcus Staffing"), which
was acquired in January 1998 as part of its acquisition of Arcus Group, Inc.
Effective November 1, 1999, Iron Mountain completed the sale of substantially
all of the assets of Arcus Staffing. Iron Mountain has accounted for the sale
of Arcus Staffing as a discontinued operation.
Iron Mountain has accounted for its acquisitions and the related real
estate transactions using the purchase method of accounting.
The Pro Forma Statements of Operations do not necessarily indicate the
actual results of operations that Iron Mountain would have reported if the
pro forma transactions described above had occurred as of January 1, 1999,
nor do they necessarily indicate the results of future operations. In the
opinion of Iron Mountain's management, all adjustments and disclosures
necessary to fairly present these pro forma financial statements have been
made.
On August 14, 2000, Iron Mountain entered into an amended and restated
revolving credit agreement (the "Amended Credit Agreement"). The Amended
Credit Agreement replaces the Company's prior credit facility, increases the
aggregate principal amount available to $750 million and includes two
tranches of term debt. Tranches A and B represent term loans to the Company in
principal amounts of $150 million and $200 million, respectively. The Tranche
A term loan and the revolving credit component of the Amended Credit
Agreement mature on January 31, 2005, while the Tranche B term loan matures
on February 28, 2006. The interest rate on borrowings under the Amended
Credit Agreement varies depending on the Company's choice of base rates, plus
an applicable margin. Restrictive covenants under this agreement are similar
to those under the Company's prior credit facility.
There was no impact to the interest rates under the Amended Credit
Agreement, except for the Tranche B term loan, which has an interest rate of
.75% higher than the remainder of the facility. The pro forma effect of the
additional interest expense, net of commitment fees, that would have been
incurred if this Amended Credit Agreement had been in effect since January 1,
1999 is $13.5 million for the year ended December 31, 1999 and $5.7 for the
six months ended June 30, 2000. The pro forma increase in net loss is $8.1
million for the year ended December 31, 1999 and $3.4 for the six months
ended June 30, 2000, respectively. These adjustments are not reflected in the
accompanying pro forma financial statements.
The term loans under the Amended Credit Agreement have been used to pay
down the revolving credit line, thereby creating an excess cash position. The
accompanying pro forma financial statements do not reflect the interest
income on the excess cash balance.
1
IRON MOUNTAIN INCORPORATED
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 2000
(IN THOUSANDS, EXCEPT PER SHARE DATA)
PRO FORMA
HISTORICAL ---------------------- PRO FORMA
-------------------- PIERCE FOR PIERCE HISTORICAL -----------------------
IRON PIERCE LEAHY LEAHY DATA STORAGE DATA STORAGE IRON
MOUNTAIN LEAHY (1) ADJUSTMENTS ACQUISITION CENTER(2) ADJUSTMENTS MOUNTAIN
-------- --------- ----------- ---------- ------------ ------------ --------
Revenues:
Storage $ 273,384 $ 17,476 $ -- $ 290,860 $ 4,253 $ -- $ 295,113
Service and Storage Material Sales 191,318 12,701 -- 204,019 2,230 -- 206,249
--------- --------- -------- --------- --------- --------- ---------
Total Revenues 464,702 30,177 -- 494,879 6,483 -- 501,362
Operating Expenses:
Cost of Sales (Excluding Depreciation) 226,431 18,189 (2,363)(E) 242,257 2,544 77(A) 244,878
Selling, General and Administrative 118,181 3,592 2,363 (F) 124,136 2,042 -- 126,178
Depreciation and Amortization 57,947 3,708 258 (G) 61,913 471 418(B) 62,802
Foreign Currency Exchange -- 147 (147)(H) -- -- -- --
Stock Option Compensation Expense 14,939 -- -- 14,939 -- -- 14,939
Merger-related Expenses(3) 4,391 4,438 (3,232)(I) 5,597 -- -- 5,597
--------- --------- -------- --------- --------- --------- ---------
Total Operating Expenses 421,889 30,074 (3,121) 448,842 5,057 495 454,394
Operating Income 42,813 103 3,121 46,037 1,426 (495) 46,968
Interest Expense 54,028 4,724 (402)(J) 58,350 111 1,058(C) 59,519
Other Expense, net 4,480 -- 147 (K) 4,627 -- -- 4,627
--------- --------- --------- --------- --------- --------- ---------
Income (Loss) Before Provision
(Credit) for Income Taxes and
Minority Interest (15,695) (4,621) 3,376 (16,940) 1,315 (1,553) (17,178)
Provision (Credit) for Income Taxes 18,376 (324) 1,348(L) 19,400 525 (621)(D) 19,304
Minority Interests in losses of
subsidiaries (443) -- -- (443) -- -- (443)
--------- --------- --------- --------- --------- --------- ---------
Income (Loss) from Continuing Operations $ (33,628) $ (4,297) $ 2,028 $(35,897) $ 790 $ (932) $ (36,039)
========= ========= ========= ========= ========= ========= =========
Loss from Continuing Operations per
Common Share-Basic and Diluted $(0.66) $(0.66) $(0.66)
========= ========= =========
Weighted Average Common Shares
Outstanding-Basic and Diluted 51,292 3,199(M) 54,491 54,491
========= ========= ========= ========= ========= ========= =========
EBITDA(4) $ 120,090 $ 8,396 $ -- $ 128,486 $ 1,897 $ (77) $ 130,306
========= ========= ========= ========= ========= ========= =========
- ---------
(1) Represents the historical results of operations of Pierce Leahy prior to the
acquisition date, February 1, 2000.
(2) Represents the historical results of operations of DSC prior to the
acquisition date, May 1, 2000.
(3) Merger-related expenses are certain expenses directly related to the
Company's merger with Pierce Leahy that cannot be capitalized and include
costs of exiting certain facilities, severance and pay-to-stay payments,
system conversion costs and other transaction-related costs.
(4) EBITDA is defined as earnings before interest, taxes, depreciation,
amortization, extraordinary items, other income, foreign currency
exchange, merger-related expenses and stock option compensation expense.
The accompanying notes are an integral part of these pro forma financial
statements.
2
IRON MOUNTAIN INCORPORATED
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1999
(IN THOUSANDS, EXCEPT PER SHARE DATA)
HISTORICAL PRO FORMA ADJUSTMENTS PRO PRO FORMA
----------------------------- ----------------------------- FORMA HISTORICAL -----------------
1999 IRON DATA DSC
IRON ACQUISI- PIERCE 1999 MOUNTAIN STORAGE ADJUST- IRON
MOUNTAIN TIONS (1) LEAHY ACQUISITIONS (2) PIERCE LEAHY BEFORE DSC CENTER MENTS MOUNTAIN
--------- --------- ------- ---------------- ------------ ---------- ----------- ------ ---------
Revenues:
Storage .................... $317,387 $18,962 $190,095 $ -- $ -- $526,444 $11,536 $ -- $537,980
Service and Storage
Material Sales ........... 202,162 7,154 152,167 -- -- 361,483 5,736 -- 367,219
--------- -------- -------- --------- --------- -------- -------- ----- --------
Total Revenues ......... 519,549 26,116 342,262 -- -- 887,927 17,272 -- 905,199
Operating Expenses:
Cost of Sales (Excluding
Depreciation) ............ 260,930 12,618 191,510 -- (20,393) (E) 444,665 7,313 328 (A) 452,306
Selling, General and
Administrative ........... 128,948 15,882 45,856 (9,396) (N) 28,716 (F) 210,006 5,649 -- 215,655
Depreciation and
Amortization ............. 65,422 2,477 43,655 1,748 (O) 4,216 (G) 117,518 1,556 1,122 (B) 120,196
Foreign Currency Exchange... -- -- (7,473) -- 7,473 (H) -- -- -- --
Merger-related Expenses..... -- -- 2,361 -- (1,136) (I) 1,225 -- -- 1,225
--------- -------- -------- --------- --------- -------- -------- ----- --------
Total Operating
Expenses ............... 455,300 30,977 275,909 (7,648) 18,876 773,414 14,518 1,450 789,382
--------- -------- -------- --------- --------- -------- -------- ----- --------
Operating Income (Loss) ...... 64,249 (4,861) 66,353 7,648 (18,876) 114,513 2,754 (1,450) 115,817
Interest Expense, net ........ 54,425 1,210 52,363 855 (P) (15) (J) 108,838 365 3,145 (C) 112,348
Other Income, net............. 17 -- -- -- 7,473 (K) 7,490 -- -- 7,490
--------- -------- -------- --------- --------- -------- -------- ----- --------
Income (Loss) Before
Provision for Income Taxes
and Minority Interest ...... 9,841 (6,071) 13,990 6,793 (11,388) 13,165 2,389 (4,595) 10,959
Provision for Income Taxes ... 10,579 805 6,290 (223) (Q) 942 (L) 18,393 896 (1,778)(D) 17,511
Minority Interests in
Earnings of Subsidiaries.. 322 -- -- 339 (R) -- 661 -- -- 661
--------- -------- -------- --------- --------- -------- -------- ----- --------
Income (Loss) from
Continuing Operations ..... $ (1,060) $(6,876) $ 7,700 $6,677 $(12,330) $ (5,889) $ 1,493 $(2,817) $ (7,213)
========= ======== ======== ========= ========= ======== ======== ===== =========
Loss from Continuing
Operations per Common
Share - Basic and Diluted.. $ (0.03) $ (0.13)
========= =========
Weighted Average Common
Shares Outstanding - Basic
and Diluted ............... 33,345 2,063 (S) 18,784 (M) 54,192 54,192
========= ========= ========= ======== =========
EBITDA ....................... $129,671 $(2,384) $104,896 $9,396 $ (8,323) $233,256 $ 4,310 $ (328) $237,238
========= ======== ======== ========= ========= ======== ======== ===== =========
(1) See Schedule A for detail of the 1999 Pro Forma Acquisitions. Includes
adjustments for the 1999 debt and equity offerings.
(2) Includes adjustments for the 1999 debt and equity offerings.
The accompanying notes are an integral part of these pro forma financial
statements.
3
SCHEDULE A
IRON MOUNTAIN INCORPORATED
SCHEDULE OF 1999 PRO FORMA ACQUISITIONS (1)
FOR THE YEAR ENDED DECEMBER 31, 1999
(IN THOUSANDS)
(UNAUDITED)
FIRST
IRON AMERICAN 1999
MOUNTAIN RECORDS DATA PRO FORMA
EUROPE MANAGEMENT BASE MEMOGARDE OTHER ACQUISITIONS
-------- ---------- -------- --------- --------- ------------
Revenues:
Storage .............................. $3,178 $ 1,687 $ 6,781 $1,847 $5,469 $18,962
Service and Storage Material Sales ... 2,032 1,165 415 902 2,640 7,154
-------- ---------- -------- --------- ----- ------------
Total Revenues ................... 5,210 2,852 7,196 2,749 8,109 26,116
Operating Expenses:
Cost of Sales (Excluding Depreciation) 2,624 1,816 3,254 826 4,098 12,618
Selling, General and Administrative .. 1,313 3,258 8,695 719 1,897 15,882
Depreciation and Amortization ........ 608 153 873 271 572 2,477
-------- -------- -------- -------- -------- --------
Total Operating Expenses ......... 4,545 5,227 12,822 1,816 6,567 30,977
-------- -------- -------- -------- -------- --------
Operating Income (Loss) .................. 665 (2,375) (5,626) 933 1,542 (4,861)
Interest Expense, net .................... 200 161 491 151 207 1,210
-------- -------- -------- -------- -------- --------
Income (Loss) Before Provision for Income
Taxes and Minority Interest ........... 465 (2,536) (6,117) 782 1,335 (6,071)
Provision for Income Taxes ............... 215 -- -- 408 182 805
-------- -------- -------- -------- -------- --------
Income (Loss) from Continuing Operations.. $ 250 $(2,536) $(6,117) $ 374 $1,153 $(6,876)
======== ======== ======== ======== ======== ========
EBITDA ................................... $1,273 $(2,222) $(4,753) $1,204 $2,114 $(2,384)
======== ======== ======== ======== ======== ========
- --------------------------------------------
(1) Represents historical results of operations for each 1999 Pro Forma
Acquisition for the period in 1999 prior to the time it was acquired,
unless otherwise noted. See "Overview" in the accompanying notes.
The accompanying notes are an integral part of these pro forma financial
statements.
4
IRON MOUNTAIN INCORPORATED
NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
OVERVIEW
DSC ACQUISITION
On May 1, 2000, Iron Mountain acquired certain assets and assumed
certain liabilities of DSC pursuant to an agreement dated February 18, 2000.
The Company acquired substantially all of the operating assets and
liabilities of DSC excluding cash, real estate and long-term debt. Iron
Mountain did not acquire or assume any assets or liabilities associated with
DSC's Pensacola, Florida records management business. The acquisition has
been accounted for as a purchase and DSC is included in Iron Mountain's
consolidated financial results from the date of acquisition. The accompanying
pro forma financial statements do not include adjustments to remove the
assets and liabilities or the results of operations related to DSC's
Pensacola, Florida records management business as the impact is immaterial.
Total consideration was $54.0 million in cash. The Company funded the
purchase with borrowings under its revolving credit facility.
The assets acquired by Iron Mountain included tangible personal property
(consisting primarily of office equipment, furniture and fixtures, motor
vehicles and racking) and intangible personal property regularly used in
DSC's records management business. Iron Mountain intends to use the acquired
property and equipment in the operation of its records management business in
the United States.
PIERCE LEAHY ACQUISITION
On February 1, 2000, Iron Mountain completed its merger with Pierce Leahy
for total consideration of approximately $1.1 billion, which consisted of common
stock, options to acquire common stock and the assumption of debt. Pierce Leahy
was the surviving legal entity and immediately changed its name to Iron Mountain
Incorporated. Although Pierce Leahy is the surviving legal entity, Iron Mountain
is considered the acquirer for accounting purposes.
The merger consideration resulted in the equivalent of a fixed exchange
ratio of 1.1 shares of Iron Mountain common stock for each share of Pierce Leahy
common stock. The exchange ratio was effected by Pierce Leahy paying, prior to
the merger, a stock dividend of one share of Pierce Leahy common stock for each
10 shares then outstanding. The Pierce Leahy common stock was exchanged for
shares of Iron Mountain common stock. Each outstanding share of Iron Mountain
common stock was converted into one share of common stock of the combined
entity.
The transaction has been accounted for as a reverse acquisition. The
purchase price of Pierce Leahy is based upon the fair value of Pierce Leahy
common stock and options to acquire Pierce Leahy common stock, the fair value of
the assumed debt on the date that the merger was completed and transaction
costs. As the common stock exchange ratio is fixed, the fair value of Pierce
Leahy common stock is based upon the stock price on the date the merger was
announced.
5
IRON MOUNTAIN INCORPORATED
NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
The calculation of the purchase price as of February 1, 2000 is as follows (in
millions):
Fair Value of Common Stock Issued (1) $ 444.0
Fair Value of Stock Options (2) 25.0
Fair Value of Debt Assumed (3) 584.9
Transaction Costs 4.1
--------
Total Purchase Price $1,058.0
========
(1) Based on 18,783,813 outstanding shares of Pierce Leahy common stock at
February 1, 2000 at a fair value of $23.64 per share. Both the numbers of
shares and share price reflect an adjustment for Pierce Leahy's January
2000 10% stock dividend.
(2) Based on options to acquire 1,563,566 shares of Pierce Leahy common stock
at February 1, 2000 after giving effect to the January 2000 10% stock
dividend.
(3) Calculated based on the outstanding balances and the quoted market prices
when the merger was completed on February 1, 2000.
A number of Pierce Leahy shareholders are parties to a certain
shareholders' agreement, dated October 20, 1999. This agreement restricts the
ability of these shareholders to sell 5.7 million shares of Iron Mountain
common stock (after giving effect to the stock dividend) for up to five years
after the merger. Iron Mountain may obtain an appraisal to determine the fair
value of these restricted shares. Iron Mountain believes that, due to these
restrictions, the actual fair value of these restricted shares could be less
than the $23.64 per share value used for purposes of calculating the purchase
price. Accordingly, Iron Mountain would record a corresponding decrease in
equity, goodwill and goodwill amortization from the amounts used in the
accompanying pro forma financial statements. If the resale restrictions
result in a 10% discount to the fair value of the shares, there would be a
reduction of approximately $13 million of equity and goodwill and $0.5
million of goodwill amortization annually.
1999 PRO FORMA ACQUISITIONS
In January 1999, Iron Mountain acquired a controlling 50.1% interest in
Iron Mountain Europe (f.k.a. Britannia Data Management Limited) for total
consideration of $49.3 million, consisting of cash and the capital stock of
Arcus Data Security Limited, the Company's existing data security services
business in London. In April 1999, Iron Mountain acquired Data Base and
related real estate for total consideration of $115.0 million, consisting of
cash, assumed debt and common stock. In April 1999, Iron Mountain also
acquired FARM for total consideration of $41.5 million in cash. In June 1999,
Iron Mountain Europe acquired a controlling 50.1% interest in Memogarde for
total consideration of $16.9 million, consisting of cash and assumed debt.
The aggregate purchase price for the four remaining 1999 pro forma
acquisitions, comprising Midtown, Central File, Iron Mountain Europe's
acquisition of Stortext and a 50.1% interest in Sistemas de Archivo
Corporativo, was $30.3 million in cash and assumed debt. All of these
acquisitions are referred to collectively as the "1999 Pro Forma
Acquisitions".
IRON MOUNTAIN EUROPE
In January 1999, Iron Mountain purchased a controlling 50.1% interest in
Iron Mountain Europe for total consideration of $49.3 million, consisting of
cash and the capital stock of Arcus Data Security Limited.
Iron Mountain Europe has an April 30 fiscal year end. Iron Mountain
consolidates Iron Mountain Europe using an October 31 fiscal year end.
Accordingly, the Iron Mountain Pro Forma Statements of Operations for the year
ended December 31, 1999 include Iron Mountain Europe's results for the year
ended October 31, 1999.
6
IRON MOUNTAIN INCORPORATED
NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
The financial statements of Iron Mountain Europe, Memogarde and Stortext
have been prepared in accordance with U.S. generally accepted accounting
principles and have been translated into U.S. dollars in accordance with
Statement of Financial Accounting Standards No. 52, "Foreign Currency
Translation." The functional currencies of Iron Mountain Europe, Memogarde,
and Stortext are Pounds Sterling, French Francs and Pounds Sterling,
respectively. Revenues and expenses have been translated into U.S. dollars at
the average exchange rate in effect during the period translated.
DATA BASE ACQUISITION
On April 8, 1999, Iron Mountain acquired Data Base and related real estate
for $115.0 million including transaction costs. As part of the total
consideration, Iron Mountain issued 1,476,577 shares of common stock with a fair
value of $46.0 million. On May 18, 1999, Iron Mountain repurchased all of the
shares issued in connection with the Data Base acquisition from the former
shareholders of Data Base for $39.5 million, with a portion of the net proceeds
from the 1999 equity offering.
PURCHASE PRICE ALLOCATION
The aggregate consideration paid for the 1999 Pro Forma Acquisitions and
the Pierce Leahy and DSC acquisitions was $1.4 billion. The excess of the
purchase price over the book value of the net assets acquired for each of the
acquisitions was allocated to tangible and intangible assets, based on our
estimate of the fair value of the net assets acquired. The following
allocation of the aggregate purchase price of DSC and Pierce Leahy is based
on the fair value of net assets acquired as of the respective acquisition
dates and is subject to adjustment, based on the final determination of the
fair value. Management believes that the final allocation of the purchase
price of the 1999 Pro Forma Acquisitions will not differ materially from the
preliminary estimated amounts.
7
IRON MOUNTAIN INCORPORATED
NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
(in millions)
DSC (1):
Current Assets ............................................... $ 2.7
Property, Plant and Equipment ................................ 7.3
Goodwill ..................................................... 42.0
Other Long-term Assets ....................................... 3.0
Current Liabilities .......................................... (1.0)
--------
Purchase Price of DSC ....................................... 54.0
PIERCE LEAHY (2):
Current Assets ............................................... $ 76.6
Property, Plant and Equipment ................................ 279.8
Goodwill ..................................................... 787.5
Other Long-term Assets ....................................... 8.1
Current Liabilities .......................................... (83.5)
Deferred Income Taxes ........................................ (10.5)
--------
Purchase Price of Pierce Leahy .............................. 1,058.0
1999 PRO FORMA ACQUISITIONS:
Current Assets ............................................... $ 32.0
Property, Plant and Equipment ................................ 69.3
Goodwill ..................................................... 235.9
Other Long-term Assets ....................................... 2.2
Current Liabilities .......................................... (25.9)
Deferred Income Taxes ........................................ (2.1)
Long-term Debt ............................................... (15.2)
Other Long-term Liabilities .................................. (0.1)
Minority Interest ............................................ (43.1)
--------
Purchase Price of 1999 Pro Forma Acquisitions .............. $ 253.0
--------
Total Purchase Price of DSC, Pierce Leahy and the 1999
Pro Forma Acquisitions ................................... $1,365.0
========
(1) The purchase price allocation is preliminary and is subject to finalization
of the assessment of the fair value of fixed assets, operating leases,
and deferred income taxes.
(2) The purchase price allocation is preliminary and is subject to finalization
of the assessment of the fair value of fixed assets, operating leases,
restricted common stock, and deferred income taxes.
8
IRON MOUNTAIN INCORPORATED
NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
The 1999 Pro Forma Acquisitions are assumed to be financed as follows (in
millions):
Fair value of common stock issued .............................. $ 46.0
Net proceeds from the 1999 debt offering ....................... 145.0
Net proceeds from the 1999 equity offering ..................... 41.3
Borrowing's under Iron Mountain Europe's line of credit ........ 13.4
Assumption of long-term debt ................................... 4.8
Capital Stock of Arcus Data Security Limited ................... 2.5
------
Purchase Price of 1999 Pro Forma Acquisitions ................ $ 253.0
=======
9
IRON MOUNTAIN INCORPORATED
NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
STATEMENTS OF OPERATIONS
PRO FORMA ADJUSTMENTS - DSC
The accompanying Pro Forma Statements of Operations for the six months
ended June 30, 2000 and the year ended December 31, 1999 have been prepared
as if the DSC acquisition had occurred on January 1, 1999 and reflects the
following pro forma adjustments (in millions):
(A) To adjust rent expense to new lease rates negotiated in connection with
the acquisition.
(B) To reflect additional depreciation expense based on the fair value of the
assets acquired and the remaining useful lives and the amortization of
goodwill. Plant and equipment are depreciated over three to 15 years,
goodwill is amortized over 30 years and covenants not-to-compete are
amortized over five years on a straight-line basis.
(C) Pro forma adjustments to interest expense consist of the following:
SIX MONTHS ENDED YEAR ENDED
JUNE 30, 2000 DECEMBER 31, 1999
-------------- -----------------
Reverse interest expense on debt of DSC retired or not assumed......... $ (0.1) $ (0.4)
Record interest expense on the additional debt used to finance
the DSC acquisition assumed to be financed under our
revolving credit facility ........................................... 1.2 3.5
-------- --------
Total .................................................... $ 1.1 $ 3.1
======== ========
(D) To adjust the provision for income taxes to a 40% rate on pro forma income.
PRO FORMA ADJUSTMENTS - PIERCE LEAHY
The accompanying Pro Forma Statements of Operations for the six months
ended June 30, 2000 and the year ended December 31, 1999 have been prepared as
if the Pierce Leahy acquisition had occurred on January 1, 1999 and reflects the
following pro forma adjustments (in millions):
SIX MONTHS ENDED YEAR ENDED
JUNE 30, 2000 DECEMBER 31, 1999
-------------- -----------------
(E) Costs of Sales (excluding depreciation)
To reflect the normalization of rent expense ............................ $ -- $ 0.2
To conform Pierce Leahy's classification of cost of sales and
selling, general and administrative expenses to Iron
Mountain's classification ............................................... (2.4) (20.6)
------- --------
$(2.4) $(20.4)
======= ========
10
IRON MOUNTAIN INCORPORATED
NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
SIX MONTHS ENDED YEAR ENDED
JUNE 30, 2000 DECEMBER 31, 1999
-------------- -----------------
(F) Selling, General and Administrative
To conform Pierce Leahy's classification of cost of sales and
selling, general and administrative expenses to Iron
Mountain's classification .............................................. $ 2.4 $ 20.6
To conform Pierce Leahy's accounting for customer acquisition
costs to Iron Mountain's accounting .................................... -- 8.1
-------- ---------
$ 2.4 $ 28.7
======== ========
(G) Depreciation and Amortization
Amortization of goodwill created in the merger based on a
30-year life ........................................................... $ 1.2 $ 14.9
To adjust depreciation and amortization for Iron Mountain's
estimation of useful lives of Pierce Leahy's fixed assets and
intangible assets ...................................................... (0.9) (10.7)
------- --------
$ 0.3 $ 4.2
======= ========
(H) Foreign Currency Exchange
To conform Pierce Leahy's classification of foreign currency
exchange gain to Iron Mountain's classification
(I) Merger-related Expenses
To reverse expenses directly attributable to the acquisition and
expensed by Pierce Leahy. These expenses consist of compensation expense
related to the acceleration of certain stock options, financial advisor,
legal, accounting and SEC fees
(J) Interest Expense
Reverse amortization of Pierce Leahy's deferred financing costs in
connection with the adjustment to fair value of debt assumed .......... $(0.1) (1.6)
Record the amortization related to fair value adjustment of
debt assumed .......................................................... -- 0.2
Record amortization of deferred financing costs in connection
with the new credit facility .......................................... 0.1 0.4
Record interest on borrowings associated with the transaction
costs of the merger, registration of shares of common stock
and deferred financing costs associated with the credit
agreement amendment ................................................... -- 0.6
Reverse interest on Pierce Leahy's revolving credit facility .......... (1.4) (12.3)
Record interest on Iron Mountain's revolving credit facility
at 7.48% and 7.03%, respectively ...................................... 1.0 11.5
Record interest on additional debt incurred by Pierce Leahy
through February 1, 2000 .............................................. -- 1.2
-------- ---------
$ (0.4) $ --
======= =========
11
IRON MOUNTAIN INCORPORATED
NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
The impact of a 1/8% change in the interest rate on pro forma borrowings
under Iron Mountain's revolving credit facility for the six months ended June
30, 2000 and the year ended December 31, 1999 are $0.1 million and $0.3 million,
respectively.
(K) Other Expense, net
To conform Pierce Leahy's classification of foreign
currency exchange gain to Iron Mountain's classification
(L) Provision for Income Taxes
To adjust the provision for income taxes to a 40% rate on pro
forma income before nondeductible goodwill and other
nondeductible expenses
(M) To adjust the pro forma weighted average common shares
outstanding as if the merger with Pierce Leahy had occurred on
January 1, 1999, including the effect of the 10% stock
dividend
PRO FORMA ADJUSTMENTS - 1999 PRO FORMA ACQUISITIONS AND FINANCING TRANSACTIONS
The accompanying Pro Forma Statement of Operations for the year ended
December 31, 1999 has been prepared as if the 1999 Pro Forma Acquisitions,
the 1999 equity offering, and the 1999 debt offering had occurred on
January 1, 1999 and reflect the following pro forma adjustments:
(N) To reverse one-time bonus payments, other non-recurring compensation
expenses and broker's fees directly attributable to the Data Base and FARM
acquisitions.
(O) To reflect additional depreciation expense based on the fair value of the
assets acquired and the remaining useful lives and the amortization of
goodwill. Property, plant and equipment are depreciated over three to 50
years, goodwill is amortized over 25 to 30 years, software is amortized
over three years and covenants not-to-compete are amortized over two to
five years on a straight-line basis.
12
IRON MOUNTAIN INCORPORATED
NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
(P) Pro forma adjustments to interest expense consist of the following (in
millions):
YEAR ENDED
DECEMBER 31, 1999
------------------
ACQUISITION ADJUSTMENTS:
Reverse interest expense on debt of the acquired companies
retired or not assumed ...................................... $ (0.8)
Record interest expense on the additional debt used to finance
the 1999 acquisitions assumed to be financed under our
revolving credit facility ................................... 2.4
FINANCING ADJUSTMENTS:
Reverse interest expense on our revolving credit facility debt
assumed to be retired with the net proceeds from the 1999
debt offering and a portion of the net proceeds from the
1999 equity offering .............................................. $(4.5)
Record interest expense related to our 1999 debt offering,
including amortization of deferred financing fees ................. 3.8
--------
Total Acquisition and Financing Adjustments ................... $ 0.9
=======
(Q) To adjust the provision for income taxes to a 40% rate on domestic pro forma
income before nondeductible goodwill amortization and other nondeductible
expenses, and adjust to foreign statutory rates on foreign pro forma
income before nondeductible goodwill.
(R) To record the 49.9% minority interest in the net income of Memogarde,
Stortext, Sistemas de Archivo Corporativo and Iron Mountain Europe.
(S) To adjust the pro forma weighted average common shares outstanding as if
the 1999 Pro Forma Acquisitions, the 1999 equity offering, and the 1999
debt offering had occurred on January 1, 1999. The number of shares of
common stock issued and repurchased, and the adjustments, are as follows
(in thousands):
Total
Number of
Shares Issued Year Ended
TRANSACTIONS: or Repurchased December 31, 1999
-------------- -----------------
1999 equity offering ........... 5,750 2,063
Data Base ...................... 1,477 393
Repurchase of Data Base shares.. (1,477) (393)
--------- ---------
Net shares issued .......... 5,750 2,063
========= =========
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SIGNATURES
Pursuant to the requirements 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
(Registrant)
AUGUST 15, 2000 By: /S/ JEAN A. BUA
(date) ----------------------------------
Jean A. Bua
Vice President and Corporate Controller
(Principal Accounting Officer)
14