[IRON MOUNTAIN LOGO]
Investor Relations Contact:
Stephen P. Golden
Vice President, Investor Relations
sgolden@ironmountain.com
- ------------------------
(617) 535-4766
FOR IMMEDIATE RELEASE
Iron Mountain Reports Fourth Quarter and Full Year 2008 Financial Results
- - Company reports solid finish to 2008; exceeds $3 billion in revenues for the
first time in its history and achieves its full year financial objectives
- - Fourth quarter OIBDA (excluding asset gains and losses) increases 11%
year-over-year on 9% total core revenue internal growth, gross margin gains and
disciplined cost management; operating income increases 10% over prior year
quarter to $126 million
- - Liquidity position strengthened as cash and available credit exceed $775
million
- - 2009 guidance reflects continued solid operating performance; includes impacts
of recent foreign currency fluctuations and declines in recycled paper prices
BOSTON, Feb. 26 /PRNewswire-FirstCall/ -- Iron Mountain Incorporated (NYSE:
IRM), the global leader in information protection and storage services, today
reported its financial results for the quarter and full year ended December 31,
2008, announcing a solid finish to a strong year of performance. The Company
exceeded $3 billion in total revenues for the first time in its history and
achieved its full year financial objectives by posting 8% internal revenue
growth, 13% operating income before depreciation and amortization (OIBDA) growth
(excluding asset gains and losses) and making significant progress in improving
its capital efficiency. Importantly, the Company ended the year with excellent
liquidity comprised of cash and availability under its revolving credit facility
of more than $775 million.
"We are pleased with our fourth quarter operating results and continued solid
business performance especially in such difficult economic conditions. These
results reflect the fundamental resiliency of our business model and our team's
focus on disciplined execution, particularly in our North American Physical
segment," said Bob Brennan, President and CEO. "We intend to build on this
progress in 2009, with goals for solid underlying operating performance. We
continue to exercise financial discipline in the current environment,
maintaining strong liquidity and financing capacity."
Iron Mountain reported year-over-year revenue growth of 4% in the fourth
quarter. Internal revenue growth of 7% was supported by strong total core
revenue internal growth of 9%. Acquisitions completed in 2007 and earlier in
2008 added 1% to reported revenues and foreign currency rate changes reduced
reported revenues by approximately 4%, respectively in the quarter. The Company
drove solid total core revenue gains across its North American Physical,
International Physical and Worldwide Digital business segments. Total revenue
growth was highlighted by continued strength in storage revenue growth, and by
strong core service revenue performance in the North American Physical business.
As expected, internal revenue gains were constrained by pressures on
complementary service revenues. OIBDA of $199 million for the quarter was at the
top of the Company's forecasted range driven by higher gross profit margins and
continued focus on overhead cost controls. See Appendix A at the end of this
press release for a presentation of Selected Financial Data.
Net income for the quarter of $1 million, or $0.01 per diluted share, was
impacted by the significant strengthening of the U.S. dollar since the end of
the third quarter of 2008. Declines of 15% to 20% in currencies such as the
Canadian dollar and British pound versus the U.S. dollar during the quarter
resulted in a net $16 million charge in other expense as the Company marked its
foreign currency forward contracts and non-U.S. dollar denominated third party
and intercompany debt to market. The net $16 million expense includes both
foreign currency gains and losses, which are incurred in different tax
jurisdictions. As a result, the Company recorded an additional $24 million tax
provision. For the quarter, these charges impacted earnings by $0.20 per diluted
share. See Appendix B at the end of this press release for a discussion of OIBDA
and the required reconciliation to the appropriate GAAP measures.
Key Financial Highlights - Q4 2008
Iron Mountain's total consolidated revenues for the quarter grew 4% over the
prior year period to $753 million driven by solid internal growth of 7% and
augmented by the acquisition of Stratify, Inc., completed in December 2007, and
several smaller acquisitions completed earlier in 2008. Storage internal growth
of 8% over the prior year period was as expected. Core service internal revenue
growth of 11% was supported by strong performance in the physical records
management and data protection businesses, double-digit growth in the secure
shredding business and increased fuel surcharges. As expected, complementary
service revenues decreased modestly year-over-year, due primarily to the
completion of large special projects in Europe, lower recycled paper prices and
some softness in the more discretionary revenues such as fulfillment services
and software license sales.
The Company reported gross profits of $418 million representing a 6%
year-over-year increase with gross profit margin improving from 54.0% in the
fourth quarter of 2007 to 55.5% in the fourth quarter of 2008. Gross margins
were up 150 basis points for the quarter compared to the same prior year period,
supported by productivity gains and improved storage gross margins in North
America. Gross margins also benefited from the sale of the low margin data
product sales business in June 2008. These benefits more than offset the impact
of expenses associated with the planned real estate moves in the U.K. and a
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 9% over the prior year period to $199 million,
reflecting the Company's gross margin gains and overhead cost controls. Selling,
general and administrative costs increased 3% in the quarter, slightly below the
rate of revenue growth, reflecting disciplined management and the year-over-year
comparisons to increased investments in security, new products and
infrastructure enhancements initiated in 2007. The impact of these investments
and the cost growth related to 2007 acquisitions moderated in the fourth
quarter.
Operating income for the fourth quarter of 2008 was $126 million, up 10%
compared to the same period in 2007, as OIBDA gains were augmented by a modest
increase in depreciation and amortization expense, driven primarily by lower
levels of capital expenditures and acquisitions in 2008. Net income for the
quarter was $1 million, or $0.01 per diluted share, including other expense of
$18 million, driven primarily by foreign currency rate fluctuations.
The net tax impact of the foreign currency rate fluctuations described above
added nearly 60% and discrete items added another 5% to the effective tax rate
in the quarter. The Company's effective tax rate before the impact of foreign
currency rate changes and other discrete items for 2008 was approximately 38%.
Key Financial Highlights - Full Year 2008
Iron Mountain posted strong financial results for 2008 as it delivered against
all of its stated financial goals for the year of 10% to 13% revenue growth, 10%
to 14% OIBDA growth (excluding asset gains and losses) and improved capital
efficiency. Total revenues grew 12% over the prior year to $3,055 million,
exceeding the $3 billion mark for the first time in the Company's history.
Internal revenue growth was solid at 8% supported by strong 9% core revenue
internal growth that was partially offset by the expected weakness in
complementary revenue growth. Acquisitions completed in 2007 and 2008 and
favorable foreign currency rate changes added 3% and 1%, respectively to revenue
growth. 2008 marked the 20th consecutive year of increased storage revenues for
the Company. Gross profits increased 14% driven by revenue performance and
productivity gains, in areas such as transportation and workflow, particularly
in the North American Physical business segment. As a result, OIBDA (excluding
asset gains and losses) grew 13% on a year-over-year basis.
Net income for the year was $82 million, or $0.40 per diluted share. As
previously discussed, the significant strengthening of the U.S. dollar during
the year resulted in a net $29 million charge in other expense and an additional
$41 million of tax provision. For the year, these charges impacted earnings by
$0.34 per diluted share and raised the effective tax rate to 64%. In 2008, the
Company paid $44 million in cash taxes, which represents less than 20% of
pre-tax income. The Company expects its tax rate before the impact of any
foreign currency rate fluctuations and other discrete items for 2009 to be
approximately 39%.
Capital expenditures incurred in 2008 totaled $373 million, or 10.8% of
revenues, excluding $44 million for the purchase of real estate. This represents
a 270 basis point improvement over the same measure for 2007. Tighter control
over capital spending and increased asset utilization rates were the key drivers
of the improved capital efficiency in 2008.
The Company's Free Cash Flow before Acquisitions and Discretionary Investments
(FCF) for the year ended December 31, 2008 was $182 million. Higher cash flows
from operating activities compared to the comparable prior year period,
including a $24 million cash gain on the settlement of a foreign currency
forward contract and controlled capital expenditures drove this improvement. As
a result of the increase in FCF and significantly lower level of acquisition
activity in 2008, the Company improved its liquidity position. As of December
31, 2008, the Company had more than $775 million of cash and availability under
its revolving credit facility. Further, the Company's consolidated leverage
ratio of total debt to EBITDA (as defined by its senior credit facility)
decreased from 4.5 times at December 31, 2007 to 3.8 times at December 31, 2008,
well below the covenant limitation of 5.5 times. The decrease illustrates the
Company's ability to naturally de-lever in the absence of significant
acquisition activity.
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. The Company has not completed any acquisitions since the end of the
third quarter of 2008.
Financial Performance Outlook
For 2009, the Company is targeting solid underlying operating performance
supported by solid core revenue growth and continued progress in the North
American Physical business segment through sustained focus on execution. The
Company is now targeting 5%-7% internal revenue growth and 8%-13% OIBDA growth
(excluding asset gains and losses) before the impact of foreign currency rate
fluctuations. The Company's internal growth goals are consistent with the
preliminary guidance issued in October 2008 updated for an expected 2% reduction
from the impact of lower commodity prices, most notably recycled paper. The
significant strengthening of the U.S. dollar against the major currencies is
expected to lower results reported in US dollars by more than 7% in 2009. The
Company's outlook for the first quarter of 2009 set forth below includes a
reduction of about 8% in both revenue and OIBDA driven by the strengthening U.S.
dollar. In 2008, primarily due to a softening vehicle resale market, certain
vehicle leases that previously met the requirements to be considered operating
leases are now classified as capital leases upon renewal. As a result, 2009 rent
expense is expected to decrease by approximately $21 million with an offsetting
increase to depreciation expense and interest expense. This guidance is based on
current expectations and does not include the potential impact of any future
acquisitions (dollars in millions):
------------------------------------------------------
Quarter Ending Full Year Ending
March 31, 2009 December 31, 2009 % Growth vs. 2008
------------------------- ------------------------- --------------------------
Low High Low High FX Neutral As Reported
------------------------- ------------------------- --------------------------
Revenues $ 710 $ 730 $ 2,975 $ 3,050 5% - 7% (3)% - 0%
Operating Income 90 100 475 515
Depreciation & Amortization ~80 ~325
OIBDA (before asset gains and losses) 170 180 800 840 8% - 13% 1% - 6%
Capital Expenditures ~420
Iron Mountain's conference call to discuss its fourth quarter and full year 2008
financial results and first quarter and full year 2009 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.
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 2009 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.
APPENDIX A
Selected Financial Data:
(dollars in millions, except per share data) Q4/2007 Q4/2008 Inc (Dec)
---------------------------------------
Revenues $ 727 $ 753 4%
Gross Profit (excluding D&A) $ 392 $ 418 6%
Gross Margin % 54.0% 55.5%
OIBDA (excluding asset gains and losses) $ 183 $ 202 11%
OIBDA $ 184 $ 199 9%
OIBDA Margin % 25.2% 26.5%
Operating Income $ 115 $ 126 10%
Interest Expense, net $ 59 $ 57 (3)%
Provision for income taxes $ 22 $ 50 124%
Effective tax rate 44.6% 98.3%
Net Income $ 28 $ 1 (95)%
EPS - Diluted $ 0.14 $ 0.01
Major Component of Other Income (Expense), net:
Foreign Currency Exchange Gains (Losses) $ (6) $ (16)
Q4/2008 FY/2008
-----------------------
Components of Revenue Growth:
Storage internal growth rate 8% 8%
Core service internal growth rate 11% 10%
--------- ---------
Core revenue internal growth rate 9% 9%
Complementary service internal growth rate (6)% 4%
--------- ---------
Total internal growth rate 7% 8%
Impact of acquisitions 1% 3%
Impact of foreign currency fluctuations (4)% 1%
--------- ---------
Total revenue growth 4% 12%
--------- ---------
NOTE: Columns may not foot due to rounding.
The Company's core revenues are comprised of storage revenues plus core service
revenues. Included in core service revenues are revenues related to the handling
and transportation of items in storage and other recurring revenue streams such
as secure shredding service revenues, recurring project revenues and recurring
revenues associated with software license sales.
Included in the Company's complementary revenues are revenues associated with
ancillary services, such as special projects, public sector projects and
fulfillment services, along with revenues from the sale of recycled paper and
other products such as cardboard boxes and software licenses.
APPENDIX B
Operating Income Before Depreciation and Amortization
Iron Mountain uses Operating Income Before Depreciation and Amortization
("OIBDA") and OIBDA (excluding asset gains and losses), as integral parts of its
planning and reporting systems, to evaluate the operating performance of the
consolidated business. The Company uses multiples of current and projected OIBDA
(excluding asset gains and losses) 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 and OIBDA (excluding asset gains
and losses) are 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).
Following is a reconciliation of OIBDA (excluding asset gains and losses) to
operating income and net income (in millions):
Three Months Ended Full Year Ended
December 31, December 31,
--------------------------------------------
2007 2008 2007 2008
--------------------------------------------
OIBDA (excluding asset gains and losses) $ 183 $ 202 $ 699 $ 791
Less: Asset (Gains) Losses (1) 3 (5) 7
-------- -------- -------- --------
OIBDA $ 184 $ 199 $ 704 $ 783
Less: Depreciation and Amortization 69 73 249 291
-------- -------- -------- --------
Operating Income $ 115 $ 126 $ 455 $ 493
Less: Interest Expense, net 59 57 229 237
Other Income (Expense), net (6) (18) (3) (31)
Provision for Income Taxes 22 50 69 143
Minority Interest -- -- 1 --
-------- -------- -------- --------
Net Income $ 28 $ 1 $ 153 $ 82
======== ======== ======== ========
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):
Full Year Ended
December 31,
--------------------
2007 2008
--------------------
Free Cash Flows Before Acquisitions and
Discretionary Investments
$ 148 $ 182
Add: Capital Expenditures (excluding real estate), net 321 341
Additions to Customer Acquisition Costs 16 14
-------- --------
Cash Flows From Operating Activities $ 485 $ 537
======== ========
NOTE: Columns may not foot due to rounding.
IRON MOUNTAIN INCORPORATED
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Amounts in Thousands except Per Share Data)
(Unaudited)
Three Months Ended Twelve Months Ended
December 31, December 31,
---------------------------- ----------------------------
2007 2008 2007 2008
---------------------------- ----------------------------
REVENUES:
Storage $ 394,840 $ 415,724 $ 1,499,074 $ 1,657,909
Service 332,161 336,831 1,230,961 1,397,225
------------ ------------ ------------ ------------
Total Revenues 727,001 752,555 2,730,035 3,055,134
OPERATING EXPENSES:
Cost of Sales (Excluding Depreciation and Amortization) 334,554 335,046 1,260,120 1,382,019
Selling, General and Administrative 209,751 215,246 771,375 882,364
Depreciation and Amortization 68,625 73,445 249,294 290,738
(Gain) Loss on Disposal / Writedown of Property, Plant and
Equipment, Net (833) 2,849 (5,472) 7,483
------------ ------------ ------------ ------------
Total Operating Expenses 612,097 626,586 2,275,317 2,562,604
------------ ------------ ------------ ------------
OPERATING INCOME 114,904 125,969 454,718 492,530
INTEREST EXPENSE, NET 59,480 57,436 228,593 236,635
OTHER EXPENSE, NET 5,555 17,871 3,101 31,028
------------ ------------ ------------ ------------
Income Before Provision for Income Taxes and Minority
Interest 49,869 50,662 223,024 224,867
PROVISION FOR INCOME TAXES
22,256 49,783 69,010 142,924
MINORITY INTERESTS IN (LOSSES) EARNINGS OF SUBSIDIARIES, NET (388) (476) 920 (94)
------------ ------------ ------------ ------------
Net Income $ 28,001 $ 1,355 $ 153,094 $ 82,037
============ ============ ============ ============
NET INCOME PER SHARE - BASIC $ 0.14 $ 0.01 $ 0.77 $ 0.41
============ ============ ============ ============
NET INCOME PER SHARE - DILUTED $ 0.14 $ 0.01 $ 0.76 $ 0.40
============ ============ ============ ============
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING - BASIC 200,528 201,817 199,938 201,279
============ ============ ============ ============
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING - DILUTED 202,982 203,186 202,062 203,290
============ ============ ============ ============
Operating Income before Depreciation and Amortization $ 183,529 $ 199,414 $ 704,012 $ 783,268
============ ============ ============ ============
IRON MOUNTAIN INCORPORATED
CONDENSED CONSOLIDATED BALANCE SHEETS
(Amounts in Thousands)
(Unaudited)
December 31, December 31,
2007 2008
------------ ------------
ASSETS
CURRENT ASSETS:
Cash and Cash Equivalents $ 125,607 $ 278,370
Accounts Receivable (less allowances of $19,246
and $19,562, respectively) 564,049 552,830
Other Current Assets 132,740 145,192
------------ ------------
Total Current Assets 822,396 976,392
------------ ------------
PROPERTY, PLANT AND EQUIPMENT:
Property, Plant and Equipment at Cost 3,522,525 3,750,515
Less: Accumulated Depreciation (1,186,564) (1,363,761)
------------ ------------
Property, Plant and Equipment, net 2,335,961 2,386,754
------------ ------------
OTHER ASSETS:
Goodwill, net 2,574,292 2,452,304
Other Non-current Assets, net 575,272 541,404
------------ ------------
Total Other Assets 3,149,564 2,993,708
------------ ------------
Total Assets $ 6,307,921 $ 6,356,854
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Current Portion of Long-term Debt $ 33,440 $ 35,751
Other Current Liabilities 732,237 693,846
------------ ------------
Total Current Liabilities 765,677 729,597
LONG-TERM DEBT, NET OF CURRENT PORTION 3,232,848 3,207,464
OTHER LONG-TERM LIABILITIES 504,852 613,465
MINORITY INTERESTS 9,089 3,548
STOCKHOLDERS' EQUITY 1,795,455 1,802,780
------------ ------------
Total Liabilities and Stockholders' Equity $ 6,307,921 $ 6,356,854
============ ============