SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
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(Mark One)
[X] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the Quarterly Period Ended September 30, 1997
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 333-9963
PIERCE LEAHY CORP.
(Exact Name of Registrant as Specified in its Charter)
Pennsylvania 23-2588479
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(State or Other Jurisdiction of (I.R.S. Employer Identification No.)
Incorporation or Organization)
631 Park Avenue, King of Prussia, PA 19406
------------------------------------------
(Address of Principal Executive Offices, Including Zip Code)
(610) 992-8200
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(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
----- -----
As of November 7, 1997, there were 16,477,728 shares of the Registrant's Common
Stock, par value $0.01 per share, outstanding.
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PIERCE LEAHY CORP.
INDEX
Page
PART I - FINANCIAL INFORMATION
Item 1 - Financial Statements (Unaudited)
Consolidated Balance Sheets at December 31, 1996 3
and September 30, 1997
Consolidated Statements of Operations for the Three
Months Ended September 30, 1996 and 1997 4
Consolidated Statements of Operations for the Nine
Months Ended September 30, 1996 and 1997 5
Consolidated Statements of Cash Flows for the Nine
Months Ended September 30, 1996 and 1997 6
Notes to Consolidated Financial Statements 7-9
Item 2 - Management's Discussion and Analysis of Financial Condition
and Results of Operations 10-14
PART II - OTHER INFORMATION
Item 6 - Exhibits and Reports on Form 8-K
Signatures 15
Exhibit 27 - Financial Data Schedule 16
- 2 -
PART I - FINANCIAL INFORMATION
ITEM I - FINANCIAL STATEMENTS
PIERCE LEAHY CORP.
CONSOLIDATED BALANCE SHEETS
(unaudited, in thousands)
December 31, September 30,
ASSETS 1996 1997
------ ------------ -------------
CURRENT ASSETS:
Cash and cash equivalents $ 1,254 $ 1,968
Accounts receivable (less allowance for doubtful
accounts of $795 and $2,064) 17,828 27,548
Inventories 611 1,250
Prepaid expenses and other 688 888
Deferred income taxes - 59
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Total current assets 20,381 31,713
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PROPERTY AND EQUIPMENT: 158,154 200,280
Less: Accumulated depreciation and amortization (45,020) (51,535)
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Net property and equipment 113,134 148,745
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OTHER ASSETS:
Intangible assets and equipment 97,544 181,960
Other 3,761 2,655
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Total other assets 101,305 184,615
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$ 234,820 $ 365,073
============ =============
LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT)
---------------------------------------------
CURRENT LIABILITIES:
Current portion of long-term debt $ 7,310 $ 1,683
Current portion of noncompete obligations 466 220
Accounts payable 6,757 5,107
Accrued expenses 20,563 19,622
Deferred revenue 9,218 10,824
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Total current liabilities 44,314 37,456
LONG-TERM DEBT 209,330 260,844
NONCOMPETE OBLIGATIONS 317 182
DEFERRED RENT 2,841 3,631
DEFERRED INCOME TAXES 3,456 6,251
SHAREHOLDERS' EQUITY (DEFICIT) (25,438) 56,709
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$ 234,820 $ 365,073
============ =============
The accompanying notes are an integral part of these financial statements.
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PIERCE LEAHY CORP.
CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited in thousands except share and per share amounts)
Three months ended
September 30,
---------------------------------
1996 1997
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REVENUES:
Storage $ 19,272 $ 27,894
Service and storage material sales 13,236 19,355
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Total revenues 32,508 47,249
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OPERATING EXPENSES:
Cost of sales, excluding depreciation and amortization 17,706 25,943
Selling, general and administration 5,024 7,087
Depreciation and amortization 3,236 5,627
Non-recurring charge 3,254 -
Special compensation charge - 1,752
Foreign currency translation - 60
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Total operating expenses 29,220 40,469
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Operating income 3,288 6,780
Interest expenses 5,366 7,352
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Loss before income taxes and extraordinary item (2,078) (572)
Income taxes - 7,298
-------------- --------------
Loss before extraordinary item (2,078) (7,870)
Extraordinary item-loss on early extinguishment of debt,
net of $4,014 tax benefit in 1997 2,015 6,036
-------------- --------------
Net loss $ (4,093) $ (13,906)
============== ==============
Net loss per Common share:
Loss before extraordinary item $ (0.49)
Extraordinary item, net of tax (0.37)
--------------
Net loss $ (0.86)
==============
Shares used in computing net loss per Common share 16,190,290
==============
The accompanying notes are an integral part of these financial statements.
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PIERCE LEAHY CORP.
CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited, in thousands except share and per share amounts)
Nine months ended
September 30,
-------------------------
1996 1997
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REVENUES:
Storage $ 54,757 $ 77,907
Service and storage material sales 39,073 55,782
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Total revenues 93,830 133,689
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OPERATING EXPENSES:
Cost of sales, excluding depreciation and amortization 52,895 73,852
Selling, general and administrative 14,935 21,258
Depreciation and amortization 8,848 15,051
Non-recurring charge 3,254 --
Special compensation charge -- 1,752
Foreign currency translation -- 180
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Total operating expenses 79,932 112,093
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Operating income 13,898 21,596
Interest expense 11,319 22,207
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Income (loss) before income taxes and extraordinary item 2,579 (611)
Income taxes -- 7,298
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Income (loss) before extraordinary item 2,579 (7,909)
Extraordinary item-loss on early extinguishment of debt,
net of $4,014 tax benefit in 1997 2,015 6,036
--------- -----------
Net income (loss) 564 (13,945)
Accretion of redeemable warrants 1,561 --
--------- -----------
Net loss applicable to Common Shareholders $ (997) $ (13,945)
========= ===========
Pro forma data:
Historical loss before income taxes and extraordinary item $ (611)
Pro forma income taxes 1,326
Extraordinary item, net of tax 6,036
-----------
Pro forma net loss available to Common shareholders $ (7,973)
===========
Pro forma loss per Common share:
Pro forma loss before extraordinary item $ (0.16)
Extraordinary item, net of tax (0.48)
-----------
Pro forma net loss $ (0.64)
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Shares used in computing pro forma net loss per Common share 12,437,556
===========
The accompanying notes are an integral part of these financial statements.
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PIERCE LEAHY CORP.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited, in thousands)
Nine months ended
September 30,
-----------------------------------
1996 1997
--------------- ---------------
OPERATING ACTIVITES:
Net income (loss) $ 564 $ (13,945)
Adjustments to reconcile net income (loss) to net cash
provided by operations:
Extraordinary Item 2,015 6,036
Special compensation charge -- 1,752
Depreciation and amortization 8,848 15,051
Loss on sale of property and equipment -- (5)
Amortization of deferred financing costs 360 776
Change in deferred rent 145 680
Foreign currency adjustment 79 180
Deferred income taxes (125) 7,188
Changes in assets and liabilities, net of the effects
from the purchase of businesses:
(Increase) decrease in -
Accounts receivable (4,514) (6,214)
Inventories 72 (251)
Prepaid expenses and other (281) (638)
Other assets (787) 979
Increase (decrease) in -
Accounts payable 739 (3,424)
Accrued expenses 4,336 (2,877)
Deferred revenue 56 981
--------------- ---------------
Net cash provided by operating activities 11,507 6,269
--------------- ---------------
INVESTING ACTIVITIES:
Payments for businesses acquired, net of cash acquired (27,828) (92,451)
Capital expenditures (30,799) (27,081)
Client acquisition costs (4,542) (6,875)
Increase in intangible assets (10,100) (7,449)
Payments on noncompete agreements (183) (442)
--------------- ---------------
Net cash used in investing activities (73,452) (134,298)
--------------- ---------------
FINANCING ACTIVITIES:
Net borrowings on revolving line of credit -- 1,231
Proceeds from issuance of long-term debt 226,701 120,000
Proceeds from issuance of Common Stock -- 93,514
Payments on long-term debt (141,216) (77,136)
Proceeds from issuance of non-compete 400 --
Distribution to shareholders (500) --
Prepayment penalty on early redemption of bonds -- (7,000)
Prepayment penalties and cancellation of warrants (2,625) --
Repurchase of Common Stock (1,450) --
Payment of debt financing costs -- (1,866)
--------------- ---------------
Net cash provided by financing activities 81,310 128,743
--------------- ---------------
NET INCREASE IN CASH AND CASH EQUIVALENTS 19,365 714
CASH AND CASH EQUIVALENTS, BEGINNING PERIOD 722 1,254
--------------- ---------------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 20,087 $ 1,968
=============== ===============
The accompanying notes are an integral part of these financial statements.
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PIERCE LEAHY CORP.
ITEM 1 - NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited, in thousands except share and per share data)
(1) GENERAL:
The interim consolidated financial statements presented herein have
been prepared by Pierce Leahy Corp. ("Pierce Leahy" 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 consolidated balance sheet as of December 31, 1996 has been derived
from the Company's consolidated financial statements that have been
audited by the Company's independent public accountants. The unaudited
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. The consolidated financial statements and notes
included herein should be read in conjunction with the consolidated
financial statements and notes for the year ended December 31, 1996,
included in the Company's Annual Report on Form 10-K and the Company's
Registration Statement on Form S-1 (File number 333-23121).
(2) ACQUISITIONS:
During 1996, the Company purchased twelve records management
businesses. During the nine months ended September 30, 1997, eleven
records management businesses were purchased by the Company. Ten of the
eleven acquisitions recorded during the nine months ended September 30,
1997 were accounted for using the purchase method of accounting and,
accordingly, the results of operations for such acquisitions have been
included in the consolidated results of the Company from their
respective acquisition dates. One acquisition has been accounted for
using the pooling of interests method. The Company issued 92,507 shares
of Common Stock in connection with this acquisition. The impact of this
acquisition on the consolidated financial position and results of
operations was not material and, as such, the prior period consolidated
financial statements were not restated for this transaction. The
results of operations for this acquisition have been included in the
consolidated results of the Company from its acquisition date. The
purchase price for the ten 1997 acquisitions accounted for by the
purchase method exceeded the underlying fair market value of the net
assets acquired by $75,961, which amount has been assigned to goodwill
and is being amortized over the estimated benefit period of 30 years.
For the ten acquisitions, the Company paid an aggregate of
approximately $92,451 in cash which was provided primarily from the
Company's credit facility and (approximately $6,000) from proceeds from
the Company's initial public offering.
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(3) LONG-TERM DEBT:
December 31, September 30,
1996 1997
------------------- -----------------
Revolving credit facility $ 5,327 $ 6,517
1996 Senior subordinated notes 200,000 130,000
1997 Senior subordinated notes - 120,000
Mortgages 3,679 5,060
Seller notes 7,600 925
Other 34 25
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216,640 262,527
Less: Current portion (7,310) (1,683)
------------------- -----------------
$ 209,330 $ 260,844
=================== =================
(4) EQUITY AND DEBT OFFERINGS:
On July 7, 1997, Pierce Leahy completed an initial public offering of
5,664,017 shares of its Common Stock (the "Equity Offering").
Concurrent with the Equity Offering, the Company also issued $120,000
principal amount of 9 1/8% Senior Subordinated Notes due 2007 (the
"Notes Offering").
A substantial portion of the net proceeds of the Equity Offering was
used to redeem $70,000 of the Company's 11 1/8% Senior Subordinated
Notes (the "1996 Notes") on August 1, 1997 at their face amount plus a
$7,000 (pretax) premium incurred in connection with the redemption. The
net proceeds from the Notes Offering were primarily used to repay
existing amounts outstanding under the Company's credit facility. The
remainder of the net proceeds of the offerings was used for general
corporate purposes and acquisitions.
The Company recorded a charge of $3,050 relating to the write-off of
unamortized deferred financing costs on the redeemed 1996 Notes and
fees associated with the repayment of the Company's prior credit
facility. These items (plus the $7,000 premium paid for the redemption)
resulted in an extraordinary charge of $6,036, net of the related tax
benefit of $4,014, in the third quarter of 1997.
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(5) SPECIAL COMPENSATION CHARGE:
In the third quarter of 1997, a special compensation charge of $1,752
was incurred for the write-off of the unamortized compensation expense
due to the acceleration of vesting of stock options granted on January
1, 1997.
(6) INCOME TAX EXPENSE:
Income taxes of $7,298 for the three and nine month periods ended
September 30, 1997 are comprised of two factors: (1) a $6,600 provision
in connection with the termination of the Company's status as a
Subchapter S corporation; and (2) a $698 provision related to current
periods results from July 1, 1997 (date of termination of Subchapter S
corporation status) through September 30, 1997.
(7) PRO FORMA INCOME TAXES:
Prior to June 30, 1997, Pierce Leahy was a Subchapter S corporation for
federal income tax purposes and, accordingly, income and loss were
passed through to the shareholders. The Subchapter S corporation status
was terminated in conjunction with the Equity Offering on July 1, 1997.
The pro forma income tax provision assumes the Company had been treated
as a C corporation for income tax purposes for the nine month period
ended September 30, 1997.
(8) SUBSEQUENT EVENTS:
Subsequent to September 30, 1997, the Company completed three
additional acquisitions; Records Management and Protection (New
Orleans, LA), Davidson Archives (Kansas City, MO), and Datafilms, Inc.
d/b/a Medical Administration Company (Denver, CO). The total
consideration for these three acquisitions was approximately $10,050.
Two of these transactions will be accounted for under the purchase
method of accounting and one will be accounted for under the pooling of
interests method of accounting.
- 9 -
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 nine month periods ended September 30,
1996 and 1997 should be read in conjunction with the consolidated financial
statements and footnotes for the three and nine month periods ended September
30, 1996 and 1997, included herein, and the consolidated financial statements
and footnotes for the year ended December 31, 1996, included in the Company's
Annual Report on Form 10-K and the Company's Registration Statement on Form S-1
(File number 333-23121).
Results of Operations
Three Months Ended September 30, 1996 Compared to Three Months Ended September
30, 1997
Total revenues increased from $32.5 million for the three months ended September
30, 1996 to $47.2 million for the three months ended September 30, 1997, an
increase of $14.7 million, or 45.3%. Sixteen acquisitions were completed from
October 1996 to September 1997 which accounted for $9.5 million, or 64.6%, of
such increase in total revenues. The balance of the revenue growth resulted from
sales to new customers and from net increases in cubic feet stored from existing
customers.
Storage revenues increased from $19.3 million for the three months ended
September 30, 1996 to $27.9 million for the three months ended September 30,
1997, an increase of $8.6 million, or 44.7%. Service and storage material sales
revenues increased from $13.2 million for the three months ended September 30,
1996 to $19.4 million for the three months ended September 30, 1997, an increase
of $6.1 million, or 46.2%.
Cost of sales (excluding depreciation and amortization) increased from $17.7
million in the three months ended September 30, 1996 to $25.9 million in the
three months ended September 30, 1997, an increase of $8.2 million, or 46.5%,
and increased slightly as a percentage of total revenues from 54.5% in the 1996
period to 54.9% in the 1997 period. The $8.2 million increase in cost of sales
resulted primarily from an increase in cubic feet stored associated with the
growth in business. The integration of Records Management Systems, Inc. ("RMS"),
acquired in April 1997 and which operates in nine cities, also contributed to
the slight increase in cost of sales as a percentage of total revenues.
Selling, general and administrative expenses increased from $5.0 million for the
three months ended September 30, 1996 to $7.1 million for the three months ended
September 30, 1997, an increase of $2.1 million, or 41.1%, but decreased as a
percentage of total revenues from 15.5% in the 1996 period to 15.0% in the 1997
period. The dollar increase was primarily attributable to increases in staffing,
including increases in sales force and administrative staff. The decrease as a
percentage of total revenues was attributable to economies realized from
operating administratively in a centralized manner and using the Company's
proprietary PLUS software system. The Company also began to realize some of the
efficiencies from the integration of administrative functions of RMS during the
1997 period.
- 10 -
Depreciation and amortization expense increased from $3.2 million for the three
months ended September 30, 1996 to $5.6 million for the three months ended
September 30, 1997, an increase of $2.4 million, or 73.9%, and increased as a
percentage of revenues from 10.0% for the three months ended September 30, 1996
to 11.9% for the three months ended September 30, 1997. The increase was
primarily attributable to the additional depreciation and amortization expense
related to the sixteen acquisitions completed from October 1996 to September
1997 and to capital expenditures for buildings, shelving, improvements to
records management facilities and information systems, and client acquisition
costs.
The Company incurred a non-recurring charge of $3.3 million, or 10.0%, of total
revenues in the three months ended September 30, 1996 relating to the purchase
of real estate from affiliated parties completed in connection with the sale of
the Company's 1996 Notes.
A special compensation charge of $1.8 million was incurred during the three
months ended September 30, 1997. This charge related to the write-off of the
unamortized compensation expense due to the acceleration of vesting of stock
options granted on January 1, 1997.
Interest expense increased from $5.4 million for the three months ended
September 30, 1996 to $7.4 million for the three months ended September 30,
1997, an increase of $2.0 million, or 37.0%. The increase was primarily
attributable to increased indebtedness related to financing acquisitions and
capital expenditures. Interest expense was also affected by the lower interest
income earned on $77.0 million held in escrow for approximately one month from
the Equity Offering until the redemption of a portion of the 1996 Notes, which
bear interest at 11 1/8%, on August 1, 1997.
As a result of the foregoing factors, the Company incurred a loss before income
taxes and extraordinary item of $2.1 million (-6.4% of revenues) for the three
months ended September 30, 1996 compared to a loss before income taxes and
extraordinary item of $0.6 million (-1.2% of revenues) for the three months
ended September 30, 1997.
The Company recorded income taxes of $7.3 million (or 15.4% of revenues) for the
three months ended September 30, 1997. These taxes were comprised of the tax
effect from the termination of the Company's Subchapter S status and the
provision for the results of the three months ended September 30, 1997. There
were no income taxes in the three months ended September 30, 1996 since the
Company operated as a Subchapter S corporation during such period.
The extraordinary items of $2.0 million (or 6.2% of total revenues) for the
three months ended September 30, 1996 and $6.0 million (12.8% of total revenues)
for the three months ended September 30, 1997 related to losses on early
extinguishment of debt. The $6.0 million extraordinary item for the three months
ended September 30, 1997 is net of a tax benefit of $4.0 million.
As a result of the foregoing items, the net loss for the three months ended
September 30, 1996 and 1997 was $4.1 million (-12.6% of revenues) and $13.9
million (-29.4% of revenues), respectively.
- 11 -
Earnings before interest, taxes, depreciation and amortization, non-recurring
charge, special compensation charge, and foreign currency translation ("EBITDA")
increased from $9.8 million for the three months ended September 30, 1996 to
$14.2 million for the three months ended September 30, 1997, an increase of $4.4
million, or 45.4%. As a percentage of revenues, EBITDA remained the same at
30.1% for the three months ended September 30, 1996 and 1997.
Nine Months Ended September 30, 1996 Compared to Nine Months Ended September 30,
1997
Total revenues increased from $93.8 million for the nine months ended September
30, 1996 to $133.7 million for the nine months ended September 30, 1997, an
increase of $39.9 million, or 42.5%. Sixteen acquisitions completed from October
1996 to September 30, 1997 accounted for $22.9 million, or 57.4%, of such
increase in total revenues. The balance of the revenue growth resulted from
sales to new customers and from net increases in cubic feet stored from existing
customers
Storage revenues increased from $54.8 million for the nine months ended
September 30, 1996 to $77.9 million for the nine months ended September 30,
1997, an increase of $23.2 million, or 42.3%. Service and storage material sales
revenues increased from $39.1 million for the nine months ended September 30,
1996 to $55.8 million for the nine months ended September 30, 1997, an increase
of $16.7 million, or 42.8%.
Cost of sales (excluding depreciation and amortization) increased from $52.9
million in the nine months ended September 30, 1996 to $73.9 million in the nine
months ended September 30, 1997, an increase of $21.0 million, or 39.6%, but
decreased as a percentage of total revenues from 56.4% in 1996 to 55.2% in 1997.
The $21.0 million increase in cost of sales resulted primarily from an increase
in cubic feet associated with the growth in business. The decrease in cost of
sales as a percentage of total revenues was due primarily to operating and
storage efficiencies.
Selling, general and administrative expenses increased from $14.9 million for
the nine months ended September 30, 1996 to $21.3 million for the nine months
ended September 30, 1997, an increase of $6.3 million, or 42.3%, and remained
the same as a percentage of revenues at 15.9%. The dollar increase was primarily
attributable to increases in staffing, including increases in the Company's
sales forces and increases due to acquisitions.
Depreciation and amortization expense increased from $8.8 million for the nine
months ended September 30, 1996 to $15.1 million for the nine months ended
September 30, 1997, an increase of $6.2 million, or 70.1%, and increased as a
percentage of revenues from 9.4% for the nine months ended September 30, 1996 to
11.3% for the nine months ended September 30, 1997. The increase was primarily
attributable to the additional depreciation and amortization expense related to
the sixteen acquisitions completed from October 1996 to September 1997 and to
capital expenditures for buildings, shelving, improvements to records management
facilities and information systems, and client acquisition costs.
- 12 -
The Company incurred a non-recurring charge of $3.3 million, or 3.5%, of total
revenues in the nine months ended September 30, 1996 related to the purchase of
real estate from affiliated parties completed in connection with the sale of the
Company's 1996 Notes.
A special compensation charge of $1.8 million was incurred during the nine
months ended September 30, 1997. This charge relates to the write-off of the
unamortized compensation expense due to the acceleration of vesting of stock
options granted on January 1, 1997.
Interest expense increased from $11.3 million for the nine months ended
September 30, 1996 to $22.2 million for the nine months ended September 30,
1997, an increase of $10.9 million, or 96.2%. The increase was primarily
attributable to increased indebtedness related to financing acquisitions and
capital expenditures, as well as the higher interest rate on the Company's 9
1/8% Senior Subordinated Notes issued in July 1997 compared to the bank debt
repaid upon the issuance of such Notes. Interest expense was also affected by
the lower interest income earned on $77.0 million held in escrow for
approximately one month from the Equity Offering until the redemption of a
portion of the 1996 Notes, which bear interest at 11 1/8%, on August 1, 1997.
As a result of the foregoing factors, the Company had income before income taxes
and extraordinary item of $2.6 million (2.7% of revenues) for the nine months
ended September 30, 1996 compared to a loss of $0.6 million (-0.5% of revenues)
for the nine months ended September 30, 1997.
The Company recorded income taxes of $7.3 million (or 5.5% of revenues) for the
nine months ended September 30, 1997. These taxes were comprised of the tax
effect from the termination of the Company's Subchapter S status and the
provision for the results of operations after the termination of its status as
an S Corporation on July 1, 1997. There were no income taxes in the nine months
ended September 30, 1996 since the Company operated as a Subchapter S
corporation during such period.
The extraordinary items of $2.0 million (or 2.1% of total revenues) for the nine
months ended September 30, 1996 and $6.0 (4.5% of total revenues) for the nine
months ended September 30, 1997 related to losses on early extinguishment of
debt. The $6.0 million extraordinary item for the nine months ended September
30, 1997 is net of a tax benefit of $4.0 million.
As a result of the foregoing items, the Company had net income of $0.6 million
and a net loss of $13.9 million for the nine months ended September 30, 1996 and
1997, respectively.
EBITDA increased from $26.0 million for the nine months ended September 30, 1996
to $38.6 million for the nine months ended September 30, 1997, an increase of
$12.6 million, or 48.4%. As a percentage of revenues, EBITDA increased from
27.7% for the nine months ended September 30, 1996 to 28.9% for the nine months
ended September 30, 1997.
Liquidity and Capital Resources
The Company has made significant investments, consisting primarily of (i)
acquisitions, (ii) capital expenditures for buildings, shelving, improvements to
records management facilities and information systems, and (iii) client
acquisition costs. Cash paid for these investments during the nine months ended
September 30, 1997 was $92.5 million, $27.1 million and $6.9 million,
- 13 -
respectively. These investments were primarily funded with the net proceeds of
the Company's equity and debt offerings and the borrowings under the Company's
credit facility.
During the nine months ended September 30, 1996, the Company generated $11.5
million in net cash provided by operations as compared to net cash provided by
operations of $6.3 million for the nine months ended September 30, 1997. The
$5.2 million decrease in net cash provided by operations for the nine months
ended September 30, 1997 compared to the prior year period resulted from a
decrease in net income of $14.5 million, an $11.1 million decrease in working
capital, of which $11.4 million was a result of reductions in accrued expenses
and accounts payable, offset by an increase in deferred income taxes of $7.3
million, an increase of $6.2 million in depreciation and amortization, an
increase in extraordinary items of $4.0 million, and an increase in special
compensation charge of $1.8 million.
The net cash provided by financing activities for the nine months ended
September 30, 1997 was $128.7 million, consisting primarily of $120.0 million of
gross proceeds from the issuance of the 1997 Notes and $93.5 million net
proceeds from the issuance of Common stock, offset by the repayment of long-term
debt of $77.1 million and the $7.0 million prepayment premium on the redemption
of a portion of the 1996 Notes. As of September 30, 1997, the Company had $2.0
million of available cash and cash equivalents and a credit facility providing
for $140.0 million of U.S. dollar borrowings and $35.0 million of Canadian
dollar borrowings. As of September 30, 1997, $6.5 million was outstanding under
the credit facility.
Forward-Looking Statements
This report contains certain forward-looking statements within the meaning of
Section 27A of the Securities Act and Section 21E of the Securities Exchange Act
of 1934, as amended, and is subject to the safe-harbor created by such sections.
Such forward-looking statements concern the Company's operations, economic
performance and financial condition, including in particular its acquisitions
and their integration into the Company's existing operations. Such statements
involve known and unknown risks, uncertainties and other factors that may cause
the actual results, performance or achievements of the Company, or industry
results, to be materially different from any future results, performance or
achievements expressed or implied by such forward-looking statements. The
factors that could cause such difference, include among others, the following:
general economic and business condition; changes in customer preferences;
competition; changes in technology; the integration of any acquisitions; changes
in business strategy; the indebtedness of the Company; quality of management,
business abilities and judgment of the Company's personnel; the availability,
terms and deployment of capital; and various other factors referenced in this
report. The forward-looking statements are made as of the date of this report,
and the Company assumes no obligation to update the forward-looking statements
or to update the reasons why actual results could differ from those projected in
the forward-looking statements.
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PART II - OTHER INFORMATION
Item 6 - Exhibits and Reports on Form 8-K
(a) Exhibits
Exhibit 27 - Financial Data Schedule for the nine months ended
September 30, 1997, submitted to the Securities and
Exchange Commission in electronic format
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.
PIERCE LEAHY CORP.
November 14, 1997 By: /s/ Douglas B. Huntley
----------------- ---------------------------------------
(date) Douglas B. Huntley
Vice President and Chief Financial Officer
(Principal Financial Officer)
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