UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
[X] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934
For the Quarterly Period Ended June 30, 2001
or
[ ] 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 Registrant as Specified in its Charter)
PENNSYLVANIA 23-2588479
------------ ----------
(State or Other Jurisdiction of (I.R.S. Employer Identification No.)
Incorporation or Organization)
745 ATLANTIC AVENUE, BOSTON, MA 02111
(Address of Principal Executive Offices, Including Zip Code)
(617) 535-4766
(Registrant's Telephone Number, Including Area Code)
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 X NO
---- -----
Number of shares of the registrant's Common Stock outstanding as of August 3,
2001: 55,846,765.
IRON MOUNTAIN INCORPORATED
INDEX
PAGE
PART I. FINANCIAL INFORMATION
Item 1. Unaudited Condensed Consolidated Financial Statements
Condensed Consolidated Balance Sheets at June 30, 2001 and
December 31, 2000 (Unaudited) ................................................ 3
Condensed Consolidated Statements of Operations for the Three Months Ended
June 30, 2001 and 2000 (Unaudited) ........................................... 4
Condensed Consolidated Statements of Operations for the Six Months Ended
June 30, 2001 and 2000 (Unaudited) ........................................... 5
Condensed Consolidated Statements of Cash Flows for the Six Months Ended
June 30, 2001 and 2000 (Unaudited) ........................................... 6
Notes to Condensed Consolidated Financial Statements (Unaudited) .................. 7-21
Item 2. Management's Discussion and Analysis of Financial Condition and Results of
Operations ................................................................... 22-27
Item 3. Quantitative and Qualitative Disclosures About Market Risk ........................ 28
PART II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security-Holders ............................... 28
Item 6. Exhibits and Reports on Form 8-K .................................................. 29
Signature ......................................................................... 30
2
PART I. FINANCIAL INFORMATION
ITEM 1. UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
IRON MOUNTAIN INCORPORATED
CONDENSED CONSOLIDATED BALANCE SHEETS
(In Thousands)
(Unaudited)
JUNE 30, DECEMBER 31,
2001 2000
---- ----
ASSETS
Current Assets:
Cash and cash equivalents ...................... $ 36,837 $ 6,200
Accounts receivable (less allowances of $18,056
and $15,989 respectively) .................... 215,531 176,442
Deferred income taxes .......................... 30,642 30,990
Prepaid expenses and other ..................... 37,828 23,036
----------- -----------
Total Current Assets ..................... 320,838 236,668
Property, Plant and Equipment:
Property, plant and equipment .................. 1,080,348 984,939
Less: Accumulated depreciation ................. (194,293) (152,545)
----------- -----------
Property, Plant and Equipment, net ....... 886,055 832,394
Other Assets, net:
Goodwill ....................................... 1,544,875 1,525,630
Customer acquisition costs ..................... 31,391 27,692
Deferred financing costs ....................... 19,920 14,534
Other .......................................... 20,349 22,178
----------- -----------
Total Other Assets, net .................. 1,616,535 1,590,034
----------- -----------
Total Assets ............................. $ 2,823,428 $ 2,659,096
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Current portion of long-term debt .............. $ 31,395 $ 40,789
Accounts payable ............................... 48,822 42,531
Accrued expenses ............................... 158,764 153,291
Deferred income ................................ 78,738 53,884
Other current liabilities ...................... 23,342 23,558
----------- -----------
Total Current Liabilities ................ 341,061 314,053
Long-term Debt, net of current portion ............ 1,420,946 1,314,342
Other Long-term Liabilities ....................... 9,687 7,920
Deferred Rent ..................................... 17,139 16,346
Deferred Income Taxes ............................. 44,142 38,948
Minority Interest ................................. 67,976 43,029
Shareholders' Equity:
Common stock ................................... 558 553
Additional paid-in capital ..................... 998,628 990,854
Accumulated deficit ............................ (66,185) (59,383)
Accumulated other comprehensive items .......... (10,524) (7,566)
----------- -----------
Total Shareholders' Equity ............... 922,477 924,458
----------- -----------
Total Liabilities and Shareholders' Equity $ 2,823,428 $ 2,659,096
=========== ===========
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED FINANCIAL
STATEMENTS.
3
IRON MOUNTAIN INCORPORATED
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In Thousands, except Per Share Data)
(Unaudited)
THREE MONTHS ENDED
JUNE 30,
----------------------
2001 2000
---- ----
Revenues:
Storage .......................................................... $171,891 $148,445
Service and storage material sales ............................... 121,443 104,120
--------- ---------
Total Revenues ............................................. 293,334 252,565
Operating Expenses:
Cost of sales (excluding depreciation) ........................... 139,030 121,973
Selling, general and administrative .............................. 78,686 64,724
Depreciation and amortization .................................... 37,788 31,644
Stock option compensation expense ................................ -- 14,939
Merger-related expenses .......................................... 377 3,875
--------- ---------
Total Operating Expenses ................................... 255,881 237,155
--------- ---------
Operating Income .................................................... 37,453 15,410
Interest Expense .................................................... 34,043 30,245
Other Income (Expense) .............................................. 7,015 (3,699)
--------- ---------
Income (Loss) Before Provision for Income Taxes and
Minority Interest ...................................... 10,425 (18,534)
Provision for Income Taxes .......................................... 16,091 9,847
Minority Interest in Losses of Subsidiaries ......................... (700) (136)
--------- ---------
Loss before Extraordinary Item ............................. (4,966) (28,245)
Extraordinary Charge from Early Extinguishment of Debt (net of tax
benefit of $3,300) ............................................... (4,780) --
--------- ---------
Net Loss ................................................... $(9,746) $(28,245)
========= =========
Net Loss per Common Share - Basic and Diluted:
Loss before Extraordinary Item ................................... $(0.09) $(0.52)
Extraordinary Charge from Early Extinguishment of Debt ........... (0.09) --
--------- ---------
Net Loss per Share - Basic and Diluted ..................... $(0.18) $(0.52)
========= =========
Weighted Average Common Shares Outstanding - Basic and Diluted ...... 55,651 54,641
========= =========
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED FINANCIAL
STATEMENTS.
4
IRON MOUNTAIN INCORPORATED
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In Thousands, except Per Share Data)
(Unaudited)
SIX MONTHS ENDED
JUNE 30,
----------------------
2001 2000
---- ----
Revenues:
Storage .......................................................... $339,756 $273,384
Service and storage material sales ............................... 237,500 191,318
--------- ---------
Total Revenues ............................................. 577,256 464,702
Operating Expenses:
Cost of sales (excluding depreciation) ........................... 278,850 226,431
Selling, general and administrative .............................. 149,003 118,181
Depreciation and amortization .................................... 73,506 57,947
Stock option compensation expense ................................ -- 14,939
Merger-related expenses .......................................... 1,178 4,391
--------- ---------
Total Operating Expenses ................................... 502,537 421,889
--------- ---------
Operating Income .................................................... 74,719 42,813
Interest Expense .................................................... 68,030 54,028
Other Expense ....................................................... (2,172) (4,480)
--------- ---------
Income (Loss) Before Provision for Income Taxes and
Minority Interest ...................................... 4,517 (15,695)
Provision for Income Taxes .......................................... 7,254 18,376
Minority Interest in Losses of Subsidiaries ......................... (970) (443)
--------- ---------
Loss before Extraordinary Item ............................. (1,767) (33,628)
Extraordinary Charge from Early Extinguishment of Debt (net of tax
benefit of $3,300) ............................................... (4,780) --
--------- ---------
Net Loss ................................................... $(6,547) $(33,628)
========= =========
Net Loss per Common Share - Basic and Diluted:
Loss before Extraordinary Item ................................... $(0.03) $(0.66)
Extraordinary Charge from Early Extinguishment of Debt ........... (0.09) --
--------- ---------
Net Loss per Share - Basic and Diluted ..................... $(0.12) $(0.66)
========= =========
Weighted Average Common Shares Outstanding - Basic and Diluted ...... 55,540 51,292
========= =========
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED FINANCIAL
STATEMENTS.
5
IRON MOUNTAIN INCORPORATED
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In Thousands)
(Unaudited)
SIX MONTHS ENDED
JUNE 30,
-------------------------
2001 2000
---- ----
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Loss .................................................................. $ (6,547) $ (33,628)
Adjustments to Reconcile Net Loss before Extraordinary Item:
Extraordinary Charge from Early Extinguishment of Debt ................. 4,780 --
--------- ---------
Loss before Extraordinary Item ............................................ (1,767) (33,628)
Adjustments to Reconcile Net Loss before Extraordinary Item to Cash
Provided by Operating Activities:
Minority Interests in Losses of Subsidiaries ........................... (970) (443)
Depreciation and Amortization .......................................... 73,506 57,947
Amortization of Deferred Financing Costs and Bond Discount ............. 2,361 1,478
Provision for Doubtful Accounts ........................................ 6,172 2,810
Stock Option Compensation Expense ...................................... -- 14,939
Foreign Currency Loss .................................................. 2,172 4,480
Other, Net ............................................................. (39) 754
Changes in Assets and Liabilities (Exclusive of Acquisitions):
Accounts Receivable .................................................... (19,192) (6,817)
Prepaid Expenses and Other Current Assets .............................. (2,679) 6,663
Deferred Income Taxes .................................................. 8,296 20,348
Other Assets ........................................................... (206) 328
Accounts Payable ....................................................... (2,135) (14,547)
Accrued Expenses ....................................................... (2,009) 19,476
Deferred Income ........................................................ (1,488) (1,421)
Other Current Liabilities .............................................. 56 --
Deferred Rent .......................................................... 785 1,079
Other Long-term Liabilities ............................................ (55) (375)
--------- ---------
Cash Flows Provided by Operating Activities ...................... 62,808 73,071
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital Expenditures ...................................................... (89,975) (62,766)
Cash Paid for Acquisitions, net of cash acquired .......................... (44,769) (71,099)
Investment in Convertible Preferred Stock ................................. -- (6,500)
Additions to Customer Acquisition Costs ................................... (5,832) (5,101)
Other, Net ................................................................ 632 (543)
--------- ---------
Cash Flows Used in Investing Activities .......................... (139,944) (146,009)
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayment of Debt ......................................................... (112,349) (295,093)
Early Retirement of Senior Subordinated Notes ............................. (133,726) --
Proceeds from Borrowings .................................................. 104,819 361,831
Net Proceeds from Sale of Senior Subordinated Notes ....................... 218,590 --
Equity Contributions from Minority Shareholders ........................... 24,744 --
Debt Financing from (Repayment to) Minority Shareholders .................. (271) 9,479
Proceeds from Exercise of Stock Options ................................... 6,145 3,862
Financing and Stock Issuance Costs ........................................ (185) (3,068)
--------- ---------
Cash Flows Provided by Financing Activities ...................... 107,767 77,011
Effect of Exchange Rates on Cash and Cash Equivalents ......................... 6 444
--------- ---------
Increase in Cash and Cash Equivalents ......................................... 30,637 4,517
Cash and Cash Equivalents, Beginning of Period ................................ 6,200 3,830
--------- ---------
Cash and Cash Equivalents, End of Period ...................................... $ 36,837 $ 8,347
========= =========
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED FINANCIAL
STATEMENTS.
6
IRON MOUNTAIN INCORPORATED
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In Thousands)
(Unaudited)
(1) GENERAL
The interim condensed consolidated financial statements presented herein have
been prepared by Iron Mountain Incorporated ("Iron Mountain" or the "Company")
without audit and, in the opinion of management, reflect all adjustments of a
normal recurring nature necessary for a fair presentation. Interim results are
not necessarily indicative of results for a full year.
The condensed consolidated balance sheet presented as of December 31, 2000 has
been derived from the consolidated financial statements that have been audited
by the Company's independent public accountants. The unaudited condensed
consolidated financial statements have been prepared pursuant to the rules and
regulations of the Securities and Exchange Commission. Certain information and
footnote disclosures normally included in the annual financial statements
prepared in accordance with generally accepted accounting principles have been
omitted pursuant to those rules and regulations, but the Company believes that
the disclosures are adequate to make the information presented not misleading.
The condensed consolidated financial statements and notes included herein should
be read in conjunction with the consolidated financial statements and notes
included in the Company's Annual Report on Form 10-K for the year ended December
31, 2000.
Certain reclassifications have been made to the 2000 financial statements to
conform to the 2001 presentation.
(2) COMPREHENSIVE LOSS
Statement of Financial Accounting Standards ("SFAS") No. 130, "Reporting
Comprehensive Income," requires presentation of the components of comprehensive
income (loss), including the changes in equity from non-owner sources such as
unrealized gains (losses) on securities and foreign currency translation
adjustments. The Company's total comprehensive loss is as follows:
THREE MONTHS ENDED JUNE 30, SIX MONTHS ENDED JUNE 30,
-------------------------- -------------------------
2001 2000 2001 2000
---- ---- ---- ----
Comprehensive Loss:
Net Loss ...................................... $ (9,746) $(28,245) $ (6,547) $(33,628)
Other Comprehensive Loss:
Foreign Currency Translation Adjustment ... (262) (2,598) (1,050) (2,477)
Transition Adjustment Charge .............. -- -- (214) --
Unrealized Gain (Loss) on Hedging Contracts 2,346 -- (1,694) --
-------- -------- -------- --------
Comprehensive Loss ............................ $ (7,662) $(30,843) $ (9,505) $(36,105)
======== ======== ======== ========
7
IRON MOUNTAIN INCORPORATED
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In Thousands)
(Unaudited)
(Continued)
(3) DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES
The Company adopted the provisions of SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities," on January 1, 2001. The adoption of SFAS
No. 133 on January 1, 2001 resulted in the recognition of a derivative liability
and a corresponding transition adjustment charge to accumulated other
comprehensive items of approximately $214.
The Company has entered into three interest rate swap agreements, which are
derivatives as defined by SFAS No. 133 and designated as cash flow hedges. These
swap agreements hedge interest rate risk on certain amounts of its Tranche B
debt as well as certain variable operating lease commitments. For all qualifying
and highly effective cash flow hedges, the changes in the fair value of the
derivatives are recorded in other comprehensive income. As a result of these
interest rate swap agreements, the Company has recorded a derivative liability
of and a corresponding cumulative charge to accumulated other comprehensive
items of $1,908 at June 30, 2001.
For the three and six months ended June 30, 2001, the Company recorded net
losses of $397 and $456 resulting from interest rate swap settlements in
interest, and $125 and $134 in rent expense, respectively. All interest rate
swap agreements were determined to be highly effective whereby no
ineffectiveness was recorded in earnings.
(4) ACQUISITIONS
During the six months ended June 30, 2001, the Company purchased substantially
all of the assets, and assumed certain liabilities, of ten businesses.
Each of the 2001 acquisitions and all 12 of the records and information
management services businesses acquired during 2000 were accounted for using the
purchase method of accounting and, accordingly, the results of operations for
each acquisition have been included in the consolidated results of the Company
from their respective acquisition dates. In connection with certain 2001 and
2000 acquisitions, related real estate was also purchased. The aggregate
purchase price for the 2001 acquisitions exceeded the underlying fair value of
the net assets acquired by $53,169 which has been assigned to goodwill and is
being amortized over 25 to 30 years.
In connection with the 2001 and 2000 acquisitions, the Company has undertaken
certain restructurings of the acquired businesses. 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. These restructuring activities were recorded as costs of
the acquisitions and were provided in accordance with Emerging Issues Task Force
Issue No. 95-3, "Recognition of Liabilities in Connection with a Purchase
Business Combination." The Company finalizes its restructuring plans for each
business no later than one year from the date of acquisition. Unresolved matters
primarily include completion of planned abandonments of facilities and employee
severance costs for certain 2001 and 2000 acquisitions.
8
IRON MOUNTAIN INCORPORATED
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In Thousands)
(Unaudited)
(Continued)
(4) ACQUISITIONS (CONTINUED)
The following is a summary of reserves related to such restructuring activities:
JUNE 30, DECEMBER 31,
2001 2000
---- ----
Reserves, Beginning Balance ......................................... $ 28,514 $ 9,340
Reserves Established ................................................ 1,162 31,409
Expenditures ........................................................ (4,722) (7,539)
Adjustments to Goodwill ............................................. (1,335) (4,696)
-------- ---------
Reserves, Ending Balance ............................................ $ 23,619 $ 28,514
======== =========
At June 30, 2001, the restructuring reserves related to acquisitions consisted
of lease losses on abandoned facilities ($15,180), severance costs for
approximately 11 people ($1,293) and other exit costs ($7,146). These accruals
are expected to be used within one year of the finalization of the restructuring
plans except for lease losses of $8,883 and severance contracts of approximately
$615, all of which are based on contracts that extend beyond one year.
(5) LONG-TERM DEBT
Long-term debt consists of the following:
JUNE 30, 2001 DECEMBER 31, 2000
------------- -----------------
CARRYING FAIR CARRYING FAIR
AMOUNT VALUE AMOUNT VALUE
-------- ----- -------- -----
Revolving Credit Facility due 2005 .................................. $ -- $ -- $ 4,000 $ 4,000
Tranche A Term Loan due 2005 ........................................ 150,000 150,000 150,000 150,000
Tranche B Term Loan due 2006 ........................................ 199,250 199,250 199,750 199,750
11 1/8% Senior Subordinated Notes due 2006 (the "11-1/8% notes")..... 5,462 5,777 131,517 136,500
10 1/8% Senior Subordinated Notes due 2006 (the "10-1/8% notes")..... 165,000 174,500 165,000 170,800
9 1/8% Senior Subordinated Notes due 2007 (the "9-1/8% notes")...... 114,660 125,400 114,216 118,800
8 3/4% Senior Subordinated Notes due 2009 (the "8-3/4% notes")....... 249,667 255,000 249,646 245,600
8 1/4% Senior Subordinated Notes due 2011 (the "8-1/4% notes")....... 149,557 148,900 149,535 141,400
8 5/8% Senior Subordinated Notes due 2013 (the "8-5/8% notes")....... 225,000 227,000 -- --
8 1/8% Senior Subordinated Notes due 2008 (the "Subsidiary notes")... 121,804 134,300 120,850 128,600
Real Estate Mortgage ................................................ 22,187 22,187 20,457 20,457
Seller Notes ........................................................ 12,307 12,307 13,971 13,971
Other ............................................................... 37,447 37,447 36,189 36,189
----------- -----------
Long-term debt ...................................................... 1,452,341 1,355,131
Less current portion ................................................ (31,395) (40,789)
----------- -----------
Long-term debt, net of current portion .............................. $ 1,420,946 $ 1,314,342
=========== ===========
9
IRON MOUNTAIN INCORPORATED
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In Thousands)
(Unaudited)
(Continued)
(5) LONG-TERM DEBT (CONTINUED)
The estimated fair values for the long-term debt are based on the borrowing
rates available to the Company at June 30, 2001 and December 31, 2000 for loans
with similar terms and average maturities. The fair values of the 11-1/8% notes,
10-1/8% notes, 9-1/8% notes, 8-3/4% notes, 8-1/4% notes, 8-5/8% notes
(collectively, the "Parent Notes") and the Subsidiary notes are based on the
quoted market prices for those notes on June 30, 2001 and December 31, 2000.
In April 2001, Iron Mountain completed an underwritten public offering of
$225,000 in aggregate principal amount of 8-5/8% Senior Subordinated Notes due
2013. The 8-5/8% notes were issued at a price to investors of 100% of par. The
net proceeds to the Company, $218,590 after paying the underwriters' discounts
and commissions and related expenses, were used to fund the Company's offer to
purchase and consent solicitation relating to its outstanding 11-1/8% Senior
Subordinated Notes due 2006, to repay outstanding borrowings under the Company's
revolving credit facility and for general corporate purposes, including
acquisitions.
In April 2001, the Company received and accepted tenders for $124,588 of the
outstanding principal amount of its 11-1/8% notes. The Company recorded an
extraordinary charge of $4,780 (net of tax benefit of $3,300) in the second
quarter related to the early retirement of the 11-1/8% notes. The Company
redeemed the remaining $5,412 of outstanding principal amount of the 11-1/8%
notes in July 2001, at a redemption price (expressed as a percentage of
principal amount) of 105.563%, plus accrued and unpaid interest, totaling
$6,016.
10
IRON MOUNTAIN INCORPORATED
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In Thousands)
(Unaudited)
(Continued)
(6) SELECTED CONSOLIDATED FINANCIAL STATEMENTS OF PARENT, GUARANTORS AND NON-
GUARANTORS
The following financial data summarizes the consolidating Company on the
equity method of accounting as of June 30, 2001 and December 31, 2000 and for
the three and six month periods ended June 30, 2001 and 2000. The Guarantor
column includes all subsidiaries that guarantee the Parent notes and the
Subsidiary notes. The Canada Company column includes Iron Mountain Canada
Corporation ("Canada Company") and the Company's other Canadian subsidiaries
that guarantee the Subsidiary notes, but do not guarantee the Parent notes.
The Parent and the Guarantors also guarantee the Subsidiary notes issued by
Canada Company. The subsidiaries that do not guarantee either the Parent
notes or the Subsidiary notes are referred to in the table as the
"non-guarantors."
JUNE 30, 2001
-------------------------------------------------------------------------------
CANADA NON-
PARENT GUARANTORS COMPANY GUARANTORS ELIMINATIONS CONSOLIDATED
------ ----------- ------- ---------- ------------- ------------
ASSETS
Current Assets:
Cash and Cash Equivalents .................... $ -- $ 23,127 $ 1,724 $ 11,986 $ -- $ 36,837
Accounts Receivable .......................... -- 177,759 15,747 22,025 -- 215,531
Intercompany Receivable (Payable) ............ 614,934 (499,507) (94,508) (20,919) -- --
Other Current Assets ......................... -- 62,425 3,116 2,929 -- 68,470
---------- ----------- --------- --------- ------------ -----------
Total Current Assets ....................... 614,934 (236,196) (73,921) 16,021 -- 320,838
Property, Plant and Equipment, net ............. -- 719,706 71,395 94,954 -- 886,055
Other Assets:
Long-term Intercompany Receivable ............ 535,979 -- -- -- (535,979) --
Long-term Notes Receivable from Affiliates ... 654,278 -- -- -- (654,278) --
Investment in Subsidiaries ................... 390,086 85,286 -- -- (475,372) --
Goodwill, net ................................ -- 1,264,271 124,117 146,022 10,465 1,544,875
Other ........................................ 26,496 40,316 10,639 727 (6,518) 71,660
---------- ----------- --------- --------- ------------ -----------
Total Other Assets ......................... 1,606,839 1,389,873 134,756 146,749 (1,661,682) 1,616,535
---------- ----------- --------- --------- ------------ -----------
Total Assets ............................... $2,221,773 $1,873,383 $132,230 $257,724 $(1,661,682) $2,823,428
========== =========== ========= ========= ============ ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Total Current Liabilities .................... $ 33,584 $ 210,075 $ 14,348 $ 83,054 $ -- $ 341,061
Long-term Debt, Net of Current Portion ....... 1,265,712 1,782 126,558 26,894 -- 1,420,946
Long-term Intercompany Payable ............... -- 535,979 -- -- (535,979) --
Long-term Notes Payable to Affiliates ........ -- 654,278 -- -- (654,278) --
Other Long-term Liabilities .................. -- 74,587 858 2,041 (6,518) 70,968
Minority Interest ............................ -- -- -- 709 67,267 67,976
Shareholders' Equity ......................... 922,477 396,682 (9,534) 145,026 (532,174) 922,477
---------- ----------- ---------- --------- ------------ ----------
Total Liabilities and Shareholders' Equity . $2,221,773 $1,873,383 $ 132,230 $257,724 $(1,661,682) $2,823,428
========== =========== ========== ========= ============ ==========
11
IRON MOUNTAIN INCORPORATED
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In Thousands)
(Unaudited)
(Continued)
(6) SELECTED CONSOLIDATED FINANCIAL STATEMENTS OF PARENT, GUARANTORS AND NON-
GUARANTORS (CONTINUED)
DECEMBER 31, 2000
------------------------------------------------------------------------------------
CANADA NON-
PARENT GUARANTORS COMPANY GUARANTORS ELIMINATIONS CONSOLIDATED
------- ---------- --------- ----------- ------------ ------------
ASSETS
Current Assets:
Cash and Cash Equivalents ................ $ 191 $ 3,336 $ 302 $ 2,371 $ -- $ 6,200
Accounts Receivable ...................... 7,060 140,095 12,370 16,917 -- 176,442
Intercompany Receivable (Payable) ........ 795,522 (658,022) (98,386) (45,060) 5,946 --
Other Current Assets ..................... 531 46,605 827 6,063 -- 54,026
----------- ----------- ---------- ---------- ------------ -----------
Total Current Assets .................. 803,304 (467,986) (84,887) (19,709) 5,946 236,668
Property, Plant and Equipment, net .......... 99,549 586,504 66,953 79,388 -- 832,394
Other Assets:
Long-term Intercompany Receivable ........ 344,300 -- -- -- (344,300) --
Long-term Notes Receivable from Affiliates... 607,600 124,100 -- -- (731,700) --
Investment in Subsidiaries ............... 370,830 49,626 -- -- (420,456) --
Goodwill, net ............................ -- 1,255,302 138,663 121,096 10,569 1,525,630
Other .................................... 20,986 42,956 11,036 1,834 (12,408) 64,404
----------- ----------- ---------- ---------- ------------ -----------
Total Other Assets .................. 1,343,716 1,471,984 149,699 122,930 (1,498,295) 1,590,034
----------- ----------- ---------- ---------- ------------ -----------
Total Assets ........................ $2,246,569 $1,590,502 $ 131,765 $ 182,609 $(1,492,349) $2,659,096
========== ========== ========= ========= ============ ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Total Current Liabilities .............. $ 26,921 $ 189,362 $ 12,429 $ 79,378 $ 5,963 $ 314,053
Long-term Debt, Net of Current Portion . 1,170,884 3,513 124,834 15,111 -- 1,314,342
Long-term Intercompany Payable ......... -- 344,300 -- -- (344,300) --
Long-term Notes Payable to Affiliates .. 124,100 607,600 -- -- (731,700) --
Other Long-term Liabilities ............ 206 73,693 113 1,610 (12,408) 63,214
Minority Interest ...................... -- -- -- (1,636) 44,665 43,029
Shareholders' Equity ................... 924,458 372,034 (5,611) 88,146 (454,569) 924,458
----------- ----------- ---------- ---------- ------------ -----------
Total Liabilities and Shareholders'
Equity ............................. $2,246,569 $1,590,502 $ 131,765 $ 182,609 $(1,492,349) $2,659,096
========== ========== ========= ========= ============ ==========
12
IRON MOUNTAIN INCORPORATED
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In Thousands)
(Unaudited)
(Continued)
(6) SELECTED CONSOLIDATED FINANCIAL STATEMENTS OF PARENT, GUARANTORS AND NON-
GUARANTORS (CONTINUED)
THREE MONTHS ENDED JUNE 30, 2001
-----------------------------------------------------------------------------
CANADA NON-
PARENT GUARANTORS COMPANY GUARANTORS ELIMINATIONS CONSOLIDATED
---------- ---------- -------- ---------- ------------ ------------
Revenues:
Storage ........................................ $ -- $ 149,666 $ 8,279 $ 13,946 $ -- $ 171,891
Service and Storage Material Sales ............. -- 103,527 8,941 8,975 -- 121,443
--------- --------- --------- --------- --------- ---------
Total Revenues ................................ -- 253,193 17,220 22,921 -- 293,334
Operating Expenses:
Cost of Sales (Excluding Depreciation) .......... -- 117,983 8,367 12,680 -- 139,030
Selling, General and Administrative ............. -- 68,960 3,530 6,196 -- 78,686
Depreciation and Amortization ................... -- 32,135 2,564 3,089 -- 37,788
Merger-related Expenses ......................... -- 377 -- -- -- 377
--------- --------- --------- --------- --------- ---------
Total Operating Expenses ...................... -- 219,455 14,461 21,965 -- 255,881
--------- --------- --------- --------- --------- ---------
Operating Income ................................ -- 33,738 2,759 956 -- 37,453
Interest Expense, net ........................... 13,190 14,841 4,063 1,949 -- 34,043
Equity in the (Earnings) Losses of
Subsidiaries .................................. (8,224) 1,113 -- -- 7,111 --
Other Income (Expense), net ..................... -- 2,003 5,024 (12) -- 7,015
--------- --------- --------- --------- --------- ---------
Income (Loss) Before Provision (Benefit)
for Income Taxes and Minority Interest
Expense .................................... (4,966) 19,787 3,720 (1,005) (7,111) 10,425
Provision (Benefit) for Income Taxes ............ -- 15,846 (603) 848 -- 16,091
Minority Interests in Losses of
Subsidiaries .................................. -- -- -- (700) -- (700)
--------- --------- --------- --------- --------- ---------
Income (Loss) before Extraordinary Item ....... (4,966) 3,941 4,323 (1,153) (7,111) (4,966)
Extraordinary Charge from Early
Extinguishment of Debt (Net of Tax
Benefit of $3,300) ............................ (4,780) -- -- -- -- (4,780)
--------- --------- --------- --------- --------- ---------
Net Income (Loss) ............................. $ (9,746) $ 3,941 $ 4,323 $ (1,153) $ (7,111) $ (9,746)
========= ========= ========= ========= ========= =========
13
IRON MOUNTAIN INCORPORATED
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In Thousands)
(Unaudited)
(Continued)
(6) SELECTED CONSOLIDATED FINANCIAL STATEMENTS OF PARENT, GUARANTORS AND NON-
GUARANTORS (CONTINUED)
THREE MONTHS ENDED JUNE 30, 2000
---------------------------------------------------------------------------------
CANADA NON-
PARENT GUARANTORS COMPANY GUARANTORS ELIMINATIONS CONSOLIDATED
----------- ---------- -------- ----------- ------------ ------------
Revenues:
Storage ..................................... $ 869 $ 131,388 $ 6,643 $ 9,545 $ -- $ 148,445
Service and Storage Material Sales .......... 4,741 85,788 7,007 7,831 (1,247) 104,120
--------- --------- --------- --------- --------- ---------
Total Revenues ............................ 5,610 217,176 13,650 17,376 (1,247) 252,565
Operating Expenses:
Cost of Sales (Excluding Depreciation) ...... 3,129 105,046 6,004 10,880 (3,086) 121,973
Selling, General and Administrative ......... 960 54,216 3,895 3,814 1,839 64,724
Depreciation and Amortization ............... 1,389 26,670 1,575 2,010 -- 31,644
Stock Option Compensation Expense ........... -- 14,939 -- -- -- 14,939
Merger-related Expenses ..................... -- 3,753 122 -- -- 3,875
--------- --------- --------- --------- --------- ---------
Total Operating Expenses .................. 5,478 204,624 11,596 16,704 (1,247) 237,155
--------- --------- --------- --------- --------- ---------
Operating Income .............................. 132 12,552 2,054 672 -- 15,410
Interest Expense, net ......................... 11,516 13,586 4,428 715 -- 30,245
Equity in the Losses of Subsidiaries .......... 18,981 186 -- -- (19,167) --
Other Expense, net ............................ -- (713) (2,108) (878) -- (3,699)
--------- --------- --------- --------- --------- ---------
Loss Before Provision (Benefit) for
Income Taxes and Minority Interest
Expense ............................... (30,365) (1,933) (4,482) (921) 19,167 (18,534)
Provision (Benefit) for Income Taxes .......... (2,120) 12,536 (371) (198) -- 9,847
Minority Interests in Losses of
Subsidiaries ................................ -- -- -- (136) -- (136)
--------- --------- --------- --------- --------- ---------
Net Loss .................................. $ (28,245) $ (14,469) $ (4,111) $ (587) $ 19,167 $ (28,245)
========= ========= ========= ========= ========= =========
14
IRON MOUNTAIN INCORPORATED
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In Thousands)
(Unaudited)
(Continued)
(6) SELECTED CONSOLIDATED FINANCIAL STATEMENTS OF PARENT, GUARANTORS AND NON-
GUARANTORS (CONTINUED)
SIX MONTHS ENDED JUNE 30, 2001
------------------------------------------------------------------------------
CANADA NON-
PARENT GUARANTORS COMPANY GUARANTORS ELIMINATIONS CONSOLIDATED
--------- ----------- -------- ---------- ------------ ------------
Revenues:
Storage ........................................ $ -- $ 296,241 $ 16,681 $ 26,834 $ -- $ 339,756
Service and Storage Material Sales ............. -- 203,515 17,208 16,777 -- 237,500
--------- --------- --------- --------- --------- ---------
Total Revenues ............................... -- 499,756 33,889 43,611 -- 577,256
Operating Expenses:
Cost of Sales (Excluding Depreciation) ......... -- 237,473 17,104 24,273 -- 278,850
Selling, General and Administrative ............ 75 131,233 6,281 11,414 -- 149,003
Depreciation and Amortization .................. -- 62,623 5,048 5,835 -- 73,506
Merger-related Expenses ........................ -- 1,149 -- 29 -- 1,178
--------- --------- --------- --------- --------- ---------
Total Operating Expenses ..................... 75 432,478 28,433 41,551 -- 502,537
--------- --------- --------- --------- --------- ---------
Operating Income (Loss) .......................... (75) 67,278 5,456 2,060 -- 74,719
Interest Expense, net ............................ 26,360 29,722 8,113 3,835 -- 68,030
Equity in the (Earnings) Losses of
Subsidiaries ................................... (24,668) 1,198 -- -- 23,470 --
Other Expense, net ............................... -- (889) (1,270) (13) -- (2,172)
--------- --------- --------- --------- --------- ---------
Income (Loss) Before Provision for Income
Taxes and Minority Interest Expense ........ (1,767) 35,469 (3,927) (1,788) (23,470) 4,517
Provision for Income Taxes ....................... -- 6,746 14 494 -- 7,254
Minority Interests in Losses of
Subsidiaries ................................... -- -- -- (970) -- (970)
--------- --------- --------- --------- --------- ---------
Income (Loss) before Extraordinary Item ...... (1,767) 28,723 (3,941) (1,312) (23,470) (1,767)
Extraordinary Charge from Early Extinguishment
of Debt (Net of Tax Benefit of $3,300) ...... (4,780) -- -- -- -- (4,780)
--------- --------- --------- --------- --------- ---------
Net Income (Loss) ........................... $ (6,547) $ 28,723 $ (3,941) $ (1,312) $ (23,470) $ (6,547)
========= ========= ========= ========= ========= =========
15
IRON MOUNTAIN INCORPORATED
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In Thousands)
(Unaudited)
(Continued)
(6) SELECTED CONSOLIDATED FINANCIAL STATEMENTS OF PARENT, GUARANTORS AND NON-
GUARANTORS (CONTINUED)
SIX MONTHS ENDED JUNE 30, 2000
----------------------------------------------------------------------------------
CANADA NON-
PARENT GUARANTORS COMPANY GUARANTORS ELIMINATIONS CONSOLIDATED
---------- ---------- --------- ---------- ------------ ------------
Revenues:
Storage .................................... $ 1,443 $ 242,464 $ 11,003 $ 18,474 $ -- $ 273,384
Service and Storage Material Sales ......... 7,990 158,292 12,363 14,423 (1,750) 191,318
--------- ---------- ---------- ------- --------- ----------
Total Revenues .......................... 9,433 400,756 23,366 32,897 (1,750) 464,702
Operating Expenses:
Cost of Sales (Excluding Depreciation) ..... 5,365 194,930 11,140 19,950 (4,954) 226,431
Selling, General and Administrative ........ 1,620 100,138 5,826 7,393 3,204 118,181
Depreciation and Amortization .............. 1,730 49,471 2,637 4,109 -- 57,947
Stock Option Compensation Expense .......... -- 14,939 -- -- -- 14,939
Merger-related Expenses .................... -- 4,269 122 -- -- 4,391
--------- ---------- ---------- ------- -------- ----------
Total Operating Expenses ................ 8,715 363,747 19,725 31,452 (1,750) 421,889
--------- ---------- ---------- ------ --------- ----------
Operating Income .............................. 718 37,009 3,641 1,445 -- 42,813
Interest Expense, net ......................... 18,334 27,096 6,732 1,866 -- 54,028
Equity in the Losses of Subsidiaries .......... 19,333 84 -- -- (19,417) --
Other Expense, net ............................ -- (647) (2,954) (879) -- (4,480)
--------- ----------- ----------- -------- -------- -----------
Income (Loss) Before Provision
(Benefit) for Income Taxes and
Minority Interest Expense ............. (36,949) 9,182 (6,045) (1,300) 19,417 (15,695)
Provision (Benefit) for Income Taxes .......... (3,321) 22,506 (570) (239) -- 18,376
Minority Interests in Losses of Subsidiaries .. -- -- -- (443) -- (443)
--------- ---------- ---------- -------- -------- -----------
Net Loss ................................ $ (33,628) $ (13,324) $ (5,475) $ (618) $ 19,417 $ (33,628)
========= =========== =========== ======== ======== ==========
16
IRON MOUNTAIN INCORPORATED
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In Thousands)
(Unaudited)
(Continued)
(6) SELECTED CONSOLIDATED FINANCIAL STATEMENTS OF PARENT, GUARANTORS AND NON-
GUARANTORS (CONTINUED)
SIX MONTHS ENDED JUNE 30, 2001
--------------------------------------------------------------------------------
CANADA NON-
PARENT GUARANTORS COMPANY GUARANTORS ELIMINATIONS CONSOLIDATED
------------- ---------- -------- ---------- ------------ ------------
Cash Flows from Operating Activities:
Cash Flows Provided by (Used in)
Operating Activities ........................ $ (57,662) $ 116,583 $ 388 $ 3,499 $ -- $ 62,808
Cash Flows from Investing Activities:
Cash Paid for Acquisitions, net of cash
acquired ...................................... -- (27,783) 326 (17,312) -- (44,769)
Capital Expenditures ............................ -- (73,035) (3,063) (13,877) -- (89,975)
Intercompany Loans to Subsidiaries .............. (20,204) (4,743) -- -- 24,947 --
Investment in Subsidiaries ...................... (6,739) (6,739) -- -- 13,478 --
Additions to Customer Acquisition Costs ......... -- (5,339) (151) (342) -- (5,832)
Proceeds from Sales of Property and Equipment ... -- 58 5 569 -- 632
--------- --------- --------- --------- --------- ---------
Cash Flows Used in Investing Activities ....... (26,943) (117,581) (2,883) (30,962) 38,425 (139,944)
Cash Flows from Financing Activities:
Repayment of Debt ............................... (109,410) (142) (241) (2,556) -- (112,349)
Early Retirement of Senior Subordinated
Notes ......................................... (133,726) -- -- -- -- (133,726)
Proceeds from Borrowings ........................ 103,000 73 -- 1,746 -- 104,819
Net Proceeds from Sale of Senior
Subordinated Notes ............................ 218,590 -- -- -- -- 218,590
Debt Repayment to Minority Shareholders ........ -- -- -- (271) -- (271)
Equity Contributions from Minority
Shareholders ................................ -- -- -- 24,744 -- 24,744
Intercompany Loans from Parent .................. -- 14,119 6,072 4,756 (24,947) --
Equity Contribution from Parent ................. -- 6,739 -- 6,739 (13,478) --
Proceeds from Exercise of Stock Options ......... 6,145 -- -- -- -- 6,145
Debt Financing and Stock Issuance Costs ......... (185) -- -- -- -- (185)
--------- --------- --------- --------- --------- ---------
Cash Flows Provided by Financing
Activities................................... 84,414 20,789 5,831 35,158 (38,425) 107,767
Effect of Exchange Rates on Cash and Cash
Equivalents ..................................... -- -- (1,914) 1,920 -- 6
--------- --------- --------- --------- --------- ---------
Increase (Decrease) in Cash and Cash Equivalents .. (191) 19,791 1,422 9,615 -- 30,637
Cash and Cash Equivalents, Beginning of Period .... 191 3,336 302 2,371 -- 6,200
--------- --------- --------- --------- --------- ---------
Cash and Cash Equivalents, End of Period .......... $ -- $ 23,127 $ 1,724 $ 11,986 $ -- $ 36,837
========= ========= ========= ========= ========= =========
17
IRON MOUNTAIN INCORPORATED
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In Thousands)
(Unaudited)
(Continued)
(6) SELECTED CONSOLIDATED FINANCIAL STATEMENTS OF PARENT, GUARANTORS AND NON-
GUARANTORS (CONTINUED)
SIX MONTHS ENDED JUNE 30, 2000
---------------------------------------------------------------------------------
CANADA NON-
PARENT GUARANTORS COMPANY GUARANTORS ELIMINATIONS CONSOLIDATED
------------ ---------- -------- ---------- ------------ ------------
Cash Flows from Operating Activities:
Cash Flows Provided by (Used in)
Operating Activities ......................... $ (13,796) $ 85,576 $ (4,987) $ 6,278 $ -- $ 73,071
Cash Flows from Investing Activities:
Investment in Convertible Preferred Stock ........ -- (6,500) -- -- -- (6,500)
Cash Paid for Acquisitions, net of cash
acquired ....................................... (3,895) (57,012) 55 (10,247) -- (71,099)
Capital Expenditures ............................. (10,960) (44,397) (1,999) (5,410) -- (62,766)
Intercompany Loans to Subsidiaries ............... (239,690) (18,822) -- -- 258,512 --
Additions to Customer Acquisition Costs .......... -- (4,431) (670) -- -- (5,101)
Other, Net ....................................... (11) (487) (45) -- -- (543)
--------- --------- --------- --------- --------- ---------
Cash Flows Used in Investing
Activities ................................... (254,556) (131,649) (2,659) (15,657) 258,512 (146,009)
Cash Flows from Financing Activities:
Repayment of Debt ................................ (114,830) (172,277) (908) (7,078) -- (295,093)
Proceeds from Borrowings ......................... 358,500 1,885 1,163 283 -- 361,831
Debt Financing from Minority Shareholders ....... -- -- -- 9,479 -- 9,479
Intercompany Loans from Parent ................... 24,200 214,106 9,973 10,233 (258,512) --
Proceeds from Exercise of Stock Options .......... 3,862 -- -- -- -- 3,862
Debt Financing and Stock Issuance Costs .......... (2,771) (297) -- -- -- (3,068)
--------- --------- --------- --------- --------- ---------
Cash Flows Provided by Financing ............... 268,961 43,417 10,228 12,917 (258,512) 77,011
Activities
Effect of Exchange Rates on Cash and Cash
Equivalents ...................................... -- 81 (797) 1,160 -- 444
--------- --------- --------- --------- --------- ---------
Increase (Decrease) in Cash and Cash Equivalents ... 609 (2,575) 1,785 4,698 -- 4,517
Cash and Cash Equivalents, Beginning of Period ..... -- 2,260 -- 1,570 -- 3,830
--------- --------- --------- --------- --------- ---------
Cash and Cash Equivalents, End of Period ........... $ 609 $ (315) $ 1,785 $ 6,268 $ -- $ 8,347
========= ========= ========= ========= ========= =========
18
IRON MOUNTAIN INCORPORATED
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In Thousands)
(Unaudited)
(Continued)
(7) EARNINGS PER SHARE
In accordance with SFAS No. 128, "Earnings per Share," basic net income (loss)
per common share is calculated by dividing net income (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. For the three and six months ended
June 30, 2001, 2,992 potential common shares have been excluded from the
calculation of diluted net loss per share, as their effects are antidilutive.
(8) SEGMENT INFORMATION
An analysis of the Company's business segment information to the respective
information in the consolidated financial statements is as follows:
BUSINESS OFF SITE
RECORDS DATA CORPORATE TOTAL
MANAGEMENT PROTECTION INTERNATIONAL & OTHER CONSOLIDATED
----------- ---------- ------------- --------- ------------
THREE MONTHS ENDED JUNE 30, 2001
Revenue ........................... $ 193,218 $47,876 $ 39,663 $ 12,577 $ 293,334
EBITDA ............................ 52,986 12,669 8,875 1,088 75,618
THREE MONTHS ENDED JUNE 30, 2000
Revenue ........................... 174,291 41,071 30,626 6,577 252,565
EBITDA ............................ 49,930 11,272 5,613 (947) 65,868
SIX MONTHS ENDED JUNE 30, 2001
Revenue ........................... $ 383,140 $92,792 $ 76,542 $ 24,782 $ 577,256
EBITDA ............................ 103,200 23,480 17,554 5,169 149,403
Total Assets ...................... 1,085,361 78,814 377,218 1,282,035 2,823,428
SIX MONTHS ENDED JUNE 30, 2000
Revenue ........................... 318,330 79,686 55,500 11,186 464,702
EBITDA ............................ 88,595 19,831 10,571 1,093 120,090
EBITDA, as presented above, is defined as earnings before interest, taxes,
depreciation, amortization, extraordinary items, other income, merger-related
expenses and stock option compensation expense.
The Company's consulting business, previously analyzed as part of Business
Records Management, is now analyzed within the Corporate & Other category. In
addition, certain allocations from Corporate & Other to Business Records
Management and Off Site Data Protection have been changed. To the extent
practicable, the prior period numbers shown above have been adjusted to reflect
both such changes.
19
IRON MOUNTAIN INCORPORATED
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In Thousands)
(Unaudited)
(Continued)
(8) SEGMENT INFORMATION (CONTINUED)
A reconciliation from the segment information to the consolidated balances for
income (loss) before provision (benefit) for income taxes and minority interest
is as follows:
THREE MONTHS ENDED JUNE 30, SIX MONTHS ENDED JUNE 30,
--------------------------- -------------------------
2001 2000 2001 2000
---- ---- ---- ----
EBITDA ................................................ $ 75,618 $ 65,868 $149,403 $120,090
Depreciation and Amortization ......................... (37,788) (31,644) (73,506) (57,947)
Stock Option Compensation Expense ..................... -- (14,939) -- (14,939)
Merger-related Expenses ............................... (377) (3,875) (1,178) (4,391)
Interest Expense ...................................... (34,043) (30,245) (68,030) (54,028)
Other Income (Expense), net ........................... 7,015 (3,699) (2,172) (4,480)
--------- --------- --------- ----------
Income (Loss) Before Provision (Benefit)
for Income Taxes and Minority Interest .......... $ 10,425 $(18,534) $ 4,517 $(15,695)
========= ========= ========= ==========
Information as to the Company's operations in different geographical areas is as
follows:
THREE MONTHS ENDED JUNE 30,
---------------------------
2001 2000
---- ----
Revenues:
United States ......................................... $253,671 $221,939
International ......................................... 39,663 30,626
-------- --------
Total Revenues ..................................... $293,334 $252,565
======== ========
SIX MONTHS ENDED JUNE 30,
-------------------------
2001 2000
---- ----
Revenues:
United States ......................................... $500,714 $409,202
International ......................................... 76,542 55,500
-------- --------
Total Revenues ..................................... $577,256 $464,702
======== ========
JUNE 30, 2001 DECEMBER 31, 2000
------------- -----------------
Long-lived Assets:
United States ......................................... $2,072,934 $2,050,257
International ......................................... 429,656 372,171
---------- ----------
Total Long-lived Assets............................. $2,502,590 $2,422,428
========== ==========
(9) SUBSEQUENT EVENTS
The Company redeemed the remaining $5,412 of principal amount of the 11-1/8%
notes in July 2001, at a redemption price (expressed as a percentage of
principal amount) of 105.563%, plus accrued and unpaid interest, totaling
$6,016.
20
IRON MOUNTAIN INCORPORATED
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In Thousands)
(Unaudited)
(Continued)
(9) SUBSEQUENT EVENTS (CONTINUED)
In July 2001, the Financial Accounting Standards Board issued SFAS No. 141,
"Business Combinations" and SFAS No. 142, "Goodwill and Other Intangible
Assets." SFAS No. 141 requires all business combinations initiated after June
30, 2001 to be accounted for using the purchase method. Under SFAS No. 142,
goodwill and intangible assets with indefinite lives are no longer amortized
but are reviewed annually for impairment or more frequently if impairment
indicators arise. Separable intangible assets that are not deemed to have
indefinite lives will continue to be amortized over their useful lives. The
amortization provisions of SFAS No. 142 apply to goodwill and intangible
assets acquired after June 30, 2001. With respect to goodwill and intangible
assets acquired prior to July 1, 2001, the Company is required to adopt SFAS
No. 142 effective January 1, 2002. We expect the adoption of SFAS No. 142
will have the impact of reducing our amortization of goodwill and intangibles
commencing January 1, 2002; however, impairment reviews may result in future
periodic write-downs. For the six months ended June 30, 2001, the Company
recorded goodwill amortization of $29,480. The Company is currently
evaluating the effect that the adoption of the provisions of SFAS No. 142
will have on its intangible assets.
21
IRON MOUNTAIN INCORPORATED
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The following discussion and analysis of the Company's financial condition and
results of operations for the three and six months ended June 30, 2001 and 2000
should be read in conjunction with the condensed consolidated financial
statements and footnotes for the three and six months ended June 30, 2001
included herein, and the year ended December 31, 2000, included in the Company's
Annual Report on Form 10-K filed with the Securities and Exchange Commission on
March 23, 2001.
OVERVIEW
The Company's consolidated revenues increased $40.8 million, or 16.1%, to $293.3
million for the second quarter of 2001 from $252.6 million for the second
quarter of 2000. Internal revenue growth, calculated in local currency for our
international operations and as if Pierce Leahy had merged with Iron Mountain on
January 1, 2000, was 10.9%. For the six months ended June 30, 2001, the
Company's consolidated revenues were $577.3 million compared to $464.7 million
for the same period last year, an increase of 24.2%. Internal revenue growth,
calculated in local currency for our international operations and as if Pierce
Leahy had merged with Iron Mountain on January 1, 2000, was 11.0%.
During the second quarter of 2001, the Company acquired four businesses for
total consideration of $11.1 million. These four acquisitions reported
approximately $5 million in revenues for the fiscal year 2000.
RESULTS OF OPERATIONS
THREE MONTHS ENDED JUNE 30, 2001 COMPARED TO THREE MONTHS ENDED JUNE 30, 2000
Consolidated storage revenues increased $23.4 million, or 15.8%, to $171.9
million for the second quarter of 2001, from $148.4 million for the second
quarter of 2000. The increase was attributable to: (i) internal revenue growth
of 11.5% resulting primarily from net increases in records and other media
stored by existing customers and sales to new customers; and (ii) acquisitions.
The total increase in storage revenues was partially offset by the unfavorable
effects of currency translation as a result of the strengthening of the U.S.
dollar against certain foreign currencies, primarily the Canadian dollar and the
British pound sterling, in which the Company's international segment does
business.
Consolidated service and storage material sales revenues increased $17.3
million, or 16.6%, to $121.4 million for the second quarter of 2001, from $104.1
million for the second quarter of 2000. The increase was attributable to: (i)
internal revenue growth of 10.0% resulting primarily from net increases in
service and storage material sales to existing customers and sales to new
customers; and (ii) acquisitions. The total increase in service and storage
material sales revenues was partially offset by the unfavorable effects of
currency translation as a result of the strengthening of the U.S. dollar against
certain foreign currencies, primarily the Canadian dollar and the British pound
sterling, in which the Company's international segment does business.
For the reasons discussed above, total consolidated revenues increased $40.8
million, or 16.1%, to $293.3 million for the second quarter of 2001 from $252.6
million for the second quarter of 2000.
22
IRON MOUNTAIN INCORPORATED
Consolidated cost of sales (excluding depreciation) increased $17.1 million,
or 14.0%, to $139.0 million (47.4% of consolidated revenues) for the second
quarter of 2001 from $122.0 million (48.3% of consolidated revenues) for the
second quarter of 2000. The dollar increase was consistent with the revenue
growth of the Company and was partially offset by operating efficiencies at
the Company's US and Canadian operations, particularly related to facility
and labor costs. These efficiencies were gained as a result of an increase in
scale. The decrease as a percentage of revenue was primarily attributable to
the operating efficiencies mentioned above, offset by lower margins in the
Company's expanding Confidential Destruction services. In US and Canadian
operations, the facility costs increased $3.1 million, or 9.0%, and labor
increased $7.2 million, or 12.4%, versus an increase in revenue of $35.3
million, or 15.0%. The Company's Confidential Destruction business generated
gross margins of 42.6%, which negatively impacted the Company's gross margins
by 0.2%.
Consolidated selling, general and administrative expenses increased $14.0
million, or 21.6%, to $78.7 million (26.8% of consolidated revenues) for the
second quarter of 2001 from $64.7 million (25.6% of consolidated revenues)
for the second quarter of 2000. The dollar increase was primarily
attributable to revenue growth of the Company, while the increase as a
percentage of revenues was primarily attributable to: (i) $1.2 million of
spending in the second quarter of 2001 for the Company's marketing and
information technology initiatives related to the development of
complementary technology-based service offerings; (ii) $1.2 million of
increased spending for account management compensation at the Company's US
and Canadian operations; and (iii) $2.3 million of increased bad debt
expenses. These increases were offset by decreased spending in management and
administrative compensation as a percentage of revenue (from 9.2% to 9.0%)
due to efficiencies gained as a result of an increase in scale at the
Company's US and Canadian operations.
Consolidated depreciation and amortization expense increased $6.1 million, or
19.4%, to $37.8 million (12.9% of consolidated revenues) for the second
quarter of 2001 from $31.6 million (12.5% of consolidated revenues) for the
second quarter of 2000. Depreciation expense increased $4.6 million,
primarily attributable to the additional depreciation expense related to the
2000 and 2001 acquisitions, and capital expenditures including racking
systems, information systems and expansion of storage capacity in existing
facilities. Amortization expense increased $1.5 million, primarily due to the
additional amortization related to the goodwill generated by the Company's
2000 and 2001 acquisitions.
Stock option compensation expense represents a non-cash charge resulting from
the acceleration and extension of previously granted stock options as a part
of separation agreements with certain executives. There were no such costs in
the second quarter of 2001 compared to $14.9 million for the second quarter
of 2000.
Merger-related expenses are certain expenses directly related to the Company's
merger with Pierce Leahy that cannot be capitalized and include system
conversion costs, costs of exiting certain facilities, severance, relocation and
pay-to-stay payments and other transaction-related costs. Merger-related
expenses were $0.4 million (0.1% of consolidated revenues) for the second
quarter of 2001 compared to $3.9 million (1.5% of consolidated revenues) for the
second quarter of 2000.
23
IRON MOUNTAIN INCORPORATED
As a result of the foregoing factors, consolidated operating income increased
$22.0 million, or 143.0%, to $37.5 million (12.8% of consolidated revenues) for
the second quarter of 2001 from $15.4 million (6.1% of consolidated revenues)
for the second quarter of 2000.
Consolidated interest expense increased $3.8 million, or 12.6%, to $34.0
million for the second quarter of 2001 from $30.2 million for the second
quarter of 2000. The increase was primarily attributable to increased
indebtedness related to: (i) the inclusion of $4.7 million of interest
expense on the 8-5/8% notes, which were issued in April 2001 and (ii) the
financing of acquisitions and capital expenditures. These increases were
partially offset by reduced interest expense of $3.3 million due to the early
retirement of the 11-1/8% notes as well as a decline in the weighted average
interest rate on the Company's variable rate debt.
Consolidated other income (expense) was income of $7.0 million for the second
quarter of 2001 compared to an expense of $3.7 million for the second quarter of
2000. The change was primarily due to the effect of the strengthening of the
Canadian dollar against the U.S. dollar in the second quarter of 2001 as it
relates to Canada Company's 8-1/8% Senior Subordinated Notes versus the
weakening in both the Canadian dollar as it relates to the notes and the
intercompany balances with the Company's Canadian subsidiaries and the British
pound sterling as it relates to intercompany balances with the Company's
European subsidiaries against the U.S. dollar in the second quarter of 2000.
As a result of the foregoing factors, consolidated income (loss) before
provision for income taxes and minority interest increased $29.0 million to
income of $10.4 million (3.6% of consolidated revenues) for the second quarter
of 2001 from a loss of $18.5 million (7.3% of consolidated revenues) for the
second quarter of 2000. The provision for income taxes was $16.1 million for the
second quarter of 2001 compared to $9.8 million for the second quarter of 2000.
The provision was calculated by applying the Company's effective tax rate to the
pre-tax income (loss). The Company's effective tax rate is based on an estimate
of annual pre-tax income and is higher than statutory rates primarily due to the
amortization of the nondeductible portion of goodwill associated with particular
acquisitions.
Consolidated loss before extraordinary item decreased $23.3 million to $5.0
million (1.7% of consolidated revenues) for the second quarter of 2001 from
$28.2 million (11.2% of consolidated revenues) for the second quarter of 2000.
In addition, the Company recorded an extraordinary charge of $4.8 million (net
of tax benefit of $3.3 million) related to the early retirement of the 11-1/8%
notes in conjunction with the Company's underwritten public offering of the
8-5/8% notes in the second quarter of 2001.
As noted in Note 8, Segment Information, of Notes to Condensed Consolidated
Financial Statements, EBITDA is used for the Company's internal measurement
of financial performance. As a result of the foregoing factors, consolidated
EBITDA increased $9.8 million, or 14.8%, to $75.6 million (25.8% of
consolidated revenues) for the second quarter of 2001 from $65.9 million
(26.1% of consolidated revenues) for the second quarter of 2000. Excluding
the $1.2 million of expenses related to the Company's technology-related
service offerings, the Company's EBITDA margin for the second quarter of 2001
was 26.2% of consolidated revenues. There were no such costs in the second
quarter of 2000. EBITDA margins at the Company's Business Records Management
and Off Site Data Protection segments declined primarily due to the increased
costs inherent in the decentralization of the Company's administrative
functions which took place in the second half of 2000. In the Business Records
Management segment, EBITDA margins also declined due to increased effort in
accounts receivable management. In the Off Site Data Protection segment, these
increased overhead costs were partially offset by improved gross margin
performance driven by operational efficiencies achieved with the increase in
revenue, particularly as it relates to labor and transportation costs. EBITDA
margins at the Company's international segment increased from 18.3% to 22.4%
primarily due to a decrease in management and administrative expenses as a
percentage of revenue in the Company's Canadian subsidiary as a result of
efficiencies gained through the increase in scale with the acquisition of
FACS in December 2000. These gains were partially offset by an increase of
$0.9 million of bad debt expense at the Company's European operations.
SIX MONTHS ENDED JUNE 30, 2001 COMPARED TO SIX MONTHS ENDED JUNE 30, 2000
Consolidated storage revenues increased $66.4 million, or 24.3%, to $339.8
million for the first six months of 2001, from $273.4 million for the first six
months of 2000. The increase was attributable to: (i) acquisitions, particularly
the inclusion of Pierce Leahy's revenue for six months of 2001 versus five
months of 2000; and (ii) internal revenue growth of 12.1% resulting primarily
from net increases in records and other media stored by existing customers and
sales to new customers. The total increase in storage revenues was partially
offset by the unfavorable effects of currency translation as a result of the
strengthening of the U.S. dollar against certain foreign currencies, primarily
the Canadian dollar and the British pound sterling, in which the Company's
international segment does business.
24
IRON MOUNTAIN INCORPORATED
Consolidated service and storage material sales revenues increased $46.2
million, or 24.1%, to $237.5 million for the first six months of 2001, from
$191.3 million for the first six months of 2000. The increase was attributable
to: (i) acquisitions, particularly the inclusion of Pierce Leahy's revenue for
six months of 2001 versus five months of 2000; and (ii) internal revenue growth
of 9.5% resulting primarily from net increases in service and storage material
sales to existing customers and sales to new customers. The total increase in
service and storage material sales revenues was partially offset by the
unfavorable effects of currency translation as a result of the strengthening of
the U.S. dollar against certain foreign currencies, primarily the Canadian
dollar and the British pound sterling, in which the Company's international
segment does business.
For the reasons discussed above, total consolidated revenues increased $112.6
million, or 24.2%, to $577.3 million for the first six months of 2001 from
$464.7 million for the first six months of 2000.
Consolidated cost of sales (excluding depreciation) increased $52.4 million,
or 23.2%, to $278.9 million (48.3% of consolidated revenues) for the first
six months of 2001 from $226.4 million (48.7% of consolidated revenues) for
the first six months of 2000. The dollar increase was consistent with the
revenue growth of the Company and was partially offset by operating
efficiencies at the Company's US and Canadian operations, particularly
related to labor and facility costs. These efficiencies were gained as a
result of an increase in scale. The decrease as a percentage of revenue was
primarily attributable to the operating efficiencies mentioned above, offset
by lower margins in the Company's expanding Confidential Destruction
services. In US and Canadian operations, the labor increased $21.3 million or
19.7%, and facility costs increased $14.7 million or 23.0%, versus an
increase in revenue of $102.0 million, or 23.6%. The Company's Confidential
Destruction business generated gross margins of 42.4%, which negatively
impacted the Company's gross margins by 0.2%.
Consolidated selling, general and administrative expenses increased $30.8
million, or 26.1%, to $149.0 million (25.8% of consolidated revenues) for the
first six months of 2001 from $118.2 million (25.4% of consolidated revenues)
for the first six months of 2000. The dollar increase was primarily
attributable to revenue growth of the Company, while the increase as a
percentage of revenues was primarily attributable to: (i) $2.1 million of
spending in the first six months of 2001 for the Company's marketing and
information technology initiatives related to the development of
complementary technology-based service offerings; (ii) $2.7 million of
increased spending in account management compensation at the Company's US and
Canadian operations; and (iii) $3.5 million of increased bad debt expenses.
The increases were offset by a decrease in spending for management and
administrative compensation as a percentage of revenue (from 9.4% to 8.7%)
due to efficiencies gained as a result of an increase in scale at the
Company's US and Canadian operations.
Consolidated depreciation and amortization expense increased $15.6 million,
or 26.9%, to $73.5 million (12.7% of consolidated revenues) for the first six
months of 2001 from $57.9 million (12.5% of consolidated revenues) for the
first six months of 2000. Depreciation increased $10.6 million, primarily
attributable to the additional depreciation expense related to the 2000 and
2001 acquisitions, particularly the inclusion of Pierce Leahy's expenses for
six months of 2001 versus five months of 2000, and capital expenditures
including racking systems, information systems and expansion of storage
capacity in existing facilities. Amortization increased $5.0 million,
primarily attributable to the additional amortization related to the goodwill
generated by the Company's 2000 and 2001 acquisitions, particularly Pierce
Leahy.
25
IRON MOUNTAIN INCORPORATED
Stock option compensation expense represents a non-cash charge resulting from
the acceleration and extension of previously granted stock options as a part of
separation agreements with certain executives. There were no such costs for the
first six months of 2001 compared to $14.9 million for the same period of 2000.
Merger-related expenses are certain expenses directly related to the Company's
merger with Pierce Leahy that cannot be capitalized and include system
conversion costs, costs of exiting certain facilities, severance, relocation and
pay-to-stay payments and other transaction-related costs. Merger-related
expenses were $1.2 million (0.2% of consolidated revenues) for the first six
months of 2001 compared to $4.4 million (0.9% of consolidated revenues) for the
same period of 2000.
As a result of the foregoing factors, consolidated operating income increased
$31.9 million, or 74.5%, to $74.7 million (12.9% of consolidated revenues) for
the first six months of 2001 from $42.8 million (9.2% of consolidated revenues)
for the first six months of 2000.
Consolidated interest expense increased $14.0 million, or 25.9%, to $68.0
million for the first six months of 2001 from $54.0 million for the first six
months of 2000. The increase was primarily attributable to increased
indebtedness related to: (i) the inclusion of Pierce Leahy's debt for six
months of 2001 versus five months of 2000 resulting in an increase of
approximately $4.7 million; (ii) the inclusion of $4.7 million of interest
expense on the 8-5/8% notes, which were issued in April 2001; and (iii) the
financing of acquisitions and capital expenditures. These increases were
partially offset by reduced interest expense of $2.0 million due to the early
retirement of the 11-1/8% notes as well as a decline in the weighted average
interest rate on the Company's variable rate debt.
Consolidated other expense was $2.2 million for the first six months of 2001
compared to $4.5 million for the first six months of 2000. The change was
primarily due to the more dramatic weakening in both the Canadian dollar as it
relates to intercompany balances with the Company's Canadian subsidiaries and
the British pound sterling as it relates to intercompany balances with the
Company's European subsidiaries against the U.S. dollar in the first six months
of 2000 versus the first six months of 2001.
As a result of the foregoing factors, consolidated income (loss) before
provision for income taxes and minority interest increased $20.2 million to
income of $4.5 million (0.8% of consolidated revenues) for the first six months
of 2001 from a loss of $15.7 million (3.4% of consolidated revenues) for the
first six months of 2000. The provision for income taxes was $7.3 million for
the first six months of 2001 compared to $18.4 million for the first six months
of 2000. The provision was calculated by applying the Company's effective tax
rate to the pre-tax income (loss). The Company's effective tax rate is based on
an estimate of annual pre-tax income and is higher than statutory rates
primarily due to the amortization of the nondeductible portion of goodwill
associated with particular acquisitions. For the six months ended June 30, 2001,
the Company recorded $19.6 million in nondeductible goodwill amortization
expense.
Consolidated loss before extraordinary item decreased $31.9 million to $1.8
million (0.3% of consolidated revenues) for the first six months of 2001 from
$33.6 million (7.2% of consolidated revenues) for the first six months of 2000.
In April 2001, the Company recorded an extraordinary charge of $4.8 million (net
of tax benefit of $3.3 million) related to the early retirement of the 11-1/8%
notes in conjunction with the Company's underwritten public offering of the
8-5/8% notes.
As noted in Note 8, Segment Information, of Notes to Condensed Consolidated
Financial Statements, EBITDA is used for the Company's internal measurement
of financial performance. As a result of the foregoing factors, consolidated
EBITDA increased $29.3 million, or 24.4%, to $149.4 million (25.9% of
consolidated revenues) for the first six months of 2001 from $120.1 million
(25.8% of consolidated revenues) for the first six months of 2000. Excluding
the $2.1 million of expenses related to the Company's technology-related
service offerings, the Company's EBITDA margin for the first six months of
2001 was 26.2% of consolidated revenues. There were no such costs in the
first six months of 2000. EBITDA margins at the Company's Business Records
Management segment declined primarily due to the increased costs associated
with the decentralization of the Company's administrative functions, which
took place in the second half of 2000, as well as increased effort in
accounts receivable management. The decline in margins caused by
decentralization at the Company's Off Site Data Protection segment was more
than offset by gross margin improvement driven by operational efficiencies
achieved with the increase in revenue, particularly as it relates to labor
and transportation costs. EBITDA margins in the Company's international
segment increased from 19.0% to 22.9% due to the inclusion of an additional
month in 2001 of the Company's more profitable Canadian business acquired as
a part of the Pierce Leahy acquisition and efficiency gains from the December
2000 acquisition of FACS. These increases were partially offset by an
increase of $1.0 million of bad debt expense at the Company's European
operations.
26
IRON MOUNTAIN INCORPORATED
LIQUIDITY AND CAPITAL RESOURCES
The Company has made significant capital investments, consisting primarily
of: (i) capital expenditures, primarily related to growth (including
investments in real estate, racking systems, information systems and
expansion of storage capacity in existing facilities); (ii) acquisitions; and
(iii) customer acquisition costs. Cash paid for these investments during the
first six months of 2001 amounted to $90.0 million, $44.8 million and $5.8
million, respectively. These investments have been primarily funded through
cash flows from operations and borrowings under the Company's credit
agreements. Included in capital expenditures is $2.7 million related to the
Company's technology-based service offerings.
Net cash provided by operations was $62.8 million for the first six months of
2001 compared to $73.1 million for the same period in 2000. The decrease
primarily resulted from an increase in trade accounts receivable and prepaid
expenses and a decrease in net deferred tax liabilities and accrued expenses
which was partially offset by an increase in operating income and trade
accounts payable.
Net cash provided by financing activities was $107.8 million for the first six
months of 2001, consisting primarily of net proceeds of $218.6 million from the
sale of 8-5/8% Notes and equity contributions from minority shareholders of
$24.7 million, which were partially offset by the early retirement of 11-1/8%
Notes of $133.7 million.
In April 2001, Iron Mountain completed an underwritten public offering of $225.0
million in aggregate principal amount of 8-5/8% Senior Subordinated Notes due
2013. The 8-5/8% notes were issued at a price to investors of 100% of par. The
net proceeds to the Company, $218.6 million after paying the underwriters'
discounts and commissions and related expenses, were used to fund the
Company's offer to purchase and consent solicitation relating to its outstanding
11-1/8% Senior Subordinated Notes due 2006, to repay outstanding borrowings
under the Company's revolving credit facility and for general corporate
purposes, including acquisitions.
In April 2001, the Company received and accepted tenders for $124.6 million of
the outstanding principal amount of its 11-1/8% notes. The Company recorded an
extraordinary charge of $4.8 million (net of tax benefit of $3.3 million) in the
second quarter related to the early retirement of the 11-1/8% notes. The Company
redeemed the remaining $5.4 million of principal amount of the 11-1/8% notes in
July 2001, at a redemption price (expressed as a percentage of principal amount)
of 105.563%, plus accrued and unpaid interest, totaling $6.0 million.
In July 2001, the Financial Accounting Standards Board issued SFAS No. 141,
"Business Combinations" and SFAS No. 142, "Goodwill and Other Intangible
Assets." SFAS No. 141 requires all business combinations initiated after June
30, 2001 to be accounted for using the purchase method. Under SFAS No. 142,
goodwill and intangible assets with indefinite lives are no longer amortized
but are reviewed annually for impairment or more frequently if impairment
indicators arise. Separable intangible assets that are not deemed to have
indefinite lives will continue to be amortized over their useful lives. The
amortization provisions of SFAS No. 142 apply to goodwill and intangible
assets acquired after June 30, 2001. With respect to goodwill and intangible
assets acquired prior to July 1, 2001, the Company is required to adopt SFAS
No. 142 effective January 1, 2002. We expect the adoption of SFAS No. 142
will have the impact of reducing our amortization of goodwill and intangibles
commencing January 1, 2002; however, impairment reviews may result in future
periodic write-downs. For the six months ended June 30, 2001, the Company
recorded goodwill amortization of $29.5 million. The Company is currently
evaluating the effect that the adoption of the provisions of SFAS No. 142
will have on its intangible assets.
27
IRON MOUNTAIN INCORPORATED
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
In December 2000 and January 2001, the Company entered into certain
derivative financial contracts, which are variable-for-fixed swaps of
interest payments payable on an aggregate principal amount of $195.5 million
of the Company's Tranche B term loan and certain variable operating lease
commitments.
Iron Mountain's investments in Iron Mountain Europe Limited, Iron Mountain South
America, Ltd. and other international investments may be subject to risks and
uncertainties relating to fluctuations in currency valuation. One of the
Company's Canadian subsidiaries, Canada Company, has U.S. dollar denominated
debt. Gains and losses due to exchange rate fluctuations related to this debt
are recognized in the Company's consolidated statements of operations.
As of June 30, 2001, the Company had $178.0 million of variable rate debt
outstanding with a weighted average interest rate of 6.42% and $1,274.3 million
of fixed rate debt outstanding. If the weighted average variable interest rate
had increased by 1%, such increase would have had a negative impact on the
Company's net income for the three and six month periods ended June 30, 2001 by
approximately $0.3 and $0.6 million, respectively. See Note 5 of Notes to
Consolidated Financial Statements for a discussion of the Company's long-term
indebtedness, including the fair values of such indebtedness as of June 30,
2001.
PART II. OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY-HOLDERS
The following matters were voted on by the Company's stockholders at its Annual
Meeting of Stockholders held on May 24, 2001 (the "2001 Annual Meeting").
(a) ELECTION OF CLASS I DIRECTORS
Election of three (3) Class I directors to serve until the Company's Year 2004
Annual Meeting of Stockholders, or until their successors are elected and
qualified.
TOTAL VOTE FOR TOTAL VOTE WITHHELD
EACH DIRECTOR FROM EACH DIRECTOR BROKER NON-VOTES
-------------- --------------------- ----------------
Clarke H. Bailey ..................... 46,673,871 766,717 0
Constantin R. Boden .................. 46,676,220 764,368 0
Eugene B. Doggett .................... 46,617,311 823,277 0
The following directors' terms continued after the 2001 Annual Meeting: B.
Thomas Golisano, John F. Kenny, Jr., Howard D. Ross, Vincent J. Ryan, Kent P.
Dauten, Arthur D. Little, J. Peter Pierce and C. Richard Reese.
(b) RATIFICATION OF SELECTION OF INDEPENDENT PUBLIC ACCOUNTANTS
Ratification of the selection by the Board of Directors of the firm of Arthur
Andersen LLP as the Company's independent public accountants for the current
year.
FOR AGAINST ABSTAIN BROKER NON-VOTES
--- ------- ------- ----------------
46,980,829 466,237 13,522 0
28
IRON MOUNTAIN INCORPORATED
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) EXHIBITS
EXHIBIT NO. DESCRIPTION
10.1 Master Lease and Security Agreement, dated as of May 22, 2001,
between Iron Mountain Statutory Trust - 2001, as Lessor, and the
Company, as Lessee
10.2 Unconditional Guaranty, dated as of May 22, 2001, from the
Company, as Guarantor, to Iron Mountain Statutory Trust - 2001,
as Lessor
10.3 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 Construction Agent
(b) REPORTS ON FORM 8-K
None.
29
IRON MOUNTAIN INCORPORATED
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
AUGUST 14, 2001 By: /S/ JEAN A. BUA
- --------------- ---------------------------------------
(date) Jean A. Bua
Vice President and Corporate Controller
(Principal Accounting Officer)
30