Investor Relations Contact:
Stephen P. Golden
Vice President, Investor Relations
sgolden@ironmountain.com
- ------------------------
(617) 535-2994
FOR IMMEDIATE RELEASE
Iron Mountain Reports Second Quarter 2008 Financial Results
o Revenue and OIBDA up 15% for Q2 driven by solid performance across
business segments
o Operating income increased 11% to $124 million; net income $0.18 per
diluted share
o Company announces positive revisions to full year guidance based on
solid first half performance
BOSTON - July 31, 2008 - Iron Mountain Incorporated (NYSE: IRM), the global
leader in information protection and storage services, today announced its
financial results for the quarter ended June 30, 2008, reporting strong revenue
and operating income before depreciation and amortization (OIBDA) growth and
earnings of $0.18 per diluted share.
Iron Mountain posted strong year-over-year revenue growth of 15% in the second
quarter supported by internal growth of 9%, with acquisitions and favorable
foreign currency changes contributing approximately 6% to total growth. The
Company drove strong revenue gains across its North American Physical,
International Physical and Worldwide Digital business segments. Total revenue
growth was highlighted by continued strength in service revenue growth,
supported by international gains and strong performance in the digital business.
OIBDA of $197 million for the quarter exceeded the Company's forecasted range
reflecting benefits from strong revenue growth and a 17% year-over-year increase
in gross profit. Net income for the quarter was $36 million, or $0.18 per
diluted share, and capital expenditures were in line with Company expectations
for the quarter.
"We are pleased with our strong second quarter results and solid first half
performance. We're driving solid growth across our business, reflecting our
team's focus on disciplined execution in servicing our customers," said Bob
Brennan, President and CEO. "We continue to advance our growth strategy,
reflected in solid growth in service revenues, expansion of our international
business and strong performance in our developing digital business."
Key Financial Highlights - Q2 2008
Iron Mountain's total consolidated revenues for the quarter grew 15% over the
prior year period to $769 million driven by solid internal growth of 9% and
augmented by several acquisitions completed in 2007, most notably ArchivesOne,
Inc., RMS Services - USA, Inc. and Stratify, Inc. Storage internal growth of 8%
was as expected. Core service internal revenue growth of 9% was supported by
continued strength in shredding services and strong performance in the physical
data protection business. Complementary service revenues posted 9% internal
growth highlighted by strength in digital services, physical data protection and
recycled paper revenues. See Appendix A at the end of this press release for a
presentation of Selected Financial Data.
--more--
Iron Mountain Reports Second Quarter 2008 Financial Results / Page 2
The Company posted a 17% increase in gross profits for the quarter driven
primarily by strong revenue growth combined with real estate and productivity
gains. Gross profit margin improved from 53.9% in the second quarter of 2007 to
54.9% in the second quarter of 2008 due to higher storage gross margins,
increased recycled paper revenues and strength in the digital service
businesses. These benefits more than offset the impact of the shift in revenue
mix, as labor and transportation intensive services such as secure shredding and
Document Management Solutions (DMS) grew faster than storage. OIBDA for the
quarter grew 15% over the prior year period to $197 million, reflecting the
Company's revenue performance and gross margin gains. Selling, general and
administrative costs increased 20% in the quarter, ahead of revenue gains,
reflecting impacts from integration of recent acquisitions and increased
investments in security, new products and infrastructure enhancements initiated
in 2007. The impact of these investments is expected to moderate later this
year. See Appendix B at the end of this press release for a discussion of OIBDA
and the required reconciliation to the appropriate GAAP measures.
Operating income for the second quarter of 2008 was $124 million, up 11%
compared to the same period in 2007, as OIBDA gains were partially offset by
increased depreciation and amortization expense, driven primarily by higher
levels of capital expenditures in 2007 and acquisitions. Net income for the
quarter was $36 million, or $0.18 per diluted share, including other expense,
net of $4 million, or $0.01 per diluted share. The components of other expense,
net, including the impact of foreign currency fluctuations are detailed in the
table below.
The Company's effective tax rate for the quarter was 41.0%, including
approximately 3% related to the net tax impact of discrete items, including the
interest on its tax reserves. Based on the current view of its 2008 projected
tax position, the Company expects its tax rate before the impact of any foreign
currency rate fluctuations and other discrete items for 2008 to be approximately
38%. Included in the 38% rate for 2008 is approximately 2% resulting from the
unbenefited net operating losses of certain start-up entities. Beyond 2008, we
expect our tax rate before the impact of any foreign currency rate fluctuations
and other discrete items to decrease over time to approximately 36%.
The Company's Free Cash Flow before Acquisitions and Discretionary Investments
for the six months ended June 30, 2008 was $20 million reflecting higher capital
expenditures as the higher 2007 year end accrual reversed into the first quarter
and higher use of working capital compared to the same period in 2007. The use
of working capital was driven by increased accounts receivable balances due to
sales growth, and reductions in accounts payable and accrued expense balances
due to the payment of annual bonuses, and the timing of normal payroll and
accounts payable cycles relative to quarter end. See Appendix B at the end of
this press release for a discussion of FCF and the required reconciliation to
the appropriate GAAP measures.
Acquisitions
Iron Mountain's acquisition strategy focuses on acquiring attractive businesses
that provide a strong platform for future growth by expanding the Company's
geographic footprint and service offerings while enhancing its existing
operations. Since the end of the first quarter, the Company completed two
acquisitions, a records management business in North America and a DMS business
in France, entered the Swiss market via a minority interest in a local records
management business and acquired the remaining 29% minority interest in its
Brazilian business. In addition, the Company divested itself of its North
American commodity product sales business effective June 1, 2008. Consistent
with its treatment of acquisitions, the Company will eliminate all revenues
associated with its data products business from the calculation of its internal
growth in 2008 and 2009. Adjusting for this divestiture had no impact on the
Company's internal growth rates for its first quarter ended March 31, 2008.
--more--
Iron Mountain Reports Second Quarter 2008 Financial Results / Page 3
Financial Performance Outlook
Iron Mountain is issuing its financial performance outlook for the third quarter
ending September 30, 2008 and making positive revisions to its outlook for the
full year ending December 31, 2008. This guidance is based on current
expectations and does not include the potential impact of any future
acquisitions. For the full year, the Company is targeting 12% to 13% revenue
growth and 11% to 14% OIBDA growth, performance consistent with its long-term
financial goals. Please note that targeted OIBDA growth excludes current and
prior year impacts from asset dispositions. The Company's outlook for the full
year ending December 31, 2008 set forth below includes the $3 million loss on
asset write-offs reported year-to-date 2008 (dollars in millions):
Full Year Ending December 31, 2008
------------------------------------------------------
Quarter Ending
September 30, 2008 Previous Current
------------------------ ------------------------ -------------------------
Low High Low High Low High
----------- ------------ ------------ ----------- ------------ ------------
Revenues $755 $775 $3,015 $3,080 $3,050 $3,090
Operating Income 119 129 474 499 478 498
Depreciation & Amortization ~75 ~292 ~295
Capital Expenditures 440 480 440 480
Internal Revenue Growth 7% 9% 7% 9%
Iron Mountain's conference call to discuss its second quarter 2008 financial
results and third quarter and full year 2008 outlook will be held today at 11:00
a.m. Eastern Time. In order to further enhance the overall quality of its
investor communications, the Company will simulcast the conference call on its
Web site at www.ironmountain.com, the content of which is not part of this
earnings release. A slide presentation providing summary financial and
statistical information that will be discussed on the conference call will also
be posted to the Web site and available for real-time viewing. The slide
presentation and replays of the conference call will be available on the Web
site for future reference.
About Iron Mountain
Iron Mountain Incorporated (NYSE:IRM) helps organizations around the world
reduce the costs and risks associated with information protection and storage.
The Company offers comprehensive records management and data protection
solutions, along with the expertise and experience to address complex
information challenges such as rising storage costs, litigation, regulatory
compliance and disaster recovery. Founded in 1951, Iron Mountain is a trusted
partner to more than 100,000 corporate clients throughout North America, Europe,
Latin America and Asia Pacific. For more information, visit the Company's Web
site at www.ironmountain.com.
--more--
Iron Mountain Reports Second Quarter 2008 Financial Results / Page 4
Forward Looking Statements
This press release contains certain forward-looking statements within the
meaning of the Private Securities Litigation Reform Act of 1995 and federal
securities laws, and is subject to the safe-harbor created by such Act.
Forward-looking statements include our 2008 financial performance outlook and
statements regarding our goals, beliefs, future growth strategies, investments,
objectives, plans and current expectations. These statements involve known and
unknown risks, uncertainties and other factors that may cause the actual results
to be materially different from those contemplated in the forward-looking
statements. Such factors include, but are not limited to: (i) the cost to comply
with current and future legislation, regulations and customer demands relating
to privacy issues; (ii) the impact of litigation that may arise in connection
with incidents in which we fail to protect the Company's customers' information;
(iii) changes in the price for the Company's services relative to the cost of
providing such services; (iv) changes in customer preferences and demand for the
Company's services; (v) in the various digital businesses in which the Company
is engaged, the cost of capital and technical requirements, demand for the
Company's services or competition for customers; (vi) the Company's ability or
inability to complete acquisitions on satisfactory terms and to integrate
acquired companies efficiently; (vii) the cost or potential liabilities
associated with real estate necessary for the Company's business; (viii) the
performance of business partners upon whom the Company depends for technical
assistance or management and acquisition expertise outside the United States;
(ix) changes in the political and economic environments in the countries in
which the Company's international subsidiaries operate; (x) claims that the
Company's technology violates the intellectual property rights of a third party;
(xi) other trends in competitive or economic conditions affecting Iron
Mountain's financial condition or results of operations not presently
contemplated; and (xii) other risks described more fully in the Company's most
recently filed Annual Report on Form 10-K under "Item 1A. Risk Factors". Except
as required by law, Iron Mountain undertakes no obligation to release publicly
the result of any revision to these forward-looking statements that may be made
to reflect events or circumstances after the date hereof or to reflect the
occurrence of unanticipated events.
-- more --
Iron Mountain Reports Second Quarter 2008 Financial Results / Page 5
APPENDIX A
Selected Financial Data:
(dollars in millions, except per share data) Q2/2007 Q2/2008 Inc (Dec)
-----------------------------
Revenues $ 669 $ 769 15%
Gross Profit (excluding D&A) $ 361 $ 422 17%
Gross Margin % 53.9% 54.9%
OIBDA $ 172 $ 197 15%
OIBDA Margin % 25.7% 25.6%
Operating Income $ 111 $ 124 11%
Interest Expense, net $ 61 $ 60 (2)%
Net Income $ 39 $ 36 (8)%
EPS - Diluted $0.19 $ 0.18
Components of Other Income (Expense), net:
Foreign Currency Exchange Gains (Losses) $ 4 $ (4)
Insurance Related Gains 3 --
Debt Extinguishment Charges (4) --
Q2/2008 YTD/2008
------------ ------------
Components of Revenue Growth:
Storage internal growth rate 8% 8%
Service internal growth rate 9% 9%
------------ ------------
Total internal growth rate 9% 9%
Impact of acquisitions 4% 5%
Impact of foreign currency fluctuations 3% 3%
------------ ------------
Total revenue growth 15% 17%
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NOTE: Column may not foot due to rounding.
APPENDIX B
Operating Income Before Depreciation and Amortization
Iron Mountain uses Operating Income Before Depreciation and Amortization
("OIBDA"), an integral part of its planning and reporting systems, to evaluate
the operating performance of the consolidated business. The Company uses
multiples of current and projected OIBDA in conjunction with its discounted cash
flow models to determine its overall enterprise valuation and to evaluate
acquisition targets. The Company believes OIBDA and OIBDA Margin provide current
and potential investors with relevant and useful information regarding its
ability to generate cash flow to support business investment and its ability to
grow revenues faster than operating expenses. OIBDA is not a measurement of
financial performance under accounting principles generally accepted in the
United States, or GAAP, and should not be considered as a substitute for
operating or net income or cash flows from operating activities (as determined
in accordance with GAAP).
-- more --
Iron Mountain Reports Second Quarter 2008 Financial Results / Page 6
Following is a reconciliation of operating income before depreciation and
amortization to operating income and net income (in millions):
Three Months Ended Six Months Ended
June 30, June 30,
---------------------------------------------------
2007 2008 2007 2008
------------ ------------ ------------ ------------
OIBDA (Operating Income Before Depreciation and Amortization) $ 172 $ 197 $ 328 $ 373
Less: Depreciation and Amortization 60 73 117 142
----- ----- ----- -----
Operating Income $ 111 $ 124 $ 211 $ 230
Less: Interest Expense, net 61 60 112 120
Other Income (Expense), net 3 3
(4) 11
Provision for Income Taxes 14 25 36 43
Minority Interest -- -- 1 --
----- ----- ----- -----
Net Income $ 39 $ 36 $ 74 $ 69
===== ===== ===== =====
NOTE: Columns may not foot due to rounding.
Free Cash Flows Before Acquisitions and Discretionary Investments, or FCF
FCF is defined as Cash Flows From Operating Activities less capital expenditures
(excluding real estate), net of proceeds from the sales of property and
equipment and other, net, and additions to customer acquisition costs. Our
management uses this measure when evaluating the operating performance and
profitability of our consolidated business. FCF is a useful measure in
determining our ability to generate cash flows in excess of our capital
expenditures (both growth and maintenance) and our customer acquisition costs.
As such, we believe this measure provides relevant and useful information to our
current and potential investors. FCF should be considered in addition to, but
not as a substitute for, other measures of financial performance reported in
accordance with GAAP, such as cash flows from operating activities (as
determined in accordance with GAAP).
Following is a reconciliation of Free Cash Flows Before Acquisitions and
Discretionary Investments to Cash Flows from Operating Activities (in millions):
Six Months Ended
June 30,
--------------------------
2007 2008
--------------------------
Free Cash Flows Before Acquisitions and Discretionary Investments $ 59 $ 20
Add: Capital Expenditures (excluding real estate), net 139 163
Additions to Customer Acquisition Costs 9 7
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Cash Flows From Operating Activities $207 $190
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NOTE: Columns may not foot due to rounding.
-- more --
Iron Mountain Reports Second Quarter 2008 Financial Results / Page 7
IRON MOUNTAIN INCORPORATED
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Amounts in Thousands except Per Share Data)
(Unaudited)
Three Months Ended Six Months Ended
June 30, June 30,
-------------------------------------------------------
2007 2008 2007 2008
-------------------------------------------------------
REVENUES:
Storage $ 368,679 $ 416,195 $ 720,844 $ 820,512
Service and Storage Material Sales 300,010 352,662 580,357 697,729
------- ------- --------- ---------
Total Revenues 668,689 768,857 1,301,201 1,518,241
OPERATING EXPENSES:
Cost of Sales (Excluding Depreciation and Amortization) 307,963 346,971 602,968 694,722
Selling, General and Administrative 188,845 225,932 369,350 448,160
Depreciation and Amortization 60,290 72,907 117,462 142,437
Loss (Gain) on Disposal / Writedown of Property, Plant and
Equipment, Net 357 (839) 394 2,706
------- ------- --------- ---------
Total Operating Expenses 557,455 644,971 1,090,174 1,288,025
------- ------- --------- ---------
OPERATING INCOME 111,234 123,886 211,027 230,216
INTEREST EXPENSE, NET 61,222 59,757 119,776
111,557
OTHER (INCOME) EXPENSE, NET (3,235) 3,532 (10,958) (2,503)
------- ------- --------- ---------
Income Before Provision for Income Taxes and Minority
Interest 53,247 60,597 110,428 112,943
PROVISION FOR INCOME TAXES
14,024 24,859 36,107 43,131
MINORITY INTEREST IN EARNINGS OF SUBSIDIARIES, NET
171 (148) 562 444
------- ------- --------- ---------
Net Income $ 39,052 $ 35,886 $ 73,759 $ 69,368
NET INCOME PER SHARE - BASIC $ 0.20 $ 0.18 $ 0.37 $ 0.35
======= ======= ========= =========
NET INCOME PER SHARE - DILUTED $ 0.19 $ 0.18 $ 0.37 $ 0.34
======= ======= ========= =========
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING - BASIC 199,792 200,855 199,511 200,863
======= ======= ========= =========
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING - DILUTED 201,742 203,038 201,579 203,229
======= ======= ========= =========
Operating Income before Depreciation and Amortization $ 171,524 $ 196,793 $ 328,489 $ 372,653
======= ======= ========= =========
-- more --
Iron Mountain Reports Second Quarter 2008 Financial Results / Page 8
IRON MOUNTAIN INCORPORATED
CONDENSED CONSOLIDATED BALANCE SHEETS
(Amounts in Thousands)
(Unaudited)
December 31, June 30,
2007 2008
----------- -----------
ASSETS
CURRENT ASSETS:
Cash and Cash Equivalents $ 125,607 $ 203,197
Accounts Receivable (less allowances
of $19,246 and $19,954, respectively) 564,049 603,419
Other Current Assets 132,740 148,533
----------- -----------
Total Current Assets 822,396 955,149
----------- -----------
PROPERTY, PLANT AND EQUIPMENT:
Property, Plant and Equipment at Cost 3,522,525 3,672,255
Less: Accumulated Depreciation (1,186,564) (1,300,916)
----------- -----------
Property, Plant and Equipment, net 2,335,961 2,371,339
----------- -----------
OTHER ASSETS:
Goodwill, net 2,574,292 2,583,428
Other Non-current Assets, net 575,272 598,694
----------- -----------
Total Other Assets 3,149,564 3,182,122
----------- -----------
Total Assets $ 6,307,921 $ 6,508,610
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LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Current Portion of Long-term Debt $ 33,440 $ 98,839
Other Current Liabilities 732,237 656,769
----------- -----------
Total Current Liabilities 765,677 755,608
LONG-TERM DEBT, NET OF CURRENT PORTION 3,232,848 3,318,950
OTHER LONG-TERM LIABILITIES 504,852 529,440
MINORITY INTERESTS 9,089 4,270
STOCKHOLDERS' EQUITY 1,795,455 1,900,342
----------- -----------
Total Liabilities and Stockholders' Equity $ 6,307,921 $ 6,508,610
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