Iron Mountain
Annual Report 2014

Plain-text annual report

3APR201420591154 2014 Annual Financial Report and Stockholder Letter Dear Stockholders Having been at the helm of Iron Mountain for two years, and as only the fourth person to lead the company in its 64-year history, I continue to appreciate the power of our brand, our deep heritage of providing records and storage solutions for an array of enterprise needs, and the uncompromising dedication of our employees. During 2014, we leveraged all these strengths to deliver solid performance in line with our 3-year strategic plan. As previously outlined, our plan rests on three pillars: driving continued profitable growth in our developed markets, extending our reach into emerging markets, and identifying, incubating and scaling emerging business opportunities. Through the execution of this plan, we aim to deliver 4% compound annual growth in revenue and profits through 2016, as measured using constant currency rates. We expect that profit growth, combined with our dividend yield, to support total stockholder returns of roughly 8% to 9% over that timeframe. In fact, driven by our successful conversion to a Real Estate Investment Trust (REIT) during the year and the related special distribution of $700 million in stock and cash dividends, we delivered total stockholder return of 49% in 2014 – making us one of the top performers in the S&P 500 and major REIT Indexes. Overall Operating Performance Consistent with Plan Similar to most multinational companies, the significant strengthening of the dollar in late 2014 impacted our reported financial results. We grew Total Revenue and Adjusted OIBDA by more than 3%; however, on a constant dollar basis, which we believe more accurately reflects core operating performance, we grew these measures by nearly 5% – at the high end of our expectations. These solid results were supported by the durability of our storage rental business. Total storage revenue, a key economic driver of our business, grew 5% in constant dollars, reflecting our continued focus on driving net positive records volume and storage rental revenue growth in developed markets as well as further expansion into higher-growth emerging markets. Importantly, we saw improving fundamentals as we progressed throughout the year and are maintaining momentum as we move into 2015. Driving Continued Profitable Growth in Developed Markets Throughout our developed markets, we look to attract new business from customers who do not currently outsource their records storage and information management, and gain a larger share of the vended market through targeted solutions and a vertical market approach. In our North American Records Management segment, we turned around recent volume trends and achieved positive internal volume growth, prior to any acquisitions. This success was driven in part by a meaningful improvement in customer retention, which was supported by new tools and information insights to better serve our customers. We also achieved enhanced growth in volume from new customers and maintained consistent new record volumes from our existing customers. During the year, we further sharpened our focus in developed markets with the sale of our shred operations in the United Kingdom, Ireland, and Australia. We chose to divest these businesses because they were much smaller than our North American operations, and we did not benefit from the same scale in these markets. Extending Our Reach into Emerging Markets We are making good progress toward our goal of generating 16% of total revenue from emerging markets by the end of 2016. At year end, these high-growth markets represented 14% of total revenues in constant dollars and delivered strong double-digit internal storage revenue growth. As noted, the strengthening of the dollar impacted our reported results. However, we continue to see attractive growth potential in both storage and services in emerging markets as customers in those regions embrace outsourcing of enterprise storage and believe we can create value by investing with a strong U.S. dollar during this part of the currency cycle. In addition, unlike more mature multinational companies whose growth rates are fairly similar around the globe, we are positioned to invest our capital in emerging markets that are still early in the growth cycle, enabling us to capture higher growth rates at a lower investment cost, thereby enhancing our returns over the long-term. Acquisitions continue to be an integral part of our strategy. We completed $190 million of acquisitions in 2014, including purchasing the records inventory of small records management companies. More than $125 million of this amount was invested in emerging markets throughout Eastern Europe, Latin America, and the Asia Pacific regions. We have a number of acquisition opportunities in emerging markets with more than four times the pipeline coverage needed to achieve our goal of 16% of total revenue from these regions. We continue to evaluate these opportunities in light of their favorable underlying growth dynamics and ability to support the durability of our business. Pursuing New Business Opportunities Within our emerging business opportunity area, we made progress in our data center operations, investing a total of roughly $35 million in 2014 in our underground facility in Pennsylvania and our first above-ground facility in Massachusetts. We continue to leverage our data management sales channel as we selectively invest in this initiative and assess its long-term potential. We also are evaluating other emerging business opportunities that leverage our unique platform as a leader in enterprise storage. We see the potential to extend our brand in secure chain of custody and logistics to a broader range of offerings. Many of these opportunities are customer-driven where they have asked for our assistance in solving an enterprise storage need, whether it be upstream in their supply chain or downstream to support distribution. Successful Conversion to a REIT Our three-year pursuit of REIT conversion culminated in a successful outcome in June 2014 with the receipt of the required private letter rulings from the U.S. Internal Revenue Service. We created nearly $2.4 billion of stockholder value through a combination of the special distribution of our remaining cumulative earnings and profits, the boost in our ordinary quarterly dividend per share and a substantial increase in our stock price. Following conversion, we expanded our REIT investor outreach and were added to the MSCI REIT and FTSE NAREIT indexes. Inclusion in these important benchmarks is important for generating a higher level of awareness of Iron Mountain as an attractive REIT investment. Moreover, the pillars of our strategic plan support the durability of our business, the sustainability of our cash flow and our fit as a REIT. When considering the nature of our business, our enterprise storage foundation compares very favorably with self-storage. We have superior customer credit quality given our service to more than 92% of the Fortune 1000. In total, we serve more than 155,000 business customers, and this large base supports a diversified revenue stream and low customer turnover of less than 2% per year. And, unlike consumer self-storage where customers tend to be in transition and generally have temporary space needs, in our enterprise storage model, the average life of a box is 15 years, supporting durability and low volatility in our storage revenue. In fact, we have posted 26 years of consecutive growth in storage rental revenue, a trend that persisted even throughout the recent financial crisis. We also compare very favorably with the industrial property sector when considering the nature of our operating facilities. Our real estate costs are incurred by the square foot, but we generate storage rental revenue by the cubic foot. This multiplier effect generates an attractive spread between our cost and our return on investment. It yields high net operating income per square foot relative to other property types and is core to how we create value for our stockholders. When we invest in incremental racking structures within an existing industrial building, we generate strong returns due to this volume dynamic. And similar to industrial properties, we have low maintenance capital requirements, but our turnover costs are even lower on a per square foot basis. As a REIT, we believe it is important to own more of our underlying properties and intend to invest $800 million to $1 billion over the next 8 to 10 years to purchase a portion of the facilities we currently lease. This shift to a majority of owned, rather than leased, properties supports our REIT status, but it also means we have more options for those buildings over the long term. If we consolidate in a market and no longer operate in buildings we own, we have the ability to lease those properties to customers for other industrial or distribution uses. Additionally, in more densely populated markets, we can create value by selling owned properties or redeveloping the underlying land for alternative use. Importantly, the REIT structure is consistent with our capital allocation goals and does not limit our ability to fund our business plan. As we become more active in acquiring our properties and continue to execute on our acquisition pipeline, we expect to fund incremental investment opportunities with additional borrowing and/or equity issuance, similar to the manner in which most REITs fund their external growth. We believe we have attractive high-return investment opportunities in all of our segments, including potential acquisitions in developed and emerging markets and interesting initiatives to leverage our enterprise storage brand through emerging business opportunities. Over the near term, we intend to maintain our ordinary dividend in line with growth in operating profits, thereby maintaining an attractive dividend yield. Simultaneously, our operating profits provide the cash flow to fund required capital expenditures as well as a portion of our growth investment. We will continue to maintain our capital allocation discipline and, like most REITs, we expect to fund external growth with new capital, while demonstrating our ability to generate required return on these investments. In summary, we have a very durable business supported by attractive fundamentals and additional opportunities to leverage our core brand to extend this durability. We sincerely appreciate the support of our customers and stockholders and the dedication of our employees as we continue to implement our strategic plan and deliver attractive stockholder returns. Yours sincerely, 7APR201410113958 William L. Meaney, President and Chief Executive Officer 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, 2014 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) One Federal Street, Boston, Massachusetts (Address of principal executive offices) 23-2588479 (I.R.S. Employer Identification No.) 02110 (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 30, 2014, the aggregate market value of the Common Stock of the registrant held by non-affiliates of the registrant was approximately $6.2 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 20, 2015: 210,071,985 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 2015 Annual Meeting of Stockholders (our ‘‘Proxy Statement’’) to be filed with the Securities and Exchange Commission (the ‘‘SEC’’) within 120 days after the close of the fiscal year ended December 31, 2014. IRON MOUNTAIN INCORPORATED 2014 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 13 26 26 29 29 30 33 35 70 72 72 72 74 75 75 75 75 75 Item 15. Exhibits and Financial Statement Schedules . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75 PART IV ii References in this Annual Report on Form 10-K to ‘‘the Company,’’ ‘‘IMI,’’ ‘‘Iron Mountain,’’ ‘‘we,’’ ‘‘us’’ or ‘‘our’’ include Iron Mountain Incorporated, a Delaware corporation, and its predecessor, as applicable, and its consolidated subsidiaries, unless the context indicates otherwise. 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 growth in volume of records stored with us from existing customers, (3) expected 2015 consolidated internal revenue growth rate and capital expenditures in 2015, and (4) expected target leverage ratio. 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. In addition, important factors that could cause actual results to differ from expectations include, among others: (cid:127) the cost to comply with current and future laws, regulations and customer demands relating to privacy issues; (cid:127) the impact of litigation or disputes that may arise in connection with incidents in which we fail to protect our customers’ information; (cid:127) changes in the price for our 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; (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 United States; (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) changes in the cost of our debt; (cid:127) changes in the amount of our capital expenditures; (cid:127) the impact of alternative, more attractive investments on dividends; (cid:127) our ability to remain qualified for taxation as a real estate investment trust (‘‘REIT’’); (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. iii 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. iv Item 1. Business. Business Overview 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 and information management services and data management 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 customers throughout North America, Europe, Latin America and the Asia Pacific region. We have a diversified customer base consisting of commercial, legal, banking, healthcare, accounting, insurance, entertainment and government organizations, including more than 92% of the Fortune 1000. As of December 31, 2014, we operated in 36 countries on five continents and employed over 20,000 people. Now in our 64th 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 records and information management services to customers in markets around the world with approximately 1,100 facilities (67.8 million square feet) as of December 31, 2014 and total revenues of more than $3.1 billion for the year ended December 31, 2014. On January 5, 2009, we were added to the S&P 500 Index. On November 28 2014, we were added to the MSCI REIT index and as of December 31, 2014 we were number 712 on the Fortune 1000. REIT Conversion We are committed to delivering stockholder value. To that end, and supported by our strong cash flows, we initiated a stockholder payout program in February 2010 and a dividend policy under which we have paid, and in the future intend to pay, cash dividends on our common stock. In April 2011, we announced a three-year strategic plan to increase stockholder value. A major component of that plan was our commitment 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 cash to stockholders by May 2012, and in June 2012, we announced our intention to pursue conversion to a REIT. The plan 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. Since May 2012, we have returned $2.1 billion of capital to stockholders including $1.0 billion in cash and $1.1 billion in our common stock. As part of our plan to convert to a REIT for federal income tax purposes and elect REIT status effective January 1, 2014, we sought private letter rulings (‘‘PLRs’’) from the United States Internal Revenue Service (the ‘‘IRS’’) relating to numerous technical tax issues, including classification of our steel racking structures as qualified real estate assets. We submitted the PLR requests in the third quarter of 2012, and on June 25, 2014, we announced that we received the favorable PLRs from the IRS necessary for our conversion to a REIT. After receipt of the PLRs, our board of directors unanimously approved our conversion to a REIT for our taxable year beginning January 1, 2014. In connection with our conversion to a REIT and, in particular, to impose ownership limitations customary for REITs, on January 20, 2015, we completed the merger with our predecessor and all outstanding shares of our predecessor’s common stock were converted into a right to receive an equal 1 number of shares of our common stock. Accordingly, references herein to our ‘‘common stock’’ refer to our common stock and the common stock of our predecessor, as applicable. The Durability of Our Business 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. 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. Business Strategy Overview We have transitioned from a growth strategy driven primarily by acquisitions of storage and information management services companies to a strategy that targets multiple sources of revenue growth. Our current strategy is focused on: (1) increasing revenues in developed markets such as the United States, Canada, Australia and western Europe, primarily through improved sales and marketing efforts and attractive fold-in acquisitions; (2) establishing and enhancing leadership positions in high-growth emerging markets such as central and eastern Europe, Latin America and the Asia Pacific region (excluding Australia), primarily through acquisitions; and (3) continuing to identify, incubate and scale emerging business opportunities to support our long-term growth objectives and drive solid returns on invested capital. In our developed markets, we expect continuous improvement initiatives will generate modest profit growth, a portion of which we expect to reinvest in our business. In our existing emerging markets, we expect profits will grow as the local businesses scale, and we will look to reinvest a portion of that improvement to support the growth of these businesses. However, any increases in our international profits will be limited as we seek to make acquisitions in new emerging markets. 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 acquisitions of customer relationships and storage and information management services businesses. In our developed 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 continue to pursue new rental streams through emerging business opportunities. 2 We offer our customers an integrated value proposition by providing them with secure storage and comprehensive service offerings, including records and information management services and data management 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 objective is to continue to capitalize on our brand, our expertise in the storage and information management industry and our global network to enhance our customers’ experience, thereby increasing our customer retention rates and attracting new customers. Our overall growth strategy will focus on growing our business organically, making strategic customer acquisitions, pursuing acquisitions of storage and information management businesses, and developing ancillary businesses and real estate. 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 and New Customers Our existing customers’ storage of physical records contributes to the growth of storage rental and certain records and information management services revenues because, on average, our existing customers generate additional records at a faster rate than old records are destroyed or permanently removed. The growth in new records volume from our existing customers has been consistent in the past three years, and we anticipate this growth will be sustained, although we cannot give any assurance as to whether this growth will continue. In order to maximize growth opportunities from existing customers, we seek to maintain high levels of customer retention by providing premium customer service. 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, records and information management services and products in new and existing markets. Our sales force is 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 related services and products. In order to accomplish these objectives, our sales forces draw on our United States and international marketing organizations and senior management. We are developing tailored marketing strategies to target customers in the healthcare, financial, insurance, legal, life sciences, energy, business services and federal vertical market segments. Growth through Acquisitions The storage and information management services industry is highly fragmented 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. After 2004, acquisition activity was reduced as we focused on integrating these recent transactions and diversifying the business. Beginning again in 2012, we saw opportunities for attractive acquisitions in emerging markets and consolidation opportunities in more developed markets, and resumed acquisition activity. We believe this ongoing acquisition activity is due to opportunities for large providers to achieve economies of scale and meet customer demands for sophisticated, technology-based solutions. Attractive acquisition opportunities, in North America and internationally, many of which are small, continue to exist, and we expect to continue to pursue acquisition of these businesses where we believe they present a good opportunity to create value for our stockholders. Lastly, we have a successful record of acquiring and integrating these businesses. 3 We have acquired, and we continue to seek to acquire, storage and information management services businesses in developed markets including the United States, Canada, Australia and western Europe. Given the relatively small size of most attractive acquisition targets in these markets, future acquisitions are expected to be less significant to our overall revenue growth in these markets than in the past. Occasionally, however, we may be presented with the opportunity to acquire one of the larger businesses in these markets and will evaluate each opportunity with a focus on return on invested capital and the creation of stockholder value. Such was the case with our acquisition in October 2013 of Cornerstone Records Management, LLC and its affiliates. We expect to continue to make acquisitions and investments in storage and information management services businesses in targeted emerging markets outside the United States, Canada, Australia and western Europe. 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. We expect that future acquisitions and investments will focus primarily on expanding priority markets in central and eastern Europe, Latin America and the Asia Pacific region. The experience, depth and strength of local management are particularly important in our emerging market acquisition strategy. Since beginning our international expansion program in January 1999, we have, directly and through joint ventures, expanded our operations into 35 countries. 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 developed market acquisition candidates, when looking at an emerging market 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. We now own more than 98% of our international operations, measured as a percentage of consolidated revenues. 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. Business Characteristics. We generate our revenues by renting storage space to a large and diverse customer base in approximately 1,100 facilities representing 67.8 million square feet of real estate as of December 31, 2014 around the globe and providing to our customers an expanding menu of related and ancillary products and services. Providing outsourced storage is the mainstay of our customer relationships and serves as the foundation for all our revenue growth. Services are a vital part of a comprehensive records management program and consist primarily of the handling and transportation of stored records and information, shredding, document management solutions (‘‘DMS’’), data restoration projects, fulfillment services, consulting services, technology services, product sales (including specially designed storage containers and related supplies), and recurring project revenues. Shredding consists primarily of the scheduled collection and shredding of records and documents generated by business operations and the sale of recycled paper resulting from shredding services. 4 Secure Storage Our storage operations consist of providing non-dedicated storage rental space to our customers. Non-dedicated space allows our customers to increase or decrease the volume of their physical storage over the life of the contract based on their storage needs, while also reducing their risk of loss in the event of natural disaster. Given this non-dedicated space dynamic, the large portfolio of customer contracts, and the fact that no customer accounted for more than 2% of our consolidated revenues as of the year ended December 31, 2014, we assess the performance of our storage rental business predominantly by analyzing trends in segment level storage rental volume and storage rental revenue. Renting secure space to customers for the purpose of storing paper records and data backup media is 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 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. Physical records may also include critical or irreplaceable data such as master audio and video recordings, film and other highly proprietary information, such as energy data. We continue to identify additional areas of physical storage that fit with our core competencies in security and transportation, seeking to provide enterprise storage to businesses in much the same manner that self-storage companies serve consumers. Physical 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 these vital records are higher than for typical storage rental. 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. Physical data management 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 our customers’ data centers. We also manage tape library relocations and support disaster recovery testing and execution. 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 5 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 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 offsite locations on a regular basis and to store 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 an Internet-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. Service Offerings Central to any records management program is the handling and transportation and the eventual destruction of records upon the expiration of retention periods. These activities are accomplished through our extensive service and courier operations. Service charges are generally assessed for each activity on a per unit basis. Courier operations consist primarily of the pickup 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, 2014, our courier fleet consisted of approximately 3,600 owned or leased vehicles. Our other services include secure shredding, DMS, Compliant Records Management and Consulting Services, Health Information Storage and Management Solutions, Entertainment Services, Energy Data Services, Discovery Services and other ancillary services. Our information destruction services consist primarily of physical secure shredding operations and typically include the scheduled pick-up of loose office records that customers accumulate in specially designed secure containers we provide. In addition, secure shredding is a natural extension of our hard copy records management services by completing the lifecycle of a record and involves the shredding of sensitive documents for customers that, in many cases, store their records with us. 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 United States, Canada and Latin America. In December 2014, we sold our secure shredding businesses in the United Kingdom, Ireland and Australia, which were much smaller than our operation in North America, because we did not benefit from scale in these markets. 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 service offerings and enhance our existing customer relationships. We differentiate our offerings from our competitors by providing solutions that complement 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 and information management services that have been tailored for specific industries, such as healthcare, 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 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. 6 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 offsite at our own facilities and by supplying our own personnel to perform management functions on-site at a customer’s premises. Other services that we provide include fulfillment, professional consulting services, and technology escrow services. Business Segments Our North American Records and Information Management Business, North American Data Management Business, and our International Business segments offer storage and the information management services discussed above, in their respective geographies. The amount of revenues derived from our North American Records and Information Management Business, North American Data Management Business, International Business, and Corporate and Other segments and other relevant data, including financial information about geographic areas and product and service lines, for fiscal years 2012, 2013 and 2014 are set forth in Note 9 to Notes to Consolidated Financial Statements included in this Annual Report. North American Records and Information Management Business Our North American Records and Information Management Business segment consists of 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 (‘‘Records Management’’); information destruction services (‘‘Destruction’’); DMS; fulfillment services; and technology escrow services that protect and manage source code. North American Data Management Business Our North American Data Management Business segment consists of the storage and rotation of backup computer media as part of corporate disaster recovery plans throughout the United States and Canada, including service and courier operations (‘‘Data Protection & Recovery’’), server and computer backup services, digital content repository systems to house, distribute, and archive key media assets, and storage, safeguarding and electronic or physical delivery of physical media of all types, primarily for entertainment and media industry clients. International Business Our International Business segment consists of storage and information management services throughout Europe, Latin America and Asia Pacific, including Records Management, Data Protection & Recovery and DMS. Our European operations provide Records Management, Data Protection & Recovery and DMS throughout Europe. Our Latin America operations provide Records Management, Data Protection & Recovery and DMS throughout Argentina, Brazil, Chile, Colombia, Mexico and Peru. Our Asia Pacific operations provide Records Management, Data Protection & Recovery and DMS throughout Australia, with Records Management and Data Protection & Recovery also provided in certain cities in India, Singapore, Hong Kong-SAR and China. Prior to December 2014, our International Business segment offered Destruction in the United Kingdom, Ireland and Australia. 7 Corporate and Other Our Corporate and Other segment consists of our data center business in the United States as well as 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. Our Corporate and Other segment also includes stock-based employee compensation expense associated with all stock options, restricted stock, restricted stock units, performance units and shares of stock issued under our employee stock purchase plans. Emerging Business Opportunities (‘‘EBOs’’) are prospective business lines that we consider investing in to grow and diversify our business. We are seeking businesses with long-term, recurring revenue, preferably with storage rental attributes, which are consistent with and will enhance our REIT structure. Our management team is focused on identifying and evaluating these opportunities. We have established an innovation process so we cautiously and effectively develop opportunities to leverage our capabilities. After we have demonstrated success and met return thresholds, we may potentially acquire businesses to further accelerate our growth in the relevant opportunity. Importantly, the EBO process includes financial hurdles and decision gates to help us evaluate whether we scale or scrap these opportunities, consistent with our disciplined approach to capital allocation. Currently, our data center business is one example of an EBO where we are assessing the potential for additional investment. The growth rate of 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. Our Business Fundamentals Our business fundamentals are based on the recurring nature of our various revenue streams. We generate attractive returns from our differentiated storage rental business model because our occupancy costs, whether in a leased or owned building, are incurred per square foot while our storage revenue is generally earned per cubic foot. The historical predictability of our revenues and the resulting profitability allows us to operate with a high degree of financial leverage. Our business fundamentals consist of: (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 26 consecutive years. This stable and growing storage rental revenue base also provides the foundation for increases in service revenues and profitability. A customer is allocated a certain amount of storage space in our storage facilities but is not allocated a dedicated building or space in a particular building. In practice, we can, and sometimes will, for a variety of reasons, move records from one facility and into another facility. In order to track net move-in and move-out activity of customer materials, as well as to assess the optimization of our real estate portfolio, we regularly assess the utilization of our overall real estate portfolio. On a per building basis, we compare the amount of racking that is being used to store customer materials to the capacity of the entire building assuming it was fully 8 racked (‘‘Total Building Utilization’’). Additionally, we compare the amount of racking that is being used to store customer materials to the capacity of the racking that has been installed (‘‘Total Racking Utilization’’). As of December 31, 2014, our Total Building Utilization and Total Racking Utilization were approximately 83% and 91%, respectively, for our records management business and our Total Building Utilization and Total Racking Utilization were approximately 68% and 81%, respectively, for our data management business. We regularly offer concessions to our customers in order to generate new business opportunities. Such concessions most commonly come in the form of providing free intake costs to transport a customer’s records to one of our facilities, including labor and transportation costs (‘‘Move Costs’’), or payments that are made to a customer’s current records management vendor in order to terminate the customer’s existing contract with that vendor (‘‘Permanent Withdrawal Fees’’). We capitalize Move Costs and Permanent Withdrawal Fees as customer acquisition costs. (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. We believe the durability of our storage rental business is driven by a number of factors, including the trend toward increased records retention, albeit at a lower rate of growth, customer satisfaction with our services and contractual net price increases. The growth in new records volume from our existing customers has been consistent in the past three years, and we anticipate this growth will be sustained, although we cannot give any assurance as to whether this growth will continue. Total net volume growth, including acquisitions, was approximately 3%, 6% and 4% on a global basis for 2012, 2013 and 2014, respectively. (cid:127) Diversified and Stable Customer Base. As of December 31, 2014, we had over 155,000 customers in a variety of industries in 36 countries around the world. We currently provide storage and information management services to legal, financial, healthcare, insurance, life sciences, energy, businesses services and government organizations, including more than 92% 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, 2012, 2013 and 2014. For each of the three years 2012 through 2014, the average annual volume reduction due to customers terminating their relationship with us was approximately 2% to 3%. (cid:127) Capital Allocation. All the characteristics of our business noted above support the durability of our cash flows, which in turn support our dividends and a portion of our investments. Absent a large acquisition or significant investments in real estate, we generally generate cash flows to support our dividends, maintain our operations and infrastructure and invest in core growth opportunities. We plan on funding acquisitions, EBO investments and real estate investments primarily through incremental borrowing at a targeted leverage ratio and/or proceeds from the issuance of equity. Below are descriptions of the major types of investments and other capital expenditures that we have made in recent years or that we are likely to consider in 2015: Real Estate: (cid:127) Capital expenditures for investments in real estate assets that support core business growth— these expenditures are primarily related to investments in land, buildings, building improvements, leasehold improvements and racking structures that expand our revenue capacity in existing or new geographies, replace a long-term operational obligation or create operational efficiencies. (cid:127) Capital expenditures in real estate assets necessary to maintain ongoing business operations— these expenditures are primarily related to the repair or replacement of real estate assets such as buildings, building improvements, leasehold improvements and racking structures. 9 Non-Real Estate: (cid:127) Capital expenditures for investments in non-real estate assets that support core business growth—these expenditures support either (i) the growth of our business and/or an increase of our profitability by investing in either supporting assets such as carton storage systems, tape storage systems and containers, shredding plants and bins, and technology service storage and processing capacity, or (ii) they are directly related to the development of new products or services in support of our integrated value proposition and enhancements that support our leadership position in the industry, including items such as increased feature functionality, security upgrades or system enhancements. (cid:127) Capital expenditures in non-real estate assets necessary to maintain ongoing business operations—these expenditures are primarily related to the repair or replacement of customer-facing assets such as containers and shred bins, warehouse equipment, fixtures, computer hardware, or third-party or internally-developed software assets. This category also includes operational support initiatives such as sales and marketing and information technology projects to support infrastructure requirements. The following table presents our capital spend for 2012, 2013 and 2014 organized by the type of the spending as described above: Nature of Capital Spend (dollars in thousands) Real Estate: Investment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Maintenance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Non-Real Estate: Investment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Maintenance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Year Ended December 31, 2012(1) 2013(1) 2014(1) $113,577 47,013 $135,708 61,863 $199,663 57,574 160,590 197,571 257,237 63,722 24,915 88,637 91,792 22,644 114,436 55,991 19,527 75,518 Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $249,227 $312,007 $332,755 (1) Represents capital expenditures on an accrual basis and may differ from amounts presented on the cash basis in the Consolidated Statements of Cash Flows included in this Annual Report. Competition We are a global leader in the physical storage and information management services industry with operations in 36 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 us 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 we believe we generally compete effectively in each of these areas. 10 Alternative Technologies We derive most of our revenues from rental fees for the storage of paper documents and computer backup tapes and from storage related services. Alternative storage technologies exist, many of which require significantly less space than paper documents and tapes, and as alternative technologies are adopted, storage related services may decline as the physical records or tapes we store become less active and more archived. To date, none of the alternative 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 or a portion of their records as paper documents or in tape format. We continue to provide, primarily through partnerships, additional services such as online backup, 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, 2014, we employed more than 7,500 employees in the United States and more than 12,500 employees outside of the United States. At December 31, 2014, an aggregate of 528 employees were represented by unions in California, Georgia and three provinces in Canada. All union and 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. Certain unionized employees in California receive these types of benefits through their unions and are not eligible to participate in our benefit programs. In addition to base compensation and other usual benefits, all full-time employees participate in some form of incentive-based compensation program that provides payments based on revenues, profits, collections or attainment of specified objectives for the unit in which they work. Management believes that we have good relationships with our employees and unions. All union employees are currently under renewed labor agreements or operating under an extension agreement. Insurance For strategic risk transfer purposes, we maintain a comprehensive insurance program with insurers that we believe to be reputable and that have adequate capitalization in amounts that we believe to be appropriate. Property insurance is purchased on a comprehensive basis, including flood and earthquake (including excess coverage), subject to certain policy conditions, sublimits and deductibles. Property is insured based upon the replacement cost of real and personal property, including leasehold improvements, business income loss and extra expense. Other types of insurance that we carry, which are also subject to certain policy conditions, sublimits and deductibles, include medical, workers’ compensation, general liability, umbrella, automobile, professional, warehouse legal liability and directors’ and officers’ liability policies. Our customer contracts usually contain provisions limiting our liability for damages 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 can provide no 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 11 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, or were affected by waste generated from nearby properties, 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. Where we are aware of environmental conditions that require remediation, we undertake appropriate activity, in accordance with all legal requirements. 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. Corporate Responsibility We are committed to transparent reporting on sustainability and corporate responsibility efforts in accordance with the guidelines of the Global Reporting Initiative. Our corporate responsibility report highlights our progress against key measures of success for our efforts in the community, our environment, and for our people. We are a trusted partner to more than 92% of the Fortune 1000 companies. Iron Mountain is also a member of the Fortune 1000, ranked at 712 as of December 31, 2014, as well as a member of the FTSE4 Good Index, MSCI World ESG Index, MSCI ACWI ESG Index and MSCI USA IMI ESG Index in which include companies that meet globally recognized corporate responsibility standards. A copy of our corporate responsibility report is available on the ‘‘Company’’ section of our website, www.ironmountain.com, under the heading ‘‘Corporate Responsibility.’’ Internet Website Our Internet address is www.ironmountain.com. Under the ‘‘For Investors’’ section on our Internet website, we make available 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. 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.’’ 12 Item 1A. Risk Factors. We face many risks. If any of the events or circumstances described below actually occur, we and 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 Operating as a REIT If we fail to remain qualified as a REIT, we will be subject to tax at corporate income tax rates and will not be able to deduct distributions to stockholders when computing our taxable income. We began operating as a REIT for federal income tax purposes effective for the taxable year beginning January 1, 2014; however, we can provide no assurance that we will remain qualified as a REIT. If we fail to remain qualified as a REIT, we will be taxed at corporate income tax rates unless certain relief provisions apply. REIT qualification involves the application of highly technical and complex provisions of the Internal Revenue Code of 1986, as amended (the ‘‘Code’’), which provisions may change from time to time, 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. If, in any taxable year, we fail to remain qualified for taxation as a REIT and are not entitled to relief under the Code: (cid:127) we will not be allowed a deduction for distributions to stockholders in computing our taxable income; (cid:127) we will be subject to federal and state income tax, including any applicable alternative minimum tax, on our taxable income at regular corporate tax rates; and (cid:127) we will be disqualified from REIT tax treatment for four taxable years following the year we were so disqualified. Any such corporate tax liability could be substantial and would reduce the amount of cash available for other purposes. If we fail to remain qualified for taxation as a REIT, we may need to borrow additional funds or liquidate some investments to pay any additional tax liability. Accordingly, funds available for investment and distributions to stockholders could be reduced. As a REIT, failure to make required distributions would subject us to federal corporate income tax. We expect to continue paying regular quarterly distributions, and, to achieve maximum tax efficiency and retain cash to allow us to make selective discretionary investments, we currently anticipate our typical regular quarterly distributions will be based on a payment of approximately 100% of our REIT taxable income; however, the amount, timing and form of our regular quarterly distributions will be determined, and will be subject to adjustment, by our board of directors. To remain qualified and be taxed as a REIT, we are generally required to distribute at least 90% of our REIT taxable income (determined without regard to the dividends paid deduction and excluding net capital gain) each year to our stockholders. Generally, we expect to distribute all or substantially all of our REIT taxable income. If our cash available for distribution falls short of our estimates, we may be unable to maintain distributions that approximate our REIT taxable income and may fail to remain qualified for taxation as a REIT. In addition, our cash flows from operations may be insufficient to 13 fund required distributions as a result of differences in timing between the actual receipt of income and the recognition of income for federal income tax purposes, or the effect of nondeductible expenditures, such as capital expenditures, payments of compensation for which Section 162(m) of the Code denies a deduction, the creation of reserves or required debt service or amortization payments. To the extent that we satisfy the 90% distribution requirement but distribute less than 100% of our REIT taxable income, we will be subject to federal corporate income tax on our undistributed taxable income. In addition, we will be subject to a 4% nondeductible excise tax if the actual amount that we distribute to our stockholders for a calendar year is less than the minimum amount specified under the Code. We may be required to borrow funds, sell assets or raise equity to satisfy REIT distribution requirements, to comply with asset ownership tests or to fund capital expenditures, future growth and expansion initiatives. In order to meet the REIT distribution requirements and maintain our qualification and taxation as a REIT, or to fund capital expenditures, future growth and expansion initiatives, we may need to borrow funds, sell assets or raise equity, even if the then-prevailing market conditions are not favorable for these borrowings, sales or offerings. Any insufficiency of our cash flows to cover our REIT distribution requirements could adversely impact our ability to raise short- and long-term debt, to sell assets, or to offer equity securities in order to fund distributions required to maintain our qualification and taxation as a REIT. Furthermore, the REIT distribution requirements may increase the financing we need to fund capital expenditures, future growth and expansion initiatives. This would increase our indebtedness. An increase in our outstanding debt could lead to a downgrade of our credit rating. A downgrade of our credit rating could negatively impact our ability to access credit markets. Further, certain of our current debt instruments limit the amount of indebtedness we and our subsidiaries may incur. Additional financing, therefore, may be unavailable, more expensive or restricted by the terms of our outstanding indebtedness. For a discussion of risks related to our substantial level of indebtedness, see ‘‘Risks Relating to Our Indebtedness.’’ 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. In addition, if we fail to comply with specified asset ownership tests applicable to REITs as measured at the end of any calendar quarter, we must correct such failure within 30 days after the end of the applicable calendar quarter or qualify for statutory relief provisions to avoid losing our REIT qualification. As a result, we may be required to liquidate otherwise attractive investments. These actions may reduce our income and amounts available for distribution to our stockholders. Legislative or other actions affecting REITs could have a negative effect on us or our stockholders. At any time, the federal income tax laws governing REITs or the administrative interpretations of those laws may be amended. Federal and state tax laws are constantly under review by persons involved in the legislative process, the IRS, the United States Department of the Treasury and state taxing authorities. Changes to the tax laws, regulations and administrative interpretations, which may have retroactive application, could adversely affect us. In addition, some of these changes could have a more 14 significant impact on us as compared to other REITs due to the nature of our business and our substantial use of taxable REIT subsidiaries (‘‘TRSs’’). We cannot predict with certainty whether, when, in what forms, or with what effective dates, the tax laws, regulations and administrative interpretations applicable to us may be changed. Complying with REIT requirements may limit our flexibility or cause us to forgo otherwise attractive opportunities. To remain qualified as a REIT for federal income tax purposes, we must continually satisfy tests concerning, among other things, the sources of our income, the nature and diversification of our assets and the amounts we distribute to our stockholders. Thus, compliance with these tests may require us to refrain from certain activities and may hinder our ability to make certain attractive investments, including the purchase of non-REIT qualifying operations or assets, the expansion of non-real estate activities, and investments in the businesses to be conducted by our TRSs, and to that extent limit our opportunities and our flexibility to change our business strategy. Furthermore, acquisition opportunities in domestic and international markets may be adversely affected if we need or require the target company to comply with some REIT requirements prior to closing. We conduct a significant portion of our business activities, including our information management services businesses and several of our international operations, through domestic and foreign TRSs. 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 TRSs and other nonqualifying assets. This limitation may affect our ability to make additional investments in non-REIT qualifying operations or assets or in international operations through TRSs. As a REIT, we are limited in our ability to fund distribution payments using cash generated through our TRSs. Our ability to receive distributions from our TRSs is limited by the rules with which we must comply to maintain our status as a REIT. In particular, at least 75% of our gross income for each taxable year as a REIT must be derived from real estate, which principally includes gross income from providing customers with secure storage space. Consequently, no more than 25% of our gross income may consist of dividend income from our TRSs and other nonqualifying types of income. Thus, our ability to receive distributions from our TRSs may be limited, and may impact our ability to fund distributions to our stockholders using cash flows from our TRSs. Specifically, if our TRSs become highly profitable, we might become limited in our ability to receive net income from our TRSs in an amount required to fund distributions to our stockholders commensurate with that profitability. In addition, a significant amount of our income and cash flows from our TRSs is generated from our international operations. In many cases, there are local withholding taxes and currency controls that may impact our ability or willingness to repatriate funds to the United States to help satisfy REIT distribution requirements. Our extensive use of TRSs, including for certain of our international operations, may cause us to fail to remain qualified as a REIT. The net income of our TRSs is not required to be distributed to us, and income that is not distributed to us generally is not subject to the REIT income distribution requirement. However, there may be limitations on our ability to accumulate earnings in our TRSs and the accumulation or reinvestment of significant earnings in our TRSs could result in adverse tax treatment. In particular, if the accumulation of cash in our TRSs causes the fair market value of our securities in our TRSs and other nonqualifying assets to exceed 25% of the fair market value of our assets, we will fail to remain qualified as a REIT. 15 Our cash distributions are not guaranteed and may fluctuate. A REIT generally is required to distribute at least 90% of its REIT taxable income to its stockholders. Our board of directors, in its sole discretion, will determine on a quarterly basis the amount of cash to be distributed to our stockholders based on a number of factors including, but not limited to, our results of operations, cash flow and capital requirements, economic conditions, tax considerations, borrowing capacity and other factors, including debt covenant restrictions that may impose limitations on cash payments, future acquisitions and divestitures, any stock repurchase program and general market demand for our space and services. Consequently, our distribution levels may fluctuate. Even if we remain qualified as a REIT, some of our business activities are subject to corporate level income tax and foreign taxes, which will reduce our cash flows, and we will have potential deferred and contingent tax liabilities. Even if we remain qualified for taxation as a REIT, we may be subject to some federal, state, local and foreign taxes on our income and assets, including alternative minimum taxes, taxes on any undistributed income, and state, local or foreign income, franchise, property and transfer taxes. In addition, we could in certain circumstances be required to pay an excise or penalty tax, which could be significant in amount, in order to utilize one or more relief provisions under the Code to maintain qualification for taxation as a REIT. Our information management services businesses are conducted through wholly owned TRSs because these activities could generate nonqualifying REIT income as currently structured and operated. The income of our domestic TRSs will continue to be subject to federal and state corporate income taxes. In addition, our international assets and operations will continue to be subject to taxation in the foreign jurisdictions where those assets are held or those operations are conducted. Any of these taxes would decrease our earnings and our available cash. We will also be subject to a federal corporate level tax at the highest regular corporate tax rate (currently 35%) on gain recognized from a sale of assets occurring within a specified period (generally ten years) after the effective date of our REIT election, that is, January 1, 2014, to the extent of the built-in-gain based on the fair market value of those assets on the effective date of the REIT election in excess of our then tax basis. In addition, depreciation recapture income that we recognized in our 2014 taxable year and will recognize in subsequent taxable years, as a result of accounting method changes that were effective prior to January 1, 2014, has been and will be fully subject to this 35% tax. In addition, the IRS and any state or local tax authority may successfully assert liabilities against us for corporate income taxes for our pre-REIT period, in which case we will owe these taxes plus applicable interest and penalties, if any. Moreover, any increase in taxable income for these pre-REIT periods will likely result in an increase in pre-REIT accumulated earnings and profits, which could cause us to pay an additional taxable distribution to our stockholders after the relevant determination. Complying with REIT requirements may limit our ability to hedge effectively and increase the cost of our hedging and may cause us to incur tax liabilities. The REIT provisions of the Code limit our ability to hedge liabilities. Generally, income from hedging transactions that we enter into to manage risk of interest rate changes with respect to borrowings made or to be made to acquire or carry real estate assets and income from certain currency hedging transactions related to our non-U.S. operations do not constitute ‘‘gross income’’ for purposes of the REIT gross income tests. To the extent that we enter into other types of hedging transactions, the income from those transactions is likely to be treated as nonqualifying income for purposes of the REIT gross income tests. As a result of these rules, we may need to limit our use of advantageous 16 hedging techniques or implement those hedges through our TRSs. This could increase the cost of our hedging activities because our TRSs would be subject to tax on income or gains resulting from hedges entered into by them or expose us to greater risks associated with changes in interest rates or exchange rates than we would otherwise want to bear. In addition, hedging losses in any of our TRSs generally will not provide any tax benefit, except for being carried forward for possible use against future taxable income in the TRSs. We have limited experience operating as a REIT, which may adversely affect our financial condition, results of operations, cash flow, per share trading price of our common stock, ability to forecast dividends and ability to satisfy debt service obligations. We began operating as a REIT on January 1, 2014 and, as such, have limited operating history as a REIT. In addition, prior to January 1, 2014 our senior management team had no prior experience operating a REIT. We can provide no assurance that our past experience has sufficiently prepared 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. Distributions payable by REITs generally do not qualify for preferential tax rates. Qualifying distributions payable by corporations to individuals, trusts and estates that are United States stockholders are currently eligible for federal income tax at preferential rates. Distributions payable by REITs, in contrast, generally are not eligible for the preferential rates. The preferential rates applicable to regular corporate distributions could cause investors who are individuals, trusts and estates to perceive investments in REITs to be relatively less attractive than investments in the stock of non-REIT corporations that pay distributions, which could adversely affect the value of the stock of REITs, including our common stock. The ownership and transfer restrictions contained in our certificate of incorporation may not protect our status as a REIT, could have unintended antitakeover effects and may prevent our stockholders from receiving a takeover premium. In order for us to remain qualified as a REIT, no more than 50% of the value of outstanding shares of our capital stock may be owned, beneficially or constructively, by five or fewer individuals at any time during the last half of each taxable year other than the first year for which we elect to be taxed as a REIT. In addition, rents from ‘‘affiliated tenants’’ will not qualify as qualifying REIT income if we own 10% or more by vote or value of the customer, whether directly or after application of attribution rules under the Code. Subject to certain exceptions, our certificate of incorporation prohibits any stockholder from owning, beneficially or constructively, more than (i) 9.8% in value of the outstanding shares of all classes or series of our capital stock or (ii) 9.8% in value or number, whichever is more restrictive, of the outstanding shares of any class or series of our capital stock. We refer to these restrictions collectively as the ‘‘ownership limits’’ and we included them in our certificate of incorporation to facilitate our compliance with REIT tax rules. The constructive ownership rules under the Code are complex and may cause the outstanding stock owned by a group of related individuals or entities to be deemed to be constructively owned by one individual or entity. As a result, the acquisition of less than 9.8% of our outstanding common stock (or the outstanding shares of any class or series of our capital stock) by an individual or entity could cause that individual or entity or another individual or entity to own constructively in excess of the relevant ownership limits. Any attempt to own or transfer shares of our common stock or of any of our other capital stock in violation of these restrictions may result in the shares being automatically transferred to a charitable trust or may be void. Even though our certificate of incorporation contains the ownership limits, there can be no assurance that these provisions will be effective to prevent our REIT status from being jeopardized, including under the affiliated tenant rule. Furthermore, there can be no assurance that we will be able 17 to monitor and enforce the ownership limits. If the restrictions in our certificate of incorporation are not effective and as a result we fail to satisfy the REIT tax rules described above, then absent an applicable relief provision, we will fail to remain qualified as a REIT. In addition, the ownership and transfer restrictions could delay, defer or prevent a transaction or a change in control that might involve a premium price for our stock or otherwise be in the best interest of our stockholders. As a result, the overall effect of the ownership and transfer restrictions may be to render more difficult or discourage any attempt to acquire us, even if such acquisition may be favorable to the interests of our stockholders. The ability of our board of directors to change our major policies without the consent of stockholders may not be in the interest of our stockholders. Our board of directors determines our major policies, including policies and guidelines relating to our investments, acquisitions, leverage, financing, growth, operations and distributions to our stockholders. Our board of directors may amend or revise these and other policies and guidelines from time to time without the vote or consent of our stockholders. Accordingly, our stockholders will have limited control over changes in our policies, and any such changes could adversely affect our financial condition, results of operations, the market price of our common stock and our ability to make distributions to our stockholders. Operational Risks Our customers may shift from paper and tape storage to alternative technologies that require less physical space. We derive most of our revenues from rental fees for the storage of paper documents and computer backup tapes and from storage related services. Alternative storage technologies exist, many of which require significantly less space than paper documents and tapes, and as alternative technologies are adopted, storage related services may decline as the physical records or tapes we store become less active and more archived. We can provide no assurance that our customers will continue to store most or a portion of their records as paper documents or in tape format. The adoption of alternative technologies may also result in decreased demand for services related to the paper documents and tapes we store. A significant shift by our customers to storage of data through non-paper or tape-based technologies, whether now existing or developed in the future, could adversely affect our businesses. As stored records become less active our service revenue growth and profitability may decline. Our records management 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 we continue to experience growth in storage rental, our customers are less likely than they have been in the past to retrieve records, thereby reducing their service activity levels. At the same time many of our costs related to records related services remain fixed. In addition, our reputation for providing secure information storage is critical to our success, and actions to manage cost structure, such as outsourcing certain transportation, security or other functions, could negatively impact our reputation and adversely affect our business. Ultimately, if we are unable to appropriately align our cost structure with decreased levels of service revenue, our operating results could be adversely affected. 18 Changes in customer behavior with respect to document destruction and pricing could adversely affect our business, financial condition and results of operations. We have experienced pricing pressure in recent years as some customers have become more cost conscious with respect to their information management expenditures. Some customers have taken actions designed to reduce costs associated with the retention of documents, including reducing the volume of documents they store and adopting more aggressive destruction practices. If we are unable to increase pricing over time, or if rates of destruction of documents stored with us increase substantially, particularly in our developed and slower growing markets, our financial condition and results of operations would be adversely affected. 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. 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 addition, if we fail to protect our own information, including information about our employees, we could experience significant costs and expenses as well as damage to our reputation. In reaction to publicized incidents in which electronically stored information has been lost, illegally accessed or stolen, almost all states in the United States have adopted breach of data security statutes or regulations that require notification to consumers if the security of their personal information 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. Some states in the United States have adopted regulations requiring every company that maintains or stores personal information to adopt a comprehensive written information security program. The European Commission has proposed a 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 proposed regulation and directive will significantly alter the security and privacy obligations of entities, such as Iron Mountain, that process data of residents of members of the European Union and substantially increase penalties for violations. If adopted, we would be directly subject to some of these laws, and our customers, pursuant to agreements, would require us to comply with others. Continued governmental focus on data security may lead to additional legislative action in the United States. For example, the recently completed 113th Congress considered legislation that would expand the federal data breach notification requirement beyond the financial and medical fields, and it is anticipated that the 114th Congress will also consider such issues. Also, an increasing number of countries have introduced and/or increased enforcement of comprehensive privacy laws, or are expected to do so. The continued emphasis on information security as well as increasing concerns about government surveillance may lead customers to request that we take additional measures to enhance security and assume higher liability under our contracts. While 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 or losses of information, our reputation may be damaged by any 19 compromise of security, accidental loss or theft of our own records, or information that we maintain with respect to our employees, as well as 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. Changing fire and safety standards may result in significant expense in certain jurisdictions. As of December 31, 2014, we operated 977 records management and off-site data protection facilities worldwide, including 561 in the United States. Many of these facilities were built and outfitted by third parties and added to our real estate portfolio as part of acquisitions. Some of these facilities contain fire suppression and safety features that are different from our current specifications and current standards for new facilities although we believe all of our facilities were constructed, in all material respects, in compliance with laws and regulations in effect at the time of their construction or outfitting. 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 that may involve considerable expense to us. In addition, where we determine that the fire suppression and safety features of a facility require improvement, we will develop and implement a plan to remediate the issue, although implementation may require an extended period to complete. 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. 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 typically 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 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. In the past, 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, but we can provide no assurance that we will not have material disputes in the future. Although we maintain a comprehensive insurance program, we can provide no assurance that we will be able to maintain insurance policies on acceptable terms in order to cover losses to us in connection with customer contract disputes. Failure to comply with certain regulatory and contractual requirements under our United States Government contracts could adversely affect our revenues, operating results and financial position. Selling our services to the United States 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 United States Government contracting. We may also face private derivative securities claims as a result of adverse 20 government actions. Any of these outcomes could have a material adverse effect on our revenues, operating results, financial position and reputation. International operations may pose unique risks. As of December 31, 2014, we provided services in 35 countries outside the United States. 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, including countries where we do not currently operate. International operations are subject to numerous risks, including: (cid:127) the impact of foreign government regulations and United States regulations that apply to us wherever we operate; in particular, Iron Mountain is subject to United States and foreign anticorruption laws, such as the Foreign Corrupt Practices Act and the United Kingdom Bribery Act, and, although we have implemented internal controls, policies and procedures and training to deter prohibited practices, our employees, partners, contractors or agents may violate or circumvent such policies and the law; (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) costs and difficulties associated with managing international operations of varying sizes and scale; (cid:127) the risk that business partners upon whom we depend for technical assistance or management and acquisition expertise in some markets outside of the United States will not perform as expected; (cid:127) difficulties attracting and retaining local management and key employees to operate our business in certain countries; (cid:127) cultural differences and differences in business practices and operating standards; and (cid:127) foreign currency fluctuations. In particular, our net income can be significantly affected by fluctuations in currencies associated with certain intercompany balances of our foreign subsidiaries owed to us and between our foreign subsidiaries. We have operations in multiple foreign countries and, as a result, are subject to foreign exchange translation risk, which could have an adverse effect on our financial results. We conduct business operations in several foreign countries through our foreign subsidiaries or affiliates, which operate in their respective local currencies. Those local currencies are translated into United States dollars at the applicable exchange rates for inclusion in our consolidated financial statements. The results of operations of, and certain of our intercompany balances associated with, our international storage and information management services businesses are exposed to foreign exchange rate fluctuations, and as we have expanded our international operations, our exposure to exchange rate fluctuations has increased. Upon translation, operating results may differ materially from expectations, and significant shifts in foreign currencies can impact our short-term results, as well as our long-term forecasts and targets. In addition, because we intend to distribute 100% of our REIT taxable income to our stockholders, and any exchange rate fluctuations may negatively impact our REIT taxable income, our distribution amounts may fluctuate as a result of exchange rate fluctuations. 21 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) acquisition and occupancy costs that make it difficult to meet anticipated margins and difficulty locating suitable facilities due to a relatively small number of available buildings having the desired characteristics in some real estate markets; (cid:127) uninsured losses or damage to our storage facilities due to an inability to obtain full coverage on a cost-effective basis for some casualties, such as fires, 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, or were affected by waste generated from nearby properties, 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. Where we are aware of environmental conditions that require remediation, we undertake appropriate activity, in accordance with all legal requirements. 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. Unexpected events could disrupt our operations and adversely affect our reputation and 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 reputation and results of operations. Our customers rely on us to securely store and timely retrieve their critical information, and these events could result in customer service disruption, physical damage to one or more key operating facilities and the information stored in those 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 reputation and results of operations. During the past several years we have seen an increase in severe storms and hurricanes and our key facilities in Florida and other coastal areas in particular are subject to this inherent risk. Damage to our reputation could adversely affect our business, financial condition and results of operations. Our reputation for providing highly secure information storage to customers is critical to the success of our business. Our reputation or brand, and specifically, the trust our customers place in us, could be negatively impacted in the event of perceived or actual failures by us to store information securely. For example, events such as fires, natural disasters, attacks on our information technology 22 systems or security breaches involving Iron Mountain could negatively impact our reputation, particularly if such incidents result in adverse publicity, governmental investigations or litigation. Damage to our reputation could make us less competitive, which could negatively impact our business, financial condition and 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, our information technology and network infrastructure may be vulnerable to attacks by hackers or breaches due to employee error, malfeasance or other disruptions. 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 have in the past, and may in the future, 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. 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 us for their future storage and information management service needs. 23 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. As of December 31, 2014, our total long-term debt was approximately $4.66 billion. Our substantial indebtedness could have important consequences to our current and potential investors. 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; (cid:127) limits on our distributions to stockholders; in this regard if these limits prevented us from satisfying our REIT distribution requirements, we could fail to remain qualified for taxation as a REIT or, if these limits do not jeopardize our qualification for taxation as a REIT but do nevertheless prevent us from distributing 100% of our REIT taxable income, we will be subject to federal corporate income tax, and potentially a nondeductible excise tax, on the retained amounts; (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) loss of customers and reduced effectiveness in attracting new customers due to concerns over the levels of our debt or concern over financial ratios that are negatively impacted by our requirement to make large distributions as a REIT and the impact of these on our operations; (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 debt covenants may limit our ability to pursue our growth strategy. Our credit facility and our indentures contain covenants restricting or limiting our ability to, among other things: (cid:127) incur additional indebtedness; (cid:127) pay dividends or make other restricted payments; (cid:127) make asset dispositions; (cid:127) create or permit liens; and (cid:127) make acquisitions 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 or senior subordinated notes 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 or senior subordinated notes. However, it is possible that we will not have sufficient 24 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 United States subsidiaries. Acquisition and Expansion Risks Elements of our strategic growth plan involve inherent risks. As part of our strategic growth plan, we expect to invest in new business strategies, products, services, technologies and geographies and we may selectively divest certain businesses. These initiatives may involve significant risks and uncertainties, including distraction of management from current operations, insufficient revenues to offset expenses and liabilities associated with new investments, inadequate return of capital on these investments and the inability to attract, develop and retain skilled employees to lead and support new initiatives. For example, in 2013 we expanded our entry into the data center market by leasing wholesale and retail colocation space in our underground facility in Pennsylvania, and in 2014 we opened our first regional data center in Massachusetts, each of which required a significant capital commitment. Many of these new ventures are inherently risky and we can provide no assurance that such strategies and offerings will be successful in achieving the desired returns within a reasonable timeframe, if at all, and that they will not adversely affect our business, reputation, financial condition, and operating results. 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 customers. In addition, our personnel, systems, procedures and controls may be inadequate to support future operations, particularly with respect to operations in countries outside of the United States or in new lines of business. 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. Strategic acquisitions are an important element of our growth strategy and the success of any acquisition we make depends in part on our ability to integrate the acquired company and realize anticipated synergies. The process of integrating acquired businesses, particularly in new markets, may involve unforeseen difficulties and may require a disproportionate amount of our management’s 25 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 or realize anticipated synergies. 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. We may be unable to continue our international expansion. An important part of our growth strategy involves expanding operations in international markets, including in markets where we currently do not operate, 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, including in new countries/markets where we currently do not operate. 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) achieve satisfactory returns on acquired companies, particularly in countries where we do not currently operate; (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 United States. 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, 2014, we conducted operations through 839 leased facilities and 255 facilities that we own. Our facilities are divided among our reportable segments as follows: North American Records and Information Management Business (614), North American Data Management Business (58), International Business (421) and Corporate and Other (1). These facilities contain a total of 67.8 million square feet of space. 26 A breakdown of owned and leased facilities by country (and by state within the United States) is listed below: Country/State North America United States (Including Puerto Rico) Alabama . . . . . . . . . . . . . . . . . . . . Arizona . . . . . . . . . . . . . . . . . . . . . California . . . . . . . . . . . . . . . . . . . . Colorado . . . . . . . . . . . . . . . . . . . . Connecticut . . . . . . . . . . . . . . . . . . Delaware . . . . . . . . . . . . . . . . . . . . Florida . . . . . . . . . . . . . . . . . . . . . . Georgia . . . . . . . . . . . . . . . . . . . . . Illinois . . . . . . . . . . . . . . . . . . . . . . Indiana . . . . . . . . . . . . . . . . . . . . . Iowa . . . . . . . . . . . . . . . . . . . . . . . Kansas . . . . . . . . . . . . . . . . . . . . . . Kentucky . . . . . . . . . . . . . . . . . . . . Louisiana . . . . . . . . . . . . . . . . . . . . Maine . . . . . . . . . . . . . . . . . . . . . . Maryland . . . . . . . . . . . . . . . . . . . . Massachusetts . . . . . . . . . . . . . . . . . Michigan . . . . . . . . . . . . . . . . . . . . Minnesota . . . . . . . . . . . . . . . . . . . Mississippi . . . . . . . . . . . . . . . . . . . Missouri . . . . . . . . . . . . . . . . . . . . . Nebraska . . . . . . . . . . . . . . . . . . . . Nevada . . . . . . . . . . . . . . . . . . . . . New Hampshire . . . . . . . . . . . . . . . New Jersey . . . . . . . . . . . . . . . . . . . New Mexico . . . . . . . . . . . . . . . . . . New York . . . . . . . . . . . . . . . . . . . . North Carolina . . . . . . . . . . . . . . . . Ohio . . . . . . . . . . . . . . . . . . . . . . . Oklahoma . . . . . . . . . . . . . . . . . . . Oregon . . . . . . . . . . . . . . . . . . . . . Pennsylvania . . . . . . . . . . . . . . . . . . Puerto Rico . . . . . . . . . . . . . . . . . . Rhode Island . . . . . . . . . . . . . . . . . South Carolina . . . . . . . . . . . . . . . . Tennessee . . . . . . . . . . . . . . . . . . . . Texas . . . . . . . . . . . . . . . . . . . . . . . Utah . . . . . . . . . . . . . . . . . . . . . . . Vermont . . . . . . . . . . . . . . . . . . . . . Virginia . . . . . . . . . . . . . . . . . . . . . Washington . . . . . . . . . . . . . . . . . . West Virginia . . . . . . . . . . . . . . . . . Wisconsin . . . . . . . . . . . . . . . . . . . . Canada . . . . . . . . . . . . . . . . . . . . . . . Leased Owned Total Number Square Feet Number Square Feet Number Square Feet 3 12 59 13 4 3 37 12 13 3 3 1 2 3 1 13 5 18 11 2 11 1 6 — 27 — 17 19 13 5 11 18 3 2 10 4 47 2 2 15 6 2 7 312,473 535,921 3,404,346 543,590 209,183 267,267 2,426,077 910,820 1,128,817 154,080 118,658 131,764 64,000 210,350 95,000 1,220,692 396,656 1,011,868 841,567 157,386 1,182,324 34,560 220,276 — 1,903,574 — 789,817 1,019,486 859,305 227,883 360,475 1,661,118 178,449 70,159 521,005 166,993 2,231,997 78,148 55,200 749,745 312,763 167,055 428,068 1 4 15 5 6 1 4 4 6 1 1 — 4 2 — 3 8 5 — — 1 3 1 1 8 2 13 1 6 — 1 8 1 1 — 5 28 1 — 5 5 — 1 12,621 239,110 1,964,572 338,009 665,013 120,921 194,090 229,719 1,281,947 131,506 14,200 — 418,760 214,625 — 327,258 1,171,438 217,936 — — 25,120 316,970 107,041 146,467 1,628,945 109,473 1,186,266 13,624 603,878 — 55,621 2,577,883 54,352 12,748 — 153,659 2,484,082 90,553 — 437,021 432,896 — 10,655 4 16 74 18 10 4 41 16 19 4 4 1 6 5 1 16 13 23 11 2 12 4 7 1 35 2 30 20 19 5 12 26 4 3 10 9 75 3 2 20 11 2 8 325,094 775,031 5,368,918 881,599 874,196 388,188 2,620,167 1,140,539 2,410,764 285,586 132,858 131,764 482,760 424,975 95,000 1,547,950 1,568,094 1,229,804 841,567 157,386 1,207,444 351,530 327,317 146,467 3,532,519 109,473 1,976,083 1,033,110 1,463,183 227,883 416,096 4,239,001 232,801 82,907 521,005 320,652 4,716,079 168,701 55,200 1,186,766 745,659 167,055 438,723 446 49 495 27,358,915 2,906,882 30,265,797 162 15 177 17,988,979 1,749,664 19,738,643 608 64 672 45,347,894 4,656,546 50,004,440 27 Country/State International Argentina . . . . . . . . . . . . . . . . . . . . . Australia . . . . . . . . . . . . . . . . . . . . . . Austria . . . . . . . . . . . . . . . . . . . . . . . Belgium . . . . . . . . . . . . . . . . . . . . . . . Brazil . . . . . . . . . . . . . . . . . . . . . . . . Chile . . . . . . . . . . . . . . . . . . . . . . . . . China . . . . . . . . . . . . . . . . . . . . . . . . Columbia . . . . . . . . . . . . . . . . . . . . . . Czech Republic . . . . . . . . . . . . . . . . . Denmark . . . . . . . . . . . . . . . . . . . . . . France . . . . . . . . . . . . . . . . . . . . . . . . Germany . . . . . . . . . . . . . . . . . . . . . . Greece . . . . . . . . . . . . . . . . . . . . . . . Hong Kong . . . . . . . . . . . . . . . . . . . . Hungary . . . . . . . . . . . . . . . . . . . . . . India . . . . . . . . . . . . . . . . . . . . . . . . . Mexico . . . . . . . . . . . . . . . . . . . . . . . Netherlands . . . . . . . . . . . . . . . . . . . . Northern Ireland . . . . . . . . . . . . . . . . Norway . . . . . . . . . . . . . . . . . . . . . . . Peru . . . . . . . . . . . . . . . . . . . . . . . . . Poland . . . . . . . . . . . . . . . . . . . . . . . . Republic of Ireland . . . . . . . . . . . . . . Romania . . . . . . . . . . . . . . . . . . . . . . Russia . . . . . . . . . . . . . . . . . . . . . . . . Scotland . . . . . . . . . . . . . . . . . . . . . . Serbia . . . . . . . . . . . . . . . . . . . . . . . . Singapore . . . . . . . . . . . . . . . . . . . . . Slovakia . . . . . . . . . . . . . . . . . . . . . . . Spain . . . . . . . . . . . . . . . . . . . . . . . . Switzerland . . . . . . . . . . . . . . . . . . . . Turkey . . . . . . . . . . . . . . . . . . . . . . . . Ukraine . . . . . . . . . . . . . . . . . . . . . . . United Kingdom . . . . . . . . . . . . . . . . Leased Owned Total Number Square Feet Number Square Feet Number Square Feet 5 22 — 4 31 10 19 16 8 1 17 15 2 3 5 24 9 8 2 3 2 21 6 3 25 7 2 1 3 7 4 12 1 45 491,545 1,343,068 — 135,456 1,957,275 409,643 253,302 511,932 256,300 66,942 704,656 658,212 73,947 138,498 304,161 396,420 257,883 466,347 66,876 104,937 41,878 731,250 56,525 232,368 612,083 196,298 23,681 33,700 104,846 165,935 85,357 624,383 48,438 1,942,306 5 1 1 1 3 5 1 — — — 4 1 — — — — 6 — — — 8 — 3 — — 4 — — — 6 — — — 29 78 469,748 30,615 30,000 104,391 190,076 212,010 20,721 — — — 217,919 58,329 — — — — 419,188 — — — 259,903 — 158,558 — — 375,294 — — — 203,000 — — — 1,377,324 10 23 1 5 34 15 20 16 8 1 21 16 2 3 5 24 15 8 2 3 10 21 9 3 25 11 2 1 3 13 4 12 1 74 961,293 1,373,683 30,000 239,847 2,147,351 621,653 274,023 511,932 256,300 66,942 922,575 716,541 73,947 138,498 304,161 396,420 677,071 466,347 66,876 104,937 301,781 731,250 215,083 232,368 612,083 571,592 23,681 33,700 104,846 368,935 85,357 624,383 48,438 3,319,630 4,127,076 421 17,623,524 Corporate and Other Corporate headquarters (Boston, 343 13,496,448 Massachusetts) . . . . . . . . . . . . . . . . 1 132,860 Total . . . . . . . . . . . . . . . . . . . . . . . . . . . 839 43,895,105 — 255 — 1 132,860 23,865,719 1,094 67,760,824 The leased facilities typically have initial lease terms of five to ten years with one or more five-year renewal options. In addition, some of the leases contain either a purchase option or a right of first refusal upon the sale of the property. We believe that the space available in our facilities is adequate to meet our current needs, although future growth may require that we lease or purchase additional real property. 28 See Note 10 to the Notes to the Consolidated Financial Statements included in this Annual Report for information regarding our minimum annual lease commitments. See Schedule III—Schedule of Real Estate and Accumulated Depreciation in this Annual Report for information regarding the cost, accumulated depreciation and encumbrances associated with our owned real estate. Item 3. Legal Proceedings. 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, no material legal proceedings are pending to which we, or any of our properties, are subject. Item 4. Mine Safety Disclosures. None. 29 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 2013 and 2014: 2013 First Quarter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Second Quarter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Third Quarter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Fourth Quarter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2014 First Quarter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Second Quarter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Third Quarter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Fourth Quarter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Sale Prices High Low $36.67 39.71 29.12 30.80 $30.48 31.15 37.10 40.41 $31.45 25.91 25.53 25.03 $25.74 25.95 31.17 31.11 The closing price of our common stock on the NYSE on February 20, 2015 was $36.71. As of February 20, 2015, there were 439 holders of record of our common stock. On September 15, 2014, we announced the declaration by our board of directors of a special distribution of $700.0 million (the ‘‘Special Distribution’’), payable to stockholders of record as of September 30, 2014 (the ‘‘Record Date’’). The Special Distribution represented the remaining amount of our undistributed earnings and profits attributable to all taxable periods ending on or prior to December 31, 2013, which in accordance with tax rules applicable to REIT conversions, we were required to pay to our stockholders on or before December 31, 2014 in connection with our conversion to a REIT. The Special Distribution also included certain items of taxable income that we recognized in 2014, such as depreciation recapture in respect of accounting method changes commenced in our pre-REIT period as well as foreign earnings and profits recognized as dividend income. The Special Distribution followed an initial special distribution of $700.0 million paid to stockholders in November 2012. The Special Distribution was paid on November 4, 2014 (the ‘‘Payment Date’’) to stockholders of record as of the Record Date in a combination of common stock and cash. Stockholders had the right to elect to be paid their pro rata portion of the Special Distribution in all common stock or all cash, with the total cash payment to stockholders limited to no more than $140.0 million, or 20% of the total Special Distribution, not including cash paid in lieu of fractional shares. Based on stockholder elections, we paid $140.0 million of the Special Distribution in cash, not including cash paid in lieu of fractional shares, with the balance paid in the form of common stock. Our shares of common stock were valued for purposes of the Special Distribution based upon the average closing price on the three trading days following October 24, 2014, or $35.55 per share, and as such, we issued approximately 15.8 million shares of common stock in the Special Distribution. These shares impact weighted average shares outstanding from the date of issuance, and thus impact our earnings per share data prospectively from the Payment Date. In November 2014, our board of directors declared a distribution of $0.255 per share (the ‘‘Catch-Up Distribution’’) payable on December 15, 2014 to stockholders of record on November 28, 2014. Our board of directors declared the Catch-Up Distribution because our cash distributions paid from January 2014 through July 2014 were declared and paid before our board of directors had 30 determined that we would elect REIT status effective January 1, 2014 and were lower than they otherwise would have been if the final determination to elect REIT status effective January 1, 2014 had been prior to such distributions. 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 2013 and 2014, our board of directors declared the following dividends: Declaration Date March 14, 2013 . . . . . . . . . . . . . . June 6, 2013 . . . . . . . . . . . . . . . . September 11, 2013 . . . . . . . . . . . December 16, 2013 . . . . . . . . . . . March 14, 2014 . . . . . . . . . . . . . . May 28, 2014 . . . . . . . . . . . . . . . September 15, 2014 . . . . . . . . . . . September 15, 2014(1) . . . . . . . . . November 17, 2014(2) . . . . . . . . . November 17, 2014 . . . . . . . . . . . Dividend Per Share Record Date March 25, 2013 $0.2700 June 25, 2013 0.2700 0.2700 September 25, 2013 0.2700 December 27, 2013 March 25, 2014 0.2700 June 25, 2014 0.2700 September 25, 2014 0.4750 3.6144 September 30, 2014 0.2550 November 28, 2014 December 5, 2014 0.4750 Total Amount (in thousands) $ 51,460 51,597 51,625 51,683 51,812 52,033 91,993 700,000 53,450 99,617 Payment Date April 15, 2013 July 15, 2013 October 15, 2013 January 15, 2014 April 15, 2014 July 15, 2014 October 15, 2014 November 4, 2014 December 15, 2014 December 22, 2014 (1) Represents Special Distribution. (2) Represents Catch-Up Distribution. During the years ended December 31, 2012, 2013 and 2014, we declared distributions to our stockholders of $886.9 million, $206.4 million and $1,048.9 million, respectively. These distributions represent approximately $5.12 per share, $1.08 per share and $5.37 per share for the years ended December 31, 2012, 2013 and 2014, respectively, based on the weighted average number of common shares outstanding during each respective year. For each of 2012 and 2014, total amounts distributed included Special Distributions (as described above) of $700.0 million, or $4.07 and $3.61 per share, respectively, associated with the Company’s conversion to a REIT. For federal income tax purposes, distributions to our stockholders are generally treated as nonqualified ordinary dividends, qualified ordinary dividends or return of capital. The IRS requires historical C corporation earnings and profits to be distributed prior to any REIT distributions, which may affect the character of each distribution to our stockholders, including whether and to what extent each distribution is characterized as a qualified or nonqualified ordinary dividend. For the years ended December 31, 2012, 2013 and 2014, the dividends we paid on our common shares were classified as follows: Year Ended December 31, 2012 2013 2014 Nonqualified ordinary dividends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Qualified ordinary dividends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Return of capital 0.0% 0.0% 26.4% 100.0% 100.0% 56.4% 0.0% 0.0% 17.2% 100.0% 100.0% 100.0% In December 2013, our board of directors approved, and we entered into, a REIT Status Protection Rights Agreement (the ‘‘Rights Agreement’’) which provided for a dividend of one preferred stock purchase right (a ‘‘Right’’) for each share of our common stock outstanding on December 20, 31 2013. On November 18, 2014, we entered into the First Amendment to the Rights Agreement to extend the expiration of the Rights Agreement from December 9, 2014 to February 28, 2015. On January 20, 2015, in connection with the merger with our predecessor, the Rights Agreement was terminated. Unregistered Sales of Equity Securities and Use of Proceeds We did not sell any unregistered securities during the three months ended December 31, 2014, nor did we repurchase any shares of our common stock during the three months ended December 31, 2014. 32 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. 2010(1)(2) 2011(1)(2) 2012(1)(2) 2013(1)(2) 2014 Year Ended December 31, Consolidated Statements of Operations Data: Revenues: . . . . . . . . . . . . . . . . Storage rental Service . . . . . . . . . . . . . . . . . . . . . $1,598,718 1,292,431 $1,682,990 1,330,613 $1,733,138 1,270,817 $1,784,721 1,239,902 $1,860,243 1,257,450 Total Revenues . . . . . . . . . . . . . . 2,891,149 3,013,603 3,003,955 3,024,623 3,117,693 Operating Expenses: Cost of sales (excluding depreciation and amortization) . . . . . . . . . . . . Selling, general and administrative . . Depreciation and amortization . . . . Intangible impairments(3) . . . . . . . . (Gain) loss on disposal/write-down of property, plant and equipment (excluding real estate), net . . . . . . 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 — 1,288,878 924,031 322,037 — 1,344,636 869,572 353,143 — (9,906) 995 4,661 430 1,065 Total Operating Expenses . . . . . . Operating Income . . . . . . . . . . . . . . . Interest Expense, Net . . . . . . . . . . . . Other Expense, Net . . . . . . . . . . . . . . 2,345,881 545,268 204,559 8,768 2,446,785 566,818 205,256 13,043 2,448,489 555,466 242,599 16,062 2,535,376 489,247 254,174 75,202 2,568,416 549,277 260,717 65,187 Income from Continuing Operations Before Provision (Benefit) for Income Taxes and Gain on Sale of Real Estate . . . Provision (Benefit) for Income Taxes . Gain on Sale of Real Estate, Net of 331,941 166,720 348,519 105,139 296,805 114,304 159,871 62,127 Tax . . . . . . . . . . . . . . . . . . . . . . . . (786) (2,361) (206) Income from Continuing Operations . . (Loss) Income from Discontinued 166,007 245,741 182,707 Operations, Net of Tax . . . . . . . . . . (219,417) (47,439) (6,774) Gain (Loss) on Sale of Discontinued Operations, Net of Tax . . . . . . . . . . — Net (Loss) Income . . . . . . . . . . . . . . . (53,410) Less: Net Income Attributable to 200,619 398,921 (1,885) 174,048 99,992 328,746 Noncontrolling Interests . . . . . . 4,908 4,054 3,126 3,530 2,627 Net (Loss) Income Attributable to Iron Mountain Incorporated . . . . . . $ (58,318) $ 394,867 $ 170,922 $ 96,462 $ 326,119 (footnotes follow) 33 223,373 (97,275) (8,307) 328,955 (209) — (1,417) 99,161 831 — Earnings (Losses) per Share—Basic: Income from Continuing Operations . . . . . . . . Total (Loss) Income from Discontinued Operations . . . . . . . . . . . . . . . . . . . . . . . . . Net (Loss) Income Attributable to Iron Mountain Incorporated . . . . . . . . . . . . . . . . Earnings (Losses) per Share—Diluted: Income from Continuing Operations . . . . . . . . Total (Loss) Income from Discontinued Operations . . . . . . . . . . . . . . . . . . . . . . . . . Net (Loss) Income Attributable to Iron Mountain Incorporated . . . . . . . . . . . . . . . . Weighted Average Common Shares Year Ended December 31, 2010(1) 2011(1) 2012(1) 2013(1) 2014 (In thousands, except per share data) $ $ $ $ $ $ 0.82 $ 1.26 (1.09) $ 0.79 (0.29) $ 2.03 0.82 $ 1.25 (1.09) $ 0.78 (0.29) $ 2.02 $ $ $ $ $ $ 1.05 $ 0.52 $ 1.68 (0.05) $ — $ — 0.98 1.04 $ $ 0.51 0.52 $ $ 1.67 1.67 (0.05) — $ — 0.98 $ 0.50 $ 1.66 Outstanding—Basic . . . . . . . . . . . . . . . . . . . 201,991 194,777 173,604 190,994 195,278 Weighted Average Common Shares Outstanding—Diluted . . . . . . . . . . . . . . . . . 201,991 195,938 174,867 192,412 196,749 Dividends Declared per Common Share . . . . . $ 0.3750 $ 0.9375 $ 5.1200 $ 1.0800 $ 5.3713 (footnotes follow) Other Data: Adjusted OIBDA(4) . . . . . . . . . . . . . . . . . . . . Adjusted OIBDA Margin(4) . . . . . . . . . . . . . . Ratio of Earnings to Fixed Charges . . . . . . . . . (footnotes follow) Year Ended December 31, 2010(1) 2011(1) 2012(1) 2013(1) 2014 (In thousands) $925,476 $949,339 $910,917 $894,581 $925,797 32.0% 2.2x 31.5% 2.2x 30.3% 1.9x 29.6% 1.5x 29.7% 1.7x 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) 2010(1) 2011(1) 2012(1) 2013(1) 2014 As of December 31, (in thousands) $ 258,693 6,416,393 $ 179,845 6,041,258 $ 243,415 6,358,339 $ 120,526 6,653,005 $ 125,933 6,570,342 3,008,207 1,949,022 3,353,588 1,249,742 3,825,003 1,157,148 4,171,722 1,051,734 4,663,531 869,955 (1) During the second quarter of 2014, we identified contract billing inaccuracies arising from a single location which occurred over numerous years that resulted in an overstatement of prior years’ reported revenue by an aggregate of $10.0 million, as described in Note 2.y. to the Notes to Consolidated Financial Statements included in this Annual Report. Revenue and Adjusted OIBDA, 34 as defined below, for the years ended December 31, 2010, 2011, 2012 and 2013 have been restated to reflect a reduction in revenues of $1.2 million, $1.1 million, $1.3 million and $1.3 million, respectively, to correct billing the billing inaccuracies. The remaining overstated amount of $5.1 million relates to the periods prior to 2010. The impact to income from continuing operations and net income is a reduction of $0.7 million, $0.7 million, $0.8 million and $0.8 million, respectively, for the after tax impact of the contract billing inaccuracies for the years ended December 31, 2010, 2011, 2012 and 2013, respectively. Earnings (loss) per share—basic and earnings (loss) per share—diluted have also been restated to reflect the restatement. In addition, total equity at December 31, 2010, 2011, 2012 and 2013 has been reduced by $3.8 million, $4.5 million, $5.3 million and $6.1 million, respectively, to account for the contract billing inaccuracies. (2) As a result of our conversion to a REIT and in accordance with SEC rules applicable to REITs, we no longer report (gain) loss on sale of real estate as a component of operating income, but we will continue to report it as a component of income (loss) from continuing operations. We will continue to report the (gain) loss on sale of property, plant and equipment (excluding real estate), along with any impairment, write-downs or involuntary conversions related to real estate, as a component of operating income. The results for the years ended December 31, 2010, 2011, 2012 and 2013 have been reclassified to conform to this presentation. (3) For the year ended December 31, 2010, we recorded a non-cash goodwill impairment charge of $85.9 million 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 Records and Information Management segment. For the year ended December 31, 2010, we recorded a $197.9 million 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 $46.5 million in our Continental Western Europe reporting unit, which is a component of the International Business segment. (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 (excluding real estate), 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. 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 iii of this Annual Report and ‘‘Item 1A. Risk Factors’’ beginning on page 13 of this Annual Report. 35 Overview REIT Conversion We previously disclosed that, as part of our plan to convert to a REIT for federal income tax purposes and elect REIT status effective January 1, 2014 (the ‘‘Conversion Plan’’), we sought PLRs from the IRS relating to numerous technical tax issues, including classification of our steel racking structures as qualified real estate assets. We submitted the PLR requests in the third quarter of 2012, and on June 25, 2014, we announced that we received the favorable PLRs from the IRS necessary for our conversion to a REIT. After receipt of the PLRs, our board of directors unanimously approved our conversion to a REIT for our taxable year beginning January 1, 2014. In connection with the Conversion Plan, and, in particular, to impose ownership limitations customary for REITs, on January 20, 2015, we completed the merger with our predecessor and all outstanding shares of our predecessor’s common stock were converted into a right to receive an equal number of shares of our common stock. Total operating and capital expenditures associated with the Conversion Plan through the end of 2014 were approximately $180.7 million. Of these amounts, approximately $47.0 million was incurred in 2012, including approximately $12.5 million of capital expenditures. Additionally, approximately $106.3 million was incurred in 2013, including approximately $23.4 million of capital expenditures. Also, we incurred approximately $27.4 million in 2014, including approximately $5.1 million of capital expenditures. Discontinued Operations On April 27, 2012, we sold our records management operations in Italy. The financial position, operating results and cash flows of our Italian operations, including 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 to Notes to Consolidated Financial Statements included in this Annual Report. In December 2014, we divested our secure shredding operations in Australia, Ireland and the United Kingdom (the ‘‘International Shredding Operations’’) in a stock transaction for approximately $26.2 million of cash at closing, including $1.5 million being held in escrow. The assets sold primarily consisted of customer contracts and certain long-lived assets. We have concluded that this divestiture is not a discontinued operation and, therefore, have recorded a pretax gain on sale in other (income) expense, net of approximately $6.9 million ($10.2 million, inclusive of a tax benefit) in our Consolidated Statement of Operations for the year ended December 31, 2014. Revenues from our International Shredding Operations in 2014 represent less than 1% of our consolidated revenues. The International Shredding Operations were previously included in our International Business segment. Restructuring In the third quarter of 2013, we implemented a plan that called for certain organizational realignments to advance our growth strategy and reduce operating costs, which was completed in 2014. As a result, we recorded restructuring costs of approximately $23.4 million and $3.5 million for the years ended December 31, 2013 and 2014, respectively, primarily related to employee severance and associated benefits. Of the total restructuring costs incurred in 2013, $12.6 million, $2.1 million, $3.7 million and $5.0 million are reflected in the North American Records and Information Management Business, North American Data Management Business, International Business and Corporate and Other segments, respectively. Of the total restructuring costs incurred in 2014, $1.6 million, $0.3 million and $1.5 million are reflected in the North American Records and Information Management Business, North American Data Management Business and Corporate and 36 Other segments, respectively. In our Consolidated Statements of Operations for the year ended December 31, 2013, $20.0 million and $3.4 million of these restructuring costs are recorded in selling, general and administrative expenses and cost of sales, respectively. In our Consolidated Statements of Operations for the year ended December 31, 2014, $2.2 million and $1.2 million of these restructuring costs are recorded in selling, general and administrative expenses and cost of sales, respectively. General As a result of certain organizational realignments effective January 1, 2014, we evaluated changes to our internal financial reporting to better align our internal reporting to how we will manage our business going forward. This evaluation resulted in changes to our reportable segments effective January 1, 2014 and, as a result, we have restated previously reported segment information. As a result of the changes to our reportable segments, the former North American Business segment was separated into two unique reportable segments, which we refer to as (1) North American Records and Information Management Business segment and (2) North American Data Management Business segment. In addition, the Emerging Businesses segment, which was previously reported as a component of the former North American Business segment, is now reported as a component of the Corporate and Other segment. 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) that are typically retained by customers for many years. Service revenues include charges for related service activities, which include: (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 the related sale of recycled paper, the price of which can fluctuate from period to period; (4) other services, including DMS, which relate to physical and digital records, and project revenues; (5) customer termination and permanent withdrawal fees; (6) data restoration projects; (7) special project work; (8) fulfillment services; (9) consulting services; and (10) technology escrow services that protect and manage source code (‘‘Intellectual Property Management’’) and other technology services and product sales (including specially designed storage containers and related supplies). Our service revenue growth has been negatively impacted by declining activity rates as stored records are becoming less active. 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 service activity levels. 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. 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 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. 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. 37 The expansion of our international businesses has impacted the major cost of sales components and selling, general and administrative expenses. Our international operations are more labor intensive than our operations in North America and, therefore, labor costs are a higher percentage of segment revenue. In addition, the overhead structure of our expanding international operations has not achieved the same level of overhead leverage as our North American segments, 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 structures, 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 United States. It is difficult to predict the future fluctuations of foreign currency exchange rates and how those fluctuations will impact our Consolidated Statements 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 2012 results at the 2013 average exchange rates and the 2013 results at the 2014 average exchange rates. The following table is a comparison of underlying average exchange rates of the foreign currencies that had the most significant impact on our United States dollar-reported revenues and expenses: Australian dollar . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Brazilian real . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . British pound sterling . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Canadian dollar . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Euro . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Australian dollar . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Brazilian real . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . British pound sterling . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Canadian dollar . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Euro . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Average Exchange Rates for the Year Ended December 31, 2013 2014 $0.968 $0.465 $1.565 $0.971 $1.328 $0.902 $0.426 $1.648 $0.906 $1.329 Average Exchange Rates for the Year Ended December 31, 2012 2013 $1.036 $0.514 $1.585 $1.000 $1.286 $0.968 $0.465 $1.565 $0.971 $1.328 Percentage Strengthening / (Weakening) of Foreign Currency (6.8)% (8.4)% 5.3% (6.7)% 0.1% Percentage Strengthening / (Weakening) of Foreign Currency (6.6)% (9.5)% (1.3)% (2.9)% 3.3% 38 Non-GAAP Measures Adjusted Operating Income Before Depreciation, Amortization, Intangible Impairments, (Gain) Loss on Disposal/Write-Down of Property, Plant and Equipment (Excluding Real Estate), Net 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 (excluding real estate), 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 (excluding real estate), net; (2) (gain) loss on sale of real estate, net of tax; (3) intangible impairments; (4) REIT Costs; (5) other expense (income), net; (6) income (loss) from discontinued operations, net of tax; (7) gain (loss) on sale of discontinued operations, net of tax; and (8) 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 United 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). Reconciliation of Operating Income to Adjusted OIBDA (in thousands): Operating Income . . . . . . . . . . . . . . . . . . . . . Add: Depreciation and Amortization . . . . . . . . Intangible Impairments . . . . . . . . . . . . . . . . (Gain) Loss on Disposal/Write-Down of Property, Plant and Equipment (Excluding . . . . . . . . . . . . . . . . . . Real Estate), Net REIT Costs(1) . . . . . . . . . . . . . . . . . . . . . . Year Ended December 31, 2010 2011 2012 2013 2014 $545,268 304,205 85,909 $566,818 319,499 46,500 $555,466 316,344 — $489,247 322,037 — $549,277 353,143 — (9,906) — 995 15,527 4,661 34,446 430 82,867 1,065 22,312 Adjusted OIBDA . . . . . . . . . . . . . . . . . . . . . . $925,476 $949,339 $910,917 $894,581 $925,797 (1) Includes costs associated with our 2011 proxy contest, the previous work of the former Strategic Review Special Committee of the board of directors and costs associated with our conversion to a REIT, excluding REIT compliance costs beginning January 1, 2014 which we expect to recur in future periods (‘‘REIT Costs’’). 39 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 (excluding real estate), net; (2) (gain) loss on sale of real estate, net of tax; (3) intangible impairments; (4) REIT Costs; (5) other expense (income), net; and (6) 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. Reconciliation of Reported EPS—Fully Diluted from Continuing Operations to Adjusted EPS—Fully Diluted from Continuing Operations: Reported EPS—Fully Diluted from Continuing Operations . . Add: (Gain) Loss on Disposal/Write-down of Property, Plant and Equipment (Excluding Real Estate), Net . . . . Intangible Impairments . . . . . . . . . . . . . . . . . . . . . . . . Gain on Sale of Real Estate, Net of Tax . . . . . . . . . . . . Other Expense (Income), Net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . REIT Costs Tax Impact of Reconciling Items and Discrete Tax Year Ended December 31, 2010 2011 2012 2013 2014 $ 0.82 $ 1.25 $1.04 $ 0.52 $ 1.67 (0.05) 0.43 0.01 0.24 — (0.01) 0.07 0.08 0.04 — — 0.03 — — — (0.01) 0.39 0.43 0.09 0.20 0.01 — (0.04) 0.33 0.11 Items(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.52 0.21 0.35 0.07 (0.72) Adjusted EPS—Fully Diluted from Continuing Operations . . $ 1.76 $ 1.85 $1.71 $ 1.40 $ 1.36 (1) The Adjusted EPS for the years ended December 31, 2010, 2011, 2012 and 2013 have been restated to reflect an estimated annual effective tax rate of approximately 15.0%. The Adjusted EPS for the year ended December 31, 2014 reflects an estimated annual effective tax rate of approximately 14.4%. 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 40 basis). Service revenues include charges for related service activities, which include: (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 the related sale of recycled paper, the price of which can fluctuate from period to period; (4) other services, including DMS, which relate to physical and digital records, and project revenues; (5) customer termination and permanent withdrawal fees; (6) data restoration projects; (7) special project work; (8) fulfillment services; (9) consulting services; and (10) Intellectual Property Management and other technology services and product sales (including specially designed storage containers and related supplies). 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 period the applicable storage rental or service is provided or performed. Revenues from the sales of products, which are included as a component of service revenues, are 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 intangible assets (primarily customer relationship intangible assets), property, plant and equipment (primarily racking structures), operating leases, contingencies and income taxes (primarily deferred income taxes). We complete these assessments within one year of the date of acquisition. See Note 6 to Notes to Consolidated Financial Statements included in this Annual Report for a description of recent acquisitions. Determining the fair values of the net assets acquired requires management’s judgment and often involves the use of assumptions with respect to future cash inflows and outflows, discount rates and market data, among other items. Due to the inherent uncertainty of future events, actual values of net assets acquired could be different from our estimated fair values and could have a material impact on our financial statements. Of the net assets acquired in our acquisitions, the fair value of owned buildings, customer relationship intangible assets, racking structures and operating leases are generally the most common and most significant. For significant acquisitions or acquisitions involving new markets or new products, we generally use third party appraisals of the fair value of owned buildings, customer relationship intangible assets and market rental rates for acquired operating leases. For acquisitions that are not significant or do not involve new markets or new products, we generally use third party appraisals of 41 fair value for acquired owned buildings and market rental rates for acquired operating leases. When not using third party appraisals of the fair value of acquired net assets, the fair value of acquired customer relationship intangible assets and acquired racking structures is determined internally. The fair value of acquired racking structures is determined internally by taking current replacement cost at the date of acquisition for the quantity of racking structures acquired, discounted to take into account the quality (e.g. age, material and type) of the racking structures. Additionally, we use discounted cash flow models to determine the fair value of customer relationship intangible assets, which requires a significant amount of judgment by management, including estimating expected lives of the relationships, expected future cash flows and discount rates. Of the key assumptions that impact the estimated fair values of customer relationship intangible assets, the expected future cash flows and discount rate are among the most sensitive and are considered to be critical assumptions. To illustrate the sensitivity of changes in key assumptions used in determining the fair value of customer relationship intangible assets acquired in our most significant acquisitions in fiscal year 2014 (Keepers Brasil Ltda and Securit Records Management), a hypothetical increase of 10% in the expected annual future cash flows attributable to these two acquisitions, with all other assumptions unchanged, would have increased the calculated fair value of the acquired customer relationship intangible assets in the aggregate for both of these acquisitions combined by $2.6 million, with an offsetting decrease to goodwill. A hypothetical decrease of 100 basis points in the discount rate, with all other assumptions unchanged, would have increased the fair value of the acquired customer relationship intangible assets in the aggregate for both of these acquisitions combined by $1.7 million, with an offsetting decrease to goodwill. Our estimates of fair value are based upon assumptions believed to be reasonable at that time but which are inherently uncertain and unpredictable. Assumptions may be incomplete or inaccurate, and unanticipated events and circumstances may occur, which may affect the accuracy of such assumptions. 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. Examples of events or circumstances that may be indicative of impairment include, but are not limited to: (cid:127) A significant decrease in the market price of an asset; (cid:127) A significant change in the extent or manner in which a long-lived asset is being used or in its physical condition; (cid:127) A significant adverse change in legal factors or in the business climate that could affect the value of the asset; (cid:127) An accumulation of costs significantly greater than the amount originally expected for the acquisition or construction of an asset; and (cid:127) A current expectation that, more likely than not, an asset will be sold or otherwise disposed of significantly before the end of its previously estimated useful life. 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, the long-lived assets are written down, on a pro rata basis, to fair value. Fair value is determined based on discounted cash flows or appraised values, depending upon the nature of the assets. 42 Goodwill and intangible 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. Other than goodwill, we currently have no intangible assets that have indefinite lives and which are not amortized. We have selected October 1 as our annual goodwill impairment review date. We performed our annual goodwill impairment review as of October 1, 2012, 2013 and 2014 and concluded that goodwill was not impaired as of those dates. Based on our goodwill impairment assessment, all of our reporting units with goodwill had estimated fair values as of October 1, 2014 that exceeded their carrying values by greater than 15%. As of December 31, 2014, no factors were identified that would alter our October 1, 2014 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. Our reporting units at which level we performed our goodwill impairment analysis as of October 1, 2013 were as follows: (1) North America; (2) United Kingdom, Ireland, Norway, Belgium, France, Germany, Luxembourg, Netherlands and Spain (‘‘Western Europe’’); (3) the remaining countries in Europe in which we operate, excluding Russia and Ukraine (‘‘Emerging Markets’’); (4) Latin America; (5) Australia, China, Hong Kong and Singapore (‘‘Asia Pacific’’); and (6) India, Russia and Ukraine (‘‘Emerging Market Joint Ventures’’). The carrying value of goodwill, net for each of these reporting units as of December 31, 2013 is as follows (in thousands): Carrying Value as of December 31, 2013 North America . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Western Europe . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Emerging Markets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Latin America . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Asia Pacific . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Emerging Market Joint Ventures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $1,849,440 375,954 88,599 93,149 56,210 — Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $2,463,352 Beginning January 1, 2014, as a result of the changes in our reportable segments associated with our reorganization (see Note 9 to Notes to Consolidated Financial Statements included in this Annual Report for a description of our reportable operating segments), we now have 12 reporting units. Our North American Records and Information Management Business segment includes the following three reporting units: (1) North American Records and Information Management; (2) Intellectual Property Management; and (3) Fulfillment Services. The North American Data Management Business segment is a separate reporting unit. The Emerging Businesses reporting unit (which primarily relates to our data center business in the United States and which is a component of Corporate and Other) is also a reporting unit. Additionally, the International Business segment consists of the following seven reporting units: (1) United Kingdom, Ireland, Norway, Austria, Belgium, France, Germany, Luxembourg, Netherlands, Spain and Switzerland (‘‘New Western Europe’’); (2) the remaining countries in Europe in which we operate, excluding Russia, Ukraine and Denmark (‘‘New Emerging Markets’’); (3) Latin America; (4) Australia and Singapore; (5) China and Hong Kong (‘‘Greater China’’); (6) India; and (7) Russia, Ukraine and Denmark. We have reassigned goodwill associated with the reporting units impacted by the reorganization among the new reporting units on a relative fair value basis. The fair value of each of our new reporting units was determined based on the application of a combined weighted average approach of fair value multiples of revenue and earnings and discounted cash flow techniques. 43 As a result of the change in the composition of our reporting units noted above, we concluded that we had an interim triggering event, and, therefore, we performed an interim goodwill impairment test as of January 1, 2014 on the basis of these new reporting units during the first quarter of 2014. We concluded that the goodwill for each of our new reporting units was not impaired as of such date. The carrying value of goodwill, net for each of these reporting units as of December 31, 2014 is as follows (in thousands): Carrying Value as of December 31, 2014 North American Records and Information Management . . . . . . . . . . . . . . . . . . . . . Intellectual Property Management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Fulfillment Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . North American Data Management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Emerging Businesses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . New Western Europe . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . New Emerging Markets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Latin America . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Australia and Singapore . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Greater China . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . India . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Russia, Ukraine and Denmark . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $1,397,484 38,491 3,247 375,957 — 354,049 87,408 107,240 55,779 3,500 — 628 Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $2,423,783 Reporting unit valuations have been determined using a combined approach based on the present value of future cash flows and market 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. Although we believe we have sufficient historical and projected information available to us to test for impairment, it is possible that actual results could differ from the estimates used in our impairment tests. Of the key assumptions that impact the goodwill impairment test, the expected future cash flows and discount rate are among the most sensitive and are considered to be critical assumptions, as changes to these estimates could have an effect on the estimated fair value of each of our reporting units. As a measure of sensitivity, we have grouped each of our reporting units according to the amount by which each reporting unit’s fair value exceeded its carrying value in the goodwill impairment test. A hypothetical decrease of 10% in the expected annual future cash flows, with all other assumptions unchanged, would have decreased the fair value of our reporting units as of October 1, 2014 by a range of approximately 9.1% to 10.4% but would not, however, have resulted in the carrying value of any of our reporting units with goodwill exceeding their fair value. A hypothetical increase of 100 basis points in the discount rate, with all other assumptions unchanged, would have decreased the fair value of our reporting units as of October 1, 2014 by a range of approximately 3.9% to 11.6% but would not, however, have resulted in the carrying value of any of our reporting units with goodwill exceeding their fair value. Income Taxes As a REIT, we are generally permitted to deduct from our federal taxable income the dividends we pay to our stockholders. The income represented by such dividends is not subject to federal taxation at the entity level but is taxed, if at all, at the stockholder level. The income of our domestic TRSs, 44 which hold our domestic operations that may not be REIT-compliant as currently operated and structured, is subject, as applicable, to federal and state corporate income tax. In addition, we and our subsidiaries continue to be subject to foreign income taxes in jurisdictions in which they hold assets or conduct operations, regardless of whether held or conducted through subsidiaries disregarded for federal tax purposes or TRSs. We will also be subject to a separate corporate income tax on any gains recognized during a specified period (generally ten years) following the REIT conversion that are attributable to ‘‘built-in’’ gains with respect to the assets that we owned on January 1, 2014; this built-in gains tax will also be imposed on our depreciation recapture recognized into income in 2014 and subsequent taxable years as a result of accounting method changes commenced in our pre-REIT period. If we fail to remain qualified for taxation as a REIT, we will be subject to federal income tax at regular corporate tax rates. Even if we remain qualified for taxation as a REIT, we may be subject to some federal, state, local and foreign taxes on our income and property in addition to taxes owed with respect to our TRS operations. In particular, while state income tax regimes often parallel the federal income tax regime for REITs, many states do not completely follow federal rules and some do not follow them at all. 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 bases of assets and liabilities and for loss and credit carryforwards. Valuation allowances are provided when recovery of deferred tax assets does not meet the more likely than not standards as defined in GAAP. We have federal net operating loss carryforwards, which expire in 2021 through 2033, of $88.1 million ($0, tax effected) at December 31, 2014 to reduce future federal taxable income, on which no federal tax benefit is expected to be realized. We have state net operating loss carryforwards, which expire in 2015 through 2033, of $74.4 million ($0.1 million, tax effected) at December 31, 2014 to reduce future state taxable income, on which an insignificant state tax benefit is expected to be realized. We have assets for foreign net operating losses of $64.6 million, with various expiration dates (and in some cases no expiration date), subject to a valuation allowance of approximately 62%. 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 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 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 income taxes in the United States 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. As of December 31, 2013 and 2014, we had approximately $51.1 million and $56.0 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. 45 We had not previously provided incremental federal and certain state income taxes on net tax over book outside basis differences related to the earnings of our foreign subsidiaries because our intent, prior to our conversion to a REIT, was to reinvest our current and future undistributed earnings of certain foreign subsidiaries indefinitely outside the United States. As a result of our conversion to a REIT, it is no longer our intent to indefinitely reinvest our current and future undistributed foreign earnings outside the United States, and, therefore, during 2014, we recognized an increase in our tax provision from continuing operations in the amount of $46.4 million, representing incremental federal and state income taxes and foreign withholding taxes on such foreign earnings. As a REIT, future repatriation of incremental undistributed earnings of our foreign subsidiaries will not be subject to federal or state income tax, with the exception of foreign withholding taxes in limited instances; however, such future repatriations will require distribution in accordance with REIT distribution rules, and any such distribution may then be taxable, as appropriate, at the stockholder level. Recent Accounting Pronouncements In April 2014, the Financial Accounting Standards Board (‘‘FASB’’) issued Accounting Standards Update (‘‘ASU’’) No. 2014-08, Presentation of Financial Statements (Topic 205) and Property, Plant, and Equipment (Topic 360) (‘‘ASU 2014-08’’). ASU 2014-08 changes the criteria for a disposal to qualify as a discontinued operation and requires additional disclosures of both discontinued operations and certain other disposals that do not meet the definition of a discontinued operation. ASU 2014-08 is effective for annual periods beginning on or after December 15, 2014. Under this guidance, we expect fewer dispositions to qualify as discontinued operations. Early adoption is permitted, but only for disposals that have not been reported in the financial statements previously issued. We adopted ASU 2014-08 effective April 1, 2014. In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers (Topic 606) (‘‘ASU 2014-09’’). ASU 2014-09 provides additional guidance for management to reassess revenue recognition as it relates to: (1) transfer of control, (2) variable consideration, (3) allocation of transaction price based on relative standalone selling price, (3) licenses, (4) time value of money and (5) contract costs. Further disclosures will be required to provide a better understanding of revenue that has been recognized and revenue that is expected to be recognized in the future from existing contracts. ASU 2014-09 is effective for us on January 1, 2017, with no early adoption permitted. We are currently evaluating the impact ASU 2014-09 will have on our consolidated financial statements. In August 2014, the FASB issued ASU No. 2014-15, Presentation of Financial Statements Going Concern (Subtopic 205-40) (‘‘ASU 2014-15’’). ASU 2014-15 requires management to assess an entity’s ability to continue as a going concern by incorporating and expanding upon certain principles of current United States auditing standards. Specifically, the amendments (1) provide a definition of the term ‘‘substantial doubt’’, (2) require an evaluation every reporting period, including interim periods, (3) provide principles for considering the mitigating effect of management’s plans, (4) require certain disclosures when substantial doubt is alleviated as a result of consideration of management’s plans, (5) require an express statement and other disclosures when substantial doubt is still present, and (6) require an assessment for a period of one year after the date that the financial statements are issued (or available to be issued). ASU 2014-15 is effective for us on January 1, 2017, with early adoption permitted. We do not believe that this pronouncement will have an impact on our consolidated financial statements. In February 2015, the FASB issued ASU No. 2015-02, Consolidation (Topic 810): Amendments to the Consolidation Analysis (‘‘ASU 2015-02’’). ASU 2015-02 affects reporting entities that are required to evaluate whether they should consolidate certain legal entities. ASU 2015-02 is effective for us on January 1, 2016, with early adoption permitted. We do not believe that this pronouncement will have an impact on our consolidated financial statements. 46 Results of Operations Comparison of Year Ended December 31, 2014 to Year Ended December 31, 2013 and Comparison of Year Ended December 31, 2013 to Year Ended December 31, 2012 Year Ended December 31, 2013 2014 Dollar Change Percentage Change Revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Operating Expenses . . . . . . . . . . . . . . . . . . . . . . . . . $3,024,623 2,535,376 $3,117,693 2,568,416 $ 93,070 33,040 3.1% 1.3% Operating Income . . . . . . . . . . . . . . . . . . . . . . . . . Other Expenses, Net . . . . . . . . . . . . . . . . . . . . . . . . . Income from Continuing Operations . . . . . . . . . . . . . Income (Loss) from Discontinued Operations, Net of Tax . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Net Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Net Income Attributable to Noncontrolling Interests . Net Income Attributable to Iron Mountain 489,247 390,086 99,161 831 99,992 3,530 549,277 220,322 328,955 60,030 (169,764) 12.3% (43.5)% 229,794 231.7% (209) (1,040) (125.2)% 328,746 2,627 228,754 (903) 228.8% 25.6% Incorporated . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 96,462 $ 326,119 $ 229,657 238.1% Adjusted OIBDA(1) . . . . . . . . . . . . . . . . . . . . . . . . . $ 894,581 $ 925,797 $ 31,216 3.5% Adjusted OIBDA Margin(1) . . . . . . . . . . . . . . . . . . . 29.6% 29.7% Year Ended December 31, 2012 2013 Dollar Change Percentage Change Revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Operating Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . $3,003,955 2,448,489 $3,024,623 2,535,376 $ 20,668 86,887 0.7% 3.5% Operating Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Other Expenses, Net Income from Continuing Operations . . . . . . . . . . . . . . (Loss) Income from Discontinued Operations, Net of Tax . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Loss on Sale of Discontinued Operations, Net of Tax . . Net Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Net Income Attributable to Noncontrolling Interests . . Net Income Attributable to Iron Mountain 555,466 372,759 182,707 (6,774) (1,885) 174,048 3,126 489,247 390,086 (66,219) 17,327 (11.9)% 4.6% 99,161 (83,546) (45.7)% 831 — 7,605 1,885 99,992 3,530 (74,056) 404 112.3% 100.0% (42.5)% (12.9)% Incorporated . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 170,922 $ 96,462 $(74,460) (43.6)% Adjusted OIBDA(1) . . . . . . . . . . . . . . . . . . . . . . . . . . $ 910,917 $ 894,581 $(16,336) (1.8)% Adjusted OIBDA Margin(1) . . . . . . . . . . . . . . . . . . . . 30.3% 29.6% (1) See ‘‘Non-GAAP Measures—Adjusted Operating Income Before Depreciation, Amortization, Intangible Impairments, (Gain) Loss on Disposal/Write-Down of Property, Plant and Equipment (Excluding Real Estate), Net and REIT Costs (‘Adjusted OIBDA’)’’ in this Annual Report for the definition, reconciliation and a discussion of why we believe these measures provide relevant and useful information to our current and potential investors. 47 REVENUES Year Ended December 31, 2013 2014 Dollar Change Actual Constant Internal Currency(1) Growth(2) Percentage Change Storage Rental . . . . . . . . . . . . . . . . Service . . . . . . . . . . . . . . . . . . . . . $1,784,721 1,239,902 $1,860,243 1,257,450 $75,522 17,548 Total Revenues . . . . . . . . . . . . . . $3,024,623 $3,117,693 $93,070 4.2% 1.4% 3.1% 5.4% 2.8% 4.3% 2.2% (0.7)% 1.0% Year Ended December 31, 2012 2013 Dollar Change Actual Constant Internal Currency(1) Growth(2) Percentage Change . . . . . . . . . . . . . . . Storage Rental Service . . . . . . . . . . . . . . . . . . . . . $1,733,138 1,270,817 $1,784,721 1,239,902 $ 51,583 (30,915) 3.6% 3.0% (2.4)% (1.6)% Total Revenues . . . . . . . . . . . . . $3,003,955 $3,024,623 $ 20,668 0.7% 1.4% 2.1% (3.4)% (0.2)% (1) Constant currency growth rates are calculated by translating the 2013 results at the 2014 average exchange rates and the 2012 results at the 2013 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. Consolidated storage rental revenues increased $75.5 million, or 4.2%, to $1,860.2 million for the year ended December 31, 2014 and $51.6 million, or 3.0%, to $1,784.7 million for the year ended December 31, 2013, in comparison to the years ended December 31, 2013 and 2012, respectively. The growth rate for the year ended December 31, 2014 consists primarily of internal revenue growth of 2.2%. Net acquisitions/divestitures contributed 3.2% of the increase in reported storage rental revenues in 2014 over 2013. Foreign currency exchange rate fluctuations decreased our reported storage rental revenue growth rate for the year ended December 31, 2014 by approximately 1.2%. Our consolidated storage rental revenue growth in 2014 was driven by sustained storage rental internal growth of 0.3%, 2.3% and 6.3% in our North American Records and Information Management Business, North American Data Management Business and International Business segments, respectively. Global records management net volumes in 2014 increased by 3.6% over the ending volume at December 31, 2013, supported by 12.3% volume increases in our International Business segment, which was driven by growth from both emerging and developed markets as well as recent acquisitions. The growth rate for the year ended December 31, 2013 consists primarily of internal revenue growth of 2.1%. Net acquisitions/divestitures contributed 1.5% of the increase in reported storage rental revenues in 2013 over 2012. Foreign currency exchange rate fluctuations decreased our reported storage rental revenue growth rate for the year ended December 31, 2013 by approximately 0.6%. Our consolidated storage rental revenue growth in 2013 was driven by sustained storage rental internal growth of 0.4%, 1.5% and 6.2% in our North American Records and Information Management Business, North American Data Management Business and International Business segments, respectively. Consolidated service revenues increased $17.5 million, or 1.4%, to $1,257.5 million for the year ended December 31, 2014 from $1,239.9 million for the year ended December 31, 2013. Service revenue internal growth was negative 0.7% for the year ended December 31, 2014. The negative service revenue internal growth for 2014 reflects a trend toward reduced retrieval/re-file activity and a related decrease in transportation revenues within our North American Records and Information Management Business segment, as well as continued declines in service revenue activity levels in our North American 48 Data Management Business segment as the storage business becomes more archival in nature. Foreign currency exchange rate fluctuations decreased our reported total service revenues by 1.4% in 2014 over 2013. Net acquisitions/divestitures contributed 3.5% of the increase of reported service revenues in 2014. Consolidated service revenues decreased $30.9 million, or 2.4%, to $1,239.9 million for the year ended December 31, 2013 from $1,270.8 million for the year ended December 31, 2012. Service revenue internal growth was negative 3.4% for the year ended December 31, 2013. The negative service revenue internal growth for 2013 reflects a trend toward reduced retrieval/re-file activity and a related decrease in transportation revenues within our North American Records and Information Management Business segment, as well as continued declines in service revenue activity levels in our North American Data Management Business segment as the storage business becomes more archival in nature. Foreign currency exchange rate fluctuations decreased reported service revenues by 0.8% in 2013 over 2012. Net acquisitions/divestitures partially offset the decrease in reported consolidated service revenues and contributed an increase of 1.8% of reported service revenues in 2013. For the reasons stated above, our consolidated revenues increased $93.1 million, or 3.1%, to $3,117.7 million for the year ended December 31, 2014 from $3,024.6 million for the year ended December 31, 2013. Internal revenue growth was 1.0% for 2014. For the year ended December 31, 2014, foreign currency exchange rate fluctuations decreased our reported consolidated revenues by 1.2% primarily due to the weakening of the Australian dollar, Brazilian real and Canadian dollar against the United States dollar, partially offset by a strengthening of the British pound sterling and the Euro against the United States dollar, based on an analysis of weighted average rates for the comparable periods. Net acquisitions/divestitures contributed an increase of 3.3% of total reported revenues in 2014 over the same period in 2013. Our consolidated revenues increased $20.7 million, or 0.7%, to $3,024.6 million for the year ended December 31, 2013 from $3,004.0 million for the year ended December 31, 2012. Internal revenue growth was negative 0.2% for 2013. For the year ended December 31, 2013, foreign currency exchange rate fluctuations decreased our consolidated revenues by 0.7% primarily due to the weakening of the Australian dollar, Brazilian real, British pound sterling and Canadian dollar, offset by an increase of the Euro against the United States dollar, based on an analysis of weighted average rates for the comparable periods. Net acquisitions/divestitures partially offset the decrease in reported consolidated revenues and contributed an increase of 1.6% of total reported revenues in 2013 over the same period in 2012. Internal Growth—Eight-Quarter Trend 2013 2014 First Fourth Quarter Quarter Quarter Quarter Quarter Quarter Quarter Quarter Second Second Fourth Third Third First Storage Rental Revenue . . . . . Service Revenue . . . . . . . . . . . Total Revenue . . . . . . . . . . . . 2.5% 2.3% 2.3% 1.3% 1.4% 1.6% 2.2% 3.5% (6.5)% (1.9)% (0.9)% (4.4)% (0.7)% (1.9)% (2.7)% 2.3% (1.4)% 0.5% 1.0% (1.1)% 0.5% 0.1% 0.2% 3.0% We expect our consolidated internal revenue growth rate for 2015 to be approximately 0% to 2%. During the past eight quarters our storage rental revenue internal growth rate has ranged between 1.3% and 3.5%. Storage rental revenue internal growth rates have been relatively stable over the past eight quarters, averaging between 2.1% and 2.2% for full-year 2013 and 2014. At various points in the economic cycle, storage rental internal growth may be influenced by changes in pricing and volume. Recently, we initiated sales force programs focused on increasing volume through new sales and improved customer retention. In addition, we are working on enhancing our pricing strategy through implementing a statistically based approach, which enables customized pricing based on customer profiles and needs. Within our International Business segment, the developed markets are generating consistent low-to-mid single-digit storage rental revenue growth, and the emerging markets are producing strong double-digit storage rental revenue growth by capturing the first-time outsourcing 49 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 services we offer, such as large special projects, and, as a commodity, 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. 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 in the North American Records and Information Management Business and the North American Data Management Business segments and secure shredding revenues; and (2) softness in some of our other service lines, such as fulfillment services. OPERATING EXPENSES Cost of Sales Consolidated cost of sales (excluding depreciation and amortization) consists of the following expenses (in thousands): Year Ended December 31, 2013 2014 Dollar Change Actual Constant Currency Percentage Change % of Consolidated Revenues 2013 2014 Percentage Change (Favorable)/ Unfavorable Labor . . . . . . . . . . . . . . . $ 638,403 $ 674,658 $36,255 26,733 Facilities . . . . . . . . . . . . . Transportation . . . . . . . . . (5,152) Product Cost of Sales and Other . . . . . . . . . . . . . 440,408 118,027 413,675 123,179 111,543 113,621 (2,078) 0.5% 5.7% 7.7% 21.1% 21.6% 6.5% 7.5% 13.7% 14.1% 0.4% (4.2)% (2.6)% 4.1% 3.8% (0.3)% (1.8)% 0.0% 3.8% 3.6% (0.2)% $1,288,878 $1,344,636 $55,758 4.3% 6.0% 42.6% 43.1% 0.5% Year Ended December 31, 2012 2013 Dollar Change Actual Constant Currency Percentage Change % of Consolidated Revenues 2012 2013 Percentage Change (Favorable)/ Unfavorable Labor . . . . . . . . . . . . . . . $ 625,922 $ 638,403 $12,481 (7,423) Facilities . . . . . . . . . . . . . Transportation . . . . . . . . . (2,844) Product Cost of Sales and Other . . . . . . . . . . . . . 413,675 123,179 421,098 126,023 113,621 104,070 9,551 2.0% 3.1% 20.8% 21.1% 0.3% (1.8)% (0.9)% 14.0% 13.7% (0.3)% (2.3)% (1.1)% 4.2% 4.1% (0.1)% $1,277,113 $1,288,878 $11,765 0.9% 1.9% 42.5% 42.6% 9.2% 10.2% 3.5% 3.8% 0.3% 0.1% Labor Labor expense increased to 21.6% of consolidated revenues for the year ended December 31, 2014 compared to 21.1% for the year ended December 31, 2013. Labor expense for the year ended December 31, 2014 increased by 7.7% on a constant dollar basis compared to the year ended December 31, 2013 primarily due to incremental labor costs associated with acquisitions completed during fiscal year 2014 and the fourth quarter of 2013, as well as merit increases, partially offset by a $2.2 million decrease in restructuring costs. Labor costs were favorably impacted by 2.0 percentage points due to currency rate changes during the year ended December 31, 2014. 50 Labor expense increased to 21.1% of consolidated revenues for the year ended December 31, 2013 compared to 20.8% for the year ended December 31, 2012. Labor expense for the year ended December 31, 2013 increased by 3.1% on a constant dollar basis compared to the year ended December 31, 2012 primarily due to $10.7 million of incremental labor costs associated with fiscal year 2013 acquisitions, as well as $3.4 million of restructuring costs that were incurred in 2013. Labor costs were favorably impacted by 1.1 percentage points due to currency rate changes during the year ended December 31, 2013. Facilities Facilities costs increased to 14.1% of consolidated revenues for the year ended December 31, 2014, compared to 13.7% for the year ended December 31, 2013. Rent expense, which, on a constant dollar basis, increased by $10.9 million for the year ended December 31, 2014 compared to the year ended December 31, 2013, primarily due to the impact of acquisitions completed during fiscal year 2014 and the fourth quarter of 2013. Other facilities costs increased by $19.9 million on a constant dollar basis for the year ended December 31, 2014 compared to the year ended December 31, 2013, primarily due to higher utilities of $4.0 million and building maintenance costs of $6.5 million, as well as higher insurance costs of $3.5 million associated with a fire at one of our facilities in Buenos Aires, Argentina on February 5, 2014 (described at Note 10.g. to Notes to Consolidated Financial Statements included in this Annual Report). Facilities costs were favorably impacted by 1.0 percentage points due to currency rate changes during the year ended December 31, 2014. Facilities costs decreased to 13.7% of consolidated revenues for the year ended December 31, 2013, compared to 14.0% for the year ended December 31, 2012. The largest component of our facilities cost is rent expense, which, on a constant dollar basis, decreased by $6.0 million for the year ended December 31, 2013 compared to the year ended December 31, 2012 as a result of our ongoing facility consolidation efforts. This decrease was partially offset by $4.8 million of costs associated with 2013 acquisitions. Facilities costs were favorably impacted by 0.9 percentage points due to currency rate changes during the year ended December 31, 2013. Transportation Transportation expenses decreased by $3.2 million on a constant dollar basis during the year ended December 31, 2014 compared to the year ended December 31, 2013 primarily as a result of decreased fuel and maintenance costs of $1.3 million and $0.9 million, respectively. Transportation expenses were favorably impacted by 1.6 percentage points due to currency rate changes during the year ended December 31, 2014. Transportation expenses decreased by $1.4 million on a constant dollar basis during the year ended December 31, 2013 compared to the year ended December 31, 2012 as a result of a decrease in vehicle lease expense, primarily associated with our United Kingdom operations, due to the capitalization of leased vehicles upon renewal. Although the aggregate lease cost has not changed, the categorization of charges did change, resulting in the cost being allocated to depreciation and interest. Transportation expenses were favorably impacted by 1.2 percentage points due to currency rate changes during the year ended December 31, 2013. 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 service revenue streams, particularly project revenues. For the year ended December 31, 2014, product cost of sales and other decreased by $2.1 million compared to the year ended December 31, 2013 on an actual basis, primarily due to a reduction in costs associated with 51 special projects. These costs were favorably impacted by 1.8 percentage points due to currency rate changes during the year ended December 31, 2014. For the year ended December 31, 2013, product cost of sales and other increased by $9.6 million compared to the year ended December 31, 2012 on an actual basis, primarily as a result of higher move costs associated with facility consolidations, as well as $1.5 million of incremental costs incurred associated with 2013 acquisitions. These costs were favorably impacted by 1.0 percentage points due to currency rate changes during the year ended December 31, 2013. Selling, General and Administrative Expenses Selling, general and administrative expenses consists of the following expenses (in thousands): Year Ended December 31, 2013 2014 Percentage Change Dollar Change Actual Constant Currency % of Consolidated Revenues 2013 2014 Percentage Change (Favorable)/ Unfavorable General and Administrative . . $595,699 $538,657 $(57,042) (9.6)% (8.8)% 19.7% 17.3% (2.4)% Sales, Marketing & Account Management . . . . . . . . . . . Information Technology . . . . . Bad Debt Expense . . . . . . . . . 219,143 97,868 11,321 213,532 103,174 14,209 (5,611) (2.6)% (1.8)% 7.2% 6.8% (0.4)% 0.1% 5,306 5.4% 6.1% 3.2% 3.3% 0.1% 2,888 25.5% 27.4% 0.4% 0.5% $924,031 $869,572 $(54,459) (5.9)% (5.1)% 30.6% 27.9% (2.7)% Year Ended December 31, 2012 2013 Percentage Change Dollar Change Actual Constant Currency % of Consolidated Revenues 2012 2013 Percentage Change (Favorable)/ Unfavorable General and Administrative . $508,365 $595,699 $ 87,334 Sales, Marketing & Account 17.2% 18.0% 16.9% 19.7% 2.8% Management . . . . . . . . . . Information Technology . . . . Bad Debt Expense . . . . . . . . 235,449 98,234 8,323 219,143 97,868 11,321 (16,306) (366) 2,998 (6.9)% (6.3)% 7.8% 7.2% (0.6)% (0.4)% 0.4% 3.3% 3.2% (0.1)% 0.1% 36.0% 38.7% 0.3% 0.4% $850,371 $924,031 $ 73,660 8.7% 9.4% 28.3% 30.6% 2.3% General and Administrative General and administrative expenses decreased to 17.3% of consolidated revenues during the year ended December 31, 2014 compared to 19.7% in the year ended December 31, 2013. On a constant dollar basis, general and administrative expenses decreased by $52.0 million during the year ended December 31, 2014 compared to the year ended December 31, 2013, primarily driven by a $60.6 million decrease in REIT Costs and a $15.3 million decrease in restructuring costs. These decreases were partially offset by increased compensation costs of $15.1 million, primarily associated with merit increases, higher incentive compensation and the associated payroll taxes, as well as $7.2 million of incremental general and administrative expenses associated with international acquisitions completed during fiscal year 2014 and the fourth quarter of 2013. General and administrative expenses were favorably impacted by 0.8 percentage points due to currency rate changes during the year ended December 31, 2014. General and administrative expenses increased to 19.7% of consolidated revenues during the year ended December 31, 2013 compared to 16.9% in the year ended December 31, 2012. On a constant dollar basis, general and administrative expenses increased by $91.0 million during the year ended 52 December 31, 2013 compared to the year ended December 31, 2012. Included in general and administrative expenses for the year ended December 31, 2013 were $82.9 million of REIT Costs compared to $34.4 million for the year ended December 31, 2012. The increase during the year ended December 31, 2013 compared to the year ended December 31, 2012 also included a $31.7 million increase in compensation expenses, primarily associated with restructuring costs, $5.1 million of incremental costs associated with 2013 acquisitions and a $4.8 million increase in software license fees. General and administrative expenses were favorably impacted by 0.8 percentage points due to currency rate changes during the year ended December 31, 2013. Sales, Marketing & Account Management Sales, marketing and account management expenses decreased to 6.8% of consolidated revenues during the year ended December 31, 2014 compared to 7.2% in 2013. On a constant dollar basis, the decrease of $4.0 million during the year ended December 31, 2014 compared to the year ended December 31, 2013 is primarily due to a decrease in compensation expense of $3.5 million as a result of the organizational restructuring initiated in 2013 and completed in 2014. Sales, marketing and account management expenses were favorably impacted by 0.8 percentage points due to currency rate changes during the year ended December 31, 2014. Sales, marketing and account management expenses decreased to 7.2% of consolidated revenues during the year ended December 31, 2013 compared to 7.8% for the year ended December 31, 2012. On a constant dollar basis, the decrease of $14.8 million during the year ended December 31, 2013 compared to the year ended December 31, 2012 is primarily due to a decrease of $15.4 million in compensation expense within our North American Records and Information Management Business segment and $3.1 million in compensation expense within our North American Data Management Business segment as a result of restructuring in the fourth quarter of 2012. This decrease was partially offset by $1.1 million of incremental costs incurred associated with 2013 acquisitions. Sales, marketing and account management expenses were favorably impacted by 0.6 percentage points due to currency rate changes during the year ended December 31, 2013. Information Technology On a constant dollar basis, information technology expenses increased $6.0 million during the year ended December 31, 2014 compared to the year ended December 31, 2013 primarily due to increased professional fees of $2.4 million and software license fees of $1.0 million, as well as an increase in compensation expenses of $2.9 million related to the mix of project work year over year performed by internal personnel associated with capital versus maintenance initiatives. Information technology expenses were favorably impacted by 0.7 percentage points due to currency rate changes during the year ended December 31, 2014. On a constant dollar basis, information technology expenses increased $0.4 million during the year ended December 31, 2013 compared to the year ended December 31, 2012 primarily due to incremental costs associated with 2013 acquisitions. Information technology expenses were favorably impacted by 0.8 percentage points due to currency rate changes during the year ended December 31, 2013. Bad Debt Expense Consolidated bad debt expense for the year ended December 31, 2014 increased $2.9 million to $14.2 million (0.5% of consolidated revenues) from $11.3 million (0.4% of consolidated revenues) for the year ended December 31, 2013. 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 53 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, 2013 increased $3.0 million to $11.3 million (0.4% of consolidated revenues) from $8.3 million (0.3% of consolidated revenues) for the year ended December 31, 2012. Depreciation, Amortization, and (Gain) Loss on Disposal/Write-down of Property, Plant and Equipment (Excluding Real Estate), Net Depreciation expense increased $21.7 million and $2.3 million for the years ended December 31, 2014 and 2013, respectively, compared to the years ended December 31, 2013 and 2012, respectively, primarily due to the increased depreciation of property, plant and equipment acquired through business combinations. Amortization expense increased $9.4 million and $3.4 million for the years ended December 31, 2014 and 2013, respectively, compared to the years ended December 31, 2013 and 2012, respectively, primarily due to the increased amortization of customer relationship intangible assets acquired through business combinations. As a result of our conversion to a REIT and in accordance with SEC rules applicable to REITs, we no longer report (gain) loss on sale of real estate as a component of operating income, but we will continue to report it as a component of income (loss) from continuing operations. We will continue to report the (gain) loss on sale of property, plant and equipment (excluding real estate), along with any impairment, write-downs or involuntary conversions related to real estate, as a component of operating income. Previously reported amounts have been reclassified to conform to this presentation. Consolidated loss on disposal/write-down of property, plant and equipment (excluding real estate), net was $1.1 million for the year ended December 31, 2014 and consisted primarily of losses associated with the write-off of certain software associated with our North American Records and Information Management Business segment. Consolidated loss on disposal/write-down of property, plant and equipment (excluding real estate), net was $0.4 million for the year ended December 31, 2013 and consisted of $1.7 million of asset write-offs in our North American Records and Information Management Business segment, approximately $0.3 million of asset write-offs in our Corporate and Other segment and approximately $0.9 million of asset write-offs associated with our European operations, partially offset by gains of approximately $2.5 million on the retirement of leased vehicles accounted for as capital lease assets primarily associated with our North American Records and Information Management Business segment. Consolidated loss on disposal/write-down of property, plant and equipment (excluding real estate), net was $4.7 million for the year ended December 31, 2012 and consisted primarily of approximately $5.8 million, $0.7 million, $1.1 million and $0.5 million of asset write-offs in Europe, North American Records and Information Management Business, Emerging Businesses and Latin America, respectively, partially offset by approximately $3.5 million of gains associated with the retirement of leased vehicles accounted for as capital lease assets associated with our North American Records and Information Management Business segment. OPERATING INCOME and ADJUSTED OIBDA As a result of the foregoing factors, consolidated operating income increased $60.0 million, or 12.3%, to $549.3 million (17.6% of consolidated revenues) for the year ended December 31, 2014 from $489.2 million (16.2% of consolidated revenues) for the year ended December 31, 2013, and consolidated Adjusted OIBDA increased $31.2 million, or 3.5%, to $925.8 million (29.7% of consolidated revenues) for the year ended December 31, 2014 from $894.6 million (29.6% of consolidated revenues) for the year ended December 31, 2013. 54 As a result of the foregoing factors, consolidated operating income decreased $66.2 million, or 11.9%, to $489.2 million (16.2% of consolidated revenues) for the year ended December 31, 2013 from $555.5 million (18.5% of consolidated revenues) for the year ended December 31, 2012, and consolidated Adjusted OIBDA decreased $16.3 million, or 1.8%, to $894.6 million (29.6% of consolidated revenues) for the year ended December 31, 2013 from $910.9 million (30.3% of consolidated revenues) for the year ended December 31, 2012. OTHER EXPENSES, NET Interest Expense, Net Consolidated interest expense, net increased $6.5 million to $260.7 million (8.4% of consolidated revenues) for the year ended December 31, 2014 from $254.2 million (8.4% of consolidated revenues) for the year ended December 31, 2013 primarily due to the issuance in August 2013 of (i) $600.0 million in aggregate principal of the 6% Senior Notes due 2023 (the ‘‘6% Notes’’) by IMI and (ii) 200.0 million CAD in aggregate principal of the 61⁄8% Senior Notes due 2021 (the ‘‘CAD Notes’’) by Iron Mountain Canada Operations ULC (‘‘Canada Company’’), as well as the issuance in September 2014 of 400.0 million British pounds sterling in aggregate principal of the 61⁄8% Senior Notes due 2022 (the ‘‘GBP Notes’’) by Iron Mountain Europe PLC (‘‘IME’’). This increase was partially offset by (1) the early retirement in August 2013 of (i) 175.0 million CAD of the 71⁄2% CAD Senior Subordinated Notes due 2017 (the ‘‘71⁄2% Notes’’), (ii) $50.0 million of the 8% Senior Subordinated Notes due 2018 (the ‘‘8% Notes’’), (iii) $300.0 million of the 8% Senior Subordinated Notes due 2020 (the ‘‘8% Notes due 2020’’) and (iv) $137.5 million of the 83⁄8% Senior Subordinated Notes due 2021 (the ‘‘83⁄8% Notes’’) as well as (2) the redemption in January 2014 of 150.0 million British pounds sterling of the 71⁄4% GBP Senior Subordinated Notes due 2014 (the ‘‘71⁄4% Notes’’). Our weighted average interest rate was 5.6% at December 31, 2014 and 6.2% at December 31, 2013. Consolidated interest expense, net increased $11.6 million to $254.2 million (8.4% of consolidated revenues) for the year ended December 31, 2013 from $242.6 million (8.1% of consolidated revenues) for the year ended December 31, 2012 primarily due to the issuance of the 6% Notes, the CAD Notes and the issuance of $1.0 billion in aggregate principal of the 53⁄4% Senior Subordinated Notes due 2024 in August 2012. This increase was partially offset by the early retirement in August 2013 of the (i) 71⁄2% Notes, (ii) the 8% Notes , (iii) the 8% Notes due 2020 and (iv) $137.5 million of our 83⁄8% Notes as well as the early retirement in August 2012 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’’). Other Expense (Income), Net (in thousands) Foreign currency transaction losses, net . . . . . . . . . . . . . . . . . . . . . . . . Debt extinguishment expense, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Other, net $36,201 43,724 (4,723) $58,316 16,495 (9,624) $ 22,115 (27,229) (4,901) Year Ended December 31, 2013 2014 Dollar Change Foreign currency transaction losses, net . . . . . . . . . . . . . . . . . . . . . . . . . Debt extinguishment expense, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Other, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55 $75,202 $65,187 $(10,015) Year Ended December 31, 2012 2013 $10,223 10,628 (4,789) $16,062 $36,201 43,724 (4,723) $75,202 Dollar Change $25,978 33,096 66 $59,140 Net foreign currency transaction losses of $58.3 million, based on period-end exchange rates, were recorded in the year ended December 31, 2014. Losses resulted primarily from changes in the exchange rate of each of the Argentine peso, Brazilian real, British pound sterling, Euro, Russian ruble and Ukrainian hryvnia against the United States dollar compared to December 31, 2013, as these currencies relate to our intercompany balances with and between our Latin American and European subsidiaries, as well as Euro forward contracts. These losses were partially offset by gains primarily from British pound sterling borrowings on our revolving credit facility, Australian dollar and British pound sterling forward contracts, and Euro denominated bonds issued by IMI. Net foreign currency transaction losses of $36.2 million, based on period-end exchange rates, were recorded in the year ended December 31, 2013. Losses resulted primarily from changes in the exchange rate of each of the Australian dollar, Brazilian real, Russian ruble and Euro against the United States dollar compared to December 31, 2012, as these currencies relate to our intercompany balances with and between our European, Australian and Brazilian subsidiaries as well as British pound sterling debt and forward currency contracts, which were partially offset by gains as a result of an Australian forward currency contract, as well as changes in the exchange rate of the British pound sterling against the United States dollar compared to December 31, 2012 as it relates to our intercompany balances with and between our United Kingdom subsidiaries. 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 United States dollar compared to December 31, 2011, as it relates to our intercompany balances with and between our European and Australian subsidiaries. In December 2014, we recorded a debt extinguishment charge of $16.5 million related to the early redemption of $306.0 million in aggregate principal of the 83⁄8% Notes at 104.188% of par. This charge consists of call premiums, original issue discounts and deferred financing costs related to the 83⁄8% Notes. During the year ended December 31, 2013, we recorded a charge of $43.7 million related to the amendment of our former credit agreement in the third quarter of 2013, representing a write-off of deferred financing costs, and the early extinguishment of the 71⁄2% Notes, the 8% Notes, the 8% Notes due 2020 and a portion of the 83⁄8% Notes. This charge consists of call premiums, original issue discounts and deferred financing costs related to this debt. During the year ended December 31, 2012, we recorded a charge of approximately $10.6 million related to the early extinguishment of $320.0 million of the 65⁄8% Notes and $200.0 million of the 83⁄4% Notes in the third quarter of 2012. 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. Other, net in the year ended December 31, 2014 included income of $9.6 million. In December 2014, we divested our secure shredding operations in Australia, Ireland and the United Kingdom in a stock transaction and recorded a pretax gain of approximately $6.9 million (see Note 16 to Notes to Consolidated Financial Statements included in this Annual Report). Also included in other, net in the year ended December 31, 2014 was approximately $0.9 million of royalty income and $1.1 million of gains associated with a deferred compensation plan we sponsor. Other, net in the year ended December 31, 2013 consists primarily of $3.7 million of royalty income. Other, net in the year ended December 31, 2012 consists primarily of $2.7 million of royalty income, $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 associated with a deferred compensation plan we sponsor. 56 Provision for Income Taxes Our effective tax rates for the years ended December 31, 2012, 2013 and 2014 were 38.5%, 38.9% and (43.5)%, 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, 2013 were the impact from the repatriation discussed below, which increased our 2013 effective tax rate by 13.1%, and state income taxes (net of federal tax benefit). These expenses were partially offset by a favorable 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. During 2013, we completed a plan to utilize both current and carryforward foreign tax credits by repatriating approximately $252.7 million (approximately $65.2 million of which was previously subject to United States taxes) from our foreign earnings. Due to uncertainty in our ability to fully utilize foreign tax credit carryforwards, we previously did not recognize a full benefit for such foreign tax credit carryforwards in our tax provision. As a result, we recorded an increase in our tax provision from continuing operations in the amount of $63.5 million in 2013. This increase was offset by decreases of $18.8 million from current year foreign tax credits and $23.3 million reversal of valuation allowances related to foreign tax credit carryforwards, resulting in a net increase of $21.5 million in our tax provision from continuing operations. As a result of our REIT conversion, we recorded a net tax benefit of $212.2 million during the year ended December 31, 2014 for the revaluation of certain deferred tax assets and liabilities associated with the REIT conversion. In 2014, we recorded an increase to the tax provision of $29.3 million associated with tax accounting method changes consistent with our REIT conversion, primarily affected through the filing of amended tax returns. The primary other reconciling items between the federal statutory rate of 35% and our overall effective tax rate during the year ended December 31, 2014 was an increase of $46.4 million in our tax provision from the repatriation discussed below and other net tax adjustments related to the REIT conversion, including a tax benefit of $63.3 million primarily related to the dividends paid deduction. As a REIT, we are entitled to a deduction for dividends paid, resulting in a substantial reduction of federal income tax expense. As a REIT, substantially all of our income tax expense will be incurred based on the earnings generated by our foreign subsidiaries and our domestic TRSs. We had not previously provided incremental federal and certain state income taxes on net tax over book outside basis differences related to the earnings of our foreign subsidiaries because our intent, prior to our conversion to a REIT, was to reinvest our current and future undistributed earnings of certain foreign subsidiaries indefinitely outside the United States. As a result of our conversion to a REIT, it is no longer our intent to indefinitely reinvest our current and future undistributed foreign earnings outside the United States, and, therefore, during 2014, we recognized an increase in our tax provision from continuing operations in the amount of $46.4 million, representing incremental federal and state income taxes and foreign withholding taxes on such foreign earnings. As a REIT, future repatriation of incremental undistributed earnings of our foreign subsidiaries will not be subject to federal or state income tax, with the exception of foreign withholding taxes in limited instances; 57 however, such future repatriations will require distribution in accordance with REIT distribution rules, and any such distribution may then be taxable, as appropriate, at the stockholder level. Our effective tax rate is subject to variability in the future due to, among other items: (1) changes in the mix of income between our qualified REIT subsidiaries and our TRSs; (2) tax law changes; (3) volatility in foreign exchange gains (losses); (4) the timing of the establishment and reversal of tax reserves; and (5) our ability to utilize foreign tax credits and net operating losses that we generate. We are subject to income taxes in the United States 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. Gain on Sale of Real Estate, Net of Tax Consolidated gain on sale of real estate for the year ended December 31, 2014 was $8.3 million, net of tax of $2.2 million associated with the sale of two buildings in the United Kingdom and a building in Canada. Consolidated gain on sale of real estate for the year ended December 31, 2013 was $1.4 million, net of tax of $0.4 million associated with the sale of a building in the United Kingdom. Consolidated gain on sale of real estate for the year ended December 31, 2012 was $0.2 million, net of tax of $0.1 million associated with the sale of a building in the United Kingdom. INCOME FROM CONTINUING OPERATIONS As a result of the foregoing factors, consolidated income from continuing operations for the year ended December 31, 2014 increased $229.8 million, or 231.7%, to $329.0 million (10.6% of consolidated revenues) from income from continuing operations of $99.2 million (3.3% of consolidated revenues) for the year ended December 31, 2013. The increase in income from continuing operations is primarily due to a $159.4 million decrease in our provision for income taxes as a result of our REIT conversion and a $60.6 million decrease in REIT Costs in 2014 compared to 2013. As a result of the foregoing factors, consolidated income from continuing operations for the year ended December 31, 2013 decreased $83.5 million, or 45.7%, to $99.2 million (3.3% of consolidated revenues) from income from continuing operations of $182.7 million (6.1% of consolidated revenues) for the year ended December 31, 2012. The decrease in income from continuing operations is primarily due to a $48.4 million increase in REIT Costs year over year, restructuring costs of $23.4 million and a $59.1 million increase in other expenses primarily associated with debt extinguishment costs and foreign exchange losses, partially offset by a lower income tax provision in 2013 compared to 2012. INCOME (LOSS) FROM DISCONTINUED OPERATIONS AND GAIN (LOSS) ON SALE OF DISCONTINUED OPERATIONS, NET OF TAX Loss from discontinued operations, net of tax was $0.2 million for the year ended December 31, 2014, primarily related to legal reserves, offset by the recovery of insurance proceeds in excess of carrying value. Income from discontinued operations, net of tax was $0.8 million for the year ended December 31, 2013, which primarily represents the recovery of insurance proceeds in excess of carrying value. Loss from discontinued operations, net of tax was $6.8 million for the year ended December 31, 2012, primarily due to losses related to our Italian operations which we sold on April 27, 2012. We recorded a loss on sale of discontinued operations in the amount of $1.9 million ($1.9 million, net of tax) during the year ended December 31, 2012 as a result of the sale of our Italian operations. 58 NONCONTROLLING INTERESTS Net income attributable to noncontrolling interests resulted in a decrease in net income attributable to Iron Mountain Incorporated of $2.6 million, $3.5 million and $3.1 million for the years ended December 31, 2014, 2013 and 2012, respectively. These amounts represent our noncontrolling partners’ share of earnings/losses in our majority-owned international subsidiaries that are consolidated in our operating results. Segment Analysis (in thousands) As a result of certain organizational realignments effective January 1, 2014, we evaluated changes to our internal financial reporting to better align our internal reporting to how we will manage our business going forward. This evaluation resulted in changes to our reportable segments effective January 1, 2014. As a result of the changes to our reportable segments, the former North American Business segment was separated into two unique reportable segments, which we refer to as (1) North American Records and Information Management Business segment and (2) North American Data Management Business segment. In addition, the Emerging Businesses segment, which was previously reported as a component of the former North American Business segment, is now reported as a component of the Corporate and Other segment. As a result, we have restated previously reported segment information. Our reportable operating segments are North American Records and Information Management Business, North American Data Management Business, International Business and Corporate and Other. See Note 9 to Notes to Consolidated Financial Statements included in this Annual Report. Our North American Records and Information Management Business segment offers storage and information management services throughout the United States and Canada, including Records Management; Destruction; DMS; Fulfillment Services; and Intellectual Property Management. Our North American Data Management Business segment offers storage and rotation of backup computer media as part of corporate disaster recovery plans throughout the United States and Canada, including Data Protection & Recovery, server and computer backup services, digital content repository systems to house, distribute, and archive key media assets, and storage, safeguarding and electronic or physical delivery of physical media of all types, primarily for entertainment and media industry clients. Our International Business segment offers storage and information management services throughout Europe, Latin America and Asia Pacific, including Records Management, Data Protection & Recovery and DMS. Our European operations provide Records Management, Data Protection & Recovery and DMS throughout Europe. Our Latin America operations provide Records Management, Data Protection & Recovery and DMS throughout Argentina, Brazil, Chile, Colombia, Mexico and Peru. Our Asia Pacific operations provide Records Management, Data Protection & Recovery and DMS throughout Australia, with Records Management and Data Protection & Recovery also provided in certain cities in India, Singapore, Hong Kong-SAR and China. Prior to December 2014, our International Business segment offered Destruction in the United Kingdom, Ireland and Australia. See Note 16 to Notes to Consolidated Financial Statements included in this Annual Report for further disclosure related to the divestiture of these secure shredding operations in December 2014. Corporate and Other consists of our data center business in the United States, the primary product offering of our Emerging Businesses segment, as well as 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. Our Corporate and Other segment also includes stock-based employee compensation expense associated with all stock options, restricted stock, restricted stock units, performance units and shares of stock issued under our employee stock purchase plan. 59 North American Records and Information Management Business Year Ended December 31, 2013 2014 Dollar Change Actual Constant Currency Internal Growth Percentage Change Storage Rental . . . . . . . . . . . . . . . . . . Service . . . . . . . . . . . . . . . . . . . . . . . . $1,057,126 712,107 $1,080,013 715,348 $22,887 3,241 2.2% 2.9% 0.3% 0.5% 1.4% (0.5)% Segment Revenue . . . . . . . . . . . . . . . . $1,769,233 $1,795,361 $26,128 1.5% 2.3% 0.0% Segment Adjusted OIBDA(1) . . . . . . . $ 645,575 $ 690,419 $44,844 Segment Adjusted OIBDA(1) as a Percentage of Segment Revenue . . . . 36.5% 38.5% Year Ended December 31, 2012 2013 Dollar Change Actual Constant Currency Internal Growth Percentage Change Storage Rental . . . . . . . . . . . . . . . . . Service . . . . . . . . . . . . . . . . . . . . . . . $1,045,161 735,138 $1,057,126 712,107 $ 11,965 (23,031) 1.1% 0.4% 0.4% (3.1)% (1.0)% (3.9)% Segment Revenue . . . . . . . . . . . . . . . $1,780,299 $1,769,233 $(11,066) (0.6)% (0.2)% (1.4)% Segment Adjusted OIBDA(1) . . . . . . $ 665,655 $ 645,575 $(20,080) Segment Adjusted OIBDA(1) as a Percentage of Segment Revenue . . . 37.4% 36.5% (1) See Note 9 to Notes to the Consolidated Financial Statements included in this Annual Report for the 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 and (gain) loss on sale of real estate. During the year ended December 31, 2014, reported revenue in our North American Records and Information Management Business segment increased 1.5% compared to the year ended December 31, 2013. This increase is primarily attributable to the impact of acquisitions of 2.3% in the year ended December 31, 2014 compared to the year ended December 31, 2013. Flat total internal growth was primarily the result of negative service internal growth of 0.5%, resulting from a trend toward reduced retrieval/re-file activity and a related decrease in transportation revenues, partially offset by storage rental revenue internal growth of 0.3% in the year ended December 31, 2014, primarily related to net price increases. For the year ended December 31, 2014, foreign currency exchange rate fluctuations decreased our reported revenues for the North American Records and Information Management Business segment by 0.8% compared to the year ended December 31, 2013 due to the weakening of the Canadian dollar against the United States dollar. Adjusted OIBDA as a percentage of segment revenue increased 200 basis points in the year ended December 31, 2014 compared to 2013, primarily due to decreases in restructuring charges and compensation expense as a result of the organizational restructuring initiated in the fourth quarter of 2013. During the year ended December 31, 2013, reported revenue in our North American Records and Information Management Business segment decreased 0.6% compared to the year ended December 31, 2012, primarily due to negative internal growth of 1.4%. For the year ended December 31, 2013, the negative internal growth was primarily driven by negative consolidated service internal growth of 3.9%, which was the result of a trend toward reduced retrieval/re-file activity and a related decrease in transportation revenues, partially offset by storage rental revenue internal growth of 0.4% in the year 60 ended December 31, 2013 primarily related to net price increases. Adjusted OIBDA as a percentage of segment revenue declined 90 basis points in the year ended December 31, 2013 compared to the year ended December 31, 2012, primarily due to restructuring charges, partially offset by a decrease in compensation expense as a result of restructuring in sales, marketing and account management during the fourth quarter of 2012. North American Data Management Business Year Ended December 31, 2013 2014 Percentage Change Dollar Change Actual Constant Currency Internal Growth Storage Rental . . . . . . . . . . . . . . . . . . . . Service . . . . . . . . . . . . . . . . . . . . . . . . . $241,772 154,747 $247,017 143,190 $ 5,245 (11,557) 2.2% 2.3% 2.6% (7.5)% (7.0)% (7.5)% Segment Revenue . . . . . . . . . . . . . . . . . $396,519 $390,207 $ (6,312) (1.6)% (1.1)% (1.5)% Segment Adjusted OIBDA(1) . . . . . . . . . $235,380 $224,696 $(10,684) Segment Adjusted OIBDA(1) as a Percentage of Segment Revenue . . . . . 59.4% 57.6% Year Ended December 31, 2012 2013 Percentage Change Dollar Change Actual Constant Currency Internal Growth Storage Rental . . . . . . . . . . . . . . . . . . . . Service . . . . . . . . . . . . . . . . . . . . . . . . . $237,947 166,306 $241,772 154,747 $ 3,825 (11,559) 1.6% 1.5% 1.4% (7.0)% (6.3)% (7.0)% Segment Revenue . . . . . . . . . . . . . . . . . $404,253 $396,519 $ (7,734) (1.9)% (1.7)% (2.0)% Segment Adjusted OIBDA(1) . . . . . . . . . $243,908 $235,380 $ (8,528) Segment Adjusted OIBDA(1) as a Percentage of Segment Revenue . . . . . 60.3% 59.4% (1) See Note 9 to Notes to the Consolidated Financial Statements included in this Annual Report for the 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 and (gain) loss on sale of real estate. During the year ended December 31, 2014, reported revenue in our North American Data Management Business segment decreased 1.6% compared to the year ended December 31, 2013, primarily due to negative internal growth of 1.5%. The negative internal growth was primarily attributable to negative service internal growth of 7.5%, which was due to declines in service revenue activity levels as the storage business becomes more archival in nature, partially offset by storage rental revenue internal growth of 2.3% in the year ended December 31, 2014, primarily related to net price increases. For the year ended December 31, 2014, foreign currency exchange rate fluctuations decreased our reported revenues for the North American Data Management Business segment by 0.5% compared to the year ended December 31, 2013 due to the weakening of the Canadian dollar against the United States dollar. Adjusted OIBDA as a percentage of segment revenue declined 180 basis points in the year ended December 31, 2014 compared to the year ended December 31, 2013, primarily due to the aforementioned negative internal growth, as well as costs not decreasing in proportion to the decline in revenue. 61 During the year ended December 31, 2013, reported revenue in our North American Data Management Business segment decreased 1.9% compared to the year ended December 31, 2012, primarily due to negative internal growth of 2.0%. For the year ended December 31, 2013, the negative internal growth was primarily attributable to negative consolidated service internal growth of 7.0%, which was due to declines in service revenue activity levels as the storage business becomes more archival in nature, partially offset by storage rental revenue internal growth of 1.5% in the year ended December 31, 2013 primarily related to net price increases. Adjusted OIBDA as a percentage of segment revenue declined 90 basis points in the year ended December 31, 2013 compared to the year ended December 31, 2012, primarily due to restructuring charges, partially offset by a decrease in compensation expense as a result of restructuring in sales, marketing and account management in the fourth quarter of 2012. International Business Year Ended December 31, 2013 2014 Percentage Change Dollar Change Actual Constant Currency Internal Growth Storage Rental . . . . . . . . . . . . . . . . . . . . . Service . . . . . . . . . . . . . . . . . . . . . . . . . . $473,723 371,876 $521,127 397,418 $47,404 25,542 10.0% 12.7% 6.3% 6.9% 9.5% 2.0% Segment Revenue . . . . . . . . . . . . . . . . . . $845,599 $918,545 $72,946 8.6% 11.3% 4.5% Segment Adjusted OIBDA(1) . . . . . . . . . . $206,003 $214,891 $ 8,888 Segment Adjusted OIBDA(1) as a Percentage of Segment Revenue . . . . . . 24.4% 23.4% Year Ended December 31, 2012 2013 Percentage Change Dollar Change Actual Constant Currency Internal Growth Storage Rental . . . . . . . . . . . . . . . . . . . . . Service . . . . . . . . . . . . . . . . . . . . . . . . . . $440,077 366,615 $473,723 371,876 $33,646 5,261 6.2% 7.6% 9.5% 1.4% 3.5% (0.5)% Segment Revenue . . . . . . . . . . . . . . . . . . $806,692 $845,599 $38,907 4.8% 6.8% 3.2% Segment Adjusted OIBDA(1) . . . . . . . . . . $173,620 $206,003 $32,383 Segment Adjusted OIBDA(1) as a Percentage of Segment Revenue . . . . . . 21.5% 24.4% (1) See Note 9 to Notes to the Consolidated Financial Statements included in this Annual Report for the 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 and (gain) loss on sale of real estate. Reported revenues in our International Business segment increased 8.6% during the year ended December 31, 2014 compared to the year ended December 31, 2013. Internal growth for the year ended December 31, 2014 was 4.5%, supported by 6.3% storage rental internal growth. Net acquisitions/divestitures contributed 6.8% of the increase in total reported revenue growth in the year ended December 31, 2014. Foreign currency fluctuations in 2014 resulted in decreased revenue in the year ended December 31, 2014, as measured in United States dollars, of approximately 2.7% as compared to the year ended December 31, 2013, primarily due to the weakening of the Australian dollar and Brazilian real against the United States dollar, partially offset by a strengthening of the British pound sterling and the Euro against the United States dollar. Adjusted OIBDA as a percentage 62 of segment revenue decreased on a portfolio basis in the year ended December 31, 2014 compared to the year ended December 31, 2013 primarily due to the impact associated with a fire at one of our facilities in Buenos Aires, Argentina on February 5, 2014 (described at Note 10.g. to Notes to Consolidated Financial Statements included in this Annual Report), as well as integration costs associated with recent international acquisitions. Reported revenues in our International Business segment increased 4.8% during the year ended December 31, 2013 compared to the year ended December 31, 2012. Internal growth for the year ended December 31, 2013 was 3.2%, supported by 6.2% storage rental internal growth, partially offset by negative total service internal growth of 0.5% as a result of lower shredding revenues. Acquisitions contributed 3.6% to total reported revenue growth in the year ended December 31, 2013. Foreign currency fluctuations in 2013, primarily in Europe, resulted in decreased revenue in the year ended December 31, 2013, as measured in United States dollars, of approximately 2.0% as compared to the year ended December 31, 2012. Adjusted OIBDA as a percentage of segment revenue increased in the year ended December 31, 2013 compared to the year ended December 31, 2012 primarily due to increased operating income from productivity gains, pricing actions and disciplined cost management. Corporate and Other Year Ended December 31, 2013 2014 Dollar Change Actual Constant Currency Internal Growth Percentage Change Storage Rental . . . . . . . . . . . . . . . . . Service . . . . . . . . . . . . . . . . . . . . . . . $ 12,100 1,172 $ 12,086 1,494 Segment Revenue . . . . . . . . . . . . . . . $ 13,272 $ 13,580 $ $ (14) 322 308 (0.1)% (0.1)% (0.1)% 27.5% 27.5% 27.5% 2.3% 2.3% 2.3% Segment Adjusted OIBDA(1) . . . . . . . $(192,377) $(204,209) $(11,832) Segment Adjusted OIBDA(1) as a Percentage of Consolidated Revenue . . . . . . . . . . . . . . . . . . . . (6.4)% (6.6)% Year Ended December 31, 2012 2013 Dollar Change Actual Constant Currency Internal Growth Percentage Change Storage Rental . . . . . . . . . . . . . . . . . Service . . . . . . . . . . . . . . . . . . . . . . . $ 9,954 2,757 $ 12,100 1,172 $ 2,146 (1,585) 21.6% 21.6% 21.6% (57.5)% (57.5)% (57.5)% Segment Revenue . . . . . . . . . . . . . . . $ 12,711 $ 13,272 $ 561 4.4% 4.4% 4.4% Segment Adjusted OIBDA(1) . . . . . . . $(172,266) $(192,377) $(20,111) Segment Adjusted OIBDA(1) as a Percentage of Consolidated Revenue . . . . . . . . . . . . . . . . . . . . (5.7)% (6.4)% (1) See Note 9 to Notes to the Consolidated Financial Statements included in this Annual Report for the 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 and (gain) loss on sale of real estate. During the year ended December 31, 2014, Adjusted OIBDA in the Corporate and Other segment as a percentage of consolidated revenue decreased by 20 basis points compared to the year ended 63 December 31, 2013, primarily due to increased insurance costs of $3.5 million associated with a fire at one of our facilities in Buenos Aires, Argentina on February 5, 2014 (described at Note 10.g. to Notes to Consolidated Financial Statements included in this Annual Report), higher professional fees of $2.6 million, restructuring costs of $1.5 million and REIT compliance costs. During the year ended December 31, 2013, Adjusted OIBDA in the Corporate and Other segment as a percentage of consolidated revenue decreased by 70 basis points compared to the year ended December 31, 2012, primarily due to an $11.7 million increase in compensation costs, primarily associated with employee compensation and restructuring costs, an $8.7 million increase in professional fees and legal reserves, and the costs associated with the decision to discontinue work on a data archiving solution recorded in 2013. 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, 2012 2013 2014 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 . . . . . . . . . . . . . . . . $ 443,652 (394,064) 28,269 243,415 $ 506,593 (632,750) 18,564 120,526 $ 472,948 (479,978) 19,857 125,933 Net cash provided by operating activities from continuing operations was $472.9 million for the year ended December 31, 2014 compared to $506.6 million for the year ended December 31, 2013. The 6.6% year-over-year decrease resulted primarily from an increase in cash used in working capital of $74.7 million primarily related to the timing and payments of certain accrued expenses and deferred revenue liabilities, offset by an increase in net income, including non-cash charges and realized foreign exchange losses, of $41.1 million. 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, 2014 amounted to $361.9 million, $128.1 million and $34.4 million, respectively. For the year ended December 31, 2014, these expenditures were funded with cash flows provided by operating activities from continuing operations, cash equivalents on hand, borrowings under the Credit Agreement, proceeds from the sale of property, plant and equipment and the divestiture of our International Shredding Operations. Excluding potential future acquisitions and additional real estate purchases above our plan, we expect our capital expenditures to be approximately $330.0 million to $360.0 million in the year ending December 31, 2015 (inclusive of approximately $25.0 million in planned real estate purchases). 64 Net cash provided by financing activities from continuing operations was $19.9 million for the year ended December 31, 2014. During 2014, we received $642.4 million in net proceeds from the issuance of the GBP Notes, net receipts of $460.5 million of other debt (primarily associated with our Credit Agreement, defined below) and $44.3 million from proceeds from the exercise of stock options and the employee stock purchase plan. We used the proceeds from these transactions for the retirement of $247.3 million of the 71⁄4% Notes, the early redemption of $306.0 million of our 83⁄8% Notes for approximately $319.1 million (inclusive of call premium payment), for payment of dividends in the amount of $542.3 million on our common stock and net payments of $14.8 million associated with our noncontrolling interest holders. Dividends See ‘‘Item 5. Market For Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities’’ of this Annual Report for information on dividends. Financial Instruments and Debt Financial instruments that potentially subject us to credit risk consist principally of cash and cash equivalents (including money market funds and time deposits), restricted cash (primarily United States Treasuries) and accounts receivable. The only significant concentrations of liquid investments as of December 31, 2014 relate to cash and cash equivalents and restricted cash held on deposit with three global banks and two ‘‘Triple A’’ rated money market funds, all of 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, 2014, our cash and cash equivalents and restricted cash balance was $159.8 million, including money market funds and time deposits amounting to $53.0 million. The money market funds are invested substantially in United States Treasuries. Our consolidated debt as of December 31, 2014 comprised the following (in thousands): Revolving Credit Facility(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Term Loan(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63⁄4% Euro Senior Subordinated Notes due 2018 (the ‘‘63⁄4% Notes’’)(2) . . . . . . . . . . . . . . 73⁄4% Senior Subordinated Notes due 2019 (the ‘‘73⁄4% Notes ‘‘)(2) . . . . . . . . . . . . . . . . . . 83⁄8% Senior Subordinated Notes due 2021 (the ‘‘83⁄8% Notes’’)(2) . . . . . . . . . . . . . . . . . . CAD Notes(3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . GBP Notes(4) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6% Notes due 2023 (the ‘‘6% Notes’’)(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53⁄4% Senior Subordinated Notes due 2024 (the ‘‘53⁄4% Notes’’)(2) . . . . . . . . . . . . . . . . . . Real Estate Mortgages, Capital Leases and Other(5) . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 883,428 249,375 308,616 400,000 106,030 172,420 622,960 600,000 1,000,000 320,702 Total Long-term Debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Less Current Portion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,663,531 (52,095) Long-term Debt, Net of Current Portion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $4,611,436 (1) The capital stock or other equity interests of most of our United States 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 (including promissory notes) of subsidiaries owed to us or to one of our United States subsidiary guarantors. In addition, Canada Company has pledged 66% of the capital stock of its subsidiaries, and all intercompany 65 obligations (including promissory notes) owed to or held by it, to secure the Canadian dollar subfacility under the Revolving Credit Facility. (2) Collectively, the ‘‘Parent Notes.’’ IMI is the direct obligor on the Parent Notes, which are fully and unconditionally guaranteed, on a senior or senior subordinated basis, as the case may be, by substantially all of its direct and indirect 100% owned United States subsidiaries (the ‘‘Guarantors’’). These guarantees are joint and several obligations of the Guarantors. Canada Company, IME and the remainder of our subsidiaries do not guarantee the Parent Notes. (3) Canada Company is the direct obligor on the CAD Notes, which are fully and unconditionally guaranteed, on a senior basis, by IMI and the Guarantors. These guarantees are joint and several obligations of IMI and the Guarantors. See Note 5 to Notes to Consolidated Financial Statements included in this Annual Report. (4) IME is the direct obligor on the GBP Notes, which are fully and unconditionally guaranteed, on a senior basis, by IMI and the Guarantors. These guarantees are joint and several obligations of IMI and the Guarantors. See Note 5 to Notes to Consolidated Financial Statements included in this Annual Report. (5) Includes (a) real estate mortgages of $5.1 million, (b) capital lease obligations of $241.9 million, and (c) other various notes and other obligations, which were assumed by us as a result of certain acquisitions, of $73.7 million. On August 7, 2013, we amended our existing credit agreement. The revolving credit facilities (the ‘‘Revolving Credit Facility’’) under our credit agreement, as amended (the ‘‘Credit Agreement’’), allow IMI and certain of its United States and foreign subsidiaries to borrow in United States dollars and (subject to sublimits) a variety of other currencies (including Canadian dollars, British pounds sterling, Euros, Brazilian reais and Australian dollars, among other currencies) in an aggregate outstanding amount not to exceed $1.5 billion. Additionally, the Credit Agreement included an option to allow us to request additional commitments of up to $500.0 million, in the form of term loans or through increased commitments under the Revolving Credit Facility. On September 24, 2014, we borrowed an additional $250.0 million in the form of a term loan under the Credit Agreement (the ‘‘Term Loan’’). Commencing on December 31, 2014, the Term Loan will begin amortizing in quarterly installments in an amount equal to $0.6 million per quarter, with the remaining balance due on June 27, 2016. The Term Loan may be prepaid without penalty or premium, in whole or in part, at any time. The Credit Agreement continues to include an option to allow us to request additional commitments of up to $250.0 million, in the form of term loans or through increased commitments under the Revolving Credit Facility. The Credit Agreement terminates on June 27, 2016, at which point all obligations become due. IMI and the Guarantors guarantee all obligations under the Credit Agreement, and have pledged the capital stock or other equity interests of most of their United States subsidiaries, up to 66% of the capital stock or other equity interests of their first-tier foreign subsidiaries, and all intercompany obligations (including promissory notes) owed to or held by them to secure the Credit Agreement. In addition, Canada Company has pledged 66% of the capital stock of its subsidiaries, and all intercompany obligations (including promissory notes) owed to or held by it to secure the Canadian dollar subfacility under the Revolving Credit Facility. 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 our consolidated leverage ratio. 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 and fees associated with outstanding letters of credit. As of December 31, 2014, we had $883.4 million and $249.4 million of outstanding borrowings under the Revolving Credit Facility and the Term Loan, respectively. Of the $883.4 million of outstanding borrowings under the Revolving Credit Facility, $680.2 million was 66 denominated in United States dollars, 77.2 million was denominated in Canadian dollars, 64.3 million was denominated in Euros and 71.6 million was denominated in Australian dollars. In addition, we also had various outstanding letters of credit totaling $10.4 million. The remaining amount available for borrowing under the Revolving Credit Facility as of December 31, 2014, based on IMI’s leverage ratio, the last 12 months’ earnings before interest, taxes, depreciation and amortization and rent expense (‘‘EBITDAR’’), other adjustments as defined in the Credit Agreement and current external debt, was $606.2 million (which amount represents the maximum availability as of such date). The average interest rate in effect under the Credit Agreement was 2.7% as of December 31, 2014. The average interest rate in effect under the Revolving Credit Facility was 2.8% and ranged from 2.3% to 5.1% as of December 31, 2014 and the interest rate in effect under the Term Loan as of December 31, 2014 was 2.4%. For the years ended December 31, 2012, 2013 and 2014, we recorded commitment fees and letters of credit fees of $2.3 million, $3.2 million and $3.3 million, respectively, based on the unused balances under our revolving credit facilities and outstanding letters of credit. We recorded a charge of $5.5 million to other expense (income), net in the third quarter of 2013 related to an amendment of our revolving credit and term loan facilities, representing a write-off of deferred financing costs. 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 uses EBITDAR-based calculations as the primary measures of financial performance, including leverage and fixed charge coverage ratios. IMI’s Credit Agreement net total lease adjusted leverage ratio was 5.0 and 5.4 as of December 31, 2013 and 2014, respectively, compared to a maximum allowable ratio of 6.5, and its net secured debt lease adjusted leverage ratio was 2.2 and 2.6 as of December 31, 2013 and 2014, respectively, compared to a maximum allowable ratio of 4.0. IMI’s bond leverage ratio (which is not lease adjusted), per the indentures, was 5.1 and 5.7 as of December 31, 2013 and 2014, respectively, compared to a maximum allowable ratio of 6.5. IMI’s Credit Agreement fixed charge coverage ratio was 2.5 at both December 31, 2013 and 2014 compared to a minimum allowable ratio of 1.5 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. In August 2013, IMI completed an underwritten public offering of $600.0 million in aggregate principal amount of 6% Notes, and Canada Company completed an underwritten public offering of 200.0 million CAD in aggregate principal amount of CAD Notes, both of which were issued at 100% of par. The net proceeds to IMI and Canada Company of $782.3 million, after paying the underwriters’ discounts and commissions, were used to redeem (1) all of the outstanding 71⁄2% Notes, (2) all of the outstanding 8% Notes due 2018, (3) all of the outstanding 8% Notes due 2020, and (4) $137.5 million in principal amount of the 83⁄8% Notes. The remaining net proceeds were used to repay indebtedness under our Revolving Credit Facility. We recorded a charge to other expense (income), net of $38.1 million in the third quarter of 2013 related to the early extinguishment of this debt. This charge consists of call and tender premiums, original issue discounts and deferred financing costs related to this debt. In January 2014, we redeemed the 150.0 million British pounds sterling (approximately $248.0 million) in aggregate principal amount of the 71⁄4% Notes at 100% of par, plus accrued and unpaid interest, utilizing borrowings under our Revolving Credit Facility and cash on-hand. In September 2014, IME completed a private offering of 400.0 million British pounds sterling in aggregate principal amount of the GBP Notes, which were issued at 100% of par. The net proceeds to IME of 394.0 million British pounds sterling (approximately $642.0 million based on an exchange rate 67 of 1.63), after paying the initial purchasers’ commissions and expenses, were used to repay amounts outstanding under our Revolving Credit Facility and for general corporate purposes. In December 2014, we redeemed $306.0 million aggregate principal outstanding of our 83⁄8% Notes at 104.188% of par, plus accrued and unpaid interest, utilizing borrowings under our Revolving Credit Facility. We recorded a charge to other expense (income), net of $16.5 million related to the early extinguishment of this debt in the fourth quarter of 2014 representing the call premium associated with the early redemption, as well as a write-off of original issue discounts and deferred financing costs related to this debt. 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. Acquisitions In January 2014, in order to enhance our existing operations in Australia, we acquired the stock of Tape Management Services Pty Ltd, a storage and data management company with operations in Australia, for approximately $15.3 million. In February 2014, in order to enhance our existing operations in Turkey, we acquired the stock of RM Ar¸siv Y¨onetim Hizmetleri Ticaret Anonim ¸Sirketi, a storage rental and records management business with operations in Turkey, for approximately $21.2 million, of which $16.8 million was paid in the first quarter of 2014, with the remainder paid in the first quarter of 2015. In April 2014, in order to enhance our existing operations in Poland, we acquired the stock of OSG Polska sp. z.o.o., a storage rental and records management business with operations in Poland, for approximately $13.7 million. In September 2014, we purchased our joint venture partners’ noncontrolling interests in the businesses we operate in Russia, Ukraine and Denmark, which we had previously consolidated. The purchase price of approximately $24.5 million is comprised of $17.9 million paid at closing, $2.1 million payable in 2017 and $4.5 million payable in 2020. Of the $17.9 million paid at closing, approximately $12.0 million was associated with the underlying shares owned by our joint venture partners and approximately $6.0 million was associated with the payment of outstanding loans between the joint venture and the joint venture partners. In October 2014, in order to enhance our existing operations in Brazil, we acquired the stock of Keepers Brasil Ltda, a storage rental and data management business in Sao Paulo, Brazil, for approximately $46.2 million. The purchase price includes $5.4 million held in escrow to secure indemnification obligations of the former owners of the business to us. In December 2014, in order to enhance our North American records management operations, we acquired the stock of Canadian-based Securit Records Management for approximately $29.5 million. Included in the purchase price is approximately $1.3 million held in escrow to secure indemnification obligations and certain working capital adjustments. Divestitures In December 2014, we divested our International Shredding Operations in a stock transaction for approximately $26.2 million in cash at closing, including $1.5 million being held in escrow. The assets sold primarily consisted of customer contracts and certain long-lived assets. 68 Contractual Obligations The following table summarizes our contractual obligations as of December 31, 2014 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 $ 241,866 $ 38,761 $ 70,155 $ 42,828 $ 90,122 4,422,903 1,797,236 2,229,941 13,334 253,065 227,771 1,180,746 441,346 419,419 720,798 404,234 367,544 2,508,025 698,591 1,215,207 Obligations . . . . . . . . . . . . . . . . . . . . 94,672 43,908 31,558 3,999 15,207 Total(3) . . . . . . . . . . . . . . . . . . . . . . . . $8,786,618 $576,839 $2,143,224 $1,539,403 $4,527,152 (1) Amounts include variable rate interest payments, which are calculated utilizing the applicable interest rates as of December 31, 2014; see Note 4 to Notes to Consolidated Financial Statements included in this Annual Report. Amounts also include interest on capital leases. (2) Amounts are offset by sublease income of $16.7 million in total (including $5.7 million, $7.9 million, $2.1 million and $1.0 million, in less than 1 year, 1-3 years, 3-5 years and more than 5 years, respectively). (3) The table above excludes $56.0 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 or 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. We are highly leveraged. While we expect to continue to be highly leveraged for the foreseeable future, as 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 has increased, 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 We have federal net operating loss carryforwards, which expire in 2021 through 2033, of $88.1 million ($0, tax effected) at December 31, 2014 to reduce future federal taxable income, on which no federal tax benefit is expected to be realized. We have state net operating loss carryforwards, which expire in 2015 through 2033, of $74.4 million ($0.1 million, tax effected) at December 31, 2014 to reduce future state taxable income, on which an insignificant state tax benefit is expected to be realized. We have assets for foreign net operating losses of $64.6 million, with various expiration dates (and in some cases no expiration date), subject to a valuation allowance of approximately 62%. 69 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, the negotiation of favorable long-term real estate leases and customer contracts which contain provisions for inflationary price escalators, 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. Credit Risk Financial instruments that potentially subject us to credit risk consist principally of cash and cash equivalents (including money market funds and time deposits), restricted cash (primarily United States Treasuries) and accounts receivable. The only significant concentrations of liquid investments as of December 31, 2014 relate to cash and cash equivalents and restricted cash held on deposit with three global banks and two ‘‘Triple A’’ rated money market funds, all of 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, 2014, our cash and cash equivalents and restricted cash balance was $159.8 million, including money market funds and time deposits amounting to $53.0 million. The money market funds are invested substantially in United States 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 included in this Annual Report. As of December 31, 2014, we had $1,134.6 million of variable rate debt outstanding with a weighted average variable interest rate of approximately 2.7%, and $3,528.9 million of fixed rate debt outstanding. As of December 31, 2014, approximately 76% 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, 2014 would have been reduced by approximately $3.7 million. See Note 4 to Notes to Consolidated Financial Statements included in this Annual Report for a discussion of our long-term indebtedness, including the fair values of such indebtedness as of December 31, 2014. 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., Iron Mountain CIS and our other international investments may be subject to risks and uncertainties related to fluctuations in currency valuation. Our reporting currency is the United States dollar. However, our international revenues and expenses are generated in the currencies of the countries in which we operate, primarily the British pound sterling, Euro, Canadian dollar, Brazilian real, Australian dollar and the Russian ruble. Declines in the value of the local currencies in which we are paid relative to the United States dollar will cause revenues in United States dollar terms to decrease and dollar-denominated liabilities to increase in local currency. 70 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 United States-based subsidiaries. In addition, our treasury centers in Switzerland, 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 Iron Mountain Information Management, LLC, a wholly- owned subsidiary of IMI, 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, Canada and Continental Europe. IME has financed its capital needs through direct borrowings in British pounds sterling under the GBP Notes. Similarly, Canada Company has financed its capital needs through direct borrowings in Canadian dollars under the Credit Agreement and the CAD Notes. This creates a tax efficient natural currency hedge. Specifically, through our 255.0 million 63⁄4% Notes, we effectively hedge our outstanding intercompany loans denominated in Euros. We designated a portion of our 63⁄4% Notes issued by IMI as a hedge of net investment of certain of our Euro denominated subsidiaries. As a result, we recorded $6.4 million ($6.3 million, net of tax) of foreign exchange gains related to the ‘‘marking-to-market’’ of such debt to currency translation adjustments which is a component of accumulated other comprehensive items, net included in stockholders’ equity for the year ended December 31, 2014. As of December 31, 2014, cumulative net gains of $13.8 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 in Euros, British pounds sterling and Australian dollars. As of December 31, 2014, we had outstanding forward contracts to purchase 206.0 million Euros and sell $252.7 million United States dollars to hedge our intercompany exposures with our European operations. 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 statements 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 forward contracts as hedges. During the year ended December 31, 2014, there was $21.1 million in net cash payments included in cash from operating activities from continuing operations related to settlements associated with foreign currency forward contracts. We recorded net losses in connection with forward contracts of $18.0 million, including an unrealized foreign exchange loss of $2.4 million related to the Euro forward contracts in other expense (income), net in the accompanying statement of operations as of December 31, 2014. As of December 31, 2014, 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 2014 71 functional currencies, relative to the United States dollar, would result in a reduction in our equity of approximately $70.4 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, 2014 (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 (2013) 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, 2014. 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. 72 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Board of Directors and Stockholders of Iron Mountain Incorporated Boston, Massachusetts We have audited the internal control over financial reporting of Iron Mountain Incorporated and subsidiaries (the ‘‘Company’’) as of December 31, 2014, based on criteria established in Internal Control—Integrated Framework (2013) 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, 2014, based on the criteria established in Internal Control— Integrated Framework (2013) 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 and financial statement schedule as of and for the year ended December 31, 2014 of the Company and our report dated February 27, 2015 expressed an unqualified opinion on those financial statements and financial statement schedule. /s/ DELOITTE & TOUCHE LLP Boston, Massachusetts February 27, 2015 73 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, 2014 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. Item 9B. Other Information. None. 74 PART III Item 10. Directors, Executive Officers and Corporate Governance. The information required by Item 10 is incorporated by reference to our Proxy Statement. Item 11. Executive Compensation. The information required by Item 11 is incorporated by reference to our Proxy Statement. Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters. The information required by Item 12 is incorporated by reference to our Proxy Statement. Item 13. Certain Relationships and Related Transactions, and Director Independence. The information required by Item 13 is incorporated by reference to our Proxy Statement. Item 14. Principal Accountant Fees and Services. The information required by Item 14 is incorporated by reference to our Proxy Statement. Item 15. Exhibits and Financial Statements. (a) Financial Statements filed as part of this report: PART IV A. Iron Mountain Incorporated Report of Independent Registered Public Accounting Firm . . . . . . . . . . . . . . . . . . . . . . . . . . . . Consolidated Balance Sheets, December 31, 2013 and 2014 . . . . . . . . . . . . . . . . . . . . . . . . . . . . Consolidated Statements of Operations, Years Ended December 31, 2012, 2013 and 2014 . . . . . . Consolidated Statements of Comprehensive Income (Loss), Years Ended December 31, 2012, 2013 and 2014 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Consolidated Statements of Equity, Years Ended December 31, 2012, 2013 and 2014 . . . . . . . . . Consolidated Statements of Cash Flows, Years Ended December 31, 2012, 2013 and 2014 . . . . . . Notes to Consolidated Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Page 76 77 78 79 80 81 82 Financial Statement Schedule III—Schedule of Real Estate and Accumulated Depreciation . . . . . 150 (b) Exhibits filed as part of this report: As listed in the Exhibit Index following the signature page hereof. 75 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Board of Directors and Stockholders of Iron Mountain Incorporated Boston, Massachusetts We have audited the accompanying consolidated balance sheets of Iron Mountain Incorporated and subsidiaries (the ‘‘Company’’) as of December 31, 2014 and 2013, 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, 2014. Our audits also included the financial statement schedule listed in the Index at Item 15. These financial statements and financial statement schedule are the responsibility of the Company’s management. Our responsibility is to express an opinion on the financial statements and financial statement schedule 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, 2014 and 2013, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2014, in conformity with accounting principles generally accepted in the United States of America. Also, in our opinion, such financial statement schedule, when considered in relation to the basic consolidated financial statements taken as a whole, present fairly, in all material respects, the information set forth therein. 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, 2014, based on the criteria established in Internal Control—Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission, and our report dated February 27, 2015 expressed an unqualified opinion on the Company’s internal control over financial reporting /s/ DELOITTE & TOUCHE LLP Boston, Massachusetts February 27, 2015 76 IRON MOUNTAIN INCORPORATED CONSOLIDATED BALANCE SHEETS (In thousands, except share and per share data) December 31, 2013 2014 ASSETS Current Assets: Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Restricted cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Accounts receivable (less allowances of $34,645 and $32,141 as of December 31, 2013 and 2014, respectively) . . . . . . . . . . . . . . . . . . . . . . . . . . . Deferred income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Prepaid expenses and other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Total Current Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 120,526 33,860 $ 125,933 33,860 616,797 17,623 144,801 933,607 604,265 14,192 139,469 917,719 Property, Plant and Equipment: Property, plant and equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Less—Accumulated depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,631,067 (2,052,807) 4,668,705 (2,117,978) Property, Plant and Equipment, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,578,260 2,550,727 Other Assets, net: Goodwill . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Customer relationships and acquisition costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . Deferred financing costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,463,352 605,484 45,607 26,695 2,423,783 607,837 47,077 23,199 Total Other Assets, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,141,138 3,101,896 Total Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 6,653,005 $ 6,570,342 LIABILITIES AND EQUITY Current Liabilities: Current portion of long-term debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Accrued expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Deferred revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 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 52,583 216,456 461,338 238,724 969,101 4,119,139 68,219 104,244 340,568 $ 52,095 203,014 404,485 197,142 856,736 4,611,436 73,506 104,051 54,658 outstanding) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — — Common stock (par value $0.01; authorized 400,000,000 shares; issued and outstanding 191,426,920 shares and 209,818,812 shares as of December 31, 2013 and 2014, respectively) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Additional paid-in capital Earnings in excess of distributions (Distributions in excess of earnings) . . . . . . . . Accumulated other comprehensive items, net . . . . . . . . . . . . . . . . . . . . . . . . . . 1,914 980,164 67,820 (8,660) Total Iron Mountain Incorporated Stockholders’ Equity . . . . . . . . . . . . . . . 1,041,238 Noncontrolling Interests . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10,496 Total Equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,051,734 2,098 1,588,841 (659,553) (75,031) 856,355 13,600 869,955 Total Liabilities and Equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 6,653,005 $ 6,570,342 The accompanying notes are an integral part of these consolidated financial statements. 77 IRON MOUNTAIN INCORPORATED CONSOLIDATED STATEMENTS OF OPERATIONS (In thousands, except per share data) Year Ended December 31, 2012 2013 2014 Revenues: Storage rental . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Service . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $1,733,138 1,270,817 $1,784,721 1,239,902 $1,860,243 1,257,450 Total Revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,003,955 3,024,623 3,117,693 Operating Expenses: Cost of sales (excluding depreciation and amortization) . . . . . Selling, general and administrative . . . . . . . . . . . . . . . . . . . . . Depreciation and amortization . . . . . . . . . . . . . . . . . . . . . . . Loss (Gain) on disposal/write-down of property, plant and 1,277,113 850,371 316,344 1,288,878 924,031 322,037 1,344,636 869,572 353,143 equipment (excluding real estate), net . . . . . . . . . . . . . . . . 4,661 430 1,065 Total Operating Expenses . . . . . . . . . . . . . . . . . . . . . . . . . Operating Income (Loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Interest Expense, Net (includes Interest Income of $2,418, $4,208 and $2,443 in 2012, 2013 and 2014, respectively) . . . . . Other Expense (Income), Net . . . . . . . . . . . . . . . . . . . . . . . . . . Income (Loss) from Continuing Operations Before Provision (Benefit) for Income Taxes and (Gain) Loss on Sale of Real Estate . . . . . . . . . . . . . . . . . . . . . . . . . . . . Provision (Benefit) for Income Taxes . . . . . . . . . . . . . . . . . . . . (Gain) Loss on Sale of Real Estate, Net of Tax . . . . . . . . . . . . . Income (Loss) from Continuing Operations . . . . . . . . . . . . . . . . (Loss) Income from Discontinued Operations, Net of Tax . . . . . (Loss) Gain on Sale of Discontinued Operations, Net of Tax . . . Net Income (Loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Less: Net Income (Loss) Attributable to Noncontrolling 2,448,489 555,466 2,535,376 489,247 2,568,416 549,277 242,599 16,062 254,174 75,202 260,717 65,187 296,805 114,304 (206) 182,707 (6,774) (1,885) 174,048 159,871 62,127 (1,417) 99,161 831 — 99,992 223,373 (97,275) (8,307) 328,955 (209) — 328,746 Interests . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,126 3,530 2,627 Net Income (Loss) Attributable to Iron Mountain Incorporated . $ 170,922 96,462 $ 326,119 Earnings (Losses) per Share—Basic: Income (Loss) from Continuing Operations . . . . . . . . . . . . . . . . Total (Loss) Income from Discontinued Operations . . . . . . . . . . Net Income (Loss) Attributable to Iron Mountain Incorporated . Earnings (Losses) per Share—Diluted: Income (Loss) from Continuing Operations . . . . . . . . . . . . . . . . Total (Loss) Income from Discontinued Operations . . . . . . . . . . Net Income (Loss) Attributable to Iron Mountain Incorporated . $ $ $ $ $ $ $ $ 1.05 (0.05) $ 0.98 1.04 $ $ 0.52 $ — $ 0.51 0.52 $ $ (0.05) $ — $ 0.98 $ 0.50 $ 1.68 — 1.67 1.67 — 1.66 Weighted Average Common Shares Outstanding—Basic . . . . . . . Weighted Average Common Shares Outstanding—Diluted . . . . . 173,604 174,867 190,994 192,412 195,278 196,749 Dividends Declared per Common Share . . . . . . . . . . . . . . . . . . $ 5.1200 $ 1.0800 $ 5.3713 The accompanying notes are an integral part of these consolidated financial statements. 78 IRON MOUNTAIN INCORPORATED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (In thousands) Net Income (Loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Other Comprehensive Income (Loss): Foreign Currency Translation Adjustments . . . . . . . . . . . . . . . . . . . Market Value Adjustments for Securities . . . . . . . . . . . . . . . . . . . . Total Other Comprehensive Income (Loss) . . . . . . . . . . . . . . . . . . . . Year Ended December 31, 2012 2013 2014 $174,048 $ 99,992 $328,746 23,186 — 23,186 (31,532) 926 (66,867) 53 (30,606) (66,814) Comprehensive Income (Loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 197,234 69,386 261,932 Comprehensive Income (Loss) Attributable to Noncontrolling Interests . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,795 1,898 2,184 Comprehensive Income (Loss) Attributable to Iron Mountain Incorporated . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $193,439 $ 67,488 $259,748 The accompanying notes are an integral part of these consolidated financial statements. 79 IRON MOUNTAIN INCORPORATED CONSOLIDATED STATEMENTS OF EQUITY (In thousands, except share data) Iron Mountain Incorporated Stockholders’ Equity Common Stock Total Shares Amounts Earnings in Excess of Distributions (Distributions in Excess of Earnings) Additional Paid-in Capital Accumulated Other Comprehensive Noncontrolling Items, Net Interests $1,721 $ 343,603 $ 898,053 $ (2,203) $ 8,568 Balance, December 31, 2011 . . . . . . . . $1,249,742 172,140,966 Issuance of shares under employee stock purchase plan and option plans and stock-based compensation, including tax benefit of $1,045 . . . . . . . . . . . 1,958,690 73,453 Special distribution in connection with conversion to REIT (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 . . . Balance, December 31, 2012 . . . . . . . . Issuance of shares under employee stock purchase plan and option plans and stock-based compensation, including tax benefit of $2,389 . . . . . . . . . . . Parent cash dividends declared . . . . . . Currency translation adjustment . . . . . . Market value adjustments for securities, net of tax . . . . . . . . . . . . . . . . . . Net income (loss) . . . . . . . . . . . . . . . Noncontrolling interests equity contributions . . . . . . . . . . . . . . . . Noncontrolling interests dividends . . . . Purchase of noncontrolling interests . . . Balance, December 31, 2013 . . . . . . . . Issuance of shares under employee stock purchase plan and option plans and stock-based compensation, including tax deficiency of $60 . . . . . . . . . . . Parent cash dividends declared . . . . . . Special distribution in connection with conversion to REIT (see Note 13) . . . Currency translation adjustment . . . . . . Market value adjustments for securities, net of tax . . . . . . . . . . . . . . . . . . Net income (loss) . . . . . . . . . . . . . . . Noncontrolling interests equity contributions . . . . . . . . . . . . . . . . Noncontrolling interests dividends . . . . Purchase of noncontrolling interests . . . Divestiture of noncontrolling interests . . 20 73,433 — — 17,009,281 (1,103,149) — — — (34,688) (328,707) 23,186 174,048 836 (1,722) 1,000 — — — 170 (11) — — — — — — 559,840 (34,677) — — — — — — (560,010) — (328,707) — 170,922 — — — — — — — 22,517 — — — — 1,157,148 190,005,788 1,900 942,199 180,258 20,314 50,479 (208,900) (31,532) 1,421,132 — — 926 99,992 743 (2,270) (14,852) — — — — — 14 — — — — — — — 50,465 — — — — — — (12,500) — (208,900) — — 96,462 — — — — — (29,900) 926 — — — — 1,051,734 191,426,920 1,914 980,164 67,820 (8,660) 64,473 (493,513) 2,638,554 — — 15,753,338 — (66,867) 53 328,746 1,800 (1,613) (20,416) 5,558 — — — — — — 26 — 158 — — — — — — — 64,447 — 559,821 — — — — — (17,693) 2,102 — (493,513) (559,979) — — 326,119 — — — — — — — (66,424) 53 — — — — — — — — — 669 3,126 836 (1,722) 1,000 12,477 — — (1,632) — 3,530 743 (2,270) (2,352) 10,496 — — — (443) — 2,627 1,800 (1,613) (2,723) 3,456 Balance, December 31, 2014 . . . . . . . . $ 869,955 209,818,812 $2,098 $1,588,841 $(659,553) $(75,031) $13,600 The accompanying notes are an integral part of these consolidated financial statements. 80 IRON MOUNTAIN INCORPORATED CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands) Year Ended December 31, 2012 2013 2014 Cash Flows from Operating Activities: Net Income (Loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Loss (Income) from discontinued operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Loss (Gain) on sale of discontinued operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 174,048 6,774 1,885 $ 99,992 (831) — $ 328,746 209 — Adjustments to reconcile net income (loss) to cash flows from operating activities: Depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Amortization (includes deferred financing costs and bond discount of $6,948, $7,258 and $8,009 in 2012, 2013 and 2014, respectively) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Stock-based compensation expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (Benefit) provision for deferred income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Loss on early extinguishment of debt, net Loss (Gain) on disposal/write-down of property, plant and equipment, net (including real estate) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 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 (including real estate) Cash Flows from Investing Activities-Continuing Operations . . . . . . . . . . . . . . . . . . . . . . Cash Flows from Investing Activities-Discontinued Operations . . . . . . . . . . . . . . . . . . . . . Cash Flows from Investing Activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Cash Flows from Financing Activities: . . . . . . . . . . . . . . . . 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 . . . . . . . . . . . . . . . . . . . . . . . . . . Net proceeds from sales of senior 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 (deficiency) from stock-based compensation . . . . . . . . . . . . . . . . . . . . Payment of debt financing and stock issuance costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . Cash Flows from Financing Activities-Continuing Operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Cash Flows from Financing Activities-Discontinued Operations Cash Flows from Financing Activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Effect of Exchange Rates on Cash and Cash Equivalents Increase (Decrease) in Cash and Cash Equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Cash and Cash Equivalents, Beginning of Year Cash and Cash Equivalents, End of Year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Supplemental Information: Cash Paid for Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Cash Paid for Income Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Non-Cash Investing and Financing Activities: Capital Leases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Accrued Capital Expenditures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Dividends Payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 280,598 282,856 304,557 42,694 30,360 (77,201) 10,628 4,400 11,764 (17,964) (58,400) (706) 36,295 (1,523) 443,652 (10,916) 432,736 (240,683) (125,134) 1,498 (28,872) (2,330) 1,457 (394,064) (6,136) (400,200) 46,439 30,354 (99,432) 43,318 (1,417) 63,648 (33,181) 48,302 24,168 (5,120) 7,497 506,593 953 507,546 (287,295) (317,100) (248) (30,191) — 2,084 (632,750) (4,937) (637,687) 56,595 29,624 (270,790) 16,495 (9,447) 50,011 113 48,941 16,870 (101,427) 2,451 472,948 — 472,948 (361,924) (128,093) — (34,447) — 44,486 (479,978) — (479,978) (2,844,693) 2,731,185 (525,834) 985,000 — (5,526,672) 5,661,750 (685,134) — 782,307 (8,824,711) 9,285,187 (566,352) — 642,417 480 (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 $ $ $ $ $ $ (18,236) — (206,798) 17,664 2,389 (8,706) 18,564 — 18,564 (11,312) (122,889) 243,415 120,526 243,380 125,624 48,488 79,153 55,142 $ $ $ $ $ $ (14,770) — (542,298) 44,290 (60) (3,846) 19,857 — 19,857 (7,420) 5,407 120,526 125,933 257,599 167,448 24,106 47,529 6,182 $ $ $ $ $ $ The accompanying notes are an integral part of these consolidated financial statements. 81 IRON MOUNTAIN INCORPORATED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 2014 (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’’ or ‘‘us’’). We store records, primarily paper documents and data backup media, 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, healthcare, accounting, insurance, entertainment and government organizations. We previously disclosed that, as part of our plan to convert to a real estate investment trust (‘‘REIT’’) for federal income tax purposes and elect REIT status effective January 1, 2014 (the ‘‘Conversion Plan’’), we sought private letter rulings (‘‘PLRs’’) from the United States Internal Revenue Service (the ‘‘IRS’’) relating to numerous technical tax issues, including classification of our steel racking structures as qualified real estate assets. We submitted the PLR requests in the third quarter of 2012, and on June 25, 2014, we announced that we received the favorable PLRs from the IRS necessary for our conversion to a REIT. After receipt of the PLRs, our board of directors unanimously approved our conversion to a REIT for our taxable year beginning January 1, 2014. In connection with the Conversion Plan, and, in particular, to impose ownership limitations customary for REITs, on January 20, 2015, we completed the merger with our predecessor and all outstanding shares of our predecessor’s common stock were converted into a right to receive an equal number of shares of our common stock. Accordingly, references herein to our ‘‘common stock’’ refer to our common stock and the common stock of our predecessor, as applicable. 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. Also, on April 27, 2012, we sold our records management operations in Italy. The financial position, operating results and cash flows of the Digital Business, our New Zealand operations and our Italian operations, including the gain on the sale of 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 The accompanying financial statements reflect our financial position, results of operations, comprehensive income (loss), equity and cash flows on a consolidated basis. All intercompany transactions and 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 82 IRON MOUNTAIN INCORPORATED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) DECEMBER 31, 2014 (In thousands, except share and per share data) 2. Summary of Significant Accounting Policies (Continued) 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 highly liquid short-term securities, which have remaining maturities at the date of purchase of less than 90 days. Cash and cash equivalents are carried at cost, which approximates fair value. We have restricted cash associated with a collateral trust agreement with our insurance carrier related to our workers’ compensation self-insurance program. The restricted cash subject to this agreement was $33,860 as of both December 31, 2013 and 2014, and is included in current assets on our Consolidated Balance Sheets. Restricted cash consists primarily of United States Treasuries. d. Foreign Currency Local currencies are the functional currencies for our operations outside the United States, with the exception of certain foreign holding companies and our financing centers in Switzerland, whose functional currency is the United States 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 in the accompanying Consolidated Balance Sheets. 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 previously outstanding 71⁄4% GBP Senior Subordinated Notes due 2014 (the ‘‘71⁄4% Notes’’), (2) our 63⁄4% Euro Senior Subordinated Notes due 2018 (the ‘‘63⁄4% Notes’’), (3) the borrowings in certain foreign currencies under our revolving credit facility 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, in the accompanying Consolidated Statements of Operations. The total loss on foreign currency transactions amounted to $10,223, $36,201 and $58,316 for the years ended December 31, 2012, 2013 and 2014, 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 83 IRON MOUNTAIN INCORPORATED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) DECEMBER 31, 2014 (In thousands, except share and per share data) 2. Summary of Significant Accounting Policies (Continued) 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 United States 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, 2013 and 2014, none of our derivative instruments contained credit-risk related contingent features. f. Property, Plant and Equipment Property, plant and equipment are stated at cost and depreciated using the straight-line method with the following useful lives (in years): Buildings and building improvements . . . . . . . . . . . . . . . . . . . . . . . Leasehold improvements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Racking . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Warehouse equipment/vehicles . . . . . . . . . . . . . . . . . . . . . . . . . . . . Furniture and fixtures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Computer hardware and software . . . . . . . . . . . . . . . . . . . . . . . . . Range 5 to 40 5 to 10 or life of the lease (whichever is shorter) 1 to 20 or life of the lease (whichever is shorter) 1 to 10 3 to 10 2 to 5 Property, plant and equipment (including capital leases in the respective category), at cost, consist of the following: December 31, 2013 2014 Land . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Buildings and building improvements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Leasehold improvements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Racking . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Warehouse equipment/vehicles . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Furniture and fixtures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Computer hardware and software . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Construction in progress . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 203,423 1,283,458 499,906 1,536,212 365,171 53,590 511,927 177,380 $ 205,463 1,409,330 467,176 1,559,383 341,393 53,189 501,882 130,889 $4,631,067 $4,668,705 84 IRON MOUNTAIN INCORPORATED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) DECEMBER 31, 2014 (In thousands, except share and per share data) 2. Summary of Significant Accounting Policies (Continued) 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. During the years ended December 31, 2012, 2013 and 2014, we capitalized $26,755, $39,487 and $19,419 of costs, respectively, associated with the development of internal use computer software projects. 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. Capitalization ends when the asset is ready for its intended use. Depreciation begins when the software is placed in service. Computer software costs that are capitalized are periodically evaluated for impairment. We wrote off previously deferred software costs associated with internal use software development projects that were discontinued after implementation, which resulted in a loss on disposal/write-down of property, plant and equipment (excluding real estate), net in the accompanying Consolidated Statements of Operations, by segment as follows: Year Ended December 31, 2012 2013 2014 North American Records and Information Management Business . . . . . . . . North American Data Management Business . . . . . . . . . . . . . . . . . . . . . . . International Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Corporate and Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ — $ 800 — — 300 — — 1,110 $1,000 — 300 — $1,110 $1,100 $1,300 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 accretion expense (included in 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. 85 IRON MOUNTAIN INCORPORATED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) DECEMBER 31, 2014 (In thousands, except share and per share data) 2. Summary of Significant Accounting Policies (Continued) A reconciliation of liabilities for asset retirement obligations (included in other long-term liabilities) is as follows: December 31, 2013 2014 Asset Retirement Obligations, beginning of the year . . . . . . . . . . . . . . . . . . . . . . . Liabilities Incurred . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Liabilities Settled . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Accretion Expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Foreign Currency Exchange Movement $10,982 480 (687) 1,123 (89) $11,809 1,366 (1,199) 1,121 (200) Asset Retirement Obligations, end of the year . . . . . . . . . . . . . . . . . . . . . . . . . . . $11,809 $12,897 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, or more frequently if events or circumstances warrant, assess whether a change in the lives over which our intangible assets are amortized is necessary. We have selected October 1 as our annual goodwill impairment review date. We performed our annual goodwill impairment review as of October 1, 2012, 2013 and 2014 and concluded that goodwill was not impaired as of those dates. As of December 31, 2014, no factors were identified that would alter our October 1, 2014 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. Our reporting units at which level we performed our goodwill impairment analysis as of October 1, 2013 were as follows: (1) North America; (2) United Kingdom, Ireland, Norway, Belgium, France, Germany, Luxembourg, Netherlands and Spain (‘‘Western Europe’’); (3) the remaining countries in Europe in which we operate, excluding Russia and Ukraine (‘‘Emerging Markets’’); (4) Latin America; (5) Australia, China, Hong Kong and Singapore (‘‘Asia Pacific’’); and (6) India, Russia and Ukraine 86 IRON MOUNTAIN INCORPORATED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) DECEMBER 31, 2014 (In thousands, except share and per share data) 2. Summary of Significant Accounting Policies (Continued) (‘‘Emerging Market Joint Ventures’’). The carrying value of goodwill, net for each of these reporting units as of December 31, 2013 is as follows: Carrying Value as of December 31, 2013 North America . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Western Europe . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Emerging Markets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Latin America . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Asia Pacific . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Emerging Market Joint Ventures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $1,849,440 375,954 88,599 93,149 56,210 — Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $2,463,352 Beginning January 1, 2014, as a result of the changes in our reportable segments associated with our reorganization (see Note 9 for a description of our reportable operating segments), we now have 12 reporting units. Our North American Records and Information Management Business segment includes the following three reporting units: (1) North American Records and Information Management; (2) Intellectual Property Management; and (3) Fulfillment Services. The North American Data Management Business segment is a separate reporting unit. The Emerging Businesses reporting unit (which primarily relates to our data center business in the United States and which is a component of Corporate and Other) is also a reporting unit. Additionally, the International Business segment consists of the following seven reporting units: (1) United Kingdom, Ireland, Norway, Austria, Belgium, France, Germany, Luxembourg, Netherlands, Spain and Switzerland (‘‘New Western Europe’’); (2) the remaining countries in Europe in which we operate, excluding Russia, Ukraine and Denmark (‘‘New Emerging Markets’’); (3) Latin America; (4) Australia and Singapore; (5) China and Hong Kong (‘‘Greater China’’); (6) India; and (7) Russia, Ukraine and Denmark. We have reassigned goodwill associated with the reporting units impacted by the reorganization among the new reporting units on a relative fair value basis. The fair value of each of our new reporting units was determined based on the application of a combined weighted average approach of fair value multiples of revenue and earnings and discounted cash flow techniques. As a result of the change in the composition of our reporting units noted above, we concluded that we had an interim triggering event, and, therefore, we performed an interim goodwill impairment test as of January 1, 2014 on the basis of these new reporting units during the first quarter of 2014. We 87 IRON MOUNTAIN INCORPORATED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) DECEMBER 31, 2014 (In thousands, except share and per share data) 2. Summary of Significant Accounting Policies (Continued) concluded that the goodwill for each of our new reporting units was not impaired as of such date. The carrying value of goodwill, net for each of these reporting units as of December 31, 2014 is as follows: Carrying Value as of December 31, 2014 North American Records and Information Management . . . . . . . . . . . . . . . . . . . . . Intellectual Property Management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Fulfillment Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . North American Data Management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Emerging Businesses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . New Western Europe . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . New Emerging Markets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Latin America . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Australia and Singapore . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Greater China . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . India . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Russia, Ukraine and Denmark . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $1,397,484 38,491 3,247 375,957 — 354,049 87,408 107,240 55,779 3,500 — 628 Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $2,423,783 Reporting unit valuations have been determined using a combined approach based on the present value of future cash flows and market 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. 88 IRON MOUNTAIN INCORPORATED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) DECEMBER 31, 2014 (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, 2013 and 2014 is as follows: Gross Balance as of December 31, 2012 . . . . . 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, 2013 . . . . . Deductible goodwill acquired during the year . Non-deductible goodwill acquired during the year . . . . . . . . . . . . . . . . . . . . . . . . . . . . Allocated to divestiture (see Note 16) . . . . . . Fair value and other adjustments(2) . . . . . . . . Currency effects . . . . . . . . . . . . . . . . . . . . . . North American Records and Information Management Business $1,602,824 40,046 34,066 7,144 (12,153) 1,671,927 7,745 7,045 — (26,898) (14,610) North American Data Management Business International Business Total Consolidated $421,147 10,011 $631,528 13,983 $2,655,499 64,040 8,517 1,786 (3,038) 438,423 1,936 — — (6,724) (3,653) 35,129 (408) (6,897) 673,335 30,117 37,274 (7,750) (386) (65,562) 77,712 8,522 (22,088) 2,783,685 39,798 44,319 (7,750) (34,008) (83,825) Gross Balance as of December 31, 2014 . . . . . $1,645,209 $429,982 $667,028 $2,742,219 Accumulated Amortization Balance as of December 31, 2012 . . . . . . . . . . . . . . . . . . Currency effects . . . . . . . . . . . . . . . . . . . . . . $ 207,309 (603) $ 54,355 (151) $ 59,076 347 $ 320,740 (407) Accumulated Amortization Balance as of December 31, 2013 . . . . . . . . . . . . . . . . . . Currency effects . . . . . . . . . . . . . . . . . . . . . . 206,706 (719) 54,204 (179) 59,423 (999) 320,333 (1,897) Accumulated Amortization Balance as of December 31, 2014 . . . . . . . . . . . . . . . . . . $ 205,987 Net Balance as of December 31, 2013 . . . . . . $1,465,221 Net Balance as of December 31, 2014 . . . . . . $1,439,222 Accumulated Goodwill Impairment Balance as of December 31, 2013 . . . . . . . . . . . . . . . . Accumulated Goodwill Impairment Balance as of December 31, 2014 . . . . . . . . . . . . . . . . $ $ 85,909 85,909 $ 54,025 $384,219 $375,957 $ $ — — $ 58,424 $ 318,436 $613,912 $2,463,352 $608,604 $2,423,783 $ 46,500 $ 132,409 $ 46,500 $ 132,409 (1) Total fair value and other adjustments primarily include $8,446 in net adjustments to property, plant and equipment, net, customer relationships and deferred income taxes, as well as $76 of cash paid related to acquisitions made in previous years. (2) Total fair value and other adjustments primarily include $(32,265) in net adjustments to deferred income taxes and $(443) related to property, plant and equipment and other assumed liabilities, as well as $(1,300) of cash received related to certain 2013 acquisitions. 89 IRON MOUNTAIN INCORPORATED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) DECEMBER 31, 2014 (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, the long-lived assets are written down, on a pro rata basis, to fair value. Fair value is determined based on discounted cash flows or appraised values, depending upon the nature of the assets. As a result of our conversion to a REIT and in accordance with Securities and Exchange Commission (‘‘SEC’’) rules applicable to REITs, we no longer report (gain) loss on sale of real estate as a component of operating income, but we will continue to report it as a component of income (loss) from continuing operations. We will continue to report the (gain) loss on sale of property, plant and equipment (excluding real estate), along with any impairment, write-downs or involuntary conversions related to real estate, as a component of operating income. Previously reported amounts have been reclassified to conform to this presentation. Consolidated loss on disposal/write-down of property, plant and equipment (excluding real estate), net was $4,661 for the year ended December 31, 2012 and consisted primarily of approximately $5,800, $700, $1,100 and $500 of asset write-offs in Europe, North American Records and Information Management Business, Emerging Businesses and Latin America, respectively, partially offset by approximately $3,500 of gains associated with the retirement of leased vehicles accounted for as capital lease assets associated with our North American Records and Information Management Business segment. Consolidated loss on disposal/write-down of property, plant and equipment (excluding real estate), net was $430 for the year ended December 31, 2013 and consisted of $1,700 of asset write-offs in our North American Records and Information Management Business segment, approximately $300 of asset write-offs in our Corporate and Other segment and approximately $900 of asset write-offs associated with our European operations, offset by gains of approximately $2,500 on the retirement of leased vehicles accounted for as capital lease assets primarily associated with our North American Records and Information Management Business segment. Consolidated loss on disposal/write-down of property, plant and equipment (excluding real estate), net was $1,065 for the year ended December 31, 2014 and consisted primarily of losses associated with the write-off of certain software associated with our North American Records and Information Management Business segment. Gain on sale of real estate, net of tax, which consists primarily of the sale of buildings in the United Kingdom, for the years ended December 31, 2012, 2013 and 2014 is as follows: Gain on sale of real estate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Tax effect on gain on sale of real estate . . . . . . . . . . . . . . . . . . . . . . . . . . . . $261 (55) $1,847 (430) $10,512 (2,205) Gain on sale of real estate, net of tax . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $206 $1,417 $ 8,307 Year Ended December 31, 2012 2013 2014 90 IRON MOUNTAIN INCORPORATED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) DECEMBER 31, 2014 (In thousands, except share and per share data) 2. Summary of Significant Accounting Policies (Continued) 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 boxes to one of our facilities, which include labor and transportation charges, are amortized over periods ranging from one to 30 years (weighted average of 25 years at December 31, 2014), 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 15 years (weighted average of six years at December 31, 2014) 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, which represents the majority of the balance, are amortized over periods ranging from 10 to 30 years (weighted average of 20 years at December 31, 2014). 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 five to 10 years (weighted average of six years at December 31, 2014). The gross carrying amount and accumulated amortization are as follows: Gross Carrying Amount December 31, 2013 2014 Customer relationship and acquisition costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . Other intangible assets (included in other assets, net) . . . . . . . . . . . . . . . . . . . . $879,378 9,475 $904,866 10,630 Accumulated Amortization Customer relationship and acquisition costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . Other intangible assets (included in other assets, net) . . . . . . . . . . . . . . . . . . . . $273,894 7,305 $297,029 8,608 The amortization expense for the years ended December 31, 2012, 2013 and 2014 is as follows: Customer relationship and acquisition costs: Amortization expense included in depreciation and amortization . . . . . Amortization expense offsetting revenues . . . . . . . . . . . . . . . . . . . . . . $34,806 10,784 $37,725 11,788 $46,733 11,715 Other intangible assets: Amortization expense included in depreciation and amortization . . . . . 940 1,456 1,853 Year Ended December 31, 2012 2013 2014 91 IRON MOUNTAIN INCORPORATED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) DECEMBER 31, 2014 (In thousands, except share and per share data) 2. Summary of Significant Accounting Policies (Continued) Estimated amortization expense for existing intangible assets (excluding deferred financing costs, as disclosed in Note 2.j.) is as follows: Estimated Amortization Included in Depreciation and Amortization Charged to Revenues 2015 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2016 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2017 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2018 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2019 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $48,230 48,040 47,192 46,389 45,189 $7,748 6,073 4,280 2,838 1,554 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, 2013 and 2014, gross carrying amount of deferred financing costs was $62,418 and $63,033, respectively, and accumulated amortization of those costs was $16,811 and $15,956, respectively, and was recorded in other assets, net in the accompanying Consolidated Balance Sheets. Estimated amortization expense for deferred financing costs, which are amortized as a component of interest expense, is as follows: Estimated Amortization of Deferred Financing Costs 2015 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2016 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2017 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2018 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2019 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $7,702 6,874 5,714 5,683 4,966 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: Income tax receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 31,915 112,886 $ 41,559 97,910 Prepaid expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $144,801 $139,469 December 31, 2013 2014 92 IRON MOUNTAIN INCORPORATED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) DECEMBER 31, 2014 (In thousands, except share and per share data) 2. Summary of Significant Accounting Policies (Continued) December 31, 2013 2014 Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Payroll and vacation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Incentive compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Dividend . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Self-insured liabilities (Note 10.b.) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 71,971 91,519 58,562 55,142 32,850 151,294 $ 69,525 75,050 66,552 6,182 33,381 153,795 Accrued expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $461,338 $404,485 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 service activities, which include: (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 the related sale of recycled paper, the price of which can fluctuate from period to period; (4) other services, including the scanning, imaging and document conversion services of active and inactive records, or Document Management Solutions (‘‘DMS’’), which relate to physical and digital records, and project revenues; (5) customer termination and permanent withdrawal fees; (6) data restoration projects; (7) special project work; (8) 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 Services’’); (9) consulting services; and (10) technology escrow services that protect and manage source code (‘‘Intellectual Property Management’’) and other technology services and product sales (including specially designed storage containers and related supplies). 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 period the applicable storage rental or service is provided or performed. Revenues from the sales of products, which are included as a component of service revenues, are recognized when products are shipped and title has passed to the customer. Revenues from the sales of products have historically not been significant. 93 IRON MOUNTAIN INCORPORATED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) DECEMBER 31, 2014 (In thousands, except share and per share data) 2. Summary of Significant Accounting Policies (Continued) 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 to rent expense 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 (‘‘RSUs’’), performance units (‘‘PUs’’) and shares of stock issued under our employee stock purchase plan (‘‘ESPP’’) (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, 2012, 2013 and 2014 was $30,360 ($23,437 after tax or $0.14 per basic and $0.13 per diluted share), $30,354 ($22,085 after tax or $0.12 per basic and $0.11 per diluted share) and $29,624 ($21,886 after tax or $0.11 per basic and diluted share), respectively. Stock-based compensation expense for Employee Stock-Based Awards included in the accompanying Consolidated Statements of Operations related to continuing operations is as follows: Year Ended December 31, 2012 2013 2014 Cost of sales (excluding depreciation and amortization) . . . . . . . . . . . . . Selling, general and administrative expenses . . . . . . . . . . . . . . . . . . . . . . $ 1,392 28,968 $ 293 30,061 $ 680 28,944 Total stock-based compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $30,360 $30,354 $29,624 The benefits associated with the tax deductions in excess of recognized compensation cost are required to be reported as financing activities in the accompanying Consolidated Statements of Cash Flows. This requirement reduces reported operating cash flows and increases reported financing cash flows. As a result, net financing cash flows from continuing operations included $1,045, $2,389 and $(60) for the years ended December 31, 2012, 2013 and 2014, respectively, from the benefits (deficiency) of tax deductions compared to 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. 94 IRON MOUNTAIN INCORPORATED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) DECEMBER 31, 2014 (In thousands, except share and per share data) 2. Summary of Significant Accounting Policies (Continued) Stock Options Under our various stock option plans, options are generally granted with exercise prices equal to the market price of the stock on the date of grant; however, in certain limited instances, options are granted at prices greater than 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 from the date of grant and generally have a contractual life of ten years from the date of grant, unless the holder’s employment is terminated sooner. Certain of the options we issue become exercisable ratably over a period of ten years from the date of grant and have a contractual life of 12 years from the date of grant, unless the holder’s employment is terminated sooner. As of December 31, 2014, ten-year vesting options represented 8.0% of total outstanding options. Certain of the options we issue become exercisable ratably over a period of three years from the date of grant and have a contractual life of ten years from the date of grant, unless the holder’s employment is terminated sooner. As of December 31, 2014, three-year vesting options represented 34.3% 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 one year from the date of grant. Our equity compensation plans generally provide that any unvested options and other awards granted thereunder shall vest immediately if an employee is terminated by the Company, or terminates 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). On January 20, 2015, our stockholders approved the adoption of the Iron Mountain Incorporated 2014 Stock and Cash Incentive Plan (the ‘‘2014 Plan’’). Under the 2014 Plan, the total amount of shares of common stock reserved and available for issuance pursuant to awards granted under the 2014 Plan is 7,750,000. The 2014 Plan permits the Company to continue to grant awards through January 20, 2025. A total of 43,253,839 shares of common stock have been reserved for grants of options and other rights under our various stock incentive plans, including the 2014 Plan. The number of shares available for grant under our various stock incentive plans, not including the 2014 Plan, at December 31, 2014 was 4,581,754. The weighted average fair value of options granted in 2012, 2013 and 2014 was $7.00, $7.69 and $5.70 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 2012 2013 2014 Expected volatility . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Risk-free interest rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Expected dividend yield . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Expected life . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33.8% 1.24% 3% 6.3 years 33.8% 1.13% 3% 6.3 years 34.0% 2.04% 4% 6.7 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 United States Treasury interest rates whose term is consistent with the expected life of the stock options. Expected dividend yield is 95 IRON MOUNTAIN INCORPORATED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) DECEMBER 31, 2014 (In thousands, except share and per share data) 2. Summary of Significant Accounting Policies (Continued) 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, 2014 is as follows: Outstanding at December 31, 2013 . . . . . . . . . . . . . . . . . Granted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Adjustment associated with special dividend . . . . . . . . . . Exercised . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Forfeited . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Expired . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Weighted Average Remaining Contractual Term (Years) Aggregate Intrinsic Value Weighted Average Exercise Price $24.09 31.00 N/A 23.15 24.13 30.13 Options 5,145,739 576,174 360,814 (2,223,012) (180,335) (1,134) Outstanding at December 31, 2014 . . . . . . . . . . . . . . . . . 3,678,246 $23.37 Options exercisable at December 31, 2014 . . . . . . . . . . . 2,643,384 $21.97 Options expected to vest . . . . . . . . . . . . . . . . . . . . . . . . 986,850 $26.90 5.17 4.08 7.94 $56,248 $44,116 $11,603 The following table provides the aggregate intrinsic value of stock options exercised for the years ended December 31, 2012, 2013 and 2014: Year Ended December 31, 2012 2013 2014 Aggregate intrinsic value of stock options exercised . . . . . . . . . . . . . . . . $15,859 $11,024 $23,178 Restricted Stock and Restricted Stock Units Under our various equity compensation plans, we may also grant restricted stock or RSUs. Our restricted stock and RSUs generally have a vesting period of between three and five years from the date of grant. All RSUs 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, $1,854 and $3,698 of cash dividends on RSUs for the years ended December 31, 2012, 2013 and 2014, respectively. We paid approximately $58, $820 and $1,377 of cash dividends on RSUs for the years ended December 31, 2012, 2013 and 2014, respectively. 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). 96 IRON MOUNTAIN INCORPORATED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) DECEMBER 31, 2014 (In thousands, except share and per share data) 2. Summary of Significant Accounting Policies (Continued) A summary of restricted stock and RSU activity for the year ended December 31, 2014 is as follows: Non-vested at December 31, 2013 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Granted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Vested . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Forfeited . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Restricted Stock and RSUs 1,435,230 902,702 (721,533) (210,830) Non-vested at December 31, 2014 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,405,569 Weighted- Average Grant-Date Fair Value $29.76 29.73 31.24 31.14 $28.78 The total fair value of restricted stock vested for each of the years ended December 31, 2012, 2013 and 2014 was $1. The total fair value of RSUs vested for the years ended December 31, 2012, 2013 and 2014 was $8,296, $16,638 and $22,535, respectively. Performance Units Under our various equity compensation plans, we may also make awards of PUs. For the majority of PUs, the number of PUs earned is determined based on our performance against predefined targets of revenue or revenue growth and return on invested capital (‘‘ROIC’’). The number of PUs earned may range from 0% to 150% (for PUs granted prior to 2014) and 0% to 200% (for PUs granted in 2014) of the initial award. The number of PUs earned is determined based on our actual performance as compared to the targets at the end of either the one-year performance period (for PUs granted prior to 2014) or the three-year performance period (for PUs granted in 2014). Certain PUs granted in 2013 and 2014 will be earned based on a market condition associated with the total return on our common stock in relation to a subset of the S&P 500 rather than the revenue growth and ROIC targets noted above. The number of PUs earned based on this market condition may range from 0% to 200% of the initial award. All of our PUs will be settled in shares of our common stock and are subject to cliff vesting three years from the date of the original PU grant. For those PUs subject to a one-year performance period, 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 (but delivery of the shares remains deferred). As a result, PUs subject to a one-year performance period are generally expensed over the shorter of (1) the vesting period, (2) achievement of the retirement criteria, which may occur as early as January 1 of the year following the year of grant or (3) a maximum of three years. Outstanding PUs 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 settlement date of the associated PU and will be forfeited if the PU does not vest. We accrued approximately $369, $681 and $1,341 of cash dividends on PUs for the years ended December 31, 2012, 2013 and 2014, respectively. There were no cash dividends paid on PUs for the years ended December 31, 2012 and 2013. We paid approximately $312 of cash dividends on PUs for the year ended December 31, 2014. 97 IRON MOUNTAIN INCORPORATED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) DECEMBER 31, 2014 (In thousands, except share and per share data) 2. Summary of Significant Accounting Policies (Continued) In 2012, 2013 and 2014, we issued 221,781, 198,869 and 225,429 PUs, respectively. Our PUs are earned based on our performance against revenue or revenue growth and ROIC targets during their applicable performance period; therefore, we forecast the likelihood of achieving the predefined revenue, revenue growth and ROIC targets in order to calculate the expected PUs to be earned. We record a compensation charge based on either the forecasted PUs to be earned (during the applicable performance period) or the actual PUs earned (at the one-year anniversary date for PUs granted prior to 2014, and at the three-year anniversary date for PUs granted in 2014) over the vesting period for each of the awards. For the 2013 and 2014 PUs that will be earned based on a market condition, we utilized a Monte Carlo simulation to fair value these awards at the date of grant, and such fair value will be expensed over the three-year performance period. The total fair value of earned PUs that vested during the years ended December 31, 2012, 2013 and 2014 was $4,285, $2,962 and $1,216, respectively. As of December 31, 2014, we expected 60% achievement of the predefined revenue, revenue growth and ROIC targets associated with the awards of PUs made in 2014. A summary of PU activity for the year ended December 31, 2014 is as follows: Non-vested at December 31, 2013 . . . . . . . . . . . . . Granted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Vested . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Forfeited . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Original PU Awards 334,548 225,429 (68,389) (29,922) Non-vested at December 31, 2014 . . . . . . . . . . . . . 461,666 PU Adjustment(1) (23,732) (49,776) (9,101) — (82,609) Total PU Awards 310,816 175,653 (77,490) (29,922) 379,057 Weighted- Average Grant-Date Fair Value $33.18 26.82 31.85 29.44 $30.80 (1) Represents an increase or decrease in the number of original PUs awarded based on either (a) the final performance criteria achievement at the end of the defined performance period of such PUs or (b) a change in estimated awards based on the forecasted performance against the predefined targets. Employee Stock Purchase Plan We offer an ESPP in which participation is available to substantially all United States and Canadian employees who meet certain service eligibility requirements. The ESPP provides a way for our eligible employees to become stockholders on favorable terms. The ESPP provides for the purchase of our common stock by eligible employees through successive offering periods. We have historically had two six-month offering periods per year, the first of which generally runs from June 1 through November 30 and the second of which generally runs from December 1 through 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 purchase price at the end of the offering. Participating employees may withdraw from an offering before the purchase date and obtain a refund of the amounts withheld as payroll deductions. At the end of the offering period, outstanding options under the ESPP are exercised, and each employee’s accumulated contributions are used to purchase our 98 IRON MOUNTAIN INCORPORATED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) DECEMBER 31, 2014 (In thousands, except share and per share data) 2. Summary of Significant Accounting Policies (Continued) 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 expense for the ESPP shares purchased. For the years ended December 31, 2012, 2013 and 2014, there were 151,285 shares, 144,432 shares and 115,046 shares, respectively, purchased under the ESPP. As of December 31, 2014, we have 960,638 shares available under the ESPP. As of December 31, 2014, unrecognized compensation cost related to the unvested portion of our Employee Stock-Based Awards was $35,467 and is expected to be recognized over a weighted-average period of 1.9 years. We generally issue shares of our common stock for the exercises of stock options, restricted stock, RSUs, PUs and shares of our common stock 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 bases of assets and liabilities and for loss and credit carryforwards. Valuation allowances are provided when recovery of deferred tax assets does not meet the more likely than not standard as defined in GAAP. 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. 99 IRON MOUNTAIN INCORPORATED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) DECEMBER 31, 2014 (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 income (loss) attributable to Iron Mountain Incorporated . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Weighted-average shares—basic . . . . . . . . . . . . . . . . . . . Effect of dilutive potential stock options . . . . . . . . . . . . . Effect of dilutive potential restricted stock, RSUs and Year Ended December 31, 2012 2013 2014 $ $ $ 182,707 $ 99,161 (8,659) $ 831 170,922 $ 96,462 $ $ $ 328,955 (209) 326,119 173,604,000 914,308 190,994,000 995,836 195,278,000 913,926 PUs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 349,128 422,045 557,269 Weighted-average shares—diluted . . . . . . . . . . . . . . . . . . 174,867,436 192,411,881 196,749,195 Earnings (losses) per share—basic: Income (loss) from continuing operations . . . . . . . . . . . . Total (loss) income from discontinued operations (see Note 14) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Net income (loss) attributable to Iron Mountain Incorporated—basic . . . . . . . . . . . . . . . . . . . . . . . . . . Earnings (losses) per share—diluted: Income (loss) from continuing operations . . . . . . . . . . . . Total (loss) income from discontinued operations (see Note 14) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Net income (loss) attributable to Iron Mountain Incorporated—diluted . . . . . . . . . . . . . . . . . . . . . . . . . Antidilutive stock options, RSUs and PUs, excluded from the calculation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ $ $ $ $ $ 1.05 $ 0.52 $ 1.68 (0.05) $ — $ — 0.98 1.04 $ $ 0.51 0.52 $ $ 1.67 1.67 (0.05) $ — $ — 0.98 $ 0.50 $ 1.66 1,286,150 903,416 872,039 q. 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 100 IRON MOUNTAIN INCORPORATED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) DECEMBER 31, 2014 (In thousands, except share and per share data) 2. Summary of Significant Accounting Policies (Continued) ability to make payments, an adjustment of the allowance may be required. 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) 2012 . . . . . . . . . . . . . . . . . 2013 . . . . . . . . . . . . . . . . . 2014 . . . . . . . . . . . . . . . . . $23,277 25,209 34,645 $39,723 49,483 47,137 $ 8,323 11,321 14,209 $ 977 3,612 (572) $(47,091) (54,980) (63,278) Balance at End of the Year $25,209 34,645 32,141 (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. r. Concentrations of Credit Risk Financial instruments that potentially subject us to credit risk consist principally of cash and cash equivalents (including money market funds and time deposits), restricted cash (primarily United States Treasuries) and accounts receivable. The only significant concentrations of liquid investments as of both December 31, 2013 and 2014 relate to cash and cash equivalents and restricted cash held on deposit with one global bank and one ‘‘Triple A’’ rated money market fund, and three global banks and two ‘‘Triple A’’ rated money market funds, respectively, all of 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, 2013 and 2014, our cash and cash equivalents and restricted cash balance was $154,386 and $159,793, respectively, including money market funds and time deposits amounting to $36,613 and $53,032 respectively. The money market funds are invested substantially in United States Treasuries. s. 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. Our financial assets or liabilities that are carried at fair value are required to be 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. 101 IRON MOUNTAIN INCORPORATED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) DECEMBER 31, 2014 (In thousands, except share and per share data) 2. Summary of Significant Accounting Policies (Continued) 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, 2013 and 2014, respectively: Description Fair Value Measurements at December 31, 2013 Using Total Carrying Quoted prices Value at December 31, 2013 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) . . . . . . . . . . . . . . . . . $33,860 2,753 13,386 72 5,592 $ — — 12,785(2) — — $33,860 2,753 601(1) 72 5,592 $— — — — — Description Fair Value Measurements at December 31, 2014 Using Total Carrying Quoted prices Value at December 31, 2014 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) . . . . . . . . . . . . . . . . . $36,828 16,204 13,172 2,411 $ — — 12,428(2) — $36,828 16,204 744(1) 2,411 $— — — — (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 certain of our intercompany exposures, as more fully disclosed at Note 3. 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 102 IRON MOUNTAIN INCORPORATED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) DECEMBER 31, 2014 (In thousands, except share and per share data) 2. Summary of Significant Accounting Policies (Continued) non-recurring basis for the years ended December 31, 2012, 2013 and 2014, except goodwill calculated based on Level 3 inputs, as more fully disclosed in Note 2.g. t. 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, 2013 and 2014, the fair value of the money market and mutual funds included in this trust amounted to $13,386 and $13,172 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 Statements of Operations are realized and unrealized net gains (losses) of $1,292, $2,283 and $1,112 for the years ended December 31, 2012, 2013 and 2014, respectively, related to these marketable securities. u. Investments As of December 31, 2014, we had a 4% investment in Crossroads Systems, Inc. Its carrying value as of December 31, 2013 and 2014 was $1,404 and $1,457, respectively, and is included in other assets in the accompanying Consolidated Balance Sheets. This investment, which is publicly traded, is carried at fair value with corresponding changes to fair value recorded in accumulated other comprehensive items, net. v. Accumulated Other Comprehensive Items, Net The changes in accumulated other comprehensive items, net for the years ended December 31, 2013 and 2014 is as follows: Balance as of December 31, 2012 . . . . . . . . . . . . . . . . . . . . . Other comprehensive (loss) income: Foreign currency translation adjustments . . . . . . . . . . . . . . Market value adjustments for securities . . . . . . . . . . . . . . . Total other comprehensive (loss) income . . . . . . . . . . . . . . . . Balance as of December 31, 2013 . . . . . . . . . . . . . . . . . . . . . Other comprehensive (loss) income: Foreign currency translation adjustments . . . . . . . . . . . . . . Market value adjustments for securities . . . . . . . . . . . . . . . Total other comprehensive (loss) income . . . . . . . . . . . . . . . . Foreign Currency Market Value Adjustments for Securities Translation Adjustments Total $ 20,314 $ — $ 20,314 (29,900) — (29,900) — 926 926 (29,900) 926 (28,974) $ (9,586) $926 $ (8,660) (66,424) — (66,424) — 53 53 (66,424) 53 (66,371) Balance as of December 31, 2014 . . . . . . . . . . . . . . . . . . . . . $(76,010) $979 $(75,031) 103 IRON MOUNTAIN INCORPORATED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) DECEMBER 31, 2014 (In thousands, except share and per share data) 2. Summary of Significant Accounting Policies (Continued) w. Other Expense (Income), Net Other expense (income), net consists of the following: Year Ended December 31, 2012 2013 2014 Foreign currency transaction losses (gains), net . . . . . . . . . . . . . . . . . . . Debt extinguishment expense, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Other, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $10,223 10,628 (4,789) $36,201 43,724 (4,723) $58,316 16,495 (9,624) $16,062 $75,202 $65,187 x. New Accounting Pronouncements In April 2014, the Financial Accounting Standards Board (‘‘FASB’’) issued Accounting Standards Update (‘‘ASU’’) No. 2014-08, Presentation of Financial Statements (Topic 205) and Property, Plant, and Equipment (Topic 360) (‘‘ASU 2014-08’’). ASU 2014-08 changes the criteria for a disposal to qualify as a discontinued operation and requires additional disclosures of both discontinued operations and certain other disposals that do not meet the definition of a discontinued operation. ASU 2014-08 is effective for annual periods beginning on or after December 15, 2014. Under this guidance, we expect fewer dispositions to qualify as discontinued operations. Early adoption is permitted, but only for disposals that have not been reported in the financial statements previously issued. We adopted ASU 2014-08 effective April 1, 2014. In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers (Topic 606) (‘‘ASU 2014-09’’). ASU 2014-09 provides additional guidance for management to reassess revenue recognition as it relates to: (1) transfer of control, (2) variable consideration, (3) allocation of transaction price based on relative standalone selling price, (3) licenses, (4) time value of money and (5) contract costs. Further disclosures will be required to provide a better understanding of revenue that has been recognized and revenue that is expected to be recognized in the future from existing contracts. ASU 2014-09 is effective for us on January 1, 2017, with no early adoption permitted. We are currently evaluating the impact ASU 2014-09 will have on our consolidated financial statements. In August 2014, the FASB issued ASU No. 2014-15, Presentation of Financial Statements Going Concern (Subtopic 205-40) (‘‘ASU 2014-15’’). ASU 2014-15 requires management to assess an entity’s ability to continue as a going concern by incorporating and expanding upon certain principles of current United States auditing standards. Specifically, the amendments (1) provide a definition of the term ‘‘substantial doubt’’, (2) require an evaluation every reporting period, including interim periods, (3) provide principles for considering the mitigating effect of management’s plans, (4) require certain disclosures when substantial doubt is alleviated as a result of consideration of management’s plans, (5) require an express statement and other disclosures when substantial doubt is still present, and (6) require an assessment for a period of one year after the date that the financial statements are issued (or available to be issued). ASU 2014-15 is effective for us on January 1, 2017, with early adoption permitted. We do not believe that this pronouncement will have an impact on our consolidated financial statements. 104 IRON MOUNTAIN INCORPORATED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) DECEMBER 31, 2014 (In thousands, except share and per share data) 2. Summary of Significant Accounting Policies (Continued) In February 2015, the FASB issued ASU No. 2015-02, Consolidation (Topic 810): Amendments to the Consolidation Analysis (‘‘ASU 2015-02’’). ASU 2015-02 affects reporting entities that are required to evaluate whether they should consolidate certain legal entities. ASU 2015-02 is effective for us on January 1, 2016, with early adoption permitted. We do not believe that this pronouncement will have an impact on our consolidated financial statements. y. Immaterial Restatement During the second quarter of 2014, we identified contract billing inaccuracies arising from a single location which occurred over numerous years that resulted in an overstatement of our prior years’ reported revenue by $10,000 in the aggregate. Of this amount, $1,300 relates to the year ended December 31, 2013, $1,300 relates to the year ended December 31, 2012 and the remaining $7,400 relates to the periods prior to December 31, 2011. We have determined that no prior period financial statement was materially misstated as a result of these billing inaccuracies. As a result, we have restated beginning retained earnings as of December 31, 2011 for the cumulative impact of these billing inaccuracies, net of tax, prior to December 31, 2011 in the amount of $4,514. Additionally, we have restated the following: (1) our 2013 Consolidated Balance Sheet, (2) our 2012 and 2013 Consolidated Statements of Operations, (3) our 2012 and 2013 Consolidated Statements of Comprehensive Income (Loss), (4) our 2012 and 2013 Consolidated Statements of Equity and (5) our 2012 and 2013 Consolidated Statements of Cash Flows to reflect the impact of these billing inaccuracies in those particular periods. There was no change to the following lines of the Consolidated Statement of Cash Flows for the years ended December 31, 2012 and 2013: (1) cash flows from operating activities, (2) cash flows from investing activities and (3) cash flows from financing activities. Also, we restated the 2013 quarterly data presented in Note 8. 105 IRON MOUNTAIN INCORPORATED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) DECEMBER 31, 2014 (In thousands, except share and per share data) 2. Summary of Significant Accounting Policies (Continued) The following table sets forth the effect of the immaterial restatement to certain line items of our Consolidated Statements of Operations for the years ended December 31, 2012 and 2013: Year Ended December 31, 2012 2013 Storage Rental . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Service . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ — $ — (1,300) (1,300) Total Revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $(1,300) $(1,300) Operating (Loss) Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $(1,300) $(1,300) (Loss) Income from Continuing Operations before Provision (Benefit) for Income Taxes and (Gain) Loss on Sale of Real Estate . . . . . . . . . . . . . . . . . . . . . . . . . . $(1,300) $(1,300) (Benefit) Provision for Income Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ (514) $ (500) (Loss) Income from Continuing Operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ (786) $ (800) Net (Loss) Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ (786) $ (800) Net (Loss) Income Attributable to Iron Mountain Incorporated . . . . . . . . . . . . . . . $ (786) $ (800) Earnings (Losses) per Share-Basic: (Loss) Income from Continuing Operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ (0.00) $ (0.00) Net (Loss) Income Attributable to Iron Mountain Incorporated . . . . . . . . . . . . . $ (0.00) $ (0.00) Earnings (Losses) per Share-Diluted: (Loss) Income from Continuing Operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ (0.00) $ (0.00) Net (Loss) Income Attributable to Iron Mountain Incorporated . . . . . . . . . . . . . $ (0.00) $ (0.00) The following table sets forth the effect of the immaterial restatement to certain line items of our Consolidated Balance Sheet as of December 31, 2013: Deferred Revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Total Current Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Deferred Income Tax Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Earnings in excess of distributions (Distributions in excess of earnings) . . . . . . . . . . . Total Iron Mountain Incorporated Stockholders’ Equity . . . . . . . . . . . . . . . . . . . . . . Total Equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $10,000 $10,000 $ (3,900) $ (6,100) $ (6,100) $ (6,100) December 31, 2013 106 IRON MOUNTAIN INCORPORATED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) DECEMBER 31, 2014 (In thousands, except share and per share data) 3. Derivative Instruments and Hedging Activities We have entered into a number of separate forward contracts to hedge our exposures in Euros, British pounds sterling and Australian dollars. As of December 31, 2014, we had outstanding forward contracts to purchase 206,000 Euros and sell $252,745 United States dollars to hedge our intercompany exposures with our European operations. 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 Consolidated Statements 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 forward contracts as hedges. During the years ended December 31, 2012, 2013 and 2014, there was $9,116 in net cash payments, $6,954 in net cash receipts and $21,125 in net cash payments, respectively, included in cash from operating activities from continuing operations related to settlements associated with foreign currency forward contracts. Our policy is to record the fair value of each derivative instrument on a gross basis. The following table provides the fair value of our derivative instruments as of December 31, 2013 and 2014 and their gains and losses for the years ended December 31, 2012, 2013 and 2014: Derivatives Not Designated as Hedging Instruments 2013 Balance Sheet Location Foreign exchange contracts . . Prepaid expenses and other Total . . . . . . . . . . . . . . . . . . 2014 Balance Sheet Location Prepaid expenses and other Fair Value $— $— Fair Value $72 $72 Asset Derivatives December 31, Derivatives Not Designated as Hedging Instruments Liability Derivatives December 31, 2013 2014 Balance Sheet Location Fair Value Balance Sheet Location Fair Value Foreign exchange contracts . . . . . . . . . . . . Accrued expenses $5,592 Accrued expenses $2,411 Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . $5,592 $2,411 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, 2012 2013 2014 Foreign exchange contracts . . . . . . . . . . . Other expense (income), net $13,007 $(2,955) $18,016 Total . . . . . . . . . . . . . . . . . . . . . . . . . . . $13,007 $(2,955) $18,016 107 IRON MOUNTAIN INCORPORATED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) DECEMBER 31, 2014 (In thousands, except share and per share data) 3. Derivative Instruments and Hedging Activities (Continued) We have designated a portion of our 63⁄4% Notes as a hedge of net investment of certain of our Euro denominated subsidiaries. For the years ended December 31, 2012, 2013 and 2014, we designated on average 101,167, 106,525 and 47,730 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 the following foreign exchange (losses) gains, net of tax, related to the change in fair value of such debt due to the currency translation adjustments, which is a component of accumulated other comprehensive items, net: Year Ended December 31, 2012 2013 2014 Foreign exchange (losses) gains . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Tax benefit (expense) on foreign exchange (losses) gains . . . . . . . . . . . . . . $(4,408) $(5,311) $6,385 (57) 2,073 1,740 Foreign exchange (losses) gains, net of tax . . . . . . . . . . . . . . . . . . . . . . . . $(2,668) $(3,238) $6,328 As of December 31, 2014, cumulative net gains of $13,812, net of tax are recorded in accumulated other comprehensive items, net associated with this net investment hedge. 108 IRON MOUNTAIN INCORPORATED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) DECEMBER 31, 2014 (In thousands, except share and per share data) 4. Debt Long-term debt comprised the following: Revolving Credit Facility(1) . . . . . . . . . . . . . . . . . . . Term Loan(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71⁄4% GBP Senior Subordinated Notes due 2014 (the ‘‘71⁄4% 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 December 31, 2013 December 31, 2014 Carrying Amount Fair Value Carrying Amount Fair Value $ 675,717 — $675,717 — $ 883,428 249,375 $ 883,428 249,375 247,808 248,117 — — 350,272 355,071 308,616 309,634 ‘‘73⁄4% Notes’’)(2)(3) . . . . . . . . . . . . . . . . . . . . . . 400,000 446,000 400,000 429,000 83⁄8% Senior Subordinated Notes due 2021 (the ‘‘83⁄8% Notes’’)(2)(3) . . . . . . . . . . . . . . . . . . . . . . 411,518 444,470 106,030 110,500 61⁄8% CAD Senior Notes due 2021 (the ‘‘CAD Notes’’)(2)(4) . . . . . . . . . . . . . . . . . . . . . . . . . . . 187,960 187,960 172,420 175,437 61⁄8% GBP Senior Notes due 2022 (the ‘‘GBP Notes’’)(2)(5) . . . . . . . . . . . . . . . . . . . . . . . . . . . 6% Senior Notes due 2023 (the ‘‘6% Notes’’)(2)(3) . . 53⁄4% Senior Subordinated Notes due 2024 (the ‘‘53⁄4% Notes’’)(2)(3) . . . . . . . . . . . . . . . . . . . . . . Real Estate Mortgages, Capital Leases and Other(6) . Total Long-term Debt . . . . . . . . . . . . . . . . . . . . . . . Less Current Portion . . . . . . . . . . . . . . . . . . . . . . . . Long-term Debt, Net of Current Portion . . . . . . . . . $4,119,139 — 600,000 — 614,820 622,960 600,000 639,282 625,500 930,000 298,447 1,000,000 298,447 4,171,722 (52,583) 1,005,000 320,702 1,000,000 320,702 4,663,531 (52,095) $4,611,436 (1) The capital stock or other equity interests of most of our United States 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 (including promissory notes) of subsidiaries owed to us or to one of our United States subsidiary guarantors. In addition, Iron Mountain Canada Operations ULC (‘‘Canada Company’’) has pledged 66% of the capital stock of its subsidiaries, and all intercompany obligations (including promissory notes) owed to or held by it, to secure the Canadian dollar subfacility under the Revolving Credit Facility (defined below). The fair value (Level 3 of fair value hierarchy described at Note 2.s.) of these debt instruments approximates the carrying value (as borrowings under these debt instruments are based on current variable market interest rates (plus a margin that is subject to change based on our consolidated leverage ratio)), as of December 31, 2013 and 2014, respectively. (2) The fair values (Level 1 of fair value hierarchy described at Note 2.s.) of these debt instruments are based on quoted market prices for these notes on December 31, 2013 and 2014, respectively. 109 IRON MOUNTAIN INCORPORATED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) DECEMBER 31, 2014 (In thousands, except share and per share data) 4. Debt (Continued) (3) Collectively, the ‘‘Parent Notes.’’ IMI is the direct obligor on the Parent Notes, which are fully and unconditionally guaranteed, on a senior or senior subordinated basis, as the case may be, by substantially all of its direct and indirect 100% owned United States subsidiaries (the ‘‘Guarantors’’). These guarantees are joint and several obligations of the Guarantors. Canada Company, Iron Mountain Europe PLC (‘‘IME’’) and the remainder of our subsidiaries do not guarantee the Parent Notes. (4) Canada Company is the direct obligor on the CAD Notes, which are fully and unconditionally guaranteed, on a senior basis, by IMI and the Guarantors. These guarantees are joint and several obligations of IMI and the Guarantors. See Note 5 to Notes to Consolidated Financial Statements. (5) IME is the direct obligor on the GBP Notes, which are fully and unconditionally guaranteed, on a senior basis, by IMI and the Guarantors. These guarantees are joint and several obligations of IMI and the Guarantors. See Note 5 to Notes to Consolidated Financial Statements. (6) Includes (a) real estate mortgages of $3,704 and $5,107 as of December 31, 2013 and 2014, respectively, which bear interest at approximately 4.5% and are payable in various installments through 2021, (b) capital lease obligations of $255,124 and $241,866 as of December 31, 2013 and 2014, respectively, which bear a weighted average interest rate of 5.8% at both December 31, 2013 and 2014, and (c) other various notes and other obligations, which were assumed by us as a result of certain acquisitions, of $39,619 and $73,729 as of December 31, 2013 and 2014, respectively, and bear a weighted average interest rate of 14.3% and 11.5% as of December 31, 2013 and 2014, respectively. We believe the fair value (Level 3 of fair value hierarchy described at Note 2.s.) of this debt approximates its carrying value. a. Revolving Credit Facility On August 7, 2013, we amended our existing credit agreement. The revolving credit facilities (the ‘‘Revolving Credit Facility’’) under our credit agreement, as amended (the ‘‘Credit Agreement’’), allow IMI and certain of its United States and foreign subsidiaries to borrow in United States dollars and (subject to sublimits) a variety of other currencies (including Canadian dollars, British pounds sterling, Euros, Brazilian reais and Australian dollars, among other currencies) in an aggregate outstanding amount not to exceed $1,500,000. Additionally, the Credit Agreement included an option to allow us to request additional commitments of up to $500,000, in the form of term loans or through increased commitments under the Revolving Credit Facility. On September 24, 2014, we borrowed an additional $250,000 in the form of a term loan under the Credit Agreement (the ‘‘Term Loan’’). Commencing on December 31, 2014, the Term Loan will begin amortizing in quarterly installments in an amount equal to $625 per quarter, with the remaining balance due on June 27, 2016. The Term Loan may be prepaid without penalty or premium, in whole or in part, at any time. The Credit Agreement continues to include an option to allow us to request additional commitments of up to $250,000, in the form of term loans or through increased commitments under the Revolving Credit Facility. The Credit Agreement terminates on June 27, 2016, at which point all obligations become due. IMI and the Guarantors guarantee all obligations under the Credit Agreement, and have pledged the capital stock or other equity interests of most of their United States subsidiaries, up to 66% of the capital stock or other equity interests of their first-tier foreign subsidiaries, and all intercompany 110 IRON MOUNTAIN INCORPORATED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) DECEMBER 31, 2014 (In thousands, except share and per share data) 4. Debt (Continued) obligations (including promissory notes) owed to or held by them to secure the Credit Agreement. In addition, Canada Company has pledged 66% of the capital stock of its subsidiaries, and all intercompany obligations (including promissory notes) owed to or held by it to secure the Canadian dollar subfacility under the Revolving Credit Facility. 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 our consolidated leverage ratio. 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 and fees associated with outstanding letters of credit. As of December 31, 2014, we had $883,428 and $249,375 of outstanding borrowings under the Revolving Credit Facility and the Term Loan, respectively. Of the $883,428 of outstanding borrowings under the Revolving Credit Facility, $680,150 was denominated in United States dollars, 77,200 was denominated in Canadian dollars, 64,250 was denominated in Euros and 71,600 was denominated in Australian dollars. In addition, we also had various outstanding letters of credit totaling $10,403. The remaining amount available for borrowing under the Revolving Credit Facility as of December 31, 2014, based on IMI’s leverage ratio, the last 12 months’ earnings before interest, taxes, depreciation and amortization and rent expense (‘‘EBITDAR’’), other adjustments as defined in the Credit Agreement and current external debt, was $606,169 (which amount represents the maximum availability as of such date). The average interest rate in effect under the Credit Agreement was 2.7% as of December 31, 2014. The average interest rate in effect under the Revolving Credit Facility was 2.8% and ranged from 2.3% to 5.1% as of December 31, 2014 and the interest rate in effect under the Term Loan as of December 31, 2014 was 2.4%. For the years ended December 31, 2012, 2013 and 2014, we recorded commitment fees and letter of credit fees of $2,306, $3,167 and $3,322, respectively, based on the unused balances under our revolving credit facilities and outstanding letters of credit. We recorded a charge of $5,544 to other expense (income), net in the third quarter of 2013 related to an amendment of our revolving credit and term loan facilities, representing a write-off of deferred financing costs. 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 uses EBITDAR-based calculations as the primary measures of financial performance, including leverage and fixed charge coverage ratios. IMI’s Credit Agreement net total lease adjusted leverage ratio was 5.0 and 5.4 as of December 31, 2013 and 2014, respectively, compared to a maximum allowable ratio of 6.5, and its net secured debt lease adjusted leverage ratio was 2.2 and 2.6 as of December 31, 2013 and 2014, respectively, compared to a maximum allowable ratio of 4.0. IMI’s bond leverage ratio (which is not lease adjusted), per the indentures, was 5.1 and 5.7 as of December 31, 2013 and 2014, respectively, compared to a maximum allowable ratio of 6.5. IMI’s Credit Agreement fixed charge coverage ratio was 2.5 at both December 31, 2013 and 2014 compared to a minimum allowable ratio of 1.5 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. 111 IRON MOUNTAIN INCORPORATED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) DECEMBER 31, 2014 (In thousands, except share and per share data) 4. Debt (Continued) b. Notes Issued under Indentures As of December 31, 2014, we had seven series of senior subordinated or senior notes issued under various indentures, five of which are direct obligations of the parent company, IMI; one (the CAD Notes) is a direct obligation of Canada Company; one (the GBP Notes) is a direct obligation of IME; and all are subordinated to debt outstanding under the Credit Agreement, except the 6% Notes, the CAD Notes and the GBP Notes which are pari passu with the Credit Agreement: (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) $106,250 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; (cid:127) 200,000 CAD principal amount of notes maturing on August 15, 2021 and bearing interest at a rate of 61⁄8% per annum, payable semi-annually in arrears on February 15 and August 15; (cid:127) 400,000 British pounds sterling principal amount of notes maturing on September 15, 2022 and bearing interest at a rate of 61⁄8% per annum, payable semi-annually in arrears on March 15 and September 15; (cid:127) $600,000 principal amount of notes maturing on August 15, 2023 and bearing interest at a rate of 6% 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, the CAD Notes and the GBP Notes are fully and unconditionally guaranteed, on a senior or senior subordinated basis, as the case may be, by the Guarantors. These guarantees are joint and several obligations of the Guarantors. The remainder of our subsidiaries do not guarantee the Parent Notes, the CAD Notes or the GBP Notes. Additionally, IMI guarantees the CAD Notes and the GBP Notes. Canada Company and IME do not guarantee the Parent Notes. In August 2012, we redeemed (1) the $320,000 aggregate principal amount outstanding of the 65⁄8% Senior Subordinated Notes due 2016 at 100% of par, plus accrued and unpaid interest, and (2) the $200,000 aggregate principal amount outstanding of the 83⁄4% Senior Subordinated Notes due 2018 at 102.9% of par, plus accrued and unpaid interest. We recorded a charge to other expense (income), net of $10,628 related to the early extinguishment of this debt in the third quarter of 2012. This charge consists of the call premium, original issue discounts and deferred financing costs related to this debt. In August 2013, IMI completed an underwritten public offering of $600,000 in aggregate principal amount of 6% Notes, and Canada Company completed an underwritten public offering of 200,000 CAD in aggregate principal amount of the CAD Notes, both of which were issued at 100% of par (together, the ‘‘August 2013 Offerings’’). The net proceeds to IMI and Canada Company of $782,307, 112 IRON MOUNTAIN INCORPORATED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) DECEMBER 31, 2014 (In thousands, except share and per share data) 4. Debt (Continued) after paying the underwriters’ discounts and commissions, were used to redeem (1) all of the outstanding 71⁄2% CAD Senior Subordinated Notes due 2017, (2) all of the outstanding 8% Senior Subordinated Notes due 2018, (3) all of the outstanding 8% Senior Subordinated Notes due 2020, and (4) $137,500 in principal amount of the 83⁄8% Notes. The remaining net proceeds were used to repay indebtedness under our Revolving Credit Facility. We recorded a charge to other expense (income), net of $38,118 in the third quarter of 2013 related to the early extinguishment of this debt. This charge consists of call and tender premiums, original issue discounts and deferred financing costs related to this debt. In January 2014, we redeemed the 150,000 British pounds sterling (approximately $248,000) in aggregate principal amount of the 71⁄4% Notes at 100% of par, plus accrued and unpaid interest, utilizing borrowings under our Revolving Credit Facility and cash on-hand. In September 2014, IME completed a private offering of 400,000 British pounds sterling in aggregate principal amount of the GBP Notes, which were issued at 100% of par. The net proceeds to IME of 394,000 British pounds sterling (approximately $642,000 based on an exchange rate of 1.63), after paying the initial purchasers’ commissions and expenses, were used to repay amounts outstanding under our Revolving Credit Facility and for general corporate purposes. In December 2014, we redeemed $306,000 aggregate principal outstanding of our 83⁄8% Notes at 104.188% of par, plus accrued and unpaid interest, utilizing borrowings under our Revolving Credit Facility. We recorded a charge to other expense (income), net of $16,495 related to the early extinguishment of this debt in the fourth quarter of 2014 representing the call premium associated with the early redemption, as well as a write-off of original issue discounts and deferred financing costs related to this debt. 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 or senior subordinated notes. The redemption dates reflect the date at or after which the notes may be 113 IRON MOUNTAIN INCORPORATED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) DECEMBER 31, 2014 (In thousands, except share and per share data) 4. Debt (Continued) redeemed at our option at a premium redemption price. After these dates, the notes may be redeemed at 100% of face value: 73⁄4% Notes Redemption Date October 15, October 1, 63⁄4% Notes 83⁄8% Notes August 15, CAD Notes August 15, GBP Notes September 15, 6% Notes August 15, 53⁄4% Notes August 15, 2014 . . . . . . . . 2015 . . . . . . . . 2016 . . . . . . . . 2017 . . . . . . . . 2018 . . . . . . . . 2019 . . . . . . . . 2020 . . . . . . . . 2021 . . . . . . . . 2022 . . . . . . . . 2023 . . . . . . . . 2024 . . . . . . . . — — — 100.000% 104.188% — 100.000% 103.875%(1) 102.792% 101.396% 100.000% 101.938% 100.000% 103.063%(1) 100.000% 100.000% 100.000% 101.531% 100.000% 100.000% 100.000% 100.000% — 100.000% 100.000% 100.000% — — 100.000% 100.000% — — — — — — — — — — — — — — — — — 104.594%(1) 103.063% 101.531% 100.000% 100.000% 100.000% — — — — — — — — — 102.875%(1) 103.000%(1) 101.917% 100.958% 102.000% 100.000% 101.000% 100.000% 100.000% 100.000% 100.000% 100.000% 100.000% 100.000% — (1) Prior to this date, the relevant 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 2015 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2016 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2017 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2018 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2019 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Thereafter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Net Premiums (Discounts) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Amount $ 52,095 1,178,272 72,629 340,823 422,803 2,598,147 4,664,769 (1,238) Total Long-term Debt (including current portion) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $4,663,531 114 IRON MOUNTAIN INCORPORATED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) DECEMBER 31, 2014 (In thousands, except share and per share data) 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, 2013 and 2014 and for the years ended December 31, 2012, 2013 and 2014 and are prepared on the same basis as the consolidated financial statements. The Parent Notes, CAD Notes and GBP Notes are guaranteed by the subsidiaries referred to below as the Guarantors. These subsidiaries are 100% owned by IMI. The guarantees are full and unconditional, as well as joint and several. Additionally, IMI and the Guarantors guarantee the CAD Notes, which were issued by Canada Company, and the GBP Notes, which were issued by IME. Canada Company and IME do not guarantee the Parent Notes. The subsidiaries that do not guarantee the Parent Notes, the CAD Notes and the GBP Notes, including IME but excluding Canada Company, are referred to below as the Non-Guarantors. In the normal course of business we periodically change the ownership structure of our subsidiaries to meet the requirements of our business. In the event of such changes, we recast the prior period financial information within this footnote to conform to the current period presentation in the period such changes occur. Generally, these changes do not alter the designation of the underlying subsidiaries as Guarantors or Non-Guarantors. However, they may change whether the underlying subsidiary is owned by the Parent, a Guarantor, Canada Company or a Non-Guarantor. If such a change occurs, the amount of investment in subsidiaries in the below balance sheets and equity in the earnings (losses) of subsidiaries, net of tax in the below statements of operations with respect to the relevant Parent, Guarantors, Canada Company, Non-Guarantors and Eliminations columns also would change. 115 IRON MOUNTAIN INCORPORATED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) DECEMBER 31, 2014 (In thousands, except share and per share data) 5. Selected Consolidated Financial Statements of Parent, Guarantors, Canada Company and Non-Guarantors (Continued) CONSOLIDATED BALANCE SHEETS Parent Guarantors December 31, 2013 Canada Company Guarantors Non- Eliminations Consolidated $ 1,243 33,860 — 761,501 1,120 797,724 1,019 $ 10,366 — 358,118 — 98,717 467,201 1,569,248 $ 1,094 — 38,928 1,607 5,995 47,624 172,246 $ 107,823 — 219,751 — 56,622 384,196 835,747 $ — — — (763,108) (30) (763,138) — $ 120,526 33,860 616,797 — 162,424 933,607 2,578,260 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 . . . . . . . . . . . . . . . . . . . . . 1,775,570 1,564,405 — 38,862 1,000 1,313,835 1,638,534 376,939 2,672 31,130 187,259 11,257 232,318 — 70,788 637,559 250,842 959,189 (1,779,242) (2,980,158) — (114) — — 2,463,352 677,786 (4,759,514) 3,141,138 Total Other Assets, Net . . . . . . . . 3,378,837 3,330,308 Total Assets . . . . . . . . . . . . . . . . $4,177,580 $5,366,757 $452,188 $2,179,132 $(5,522,652) $6,653,005 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 $ — $ 581,029 30,236 — 540,169 125,705 508,382 3,009,597 $ — $ 182,079 22,377 — 221,131 29,513 312,055 289,105 $ (763,108) (30) — — $ — 52,583 916,518 4,119,139 1,000 40 1,772,144 388,645 — 31,652 6,098 92,808 (1,779,242) (114) — 513,031 Stockholders’ Equity . . . . . . . . . . Noncontrolling Interests . . . . . . . . . 1,041,238 — 1,546,152 — Total Equity . . . . . . . . . . . . . . . 1,041,238 1,546,152 101,918 — 101,918 1,332,088 10,496 1,342,584 (2,980,158) — 1,041,238 10,496 (2,980,158) 1,051,734 Total Liabilities and Equity . . . . . . $4,177,580 $5,366,757 $452,188 $2,179,132 $(5,522,652) $6,653,005 116 IRON MOUNTAIN INCORPORATED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) DECEMBER 31, 2014 (In thousands, except share and per share data) 5. Selected Consolidated Financial Statements of Parent, Guarantors, Canada Company and Non-Guarantors (Continued) CONSOLIDATED BALANCE SHEETS (Continued) Parent Guarantors December 31, 2014 Canada Company Guarantors Non- Eliminations Consolidated 2,399 33,860 — — 153 36,412 840 $ 4,713 — 361,330 586,725 88,709 1,041,477 1,580,337 $ 4,979 — 37,137 — 2,925 45,041 160,977 $ 113,842 — 205,798 — 61,908 381,548 808,573 $ — — — (586,725) (34) (586,759) — $ 125,933 33,860 604,265 — 153,661 917,719 2,550,727 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 . . . . . . . . . . . . . . . . . . . . . 2,851,651 917,170 — 31,108 245 656,877 1,611,957 375,082 2,448 30,751 180,342 26,672 240,213 — 93,355 631,484 245,251 970,090 (2,854,344) (1,698,153) — — — — 2,423,783 678,113 (4,552,497) 3,101,896 Total Other Assets, Net . . . . . . . . 3,799,929 2,644,161 Total Assets . . . . . . . . . . . . . . . . $3,837,181 $5,265,975 $446,231 $2,160,211 $(5,139,256) $6,570,342 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 Stockholders’ Equity . . . . . . . . . . Noncontrolling Interests . . . . . . . . . Total Equity . . . . . . . . . . . . . . . $ 505,083 — 60,097 2,414,646 $ — $ 24,955 470,122 908,431 1,000 — 2,851,384 115,789 3,564 — 35,142 245,861 — 37,558 $ 78,078 27,174 239,280 1,042,498 $ (586,725) (34) — — $ — 52,095 804,641 4,611,436 1,960 78,868 (2,854,344) — — 232,215 856,355 — 856,355 895,294 — 895,294 124,106 — 124,106 678,753 13,600 692,353 (1,698,153) — (1,698,153) 856,355 13,600 869,955 Total Liabilities and Equity . . . . . . $3,837,181 $5,265,975 $446,231 $2,160,211 $(5,139,256) $6,570,342 117 IRON MOUNTAIN INCORPORATED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) DECEMBER 31, 2014 (In thousands, except share and per share data) 5. Selected Consolidated Financial Statements of Parent, Guarantors, Canada Company and Non-Guarantors (Continued) CONSOLIDATED STATEMENTS OF OPERATIONS Year Ended December 31, 2012 Parent Guarantors Canada Company Non- Guarantors Eliminations Consolidated Revenues: Storage Rental . . . . . . . . . . . . . . . . . . . . Service . . . . . . . . . . . . . . . . . . . . . . . . . $ — $1,156,681 782,768 — $130,825 — $445,632 488,049 $ Total Revenues . . . . . . . . . . . . . . . . . . . — 1,939,449 130,825 933,681 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 (excluding real estate), net . . . . . . . . . . . . . . . . . . . . . . . . . . Total Operating Expenses . . . . . . . . . . . . — 220 320 — 540 Operating (Loss) Income . . . . . . . . . . . . . . . Interest Expense (Income), Net . . . . . . . . . . . . Other Expense (Income), Net . . . . . . . . . . . . . (540) 196,423 32,161 761,092 591,092 192,304 (1,030) 1,543,458 395,991 (17,117) (3,842) 27,881 17,741 12,797 84 58,503 72,322 36,114 (37) 488,140 241,318 110,923 5,607 845,988 87,693 27,179 (12,220) (Loss) Income from Continuing Operations Before Provision (Benefit) for Income Taxes and (Gain) Loss on Sale of Real Estate . . . . . . . . . . . . Provision (Benefit) for Income Taxes . . . . . . . . Loss (Gain) on Sale of Real Estate, Net of Tax . . Equity in the (Earnings) Losses of Subsidiaries, (229,124) — — 416,950 86,060 39 36,245 12,768 — 72,734 15,476 (245) — — — — — — — — — — — — — — $1,733,138 1,270,817 3,003,955 1,277,113 850,371 316,344 4,661 2,448,489 555,466 242,599 16,062 296,805 114,304 (206) Net of Tax . . . . . . . . . . . . . . . . . . . . . . . (400,046) (73,625) (5,273) (23,477) 502,421 — Income (Loss) from Continuing Operations . . . . Income (Loss) from Discontinued Operations, Net of Tax . . . . . . . . . . . . . . . . . . . . . . . . . . (Loss) Gain on Sale of Discontinued Operations, Net of Tax . . . . . . . . . . . . . . . . . . . . . . . 170,922 404,476 28,750 80,980 (502,421) 182,707 — — 430 — — — (7,204) (1,885) 71,891 — — (502,421) (6,774) (1,885) 174,048 Net Income (Loss) . . . . . . . . . . . . . . . . . . . 170,922 404,906 28,750 Less: Net Income (Loss) Attributable to Noncontrolling Interests . . . . . . . . . . . . — — — 3,126 — 3,126 Net Income (Loss) Attributable to Iron Mountain Incorporated . . . . . . . . . . . . . . . . . . . . . . Net Income (Loss) Other Comprehensive Income (Loss): . . . . . . . . . . . . . . . . . . . Foreign Currency Translation Adjustments . . . . Equity in Other Comprehensive Income (Loss) of Subsidiaries . . . . . . . . . . . . . . . . . . . Total Other Comprehensive Income (Loss) . . . . . $ 170,922 $ 404,906 $ 28,750 $ 68,765 $(502,421) $ 170,922 $ 170,922 $ 404,906 $ 28,750 $ 71,891 $(502,421) $ 174,048 (2,668) (212) 8,012 18,054 — 23,186 25,185 22,517 25,421 25,209 — 8,012 36,762 8,012 26,066 97,957 (58,618) (58,618) (561,039) — 23,186 197,234 Comprehensive Income (Loss) . . . . . . . . . . . . 193,439 430,115 Comprehensive Income (Loss) Attributable to Noncontrolling Interests . . . . . . . . . . . . . — — — 3,795 — 3,795 Comprehensive Income (Loss) Attributable to Iron Mountain Incorporated . . . . . . . . . . . . $ 193,439 $ 430,115 $ 36,762 $ 94,162 $(561,039) $ 193,439 118 IRON MOUNTAIN INCORPORATED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) DECEMBER 31, 2014 (In thousands, except share and per share data) 5. Selected Consolidated Financial Statements of Parent, Guarantors, Canada Company and Non-Guarantors (Continued) CONSOLIDATED STATEMENTS OF OPERATIONS (Continued) Year Ended December 31, 2013 Parent Guarantors Canada Company Non- Guarantors Eliminations Consolidated Revenues: Storage Rental . . . . . . . . . . . . . . . . . . . . Service . . . . . . . . . . . . . . . . . . . . . . . . . Intercompany service . . . . . . . . . . . . . . . . . $ — $1,174,978 754,090 — — — $129,987 35,119 — $479,756 450,693 32,810 Total Revenues . . . . . . . . . . . . . . . . . . . — 1,929,068 165,106 963,259 $ — — (32,810) (32,810) $1,784,721 1,239,902 — 3,024,623 Operating Expenses: Cost of sales (excluding depreciation and amortization) . . . . . . . . . . . . . . . . . . . . Intercompany service cost of sales . . . . . . . . . Selling, general and administrative . . . . . . . . . Depreciation and amortization . . . . . . . . . . . Loss (Gain) on disposal/write-down of property, plant and equipment (excluding real estate), net . . . . . . . . . . . . . . . . . . . . . . . . . . Total Operating Expenses . . . . . . . . . . . . — — 227 319 5 551 Operating (Loss) Income . . . . . . . . . . . . . . . Interest Expense (Income), Net . . . . . . . . . . . . Other Expense (Income), Net . . . . . . . . . . . . . (551) 206,682 54,144 771,271 — 655,052 195,794 (100) 1,622,017 307,051 (19,731) 1,283 (Loss) Income from Continuing Operations Before Provision (Benefit) for Income Taxes and (Gain) Loss on Sale of Real Estate . . . . . . . . . . . . (Benefit) Provision for Income Taxes . . . . . . . . (Gain) Loss on Sale of Real Estate, Net of Tax . . Equity in the (Earnings) Losses of Subsidiaries, (261,377) (16) — 325,499 33,767 — 27,354 32,810 15,792 12,383 21 88,360 76,746 40,537 5,410 30,799 12,361 — 490,253 — 252,960 113,541 504 857,258 106,001 26,686 14,365 64,950 16,015 (1,417) Net of Tax . . . . . . . . . . . . . . . . . . . . . . . (357,823) (63,775) (5,681) (18,438) 445,717 . . . . Income (Loss) from Continuing Operations (Loss) Income from Discontinued Operations, Net of Tax . . . . . . . . . . . . . . . . . . . . . . . . . . Net Income (Loss) . . . . . . . . . . . . . . . . . . . 96,462 354,978 24,119 Less: Net Income (Loss) Attributable to Noncontrolling Interests . . . . . . . . . . . . — — — 3,530 — — (529) — 1,360 70,150 — (445,717) 96,462 355,507 24,119 68,790 (445,717) Net Income (Loss) Attributable to Iron Mountain Incorporated . . . . . . . . . . . . . . . . . . . . . . Net Income (Loss) Other Comprehensive Income (Loss): . . . . . . . . . . . . . . . . . . . Foreign Currency Translation Adjustments . . . . Market Value Adjustments for Securities . . . . . Equity in Other Comprehensive Income (Loss) of Subsidiaries . . . . . . . . . . . . . . . . . . . Total Other Comprehensive (Loss) Income . . . . . $ 96,462 $ 354,978 $ 24,119 $ 66,620 $(445,717) $ 96,462 $ 354,978 $ 24,119 $ 70,150 $(445,717) (3,237) — (25,737) (28,974) 1,177 926 (11,096) — (26,862) (4,037) (24,759) (15,133) (18,376) — (11,096) (29,472) 40,678 — — 67,732 67,732 (377,985) Comprehensive Income (Loss) . . . . . . . . . . . . 67,488 330,219 8,986 Comprehensive Income (Loss) Attributable to Noncontrolling Interests . . . . . . . . . . . . . — — — 1,898 — 1,898 Comprehensive Income (Loss) Attributable to Iron Mountain Incorporated . . . . . . . . . . . . $ 67,488 $ 330,219 $ 8,986 $ 38,780 $(377,985) $ 67,488 119 — (32,810) — — 1,288,878 — 924,031 322,037 — 430 (32,810) 2,535,376 — — — — — — 489,247 254,174 75,202 159,871 62,127 (1,417) — 99,161 831 99,992 3,530 $ $ 96,462 99,992 (31,532) 926 — (30,606) 69,386 IRON MOUNTAIN INCORPORATED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) DECEMBER 31, 2014 (In thousands, except share and per share data) 5. Selected Consolidated Financial Statements of Parent, Guarantors, Canada Company and Non-Guarantors (Continued) CONSOLIDATED STATEMENTS OF OPERATIONS (Continued) Year Ended December 31, 2014 Parent Guarantors Canada Company Non- Guarantors Eliminations Consolidated Revenues: Storage Rental . . . . . . . . . . . . . . . . . . . . Service . . . . . . . . . . . . . . . . . . . . . . . . . Intercompany service . . . . . . . . . . . . . . . . . $ — $1,208,380 749,711 — — — $124,551 68,669 — $ 527,312 439,070 64,794 Total Revenues . . . . . . . . . . . . . . . . . . . — 1,958,091 193,220 1,031,176 $ — — (64,794) (64,794) $1,860,243 1,257,450 — 3,117,693 Operating Expenses: Cost of sales (excluding depreciation and amortization) . . . . . . . . . . . . . . . . . . . . Intercompany service cost of sales . . . . . . . . . Selling, general and administrative . . . . . . . . . Depreciation and amortization . . . . . . . . . . . Loss (Gain) on disposal/write-down of property, plant and equipment (excluding real estate), net . . . . . . . . . . . . . . . . . . . . . . . . . . — — 1,182 225 793,274 — 580,568 214,341 23,040 64,794 13,304 11,797 — 829 173 Total Operating Expenses . . . . . . . . . . . . 1,407 1,589,012 113,108 Operating (Loss) Income . . . . . . . . . . . . . . . Interest Expense (Income), Net . . . . . . . . . . . . Other Expense (Income), Net . . . . . . . . . . . . . (1,407) 187,650 78 369,079 (23,295) (203,380) 80,112 36,946 (91) 528,322 — 274,518 126,780 63 929,683 101,493 59,416 268,580 (Loss) Income from Continuing Operations Before Provision (Benefit) for Income Taxes and (Gain) on Sale of Real Estate . . . . . . . . . . . . . . . . (Benefit) Provision for Income Taxes . . . . . . . . (Gain) on Sale of Real Estate . . . . . . . . . . . . . Equity in the (Earnings) Losses of Subsidiaries, (189,135) — — Net of Tax . . . . . . . . . . . . . . . . . . . . . . . (515,254) . . . . Income (Loss) from Continuing Operations (Loss) Income from Discontinued Operations, Net of Tax . . . . . . . . . . . . . . . . . . . . . . . . . . 326,119 595,754 (114,947) (196) 196,310 514,587 43,257 12,876 (832) (226,503) 4,796 (7,279) (992) (31,215) 351,151 — 32,205 (192,805) (351,151) 328,955 Net Income (Loss) . . . . . . . . . . . . . . . . . . . 326,119 513,650 32,205 (192,077) (351,151) 328,746 Less: Net Income (Loss) Attributable to Noncontrolling Interests . . . . . . . . . . . . — — — 2,627 — 2,627 — (937) — 728 — (209) Net Income (Loss) Attributable to Iron Mountain Incorporated . . . . . . . . . . . . . . . . . . . . . . Net Income (Loss) Other Comprehensive Income (Loss): . . . . . . . . . . . . . . . . . . . Foreign Currency Translation Adjustments . . . . Market Value Adjustments for Securities . . . . . Equity in Other Comprehensive Income (Loss) of Subsidiaries . . . . . . . . . . . . . . . . . . . Total Other Comprehensive Income (Loss) . . . . . $ 326,119 $ 513,650 $ 32,205 $ (194,704) $(351,151) $ 326,119 $ 326,119 $ 513,650 $ 32,205 $ (192,077) $(351,151) $ 328,746 6,328 — (72,662) (66,334) 47 53 (10,306) — (73,696) 288 (73,596) (10,018) (62,936) — (10,306) (73,242) — — 156,376 156,376 (66,867) 53 — (66,814) 261,932 Comprehensive Income (Loss) . . . . . . . . . . . . 259,785 440,054 22,187 (265,319) (194,775) Comprehensive Income (Loss) Attributable to Noncontrolling Interests . . . . . . . . . . . . . — — — 2,184 — 2,184 Comprehensive Income (Loss) Attributable to Iron Mountain Incorporated . . . . . . . . . . . . $ 259,785 $ 440,054 $ 22,187 $ (267,503) $(194,775) $ 259,748 120 — (64,794) — — 1,344,636 — 869,572 353,143 — 1,065 (64,794) 2,568,416 — — — — — — 549,277 260,717 65,187 223,373 (97,275) (8,307) IRON MOUNTAIN INCORPORATED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) DECEMBER 31, 2014 (In thousands, except share and per share data) 5. Selected Consolidated Financial Statements of Parent, Guarantors, Canada Company and Non-Guarantors (Continued) CONSOLIDATED STATEMENTS OF CASH FLOWS Cash Flows from Operating Activities: Year Ended December 31, 2012 Canada Non- Parent Guarantors Company Guarantors Eliminations Consolidated Cash Flows from Operating Activities-Continuing Operations . Cash Flows from Operating Activities-Discontinued Operations . . $(195,478) $ — 496,542 (8,814) $ 37,299 — $ 105,289 (2,102) $ 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 costs . . . . Investment in joint ventures . Proceeds from sales of property and equipment and other, net . . (including real estate) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Cash Flows from Investing Activities-Continuing Operations . Cash Flows from Investing Activities-Discontinued Operations Cash Flows from Investing Activities . . . . . . . . . . . . . . Cash Flows from Financing Activities: . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . debt debt Repayment of revolving credit and term loan facilities and other . . Proceeds from revolving credit and term loan facilities and other . . . . . . . . . . . . Early retirement of senior subordinated notes Net proceeds from sales of senior subordinated notes . . . Debt financing (repayment to) and equity contribution from . . Intercompany loans from parent . Equity contribution from parent . . . . Stock repurchases . Parent cash dividends . . . . Proceeds from exercise of stock options and employee stock . . . (distribution to) noncontrolling interests, net . . . . . . . Excess tax benefits (deficiency) from stock-based compensation . . Payment of debt financing and stock issuance costs purchase plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 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 year . . Cash and cash equivalents, end of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (195,478) 487,728 37,299 103,187 — — 88,376 (37,572) 1,498 — (2,330) (134,852) (28,126) (110,142) (37,572) — (23,543) — (8,454) — — — — (2,132) — (97,377) (97,008) — — — (3,197) — — (1,739) 5 3,191 49,972 — 49,972 (335,974) (1,982) (10,581) — (194,391) (4,154) (337,956) (10,581) (198,545) — (2,774,070) (58) (70,565) — 2,680,107 — — (525,834) 985,000 — — — (38,052) (318,845) 40,244 1,045 (1,480) 142,078 — 142,078 — (3,428) 3,428 — (89,878) 37,572 — — — — (781) (147,050) — (147,050) — 2,722 10,750 — — — — 4,861 — — — — — — 4,803 — 4,803 1,880 33,401 69,945 51,078 — — 480 106,783 37,572 — — — — — 125,348 (39) 125,309 924 30,875 95,722 — — — $ 443,652 (10,916) 432,736 — — 21,766 75,144 — — — — 96,910 — 96,910 — — — — — (21,766) (75,144) — — — — — (96,910) — (96,910) — (240,683) (125,134) — — 1,498 (28,872) (2,330) 1,457 (394,064) (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) 28,269 (39) 28,230 2,804 — — — 63,570 179,845 $ 243,415 . $ — $ 13,472 $103,346 $ 126,597 $ 121 IRON MOUNTAIN INCORPORATED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) DECEMBER 31, 2014 (In thousands, except share and per share data) 5. Selected Consolidated Financial Statements of Parent, Guarantors, Canada Company and Non-Guarantors (Continued) CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued) Cash Flows from Operating Activities: Year Ended December 31, 2013 Canada Non- Parent Guarantors Company Guarantors Eliminations Consolidated Cash Flows from Operating Activities-Continuing Operations . Cash Flows from Operating Activities-Discontinued Operations . . $(195,786) $ — 528,011 $ 28,580 — (129) $ 145,788 1,082 $ 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 costs . Proceeds from sales of property and equipment and other, net . . (including real estate) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Cash Flows from Investing Activities-Continuing Operations . Cash Flows from Investing Activities-Discontinued Operations Cash Flows from Investing Activities . . . . . . . . . . . . . . Cash Flows from Financing Activities: . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . debt debt Repayment of revolving credit and term loan facilities and other . . Proceeds from revolving credit and term loan facilities and other . . . . . . . . . . Early retirement of senior subordinated notes . . . Net proceeds from sales of senior notes . Debt financing (repayment to) and equity contribution from . . Intercompany loans from parent . Equity contribution from parent Parent cash dividends . . . Proceeds from exercise of stock options and employee stock . . . (distribution to) noncontrolling interests, net . . . . . . Excess tax benefits (deficiency) from stock-based compensation . . Payment of debt financing and stock issuance costs purchase plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Cash Flows from Financing Activities-Continuing Operations . Cash Flows from Financing Activities-Discontinued Operations . . Cash Flows from Financing Activities . . Effect of exchange rates on cash and cash equivalents . . . . . . . Increase (Decrease) in cash and cash equivalents . . Cash and cash equivalents, beginning of year . . Cash and cash equivalents, end of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — $ — — 506,593 953 507,546 (195,786) 527,882 28,580 146,870 — — 387,299 (63,149) (248) — — 323,902 — 323,902 (180,047) (212,042) 398,299 (63,149) — (18,083) (6,534) (100,714) — (105,058) — — — — — — (11,610) (498) — — (785,598) 126,298 — — (287,295) (317,100) — — (248) (30,191) 54 (3,175) 5,205 — 2,084 (74,968) (4,937) (10,207) — (212,177) — (659,300) — (632,750) (4,937) (79,905) (10,207) (212,177) (659,300) (637,687) — (5,077,356) (341,336) (107,980) — 4,948,691 438,188 — (170,895) — 191,307 274,871 — — — — — — — (379,910) 63,149 — — (232,436) — — (3,384) (173,252) 63,149 — — 785,598 (126,298) — — — (5,657) — — (750) (451,083) — (115,922) — (451,083) — (115,922) (4,703) — — (262) 53,142 — 53,142 (6,609) 1,243 — (3,106) 13,472 (102,252) 103,346 (18,774) 126,597 — — — 659,300 — 659,300 — — — (514,239) 591,000 (14,852) — — (206,798) 17,664 2,389 (2,037) (126,873) — (126,873) — (5,526,672) 5,661,750 (685,134) 782,307 (18,236) — — (206,798) 17,664 2,389 (8,706) 18,564 — 18,564 (11,312) (122,889) 243,415 . $ 1,243 $ 10,366 $ 1,094 $ 107,823 $ — $ 120,526 122 IRON MOUNTAIN INCORPORATED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) DECEMBER 31, 2014 (In thousands, except share and per share data) 5. Selected Consolidated Financial Statements of Parent, Guarantors, Canada Company and Non-Guarantors (Continued) CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued) Cash Flows from Operating Activities: Year Ended December 31, 2014 Canada Non- Parent Guarantors Company Guarantors Eliminations Consolidated 452,577 $ 55,538 $ 156,891 $ — $ 472,948 Cash Flows from Operating Activities-Continuing Operations . $ (192,058) $ 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 . . . . Additions to customer relationship and acquisition costs . Proceeds from sales of property and equipment and other, net . . (including real estate) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Cash Flows from Investing Activities-Continuing Operations . Cash Flows from Investing Activities-Discontinued Operations Cash Flows from Investing Activities . . . . . . . . . . . . . . Cash Flows from Financing Activities: . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . debt debt Repayment of revolving credit and term loan facilities and other . . Proceeds from revolving credit and term loan facilities and other . . . . . . . . Early retirement of senior subordinated notes . . Net proceeds from sales of senior notes . Debt financing (repayment to) and equity contribution from . . . . Intercompany loans from parent . . Equity contribution from parent Parent cash dividends . . . . Proceeds from exercise of stock options and employee stock . . . . . . Excess tax deficiency from stock-based compensation . . . Payment of debt financing costs and stock issuance costs . . (distribution to) noncontrolling interests, net . . . . . . . . . . . . . . . . . . purchase plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Cash Flows from Financing Activities-Continuing Operations . Cash Flows from Financing Activities-Discontinued Operations (1,065,716) — 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 year . . Cash and cash equivalents, end of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1,065,716) — 1,156 1,243 — — — (192,058) 452,577 55,538 156,891 — — — — 1,307,133 (48,203) — (217,924) (3,371) 112,845 (48,203) (26,788) (6,877) (29,016) — — (2,140) (137,123) (95,706) — — (5,519) — — (1,419,978) 96,406 — — 472,948 (361,924) (128,093) — — (34,447) — 2,641 1,871 39,974 — 44,486 1,258,930 — (180,800) — (36,162) — (198,374) — (1,323,572) — (479,978) — 1,258,930 (180,800) (36,162) (198,374) (1,323,572) (479,978) — (7,949,523) (667,505) (207,683) — 8,327,608 — — (566,352) — 645,848 — — 311,731 — 642,417 — — — — — — — (542,298) 5,716 (708,935) 48,203 — 44,290 (60) (1,296) — — (499) (277,430) — (277,430) — (5,653) 10,366 — 5,866 — — — — (12) (15,803) — (15,803) 312 (20,486) (716,909) 48,203 — — 1,419,978 (96,406) — — — (2,039) 55,234 — 55,234 (7,732) — — — 1,323,572 — 1,323,572 — (8,824,711) 9,285,187 (566,352) 642,417 (14,770) — — (542,298) 44,290 (60) (3,846) 19,857 — 19,857 (7,420) 3,885 1,094 6,019 107,823 — — 5,407 120,526 . $ 2,399 $ 4,713 $ 4,979 $ 113,842 $ — $ 125,933 123 IRON MOUNTAIN INCORPORATED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) DECEMBER 31, 2014 (In thousands, except share and per share data) 6. Acquisitions We account for acquisitions using the acquisition method of accounting, and, accordingly, the assets and liabilities acquired were recorded at their estimated fair values and 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 (including revenue and earnings) for the current and prior periods are not presented due to the insignificant impact of the 2012, 2013 and 2014 acquisitions on our consolidated results of operations. Noteworthy acquisitions are as follows: 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 held in escrow to secure a working capital adjustment and the indemnification obligations of the former owners of the business (‘‘Sellers’’) to IMI. In 2013, approximately $1,500 of the escrow funds were released to the Sellers in connection with the final working capital adjustment. Unless paid to us in accordance with the terms of the agreement, all amounts remaining in escrow after any indemnification payments are paid 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 and information 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. In May 2013, in order to enhance our existing operations in the United States, we acquired a storage rental and records management business in Texas with locations in Michigan, Texas and Florida, in a cash transaction for a purchase price of approximately $25,000. In June 2013, in order to enhance our existing operations in Brazil, we acquired the stock of Archivum Comercial Ltda. and AMG Comercial Ltda., storage rental and records management businesses in Sao Paulo, Brazil, in a single transaction for an aggregate purchase price of approximately $29,000. Included in the purchase price is approximately $2,900 held in escrow to secure a post-closing working capital adjustment and the indemnification obligations of the former owners of the businesses to us, to be released in annual installments through 2017. 124 IRON MOUNTAIN INCORPORATED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) DECEMBER 31, 2014 (In thousands, except share and per share data) 6. Acquisitions (Continued) In September 2013, in order to enhance our existing operations in Latin America, we acquired certain entities with operations in Colombia and Peru. We acquired the stock of G4S Secure Data Solutions Colombia S.A.S. and G4S Document Delivery S.A.S (collectively, ‘‘G4S’’). G4S, a storage rental and records management business with operations in Bogota, Cali, Medellin and Pereira, Colombia, was acquired in a single transaction for an aggregate purchase price of approximately $54,000. We also acquired the stock of File Service S.A., a storage rental and records management business in Peru, for a purchase price of approximately $16,000. In October 2013, in order to enhance our existing operations in the United States, we acquired Cornerstone Records Management, LLC and its affiliates, a national, full solution records and information-management company, in a cash transaction for a purchase price of approximately $191,000. Included in the purchase price is approximately $9,000 held in escrow to secure indemnification obligations and certain working capital adjustments. In January 2014, in order to enhance our existing operations in Australia, we acquired the stock of Tape Management Services Pty Ltd, a storage and data management company with operations in Australia, for approximately $15,300. In February 2014, in order to enhance our existing operations in Turkey, we acquired the stock of RM Ar¸siv Y¨onetim Hizmetleri Ticaret Anonim ¸Sirketi, a storage rental and records management business with operations in Turkey, for approximately $21,200, of which $16,750 was paid in the first quarter of 2014, with the remainder paid in the first quarter of 2015. In April 2014, in order to enhance our existing operations in Poland, we acquired the stock of OSG Polska sp. z.o.o., a storage rental and records management business with operations in Poland, for approximately $13,700. In October 2014, in order to enhance our existing operations in Brazil, we acquired the stock of Keepers Brasil Ltda, a storage rental and data management business with operations in Sao Paulo, Brazil, for approximately $46,200. The purchase price includes $5,425 held in escrow to secure indemnification obligations of the former owners of the business to us. In December 2014, in order to enhance our North American records management operations, we acquired the stock of Canadian-based Securit Records Management for approximately $29,500. Included in the purchase price is approximately $1,300 held in escrow to secure indemnification obligations and certain working capital adjustments. 125 IRON MOUNTAIN INCORPORATED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) DECEMBER 31, 2014 (In thousands, except share and per share data) 6. Acquisitions (Continued) A summary of the cumulative consideration paid and the allocation of the purchase price paid of all of the acquisitions in each respective year is as follows: Cash Paid (gross of cash acquired) . . . . . . . . . . . . . . . . . . . . . . . . . Fair Value of Previously Held Equity Interest . . . . . . . . . . . . . . . . . Fair Value of Noncontrolling Interest . . . . . . . . . . . . . . . . . . . . . . . $131,972 4,265 1,000 $321,121(1) $134,301(1) — — 794 — Total Consideration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 137,237 321,121 135,095 2012 2013 2014 Fair Value of Identifiable Assets Acquired: Cash, Accounts Receivable, Prepaid Expenses, Deferred Income Taxes and Other . . . . . . . . . . . . . . . . . . . . . . Property, Plant and Equipment(2) . . . . . . . . . . . . . . . . . . . . . . . . Customer Relationship Intangible Assets(3) . . . . . . . . . . . . . . . . . Other Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Liabilities Assumed and Deferred Income Taxes(4) . . . . . . . . . . . 18,998 11,794 59,479 4,620 (15,947) 28,532 44,681 173,733 68 (67,645) 15,098 23,269 60,172 3,342 (50,903) Total Fair Value of Identifiable Net Assets Acquired . . . . . . . . . . 78,944 179,369 50,978 Goodwill Initially Recorded . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 58,293 $141,752 $ 84,117 (1) Included in cash paid for acquisitions in the Consolidated Statements of Cash Flows for the year ended December 31, 2013 is contingent and other payments of $(76). Included in cash paid for acquisitions in the Consolidated Statements of Cash Flows for the year ended December 31, 2014 is net cash acquired of $(4,704) and contingent and other payments of $(1,504) related to acquisitions made in previous years. (2) Consists primarily of racking structures, leasehold improvements and computer hardware and software. (3) The weighted average lives of customer relationship intangible assets associated with acquisitions in 2012, 2013 and 2014 was 17 years, 22 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 paid for certain acquisitions made in 2014 were based on estimates of the fair value of net assets acquired and are subject to adjustment as additional information becomes available to us. We are not aware of any information that would indicate that the final purchase price allocations for these 2014 acquisitions will differ meaningfully from preliminary estimates. The purchase price allocations of these 2014 acquisitions are subject to finalization of the assessment of the fair value of intangible assets (primarily customer relationship intangible assets), property, plant and equipment (primarily racking structures), operating leases, contingencies and income taxes (primarily deferred income taxes). In September 2014, we purchased our joint venture partners’ noncontrolling interests in the businesses we operate in Russia, Ukraine and Denmark, which we had previously consolidated. The 126 IRON MOUNTAIN INCORPORATED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) DECEMBER 31, 2014 (In thousands, except share and per share data) 6. Acquisitions (Continued) purchase price of approximately $24,500 is comprised of $17,900 paid at closing, $2,100 payable in 2017 and $4,500 payable in 2020. The components of the purchase price payable in 2017 and 2020 are reflected as non-cash items within our Consolidated Statement of Cash Flows for the year ended December 31, 2014. Of the $17,900 paid at closing, approximately $11,950 was associated with the underlying shares owned by our joint venture partners and approximately $5,950 was associated with the payment of outstanding loans between the joint venture and the joint venture partners. 7. Income Taxes As noted previously, on June 25, 2014, we announced that we received the favorable PLRs from the IRS necessary for our conversion to a REIT. In the PLRs, the IRS addressed and favorably ruled on our assets and revenue model, including regarding our steel racking structures as real estate for REIT purposes under the Internal Revenue Code of 1986, as amended (the ‘‘Code’’), our global operations and our transition plans from a C corporation to a REIT. The PLRs are subject to certain qualifications and are based upon certain representations and statements made by us. If such representations and statements are untrue or incomplete in any material respect (including as a result of a material change in relevant facts), we may not be able to rely on the PLRs. After receipt of the PLRs, our board of directors unanimously approved our conversion to a REIT for our taxable year beginning January 1, 2014. As a REIT, we are generally permitted to deduct from our federal taxable income the dividends we pay to our stockholders. The income represented by such dividends is not subject to federal taxation at the entity level but is taxed, if at all, at the stockholder level. The income of our domestic taxable REIT subsidiaries (‘‘TRSs’’), which hold our domestic operations that may not be REIT-compliant as currently operated and structured, is subject, as applicable, to federal and state corporate income tax. In addition, we and our subsidiaries continue to be subject to foreign income taxes in jurisdictions in which they hold assets or conduct operations, regardless of whether held or conducted through subsidiaries disregarded for federal tax purposes or TRSs. We will also be subject to a separate corporate income tax on any gains recognized during a specified period (generally ten years) following the REIT conversion that are attributable to ‘‘built-in’’ gains with respect to the assets that we owned on January 1, 2014; this built-in gains tax will also be imposed on our depreciation recapture recognized into income in 2014 and subsequent taxable years as a result of accounting method changes commenced in our pre-REIT period. If we fail to remain qualified for taxation as a REIT, we will be subject to federal income tax at regular corporate tax rates. Even if we remain qualified for taxation as a REIT, we may be subject to some federal, state, local and foreign taxes on our income and property in addition to taxes owed with respect to our TRS operations. In particular, while state income tax regimes often parallel the federal income tax regime for REITs, many states do not completely follow federal rules and some do not follow them at all. 127 IRON MOUNTAIN INCORPORATED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) DECEMBER 31, 2014 (In thousands, except share and per share data) 7. Income Taxes (Continued) 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 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Stock compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Federal benefit of unrecognized tax benefits . . . . . . . . . . . . . . . . . . . . . . . . Foreign currency and other adjustments . . . . . . . . . . . . . . . . . . . . . . . . . . . Valuation allowance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . December 31, 2013 2014 $ 75,731 25,624 81,124 10,229 16,745 20,263 23,938 (40,278) $ 22,236 3,144 64,718 — — 14,859 8,620 (40,182) 213,376 73,395 Deferred Tax Liabilities: Other assets, principally due to differences in amortization . . . . . . . . . . . . . . Plant and equipment, principally due to differences in depreciation . . . . . . . (367,936) (168,385) (74,782) (39,079) Net deferred tax liability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $(322,945) $ (40,466) (536,321) (113,861) The current and noncurrent deferred tax assets (liabilities) are presented below: December 31, 2013 2014 Deferred tax assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Deferred tax liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 65,332 (47,709) $ 16,655 (2,463) Current deferred tax assets, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 17,623 $ 14,192 Deferred tax assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Deferred tax liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 148,044 (488,612) $ 56,740 (111,398) Noncurrent deferred tax liabilities, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $(340,568) $ (54,658) The tax basis of REIT assets, excluding investments in TRSs, is less than the amounts reported for such assets in the accompanying Consolidated Balance Sheet by approximately $486,000 at December 31, 2014. As of December 31, 2013, we have reclassified approximately $26,916 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) in the accompanying Consolidated Balance Sheets related to the depreciation recapture associated with our characterization 128 IRON MOUNTAIN INCORPORATED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) DECEMBER 31, 2014 (In thousands, except share and per share data) 7. Income Taxes (Continued) of certain racking structures as real estate rather than personal property and amortization associated with other intangible assets in conjunction with our conversion to a REIT. We have federal net operating loss carryforwards, which expire in 2021 through 2033, of $88,090 ($0, tax effected) at December 31, 2014 to reduce future federal taxable income, on which no federal tax benefit is expected to be realized. We have state net operating loss carryforwards, which expire in 2015 through 2033, of $74,439 ($112, tax effected) at December 31, 2014 to reduce future state taxable income, on which an insignificant state tax benefit is expected to be realized. We have assets for foreign net operating losses of $64,606, with various expiration dates (and in some cases no expiration date), subject to a valuation allowance of approximately 62%. Rollforward of the valuation allowance is as follows: Year Ended December 31, Balance at Beginning of the Year Charged (Credited) to Expense Other Additions Other Deductions Balance at End of the Year 2012 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2013 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2014 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $72,239 76,050 40,278 $ 2,274 (27,186) 9,404 $1,537 — — $ — $76,050 40,278 40,182 (8,586) (9,500) 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 ESPP 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 associated with our TRSs 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 associated with our TRSs is recorded in the period the disqualifying disposition occurs. Incremental tax benefits (deficiencies) in excess of compensation expense recorded in the consolidated financial statements are credited (charged) directly to equity and amounted to $1,045, $2,389 and $(60) for the years ended December 31, 2012, 2013 and 2014, respectively. The components of income (loss) from continuing operations before provision (benefit) for income taxes and (gain) loss on sale of real estate are: United States . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Canada . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Other Foreign . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $189,939 44,358 62,508 $ 63,930 39,038 56,903 $202,067 46,191 (24,885) $296,805 $159,871 $223,373 Year Ended December 31, 2012 2013 2014 129 IRON MOUNTAIN INCORPORATED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) DECEMBER 31, 2014 (In thousands, except share and per share data) 7. Income Taxes (Continued) The provision (benefit) for income taxes consists of the following components: Year Ended December 31, 2012 2013 2014 Federal—current . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Federal—deferred . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . State—current . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . State—deferred . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Foreign—current . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Foreign—deferred . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $133,824 (57,166) 25,384 (15,134) 32,297 (4,901) $ 92,237 (64,441) 10,152 (8,056) 59,170 (26,935) $ 118,314 (214,132) 28,034 (47,814) 27,167 (8,844) $114,304 $ 62,127 $ (97,275) 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 and (gain) loss on sale of real estate for the years ended December 31, 2012, 2013 and 2014, respectively, is as follows: Computed ‘‘expected’’ tax provision . . . . . . . . . . . . . . . . . . . . . . . . . Changes in income taxes resulting from: Tax adjustment relating to REIT . . . . . . . . . . . . . . . . . . . . . . . . . Deferred tax adjustment and other taxes due to REIT conversion . State taxes (net of federal tax benefit) . . . . . . . . . . . . . . . . . . . . . Increase in valuation allowance (net operating losses) . . . . . . . . . . Decrease in valuation allowance (foreign tax credits) . . . . . . . . . . . Foreign repatriation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Foreign restructuring . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Impairment of assets and other transaction costs . . . . . . . . . . . . . . Reserve accrual (reversal) and audit settlements (net of federal tax benefit) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Foreign tax rate differential . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Disallowed foreign interest, Subpart F income, and other foreign Year Ended December 31, 2012 2013 2014 $103,882 $ 55,955 $ 78,181 — — 6,923 9,045 (6,771) — — 3,045 — (63,333) — (182,853) 2,207 9,404 — 46,356 — 2,869 4,384 2,832 (30,018) 44,751 17,691 6,576 8,266 (30,798) (16,322) (33,852) 3,175 (9,496) taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Other, net 15,242 5,470 9,708 422 12,502 3,713 Provision (Benefit) for Income Taxes . . . . . . . . . . . . . . . . . . . . . . . . $114,304 $ 62,127 $ (97,275) Our effective tax rates for the years ended December 31, 2012, 2013 and 2014 were 38.5%, 38.9% and (43.5)%, respectively. Our effective tax rate is subject to variability in the future due to, among other items: (1) changes in the mix of income between our qualified REIT subsidiaries and our TRSs; (2) tax law changes; (3) volatility in foreign exchange gains (losses); (4) the timing of the establishment 130 IRON MOUNTAIN INCORPORATED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) DECEMBER 31, 2014 (In thousands, except share and per share data) 7. Income Taxes (Continued) and reversal of tax reserves; and (5) our ability to utilize foreign tax credits and net operating losses that we generate. 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, 2013 were the impact from the repatriation discussed below, which increased our 2013 effective tax rate by 13.1%, and state income taxes (net of federal tax benefit). These expenses were partially offset by a favorable 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. During 2013, we completed a plan to utilize both current and carryforward foreign tax credits by repatriating approximately $252,700 (approximately $65,200 of which was previously subject to United States taxes) from our foreign earnings. Due to uncertainty in our ability to fully utilize foreign tax credit carryforwards, we previously did not recognize a full benefit for such foreign tax credit carryforwards in our tax provision. As a result, we recorded an increase in our tax provision from continuing operations in the amount of $63,504 in 2013. This increase was offset by decreases of $18,753 from current year foreign tax credits and $23,301 reversal of valuation allowances related to foreign tax credit carryforwards, resulting in a net increase of $21,450 in our tax provision from continuing operations. On September 13, 2013, the United States Department of the Treasury and the IRS released final tangible property regulations under Sections 162(a) and 263(a) of the Code regarding the deduction and capitalization of expenditures related to tangible property. In addition, proposed regulations under Section 168 of the Code regarding dispositions of tangible property have also been released. These final and proposed regulations are generally effective for our tax year beginning on January 1, 2014. Early adoption was available, and we adopted the regulations in 2013. The impact from these regulations did not have a material impact on our consolidated results of operations, cash flows and financial position. As a result of our REIT conversion, we recorded a net tax benefit of $212,151 during the year ended December 31, 2014 for the revaluation of certain deferred tax assets and liabilities associated with the REIT conversion. In 2014, we recorded an increase to the tax provision of $29,298 associated with tax accounting method changes consistent with our REIT conversion, primarily affected through the filing of amended tax returns. The primary other reconciling items between the federal statutory rate of 35% and our overall effective tax rate during the year ended December 31, 2014 was an increase of $46,356 in our tax provision from the repatriation discussed below and other net tax adjustments related to the REIT conversion, including a tax benefit of $63,333 primarily related to the 131 IRON MOUNTAIN INCORPORATED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) DECEMBER 31, 2014 (In thousands, except share and per share data) 7. Income Taxes (Continued) dividends paid deduction. As a REIT, we are entitled to a deduction for dividends paid, resulting in a substantial reduction of federal income tax expense. As a REIT, substantially all of our income tax expense will be incurred based on the earnings generated by our foreign subsidiaries and our domestic TRSs. The following table presents a reconciliation of significant components of deferred tax assets and liabilities from December 31, 2013 to December 31, 2014: December 31, 2013 Revaluation Associated with REIT Conversion Current Year Activity(1) December 31, 2014 Deferred Tax Assets Accrued liabilities . . . . . . . . . . . . . . . . Deferred rent . . . . . . . . . . . . . . . . . . . Net operating loss carryforwards . . . . . . Foreign tax credits . . . . . . . . . . . . . . . . Stock compensation . . . . . . . . . . . . . . . Federal benefit of unrecognized tax $ 75,731 25,624 81,124 10,229 16,745 $ (48,087) (25,749) (34,912) (9,207) (17,942) $ (5,408) 3,269 18,506 (1,022) 1,197 $ 22,236 3,144 64,718 — — benefits . . . . . . . . . . . . . . . . . . . . . . 20,263 — (5,404) 14,859 Unrealized foreign currency and other foreign adjustments . . . . . . . . . . . . . Valuation allowance . . . . . . . . . . . . . . . Deferred Tax Liabilities Other assets, principally due to differences in amortization . . . . . . . . Plant and equipment, principally due to differences in depreciation . . . . . . . . 23,938 (40,278) 213,376 (34,552) — (170,449) 19,234 96 30,468 8,620 (40,182) 73,395 (367,936) 273,268 19,886 (74,782) (168,385) (536,321) 109,332 382,600 19,974 39,860 (39,079) (113,861) Net Deferred Tax Asset (Liability) . . . . . . $(322,945) $ 212,151 $70,328 $ (40,466) (1) Current year activity primarily consists of additional deferred tax assets and liabilities recognized due to changes in current year taxable temporary differences, purchase accounting and return to accrual adjustments related to the 2013 tax return. 132 IRON MOUNTAIN INCORPORATED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) DECEMBER 31, 2014 (In thousands, except share and per share data) 7. Income Taxes (Continued) We had not previously provided incremental federal and certain state income taxes on net tax over book outside basis differences related to the earnings of our foreign subsidiaries because our intent, prior to our conversion to a REIT, was to reinvest our current and future undistributed earnings of certain foreign subsidiaries indefinitely outside the United States. As a result of our conversion to a REIT, it is no longer our intent to indefinitely reinvest our current and future undistributed foreign earnings outside the United States, and, therefore, during 2014, we recognized an increase in our tax provision from continuing operations in the amount of $46,356, representing incremental federal and state income taxes and foreign withholding taxes on such foreign earnings. As a REIT, future repatriation of incremental undistributed earnings of our foreign subsidiaries will not be subject to federal or state income tax, with the exception of foreign withholding taxes in limited instances; however, such future repatriations will require distribution in accordance with REIT distribution rules, and any such distribution may then be taxable, as appropriate, at the stockholder level. 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 an increase of $1,257, $1,459 and $1,462 for gross interest and penalties for the years ended December 31, 2012, 2013 and 2014, respectively. We had $4,874 and $5,884 accrued for the payment of interest and penalties as of December 31, 2013 and 2014, 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 2007 to present . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Canada 2009 to present . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . United Kingdom The normal statute of limitations for United States federal tax purposes is three years from the date the tax return is filed. The 2011, 2012 and 2013 tax years remain subject to examination for United States federal tax purposes as well as net operating loss carryforwards utilized in these years. We utilized net operating losses from 2000, 2001 and 2008 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. We are subject to income taxes in the United States 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 133 IRON MOUNTAIN INCORPORATED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) DECEMBER 31, 2014 (In thousands, except share and per share data) 7. Income Taxes (Continued) and provide for these matters as appropriate. As of December 31, 2013, we had $51,146 of reserves related to uncertain tax positions included in other long-term liabilities in the accompanying Consolidated Balance Sheet. As of December 31, 2014, we had $55,951 of reserves related to uncertain tax positions, of which $53,078 and $2,873 is included in other long-term liabilities and deferred income taxes, respectively, in the accompanying Consolidated Balance Sheet. 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, 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 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Gross tax contingencies—December 31, 2012 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 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, 2013 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 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 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $31,408 6,598 3,912 (427) (2,829) (1,099) $37,563 5,985 20,275 (1,370) (1,312) (9,995) $51,146 3,984 13,717 (2,699) (5,350) (4,847) Gross tax contingencies—December 31, 2014 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $55,951 The reversal of these reserves of $55,951 ($41,990 net of federal tax benefit) as of December 31, 2014 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 $6,560 of our unrecognized tax positions may be recognized by the end of 2015 as a result of a lapse of statute of limitations or upon closing and settling significant audits in various worldwide jurisdictions. 134 IRON MOUNTAIN INCORPORATED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) DECEMBER 31, 2014 (In thousands, except share and per share data) 8. Quarterly Results of Operations (Unaudited) Quarter Ended March 31 June 30 Sept. 30 Dec. 31 2013 Total revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $746,706 $754,396 $755,314 $768,207 97,075 Operating income (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48,339 Income (loss) from continuing operations . . . . . . . . . . . . . . . . . Total income (loss) from discontinued operations . . . . . . . . . . . (684) 47,655 Net income (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Net income (loss) attributable to Iron Mountain Incorporated . . 47,059(1) Earnings (losses) per Share-Basic Income (loss) per share from continuing operations . . . . . . . . . Total income (loss) per share from discontinued operations . . . . Net income (loss) per share attributable to Iron Mountain 139,958 5,330 (571) 4,759 3,849 129,697 27,340 (98) 27,242 26,366 122,517 18,152 2,184 20,336 19,188 0.10 0.01 0.14 — 0.03 — 0.25 — Incorporated . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Earnings (losses) per Share-Diluted Income (loss) per share from continuing operations . . . . . . . . . Total income (loss) per share from discontinued operations . . . . Net income (loss) per share attributable to Iron Mountain Incorporated . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.10 0.09 0.01 0.10 0.14 0.14 — 0.14 0.02 0.03 — 0.02 0.25 0.25 — 0.24 2014 Total revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $770,126 $786,892 $782,697 $777,978 127,895 Operating income (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12,674 Income (loss) from continuing operations . . . . . . . . . . . . . . . . . Total (loss) income from discontinued operations . . . . . . . . . . . 729 13,403 Net income (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12,749(2) Net income (loss) attributable to Iron Mountain Incorporated . . 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 147,290 272,702 (326) 272,376 271,637 132,616 42,721 (612) 42,109 41,667 141,476 858 — 858 66 0.22 — 0.06 — 1.42 — — — 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 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.22 0.22 — 0.22 1.41 1.41 — 1.40 — — — — 0.06 0.06 — 0.06 (1) The change in net income (loss) attributable to Iron Mountain Incorporated in the fourth quarter of 2013 compared to the third quarter of 2013 is primarily attributable to a benefit for income taxes recorded in the fourth quarter of 2013 compared to a provision recorded in the third quarter of 2013 for a net benefit of approximately $50,200, as well as a decrease in other expenses, net of approximately $34,700 primarily as a result of debt extinguishment charges recorded in the third quarter of 2013 of approximately $43,600 that did not repeat in the fourth quarter of 2013, offset 135 IRON MOUNTAIN INCORPORATED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) DECEMBER 31, 2014 (In thousands, except share and per share data) 8. Quarterly Results of Operations (Unaudited) (Continued) by an increase in foreign exchange transaction losses of approximately $11,000. Offsetting these benefits was a decrease in operating income of approximately $42,900. The decrease in operating income is primarily attributable to: (1) $18,700 of restructuring costs associated with our organizational realignment, (2) $11,200 of facilities costs primarily associated with facility consolidation, (3) $8,100 of other cost increases, including costs associated with recent acquisitions and executing our strategy, (4) $3,600 of increased depreciation and amortization, primarily related to business acquisitions, (5) $3,000 in sales, marketing and account management costs within our North American Records and Information Management Business and North American Data Management segments (primarily associated with sales commissions), (6) $2,200 of increased bad debt expense and (7) $2,000 of charitable contributions, partially offset by a $7,100 decrease in REIT Costs (defined at Note 9) incurred in the fourth quarter compared to the third quarter of 2013. (2) The change in net income (loss) attributable to Iron Mountain Incorporated in the fourth quarter of 2014 compared to the third quarter of 2014 is primarily attributable to a decrease in the provision for income taxes recorded in the fourth quarter of 2014 compared to the third quarter of 2014 of approximately $54,000. The decrease in the income tax provision was offset by a decrease in operating income of approximately $13,600, a debt extinguishment charge recorded in the fourth quarter of 2014 of approximately $16,500 and an increase in interest expense of $9,800. The decrease in operating income is attributable to a $8,300 increase in selling, general and administrative expenses, primarily due to higher professional fees and charitable contributions, as well as a $4,700 decrease in revenue, primarily due to unfavorable changes in foreign exchange rates, in the fourth quarter compared to the third quarter. 9. Segment Information As a result of certain organizational realignments effective January 1, 2014, we evaluated changes to our internal financial reporting to better align our internal reporting to how we will manage our business going forward. This evaluation resulted in changes to our reportable segments effective January 1, 2014. As a result of the changes to our reportable segments, the former North American Business segment was separated into two unique reportable segments, which we refer to as (1) North American Records and Information Management Business segment and (2) North American Data Management Business segment. In addition, the Emerging Businesses segment, which was previously reported as a component of the former North American Business segment, is now reported as a component of the Corporate and Other segment. As a result, we have restated previously reported segment information. Our four reportable operating segments are described as follows: (cid:127) North American Records and Information Management 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 136 IRON MOUNTAIN INCORPORATED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) DECEMBER 31, 2014 (In thousands, except share and per share data) 9. Segment Information (Continued) documents for corporate customers (‘‘Records Management’’); information destruction services (‘‘Destruction’’); DMS; Fulfillment Services; and Intellectual Property Management. (cid:127) North American Data Management Business—storage and rotation of backup computer media as part of corporate disaster recovery plans throughout the United States and Canada, including service and courier operations (‘‘Data Protection & Recovery’’), server and computer backup services, digital content repository systems to house, distribute, and archive key media assets, and storage, safeguarding and electronic or physical delivery of physical media of all types, primarily for entertainment and media industry clients. (cid:127) International Business—storage and information management services throughout Europe, Latin America and Asia Pacific, including Records Management, Data Protection & Recovery and DMS. Our European operations provide Records Management, Data Protection & Recovery and DMS throughout Europe. Our Latin America operations provide Records Management, Data Protection & Recovery and DMS throughout Argentina, Brazil, Chile, Colombia, Mexico and Peru. Our Asia Pacific operations provide Records Management, Data Protection & Recovery and DMS throughout Australia, with Records Management and Data Protection & Recovery also provided in certain cities in India, Singapore, Hong Kong-SAR and China. Prior to December 2014, our International Business segment offered Destruction in the United Kingdom, Ireland and Australia. See Note 16 for further disclosure related to the divestiture of these secure shredding operations in December 2014. (cid:127) Corporate and Other—consists of our data center business in the United States, the primary product offering of our Emerging Businesses segment, as well as 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. Our Corporate and Other segment also includes stock-based employee compensation expense associated with all Employee Stock-Based Awards. 137 IRON MOUNTAIN INCORPORATED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) DECEMBER 31, 2014 (In thousands, except share and per share data) 9. Segment Information (Continued) An analysis of our business segment information and reconciliation to the accompanying Consolidated Financial Statements is as follows: North American Records & Information Management Management North American Data Business Business International Business Corporate & Other Total Consolidated 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 Acquisition Costs . . . . . . . . . . . . . . . . . 2013 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 $1,780,299 163,375 151,471 11,904 665,655 3,543,166 138,837 98,169 21,770 18,898 1,769,233 165,097 150,557 14,540 645,575 3,687,865 319,419 96,545 Acquired . . . . . . . . . . . . . . . . . . . . . . 205,251 Additions to Customer Relationship and Acquisition Costs . . . . . . . . . . . . . . . . . 2014 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 Acquisition Costs . . . . . . . . . . . . . . . . . 17,623 1,795,361 177,097 158,122 18,975 690,419 3,657,366 198,651 145,199 26,450 27,002 $404,253 17,841 17,034 807 243,908 644,952 26,243 13,106 6,356 6,781 396,519 19,956 19,652 304 235,380 690,507 20,678 12,929 6,791 958 390,207 21,770 21,458 312 224,696 653,275 24,387 18,076 5,863 448 $ 806,692 103,393 80,493 22,900 173,620 1,854,050 191,360 91,159 97,008 3,193 845,599 105,485 81,279 24,206 206,003 2,015,412 218,903 102,235 105,058 11,610 918,545 119,685 90,404 29,281 214,891 1,989,642 233,767 132,468 95,780 5,519 $ 12,711 31,735 31,600 135 (172,266) 316,171 38,249 38,249 — — 13,272 31,499 31,368 131 (192,377) 259,221 75,586 75,586 — — 13,580 34,591 34,573 18 (204,209) 270,059 67,659 66,181 — 1,478 $3,003,955 316,344 280,598 35,746 910,917 6,358,339 394,689 240,683 125,134 28,872 3,024,623 322,037 282,856 39,181 894,581 6,653,005 634,586 287,295 317,100 30,191 3,117,693 353,143 304,557 48,586 925,797 6,570,342 524,464 361,924 128,093 34,447 (1) Excludes all intercompany receivables or payables and investment in subsidiary balances. 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 (excluding real estate) 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. 138 IRON MOUNTAIN INCORPORATED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) DECEMBER 31, 2014 (In thousands, except share and per share data) 9. Segment Information (Continued) A reconciliation of Adjusted OIBDA to income (loss) from continuing operations before provision (benefit) for income taxes and (gain) loss on sale of real estate on a consolidated basis is as follows: Year Ended December 31, 2012 2013 2014 Adjusted OIBDA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Less: Depreciation and Amortization . . . . . . . . . . . . . . . . . . . . . . $910,917 316,344 $894,581 322,037 $925,797 353,143 (Gain) Loss on Disposal/Write-down of Property, Plant and Equipment (Excluding Real Estate), Net . . . . . . . . . . . . . . . . REIT Costs(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Interest Expense, Net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Other Expense (Income), Net . . . . . . . . . . . . . . . . . . . . . . . . . . 4,661 34,446 242,599 16,062 430 82,867 254,174 75,202 1,065 22,312 260,717 65,187 Income (loss) from Continuing Operations before Provision (Benefit) for Income Taxes and (Gain) Loss on Sale of Real Estate . . . . . . . $296,805 $159,871 $223,373 (1) Includes costs associated with our 2011 proxy contest, the previous work of the former Strategic Review Special Committee of the board of directors and costs associated with our conversion to a REIT, excluding REIT compliance costs beginning January 1, 2014 which we expect to recur in future periods (‘‘REIT Costs’’). Information as to our operations in different geographical areas is as follows: Year Ended December 31, 2012 2013 2014 Revenues: United States . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . United Kingdom . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Canada . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Other International . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $1,948,679 290,044 248,583 516,649 $1,938,307 275,343 240,716 570,257 $1,967,169 280,020 231,979 638,525 Total Revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $3,003,955 $3,024,623 $3,117,693 Long-lived Assets: United States . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . United Kingdom . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Canada . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Other International . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $3,359,560 529,336 445,699 999,652 $3,645,211 520,255 413,821 1,140,111 $3,619,396 474,748 409,278 1,149,201 Total Long-lived Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $5,334,247 $5,719,398 $5,652,623 139 IRON MOUNTAIN INCORPORATED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) DECEMBER 31, 2014 (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, 2012 2013 2014 Revenues: Records Management(1)(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . Data Management(1)(3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Information Destruction(1)(4) . . . . . . . . . . . . . . . . . . . . . . . . . $2,211,101 524,627 268,227 $2,244,494 527,091 253,038 $2,329,546 531,516 256,631 Total Revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $3,003,955 $3,024,623 $3,117,693 (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 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, Energy Data Services, Dedicated Facilities Management and Technology Escrow Services. (3) Includes Data Protection & Recovery Services and Entertainment 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 under all of our operating leases was $250,986, $244,390 and $255,193 for the years ended December 31, 2012, 2013 and 2014, 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 disincentive due to significant capital expenditure costs (e.g., racking structures), thereby making it 140 IRON MOUNTAIN INCORPORATED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) DECEMBER 31, 2014 (In thousands, except share and per share data) 10. Commitments and Contingencies (Continued) reasonably assured that we will renew the lease. Such payments in effect at December 31, are as follows: Year Operating Lease Payment Sublease Income Capital Leases 2015 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2016 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2017 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2018 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2019 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Thereafter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 233,428 220,328 207,027 190,906 178,728 1,216,193 $ (5,657) $ 52,531 52,685 40,539 34,414 25,827 152,799 (4,458) (3,478) (1,361) (729) (986) Total minimum lease payments . . . . . . . . . . . . . . . . . . . . . . . . . $2,246,610 $(16,669) 358,795 Less amounts representing interest . . . . . . . . . . . . . . . . . . . . Present value of capital lease obligations . . . . . . . . . . . . . . . . (116,929) $ 241,866 In addition, we have certain contractual obligations related to purchase commitments which require minimum payments as follows: Year 2015 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2016 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2017 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2018 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2019 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Thereafter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Purchase Commitments $43,908 19,615 11,943 2,188 1,811 2,310 $81,775 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, 2013 and 2014 there were $32,850 and $33,381, 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. 141 IRON MOUNTAIN INCORPORATED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) DECEMBER 31, 2014 (In thousands, except share and per share data) 10. Commitments and Contingencies (Continued) 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 possible that we could incur aggregate losses in addition to amounts currently accrued for all matters up to an additional $4,500 over the next several years, of which certain amounts would be covered by insurance or indemnity arrangements. d. Government Contract Billing Matter Since October 2001, we have provided services to the United States Government under several General Services Administration (‘‘GSA’’) multiple award schedule contracts (the ‘‘Schedules’’). The Schedules contain a price reductions clause (‘‘Price Reductions Clause’’) that requires us to offer to reduce the prices billed under the Schedules to correspond to the prices billed to certain benchmark commercial customers. 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 for that period to the GSA and its Office of Inspector General (‘‘OIG’’) in June 2011. In April 2012, the United States Government sent us a subpoena seeking information that substantially overlapped with the subjects that were covered by the voluntary disclosure process that we initiated with the GSA and OIG in June 2011, except that the subpoena sought information dating back to 2000, and sought information about non-GSA federal and state and local customers. In June 2014, we learned that the government subpoena and investigation were the result of a pending, sealed qui tam lawsuit brought against us on behalf of the United States and the State of California. In December 2014, we settled the lawsuit. As a result of the settlement, we paid the United States Government and the State of California $44,500 and $1,250, respectively, in the fourth quarter of 2014. There was no material impact to our consolidated statement of operations in 2014 as a result of the settlement as we had previously accrued and maintained a deferred revenue liability related to this matter. e. Commonwealth of Massachusetts Assessment During the third quarter of 2012, we applied for an abatement of assessments from the Commonwealth of Massachusetts. The assessments, issued in the second quarter of 2012, 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. In addition, during the second quarter of 2013, 142 IRON MOUNTAIN INCORPORATED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) DECEMBER 31, 2014 (In thousands, except share and per share data) 10. Commitments and Contingencies (Continued) Massachusetts assessed tax for the 2007 and 2008 tax years in the aggregate amount of $4,120, including tax, interest and penalties through the assessment date. The assessment is for issues consistent with those assessed in the earlier years. In the third quarter of 2013, we filed an application for abatement for the 2007 and 2008 tax years, which Massachusetts denied on October 15, 2013. On December 13, 2013, we filed a petition with the Massachusetts Appellate Tax Board to challenge the assessment for the 2007 and 2008 tax years. In February 2015, we reached a settlement agreement with the Commonwealth of Massachusetts, under which we paid $6,000 to settle the assessments related to the 2004 through 2008 tax years. Additionally, following a corporate excise audit for the 2009 through 2011 tax years, Massachusetts has issued Notices of Intention to Assess dated December 27, 2014 which set forth proposed corporate excise assessments in the aggregate amount of $1,503, including tax, interest and penalties. We intend to defend this matter vigorously at the Massachusetts Appellate Tax Board. f. 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. 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 four customers, of which three of those matters have been settled. We have also 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 or 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 Statements of Operations and proceeds received within cash flows from operating activities in our Consolidated Statements 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 (excluding real estate), net within operating income in our Consolidated Statements of Operations and proceeds received within cash flows from investing activities within our Consolidated Statements 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 Italian operations, statements of operations and cash flows related to the fire are reflected as discontinued operations. 143 IRON MOUNTAIN INCORPORATED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) DECEMBER 31, 2014 (In thousands, except share and per share data) 10. Commitments and Contingencies (Continued) g. Argentina Fire On February 5, 2014, we experienced a fire at a facility we own in Buenos Aires, Argentina. As a result of the quick response by local fire authorities, the fire was contained before the entire facility was destroyed and all employees were safely evacuated; however, a number of first responders lost their lives, or in some cases, were severely injured. The cause of the fire is currently being investigated. We believe we carry adequate insurance and do not expect that this event will have a material impact to our consolidated financial condition, results of operations or cash flows. Revenues from our operations at this facility represent less than 0.5% of our consolidated revenues. 11. Related Party Transactions Paul F. Deninger, one of our directors, is a senior managing director at Evercore Group L.L.C. (‘‘Evercore’’). In May 2013, we entered into an agreement with Evercore, which was amended and restated in August 2013 (the ‘‘Evercore Engagement’’), pursuant to which Evercore agreed to provide financial advisory services to us in exchange for an aggregate fee of up to $3,000. In connection with the Evercore Engagement, Mr. Deninger agreed, and Evercore represented, that Mr. Deninger would not be involved with the Evercore Engagement and would not receive any fees or direct compensation in connection with the Evercore Engagement. The Evercore Engagement was approved by the audit committee of our board of directors in accordance with our Related Persons Transaction Policy. For the years ended December 31, 2013 and 2014, we have incurred fees associated with the Evercore Engagement, including fees associated with the amendment of our Credit Agreement in August 2013 and discounts and commissions attributable to Evercore’s participation as one of the underwriters in the August 2013 Offerings, as well as monthly retention fees, of $2,750 and $250, respectively. 12. 401(k) Plans We have a defined contribution plan, which generally covers all non-union United States 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 Code. In addition, IME operates a defined contribution plan, which is similar to our United States 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 $18,026, $19,999 and $18,306 for the years ended December 31, 2012, 2013 and 2014, respectively. 13. Stockholders’ Equity Matters On September 15, 2014, we announced the declaration by our board of directors of a special distribution of $700,000 (the ‘‘Special Distribution’’), payable to stockholders of record as of September 30, 2014 (the ‘‘Record Date’’). The Special Distribution represented the remaining amount of our undistributed earnings and profits attributable to all taxable periods ending on or prior to December 31, 2013, which in accordance with tax rules applicable to REIT conversions, we were required to pay to our stockholders on or before December 31, 2014 in connection with our conversion to a REIT. The Special Distribution also included certain items of taxable income that we recognized in 2014, such as depreciation recapture in respect of accounting method changes commenced in our 144 IRON MOUNTAIN INCORPORATED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) DECEMBER 31, 2014 (In thousands, except share and per share data) 13. Stockholders’ Equity Matters (Continued) pre-REIT period as well as foreign earnings and profits recognized as dividend income. The Special Distribution followed an initial special distribution of $700,000 paid to stockholders in November 2012. The Special Distribution was paid on November 4, 2014 (the ‘‘Payment Date’’) to stockholders of record as of the Record Date in a combination of common stock and cash. Stockholders had the right to elect to be paid their pro rata portion of the Special Distribution in all common stock or all cash, with the total cash payment to stockholders limited to no more than $140,000, or 20% of the total Special Distribution, not including cash paid in lieu of fractional shares. Based on stockholder elections, we paid $140,000 of the Special Distribution in cash, not including cash paid in lieu of fractional shares, with the balance paid in the form of common stock. Our shares of common stock were valued for purposes of the Special Distribution based upon the average closing price on the three trading days following October 24, 2014, or $35.55 per share, and as such, we issued approximately 15,750,000 shares of common stock in the Special Distribution. These shares impact weighted average shares outstanding from the date of issuance, and thus impact our earnings per share data prospectively from the Payment Date. In November 2014, our board of directors declared a distribution of $0.255 per share (the ‘‘Catch-Up Distribution’’) payable on December 15, 2014 to stockholders of record on November 28, 2014. Our board of directors declared the Catch-Up Distribution because our cash distributions paid from January 2014 through July 2014 were declared and paid before our board of directors had determined that we would elect REIT status effective January 1, 2014 and were lower than they otherwise would have been if the final determination to elect REIT status effective January 1, 2014 had been prior to such distributions. 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 2013 and 2014, our board of directors declared the following dividends: Declaration Date Dividend Per Share Record Date Total Amount Payment Date March 14, 2013 . . . . . . . . . . . . . . . . June 6, 2013 . . . . . . . . . . . . . . . . . . September 11, 2013 . . . . . . . . . . . . . December 16, 2013 . . . . . . . . . . . . . March 14, 2014 . . . . . . . . . . . . . . . . May 28, 2014 . . . . . . . . . . . . . . . . . . September 15, 2014 . . . . . . . . . . . . . September 15, 2014(1) . . . . . . . . . . . November 17, 2014(2) . . . . . . . . . . . November 17, 2014 . . . . . . . . . . . . . March 25, 2013 $0.2700 June 25, 2013 0.2700 0.2700 September 25, 2013 0.2700 December 27, 2013 March 25, 2014 0.2700 0.2700 June 25, 2014 September 25, 2014 0.4750 3.6144 September 30, 2014 0.2550 November 28, 2014 December 5, 2014 0.4750 April 15, 2013 $ 51,460 July 15, 2013 51,597 October 15, 2013 51,625 January 15, 2014 51,683 April 15, 2014 51,812 July 15, 2014 52,033 October 15, 2014 91,993 700,000 November 4, 2014 53,450 December 15, 2014 99,617 December 22, 2014 (1) Represents Special Distribution. (2) Represents Catch-Up Distribution. 145 IRON MOUNTAIN INCORPORATED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) DECEMBER 31, 2014 (In thousands, except share and per share data) 13. Stockholders’ Equity Matters (Continued) During the years ended December 31, 2012, 2013 and 2014, we declared distributions to our stockholders of $886,896, $206,365 and $1,048,905, respectively. These distributions represent approximately $5.12 per share, $1.08 per share and $5.37 per share for the years ended December 31, 2012, 2013 and 2014, respectively, based on the weighted average number of common shares outstanding during each respective year. For each of 2012 and 2014, total amounts distributed included Special Distributions (as described above) of $700,000, or $4.07 and $3.61 per share, respectively, associated with the Company’s conversion to a REIT. For federal income tax purposes, distributions to our stockholders are generally treated as nonqualified ordinary dividends, qualified ordinary dividends or return of capital. The IRS requires historical C corporation earnings and profits to be distributed prior to any REIT distributions, which may affect the character of each distribution to our stockholders, including whether and to what extent each distribution is characterized as a qualified or nonqualified ordinary dividend. For the years ended December 31, 2012, 2013 and 2014, the dividends we paid on our common shares were classified as follows: Year Ended December 31, 2012 2013 2014 Nonqualified ordinary dividends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Qualified ordinary dividends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Return of capital 0.0% 0.0% 26.4% 100.0% 100.0% 56.4% 0.0% 0.0% 17.2% 100.0% 100.0% 100.0% In December 2013, our board of directors approved, and we entered into, a REIT Status Protection Rights Agreement (the ‘‘Rights Agreement’’) which provided for a dividend of one preferred stock purchase right (a ‘‘Right’’) for each share of our common stock outstanding on December 20, 2013. On November 18, 2014, we entered into the First Amendment to the Rights Agreement to extend the expiration of the Rights Agreement from December 9, 2014 to February 28, 2015. On January 20, 2015, in connection with the merger with our predecessor, the Rights Agreement was terminated. 14. Discontinued Operations Digital 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, for all periods presented, have been reported as discontinued operations for financial reporting purposes. 146 IRON MOUNTAIN INCORPORATED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) DECEMBER 31, 2014 (In thousands, except share and per share data) 14. Discontinued Operations (Continued) The table below summarizes certain results of operations of the Digital Business: Year Ended December 31, 2012 2013 2014 (Loss) Income Before (Benefit) Provision for Income Taxes of Discontinued Operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (Benefit) Provision for Income Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ (75) $(958) $(960) — (429) (505) Income (Loss) from Discontinued Operations, Net of Tax . . . . . . . . . . . . . . . . $ 430 $(529) $(960) During the year ended December 31, 2013, we recognized a loss before provision of income taxes of discontinued operations of $958 primarily related to the write-off of certain software costs. During the year ended December 31, 2014, we recognized a loss before provision for income taxes of discontinued operations of $960, primarily related to settlements of legal matters directly related to the disposed business. New Zealand Operations We completed the sale of our New Zealand operations on October 3, 2011. Our 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, 2012 2013 2014 (Loss) Income Before (Benefit) Provision for Income Taxes of Discontinued Operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (Benefit) Provision for Income Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $(88) $— $— (34) — — (Loss) Income from Discontinued Operations, Net of Tax . . . . . . . . . . . . . . . . . . . $(54) $— $— 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 obligations and contingencies associated with the fire in Italy discussed more fully in Note 10.f. 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. 147 IRON MOUNTAIN INCORPORATED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) DECEMBER 31, 2014 (In thousands, except share and per share data) 14. Discontinued Operations (Continued) The table below summarizes certain results of our Italian operations: Year Ended December 31, 2012(1) 2013(2) 2014(2) Total Revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 2,138 $ — $ — (Loss) Income Before (Benefit) Provison for Income Taxes of Discontinued Operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (Benefit) Provision for Income Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $(8,692) $2,290 930 (1,542) (Loss) Income from Discontinued Operations, Net of Tax . . . . . . . . . . . . . . Loss on Sale of Discontinued Operations, Net of Tax . . . . . . . . . . . . . . . . . (7,150) (1,885) 1,360 — $751 — 751 — Total (Loss) Income from Discontinued Operations and Sale, Net of Tax . . . $(9,035) $1,360 $751 (1) Includes the results of operations of Italy through April 27, 2012, the date the sale of our Italian operations was consummated. (2) During the years ended December 31, 2013 and 2014, we recognized income before provision of income taxes of discontinued operations primarily related to the recovery of insurance proceeds in excess of carrying value. 15. Restructuring In the third quarter of 2013, we implemented a plan that called for certain organizational realignments to advance our growth strategy and reduce operating costs, which was completed in 2014. As a result, we recorded restructuring costs of approximately $23,400 and $3,475 for the years ended December 31, 2013 and 2014, respectively, primarily related to employee severance and associated benefits. Restructuring costs included in the accompanying Consolidated Statements of Operations related to continuing operations is as follows: Cost of sales (excluding depreciation and amortization) . . . . . . . . . . . . . . . . . . . . . Selling, general and administrative expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 3,400 20,000 $1,228 2,247 Total restructuring costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $23,400 $3,475 Year Ended December 31, 2013 2014 148 IRON MOUNTAIN INCORPORATED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) DECEMBER 31, 2014 (In thousands, except share and per share data) 15. Restructuring (Continued) Restructuring costs recorded by segment are as follows: Year Ended December 31, 2013 2014 North American Records and Information Management Business . . . . . . . . . . . . . . North American Data Management Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . International Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Corporate and Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $12,600 2,100 3,700 5,000 $1,560 340 33 1,542 Total restructuring costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $23,400 $3,475 16. Divestitures In December 2014, we divested our secure shredding operations in Australia, Ireland and the United Kingdom (the ‘‘International Shredding Operations’’) in a stock transaction for approximately $26,200 in cash at closing, including $1,500 being held in escrow. The assets sold primarily consisted of customer contracts and certain long-lived assets. We have concluded that this divestiture is not a discontinued operation under the guidance in ASU 2014-08 described in Note 2.x. and, therefore, have recorded a pretax gain on sale in other (income) expense, net of approximately $6,900 ($10,200, inclusive of a tax benefit) in our Consolidated Statement of Operations for the year ended December 31, 2014. Revenues from our International Shredding Operations in 2014 represent less than 1% of our consolidated revenues. Approximately $7,750 of goodwill was allocated to the International Shredding Operations, utilizing a relative fair value approach. The International Shredding Operations were previously included in our International Business segment. 149 SCHEDULE III—SCHEDULE OF REAL ESTATE AND ACCUMULATED DEPRECIATION IRON MOUNTAIN INCORPORATED DECEMBER 31, 2014 (Dollars in thousands) (A) (B) (C) (D) (E) (F) Accumulated Gross amount Cost capitalized carried at close depreciation at of current subsequent to period(1)(2) acquisition period(1)(2) close of current construction or Region/Country/State/Campus Address North America United States (Including Puerto Rico) Initial cost Facilities(1) Encumbrances to Company 1 5 0 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 140 Oxmoor Ct, Birmingham, Alabama . . . . . . 1420 North Fiesta Blvd, Gilbert, Arizona . . . . . . 2955 S. 18th Place, Phoenix, Arizona . . . . . 4449 South 36th St, Phoenix, Arizona . . . . . . 3381 East Global Loop, Tucson, Arizona . . . . . . 200 Madrone Way, Felton, California . . . . . 13379 Jurupa Ave, Fontana, California . . . . . . 600 Burning Tree Rd, Fullerton, California . . . . . 5086 4th St, Irwindale, California . . . . 6933 Preston Ave, Livermore, California . . . . 1006 North Mansfield, Los Angeles, California . . . 1025 North Highland Ave, Los Angeles, California . 1350 West Grand Ave, Oakland, California . . . 1760 North Saint Thomas Circle, Orange, California . . . 8700 Mercury Lane, Pico Rivera, California . . . 8661 Kerns St, San Diego, California . . . . . 1915 South Grand Ave, Santa Ana, California . . . . 2680 Sequoia Dr, South Gate, California . . . . . . . 111 Uranium Drive, Sunnyvale, California . . . 25250 South Schulte Rd, Tracy, California . . . . . . . . 3576 N. Moline, Aurora, Colorado . . . North Stone Ave, Colorado Springs, Colorado . . . . 11333 E 53rd Ave, Denver, Colorado . . . 5151 E. 46th Ave, Denver, Coloardo . . . . 20 Eastern Park Rd, East Hartford, Connecticut . . . Bennett Rd, Suffield, Connecticut . . . . . . Kennedy Road, Windsor, Connecticut . . 293 Ella Grasso Rd, Windsor Locks, Connecticut . . . 150-200 Todds Ln, Wilmington, Delaware . . . . 13280 Vantage Way, Jacksonville, Florida . . . . . 12855 Starkey Rd, Largo, Florida . . . 10002 Satellite Blvd, Orlando, Florida . . . . . 3501 Electronics Way, West Palm Beach, Florida . . . . 1890 MacArthur Blvd, Atlanta Georgia . . . 3881 Old Gordon Rd, Atlanta, Georgia . . . . 5319 Tulane Drive SW, Atlanta, Georgia . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 2 1 1 1 2 2 1 1 1 1 1 1 1 1 1 $— — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — $ 1,322 1,637 12,178 7,305 1,622 760 10,472 4,762 6,800 14,585 749 10,168 15,172 4,576 27,957 10,512 3,420 6,329 9,645 3,049 1,583 761 7,403 6,312 7,417 1,768 10,447 4,021 7,226 1,853 3,293 1,927 4,201 1,786 1,185 2,808 $ 800 2,539 2,546 514 3,322 633 7,200 1,558 2,091 12,497 — 17,842 4,629 — 67 6,641 1,095 2,104 4,919 1,615 1,827 2,671 9,807 — 1,180 672 29,062 1,274 843 192 2,392 245 12,708 620 291 3,131 $ 2,122 4,176 14,724 7,819 4,944 1,393 17,672 6,320 8,891 27,082 749 28,010 19,801 4,576 28,024 17,153 4,515 8,433 14,564 4,664 3,410 3,432 17,210 6,312 8,597 2,440 39,509 5,295 8,069 2,045 5,685 2,172 16,909 2,406 1,476 5,939 $ 737 1,082 2,762 3,774 1,993 471 6,604 2,183 2,470 5,694 16 9,174 12,476 1,286 5,811 4,747 1,459 3,222 3,102 1,354 1,066 1,174 6,187 569 5,044 967 12,790 2,120 4,157 619 2,192 631 3,978 778 677 1,846 Date of acquired(3) 2001 2001 2007 2012 2000 1997 2002 2002 2002 2002 2014 1988 1997 2002 2012 2002 2001 2002 2002 2001 2001 2001 2001 2014 2002 2000 2001 2002 2002 2001 2001 2001 2001 2002 2001 2002 Life on which depreciation in latest income statement is computed Up to 40 years Up to 40 years Up to 40 years Up to 40 years Up to 40 years Up to 40 years Up to 40 years Up to 40 years Up to 40 years Up to 40 years Up to 40 years Up to 40 years Up to 40 years Up to 40 years Up to 40 years Up to 40 years Up to 40 years Up to 40 years Up to 40 years Up to 40 years Up to 40 years Up to 40 years Up to 40 years Up to 40 years Up to 40 years Up to 40 years Up to 40 years Up to 40 years Up to 40 years Up to 40 years Up to 40 years Up to 40 years Up to 40 years Up to 40 years Up to 40 years Up to 40 years SCHEDULE III—SCHEDULE OF REAL ESTATE AND ACCUMULATED DEPRECIATION (Continued) IRON MOUNTAIN INCORPORATED DECEMBER 31, 2014 (Dollars in thousands) (A) (B) (C) (D) (E) (F) Region/Country/State/Campus Address Initial cost Facilities(1) Encumbrances to Company Accumulated Gross amount Cost capitalized carried at close depreciation at of current subsequent to period(1)(2) acquisition period(1)(2) close of current construction or 1 5 1 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3150 Nifda Dr, Smyrna, Georgia . . . 1301 S. Rockwell St, Chicago, Illinois . . . 2211 W. Pershing Rd, Chicago, Illinois . . 2425 South Halsted St, Chicago, Illinois . . 2604 West 13th St, Chicago, Illinois . 2255 Pratt Blvd, Elk Grove, Illinois . . . 4175 Chandler Dr Opus No. Corp, Hanover Park, Illinois . . . . 6120 Churchman Bypass, Indianapolis, Indiana . . . . . 6090 NE 14th Street, Des Moines, Iowa . . . . South 7th St, Louisville, Kentucky . . . . . . 900 Distributors Row, New Orleans, Louisiana . . . . 1274 Commercial Drive, Port Allen, Louisiana . . . . . . . 8928 McGaw Ct, Columbia, Maryland . . . . . . . 10641 Iron Bridge Rd, Jessup, Maryland . . . . . . . 8275 Patuxent Range Rd, Jessup, Maryland . . . . . . . . . 96 High St, Billerica, Massachusetts . . . . . . . . 120 Hampden St, Boston, Massachusetts . . . . . . 32 George St, Boston, Massachusetts . . . . . . 3435 Sharps Lot Rd, Dighton, Massachusetts . . . . . 77 Constitution Boulevard, Franklin, Massachusetts . . . 216 Canal St, Lawrence, Massachusetts . . . . . . Bearfoot Road, Northboro, Massachusetts . . . 6601 Sterling Dr South, Sterling Heights, Michigan . . . . . . . . 1985 Bart Ave, Warren, Michigan . . . . . . . Wahl Court, Warren, Michigan . . . . . . . . 31155 Wixom Rd, Wixom, Michigan . . . . . . . 3140 Ryder Trail South, Earth City, Missouri . . . . . . Leavenworth St/18th St, Omaha, Nebraska . . . . . . 4105 North Lamb Blvd, Las Vegas, Nevada . . . . . . 17 Hydro Plant Rd, Milton, New Hampshire . . . . . . Kimberly Rd, East Brunsick, New Jersey . . . . . . . . . 1189 Magnolia Ave, Elizabeth, New Jersey . . . . . . 811 Route 33, Freehold, New Jersey . . . . . . . 650 Howard Avenue, Somerset, New Jersey . . 555 Gallatin Place, Alburquerque, New Mexico . . . . 7500 Los Volcanes Rd NW, Albuquerque, New Mexico . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 1 1 1 1 1 1 1 1 4 1 1 1 1 1 1 1 1 1 1 1 2 1 1 2 1 1 3 1 1 3 1 3 1 1 1 $— — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — $ 463 7,947 4,264 7,470 404 1,989 22,048 4,827 622 709 7,607 2,680 2,198 3,782 10,105 3,221 164 1,820 1,911 5,413 1,298 55,923 1,294 1,802 3,426 4,000 3,072 2,924 3,430 6,179 22,105 1,278 38,697 3,585 4,083 2,801 $ 640 18,461 12,850 925 2,670 3,622 17 7,761 313 8,166 816 3,133 5,511 689 7,181 3,776 420 5,067 514 48 975 18,343 1,048 314 2,253 1,142 2,796 10,273 8,614 4,015 5,094 2,102 49,849 11,303 377 1,791 $ 1,103 26,408 17,114 8,395 3,074 5,611 22,065 12,588 935 8,875 8,423 5,813 7,709 4,471 17,286 6,997 584 6,887 2,425 5,461 2,273 74,266 2,342 2,116 5,679 5,142 5,868 13,197 12,044 10,194 27,199 3,380 88,546 14,888 4,460 4,592 $ 551 11,484 5,639 3,098 2,111 741 5,838 4,013 247 2,760 4,794 1,866 2,130 1,831 7,003 2,705 388 4,451 1,728 43 902 27,786 925 784 2,876 1,906 1,414 3,945 3,773 4,739 10,184 1,310 34,649 3,291 1,773 1,944 Date of acquired(3) 1990 1999 2001 2006 2001 2000 2014 2002 2003 Various 2002 2003 1999 2000 2001 1998 2002 1991 1999 2014 2001 Various 2002 2000 Various 2001 2004 Various 2002 2001 Various 2000 Various 2006 2001 1999 Life on which depreciation in latest income statement is computed Up to 40 years Up to 40 years Up to 40 years Up to 40 years Up to 40 years Up to 40 years Up to 40 years Up to 40 years Up to 40 years Up to 40 years Up to 40 years Up to 40 years Up to 40 years Up to 40 years Up to 40 years Up to 40 years Up to 40 years Up to 40 years Up to 40 years Up to 40 years Up to 40 years Up to 40 years Up to 40 years Up to 40 years Up to 40 years Up to 40 years Up to 40 years Up to 40 years Up to 40 years Up to 40 years Up to 40 years Up to 40 years Up to 40 years Up to 40 years Up to 40 years Up to 40 years SCHEDULE III—SCHEDULE OF REAL ESTATE AND ACCUMULATED DEPRECIATION (Continued) IRON MOUNTAIN INCORPORATED DECEMBER 31, 2014 (Dollars in thousands) (A) (B) (C) (D) (E) (F) Region/Country/State/Campus Address Initial cost Facilities(1) Encumbrances to Company Accumulated Gross amount Cost capitalized carried at close depreciation at of current subsequent to period(1)(2) acquisition period(1)(2) close of current construction or 1 5 2 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100 Bailey Ave, Buffalo, New York . . . 64 Leone Ln, Chester, New York . . . . . 1368 County Rd 8, Farmington, New York . . . County Rd 10, Linlithgo, New York . . . . 77 Seaview Blvd, N. Hempstead New York . . . 37 Hurds Corner Road, Pawling, New York . . . Ulster Ave/Route 9W, Port Ewen, New York . . . . Binnewater Rd, Rosendale, New York . . . . . 220 Wavel St, Syracuse, New York . . . 14500 Weston Pkwy, Cary, North Carolina . . . . . 1034 Hulbert Ave, Cincinnati, Ohio . . . . 1275 East 40th, Cleveland, Ohio . . . . . . 7208 Euclid Avenue, Cleveland, Ohio . . . . 4260 Tuller Ridge Rd, Dublin, Ohio . . . . . 2120 Buzick Drive, Obetz, Ohio . . . . . . 302 South Byrne Rd, Toledo, Ohio . . . 7530 N. Leadbetter Road, Portland, Oregon . . Branchton Rd, Boyers, Pennsylvania . . . . 1201 Freedom Rd, Cranberry Township, Pennsylvania . . . 800 Carpenters Crossings, Folcroft, Pennsylvania . 36 Great Valley Pkwy, Malvern, Pennsylvania . . . . Henderson Dr/Elmwood Ave, Sharon Hill, Pennsylvania . . Las Flores Industrial Park, Rio Grande, Puerto Rico . . . . 24 Snake Hill Road, Chepachet, Rhode Island . . . Mitchell Street, Knoxville, Tennessee . . . . . 415 Brick Church Park Dr, Nashville, Tennessee . . . . . . 6005 Dana Way, Nashville, Tennessee . . . . . . . 11406 Metric Blvd, Austin, Texas . . . . 6600 Metropolis Drive, Austin, Texas . . . . . . 1800 Columbian Club Dr, Carrollton, Texas . . . . . . 1905 John Connally Dr, Carrolton, Texas . . . . . . . Alma St, Dallas, Texas . . . . . . . 13425 Branchview Ln, Dallas, Texas . . . . . . . . . Cockrell Ave, Dallas, Texas . . . 1819 S. Lamar St, Dallas, Texas . . . . . . . . 2000 Robotics Place Suite B, Fort Worth, Texas . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 1 1 2 1 1 3 2 1 1 1 1 1 1 1 1 1 2 1 1 1 3 1 1 2 1 2 1 1 1 1 2 1 2 1 1 $— — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — $ 1,324 5,086 2,611 102 5,719 4,323 23,137 5,142 2,929 1,880 786 3,129 3,336 1,030 4,317 602 5,187 21,166 1,057 2,457 2,397 24,153 4,185 2,659 718 2,312 1,827 5,489 4,519 19,673 2,174 3,431 3,518 3,950 3,215 5,328 $ 9,528 1,047 4,411 2,878 1,294 443 7,222 9,291 1,983 1,619 794 354 2,404 1,538 12,715 804 1,813 122,202 11,953 853 6,421 9,562 3,225 1,995 3,752 3,681 1,802 1,725 242 64 394 1,297 3,237 1,914 596 450 $ 10,852 6,133 7,022 2,980 7,013 4,766 30,359 14,433 4,912 3,499 1,580 3,483 5,740 2,568 17,032 1,406 7,000 143,368 13,010 3,310 8,818 33,715 7,410 4,654 4,470 5,993 3,629 7,214 4,761 19,737 2,568 4,728 6,755 5,864 3,811 5,778 $ 4,252 2,771 3,240 899 1,648 1,383 17,537 3,861 2,153 1,205 659 1,487 2,002 1,123 4,534 431 3,214 26,668 4,698 1,513 2,641 12,690 2,986 1,955 1,053 2,691 1,142 3,025 531 6,020 960 2,020 3,099 2,652 1,849 2,051 Date of acquired(3) 1998 2000 1998 2001 2006 2005 2001 Various 1997 1999 2000 1999 2001 1999 2003 2001 2002 Various 2001 2000 1999 Various 2001 2001 Various 2000 2000 2002 2011 2013 2000 2000 2001 2000 2000 2002 Life on which depreciation in latest income statement is computed Up to 40 years Up to 40 years Up to 40 years Up to 40 years Up to 40 years Up to 40 years Up to 40 years Up to 40 years Up to 40 years Up to 40 years Up to 40 years Up to 40 years Up to 40 years Up to 40 years Up to 40 years Up to 40 years Up to 40 years Up to 40 years Up to 40 years Up to 40 years Up to 40 years Up to 40 years Up to 40 years Up to 40 years Up to 40 years Up to 40 years Up to 40 years Up to 40 years Up to 40 years Up to 40 years Up to 40 years Up to 40 years Up to 40 years Up to 40 years Up to 40 years Up to 40 years SCHEDULE III—SCHEDULE OF REAL ESTATE AND ACCUMULATED DEPRECIATION (Continued) IRON MOUNTAIN INCORPORATED DECEMBER 31, 2014 (Dollars in thousands) (A) (B) (C) (D) (E) (F) Region/Country/State/Campus Address Initial cost Facilities(1) Encumbrances to Company Accumulated Gross amount Cost capitalized carried at close depreciation at of current subsequent to period(1)(2) acquisition period(1)(2) close of current construction or 1 5 3 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1202 Ave R, Grand Prairie, Texas . . . . . 15333 Hempstead Hwy, Houston, Texas . . . . . 2600 Center Street, Houston, Texas . . . . . . 3502 Bissonnet St, Houston, Texas . . . . . . . 5249 Glenmont Ave, Houston, Texas . . . . . 5707 Chimney Rock, Houston, Texas . . . . . 5757 Royalton Dr, Houston, Texas . . . . . . 6203 Bingle Rd, Houston, Texas . . . . . 9601 West Tidwell, Houston, Texas . . . . . 1235 North Union Bower, Irving, Texas . . . . 15300 FM 1825, Pflugerville, Texas . . . . 929 South Medina St, San Antonio, Texas . . . 930 Avenue B, San Antonio, Texas . . . . 931 North Broadway, San Antonio, Texas . . . 1665 S. 5350 West, Salt Lake City, Utah . . . . 11052 Lakeridge Pkwy, Ashland, Virginia . . . . 4555 Progress Road, Norfolk, Virginia . . . . 7700-7730 Southern Dr, Springfield, Virginia . . . 8001 Research Way, Springfield, Virginia . . . . . 22445 Randolph Dr, Sterling, Virginia . . . . . 307 South 140th St, Burien, Washington . . . . 8908 W. Hallett Rd, Cheney, Washington . . . 6600 Hardeson Rd, Everett, Washington . . . . 19826 Russell Rd South, Kent, Washington . 1201 N. 96th St, Seattle, Washington . . . . 12021 West Bluemound Rd, Wauwatosa, Wisconsin . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 3 1 1 1 1 1 1 1 1 2 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 162 $— — — — — — — — — — — — — — — — — — — — — — — — — — — $ 8,354 6,327 2,840 7,687 3,467 1,032 1,795 3,188 1,680 1,574 3,811 3,883 393 3,526 6,239 1,709 6,527 14,167 5,230 7,598 2,078 510 5,399 14,793 4,496 1,307 $ 1,660 33,410 1,335 178 1,775 916 863 10,845 486 960 7,381 1,079 171 759 2,361 1,813 209 1,813 2,309 3,647 2,062 3,915 3,190 8,047 1,122 2,040 $ 10,014 39,737 4,175 7,865 5,242 1,948 2,658 14,033 2,166 2,534 11,192 4,962 564 4,285 8,600 3,522 6,736 15,980 7,539 11,245 4,140 4,425 8,589 22,840 5,618 3,347 $ 4,245 5,615 1,870 5,062 1,786 746 864 6,609 756 944 2,991 1,901 153 2,142 3,524 1,197 1,922 7,835 2,119 4,324 1,653 1,177 2,428 7,270 2,557 942 767,030 672,245 1,439,275 486,109 Date of acquired(3) 2003 2004 2000 2002 2000 2002 2000 2001 2001 2001 2001 2002 1998 1999 2002 1999 2011 2002 2002 2005 1999 1999 2002 2002 2001 1999 Life on which depreciation in latest income statement is computed Up to 40 years Up to 40 years Up to 40 years Up to 40 years Up to 40 years Up to 40 years Up to 40 years Up to 40 years Up to 40 years Up to 40 years Up to 40 years Up to 40 years Up to 40 years Up to 40 years Up to 40 years Up to 40 years Up to 40 years Up to 40 years Up to 40 years Up to 40 years Up to 40 years Up to 40 years Up to 40 years Up to 40 years Up to 40 years Up to 40 years SCHEDULE III—SCHEDULE OF REAL ESTATE AND ACCUMULATED DEPRECIATION (Continued) IRON MOUNTAIN INCORPORATED DECEMBER 31, 2014 (Dollars in thousands) (A) (B) (C) (D) (E) (F) Accumulated Gross amount Cost capitalized carried at close depreciation at of current subsequent to period(1)(2) acquisition period(1)(2) close of current construction or Region/Country/State/Campus Address Canada Initial cost Facilities(1) Encumbrances to Company 1 5 4 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . One Command Court, Bedford . . . . 195 Summerlea Road, Brampton . . . 10 Tilbury Court, Brampton . . . . 8825 Northbrook Court, Burnaby . . . . 8088 Glenwood Drive, Burnaby . . . . . 5811 26th Street S.E., Calgary . 3905-101 Street, Edmonton . . . . . . 3005 Boul. Jean-Baptiste Deschamps, Lachine . . . . 1655 Fleetwood, Laval . . . . . . 4005 Richelieu, Montreal . . . . . 1209 Algoma Rd, Ottawa . . . . . 1650 Comstock Rd, Ottawa . . . . . . . 235 Edson Street, Saskatoon . . . 640 Coronation Drive, Scarborough . . . . 610 Sprucewood Ave, Windsor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 15 177 $— — — — — — — — — — — — — — — — — $ 3,847 5,403 5,007 8,091 4,326 14,658 2,020 2,751 8,196 1,800 1,059 7,691 829 1,853 1,243 68,774 $ 4,809 5,737 16,195 1,448 8,040 10,383 829 453 16,495 1,343 6,759 2,697 1,562 1,023 537 78,310 835,804 750,555 $ 8,656 11,140 21,202 9,539 12,366 25,041 2,849 3,204 24,691 3,143 7,818 10,388 2,391 2,876 1,780 $ 2,941 3,878 4,284 3,560 3,170 8,384 1,223 1,097 9,062 1,183 2,836 2,113 549 964 416 147,084 1,586,359 45,660 531,769 Date of acquired(3) 2000 2000 2000 2001 2005 2000 2000 2000 2000 2000 2000 2003 2008 2000 2007 Life on which depreciation in latest income statement is computed Up to 40 years Up to 40 years Up to 40 years Up to 40 years Up to 40 years Up to 40 years Up to 40 years Up to 40 years Up to 40 years Up to 40 years Up to 40 years Up to 40 years Up to 40 years Up to 40 years Up to 40 years SCHEDULE III—SCHEDULE OF REAL ESTATE AND ACCUMULATED DEPRECIATION (Continued) IRON MOUNTAIN INCORPORATED DECEMBER 31, 2014 (Dollars in thousands) (A) (B) (C) (D) (E) (F) Region/Country/State/Campus Address Facilities(1) Encumbrances Initial cost to Company Accumulated Gross amount Cost capitalized carried at close depreciation at subsequent to of current period(1)(2) acquisition period(1)(2) close of current construction or 1 5 5 Europe . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Gewerbeparkstr. 3, Vienna, Austria . . . . . . . . . . . Woluwelaan 147, Diegem, Belgium . . . . . . . . . . . Jeumont-Schneider, Champagne Sur Seine, France . ZI des Sables, Morangis, France . . . . . . . . . . . . . Brommer Weg 1, Wipshausen, Germany . . . . . . . . Warehouse and Offices 4 Springhill, Cork, Ireland . . 17 Crag Terrace, Dublin, Ireland . . . . . . . . . . . . Damastown Industrial Park, Dublin, Ireland . . . . . Howemoss Drive, Aberdeen, Scotland . . . . . . . . . Traquair Road, Innerleithen, Scotland . . . . . . . . . Nettlehill Road, Houston Industrial Estate, Livingston, Scotland . . . . . . . . . . . . . . . . . . . Av Madrid s/n Poligono Industrial Matillas, Alcala de Henares, Spain . . . . . . . . . . . . . . . . . . . . Calle Bronce, 37, Chiloeches, Spain . . . . . . . . . . Ctra M.118 , Km.3 Parcela 3, Madrid, Spain . . . . . Fundicion 8, Rivas-Vaciamadrid, Spain . . . . . . . . . Abanto Ciervava, Spain . . . . . . . . . . . . . . . . . . 628 Western Avenue, Acton, United Kingdom . . . . 65 Egerton Road, Birmingham, United Kingdom . . Otterham Quay Lane, Gillingham, United Kingdom . Pennine Way, Hemel Hempstead, United Kingdom . Kemble Industrial Park, Kemble, United Kingdom . Gayton Road, Kings Lynn, United Kingdom . . . . . 24/26 Gillender Street, London, United Kingdom . . Cody Road, London, United Kingdom . . . . . . . . . Unit 10 High Cross Centre, London, United Kingdom . . . . . . . . . . . . . . . . . . . . . . . . . Old Poplar Bus Garage, London, United Kingdom . 17 Broadgate, Oldham, United Kingdom . . . . . . . Harpway Lane, Sopley, United Kingdom . . . . . . . Unit 1A Broadmoor Road, Swindom, United Kingdom . . . . . . . . . . . . . . . . . . . . . . . . . 1 1 3 1 1 1 1 1 2 1 1 1 1 1 1 2 1 1 13 1 2 3 1 2 1 1 1 1 1 49 $ — — — 2,235 — — — — — — — — — — — — — — — — — — — — — — — — — $ 6,542 2,541 1,750 12,407 3,220 9,040 2,818 16,034 6,970 113 11,517 186 11,011 3,981 1,022 1,053 2,070 6,980 7,418 10,847 5,277 3,119 4,666 20,307 3,598 4,639 4,039 681 2,636 $ 1,777 4,975 1,551 — — 1,653 996 5,781 7,559 2,497 29,434 — 2,808 6,054 2,594 — 87 2,897 4,874 7,482 8,926 1,872 2,910 9,204 1,104 2,923 1,076 1,781 1,042 $ 8,319 7,516 3,301 12,407 3,220 10,693 3,814 21,815 14,529 2,610 40,951 186 13,819 10,035 3,616 1,053 2,157 9,877 12,292 18,329 14,203 4,991 7,576 29,511 4,702 7,562 5,115 2,462 3,678 2,235 166,482 113,857 280,339 $ 1,260 2,504 1,231 5,830 1,697 2,754 960 4,210 3,084 794 14,604 — 1,552 4,703 1,221 412 766 4,355 4,730 6,356 8,157 2,783 2,390 9,212 1,153 3,237 2,074 1,208 860 94,097 Date of acquired(3) 2010 2003 2003 2004 2006 2014 2001 2012 Various 2004 Life on which depreciation in latest income statement is computed Up to 40 years Up to 40 years Up to 40 years Up to 40 years Up to 40 years Up to 40 years Up to 40 years Up to 40 years Up to 40 years Up to 40 years Up to 40 years 2001 Up to 40 years 2014 2010 2001 2002 Various 2003 2003 2003 2004 2004 2003 2003 2003 2003 2003 2008 2004 2006 Up to 40 years Up to 40 years Up to 40 years Up to 40 years Up to 40 years Up to 40 years Up to 40 years Up to 40 years Up to 40 years Up to 40 years Up to 40 years Up to 40 years Up to 40 years Up to 40 years Up to 40 years Up to 40 years Up to 40 years Up to 40 years SCHEDULE III—SCHEDULE OF REAL ESTATE AND ACCUMULATED DEPRECIATION (Continued) IRON MOUNTAIN INCORPORATED DECEMBER 31, 2014 (Dollars in thousands) (A) (B) (C) (D) Region/Country/State/Campus Address Facilities(1) Encumbrances Company Initial cost to Cost capitalized subsequent to acquisition (E) (F) Accumulated Gross amount depreciation at carried at close of current period(1)(2) close of current period(1)(2) 1 5 6 Latin America Amancio Alcorta 2396, Buenos Aires, Argentina . . . . . . Azara 1245, Buenos Aires, Argentina . . . . . . . . . . . . . Saraza 6135, Buenos Aires, Argentina . . . . . . . . . . . . Spegazzini, Ezeiza Buenos Aires, Argentina . . . . . . . . . Francisco de Souza e Melo, Rio de Janerio, Brazil . . . . . Hortolandia, Sao Paulo, Brazil . . . . . . . . . . . . . . . . . El Taqueral 99, Santiago, Chile . . . . . . . . . . . . . . . . . Panamericana Norte 18900, Santiago, Chile . . . . . . . . . Avenida Prolongacion del Colli 1104, Guadalajara, Mexico . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Privada Las Flores No. 25 (G3), Guadalajara, Mexico . . . Carretera Pesqueria Km2.5(M3), Monterrey, Mexico . . . . Lote 2, Manzana A, (T2& T3), Toluca, Mexico . . . . . . . Prolongacion de la Calle 7 (T4), Toluca, Mexico . . . . . . Panamericana Sur, KM 57.5, Lima, Peru . . . . . . . . . . . Av. Elmer Faucett 3462, Lima, Peru . . . . . . . . . . . . . . Calle Los Claveles-Seccion 3, Lima, Peru . . . . . . . . . . Asia Pacific 8 Whitestone Drive, Austins Ferry, Australia . . . . . . . . Warehouse No 4, Shanghai, China . . . . . . . . . . . . . . . 2 1 1 1 2 1 1 4 1 1 2 1 1 5 2 1 27 1 1 2 $ — — — — — — — — — — — — — 2,589 — — 2,589 — — — $ 655 166 144 12,773 1,868 24,078 2,629 4,001 374 905 3,537 2,204 7,544 1,549 4,112 8,179 $ 2,113 168 272 5,020 563 5,518 35,628 10,507 139 333 1,085 707 2,580 947 2,296 3,614 $ 2,768 334 416 17,793 2,431 29,596 38,257 14,508 513 1,238 4,622 2,911 10,124 2,496 6,408 11,793 $ 813 113 118 2,483 83 1,160 7,834 1,588 79 194 831 507 1,692 402 1,212 3,048 74,718 71,490 146,208 22,157 681 1,530 2,211 3,438 1,030 4,468 4,119 2,560 6,679 619 92 711 2012 2013 Up to 40 years Up to 40 years Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 255 $4,824 $1,079,215 $940,370 $2,019,585 $648,734 (1) The above information only includes the real estate facilities that are owned. The gross cost includes the cost for land, land improvements, buildings, building improvements and racking. The listing does not reflect the 839 leased facilities in our real estate portfolio. In addition, the above information does not include any value for capital leases for property that is classified as land, buildings and building improvements in our consolidated financial statements. (2) No single site exceeds 5% of the aggregate gross amounts at which the assets were carried at the close of the period set forth in the table above. (3) Date of construction or acquired represents the date we constructed the facility or acquired the facility through purchase or acquisition. Date of construction or acquired(3) Various 1998 1995 2012 Various 2014 2006 2004 2002 2004 2004 2002 2007 2013 Various 2010 Life on which depreciation in latest income statement is computed Up to 40 years Up to 40 years Up to 40 years Up to 40 years Up to 40 years Up to 40 years Up to 40 years Up to 40 years Up to 40 years Up to 40 years Up to 40 years Up to 40 years Up to 40 years Up to 40 years Up to 40 years Up to 40 years SCHEDULE III—SCHEDULE OF REAL ESTATE AND ACCUMULATED DEPRECIATION (Continued) IRON MOUNTAIN INCORPORATED DECEMBER 31, 2014 (Dollars in thousands) The change in gross carrying amount of real estate owned for the year ended December 31, 2014 is as follows: Gross amount at beginning of period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Additions during period: $1,949,073 Acquisitions(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Discretionary capital projects . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Other(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — 119,654 (36,324) 83,330 Deductions during period: Cost of real estate sold or disposed . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (12,818) Gross amount at end of period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $2,019,585 (1) Includes acquisition of sites through business combinations and purchase accounting adjustments. (2) Includes foreign currency exchange rate fluctuations. The aggregate cost for Federal tax purposes at December 31, 2014 of our real estate assets was approximately $1,848,000 (unaudited). The change in accumulated depreciation amount of real estate owned for the year ended December 31, 2014 is as follows: Gross amount of accumulated depreciation at beginning of period . . . . . . . . . . . . . . . . . . . Additions during period: $592,329 Depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Other(1) 66,617 (6,547) 60,070 Deductions during period: Amount of accumulated depreciation for real estate assets sold or disposed . . . . . . . . . . . (3,665) Gross amount of end of period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $648,734 (1) Includes foreign currency exchange rate fluctuations. 157 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/ RODERICK DAY Roderick Day Executive Vice President and Chief Financial Officer (Principal Financial and Accounting Officer) Dated: February 27, 2015 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/ RODERICK DAY Roderick Day /s/ JENNIFER M. ALLERTON Jennifer M. Allerton /s/ TED R. ANTENUCCI Ted R. Antenucci /s/ PAMELA M. ARWAY Pamela M. Arway /s/ CLARKE H. BAILEY Clarke H. Bailey /s/ KENT P. DAUTEN Kent P. Dauten /s/ PAUL F. DENINGER Paul F. Deninger President and Chief Executive Officer and Director (Principal Executive Officer) Executive Vice President and Chief Financial Officer (Principal Financial and Accounting Officer) Director Director Director Director Director Director 158 February 27, 2015 February 27, 2015 February 27, 2015 February 27, 2015 February 27, 2015 February 27, 2015 February 27, 2015 February 27, 2015 Name Title Date /s/ PER-KRISTIAN HALVORSEN Per-Kristian Halvorsen /s/ MICHAEL LAMACH Michael Lamach /s/ WALTER C. RAKOWICH Walter. C. Rakowich /s/ ALFRED J. VERRECCHIA Alfred J. Verrecchia Director Director Director Director February 27, 2015 February 27, 2015 February 27, 2015 February 27, 2015 159 Certain exhibits indicated below are incorporated by reference to documents we have filed with the SEC. Each exhibit marked by a pound sign (#) is a management contract or compensatory plan. INDEX TO EXHIBITS Exhibit 2.1 2.2 3.1 3.2 3.3 4.1 4.2 4.3 4.4 4.5 4.6 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.) Agreement and Plan of Merger, dated as of November 12, 2014, between Iron Mountain Incorporated and Iron Mountain REIT, Inc. (Incorporated by reference to the Company’s Current Report on Form 8-K dated November 18, 2014.) Certificate of Incorporation of the Company, as filed with the Secretary of State of the State of Delaware on June 26, 2014, as corrected by the Certificate of Correction of the Company filed with the Secretary of State of the State of Delaware on June 30, 2014. (Incorporated by reference to Annex B-1 to the Iron Mountain Incorporated Proxy Statement for the Special Meeting of Stockholders, filed with the SEC on December 23, 2014, File No. 001-13045.) Certificate of Merger, filed by the Company, effective as of January 20, 2015. (Incorporated by reference to the Company’s Current Report on Form 8-K12b dated January 21, 2015.) Bylaws of the Company. (Filed herewith.) 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, File Number 001-13045.) 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, File Number 001-13045.) 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, File Number 001-13045.) 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, File Number 001-13045.) 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, File Number 001-13045.) Ninth Supplemental Indenture, dated as of January 20, 2015, to Senior Subordinated Indenture, dated as of December 30, 2002, among the Company, the Company’s predecessor immediately prior to its conversion to a REIT (the ‘‘Predecessor Registrant’’) and The Bank of New York Trust Company, N.A, as trustee. (Incorporated by reference to the Company’s Current Report on Form 8-K12b dated January 21, 2015.) 160 Exhibit 4.7 4.8 4.9 4.10 4.11 4.12 4.13 4.14 4.15 4.16 4.17 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 the Company, 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.) Third Supplemental Indenture, dated as of January 20, 2015, to Senior Subordinated Indenture, dated as of September 23, 2011, among the Company, the Predecessor Registrant and The Bank of New York Trust Company, N.A., as trustee. (Incorporated by reference to the Company’s Current Report on Form 8-K12b dated January 21, 2015.) Senior Indenture, dated as of August 13, 2013, among the Company, the Guarantors named therein and Wells Fargo Bank, National Association, as trustee. (Incorporated by reference to the Company’s Current Report on Form 8- K dated August 13, 2013.) First Supplemental Indenture, dated as of August 13, 2013, among the Company, the Guarantors named therein and Wells Fargo Bank, National Association, as trustee, relating to the 6% Senior Notes due 2023. (Incorporated by reference to the Company’s Current Report on Form 8-K dated August 13, 2013.) Second Supplemental Indenture, dated as of January 20, 2015, to Senior Indenture, dated as of August 13, 2013, among the Company, the Predecessor Registrant and Wells Fargo Bank, National Association, as trustee. (Incorporated by reference to the Company’s Current Report on Form 8-K12b dated January 21, 2015.) Senior Indenture, dated as of August 13, 2013, among Iron Mountain Canada Operations ULC, the Company, the Guarantors named therein and Wells Fargo Bank, National Association, as trustee. (Incorporated by reference to the Company’s Current Report on Form 8-K dated August 13, 2013.) First Supplemental Indenture, dated as of August 13, 2013, among Iron Mountain Canada Operations ULC, the Guarantors named therein and Wells Fargo Bank, National Association, as trustee, relating to the 6.125% CAD Senior Notes due 2021. (Incorporated by reference to the Company’s Current Report on Form 8-K dated August 13, 2013.) Second Supplemental Indenture, dated as of January 20, 2015, to Senior Indenture, dated as of August 13, 2013, among the Company, the Predecessor Registrant, Iron Mountain Canada Operations ULC and Wells Fargo Bank, National Association, as trustee. (Incorporated by reference to the Company’s Current Report on Form 8-K12b dated January 21, 2015.) Senior Indenture, dated as of September 18, 2014, among Iron Mountain Europe PLC, the Company, the Subsidiary Guarantors, Wells Fargo Bank, National Association, as trustee, and Soci´et´e G´en´erale Bank & Trust, as paying agent, registrar and transfer agent. (Incorporated by reference to the Company’s Current Report on Form 8-K dated September 22, 2014.) 161 Exhibit 4.18 4.20 4.21 4.22 4.23 10.1 10.2 10.3 10.4 10.5 10.6 10.7 10.8 Item First Supplemental Indenture, dated as of January 20, 2015, to Senior Indenture, dated as of September 18, 2014, among the Company, the Predecessor Registrant, Iron Mountain Europe PLC, Wells Fargo Bank, National Association, as trustee, and Soci´et´e G´en´erale Bank & Trust, as Paying Agent, Registrar and Transfer Agent. (Incorporated by reference to the Company’s Current Report on Form 8-K12b dated January 21, 2015.) 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 Current Report on Form 8-K12b dated January 21, 2015.) REIT Status Protection Rights Agreement, dated as of December 9, 2013, between the Company and Computershare Inc. (Incorporated by reference to the Company’s Current Report on Form 8-K dated December 9, 2013.) First Amendment to REIT Status Protection Agreement, dated as of November 18, 2014, between Iron Mountain Incorporated and Computershare Inc. (Incorporated by reference to the Company’s Current Report on Form 8-K dated November 18, 2014.) Second Amendment to REIT Status Protection Rights Agreement, dated as of January 20, 2015, between the Predecessor Registrant and Computershare Inc. (Incorporated by reference to the Company’s Current Report on Form 8-K12b dated January 21, 2015.) 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, File Number 001-13045.) 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, File Number 001-13045.) 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. (#) (Incorporated by reference to the Company’s Annual Report on Form 10-K for the year ended December 31, 2012.) 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, File Number 001-13045.) 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, File Number 001-13045.) 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, File Number 001-13045.) 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, File Number 001-13045.) 162 Exhibit 10.9 10.10 10.11 10.12 10.13 10.14 10.15 10.16 10.17 10.18 10.19 10.20 10.21 10.22 Item 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 SEC on April 21, 2008, File Number 001-13045.) 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, File Number 001-13045.) Fifth Amendment to the Iron Mountain Incorporated 2002 Stock Incentive Plan. (#) (Incorporated by reference to the Company’s Current Report on Form 8-K dated June 4, 2010.) Sixth Amendment to the Iron Mountain Incorporated 2002 Stock Incentive Plan. (#) (Incorporated by reference to the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2011.) Iron Mountain Incorporated 2014 Stock and Cash Incentive Plan. (#) (Incorporated by reference to Annex C to the Iron Mountain REIT, Inc. Registration Statement on Form S-4, filed with the SEC on November 12, 2014, File No. 333-197819.) 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, File Number 001-13045.) 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, File Number 001-13045.) 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, File Number 001-13045.) 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, File Number 001-13045.) 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, File Number 001-13045.) 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, File Number 001-13045.) 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, File Number 001-13045.) 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, File Number 001-13045.) Form of Iron Mountain Incorporated 2002 Stock Incentive Plan Stock Option Agreement (version 2B). (#) (Incorporated by reference to the Company’s Annual Report on Form 10-K for the year ended December 31, 2013.) 163 Exhibit 10.23 10.24 10.25 10.26 10.27 10.28 10.29 10.30 Item Form of Performance 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 March 31, 2013.) Form of Performance Unit Agreement pursuant to the Iron Mountain Incorporated 2002 Stock Incentive Plan (version 20). (#) (Incorporated by reference to the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2013.) Form of Performance Unit Agreement pursuant to the Iron Mountain Incorporated 2002 Stock Incentive Plan (version 21). (#) (Incorporated by reference to the Company’s Current Report on Form 8-K dated March 19, 2014.) 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.) Form of Restricted Stock Unit Agreement pursuant to the Iron Mountain Incorporated 2014 Stock and Cash Incentive Plan (version 1). (#) (Filed herewith.) Form of Stock Option Agreement pursuant to the Iron Mountain Incorporated 2014 Stock and Cash Incentive Plan (version 1). (#) (Filed herewith.) Form of Performance Unit Agreement pursuant to the Iron Mountain Incorporated 2014 Stock and Cash Incentive Plan (version 1). (#) (Filed herewith.) Form of Performance Unit Agreement pursuant to the Iron Mountain Incorporated 2014 Stock and Cash Incentive Plan (version 2). (#) (Filed herewith.) 10.31 Change in Control Agreement, dated September 8, 2008, between the Company and Ernest W. Cloutier. (Incorporated by reference to the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2014.) 10.32 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, File Number 001-13045.) 10.33 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.) 10.34 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, File Number 001-13045.) 10.35 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.) 10.36 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, File Number 001-13045.) 164 Exhibit Item 10.37 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.) 10.38 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.) 10.39 Employment Offer Letter, dated April 10, 2014, from the Company to Roderick Day. (#) (Incorporated by reference to the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2014.) 10.40 Contract of Employment with Iron Mountain, between Roderick Day and Iron Mountain (UK) Ltd., dated as of November 1, 2009. (#) (Incorporated by reference to the Company’s Annual Report on Form 10-K for the year ended December 31, 2013.) 10.41 Restated Compensation Plan for Non-Employee Directors. (#) (Filed herewith.) 10.42 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, File Number 001-13045.) 10.43 The Iron Mountain Companies Severance Plan. (#) (Incorporated by reference to the Company’s Current Report on Form 8-K, dated March 13, 2012.) 10.44 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.) 10.45 10.46 First Amendment to Amended and Restated Severance Plan Severance Program No. 1. (#) (Incorporated by reference to the Company’s Annual Report on Form 10-K for the year ended December 31, 2012.) Second Amendment to The Iron Mountain Companies Severance Plan Severance Program No. 1. (#) (Incorporated by reference to the Company’s Current Report on Form 8-K dated December 19, 2014.) 10.47 Severance Program No. 2. (#) (Incorporated by reference to the Company’s Current Report on Form 8-K dated December 3, 2012.) 10.48 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, File Number 001-13045.) 165 Exhibit Item 10.49 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.) 10.50 Amendment to Credit Agreement, dated as of August 15, 2012, among the Company, Iron 10.51 10.52 10.53 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.) Second Amendment to Credit Agreement, dated as of January 31, 2013, among the Company, Iron Mountain Information Management, LLC (f/k/a 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.) Third Amendment to Credit Agreement, dated as of August 7, 2013, among the Company, Iron Mountain Information Management, LLC (f/k/a Iron Mountain Information Management, Inc.), Iron Mountain Holdings Group, Inc., Iron Mountain US Holdings, Inc., Iron Mountain Global Holdings, Inc., Iron Mountain Global LLC, Iron Mountain Fulfillment Services, Inc., Iron Mountain Intellectual Property Management, Inc., Iron Mountain Secure Shredding, Inc., Iron Mountain Information Management Services, Inc., Iron Mountain Canada Operations ULC, Iron Mountain do Brasil Ltda., Iron Mountain Switzerland GmbH, Iron Mountain Europe Limited, Iron Mountain Holdings (Europe) Limited, Iron Mountain (UK) Limited, Iron Mountain Australia Pty Ltd, 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 August 8, 2013.) Fourth Amendment to Credit Agreement, dated as of June 19, 2014, among the Company, Iron Mountain Information Management, LLC, Iron Mountain Holdings Group, Inc., Iron Mountain US Holdings, Inc., Iron Mountain Global Holdings, Inc., Iron Mountain Global LLC, Iron Mountain Fulfillment Services, Inc., Iron Mountain Intellectual Property Management, Inc., Iron Mountain Secure Shredding, Inc., Iron Mountain Information Management Services, Inc., Iron Mountain Canada Operations ULC, Iron Mountain do Brasil Ltda., Iron Mountain Switzerland GmbH, Iron Mountain Europe Limited, Iron Mountain Holdings (Europe) Limited, Iron Mountain (UK) Limited, Iron Mountain Australia Pty Ltd, 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, 2014.) 166 Exhibit 10.54 Incremental Term Loan Activation Notice, dated August 25, 2014, between Iron Mountain Information Management, LLC and the lenders party thereto. (Incorporated by reference to the Company’s Current Report on Form 8-K dated August 26, 2014.) Item 10.55 Assumption and Affirmation Agreement, dated as of January 20, 2015, among the Company, the Predecessor Registrant, Iron Mountain Information Management, LLC, Iron Mountain Holdings Group, Inc., Iron Mountain US Holdings, Inc., Iron Mountain Global Holdings, Inc., Iron Mountain Global LLC, Iron Mountain Fulfillment Services, Inc., Iron Mountain Intellectual Property Management, Inc., Iron Mountain Secure Shredding, Inc., Iron Mountain Information Management Services, Inc., Iron Mountain Canada Operations ULC, Iron Mountain Secure Shredding Canada, Inc., Iron Mountain Information Management Services Canada, Inc., Mountain Reserve III, Inc., Nettlebed Acquisition Corp., Iron Mountain do Brasil Ltda., Iron Mountain Switzerland GmbH, Iron Mountain Europe PLC, Iron Mountain Holdings (Europe) Limited, Iron Mountain (UK) Limited, Iron Mountain Australia Pty Ltd, Iron Mountain Australia Services Pty Ltd, Iron Mountain Australia Holdings Pty Ltd, Iron Mountain Austria Archivierung GmbH, Iron Mountain Luxembourg Services S.a.r.l., Luxembourg, Schaffhausen Branch and Iron Mountain International Holdings B.V. (Incorporated by reference to the Company’s Current Report on Form 8-K12b dated January 21, 2015.) 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, 2014 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.) 167 CORPORATE DIRECTORS AND OFFICERS (As of 04/02/15) Per-Kristian Halvorsen 4, 2, 5 Senior Vice President and Chief Innovation Officer Intuit Inc. Mountain View, CA Michael W. Lamach 2, 4 President, Chief Executive Officer and Chairperson of the Board of Directors Ingersoll-Rand, plc Davidson, NC William L. Meaney 5 President and Chief Executive Officer Iron Mountain Incorporated Boston, MA Walter C. Rakowich 1, 3 Retired Former CEO of Prologis San Francisco, CA Alfred J. Verrecchia 3, 6 Chairperson of the Board of Directors Iron Mountain Incorporated Boston, MA DIRECTORS Jennifer Allerton 1, 5 Retired Hoffmann La Roche Ltd Basel, Switzerland Ted R. Antenucci 1, 4 President and Chief Executive Officer Catellus Development Corporation Oakland, CA Pamela Arway 2, 3 Retired American Express Company, Inc. New York, NY Clarke H. Bailey 2, 3, 5 Chief Executive Officer and Chairperson of the Board of Directors EDCI Holdings, Inc. New York, NY Kent P. Dauten 1, 3, 4 Managing Director Keystone Capital, Inc. Deerfield, IL Paul F. Deninger 4, 5 Senior Managing Director Evercore Partners, Inc. Waltham, MA and San Francisco, CA SENIOR OFFICERS William L. Meaney President and Chief Executive Officer Roderick Day Executive Vice President and Chief Financial Officer Patrick Keddy Executive Vice President and General Manager, Marc A. Duale North America and Western Europe President, International John Tomovcsik Executive Vice President & General Manager, Records and Information Management Ernest W. Cloutier Executive Vice President, General Counsel and Secretary Tasos Tsolakis Executive Vice President, Global Services and Chief Information Eileen Sweeney, Senior Vice President and General Manager, Data Management Theodore MacLean Executive Vice President and Chief Marketing Officer 1 Member of Audit Committee (Mr. Rakowich is Chairperson). 2 Member of the Compensation Committee (Ms. Arway is Chairperson). 3 Member of the Nominating and Governance Committee (Mr. Verrecchia is Chairperson). 4 Member of the Finance Committee (Mr. Dauten is Chairperson) 5 Member of the Risk and Safety Committee (Mr. Bailey is Chairperson) 6 Independent Chairperson of the Board CORPORATE INFORMATION 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 One Federal Street Boston, MA 02110 800/935-6966 www.ironmountain.com Common Stock Data Traded: NYSE Symbol: IRM Beneficial Stockholders: 54,404 as of March 11, 2015 Investor Relations Melissa Marsden Senior Vice President, Investor Relations Iron Mountain Incorporated One Federal Street Boston, MA 02110 617/535-4766 www.ironmountain.com Annual Meeting Date Iron Mountain Incorporated will conduct its annual meeting of stockholders on Thursday, May 28, 2015, 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 CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS The stockholder letter contains certain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 and other securities laws and is subject to the safe-harbor created by such Act. Forward-looking statements include our financial performance outlook and shareholder returns in 2014 and through 2016 and statements regarding our operations, economic performance, financial condition, goals, beliefs, future growth strategies, investment objectives, plans and current expectations, such as projected revenues from our emerging market acquisition pipeline, valuation creation and returns associated with our data center business, and the acquisition of currently leased facilities. 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. 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. 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. In addition, important factors that could cause actual results to differ from our other expectations include, among others: (i) the cost to comply with current and future laws, regulations and customer demands relating to privacy issues; (ii) the impact of litigation or disputes that may arise in connection with incidents in which we fail to protect our customers’ information; (iii) changes in the price for our storage and information management services relative to the cost of providing such storage and information management services; (iv) changes in customer preferences and demand for our storage and information management services; (v) the adoption of alternative technologies and shifts by our customers to storage of data through non-paper based technologies; (vi) the cost or potential liabilities associated with real estate necessary for our business; (vii) the performance of business partners upon whom we depend for technical assistance or management expertise outside the U.S.; (viii) changes in the political and economic environments in the countries in which our international subsidiaries operate; (ix) claims that our technology violates the intellectual property rights of a third party; (x) changes in the cost of our debt; (xi) changes in the amount of our capital expenditures; (xii) the impact of alternative, more attractive investments on dividends; (xiii) our ability to remain qualified for taxation as a real estate investment trust; (xiv) our ability or inability to complete acquisitions on satisfactory terms and to integrate acquired companies efficiently; (xv) other trends in competitive or economic conditions affecting our financial condition or results of operations not presently contemplated; and (xvi) other risks described more fully in our Annual Report on Form 10-K filed with the SEC on February 27, 2015 under ‘‘Item 1A. Risk Factors’’ and other documents that we file with the SEC from time to time. 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. OPERATIONAL LOCATIONS (As of 12/31/14) Asia Pacific Australia China Hong Kong-SAR India Singapore Europe Austria Belgium Czech Republic Denmark England France Germany IRM Stock Performance $275 $250 $225 $200 $175 $150 $125 $100 Greece Hungary Netherlands Northern Ireland Norway Poland Republic of Ireland Turkey Romania Russia Scotland Serbia Slovakia Spain Switzerland Ukraine Latin America Argentina Brazil Chile Mexico Peru Colombia North America Canada United States Iron Mountain Russell 1000 Index S&P 500 MSCI REIT Index $75 Dec-09 Dec-10 Dec-11 Dec-12 Dec-13 Dec-14 6APR201511244149 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, the Russell 1000 Index and the MSCI REIT Index for the period from December 31, 2009, through December 31, 2014. This comparison assumes an investment of $100 on December 31, 2009, and the reinvestments of any dividends. 3APR201420591154 

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