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DELIVERING
SUSTAINABLE VALUE
Visit www.ironmountain.com
for more information.
IRON MOUNTAIN AT-A-GLANCE
AS OF 12/31/12
>155,000
corporate clients
>17,500
employees
35
countries
675
FORTUNE 1000 rank
1,026
facilities worldwide
64.5
million square feet of
real estate
member
S&P 500 Index
member
FTSE4Good
ABOUT THE COMPANY
Iron Mountain Incorporated (NYSE: IRM) is a leading provider of storage and
information management services. The company’s real estate network of 64.5
million square feet across more than 1,000 facilities in 35 countries allows it to
serve customers around the world with speed and accuracy. And its solutions
for records management, data backup and recovery, document management and
secure shredding help organizations to lower storage costs, comply with regulations,
recover from disaster and better use their information for business advantage.
Founded in 1951, Iron Mountain stores and protects billions of information assets,
including business documents, backup tapes, electronic files and medical data.
2012 FINANCIAL RESULTS SUMMARY
REVENUES
in millions
ADJUSTED OIBDA1
in millions
CAPEX AS A PERCENT
OF REVENUE
FCF2
in millions
$3,005
$912
6.1%
$347
OPERATING INCOME
in millions
ADJUSTED EPS1
diluted
EPS FROM CONTINUING
OPERATIONS diluted
RETURN ON INVESTED
CAPITAL3
$557
$1.21
$1.05
10.6%
1 See Note 2 on Page 18.
2 See Investor Relations page of the Company web site at www.ironmountain.com.
3 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.
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IRON MOUNTAIN
2012 ANNUAL REPORT
A MESSAGE
FROM THE CEO:
William L. Meaney
TO OUR STOCKHOLDERS:
Our results in 2012 reflect our
continued focus on maintaining the
steady, long-term growth of our core
business, driving strong returns on
invested capital and preserving the
durability of our cash flow stream –
all key elements of our goal to deliver
sustainable value.
We wrapped up another year of solid
financial performance, with total
revenues, margins and adjusted earn-
ings all in line with expectations. Our
storage rental growth of more than
4% in constant currency reflected
both healthy increases in our inter-
national business and stable growth
in our North American business,
and offset a modest decline in total
service revenues. In addition, we
maintained our strong balance sheet,
achieved further improvements in
capital efficiency, maintained strong
return on invested capital and made
significant distributions to our stock-
holders consistent with our capital
allocation strategy.
These strong fundamentals are what
attracted me to the opportunity to
lead Iron Mountain. I was impressed
by the company’s established history
of steady growth and strong cash
flow generation, high return oppor-
tunities in international markets and
unique culture. Many companies
experience fluctuations in revenues
as global economies rise and fall, but
Iron Mountain has a unique ability
to sustain its durable growth rate
throughout business cycles due to
the attractive underlying stability of
the storage business.
My near-term focus upon joining
the company in January 2013 was
to spend a good deal of time with
customers, investors and our associ-
ates around the globe. These interac-
tions reinforced for me the opportunity
Iron Mountain has in three areas:
tapping the unvended records market,
expanding into additional emerging
markets and leveraging the brand
through adjacent services. Be assured
that as we pursue these opportuni-
ties, we will continue to view them
through our capital allocation filter,
which focuses on maximizing cash
flow, generating strong returns and
supporting consistent growth.
The first of these opportunities
relates to the amount of unvended
records that remain in developed
markets in both the private and
public sectors. We have organized
our marketing efforts into vertical
segments such as healthcare, finan-
cial services, legal and government
and more closely aligned our sales
and account management groups to
address this opportunity. It is early
in the process, but we are making
progress and receiving positive feed-
back from customers who look to us
I was impressed by the company’s established history of
steady growth and strong cash flow generation, high return
opportunities in international markets and unique culture.
2
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IRON MOUNTAIN
2012 ANNUAL REPORT
94%
of the FORTUNE 1000
to provide insight into industry
best practices. This sector focus
combined with Iron Mountain’s
strong relationships should, in time,
allow us to store more records for
our customers and provide higher-
value-added services.
Additionally, Iron Mountain has an
internationally recognized brand,
yet only about a quarter of our
revenues today are generated
outside North America. Overall,
emerging markets are still early in
the records outsourcing process,
providing significant untapped
potential for continued growth in
our international business. This
expansion is a great fit with my
background, having spent the last
27 years running multinational
businesses from outside the United
States. To be clear, international
expansion is not about putting
pins on the map. We will pursue
entry into additional markets with
an aggressive, yet disciplined
approach that is consistent with
our return on invested capital
focus, and where we believe we
can develop industry-leading busi-
nesses over time.
As a result of our efforts to
improve operating efficiencies
and capacity utilization, we are on
track to achieve our goal of 25%
international margins by the end of
2013. We manage our international
operations as a portfolio, where
margins range from very high in
markets where we have leadership
positions to emerging markets
we have only recently entered
that have the potential to achieve
attractive results over time.
Overall, our international business
is strong, with good growth oppor-
tunities, and we expect to maintain
solid margins and returns as we
continue to expand.
Lastly, we will look to invest where
we can build on the trust our
customers have in Iron Mountain
for secure, reliable enterprise
storage, but in areas that are
adjacent to our core opera-
tional expertise. One example
is our underground wholesale
data center, where customers
approached us seeking secure
space for their data center opera-
tions. We have substantial space
to further expand capacity in this
data center, and we continue to
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IRON MOUNTAIN
2012 ANNUAL REPORT
A MESSAGE FROM RICHARD REESE
During 2012, we continued to advance the three-year plan that was
implemented in 2011. This plan included a focus on the fundamentals
in our physical storage rental business, a goal to improve return on
invested capital – particularly in our international operations – and a
review of strategies to enhance stockholder value
through various capital and tax strategies. We
reported on our progress toward each of these
initiatives in last year’s annual report – including
the fulfillment of our commitment to return
$1.2 billion to stockholders by May 2012 – while
the Special Committee of the Board continued
its work to examine value-enhancing strategies.
In June 2012, we concluded the work of the
Special Committee, and our full Board unani-
mously approved a plan to pursue conversion to
a REIT. While we await a response from the Internal Revenue Service
on numerous technical tax issues, we have made progress with legal,
tax and information technology initiatives to ensure we are ready to
operate as a REIT beginning in January 2014. In anticipation of that
conversion, we paid a $700 million special dividend to stockholders
in the form of stock and cash, representing the initial distribution of
accumulated earnings and profits that will be required if we are able
to convert to a REIT. In total, we have distributed over $2 billion to
stockholders since the initiation of our three-year plan.
We also drove substantial operating improvements during the execu-
tion of the plan, reflecting the strength of the management team
we have in place. Following my return as CEO in 2011, we advanced
our succession planning to identify the right person to lead this
dedicated team. I committed to remain for as long as it took to
find a leader who shared my enthusiasm for the brand, could see
the potential to sustain the durability of the business and would
continue to deliver value for all our stakeholders. I am pleased to
be handing over the reins to Bill Meaney, who I believe has the right
characteristics, including an international business background,
experience in emerging markets and a track record of investing to
drive sustainable returns through disciplined capital allocation.
I have complete confidence in Bill and in the underlying strengths
of Iron Mountain’s business, its people, its culture and its busi-
ness model. I am privileged to have served as your CEO to lead
our Mountaineers for most of the past 30 years, and I sincerely
appreciate your continued support of Iron Mountain.
With continued pride and enthusiasm,
With continued pride and enthusiasm,
Richard Reese
Richard Reese
4
evaluate this and other opportuni-
ties that are consistent with our
core business.
The combination of our durable
leadership positions in devel-
oped markets, emerging market
opportunities and potential for
business adjacencies provides a
solid foundation from which we
will continue to drive sustainable
value, and I am confident in our
ability to build on this platform.
Beyond these opportunities to
sustain the durability of our
business, I was attracted by the
nature of the organization. It is
rare that one has the chance to
lead a company with such a strong
global franchise, extensive opera-
tional expertise and reputation
for quality. These characteristics
are why customers trust us with
their critical documents and what
enable us to innovate and do
more to improve the efficiency of
their records management. I have
also found the culture to be very
collaborative, with an overarching
objective of driving returns
through smart, disciplined capital
allocation and a focus on long-
term sustainable growth.
Iron Mountain is a great busi-
ness that drives excellent returns.
During the year, we made
steady progress on prepara-
tions to convert to a Real Estate
Investment Trust, or REIT, which
aligns well with our investment
strategy and can enhance our
strong returns. It enables inves-
tors to participate in growth
from our international business
and allows flexibility to invest in
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2012 ANNUAL REPORT
It is rare that one has the chance to lead a company
with such a strong global franchise, extensive
operational expertise and reputation for quality.
These characteristics are why customers trust us
with their critical documents and what enables us to
innovate and do more to improve the efficiency of
their records management.
closely related businesses. It also
enhances stockholder value by
providing certainty with respect
to our cash dividend, which we
anticipate will increase from
current levels. If we are successful
with our planned conversion to a
REIT, we expect our dividends to
grow in line with free cash flow.
Moving additional international
operations into the REIT structure
and expanding our service busi-
nesses would also support dividend
growth over time. We will measure
the success of our efforts by rela-
tive stockholder return – including
both stock price appreciation and
dividends. Building on the strong
fundamentals of our business, the
REIT structure can enhance our
ability to deliver value.
We have invested in people, process
and preparation to accelerate our
ability to be ready for REIT conver-
sion at the beginning of 2014.
Work is underway to integrate and
upgrade information systems to
support portfolio performance
reporting and to organize our busi-
ness structures to align with REIT
requirements. We see strong paral-
lels between Iron Mountain and
certain REIT sector characteristics.
In terms of the nature of our busi-
ness, we believe Iron Mountain
is most like self-storage, but with
an important difference: we are
enterprise storage serving 94% of
the FORTUNE 1000, as opposed to
consumer self-storage, which has
a very different credit profile. We
also compare favorably in terms of
attractive cash flow characteris-
tics, low volatility and low risk. We
look forward to elaborating on the
specifics of these and other prop-
erty portfolio metrics, as well as our
thoughts on Iron Mountain’s valua-
tion as a REIT, in future reports.
In closing, we are executing against
our business strategy and are well
positioned to deliver on our finan-
cial objectives in 2013. Our core
storage rental business is strong,
we have meaningful opportuni-
ties available to us to extend the
durable storage annuity, and we
are making good progress toward
delivering the REIT.
I would like to take this oppor-
tunity to thank Richard Reese
for his many contributions to
Iron Mountain. Our stockholders
have come to know his candid,
thoughtful style, and I believe the
culture of the company is due to
his influence and leadership over
the past 30 years. I have truly
appreciated his insights in the time
I have gotten to work with him, and
I know you all join me in thanking
him and wishing him well.
As we continue our work to deliver
sustainable value, we appreciate the
commitment of our employees, the
loyalty of our customers and the
encouragement from our investors.
With confidence and appreciation for your continued support,
William L. Meaney,
Chief Executive Officer
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2012 ANNUAL REPORT
DELIVERING
SUSTAINABLE VALUE
For Iron Mountain, sustainability has broad
meaning. It’s about how we sustain the
durability of our business, how we organize
and how we capitalize to ensure we remain a
thriving enterprise for many years to come.
It’s also about how we ensure that we continue to deliver value for all our stakeholders:
customers, employees, investors and the communities in which we work and live.
Delivering sustainable value is also closely tied to how we interact with those stake-
holders. Deeper engagement with our customers helped us identify new ways to
better serve them through realignment of our sales and account management
teams. Listening to employees led to programs to enhance broader awareness
of our corporate objectives and improve job satisfaction and retention. Engaging
with stockholders supported our evaluation of alternatives and led to our plan to
pursue conversion to a REIT. And community involvement deepens our connec-
tions with what each of us is passionate about: our charitable causes, our environ-
ment and our neighborhoods. It makes us better citizens and better employees.
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When we think about delivering sustainable value for stake-
holders, it breaks down into three elements: how we grow,
how we build and how we operate.
HOW WE GROW
This element of our strategy focuses on growing storage rental revenues in
developed markets to sustain the durability of our strong cash flow and expand
our market presence. We have opportunities tied to improving customer loyalty
and retention through better alignment of our customer-facing teams, deeper
understanding of their business challenges and improved responsiveness.
HOW WE BUILD
Our global footprint spans 35 countries and provides a sturdy platform for
strengthening our presence in international markets and developing posi-
tions in attractive emerging ones. We have the industry expertise and deep
customer relationships that permit us to leverage our infrastructure to expand
the foundation of our great business and create new revenue streams.
HOW WE OPERATE
The ability to capture opportunities is tied to execution, or how we operate. We
will continue to look for ways to increase the effectiveness of how we run our
business, continuing the progress we made with our operational excellence initia-
tives. We will also continue to evaluate investment opportunities through a disci-
plined capital allocation approach to deliver maximum value for stakeholders.
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2012 ANNUAL REPORT
63 of our
top 100
U.S. customers in
global markets
HOW WE GROW
North America is our largest business segment, where we built
a leadership position over more than 30 years through internal
growth and acquisitions. Having amassed a large, stable business
and achieved optimized returns, we are now focused on sustaining
our record of consistent growth and profitability.
North America’s results for 2012 were in line with our
expectations, with 2% storage rental growth, solid
40%+ adjusted OIBDA margins and 14% ROIC. We
faced continued headwinds in our service business,
driven by a decrease in records retrieval activity and
lower recycled paper revenue, which were partially
offset by strong growth in our Document Management
Services. We expect continued moderate declines in
our North American service business, as queries – or
retrieval of storage assets – become less frequent.
However, these service declines continue to be more
than offset by steady growth in storage rental, as
retaining information in its original format remains
the most cost-efficient storage means and often is
required for legal, regulatory or compliance reasons.
Capturing additional unvended records is key to
continued growth in our global storage rental busi-
ness. We believe significant opportunity remains
as companies seek to better manage information
currently scattered throughout vacant offices,
random storage areas and headquarters’ base-
ments. Complications from lack of proper records
management and recent severe weather events
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2012 ANNUAL REPORT
Having piloted the
program with a focus on
the healthcare industry,
we are expanding our
efforts to build industry-
specific expertise in the
other vertical segments.
have highlighted the importance of storing critical
physical records and backup media in secure facili-
ties. Increasingly, sophisticated customers see records
management as an important business function and
are moving their storage assets to dedicated facili-
ties. One of the ways we intend to capture this shift is
through market segmentation.
During the year, we realigned our North American
sales and account management teams to focus on
the following vertical markets: healthcare, financial
services, life sciences, government, legal, insur-
ance, entertainment and energy. Having piloted the
program with a focus on the healthcare industry,
we are expanding our efforts to build industry-
specific expertise in the other vertical segments.
Understanding the unique issues and technology
trends that impact each of these industries enables us
to help customers reduce their overall storage costs,
improve efficiency and better comply with complex
regulatory requirements. To support this targeted
approach, we have brought our Industry Relations and
Customer Experience groups under common leader-
ship and have established new customer forums,
such as industry symposiums and advisory boards,
that deliver insights and best practice solutions. And
we have enhanced our customer communications,
offering practical solutions for better understanding
and use of our products and services, as well as
targeted topics related to data security, compliance,
regulation and destruction.
In our international business, we have grown to
become one of the major providers in several devel-
oped markets. Our expanding international network
not only brings us new business from locally based
customers, it supports our efforts to deepen our
presence with North American-based multinational
accounts, who more and more frequently are seeking
to consolidate records management with a common
vendor. Importantly, 63 of our Top 100 U.S. customers
are also active international customers, enhancing our
efforts to capture a greater portion of the unvended
business in developed international markets.
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2012 ANNUAL REPORT
15
YEARS
of global expansion
35
countries
Our objective is to achieve international
Adjusted OIBDA margins of 25% by the
end of 2013.
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HOW WE BUILD
Our strategy to deliver sustainable value includes maintaining
an industry-leading position in key international markets, building
our presence in emerging markets and capturing new, related
business opportunities.
Performance in our $800 million international busi-
ness was strong in 2012, with constant dollar storage
rental growth of 11% and further profit improve-
ment. We expect continued strong storage volume
increases, particularly from emerging markets, and
we are on track to achieve our margin targets in 2013.
The development of scalable platforms is key to both
revenue growth and margin improvement. One way
we achieve this is through synergistic acquisitions
of local storage companies that help us achieve top
tier positions, such as those completed in Brazil and
Hungary during the year. In addition, we often estab-
lish our footprint in attractive international markets
through joint ventures with local partners. As we
grow our presence, we may acquire controlling inter-
ests in these joint ventures to accelerate our prog-
ress, as we did in Switzerland and Turkey during 2012.
We believe there is substantial opportunity for expan-
sion in Latin America, Central and Eastern Europe
and the Asia Pacific region, and we will continue to
explore the potential in these emerging markets.
As we evaluate international opportunities, we deter-
mine whether we have, or believe we can achieve,
a leading position and estimate the relative level of
market maturity. In developed markets where we
have a strong position, we manage for consistent
growth and achieve durable returns comparable
to those in North America. In developed markets
where we do not have as strong a position, we focus
on increasing returns and building toward leader-
ship positions. In emerging markets, we invest to
gain leadership, enhance returns and capture the
initial wave of records outsourcing. We expect these
markets to generate higher revenue growth at attrac-
tive returns.
In 2011, we completed an evaluation of our inter-
national portfolio and are achieving returns above
our hurdle rates in all of our remaining international
markets. Our objective for our international business
is to achieve Adjusted OIBDA margins of 25% by the
end of 2013, which we expect to meet through contin-
uous refinement of operational efficiencies, reduction
in business support costs and improved capacity utili-
zation through real estate consolidation. For example,
at the end of 2012, we consolidated several smaller
facilities in the United Kingdom, which resulted in a
modest one-time charge but will provide meaningful
annual savings.
We also have opportunities to invest in emerging
businesses that leverage our expertise and infra-
structure. One example is our geothermal-cooled,
underground wholesale data center in Pennsylvania
where we rent secure space to customers who install
and manage their own data servers. This business
has long-term leases supporting annualized revenues
approaching $20 million, and we intend to invest a
modest amount of capital in 2013 to build out addi-
tional capacity driven by pre-committed customer
demand. Another example is the potential for new
services related to backup tape storage, which allows
customers to capture significant cost advantages
when compared with disk storage. We are continuing
to study the breadth of these and related service
opportunities and evaluating appropriate strategies
for potential further expansion.
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8
million stops
with 99.999%
accuracy
HOW WE OPERATE
In 2012, we continued to aim
for operational excellence,
increasing both internal and external
effectiveness through technology
initiatives and strategic investments.
We rolled out several listening posts, or channels
for customers to share their opinions and provide
insights that help us design services and solutions
to meet their needs. We established metrics to
measure customer loyalty and monitor progress in
connection with our second Voice of the Customer
(VOC) survey, and in February 2013, we established
our first Customer Advisory Board. These are just a
few of the efforts underway to help us better under-
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A key component of how we operate is how we
evaluate investment opportunities through a
capital allocation approach that is structured to
maximize return on invested capital.
stand our customers’ unique business challenges.
Their feedback helps shape our business strategy,
determine investment in new programs and guide us
to continually improve.
Information technology is another critical business
enabler. We have invested to provide the technology
platform and improved systems that help customers
to better track and manage their storage assets.
These technology tools include our Iron Mountain
Connect customer portal, and Accutrac,® our records
management system that allows customers to apply
consistent record retention policies across a variety
of systems and streamline access through a single
search of physical and electronic records.
We also implemented continuous improvement
initiatives related to transportation management
and route densities, helping us achieve a significant
reduction in route costs. In addition, we introduced
Telematics on our trucks to enhance safety and
provide driving pattern data. This information allows
us to improve chain of custody and reduce expenses,
and based on early results, should drive fuel savings
from improved driving practices.
A key component of how we operate is how we
evaluate investment opportunities through a capital
allocation approach that is structured to maximize
return on invested capital. Acquisitions are one such
opportunity. While enterprise storage remains highly
fragmented with dozens of smaller competitors,
select competitive acquisitions allow us to leverage
our regional operations and management infrastruc-
ture. Additionally, customer relationship acquisitions
enable us to integrate storage assets into existing
space to enhance facility utilization and returns.
In keeping with this focus, we also may invest in real
estate to increase the percentage of our storage
facilities that we own. Increased real estate owner-
ship is consistent with our plan to convert to a REIT,
and there are situations where ownership may be
preferable to leasing space. For example, we may
have opportunities to invest in new building capacity
to satisfy local demand, or to buy properties in inter-
national regions where local leasing markets are inef-
ficient. We also may buy out leases in cases where
the cost of ownership financing is lower than the cost
of leasing. As we evaluate these opportunities, we
believe we have more than $1 billion of real estate
acquisition opportunities over the next 10 years. In
the near term, we expect to invest $75 million in real
estate in 2013, including $30 million for expanded
capacity in our wholesale data center business.
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2012 ANNUAL REPORT
TAKING CARE
FULFILLING OUR
CORPORATE
RESPONSIBILITY
Our engagement with key
stakeholders is integral to how
we deliver sustainable value.
We interact through a variety
of means, including: customer
advisory boards, surveys and
industry forums, investor percep-
tion studies and one-on-one
meetings, employee all-hands
meetings and senior leadership
webcasts. We also respond to
inquiries that may originate from
local communities seeking volun-
teers, third-party organizations
looking for information about
our environmental initiatives or
investors trying to better under-
stand our business. All of these
interactions inspire a culture of
collaboration and provide us with
feedback that we use for contin-
uous improvement.
EMPLOYEES
Our Mountaineers are the back-
bone of the company – they
sustain day-to-day operations,
generate new business, maintain
existing relationships and are the
face of the company to external
stakeholders. Recognizing that
employees must feel empow-
ered to do what it takes to get
their jobs done, we enhanced
our employee engagement and
enablement in 2012. During the
year, we engaged the Hay Group,
a highly regarded HR consultancy,
to survey our global workforce.
Participation was strong, with
76% of the workforce responding.
Our survey was designed to
measure how committed our
teams are, how clear they are
about their respective roles, their
access to the tools they need and
their overall working environment.
The survey results showed we are
making strong progress toward
becoming a high-performing
company (HPC), an external
benchmark designed by the Hay
Group. We achieved scores above
the HPC average in nine out of 13
categories, including employee
effectiveness and engagement.
We scored high marks for collabo-
ration, quality and customer
focus, and we identified training,
career development and empow-
erment as areas that require addi-
tional emphasis.
We communicate and reinforce
company goals and priorities
continuously and report on our
progress so teams can align their
efforts appropriately. We will
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2012 ANNUAL REPORT
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.
continue to invest in our Managers
Who Lead program to empower
managers with the skills they need
to inspire their teams for success,
and we are expanding our efforts
to develop talent and build our
bench throughout the company.
We affirm our commitment to
treating employees fairly and
consistently, and we seek to hire
and retain superior employees
through excellent employment
standards. We recruit, hire, train,
promote and compensate without
regard to race, color, age, religion,
gender, national origin, disability
or sexual orientation. We are also
dedicated to supporting our mili-
tary and are a founding member
of the 100,000 Jobs Mission
along with 10 other companies. As
part of our involvement, we were
recognized as a military friendly
company by GI Jobs for 2013.
CUSTOMERS
In January 2012, we launched our
first Customer Advisory Board
(CAB) focused on the Financial
Services industry. The CAB is an
excellent way to engage with our
customers to build better relation-
ships, capture insights and earn
trust. The initial meeting brought
together thought leaders from
11 of our key financial services
customers, including many of the
nation’s largest banking institu-
tions, to discuss the future of
records and information manage-
ment in the sector.
The meeting generated a number
of key insights that our team is
working to understand in more
detail, including the importance
of consistent service and support
on a global basis, the desire for
more thought leadership and a
need for tools that they can use
to demonstrate the business value
of formal records and informa-
tion programs. Based on insights
gathered during the sessions, the
CAB team already has formed two
sub-committees whose goals are
to help shape our future products
and services and identify potential
best practices – not only for our
financial services customers, but
for customers in other vertical
markets.
We also gained important insight
from our VOC survey. Listening
to our customers teaches us a
great deal about the importance
of security, on-time delivery,
accurate billing and customer
service. They want us to provide
benchmarking relative to their
peers. They also want solutions to
help them reduce paper, improve
efficiency, drive compliance and
reduce risk. In support of these
goals, we are committed to safe-
guarding sensitive customer
information, ensuring that all
Iron Mountain employees under-
stand their shared responsibility.
We continually invest in tech-
nology and processes to help our
customers keep their confidential
records and business data acces-
sible and secure.
INVESTORS, GOVERNANCE
AND ETHICS
Delivering sustainable value for
investors means taking care to
support the durable cash flow
annuity and being responsible
stewards of investor capital
through a disciplined, return-
driven approach to allocation.
We continually engage with our
institutional stockholders and
bondholders to understand their
perspective and to communicate
management’s views on past
financial performance, current
expectations and long-term
opportunities. Some of the ways
we interact include: a regular
program of industry and brokerage
conferences that include group
presentations and one-on-one
meetings, annual perception
studies conducted by a third party
to ensure candid, anonymous
feedback, webcast presentations
to review financial results and
annual Investor Days to dive
deeper into company strategy.
15
431894.Text.cs5.indd 15
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IRON MOUNTAIN
2012 ANNUAL REPORT
450,000
TONS
of material shredded
with 98.8% UPTIME
Engagement with investors was
a key driver of our evaluation
of various financing and tax
alternatives that ultimately led to
our decision to pursue potential
conversion to a REIT. As part
of the potential conversion, we
plan to expand the scope of
our investor relations outreach
efforts, communicating with a
new group of investors that has
specific information needs. If we
are successful in our conversion
to a REIT, we plan to significantly
enhance our supplemental
disclosure to provide property
portfolio performance metrics to
enable comparability and increase
transparency.
In addition, we are focused on
maintaining sound ethics and
corporate governance policies,
working to ensure effective
oversight and accountability. We
plan to maintain high corporate
governance standards through
exemplary board stewardship,
management accountability and
proactive risk management.
Consistent with governance best
practices we maintain an inde-
pendent, non-staggered Board
and we have separated the posi-
tions of CEO and Chairman. We
also maintain high ethical stan-
dards through a strong ethics
policy, ongoing, mandatory
ethics training for all employees
With operations in 35 countries and
more than 1,000 facilities around the
globe, Mountaineers have the potential
to impact hundreds of communities
and thousands of lives.
16
and executive leadership that
promotes a culture of integrity.
COMMUNITY AND THE
ENVIRONMENT
With operations in 35 countries
and more than 1,000 facilities
around the globe, Mountaineers
have the potential to impact
hundreds of communities and
thousands of lives. We contribute
through strategic partnerships
that preserve public treasures and
by volunteering to address local
community needs. Our employees
are provided with 16 hours of paid
time each year to give back by
donating time to the non-profit
organizations of their choice. In
2012, Iron Mountain employees
donated more than 35,000 hours
to support charitable causes,
including organizations such as
The American Red Cross, Habitat
for Humanity, Big Brothers/Big
Sisters, The Humane Society,
Special Olympics and Cradle
to Crayons, as well as public
schools, children’s recreational
sports leagues and police and fire
departments in the communities
in which we live.
In support of our taking CARE
initiatives, during 2012 we formed
an Environmental Sustainability
Council made up of senior
leaders, hired a Director of
Corporate Responsibility and
contracted a full-time energy
manager to review energy usage
and make recommendations
for reductions. One program
431894.Text.cs5.indd 16
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IRON MOUNTAIN
2012 ANNUAL REPORT
undertaken during the year
was a $5 million lighting retrofit
in 68 of our North American
facilities. This upgrade to more
efficient fixtures is expected to
yield annual energy savings of
approximately $1.5 million and an
additional $600,000 in rebates.
As part of a broader effort, we
will evaluate the expansion of
this program and are working to
establish company-wide carbon
footprint reduction goals.
Another step that demonstrates
our commitment is our planned
move to our new, Leadership in
Energy and Environmental Design
(LEED) Gold-certified corporate
headquarters in early 2014. The
new location will incorporate
energy-efficient features that help
reduce our business environmental
impact and encourage positive
actions in our day-to-day practices.
Additionally, through our secure
shredding business, we are one
of the world’s largest paper recy-
clers, having diverted more than
450,000 tons of paper waste
from landfills during 2012.
At Iron Mountain, we are taking
care to deliver sustainable value
to our key stakeholders – our
customers, employees, investors
and the communities in which
we operate. We look forward to
providing updates as we expand
our Corporate Responsibility
initiatives and move toward
more formal measurement and
reporting of our progress.
HELPING TO PRESERVE
PUBLIC TREASURES
Iron Mountain develops cultural
heritage archive solution
Our world is filled with amazing
but fragile cultural heritage sites
and structures, such as Mount
Rushmore and the Eastern Ming
tombs in China. However, these
tangible records of our journey
on earth face extinction due to
environmental forces and acts
of human aggression.
CyArk, a non-profit organiza-
tion, is dedicated to the digital
preservation of these sites for
the benefit of future genera-
tions and has an ambitious
plan to use 3-D laser scan-
ners to digitally capture 500
of them in the next five years.
As CyArk captures these sites,
they collect massive amounts of
data – up to five petabytes over
time – so a comprehensive infor-
mation management strategy
with a reliable and scalable
archive is central to its mission.
In keeping with our commitment
to help organizations protect
and preserve global cultural
heritage, we developed a solu-
tion and brought together other
corporate partners to donate
resources and ensure CyArk has
a reliable means to preserve
these treasures.
With Iron Mountain’s support,
CyArk now has a long-term
data storage solution that
leverages tape storage tech-
nologies, including off-site data
archiving at two Iron Mountain
locations: one close to CyArk’s
home base in San Francisco and
one in our data warehouse in
Pennsylvania, where the archive
resides 220 feet underground in
one of the most environmentally
stable and secure environments
in the world.
17
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FINANCIAL HIGHLIGHTS
(Amounts in millions, except per share data)
2008
2009
2010
2011
2012
Storage Rental Revenues
$ 1,496
$ 1,534
$ 1,599
$ 1,683
$ 1,733
Service Revenues
Total Revenues
$ 1,329
$ 1,241
$ 1,294
$ 1,332
$ 1,272
$ 2,825
$ 2,774
$ 2,892
$ 3,015
$ 3,005
Gross Margin (ex Depreciation & Amortization)
53.6%
56.7%
58.8%
58.7%
57.5%
Operating Income1
Adjusted OIBDA2
Adjusted OIBDA %
EPS—Diluted1
Adjusted EPS—Diluted2
$ 492
$ 545
$ 548
$ 571
$ 557
$ 754
$ 823
$ 927
$ 950
$ 912
26.7%
29.6%
32.0%
31.5%
30.4%
$ 0.47
$ 0.86
$
$
1.13
1.01
$ 0.83
$ 1.26
$ 1.05
$
1.28
$ 1.36
$
1.21
Capex3 (ex Real Estate and REIT Capex) %
10.4%
9.4%
7.9%
6.6%
6.1%
Cash Flows from Operating Activities - Continuing
$ 514
$ 587
$ 603
$ 664
$ 444
Free Cash Flow4
$
197
$ 330
$ 370
$ 467
$ 347
1 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. 84 of the accompanying Annual Report on Form 10-K for additional information.
2 Adjusted OIBDA and Adjusted EPS-Diluted are non-GAAP measures. Please refer to p. 35 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.
3 Based on incurred versus cash paid basis.
4 Defined as Cash Flows from Operating Activities from continuing operations less capital expenditures (excluding real estate and capital expenditures associated with the REIT conversion), net of
proceeds from the sales of property and equipment and other, net, and additions to customer relationship and acquisition costs. REIT costs are also excluded from Free Cash Flow.
Revenues
(in millions)
$1329
$1241
$1294
$1332
$1272
Adjusted OIBDA
(in millions)
$823
$754
$927
$950
$912
$1496
$1534
$1599
$1683
$1733
Service
Revenues
Storage Rental
Revenues
08
09
10
11
12
08
09
10
11
12
Cash Flows from Operating Activities
from Continuing Operations
(in millions)
$664
$587
$603
$514
$444
Capex (ex Real Estate and REIT Capex)
(as a % of revenues)
10.4%
9.4%
7.9%
6.6%
6.1%
08
09
10
11
12
08
09
10
11
12
18
18
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24 YEARS OF STORAGE RENTAL GROWTH
Annual storage rental revenues (in millions)
2012 C$ Storage
Rental Growth
4.3%
23-year Compound
Annual Growth Rate
18.5%
$35
$48
$73
$82
$91
$101
$120
$234
$162
$1043
$875
$760
$695
$603
$507
$384
$1733
$1683
$1599
$1534
$1496
$1362
$1182
$1217
89
90
91
92
93
94
95
96
97
98
99
00
01
02
03
04
05
06
07
08
09
10
11
12
2012
FINANCIAL REVIEW
During 2012 we delivered consistent growth in Iron Mountain’s storage rental business,
which continued to provide a solid foundation for overall financial performance and
more than offset moderate declines in our information management services business.
Consistent with our strategy, we are focused on sustaining high returns in our North
American Business segment while building momentum in our International Business
segment – and emerging markets in particular – as a significant driver of revenue
growth and Adjusted OIBDA margin improvement. During 2012, we maintained a strong
balance sheet and continued to enhance stockholder returns through both increases
in our regular dividends and a special distribution associated with our plan to pursue
conversion to a REIT.
19
19
431894.Text.cs5.indd 19
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IRON MOUNTAIN
IRON MOUNTAIN
2012 ANNUAL REPORT
Delivering storage and information
management services via an
unmatched global footprint
comprising operations in
35 COUNTRIES
on
5 CONTINENTS
KEY FINANCIAL HIGHLIGHTS
We reported total revenues of
$3.0 billion, a 1% increase over
last year in constant dollars (C$).
In our storage rental business,
strong growth of more than
4% C$ for the year reflected
healthy increases of 11% in our
International business, driven
equally by both robust organic
growth and acquisitions, and
more than 2% growth in North
America. Globally, storage rental
volumes expanded by nearly 2%,
driven by a 9% increase in inter-
national volumes and basically
flat volumes in North America.
In our information management
services business, we experienced
a 3% C$ decline in revenues due
to a decrease in North American
activity-based services and
lower recycled paper revenues.
However, the negative impact
from paper lessened toward the
end of 2012, as paper pricing
began to stabilize following a
steep decline at the end of 2011
and into early 2012. Strong growth
in our Document Management
Solutions business and core
services in Latin America helped
to offset the decline in activity-
based service revenues.
For 2012, adjusted operating
income before depreciation and
amortization (Adjusted OIBDA)
margins were slightly lower than
in 2011, reflecting targeted expen-
ditures for the realignment of our
sales and account management
organizations in North America
and lower paper prices. Despite
these impacts, we sustained
strong Adjusted OIBDA margins of
42% in North America, while our
international business benefitted
from cost improvement initiatives
IRM STOCK PERFORMANCE
Iron Mountain
S&P 500
Russell 1000
$120
$100
$80
$60
07
08
09
10
11
12
This graph compares the 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, 2007, through December 31, 2012. This comparison assumes an
investment of $100 on December 31, 2007, and the reinvestment of any dividends.
20
431894.Text.cs5.indd 20
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IRON MOUNTAIN
2012 ANNUAL REPORT
We continued to
improve our capital
efficiency in 2012,
reducing capital
expenditures –
before real estate
and REIT capex – by
50 basis points to
6.1% of revenues.
in Western Europe and strong
profit performance in the Asia
Pacific region. Excluding acqui-
sition integration costs and an
accelerated facility closure in the
United Kingdom, International
Adjusted OIBDA margins expanded
by roughly 150 basis points in
2012, and we remain on track with
our plan to achieve international
margins of 25% by the end of
2013. Adjusted Earnings per Share
(EPS) for 2012 were $1.21, down
11%, as lower Adjusted OIBDA and
higher interest expense associ-
ated with borrowings to support
our stockholder payout program
more than offset the benefit of
fewer weighted average shares
outstanding for the year. These
Adjusted OIBDA and Adjusted EPS
results exclude costs associated
with the potential REIT conversion,
Special Committee and prior year
proxy costs, which would have
reduced reported EPS by approxi-
mately $0.14 and $0.05 in 2012
and 2011, respectively.
We continued to improve our
capital efficiency in 2012,
reducing capital expenditures
– before real estate and REIT
capex – by 50 basis points to
6.1% of revenues. Free Cash Flow
for 2012 before acquisitions, real
estate and REIT costs was $347
million, down from the prior year
due primarily to lower Adjusted
OIBDA, higher cash taxes and
higher interest expense.
STRONG LIQUIDITY AND
BALANCE SHEET
Our liquidity position remains
strong, with more than $900
million of availability at year end,
and we maintained our consoli-
dated leverage ratio within our
target range of 3x - 4x. In addi-
tion, our debt portfolio remains
long and fixed with no meaningful
repayments until next year. Last
August, we issued $1.0 billion of
5.75% Senior Subordinated Notes
to redeem $520 million of existing
Senior Subordinated debt, repay
existing indebtedness under our
revolving credit facility and for
general corporate purposes,
including funding a portion of
our anticipated REIT costs. This
offering was highly successful,
resulting in the lowest coupon for
our rating and tenor in the history
of the high-yield market.
In November 2012, we paid a
special dividend related to our
proposed REIT conversion of
$700 million, which included
$140 million in cash and 17 million
new shares valued at $560
million. Also, in December 2012,
we declared our fourth quarter
dividend of $0.27 per share, and
the Board agreed to maintain the
quarterly cash dividend rate per
share rather than reduce it based
on the higher number of shares
outstanding. The result of main-
taining this rate is an increase
to our dividend payout levels of
nearly 10% over prior levels.
21
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IRON MOUNTAIN
2013 FINANCIAL OUTLOOK
We are positioned for another
strong year in 2013 and will
continue to pursue strategies
to sustain the durability of our
storage rental business. We
have opportunities to invest in
fast-growing emerging markets
through an approach that is
consistent with our focus on
attractive returns, while in
mature markets, we are begin-
ning to see results from the refo-
cusing of our sales and account
management teams.
For 2013, we expect consis-
tent revenue growth and profit
performance with total revenue
C$ growth of 0% to 3% driven
by consistent 4% C$ storage
rental growth. We expect
service headwinds to persist but
remain manageable. We look
for continued healthy Adjusted
OIBDA margins in North America
and further improvement in inter-
national margins, resulting in
total Adjusted OIBDA roughly in
line with 2012.
Our outlook for free cash flow
remains $320 million to $360
million, excluding one-time oper-
ating and capital costs associated
with our potential conversion to a
REIT. Total REIT costs related to
substantial system investments,
legal and tax work, advisory
fees and other costs needed
to implement the structure are
estimated to be between $150
million and $200 million, with the
majority deployed in 2013. We
have increased our estimate of
these costs by approximately $50
million to reflect a more informed
analysis of the conversion project
and to ensure we are prepared
to meet the January 2014 time-
frame.
While we ended 2012 with a
consolidated leverage ratio
within our targeted range, as we
have previously noted, expendi-
tures associated with the poten-
tial REIT conversion (including
tax payments) will temporarily
and modestly move our leverage
above 4x. We expect continued
strong free cash flow from
operations prior to investments
in real estate and REIT costs. We
are managing our balance sheet
consistent with our strategy
– while advancing substantial
payouts to stockholders – and we
remain well positioned to fund
our business plan.
We are positioned for
another strong year in 2013
and will continue to pursue
strategies to sustain the
durability of our storage
rental business.
22
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10-K
FIRST PAGE
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, 2012
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:2)
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 29, 2012, the aggregate market value of the Common Stock of the registrant held by non-affiliates of the
registrant was approximately $4.8 billion 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 8, 2013: 190,140,008
IRON MOUNTAIN INCORPORATED
2012 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
16
25
25
25
26
27
29
32
68
70
70
70
73
74
74
74
74
74
Item 15.
Exhibits and Financial Statement Schedules . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
74
PART IV
i
References in this Annual Report on Form 10-K to ‘‘the Company,’’ ‘‘Iron Mountain,’’ ‘‘IMI,’’
‘‘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 (the ‘‘Annual Report’’) is incorporated by reference from our definitive Proxy Statement for
our 2013 Annual Meeting of Stockholders (our ‘‘Proxy Statement’’) to be filed with the Securities and
Exchange Commission (the ‘‘SEC’’ or ‘‘Commission’’) within 120 days after the close of the fiscal year
ended December 31, 2012.
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 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) commitment to future dividend payments, (2) expected target leverage ratio, (3) expected
internal revenue growth rate and capital expenditures for 2013, (4) expected increase in our Adjusted
OIBDA margins in our International Business segment, (5) expected growth in cartons stored on behalf
of existing customers, and (6) estimated range of tax payments and other costs expected to be incurred
in connection with our proposed conversion to a real estate investment trust (‘‘REIT’’). These 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) with regard to our estimated tax and other REIT conversion costs, our estimates may not be
accurate, and such costs may turn out to be materially different than our estimates due to
unanticipated outcomes in the private letter rulings (‘‘PLR’’) from the U.S. Internal Revenue
Service (‘‘IRS’’), changes in our support functions and support costs, the unsuccessful execution
of internal planning, including restructurings and cost reduction initiatives, or other factors;
(cid:127) realizing the anticipated benefits to stockholders of our proposed REIT conversion, including
the achievement of tax savings for us, increases in income distributable to stockholders, the
potential to lower the cost of financing through increased ownership of currently leased real
estate, maximizing our enterprise value and the expansion of our stockholder base;
(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 storage and information management services relative to the cost of
providing such storage and information management services;
(cid:127) changes in customer preferences and demand for our storage and information management
services;
(cid:127) the adoption of alternative technologies and shifts by our customers to storage of data through
non-paper based technologies;
ii
(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) claims that our technology violates the intellectual property rights of a third party;
(cid:127) the cost of our debt;
(cid:127) the impact of alternative, more attractive investments on dividends;
(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’’ of this
Annual Report.
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 SEC.
iii
Item 1. Business.
A. Development of Business.
PART I
We store records, primarily paper documents and data backup media, and provide information
management services that help organizations around the world protect their information, lower storage
rental costs, comply with regulations, enable corporate disaster recovery, and better use their
information for business advantages, regardless of its format, location or lifecycle stage. We offer
comprehensive records management services, data protection & recovery services and information
destruction services, along with the expertise and experience to address complex storage and
information management challenges such as rising storage rental costs, and increased litigation,
regulatory compliance and disaster recovery requirements. 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 consisting of commercial, legal, banking, healthcare, accounting,
insurance, entertainment and government organizations, including more than 94% of the Fortune 1000.
As of December 31, 2012, we operated over 1,000 facilities, comprising 64.5 million square feet, in 35
countries on five continents and employed over 17,500 people.
Now in our 62nd 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
U.S. business operating fewer than 85 facilities (6 million square feet) with limited storage and
information management service offerings and annual revenues of $104.0 million in 1995 into a global
enterprise providing storage and a broad range of related information management services to
customers in markets around the world with over 1,000 facilities (64.5 million square feet) and total
revenues of more than $3.0 billion for the year ended December 31, 2012. On January 5, 2009, we were
added to the S&P 500 Index, and as of December 31, 2012 we were number 644 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 industry leadership by extending our presence
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 storage solutions and
related records management services and data protection & recovery services, 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, in North America and our more developed
international markets, 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 storage and information
management problems. Growing our customer relationships means expanding our global storage and
service offerings 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 storage and information management services companies to a growth strategy that
includes multiple sources of revenue growth. These sources of revenue growth include: (i) organic
growth comprised of growth from existing customers, sales to new customers and acquiring customer
relationships from third-parties; (ii) acquisitions of storage and information management services
businesses; and (iii) the introduction of new rental streams and ancillary services.
We expect to achieve our long-term growth goals by focusing on expanding our global core storage
rental business through increased incoming volumes and by offering our customers integrated services
1
that address their increasingly complex storage and information management needs regardless of the
format, location or lifecycle stage of their information. Storage rental is the key driver of our
economics and allows us to expand our relationships with our customers through value-added services
that flow from storage rental. Consistent with our overall strategy, we are focused on increasing
incoming volumes on a global basis. There are multiple sources of new volumes available to us, and
these sources inform our growth investment strategy. Our investments in sales and marketing support
sales to new customers that do not currently outsource some or all of their storage and information
management needs, as well as increased volumes from existing customers. We also expect to invest in
the acquisitions of customer relationships and acquisitions of storage and information management
services businesses. In North America and our more developed international markets, we expect that
these acquisitions will primarily be fold-in acquisitions designed to optimize the utilization of existing
assets, expand our presence and better serve customers. We also expect to use acquisitions to expand
our presence in attractive, higher growth emerging markets. Finally, we are continuing to add new
rental streams and ancillary services to our portfolio to support our long-term growth objectives and
drive solid returns on invested capital.
At this stage in our evolution we also are focused on driving increased profitability and cash flow
through a disciplined management approach and a focus on optimizing our business operations.
Consisting of productivity initiatives, pricing program improvements and cost controls, our optimization
strategy has produced significant and visible results. Between 2006 and 2010, we had compounded
annual growth rates of 11% for Adjusted OIBDA, defined as operating income before (1) depreciation
and amortization, (2) intangible impairments, (3) (gain) loss on disposal/write-down of property, plant
and equipment, net and (4) costs associated with our 2011 proxy contest, the work of the Strategic
Review Special Committee of our board of directors (the ‘‘Special Committee’’) and the proposed
REIT conversion, discussed below (collectively ‘‘REIT Costs’’), 17% for Adjusted Earnings per Share
from Continuing Operations and 3% for Earnings per Share from Continuing Operations. During that
same period, we reduced our capital expenditures (excluding real estate) as a percent of revenues from
13.4% in 2006 to 7.9% in 2010. These gains were driven primarily by cost reductions and the
optimization of our North American Business segment as we increased Adjusted OIBDA margins in
that segment by nearly 800 basis points between 2006 and 2010. Our current 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 achieve 25% Adjusted OIBDA
margins in the International Business segment by the end of 2013, a 700 basis points improvement over
2010 levels. Beyond 2013, we expect to grow consolidated Adjusted OIBDA margins at a much slower
rate because we will have already completed the major profit improvement initiatives in both the North
American and International Business segments. In our more developed markets, continuous
improvement initiatives will generate modest margin improvement, a portion of which we expect to
reinvest in our business. In our emerging markets, margins should expand as the local businesses
mature, and we will look to reinvest a portion of that improvement to support the growth of these
businesses. For more detailed definitions and reconciliations of Adjusted OIBDA and Adjusted
Earnings per Share from Continuing Operations 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’’ of this Annual Report.
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. Subsequently, our board
of directors approved an increase 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, 2012,
2
we have purchased 37.7 million shares of our common stock for approximately $1.1 billion under this
program. We have also increased our quarterly dividend on three occasions, including most recently in
June 2012, when we announced an 8% increase to our regular quarterly dividend payments through
2013. The June 2012 increase to our quarterly dividend, to $0.27 per share, represented a 332%
increase over the quarterly dividend 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 by May 2012. We fulfilled the commitment to return $1.2 billion of capital to stockholders by
May 2012. The remaining $1.0 billion of the stockholder payout plan has been replaced by our regular
quarterly dividends and the stockholder distributions and expenditures associated with our plan to
convert to a REIT (the ‘‘Conversion Plan’’). 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 portfolio review of certain international operations, we sold our New Zealand operations in
October 2011, and we sold our Italian operations in April 2012.
Potential REIT Conversion
In June 2012, we announced our intention to pursue conversion to a REIT. The plan to convert to
a REIT was unanimously approved by our board of directors following a thorough analysis and careful
consideration of ways to maximize value through alternative financing, capital and tax strategies.
Assuming we are successful in converting, we would plan to elect REIT status no sooner than our
taxable year beginning January 1, 2014. Any REIT election made by us must be effective as of the
beginning of a taxable year; therefore, if, as a calendar year taxpayer, we are unable to convert to a
REIT by January 1, 2014, the next possible conversion date would be January 1, 2015.
Our Conversion Plan currently includes submitting requests for private letter rulings (‘‘PLR’’) to
the U.S. Internal Revenue Service (the ‘‘IRS’’). Our PLR requests have multiple components, and the
conversion to a REIT will require favorable rulings from the IRS on numerous technical tax issues,
including the characterization of our racking assets as real estate. We submitted our PLR requests to
the IRS during the third quarter of 2012, but the IRS may not provide a favorable response to our
PLR requests until the second half of 2013 or at all.
Our ability to qualify as a REIT will depend upon our continuing compliance following our
conversion to a REIT with various requirements, including requirements related to the nature of our
assets, the sources of our income and the distributions to our stockholders. If we fail to qualify as a
REIT, we will be subject to U.S. federal income tax at regular corporate rates. Even if we qualify for
taxation as a REIT, we may be subject to some federal, state, local and foreign taxes on our income
and property. In particular, while state income tax regimes often parallel the U.S. federal income tax
regime for REITs described above, many states do not completely follow U.S. federal rules and some
may not follow them at all.
We believe that electing REIT status will maximize our enterprise value as we advance our strategy
and provide significant benefits to our stockholders. A key component of our overall strategic plan is
our capital allocation strategy to return excess cash to our stockholders, and we believe operating as a
REIT aligns well with this strategy. In November 2012, we paid a $700.0 million special dividend (the
‘‘Special Dividend’’) representing the initial distribution to satisfy the requirement that we pay to
stockholders our accumulated earnings and profits which is estimated to be approximately $1.0 billion
to $1.5 billion (the ‘‘E&P Distribution’’) in connection with our potential conversion to a REIT. The
Special Dividend consisted of $140.0 million paid in cash and $560.0 million in common stock value.
3
We issued 17.0 million new shares in connection with the Special Dividend. We also believe that
through conversion to a REIT we may be able to expand our shareholder base and lower our cost of
financing through increased ownership of currently leased real estate. We expect our long-term capital
allocation strategy as a REIT will naturally shift toward increased use of equity to support lower
leverage, though our leverage may increase in the short-term to fund the costs to support the
Conversion Plan.
See Item 7. ‘‘Management’s Discussion and Analysis of Financial Condition and Results of
Operations—Overview’’ and ‘‘—Liquidity and Capital Resources’’ of this Annual Report for more
information regarding our possible conversion to a REIT, including anticipated costs associated with the
Conversion Plan, and Item 1A. ‘‘Risk Factors—Risks Related to the Proposed REIT Conversion’’ of
this Annual Report for a discussion of risks associated with our conversion to a REIT, including
impediments to a conversion.
B. Description of Business.
Overview
We provide cost-effective secure storage for all major media, including paper (which is the primary
form of records storage we provide), as well as secure off-site storage of data backup media. Our
related information management services can be broadly divided into three major 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: flexible retrieval access, retention management and
records management program development and implementation based on best practices to help
customers comply with specific regulatory requirements and policy-based programs. Also included
within records management services are our Document Management Solutions (‘‘DMS’’). DMS helps
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 the secure handling and transportation of data
backup media for fast and efficient data recovery in the event of a disaster, human error or virus as
well as disaster preparedness, planning and support. 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 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 almost exclusively consist 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 that we provide, or the shredding of documents stored in our records
facilities upon the expiration of their scheduled retention periods.
4
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 storage and 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, a
storage and 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 relating to storage and information
management.
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 storage and
rotation 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.
5
Acquisitions in a Highly Fragmented Industry
The storage and 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. Acquisitions were a fast and
efficient way to achieve scale, expand geographically and broaden service offerings. We believe this
acquisition activity, which is ongoing, is due to the opportunities for large providers to achieve
economies of scale and meet customer demands for sophisticated, technology-based solutions.
Attractive acquisition opportunities, many of which are small, in North America and internationally
continue to exist, and we may pursue acquisition of 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 renting storage space to a large and diverse customer base in
64.5 million square feet of real estate around the globe and providing to our customers core records
management, data protection & recovery, information destruction, DMS services and an expanding
menu of complementary products and services. Providing outsourced storage is the mainstay of our
customer relationships and serves as the foundation for all 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 DMS services and recurring project
revenues. As is the case with storage rental revenue, core service revenues are highly recurring in
nature. In 2012, our storage rental and core service revenues represented approximately 89% 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). Furthermore, complementary services revenue includes recycled paper
revenue. Complementary services address specific needs of our customers 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 storage
and the information management 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 2010, 2011 and 2012 are set forth in Note 9 to Notes to Consolidated Financial Statements.
Secure Storage
We provide cost-effective secure storage for all major media, including paper (which is the primary
form of records storage we provide) as well as secure off-site vaulting of data backup media. Renting
secure space to customers for the purpose of storing paper records and data backup media is by far our
largest source of revenue. Records storage consists primarily of the archival storage of records for long
periods of time according to applicable laws, regulations and industry best practices. The secure off-site
storage of data backup media is a key component of a company’s disaster recovery and business
continuity programs and storage rental charges are generally billed monthly on a per storage unit basis.
Hard copy business records are typically stored for long periods of time with limited activity in
cartons packed by the customer. For some customers we store individual files on an open shelf basis,
and these files are typically more active. Storage rental charges are generally billed monthly on a per
6
storage unit basis, usually per cubic foot of records, and include the provision of space, racking systems,
computerized inventory and activity tracking and physical security.
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, either because of the data they contain or the media on which they are recorded. Accordingly,
our charges for providing enhanced security and special climate-controlled environments for vital
records are higher than for typical storage rental.
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 offer only physical services in the information destruction services
category.
Records Management Services
Central 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 DMS services as well as Compliant Records Management and Consulting Services,
Health Information Storage and Management Solutions, Entertainment Services, Energy Data Services,
Discovery Services and other ancillary services.
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, 2012, our fleet consisted 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
storing and managing digital information, 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 storage and management challenges. We continue to
cultivate marketing and technology partnerships to support this anticipated growth.
The focus of our DMS business is to develop, implement and support comprehensive storage and
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 DMS services
complement our core service offerings and enhance our existing customer relationships. We
differentiate our offerings from our competitors by providing solutions that integrate and expand 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
DMS services provide the bridge between customers’ physical documents and their 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. For example, medical records tend to be more active in nature and are typically
7
stored on specialized open shelving systems that provide easier access to individual files. In addition to
storing medical records, we provide health care information services, which include the handling, filing,
processing and retrieval of medical records used by hospitals, private practitioners and other medical
institutions, as well as 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.
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.
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 needs. 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 storage and information management programs. Our consulting business draws on our
experience in storage solutions and information management services to analyze the practices of
companies and assist them in creating more effective programs to store records and manage
information. Our consultants work with these customers to develop policies and schedules for
document retention and destruction.
We sold our domain name management product line in 2010 and the Digital Business, including
our former wholly owned subsidiaries, Mimosa Systems, Inc. and Stratify, Inc., and our New Zealand
operations in 2011. Also, we sold our Italian operations in April 2012. 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 2010, 2011 and 2012.
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 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 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
8
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. After
the 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
scheduled pick-up of loose office records that 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 consisting of custom built trucks, we are able to offer secure shredding services to our
customers throughout the U.S., Canada, the United Kingdom, Ireland, 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, storage rental fees charged to customers based on the volume of their 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 rental without incurring additional labor or marketing expenses
or significant capital costs. Similarly, contracts for the storage of electronic backup media involve
primarily fixed monthly rental payments. Our annual revenues from these fixed periodic storage
rental fees have grown for 24 consecutive years. For each of the three years 2010 through 2012,
storage rental revenues, which are stable and recurring, have accounted for over 55% or more of
our total consolidated revenues. This stable and growing storage rental revenue base also
provides the foundation for increases in service revenues and Adjusted OIBDA.
(cid:127) Historically Non-Cyclical Storage Rental Business. Historically, we have not experienced significant
reductions in our storage rental 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. However, during the recent economic downturn, which was
more severe and lasted longer than other recent downturns, destruction rates increased as some
customers have been more willing to incur additional short-term service costs in exchange for
lower storage rental 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 rental revenue base, albeit at a lower rate. For each of the
three years 2010 through 2012, total net volume growth has been approximately 2% on a global
basis.
9
(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 recent 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, resulted in lower consolidated net volume growth in recent quarters, including
negative net volume growth from existing customers at times in certain markets. Since reaching
unusually high levels in 2009, our destruction rates have stabilized at rates closer to historical
norms. After the economy has improved, we expect our growth from existing customers should
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 rental revenues is the
result of a number of factors, including the trend toward increased records retention, albeit at a
lower rate of growth, customer satisfaction with our services and net price increases.
(cid:127) Diversified and Stable Customer Base. As of December 31, 2012, we had over 155,000 clients in a
variety of industries in 35 countries around the world. We currently provide storage and
information management services to commercial, legal, banking, healthcare, accounting,
insurance, entertainment and government organizations, including more than 94% of the
Fortune 1000. No single customer accounted for as much as 2% of our consolidated revenues in
any of the years ended December 31, 2010, 2011 and 2012. For each of the three years 2010
through 2012, the average annual 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 storage rental revenue
and service revenue growth and ongoing operations, 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.
Additionally, we invest capital to acquire or construct real estate. 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 relatively small and 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 acquire/construct real estate—these expenditures are directly related to the
acquisition of real estate, either through the purchase or construction of a new facility or
the buyout of an existing lease.
(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. 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 industry. Spending in this
area includes items such as increased feature functionality, security upgrades or system
enhancements.
10
(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.
Following is a table presenting our capital expenditures for 2010, 2011 and 2012 organized by the
nature of the spending as described above:
Nature of Capital Spend (dollars in millions)
Year Ended December 31,
2010(1)(2)
2011(1)(2)
2012(1)(2)
Business Line Growth . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Real Estate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Business Operations(3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Product Development . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Product Improvement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Operational Efficiencies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total Capital
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Less: Real Estate and REIT Capital Expenditures . . . . . . . . . . . . . . .
Total Capital, Net of Real Estate and REIT Capital Expenditures . . . .
$116
14
65
10
31
8
$244
(14)
$230
$ 81
20
84
2
14
18
$218
(20)
$198
$ 61
54
75
4
12
42
$248
(66)
$182
We believe that capital expenditures, net of real estate and capital expenditures that are part of
our REIT Costs, incurred as a percent of revenues is a meaningful metric for investors because it
indicates the efficiency with which we are investing in the growth and operational efficiency of our
business. For the years 2010 through 2012, our total capital expenditures, net of real estate and capital
expenditures that are part of our REIT Costs, incurred as a percent of revenues were approximately
8%, 7% and 6%, respectively. This decrease since 2010 is due primarily to our disciplined approach to
capital management, a shift toward less capital intensive service revenues and moderating growth rates
in our physical storage rental business.
Following is a table presenting our capital expenditures as a percent of total revenues for 2010,
2011 and 2012 organized by the nature of the spending as described above:
Nature of Capital Spend
Year Ended December 31,
2010(1)(2)
2011(1)(2)
2012(1)(2)
Business Line Growth . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Real Estate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Business Operations(3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Product Development . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Product Improvement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Operational Efficiencies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
4.0%
0.5%
2.2%
0.3%
1.1%
0.3%
2.7%
0.7%
2.8%
0.1%
0.5%
0.6%
2.0%
1.8%
2.5%
0.1%
0.4%
1.4%
Total Capital
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Less: Real Estate and REIT Capital Expenditures . . . . . . . . . . . . . . .
8.4%
8.3%
7.2%
(0.5)% (0.7)% (2.2)%
Total Capital, Net of Real Estate and REIT Capital Expenditures . . . .
7.9%
6.6%
6.1%
(1) Represents capital expenditures on an accrual basis 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 includes capital expended on operational
support initiatives such as sales and marketing and information technology projects to support
infrastructure requirements.
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Growth Strategy
We offer our customers an integrated value proposition by providing them with secure storage and
comprehensive information management services, including records management services, data
protection & recovery services and information destruction services. We have the expertise and
experience to address complex storage and information management challenges such as rising storage
rental costs and increased litigation, regulatory compliance and disaster recovery requirements. We
expect to maintain a leadership position in the storage and information management services industry
around the world by enabling customers to store, 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.
Our objectives are to continue to capitalize on our expertise in the storage and information
management industry and to make additional fold-in acquisitions in more developed markets and
acquisitions and investments to establish an industry-leading presence in selected emerging markets.
Our near-term growth objectives include a set of specific initiatives: (1) increasing our incoming storage
volumes with a targeted, low risk approach to improving our sales effectiveness, thereby increasing
revenues from our existing customers and gaining new customers; (2) driving higher volume growth in
our international businesses as we expand our platform for selling storage, core services and new
services in higher growth markets; and (3) continuing to add new rental streams and ancillary services
to our portfolio to support our long-term growth objectives and drive solid returns on invested capital.
Our overall growth strategy will focus on growing our business organically, making strategic customer
acquisitions and pursuing acquisitions of storage and information management businesses.
Introduction of New Products and Services
We continue to expand our portfolio of products and services. Adding new products and services
allows us to strengthen our existing customer relationships 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 rental and
certain records management 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 recent 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, resulted in lower consolidated net volume growth in recent
quarters, including negative net volume growth from existing customers at times in certain markets.
Since reaching unusually high levels in 2009, our destruction rates have stabilized at rates closer to
historical norms. After the economy has improved, we expect our growth from existing customers
should 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 strategically allocating our sales resources to our customer base and selling additional
storage, information management services and products in new and existing markets within our existing
customer relationships. These services and products include special project work, data restoration
projects, fulfillment services, consulting services, technology services and product sales (including
specially designed storage containers and related supplies).
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Expanding New and Existing Customer Relationships
Our sales forces are dedicated to three primary objectives: (1) establishing new customer account
relationships; (2) generating additional revenue by expanding existing customer relationships globally;
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 emerging markets, continuing to make fold-in acquisitions in North
America and more developed international markets and expanding our rental streams, new service
capabilities and industry-specific services. We have a successful record of acquiring and integrating
storage and information management services companies.
Acquisitions in the North American Business Segment
We have acquired, and we continue to seek to acquire, storage and information management
services businesses in the U.S. and Canada. Given the relatively small size of most acquisition targets in
our core physical businesses in North America, where we believe they present a good opportunity to
create value for our stockholders, 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 expect to continue to make acquisitions and investments in storage and information
management services businesses in targeted markets outside North America, particularly emerging
markets. We have acquired and invested in, and seek to acquire and invest in, storage and 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 Pacific, 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
30 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 a 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 storage and information management services industry, our
multinational customer relationships, our access to capital and our technology, while 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 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 make a joint venture
investment. Since 2008, we have acquired the remaining minority equity ownership in our Greece
(2010), China (2010), Hong Kong (2010) and Singapore (2010) operations and increased our equity
ownership interest in our Switzerland (2012) and Turkey (2012) operations. In 2010, to better align our
operations with our long-term international growth objectives, we sold our equity ownership interest 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
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international businesses, we sold our New Zealand operations in October 2011 and our Italian
operations in April 2012.
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 2010, 2011 and 2012 are set forth in Note 9 to Notes to Consolidated Financial
Statements. For the years ended December 31, 2010, 2011 and 2012, we derived approximately 32%,
34% and 35%, respectively, of our total revenues from outside of the U.S. As of December 31, 2010,
2011 and 2012, we had long-lived assets of approximately 36%, 36% and 37%, respectively, outside of
the U.S.
Competition
We are a global leader in the physical storage and information management services industry with
operations in 35 countries. We compete with our current and potential customers’ internal storage and
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 storage and
information management services.
We also compete with numerous storage and information management services providers in every
geographic area where we operate. The physical storage and information management services industry
is highly competitive and includes thousands of competitors in North America and around the world.
We believe that competition for customers is based on price, reputation for reliability, quality and
security of storage, 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 rental fees for the storage of paper documents and records
management 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 primary 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 storage and information management.
Employees
As of December 31, 2012, we employed over 8,500 employees in the U.S. and over 9,000
employees outside of the U.S. At December 31, 2012, an aggregate of 445 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
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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.
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 DMS services and other service contracts is often limited to a percentage of
annual revenue under the contract. We cannot provide assurance 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 rental and service contracts include a schedule setting forth the majority
of the customer-specific terms, including storage rental 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 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 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 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.
15
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
Reports 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.’’
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 current and potential 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.
Risks Related to the Proposed REIT Conversion
Although following our strategic review process we have chosen to pursue conversion to a REIT, we may not
be successful in converting to a REIT effective January 1, 2014, or at all.
As previously announced, in June 2011 we formed the Special Committee to evaluate, among
other things, ways to maximize stockholder value through alternative financing, capital, and tax
strategies, including evaluating a potential conversion to a REIT (the ‘‘Conversion Plan’’). In June
2012, our board of directors unanimously approved the Conversion Plan. There are significant
implementation and operational complexities to address in connection with converting to a REIT,
including obtaining a favorable PLR from the IRS, completing internal reorganizations, modifying
accounting, information technology and real estate systems, receiving stockholder approvals, refinancing
our revolving credit and term loan facilities and making required stockholder payouts. Further, changes
in legislation or the federal tax rules could adversely impact our ability to convert to a REIT and/or the
attractiveness of converting to a REIT. Similarly, even if we are able to satisfy the existing REIT
requirements, the tax laws, regulations and interpretations governing REITs may change at any time in
ways that could be disadvantageous to us.
Additionally, several conditions must be met in order to complete the conversion to a REIT, and
the timing and outcome of many of these conditions are beyond our control. For example, we cannot
provide assurance that the IRS will ultimately provide us with a favorable PLR or that any favorable
PLR will be received in a timely manner for us to convert successfully to a REIT as of January 1, 2014.
Even if the transactions necessary to implement REIT conversion are effected, our board of directors
may decide not to elect REIT status, or to delay such election, if it determines in its sole discretion
that it is not in the best interests of our stockholders. We can provide no assurance if or when
conversion to a REIT will be successful. Furthermore, if we do convert, the effective date of the REIT
conversion could be delayed beyond January 1, 2014, in which event we could not elect REIT status
until the taxable year beginning January 1, 2015, at the earliest.
16
We may not qualify or remain qualified as a REIT, and/or may not realize the anticipated benefits to
stockholders, including the achievement of tax savings for us, increases in income distributable to
stockholders, the potential to lower our cost of financing through increased ownership of currently leased
real estate and the expansion of our stockholder base.
If we convert to a REIT, we plan to operate in a manner consistent with REIT qualification rules;
however, we cannot provide assurance that we will, in fact, qualify as a REIT or remain so qualified.
REIT qualification involves the application of highly technical and complex provisions of the U.S.
Internal Revenue Code of 1986, as amended (the ‘‘Code’’), to our operations as well as various factual
determinations concerning matters and circumstances not entirely within our control. There are limited
judicial or administrative interpretations of these provisions.
Even if we are successful converting to a REIT and electing REIT status, we cannot provide
assurance that our stockholders will experience benefits attributable to our qualification and taxation as
a REIT, including our ability to (1) reduce our corporate level federal tax through distributions to
stockholders, (2) lower our cost of financing or (3) expand our stockholder base. The realization of the
anticipated benefits to stockholders will depend on numerous factors, many of which are outside our
control, including interest rates. In addition, future distributions to stockholders will depend on our
cash flows, as well as the impact of alternative, more attractive investments as compared to dividends.
Further, changes in legislation or the federal tax rules could adversely impact the benefits of being a
REIT.
Complying with REIT qualification requirements may limit our flexibility or cause us to forego otherwise
attractive opportunities.
To qualify as a REIT for federal income tax purposes, and to remain so qualified, we must
continually satisfy tests concerning, among other things, the sources of our income, the nature and
diversification of our assets, the amounts we distribute to our stockholders and the ownership of our
common stock. For example, under the Code, no more than 25% of the value of the assets of a REIT
may be represented by securities of one or more U.S. taxable REIT subsidiaries (‘‘TRS’’) and other
nonqualifying assets. This limitation may affect our ability to make large investments in other
non-REIT qualifying operations or assets. As such, compliance with REIT tests may hinder our ability
to make certain attractive investments, including the purchase of significant nonqualifying assets and
the material expansion of non-real estate activities.
There are uncertainties relating to our estimate of our E&P Distribution, as well as the timing of such E&P
Distribution and the percentage of common stock and cash we may distribute.
We have provided an estimated range of the E&P Distribution. We are in the process of
conducting a study of our pre-REIT accumulated earnings and profits as of the close of our 2011
taxable year using our historic tax returns and other available information. This is a very involved and
complex study that is not yet complete, and the actual result of the study relating to our pre-REIT
accumulated earnings and profits as of the close of our 2011 taxable year may be materially different
from our current estimates. In addition, the estimated range of our E&P Distribution is based on our
projected taxable income for our 2012 and 2013 taxable years and our current business plans and
performance, but our actual earnings and profits (and the actual amount of the E&P Distribution) will
vary depending on, among other items, the timing of certain transactions, our actual taxable income
and performance for 2012 and 2013 and possible changes in legislation or tax rules and IRS revenue
procedures relating to distributions of earnings and profits. For these reasons and others, our actual
E&P Distribution may be materially different from our estimated range.
In the fourth quarter of 2012, we paid to our stockholders a Special Dividend of $700 million,
which represented the initial portion of the expected E&P Distribution. We expect the balance of the
17
E&P Distribution will be paid in 2014, but the timing of the planned payment of the remaining E&P
Distribution, which may or may not occur, may be affected by potential tax law changes, the completion
of various phases of the REIT Conversion Plan and other factors beyond our control. The Special
Dividend was paid in the aggregate of 20% in cash and 80% in shares of our common stock. We may
decide, based on our cash flows and strategic plans, IRS revenue procedures relating to distributions of
earnings and profits, leverage and other factors, to pay the remaining portion of the E&P Distribution
entirely in cash or a different mix of cash and common stock.
We may be required to borrow funds and/or raise equity to satisfy our E&P Distribution and other
conversion costs.
Depending on the ultimate size and timing of the stockholder distributions and the cash outlays
associated with our conversion to a REIT, we may raise debt and/or issue equity in the near-term to
fund these disbursements, even if the then-prevailing market conditions are not favorable for these
borrowings or offerings. Whether we issue equity, at what price and the amount and other terms of any
such issuances will depend on many factors, including alternative sources of capital, our then-existing
leverage, our need for additional capital, market conditions and other factors beyond our control. If we
raise additional funds through the issuance of equity securities or debt convertible into equity securities,
the percentage of stock ownership by our existing stockholders may be reduced. In addition, new equity
securities or convertible debt securities could have rights, preferences, and privileges senior to those of
our current stockholders, which could substantially decrease the value of our securities owned by them.
Depending on the share price we are able to obtain, we may have to sell a significant number of shares
in order to raise the capital we deem necessary to execute our long-term strategy, and our stockholders
may experience dilution in the value of their shares as a result. Furthermore, satisfying our E&P
Distribution and other conversion costs may increase the financing we need to fund capital
expenditures, future growth and expansion initiatives. As a result, our indebtedness could increase. See
‘‘Risks Relating to Our Indebtedness’’ for further information regarding our substantial indebtedness.
There are uncertainties relating to the costs associated with implementing the Conversion Plan.
We have provided an estimated range of our tax and other costs to convert to a REIT, including
estimated tax liabilities associated with a change in our method of depreciating and amortizing various
assets and annual compliance costs. Our estimate of these taxes and other costs, however, may not be
accurate, and such costs may in actuality be materially different from our estimates due to
unanticipated outcomes in the PLR, changes in our business support functions and support costs, the
unsuccessful execution of internal planning, including restructurings and cost reduction initiatives, or
other factors.
We have no experience operating as a REIT, which may adversely affect our business, financial condition
and results of operations if we successfully convert to a REIT.
We have no experience operating as a REIT and our senior management has no experience
operating a REIT. Our pre-REIT operating experience may not be sufficient to prepare us to operate
successfully as a REIT. Our inability to operate successfully as a REIT, including the failure to maintain
REIT status, could adversely affect our business, financial condition and results of operations.
Operational Risks
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
18
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.
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 U.S. 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 and require the adoption and maintenance of privacy
and information security programs; our failure to be in compliance with any such programs may
adversely affect our business. One U.S. 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, in the past the U.S. Congress has considered 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 costs to those
customers for which we have provided reimbursement. 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.
19
Our customer contracts may not always limit our liability and may sometimes contain terms that could lead
to disputes in contract 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
and our liability under our DMS services and other service contracts is often limited to a percentage of
annual revenue under the contract; however, 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. We
cannot provide assurance 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 rental and service contracts include a schedule
setting forth the majority of the customer-specific terms, including storage rental 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 no assurance
that we will not have material disputes in the future.
As stored records become less active our core service revenue growth may decline.
Our core service revenue growth is being negatively impacted by declining activity rates as stored
records are becoming less active. The amount of information available to customers through the
internet or their own information systems has been steadily increasing in recent years. As a result, while
customers continue to store their records with us, they are less likely than they have been in the past to
retrieve records for research purposes thereby reducing their core service activity levels.
We face competition for customers.
We compete with multiple storage and 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. We also compete, in some of our business lines, with our current and
potential customers’ internal storage and information management services capabilities. These
organizations may not begin or continue to use a third party, such as Iron Mountain, for their future
storage and information management services needs.
Failure to comply with certain regulatory and contractual requirements under our U.S. Government
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;
20
(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 or because competitors attract our customers; 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, 2012, we provided services in more than 30 countries outside the U.S. As part
of our growth strategy, we expect to continue to acquire or invest in storage and 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;
(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.
Changing fire and safety standards may result in significant expense in certain jurisdictions.
As of December 31, 2012, we operated 938 records management and off-site data protection
facilities worldwide, including 569 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
21
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 beyond our current operating plan were
required at a large number of our facilities, the expense required for compliance could negatively
impact our business, financial condition or 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 damage to one or more key operating facilities, the
temporary closure of one or more key operating facilities or the temporary disruption of information
systems, each of which could negatively impact our 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. In particular, our secure shredding operations generate revenue from the sale of
shredded paper to recyclers. We generate additional revenue through a customer surcharge when the
price of diesel fuel rises above certain predetermined rates. As a result, significant declines in paper
and diesel fuel prices may negatively impact our revenues and results of operations, and increases in
other commodity prices, including steel, may negatively impact our results of operations.
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 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.
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.
22
Risks Related to Our Common Stock
There is no assurance that we will continue to pay dividends.
Our board of directors adopted a dividend policy under which we intend to pay quarterly cash
dividends on our common stock. However, our ability to pay dividends will be adversely affected if any
of the risks described herein occur. In addition, any determination by us to pay cash dividends on our
common stock in the future will be based primarily upon our financial condition, results of operations,
business requirements and strategy and our board of directors’ continuing determination that the
declaration of dividends under the dividend policy is in the best interests of our stockholders. The
terms of our revolving credit facility and term loan facility and our indentures contain provisions
permitting the payment of cash dividends subject to certain limitations. For these reasons, among
others, our cash dividend rate may decline or we may cease paying dividends.
Risks Related 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, 2012 (dollars in millions):
Total long-term debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Debt to equity ratio . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$3,825.0
$1,162.4
3.29 X
Our substantial indebtedness could have important consequences to our current and potential
investors. Our indebtedness may increase as we continue to borrow under existing and future credit
arrangements in order to finance future acquisitions, to fund the Conversion Plan 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 or
the payment of quarterly dividends;
(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;
23
(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.
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. Certain important corporate
events, however, such as leveraged recapitalizations that would increase the level of our indebtedness,
would not constitute a ‘‘change of control’’ under our indentures.
Iron Mountain is a holding company, and, therefore, 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; 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 balance sheet and results of
operations.
The success of any acquisition we make 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 balance sheet and results of operations.
24
We may be unable to continue our international expansion.
Part of 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 storage and
information management services businesses operating in these areas and may acquire other storage
and information management services businesses in the future.
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 storage and 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, 2012, we conducted operations through 760 leased facilities and 266 facilities
that we own. Our facilities are divided among our reportable segments as follows: North American
Business (656), International Business (369), and Corporate (1). These facilities contain a total of
64.5 million square feet of space. Facility rent expense was $216.1 million, $219.4 million and
$224.7 million for the years ended December 31, 2010, 2011 and 2012, 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 alleged that the
technology found in our Connected and LiveVault products infringed certain U.S. patents owned by the
25
plaintiff. As part of the sale of our Digital Business, discussed in Note 14 to Notes to Consolidated
Financial Statements, our Connected and LiveVault products were sold to Autonomy, and Autonomy
assumed this obligation and the defense of this litigation and agreed to indemnify us against any losses.
In November 2012, the claim was settled and Autonomy paid the entire settlement amount.
On November 4, 2011, we experienced a fire at a facility we leased in Aprilia, Italy. The facility
primarily stored archival and inactive business records for local area businesses. Despite quick response
by local fire authorities, damage to the building was extensive, and the building and its contents were a
total loss. We continue to assess the impact of the fire, and, although our warehouse legal liability
insurer has reserved its rights to contest coverage related to certain types of potential claims, we
believe we carry adequate insurance. We have been sued by two customers, and have received
correspondence from other customers, under various theories of liabilities. We deny any liability with
respect to the fire and we have referred these claims to our warehouse legal liability insurer for an
appropriate response. We do not expect that this event will have a material impact on our consolidated
financial condition, results of operations and cash flows. As discussed in Note 14 to Notes to
Consolidated Financial Statements, we sold our Italian operations on April 27, 2012, and we
indemnified the buyers related to certain obligations and contingencies associated with the fire.
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.
26
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 2011
and 2012:
2011
First Quarter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Second Quarter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Third Quarter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Fourth Quarter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2012
First Quarter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Second Quarter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Third Quarter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Fourth Quarter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Sale Prices
High
Low
$31.53
35.50
35.79
33.70
$32.24
33.50
34.18
37.70
$24.28
31.18
27.68
28.34
$28.35
27.10
30.91
30.50
The closing price of our common stock on the NYSE on February 8, 2013 was $34.25. As of
February 8, 2013, there were 490 holders of record of our common stock. We believe that there are
more than 62,500 beneficial owners of our common stock.
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 2011 and 2012, our board of
directors declared the following dividends:
Declaration Date
March 11, 2011 . . . . . . . . . . . . . .
June 10, 2011 . . . . . . . . . . . . . . .
September 8, 2011 . . . . . . . . . . . .
December 1, 2011 . . . . . . . . . . . .
March 8, 2012 . . . . . . . . . . . . . . .
June 5, 2012 . . . . . . . . . . . . . . . .
September 6, 2012 . . . . . . . . . . . .
October 11, 2012 . . . . . . . . . . . . .
December 14, 2012 . . . . . . . . . . .
Dividend
Per Share
Record Date
March 25, 2011
$0.1875
June 24, 2011
0.2500
September 23, 2011
0.2500
0.2500 December 23, 2011
March 23, 2012
0.2500
0.2700
June 22, 2012
September 25, 2012
0.2700
4.0600
October 22, 2012
0.2700 December 26, 2012
Total
Amount
(in thousands)
$ 37,601
50,694
46,877
43,180
42,791
46,336
46,473
700,000
51,296
Payment Date
April 15, 2011
July 15, 2011
October 14, 2011
January 13, 2012
April 13, 2012
July 13, 2012
October 15, 2012
November 21, 2012
January 17, 2013
On October 11, 2012, we announced the declaration by our board of directors of a special dividend
of $700 million (the ‘‘Special Dividend’’) on our shares of common stock, payable, at the election of
the stockholders, in either common stock or cash to stockholders of record as of October 22, 2012 (the
‘‘Record Date’’). The Special Dividend, which is a distribution to stockholders of a portion of our
accumulated earnings and profits, was paid in a combination of common stock and cash on
November 21, 2012 (the ‘‘Distribution Date’’) to stockholders of record as of the Record Date. The
total amount of cash paid to all stockholders associated with the Special Dividend was approximately
$140.0 million (including cash paid in lieu of fractional shares). Our shares of common stock were
valued for purposes of the Special Dividend based upon the average closing price on the three trading
days following November 14, 2012, or $32.87 per share, and we issued approximately 17 million shares
27
of our common stock in connection with the Special Dividend. These shares impact weighted average
shares outstanding from the date of issuance, thus impacting our earnings per share data prospectively
from the Distribution Date.
Our board of directors has authorized up to $1.2 billion in repurchases of our common stock. As
of February 8, 2013, 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.
Unregistered Sales of Equity Securities and Use of Proceeds
We did not sell any unregistered securities during the three months ended December 31, 2012, nor
did we repurchase any shares of our common stock during the three months ended December 31, 2012.
As of December 31, 2012, we had approximately $66.0 million available for future repurchases under
our authorized stock repurchase program.
28
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. The selected consolidated financial
and operating information set forth below 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 Annual Report.
2008
2009
2010(1)
2011
2012
Year Ended December 31,
Consolidated Statements of
Operations Data:
Revenues:
. . . . . . . . . . . . . . . .
Storage rental
Service . . . . . . . . . . . . . . . . . . . . .
$1,496,194
1,329,240
$1,533,792
1,240,592
$1,598,718
1,293,631
$1,682,990
1,331,713
$1,733,138
1,272,117
Total Revenues . . . . . . . . . . . . . .
2,825,434
2,774,384
2,892,349
3,014,703
3,005,255
Operating Expenses:
Cost of sales (excluding depreciation
and amortization) . . . . . . . . . . . .
Selling, general and administrative . .
Depreciation and amortization . . . .
Intangible Impairments(2) . . . . . . . .
Loss (Gain) on disposal/write-down
of property, plant and equipment,
net . . . . . . . . . . . . . . . . . . . . . . .
Total Operating Expenses . . . . . .
Operating Income . . . . . . . . . . . . . . .
Interest Expense, Net
. . . . . . . . . . . .
Other Expense (Income), Net . . . . . . .
Income from Continuing
Operations Before Provision for
Income Taxes . . . . . . . . . . . . .
Provision for Income Taxes . . . . . . . . .
Income from Continuing Operations . .
Loss from Discontinued Operations,
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
1,277,113
850,371
316,344
—
7,522
2,333,174
492,260
219,989
31,505
168
(10,987)
(2,286)
4,400
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
2,448,228
557,027
242,599
16,062
240,766
146,122
94,644
345,279
113,762
231,517
334,222
167,483
166,739
352,900
106,488
246,412
298,366
114,873
183,493
Net of Tax . . . . . . . . . . . . . . . . . . .
(14,889)
(12,138)
(219,417)
(47,439)
(6,774)
Gain (Loss) on Sale of Discontinued
Operations, Net of Tax . . . . . . . . . .
—
—
—
Net Income (Loss) . . . . . . . . . . . . . . .
79,755
219,379
(52,678)
200,619
399,592
(1,885)
174,834
Less: Net (Loss) Income
Attributable to Noncontrolling
Interests . . . . . . . . . . . . . . . . .
Net Income (Loss) Attributable to
(94)
1,429
4,908
4,054
3,126
Iron Mountain Incorporated . . . . . .
$
79,849
$ 217,950
$ (57,586) $ 395,538
$ 171,708
(footnotes follow)
29
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,
2008
2009
2010(1)
2011
2012
(In thousands, except per share data)
0.47
$
1.14
$
0.83
$
1.27
(0.07) $
(0.06) $
(1.09) $
0.79
0.40
0.47
$
$
1.07
1.13
$
$
(0.29) $
2.03
0.83
$
1.26
(0.07) $
(0.06) $
(1.09) $
0.78
0.39
$
1.07
$
(0.29) $
2.02
$
$
$
$
$
$
1.06
(0.05)
0.99
1.05
(0.05)
0.98
Outstanding—Basic . . . . . . . . . . . .
201,279
202,812
201,991
194,777
173,604
Weighted Average Common Shares
Outstanding—Diluted . . . . . . . . . . .
203,290
204,271
201,991
195,938
174,867
Dividends Declared per Common
Share(3) . . . . . . . . . . . . . . . . . . . .
$
— $
— $
0.3750
$
0.9375
$
5.1200
(footnotes follow)
Year Ended December 31,
2008
2009
2010(1)
2011
2012
(In thousands)
Other Data:
Adjusted OIBDA(4) . . . . . . . . . . . . . . . . . . . .
Adjusted OIBDA Margin(4) . . . . . . . . . . . . . .
Ratio of Earnings to Fixed Charges . . . . . . . . .
$754,279
$822,579
$926,676
$950,439
$912,217
26.7%
1.8x
29.6%
2.2x
32.0%
2.2x
31.5%
2.2x
30.4%
1.9x
Consolidated Balance Sheet Data:
Cash and Cash Equivalents . . . . . . . .
Total Assets . . . . . . . . . . . . . . . . . . . .
Total Long-Term Debt (including
Current Portion of Long-Term Debt)
Total Equity . . . . . . . . . . . . . . . . . . .
(footnotes follow)
2008
2009
2010(1)
2011
2012
As of December 31,
(In thousands)
$ 278,370
6,359,291
$ 446,656
6,851,157
$ 258,693
6,416,393
$ 179,845
6,041,258
$ 243,415
6,358,339
3,240,450
1,814,769
3,248,649
2,150,760
3,008,207
1,952,865
3,353,588
1,254,256
3,825,003
1,162,448
(1) 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.
30
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, 2008, 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.
(2) 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
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 Continental Western Europe reporting unit, which is a component of the
International Business segment. See Note 2.g. to Notes to Consolidated Financial Statements.
(3) 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’’ of this Annual Report.
(4) Adjusted OIBDA and Adjusted OIBDA Margin are non-GAAP measures. Adjusted OIBDA is
defined as operating income before depreciation, amortization, intangible impairments, (gain) loss
on disposal/write-down of property, plant and equipment, net and REIT Costs (as defined below).
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
non-GAAP 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’’ of this Annual Report.
31
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 Annual Report.
This discussion contains ‘‘forward-looking statements’’ as that term is defined in the Private
Securities Litigation Reform Act of 1995 and in other securities laws. See ‘‘Cautionary Note Regarding
Forward-Looking Statements’’ on page ii of this Annual Report and ‘‘Item 1A. Risk Factors’’ beginning
on page 16 of this Annual Report.
Overview
Potential REIT Conversion
On June 5, 2012, we announced that our board of directors, following a thorough analysis of
alternatives and careful consideration of the topic, and after the unanimous recommendation of the
Special Committee, unanimously approved a plan for IMI to pursue the Conversion Plan. If we are
able to convert to, and qualify as, a REIT, we will generally be permitted to deduct from U.S. federal
income taxes dividends paid to our stockholders. The income represented by such dividends would not
be subject to U.S. federal taxation at the entity level but would be taxed, if at all, only at the
stockholder level. Nevertheless, the income of our U.S. taxable REIT subsidiaries (‘‘TRS’’), which will
hold our U.S. operations that may not be REIT-compliant, will be subject, as applicable, to U.S. federal
and state corporate income tax, and we will continue to be subject to foreign income taxes in non-U.S.
jurisdictions in which we hold assets or conduct operations, regardless of whether held or conducted
through qualified REIT subsidiaries (‘‘QRS’’) or TRS. We will also be subject to a separate corporate
income tax on any gains recognized during a specified period (generally, 10 years) following the REIT
conversion that are attributable to ‘‘built-in’’ gains with respect to the assets that we own on the date
we convert to a REIT. Our ability to qualify as a REIT will depend upon our continuing compliance
with various requirements following our conversion to a REIT, including requirements related to the
nature of our assets, the sources of our income and the distributions to our stockholders. If we fail to
qualify as a REIT, we will be subject to U.S. federal income tax at regular corporate rates. Even if we
qualify for taxation as a REIT, we may be subject to some federal, state, local and foreign taxes on our
income and property. In particular, while state income tax regimes often parallel the U.S. federal
income tax regime for REITs described above, many states do not completely follow U.S. federal rules
and some may not follow them at all.
We currently estimate the incremental operating and capital expenditures associated with the
Conversion Plan through 2014 to be approximately $150.0 million to $200.0 million. Of these amounts,
approximately $47.0 million was incurred in 2012, including approximately $12.5 million of capital
expenditures. If the Conversion Plan is successful, we also expect to incur an additional $10.0 million to
$15.0 million in annual REIT compliance costs in future years.
Discontinued Operations
In August 2010, we divested the domain name management product line of our digital business
(the ‘‘Domain Name Product Line’’). On June 2, 2011, we 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’’).
Additionally, on October 3, 2011, we sold our records management operations in New Zealand. Also,
on April 27, 2012, we sold our records management operations in Italy. The financial position,
operating results and cash flows of the Domain Name Product Line, the Digital Business, our New
32
Zealand operations and our Italian operations, including the gain on the sale of the Domain Name
Product Line, the Digital Business and our New Zealand operations and the loss on the sale of the
Italian operations, for all periods presented, have been reported as discontinued operations for
financial reporting purposes. See Note 14 to Notes to Consolidated Financial Statements.
General
Our revenues consist of storage rental revenues as well as service revenues. Storage rental
revenues, which are considered a key driver of financial performance for the storage and information
management services industry, consist primarily of recurring periodic rental charges related to the
storage of materials or data (generally on a per unit basis) that are typically retained by customers for
many years. Service revenues include 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 Document Management Solutions (‘‘DMS’’), which relate to
physical and digital records, and recurring project revenues. Our core service revenue growth has been
negatively impacted by declining activity rates as stored records are becoming less active. The amount
of information available to customers through the internet or their own information systems has been
steadily increasing in recent years. As a result, while customers continue to store their records with us,
they are less likely than they have been in the past to retrieve records for research purposes thereby
reducing their core service activity levels. We expect this trend to continue in 2013. 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 rental and service revenues are recognized in the
month the respective storage rental or service is provided, and customers are generally billed on a
monthly basis on contractually agreed-upon terms. Amounts related to future storage rental or prepaid
service contracts for customers where storage rental fees or services are billed in advance are accounted
for as deferred revenue and recognized ratably over the applicable storage rental 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 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.
33
The expansion of our international and secure shredding businesses has impacted the major cost of
sales components. Our international operations are more labor intensive than our operations in North
America and, therefore, labor costs are a higher percentage of segment revenue than in our North
American operations. 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 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. The overhead structure of our expanding international 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 international 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.
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. It is
difficult to predict the future fluctuations of foreign currency exchange rates and how those fluctuations
will impact our consolidated statement of operations. Due to the expansion of our international
operations, some of 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 presentation. The
constant currency growth rates are calculated by translating the 2010 results at the 2011 average
exchange rates and the 2011 results at the 2012 average exchange rates.
34
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 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$1.604
$1.012
$1.392
$1.585
$1.000
$1.286
(1.2)%
(1.2)%
(7.6)%
Average Exchange
Rates for the
Year Ended
December 31,
2011
2012
Percentage
Strengthening/
(Weakening) of
Foreign Currency
Average Exchange
Rates for the
Year Ended
December 31,
2010
2011
Percentage
Strengthening/
(Weakening) of
Foreign Currency
British pound sterling . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Canadian dollar . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Euro . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$1.546
$0.971
$1.328
$1.604
$1.012
$1.392
3.8%
4.2%
4.8%
Non-GAAP Measures
Adjusted Operating Income Before Depreciation, Amortization, Intangible Impairments, and REIT Costs
(‘‘Adjusted OIBDA’’)
Adjusted OIBDA is defined as operating income before depreciation, amortization, intangible
impairments, (gain) loss on disposal/write-down of property, plant and equipment, net, and REIT Costs
(as defined below). 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 our 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) loss
on disposal/write-down of property, plant and equipment, net; (2) intangible impairments; (3) REIT
Costs; (4) other expense (income), net; (5) income (loss) from discontinued operations, net of tax;
(6) gain (loss) on sale of discontinued operations, net of tax 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 accounting principles generally accepted in the Unites States
of America (‘‘GAAP’’), such as operating or net income (loss) or cash flows from operating activities
from continuing operations (as determined in accordance with GAAP).
35
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
Property, Plant and Equipment, Net . . . .
REIT Costs(1) . . . . . . . . . . . . . . . . . . . . .
Operating Income . . . . . . . . . . . . . . . . . . . . .
Less: Interest Expense, Net . . . . . . . . . . . . . .
Other Expense (Income), Net . . . . . . . . .
Provision for Income Taxes . . . . . . . . . . .
Income from Continuing Operations . . . .
Total (Loss) Income from Discontinued
Year Ended December 31,
2008
2009
2010
2011
2012
$754,279
254,497
—
$822,579
277,186
—
$ 926,676
304,205
85,909
$950,439
319,499
46,500
$912,217
316,344
—
7,522
—
492,260
219,989
31,505
146,122
168
—
(10,987)
—
(2,286)
15,527
545,225
212,545
(12,599)
113,762
547,549
204,559
8,768
167,483
571,199
205,256
13,043
106,488
4,400
34,446
557,027
242,599
16,062
114,873
94,644
231,517
166,739
246,412
183,493
Operations, Net of Tax . . . . . . . . . . . .
(14,889)
(12,138)
(219,417)
153,180
(8,659)
Net (Loss) Income Attributable to
Noncontrolling Interests . . . . . . . . . . .
(94)
1,429
4,908
4,054
3,126
Net Income (Loss) Attributable to Iron
Mountain Incorporated . . . . . . . . . . . . . . .
$ 79,849
$217,950
$ (57,586) $395,538
$171,708
(1) Includes costs associated with our 2011 proxy contest, the work of the Special Committee and the
proposed REIT conversion (‘‘REIT Costs’’).
Adjusted Earnings per Share from Continuing Operations (‘‘Adjusted EPS’’)
Adjusted EPS is defined as reported earnings per share from continuing operations excluding:
(1) (gain) loss on disposal/write-down of property, plant and equipment, net; (2) intangible
impairments; (3) REIT Costs; (4) other expense (income), net; and (5) 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 is of value to our current and potential investors when comparing our results from past,
present and future periods.
36
Reconciliation of Adjusted EPS—Fully Diluted from Continuing Operations to Reported EPS—Fully
Diluted from Continuing Operations:
Year Ended December 31,
2008
2009
2010
2011
2012
Adjusted EPS—Fully Diluted from Continuing Operations . .
$0.86
$ 1.01
$ 1.28
$ 1.36
$ 1.21
Less: Loss (Gain) on disposal/write-down of property,
plant and equipment, net . . . . . . . . . . . . . . . . . . . . . . .
Intangible Impairments . . . . . . . . . . . . . . . . . . . . . . . .
Other Expense (Income), net . . . . . . . . . . . . . . . . . . . .
REIT Costs
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Tax impact of reconciling items and discrete tax items . .
0.04
—
0.15
—
0.20
— (0.05)
0.43
—
0.04
(0.06)
—
—
0.03
(0.06)
(0.01)
0.24
0.07
0.08
(0.28)
0.03
—
0.09
0.20
(0.16)
Reported EPS—Fully Diluted from Continuing Operations . .
$0.47
$ 1.13
$ 0.83
$ 1.26
$ 1.05
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
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 rental revenues as well as service revenues and are reflected net of
sales and value added taxes. Storage rental revenues, which are considered a key driver of financial
performance for the storage and information management services industry, consist primarily of
recurring periodic rental charges related to the storage of materials or data (generally on a per unit
basis). Service revenues include 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 DMS, which relate to physical and digital records, 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 rental and service revenues are recognized in the
month the respective storage rental or service is provided, and customers are generally billed on a
37
monthly basis on contractually agreed-upon terms. Amounts related to future storage rental or prepaid
service contracts for customers where storage rental fees or services are billed in advance are accounted
for as deferred revenue and recognized ratably over the applicable storage rental 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 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 by us of numerous businesses. The
purchase price of each acquisition has been determined after due diligence of the target 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.
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.
As of December 31, 2011 and 2012, our allowance for doubtful accounts and credit memos balance
totaled $23.3 million and $25.2 million, respectively.
Impairment of Tangible and Intangible Assets
Assets subject to depreciation or 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
38
performed our annual goodwill impairment review as of October 1, 2010, 2011 and 2012 and noted no
impairment of goodwill at these dates. 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, 2012, no factors were identified that would alter our
October 1, 2012 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.
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. 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. 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 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. As a result of the management and reporting changes, we concluded at that
time that we had three reporting units within our European operations: (1) United Kingdom, Ireland
and Norway (‘‘UKI’’); (2) Belgium, France, Germany, Luxembourg, Netherlands and Spain
(‘‘Continental Western Europe’’); and (3) the remaining countries in Europe (‘‘Central Europe’’). 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, Continental 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, Continental Western Europe and Central Europe reporting units and noted no
impairment, except for our Italian operations, which was included in our Continental Western Europe
reporting unit, and which is now included in discontinued operations. Based on our analysis, we
concluded that the goodwill of our UKI and Central Europe reporting units was not impaired. Our
Continental 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.
Our reporting units at which level we performed our goodwill impairment analysis as of October 1,
2011 were as follows: (1) North America; (2) UKI; (3) Continental Western Europe; (4) Central
39
Europe; (5) Latin America; (6) Australia; and (7) our China, Hong Kong, India, Russia, Singapore and
Ukraine joint ventures (collectively, ‘‘Worldwide 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, Continental Western Europe,
Central Europe, Latin America and Australia, respectively. Our Worldwide Joint Ventures reporting
unit had no goodwill as of December 31, 2011.
In 2012, we reorganized the management and reporting structure of our international operations.
As a result of the management and reporting changes, we concluded that we have the following six
reporting units: (1) North America; (2) United Kingdom, Ireland, Norway, Belgium, France, Germany,
Luxembourg, Netherlands and Spain (‘‘Western Europe’’); (3) the remaining countries in Europe
(‘‘Emerging Markets’’); (4) Latin America; (5) Australia, China, Hong Kong and Singapore (‘‘Asia
Pacific’’); and (6) India, Russia and Ukraine (‘‘Emerging Market Joint Ventures’’). As of December 31,
2012, the carrying value of goodwill, net amounted to $1,762.3 million, $365.3 million, $87.5 million,
$56.9 million and $62.8 million for North America, Western Europe, Emerging Markets, Latin America
and Asia Pacific, respectively. Our Emerging Market Joint Ventures reporting unit had no goodwill as
of December 31, 2012. Based on our goodwill impairment assessment, all of our reporting units with
goodwill had estimated fair values as of October 1, 2012 that exceeded their carrying values by greater
than 30%.
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.
Income Taxes
We have a valuation allowance, amounting to $76.1 million as of December 31, 2012, reducing 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 expire in 2020 through 2025, of $25.9 million
($9.1 million, tax effected) at December 31, 2012 to reduce future federal taxable income. We have
assets for state net operating losses of $9.4 million (net of federal tax benefit), which expire in 2013
through 2025, subject to a valuation allowance of approximately 83%. We have assets for foreign net
operating losses of $46.3 million, with various expiration dates (and in some cases no expiration date),
subject to a valuation allowance of approximately 82%. We also have foreign tax credits of
$44.3 million, which expire in 2017 through 2020, subject to a valuation allowance of approximately
68%. 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.
The evaluation of an uncertain tax position is a two-step process. The first step is a recognition
process whereby we determine 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
40
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 business
operations or a taxable presence. We regularly assess the likelihood of additional assessments by tax
authorities and provide for these matters as appropriate. As of December 31, 2011 and 2012, we had
approximately $31.4 million and $37.6 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 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 $(1.6) million, $(8.5) million and
$1.3 million for gross interest and penalties for the years ended December 31, 2010, 2011 and 2012,
respectively.
We had $2.8 million and $3.6 million accrued for the payment of interest and penalties as of
December 31, 2011 and 2012, respectively.
Except for certain Canadian subsidiaries for which we recorded a deferred tax liability of
$0.6 million, we have not recorded deferred taxes on book over tax outside basis differences related to
our other foreign subsidiaries because such basis differences are not expected to reverse in the
foreseeable future and we intend to reinvest the undistributed earnings of such foreign subsidiaries
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 unrecognized deferred tax liability on the book over tax outside basis
difference because of the complexities of the hypothetical calculation. As of December 31, 2012, we
had approximately $71.5 million of undistributed earnings within our foreign subsidiaries which
approximates the book over tax outside basis difference. We may record deferred taxes on book over
tax outside basis differences related to certain foreign subsidiaries in the future depending upon a
number of factors, decisions and events in connection with our potential conversion to a REIT,
including favorable indications from the IRS with regard to our PLR requests, finalization of countries
to be included in the reorganization pursuant to the Conversion Plan, refinancing our revolving credit
and term loan facilities, shareholder approval of certain modifications to our corporate charter and
final board of directors approval of our conversion to a REIT.
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, 2010, 2011 and 2012 was $20.4 million, including $3.1 million in discontinued operations,
($15.7 million after tax or $0.08 per basic and diluted share), $17.5 million, including $0.3 million in
discontinued operations, ($8.8 million after tax or $0.05 per basic and diluted share), and $30.4 million
($23.4 million after tax or $0.14 per basic and $0.13 per 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.
41
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 No. 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. We adopted ASU No. 2011-08 as of January 1, 2012. The adoption of ASU No. 2011-08
did not have an impact on our consolidated financial position, results of operations or cash flows.
42
Results of Operations
Comparison of Year Ended December 31, 2012 to Year Ended December 31, 2011 and Comparison of Year
Ended December 31, 2011 to Year Ended December 31, 2010 (in thousands):
Year Ended December 31,
2011
2012
Dollar
Change
Percentage
Change
Revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Operating Expenses(1) . . . . . . . . . . . . . . . . . . . . . . .
$3,014,703
2,443,504
$3,005,255
2,448,228
$
(9,448)
4,724
Operating Income . . . . . . . . . . . . . . . . . . . . . . . . .
Other Expenses, Net . . . . . . . . . . . . . . . . . . . . . . . . .
Income from Continuing Operations(1) . . . . . . . . . . .
Loss from Discontinued Operations(1) . . . . . . . . . . .
Gain (Loss) on Sale of Discontinued Operations . . . .
Net Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net Income Attributable to Noncontrolling Interests .
Net Income Attributable to Iron Mountain
571,199
324,787
246,412
(47,439)
200,619
399,592
4,054
557,027
373,534
183,493
(6,774)
(1,885)
174,834
3,126
(14,172)
48,747
(62,919)
40,665
(202,504)
(224,758)
(928)
(0.3)%
0.2%
(2.5)%
15.0%
(25.5)%
85.7%
(100.9)%
(56.2)%
22.9%
Incorporated . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 395,538
$ 171,708
$(223,830)
(56.6)%
Adjusted OIBDA(2) . . . . . . . . . . . . . . . . . . . . . . . . .
$ 950,439
$ 912,217
$ (38,222)
(4.0)%
Adjusted OIBDA Margin(2) . . . . . . . . . . . . . . . . . . .
31.5%
30.4%
Year Ended December 31,
2010
2011
Dollar
Change
Percentage
Change
Revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Operating Expenses(1)(3) . . . . . . . . . . . . . . . . . . . . . .
$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)(3) . . . . . . . . .
Loss from Discontinued Operations(1)(3) . . . . . . . . . .
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(2) . . . . . . . . . . . . . . . . . . . . . . . . .
$ 926,676
$ 950,439
$ 23,763
2.6%
Adjusted OIBDA Margin(2) . . . . . . . . . . . . . . . . . . . .
32.0%
31.5%
(1) A $49.0 million non-cash goodwill impairment charge related to our Continental 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 our Italian operations and is included in loss from
discontinued operations in 2011. See Notes 2.g. and 14 to Notes to Consolidated Financial
Statements.
(2) See ‘‘Non-GAAP Measures—Adjusted Operating Income Before Depreciation, Amortization,
Intangible Impairments and REIT Costs (‘Adjusted OIBDA’)’’ in this Annual Report for the
43
definition, reconciliation and a discussion of why we believe these measures provide relevant and
useful information to our current and potential investors.
(3) 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 of the charge to the Digital Business (included in loss from discontinued
operations in 2010). See Notes 2.g. and 14 to Notes to Consolidated Financial Statements.
REVENUE
Year Ended December 31,
2011
2012
Dollar
Change
Actual
Constant
Internal
Currency(1) Growth(2)
Percentage Change
Storage Rental
. . . . . . . . . . . . . . .
Core Service . . . . . . . . . . . . . . . . .
$1,682,990
968,424
$1,733,138
942,826
$ 50,148
(25,598)
3.0%
4.3%
(2.6)% (1.0)%
Total Core Revenue . . . . . . . . . .
Complementary Services . . . . . . . .
2,651,414
363,289
2,675,964
329,291
24,550
(33,998)
2.4%
0.9%
(9.4)% (8.5)%
Total Revenue . . . . . . . . . . . . . .
$3,014,703
$3,005,255
$ (9,448)
(0.3)% 1.1%
3.0%
(2.5)%
1.0%
(9.6)%
(0.3)%
Total Service Revenue . . . . . . . . . .
$1,331,713
$1,272,117
$(59,596)
(4.5)% (3.1)%
(4.4)%
Year Ended December 31,
2010
2011
Dollar
Change
Actual
Constant
Internal
Currency(1) Growth(2)
Percentage Change
Storage Rental . . . . . . . . . . . . . . .
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
Total Service Revenue . . . . . . . . . .
$1,293,631
$1,331,713
$ 38,082
5.3%
2.2%
4.1%
5.0%
4.2%
2.9%
3.9%
0.3%
2.6%
3.5%
2.7%
1.2%
3.1%
(0.8)%
1.6%
3.7%
1.9%
0.4%
(1) Constant currency growth rates are calculated by translating the 2011 results at the 2012 average
exchange rates and the 2010 results at the 2011 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 rental revenues increased $50.1 million, or 3.0%, to $1,733.1 million for
the year ended December 31, 2012 and $84.3 million, or 5.3%, to $1,683.0 million for the year ended
December 31, 2011, in comparison to the years ended December 31, 2011 and 2010, respectively. The
growth rate for the year ended December 31, 2012 consists of internal revenue growth of 3.0%. Net
acquisitions/divestitures contributed 1.3% of the increase in reported storage rental revenues in 2012
over 2011. Foreign currency exchange rate fluctuations decreased our storage rental revenue growth
rate for the year ended December 31, 2012 by approximately 1.4%. Our consolidated storage rental
revenue growth in 2012 was driven by sustained storage rental internal growth of 2.1% and 6.1% in our
North American Business and International Business segments, respectively. Global records
management net volumes in 2012 increased by 1.8% over the ending volume at December 31, 2011.
44
The growth rate for the year ended December 31, 2011 consists of internal revenue growth of 3.1%.
Net acquisitions/divestitures contributed 0.8% of the increase in reported storage rental revenues in
2011 over 2010. Foreign currency exchange rate fluctuations added approximately 1.4% to our storage
rental revenue growth rate for the year ended December 31, 2011. Our consolidated storage rental
revenue growth in 2011 was driven by continued solid storage rental growth in the International
Business segment and consistent volume and price increases in our North American Business segment.
Consolidated service revenues, consisting of core and complementary services, decreased
$59.6 million, or 4.5%, to $1,272.1 million for the year ended December 31, 2012 from $1,331.7 million
for the year ended December 31, 2011. Service revenue internal growth was negative 4.4% for the year
ended December 31, 2012. The negative service revenue internal growth for 2012 was driven by
negative complementary service revenue internal growth of 9.6% due primarily to the significant
decrease in recycled paper prices in 2012 compared to the same period last year, which resulted in
$30.0 million less of recycled paper revenue. This decline was partially offset by strong DMS revenue
growth and increased project revenues in 2012. Core service internal growth in 2012 was negative 2.5%
due to expected declines in activity-based core services, particularly in the North American Business
segment. Foreign currency exchange rate fluctuations decreased reported service revenues by 1.4% in
2012 over 2011. Offsetting the decrease in reported service revenues were net acquisitions/divestures,
which contributed 1.4% to our service revenues in 2012. Consolidated service revenues, consisting of
core 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. The price
of recycled paper increased through the third quarter of 2011 before beginning a sharp decline into the
first quarter of 2012 and settling into a level approximately 30% below the 2011 average price for most
of 2012. Core service revenue internal growth in the year ended December 31, 2011 was constrained by
pressure on activity-based service revenues related to the handling and transportation of items in
storage. These decreases were partially offset by strong DMS revenue growth and higher fuel
surcharges in 2011. 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.
For the reasons stated above, our consolidated revenues decreased $9.4 million, or 0.3%, to
$3,005.3 million for the year ended December 31, 2012 from $3,014.7 million for the year ended
December 31, 2011. We calculate internal revenue growth in local currency for our international
operations. Internal revenue growth was negative 0.3% for 2012. For the year ended December 31,
2012, foreign currency exchange rate fluctuations decreased our consolidated revenues by 1.4%
primarily due to the weakening 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. Offsetting the
decrease in reported consolidated revenues were net acquisitions/divestitures which contributed an
increase of 1.3% of total reported revenues in 2012 over the same period in 2011. 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. 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.
45
Internal Growth—Eight-Quarter Trend
2011
2012
First
Fourth
Quarter Quarter Quarter Quarter Quarter Quarter Quarter Quarter
Second
Second
Fourth
Third
Third
First
Storage Rental Revenue . . . . .
Service Revenue . . . . . . . . . . .
Total Revenue . . . . . . . . . . . .
3.0% 2.8% 3.3%
3.3% 2.9% 3.5% 2.4% 3.2%
(0.1)% 1.2% 1.8% (1.4)% (2.2)% (5.2)% (7.8)% (2.4)%
1.2% 0.6% (0.3)% (2.1)% 0.8%
1.6% 2.1% 2.6%
We expect our consolidated internal revenue growth rate for 2013 to be approximately (1)% to
2%. During the past eight quarters our storage rental revenue internal growth rate has ranged between
2.4% and 3.5%. Storage rental revenue internal growth rates have stabilized over the past eight
quarters following a decline that was driven primarily by the most recent financial crisis. Volume
growth in the North American Business segment has been relatively flat over this period and as a
result, storage rental growth has been driven primarily by net price increases. Within our International
Business segment, the more developed markets are generating consistent low-to-mid single-digit storage
rental growth while the emerging markets are producing strong double-digit storage rental growth by
taking advantage of the first-time outsourcing trends for physical records storage and management in
those markets. The internal revenue growth rate for service revenue is inherently more volatile than the
storage rental 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 pricing 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 internal growth rate for total service revenues reflects
the following: (1) consistent pressures on activity-based service revenues related to the handling and
transportation of items in storage and secure shredding, particularly in the North American Business
segment; (2) fluctuations in the price of recycled paper, which increased through the third quarter of
2011 before beginning a sharp decline into the first quarter of 2012 and settling into a level
approximately 30% below the 2011 average price for most of 2012; (3) softness in some of our other
complementary service lines, such as fulfillment services; and (4) higher fuel surcharges.
46
OPERATING EXPENSES
Cost of Sales
Consolidated cost of sales (excluding depreciation and amortization) consists of the following
expenses (in thousands):
Year Ended December 31,
2011
2012
Dollar
Change
Constant
Actual Currency
Percentage
Change
% of
Consolidated
Revenues
2011
2012
Percentage
Change
(Favorable)/
Unfavorable
Labor . . . . . . . . . . . . . . . . $ 595,207 $ 625,922 $30,715
(922)
Facilities . . . . . . . . . . . . . .
Transportation . . . . . . . . . .
1,018
Product Cost of Sales and
421,098
126,023
422,020
125,005
5.2% 6.8% 19.7% 20.8% 1.1%
(0.2)% 1.2% 14.0% 14.0% 0.0%
0.8% 2.4% 4.1% 4.2% 0.1%
Other . . . . . . . . . . . . . .
102,968
104,070
1,102
1.1% 3.0% 3.4% 3.5% 0.1%
$1,245,200 $1,277,113 $31,913
2.6% 4.1% 41.3% 42.5% 1.2%
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
422,020
125,005
405,341
107,406
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%
Labor
Labor expense increased to 20.8% of consolidated revenues for the year ended December 31, 2012
compared to 19.7% for the year ended December 31, 2011. Labor expense for the year ended
December 31, 2012 increased by 6.8% on a constant currency basis compared to the year ended
December 31, 2011 primarily due to merit increases, the reclassification of certain overhead expenses to
cost of sales, and $12.9 million in labor costs associated with our recent acquisitions. Labor costs were
favorably impacted by 1.6 percentage points due to currency rate changes during the year ended
December 31, 2012.
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.
Facilities
Facilities costs as a percentage of consolidated revenues were flat at 14.0% for the years ended
December 31, 2012 and December 31, 2011. The largest component of our facilities cost is rent
expense, which, in constant currency terms, increased by $6.5 million to $213.8 million for the year
47
ended December 31, 2012 compared to the same period in 2011, primarily due to $3.4 million of rent
expense associated with our recent acquisitions, as well as certain facility consolidations within both our
North American Business and International Business segments during the fourth quarter of fiscal year
2012. Other facilities costs decreased by approximately $2.2 million, in constant currency terms, for the
year ended December 31, 2012 compared to the year ended December 31, 2011, primarily due to
reductions in insurance costs and personal property taxes. Facilities costs were favorably impacted by
1.4 percentage points due to currency rate changes during the year ended December 31, 2012.
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 rental 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.
Transportation
Transportation expenses increased by $2.9 million in constant currency terms during the year ended
December 31, 2012 compared to the same period in 2011 as a result of a $3.5 million increase in
various vehicle costs (including fuel, insurance, repair and lease costs), partially offset by a reduction in
third-party transportation costs of $0.4 million. Transportation expenses were favorably impacted by
1.6 percentage points due to currency rate changes during the year ended December 31, 2012.
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.
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. For the year ended December 31,
2012, product cost of sales and other, which is correlated to higher project revenues, increased by
$1.1 million as compared to the prior year period on an actual basis. These costs were favorably
impacted by 1.9 percentage points due to currency rate changes during the year ended December 31,
2012.
Product cost of sales and other was 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.
48
Selling, General and Administrative Expenses
Selling, general and administrative expenses consists of the following expenses (in thousands):
Year Ended
December 31,
2011
2012
Percentage
Change
Dollar
Change
Constant
Actual Currency
% of
Consolidated
Revenues
2011
2012
Percentage
Change
(Favorable)/
Unfavorable
General and Administrative . . $470,430 $508,365 $37,935
Sales, Marketing & Account
8.1% 9.5% 15.6% 16.9% 1.3%
Management
. . . . . . . . . . .
Information Technology . . . . .
Bad Debt Expense . . . . . . . . .
244,645
110,010
9,506
235,449
98,234
8,323
(9,196)
(3.8)% (2.6)% 8.1% 7.8% (0.3)%
(11,776) (10.7)% (9.3)% 3.6% 3.3% (0.3)%
(1,183) (12.4)% (12.5)% 0.3% 0.3% 0.0%
$834,591 $850,371 $15,780
1.9% 3.2% 27.7% 28.3% 0.6%
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
29,668
13.8% 12.0% 7.4% 8.1% 0.7%
10.2% 8.7% 3.5% 3.6% 0.1%
10,152
(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%
General and Administrative
General and administrative expenses increased to 16.9% of consolidated revenues in the year
ended December 31, 2012 compared to 15.6% in the year ended December 31, 2011. In constant
currency terms, general and administrative expenses increased by 9.5% during the year ended
December 31, 2012 compared to the same period in 2011. Included in general and administrative
expenses for the year ended December 31, 2012 were $34.4 million of REIT Costs compared to
$15.5 million in the comparable prior year period. Further contributing to the increase in 2012 was
increased stock-based compensation expense of $10.6 million and a $7.4 million increase within our
Latin American operations primarily associated with our recent acquisition in Brazil. These increases
were partially offset by the reclassification of certain overhead expenses to cost of sales. General and
administrative expenses were favorably impacted by 1.4 percentage points due to currency rate changes
during the year ended December 31, 2012.
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 $15.5 million of advisory fees and
other costs 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.
49
Sales, Marketing & Account Management
Sales, marketing and account management expenses decreased to 7.8% of consolidated revenues
during the year ended December 31, 2012 compared to 8.1% in the same prior year period. In constant
currency terms, the decrease of $6.3 million during the year ended December 31, 2012 compared to the
same period in 2011 is primarily due to a $3.0 million reduction in compensation expenses, primarily
associated with a decrease in commissions expense within our North American Business segment, as
well as a corresponding decrease in the associated payroll taxes. Sales, marketing and account
management expenses were favorably impacted by 1.2 percentage points due to currency rate changes
during the year ended December 31, 2012. These decreases were partially offset by restructuring costs
of $3.6 million incurred within our North American Business segment during the fourth quarter of
2012.
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.
Information Technology
In constant currency terms, information technology expenses decreased $10.1 million during the
year ended December 31, 2012 compared to the same period in 2011 primarily due to decreased
compensation expenses of $8.2 million, as well as decreased professional fees of $2.6 million.
Information technology expenses were favorably impacted by 1.4 percentage points due to currency rate
changes during the year ended December 31, 2012.
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 primarily due 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 unfavorably impacted by 1.5 percentage
points due to currency rate changes during the year ended December 31, 2011.
Bad Debt Expense
Consolidated bad debt expense for the year ended December 31, 2012 decreased $1.2 million, or
12.4%, to $8.3 million (0.3% of consolidated revenues) from $9.5 million (0.3% of consolidated
revenues) for the year ended December 31, 2011. 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, 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.
Depreciation, Amortization, and (Gain) Loss on Disposal/Write-down of Property, Plant and
Equipment, Net
Depreciation expense decreased $10.0 million for the year ended December 31, 2012 compared to
the year ended December 31, 2011, consisting of $2.1 million within our North American Business and
50
Corporate segments associated with information technology assets reaching the end of their useful life
and $7.9 million in our International Business segment primarily related to accelerated depreciation
taken in previous years due to the decision to exit certain facilities in the United Kingdom.
Depreciation expense increased $11.9 million for the year ended December 31, 2011 compared to the
year ended December 31, 2010, primarily due to the $7.9 million increase in our International Business
segment noted above, as well as 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 $6.9 million for the year ended December 31, 2012 compared to
the year ended December 31, 2011, primarily due to the increased amortization of customer
relationship intangible assets acquired through business combinations. 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 described in Note 6 to Notes to Consolidated Financial Statements.
Consolidated loss on disposal/write-down of property, plant and equipment, net was $4.4 million
for the year ended December 31, 2012 and consisted primarily of $5.5 million, $1.9 million and
$0.5 million of losses associated with asset write-downs in our European operations, North American
operations and Latin American operations, respectively, offset by $3.5 million of gains associated with
the sale of leased vehicles in North America. 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
(1) a gain of approximately $3.2 million related to the disposition of a facility in Canada and (2) a gain
of approximately $3.0 million on the retirement of leased vehicles accounted for as capital lease assets
in North America, offset by (3) 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 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.
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
51
goodwill impairment charge of $283.8 million. In 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. 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 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. As a result of the management and reporting changes, we concluded at that
time that we had three reporting units within our European operations: (1) UKI; (2) Continental
Western Europe; and (3) Central Europe. 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, Continental 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, Continental Western
Europe and Central Europe reporting units and noted no impairment, except for our Italian
operations, which was included in our Continental Western Europe reporting unit, and which is now
included in discontinued operations. Based on our analyses, we concluded that the goodwill of our UKI
and Central Europe reporting units was not impaired. Our Continental 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.
OPERATING INCOME and ADJUSTED OIBDA
As a result of the foregoing factors, consolidated operating income decreased $14.2 million, or
2.5%, to $557.0 million (18.5% of consolidated revenues) for the year ended December 31, 2012 from
$571.2 million (18.9% of consolidated revenues) for the year ended December 31, 2011. As a result of
the foregoing factors, consolidated Adjusted OIBDA decreased $38.2 million, or 4.0%, to
$912.2 million (30.4% of consolidated revenues) for the year ended December 31, 2012 from
$950.4 million (31.5% of consolidated revenues) for the year ended December 31, 2011.
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 $23.8 million, or 2.6%, to $950.4 million
(31.5% 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.
52
OTHER EXPENSES, NET
Interest Expense, Net
Consolidated interest expense, net increased $37.3 million to $242.6 million (8.1% of consolidated
revenues) for the year ended December 31, 2012 from $205.3 million (6.8% of consolidated revenues)
for the year ended December 31, 2011 primarily due to the issuance of $1.0 billion in aggregate
principal of the 53⁄4% Senior Subordinated Notes due 2024 (the ‘‘53⁄4% Notes’’) in August 2012 and the
issuance of $400.0 million in aggregate principal amount of the 73⁄4% Senior Subordinated Notes due
2019 (the ‘‘73⁄4% Notes’’) in September 2011, as well as an increase in the average outstanding
borrowings under our revolving credit facilities during the year ended December 31, 2012 compared to
the same period in 2011. This increase was partially offset by the early retirement of $231.3 million of
the 73⁄4% Senior Subordinated Notes due 2015 (the ‘‘73⁄4% Notes due 2015’’) during early 2011, as well
as the early retirement of $320.0 million of our 65⁄8% Senior Subordinated Notes due 2016 (the ‘‘65⁄8%
Notes’’) and $200.0 million of our 83⁄4% Senior Subordinated Notes due 2018 (the ‘‘83⁄4% Notes’’) in
August 2012. Our weighted average interest rate was 6.5% at December 31, 2012 and 6.9% at
December 31, 2011.
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% Notes due 2019 in September 2011, which was partially offset by the early
retirement of $431.3 million of our 73⁄4% Notes due 2015 during late 2010 and early 2011.
Other (Income) Expense, Net (in thousands)
Foreign currency transaction losses (gains), net . . . . . . . . . . . . . . . . . . . .
Debt extinguishment expense, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$17,352
993
(5,302)
$10,223
10,628
(4,789)
$(7,129)
9,635
513
Year Ended
December 31,
2011
2012
Dollar
Change
$13,043
$16,062
$ 3,019
Year Ended
December 31,
2010
2011
Dollar
Change
Foreign currency transaction losses, 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
Net foreign currency transaction losses of $10.2 million, based on period-end exchange rates, were
recorded in the year ended December 31, 2012. Losses were primarily a result of changes in the
exchange rate of the Brazilian real, as this currency relates to our intercompany balances with and
between our Brazilian subsidiaries, as well as additional losses associated with our British pound
sterling and Euro denominated debt and forward foreign currency swap contracts denominated in
British pounds sterling and Australian dollars. These losses were partially offset by gains resulting
primarily from the change in the exchange rate of the British pound sterling, Euro and Australian
dollar against the U.S. dollar compared to December 31, 2011, as it relates to our intercompany
balances with and between our European and Australian subsidiaries.
53
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.
During the year ended December 31, 2012 we recorded a charge of approximately $10.6 million in
the third quarter of 2012 related to the early extinguishment of $320.0 million of the 65⁄8% Notes and
$200.0 million of the 83⁄4% Notes. This charge consists of the call premium associated with the 83⁄4%
Notes and original issue discounts and deferred financing costs related to the 65⁄8% Notes and 83⁄4%
Notes. 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 the 73⁄4% Notes due
2015. This gain consists of original issue premiums, net of deferred financing costs related to the 73⁄4%
Notes due 2015. 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 the 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 the 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 the 73⁄4% Notes due 2015 that were redeemed.
Other, net in the year ended December 31, 2012 consisted primarily of $2.7 million of royalty
income associated with the Digital Business, $1.5 million of gains associated with our acquisition of
equity interests that we previously held associated with our Turkish and Swiss joint ventures and
$1.3 million of gains related to certain marketable securities held in a trust for the benefit of employees
included in a deferred compensation plan we sponsor. 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% 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.
54
Provision for Income Taxes
Our effective tax rates for the years ended December 31, 2010, 2011 and 2012 were 50.1%, 30.2%
and 38.5%, respectively. The primary reconciling items between the federal statutory rate of 35% and
our overall effective tax rate for the year ended December 31, 2012 were 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 and state income taxes (net of federal tax benefit). During the year
ended December 31, 2012, foreign currency gains were recorded in lower tax jurisdictions associated
with our marking-to-market of intercompany loan positions while foreign currency losses were recorded
in higher tax jurisdictions associated with our marking-to-market of debt and derivative instruments,
which lowered our 2012 effective tax rate by 2.2%. 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 a
positive impact provided 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
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 was 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.
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; (5) our ability to
utilize foreign tax credits and net operating losses that we generate; and (6) our proposed REIT
conversion. 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 business operations
or a taxable presence. 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 appropriate,
the final determination of tax audits and any related litigation could result in changes in our estimates.
INCOME FROM CONTINUING OPERATIONS
As a result of the foregoing factors, consolidated income from continuing operations for the year
ended December 31, 2012 decreased $62.9 million, or 25.5%, to $183.5 million (6.1% of consolidated
revenues) from income from continuing operations of $246.4 million (8.2% of consolidated revenues)
for the year ended December 31, 2011. The decrease in income from continuing operations is primarily
due to the $37.3 million increase in interest expense, an $18.9 million increase in REIT Costs year over
year, and a higher income tax provision in 2012 compared to 2011.
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)
55
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 Continental
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.
INCOME (LOSS) FROM DISCONTINUED OPERATIONS AND GAIN (LOSS) ON SALE OF
DISCONTINUED OPERATIONS, NET OF TAX
Loss from discontinued operations was $(219.4) million, $(47.4) million and $(6.8) million for the
years ended December 31, 2010, 2011 and 2012, respectively. We recorded a goodwill impairment
charge associated with our former worldwide digital business reporting unit in the amount of
$197.9 million, net of the amount allocated to the retained technology escrow services business during
the year ended December 31, 2010, 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 our New Zealand operations
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 our New Zealand operations, which is also reflected in income (loss) from discontinued operations.
Additionally, in conjunction with the goodwill impairment analysis performed associated with our
Continental Western Europe reporting unit, we performed an impairment test on the long-lived assets
of our Italian operations in the third quarter of 2011. The undiscounted cash flows from our Italian
operations were lower than the carrying value of the long-lived assets of such operations 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 Continental Western Europe goodwill impairment charge to our Italian
operations 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 and a preliminary working capital adjustment, which was subject
to a customary post-closing adjustment based on the amount of working capital at closing. Autonomy
disputed our calculation of the working capital adjustment in the Digital Sale Agreement and, as
contemplated by the Digital Sale Agreement, the matter was referred to an independent third party
accounting firm for determination of the appropriate adjustment amount. On February 22, 2013, the
independent third party accounting firm issued its determination of the appropriate working capital
adjustment, which was consistent with the amount we had accrued. As a result, no adjustment to the
previously recorded gain on sale of discontinued operations, net of tax was required. Transaction costs
relating to the Digital Sale amounted to approximately $7.4 million. Additionally, $11.1 million of
inducements payable to Autonomy 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 sold our New Zealand operations on October 3, 2011 and
recorded a gain on the sale of discontinued operations of approximately $1.9 million during the fourth
quarter of 2011. A loss on sale of discontinued operations in the amount of $1.9 million ($1.9 million,
56
net of tax) was recorded during the year ended December 31, 2012 as a result of the sale of our Italian
operations.
NONCONTROLLING INTERESTS
For the year ended December 31, 2012, net income attributable to noncontrolling interests resulted
in a decrease in net income attributable to Iron Mountain Incorporated of $3.1 million. 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. 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)
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 storage and 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, or DMS; 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 storage and information management services throughout Europe, Latin America and Asia
Pacific, including Hard Copy, Data Protection, Destruction and DMS. 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,
2011
2012
Dollar
Change
Actual
Constant
Currency
Internal
Growth
Percentage
Change
Segment Revenue . . . . . . . . . . . . . . . .
$2,229,143
$2,198,563
$(30,580)
(1.4)% (1.3)% (1.3)%
Segment Adjusted OIBDA(1) . . . . . . .
$ 961,973
$ 916,196
$(45,777)
(4.8)% (4.6)%
Segment Adjusted OIBDA(1) as a
Percentage of Segment Revenue . . . .
43.2%
41.7%
57
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%
(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, 2012, revenue in our North American Business segment
decreased 1.4% compared to the year ended December 31, 2011, primarily due to negative internal
growth of 1.3%. The negative internal growth was driven by negative complementary service revenue
internal growth of 12.0% in the year ended December 31, 2012 due primarily to a decrease in the price
of recycled paper. The negative internal growth was also driven by negative core service internal growth
of 3.1% in the year ended December 31, 2012, which was primarily a result of lower revenues from
activity-based services. Partially offsetting the negative service growth was storage rental revenue
internal growth of 2.1% in the year ended December 31, 2012, as a result of net price increases.
Additionally, unfavorable foreign currency rate changes related to the Canadian dollar resulted in
decreased reported revenues, as measured in U.S. dollars, of 0.1% for the year ended December 31,
2012. Adjusted OIBDA, as a percentage of segment revenue, decreased by 1.3% on a constant currency
basis in the year ended December 31, 2012 compared to the same period in 2011 primarily as a result
of the decrease in recycled paper revenue as well as $6.3 million of certain costs that were reclassified
into the North American Business segment from the Corporate segment in fiscal year 2012.
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 rental internal growth of 2.2% related to flat volume growth and
net price increases, 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 $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.
58
International Business
Year Ended
December 31,
2011
2012
Percentage
Change
Dollar
Change
Actual
Constant
Currency
Internal
Growth
Segment Revenue . . . . . . . . . . . . . . . . . . .
$785,560
$806,692
$21,132
2.7% 7.9%
2.8%
Segment Adjusted OIBDA(1)
. . . . . . . . . .
$164,212
$173,620
$ 9,408
5.7% 9.5%
Segment Adjusted OIBDA(1) as a
Percentage of Segment Revenue . . . . . . .
20.9%
21.5%
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%
(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.
Reported revenues in our International Business segment increased 2.7% during the year ended
December 31, 2012 over the same period last year. Internal growth was 2.8% supported by solid 6.1%
storage rental internal growth. Acquisitions contributed 5.1% to total reported revenue growth in the
year ended December 31, 2012 primarily due to our acquisitions in Brazil and Switzerland in the
second quarter of 2012. These gains were partially offset by foreign currency fluctuations in 2012,
primarily in Europe, that decreased revenue, as measured in U.S. dollars, by approximately 5.2% in the
year ended December 31, 2012 as compared to 2011. Adjusted OIBDA as a percentage of segment
revenue increased by 60 basis points in the year ended December 31, 2012 compared to the prior year
period. Increased operating income from productivity gains and disciplined cost management
contributed 150 basis points of improvement in 2012 over 2011. These gains were partially offset by the
costs associated with closing a facility in the United Kingdom and the impact of integration costs
associated with acquisitions completed in 2012.
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 rental 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
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.
59
Corporate
Year Ended December 31,
2010
2011
2012
Dollar Change
from
2010
to 2011
from
2011
to 2012
Segment Adjusted OIBDA(1) . . . . $(173,798) $(175,746) $(177,599) $(1,948) $(1,853)
Segment Adjusted OIBDA(1) as a
Percentage of Consolidated
Revenue . . . . . . . . . . . . . . . . . .
(6.0)% (5.8)% (5.9)%
Percentage Change
from 2010 from 2011
to 2011
to 2012
(1.1)% (1.1)%
(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, 2012, expenses in the Corporate segment as a percentage of
consolidated revenue increased 10 basis points compared to the year ended December 31, 2011,
primarily due to a $13.1 million increase in stock-based compensation expense and increased
professional fees associated with strategic and corporate initiatives, which was partially offset by
reduced information technology expenses of $9.7 million and a $6.3 million reclassification of certain
costs out of the Corporate segment and into the North American Business segment in fiscal year 2012.
During the year ended December 31, 2011, expenses in the Corporate segment as a percentage of
consolidated revenues decreased 1.1% compared to the year ended December 31, 2010.
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,
2010
2011
2012
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 . . . . . . . . . . . . . . . .
$ 603,229
(298,458)
(379,711)
258,693
$ 663,514
(302,213)
(762,670)
179,845
$ 443,652
(394,064)
28,269
243,415
Net cash provided by operating activities from continuing operations was $443.7 million for the
year ended December 31, 2012 compared to $663.5 million for the year ended December 31, 2011. The
33.1% decrease resulted primarily from lower operating income combined with higher cash payments
for interest (primarily related to funding our stockholder payout plan and funding of REIT Costs),
incentive compensation and income taxes in the year ended December 31, 2012 compared to the same
period in 2011.
Our business requires 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 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, 2012 amounted to $240.7 million, $125.1 million
and $28.9 million, respectively. For the year ended December 31, 2012, these expenditures were funded
60
with cash flows provided by operating activities from continuing operations. Excluding potential future
acquisitions, we expect our capital expenditures to be approximately $325.0 million in the year ending
December 31, 2013. Included in our estimated capital expenditures for 2013 is approximately
$75.0 million of real estate and approximately $35.0 million associated with the Conversion Plan.
Net cash provided by financing activities from continuing operations was $28.3 million for the year
ended December 31, 2012. During 2012, we received $985.0 million in net proceeds from the issuance
of the 53⁄4% Notes due 2024 and $40.2 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 (1) for the early retirement of $320.0 million and $200.0 million of the 65⁄8% Notes and
83⁄4% Notes, respectively; (2) to repay borrowings under our term loan and revolving credit facilities
and other debt of $113.5 million; (3) to repurchase $38.1 million of our common stock; and (4) to pay
dividends in the amount of $318.8 million on our common stock (including the cash portion of the
Special Dividend).
Share Repurchases and Dividends
Our board of directors has authorized up to $1.2 billion in repurchases of our common stock. All
repurchases are subject to stock price, market conditions, corporate and legal requirements and other
factors. As of December 31, 2012, we had a remaining amount available for repurchase under our
share repurchase program of $66.0 million, which represents approximately 1% in the aggregate of our
outstanding common stock based on the closing price on such date.
The following table is a summary of our repurchase activity under all of our share repurchase
programs during 2012:
2012
Shares
Amount(1)
Authorizations remaining as of January 1, . . . . . . . . . . . . . . . . . . . . . . . . . .
Additional Authorizations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Repurchases paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Repurchases unsettled . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1,103,149
Authorization remaining as of December 31, . . . . . . . . . . . . . . . . . . . . . . . .
(In thousands)
$100,701
—
(34,666)
—
$ 66,035
(1) Amount excludes commissions paid associated with share repurchases.
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. We may pay certain
61
distributions after becoming a REIT in the form of cash and common stock. In fiscal years 2011 and
2012, our board of directors declared the following dividends:
Declaration Date
March 11, 2011 . . . . . . . . . . . . . .
June 10, 2011 . . . . . . . . . . . . . . . .
September 8, 2011 . . . . . . . . . . . .
December 1, 2011 . . . . . . . . . . . .
March 8, 2012 . . . . . . . . . . . . . . .
June 5, 2012 . . . . . . . . . . . . . . . . .
September 6, 2012 . . . . . . . . . . . .
October 11, 2012 . . . . . . . . . . . . .
December 14, 2012 . . . . . . . . . . . .
Potential REIT Conversion
Dividend
Per Share
Record Date
March 25, 2011
$0.1875
June 24, 2011
0.2500
0.2500
September 23, 2011
0.2500 December 23, 2011
March 23, 2012
0.2500
0.2700
June 22, 2012
September 25, 2012
0.2700
October 22, 2012
4.0600
0.2700 December 26, 2012
Total
Amount
$ 37,601
50,694
46,877
43,180
42,791
46,336
46,473
700,000
51,296
Payment Date
April 15, 2011
July 15, 2011
October 14, 2011
January 13, 2012
April 13, 2012
July 13, 2012
October 15, 2012
November 21, 2012
January 17, 2013
In April 2011, we announced a three-year strategic plan that included 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 to be paid out by May 2012.
We fulfilled the commitment to return $1.2 billion of capital to stockholders by May 2012. The REIT
Conversion Plan, however, includes several modifications to the previously announced stockholder
payout plan. In accordance with tax rules applicable to REIT conversions, we anticipate making
distributions to stockholders of our accumulated earnings and profits which is estimated to be
approximately $1.0 billion to $1.5 billion (collectively, the ‘‘E&P Distribution’’). We expect to pay the
E&P Distribution in a combination of common stock and cash dividends, with at least 80% of the E&P
Distribution in the form of common stock and up to 20% in cash. On October 11, 2012, we announced
the declaration by our board of directors of a special dividend of $700 million (the ‘‘Special Dividend’’)
payable, at the election of the stockholders, in either common stock or cash to stockholders of record
as of October 22, 2012 (the ‘‘Record Date’’). The Special Dividend, which is a portion of the E&P
Distribution, was paid in a combination of common stock and cash on November 21, 2012 (the
‘‘Distribution Date’’) to stockholders of record as of the Record Date. The balance of any additional
E&P Distribution will be paid out over several years beginning in 2014 based, in part, on IRS rules and
the timing of the conversions of additional international operations into the REIT structure.
Stockholders elected to be paid their pro rata portion of the Special Dividend in all common stock or
cash. The total amount of cash paid to all stockholders associated with the Special Dividend was
approximately $140.0 million (including cash paid in lieu of fractional shares). Our shares of common
stock were valued for purposes of the Special Dividend based upon the average closing price on the
three trading days following November 14, 2012, or $32.87 per share, and as such, the number of shares
of common stock we issued in the Special Dividend was approximately 17.0 million and the total value
of common stock paid to all stockholders associated with the Special Dividend was approximately
$560.0 million. These shares will impact weighted average shares outstanding from the date of issuance,
thus impacting our earnings per share data prospectively from the Distribution Date. With regard to
our levels of indebtedness, we plan to operate within our target leverage ratio range of 3x—4x
EBITDA (as defined in our revolving credit facilities). We may, however, temporarily operate above
the high end of this range due to the timing of cash outlays related to the Conversion Plan.
There are significant tax payments and other costs associated with implementing the Conversion
Plan, and certain tax liabilities may be incurred regardless of whether we ultimately succeed in
converting to a REIT. In addition, we must undertake major modifications to our internal systems,
including accounting, information technology and real estate, in order to convert to a REIT. We
currently estimate that we will incur approximately $375.0 million to $475.0 million in costs to support
62
the Conversion Plan, including approximately $225.0 million to $275.0 million of related tax payments
associated with a change in our method of depreciating and amortizing various assets, including certain
of our racking, from our current method to methods that are consistent with the characterization of
such assets as real property. The total tax on recapture of depreciation and amortization expenses
across all relevant assets is expected to be paid out over up to five years beginning in 2012, with
approximately $80.0 million paid in 2012. These tax liabilities were already reflected as long-term
deferred income taxes on our consolidated balance sheet. As such, there will be no income statement
impact associated with the payment of these tax liabilities. However, we have reclassified approximately
$123.9 million of long-term deferred income tax liabilities to current deferred income taxes (included
within accrued expenses within current liabilities) and prepaid and other assets (included within current
assets) within our consolidated balance sheet as of December 31, 2012. In 2013, we expect to reclassify
another $41.3 million of long-term deferred income tax liabilities to current deferred income taxes.
Additionally, we currently estimate the incremental operating and capital expenditures associated with
the Conversion Plan through 2014 to be approximately $150.0 million to $200.0 million. Of these
amounts, approximately $47.0 million was incurred in 2012, including approximately $12.5 million of
capital expenditures.
Financial Instruments and Debt
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, 2012 relate to cash and cash equivalents and restricted cash held on deposit with five
global banks and two ‘‘Triple A’’ rated money market funds 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 to a maximum of
$50.0 million or in any one financial institution to a maximum of $75.0 million. As of December 31,
2012, our cash and cash equivalents and restricted cash balance was $277.0 million, including money
market funds and time deposits amounting to $218.6 million. A substantial portion of the money
market funds is invested in U.S. Treasuries. As of December 31, 2012, we had approximately
$122.8 million of our cash and cash equivalents in foreign entities (excluding foreign branches of U.S.
entities). We do not intend to repatriate this cash and cash equivalents in the foreseeable future, and
we intend to reinvest these funds indefinitely outside the U.S. (see Note 7 to Notes to Consolidated
Financial Statements).
63
We are highly leveraged and expect to continue to be highly leveraged for the foreseeable future.
Our consolidated debt as of December 31, 2012 comprised the following (in thousands):
Revolving Credit Facility(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Term Loan Facility(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
71⁄4% GBP Senior Subordinated Notes due 2014 (the ‘‘71⁄4% Notes’’)(2) . . . . . . . . . . . . . .
71⁄2% CAD Senior Subordinated Notes due 2017 (the ‘‘Subsidiary Notes’’) (3) . . . . . . . . . .
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) . . . . . . . . . . . . . . . . . .
53⁄4% Senior Subordinated Notes due 2024 (the ‘‘53⁄4% Notes’’)(2) . . . . . . . . . . . . . . . . . .
Real Estate Mortgages, Capital Leases and Other(4) . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
55,500
462,500
242,813
175,875
49,834
335,152
400,000
300,000
548,518
1,000,000
254,811
Total Long-term Debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Less Current Portion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
3,825,003
(92,887)
Long-term Debt, Net of Current Portion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$3,732,116
(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 subsidiaries owed to us or to
one of our U.S. subsidiary guarantors or Iron Mountain Canada Corporation (‘‘Canada
Company’’) and all promissory notes held by us or one of our U.S. subsidiary guarantors or
Canada Company.
(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 100% owned U.S. subsidiaries (the ‘‘Guarantors’’). These guarantees are joint and several
obligations of the Guarantors. 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 $4.3 million, (b) capital lease obligations of $235.8 million,
and (c) other various notes and other obligations, which were assumed by us as a result of certain
acquisitions, of $14.7 million.
64
On June 27, 2011, we entered into a credit agreement that consists of (1) revolving credit facilities
under which we can borrow, subject to certain limitations as defined in the credit agreement, up to an
aggregate amount of $725.0 million (including Canadian dollars, British pounds sterling and Euros,
among other currencies) (the ‘‘Revolving Credit Facility’’) and (2) a $500.0 million term loan facility
(the ‘‘Term Loan Facility,’’ and collectively with the Revolving Credit Facility, the ‘‘Credit Agreement’’).
We have the right to request an increase in the aggregate amount available to be borrowed under the
Credit Agreement up to a maximum of $1.8 billion. The 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 Credit Agreement, borrow under certain of the following tranches of the
Revolving Credit Facility: (1) tranche one in the amount of $400.0 million is available to IMI and
IMIM in U.S. dollars, British pounds sterling and Euros, (2) 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 (3) 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 Revolving Credit Facility terminates on
June 27, 2016, at which point all revolving credit loans under such facility become due. With respect to
the 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 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 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 the Credit Agreement,
together with all intercompany obligations of subsidiaries owed to us or to one of our U.S. subsidiary
guarantors or Canada Company and all promissory notes held by us or one of our U.S. subsidiary
guarantors or Canada Company. The interest rate on borrowings under the 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 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. There are also fees associated with any outstanding
letters of credit. As of December 31, 2012, we had $55.5 million of outstanding borrowings under the
Revolving Credit Facility, all of which was denominated in U.S. dollars; we also had various outstanding
letters of credit totaling $2.3 million. The remaining availability under the Revolving Credit Facility on
December 31, 2012, 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 Credit Agreement and current external debt, was $667.2 million. The interest rate in
effect under the Revolving Credit Facility and Term Loan Facility was 4.0% and 2.0%, respectively, as
of December 31, 2012.
65
The 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 Credit Agreement, our indentures or other
agreements governing our indebtedness. The Credit Agreement, as well as our indentures, uses
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 3.4 and 3.9 as of
December 31, 2011 and 2012, respectively, compared to a maximum allowable ratio of 5.5 under the
Credit Agreement. Similarly, our bond leverage ratio, per the indentures, was 3.9 and 5.3 as of
December 31, 2011 and 2012, respectively, compared to a maximum allowable ratio of 6.5. IMI’s
revolving credit and term loan fixed charge coverage ratio was 1.5 and 1.3 as of December 31, 2011 and
2012, respectively, compared to a minimum allowable ratio of 1.2 under the Credit Agreement.
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 August 2012, we completed an underwritten public offering of $1.0 billion in aggregate principal
amount of the 53⁄4% Notes, which were issued at 100% of par. Our net proceeds of $985.0 million,
after paying the underwriters’ discounts and commissions, were used to redeem of all of the
outstanding 65⁄8% Notes and 83⁄4% Notes and to repay existing indebtedness under our Revolving Credit
Facility, and the balance will be used for general corporate purposes, including funding a portion of the
costs we expect to incur in connection with the Conversion Plan.
In August 2012, we redeemed (1) the $320.0 million aggregate principal amount outstanding of the
65⁄8% Notes at 100% of par, plus accrued and unpaid interest, and (2) the $200.0 million aggregate
principal amount outstanding of the 83⁄4% Notes at 102.9% of par, plus accrued and unpaid interest.
We recorded a charge to other expense (income), net of $10.6 million in the third quarter of 2012
related to the early extinguishment of the 65⁄8% Notes and 83⁄4% Notes. This charge consists of the call
premium, original issue discounts and deferred financing costs related to the 65⁄8% Notes and 83⁄4%
Notes.
Acquisitions
In April 2012, in order to enhance our existing operations in Brazil, we acquired the stock of
Grupo Store, a storage rental and records management and data protection business in Brazil with
locations in Sao Paulo, Rio de Janeiro, Porto Alegre and Recife, for a purchase price of approximately
$79.0 million ($75.0 million, net of cash acquired). Included in the purchase price is approximately
$8.0 million being held in escrow to secure a working capital adjustment and the indemnification
obligations of the former owners of the business (‘‘Sellers’’) to IMI. The amounts held in escrow for
purposes of the working capital adjustment will be distributed either to IMI or the Sellers based on the
final agreed upon working capital amount. Unless paid to us in accordance with the terms of the
agreement, all amounts remaining in escrow after the final working capital adjustment and any
indemnification payments are paid out will be released to the Sellers in four annual installments,
commencing in April 2014.
66
In May 2012, we acquired a controlling interest of our joint venture in Switzerland (Sispace AG),
which provides storage rental and records management services, in a stock transaction for a cash
purchase price of approximately $21.6 million.
Contractual Obligations
The following table summarizes our contractual obligations as of December 31, 2012 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) . . . . . . .
Purchase and Asset Retirement
Payments Due by Period
Total
Less than
1 Year
1-3 Years
3-5 Years
More than
5 Years
$ 235,826
$ 47,312
$
72,219
$
34,906
$
81,389
3,592,375
1,833,567
2,632,496
45,575
241,076
223,138
447,662
443,955
416,931
461,054
404,182
383,619
2,638,084
744,354
1,608,808
Obligations . . . . . . . . . . . . . . . . . . . .
44,821
22,683
10,094
1,043
11,001
Total(3) . . . . . . . . . . . . . . . . . . . . . . . .
$8,339,085
$579,784
$1,390,861
$1,284,804
$5,083,636
(1) Amounts include variable rate interest payments, which are calculated utilizing the applicable
interest rates as of December 31, 2012; see Note 4 to Notes to Consolidated Financial Statements.
Amounts also include interest on capital leases.
(2) Amounts are offset by sublease income of $13.8 million in total (including $4.1 million,
$5.9 million, $3.1 million and $0.7 million, in less than 1 year, 1-3 years, 3-5 years and more than
5 years, respectively).
(3) The table above excludes $37.6 million in uncertain tax positions as we are unable to make 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 Credit Agreement and other
financings, which may include senior subordinated notes, secured credit facilities, securitizations and
mortgage or capital lease financings, and the issuance of equity. We expect to meet our long-term cash
flow requirements using the same means described above. If we convert to a REIT, we expect our
long-term capital allocation strategy will naturally shift toward increased use of equity to support lower
leverage, though our leverage may increase in the short-term to fund the costs of the Conversion Plan.
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 expire in 2020 through 2025, of
$25.9 million ($9.1 million, tax effected) at December 31, 2012 to reduce future federal taxable income.
We have assets for state net operating losses of $9.4 million (net of federal tax benefit), which expire in
2013 through 2025, subject to a valuation allowance of approximately 83%. We have assets for foreign
net operating losses of $46.3 million, with various expiration dates (and in some cases no expiration
date), subject to a valuation allowance of approximately 82%. We also have foreign tax credits of
67
$44.3 million, which expire in 2017 through 2020, subject to a valuation allowance of approximately
68%.
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 rental 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, 2012 relate to cash and cash equivalents and restricted cash held on deposit with five
global banks and two ‘‘Triple A’’ rated money market funds 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 to a maximum of
$50.0 million or in any one financial institution to a maximum of $75.0 million. As of December 31,
2012, our cash and cash equivalents and restricted cash balance was $277.0 million, including money
market funds and time deposits amounting to $218.6 million. A substantial portion of the money
market funds 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 at
attractive rates, 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, 2012, we had $519.3 million of variable rate debt outstanding with a weighted
average variable interest rate of approximately 2.2%, and $3,305.7 million of fixed rate debt
outstanding. As of December 31, 2012, approximately 86.4% 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, 2012 would have been reduced by approximately $4.5 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, 2012.
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 and British
pound sterling. Declines in the value of the local currencies in which we are paid relative to the U.S.
68
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 considerations, 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. 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
$4.4 million ($2.7 million, net of tax) of foreign exchange losses 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 stockholders’ equity for the year ended December 31, 2012. As of
December 31, 2012, cumulative net gains of $10.7 million, net of tax 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, 2012, we had an outstanding
forward contract to purchase $201.2 million U.S. dollars and sell 125.0 million British pounds sterling
to hedge our intercompany exposures with our European operations. As of December 31, 2012, we had
an outstanding forward contract to purchase $77.3 million U.S. dollars and sell 75.0 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
through other expense (income), net. During the year ended December 31, 2012, there was $9.1 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 losses in
connection with these forward contracts of $13.0 million (including an unrealized foreign exchange loss
of $1.1 million related to certain British pound sterling forward contracts and an unrealized foreign
exchange loss of $0.4 million related to the Australian dollar forward contract in other expense
(income), net in the accompanying statement of operations as of December 31, 2012, respectively. As
69
of December 31, 2012, 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 2012
functional currencies, relative to the U.S. dollar, would result in a reduction in our equity of
approximately $88.8 million.
Item 8. Financial Statements and Supplementary Data.
The information required by this item is included in Item 15(a) of this Annual Report.
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, 2012 (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 are effective.
Management’s Report on Internal Control over Financial Reporting
Our management, with the participation of our principal executive officer and principal financial
officer, is responsible for establishing and maintaining adequate internal control over financial reporting
as defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act. Our internal control system is
designed to provide reasonable assurance to our management and board of directors regarding the
preparation and fair presentation of published financial statements. 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 effective as of December 31, 2012.
70
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.
Remediation of Prior Material Weakness in Internal Control over Financial Reporting
As previously disclosed in our Annual Report on Form 10-K for the year ended December 31,
2011, we determined that 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.
During the year ended December 31, 2012, we implemented the following changes in our internal
control over financial reporting that remediated the material weakness described above:
(cid:127) We hired a government contract compliance specialist and additional staffing in the contracts
and billing department who are specifically dedicated to government contracting;
(cid:127) We developed and implemented a process to appropriately identify government contracts with
price reduction clauses; and
(cid:127) We developed and implemented procedures to track and monitor benchmark pricing in order to
calculate any related price reductions required under these contracts.
We have evaluated and tested the effectiveness of these controls as of December 31, 2012 and
have determined that our previously reported material weakness has been remediated.
71
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, 2012, 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 the assessed 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.
In our opinion, the Company maintained, in all material respects, effective internal control over
financial reporting as of December 31, 2012, 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, 2012 of the Company and our report dated March 1, 2013 expressed an unqualified
opinion on those financial statements.
/s/ DELOITTE & TOUCHE LLP
Boston, Massachusetts
March 1, 2013
72
Changes in Internal Control over Financial Reporting
There have been no changes in our internal control over financial reporting (as defined in
Rule 13a-15(f) under the Securities Act of 1934) during the quarter ended December 31, 2012 that
have materially affected, or are reasonably likely to materially affect, our internal control over financial
reporting.
Item 9B. Other Information.
None.
73
PART III
Item 10. Directors, Executive Officers and Corporate Governance.
The information required by Item 10 is incorporated by reference to our definitive Proxy
Statement for our 2013 Annual Meeting of Stockholders (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, 2011 and 2012 . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Consolidated Statements of Operations, Years Ended December 31, 2010, 2011 and 2012 . . . . . .
Consolidated Statements of Comprehensive Income (Loss), Years Ended December 31, 2010,
2011 and 2012 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Consolidated Statements of Equity, Years Ended December 31, 2010, 2011 and 2012 . . . . . . . . .
Consolidated Statements of Cash Flows, Years Ended December 31, 2010, 2011 and 2012 . . . . . .
Notes to Consolidated Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Page
75
76
77
78
79
80
81
(b) Exhibits filed as part of this report: As listed in the Exhibit Index following the signature page hereof.
74
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, 2012 and 2011, 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, 2012. These financial statements are the responsibility of the
Company’s management. Our responsibility is to express an opinion on the 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, 2012 and 2011,
and the results of their operations and their cash flows for each of the three years in the period ended
December 31, 2012, 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, 2012, 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
March 1, 2013 expressed an unqualified opinion on the Company’s internal control over financial
reporting.
/s/ DELOITTE & TOUCHE LLP
Boston, Massachusetts
March 1, 2013
75
IRON MOUNTAIN INCORPORATED
CONSOLIDATED BALANCE SHEETS
(In thousands, except share and per share data)
December 31,
2011
2012
ASSETS
Current Assets:
Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Restricted cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accounts receivable (less allowances of $23,277 and $25,209 as of December 31,
2011 and 2012, respectively) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Prepaid expenses and other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Assets of discontinued operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total Current Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
179,845
35,110
$
243,415
33,612
543,467
43,235
105,537
7,256
914,450
572,200
10,152
164,713
—
1,024,092
Property, Plant and Equipment:
Property, plant and equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Less—Accumulated depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Property, Plant and Equipment, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
4,232,594
(1,825,511)
2,407,083
4,443,323
(1,965,596)
2,477,727
Other Assets, net:
Goodwill . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Customer relationships and acquisition costs . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred financing costs
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total Other Assets, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2,254,268
410,149
35,798
19,510
2,719,725
2,334,759
456,120
43,850
21,791
2,856,520
Total Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 6,041,258
$ 6,358,339
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 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
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
outstanding)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Common stock (par value $0.01; authorized 400,000,000 shares; issued and
outstanding 172,140,966 shares and 190,005,788 shares as of December 31, 2011
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
and 2012, respectively)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Additional paid-in capital
Retained earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accumulated other comprehensive items, net . . . . . . . . . . . . . . . . . . . . . . . . . .
73,320
156,381
418,831
197,181
3,317
849,030
3,280,268
53,169
97,177
507,358
$
92,887
168,120
426,813
217,133
—
904,953
3,732,116
62,917
97,356
398,549
—
—
1,721
343,603
902,567
(2,203)
1,900
942,199
185,558
20,314
Total Iron Mountain Incorporated Stockholders’ Equity . . . . . . . . . . . . . . .
1,245,688
1,149,971
Noncontrolling Interests . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
8,568
12,477
Total Equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1,254,256
1,162,448
Total Liabilities and Equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 6,041,258
$ 6,358,339
The accompanying notes are an integral part of these consolidated financial statements.
76
IRON MOUNTAIN INCORPORATED
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
Year Ended December 31,
2010
2011
2012
Revenues:
Storage rental
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Service . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$1,598,718
1,293,631
$1,682,990
1,331,713
$1,733,138
1,272,117
Total Revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2,892,349
3,014,703
3,005,255
Operating Expenses:
Cost of sales (excluding depreciation and amortization) . . . . .
Selling, general and administrative . . . . . . . . . . . . . . . . . . . . .
Depreciation and amortization . . . . . . . . . . . . . . . . . . . . . . .
Intangible impairments . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(Gain) Loss on disposal/write-down of property, plant and
1,192,862
772,811
304,205
85,909
1,245,200
834,591
319,499
46,500
1,277,113
850,371
316,344
—
equipment, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(10,987)
(2,286)
4,400
Total Operating Expenses . . . . . . . . . . . . . . . . . . . . . . . . .
Operating Income (Loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest Expense, Net (includes Interest Income of $1,785,
$2,313 and $2,418 in 2010, 2011 and 2012, respectively) . . . . .
Other Expense (Income), Net . . . . . . . . . . . . . . . . . . . . . . . . . .
Income (Loss) from Continuing Operations Before
Provision (Benefit) for Income Taxes . . . . . . . . . . . . . . .
Provision (Benefit) for Income Taxes . . . . . . . . . . . . . . . . . . . .
Income (Loss) from Continuing Operations . . . . . . . . . . . . . . . .
(Loss) Income from Discontinued Operations, Net of Tax . . . . .
Gain (Loss) on Sale of Discontinued Operations, Net of Tax . . .
Net (Loss) Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Less: Net Income (Loss) Attributable to Noncontrolling
2,344,800
547,549
2,443,504
571,199
2,448,228
557,027
204,559
8,768
205,256
13,043
242,599
16,062
334,222
167,483
166,739
(219,417)
—
352,900
106,488
246,412
(47,439)
200,619
(52,678)
399,592
298,366
114,873
183,493
(6,774)
(1,885)
174,834
Interests . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
4,908
4,054
3,126
Net (Loss) Income Attributable to Iron Mountain Incorporated .
$ (57,586) $ 395,538
$ 171,708
Earnings (Losses) per Share—Basic:
Income (Loss) from Continuing Operations . . . . . . . . . . . . . . . .
Total (Loss) Income from Discontinued Operations . . . . . . . . . .
Net (Loss) Income Attributable to Iron Mountain Incorporated .
Earnings (Losses) per Share—Diluted:
Income (Loss) from Continuing Operations . . . . . . . . . . . . . . . .
Total (Loss) Income from Discontinued Operations . . . . . . . . . .
Net (Loss) Income Attributable to Iron Mountain Incorporated .
$
$
$
$
$
$
0.83
$
(1.09) $
(0.29) $
0.83
$
(1.09) $
(0.29) $
1.27
0.79
2.03
1.26
0.78
2.02
$
$
$
$
$
$
1.06
(0.05)
0.99
1.05
(0.05)
0.98
Weighted Average Common Shares Outstanding—Basic . . . . . . .
Weighted Average Common Shares Outstanding—Diluted . . . . .
201,991
201,991
194,777
195,938
173,604
174,867
Dividends Declared per Common Share . . . . . . . . . . . . . . . . . .
$
0.3750
$
0.9375
$
5.1200
The accompanying notes are an integral part of these consolidated financial statements.
77
IRON MOUNTAIN INCORPORATED
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(In thousands)
Net (Loss) Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other Comprehensive Income (Loss):
Foreign Currency Translation Adjustments . . . . . . . . . . . . . . . . . . .
Total Other Comprehensive Income (Loss) . . . . . . . . . . . . . . . . . . . .
Year Ended December 31,
2010
2011
2012
$(52,678) $399,592
$174,834
2,288
2,288
(32,616)
(32,616)
23,186
23,186
Comprehensive (Loss) Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(50,390)
366,976
198,020
Comprehensive Income (Loss) Attributable to Noncontrolling
Interests . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
5,375
3,123
3,795
Comprehensive (Loss) Income Attributable to Iron Mountain
Incorporated . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$(55,765) $363,853
$194,225
The accompanying notes are an integral part of these consolidated financial statements.
78
IRON MOUNTAIN INCORPORATED
CONSOLIDATED STATEMENTS OF EQUITY
(In thousands, except share data)
Iron Mountain Incorporated Stockholders’ Equity
Common Stock
Total
Shares
Amounts
Additional
Paid-in
Capital
Accumulated
Other
Retained Comprehensive Noncontrolling
Earnings
Items, Net
Interests
Balance, December 31, 2009 . . . . . . . . . . . . . . . $2,150,760 203,546,757
Issuance of shares under employee stock purchase
$2,035
$1,298,657 $ 818,303
$ 27,661
$ 4,104
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 . . . . . . . . . . . . .
Currency translation adjustment . . . . . . . . . . . . .
Net (loss) income . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . .
Noncontrolling interests dividends
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 . . . . . . . . . . . . .
Currency translation adjustment . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . .
Net income (loss)
Noncontrolling interests equity contributions . . . . .
. . . . . . . . . . .
Noncontrolling interests dividends
Balance, December 31, 2011 . . . . . . . . . . . . . . .
Issuance of shares under employee stock purchase
plan and option plans and stock-based
compensation, including tax benefit of $1,045 . . .
Shares issued in connection with special dividend
(see Note 13)
. . . . . . . . . . . . . . . . . . . . . .
Stock repurchases . . . . . . . . . . . . . . . . . . . . .
Parent cash dividends declared . . . . . . . . . . . . .
Currency translation adjustment . . . . . . . . . . . . .
Net income (loss)
. . . . . . . . . . . . . . . . . . . . .
Noncontrolling interests equity contributions . . . . .
Noncontrolling interests dividends
. . . . . . . . . . .
Purchase of noncontrolling interests . . . . . . . . . .
39,530
1,997
(111,563)
(75,407)
2,288
(52,678)
(2,062)
1,281,332
—
(4,764,023)
—
—
—
—
13
—
(47)
—
—
—
—
39,517
1,997
(111,516)
—
—
—
— (75,407)
—
—
— (57,586)
—
—
—
—
—
—
1,821
—
—
1,952,865 200,064,066
2,001
1,228,655
685,310
29,482
102,986
3,930,318
(988,318) (31,853,418)
—
(178,281)
—
(32,616)
—
399,592
—
215
—
(2,187)
39
(319)
—
—
—
—
—
102,947
(987,999)
—
—
— (178,281)
—
—
— 395,538
—
—
—
—
1,254,256 172,140,966
1,721
343,603
902,567
—
—
—
(31,685)
—
—
—
(2,203)
73,453
1,958,690
20
73,433
—
—
— 17,009,281
(1,103,149)
—
—
—
—
—
—
(34,688)
(328,707)
23,186
174,834
836
(1,722)
1,000
170
(11)
—
—
—
—
—
—
559,840
(34,677)
(560,010)
—
— (328,707)
—
—
— 171,708
—
—
—
—
—
—
—
—
—
22,517
—
—
—
—
—
—
—
—
467
4,908
(2,062)
7,417
—
—
—
(931)
4,054
215
(2,187)
8,568
—
—
—
—
669
3,126
836
(1,722)
1,000
Balance, December 31, 2012 . . . . . . . . . . . . . . . $1,162,448 190,005,788
$1,900
$ 942,199 $ 185,558
$ 20,314
$12,477
The accompanying notes are an integral part of these consolidated financial statements.
79
IRON MOUNTAIN INCORPORATED
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
Cash Flows from Operating Activities:
Net (loss) income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Loss (Income) from discontinued operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(Gain) Loss on sale of discontinued operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ (52,678)
219,417
—
$
399,592
47,439
(200,619)
$
174,834
6,774
1,885
Year Ended December 31,
2010
2011
2012
Adjustments to reconcile net income (loss) to cash flows from operating activities:
Depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Amortization (includes deferred financing costs and bond discount of $5,357, $6,318 and $6,948
in 2010, 2011 and 2012, respectively) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Intangible impairments
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Stock-based compensation expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Provision (Benefit) for deferred income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Loss on early extinguishment of debt, net
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(Gain) Loss 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 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accrued expenses and deferred revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
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 . . . . . . . . . . . . . . . . . . . . .
278,760
290,638
280,598
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
42,694
—
30,360
(77,201)
10,628
4,400
11,764
(17,964)
(58,400)
(706)
34,995
(1,009)
443,652
(10,916)
432,736
(240,683)
(125,134)
1,498
(28,872)
(2,330)
1,457
(394,064)
(6,136)
(400,200)
Cash Flows from Investing Activities
Cash Flows from Financing Activities:
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(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 . . . . . . . . . . . . . . . . . . . . . . . . . .
(Decrease) Increase in Cash and Cash Equivalents
. . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cash and Cash Equivalents, Beginning of Period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(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 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 258,693
Supplemental Information:
Cash Paid for Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 226,463
Cash Paid for Income Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 139,072
Non-Cash Investing and Financing Activities:
Capital Leases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 30,367
Accrued Capital Expenditures
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 41,222
Dividends Payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 37,514
(2,017,174)
2,170,979
(231,255)
394,000
(2,844,693)
2,731,185
(525,834)
985,000
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
$
$
$
$
$
$
480
(38,052)
(318,845)
40,244
1,045
(2,261)
28,269
(39)
28,230
2,804
63,570
179,845
243,415
231,936
228,607
54,518
51,114
53,042
—
$
$
$
$
$
$
$
Unsettled Purchases of Parent Common Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
— $
3,364
The accompanying notes are an integral part of these consolidated financial statements.
80
IRON MOUNTAIN INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2012
(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 store records and provide
information management services in various locations throughout North America, Europe, Latin
America and Asia Pacific. We have a diversified customer base consisting of commercial, legal, banking,
health care, accounting, insurance, entertainment and government organizations.
In August 2010, we sold the domain name management product line of our digital business (the
‘‘Domain Name Product Line’’). On June 2, 2011, we sold (the ‘‘Digital Sale’’) 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’’). Additionally, on October 3,
2011, we sold our records management operations in New Zealand and on April 27, 2012, we sold our
records management operations in Italy. The financial position, operating results and cash flows of the
Domain Name Product Line, the Digital Business, our New Zealand operations and our Italian
operations, including the gain on the sale of the Domain Name Product Line, the Digital Business and
our New Zealand operations and the loss on the sale of our Italian operations, 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,
comprehensive income (loss), equity and cash flows on a consolidated basis. 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.
81
IRON MOUNTAIN INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
DECEMBER 31, 2012
(In thousands, except share and per share data)
2. Summary of Significant Accounting Policies (Continued)
We have restricted cash associated with a collateral trust agreement with our insurance carrier
related to our worker’s compensation self-insurance program. The restricted cash subject to this
agreement was $35,110 and $33,612 as of December 31, 2011 and 2012, 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 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 (1) our 71⁄4% GBP Senior Subordinated
Notes due 2014, (2) our 63⁄4% Euro Senior Subordinated Notes due 2018, (3) the borrowings in certain
foreign currencies under our revolving credit agreement and (4) 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
to a net loss of $5,664, $17,352 and $10,223 for the years ended December 31, 2010, 2011 and 2012,
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 that 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, 2011 and 2012, none of our derivative instruments contained credit-risk related
contingent features.
82
IRON MOUNTAIN INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
DECEMBER 31, 2012
(In thousands, except share and per share data)
2. Summary of Significant Accounting Policies (Continued)
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 and vehicles . . . . . . . . . . . . . . . . . . . . . . . .
Furniture and fixtures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Computer hardware and software . . . . . . . . . . . . . . . . . . . . . . . . .
5 to 40 years
10 years or the life of the lease,
whichever is shorter
1 to 20 years
2 to 10 years
2 to 10 years
3 to 5 years
Property, plant and equipment (including capital leases in the respective category), at cost, consist
of the following:
December 31,
2011
2012
Land . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Buildings and building improvements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Leasehold improvements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Racking . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Warehouse equipment/vehicles . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Furniture and fixtures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Computer hardware and software . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Construction in progress . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 172,454
1,109,176
474,965
1,420,180
355,951
79,193
527,585
93,090
$ 199,354
1,217,107
461,927
1,481,377
366,754
81,093
526,973
108,738
$4,232,594
$4,443,323
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 directly associated with, and devoting time to, the development of internal
use computer software projects (to the extent time is spent directly on the project) are capitalized.
Capitalization begins when the design stage of the application has been completed and it is probable
that the project 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, 2010, 2011 and 2012, we wrote-off $0,
$3,500 (approximately $3,050 associated with our International Business segment and approximately
$450 associated with our North American Business segment) and $1,110 associated with our North
American Business segment, respectively, of previously deferred software costs associated with internal
83
IRON MOUNTAIN INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
DECEMBER 31, 2012
(In thousands, except share and per share data)
2. Summary of Significant Accounting Policies (Continued)
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 depreciation expense 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 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,
2011
2012
Asset Retirement Obligations, beginning of the year . . . . . . . . . . . . . . . . . . . . . . .
Liabilities Incurred . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Liabilities Settled . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accretion Expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Change in Probability Adjustment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Foreign Currency Exchange Movement
$ 9,465
300
(774)
1,327
(176)
(26)
$10,116
389
(785)
1,056
—
206
Asset Retirement Obligations, end of the year . . . . . . . . . . . . . . . . . . . . . . . . . . .
$10,116
$10,982
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 annually assess
whether a change in the life over which our intangible assets are amortized is necessary or more
frequently if events or circumstances warrant.
We have selected October 1 as our annual goodwill impairment review date. We performed our
annual goodwill impairment review as of October 1, 2010, 2011 and 2012 and noted no impairment of
84
IRON MOUNTAIN INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
DECEMBER 31, 2012
(In thousands, except share and per share data)
2. Summary of Significant Accounting Policies (Continued)
goodwill at those dates. 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 Continental Western Europe (as defined
below) 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, 2012, no factors
were identified that would alter our October 1, 2012 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 in 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.
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 at that time that we had
three reporting units within our European operations: (1) United Kingdom, Ireland and Norway
(‘‘UKI’’); (2) Belgium, France, Germany, Luxembourg, Netherlands and Spain (‘‘Continental Western
Europe’’); and (3) the remaining countries in Europe (‘‘Central Europe’’). 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, Continental 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, Continental Western Europe and Central Europe reporting units and noted no
impairment, except for our Italian operations, which was included in our Continental Western Europe
reporting unit, and which is now included in discontinued operations as discussed in Note 14. Based on
our analysis, we concluded that the goodwill of our UKI and Central Europe reporting units was not
impaired. Our Continental 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
Continental 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
85
IRON MOUNTAIN INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
DECEMBER 31, 2012
(In thousands, except share and per share data)
2. Summary of Significant Accounting Policies (Continued)
consolidated statement of operations. See Note 14 for the portion of the charge allocated to our Italian
operations based on a relative fair value basis.
Our reporting units at which level we performed our goodwill impairment analysis as of October 1,
2011 were as follows: (1) North America; (2) UKI; (3) Continental Western Europe; (4) Central
Europe; (5) Latin America; (6) Australia; and (7) our China, Hong Kong, India, Russia, Singapore and
Ukraine joint ventures (collectively, ‘‘Worldwide 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, Continental Western Europe, Central Europe, Latin America and Australia,
respectively. Our Worldwide Joint Ventures reporting unit had no goodwill as of December 31, 2011.
In 2012, we reorganized the management and reporting structure of our international operations.
As a result of the management and reporting changes, we concluded that we have the following six
reporting units: (1) North America; (2) United Kingdom, Ireland, Norway, Belgium, France, Germany,
Luxembourg, Netherlands and Spain (‘‘Western Europe’’); (3) the remaining countries in Europe
(‘‘Emerging Markets’’); (4) Latin America; (5) Australia, China, Hong Kong and Singapore (‘‘Asia
Pacific’’); (6) India, Russia and Ukraine (‘‘Emerging Market Joint Ventures’’). As of December 31,
2012, the carrying value of goodwill, net amounted to $1,762,307, $365,303, $87,492, $56,893 and
$62,764 for North America, Western Europe, Emerging Markets, Latin America and Asia Pacific,
respectively. Our Emerging Market Joint Ventures reporting unit had no goodwill as of December 31,
2012. Based on our goodwill impairment assessment, all of our reporting units with goodwill had
estimated fair values as of October 1, 2012 that exceeded their carrying values by greater than 30%.
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.
86
IRON MOUNTAIN INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
DECEMBER 31, 2012
(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, 2011 and 2012 is as follows:
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(1) . . . . . . . . . . . . . . . . . . . . .
Currency effects . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Gross Balance as of December 31, 2011 . . . . . . . . . . . . . . . . . .
Deductible goodwill acquired during the year . . . . . . . . . . . . . .
Non-deductible goodwill acquired during the year . . . . . . . . . . .
Currency effects . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
North
American
Business
$2,012,049
1,398
—
2,161
(5,367)
2,010,241
7,605
—
6,125
International
Business
Total
Consolidated
$542,379
—
35,207
(865)
(12,677)
564,044
32,609
18,079
16,796
$2,554,428
1,398
35,207
1,296
(18,044)
2,574,285
40,214
18,079
22,921
Gross Balance as of December 31, 2012 . . . . . . . . . . . . . . . . . .
$2,023,971
$631,528
$2,655,499
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 . .
Currency effects . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
261,362
302
58,655
421
320,017
723
Accumulated Amortization Balance as of December 31, 2012 . .
$ 261,664
$ 59,076
$ 320,740
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
Net Balance as of December 31, 2012 . . . . . . . . . . . . . . . . . . .
$1,762,307
$572,452
$2,334,759
Accumulated Goodwill Impairment Balance as of December 31,
2011 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accumulated Goodwill Impairment Balance as of December 31,
2012 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
$
85,909
$ 46,500
$ 132,409
85,909
$ 46,500
$ 132,409
(1) 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.
87
IRON MOUNTAIN INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
DECEMBER 31, 2012
(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 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). Consolidated loss on
disposal/write-down of property, plant and equipment, net was $4,400 in the year ended December 31,
2012 and consisted primarily of approximately $5,500, $1,900 and $500 of asset write-offs in Europe,
North America and Latin America, respectively, partially offset by approximately $3,500 of gains
associated with the sale of leased vehicles in North America.
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,
2012), 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 five years at
December 31, 2012) 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
unamortized costs. Customer relationship intangible assets acquired through business combinations,
88
IRON MOUNTAIN INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
DECEMBER 31, 2012
(In thousands, except share and per share data)
2. Summary of Significant Accounting Policies (Continued)
which represents the majority of the balance, are amortized over periods ranging from eight to 30 years
(weighted average of 19 years at December 31, 2012). 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 expected future cash flows. Other intangible assets,
including noncompetition agreements, acquired core technology and trademarks, are capitalized and
amortized over periods ranging from one to 10 years (weighted average of seven years at December 31,
2012).
The gross carrying amount and accumulated amortization are as follows:
Gross Carrying Amount
December 31,
2011
2012
Customer relationship and acquisition costs . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other intangible assets (included in other assets, net) . . . . . . . . . . . . . . . . . . . .
$593,901
6,761
$685,898
9,778
Accumulated Amortization
Customer relationship and acquisition costs . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other intangible assets (included in other assets, net) . . . . . . . . . . . . . . . . . . . .
$183,752
4,899
$229,778
5,875
The amortization expense for the years ended December 31, 2010, 2011 and 2012 are as follows:
Year Ended December 31,
2010
2011
2012
Customer relationship and acquisition costs:
Amortization expense included in depreciation and amortization . . . . .
Amortization expense offsetting revenues . . . . . . . . . . . . . . . . . . . . . .
$24,435
9,710
$27,900
10,100
$34,806
10,784
Other intangible assets:
Amortization expense included in depreciation and amortization . . . . .
1,010
961
940
Estimated amortization expense for existing intangible assets (excluding deferred financing costs,
which are amortized through interest expense, of $6,823, $6,366, $6,211, $5,146 and $4,077 for 2013,
2014, 2015, 2016 and 2017, respectively) for the next five succeeding fiscal years is as follows:
Estimated Amortization
Included in Depreciation
and Amortization
Charged to Revenues
2013 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2014 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2015 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2016 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2017 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$37,582
36,861
36,304
35,187
32,092
$6,194
4,556
3,651
2,662
2,169
89
IRON MOUNTAIN INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
DECEMBER 31, 2012
(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, 2011 and 2012, gross
carrying amount of deferred financing costs was $54,826 and $63,649, respectively, and accumulated
amortization of those costs was $19,028 and $19,799, respectively, and was recorded in other assets, net
in the accompanying consolidated balance sheet.
k.
Prepaid Expenses and Accrued Expenses
Prepaid expenses and accrued expenses with items greater than 5% of total current assets and
liabilities shown separately, respectively, consist of the following:
December 31,
2011
2012
Income tax receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 17,174
88,363
$ 68,312
96,401
Prepaid expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$105,537
$164,713
December 31,
2011
2012
Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Payroll and vacation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Incentive compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Dividend . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Self-insured liabilities (Note 10.b.) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 59,268
75,384
62,550
43,180
39,358
139,091
$ 64,227
80,931
63,828
53,042
34,806
129,979
Accrued expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$418,831
$426,813
l. Revenues
Our revenues consist of storage rental revenues as well as service revenues and are reflected net of
sales and value added taxes. Storage rental revenues, which are considered a key driver of financial
performance for the storage and information management services industry, consist primarily of
recurring periodic rental charges related to the storage of materials or data (generally on a per unit
basis). Service revenues include 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 Document Management Solutions (‘‘DMS’’), which relate to
physical and digital records, and recurring project revenues. Our complementary services revenues
90
IRON MOUNTAIN INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
DECEMBER 31, 2012
(In thousands, except share and per share data)
2. Summary of Significant Accounting Policies (Continued)
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 rental and service revenues are recognized in the
month the respective storage rental or service is provided, and customers are generally billed on a
monthly basis on contractually agreed-upon terms. Amounts related to future storage rental or prepaid
service contracts for customers where storage rental fees or services are billed in advance are accounted
for as deferred revenue and recognized ratably over the applicable storage rental 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 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 as a liability 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, 2010, 2011 and
2012 was $20,378, including $3,104 in discontinued operations, ($15,672 after tax or $0.08 per basic and
diluted share), $17,510, including $260 in discontinued operations, ($8,834 after tax or $0.05 per basic
and diluted share) and $30,360 ($23,437 after tax or $0.14 per basic and $0.13 per diluted share),
respectively.
91
IRON MOUNTAIN INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
DECEMBER 31, 2012
(In thousands, except share and per share data)
2. Summary of Significant Accounting Policies (Continued)
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,
2010
2011
2012
Cost of sales (excluding depreciation and amortization) . . . . . . . . . . . . .
Selling, general and administrative expenses . . . . . . . . . . . . . . . . . . . . . .
$
730
16,544
$
914
16,336
$ 1,392
28,968
Total stock-based compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$17,274
$17,250
$30,360
The benefits associated with the tax deductions in excess of recognized compensation cost are
required to be reported as financing activities in the consolidated statements of cash flow. This
requirement reduces reported operating cash flows and increases reported financing cash flows. As a
result, net financing cash flows from continuing operations included $2,252, $919 and $1,045 for the
years ended December 31, 2010, 2011 and 2012, 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 terminated sooner. 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
terminated sooner. As of December 31, 2012, ten-year vesting options represent 9.3% 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
terminated sooner. As of December 31, 2012, three-year vesting options represent 14.4% 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 and the LiveVault Corporation 2001
Stock Incentive 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.
92
IRON MOUNTAIN INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
DECEMBER 31, 2012
(In thousands, except share and per share data)
2. Summary of Significant Accounting Policies (Continued)
A total of 38,917,411 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, 2012 was 6,801,350.
The weighted average fair value of options granted in 2010, 2011 and 2012 was $7.71, $7.42 and
$7.00 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
2010
2011
2012
Expected volatility . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Risk-free interest rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Expected dividend yield . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Expected life . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
32.8%
2.48%
1.2%
33.4%
2.40%
3%
33.8%
1.24%
3%
6.4 Years
6.3 Years
6.3 Years
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. Expected dividend yield is
considered in the option pricing model and represents our current annualized expected per share
dividends over the current trade price of our common stock. 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, 2012 is as follows:
Outstanding at December 31, 2011 . . . . . . . . . . . . . . . . .
Granted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Issued in connection with special dividend . . . . . . . . . . . .
Exercised . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Forfeited . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Expired . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Weighted
Average
Remaining
Contractual
Term
Aggregate
Intrinsic
Value
Weighted
Average
Exercise
Price
$25.73
25.76
N/A
21.53
22.74
28.49
Options
7,118,458
21,472
856,019
(1,772,947)
(271,462)
(43,438)
Outstanding at December 31, 2012 . . . . . . . . . . . . . . . . .
5,908,102
$23.39
Options exercisable at December 31, 2012 . . . . . . . . . . . .
3,748,668
$23.42
Options expected to vest . . . . . . . . . . . . . . . . . . . . . . . . .
2,021,352
$23.35
5.88
5.11
7.26
$45,908
$29,251
$15,572
93
IRON MOUNTAIN INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
DECEMBER 31, 2012
(In thousands, except share and per share data)
2. Summary of Significant Accounting Policies (Continued)
The following table provides the aggregate intrinsic value of stock options exercised for the years
ended December 31, 2010, 2011 and 2012:
Year Ended December 31,
2010
2011
2012
Aggregate intrinsic value of stock options exercised . . . . . . . . . . . . . . . .
$12,063
$37,901
$15,859
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.
As a result of an amendment to our RSUs approved by our Compensation Committee of our board of
directors in October 2012, all RSUs now accrue dividend equivalents associated with the underlying
stock as we declare dividends. Dividends will generally be paid to holders of RSUs in cash upon the
vesting date of the associated RSU and will be forfeited if the RSU does not vest. We accrued
approximately $1,378 of cash dividends on RSUs for the year ended December 31, 2012. 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).
A summary of restricted stock and RSUs activity for the year ended December 31, 2012 is as
follows:
Non-vested at December 31, 2011 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Granted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Issued in connection with special dividend . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Vested . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Forfeited . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Restricted
Stock and
RSUs
610,951
898,093
122,589
(286,931)
(41,038)
Non-vested at December 31, 2012 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1,303,664
Weighted-
Average
Grant-Date
Fair Value
$28.85
30.08
N/A
28.91
27.51
$29.89
The total fair value of restricted stock vested for the years ended December 31, 2010, 2011 and
2012 was $13, $13 and $1, respectively. No RSUs vested during 2010. The total fair value of RSUs
vested for the years ended December 31, 2011 and 2012 was $931 and $8,296, respectively.
Performance Units
Under our various stock option plans, we may also issue grants of performance units (‘‘PUs’’). The
number of PUs earned is determined based on our performance against predefined targets, which for
grants of PUs made in 2011 and 2012 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 is 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
94
IRON MOUNTAIN INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
DECEMBER 31, 2012
(In thousands, except share and per share data)
2. Summary of Significant Accounting Policies (Continued)
the date of the original PU grant. Additionally, employees who subsequently terminate their
employment after the end of the one-year performance period and on or after attaining age 55 and
completing 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 (1) the vesting period, (2) achievement of
the retirement criteria, which such achievement may occur as early as one year after the date of grant,
or (3) a maximum of three years. As a result of an amendment to our PUs approved by our
Compensation Committee of our board of directors in October 2012, all PUs now accrue dividend
equivalents associated with the underlying stock as we declare dividends. Dividends will generally be
paid to holders of PUs in cash upon the vesting date of the associated PU and will be forfeited if the
PU does not vest. We accrued approximately $369 of cash dividends on PUs for the year ended
December 31, 2012.
In 2011 and 2012, we issued 154,239 and 221,781 PUs, respectively. During the one-year
performance period, we will forecast the likelihood of achieving the predefined annual revenue growth
and ROIC 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. No PUs vested during 2011. The total fair value of earned PUs that vested
during the year ended December 31, 2012 was $4,285. As of December 31, 2012, we expected 98.2%
achievement of the predefined revenue and ROIC targets associated with the grants made in 2012.
A summary of PU activity for the year ended December 31, 2012 is as follows:
PUs Original
Awards
PUs
Adjustment(1)
Total
PUs Awards
Non-vested at December 31, 2011 . . . . . . . . . . . . .
Granted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Issued in connection with special dividend . . . . . . .
Vested . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Forfeited . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
112,749
221,781
32,495
(124,914)
(6,018)
—
12,012
1,392
(17,851)
—
112,749
233,793
33,887
(142,765)
(6,018)
Non-vested at December 31, 2012 . . . . . . . . . . . . .
236,093
(4,447)
231,646
Weighted-
Average
Grant-Date
Fair Value
$29.37
29.48
N/A
30.01
28.63
$29.12
(1) Represents the additional number of PUs based on either (a) the final performance criteria
achievement at the end of the one-year performance period or (b) a change in estimated awards
based on the forecasted performance against the predefined targets.
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
95
IRON MOUNTAIN INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
DECEMBER 31, 2012
(In thousands, except share and per share data)
2. Summary of Significant Accounting Policies (Continued)
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, 2010, 2011 and 2012, there were 257,381 shares, 154,559 shares and 151,285
shares, respectively, purchased under the ESPP. The number of shares available for purchase under the
ESPP at December 31, 2012 was 279,226.
As of December 31, 2012, unrecognized compensation cost related to the unvested portion of our
Employee Stock-Based Awards was $44,255 and is expected to be recognized over a weighted-average
period of 2.2 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
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.
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.
96
IRON MOUNTAIN INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
DECEMBER 31, 2012
(In thousands, except share and per share data)
2. Summary of Significant Accounting Policies (Continued)
The following table presents the calculation of basic and diluted income (loss) per share:
Income (Loss) from continuing operations . . . . . . . . . . .
Total (loss) income from discontinued operations (see
Note 14) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net (loss) income 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,
2010
2011
2012
$
$
$
166,739
$
246,412
(219,417) $
153,180
(57,586) $
395,538
$
$
$
183,493
(8,659)
171,708
201,991,000
—
194,777,000
1,060,477
173,604,000
914,308
PUs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
—
100,136
349,128
Weighted-average shares—diluted . . . . . . . . . . . . . . . . . .
201,991,000
195,937,613
174,867,436
Earnings (Losses) per share—basic:
Income (Loss) from continuing operations . . . . . . . . . . .
Total (loss) income from discontinued operations (see
Note 14) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net (loss) income attributable to Iron Mountain
Incorporated—basic . . . . . . . . . . . . . . . . . . . . . . . . . .
Earnings (Losses) per share—diluted:
Income (Loss) from continuing operations . . . . . . . . . . .
Total (loss) income from discontinued operations (see
Note 14) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net (loss) income attributable to Iron Mountain
Incorporated—diluted . . . . . . . . . . . . . . . . . . . . . . . . .
Antidilutive stock options, RSUs and PUs, excluded from
the calculation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
$
$
$
$
$
q. New Accounting Pronouncements
0.83
$
1.27
(1.09) $
0.79
(0.29) $
2.03
0.83
$
1.26
(1.09) $
0.78
(0.29) $
2.02
$
$
$
$
$
$
1.06
(0.05)
0.99
1.05
(0.05)
0.98
9,305,328
3,973,760
1,286,150
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 No. 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
97
IRON MOUNTAIN INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
DECEMBER 31, 2012
(In thousands, except share and per share data)
2. Summary of Significant Accounting Policies (Continued)
is required. We adopted ASU No. 2011-08 as of January 1, 2012. The adoption of ASU No. 2011-08
did not have an 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)
2010 . . . . . . . . . . . . . . . . .
2011 . . . . . . . . . . . . . . . . .
2012 . . . . . . . . . . . . . . . . .
$19,595
20,747
23,277
$42,204
39,343
39,723
$11,801
9,506
8,323
$(481)
(205)
977
$(52,372)
(46,114)
(47,091)
Balance at
End of
the Year
$20,747
23,277
25,209
(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 issuance of credit memos and 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 both
December 31, 2011 and 2012 relate to cash and cash equivalents and restricted cash held on deposit
with five global banks and one ‘‘Triple A’’ rated money market fund and five global banks and two
‘‘Triple A’’ rated money market funds, respectively, 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 to a maximum of
$50,000 or in any one financial institution to a maximum of $75,000. As of December 31, 2011 and
2012, our cash and cash equivalents and restricted cash balance was $214,955 and $277,027,
respectively, including money market funds and time deposits amounting to $181,823 and $218,629,
respectively. A substantial portion of the money market funds is invested in U.S. Treasuries.
98
IRON MOUNTAIN INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
DECEMBER 31, 2012
(In thousands, except share and per share data)
2. Summary of Significant Accounting Policies (Continued)
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, 2011 and 2012, respectively:
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
$—
—
—
—
—
99
IRON MOUNTAIN INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
DECEMBER 31, 2012
(In thousands, except share and per share data)
2. Summary of Significant Accounting Policies (Continued)
Description
Fair Value Measurements at
December 31, 2012 Using
Total Carrying Quoted prices
Value at
December 31,
2012
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 Liabilities(3) . . . . . . . . . . . . . . . . .
$ 68,800
149,829
11,071
1,522
$ —
—
10,525(2)
—
$ 68,800
149,829
546(1)
1,522
$—
—
—
—
(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, 2011 and 2012, except goodwill calculated
based on Level 3 inputs, as more fully disclosed in 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, 2011 and 2012, the fair value of the money market
and mutual funds included in this trust amounted to $9,124 and $11,071, 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
$1,221, net losses of $321 and net gains of $1,292 for the years ended December 31, 2010, 2011 and
2012, respectively.
v.
Investments
As of December 31, 2012, we have investments in joint ventures, including noncontrolling interests,
in Iron Mountain A/S of 32% (Denmark) 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, 2011 and 2012, the carrying value related
to our equity investments was $3,499 and $398, respectively, included in other assets in the
accompanying consolidated balance sheets. Additionally, we have a 4% investment in Crossroads
Systems, Inc. (U.S.) and its carrying value as of December 31, 2012 was $1,672.
100
IRON MOUNTAIN INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
DECEMBER 31, 2012
(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, 2011 and 2012.
x. Other Expense (Income), Net
Other expense (income), net consists of the following:
Foreign currency transaction losses (gains), net . . . . . . . . . . . . . . . . . . . .
Debt extinguishment expense, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$5,664
1,792
1,312
$17,352
993
(5,302)
$10,223
10,628
(4,789)
$8,768
$13,043
$16,062
Year Ended December 31,
2010
2011
2012
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, 2012, we had (1) an outstanding forward
contract to purchase $201,159 U.S. dollars and sell 125,000 British pounds sterling to hedge our
intercompany exposures with our European operations and (2) an outstanding forward contract to
purchase $77,250 U.S. dollars and sell 75,000 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, 2010, 2011 and 2012, there
was $2,030 in net cash receipts, $1,092 in net cash disbursements and $9,116 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, 2011 and 2012 and their gains and losses
for the years ended December 31, 2010, 2011 and 2012:
Asset Derivatives
December 31,
Derivatives Not Designated as
Hedging Instruments
2011
Balance Sheet
Location
Fair
Value
2012
Balance
Sheet Location
Foreign exchange contracts . . Prepaid expenses and other $2,803 Prepaid expenses and other
Total . . . . . . . . . . . . . . . . . .
$2,803
Fair
Value
$ —
$ —
101
IRON MOUNTAIN INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
DECEMBER 31, 2012
(In thousands, except share and per share data)
3. Derivative Instruments and Hedging Activities (Continued)
Derivatives Not Designated as
Hedging Instruments
2011
Balance Sheet
Location
Foreign exchange contracts . . . . . . . . . Accrued expenses
Total . . . . . . . . . . . . . . . . . . . . . . . . .
Liability Derivatives
December 31,
2012
Balance Sheet
Location
Accrued expenses
Fair
Value
$435
$435
Fair
Value
$1,522
$1,522
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,
2010
2011
2012
Foreign exchange contracts . . . . . . . . . . . . . . . Other expense (income), net $2,025 $(1,209) $13,007
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$2,025 $(1,209) $13,007
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, 2010, 2011 and 2012, we designated on average 74,750, 86,750 and
101,167 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 $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. We recorded foreign exchange losses of $4,408 ($2,668, 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, 2012. As of December 31, 2012, cumulative net gains of $10,722, net of tax 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, 2012
(In thousands, except share and per share data)
4. Debt
Long-term debt comprised the following:
Revolving Credit Facility(1) . . . . . . . . . . . . . . . . . . .
Term Loan Facility(1) . . . . . . . . . . . . . . . . . . . . . . .
71⁄4% GBP Senior Subordinated Notes due 2014 (the
‘‘71⁄4% Notes’’)(2)(3) . . . . . . . . . . . . . . . . . . . . . .
65⁄8% Senior Subordinated Notes due 2016 (the
‘‘65⁄8% Notes’’)(2)(3) . . . . . . . . . . . . . . . . . . . . . .
71⁄2% CAD Senior Subordinated Notes due 2017 (the
‘‘Subsidiary Notes’’)(2)(4) . . . . . . . . . . . . . . . . . . .
83⁄4% Senior Subordinated Notes due 2018 (the
December 31, 2011
December 31, 2012
Carrying
Amount
Fair
Value
Carrying
Amount
Fair
Value
$
96,000
487,500
$ 96,000
487,500
$
55,500
462,500
$
55,500
462,500
233,115
233,115
242,813
242,813
318,025
320,400
—
—
171,273
174,698
175,875
181,591
‘‘83⁄4% Notes’’)(2)(3) . . . . . . . . . . . . . . . . . . . . . .
200,000
209,000
—
—
8% Senior Subordinated Notes due 2018 (the ‘‘8%
Notes’’)(2)(3)
. . . . . . . . . . . . . . . . . . . . . . . . . . .
63⁄4% Euro Senior Subordinated Notes due 2018 (the
‘‘63⁄4% Notes’’)(2)(3) . . . . . . . . . . . . . . . . . . . . . .
73⁄4% Senior Subordinated Notes due 2019 (the
49,806
47,607
49,834
56,052
328,750
312,352
335,152
341,753
‘‘73⁄4% Notes’’)(2)(3) . . . . . . . . . . . . . . . . . . . . . .
400,000
422,750
400,000
451,000
8% Senior Subordinated Notes due 2020 (the ‘‘8%
Notes due 2020’’)(2)(3) . . . . . . . . . . . . . . . . . . . .
300,000
313,313
300,000
317,250
83⁄8% Senior Subordinated Notes due 2021 (the
‘‘83⁄8% Notes’’)(2)(3) . . . . . . . . . . . . . . . . . . . . . .
548,346
586,438
548,518
610,500
53⁄4% Senior Subordinated Notes due 2024 (the
‘‘53⁄4% Notes’’)(2)(3) . . . . . . . . . . . . . . . . . . . . . .
Real Estate Mortgages, Capital Leases and Other(5) .
—
220,773
— 1,000,000
254,811
220,773
1,012,500
254,811
Total Long-term Debt . . . . . . . . . . . . . . . . . . . . . . .
Less Current Portion . . . . . . . . . . . . . . . . . . . . . . . .
3,353,588
(73,320)
Long-term Debt, Net of Current Portion . . . . . . . . .
$3,280,268
3,825,003
(92,887)
$3,732,116
(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 subsidiaries owed to us or to
one of our U.S. subsidiary guarantors or Iron Mountain Canada Corporation (‘‘Canada
Company’’) and all promissory notes held by us or one of our U.S. subsidiary guarantors or
Canada Company. 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, which
are subject to change based on our consolidated leverage ratio, as of December 31, 2011 and 2012,
respectively).
103
IRON MOUNTAIN INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
DECEMBER 31, 2012
(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, 2011 and 2012, 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 100% owned U.S. subsidiaries (the ‘‘Guarantors’’). These guarantees are joint and several
obligations of the Guarantors. 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 $5,232 and $4,305 as of December 31, 2011 and 2012,
respectively, which bear interest at rates ranging from 4.6% to 5.5% and are payable in various
installments through 2021, (b) capital lease obligations of $207,300 and $235,826 as of
December 31, 2011 and 2012, respectively, which bear a weighted average interest rate of 5.2% as
of December 31, 2012 and (c) other various notes and other obligations, which were assumed by us
as a result of certain acquisitions, of $8,241 and $14,680 as of December 31, 2011 and 2012,
respectively, and bear a weighted average interest rate of 16.2% as of December 31, 2012. We
believe The fair value of this debt approximates its carrying value.
a. Revolving Credit Facility and Term Loan
On June 27, 2011, we entered into a credit agreement that consists of (1) revolving credit facilities
under which we can borrow, subject to certain limitations as defined in the credit agreement, up to an
aggregate amount of $725,000 (including Canadian dollars, British pounds sterling and Euros, among
other currencies) (the ‘‘Revolving Credit Facility’’) and (2) a $500,000 term loan facility (the ‘‘Term
Loan Facility,’’ and collectively with the Revolving Credit Facility, the ‘‘Credit Agreement’’). We have
the right to request an increase in the aggregate amount available to be borrowed under the Credit
Agreement up to a maximum of $1,800,000. The Revolving Credit Facility is supported by a group of
19 banks. IMI, Iron Mountain Information Management, Inc. (‘‘IMIM’’), Canada Company, Iron
Mountain Europe (Group) Limited (‘‘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 Credit Agreement, borrow under
certain of the following tranches of the Revolving Credit Facility: (1) tranche one in the amount of
$400,000 is available to IMI and IMIM in U.S. dollars, British pounds sterling and Euros; (2) 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 (3) 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 Revolving Credit Facility
terminates on June 27, 2016, at which point all revolving credit loans under such facility become due.
With respect to the 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
104
IRON MOUNTAIN INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
DECEMBER 31, 2012
(In thousands, except share and per share data)
4. Debt (Continued)
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 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 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 the Credit Agreement,
together with all intercompany obligations of subsidiaries owed to us or to one of our U.S. subsidiary
guarantors or Canada Company and all promissory notes held by us or one of our U.S. subsidiary
guarantors or Canada Company. The interest rate on borrowings under the 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 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. There are also fees associated with any outstanding
letters of credit. As of December 31, 2012, we had $55,500 of outstanding borrowings under the
Revolving Credit Facility, all of which was denominated in U.S. dollars; we also had various outstanding
letters of credit totaling $2,321. The remaining availability under the Revolving Credit Facility on
December 31, 2012, 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 Credit Agreement and current external debt, was $667,179. The interest rate in effect
under the Revolving Credit Facility and Term Loan Facility was 4.0% and 2.0%, respectively, as of
December 31, 2012. For the years ended December 31, 2010, 2011 and 2012, we recorded commitment
fees and letters of credit fees of $2,399, $2,123 and $2,306, respectively, based on the unused balances
under our revolving credit facilities and outstanding letters of credit.
The 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 Credit Agreement, our indentures or other
agreements governing our indebtedness. The 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 3.4 and 3.9 as of
December 31, 2011 and 2012, respectively, compared to a maximum allowable ratio of 5.5 under the
Credit Agreement. Similarly, our bond leverage ratio, per the indentures, was 3.9 and 5.3 as of
December 31, 2011 and 2012, respectively, compared to a maximum allowable ratio of 6.5. IMI’s
revolving credit and term loan fixed charge coverage ratio was 1.5 and 1.3 as of December 31, 2011 and
105
IRON MOUNTAIN INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
DECEMBER 31, 2012
(In thousands, except share and per share data)
4. Debt (Continued)
2012, respectively, compared to a minimum allowable ratio of 1.2 under the Credit Agreement.
Noncompliance with these leverage and fixed charge coverage ratios would have a material adverse
effect on our financial condition and liquidity.
b. Notes Issued under Indentures
As of December 31, 2012, we had eight series of senior subordinated notes issued under various
indentures, seven of which 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) 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) $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;
(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; and
(cid:127) $1,000,000 principal amount of notes maturing on August 15, 2024 and bearing interest at a rate
of 53⁄4% 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 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 August 2012, we completed an underwritten public offering of $1,000,000 in aggregate principal
amount of the 53⁄4% Notes, which were issued at 100% of par. Our net proceeds of $985,000, after
paying the underwriters’ discounts and commissions, were used to redeem all of the outstanding 65⁄8%
Notes and 83⁄4% Notes and to repay existing indebtedness under our Revolving Credit Facility, and the
balance will be used for general corporate purposes, including funding a portion of the costs we expect
to incur in connection with our proposed conversion to a real estate investment trust (‘‘REIT’’).
106
IRON MOUNTAIN INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
DECEMBER 31, 2012
(In thousands, except share and per share data)
4. Debt (Continued)
In August 2012, we redeemed (1) the $320,000 aggregate principal amount outstanding of the
65⁄8% Notes at 100% of par, plus accrued and unpaid interest, and (2) the $200,000 aggregate principal
amount outstanding of the 83⁄4% Notes at 102.9% of par, plus accrued and unpaid interest. We
recorded a charge to other expense (income), net of $10,628 in the third quarter of 2012 related to the
early extinguishment of the 65⁄8% Notes and 83⁄4% Notes. This charge consists of the call premium,
original issue discounts and deferred financing costs related to the 65⁄8% Notes and 83⁄4% Notes.
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. In September 2010, we redeemed $200,000 of the $431,255
aggregate principal amount outstanding of our 73⁄4% Senior Subordinated Notes due 2015 (the ‘‘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
option at a premium redemption price. After these dates, the notes may be redeemed at 100% of face
value:
Redemption Date
April 15, March 15, October 15, October 15, October 1, June 15, August 15, August 15,
71⁄4% Notes
71⁄2% Notes
8% Notes
63⁄4% Notes 73⁄4% Notes Notes
8%
83⁄8%
Notes
53⁄4%
Notes
2012 . . . . . . . . . . . . . . . . .
2013 . . . . . . . . . . . . . . . . .
2014 . . . . . . . . . . . . . . . . .
2015 . . . . . . . . . . . . . . . . .
2016 . . . . . . . . . . . . . . . . .
2017 . . . . . . . . . . . . . . . . .
2018 . . . . . . . . . . . . . . . . .
2019 . . . . . . . . . . . . . . . . .
2020 . . . . . . . . . . . . . . . . .
—
100.000% 103.750% 102.667% 102.250%
100.000% 102.500% 101.333% 101.125%
100.000% 101.250% 100.000% 100.000%
—
— 104.000%
— 102.667% 104.188%
100.000% 100.000% 100.000% 103.875% 101.333% 102.792%
100.000% 100.000% 100.000% 101.938% 100.000% 101.396%
100.000% 100.000% 100.000% 100.000% 100.000% 100.000% 102.875%
100.000% 100.000% 100.000% 100.000% 100.000% 101.917%
100.000% 100.000% 100.000% 100.958%
— 100.000% 100.000% 100.000%
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
107
IRON MOUNTAIN INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
DECEMBER 31, 2012
(In thousands, except share and per share data)
4. Debt (Continued)
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 are redeemable at our option, in whole or in part, at a
specified make-whole price.
Prior to August 15, 2017, the 53⁄4% Notes 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.
Maturities of long-term debt are as follows:
Year
2013 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2014 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2015 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2016 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2017 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Thereafter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net Premiums (Discounts) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Amount
$
92,887
357,370
162,511
302,014
193,946
2,719,473
3,828,201
(3,198)
Total Long-term Debt (including current portion) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$3,825,003
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, 2011 and 2012 and for the years ended December 31, 2010, 2011 and
2012.
The Parent Notes and the Subsidiary Notes are guaranteed by the subsidiaries referred to below as
the ‘‘Guarantors.’’ These subsidiaries are 100% 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.’’
108
IRON MOUNTAIN INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
DECEMBER 31, 2012
(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
1,579,399
1,529,359
240,557
Total Other Assets, Net . . . . . . .
2,784,120
3,350,315
$ 68,907
—
40,115
4,639
—
3,323
116,984
200,755
2,961
17,397
196,989
9,804
227,151
$
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)
(3,425,508)
—
—
—
—
2,254,268
465,457
(4,372,661)
2,719,725
Total Assets . . . . . . . . . . . . . .
$3,731,615
$5,280,407
$544,890
$1,768,101
$(5,283,755)
$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)
—
—
$
—
73,320
772,393
3,317
3,280,268
(947,153)
—
—
657,704
Stockholders’ Equity . . . . . . . . . .
Noncontrolling Interests . . . . . . . . .
1,245,688
—
1,817,816
—
Total Equity . . . . . . . . . . . . . .
1,245,688
1,817,816
293,454
—
293,454
1,314,238
8,568
1,322,806
(3,425,508)
—
1,245,688
8,568
(3,425,508)
1,254,256
Total Liabilities and Equity . . . . .
$3,731,615
$5,280,407
$544,890
$1,768,101
$(5,283,755)
$6,041,258
109
IRON MOUNTAIN INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
DECEMBER 31, 2012
(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, 2012
Canada
Company Guarantors
Non-
Eliminations
Consolidated
$
— $
33,612
—
1,055,593
48
1,089,253
1,305
13,472
—
338,455
—
121,933
473,860
1,500,309
$103,500
—
44,363
5,781
5,720
159,364
203,909
$ 126,443
—
189,382
—
47,164
362,989
772,204
$
—
—
—
(1,061,374)
—
(1,061,374)
—
$ 243,415
33,612
572,200
—
174,865
1,024,092
2,477,727
Assets
Current Assets:
Cash and Cash Equivalents . . . . . .
Restricted Cash . . . . . . . . . . . . .
Accounts Receivable . . . . . . . . . .
Intercompany Receivable . . . . . . .
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
1,070,930
1,941,540
—
37,909
1,000
1,688,000
1,536,964
261,950
4,136
18,422
202,282
10,622
235,462
—
—
595,513
211,394
806,907
(1,076,066)
(3,647,962)
—
(114)
—
—
2,334,759
521,761
(4,724,142)
2,856,520
Total Other Assets, Net . . . . . . .
3,050,379
3,487,914
Total Assets . . . . . . . . . . . . . .
$4,140,937
$5,462,083
$598,735
$1,942,100
$(5,785,516)
$6,358,339
Liabilities and Equity
Intercompany Payable . . . . . . . . . . . .
Current Portion of Long-term Debt
. . .
Total Other Current Liabilities . . . . . . .
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
$
— $ 942,547
70,870
—
469,249
111,536
568,205
2,876,317
$
— $ 118,827
19,218
200,266
94,413
2,799
31,015
193,181
$(1,061,374)
—
—
—
$
—
92,887
812,066
3,732,116
1,000
2,113
1,066,823
417,972
—
38,745
8,243
100,106
(1,076,066)
(114)
—
558,822
Stockholders’ Equity . . . . . . . . . .
Noncontrolling Interests . . . . . . . . .
1,149,971
—
1,926,417
—
Total Equity . . . . . . . . . . . . . .
1,149,971
1,926,417
332,995
—
332,995
1,388,550
12,477
1,401,027
(3,647,962)
—
1,149,971
12,477
(3,647,962)
1,162,448
Total Liabilities and Equity . . . . .
$4,140,937
$5,462,083
$598,735
$1,942,100
$(5,785,516)
$6,358,339
110
IRON MOUNTAIN INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
DECEMBER 31, 2012
(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 Rental . . . . . . . . . . . . . . . .
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:
Cost of Sales (Excluding Depreciation
and Amortization) . . . . . . . . . . . .
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
Operating (Loss) Income . . . . . . . . . . .
Interest Expense (Income), Net . . . . . . .
Other (Income) Expense, Net . . . . . . . .
(291)
194,689
(22,662)
746,479
516,664
201,534
84,611
86,352
36,587
18,818
—
(1,039)
196
1,548,249
141,953
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
—
—
—
—
—
—
—
—
—
—
—
—
—
—
Subsidiaries, Net of Tax . . . . . . . . . .
(114,732)
(35,947)
(1,508)
—
152,187
$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
—
(Loss) Income from Continuing
Operations . . . . . . . . . . . . . . . . . .
(57,586)
330,138
27,763
18,611
(152,187)
166,739
(Loss) Income from Discontinued
Operations, Net of Tax . . . . . . . . . . .
—
(215,479)
—
(57,586)
114,659
27,763
(3,938)
14,673
—
(152,187)
(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)
$ 114,659
$ 27,763
$
9,765
$(152,187)
$ (57,586)
Net (Loss) Income . . . . . . . . . . . . . . .
Other Comprehensive Income (Loss):
Foreign Currency Translation
Adjustments . . . . . . . . . . . . . . . .
Equity in Other Comprehensive (Loss)
Income of Subsidiaries . . . . . . . . .
Total Other Comprehensive Income
$ (57,586)
$ 114,659
$ 27,763
$ 14,673
$(152,187)
$ (52,678)
4,620
(6,177)
12,174
(8,329)
—
(2,799)
3,224
621
—
(1,046)
2,288
—
(Loss) . . . . . . . . . . . . . . . . . . . . .
1,821
(2,953)
Comprehensive (Loss) Income . . . . . . .
(55,765)
111,706
12,795
40,558
(8,329)
6,344
(1,046)
(153,233)
2,288
(50,390)
Comprehensive Income (Loss)
Attributable to Noncontrolling
Interests
. . . . . . . . . . . . . . . . . .
Comprehensive (Loss) Income
Attributable to Iron Mountain
Incorporated . . . . . . . . . . . . . . . . .
—
—
—
5,375
—
5,375
$ (55,765)
$ 111,706
$ 40,558
$
969
$(153,233)
$ (55,765)
111
IRON MOUNTAIN INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
DECEMBER 31, 2012
(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 Rental . . . . . . . . . . . . . . . .
Service . . . . . . . . . . . . . . . . . . . . .
$
— $1,132,743
833,652
—
$120,476
115,973
Total Revenues . . . . . . . . . . . . . .
—
1,966,395
236,449
Operating Expenses:
Cost of Sales (Excluding Depreciation
and Amortization) . . . . . . . . . . . .
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
—
(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)
$
$429,771
382,088
811,859
391,651
248,663
107,806
46,500
—
—
—
—
—
—
—
—
—
—
—
—
—
—
$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)
18,569
(4,545)
—
551,880
Income (Loss) from Continuing
Operations . . . . . . . . . . . . . . . . . .
395,538
377,602
26,960
(1,808)
(551,880)
246,412
(Loss) Income 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 Interests . . . . .
Net Income (Loss) Attributable to Iron
—
—
395,538
(17,350)
198,735
558,987
—
—
(30,089)
1,884
—
—
26,960
(30,013)
(551,880)
—
—
—
4,054
—
(47,439)
200,619
399,592
4,054
Mountain Incorporated . . . . . . . . . .
$ 395,538
$ 558,987
$ 26,960
$ (34,067)
$(551,880)
$ 395,538
Net Income (Loss) . . . . . . . . . . . . . . .
Other Comprehensive Income (Loss):
Foreign Currency Translation
Adjustments . . . . . . . . . . . . . . . .
Equity in Other Comprehensive (Loss)
Income of Subsidiaries . . . . . . . . .
$ 395,538
$ 558,987
$ 26,960
$ (30,013)
$(551,880)
$ 399,592
5,412
(97)
(6,831)
(31,100)
—
(32,616)
(37,097)
(36,443)
979
—
72,561
—
Total Other Comprehensive (Loss)
Income . . . . . . . . . . . . . . . . . . . .
(31,685)
Comprehensive Income (Loss) . . . . . . .
363,853
(36,540)
522,447
(5,852)
21,108
(31,100)
(61,113)
72,561
(479,319)
(32,616)
366,976
Comprehensive Income (Loss)
Attributable to Noncontrolling
Interests
. . . . . . . . . . . . . . . . . .
Comprehensive Income (Loss)
Attributable to Iron Mountain
Incorporated . . . . . . . . . . . . . . . . .
—
—
—
3,123
—
3,123
$ 363,853
$ 522,447
$ 21,108
$ (64,236)
$(479,319)
$ 363,853
112
IRON MOUNTAIN INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
DECEMBER 31, 2012
(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, 2012
Parent
Guarantors
Canada
Company Guarantors
Non-
Eliminations
Consolidated
Revenues:
Storage Rental . . . . . . . . . . . . . . . .
Service . . . . . . . . . . . . . . . . . . . . .
$
— $1,156,681
784,068
—
$124,370
115,746
$452,087
372,303
$
Total Revenues . . . . . . . . . . . . . .
—
1,940,749
240,116
824,390
Operating Expenses:
Cost of Sales (Excluding Depreciation
and Amortization) . . . . . . . . . . . .
Selling, General and Administrative . .
Depreciation and Amortization . . . . .
(Gain) Loss on Disposal/Write-down of
Property, Plant and Equipment, Net .
Total Operating Expenses
. . . . . . .
—
220
320
—
540
761,092
591,092
192,304
97,436
35,554
18,601
418,585
223,505
105,119
(966)
(122)
5,488
1,543,522
151,469
752,697
Operating (Loss) Income . . . . . . . . . . .
Interest Expense (Income), Net . . . . . . .
Other Expense (Income), Net . . . . . . . .
(540)
196,423
32,161
397,227
(17,117)
(3,842)
88,647
45,826
(53)
71,693
17,467
(12,204)
(Loss) Income from Continuing
Operations Before Provision (Benefit)
for Income Taxes . . . . . . . . . . . . . .
Provision (Benefit) for Income Taxes . . .
Equity in the (Earnings) Losses of
(229,124)
—
418,186
86,549
42,874
14,715
66,430
13,609
—
—
—
—
—
—
—
—
—
—
—
—
—
Subsidiaries, Net of Tax . . . . . . . . . .
(400,832)
(73,625)
(591)
—
475,048
$1,733,138
1,272,117
3,005,255
1,277,113
850,371
316,344
4,400
2,448,228
557,027
242,599
16,062
298,366
114,873
—
Income (Loss) from Continuing
Operations . . . . . . . . . . . . . . . . . .
171,708
405,262
28,750
52,821
(475,048)
183,493
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 Interests . . . . .
Net Income (Loss) Attributable to Iron
—
—
430
—
—
—
171,708
405,692
28,750
(7,204)
(1,885)
43,732
—
—
(475,048)
(6,774)
(1,885)
174,834
—
—
—
3,126
—
3,126
Mountain Incorporated . . . . . . . . . .
$ 171,708
$ 405,692
$ 28,750
$ 40,606
$(475,048)
$ 171,708
Net Income (Loss) . . . . . . . . . . . . . . .
Other Comprehensive Income (Loss):
Foreign Currency Translation
$ 171,708
$ 405,692
$ 28,750
$ 43,732
$(475,048)
$ 174,834
Adjustments . . . . . . . . . . . . . . . .
(2,668)
(212)
7,578
18,488
—
23,186
Equity in Other Comprehensive
Income (Loss) of Subsidiaries . . . . .
25,185
25,421
434
—
(51,040)
—
Total Other Comprehensive Income
(Loss) . . . . . . . . . . . . . . . . . . . . .
22,517
Comprehensive Income (Loss) . . . . . . .
194,225
25,209
430,901
8,012
36,762
18,488
62,220
(51,040)
(526,088)
23,186
198,020
Comprehensive Income (Loss)
Attributable to Noncontrolling
Interests
. . . . . . . . . . . . . . . . . .
Comprehensive Income (Loss)
Attributable to Iron Mountain
Incorporated . . . . . . . . . . . . . . . . .
—
—
—
3,795
—
3,795
$ 194,225
$ 430,901
$ 36,762
$ 58,425
$(526,088)
$ 194,225
113
IRON MOUNTAIN INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
DECEMBER 31, 2012
(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:
Year Ended December 31, 2010
Canada
Non-
Parent Guarantors Company Guarantors Eliminations Consolidated
Operations
Cash Flows from Operating Activities-Continuing
.
.
.
.
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 .
.
.
Intercompany loans to subsidiaries
.
.
.
Investment in subsidiaries
.
.
.
.
Investment in restricted cash .
Additions to customer relationship and acquisition
.
.
.
.
Proceeds from sales of property and equipment and
.
.
other, net
costs
.
.
.
.
.
. .
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
Operations
Cash Flows from Investing Activities-Continuing
.
.
.
.
Cash Flows from Investing Activities-Discontinued
.
.
Operations
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
Cash Flows from Investing Activities .
.
.
.
.
.
.
.
Cash Flows from Financing Activities:
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
and other debt
and other debt
Repayment of revolving credit and term loan facilities
.
.
.
Proceeds from revolving credit and term loan facilities
.
.
.
.
.
.
Early retirement of senior subordinated notes .
.
Debt financing (repayment to) and equity 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
.
.
.
.
.
Excess tax benefits from stock-based compensation .
stock purchase plan .
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
Operations
Cash Flows from Financing Activities-Continuing
.
.
.
.
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 .
Cash and cash equivalents, end of period .
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
. $(180,588)
$ 578,159
$ 56,113
$ 149,545
$
—
19,347
—
2,564
(180,588)
597,506
56,113
152,109
—
—
577,316
(10,258)
(35,102)
(137,937)
(1,970)
34,465
(35,124)
—
(16,593)
(3,705)
—
—
—
(104,319)
(8,166)
—
—
—
—
—
(9,332)
(594)
(3,276)
5,867
93
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)
(3,592)
562,807
—
—
—
—
(1,523)
(381,234)
801
(187,963)
446,656
$ 258,693
—
1,796
(335,663)
—
13,909
—
(584,507)
—
(261,004)
382,588
—
(2,382)
814
33,746
3,906
273
(21,489)
(13)
25,386
60,162
. $ 13,909
$ 121,584
$ 37,652
$ 85,548
$
114
IRON MOUNTAIN INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
DECEMBER 31, 2012
(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:
Year Ended December 31, 2011
Canada
Non-
Parent
Guarantors Company Guarantors Eliminations Consolidated
Operations
Cash Flows from Operating Activities-Continuing
.
.
.
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 .
.
.
Intercompany loans to subsidiaries
.
.
.
Investment in subsidiaries
.
.
.
.
.
Investment in restricted cash .
Additions to customer relationship and acquisition
.
.
.
.
.
.
.
.
Investment in joint ventures .
.
Proceeds from sales of property and equipment and
.
.
other, net
costs
. .
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
Operations
Cash Flows from Investing Activities-Continuing
.
.
.
.
Cash Flows from Investing Activities-Discontinued
.
.
Operations
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
Cash Flows from Investing Activities .
.
.
.
.
.
.
.
Cash Flows from Financing Activities:
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
and other debt
Repayment of revolving credit and term loan facilities
.
.
.
.
.
Proceeds from revolving credit and term loan
.
.
.
.
Early retirement of senior subordinated notes .
Net proceeds from sale of senior subordinated notes .
Debt financing (repayment to) and equity
facilities and other debt
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
. $ (162,478)
$
698,033
$ 45,232
$ 82,727
$
—
(47,166)
—
(162,478)
650,867
45,232
(114,768)
(5,378)
(83,385)
(12,595)
—
(15,700)
—
(14,155)
(58)
—
—
—
(462)
—
—
—
1,469,788
(12,595)
(5)
—
—
—
(910)
81,817
(80,232)
(69,810)
—
—
—
(5,541)
(335)
363
66
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)
380,721
78,508
(396,200)
(1,458,628)
(90,752)
(71,594)
—
(231,255)
394,000
2,014,500
—
—
89,838
—
—
.
.
.
.
.
.
.
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
.
.
Excess tax benefits from stock-based compensation .
.
Payment of debt financing costs .
employee stock purchase plan .
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
—
—
—
(984,953)
(172,616)
85,742
919
(828)
—
(1,461,888)
12,595
—
—
—
—
(8,182)
—
5,429
—
—
—
—
—
—
Operations
Cash Flows from Financing Activities-Continuing
.
.
.
.
Cash Flows from Financing Activities-Discontinued
.
.
Operations
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
Cash Flows from Financing Activities
.
Effect of exchange rates on cash and cash equivalents
.
.
.
.
.
(Decrease) Increase in cash and cash equivalents .
.
Cash and cash equivalents, beginning of period .
Cash and cash equivalents, end of period .
.
.
.
.
.
.
.
.
.
.
.
.
(1,305,191)
(901,603)
4,515
78,396
1,361,213
(762,670)
—
—
.
.
.
.
(1,305,191)
—
(10,481)
13,909
(901,603)
—
(110,834)
121,584
—
4,515
(3,883)
31,255
37,652
(1,138)
77,258
(5,103)
11,212
85,548
. $
3,428
$
10,750
$ 68,907
$ 96,760
$
115
66,641
—
—
698
70,056
12,595
—
—
—
—
—
—
—
—
—
(2,017,174)
2,170,979
(231,255)
394,000
—
1,386,403
(25,190)
—
—
—
—
—
698
—
—
(984,953)
(172,616)
85,742
919
(9,010)
—
1,361,213
—
—
—
—
(1,138)
(763,808)
(8,986)
(78,848)
258,693
$
179,845
IRON MOUNTAIN INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
DECEMBER 31, 2012
(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:
Year Ended December 31, 2012
Canada
Non-
Parent Guarantors Company Guarantors Eliminations Consolidated
Operations
Cash Flows from Operating Activities-Continuing
.
.
.
.
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 .
.
.
Intercompany loans to subsidiaries
.
.
.
Investment in subsidiaries
.
.
.
.
.
Investment in restricted cash .
Additions to customer relationship and acquisition
.
.
.
.
.
.
.
.
Investment in joint ventures .
.
Proceeds from sales of property and equipment and
.
.
other, net
costs
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
Operations
Cash Flows from Investing Activities-Continuing
.
.
.
.
Cash Flows from Investing Activities-Discontinued
.
.
Operations
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
Cash Flows from Investing Activities .
.
.
.
.
.
.
.
Cash Flows from Financing Activities:
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
and other debt
and other debt
Repayment of revolving credit and term loan facilities
.
.
.
Proceeds from revolving credit and term loan facilities
.
.
.
.
.
.
.
.
.
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 .
.
Intercompany loans from parent .
.
Equity contribution from parent .
.
.
.
.
.
Stock repurchases .
Parent cash dividends .
.
.
.
.
Proceeds from exercise of stock options and employee
.
.
.
.
.
Excess tax benefits from stock-based compensation .
.
.
Payment of debt finacing costs .
stock purchase plan .
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
Operations
Cash Flows from Financing Activities-Continuing
.
.
.
.
Cash Flows from Financing Activities-Discontinued
.
.
Operations
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
Cash Flows from Financing Activities
.
Effect of exchange rates on cash and cash equivalents
.
.
.
.
.
(Decrease) Increase in cash and cash equivalents .
.
Cash and cash equivalents, beginning of period .
Cash and cash equivalents, end of period .
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
. $(195,478)
$
496,542
$ 48,037
$ 94,551
$
—
(8,814)
—
(195,478)
487,728
48,037
—
—
88,376
(37,572)
1,498
—
(2,330)
(134,852)
(28,126)
(110,142)
(37,572)
—
(23,543)
—
(10,829)
—
—
—
—
(2,132)
—
(2,102)
92,449
(95,002)
(97,008)
—
—
—
(3,197)
—
—
(1,739)
5
3,191
—
—
—
—
—
21,766
75,144
—
—
—
—
$
443,652
(10,916)
432,736
(240,683)
(125,134)
—
—
1,498
(28,872)
(2,330)
1,457
49,972
(335,974)
(12,956)
(192,016)
96,910
(394,064)
—
(1,982)
—
(4,154)
—
49,972
(337,956)
(12,956)
(196,170)
96,910
—
(2,774,070)
(3,069)
(67,554)
—
(525,834)
985,000
—
—
—
(38,052)
(318,845)
40,244
1,045
(1,480)
2,680,107
—
—
—
(89,878)
37,572
—
—
—
—
(781)
—
—
—
—
714
—
—
—
—
—
—
51,078
—
—
480
110,930
37,572
—
—
—
—
—
—
—
—
—
—
(21,766)
(75,144)
—
—
—
—
—
(6,136)
(400,200)
(2,844,693)
2,731,185
(525,834)
985,000
480
—
—
(38,052)
(318,845)
40,244
1,045
(2,261)
142,078
(147,050)
(2,355)
132,506
(96,910)
28,269
—
142,078
—
(3,428)
3,428
—
(147,050)
—
2,722
10,750
—
(2,355)
1,867
34,593
68,907
(39)
132,467
937
29,683
96,760
. $
— $
13,472
$103,500
$ 126,443
$
116
—
(96,910)
—
—
—
—
(39)
28,230
2,804
63,570
179,845
$
243,415
IRON MOUNTAIN INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
DECEMBER 31, 2012
(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. The unaudited pro forma
results of operations for the current and prior periods are not presented due to the insignificant impact
of the 2010, 2011 and 2012 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, in July 2012, we paid
$2,500 of contingent consideration 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 on the date of the acquisition of
such interest 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 (including the contingent consideration discussed above).
In April 2012, in order to enhance our existing operations in Brazil, we acquired the stock of
Grupo Store, a storage rental and records management and data protection business in Brazil with
locations in Sao Paulo, Rio de Janeiro, Porto Alegre and Recife, for a purchase price of approximately
$79,000 ($75,000, net of cash acquired). Included in the purchase price is approximately $8,000 being
held in escrow to secure a working capital adjustment and the indemnification obligations of the former
117
IRON MOUNTAIN INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
DECEMBER 31, 2012
(In thousands, except share and per share data)
6. Acquisitions (Continued)
owners of the business (‘‘Sellers’’) to IMI. The amounts held in escrow for purposes of the working
capital adjustment will be distributed either to IMI or the Sellers based on the final agreed upon
working capital amount. Unless paid to us in accordance with the terms of the agreement, all amounts
remaining in escrow after the final working capital adjustment and any indemnification payments are
paid out will be released to the Sellers in four annual installments, commencing in April 2014.
In May 2012, we acquired a controlling interest of our joint venture in Switzerland (Sispace AG),
which provides storage rental and records management services, in a stock transaction for a cash
purchase price of approximately $21,600. The carrying value of the 15% interest that we previously held
and accounted for under the equity method of accounting amounted to approximately $1,700 as of the
date of acquisition, and the fair value on the date of the acquisition of such interest was approximately
$2,700. This resulted in a gain being recorded to other income (expense), net of approximately $1,000
in the second quarter of 2012. The fair value of our previously held equity interest was derived by
reducing the total estimated consideration for the controlling interest purchased by 30%, which
represents management’s estimate of the control premium paid, in order to derive the fair value of
$2,700 for the 15% noncontrolling equity interest which we previously held. We determined the 30%
control premium was appropriate after considering the size and location of the business acquired, the
potential future profits expected to be generated by the Swiss entity and other publicly available market
data.
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
2012
Cash Paid (gross of cash acquired) . . . . . . . . . . . . . . . . . . . . . . .
Contingent Consideration . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Fair Value of Previously Held Equity Interest . . . . . . . . . . . . . . .
Fair Value of Noncontrolling Interest . . . . . . . . . . . . . . . . . . . . .
$10,542(1)
—
473
—
$ 80,439(1)
2,900
11,694
—
Total Consideration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
11,015
95,033
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 and Deferred Income Taxes(4) . . . . . . . . .
Noncontrolling Interests . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1,615
2,711
5,189
—
(3,840)
(390)
Total Fair Value of Identifiable Net Assets Acquired . . . . . . . .
5,285
7,918
6,002
59,100
653
(15,245)
—
58,428
$131,972
—
4,265
1,000
137,237
18,998
11,794
59,479
4,620
(15,947)
—
78,944
Goodwill Initially Recorded . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 5,730
$ 36,605
$ 58,293
(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.
118
IRON MOUNTAIN INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
DECEMBER 31, 2012
(In thousands, except share and per share data)
6. Acquisitions (Continued)
(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,
2011 and 2012 was 10 years, 20 years and 17 years, respectively.
(4) Consists primarily of accounts payable, accrued expenses, notes payable, deferred revenue and
deferred income taxes.
Allocations of the purchase price for acquisitions completed in 2012 were based on estimates of
the fair value of net assets acquired and are subject to adjustment. We are not aware of any
information that would indicate that the final purchase price allocations will differ meaningfully from
preliminary estimates. The purchase price allocations of the 2012 acquisitions are subject to finalization
of the assessment of the fair value of intangible assets (primarily customer relationship assets) and
income taxes (primarily 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 at any time after May 2009, for the greater of fair market value
or approximately 84,835 Rupees (approximately $1,547 at December 31, 2012 spot rate).
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 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Valuation allowance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
December 31,
2011
2012
$ 53,983
21,889
58,113
56,599
44,168
(72,239)
$ 87,109
19,772
64,796
44,315
44,673
(76,050)
162,513
184,615
Deferred Tax Liabilities:
Other assets, principally due to differences in amortization . . . . . . . . . . . . . .
Plant and equipment, principally due to differences in depreciation . . . . . . .
(281,060)
(345,576)
(254,156)
(318,856)
Net deferred tax liability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$(464,123) $(388,397)
(626,636)
(573,012)
119
IRON MOUNTAIN INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
DECEMBER 31, 2012
(In thousands, except share and per share data)
7. Income Taxes (Continued)
The current and noncurrent deferred tax assets (liabilities) are presented below:
December 31,
2011
2012
Deferred tax assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred tax liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 54,383
(11,148)
$ 54,409
(44,257)
Current deferred tax assets, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 43,235
$ 10,152
Deferred tax assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred tax liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 108,130
(615,488)
$ 130,206
(528,755)
Noncurrent deferred tax liabilities, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$(507,358) $(398,549)
As of December 31, 2012, we have reclassified $123,946 of long-term deferred income tax liabilities
to current deferred income taxes (included within accrued expenses within current liabilities) and
prepaid and other assets (included within current assets) within our consolidated balance sheet related
to the depreciation recapture associated with our recharacterization of certain racking as real estate
rather than personal property and amortization associated with other intangible assets in conjunction
with our potential conversion to a REIT. In 2013, we expect to reclassify another $41,315 of long-term
deferred income tax liabilities to current deferred income taxes.
We have federal net operating loss carryforwards, which expire in 2020 through 2025, of $25,864
($9,052, tax effected) at December 31, 2012 to reduce future federal taxable income. We have assets for
state net operating losses of $9,420 (net of federal tax benefit), which expire in 2013 through 2025,
subject to a valuation allowance of approximately 83%. We have assets for foreign net operating losses
of $46,324, with various expiration dates (and in some cases no expiration date), subject to a valuation
allowance of approximately 82%. We also have foreign tax credits of $44,315, which expire in 2017
through 2020, subject to a valuation allowance of approximately 68%.
Rollforward of valuation allowance is as follows:
Year Ended December 31,
Balance at
Beginning of
the Year
Charged
(Credited) to
Expense
2010 . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2011 . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2012 . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$33,926
72,229
72,239
$39,545
9,844
2,274
Other
Additions
Other
Deductions
$ — $(1,242)
(9,834)
—
—
1,537
Balance at
End of
the Year
$72,229
72,239
76,050
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
120
IRON MOUNTAIN INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
DECEMBER 31, 2012
(In thousands, except share and per share data)
7. Income Taxes (Continued)
incremental tax benefits in excess of compensation expense recorded in the consolidated financial
statements are credited directly to equity and amounted to $2,252, $919 and $1,045 for the years ended
December 31, 2010, 2011 and 2012, respectively.
Except for certain Canadian subsidiaries for which we recorded a deferred tax liability of $577, we
have not recorded deferred taxes on book over tax outside basis differences related to our other
foreign subsidiaries because such basis differences are not expected to reverse in the foreseeable future
and we intend to reinvest the undistributed earnings of such foreign subsidiaries 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
unrecognized deferred tax liability on the book over tax outside basis difference because of the
complexities of the hypothetical calculation. As of December 31, 2012, we had $71,466 of undistributed
earnings within our foreign subsidiaries which approximates the book over tax outside basis difference.
We may record deferred taxes on book over tax outside basis differences related to certain foreign
subsidiaries in the future depending upon a number of factors, decisions and events in connection with
our potential conversion to a REIT, including favorable indications from the U.S. Internal Revenue
Service with regard to our private letter ruling requests, finalization of countries to be included in the
conversion plan, refinancing our revolving credit and term loan facilities, shareholder approval of
certain modifications to our corporate charter and final board of directors approval of our conversion
to a REIT.
The components of income (loss) from continuing operations before provision (benefit) for income
taxes are:
U.S. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Canada . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other Foreign . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$272,806
41,474
19,942
$313,530
48,327
(8,957)
$191,175
44,358
62,833
$334,222
$352,900
$298,366
The provision (benefit) for income taxes consists of the following components:
Year Ended December 31,
2010
2011
2012
Year Ended December 31,
2010
2011
2012
Federal—current . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Federal—deferred . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
State—current . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
State—deferred . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Foreign—current . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Foreign—deferred . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 76,992
41,825
32,475
(851)
20,350
(3,308)
$ 47,523
25,708
23,828
(1,093)
31,748
(21,226)
$134,231
(57,166)
25,466
(15,134)
32,377
(4,901)
$167,483
$106,488
$114,873
121
IRON MOUNTAIN INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
DECEMBER 31, 2012
(In thousands, except share and per share data)
7. Income Taxes (Continued)
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, 2010, 2011 and 2012, 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 other transaction costs . . . . . . . . . . . .
Reserve accrual (reversal) and audit settlements (net of federal tax
benefit) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Foreign tax rate differential
. . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Disallowed foreign interest and Subpart F income . . . . . . . . . . . . .
Other, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Year Ended December 31,
2010
2011
2012
$116,978
$123,515
$104,428
17,163
(2)
39,547
29,772
16,301
12,601
(2,757)
10,254
6,946
9,045
(6,771)
3,045
(41,753)
(7,828)
8,247
5,359
(32,989)
(34,867)
5,663
8,767
8,266
(30,798)
15,242
5,470
$167,483
$106,488
$114,873
Our effective tax rates for the years ended December 31, 2010, 2011 and 2012 were 50.1%, 30.2%
and 38.5%, respectively. 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 (losses); (4) the timing of the establishment and reversal of tax reserves; (5) our
ability to utilize foreign tax credits and net operating losses that we generate; and (6) our proposed
REIT conversion. The primary reconciling items between the federal statutory rate of 35% and our
overall effective tax rate for the year ended December 31, 2012 were 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 and state income taxes (net of federal tax benefit). During the year
ended December 31, 2012, foreign currency gains were recorded in lower tax jurisdictions associated
with our marking-to-market of intercompany loan positions while foreign currency losses were recorded
in higher tax jurisdictions associated with our marking-to-market of debt and derivative instruments,
which lowered our 2012 effective tax rate by 2.2%. 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 a
positive impact provided 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
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 tax 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 was a
122
IRON MOUNTAIN INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
DECEMBER 31, 2012
(In thousands, except share and per share data)
7. Income Taxes (Continued)
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 tax 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.
On January 2, 2013, the American Taxpayer Relief Act of 2012 (the ‘‘ATRA’’) was signed into law.
In part, the ATRA retroactively reinstated and extended the controlled foreign corporation
look-through rule, which provides for the exception from January 1, 2012 to December 31, 2013 of
certain foreign earnings from U.S. federal taxation as Subpart F income. As a result, we expect our
income tax provision for the first quarter of 2013 will include a discrete tax benefit of $4,025 relating to
the previously expired period from January 1, 2012 to December 31, 2012.
The evaluation of an uncertain tax position is a two-step process. The first step is a recognition
process whereby we determine 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 $(1,607), $(8,477) and $1,257 for gross interest and penalties for the years
ended December 31, 2010, 2011 and 2012, respectively.
We had 2,819 and $3,554 accrued for the payment of interest and penalties as of December 31,
2011 and 2012, respectively.
A summary of tax years that remain subject to examination by major tax jurisdictions is as follows:
Tax Years
Tax Jurisdiction
See Below . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . United States—Federal and State
2006 to present . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Canada
2010 to present . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . United Kingdom
The normal statute of limitations for U.S. federal tax purposes is three years from the date the tax
return is filed. The 2009, 2010 and 2011 tax years remain subject to examination for U.S. federal tax
purposes as well as net operating loss carryforwards utilized in these years. We utilized net operating
losses from 1998, 1999, and 2000 in our federal income tax returns for these tax years. The normal
statute of 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.
123
IRON MOUNTAIN INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
DECEMBER 31, 2012
(In thousands, except share and per share data)
7. Income Taxes (Continued)
We are subject to examination by various tax authorities in jurisdictions in which we have business
operations or a taxable presence. We regularly assess the likelihood of additional assessments by tax
authorities and provide for these matters as appropriate. As of December 31, 2011 and 2012, we had
$31,408 and $37,563, 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
changes in our estimates.
A reconciliation of unrecognized tax benefits is as follows:
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 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Gross tax contingencies—December 31, 2011 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
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 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 88,155
6,575
9,759
(3,349)
(33,001)
(8,248)
$ 59,891
6,593
6,437
(30,316)
(6,268)
(4,929)
$ 31,408
6,598
3,912
(427)
(2,829)
(1,099)
Gross tax contingencies—December 31, 2012 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 37,563
The reversal of these reserves of $37,563 ($30,504 net of federal tax benefit) as of December 31,
2012 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 $5,230 of our unrecognized tax positions may
be recognized by the end of 2013 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, 2012
(In thousands, except share and per share data)
8. Quarterly Results of Operations (Unaudited)
Quarter Ended
March 31
June 30
Sept. 30
Dec. 31
0.41
(0.03)
0.37
148,937
67,460
185,587
253,047
252,684
135,199
50,394
(12,469)
37,925
37,338
137,600
81,176
(6,557)
74,619
73,460
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 (loss) income from discontinued operations . . . . . . . . . . . . . . . . .
34,001
Net income (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net income (loss) attributable to Iron Mountain Incorporated . . . . . . . .
32,056
Earnings (Losses) per Share-Basic
. . . . . . . . . . . . . .
Income (Loss) per share from continuing operations
Total (loss) income per share from discontinued operations . . . . . . . . . .
Net income (loss) per share attributable to Iron Mountain Incorporated .
Earnings (Losses) per Share-Diluted
Income (Loss) per share from continuing operations
. . . . . . . . . . . . . .
Total (loss) income per share from discontinued operations . . . . . . . . . .
Net income (loss) per share attributable to Iron Mountain Incorporated .
2012
Total revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $746,498 $752,165 $748,125 $758,467
102,561
Operating income (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
27,260
Income (Loss) from continuing operations
. . . . . . . . . . . . . . . . . . . . .
(1,074)
Total (loss) income from discontinued operations . . . . . . . . . . . . . . . . .
26,186
Net income (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net income (loss) attributable to Iron Mountain Incorporated . . . . . . . .
25,494(1)
Earnings (Losses) per Share-Basic
Income (Loss) per share from continuing operations
. . . . . . . . . . . . . .
Total (loss) income per share from discontinued operations . . . . . . . . . .
Net income (loss) per share attributable to Iron Mountain Incorporated .
Earnings (Losses) per Share-Diluted
. . . . . . . . . . . . . .
Income (Loss) per share from continuing operations
Total (loss) income per share from discontinued operations . . . . . . . . . .
Net income (loss) per share attributable to Iron Mountain Incorporated .
141,813
61,073
(5,093)
55,980
55,350
158,687
41,441
(2,524)
38,917
38,055
153,966
53,719
32
53,751
52,809
0.26
(0.06)
0.19
0.26
(0.07)
0.18
0.36
(0.03)
0.32
0.24
(0.01)
0.22
0.15
(0.01)
0.14
0.26
(0.07)
0.18
0.40
(0.03)
0.37
0.26
(0.06)
0.19
0.35
(0.03)
0.32
0.24
(0.01)
0.22
0.15
(0.01)
0.14
0.33
0.92
1.25
0.31
—
0.31
0.31
—
0.31
0.33
0.91
1.24
(1) The change in net income (loss) attributable to Iron Mountain Incorporated in the fourth quarter of 2012
compared to the third quarter of 2012 is primarily attributable to a decrease in operating income of
approximately $51,400. The decrease in operating income is primarily related to increases in operating
expenses attributable to: (1) $16,700 in costs and certain asset write-downs associated with facility
consolidations and other asset impairments, (2) $6,400 in legal fees and reserves and $4,000 in professional
fees associated with certain strategic and corporate initiatives, (3) $7,400 in costs associated with the REIT
conversion, (4) $6,100 in sales, marketing and account management costs within our North American Business
segment (primarily associated with certain restructuring activities), (5) $4,300 in worker’s compensation and
personal property taxes related to certain benefits recorded in the third quarter of 2012 that did not repeat in
the fourth quarter of 2012 and (6) $2,800 in stock-based compensation. Additionally, interest expense, net
increased approximately $2,800 associated with the issuance of the 53⁄4% Notes offset by the redemption of
the 65⁄8% Notes and the 83⁄4% Notes. Offsetting the decrease in operating income and the increase in interest
expense, net were a reduction in the provision for income taxes of approximately $21,600 and a reduction in
other expenses, net of approximately $6,200 primarily as a result of debt extinguishment charges recorded in
the third quarter of 2012 related to the redemption of the 65⁄8% Notes and the 83⁄4% Notes that did not
repeat in the fourth quarter of 2012.
125
IRON MOUNTAIN INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
DECEMBER 31, 2012
(In thousands, except share and per share data)
9. Segment Information
Our reportable operating segments and Corporate are described as follows:
(cid:127) North American Business—storage and 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 & Recovery’’); information
destruction services (‘‘Destruction’’); the scanning, imaging and document conversion services of
active and inactive records (‘‘DMS’’); 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) International Business—storage and information management services throughout Europe, Latin
America and Asia Pacific, including Hard Copy, Data Protection & Recovery, Destruction and
DMS. Our European operations provide Hard Copy, Data Protection & Recovery and DMS
throughout Europe and Destruction services are primarily provided in the United Kingdom and
Ireland. Our Latin America operations provide Hard Copy, Data Protection & Recovery,
Destruction and DMS throughout Argentina, Brazil, Chile, Mexico and Peru. Our Asia Pacific
operations provide Hard Copy, Data Protection & Recovery, Destruction and DMS throughout
Australia, with Hard Copy and Data Protection & Recovery services also provided in certain
cities in India, Singapore, Hong Kong-SAR and China.
(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
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.
126
IRON MOUNTAIN INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
DECEMBER 31, 2012
(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:
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
North
American
Business
$2,193,464
185,483
172,713
12,770
969,505
4,370,465
135,825
120,162
5,675
International
Business
Corporate
Total
Consolidated
$ 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
950,439
6,041,258
306,104
209,155
75,246
33,921
33,657
264
(175,746)
199,707
14,961
14,961
—
Acquisition Costs . . . . . . . . . . . . . . . . . . . . . .
16,305
5,398
—
21,703
2012
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
2,198,563
181,607
168,896
12,711
916,196
4,304,340
177,687
123,882
28,126
806,692
103,393
80,493
22,900
173,620
1,854,050
191,360
91,159
97,008
— 3,005,255
316,344
280,598
35,746
912,217
6,358,339
394,689
240,683
125,134
31,344
31,209
135
(177,599)
199,949
25,642
25,642
—
Acquisition Costs . . . . . . . . . . . . . . . . . . . . . .
25,679
3,193
—
28,872
(1) Excludes all intercompany receivables or payables and investment in subsidiary balances.
127
IRON MOUNTAIN INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
DECEMBER 31, 2012
(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, (gain) loss on disposal/write-down of property, plant and equipment, net and
REIT Costs (defined below) 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) . . . . . . . . . .
(Gain) Loss on Disposal/Write-down of Property, Plant and
Year Ended December 31,
2010
2011
2012
$926,676
304,205
85,909
$950,439
319,499
46,500
$912,217
316,344
—
Equipment, Net
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
REIT Costs(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest Expense, Net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other Expense (Income), Net . . . . . . . . . . . . . . . . . . . . . . . . . .
(10,987)
—
204,559
8,768
(2,286)
15,527
205,256
13,043
4,400
34,446
242,599
16,062
Income from Continuing Operations before Provision (Benefit) for
Income Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$334,222
$352,900
$298,366
(1) Includes costs associated with our 2011 proxy contest, the work of the Strategic Review Special
Committee of the board of directors and the proposed REIT conversion (‘‘REIT Costs’’).
Information as to our operations in different geographical areas is as follows:
Year Ended December 31,
2010
2011
2012
Revenues:
United States . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
United Kingdom . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Canada . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other International . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$1,958,820
295,462
231,477
406,590
$1,984,805
307,905
244,337
477,656
$1,949,979
290,044
248,583
516,649
Total Revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$2,892,349
$3,014,703
$3,005,255
Long-lived Assets:
United States . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
United Kingdom . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Canada . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other International . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$3,341,241
552,309
448,485
861,896
$3,306,574
529,239
434,517
856,478
$3,359,560
529,336
445,699
999,652
Total Long-lived Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$5,203,931
$5,126,808
$5,334,247
128
IRON MOUNTAIN INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
DECEMBER 31, 2012
(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:
Year Ended December 31,
2010
2011
2012
Revenues:
Records Management(1)(2) . . . . . . . . . . . . . . . . . . . . . . . . . . .
Data Protection & Recovery(1)(3) . . . . . . . . . . . . . . . . . . . . . .
Information Destruction(1)(4) . . . . . . . . . . . . . . . . . . . . . . . . .
$2,081,492
531,580
279,277
$2,183,154
522,632
308,917
$2,193,602
543,426
268,227
Total Revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$2,892,349
$3,014,703
$3,005,255
(1) Each of the offerings within our product and service lines has a component of revenue that is
storage rental 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,
DMS, Fulfillment Services, Health Information Management Solutions, Film and Sound Archives
and Energy Data Services and Dedicated Facilities Management.
(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 $238,480, $242,954 and $250,986 for the years ended December 31, 2010, 2011 and
2012, respectively. Included in total rent expense was sublease income of $2,721, $2,974 and $3,407 for
the years ended December 31, 2010, 2011 and 2012, 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
129
IRON MOUNTAIN INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
DECEMBER 31, 2012
(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:
2013 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2014 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2015 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2016 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2017 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Thereafter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Operating
Lease
Payment
$ 227,231
215,659
207,176
197,390
189,391
1,609,500
Sublease
Income
$ 4,093
3,120
2,784
2,008
1,154
692
Capital
Leases
$ 58,454
58,691
31,131
26,450
22,474
142,598
Total minimum lease payments
. . . . . . . . . . . . . . . . . . . . . . . . . . .
$2,646,347
$13,851
339,798
Less amounts representing interest . . . . . . . . . . . . . . . . . . . . . . .
Present value of capital lease obligations . . . . . . . . . . . . . . . . . . .
(103,972)
$ 235,826
In addition, we have certain contractual obligations related to purchase commitments which
require minimum payments of $22,683, $8,873, $1,221, $595, $448 and $19 in 2013, 2014, 2015, 2016,
2017 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, 2011 and 2012 there were $39,358 and $34,806,
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—General
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
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
130
IRON MOUNTAIN INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
DECEMBER 31, 2012
(In thousands, except share and per share data)
10. Commitments and Contingencies (Continued)
possible that we could incur aggregate losses in addition to amounts currently accrued for all matters
up to an additional $37,000 over the next several years.
d. 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 alleged that the
technology found in our Connected and LiveVault products infringed certain U.S. patents owned by the
plaintiff. As part of the sale of our Digital Business, discussed in Note 14, our Connected and
LiveVault products were sold to Autonomy, and Autonomy assumed this obligation and the defense of
this litigation and agreed to indemnify us against any losses. In November 2012, the claim was settled
and Autonomy paid the entire settlement amount.
e. 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 in October 2006 with certain modifications to its terms. 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. Through December 31, 2012, we billed approximately $54,000 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.
We continue to review this matter and provide the GSA and OIG with information regarding our
pricing practices and the 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.
In April 2012, the U.S. Government sent us a subpoena seeking information that substantially
overlaps with the subjects that are covered by the voluntary disclosure process that we initiated with the
GSA and OIG in June 2011, except that the subpoena seeks information dating back to 2000 and seeks
information about non-GSA federal and state and local customers. Despite the substantial overlap, we
understand that the subpoena relates to a separate inquiry, under the civil False Claims Act, that has
been initiated independent of the GSA and OIG voluntary disclosure matter. We cannot determine at
this time whether this separate inquiry will result in liability in addition to the amount that may be paid
in connection with the voluntary disclosure to the OIG and GSA described above.
Given the above, it is reasonably possible that an adjustment to our estimates may be required in
the future as a result of updated facts and circumstances. To the extent that an adjustment to our
estimates is necessary in a future period, we will assess, at that time, whether the adjustment is a result
of a change in estimate or the correction of an error. A change in estimate would be reflected as an
adjustment through the then-current period statement of operations. A correction of an error would
131
IRON MOUNTAIN INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
DECEMBER 31, 2012
(In thousands, except share and per share data)
10. Commitments and Contingencies (Continued)
require a quantitative and qualitative analysis to determine the approach to correcting the error. A
correction of an error could be reflected in the then-current period statement of operations or as a
restatement of prior period financial information, depending upon the underlying facts and
circumstances and our quantitative and qualitative analysis.
f.
State of Massachusetts Assessment
During the third quarter of 2012, we applied for abatement of assessments from the state of
Massachusetts. The assessments related to a corporate excise audit of the 2004 through 2006 tax years
in the aggregate amount of $8,191, including tax, interest and penalties through the assessment date.
The applications for abatement were denied during the third quarter of 2012. On October 19, 2012 we
filed petitions with the Massachusetts Appellate Tax Board challenging the assessments. The final
outcome of this matter may require payment of additional corporate excise tax, which consists of two
measures, an income tax, which is a component of the provision for income taxes, and a net worth tax,
which is an operating charge. We intend to defend this matter vigorously at the Massachusetts
Appellate Tax Board. In addition, we are currently under a corporate excise audit by the state of
Massachusetts for the 2007 and 2008 tax years. The adjustments being proposed are for issues
consistent with those assessed in the earlier years. The state has also informed us that an audit of the
2009-2011 years will begin shortly.
g.
Italy Fire
On November 4, 2011, we experienced a fire at a facility we leased in Aprilia, Italy. The facility
primarily stored archival and inactive business records for local area businesses. Despite quick response
by local fire authorities, damage to the building was extensive, and the building and its contents were a
total loss. We continue to assess the impact of the fire, and, although our warehouse legal liability
insurer has reserved its rights to contest coverage related to certain types of potential claims, we
believe we carry adequate insurance. We have been sued by two customers, and have received
correspondence from other customers, under various theories of liabilities. We deny any liability with
respect to the fire and we have referred these claims to our warehouse legal liability insurer for an
appropriate response. We do not expect that this event will have a material impact on our consolidated
financial condition, results of operations and cash flows. As discussed in Note 14, we sold our Italian
operations on April 27, 2012, and we indemnified the buyers related to certain obligations and
contingencies associated with the fire.
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. As a result of the sale of the
132
IRON MOUNTAIN INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
DECEMBER 31, 2012
(In thousands, except share and per share data)
10. Commitments and Contingencies (Continued)
Italian operations, statements of operation and cash flow impacts related to the fire will be reflected as
discontinued operations.
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, 2010, 2011 and
2012, Schooner paid rent to us totaling $198, $188 and $196, 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,
received approximately 24% of the purchase price that we paid in connection with this transaction. 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 U.S. Internal Revenue Code of 1986, as amended. 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 $14,282, $18,133 and $18,026 for the years ended December 31,
2010, 2011 and 2012, respectively.
13. Stockholders’ Equity Matters
Our board of directors has authorized up to $1,200,000 in repurchases of our common stock. All
repurchases are subject to stock price, market conditions, corporate and legal requirements and other
factors. As of December 31, 2012, we had a remaining amount available for repurchase under our
share repurchase program of $66,035, which represents approximately 1% 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 have paid, and
in the future intend to pay, quarterly cash dividends on our common stock. Declaration and payment of
133
IRON MOUNTAIN INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
DECEMBER 31, 2012
(In thousands, except share and per share data)
13. Stockholders’ Equity Matters (Continued)
future quarterly dividends is at the discretion of our board of directors. In 2011 and 2012, our board of
directors declared the following dividends:
Declaration Date
March 11, 2011 . . . . . . . . . . . . . . .
June 10, 2011 . . . . . . . . . . . . . . . .
September 8, 2011 . . . . . . . . . . . .
December 1, 2011 . . . . . . . . . . . . .
March 8, 2012 . . . . . . . . . . . . . . .
June 5, 2012 . . . . . . . . . . . . . . . . .
September 6, 2012 . . . . . . . . . . . .
October 11, 2012 . . . . . . . . . . . . .
December 14, 2012 . . . . . . . . . . . .
Dividend
Per Share
$0.1875
0.2500
0.2500
0.2500
0.2500
0.2700
0.2700
4.0600
0.2700
Record Date
March 25, 2011
June 24, 2011
September 23, 2011
December 23, 2011
March 23, 2012
June 22, 2012
September 25, 2012
October 22, 2012
December 26, 2012
Total
Amount
$ 37,601
50,694
46,877
43,180
42,791
46,336
46,473
700,000
51,296
Payment
Date
April 15, 2011
July 15, 2011
October 14, 2011
January 13, 2012
April 13, 2012
July 13, 2012
October 15, 2012
November 21, 2012
January 17, 2013
On October 11, 2012, we announced the declaration by our board of directors of a special dividend
of $700,000 (the ‘‘Special Dividend’’), payable, at the election of the stockholders, in either common
stock or cash to stockholders of record as of October 22, 2012 (the ‘‘Record Date’’). The Special
Dividend, which is a distribution to stockholders of a portion of our accumulated earnings and profits,
was paid in a combination of common stock and cash. The Special Dividend was paid on November 21,
2012 (the ‘‘Distribution Date’’) to stockholders as of the Record Date. Stockholders elected to be paid
their pro rata portion of the Special Dividend in all common stock or cash. The total amount of cash
paid to all stockholders associated with the Special Dividend was approximately $140,000 (including
cash paid in lieu of fractional shares). Our shares of common stock were valued for purposes of the
Special Dividend based upon the average closing price on the three trading days following
November 14, 2012, or $32.87 per share, and as such, the number of shares of common stock we issued
in the Special Dividend was approximately 17,000 and the total amount of common stock paid to all
stockholders associated with the Special Dividend was approximately $560,000. These shares impact
weighted average shares outstanding from the date of issuance, thus impacting our earnings per share
data prospectively from the Distribution Date.
14. Discontinued Operations
Digital Operations
In August 2010, we sold 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 seven months ended July 31, 2010 were approximately $3,500. 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
134
IRON MOUNTAIN INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
DECEMBER 31, 2012
(In thousands, except share and per share data)
14. Discontinued Operations (Continued)
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.
On June 2, 2011, we sold the Digital Business to Autonomy pursuant to the Digital Sale
Agreement. In the Digital Sale, Autonomy purchased (1) the shares of certain of IMI’s subsidiaries
through which we conducted the Digital Business and (2) certain assets of IMI and its subsidiaries
relating to the Digital Business. The Digital Sale qualified as discontinued operations and, 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 and a preliminary working capital adjustment, which was subject to a
customary post-closing adjustment based on the amount of working capital at closing. Autonomy
disputed our calculation of the working capital adjustment in the Digital Sale Agreement and, as
contemplated by the Digital Sale Agreement, the matter was referred to an independent third party
accounting firm for determination of the appropriate adjustment amount. On February 22, 2013, the
independent third party accounting firm issued its determination of the appropriate working capital
adjustment, which was consistent with the amount we had accrued. As a result, no adjustment to the
previously recorded gain on sale of discontinued operations, net of tax was required. Transaction costs
relating to the Digital Sale amounted to $7,387. Additionally, $11,075 of inducements payable to
Autonomy have been netted against the proceeds in calculating the gain on the Digital Sale. 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.
135
IRON MOUNTAIN INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
DECEMBER 31, 2012
(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:
Total Revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 203,479
$ 79,199
$ —
Year Ended December 31,
2010
2011(1)
2012
Loss Before Benefit for Income Taxes of Discontinued Operations . . . .
Benefit for Income Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$(235,161) $ (31,094) $ (75)
(505)
(13,744)
(19,682)
(Loss) Income from Discontinued Operations, Net of Tax . . . . . . . . . . .
$(215,479) $ (17,350) $ 430
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 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$(215,479) $181,385
$ 430
(1) Includes the results of operations of our Digital Business 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 $14,336 and $2,396 for the years ended December 31, 2010 and 2011,
respectively.
New Zealand Operations
We completed the sale of our New Zealand operations on October 3, 2011 for a purchase price of
approximately $10,000. During the second quarter of 2011, we recorded an impairment charge of
$4,900 to write-down the long-lived assets of our New Zealand operations to its estimated net
realizable value, which is included in income (loss) from discontinued operations. In the calculation of
the carrying value of our New Zealand operations, 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 our New Zealand operations, which is also reflected in income (loss) from
discontinued operations. No valuation allowance was provided against this benefit as such amount is
recoverable against the capital gain associated with the Digital Sale. We recorded a gain on the sale of
discontinued operations associated with our New Zealand operations of $1,884 during the fourth
quarter of 2011 which primarily represents cumulative translation adjustment associated with our New
136
IRON MOUNTAIN INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
DECEMBER 31, 2012
(In thousands, except share and per share data)
14. Discontinued Operations (Continued)
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 operations
were previously included within the International Business segment. For all periods presented, the
financial position, operating results and cash flows of our New Zealand operations, including the gain
on the sale, have been reported as discontinued operations for financial reporting purposes.
The table below summarizes certain results of our New Zealand operations:
Year Ended December 31,
2010
2011(1)
2012
Total Revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$7,414
$ 6,489
$ —
Loss Before Benefit for Income Taxes of Discontinued Operations . . . . . . . .
Benefit for Income Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ (533) $(4,726) $(88)
(34)
— (7,883)
(Loss) Income from Discontinued Operations, Net of Tax . . . . . . . . . . . . . . .
$ (533) $ 3,157
$(54)
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 . . . .
$ (533) $ 5,041
$(54)
(1) Includes the results of operations of New Zealand through October 3, 2011, the date the sale of
our New Zealand operations was consummated.
Italian Operations
We sold our Italian operations on April 27, 2012, and we agreed to indemnify the buyers of our
Italian operations for certain possible costs associated with the fire in Italy discussed more fully in
Note 10.g. A loss on sale of discontinued operations in the amount of $1,885 was recorded during the
year ended December 31, 2012 as a result of the sale of our Italian operations. Approximately $383 of
cumulative translation adjustment associated with our Italian operations was reclassified from
accumulated other comprehensive items, net and reduced the loss on the sale by the same amount. We
allocated the goodwill of our Continental Western European reporting unit between our Italian
operations and the remainder of this reporting unit on a relative fair value basis. During the third
quarter of 2011, we recorded an impairment charge of $17,100 to write down the long-lived assets of
our Italian operations to its estimated net realizable value, which is included in loss from discontinued
operations. Our Italian operations were previously included within the International Business segment.
For all periods presented, the financial position, operating results and cash flows of our Italian
operations, including the loss on the sale, have been reported as discontinued operations for financial
reporting purposes.
137
IRON MOUNTAIN INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
DECEMBER 31, 2012
(In thousands, except share and per share data)
14. Discontinued Operations (Continued)
The table below summarizes certain results of our Italian operations:
Total Revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$18,284
$ 15,353
$ 2,138
Year Ended December 31,
2010
2011
2012(1)
Loss Before Benefit for Income Taxes of Discontinued Operations . . . . .
Benefit for Income Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ (3,756) $(35,350) $(8,692)
(1,542)
(2,104)
(351)
Loss from Discontinued Operations, Net of Tax . . . . . . . . . . . . . . . . . .
$ (3,405) $(33,246) $(7,150)
Loss on Sale of Discontinued Operations . . . . . . . . . . . . . . . . . . . . . . .
Provision for Income Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ — $
—
— $(1,885)
—
—
Loss on Sale of Discontinued Operations, Net of Tax . . . . . . . . . . . . . .
$ — $
— $(1,885)
Total Loss from Discontinued Operations and Sale, Net of Tax . . . . . . .
$ (3,405) $(33,246) $(9,035)
(1) Includes the results of operations of Italy through April 27, 2012, the date the sale of our Italian
operations was consummated.
The carrying amounts of the major classes of assets and liabilities of our Italian operations were as
follows:
December 31, 2011
Accounts receivable, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Prepaid expenses and other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Current assets of discontinued operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
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 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Non-current liabilities of discontinued operations . . . . . . . . . . . . . . . . . . . . . . . . .
$4,676
602
5,278
1,978
1,978
$7,256
$ 118
563
2,552
41
3,274
43
43
Liabilities of discontinued operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$3,317
138
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: March 1, 2013
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/ WILLIAM L. MEANEY
William L. Meaney
/s/ BRIAN P. MCKEON
Brian P. McKeon
/s/ C. RICHARD REESE
C. Richard Reese
/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
President and Chief Executive Officer
and Director (Principal Executive
Officer)
Executive Vice President and Chief
Financial Officer (Principal Financial
and Accounting Officer)
March 1, 2013
March 1, 2013
Executive Chairman of the Board of
Directors
March 1, 2013
March 1, 2013
March 1, 2013
March 1, 2013
March 1, 2013
March 1, 2013
Director
Director
Director
Director
Director
139
Name
Title
Date
/s/ MICHAEL LAMACH
Michael Lamach
/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
Director
March 1, 2013
March 1, 2013
March 1, 2013
March 1, 2013
March 1, 2013
March 1, 2013
140
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
3.1
3.2
4.1
4.2
4.3
4.4
4.5
4.6
4.7
4.8
Item
Purchase and Sale Agreement, among Autonomy Corporation plc, the Company 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.)
Indenture for 71⁄4% GBP Senior Subordinated Notes due 2014, dated as of January 22, 2004,
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.)
Fourth Supplemental Indenture, dated as of October 16, 2006, 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% Euro 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, among the Company, the
Guarantors named therein and The Bank of New York Trust Company, N.A., as trustee,
relating to the 63⁄4% Euro 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, 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, 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% CAD Senior Subordinated
Notes due 2017. (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, 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, among the Company, the
Guarantors named therein and The Bank of New York Mellon 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.)
141
Exhibit
4.9
4.10
4.11
4.12
10.1
10.2
10.3
10.4
10.5
10.6
10.7
10.8
10.9
Item
Senior Subordinated Indenture, 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.)
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, relating to the 73⁄4% Senior Subordinated Notes due 2019.
(Incorporated by reference to the Company’s Current Report on Form 8-K dated September 29,
2011.)
Second Supplemental Indenture, dated as of August 10, 2012, among the Company, the
Guarantors named therein and The Bank of New York Mellon Trust Company, N.A., as
trustee, relating to the 53⁄4% Senior Subordinated Notes due 2024. (Incorporated by reference to
the Company’s Current Report on Form 8-K dated August 10, 2012.)
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.)
2008 Restatement of 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, 2007.)
First Amendment to 2008 Restatement of 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.)
Third Amendment to 2008 Restatement of the Iron Mountain Incorporated Executive
Deferred Compensation Plan. (#) (Incorporated by reference to the Company’s Quarterly Report
on Form 10-Q for the quarter ended June 30, 2012.)
Fourth Amendment to 2008 Restatement of the Iron Mountain Incorporated Executive
Deferred Compensation Plan. (#) (Filed herewith.)
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 with the Commission on April 21, 2008.)
10.10
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.)
10.11
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.)
142
Exhibit
10.12
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.)
Item
10.13 Omnibus Performance Unit 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 September 30, 2012.)
10.14
10.15
10.16
10.17
10.18
10.19
10.20
10.21
10.22
10.23
10.24
10.25
10.26
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.)
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, between the Company 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 (version 3). (#) (Incorporated by reference to the Company’s Quarterly
Report on Form 10-Q for the quarter ended June 30, 2012.)
143
Exhibit
Item
10.27 Change in Control Agreement, dated December 10, 2008, between the Company and Brian P.
McKeon. (Incorporated by reference to the Company’s Current Report on Form 8-K dated
December 10, 2008.)
10.28
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.)
10.29 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.)
10.30
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.)
10.31 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.)
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 Addendum, dated March 19, 2012, to the Contract of Employment between Iron Mountain
BPM International Sarl and Marc Duale, dated September 29, 2011, together with the
Contract of Employment between Iron Mountain BPM International Sarl and Marc Duale,
dated September 29, 2011, the Agreement Regarding the Suspension of the Employment
Contract, effective September 30, 2011, and the Terms and Conditions for the Office of
Director (Gerant) between Iron Mountain BPM SPRL and Marc Duale, dated October 1,
2011. (#) (Incorporated by reference to the Company’s Quarterly Report on Form 10-Q for the
quarter ended March 31, 2012.)
10.34 Employment Offer Letter, dated November 30, 2012, from the Company to William L.
Meaney. (#) (Incorporated by reference to the Company’s Current Report on Form 8-K dated
December 3, 2012.)
10.35 Restated Compensation Plan for Non-Employee Directors. (#) (Filed herewith.)
10.36
10.37
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.)
The Iron Mountain Companies Severance Plan. (#) (Incorporated by reference to the Company’s
Current Report on Form 8-K, dated March 13, 2012.)
10.38 Amended and Restated Severance Plan Severance Program No. 1. (#) (Incorporated by
reference to the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31,
2012.)
10.39
10.40
First Amendment to Amended and Restated Severance Plan Severance Program No. 1. (#)
(Filed herewith.)
Severance Program No. 2. (#) (Incorporated by reference to the Company’s Current Report on
Form 8-K dated December 3, 2012.)
10.41 Amended and Restated Registration Rights Agreement, dated as of June 12, 1997, 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.)
144
Exhibit
Item
10.42 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 and other financial institutions party thereto, JPMorgan Chase Bank, Toronto
Branch, as Canadian Administrative Agent, and JPMorgan Chase Bank, N.A., as
Administrative Agent. (Incorporated by reference to the Company’s Quarterly Report on
Form 10-Q for the quarter ended June 30, 2011.)
10.43 Amendment to Credit Agreement, dated as of August 15, 2012, 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 and other financial institutions party thereto, JPMorgan Chase Bank, Toronto
Branch, as Canadian Administrative Agent, and JPMorgan Chase Bank, N.A., as
Administrative Agent. (Incorporated by reference to the Company’s Quarterly Report on
Form 10-Q for the quarter ended September 30, 2012.)
10.44
Second Amendment to Credit Agreement, dated as of January 31, 2013, 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 Luxembourg S.a r.l., the lenders and other financial institutions party
thereto, JPMorgan Chase Bank, Toronto Branch, as Canadian Administrative Agent, and
JPMorgan Chase Bank, N.A., as Administrative Agent. (Incorporated by reference to the
Company’s Current Report on Form 8-K dated February 4, 2013.)
10.45 Agreement of Resignation, Appointment and Acceptance, dated as of January 28, 2005, 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, Elliot Associates, L.P. and Elliot
International, L.P., dated April 18, 2011. (Incorporated by reference to the Company’s Current
Report on Form 8-K dated April 19, 2011.)
12
21.1
23.1
31.1
31.2
32.1
32.2
101.1
Statement re: Computation of Ratios. (Filed herewith.)
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. (Furnished herewith.)
Section 1350 Certification of Chief Financial Officer. (Furnished herewith.)
The following materials from Iron Mountain Incorporated’s Annual Report on Form 10-K for
the year ended December 31, 2012 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. (Filed herewith.)
145
EXHIBIT 12
STATEMENT OF THE CALCULATION OF RATIO OF EARNINGS TO FIXED CHARGES
IRON MOUNTAIN INCORPORATED
(Dollars in thousands)
Year Ended December 31,
2008
2009
2010
2011
2012
Earnings:
Income from Continuing Operations before
Provision for Income Taxes . . . . . . . . . . .
Add: Fixed Charges . . . . . . . . . . . . . . . . . .
$240,766
309,991
$345,279
292,860
$334,222
284,052
$352,900
286,241
$298,366
326,261
$550,757
$638,139
$618,274
$639,141
$624,627
Fixed Charges:
Interest Expense, Net . . . . . . . . . . . . . . . . .
Interest Portion of Rent Expense . . . . . . . . .
$219,989
90,002
$212,545
80,315
$204,559
79,493
$205,256
80,985
$242,599
83,662
$309,991
$292,860
$284,052
$286,241
$326,261
Ratio of Earnings to Fixed Charges . . . . . . . . .
1.8x
2.2x
2.2x
2.2x
1.9x
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
We consent to the incorporation by reference in Registration Statement No. 333-167837 on
Form S-3ASR, No. 333-91577 on Form S-4 and Nos. 333-43787, 333-89008, 333-95901, 333-105938,
333-118322, 333-120395, 333-126982, 333-130270, 333-138716, 333-147995, 333-155304, and 333-165261
on Form S-8 of our report dated March 1, 2013, relating to the financial statements of Iron Mountain
Incorporated (the ‘‘Company’’), and the effectiveness of the Company’s internal control over financial
reporting, appearing in this Annual Report on Form 10-K of Iron Mountain Incorporated for the year
ended December 31, 2012.
Exhibit 23.1
/s/ DELOITTE & TOUCHE LLP
Boston, Massachusetts
March 1, 2013
EXHIBIT 31.1
I, William L. Meaney, certify that:
CERTIFICATIONS
1.
I have reviewed this annual report on Form 10-K of Iron Mountain Incorporated;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or
omit to state a material fact necessary to make the statements made, in light of the circumstances
under which such statements were made, not misleading with respect to the period covered by this
report;
3. Based on my knowledge, the financial statements, and other financial information included in this
report, fairly present in all material respects the financial condition, results of operations and cash
flows of the registrant as of, and for, the periods presented in this report;
4. The registrant’s other certifying officers and I are responsible for establishing and maintaining
disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e))
and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and
15d-15(f)) for the registrant and have:
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and
procedures to be designed under our supervision, to ensure that material information relating
to the registrant, including its consolidated subsidiaries, is made known to us by others within
those entities, particularly during the period in which this report is being prepared;
(b) Designed such internal control over financial reporting, or caused such internal control over
financial reporting to be designed under our supervision, 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;
(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and
presented in this report our conclusions about the effectiveness of the disclosure controls and
procedures, as of the end of the period covered by this report based on such evaluation; and
(d) Disclosed in this report any change in the registrant’s internal control over financial reporting
that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal
quarter in the case of an annual report) that has materially affected, or is reasonably likely to
materially affect, the registrant’s internal control over financial reporting; and
5. The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation
of internal control over financial reporting, to the registrant’s auditors and the audit committee of
registrant’s board of directors (or persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design or operation of internal
control over financial reporting which are reasonably likely to adversely affect the registrant’s
ability to record, process, summarize and report financial information; and
(b) Any fraud, whether or not material, that involves management or other employees who have a
significant role in the registrant’s internal control over financial reporting.
Date: March 1, 2013
/s/ WILLIAM L. MEANEY
William L. Meaney
President and Chief Executive Officer
EXHIBIT 31.2
I, Brian P. McKeon, certify that:
CERTIFICATIONS
1.
I have reviewed this annual report on Form 10-K of Iron Mountain Incorporated;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or
omit to state a material fact necessary to make the statements made, in light of the circumstances
under which such statements were made, not misleading with respect to the period covered by this
report;
3. Based on my knowledge, the financial statements, and other financial information included in this
report, fairly present in all material respects the financial condition, results of operations and cash
flows of the registrant as of, and for, the periods presented in this report;
4. The registrant’s other certifying officers and I are responsible for establishing and maintaining
disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e))
and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and
15d-15(f)) for the registrant and have:
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and
procedures to be designed under our supervision, to ensure that material information relating
to the registrant, including its consolidated subsidiaries, is made known to us by others within
those entities, particularly during the period in which this report is being prepared;
(b) Designed such internal control over financial reporting, or caused such internal control over
financial reporting to be designed under our supervision, 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;
(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and
presented in this report our conclusions about the effectiveness of the disclosure controls and
procedures, as of the end of the period covered by this report based on such evaluation; and
(d) Disclosed in this report any change in the registrant’s internal control over financial reporting
that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal
quarter in the case of an annual report) that has materially affected, or is reasonably likely to
materially affect, the registrant’s internal control over financial reporting; and
5. The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation
of internal control over financial reporting, to the registrant’s auditors and the audit committee of
registrant’s board of directors (or persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design or operation of internal
control over financial reporting which are reasonably likely to adversely affect the registrant’s
ability to record, process, summarize and report financial information; and
(b) Any fraud, whether or not material, that involves management or other employees who have a
significant role in the registrant’s internal control over financial reporting.
Date: March 1, 2013
/s/ BRIAN P. MCKEON
Brian P. McKeon
Chief Financial Officer
CERTIFICATION PURSUANT TO
18 U.S.C. Section 1350, as adopted pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002
EXHIBIT 32.1
In connection with the filing of the Annual Report on Form 10-K for the year ended
December 31, 2012 (the ‘‘Report’’) by Iron Mountain Incorporated (the ‘‘Company’’), the undersigned,
as the President and Chief Executive Officer of the Company, hereby certifies pursuant to 18 U.S.C.
Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to my
knowledge:
1.
2.
the Report fully complies with the requirements of Section 13(a) or Section 15(d) of the Securities
Exchange Act of 1934; and
the information contained in the Report fairly presents, in all material respects, the financial
condition and results of operations of the Company.
Date: March 1, 2013
/s/ WILLIAM L. MEANEY
William L. Meaney
President and Chief Executive Officer
CERTIFICATION PURSUANT TO
18 U.S.C. Section 1350, as adopted pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002
EXHIBIT 32.2
In connection with the filing of the Annual Report on Form 10-K for the year ended
December 31, 2012 (the ‘‘Report’’) by Iron Mountain Incorporated (the ‘‘Company’’), the undersigned,
as the Chief Financial Officer of the Company, hereby certifies pursuant to 18 U.S.C. Section 1350, as
adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to my knowledge:
1.
2.
the Report fully complies with the requirements of Section 13(a) or Section 15(d) of the Securities
Exchange Act of 1934; and
the information contained in the Report fairly presents, in all material respects, the financial
condition and results of operations of the Company.
Date: March 1, 2013
/s/ BRIAN P. MCKEON
Brian P. McKeon
Chief Financial Officer
CO RP O RATE DIREC TO RS AN D O FFICERS
(As of 3/31/13)
DIRECTORS
Alfred J. Verrecchia1, 4, 5
Chairman of the Board of Directors
Iron Mountain Incorporated
Boston, MA
Ted R. Antenucci 1, 4
President and Chief Executive Officer
Catellus Development Corporation
Oakland, CA
Clarke H. Bailey2
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
Senior Managing Director
Evercore Partners, Inc.
Waltham, MA and San Francisco, CA
Per-Kristian Halvorsen 3
Senior Vice President and Chief Innovation Officer
Intuit Inc.
Mountain View, CA
Michael W. Lamach 2
President, Chief Executive Officer and
Chairman of the Board of Directors
Ingersoll-Rand, plc
Davidson, NC
SENIOR OFFICERS
William L. Meaney
President and Chief Executive Officer
Arthur D. Little1, 3
President and Principal
L Squared Inc.
Effingham, NH
Allan Z. Loren
Executive Coach
Retired Chairman and Chief Executive Officer
Dun and Bradstreet
New York, NY
William L. Meaney
President and Chief Executive Officer
Iron Mountain Incorporated
Boston, MA
Vincent J. Ryan4
Chief Executive Officer and
Chairman of the Board of Directors
Schooner Capital Corporation
Boston, MA
Laurie A. Tucker 3
Senior Vice President of Corporate Marketing
FedEx Services, Inc.
Memphis, TN
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 Independent Chairman of the Board.
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CO RP O RATE INFO RMATIO N
STOCKHOLDER INFORMATION
Transfer Agent, Trustee and Registrar
Computershare
877/897-6892
201/680-6578 (outside the United States)
800/231-5469 (hearing impaired – TDD phone)
shrrelations@cpushareownerservices.com
www.computershare.com/investor
Address stockholder inquiries and send certificates for
transfer and address changes to:
Iron Mountain Incorporated
c/o Computershare
P.O. Box 43006
Providence, RI 02940-3006
Overnight delivery
250 Royal Street
Canton, MA 02021
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 62,500
Investor Relations
Melissa Marsden
Senior 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 stockholders on Thursday, June 6, 2013,
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 have paid, and in
the future intend to pay, quarterly cash dividends
on our common stock. In June 2011, our Board of
Directors increased the quarterly dividend rate
from $0.1875 per share to $0.25 per share. In June
2012, our Board of Directors further increased
the quarterly dividend rate to $0.27 per share.
On October 11, 2012, we announced the declaration
by our Board of Directors of a special dividend of
$700 million (the ‘‘Special Dividend’’) on our shares
of common stock, payable, at the election of the
stockholders, in either common stock or cash to stock-
holders of record as of October 22, 2012 (the ‘‘Record
Date’’). The Special Dividend, which is a distribu-
tion to stockholders of a portion of our accumulated
earnings and profits, was paid in a combination of
common stock and cash on November 21, 2012, to
stockholders of record as of the Record Date. The
total amount of cash paid to all stockholders associ-
ated with the Special Dividend was approximately
$140 million (including cash paid in lieu of fractional
shares). Our shares of common stock were valued
for purposes of the Special Dividend based upon
the average closing price on the three trading days
following November 14, 2012, or $32.87 per share,
and we issued approximately 17 million shares of our
common stock in connection with the Special Dividend.
Our Board of Directors has authorized up to $1.2 billion
in repurchases of our common stock. As of February
8, 2013, 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 condi-
tion, results of operations, business requirements, the
price of our common stock (in the case of the repur-
chase 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.
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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 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) commitment
to future dividend payments, (2) expected target leverage ratio, (3)
expected internal revenue growth rate and capital expenditures for 2013,
(4) expected increase in our Adjusted OIBDA margins in our International
Business segment, (5) expected growth in cartons stored on behalf of
existing customers, and (6) estimated range of tax payments and other
costs expected to be incurred in connection with our proposed conversion
to a real estate investment trust (‘‘REIT’’). These 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:
• although we plan to pursue conversion to a REIT, there are, in fact,
significant implementation and operational complexities to address
before we can convert to a REIT, including obtaining a favorable
private letter ruling (“PLR”) from the U.S. Internal Revenue Service
(“IRS”), completing internal reorganizations and modifying accounting,
information technology and real estate systems, receiving stockholder
approvals and making required stockholder payouts. In addition, we plan
to elect REIT status no earlier than the taxable year beginning January
1, 2014, but, in fact, we do not know when, if at all, we will elect REIT
status, and we may not do so. Further, as described in the accompanying
Annual Report on Form 10-K for the year ended December 31, 2012,
many conditions must be met in order to complete the conversion to
a REIT, and the timing and outcome of many of these are beyond our
control. Therefore, we can provide no assurance when conversion to a
REIT will be successful, if at all;
• with regard to our estimated tax and other REIT conversion costs, our
estimates may not be accurate, and such costs may turn out to be
materially different than our estimates due to unanticipated outcomes
in the PLR from the IRS, changes in our support functions and support
costs, the unsuccessful execution of internal planning, including
restructurings and cost reduction initiatives, or other factors;
• realizing the anticipated benefits to stockholders of our proposed REIT
conversion, including the achievement of tax savings for us, increases in
income distributable to stockholders, the potential to lower the cost of
financing through increased ownership of currently leased real estate,
maximizing our enterprise value and the expansion of our stockholder
base;
• 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 storage and information management
services relative to the cost of providing such storage and information
management services;
• changes in customer preferences and demand for our storage and
information management 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 United States;
• changes in the political and economic environments in the countries in
which our international subsidiaries operate;
• claims that our technology violates the intellectual property rights of a
third party;
• the cost of our debt;
• the impact of alternative, more attractive investments on dividends;
• 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 Form
10-K for the year ended December 31, 2012.
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 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, 617/535-4766, or
corporatesecretary@ironmountain.com.
O PERATIO NAL LOCATIO NS
(As of 12/31/12)
BUSINESS OPERATIONS
Asia Pacific
Australia
China
Hong Kong-SAR
India
Singapore
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
T
R
O
P
E
R
l
A
u
n
n
A
2
1
0
2
DElivERing
SuStainable Value
431894.Cover.cs5.indd 2-3
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1477-AR-13