[LOGO OF IRON MOUNTAIN]
Investor Relations Contact:
Stephen P. Golden
Vice President, Investor Relations
sgolden@ironmountain.com
(617) 535-2994
FOR IMMEDIATE RELEASE
Iron Mountain Reports Third Quarter 2008 Financial Results
o Q3 revenue up 12% year-over-year driven by solid 8% internal growth
and balanced performance across business segments
o OIBDA (excluding asset gains and losses) increases 14% year-over-year
on revenue growth, gross margin gains and disciplined cost management;
operating income increases to $136 million
o Significant strengthening of U.S. Dollar drives $16 million, non-cash
charge and higher tax provision
o Revisions made to full year 2008 guidance to reflect projected impacts
from recent changes in foreign currency exchange rates
BOSTON - October 30, 2008 - Iron Mountain Incorporated (NYSE: IRM), the global
leader in information protection and storage services, today announced its
financial results for the quarter ended September 30, 2008, reporting strong
revenue and operating income before depreciation and amortization (OIBDA) growth
and earnings of $0.06 per diluted share.
Iron Mountain posted strong year-over-year revenue growth of 12% in the third
quarter supported by internal growth of 8%, with acquisitions and foreign
currency rate changes contributing approximately 4% to total growth. The Company
drove solid 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 strong
overall performance in the North American physical business. OIBDA of $211
million for the quarter exceeded the Company's forecasted range driven by a 14%
year-over-year increase in gross profit, reflecting strong revenue gains and
continued improvements in gross margins.
"While considerable volatility in foreign exchange rates impacts our reported
results, our underlying operational performance and outlook remain strong,
reflecting the resiliency of our business model," said Bob Brennan, President
and CEO. "We are pleased with our strong third quarter operating results and
continued solid business performance. These results reflect solid growth across
our segments, driven by our team's focus on disciplined execution in servicing
our customers. We also continue to exercise financial discipline in the current
environment, maintaining strong liquidity and financing capacity."
Net income for the quarter of $11 million, or $0.06 per diluted share, was
impacted by the significant strengthening of the U.S. dollar since the end of
the second quarter of 2008. Declines of approximately 9% in currencies such as
the British pound sterling and the Euro versus the U.S. dollar during the
quarter resulted in a net $16 million non-cash charge in other expense, net as
the Company marked its U.S. dollar denominated third party and intercompany debt
to market. The net $16 million expense includes offsetting foreign currency
gains and losses, which are incurred in different tax jurisdictions. As a
result, the Company recorded an additional $20 million of non-cash tax
provision. For the quarter, these non-cash charges impacted earnings by $0.17
per diluted share and raised the effective tax rate to 81.6%.
--more--
Iron Mountain Reports Third Quarter 2008 Financial Results / Page 2
Key Financial Highlights - Q3 2008
Iron Mountain's total consolidated revenues for the quarter grew 12% over the
prior year period to $784 million driven by solid internal growth of 8% 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 13% was supported by
continued strength in shredding services, strong performance in the physical
data protection business and increased fuel surcharges. Complementary service
revenue internal growth was modest, as expected, due primarily to the completion
of large special projects in Europe and some softness in the more discretionary
revenues such as fulfillment services and software license sales. See Appendix A
at the end of this press release for a presentation of Selected Financial Data.
The Company posted a 14% increase in gross profits for the quarter driven
primarily by strong revenue growth. Gross profit margin improved from 54.0% in
the third quarter of 2007 to 55.1% in the third quarter of 2008 due to improved
storage gross margins in North America, Latin America and Asia Pacific, and
increased service margins, supported in part by higher recycled paper revenues.
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 10% over the prior year period to $211 million,
reflecting the Company's revenue performance and gross margin gains. Selling,
general and administrative costs increased 14% in the quarter, slightly ahead of
revenue gains, reflecting impacts from the integration of recent acquisitions
and increased investments in security, new products and infrastructure
enhancements initiated in 2007. The impacts of these investments moderated in
the third quarter and are expected to moderate further in the fourth quarter.
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 third quarter of 2008 was $136 million, up 6% 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
$11 million, or $0.06 per diluted share, including other expense, net of $16
million, driven by foreign currency rate fluctuations. The components of other
expense, net, are detailed in the table below.
The Company's effective tax rate for the quarter before the impact of any
foreign currency rate fluctuations and other discrete items was approximately
40%, which is higher than the expected rate of 38% due to an increase in the
estimate of disallowed interest expense deductions at certain foreign
subsidiaries. The net tax impact of the foreign currency rate fluctuations as
described above added approximately 42% to the effective rate. 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 39%. Included in the 39% 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 by approximately 2%.
The Company's Free Cash Flow before Acquisitions and Discretionary Investments
for the nine months ended September 30, 2008 was $86 million. Higher cash flows
from operating activities compared to the comparable prior year period were more
than offset by increased capital expenditures as the higher 2007 year end
accrual reversed into the first quarter of 2008. See Appendix B at the end of
this press release for a discussion of FCF and the required reconciliation to
the appropriate GAAP measures.
--more--
Iron Mountain Reports Third Quarter 2008 Financial Results / Page 3
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 second quarter, the Company completed the
previously announced acquisition of a DMS business in France.
Financial Performance Outlook
Iron Mountain is refining its financial performance 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 now targeting 11%-12% revenue growth and 11%-13% OIBDA
growth (excluding gains and losses from asset disposals/write-offs). This
performance is consistent with its long-term financial goals. Reductions in the
company's full year revenue and OIBDA guidance are driven by the significant
strengthening of the U.S. dollar against the major currencies, which lowers
results reported in US dollars. The Company's outlook for the fourth quarter of
2008 set forth below includes a reduction of about 5% in both revenue and OIBDA
driven by the strengthening U.S. dollar, which more than offset the impact of
higher than expected performance in the third quarter. Also included in the full
year outlook is the $5 million loss on asset write-offs reported year-to-date
2008 plus the $2 million write-off associated with planned real estate moves
expected to be recorded in the quarter ending December 31, 2008 (dollars in
millions):
Full Year Ending December 31, 2008
------------------------------------------------------
Quarter Ending
December 31, 2008 Previous Current
---------------- ---------------- -----------------
Low High Low High Low High
---------------- ---------------- -----------------
Revenues $ 732 $ 762 $ 3,050 $ 3,090 $ 3,035 $ 3,065
Operating Income 106 121 478 498 473 488
Depreciation & Amortization ~78 ~295 ~295
Capital Expenditures ~440 ~430
Internal Revenue Growth 7% 9% 7% 9%
Iron Mountain's conference call to discuss its third quarter 2008 financial
results and third quarter and full year 2008 outlook will be held today at 8:30
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 120,000 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 Third 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 Third Quarter 2008 Financial Results / Page 5
APPENDIX A
Selected Financial Data:
(dollars in millions, except per share data) Q3/2007 Q3/2008 Inc (Dec)
------- ------- --------
Revenues $ 702 $ 784 12%
Gross Profit (excluding D&A) $ 379 $ 432 14%
Gross Margin % 54.0% 55.1%
OIBDA $ 192 $ 211 10%
OIBDA Margin % 27.4% 26.9%
Operating Income $ 129 $ 136 6%
Interest Expense, net $ 58 $ 59 3%
Provision for income taxes $ 11 $ 50 370%
Effective tax rate 17.0% 81.6%
Net Income $ 51 $ 11 (78)%
EPS - Diluted $0.25 $0.06
Components of Other Income (Expense), net:
Foreign Currency Exchange Gains (Losses) $ (9) $ (16)
Q3/2008 YTD/2008
------- --------
Components of Revenue Growth:
Storage internal growth rate 8% 8%
Service internal growth rate 9% 9%
------- --------
Total internal growth rate 8% 8%
Impact of acquisitions >2% >4%
Impact of foreign currency fluctuations >1% >2%
------- --------
Total revenue growth 12% 15%
------- --------
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 Third 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 Nine Months Ended
September 30, September 30,
------------------ -------------------
2007 2008 2007 2008
-------- -------- -------- --------
OIBDA (Operating Income Before Depreciation
and Amortization) $ 192 $ 211 $ 520 $ 584
Less: Depreciation and Amortization 63 75 181 217
Operating Income $ 129 $ 136 $ 340 $ 367
Less: Interest Expense, net 58 59 169 179
Other Income (Expense), net (9) (16) 2 (13)
Provision for Income Taxes 11 50 47 93
Minority Interest 1 -- 1 --
-------- -------- -------- --------
Net Income $ 51 $ 11 $ 125 $ 81
======== ======== ======== ========
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):
Nine Months Ended
September 30,
-------------------
2007 2008
-------- --------
Free Cash Flows Before Acquisitions and
Discretionary Investments $ 95 $ 86
Add: Capital Expenditures (excluding
real estate), net 221 254
Additions to Customer Acquisition
Costs 12 10
-------- --------
Cash Flows From Operating Activities $ 328 $ 350
======== ========
NOTE: Columns may not foot due to rounding.
-- more --
Iron Mountain Reports Third 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 Nine Months Ended
September 30, September 30,
-------------------------- --------------------------
2007 2008 2007 2008
----------- ----------- ----------- -----------
REVENUES:
Storage $ 383,390 $ 421,673 $ 1,104,234 $ 1,242,185
Service and Storage Material Sales 318,443 362,665 898,800 1,060,394
----------- ----------- ----------- -----------
Total Revenues 701,833 784,338 2,003,034 2,302,579
OPERATING EXPENSES:
Cost of Sales (Excluding Depreciation and Amortization) 322,598 352,251 925,566 1,046,973
Selling, General and Administrative 192,274 218,958 561,624 667,118
Depreciation and Amortization 63,207 74,856 180,669 217,293
(Gain) Loss on Disposal / Writedown of Property, Plant and (5,033) 1,928 (4,639) 4,634
----------- ----------- ----------- -----------
Equipment, Net
Total Operating Expenses 573,046 647,993 1,663,220 1,936,018
----------- ----------- ----------- -----------
OPERATING INCOME 128,787 136,345 339,814 366,561
INTEREST EXPENSE, NET 57,556 59,423 169,113 179,199
OTHER EXPENSE (INCOME), NET 8,504 15,660 (2,454) 13,157
----------- ----------- ----------- -----------
Income Before Provision for Income Taxes and Minority 62,727 61,262 173,155 174,205
Interest
PROVISION FOR INCOME TAXES 10,647 50,010 46,754 93,141
MINORITY INTEREST IN EARNINGS OF SUBSIDIARIES, NET 746 (62) 1,308 382
----------- ----------- ----------- -----------
Net Income $ 51,334 $ 11,314 $ 125,093 $ 80,682
=========== =========== =========== ===========
NET INCOME PER SHARE - BASIC $ 0.26 $ 0.06 $ 0.63 $ 0.40
=========== =========== =========== ===========
NET INCOME PER SHARE - DILUTED $ 0.25 $ 0.06 $ 0.62 $ 0.40
=========== =========== =========== ===========
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING - BASIC 200,203 201,575 199,742 201,100
=========== =========== =========== ===========
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING - DILUTED 202,111 203,518 201,757 203,325
=========== =========== =========== ===========
Operating Income before Depreciation and Amortization $ 191,994 $ 211,201 $ 520,483 $ 583,854
=========== =========== =========== ===========
-- more --
Iron Mountain Reports Third Quarter 2008 Financial Results / Page 8
IRON MOUNTAIN INCORPORATED
CONDENSED CONSOLIDATED BALANCE SHEETS
(Amounts in Thousands)
(Unaudited)
December 31, September 30,
2007 2008
----------- -----------
ASSETS
CURRENT ASSETS:
Cash and Cash Equivalents $ 125,607 $ 318,244
Accounts Receivable (less allowances of $19,246
and $18,685, respectively) 564,049 610,472
Other Current Assets 132,740 153,584
----------- -----------
Total Current Assets 822,396 1,082,300
----------- -----------
PROPERTY, PLANT AND EQUIPMENT:
Property, Plant and Equipment at Cost 3,522,525 3,747,368
Less: Accumulated Depreciation (1,186,564) (1,356,255)
----------- -----------
Property, Plant and Equipment, net 2,335,961 2,391,113
----------- -----------
OTHER ASSETS:
Goodwill, net 2,574,292 2,581,278
Other Non-current Assets, net 575,272 583,003
----------- -----------
Total Other Assets 3,149,564 3,164,281
----------- -----------
Total Assets $ 6,307,921 $ 6,637,694
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Current Portion of Long-term Debt $ 33,440 $ 22,367
Other Current Liabilities 732,237 759,218
----------- -----------
Total Current Liabilities 765,677 781,585
LONG-TERM DEBT, NET OF CURRENT PORTION 3,232,848 3,393,367
OTHER LONG-TERM LIABILITIES 504,852 561,900
MINORITY INTERESTS 9,089 3,376
STOCKHOLDERS' EQUITY 1,795,455 1,897,466
----------- -----------
Total Liabilities and Stockholders' Equity $ 6,307,921 $ 6,637,694
=========== ===========
# # #