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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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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): March 23, 2001
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)
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ITEM 5. OTHER EVENTS
On March 23, 2001, the Company announced a proposed underwritten public
offering of $200.0 million in aggregate principal amount of Senior Subordinated
Notes due 2013. The Company intends to use the net proceeds from such offering
to fund its offer to purchase and consent solicitation (which was separately
announced the same day) relating to its outstanding 11 1/8% Senior Subordinated
Notes due 2006 (the "11 1/8% Notes"), to repay outstanding borrowings under the
Company's revolving credit facility and for general corporate purposes,
including future acquisitions. Copies of the Company's press releases regarding
these events are being filed as exhibits to this report.
The public debt offering will be made only by means of a prospectus. This
Form 8-K shall not constitute an offer to sell or a solicitation of an offer to
buy any securities.
The tender offer and consent solicitation will be made only by means of the
Company's Offer to Purchase and Consent Solicitation Statement dated March 23,
2001 and related materials. This Form 8-K shall not constitute an offer to
purchase or consent solicitation with regard to the 11 1/8% Notes.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS
(b) Pro Forma Financial Information
The following represents the unaudited pro forma condensed consolidated
statement of operations (the "pro forma statement") for certain businesses
acquired by the Company in 2000 and certain other transactions. Pro forma effect
has been given to two acquired businesses for which the Company has previously
filed audited financial statements and has also been given to certain other
acquired businesses which are not significant in accordance with Rule 3-05 of
Regulation S-X. The Company has not given pro forma effect in the accompanying
pro forma statement for the fourteen other businesses acquired in 2000 and in
2001 because they are not material.
The primary purpose of this Form 8-K is to update previously filed pro forma
information with the Company's results of operations for the year ended
December 31, 2000. Other than the three interest rate swaps the Company entered
into in December 2000 and January 2001 and the acquisition of two businesses,
Document Services, Inc., effective October 1, 2000, and FACS Records Centre,
effective December 31, 2000, all other acquisitions and financing transactions
included in the accompanying pro forma statement have been previously reported.
PAGE
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Pro Forma Statement for the
Year Ended December 31, 2000.............................. 3
Notes to Pro Forma Statement................................ 4-7
(c) Exhibits
99.1 The Company's press release, dated March 23, 2001, regarding proposed
public debt offering.
99.2 The Company's press release, dated March 23, 2001, regarding tender
offer and consent solicitation relating to the 11 1/8% Notes.
IRON MOUNTAIN INCORPORATED
PRO FORMA STATEMENT
The following unaudited pro forma condensed consolidated statement of
operations (the "pro forma statement") for the year ended December 31, 2000 has
been prepared based upon the historical condensed consolidated statement of
operations of the Company. The pro forma statement gives effect to: (a) the
acquisitions of Pierce Leahy Corp. ("Pierce Leahy"), Data Storage Center, Inc.
("DSC"), Document Services, Inc. ("DSI") and FACS Records Centre ("FACS")
(collectively the "2000 Acquisitions"); (b) an amendment to the Company's credit
facility effective August 14, 2000 to include two tranches of term debt
totalling $350.0 million and a revolving credit facility of $400.0 million; and
(c) interest rate swap agreements entered into in December 2000 and
January 2001, as if each had occurred as of January 1, 2000. Pro forma
adjustments are described in the accompanying notes.
The pro forma statement does not include the impact of the Company's
proposed public offering of $200.0 million of Senior Subordinated Notes due 2013
(the "Debt Offering"). If the Company successfully completes the Debt Offering,
the Company intends to use the net proceeds from the Debt Offering to fund the
offer to purchase and consent solicitation relating to the Company's 11 1/8%
Senior Subordinated Notes due 2006 (the "11 1/8% Notes"), to repay outstanding
borrowings under the Company's revolving credit facility and for general
corporate purposes. Assuming: (a) an interest rate of 8 3/4% per annum on notes
issued in the Debt Offering; (b) the Company retires all of the 11 1/8% Notes at
a price of 107.157; and (c) the Company repays the revolving credit facility
with the net proceeds of the Debt Offering, the impact on the pro forma
statement would be an increase in interest expense and net loss before
extraordinary item of $2.9 million and $1.7 million, respectively. The impact on
the Company's balance sheet would be an increase in cash of $44.6 million, an
increase in deferred financing costs of $5.5 million, a net increase in
long-term debt of $64.5 million and a net decrease in shareholders' equity of
$4.6 million.
In addition, the Company would record, in the quarter in which the tender
offer and consent solicitation is completed, an extraordinary charge of
$4.6 million (after a tax benefit of approximately $3.2 million) from the early
retirement of debt. This pretax extraordinary charge of $7.8 million would
consist of a redemption premium of $9.3 million offset by the write-off of
unamortized fair value adjustment of $1.5 million.
The impact to the pro forma statement of a 1/8% change in the interest rate
on the Debt Offering would be a $0.3 million change in interest expense and a
$0.1 million change in the net loss before extraordinary item. The impact to the
pro forma statement of a $25.0 million change in the principal amount of the
Debt Offering would be a $0.8 million change in interest expense and a
$0.5 million change in the net loss before extraordinary item.
The pro forma statement does not include results of operations, or pro forma
adjustments, for the eight acquisitions completed in 2000 and the six
acquisitions completed in 2001 through March 1, 2001. The aggregate pro forma
revenues of those 2000 and 2001 acquisitions not included in the pro forma
statement were $3.8 million and $19.3 million, respectively.
The pro forma statement does not give effect to estimated annual net cost
savings of approximately $15 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 statement does 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
the Company's results of operations. Depending upon management's plans and the
nature and timing of the costs, the costs may be accounted for as operating
expenses in the period incurred or as capital expenditures. Furthermore, the pro
forma statement does not give effect to all cost savings or incremental costs
that may occur as a result of the integration and consolidation of the 2000
Acquisitions.
1
IRON MOUNTAIN INCORPORATED
PRO FORMA STATEMENT (CONTINUED)
The Company has accounted for its acquisitions using the purchase method of
accounting. The operating results of each acquisition have been included in the
historical consolidated results from the acquisition date.
The pro forma statement does not necessarily indicate the actual results of
operations that the Company would have reported if the pro forma transactions
described above had occurred as of January 1, 2000, nor does it necessarily
indicate the results of future operations. In the opinion of the Company's
management, all adjustments and disclosures necessary to fairly present this pro
forma statement have been made. You should read the pro forma financial
information in conjunction with the Company's Annual Report on Form 10-K for the
year ended December 31, 2000 previously filed with the SEC.
2
IRON MOUNTAIN INCORPORATED
PRO FORMA STATEMENT
FOR THE YEAR ENDED DECEMBER 31, 2000
(IN THOUSANDS, EXCEPT PER SHARE DATA)
HISTORICAL(1)
--------------------------------------------------------------- PRO FORMA
IRON PIERCE PRO FORMA IRON
MOUNTAIN LEAHY DSC DSI FACS ADJUSTMENTS(4) MOUNTAIN
--------- -------- ----------- ----------- ------------ -------------- ----------
Revenues:
Storage...................... $ 585,664 $ 17,476 $ 4,265 $ -- $ 6,689 $ -- $ 614,094
Service and Storage Material
Sales...................... 400,707 12,701 2,226 14,909 4,584 -- 435,127
--------- -------- ------- ------- -------- ------- ----------
Total Revenues............. 986,371 30,177 6,491 14,909 11,273 -- 1,049,221
Operating Expenses:
Cost of Sales (Excluding
Depreciation).............. 482,771 18,189 2,554 8,068 4,947 (2,968)(A) 513,561
Selling, General and
Administrative............. 246,559 3,962 2,029 3,675 3,191 2,575 (B) 261,991
Depreciation and
Amortization............... 126,810 3,708 475 685 1,732 807 (C) 134,217
Foreign Currency Exchange.... -- 147 -- -- -- (147)(D) --
Stock Option Compensation
Expense.................... 15,110 -- -- -- -- -- 15,110
Merger-related Expenses(2)... 9,133 4,438 -- 3,707 2,182 (9,121)(E) 10,339
--------- -------- ------- ------- -------- ------- ----------
Total Operating Expenses... 880,383 30,444 5,058 16,135 12,052 (8,854) 935,218
--------- -------- ------- ------- -------- ------- ----------
Operating Income (Loss)........ 105,988 (267) 1,433 (1,226) (779) 8,854 114,003
Interest (Income) Expense,
net.......................... 117,975 4,724 112 (3) 3,545 2,990 (F) 129,343
Other Income (Expense), net.... (6,045) -- -- 1,075 -- (147)(G) (5,117)
--------- -------- ------- ------- -------- ------- ----------
Income (Loss) Before Provision
(Benefit) for Income Taxes
and Minority Interest........ (18,032) (4,991) 1,321 (148) (4,324) 5,717 (20,457)
Provision (Benefit) for Income
Taxes........................ 9,125 (472) 471 (55) (1,503) 3,138 (H) 10,704
Minority Interests in Losses of
Subsidiaries................. (2,224) -- -- -- -- -- (2,224)
--------- -------- ------- ------- -------- ------- ----------
Income (Loss) Before
Extraordinary Item........... $ (24,933) $ (4,519) $ 850 $ (93) $ (2,821) $ 2,579 $ (28,937)
========= ======== ======= ======= ======== ======= ==========
Loss Before Extraordinary Item
--
Basic and Diluted............ $ (.47) $ (.53)
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Weighted Average Common Shares
Outstanding--Basic and
Diluted...................... 53,125 1,595 (I) 54,720
========= ======= ==========
EBITDA(3)...................... $ 257,041 $ 8,026 $ 1,908 $ 3,166 $ 3,135 $ 393 $ 273,669
========= ======== ======= ======= ======== ======= ==========
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(1) Represents the historical results of operations of the acquired companies
prior to the date of acquisition.
(2) The merger-related expenses of Iron Mountain are primarily those expenses
directly related to its merger with Pierce Leahy that cannot be capitalized
and include severance and pay-to-stay payments, costs of exiting certain
facilities, system conversion costs and other transaction-related costs. The
merger-related expenses for Pierce Leahy, DSI and FACS, are those expenses
that they each incurred which are directly related to their acquisition by
the Company that cannot be capitalized and consist primarily of a
compensation charge due to the acceleration of vesting of certain stock
options, severance and pay-to-stay payments, professional fees and other
transaction related costs.
(3) Represents earnings before interest, taxes, depreciation, amortization,
extraordinary items, other income (expense), foreign currency exchange,
merger-related expenses and stock option compensation expense.
(4) Does not include the pro forma effects of the Debt Offering or the use of
proceeds from such offering.
The accompanying notes are an integral part of this pro forma statement.
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IRON MOUNTAIN INCORPORATED
NOTES TO PRO FORMA STATEMENT
2000 ACQUISITIONS
PIERCE LEAHY ACQUISITION
On February 1, 2000, the Company completed its merger with Pierce Leahy for
total consideration of $1.0 billion, which consisted of common stock, options to
acquire common stock and the assumption of debt.
DSC ACQUISITION
On May 1, 2000, the Company acquired certain assets and assumed certain
liabilities of DSC for total consideration of $54.3 million. The Company
acquired substantially all of the operating assets and liabilities of DSC
excluding cash, real estate and long-term debt. The Company did not acquire or
assume any assets or liabilities associated with DSC's Pensacola, Florida
records management business.
DSI ACQUISITION
Effective October 1, 2000, the Company acquired all of the outstanding
capital stock of DSI, a confidential destruction business, for $27.7 million.
FACS ACQUISITION
Effective December 31, 2000, the Company acquired all of the outstanding
capital stock of FACS for $36.0 million.
PURCHASE PRICE ALLOCATION
The aggregate consideration paid for the 2000 Acquisitions was
$1.2 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 preliminary allocation of the aggregate purchase price
of the 2000 Acquisitions 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 2000 Acquisitions will not differ
materially from the following preliminary estimated amounts (in millions):
2000 Acquisitions:
Current Assets............................................ $ 78.3
Property, Plant and Equipment............................. 330.2
Goodwill.................................................. 841.1
Other Long-term Assets.................................... 19.8
Current Liabilities....................................... (96.6)
Deferred Income Taxes..................................... (14.2)
Other Long-term Liabilities............................... (4.9)
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Total Purchase Price of 2000 Acquisitions............... $1,153.7
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IRON MOUNTAIN INCORPORATED
NOTES TO PRO FORMA STATEMENT (CONTINUED)
FINANCING OF PURCHASE PRICE
The Company has assumed the 2000 Acquisitions to be financed with common
stock, options to purchase common stock, fair value of debt assumed and the
amended credit facility as follows (in millions):
2000 Acquisitions:
Fair Value of Common Stock Issued......................... $ 421.2
Fair Value of Options Granted............................. 25.3
Fair Value of Debt Assumed................................ 584.9
Proceeds from Amended Credit Facility..................... 122.3
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Purchase Price of 2000 Acquisitions................... $1,153.7
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AMENDED CREDIT FACILITY
On August 14, 2000, the Company entered into an amended and restated credit
facility. The amended credit facility replaced the Company's prior revolving
credit facility, increased the aggregate principal amount available to
$750.0 million and includes a $400.0 million revolving credit facility and two
tranches of term debt totalling $350.0 million (the "Tranche A Term Loan" and
the "Tranche B Term Loan").
In conjunction with the refinancing of the Company's prior revolving credit
facility, the Company reported a loss on early extinguishment of debt of
$2.9 million (net of tax benefit of $1.9 million) in the third quarter of 2000.
The pro forma statement does not reflect this extraordinary charge.
INTEREST RATE SWAP AGREEMENTS
In December 2000 and January 2001, the Company entered into interest rate
swap agreements for the interest payments on an aggregate principal amount of
$195.5 million of the Tranche B Term Loan, thereby fixing the weighted average
interest rate thereon at 8.43%.
Also in January 2001, the Company entered into an interest rate swap
agreement for $47.5 million of principal payments related to certain operating
leases, thereby fixing the variable interest component of these lease
obligations.
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IRON MOUNTAIN INCORPORATED
NOTES TO PRO FORMA STATEMENT (CONTINUED)
PRO FORMA ADJUSTMENTS
The accompanying pro forma statement has been prepared as if each of the
following had occurred as of January 1, 2000: (a) the Company completed the 2000
Acquisitions; (b) the Company signed the amended credit facility; and (c) the
Company entered into the interest rate swap agreements. The following pro forma
adjustments reflect these transactions (in millions):
(A) Cost of Sales
To adjust rent expense to new lease rates negotiated in
connection with the DSC acquisition......................... $ 0.1
To conform to the Company's policies for fixed assets
capitalization for the acquired companies................... (0.1)
To conform the classification of cost of sales and selling,
general and administrative expenses to the Company's
classification.............................................. (2.6)
To reflect the impact of interest rate swap agreements on
certain operating leases.................................... (0.4)
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$ (3.0)
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(B) Selling, General and Administrative
To conform the classification of cost of sales and selling,
general and administrative expenses to the Company's
classification.
(C) Depreciation and Amortization
To adjust depreciation and amortization expense based on the
fair value of the assets acquired and the estimated
remaining useful lives. 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.
(D) Foreign Currency Exchange
To conform Pierce Leahy's classification of foreign currency
exchange gains and losses to the Company's classification.
(E) Merger-related Expenses
To reverse expenses incurred by Pierce Leahy that are
directly attributable to the acquisition. These expenses
consist of a compensation charge due to the acceleration of
certain stock options, and financial advisor, legal,
accounting and SEC fees..................................... $ 3.2
To reverse expenses incurred by DSI that are directly
attributable to the acquisition. These expenses consist of
the acceleration of vesting of certain stock options,
severance, financial advisor and legal fees, and other
transaction costs........................................... 3.7
To reverse expenses incurred by FACS that are directly
related to the acquisition. These expenses consist of
severance and pay-to-stay payments.......................... 2.2
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$ 9.1
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IRON MOUNTAIN INCORPORATED
NOTES TO PRO FORMA STATEMENT (CONTINUED)
(F) Interest (Income) Expense, net
Record interest expense on debt incurred under the amended
credit facility (including commitment fees and amortization
of deferred financing costs) at a weighted average interest
rate of 9.0%................................................ $ 33.9
Reverse interest expense on the revolving credit facility,
net of interest income on excess cash, assumed to be repaid
with the amounts borrowed under the amended credit facility
(including commitment fees and amortization of deferred
financing costs)............................................ (24.4)
Reverse historical interest expense on debt of acquired
companies retired or not assumed............................ (4.9)
Record the amortization related to the fair value adjustment
of Pierce Leahy debt assumed net of adjustment to
amortization of deferred financing costs.................... 0.1
Record impact of interest rate swap agreements related to
the Tranche B Term Loan..................................... (1.7)
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Total....................................................... $ 3.0
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The impact of a 1/8% change in the interest rate on pro forma borrowings
under the amended credit facility, giving effect to the swap agreements, for the
year ended December 31, 2000 is $0.2 million.
(G) Other Income (Expense), net
To conform Pierce Leahy's classification of foreign currency
exchange gains and losses to the Company's classification.
(H) Provision for Income Taxes
To adjust the provision for income taxes to a 40.85% rate on
domestic pro forma income before nondeductible goodwill
amortization and other nondeductible expenses, and to adjust
to foreign statutory rates on foreign pro forma income
(loss) before nondeductible goodwill.
(I) Weighted Average Common Stock Outstanding-Basic and Diluted
To adjust the pro forma weighted average common shares
outstanding as if the merger with Pierce Leahy had occurred
on January 1, 2000.
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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)
By: /s/ JEAN A. BUA
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Jean A. Bua
VICE PRESIDENT AND CORPORATE CONTROLLER
(PRINCIPAL ACCOUNTING OFFICER)
March 23, 2001
8