2011 ANNUAL REPORT
SECURITY.
SERVICE.
KNOWLEDGE.
IRON MOUNTAIN
AT-A-GLANCE
AS OF 12/31/11
YEAR FOUNDED
1951
CORPORATE CLIENTS
>155,000
EMPLOYEES
>17,000
FACILITIES WORLDWIDE
>975
FORTUNE 1000 RANK
643
MEMBER S&P 500 INDEX
ABOUT THE COMPANY
2011 ANNUAL REPORT
1
Iron Mountain Incorporated (NYSE: IRM) provides
information management services that help organizations
lower the costs, risks and inefficiencies of managing their
physical and digital data. The company’s solutions enable
customers to protect and better use their information
— regardless of its format, location or lifecycle stage —
so they can optimize their business and ensure proper
recovery, compliance and discovery. Founded in 1951,
Iron Mountain manages billions of information assets,
including business records, electronic files, medical data,
emails and more for organizations around the world.
—
2011 FINANCIAL RESULTS
REVENUES
in millions
$3,015
ADJUSTED OIBDA1
in millions
$935
FCF 1
in millions
$458
OPERATING INCOME
in millions
ADJUSTED EPS1
diluted
EPS FROM CONTINUING
OPERATIONS
diluted
$571
$1.31
$1.26
1 Adjusted OIBDA, Adjusted EPS and Free Cash Flow (FCF) are non-GAAP measures. Please refer to p. 33 of the accompanying Annual Report on Form 10-K for additional
information including the reconciliations of these non-GAAP measures to their nearest GAAP measure.
Visit www.ironmountain.com for more information.
2
IRON MOUNTAIN
A TRUSTED PARTNER
Trusting an outsider with your
organization’s information is
no small decision. Outside of
employees, little is as important to
an organization as its information.
It’s the insight behind a new
service or new market. It’s the
secret sauce and intellectual prop-
erty that gave birth to your orga-
nization. It’s your customer base.
It’s your finances. In short, it’s the
sum of your business. So there’s
a lot on the line when choosing
an information management
company like Iron Mountain to
keep it safe and keep it accessible.
We understand the trust that’s
been placed in us. That’s why
it was so humbling to mark 60
years in business this year. No
one in our industry has helped
organizations to lower their
storage costs and compliance
risks for longer than we have.
It’s an incredible affirmation of
the relationship we have with our
customers, and we don’t take
it for granted for one minute.
Our customers have hired us to
do a job. They ask us to keep their
information safe in the event
they must restart their business
following a disaster. They ask
us to destroy their information
when there’s no longer a legal or
business requirement to keep it.
And they ask us to digitize their
documents and paper-heavy
processes so they can find infor-
mation more easily and run their
businesses more efficiently.
But they didn’t have to hire Iron
Mountain for those jobs; there are
others who do what we do. That’s
why we must do it better. For us,
that means offering unparalleled
security, service and knowledge.
WE PROTECT INFORMATION
AS IF IT WERE OUR OWN.
Our commitment to security
permeates every facet of our
business and is reflected in the
investments we make in our
people, processes and infrastruc-
ture. We hire the best people and
regularly train them on our core
values, our code of ethics and
our chain-of-custody processes.
Our culture stresses security
and serves to put employees in a
position where they can succeed
on behalf of our customers.
No one makes the level of
investments in security infra-
structure that we do. Over the
last decade, Iron Mountain has
spent tens of millions of dollars
adding advanced alarm systems
to our trucks and upgrading
acquired facilities to meet our
company’s security standards.
2011 ANNUAL REPORT
3
SECURITY. SERVICE.
KNOWLEDGE. THESE ARE
THE COMMITMENTS WE
MAKE TO OUR CUSTOMERS
AT EVERY DELIVERY,
ON EVERY CALL AND IN
EVERY INTERACTION.
WE ACT WITH URGENCY AND
ACCURACY WHEN SERVING
OUR CUSTOMERS.
We believe serving customers
starts with listening, and that
meeting their needs depends on
consistent results. We’ve built
a global operation to ensure no
one can deliver with the same
combination of accuracy and
urgency as Iron Mountain. Today
that operation comprises a team
of more than 17,000 employees,
3,700 vehicles and more than
975 facilities across 35 coun-
tries. It also includes proprietary
technology systems and chain-
of-custody processes for invento-
rying and moving data between
us and our customers. The result
is an organization that makes
millions of transactions every
day with repeatable accuracy.
WE ADVISE OUR CUSTOMERS,
DRAWING ON OUR 60-YEAR
EXPERIENCE OF HELPING
OTHERS LIKE THEM.
Our customers rely on us for
more than delivering a service;
they also want our advice on
how best to manage their infor-
mation. Having helped orga-
nizations of every size and in
every industry for more than
60 years, we’re best positioned
to offer our customers unique
perspective for solving their
current and future informa-
tion management challenges.
Information is both costly and
complex. Even big, savvy orga-
nizations have questions related
to lowering their storage costs;
complying with regulations;
ensuring information is acces-
sible for legal discovery; and
protecting data from the risk
of data breach, among other
concerns. Our consultants have
a deep understanding of legal
requirements and industry
best practices that they bring
to bear in these discussions.
Security. Service. Knowledge.
These are the commitments
we make to our customers at
every delivery, on every call
and in every interaction. It’s
what we believe makes us stand
apart and why we believe we’ve
been fortunate to become the
industry leader in information
management services. Thank
you to our customers; we will
never stop serving you.
4
IRON MOUNTAIN
FROM THE CEO
through a successful acquisition strategy in which
we invested your capital to expand our geographic
footprint and to broaden our business lines into
related storage and physical information services.
We sustained strong revenue growth rates for 13
years following our initial public offering in 1996.
Since 2007 we have been optimizing our operations,
beginning in North America, to enhance Adjusted
OIBDA margins and improve capital efficiency, all of
this with the goal of generating the kinds of returns
on capital that comes with market leadership. We
expanded our international operations, building
market leadership positions in more than 20 markets
that provide a strong growth platform for our busi-
ness. We had also expanded into technology services,
creating a new digital business that provided online
services that were directly analogous to our tradi-
tional physical businesses.
Upon my return, we promised our organization and
you, our stockholders, that we would focus on three
areas: returning to the fundamentals in our tradi-
tional physical businesses, aligning stockholders and
our organization around a new three-year plan to
unlock value and improve ROIC, particularly in our
international segment, and studying opportunities
to enhance stockholder value through alternative
financing, capital and tax strategies—including the
evaluation of a potential conversion to a Real Estate
Investment Trust (REIT). We have made significant
progress in all three of these focus areas.
First, to return our focus to the fundamentals we sold
our Digital business unit in June 2011 for approxi-
mately $390 million. We concluded that although
it was a profitable business we could not foresee
earning an acceptable return on capital in the future.
We realigned our sales and marketing teams to focus
on selling more of our traditional physical services.
At the same time, we rejuvenated the organization
around the mission to continue to build Iron Mountain
for the long-term as a durable annuity storage and
services business by optimizing our services and
introducing new adjacent offerings.
TO OUR
STOCKHOLDERS
C. RICHARD REESE
Chairman and Chief Executive Officer
Iron Mountain Incorporated
2011 was a year of significant
change at Iron Mountain.
Yet with this change, the strength of our organiza-
tion and business model was evidenced by our strong
financial performance. We delivered internal revenue
growth in excess of the GDP growth rate1 of our
markets, and strong Adjusted OIBDA margins and
capital controls contributed to record free cash flows
and increased Returns on Invested Capital (ROIC)2.
In April of last year I was asked to return to the role
as your CEO to accelerate a strategic transition. As a
brief historical reminder, Iron Mountain was built into
a market leading global services company principally
1 Represents weighted average GDP growth based on the countries in which we have operations.
2 ROIC is calculated as Net Operating Profit After Tax (NOPAT) plus depreciation and amortization less non-growth capital expenditures divided by average capital invested plus racking accumulated
depreciation.
2011 ANNUAL REPORT
5
In our second focus area – unlocking value and
enhancing returns – we implemented a three-year
plan to improve total ROIC to 12% by driving strong
growth and expanding Adjusted OIBDA margins
by 700 basis points in our International Business
segment while sustaining the high returns in our
North American business segment. In 2011 our ROIC
increased 70 basis points to 11.4%. Our international
Adjusted OIBDA margins expanded by 220 basis
points on 7% constant currency revenue growth,
yielding an ROIC of 8% in that segment, up from 5%
in 2010. We completed a total portfolio review of our
international business units, which resulted in plans
to divest businesses that were not likely to achieve
market leadership and appropriate returns. We
sold our New Zealand business in October 2011 and
in February 2012 announced our intent to sell our
Italian business. We also identified six other business
units where we developed individualized strategies
to improve returns to attractive levels within three
years. The international team is on track with these
plans and we expect to achieve our target of 700
basis points of Adjusted OIBDA margin improvement
by the end of 2013 while sustaining strong growth in
these markets.
In addition to these operational improvement strat-
egies, we fulfilled our commitment to return $1.2
billion of capital to stockholders by May 2012 through
a combination of an increased quarterly dividend and
the repurchase of approximately 33 million shares of
our common stock. Since implementing our program
in 2010, we have repurchased more than 18% of
our total shares outstanding. During the year, we
increased our debt to return our leverage ratio to the
2011 WAS A YEAR OF
SIGNIFICANT CHANGE AT
IRON MOUNTAIN. YET WITH
THIS CHANGE, THE STRENGTH
OF OUR ORGANIZATION
AND BUSINESS MODEL WAS
EVIDENCED BY OUR STRONG
FINANCIAL PERFORMANCE.—
6
IRON MOUNTAIN
middle of our targeted range of 3x to 4x EBITDA3,
up from an all-time low leverage ratio. Further, we
announced our intent to return an additional $1.0
billion to stockholders through the end of 2013.
Finally, we formed a Special Committee of the board
of directors to examine ways to maximize value
through alternative financing, capital and tax strat-
egies—including the evaluation of a possible REIT
conversion. The Special Committee is comprised of me
as committee chair, and four independent directors,
including two new directors who joined in June 2011,
one of which has substantial REIT experience. We have
been working this agenda aggressively and expect to
meet our target deadline of no later than June 9, 2012
to announce the results of the committee work and
the board’s conclusions in this area.
As I think about our business and its future, I am
optimistic. But the future is necessarily different
from the past. Our customers continue to create
information at a fast pace, but the manner in which
they use it is changing. In the past, the informa-
tion assets we stored were accessed by customers
for two main reasons: to extract a fact or answer
to a query or as original documentation or “proof.”
Although the rapid growth of online information
does impact how much information is maintained in
physical form, the main impact is that customers are
more likely to satisfy the first use case, extracting
information, from an online system. However, storing
information in its original format is still the primary
and least expensive way to maintain documentation
for the “proof” use case. We see this trend as our
information storage assets are becoming less active
and the service part of our revenue is growing much
slower than storage, which grew at 4% in constant
dollars last year.
Although some worry that these secular trends in
our core physical storage business will cause the
business to decline, we believe that we can extend
the duration and sustainability of this business
for a very long time. We are implementing strate-
gies to continue to expand our storage businesses
3 As defined in our credit agreement.
2011 ANNUAL REPORT
7
in our mature markets and to accelerate growth
in emerging markets. In our more mature markets
we will continue to invest in various storage-
focused growth strategies including penetration
of existing accounts, conversion of the still large,
un-vended segments, and local tuck-in acquisi-
tions of customers’ assembled storage assets while
increasing facility utilization to sustain returns. In
emerging markets that have strong storage growth
dynamics, we have spent significant energy and
capital establishing our footprint and plan to capi-
talize on this position by investing to build market
leadership and drive the returns that will come with
leadership. This investment will be both in sales
and marketing activities to capture the outsourcing
trends in these markets and select acquisitions of
competitors to solidify leadership.
We are extending our services by continuing to
build our secure shredding business and our docu-
ment management solutions business. We are also
employing a disciplined product management process
to add new services adjacent to our traditional busi-
nesses to capitalize on our core strengths of secure
information logistics services and process knowledge
for management of information in a cost effective
and compliant manner. Our goal is to extend the
duration and ensure the sustainability of our annuity
revenue stream with steady growth rates in the low
WE BELIEVE THAT WE CAN
EXTEND THE DURATION AND
SUSTAINABILITY OF THIS
BUSINESS FOR A VERY LONG
TIME BY IMPLEMENTING
STRATEGIES TO CONTINUE
TO EXPAND OUR STORAGE
BUSINESSES IN OUR MATURE
MARKETS AND TO ACCELERATE
GROWTH IN EMERGING MARKETS.
to middle single digit range. We have the capital and
market opportunity necessary to execute this plan.
We expect that we will continue to generate signifi-
cant capital in excess of that needed to execute our
plan. Therefore, we have a strong focus on capital
allocation. We will invest in our business as described
above so long as we can expect to generate after tax
8
IRON MOUNTAIN
WE EXPECT THAT WE WILL CONTINUE
TO GENERATE SIGNIFICANT CAPITAL
IN EXCESS OF THAT NEEDED TO
EXECUTE OUR PLAN. THEREFORE, WE
HAVE A STRONG FOCUS ON CAPITAL
ALLOCATION. WE WILL INVEST IN
OUR BUSINESS SO LONG AS WE CAN
EXPECT TO GENERATE AFTER TAX
RETURNS IN EXCESS OF OUR COST OF
CAPITAL, ADJUSTED FOR THE RELATED
RISK. WE WILL RETURN EXCESS
CAPITAL TO OUR STOCKHOLDERS.—
2011 ANNUAL REPORT
9
returns in excess of our cost of capital, adjusted for
the related risk. We will return excess capital to our
stockholders through a mix of quarterly dividends,
share repurchases and/or special dividends. As we
complete the work of the Special Committee of the
board, we will communicate more detailed views on
future capital allocation to you.
We built Iron Mountain by being an aggressive but
disciplined investor of capital. During the capital
investment phase, we used prudent leverage to
enhance returns on equity because of the predict-
able nature of our revenue streams and cash flows.
We will continue to manage our leverage in a prudent
manner in our next phase and will maintain a balance
of risk between our stockholders and debt holders.
As I stated, I was asked to come back as your CEO to
accomplish some specific goals. We are well along in
meeting the commitments that we made. Our board
of directors is actively engaged in succession plan-
ning to identify the right candidate who understands
the opportunities ahead of Iron Mountain and has
the skills and enthusiasm to continue to create value
for a long period of time. I thank you and the board
for the honor of leading this organization and look
forward to helping the next generation of leaders
take the company to the next level.
With all of the change that the company experi-
enced this year, our strong strategic progress and
financial performance is a testament to the quality
and commitment of our Mountaineers. I appreciate
every day their commitment and focus on success.
Thank you.
With continued pride and enthusiasm,
C. Richard Reese
Chairman & Chief Executive Officer
OUR GOAL IS TO EXTEND THE
DURATION AND ENSURE THE
SUSTAINABILITY OF OUR ANNUITY
REVENUE STREAM WITH STEADY
GROWTH RATES IN THE LOW TO
MIDDLE SINGLE DIGIT RANGE. WE
HAVE THE CAPITAL AND MARKET
OPPORTUNITY NECESSARY TO
EXECUTE THIS PLAN.
10
IRON MOUNTAIN
WHAT IS
TAKING CARE?
Taking CARE is a platform of
global strategies and initiatives
that expresses our commitment
to live by our core values and put
them into action every day and
in everything we do – from the
safeguards we take to protect
our customers’ information, to
the way we empower employees,
serve our communities and
protect the environment. By
Taking CARE, we hope to be a
supplier, employer and neighbor
of choice.
bility for protecting our customers’
information. We continually invest
in new technology and develop
new policies and procedures to be
the strongest steward of informa-
tion security and compliance.
Our commitment to informa-
tion responsibility goes beyond
our internal operations and is
at the core of our products and
services. As a trusted partner to
more than 94% of Fortune 1000
companies, Iron Mountain helps
its customers keep confidential
customer, employee and business
data accessible and secure.
INFORMATION RESPONSIBILITY
Safeguarding sensitive
information is a responsibility
We believe that every individual –
every company – has the right to
information protection, security
and privacy. Upholding this right
is embedded in the culture of
our business, and we ensure that
every Iron Mountain employee
understands their shared responsi-
FULFILLING OUR CORPORATE RESPONSIBILITY 2011 ANNUAL REPORT
11
We contribute to communities
in two primary ways: through
strategic partnerships aimed at
creating access to information
and preserving public treasures
and through localized efforts
that address community needs.
ENVIRONMENTAL
SUSTAINABILITY
Building a sustainable
business is a priority.
We recognize the importance of
environmental stewardship and
continuously seek new ways that
we, and our customers, can reduce
our footprint and have a posi-
tive impact on the environment.
We are making investments to
improve our own internal opera-
tions. We also seek to help our
customers make their organi-
zations more sustainable by
securing, managing, and disposing
of their information in ways that
are environmentally responsible.
Iron Mountain is committed
to investing in operational
activities that minimize our impact
on the environment, particularly
as it relates to Iron Mountain’s
consumption of energy and
burning of fossil fuels. And as
many of our customers explore
ways to minimize their own
impact, we are developing
solutions and services to help
them meet their goals.
EMPLOYEE ADVOCACY
We are committed to
our employees.
Mountaineers are deeply
committed to the company’s
mission, our customers, their
communities and to each other.
We value our employees above
all and are creating a work-
place where they can thrive.
Each day, our employees serve
as trusted guardians of a wide
range of personal, private, and
historic information. We are proud
and humbled by their passionate
dedication to our customers and
to each other. They truly go above
and beyond, and their commit-
ment keeps our culture strong.
At Iron Mountain, we work hard
to make sure our workplace
and our policies and practices
support Mountaineers in their
professional and personal lives.
COMMUNITY ENGAGEMENT
We support the many
communities we call home.
With more than 975 facilities
around the world, there are
many places we call home. We
respond to urgent needs in our
communities and work to better
people’s lives by protecting and
improving access to informa-
tion and public treasures.
Over the past 60 years, Iron
Mountain has established a pres-
ence in many small towns and
large cities around the world.
Today we employ over 17,000
people and have more than 975
facilities. We understand the
integral role that businesses
play in maintaining the health
and vitality of the communi-
ties they belong to and we look
for ways to go beyond “busi-
ness as usual” to make our
neighborhoods better places.
“ THE SAME DEDICATION AND PASSION WE HAVE FOR
MEETING CUSTOMER DEMANDS IS WHAT COMPELS US TO
BE RESPONSIVE TO COMMUNITY NEEDS, TO ADDRESS
OUR ENVIRONMENTAL IMPACTS AND TO BUILD A GREAT
WORKPLACE. THESE ARE CORE ELEMENTS OF OUR
CORPORATE RESPONSIBILITY, EXPRESSED THROUGH OUR
PLATFORM CALLED TAKING CARE – APTLY NAMED BECAUSE
IT UNDERSCORES WHAT WE BELIEVE TO BE IMPORTANT AND
THE RIGHT THING FOR OUR COMPANY TO DO.”
—
RICHARD REESE, CHAIRMAN & CEO
12
IRON MOUNTAIN
FINANCIAL HIGHLIGHTS
(Amounts in millions, except per share data)
20071
20081
20091
20101
2011
Gross Margin (ex Depreciation & Amortization)
52.8%
53.6%
56.7%
58.8%
Storage Revenues
Service Revenues
Total Revenues
Operating Income2
Adjusted OIBDA3
Adjusted OIBDA %
EPS—Diluted2
Adjusted EPS—Diluted3
Capex4 (ex Real Estate) %
Free Cash Flow3
$ 1,496
$ 1,534
$ 1,599
$ 1,683
$ 1,362
$ 1,204
$ 1,329
$ 1,241
$ 1,294
$ 2,567
$ 2,825
$ 2,774
$ 2,892
$ 461
$ 676
26.3%
$ 0.84
$ 0.75
13.5%
$ 492
$ 545
$ 548
$ 754
$ 823
$ 927
26.7%
29.6%
32.0%
$ 0.47
$ 0.86
$
$
1.13
1.01
$ 0.83
$ 1.28
10.4%
9.4%
7.9%
$ 168
$
197
$ 330
$ 370
$ 458
$ 1,332
$ 3,015
58.7%
$ 571
$ 935
31.0%
$ 1.26
$ 1.31
6.6%
1 Revenue and Adjusted OIBDA for the years ended December 31, 2007, 2008, 2009 and 2010 have been restated to reflect a reduction in revenues to correct billing errors made in connection
with a government contract as more fully described in Notes 2.y. and 10.h. to Notes to Consolidated Financial Statements beginning on page 79 of the accompanying Annual Report on Form 10-K.
2 Included in operating income and EPS-Diluted for 2010 is an $86 million non-cash goodwill impairment charge related to our technology escrow services business, which we continue to own and
operate and which was previously reflected in the former Worldwide Digital Business segment and is now reflected as a component of the North American Business segment. See footnote 2.g. on
p. 83 of the accompanying Annual Report on Form 10-K for additional information.
3 Adjusted OIBDA, Adjusted EPS-Diluted and Free Cash Flow are non-GAAP measures. Please refer to p. 33 of the accompanying Annual Report on Form 10-K for additional information including
the reconciliations of these non-GAAP measures to their nearest GAAP measure.
4 Based on incurred versus cash paid basis.
REVENUES
in millions
ADJUSTED OIBDA
in millions
$1329
$1241
$1294
$1332
$1204
$1204
$1204
$1204
$676
$754
$823
$927
$935
$1362
$1496
$1534
$1599
$1683
07
08
09
10
11
07
08
09
10
11
Storage Revenues
Service Revenues
CASH FLOWS FROM
OPERATING ACTIVITIES
FROM CONTINUING OPERATIONS
in millions
CAPEX (EX REAL ESTATE)
as a % of revenues
$483
$514
$587
$603
$664
13.5%
10.4%
9.4%
7.9%
6.6%
07
08
09
10
11
07
08
09
10
11
2011 ANNUAL REPORT
13
2011
OPERATIONS
REVIEW
—
Iron Mountain delivered strong financial performance
in 2011. Our 23rd consecutive year of storage revenue
growth provided the foundation for solid underlying
profit performance, which, combined with continued
capital efficiency improvement, was a key factor in
driving record levels of Free Cash Flows1 (FCF). Our
International Business segment performed particu-
larly well with strong revenue growth, especially
in our emerging markets, and significant Adjusted
OIBDA margin expansion. We maintained our strong
balance sheet and enhanced total stockholder returns
by distributing $1.2 billion of excess capital to stock-
holders during the year.
2011 KEY FINANCIAL HIGHLIGHTS
Iron Mountain reported total revenues of $3.0 billion
in 2011, an increase of 3% on a constant dollar basis
over 2010. This increase was supported by strong,
consistent storage revenue growth of 4% (constant
dollar) which outpaced a lagging service growth rate
of 1%. Storage revenue growth was comprised of 2%
unit volume increases and pricing trends that were
consistent with prior years. The service revenue
1 Before discretionary investments in acquisitions and real estate.
IRM STOCK PERFORMANCE
$150
$120
$90
$60
06
07
08
09
10
11
Iron Mountain
S&P 500
Russell 1000
This graph compares the percentage change in the
cumulative total return on our common stock to the
cumulative total returns of the S&P 500 Index and
the Russell 1000 Index for the period from December
31, 2006 through December 31, 2011. This comparison
assumes an investment of $100 on December 31, 2006
and the reinvestment of any dividends.
3
7
$
2
8
$
1
9
$
1
0
1
$
0
2
1
$
2
6
1
$
4
3
2
$
4
8
3
$
7
0
5
$
3
0
6
$
3
9
6
$
8
4
7
$
3
5
8
$
4
1
0
1
$
2
5
1
1
$
9
9
2
1
$
0
7
4
1
$
9
2
6
1
$
8
6
6
1
$
2
3
7
1
$
14
IRON MOUNTAIN
$1750
$1500
$1250
$1000
$750
$500
$250
$1683
$1599
$1534
$1496
$1362
$1217
$1182
$1043
$875
$760
$695
$603
$507
$35
$48
$73
$82
$91
$101
$162
$120
$384
$234
89
90
91
92
93
94
95
96
97
98
99
00
01
02
03
04
05
06
07
08
09
10
11
23 YEARS OF STORAGE REVENUE GROWTH
Annual storage revenues (in millions)
2000
1500
1000
500
0
efficiency and solid operating performance were
key drivers of the $458 million of FCF we generated
in 2011. Our FCF also benefited from the timing of
certain tax and capital expenditure payments as well
as other temporary tax items.
Driving strong returns on invested capital3 (ROIC) is
a major tenet of how we manage our business and
a key area of focus in our three-year strategic plan.
In addition to the solid operating performance and
improved capital efficiency described above, reducing
the capital base by returning $1.2 billion of excess
capital to stockholders was a key driver in increasing
ROIC to 11.4% in 2011 from 10.7% in 2010.
growth of 1% on a constant dollar basis was a mix of
faster growing hybrid services and higher recycled
paper prices which more than offset continued
declines in handling and transportation revenues
resulting from records becoming more archival in
nature. Favorable foreign currency exchange rate
changes added approximately one percentage point
to our growth rates in 2011.
Sustained Adjusted OIBDA margins in North America
and significant margin expansion in our international
business resulted in consolidated Adjusted OIBDA
of $935 million for 2011, or 31.0% of revenues.
International Adjusted OIBDA margins expanded 220
basis points as a result of strong revenue growth
and optimization initiatives. Adjusted EPS for 2011
was $1.31 including $15 million, or $0.05 per share,
of costs related to our proxy contest compared to
$1.28 for 2010. Reported earnings were $1.26 per
share in 2011.
For the fifth consecutive year we improved our
capital efficiency in 2011 as capital expenditures2 as
a percent of consolidated revenues decreased 130
basis points to a record low of 6.6%. Improved capital
2 Based on incurred versus cash paid basis and excludes real estate.
3 ROIC is calculated as NOPAT plus depreciation and amortization less non-growth capital
expenditures divided by average capital invested plus racking accumulated depreciation.
2000
1500
1000
500
0
2000
1500
1000
500
0
NORTH AMERICAN BUSINESS SEGMENT
2011 ANNUAL REPORT
15
OUR NORTH AMERICAN
BUSINESS SEGMENT, which
includes our operations in the
U.S. and Canada, is our largest
and most mature business, repre-
senting 74% of our consolidated
revenues. We have built leadership
positions across our service lines.
Our customer base is large and
stable, has an annual termination
rate of less than 3%, and includes
more than 94% of the Fortune
1000. The North American busi-
ness is a highly optimized busi-
ness that generates significant
FCF and strong ROIC. Our focus
is to sustain the margins we have
achieved in this business while
continuing to grow revenues and
improve capital efficiency.
In 2011 the North American
Business segment reported $2.2
billion of revenues, an increase of
1% over 2010 on a constant dollar
basis. Consistent constant dollar
storage revenue growth of 2% was
a key driver of North America’s
overall revenue performance and
offset flat constant dollar service
revenue growth. Storage growth
was comprised of flat year-over-
year records management volume
growth and consistent pricing
trends. Solid gains in hybrid
services and benefits from higher
recycled paper prices offset by
decreased core service revenues
due to lower service activity
levels yielded flat service revenue
growth (constant dollar).
NORTH AMERICAN
REVENUES
in millions
$232
$271
$277
$695
$687
$684
$1198
$1235
$1268
09
10
11
Complementary Service
Core Service
Core Storage
THE NORTH
AMERICAN BUSINESS
IS A HIGHLY
OPTIMIZED BUSINESS
THAT GENERATES
SIGNIFICANT FCF AND
STRONG ROIC.—
16
IRON MOUNTAIN
Adjusted OIBDA for the North
American Business segment
was $962 million, or 43.2% of
segment revenues. Continued
productivity improvements and
overhead cost controls maintained
margins in this segment while
absorbing an incremental $20
million investment in sales and
marketing to sustain the annuity,
consistent with our three-year
strategic plan. Capital expendi-
tures4 were 4.8% for the North
American Business segment
in 2011, consistent with prior
year levels. ROIC for the North
American Business segment was
16% in 2011.
NORTH AMERICAN
ADJUSTED OIBDA
NORTH AMERICAN
CAPEX (EX RE)
in millions
percent of segment revenues
$866
$970
$962
7.0%
4.6%
4.8%
09
10
11
09
10
11
4 See Footnote 2 on p. 14.
INTERNATIONAL BUSINESS SEGMENT
2011 ANNUAL REPORT
17
THE INTERNATIONAL BUSINESS
SEGMENT is an attractive growing
business that represents a
significant opportunity for us.
It is comprised of operations in
33 countries in Europe, Latin
America, Australia and Asia
Pacific and represents 26% of
our consolidated revenues. Our
strategy is to capitalize on our
prior investments that created a
broad footprint to now invest in
growth to achieve local market
leadership and the demonstrated
attractive returns that come from
this leadership position. We expect
to increase ROIC in this business
by expanding and optimizing our
mature markets and aggressively
growing our emerging markets,
which today account for nearly
30% of this segment’s revenues.
International revenues grew 7%
on a constant dollar basis to $786
million in 2011. Storage revenue
growth of 9% on a constant dollar
basis was driven primarily by
growth in our emerging markets,
a key driver of overall revenue
performance in this segment.
Adjusted OIBDA margins in the
International Business segment
expanded by 220 basis points to
20.9% in 2011, driven primarily by
realized benefits from our optimi-
zation initiatives in the U.K. This
improvement keeps us on track
towards achieving our commit-
ment to expand international
margins by 700 basis points by
the end of 2013. Capital expendi-
tures5 decreased as a percent of
revenues from 12.4% in 2010 to
9.5% in 2011. This improvement,
combined with strong revenue
growth and benefits from our
optimization initiatives, drove an
increase in ROIC in our interna-
tional business from 5% in 2010
to 8% in 2011.
We completed an extensive port-
folio review of our international
markets in 2011. We identified
eight markets, representing
approximately 25% of total
segment revenues, that were not
generating acceptable returns. As
a result of that analysis, we made
the decision to divest our New
Zealand and Italian operations.
The New Zealand transaction
was completed in October 2011,
and the Italian sale is in process.
We have developed aggres-
sive improvement plans for the
remaining six markets, which we
expect will result in those busi-
nesses generating strong returns
by 2013.
INTERNATIONAL
REVENUES
in millions
$86
$285
$75
$260
$64
$250
$336
$364
$415
INTERNATIONAL
ADJUSTED OIBDA
in millions
INTERNATIONAL
CAPEX (EX RE)
percent of segment revenues
$164
12.3%
12.4%
$120
$131
9.5%
09
10
11
09
10
11
09
10
11
Complementary Service
Core Service
Core Storage
5 See Footnote 2 on p. 14.
18
IRON MOUNTAIN
THE INTERNATIONAL BUSINESS
SEGMENT IS AN ATTRACTIVE GROWING
BUSINESS THAT REPRESENTS A
SIGNIFICANT OPPORTUNITY FOR US.
OUR STRATEGY IS TO CAPITALIZE ON
OUR PRIOR INVESTMENTS TO NOW
INVEST IN GROWTH TO ACHIEVE
LOCAL MARKET LEADERSHIP AND
THE DEMONSTRATED ATTRACTIVE
RETURNS THAT COME FROM THIS
LEADERSHIP POSITION.—
IRON MOUNTAIN’S GLOBAL FOOTPRINT
Delivering services via an
unmatched global footprint
comprised of operations in
35 countries on five continents.
MAINTAINING A STRONG BALANCE SHEET
2011 ANNUAL REPORT
19
OUR BALANCE SHEET REMAINS STRONG, and our
debt portfolio remains long and fixed. At December
31, 2011, we had over $0.8 billion of liquidity and our
consolidated leverage ratio of net debt to EBITDA
was 3.4x, near the midpoint of our target 3x to 4x
leverage range. In September 2011 we issued $400
million of our 7-3/4% senior subordinated notes due
in 2019. We will continue to use prudent levels of debt
in our business to enhance returns on equity.
The business model we have built generates a signifi-
cant amount of cash, beyond what we can reinvest in
the business at acceptable returns. We are committed
to returning that excess capital to stockholders. Our
stockholder payout program consists of a quarterly
dividend, which we expect to grow over time, and our
share repurchase program. In June 2011, our board of
directors increased our quarterly dividend to $0.25
per share, a 33% increase over the quarterly dividend
previously paid. In 2011, we repurchased 32 million
shares of our common stock for approximately $1.0
billion. Since we initiated our share repurchase plan in
March 2010, we have repurchased 38 million shares
representing more than 18% of the total shares
outstanding. A key element of our three-year stra-
tegic plan is the commitment to return $2.2 billion
to stockholders by the end of 2013 including $1.2
billion by May 2012. The first phase of those commit-
ments was completed with our most recent dividend
payment in April 2012.
20
IRON MOUNTAIN
2012 FINANCIAL OUTLOOK6
LOOKING AHEAD TO 2012, we are planning for
consistent revenue growth trends and profit perfor-
mance, excluding impacts from lower recycled paper
prices. Supported by consistent storage internal
growth of approximately 3%, we are expecting
underlying internal growth to be between 1% and
3%, consistent with 2011 internal growth of 2%.
Continued resizing of our North American core
service business as a result of lower activity of
information assets will likely constrain core service
revenue growth and partially offset the strong
storage revenue performance. Adjusted OIBDA
margin expansion in our International Business
segment and sustained levels in North America
support our outlook for constant currency Adjusted
OIBDA growth of between 1% and 5% excluding
the impacts of lower recycled paper prices. Lower
recycled paper prices are expected to reduce our
revenue and Adjusted OIBDA growth rates by
approximately 2% and 5%, respectively. FCF genera-
tion is expected to be strong driven by continued
capital efficiency improvements although higher
interest and tax payments and the impact of high
year-end capital accruals will constrain reported
FCF in 2012 and bring it more in line with historical
performance versus our record performance in 2011.
6 Based on our guidance issued on February 23, 2012.
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-K
(Mark One)
(cid:1) ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the Fiscal Year Ended December 31, 2011
or
(cid:2) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from
to
Commission File Number 1-13045
IRON MOUNTAIN INCORPORATED
(Exact name of Registrant as Specified in Its Charter)
Delaware
(State or other jurisdiction of incorporation)
745 Atlantic Avenue, Boston, Massachusetts
(Address of principal executive offices)
23-2588479
(I.R.S. Employer Identification No.)
02111
(Zip Code)
617-535-4766
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of Each Class
Name of Exchange on Which Registered
Common Stock, $.01 par value per share
New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities
Act. Yes (cid:1) No (cid:2)
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the
Act. Yes (cid:2) No (cid:1)
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 (cid:1) No (cid:2)
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if
any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the
preceding 12 months (or for such shorter period that the registrant was required to submit and post such
files). Yes (cid:1) No (cid:2)
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained
herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K (cid:1)
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated
filer or a small reporting company. See the definitions of ‘‘large accelerated filer,’’ ‘‘accelerated filer’’ and ‘‘smaller
reporting company’’ in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filer (cid:1)
Non-accelerated filer (cid:2)
(Do not check if a smaller reporting company)
Accelerated filer (cid:2)
Smaller reporting company (cid:2)
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange
Act). Yes (cid:2) No (cid:1)
As of June 30, 2011, the aggregate market value of the Common Stock of the registrant held by non-affiliates of the
registrant was $6,038,510,230.13 based on the closing price on the New York Stock Exchange on such date.
Number of shares of the registrant’s Common Stock at February 10, 2012: 171,087,289
IRON MOUNTAIN INCORPORATED
2011 FORM 10-K ANNUAL REPORT
Table of Contents
PART I
Item 1.
Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 1A. Risk Factors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 1B. Unresolved Staff Comments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 2.
Properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 3.
Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 4.
Mine Safety Disclosures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
PART II
Item 5.
Market For Registrant’s Common Equity, Related Stockholder Matters and Issuer
Purchases of Equity Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 6.
Selected Financial Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 7.
Management’s Discussion and Analysis of Financial Condition and Results of
Operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 7A. Quantitative and Qualitative Disclosures About Market Risk . . . . . . . . . . . . . . . . . .
Item 8.
Financial Statements and Supplementary Data . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 9.
Changes in and Disagreements With Accountants on Accounting and Financial
Disclosure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 9A. Controls and Procedures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 9B. Other Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
PART III
Item 10.
Directors, Executive Officers and Corporate Governance . . . . . . . . . . . . . . . . . . . . .
Item 11.
Executive Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 12.
Security Ownership of Certain Beneficial Owners and Management and Related
Stockholder Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 13.
Certain Relationships and Related Transactions, and Director Independence . . . . . . .
Item 14.
Principal Accountant Fees and Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Page
1
15
22
22
22
23
24
26
29
65
67
67
67
71
72
72
72
72
72
Item 15.
Exhibits and Financial Statement Schedules . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
72
PART IV
i
References in this Annual Report on Form 10-K to ‘‘the Company,’’ ‘‘Iron Mountain,’’ ‘‘we,’’ ‘‘us’’
or ‘‘our’’ include Iron Mountain Incorporated and its consolidated subsidiaries, unless the context
indicates otherwise.
DOCUMENTS INCORPORATED BY REFERENCE
Certain information required in Items 10, 11, 12, 13 and 14 of Part III of this Annual Report on
Form 10-K is incorporated by reference from our definitive Proxy Statement for our 2012 Annual
Meeting of Stockholders (our ‘‘Proxy Statement’’) to be filed with the Securities and Exchange
Commission within 120 days after the close of the fiscal year ended December 31, 2011.
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
We have made statements in this Annual Report on Form 10-K that constitute ‘‘forward-looking
statements’’ as that term is defined in the Private Securities Litigation Reform Act of 1995 and other
federal securities laws. These forward-looking statements concern our operations, economic
performance, financial condition, goals, beliefs, future growth strategies, investment objectives, plans
and current expectations, such as our (1) expected increase in our Adjusted OIBDA margins in our
International Business segment, (2) commitment to stockholder payouts and dividend payments,
(3) expected target leverage ratio, and (4) expected divestiture of the Italian Business. The forward-
looking statements are subject to various known and unknown risks, uncertainties and other factors.
When we use words such as ‘‘believes,’’ ‘‘expects,’’ ‘‘anticipates,’’ ‘‘estimates’’ or similar expressions, we
are making forward-looking statements.
Although we believe that our forward-looking statements are based on reasonable assumptions, our
expected results may not be achieved, and actual results may differ materially from our expectations.
Important factors that could cause actual results to differ from expectations include, among others:
(cid:127) the cost to comply with current and future laws, regulations and customer demands relating to
privacy issues;
(cid:127) the impact of litigation or disputes that may arise in connection with incidents in which we fail
to protect our customers’ information;
(cid:127) changes in the price for our services relative to the cost of providing such services;
(cid:127) changes in customer preferences and demand for our services;
(cid:127) the adoption of alternative technologies and shifts by our customers to storage of data through
non-paper based technologies;
(cid:127) the cost or potential liabilities associated with real estate necessary for our business;
(cid:127) the performance of business partners upon whom we depend for technical assistance or
management expertise outside the U.S.;
(cid:127) changes in the political and economic environments in the countries in which our international
subsidiaries operate;
(cid:127) the failure to consummate a successful sale of the Italian Business;
(cid:127) claims that our technology violates the intellectual property rights of a third party;
(cid:127) the impact of legal restrictions or limitations under stock repurchase plans on price, volume or
timing of stock repurchases;
(cid:127) the impact of alternative, more attractive investments on dividends or stock repurchases;
ii
(cid:127) our ability or inability to complete acquisitions on satisfactory terms and to integrate acquired
companies efficiently; and
(cid:127) other trends in competitive or economic conditions affecting our financial condition or results of
operations not presently contemplated.
Other risks may adversely impact us, as described more fully under ‘‘Item 1A. Risk Factors.’’
You should not rely upon forward-looking statements except as statements of our present
intentions and of our present expectations, which may or may not occur. You should read these
cautionary statements as being applicable to all forward-looking statements wherever they appear.
Except as required by law, we undertake 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. Readers are also urged to carefully review
and consider the various disclosures we have made in this document, as well as our other periodic
reports filed with the Securities and Exchange Commission (the ‘‘Commission’’ or ‘‘SEC’’).
iii
Item 1. Business.
A. Development of Business.
PART I
We provide information management services that help organizations around the world lower the
costs, risks and inefficiencies of managing their physical and digital data. Our solutions enable
customers to protect and better use their information—regardless of its format, location or lifecycle
stage—so they can optimize their business and ensure proper recovery, compliance and discovery. We
offer comprehensive records management services, data protection & recovery services and information
destruction services, along with the expertise and experience to address complex information
management challenges such as rising storage costs, litigation, regulatory compliance and disaster
recovery. Founded in an underground facility near Hudson, New York in 1951, Iron Mountain
Incorporated, a Delaware corporation, is a trusted partner to more than 155,000 clients throughout
North America, Europe, Latin America and Asia Pacific. We have a diversified customer base
comprised of commercial, legal, banking, healthcare, accounting, insurance, entertainment and
government organizations, including more than 94% of the Fortune 1000. As of December 31, 2011, we
provided services in more than 35 countries on five continents, employed over 17,000 people and
operated more than 975 facilities.
Now in our 61st year, we have experienced tremendous growth, particularly since successfully
completing the initial public offering of our common stock in February 1996. We have grown from a
business with limited product offerings and annual revenues of $104.0 million in 1995 into a global
enterprise providing a broad range of information management services to customers in markets
around the world with total revenues of more than $3.0 billion for the year ended December 31, 2011.
On January 5, 2009, we were added to the S&P 500 Index and as of December 31, 2011 we were
number 643 on the Fortune 1000.
Our success since becoming a public company in 1996 has been driven in large part by our
execution of a consistent long-term growth plan to build market leadership by extending our strategic
position through service line and global expansion. This growth plan has been sequenced into three
phases. The first phase involved establishing leadership and broad market access in our core businesses,
records management and data protection & recovery, primarily through acquisitions. In the second
phase, we invested in building a successful selling organization to access new customers, converting
previously unvended demand. While different parts of our business are in different stages of evolution
along our three-phase strategy, as an enterprise, we have transitioned to the third phase of our growth
plan, which we call the capitalization phase. In this phase, which we expect to continue for many years,
we seek to expand our relationships with our customers to continue solving their increasingly complex
information management problems. Growing our customer relationships well means expanding our
service offerings on a global basis while maximizing our solid core businesses. In doing this, we
continue to build what we believe to be a very durable business through disciplined execution.
Consistent with this model, we have transitioned from a growth strategy driven primarily by
acquisitions of information management services companies to a growth strategy driven primarily by
internal growth. In 2001, internal revenue growth exceeded growth through acquisitions for the first
time since we began the first phase of our growth plan in 1996. This has been the case in each year
since 2001, with the exception of 2004. In the absence of significant acquisition spending, we expect to
achieve a majority of our revenue growth internally in 2012 and beyond.
We expect to achieve our long-term growth goals by offering our customers integrated services that
address their increasingly complex information management needs regardless of the format, location or
lifecycle stage of their information. By offering integrated services, we aim to help our customers
reduce the costs, risks and complexities associated with managing their data while increasing their
compliance with various laws, regulations, company policies and industry best practices. Consistent with
1
our overall strategy, we are focused on improving our internal revenue growth trajectory in the
near-term primarily through a set of specific initiatives. These initiatives are based on a targeted
approach to improving our sales effectiveness through increased focus on our core businesses, customer
segmentation and enhanced marketing programs. By successfully executing on these initiatives, we
expect to increase revenues from our existing customers by selling them new services and by gaining
new customers that do not currently outsource some or all of their information management service
needs or who outsource their information management needs to other vendors. We are also targeting
higher growth in certain international businesses as we expand our platform for selling core services
and new services in higher growth markets. Finally, we are continuing to expand our services portfolio
in the hybrid records market, which includes both physical and digital records, to capture what we see
as larger, faster growing opportunities.
At this stage in our evolution we are also focused on driving increased profitability and cash flow
through a disciplined management approach and a focus on optimizing our business operations.
Comprised of productivity initiatives, pricing program improvements and cost controls, our optimization
strategy has produced significant and visible results. Between 2007 and 2011, we have compounded
annual growth rates of 8% for adjusted operating income before depreciation, amortization, intangible
impairments and (gain) loss on disposal/write-down of property, plant and equipment, net (‘‘Adjusted
OIBDA’’), 15% for Adjusted Earnings per Share and 28% for Free Cash Flows before Acquisitions and
Discretionary Investments (‘‘FCF’’). During that same period, we reduced our capital expenditures
(excluding real estate) as a percent of revenues from 13.5% in 2007 to 6.6% in 2011. These gains were
driven primarily by the optimization of our North American Business segment as we increased Adjusted
OIBDA margins in that segment by more than 700 basis points. Our focus is on sustaining the high
margin, high profitability levels of the North American Business segment while optimizing our
International Business segment using the same strategies. We expect to increase our Adjusted OIBDA
margins in the International Business segment by approximately 700 basis points between 2010 and
the end of 2013. For more detailed definitions and reconciliations of Adjusted OIBDA, Adjusted
Earnings per Share from Continuing Operations and FCF and a discussion of why we believe these
measures provide relevant and useful information to our current and potential investors, see
‘‘Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations—
Non-GAAP Measures.’’
We are committed to delivering stockholder value. To that end, and supported by our increased
profitability and strong cash flows, we initiated a stockholder payout program in February 2010
consisting of a share repurchase authorization of up to $150.0 million and a dividend policy under
which we have paid and in the future intend to pay cash dividends on our common stock. Our first ever
quarterly cash dividend, declared in March 2010, was $0.0625 per share. Since initiating our stockholder
payout program in February 2010, our board of directors has approved increases in the amount
authorized under our share repurchase program of up to an additional $1.05 billion, bringing the total
authorization to $1.2 billion. As of December 31, 2011, we have purchased 36.6 million shares of our
common stock for $1.1 billion under this program. We have also increased our quarterly dividend on
two occasions, most recently to $0.25 per share in June 2011, which represents a 300% increase over
the quarterly amount declared in March 2010.
In April 2011, we announced a three-year strategic plan to increase stockholder value. The key
components of our plan are: (i) sustaining a leadership position in our North American Business
segment; (ii) driving substantial improvements in our International Business segment; and
(iii) committing to significant stockholder payouts of $2.2 billion through 2013, with $1.2 billion being
paid out through May 2012. As of December 31, 2011, we had returned $1.1 billion to stockholders
against our commitment of returning $1.2 billion through May 2012, including $0.1 billion in dividends
and $1.0 billion in share repurchases. As part of our strategic plan, in June 2011, we completed the sale
of our online backup and recovery, digital archiving and eDiscovery solutions businesses (the ‘‘Digital
Business’’) for approximately $395.4 million in cash. Additionally, in connection with our strategic
2
portfolio review of certain international operations, we sold our New Zealand operations in October
2011 for approximately $10.0 million in cash and, in December 2011, we committed to a plan to sell
our records management business in Italy (the ‘‘Italian Business’’).
B. Description of Business.
Overview
Our information management services can be broadly divided into three major service categories:
records management services, data protection & recovery services, and information destruction services.
Media formats can be broadly divided into physical and electronic records. We define physical records
to include paper documents, as well as all other non-electronic media such as microfilm and microfiche,
master audio and videotapes, film, X-rays and blueprints. Electronic records include e-mail and various
forms of magnetic media such as computer tapes, hard drives and optical disks.
Our records management services include: records management program development and
implementation based on best practices to help customers comply with specific regulatory requirements,
implementation of policy-based programs that feature secure, cost-effective storage for all major media,
including paper (which is the dominant form of records storage), flexible retrieval access and retention
management. Included within records management services are our hybrid services. These services help
organizations gain better access to, and ultimately control over, their paper records by digitizing,
indexing and hosting them in online archives to provide complete information lifecycle solutions.
Within the records management services category, we have developed specialized services for vital
records and regulated industries such as healthcare, energy, government and financial services.
Our data protection & recovery services include disaster preparedness, planning, support and
secure, off-site vaulting of data backup media for fast and efficient data recovery in the event of a
disaster, human error or virus. Our technology-based data protection & recovery services include online
backup and recovery solutions for desktop and laptop computers and remote servers. Since our sale of
the Digital Business, we continue to offer these technology-based services primarily through
partnerships. Additionally, we serve as a trusted, neutral third party and offer technology escrow
services to protect and manage source code and other proprietary information.
Our information destruction services are comprised almost exclusively of secure shredding services.
Secure shredding services complete the lifecycle of a record and involve the shredding of sensitive
documents in a way that ensures privacy and a secure chain of custody for the records. These services
typically include either the scheduled pick-up of loose office records, which customers accumulate in
specially designed secure containers we provide, or the shredding of documents stored in records
facilities upon the expiration of their scheduled retention periods.
Physical Records
Physical records may be broadly divided into two categories: active and inactive. Active records
relate to ongoing and recently completed activities or contain information that is frequently referenced.
Active records are usually stored and managed on-site by their owners to ensure ready availability.
Inactive physical records are the principal focus of the information management services industry and
consist of those records that are not needed for immediate access but which must be retained for legal,
regulatory and compliance reasons or for occasional reference in support of ongoing business
operations. A large and growing specialty subset of the physical records market is medical records.
These are active and semi-active records that are often stored off-site with, and serviced by, an
information management services vendor. Special regulatory requirements often apply to medical
records. In addition to our core records management services, we provide consulting, facilities
management, fulfillment and other outsourcing services.
3
Electronic Records
Electronic records management focuses on the storage of, and related services for, computer
media that is either a backup copy of recently processed data or archival in nature. We believe the
issues encountered by customers trying to manage their electronic records are similar to the ones they
face in their physical records management programs and consist primarily of: (1) storage capacity and
the preservation of data; (2) access to and control over the data in a secure environment; and (3) the
need to retain electronic records due to regulatory requirements or for litigation support. Customer
needs for data backup and recovery and archiving are distinctively different. Backup data exists because
of the need of many businesses to maintain backup copies of their data in order to be able to recover
the data in the event of a system failure, casualty loss or other disaster. It is customary (and a best
practice) for data processing groups to rotate backup tapes to off-site locations on a regular basis and
to require multiple copies of such information at multiple sites. In addition to the physical rotation and
storage of backup data that we provide, we offer online backup services through partnerships as an
alternative way for businesses to store and access data. Online backup is a Web-based service that
automatically backs up computer data from servers or directly from desktop and laptop computers over
the Internet and stores it in secure data centers.
Growth of Market
We believe that the volume of stored physical and electronic records will continue to increase on a
global basis for a number of reasons, including: (1) regulatory requirements; (2) concerns over possible
future litigation and the resulting increases in volume and holding periods of records; (3) the continued
proliferation of data processing technologies such as personal computers and networks; (4) inexpensive
document producing technologies such as desktop publishing software and desktop printing; (5) the
high cost of reviewing records and deciding whether to retain or destroy them; (6) the failure of many
entities to adopt or follow policies on records destruction; and (7) the need to keep backup copies of
certain records in off-site locations for business continuity purposes in the event of disaster.
We believe that the creation of paper-based information will be sustained, not in spite of, but
because of, ‘‘paperless’’ technologies such as e-mail and the Internet. These technologies have
prompted the creation of hard copies of such electronic information and have also led to increased
demand for electronic records services, such as the storage and off-site rotation of backup copies of
magnetic media. In addition, we believe that the proliferation of digital information technologies and
distributed data networks has created a growing need for efficient, cost-effective, high quality
technology solutions for electronic data protection and the management of electronic documents.
Acquisitions in a Highly Fragmented Industry
The physical information management services industry has long been and remains a highly
fragmented industry with thousands of competitors in North America and around the world. Between
1995 and 2004 there was significant acquisition activity in the industry driven primarily by us and
certain of our larger competitors. Acquisitions were a fast and efficient way to achieve scale, expand
geographically and broaden service offerings.
We believe that since the 1990s there has been ongoing acquisition activity in the physical
information management services industry, both in North America and internationally, because of the
opportunities for larger information management services providers to achieve economies of scale and
meet customer demands for more sophisticated, technology-based solutions. We believe that this trend
is also due to, and may continue as a result of, the preference of certain large organizations to contract
with one physical information management services vendor in multiple cities and countries for its
physical information management service needs. Larger national or multinational information
management service companies are better able to satisfy the demands of larger multi-city or multi-
national customers than single city competitors.
4
Attractive acquisitions, many of which are small, in North America and internationally continue to
exist and we may from time to time acquire these businesses where we believe they present a good
opportunity to create value for our stockholders.
Characteristics of Our Business
We generate our revenues by providing storage, core records management, data protection &
recovery, information destruction, hybrid services and an expanding menu of complementary products
and services to a large and diverse customer base. Providing outsourced information management
services is the mainstay of our customer relationships and serves as the foundation for our revenue
growth. Core services, which are a vital part of a comprehensive records management program, consist
primarily of the handling and transportation of stored records and information. In our secure shredding
operations, core services consist primarily of the scheduled collection and shredding of records and
documents generated by business operations. Additionally, core services include certain hybrid services
and recurring project revenues. As is the case with storage revenues, core service revenues are highly
recurring in nature. In 2011, our storage and core service revenues represented approximately 88% of
our total consolidated revenues. In addition to our core services, we offer a wide array of
complementary products and services, including special project work, data restoration projects,
fulfillment services, consulting services, technology services and product sales (including specially
designed storage containers and related supplies). In addition, complementary services revenue includes
recycled paper revenue. Complementary services address more specific needs and are designed to
enhance our customers’ overall records management programs. These services complement our core
services; however, they are more episodic and discretionary in nature. Revenue generated by all of our
operating segments includes both core and complementary components.
In general, our North American Business and our International Business segments offer the
products and services discussed below, in their respective geographies. The amount of revenues derived
from our North American Business and International Business segments and other relevant data,
including financial information about geographic areas and product and service lines, for fiscal years
2009, 2010 and 2011 are set forth in Note 9 to Notes to Consolidated Financial Statements.
Service Offerings
Our information management services can be broadly divided into three major categories: records
management services, data protection & recovery services and information destruction services. We
offer both physical services and technology solutions in the records management and data protection &
recovery categories. Currently, we only offer physical services in the information destruction services
category.
Records Management Services
By far our largest category of services, records management services consists primarily of the
archival storage of records for long periods of time according to applicable laws, regulations and
industry best practices. Core to any records management program is the handling and transportation of
stored records and the eventual destruction of those records upon the expiration of their scheduled
retention periods. This is accomplished through our extensive service and courier operations. Other
records management services include our hybrid services as well as Compliant Records Management
and Consulting Services, Health Information Management Solutions, IM Entertainment Services,
Energy Data Services, Discovery Services and other ancillary services.
Hard copy business records are typically stored in cartons packed by the customer for long periods
of time with limited activity. For some customers we store individual files on an open shelf basis and
these files are typically more active. Storage charges are generally billed monthly on a per storage unit
5
basis, usually either per carton or per cubic foot of records, and include the provision of space, racking,
computerized inventory and activity tracking and physical security.
Service and courier operations are an integral part of our comprehensive records management
program for all physical media and include adding records to storage, temporarily removing records
from storage, refiling of removed records, permanently withdrawing records from storage and
destroying records. Service charges are generally assessed for each activity on a per unit basis. Courier
operations consist primarily of the pick-up and delivery of records upon customer request. Charges for
courier services are based on urgency of delivery, volume and location and are billed monthly. As of
December 31, 2011, we were utilizing a fleet of approximately 3,700 owned or leased vehicles.
The growth rate of mission-critical digital information is accelerating, driven in part by the use of
the Internet as a distribution and transaction medium. The rising cost and increasing importance of
digital information management, coupled with the increasing availability of telecommunications
bandwidth at lower costs, may create meaningful opportunities for us to provide solutions to our
customers with respect to their digital records management challenges. We continue to cultivate
marketing and technology partnerships to support this anticipated growth.
The focus of our hybrid business is to develop, implement and support comprehensive information
management solutions for the complete lifecycle of our customers’ information. We seek to develop
solutions that solve our customers’ document management challenges by integrating the management of
physical records, document conversion and digital storage. Our hybrid services complement our core
service offerings, leveraging our global footprint and our existing customer relationships. We
differentiate our offerings from our competitors by providing solutions that integrate and extend our
existing portfolio of products and services. The trend towards increased usage of Electronic Document
Management (‘‘EDM’’) systems represents another opportunity for us to manage active records.
Our hybrid services provide the bridge between customers’ physical documents and their new
EDM solutions.
We offer records management services that have been tailored for specific industries, such as
health care, or to address the needs of customers with more specific requirements based on the critical
nature of their records. Healthcare information services principally include the handling, storage, filing,
processing and retrieval of medical records used by hospitals, private practitioners and other medical
institutions. Medical records tend to be more active in nature and are typically stored on specialized
open shelving systems that provide easier access to individual files. Healthcare information services also
include recurring project work and ancillary services. Recurring project work involves the on-site
removal of aged patient files and related computerized file indexing. Ancillary healthcare information
services include release of information (medical record copying and delivery), temporary staffing,
contract coding, facilities management and imaging.
Vital records contain critical or irreplaceable data such as master audio and video recordings, film
and other highly proprietary information, such as energy data. Vital records may require special
facilities or services, either because of the data they contain or the media on which they are recorded.
Our charges for providing enhanced security and special climate-controlled environments for vital
records are higher than for typical storage services. We provide the same ancillary services for vital
records as we provide for our other storage operations.
We offer a variety of additional services which customers may request or contract for on an
individual basis. These services include conducting records inventories, packing records into cartons or
other containers, and creating computerized indices of files and individual documents. We also provide
services for the management of active records programs. We can provide these services, which generally
include document and file processing and storage, both off-site at our own facilities and by supplying
our own personnel to perform management functions on-site at the customer’s premises. We also sell a
full line of specially designed corrugated cardboard storage cartons.
6
Other complementary lines of business that we operate include fulfillment services and
professional consulting services. Fulfillment services are performed by our wholly owned subsidiary,
Iron Mountain Fulfillment Services, Inc. (‘‘IMFS’’). IMFS stores marketing literature and other
materials for its customers and delivers this material to sales offices, trade shows and prospective
customers’ locations based on current and prospective customer requests. In addition, IMFS assembles
custom marketing packages and orders and manages and provides detailed reporting on customer
marketing literature inventories. A growing element of the content we manage and fulfill is stored
digitally and printed on demand by IMFS. Digital print allows marketing materials such as brochures,
direct mail, flyers, pamphlets and newsletters to be personalized to the recipient with variable messages,
graphics and content.
We provide professional consulting services to customers, enabling them to develop and implement
comprehensive records and information management programs. Our consulting business draws on our
experience in information management services to analyze the practices of companies and assist them
in creating more effective programs of records and information management. Our consultants work
with these customers to develop policies and schedules for document retention and destruction.
We divested ourselves of our domain name management product line in 2010 and our Digital
Business, including our former wholly owned subsidiaries, Mimosa Systems, Inc. and Stratify, Inc., and
New Zealand operations in 2011. Also, we committed to selling our Italian Business in December 2011.
Consistent with our treatment of acquisitions, we eliminated all revenues associated with these
businesses, which have all been reflected as discontinued operations for financial reporting purposes,
from the calculation of our internal growth rates for 2009, 2010 and 2011.
Data Protection & Recovery Services
Our data protection & recovery services are designed to comply with applicable laws and
regulations and to satisfy industry best practices with regard to the off-site vaulting of data for disaster
recovery and business continuity purposes. We provide data protection & recovery services for both
physical and electronic records. We also offer technology escrow services in this category.
Physical data protection & recovery services consist of the storage and rotation of backup
computer media as part of corporate disaster recovery and business continuity plans. Computer tapes,
cartridges and disk packs are transported off-site by our courier operations on a scheduled basis to
secure, climate-controlled facilities, where they are available to customers 24 hours a day, 365 days a
year, to facilitate data recovery in the event of a disaster. Frequently, backup tapes are rotated from
our facilities back to our customers’ data centers. We also manage tape library relocations and support
disaster recovery testing and execution.
Online backup is a Web-based service that automatically backs up computer data from servers or
directly from desktop or laptop computers over the Internet and stores it in secure data centers. Since
our sale of the Digital Business, we continue to offer this service pursuant to a reseller agreement with
Autonomy Corporation plc, a corporation formed under the laws of England and Wales (‘‘Autonomy’’).
Through our technology escrow services business, we act as a trusted, neutral, third party,
safeguarding valuable technology assets—such as software source code, object code and data—in
secure, access-protected escrow accounts. Acting in this intermediary role, we help document and
maintain intellectual property integrity. The result is increased control and leverage for all parties,
enabling them to protect themselves, while maintaining competitive advantage.
Information Destruction Services
Our information destruction services consist primarily of physical secure shredding operations.
Secure shredding is a natural extension of our hard copy records management services, completing the
lifecycle of a record, and involves the shredding of sensitive documents for customers that, in many
cases, also use our services for management of archival records. These services typically include the
7
scheduled pick-up of loose office records which customers accumulate in specially designed secure
containers we provide. Complementary to our shredding operations is the sale of the resultant waste
paper to third-party recyclers. Through a combination of plant-based shredding operations and mobile
shredding units comprised of custom built trucks, we are able to offer secure shredding services to our
customers throughout the U.S., Canada, the United Kingdom, Australia and Latin America.
Financial Characteristics of Our Business
Our financial model is based on the recurring nature of our various revenue streams. The
historical predictability of our revenues and the resulting Adjusted OIBDA allow us to operate with a
high degree of financial leverage. Our business has the following financial characteristics:
(cid:127) Recurring Revenues. We derive a majority of our consolidated revenues from fixed periodic,
usually monthly, fees charged to customers based on the volume of records stored. Once a
customer places physical records in storage with us and until those records are destroyed or
permanently removed (for which we typically receive a service fee), we receive recurring
payments for storage fees without incurring additional labor or marketing expenses or significant
capital costs. Similarly, contracts for the storage of electronic backup media involve primarily
fixed monthly payments. Our annual revenues from these fixed periodic storage fees have grown
for 23 consecutive years. For each of the three years 2009 through 2011, storage revenues, which
are stable and recurring, have accounted for over 55% or more of our total consolidated
revenues. This stable and growing storage revenue base also provides the foundation for
increases in service revenues and Adjusted OIBDA.
(cid:127) Historically Non-Cyclical Storage Business. Historically, we have not experienced significant
reductions in our storage business as a result of economic downturns although, during recent
economic slowdowns, the rate at which some customers added new cartons to their inventory
was below historical levels. We believe that companies that have outsourced records
management services are less likely during economic downturns to incur the move-out costs and
other expenses associated with accelerating destruction of their records, switching vendors or
moving their records management services programs in-house. However, during the current
economic downturn, which is more severe and has lasted longer than other recent downturns,
destruction rates have increased as some customers have been more willing to incur additional
short-term service costs in exchange for lower storage costs in the long-term. In addition, we
have experienced longer sales cycles and lower incoming volumes from existing customers, due
in large part we believe to high unemployment rates and generally lower levels of business
activity. Combined, these impacts have resulted in lower net volume growth rates. The net effect
of these factors has been the continued growth of our storage revenue base, albeit at a lower
rate. For each of the three years 2009 through 2011, total net volume storage growth has been
approximately 2% on a global basis.
(cid:127) Inherent Growth from Existing Physical Records Customers. Our physical records customers have,
on average, sent us additional cartons at a faster rate than stored cartons have been destroyed
or permanently removed. However, during the current economic downturn, the combination of
lower incoming volumes from existing customers, due in large part we believe to high
unemployment rates and generally lower business activity, and increased destruction rates, as
described above, has resulted in net volume growth from existing customers being negative at
times in certain markets. We expect that after the economy has improved, our growth from
existing customers will improve although we cannot give any assurance as to how much, if any,
improvement we will realize. We believe the continued growth of our physical records storage
revenues is the result of a number of factors, including: (1) the trend toward increased records
retention; (2) customer satisfaction with our services; (3) the costs and inconvenience of moving
storage operations in-house or to another provider of information management services; and
8
(4) our positive pricing actions; however, in the current economic downturn, elevated destruction
and withdrawal rates have resulted in lower net volume growth in recent quarters.
(cid:127) Diversified and Stable Customer Base. As of December 31, 2011, we had over 155,000 clients in a
variety of industries. We currently provide services to commercial, legal, banking, healthcare,
accounting, insurance, entertainment and government organizations, including more than 94% of
the Fortune 1000. No customer accounted for as much as 2% of our consolidated revenues in
any of the years ended December 31, 2009, 2010 and 2011. For each of the three years 2009
through 2011, the average volume reduction due to customers terminating their relationship with
us was less than 3%.
(cid:127) Capital Expenditures Related Primarily to Business Line Growth and Ongoing Operations. Our
business requires significant capital expenditures to support our expected revenue growth and
ongoing operations as well as new products and services and increased profitability. As the
nature of our business has evolved over time, so has the nature of our capital expenditures.
Every year we expend capital to support a number of different objectives. The majority of our
capital goes to support business line growth and our ongoing operations. We also expend capital
to support the development and improvement of products and services and projects designed to
increase our profitability. These expenditures are generally smaller and more discretionary in
nature. Below are descriptions of the major types of capital expenditures we are likely to make
in a given year:
(cid:127) Capital to support business line growth—these expenditures are primarily related to capacity
expansion such as investments in new building outfitting, carton storage systems, tape
storage systems and containers, shredding plants and bins and technology service storage
and processing capacity.
(cid:127) Capital to support ongoing business operations—these expenditures are primarily related to
major repairs and/or the replacement of assets, such as facilities, warehouse equipment and
computers, previously referred to as maintenance capital expenditures. This category also
includes operational support initiatives such as sales and marketing and information
technology projects to support infrastructure requirements.
(cid:127) Capital for new product development—these expenditures are directly related to the
development of new products or services in support of our integrated value proposition.
(cid:127) Capital for product improvement—these expenditures are primarily related to product and
service enhancements that support our leadership position in the various markets in which
we operate. Spending in this area includes items such as increased feature functionality,
security upgrades or system enhancements.
(cid:127) Capital to support operational efficiencies—these expenditures are primarily related to driving
increased profitability through cost savings and operating efficiencies and include items such
as facility consolidations and systems to support operating process improvements.
(cid:127) Capital to acquire/construct real estate—these expenditures are directly related to the
acquisition of real estate, either through the purchase of a new facility or the exercise of a
purchase option in an existing lease, or the construction of a new facility.
9
Following is a table presenting our capital expenditures for 2009, 2010 and 2011 organized by the
nature of the spending as described above:
Nature of Capital Spend (dollars in millions)
Year Ended December 31,
2009(1)(2)
2010(1)(2)
2011(1)(2)
Business Line Growth . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Business Operations(3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Product Development . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Product Improvement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Operational Efficiencies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Real Estate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total Capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$156
56
12
28
9
36
$297
$116
65
10
31
8
14
$244
$ 81
84
2
14
18
20
$218
We believe that capital expenditures incurred as a percent of revenues is a meaningful metric for
investors as it indicates the efficiency with which we are investing in the growth and operational
efficiency of our business. For the years 2009 through 2011, our total capital expenditures incurred as a
percent of revenues were approximately 11%, 8% and 7%, respectively. The decrease in capital
expenditures as percent of revenues since 2009 is due primarily to our disciplined approach to capital
management, a shift toward less capital intense service revenues and moderating growth rates in our
physical storage business.
Following is a table presenting our capital expenditures as a percent of total revenues for 2009,
2010 and 2011 organized by the nature of the spending as described above:
Nature of Capital Spend
Year Ended December 31,
2009(1)(2)
2010(1)(2)
2011(1)(2)
Business Line Growth . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Business Operations(3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Product Development . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Product Improvement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Operational Efficiencies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Real Estate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
5.6%
2.0%
0.4%
1.0%
0.3%
1.3%
Total Capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
10.7%
4.0%
2.2%
0.3%
1.1%
0.3%
0.5%
8.4%
2.7%
2.8%
0.1%
0.5%
0.6%
0.7%
7.2%
(1) Represents accrued capital expenditures and may differ from amounts presented on the cash basis
in the Consolidated Statement of Cash Flows.
(2) Columns may not foot due to rounding.
(3) Capital expended in support of ongoing business operations includes amounts previously referred
to as maintenance capital expenditures. This category also includes capital expended on
operational support initiatives such as sales and marketing and information technology projects to
support infrastructure requirements.
Growth Strategy
We offer our customers an integrated value proposition by providing them with comprehensive
records management services, data protection & recovery services and information destruction services,
along with the expertise and experience to address complex information management challenges such
as rising storage costs, litigation, regulatory compliance and disaster recovery. We expect to maintain a
leadership position in the information management services industry around the world by enabling
customers to protect and better use their information—regardless of its format, location or lifecycle
stage—so they can optimize their business and ensure proper recovery, compliance and discovery.
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In the U.S. and Canada, we seek to be one of the largest information management services
providers in each of our markets. Internationally, our objectives are to continue to capitalize on our
expertise in the information management services industry and to make additional acquisitions and
investments in selected international markets. Our near-term growth objectives are comprised of a set
of specific initiatives including: (1) increasing our focus on our core businesses with a targeted, low risk
approach to improving our sales effectiveness and thereby increasing revenues with our existing
customers by selling them new services and gaining net new customers; (2) higher growth in our
international businesses as we expand our platform for selling core services and new services in higher
growth markets; and (3) continuing to expand our services portfolio in the hybrid market to capture
those larger, faster growing opportunities. Although the focus will be on growing our business
organically, targeted acquisitions will continue to play a role in our overall growth strategy.
Introduction of New Products and Services
We continue to expand our portfolio of products and services. Adding new products and services
allows us to further penetrate our existing customer accounts and attract new customers in previously
untapped markets.
Growth from Existing Customers
Our existing customers’ storage of physical records contributes to the growth of storage and
storage-related services revenues because, on average, our existing customers generate additional
cartons at a faster rate than old cartons are destroyed or permanently removed. However, during the
current economic downturn, the combination of lower incoming volumes from existing customers, due
in large part we believe to high unemployment rates and generally lower business activity, and
increased destruction rates, as described above, has resulted in net volume growth from existing
customers being negative at times in certain markets. We expect that after the economy has improved,
our growth from existing customers will improve although we cannot give any assurance as to how
much, if any, improvement we will realize. In order to maximize growth opportunities from existing
customers, we seek to maintain high levels of customer retention by providing premium customer
service through our local account management staff.
Our sales coverage model is designed to identify and capitalize on incremental revenue
opportunities by allocating our sales resources based on a sophisticated segmentation of our customer
base and selling additional records management, data protection & recovery and information
destruction services in new and existing markets within our existing customer relationships. We also
seek to leverage existing business relationships with our customers by selling complementary services
and products such as special project work, data restoration projects, fulfillment services, consulting
services, technology services and product sales (including specially designed storage containers and
related supplies).
Addition of New Customers
Our sales forces are dedicated to three primary objectives: (1) establishing new customer account
relationships; (2) generating additional revenue from existing customers in new and existing markets;
and (3) expanding new and existing customer relationships by effectively selling a wide array of
complementary services and products. In order to accomplish these objectives, our sales forces draw on
our U.S. and international marketing organizations and senior management.
Growth through Acquisitions
The goal of our current acquisition program is to supplement internal growth by continuing to
expand our presence in targeted international markets, continuing to make fold-in acquisitions in North
America and expanding our new service capabilities and industry-specific services. We have a successful
record of acquiring and integrating information management services companies.
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Acquisitions in the North American Business Segment
Although we substantially completed our geographic expansion in North America in 2003, we have
since acquired and we continue to seek to acquire information management services businesses in the
U.S. and Canada. Given the relatively smaller size of the acquisition targets in our core physical
businesses in North America and our increased revenue base, future acquisitions are expected to be
less significant to our overall North American Business segment revenue growth than in the past.
Acquisitions in the International Business Segment
We substantially completed our geographic expansion in Europe and Latin America by 2003 and
entered the Asia Pacific market in 2005. We expect to continue to make acquisitions and investments in
information management services businesses in targeted markets outside North America. We have
acquired and invested in, and seek to acquire and invest in, information management services
companies in certain countries, and, more specifically, certain markets within such countries, where we
believe there is potential for significant growth. Future acquisitions and investments will focus primarily
on expanding priority markets in Continental Europe, Latin America and Asia, with continued leverage
of our successful joint venture model.
The experience, depth and strength of local management are particularly important in our
international expansion and acquisition strategy. Since beginning our international expansion program
in January 1999, we have, directly and through joint ventures, expanded our operations into more than
35 countries in Europe, Latin America and Asia Pacific. These transactions have taken, and may
continue to take, the form of acquisitions of an entire business or controlling or minority investments
with a long-term goal of full ownership. We believe our joint venture strategy, rather than an outright
acquisition, may, in certain markets, better position us to expand the existing business. The local
partners benefit from our expertise in the information management services industry, our multinational
customer relationships, our access to capital and our technology, and we benefit from our local
partners’ knowledge of the market, relationships with local customers and their presence in the
community. In addition to the criteria we use to evaluate North American acquisition candidates, when
looking at an international investment or acquisition, we also evaluate the presence in the potential
market of our existing customers as well as the risks uniquely associated with an international
investment, including those risks described below.
Our long-term goal is to acquire full ownership of each business in which we made a joint venture
investment. Since 2008, we acquired the remaining minority equity ownership in our Greek (2010),
Chinese (2010), Hong Kong (2010) and Singapore (2010) operations. In 2010, to better align our
operations with our long-term international growth objectives, we sold our ownership stakes in
Indonesia and Sri Lanka. We now own more than 97% of our international operations, measured as a
percentage of consolidated revenues. In connection with the strategic review of certain of our
international businesses, we sold our New Zealand operations in October 2011. Additionally, in
December 2011, we committed to a plan to sell our Italian Business.
Our international investments are subject to risks and uncertainties relating to the indigenous
political, social, regulatory, tax and economic structures of other countries, as well as fluctuations in
currency valuation, exchange controls, expropriation and governmental policies limiting returns to
foreign investors.
The amount of our revenues derived from international operations and other relevant financial
data for fiscal years 2009, 2010 and 2011 are set forth in Note 9 to Notes to Consolidated Financial
Statements. For the years ended December 31, 2009, 2010 and 2011, we derived approximately 31%,
32% and 34%, respectively, of our total revenues from outside of the U.S. As of December 31, 2009,
2010 and 2011, we had long-lived assets of approximately 34%, 36% and 36%, respectively, outside of
the U.S.
12
Competition
We are the global leader in the physical information management services industry with operations
in more than 35 countries. We compete with our current and potential customers’ internal information
management services capabilities. We can provide no assurance that these organizations will begin or
continue to use an outside company such as Iron Mountain for their future information management
services.
We also compete with numerous information management services providers in all geographic
areas where we operate. The physical information management services industry is highly competitive
and includes thousands of competitors in North America and around the world. We believe that the
majority of physical information management services companies serve a single city and are either
owner-operated or ancillary to another business, such as a moving and storage company. We believe
that competition for customers is based on price, reputation for reliability, quality of service and scope
and scale of technology and that we generally compete effectively in each of these areas.
Alternative Technologies
We derive most of our revenues from the storage of paper documents and storage-related services.
This storage requires significant physical space. Alternative storage technologies exist, many of which
require significantly less space than paper documents. These technologies include computer media,
microform, CD-ROM and optical disk. To date, none of these technologies has replaced paper
documents as the principal means for storing information. However, we can provide no assurance that
our customers will continue to store most of their records as paper documents. We continue to provide
additional services such as online backup, primarily through partnerships, designed to address our
customers’ need for efficient, cost-effective, high quality solutions for electronic records and
information management.
Employees
As of December 31, 2011, we employed over 8,800 employees in the U.S. and over
8,200 employees outside of the U.S. At December 31, 2011, an aggregate of 469 employees were
represented by unions in California, Georgia and three provinces in Canada.
All non-union employees are generally eligible to participate in our benefit programs, which
include medical, dental, life, short and long-term disability, retirement/401(k) and accidental death and
dismemberment plans. Unionized employees receive these types of benefits through their unions. In
addition to base compensation and other usual benefits, all full-time employees participate in some
form of incentive-based compensation program that provides payments based on revenues, profits,
collections or attainment of specified objectives for the unit in which they work. Management believes
that we have good relationships with our employees and unions. All union employees are currently
under renewed labor agreements or operating under an extension agreement.
Insurance
For strategic risk transfer purposes, we maintain a comprehensive insurance program with insurers
that we believe to be reputable and that have adequate capitalization in amounts that we believe to be
appropriate. Property insurance is purchased on a comprehensive basis, including flood and earthquake
(including excess coverage), subject to certain policy conditions, sublimits and deductibles. Property is
insured based upon the replacement cost of real and personal property, including leasehold
improvements, business income loss and extra expense. Other types of insurance that we carry, which
are also subject to certain policy conditions, sublimits and deductibles, include: medical, workers’
compensation, general liability, umbrella, automobile, professional, warehouse legal liability and
directors’ and officers’ liability policies. In 2002, we established a wholly owned Vermont domiciled
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captive insurance company as a subsidiary through which we retain and reinsure a portion of our
property loss exposure.
Our customer contracts usually contain provisions limiting our liability with respect to loss or
destruction of, or damage to, records stored with us. Our liability under these contracts is often limited
to a nominal fixed amount per item or unit of storage, such as per cubic foot. We cannot assure you
that where we have limitation of liability provisions that they will be enforceable in all instances or
would otherwise protect us from liability. Also, some of our contracts with large volume accounts and
some of the contracts assumed in our acquisitions contain no such limits or contain higher limits. In
addition to provisions limiting our liability, our standard storage and service contracts include a
schedule setting forth the majority of the customer-specific terms, including storage and service pricing
and service delivery terms. Our customers may dispute the interpretation of various provisions in their
contracts. While we have had relatively few disputes with our customers with regard to the terms of
their customer contracts, and most disputes to date have not been material, we can give you no
assurance that we will not have material disputes in the future.
Environmental Matters
Some of our current and formerly owned or leased properties were previously used by entities
other than us for industrial or other purposes that involved the use, storage, generation and/or disposal
of hazardous substances and wastes, including petroleum products. In some instances these properties
included the operation of underground storage tanks or the presence of asbestos-containing materials.
Although we have from time to time conducted limited environmental investigations and remedial
activities at some of our former and current facilities, we have not undertaken an in-depth
environmental review of all of our properties. We therefore may be liable for environmental costs and
may be unable to sell, rent, mortgage or use contaminated real estate owned or leased by us. Under
various federal, state and local environmental laws, we may be liable for environmental compliance and
remediation costs to address contamination, if any, located at owned and leased properties as well as
damages arising from such contamination, whether or not we know of, or were responsible for, the
contamination, or the contamination occurred while we owned or leased the property. Environmental
conditions for which we might be liable may also exist at properties that we may acquire in the future.
In addition, future regulatory action and environmental laws may impose costs for environmental
compliance that do not exist today.
We transfer a portion of our risk of financial loss due to currently undetected environmental
matters by purchasing an environmental impairment liability insurance policy, which covers all owned
and leased locations. Coverage is provided for both liability and remediation costs.
Internet Website
Our Internet address is www.ironmountain.com. Under the ‘‘For Investors’’ section on our Internet
website, we make available through a hyperlink to a third party website, free of charge, our Annual
Report on Form 10-K, our Quarterly Reports on Form 10-Q, our Current Reports on Form 8-K and
amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities
Exchange Act of 1934 (the ‘‘Exchange Act’’) as soon as reasonably practicable after such forms are
filed with or furnished to the SEC. We are not including the information contained on or available
through our website as a part of, or incorporating such information by reference into, this
Annual Report on Form 10-K. Copies of our corporate governance guidelines, code of ethics and the
charters of our audit, compensation, and nominating and governance committees are available on the
‘‘For Investors’’ section of our website, www.ironmountain.com, under the heading ‘‘Corporate
Governance.’’
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Item 1A. Risk Factors.
Our businesses face many risks. If any of the events or circumstances described in the following
risks actually occur, our businesses, financial condition or results of operations could suffer, and the
trading price of our debt or equity securities could decline. Our investors and prospective investors
should consider the following risks and the information contained under the heading ‘‘Cautionary Note
Regarding Forward-Looking Statements’’ before deciding to invest in our securities.
Operational Risks
Governmental and customer focus on data security could increase our costs of operations. We may not be
able to fully offset these costs through increases in our rates. In addition, incidents in which we fail to
protect our customers’ information against security breaches could result in monetary damages against us
and could otherwise damage our reputation, harm our businesses and adversely impact our results
of operations.
In reaction to publicized incidents in which electronically stored information has been lost, illegally
accessed or stolen, almost all states have adopted breach of data security statutes or regulations that
require notification to consumers if the security of their personal information, such as social security
numbers, is breached. In addition, certain federal laws and regulations affecting financial institutions,
health care providers and plans and others impose requirements regarding the privacy and security of
information maintained by those institutions as well as notification to persons whose personal
information is accessed by an unauthorized third party. Some of these laws and regulations provide for
civil fines in certain circumstances. One state has adopted regulations requiring every company that
maintains or stores personal information to adopt a comprehensive written information security
program. In some instances European data protection authorities have issued large fines as a result of
data security breaches.
Continued governmental focus on data security may lead to additional legislative action. For
example, the U.S. Congress is considering legislation that would expand the federal data breach
notification requirement beyond the financial and medical fields. In addition, the European
Commission has proposed a new regulation and directive that will, if adopted, supersede
Directive 95/46/EC, which has governed the processing of personal data since 1995. It is anticipated
that the new proposal will significantly alter the security and privacy obligations of entities, such as Iron
Mountain, that process data of citizens of members of the European Union. The continued emphasis
on information security may lead customers to request that we take additional measures to enhance
security and assume higher liability under our contracts. We have experienced incidents in which
customers’ backup tapes or other records have been lost, and we have been informed by customers that
some of the incidents involved the loss of personal information, resulting in monetary damages which
we have paid. As a result of legislative initiatives and client demands, we may have to modify our
operations with the goal of further improving data security. Any such modifications may result in
increased expenses and operating complexity, and we may be unable to increase the rates we charge for
our services sufficiently to offset any increased expenses.
In addition to increases in the costs of operations or potential liability that may result from a
heightened focus on data security, our reputation may be damaged by any compromise of security,
accidental loss or theft of customer data in our possession. We believe that establishing and maintaining
a good reputation is critical to attracting and retaining customers. If our reputation is damaged, we
may become less competitive, which could negatively impact our businesses, financial condition or
results of operations.
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Our customers may shift from paper storage to alternative technologies that require less physical space.
We derive most of our revenues from the storage of paper documents and storage related services.
This storage requires significant physical space, which we provide through our owned and leased
facilities. Alternative storage technologies exist, many of which require significantly less space than
paper documents. These technologies include computer media, microform, CD-ROM and optical disk.
U.S. federal government initiatives have resulted in many health care providers adopting programs to
evolve to greater use of electronic medical records. In addition, as alternative technologies are adopted,
storage related services may decline as the physical records we store become less active and more
archived. We can provide no assurance that our customers will continue to store most of their records
in paper documents format. The adoption of alternative technologies may also result in decreased
demand for services related to the paper documents we store. A significant shift by our customers to
storage of data through non-paper based technologies, whether now existing or developed in the future,
could adversely affect our businesses.
Our customer contracts may not always limit our liability and may sometimes contain terms that could lead
to disputes in interpretation.
Our customer contracts usually contain provisions limiting our liability with respect to loss or
destruction of, or damage to, records or information stored with us. Our liability under physical storage
contracts is often limited to a nominal fixed amount per item or unit of storage, such as per cubic foot.
Our liability under our hybrid services and other service contracts is often limited to a percentage of
annual revenue under the contract. We cannot assure you that where we have limitation of liability
provisions they will be enforceable in all instances or, if enforceable, that they would otherwise protect
us from liability. In addition to provisions limiting our liability, our standard storage and service
contracts include a schedule setting forth the majority of the customer-specific terms, including storage
and service pricing and service delivery terms. Our customers may dispute the interpretation of various
provisions in their contracts. While we have had relatively few disputes with our customers with regard
to the terms of their customer contracts, and most disputes to date have not been material, we can give
you no assurance that we will not have material disputes in the future.
We face competition for customers.
We compete, in some of our business lines, with our current and potential customers’ internal
information management services capabilities. These organizations may not begin or continue to use a
third party, such as Iron Mountain, for their future information management services needs. We also
compete with multiple information management services providers in all geographic areas where we
operate; our current or potential customers may choose to use those competitors instead of us.
Our customers may be constrained in their ability to pay for services or require fewer services.
Continued economic weakness in the markets where we operate may cause some customers to
postpone projects for which they would otherwise retain our services and may, in some instances, cause
customers to reduce or forgo our services. Many of our largest customers are financial institutions that
have been particularly affected by the economic downturn; their condition may lead them to reduce
their use of our services. In addition, customers may increasingly seek protection under bankruptcy
laws, potentially affecting not only future business but also our ability to collect accounts receivable.
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Failure to comply with certain regulatory and contractual requirements under our U.S. Government General
Services Administration Multiple Award Schedule contracts could adversely affect our revenues, operating
results and financial position.
Selling our services to the U.S. Government subjects us to certain regulatory and contractual
requirements. Failure to comply with these requirements could subject us to investigations, price
reductions, up to treble damages, and civil penalties. Noncompliance with certain regulatory and
contractual requirements could also result in us being suspended or barred from future
U.S. Government contracting. Any of these outcomes could have a material adverse effect on our
revenues, operating results and financial position.
We may be subject to certain costs and potential liabilities associated with the real estate required for our
business.
Because our business is heavily dependent on real estate, we face special risks attributable to the
real estate we own or lease. Such risks include:
(cid:127) variable occupancy costs and difficulty locating suitable sites due to fluctuations in real estate
markets;
(cid:127) uninsured losses or damage to our storage facilities due to an inability to obtain full coverage on
a cost-effective basis for some casualties, such as earthquakes, or any coverage for certain losses,
such as losses from riots or terrorist activities;
(cid:127) inability to use our real estate holdings effectively and costs associated with vacating or
consolidating facilities if the demand for physical storage were to diminish because our
customers choose other storage technologies; and
(cid:127) liability under environmental laws for the costs of investigation and cleanup of contaminated real
estate owned or leased by us, whether or not (i) we know of, or were responsible for, the
contamination, or (ii) the contamination occurred while we owned or leased the property.
Some of our current and formerly owned or leased properties were previously used by entities
other than us for industrial or other purposes that involved the use, storage, generation and/or disposal
of hazardous substances and wastes, including petroleum products. In some instances this prior use
involved the operation of underground storage tanks or the presence of asbestos-containing materials.
Although we have from time to time conducted limited environmental investigations and remedial
activities at some of our former and current facilities, we have not undertaken an in-depth
environmental review of all of our properties. We therefore may be potentially liable for environmental
costs like those discussed above and may be unable to sell, rent, mortgage or use contaminated real
estate owned or leased by us. Environmental conditions for which we might be liable may also exist at
properties that we may acquire in the future. In addition, future regulatory action and environmental
laws may impose costs for environmental compliance that do not exist today.
International operations may pose unique risks.
As of December 31, 2011, we provided services in more than 35 countries outside the U.S. As part
of our growth strategy, we expect to continue to acquire or invest in information management services
businesses in select foreign markets. International operations are subject to numerous risks, including:
(cid:127) the impact of foreign government regulations and U.S. regulations that apply to us wherever we
operate;
(cid:127) the volatility of certain foreign economies in which we operate;
(cid:127) political uncertainties;
17
(cid:127) unforeseen liabilities, particularly within acquired businesses;
(cid:127) the risk that the business partners upon whom we depend for technical assistance or
management and acquisition expertise outside of the U.S. will not perform as expected;
(cid:127) differences in business practices; and
(cid:127) foreign currency fluctuations.
In particular, our net income can be significantly affected by fluctuations in currencies associated
with certain intercompany balances of our foreign subsidiaries owed to us and between our foreign
subsidiaries.
We may be subject to claims that our technology violates the intellectual property rights of a third party.
Third parties may have legal rights (including ownership of patents, trade secrets, trademarks and
copyrights) to ideas, materials, processes, names or original works that are the same or similar to those
we use. Third parties may bring claims, or threaten to bring claims, against us that allege that their
intellectual property rights are being infringed or violated by our use of intellectual property. Litigation
or threatened litigation could be costly and distract our senior management from operating our
business. Further, if we cannot establish our right or obtain the right to use the intellectual property on
reasonable terms, we may be required to develop alternative intellectual property at our expense to
mitigate potential harm.
Changing fire and safety standards may result in significant expense in certain jurisdictions.
As of December 31, 2011, we operated 932 records management and off-site data protection
facilities worldwide, including 615 in the United States alone. Many of these facilities were built and
outfitted by third parties and added to Iron Mountain’s real estate portfolio as part of acquisitions.
Some of these facilities contain fire suppression and safety features that are different from our current
specifications and current standards for new facilities, although we believe all of our facilities were
constructed in compliance with laws and regulations in effect at the time of their construction or
outfitting. Where we believe the fire suppression and safety features of a facility require improvement,
we will develop and implement a plan to remediate the issue. In some instances local authorities having
jurisdiction may take the position that our fire suppression and safety features in a particular facility
are insufficient and require additional measures which may involve considerable expense to Iron
Mountain. If additional fire safety and suppression measures were required at a large number of our
facilities, this could negatively impact our business, financial condition or results of operations.
Fluctuations in commodity prices may affect our operating revenues and results of operations.
Our operating revenues and results of operations are impacted by significant changes in
commodity prices. Our secure shredding operations generate revenue from the sale of shredded paper
to recyclers. We generate additional revenue when the price of diesel fuel rises above certain
predetermined rates through a customer surcharge. As a result, significant declines in paper and diesel
fuel prices may negatively impact our revenues and results of operations while increases in other
commodity prices, including steel, may negatively impact our results of operations.
Unexpected events could disrupt our operations and adversely affect our results of operations.
Unexpected events, including fires or explosions at our facilities, natural disasters such as
hurricanes and earthquakes, war or terrorist activities, unplanned power outages, supply disruptions and
failure of equipment or systems, could adversely affect our results of operations. These events could
result in customer service disruption, physical damages to one or more key operating facilities, the
18
temporary closure of one or more key operating facilities or the temporary disruption of information
systems.
Attacks on our internal information technology systems could damage our reputation, harm our businesses
and adversely impact our results of operations.
Our reputation for providing secure information storage to customers is critical to the success of
our business. We have previously faced attempts by hackers and similar unauthorized users to gain
access to our information technology systems and expect to continue to face such attempts. Although
we seek to prevent, detect and investigate these security incidents and have taken steps to prevent such
security breaches, there can be no assurance that attacks by unauthorized users will not be attempted in
the future or that our security measures will be effective. A successful breach of the security of our
information technology systems could lead to theft or misuse of our customers’ proprietary or
confidential information and result in third party claims against us and reputational harm. If our
reputation is damaged, we may become less competitive, which could negatively impact our businesses,
financial condition or results of operations.
Risks Relating to our Strategic Review
No guaranty that any of the alternative financing, capital, and tax strategies being evaluated, including a
potential conversion to a REIT, will be implemented or will be successful if implemented.
In April 2011 we entered into a settlement agreement with Elliott Associates, L.P. and Elliott
International, L.P. in which we agreed to form a special committee of our board of directors to, among
other things, evaluate ways to maximize stockholder value through alternative financing, capital, and tax
strategies (the ‘‘Strategic Review’’), including evaluating a potential conversion to a real estate
investment trust (a ‘‘REIT’’). The Strategic Review has required, and may continue to require, the
expenditure of significant time and resources by us. The Strategic Review process is complex and may
divert management’s time and attention. We may not pursue any of the alternative strategies being
evaluated, including a potential conversion to a REIT, and we can provide no assurances that any
strategy we pursue will be successfully implemented or achieve the intended benefits. Finally,
stockholder litigation that may arise in connection with the Strategic Review may result in significant
costs for defense or liability. These consequences, alone or in combination, may have a material
adverse effect on our business, financial condition or results of operations.
Risks Relating to Our Common Stock
No Guaranty of Dividend Payments or Stock Repurchases.
Our board of directors approved a share repurchase program and adopted a dividend policy under
which we intend to pay quarterly cash dividends on our common stock. In addition, on April 19, 2011,
we announced our intention to make stockholder payouts of approximately $2.2 billion through 2013,
with approximately $1.2 billion of capital returned to stockholders by May 2012 through a combination
of share repurchases, ongoing quarterly dividends and potential one-time dividends. Although we are
committed to returning capital to stockholders and returned $1.15 billion between April 19, 2011 and
February 10, 2012, any determinations by us to repurchase our common stock or pay cash dividends on
our common stock in the future, as well as the form and mix of such stockholder payouts, will be based
primarily upon our financial condition, results of operations, business requirements and strategy, the
price of our common stock (in the case of the repurchase program) and our board of directors’
continuing determination that the repurchase program and the declaration of dividends under the
dividend policy are in the best interests of our stockholders and are in compliance with all laws and
agreements applicable to the repurchase and dividend programs. The terms of our credit agreement
19
and our indentures contain provisions permitting the payment of cash dividends and stock repurchases
subject to certain limitations.
Risks Relating to Our Indebtedness
Our substantial indebtedness could adversely affect our financial health and prevent us from fulfilling our
obligations under our various debt instruments.
We have a significant amount of indebtedness. The following table shows important credit statistics
as of December 31, 2011 (dollars in millions):
Total long-term debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Debt to equity ratio . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$3,353.6
$1,254.3
2.67X
Our substantial indebtedness could have important consequences to you. Our indebtedness may
increase as we continue to borrow under existing and future credit arrangements in order to finance
future acquisitions and for general corporate purposes, which would increase the associated risks. These
risks include:
(cid:127) inability to satisfy our obligations with respect to our various debt instruments;
(cid:127) inability to adjust to adverse economic conditions;
(cid:127) inability to fund future working capital, capital expenditures, acquisitions and other general
corporate requirements, including possible required repurchases of our various indebtedness, the
payment of quarterly dividends or the repurchase of shares of our common stock;
(cid:127) limits on our flexibility in planning for, or reacting to, changes in our business and the
information management services industry;
(cid:127) limits on future borrowings under our existing or future credit arrangements, which could affect
our ability to pay our indebtedness or to fund our other liquidity needs;
(cid:127) inability to generate sufficient funds to cover required interest payments; and
(cid:127) restrictions on our ability to refinance our indebtedness on commercially reasonable terms.
Restrictive loan covenants may limit our ability to pursue our growth strategy.
Our credit facility and our indentures contain covenants restricting or limiting our ability to, among
other things:
(cid:127) incur additional indebtedness;
(cid:127) pay dividends or make other restricted payments;
(cid:127) make asset dispositions;
(cid:127) create or permit liens; and
(cid:127) make capital expenditures and other investments.
These restrictions may adversely affect our ability to pursue our acquisition and other growth
strategies.
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We may not have the ability to raise the funds necessary to finance the repurchase of outstanding senior
subordinated indebtedness upon a change of control event as required by our indentures.
Upon the occurrence of a change of control, we will be required to offer to repurchase all
outstanding senior subordinated indebtedness. However, it is possible that we will not have sufficient
funds at the time of the change of control to make the required repurchase of the notes or that
restrictions in our revolving credit facility will not allow such repurchases. In addition, certain important
corporate events, such as leveraged recapitalizations that would increase the level of our indebtedness,
would not constitute a ‘‘change of control’’ under our indentures.
Since Iron Mountain is a holding company, our ability to make payments on our various debt obligations
depends in part on the operations of our subsidiaries.
Iron Mountain is a holding company, and substantially all of our assets consist of the stock of our
subsidiaries and substantially all of our operations are conducted by our direct and indirect wholly
owned subsidiaries. As a result, our ability to make payments on our various debt obligations will be
dependent upon the receipt of sufficient funds from our subsidiaries. However, our various debt
obligations are guaranteed, on a joint and several and full and unconditional basis, by most, but not all,
of our direct and indirect wholly owned U.S. subsidiaries.
Acquisition and Expansion Risks
Failure to manage our growth may impact operating results.
If we succeed in expanding our existing businesses, or in moving into new areas of business, that
expansion may place increased demands on our management, operating systems, internal controls and
financial and physical resources. If not managed effectively, these increased demands may adversely
affect the services we provide to existing customers. In addition, our personnel, systems, procedures and
controls may be inadequate to support future operations. Consequently, in order to manage growth
effectively, we may be required to increase expenditures to increase our physical resources, expand,
train and manage our employee base, improve management, financial and information systems and
controls, or make other capital expenditures. Our results of operations and financial condition could be
harmed if we encounter difficulties in effectively managing the budgeting, forecasting and other process
control issues presented by future growth.
Failure to successfully integrate acquired operations could negatively impact our future results of operations.
The success of any acquisition depends in part on our ability to integrate the acquired company.
The process of integrating acquired businesses may involve unforeseen difficulties and may require a
disproportionate amount of our management’s attention and our financial and other resources. We can
give no assurance that we will ultimately be able to effectively integrate and manage the operations of
any acquired business. The failure to successfully integrate the cultures, operating systems, procedures
and information technologies of an acquired business could have a material adverse effect on our
results of operations.
We may be unable to continue our international expansion.
Our growth strategy involves expanding operations in international markets, and we expect to
continue this expansion. Europe, Latin America and Australia have been our primary areas of focus for
international expansion, and we have expanded into the Asia Pacific region to a lesser extent. We have
entered into joint ventures and have acquired all or a majority of the equity in information
management services businesses operating in these areas and may acquire other information
management services businesses in the future.
21
This growth strategy involves risks. We may be unable to pursue this strategy in the future at the
desired pace or at all. For example, we may be unable to:
(cid:127) identify suitable companies to acquire or invest in;
(cid:127) complete acquisitions on satisfactory terms;
(cid:127) successfully expand our infrastructure and sales force to support growth;
(cid:127) incur additional debt necessary to acquire suitable companies if we are unable to pay the
purchase price out of working capital, common stock or other equity securities; or
(cid:127) enter into successful business arrangements for technical assistance or management expertise
outside of the U.S.
We also compete with other information management services providers for companies to acquire.
Some of our competitors may possess substantial financial and other resources. If any such competitor
were to devote additional resources to pursue such acquisition candidates or focus its strategy on our
international markets, the purchase price for potential acquisitions or investments could rise,
competition in international markets could increase and our results of operations could be adversely
affected.
Item 1B. Unresolved Staff Comments.
None.
Item 2. Properties.
As of December 31, 2011, we conducted operations through 746 leased facilities and 236 facilities
that we own. Our facilities are divided among our reportable segments as follows: North American
Business (643), International Business (338), and Corporate (1). These facilities contain a total of
63.7 million square feet of space. Facility rent expense was $216.1 million and $219.4 million for the
years ended December 31, 2010 and 2011, respectively. The leased facilities typically have initial lease
terms of five to ten years with one or more five-year options to extend. In addition, some of the leases
contain either a purchase option or a right of first refusal upon the sale of the property. Our facilities
are located throughout North America, Europe, Latin America and Asia Pacific, with the largest
number of facilities in California, Florida, New York, New Jersey, Texas, Canada and the
United Kingdom. We believe that the space available in our facilities is adequate to meet our current
needs, although future growth may require that we acquire additional real property either by leasing or
purchasing. See Note 10 to Notes to Consolidated Financial Statements for information regarding our
minimum annual lease commitments.
Item 3. Legal Proceedings.
In August 2010, we were named as a defendant in a patent infringement suit filed in the
U.S. District Court for the Eastern District of Texas by Oasis Research, LLC. The plaintiff alleges that
the technology found in our Connected and LiveVault products infringed certain U.S. patents owned by
the plaintiff and seeks an unspecified amount of damages. A final pre-trial conference has been
scheduled for October 12, 2012. We expect the court to establish a trial date during the pre-trial
conference. As part of the sale of our Digital Business discussed at Note 14 to Notes to Consolidated
Financial Statements, our Connected and LiveVault products were sold to Autonomy and Autonomy
has assumed this obligation and the defense of this litigation and has agreed to indemnify us against
any losses.
In July 2006, we experienced a significant fire in a leased records and information management
facility in London, England, that resulted in the complete destruction of the facility and its contents.
22
The London Fire Brigade (‘‘LFB’’) issued a report in which it concluded that the fire resulted either
from human agency, i.e., arson, or an unidentified ignition device or source, and its report to the Home
Office concluded that the fire resulted from a deliberate act. The LFB also concluded that the installed
sprinkler system failed to control the fire because the primary electric fire pump was disabled prior to
the fire and the standby diesel fire pump was disabled in the early stages of the fire by third-party
contractors. We have received notices of claims from customers or their subrogated insurance carriers
under various theories of liability arising out of lost data and/or records as a result of the fire. Certain
of those claims have resulted in litigation in courts in the United Kingdom. We deny any liability in
respect of the London fire, and we have referred these claims to our excess warehouse legal liability
insurer, which has been defending them to date under a reservation of rights. Certain of the claims
have been settled for nominal amounts, typically one to two British pounds sterling per carton, as
specified in the contracts, which amounts have been or will be reimbursed to us from our primary
property insurer. We believe we carry adequate property and liability insurance related to this incident.
General
In addition to the matters discussed above, we are involved in litigation from time to time in the
ordinary course of business. A portion of the defense and/or settlement costs associated with such
litigation is covered by various commercial liability insurance policies purchased by us and, in limited
cases, indemnification from third parties. In the opinion of management, other than discussed above,
no material legal proceedings are pending to which we, or any of our properties, are subject.
Item 4. Mine Safety Disclosures.
None.
23
PART II
Item 5. Market For Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of
Equity Securities.
Our common stock is traded on the New York Stock Exchange (the ‘‘NYSE’’) under the symbol
‘‘IRM.’’ The following table sets forth the high and low sale prices on the NYSE, for the years 2010
and 2011:
2010
First Quarter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Second Quarter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Third Quarter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Fourth Quarter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2011
First Quarter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Second Quarter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Third Quarter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Fourth Quarter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Sale Prices
High
Low
$27.76
28.49
25.81
25.42
$31.53
35.50
35.79
33.70
$21.32
22.44
20.09
19.93
$24.28
31.18
27.68
28.34
The closing price of our common stock on the NYSE on February 10, 2012 was $30.47. As of
February 10, 2012, there were 539 holders of record of our common stock. We believe that there are
more than 50,500 beneficial owners of our common stock.
In February 2010, our board of directors adopted a dividend policy under which we intend to pay
quarterly cash dividends on our common stock. Declaration and payment of future quarterly dividends
is at the discretion of our board of directors. In 2010 and 2011, our board of directors declared the
following dividends:
Declaration Date
Dividend
Per Share
Record Date
Total
Amount
(in thousands)
March 25, 2010 . . . . . . . . . . . . . . .
June 4, 2010 . . . . . . . . . . . . . . . . . .
September 15, 2010 . . . . . . . . . . . .
December 10, 2010 . . . . . . . . . . . . .
March 11, 2011 . . . . . . . . . . . . . . .
June 10, 2011 . . . . . . . . . . . . . . . . .
September 8, 2011 . . . . . . . . . . . . .
December 1, 2011 . . . . . . . . . . . . .
$0.0625
March 25, 2010
0.0625
June 25, 2010
September 28, 2010
0.0625
0.1875 December 27, 2010
March 25, 2011
0.1875
0.2500
June 24, 2011
September 23, 2011
0.2500
0.2500 December 23, 2011
$12,720
12,641
12,532
37,514
37,601
50,694
46,877
43,180
Payment Date
April 15, 2010
July 15, 2010
October 15, 2010
January 14, 2011
April 15, 2011
July 15, 2011
October 14, 2011
January 13, 2012
Our board of directors has authorized up to $1.2 billion in repurchases of our common stock. As
of February 10, 2012, we have repurchased approximately $1.1 billion of our common stock under such
authorization. Any determinations by us to repurchase our common stock or pay cash dividends on our
common stock in the future will be based primarily upon our financial condition, results of operations,
business requirements, the price of our common stock (in the case of the repurchase program) and our
board of directors’ continuing determination that the repurchase program and the declaration of
dividends under the dividend policy are in the best interests of our stockholders and are in compliance
with all laws and agreements applicable to the repurchase and dividend programs. The terms of our
credit agreement and our indentures contain provisions permitting the payment of cash dividends and
stock repurchases subject to certain limitations.
24
Unregistered Sales of Equity Securities and Use of Proceeds
There were no sales of unregistered securities for the three months ended December 31, 2011. The
following table sets forth our common stock repurchased for the three months ended December 31,
2011:
Issuer Purchases of Equity
Securities
Period(1)
October 1, 2011–October 31, 2011 . . .
November 1, 2011–November 30, 2011
December 1, 2011–December 31, 2011
Total Number
of Shares
Purchased(2)
3,650,195
6,078,525
4,923,158
Total
. . . . . . . . . . . . . . . . . . . . . . . .
14,651,878
Total Number
of Shares
Purchased as Part
of Publicly
Announced Plans
or Programs(3)
3,650,195
6,078,525
4,923,158
14,651,878
Average Price
Paid per Share
$30.70
$29.68
$29.89
$30.00
Maximum Number
(or Approximate
Dollar Value) of
Shares that May Yet
Be Purchased Under
the Plans or
Programs(4)
(In Thousands)
$428,226
$247,845
$100,701
(1) Information is based on trade dates of repurchase transactions.
(2) Consists of shares of our common stock, par value $.01 per share. All repurchases were made
pursuant to an announced plan. All repurchases were made in open market transactions under the
terms of a Rule 10b5-1 plan adopted by us.
(3) In February 2010, our board of directors approved a share repurchase program authorizing up to
$150.0 million in repurchases of our common stock, and in October 2010, our board of directors
authorized up to an additional $200.0 million of such purchases. In May 2011, our board of
directors authorized up to an additional $850.0 million of such purchases, for a total authorization
of $1.2 billion. Our board of directors did not specify an expiration date for this program.
(4) Dollar amounts represented reflect $1.2 billion total authorization minus the total aggregate
amount purchased in such month and all prior months during which the repurchase program was
in effect and exclude commissions paid in connection therewith.
25
Item 6. Selected Financial Data.
The following selected consolidated statements of operations, balance sheet and other data have
been derived from our audited consolidated financial statements (see footnote (1) below). The selected
consolidated financial and operating information set forth below, giving effect to stock splits, should be
read in conjunction with ‘‘Item 7. Management’s Discussion and Analysis of Financial Condition and
Results of Operations’’ and our Consolidated Financial Statements and the Notes thereto included
elsewhere in this filing.
Year Ended December 31,
2007(1)
2008(1)
2009(1)
2010(1)(2)
2011
(in thousands, except per share data)
Consolidated Statements of
Operations Data:
Revenues:
Storage . . . . . . . . . . . . . . . . . . . . .
Service . . . . . . . . . . . . . . . . . . . . .
$1,362,161
1,204,367
$1,496,194
1,329,240
$1,533,792
1,240,592
$1,598,718
1,293,631
$1,682,990
1,331,713
Total Revenues . . . . . . . . . . . . . .
2,566,528
2,825,434
2,774,384
2,892,349
3,014,703
Operating Expenses:
Cost of sales (excluding depreciation
and amortization) . . . . . . . . . . . .
Selling, general and administrative . .
Depreciation and amortization . . . .
Intangible Impairments(3) . . . . . . . .
(Gain) Loss on disposal/write-down
of property, plant and equipment,
net . . . . . . . . . . . . . . . . . . . . . . .
1,212,516
677,847
220,217
—
1,311,891
759,264
254,497
—
1,201,871
749,934
277,186
—
1,192,862
772,811
304,205
85,909
1,245,200
834,591
319,499
46,500
(5,463)
7,522
168
(10,987)
(2,286)
Total Operating Expenses . . . . . .
Operating Income . . . . . . . . . . . . . . .
. . . . . . . . . . . .
Interest Expense, Net
Other Expense (Income), Net . . . . . . .
2,105,117
461,411
214,147
4,103
2,333,174
492,260
219,989
31,505
2,229,159
545,225
212,545
(12,599)
2,344,800
547,549
204,559
8,768
2,443,504
571,199
205,256
13,043
Income from Continuing
Operations Before Provision for
Income Taxes . . . . . . . . . . . . .
Provision for Income Taxes . . . . . . . . .
Income from Continuing Operations . .
Loss from Discontinued Operations,
243,161
72,617
170,544
240,766
146,122
94,644
345,279
113,762
231,517
334,222
167,483
166,739
352,900
106,488
246,412
Net of Tax . . . . . . . . . . . . . . . . . . .
(17,858)
(14,889)
(12,138)
(219,417)
(47,439)
Gain on Sale of Discontinued
Operations, Net of Tax . . . . . . . . . .
—
—
—
—
Net Income (Loss) . . . . . . . . . . . . . . .
152,686
79,755
219,379
(52,678)
200,619
399,592
Less: Net Income (Loss)
Attributable to Noncontrolling
Interests . . . . . . . . . . . . . . . . .
Net Income (Loss) Attributable to
920
(94)
1,429
4,908
4,054
Iron Mountain Incorporated . . . . . .
$ 151,766
$
79,849
$ 217,950
$ (57,586) $ 395,538
(footnotes follow)
26
Earnings (Losses) per Share—Basic:
Income from Continuing Operations . .
Total Loss (Income) from
Discontinued Operations
. . . . . . . .
Net Income (Loss) Attributable to
Iron Mountain Incorporated . . . . . .
Earnings (Losses) per Share—Diluted:
Income from Continuing Operations . .
Total Loss (Income) from
Discontinued Operations
. . . . . . . .
Net Income (Loss) Attributable to
Iron Mountain Incorporated . . . . . .
Weighted Average Common Shares
$
$
$
$
$
$
Year Ended December 31,
2007(1)
2008(1)
2009(1)
2010(1)(2)
2011
(in thousands, except per share data)
0.85
$
0.47
$
1.14
$
0.83
$
1.27
(0.09) $
(0.07) $
(0.06) $
(1.09) $
0.79
0.76
0.84
$
$
0.40
0.47
$
$
1.07
1.13
$
$
(0.29) $
2.03
0.83
$
1.26
(0.09) $
(0.07) $
(0.06) $
(1.09) $
0.78
0.75
$
0.39
$
1.07
$
(0.29) $
2.02
Outstanding—Basic . . . . . . . . . . . .
199,938
201,279
202,812
201,991
194,777
Weighted Average Common Shares
Outstanding—Diluted . . . . . . . . . . .
202,062
203,290
204,271
201,991
195,938
Dividends Declared per Common
Share(4) . . . . . . . . . . . . . . . . . . . .
$
— $
— $
— $
0.3750
$
0.9375
(footnotes follow)
Year Ended December 31,
2007(1)
2008(1)
2009(1)
2010(1)(2)
2011
(In thousands)
Other Data:
Adjusted OIBDA(5) . . . . . . . . . . . . . . . . . . . .
Adjusted OIBDA Margin(5) . . . . . . . . . . . . . .
Ratio of Earnings to Fixed Charges . . . . . . . . .
$676,165
$754,279
$822,579
$926,676
$934,912
26.3%
1.8x
26.7%
1.8x
29.6%
2.2x
32.0%
2.2x
31.0%
2.2x
Consolidated Balance Sheet Data:
Cash and Cash Equivalents . . . . . . . .
Total Assets . . . . . . . . . . . . . . . . . . . .
Total Long-Term Debt (including
Current Portion of Long-Term Debt)
Total Equity(1) . . . . . . . . . . . . . . . . .
(footnotes follow)
2007
2008
2009
2010(2)
2011
As of December 31,
(in thousands)
$ 125,607
6,308,949
$ 278,370
6,359,291
$ 446,656
6,851,157
$ 258,693
6,416,393
$ 179,845
6,041,258
3,263,998
1,815,173
3,240,450
1,814,769
3,248,649
2,150,760
3,008,207
1,952,865
3,353,588
1,254,256
27
Reconciliation of Adjusted OIBDA to Operating Income and Net Income (Loss):
Adjusted OIBDA(5) . . . . . . . . . . . . . . . . . . .
Less: Depreciation and Amortization . . . . . . .
Intangible Impairments(3) . . . . . . . . . . . . .
(Gain) Loss on Disposal/Write-down of
Year Ended December 31,
2007(1)
2008(1)
2009(1)
2010(1)(2)
2011
$676,165
220,217
—
$754,279
254,497
—
(in thousands)
$822,579
277,186
—
$926,676
304,205
85,909
$ 934,912
319,499
46,500
Property, Plant and Equipment, Net . . . .
(5,463)
7,522
168
(10,987)
(2,286)
Operating Income . . . . . . . . . . . . . . . . . . . . .
Less: Interest Expense, Net . . . . . . . . . . . . . .
. . . . . . . . . .
Other Expense (Income), Net
Provision for Income Taxes . . . . . . . . . . . . .
Loss from Discontinued Operations, Net of
Tax . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Gain on Sale of Discontinued Operations,
Net of Tax . . . . . . . . . . . . . . . . . . . . . . .
Net Income (Loss) Attributable to
Noncontrolling Interests . . . . . . . . . . . . .
Net Income (Loss) Attributable to Iron
461,411
214,147
4,103
72,617
492,260
219,989
31,505
146,122
545,225
212,545
(12,599)
113,762
547,549
204,559
8,768
167,483
571,199
205,256
13,043
106,488
17,858
14,889
12,138
219,417
47,439
—
920
—
—
— (200,619)
(94)
1,429
4,908
4,054
Mountain Incorporated . . . . . . . . . . . . . . .
$151,766
$ 79,849
$217,950
$ (57,586) $ 395,538
(footnotes follow)
(1) Revenue and Adjusted OIBDA for the years ended December 31, 2007, 2008, 2009 and 2010 have
been restated to reflect a reduction in revenues of $2,183, $3,597, $4,813 and $6,023, respectively,
to correct billing errors made in connection with a government contract as more fully described in
Notes 2.y. and 10.h. to Notes to Consolidated Financial Statements. The impact to income from
continuing operations and net income is a reduction of $1,328, $2,188, $2,927 and $3,686,
respectively, for the after tax impact of the revenue errors for the years ended December 31, 2007,
2008, 2009 and 2010, respectively.
(2) Prior to January 1, 2010, the financial position and results of operations of the operating
subsidiaries of Iron Mountain Europe (Group) Limited (collectively referred to as ‘‘IME’’), our
European business, were consolidated based on IME’s fiscal year ended October 31. Effective
January 1, 2010, we changed the fiscal year-end (and the reporting period for consolidation
purposes) of IME to coincide with Iron Mountain Incorporated’s fiscal year-end of December 31.
We believe that the change in accounting principle related to the elimination of the two-month
reporting lag for IME is preferable because it will result in more contemporaneous reporting of
events and results related to IME. In accordance with applicable accounting literature, a change in
subsidiary year-end is treated as a change in accounting principle and requires retrospective
application. The impact of the change was not material to the results of operations for the
previously reported annual and interim periods after January 1, 2007, and, thus, those results have
not been revised. There is, however, a charge of $4.7 million recorded to other (income) expense,
net in the year ended December 31, 2010 to recognize the immaterial difference arising from the
change. There were no significant infrequent or unusual items in the IME two-month period
ended December 31, 2008 and 2009.
(3) For the year ended December 31, 2010, we recorded a non-cash goodwill impairment charge of
$85,909 related to our technology escrow services business, which we continue to own and operate
28
and which was previously reflected in the former worldwide digital business segment and is now
reflected as a component of the North American Business segment. For the year ended
December 31, 2010, we recorded a $197,876 non-cash goodwill impairment charge related to our
former worldwide digital business that is included in loss from discontinued operations, net of tax.
For the year ended December 31, 2011, we recorded a non-cash goodwill impairment charge of
$46,500 in our Western Europe reporting unit, which is a component of the International Business
segment. See Note 2.g. to Notes to Consolidated Financial Statements.
(4) In February 2010, our board of directors adopted a dividend policy under which we began paying
quarterly dividends on our common stock. See ‘‘Item 5. Market for Registrant’s Common Equity,
Related Stockholder Matters and Issuer Purchases of Equity Securities.’’
(5) Adjusted OIBDA is defined as operating income before depreciation, amortization, intangible
impairments and (gain) loss on disposal/write-down of property, plant and equipment, net.
Adjusted OIBDA Margin is calculated by dividing Adjusted OIBDA by total revenues. For a more
detailed definition and reconciliation of Adjusted OIBDA and a discussion of why we believe these
measures provide relevant and useful information to our current and potential investors, see
‘‘Item 7. Management’s Discussion and Analysis of Financial Condition and Results of
Operations—Non-GAAP Measures.’’
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
The following discussion should be read in conjunction with ‘‘Item 6. Selected Financial Data’’ and the
Consolidated Financial Statements and Notes thereto and the other financial and operating information
included elsewhere in this filing.
This discussion contains ‘‘forward-looking statements’’ as that term is defined in the Private
Securities Litigation Reform Act of 1995 and in other federal securities laws. See ‘‘Cautionary Note
Regarding Forward-Looking Statements’’ on page ii of this filing and ‘‘Item 1A. Risk Factors’’
beginning on page 15 of this filing.
Overview
In August 2010, we divested the domain name management product line (the ‘‘Domain Name
Product Line’’) of our digital business. On June 2, 2011, we completed the sale (the ‘‘Digital Sale’’) of
our online backup and recovery, digital archiving and eDiscovery solutions businesses (the ‘‘Digital
Business’’) to Autonomy, pursuant to a purchase and sale agreement dated as of May 15, 2011 among
Iron Mountain Incorporated (‘‘IMI’’), certain subsidiaries of IMI and Autonomy (the ‘‘Digital Sale
Agreement’’). In the Digital Sale, Autonomy purchased (i) the shares of certain of IMI’s subsidiaries
through which IMI conducted the Digital Business and (ii) certain assets of IMI and its subsidiaries
relating to our Digital Business. The financial position, operating results and cash flows of the Domain
Name Product Line and the Digital Business, for all periods presented in this Annual Report on
Form 10-K, including the gains on the sales, have been reported as discontinued operations for
financial reporting purposes. IMI retained its technology escrow services business which had previously
been reported in the former worldwide digital business segment along with the Digital Business and the
Domain Name Product Line. The technology escrow services business is now reported in the North
American Business segment. Additionally, on October 3, 2011, we sold our records management
business in New Zealand (the ‘‘New Zealand Business’’). The financial position, operating results and
cash flows of the New Zealand Business, including the gain on the sale, for all periods presented, have
been reported as discontinued operations for financial reporting purposes. Also, in December 2011, we
committed to a plan to sell the Italian Business. The financial position, operating results and cash flows
of the Italian Business, for all periods presented, have been reported as discontinued operations for
financial reporting purposes. See Note 14 to Notes to Consolidated Financial Statements.
29
Consolidated statements of operations amounts for 2009 and 2010 were restated in connection with
the government contract billing error more fully discussed in Notes 2.y. and 10.h. to Notes to
Consolidated Financial Statements. As a result, 2009 and 2010 consolidated statements of operations
amounts related to: (a) storage, (b) service, (c) total revenues, (d) operating income, (e) income from
continuing operations before provision for income taxes, (f) provision for income taxes, (g) income
from continuing operations, (h) net income (loss) and (g) net income (loss) attributable to Iron
Mountain Incorporated have been changed throughout management’s discussion and analysis to
conform to the restated figures.
Our revenues consist of storage revenues as well as service revenues. Storage revenues, which are
considered a key performance indicator for the information management services industry, consist
primarily of recurring periodic charges related to the storage of materials or data (generally on a per
unit basis) that are typically retained by customers for many years and have accounted for over 55% of
total consolidated revenues in each of the last three years. Our annual revenues from these fixed
periodic storage fees have grown for 23 consecutive years. Service revenues are comprised of charges
for related core service activities and a wide array of complementary products and services. Included in
core service revenues are: (1) the handling of records, including the addition of new records, temporary
removal of records from storage, refiling of removed records and the destruction of records; (2) courier
operations, consisting primarily of the pickup and delivery of records upon customer request; (3) secure
shredding of sensitive documents; and (4) other recurring services, including hybrid services and
recurring project revenues. Our complementary services revenues include special project work,
customer termination and permanent withdrawal fees, data restoration projects, fulfillment services,
consulting services, technology services and product sales (including specially designed storage
containers and related supplies). A by-product of our secure shredding and destruction services is the
sale of recycled paper (included in complementary services revenues), the price of which can fluctuate
from period to period, adding to the volatility and reducing the predictability of that revenue stream.
Our consolidated revenues are also subject to variations caused by the net effect of foreign currency
translation on revenue derived from outside the U.S. For the years ended December 31, 2009, 2010 and
2011, we derived approximately 31%, 32% and 34%, respectively, of our total revenues from outside
the U.S.
We recognize revenue when the following criteria are met: persuasive evidence of an arrangement
exists, services have been rendered, the sales price is fixed or determinable and collectability of the
resulting receivable is reasonably assured. Storage and service revenues are recognized in the month
the respective storage or service is provided, and customers are generally billed on a monthly basis on
contractually agreed-upon terms. Amounts related to future storage or prepaid service contracts for
customers where storage fees or services are billed in advance are accounted for as deferred revenue
and recognized ratably over the applicable storage or service period or when the service is performed.
Revenue from the sales of products, which is included as a component of service revenues, is
recognized when products are shipped to the customer and title has passed to the customer.
Revenues from the sales of products have historically not been significant.
Cost of sales (excluding depreciation and amortization) consists primarily of wages and benefits for
field personnel, facility occupancy costs (including rent and utilities), transportation expenses (including
vehicle leases and fuel), other product cost of sales and other equipment costs and supplies. Of these,
wages and benefits and facility occupancy costs are the most significant. Trends in total wages and
benefits in dollars and as a percentage of total consolidated revenue are influenced by changes in
headcount and compensation levels, achievement of incentive compensation targets, workforce
productivity and variability in costs associated with medical insurance and workers compensation.
Trends in facility occupancy costs are impacted by the total number of facilities we occupy, the mix of
properties we own versus properties we occupy under operating leases, fluctuations in per square foot
occupancy costs, and the levels of utilization of these properties.
30
The expansion of our European and secure shredding businesses has impacted the major cost of
sales components. Our European operations are more labor intensive than our North American
businesses and, therefore, add incremental labor costs at a higher percentage of segment revenue than
our North American business. Our secure shredding operations incur lower facility costs and higher
transportation costs as a percentage of revenues compared to our core physical businesses.
Selling, general and administrative expenses consist primarily of wages and benefits for
management, administrative, information technology, sales, account management and marketing
personnel, as well as expenses related to communications and data processing, travel, professional fees,
bad debts, training, office equipment and supplies. Trends in total wage and benefit dollars as a
percentage of total consolidated revenue are influenced by changes in headcount and compensation
levels, achievement of incentive compensation targets, workforce productivity and variability in costs
associated with medical insurance. The overhead structure of our expanding European and Asian
operations, as compared to our North American operations, is more labor intensive and has not
achieved the same level of overhead leverage, which may result in an increase in selling, general and
administrative expenses, as a percentage of consolidated revenue, as our European and Asian
operations become a more meaningful percentage of our consolidated results.
Our depreciation and amortization charges result primarily from the capital-intensive nature of our
business. The principal components of depreciation relate to storage systems, which include racking,
building and leasehold improvements, computer systems hardware and software, and buildings.
Amortization relates primarily to customer relationship acquisition costs and is impacted by the nature
and timing of acquisitions.
In September 2011, as a result of certain changes we made in the manner in which our European
operations are managed, we reorganized our reporting structure and reassigned goodwill among the
revised reporting units. As a result of the management and reporting changes, we concluded that we
have three reporting units for our European operations: (1) the United Kingdom, Ireland and Norway
(‘‘UKI’’); (2) Belgium, France, Germany, Luxembourg, Netherlands and Spain (‘‘Western Europe’’);
and (3) the remaining countries in Europe (‘‘Central Europe’’). Due to these changes, we will perform
all future goodwill impairment analysis on the new reporting unit basis. As a result of the restructuring
of our reporting units, we concluded that we had an interim triggering event, and, therefore, we
performed an interim goodwill impairment test for UKI, Western Europe and Central Europe in the
third quarter of 2011 as of August 31, 2011. As required by accounting principles generally accepted in
the United States of America (‘‘GAAP’’), prior to our goodwill impairment analysis, we performed an
impairment assessment on the long-lived assets within our UKI, Western Europe and Central Europe
reporting units and noted no impairment, except for the Italian Business, which was included in our
Western Europe reporting unit, and which is now included in discontinued operations. See Note 14 to
Notes to Consolidated Financial Statements. Based on our analyses, we concluded that the goodwill of
our UKI and Central Europe reporting units was not impaired. Our UKI and Central Europe reporting
units had fair values that exceed their carrying values by 15.1% and 4.9%, respectively, as of August 31,
2011. Central Europe is still in the investment stage, and, accordingly, its fair value does not exceed its
carrying value by a significant margin at this point in time. A deterioration of the UKI or Central
Europe businesses or their failure to achieve the forecasted results could lead to impairments in future
periods. Our Western Europe reporting unit’s fair value was less than its carrying value, and, as a
result, we recorded a goodwill impairment charge of $46.5 million included as a component of
intangible impairments from continuing operations in our consolidated statements of operations for the
year ended December 31, 2011. A tax benefit of approximately $5.4 million was recorded associated
with the Western Europe goodwill impairment charge for the year ended December 31, 2011 and is
included in the provision from income taxes from continuing operations.
During the quarter ended September 30, 2010, prior to our annual goodwill impairment review, we
concluded that events occurred and circumstances changed in our former worldwide digital business
31
reporting unit that required us to conduct an impairment review. The primary factors contributing to
our conclusion that we had a triggering event and a requirement to reassess our former worldwide
digital business reporting unit goodwill for impairment included: (1) a reduction in forecasted revenue
and operating results due to continued pressure on key parts of the business as a result of the weak
economy; (2) reduced revenue and profit outlook for our eDiscovery service due to smaller average
matter size and lower pricing; (3) a decision to discontinue certain software development projects; and
(4) the sale of the Domain Name Product Line. As a result of the review, we recorded a provisional
goodwill impairment charge associated with our former worldwide digital business reporting unit in the
amount of $255.0 million during the quarter ended September 30, 2010. We finalized the estimate in
the fourth quarter of 2010, and we recorded an additional impairment of $28.8 million, for a total
goodwill impairment charge of $283.8 million. Based on a relative fair value basis, we allocated
$85.9 million of this charge to the retained technology escrow services business which continues to be
included in our continuing results of operations. Our technology escrow services business had previously
been reported in the former worldwide digital business segment along with the Digital Business and the
Domain Name Product Line. The technology escrow services business is now reported in the North
American Business segment.
Our consolidated revenues and expenses are subject to variations caused by the net effect of
foreign currency translation on revenues and expenses incurred by our entities outside the U.S. In 2009,
we saw decreases in both revenues and expenses as a result of the weakening of the British pound
sterling, the Canadian dollar and the Euro against the U.S. dollar, based on an analysis of weighted
average exchange rates for the comparable periods. In 2010, we saw increases in both revenues and
expenses as a result of the strengthening of the British pound sterling and the Canadian dollar, slightly
offset by a weakening of the Euro, against the U.S. dollar, based on an analysis of weighted average
exchange rates for the comparable periods. In 2011, we saw increases in both revenues and expenses as
a result of the strengthening of the British pound sterling, Canadian dollar and Euro, against the U.S.
dollar, based on an analysis of weighted average exchange rates for the comparable periods. It is
difficult to predict how much foreign currency exchange rates will fluctuate in the future and how those
fluctuations will impact our consolidated statement of operations. Due to the expansion of our
international operations, these fluctuations have become material on individual balances. However,
because both the revenues and expenses are denominated in the local currency of the country in which
they are derived or incurred, the impact of currency fluctuations on our operating income and
operating margin is partially mitigated. In order to provide a framework for assessing how our
underlying businesses performed excluding the effect of foreign currency fluctuations, we compare the
percentage change in the results from one period to another period in this report using constant
currency disclosure. The constant currency growth rates are calculated by translating the 2009 results at
the 2010 average exchange rates and the 2010 results at the 2011 average exchange rates.
Prior to January 1, 2010, the financial position and results of operations of the operating
subsidiaries of IME, our European business, were consolidated based on IME’s fiscal year ended
October 31. Effective January 1, 2010, we changed the fiscal year-end (and the reporting period for
consolidation purposes) of IME to coincide with IMI’s fiscal year-end of December 31. We believe that
the change in accounting principle related to the elimination of the two-month reporting lag for IME is
preferable because it results in more contemporaneous reporting of events and results related to IME.
In accordance with applicable accounting literature, a change in a subsidiary’s year-end is treated as a
change in accounting principle and requires retrospective application. The impact of the change was
not material to the results of operations for the previously reported annual and interim periods prior to
January 1, 2010, and, thus, those results have not been revised. There is, however, a charge of
$4.7 million recorded to other (income) expense, net in the year ended December 31, 2010 to recognize
the immaterial differences arising from the change.
32
The following table is a comparison of underlying average exchange rates of the foreign currencies
that had the most significant impact on our U.S. dollar-reported revenues and expenses:
British pound sterling . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Canadian dollar . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Euro . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$1.546
$0.971
$1.328
$1.604
$1.012
$1.392
3.8%
4.2%
4.8%
Average Exchange
Rates for the
Year Ended
December 31,
2010
2011
Percentage
Strengthening/
(Weakening) of
Foreign Currency
Average Exchange
Rates for the
Year Ended
December 31,
2009(1)
2010
Percentage
Strengthening/
(Weakening) of
Foreign Currency
British pound sterling . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Canadian dollar . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Euro . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$1.544
$0.880
$1.366
$1.546
$0.971
$1.328
0.1%
10.3%
(2.8)%
(1) Corresponding to the appropriate periods based on the operating subsidiaries of IME’s fiscal year
ended October 31.
Non-GAAP Measures
Adjusted Operating Income Before Depreciation, Amortization and Intangible Impairments (‘‘Adjusted
OIBDA’’)
Adjusted OIBDA is defined as operating income before depreciation, amortization, intangible
impairments and (gain) loss on disposal/write-down of property, plant and equipment, net. Adjusted
OIBDA Margin is calculated by dividing Adjusted OIBDA by total revenues. We use multiples of
current or projected Adjusted OIBDA in conjunction with our discounted cash flow models to
determine our overall enterprise valuation and to evaluate acquisition targets. We believe Adjusted
OIBDA and Adjusted OIBDA Margin provide current and potential investors with relevant and useful
information regarding our ability to generate cash flow to support business investment. These measures
are an integral part of the internal reporting system we use to assess and evaluate the operating
performance of our business. Adjusted OIBDA does not include certain items that we believe are not
indicative of our core operating results, specifically: (1) (gain) and loss on disposal/write-down of
property, plant and equipment, net; (2) intangible impairments; (3) other expense (income), net;
(4) cumulative effect of change in accounting principle; (5) income (loss) from discontinued operations;
(6) gain (loss) on sale of discontinued operations; and (7) net income (loss) attributable to
noncontrolling interests.
Adjusted OIBDA also does not include interest expense, net and the provision (benefit) for
income taxes. These expenses are associated with our capitalization and tax structures, which we do not
consider when evaluating the operating profitability of our core operations. Finally, Adjusted OIBDA
does not include depreciation and amortization expenses in order to eliminate the impact of capital
investments, which we evaluate by comparing capital expenditures to incremental revenue generated
and as a percentage of total revenues. Adjusted OIBDA and Adjusted OIBDA Margin should be
considered in addition to, but not as a substitute for, other measures of financial performance reported
in accordance with GAAP, such as operating or net income (loss) or cash flows from operating
activities from continuing operations (as determined in accordance with GAAP).
33
Reconciliation of Adjusted OIBDA to Operating Income; Income from Continuing Operations and Net
Income (Loss) (in thousands):
Adjusted OIBDA . . . . . . . . . . . . . . . . . . . . .
Less: Depreciation and Amortization . . . . .
Intangible Impairments . . . . . . . . . . . . . . .
Loss (Gain) on Disposal/Write-Down of
Year Ended December 31,
2007
2008
2009
2010
2011
$676,165
220,217
—
$754,279
254,497
—
$822,579
277,186
—
$ 926,676
304,205
85,909
$934,912
319,499
46,500
Property, Plant and Equipment, Net . . .
(5,463)
7,522
168
(10,987)
(2,286)
Operating Income . . . . . . . . . . . . . . . . . . .
Less: Interest Expense, Net . . . . . . . . . . . .
Other (Income) Expense, Net . . . . . . . . .
Provision for Income Taxes . . . . . . . . . . .
Income from Continuing Operations . . . .
Total (Loss) Income from Discontinued
461,411
214,147
4,103
72,617
170,544
492,260
219,989
31,505
146,122
545,225
212,545
(12,599)
113,762
547,549
204,559
8,768
167,483
571,199
205,256
13,043
106,488
94,644
231,517
166,739
246,412
Operations, Net of Tax . . . . . . . . . . . .
(17,858)
(14,889)
(12,138)
(219,417)
153,180
Net Income Attributable to
Noncontrolling Interests . . . . . . . . . . .
920
(94)
1,429
4,908
4,054
Net Income (Loss) Attributable to Iron
Mountain Incorporated . . . . . . . . . . . . . . .
$151,766
$ 79,849
$217,950
$ (57,586) $395,538
Free Cash Flows before Acquisitions and Discretionary Investments (‘‘FCF’’)
FCF is defined as Cash Flows from Operating Activities—Continuing Operations less capital
expenditures (excluding real estate), net of proceeds from the sales of property and equipment and
other, net, and additions to customer relationship and acquisition costs. Our management uses this
measure when evaluating the operating performance of our consolidated business. We believe this
measure provides relevant and useful information to our current and potential investors. FCF is a
useful measure in determining our ability to generate excess cash that may be used for reinvestment in
the business, discretionary deployment in investments such as real estate or acquisition opportunities,
returning of capital to our stockholders and voluntary prepayments of indebtedness.
34
Reconciliation of FCF to Cash Flows from Operating Activities—Continuing Operations (in thousands):
Free Cash Flows before Acquisitions and
Discretionary Investments . . . . . . . . . . .
Add: Capital Expenditures (excluding
real estate), net(1)
Additions to Customer Relationship
. . . . . . . . . . . . . .
Year Ended December 31,
2007
2008
2009
2010
2011
$ 168,196
$ 196,522
$ 330,142
$ 370,128
$ 457,838
298,158
303,236
245,687
219,899
183,973
and Acquisitions Costs . . . . . . . . . .
16,384
14,141
10,741
13,202
21,703
Cash Flows From Operating Activities—
Continuing Operations . . . . . . . . . . . . .
$ 482,738
$ 513,899
$ 586,570
$ 603,229
$ 663,514
Cash Flows From Investing Activities—
Continuing Operations . . . . . . . . . . . . .
$(700,689) $(421,480) $(298,699) $(298,458) $(302,213)
Cash Flows From Financing Activities—
Continuing Operations . . . . . . . . . . . . .
$ 461,570
$ 87,028
$(128,286) $(379,711) $(762,670)
(1) The 2010 results included approximately $11,000 incurred by IME in November and December
2009 prior to the change in its fiscal year-end.
Adjusted Earnings per Share from Continuing Operations (‘‘Adjusted EPS’’)
Adjusted EPS from continuing operations is defined as reported earnings per share from
continuing operations excluding: (a) (gain) loss on the disposal/write-down of property, plant and
equipment, net; (b) intangible impairments; (c) other expense (income), net; and (d) the tax impact of
reconciling items and discrete tax items. We do not believe these excluded items to be indicative of our
ongoing operating results, and they are not considered when we are forecasting our future results.
We believe Adjusted EPS from continuing operations is of value to investors when comparing our
results from past, present and future periods.
Reconciliation of Adjusted EPS—Fully Diluted from Continuing Operations to Reported EPS Fully Diluted
from Continuing Operations:
Year Ended December 31,
2007
2008
2009
2010
2011
Adjusted EPS—Fully Diluted from Continuing Operations . .
$ 0.75
$0.86
$ 1.01
$ 1.28
$ 1.31
Less: (Gain) Loss on disposal/write-down of property,
plant and equipment, net . . . . . . . . . . . . . . . . . . . . . . .
Intangible Impairments . . . . . . . . . . . . . . . . . . . . . . . . . .
Other Expense (Income), net . . . . . . . . . . . . . . . . . . . .
Tax impact of reconciling items and discrete tax items . .
(0.03)
—
0.02
(0.08)
0.04
—
0.15
0.20
— (0.05)
0.43
—
0.04
(0.06)
0.03
(0.06)
(0.01)
0.24
0.07
(0.25)
Reported EPS—Fully Diluted from Continuing Operations . .
$ 0.84
$0.47
$ 1.13
$ 0.83
$ 1.26
Critical Accounting Policies
Our discussion and analysis of our financial condition and results of operations are based upon
our consolidated financial statements, which have been prepared in accordance with GAAP. The
preparation of these financial statements requires us to make estimates, judgments and assumptions
that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of
35
contingent assets and liabilities at the date of the financial statements and for the period then ended.
On an ongoing basis, we evaluate the estimates used. We base our estimates on historical experience,
actuarial estimates, current conditions and various other assumptions that we believe to be reasonable
under the circumstances. These estimates form the basis for making judgments about the carrying
values of assets and liabilities and are not readily apparent from other sources. Actual results may
differ from these estimates. Our critical accounting policies include the following, which are listed in no
particular order:
Revenue Recognition
Our revenues consist of storage revenues as well as service revenues and are reflected net of sales
and value added taxes. Storage revenues, which are considered a key performance indicator for the
information management services industry, consist primarily of recurring periodic charges related to the
storage of materials or data (generally on a per unit basis). Service revenues are comprised of charges
for related core service activities and a wide array of complementary products and services. Included in
core service revenues are: (1) the handling of records, including the addition of new records, temporary
removal of records from storage, refilling of removed records and the destruction of records;
(2) courier operations, consisting primarily of the pickup and delivery of records upon customer
request; (3) secure shredding of sensitive documents; and (4) other recurring services, including hybrid
services and recurring project revenues. Our complementary services revenues include special project
work, customer termination and permanent withdrawal fees, data restoration projects, fulfillment
services, consulting services, technology services and product sales (including specially designed storage
containers and related supplies). A by-product of our secure shredding and destruction services is the
sale of recycled paper (included in complementary services revenues), the price of which can fluctuate
from period to period, adding to the volatility and reducing the predictability of that revenue stream.
We recognize revenue when the following criteria are met: persuasive evidence of an arrangement
exists, services have been rendered, the sales price is fixed or determinable and collectability of the
resulting receivable is reasonably assured. Storage and service revenues are recognized in the month
the respective storage or service is provided, and customers are generally billed on a monthly basis on
contractually agreed-upon terms. Amounts related to future storage or prepaid service contracts for
customers where storage fees or services are billed in advance are accounted for as deferred revenue
and recognized ratably over the applicable storage or service period or when the service is performed.
Revenue from the sales of products, which is included as a component of service revenues, is
recognized when products are shipped to the customer and title has passed to the customer.
Revenues from the sales of products have historically not been significant.
Accounting for Acquisitions
Part of our growth strategy has included the acquisition of numerous businesses. The purchase
price of each acquisition has been determined after due diligence of the acquired business, market
research, strategic planning and the forecasting of expected future results and synergies. Estimated
future results and expected synergies are subject to revisions as we integrate each acquisition and
attempt to leverage resources.
Each acquisition has been accounted for using the acquisition method of accounting as defined
under the applicable accounting standards at the date of each acquisition. Accounting for these
acquisitions has resulted in the capitalization of the cost in excess of fair value of the net assets
acquired in each of these acquisitions as goodwill. We estimated the fair values of the assets acquired
in each acquisition as of the date of acquisition and these estimates are subject to adjustment based on
the final assessments of the fair value of property, plant and equipment, intangible assets, operating
leases and deferred income taxes. We complete these assessments within one year of the date of
acquisition. See Note 6 to Notes to Consolidated Financial Statements.
36
Allowance for Doubtful Accounts and Credit Memos
We maintain an allowance for doubtful accounts and credit memos for estimated losses resulting
from the potential inability of our customers to make required payments and potential disputes
regarding billing and service issues. When calculating the allowance, we consider our past loss
experience, current and prior trends in our aged receivables and credit memo activity, current economic
conditions and specific circumstances of individual receivable balances. If the financial condition of our
customers were to significantly change, resulting in a significant improvement or impairment of their
ability to make payments, an adjustment of the allowance may be required. We consider accounts
receivable to be delinquent after such time as reasonable means of collection have been exhausted.
We charge-off uncollectible balances as circumstances warrant, generally no later than one year past
due. As of December 31, 2010 and 2011, our allowance for doubtful accounts and credit memos
balance totaled $20.7 million and $23.3 million, respectively.
Impairment of Tangible and Intangible Assets
Assets subject to amortization: We review long-lived assets and all amortizable intangible assets for
impairment whenever events or changes in circumstances indicate the carrying amount of such assets
may not be recoverable. Recoverability of these assets is determined by comparing the forecasted
undiscounted net cash flows of the operation to which the assets relate to their carrying amount.
The operations are generally distinguished by the business segment and geographic region in which
they operate. If the operation is determined to be unable to recover the carrying amount of its assets,
then intangible assets are written down first, followed by the other long-lived assets of the operation, to
fair value. Fair value is determined based on discounted cash flows or appraised values, depending
upon the nature of the assets.
Goodwill—Assets not subject to amortization: Goodwill and intangible assets with indefinite lives
are not amortized but are reviewed annually for impairment, or more frequently if impairment
indicators arise. We have selected October 1 as our annual goodwill impairment review date.
We performed our annual goodwill impairment review as of October 1, 2009, 2010 and 2011 and noted
no impairment of goodwill. However, as a result of interim triggering events as discussed below, we
recorded provisional goodwill impairment charges in each of the third quarters of 2010 and 2011 in
conjunction with the Digital Sale and associated with our European operations, respectively.
These provisional goodwill impairment charges were finalized in the fourth quarters of the 2010 and
2011 fiscal years, respectively. As of December 31, 2011, no factors were identified that would alter our
October 1, 2011 goodwill assessment. In making this assessment, we relied on a number of factors
including operating results, business plans, anticipated future cash flows, transactions and market place
data. There are inherent uncertainties related to these factors and our judgment in applying them to
the analysis of goodwill impairment. When changes occur in the composition of one or more reporting
units, the goodwill is reassigned to the reporting units affected based on their relative fair values.
During the quarter ended September 30, 2010, prior to our annual goodwill impairment review, we
concluded that events occurred and circumstances changed in our former worldwide digital business
reporting unit that required us to conduct an impairment review. The primary factors contributing to
our conclusion that we had a triggering event and a requirement to reassess our former worldwide
digital business reporting unit goodwill for impairment included: (1) a reduction in forecasted revenue
and operating results due to continued pressure on key parts of the business as a result of the weak
economy; (2) reduced revenue and profit outlook for our eDiscovery service due to smaller average
matter size and lower pricing; (3) a decision to discontinue certain software development projects; and
(4) the sale of the Domain Name Product Line. As a result of the review, we recorded a provisional
goodwill impairment charge associated with our former worldwide digital business reporting unit in the
amount of $255.0 million during the quarter ended September 30, 2010. We finalized the estimate in
the fourth quarter of 2010, and we recorded an additional impairment of $28.8 million, for a total
37
goodwill impairment charge of $283.8 million. For the year ended December 31, 2010, based on a
relative fair value basis, we allocated $85.9 million of this charge to the retained technology escrow
services business which continues to be included in our continuing results of operations. The technology
escrow services business had previously been reported in the former worldwide digital business segment
along with the Digital Business and the Domain Name Product Line and is now reported in the North
American Business segment.
In September 2011, as a result of certain changes we made in the manner in which our European
operations are managed, we reorganized our reporting structure and reassigned goodwill among the
revised reporting units. Previously, we tested goodwill impairment at the European level on a combined
basis. As a result of the management and reporting changes, we concluded that we have three reporting
units for our European operations: (1) UKI; (2) Western Europe; and (3) Central Europe. Due to
these changes, we will perform all future goodwill impairment analyses on the new reporting unit basis.
As a result of the restructuring of our reporting units, we concluded that we had an interim triggering
event, and, therefore, we performed an interim goodwill impairment test for UKI, Western Europe and
Central Europe in the third quarter of 2011 as of August 31, 2011. As required by GAAP, prior to our
goodwill impairment analysis, we performed an impairment assessment on the long-lived assets within
our UKI, Western Europe and Central Europe reporting units and noted no impairment, except for the
Italian Business, which was included in our Western Europe reporting unit, and which is now included
in discontinued operations as discussed at Note 14 to Notes to Consolidated Financial Statements.
Based on our analyses, we concluded that the goodwill of our UKI and Central Europe reporting units
was not impaired. Our UKI and Central Europe reporting units had fair values that exceed their
carrying values by 15.1% and 4.9%, respectively, as of August 31, 2011. Central Europe is still in the
investment stage, and, accordingly, its fair value does not exceed its carrying value by a significant
margin at this point in time. A deterioration of the UKI or Central Europe businesses or their failure
to achieve the forecasted results could lead to impairments in future periods. Our Western Europe
reporting unit’s fair value was less than its carrying value, and, as a result, we recorded a goodwill
impairment charge of $46.5 million included as a component of intangible impairments from continuing
operations in our consolidated statements of operations for the year ended December 31, 2011. A tax
benefit of approximately $5.4 million was recorded associated with the Western Europe goodwill
impairment charge for the year ended December 31, 2011 and is included in the provision for income
taxes from continuing operations.
Our reporting units at which level we performed our goodwill impairment analysis as of October 1,
2010 were as follows: North America; Europe; Latin America; Australia; Joint Ventures (which includes
India, the various joint ventures in Southeast Asia and Russia (referred to as ‘‘Joint Ventures’’)); and
Business Process Management (‘‘BPM’’). Given their similar economic characteristics, products,
customers and processes, (1) the United Kingdom, Ireland and Norway and (2) the countries of
Continental Europe (excluding Joint Ventures), each a reporting unit, have been aggregated as Europe
and tested as one for goodwill impairment. As of December 31, 2010, the carrying value of goodwill,
net amounted to $1,750.4 million, $438.3 million, $29.8 million and $61.0 million for North America,
Europe, Latin America and Australia, respectively. Our Joint Ventures and BPM reporting units had
no goodwill as of December 31, 2010. Our reporting units at which level we performed our goodwill
impairment analysis as of October 1, 2011 were as follows: North America; UKI; Western Europe;
Central Europe; Latin America; Australia; and Joint Ventures. As of December 31, 2011, the carrying
value of goodwill, net amounted to $1,748.9 million, $306.2 million, $46.4 million, $63.8 million,
$27.3 million, and $61.7 million for North America, UKI, Western Europe, Central Europe, Latin
America and Australia, respectively. Our Joint Ventures reporting unit has no goodwill as of
December 31, 2011. Our North America, Latin America and Australia reporting units had estimated
fair values as of October 1, 2011 that exceeded their carrying value by greater than 40%.
38
Reporting unit valuations have been calculated using an income approach based on the present
value of future cash flows of each reporting unit or a combined approach based on the present value of
future cash flows and market and transaction multiples of revenues and earnings. The income approach
incorporates many assumptions including future growth rates, discount factors, expected capital
expenditures and income tax cash flows. Changes in economic and operating conditions impacting these
assumptions could result in goodwill impairments in future periods. In conjunction with our annual
goodwill impairment reviews, we reconcile the sum of the valuations of all of our reporting units to our
market capitalization as of such dates.
Accounting for Internal Use Software
We develop various software applications for internal use. Computer software costs associated with
internal use software are expensed as incurred until certain capitalization criteria are met. Payroll and
related costs for employees who are directly associated with, and who devote time to, the development
of internal use computer software projects (to the extent time is spent directly on the project) are
capitalized and depreciated over the estimated useful life of the software. Capitalization begins when
the design stage of the application has been completed and it is probable that the application will be
completed and used to perform the function intended. Depreciation begins when the software is placed
in service. Computer software costs that are capitalized are periodically evaluated for impairment.
It may be necessary for us to write-off amounts associated with the development of internal use
software if the project cannot be completed as intended. We may be required to write-off unamortized
costs or shorten the estimated useful life if an internal use software program is replaced with an
alternative tool prior to the end of the software’s estimated useful life. Capitalized labor net of
accumulated depreciation was $33.7 million as of both December 31, 2011 and December 31, 2010.
See Note 2.f. to Notes to Consolidated Financial Statements.
During the years ended December 31, 2009 and 2011, we wrote-off $0.6 million (primarily in
Corporate) and $3.5 million (approximately $3.1 million associated with our International Business
segment and approximately $0.4 million associated with our North American Business segment),
respectively, of previously deferred software costs associated with internal use software development
projects that were discontinued after implementation, which resulted in a loss on disposal/write-down of
property, plant and equipment, net in each of these years.
Income Taxes
We recorded a valuation allowance, amounting to $72.2 million as of December 31, 2011, to
reduce our deferred tax assets, primarily associated with certain state and foreign net operating loss
carryforwards and foreign tax credit carryforwards, to the amount that is more likely than not to be
realized. We have federal net operating loss carryforwards which begin to expire in 2020 through 2025
of $28.2 million ($9.9 million, tax effected) at December 31, 2011 to reduce future federal taxable
income. We have an asset for state net operating losses of $7.9 million (net of federal tax benefit),
which begins to expire in 2012 through 2025, subject to a valuation allowance of approximately 99%.
We have assets for foreign net operating losses of $40.3 million, with various expiration dates, subject
to a valuation allowance of approximately 69%. We also have foreign tax credits of $56.6 million, which
begin to expire in 2014 through 2019, subject to a valuation allowance of approximately 65%.
U.S. legislative changes in 2010 reduced the expected utilization of foreign tax credits which resulted in
the requirement for a valuation allowance. If actual results differ unfavorably from certain of our
estimates used, we may not be able to realize all or part of our net deferred income tax assets and
foreign tax credit carryforwards, and additional valuation allowances may be required. Although we
believe our estimates are reasonable, no assurance can be given that our estimates reflected in the tax
provisions and accruals will equal our actual results. These differences could have a material impact on
our income tax provision and operating results in the period in which such determination is made.
39
The evaluation of an uncertain tax position is a two-step process. The first step is a recognition
process whereby the company determines whether it is more likely than not that a tax position will be
sustained upon examination, including resolution of any related appeals or litigation processes, based
on the technical merits of the position. The second step is a measurement process whereby a tax
position that meets the more likely than not recognition threshold is calculated to determine the
amount of benefit to recognize in the financial statements. The tax position is measured at the largest
amount of benefit that is greater than 50% likely of being realized upon ultimate settlement.
We are subject to examination by various tax authorities in jurisdictions in which we have
significant business operations. We regularly assess the likelihood of additional assessments by tax
authorities and provide for these matters as appropriate. As of December 31, 2010 and 2011, we had
approximately $59.9 million and $31.4 million, respectively, of reserves related to uncertain tax
positions. The reversal of these reserves will be recorded as a reduction of our income tax provision if
sustained. Although we believe our tax estimates are appropriate, the final determination of tax audits
and any related litigation could result in favorable or unfavorable changes in our estimates.
We have elected to recognize interest and penalties associated with uncertain tax positions as a
component of the provision (benefit) for income taxes. We recorded $4.7 million, $(1.6) million and
$(8.5) million for gross interest and penalties for the years ended December 31, 2009, 2010 and 2011,
respectively.
We had $11.6 million and $2.8 million accrued for the payment of interest and penalties as of
December 31, 2010 and 2011, respectively.
We have not provided deferred taxes on book basis differences related to certain foreign
subsidiaries because such basis differences are not expected to reverse in the foreseeable future and we
intend to reinvest indefinitely outside the U.S. These basis differences arose primarily through the
undistributed book earnings of our foreign subsidiaries. The basis differences could be reversed through
a sale of the subsidiaries, the receipt of dividends from subsidiaries and certain other events or actions
on our part, each of which would result in an increase in our provision for income taxes. It is not
practicable to calculate the amount of such basis differences.
Stock-Based Compensation
We record stock-based compensation expense, utilizing the straight-line method, for the cost of
stock options, restricted stock, restricted stock units, performance units and shares of stock issued
under the employee stock purchase plan. Stock-based compensation expense for the years ended
December 31, 2009, 2010 and 2011 was $18.7 million, including $3.5 million in discontinued operations,
($14.7 million after tax or $0.07 per basic and diluted share), $20.4 million, including $3.1 million in
discontinued operations, ($15.7 million after tax or $0.08 per basic and diluted share) and $17.5 million,
including $0.3 million in discontinued operations, ($8.8 million after tax or $0.05 per basic and diluted
share), respectively.
The fair values of option grants are estimated on the date of grant using the Black-Scholes option
pricing model. Expected volatility and the expected term are the input factors to that model which
require the most significant management judgment. Expected volatility is calculated utilizing daily
historical volatility over a period that equates to the expected life of the option. The expected life
(estimated period of time outstanding) of the stock options granted is estimated using the historical
exercise behavior of employees.
Self-Insured Liabilities
We are self-insured up to certain limits for costs associated with workers’ compensation claims,
vehicle accidents, property and general business liabilities, and benefits paid under employee healthcare
40
and short-term disability programs. At December 31, 2010 and 2011, there were approximately
$43.9 million and $39.4 million, respectively, of self-insurance accruals reflected in our consolidated
balance sheets. The measurement of these costs requires the consideration of historical cost experience
and judgments about the present and expected levels of cost per claim. We account for these costs
primarily through actuarial methods, which develop estimates of the undiscounted liability for claims
incurred, including those claims incurred but not reported. These methods provide estimates of future
ultimate claim costs based on claims incurred as of the balance sheet date.
We believe the use of actuarial methods to account for these liabilities provides a consistent and
effective way to measure these highly judgmental accruals. However, the use of any estimation
technique in this area is inherently sensitive given the magnitude of claims involved and the length of
time until the ultimate cost is known. We believe our recorded obligations for these expenses are
appropriate. Nevertheless, changes in healthcare costs, severity, and other factors can materially affect
the estimates for these liabilities.
Recent Accounting Pronouncements
In September 2011, the Financial Accounting Standards Board issued Accounting Standards
Update (‘‘ASU’’) No. 2011-08, Intangibles—Goodwill and Other (Topic 350): Testing Goodwill for
Impairment. ASU 2011-08 allows but does not require entities to first assess qualitatively whether it is
necessary to perform the two-step goodwill impairment test. If an entity believes, as a result of its
qualitative assessment, that it is more likely than not that the fair value of a reporting unit is less than
its carrying amount, the quantitative two-step impairment test is required; otherwise, no further testing
is required. ASU 2011-08 is effective for annual and interim goodwill impairment tests performed for
fiscal years beginning after December 15, 2011, with early adoption permitted. The adoption of this
ASU 2011-08 will not have a material impact on our consolidated financial position, results of
operations or cash flows.
Results of Operations
Comparison of Year Ended December 31, 2011 to Year Ended December 31, 2010 and Comparison of Year
Ended December 31, 2010 to Year Ended December 31, 2009 (in thousands):
Year Ended December 31,
2010
2011
Dollar
Change
Percentage
Change
Revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Operating Expenses(1)(2) . . . . . . . . . . . . . . . . . . . . . .
$2,892,349
2,344,800
$3,014,703
2,443,504
$122,354
98,704
Operating Income . . . . . . . . . . . . . . . . . . . . . . . . .
Other Expenses, Net . . . . . . . . . . . . . . . . . . . . . . . . .
Income from Continuing Operations(1)(2) . . . . . . . . .
Loss from Discontinued Operations(1)(2) . . . . . . . . . .
Gain on Sale of Discontinued Operations . . . . . . . . . .
Net (Loss) Income . . . . . . . . . . . . . . . . . . . . . . . . .
Net Income Attributable to Noncontrolling Interests . .
Net (Loss) Income Attributable to Iron Mountain
547,549
380,810
166,739
(219,417)
—
(52,678)
4,908
571,199
324,787
246,412
(47,439)
200,619
399,592
4,054
23,650
(56,023)
79,673
171,978
200,619
452,270
(854)
4.2%
4.2%
4.3%
(14.7)%
47.8%
78.4%
100.0%
858.6%
17.4%
Incorporated . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ (57,586) $ 395,538
$453,124
786.9%
Adjusted OIBDA(3) . . . . . . . . . . . . . . . . . . . . . . . . .
$ 926,676
$ 934,912
$
8,236
0.9%
Adjusted OIBDA Margin(3) . . . . . . . . . . . . . . . . . . . .
32.0%
31.0%
41
Revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Operating Expenses(1) . . . . . . . . . . . . . . . . . . . . . . .
$2,774,384
2,229,159
$2,892,349
2,344,800
$ 117,965
115,641
Operating Income . . . . . . . . . . . . . . . . . . . . . . . . .
Other Expenses, Net . . . . . . . . . . . . . . . . . . . . . . . . .
Income from Continuing Operations(1) . . . . . . . . . . .
Loss from Discontinued Operations(1) . . . . . . . . . . .
Net Income (Loss) . . . . . . . . . . . . . . . . . . . . . . . .
Net Income Attributable to Noncontrolling Interests .
Net Income (Loss) Attributable to Iron Mountain
545,225
313,708
231,517
(12,138)
219,379
1,429
Year Ended December 31,
2009
2010
Dollar
Change
Percentage
Change
4.3%
5.2%
0.4%
21.4%
547,549
380,810
2,324
67,102
166,739
(219,417)
(64,778)
(207,279)
(28.0)%
(1,707.7)%
(52,678)
4,908
(272,057)
3,479
(124.0)%
(243.5)%
Incorporated . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 217,950
$ (57,586) $(275,536)
(126.4)%
Adjusted OIBDA(3) . . . . . . . . . . . . . . . . . . . . . . . . .
$ 822,579
$ 926,676
$ 104,097
12.7%
Adjusted OIBDA Margin(3) . . . . . . . . . . . . . . . . . . .
29.6%
32.0%
(1) A $283.8 million non-cash goodwill impairment charge related to our former worldwide digital
business reporting unit in the year ended December 31, 2010 was recorded. We allocated
$85.9 million of the charge to our retained technology escrow services business, included in our
continuing results of operations (included in operating expenses in 2010). We allocated the
remaining $197.9 million to the Digital Business (included in loss from discontinued operations in
2010). See Notes 2.g. and 14 to Notes to Consolidated Financial Statements.
(2) A $49.0 million non-cash goodwill impairment charge related to our Western Europe reporting
unit in the year ended December 31, 2011 was recorded. $46.5 million of the charge is included in
our continuing results of operations (included in operating expenses in 2011). $2.5 million of the
charge was allocated to the Italian Business and is included in loss from discontinued operations in
2011. See Notes 2.g. and 14 to Notes to Consolidated Financial Statements.
(3) See ‘‘Non-GAAP Measures—Adjusted Operating Income Before Depreciation, Amortization and
Intangible Impairments, or ‘Adjusted OIBDA’’’ for the definition, reconciliation and a discussion of
why we believe these measures provide relevant and useful information to our current and
potential investors.
REVENUE
Year Ended December 31,
2010
2011
Dollar
Change
Actual
Constant
Internal
Currency(1) Growth(2)
Percentage Change
Storage . . . . . . . . . . . . . . . . . . . .
Core Service . . . . . . . . . . . . . . . . .
$1,598,718
947,737
$1,682,990
968,424
$ 84,272
20,687
Total Core Revenue . . . . . . . . . .
Complementary Services . . . . . . . .
2,546,455
345,894
2,651,414
363,289
104,959
17,395
Total Revenue . . . . . . . . . . . . . .
$2,892,349
$3,014,703
$122,354
5.3%
2.2%
4.1%
5.0%
4.2%
3.9%
0.3%
2.6%
3.5%
2.7%
3.1%
(0.8)%
1.6%
3.7%
1.9%
42
Year Ended December 31,
2009
2010
Dollar
Change
Actual
Constant
Internal
Currency(1) Growth(2)
Percentage Change
Storage . . . . . . . . . . . . . . . . . . . .
Core Service . . . . . . . . . . . . . . . . .
$1,533,792
944,676
$1,598,718
947,737
$ 64,926
3,061
4.2%
3.2%
0.3% (0.7)%
Total Core Revenue . . . . . . . . . .
Complementary Services . . . . . . . .
2,478,468
295,916
2,546,455
345,894
67,987
49,978
2.7%
1.7%
16.9% 13.0%
Total Revenue . . . . . . . . . . . . . .
$2,774,384
$2,892,349
$117,965
4.3%
2.9%
3.1%
(0.9)%
1.6%
15.6%
3.1%
(1) Constant currency growth rates are calculated by translating the 2010 results at the 2011 average
exchange rates and the 2009 results at the 2010 average exchange rates.
(2) Our internal revenue growth rate represents the weighted average year-over-year growth rate of
our revenues after removing the effects of acquisitions, divestitures and foreign currency exchange
rate fluctuations. We calculate internal revenue growth in local currency for our international
operations.
Our consolidated storage revenues increased $84.3 million, or 5.3%, to $1,683.0 million for the
year ended December 31, 2011 and $64.9 million, or 4.2%, to $1,598.7 million for the year ended
December 31, 2010, in comparison to the years ended December 31, 2010 and 2009, respectively.
The growth rate for the year ended December 31, 2011 is comprised of internal revenue growth of
3.1%. Foreign currency exchange rate fluctuations added approximately 1.4% to our storage revenue
growth rate for the year ended December 31, 2011. Net acquisitions/divestitures contributed 0.8% of
the increase in reported storage revenues in 2011. Our consolidated storage revenue growth in 2011
was driven by continued solid storage growth in the International Business segment and consistent
volume and price increases in our North American Business segment. The growth rate for the year
ended December 31, 2010 as compared to 2009 is comprised of internal revenue growth of 3.1%.
Foreign currency exchange rate fluctuations added 1.1% to our storage revenue growth rate for the
year ended December 31, 2010. Our consolidated storage revenue growth was moderated in 2010 by
economic factors, resulting in reduced average net pricing gains in North America due to the low
inflationary environment, episodic destructions in the physical data protection business and lower new
sales and higher destruction rates in our North American Business segment, which were offset by new
sales in international markets.
43
Consolidated service revenues, consisting of core service and complementary services, increased
$38.1 million, or 2.9%, to $1,331.7 million for the year ended December 31, 2011 from $1,293.6 million
for the year ended December 31, 2010. Service revenue internal growth was 0.4% driven by
complementary service revenue internal growth of 3.7% in 2011, partially offset by negative core service
revenue internal growth of 0.8% in 2011. Complementary service revenues increased in 2011 compared
to 2010 primarily due to $25.8 million of additional revenue generated from the sale of recycled paper
due, in part, to increases in paper prices. Paper prices, however, declined significantly during the fourth
quarter of 2011 and into 2012. Should paper prices remain at their current levels throughout 2012, we
would expect revenues from the sale of recycled paper to be lower in 2012 than in 2011. Core service
revenue internal growth in the year ended December 31, 2011 continued to be constrained by current
economic trends and pressures on activity-based service revenues related to the handling and
transportation of items in storage. These decreases were partially offset by strong hybrid revenue
growth and higher fuel surcharges. Foreign currency exchange rate fluctuations increased reported
service revenues by 1.7% in 2011 over the same period in 2010. Net acquisitions/divestitures
contributed 0.8% of the increase in reported service revenues in 2011 compared to the same period in
2010. Consolidated service revenues, consisting of core service and complementary services, increased
$53.0 million, or 4.3%, to $1,293.6 million for the year ended December 31, 2010 from $1,240.6 million
for the year ended December 31, 2009. Service revenue internal growth was 3.0% as complementary
service revenue internal growth of 15.6% in 2010 was offset by negative core service revenue internal
growth of 0.9% in 2010. Complementary service revenues increased in 2010 primarily due to
$36.8 million more revenue resulting from higher recycled paper pricing and gains in hybrid service
revenues in the year ended December 31, 2010 compared to 2009. Core service revenue internal growth
in the year ended December 31, 2010 was constrained by economic trends and pressures on activity-
based service revenues related to the handling and transportation of items in storage. Favorable foreign
currency exchange rate fluctuations for the year ended December 31, 2010 compared to the same
period in 2009 increased reported service revenues 1.3%.
For the reasons stated above, our consolidated revenues increased $122.4 million, or 4.2%, to
$3,014.7 million for the year ended December 31, 2011 from $2,892.3 million for the year ended
December 31, 2010. During the years ended December 31, 2011, 2010 and 2009, we recorded
reductions to reported revenues of $6.0 million, $6.0 million and $4.8 million, respectively, related to a
billing error involving a government contract. See Note 2.y. to Notes to Consolidated Financial
Statements. We calculate internal revenue growth in local currency for our international operations.
Internal revenue growth was 1.9% for 2011. For the year ended December 31, 2011, foreign currency
exchange rate fluctuations increased our consolidated revenues by 1.5% primarily due to the
strengthening of the British pound sterling, Canadian dollar and Euro against the U.S. dollar, based on
an analysis of weighted average rates for the comparable periods. Net acquisitions/divestitures
contributed 0.8% of the increase in total reported revenues in 2011 over the same period in 2010.
Our consolidated revenues increased $118.0 million, or 4.3%, to $2,892.3 million for the year ended
December 31, 2010 from $2,774.4 million for the year ended December 31, 2009. Internal revenue
growth was 3.1% for 2010. For the year ended December 31, 2010, foreign currency exchange rate
fluctuations increased our reported revenues by 1.2% primarily due to the strengthening of the British
pound sterling and the Canadian dollar against the U.S. dollar, offset by the weakening of the Euro
against the U.S. dollar, based on an analysis of weighted average rates for the comparable periods.
44
Internal Growth—Eight-Quarter Trend
2010
2011
First
Fourth
Quarter Quarter Quarter Quarter Quarter Quarter Quarter Quarter
Second
Second
Fourth
Third
Third
First
Storage Revenue . . . . . . . . . .
Service Revenue . . . . . . . . . . .
Total Revenue . . . . . . . . . . . .
4.3% 3.7% 2.3% 2.3%
3.3%
4.5% 2.4% 3.9% 1.1% (0.1)% 1.2% 1.8% (1.4)%
1.2%
4.4% 3.1% 3.0% 1.8%
1.6% 2.1% 2.6%
3.0% 2.8% 3.3%
We expect our consolidated internal revenue growth for 2012 to be approximately (1)% to 2%.
During the past eight quarters our storage revenue internal growth rate has ranged between 2.3% and
4.3%. Our storage revenue growth rate moderated in late 2009 and into 2010 due to the economic
downturn, which resulted in reduced average net pricing gains in North America due to the low
inflationary environment, episodic destructions in the physical data protection business and lower new
sales and higher destruction rates in our North American Business segment. These impacts were offset
by new sales in international markets. Our storage growth rate in 2011 was driven by continued solid
storage growth in the International Business segment and sustained growth in our North American
Business segment. The internal revenue growth rate for service revenue is inherently more volatile than
the storage revenue internal growth rate due to the more discretionary nature of certain
complementary services we offer, such as large special projects, and the volatility of prices for recycled
paper. These revenues, which are often event driven and impacted to a greater extent by economic
downturns as customers defer or cancel the purchase of certain services as a way to reduce their
short-term costs, may be difficult to replicate in future periods. As a commodity, recycled paper prices
are subject to the volatility of that market. The revenue internal growth rate for service revenues
reflects the following: (1) pressures on activity-based service revenues related to the handling and
transportation of items in storage and secure shredding; (2) the expected softness in our
complementary service revenues, such as project revenues and fulfillment services; and (3) improvement
in commodity prices for recycled paper during the first half of fiscal year 2011 and higher fuel
surcharges.
OPERATING EXPENSES
Cost of Sales
Consolidated cost of sales (excluding depreciation and amortization) is comprised of the following
expenses (in thousands):
Year Ended December 31,
2010
2011
Dollar
Change
Constant
Actual Currency
Percentage
Change
% of
Consolidated
Revenues
2010
2011
Percentage
Change
(Favorable)/
Unfavorable
Labor . . . . . . . . . . . . . . . . $ 580,920 $ 595,207 $14,287
16,679
Facilities . . . . . . . . . . . . . .
Transportation . . . . . . . . . .
17,599
Product Cost of Sales and
405,341
107,406
422,020
125,005
2.5% 0.7% 20.1% 19.7% (0.4)%
4.1% 2.4% 14.0% 14.0% 0.0%
16.4% 14.4% 3.7% 4.1% 0.4%
Other . . . . . . . . . . . . . .
99,195
102,968
3,773
3.8% 1.7% 3.4% 3.4% 0.0%
$1,192,862 $1,245,200 $52,338
4.4% 2.6% 41.2% 41.3% 0.1%
45
Year Ended December 31,
2009
2010
Dollar
Change
Constant
Actual Currency
Percentage
Change
% of
Consolidated
Revenues
2009
2010
Percentage
Change
(Favorable)/
Unfavorable
Labor . . . . . . . . . . . . . . . . $ 588,383 $ 580,920 $(7,463)
990
Facilities . . . . . . . . . . . . . .
Transportation . . . . . . . . . .
(2,417)
Product Cost of Sales and
405,341
107,406
404,351
109,823
(1.3)% (2.3)% 21.2% 20.1% (1.1)%
0.2%
14.6% 14.0% (0.6)%
(2.2)% (2.8)% 4.0% 3.7% (0.3)%
Other . . . . . . . . . . . . . .
99,314
99,195
(119)
(0.1)% (3.6)% 3.6% 3.4% (0.2)%
$1,201,871 $1,192,862 $(9,009)
(0.7)% (1.9)% 43.3% 41.2% (2.1)%
Labor
Labor expense decreased to 19.7% of consolidated revenues for the year ended December 31,
2011 compared to 20.1% for the year ended December 31, 2010. For the year ended December 31,
2011, labor expense was unfavorably impacted by 1.8 percentage points due to currency rate changes.
Excluding (1) the effect of currency rate fluctuations and (2) the impact associated with labor cost
accruals related to the Brazilian litigation, in which a charge of $7.4 million was recorded in 2010 and a
benefit of $3.5 million was recorded in 2011, labor expense increased by 2.6% in 2011 over 2010
primarily due to increased incentive compensation of $8.0 million as well as increased health insurance
expenses of $5.0 million.
Labor expense decreased to 20.1% of consolidated revenues for the year ended December 31,
2010 compared to 21.2% for the year ended December 31, 2009. For the year ended December 31,
2010 as compared to the year ended December 31, 2009, labor expense was unfavorably impacted by
1.0 percentage points due to currency rate changes. Excluding the effect of currency rate fluctuations,
labor expense decreased by 2.3% in 2010 primarily due to productivity gains in our North American
Business segment, lower core service levels and lower incentive compensation expense of $12.3 million
in the year ended December 31, 2010.
Facilities
Facilities costs were flat at 14.0% of consolidated revenues for the years ended December 31, 2011
and December 31, 2010. Facilities costs were unfavorably impacted by 1.7 percentage points due to
currency rate changes during the year ended December 31, 2011. The largest component of our
facilities cost is rent expense, which, on a reported dollar basis, decreased to 12.5% of consolidated
storage revenues for the year ended December 31, 2011 compared to 13.0% in the same period in
2010. Other facilities costs increased by approximately $10.1 million, in constant currency terms, for the
year ended December 31, 2011 compared to the year ended December 31, 2010, primarily due to
increased building maintenance costs of $6.9 million and increased insurance costs of $5.4 million.
Facilities costs decreased to 14.0% of consolidated revenues for the year ended December 31, 2010
compared to 14.6% for the year ended December 31, 2009. Facilities costs were unfavorably impacted
by 0.7 percentage points due to currency rate changes during the year ended December 31, 2010.
The largest component of our facilities cost is rent expense, which decreased on a reported dollar basis
to 13.0% of consolidated storage revenues in the year ended December 31, 2010 compared to 13.4% in
the same period in 2009. Other facilities costs decreased by approximately $2.0 million, in constant
currency terms, for the year ended December 31, 2010 compared to the year ended December 31, 2009
primarily due to decreased building maintenance charges of $2.2 million.
46
Transportation
Transportation expenses were unfavorably impacted by 2.0 percentage points due to currency rate
changes during the year ended December 31, 2011. Transportation expenses increased by $15.7 million
in constant currency terms during the year ended December 31, 2011 compared to the same period in
2010. The increase in transportation costs was primarily a result of increased third party transportation
costs of $7.1 million, increased fuel costs of $6.3 million and increased vehicle repair, rental and
insurance costs of $2.0 million.
Transportation expenses were unfavorably impacted by 0.6 percentage points due to currency rate
changes during the year ended December 31, 2010. Transportation expenses decreased by $3.1 million
in constant currency terms during the year ended December 31, 2010 compared to the same period in
2009. A decrease of $3.3 million in vehicle lease expense for the year ended December 31, 2010
compared to 2009 was due to the capitalization of leased vehicles upon renewal. The lease cost did not
change, but the categorization of charges did, resulting in the cost now being allocated to depreciation
and interest.
Product Cost of Sales and Other
Product cost of sales and other, which includes cartons, media and other service, storage and
supply costs, is highly correlated to complementary revenue streams. These costs were unfavorably
impacted by 2.1 percentage points of currency rate changes during the year ended December 31, 2011.
For 2011, product cost of sales and other increased by $3.8 million as compared to 2010 on an actual
basis.
Product cost of sales and other was unfavorably impacted by 3.5 percentage points of currency rate
changes during the year ended December 31, 2010. For 2010, these costs decreased by $0.1 million as
compared to 2009 on an actual basis.
Selling, General and Administrative Expenses
Selling, general and administrative expenses are comprised of the following expenses
(in thousands):
Year Ended
December 31,
2010
2011
Percentage
Change
Dollar
Change
Constant
Actual Currency
% of
Consolidated
Revenues
2010
2011
Percentage
Change
(Favorable)/
Unfavorable
General and Administrative . . $446,175 $470,430 $24,255
Sales, Marketing & Account
5.4% 3.9% 15.4% 15.6% 0.2%
Management
. . . . . . . . . . .
Information Technology . . . . .
Bad Debt Expense . . . . . . . . .
214,977
99,858
11,801
244,645
110,010
9,506
7.4% 8.1% 0.7%
13.8%
29,668
10,152
10.2% 8.7% 3.5% 3.6% 0.1%
(2,295) (19.4)% (20.8)% 0.4% 0.3% (0.1)%
$772,811 $834,591 $61,780
8.0% 6.4% 26.7% 27.7% 1.0%
47
Year Ended
December 31,
2009
2010
Percentage
Change
Dollar
Change
Constant
Actual Currency
% of
Consolidated
Revenues
2009
2010
Percentage
Change
(Favorable)/
Unfavorable
General and Administrative . . $433,654 $446,175 $12,521
Sales, Marketing & Account
2.9% 2.1% 15.6% 15.4% (0.2)%
Management
. . . . . . . . . . .
Information Technology . . . . .
Bad Debt Expense . . . . . . . . .
208,127
99,159
8,994
214,977
99,858
11,801
6,850
699
2,807
3.3%
7.5% 7.4% (0.1)%
0.7% 1.0% 3.6% 3.5% (0.1)%
31.2% 15.1% 0.3% 0.4% 0.1%
$749,934 $772,811 $22,877
3.1% 2.0% 27.0% 26.7% (0.3)%
General and Administrative
General and administrative expenses increased to 15.6% of consolidated revenues in the year
ended December 31, 2011 compared to 15.4% in the year ended December 31, 2010. General and
administrative expenses were unfavorably impacted by 1.5 percentage points due to currency rate
changes during the year ended December 31, 2011. In constant currency terms, general and
administrative expenses increased by $17.8 million in the year ended December 31, 2011 compared to
the same period in 2010. The increase was primarily attributable to $15.0 million of advisory fees and
other costs in the first and second quarter of 2011 associated with our 2011 proxy contest and a
$16.1 million increase in incentive compensation, partially offset by a reduction of $16.2 million in
other professional fees within North America related to productivity investments incurred in 2010 and
which did not repeat in 2011.
General and administrative expenses decreased to 15.4% of consolidated revenues in the year
ended December 31, 2010 compared to 15.6% in the year ended December 31, 2009. General and
administrative expenses were unfavorably impacted by 0.8 percentage points due to currency rate
changes during the year ended December 31, 2010. In constant currency terms, general and
administrative expenses increased by $9.4 million in the year ended December 31, 2010 as compared to
the same period in 2009. The increase was primarily attributable to increased compensation expense of
$8.8 million. The increased compensation during the year ended December 31, 2010 is primarily a
result of merit increases, increased medical and other benefits, as well as increased headcount primarily
related to our continued investment in our hybrid records management services of $19.6 million, all of
which were partially offset by a reduction in incentive compensation of $10.9 million.
Sales, Marketing & Account Management
Sales, marketing and account management expenses were unfavorably impacted by 1.8 percentage
points due to currency rate changes during the year ended December 31, 2011. In constant currency
terms, the increase of $26.3 million in the year ended December 31, 2011 is primarily related to
increased sales and marketing expenses, primarily related to a planned incremental investment of
$20.0 million within North America to sustain the revenue annuity, primarily resulting in increased
compensation of $23.9 million, due to increased sales commissions, payroll tax expenses and incentive
compensation.
Sales, marketing and account management expenses were unfavorably impacted by 1.5 percentage
points due to currency rate changes during the year ended December 31, 2010. In constant currency
terms, the increase of $5.2 million in the year ended December 31, 2010 is primarily related to
$2.9 million of increased marketing costs and $1.5 million of increased professional fees.
48
Information Technology
Information technology expenses were unfavorably impacted by 1.5 percentage points due to
currency rate changes during the year ended December 31, 2011. In constant currency terms,
information technology expenses increased $8.8 million during the year ended December 31, 2011
compared to the same period in 2010 due primarily to an increase in incentive compensation and
related payroll taxes of $6.1 million and health insurance and other benefit costs of $2.9 million.
Information technology expenses were favorably impacted by 0.3 percentage point due to currency
rate changes during the year ended December 31, 2010. In constant currency terms, information
technology expenses increased $0.5 million during the year ended December 31, 2010, primarily a result
of increased overhead expenses of $5.4 million, partially offset by decreased compensation of
$5.3 million, which offset was driven by lower incentive compensation.
Bad Debt Expense
Consolidated bad debt expense for the year ended December 31, 2011 decreased $2.3 million to
$9.5 million (0.3% of consolidated revenues) from $11.8 million (0.4% of consolidated revenues) for
the year ended December 31, 2010. We maintain an allowance for doubtful accounts that is calculated
based on our past loss experience, current and prior trends in our aged receivables, current economic
conditions, and specific circumstances of individual receivable balances. We continue to monitor our
customers’ payment activity and make adjustments based on their financial condition and in light of
historical and expected trends.
Consolidated bad debt expense for the year ended December 31, 2010 increased $2.8 million to
$11.8 million (0.4% of consolidated revenues) from $9.0 million (0.3% of consolidated revenues) for
the year ended December 31, 2009.
Depreciation, Amortization, and (Gain) Loss on Disposal/Write-down of Property, Plant and
Equipment, Net
Depreciation expense increased $11.9 million and $25.7 million for the year ended December 31,
2011 and 2010, respectively, compared to the year ended December 31, 2010 and 2009, primarily due to
additional depreciation expense related to capital expenditures and acquisitions, including storage
systems, which include racking, building and leasehold improvements, computer systems, hardware and
software, and buildings primarily in our International Business segment.
Amortization expense increased $3.4 million for the year ended December 31, 2011, compared to
the year ended December 31, 2010, primarily due to an increase of customer relationship intangible
assets acquired related to the Poland acquisition. Amortization expense increased $1.3 million for the
year ended December 31, 2010, compared to the year ended December 31, 2009, primarily due to the
increased amortization of intangible assets, such as customer relationship intangible assets acquired
through business combinations.
Consolidated gain on disposal/write-down of property, plant and equipment, net of $2.3 million for
the year ended December 31, 2011 consisted primarily of (a) a gain of approximately $3.2 million
related to the disposition of a facility in Canada and (b) a gain of approximately $3.0 million on the
retirement of leased vehicles accounted for as capital lease assets in North America, offset by (c) a loss
associated with discontinued use of certain third-party software licenses of approximately $3.5 million
(approximately $3.1 million associated with our International Business segment and approximately
$0.4 million associated with our North American Business segment). Consolidated gain on disposal/
write-down of property, plant and equipment, net of $11.0 million for the year ended December 31,
2010 consisted primarily of a gain of approximately $10.2 million as a result of the settlement with our
insurers in connection with a portion of the property component of our claim related to the Chilean
49
earthquake in the third and fourth quarter of 2010, gains of approximately $3.2 million in North
America primarily related to the disposition of certain owned equipment and a gain on disposal of a
building in our International Business segment of approximately $1.3 million in the United Kingdom,
offset by approximately $1.0 million of asset write-downs associated with our Latin American
operations and approximately $2.6 million of impairment losses primarily related to certain owned
facilities in North America. Consolidated loss on disposal/write-down of property, plant and equipment,
net of $0.2 million for the year ended December 31, 2009, consisted primarily of a gain on disposal of a
building in our International Business segment of approximately $1.9 million in France, offset by losses
on the write-down of certain facilities of approximately $1.0 million in our North American Business
segment, $0.7 million in our International Business segment and $0.3 million in Corporate (associated
with discontinued products after implementation).
Intangible Impairments
During the quarter ended September 30, 2010, prior to our annual goodwill impairment review, we
concluded that events occurred and circumstances changed in our former worldwide digital business
reporting unit that required us to conduct an impairment review. The primary factors contributing to
our conclusion that we had a triggering event and a requirement to reassess our former worldwide
digital business reporting unit goodwill for impairment included: (1) a reduction in forecasted revenue
and operating results due to continued pressure on key parts of the business as a result of the weak
economy; (2) reduced revenue and profit outlook for our eDiscovery service due to smaller average
matter size and lower pricing; (3) a decision to discontinue certain software development projects; and
(4) the sale of the Domain Name Product Line. As a result of the review, we recorded a provisional
goodwill impairment charge associated with our former worldwide digital business reporting unit in the
amount of $255.0 million during the quarter ended September 30, 2010. We finalized the estimate in
the fourth quarter of 2010, and we recorded an additional impairment of $28.8 million, for a total
goodwill impairment charge of $283.8 million. Based on a relative fair value basis, we allocated
$85.9 million of this charge to the retained technology escrow services business, which continues to be
included in our continuing results of operations. We retained our technology escrow services business,
which had previously been reported in the former worldwide digital business segment along with the
Digital Business and the Domain Name Product Line. The technology escrow services business is now
reported in the North American Business segment.
In September 2011, as a result of certain changes we made in the manner in which our European
operations are managed, we reorganized our reporting structure and reassigned goodwill among the
revised reporting units. As a result of the management and reporting changes, we concluded that we
have three reporting units for our European operations: (1) UKI; (2) Western Europe; and (3) Central
Europe. Due to these changes, we will perform all future goodwill impairment analysis on the new
reporting unit basis. As a result of the restructuring of our reporting units, we concluded that we had
an interim triggering event, and, therefore, we performed an interim goodwill impairment test for UKI,
Western Europe and Central Europe in the third quarter of 2011 as of August 31, 2011. As required by
GAAP, prior to our goodwill impairment analysis, we performed an impairment assessment on the
long-lived assets within our UKI, Western Europe and Central Europe reporting units and noted no
impairment, except for the Italian Business, which was included in our Western Europe reporting unit,
and which is now included in discontinued operations below. Based on our analyses, we concluded that
the goodwill of our UKI and Central Europe reporting units was not impaired. Our Western Europe
reporting unit’s fair value was less than its carrying value, and, as a result, we recorded a goodwill
impairment charge of $46.5 million included as a component of intangible impairments from continuing
operations in our consolidated statements of operations for the year ended December 31, 2011.
50
OPERATING INCOME and ADJUSTED OIBDA
As a result of the foregoing factors, consolidated operating income increased $23.7 million, or
4.3%, to $571.2 million (18.9% of consolidated revenues) for the year ended December 31, 2011 from
$547.5 million (18.9% of consolidated revenues) for the year ended December 31, 2010. As a result of
the foregoing factors, consolidated Adjusted OIBDA increased $8.2 million, or 0.9%, to $934.9 million
(31.0% of consolidated revenues) for the year ended December 31, 2011 from $926.7 million (32.0% of
consolidated revenues) for the year ended December 31, 2010.
As a result of the foregoing factors, consolidated operating income increased $2.3 million, or 0.4%,
to $547.5 million (18.9% of consolidated revenues) for the year ended December 31, 2010 from
$545.2 million (19.7% of consolidated revenues) for the year ended December 31, 2009. As a result of
the foregoing factors, consolidated Adjusted OIBDA increased $104.1 million, or 12.7%, to
$926.7 million (32.0% of consolidated revenues) for the year ended December 31, 2010 from
$822.6 million (29.6% of consolidated revenues) for the year ended December 31, 2009.
OTHER EXPENSES, NET
Interest Expense, Net
Consolidated interest expense, net increased $0.7 million to $205.3 million (6.8% of consolidated
revenues) for the year ended December 31, 2011 from $204.6 million (7.1% of consolidated revenues)
for the year ended December 31, 2010 primarily due to the issuance of $400.0 million in aggregate
principal of our 73⁄4% Senior Subordinated Notes due 2019 (the ‘‘73⁄4% Notes due 2019’’) in September
2011, which was partially offset by the early retirement of $431.3 million of our 73⁄4% Senior
Subordinated Notes due 2015 (the ‘‘73⁄4% Notes due 2015’’) during late 2010 and early 2011. We expect
that our interest expense will increase in fiscal year 2012 compared to 2011 as a result of the issuance
of our 73⁄4% Notes due 2019 as part of a planned increase in leverage to the midpoint of our 3x–4x
target leverage ratio range. Our weighted average interest rate was 6.9% at both December 31, 2011
and December 31, 2010 and 7.0% at December 31, 2009.
Consolidated interest expense, net decreased $8.0 million to $204.6 million (7.1% of consolidated
revenues) for the year ended December 31, 2010 from $212.5 million (7.7% of consolidated revenues)
for the year ended December 31, 2009 primarily due to a reduction in year-over-year short-term
borrowings on our revolving credit facility, as well as a reduction in our outstanding borrowings due to
the early retirement of $200.0 million of our 73⁄4% Notes due 2015 during 2010.
Other (Income) Expense, Net (in thousands)
Foreign currency transaction losses (gains), net . . . . . . . . . . . . . . . . . . . .
Debt extinguishment expense, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$5,664
1,792
1,312
$17,352
993
(5,302)
$11,688
(799)
(6,614)
$8,768
$13,043
$ 4,275
Year Ended
December 31,
2010
2011
Dollar
Change
51
Foreign currency transaction (gains) losses, net . . . . . . . . . . . . . . . . . . . .
Debt extinguishment expense, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$(12,845) $5,664
1,792
1,312
3,031
(2,785)
Year Ended
December 31,
2009
2010
Dollar
Change
$18,509
(1,239)
4,097
$(12,599) $8,768
$21,367
Net foreign currency transaction losses of $17.4 million, based on period-end exchange rates, were
recorded in the year ended December 31, 2011. Losses were primarily a result of British pound sterling
denominated debt and forward foreign currency swap contracts and changes in the exchange rate of the
Euro, Russian Ruble and certain Latin American currencies against the U.S. dollar compared to
December 31, 2010, as these currencies relate to our intercompany balances with and between our
European and Latin American subsidiaries. Partially offsetting these losses were gains which resulted
primarily from our Euro denominated bonds issued by IMI as well as changes in the exchange rate of
the British pound sterling against the U.S. dollar compared to December 31, 2010, as these currencies
relate to our intercompany balances with and between our United Kingdom subsidiaries.
Net foreign currency transaction losses of $5.7 million, based on period-end exchange rates, were
recorded in the year ended December 31, 2010. Losses resulted primarily from changes in the exchange
rate of the British pounds sterling, the Euro and the Russian Ruble, offset by the Brazilian Real,
against the U.S. dollar compared to December 31, 2009, as these currencies relate to our intercompany
balances with and between our European and Latin American subsidiaries, and gains associated with
our British pound sterling forward contracts, British pound sterling denominated debt and Euro
denominated debt issued by IMI.
Net foreign currency transaction gains of $12.9 million, based on period-end exchange rates, were
recorded in the year ended December 31, 2009. Gains resulted primarily from changes in the exchange
rate of the British pounds sterling, Euro, Brazilian Real and Chilean Peso against the U.S. dollar
compared to December 31, 2008, as these currencies relate to our intercompany balances with and
between our European and Latin American subsidiaries, offset by losses as a result of British pounds
sterling and Euro denominated debt and forward foreign currency swap contracts held by our
U.S. parent company.
During the year ended December 31, 2011 we recorded a gain of approximately $0.9 million in the
first quarter of 2011 related to the early extinguishment of $231.3 million of our 73⁄4% Notes due 2015
that were redeemed. This gain consists of original issue premiums, net of deferred financing costs
related to our 73⁄4% Notes due 2015 that were redeemed. Additionally, we recorded a charge of
$1.8 million in the second quarter of 2011 related to the early retirement of our previous revolving
credit and term loan facilities, representing a write-off of deferred financing costs. During the year
ended December 31, 2010, we redeemed $200.0 million of the $431.3 million aggregate principal
amount outstanding of our 73⁄4% Notes due 2015 at a redemption price of $1,012.92 for each one
thousand dollars of principal amount of the notes redeemed, plus accrued and unpaid interest.
We recorded a charge to other expense (income), net of $1.8 million in the third quarter of 2010
related to the early extinguishment of our 73⁄4% Notes due 2015 that were redeemed. This charge
consists of the call premium and deferred financing costs, net of original issue premiums related to our
73⁄4% Notes due 2015 that were redeemed. During the year ended December 31, 2009, we redeemed
our 85⁄8% Senior Subordinated Notes due 2013 and wrote-off $3.0 million in associated deferred
financing costs.
Other, net for the year ended December 31, 2011 was a gain of $5.3 million, which primarily
consists of a $5.9 million gain associated with the fair valuing of the 20% equity interest that we
previously held in our Polish joint venture in connection with our acquisition of the remaining 80%
52
interest in January 2011. Other, net in the year ended December 31, 2010 was a $1.3 million loss.
Included in the loss for the year ended December 31, 2010 was $4.7 million of losses related to the
impact of the change in IME’s fiscal year-end. Since its inception, IME had operated with an
October 31 fiscal year-end. IME’s financial results had historically been consolidated with IMI’s results
with a two month lag. In order to better align our European processes with the enterprise, effective
January 1, 2010, the IME fiscal year-end was changed to December 31 to match the Company’s fiscal
year-end. The $4.7 million charge represents the net impact of this change for the two years ended
December 31, 2009. Partially offsetting this loss was $1.2 million of gains related to certain trading
marketable securities held in a trust for the benefit of employees included in a deferred compensation
plan we sponsor. Other, net in the year ended December 31, 2009 primarily consisted of $1.7 million of
gains related to certain trading marketable securities held in a trust for the benefit of employees
included in a deferred compensation plan we sponsor, in addition to $0.6 million of business
interruption proceeds for an owned storage facility in France, which was taken by eminent domain in
the first quarter of 2009.
Provision for Income Taxes
Our effective tax rates for the years ended December 31, 2009, 2010 and 2011 were 32.9%, 50.1%
and 30.2%, respectively. The primary reconciling items between the federal statutory rate of 35% and
our overall effective tax rate for the year ended December 31, 2011 was the recognition of certain
previously unrecognized tax benefits related to tax positions of prior years, expirations of statute of
limitation periods and settlements with tax authorities in various jurisdictions and differences in the
rates of tax at which our foreign earnings are subject, including foreign exchange gains and losses in
different jurisdictions with different tax rates. This benefit was partially offset by state income taxes
(net of federal benefit). Additionally, to a lesser extent, a goodwill impairment charge included in
income from continuing operations as a component of intangible impairments in our consolidated
statements of operations, of which a majority was non-deductible for tax purposes, is a reconciling item
that impacts our effective tax rate. The primary reconciling item between the federal statutory rate of
35% and our overall effective tax rate for the year ended December 31, 2010 is a goodwill impairment
charge included in income from continuing operations as a component of intangible impairments in our
consolidated statements of operations, of which a majority was non-deductible for tax purposes. The
negative impact of U.S. legislative changes reducing the expected utilization of foreign tax credits was
offset by the recognition of certain previously unrecognized tax benefits due to expirations of statute of
limitation periods and settlements with tax authorities in various jurisdictions. Additionally, to a lesser
extent, state income taxes (net of federal benefit) and differences in the rates of tax at which our
foreign earnings are subject, including foreign exchange gains and losses in different jurisdictions with
different tax rates, are also reconciling items and impact our effective tax rate. In 2009, we had
significant unrealized foreign exchange gains and losses on intercompany loans and on debt and
derivative instruments in different jurisdictions with different tax rates. For 2009, foreign currency gains
were recorded in lower tax jurisdictions associated with the marking-to-market of intercompany loan
positions while foreign currency losses were recorded in higher tax jurisdictions associated with the
marking-to-market of debt and derivative instruments, which reduced the effective tax rate for the year
ended December 31, 2009.
Our effective tax rate is subject to variability in the future due to, among other items: (1) changes
in the mix of income from foreign jurisdictions; (2) tax law changes; (3) volatility in foreign exchange
gains and (losses); (4) the timing of the establishment and reversal of tax reserves; and (5) our ability
to utilize foreign tax credits that we generate. We are subject to income taxes in the U.S. and numerous
foreign jurisdictions. We are subject to examination by various tax authorities in jurisdictions in which
we have significant business operations. We regularly assess the likelihood of additional assessments by
tax authorities and provide for these matters as appropriate. Although we believe our tax estimates are
53
appropriate, the final determination of tax audits and any related litigation could result in changes in
our estimates. Discrete items are recorded in the period they occur.
INCOME FROM CONTINUING OPERATIONS
As a result of the foregoing factors, consolidated income from continuing operations for the year
ended December 31, 2011 increased $79.7 million, or 47.8%, to $246.4 million (8.2% of consolidated
revenues) from income from continuing operations of $166.7 million (5.8% of consolidated revenues)
for the year ended December 31, 2010. The increase in income from continuing operations is primarily
due to the year-over-year decrease of our provision for income taxes as described above and the
goodwill impairment charge recorded in fiscal year 2010 associated with our technology escrow services
business, which was previously a component of our former worldwide digital business segment, partially
offset by the goodwill impairment charge recorded in fiscal year 2011 associated with our Western
Europe reporting unit, as well as, the impact of foreign currency exchange rate fluctuations and the
year-over-year change in the (gain) loss on disposal/write-down of property, plant and equipment, net.
As a result of the foregoing factors, consolidated income from continuing operations for the year
ended December 31, 2010 decreased $64.8 million, or 28.0%, to $166.7 million (5.8% of consolidated
revenues) from income from continuing operations of $231.5 million (8.3% of consolidated revenues)
for the year ended December 31, 2009. The decrease in income from continuing operations is primarily
due to the goodwill impairment charge associated with our technology escrow services business, which
was previously a component of our former worldwide digital business segment, as well as, foreign
currency exchange rate impacts and the impact of the change in IME’s fiscal year-end included in other
(income) expense, net and the impact of our tax rate for 2010 and the resulting increase in the
provision for income taxes described above.
INCOME (LOSS) FROM DISCONTINUED OPERATIONS AND GAIN (LOSS) ON SALE OF
DISCONTINUED OPERATIONS
Loss from discontinued operations was $(12.1) million, $(219.4) million and $(47.4) million for the
years ended December 31, 2009, 2010 and 2011, respectively. We recorded a goodwill impairment
charge associated with our former worldwide digital business reporting unit in the amount of
$197.9 million during the year ended December 31, 2010 net of the amount allocated to the retained
technology escrow services business, based on a relative fair value basis, which continues to be included
in our continuing results of operations as previously discussed above. During 2011, we recorded an
impairment charge of $4.9 million to write-down the long-lived assets of the New Zealand Business to
its estimated net realizable value which is included in loss from discontinued operations. Additionally,
we recorded a tax benefit of $7.9 million during 2011 associated with the outside tax basis of the New
Zealand Business, which is also reflected in income (loss) from discontinued operations. Additionally,
in conjunction with the goodwill impairment analysis performed associated with our Western Europe
reporting unit, we performed an impairment test on the long-lived assets of our Italian Business in the
third quarter of 2011. The undiscounted cash flows from the Italian Business were lower than the
carrying value of the long-lived assets associated with the operations of the Italian Business and
resulted in the requirement to fair value the long-lived assets of this lower level component. As a
result, we recorded write-offs of other intangible assets, primarily customer relationship values of
$8.0 million, and certain write-downs to property, plant and equipment (primarily racking) long-lived
assets in Italy of $6.6 million in the third quarter of 2011, which are included in loss from discontinued
operations. We allocated $2.5 million of the Western Europe goodwill impairment charge to the Italian
Business which is included in loss from discontinued operations for the year ended December 31, 2011.
Pursuant to the Digital Sale Agreement, we received approximately $395.4 million in cash,
consisting of the initial purchase price of $380.0 million and a preliminary working capital adjustment
of approximately $15.4 million, which remains subject to a customary post-closing adjustment based on
54
the amount of working capital at closing. The purchase price for the Digital Sale will be increased on a
dollar-for-dollar basis if the working capital balance at the time of closing exceeds the target amount of
working capital as set forth in the Digital Sale Agreement and decreased on a dollar-for-dollar basis if
such closing working capital balance is less than the target amount. We and Autonomy are in
disagreement regarding the working capital adjustment in the Digital Sale Agreement. As a result, as
contemplated by the Digital Sale Agreement, the matter is being referred to an independent third party
accounting firm for determination of the appropriate adjustment amount. Transaction costs relating to
the Digital Sale amounted to approximately $7.4 million. Additionally, $11.1 million of inducements are
payable to Autonomy and have been netted against the proceeds in calculating the gain on the Digital
Sale. Also, a tax provision of $45.1 million associated with the gain recorded on the Digital Sale was
recorded for the year ended December 31, 2011. A gain on sale of discontinued operations in the
amount of $243.9 million ($198.7 million, net of tax) was recorded during the year ended December 31,
2011, as a result of the Digital Sale. We completed the sale of the New Zealand Business on
October 3, 2011 for a purchase price of approximately $10.0 million. We recorded a gain on the sale of
discontinued operations associated with the New Zealand Business of approximately $1.9 million during
the fourth quarter of 2011. A gain on sale of discontinued operations of approximately $6.9 million
($2.8 million, net of tax) was recorded during the year ended December 31, 2010 associated with the
divestiture of the Domain Name Product Line.
NONCONTROLLING INTERESTS
For the year ended December 31, 2011, net income attributable to noncontrolling interests resulted
in a decrease in net income attributable to Iron Mountain Incorporated of $4.1 million. For the year
ended December 31, 2010, net income attributable to noncontrolling interests resulted in a decrease in
net income attributable to Iron Mountain Incorporated of $4.9 million. For the year ended
December 31, 2009, net income attributable to noncontrolling interests resulted in a reduction to net
income attributable to Iron Mountain Incorporated of $1.4 million. These amounts represent our
noncontrolling partners’ share of earnings/losses in our majority-owned international subsidiaries that
are consolidated in our operating results.
Segment Analysis (in thousands)
As a result of the disposition of our Digital Business and New Zealand Business and our decision
to sell the Italian Business as discussed in Note 14 to Notes to Consolidated Financial Statements, we
changed our reportable segments. The most significant of these changes is that the reportable segment
previously referred to as the worldwide digital business is no longer reported separately in our
management reporting as the operations associated with the Domain Name Product Line and the
Digital Business are reported as discontinued operations. Also, the technology escrow services business,
which we continue to own and operate and was previously reported in the former worldwide digital
business segment, is now reported in the North American Business segment. Additionally, the
International Business segment no longer includes the New Zealand Business and the Italian Business
as these operations are reported as discontinued operations.
Our reportable operating segments are North American Business, International Business and
Corporate. See Note 9 to Notes to Consolidated Financial Statements. Our North American Business
segment offers information management services throughout the United States and Canada, including
the storage of paper documents, as well as other media such as microfilm and microfiche, master audio
and videotapes, film, X-rays and blueprints, including healthcare information services, vital records
services, service and courier operations, and the collection, handling and disposal of sensitive
documents for corporate customers (‘‘Hard Copy’’); the storage and rotation of backup computer
media as part of corporate disaster recovery plans, including service and courier operations (‘‘Data
Protection’’); information destruction services (‘‘Destruction’’); the scanning, imaging and document
55
conversion services of active and inactive records (‘‘Hybrid Services’’); the storage, assembly, and
detailed reporting of customer marketing literature and delivery to sales offices, trade shows and
prospective customers’ sites based on current and prospective customer orders (‘‘Fulfillment’’), and
technology escrow services that protect and manage source code. Our International Business segment
offers information management services throughout Europe, Latin America and Asia Pacific, including
Hard Copy, Data Protection, Destruction and Hybrid Services. Corporate consists of costs related to
executive and staff functions, including finance, human resources and information technology, which
benefit the enterprise as a whole. These costs are primarily related to the general management of these
functions on a corporate level and the design and development of programs, policies and procedures
that are then implemented in the individual segments, with each segment bearing its own cost of
implementation. Corporate also includes stock-based employee compensation expense associated with
all employee stock-based awards.
North American Business
Year Ended December 31,
2010
2011
Dollar
Change
Actual
Constant
Currency
Internal
Growth
Percentage
Change
Segment Revenue . . . . . . . . . . . . . . . . .
$2,193,464
$2,229,143
$35,679
1.6% 1.2% 1.1%
Segment Adjusted OIBDA(1) . . . . . . . .
$ 969,505
$ 961,973
$ (7,532)
(0.8)% (1.2)%
Segment Adjusted OIBDA(1) as a
Percentage of Segment Revenue . . .
44.2%
43.2%
Year Ended December 31,
2009
2010
Dollar
Change
Actual
Constant
Currency
Internal
Growth
Percentage
Change
Segment Revenue . . . . . . . . . . . . . . . .
$2,124,964
$2,193,464
$ 68,500
3.2% 2.3% 2.3%
Segment Adjusted OIBDA(1) . . . . . . .
$ 866,356
$ 969,505
$103,149
11.9% 11.0%
Segment Adjusted OIBDA(1) as a
Percentage of Segment Revenue . . . .
40.8%
44.2%
(1) See Note 9 to Notes to the Consolidated Financial Statements for definition of Adjusted OIBDA
and for the basis on which allocations are made and a reconciliation of Adjusted OIBDA to
income (loss) from continuing operations before provision (benefit) for income taxes.
During the year ended December 31, 2011, revenue in our North American Business segment
increased 1.6% over the year ended December 31, 2010, primarily due to internal growth of 1.1%.
Internal growth was due to storage internal growth of 2.2% related to increased new sales and lower
volume outflows, partially offset by total service internal growth of negative 0.3%. Our core service
revenues were constrained by lower service and activity levels partially offset by higher fuel surcharges,
yielding negative internal growth of 1.4% for the year ended December 31, 2011, while our
complementary service revenue yielded 2.5% internal growth as a result of higher pricing of recycled
paper, as well as improved special project and product sales. Additionally, favorable foreign currency
rate changes related to the Canadian dollar resulted in increased 2011 revenue, as measured in
U.S. dollars, of 0.4% for the year ended December 31, 2011. Adjusted OIBDA as a percentage of
segment revenue decreased for the year ended December 31, 2011 compared to the same period in
2010 due mainly to increases in sales and marketing expenses of $27.5 million, inclusive of a planned
incremental investment of $20.0 million to sustain the revenue annuity, and higher incentive
compensation accruals of $20.6 million, partially offset by a constant currency increase in revenue of
56
$26.0 million and a reduction of $16.2 million in professional fees related to productivity investments
incurred in 2010 and which did not repeat in 2011.
During the year ended December 31, 2010, revenue in our North American Business segment
increased 3.2% over the year ended December 31, 2009, primarily due to internal growth of 2.3%.
Total revenue internal growth was comprised of storage internal growth of 2.3% related to increased
Hard Copy and Data Protection revenues and service internal growth of 2.4%. Economic factors led to
a moderation in our storage growth rate as a result of reduced average net pricing gains due to the
current low inflationary environment, episodic destructions in the data protection business and lower
new sales and higher destruction rates in our physical business over the past year. Core service revenue
growth was also constrained by economic trends and pressures on activity-based services revenues
related to the handling and transportation of items in storage. Our core services business yielded
negative internal growth of 2.2%, which was more than offset by complementary services revenues
internal growth of 16.3%, due primarily to higher recycled paper prices and gains in hybrid service
revenues. Additionally, favorable foreign currency rate changes related to Canada resulted in increased
2010 revenue, as measured in U.S. dollars, of 0.9%. Adjusted OIBDA as a percentage of segment
revenue increased in 2010 due mainly to productivity gains and disciplined cost management, partially
offset by a $5.5 million increase in general and administrative compensation and a $1.4 million increase
in bad debt expense.
International Business
Year Ended
December 31,
2010
2011
Percentage
Change
Dollar
Change
Actual
Constant
Currency
Internal
Growth
Segment Revenue . . . . . . . . . . . . . . . . . . .
$698,885
$785,560
$86,675
12.4% 7.2% 4.3%
Segment Adjusted OIBDA(1)
. . . . . . . . . .
$130,969
$164,212
$33,243
25.4% 19.0%
Segment Adjusted OIBDA(1) as a
Percentage of Segment Revenue . . . . . . .
18.7%
20.9%
Year Ended
December 31,
2009
2010
Percentage
Change
Dollar
Change
Actual
Constant
Currency
Internal
Growth
Segment Revenue . . . . . . . . . . . . . . . . . . .
$649,420
$698,885
$49,465
7.6% 4.9%
5.3%
Segment Adjusted OIBDA(1)
. . . . . . . . . .
$120,482
$130,969
$10,487
8.7% 3.0%
Segment Adjusted OIBDA(1) as a
Percentage of Segment Revenue . . . . .
18.6%
18.7%
(1) See Note 9 to Notes to the Consolidated Financial Statements for definition of Adjusted OIBDA
and for the basis on which allocations are made and a reconciliation of Adjusted OIBDA to
income (loss) from continuing operations before provision (benefit) for income taxes.
Revenue in our International Business segment increased 12.4% during the year ended
December 31, 2011 over 2010 due to internal growth of 4.3% and foreign currency fluctuations in 2011,
primarily in Europe, which resulted in increased 2011 revenue, as measured in U.S. dollars, of
approximately 5.1% as compared to 2010. Total internal revenue growth for the segment for the year
ended December 31, 2011 was supported by solid 6.2% storage internal growth and total service
internal growth of 2.3%. Acquisitions contributed 3.0% of the increase in total reported international
revenues in the year ended December 31, 2011, primarily due to our acquisitions in Poland in the first
57
quarter of 2011 and Greece in the second quarter of 2010. Adjusted OIBDA as a percentage of
segment revenue increased in the year ended December 31, 2011 compared to the same period in 2010
primarily due to increased operating income from productivity gains, pricing actions and disciplined
cost management, offset by $5.9 million of additional productivity investments.
Revenue in our International Business segment increased 7.6% during the year ended
December 31, 2010 over 2009 due to internal revenue growth of 5.3% supported by storage internal
growth of 6.0% and core services internal growth of 2.4%. The impact of acquisitions increased
reported revenue by 0.3% in 2010. Foreign currency fluctuations in 2010, primarily in Europe, resulted
in increased 2010 revenue, as measured in U.S. dollars, of approximately 2.0% as compared to 2009.
Adjusted OIBDA increased in 2010 by $10.5 million compared to the same period in 2009 due to
increased operating income from productivity gains, pricing actions and disciplined cost management,
partially offset by increased compensation expense of $9.5 million primarily related to investments in
our hybrid records management services, as well as one-time cost accruals recorded in 2010 of
approximately $7.4 million.
Corporate
Segment Adjusted OIBDA(1)
Segment Adjusted OIBDA(1)
as a Percentage of
Consolidated Revenue . . . .
Year Ended December 31,
2009
2010
2011
from 2009
to 2010
from 2010 from 2009 from 2010
to 2010
to 2011
to 2011
Dollar Change
Percentage Change
$(164,259) $(173,798) $(191,273) $(9,539) $(17,475)
(5.8)% (10.1)%
(5.9)%
(6.0)%
(6.3)%
(1) See Note 9 to Notes to the Consolidated Financial Statements for definition of Adjusted OIBDA
and for the basis on which allocations are made and a reconciliation of Adjusted OIBDA to
income (loss) from continuing operations before provision (benefit) for income taxes.
During the year ended December 31, 2011, expenses in the Corporate segment as a percentage of
consolidated revenues increased 10.1% over 2010. This increase was primarily due to $15.0 million of
advisory fees and other costs associated with our 2011 proxy contest.
During the year ended December 31, 2010, expenses in the Corporate segment increased 5.8%
over 2009. This increase was primarily driven by increased sales, marketing and account management
expenses of $6.0 million, higher professional fees of $2.2 million related to productivity and cost saving
initiatives, an insurance deductible of $2.8 million associated with earthquakes, increased stock-based
compensation of $2.1 million and increased marketing expenses, partially offset by a reduction in
incentive compensation.
Liquidity and Capital Resources
The following is a summary of our cash balances and cash flows (in thousands) as of and for the
years ended December 31,
Cash flows from operating activities—continuing operations . . . . . .
Cash flows from investing activities—continuing operations . . . . . .
Cash flows from financing activities—continuing operations . . . . . .
Cash and cash equivalents at the end of year . . . . . . . . . . . . . . . .
$ 586,570
(298,699)
(128,286)
446,656
$ 603,229
(298,458)
(379,711)
258,693
$ 663,514
(302,213)
(762,670)
179,845
2009
2010
2011
58
Net cash provided by operating activities from continuing operations was $663.5 million for the
year ended December 31, 2011 compared to $603.2 million for the year ended December 31, 2010.
The 10.0% increase resulted primarily from an increase in net income, excluding non-cash charges of
$31.3 million, a decrease in cash used for working capital of $23.9 million and a decrease in realized
foreign exchange losses of $5.1 million over the same period last year. Uses of working capital are
primarily related to lower taxes paid from continuing operations, excluding the $52.4 million of taxes
paid as a result of the sale of our Digital Business which is classified in discontinued operations, lower
amounts paid for cash interest and cash incentive compensation in fiscal year 2011 compared to fiscal
year 2010, partially offset by a reduction in cash collections from customers associated with accounts
receivable. We expect our cash flows provided by operating activities from continuing operations to
decrease in fiscal year 2012 as a result of a reduction in Adjusted OIBDA related to lower recycled
paper revenues, combined with higher interest costs and higher incentive compensation payouts
compared to fiscal year 2011.
Our business requires significant capital expenditures to support our expected revenue growth and
ongoing operations as well as new products and services and increased profitability. These expenditures
are included in the cash flows from investing activities from continuing operations. The nature of our
capital expenditures has evolved over time along with the nature of our business. We make capital
expenditures to support a number of different objectives. The majority of our capital goes to support
business line growth and our ongoing operations, but we also expend capital to support the
development and improvement of products and services and projects designed to increase our
profitability. These expenditures are generally small and more discretionary in nature. Cash paid for
our capital expenditures, cash paid for acquisitions (net of cash acquired) and additions to customer
acquisition costs during the year ended December 31, 2011 amounted to $209.2 million, $75.2 million
and $21.7 million, respectively. For the year ended December 31, 2011, capital expenditures, net, cash
paid for acquisitions (net of cash acquired) and additions to customer acquisition costs were funded
with cash flows provided by operating activities from continuing operations and cash equivalents on
hand. Excluding potential future acquisitions, we expect our capital expenditures to be approximately
$215.0 million in the year ending December 31, 2012. Included in our estimated capital expenditures
for 2012 is approximately $25.0 million of real estate purchases.
Net cash used in financing activities from continuing operations was $762.7 million for the year
ended December 31, 2011. During 2011, we received (i) $394.0 million in proceeds from the issuance of
our 73⁄4% Notes due 2019; (ii) net borrowings under our revolving credit and term loan facilities and
other debt of $153.8 million; and (iii) $85.7 million of proceeds from the exercise of stock options and
purchases under the employee stock purchase plan. We used the proceeds from these financing
transactions and cash on hand: (i) for the early retirement of $231.3 million of our 73⁄4% Notes due
2015; (ii) to repurchase $985.0 million of our common stock; (iii) to pay dividends in the amount of
$172.6 million on our common stock; and (iv) to fund debt financing costs of $9.0 million.
Our board of directors has authorized up to $1.2 billion in repurchases of our common stock.
All purchases are subject to stock price, market conditions, corporate and legal requirements and other
factors. As of December 31, 2011, we had a remaining amount available for repurchase under our
share repurchase program of $100.7 million, which represents approximately 2% in the aggregate of our
outstanding common stock based on the closing price on such date.
59
The following table is a summary of our repurchase activity under all of our share repurchase
programs during 2011:
Authorizations remaining as of January 1,
. . . . . . . . . . . . . . . . . . . . . . . . .
Additional Authorizations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Repurchases paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Repurchases unsettled . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
31,743,886
109,532
(In thousands)
$ 238,532
850,000
(984,469)
(3,362)
Authorization remaining as of December 31,
. . . . . . . . . . . . . . . . . . . . . . .
$ 100,701(2)
2011
Shares
Amount(1)
(1) Amount excludes commissions paid associated with share repurchases.
(2) Between January 1, 2012 and February 10, 2012, we repurchased an additional 1.1 million shares
of our common stock for an aggregate purchase price of $34.7 million, reducing our remaining
authorization to approximately $66.0 million.
In February 2010, our board of directors adopted a dividend policy under which we have paid and
in the future intend to pay quarterly cash dividends on our common stock. Declaration and payment of
future quarterly dividends is at the discretion of our board of directors. In fiscal years 2010 and 2011,
our board of directors declared the following dividends:
Declaration Date
Dividend
Per Share
Record Date
March 25, 2010 . . . . . . . . . . . . . . .
June 4, 2010 . . . . . . . . . . . . . . . . . .
September 15, 2010 . . . . . . . . . . . .
December 10, 2010 . . . . . . . . . . . . .
March 11, 2011 . . . . . . . . . . . . . . .
June 10, 2011 . . . . . . . . . . . . . . . . .
September 8, 2011 . . . . . . . . . . . . .
December 1, 2011 . . . . . . . . . . . . .
March 25, 2010
$0.0625
June 25, 2010
0.0625
0.0625
September 28, 2010
0.1875 December 27, 2010
March 25, 2011
0.1875
0.2500
June 24, 2011
0.2500
September 23, 2011
0.2500 December 23, 2011
Total
Amount
(in thousands)
$12,720
12,641
12,532
37,514
37,601
50,694
46,877
43,180
Payment Date
April 15, 2010
July 15, 2010
October 15, 2010
January 14, 2011
April 15, 2011
July 15, 2011
October 14, 2011
January 13, 2012
We are committed to stockholder payouts through a combination of share buybacks, ongoing
quarterly dividends and potential one-time dividends of approximately $2.2 billion through 2013, with
approximately $1.2 billion of capital returned to stockholders by May 2012. Through February 10, 2012,
we have returned approximately $1.15 billion to stockholders against these commitments. We expect to
fund future payouts with cash flows from operations and borrowings under existing and potentially
additional debt instruments. With regard to our levels of indebtedness, we plan to operate around the
mid-point of our target leverage ratio range of 3x—4x EBITDA (as defined in our revolving credit
facility).
Financial instruments that potentially subject us to market risk consist principally of cash and cash
equivalents (including money market funds and time deposits), restricted cash (primarily U.S.
Treasuries) and accounts receivable. The only significant concentrations of liquid investments as of
December 31, 2011 relate to cash and cash equivalents and restricted cash held on deposit with five
global banks and one ‘‘Triple A’’ rated money market fund which we consider to be large, highly-rated
investment-grade institutions. As per our risk management investment policy, we limit exposure to
concentration of credit risk by limiting the amount invested in any one mutual fund or financial
institution to a maximum of $50.0 million. As of December 31, 2011, our cash and cash equivalents and
60
restricted cash balance was $215.0 million, including a money market fund and time deposits amounting
to $181.8 million. A substantial portion of the money market fund is invested in U.S. Treasuries.
We are highly leveraged and expect to continue to be highly leveraged for the foreseeable future.
Our consolidated debt as of December 31, 2011 was comprised of the following (in thousands):
New Revolving Credit Facility(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
New Term Loan Facility(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
71⁄4% GBP Senior Subordinated Notes due 2014 (the ‘‘71⁄4% Notes’’)(2) . . . . . . . . . . . . . .
65⁄8% Senior Subordinated Notes due 2016 (the ‘‘65⁄8% Notes’’)(2) . . . . . . . . . . . . . . . . . .
71⁄2% CAD Senior Subordinated Notes due 2017 (the ‘‘Subsidiary Notes’’)(3) . . . . . . . . . .
83⁄4% Senior Subordinated Notes due 2018 (the ‘‘83⁄4% Notes’’)(2) . . . . . . . . . . . . . . . . . .
8% Senior Subordinated Notes due 2018 (the ‘‘8% Notes’’)(2) . . . . . . . . . . . . . . . . . . . . .
63⁄4% Euro Senior Subordinated Notes due 2018 (the ‘‘63⁄4% Notes’’)(2) . . . . . . . . . . . . . .
73⁄4% Senior Subordinated Notes due 2019 (the ‘‘73⁄4% Notes due 2019’’)(2) . . . . . . . . . . .
8% Senior Subordinated Notes due 2020 (the ‘‘8% Notes due 2020’’)(2) . . . . . . . . . . . . . .
83⁄8% Senior Subordinated Notes due 2021 (the ‘‘83⁄8% Notes’’)(2) . . . . . . . . . . . . . . . . . .
Real Estate Mortgages, Capital Leases and Other (4) . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
96,000
487,500
233,115
318,025
171,273
200,000
49,806
328,750
400,000
300,000
548,346
220,773
Total Long-term Debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Less Current Portion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
3,353,588
(73,320)
Long-term Debt, Net of Current Portion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$3,280,268
(1) The capital stock or other equity interests of most of our U.S. subsidiaries, and up to 66% of the
capital stock or other equity interests of our first-tier foreign subsidiaries, are pledged to secure
these debt instruments, together with all intercompany obligations of foreign subsidiaries owed to
us or to one of our U.S. subsidiary guarantors.
(2) Collectively, the ‘‘Parent Notes’’. IMI is the direct obligor on the Parent Notes, which are fully and
unconditionally guaranteed, on a senior subordinated basis, by substantially all of its direct and
indirect wholly owned U.S. subsidiaries (the ‘‘Guarantors’’). These guarantees are joint and several
obligations of the Guarantors. Iron Mountain Canada Corporation (‘‘Canada Company’’) and the
remainder of our subsidiaries do not guarantee the Parent Notes.
(3) Canada Company is the direct obligor on the Subsidiary Notes, which are fully and unconditionally
guaranteed, on a senior subordinated basis, by IMI and the Guarantors. These guarantees are joint
and several obligations of IMI and the Guarantors.
(4) Includes (a) real estate mortgages of $5.2 million, (b) capital lease obligations of $207.3 million,
and (c) other various notes and other obligations, which were assumed by us as a result of certain
acquisitions, of $8.2 million.
On June 27, 2011, we entered into a new credit agreement to replace the IMI revolving credit
facility and the IMI term loan facility, each entered into on April 16, 2007. The new credit agreement
consists of (i) revolving credit facilities under which we can borrow, subject to certain limitations as
defined in the new credit agreement, up to an aggregate amount of $725.0 million (including Canadian
dollars, British pounds sterling and Euros, among other currencies) (the ‘‘New Revolving Credit
Facility’’) and (ii) a $500.0 million term loan facility (the ‘‘New Term Loan Facility,’’ and collectively
with the New Revolving Credit Facility, the ‘‘New Credit Agreement’’). We have the right to increase
the aggregate amount available to be borrowed under the New Credit Agreement up to a maximum of
$1.8 billion. The New Revolving Credit Facility is supported by a group of 19 banks. IMI, Iron
Mountain Information Management, Inc. (‘‘IMIM’’), Canada Company, IME, Iron Mountain Australia
Pty Ltd., Iron Mountain Switzerland Gmbh and any other subsidiary of IMIM designated by IMIM
61
(the ‘‘Other Subsidiaries’’) may, with the consent of the administrative agent, as defined in the New
Credit Agreement, borrow under certain of the following tranches of the New Revolving Credit Facility:
(a) tranche one in the amount of $400.0 million is available to IMI and IMIM in U.S. dollars, British
pounds sterling and Euros, (b) tranche two in the amount of $150.0 million is available to IMI or
IMIM in either U.S. dollars or Canadian dollars and available to Canada Company in Canadian dollars
and (c) tranche three in the amount of $175.0 million is available to IMI or IMIM and the Other
Subsidiaries in U.S. dollars, Canadian dollars, British pounds sterling, Euros and Australian dollars,
among others. The New Revolving Credit Facility terminates on June 27, 2016, at which point all
revolving credit loans under such facility become due. With respect to the New Term Loan Facility,
loan payments are required through maturity on June 27, 2016 in equal quarterly installments of the
aggregate annual amounts based upon the following percentage of the original principal amount in the
table below (except that each of the first three quarterly installments in the fifth year shall be 10% of
the original principal amount and the final quarterly installment in the fifth year shall be 35% of the
original principal):
Year Ended
Percentage
June 30, 2012 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
June 30, 2013 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
June 30, 2014 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
June 30, 2015 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
June 27, 2016 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
5%
5%
10%
15%
65%
The New Term Loan Facility may be prepaid without penalty or premium, in whole or in part, at
any time. IMI and IMIM guarantee the obligations of each of the subsidiary borrowers. The capital
stock or other equity interests of most of the U.S. subsidiaries, and up to 66% of the capital stock or
other equity interests of our first-tier foreign subsidiaries, are pledged to secure the New Credit
Agreement, together with all intercompany obligations of foreign subsidiaries owed to us or to one of
our U.S. subsidiary guarantors. The interest rate on borrowings under the New Credit Agreement
varies depending on our choice of interest rate and currency options, plus an applicable margin, which
varies based on certain financial ratios. Additionally, the New Credit Agreement requires the payment
of a commitment fee on the unused portion of the revolving credit facility, which fee ranges from
between 0.3% to 0.5% based on certain financial ratios, as well as fees associated with any outstanding
letters of credit. Proceeds from the New Credit Agreement are for general corporate purposes and
were used to repay the previous revolving credit and term loan facilities. We recorded a charge of
$1.8 million to other expense (income), net in the second quarter of 2011 related to the early
retirement of the previous revolving credit and term loan facilities, representing a write-off of deferred
financings costs. As of December 31, 2011, we had $96.0 million of outstanding borrowings under the
New Revolving Credit Facility, all of which was denominated in U.S. dollars; we also had various
outstanding letters of credit totaling $5.8 million. The remaining availability on December 31, 2011,
based on IMI’s leverage ratio, which is calculated based on the last 12 months’ earnings before interest,
taxes, depreciation and amortization (‘‘EBITDA’’), and other adjustments as defined in the New Credit
Agreement and current external debt, under the New Revolving Credit Facility was $623.2 million.
The interest rate in effect under the New Revolving Credit Facility and New Term Loan Facility was
4.0% and 2.3%, respectively, as of December 31, 2011.
The New Credit Agreement, our indentures and other agreements governing our indebtedness
contain certain restrictive financial and operating covenants, including covenants that restrict our ability
to complete acquisitions, pay cash dividends, incur indebtedness, make investments, sell assets and take
certain other corporate actions. The covenants do not contain a rating trigger. Therefore, a change in
our debt rating would not trigger a default under the New Credit Agreement, our indentures or other
agreements governing our indebtedness. The New Credit Agreement, as well as our indentures, use
EBITDA-based calculations as primary measures of financial performance, including leverage and fixed
62
charge coverage ratios. IMI’s revolving credit and term leverage ratio was 2.9 and 3.4 as of
December 31, 2010 and 2011, respectively, compared to a maximum allowable ratio of 5.5. Similarly,
our bond leverage ratio, per the indentures, was 3.4 and 3.9 as of December 31, 2010 and 2011,
respectively, compared to a maximum allowable ratio of 6.5. IMI’s revolving credit and term loan fixed
charge coverage ratio was 1.5 as of December 31, 2011, compared to a minimum allowable ratio of 1.2.
Noncompliance with these leverage and fixed charge coverage ratios would have a material adverse
effect on our financial condition and liquidity.
Our ability to pay interest on or to refinance our indebtedness depends on our future
performance, working capital levels and capital structure, which are subject to general economic,
financial, competitive, legislative, regulatory and other factors which may be beyond our control.
There can be no assurance that we will generate sufficient cash flow from our operations or that future
financings will be available on acceptable terms or in amounts sufficient to enable us to service or
refinance our indebtedness or to make necessary capital expenditures.
In January 2011, we redeemed the remaining $231.3 million aggregate principal amount
outstanding of our 73⁄4% Notes due 2015 at a redemption price of one thousand dollars for each one
thousand dollars of principal amount of notes redeemed, plus accrued and unpaid interest. We
recorded a gain to other expense (income), net of approximately $0.9 million in the first quarter of
2011 related to the early extinguishment of our 73⁄4% Notes due 2015 that were redeemed. This gain
consists of original issue premiums, net of deferred financing costs related to our 73⁄4% Notes due 2015
that were redeemed.
On June 2, 2011, we completed the sale of the Digital Business to Autonomy. Pursuant to the
Digital Sale Agreement, we received approximately $395.4 million in cash, consisting of the initial
purchase price of $380.0 million and a preliminary working capital adjustment of approximately
$15.4 million, which remains subject to a customary post-closing adjustment based on the amount of
working capital at closing. The purchase price for the Digital Sale will be increased on a
dollar-for-dollar basis if the working capital balance at the time of closing exceeds the target amount of
working capital as set forth in the Digital Sale Agreement and decreased on a dollar-for-dollar basis if
such closing working capital balance is less than the target amount. We and Autonomy are in
disagreement regarding the working capital adjustment in the Digital Sale Agreement. As a result, as
contemplated by the Digital Sale Agreement, the matter is being referred to an independent third party
accounting firm for determination of the appropriate adjustment. Transaction costs related to the
Digital Sale amounted to approximately $7.4 million. Additionally, $11.1 million of inducements are
payable to Autonomy and have been netted against the proceeds in calculating the gain on the Digital
Sale. We used the net proceeds received from the Digital Sale to pay down amounts outstanding under
our revolving credit facility and used $52.4 million of the net proceeds to fund cash taxes due as a
result of the Digital Sale.
In September 2011, we completed an underwritten public offering of $400.0 million in aggregate
principal amount of our 73⁄4% Notes due 2019, which were issued at 100% of par. Our net proceeds of
$394.0 million after paying the underwriters’ discounts and commissions, were used for general
corporate purposes, including funding a portion of the stockholder payout commitments we have made.
63
Contractual Obligations
The following table summarizes our contractual obligations as of December 31, 2011 and the
anticipated effect of these obligations on our liquidity in future years (in thousands):
Capital Lease Obligations . . . . . . . . . . .
Long-Term Debt Obligations (excluding
Capital Lease Obligations) . . . . . . . .
Interest Payments(1) . . . . . . . . . . . . . . .
Operating Lease Obligations(2)(3) . . . .
Purchase and Asset Retirement
Payments Due by Period
Total
Less than
1 Year
1–3 Years
3–5 Years
More than
5 Years
$ 207,300
$ 41,028
$
64,029
$
26,578
$
75,665
3,151,895
1,547,822
2,698,542
32,292
223,402
217,634
336,343
428,151
403,095
779,770
369,409
365,486
2,003,490
526,860
1,712,327
Obligations(4) . . . . . . . . . . . . . . . . . .
68,580
36,352
20,346
1,325
10,557
Total(3)(5) . . . . . . . . . . . . . . . . . . . . . .
$7,674,139
$550,708
$1,251,964
$1,542,568
$4,328,899
(1) Amounts include variable rate interest payments, which are calculated utilizing the applicable
interest rates as of December 31, 2011; see Note 4 to Notes to Consolidated Financial Statements.
Amounts also include interest on capital leases.
(2) Amounts are offset by sublease income of $10.6 million in total (including $2.3 million,
$3.6 million, $2.8 million and $1.9 million, in less than 1 year, 1–3 years, 3–5 years and more than
5 years, respectively).
(3) Includes aggregate amounts related to our Italian Business of $2.6 million, $3.7 million,
$3.5 million, $8.2 million ($18.0 million in total) in less than 1 year, 1–3 years, 3–5 years and more
than 5 years, respectively.
(4) In connection with some of our acquisitions, we have potential earn-out obligations that may be
payable in the event businesses we acquired meet certain financial objectives. These payments are
based on the future results of these operations, and our estimate of the maximum contingent
earn-out payments we may be required to make under all such agreements as of December 31,
2011 is approximately $4.5 million.
(5) The table above excludes $31.4 million in uncertain tax positions as we are unable to make
reasonably reliable estimates of the period of cash settlement, if any, with the respective taxing
authorities.
We expect to meet our cash flow requirements for the next twelve months from cash generated
from operations, existing cash, cash equivalents, borrowings under the New Credit Agreement and
other financings, which may include secured credit facilities, securitizations and mortgage or capital
lease financings. We expect to meet our long-term cash flow requirements using the same means
described above, as well as the potential issuance of debt or equity securities as we deem appropriate.
Off-Balance Sheet Arrangements
We have no off-balance sheet arrangements as defined in Regulation S-K Item 303(a)(4)(ii).
Net Operating Losses and Foreign Tax Credit Carryforwards
We have federal net operating loss carryforwards which begin to expire in 2020 through 2025 of
$28.2 million ($9.9 million, tax effected) at December 31, 2011 to reduce future federal taxable income.
We have an asset for state net operating losses of $7.9 million (net of federal tax benefit), which begins
64
to expire in 2012 through 2025, subject to a valuation allowance of approximately 99%. We have assets
for foreign net operating losses of $40.3 million, with various expiration dates, subject to a valuation
allowance of approximately 69%. We also have foreign tax credits of $56.6 million, which begin to
expire in 2014 through 2019, subject to a valuation allowance of approximately 65%. U.S. legislative
changes in 2010 reduced the expected utilization of foreign tax credits which resulted in the
requirement for a valuation allowance.
Inflation
Certain of our expenses, such as wages and benefits, insurance, occupancy costs and equipment
repair and replacement, are subject to normal inflationary pressures. Although to date we have been
able to offset inflationary cost increases through increased operating efficiencies and the negotiation of
favorable long-term real estate leases, we can give no assurance that we will be able to offset any future
inflationary cost increases through similar efficiencies, leases or increased storage or service charges.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk.
Market Risk
Financial instruments that potentially subject us to market risk consist principally of cash and cash
equivalents (including money market funds and time deposits), restricted cash (primarily U.S.
Treasuries) and accounts receivable. The only significant concentrations of liquid investments as of
December 31, 2011 relate to cash and cash equivalents and restricted cash held on deposit with five
global banks and one ‘‘Triple A’’ rated money market fund which we consider to be large, highly-rated
investment-grade institutions. As per our risk management investment policy, we limit exposure to
concentration of credit risk by limiting the amount invested in any one mutual fund or financial
institution to a maximum of $50.0 million. As of December 31, 2011, our cash and cash equivalents and
restricted cash balance was $215.0 million, including a money market fund and time deposits amounting
to $181.8 million. A substantial portion of the money market fund is invested in U.S. Treasuries.
Interest Rate Risk
Given the recurring nature of our revenues and the long-term nature of our asset base, we have
the ability and the preference to use long-term, fixed interest rate debt to finance our business, thereby
helping to preserve our long-term returns on invested capital. We target approximately 75% of our debt
portfolio to be fixed with respect to interest rates. Occasionally, we will use interest rate swaps as a tool
to maintain our targeted level of fixed rate debt. See Notes 3 and 4 to Notes to Consolidated Financial
Statements.
As of December 31, 2011, we had $586.7 million of variable rate debt outstanding with a weighted
average variable interest rate of approximately 2.6%, and $2,766.9 million of fixed rate debt
outstanding. As of December 31, 2011, approximately 82.5% of our total debt outstanding was fixed.
If the weighted average variable interest rate on our variable rate debt had increased by 1%, our net
income for the year ended December 31, 2011 would have been reduced by approximately $3.4 million.
See Note 4 to Notes to Consolidated Financial Statements for a discussion of our long-term
indebtedness, including the fair values of such indebtedness as of December 31, 2011.
Currency Risk
Our investments in IME, Canada Company, Iron Mountain Mexico, SA de RL de CV, Iron
Mountain South America, Ltd., Iron Mountain Australia Pty Ltd. and our other international
investments may be subject to risks and uncertainties related to fluctuations in currency valuation.
Our reporting currency is the U.S. dollar. However, our international revenues and expenses are
generated in the currencies of the countries in which we operate, primarily the Euro, Canadian dollar
65
and British pound sterling. Declines in the value of the local currencies in which we are paid relative to
the U.S. dollar will cause revenues in U.S. dollar terms to decrease and dollar-denominated liabilities
to increase in local currency.
The impact of currency fluctuations on our earnings is mitigated significantly by the fact that most
operating and other expenses are also incurred and paid in the local currency. We also have several
intercompany obligations between our foreign subsidiaries and IMI and our U.S.-based subsidiaries.
In addition, Iron Mountain Switzerland GmbH, our foreign subsidiaries and IME also have
intercompany obligations between them. These intercompany obligations are primarily denominated in
the local currency of the foreign subsidiary.
We have adopted and implemented a number of strategies to mitigate the risks associated with
fluctuations in currency valuations. One strategy is to finance certain of our international subsidiaries
with debt that is denominated in local currencies, thereby providing a natural hedge. In determining the
amount of any such financing, we take into account local tax strategies, among other factors. Another
strategy we utilize is for IMI or IMIM to borrow in foreign currencies to hedge our intercompany
financing activities. In addition, on occasion, we enter into currency swaps to temporarily or
permanently hedge an overseas investment, such as a major acquisition, to lock in certain transaction
economics. We have implemented these strategies for our foreign investments in the United Kingdom,
Continental Europe and Canada. Specifically, through our 150.0 million British pounds sterling
denominated 71⁄4% Senior Subordinated Notes due 2014 and our 255.0 million 63⁄4% Euro Senior
Subordinated Notes due 2018, we effectively hedge most of our outstanding intercompany loans
denominated in British pounds sterling and Euros. Canada Company has financed its capital needs
through direct borrowings in Canadian dollars under the Credit Agreement and its 175.0 million CAD
denominated 71⁄2% Senior Subordinated Notes due 2017. This creates a tax efficient natural currency
hedge. In the third quarter of 2007, we designated a portion of our 63⁄4% Euro Senior Subordinated
Notes due 2018 issued by IMI as a hedge of net investment of certain of our Euro denominated
subsidiaries. As a result, we recorded $8.6 million ($5.4 million, net of tax) of foreign exchange gains
related to the ‘‘marking-to-market’’ of such debt to currency translation adjustments which is a
component of accumulated other comprehensive items, net included in equity for the year ended
December 31, 2011. As of December 31, 2011, net gains of $13.4 million are recorded in accumulated
other comprehensive items, net associated with this net investment hedge.
We have also entered into a number of separate forward contracts to hedge our exposures to
British pounds sterling and Australian dollars. As of December 31, 2011, we had an outstanding
forward contract to purchase $195.6 million U.S. dollars and sell 125.0 million British pounds sterling
to hedge our intercompany exposures with IME. As of December 31, 2011, we had an outstanding
forward contract to purchase $75.1 million U.S. dollars and sell 73.0 million Australian dollars to hedge
our intercompany exposures with our Australian subsidiary. At the maturity of the forward contracts,
we may enter into new forward contracts to hedge movements in the underlying currencies. At the time
of settlement, we either pay or receive the net settlement amount from the forward contract and
recognize this amount in other expense (income), net in the accompanying statement of operations as a
realized foreign exchange gain or loss. We have not designated these forward contracts as hedges.
At the end of each month, we mark the outstanding forward contracts to market and record an
unrealized foreign exchange gain or loss for the mark-to-market valuation. During the year ended
December 31, 2011, there was $1.1 million in net cash disbursements included in cash from operating
activities from continuing operations related to settlements associated with these foreign currency
forward contracts. We recorded net gains in connection with these forward contracts of $1.2 million
(including an unrealized foreign exchange gain of $2.0 million related to certain British pound sterling
forward contracts and an unrealized foreign exchange gain of $0.8 million related to the Australian
dollar forward contract offset by an unrealized foreign exchange loss of $0.4 million related to a British
pound sterling forward contract) in other expense (income), net in the accompanying statement of
66
operations as of December 31, 2011, respectively. As of December 31, 2011, except as noted above, our
currency exposures to intercompany balances are not hedged.
The impact of devaluation or depreciating currency on an entity depends on the residual effect on
the local economy and the ability of an entity to raise prices and/or reduce expenses. Due to our
constantly changing currency exposure and the potential substantial volatility of currency exchange
rates, we cannot predict the effect of exchange fluctuations on our business. The effect of a change in
foreign exchange rates on our net investment in foreign subsidiaries is reflected in the ‘‘Accumulated
Other Comprehensive Items, net’’ component of equity. A 10% depreciation in year-end 2011
functional currencies, relative to the U.S. dollar, would result in a reduction in our equity of
approximately $79.8 million.
Item 8. Financial Statements and Supplementary Data.
The information required by this item is included in Item 15(a) of this Annual Report on
Form 10-K.
Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure.
None.
Item 9A. Controls and Procedures.
Disclosure Controls and Procedures
The term ‘‘disclosure controls and procedures’’ is defined in Rules 13a-15(e) and 15d-15(e) of the
Exchange Act. These rules refer to the controls and other procedures of a company that are designed
to ensure that information is recorded, processed, summarized and communicated to management,
including its principal executive and principal financial officers, as appropriate to allow timely decisions
regarding what is required to be disclosed by a company in the reports that it files under the Exchange
Act. As of December 31, 2011 (the ‘‘Evaluation Date’’), we carried out an evaluation, under the
supervision and with the participation of our management, including our chief executive officer and
chief financial officer, of the effectiveness of our disclosure controls and procedures. Based upon that
evaluation, our chief executive officer and chief financial officer concluded that, as of the Evaluation
Date, our disclosure controls and procedures were not effective due to a material weakness in our
internal control over identification and monitoring of price reduction clauses in certain U.S.
government customer contracts as described below.
Management’s Report on Internal Control over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over
financial reporting, as such term is defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act. Due
to their inherent limitations, internal control over financial reporting may not prevent or detect
misstatements. Projections of any evaluation of effectiveness to future periods are subject to the risks
that controls may become inadequate because of changes in conditions or that the degree of
compliance with policies or procedures may deteriorate. Under the supervision and with the
participation of our management, including our chief executive officer and chief financial officer, we
conducted an evaluation of the effectiveness of our internal control over financial reporting based on
the framework in Internal Control—Integrated Framework issued by the Committee of Sponsoring
Organizations of the Treadway Commission. Based on this evaluation, our management concluded that
our internal control over financial reporting was not effective as of December 31, 2011 because of the
material weakness described below. A material weakness is a deficiency, or combination of deficiencies,
in internal control over financial reporting, such that there is a reasonable possibility that a material
misstatement of our annual or interim consolidated financial statements will not be prevented or
67
detected on a timely basis. In our assessment of the effectiveness of internal control over financial
reporting at December 31, 2011, we identified the following material weakness:
We did not maintain adequate and effective internal control in the area of identifying and
monitoring price reduction clauses in certain U.S. government customer contracts. In 2011, we
discovered, in conjunction with a government contract renewal, as more fully discussed in Note 10.h. to
Notes to Consolidated Financial Statements, that we did not have a control in place to appropriately
identify and monitor price reduction clauses of certain U.S. government customer contracts. The
material weakness contributed to management’s conclusion that an immaterial restatement of our
consolidated financial statements was appropriate, as more fully discussed in Note 2.y. to Notes to
Consolidated Financial Statements. Total revenue under U.S. government contracts for the year ended
December 31, 2011 was less than $75 million.
Remediation of Material Weakness in Internal Control over Financial Reporting
To address the material weakness in our internal control over financial reporting described above,
we performed additional analyses and other post-closing procedures designed to provide reasonable
assurance that our consolidated financial statements were prepared in accordance with GAAP. As a
result of these procedures, we believe that the consolidated financial statements included in this Annual
Report on Form 10-K as of and for the year ended December 31, 2011 fairly present, in all material
respects, our financial condition, results of operations and cash flow for the periods presented, in
conformity with GAAP. We will continue to take appropriate and reasonable steps to make necessary
improvements to our internal control over financial reporting including:
(cid:127) Hiring a government contract compliance specialist.
(cid:127) Developing and implementing a process to appropriately identify government contracts with
price reduction clauses.
(cid:127) Developing and implementing procedures to track and monitor benchmark pricing and
calculating any related price reductions under these contracts.
We have begun our remediation efforts and we expect these efforts, which include design,
implementation and testing, to continue throughout fiscal year 2012. We believe that the remediation
measures described above will strengthen our internal control over financial reporting and remediate
the material weakness we have identified. We are committed to continuing to improve our internal
control processes and will continue to diligently review our financial controls and procedures.
The effectiveness of our internal control over financial reporting has been audited by Deloitte &
Touche LLP, an independent registered public accounting firm, as stated in their report which is
included in this Annual Report on Form 10-K.
68
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Stockholders of Iron Mountain Incorporated
We have audited the internal control over financial reporting of Iron Mountain Incorporated and
subsidiaries (the ‘‘Company’’) as of December 31, 2011, based on criteria established in Internal
Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway
Commission. The Company’s management is responsible for maintaining effective internal control over
financial reporting and for its assessment of the effectiveness of internal control over financial
reporting, included in the accompanying Management’s Report on Internal Control over Financial
Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial
reporting based on our audit.
We conducted our audit in accordance with the standards of the Public Company Accounting
Oversight Board (United States). Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether effective internal control over financial reporting was maintained
in all material respects. Our audit included obtaining an understanding of internal control over
financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design
and operating effectiveness of internal control based on that risk, and performing such other
procedures as we considered necessary in the circumstances. We believe that our audit provides a
reasonable basis for our opinion.
A company’s internal control over financial reporting is a process designed by, or under the
supervision of, the company’s principal executive and principal financial officers, or persons performing
similar functions, and effected by the company’s board of directors, management, and other personnel
to provide reasonable assurance regarding the reliability of financial reporting and the preparation of
financial statements for external purposes in accordance with generally accepted accounting principles.
A company’s internal control over financial reporting includes those policies and procedures that
(1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the
transactions and dispositions of the assets of the company; (2) provide reasonable assurance that
transactions are recorded as necessary to permit preparation of financial statements in accordance with
generally accepted accounting principles, and that receipts and expenditures of the company are being
made only in accordance with authorizations of management and directors of the company; and
(3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition,
use, or disposition of the company’s assets that could have a material effect on the financial statements.
Because of the inherent limitations of internal control over financial reporting, including the
possibility of collusion or improper management override of controls, material misstatements due to
error or fraud may not be prevented or detected on a timely basis. Also, projections of any evaluation
of the effectiveness of the internal control over financial reporting to future periods are subject to the
risk that the controls may become inadequate because of changes in conditions, or that the degree of
compliance with the policies or procedures may deteriorate.
A material weakness is a deficiency, or a combination of deficiencies, in internal control over
financial reporting, such that there is a reasonable possibility that a material misstatement of a
company’s annual or interim financial statements will not be prevented or detected on a timely basis.
The following material weakness has been identified and included in management’s assessment: the
Company did not maintain adequate and effective internal control in the area of identifying and
monitoring price reduction clauses in certain U.S. government customer contracts. This material
weakness was considered in determining the nature, timing, and extent of audit tests applied in our
audit of the Company’s consolidated financial statements as of and for the year ended December 31,
2011 and this report does not affect our report on such financial statements.
69
In our opinion, because of the effect of the material weakness identified above on the achievement
of the objectives of the control criteria, the Company has not maintained effective internal control over
financial reporting as of December 31, 2011, based on the criteria established in Internal Control—
Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway
Commission.
We have also audited, in accordance with the standards of the Public Company Accounting
Oversight Board (United States), the consolidated financial statements as of and for the year ended
December 31, 2011 of the Company and our report dated February 28, 2012 expressed an unqualified
opinion on those financial statements.
/s/ DELOITTE & TOUCHE LLP
Boston, Massachusetts
February 28, 2012
70
Changes in Internal Control over Financial Reporting
There have been no changes in our internal control over financial reporting during the quarter
ended December 31, 2011 that have materially affected, or are reasonably likely to materially affect,
our internal control over financial reporting.
Item 9B. Other Information.
None.
71
PART III
Item 10. Directors, Executive Officers and Corporate Governance.
The information required by Item 10 is incorporated by reference to our Proxy Statement.
Item 11. Executive Compensation.
The information required by Item 11 is incorporated by reference to our Proxy Statement.
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder
Matters.
The information required by Item 12 is incorporated by reference to our Proxy Statement.
Item 13. Certain Relationships and Related Transactions, and Director Independence.
The information required by Item 13 is incorporated by reference to our Proxy Statement.
Item 14. Principal Accountant Fees and Services.
The information required by Item 14 is incorporated by reference to our Proxy Statement.
Item 15. Exhibits and Financial Statement Schedules.
PART IV
(a) Financial Statements and Financial Statement Schedules filed as part of this report:
A. Iron Mountain Incorporated
Report of Independent Registered Public Accounting Firm . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Consolidated Balance Sheets, December 31, 2010 and 2011 . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Consolidated Statements of Operations, Years Ended December 31, 2009, 2010 and 2011 . . . . . .
Consolidated Statements of Comprehensive Income (Loss), Years Ended December 31, 2009,
2010 and 2011 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Consolidated Statements of Equity, Years Ended December 31, 2009, 2010 and 2011 . . . . . . . . .
Consolidated Statements of Cash Flows, Years Ended December 31, 2009, 2010 and 2011 . . . . . .
Notes to Consolidated Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Page
73
74
75
76
77
78
79
(b) Exhibits filed as part of this report: As listed in the Exhibit Index following the signature page hereof.
72
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Stockholders of Iron Mountain Incorporated
We have audited the accompanying consolidated balance sheets of Iron Mountain Incorporated
and subsidiaries (the ‘‘Company’’) as of December 31, 2011 and 2010, and the related consolidated
statements of operations, comprehensive income (loss), equity and cash flows for each of the three
years in the period ended December 31, 2011. These financial statements are the responsibility of the
Company’s management. Our responsibility is to express an opinion on these financial statements based
on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting
Oversight Board (United States). Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the
financial statements. An audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in all material respects, the
financial position of Iron Mountain Incorporated and subsidiaries as of December 31, 2011 and 2010,
and the results of their operations and their cash flows for each of the three years in the period ended
December 31, 2011, in conformity with accounting principles generally accepted in the United States of
America.
We have also audited, in accordance with the standards of the Public Company Accounting
Oversight Board (United States), the Company’s internal control over financial reporting as of
December 31, 2011, based on the criteria established in Internal Control—Integrated Framework issued
by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated
February 28, 2012 expressed an adverse opinion on the Company’s internal control over financial
reporting because of a material weakness.
/s/ DELOITTE & TOUCHE LLP
Boston, Massachusetts
February 28, 2012
73
IRON MOUNTAIN INCORPORATED
CONSOLIDATED BALANCE SHEETS
(In thousands, except share and per share data)
ASSETS
Current Assets:
Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Restricted cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accounts receivable (less allowances of $20,747 and $23,277 as of December 31,
2010 and 2011, respectively) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Prepaid expenses and other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Assets of discontinued operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
December 31,
2010
2011
$
258,693
35,105
$
179,845
35,110
524,326
44,225
136,905
213,208
543,467
43,235
105,537
7,256
914,450
Total Current Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1,212,462
Property, Plant and Equipment:
Property, plant and equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Less—Accumulated depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
4,161,410
(1,693,166)
4,232,594
(1,825,511)
Property, Plant and Equipment, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2,468,244
2,407,083
Other Assets, net:
Goodwill . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Customer relationships and acquisition costs . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred financing costs
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Assets of discontinued operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total Other Assets, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2,279,561
379,808
29,146
27,686
19,486
2,735,687
2,254,268
410,149
35,798
19,510
—
2,719,725
Total Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 6,416,393
$ 6,041,258
LIABILITIES AND EQUITY
Current Liabilities:
Current portion of long-term debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accrued expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Liabilities of discontinued operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
Total Current Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Long-term Debt, net of current portion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other Long-term Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred Rent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred Income Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Liabilities of discontinued operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Commitments and Contingencies (see Note 10)
Equity:
Iron Mountain Incorporated Stockholders’ Equity:
Preferred stock (par value $0.01; authorized 10,000,000 shares; none issued and
96,081
143,765
382,670
190,713
61,474
874,703
2,912,126
86,605
95,860
492,464
1,770
$
73,320
156,381
418,831
197,181
3,317
849,030
3,280,268
53,169
97,177
507,358
—
outstanding)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
—
—
Common stock (par value $0.01; authorized 400,000,000 shares; issued and
outstanding 200,064,066 shares and 172,140,966 shares as of December 31,
2010 and 2011, respectively) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Additional paid-in capital
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Retained earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accumulated other comprehensive items, net . . . . . . . . . . . . . . . . . . . . . . . . . .
Total Iron Mountain Incorporated Stockholders’ Equity . . . . . . . . . . . . . . . . .
Noncontrolling Interests . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2,001
1,228,655
685,310
29,482
1,945,448
7,417
1,721
343,603
902,567
(2,203)
1,245,688
8,568
Total Equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1,952,865
1,254,256
Total Liabilities and Equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 6,416,393
$ 6,041,258
The accompanying notes are an integral part of these consolidated financial statements.
74
IRON MOUNTAIN INCORPORATED
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
Year Ended December 31,
2009
2010
2011
Revenues:
Storage . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Service . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$1,533,792
1,240,592
$1,598,718
1,293,631
$1,682,990
1,331,713
Total Revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2,774,384
2,892,349
3,014,703
Operating Expenses:
Cost of sales (excluding depreciation and amortization) . . . . .
Selling, general and administrative . . . . . . . . . . . . . . . . . . . . .
Depreciation and amortization . . . . . . . . . . . . . . . . . . . . . . .
Intangible Impairments . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Loss (Gain) on disposal/write-down of property, plant and
equipment, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total Operating Expenses . . . . . . . . . . . . . . . . . . . . . . . . .
Operating Income (Loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest Expense, Net (includes Interest Income of $2,563,
$1,785 and $2,313 in 2009, 2010 and 2011, respectively) . . . . .
Other (Income) Expense, Net . . . . . . . . . . . . . . . . . . . . . . . . . .
Income (Loss) from Continuing Operations
Before Provision (Benefit) for Income Taxes . . . . . . . . . .
Provision (Benefit) for Income Taxes . . . . . . . . . . . . . . . . . . . .
Income (Loss) from Continuing Operations . . . . . . . . . . . . . . . .
Income (Loss) from Discontinued Operations, Net of Tax . . . . .
Gain (Loss) on Sale of Discontinued Operations, Net of Tax . . .
Net Income (Loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Less: Net Income (Loss) Attributable to Noncontrolling
1,201,871
749,934
277,186
—
1,192,862
772,811
304,205
85,909
1,245,200
834,591
319,499
46,500
168
(10,987)
(2,286)
2,229,159
545,225
2,344,800
547,549
2,443,504
571,199
212,545
(12,599)
204,559
8,768
205,256
13,043
345,279
113,762
231,517
(12,138)
—
219,379
334,222
167,483
166,739
(219,417)
—
352,900
106,488
246,412
(47,439)
200,619
(52,678)
399,592
Interests . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1,429
4,908
4,054
Net Income (Loss) Attributable to Iron Mountain Incorporated .
$ 217,950
$ (57,586) $ 395,538
Earnings (Losses) per Share—Basic:
Income (Loss) from Continuing Operations . . . . . . . . . . . . . . . .
Total Income (Loss) from Discontinued Operations . . . . . . . . . .
Net Income (Loss) Attributable to Iron Mountain Incorporated .
Earnings (Losses) per Share—Diluted:
Income (Loss) from Continuing Operations . . . . . . . . . . . . . . . .
Total Income (Loss) from Discontinued Operations . . . . . . . . . .
Net Income (Loss) Attributable to Iron Mountain Incorporated .
$
$
$
$
$
$
1.14
$
0.83
$
(0.06) $
(1.09) $
1.07
1.13
$
$
(0.29) $
0.83
$
(0.06) $
(1.09) $
1.07
$
(0.29) $
1.27
0.79
2.03
1.26
0.78
2.02
Weighted Average Common Shares Outstanding—Basic . . . . . . .
Weighted Average Common Shares Outstanding—Diluted . . . . .
202,812
204,271
201,991
201,991
194,777
195,938
Dividends Declared per Common Share . . . . . . . . . . . . . . . . . .
$
— $
0.3750
$
0.9375
The accompanying notes are an integral part of these consolidated financial statements.
75
IRON MOUNTAIN INCORPORATED
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(In thousands)
Net Income (Loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other Comprehensive Income (Loss):
Foreign Currency Translation Adjustments . . . . . . . . . . . . . . . . . . .
Total Other Comprehensive Income (Loss) . . . . . . . . . . . . . . . . . . . .
Year Ended December 31,
2009
2010
2011
$219,379
$(52,678) $399,592
69,455
69,455
2,288
2,288
(32,616)
(32,616)
Comprehensive Income (Loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
288,834
(50,390)
366,976
Comprehensive Income (Loss) Attributable to Noncontrolling
Interests . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2,008
5,375
3,123
Comprehensive Income (Loss) Attributable to Iron Mountain
Incorporated . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$286,826
$(55,765) $363,853
The accompanying notes are an integral part of these consolidated financial statements.
76
IRON MOUNTAIN INCORPORATED
CONSOLIDATED STATEMENTS OF EQUITY
(In thousands, except share data)
Iron Mountain Incorporated Stockholders’ Equity
Total
Comprehensive
Income (Loss)
Common Stock
Voting
Shares
Amounts
Additional
Paid-in
Capital
Accumulated
Other
Retained Comprehensive Noncontrolling
Earnings
Items, Net
Interests
$
—
201,931,332
$2,019
$1,250,064 $ 600,353
$(41,215)
$ 3,548
—
1,615,425
69,455
219,379
$288,834
—
—
—
—
—
16
—
—
—
—
—
48,593
—
—
—
—
— 217,950
68,876
—
—
—
—
—
—
—
—
—
—
2,150,760
$
—
203,546,757
2,035
1,298,657
818,303
27,661
Balance, December 31, 2008 . . . . . . . . . $1,814,769
Issuance of shares under employee stock
purchase plan and option plans and
stock-based compensation, including tax
benefit of $5,532 . . . . . . . . . . . . . .
48,609
Comprehensive Income (Loss):
. . . . .
Currency translation adjustment
Net income (loss) . . . . . . . . . . . . . .
69,455
219,379
Comprehensive Income (Loss)
. . . . . . .
Noncontrolling interests equity
contributions . . . . . . . . . . . . . . . . .
. . . . .
Noncontrolling interests dividends
578
(2,030)
Balance, December 31, 2009 . . . . . . . . .
Issuance of shares under employee stock
purchase plan and option plans and
stock-based compensation, including tax
benefit of $2,252 . . . . . . . . . . . . . .
Stock options issued in connection with
acquisition . . . . . . . . . . . . . . . . . .
Stock repurchases . . . . . . . . . . . . . . .
Parent cash dividends declared . . . . . . .
Comprehensive Income (Loss):
. . . . .
Currency translation adjustment
Net income (loss) . . . . . . . . . . . . . .
2,288
(52,678)
Comprehensive Income (Loss)
. . . . . . .
2,288
(52,678)
$ (50,390)
Noncontrolling interests dividends
. . . . .
(2,062)
—
—
—
—
39,530
1,997
(111,563)
(75,407)
—
—
—
—
1,281,332
—
(4,764,023)
—
13
—
(47)
—
—
—
—
—
39,517
—
1,997
(111,516)
—
—
— (75,407)
—
—
— (57,586)
—
—
—
—
—
—
—
—
1,821
—
—
—
Balance, December 31, 2010 . . . . . . . . .
Issuance of shares under employee stock
purchase plan and option plans and
stock-based compensation, including tax
benefit of $919 . . . . . . . . . . . . . . .
Stock repurchases . . . . . . . . . . . . . . .
Parent cash dividends declared . . . . . . .
Comprehensive Income (Loss):
1,952,865
$
—
200,064,066
2,001
1,228,655
685,310
29,482
102,986
(988,318)
(178,281)
—
—
—
3,930,318
(31,853,418)
—
39
(319)
—
102,947
(987,999)
—
—
— (178,281)
—
—
—
Currency translation adjustment
. . . . .
Net income (loss) . . . . . . . . . . . . . .
(32,616)
399,592
Comprehensive Income (Loss)
. . . . . . .
(32,616)
399,592
$366,976
Noncontrolling interests equity
contributions . . . . . . . . . . . . . . . . .
. . . . .
Noncontrolling interests dividends
215
(2,187)
—
—
—
—
—
—
—
—
—
—
—
—
— 395,538
(31,685)
—
—
—
—
—
—
—
—
—
—
Balance, December 31, 2011 . . . . . . . . . $1,254,256
172,140,966
$1,721
$ 343,603 $ 902,567
$ (2,203)
$ 8,568
The accompanying notes are an integral part of these consolidated financial statements.
77
—
579
1,429
—
578
(2,030)
4,104
—
—
—
—
467
4,908
—
(2,062)
7,417
—
—
—
(931)
4,054
—
215
(2,187)
IRON MOUNTAIN INCORPORATED
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
Year Ended December 31,
2009
2010
2011
Cash Flows from Operating Activities:
Net income (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Loss (Income) from discontinued operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(Gain) Loss on sale of discontinued operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 219,379
12,138
—
$ (52,678)
219,417
—
$
399,592
47,439
(200,619)
Adjustments to reconcile net income (loss) to cash flows from operating activities:
Depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Amortization (includes deferred financing costs and bond discount of $5,117, $5,357 and $6,318 in
2009, 2010 and 2011, respectively) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Intangible impairments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Stock-based compensation expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Provision for deferred income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Loss (Gain) on early extinguishment of debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Loss (Gain) on disposal/write-down of property, plant and equipment, net . . . . . . . . . . . . . . .
Foreign currency transactions and other, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Changes in Assets and Liabilities (exclusive of acquisitions):
Accounts receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Prepaid expenses and other current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accrued expenses, deferred revenue and other current liabilities . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other assets and long-term liabilities
Cash Flows from Operating Activities—Continuing Operations . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . .
Cash Flows from Operating Activities—Discontinued Operations
Cash Flows from Operating Activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cash Flows from Investing Activities:
Capital expenditures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cash paid for acquisitions, net of cash acquired . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Investment in restricted cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Additions to customer relationship and acquisition costs . . . . . . . . . . . . . . . . . . . . . . . . . .
Investment in joint ventures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Proceeds from sales of property and equipment and other, net . . . . . . . . . . . . . . . . . . . . . .
Cash Flows from Investing Activities—Continuing Operations
. . . . . . . . . . . . . . . . . . . . . .
Cash Flows from Investing Activities—Discontinued Operations . . . . . . . . . . . . . . . . . . . . .
253,061
278,760
290,638
29,242
—
15,210
30,335
3,031
168
(12,690)
(14,897)
(22,052)
10,180
45,200
18,265
586,570
30,341
616,911
(287,917)
(1,518)
—
(10,741)
(3,114)
4,591
(298,699)
(25,367)
30,802
85,909
17,274
37,666
1,792
(10,987)
18,043
11,793
(8,811)
(547)
(38,072)
12,868
603,229
21,911
625,140
(258,849)
(13,841)
(35,102)
(13,202)
—
22,536
(298,458)
(134,212)
35,179
46,500
17,250
3,389
993
(2,286)
24,298
(20,799)
5,299
7,069
15,629
(6,057)
663,514
(48,076)
615,438
(209,155)
(75,246)
(5)
(21,703)
(335)
4,231
(302,213)
380,721
Cash Flows from Investing Activities
Cash Flows from Financing Activities:
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(324,066)
(432,670)
78,508
Repayment of revolving credit and term loan facilities and other debt . . . . . . . . . . . . . . . . . .
Proceeds from revolving credit and term loan facilities and other debt
. . . . . . . . . . . . . . . . .
Early retirement of senior subordinated notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net proceeds from sales of senior subordinated notes
. . . . . . . . . . . . . . . . . . . . . . . . . . .
Debt financing (repayment to) and equity contribution from (distribution to) noncontrolling
interests, net
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Stock repurchases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Parent cash dividends
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Proceeds from exercise of stock options and employee stock purchase plan . . . . . . . . . . . . . .
Excess tax benefits from stock-based compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Payment of debt financing costs
Cash Flows from Financing Activities—Continuing Operations . . . . . . . . . . . . . . . . . . . . . .
Cash Flows from Financing Activities—Discontinued Operations . . . . . . . . . . . . . . . . . . . . .
Cash Flows from Financing Activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Effect of Exchange Rates on Cash and Cash Equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . .
Increase (Decrease) in Cash and Cash Equivalents
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cash and Cash Equivalents, Beginning of Period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(283,318)
33,944
(447,874)
539,688
1,064
—
—
24,233
5,532
(1,555)
(128,286)
(1,406)
(129,692)
5,133
168,286
278,370
(101,884)
53,567
(202,584)
—
169
(111,563)
(37,893)
18,225
2,252
—
(379,711)
(1,523)
(381,234)
801
(187,963)
446,656
Cash and Cash Equivalents, End of Period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 446,656
$ 258,693
Supplemental Information:
Cash Paid for Interest
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 216,673
$ 226,463
Cash Paid for Income Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 87,062
$ 139,072
Non-Cash Investing and Financing Activities:
Capital Leases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 72,120
$ 30,367
Accrued Capital Expenditures
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 53,701
$ 41,222
(2,017,174)
2,170,979
(231,255)
394,000
698
(984,953)
(172,616)
85,742
919
(9,010)
(762,670)
(1,138)
(763,808)
(8,986)
(78,848)
258,693
179,845
203,035
147,998
30,090
43,696
43,180
$
$
$
$
$
$
Dividends Payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Unsettled Purchases of Parent Common Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
$
— $ 37,514
— $
— $
3,364
The accompanying notes are an integral part of these consolidated financial statements.
78
IRON MOUNTAIN INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2011
(In thousands, except share and per share data)
1. Nature of Business
The accompanying financial statements represent the consolidated accounts of Iron Mountain
Incorporated, a Delaware corporation (‘‘IMI’’), and its subsidiaries. We are a global full-service
provider of information management and related services for all media in various locations throughout
North America, Europe, Latin America and Asia Pacific. We have a diversified customer base
comprised of commercial, legal, banking, health care, accounting, insurance, entertainment and
government organizations.
In August 2010, IMI divested the domain name management product line of our digital business
(the ‘‘Domain Name Product Line’’). On June 2, 2011, IMI completed the sale (the ‘‘Digital Sale’’) of
our online backup and recovery, digital archiving and eDiscovery solutions businesses of our digital
business (the ‘‘Digital Business’’) to Autonomy Corporation plc, a corporation formed under the laws
of England and Wales (‘‘Autonomy’’), pursuant to a purchase and sale agreement dated as of May 15,
2011 among IMI, certain subsidiaries of IMI and Autonomy (the ‘‘Digital Sale Agreement’’). The
financial position, operating results and cash flows of the Domain Name Product Line and the Digital
Business, for all periods presented, including the gains on the sales, have been reported as discontinued
operations for financial reporting purposes. Additionally, on October 3, 2011, we sold our records
management business in New Zealand (the ‘‘New Zealand Business’’), and in December 2011, we
committed to a plan to sell our records management business in Italy (the ‘‘Italian Business’’). The
financial position, operating results and cash flows of the New Zealand and Italian Businesses,
including the gain on the sale of the New Zealand Business, for all periods presented, have been
reported as discontinued operations for financial reporting purposes. See Note 14 for a further
discussion of these events.
2. Summary of Significant Accounting Policies
a.
Principles of Consolidation and Change in Accounting Principle
The accompanying financial statements reflect our financial position, results of operations and cash
flows on a consolidated basis. Prior to January 1, 2010, the financial position and results of operations
of the operating subsidiaries of Iron Mountain Europe (Group) Limited (collectively referred to as
‘‘IME’’), our European business, were consolidated based on IME’s fiscal year ended October 31.
Effective January 1, 2010, we changed the fiscal year-end (and the reporting period for consolidation
purposes) of IME to coincide with IMI’s fiscal year-end of December 31. We believe that the change in
accounting principle related to the elimination of the two-month reporting lag for IME is preferable
because it results in more contemporaneous reporting of events and results related to IME. In
accordance with applicable accounting literature, a change in subsidiary year-end is treated as a change
in accounting principle and requires retrospective application. The impact of the change was not
material to the results of operations for the previously reported annual and interim periods prior to
January 1, 2010, and, thus, those results have not been revised. There is, however, a charge of $4,711
recorded to other expense (income), net in the year ended December 31, 2010 to recognize the
immaterial difference arising from the change. Had the annual financial statements been revised,
operating income (loss), income (loss) from continuing operations before provision (benefit) for income
taxes and net income (loss) attributable to Iron Mountain Incorporated in calendar 2009 would have
been increased by $3,714, $7,041 and $4,957, respectively. In addition, revenue, operating income (loss),
79
IRON MOUNTAIN INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
DECEMBER 31, 2011
(In thousands, except share and per share data)
2. Summary of Significant Accounting Policies (Continued)
income (loss) from continuing operations before provision (benefit) for income taxes and net income
(loss) attributable to Iron Mountain Incorporated for the year ended December 31, 2010 would not
have changed materially had we not eliminated the two-month reporting lag. There were no significant,
infrequent or unusual items in the IME two-month period ended December 31, 2009. All intercompany
account balances have been eliminated.
b. Use of Estimates
The preparation of financial statements in conformity with accounting principles generally accepted
in the United States of America (‘‘GAAP’’) requires us to make estimates, judgments and assumptions
that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of
contingent assets and liabilities at the date of the financial statements and for the period then ended.
On an ongoing basis, we evaluate the estimates used. We base our estimates on historical experience,
actuarial estimates, current conditions and various other assumptions that we believe to be reasonable
under the circumstances. These estimates form the basis for making judgments about the carrying
values of assets and liabilities and are not readily apparent from other sources. Actual results may
differ from these estimates.
c. Cash, Cash Equivalents and Restricted Cash
Cash and cash equivalents include cash on hand and cash invested in short-term securities, which
have remaining maturities at the date of purchase of less than 90 days. Cash and cash equivalents are
carried at cost, which approximates fair value.
We have restricted cash associated with a collateral trust agreement with our insurance carrier that
was entered into in 2010 related to our worker’s compensation self-insurance program. The restricted
cash subject to this agreement was $35,105 and $35,110 as of December 31, 2010 and 2011, respectively,
and is included in current assets on our consolidated balance sheets. Restricted cash consists primarily
of U.S. Treasuries.
d. Foreign Currency
Local currencies are considered the functional currencies for our operations outside the U.S., with
the exception of certain foreign holding companies and our financing center in Switzerland, whose
functional currencies are the U.S. dollar. In those instances where the local currency is the functional
currency, assets and liabilities are translated at period-end exchange rates, and revenues and expenses
are translated at average exchange rates for the applicable period. Resulting translation adjustments are
reflected in the accumulated other comprehensive items, net component of Iron Mountain
Incorporated Stockholders’ Equity and Noncontrolling Interests. The gain or loss on foreign currency
transactions, calculated as the difference between the historical exchange rate and the exchange rate at
the applicable measurement date, including those related to (a) our 71⁄4% GBP Senior Subordinated
Notes due 2014, (b) our 63⁄4% Euro Senior Subordinated Notes due 2018, (c) the borrowings in certain
foreign currencies under our revolving credit agreement, and (d) certain foreign currency denominated
intercompany obligations of our foreign subsidiaries to us and between our foreign subsidiaries, which
are not considered permanently invested, are included in other expense (income), net, on our
consolidated statements of operations. The total gain or loss on foreign currency transactions amounted
80
IRON MOUNTAIN INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
DECEMBER 31, 2011
(In thousands, except share and per share data)
2. Summary of Significant Accounting Policies (Continued)
to a net gain of $12,845, a net loss of $5,664 and a net loss of $17,352 for the years ended
December 31, 2009, 2010 and 2011, respectively.
e. Derivative Instruments and Hedging Activities
Every derivative instrument is required to be recorded in the balance sheet as either an asset or a
liability measured at its fair value. Periodically, we acquire derivative instruments that are intended to
hedge either cash flows or values which are subject to foreign exchange or other market price risk and
not for trading purposes. We have formally documented our hedging relationships, including
identification of the hedging instruments and the hedged items, as well as our risk management
objectives and strategies for undertaking each hedge transaction. Given the recurring nature of our
revenues and the long-term nature of our asset base, we have the ability and the preference to use
long-term, fixed interest rate debt to finance our business, thereby preserving our long-term returns on
invested capital. We target approximately 75% of our debt portfolio to be fixed with respect to interest
rates. Occasionally, we may use interest rate swaps as a tool to maintain our targeted level of fixed rate
debt. In addition, we may use borrowings in foreign currencies, either obtained in the U.S. or by our
foreign subsidiaries, to hedge foreign currency risk associated with our international investments.
Sometimes we enter into currency swaps to temporarily hedge an overseas investment, such as a major
acquisition, while we arrange permanent financing or to hedge our exposure due to foreign currency
exchange movements related to our intercompany accounts with and between our foreign subsidiaries.
As of December 31, 2010 and 2011, none of our derivative instruments contained credit-risk related
contingent features.
f.
Property, Plant and Equipment
Property, plant and equipment are stated at cost and depreciated using the straight-line method
with the following useful lives:
Building and building improvements . . . . . . . . . . . . . . . . . . . . . . .
Leasehold improvements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Racking . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Warehouse equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Vehicles . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Furniture and fixtures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Computer hardware and software . . . . . . . . . . . . . . . . . . . . . . . . .
5 to 40 years
10 years or the life of the lease,
whichever is shorter
2 to 20 years
3 to 10 years
2 to 10 years
2 to 10 years
3 to 5 years
81
IRON MOUNTAIN INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
DECEMBER 31, 2011
(In thousands, except share and per share data)
2. Summary of Significant Accounting Policies (Continued)
Property, plant and equipment (including capital leases in the respective category), at cost, consist
of the following:
December 31,
2010
2011
Land . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Buildings and building improvements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Leasehold improvements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Racking . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Warehouse equipment/vehicles . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Furniture and fixtures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Computer hardware and software . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Construction in progress . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 170,576
1,064,478
469,324
1,368,218
362,663
76,971
548,453
100,727
$ 172,454
1,109,176
474,965
1,420,180
355,951
79,193
527,585
93,090
$4,161,410
$4,232,594
Minor maintenance costs are expensed as incurred. Major improvements which extend the life,
increase the capacity or improve the safety or the efficiency of property owned are capitalized. Major
improvements to leased buildings are capitalized as leasehold improvements and depreciated.
We develop various software applications for internal use. Computer software costs associated with
internal use software are expensed as incurred until certain capitalization criteria are met. Payroll and
related costs for employees who are directly associated with, and who devote time to, the development
of internal use computer software projects (to the extent time is spent directly on the project) are
capitalized and depreciated over the estimated useful life of the software. Capitalization begins when
the design stage of the application has been completed and it is probable that the application will be
completed and used to perform the function intended. Depreciation begins when the software is placed
in service. Computer software costs that are capitalized are periodically evaluated for impairment.
During the years ended December 31, 2009 and 2011, we wrote-off $600 (primarily in Corporate) and
$3,500 (approximately $3,050 associated with our International Business segment and approximately
$450 associated with our North American Business segment), respectively, of previously deferred
software costs associated with internal use software development projects that were discontinued after
implementation, which resulted in a loss on disposal/write-down of property, plant and equipment, net
in the accompanying consolidated statement of operations.
Entities are required to record the fair value of a liability for an asset retirement obligation in the
period in which it is incurred. Asset retirement obligations represent the costs to replace or remove
tangible long-lived assets required by law, regulatory rule or contractual agreement. When the liability
is initially recorded, the entity capitalizes the cost by increasing the carrying amount of the related
long-lived asset, which is then depreciated over the useful life of the related asset. The liability is
increased over time through income such that the liability will equate to the future cost to retire the
long-lived asset at the expected retirement date. Upon settlement of the liability, an entity either settles
the obligation for its recorded amount or realizes a gain or loss upon settlement. Our obligations are
primarily the result of requirements under our facility lease agreements which generally have ‘‘return to
82
IRON MOUNTAIN INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
DECEMBER 31, 2011
(In thousands, except share and per share data)
2. Summary of Significant Accounting Policies (Continued)
original condition’’ clauses which would require us to remove or restore items such as shred pits, vaults,
demising walls and office build-outs, among others. The significant assumptions used in estimating our
aggregate asset retirement obligation are the timing of removals, the probability of a requirement to
perform, estimated cost and associated expected inflation rates that are consistent with historical rates
and credit-adjusted risk-free rates that approximate our incremental borrowing rate.
A reconciliation of liabilities for asset retirement obligations (included in other long-term
liabilities) is as follows:
December 31,
2010
2011
Asset Retirement Obligations, beginning of the year . . . . . . . . . . . . . . . . . . . . . . .
Liabilities Incurred . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Liabilities Settled . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accretion Expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Change in Probability Adjustment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Foreign Currency Exchange Movement
$10,734
531
(70)
1,254
(2,745)
(239)
$ 9,465
300
(774)
1,327
(176)
(26)
Asset Retirement Obligations, end of the year . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 9,465
$10,116
g. Goodwill and Other Intangible Assets
Goodwill and intangible assets with indefinite lives are not amortized but are reviewed annually for
impairment or more frequently if impairment indicators arise. Other than goodwill, we currently have
no intangible assets that have indefinite lives and which are not amortized. Separable intangible assets
that are not deemed to have indefinite lives are amortized over their useful lives. We periodically assess
whether events or circumstances warrant a change in the life over which our intangible assets are
amortized.
We have selected October 1 as our annual goodwill impairment review date. We performed our
annual goodwill impairment review as of October 1, 2009, 2010 and 2011 and noted no impairment of
goodwill. However, as a result of interim triggering events as discussed below, we recorded provisional
goodwill impairment charges in each of the third quarters of 2010 and 2011 in conjunction with the
Digital Sale and associated with our Western European operations, respectively. These provisional
goodwill impairment charges were finalized in the fourth quarters of the 2010 and 2011 fiscal years,
respectively. As of December 31, 2011, no factors were identified that would alter our October 1, 2011
goodwill assessment. In making this assessment, we relied on a number of factors including operating
results, business plans, anticipated future cash flows, transactions and marketplace data. There are
inherent uncertainties related to these factors and our judgment in applying them to the analysis of
goodwill impairment. When changes occur in the composition of one or more reporting units, the
goodwill is reassigned to the reporting units affected based on their relative fair values.
As discussed at Note 14, we recorded a goodwill impairment charge in 2010 associated with our
former worldwide digital business reporting unit. For the year ended December 31, 2010, we allocated
$85,909 of this charge to the technology escrow services business based on a relative fair value basis.
83
IRON MOUNTAIN INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
DECEMBER 31, 2011
(In thousands, except share and per share data)
2. Summary of Significant Accounting Policies (Continued)
This charge continues to be included in our continuing results of operations as a component of
intangible impairments in our consolidated statements of operations as we retained this business
following the Digital Sale. Our technology escrow services business had previously been reported in the
former worldwide digital business segment and is now reported in the North American Business
segment.
In September 2011, as a result of certain changes we made in the manner in which our European
operations are managed, we reorganized our reporting structure and reassigned goodwill among the
revised reporting units. Previously, we tested goodwill impairment at the European level on a combined
basis. As a result of the management and reporting changes, we concluded that we have three reporting
units for our European operations: (1) the United Kingdom, Ireland and Norway (‘‘UKI’’);
(2) Belgium, France, Germany, Luxembourg, Netherlands and Spain (‘‘Western Europe’’); and (3) the
remaining countries in Europe (‘‘Central Europe’’). Due to these changes, we will perform all future
goodwill impairment analysis on the new reporting unit basis. As a result of the restructuring of our
reporting units, we concluded that we had an interim triggering event, and, therefore, we performed an
interim goodwill impairment test for UKI, Western Europe and Central Europe in the third quarter of
2011 as of August 31, 2011. As required by GAAP, prior to our goodwill impairment analysis, we
performed an impairment assessment on the long-lived assets within our UKI, Western Europe and
Central Europe reporting units and noted no impairment, except for the Italian Business, which was
included in our Western Europe reporting unit, and which is now included in discontinued operations
as discussed in Note 14. Based on our analyses, we concluded that the goodwill of our UKI and
Central Europe reporting units was not impaired. Our UKI and Central Europe reporting units had
fair values that exceed their carrying values by 15.1% and 4.9%, respectively, as of August 31, 2011.
Central Europe is still in the investment stage and accordingly its fair value does not exceed its carrying
value by a significant margin at this point in time. A deterioration of the UKI or Central Europe
businesses or their failure to achieve the forecasted results could lead to impairments in future periods.
Our Western Europe reporting unit’s fair value was less than its carrying value, and, as a result, we
recorded a goodwill impairment charge of $46,500 included as a component of intangible impairments
from continuing operations in our consolidated statements of operations for the year ended
December 31, 2011. A tax benefit of approximately $5,449 was recorded associated with the Western
Europe goodwill impairment charge for the year ended December 31, 2011 and is included in the
provision (benefit) for income taxes from continuing operations in the accompanying consolidated
statement of operations. See Note 14 for the portion of the charge allocated to the Italian Business
based on a relative fair value basis.
Our reporting units at which level we performed our goodwill impairment analysis as of October 1,
2010 were as follows: North America; Europe; Latin America; Australia; Joint Ventures (which includes
India, the various joint ventures in Southeast Asia and Russia (referred to as ‘‘Joint Ventures’’)); and
Business Process Management (‘‘BPM’’). Given their similar economic characteristics, products,
customers and processes, (1) the United Kingdom, Ireland and Norway and (2) the countries of
Continental Europe (excluding Joint Ventures), each a reporting unit, have been aggregated as Europe
and tested as one for goodwill impairment. As of December 31, 2010, the carrying value of goodwill,
net amounted to $1,750,420, $438,344, $29,787 and $61,010 for North America, Europe, Latin America
and Australia, respectively. Our Joint Ventures and BPM reporting units had no goodwill as of
84
IRON MOUNTAIN INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
DECEMBER 31, 2011
(In thousands, except share and per share data)
2. Summary of Significant Accounting Policies (Continued)
December 31, 2010. Our reporting units at which level we performed our goodwill impairment analysis
as of October 1, 2011 were as follows: North America; UKI; Western Europe; Central Europe; Latin
America; Australia; and Joint Ventures. As of December 31, 2011, the carrying value of goodwill, net
amounted to $1,748,879, $306,150, $46,439, $63,781, $27,322, and $61,697 for North America, UKI,
Western Europe, Central Europe, Latin America and Australia, respectively. Our Joint Ventures
reporting unit has no goodwill as of December 31, 2011. Our North America, Latin America and
Australia reporting units had estimated fair values as of October 1, 2011 that exceeded their carrying
values by greater than 40%.
Reporting unit valuations have been calculated using an income approach based on the present
value of future cash flows of each reporting unit or a combined approach based on the present value of
future cash flows and market and transaction multiples of revenues and earnings. The income approach
incorporates many assumptions including future growth rates, discount factors, expected capital
expenditures and income tax cash flows. Changes in economic and operating conditions impacting these
assumptions could result in goodwill impairments in future periods. In conjunction with our annual
goodwill impairment reviews, we reconcile the sum of the valuations of all of our reporting units to our
market capitalization as of such dates.
85
IRON MOUNTAIN INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
DECEMBER 31, 2011
(In thousands, except share and per share data)
2. Summary of Significant Accounting Policies (Continued)
The changes in the carrying value of goodwill attributable to each reportable operating segment
for the years ended December 31, 2010 and 2011 is as follows:
Gross Balance as of December 31, 2009 . . . . . . . . . . . . . . . . . .
Non-deductible goodwill acquired during the year . . . . . . . . . . .
Adjustments to purchase reserves . . . . . . . . . . . . . . . . . . . . . . .
Fair value and other adjustments(1) . . . . . . . . . . . . . . . . . . . . .
Currency effects . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Gross Balance as of December 31, 2010 . . . . . . . . . . . . . . . . . .
Deductible goodwill acquired during the year . . . . . . . . . . . . . .
Non-deductible goodwill acquired during the year . . . . . . . . . . .
Fair value and other adjustments(2) . . . . . . . . . . . . . . . . . . . . .
Currency effects . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
North
American
Business
International
Physical
Business
$1,996,959
1,700
(401)
2,553
11,238
2,012,049
1,398
—
2,161
(5,367)
$565,717
4,030
—
164
(27,532)
542,379
—
35,207
(865)
(12,677)
Total
Consolidated
$2,562,676
5,730
(401)
2,717
(16,294)
2,554,428
1,398
35,207
1,296
(18,044)
Gross Balance as of December 31, 2011 . . . . . . . . . . . . . . . . . .
$2,010,241
$564,044
$2,574,285
Accumulated Amortization Balance as of December 31, 2009 . .
Goodwill impairment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Currency effects . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 175,158
85,909
562
$ 14,199
—
(961)
$ 189,357
85,909
(399)
Accumulated Amortization Balance as of December 31, 2010 . .
Goodwill impairment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Currency effects . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
261,629
—
(267)
13,238
46,500
(1,083)
274,867
46,500
(1,350)
Accumulated Amortization Balance as of December 31, 2011 . .
$ 261,362
$ 58,655
$ 320,017
Net Balance as of December 31, 2009 . . . . . . . . . . . . . . . . . . .
$1,821,801
$551,518
$2,373,319
Net Balance as of December 31, 2010 . . . . . . . . . . . . . . . . . . .
$1,750,420
$529,141
$2,279,561
Net Balance as of December 31, 2011 . . . . . . . . . . . . . . . . . . .
$1,748,879
$505,389
$2,254,268
Accumulated Goodwill Impairment Balance as of December 31,
2010 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accumulated Goodwill Impairment Balance as of December 31,
2011 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
$
85,909
$
— $
85,909
85,909
$ 46,500
$ 132,409
(1) Fair value and other adjustments primarily include $(711) of adjustments to property, plant and
equipment, net, customer relationships and deferred income taxes, as well as $1,428 of cash paid
related to prior year’s acquisitions and $2,000 of contingent earn-out obligations accrued and
unpaid as of December 31, 2010 related to a 2007 acquisition.
(2) Fair value and other adjustments primarily include $(835) of adjustments to property, plant and
equipment, net, customer relationships and deferred income taxes, as well as $131 of cash paid
related to prior year’s acquisitions and $2,000 of contingent earn-out obligations accrued and
unpaid as of December 31, 2011 related to a 2007 acquisition.
86
IRON MOUNTAIN INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
DECEMBER 31, 2011
(In thousands, except share and per share data)
2. Summary of Significant Accounting Policies (Continued)
h. Long-Lived Assets
We review long-lived assets and all amortizable intangible assets for impairment whenever events
or changes in circumstances indicate the carrying amount of such assets may not be recoverable.
Recoverability of these assets is determined by comparing the forecasted undiscounted net cash flows of
the operation to which the assets relate to their carrying amount. The operations are generally
distinguished by the business segment and geographic region in which they operate. If the operation is
determined to be unable to recover the carrying amount of its assets, then intangible assets are written
down first, followed by the other long-lived assets of the operation, to fair value. Fair value is
determined based on discounted cash flows or appraised values, depending upon the nature of the
assets.
Consolidated loss on disposal/write-down of property, plant and equipment, net of $168 in the year
ended December 31, 2009 consisted primarily of a gain on disposal of a building in our International
Business segment of approximately $1,900 in France, offset by losses on the write-down of certain
facilities of approximately $1,000 in our North American Business segment, $700 in our International
Business segment and $300 in Corporate (associated with discontinued products after implementation).
Consolidated gain on disposal/write-down of property, plant and equipment, net of $10,987 in the year
ended December 31, 2010 consisted primarily of a gain of approximately $10,200 as a result of the
settlement with our insurers in connection with a portion of the property component of our claim
related to the Chilean earthquake in the third and fourth quarter of 2010, gains of approximately
$3,200 in North America primarily related to the disposition of certain owned equipment and a gain on
disposal of a building in our International Business segment of approximately $1,300 in the United
Kingdom, offset by approximately $1,000 of asset write-downs associated with our Latin American
operations and approximately $2,600 of impairment losses primarily related to certain owned facilities
in North America. Consolidated gain on disposal/write-down of property, plant and equipment, net of
$2,286 in the year ended December 31, 2011 consisted primarily of a gain of approximately $3,200
related to the disposition of a facility in Canada and a gain of approximately $3,000 on the retirement
of leased vehicles accounted for as capital lease assets associated with our North American Business
segment, offset by a loss associated with discontinued use of certain third-party software licenses of
approximately $3,500 (approximately $3,050 associated with our International Business segment and
approximately $450 associated with our North American Business segment).
i.
Customer Relationships and Acquisition Costs and Other Intangible Assets
Costs related to the acquisition of large volume accounts are capitalized. Initial costs incurred to
transport the boxes to one of our facilities, which includes labor and transportation charges, are
amortized over periods ranging from one to 30 years (weighted average of 25 years at December 31,
2011), and are included in depreciation and amortization in the accompanying consolidated statements
of operations. Payments to a customer’s current records management vendor or direct payments to a
customer are amortized over periods ranging from one to 10 years (weighted average of four years at
December 31, 2011) to the storage and service revenue line items in the accompanying consolidated
statements of operations. If the customer terminates its relationship with us, the unamortized cost is
charged to expense or revenue. However, in the event of such termination, we generally collect, and
record as income, permanent removal fees that generally equal or exceed the amount of the
87
IRON MOUNTAIN INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
DECEMBER 31, 2011
(In thousands, except share and per share data)
2. Summary of Significant Accounting Policies (Continued)
unamortized costs. Customer relationship intangible assets acquired through business combinations,
which represents the majority of the balance, are amortized over periods ranging from 10 to 30 years
(weighted average of 19 years at December 31, 2011). Amounts allocated in purchase accounting to
customer relationship intangible assets are calculated based upon estimates of their fair value utilizing
an income approach based on the present value of future cash flows. Other intangible assets, including
noncompetition agreements, acquired core technology and trademarks, are capitalized and amortized
over periods ranging from two to 10 years (weighted average of seven years at December 31, 2011).
The gross carrying amount and accumulated amortization are as follows:
Gross Carrying Amount
December 31,
2010
2011
Customer relationship and acquisition costs . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other intangible assets (included in other assets, net) . . . . . . . . . . . . . . . . . . . .
$533,223
7,014
$593,901
6,761
Accumulated Amortization
Customer relationship and acquisition costs . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other intangible assets (included in other assets, net) . . . . . . . . . . . . . . . . . . . .
$153,415
4,348
$183,752
4,899
The amortization expense for the years ended December 31, 2009, 2010 and 2011 are as follows:
Year Ended December 31,
2009
2010
2011
Customer relationship and acquisition costs:
Amortization expense included in depreciation and amortization . . . . .
Amortization expense charged to revenues . . . . . . . . . . . . . . . . . . . . .
$23,104
8,096
$24,435
9,710
$27,900
10,100
Other intangible assets:
Amortization expense included in depreciation and amortization . . . . .
1,021
1,010
961
Estimated amortization expense for existing intangible assets (excluding deferred financing costs,
which are amortized through interest expense, of $5,969, $5,969, $5,512, $5,322 and $3,978 for 2012,
2013, 2014, 2015 and 2016, respectively) for the next five succeeding fiscal years is as follows:
Estimated Amortization
Included in Depreciation
and Amortization
Charged to Revenues
2012 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2013 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2014 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2015 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2016 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$30,505
29,618
29,077
28,758
28,461
$6,279
4,149
2,601
1,187
440
88
IRON MOUNTAIN INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
DECEMBER 31, 2011
(In thousands, except share and per share data)
2. Summary of Significant Accounting Policies (Continued)
j. Deferred Financing Costs
Deferred financing costs are amortized over the life of the related debt using the effective interest
rate method. If debt is retired early, the related unamortized deferred financing costs are written off in
the period the debt is retired to other expense (income), net. As of December 31, 2010 and 2011, gross
carrying amount of deferred financing costs was $50,242 and $54,826, respectively, and accumulated
amortization of those costs was $21,096 and $19,028, respectively, and was recorded in other assets, net
in the accompanying consolidated balance sheet.
k. Accrued Expenses
Accrued expenses (with items greater than 5% of total current liabilities shown separately) consist
of the following:
December 31,
2010
2011
Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Payroll and vacation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Incentive compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Self-insured liabilities (Note 10.b.) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 59,774
76,979
26,285
43,901
29,484
146,247
$ 59,268
75,384
62,550
39,358
4,957
177,314
$382,670
$418,831
l. Revenues
Our revenues consist of storage revenues as well as service revenues and are reflected net of sales
and value added taxes. Storage revenues, which are considered a key performance indicator for the
information management services industry, consist primarily of recurring periodic charges related to the
storage of materials or data (generally on a per unit basis). Service revenues are comprised of charges
for related core service activities and a wide array of complementary products and services. Included in
core service revenues are: (1) the handling of records, including the addition of new records, temporary
removal of records from storage, refiling of removed records and the destruction of records; (2) courier
operations, consisting primarily of the pickup and delivery of records upon customer request; (3) secure
shredding of sensitive documents; and (4) other recurring services, including hybrid services and
recurring project revenues. Our complementary services revenues include special project work,
customer termination and permanent withdrawal fees, data restoration projects, fulfillment services,
consulting services, technology services and product sales (including specially designed storage
containers and related supplies). Our secure shredding revenues include the sale of recycled paper
(included in complementary services revenues), the price of which can fluctuate from period to period,
adding to the volatility and reducing the predictability of that revenue stream.
We recognize revenue when the following criteria are met: persuasive evidence of an arrangement
exists, services have been rendered, the sales price is fixed or determinable and collectability of the
resulting receivable is reasonably assured. Storage and service revenues are recognized in the month
89
IRON MOUNTAIN INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
DECEMBER 31, 2011
(In thousands, except share and per share data)
2. Summary of Significant Accounting Policies (Continued)
the respective storage or service is provided, and customers are generally billed on a monthly basis on
contractually agreed-upon terms. Amounts related to future storage or prepaid service contracts for
customers where storage fees or services are billed in advance are accounted for as deferred revenue
and recognized ratably over the applicable storage or service period or when the service is performed.
Revenue from the sales of products, which is included as a component of service revenues, is
recognized when products are shipped to the customer and title has passed to the customer. Revenues
from the sales of products have historically not been significant.
m. Rent Normalization
We have entered into various leases for buildings that expire over various terms. Certain leases
have fixed escalation clauses (excluding those tied to the consumer price index or other inflation-based
indices) or other features (including return to original condition, primarily in the United Kingdom)
which require normalization of the rental expense over the life of the lease resulting in deferred rent
being reflected in the accompanying consolidated balance sheets. In addition, we have assumed various
above and below market leases in connection with certain of our acquisitions. The difference between
the present value of these lease obligations and the market rate at the date of the acquisition was
recorded as a deferred rent liability or other long-term asset and is being amortized over the remaining
lives of the respective leases.
n.
Stock-Based Compensation
We record stock-based compensation expense, utilizing the straight-line method, for the cost of
stock options, restricted stock, restricted stock units, performance units and shares of stock issued
under the employee stock purchase plan (together, ‘‘Employee Stock-Based Awards’’).
Stock-based compensation expense for Employee Stock-Based Awards included in the
accompanying consolidated statements of operations for the years ended December 31, 2009, 2010 and
2011 was $18,703, including $3,493 in discontinued operations, ($14,716 after tax or $0.07 per basic and
diluted share), $20,378, including $3,104 in discontinued operations, ($15,672 after tax or $0.08 per
basic and diluted share) and $17,510, including $260 in discontinued operations, ($8,834 after tax or
$0.05 per basic and diluted share), respectively.
Stock-based compensation expense for Employee Stock-Based Awards included in the
accompanying consolidated statements of operations related to continuing operations is as follows:
Year Ended December 31,
2009
2010
2011
Cost of sales (excluding depreciation and amortization) . . . . . . . . . . . . .
Selling, general and administrative expenses . . . . . . . . . . . . . . . . . . . . . .
$
248
14,962
$
730
16,544
$
914
16,336
Total stock-based compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$15,210
$17,274
$17,250
The benefits associated with the tax deductions in excess of recognized compensation cost are
required to be reported as a financing cash flow. This requirement reduces reported operating cash
flows and increases reported financing cash flows. As a result, net financing cash flows from continuing
90
IRON MOUNTAIN INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
DECEMBER 31, 2011
(In thousands, except share and per share data)
2. Summary of Significant Accounting Policies (Continued)
operations included $5,532, $2,252 and $919 for the years ended December 31, 2009, 2010 and 2011,
respectively, from the benefits of tax deductions in excess of recognized compensation cost. The tax
benefit of any resulting excess tax deduction increases the Additional Paid-in Capital (‘‘APIC’’) pool.
Any resulting tax deficiency is deducted from the APIC pool.
Stock Options
Under our various stock option plans, options were granted with exercise prices equal to the
market price of the stock on the date of grant. The majority of our options become exercisable ratably
over a period of five years and generally have a contractual life of ten years, unless the holder’s
employment is sooner terminated. Certain of the options we issue become exercisable ratably over a
period of ten years and have a contractual life of 12 years, unless the holder’s employment is sooner
terminated. As of December 31, 2011, ten-year vesting options represented 7.3% of total outstanding
options. Beginning in 2011, certain of the options we issue become exercisable ratably over a period of
three years and have a contractual life of ten years, unless the holder’s employment is sooner
terminated. As of December 31, 2011, three-year vesting options represented 11.0% of total
outstanding options. Our non-employee directors are considered employees for purposes of our stock
option plans and stock option reporting. Options granted to our non-employee directors generally
become exercisable after one year.
In December 2008, we amended each of the Iron Mountain Incorporated 2002 Stock Incentive
Plan, the Iron Mountain Incorporated 1997 Stock Option Plan, the LiveVault Corporation 2001 Stock
Incentive Plan and the Stratify, Inc. 1999 Stock Plan (each a ‘‘Plan’’ and, collectively, the ‘‘Plans’’) to
provide that any unvested options and other awards granted under each respective Plan shall vest
immediately should an employee be terminated by the Company, or terminate his or her own
employment for good reason (as defined in each Plan), in connection with a vesting change in control
(as defined in each Plan). The Mimosa Systems, Inc. 2009 Equity Incentive Plan and the Mimosa
Systems, Inc. 2003 Stock Plan were similarly amended in June 2010.
A total of 37,536,442 shares of common stock have been reserved for grants of options and other
rights under our various stock incentive plans. The number of shares available for grant at
December 31, 2011 was 7,112,835.
The weighted average fair value of options granted in 2009, 2010 and 2011 was $9.72, $7.71 and
$7.42 per share, respectively. These values were estimated on the date of grant using the Black-Scholes
option pricing model. The following table summarizes the weighted average assumptions used for
grants in the year ended December 31:
Weighted Average Assumptions
2009
2010
2011
Expected volatility . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Risk-free interest rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Expected dividend yield . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Expected life . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
32.1%
2.64%
None
6.4 Years
32.8%
2.48%
1.2%
6.4 Years
33.4%
2.40%
3%
6.3 Years
91
IRON MOUNTAIN INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
DECEMBER 31, 2011
(In thousands, except share and per share data)
2. Summary of Significant Accounting Policies (Continued)
Expected volatility is calculated utilizing daily historical volatility over a period that equates to the
expected life of the option. The risk-free interest rate was based on the U.S. Treasury interest rates
whose term is consistent with the expected life of the stock options. Beginning in the first quarter of
2010, expected dividend yield was considered in the option pricing model as a result of our new
dividend program. The expected life (estimated period of time outstanding) of the stock options
granted is estimated using the historical exercise behavior of employees.
A summary of option activity for the year ended December 31, 2011 is as follows:
Outstanding at December 31, 2010 . . . . . . . . . . . . . . . . .
Granted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Exercised . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Forfeited . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Expired . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Weighted
Average
Remaining
Contractual
Term
Aggregate
Intrinsic
Value
Weighted
Average
Exercise
Price
$24.30
28.60
21.78
25.90
27.72
Options
12,140,560
1,077,648
(3,753,905)
(2,226,605)
(119,240)
Outstanding at December 31, 2011 . . . . . . . . . . . . . . . . .
7,118,458
$25.73
Options exercisable at December 31, 2011 . . . . . . . . . . . .
3,749,481
$25.19
Options expected to vest
. . . . . . . . . . . . . . . . . . . . . . . .
3,103,537
$26.36
6.72
5.66
7.91
$38,002
$22,446
$14,245
The following table provides the aggregate intrinsic value of stock options exercised for the years
ended December 31, 2009, 2010 and 2011:
Year Ended December 31,
2009
2010
2011
Aggregate intrinsic value of stock options exercised . . . . . . . . . . . . . . . .
$18,929
$12,063
$37,901
Restricted Stock and Restricted Stock Units
Under our various stock option plans, we may also issue grants of restricted stock or restricted
stock units (‘‘RSUs’’). Our restricted stock and RSUs generally have a three to five year vesting period.
The fair value of restricted stock and RSUs is the excess of the market price of our common stock at
the date of grant over the purchase price (which is typically zero).
92
IRON MOUNTAIN INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
DECEMBER 31, 2011
(In thousands, except share and per share data)
2. Summary of Significant Accounting Policies (Continued)
A summary of restricted stock and RSUs activity for the year ended December 31, 2011 is as
follows:
Non-vested at December 31, 2010 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Granted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Vested . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Forfeited . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Restricted
Stock and
RSUs
168,221
609,743
(39,844)
(127,169)
Non-vested at December 31, 2011 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
610,951
Weighted-
Average
Grant-Date
Fair Value
$22.53
29.77
23.69
26.53
$28.85
The total fair value of restricted stock vested for the years ended December 31, 2009, 2010 and
2011 was $0, $13 and $13, respectively. No RSUs vested during 2009 and 2010. The total fair value of
RSUs vested for the year ended December 31, 2011 was $931.
Performance Units
Under our various stock option plans, we may also issue grants of performance units (‘‘PUs’’). The
number of PUs earned will be determined based on our performance against predefined targets, which
for 2011 were calendar year revenue growth and return on invested capital (‘‘ROIC’’). The range of
payout is zero to 150% of the number of granted PUs. The number of PUs earned will be determined
based on actual performance at the end of the one-year performance period, and the award will be
settled in shares of our common stock, subject to cliff vesting, three years from the date of the original
PU grant. Additionally, employees who are employed through the one-year anniversary of the date of
grant and who reach both 55 years of age and 10 years of qualifying service (the ‘‘retirement criteria’’)
shall immediately and completely vest in any PUs earned based on the actual achievement against the
predefined targets as discussed above. As a result, PUs will be expensed over the shorter of
(a) achievement of the retirement criteria, which such achievement may occur as early as one year after
the date of grant, or (b) a maximum of three years.
In 2011, we issued 154,239 PUs. During the one-year performance period, we will forecast the
likelihood of achieving the annual revenue growth and ROIC predefined targets in order to calculate
the expected PUs to be earned. We will record a compensation charge based on either the forecasted
PUs to be earned (during the one-year performance period) or the actual PUs earned (at the one-year
anniversary date) over the vesting period for each individual grant as described above. The
performance unit liability is remeasured at each fiscal quarter-end during the vesting period using the
estimated percentage of units earned multiplied by the closing market price of our common stock on
the current period-end date and is pro-rated based on the amount of time passed in the vesting period.
As of December 31, 2011, we expected 99.6% achievement of the predefined revenue and ROIC
targets associated with the grants made in 2011 and the closing market price of our common stock was
$30.80.
93
IRON MOUNTAIN INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
DECEMBER 31, 2011
(In thousands, except share and per share data)
2. Summary of Significant Accounting Policies (Continued)
A summary of PU activity for the year ended December 31, 2011 is as follows:
Non-vested at December 31, 2010 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Granted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Vested . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Forfeited . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
PUs
—
154,239
—
(41,490)
Non-vested at December 31, 2011 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
112,749
Employee Stock Purchase Plan
We offer an employee stock purchase plan (the ‘‘ESPP’’) in which participation is available to
substantially all U.S. and Canadian employees who meet certain service eligibility requirements. The
ESPP provides a way for our eligible employees to become stockholders on favorable terms. The ESPP
provides for the purchase of our common stock by eligible employees through successive offering
periods. We generally have two six-month offering periods per year, the first of which begins June 1
and ends November 30 and the second of which begins December 1 and ends May 31. During each
offering period, participating employees accumulate after-tax payroll contributions, up to a maximum of
15% of their compensation, to pay the exercise price of their options. Participating employees may
withdraw from an offering period before the purchase date and obtain a refund of the amounts
withheld as payroll deductions. At the end of the offering period, outstanding options are exercised,
and each employee’s accumulated contributions are used to purchase our common stock. The price for
shares purchased under the ESPP is 95% of the fair market price at the end of the offering period,
without a look-back feature. As a result, we do not recognize compensation cost for the ESPP shares
purchased. The ESPP was amended and approved by our stockholders on May 26, 2005 and the
number of shares available for purchase under the ESPP was increased to 3,487,500. For the years
ended December 31, 2009, 2010 and 2011, there were 258,680 shares, 257,381 shares and 154,559
shares, respectively, purchased under the ESPP. The number of shares available for purchase under the
ESPP at December 31, 2011 was 399,761.
As of December 31, 2011, unrecognized compensation cost related to the unvested portion of our
Employee Stock-Based Awards was $40,454 and is expected to be recognized over a weighted-average
period of 2.9 years.
We generally issue shares for the exercises of stock options, restricted stock, RSUs, PUs and shares
under our ESPP from unissued reserved shares.
o.
Income Taxes
Accounting for income taxes requires the recognition of deferred tax assets and liabilities for the
expected future tax consequences of temporary differences between the tax and financial reporting basis
of assets and liabilities and for loss and credit carryforwards. Valuation allowances are provided when
recovery of deferred tax assets is not considered more likely than not. We have elected to recognize
94
IRON MOUNTAIN INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
DECEMBER 31, 2011
(In thousands, except share and per share data)
2. Summary of Significant Accounting Policies (Continued)
interest and penalties associated with uncertain tax positions as a component of the provision for
income taxes in the accompanying consolidated statements of operations.
p.
Income (Loss) Per Share—Basic and Diluted
Basic income (loss) per common share is calculated by dividing income (loss) by the weighted
average number of common shares outstanding. The calculation of diluted income (loss) per share is
consistent with that of basic income (loss) per share but gives effect to all potential common shares
(that is, securities such as options, warrants or convertible securities) that were outstanding during the
period, unless the effect is antidilutive.
The following table presents the calculation of basic and diluted income (loss) per share:
Income (Loss) from continuing operations . . . . . . . . . . .
Total income (loss) from discontinued operations (see
Note 14) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net income (loss) attributable to Iron Mountain
Incorporated . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Weighted-average shares—basic . . . . . . . . . . . . . . . . . . .
Effect of dilutive potential stock options . . . . . . . . . . . . .
Effect of dilutive potential restricted stock, RSUs and
Year Ended December 31,
2009
2010
2011
231,517
$
166,739
$
246,412
(12,138) $
(219,417) $
153,180
217,950
$
(57,586) $
395,538
$
$
$
202,812,000
1,458,777
201,991,000
—
194,777,000
1,060,477
PUs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
41
—
100,136
Weighted-average shares—diluted . . . . . . . . . . . . . . . . . .
204,270,818
201,991,000
195,937,613
Earnings (Losses) per share—basic:
Income (Loss) from continuing operations . . . . . . . . . . .
Total income (loss) from discontinued operations (see
Note 14) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net income (loss) attributable to Iron Mountain
Incorporated—basic . . . . . . . . . . . . . . . . . . . . . . . . . .
Earnings (Losses) per share—diluted:
Income (Loss) from continuing operations . . . . . . . . . . .
Total income (loss) from discontinued operations (see
Note 14) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net income (loss) attributable to Iron Mountain
Incorporated—diluted . . . . . . . . . . . . . . . . . . . . . . . . .
Antidilutive stock options, RSUs and PUs, excluded from
the calculation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
$
$
$
$
$
1.14
$
0.83
$
1.27
(0.06) $
(1.09) $
0.79
1.07
1.13
$
$
(0.29) $
2.03
0.83
$
1.26
(0.06) $
(1.09) $
0.78
1.07
$
(0.29) $
2.02
8,085,784
9,305,328
3,973,760
95
IRON MOUNTAIN INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
DECEMBER 31, 2011
(In thousands, except share and per share data)
2. Summary of Significant Accounting Policies (Continued)
q. New Accounting Pronouncements
In September 2011, the Financial Accounting Standards Board issued Accounting Standards
Update (‘‘ASU’’) No. 2011-08, Intangibles—Goodwill and Other (Topic 350): Testing Goodwill for
Impairment. ASU 2011-08 allows but does not require entities to first assess qualitatively whether it is
necessary to perform the two-step goodwill impairment test. If an entity believes, as a result of its
qualitative assessment, that it is more likely than not that the fair value of a reporting unit is less than
its carrying amount, the quantitative two-step impairment test is required; otherwise, no further testing
is required. ASU 2011-08 is effective for annual and interim goodwill impairment tests performed for
fiscal years beginning after December 15, 2011, with early adoption permitted. The adoption of this
ASU 2011-08 will not have a material impact on our consolidated financial position, results of
operations or cash flows.
r. Allowance for Doubtful Accounts and Credit Memo Reserves
We maintain an allowance for doubtful accounts and credit memos for estimated losses resulting
from the potential inability of our customers to make required payments and potential disputes
regarding billing and service issues. When calculating the allowance, we consider our past loss
experience, current and prior trends in our aged receivables and credit memo activity, current economic
conditions and specific circumstances of individual receivable balances. If the financial condition of our
customers were to significantly change, resulting in a significant improvement or impairment of their
ability to make payments, an adjustment of the allowance may be required. We consider accounts
receivable to be delinquent after such time as reasonable means of collection have been exhausted. We
charge-off uncollectible balances as circumstances warrant, generally, no later than one year past due.
Rollforward of allowance for doubtful accounts and credit memo reserves is as follows:
Year Ended December 31,
Balance at
Beginning of
the Year
Credit Memos
Charged to
Revenue
Allowance for
Bad Debts
Charged to
Expense
Other(1)
Deductions(2)
2009 . . . . . . . . . . . . . . . . .
2010 . . . . . . . . . . . . . . . . .
2011 . . . . . . . . . . . . . . . . .
$16,412
19,595
20,747
$39,018
42,204
39,343
$ 8,994
11,801
9,506
$1,006
(481)
(205)
$(45,835)
(52,372)
(46,114)
Balance at
End of
the Year
$19,595
20,747
23,277
(1) Primarily consists of recoveries of previously written-off accounts receivable, allowances of
businesses acquired and the impact associated with currency translation adjustments.
(2) Primarily consists of the write-off of accounts receivable.
s. Concentrations of Credit Risk
Financial instruments that potentially subject us to market risk consist principally of cash and cash
equivalents (including money market funds and time deposits), restricted cash (primarily U.S.
Treasuries) and accounts receivable. The only significant concentrations of liquid investments as of
December 31, 2011 relate to cash and cash equivalents and restricted cash held on deposit with five
global banks and one ‘‘Triple A’’ rated money market fund which we consider to be large, highly-rated
investment-grade institutions. As per our risk management investment policy, we limit exposure to
96
IRON MOUNTAIN INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
DECEMBER 31, 2011
(In thousands, except share and per share data)
2. Summary of Significant Accounting Policies (Continued)
concentration of credit risk by limiting the amount invested in any one mutual fund or financial
institution to a maximum of $50,000. As of December 31, 2011, our cash and cash equivalent and
restricted cash balance was $214,955, including a money market fund and time deposits amounting to
$181,823. A substantial portion of the money market fund is invested in U.S. Treasuries.
t.
Fair Value Measurements
Entities are permitted under GAAP to elect to measure many financial instruments and certain
other items at either fair value or cost. We did not elect the fair value measurement option for any of
our financial assets or liabilities.
Our financial assets or liabilities are measured using inputs from the three levels of the fair value
hierarchy. A financial asset or liability’s classification within the hierarchy is determined based on the
lowest level input that is significant to the fair value measurement.
The three levels of the fair value hierarchy are as follows:
Level 1—Inputs are unadjusted quoted prices in active markets for identical assets or liabilities
that we have the ability to access at the measurement date.
Level 2—Inputs include quoted prices for similar assets and liabilities in active markets, quoted
prices for identical or similar assets or liabilities in markets that are not active, inputs other than
quoted prices that are observable for the asset or liability (i.e., interest rates, yield curves, etc.), and
inputs that are derived principally from or corroborated by observable market data by correlation or
other means (market corroborated inputs).
Level 3—Unobservable inputs that reflect our assumptions about the assumptions that market
participants would use in pricing the asset or liability.
The following tables provide the assets and liabilities carried at fair value measured on a recurring
basis as of December 31, 2010 and 2011, respectively:
Description
Fair Value Measurements at
December 31, 2010 Using
Total Carrying Quoted prices
Value at
December 31,
2010
in active
markets
(Level 1)
Significant other
observable
inputs
(Level 2)
Significant
unobservable
inputs
(Level 3)
Money Market Funds(1) . . . . . . . . . . . . . . . .
Time Deposits(1) . . . . . . . . . . . . . . . . . . . . .
Trading Securities . . . . . . . . . . . . . . . . . . . . .
Derivative Assets(3) . . . . . . . . . . . . . . . . . . .
Derivative Liabilities(3) . . . . . . . . . . . . . . . . .
$107,129
134,022
9,215
2,500
2,440
$ —
—
8,527(2)
—
—
$107,129
134,022
688(1)
2,500
2,440
$—
—
—
—
—
97
IRON MOUNTAIN INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
DECEMBER 31, 2011
(In thousands, except share and per share data)
2. Summary of Significant Accounting Policies (Continued)
Description
Fair Value Measurements at
December 31, 2011 Using
Total Carrying Quoted prices
Value at
December 31,
2011
in active
markets
(Level 1)
Significant other
observable
inputs
(Level 2)
Significant
unobservable
inputs
(Level 3)
Money Market Funds(1) . . . . . . . . . . . . . . . .
Time Deposits(1) . . . . . . . . . . . . . . . . . . . . .
Trading Securities . . . . . . . . . . . . . . . . . . . . .
Derivative Assets(3) . . . . . . . . . . . . . . . . . . .
Derivative Liabilities(3) . . . . . . . . . . . . . . . . .
$ 35,110
146,713
9,124
2,803
435
$ —
—
8,497(2)
—
—
$ 35,110
146,713
627(1)
2,803
435
$—
—
—
—
—
(1) Money market funds and time deposits (including certain trading securities) are measured based
on quoted prices for similar assets and/or subsequent transactions.
(2) Securities are measured at fair value using quoted market prices.
(3) Our derivative assets and liabilities primarily relate to short-term (six months or less) foreign
currency contracts that we have entered into to hedge our intercompany exposures denominated in
British pounds sterling and Australian dollars. We calculate the fair value of such forward contracts
by adjusting the spot rate utilized at the balance sheet date for translation purposes by an estimate
of the forward points observed in active markets.
Disclosures are required in the financial statements for items measured at fair value on a
non-recurring basis. We did not have any material items that are measured at fair value on a
non-recurring basis for the years ended December 31, 2010 and 2011, except goodwill calculated based
on Level 3 inputs, as more fully disclosed at Note 2.g.
u. Available-for-sale and Trading Securities
We have one trust that holds marketable securities. Marketable securities are classified as
available-for-sale or trading. As of December 31, 2010 and 2011, the fair value of the money market
and mutual funds included in this trust amounted to $9,215 and $9,124, respectively, and were included
in prepaid expenses and other in the accompanying consolidated balance sheets. We classified these
marketable securities included in the trust as trading, and included in other expense (income), net in
the accompanying consolidated statement of operations realized and unrealized net gains of $1,745,
$1,221 and net losses of $321 for the years ended December 31, 2009, 2010 and 2011, respectively.
v.
Investments
As of December 31, 2011, we have investments in joint ventures, including noncontrolling interests,
in Iron Mountain A/S of 20% (Denmark), in Iron Mountain Arsivleme Hizmetleri A.S. of 40%
(Turkey), in Sispace AG of 15% (Switzerland) and in Kelman Technologies Inc. of 25% (U.S. and
Canada). These investments are accounted for using the equity method because we exercise significant
influence over these entities and their operations. As of December 31, 2010 and 2011, the carrying
value related to our equity investments was $9,663 and $3,499, respectively, included in other assets in
the accompanying consolidated balance sheets.
98
IRON MOUNTAIN INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
DECEMBER 31, 2011
(In thousands, except share and per share data)
2. Summary of Significant Accounting Policies (Continued)
w. Accumulated Other Comprehensive Items, Net
Accumulated other comprehensive items, net consists of foreign currency translation adjustments
as of December, 31, 2010 and 2011.
x. Other Expense (Income), Net
Other expense (income), net consists of the following:
Year Ended December 31,
2009
2010
2011
Foreign currency transaction (gains) losses, net . . . . . . . . . . . . . . . . . . . .
Debt extinguishment expense, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$(12,845) $5,664
1,792
1,312
3,031
(2,785)
$17,352
993
(5,302)
$(12,599) $8,768
$13,043
y.
Immaterial Restatement
Subsequent to the issuance of the Company’s 2010 financial statements, the Company’s
management identified a government contract billing error more fully discussed at Note 10.h., which
resulted in an overstatement of prior years reported revenue by an amount currently estimated to be
approximately $17,000 in the aggregate. While no prior period financial statement was materially
misstated, we have determined that the cumulative impact of recording this adjustment would have
significantly distorted our results for the year ended December 31, 2011. As a result, we have restated
beginning retained earnings as of December 31, 2008 for the cumulative impact of activity prior to
December 31, 2008 in the amount of $3,784. Additionally, we have restated our 2009 and 2010
consolidated statements of operations and consolidated statements of equity and our 2010 consolidated
balance sheet to reflect the impact in those particular years. There was no change to the following lines
of the 2009 and 2010 consolidated statements of cash flows: (1) cash flows from operating activities,
(2) cash flows from investing activities and (3) cash flows from financing activities.
99
IRON MOUNTAIN INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
DECEMBER 31, 2011
(In thousands, except share and per share data)
2. Summary of Significant Accounting Policies (Continued)
The following table sets forth the effect of the immaterial restatement to certain line items of our
consolidated statements of operations for the years ended December 31, 2009 and 2010:
Year Ended
December 31,
2009
2010
Storage . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Service . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$(2,327) $(2,955)
(3,068)
(2,486)
Total Revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$(4,813) $(6,023)
Operating Income (Loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$(4,813) $(6,023)
Income (Loss) from Continuing Operations before Provision (Benefit) for
Income Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$(4,813) $(6,023)
Provision (Benefit) for Income Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$(1,886) $(2,337)
Income (Loss) from Continuing Operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$(2,927) $(3,686)
Net Income (Loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$(2,927) $(3,686)
Net Income (Loss) Attributable to Iron Mountain Incorporated . . . . . . . . . . . . . . .
$(2,927) $(3,686)
Earnings (Losses) per Share—Basic:
Income (Loss) from Continuing Operations . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ (0.01) $ (0.02)
Net Income (Loss) Attributable to Iron Mountain Incorporated . . . . . . . . . . . . .
$ (0.01) $ (0.02)
Earnings (Losses) per Share—Diluted:
Income (Loss) from Continuing Operations . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ (0.01) $ (0.02)
Net Income (Loss) Attributable to Iron Mountain Incorporated . . . . . . . . . . . . .
$ (0.01) $ (0.02)
The following table sets forth the effect of the immaterial restatement to certain line items of our
consolidated balance sheet as of December 31, 2010:
Prepaid Expenses and Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 6,660
Total Current Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 6,660
Total Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 6,660
Deferred Revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 17,057
Total Current Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 17,057
Retained Earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$(10,397)
Total Iron Mountain Incorporated Stockholders’ Equity . . . . . . . . . . . . . .
$(10,397)
Total Equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$(10,397)
Total Liabilities and Equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 6,660
100
IRON MOUNTAIN INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
DECEMBER 31, 2011
(In thousands, except share and per share data)
3. Derivative Instruments and Hedging Activities
We have entered into a number of separate forward contracts to hedge our exposures in British
pounds sterling and Australian dollars. As of December 31, 2011, we had an outstanding forward
contract to purchase $195,610 U.S. dollars and sell 125,000 British pounds sterling to hedge our
intercompany exposures with IME. In the fourth quarter of 2010, we entered into a forward contract to
hedge our exposures in Australian dollars. As of December 31, 2011, we had an outstanding forward
contract to purchase $75,065 U.S. dollars and sell 73,000 Australian dollars to hedge our intercompany
exposures with our Australian subsidiary. At the maturity of the forward contracts, we may enter into
new forward contracts to hedge movements in the underlying currencies. At the time of settlement, we
either pay or receive the net settlement amount from the forward contract and recognize this amount
in other (income) expense, net in the accompanying statement of operations as a realized foreign
exchange gain or loss. At the end of each month, we mark the outstanding forward contracts to market
and record an unrealized foreign exchange gain or loss for the mark-to-market valuation. We have not
designated these forward contracts as hedges. During the years ended December 31, 2009, 2010 and
2011, there was $2,392 in net cash disbursements, $2,030 in net cash receipts and $1,092 in net cash
disbursements, respectively, included in cash from operating activities from continuing operations
related to settlements associated with these foreign currency forward contracts. The following table
provides the fair value of our derivative instruments as of December 31, 2010 and 2011 and their gains
and losses for the years ended December 31, 2009, 2010 and 2011:
Derivatives Not Designated as Hedging Instruments
Asset Derivatives
December 31,
2010
2011
Balance Sheet
Location
Fair
Value
Balance
Sheet Location
Foreign exchange contracts . . . . . . . . . . . Current assets
$ 2,500 Current assets
Total
. . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 2,500
Fair
Value
$2,803
$2,803
Derivatives Not Designated as Hedging Instruments
Liability Derivatives
December 31,
2010
2011
Balance Sheet
Location
Fair
Value
Balance Sheet
Location
Fair
Value
Foreign exchange contracts . . . . . . . . . . . . . Current liabilities
$ 2,440 Current liabilities
$ 435
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 2,440
$ 435
Derivatives Not Designated as Hedging Instruments
Location of (Gain) Loss
Recognized in Income on
Derivative
Amount of (Gain) Loss
Recognized in Income
on Derivatives
December 31,
2009
2010
2011
Foreign exchange contracts . . . . . . . . . . . . . . . . Other expense (income), net $11,952 $2,025 $(1,209)
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$11,952 $2,025 $(1,209)
101
IRON MOUNTAIN INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
DECEMBER 31, 2011
(In thousands, except share and per share data)
3. Derivative Instruments and Hedging Activities (Continued)
We have designated a portion of our 63⁄4% Euro Senior Subordinated Notes due 2018 issued by
IMI (the ‘‘63⁄4% Notes’’) as a hedge of net investment of certain of our Euro denominated subsidiaries.
For the years ended December 31, 2009, 2010 and 2011, we designated on average 95,500, 74,750 and
86,750 Euros, respectively, of the 63⁄4% Notes as a hedge of net investment of certain of our Euro
denominated subsidiaries. As a result, we recorded foreign exchange gains of $1,863 ($989, net of tax)
related to the change in fair value of such debt due to currency translation adjustments which is a
component of accumulated other comprehensive items, net included in stockholders’ equity for the year
ended December 31, 2009. We recorded foreign exchange gains of $7,392 ($4,620, net of tax) related to
the change in fair value of such debt due to currency translation adjustments which is a component of
accumulated other comprehensive items, net included in stockholders’ equity for the year ended
December 31, 2010. We recorded foreign exchange gains of $8,634 ($5,411, net of tax) related to the
change in fair value of such debt due to currency translation adjustments which is a component of
accumulated other comprehensive items, net included in stockholders’ equity for the year ended
December 31, 2011. As of December 31, 2011, net gains of $13,390 are recorded in accumulated other
comprehensive items, net associated with this net investment hedge.
102
IRON MOUNTAIN INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
DECEMBER 31, 2011
(In thousands, except share and per share data)
4. Debt
Long-term debt consists of the following:
IMI Revolving Credit Facility(1) . . . . . . . . . . . . . . . .
IMI Term Loan Facility(1) . . . . . . . . . . . . . . . . . . . .
New Revolving Credit Facility(1) . . . . . . . . . . . . . . . .
New Term Loan Facility(1) . . . . . . . . . . . . . . . . . . . .
71⁄4% GBP Senior Subordinated Notes due 2014
December 31, 2010
December 31, 2011
Carrying
Amount
Fair
Value
Carrying
Amount
Fair
Value
$
— $
— $
396,200
—
—
396,200
—
—
— $
—
96,000
487,500
—
—
96,000
487,500
(the ‘‘71⁄4% Notes’’)(2)(3) . . . . . . . . . . . . . . . . . . .
232,530
234,855
233,115
233,115
73⁄4% Senior Subordinated Notes due 2015
(the ‘‘73⁄4% Notes due 2015’’)(2)(3) . . . . . . . . . . . .
233,234
231,683
—
—
65⁄8% Senior Subordinated Notes due 2016
(the ‘‘65⁄8% Notes’’)(2)(3) . . . . . . . . . . . . . . . . . . .
317,529
321,592
318,025
320,400
71⁄2% CAD Senior Subordinated Notes due 2017
(the ‘‘Subsidiary Notes’’)(2)(4) . . . . . . . . . . . . . . . .
175,306
182,099
171,273
174,698
83⁄4% Senior Subordinated Notes due 2018
(the ‘‘83⁄4% Notes’’)(2)(3) . . . . . . . . . . . . . . . . . . .
200,000
209,625
200,000
209,000
8% Senior Subordinated Notes due 2018
(the ‘‘8% Notes’’)(2)(3) . . . . . . . . . . . . . . . . . . . . .
49,777
53,756
49,806
47,607
63⁄4% Euro Senior Subordinated Notes due 2018
(the ‘‘63⁄4% Notes’’)(2)(3) . . . . . . . . . . . . . . . . . . .
338,129
337,631
328,750
312,352
73⁄4% Senior Subordinated Notes due 2019
(the ‘‘73⁄4% Notes due 2019’’)(2)(3) . . . . . . . . . . . .
—
—
400,000
422,750
8% Senior Subordinated Notes due 2020
(the ‘‘8% Notes due 2020’’)(2)(3) . . . . . . . . . . . . . .
300,000
316,313
300,000
313,313
83⁄8% Senior Subordinated Notes due 2021
(the ‘‘83⁄8% Notes’’)(2)(3) . . . . . . . . . . . . . . . . . . .
Real Estate Mortgages, Capital Leases and Other(5) .
548,174
217,328
589,188
217,328
548,346
220,773
586,438
220,773
Total Long-term Debt . . . . . . . . . . . . . . . . . . . . . . . .
Less Current Portion . . . . . . . . . . . . . . . . . . . . . . . .
3,008,207
(96,081)(6)
Long-term Debt, Net of Current Portion . . . . . . . . . .
$ 2,912,126
3,353,588
(73,320)
$3,280,268
(1) The capital stock or other equity interests of most of our U.S. subsidiaries, and up to 66% of the
capital stock or other equity interests of our first-tier foreign subsidiaries, are pledged to secure
these debt instruments, together with all intercompany obligations of foreign subsidiaries owed to
us or to one of our U.S. subsidiary guarantors. The fair value of this long-term debt approximates
the carrying value (as borrowings under these debt instruments are based on current variable
market interest rates as of December 31, 2010 and 2011, respectively).
103
IRON MOUNTAIN INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
DECEMBER 31, 2011
(In thousands, except share and per share data)
4. Debt (Continued)
(2) The fair values of these debt instruments are based on quoted market prices for these notes on
December 31, 2010 and 2011, respectively.
(3) Collectively, the ‘‘Parent Notes’’. IMI is the direct obligor on the Parent Notes, which are fully and
unconditionally guaranteed, on a senior subordinated basis, by substantially all of its direct and
indirect wholly owned U.S. subsidiaries (the ‘‘Guarantors’’). These guarantees are joint and several
obligations of the Guarantors. Iron Mountain Canada Corporation (‘‘Canada Company’’) and the
remainder of our subsidiaries do not guarantee the Parent Notes.
(4) Canada Company is the direct obligor on the Subsidiary Notes, which are fully and unconditionally
guaranteed, on a senior subordinated basis, by IMI and the Guarantors. These guarantees are joint
and several obligations of IMI and the Guarantors.
(5) Includes (a) real estate mortgages of $7,492 and $5,232 as of December 31, 2010 and 2011,
respectively, which bear interest at rates ranging from 2.0% to 5.5% and are payable in various
installments through 2021, (b) capital lease obligations of $200,996 and $207,300 as of
December 31, 2010 and 2011, respectively, which bear a weighted average interest rate of 5.8% as
of December 31, 2011 and (c) other various notes and other obligations, which were assumed by us
as a result of certain acquisitions, of $8,840 and $8,241 as of December 31, 2010 and 2011,
respectively, and bear a weighted average interest rate of 8.7% as of December 31, 2011. We
believe the fair value of this debt approximates its carrying value.
(6) Includes $51,694 associated with the 73⁄4% Notes which we fully redeemed in January 2011. This
amount represents the portion of the redemption funded with cash on-hand. The remaining funds
were drawn under the revolving credit facility.
a. Revolving Credit Facility and Term Loans
On June 27, 2011, we entered into a new credit agreement to replace the IMI revolving credit
facility and the IMI term loan facility, each entered into on April 16, 2007. The new credit agreement
consists of (i) revolving credit facilities under which we can borrow, subject to certain limitations as
defined in the new credit agreement, up to an aggregate amount of $725,000 (including Canadian
dollars, British pounds sterling and Euros, among other currencies) (the ‘‘New Revolving Credit
Facility’’) and (ii) a $500,000 term loan facility (the ‘‘New Term Loan Facility,’’ and collectively with the
New Revolving Credit Facility, the ‘‘New Credit Agreement’’). We have the right to increase the
aggregate amount available to be borrowed under the New Credit Agreement up to a maximum of
$1,800,000. The New Revolving Credit Facility is supported by a group of 19 banks. IMI, Iron
Mountain Information Management, Inc. (‘‘IMIM’’), Canada Company, IME, Iron Mountain Australia
Pty Ltd., Iron Mountain Switzerland Gmbh and any other subsidiary of IMIM designated by IMIM (the
‘‘Other Subsidiaries’’) may, with the consent of the administrative agent, as defined in the New Credit
Agreement, borrow under certain of the following tranches of the New Revolving Credit Facility:
(a) tranche one in the amount of $400,000 is available to IMI and IMIM in U.S. dollars, British pounds
sterling and Euros, (b) tranche two in the amount of $150,000 is available to IMI or IMIM in either
U.S. dollars or Canadian dollars and available to Canada Company in Canadian dollars and (c) tranche
three in the amount of $175,000 is available to IMI or IMIM and the Other Subsidiaries in U.S.
dollars, Canadian dollars, British pounds sterling, Euros and Australian dollars, among others. The New
104
IRON MOUNTAIN INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
DECEMBER 31, 2011
(In thousands, except share and per share data)
4. Debt (Continued)
Revolving Credit Facility terminates on June 27, 2016, at which point all revolving credit loans under
such facility become due. With respect to the New Term Loan Facility, loan payments are required
through maturity on June 27, 2016 in equal quarterly installments of the aggregate annual amounts
based upon the following percentage of the original principal amount in the table below (except that
each of the first three quarterly installments in the fifth year shall be 10% of the original principal
amount and the final quarterly installment in the fifth year shall be 35% of the original principal):
Year Ending
June 30, 2012 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
June 30, 2013 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
June 30, 2014 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
June 30, 2015 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
June 27, 2016 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Percentage
5%
5%
10%
15%
65%
The New Term Loan Facility may be prepaid without penalty or premium, in whole or in part, at
any time. IMI and IMIM guarantee the obligations of each of the subsidiary borrowers. The capital
stock or other equity interests of most of the U.S. subsidiaries, and up to 66% of the capital stock or
other equity interests of our first-tier foreign subsidiaries, are pledged to secure the New Credit
Agreement, together with all intercompany obligations of foreign subsidiaries owed to us or to one of
our U.S. subsidiary guarantors. The interest rate on borrowings under the New Credit Agreement
varies depending on our choice of interest rate and currency options, plus an applicable margin, which
varies based on certain financial ratios. Additionally, the New Credit Agreement requires the payment
of a commitment fee on the unused portion of the revolving credit facility, which fee ranges from
between 0.3% to 0.5% based on certain financial ratios, as well as fees associated with any outstanding
letters of credit. Proceeds from the New Credit Agreement are for general corporate purposes and
were used to repay the previous revolving credit and term loan facilities. We recorded a charge of
$1,843 to other expense (income), net in the second quarter of 2011 related to the early retirement of
the previous revolving credit and term loan facilities, representing a write-off of deferred financings
costs. As of December 31, 2011, we had $96,000 of outstanding borrowings under the New Revolving
Credit Facility, all of which was denominated in U.S. dollars; we also had various outstanding letters of
credit totaling $5,833. The remaining availability on December 31, 2011, based on IMI’s leverage ratio,
which is calculated based on the last 12 months’ earnings before interest, taxes, depreciation and
amortization (‘‘EBITDA’’), and other adjustments as defined in the New Credit Agreement and current
external debt, under the New Revolving Credit Facility was $623,167. The interest rate in effect under
the New Revolving Credit Facility and New Term Loan Facility was 4.0% and 2.3%, respectively, as of
December 31, 2011. For the years ended December 31, 2009, 2010 and 2011, we recorded commitment
fees of $1,953, $2,348 and $2,038, respectively, based on the unused balances under our revolving credit
facilities.
The New Credit Agreement, our indentures and other agreements governing our indebtedness
contain certain restrictive financial and operating covenants, including covenants that restrict our ability
to complete acquisitions, pay cash dividends, incur indebtedness, make investments, sell assets and take
certain other corporate actions. The covenants do not contain a rating trigger. Therefore, a change in
our debt rating would not trigger a default under the New Credit Agreement, our indentures or other
105
IRON MOUNTAIN INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
DECEMBER 31, 2011
(In thousands, except share and per share data)
4. Debt (Continued)
agreements governing our indebtedness. The New Credit Agreement, as well as our indentures, use
EBITDA-based calculations as primary measures of financial performance, including leverage and fixed
charge coverage ratios. IMI’s revolving credit and term leverage ratio was 2.9 and 3.4 as of
December 31, 2010 and 2011, respectively, compared to a maximum allowable ratio of 5.5. Similarly,
our bond leverage ratio, per the indentures, was 3.4 and 3.9 as of December 31, 2010 and 2011,
respectively, compared to a maximum allowable ratio of 6.5. IMI’s revolving credit and term loan fixed
charge coverage ratio was 1.5 as of December 31, 2011, compared to a minimum allowable ratio of 1.2.
Noncompliance with these leverage and fixed charge coverage ratios would have a material adverse
effect on our financial condition and liquidity. In the fourth quarter of 2007, we designated as Excluded
Restricted Subsidiaries (as defined in the indentures), certain of our subsidiaries that own our assets
and conduct our operations in the United Kingdom. As a result of such designation, these subsidiaries
are now subject to substantially all of the covenants of the indentures, except that they are not required
to provide a guarantee, and the EBITDA and debt of these subsidiaries is included for purposes of
calculating the leverage ratio.
b. Notes Issued under Indentures
As of December 31, 2011, we had nine series of senior subordinated notes issued under various
indentures, eight are direct obligations of the parent company, IMI; one (the Subsidiary Notes) is a
direct obligation of Canada Company; and all are subordinated to debt outstanding under the Credit
Agreement:
(cid:127) 150,000 British pounds sterling principal amount of notes maturing on April 15, 2014 and
bearing interest at a rate of 71⁄4% per annum, payable semi-annually in arrears on April 15 and
October 15;
(cid:127) $320,000 principal amount of notes maturing on January 1, 2016 and bearing interest at a rate of
65⁄8% per annum, payable semi-annually in arrears on January 1 and July 1;
(cid:127) 175,000 CAD principal amount of notes maturing on March 15, 2017 and bearing interest at a
rate of 71⁄2% per annum, payable semi-annually in arrears on March 15 and September 15 (the
‘‘Subsidiary Notes’’);
(cid:127) $200,000 principal amount of notes maturing on July 15, 2018 and bearing interest at a rate of
83⁄4% per annum, payable semi-annually in arrears on January 15 and July 15;
(cid:127) $50,000 principal amount of notes maturing on October 15, 2018 and bearing interest at a rate
of 8% per annum, payable semi-annually in arrears on April 15 and October 15;
(cid:127) 255,000 Euro principal amount of notes maturing on October 15, 2018 and bearing interest at a
rate of 63⁄4% per annum, payable semi-annually in arrears on April 15 and October 15;
(cid:127) $400,000 principal amount of notes maturing on October 1, 2019 and bearing interest at a rate
of 73⁄4% per annum, payable semi-annually in arrears on April 1 and October 1;
(cid:127) $300,000 principal amount of notes maturing on June 15, 2020 and bearing interest at a rate of
8% per annum, payable semi-annually in arrears on June 15 and December 15; and
106
IRON MOUNTAIN INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
DECEMBER 31, 2011
(In thousands, except share and per share data)
4. Debt (Continued)
(cid:127) $550,000 principal amount of notes maturing on August 15, 2021 and bearing interest at a rate
of 83⁄8% per annum, payable semi-annually in arrears on February 15 and August 15.
The Parent Notes and the Subsidiary Notes are fully and unconditionally guaranteed, on a senior
subordinated basis, by substantially all of our direct and indirect wholly owned U.S. subsidiaries (the
‘‘Guarantors’’). These guarantees are joint and several obligations of the Guarantors. The remainder of
our subsidiaries do not guarantee the senior subordinated notes. Additionally, IMI guarantees the
Subsidiary Notes. Canada Company does not guarantee the Parent Notes.
In September 2011, we completed an underwritten public offering of $400,000 in aggregate
principal amount of our 73⁄4% Senior Subordinated Notes due 2019, which were issued at 100% of par.
Our net proceeds of $394,000 after paying the underwriters’ discounts and commissions, were used for
general corporate purposes, including funding a portion of the stockholder payout commitments we
have made.
We recorded a charge to other expense (income), net of $3,031 in the third quarter of 2009 related
to the early extinguishment of our 85⁄8% Senior Subordinated Notes due 2013 (the ‘‘85⁄8% Notes’’),
which consists of deferred financing costs and original issue premiums and discounts related to the
85⁄8% Notes. In September 2010, we redeemed $200,000 of the $431,255 aggregate principal amount
outstanding of our 73⁄4% Notes due 2015 at a redemption price of $1,012.92 for each one thousand
dollars of principal amount of notes redeemed, plus accrued and unpaid interest. We recorded a charge
to other expense (income), net of $1,792 in the third quarter of 2010 related to the early
extinguishment of our 73⁄4% Notes due 2015 that were redeemed. This charge consists of the call
premium and deferred financing costs, net of original issue premiums related to our 73⁄4% Notes due
2015 that were redeemed. In January 2011, we redeemed the remaining $231,255 aggregate principal
amount outstanding of our 73⁄4% Notes due 2015 at a redemption price of one thousand dollars for
each one thousand dollars of principal amount of notes redeemed, plus accrued and unpaid interest.
We recorded a gain to other expense (income), net of $850 in the first quarter of 2011 related to the
early extinguishment of our 73⁄4% Notes due 2015 that were redeemed. This gain consists of original
issue premiums, net of deferred financing costs related to our 73⁄4% Notes due 2015 that were
redeemed.
Each of the indentures for the notes provides that we may redeem the outstanding notes, in whole
or in part, upon satisfaction of certain terms and conditions. In any redemption, we are also required
to pay all accrued but unpaid interest on the outstanding notes.
The following table presents the various redemption dates and prices of the senior subordinated
notes. The redemption dates reflect the date at or after which the notes may be redeemed at our
107
IRON MOUNTAIN INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
DECEMBER 31, 2011
(In thousands, except share and per share data)
4. Debt (Continued)
option at a premium redemption price. After these dates, the notes may be redeemed at 100% of face
value:
Redemption
Date
71⁄4% Notes
April 15,
65⁄8% Notes
July 1,
71⁄2% Notes
March 15,
83⁄4% Notes
8% Notes
63⁄4% Notes
73⁄4%
Notes
8% Notes
83⁄8%
Notes
July 15, October 15, October 15, October 1, June 15, August 15,
2011 . . . . . . .
2012 . . . . . . .
2013 . . . . . . .
2014 . . . . . . .
2015 . . . . . . .
2016 . . . . . . .
2017 . . . . . . .
2018 . . . . . . .
—
101.208% 100.000%
104.375% 104.000% 103.375%
100.000% 100.000% 103.750% 102.917% 102.667% 102.250%
100.000% 100.000% 102.500% 101.458% 101.333% 101.125%
100.000% 100.000% 101.250% 100.000% 100.000% 100.000%
—
—
— 104.000%
— 102.667% 104.188%
100.000% 100.000% 100.000% 100.000% 100.000% 103.875% 101.333% 102.792%
100.000% 100.000% 100.000% 100.000% 100.000% 101.938% 100.000% 101.396%
100.000% 100.000% 100.000% 100.000% 100.000% 100.000% 100.000%
100.000% 100.000% 100.000% 100.000% 100.000% 100.000%
—
—
—
—
—
—
—
—
—
—
—
—
Prior to June 15, 2013, the 8% Notes due 2020 are redeemable at our option, in whole or in part,
at a specified make-whole price.
Prior to August 15, 2014, the 83⁄8% Notes are redeemable at our option, in whole or in part, at a
specified make-whole price.
Prior to October 1, 2015, the 73⁄4% Notes due 2019 are redeemable at our option, in whole or in
part, at a specified make-whole price.
Each of the indentures for the notes provides that we must repurchase, at the option of the
holders, the notes at 101% of their principal amount, plus accrued and unpaid interest, upon the
occurrence of a ‘‘Change of Control,’’ which is defined in each respective indenture. Except for
required repurchases upon the occurrence of a Change of Control or in the event of certain asset sales,
each as described in the respective indenture, we are not required to make sinking fund or redemption
payments with respect to any of the notes.
Our indentures and other agreements governing our indebtedness contain certain restrictive
financial and operating covenants including covenants that restrict our ability to complete acquisitions,
pay cash dividends, incur indebtedness, make investments, sell assets and take certain other corporate
actions. The covenants do not contain a rating trigger. Therefore, a change in our debt rating would
not trigger a default under our indentures or other agreements governing our indebtedness.
108
IRON MOUNTAIN INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
DECEMBER 31, 2011
(In thousands, except share and per share data)
4. Debt (Continued)
Maturities of long-term debt are as follows:
Year
2012 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2013 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2014 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2015 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2016 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Thereafter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net Premiums (Discounts) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Amount
$
73,320
79,195
321,177
154,030
652,318
2,079,155
3,359,195
(5,607)
Total Long-term Debt (including current portion) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$3,353,588
5. Selected Consolidated Financial Statements of Parent, Guarantors, Canada Company and
Non-Guarantors
The following data summarizes the consolidating results of IMI on the equity method of
accounting as of December 31, 2010 and 2011 and for the years ended December 31, 2009, 2010 and
2011.
The Parent Notes and the Subsidiary Notes are guaranteed by the subsidiaries referred to below as
the ‘‘Guarantors.’’ These subsidiaries are wholly owned by the Parent. The guarantees are full and
unconditional, as well as joint and several.
Additionally, IMI guarantees the Subsidiary Notes, which were issued by Canada Company.
Canada Company does not guarantee the Parent Notes. The other subsidiaries that do not guarantee
the Parent Notes or the Subsidiary Notes are referred to below as the ‘‘Non-Guarantors.’’
109
IRON MOUNTAIN INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
DECEMBER 31, 2011
(In thousands, except share and per share data)
5. Selected Consolidated Financial Statements of Parent, Guarantors, Canada Company and
Non-Guarantors (Continued)
Parent
Guarantors
December 31, 2010
Canada
Company
Non-
Guarantors
Eliminations
Consolidated
Assets
Current Assets:
Cash and Cash Equivalents . . . . . . .
Restricted Cash . . . . . . . . . . . . . .
Accounts Receivable . . . . . . . . . . .
Intercompany Receivable . . . . . . . .
Assets of Discontinued Operations . .
. . . . . . . . . .
Other Current Assets
Total Current Assets . . . . . . . . . .
Property, Plant and Equipment, Net . . .
Other Assets, Net:
Long-term Notes Receivable from
Affiliates and Intercompany
Receivable . . . . . . . . . . . . . . . .
Investment in Subsidiaries . . . . . . . .
Goodwill
. . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . .
Other
Assets of Discontinued Operations . .
$
13,909
35,105
—
1,344,802
—
2,601
1,396,417
—
$ 121,584
—
327,842
—
184,790
128,341
762,557
1,522,073
1,381,546
1,853,560
—
27,304
—
1,000
1,599,133
1,525,960
236,497
—
Total Other Assets, Net . . . . . . . .
3,262,410
3,362,590
$ 37,652
—
41,562
9,281
—
10,878
99,373
208,020
—
—
203,345
13,601
—
216,946
$
85,548
—
154,922
—
28,418
39,310
308,198
738,151
$
—
—
—
(1,354,083)
—
—
(1,354,083)
—
$ 258,693
35,105
524,326
—
213,208
181,130
1,212,462
2,468,244
—
—
550,256
159,352
19,486
729,094
(1,382,546)
(3,452,693)
—
(114)
—
—
—
2,279,561
436,640
19,486
(4,835,353)
2,735,687
Total Assets . . . . . . . . . . . . . . .
$4,658,827
$5,647,220
$524,339
$1,775,443
$(6,189,436)
$6,416,393
Liabilities and Equity
Intercompany Payable . . . . . . . . . . . .
Current Portion of Long-term Debt . . .
Total Other Current Liabilities . . . . . .
Liabilities of Discontinued Operations
.
Long-term Debt, Net of Current
$
— $1,325,593
24,393
405,299
53,374
56,407
92,339
—
$
—
2,606
42,614
—
$
28,490
12,675
176,896
8,100
$(1,354,083)
—
—
—
$
—
96,081
717,148
61,474
Portion . . . . . . . . . . . . . . . . . . . .
2,559,780
67,504
191,010
Long-term Notes Payable to Affiliates
and Intercompany Payable . . . . . . .
Other Long-term Liabilities . . . . . . . .
Liabilities of Discontinued Operations
.
Commitments and Contingencies
(See Note 10)
Total Iron Mountain Incorporated
1,000
3,853
—
1,381,546
551,961
—
—
27,585
—
93,832
—
91,644
1,770
—
2,912,126
(1,382,546)
(114)
—
—
674,929
1,770
Stockholders’ Equity . . . . . . . . . .
Noncontrolling Interests . . . . . . . . .
1,945,448
—
1,837,550
—
Total Equity . . . . . . . . . . . . . . .
1,945,448
1,837,550
260,524
—
260,524
1,354,619
7,417
1,362,036
(3,452,693)
—
1,945,448
7,417
(3,452,693)
1,952,865
Total Liabilities and Equity . . . . .
$4,658,827
$5,647,220
$524,339
$1,775,443
$(6,189,436)
$6,416,393
110
IRON MOUNTAIN INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
DECEMBER 31, 2011
(In thousands, except share and per share data)
5. Selected Consolidated Financial Statements of Parent, Guarantors, Canada Company and
Non-Guarantors (Continued)
Parent
Guarantors
December 31, 2011
Canada
Company Guarantors
Non-
Eliminations
Consolidated
Assets
Current Assets:
Cash and Cash Equivalents
. . . . . . .
Restricted Cash . . . . . . . . . . . . . . .
Accounts Receivable . . . . . . . . . . . .
Intercompany Receivable . . . . . . . . .
Assets of Discontinued Operations . . .
Other Current Assets . . . . . . . . . . .
Total Current Assets . . . . . . . . . .
Property, Plant and Equipment, Net . . .
Other Assets, Net:
Long-term Notes Receivable from
Affiliates and Intercompany
Receivable . . . . . . . . . . . . . . . .
Investment in Subsidiaries . . . . . . . .
Goodwill . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . .
$
3,428
35,110
—
905,451
—
2,016
946,005
1,490
$
10,750
—
334,658
—
—
103,899
449,307
1,480,785
928,182
1,828,712
—
27,226
1,000
1,563,690
1,529,359
240,557
Total Other Assets, Net
. . . . . . . .
2,784,120
3,334,606
$ 68,907
—
40,115
4,639
—
3,323
116,984
200,755
2,961
—
196,989
9,804
209,754
$
96,760
—
168,694
—
7,256
40,538
313,248
724,053
$
—
—
—
(910,090)
—
(1,004)
(911,094)
—
$ 179,845
35,110
543,467
—
7,256
148,772
914,450
2,407,083
15,010
—
527,920
187,870
730,800
(947,153)
(3,392,402)
—
—
—
2,254,268
465,457
(4,339,555)
2,719,725
Total Assets . . . . . . . . . . . . . . . .
$3,731,615
$5,264,698
$527,493
$1,768,101
$(5,250,649)
$6,041,258
Liabilities and Equity
Intercompany Payable . . . . . . . . . . . .
Current Portion of Long-term Debt
. . .
Total Other Current Liabilities . . . . . . .
Liabilities of Discontinued Operations . .
Long-term Debt, Net of Current Portion
Long-term Notes Payable to Affiliates
and Intercompany Payable . . . . . . . .
Other Long-term Liabilities . . . . . . . . .
Commitments and Contingencies (See
Note 10)
Total Iron Mountain Incorporated
$
— $ 856,808
46,967
658
453,648
100,921
—
—
630,118
2,378,040
1,000
5,308
946,153
528,897
$
— $
2,658
31,407
—
185,953
—
31,418
53,282
23,037
187,421
3,317
86,157
—
92,081
$ (910,090)
—
(1,004)
—
—
(947,153)
$
—
73,320
772,393
3,317
3,280,268
—
657,704
Stockholders’ Equity . . . . . . . . . .
Noncontrolling Interests . . . . . . . . .
1,245,688
—
1,802,107
—
Total Equity . . . . . . . . . . . . . . .
1,245,688
1,802,107
276,057
—
276,057
1,314,238
8,568
1,322,806
(3,392,402)
—
1,245,688
8,568
(3,392,402)
1,254,256
Total Liabilities and Equity . . . . . .
$3,731,615
$5,264,698
$527,493
$1,768,101
$(5,250,649)
$6,041,258
111
IRON MOUNTAIN INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
DECEMBER 31, 2011
(In thousands, except share and per share data)
5. Selected Consolidated Financial Statements of Parent, Guarantors, Canada Company and
Non-Guarantors (Continued)
Year Ended December 31, 2009
Parent
Guarantors
Canada
Company Guarantors
Non-
Eliminations
Consolidated
Revenues:
Storage . . . . . . . . . . . . . . . . . . . .
Service . . . . . . . . . . . . . . . . . . . .
$
— $1,094,221
822,907
—
$ 93,244
96,764
$ 346,327
320,921
$
Total Revenues . . . . . . . . . . . . . .
—
1,917,128
190,008
667,248
Operating Expenses:
and Amortization)
Cost of Sales (Excluding Depreciation
. . . . . . . . . . .
Selling, General and Administrative . .
Depreciation and Amortization . . . . .
Loss (Gain) on Disposal/Write-down
of Property, Plant and Equipment,
Net . . . . . . . . . . . . . . . . . . . . .
Total Operating Expenses . . . . . . .
—
92
231
—
323
778,296
523,698
189,990
80,205
32,127
15,717
1,205
123
1,493,189
128,172
Operating (Loss) Income . . . . . . . . . .
Interest Expense (Income), Net . . . . . .
Other Expense (Income), Net . . . . . . .
(323)
202,947
44,642
423,939
(41,320)
(5,131)
61,836
42,066
(2)
343,370
194,017
71,248
(1,160)
607,475
59,773
8,852
(52,108)
(Loss) Income from Continuing
Operations
Before Provision (Benefit) for Income
Taxes . . . . . . . . . . . . . . . . . . . .
Provision (Benefit) for Income Taxes . . .
Equity in the (Earnings) Losses of
(247,912)
—
470,390
100,409
19,772
3,624
103,029
9,729
—
—
—
—
—
—
—
—
—
—
—
—
—
$1,533,792
1,240,592
2,774,384
1,201,871
749,934
277,186
168
2,229,159
545,225
212,545
(12,599)
345,279
113,762
Subsidiaries, Net of Tax . . . . . . . . . .
(465,862)
(102,601)
—
—
568,463
—
Income (Loss) from Continuing
Operations . . . . . . . . . . . . . . . . . .
217,950
472,582
16,148
93,300
(568,463)
231,517
(Loss) Income from Discontinued
Operations . . . . . . . . . . . . . . . . . .
Net Income (Loss) . . . . . . . . . . . . . .
Less: Net Income (Loss) Attributable
to Noncontrolling Interests . . . . . .
Net Income (Loss) Attributable to Iron
—
217,950
(10,168)
462,414
—
16,148
(1,970)
91,330
—
(568,463)
(12,138)
219,379
—
—
—
1,429
—
1,429
Mountain Incorporated . . . . . . . . . .
$ 217,950
$ 462,414
$ 16,148
$
89,901
$ (568,463)
$ 217,950
112
IRON MOUNTAIN INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
DECEMBER 31, 2011
(In thousands, except share and per share data)
5. Selected Consolidated Financial Statements of Parent, Guarantors, Canada Company and
Non-Guarantors (Continued)
Year Ended December 31, 2010
Parent
Guarantors
Canada
Company Guarantors
Non-
Eliminations
Consolidated
Revenues:
Storage . . . . . . . . . . . . . . . . . . . .
Service . . . . . . . . . . . . . . . . . . . .
$
— $1,113,674
836,443
—
$110,768
113,498
$ 374,276
343,690
$
Total Revenues . . . . . . . . . . . . . .
—
1,950,117
224,266
717,966
Operating Expenses:
and Amortization)
Cost of Sales (Excluding Depreciation
. . . . . . . . . . .
Selling, General and Administrative . .
Depreciation and Amortization . . . . .
Intangible Impairments . . . . . . . . . .
(Gain) Loss on Disposal/Write-down
of Property, Plant and Equipment,
Net . . . . . . . . . . . . . . . . . . . . .
Total Operating Expenses . . . . . . .
—
68
223
—
—
291
746,479
516,664
201,534
84,611
86,352
36,587
18,818
—
(1,039)
196
1,548,249
141,953
Operating (Loss) Income . . . . . . . . . .
Interest Expense (Income), Net . . . . . .
Other (Income) Expense, Net . . . . . . .
(291)
194,689
(22,662)
401,868
(41,770)
(1,882)
82,313
44,898
18
360,031
219,492
83,630
1,298
(10,144)
654,307
63,659
6,742
33,294
(Loss) Income from Continuing
Operations Before Provision (Benefit)
for Income Taxes . . . . . . . . . . . . . .
Provision (Benefit) for Income Taxes . . .
Equity in the (Earnings) Losses of
(172,318)
—
445,520
151,329
37,397
11,142
23,623
5,012
—
—
—
—
—
—
—
—
—
—
—
—
—
—
$1,598,718
1,293,631
2,892,349
1,192,862
772,811
304,205
85,909
(10,987)
2,344,800
547,549
204,559
8,768
334,222
167,483
Subsidiaries, Net of Tax . . . . . . . . . .
(114,732)
(34,014)
—
—
148,746
—
(Loss) Income from Continuing
Operations . . . . . . . . . . . . . . . . . .
(57,586)
328,205
26,255
18,611
(148,746)
166,739
(Loss) Income from Discontinued
Operations . . . . . . . . . . . . . . . . . .
—
(215,479)
—
(57,586)
112,726
26,255
(3,938)
14,673
—
(148,746)
(219,417)
(52,678)
—
—
—
4,908
—
4,908
Net (Loss) Income . . . . . . . . . . . . . .
Less: Net Income (Loss) Attributable
to Noncontrolling Interests . . . . . .
Net (Loss) Income Attributable to Iron
Mountain Incorporated . . . . . . . . . .
$ (57,586)
$ 112,726
$ 26,255
$
9,765
$ (148,746)
$ (57,586)
113
IRON MOUNTAIN INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
DECEMBER 31, 2011
(In thousands, except share and per share data)
5. Selected Consolidated Financial Statements of Parent, Guarantors, Canada Company and
Non-Guarantors (Continued)
Year Ended December 31, 2011
Parent
Guarantors
Canada
Company Guarantors
Non-
Eliminations
Consolidated
Revenues:
Storage . . . . . . . . . . . . . . . . . . . .
Service . . . . . . . . . . . . . . . . . . . .
$
— $1,132,743
833,652
—
$120,476
115,973
$ 429,771
382,088
$
Total Revenues . . . . . . . . . . . . . .
—
1,966,395
236,449
811,859
Operating Expenses:
and Amortization)
Cost of Sales (Excluding Depreciation
. . . . . . . . . . .
Selling, General and Administrative . .
Depreciation and Amortization . . . . .
Intangible Impairments . . . . . . . . . .
(Gain) Loss on Disposal/Write-down
of Property, Plant and Equipment,
Net . . . . . . . . . . . . . . . . . . . . .
Total Operating Expenses . . . . . . .
Operating (Loss) Income . . . . . . . . . .
Interest Expense (Income), Net . . . . . .
Other (Income) Expense, Net . . . . . . .
(Loss) Income from Continuing
Operations Before Provision (Benefit)
for Income Taxes . . . . . . . . . . . . . .
Provision (Benefit) for Income Taxes . . .
Equity in the (Earnings) Losses of
2,000
(1,885)
457
—
—
572
(572)
173,738
(3,944)
760,300
548,848
192,551
—
91,249
38,965
18,685
—
391,651
248,663
107,806
46,500
(1,120)
(420)
(746)
1,500,579
148,479
793,874
465,816
(24,055)
7,561
87,970
44,559
315
17,985
11,014
9,111
(170,366)
—
482,310
86,139
43,096
20,681
(2,140)
(332)
—
—
—
—
—
—
—
—
—
—
—
—
—
—
$1,682,990
1,331,713
3,014,703
1,245,200
834,591
319,499
46,500
(2,286)
2,443,504
571,199
205,256
13,043
352,900
106,488
Subsidiaries, Net of Tax . . . . . . . . . .
(565,904)
23,069
—
—
542,835
—
Income (Loss) from Continuing
Operations . . . . . . . . . . . . . . . . . .
395,538
373,102
22,415
(1,808)
(542,835)
246,412
(Loss) Income from Discontinued
Operations . . . . . . . . . . . . . . . . . .
Gain (Loss) on Sale of Discontinued
Operations . . . . . . . . . . . . . . . . . .
Net (Loss) Income . . . . . . . . . . . . . .
Less: Net Income (Loss) Attributable
to Noncontrolling Interests . . . . . .
Net (Loss) Income Attributable to Iron
—
—
395,538
(17,350)
198,735
554,487
—
—
(30,089)
1,884
—
—
22,415
(30,013)
(542,835)
(47,439)
200,619
399,592
—
—
—
4,054
—
4,054
Mountain Incorporated . . . . . . . . . .
$ 395,538
$ 554,487
$ 22,415
$ (34,067)
$ (542,835)
$ 395,538
114
IRON MOUNTAIN INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
DECEMBER 31, 2011
(In thousands, except share and per share data)
5. Selected Consolidated Financial Statements of Parent, Guarantors, Canada Company and
Non-Guarantors (Continued)
.
.
.
.
.
.
Cash Flows from Operating Activities:
Cash Flows from Operating Activities-
.
Cash Flows from Operating Activities-
.
Discontinued Operations
Continuing Operations .
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
Cash Flows from Operating Activities
Cash Flows from Investing Activities:
.
acquired .
Capital expenditures .
.
Cash paid for acquisitions, net of cash
.
.
.
.
.
.
.
Intercompany loans to subsidiaries .
.
.
.
Investment in subsidiaries .
Additions to customer relationship and
.
.
.
.
Investments in joint ventures .
.
Proceeds from sales of property and
.
equipment and other, net .
acquisition costs .
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
Cash Flows from Investing Activities-
.
Continuing Operations .
.
Cash Flows from Investing Activities-
.
Discontinued Operations
.
.
.
.
.
.
.
.
.
.
Cash Flows from Investing Activities .
Cash Flows from Financing Activities:
.
.
.
.
.
.
.
facilities and other debt .
facilities and other debt .
Repayment of revolving credit and term loan
.
Proceeds from revolving credit and term loan
.
Early retirement of senior subordinated notes
Net proceeds from sale of senior
.
.
Debt financing (repayment to) and equity
subordinated notes .
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
contribution from (distribution to)
.
.
noncontrolling interests, net
.
.
.
Intercompany loans from parent
Equity contribution from parent
.
.
Proceeds from exercise of stock options and
.
employee stock purchase plan .
.
Excess tax benefits from stock-based
.
.
.
.
Payment of debt financing costs
compensation .
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
Continuing Operations
Cash Flows from Financing Activities-
.
Cash Flows from Financing Activities-
.
Discontinued Operations .
.
.
.
.
.
.
.
.
.
.
Cash Flows from Financing Activities .
Effect of exchange rates on cash and cash
.
.
equivalents
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
Increase (Decrease) in cash and cash
.
.
.
.
.
Cash and cash equivalents, beginning of period .
equivalents
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
Cash and cash equivalents, end of period .
.
.
.
$
Year Ended December 31, 2009
Parent
Guarantors
Canada
Company Guarantors
Non-
Eliminations
Consolidated
$ (186,314)
$ 602,593
$ 38,154
$ 132,137
$
—
(186,314)
31,470
634,063
—
38,154
(1,129)
131,008
—
(153,995)
(22,042)
(111,880)
—
284,604
(164,256)
(256)
17,807
(164,256)
—
—
—
(6,711)
—
3,717
—
—
—
(520)
—
45
(1,262)
—
—
(3,510)
(3,114)
829
120,348
(303,694)
(22,517)
(118,937)
—
(20,261)
—
(5,106)
120,348
(323,955)
(22,517)
(124,043)
(54,150)
(18,438)
(192,097)
(18,633)
—
(447,874)
539,688
—
—
—
—
—
—
—
—
—
—
(283,974)
164,256
—
5,751
156,655
24,233
5,532
(1,463)
—
—
—
—
—
(37)
33,944
—
—
1,064
(24,188)
7,601
—
—
(55)
—
—
—
—
—
(302,411)
328,512
—
—
—
26,101
—
26,101
—
—
—
—
—
302,411
(328,512)
—
—
—
$ 586,570
30,341
616,911
(287,917)
(1,518)
—
—
(10,741)
(3,114)
4,591
(298,699)
(25,367)
(324,066)
(283,318)
33,944
(447,874)
539,688
1,064
—
—
24,233
5,532
(1,555)
65,966
(138,156)
(29,728)
(267)
(26,101)
(128,286)
—
—
—
65,966
(138,156)
(29,728)
—
928
171,952
210,636
(13,163)
17,069
—
—
—
—
(1,406)
(1,673)
4,205
9,497
50,665
$ 382,588
$
3,906
$
60,162
$
115
—
(26,101)
—
—
—
—
(1,406)
(129,692)
5,133
168,286
278,370
$ 446,656
IRON MOUNTAIN INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
DECEMBER 31, 2011
(In thousands, except share and per share data)
5. Selected Consolidated Financial Statements of Parent, Guarantors, Canada Company and
Non-Guarantors (Continued)
Cash Flows from Operating Activities:
Continuing Operations
Cash Flows from Operating Activities-
.
Cash Flows from Operating Activities-
.
Discontinued Operations .
.
.
.
.
.
.
.
.
.
.
.
.
Cash Flows from Operating Activities .
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
Cash Flows from Investing Activities:
.
acquired .
Capital expenditures .
.
Cash paid for acquisitions, net of cash
.
.
.
.
.
.
.
Intercompany loans to subsidiaries .
.
.
.
.
Investment in subsidiaries .
Investment in restricted cash .
.
.
.
Additions to customer relationship and
.
.
Proceeds from sales of property and
.
equipment and other, net .
acquisition costs .
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
Continuing Operations
Cash Flows from Investing Activities-
.
Cash Flows from Investing Activities-
.
Discontinued Operations .
.
.
.
.
.
.
.
.
.
.
Cash Flows from Investing Activities .
Cash Flows from Financing Activities:
facilities and other debt .
Repayment of revolving credit and term loan
.
Proceeds from revolving credit and term loan
.
Early retirement of senior subordinated notes
Debt financing (repayment to) and equity
facilities and other debt .
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
contribution from (distribution to)
.
.
noncontrolling interests, net
.
.
.
Intercompany loans from parent
.
.
Equity contribution from parent
.
.
.
Stock repurchases
.
Parent cash dividends
.
.
.
Proceeds from exercise of stock options and
.
employee stock purchase plan .
.
Excess tax benefits from stock-based
.
.
compensation .
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
Continuing Operations
Cash Flows from Financing Activities-
.
Cash Flows from Financing Activities-
.
Discontinued Operations .
.
.
.
.
.
.
.
.
.
.
Cash Flows from Financing Activities .
Effect of exchange rates on cash and cash
.
.
equivalents
.
.
.
.
.
.
.
.
.
.
.
.
.
.
Increase (Decrease) in cash and cash
.
.
.
.
.
Cash and cash equivalents, beginning of period .
equivalents
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
Year Ended December 31, 2010
Parent
Guarantors
Canada
Company Guarantors
Non-
Eliminations
Consolidated
$ (180,588)
$ 578,159
$ 56,113
$ 149,545
$
—
(180,588)
19,347
597,506
—
56,113
2,564
152,109
—
(137,937)
(16,593)
(104,319)
—
577,316
(10,258)
(35,102)
—
—
(1,970)
34,465
(35,124)
—
(9,332)
5,867
(3,705)
—
—
—
(594)
93
(8,166)
—
—
—
(3,276)
16,576
—
—
—
—
—
(611,781)
45,382
—
—
—
$ 603,229
21,911
625,140
(258,849)
(13,841)
—
—
(35,102)
(13,202)
22,536
531,956
(144,031)
(20,799)
(99,185)
(566,399)
(298,458)
(1,796)
(129,972)
—
(6,036)
3,592
530,160
(274,003)
(20,799)
(105,221)
(562,807)
(4,100)
(24,226)
(2,504)
(71,054)
—
(202,584)
—
—
—
(111,563)
(37,893)
18,225
2,252
—
—
—
(572,335)
10,258
—
—
—
—
—
—
—
122
—
—
—
—
—
53,567
—
169
(39,568)
35,124
—
—
—
—
—
—
—
—
611,781
(45,382)
—
—
—
—
(134,212)
(432,670)
(101,884)
53,567
(202,584)
169
—
—
(111,563)
(37,893)
18,225
2,252
(335,663)
(586,303)
(2,382)
(21,762)
566,399
(379,711)
—
1,796
—
273
(335,663)
(584,507)
(2,382)
(21,489)
(3,592)
562,807
—
—
814
(13)
13,909
—
(261,004)
382,588
33,746
3,906
25,386
60,162
(1,523)
(381,234)
801
(187,963)
446,656
$ 258,693
—
—
—
—
Cash and cash equivalents, end of period .
.
.
.
$
13,909
$ 121,584
$ 37,652
$
85,548
$
116
IRON MOUNTAIN INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
DECEMBER 31, 2011
(In thousands, except share and per share data)
5. Selected Consolidated Financial Statements of Parent, Guarantors, Canada Company and
Non-Guarantors (Continued)
Cash Flows from Operating Activities:
Continuing Operations
Cash Flows from Operating Activities-
.
Cash Flows from Operating Activities-
.
Discontinued Operations .
.
.
.
.
.
.
.
.
.
.
.
.
Cash Flows from Operating Activities .
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
Cash Flows from Investing Activities:
.
acquired .
Capital expenditures .
.
Cash paid for acquisitions, net of cash
.
.
.
.
.
.
Intercompany loans to subsidiaries .
.
.
.
Investment in subsidiaries .
.
.
.
.
.
Investment in restricted cash .
Additions to customer relationship and
.
.
.
.
Investment in joint ventures .
.
Proceeds from sales of property and
.
equipment and other, net .
acquisition costs .
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
Continuing Operations
Cash Flows from Investing Activities-
.
Cash Flows from Investing Activities-
.
Discontinued Operations .
.
.
.
.
.
.
.
.
.
.
Cash Flows from Investing Activities .
Cash Flows from Financing Activities:
.
.
.
.
.
.
facilities and other debt .
facilities and other debt .
Repayment of revolving credit and term loan
.
Proceeds from revolving credit and term loan
.
Early retirement of senior subordinated notes
Net proceeds from sale of senior
.
.
Debt financing (repayment to) and equity
subordinated notes .
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
contribution from (distribution to)
.
.
noncontrolling interests, net
.
.
.
Intercompany loans from parent
.
.
Equity contribution from parent
.
.
.
.
Stock repurchases
Parent cash dividends
.
.
.
Proceeds from exercise of stock options and
.
employee stock purchase plan .
.
Excess tax benefits from stock-based
.
.
.
.
Payment of debt financing costs
compensation .
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
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Continuing Operations
Cash Flows from Financing Activities-
.
Cash Flows from Financing Activities-
.
Discontinued Operations .
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Cash Flows from Financing Activities .
Effect of exchange rates on cash and cash
.
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equivalents
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Increase (Decrease) in cash and cash
.
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Cash and cash equivalents, beginning of period .
equivalents
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Year Ended December 31, 2011
Parent
Guarantors
Canada
Company Guarantors
Non-
Eliminations
Consolidated
$ (162,478)
$ 698,033
$ 45,232
$
82,727
$
—
(162,478)
(47,166)
650,867
—
45,232
(910)
81,817
—
(114,768)
(14,155)
(80,232)
—
—
—
—
—
1,469,788
(12,595)
(5)
—
—
—
(5,378)
(83,385)
(12,595)
—
(15,700)
—
363
(58)
—
—
—
(462)
—
66
(69,810)
—
—
—
(5,541)
(335)
3,802
—
(1,386,403)
25,190
—
—
—
—
$ 663,514
(48,076)
615,438
(209,155)
(75,246)
—
—
(5)
(21,703)
(335)
4,231
1,457,188
(231,463)
(14,609)
(152,116)
(1,361,213)
(302,213)
—
1,457,188
371,365
139,902
—
9,356
(14,609)
(142,760)
(1,361,213)
(396,200)
(1,458,628)
(90,752)
(71,594)
—
(231,255)
2,014,500
—
394,000
—
—
—
—
(984,953)
(172,616)
—
(1,461,888)
12,595
—
—
85,742
—
919
(828)
—
(8,182)
(1,305,191)
(901,603)
—
—
(1,305,191)
(901,603)
89,838
—
—
—
5,429
—
—
—
—
—
—
4,515
—
4,515
—
—
(3,883)
(10,481)
13,909
(110,834)
121,584
31,255
37,652
66,641
—
—
698
70,056
12,595
—
—
—
—
—
(1,138)
77,258
(5,103)
11,212
85,548
380,721
78,508
(2,017,174)
2,170,979
(231,255)
394,000
698
—
—
(984,953)
(172,616)
85,742
919
(9,010)
—
—
—
—
—
1,386,403
(25,190)
—
—
—
—
—
78,396
1,361,213
(762,670)
1,361,213
—
—
—
—
(1,138)
(763,808)
(8,986)
(78,848)
258,693
$ 179,845
Cash and cash equivalents, end of period .
.
.
.
$
3,428
$
10,750
$ 68,907
$
96,760
$
117
IRON MOUNTAIN INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
DECEMBER 31, 2011
(In thousands, except share and per share data)
6. Acquisitions
We account for acquisitions using the acquisition method of accounting, and, accordingly, the
results of operations for each acquisition have been included in our consolidated results from their
respective acquisition dates. Cash consideration for our various acquisitions was primarily provided
through borrowings under our credit facilities and cash equivalents on-hand. We completed no
acquisitions during 2009. Included in cash paid for acquisitions in the consolidated statement of cash
flows for the year ended December 31, 2009 is contingent and other payments of $1,518 related to
acquisitions made in prior years. The unaudited pro forma results of operations for the current and
prior periods are not presented due to the insignificant impact of the 2010 and 2011 acquisitions on
our consolidated results of operations. Noteworthy acquisitions are as follows:
In May 2010 we acquired the remaining 87% interest of our joint venture in Greece (Safe
doc S.A.) in a stock transaction for a cash purchase price of approximately $4,700, and we now control
100% of our Greek operations, which provide storage and records management services. The carrying
value of the 13% interest that we had previously acquired and accounted for under the equity method
of accounting amounted to approximately $416 and the fair value of such interest on the date of
acquisition was approximately $473 and resulted in a gain being recorded on the date of the transaction
to other (income) expense, net of approximately $57 during the second quarter of 2010.
In January 2011, we acquired the remaining 80% interest of our joint venture in Poland (Iron
Mountain Poland Holdings Limited) in a stock transaction for an estimated purchase price of
approximately $80,000, including an initial cash purchase price of $35,000. As a result, we now own
100% of our Polish operations, which provide storage and records management services. The terms of
the purchase and sale agreement also required a second payment based upon the audited financial
results of the joint venture. This payment of $42,259 was based upon a formula defined in the purchase
and sale agreement and was paid in the second quarter of 2011. Additionally, the purchase and sale
agreement provides for an escrow hold back of $400 and the payment of up to a maximum of $2,500 of
contingent consideration to be paid in July 2012 based upon the satisfaction of certain performance
criteria. The carrying value of the 20% interest that we previously held and accounted for under the
equity method of accounting amounted to approximately $5,774, and the fair value of such interest on
the date of the acquisition of the additional 80% interest was approximately $11,694 and resulted in a
gain being recorded to other (income) expense, net of approximately $5,920 in the year ended
December 31, 2011. The fair value of our previously held equity interest was derived by reducing the
total estimated consideration for the 80% equity interest purchased by 40%, which represents
management’s estimate of the control premium paid, in order to derive the fair value of $11,694 for the
20% noncontrolling equity interest which we previously held. We determined that a 40% control
premium was appropriate after considering the size and location of the business acquired, the potential
future profits expected to be generated by the Polish entity and publicly available market data. One of
the members of our board of directors and several of his family members hold an indirect equity
interest in one of the stockholders that received proceeds in connection with this transaction. As a
result of this equity interest, such board member, together with several of his family members, received
approximately 24% of the purchase price that we paid in connection with this transaction and will
receive the same percentage of any future contingent consideration.
118
IRON MOUNTAIN INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
DECEMBER 31, 2011
(In thousands, except share and per share data)
6. Acquisitions (Continued)
A summary of the cumulative consideration paid and the allocation of the purchase price of all of
the acquisitions in each respective year is as follows:
2010
2011
$10,542(1) $ 80,439(1)
Cash Paid (gross of cash acquired) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Contingent Consideration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . .
Fair Value of Previously Held Equity Interest
—
473
Total Consideration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
11,015
Fair Value of Identifiable Assets Acquired:
Cash, Accounts Receivable, Prepaid Expenses,
Deferred Income Taxes and Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Property, Plant and Equipment(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Customer Relationship Assets(3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Liabilities Assumed(4) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Noncontrolling Interests . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1,615
2,711
5,189
—
(3,840)
(390)
2,900
11,694
95,033
7,918
6,002
59,100
653
(15,245)
—
Total Fair Value of Identifiable Net Assets Acquired . . . . . . . . . . . . . . . . . . . .
5,285
58,428
Recorded Goodwill
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 5,730
$ 36,605
(1) Included in cash paid for acquisitions in the consolidated statements of cash flows for the years
ended December 31, 2010 and 2011 are contingent and other payments of $3,428 and $132,
respectively, related to acquisitions made in previous years.
(2) Consists primarily of racking, leasehold improvements and computer hardware and software.
(3) The weighted average lives of customer relationship assets associated with acquisitions in 2010 and
2011 was 10 years and 20 years, respectively.
(4) Consists primarily of accounts payable, accrued expenses, notes payable, deferred revenue and
deferred income taxes.
In connection with our acquisition in India in May 2006, we entered into a stockholder agreement.
The agreement contains a put provision that would allow the noncontrolling interest holder to sell the
remaining 49.9% equity interest to us beginning on the third anniversary of this agreement for the
greater of fair market value or approximately 84,835 Rupees (approximately $1,563).
119
IRON MOUNTAIN INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
DECEMBER 31, 2011
(In thousands, except share and per share data)
7. Income Taxes
The significant components of the deferred tax assets and deferred tax liabilities are presented
below:
Deferred Tax Assets:
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accrued liabilities
Deferred rent
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net operating loss carryforwards . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Foreign tax credits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Valuation Allowance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
December 31,
2010
2011
$
42,360
23,253
52,099
60,841
(72,229)
47,779
$ 53,983
21,889
58,113
56,599
(72,239)
44,168
154,103
162,513
Deferred Tax Liabilities:
Other assets, principally due to differences in amortization . . . . . . . . . . . . .
Plant and equipment, principally due to differences in depreciation . . . . . . .
(262,801)
(339,541)
(281,060)
(345,576)
Net deferred tax liability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ (448,239) $(464,123)
(602,342)
(626,636)
The current and noncurrent deferred tax assets (liabilities) are presented below:
December 31,
2010
2011
Deferred tax assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred tax liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 49,342
(5,117)
$ 54,383
(11,148)
Current deferred tax assets, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 44,225
$ 43,235
Deferred tax assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred tax liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 104,761
(597,225)
$ 108,130
(615,488)
Noncurrent deferred tax liabilities, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$(492,464) $(507,358)
We have federal net operating loss carryforwards which begin to expire in 2020 through 2025, of
$28,183 ($9,864, tax effected) at December 31, 2011 to reduce future federal taxable income. We have
an asset for state net operating losses of $7,915 (net of federal tax benefit), which begins to expire in
2012 through 2025, subject to a valuation allowance of approximately 99%. We have assets for foreign
net operating losses of $40,334, with various expiration dates, subject to a valuation allowance of
approximately 69%. We also have foreign tax credits of $56,599, which begin to expire in 2014 through
2019, subject to a valuation allowance of approximately 65%. U.S. legislative changes in 2010 reduced
the expected utilization of foreign tax credits which resulted in the requirement for a valuation
allowance.
120
IRON MOUNTAIN INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
DECEMBER 31, 2011
(In thousands, except share and per share data)
7. Income Taxes (Continued)
Rollforward of valuation allowance is as follows:
Year Ended December 31,
Balance at
Beginning of
the Year
Charged
(Credited) to
Expense
2009 . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2010 . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2011 . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$36,392
33,926
72,229
$ 1,416
39,545
9,844
Other
Additions
Other
Deductions
$3,158
—
—
$(7,040)
(1,242)
(9,834)
Balance at
End of
the Year
$33,926
72,229
72,239
We receive a tax deduction upon the exercise of non-qualified stock options or upon the
disqualifying disposition by employees of incentive stock options and certain shares acquired under our
employee stock purchase plan for the difference between the exercise price and the market price of the
underlying common stock on the date of exercise or disqualifying disposition. The tax benefit for
non-qualified stock options is included in the consolidated financial statements in the period in which
compensation expense is recorded. The tax benefit associated with compensation expense recorded in
the consolidated financial statements related to incentive stock options is recorded in the period the
disqualifying disposition occurs. All tax benefits for awards issued prior to January 1, 2003 and
incremental tax benefits in excess of compensation expense recorded in the consolidated financial
statements are credited directly to equity and amounted to $5,532, $2,252 and $919 for the years ended
December 31, 2009, 2010 and 2011, respectively.
We have not recorded deferred taxes on book over tax outside basis differences related to certain
foreign subsidiaries because such basis differences are not expected to reverse in the foreseeable future
and we intend to reinvest indefinitely outside the U.S. These basis differences arose primarily through
the undistributed book earnings of our foreign subsidiaries. The basis differences could be reversed
through a sale of the subsidiaries, the receipt of dividends from subsidiaries and certain other events or
actions on our part, each of which would result in an increase in our provision for income taxes. It is
not practicable to calculate the amount of such basis differences.
The components of income (loss) from continuing operations before provision (benefit) for income
taxes are:
U.S. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Canada . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Foreign . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$224,599
22,060
98,620
$272,806
41,474
19,942
$313,530
48,327
(8,957)
$345,279
$334,222
$352,900
Year Ended December 31,
2009
2010
2011
121
IRON MOUNTAIN INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
DECEMBER 31, 2011
(In thousands, except share and per share data)
7. Income Taxes (Continued)
The provision (benefit) for income taxes consists of the following components:
Year Ended December 31,
2009
2010
2011
Federal—current . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Federal—deferred . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
State—current . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
State—deferred . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Foreign—current . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Foreign—deferred . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 53,504
23,106
17,968
6,476
11,955
753
$ 76,992
41,825
32,475
(851)
20,350
(3,308)
$ 47,523
25,708
23,828
(1,093)
31,748
(21,226)
$113,762
$167,483
$106,488
A reconciliation of total income tax expense and the amount computed by applying the federal
income tax rate of 35% to income from continuing operations before provision (benefit) for income
taxes for the years ended December 31, 2009, 2010 and 2011, respectively, is as follows:
Computed ‘‘expected’’ tax provision . . . . . . . . . . . . . . . . . . . . . . . . .
Changes in income taxes resulting from:
State taxes (net of federal tax benefit) . . . . . . . . . . . . . . . . . . . . . .
Increase in valuation allowance (net operating losses) . . . . . . . . . .
Increase (Decrease) in valuation allowance (foreign tax credits) . . .
Impairment of goodwill and divestitures . . . . . . . . . . . . . . . . . . . .
Reserve reversal and audit settlements . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Foreign tax rate differential
United Kingdom thin cap, Subpart F income and foreign
Year Ended December 31,
2009
2010
2011
$120,848
$116,978
$123,515
17,163
15,451
(2)
1,416
39,547
—
—
29,772
— (41,753)
(7,828)
(25,442)
16,301
12,601
(2,757)
10,254
(32,989)
(34,867)
restructuring . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
4,194
(2,705)
8,247
5,359
5,663
8,767
$113,762
$167,483
$106,488
Our effective tax rates for the years ended December 31, 2009, 2010 and 2011 were 32.9%, 50.1%
and 30.2%, respectively. The primary reconciling items between the federal statutory rate of 35% and
our overall effective tax rate for the year ended December 31, 2011 was the recognition of certain
previously unrecognized tax benefits related to tax positions of prior years, expirations of statute of
limitation periods and settlements with tax authorities in various jurisdictions and differences in the
rates of tax at which our foreign earnings are subject, including foreign exchange gains and losses in
different jurisdictions with different tax rates. This benefit was partially offset by state income taxes
(net of federal benefit). Additionally, to a lesser extent, a goodwill impairment charge included in
income from continuing operations as a component of intangible impairments in our consolidated
statements of operations, of which a majority was non-deductible for tax purposes, is a reconciling item
that impacts our effective tax rate. The primary reconciling item between the federal statutory rate of
122
IRON MOUNTAIN INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
DECEMBER 31, 2011
(In thousands, except share and per share data)
7. Income Taxes (Continued)
35% and our overall effective tax rate for the year ended December 31, 2010 is a goodwill impairment
charge included in income from continuing operations as a component of intangible impairments in our
consolidated statements of operations, of which a majority was non-deductible for tax purposes. The
negative impact of U.S. legislative changes reducing the expected utilization of foreign tax credits was
offset by the recognition of certain previously unrecognized tax benefits due to expirations of statute of
limitation periods and settlements with tax authorities in various jurisdictions. Additionally, to a lesser
extent, state income taxes (net of federal benefit) and differences in the rates of tax at which our
foreign earnings are subject, including foreign exchange gains and losses in different jurisdictions with
different tax rates, are also reconciling items and impact our effective tax rate. In 2009, we had
significant unrealized foreign exchange gains and losses on intercompany loans and on debt and
derivative instruments in different jurisdictions with different tax rates. For 2009, foreign currency gains
were recorded in lower tax jurisdictions associated with the marking-to-market of intercompany loan
positions while foreign currency losses were recorded in higher tax jurisdictions associated with the
marking-to-market of debt and derivative instruments, which reduced the effective tax rate for the year
ended December 31, 2009.
The evaluation of an uncertain tax position is a two-step process. The first step is a recognition
process whereby the company determines whether it is more likely than not that a tax position will be
sustained upon examination, including resolution of any related appeals or litigation processes, based
on the technical merits of the position. The second step is a measurement process whereby a tax
position that meets the more likely than not recognition threshold is calculated to determine the
amount of benefit to recognize in the financial statements. The tax position is measured at the largest
amount of benefit that is greater than 50% likely of being realized upon ultimate settlement.
We have elected to recognize interest and penalties associated with uncertain tax positions as a
component of the provision (benefit) for income taxes in the accompanying consolidated statements of
operations. We recorded $4,749, $(1,607) and $(8,477) for gross interest and penalties for the years
ended December 31, 2009, 2010 and 2011, respectively.
We had $11,610 and $2,819 accrued for the payment of interest and penalties as of December 31,
2010 and 2011, respectively.
A summary of tax years that remain subject to examination by major tax jurisdictions is as follows:
Tax Year
Tax Jurisdiction
See Below . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . United States
2006 to present
2010 to present
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Canada
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . United Kingdom
The normal statute of limitations for U.S. federal tax purposes is three years from the date the tax
return is filed. However, due to our net operating loss position, the U.S. government has the right to
audit the amount of the net operating loss up to three years after we utilize the loss on our federal
income tax return. We utilized losses from years beginning in 1996, 1998 and 1999 in our federal
income tax returns for our 2008, 2009, and 2010 tax years, respectively. The normal statute of
123
IRON MOUNTAIN INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
DECEMBER 31, 2011
(In thousands, except share and per share data)
7. Income Taxes (Continued)
limitations for state purposes is between three to five years. However, certain of our state statute of
limitations remain open for periods longer than this when audits are in progress.
We are subject to examination by various tax authorities in jurisdictions in which we have
significant business operations. We regularly assess the likelihood of additional assessments by tax
authorities and provide for these matters as appropriate. As of December 31, 2010 and 2011, we had
$59,891 and $31,408, respectively, of reserves related to uncertain tax positions included in other
long-term liabilities in the accompanying consolidated balance sheets. Although we believe our tax
estimates are appropriate, the final determination of tax audits and any related litigation could result in
favorable or unfavorable changes in our estimates.
A reconciliation of unrecognized tax benefits is as follows:
Gross tax contingencies—December 31, 2008 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Gross additions based on tax positions related to the current year . . . . . . . . . . . . . . . . . . . .
Gross additions for tax positions of prior years . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Gross reductions for tax positions of prior years . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Lapses of statutes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Settlements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Gross tax contingencies—December 31, 2009 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Gross additions based on tax positions related to the current year . . . . . . . . . . . . . . . . . . . .
Gross additions for tax positions of prior years . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Gross reductions for tax positions of prior years . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Lapses of statutes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Settlements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Gross tax contingencies—December 31, 2010 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Gross additions based on tax positions related to the current year . . . . . . . . . . . . . . . . . . . .
Gross additions for tax positions of prior years . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Gross reductions for tax positions of prior years . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Lapses of statutes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Settlements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 84,566
3,166
5,693
(720)
(4,460)
(90)
$ 88,155
6,575
9,759
(3,349)
(33,001)
(8,248)
$ 59,891
6,593
6,437
(30,316)
(6,268)
(4,929)
Gross tax contingencies—December 31, 2011 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 31,408
The reversal of these reserves of $31,408 ($23,514 net of federal tax benefit) as of December 31,
2011 will be recorded as a reduction of our income tax provision if sustained. We believe that it is
reasonably possible that an amount up to approximately $10,688 of our unrecognized tax positions may
be recognized by the end of 2012 as a result of a lapse of statute of limitations or upon closing and
settling significant audits in various worldwide jurisdictions.
124
IRON MOUNTAIN INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
DECEMBER 31, 2011
(In thousands, except share and per share data)
8. Quarterly Results of Operations (Unaudited)
Quarter Ended
March 31
June 30
Sept. 30
Dec. 31
2010
Total revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $718,996 $718,536 $ 725,649 $729,168
146,243
Operating income (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
105,686
157,278
57,930
Income (loss) from continuing operations . . . . . . . . . . . . . . . .
49,252
27,202
(24,674)
Total income (loss) from discontinued operations
. . . . . . . . . .
(8,435) (178,930)
(151,728)
40,817
Net income (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
33,256
(154,687) 32,040(1)
Net income (loss) attributable to Iron Mountain Incorporated .
40,357
Earnings (losses) per Share-Basic
Income (loss) per share from continuing operations . . . . . . . . .
Total income (loss) per share from discontinued operations . . .
Net income (loss) per share attributable to Iron Mountain
138,342
32,355
(7,378)
24,977
24,704
0.14
(0.89)
0.24
(0.04)
0.16
(0.04)
0.29
(0.12)
Incorporated . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
0.12
0.20
(0.77)
0.16
Earnings (losses) per Share-Diluted
Income (loss) per share from continuing operations . . . . . . . . .
Total income (loss) per share from discontinued operations . . .
Net income (loss) per share attributable to Iron Mountain
0.16
(0.04)
0.24
(0.04)
0.14
(0.89)
0.29
(0.12)
Incorporated . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
0.12
0.20
(0.77)
0.16
2011
Total revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $746,009 $758,551 $ 768,306 $741,837
149,463
Operating income (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
47,382
Income (loss) from continuing operations . . . . . . . . . . . . . . . .
(13,381)
Total income (loss) from discontinued operations
. . . . . . . . . .
34,001
Net income (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
32,056
Net income (loss) attributable to Iron Mountain Incorporated .
Earnings (losses) per Share-Basic
Income (loss) per share from continuing operations . . . . . . . . .
Total income (loss) per share from discontinued operations . . .
Net income (loss) per share attributable to Iron Mountain
148,937
137,600
81,176
67,460
(6,557) 185,587
253,047
74,619
252,684
73,460
135,199
50,394
(12,469)
37,925
37,338
0.26
(0.06)
0.41
(0.03)
0.26
(0.07)
0.33
0.92
Incorporated . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
0.37
Earnings (losses) per Share-Diluted
Income (loss) per share from continuing operations . . . . . . . . .
Total income (loss) per share from discontinued operations . . .
Net income (loss) per share attributable to Iron Mountain
0.40
(0.03)
Incorporated . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
0.37
1.25
0.33
0.91
1.24
0.19
0.18
0.26
(0.06)
0.26
(0.07)
0.19
0.18
(1) The change in net income (loss) attributable to Iron Mountain Incorporated in the fourth quarter
of 2010 compared to the third quarter of 2010 is primarily related to the impact associated with
the goodwill impairment charge of which $255,000 ($249,000, net of tax) was recorded in the third
quarter of 2010 compared to $28,785 ($28,300, net of tax) recorded in the fourth quarter of 2010.
See Note 14. Discrete tax benefits recorded in the third quarter compared to charges in the fourth
quarter of 2010 related to unrealized foreign exchange gains and losses in different tax jurisdictions
125
IRON MOUNTAIN INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
DECEMBER 31, 2011
(In thousands, except share and per share data)
8. Quarterly Results of Operations (Unaudited) (Continued)
at different tax rates also contributed to the change. Additionally, to a lesser extent, reduced
operating income primarily related to increased selling, general and administrative expenses offset
by reduced interest expense related to the retirement of a portion of our 73⁄4% Notes due 2015 in
the third quarter of 2010 also contributed to the change.
9. Segment Information
As a result of the disposition of our Digital Business and New Zealand Business and our decision
to sell the Italian Business as discussed in Note 14, we changed our reportable segments. The most
significant of these changes is that the reportable segment previously referred to as the worldwide
digital business is no longer reported separately in our management reporting as the operations
associated with the Domain Name Product Line and the Digital Business are reported as discontinued
operations. Also, the technology escrow services business, which we continue to own and operate and
was previously reported in the former worldwide digital business segment, is now reported in the North
American Business segment. Additionally, the International Business segment no longer includes the
New Zealand Business and the Italian Business as these operations are reported as discontinued
operations.
Our operating segments and Corporate are as follows:
(cid:127) North American Business—information management services throughout the United States and
Canada, including the storage of paper documents, as well as other media such as microfilm and
microfiche, master audio and videotapes, film, X-rays and blueprints, including healthcare
information services, vital records services, service and courier operations, and the collection,
handling and disposal of sensitive documents for corporate customers (‘‘Hard Copy’’); the
storage and rotation of backup computer media as part of corporate disaster recovery plans,
including service and courier operations (‘‘Data Protection’’); information destruction services
(‘‘Destruction’’); the scanning, imaging and document conversion services of active and inactive
records (‘‘Hybrid Services’’); the storage, assembly, and detailed reporting of customer marketing
literature and delivery to sales offices, trade shows and prospective customers’ sites based on
current and prospective customer orders (‘‘Fulfillment’’) and technology escrow services that
protect and manage source code.
(cid:127) Europe—information management services throughout Europe, including Hard Copy, Data
Protection, Destruction (in the United Kingdom and Ireland) and Hybrid Services.
(cid:127) Latin America—information management services throughout Mexico, Brazil, Chile, Argentina
and Peru, including Hard Copy, Data Protection, Destruction and Hybrid Services.
(cid:127) Asia Pacific—information management services throughout Australia, including Hard Copy, Data
Protection, Destruction and Hybrid Services; and in certain cities in India, Singapore, Hong
Kong-SAR and China, including Hard Copy and Data Protection.
(cid:127) Corporate—consists of costs related to executive and staff functions, including finance, human
resources and information technology, which benefit the enterprise as a whole. These costs are
primarily related to the general management of these functions on a corporate level and the
126
IRON MOUNTAIN INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
DECEMBER 31, 2011
(In thousands, except share and per share data)
9. Segment Information (Continued)
design and development of programs, policies and procedures that are then implemented in the
individual segments, with each segment bearing its own cost of implementation. Corporate also
includes stock-based employee compensation expense associated with all Employee Stock-Based
Awards.
The Latin America, Asia Pacific and Europe operating segments have been aggregated given their
similar economic characteristics, products, customers and processes and reported as one reportable
segment, ‘‘International Business.’’
127
IRON MOUNTAIN INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
DECEMBER 31, 2011
(In thousands, except share and per share data)
9. Segment Information (Continued)
An analysis of our business segment information and reconciliation to the consolidated financial
statements is as follows:
2009
Total Revenues . . . . . . . . . . . . . . . . . . . . . . . . . . .
Depreciation and Amortization . . . . . . . . . . . . . . .
Depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . .
Amortization . . . . . . . . . . . . . . . . . . . . . . . . . . .
Adjusted OIBDA . . . . . . . . . . . . . . . . . . . . . . . . .
Total Assets(1) . . . . . . . . . . . . . . . . . . . . . . . . . . .
Expenditures for Segment Assets . . . . . . . . . . . . . .
Capital Expenditures . . . . . . . . . . . . . . . . . . . . .
Cash Paid for Acquisitions, Net of Cash Acquired
Additions to Customer Relationship and
North
American
Business
$2,124,964
174,096
162,400
11,696
866,356
4,695,013
160,784
153,273
256
International
Business
Corporate
Total
Consolidated
$ 649,420
69,768
57,570
12,198
120,482
1,667,266
110,624
105,876
1,262
$
— $2,774,384
277,186
253,061
24,125
822,579
6,851,157
300,176
287,917
1,518
33,322
33,091
231
(164,259)
488,878
28,768
28,768
—
Acquisition Costs . . . . . . . . . . . . . . . . . . . . . .
7,255
3,486
—
10,741
2010
Total Revenues . . . . . . . . . . . . . . . . . . . . . . . . . . .
Depreciation and Amortization . . . . . . . . . . . . . . .
Depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . .
Amortization . . . . . . . . . . . . . . . . . . . . . . . . . . .
Adjusted OIBDA . . . . . . . . . . . . . . . . . . . . . . . . .
Total Assets(1) . . . . . . . . . . . . . . . . . . . . . . . . . . .
Expenditures for Segment Assets . . . . . . . . . . . . . .
Capital Expenditures . . . . . . . . . . . . . . . . . . . . .
Cash Paid for Acquisitions, Net of Cash Acquired
Additions to Customer Relationship and
2,193,464
185,483
172,713
12,770
969,505
4,370,465
135,825
120,162
5,675
698,885
81,932
69,480
12,452
130,969
1,641,251
115,496
104,116
8,166
— 2,892,349
304,205
278,760
25,445
926,676
6,416,393
285,892
258,849
13,841
36,790
36,567
223
(173,798)
404,677
34,571
34,571
—
Acquisition Costs . . . . . . . . . . . . . . . . . . . . . .
9,988
3,214
—
13,202
2011
Total Revenues . . . . . . . . . . . . . . . . . . . . . . . . . . .
Depreciation and Amortization . . . . . . . . . . . . . . .
Depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . .
Amortization . . . . . . . . . . . . . . . . . . . . . . . . . . .
Adjusted OIBDA . . . . . . . . . . . . . . . . . . . . . . . . .
Total Assets(1) . . . . . . . . . . . . . . . . . . . . . . . . . . .
Expenditures for Segment Assets . . . . . . . . . . . . . .
Capital Expenditures . . . . . . . . . . . . . . . . . . . . .
Cash Paid for Acquisitions, Net of Cash Acquired
Additions to Customer Relationship and
2,229,143
180,763
168,549
12,214
961,973
4,194,850
139,079
117,338
5,436
785,560
104,815
88,432
16,383
164,212
1,646,701
152,064
76,856
69,810
— 3,014,703
319,499
290,638
28,861
934,912
6,041,258
306,104
209,155
75,246
33,921
33,657
264
(191,273)
199,707
14,961
14,961
—
Acquisition Costs . . . . . . . . . . . . . . . . . . . . . .
16,305
5,398
—
21,703
(1) Excludes all intercompany receivables or payables and investment in subsidiary balances.
128
IRON MOUNTAIN INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
DECEMBER 31, 2011
(In thousands, except share and per share data)
9. Segment Information (Continued)
The accounting policies of the reportable segments are the same as those described in Note 2.
Adjusted OIBDA for each segment is defined as operating income before depreciation, amortization,
intangible impairments and (gain) loss on disposal/write-down of property, plant and equipment, net
which are directly attributable to the segment. Internally, we use Adjusted OIBDA as the basis for
evaluating the performance of, and allocating resources to, our operating segments.
A reconciliation of Adjusted OIBDA to income from continuing operations before provision
(benefit) for income taxes on a consolidated basis is as follows:
Adjusted OIBDA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Less: Depreciation and Amortization . . . . . . . . . . . . . . . . . . . . . .
Intangible Impairments (See Note 2.g. and Note 14) . . . . . . . . . .
Loss (Gain) on Disposal/Write-down of
Years Ended December 31,
2009
2010
2011
$822,579
277,186
—
$926,676
304,205
85,909
$934,912
319,499
46,500
Property, Plant and Equipment, Net . . . . . . . . . . . . . . . . . . . .
Interest Expense, Net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other (Income) Expense, Net . . . . . . . . . . . . . . . . . . . . . . . . . .
168
212,545
(12,599)
(10,987)
204,559
8,768
(2,286)
205,256
13,043
Income from Continuing Operations before Provision (Benefit) for
Income Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$345,279
$334,222
$352,900
Information as to our operations in different geographical areas is as follows:
Years Ended December 31,
2009
2010
2011
Revenues:
United States . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
United Kingdom . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Canada . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other International . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$1,925,424
292,685
196,246
360,029
$1,958,820
295,462
231,477
406,590
$1,984,805
307,905
244,337
477,656
Total Revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$2,774,384
$2,892,349
$3,014,703
Long-lived Assets:
United States . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
United Kingdom . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Canada . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other International . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$3,736,626
617,141
425,838
855,804
$3,341,241
552,309
448,485
861,896
$3,306,574
529,239
434,517
856,478
Total Long-lived Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$5,635,409
$5,203,931
$5,126,808
129
IRON MOUNTAIN INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
DECEMBER 31, 2011
(In thousands, except share and per share data)
9. Segment Information (Continued)
Information as to our revenues by product and service lines is as follows:
Years Ended December 31,
2009
2010
2011
Revenues:
Records Management(1)(2) . . . . . . . . . . . . . . . . . . . . . . . . . . .
Data Protection & Recovery(1)(3) . . . . . . . . . . . . . . . . . . . . . .
Information Destruction(1)(4) . . . . . . . . . . . . . . . . . . . . . . . . .
$2,040,497
483,909
249,978
$2,081,492
531,580
279,277
$2,183,154
522,632
308,917
Total Revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$2,774,384
$2,892,349
$3,014,703
(1) Each of the service offerings within our product and service lines has a component of revenue that
is storage related and a component that is service revenues, except the Information Destruction
service offering, which does not have a storage component.
(2) Includes Business Records Management, Compliant Records Management and Consulting Services,
Hybrid Services, Fulfillment Services, Health Information Management Solutions, Film and Sound
Archives and Energy Data Services.
(3) Includes Data Protection & Recovery Services and Technology Escrow Services.
(4) Includes Secure Shredding and Compliant Information Destruction.
10. Commitments and Contingencies
a. Leases
Most of our leased facilities are leased under various operating leases that typically have initial
lease terms of five to ten years. A majority of these leases have renewal options with one or more five
year options to extend and may have fixed or Consumer Price Index escalation clauses. We also lease
equipment under operating leases (primarily computers) which have an average lease life of three
years. Vehicles and office equipment are also leased and have remaining lease lives ranging from one
to seven years. Total rent expense (including common area maintenance charges) under all of our
operating leases was $240,944, $238,480 and $242,954 for the years ended December 31, 2009, 2010 and
2011, respectively. Included in total rent expense was sublease income of $4,126, $2,721 and $2,974 for
the years ended December 31, 2009, 2010 and 2011, respectively.
Estimated minimum future lease payments (excluding common area maintenance charges) include
payments for certain renewal periods at our option because failure to renew results in an economic
130
IRON MOUNTAIN INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
DECEMBER 31, 2011
(In thousands, except share and per share data)
10. Commitments and Contingencies (Continued)
disincentive due to significant capital expenditure costs (e.g., racking), thereby making it reasonably
assured that we will renew the lease. Such payments in effect at December 31, are as follows:
2012 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2013 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2014 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2015 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2016 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Thereafter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Operating
Lease
Payment(1)
$ 219,951
209,417
197,258
187,507
180,753
1,714,261
Sublease
Income
$ 2,317
1,932
1,648
1,629
1,145
1,934
Capital
Leases
$ 51,490
48,787
31,837
22,655
17,450
138,661
Total minimum lease payments
. . . . . . . . . . . . . . . . . . . . . . . . . . .
$2,709,147
$10,605
310,880
Less amounts representing interest . . . . . . . . . . . . . . . . . . . . . . .
Present value of capital lease obligations . . . . . . . . . . . . . . . . . . .
(103,580)
$ 207,300
(1) Includes $2,593, $1,975, $1,758, $1,752, $1,692 and $8,232 in 2012, 2013, 2014, 2015, 2016 and
thereafter, respectively, related to our Italian Business (a total of $18,002).
In addition, we have certain contractual obligations related to purchase commitments which
require minimum payments of $31,852, $11,546, $8,800, $982, $343 and $232 in 2012, 2013, 2014, 2015,
2016 and thereafter, respectively.
b.
Self-Insured Liabilities
We are self-insured up to certain limits for costs associated with workers’ compensation claims,
vehicle accidents, property and general business liabilities, and benefits paid under employee healthcare
and short-term disability programs. At December 31, 2010 and 2011 there were $43,901 and $39,358,
respectively, of self-insurance accruals reflected in accrued expenses of our consolidated balance sheets.
The measurement of these costs requires the consideration of historical cost experience and judgments
about the present and expected levels of cost per claim. We account for these costs primarily through
actuarial methods, which develop estimates of the undiscounted liability for claims incurred, including
those claims incurred but not reported. These methods provide estimates of future ultimate claim costs
based on claims incurred as of the balance sheet date.
c.
Litigation
We are involved in litigation from time to time in the ordinary course of business. A portion of the
defense and/or settlement costs associated with such litigation is covered by various commercial liability
insurance policies purchased by us and, in limited cases, indemnification from third parties. Our policy
is to establish reserves for loss contingencies when the losses are both probable and reasonably
estimable. We record legal costs associated with loss contingencies as expenses in the period in which
they are incurred. The matters described below represent our significant loss contingencies. We have
evaluated each matter and, if both probable and estimable, accrued an amount that represents our
131
IRON MOUNTAIN INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
DECEMBER 31, 2011
(In thousands, except share and per share data)
10. Commitments and Contingencies (Continued)
estimate of any probable loss associated with such matter. In addition, we have estimated a reasonably
possible range for all loss contingencies including those described below. We believe it is reasonably
possible that we could incur aggregate losses in addition to amounts currently accrued for all matters
up to an additional $51,300 over the next several years.
d. London Fire
In July 2006, we experienced a significant fire in a leased records and information management
facility in London, England, that resulted in the complete destruction of the facility and its contents.
The London Fire Brigade (‘‘LFB’’) issued a report in which it concluded that the fire resulted either
from human agency, i.e., arson, or an unidentified ignition device or source, and its report to the Home
Office concluded that the fire resulted from a deliberate act. The LFB also concluded that the installed
sprinkler system failed to control the fire because the primary electric fire pump was disabled prior to
the fire and the standby diesel fire pump was disabled in the early stages of the fire by third-party
contractors. We have received notices of claims from customers or their subrogated insurance carriers
under various theories of liability arising out of lost data and/or records as a result of the fire. Certain
of those claims have resulted in litigation in courts in the United Kingdom. We deny any liability in
respect of the London fire, and we have referred these claims to our excess warehouse legal liability
insurer, which has been defending them to date under a reservation of rights. Certain of the claims
have been settled for nominal amounts, typically one to two British pounds sterling per carton, as
specified in the contracts, which amounts have been or will be reimbursed to us from our primary
property insurer. We believe we carry adequate property and liability insurance related to this incident.
e. Chile Earthquake
As a result of the February 27, 2010 earthquake in Chile, we experienced damage to certain of our
13 owned and leased records management facilities in that region. None of our facilities were destroyed
by fire or significantly impacted by water damage. However, the structural integrity of five buildings was
compromised, and some of the racking included in certain buildings was damaged or destroyed. Some
customer materials were impacted by this event. Revenues from Chile represent less than 1% of our
consolidated enterprise revenues. We believe we carry adequate property and liability insurance and do
not expect that this event will have a material impact on our consolidated results of operations or
financial condition. We received cumulative payments of $33,800 from our insurance carriers of which
$27,000 was received in 2010 and $6,800 was received in 2011. Such amount represents final settlements
of claims filed with our insurance carriers. Cash from our insurance settlements was used to fund
capital expenditures and for general working capital needs. Our policy related to business interruption
insurance recoveries is to record gains within other (income) expense, net in our consolidated
statement of operations and proceeds received within cash flows from operating activities in our
consolidated statement of cash flows. Such amounts are recorded in the period the cash is received. We
recorded approximately $100 within other income (expense), net in our consolidated statement of
operations associated with business interruption insurance recoveries in the year ended December 31,
2011. We have recorded gains on the disposal/write-down of property, plant and equipment, net in our
statement of operations of approximately $10,200 for the year ended December 31, 2010. We have
reflected approximately $14,800 of the cash proceeds received from our insurers in the year ended
December 31, 2010 as proceeds from sales of property and equipment, net in our statement of cash
132
IRON MOUNTAIN INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
DECEMBER 31, 2011
(In thousands, except share and per share data)
10. Commitments and Contingencies (Continued)
flows. Our policy with respect to involuntary conversion of property, plant and equipment is to record
any gain or loss within (gain) loss on disposal/write-down of property, plant and equipment, net within
operating income in our consolidated statement of operations and proceeds received within cash flows
from investing activities within our consolidated statement of cash flows. Losses are recorded when
incurred and gains are recorded in the period when the cash received exceeds the carrying value of the
related property, plant and equipment.
f.
Brazilian Litigation
In September 2010, Iron Mountain do Brasil Ltda., our Brazilian operating subsidiary (‘‘IMB’’),
was sued in Curitiba, Brazil in the 11th Lower Labor Claim Court. The plaintiff in the six related
lawsuits, Sindicato dos Trabalhadores em Empresas de Servi¸cos Cont´abeis, Assessoramento, Per´ıcias,
Informa¸c˜oes, Pesquisas, e em Empresas Prestadoras de Servi¸cos do Estado do Paran´a (Union of
Workers in Business Services Accounting, Advice, Expertise, Information, Research and Services
Companies in the State of Parana), a labor union in Brazil, purported to represent 2,008 individuals
who provided services for IMB. The complaint alleged that these individuals were incorrectly classified
as non-employees by IMB and requested unspecified monetary damages, including attorneys’ fees,
unpaid wages, unpaid benefits and certain penalties. In August 2011, the court approved a settlement
between the parties pursuant to which we will pay $2 for each of 531 individuals, subject to each
individual’s acceptance thereof. If all 531 individuals accept the settlement, it would result in payment
by the Company of approximately $1,100. The claims of the remaining 1,477 individuals in the lawsuits
not receiving proceeds in the settlement were dismissed by the court.
g.
Patent Infringement Lawsuit
In August 2010, we were named as a defendant in a patent infringement suit filed in the U.S.
District Court for the Eastern District of Texas by Oasis Research, LLC. The plaintiff alleges that the
technology found in our Connected and LiveVault products infringed certain U.S. patents owned by the
plaintiff and seeks an unspecified amount of damages. A final pre-trial conference has been scheduled
for October 12, 2012. We expect the court to establish a trial date during the pre-trial conference. As
part of the sale of our Digital Business discussed at Note 14, our Connected and LiveVault products
were sold to Autonomy and Autonomy has assumed this obligation and the defense of this litigation
and has agreed to indemnify us against any losses.
h. Government Contract Billing Matter
Since October, 2001, we have provided services to the U.S. Government under several General
Services Administration (‘‘GSA’’) multiple award schedule contracts (the ‘‘Schedules’’). The earliest of
the Schedules was renewed with certain modifications to its terms in October 2006. The Schedules
contain a price reductions clause (‘‘Price Reductions Clause’’) that requires us to offer to reduce the
prices billed to the Government under the Schedules to correspond to the prices billed to certain
benchmark commercial customers. Over the five years and three months ended December 31, 2011 we
billed approximately $42,000 under the Schedules. In 2011, we initiated an internal review covering the
contract period commencing in October 2006 and we discovered potential non-compliance with the
Price Reductions Clause. We voluntarily disclosed the potential non-compliance to the GSA and its
Office of Inspector General (‘‘OIG’’) in June 2011. See Note 2.y.
133
IRON MOUNTAIN INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
DECEMBER 31, 2011
(In thousands, except share and per share data)
10. Commitments and Contingencies (Continued)
We continue to review this matter and will provide the GSA and OIG with information regarding
our pricing practices and proposed pricing adjustment amount to be refunded. The GSA and OIG,
however, may not agree with our determination of the refund amount and may request additional
pricing adjustments, refunds, civil penalties, up to treble damages and/or interest related to our
Schedules.
i.
State of Massachusetts Notices of Intention to Assess
We are currently under audit by the state of Massachusetts for the 2004 through 2008 tax years.
We have not received any final assessments to date. However, we have received notices of intention to
assess for the 2004 to 2006 tax years in the amount of $7,867, including tax and penalties (but excluding
interest). Currently this audit is on appeal with the Massachusetts Department of Revenue. The final
outcome of this audit may result in an assessment of income tax, which is a component of the income
tax provision, or an assessment of net worth tax, which is an operating charge. We intend to defend this
matter vigorously.
j.
Italy Fire
We experienced a fire at a facility we lease in Aprilla, Italy on November 4, 2011. All employees
were evacuated safely and the cause of the fire is currently being investigated. The facility primarily
stored archival and inactive business records for local area businesses.
The leased facility, constructed in 2004, is one of approximately 1,000 facilities in our global
portfolio and one of 10 facilities located in Italy. Despite quick response by local fire authorities,
damage to the building was extensive and the building appears to be a total loss. We believe we carry
adequate insurance and are in the process of assessing the impact of the fire but do not expect that this
event will have a material impact to our consolidated financial condition, results of operations and
cash flows.
Our policy related to business interruption insurance recoveries is to record gains within other
(income) expense, net in our consolidated statement of operations and proceeds received within cash
flows from operating activities in our consolidated statement of cash flows. Such amounts are recorded
in the period the cash is received. Our policy with respect to involuntary conversion of property, plant
and equipment is to record any gain or loss within (gain) loss on disposal/write-down of property, plant
and equipment, net within operating income in our consolidated statement of operations and proceeds
received within cash flows from investing activities within our consolidated statement of cash flows.
Losses are recorded when incurred and gains are recorded in the period when the cash received
exceeds the carrying value of the related property, plant and equipment.
11. Related Party Transactions
We lease space to an affiliated company, Schooner Capital LLC (‘‘Schooner’’), for its corporate
headquarters located in Boston, Massachusetts. For the years ended December 31, 2009, 2010 and
2011, Schooner paid rent to us totaling $177, $198 and $188, respectively. One of the members of our
board of directors and several of his family members hold an indirect equity interest in one of the
stockholders that received proceeds in connection with the acquisition of our joint venture in Poland.
As a result of this equity interest, such board member, together with several of his family members,
134
IRON MOUNTAIN INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
DECEMBER 31, 2011
(In thousands, except share and per share data)
11. Related Party Transactions (Continued)
received approximately 24% of the purchase price that we paid in connection with this transaction and
will receive the same percentage of any future contingent consideration. See Note 6.
12. 401(k) Plans
We have a defined contribution plan, which generally covers all non-union U.S. employees meeting
certain service requirements. Eligible employees may elect to defer from 1% to 25% of compensation
per pay period up to the amount allowed by the Internal Revenue Code. In addition, IME operates a
defined contribution plan, which is similar to the U.S.’s 401(k) Plan. We make matching contributions
based on the amount of an employee’s contribution in accordance with the plan documents. We have
expensed $11,508, $14,282 and $18,133 for the years ended December 31, 2009, 2010 and 2011,
respectively.
13. Stockholders’ Equity Matters
Our board of directors has authorized up to $1,200,000 in repurchases of our common stock. All
purchases are subject to stock price, market conditions, corporate and legal requirements and other
factors. As of December 31, 2011, we had a remaining amount available for repurchase under our
share repurchase program of $100,701, which represents approximately 2% in the aggregate of our
outstanding common stock based on the closing stock price on such date.
In February 2010, our board of directors adopted a dividend policy under which we intend to pay
quarterly cash dividends on our common stock. Declaration and payment of future quarterly dividends
is at the discretion of our board of directors. In 2010 and 2011, our board of directors declared the
following dividends:
Declaration Date
Dividend
Per Share
Record Date
Total
Amount
Payment
Date
March 25, 2010 . . . . . . . . . . . . . . . . . . .
June 4, 2010 . . . . . . . . . . . . . . . . . . . . .
September 15, 2010 . . . . . . . . . . . . . . . .
December 10, 2010 . . . . . . . . . . . . . . . .
March 11, 2011 . . . . . . . . . . . . . . . . . . .
June 10, 2011 . . . . . . . . . . . . . . . . . . . .
September 8, 2011 . . . . . . . . . . . . . . . .
December 1, 2011 . . . . . . . . . . . . . . . . .
March 25, 2010
$0.0625
June 25, 2010
0.0625
0.0625
September 28, 2010
0.1875 December 27, 2010
March 25, 2011
0.1875
June 24, 2011
0.2500
0.2500
September 23, 2011
0.2500 December 23, 2011
April 15, 2010
$12,720
12,641
July 15, 2010
12,532 October 15, 2010
January 14, 2011
37,514
April 15, 2011
37,601
50,694
July 15, 2011
46,877 October 14, 2011
January 13, 2012
43,180
On March 23, 2011, our board of directors declared a dividend of one preferred stock purchase
right (‘‘Right’’) for each outstanding share of our common stock held by stockholders of record at the
close of business on April 1, 2011. Each Right, once exercisable, entitles the registered holder to
purchase one one-thousandth of a share of our preferred stock, designated as Series A Junior
Participating Preferred Stock, par value $0.01 per share, at a price of $120.00 per one one-thousandth
of a share, subject to certain adjustments. No shares of Series A Junior Participating Preferred Stock
are outstanding as of December 31, 2011. The Rights will expire upon the close of business on the
earliest to occur of: (i) March 22, 2013, (ii) the date on which the Rights are redeemed or exchanged
135
IRON MOUNTAIN INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
DECEMBER 31, 2011
(In thousands, except share and per share data)
13. Stockholders’ Equity Matters (Continued)
by us in accordance with the rights agreement governing the Rights and (iii) the date of our 2012
annual meeting of stockholders if requisite stockholder approval of the rights agreement is not obtained
at such meeting.
14. Discontinued Operations
Digital Operations
In August 2010, we divested the Domain Name Product Line for approximately $11,400 in cash at
closing which is included in cash flows from operating activities—discontinued operations. This
represented the sale of assets (primarily customer contracts) of a product line. Total revenues of this
product line for the year ended December 31, 2009 and the seven months ended July 31, 2010 were
approximately $6,300 and $3,500, respectively. A gain in the amount of approximately $6,900 ($2,834,
net of tax) was recorded during the quarter ended September 30, 2010 and is included in loss from
discontinued operations, net of tax.
During the quarter ended September 30, 2010, we concluded that events occurred and
circumstances changed in our former worldwide digital business reporting unit that required us to
conduct an impairment review. The primary factors contributing to our conclusion that we had a
triggering event and a requirement to reassess our former worldwide digital business reporting unit
goodwill for impairment included: (1) a reduction in forecasted revenue and operating results due to
continued pressure on key parts of the business as a result of the weak economy; (2) reduced revenue
and profit outlook for our eDiscovery service due to smaller average matter size and lower pricing;
(3) a decision to discontinue certain software development projects; and (4) the sale of the Domain
Name Product Line. As a result of the review, we recorded a provisional goodwill impairment charge
associated with our former worldwide digital business reporting unit in the amount of $255,000 during
the quarter ended September 30, 2010. We finalized the estimate in the fourth quarter of 2010, and we
recorded an additional impairment of $28,785, for a total goodwill impairment charge of $283,785. For
the year ended December 31, 2010, we allocated $85,909 of this charge to the retained technology
escrow services business, based on a relative fair value basis, which charge continues to be included in
our continuing results of operations as a component of intangible impairments in our consolidated
statements of operations. As described in Note 9 to Notes to Consolidated Financial Statements, our
technology escrow services business, which had been reported in our former worldwide digital business
segment, is now reported as a component of our North American Business segment. In April 2011, we
announced a comprehensive strategic plan, which included exploring strategic alternatives for our
digital business, including a potential sale of the Digital Business.
136
IRON MOUNTAIN INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
DECEMBER 31, 2011
(In thousands, except share and per share data)
14. Discontinued Operations (Continued)
On June 2, 2011, IMI completed the sale of the Digital Business to Autonomy, pursuant to the
Digital Sale Agreement. In the Digital Sale, Autonomy purchased (i) the shares of certain of IMI’s
subsidiaries through which IMI conducted the Digital Business and (ii) certain assets of IMI and its
subsidiaries relating to our Digital Business. The Digital Sale qualified as discontinued operations
because (a) the remaining direct gross cash inflows and outflows of the Digital Business by IMI
post-close are not expected to be significant in relation to the direct gross cash inflows and outflows
absent the Digital Sale and (b) there is no significant continuing involvement because IMI does not
retain the ability to influence the operating and financial policies of the Digital Business. As a result,
the financial position, operating results and cash flows of the Digital Business and the Domain Name
Product Line, for all periods presented, including the gains on the sales, have been reported as
discontinued operations for financial reporting purposes.
Pursuant to the Digital Sale Agreement, IMI received approximately $395,400 in cash, consisting of
the initial purchase price of $380,000 and a preliminary working capital adjustment of approximately
$15,400, which remains subject to a customary post-closing adjustment based on the amount of working
capital at closing. The purchase price for the Digital Sale will be increased on a dollar-for-dollar basis
if the working capital balance at the time of closing exceeds the target amount of working capital as set
forth in the Digital Sale Agreement and decreased on a dollar-for-dollar basis if such closing working
capital balance is less than the target amount. We and Autonomy are in disagreement regarding the
working capital adjustment in the Digital Sale Agreement. As a result, as contemplated by the Digital
Sale Agreement, the matter is being referred to an independent third party accounting firm for
determination of the appropriate adjustment amount. Transaction costs relating to the Digital Sale
amounted to $7,387 ($774 of such costs were unpaid as of December 31, 2011). Additionally, $11,075 of
inducements are payable to Autonomy and have been netted against the proceeds in calculating the
gain on the Digital Sale ($6,000 of such amount was unpaid as of December 31, 2011). We used the net
proceeds received from the Digital Sale to pay down amounts outstanding under our revolving credit
facility. Also, a tax provision of $45,126 associated with the gain recorded on the Digital Sale was
recorded for the year ended December 31, 2011. A gain on sale of discontinued operations in the
amount of $243,861 ($198,735, net of tax) was recorded during the year ended December 31, 2011, as a
result of the Digital Sale. Approximately $3,828 of cumulative translation adjustment associated with
our Digital Business was reclassified from accumulated other comprehensive items, net and reduced the
gain on the Digital Sale by the same amount.
137
IRON MOUNTAIN INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
DECEMBER 31, 2011
(In thousands, except share and per share data)
14. Discontinued Operations (Continued)
The table below summarizes certain results of operations of the Digital Business and the Domain
Name Product Line:
Years Ended December 31,
2009
2010
2011(1)
Total Revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$201,651
$ 203,479
$ 79,199
Loss Before Benefit for Income Taxes of Discontinued Operations . .
Benefit for Income Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ (14,959) $(235,161) $ (31,094)
(13,744)
(19,682)
(4,791)
Loss from Discontinued Operations, Net of Tax . . . . . . . . . . . . . . . .
$ (10,168) $(215,479) $ (17,350)
Gain on Sale of Discontinued Operations . . . . . . . . . . . . . . . . . . . .
Provision for Income Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Gain on Sale of Discontinued Operations, Net of Tax . . . . . . . . . . .
$
$
— $
—
— $
— $243,861
45,126
—
— $198,735
Total (Loss) Income from Discontinued Operations
and Sale, Net of Tax . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ (10,168) $(215,479) $181,385
(1) Includes the Digital Business results of operations through June 2, 2011, the date the Digital Sale
was consummated.
There have been no allocations of corporate general and administrative expenses to discontinued
operations. In accordance with our policy, we have allocated corporate interest associated with all debt
that is not specifically allocated to a particular component based on the proportion of the assets of the
Digital Business and the Domain Name Product Line to our total consolidated assets at the applicable
weighted average interest rate associated with such debt for such reporting period. Interest allocated to
the Digital Business and the Domain Name Product Line and included in loss from discontinued
operations amounted to $13,041, $14,336 and $2,396 for the years ended December 31, 2009, 2010 and
2011, respectively.
138
IRON MOUNTAIN INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
DECEMBER 31, 2011
(In thousands, except share and per share data)
14. Discontinued Operations (Continued)
The carrying amounts of the major classes of assets and liabilities of the Digital Business were as
follows:
December 31, 2010
June 2, 2011
Accounts receivable, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Prepaid expenses and other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Current assets of discontinued operations . . . . . . . . . . . . . . . . . . . . . .
Property, plant and equipment, net . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Goodwill, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other assets, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 41,418
1,726
6,585
49,729
39,539
35,699
13,934
45,889
Non-current assets of discontinued operations . . . . . . . . . . . . . . . . . .
135,061
Assets of discontinued operations . . . . . . . . . . . . . . . . . . . . . . . . . . .
$184,790
Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accrued expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Current liabilities of discontinued operations . . . . . . . . . . . . . . . . . . .
Other long-term liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Non-current liabilities of discontinued operations . . . . . . . . . . . . . . . .
$ 15,848
8,879
27,638
52,365
1,009
—
1,009
$ 43,893
1,542
6,533
51,968
37,882
35,699
13,485
41,146
128,212
$180,180
$
9,665
7,824
31,755
49,244
1,027
—
1,027
Liabilities of discontinued operations . . . . . . . . . . . . . . . . . . . . . . . . .
$ 53,374
$ 50,271
In connection with the Digital Sale, we entered into several other arrangements with Autonomy,
including:
(cid:127) A reseller agreement with Autonomy that allows us to sell certain products and services of the
Digital Business now owned by Autonomy and certain other Autonomy products and services
(the ‘‘Products and Services’’) over a three year period beginning June 2, 2011. The reseller
agreement provides for the payments to Autonomy of: (i) $3,500, which was paid on the closing
of the Digital Sale; and (ii) $6,000 on June 2, 2012. Such amounts represent prepayments of
amounts payable to Autonomy related to qualifying sales of Products and Services to new
customers of the Digital Business and are non-refundable to the extent we do not achieve the
requisite level of qualifying sales of Products and Services during the term of the reseller
agreement.
(cid:127) A co-location agreement with Autonomy in which we will provide certain storage related services
associated with certain data centers to Autonomy for a two year transitional period beginning
June 2, 2011. Autonomy has the right to extend this period by two additional years upon six
months notice prior to the end of the first two-year term.
139
IRON MOUNTAIN INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
DECEMBER 31, 2011
(In thousands, except share and per share data)
14. Discontinued Operations (Continued)
(cid:127) A transitional services agreement to provide certain services, generally for a period no longer
than six months, including general, administrative, finance, human resource and information
technology services.
(cid:127) The payment by us to Autonomy of approximately $3,075 as of the closing for the purchase of
certain Products and Services for our internal use.
The revenues and corresponding expenses associated with the above agreements are reflected in
our continuing operating results. None of these services gives us the ability to influence the operating
and financial policies of the Digital Business. We have concluded that the direct cash flows associated
with these agreements are not significant because they are estimated to represent less than 5% of both
direct cash inflows and outflows of the Digital Business for the one-year period subsequent to the
Digital Sale, and, therefore, we have reported the Digital Business as discontinued operations in the
accompanying consolidated financial statements for all periods presented. We will continue to assess
the cash flows associated with these agreements and our conclusion that the Digital Business be
reported as discontinued operations until the first anniversary of the Digital Sale.
In February 2010, we acquired the stock of Mimosa Systems, Inc. (‘‘Mimosa’’), a provider of
enterprise-class digital content archiving solutions, for approximately $112,000 in cash and
approximately $2,000 in fair value of options issued. Mimosa was subsequently disposed of in the sale
of our Digital Business in June 2011. The purchase price paid by IMI for the Mimosa acquisition is
included in cash flows from investing activities-discontinued operations in our fiscal year 2010 statement
of cash flows.
New Zealand Business
After further analysis subsequent to our April 2011 announcement of our comprehensive strategic
plan, which includes reviewing select underperforming international markets, we committed in May
2011 to a plan to sell the New Zealand Business. During the second quarter of 2011, we recorded an
impairment charge of $4,900 to write-down the long-lived assets of the New Zealand Business to its
estimated net realizable value which is included in loss from discontinued operations. In the calculation
of the carrying value of the New Zealand Business, we allocated the goodwill of our Australia/New
Zealand reporting unit between Australia and New Zealand on a relative fair value basis. Additionally,
we recorded a tax benefit of $7,883 during the year ended December 31, 2011 associated with the
outside tax basis of the New Zealand Business, which is also reflected in loss from discontinued
operations. No valuation allowance was provided against this benefit because such amount is
recoverable against the capital gain associated with the Digital Sale. We completed the sale of the New
Zealand Business on October 3, 2011 for a purchase price of approximately $10,000. We recorded a
gain on the sale of discontinued operations associated with the New Zealand Business of $1,884 during
the fourth quarter of 2011 which primarily represents cumulative translation adjustment associated with
our New Zealand operations which was reclassified from accumulated other comprehensive items, net
and increased the gain on the sale of New Zealand by that same amount. The New Zealand Business
was previously included within the International Business segment. For all periods presented, the
financial position, operating results and cash flows of the New Zealand Business, including the gain on
the sale, have been reported as discontinued operations for financial reporting purposes.
140
IRON MOUNTAIN INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
DECEMBER 31, 2011
(In thousands, except share and per share data)
14. Discontinued Operations (Continued)
The table below summarizes certain results of operations of the New Zealand Business:
Total Revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 7,279
$7,414
$ 6,489
Loss Before Benefit for Income Taxes of Discontinued Operations . . . . . .
Benefit for Income Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$(1,451) $ (533) $(4,726)
— (7,883)
—
(Loss) Income from Discontinued Operations, Net of Tax . . . . . . . . . . . . .
$(1,451) $ (533) $ 3,157
Years Ended December 31,
2009
2010
2011(1)
Gain on Sale of Discontinued Operations . . . . . . . . . . . . . . . . . . . . . . . .
Provision for Income Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ — $ — $ 1,884
—
—
—
Gain on Sale of Discontinued Operations, Net of Tax . . . . . . . . . . . . . . . .
$ — $ — $ 1,884
Total (Loss) Income from Discontinued Operations
and Sale, Net of Tax . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$(1,451) $ (533) $ 5,041
(1) Includes the New Zealand Business results of operations through October 3, 2011, the date the
sale of the New Zealand Business was consummated.
The carrying amounts of the major classes of assets and liabilities of the New Zealand Business
were as follows:
December 31, 2010 October 3, 2011
Accounts receivable, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Prepaid expenses and other
$ 1,339
1,034
Current assets of discontinued operations . . . . . . . . . . . . . . . . . . . .
Property, plant and equipment, net . . . . . . . . . . . . . . . . . . . . . . . . . .
Goodwill, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other assets, net
Non-current assets of discontinued operations . . . . . . . . . . . . . . . .
Assets of discontinued operations . . . . . . . . . . . . . . . . . . . . . . . . .
Current portion of long-term debt . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accrued expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Current liabilities of discontinued operations . . . . . . . . . . . . . . . . .
Other long-term liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Non-current liabilities of discontinued operations . . . . . . . . . . . . . .
2,373
3,746
6,128
5,689
15,563
$17,936
$
387
263
1,382
113
2,145
24
1,679
1,703
$ 1,146
897
2,043
3,632
1,136
5,452
10,220
$12,263
$ —
236
524
67
827
24
1,659
1,683
Liabilities of discontinued operations . . . . . . . . . . . . . . . . . . . . . . .
$ 3,848
$ 2,510
141
IRON MOUNTAIN INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
DECEMBER 31, 2011
(In thousands, except share and per share data)
14. Discontinued Operations (Continued)
Italian Business
After further analysis subsequent to our April 2011 announcement of our comprehensive strategic
plan, which includes reviewing select underperforming international markets, we committed in
December 2011 to a plan to sell the Italian Business. In the calculation of the carrying value of the
Italian Business, we allocated the goodwill of our Western European reporting unit between the Italian
Business and the remainder of this reporting unit on a relative fair value basis. Additionally, in
conjunction with the goodwill impairment analysis performed associated with our Western Europe
reporting unit, we performed an impairment test on the long-lived assets of our Italian Business in the
third quarter of 2011. The undiscounted cash flows from the Italian Business were lower than the
carrying value of the long-lived assets associated with the operations of the Italian Business and
resulted in the requirement to fair value the long-lived assets of this lower level component. As a
result, we recorded write-offs of other intangible assets, primarily customer relationship values of
$8,000, and certain write-downs to property, plant and equipment (primarily racking) long-lived assets
in Italy of $6,600 in the third quarter of 2011, which are included in loss from discontinued operations.
We allocated $2,500 of the Western Europe goodwill impairment charge to the Italian Business which is
also included in loss from discontinued operations for the year ended December 31, 2011. The Italian
Business was previously included within the International Business segment. Beginning in the fourth
quarter of 2011, the Italian Business has been classified as held for sale and, for all periods presented,
the financial position, operating results and cash flows of the Italian Business have been reported as
discontinued operations for financial reporting purposes.
The table below summarizes certain results of operations of the Italian Business:
Total Revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$25,468
$18,284
$ 15,353
Loss Before Benefit for Income Taxes of Discontinued Operations . . . .
Benefit for Income Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ (849) $ (3,756) $(35,350)
(2,104)
(351)
(330)
Loss from Discontinued Operations, Net of Tax . . . . . . . . . . . . . . . . . .
$ (519) $ (3,405) $(33,246)
Total Loss from Discontinued Operations, Net of Tax . . . . . . . . . . . . . .
$ (519) $ (3,405) $(33,246)
Years Ended December 31,
2009
2010
2011
142
IRON MOUNTAIN INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
DECEMBER 31, 2011
(In thousands, except share and per share data)
14. Discontinued Operations (Continued)
The carrying amounts of the major classes of assets and liabilities of the Italian Business were as
follows:
December 31, 2010
December 31, 2011
Accounts receivable, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Prepaid expenses and other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Current assets of discontinued operations . . . . . . . . . . . . . . . . . .
Property, plant and equipment, net . . . . . . . . . . . . . . . . . . . . . . . .
Goodwill, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other assets, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Non-current assets of discontinued operations . . . . . . . . . . . . . . .
$ 8,744
1,738
10,482
7,583
2,576
9,327
19,486
Assets of discontinued operations . . . . . . . . . . . . . . . . . . . . . . . .
$29,968
Current portion of long-term debt . . . . . . . . . . . . . . . . . . . . . . . . .
Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accrued expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Current liabilities of discontinued operations . . . . . . . . . . . . . . . .
Other long-term liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Non-current liabilities of discontinued operations . . . . . . . . . . . .
$
522
1,324
2,386
20
4,252
339
1,431
1,770
Liabilities of discontinued operations . . . . . . . . . . . . . . . . . . . . .
$ 6,022
$4,676
602
5,278
—
—
1,978
1,978
$7,256
$ 118
563
2,552
41
3,274
43
—
43
$3,317
143
Pursuant to the requirements of Section 13 or 15(d) 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.
SIGNATURES
IRON MOUNTAIN INCORPORATED
By:
/s/ BRIAN P. MCKEON
Brian P. McKeon
Executive Vice President and
Chief Financial Officer
(Principal Financial and Accounting Officer)
Dated: February 28, 2012
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed
below by the following persons on behalf of the registrant and in the capacities and on the dates
indicated.
Name
Title
Date
/s/ C. RICHARD REESE
C. Richard Reese
/s/ BRIAN P. MCKEON
Brian P. McKeon
/s/ TED R. ANTENUCCI
Ted R. Antenucci
/s/ CLARKE H. BAILEY
Clarke H. Bailey
/s/ KENT P. DAUTEN
Kent P. Dauten
/s/ PAUL F. DENINGER
Paul F. Deninger
/s/ PER-KRISTIAN HALVORSEN
Per-Kristian Halvorsen
/s/ MICHAEL LAMACH
Michael Lamach
Chairman of the Board of Directors
and Chief Executive Officer
February 28, 2012
February 28, 2012
February 28, 2012
February 28, 2012
February 28, 2012
February 28, 2012
February 28, 2012
February 28, 2012
Executive Vice President and Chief
Financial Officer (Principal Financial
and Accounting Officer)
Director
Director
Director
Director
Director
Director
144
Name
Title
Date
/s/ ARTHUR D. LITTLE
Arthur D. Little
/s/ ALLAN Z. LOREN
Allan Z. Loren
/s/ VINCENT J. RYAN
Vincent J. Ryan
/s/ LAURIE A. TUCKER
Laurie A. Tucker
/s/ ALFRED J. VERRECCHIA
Alfred J. Verrecchia
Director
Director
Director
Director
Director
February 28, 2012
February 28, 2012
February 28, 2012
February 28, 2012
February 28, 2012
145
INDEX TO EXHIBITS
Certain exhibits indicated below are incorporated by reference to documents we have filed with the
Commission. Each exhibit marked by a pound sign (#) is a management contract or compensatory
plan.
Exhibit
2.1
2.2
3.1
3.2
3.3
3.4
3.5
4.1
4.2
4.3
4.4
4.5
Item
Agreement and Plan of Merger by and between Iron Mountain Incorporated, a Pennsylvania
corporation, and the Company, dated as of May 27, 2005. (Incorporated by reference to the
Company’s Current Report on Form 8-K dated May 27, 2005).
Purchase and Sales Agreement, by and among Autonomy Corporation plc, Iron Mountain
Incorporated and certain of its subsidiaries, dated as of May 15, 2011. (Incorporated by
reference to the Company’s Current Report on Form 8-K dated June 8, 2011).
Amended and Restated Certificate of Incorporation of the Company, as amended.
(Incorporated by reference to the Company’s Annual Report on Form 10-K for the year ended
December 31, 2006).
Amended and Restated Bylaws of the Company (as adopted on March 5, 2010). (Incorporated
by reference to the Company’s Current Report on Form 8-K dated March 5, 2010).
Declaration of Trust of IM Capital Trust I, dated as of December 10, 2001 among the
Company, The Bank of New York, The Bank of New York (Delaware) and John P. Lawrence,
as trustees. (Incorporated by reference to the Company’s Registration Statement No. 333-75068,
filed with the Commission on December 13, 2001).
Certificate of Trust of IM Capital Trust I. (Incorporated by reference to the Company’s
Registration Statement No. 333-75068, filed with the Commission on December 13, 2001).
Certificate of Designations for Iron Mountain Incorporated Series A Junior Participating
Preferred Stock, dated as of March 24, 2011. (Incorporated by reference to the Company’s
Current Report on Form 8-K dated March 24, 2011).
Indenture for 71⁄4% Senior Subordinated Notes due 2014, dated as of January 22, 2004, by and
among the Company, the Guarantors named therein and The Bank of New York, as trustee.
(Incorporated by reference to the Company’s Current Report on Form 8-K dated July 11, 2006).
Senior Subordinated Indenture, dated as of December 30, 2002, among the Company, the
Guarantors named therein and The Bank of New York, as trustee. (Incorporated by reference to
the Company’s Annual Report on Form 10-K for the year ended December 31, 2002).
First Supplemental Indenture, dated as of December 30, 2002, among the Company, the
Guarantors named therein and The Bank of New York, as trustee relating to the 73⁄4% Senior
Subordinated Notes due 2015. (Incorporated by reference to the Company’s Annual Report on
Form 10-K for the year ended December 31, 2002).
Second Supplemental Indenture, dated as of June 20, 2003, among the Company, the
Guarantors named therein and The Bank of New York, as trustee relating to the 65⁄8% Senior
Subordinated Notes due 2016. (Incorporated by reference to the Company’s Annual Report on
Form 10-K for the year ended December 31, 2003).
Third Supplemental Indenture, dated as of July 17, 2006, by and among the Company, the
Guarantors named therein and The Bank of New York Trust Company, N.A., as trustee
relating to the 83⁄4% Senior Subordinated Notes due 2018. (Incorporated by reference to the
Company’s Current Report on Form 8-K dated July 20, 2006).
146
Exhibit
4.6
4.7
4.8
4.9
4.10
4.11
4.12
4.13
4.14
4.15
Item
Fourth Supplemental Indenture, dated as of October 16, 2006, by and among the Company,
the Guarantors named therein and The Bank of New York Trust Company, N.A., as trustee
relating to the 8% Senior Subordinated Notes due 2018 and the 63⁄4% Senior Subordinated
Notes due 2018. (Incorporated by reference to the Company’s Current Report on Form 8-K dated
October 17, 2006).
Fifth Supplemental Indenture, dated as of January 19, 2007, by and among the Company, the
Guarantors named therein and The Bank of New York Trust Company, N.A., as trustee
relating to the 63⁄4% Senior Subordinated Notes due 2018. (Incorporated by reference to the
Company’s Current Report on Form 8-K dated January 24, 2007).
Amendment No. 1 to Fifth Supplemental Indenture, dated as of February 23, 2007, by and
among the Company, the Guarantors named therein and The Bank of New York Trust
Company, N.A., as trustee. (Incorporated by reference to the Company’s Annual Report on
Form 10-K for the year ended December 31, 2006).
Sixth Supplemental Indenture, dated as of March 15, 2007, by and among Iron Mountain Nova
Scotia Funding Company, the Company and the other guarantors named therein and The
Bank of New York Trust Company, N.A., as trustee relating to the 71⁄2% Senior Subordinated
Notes due 2017. (Incorporated by reference to the Company’s Current Report on Form 8-K dated
March 23, 2007).
Registration Rights Agreement, dated as of March 15, 2007, between Iron Mountain Nova
Scotia Funding Company, the Company and the other guarantors named therein and the
Initial Purchasers named therein. (Incorporated by reference to the Company’s Current Report on
Form 8-K dated March 23, 2007).
Seventh Supplemental Indenture, dated as of June 5, 2008, by and among the Company, the
Guarantors named therein and The Bank of New York Trust Company, N.A., as trustee
relating to the 8% Senior Subordinated Notes due 2020. (Incorporated by reference to the
Company’s Current Report on Form 8-K dated June 11, 2008).
Eighth Supplemental Indenture, dated as of August 10, 2009, by and among the Company, the
Guarantors named therein and The Bank of New York Trust Company, N.A., as trustee
relating to the 83⁄8% Senior Subordinated Notes due 2021. (Incorporated by reference to the
Company’s Current Report on Form 8-K dated August 11, 2009).
Form of Stock Certificate representing shares of Common Stock, $0.01 par value per share, of
the Company. (Incorporated by reference to the Company’s Quarterly Report on Form 10-Q for
the quarter ended September 30, 2011).
Rights Agreement, dated as of March 23, 2011, by and between Iron Mountain Incorporated
and Mellon Investor Services LLC (which includes the form of Certificate of Designations of
Series A Junior Participating Preferred Stock as Exhibit A to the Rights Agreement, the
Summary of Rights to Purchase Series A Junior Participating Preferred Stock as Exhibit B to
the Rights Agreement and the form of Right Certificate as Exhibit C to the Rights
Agreement). (Incorporated by reference to the Company’s Current Report on Form 8-K dated
March 24, 2011).
Senior Subordinated Indenture for 73⁄4% Senior Subordinated Notes due 2019, dated as of
September 23, 2011, among the Company, the Guarantors named therein and The Bank of
New York Mellon Trust Company, N.A., as trustee. (Incorporated by reference to the Company’s
Current Report on Form 8-K, dated September 29, 2011).
147
Exhibit
4.16
10.1
10.2
10.3
10.4
10.5
10.6
10.7
10.8
10.9
10.10
Item
First Supplemental Indenture, dated as of September 23, 2011, among Iron Mountain
Incorporated, the Guarantors named therein and The Bank of New York Mellon Trust
Company, N.A., as trustee. (Incorporated by reference to the Company’s Current Report on
Form 8-K, dated September 29, 2011).
Iron Mountain Incorporated Executive Deferred Compensation Plan. (#) (Incorporated by
reference to the Company’s Annual Report on Form 10-K for the year ended December 31, 2007).
First Amendment to the Iron Mountain Incorporated Executive Deferred Compensation Plan.
(#) (Incorporated by reference to the Company’s Annual Report on Form 10-K for the year ended
December 31, 2008).
Iron Mountain Incorporated 1997 Stock Option Plan, as amended. (#) (Incorporated by
reference to the Company’s Annual Report on Form 10-K for the year ended December 31, 2000).
Amendment to Iron Mountain Incorporated 1997 Stock Option Plan, as amended.
(#) (Incorporated by reference to the Company’s Current Report on Form 8-K dated December 10,
2008).
Iron Mountain Incorporated 1995 Stock Incentive Plan, as amended. (#) (Incorporated by
reference to Iron Mountain/DE’s Current Report on Form 8-K dated April 16, 1999).
Iron Mountain Incorporated 2002 Stock Incentive Plan. (#) (Incorporated by reference to the
Company’s Annual Report on Form 10-K for the year ended December 31, 2002).
Third Amendment to the Iron Mountain Incorporated 2002 Stock Incentive Plan. (#)
(Incorporated by reference to Appendix A of the Company’s Proxy Statement for the 2008 Annual
Meeting of Stockholders filed April 21, 2008).
Fourth Amendment to the Iron Mountain Incorporated 2002 Stock Incentive Plan. (#)
(Incorporated by reference to the Company’s Current Report on Form 8-K dated December 10,
2008).
Fifth Amendment to the Iron Mountain Incorporated 2002 Stock Incentive Plan. (#)
(Incorporated by reference to the Company’s Current Report on Form 8-K dated June 4, 2010).
Sixth Amendment to the Iron Mountain Incorporated 2002 Stock Incentive Plan. (#)
(Incorporated by reference to the Company’s Quarterly Report on Form 10-Q for the quarter ended
June 30, 2011).
10.11
Stratify, Inc. 1999 Stock Plan. (#) (Incorporated by reference to the Company’s Annual Report on
Form 10-K for the year ended December 31, 2007).
10.12 Amendment to Stratify, Inc. 1999 Stock Plan. (#) (Incorporated by reference to the Company’s
Current Report on Form 8-K dated December 10, 2008).
10.13
10.14
10.15
Form of Iron Mountain Incorporated Amended and Restated Non-Qualified Stock Option
Agreement. (#) (Incorporated by reference to the Company’s Annual Report on Form 10-K for
the year ended December 31, 2004).
Form of Iron Mountain Incorporated Incentive Stock Option Agreement. (#) (Incorporated by
reference to the Company’s Annual Report on Form 10-K for the year ended December 31, 2004).
Form of Iron Mountain Incorporated 1995 Stock Incentive Plan Non-Qualified Stock Option
Agreement. (#) (Incorporated by reference to the Company’s Annual Report on Form 10-K for
the year ended December 31, 2004).
148
Exhibit
10.16
10.17
10.18
10.19
10.20
10.21
10.22
10.23
10.24
10.25
Item
Form of Iron Mountain Incorporated 1995 Stock Incentive Plan Amended and Restated Iron
Mountain Non-Qualified Stock Option Agreement. (#) (Incorporated by reference to the
Company’s Annual Report on Form 10-K for the year ended December 31, 2004).
Form of Iron Mountain Incorporated 1995 Stock Incentive Plan Incentive Stock Option
Agreement. (#) (Incorporated by reference to the Company’s Annual Report on Form 10-K for
the year ended December 31, 2004).
Form of Iron Mountain Incorporated 1995 Stock Incentive Plan Non-Qualified Stock Option
Agreement. (#) (Incorporated by reference to the Company’s Annual Report on Form 10-K for
the year ended December 31, 2004).
Form of Iron Mountain Incorporated 1997 Stock Option Plan Stock Option Agreement
(version 1). (#) (Incorporated by reference to the Company’s Annual Report on Form 10-K for the
year ended December 31, 2004).
Form of Iron Mountain Incorporated 1997 Stock Option Plan Stock Option Agreement
(version 2). (#) (Incorporated by reference to the Company’s Annual Report on Form 10-K for the
year ended December 31, 2004).
Form of Iron Mountain Incorporated 2002 Stock Incentive Plan Stock Option Agreement
(version 1). (#) (Incorporated by reference to the Company’s Annual Report on Form 10-K for the
year ended December 31, 2004).
Form of Iron Mountain Incorporated 2002 Stock Incentive Plan Stock Option Agreement
(version 2). (#) (Incorporated by reference to the Company’s Annual Report on Form 10-K for the
year ended December 31, 2004).
Iron Mountain Incorporated 2002 Stock Incentive Plan Stock Option Agreement, dated
May 24, 2007, by and between Iron Mountain Incorporated and Brian P. McKeon. (#)
(Incorporated by reference to the Company’s Quarterly Report on Form 10-Q for the quarter ended
June 30, 2007).
Form of Performance Unit Agreement pursuant to the Iron Mountain Incorporated 2002 Stock
Incentive Plan. (#) (Incorporated by reference to the Company’s Quarterly Report on Form 10-Q
for the quarter ended March 31, 2011).
Form of Restricted Stock Unit Agreement pursuant to the Iron Mountain Incorporated 2002
Stock Incentive Plan. (#) (Incorporated by reference to the Company’s Quarterly Report on
Form 10-Q for the quarter ended March 31, 2011).
10.26 Change in Control Agreement, dated December 10, 2008, by and between the Company and
Brian P. McKeon. (Incorporated by reference to the Company’s Current Report on Form 8-K dated
December 10, 2008).
10.27
Iron Mountain Incorporated 2003 Senior Executive Incentive Program. (#) (Incorporated by
reference to the Company’s Current Report on Form 8-K dated April 5, 2005).
10.28 Amendment to the Iron Mountain Incorporated 2003 Senior Executive Incentive Program. (#)
(Incorporated by reference to the Company’s Current Report on Form 8-K dated June 4, 2010).
10.29
Iron Mountain Incorporated 2006 Senior Executive Incentive Program. (#) (Incorporated by
reference to the Company’s Current Report on Form 8-K dated June 1, 2006).
10.30 Amendment to the Iron Mountain Incorporated 2006 Senior Executive Incentive Program. (#)
(Incorporated by reference to the Company’s Current Report on Form 8-K dated June 4, 2010).
149
Exhibit
Item
10.31 Employment Agreement, dated as of August 11, 2008, by and between the Company and
Robert Brennan. (#) (Incorporated by reference to the Company’s Current Report on Form 8-K
dated August 11, 2008).
10.32 Contract of Employment with Iron Mountain, between Iron Mountain Belgium NV and
Marc Duale. (#) (Incorporated by reference to the Company’s Current Report on Form 8-K dated
December 30, 2009).
10.33 Agreement on transfer of the employment contract between Iron Mountain Belgium NV and
Marc Duale to Iron Mountain BPM International, dated December 31, 2010. (#) (Incorporated
by reference to the Company’s Annual Report on Form 10-K for the year ended December 31,
2010).
10.34 Restated Compensation Plan for Non-Employee Directors. (#) (Incorporated by reference to the
Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2011).
10.35
Iron Mountain Incorporated Director Deferred Compensation Plan. (#) (Incorporated by
reference to the Company’s Annual Report on Form 10-K for the year ended December 31, 2007).
10.36 Amended and Restated Registration Rights Agreement, dated as of June 12, 1997, by and
among the Company and certain stockholders of the Company. (#) (Incorporated by reference
to Iron Mountain/DE’s Quarterly Report on Form 10-Q for the quarter ended June 30, 1997).
10.37 Master Lease and Security Agreement, dated as of May 22, 2001, between Iron Mountain
Statutory Trust—2001, as Lessor, and Iron Mountain Records Management, Inc., as Lessee.
(Incorporated by reference to the Company’s Quarterly Report on Form 10-Q for the quarter ended
June 30, 2001).
10.38 Amendment No. 1 to Master Lease and Security Agreement, dated as of November 1, 2001
between Iron Mountain Statutory Trust—2001, as Lessor, and Iron Mountain Records
Management, Inc., as Lessee. (Incorporated by reference to the Company’s Annual Report on
Form 10-K for the year ended December 31, 2001).
10.39 Amendment to Master Lease and Security Agreement and Unconditional Guaranty, dated
March 15, 2002, between Iron Mountain Statutory Trust—2001, Iron Mountain Information
Management, Inc. and the Company. (Incorporated by reference to the Company’s Quarterly
Report on Form 10-Q for the quarter ended March 31, 2002).
10.40 Unconditional Guaranty, dated as of May 22, 2001, from the Company, as Guarantor, to
Iron Mountain Statutory Trust—2001, as Lessor. (Incorporated by reference to the Company’s
Quarterly Report on Form 10-Q for the quarter ended June 30, 2001).
10.41
Subsidiary Guaranty, dated as of May 22, 2001, from certain subsidiaries of the Company as
guarantors, for the benefit of Iron Mountain Statutory Trust—2001 and consented to by Bank
of Nova Scotia. (Incorporated by reference to the Company’s Annual Report on Form 10-K for the
year ended December 31, 2002).
10.42 Guaranty Letter, dated December 31, 2002, to Scotiabanc, Inc. from Iron Mountain
Information Services, Inc., as Lessee and the Company as Guarantor. (Incorporated by reference
to the Company’s Annual Report on Form 10-K for the year ended December 31, 2002).
10.43 Master Construction Agency Agreement, dated as of May 22, 2001, between Iron Mountain
Statutory Trust—2001, as Lessor, and Iron Mountain Records Management, Inc., as
Construction Agent. (Incorporated by reference to the Company’s Quarterly Report on Form 10-Q
for the quarter ended June 30, 2001).
150
Exhibit
Item
10.44 Credit Agreement, dated as of June 27, 2011, among the Company, Iron Mountain
Information Management, Inc., Iron Mountain Canada Corporation, Iron Mountain
Switzerland GmbH, Iron Mountain Europe Limited, Iron Mountain Australia Pty Ltd., Iron
Mountain Information Management (Luxembourg) S.C.S., Iron Mountain Luxembourg S.a r.l,
the Lenders party thereto, RBS Citizens, N.A. and Bank of America, N.A., as Co-Syndication
Agents, Barclays Bank PLC, HSBC Bank USA, N.A., Morgan Stanley Senior Funding, Inc. and
the Bank of Nova Scotia, as Co-Documentation Agents, J.P. Morgan Securities LLC and RBS
Citizens, N.A., as Lead Arrangers and Joint Bookrunners, JPMorgan Chase Bank, Toronto
Branch, as Canadian Administrative Agent, and JPMorgan Chase Bank, N.A., as Agent for the
Lenders. (Incorporated by reference to the Company’s Quarterly Report on Form 10-Q for the
quarter ended June 30, 2011).
10.45 Agreement of Resignation, Appointment and Acceptance, dated as of January 28, 2005, by and
among the Company, The Bank of New York, as prior trustee, and The Bank of New York
Trust Company, N.A., as successor trustee, relating to the Senior Subordinated Indenture for
73⁄4% Senior Subordinated Notes due 2015 and 65⁄8% Senior Subordinated Notes due 2016,
dated as of December 30, 2002. (Incorporated by reference to the Company’s Current Report on
Form 8-K dated July 11, 2006).
10.46 Agreement, by and among Iron Mountain Incorporated, Elliott Associates, L.P. and Elliott
International, L.P., dated April 18, 2011. (Incorporated by reference to the Company’s Current
Report on Form 8-K dated April 19, 2011).
10.47
12
18.1
21
23.1
31.1
31.2
32.1
32.2
101.1
Separation Agreement, dated April 20, 2011, by and between Iron Mountain Incorporated and
Robert T. Brennan. (#) (Incorporated by reference to the Company’s Quarterly Report on
Form 10-Q for the quarter ended March 31, 2011).
Statement re: Computation of Ratios. (Filed herewith).
Preferability letter from Deloitte & Touche LLP regarding a change in accounting principle
dated May 10, 2010. (Incorporated by reference to the Company’s Quarterly Report on Form 10-Q
for the quarter ended March 31, 2010).
Subsidiaries of the Company. (Filed herewith).
Consent of Deloitte & Touche LLP (Iron Mountain Incorporated, Delaware). (Filed herewith).
Rule 13a-14(a) Certification of Chief Executive Officer. (Filed herewith).
Rule 13a-14(a) Certification of Chief Financial Officer. (Filed herewith).
Section 1350 Certification of Chief Executive Officer. (Filed herewith).
Section 1350 Certification of Chief Financial Officer. (Filed herewith).
The following materials from Iron Mountain Incorporated’s Annual Report on Form 10-K for
the year ended December 31, 2011 formatted in XBRL (eXtensible Business Reporting
Language): (i) the Consolidated Balance Sheets, (ii) Consolidated Statements of Operations,
(iii) Consolidated Statements of Equity, (iv) Consolidated Statements of Comprehensive
Income (Loss), (v) Consolidated Statements of Cash Flows and (vi) Notes to Consolidated
Financial Statements, tagged as blocks of text and in detail. (Furnished herewith).
151
CO RP O RATE DIREC TO RS AND O FFICERS
(As of 3/31/12)
DIRECTORS
C. Richard Reese5
Chairman of the Board of Directors
and Chief Executive Officer
Iron Mountain Incorporated
Boston, MA
Ted R. Antenucci5
President and Chief Executive Officer
Catellus Development Corporation
Oakland, CA
Clarke H. Bailey2, 6
Chief Executive Officer and
Chairman of the Board of Directors
EDCI Holdings, Inc.
New York, NY
Kent P. Dauten1, 2, 4
Managing Director
Keystone Capital, Inc.
Deerfield, IL
Paul F. Deninger4, 5
Senior Managing Director
Evercore Partners, Inc.
Waltham, MA and San Francisco, CA
Michael W. Lamach2
President, Chief Executive Officer and
Chairman of the Board of Directors
Ingersoll-Rand, plc
Davidson, NC
Arthur D. Little1, 3, 6
President and Director
A & J Acquisition Company, Inc.
Effingham, NH
Allan Z. Loren5, 6
Retired Chairman and Chief Executive Officer
Dun and Bradstreet
New York, NY
Vincent J. Ryan4
Chief Executive Officer and
Chairman of the Board of Directors
Schooner Capital Corporation
Boston, MA
Laurie A. Tucker 3, 6
Senior Vice President of Corporate Marketing
FedEx Services, Inc.
Memphis, TN
Per-Kristian Halvorsen3
Senior Vice President and Chief Innovation Officer
Intuit Inc.
Mountain View, CA
Alfred J. Verrecchia1,4, 5
Chairman of the Board of Directors
Hasbro, Inc.
Pawtucket, RI
SENIOR OFFICERS
C. Richard Reese
Chairman of the Board and Chief Executive Officer
Brian P. McKeon
Executive Vice President and Chief Financial Officer
Harold E. Ebbighausen
President, Iron Mountain North America
Marc A. Duale
President, Iron Mountain International
1 Member of Audit Committee (Mr. Verrecchia is Chairman).
4 Member of the Strategic Planning and Capital Allocation Committee
2 Member of the Compensation Committee (Mr. Bailey is Chairman).
3 Member of the Nominating and Governance Committee (Mr. Little is Chairman).
(Mr. Ryan is Chairman).
5 Member of the Strategic Review Special Committee (Mr. Reese is Chairman).
6 Member of the Chief Executive Officer Search Committee (Mr. Little is Chairman).
CO RP O RATE INFO RMATIO N
STOCKHOLDER INFORMATION
Transfer Agent, Trustee and Registrar
Computershare1
877/897-6892
201/680-6578 (outside the U.S.)
800/231-5469 (Hearing Impaired – TDD Phone)
E-Mail: shrrelations@bnymellon.com
Website:
www.bnymellon.com/shareowner/equityaccess
Address Shareholder Inquiries to:
Iron Mountain Incorporated
c/o Computershare
480 Washington Boulevard
Jersey City, NJ 07310
Send Certificates for Transfer
and Address Changes to:
Iron Mountain Incorporated
c/o Computershare
P.O. Box 358015
Pittsburgh, PA 15252-8015
Corporate Headquarters
Iron Mountain Incorporated
745 Atlantic Avenue
Boston, MA 02111
800/935-6966
www.ironmountain.com
Common Stock Data
Traded: NYSE
Symbol: IRM
Beneficial Stockholders: more than 50,500
Investor Relations
Stephen P. Golden
Vice President, Investor Relations
Iron Mountain Incorporated
745 Atlantic Avenue
Boston, MA 02111
617/535-4766
www.ironmountain.com
Annual Meeting Date
Iron Mountain Incorporated will conduct its annual
meeting of shareholders on Thursday, June 14, 2012,
9:00 A.M. at the offices of Sullivan & Worcester LLP,
One Post Office Square, Boston, MA 02109
Independent Registered Public Accounting Firm
Deloitte & Touche LLP
200 Berkeley Street
Boston, MA 02116
Dividends
In February 2010, our board of directors adopted a
dividend policy under which we began paying quar-
terly cash dividends on our common stock in the
second quarter of 2010. We initially paid cash divi-
dends at the quarterly rate of $0.0625 per share.
In December 2010, our board of directors increased
the quarterly dividend rate to $0.1875 per share. In
June 2011, our board of directors further increased
the quarterly dividend rate to $0.25 per share.
In February 2010, our board of directors also
approved a share repurchase program authorizing
up to $150 million in repurchases of our common
stock, and, in October 2010, our board of direc-
tors authorized up to an additional $200 million
of such repurchases, for a total of $350 million. In
May 2011, our board of directors added $850 million
to this authorization, for a total of $1.2 billion.
Any determinations by us to repurchase our common
stock or pay cash dividends on our common stock
in the future, as well as the form and mix of any
stockholder payouts, will be based primarily upon
our financial condition, results of operations, busi-
ness requirements and strategy, the price of our
common stock in the case of the repurchase program
and our board of directors’ continuing determina-
tion that the repurchase program and the declara-
tion of dividends under the dividend policy are in the
best interests of our stockholders and are in compli-
ance with all laws and agreements applicable to the
repurchase and dividend programs. The terms of our
credit agreement and our indentures contain provi-
sions permitting the payment of cash dividends and
stock repurchases, subject to certain limitations.
1 The Bank of New York Mellon’s Shareowners was acquired by Computershare on December 31, 2011.
CAUTIONARY NOTE REGARDING FORWARD -LOOKING STATEMENTS
We have made statements in this Annual Report that constitute
“forward-looking statements” as that term is defined in the Private
Securities Litigation Reform Act of 1995 and other federal securities laws.
These forward-looking statements concern our operations, economic
performance, financial condition, goals, beliefs, future growth strategies,
investment objectives, plans and current expectations, such as our (1)
expected increase in our Adjusted OIBDA margins in our International
Business segment, (2) commitment to stockholder payouts and dividend
payments, (3) expected target leverage ratio, and (4) expected divestiture
of the Italian Business. The forward-looking statements are subject to
various known and unknown risks, uncertainties and other factors. When
we use words such as “believes,” “expects,” “anticipates,” “estimates” or
similar expressions, we are making forward-looking statements.
Although we believe that our forward-looking statements are based on
reasonable assumptions, our expected results may not be achieved, and
actual results may differ materially from our expectations. Important
factors that could cause actual results to differ from expectations include,
among others:
• the cost to comply with current and future laws, regulations and
customer demands relating to privacy issues;
• the impact of litigation or disputes that may arise in connection with
incidents in which we fail to protect our customers’ information;
• changes in the price for our services relative to the cost of providing
such services;
• changes in customer preferences and demand for our services;
• the adoption of alternative technologies and shifts by our customers to
storage of data through non-paper based technologies;
• the cost or potential liabilities associated with real estate necessary for
our business;
• the performance of business partners upon whom we depend for
technical assistance or management expertise outside the U.S.;
• changes in the political and economic environments in the countries in
which our international subsidiaries operate;
• the failure to consummate a successful sale of the Italian Business;
• claims that our technology violates the intellectual property rights of a
third party;
• the impact of legal restrictions or limitations under stock repurchase
plans on price, volume or timing of stock repurchases;
• the impact of alternative, more attractive investments on dividends or
stock repurchases;
• our ability or inability to complete acquisitions on satisfactory terms
and to integrate acquired companies efficiently; and
• other trends in competitive or economic conditions affecting our
financial condition or results of operations not presently contemplated.
Other risks may adversely impact us, as described more fully under “Item
1A. Risk Factors” included in the accompanying Annual Report on 10-K for
the year ended December 31, 2011.
You should not rely upon forward-looking statements except as
statements of our present intentions and of our present expectations,
which may or may not occur. You should read these cautionary
statements as being applicable to all forward-looking statements
wherever they appear. Except as required by law, we undertake 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. Readers are also urged to carefully review and consider the
various disclosures we have made in this document, as well as our other
periodic reports filed with the Securities and Exchange Commission (the
“Commission” or “SEC”).
The Company will furnish without charge to any stockholder, upon written or oral request, a copy of the Company’s
Annual Report on Form 10-K, including the financial statements and other documents filed pursuant to Sections
13(a), 13(c), 14 or 15(d) of the Exchange Act. Requests for such documents should be addressed to the Secretary of
Iron Mountain Incorporated, 745 Atlantic Avenue, Boston, Massachusetts 02111, telephone number (617) 535-4766,
or corporatesecretary@ironmountain.com.
BUSINESS OPERATIONS
Asia Pacific
Australia
China
Hong Kong-SAR
India
Singapore
O PERATIO NAL LOCATIO NS
(As of 12/31/11)
Europe
Austria
Belgium
Czech Republic
Denmark
England
France
Germany
Greece
Hungary
Netherlands
Northern Ireland
Norway
Poland
Republic of Ireland
Romania
Russia
Scotland
Serbia
Slovak Republic
Spain
Switzerland
Turkey
Ukraine
Latin America
Argentina
Brazil
Chile
Mexico
Peru
North America
Canada
United States
1477-AR-12